Video game developers increasingly release titles on multiple platforms and in dozens of countries. Growing numbers outsource testing, translation and sound editing to Keywords Studios (KWS). Strong demand and new customers such as Amazon drove the Aim-traded company's comparable sales up a fifth in 2015, propelling adjusted pre-tax profit up 57 per cent to €8m (£6.4m).
Since the start of 2014, Keywords has made 10 acquisitions that have grown its footprint and widened its range of services. In the past two weeks it agreed to buy Chinese art outsourcer Mindwalk and Ankama, a customer support specialist in the Philippines. Its purchases have allowed more cross-selling: more than 50 clients took at least three of its services in 2015.
Keywords enjoyed soaring like-for-like growth, and a full-year contribution from 2015 acquisition Lakshya, in its higher-margin arts creation business. This helped the gross margin up from 34.1 per cent to 37.6 per cent. Sales also leapt by more than a tenth in the localisation, functional testing, audio and customer support segments.
Management is eyeing further acquisitions in areas such as game engineering and analytics. It also sees applications for its services in film, digital learning and online gambling. Broker Numis Securities hiked its forecasts and now expects pre-tax profit of €10m in 2016, giving EPS of 14.7¢ (from €8m and 12.7¢ in 2015).
| KEYWORDS STUDIOS (KWS) | ||||
|---|---|---|---|---|
| ORD PRICE: | 217p | MARKET VALUE: | £116m | |
| TOUCH: | 213-220p | 12-MONTH HIGH: | 237p | LOW: 148p |
| DIVIDEND YIELD: | 0.4% | PE RATIO: | 39 | |
| NET ASSET VALUE: | 96¢* | NET CASH: | €17.3m | |
| Year to 31 Dec | Turnover (€m) | Pre-tax profit (€m) | Earnings per share (¢) | Dividend per share (p) |
|---|---|---|---|---|
| 2011 | 10.3 | 2.5 | 5.3 | na |
| 2012 | 14.3 | 2.7 | 7.3 | na |
| 2013** | 16.2 | 1.2 | 2.1 | 1.00 |
| 2014 | 37.3 | 3.4 | 4.9 | 1.10 |
| 2015 | 58.0 | 5.1 | 7.0 | 1.21 |
| % change | +55 | +48 | +41 | +10 |
Ex-div: 2 Jun Payment: 23 Jun *Includes intangible assets of €27.7m, or 51¢ a share **Keywords listed in July 2013 £1=€1.25 | ||||
