Gaming technician Keywords Studios sees share price fall as investors wait for acquisitions

Lucy White
AFL Premiership 2005 Sony Playstation Launch
Keywords' share price dropped by as much as 7.9 per cent in early trading (Source: Getty)

Keywords Studios, a business which provides technical services to the video gaming industry, released a strong set of half-year results this morning but saw its share price slide.

The numbers

Revenue increased by 50 per cent to €63.8m (£56.6m), which included a 17 per cent rise in like-for-like revenues.

Adjusted profit before tax was up 60 per cent to €9.6m while adjusted earnings per share hit 13.2¢, up 55 per cent.

Keywords announced a 10 per cent increase in the interim dividend to 0.48p per share.

The group said it had made a €6.9m net cash outlay on acquisitions, after completing the buyouts of Spov, XLOC, Gamesim and Red Hot.

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Why it's interesting

Despite the strong results, Keywords' share price dropped by as much as 7.9 per cent in early trading before recovering slightly: it was down 3.74 per cent at around 1pm.

Broker FinnCap said it had “long term confidence in the business”, but downgraded its recommendation from “buy” to “hold” “in view of the stock's exceptionally strong run”.

Analyst Harold Evans added that, since Keywords already supplies to 23 of the top 25 leading games companies across the world, its main growth opportunity is to sell them additional services.

Numis also moved from “buy” to “hold”, saying there was “relatively little new” in today's announcement compared to the trading update in July.

It added that, since Keywords has been investing heavily into the business into the second half , this may hold back profitability later in the year.

“The shares are up by almost 50 per cent since the trading update. We continue to believe that Keywords is exceptionally well positioned, both for organic growth and for value-creative mergers and acquisitions,” said the Numis analyst.

The analyst added that the current high pricing multiple would likely come down as the group makes acquisitions, and it left its target price unchanged at 1,400p.

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What Keywords Studios said

“We have delivered another strong set of results for the first six months of the year as we continue to pursue our strategy of organic and acquisition led growth as we build our global games services business,” said chief executive Andrew Day.

“We continue to invest in larger facilities and additional talent in our existing business in support of organic growth while welcoming new businesses to the group through our active strategy to lead the consolidation of a highly fragmented market.”

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