TIDMKWS
RNS Number : 3588B
Keywords Studios PLC
30 January 2020
30 January 2020
Keywords Studios plc ("Keywords Studios" or "the Group")
Full year trading update
15% organic revenue growth supported by significant
investment
Keywords Studios, the international technical and creative
services provider to the global video games industry, today
provides an unaudited trading update for the year ended 31 December
2019 ahead of full year results which will be issued on 31 March
2020.
Trading Update
The Board expects to report full year revenues of approximately
EUR326m, representing a c.30% increase on the prior year (FY18:
EUR250.8m). On an organic* basis, Group revenues are expected to
increase by approximately 15% (H1 2019: 17.3%, 2018: 10.1%).
This performance was driven primarily by the particularly strong
organic growth of our two largest service lines, Functional Testing
and Game Development, continuing to build on a very strong
performance in the first half. Some of our service lines felt the
effects of the slowing development cycle of the current generation
of games consoles with others already starting to benefit from the
new development cycle associated with the upcoming releases of the
new Xbox and PlayStation later in 2020.
Adjusted Profit Before Tax** is expected to be approximately
EUR41m, representing an increase of c.8% from EUR37.9m in the prior
year. Adjusted EBITDA*** (excluding the impact of IFRS 16) is
expected to be approximately EUR49.5m, an increase of c.13% from
EUR43.7m in the prior year. The Group's profit performance
reflected the strong revenue growth, partially offset by continued
investment in the growth of the Group, the effect of incorporating
a number of early stage technology businesses acquired in 2018 and
an under-performing, fixed price contract in an acquired business
which was finalised at the very end of the year.
As strong demand continued in the second half we invested
further in our facilities, recruitment, training, IT, security and
HR to both meet this growth opportunity and to support the business
in future periods, which introduced some short term operational
inefficiency as well as an increase in overhead cost. The Group's
investment during the year included substantial expansion of its
facilities in Montreal, Katowice, Manila, Brighton, Mexico City,
Tokyo, Sao Paolo and New Delhi, as well as establishing a new game
development studio in Leamington Spa, near Birmingham, UK. These
expansions incurred start-up costs, including for the space and
staff, as we fitted out the facilities and built and trained the
production and support teams ahead of becoming operational.
During the year, Keywords made eight high quality acquisitions
which further strengthened the breadth of value-added services we
are able to offer our global video games clients, particularly in
Game Development and Marketing Services as well as bringing
proprietary, cutting edge machine translation and crowd sourcing
technology to our Localisation offering.
Cash invested in acquisitions totalled approximately EUR28m,
which comprised of c.EUR13m (net of cash acquired) in respect of
those companies acquired during the year and c.EUR15m in settlement
of deferred consideration payments for earlier acquisitions that
became due in the period. Net debt at 31 December 2019 is expected
to be approximately EUR18m (EUR9.0m at 30 June 2019, EUR0.4m at 31
December 2018).
Andrew Day, Chief Executive of Keywords, commented:
"In what was a relatively light year for the video games
industry against a backdrop of the tail end of the current
generation of video games consoles from Microsoft and Sony, the
Group has delivered strong growth, particularly from our two
largest divisions, Functional Testing and Game Development
services.
"We have also continued to invest in expanding our business,
including in new and enlarged facilities, improved technology,
strengthened management and additional functional support. Whilst
this investment held back margins in 2019, it will enable us to
continue to deliver high levels of growth as we position ourselves
as the 'go to' global services platform for video games in a market
which is seeing an accelerating trend towards outsourcing.
"Looking forward, we expect the launch of a new generation of
games consoles and the further development of new streaming
platforms, in addition to the structural drivers of growth across
the video games market as a whole and the ongoing trend towards
external development, to drive continued strong demand for our
services through 2020 and beyond. The full benefit of this new
generation of consoles is expected to increase over the medium
term. We will continue to invest in the Group to take full
advantage of these growth opportunities with margins expected to
increase incrementally in 2020 towards our historic norms as we
leverage these costs over a growing revenue base.
"Our recently enlarged banking facility positions us well to
capitalise on this clear opportunity to take a leading share of the
increasingly outsourced video games services market both
organically and via acquisitions, as we further enhance shareholder
value. We fully expect to make a number of selective acquisitions
as we continue to build our global video games services platform
and we are managing a strong acquisition pipeline as we enter
2020."
* Organic revenue growth is calculated by adjusting the prior
year revenues, adding pre-acquisition revenues for the
corresponding period of ownership in the current year results, and
applying the 2018 foreign exchange rates in both years.
** the Group reports Adjusted Profit Before Tax before
acquisition and integration expenses, share option charges,
amortisation of intangibles, non-controlling interests and foreign
currency gains or losses.
*** EBITDA comprises profit before taxation, adding back
depreciation, amortisation, both interest income and expense, and
exchange gains and losses. Adjusted EBITDA is also before
acquisition and integration expenses, share option charges and
non-controlling interests.
Notification of Full Year Results and Capital Markets Day
The Group expects to announce its full year results for the year
ended 31 December 2019 on 31 March 2020. To register your interest,
please contact Keywords@mhpc.com.
We will also host a Capital Markets Day in London on 5 February
2020 focusing on delivering a better understanding of each service
line. This will include presentations from each of the service line
directors as well as in-depth case studies on Game Development and
Marketing Services.
For further information, please contact:
Keywords Studios (www.keywordsstudios.com)
Andrew Day, Chief Executive Officer
Jon Hauck, Chief Financial Officer
Joseph Quinn, Investor Relations +353 190 22 730
Numis (Financial Adviser)
Stuart Skinner/Kevin Cruickshank
(Nominated Adviser)
James Black/Will Baunton (Corporate
Broker) 020 7260 1000
MHP Communications (Financial PR) 020 3128 8100
Katie Hunt/Ollie Hoare keywords@mhpc.com
About Keywords Studios (www.keywordsstudios.com)
Keywords Studios is an international technical services provider
to the global video games industry. Established in 1998, and now
with over 50 facilities in 21 countries strategically located in
Asia, the Americas and Europe, it provides integrated art creation,
software engineering, testing, localisation, audio and customer
care services across more than 50 languages and 16 games platforms
to a blue-chip client base of approximately 950 clients across the
globe.
Keywords Studios has a strong market position, providing
services to 23 of the top 25 most prominent games companies,
including Activision Blizzard, Bandai Namco, Bethesda, Electronic
Arts, Konami, Microsoft, Riot Games, Square Enix, Supercell,
TakeTwo, Epic Games and Ubisoft. Recent titles worked on include
Call of Duty: Black Ops 4, Mortal Combat X, Assassin's Creed
Odyssey, Borderlands 3, League of Legends, Fortnite, Clash Royale
and Rainbow Six Siege. Keywords Studios is listed on AIM, the
London Stock Exchange regulated market (KWS.L).
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
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