SUMO GROUP PLC UNAUDITED HALF YEAR RESULTS 2019
01 DISCLAIMER Certain statements included or incorporated by reference within this presentation may constitute “forward-looking statements” in respect 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 recommendation regarding 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.
02 INTRODUCTION H1 19 results in line Strong growth in Mobile focussed with expectations Acquisition of headcount to 711 at Leamington Spa with significant Red Kite Games in end of August – 20% studio opened in H2 weighting as January 2019 increase from March 2019 previously flagged December 2018 Current trading in Two Own-IP games Announcement of announced for release: line with work with 2K at Strong cashflow management • Pass the Punch Sheffield and performance YTD expectations and Red Kite Games • Dear Esther iOS outlook positive Appointment of Ian Livingstone as Chairman
03 FINANCIAL HIGHLIGHTS ALL FIGURES IN THIS PRESENTATION ARE UNAUDITED UNLESS STATED OTHERWISE Adjusted gross margin Adjusted gross profit Revenue Utilisation (Group) excluding royalties £20.8m £9.8m 46.3% 94.8% +7.5% +13.7% (H1 18: 43.6%) (H1 18: 93.2%) (H1 18: £8.6m ) (H1 18: £19.3m) Contracted/near-contracted Net cash Adjusted EBITDA Cash flow from operations development fees £4.3m £3.5m 94.6% 2019 £5.2m June 2019 41.1% 2020 +4.5% (H1 18: £(3.4m) outflow) (Dec 18 £3.7m) at September 2019 (H1 18: £5.0m) Definition of financial terms shown in the appendix
04 CONSOLIDATED INCOME STATEMENT H1 19 H1 18 FY 18 YoY growth Notes Y/e 31 December £m £m £m Revenue Core development fees 20.4 18.9 37.5 Own IP 0.1 0.3 0.4 Snake Pass launched March 2017 FY 18 includes £0.2m recognition of Royalties 0.3 0.1 0.8 variable consideration under IFRS 15 Total Revenue 20.8 19.3 38.7 7.5% Includes IFRS 15 adjustment of £0.2m in H1 18 Adjusted revenue 20.8 19.6 38.9 6.1% and FY 18 Adjusted gross profit 9.8 8.6 18.8 13.7% Gross Margin 44.8% 43.1% 47.6% Adjusted gross margin excluding royalties 46.3% 43.6% 47.6% Adjusted EBITDA 5.2 5.0 10.4 4.5% Adjusted EBITDA margin 25.1% 25.5% 26.8% Profit / (loss) before tax 1.3 (2.1) (0.9)
05 REVENUE AND GROSS PROFIT Revenue Gross profit H1 19 H1 18 FY 18 H1 19 H1 18 FY 18 £m £m £m £m £m £m Statutory 20.8 19.3 38.7 9.3 8.3 18.4 Customer revenue included - 0.3 0.4 - 0.3 0.4 within finance income Accrued royalty not yet received - - (0.2) - - (0.2) and contingent on future sales Investment in co-funded - - - 0.5 - 0.2 games expensed Adjusted 20.8 19.6 38.9 9.8 8.6 18.8
06 EBITDA H1 19 H1 18 FY 18 £m £m £m Statutory operating profit / (loss) 1.4 (2.1) (1.1) Amortisation 0.5 5.0 6.9 Depreciation 1.0 0.5 1.1 Share based payments charge after prior year adjustment 2.0 1.3 3.0 Customer revenue included within finance income - 0.3 0.4 Accrued royalty not yet received and contingent on future sales - - (0.2) Investment in co-funded games expensed 0.5 - 0.2 Operating lease costs capitalised under IFRS 16 (0.5) - - Exceptional items (transaction fees) 0.3 - 0.1 Adjusted EBITDA 5.2 5.0 10.4
07 CONSOLIDATED BALANCE SHEET June 2019 June 2018 December 2018 Notes £m £m £m Goodwill and intangibles 23.4 23.4 22.4 Additions include computer hardware £1.1m and PPE 8.2 2.6 2.5 IFRS 16 right of use asset £5.3m Deferred tax asset 2.7 1.7 2.0 Trade and other receivables 29.3 18.2 25.2 Cash 4.3 6.5 3.7 No debt. Cash at end August 2019 £8.9m Trade and other payables (15.6) (11.0) (11.5) Corporation tax payable (0.7) (0.9) (0.8) IFRS 16 lease liabilities > 1 year (4.0) - - Net assets 47.6 40.5 43.5 Positive net tangible assets
08 TRADE AND OTHER RECEIVABLES & TRADE AND OTHER PAYABLES June 2019 June 2018 December 2018 £m £m £m Revenue in excess of billings Contract 1 2.3 5.3 7.8 Contract 2 2.3 Contract 3 - 2.6 - Contract 4 - - 1.9 Other 1.0 0.5 1.6 Trade debtors* 11.1 2.7 5.9 Work in progress 0.8 - - VGTR 10.0 5.7 6.3 Other 1.8 1.4 1.5 29.3 18.2 25.2 Trade creditors (6.3) (3.8) (4.6) Contract liabilities (0.8) (1.0) (0.5) IFRS 16 lease liabilities > 1 year (1.0) - - Other provisions (7.5) (6.2) (6.4) (15.6) (11.0) (11.5) *Includes £3.5m for Contract 1 for which cash was received 9 July 2019
09 WORKING CAPITAL £16.0 £14.0 £12.0 £10.0 £m £8.0 £6.0 £4.0 £2.0 £0.0 Jun-18 Dec-18 Jun-19 Aug-19 Cash Net Working Capital June 2018 December 2018 June 2019 August 2019 £m £m £m £m Net contract debtors 10.1 16.9 16.7 11.3 VGTR 5.7 6.3 10.0 5.3 Other debtors 1.4 1.5 1.8 1.0 Trade creditors (3.8) (4.6) (6.3) (2.3) Other creditors* (6.2) (6.4) (7.5) (6.3) Net working capital 7.2 13.7 14.7 9.0 Cash 6.5 3.7 4.3 8.9 *Excludes IFRS 16 liability
10 CONSOLIDATED CASH FLOW STATEMENT H1 19 H1 18 FY 18 Notes Y/e 31 December £m £m £m Operating profit / (loss) 1.4 (2.1) (1.1) Depreciation 1.0 0.5 1.1 Amortisation 0.6 5.0 6.9 Accelerated amortisation in 2018 from 2017 Share based payment charges 2.0 1.3 3.0 Movement in trade and other receivables (4.1) (8.1) (13.7) Movement in trade and other payables 2.6 - (1.1) Net cash flow from operating activities 3.5 (3.4) (4.9) Net finance costs (0.1) - 0.2 Tax paid (0.8) (1.0) (1.7) Capex (1.6) (1.5) (2.2) Outflow of financial debt – IFRS 16 (0.4) Net cash flow 0.6 (5.9) (8.6)
11 GUIDANCE / UPDATE • Tax charge driven by deferred tax on share based payment charge, VGTR and timing of game launches Tax • Net working capital reduced from £14.7m at 30 June 2019 to £9.0m at 31 August 2019 Working capital • Expected inflow in 2019 • Now expecting c £4.5m in 2019 on premises and new systems including audio studio and Leeds Capex • c £5m in FY 20 including audio studio and Newcastle • Expect £0.2m EBITDA in 11 months to December 2019 • Transaction costs £0.1m Red Kite Games • Capital cost of investment low – relocation to Leeds • Significant contracted revenue in US $ as previously flagged Foreign • Hedging in place Currency • Adopted in FY19 using grandfathering , short-term and low-value lease exemptions & modified IFRS 16 retrospective methodology • Impact on EBITDA expected to be c £1m : details in appendix • Expecting significant H2 weighting due to phasing of projects including Own-IP and royalties FY 2019
12 CLIENT AND PROJECT CONCENTRATION FY 2017 FY 2018 H1 2019 A 1ST 2 PROJECTS 2ND 2 PROJECTS 3RD 3 PROJECTS B 2ND 1 PROJECT CLIENT C 3RD 3 PROJECTS 1ST 3 PROJECTS 1ST 3 PROJECTS D 3RD 1 PROJECT E 2ND 2 PROJECTS 6 PROJECTS 6 PROJECTS 8 PROJECTS 58% 53% 65%
13 VIDEO GAMES TAX RELIEF Maintains Included H1 2019: £3.7m broad with Direct political (H1 2018: £3.0m) Costs support
14 RECENT GAMES RELEASED AND GAMES OR CLIENTS ANNOUNCED STRATEGIC PARTNERS
15 LIVE PROJECTS ANNOUNCED UNANNOUNCED SUMO DIGITAL BRIGHTON HUDDERSFIELD SHEFFIELD PUNE, INDIA NOTTINGHAM NEWCASTLE LEAMINGTON ATOMHAWK (THE CHINESE ROOM) (RED KITE GAMES) 275 116 84 51 31 28 13 46 MORTAL KOMBAT NEW-IP SPYDER PASS THE PUNCH LITTLE ORPHEUS 11 - DLC WORK-FOR-HIRE (Focus Home CO-DEVELOPMENT NEW-IP (Apple) (New-IP) (Apple) (NetherRealm/ Interactive) WB Games) MINECRAFT EARTH NEW-IP NEW-IP WORK-FOR-HIRE (Microsoft) NEW-IP CO-DEVELOPMENT WORK-FOR-HIRE +14 OTHER LIVE PROJECTS INCLUDING: NEW-IP PORTING WORK-FOR-HIRE MULTIPLE AAA NEW-IP FRANCHISE MULTIPLE AAA LICENSED IP CO-DEVELOPMENT Headcount figures are studio based staff at 31 August 2019
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