28 January 2021

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

Full year trading update

12% organic revenue growth despite COVID-19 constraints

Keywords Studios, the international technical and creative services provider to the global video games industry, today provides the following unaudited trading update for the year ended 31 December 2020 ahead of full year results which will be issued on 24 March 2021.

Trading Update

The Board now expects revenue and adjusted profit before tax* to be €373m and €55m, marginally ahead of the guidance issued on 24 November 2020 of c.€367m (2019: €326.5m) and c.€52m (2019: €40.9m), respectively. On an organic** basis, full year Group revenues are expected to increase by approximately 12% (H1 2020: 8.0%, 2019: 15.5%).

This performance reflects a strong finish to the year with robust demand for the Group's services continuing throughout the second half, albeit the previously stated COVID-19 production constraints continued to delay the flow of some content in certain service lines. Despite these revenue constraints, Keywords delivered good underlying margin improvement, driven by operational leverage and good cost control, together with a reduction in certain costs due to COVID-19, such as travel.

Since the placing in May 2020, Keywords Studios has made seven high quality acquisitions in the US, UK and Italy, further strengthening the breadth and depth of the Group's value-added services offered to our global video games clients. Three of these were in Game Development (High Voltage, Heavy Iron, Coconut Lizard), three in Marketing Services (g-Net, Maverick, Indigo Pearl ) and one in Audio (Jinglebell).

Total consideration for these seven acquisitions, which includes performance related contingent deferred consideration elements, is up to a maximum of c.€92m, including the acquisition of Heavy Iron that completed in January 2021. For 2020, cash invested in acquisitions totalled approximately €40m, which comprised c.€38m (net of cash acquired) in respect of those companies acquired during the year and c.€2m in settlement of deferred consideration payments for earlier acquisitions that became due in the period. Net cash at 31 December 2020 is expected to be approximately €100m (€101m at 30 June 2020, net debt €17.9m at 31 December 2019).

Andrew Day, CEO, commented:

"The Group has delivered another robust performance, delivering good organic growth despite the obvious challenges of COVID-19 across our global operations. This is testament to the dedication of our talented Keywordians, who have continued to provide our clients with the excellent service they have come to expect, despite these challenging circumstances.

"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. We continue to actively review a healthy pipeline of acquisition opportunities and we retain the financial resources to selectively execute on these as we build the 'go to' global video games services platform.

"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."  

* Adjusted profit before tax comprises Profit before taxation as reported in the Consolidated statement of comprehensive income, adjusted for costs including share option expense, costs of acquisitions and integration, amortisation 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 COVID-19 government subsidies claimed is also excluded.

** 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. 

Notification of Full Year Results

The Group expects to announce its full year results for the year ended 31 December 2020 on 24 March 2021. To register your interest, please contact Keywords@mhpc.com.

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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 65 facilities in 21 countries strategically located in Asia, the Americas and Europe, it provides integrated art creation, marketing services, software engineering, testing, localization, audio and customer care 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, 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: Modern Warfare, Anthem, Star Wars Jedi: Fallen Order, Assassin's Creed Odyssey, Valorant, League of Legends, Fortnite, Clash Royale and Doom Eternal. Keywords Studios is listed on AIM, the London Stock Exchange regulated market (KWS.L).