Sumo Group CEO Carl Cavers spoke to MCV/DEVELOP today on the company’s excellent annual results and how the company is coping with the coronavirus crisis. Results were up across the board, and ahead of expectations, with EBITDA up 37.5 per cent to £14.1m. And a strong growth in revenue from its own IP, up from 10 to 33 per cent year-on-year.
The results were actually delayed by two weeks by a blanket request by the FCA, which Cavers said allowed the company to better address what would otherwise have been “an elephant in the room” in the form of COVID-19. And the outlook is good for the developer’s now 10 studios.
RESILIENT AT HOME
“We’ve used the extra time to explain where we are, because we’ve been working at home now for five weeks. We’ve been using data points to really dig into how we’re looking at the impact on the year and I’m really encouraged by the performance that we’ve got from working from home. It’s been nothing short of a stupendous effort by everybody at Sumo,” Cavers told us.
“Obviously, there are some efficiency impacts on what we’re doing. And we are forecasting a three and-a-half percent productivity hit by being based working from home across the group,” he informs us, though that hit isn’t equally distributed across all projects.
The group released a graph as part of its results showing the varying impacts on differing sized projects – in total the group currently has 21 projects across 12 clients.
“It shows our productivity levels before COVID, where our productivity has dropped as we moved to working from home, and how it’s picked back up again since. We’ve got three examples in there:
“One’s a fairly large scale project but early in development where things are fairly stable in terms of what we know we need to do and productivity has picked back up.
“We’ve got one in the early phase of pre-production, where in fact, productivity is increased since working from home, and talking to the guys, it seems that they just have less distractions, at a point where they need to iterate very quickly, and so productivity has gone up.
“And then we’ve got a large scale project, that’s towards the back end of its life in development. And that’s taken a little bit longer to get back up to the same productivity levels. And you’d expect that, on large projects, that it takes a little bit longer to get things nailed down and organised.
“But fortunately, the management systems that we’ve got in terms of the control processes still give us all the same data, we’ve had to adjust some of the reporting elements as we’ve gone, through just to reflect where we are, on a working from home basis, but ultimately every every decision we make is based on data that we get from from our production teams. So we’re quite happy with where we are with that.”
All of that means that development, for Sumo at least and presumably many others, does not look to be the key cause for any corona-related delays in getting projects to market.
“Development is largely on track from our point of view, and we’re not seeing any impact on change of release dates, based on delivery,” confirms Cavers. “It will be interesting to see how things get marketed, though, because obviously it is a different world of the moment.”
So while Sumo’s processes look to have robustly survived the shift to working from home (as have MCV/DEVELOP’s, bar the regular intervention of small children looking for sustenance), increasing the size of its own brood is proving more difficult.
“The biggest challenge from COVID that we’re seeing, and we’ve had to trim our expectation, is with headcount growth. At the end of last year we got the headcount up to 766, and we had a really strong year. We actually exceeded our internal targets for headcount growth, and the start of the year looked really good.
“And now obviously everything’s fell off a cliff. And it’s because, generally, people aren’t looking to move.nWe normally target bringing on a new person every single working day within the group. And we’ve cut that back to a new person every five days.”
Cavers agrees that in the current climate people are staying put, with the idea that their current job is more secure than any move. Of course there’s an upside to that in terms of churn, but that’s not enough if you’re looking to grow.
“Yes, we’re expecting to our attrition levels to drop dramatically,” Cavers agrees. “But to be honest, our attrition was less than 10 per cent last year. So it’s not exactly high anyway. It does mean we’re not battling retention at the same time as we’re trying to hire, which is obviously got to be a good thing.”
There is one over possible silver lining for a company, such as Sumo, which is looking to grow: “I think there may be some acquisition opportunities for us, smaller organisations feel the sensitivity of big changes outside of their control and therefore they’re going to look for the security of being part of something larger as well,” he opines.
And with Sumo Group looking to further increase both its capabilities, in teh UK and in other regions, that could prove the answer to delivering continued growth this year when organic growth via recruitment is unlikely to deliver as usual.