Acquisition frenzy paying off for Keywords Studio

Video games industry technical services provider Keywords Studios updated the market on trading on Wednesday, following a year of what it called further strong organic growth and geographic expansion complemented by a number of successful acquisitions.

The AIM-traded group announced preliminary unaudited revenues for the year ended 31 December of €96.6m, and adjusted profit before tax of €14.8m, both of which were comfortably ahead of consensus market expectations.

It said that performance was driven by strong like-for-like growth, due to the continued growth of the established business as well as the contribution of the eight acquisitions completed during the year.

The group’s board said it was continuing to deliver on its strategy of growing organically and through acquisition in order to become the ‘go to’ supplier of technical services to the video games industry globally.

To that end, Keywords was now comprised of six globally-managed service lines operating from 27 production studios in 16 countries.

During the year, it absorbed seven new businesses through acquisition - Ankama, Synthesis, Mindwalk, Volta, Player Research, Enzyme and Sonox - which the board said all contributed positively in further extending its client penetration, its geographic reach and the talent within the Group.

Also acquired during the year was the 50% of Kite Team not already owned by the Keywords.

The group invested cash of €20.7m for the eight acquisitions completed in 2016, following which it had €17m in cash at the year-end and utilised €8m of its €15m rolling credit facility.

Its strong cash generation, coupled with available debt facilities, provided it with good headroom for further acquisitions in 2017, the board said.

“Our group continues to grow revenues and profits whilst also growing a talent pool that is increasingly recognised as a resource that enables clients around the world to reduce complexity and focus on their core business of designing and publishing great video games,” commented chief executive Andrew Day.

“The development of new Virtual and Augmented Reality platforms only adds to that complexity and, whilst we have not assumed stronger demand for our services in this area in 2017 compared to 2016, it's an exciting new form of content delivery that brings greater interactivity to many content types and requires the skills and services that we have developed over many years at the forefront of interactive content.”

Day said the board structured the management of the group in order to support both further organic growth and the continued consolidation of its highly fragmented markets around the world.

“Our cross-selling efforts continue to bear fruit and we begin 2017 with a global sales and sales support team of 14 compared to 9 in 2016, which will help drive further organic growth.

“We also remain well-funded and continue to review a healthy pipeline of complementary acquisition opportunities, which will add to the talent pool, range of services, production capacity and the choice we can offer our clients.

“Although it's early in 2017, we are therefore confident of making continued progress in the year ahead.”