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Keywords Studios beefs up its video games soundtrack capabilities

The video games services provider has purchased London-based businesses that specialise in providing music & audio services and has bought a Brazilian recording studio

Video games players
"With CORD's focus on music strategies, we hope to change the way music is created, owned and leveraged within the gaming industry," said Daniel Jackson, CEO of Cord

Video games development services provider Keywords Studios PLC (LON:KWS) has hit the acquisition trail again, beefing up its music and audio offering.

It has acquired Cord Worldwide and Laced Music from the Cutting Edge Group for £4.5mln and Maximal Studio from its owners for up to €500,000.

WATCH: Keywords Studios makes two further acquisitions to bolster audio services line

Based in London, Cord provides a range of music-focused branding and strategic consulting services to large businesses including Shell, Lego and BT; Laced is a music services company and record label specialising within the video games industry.

Being able to offer music services to our clients will further enhance our reputation as the leading provider of services to the global video games industry, Keywords said.

Cord and Laced generated combined revenue of £6.5m and underlying earnings (Ebitda) of £675,000 in the year ended 30 June 2017.

Under the terms of the acquisition, Keywords paid a cash consideration of £3.375mln on completion and will issue 73,744 in shares two years after the acquisition.

Music assets an increasing focus

"Thus far, our audio service line has specialised entirely on voice-over production for video games, yet video games publishers/developers are major buyers of specifically composed or licensed music for use in games, are increasingly focussed on using music assets as part of their brand or franchise identity and are becoming more sophisticated about how they buy and manage their music assets,” observed Andrew Day, the chief executive officer of Keywords.

"We are, therefore, delighted that we will be able to add further value to our games clients through Laced's specialism in licensing video game soundtracks for game companies and from music composers, and Cord's expertise in music composition, rights management, music strategy consulting and audio branding.

"We also see a clear opportunity to bring our localisation, voice over and trailer creation capabilities to Cord's broader client base of leading brands,” he added.

Maximal Studio is an audio studio based in Sao Paulo, Brazil, that provides voice-over recording for the video games and learning industries.

The initial consideration is €300,000 but this could rise to €500,000 depending on how the studio performs.

The acquisition adds further scale to the group’s audio capabilities in the South American markets, providing it with its first recording studio in Sao Paulo to complement its localisation business in Rio.

The acquisitions were announced on the same day as the company’s results for 2017, although the company had largely let the cat out of the bag regarding last year’s performance with a trading update released in February.

Group revenue rose 57% to €151.4mln from €96.6mln in 2016. Adjusted underlying earnings (Ebitda) was also up 57%, to €26.3mln from €16.7mln the year before while adjusted profit before tax jumped 55% to €23.0mln from €14.9mln the previous year.

READ Keywords expects 2017 revenues and profits to be “comfortably ahead” of expectations

A final dividend of 0.98p has been declared, taking the full-year dividend to 1.46p, up from 1.33p in 2016.

As for current trading, Keywords noted that the first quarter is traditionally one where the video games industry takes a breather and that activity levels are currently in line with expectations.

"The group has delivered another strong performance with good organic growth supplemented by a number of acquisitions including two of our largest acquisitions to date,” noted Day.

"We entered 2018 with pro forma revenues of €225mln, across seven service lines and 42 studios in four continents, compared to just over €16mln derived from four service lines and five studios in 2013 - the year of our IPO,” Day said.

"We expect to make continued strong progress as we realise the full benefits of our enhanced services platform and with the financing in place to support further organic and acquisitive growth in 2018," Day concluded.

In late afternoon trading, Keywords shares were 1.5% higher at 1,606p.

 -- Adds share price --

Quick facts: Keywords Studios PLC

Price: 1846 GBX

Market: AIM
Market Cap: £1.35 billion

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