viewKeywords Studios PLC

Keywords Studios expects ‘supercharged years’ with new console launches


  • Supplies range of technical services to computer games developers and publisher
  • Clients include Sega, Nintendo, Google, Microsoft and Warner Bros
  • Employs buy-and-build strategy and has been expanding rapidly
Keywords Studio

Quick facts: Keywords Studios PLC

Price: 2214 GBX

Market: AIM
Market Cap: £1.64 billion

What Keywords Studios does

Keywords Studios PLC (LON:KWS) supplies a range of technical services to computer games developers and publishers.

Some of the services it provides include art direction, 3D animation, software engineering, audio services, functionality quality assurance (QA), localisation (enabling games to be published in several languages) and player support.

Game development is its largest addressable market — estimated to be valued at well in excess of US$3bn but with just a fifth of services across the industry currently outsourced, though Keywords clients include Sega, Nintendo, Electronic Arts, Microsoft, Google, Warner Bros and Tencent Games.

Established in 1998 it now has studios in more than 42 locations in 20 countries across four continents.

Keywords employs a buy-and-build strategy and has been expanding rapidly since its first acquisition in 2014.

How it's doing

In September, Keywords confirmed a 13% increase in first-half revenue at €173.5mln, with organic revenues marking an 8% rise, as it also inked a new deal.

The group's underlying earnings (adjusted EBITDA) jumped 19% to €30.8mln for the six months ended June 30, 2020, versus €25.8mln in the same period of 2019.

Keywords highlighted strong demand for its services and a robust trading performance with its largest service line, game development, showing particularly strong growth.

What the boss says: Andrew Day, chief executive

"The resilience of our business continues to shine through as we delivered growth despite the restricted use of our 60+ studios around the world, recruiting and training challenges, and some short term disruption to content flowing into the business." 

“The growth drivers across our underlying video games market remain intact and we anticipate continued strong demand across all our service lines, including some pent-up demand from our clients as our operating environment continues to normalise.”

What the broker says

Keywords Studios is looking better than ever and can keep up its strong growth performance over the coming years, that’s the view of Liberum Capital, which upgraded its price target after the interim financial results.

Liberum repeated its ‘buy’ recommendation and set a new price target of £24.50 per share, suggesting some 14% upside to the current price of £21.47.

Inflexion points

  • Continues with acquisitions plan
  • Videogame industry booming during pandemic
  • Busy years ahead with new console cycle

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