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Keywords Studios touts revenue and profit growth despite “light year” for video game industry

The provider of technical and creative services is forecasting a double-digit increase in revenue thanks to a boost from its two largest divisions, functional testing and game development

Keywords Studios PLC - Keywords Studios touts revenue and profit growth despite “light year” for video game industry

Keywords Studios PLC (LON:KWS) has reported higher revenues and profits for 2019 despite what it said was a “relatively light year” for the video game industry.

The provider of technical and creative services said in a trading update that it expects to report a full-year adjusted pre-tax profit of €41mln, 8% higher than 2018, while revenues are forecast to climb around 30% to €326mln.

READ: Keywords Studios receives Jefferies boost

Keywords attributed the performance to “particularly strong organic growth” from its two largest service lines - functional testing and game development - which had offset some of its other business slowing down amid a transition to the new generation of Xbox and PlayStation consoles later in 2020.

The group also said that during the year it had invested further in its facilities, recruitment, training, IT, security and human resources to support its activities in future periods, although this had introduced “some short term operational inefficiency as well as an increase in overhead cost”.

"In what was a relatively light year for the video games industry against a backdrop of the tail end of the current generation of video games consoles from Microsoft and Sony, the Group has delivered strong growth", said chief executive Andrew Day.

The CEO added that while recent investments had held back margins in 2019, the expenditure will allow the company to “continue to deliver high levels of growth” as the video games market moved towards an outsourcing model.

"Looking forward, we expect the launch of a new generation of games consoles and the further development of new streaming platforms, in addition to the structural drivers of growth across the video games market as a whole and the ongoing trend towards external development, to drive continued strong demand for our services through 2020 and beyond. The full benefit of this new generation of consoles is expected to increase over the medium term”, he said.

Day also said the company expects to make “a number of selective acquisitions” in the coming year.

The shares were 4.5% lower at 1,309p in early trading on Thursday.

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Quick facts: Keywords Studios PLC

Price: 1801 GBX

Market: AIM
Market Cap: £13.24 m

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