Keywords Studios PLC (AIM:KWS, OTC:KYYWF), which provides support services for the games industry, said it expects 'good' revenue growth in 2024, with a stronger performance anticipated in the second half of the year.
It added that the sector is starting to recover from slow content creation trends that have impacted industry spending and Keywords' growth.
This will be music to the ears of private equity group EQT, which is acquiring the business in a £2.2 billion deal.
Getting into the guts of the trading statement, Keywords said that in the first half, it experienced deferrals and cancellations of several large game development projects, leading to unfilled capacity gaps.
Additionally, ongoing softer demand for its Globalize service and a slow ramp-up in Hollywood's content production resulted in expected revenue growth of around 7% for the first half, with organic growth anticipated to be around minus 2%.
Despite these challenges, spending from larger clients continued to grow strongly in the first half.
Keywords anticipates a stronger recovery in the second half as the impact of US strikes diminishes, although further delays and project scope reductions are expected to temper organic growth.
It told investors it is actively managing costs and restructuring its Globalize service as part of a broad range of cost-saving measures.
As a result, adjusted operating margins for the first half are expected to be around 13%, with improvements anticipated in the second half as cost savings and increased volumes take effect.
The business continues to pursue a strong pipeline of mergers and acquisitions.
It has signed several letters of intent with high-quality operators and recently acquired a small game development studio in Australia and a creative design studio in the UK. Keywords expects to commit around €100 million to value-accretive deals this year.