Media localisation firm warns of first-half loss amid Hollywood strikes

ZOO Digital warned of a significant EBITDA loss in the first half as demand for its translation and localisation services in the entertainment industry remain at historic lows.

Chairman Gillian Wilmot will make a statement at the Sheffield-based firm’s AGM this afternooon, in which she will tell shareholders, “The market disruption and temporarily subdued demand for localisation and media services outlined in the full year results on 10 August 2023 are continuing. Major media organisations are in the process of realigning for profitability, and industrial action by writers and actors is ongoing. Consequently, visibility remains limited, and resolution of the strikes is essential for normal order flow to resume.”

The firm said it expected first-half revenues of £21m, but it expected cash reserves to be no lower than £16m at the end of this month. The firm’s most recent full-year results, published in August, showed revenue growth of 28% to £70.9m, but it warned then that disruption would affect demand.

The ongoing demand disruption led the firm to renegotiate the acquisition of its Japan partner and defer completion until its order flow has normalised.

Wimot will tell shareholders, “The board has taken steps to mitigate ZOO’s position through the implementation of cost reductions with the objective of achieving break-even in respect of fiscal Q4… The board is confident that the changes arising from strategic reviews by ZOO’s major customers will be favourable for the group. These include accelerated transition to an end-to-end approach, studios engaging with fewer, more capable suppliers, and greater dependence on ZOOstudio, all of which will strengthen ZOO’s market position.

“ZOO continues to make good progress in cementing its relationships with existing and potential new customers even during this period of temporary disruption. ZOO’s strategy is in alignment with the needs of its current and potential customers and the Board expects the Group to be well positioned for enhanced growth once former order levels resume, in line with our medium and long-term aspirations. The structural drivers for international, multilingual content remain firmly in ZOO’s favour.”