NOT FOR PUBLICATION, DISTRIBUTION OR RELEASE, IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN OR INTO THE UNITED STATES, AUSTRALIA, CANADA, OR JAPAN

 

 

This announcement does not constitute or form part of, and should not be construed as, an offer to sell or issue, or a solicitation of any offer to buy or subscribe for, any securities, nor should it or any part of it form the basis of, or be relied on in connection with, any contract or commitment whatsoever. Investors should not subscribe for or purchase any shares referred to in this announcement except on the basis of information in the admission document (the "Admission Document") published by Keywords Studios plc ("Keywords Studios" or the "Company" and, together with its subsidiaries, the "Group" or "Keywords"), in connection with the institutional placing and admission of the ordinary shares in the capital of the Company to trading on AIM, a market operated by London Stock Exchange PLC. Copies of the Admission Document will, following publication, be available during normal business hours on any day (except Saturdays, Sundays and public holidays) from the registered office of the Company.   

12 July 2013

 

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

First Day of Dealings

Keywords Studios, the international technical services provider to the global video games industry, is pleased to announce that it has been admitted to AIM, a market operated by London Stock Exchange PLC. Dealings in Keywords Studios shares began trading today under the ticker, KWS.L.

 

This announcement follows a successful conditional Placing, at a placing price of 123p, which raised estimated gross proceeds of £28m, including £10m receivable by the Company.  The market capitalisation of the business upon admission will be £49.2m.

 

Commenting on today's announcement, Andrew Day, Chief Executive of Keywords Studios said:

"We saw strong interest from a series of blue chip investors and it is testament to the growth story of the Company that we have succeeded in our ambitions to become a listed company.

 

"Keywords Studios serves a global customer base of video games producers, yet the games service provider industry remains fragmented. Our IPO marks the next stage in the Company's evolution as we look to take a leading role in the industry's consolidation and to extend our existing offering in an expanding market."

 

For further information, please contact:

Keywords (www.keywordsstudios.com) Andrew Day, Chief Executive Officer David O'Connor, Chief Financial Officer	+353 190 22 730
Numis (Financial Adviser) Stuart Skinner / Kevin Cruickshank  (Nominated Adviser) James Serjeant (Corporate Broker)	020 7260 1000
MHP Communications (Financial PR) Lucinda Kemeny / Katie Hunt / Vicky Watkins	020 3128 8100

 

Keywords is an international technical services provider to the global video games industry.  Established in 1998, and now with facilities in Dublin, Tokyo, Rome, Montreal and Seattle, it provides integrated localisation, testing and audio services across 30 languages and 12 games platforms to a blue chip client base in more than 15 countries. 

 

Strong market position: Keywords is entirely focused on the provision of quality, outsourced services for the video games industry globally.  Its customers include many well-known blue chip multinational games publishers and developers including 15 out of the 25 most prominent games companies listed by Gartner¹.  The Group has built a strong reputation for quality of service and delivery, from secure facilities, as evidenced by its excellent client retention and new client and title wins, including Blizzard Entertainment, Disney and King.com in the last nine months alone.

Full service, international offering: The Group has expanded geographically and now has five facilities in three continents (whose locations reflect video game company clusters) providing full localisation services to local and global clients.  This broad reach has enabled Keywords to offer localisation services into over 30 languages across 12 platforms to clients in over 15 countries.  Keywords provides a fully integrated service offering, comprising functional testing, localisation, audio recording and localisation testing and the Directors believe that it is currently the only platform agnostic, multi-lingual, internationally integrated provider of global video games localisation and testing services.  Competitors tend to follow a network model using third party partners to deliver particular languages or other elements of their localisation services for large global projects, whereas Keywords offers an end-to-end service for all languages.

A pure focus on high growth market: The global video games market is predicted to grow significantly and spending on games software is predicted to grow by solid double-digit percentages during the next five years¹. Meanwhile, the eighth generation console cycle is expected to revitalise the console games market now that Sony and Microsoft have joined Nintendo with the launch of PlayStation 4 (Sony) and the new Xbox One (Microsoft).  The Group's business model is platform agnostic enabling it to take advantage of the increase in content resulting from a proliferation of platforms in the video games market (for example console, social and mobile games) as localisation and testing services are required for each platform and in each language in which a game is to be produced.

Multiple structural growth drivers: A proliferation of games platforms (beyond console and PCs to online, social gaming and cloud-based gaming), and monetisation models (beyond traditional retail sales to in-game purchases and advertising and bolt-on content models) has resulted in a number of key growth drivers for Keywords; it is taking video gaming into new markets both geographically and demographically; it is making content more dynamic and continuous, as games developers seek to keep users engaged for longer; and it is , the directors believe, furthering a perceived trend towards outsourcing localisation and testing services, as set out below.

·      Geographic and demographic market expansion: The development of mobile gaming in particular has opened up new geographical markets, including in developing countries which have little history of console or PC gaming, whilst there has also been a significant expansion of demographic markets; 47% of all games players (video and computer games) are women and 68% of games players are 18 years of age or older³. 

·      More dynamic and continuous content: With new content and upgrades being continually produced by developers, in order to extend the lifetime value of the consumer, games content now evolves considerably after its initial launch.  This evolution of content delivery and the industry shift to online games requires greater localisation and testing support for the more complex and continuous downloadable content well beyond the game going on sale. 

·      Trend towards outsourcing: As localisation and testing has become more complex and resource-intensive, due to the proliferation of devices, audiences, distribution channels, monetisation models and increased complexity of content, the trend for publishers and developers to outsource some or all of these services has continued.

Overall, the trend to outsourcing, growth in platforms, development of more dynamic content and market expansion has increased demand for localisation and testing services, leaving Keywords well positioned to grow its share of existing customers' spend and win new contracts with global blue chip gaming and software companies.

Proven financial record: Keywords has achieved strong organic growth in revenue and profits throughout the recent economic downturn.   Over the three year financial period ended 31 December 2012, it has secured compound annual growth rates of 60%, 51% and 154% in revenue, gross profit and operating profit respectively. The Group's gross margins were 39% and operating profit margins were 20% in the 2012 financial year.  Historically the Group has been entirely funded from internally generated cash flows. Notwithstanding these investments, the Group is in a cash positive position with low CAPEX requirements. It has no long term debt and no reliance on external finance providers.

 

The Group intends to continue to grow organically, building on its existing expertise to further extend its technical services offering to the games industry. In addition, the Group plans to play a leading role in the consolidation of the highly fragmented games services industry through selective acquisitions of complementary businesses.   The Directors believe that there is clear opportunity for Keywords to build on its existing relationships with many of the major games companies by extending its services offering and geographical footprint as follows:

New Service Activities:

·      By expanding its services downstream into operational support services of games including developing multilingual customer services support (such as offering support to gamers through online forums, email and over the phone); payments services (to support microtransactions such as in-game purchases or content bolt-ons); and analytics (probably in partnership with a leading predictive analytics firm, offering customers analysis of game data as well as embedded real time analytics);

·      By moving further upstream into original games content development services, including art outsourcing (such as 2D and 3D concept art and character animation using sophisticated software systems); original language audio (undertaking the original audio recording on the master game as opposed to only currently providing voiceover and dubbing); and motion capture (the process of recording actions of, for example, human actors using sensors and multiple cameras, and using that information to animate digital character models in 3D computer games animation).

Geographic Expansion: Asia Pacific, which accounts for three out of the top four video games markets in the world, is projected to be the fastest growing region during the next five years, increasing to $40 billion in 2016 (2011: $24 billion)⁴.  The Group may therefore look to strengthen its global presence by opening facilities in South Korea and China responding to existing customers already requesting support in such countries, whilst also taking advantage of the lower cost base and access to more resources.  There is similar demand from customers requiring support in Brazil, another large growth market for video games. 

Outsourcing:  It is becoming technically costly for publishers and developers to cater themselves for all types of games localisation around the world, given the growing complexity of entertainment software products and business models.  As international demand for video games rises, Keywords believes it can demonstrate to the blue chip games companies that its Group has the geographical footprint, capacity and expertise for such companies to outsource all their localisation requirements to Keywords.

Acquisitions: Complementary to the Group's organic growth opportunities, the Directors will consider selective acquisitions which are considered value enhancing where they enlarge the Group's client base, market penetration and / or service lines and where the Group can use its existing expertise, multi-service platform, scale and global reach to generate synergies and increase profitability.  The Group may also consider acquisitions or joint ventures which provide a platform for it to take its core technical expertise into new, adjacent entertainment markets such as online gambling, E-learning and film dubbing and subtitle services.

 

Keywords provides localisation, audio and testing services to the global video games market from offices in Dublin, Tokyo, Rome, Montreal and Seattle.  Its service offering includes:

·      Localisation - translation and cultural adaption including age rating support across different platforms

·      Localisation Testing - testing that the translated and adapted content fits the games context

·      Audio - voice over recordings including script translation and actor selection

·      Functional Testing  - testing for defects and compliance with console specifications

Founded in Ireland in 1998, by Teresa Luppino and Giorgio Guastalla, Keywords's operational headquarters remain in Dublin.  Originally established as a localisation service provider to the business software market, the Company gradually became exposed to the more creative challenge of localising video games.  In 2004, working in partnership with a key client, Keywords developed a new model of video game localisation testing whereby native language testers play, test and report bugs in the localised versions of the games covering both functional and linguistic aspects simultaneously.  Previously such processes would have been handled either by separate teams of non-native testers supported by a separate team of linguists or two separate teams, one focusing on functional issues in the localised game builds and another looking only at the linguistic elements. The Directors believe that Keywords was the first to perform computer game localisation testing in this new way which enabled it to provide a superior service compared to its competitors at that time.

In 2005, Keywords made a strategic decision to focus only on the localisation and testing of video games and over the following years the Directors believe it earned a reputation for delivering a quality, tailored service. 

In April 2009, Andrew Day joined Keywords as Chief Executive Officer, further driving the growth of the Group and gaining new strategic customers. He became a significant shareholder in Keywords in 2012.

In November 2010, driven by the demands of existing clients, Keywords commenced its geographic expansion by opening its Tokyo office, with capacity for 100 employees per shift specialising in Asian languages.

In June 2010, Keywords moved to new premises in Dublin due to its rapid organic expansion, whilst also taking advantage of falling rents in the Irish economy at the time.  In the same year Keywords opened its first North American production facility in Montreal principally to provide a physical presence for its existing customers in North America and to service the games company cluster in Quebec.  This was followed in 2011 by the integration of Keywords Italia SRL, Rome.  The Group's geographic expansion continued in September 2012, in response to ongoing rapid growth and client demand, with the start of Company's operations in Seattle.

 

The following are highlights from Keywords' audited full year results for the financial year ended 31 December 2012:

·      Revenue of €14.34m; 2010-2012 CAGR of 59.8%

·      Gross profit of €5.53m; 2010-2012 CAGR of 48.0%

·      Operating profit of €2.81m; 2010-2012 CAGR of 153.9%

·      Profit before tax of €2.74m; 2010-2012 CAGR of 157.6%

·      Net Cash of €3.89m

 

The Board consists of two Executive Directors and three Non-Executive Directors. Brief biographies of the Directors are set out below. The Directors believe that Keywords Studios benefits from a strong, stable and proven entrepreneurial management team. The executive management team has been enhanced by the appointment of Non-Executive Directors with substantial technology, growth company, financial and public markets experience. The Board members include:

·      Independent Non-Executive Director and Chairman: Ross Graham.

·      Chief Executive Officer: Andrew Day.

·      Chief Financial Officer: David O'Connor.

·      Independent Non-Executive Director: David Reeves.

·      Non-Executive Director and Founder: Giorgio Guastalla, Co-founded Keywords in 1998

 

Board Biographies

Ross Graham - Independent Non-Executive Director and Chairman: Ross, a chartered accountant, has had a long career in the technology industry starting in 1987 when he started work at Misys, the newly listed  global software product provider, as Finance Director before becoming Corporate Development Director. He joined Psion, the mobile computing business, in 2005 as Chairman of the Audit Committee and Remuneration Committee before he was nominated to become Senior Independent Director of the company. Today he remains a Non-Executive Director of Wolfson Microelectronics, a leading supplier to the consumer electronics industry, having been appointed to the board in 2003.

Andrew Day - Group Chief Executive Officer: Andrew has a background in technology, manufacturing and business services through corporate development and general management roles within both publicly quoted and private companies.  Andrew started his career in 1983 at Rothmans International PLC in production management.  From 1986 to 1993 he had responsibility for corporate development activities at Britannia Security Group PLC, TIP Europe PLC and Brent International PLC before holding the position of Divisional Managing Director at Brent International PLC for six years.  Andrew was Chief Executive Officer of interactive retail software developer, Unipower Solutions and Head of Retail and CPG for EMEA at NYSE listed advanced analytics business, FICO before joining Keywords as its Chief Executive Officer in April 2009.

David O'Connor - Group Financial Director: David is a chartered accountant who has extensive experience in senior management roles. He has recently held two positions as Financial Controller for international companies, including Deecal International Limited (latterly named First Data Commercial Services Limited).  In his position as Financial Controller, David has had experience in creating corporate financial systems and procedures, leading internal teams and developing sales strategies.  In 2012, David became a consultant for Baker Tilly Ryan Glennon, a firm of accountants and business advisors in Ireland, before being employed as Group Financial Controller for Keywords in July 2012.

David Reeves - Independent Non-Executive Director: David has spent over 30 years in management roles within multinational companies.  He began his career as an operational research consultant before moving overseas with RJ Reynolds Nabisco where he worked from 1979 to 1991, becoming the Marketing Director in 1986 and Worldwide Marketing Director in 1989.  In 1991, David served as the General Manager and Vice President of Marketing in Tokyo for Mitsubishi Shoji JV Technology Company.  David has considerable experience in the computer entertainment industry.  David was the Managing Director for Sony Computer Entertainment (PlayStation) from 1995 until his appointment as its Executive Vice President in 1999 and President in 2003. Throughout his career, David has developed knowledge of the various working styles of European, American and Asian corporations.  He was appointed to the Board of Keywords Studios Limited on 29 May 2013.

Giorgio Guastalla - Non-Executive Director: Giorgio Guastalla is co-founder of Keywords. Prior to establishing Keywords in Ireland in 1998, Giorgio held various positions in marketing and IT at Brent International PLC based in the US, Spain, UK and France. In 2002 Giorgio founded Italicatessen Ltd, a company operating in the food sector. Giorgio was CEO of Keywords until 2009 before concentrating on his other business interests and moving to a non-executive director role at Keywords Studios.

 

Important Notice:

This announcement does not contain or constitute an offer of, or the solicitation of an offer to buy or subscribe for, securities to any person in any jurisdiction including the United States, Canada, Australia, South Africa, the Republic of Ireland or Japan or in any jurisdiction to whom or in which such offer or solicitation is unlawful. The securities referred to herein have not been registered under the U.S. Securities Act of 1933 (the "Securities Act") and may not be offered, sold, transferred or delivered, directly or indirectly, in or into the United States or to or for the account or benefit of U.S. persons absent registration under the U.S. Securities Act or an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act. There will be no public offer of the securities in the United States. Subject to certain exceptions, the securities referred to herein may not be offered or sold in United States, Canada, Australia, South Africa, the Republic of Ireland or Japan or to, or for account or benefit of any national, resident or citizen of United States, Canada, Australia, South Africa, the Republic of Ireland or Japan. The offer and sale of the securities referred to herein has not been and will not be registered under the Securities Act, under the securities legislation of any state or territory or jurisdiction of the United States or under the applicable securities laws of United States, Canada, Australia, South Africa, the Republic of Ireland or Japan.

This announcement does not constitute or form part of, and should not be construed as, an offer to sell or issue, or a solicitation of any offer to buy or subscribe for, any securities, nor should it or any part of it form the basis of, or be relied on in connection with, any contract or commitment whatsoever. This announcement is not an admission document. Investors should not subscribe for or purchase any securities referred to in this announcement except on the basis of information in the Admission Document issued by the Company in connection with the admission of the Ordinary Shares to the AIM market operated by the London Stock Exchange. In the event of any discrepancy between this announcement and the Admission Document, the Admission Document will prevail. The information contained in this announcement is for background purposes only. It is not the purpose of this announcement to provide, and you may not rely on this announcement as providing, a complete and comprehensive analysis of the Company's financial or commercial position or prospects.

This announcement has been issued by Keywords Studios Plc and is directed only at (i) persons who are outside the United Kingdom, or (ii) persons who have professional experience in matters relating to investments falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended from time to time (the Order), or (iii) persons who fall within Article 49(2)(a) to (d) of the Order (high net worth companies, unincorporated associations etc), or (iv) persons to whom this announcement may otherwise be lawfully communicated (all such persons together being referred to as Relevant Persons). Any investment activity to which this announcement relates will only be available to and will only be engaged with, Relevant Persons. Any person who is not a Relevant Person should not act or rely on this document or any of its contents.

Investments to which this announcement relates may expose an investor to a significant risk of losing all of the amount invested. Persons considering investment in such investments should consult an authorised person specialising in advising on such investments. This announcement does not constitute a recommendation concerning the Placing. The value of shares can decrease as well as increase. Potential investors should consult a professional advisor as to the suitability of the Placing for the person concerned.

The Placing and the distribution of this announcement and other information in connection with the Placing in certain jurisdictions may be restricted by law and persons into whose possession any document or other information referred to herein comes should inform themselves about and observe any such restriction. Any failure to comply with these restrictions may constitute a violation of the securities laws of any such jurisdiction.

Numis Securities Limited is authorised and regulated in the United Kingdom by the FCA,  and is acting exclusively for the Company and no one else in connection with the Placing and will not regard any other person (whether or not a recipient of this announcement) as a client in relation to the Placing and will not be responsible to anyone other than the Company for providing the protections afforded to its clients or for providing advice in relation to the Placing, Admission or any transaction, arrangements or other matters referred to in this announcement.

Forward Looking Statements

All statements, other than statements of historical facts, included in this document, including, without limitation, those regarding the Group's financial position, business strategy, plans and objectives of management for future operations or statements relating to expectations in relation to dividends or any statements preceded by, followed by or that include the words "targets", "believes", "expects", "aims", "intends", "plans", "will", "may", "anticipates", "would", "could" or similar expressions or the negative thereof, are forward-looking statements. Such forward-looking statements involve known and unknown risks, uncertainties and other important factors beyond the Group's control that could cause the actual results, performance, achievements of or dividends paid by the Group to be materially different from actual results, performance or achievements, or dividend payments expressed or implied by such forward-looking statements. Such forward-looking statements are based on numerous assumptions regarding the Group's net asset value, present and future business strategies and income flows and the environment in which the Group will operate in the future.

These forward-looking statements speak only as of the date of this announcement. The Group and Numis expressly disclaim any obligation or undertaking to disseminate any updates or revisions to any forward-looking statements contained herein to reflect any change in the Group's expectations with regard thereto, any new information or any change in events, conditions or circumstances on which any such statements are based, unless required to do so by law or any appropriate regulatory authority.