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Sumo sounds confident note on outlook as UK video game market reaches record value

The video game services firm said it was "well positioned" to take advantage of the growing global market, which is expected to be worth US$196bn by 2022

Xbox controller on money
In 2018 the UK's video game market was valued at a record £5.7bn

Sumo Group PLC (LON:SUMO) has struck a confident tone for its current year having noted a record valuation for the UK’s video games market.

In an update presented at its AGM on Wednesday, the AIM-listed firm, which provides development services to the video game and entertainment industries, said it was currently trading in line with expectations and was confident on its outlook for the current financial year and beyond.

READ: Sumo levels up on “unusually” high earnings visibility for 2019

Sumo added that research from the Association for UK Interactive Entertainment (UKIE) had reported that the UK video gaming market was valued at a record £5.7bn for 2018, 10% higher than the prior year, and that the company itself was “well positioned” to take advantage of market growth thanks to its strengthening cash profile.

Sumo’s chairman, Ken Beaty, also said that going forward the company was “actively exploring” opportunities to accelerate its expansion through acquisitions given the fragmented market, adding that with the global market expected to grow to US$196bn in 2022 from US$152.1bn in 2019 the firm was “full of optimism” about its future and had a “very strong” business development pipeline.

In a note, analysts at Peel Hunt reiterated their ‘buy’ rating and 200p price target on the stock, adding that recent news from Google and Apple regarding their current entry into the video game space and “interesting tends” from the recent industry forum, the Electronic Entertainment Expo (E3), provided more reasons to stay positive on Sumo and its growth.

In lunchtime trading on Wednesday, Sumo’s shares were up 1.5% at 150p.

Quick facts: Sumo Group PLC

Price: 194.5 GBX

Market: AIM
Market Cap: £309.97 m

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