Keywords Studios PLC – Final Results

Keywords Studios PLC – Final Results

Keywords Studios, the international technical services provider to the global video games industry, today provides its full year results for the year to 31 December 2018.

Financial overview:

  • Group revenue increased by 66% to €250.8m (2017: €151.4m)
  • On a Constant Currency1 basis, revenue grew to €258.6m (2017: €151.4m)
  • Gross margin increased to 38.2% (2017: 36.4%)
  • Adjusted profit before tax2 increased by 65% to €37.9m (2017: €23.0m)
  • Adjusted basic earnings per share2 up by 53% to 47.75c (2017: 31.18c)
  • Return on capital employed (ROCE)3 of 19.4% (2017: 15.8%)
  • Cash conversion of 91% (2017: 91%)
  • Net debt4 of €0.4m (2017: €11.1m net cash)
  • Final dividend of 1.08p (2017: 0.98p); 10% increase in total dividend to 1.61p per share (2017: 1.46p)

Operational overview:

  • 10.1% increase in like-for-like5 revenue or 14.9% excluding the impact of VMC
  • 8 acquisitions in 2018 completed and integrated, expanding new and existing service lines:
    –  Integration of VMC across four service lines and five studios completed ahead of schedule, giving us the benefits of scale in North America
    –  Significantly expanded our newer engineering service line
    –  Added marketing services, music management and predictive analytics to our range of services
  • Invested in capacity, adding 930 work stations across multiple studios to support organic growth
  • 99 clients now using three or more services, up from 93 in 2017 indicating further cross-selling success
  • Keywords Ventures launched to make modest investments in innovations that will benefit our clients

Current trading and outlook:

  • An encouraging start to 2019, with the first quarter in line with our expectations
  • 2 further acquisitions made in 2019, adding scale in marketing services with Sunny Side Up and user retention and social engagement services with GetSocial
  • Significant new business gains including our first key wins in game streaming
  • Capital expenditure expected to be lighter in 2019 than in 2018
  • Healthy pipeline of acquisition opportunities, with a particular focus on building marketing, engineering and audio services 

The business uses a number of adjusted measures that are not defined or recognised under IFRS. For full definitions and explanations of these measures and a reconciliation to the most directly referenceable IFRS line item, please refer to the end of the statement. 

1 revenue in 2018 calculated at the currency rates consistent with those that applied in 2017
2 before acquisition and integration expenses of €5.6m (2017: €3.0m), share option charges of €4.1m (2017: €1.4m), amortisation of intangibles of €6.9m (2017: €3.0m) and foreign currency exchange gain of €0.8m (2017: loss of €3.6m).
3 ROCE represents adjusted profit before tax, including pre-acquisition profit and excluding interest expense, expressed as a percentage of the total capital employed which are both adjusted as if all the acquisitions made during each year were made at the start of that year.
4 after payment of €24.9m net cash consideration for acquisitions (2017: €86.8m), €4.5m of acquisition costs and integration expenses (2017: €3.0m).
5 like for like revenue at constant exchange rates is calculated by adjusting the prior year revenues comparison by adding pre-acquisition revenues for the corresponding period of ownership in the current year results and applying consistent foreign exchange rates in both years. 

Andrew Day, Chief Executive of Keywords Studios, commented: 

“The Group delivered a strong performance in 2018 as we increased our share of the growing video games market and expanded our range of services. This considerable progress has further improved our quality of earnings and moved us higher up the value chain with our customers.

“We have started 2019 promisingly, and we are seeing good overall demand for our services across the Group. We are actively reviewing acquisitions from which we will continue to be selective, with many businesses excited about the strong platform Keywords could potentially provide for their services and people.  

“This, combined with the likely increase in demand for content driven by the arrival of games subscription and streaming services from new entrants such as Apple and Google, give us confidence in the outcome for the full year. 

“Our strengthened market leadership and breadth and scale of service offering enable us to take advantage of the multiple growth opportunities afforded by a market that continues to grow in size and sophistication.”

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