Shares in creative services provider to the video games industry Keywords Studios (KWS:AIM) moved 6.3% higher to £26.70 on Monday, bucking general market weakness, after the company gave an unscheduled trading update and increased earnings guidance.
The buoyant video gaming industry backdrop has resulted in continued demand for the company’s services into the second half of this year to 31 December while the firm has also benefited from a reduction in costs due to Covid-19, primarily property costs, travel and business development.
Consequently, management guided for 2021 full year revenues to be slightly higher than market expectations and for adjusted pre-tax profit to be around 7.5% higher at £505 million and €85 million respectively, representing year-on-year growth of 33% and 55%.
Incoming chief executive Bertrand Bodson who joined the company on 1 December, said: ‘I have been impressed by the ambitious team at Keywords, which is highly driven to continue to build on the group's successful organic and acquisitive growth track record.’
CONTINUED MOMENTUM
The company said it anticipates positive momentum to continue into 2022 and now expects revenues and adjusted pre-tax profit to be at the upper end of market expectations.
According to estimates compiled by the company the range for revenues is between €552 million and €581 million and pre-tax profit is between €83 million to €90 million reflecting margins moving back towards historical levels of 15% as certain costs increase as restrictions are eased and the company invests in the business.
ANALYST UPGRADES
Leisure analyst at Shore Capital Katie Cousins has upped her 2022 revenue forecast by 5% towards the upper end of the guidance range and increased her recommendation to buy from hold.
Cousins commented: ‘Given the better-than-expected trading, along with a fall in share price now providing a 24% upside to our 3100p fair value, we believe investors have a more attractive entry price, therefore we upgrade our recommendations from Hold to Buy.’
Will Wallis, leisure analyst at Numis increased his earnings per share estimates for 2021/22/23 by 7%,6% and 2.5% respectively.
