REG - Keywords Studios PLC - Trading Update

Keywords StudiosAnnouncement

03/08/2022 07:15

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RNS Number : 7403U  Keywords Studios PLC  03 August 2022

3 August 2022

 

Keywords Studios plc ("Keywords Studios", "Keywords", the "Group")

 

Half year trading update and notice of results

 

Strong organic revenue growth of 22%

 

Keywords Studios, the international technical and creative services provider
to the global video games industry, today provides a trading update for the
six months ended 30 June 2022, ahead of half year results which will be
announced on 21 September 2022.

 

Trading update

 

The Group has performed strongly during the first half, with the Board
expecting to report revenues of approximately €320m representing a c.34%
increase on the comparative period (H1 2021: €238.7m). On an organic(1)
basis, Group revenues are expected to increase by approximately 22% (H1 2021:
22.9%) with robust demand for all of the Group's services.

 

Adjusted profit before tax(2) is expected to be approximately €54m,
representing an increase of over 35% from €39.7m in the comparative period
in the prior year. This reflects a strong margin of c.17% (H1 2021: 16.6%)
which includes a ~1% point benefit from foreign exchange, particularly the
strong US dollar during the period as we invoice a proportion of our sales in
US dollars.

 

We announced, at our Capital Markets Day in June, a more simplified structure
to support collaboration across the business, meaning that for the half year
ended 30 June 2022 onwards we will report divisional results in three
segments; Create (combining the former Art Services and Game Development
service lines); Globalize (the former Audio Services, Localization and
Functional and Localization Testing service lines); and Engage (the former
Player Support and Marketing service lines).

 

The newly formed Create and Globalize services lines had very strong
performances, as the momentum from the renewed industry focus on developing
new content to keep gamers engaged in 2021 continued into 2022, and started to
benefit our post production services (Globalize) to a greater extent.  Engage
saw more modest growth, with good growth from Player Support partially offset
by Marketing, due to the exceptionally strong performance in the first half of
last year (H1 2021 organic growth for Marketing of 50.6%), and some delays in
work with certain projects moving into H2 and early next year.

 

As previously outlined, we are actively relocating some of our people and
existing work from our only business operating in Russia, Sperasoft, to
locations including Poland, Serbia, Armenia and Malta. This has had a more
limited impact on H1 performance with the second half of the current financial
year being the key transition phase for this process. We are focussed on
making this as smooth a transition as possible for both our people and
international clients, with the benefit of our global footprint and
infrastructure.

 

Keywords Studios continues to deliver on its acquisition strategy with the
acquisition of the Game Development studio, Forgotten Empires, having
completed and the acquisition of Mighty Games, as announced separately today.
The Forgotten Empires acquisition has extended the reach and scale of the
Group's Create service line.  The acquisition of Mighty Games brings an
innovative and proprietary AI-based Testing technology platform, which will
allow us to do more for our clients and remain at the forefront of our
industry, in line with our strategy to develop more technology-enabled
solutions. We continue to actively review a healthy pipeline of acquisition
opportunities.

 

As at 30 June 2022, the Group had net cash of €121m (31 December 2021:
€105.6m) after cash spend on prior year acquisitions in the first half of
the year amounting to €13.6m. The Group's cash balance, strong cash
generation and the €150m available under its undrawn committed revolving
credit facility, leave the Group well placed to pursue it organic and
acquisition growth strategy.

 

Notification of Half Year Results

The Group expects to announce its half year results for the six months ended
30 June 2022 on 21 September 2022. To register your interest, please use the
following link:  https://www.keywordsstudios.com/H1-2022-results/
(https://www.keywordsstudios.com/H1-2022-results/) , or
contact Keywords@mhpc.com.

 

Bertrand Bodson, CEO of Keywords Studios commented:

 

"Keywords has started the year very strongly, building on the momentum
achieved in 2021 as we continue to benefit from a renewed focus on content
creation post pandemic and the structural trends towards outsourcing.  We
would like to thank all Keywordians for their incredible dedication to serving
our clients with passion and commitment.

"Whilst we are mindful of a more uncertain macro-economic environment and some
volatility in the scheduling of certain projects we continue to see strong
demand for our services.  Given this and the Group's strong performance in
H1, we are confident of delivering a performance comfortably ahead of current
market expectations for the full year, albeit with organic growth rates
moderating and margins moving to historic levels of ~15% as we invest in the
business, transition our people and work from Russia, and as more costs return
with the easing of COVID restrictions.

"We set out, in our Capital Markets Day in June, how we intend to build on the
Group's strong platform by developing strategic customer partnerships,
introducing new technologies, galvanising the Group's culture of
entrepreneurialism and collaboration, establishing Keywords as the destination
for talent and leveraging the Group's capabilities into adjacent markets, all
complemented by our M&A strategy.  Whilst it is early days, we are making
good progress with each of these areas of focus.

"We were pleased to have completed the acquisitions of Forbidden Empires and
Mighty Games and we continue to review a healthy pipeline of acquisitions that
extend the services Keywords is able to offer its global video games clients,
particularly as we build our Create and Engage service lines.

"Our unrivalled, scale, reach and breadth of services position Keywords well
to continue to increase our share of our large addressable market and our
strong financial position will enable further selective acquisitions as we
cement our position as the 'go to' services platform for the global video
games industry and beyond."

 

(1) Organic Revenue at constant exchange rates is calculated by adjusting the
prior year revenues, adding pre-acquisition revenues for the corresponding
period of ownership, and applying the prior year foreign exchange rates to
both years, when translating studio results into the euro reporting
currency.

 

 

(2) Adjusted profit before tax comprises Profit before taxation as reported
in the Consolidated statement of comprehensive income, adjusted for share
based payment expense, costs of acquisition and integration, amortisation and
impairment of intangible assets, non-controlling interest, foreign exchange
gains and losses, and unwinding of discounted liabilities. In order to present
the measure consistently year-on-year, the impact of investment income is also
excluded.

 

 

 For further information, please contact:

 

 Keywords Studios (www.keywordsstudios.com (http://www.keywordsstudios.com) )   +353 190 22 730

 Bertrand Bodson, Chief Executive Officer

 Jon Hauck, Chief Financial Officer

 Numis Securities                                                               +44 20 7260 1000

 Stuart Skinner/Kevin Cruickshank/Will Baunton

 MHP Communications (Financial PR)                                              +44 20 3128 8193

 Katie Hunt/Eleni Menikou/Charles Hirst                                         keywords@mhpc.com (mailto:keywords@mhpc.com)

 

About Keywords Studios ( www.keywordsstudios.com
(http://www.keywordsstudios.com/)  )

 

Keywords Studios is an international technical services provider to the global
video games industry. Established in 1998, and now with over 70 facilities in
24 countries strategically located in Asia, Australia, the Americas and
Europe, it provides integrated art creation, marketing services, game
development, testing, localization, audio and player support services across
more than 50 languages and 16 games platforms to a blue-chip client base of
over 950 clients across the globe.

Keywords Studios has a strong market position, providing services to 23 of the
top 25 most prominent games companies. Across the games and entertainment
industry, clients include Activision Blizzard, Bandai Namco, Bethesda,
Electronic Arts, Epic Games, Konami, Microsoft, Netflix, Riot Games, Square
Enix, Supercell, TakeTwo, Tencent and Ubisoft. Recent titles worked on include
Anthem, Star Wars Jedi: Fallen Order, Valorant, League of Legends, Fortnite,
Clash Royale and Doom Eternal. Keywords Studios is listed on AIM, the London
Stock Exchange regulated market (KWS.L).

 

 

 

 

 

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