Irish video game specialist Keyword Studios grows revenues by 19%

Irish video game specialist Keyword Studios grew revenues by 19.4 per cent to €383.5 million in the first half of this year, the group’s interim results show.

Keywords, which was established in 1998, provides services to 24 of the top 25 most prominent companies across the games and entertainment industry, including Activision Blizzard, Electronic Arts, Epic Games, Konami, Microsoft, and Netflix.

Organic revenue growth, which adjusts for the impact of acquisitions, was 10.4 per cent.

The company’s operating profit of €29.3 million was 25.8 per cent lower than a year earlier, but adjusted operating profit increased 5.2 per cent to €58.9 million.

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Profit before tax of €23.2 million was 40.7 per cent lower than the €39.1 million in the same period of 2022, while adjusted profit before tax increased to €55.8 million, slightly ahead of the year before.

Keywords, which provides technical and creative services to the global video games and entertainment industries, said the “adjusted” figures are used to provide “a clear understanding of the underlying profitability of the business over time”.

They take into account the cost of acquisitions and integration, as well as foreign exchange and amortisation of intangible assets.

Gross profit was €145.2 million, which was up from €124.5 million the year before, representing an increase of 16.6 per cent. The gross margin of 37.9 per cent was slightly below the previous year.

Adjusted operating costs increased by 24.8 per cent to €67.9 million, reflecting the larger group. This was due to investment in the business, the larger office footprint following Covid-19, and the return to normal of travel and business development costs.

The group’s earnings before interest, taxes, depreciation and amortisation (EBITDA) of €60.5 million was in line with the year before.

Net finance costs amounted to €6.1 million compared to €400,000 the year before. This was primarily driven by a €3.7 million negative swing in foreign exchange movements, and €1.6 million increase in interest costs relating to the drawdown on a revolving credit facility.

One-off costs associated with the acquisition and integration of businesses amounted to €7.3 million, up from €1.3m the year before.

Basic earnings per share of 18.48 cents was about half that of a year earlier when it stood at 36.8 cents. The board declared an interim dividend of 0.85p per share, up from 0.77p.

Keyword has no business operations in Ukraine, but it said the war in Europe has impacted its game development teams in Russia, as well as its collaboration with several freelance suppliers based in Ukraine.

“Throughout this period, we have continued to work with our customers supporting their preferences for where their work should be performed,” it said.

The group has also focused on mitigating any potential business interruption or other risks associated with its activities in Russia. The volume of work produced in Russia has continued to reduce over time and it has been scaling down operations accordingly.

In the period, the group produced €4.2 million of revenue in Russia, which represents approximately 1.1 per cent of its revenue, down from 5.5 per cent in the half year to June 2022, and down on 3.8 per cent in full year 2022.

Production in Russia has now ceased. Costs of acquisition and integration includes severance and rationalisation costs of €1.5 million incurred in the period associated with ending operations in Russia.