Keywords shrugs off integration and timing issues

That said, the preliminary results were broadly solid. While like-for-like revenue growth of 10.1 per cent was softer than the previous year’s 15.1 per cent, this reflected an “expected drag” from the acquisition of VMC in October 2017. Ignoring VMC, which offers video games functional testing and customer support in North America, like-for-like sales would have climbed by 14.9 per cent. Moreover, VMC has now been integrated ahead of schedule across four of Keywords’ services lines and five studio locations. It has already proved to be “significantly earnings enhancing”.

Like-for-like sales growth was also tempered by the 'Fortnite effect' – the disruption caused to other games by the huge success of Fortnite, an online video game released by Epic Games in 2017. With gamers switching to Fortnite in their droves, the effective loss of players led some clients to reduce their spending on games, or to terminate them. A few companies even stopped trading, although the overall impact has been partially mitigated by the fact that Keywords now does a “considerable amount of work” on Fortnite itself.

Six out of the group’s seven service lines enjoyed a good underlying performance. The exception was ‘localisation testing’, where certain projects were delayed from the end of 2018 into 2019, although the division has enjoyed a strong start to the current financial year.

Lower capital expenditure is expected through 2019, although there is a string of acquisition opportunities lined up. Keywords has already bought two businesses since the start of the year – game trailer and marketing platform Sunny Side Up and social-interaction specialist GetSocial.

Broker Liberum expects adjusted pre-tax profits of €47.7m and EPS of 57.7ȼ in 2019, up from €37.9m and 47.8ȼ in 2018.