sumo group plc

34
SUMO GROUP PLC Full Year Results 2020 © 2021 Sumo Group plc. All Rights Reserved. Registered in England No: 11071913 Registered office: Unit 32 Jessops Riverside, Brightside Lane, Sheffield S9 2RX

Upload: others

Post on 16-Oct-2021

16 views

Category:

Documents


0 download

TRANSCRIPT

Page 1: SUMO GROUP PLC

SUMO GROUP PLCFull Year Results 2020

© 2021 Sumo Group plc. All Rights Reserved.Registered in England No: 11071913Registered office: Unit 32 Jessops Riverside, Brightside Lane, Sheffield S9 2RX

Page 2: SUMO GROUP PLC

• Certain statements included or incorporated by reference within this presentation may constitute “forward-looking statements” inrespect of the Group’s operations, performance, prospects and/or financial condition.

• By their nature, forward-looking statements involve a number of risks, uncertainties and assumptions and actual results or events may differ materially from those expressed or implied by those statements. Accordingly, no assurance can be given that any particular expectation will be met and reliance should not be placed on any forward-looking statement. Additionally, forward-looking statements regarding past trends or activities should not be taken as a representation that such trends or activities will continue in the future. No responsibility or obligation is accepted to update or revise any forward-looking statement resulting from new information, future events or otherwise. Nothing in this presentation should be construed as a profit forecast.

• This presentation does not constitute or form part of any offer or invitation to sell, or any solicitation of any offer to purchase any shares or other securities in the Company, nor shall it or any part of it or the fact of its distribution form the basis of, or be relied on in connection with, any contract or commitment or investment decisions relating thereto, nor does it constitute a recommendationregarding the shares and other securities of the Company. Past performance cannot be relied upon as a guide to future performance and persons needing advice should consult an independent financial adviser.

• Statements in this presentation reflect the knowledge and information available at the time of its preparation. Liability arising from anything in this presentation shall be governed by English Law. Nothing in this presentation shall exclude any liability under applicable laws that cannot be excluded in accordance with such laws.

DISCLAIMER

Page 3: SUMO GROUP PLC

FY20 results ahead of market expectations

INTRODUCTION

Slide 3

Very strong market backdrop

Continuing strong and resilient performance through COVID-19 pandemic

3-star accreditation in B’Heard Engagement survey

Acquisitions of:

• Lab42 (May 2020)

• Pipeworks (October 2020)

• PixelAnt (January 2021)

Launch of Secret Mode in March 2021

FY21 very positive outlook

Sumo Group plc

Key messages:

Growth in headcount to 1,043 at December 2020 up 277 from December 2019

Our people

Acquisitions

Secret Mode

Visibility of 2021 development fees

Page 4: SUMO GROUP PLC

489

592

766

1043

415488

634

869Total heads

Direct heads

SUMO GROUP SINCE THE IPO

28.6

38.7

49

68.9

8.4 10.214.1 16.5

Number of people

Year end studios: 5 7 10 12 13 (March 2021)December 2018 December 2019 December 2020

Revenue (in £m)

Adjusted EBITDA (in £m)

Sumo Group plc

Slide 4

Revenue CAGR since 2017

Adjusted EBITDA CAGR since 2017

Organic revenue growth 2019 to 2020

>34%

>25%

24%

December 2017

Acquisitions:

.0

Page 5: SUMO GROUP PLC

FEB MAR JUN JUL AUG SEP NOVJAN ‘20 APR OCTMAY DEC

OWN

-IP

CLIE

NT-

IP

ANNOUNCED

NOW WORKING ON MORE THAN 40 PROJECTS WITH 28 DIFFERENT CLIENTS OF WHICH EIGHT ANNOUNCED(UP FROM 21 PROJECTS WITH 12 DIFFERENT CLIENTS AT APRIL 2020)

THE YEAR IN LAUNCHES AND ANNOUNCEMENTS

Slide 5

Sumo Group plc

Page 6: SUMO GROUP PLC

AWARD WINNING

Slide 6

Sumo Group plc

Page 7: SUMO GROUP PLC

LONG TERM CONTRACTED REVENUESumo Digital

Slide 7

ContractedNear-Contracted

JAN FEB MAR APR MAY JUN JUL AUG SEPT OCT NOV DEC JAN FEB MAR APR MAY JUN JULY AUG SEPT OCT NOV DEC JAN FEB MAR APR MAY JUN JUL AUG SEPT OCT NOV DEC

85% 60% 35%

2021 2022 2023

Page 8: SUMO GROUP PLC

LONG TERM CONTRACTED REVENUE

Pipeworks

Slide 8

ContractedNear-Contracted

JAN FEB MAR APR MAY JUN JUL AUG SEPT OCT NOV DEC JAN FEB MAR APR MAY JUN JULY AUG SEPT OCT NOV DEC JAN FEB MAR APR MAY JUN JUL AUG SEPT OCT NOV DEC

2021 2022 2023

50% 24% 11%

Presenter
Presentation Notes
Key Highlights on the Rationale for the deal has very strong strategic alignment
Page 9: SUMO GROUP PLC

Working remotely • All studios have been working remotely for 12 months

Maintaining our culture

• Caring and homeschooling support• Over 8,000 care packages shipped to our people • Coffee mornings, Yoga evenings, quiz nights, movie nights, etc.• Mental health first aid support

Government support measures • Have not taken any and do not expect to do so

Return to the studios • Managed re-opening of studios with greater flexibility

COVID-19 UPDATE

Slide 9

Sumo Group plc

Page 10: SUMO GROUP PLC

IMPACT OF COVID-19

Successful milestone deliveries: 7/7Successful milestone deliveries: 4/4Successful milestone deliveries: 7/7Successful milestone deliveries: 9/9

Successful milestone deliveries: 4/4

Slide 10

Operating effectively• Operational effectiveness maintained in all tracked projects whilst remote working

• Successfully delivered 279 milestones in 2020

• Project closure more challenging

Sumo Group plc

Page 11: SUMO GROUP PLC

FINANCIAL HIGHLIGHTS

1. Adjusted gross profit is calculated as statutory gross profit adjusted for net investment in co-funded games expensed

2. Adjusted gross margin is now calculated as adjusted gross profit as a percentage of revenue and Video Games Tax Relief

3. Adjusted EBITDA is set out later in this presentation

4. Adjusted gross profit, adjusted gross margin and adjusted EBITDA are non-GAAP metrics used by management and are not an IFRS disclosure

5. Some figures in this presentation have been rounded to one decimal place

£68.9m+ 40.7%

Revenue

(FY19: £49.0m)

£31.7m+ 25.8%

Adjusted gross profit

(FY19: £25.2m)

41.8%

(FY19: 44.8%)

£12.7m

Cash flows from operating activities

(FY19: £16.3m)

£6.8m

Net cash

(Dec 19 £12.9m & Jun 20 £15.2m)

£16.5m+ 17.1%

Adjusted EBITDA

(FY19: £14.1m)

Utilisation (Group)

Development fee visibility

Sumo Digital: 85%Pipeworks: 50%

(FY19: Sumo Digital 73%)

Adjusted gross margin(New definition)

92.6%

(FY19: 95.8%)

Slide 11

Sumo Group plc

Page 12: SUMO GROUP PLC

FY20 FY19 YoY growth

£m £mClient-IP

Development 55.4 31.3

Royalty 1.3 1.3

Own-IP

Development 9.9 16.0

Royalty 1.9 - Significant Own-IP Royalties

Game revenues 0.4 0.4

Total revenue 68.9 49.0 40.7%

Client-IP 82% 67%

Own-IP 18% 33%

Client-IP: Strong track record of creating high quality content for publishers and likely to continue to represent majority of revenue

Own-IP: Longer term monetisation opportunity and range of project sizes with larger projects entirely or mainly funded by publishers

Overall mix of Client-IP & Own-IP will vary depending on project mix and status during the financial period

REVENUESumo Group plc

Slide 12

Page 13: SUMO GROUP PLC

STATUTORY AND ADJUSTED GROSS MARGIN

FY20 FY19£m £m

Revenue 68.9 49.0

VGTR 6.9 7.4

Revenue + VGTR 75.9 56.3

Statutory gross profit 31.5 23.9

Investment in co-funded games expensed 0.2 1.3

Adjusted gross profit 31.7 25.2

Statutory gross margin 45.7% 48.9%

Adjusted gross margin 41.8% 44.8%

Slide 13

Sumo Group plc

RoyaltiesNow incur costs to generate royalties so no longer exclude royalty income in Adjusted Gross Margin.

VGTRVGTR a proxy for revenue in UK – No equivalent in Oregon.

Pipeworks• Considered cost classification following

acquisition.• Tend to use more contractors.• Gross margin is lower than Sumo Digital.• Underlying gross profit per direct head at least

in line with Sumo Digital.

Underlying gross marginUnderlying Adjusted Gross Margin remains strong at 43.2% - after Snake Pass 2 and holiday pay accrual flagged at H1. 2.5 months of Pipeworks has 1% impact on gross margin.

Page 14: SUMO GROUP PLC

ADJUSTED EBITDAFY20 FY19

£m £m

Statutory operating profit 1.3 7.5

Amortisation 2.1 0.8 £1.7m Pipeworks – expected to be £4.5m in 2021 and £4m in 2022

Depreciation 3.5 2.2

Share based payments 5.0 2.7

Investment in co-funded games expensed 0.2 1.3

Operating lease costs capitalised under IFRS 16 (1.5) (0.9)

Foreign currency derivative contracts (1.0) -

Exceptional items 4.1 0.5 Transaction fees

Fair value loss on contingent consideration 2.7 -

Adjusted EBITDA 16.5 14.1

Adjusted EBITDA margin 23.9% 28.7%

Slide 14

Sumo Group plc

Expect H2 weighting once more in 2021

Page 15: SUMO GROUP PLC

CONSOLIDATED CASH FLOW STATEMENTY/e 31 December FY20

£mFY19£m

Operating profit 1.3 7.6

Depreciation 3.5 2.2

Amortisation 2.2 0.8

Fair value loss on contingent consideration 2.7 -

Share based payment charge 5.0 2.6

Movement in trade and other receivables (3.7) 1.8 FY19 contract unwind

Movement in trade and other payables 1.7 1.3

Net cash flow from operating activities 12.7 16.3

Net finance (costs) (0.3) (0.2)

Tax received / (paid) 0.6 (1.6)

Purchase of intangible assets (1.4) (0.8)

Capex (4.3) (3.3) Expect c£7.5m in 2021 including £2.5m at Pipeworks

Acquisitions (25.3) - Acquisition of Lab42 and Pipeworks

Net proceeds from issue of shares 13.1 - Placing in July 2020

Proceeds of borrowings 14.2 -

Repayment of borrowings (10.0) -

Outflow of financial debt – IFRS 16 (1.0) (1.0)

Net cash (outflow)/inflow (1.7) 9.4

Slide 15

Sumo Group plc

Page 16: SUMO GROUP PLC

WORKING CAPITALJune 2019£m

December 2019£m

June 2020£m

December 2020 £m

Revenue in excess of billings

“Contract 1” 2.3 1.3 1.6 -

Other 3.3 6.9 4.8 9.2

Trade debtors 11.1 5.8 6.9 10.3

Work in progress 0.8 0.7 0.1 -

VGTR 10.0 5.7 6.5 7.4

Other 1.8 3.2 3.7 4.1

29.3 23.6 23.6 31.0

Trade creditors (6.3) (3.1) (2.3) (4.2)

Contract liabilities (0.8) (0.4) (0.5) (0.9)

IFRS 16 lease liabilities < 1 year (1.0) (0.8) (1.3) (1.4)

Other provisions (7.5) (9.9) (8.9) (14.5)

(15.6) (14.2) (13.0) (21.0)

Net working capital (exc. IFRS16 lease liability) 14.7 10.2 11.9 11.4

Net cash 4.3 12.9 15.2 6.8

Slide 16

Sumo Group plc

Page 17: SUMO GROUP PLC

CONSOLIDATED BALANCE SHEETSDecember 2020 December 2019

£m £m

Goodwill and intangibles 102.2 24.0 Goodwill on acquisition of Pipeworks

PPE 20.6 11.7

Deferred tax asset (net) 0.3 2.5

Trade and other receivables 31.0 23.7

Cash 10.8 12.9

Trade and other payables (21.0) (14.2) Bonus provision and VGTR payable

Borrowings (4.0) - $5.5m debt in US

Corporation tax (payable) / receivable (0.4) 0.7

IFRS 16 lease liabilities > 1 year (12.3) (6.5)

Contingent consideration (31.3) - Pipeworks

Net assets 95.9 54.8

Slide 17

Sumo Group plc

Page 18: SUMO GROUP PLC

CLIENT AND PROJECT CONCENTRATION

FY 17 FY 18 FY 19 FY 20A 1ST 2 PROJECTS 2ND 2 PROJECTS 3RD 5 PROJECTS

B 2ND 1 PROJECT

C 3RD 3 PROJECTS 1ST 3 PROJECTS 1ST 2 PROJECTS 2ND 3 PROJECTS

D 3RD 1 PROJECT

E 2ND 2 PROJECTS

F 3RD 3+ PROJECTS 1ST 3+ PROJECTS

6 PROJECTS58%

6 PROJECTS53%

7 PROJECTS64%

11 PROJECTS48%

3 clients each >10% 4 clients each >10% 4 clients each >10% 2 clients each >10%

CLIE

NT

FY20 includes Pipeworks post-acquisition

Slide 18

Sumo Group plc

Page 19: SUMO GROUP PLC

Little Big Planet 3(Sony Interactive Entertainment)

FORZA HORIZON 4STEAM SKU(Microsoft)

HOOD(Focus Interactive)

LITTLE ORPHEUS(Sumo Own-IP)

Unannounced(2K)

Unannounced(Dapper Labs)

FOOTBALL MANAGER 21(Sports Interactive)

HUMAN FALL FLAT(Curve Digital) NEW-IP

WORK-FOR-HIRE(Sumo Insourcing)

Sackboy: A Big Adventure

(Sony Interactive Entertainment)

NEW-IP NEW-IP NEW-IP CO-DEVELOPMENT CO-DEVELOPMENT CO-DEVELOPMENT WORK-FOR-HIRE

WORK-FOR-HIRE(Sumo Insourcing)

Unannounced(2K) CO-DEVELOPMENT CO- DEVELOPMENT AAA FRANCHISE WORK-FOR-HIRE WORK-FOR-HIRE CO-DEVELOPMENT WORK-FOR-HIRE

Unannounced(2K) CO-DEVELOPMENT WORK-FOR-HIRE WORK-FOR-HIRE WORK-FOR-HIRE

NEW-IP WORK-FOR-HIRE

AAA FRANCHISE WORK-FOR-HIRE

AAA FRANCHISE

WORK-FOR-HIRE

ANNOUNCED UNANNOUNCED

Slide 19

LIVE PROJECTS (1 of 2)Sumo Group plc

Page 20: SUMO GROUP PLC

• Responsibility for publishing Sumo IP: Spyder, Little Orpheus, Snake Pass, Dear Esther, Prominence Poker, Pass the Punch

• Commercial outlet for creative Own-IP games from within the group

• Opportunity to publish small games from indie developers

Rival Peak(Facebook)

Magic The Gathering -

Spellslingers(Wizards of the

Coast)

Prominence Poker

(Pipeworks Own-IP)

+ MULTIPLE UNANNOUNCED LIVE PROJECTS

Mortal Kombat 11 - DLC

(NetherRealm / WB Games)

Minecraft Earth (Microsoft)

Halo Infinite(XBOX Game

Studios)

Puzzle Combat

(Small Giant Games / Zynga)

Player Unknown’s

Battlegrounds(PUBG Corp)

Call of Duty: Black Ops Cold

War(Activision /

Treyarch)

+15 OTHER LIVE PROJECTS INCLUDING:

MULTIPLE AAA NEW-IPMULTIPLE AAA LICENSED IP

LIVE PROJECTS (2 of 2) ANNOUNCED UNANNOUNCED

Slide 20

Sumo Group plc

Page 21: SUMO GROUP PLC

PEOPLE31 December

201930 June

202031 December

2020

Direct

Sumo Digital + Atomhawk 634 686 741

Pipeworks - - 128

Total 634 686 869

Indirect 132 146 174

Total headcount 766 832 1,043

• Acquisitions – Lab42 team of 29 and Pipeworks team of 134

Slide 21

Sumo Group plc

• Attrition rates – 9.26% in UK (2019: 8.59%), 8.34% in India (2019: 11.45%), and 9.17% for Group (2019: 9.21%)

• Utilisation – 95.7% in UK (2019: 96.9%), 79.3% in India (2019: 91.3%), and 92.6% for Group (2019: 95.8%)

• Enhanced and flexible benefits arrangements

Page 22: SUMO GROUP PLC

ENVIRONMENTAL, SOCIAL AND GOVERNANCE

PLC Board approval of approach &

structure

March 2020

Social element can have the greatest

impact

3-star accreditation in B’Heard

Engagement survey

Sumo Digital Academy update

First Streamlined Energy and Carbon

Report in 2020 Annual Reports and

Accounts

IT security progress towards ISO 27001

accreditation

Slide 22

Sumo Group plc

Page 23: SUMO GROUP PLC

THE MARKET

£7bnin 2020

Sumo is well positioned to benefit from that increased demand

The UK games market is valued at

30% increase on 2019 figures

Slide 23

Sumo Group plc

Increased digital production

More platforms & delivery models

Backwards compatibility has resulted in smoothing of console life cycles

Increased demand for high-quality creative output

in 2020

The global games market was valued at

$174.9bn

in 2021

$196bn

Source: Ukie/Newzoo

Page 24: SUMO GROUP PLC

STRATEGY AND THE NEXT 12 MONTHS

Slide 24

Sumo Group plc

More great games

• Client-IP• Own-IP• Secret Mode

Acquisitions

• Services• Geographies• Clients• Publishers

Continued organic growth

• New studios• Accelerated organic growth• Publishing

Page 25: SUMO GROUP PLC

APPENDICES

Slide 25

Page 26: SUMO GROUP PLC

FINANCIAL CALENDAR

Publication of Annual Reports and Accounts May 2021

Annual General Meeting June 2021

Announcement of half-year results September 2021

Financial Year End 31 December 2021

Slide 26

Appendices

Page 27: SUMO GROUP PLC

THE TEAM

• Co-founded Sumo Digital in 2003

• Over 20 years of industry experience having previously been VP of Development at Infogrames

• 2015 recipient of the TIGA Most Outstanding Individual Award

• Led secondary buy-out with Perwyn in 2016

Carl Cavers Co-Founder & Chief Executive Officer

• Co-founded Sumo Digital in 2003

• Over 25 years of industry experience having previously been Head of Core Technology at Gremlin Interactive

• Previously Managing Director of Sumo Digital

• Appointed COO in April 2019

Paul PorterCo-Founder & Chief Operating Officer

• Big Four qualified chartered accountant with c.30 years post-qualified experience as Finance Director, Non Executive Director and Consultant. Previously worked in M&A with Rothschild

• Experience of PLC and Private Equity roles including as Group Finance Director of WYG plc and as Non Executive Director and Chair of the Audit Committee of Sweett Group plc

• Appointed CFO in 2017

David WiltonChief Financial Officer

Slide 27

Appendices

Page 28: SUMO GROUP PLC

OUR COMPETITIVE ADVANTAGE

Enable us to offer flexible, end-to-end turnkey and co-development solutions for publishers and other developers.

SCALEMANAGEMENTSYSTEMS

TECHNOLOGYOUR PEOPLE:GAME DEVELOPMENT

AND CREATIVE SERVICES

Slide 28

Appendices

Page 29: SUMO GROUP PLC

THE SUMO BUSINESS MODEL

£LONG-TERM CONTRACTS MILESTONE PAYMENTS

LOWER RISK CONTRACTING

MODEL

Deeply embedded with our clients due to knowledge of IP, or use of Sumo’s proprietary technology: often both!

Slide 29

Appendices

Page 30: SUMO GROUP PLC

v

THE SUMO CORE DEVELOPMENT REVENUE MODELVisibility of development fees with upside from back-end royalties

Contracted Development Fees – Paid on a 4-6 week development cycle based on milestones

Royalties

Concept & Pre- Production Production and Finalisation Downloadable Content & Games as a Service

Sumo control production and delivery…

Illu

stra

tive

Pro

jec

t

… and share in upside on strategic projects

Revenue – Development Fees (LHS) Revenue – DLC (LHS) Revenue – Royalties (LHS)

100

200

300

400

500

600

700

800

900

1,000

Reve

nue

and

cost

pro

file

’000

)

T10T0 T1 T2 T3 T4 T5 T6 T7 T8 T9 T11 T12 T13 T14 T15 T16 T17 T18 T19 T20 T21 T22 T23 T24 T25 T26 T27 T28 T29 T30 T31 T32 T33 T34 T35 T36 T37 T38 T39 T40 T41 T42 T43 T44 T45

Slide 30

Appendices

Page 31: SUMO GROUP PLC

THREE TYPES OF CONTRACT

Contract type Game Development(Turn Key or Co-Dev)

Own-IP – Game revenues

Original concept creation developed in partnership with third party

Funding Publisher Sumo or third party Co-funded with or fully funded by partner

Control of IP Publisher Sumo Publisher(Sumo may retain legal ownership)

Payment model Milestones payments plus royalties as earned

Game sale revenues or guaranteed royalty (if developed by a third party)

Milestones and royalties

Accounting

Development fees recognised using estimate of contract margin & percentage of completion

Royalties earned subject to IFRS 15 recognition principles

Development costs expensed as incurred

Recognise revenue as earned or guaranteed royalties as contractual obligation triggered

Capitalise development costs as intangible asset with regular impairment reviews (IAS 38)

Development fees as for publisher funding

Sumo investment expensed as incurred

Slide 31

Appendices

Page 32: SUMO GROUP PLC

ANALYSTS AND SHAREHOLDERS

Significant shareholders Number of shares % Holding

Perwyn Bidco (UK) II Limited 26,170,961 15.3%

Mount Emei Investment (Tencent) 15,000,000 8.8%

BlackRock Inc 14,395,963 8.4%

Directors & related holdings 11,725,597 6.8%

Lake Street Labs Topco, LLC 9,893,940 5.8%

Swedbank Robur Fonder AB 9,028,477 5.3%

Liontrust Investment Partners LLP 8,000,000 4.7%

Premier Miton 7,584,602 4.4%

Schroder Investment Management 6,500,000 3.8%

Total number of shares in issue 170,757,758

The analysts who have published research on Sumo:

The shareholders who own Sumo:

Ross Broadfoot Patrick O’Donnell

Bob Liao Benjamin May

James Lockyer Ken Rumph

Katie Cousins Andy Bryant

Steve Robertson Natasha Brilliant

Bridie Barrett Alasdair Young

Slide 32

Appendices

Page 33: SUMO GROUP PLC

SHARE BASED PAYMENTS

Management incentive schemesFY18 FY19 FY20 FY21 FY22 FY23

Actual £m

Actual£m

Actual£m

Forecast£m

Forecast£m

Forecast£m

Nil cost options at or after IPO 0.8 0.4 - - - -

LTIP awards 2.1 2.2 4.9 2.3 0.9 0.4

Share Incentive Plan 0.1 0.1 0.1 0.1 0.0 -

Total 3.0 2.7 5.0 2.4 0.9 0.4

• FY20 reflects vesting percentage for 2018 – 2020 LTIP.• Cost includes IFRS2 charge and NI cost before deferred tax credit.• Existing LTIP awards only.

Slide 33

Appendices

Page 34: SUMO GROUP PLC

THANK YOU

© 2021 Sumo Group plc. All Rights Reserved.Registered in England No: 11071913Registered office: Unit 32 Jessops Riverside, Brightside Lane, Sheffield S9 2RX