Acquisitions Lift Keywords Studios’ Sales by 72% to EUR 109.9m for H1 2018

Ireland-based and London-listed Keywords Studios issued a half-year 2018 trading update for the six months ended June 30, 2018. The technical services and localization provider for the video games industry expects preliminary unaudited revenues to be EUR 109.9m (USD 127m), up 72% from the same period the previous year at EUR 63.8m (USD 73.7m).

Keywords Studios has been executing an aggressive and focused buy and build strategy since its IPO in 2013. The company completed 11 acquisitions in 2017 and has closed seven deals so far in 2018.

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The H1 2018 growth comes on the back of a 55.3% increase in 2017 annual revenues compared to 2016, which earned Keywords a top 10 spot on the Slator LSPI. Extrapolating from its current run rate, Keywords is now generating pro-forma annual revenues of around USD 260m.

That said, by the end of 2018, Keywords is likely to be an even bigger conglomerate as it is “actively reviewing a number of high quality acquisition opportunities” and will deploy a EUR 105m bank credit facility, strong cash generation, as well as its own shares to fund “further selective acquisitions.”

Keywords, firmly rooted within the gaming sector, is still benefiting from a global trend in explosion of video gaming content, propelling the company to achieve growth well above the industry rate. Furthermore, its M&A focused strategy has seen Keywords strengthen its specialist gaming capabilities through acquisition. The company has embedded itself deeper into customers’ game production workflows beyond localization, which as of 2017 contributed about 44% of total revenue.

The trading update explains that VMC, a quality assurance and technical services company that Keywords acquired in 2017, has now been fully integrated and is starting to benefit from cost synergies, despite being a historically lower margin business. The acquisition is the largest that Keywords has made to date.

Despite the positive indicators, the share price for Keywords Studios took a tumble to 1,612 pence, a four-month low, immediately following the company trading update on August 3, 2018, reflecting weaker investor confidence as a result of the trading update. The share price had somewhat rebounded to 1,702 pence at time of writing verses a pre-trading update price of 1,800 pence. The company’s current market capitalization is GBP 1.08bn (USD 1.4bn).

Keywords Studios said it will provide a further update on trading with its half year results, which it expects to announce mid-September.

Esther Bond

Research Analyst at Slator. Localization enthusiast, linguist and inquisitor. London native.