International video games services provider Keywords Studios (KWS:AIM) expects to report better than expected full-year revenue growth of 30% to €326m for the 12 months to end-December. However it cautioned that pre-tax profit will fall short, rising only 8% to €41m, sending the shares down 4% to £13.18.
EXTRA COSTS BITE
As recently as September the company said it was ‘on track’ to meet full-year expectations but the share price fell on fears that increased investment would hold back profits and margins.
What the market wasn’t expecting was an impact from a fixed-price contact related to an earlier acquisition and the ‘effects of the slowing development cycle of the current generation of games consoles’.
It’s quite surprising that the acquisition-hungry company hasn’t seen more setbacks given the high number of acquisitions it has made historically.
Keywords made eight ‘high quality’ acquisitions in 2019, which strengthened the breadth of value-added services capabilities particularly in Game Development and Marketing Services.
Intriguingly, the new businesses bring ‘cutting edge machine translation and crowd sourcing technology’ to the company’s Localisation offering. Perhaps artificial intelligence will reduce the ‘operational inefficiencies’ and increased overheads required to support future growth.
Chief executive Andrew Day was upbeat as usual, commenting ‘we fully expect to make a number of selective acquisitions as we continue to build our global video games services platform and we are managing a strong acquisition pipeline as we enter 2020’.
