Keywords Studios PLC (LON:KWS) has said a surge in video game playing as a result of the coronavirus pandemic is driving “increased demand” for its development services.
In an outlook statement accompanying its final results, the AIM-listed firm also said trading in 2020 had started “in line with market expectation” and that it had only suffered a “limited impact” on its business from the outbreak.
WATCH: Keywords Studios' Andrew Day says business is robust and 'responding positively' to outbreak
Keywords noted that the structural drivers of growth across the video games market had remained during the pandemic and it had entered the current year with “strong growth tailwinds” and the expectation of new game console launches and streaming platforms.
The upbeat outlook was accompanied by figures for the year ended December 31,2019, which saw Keywords report an adjusted pre-tax profit of €40.9mln, up 7.9% on the prior year, while revenues surged 30.2% to €326.5mln.
The firm said the revenue jump had been driven by “strong progress” in functional testing and game development as well as eight acquisitions during the year.
Due to the uncertainty caused by coronavirus, however, Keywords said it is “inappropriate to provide guidance for [2020] at this time” and has decided not to recommend a final dividend for similar reasons.
"Whilst we are seeing some operational disruption to the provision of our services due to the [coronavirus] pandemic, with some of our service lines and locations affected more than others, the underlying drivers of growth across the video games market remain intact. It has also been encouraging to see our clients turning to us for support in these difficult times and our teams responding with extreme agility to support them, whilst rapidly implementing our own contingency plans”, said Keywords chief executive Andrew Day in the statement.
"There will be some further challenges ahead, but we are well financed, with a global footprint, a unique position in a resilient market and a strong team to manage the business through these unprecedented times. We are, therefore, confident that the group is well placed to emerge in a robust position in order to deliver on the pent-up demand across its client base when the operating environment normalizes", he added.
Video games ‘ray of light’ amid market gloom
Commenting on the results, Nicholas Hyett, equity analyst at Hargreaves Lansdown, said the video game sector was “a rare ray of light in the current stock market gloom”.
“Spending looks set to spike as the world is increasingly confined to the sofa. As the leading provider of outsourced gaming services, contributing to the development of hundreds of games every year, Keywords should see a slice of the action”, Hyett said.
“A decentralised model, with dozens of studios scattered around the globe, is naturally resilient to the current disruption. Teams are used to working with each other remotely and the company has quickly moved 75% of the workforce to work from home. The transition in some of the more commercially sensitive units is less straight forward though, and with demand for many services increasing already, the biggest question in the near term is whether Keywords will be able to service the extra business that’s coming its way”, he added.
Shares in Keywords were up 2.3% at 1,553p in late-morning trading on Thursday.
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