FY20 results Revenue was roughly flat on the prior year ($29.8m vs $28.8m) but the Adjusted EBITDA result was $2.1m compared to the 2019 outcome of $0.4m – a material improvement, driven by a higher mix of strong gross margin sales and also benefiting to the tune of c.$1m from the adoption of IFRS16. Net cash (pre the convertible loan) was some $0.7m, impacted by a new divisional relationship with an existing customer leading to some payment delays – the RNS explains that this abnormal working capital position has now “unwound” post the year-end. 

Convertible loan extension The term of the convertible loan notes ($3.2m) has been extended by one year, to October 2021. This provides additional comfort around the group’s near-term cash position as it invests for growth, and shows good support from the lender group.

Return to forecasts Having withdrawn our forecasts on ZOO, along with estimates for a number of other clients, as the COVID-19 pandemic took hold in late Spring, we now reinstate estimates for both FY21E and FY22E. The new forecasts are shown below and at the end of this document – for FY21E, we assume a continuation of the 15% year-on-year growth currently being achieved (both for Q1 revenues and in terms of the current order book), and we apply a hopefully-cautious slightly slower rate of expansion to FY22E. 

We are delighted to be reinstating estimates, and management’s clear signal is based on increased visibility across the customer base - the group now enjoys more-numerous and more-mature relationships with top tier clients. Ironically, ZOO’s visibility is set against an industry which remains in flux, with COVID-19 disrupting new content creation just as a number of platforms (Disney+, Apple TV+, HBO max and others) are vying for customers and attempting to compete with Netflix. This, in our opinion, makes ZOO’s position and confidence all the more impressive – hopefully as the industry returns to a degree of normality, ZOO can continue to build on this strength.