TIDMSUMO
RNS Number : 4687H
Sumo Group PLC
25 March 2020
25 March 2020
The information contained within this announcement is deemed by
the Company to constitute inside information stipulated under the
Market Abuse Regulation (EU) No. 596/2014. Upon the publication of
this announcement via the Regulatory Information Service, this
inside information is now considered to be in the public
domain.
SUMO GROUP PLC
("Sumo Group", the "Group" or the "Company")
AIM: SUMO
FCA request for postponement of final results, COVID-19 and
trading update
Sumo Group, the award-winning provider of creative and
development services to the video games and entertainment
industries, confirms that it will comply with the FCA's request
that all listed companies observe a moratorium on the publication
of preliminary financial statements for at least two weeks and
postpone the announcement of the Group's final results for the year
ended 31 December 2019 ("FY19"), which was scheduled for 1 April
2020.
As previously announced on 22 January 2020, FY19 results are
expected to be at least in line with market expectations. The Group
is today providing an update on its unaudited results in FY19, the
effects of COVID-19 and current trading in the year ending 31
December 2020 ("FY20").
Key financials (unaudited):
-- Revenue increased to GBP49.0m (FY18: GBP38.7m) - up 26.6%
-- Adjusted gross margin excluding royalties(1) was 50.2% (FY18:
47.1%) - up 310 bps
-- Adjusted EBITDA(2) was slightly ahead of expectations at GBP14.1m
(FY18: GBP10.2m) - up 37.5%
-- Net cash at 31 December 2019 GBP12.9m (FY18: GBP3.7m)
The Group's liquidity position remains robust with cash balances
of GBP23.6m at 24 March 2020, which includes an amount of GBP10m
drawn down on the Company's GBP13m committed revolving credit
facility.
Current trading and COVID-19
The Group has enjoyed a positive start to the new financial year
ending 31 December 2020 and already has a high degree of earnings
visibility on contracted or near contracted revenue of
approximately 71%.
Our teams are currently working on 21 projects with 12 different
clients, of which seven games or publisher partnerships have been
announced. In February, Curve Digital announced Hotshot Racing, the
arcade-style racing game, and Sega launched console versions of Two
Point Hospital. It was particularly pleasing to see Apple Arcade
launch our co-funded Own-IP game, Spyder, last week, the idea for
which was generated during one of our Game Jams.
We are now facing the unprecedented challenge of dealing with
the COVID-19 pandemic, the scale and nature of which is constantly
changing and, as yet, we have no clear visibility of its likely
duration. Sumo Group is a people business and our absolute priority
is to safeguard, where possible, the well-being of our people,
their families and our other stakeholders. Accordingly, we a re
following UK, Indian and Canadian Governments' advice and
communicating regularly with all our people. Over the last few
weeks and in close co-operation with our clients and with their
consent, we have moved to working from home across the Group.
Whilst there has been some disruption and loss of efficiency, as
project teams were migrated away from our ten studios to remote
Cloud based working from home, early indications are encouraging.
We expect a manageable level of disruption and loss of efficiency
to continue, as we re-calibrate our project management controls and
internal management systems.
Paradoxically, the COVID-19 pandemic is expected to increase
global video games software revenues, as people staying at home
play more games. As such, it is reasonable to expect some
improvement in royalty income on games already published and which
have increased sales or usage with the current restrictions on
movement in many countries. The quantum of such improvement is not
yet clear.
A number of major industry trade events have been cancelled or
postponed across the globe, most notably GDC and E3, and
increasingly severe restrictions are being placed on travel to
protect people worldwide. We are managing to mitigate the loss of
face time through increased use of telephone and video
conferencing. Our efforts are beginning to bear fruit and the Group
is continuing to generate business development opportunities on
major new projects from both existing and potential new
clients.
Prior to COVID-19 being classified as a pandemic and with strong
visibility on development fees , we were confidently on track to
deliver further double-digit growth in 2020 . While the Group is
liquid and our relatively low risk business model provides a good
foundation to withstand the challenges presented by the pandemic,
it is too early to quantify the likely financial impact with any
degree of certainty. Our exposure is primarily on the supply side
with some potential loss of efficiency during the unprecedented
restrictions delaying milestone payments, although the Group is
taking all steps possible to mitigate and limit this risk. We are
also seeing a slow-down in our new talent recruitment rate, which
we expect to continue for the foreseeable future. This is likely to
be partially offset by lower attrition rates.
We look forward to announcing our audited FY19 results in due
course and will provide further updates on trading, as the
situation develops, in a timely manner.
Carl Cavers, Chief Executive Officer of Sumo Group, said:
"Our people are adapting well to home working and we have a
strong and resilient business with GBP23.6m cash and a relatively
low risk business model. Demand for great video games content is
forecast to grow and may even strengthen as a result of the "stay
at home" measures taken to protect our health through the COVID-19
pandemic. As such, we are confident in our strategy and ability to
continue generating strong returns for our stakeholders in the
longer term. We are grateful to our team for their resilience, our
clients for their support and our investors for their
forbearance."
Adjusted gross margin excluding royalties is stated after the
(1) exclusion of royalties and the investment in co-funded games
expensed and is a non-GAAP metric used by management and is
not an IFRS disclosure.
Adjusted EBITDA, which is defined as profit before finance costs,
(2) tax, depreciation, amortisation, exceptional items, share based
payment charge, the investment in co-funded games expensed and,
in 2019, the impact of IFRS 16, is a non-GAAP metric used by
management and is not an IFRS disclosure.
In the FY 18 results adjusted gross profit and adjusted EBITDA
were both stated after adjusting for customer revenue included
within finance income (FY 18: GBP0.4m) and accrued royalty not
yet received and contingent on future sales (FY 18: (GBP0.2m)).
When we announced our half year results on 26 September 2019
we stated that we would not in future be making any adjustments
to gross profit or EBITDA for the effect of IFRS 15.
Enquiries:
Sumo Group plc Tel: +44 (0) 7715 769 078
Carl Cavers, Chief Executive Officer
David Wilton, Chief Financial Officer
Zeus Capital Limited (Nominated Adviser & Joint Broker)
Nick Cowles / Andrew Jones Tel: +44 (0) 161 831 1512
Ben Robertson / John Goold Tel: +44 (0) 203 829 5000
Investec Corporate & Investment Banking (Joint Broker)
David Flin Tel: +44 (0) 207 597 5970
Belvedere Communications Limited
Cat Valentine Tel: +44 (0) 7715 769 078
Keeley Clarke Tel: +44 (0) 7967 816 525
Llew Angus Tel: +44 (0) 7407 023 147
SumoPR@belvederepr.com
About Sumo Group - www.sumogroupplc.com
Sumo Group's businesses provide acclaimed development and design
services to the video games and entertainment industries from
studios in the UK, India, and Canada.
Sumo Digital, as the Group's primary business, is one of the
UK's largest independent developers of AAA-rated video games,
having studios in Sheffield, Newcastle, Nottingham, Leamington Spa,
Warrington and Pune, India. The business has acquired two studios
since IPO, which operate under their own names, BAFTA award-winning
The Chinese Room in Brighton and Red Kite Games in Leeds. Sumo
Digital provides turnkey and co-development solutions to a global
blue-chip client base.
Atomhawk is a multi-award-winning visual design company, with
studios in Newcastle and in Vancouver (Canada), servicing the
games, film and visual effects industries.
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END
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