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Keywords skips on dividend

The pandemic closed some studios, but the company's pre-tax profits still grew by two-thirds
September 17, 2020

Keywords Studios' (KWS) adjusted cash profits climbed by almost a fifth to €30.8m (£28.2m) in the first half to June, despite the closure of some of its studios due to coronavirus restrictions. The group, which provides technical services to video game companies, managed to deliver growth across all of its segments – with the exception of localisation, where revenues slipped 5 per cent. 

IC TIP: Buy at 2,226p

Keywords is in good health overall, helped by an attractive video games market backdrop. The balance sheet was supported by a €110m placing back in May, boosting the group into a net cash position. Still, management has skipped on the dividend; chief executive Andrew Day believes the board will be able to resume payments in 2021. 

Keywords separately announced the acquisition of Heavy Iron for $13.3m (£10.3m), which should help to strengthen its game development position. The purchase follows a number of acquisitions in the first half, including Coconut Lizard, also in game development, and Maverick Media in marketing services.

The group's adjusted free cash flow doubled to €10.9m, helped by the timing of tax relief receipts. 

FactSet places consensus forecast EPS at 41.9ȼ for 2020, rising to 53.3ȼ in 2021.  

KEYWORDS STUDIOS (KWS)  
ORD PRICE:2,226pMARKET VALUE:£ 1.6bn
TOUCH:2,222-2,230p12-MONTH HIGH:2,274pLOW: 1073p
DIVIDEND YIELD:nilPE RATIO:111
NET ASSET VALUE:460ȼ*NET CASH:€68.5m
Half-year to 30 JunTurnover (€m)Pre-tax profit (€m)Earnings per share (ȼ)Dividend per share (ȼ)
20191536.74.70.58
202017311.19.5nil
% change+13+66+102-
Ex-div:na   
Payment:na   

 *Includes intangible assets of €189m, or 255ȼ a share

£1=€1.1