Keywords Studios - Delivering the promise of a resilient growth model
In Keywords Studios’ trading update, management expectations are for H120 revenues of approximately €173.5m, delivering organic growth of 8% and a rise of 13% over H119 (€153.2m). Adjusted EBITDA is expected to be €30.8m (17.8% margin), a 19% increase on H119 (€25.8m), with adjusted PBT of €21.7m, 18% higher than H119 (€18.4m). Given the impact of COVID-19, this represents a strong performance, helping to demonstrate the benefits of a diversified services business, with a global footprint. We maintain our view that Keywords is well placed as the only games service provider on a global scale. The P/E rating, though undoubtedly high (52.8x FY20e, 40.1x FY21e), reflects the increasing recognition of Keywords’ resilient growth credentials, but should fall further as Keywords executes its buy-and-build strategy. Following its placing in May, Keywords has c €200m of dry powder to convert a ‘strong and attractive’ M&A pipeline.Keywords Studios is a technical services provider to the video games industry. Co.'s segments include: Localization Services, which relate to translation and cultural adaptation of in-game text and audio scripts; Localization Testing, which includes testing of linguistic correctness and cultural acceptability of computer games; Audio/Voiceover Services, which relate to audio production process for computer games; Functional Testing, which relates to quality assurance services provided to game producers; Art Creation Services, which relate to the production of graphical art assets for inclusion in the video game; and Customer Support, which relates to the live operations support services.
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