RNS Number : 3588B
Keywords Studios PLC
30 January 2020

30 January 2020
Keywords Studios plc ("Keywords Studios" or "the Group")
Full year trading update
15% organic revenue growth supported by significant investment
Keywords Studios, the international technical and creative services provider tothe global video games industry, today provides an unaudited trading update
for the year ended 31 December 2019 ahead of full year results which will be
issued on 31 March 2020.
Trading Update
The Board expects to report full year revenues of approximately €326m,representing a c.30% increase on the prior year (FY18: €250.8m). On an
organic* basis, Group revenues are expected to increase by approximately
15% (H1 2019: 17.3%, 2018: 10.1%).
This performance was driven primarily by the particularly strong organic growthof our two largest service lines, Functional Testing and Game Development,
continuing to build on a very strong performance in the first half. Some of ourservice lines felt the effects of the slowing development cycle of the current
generation of games consoles with others already starting to benefit from thenew development cycle associated with the upcoming releases of the new Xboxand PlayStation later in 2020.
Adjusted Profit Before Tax** is expected to be approximately €41m,representing an increase of c.8% from €37.9m in the prior year. Adjusted
EBITDA*** (excluding the impact of IFRS 16) is expected to be approximately€49.5m, an increase of c.13% from €43.7m in the prior year. The Group's profit
performance reflected the strong revenue growth, partially offset by continued
investment in the growth of the Group, the effect of incorporating a number of
early stage technology businesses acquired in 2018 and an under-performing,
fixed price contract in an acquired business which was finalised at the very endof the year.
As strong demand continued in the second half we invested further in ourfacilities, recruitment, training, IT, security and HR to both meet this growth
opportunity and to support the business in future periods, which introduced
some short term operational inefficiency as well as an increase in overheadcost. The Group's investment during the year included substantial expansion of
its facilities in Montreal, Katowice, Manila, Brighton, Mexico City, Tokyo, Sao
Paolo and New Delhi, as well as establishing a new game development studioin Leamington Spa, near Birmingham, UK. These expansions incurred start-up
costs, including for the space and staff, as we fitted out the facilities and built
and trained the production and support teams ahead of becoming operational.
During the year, Keywords made eight high quality acquisitions which furtherstrengthened the breadth of value-added services we are able to offer ourglobal video games clients, particularly in Game Development and Marketing
Services as well as bringing proprietary, cutting edge machine translation andcrowd sourcing technology to our Localisation offering.
Cash invested in acquisitions totalled approximately €28m, which comprised ofc.€13m (net of cash acquired) in respect of those companies acquired during
the year and c.€15m in settlement of deferred consideration payments forearlier acquisitions that became due in the period. Net debt at 31 December
2019 is expected to be approximately €18m (€9.0m at 30 June 2019, €0.4m at
31 December 2018).

Andrew Day, Chief Executive of Keywords, commented:"In what was a relatively light year for the video games industry against abackdrop of the tail end of the current generation of video games consoles fromMicrosoft and Sony, the Group has delivered strong growth, particularly fromour two largest divisions, Functional Testing and Game Development services.
"We have also continued to invest in expanding our business, including in newand enlarged facilities, improved technology, strengthened management andadditional functional support. Whilst this investment held back margins in 2019,it will enable us to continue to deliver high levels of growth as we position
ourselves as the 'go to' global services platform for video games in a market
which is seeing an accelerating trend towards outsourcing.
"Looking forward, we expect the launch of a new generation of games consoles
and the further development of new streaming platforms, in addition to thestructural drivers of growth across the video games market as a whole and theongoing trend towards external development, to drive continued strong demandfor our services through 2020 and beyond. The full benefit of this newgeneration of consoles is expected to increase over the medium term. We willcontinue to invest in the Group to take full advantage of these growth
opportunities with margins expected to increase incrementally in 2020 towards
our historic norms as we leverage these costs over a growing revenue base.
"Our recently enlarged banking facility positions us well to capitalise on thisclear opportunity to take a leading share of the increasingly outsourced video
games services market both organically and via acquisitions, as we further
enhance shareholder value. We fully expect to make a number of selective
acquisitions as we continue to build our global video games services platform
and we are managing a strong acquisition pipeline as we enter 2020."* Organic revenue growth is calculated by adjusting the prior year revenues,
adding pre-acquisition revenues for the corresponding period of ownership in
the current year results, and applying the 2018 foreign exchange rates in bothyears.
* * the Group reports Adjusted Profit Before Tax before acquisition andintegration expenses, share option charges, amortisation of intangibles, noncontrolling interests and foreign currency gains or losses.
*** EBITDA comprises profit before taxation, adding back depreciation,amortisation, both interest income and expense, and exchange gains andlosses. Adjusted EBITDA is also before acquisition and integration expenses,
share option charges and non-controlling interests.
Notification of Full Year Results and Capital Markets Day
The Group expects to announce its full year results for the year ended 31
December 2019 on 31 March 2020. To register your interest, please contact
Keywords@mhpc.com.

We will also host a Capital Markets Day in London on 5 February 2020 focusing
on delivering a better understanding of each service line. This will include
presentations from each of the service line directors as well as in-depth casestudies on Game Development and Marketing Services.

For further information, please contact:
Keywords
Studios (www.keywordsstudios.com)
Andrew Day, Chief Executive Officer
Jon Hauck, Chief Financial Officer
Joseph Quinn, Investor Relations
Numis (Financial Adviser)
StuartSkinner/Kevin
Cruickshank(Nominated Adviser)
James Black/Will Baunton (CorporateBroker)
MHP Communications (Financial PR)
Katie Hunt/Ollie Hoare+353 190 22 730

020 7260 1000

020 3128 8100
keywords@mhpc.com

About Keywords Studios (www.keywordsstudios.com)
Keywords Studios is an international technical services provider to theglobal video games industry. Established in 1998, and now with over50 facilities in 21 countries strategically located in Asia, the Americas
and Europe, it provides integrated art creation, software engineering,testing, localisation, audio and customer care services across morethan 50 languages and 16 games platforms to a blue-chip client baseof approximately 950 clients across the globe.
Keywords Studios has a strong market position, providing services to23 of the top 25 most prominent games companies, including
Activision Blizzard, Bandai Namco, Bethesda, Electronic Arts, Konami,Microsoft, Riot Games, Square Enix, Supercell, TakeTwo, Epic Gamesand Ubisoft. Recent titles worked on include Call of Duty: Black Ops 4,Mortal Combat X, Assassin's Creed Odyssey, Borderlands 3, League ofLegends, Fortnite, Clash Royale and Rainbow Six Siege. Keywords
Studios is listed on AIM, the London Stock Exchange regulated market(KWS.L).

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