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(Alliance News) - Keywords Studios PLC on Wednesday said it has agreed to acquire German voice over company TV+SYNCHRON Berlin GmbH and posted a sharp dip in first half profit on expenses.
Shares in Keywords were down 3.6% at 1,365.00 pence in London in morning trade.
Keywords, which provides technical services to the video games industry, will acquire the entire equity share capital of TVS from Thomas Wolfert, described as "a veteran of the German dubbing industry" for EUR2.8 million in cash plus EUR900,000 worth of shares.
The cash will be paid on completion of the acquisition while the shares will be issued on the first anniversary of the deal. Wolfert will stay with the business, managing TVS and its 19 employees.
TVS dubs and localises content into German and its clients include HBO, Warner Bros, Amazon, and Cartoon Network. It is expected to generate EUR4.1 million in revenue in 2019.
Keywords Chief Operations Officer Giacomo Duranti said: "This acquisition is an important milestone in the development of our audio services in Europe. Germany is one of the two largest markets for voice-over and dubbing in Europe, together with France where Keywords already has an unparalleled offering, and the integration of TVS into the group will create a market leading provider of services for German localised video games.
"Keywords and TVS have collaborated on a number of projects in the last year, giving us a chance to appreciate their highly experienced team's capabilities and work together to deliver excellent content to our clients. We are delighted to welcome Thomas and the talented TVS team to the Keywords family, and are looking forward to supporting their further growth across video-games as well as film, TV and streaming industry as these markets continue to develop."
Separately, Keywords reported a 38% drop in pretax profit to EUR6.7 million from EUR10.8 million.
While revenue rose 39% to EUR153.2 million from EUR110.0 million, this was offset by a number of factors.
These factors included a 50% rise in administrative expenses to EUR46.2 million from EUR30.7 million due to cost in its acquired companies, as well as investments in facilities and management. Keywords also reported a rise in financing cost to EUR2.4 million from EUR503,000.
Keywords' interim gross profit margin shrank to 36.1% from 37.4% due to "rapid recruitment and training, staffing of new facilities, and the impact of one significant project brought in through an acquisition".
In the second half, trading has started well but its Audio and Localisation Testing businesses are not likely to experience their usual peak as a result of a "shift towards focussing on games for the new consoles expected to launch in late 2020".
The company has upped its interim dividend by 10% to 0.58p per share from 0.53p per share the year prior.
Keywords Chief Executive Andrew Day said: "Trading in the second half has started well, with continued strong performances from our Game Development, Functional Testing and Art Creation service lines in particular. Overall, this leaves us well placed to deliver revenues for the full year at the upper end of current market expectations with our profit expectations broadly unchanged.
"Our organic investments leave us well positioned to capture the clear opportunity for Keywords to grow our relationships with the major games companies through increased capacity, new services and dedicated outsourced services and to increase margins to normal group levels as we benefit from these investments during 2020.
"Our acquisition pipeline is very healthy and we are actively reviewing a number of attractive acquisition opportunities that would add critical mass, capacity, and extend our service offering or geographical penetration."
