Over the past 2-3 years we have seen the re-emergence of a listed small and mid-cap games sector in the UK and Europe, with a wave of IPOs supported by a period of sustained outperformance of the industry majors against a backdrop of healthy equity markets. The more recent reversal of performance of the sector has been equally dramatic and largely indiscriminate. Mixed trading results from the industry majors reflects, in our view, the re-basement of expectations from unrealistic highs as well as disruption from digital distribution and recurring monetisation models. The small cap games sector mainly comprises companies with business models designed to exploit this new model and trading for the most part has been robust. The dynamic nature of the market will continue to create disruption, offering opportunities and risks, but we believe that the small cap European sector now offers exposure to a number of well run, innovative businesses and good execution will generate significant value.