Keywords flags strong trading, agrees to buy Mighty Games

Video games technical and creative services provider Keywords Studios said in an update on Wednesday that it performed “strongly” in the first half, while it also announced the acquisition of Mighty Games.

The AIM-traded firm said it expected to report revenue of €320m for the six months ended June, up 34% year-on-year.

On an organic basis, group revenues were expected to increase by 22%.

Adjusted profit before tax was set to total €54m, representing an increase of more than 35% over the prior year period.

The board said that reflected a “strong margin” of 17%, up from 16.6% year-on-year, including a one percentage point benefit from foreign exchange, particularly the strong dollar during the period as Keywords invoiced a proportion of its sales in that currency.

As it had announced previously, Keywords was “actively relocating” some of its people and existing work from its only business operating in Russia, Sperasoft, to locations including Poland, Serbia, Armenia and Malta.

That had a “more limited” impact on first half performance, with the second half of the current financial year being the “key transition phase”.

As at 30 June, the group had net cash of €121m, up from €105.6m at the end of December, after cash spent on prior year acquisitions in the first half amounting to €13.6m.

The group’s cash balance, strong cash generation and the €150m available under its undrawn committed revolving credit facility left it “well-placed” to pursue its organic and acquisition growth strategy.

“Keywords has started the year very strongly, building on the momentum achieved in 2021 as we continue to benefit from a renewed focus on content creation post pandemic and the structural trends towards outsourcing,” said chief executive officer Bertrand Bodson.

“Whilst we are mindful of a more uncertain macroeconomic environment and some volatility in the scheduling of certain projects we continue to see strong demand for our services.

“Given this and the group’s strong performance in the first half, we are confident of delivering a performance comfortably ahead of current market expectations for the full year, albeit with organic growth rates moderating and margins moving to historic levels of around 15% as we invest in the business, transition our people and work from Russia, and as more costs return with the easing of Covid restrictions.”

In a separate announcement on Wednesday morning, Keywords said it had acquired Mighty Games, and completed the acquisition of Forgotten Empires.

It said the acquisitions would further its strategy to become “the go-to” technical and creative services platform for the global video games industry.

Founded in 2013 by studio head Matt Ditton and co-founder Ben Britten-Smith, who would continue leading Mighty Games within Keywords Studios, the board said the studio specialises in the development of automated games testing solutions including its ‘Build and Test’ platform, which uses artificial intelligence (AI) technology to automatically test code, detect bugs and defects and report errors.

Mighty is based in Melbourne, Australia and, in addition to games testing solutions, the 21-person team provides game development services for clients including global mobile game developers as well as Australian developers and publishers.

Under the terms of the acquisition, Keywords would pay a maximum of AUD 10m (£5.7m), comprised of initial cash of AUD 4.8m, the equivalent of AUD 1.2m in new shares, and up to AUD 4m, in a mix of cash and new shares based on growth targets over three years.

Additionally, Keywords confirmed that it had completed the acquisition of Forgotten Empires on the terms it had previously announced.

“We are delighted to welcome the Mighty Games team to Keywords and to be able to offer their impressive automated game testing solutions and expertise to our clients, in line with our strategy to harness technology to do more for our clients and remain at the forefront of our industry,” Bertrand Bodson commented.

“Mighty’s talented game development team further strengthens our game development presence in Melbourne and follows the recent acquisitions of Tantalus and Wicked Witch in Australia.

“We are really looking forward to supporting Mighty’s team and growth as part of the group.”

Keywords Studios said it expected to announce its half-year results for the six months ended 30 June on 21 September.

At 1303 BST, shares in Keywords Studios were up 7.54% at 2,637p.

Reporting by Josh White at