Keywords Studios PLC – Change to full year results date & COVID-19 update
Keywords Studios plc announces that, whilst the Board were in a position to announce the Group’s audited results for the year ended 31 December 2020 on 31 March 2020, it has decided to delay their announcement in response to guidance recently issued by the Financial Conduct Authority and the Financial Reporting Council.
The original reporting date fell within the two-week moratorium recommended by both bodies and the Group will, therefore, report no earlier than 6 April 2020. It is choosing not to set a revised announcement date at this time, mindful that any new commitment could be impacted by further regulatory guidance. It will commit to a new date as soon as the regulatory backdrop becomes clearer.
In line with the announcement on 30 January 2020, the Board expects to report full year revenues of approximately €326m, representing a c.30% increase on the prior year or a 15% increase on an Organic* basis, Adjusted Profit Before Tax** of approximately €41m, representing an increase of c.8%, and Adjusted EBITDA*** (excluding the impact of IFRS 16) of approximately €49.5m, an increase of c.13% on the prior year.
Given the delay to the audited full year results and the increased uncertainty created by the spread of COVID-19, the Group today provides an update on its operational response, current trading and outlook and the Group’s liquidity.
COVID-19 response, current trading and outlook
Trading in 2020 started in line with market expectations for the full year, with only minimal impact from COVID-19 in the first two months, due principally to the short-term disruption in China that affected our five studios there. These operations have now returned to near full production, following the return to work after the government mandated shutdowns and our subsequent implementation of social distancing and rigorous hygiene regimes in the studios, as well as some work from home measures.
Our first priority during this period is the health and wellbeing of our people and we follow the health and safety recommendations of the local and national authorities in every location we work in across the 21 countries in which we have operations. Drawing on our experiences of territories that are further progressed in dealing with the crisis such as China and Italy, we have in many cases been able to get ahead of local guidance with the implementation of measures for the safety of our people and the continuity of business.
Since February, our support teams in each location have worked tirelessly and have so far converted some 4,500 people to work from home arrangements, and in consultation with our clients, we are continuing to make preparations to move more of our production staff to this model. There has clearly been some short-term disruption involved in these logistics, with some of our service lines and locations affected more than others, but overall we are pleased with how both staff and clients have coped with these challenges.
We are also currently seeing an increase in the demand for certain services, as existing and new clients look to us for support during this challenging time and as they reappraise their production arrangements. We are making efforts to satisfy their requests subject to our own near-term resource constraints, as we prioritise the wellbeing of our people. It looks likely that demand will outstrip our ability to fulfil it in the near term and we hope to benefit from pent up demand once our operating environment normalizes.
Operating within the global video games market and with seven service lines delivered from 59 studios across 21 countries, coupled with our ability to deliver the majority of our services from work from home arrangements, means we are able to offer clients a high degree of resilience to the varying cycles of the spread of the virus in different locations. However, the situation is changing rapidly, and it is difficult to foresee the impact on our clients and the further threats and opportunities that may await us. As such, the Board does not believe it is prudent to provide guidance on the potential full year outcome for FY20 at this time.
Thanks to the robustness of the Group’s model, the growth characteristics of our end markets and the strength of our market position, the Board is confident of being well positioned for growth and the long-term success of the business.
Balance sheet and liquidity
The Group has a strong balance sheet with net debt (excluding IFRS 16 leases) as at 31 December 2019 of approximately €18m, representing a net debt to Adjusted EBITDA*** ratio of 0.4x. The business currently has adequate liquidity with cash and undrawn committed facilities under the €100m revolving credit facility (RCF) of €82m as at the end of December, and a further €40m ‘accordion’ feature under the RCF, available subject to lender approval.
Given the current environment, the Group has taken steps to preserve cash by a close focus on costs and eliminating discretionary expenditure, reducing working capital and delaying certain capital projects.
Andrew Day, CEO, commented:
“Our first priority is to do all we can to responsibly support the global efforts to control the spread of COVID-19, and to safeguard our employees, our clients’ teams and our communities.
“The incredible efforts being made by our teams across the world in supporting their colleagues in reacting to the extraordinarily fast-moving events is truly heartwarming. It is encouraging to see our clients turning to us for support in these difficult times and our teams are responding with extreme agility to support them whilst rapidly implementing our own contingency plans.
“Whilst we do expect disruption to the provision of our services due to the COVID-19 pandemic, we anticipate the underlying drivers of growth across the video games market to remain intact, whilst games companies also look to enhance their resilience across their production arrangements.
“There will be some further challenges ahead, but we are well financed, with a global footprint, a unique position in a resilient market and a strong team to manage the business through these difficult times and emerge in a robust position to deliver on the pent up demand across our client base.”