Technical and creative services provider to the video gaming industry Keywords Studios (KWS:AIM) delivered better than expected full-year revenue and profit, in line with the January trading update.
Trading has continued to be buoyant in the first quarter with strong demand seen across all services lines. The company said it was confident it could deliver full-year results towards the top end of market expectations.
Analysts currently forecast 2022 revenues to grow 16.6% to €592 million and adjusted pre-tax profit to grow 7% to €92 million, according to the company. Further upgrades are likely given the confident outlook.
Continued momentum in the business was warmly received by the market with the shares gaining 5.5% to £24.66. Though the shares have since lost around 19% of their value in the last six months.
NEW CEO
Incoming chief executive Bertrand Bodson who took over from the well-regarded Andrew Day on 1 December 2021 commented: ‘I am delighted to have joined Keywords at a time when the business is performing so well.
‘The underlying video games market remains buoyant, with 2022 expected to be a particularly strong year for new game launches, as developers and publishers look to capitalise on higher player numbers and create ever more sophisticated content to engage players in their games for longer.’
Bodson has put in place workstreams designed to take the company to the ‘next level’ and will provide an update on strategy at a capital markets day on 8 June.
BUOYANT VIDEO GAMING MARKET
Full-year revenues jumped 37% to €512.2 million, aided by acquisitions while underlying organic growth was up 19%.
Adjusted pre-tax profit was 56% ahead at €86 million and strong cash generation resulted in an adjusted free cash flow of €92.3 million, representing a conversion rate of 107% compared with 92% last year.
Adjusted cash conversion rate is the adjusted free cash flow as a percentage of the adjusted pre-tax profit. Free cash flow is the cash generated after deducting all operating expenses and growth capital expenditures but excludes government Covid-19 subsidies.
Growth in 2021 was driven by high levels of demand from the video gaming market and easier comparatives from Covid-19 related disruption in the prior year.
In 2021 Keywords generated 5.7% of revenues from Russia for non-Russian clients and management said it was closely monitoring the situation.
EXPERT VIEWS
Leisure analyst at Numis Will Wallis raised his 2022 forecasts by 1%-2%, saying: ‘We continue to believe the group is extremely well positioned for the long term.’
Jefferies said the revenue run-rate including recent acquisitions of €529 million and a foreign exchange tailwind implies a ‘new normal organic growth rate in the mid-teens’.
