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28 Jan 2021 | 11:40

Keywords lifts expectations for 2020 after strong finish to year

(Sharecast News) - Video games technical and creative services provider Keywords Studios updated the market on its trading in 2020 on Thursday, saying it now expected revenue and adjusted profit before tax to be €373m and €55m respectively. The AIM-traded firm said that it would be marginally ahead of the guidance it issued on 24 November of €367m revenue and €52m adjusted profit.

It said that on an organic basis, full-year group revenues were expected to increase by about 12%.

The board said that performance reflected a "strong" finish to the year, with "robust" demand for its services continuing throughout the second half, although Covid-19-related production constraints continued to delay the flow of some content in certain service lines.

Despite those revenue constraints, Keywords said it delivered a "good" underlying margin improvement, driven by operational leverage and cost control, together with a reduction in certain costs due to Covid-19, such as travel.

Since its placing in May, Keywords Studios said it had made seven high quality acquisitions in the US, the UK and Italy, strengthening the breadth and depth of its value-added services.

Three of those acquisitions were in game development, being High Voltage, Heavy Iron and Coconut Lizard, while three were in marketing services, being g-Net, Maverick and Indigo Pearl, with one in audio, being Jinglebell.

Total consideration for the seven acquisitions, including performance-related contingent deferred consideration elements, was up to a maximum of €92m, including the acquisition of Heavy Iron that completed in January.

For 2020, cash invested in acquisitions totalled about €40m, which consisted of €38m net of cash acquired for companies acquired during the year, and €2m in settlement of deferred consideration payments for earlier acquisitions.

Net cash as at 31 December was expected to be €100m, down from €101m at 30 June but swinging from net debt of €17.9m on 31 December 2019.

"The group has delivered another robust performance, delivering good organic growth despite the obvious challenges of Covid-19 across our global operations," said chief executive officer Andrew Day.

""We are pleased to have welcomed seven high quality businesses into the group over the last year, extending the scale, capabilities and geographical reach of our game development and marketing services in particular, as we seek to grow those services to become the suppliers of choice for our global client base."

Day said the company continued to actively review a "healthy pipeline" of acquisition opportunities, and retained the financial resources to selectively execute on those.

"With a robust and flexible model and a strong market position in the buoyant video games market, we look forward with confidence to continuing to deliver on our organic and acquisitive growth strategy."

Keywords said it would issue its full-year results for the year ended 31 December on 24 March.

At 1225 GMT, shares in Keywords Studios were up 1.55% at 2,746p.
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