Keywords Studios PLC (AIM:KWS, OTC:KYYWF) said it is confident in being “comfortably ahead” of current market expectations for 2022 after first-half revenues and profits rose by over a third - news it accompanied with the acquisition of a games testing specialist.
Adjusted pre-tax profit for the six months ended 30 June is expected to be €54mln (£45.1mln), up 36% year-on-year, with an improved margin of circa 17%.
Revenues were close to €320mln, the services provider to the global video games industry said in a half-year trading update. This represents 34% growth on a reported basis and 22% on an organic basis, allowing for acquisitions and currency swings.
At the half-year stage, the group had net cash of €121mln.
“Keywords has started the year very strongly, building on the momentum achieved in 2021 as we continue to benefit from a renewed focus on content creation post pandemic and the structural trends towards outsourcing,” said chief executive Bertrand Bodson.
“Whilst we are mindful of a more uncertain macro-economic environment and some volatility in the scheduling of certain projects we continue to see strong demand for our services.
“Given this and the group's strong performance in H1, we are confident of delivering a performance comfortably ahead of current market expectations for the full year.”
He said organic growth rates were expected to “moderate” and margins moving to historic levels of nearer 15% as investment is made in the business, along with the transition of people and work from Russia, and more costs return with the easing of COVID restrictions.
Keywords said it is relocating staff from Russia to locations including Poland, Serbia, Armenia and Malta, which had a “more limited impact on 1H performance, with 2H being the key transition phase”.
Under the new divisional reporting structure announced in June, its Create (art and games development services) and Globalize (audio, localisation and localised testing) arms enjoyed “very strong” performances.
Engage (player support and marketing) was more modest, due to the tougher comparison with last year and some delays in work.
It also announced another new acquisition, Mighty Games, a provider of automated games testing solutions for up to A$10mln, and confirmed the completion of the Forgotten Empires purchase unveiled in June.
Based in Melbourne, Australia, Mighty Games brings a 21-person team and proprietary AI-based testing technology platform that Bodson said was “in line with our strategy to harness technology to do more for our clients and remain at the forefront of our industry” and to develop more technology-enabled solutions.
The initial cash consideration for Mighty is A$4.8mln, with the equivalent of A$1.2mln in new ordinary shares within 30 days of completion, and up to AUD$4.0mln in a mix of cash and new ordinary shares based on growth targets.
Bodson added that the M&A pipeline remains healthy.