30th Mar 2022 13:32
(Alliance News) - Keywords Studios PLC received rave reviews on Wednesday on strong annual results, though elsewhere in the video game sector, shares in Team17 Group PLC due to a difficult outlook for the company.
Both have benefitted from a video game market which has grown since the start of the pandemic, as evidenced by a pair of decent annual results, though shares went in opposite directions.
Keywords climbed 6.9% to 2,500.00 pence, while Team17 fell 6.8% to 2,500.00p.
"Keywords Studios, has posted a remarkable end to the year," Hargreaves Lansdown analyst Sophie Lund-Yates commented.
"The group's buoyed by the fact that, as a supplier, it's not beholden to the success of any single gaming title, but instead benefits from overall industry growth-of which, there's plenty these days."
The technical and creative services provider to the video game industry posted a 48% increase in pretax profit in 2021 to EUR48.0 million from EUR32.5 million.
Dublin-based Keywords posted revenue of EUR512.2 million, up 37% from EUR373.5 million.
Analysts at Shore Capital Markets commented: "We believe outsourcing will remain a key part of the video games industry."
As a result, the company's services "could retain a high level of demand". There are already signs that this is the case.
Keywords said it has made a strong start to 2022. It expects top and bottom line figures for the new year at the top end of current market expectations.
Company-compiled consensus has revenue for 2022 at a EUR587 million to EUR610 million range, with adjusted pretax profit between EUR90 million and EUR95 million.
Team17's outlook statement was less-than-stellar, however. The Nottingham, England-based video game development company warned of cost pressures and a hit from the Russian invasion of Ukraine.
Shore cut its recommendation for Team17 to 'hold' from 'buy', due to "the expectation of higher cost and potential headwinds".
Team17 expects wage inflation and the rising cost of living to increase group costs by GBP1.7 million in 2022.
In addition, it expects the situation in Ukraine to hit revenue by GBP4 million and hurt its earnings before interest and tax by GBP2.5 million.
The company said: "The group has already seen the closure of platform sales to Russia and Belarus. In addition, Team17's Games Label has two development partners based in Ukraine with titles previously expected to be released in 2022, that we continue to remain in contact with and support.
"Currently, one partner has insisted that we continue with the planned release and in that instance Team17 will commit to donate a proportion of our net profits from this title in FY22 to go to humanitarian aid alongside donations already made to the Red Cross earlier in March this year. Given the circumstances, it is unlikely that the other title will now be released in 2022."
In 2021, Team17's pretax profit rose 11% to GBP29.1 million from GBP26.2 million. Revenue was 9.0% higher at GBP90.5 million from GBP83.0 million.
By Eric Cunha; [email protected]
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