ZOO has provided a short trading update to accompany its AGM which will be held later today. The business is performing well…double-digit revenue growth y/y across H1 is clearly a strong result given the market disruption, and is tracking very well towards our full-year figure. We make no changes to estimates (which we reinstated in July) but will consider revisiting them at the time of the H1 results in early November.
The key metric in this morning’s update is the double-digit sales growth year-on-year expected for the H1 period. H1 FY20 (the six months to September 2019) saw revenues of some $14.2m, so revenues for H1 FY21 should be $15.6m or better…this would still leave a reasonable amount to do for H2 (up to $18.7m depending on the strength of H1), but given the positive dynamics within the business, we believe that ZOO is well-positioned to deliver.
The statement does not give specific detail, other than to highlight “significant” y/y growth in dubbing sales (powered by the highly lockdown-friendly cloud dubbing platform) and the “major growth area” of digital packaging (manipulating and managing video file formats to prepare content for delivery and viewing – crucial to streaming providers desperate to re-use existing content in the absence of new material). We suspect that these two areas will have outweighed a potentially subdued performance from subtitling as new content creation has effectively ground to a halt during the COVID-19 pandemic.
The RNS also includes positive commentary around Q3 and the second half, in particular with regard to digital packaging, which has already received record-breaking orders for the quarter. This, alongside the strength in dubbing customer wins, builds well on ZOO’s previous announcements, and framework agreements from earlier in the year. We make no changes to estimates, but suggest that the high-margin nature of digital packaging should provide an exceptional degree of underpinning to the H1 and FY21 profitability and cash generation estimates, and our forecasts will be reviewed at the time of the H1 results.
This strong, and market-beating, H1 from ZOO is hopefully the sign of even better to come in H2 and beyond…we look forward to further contract announcements over time, and to the H1 figures in early November. The success is both a vindication of previous investments and an endorsement of ZOO’s positioning as the market hopefully recovers and evolves.