Keywords Studios confirms trading remains on track for strong year

Trading in the first three months of the second half has been in line with expectations of directors', who were said to be
"selectively reviewing a strong acquisition pipeline" after completing three acquisitions last month and continuing to invest in operational capacity and group infrastructure to support future growth.

Expansion plans have been supported by investment in eight facilities to add up to 700 seats across Art, Player Support, Functionality Testing, and Localisation Testing in the second half to accommodate organic growth in response to market demands, the AIM-listed company said.

Over the last 12 months Keywords has increased its
average number of employees by around 83% to more than 2,700

For the six months to 30 June it confirmed that revenue, including contribution from acquisitions, increased 50% to €63.8m, with a 17% increase in like-for-like revenue, or 28% when excluding the acquired Synthesis in both periods.

Adjusted profit before tax increased 60% to €9.6m and adjusted earnings per share swelled 55% to 13.2 euro cents.

With net cash of €1.1m in the bank after €6.9m net cash spent on acquisitions, the board upped the interim dividend 10% to 0.48p per share.

Chief executive Andrew Day said the strategy continue to be to pursue organic- and acquisition-led growth to build a global games services business.

"Our success in providing a wider range of services to our existing client base, which is comprised of 23 of the 25 leading video game companies around the world, is evidenced by a 40% increase in the number of clients buying three or more services from us.

"We continue to invest in larger facilities and additional talent in our existing business in support of organic growth while welcoming new businesses to the group through our active strategy to lead the consolidation of a highly-fragmented market."

House broker Numis is forecasting €138.6m revenue, €21.9m PBT and 30.7 cents for the full calendar year, rising to €161m, €26m and 36.4 cents for 2018.

Given the investment in organic growth, Berenberg analysts expect margins to be more equal and maintained EBIT margin forecast of 15.5%.

They also suggested an upside scenario could see Keywords quadruple its EBIT by 2021E if it were to grow at a 15% compound annual growth rate and deploy circa €200m on M&A over that period.