Keywords Studios posts lower profits ahead of EQT acquisition

Keywords Studios on Monday reported lower first-half profits ahead of its acquisition by Swedish private equity giant EQT.

The video game services business reported that its adjusted operating profit fell 9.6 percent to $57.4 million in the six months ended in June.

It attributed the decline to moderating growth levels and the expectation that most of the savings from its cost-cutting programme would occur during the second half of 2024.

Revenue rose 6.6 percent to $440.4 million, but organic revenue fell 1.9 percent as the delay or cancellation of several major projects impacted its game development business.

Sales were also affected by lower demand for localization services, which include translation work, voice casting and quality control testing.

However, Keywords noted that spending by its largest customers continued to grow during the period, while acquisitions helped boost overall revenue.

The company is also confident of achieving good overall revenue growth this year, supported by the recovery in trade following the strikes that shook the US entertainment industry last year.

Bertrand Bodson, CEO of Keywords Studios, said: “Keywords recorded solid growth in the first half despite the current mixed market environment.”

He added: “We continue to make good progress on our strategy, enhancing our market leadership position while expanding the use of technology within our business and on behalf of our clients.”

Keywords’ trading update comes about a month before the AIM-listed group is expected to complete its £2.1bn sale to EQT.

The Stockholm-based investment firm, which owns Dechra Pharmaceuticals, agreed to buy Keywords for £24.50 a share in early July.

Announcing the deal, it said the acquisition would help accelerate Keywords’ growth and expand its reach into “adjacent media and entertainment end markets and rapidly growing technologies.”

Keywords provides technical and creative services to many of the largest video game developers, including Microsoft, Ubisoft, Electronic Arts, Tencent and Activision Blizzard.

These include trailer production, voice-overs, sound mixing, visual effects work, and translation of in-game text into dozens of languages.

It enjoyed a significant improvement since the pandemic, as strict lockdown restrictions led people to spend more time indoors.

However, the company’s share price began to fall in 2023 amid concerns that artificial intelligence was threatening the future of the video game industry.

Keywords Studies Share rose 0.2 percent to 24.30 pounds on Monday morning.

Bodson said EQT’s acquisition of Keywords “represents an exciting new chapter for the business as we continue our journey.”

“There is no doubt that the long-standing support we received as a public company provided the fuel for our growth over the past ten years, and we wanted to take this opportunity to thank all of the shareholders who have supported us.”

The acquisition is expected to take effect on October 23, and Palabras clave shares will be delisted the following day.