Keywords Studios posts strong growth despite tougher market

Keywords Studios reported a 13% rise in full-year revenue in its final results on Wednesday, to €780m.

The AIM-traded firm said that growth, equivalent to 17% on a constant currency basis, was primarily driven by strong organic growth and strategic acquisitions.

Organic revenue growth, excluding the impact of US strikes and foreign exchange, stood at 9% for 2023, reflecting solid performance even on a reported basis at 6%.

Adjusted operating profit rose 6% to €122m, with a margin of 15.6%, surpassing guidance expectations.

That increase was put down to effective cost control measures implemented by the company.

Adjusted free cash flow reached €94m, driven by robust cash generation in the second half of the year, with an adjusted cash conversion rate of 82%, in line with guidance.

Despite net debt of €68m, a shift from net cash of €82m year-on-year due to substantial acquisition activities, Keywords said it was maintaining its financial stability and growth trajectory.

Strategically, Keywords Studios said it continued to outperform the market, as its strategic partnerships yielded positive results, with revenues from top 25 clients growing ahead of the group's overall performance.

Additionally, progress was made in the development and scaling of artificial intelligence (AI) post-production technology platforms across its ‘Globalise’ and ‘Engage’ segments.

The board said 2023 was a record year for mergers and acquisitions, with Keywords completing five high-quality acquisitions, totaling €225m in maximum consideration.

Looking ahead, the company anticipated strong revenue and profit growth in 2024, aiming to extend its market leadership position.

The growth was expected to be driven by improving organic growth, recent merger and acquisition activities, and sustained adjusted operating profit margins above 15%.

“In what was a difficult year for the industry, we delivered resilient performance in 2023 and continued to extend our market leadership position, reflecting our role as a diversified enabler of the industry,” said chief executive officer Bertrand Bodson.

“Whilst the industry backdrop remains tough in the near term, our diversified technology-enabled offering and strong client relationships means that we are incredibly well-positioned to continue to grow our market share as we support clients in the creation of ever more exciting and immersive experiences.”

Bodson said the company had made “considerable progress” against its strategic objectives and delivered a record year of mergers and acquisitions, bringing greater exposure to higher growth and margin creative services, with an “extensive” pipeline of acquisitions in 2024.

“We will continue to successfully navigate the current market conditions and are excited by the opportunities that lie ahead as we deliver against our plans and become a €1b-plus revenue business in the coming years.”

At 0921 GMT, shares in Keywords Studios were up 10.65% at 1,515.95p.

Reporting by Josh White for Sharecast.com.