Keywords Studios shares shoot up as video game bonanza leads to higher profit and revenue forecasts
- Keywords Studios anticipates adjusted pre-tax profits to jump to at least €85m
- The company expects strong trading levels to be maintained into the new year
- Lockdown restrictions have led to a significant growth in video game purchases
Shares in Keywords Studios were the top riser on the junior AIM 100 Index on Monday after the software firm raised its full-year guidance.
Thanks to continued robust demand for its services, the company now anticipates minimum revenues of €505million and adjusted pre-tax profits to jump by over half to at least €85million this year.
As well as the substantial increase in trade, Keyword said it had benefited from lower coronavirus-related expenses principally arising from the move to working from home, business development, property costs and travelling less often.
Upgrade: Thanks to continued robust demand for its services, Keywords anticipates minimum revenues of €505million and adjusted pre-tax profits of at least €85million this year
The Dublin-based firm expects these significant trading levels to be maintained into the new year and for sales to consequently reach the top end of current analysts’ forecasts of €552million to €581million.
Following this announcement, its shares rocketed by 9.6 per cent to £27.58 on Monday, meaning their value has more than doubled since March 2020.
Newly-appointed chief executive Bertrand Bodson said he was ‘excited about the opportunity to capitalise on the group’s unique full service platform to deliver an ever more compelling proposition for the buoyant video games market and adjacent content industries’.
He added: ‘I have been impressed by the ambitious team at Keywords, which is highly driven to continue to build on the Group’s successful organic and acquisitive growth track record.’
Video game sales have boomed since the start of the coronavirus pandemic as people have looked to occupy the extra hours they have spent indoors following the imposition of coronavirus restrictions.
Many of Keywords’ customers have been beneficiaries of this upsurge, including Xbox designer Microsoft, FIFA video game maker Electronic Arts, and Japanese game makers Konami and Sega.
In its most recent half-year results, Keywords’ underlying revenues climbed 37 per cent to €228.3million and pre-tax profits almost doubled to €21.9million.
All the group’s service lines recorded double-digit growth, including a 63.6 per cent rise within its largest division – game development – due to the acquisitions of multiple companies such as video game developers High Voltage and Heavy Iron.
Commenting on today’s forecast upgrade, Hargreaves Lansdown equity analyst Matt Britzman stated: ‘There were concerns that the boom would dry up when restrictions eased, but as we thought, at least a good chunk of that increased demand is sticking around for now.’
He added that the introduction of restrictions in response to the spread of the Omicron variant would likely provide a further boost to gaming as people will spend greater amounts of time indoors.