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RNS Number : 5081V
Sumo Group PLC
09 April 2019
 

9 April 2019

SUMO GROUP PLC

("Sumo Group", the "Group" or the "Company")

AIM: SUMO

 

FINAL RESULTS 2018

 

 

Financials

                                                                                       

Reported results

2018

2017

Change

 

 

 

 

£38.7m

£28.6m

35.3%

£18.4m

£13.3m

38.9%

47.6%

46.4%

 

(£0.5m)

(£28.0m)

 

(£6.4m)

£3.3m

 

£3.7m

£12.4m

 

(0.20p)

(389.4p)

 

 

Underlying results

2018

2017

Change

 

 

 

£38.9m

£28.6m

35.9%

£18.8m

£13.3m

41.7%

47.6%

45.4%

 

£10.4m

£8.4m

24.6%

£9.0m

£7.5m

20.2%

 

1

The adjustment to revenue is to include £0.4m of customer revenue included within finance income, and exclude £0.2m of accrued royalty income not yet received and contingent on future sales, following the adoption of IFRS 15.

2

3

4

5

6

 

2018 highlights

 

·

 

 

 

·

·

·

·

·

Three major projects announced or officially launched in 2018: Hitman 2 (IO Interactive) - published November 2018; Crackdown 3 (Microsoft) - published in February 2019; and Team Sonic Racing (SEGA) - planned release date May 2019

·

 

Post year end highlights

 

·

·

·

Management structure broadened and Board strengthened further to facilitate growth

 

Current trading and outlook

 

·

·

 

Carl Cavers, Chief Executive Officer of Sumo Group, said:

 

 

Enquiries:

 

 

 

Sumo Group plc

Tel: +44 (0) 114 242 6766

Carl Cavers, Chief Executive Officer

 

David Wilton, Chief Financial Officer

 

 

 

Zeus Capital Limited (Nominated Adviser & Broker)

 

Nick Cowles / Richard Darlington / Andrew Jones

 Tel: +44 (0) 161 831 1512

Ben Robertson / John Goold

Tel: +44 (0) 203 829 5000

 

 

Belvedere Communications Limited

                                      

Cat Valentine (cvalentine@belvederepr.com)

Tel: +44 (0) 7715 769 078

Keeley Clarke (kclarke@belvederepr.com)

Tel: +44 (0) 7967 816 525

Llew Angus (langus@belvederepr.com)

Tel: +44 (0) 7407 023 147

 

  

 

CHAIRMAN'S STATEMENT

Deliver and expand

 

 

New strategic partners

 

Acquire complementary revenue streams

 

Develop valuable own intellectual property ("own-IP")

 

Board and Governance

Ken Beaty

Non-executive Chairman

  

 

CHIEF EXECUTIVE'S REVIEW

Introduction

Concept creation

Results

Operational review

 

Sumo Digital

 

Studios and expansion

 

Awards

 

Clients

 

Atomhawk

 

 

Strategy

·

·

·

·

Acquisitions

People

The market

Outlook

 

 

Carl Cavers

Chief Executive Officer

 

 

 

 

GROUP FINANCIAL REVIEW

 

Results overview

Trading

Profit margins

Client concentration

 

 

Video Games Tax Relief ("VGTR")

Treatment of acquisition and IPO costs

Cash flow

Balance sheet

Foreign currency

Dividend

 

Share issues

Post balance sheet date events

 

  

David Wilton

Chief Financial Officer

 

CONSOLIDATED INCOME STATEMENT

 

 

Note

 

Year ended 31 December 2018

£'000

Restated[1] Year ended 31 December 2017

£'000

Revenue

5

38,696

28,591

Direct costs

 

(27,191)

(23,635)

Video Games Tax Relief

 

6,898

8,296

Direct costs (net)

6

(20,293)

(15,339)

Gross profit

 

18,403

13,252

Operating expenses

 

(19,004)

(33,191)

Operating expenses - exceptional

7

(94)

(2,656)

Operating expenses - total

 

(19,098)

(35,847)

Group operating loss

 

(695)

(22,595)

Analysed as:

 

 

 

Adjusted EBITDA[2]

 

10,407

8,356

Amortisation

10

(6,947)

(27,626)

Depreciation

 

(1,104)

(669)

Share based payment charge

 

(2,578)

-

Customer revenue included within finance income 

12

(421)

-

Accrued royalty not yet received and contingent on future sales

12

250

-

Investment in co-funded games expensed

7

(208)

-

Exceptional items

7

(94)

(2,656)

Group operating loss

 

(695)

(22,595)

Finance cost

 

(99)

(5,381)

Finance income

 

311

3

Loss before taxation

 

(483)

(27,973)

Taxation

8

232

4,538

Loss for the year attributable to equity shareholders

 

(251)

(23,435)

Basic and diluted loss per share (pence)

9

(0.20)

(389.40)

 

[1] 2017 comparative restated for pass through revenues and costs upon which Sumo does not make a margin. During the year the directors reassessed their accounting treatment for certain 'pass through' costs which are recharged at nil margin and concluded that it would be appropriate for these costs to be netted against recharged income. This change in presentation reduced revenue and direct costs for the year ended 31 December 2017 by £2m but had no impact upon gross profit, earnings or financial position.

 

[2] Adjusted EBITDA, which is defined as profit before finance costs, tax, depreciation, amortisation, exceptional items ,share based payment charge, customer revenue included within finance income, accrued royalty not yet received and contingent on future sales and the investment in co-funded games expensed, is a non-GAAP metric used by management and is not an IFRS disclosure.

 

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

 

 

 

Year ended 31 December 2018

£'000

Year ended

31 December 2017

£'000

Loss for the year attributable to equity shareholders

 

(251)

(23,435)

Other comprehensive expense:

 

 

 

Exchange differences on retranslation of foreign operations

 

(48)

(16)

Total other comprehensive expense

 

(48)

(16)

Total comprehensive expense for the year

 

(299)

(23,451)

 

Items in the statement above are disclosed net of tax which is immaterial.

 

 

CONSOLIDATED BALANCE SHEET

as at 31 December 2018

 

 

Note

 

2018

£'000

Restated[3]   

2017

£'000

Non-current assets

 

 

 

Goodwill and other intangible assets

10

22,378

28,213

Property, plant and equipment

 

2,496

1,835

Deferred tax asset

 

1,981

474

Total non-current assets

 

26,855

30,522

Current assets

 

 

 

Trade and other receivables            

 

25,172

11,414

Cash and cash equivalents

 

3,730

12,424

Total current assets

 

28,902

23,838

Total assets

 

55,757

54,360

Current liabilities

 

 

 

Trade and other payables

 

11,050

12,022

Corporation tax payable

 

810

1,316

Total current liabilities

 

11,860

13,338

Total liabilities

 

11,860

13,338

Net assets

 

43,897

41,022

Equity

 

 

 

Share capital

 

1,501

1,450

Share premium

 

40,994

36,121

Reverse acquisition reserve

 

(60,623)

(60,623)

Merger relief reserve

 

590

-

Foreign currency translation reserve

 

(21)

27

Own shares

 

(4,919)

-

Retained earnings

 

66,375

64,047

Total equity

 

43,897

41,022

 

[3] Prior year 2017 restated for a reclassification between trade receivables and trade payables.

 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

for the year ended 31 December 2018

 

 

Share capital

£'000

Share premium

£'000

Reverse acquisition reserve

£'000

Merger relief reserve

£'000

Foreign currency translation reserve

£'000

Own shares £'000

Retained earnings

£'000

Total equity

£'000

Balance at 1 January 2017

45

352

-

-

43

-

(1,385)

(945)

Loss for the year

-

-

-

-

-

-

(23,435)

(23,435)

Exchange differences on retranslation of foreign operations

 

 

-

 

 

-

 

 

-

 

 

-

 

 

(16)

 

 

-

 

 

-

 

(16)

Total comprehensive expense for the year

 

-

 

-

 

-

 

-

 

(16)

 

-

 

(23,435)

 

(23,451)

Transactions with owners:

 

 

 

 

 

 

 

 

Issue of shares in year

1

7

-

-

-

-

-

8

Issue of shares on conversion of debt

 

18

 

28,879

 

-

 

-

 

-

 

-

 

-

 

28,897

Issue of shares pre IPO

1,065

88,867

-

-

-

-

-

89,932

Group reorganisation

(64)

(29,238)

(60,623)

-

-

-

-

(89,925)

Capital reduction

-

(88,867)

-

-

-

-

88,867

-

Issue of shares on IPO

385

38,061

-

-

-

-

-

38,446

Expenses of the IPO

-

(1,940)

-

-

-

-

-

(1,940)

 

1,405

35,769

(60,623)

-

-

-

88,867

65,418

Balance at 31 December 2017

 

1,450

 

36,121

 

(60,623)

 

-

 

27

 

-

 

64,047

 

41,022

IFRS 15 adoption impact (note 12)

 

-

 

-

 

-

 

-

 

-

 

-

 

(131)

 

(131)

Restated balance as at 1 January 2018

 

1,450

 

36,121

 

(60,623)

 

-

 

27

 

-

 

63,916

 

40,891

Loss for the year

-

-

-

-

-

-

(251)

(251)

Exchange differences on retranslation of foreign operations

 

 

-

 

 

-

 

 

-

 

 

-

 

 

(48)

 

 

-

 

 

-

 

 

(48)

Total comprehensive expense for the year

 

-

 

-

 

-

 

-

 

(48)

 

-

 

(251)

 

(299)

Transactions with owners:

 

 

 

 

 

 

 

 

Issue of shares in year

50

4,873

-

-

-

-

-

4,923

Reserve on issue of shares on acquisition of subsidiary

 

-

 

-

-

 

590

 

-

 

-

 

-

 

590

Share based payment transactions

 

-

 

-

 

-

 

-

 

-

 

-

 

2,711

 

2,711

SIP share issues and SIP reserve

 

1

 

-

 

-

 

-

 

-

 

-

 

(1)

 

-

Acquisition of shares by the Employee Benefit Trust

 

-

 

-

 

-

 

-

 

-

 

(4,919)

 

-

 

(4,919)

 

51

4,873

-

590

-

(4,919)

2,710

3,305

Balance at 31 December 2018

 

1,501

 

40,994

 

(60,623)

 

590

 

(21)

 

(4,919)

 

66,375

 

43,897

 

 

CONSOLIDATED CASH FLOW STATEMENT

for the year ended 31 December 2018

 

 

 

 

Year ended

31 December 2018

Restated[3]

Year ended

 31 December 2017

 

Note

£'000

£'000

Loss for the financial year/period

 

(251)

(23,435)

Income tax

 

(232)

(4,538)

Net finance costs

 

(212)

5,378

Operating loss

 

(695)

(22,595)

Depreciation charge

 

1,104

669

Amortisation of intangible assets

10

6,947

27,626

(Decrease)/increase in bad debt provision

 

(11)

19

Share based payments charge

 

2,578

-

(Increase)/decrease in trade and other receivables

 

(13,739)

(916)

(Decrease)/increase in trade and other payables

 

(1,072)

4,302

Cash flows from operating activities

 

(4,888)

9,105

Net finance costs

 

212

(5,378)

Tax paid

 

(1,687)

(475)

Net cash (used in)/generated from operating activities

 

(6,363)

3,252

Cash flows from investing activities

 

 

 

Purchase of intangible assets

 

(513)

(120)

Purchase of property, plant and equipment

 

(1,740)

(1,586)

Acquisition of subsidiary - net of cash acquired

 

1

(2,287)

Net cash used in investing activities

 

(2,252)

(3,993)

Cash flows from financing activities

 

 

 

Proceeds from issue of shares

 

-

67,358

Transaction costs relating to the issue of shares

 

-

(1,940)

Repayments of borrowings

 

-

(56,718)

Net cash generated from financing activities

 

-

8,700

Net (decrease)/increase in cash and cash equivalents

 

(8,615)

7,959

Cash and cash equivalents at the beginning of the year

 

12,424

4,482

Foreign exchange

 

(79)

(17)

Cash and cash equivalents at the end of the year

 

3,730

12,424

 

[3] Prior year 2017 restated for a reclassification between trade receivables and trade payables.

 

NOTES TO THE GROUP FINANCIAL STATEMENTS

for the year ended 31 December 2018

 

1. GENERAL INFORMATION

 

Sumo Group plc ("the Company") is registered in England and Wales as a public limited company. The address of its registered office is 32 Jessops Riverside, Brightside Lane, Sheffield S9 2RX.

 

The principal activity of the Company and its subsidiaries (together the 'Group') is that of video games development.

The Group financial statements present 12 months results for the year ended 31 December 2018, and were approved by the Directors on 8 April 2019

 

2. BASIS OF PREPARATION AND ACCOUNTING POLICIES

 

The Group's principal accounting policies, all of which have been applied consistently to all the periods presented, are set out below.

 

Basis of preparation

 

The Group financial statements have been prepared in accordance with International Financial Reporting Standards as endorsed by the European Union ('IFRS'), International Financial Reporting Standards Interpretation Committee ('IFRS IC') interpretations and those provisions of the Companies Act 2006 applicable to companies reporting under IFRS. The Group financial statements have been prepared on the going concern basis and on the historical cost convention modified for the revaluation of certain financial instruments.

 

The preparation of Group financial statements in conformity with IFRS requires the use of certain critical accounting estimates, which are outlined in the critical accounting estimates and judgements section of these accounting policies. It also requires management to exercise its judgement in the process of applying the Group's accounting policies.

 

Going concern

 

These Group financial statements have been prepared on the going concern basis.

 

The Directors have reviewed the forecasts for the years ending 31 December 2019 and 31 December 2020 and consider the forecasts to be prudent and have assessed the impact of them on the Group's cash flow, facilities and headroom within its banking covenants. Furthermore, the Directors have assessed the future funding requirements of the Group and compared them with the level of available borrowing facilities. Based on this work, the Directors are satisfied that the Group has adequate resources to continue in operational existence for the foreseeable future. For this reason, they continue to adopt the going concern basis in preparing the financial statements.

 

Standards, amendments and interpretations adopted during the year:

 

 

At the date of authorisation of the Group financial statements, the following new standards and interpretations which have not been applied in this financial information were in issue but not yet:

 

·

 

The new accounting standard is effective for years commencing on or after the 1 January 2019.

 

Under the new standard, the distinction between operating and finance leases is removed and most leases will be brought onto the statement of financial position, as both a right-of-use asset and a largely offsetting lease liability.  The right-of-use asset will be depreciated in accordance with IAS 16 'Property, Plant and Equipment' and the liability will be increased for the accumulation of interest and reduced by lease payments. There will be no impact on cashflow.

 

The Company has opted not to early adopt IFRS 16 and prior year financial information will not be restated resulting in no impact on retained earnings on transition. We do not intend to grandfather the lease definition as it has no material impact on our lease population.

 

A key judgement associated with the adoption of this standard is the identification of the discount rate to be used to calculate the present value of the future lease payments on which the reported lease liability and right-of-use asset are based.

 

We intend to use the modified retrospective transitional approach meaning that the right of use asset and the lease liability are brought onto the balance sheet using the discount rate applicable at the transition date. The discount rate will therefore be based on the incremental cost of borrowing as at 1 January 2019 where an interest rate is not implicit in the lease contract.

 

The Company plans to make use of the available exemptions and expedients where applicable. Given the current information available, however, we expect that we will only apply the low value leases exemption and the expedient for leases with a short remaining term although this will remain under review.

 

Basis of consolidation

 

Subsidiaries are all entities (including structured entities) over which the Group has control. The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group and are deconsolidated from the date control ceases.

 

Inter-company transactions, balances and unrealised gains and losses on transactions between Group companies are eliminated.

 

Revenue

1.

2.

3.

4.

5.

 

Third party funded game development

 

Licencing revenues

 

Own-IP

 

EBITDA and Adjusted EBITDA

 

Earnings before Interest, Taxation, Depreciation and Amortisation ("EBITDA") and Adjusted EBITDA are non-GAAP measures used by management to assess the operating performance of the Group. Exceptional items, the impact of IFRS 15 adoption and the investment in co-funded games expensed are excluded from EBITDA to calculate Adjusted EBITDA. For further explanation and details see note 14 and Consolidated Income Statement.

 

The Directors primarily use the Adjusted EBITDA measure when making decisions about the Group's activities. As these are non-GAAP measures, EBITDA and Adjusted EBITDA measures used by other entities may not be calculated in the same way and hence may not be directly comparable.

 

Foreign currency 

 

Transactions in foreign currencies are translated into the Group's functional currency at the foreign exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated at the foreign exchange rate ruling at that date. Foreign exchange differences arising on translation are recognised in profit or loss.

 

On consolidation, the assets and liabilities of foreign operations which have a functional currency other than sterling are translated into sterling at foreign exchange rates ruling at the balance sheet date. The revenues and expenses of these subsidiary undertakings are translated at average rates applicable in the period. All resulting exchange differences are recognised in other comprehensive income and documented in a separate component of equity.

 

Classification of instruments issued by the Group

 

Instruments issued by the Group are treated as equity (i.e. forming part of shareholders' funds) only to the extent that they meet the following two conditions:

 

·

they include no contractual obligations upon the Group to deliver cash or other financial assets or to exchange financial assets or financial liabilities with another party under conditions that are potentially unfavourable to the Group; and

·

where the instrument will or may be settled in the Company's own equity instruments, it is either a non-derivative that includes no obligation to deliver a variable number of the Company's own equity instruments or is a derivative that will be settled by the Company exchanging a fixed amount of cash or other financial assets for a fixed number of its own equity instruments.

 

To the extent that this definition is not met, the items are classified as a financial liability. Where the instrument so classified takes the legal form of the Company's own shares, the amounts presented in these financial statements for called up share capital and share premium account exclude amounts in relation to those shares.

 

Finance payments associated with financial liabilities are dealt with as part of finance expenses. Finance payments associated with financial instruments that are classified in equity are dividends and are recorded directly in equity.

 

Property, plant and equipment

 

Property, plant and equipment are stated at cost less accumulated depreciation.

 

Where parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items of property, plant and equipment.

 

Depreciation is charged to profit or loss on a straight-line basis over the estimated useful lives of each part of an item of property, plant and equipment. Depreciation is provided on the following basis:

 

Leasehold improvements

Over period of lease

Fixtures and fittings

25% straight line

Computer hardware

50% straight line

 

It has been assumed that all assets will be used until the end of their economic life. Freehold land is not depreciated.

 

Intangible assets

 

All business combinations are accounted for by applying the purchase method. Goodwill represents the difference between the cost of the acquisition and the fair value of the net identifiable assets acquired. Identifiable intangibles are those which can be sold separately, or which arise from legal or contractual rights regardless of whether those rights are separable, and are initially recognised at fair value.

 

Goodwill is stated at cost less any accumulated impairment losses. Goodwill is allocated to cash-generating units and is not amortised but is tested annually for impairment.

 

Other intangible assets that are acquired by the Group are stated at cost less accumulated amortisation and accumulated impairment losses.

 

Computer software purchased separately, that does not form an integral part of related hardware, is capitalised at cost. Amortisation is charged to profit or loss on a straight-line basis over the estimated useful lives of intangible assets unless such lives are indefinite and is presented within operating expenses. Intangible assets with an indefinite useful life and goodwill are systematically tested for impairment at each balance sheet date. Other intangible assets are amortised from the date they are available for use.

 

The estimated useful lives, are as follows:

 

Customer relationships

2 years

Customer contracts

Over period of contract

Software

2 years

 

Impairment

 

For goodwill that has an indefinite useful life, the recoverable amount is estimated annually. For other assets, the recoverable amount is only estimated when there is an indication that an impairment may have occurred. The recoverable amount is the higher of fair value less costs to sell and value in use.

 

An impairment loss is recognised whenever the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. Impairment losses are recognised in profit or loss.

 

Impairment losses recognised in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated to the cash-generating unit and then to reduce the carrying amount of the other assets in the unit on a pro rata basis. A cash generating unit is the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets.

 

Post-employment benefits

 

Defined contribution plans

 

Obligations for contributions to defined contribution pension plans are recognised as an expense in profit or loss as incurred.

 

Provisions

 

A provision is recognised in the balance sheet when the Group has a present legal or constructive obligation as a result of a past event, and it is probable that an outflow of economic benefits will be required to settle the obligation.

 

If the effect is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability.

 

Operating lease payments

 

Operating leases are leases in which substantially all the risks and rewards of ownership related to the asset are not transferred to the Group.

 

Payments made under operating leases are recognised in profit or loss on a straight-line basis over the term of the lease. Lease incentives received are recognised in profit or loss over the term of the lease, as an integral part of the total lease expense.

 

Taxation

 

Tax on the profit or loss for the period comprises current and deferred tax. Tax is recognised in profit or loss except to the extent that it relates to items recognised in other comprehensive income or directly in equity, in which case it is recognised in other comprehensive income or in equity, respectively.

 

Current tax is the expected tax payable on the taxable income for the period, using tax rates enacted or substantively enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years.

 

Deferred tax is provided on temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes, except to the extent that it arises on:

 

·

the initial recognition of goodwill where the initial recognition exemption applies;

·

the initial recognition of assets or liabilities that affect neither accounting nor taxable profit other than in a business combination;

·

differences relating to investments in subsidiaries to the extent that they will probably not reverse in the foreseeable future.

 

The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the balance sheet date.

 

A deferred tax asset in respect of tax losses is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised.

 

Video Game Tax Relief

 

Video Game Tax Relief has only been recognised where management believe that a tax credit will be recoverable based on their experience of obtaining the relevant certification and the success of similar historical claims. Such credits are recognised as part of direct costs in order to reflect the substance of these credits to the Group and cash flows are presented within operating activities. The debit is recorded on the balance sheet as "VGTR recoverable" within current assets.

 

Cash and cash equivalents

 

Cash and cash equivalents comprise cash balances and call deposits. Bank borrowings that are repayable on demand and form an integral part of the Group's cash management are included as a component of cash and cash equivalents for the purpose only of the statement of cash flows.

 

Trade and other receivables

 

Trade and other receivables are initially recorded at fair value and thereafter are measured at amortised cost using the effective interest rate. A loss allowance for expected credit losses is recognised based upon the lifetime expected credit losses in cases where the credit risk on trade and other receivables has increased significantly since initial recognition. In cases where the credit risk has not increased significantly, the Group measures the loss allowance at an amount equal to the 12-month expected credit loss. This assessment is performed on a collective basis considering forward-looking information.

 

Financial derivatives

 

The Group uses derivative financial instruments to hedge its exposure to risks arising from operational activities, principally foreign exchange risk. In accordance with treasury policy, the Group does not hold or issue derivative financial instruments for trading purposes. The Group does not hedge account for these items. Any gain or loss arising from derivative financial instruments is based on changes in fair value, which is determined by direct reference to active market transactions or using a valuation technique where no active market exists. At certain times the Group has foreign currency forward contracts that fall into this category.

 

Interest-bearing borrowings

 

Interest-bearing borrowings are recognised initially at fair value less attributable transaction costs. Subsequent to initial recognition, interest-bearing borrowings are stated at amortised cost with any difference between cost and redemption value being recognised in profit or loss over the period of the borrowings on an effective interest basis.

 

Trade and other payables

 

Trade payables are initially recorded at fair value and thereafter at amortised cost using the effective interest rate method.

 

Segmental reporting

 

The Group reports its business activities in one area: video games development, which is reported in a manner consistent with the internal reporting to the Board of directors, which has been identified as the chief operating decision maker. The Board of directors consists of the Executive Directors and the Non-Executive Directors.

 

Exceptional costs

 

The Group presents as exceptional costs on the face of the income statement, those significant items of expense, which, because of their size, nature and infrequency of the events giving rise to them, merit separate presentation to allow shareholders to understand better the elements of financial performance in the period. This facilitates comparison with prior periods and trends in financial performance more readily. Such costs include professional fees and other costs, directly related to the purchase of businesses.

 

Share capital

 

Share capital represents the nominal value of shares that have been issued.

 

Share premium

 

Share premium includes any premiums received on issue of share capital. Any transaction costs associated with the issuing of shares are deducted from share premium, net of any related income tax benefits.

 

Reverse acquisition reserve

 

The reverse acquisition reserve was created as a result of the share for share exchange under which Sumo Group plc became the parent undertaking prior to the IPO. Under merger accounting principles, the assets and liabilities of the subsidiaries were consolidated at book value in the Group financial statements and the consolidated reserves of the Group were adjusted to reflect the statutory share capital, share premium and other reserves of the Company as if it had always existed, with the difference presented as the reverse acquisition reserve.

 

Merger relief reserve

 

Represents the difference between the fair value and nominal value of shares issued on acquisition of a Group subsidiary.

 

Foreign currency translation reserve

 

Represents the exchange differences on retranslation of foreign operations.

 

Own shares

 

The Group holds shares in an employee benefit trust. The consideration paid for the purchase of these shares is recognised directly in equity. Any disposals are calculated on a weighted average method with any gain or loss being recognised through reserves.

 

The assets and liabilities of the Employee Benefit Trust (EBT) have been included in the Group financial statements. Any assets held by the EBT cease to be recognised on the group balance sheet when the assets vest unconditionally in identified beneficiaries. The cost of purchasing own shares held by the EBT are shown as a deduction within shareholder's equity. The proceeds from the sale of own shares are recognised in shareholder's equity. Neither the purchase nor sale of own shares leads to a gain or loss being recognised in the income statement. 

 

Retained earnings

 

Retained earnings includes all current period retained profits.

 

Direct costs

 

Included within direct costs are all costs in connection with the development of games, including an allocation of studio management costs. Video Games Tax Relief is presented within direct costs as it is directly related to the level of expenditure incurred. See note 6.

 

Share based payments

 

The Group operates equity-settled share-based remuneration plans for its employees. None of the Group's plans are cash-settled.

 

All goods and services received in exchange for the grant of any share-based payment are measured at their fair values using the Monte Carlo and Black Scholes models.

 

Where employees are rewarded using share-based payments, the fair value of employees' services is determined indirectly by reference to the fair value of the equity instruments granted. This fair value is appraised at the grant date and excludes the impact of non-market vesting conditions (for example profitability and sales growth targets and performance conditions). The fair value of the options appraised at the grant date includes the impact of market based vesting conditions.

 

All share-based remuneration is ultimately recognised as an expense in profit or loss with a corresponding credit to retained earnings. Where vesting periods or other vesting conditions apply, the expense is allocated over the vesting period, based on the best available estimate of the number of share options expected to vest.

 

Non-market vesting conditions are included in assumptions about the number of options that are expected to become exercisable. Estimates are subsequently revised if there is any indication that the number of share options expected to vest differs from previous estimates. Any adjustment to cumulative share-based compensation resulting from a revision is recognised in the current period. The number of vested options ultimately exercised by holders does not impact the expense recorded in any period.

 

Upon exercise of share options, the proceeds received, net of any directly attributable transaction costs, are allocated to share capital up to the nominal (or par) value of the shares issued with any excess being recorded as share premium.

 

3.  CRITICAL ACCOUNTING JUDGEMENTS AND ESTIMATES

 

Accounting estimates

 

Impairment of goodwill and other intangible assets

 

The carrying amount of goodwill is £21,379,000 (2017: £20,791,000) and the carrying amount of other intangible assets is £999,000 (2017: £7,422,000) as at 31 December 2018. The Directors are confident that the carrying amount of goodwill and other intangible assets is fairly stated, and have carried out an impairment review. The forecast cash generation for the Cash Generating Unit ("CGU") and the Weighted Average Cost of Capital ("WACC") represent significant assumptions and should the assumptions prove to be incorrect there would be a significant risk of a material adjustment within the next financial year.

 

The cash flows are based on a three-year forecast with growth rates between 17% and 36%. Subsequent years are based on a reduced growth rate of 2.0% into perpetuity.

 

The discount rate used was the Group's pre-tax WACC of 12%. The WACC used for the impairment review is reflective of the industry sector WACC rather than the WACC used in investment decisions.

 

Given the significant headroom in the carrying value of goodwill compared to the calculation of the net present value of the future cash flows, and bearing in mind the market value of the Group, the Directors cannot foresee a reasonable downside scenario in which the goodwill would be impaired in the foreseeable future and hence detailed sensitivity disclosures have not been presented.

 

Accounting judgements

 

Judgements in applying accounting policies and key sources of estimation uncertainty

 

In the preparation of the Group financial statements, the Directors, in applying the accounting policies of the Group, make some judgements and estimates that affect the reported amounts in the financial statements. The following are the areas requiring the use of judgement and estimates that may significantly impact the financial statements.

 

Goodwill and Intangible assets arising on acquisition

 

The process of estimating the value of customer contracts and customer relationships on acquisition includes an element of forecasting and judgement. The Directors review customer contracts and customer relationships on an annual basis which also involves an element of judgement as to the length of the contract and relationship. These judgements concerning the length of customer contracts and relationships have largely resolved during 2018 as the balances naturally unwind through the amortisation charge, given the relatively short length of the customer contracts. Details of the period end impairment review of Goodwill have been disclosed in note 10 to the Financial statements.

 

Revenue recognition on development contracts

 

There are a number of judgements in respect of the recognition of revenue on development contracts, including:

 

·

the determination of the number of distinct separate performance obligations in a contract. This is based upon judgement around whether the customer can benefit from the use of the service on its own or together with other resources that are readily available to it, and also whether the promise to transfer the service is separately identifiable from other promises in the contract. As explained in the accounting policy for revenue, there tends to be one distinct performance obligation, being the development of a completed project or game;

·

whether the Group transfers control of the game over time, and therefore satisfies the performance obligation and recognises revenue over time. This requires judgement as to whether the customer controls the game as it is created and enhanced. As the customer approves the development work as it progresses, and is involved in directing the development activity, it is generally considered that control is transferred over time and revenue is recognised accordingly;

·

recognition over time is determined based upon judgement and estimates on the overall contract margin and percentage of completion of the contract at each period end. These judgements are based on contract value, historical experience and forecasts of future outcomes. These include specific judgement in respect of contracts for which variations may be in the process of being negotiated, and so the contracts are accounted for on the basis of the best estimate of the revenue expected to be received on the contract, which are all expected to be resolved relatively shortly after the financial year end;

·

·

variable consideration is constrained on contract inception until the time at which it is considered highly probable that the revenue will not reverse in future periods. As this determination includes a number of factors outside control of the Group, it is inherently difficult to estimate, and may result in revenues being recognised in a later period than when the performance obligations were satisfied.

 

Video Game Tax Relief

 

The process of claiming Video Game Tax Relief requires estimates to be accrued at the period end. Whilst the Company undertakes a detailed exercise involving external professional support in calculating the accrual, these claims are subject to review and approval by HMRC prior to payment. It is also in the Directors' judgement that presenting Video Game Tax Relief as a deduction from direct costs best reflects the substance and nature of these credits. See note 6.

 

4.  GROUP ANNUAL REPORT AND STATUTORY ACCOUNTS

5. SEGMENTAL REPORTING

 

The trading operations of the Group are only in video games development and are all continuing. This includes the activities of Sumo Digital Limited, Mistral Entertainment Limited, Sumo Video Games Private Limited, Cirrus Development Limited, Sumo Digital (Genus) Limited, Sumo Digital (Atlantis) Limited, Atomhawk Design Limited, Atomhawk Canada Limited and The Chinese Room Limited. The central activities, comprising services and assets provided to Group companies, are considered incidental to the activities of this single segment and have therefore not been shown as a separate operating segment but have been subsumed within video games development. All assets of the Group reside in the UK, with the exception of non-current assets with a net book value of £397,000 (2017: £400,00) which were located in India and Canada.

 

Major clients

 

In 2018 there were four major clients that individually accounted for at least 10 percent of total revenues (2017: three clients). The revenues relating to these clients in 2018 were £8.1m, £6.6m, £5.7m and £5.1m (2017: £7.7m, £4.7m, and £3.2m).

 

Analysis of revenue

 

The amount of revenue from external customers can be disaggregated by location of the customers as shown below:

 

 

 

Year ended

31 December 2018

Restated

Year ended

31 December 2017

 

£'000

£'000

 

 

 

UK & Ireland

14,775

9,237

Europe

7,935

10,861

Rest of the World

15,986

8,493

 

38,696

28,591

 

Revenue by category

 

The Group's revenue can be disaggregated by category as shown below:

 

 

 

Year ended

31 December 2018

Restated

Year ended

31 December 2017

 

£'000

£'000

Development Fees

 

 

Video Game Industry

37,225

26,282

Art & Leisure

134

96

Film & TV

-

15

Retail

134

25

Total Development Fees

37,493

26,418

 

 

 

Own IP

438

1,695

Royalties

765

478

Total Revenue

38,696

28,591

 

 

The following aggregated amounts of transaction prices relate to the performance obligations from existing contracts that are unsatisfied or partially unsatisfied at 31 December 2018.

 

 

2019

2020

 

£'000

£'000

Revenue expected to be recognised

16,291

5,389

 

Assets and liabilities relating to contracts with customers

 

The Group has recognised the following asset and liabilities relating to contracts with customers:

 

 

2018

£'000

2017

£'000

Contract assets - amounts recoverable on contracts

11,310

3,461

Contract liabilities - advances for game development

512

1,259

 

6. DIRECT COSTS (NET)

 

 

 

Year ended

31 December 2018

Restated

Year ended

31 December 2017

 

£'000

£'000

 

 

 

Direct costs

27,191

23,635

Video Game Tax Relief

(6,898)

(8,296)

 

20,293

15,339

 

7. EXPENSES BY NATURE

 

 

 

Year ended

31 December 2018

Restated

Year ended

31 December 2017

 

£'000

£'000

Exceptional items

94

2,656

Employee benefit expense

26,729

17,800

Depreciation charges

1,104

669

Amortisation and impairment charges

6,947

27,626

Operating lease payments

1,230

876

Investment in co-funded games expensed

208

-

Other expenses

3,079

1,559

Total direct costs and operating expenses

39,391

51,186

 

Investment in co-funded games expensed represents the costs incurred by the Group on its percentage of the game development that is considered equivalent to the intangible asset on an own IP development.

 

Exceptional items

 

Exceptional items include external costs in relation to:

 

·

2017 - the IPO and reorganisation in 2017 which primarily relate to professional fees (£2,453,000)

·

2017 - the acquisition of Atomhawk Design Limited and Atomhawk Canada Limited (£203,000)

·

2018 - the acquisition of The Chinese Room Limited (£94,000)

 

8.     TAXATION

 

Analysis of credit in year

Year ended

31 December 2018

Year ended

31 December 2017

 

£'000

£'000

Current tax

 

 

Current taxation charge for the year

1,268

1,080

Adjustments for prior periods

(128)

(58)

Total current tax

1,140

1,022

 

 

 

Deferred tax

 

 

Origination and reversal of timing differences

(2,337)

(5,622)

Adjustments in respect of prior periods

965

62

Total deferred tax

(1,372)

(5,560)

 

 

 

Tax on loss on ordinary activities

(232)

(4,538)

 

 

 

Reconciliation of total tax (credit):

 

 

Loss on ordinary activities before tax

(483)

(27,973)

Loss on ordinary activities multiplied by the rate of corporation tax in the UK of 19% (2017: 19.25%)

 

(92)

 

(5,384)

Effects of:

 

 

Permanent differences

544

968

Share based payments

37

-

Fixed asset permanent differences

15

(40)

Effects of different tax rates in overseas jurisdictions

22

50

Non-taxable income

(1,663)

(475)

Effect of change in rates

68

339

Adjustments in respect of previous periods

837

4

Total taxation (credit)

(232)

(4,538)

 

Taxation on items taken directly to equity was a credit of £132,328 (2017: £nil) and relates to deferred tax on share option schemes.

 

Factors that may affect future tax charges

 

Changes to the UK corporation tax rates were substantively enacted as part of Finance Bill 2015 (on 26 October 2015) and Finance Bill 2016 (on 7 September 2016). These included reductions to the main rate to reduce the rate to 19% from 1 April 2017 and to 17% from 1 April 2020, and this has been reflected in these financial statements.

 

9. EARNINGS PER SHARE

 

Basic and diluted earnings per share are calculated by dividing the earnings attributable to equity shareholders by the weighted average number of ordinary shares in issue.

 

When calculating basic earnings per share, the weighted average number of shares has been adjusted to exclude shares held in the Employee Benefit Trust (21,235,933 at 31 December 2018 and 16,617,198 at 1 January 2018).

 

When calculating diluted earnings per share, the weighted average number of shares is adjusted to assume conversion of 3,712,737 (2017: 950,000) of potentially dilutive options granted to employees. The restatement of 2017 figures to include a warrant for 1,450,000 shares issued at the date of the IPO has had no impact upon earnings per share.

 

The calculation of basic and diluted profit/(loss) per share is based on the following data:

 

 

 

Year ended

31 December 2018

Restated

Year ended

31 December 2017

Earnings (£'000)

 

 

Earnings for the purposes of basic and diluted earnings per

share being profit for the year attributable to equity shareholders

 

(251)

 

(23,435)

Number of shares

 

 

Weighted average number of shares for the purposes of basic earnings per share

 

128,560,945

 

5,498,686

Weighted average dilutive effect of warrants

1,450,000

1,450,000

Weighted average dilutive effect of conditional share awards 

3,712,737

950,000

Weighted average number of shares for the purposes of diluted earnings per share

133,723,682

7,898,686

Earnings/(Losses) per ordinary share (pence)

 

 

Basic and diluted (loss) per ordinary share

(0.20)

(389.40)

 

The effects of share options that could potentially dilute basic earnings per share in the future were not included in the calculation of diluted earnings per share because they are antidilutive for the periods presented.

 

10. GOODWILL AND OTHER INTANGIBLE ASSETS

 

 

Software

Customer contracts

Customer relationships

Goodwill

Total

 

£'000

£'000

£'000

£'000

£'000

COST

 

 

 

 

 

As at 1 January 2017

249

14,285

21,432

19,225

55,191

Additions

120

-

-

-

120

Arising on acquisition on 29 June 2017

-

437

246

1,566

2,249

As at 31 December 2017

369

14,722

21,678

20,791

57,560

Additions

513

-

-

-

513

Acquisition of subsidiary (note 11)

-

-

-

588

588

As at 31 December 2018

882

14,722

21,678

21,379

58,661

 

 

 

 

 

 

 

 

 

 

 

 

AMORTISATION

 

 

 

 

 

As at 1 January 2017

54

952

715

-

1,721

Charge for the year

162

12,646

14,818

-

27,626

As at 31 December 2017

216

13,598

15,533

-

29,347

Charge for the year

163

700

6,084

-

6,947

Effect of translation to presentation currency

 

(11)

 

-

 

-

 

-

 

(11)

As at 31 December 2018

368

14,298

21,617

-

36,283

 

 

 

 

 

 

NET BOOK VALUE

 

 

 

 

 

As at 31 December 2017

153

1,124

6,145

20,791

28,213

As at 31 December 2018

514

424

61

21,379

22,378

 

The cost of customer relationships was determined as at the date of the respective changes in ownership by reference to expected future contracts. The valuations used the discounted cash flow method. The discount rate applied at that time to the future cash flows was 9.75%.

 

The customer contracts represent contracted revenues. The valuation used the discounted cash flow method, based on estimated profit margins considered on a contract by contract basis. The discount rate applied at that time to the future cash flows was 9.75%.

 

Goodwill and other intangible assets have been tested for impairment. The method, key assumptions and results of the impairment review are detailed below:

 

Goodwill is attributed to the only cash generating unit ("CGU") within the Group, video games development. Goodwill and other intangible assets have been tested for impairment by assessing the value in use of the CGU. The value-in-use calculations were based on projected cash flows in perpetuity. Cash flows were based on a three-year forecast with growth rates between 17% and 36%. Subsequent years were based on a reduced rate of growth of 2.0% into perpetuity.

 

These growth rates are based on past experience, and market conditions and discount rates are consistent with external information. The growth rates shown are the average applied to the cash flows of the individual CGUs and do not form a basis for estimating the consolidated profits of the Group in the future.

 

The discount rate used to test the cash generating units was the Group's pre-tax WACC of 12% (2017 9.75%).

 

As a result of these tests no impairment was considered necessary.

 

All amortisation charges have been treated as an expense and charged to operating expenses in the income statement.

 

11. BUSINESS COMBINATIONS

 

Acquisition of The Chinese Room Limited

 

Under an agreement dated 13 August 2018, the Group acquired the share capital of The Chinese Room Limited, a video development company registered in the United Kingdom for consideration of £2.2m.

 

The book and fair values of the assets and liabilities acquired are set out below:

 

 

 Book value recognised at acquisition

 

Fair value adjustments

 

 

Fair value

 

£'000

£'000

£'000

Assets

 

 

 

Property, plant and equipment

4

-

4

Trade and other receivables

139

-

139

Cash and cash equivalents

1,619

-

1,619

 

1,762

-

1,762

Liabilities

 

 

 

Corporation tax payable

(37)

-

(37)

Trade and other payables

(100)

-

(100)

Deferred tax

(1)

-

(1)

 

(138)

-

(138)

 

 

 

1,624

Goodwill

 

 

588

 

 

 

2,212

 

 

 

 

Summary of net cash outflow from acquisition

 

 

 

Cash paid

 

 

1,618

Cash acquired

 

 

(1,619)

Cash consideration transferred

 

 

(1)

 

 

 

 

Purchase consideration

 

 

 

Cash paid

 

 

1,618

Ordinary shares issued

 

 

594

Total purchase consideration

 

 

2,212

 

 

 

 

Acquisition costs charged to expenses

 

 

94

 

Consideration transferred

 

The acquisition of The Chinese Room was settled in cash amounting to £1.6million and approximately £0.6 million through the issue of 357,485 new ordinary shares in Sumo Group ("Consideration Shares") to the Sellers on completion. The Consideration Shares will be subject to a 12 month lock up period, during which time (subject to customary exceptions) such shares cannot be disposed of without Sumo Group consent, and thereafter to orderly market provisions for a further 12 months.

 

Acquisition related costs amounting to £94,000 are not included as part of consideration transferred and have been recognised as an expense in the income statement as part of operating expenses - exceptional.

 

Goodwill

 

Goodwill of £588,000 is primarily related to growth, technical knowledge and market diversification. Other intangible assets, including IP at 'concept phase' at the point of acquisition had a fair value of £nil.

 

Contribution to the Group results

 

The Chinese Room Limited generated a loss of £21,000 for the 5 months from acquisition. Revenue for the period was £7,000. If The Chinese Room Limited had been acquired at the beginning of the period then revenue would have increased by £19,000 and loss decreased by £8,000.

 

12. IFRS 15 ADOPTION IMPACT

 

In 2018, the Group has adopted new guidance for the recognition of revenue from contracts with customers (IFRS 15). The new standard has been applied retrospectively without restatement, with the cumulative effect of initial application recognised as an adjustment to the opening balance of retained earnings at 1 January 2018. Consequently, the comparative numbers are not restated.

 

Two transition differences noted for IFRS 15 is the separation of the financing element of one specific contract where the payment profile extends beyond twelve months and the recognition of variable consideration.

 

The financial impact to revenue, interest and retained profits is set out below:

 

 

Year ended

31 December 2018

 

£'000

£'000

Reduction in revenue - development fees

(421)

(183)

Recognition of variable consideration

250

-

Increase in interest income

309

Credit/(debit) to retained earnings

138

(131)

 

The 2017 debit to retained earnings has resulted in a restated retained earnings balance as at 01 January 2018 of £63,916,000.

 

The financial impact of adoption of IFRS15 on the 2018 income statement is set out below:

 

Pre-IFRS15

IFRS15 adoption adjustments

Post-IFRS15

 

Year ended 31 December 2018

Financing component

Variable consideration

Year ended 31 December 2018

 

£'000

£'000

£'000

£'000

Revenue

           38,867

               (421)

                 250

           38,696

Direct costs

          (27,191)

                       -

                       -

          (27,191)

Video Games Tax Relief

              6,898

                       -

                       -

              6,898

Direct costs (net)

          (20,293)

                       -

                       -

          (20,293)

Gross profit

           18,574

               (421)

                 250

           18,403

Operating expenses

          (19,004)

                       -

                       -

          (19,004)

Operating expenses - exceptional

                  (94)

                       -

                       -

                  (94)

Operating expenses - total

          (19,098)

                       -

                       -

          (19,098)

Group operating loss

               (524)

               (421)

                 250

               (695)

Finance cost

                  (99)

                       -

                       -

                  (99)

Finance income

                      2

                 309

                       -

                 311

Loss before taxation

               (621)

               (112)

                 250

               (483)

Taxation

              258

                   21

                  (48)

              232

Profit/(Loss) for the year attributable to equity shareholders

                 (363)

                 

(91)

                

203

                 (251)

 

13. POST BALANCE SHEET EVENTS

 

The draft book and fair values of the assets and liabilities acquired are set out below:

 

 

 

 

Book value recognised at acquisition

 

 

Fair value adjustments

 

 

 

Fair value

 

£'000

£'000

£'000

Assets

 

 

 

Property, plant and equipment

39

(13)

26

Trade and other receivables

202

-

202

Cash and cash equivalents

547

(5)

542

 

788

(18)

770

Liabilities

 

 

 

Corporation tax payable

(23)

-

(23)

Trade and other payables

(27)

(97)

(124)

Deferred tax

(2)

-

(2)

 

(52)

(97)

(149)

 

 

 

621

Goodwill

 

 

1,384

 

 

 

2,005

 

 

 

 

Summary of net cash outflow from acquisition

 

 

 

Cash paid

 

 

505

Cash acquired

 

 

(542)

Cash consideration transferred

 

 

(37)

 

 

 

 

 

 

 

 

Purchase consideration

 

 

 

Cash paid

 

 

505

Ordinary shares issued

 

 

1,500

Total purchase consideration

 

 

2,005

 

 

 

 

 

 

 

 

Acquisition costs charged to expenses

 

 

-

 

14. ALTERNATIVE PERFORMANCE MEASURES

 

 

Audited year ended 31 December 2018

Customer revenue included within finance income

Accrued royalty not yet received and contingent on future sales

 Deferred costs on Co-funded contracts

Adjusted Year ended

31 December 2018

 

£'000

£'000

£,000

£'000

£'000

Revenue

 38,696

 421

(250)

 -

 38,867

Gross profit

 18,403

 421

(250)

 208

 18,782

 

 

 

 

 

 

Audited year ended 31 December 2017

IFRS15 Customer revenue included within finance income

IFRS 15 Accrued royalty not yet received and contingent on future sales

 

 

 

 Deferred costs on Co-funded contracts

 

 

 

Adjusted Year ended

31 December 2017

 

£'000

£'000

£,000

£'000

£'000

Revenue

28,591

-

-

 -

 28,591

Gross profit

 13,252

-

-

 -

 13,252

 

 

 

Adjusted EBITDA

Year ended

31 December 2018

Year ended

31 December 2017

 

£'000

£'000

 

Group operating loss

 

(695)

 

(22,595)

Add back/(deduct):

 

 

Depreciation and amortisation charges

8,051

28,295

Share based payments charge

2,578

-

Customer revenue included within finance income

421

-

Accrued royalty not yet received and contingent on future sales

(250)

-

Investment in co-funded games expensed

208

-

Exceptional items              

94

2,656

Adjusted EBITDA

10,407

8,356

 

Adjusted EBITDA, which is defined as profit before finance costs, tax, depreciation, amortisation, share based payments charge, customer revenue included within finance income, accrued royalty not yet received and contingent on future sales, Sumo's investment in co-funded games expensed and exceptional items, is a non-GAAP metric used by management and is not an IFRS disclosure.

 

Reconciliation to unaudited underlying income statement

 

 

Reported 2018

Revenue margin adjustments1

Adjustments

Unaudited underlying 2018

Reported 2017

Adjustments

Unaudited underlying 2017

 

£'000

£'000

£'000

£'000

£'000

£'000

£'000

Revenue

38,696

171

38,867

28,591

28,591

Gross profit

18,403

171

208

18,782

13,252

13,252

Operating expenses excluding depreciation, amortisation, share based payments charge, exceptional items, the impact of IFRS adoption and investment in co-funded games expensed

(7,996)

(171)

(208)

(8,375)

(4,896)

(4,896)

Adjusted EBITDA

10,407

10,407

8,356

8,356

Depreciation

(1,104)

-

-

(1,104)

(669)

 

(669)

Net finance costs

212

(309)

-

(97)

(5,378)

5,378

-

Customer revenue included within finance income

(421)

421

-

-

-

Accrued royalty not yet received and contingent on future sales

250

(250)

-

-

-

-

-

Investment in co-funded games expensed

(208)

208

-

-

-

Amortisation of software

(163)

-

-

(163)

(162)

-

(162)

Adjusted profit before tax, share based payment charge, exceptional items and amortisation of customer contracts and customer relationships

8,973

 

 

9,043

2,147

 

7,525

Operating expenses - exceptional

(94)

 

 

 

(2,656)

 

 

Share based payments charge

(2,578)

 

 

 

-

 

 

Amortisation of customer contracts and customer relationships

(6,784)

 

 

 

(27,464)

 

 

Loss before taxation

(483)

 

 

 

(27,973)

 

 

 

The adjustment in 2018 in respect of gross margin is in relation to Sumo's investment in co-funded games, which for statutory purposes is expensed.

 

The adjustment in 2017 in respect of interest cost is to reflect the ungeared structure of the Group as it is following the IPO in December 2017.

 

1

The revenue margin adjustments are made up of IFRS 15 adoption adjustments for customer revenue included within finance income, accrued royalty income not yet received and contingent on future sales, investment in co-funded games expensed and net financing costs.  

 


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