The global videogames industry has expanded enormously over the past three decades, but continues to grow at a rapid pace, reaching a value of $135bn (£108bn) in 2018, according to research by market analysts Newzoo. Tapping into that growth is a key priority for Sumo (SUMO), which swung to positive earnings growth at the half year, although the gaming and entertainment developer is expecting to see an improved showing during the second half as development costs linked to various IP projects should start generating revenue.
Sumo has been up-scaling its operations. Headcount grew 15 per cent to 679 at the end of June, climbing to 711 by the end of August. It also acquired work-for-hire studio Red Kite Games in January and opened a mobile-game development studio in March, bringing its total number of studios to nine, up from six at the 2018 half year.
The group’s client concentration is an issue, with the top three accounting for 65 per cent of sales. Management says it does not consider this a major risk, but added that it should decrease over the longer term. After winning Apple (US:AAPL) as a client in late 2018, Sumo announced a partnership with 2K, the publisher behind popular series such as WWE, NBA and Bioshock.
Ian Livingstone CBE, co-founder of Games Workshop (GAW), joined Sumo’s board as non-executive chairman on the day of the results announcement, which broker Peel Hunt characterised as a “stamp of approval”. The broker now forecasts adjusted earnings per share of 6.3p for the full year, up from 5.5p in 2018.
| SUMO GROUP (SUMO) | ||||
| ORD PRICE: | 157p | MARKET VALUE: | £236m | |
| TOUCH: | 156-160p | 12-MONTH HIGH: | 185p | LOW: 105p |
| DIVIDEND YIELD: | nil | PE RATIO: | 101 | |
| NET ASSET VALUE: | 32p* | NET CASH: | £8.9m** | |
| Half-year to 30 Jun | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2018*** | 19.3 | -2.1 | -1.20 | nil |
| 2019 | 20.8 | 1.3 | 0.56 | nil |
| % change | +8 | - | - | - |
| Ex-div: | na | |||
| Payment: | na | |||
| *Includes intangible assets of £23.4m, or 16p a share, **Excludes lease liabilities of £5m, ***Restated | ||||
