Confidence in its sustainable model

Keywords Studios 2 December 2019 Update
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Keywords Studios

Confidence in its sustainable model

Capital markets day

Software & comp services

2 December 2019

Price

1,407p

Market cap

£931m

€1.17/£

Net debt (€m) at end H119

9.0

Shares in issue

66.18m

Free float

94%

Code

KWS

Primary exchange

AIM

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

24.2

(10.1)

14.2

Rel (local)

22.9

(12.9)

8.2

52-week high/low

1,838p

900p

Business description

Keywords Studios is the leading and most diverse supplier of outsourced services to the games industry. Through regular acquisitions, the company is building its scale, geographic footprint and delivery capability. Its ambition is to become the ‘go-to’ supplier across the games industry.

Next events

Year-end trading statement

January 2020

Final results

April 2020

Analysts

Richard Williamson

+44 (0)20 3077 5700

Dan Ridsdale

+44 (0)20 3077 5729

Keywords Studios is a research client of Edison Investment Research Limited

At the capital markets day (CMD) on 14 November, management offered a comprehensive review of Keywords’ business and its drivers. This was the first event with Jon Hauck formally in place as CFO, who brings useful experience from his background at Rentokil Initial. Keywords appears to be well positioned to continue to perform robustly in FY20 despite the Q420 console transition (which may even be a net benefit to the group), balancing strong growth with a margin recovery back to more normalised levels (c 15%) with M&A, particularly in game development and marketing, very much front of mind. Keywords remains the only public games service provider at a global scale. We have updated our forecasts, but these are largely unchanged as the year end approaches.

Year end

Revenue (€m)

PBT*
(€m)

EPS*
(c)

DPS
(p)

P/E
(x)

Yield
(%)

12/17

151.4

23.1

30.0

1.46

54.9

0.10

12/18

250.8

37.9

40.1

1.61

41.0

0.11

12/19e

319.7

40.2

45.0

1.77

36.6

0.13

12/20e

354.9

51.9

64.1

1.95

25.7

0.14

Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.

CMD: Key themes of the day

Management developed four core themes: 1) the benefits of being the scale player, offering an increasingly attractive professional service proposition to a global client base; 2) acquisitions and integration – the heads of a number of studios underlined the attractions of a Keywords acquisition – the integration of central processes and systems leaving them with autonomy to grow the business; 3) ‘land and expand’ – leveraging new locations from a single service line in a new hub to offer the full suite of services as client demand grows; and 4) studios are incentivised to cross-sell and cross-promote other service lines as part of the ‘Keywords family’, to support Keywords to become the ‘go-to’ provider for outsourced services to the games industry.

Valuation: Expectations of continuing growth

We have slightly updated our numbers to take account of the acquisition of TV+ Synchron in Berlin and now forecast an FY19 P/E of 36.6x and 25.7x for FY20. With the share price back down from its £18+ highs over the summer, investors have taken the opportunity to add to their exposure to Keywords after the CMD.

Keywords continues to trade at a premium to its peers in the current year (FY19: 36.6x vs 25-30x), although with the strong EPS growth forecast, FY20 PE falls to 25.7x, in line with its peer group (22-26x). Adjusted for blended average growth in FY19 and FY20, we derive a PEG ratio of 1.0x, materially below the majority of its peers (1.3-1.7x). There is limited scope for M&A in FY19, however accretive acquisition activity in FY20 (at historic multiples) could bring the 2020e P/E down further. With strong underlying growth (10%+), we continue to believe sustained execution should drive robust returns for shareholders.

Capital markets day

Summary

Management offered a comprehensive review of the business and its drivers, sharing the stage with members of the Montreal and North American leadership team. The tone was open and reassuring, with ample time for Q&A.

This was the first event with Jon Hauck formally in place as CFO, who should bring useful experience to Keywords from his background at Rentokil Initial. We took reassurance that Keywords will continue to perform, balancing strong growth with a recovery of margins back to more normalised levels (c 15%) with M&A, particularly in games development and marketing, very much front of mind. Games remains the core focus, but opportunistic expansion into adjacent sectors (entertainment) should not be ruled out in due course.

Keywords remains the only games service provider with global scale, offering a suite of services across a range of geographies and of a quality and standard of professionalism that is catching the attention of the largest games studios (see Cross-selling and cross-delivery to become the ‘go to’ provider). Keywords continues to believe there may soon be a tipping point where a large games company (or a number of companies) hands over the responsibility for outsourcing to KWS to focus on its core creative game development.

Key themes of the day

1.

The benefits of being the scale player

2.

Acquisitions and integration

3.

Leveraging location – ‘land and expand’

4.

Cross-selling and cross-delivery to become the ‘go-to’ provider

Exhibit 1: Keywords CMD video

Source: Keywords

The benefits of scale: Leading global games services company

Keywords remains a complex seat utilisation business. The logistics of putting teams together and scaling up and down with project demands is hugely complex and an area of real competitive advantage and differentiation. Keywords has proven ability to work in a distributed fashion, coordinating delivery from teams in different studios and locations although clients usually prefer the lead team to be local and based in the same time zone.

Historically, staff numbers have varied significantly through the year, with a peak between June and October. This cyclicality has moderated substantially in recent years, varying by less than 10% in FY19 because Keywords is now broader based and less dependent on consoles, and it reflects the increase in GaaS (Games as a Service) and DLC (downloadable content). Keywords also has an increasing range of evergreen project work, with teams providing multi-year post-launch support (as long as eight years in some cases).

The business has always valued flexibility, but with greater stability and predictability there is a strong argument to increase the ratio of permanent staff. Keywords recognises an increasing industry shift towards outsourcing non-core development, as publishers switch from having dedicated internal teams to leveraging Keywords’ services.

Exhibit 2: Keywords is the scale player in outsourced services

Source: Keywords CMD presentation

Acquisitions and integration: More deals expected

Since IPO, Keywords has completed 43 acquisitions across 18 geographies. Historically, most acquisitions have been priced between €3–30m, with an average historic sales multiple of 1.1x. Looking ahead, acquisitions of engineering and development studios were mentioned as the likely future focus and with only a few weeks to go until year end, Keywords did not rule out further acquisitions in FY19.

For M&A, Keywords does not use external advisers or participate in sale processes, with due diligence and integration led by Keywords staff and management. All companies are integrated with a structured transition plan and acquisitions tend to use a similar structure, pricing and methodology.

Keywords does not often compete with other buyers – developers and publishers normally look to acquire IP and content, whereas Keywords is primarily seeking service competence and is not interested in IP acquisition. In future, as well as looking for engineering and development studios, management indicated it would also consider opportunities to expand in adjacent sectors outside the games industry, although gave no defined timeline.

A number of studio heads presented to the audience, with case studies including Volta, Fire Without Smoke, Sunny Side Up, VMC and Snowed In Studios. The presenters delivered a consistent message, where each was acquired at a point where the business required increasing investment in admin and support functions, with the founding team being drawn away from its focus on the day-to-day business. Keywords was a welcome solution, taking away central functions, freeing up the management team to get back into the business and re-enabling growth.

Studios remain independent brands run semi autonomously with a high degree of independent decision making, but central functions are removed to become part of the Keywords family.

Leveraging location: ‘Land and expand’ service expansion

Keywords’ expansion strategy has been to establish a beachhead in a new territory through a single service line then expand the capabilities of that hub by building the suite of services. This strategy applies equally to clients, whereby a new client is won or acquired then cross-sold additional services to enable the relationship to be built and deepened. The breadth of Keywords’ acquisition strategy since IPO (43 deals across 18 geographies) highlights the effectiveness of this approach.

Exhibit 3: Hub-based model of international expansion

Source: Keywords CMD presentation

Trust, flexibility and scalability more critical than pricing

Keywords made the point that price is not normally the chief concern for most clients. Generally, trust, quality, flexibility, scalability and Keywords’ ability to offer a local point of contact are more important considerations than rock-bottom pricing. If pricing is critical, then Keywords can offer services from some of its lower cost locations.

Publishers and developers are beginning to realise that Keywords is better at managing outsourcing than they are. Keywords has more experience, better systems and more effective management processes than developers and publishers, so rather than getting a poorer solution through outsourcing (which may be their expectation), clients often get a better product than they would from managing the outsourcing process themselves. Keywords’ teams are involved in many more projects than in-house teams. As an indication, the Montreal studio has worked on >100 projects so far in 2019, whereas a larger publisher may only be working on c 10 projects.

Keywords avoids fixed price contracts – the risk is too high – it would prefer to walk away from a client than take on an unquantifiable level of risk. Keywords always prices based on time and materials, with clearly defined KPIs, milestones and break clauses. This approach, together with open and early communication with the client, is the only basis to build a long-term multi-project client relationship.

Keywords may look to increase its pricing, but the group will look to apply pricing more intelligently for projects that restrict Keywords’ flexibility through special conditions, such as high confidentiality, short notice projects, dedicated teams etc.

Exhibit 4: Significant scope for further growth in outsourcing

Source: Keywords CMD presentation

Cross-selling and cross-delivery to become the ‘go to’ provider

Management noted that most of its large contract wins over the last 18 months have come as a result of the VMC acquisition – the explanation is that large clients need a counterpart at scale and, following the acquisition of VMC, Keywords is increasingly being recognised by a number of major US clients as having the necessary scale and professionalism they are looking for. Although there are no immediate plans, the acquisition of VMC may allow Keywords the option to increase pricing in the future.

It is hard to document Keywords’ success at cross-selling, however, each of the studios presenting (Volta, Fire Without Smoke, Sunny Side Up, Babel and Snowed In Studios) talked about and could demonstrate both incoming and outgoing referrals within the group. This was reinforced by the finance function, with the number of inter-company transactions recorded by the finance team highlighting the success of Keywords’ cross-selling policy.

Exhibit 5: Aiming to be the ‘go-to’ provider across all service lines

Source: Keywords CMD presentation

Growth and margins to normalise at c 15% by end FY20

Organic revenues have grown at a 15% CAGR from €16m in 2013 to an expected (based on market consensus) €110m in 2019. Keywords has acquired revenue of €207m across 43 acquisitions at an average multiple of c 1.1x historic revenues. Consensus FY19e revenues are now forecast to be c €317m (vs our revenue forecast of €320m).

Exhibit 6: Sustainable recipe of organic growth supplemented by M&A

Source: Keywords CMD presentation. Note: *FY19 forecasts are based on market consensus.

As reported in H119, the company saw exceptional organic growth that, together with advance investment in the Montreal facilities to support continuing growth, affected H1 margins. Keywords expects operating margins to recover steadily to c 15% over FY20 (vs 12.6% in H119). However, if there is an opportunity to benefit from continuing high revenue growth, management will look to capitalise on this, trading off additional growth for a slower normalisation of profit margins. Nevertheless, management expects margins to have normalised by the end of FY20 (vs our forecasts of 13.2% for FY19 and 14.9% for FY20).

To explain background growth, management broke down its organic growth expectations, showing why it envisaged 10% sustainable revenue growth in the medium to long term:

Sustainable games industry growth – c 9% (Newzoo 2018–22)

Stripping out an element of growth attributable to China – minus 2%

Additional growth from the trend towards outsourcing – 2% (Keywords)

Additional growth from Keywords increasing market share – 1% (Keywords)

Resultant organic growth expectations – c 10%

Console transition: Active FY20 pipeline, benign transition

The last console transition (2013) was unexpectedly bumpy for Keywords in the run up to its IPO (over-exposure to a single key client). Keywords’ exposure to key console players is much lower than it was in 2013 and the business is more broadly based (the top five clients represent c 25% of revenues). In addition, the number of new distribution models such as mobile, VR, Stadia and Apple Arcade diversifies revenue sources. Clients tend to share their release roster with Keywords 12 months ahead for planning purposes. On this basis, although Q419 was relatively quiet in the run-up to Thanksgiving, the launch schedule for FY20 looks much busier.

Exhibit 7: Stronger and more balanced business than in 2013

Source: Keywords CMD presentation

Looking ahead to the forthcoming 2020 console transition, there are a number of factors that suggest the transition this time will be different: 1) consoles are a far less important part of the games mix than in 2013 (the number of new distribution models, eg Stadia, Apple Arcade, further diversifies revenue sources); 2) both major consoles are backwards compatible, so developers are likely to continue to focus on the current generation of consoles as the installed base of next-gen consoles builds; and 3) the increasing prevalence of the GaaS business model indicates a commercial rationale for a high level of ongoing support for ongoing titles on existing platforms.

Valuation: Forecast update

We have taken advantage of the CMD to slightly update our forecasts, in particular taking account of the TV+ Synchron deal that completed shortly after the interim results.

Exhibit 8: New/old forecasts

€'000s

2018

2019e

2020e

Actual

Old

New

Change

Old

New

Change

Revenue

 

 

250,805

315,202

319,720

1.4%

349,874

354,889

1.4%

Cost of sales

(154,997)

(197,542)

(200,799)

1.6%

(217,868)

(221,416)

1.6%

Gross profit (inc multimedia tax credits)

95,808

117,659

118,921

1.1%

132,005

133,473

1.1%

Gross margin (%)

38.2%

37.3%

37.2%

 

37.7%

37.6%

 

EBITDA

 

 

44,232

48,546

48,817

0.6%

59,838

60,271

0.7%

Operating profit (before amort. and except.)

 

 

38,916

42,011

42,188

0.4%

52,584

52,913

0.6%

Operating margin

15.5%

13.3%

13.2%

15.0%

14.9%

Profit before tax (norm)

 

 

37,911

40,011

40,188

0.4%

51,584

51,913

0.6%

Profit after tax (norm)

30,720

32,609

32,753

0.4%

42,299

42,569

0.6%

EPS - normalised (c)

 

 

40.1

45.8

45.0

-1.8%

59.5

64.1

7.7%

Dividend per share (p)

1.61

1.77

1.77

 

1.95

1.95

 

Closing net debt/(cash)

 

 

423

6,716

3,982

-40.7%

(15,776)

(29,688)

88.2%

Source: Keywords Studios, Edison Investment Research

In terms of valuation, Exhibits 9 and 10 below show Keywords’ comparator groups, both outsourcing and games companies. In terms of P/E multiples, Keywords continues to trade at a premium to its peer groups in the current year (FY19: 36.6x vs 25-30x), although with the strong EPS growth forecast, FY20 PE falls to 25.7x, in line with its peer group trading range (22-26x). Adjusted for blended average growth in FY19 and FY20, we derive a PEG ratio of 1.0x, materially below the majority of its peers (1.3-1.7x).

There is now limited scope for M&A in FY19, however accretive acquisition activity in FY20 (at multiples in line with historic levels) could bring the 2020e P/E down further. With strong underlying growth (10%+), we continue to believe sustained execution should drive robust returns for shareholders.

Exhibit 9: Peer valuations – outsourcing/localisation businesses

Name

Current price (local ccy)

Market cap ($m)

EV
($m)

EV/sales
1FY (x)

EV/sales
2FY (x)

EV/ EBITDA
1FY (x)

EV/ EBITDA
2FY (x)

P/E
1FY (x)

P/E
2FY (x)

PEG FY1/2

FCF yield 1FY (%)

Keywords Studios PLC

1407.0p

1,198

1,207

3.4

3.1

22.3

18.1

36.6

25.7

1.0

3.0

Outsourcing/Localisation

Constellation Software

CAD1420

22,665

23,112

6.6

5.7

24.8

21.1

37.5

29.7

1.3

3.0

Capita

158.4p

3,413

5,230

1.1

1.1

9.4

8.3

12.5

10.7

0.8

nm

Reply

€71.1

2,928

2,912

2.3

2.1

14.5

13.2

25.0

22.7

2.3

2.6

RWS Holdings

656.0p

2,333

2,415

5.3

4.9

22.4

20.9

31.3

28.5

3.3

2.4

Appen

A$24.5

2,002

1,977

5.4

4.3

30.2

22.8

49.4

37.0

1.1

-0.3

Learning Technologies

122.0p

1,055

1,090

6.5

6.0

19.2

17.5

27.7

25.4

2.6

2.6

Wavestone

€24.0

534

576

1.2

1.1

8.8

7.5

15.2

11.9

0.6

5.5

SDL

594.0p

697

723

1.5

1.4

12.0

10.7

20.5

18.1

1.5

2.6

ZOO Digital Group

81.0p

78

85

2.4

1.9

26.2

14.6

nm

25.1

nm

1.4

Mean

Mean

3.6

3.2

18.6

15.2

27.4

23.2

1.7

2.5

Median

Median

2.4

2.1

19.2

14.6

26.3

25.1

1.4

2.6

Source: Edison Investment Research, Refinitiv data. Note: Priced at 2 December 2019.

Exhibit 10: Peer valuations – games companies

Name

Current price (local ccy)

Market cap ($m)

EV
($m)

EV/sales
1FY (x)

EV/sales
2FY (x)

EV/ EBITDA
1FY (x)

EV/ EBITDA
2FY (x)

P/E
1FY (x)

P/E
2FY (x)

PEG FY1/2

FCF yield 1FY (%)

UK games

Frontier Developments

1220.0p

614

568

6.2

5.2

18.8

14.1

48.5

31.7

0.5

0.4

Team17 Group

337.5p

572

527

7.4

7.0

21.4

20.4

31.6

30.2

6.1

3.0

Codemasters Group

235.5p

426

394

3.7

3.3

16.8

13.7

19.0

15.4

1.2

2.8

Sumo Group

154.3p

300

301

4.6

3.8

16.8

14.3

23.4

20.8

1.7

3.8

Mean

Mean

5.5

4.8

18.5

15.6

30.6

24.5

2.4

2.5

Median

Median

5.4

4.5

17.8

14.2

27.5

25.5

1.5

2.9

US/European Games

Activision Blizzard Inc

$54.80

42,124

39,859

6.3

5.8

17.9

15.0

24.8

22.0

1.6

4.0

Electronic Arts Inc

$101.0

29,493

25,605

4.9

4.8

14.5

13.9

21.6

20.7

1.9

5.4

Take-Two Interactive

$121.4

13,755

12,250

4.3

4.3

17.7

16.4

24.9

24.3

1.7

3.8

Ubisoft Entertainment SA

€55.1

7,312

7,800

4.5

2.8

14.1

6.6

nm

16.3

0.1

nm

Zynga Inc

$6.20

5,893

5,077

3.3

2.9

16.8

14.7

24.0

23.5

2.2

3.1

Embracer Group AB

SEK67.8

1,988

1,690

2.7

2.2

8.2

6.1

41.6

27.4

0.8

nm

Glu Mobile Inc

$5.50

806

704

1.7

1.5

18.0

17.2

20.7

21.5

0.6

3.2

Mean

Mean

4.0

3.5

15.3

12.9

26.3

22.2

1.3

3.9

Median

Median

4.3

2.9

16.8

14.7

24.4

22.0

1.6

3.8

Source: Edison Investment Research, Refinitiv data. Note: Priced at 2 December 2019.

CMD presentation

The CMD presentation is available on the Keywords website.

The full CMD video can be found at: https://www.youtube.com/watch?v=SUy8j73oNpc

Exhibit 11: Financial summary

€'000s

2016

2017

2018

2019e

2020e

31-December

IFRS

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

 

 

96,525

151,430

250,805

319,720

354,889

Cost of Sales

(59,907)

(96,345)

(154,997)

(200,799)

(221,416)

Gross Profit (inc multimedia tax credits)

36,618

55,085

95,808

118,921

133,473

EBITDA

 

 

16,833

26,645

44,232

48,817

60,271

Operating Profit (before amort. and except.)

 

 

15,030

23,915

38,916

42,188

52,913

Intangible Amortisation

(1,629)

(3,038)

(6,872)

(7,559)

(8,315)

Exceptionals

(1,316)

(3,016)

(5,607)

(2,981)

0

Other

(686)

(1,426)

(4,129)

(6,000)

(6,600)

Operating Profit

11,399

16,435

22,308

25,648

37,998

Net Interest

(287)

(818)

(1,005)

(2,000)

(1,000)

FOREX

(1,737)

(3,623)

791

(1,159)

0

Profit Before Tax (norm)

 

 

14,804

23,097

37,911

40,188

51,913

Profit Before Tax (FRS 3)

 

 

9,375

11,994

22,094

22,489

36,998

Tax

(3,223)

(4,731)

(7,191)

(7,435)

(9,344)

Profit After Tax (norm)

11,581

18,366

30,720

32,753

42,569

Profit After Tax (FRS 3)

6,152

7,263

14,903

15,054

27,654

Average Number of Shares Outstanding (m)

55.9

58.7

64.3

65.1

65.1

EPS

 

 

20.8

31.3

41.8

45.9

65.4

EPS - normalised (c)

 

 

20.2

30.0

40.1

45.0

64.1

EPS - (IFRS) (c)

 

 

11.0

12.4

23.2

23.1

42.5

Dividend per share (p)

1.33

1.46

1.61

1.77

1.95

Gross Margin (%)

37.9%

36.4%

38.2%

37.2%

37.6%

EBITDA Margin (%)

17.4%

17.6%

17.6%

15.3%

17.0%

Operating Margin (before GW and except.) (%)

15.6%

15.8%

15.5%

13.2%

14.9%

BALANCE SHEET

Fixed Assets

 

 

61,873

142,927

198,215

218,080

212,507

Intangible Assets

55,495

131,610

180,086

197,579

189,365

Tangible Assets

5,498

10,111

15,002

17,534

20,176

Investments

880

1,206

3,127

2,967

2,967

Current Assets

 

 

38,677

80,182

100,349

112,863

154,183

Stocks

0

0

0

0

0

Debtors

13,879

27,473

37,019

42,572

47,255

Cash

17,020

30,374

39,871

43,313

76,983

Other

7,778

22,335

23,459

26,978

29,945

Current Liabilities

 

 

(27,830)

(51,677)

(95,031)

(80,415)

(81,303)

Creditors

(19,805)

(32,734)

(54,960)

(33,343)

(34,231)

Short term borrowings

(8,025)

(18,943)

(40,071)

(47,072)

(47,072)

Long Term Liabilities

 

 

(6,016)

(10,420)

(11,158)

(11,703)

(10,718)

Long term borrowings

(345)

(337)

(230)

(230)

(230)

Other long term liabilities

(5,671)

(10,083)

(10,928)

(11,473)

(10,488)

Net Assets

 

 

66,704

161,012

192,375

238,825

274,669

CASH FLOW

Operating Cash Flow

 

 

17,108

21,389

38,481

49,406

61,291

Net Interest

(58)

(253)

(502)

(7,542)

(6,394)

Tax

(2,129)

(4,731)

(6,304)

(7,435)

(9,344)

Capex

(2,306)

(3,803)

(9,440)

(9,000)

(10,500)

Acquisitions/disposals

(21,104)

(90,090)

(30,296)

(27,836)

(112)

Financing

643

82,936

174

0

0

Dividends

(825)

(867)

(1,080)

(1,152)

(1,271)

Net Cash Flow

(8,671)

4,581

(9,919)

(3,558)

33,670

Opening net debt/(cash)

 

 

(17,284)

(8,650)

(11,094)

423

3,982

Forex gain on cash

1

(891)

(3)

0

0

Other

36

(1,246)

(1,596)

0

0

Closing net debt/(cash)

 

 

(8,650)

(11,094)

423

3,982

(29,688)

Source: Keywords Studios accounts, Edison Investment Research

General disclaimer and copyright

This report has been commissioned by Keywords Studios and prepared and issued by Edison, in consideration of a fee payable by Keywords Studios. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2019 Edison Investment Research Limited (Edison). All rights reserved FTSE International Limited (‘FTSE’) © FTSE 2019. ‘FTSE®’ is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for ‘wholesale clients’ within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are ‘wholesale clients’ for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a ‘personalised service’ and, to the extent that it contains any financial advice, is intended only as a ‘class service’ provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the ‘FPO’) (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the ‘publishers' exclusion’ from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

General disclaimer and copyright

This report has been commissioned by Keywords Studios and prepared and issued by Edison, in consideration of a fee payable by Keywords Studios. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2019 Edison Investment Research Limited (Edison). All rights reserved FTSE International Limited (‘FTSE’) © FTSE 2019. ‘FTSE®’ is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for ‘wholesale clients’ within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are ‘wholesale clients’ for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a ‘personalised service’ and, to the extent that it contains any financial advice, is intended only as a ‘class service’ provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the ‘FPO’) (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the ‘publishers' exclusion’ from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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