Keywords Studios PLC (LON:KWS), the global provider of creative and technology-enabled solutions to the video games and entertainment industries, has provided a trading update in respect of 2024 performance.
The Board remains confident in delivering good overall revenue growth in 2024, with performance expected to be second half weighted as the sector starts to emerge from the slower content creation trends that are currently dampening industry spend and therefore Keywords’ growth.
Keywords Studio has had a small number of larger game development projects deferred or cancelled in H1, creating capacity gaps in Create which were unable to be filled at short notice. This, together with ongoing softer demand in Globalize and the relatively slow ramp-up in content production in Hollywood, has meant that reported revenue is expected to grow by around 7 per cent. in the first half, with organic growth over the period expected to be around minus 2 per cent.
The Group has seen spend from larger clients continue to grow strongly during the first half, and anticipates a stronger recovery from the US strikes in H2, reinforcing our confidence in an improved second half performance, although further delays and project scope reductions are now expected to temper H2 organic growth from previous expectations. The Board continues to be confident in the Group’s ability to outperform the market and deliver on its medium-term guidance beyond 2024.
Keywords continues to closely manage costs, taking a broad range of cost actions, including the restructuring of the go-to-market approach in Globalize set out at the full year results. Due to the timing of the cost saving programmes and the reduction of volumes, H1 adjusted operating margins are expected to be around 13 per cent., with H2 margins improving as the impact of the cost savings programmes and pick-up in volumes flow through.
There continues to be a strong pipeline of active M&A opportunities. The Group has signed a number of letters of intent with high-quality businesses, and recently completed the acquisition of a small game development studio in Australia, and a small creative design studio in the UK, as it continues to build out its offering. The Group currently expects to commit around €100 million on value accretive M&A this year, in line with its medium-term guidance.
Keywords Studio expects to post the Scheme of Arrangement documentation (the “Scheme Document”) relating to the potential acquisition of the company by Houting UK Limited, a newly formed company indirectly wholly-owned by EQT’s BPEA Fund VIII, in the coming days.
