viewKeywords Studios PLC

Keywords Studios to at least meet full-year expectations as demand for its services remains robust


  • 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: 3102 GBX

Market Cap: £2.35 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

Keywords saw its profits jump in 2020 and said it plans to resume dividends this year as a boom in the video game market during the Coronavirus (COVID-19) pandemic drove demand for its development services.

For the year to December 31, 2020, the AIM-listed firm reported an adjusted pre-tax profit of €55mln, a 34.5% increase on the prior year, while revenues jumped 14.4% to €373.5mln.

Heading into the current year, Keywords said trading in its first quarter has “started well” with momentum from the second half of 2020 continuing into 2021 despite COVID-19-related constraints.

The firm also noted stronger demand across its service lines following the launch of the PlayStation 5 and Xbox X|S Series consoles alongside the ongoing development of new subscription-based and streaming platforms.

What the boss says: joint interim chief executive Jon Hauck

"The group's strong position in the buoyant video games market, our increasingly sought after 9,000 people strong resource base, a robust business model that has proven capable of continued growth in the face of the pandemic, together with our financial strength, places us well for further growth and long-term success.”

"As we enter 2021, we are very confident in the group's opportunity for growth due to the continued trend towards outsourcing and an increased focus on content creation in a growing video games market. This combined with our ability to increase our market share and to selectively acquire high-quality businesses will allow us to further cement our position as the 'go to' provider of technical and creative services to a global client base", he added.

(Chief executive Andrew Day is on a sabbatical for health reasons)

What the brokers say

Keywords Studios PLC (LON:KWS) looks set for double-digit percentage revenue growth for many years to come, according to Barclays.

In a research note issued following Keywords' full-year results announcement from the computer games development services provider, Barclays said there was nothing too surprising about the results, with company guidance in line with the consensus forecasts in the analyst community.

“But 1) we think it is a positive that management has provided specific guidance (not the case before); 2) there is a tone of conservatism around their comments given good YTD [year-to-date] momentum (appropriate in current environment but leaving room for positive forecast momentum); and 3) management remains positive on further outsourcing among video game groups, enhanced by the pandemic,” Barclays said.

The broker advised its clients to remain overweight in the stock, for which it has a price target of 2,900p.

Inflexion points

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

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