Zoo Digital, which provides subtitles for Hollywood film studios, said first half earnings are likely to be ahead of expectations and it remains confident about its full year outcome.
The Sheffield-based firm said changes in the industry have affected its sales mix, with a positive impact on margins in the first half.
Zoo said the decline in demand for traditional DVD and Blu-ray digital packaging work has accelerated further, but lost revenues from these markets have been matched by strong growth in demand for contemporary Over-the-Top streaming video platforms and it expects this demand to continue.
People are increasingly downloading films and box sets on Amazon or Netflix rather than buying DVDs as streaming becomes the most popular way to view content.
At Zoo’s Annual General Meeting, the group’s chairman Gillian Wilmot told shareholders: “This is my first AGM as chairman of Zoo and I am pleased to provide a positive update as we approach the end of the first half of our financial year.
“Our vision is to be a leading next-generation media localisation business that offers a unique combination of software and customer service to the film and TV industry’s leading players and I believe we are making good progress.”
She said this is a time of considerable industry change, characterised by the well publicised transformation across the supply chain.
“Many major industry participants have been progressing plans for streaming video services, other participants have not yet settled internal reorganisations and there has been notable M&A activity,” she told investors.
“These were factors in the softening of our localisation sales that we reported in the second half of the prior year and which continued into the first months of the current period.”
She said that since August, Zoo has been operating as a “de facto preferred vendor” for a major content producer to support the launch of its direct-to-consumer streaming video-on-demand service.
She said that whilst longer term contractual arrangements have not yet been finalised with this client, a significant number of revenue generating projects are already underway with visibility extending throughout Zoo’s second half.
“With both new original content and back catalogue titles needing to be digitally packaged and localised for multiple territories to support this new service, this is providing us with a significant pipeline of work,” she told shareholders.
“We also continue to be in dialogue with a number of large media companies regarding their selection of preferred vendors for localisation and digital packaging services.”
Ms Wilmot said the group’s market is expanding with the launch of a number of new direct-to-consumer services taking place over the next 12 months.
“I am confident that recent commercial developments and our enhanced technological proposition leave us well positioned for long term growth,” she added.
Analyst Andrew Darley at FinnCap said: “The transformation of the media industry players shifting to delivering their own content-streaming services has led to consolidation and disruption of the supply chain, with softening of localisation sales as the studios find their own way into the streaming world.
“While DVD and Blu-ray packaging revenues wither on the vine, as expected, and despite localisation collecting its breath before the expected sprint, Zoo is undoubtedly primed, and trusted by the best.”
Zoo intends to announce its interim financial results on November 4.