ZOO Digital has provided an encouraging trading and debt facility renewal update with FY24 expected to be at least in-line with expectations. Following the significant industry disruptions to FY24, all eyes have been on a return to normality in FY25 and demand is returning with Q1’25 revenues expected to be 36% higher than Q4’24. This follows a strong exit to FY24 with March 2024 the highest invoicing month since April 2023 (pre-strikes). This rebound in Q1 revenues combined with recently implemented cost savings is expected to result in EBITDA at break-even in Q1 (implying June is likely to be a profitable month). ZOO has visibility to September 2024 and has now received dubbing and subtitling orders from the major film & TV distributor for which it was recently appointed as a primary vendor (see 26 March 2024 RNS). This is an encouraging update, and market commentators expect 2022 levels of entertainment output to likely return in 2025, this tallies with Videndum’s outlook of a pickup in markets from June 2024 and onwards. We note that ZOO benefits from exposure earlier in the production process through its Mastering service. We view now as an opportune entry point and upgrade our target price to 103p (from 50p).
