Zoo Digital, which provides subtitles for Hollywood film studios, has warned that annual earnings will fall “significantly below” expectations.
The Sheffield-based firm said its second half was hit by the loss of a material project that had been scheduled to begin and complete during the period.
In a trading update, Zoo said: “Although trading in the second half began encouragingly with the previously-reported disruption to localisation revenues having normalised, together with the group continuing to secure a number of appointments as a preferred vendor with major media companies, the second half performance has been affected by the loss of a single, material localisation project that was scheduled to begin and be completed during the period.
“This was due to reasons wholly unrelated to the company. Furthermore, revenues associated with processing legacy DVD and Blu-ray titles in the second half will be significantly lower than anticipated as the overall market decline in this area has accelerated more quickly than envisaged.
“Accordingly, the company now expects revenues for the second half to be comparable to those in the first half, and therefore to be approximately 10 per cent below full year expectations. The group expects to be profitable and cash generative in the second half, but in view of the largely fixed cost base of the group and the higher margin associated with DVD and Blu-ray processing, Adjusted EBITDA for the full year will be significantly below expectations. The group expects to end the financial year with a cash balance broadly in line with that at the year ended March 31 2018.
“The company will provide a further trading update for the year ending March 31 2019 in April, prior to the release of its audited final results.”
Stuart Green, Chief Executive of ZOO, commented: “Whilst we are disappointed to fall short of expectations, albeit primarily due to one off occurrences, we are encouraged that we have seen year on year growth across our key service lines being dubbing and subtitling, as well as having successfully delivered projects for a number of new clients. We remain confident that the company’s strategy is correct and will enable us to capitalise on the long-term opportunity. We are now enjoying a growth in orders from our largest clients and expect to add significant new accounts during the remainder of the second half.
“With several major media companies recently announcing their intention to launch OTT services, there is no doubt that the market will continue to expand significantly and with it the growing demand for the premium services offered by ZOO. Our excitement for the future remains undiminished.”