Sumo, Sheffield gaming firm, ‘ahead of expectations’

Shares of Sheffield-based video gaming firm Sumo Group plc rose about 12% on Thursday after it published a trading update saying its its revenue and adjusted EBITDA for the full year ended December 31, 2020, are expected to be ahead of consensus market expectations.

Sumo said it is pursuing a number of acquisition opportunities and new studio locations.

The company’s shares have soared almost 90% over the past 12 months to give it a stock market value of more than £600 million.

Sumo Digital, the group’s primary business, is one of the UK’s largest independent developers of AAA-rated video games, with studios in Sheffield, Newcastle, Nottingham, Leamington Spa, Warrington and Pune, India.

The business has acquired three studios since its IPO, which operate under their own names — The Chinese Room in Brighton, Red Kite Games in Leeds and Lab42 in Leamington Spa.  

The group’s Atomhawk is a visual design company with studios in Newcastle and Vancouver, Canada, servicing the games, film, and visual effects industries.

Its Pipeworks business is a video games developer based in Eugene, Oregon.

In a trading update, Sumo Group said it expects adjusted EBITDA for the year of at least £16 million.

Consensus market expectation for adjusted EBITDA is currently £14.8 million.

“The higher-than-expected results reflect strong performances from Sumo Digital and our latest acquisition, Pipeworks, and higher than expected royalty income, during the year,” said Sumo.

Net cash at 31 December 2020 was ahead of management expectations at £6.8m due to a number of timing effects, which are expected to reverse during 2021.

“Headcount increased to 1,043 at the year-end, including 139 people at Pipeworks and 40 at Lab42, an increase of 277 on the prior year (31 December 2019: 766).”

Sumo Group CEO Carl Cavers said: “The year has been extraordinary in many respects.

“Sumo Group performed very strongly in an already fast-growing market that was further boosted by the effects of the pandemic.

“We are a people business and I’d particularly like to thank all of our people for making our collective response to the pandemic a truly inspirational story which unfortunately isn’t over yet.

“We’re keen to return to some level of normality in our studios in the various countries as the vaccine roll-out progresses. In the meantime, we continue to work well from home and have the ongoing support from our partners to do so.

“We are focused on making great games and continue to operate at good levels of efficiency with no significant delays to production schedules.

We announced or launched a relatively large number of Client-IP and Own-IP games in 2020, including Spyder, Little Orpheus, Sackboy A Big Adventure and Hood.

“We also completed two great acquisitions, Lab42 and Pipeworks.

“I was delighted to welcome both of these teams to Sumo Group and am pleased to report that both businesses are fitting in very well and have performed ahead of our expectations.

“Pipeworks and Genvid announced Rival Peak, a massive interactive live event styled game for Facebook livestream in December.

Our royalty performance in FY 20 is also ahead of our expectations. We recognised royalties on eight games, including two Own-IP.

While our teams across our 12 studios in four countries are nearly all working remotely, in accordance with the relevant local regulations, we continue to manage our studio estate.

“Both our studios in the North East of England and The Chinese Room in Brighton have moved to new larger premises to accommodate our expected growth.

We are also pursuing a number of acquisition opportunities and new studio locations, as well as working hard to recruit more talented people to join our teams globally.”

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Mark McSherry
Dalriada Media LLC sites are edited by veteran news journalist Mark McSherry, a former staff editor and reporter with Reuters, Bloomberg and major newspapers including the South China Morning Post, London's Sunday Times and The Scotsman. McSherry's journalism has also appeared in The Washington Post, The Guardian, The Independent, The New York Times, London's Evening Standard and Forbes. McSherry is also a professor of journalism and communication arts in universities and colleges in New York City. Scottish-born McSherry has an MBA from the University of Edinburgh and a Certificate in Global Affairs from New York University.