- 2023 revenues up 17% at constant currency
- Adjusted operating margin of 15.6%
- Strong growth in revenues and profit expected in 2024
Video games services provider Keywords Studios (KWS:AIM) said it expects full year revenues slightly shy of consensus forecasts after the company felt the effects of Hollywood strikes and foreign exchange headwinds.
There was better news on profits as cost saving measures and efficiency gains boosted adjusted operating profit margins to 15.6%, which was ahead of consensus and the firm’s prior guidance.
Revenues for the year to 31 December 2023 increased by 13% on a reported basis and 17% in constant currencies. Organic growth excluding the US strikes and foreign exchange is expected to be approximately 9%.
The shares fell 0.4% to £15.68 on the update, taking losses to 44% over the last year compared with a 3% fall in the FTSE All-Share.
WHAT DID THE COMPANY SAY?
Chief executive Bertrand Bodson commented: ‘In what was a difficult year for the industry, we delivered resilient performance in 2023 and we continued to grow our market share and industry leadership position.
‘We made considerable progress against our strategic objectives and scaled our platform through the acquisition of five studios, broadening our high-quality offering for clients.’
In terms of the outlook, Keywords expects to deliver ‘strong’ revenue and profit growth in 2024 driven by mergers and acquisitions as well as organic growth while maintaining operating margins above 15%.
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Organic growth is expected to accelerate in the second half as Hollywood works through the backlog and the industry’s appetite for new content returns.
EXPERT VIEW
Shore Capital analyst Katie Cousins said: ‘The global video games industry is expected to grow circa 3% in FY24 (Newzoo) with most industry experts anticipating the utilisation of existing IP rather than new IP to drive growth along with a recovery in the mobile industry.
‘Management has stated that it has a strong pipeline of work and we continue to value the outsourcing model as a key part of the video games industry ecosystem, and believe as development continues to get more complex and costly, noting wider industry layoffs, that the resources provided by KWS as likely to be in good demand.’
