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Sumo Group sales grow on pandemic boost to video games, acquisitions

Wed, 31st Mar 2021 12:01

(Alliance News) - Sumo Group PLC on Wednesday reported a 40% jump in revenue in 2020 - partly organic and partly from acquisitions - and said the outlook for the video game industry remains "extremely positive".

The Sheffield, England-based provider of creative and development services to the video game industry, said revenue rose to GBP68.9 million in 2020 from GBP49.0 million in 2019. Of that roughly 40% increase, 24 percentage points was from organic growth - with video game use boosted by the dearth of other entertainment outlets during lockdown - and 16 points from acquisitions.

The biggest of these was a USD100 million deal to buy Lake Street Labs Buyer Corp, the owner of US-based video games developer Pipeworks Inc. This was completed in October.

A total of GBP7.3 million in charges related to the Pipeworks purchase reduced pretax profit to GBP900,000 in 2020 from GBP7.4 million the year before. However, adjusted earnings before interest, tax, depreciation and amortisation rose by 17% to GBP16.5 million from GBP14.1 million.

The addition of Pipeworks, a lower margin business to the rest of Sumo, was part of the reason for a reduced gross margin to 45.7% in 2020 from 48.9%.

Sumo said it has good visibility on 2021 revenue, with 85% of budgeted development fees contracted or near-contracted, up from 73% at the same time last year. For Pipeworks, this is 50%, unchanged on a year before.

Sumo didn't declare a dividend, unchanged.

Chief Financial Officer David Wilton, in an interview with Alliance News, said Sumo hasn't been a dividend stock since its debut on AIM in London in 2017. This isn't set to change, he said, despite being cash generative, as Sumo prefers to reinvest in acquisitions and other growth opportunities.

"The year ahead is packed with even more exciting opportunities for our talent to shine, and we are excited about the launch of Secret Mode, our new publishing business, announced earlier this month," Chief Executive Officer Carl Cavers said in the company's statement on Wednesday.

"Our focus remains on delivering further strong growth organically and by acquisition, and the pipeline of opportunities remains strong."

Sumo shares down 4.6% at 345.40 pence near midday on Wednesday.

By Tom Waite; thomaslwaite@alliancenews.com

Copyright 2021 Alliance News Limited. All Rights Reserved.

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