Final Results

Zoo Digital Group PLC 06 June 2003 For embargoed release at 7am 6 June 2003 ZOO Digital Group Plc ('ZOO' or 'the Group') Results For The Year Ended 31 December 2002 Zoo Digital Group plc, the Sheffield based digital entertainment company, announces preliminary results for the year ended 31 December 2002. The results are in line with market expectations. Highlights - Turnover increased to £1.9m (2001: £0.7m) - Loss before interest, tax, depreciation, amortisation and exceptional items (LBITDA) at £1.9m (2001: £1.9m). - Retained loss for the financial year was reduced to £2.2m (2001: loss of £9.0m) - Feasibility studies into interactive DVD discs completed DVD-Extra Studio and two showcase interactive DVD products successfully completed - Acquisition of 'Premier Manager' brand and franchise on PS2 in November 2002 from Atari (formerly Infogrames) - Signing of exclusive licensing agreement with Celador International Limited for 'Who Wants To Be A Millionaire' quiz game on DVD-Video - Successful £1.5m placing completed at the beginning of June 2003 to finance future growth. Commenting on the results CEO, Ian Stewart, said: 'The year to 31st December 2002 was one of significant development with the Group establishing itself in the video games market and rapidly progressing its DVD-Extra Technology.. Reaction to our DVD Extra technology has been extremely encouraging and the recent fundraising of £1.5m gives us the opportunity to accelerate its development and maximise its potential.' 'The board believes that the combination of publishing low risk licensed product and in-house own brands together with the huge potential of DVD-Extra Studio places the Group in an excellent position for a move to profitability and significant future growth.' For further information please contact: ZOO Digital Group plc Ian Stewart, Chief Executive 0114 241 3700 Binns & Co. Paul Vann 0207 786 9600 Ken Rees 07802 466 567 Noble & Company Limited John Llewellyn-Lloyd 0207 367 5600 Chairman and Chief Executive's Statement 2002 Introduction ZOO Digital Group plc ('ZOO' or 'the Group') The year to 31st December 2002 was one of significant development with the Group establishing itself in the video games market and rapidly progressing its DVD-Extra Technology. Over the year we published seven titles on the Nintendo Gameboy Advance and PC platforms across five European countries. Furthermore in November 2002, we acquired the 'Premier Manager' brand and franchise, which has enabled the Group to enter the lucrative Sony Playstation 2 market for the first time. Further PS2 titles are currently being considered for publication. The Group has also acquired a number of Electronic Arts titles, amongst others, for publishing on the Gameboy Advance platform during 2003. Following the completion of the feasibility studies into interactive DVD-Video discs it was evident that we believed we had a unique proposition with a huge market potential. Consequently the Group accelerated its development of DVD-Extra Studio and successfully produced two showcase interactive DVD products in October 2002, achieving significant credibility in the DVD industry. Results The Group increased sales for the period to £1.9m (2001: £0.7m) with a LBITDA of £1.9m (2001: £1.9m). The retained loss for the financial year was reduced to £2.2m (2001: loss of £9.0m) with a loss per share of 1.46p (2001: loss of 8.15p). The Group's cash position was £1.3m as at 31 December 2002 (2001: £3.3m). This compares with cash balances of approximately £2.2m at the interim stage. Publishing and Licensing The Group's strategy is to build on its own intellectual property assets such as Premier Manager and Home Creative Studio using internal development resources. These key titles will be supported by the acquisition of finished titles for localised or cross platform publishing, which generally entail lower risk opportunities. We aim to identify niche products that have a sizeable sales opportunity in this market and we intend to publish at least three PS2 titles in 2003 in line with this strategy. Our support for the Gameboy Advance market will continue and we intend to release twelve new titles in 2003, six of which are Electronic Arts titles including 'Need For Speed - Porsche Unleashed' and 'Sim City 2000'. Nintendo's commitment to this market has continued with the release of the New Gameboy Advance SP and is being targeted at males aged 18 to 35. Our portfolio of games aims to compliment this target audience focus. The Christmas sales seasons will be the key selling period for the Gameboy Advance SP and we are well positioned to take advantage of this. Home Creative Studio Version 1.6 will be published with new features and model sets during the summer and discussions are ongoing with US publishers. Whilst this product has proved difficult to position, the digital imaging market is now opening up and we anticipate a long life expectancy for this product. Following the acquisition of Premier Manager from Atari (formerly Infogrames), a development team has been assembled to ensure the continuation of the brand. The Group commenced a three year development program, which will enable us to re-establish the brand in the eyes of the consumer. For 2003 we will publish the title on PS2, PC and for the first time, on Gameboy Advance, taking advantage of Nintendo's positioning and marketing of the new Gameboy Advance SP. We will also look to explore the on-line and interactive TV opportunities for which product design materials are already advanced. Premier Manager is seen as a pillar title that can generate substantial revenues in a niche but popular market in which the management team has considerable experience. Who Wants To Be A Millionaire ('WWTBAM') Following the self publishing of the WWTBAM quiz game on DVD-Video in October 2002 this product has now been licensed to Vivendi Universal for publication in three initial territories; UK, France and Italy. In line with our agreement with Celador, the holder of rights to WWTBAM, the agreement with Universal is for a seven year period and gives them options over all territories apart from North America. We believe this to be a major opportunity for the Group and we look forward to extending our relationship with Universal whilst also proving the benefits of DVD-Extra. DVD-Extra During the year the Group accelerated its development of a revolutionary authoring software for producing interactive DVD-Video discs that will play on any standard consumer DVD player. We applied for and received a SMART grant award of £188,000 from the Department of Trade and Industry to assist with the research and development. DVD-Extra unlocks the hidden interactive capabilities that exist in every player, and allows developers to produce titles that exhibit many of the properties of multimedia CD-ROM on a standard, unmodified, DVD player. ZOO's principal offering is a product for authoring interactive DVD-Video discs called DVD-Extra Studio. This tool operates in a similar way to multimedia authoring products that are designed for creating CD-ROM applications for PC and Macintosh, but produces DVD-Video disc images as its output. It performs a similar function to so-called DVD authoring products that are designed specifically for creating DVD-Video discs, but due to the patent-pending authoring method it employs, it offers substantial cost savings for companies that are involved in the production of DVDs and also enables more sophisticated functionality to be developed. ZOO will license DVD-Extra Studio to multimedia developers and Compression and Authoring facilities. Charges will be levied on a pay-per-use basis, such that customers will pay a fee to ZOO for each project that uses DVD-Extra Studio. The Group has applied for patents to protect the core DVD-Extra technology and is continuing to further develop and protect its intellectual property worldwide. Outlook Following the successful fundraising of £1.5m gross through the share placing which was completed on 2nd June 2003 the Group looks forward to positive progression. The portfolio of products is expanding, with a focus on the development of our own intellectual properties. The board believes that the combination of publishing low risk licensed product and in-house own brands together with the huge potential of DVD-Extra Studio places the Group in an excellent position for a move to profitability and significant future growth. The Group plans to exploit the DVD-Extra technology internationally and has established an Early Adopter Programme consisting of around twenty companies including Technicolor, Warner and Comchoice, leading to the first commercial release of the product within twelve months. We believe that the uniqueness of DVD-Extra and the filing of international patents will allow ZOO to build and maintain significant differentiation over other authoring tool providers. John Barnes, Chairman Ian Stewart, Chief Executive Officer CONSOLIDATED PROFIT AND LOSS ACCOUNT YEAR ENDED 31 DECEMBER 2002 2002 2001 £'000 £'000 Turnover Continuing operations 618 724 Acquisitions 1,264 - __________ __________ 1,882 724 Cost of sales (1,581) (199) __________ __________ Gross profit 301 525 Other operating income 40 - Other operating expenses - other (2,215) (2,426) Loss before interest, tax, depreciation, (1,874) (1,901) amortisation and exceptional items - depreciation (98) (238) - amortisation of goodwill (403) (532) - exceptional impairment charges - (5,553) __________ __________ (2,716) (8,749) __________ __________ Operating loss Continuing operations (2,307) (8,224) Acquisitions (68) - __________ __________ (2,375) (8,224) Costs of fundamental reorganisation - (972) Investment income 35 233 __________ __________ Loss on ordinary activities before taxation (2,340) (8,963) Tax on loss on ordinary activities 134 - __________ __________ Retained loss for the financial year (2,206) (8,963) __________ __________ Loss per share Basic (1.46p) (8.15p) Diluted (1.46p) (8.15p) __________ __________ CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES 2002 2001 £'000 £'000 Loss for the financial year (2,206) (8,963) Currency (loss)/gain on net overseas investment (6) 34 __________ __________ Total gains and losses recognised during the year (2,212) (8,929) __________ __________ CONSOLIDATED BALANCE SHEET YEAR ENDED 31 DECEMBER 2002 2002 2001 £'000 £'000 Fixed assets Intangible assets 3,756 3,043 Tangible assets 210 241 Other investments 228 228 __________ __________ 4,194 3,512 __________ __________ Current assets Stock 363 - Debtors 1,435 144 Cash at bank and in hand 1,306 3,323 __________ __________ 3,104 3,467 Creditors: Amounts falling due within one year (2,595) (890) __________ __________ Net current assets 509 2,577 __________ __________ Total assets less current liabilities 4,703 6,089 Creditors: Amounts falling due after more than one year (757) (763) __________ __________ Net assets 3,946 5,326 __________ __________ Capital and reserves Called-up share capital 315 278 Share premium account 11,961 11,166 Other reserves 8,598 8,598 Profit and loss account (16,928) (14,716) __________ __________ Shareholders' funds (all equity) 3,946 5,326 __________ __________ CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2002 2002 2001 £'000 £'000 Net cash outflow from operating activities (2,583) (3,625) Returns on investments and servicing of finance 66 233 Capital expenditure and financial investment (45) (199) Acquisitions and disposals (6) (736) __________ __________ Cash outflow before financing (2,568) (4,327) Financing 551 812 __________ __________ Decrease in cash in the year (2,017) (3,515) __________ __________ Notes to the announcement For the year ended 31 December 2002 Basis of Preparation The financial information set out in this announcement does not comprise the company's statutory accounts as defined in section 240 of the Companies Act 1985. The consolidated balance sheet at 31 December 2002 and the consolidated profit and loss account, consolidated cash flow statement and associated notes for the year ended 31 December 2002 have been extracted from the statutory accounts upon which the auditors opinion was unqualified and does not contain a statement under section 237 (2) of the Companies Act 1985. Loss per share The calculations of loss per share are based on the following losses and numbers of shares. Basic and Diluted 2002 2001 £'000 £'000 Loss for the financial year 2,206 8,963 _______________________ 2002 2001 Number Number of of shares shares Weighted average number of shares for basic and diluted loss per share 151,187,593 109,915,788 ________________________ Dividend The Company does not intend to pay a dividend at this time Reconciliation of operating loss to operating cash flows Continuing Acquisitions 2002 2001 £'000 £'000 £'000 £'000 Operating loss (2,307) (68) (2,375) (8,224) Depreciation charges 94 4 98 238 (Increase)/decrease in stock (155) (208) (363) - (Increase)/decrease in debtors (189) (509) (698) 413 Increase/(decrease) in creditors 246 106 352 (1,349) Cash impact of fundamental restructuring - - - (788) Goodwill amortisation 403 - 403 532 Goodwill impairment - - - 5,553 __________ __________ __________ __________ Net cash outflow from operating activities (1,908) (675) (2,583) (3,625) __________ __________ __________ __________ Reconciliation of movements in group shareholders' funds 2002 2001 £'000 £'000 Loss for the financial year (2,206) (8,963) Currency (loss)/gain on net overseas investment (6) 34 New shares issued 832 6,785 Shares to be issued - 768 __________ __________ Net deduction from shareholders' funds (1,380) (1,376) Opening shareholders' funds 5,326 6,702 __________ __________ Closing shareholders' funds 3,946 5,326 __________ __________ Further Copies Copies of this announcement and the full annual report and accounts will be available, free of charge, for a period of one month from the Company's Nominated Adviser and Broker, Noble & Company Limited, 1 Frederick's Place, London, EC2R 8AB, Tel: 020 7367 5600 or from the Registered Office of the Company at Parkhead House, 26 Carver Street, Sheffield, S1 4FS. Copies of the full financial statements will be dispatched to shareholders as soon as possible. END This information is provided by RNS The company news service from the London Stock Exchange

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