ZOO Digital Group plc (ZOO) Earnings Call Transcript & Summary

Good afternoon, and welcome to the Zoo Digital Group AGM. We are a leading supplier of media services and localization to the global entertainment industry. And I'm Gillian Wilmot, your Chairman. I'm going to make the following AGM statement and trading update. The streaming industry continues its transition following strategic realignments and the strikes of 2023. Recent months have witnessed the early stages of recovery as major U.S. media organizations have enacted their plans to adjust for a future in which traditional linear television plays a diminishing role. While many productions that resumed following the strikes have since been completed and distributed to global audiences, changes made in the mix of content types acquired and capital allocation policies which are more strategic in nature, will take a longer period to yield results and restore levels of industry output to those seen in 2022, particularly in Hollywood. Against this backdrop, ZOO has seen a strong recovery in its pipeline over the first half of full year '25 and expects to deliver sales in the period of at least $27 million equating to a 28% increase equivalent to prior period and 42% up on the previous half. As previously stated, the Board expects EBITDA profit in the first half. Market participants anticipate the industry's recovery continuing until late 2025, which is consistent with the indication ZOO has been provided by its customers. The Board continues to be confident that the changes arising from the realignment of ZOO's major customers will, in due course, be favorable for the group. These include accelerated transition to an end-to-end approach with fewer, more capable suppliers, an increasingly diverse mix of original international content with a shift to episodic over-feature titles and great dependence on ZOO's software platforms, all of which will be advantageous to the group. The company continues to manage its cash position carefully whilst protecting production capability and capacity to satisfy the demand of its customers. As a result, the unaudited cash balance as at the 30th of September 2024 is expected to exceed $2 million. Visibility extends only to January '25, as is normally the case for the ZOO business. However, the Board expects further profitable progress that will put us on track to meet market guidance for the full year ending the 31st of March 2025. Presentation slides that will accompany an investor update following the AGM will be available on the company's website later today. Shareholders may register to join a live stream of the AGM, investor briefing and Q&A and you can see the link online. The company intends to announce its unaudited interim financial results for the 6 months to the 30th of September 2024 in November 2024. This announcement contains inside information as defined in Article 7 of the market abuse regulations. The person responsible for this announcement are the CEO, Stuart Green; and CFO, Phillip Blundell. Ladies and gentlemen, welcome to our 2024 AGM. It has now just gone 5 p.m., and a quorum of members is present, and I declare the meeting open. I am Gillian Wilmot, the Chair of the company. May I introduce you to my fellow directors. Being on my left, Dr. Stuart Green; next to him, Phillip Blundell, our CFO; Mickey Kalifa at the far end and Nathalie Schwarz on my right; and Gordon Doran sends his apologies as he is on business in Asia. Before moving to the formal business of the meeting, I would like to say a few words about the company's performance over the last year and also about our recent activities and progress. I'm now pleased to deal with any questions you may have on any of today's agenda items. I would prefer that we take all questions now before the formal business of the meeting gets underway. However, you are not precluded from asking a further question or questions later in the meeting, if you so wish. I would like to remind you that the chairs of the Audit and Remuneration Committees are available to answer your questions. Audit Chair is Mickey Kalifa. RemCo Chair is Nathalie Schwarz. Before asking a question, you should give your name and state whether you are a shareholder, proxy or corporate representative. If you are a proxy or corporate representative, please state your name and the name of the shareholder that you are representing. No questions. Okay. Straight on to the formal business then. Thank you. As there are no questions, let us move on to the formal business of our meeting. May I remind you that when it comes to voting on resolutions, ordinary shareholders here in-person, proxies here in-person who have been newly appointed by a member entitled to vote, and those who are here as corporate representatives are all able to vote on a show of hands or on a poll. This year, you were asked to approve 8 resolutions. Resolutions 1 to 7 will be proposed as ordinary resolutions. This means that for each of those resolutions to be passed, more than 50% of the votes cast must be in favor of the resolution. Resolution 8 will be proposed as a special resolution. This means for that resolution to be passed, at least 75% of the votes must be in favor of Resolution 8. May I also remind you that while you are free to abstain from voting, and abstention is not a vote in law and will not be counted in the calculation of the votes for and against any particular resolution. Resolution 1. Our first resolution is to receive the company's annual accounts strategic report and directors and auditors reports for the year ending 31st of March 2024. I now put this resolution to the meeting. Please raise your hand to vote. Those in favor. [Voting]

Those against. [Voting]

Those abstaining. [Voting]

For the information of shareholders, I advise that proxies were received in respect to shares comprising votes in favor 28,507,200 shares against the Resolution 1,610 and shares in respect to which folks were withheld 210,361. I declare the resolution carried. Resolution 2. This resolution approves the directors' remuneration report other than the part containing the directors' remuneration policy for the year ended 31st of March 2024, which sets out how the remuneration policy has been implemented in paying the company's directors in the year ended the 31st of March '24. I now put this resolution to the meeting. Please raise your hand to vote. Those in favor. [Voting]

Those against. [Voting]

Those abstaining. [Voting]

For the information of shareholders, I advise that proxies were received in respect to shares. In favor of the resolution 28,480,890. Against the resolution 19,514. And withheld 218,767. I declare the resolution carried. Resolution 3, I'm going to hand this over to Dr. Stuart Green as this resolution concerns my own reappointment to the board.

The third resolution approves the reappointment of Gillian Wilmot, who retires by rotation pursuant to the company's Articles of Association as a Director of the company. I now put this resolution to the meeting. Please raise your hand to vote. Those in favor. [Voting]

Those against. [Voting]

And those abstaining. [Voting]

For the information of shareholders advised that proxies were received in respect of shares comprising shares in favor of Resolution 23,603,015 shares. Shares against the resolution 501,997, and shares in respect to which folks were withheld 4,614,159. I declare the resolution carried.

Thank you. The fourth resolution approves the reappointment of Phillip Blundell, who retires by rotation pursuant to the company's articles as a Director of the company. I now put this resolution to the meeting. Please raise your hand to vote. Those in favor. [Voting]

Those against. [Voting]

Those abstaining. [Voting]

For the information of shareholders, I advise that proxies we received in respect to shares in favor of the resolution 28,502,162. Shares against the resolution 2,850 and shares in respect of which votes were withheld 214,159. I declare the resolution carried. Our fifth resolution approves the reappointment of Grant Thornton U.K. LLP as auditors of the company. I now put this resolution to the meeting. Please raise your hand to vote. Those in favor. [Voting]

Those against. [Voting]

Those abstaining. [Voting]

Proxies we received in respect of shares in favor of the resolution 28,497,994. Shares against the resolution 2,410 and shares in respect of which votes were withheld 218,767. I declare the resolution carried. Our sixth resolution authorizes the directors to determine the remuneration of the auditors. I now put this resolution to meeting. Please raise your hand to vote. Those in favor. [Voting]

Those against. [Voting]

Those abstaining. [Voting]

I advise that proxies were received in respect of shares in favor of the resolution 28,496,233. Shares against the resolution 7,969, and shares in respect of which votes were withheld 214,969. I declare the resolution carried. Our seventh resolution authorizes the directors to allot shares up to an aggregate nominal amount of GBP 326,294.09, in line with current institutional shareholder guidelines. This represents approximately 1/3 of the company's current issued ordinary share capital. The authority will expire at the AGM of the company or on the 18th of December 2025, whichever is the earliest. I now put this resolution to the meeting. Please raise your hand to vote. Those in favor. [Voting]

Those against. [Voting]

Those abstaining. [Voting]

I advise that proxies were received in respect of shares in favor of the resolution 28,460,425 shares. Shares against the resolution 43,587 and shares in respect of which votes were withheld 215,159. I declare the resolution carried. Our eighth resolution empowers the directors to allot shares for cash without first offering them to existing shareholders on a pro rata basis. In line with current institutional shareholder guidelines, the power is limited to a nominal amount of GBP 97,888.23, which represents approximately 10% of the company's current issued ordinary share capital. This resolution also empowers the directors to deal with technical problems arising in relation to offers such as rights issues and open offers, for example, in relation to fractional entitlements and overseas shareholders. The resolution will expire at the next AGM of the company or on the 18th of December 2025, whichever is the earlier date. I now put this resolution to the meeting. Please raise your hand to vote. Those in favor. [Voting]

Those against. [Voting]

Those abstaining. [Voting]

I advise that proxies received in respect of shares in favor of the resolution 22,089,498, shares against the resolution 6,414,604, and shares in respect of which votes were withheld 215,159. Note, this resolution require a 75% majority and it has been passed. I declare the resolution carried. Ladies and gentlemen, that completes the formal business of the AGM. Thank you for coming. I now declare the meeting closed. There are some refreshments. Also you can ask any further questions.

Absolutely. Thank you, Gillian. So what I have now is a short presentation that I'll take you through to take a few minutes. And then following that, as Gillian says, there will be an opportunity for you to post questions, and we'd be happy to answer them. [Operator Instructions] . So for the benefit of those who are brand new to the ZOO story, I'll just say a few words about what we do. We work in the entertainment industry, and we deal with content distribution for global streaming services. I put on this slide, the big streaming services that operate globally, but there are actually hundreds of services that operate around the world that now deliver entertainment content to consumers in lots of countries and in lots of languages. Specifically, what we do is we provide some technical services and some creative services to take finished programs and make them ready so that they can then be delivered through one or more streaming services and enjoyed by audiences that speak different languages. And in part, that entails subtitling and dubbing to adapt them into different languages but it also entails doing some technical things to make sure that when that content plays out, it does so without any glitches, then it's properly synchronized and a whole host of other technical things to ensure that consumers receive a very good experience. The way we go about doing this is a key point of difference for ZOO in the market. There are other companies that provide services similar to those that ZOO provides, but we are differentiated through innovating in our industry and creating a range of cloud software platforms that provide a means for us to deliver this work in a very efficient and scalable way, and in particular, in a way that is very capital efficient allowing us to virtualize many of the processes that would otherwise that historically in our industry have been conducted by people sitting at desks working on their workstations. So in a moment, I'm going to take you through a few slides that provide a few graphs that help you to understand perhaps a little better what's been happening in our industry because clearly, over the last year or 2, there's been some quite profound change that's taken place in the Internet industry. And I'm sure everyone will have heard already about the strikes that took place in Hollywood last year that brought production to a standstill when actors and writers were in negotiation with studios over pay and remuneration and royalties, but also about their concerns around artificial intelligence and what those kinds of technologies could do to this industry, if not used in a -- sort of structured and controlled way. So certainly, the year that we have just reported was very much overshadowed by events that included those strikes, but also more profoundly by a strategic review that many of the leading global media companies have gone through. And this has been triggered by the fact that in our industry, traditional forms of consumption of entertainment content, particularly linear television, has been and for some time in decline. And obviously, streaming is growing. But there are many traditional media companies who have -- and have, for a long time, had a high reliance on [ movie ] television. And as that falls away, they have needed to adapt their business models and their strategic approach to ensure that they continue to grow and thrive in this evolving industry. So in terms of what -- how that has affected ZOO, as you have seen in our results which we reported for the year to March, it had a very significant impact on our business, because there has been a much reduced volume of work that's gone through in the industry and therefore, that has come on to us to work on. Now that situation is changing, and I'll talk a little bit more about that in a second. But it is -- the nature of the changes that have taken place and the changes in approach and strategy by large players in our industry, mean that it will take a little while for that really to play out and for volumes of production in the industry to get back to where they were before this began. So let me move on to just kind of paint a picture and I guess, give some reassurance really about the industry and what the future holds because it might be -- it might seem like this industry has now turned some kind of corner and things are I got to get a whole lot worse, but that's not the case. What we've seen is something of a black swan event that's been quite specific to our industry that has created disruption and the effects of that disruption are lingering and will linger for a little while yet, but actually, there is a bright future here. And the first chart I'm showing is really to underline the fact that content -- the content that's being produced is reaching audiences globally. More and more people have access to the streaming services now. And consequently, if you look at the number of video -- number of users who can actually consume this kind of content, that number has grown has reached about 3.5 billion and is expected to continue further. And I've got some more charts in a moment just to put a little bit more color to that. As I said, linear television, the traditional means by which this kind of content has been consumed historically is in decline and has been so for a while. So this chart just gives you an idea about however, over this 3-year period, the sort of shares of how content is being consumed across different channels have been changing. As you can see, streaming is rising. Those cable broadcast, the traditional linear TV routes to market are declining. Now one of the difficulties in being able to kind of gauge the total addressable market for ZOO business is that there is very little that's been published that sizes the spend in our industry on the kinds of service that the ZOO provides. So a proxy for that in the absence of that, more specific information, one area of data that is available, it concerns how much is spent on making programs. And what we're seeing on this chart, on this slide are a couple of charts. But the one on the left is showing the spend globally on content and how that is expected to track. And on the right, specifically the spend in Hollywood over the period of 2025. So the first thing you'll see is that 2023 was an unusual year and that there was a hiatus that I just explained. Something similar happened in 2020, which, of course, was pandemic-related where at that time as well, it wasn't possible to make new content. And consequently, the spend on content declined in that year, but clearly returned to growth in '21. But 2023, clearly, what you're seeing in the chart on the left is that globally, the spend plateaued. And looking more closely at that and drilling down into what happened in Hollywood, which is of course where the strikes took place, you can see that the 2023 number declined on '22. But these charts which are come from 2 more respective market commentators that work in this industry. What they both indicate is that the industry will return to growth measured by what is spent on making original programming. So despite the fact that there have been announcements from different film studios who have gone through challenging times, that they will be trimming budgets. Overall, the expectation is when you stand back from this over the next year or 2, things will get back to where they were, and we'll continue to grow from there. So there isn't any data that's been published so far that would suggest the market is going to do anything other than go through a period of calm before things return to growth again. So these 2 charts are really quite interesting. And what they indicated is perhaps what intuitively we may all realize, but I think paints a really interesting picture. And namely that more and more, the content that we consume is actually originated in languages other than English. And of course, for a very long time within the same industry, most content that traveled globally was produced in each language. And in fact, the media localization industry, of which we're a part, was mostly about taking original programs and adapting them for consumption in other parts of the world by translating them into different languages. But if you look at where both Netflix and Amazon are now spending their capital which is significant. So Netflix spends around and has spent for a number of years around [ $17 ] billion a year on content. You can see that in both cases, less than half of that spend is being directed towards producing English original programs. And much -- obviously, the majority of the spend is in making programs that are not in English. And there are a number of reasons for that. One is that clearly, both Netflix and Amazon are serving a global market. And therefore, need to appeal to the taste of audience globally, and therefore, obviously, you want to provide content that comes from all around the world. But content from countries outside of particularly North America and the U.K. can often be sourced much more cost effectively. And therefore, sourcing content in other countries is clearly a -- one means to ensure that you get a lot of value for the money that you spend. So what both Amazon and Netflix and indeed, those other global streaming services that I showed you on an earlier slide, having common is that they need to reach audiences in lots of countries. And in order to do that and address a very diverse mix of consumers, they need to have a very diverse mix of content. So clearly, in spending $17 billion a year, Netflix is seeking to provide a good range of different types of content of different sorts. So some episodic, some feature across different genres and so on in order to have a very broad appeal to not only different tastes in English speaking countries, but clearly different tastes in many countries of the world. And that's -- and that's clearly a very challenging undertaking. And I think one of the things that we're seeing in this disruption that we've gone through is that the big commissioners of this content are looking to change the mix of programs that they make in order to appeal more to a broader audience across different demographics and in different countries. So I provided a chart earlier just to show you how many people are consuming digital video. What this chart shows you is specifically on subscription video on demand the growth that is forecast for revenues and subscribers of those types of content. So subscription video on demand is obviously where consumers are paying usually a fixed monthly fee to watch usually as much content as they like on that particular service. And clearly, for providers of these services, that's a fantastic way of being able to kind of shore up your revenue forecast by knowing that you've got regular subscribers who are paying every month. So it's a very attractive model. In the era of streaming, it's more challenging than it was on linear television. Because, of course, with streaming service, you can turn those on and off with a month's notice, whereas typically with a bundled linear TV package, perhaps from a suppliers such as Sky. It would be more usual to have longer-term contracts. And therefore, one of the consequences in [ video ] streaming is that providers of this content now are seeing much higher churn rates, so consumers turning on and off their subscriptions than was ever the case historically. So that's a key challenge that these companies are facing that is quite particular to subscription-type models through streaming services. Advertising is becoming an important part of the mix of the way in which the streaming companies are operating. So advertising video on demand is obviously a slightly different model, where content is monetized not necessarily through paying -- charging subscriptions to consumers, but rather in serving advertising and clearly making revenues from advertisers. Increasingly, actually we're in the early stages, streaming services sent to the camp or the other, it's increasingly the case that services are actually combining the 2 models. So for example, both Netflix and Disney plus have introduced in the last couple of years, advertising tiers to their services. And so they are -- they both enjoy revenues that come from subscriptions, but also through sale of advertising. But the chart what that tells you is that the -- for advertising video on demand, again, there is strong growth that is anticipated for many years to come. So certainly, the demand for entertainment content through streaming, whether that's through models that are monetized through subscriptions or through advertising looks set to continue to grow for a while. And if you look at the market share for advertising-based services globally, as you can see, there's a very wide mix and North America is currently the largest segment, but Asia Pacific is a very significant contributor and is growing rapidly. So just to wrap up then and really talk about how the things I've just outlined will and are impacting ZOO. So the key -- the key takeaways from all of this are, firstly, the demand for this content is rising. And what that means as far as we can see, is the addressable market for ZOO services is undiminished over the long term. What we have in ZOO is a very scalable business model, and we're very well positioned to address the growing demand as the market continues to develop. Also, we're seeing greater international exploitation and that drives demand for localization. So clearly, if you're sourcing programs from lots of different countries in lots of different languages. And of course, you want to make those programs available to your global audiences. So that means that you're not only taking English programs and subtitling and doing them into lots of languages, but you're also doing that with programs that originate in other languages too. So the demand for localization and the complexity of that demand is increasing and that really points to a greater opportunity for ZOO. Obviously, we have a global reach in the way in which we operate. We can provide services in over 80 languages. And through the hubs that we have in some key territories that we have people on the ground and are very well positioned to do -- provide an excellent service. In the short term, however, we are seeing a subdued order book. Obviously, that was very much the case in our FY '24, and you see that in the results that we reported for the year. But as we mentioned in the announcement, the Gillian just read out, we still see that hiatus, that subdued level of orders continuing for a little while and market commentators, as I've already shown you, expect things to really get back to where they were probably in the late part of next year. At the moment, we're seeing a recovery of the industry and our -- the guidance that we provided today gives you a feel for how the first half of our year, we expect to play out. But as we move forward, we expect that situation to continue to improve, but it will take through until -- through next year before things get back to where they were. But from this perspective, we have reduced our cost base to ensure that we can -- that we have restored profitability and intend to continue to operate profitably. And obviously, as we've -- as I just said, the order book is recovering, and we -- the opportunities are very promising in the medium to long term. Our studio customers have necessarily streamlined their operations because they have all, as I mentioned, kind of looked at their businesses and adapt to their business models, taking costs out of their operations. What that effectively does is lead to greater reliance on trusted partners and ZOO is one of those trusted partners. In fact, ZOO is one of a handful of orders referred to as end-to-end lenders. So that's to say that we are effectively a one-stop shop for our customers to do all these creative and technical services. And with the -- with that sort of drive to streamline their operations, our customers have fewer people internally to manage vendor relationships. And what that points to is the inevitability that those customers will want to work with a smaller number of vendors, but those vendors each need to be very capable. And that, again, is very advantageous for ZOO because that puts us very much on the frame to serve those customers. So as I mentioned, this move to an end-to-end model, which we're seeing increasingly by players in our industry is very fortuitous at ZOO because that is exactly how we have set out our stall with the capability across the wide range of services that are needed to fulfill this work. So there's one of a few vendors in that position, we're in a fantastic place to recover from this industry disruption, as you've seen already, return to growth to continue that growth in the years ahead. So that is where I'll stop for now and we can move on to Q&A. So I do have some questions that are coming through from online -- users online. But maybe perhaps, first of all, if there's anyone in the room who has a question that you want to ask and start there.

[indiscernible] cost base, assuming all cash has been spent [indiscernible].

So for those who are online you may not be able to hear that. So Bruce's question was, did we take -- we obviously have to cut cost in the business. Did we take those costs out soon enough and with hindsight, would we have done that sooner. Let me take that. So the difficulty that we have faced and indeed our peers in our industry face through this period is just being able to predict when this hiatus would end and would resume. And through that period, obviously, we've had to -- we have been in a very close dialogue with our customers to understand what they expect and how the envisage things unfolding. And we took multiple data points and we were informed by those in terms of the cost cutting that we did. So in the early stages, we certainly cut all discretionary spend. And as time went on, and the guidance we were receiving from customers was that it shouldn't be a few months. And from our perspective, ensuring that we had capacity to serve those customers when work resumed was quite important to us. So our aim was to retain as much capacity as we could for as long as necessary until [indiscernible]. But obviously, that hiatus was very protracted, much longer than anyone in the industry that we spoke to had anticipated. So in your question about hindsight, yes, hindsight is a wonderful thing. And if we've known then what we know now, then inevitably, we would have got sooner. And that obviously had the effect that we burn cash in the business. But based on where we are at the moment, our expectation is that whilst the cash is much reduced, we see what returning now. We have taken costs out of the business, and we can see our way through this next period, particularly with debt financing facilities that we have available to us at the moment, which we're not yet drawing upon. So we can see a journey through this period.

Do you monitor utilization rates [indiscernible] just to make sure being efficient [indiscernible]?

Yes, the question was, are we monitoring utilization rates to ensure that we're -- the business is operating efficiently. Yes, we do, and we've always done that. So we've always known kind of what utilization is in a team that's all key to our workflow planning and how we utilize resources in different geographies, of course. So yes, so we do that already and are obviously acutely aware of that and monitoring that very closely and to ensure that we are -- if there were to be a further change, then we're in a position to respond to that quickly.

How important [indiscernible] we have actually [indiscernible]. So does that undermine the logical average business found. Do we actually [indiscernible] with very similar business to the [indiscernible].

So I'll rephrase the question because those who maybe aren't as familiar with the ZOO story and strategy. So ZOO is an innovator, as I mentioned earlier, and has developed cloud platforms that enable us to virtualize lots of processes. And we are -- in our industry, we have been a first mover in developing essentially online cloud-based subtitling platform. We -- ours' was the first in the industry, and we subsequently innovated and created a cloud-based dubbing platform. Effectively, what that doubling platform means is that it's possible for us to produce very high-quality dubbed sound tracks without the need for very high-profile, big budget dubbing facilities, because in our industry traditionally the way that dubbing has been done is in highly configured, expensive studios where actors and directors would travel and sort of technical operators on hand to manage the whole process. So Bruce's question -- Bruce's observation is that in the course of the last year or 2, we've actually been spending money on establishing physical facilities in a number of locations. So is that at odds with the strategy? And are we not just becoming like one of our competitors who we differentiated ourselves from -- in the early days. So I don't honestly believe that the strategy has changed at all. What ZOOdubs enables us to do is to provide unified way in which dubbing projects can be performed that is very reliable at very high security and very scalable. So for ZOO, what that means is that if we were to establish a physical space to perform dubbing, which we have done, and I'll elaborate on that in a second. Then we can -- the performance of that space will be far greater than traditional dubbing studios because in that space, we can fair essentially many smaller dubbing booths. Because obviously, to do dubbing, you need to record in an environment that is acoustically performance for that situation. So you've got to be able to eliminate any background sounds. And also, you've got to avoid any resonance, acoustic echos in the space. You don't need a big expense to dubbing studio to do that, you can do that much more cost effectively. So our approach was always -- we always anticipated that we would particularly in locations where perhaps it's not -- other recording spaces are not readily available, then we always anticipated that we wouldn't perhaps need to establish locations of our own. So what we've actually done, and this is, I guess, where Bruce is driving with this question, is that in Italy and Germany and some other locations, we've actually created dubbing studios. But these dubbing studios look very different from the sort of traditional is. As I say, they're much more productive. They're much lower cost. They're much more scalable. And for us, the rationale for whether we have a physical location or not, hinges on a number of considerations, not least of which is local employment legislation and the expectations of unions that can be instrumental in the way in which the dubbing industry operates in particular countries. So we have to take on board their particular stipulations and make sure that we can be compliant with those not that they're satisfied their preconditions on that. But that's very different from us going out and building or buying traditional fully fledged dubbing studios.

And how does the competition more than the business during this time with you as a competitor, have they built some software solutions?

Yes. So the question is how the traditionally and essentially sort of jumped on that bandwagon then created their own software. So during the pandemic, we saw -- when it wasn't possible for people to travel to recording studios or to be in close proximity with others. So that sort of broke that traditional studio model, whereas obviously our model where typically our voice actors and directors will be in a single person in a single location doing their work. So we were able through that pandemic, we were able to continue to work unaffected, whereas our -- and they variously came up with their own solutions to try and circumvent that particular challenge. But we are not aware of any company that has developed any effects, and end-to-end dubbing, media localization and media services production platform in the way that we have that. So we still believe that ZOOdubs which is our dubbing platform is uniquely positioned in the market and has some significant benefits.

And the last question [indiscernible] so how do you see that impact on our business for positive [indiscernible] from how we're using it [indiscernible] disrupting out opportunity.

Yes, thanks. So the question was about artificial intelligence. Is it -- were the pros and cons, is it a threat? Is it an opportunity? Yes. So this is a topic that we've covered in the annual report, and you'll find it there, and we have covered it in the investor presentation. But just to take you through the key takeaways there. I guess, superficially, AI looks to be this panacea that can be all things to all men and solve all source problems. And certainly, there are tens of companies out there promoting software that apparently can dub things into different languages and subtitling things and so on. So I guess I would say a couple of things. The first is that in our industry, ZOO is the innovator. So the handful of end-to-end vendors that ZOO comes from a background as a technologist and has innovated and created, as I say, the first ever cloud-based subtitling platform, the first ever cloud-based dubbing platform. And is -- and the company is therefore ideally placed to recognize where -- whether or not AI could be of benefits to what we do and how we do it. And if so, to exploit it in a way that meets the requirements of our customers. So I think the first thing is that if AI is going to be a thing in our industry, then you can expect ZOO to be right the forefront of its adoption and decline. So that's the first thing that I would say. The next thing I would say is that it's important to recognize that what ZOO does is serve the needs of major media companies, whose requirements top of their list of requirements is quality and authenticity. And the material that we are working with and that they are producing is entertainment content. Its purpose is to entertain. And I think as speakers of English living here in England or indeed those live in the U.S. We've lived through life being exposed predominantly to English original programming. So we're not real -- we're not traditionally big consumers of foreign content. But if you were -- if you lived in a different country where lots of your content that's on screens comes from other countries, then obviously, you care very much about the quality of its localization because that is how you experience that. So I guess the point I want to make is that the experience of someone who is consuming content that was made in a different language from the language that they speak, is that language adaptation is quality and authenticity is just as important as the quality and authentic of the original program. So if a studio has spent a lot of money really thinking very hard and carefully and crafting the words in the script, the original scrip that they have to speak and carefully selecting the actors costing them to make sure that the actors who were playing a part are going to be authentic and so on and producing all that. Well, there's a degree of care and attention is necessary. And this industry has always been applied when it comes to the localization. So best to say that actually, the bar is high. And the question then is when it comes to AI is can AI deliver a result that matches those quality expectations of its consumers in the kind of content that ZOO works on. And our judgment at the moment is no. So we don't see right now ZOO display -- sorry, we don't see at the moment, AI displacing ZOO's traditional processes. However, we do see AI as a very significant opportunity to use in situations where it can actually add value. So I think treating it as a panacea, it's never going to work out. But if you can identify specific cases were actually for this particular thing. So for example, transcribing programs, so one of the first things that we do when we were in a project for a customer is to take the program into the regional language and essentially sort of reverse engineering the script for that program. So determine all the words, who set them, what the setting was and so on with annotations. And so we're now using -- we now use AI on a daily basis to help us with that job. So we've made that process much more efficient, much more scalable. And it's very advantageous to us. And obviously, our customers will in due course benefit from that, too. So there's an instance where the technology actually now has got to a point where it works very well, and we can apply it and our [indiscernible] knowledge and understanding not only of the domain, namely media localization. But also the technology as technologies means that we're kind of ideally placed to take advantage of that. So I guess the short answer is that we see AI as being an opportunity and not the threat that I know some investors fear it is. Any other questions from anyone here? Good. Question has been submitted online. It is, you paint a very detailed picture of the market but have yet to generate ongoing profits from this market. What confidence can you give to shareholders that you have a business which can generate good profits consistently in the future? Phil, I think it's time for you to take a question. Here you go.

It's a very good question. I think the first point I'd make is if you go back to FY '23, the company was very profitable. We got caught out last year, as Stuart has gone into great detail. So I won't labor the point about the strikes and capacity issues. But during the course of last year, we did take 180 people out of our business. We have rightsized it for the current year's expectations. And we have announced that today that in the first half of the year will be at least EBITDA breakeven and we expect a stronger second half. So our profitability will improve. And to the point that Bruce asked before, we are constantly monitoring our costs to make sure that we can start to generate cash and be a profitable business going forward. So as Stuart has already said, there is a huge opportunity out there with some very large customers who currently we do very little business with. So I think we can probably move the business into profits. And hopefully, over the longer term, make a lot of profit for shareholders.

Thank you for that question. Any final questions before we wrap up. Okay. In which case, I'd just like to thank everyone for coming, all those people who are intended in the room in person who can have a cup of tea now and a biscuit. And for those who've dialed in online, thanks so much for your time, and we'll see you next time.