Management says Sumo Group’s (SUMO) first results since its December IPO are complicated. True. Sumo – which provides development services to the video games industry – listed 10 days before the financial year-end, having previously been majority-owned by private equity firm Perwyn. The preliminary numbers reflect its formerly leveraged structure and pre-flotation restructuring.
Still, these figures tell a story of organic growth within the core Sumo Digital business, and a £1.3m sales contribution from Atomhawk – a visual design company purchased last June. Sumo also launched its first own IP title, ‘Snake Pass’, generating £1.7m in sales. Group-wide, the 27 per cent rise in the top line may seem a drop in the $113bn video games industry ocean, but it trumps the market’s growth rate of 8 per cent.
The gross margin improved from 37.4 per cent to 43.3 per cent, supported by higher video games tax relief. That said, it wasn’t all rosy. Sumo changed how it calculates the useful economic life of intangible assets, leading amortisation charges to rise to £27.6m, from £3.7m in 2016. Pre-tax losses thus worsened considerably. Even so, with net cash of £12.9m, new acquisitions may materialise – a criterion of which could be to strengthen cash profits.
Zeus Capital forecasts adjusted pre-tax profits of £9.1m and EPS of 4.9p for 2018 – up from £7.5m and 4.2p, respectively, last year.
| SUMO GROUP (SUMO) | ||||
| ORD PRICE: | 111p | MARKET VALUE: | £166m | |
| TOUCH: | 111-114p | 12-MONTH HIGH: | 120p | LOW: 93p |
| DIVIDEND YIELD: | nil | PE RATIO: | na | |
| NET ASSET VALUE: | 27p* | NET CASH: | £12.4m | |
| Year to 31 Dec^ | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2014 | 16.1 | 0.03 | n/a | n/a |
| 2015 | 21.6 | 2.39 | n/a | n/a |
| 2016 | 24.1 | -2.11 | -0.9 | nil |
| 2017 | 30.6 | -28.0 | -16.9 | nil |
| % change | +27 | - | - | nil |
| Ex-div: | na | |||
| Payment: | na | |||
| *Includes intangible assets of £28.2m, or 19p a share. ^IPO in Dec 2017; 2016 figures are unaudited and shown on a pro-forma basis and EPS on a post-IPO capital structure. | ||||
