RNS Number : 0470B
Keywords Studios PLC
18 September 201818 September 2018
Keywords Studios plc ("Keywords Studios", "the Group")
Half year results for the six months to 30 June 2018

An excellent performance and a strengthened services platform
Keywords Studios, the international technical services provider to the global video games industry, today provides its half year
results for the six months to 30 June 2018.
Financial overview:· Revenue, including contribution from acquisitions, increased by 72% to €110.0m (H1 2017: €63.8m)
o On a constant currency basis, revenue would have been up by 84% to €117.5m· 2% increase in like for like** revenue; 8.6% increase on a like for like constant currency basis· Gross profit margin increased to 37.4% (H1 2017: 35.6%)· Adjusted profit before tax* was up 67% to €16.0m (H1 2017: €9.6m)· Adjusted earnings per share* were up 53% to 20.1c (H1 2017: 13.2c)· Net cash of €0.1m (H1 2017: €1.1m; FY 2017: €11.1m) after €10.6m of net cash outlay on acquisitions· 10% increase in interim dividend to 0.53p per share (H1 2017: 0.48p)
Operational overview:o VMC has been successfully integrated with our margin improvement plan ahead of scheduleo Continued to invest in the development of the Group:o Expansion of studios in response to demand including investing €3.8m in new or expanded facilities in Montreal, Dublin,
London, Liverpool, Madrid, Katowice, New Delhi, Chengdu, Manila and Tokyo, providing a total of 660 additional
workstationso Acquisition of Maximal, adding further scale to our Audio capabilities in South American markets, in Marcho Acquisition of Cord and Laced, which extended our Audio offering in to the provision of composed or licenced music for use
in games and other media, in Aprilo Acquisition of Fire Without Smoke, which provides a suite of marketing services to game publishers and developers, in May
o Acquisition of Blindlight, which provides Hollywood based talent resources and services, in Juneo Launch of Keywords Ventures, to invest in innovative technologies and services that can leverage Keywords' reach in thegames market and that will benefit clients; first investment in automated app testing solution for GDPR compliance,
AppSec Test, in Juneo New revolving credit facility secured for up to €105m
o Further cross selling progression with 19% increase in clients using three or more services to 100 (H1 2017: 84)
Post period end, current trading and outlook:· Further investment in operational capacity and Group infrastructure to support growth in future periods:· Announced separately today:o Acquisition of TrailerFarm, a Brighton, UK based creator of video game trailers for a total consideration of up to £2m
o. Hiring of a leading Hollywood based sound effects team of 7 people, SoundLab, bringing world-class audio design
and production services for games, film and TV to our Audio service line····

Acquisition of Studio Gobo and Electric Square, both in Brighton, UK, enhancing our game development services in bothscale and expertise, in August
Acquisition of Tokyo, Japan based Yokozuna Data, developer of machine learning and AI technology bringing industry
leading capabilities in video game analytics for live operations, in July
Acquisition of Snowed In, in July adding strength to our Engineering service line and access to talent in Ottawa, Canada.
Further strengthened the senior management team with the appointment of a Chief Commercial Officer, Chief Marketing
Officer, Global Operations Director and Engineering Service Line Director, all newly created positions

Outlook· Selectively reviewing a strong acquisition pipeline· Trading in the second half has been good and we expect to meet market expectations for the full year before the positive
impact of any additional acquisitions
before acquisition and integration expenses of €2m (H1 2017: €0.5m), share option charges of €0.8m (H1 2017: €0.4m), amortisation of intangibles of €3.1m(H1 2017: €1.2m) and foreign currency gain/(loss) of €0.8m (H1 2017: (€1.96m))** calculated on the basis that the H1 2017 comparative includes all of the 2017 and 2018 acquisitions as if they had been owned for the same period in 2017 as
they have been in 2018.
*

Andrew Day, Chief Executive of Keywords Studios, commented:"In a period in which the gaming phenomenon, Fortnite, had a significant impact on the games market and in which the US dollar
which represented 54% of our revenues declined by 12% compared to the same period in 2017, we have none the less delivered
yet another strong set of results for the ﬁrst six months of 2018 as we continue to deepen and broaden the business for the
future.
"Our continued organic investment and acquisitions have extended our geographical reach, added further scale to our existing
service lines, and broadened the range of capabilities we can oﬀer our clients to include co-development, analytics, music,
marketing services and sound effects.
"We are particularly pleased with our performance in respect of acquisitions and their subsequent integration. Our largest
acquisition to date, VMC, which was absorbed into the Group with a track record of reducing revenues and an operating marginof 9.1% in October 2017, has been fully integrated and the resulting synergies are already signiﬁcantly enhancing operating
margins as can be seen by the overall group proﬁt margin of 14.5%. We are conﬁdent of being able to return it to revenue
growth in the near to medium term.
"The games market is starting to focus on the prospect of games being streamed and played live across all connected devices.
Advances in technology and increases in internet bandwidth including the forthcoming 5G mobile networks and the resultant
reduction in latency of communications could enable streaming of games for the ﬁrst time which we believe will drive record
demand for gaming content. We are excited by the prospect of assisting the industry in creating and repurposing content forthis new medium over the coming years and Keywords is already working on interactive streaming content and porting games

to upcoming streaming platforms.
"Our focus on organic and acquisition led growth is being maintained and we continue to invest in additional talent and better
facilities as well as in acquisitions of synergistic businesses as we build our global games services platform and lead theconsolidation of a highly-fragmented market."

A presentation of the half year results will be made to analysts later this morning at MHP's oﬃces. There will also be a live,
listen only webcast of the presentation and a recording will be made available via www.keywordsstudios.com. To register foraccess, please contact Charles Hirst at MHP Communications on +44 20 3128 8193 or email keywords@mhpc.com.
For further information, please contact:
Keywords
Studios(www.keywordsstudios.com)
Andrew Day, Chief Executive Officer
David Broderick, Chief Financial Officer+353 190 22 730

Numis (Financial Adviser)
StuartSkinner/
Kevin
Cruickshank(Nominated Adviser)
James Black / Tom Ballard (Corporate
Broker)020 7260 1000

MHP Communications (Financial PR)
Katie Hunt / Ollie Hoare / Nessyah Hart

020 3128 8100

Notes to Editors
Keywords Studios is an international technical services provider to the global video games industry. Established in 1998, andnow with 50 facilities in 20 countries strategically located in Asia, the Americas and Europe, it provides integrated art creation,
software engineering, testing, localisation, audio and customer care services across more than 50 languages and 16 games
platforms to a blue-chip client base of approximately 650 clients across the globe. It has a strong market position, providing
services to 23 of the top 25 most prominent games companies, including Activision Blizzard, Bandai Namco, Bethesda,
Electronic Arts, Epic Games, Konami, Riot Games, Sony, Square Enix, Supercell, TakeTwo and Ubisoft. Recent titles worked on
include Uncharted 4: A Thief's End, Call of Duty: WWII, Mortal Combat X, Assassin's Creed Origins, Battleﬁeld 1, League ofLegends, Fortnite, Clash Royale and Rainbow Six-Siege. Keywords Studios is listed on AIM, the London Stock Exchange regulated
market (KWS.L).
Introduction

An excellent performance and a strengthened services platform
The ﬁrst half of the ﬁnancial year has seen the Group deliver another period of strong growth. We have made investments in
expanding our existing businesses, as well as further acquisitions that have extended the Group's service oﬀering andgeographic reach, positioning the business well to face the increasing demand for outsourced services within the video games
industry.
Delivering on Our Strategy
We continue to execute well in pursuit of our strategy to build the world's leading technical services platform focused on themost complex of interactive content - video games.
We operate in a service provision market which remains highly fragmented despite the scale and global nature of the major
video games publishers and developers. There is a clear trend towards those clients outsourcing a greater proportion of theirgames development, and in-game support, in order to manage the demands for increasingly sophisticated content whilst
limiting their fixed costs.
The key pillars of our strategy are to grow organically and by acquisition to extend the Group's service capacity, capabilities andgeographical reach - where we seek to gain access to markets for the best talent or to be close to our clients. By generatingsynergies across our expanding multi-service global platform, we are increasingly becoming a strategically relevant partner toour customers.
In line with our strategy, we continued to invest in the business in the ﬁrst half with four acquisitions, of Maximal, Cord andLaced, Fire Without Smoke and Blindlight. These have added further scale to our audio capabilities in the South American
markets; provided a ﬁrst step into the market for music services; added a range of marketing services; an d increased ourservices to include Hollywood based voice over and script writing services. All have served to further position the Group as theleading global player in the outsourced services market by strengthening our capacity and the breadth of the value-added
services we are able to offer our clients.
We have also made good progress with integrating prior period acquisitions, all of which are making good contributions to theGroup. The Group's largest acquisition to date, VMC, completed on 27 October 2017 and has been well integrated with the restof the Group, and cost synergies are leading to improved operating margins ahead of our original plans.
Since the period end, we have further enhanced our services platform through the acquisitions of Snowed In, Yokozuna Data,
Studio Gobo and Electric Square, and TrailerFarm. These have, respectively, added strength and scale to our Engineering
service line; brought industry leading technology and capabilities in video game analytics, enhanced our game development
services in both scale and expertise, and extended our presence in marketing services and video game trailer production.
Organic Growth and Investment
In the seasonally weaker first half of the year, like for like revenues were up by 8.6% after adjusting for currency movements.
We have continued to invest in both expanding our operational capacity and enhancing the Group's infrastructure to support
growth in future periods and respond to customer demand. We have invested in people, systems and marketing including
strengthening the senior management team with the hiring of a Chief Marketing Officer, and the appointments of an Engineering
Service Line Director, Global Operations Director and a Chief Commercial Oﬃcer - all newly created positions. We continue todevelop our IT and ﬁnance functions as well as enhancing our branding. The second half of 2017 and the ﬁrst half of 2018 also
saw us invest substantially in the expansion of the Group's facilities in Montreal, Dublin, London, Liverpool, Madrid, Katowice,
New Delhi, Chengdu, Manila and Tokyo, which are now providing additional capacity to support the higher levels of activity wewere expecting and are now experiencing in the second half.
The acquisitions and organic investments made to date leave us better placed than ever to support our video game developersand publishers from the very early concept stages of game design through to launch and live operations phases.
We are seeing growing demand for co-development and full game development services as well as the continued trend towards
outsourcing more broadly and we look forward to a strong second half to the year and to the opportunities this demand presents
in the longer term.
Financial overview
The Group has continued to demonstrate its ability to execute and integrate acquisitions well. A very strong performance in this
aspect of the Group's strategy has led to Group revenues increasing by 72% to €110.0m (H1 2017: €63.8m).
The gross profit margin of 37.4% (H1 2017: 35.6%) was stronger than the comparative period and prior year (FY 2017: 36.4%).
Operating expenses increased in the ﬁrst half of the year to €24.7m (H1 2017: €12.8m) reﬂecting the costs of the acquired
entities and investments made in existing and new facilities and in strengthened management and support personnel. However,cost management remains a point of focus across the Group's activities as we drive synergies across the enlarged group.
One-oﬀ costs of acquiring and integrating the newly acquired companies of €2.0m (H1 2017: €0.5m) were incurred in the
period. Included in net ﬁnance costs is a translational foreign exchange gain of €0.8m (H1 2017: €1.96m loss) in the ﬁrst half ofthe current year which is primarily due to the effect of translating net current assets held in foreign currencies.
Adjusted proﬁt before tax and acquisition-related costs, share option charges, amortisation of intangibles and foreign currency
movements for the ﬁrst half of the current ﬁnancial year increased by 60% to €16.0m (H1 2017: €9.6m). After these items, theGroup reported a profit before tax for the period of €10.8m (H1 2017: €5.5m).
The estimated tax charge in the period is €3.0m (H1 2017: €2.0m), representing an eﬀective tax rate on the adjusted proﬁt of
19.3% which is a reduction on the rate for 2017 (FY 2017: 20.5%, H1 2017: 21.1%).
Adjusted earnings per share (before tax and acquisition-related costs, share option charges, amortisation of intangibles andforeign currency movements) were up 53% to €20.1c (H1 2017: €13.2c) following an increase in the average number of sharesin issue. Basic earnings per share were up 99% to €12.1c (H1 2017: €6.08c). The denominator used for these calculations
includes the shares which will be issued to the sellers of Red Hot, Around the Word, Sperasoft, Cord and Laced, Fire Without
Smoke and Blindlight.
In spite of a combination of the increased trading in the second quarter and the Group entering a traditionally busy third quarter,
where the Group has its maximum cash requirement for the year, the Group generated a net inﬂow of cash from operations of€4.0m (H1 2017: €2.3m). In the period, the Group completed ﬁve acquisitions with a net cash outﬂow on consideration of€10.6m (H1 2017: €6.7m). To help fund acquisitions and general working capital requirements the Group successfully secured a
syndicated credit facility, with Barclays Bank plc, HSBC Bank plc and Lloyds Banking Group plc for up to €105m. Investment inﬁxed assets amounted to €3.8m (H1 2017: €1.8m), reﬂecting the cost of increasing capacity in several studios and a continued
refresh of IT equipment.
Operational review
Following acquisitions during the ﬁrst half and prior periods, Keywords continues to diversify geographically with a well balanced
portfolio of services: Art Creation services represented 16% of group revenues, Audio services represented 12%, Localisation
services represented 20%, Functional Testing represented 21%, Localisation Testing represented 9%, Player Support (formerly
called Customer Support) services represented 14% and the relatively new Engineering service line represented 8% in the ﬁrst
half.
In assessing the like for like performances of these service lines, it should be noted that currency movements had a material
impact in the ﬁrst half, in particular the weakening of the US dollar, in which approximately 54% of the Group's revenues weredenominated, by 12% against the Euro between H1 2017 and H1 2018. To provide a picture of the underlying performance ofthe business during the period, the Group also assessed the like for like growth on the service lines excluding foreign exchange
impacts on revenues.
Art Creation (16% of group revenues in H1 2018)
Our Art Creation service line creates graphical art assets for inclusion in video games including concept art creation, 2D and 3D
art asset production and animation.
Art Creation revenues grew by 47% to €18.1m (H1 2017: €12.4m) with the beneﬁt of contributions from 2017 Acquisitions,
Spov, Red Hot and Sperasoft, and Fire Without Smoke, acquired in 2018. On a like for like basis, Art Creation revenues were 3%
less than H1 2017 (Foreign exchange adjusted; +4.0% growth).
Following the acquisition of Sperasoft in December 2017, we ﬁnished the ﬁrst half with 1,199 artists on our payroll (H1 2017:927) of which 1,081 are in India, China, and Russia based in our studios in Lakshya, Mindwalk, Red Hot and Sperasoft. ThroughLiquid Development, Volta, SPOV and Fire Without Smoke, we manage further pools of freelance artists. These acquisitions andour talent base make Keywords the leading global player in the outsourced art services market, in terms of capacity as well as
breadth and depth of service.
Audio Services (12% of group revenues in H1 2018)
Our Audio service line provides multi language voice-over, original language voice recording, music and related services.
Audio revenues rose by 61% in the period to €13.6m (H1 2017: €8.4m), with the beneﬁt of contributions from the recent
acquisitions of Cord, Laced and Blindlight in 2018, and the French acquisitions, La Marque Rose, Asrec, Around the Word andDune Sound in 2017. On a like for like basis revenues were down 2% year on year (foreign exchange adjusted, +2%) as larger
audio projects fell into H2 2018.
The acquisitions of Cord and Laced in the UK expanded our Audio services oﬀering into music focused branding and strategic
consulting services and, together with Blindlight's expertise in Hollywood production, further enhance our reputation as theleading provider of services to the global video games industry.
The acquisition of Maximal adds further scale to our audio capabilities in the South American markets, providing us with our ﬁrst
recording studio in Sao Paulo to complement our established business in Rio de Janeiro
The focus in H1 2018 was to consolidate the Audio oﬀering in France and expand the Audio oﬀering through the acquisitions ofBlindlight, Cord and Laced as we prepare for this year's high season for voice over recording between July and November.
Localisation (20% of group revenues in H1 2018)
Our Localisation service line provides translation of in-game text, audio scripts, cultural and local adaptation, packaging andmarketing materials.
Localisation revenues grew by 13% to €21.4m (H1 2017: €19.0m) with the beneﬁt of contributions from entities acquired in2017, including the French acquisitions, VMC and XLOC.

On a like for like basis, Localisation revenues have grown by 5% (foreign exchange adjusted 9%) as this service line delivered
sustained growth as it benefits from the trend towards continuous content generation in the games industry.
Functional Testing (21% of group revenues in H1 2018)
Our Functional Testing service line provides quality assurance including the discovery and documentation of game defects andtesting to verify that games comply with console manufacturers' specifications.
The acquisition of VMC in late October 2017 has had a signiﬁcant impact on revenues from this service line. Functional testing
revenues increased accordingly by 110% to €23.0m (H1 2017: €11.0m). Like for like revenues were ﬂat year on year (foreignexchange adjusted; increased by 7%).
Localisation Testing (9% of group revenues in H1 2018)
Our Localisation Testing service line identiﬁes out of context translations, truncations, overlaps, spelling, and grammar, age
rating issues, cultural issues and tests for console manufacturer compliance requirements in over 30 languages using native
speakers.
Localisation Testing revenue increased by 10% to €9.6m (H1 2017: €8.7m), with the beneﬁt of a contribution from theacquisition of VMC. On a like for like basis, Localisation Testing was 6% lower compared to H1 2017 (foreign exchange adjusted;
was down 1%). We typically expect localisation testing to see a higher level of activity in the second half of the year and areencouraged by current volumes and a good pipeline of activity.
Player Support (14% of group revenues in H1 2018)
Our Player Support service line (formerly called Customer Support) provides multi-lingual, cost eﬀective and ﬂexible customer
care services including managing communities of gamers across all forms of social media, within the games themselves and on
the official game forums.
As with Functional Testing, the acquisition of VMC in late October 2017 has had a signiﬁcant impact on revenues from thisservice line. Player Support sales increased accordingly by 302% to €15.3m in the ﬁrst half (H1 2017: €3.8m). Like for likerevenue was up 15% year on year (foreign exchange adjusted was 26%).
The focus in 2018 to date has been to stabilise VMC revenue ﬂows in this signiﬁcant addition to Keywords business, and toachieve our margin expectations. To date, the Group has delivered on these goals.
Engineering (8% of group revenues in H1 2018)
Our Engineering service line provides outsourced software engineering and game development services to publishers anddevelopers. The Group continues to grow the Engineering service line organically and through acquisition.
There was signiﬁcant growth from a relatively low base in the Engineering service line to €8.8m for the half year (H1 2017:€0.5m), as the Group beneﬁtted from the acquisitions of Engineering and Co-Development Studios, including GameSim, d3t andSperasoft, in 2017, and since the H1 2018 period end, Yokozuna Data, Snowed In, Studio Gobo and Electric Square. Like for likerevenue increased 5% year on year (foreign exchange adjusted +16%).
Dividends
The Board is pleased to announce a 10% increase in its interim dividend payment, in line with its progressive dividend policy.
The interim dividend of 0.53p per share will be paid on 26 October 2018 to shareholders on the register on 5 October 2018 andwill go ex-dividend on 4 October 2018. The interim dividend payment will absorb approximately €0.4m of cash resources.
PeopleIn July, we further strengthened our senior management team structure in support of our continued growth.
Igor Efremov, formerly CEO of Sperasoft was appointed to the new role of Chief Commercial Oﬃcer. In this new position, Igor
leads the seven global Service Lines of Keywords and global Business Development. He is responsible for execution andimplementation of the Group's growth strategy, production efficiency and quality of services.
Giacomo Duranti, our Chief Operations Oﬃcer, retains responsibility for global operations, IT, Legal and M&A execution and has
now taken on the additional leadership of Human Resources and the Regional, Country and Studio Management organisation.
Giacomo's team will be enhanced with the support of Mark Rizzo's appointment to the new role of Global Operations Director tohelp implement our strategy for support and growth across the entire Keywords group. As part of his new role, Mark has takenon the leadership of Group IT.
Andrew Brown was appointed to the newly created role of Chief Marketing Oﬃcer. In this role he brings together Corporate
Marketing and PR across the Group, advising on pricing and branding strategies. He also now leads our Keywords Ventures
business alongside an investment committee, comprised of senior members of the Keywords executive team, many of whom
have started and run their own businesses and have technical backgrounds.
Finally, Jamie Campbell, who joined the Group through the acquisition of d3t Ltd in October 2017, has been appointed to the roleof Service Line Director for Engineering.
These changes and additions to our leadership team add capability and capacity as we continue to develop our global video
games services platform. Welcoming companies into the Keywords family and ensuring they have the opportunity to inﬂuence
our continued growth is an important part of our success. This is something we pride ourselves on and it is pleasing to see thisbeing reflected so strongly in these changes.
The average number of employees across the Group has grown to 4,934 (H1 2017: c. 2730) and our continued growth andreputation for consistently delivering good quality service to demanding deadlines is testament to the Keywords culture and theskills and commitment of Keywords' talented and games-passionate employees and collaborators. On behalf of the Board andshareholders we would like to thank everyone involved for their valuable contribution to the continued success of the Group.
Current trading and outlook
Our progress so far in the second half has been very encouraging, with increased activity levels in the period to date in line with
the Board's expectations.
We have made signiﬁcant investments in enlarged and improved facilities, which are now providing additional capacity tosupport the higher levels of activity in the second half in response to the seasonal and structural increases in the demand we areseeing from our customers.
We have also invested in senior and mid-level management to support our organic growth in the second half and beyond and wehave continued to make selective acquisitions which have added to the breadth of our service capabilities for our clients.
With the beneﬁts of a full six months contribution from ﬁrst half acquisitions, a healthy pipeline of activity and expanded
capacity to deliver it, and a strengthening US dollar, we anticipate a strong second half performance in line with current market

expectations for the full year.
Overall, we believe that there is a clear opportunity for Keywords to continue to extend its existing relationships with many ofthe major games companies both through providing additional services to existing customers and through providing dedicatedoutsourced services. We maintain a strong acquisition pipeline and we continue to review selective acquisitions opportunities
that could add capacity and further extend our service offering or geographical penetration.

Interim consolidated statement of comprehensive income
Unaudited Unaudited
Audited26 weeks
26 weeks 52 weeks
ended
ended
ended
30 Jun 1830 Jun 17 31 Dec 17
Note
€'000
€'000
€'000
Revenues

109,951

63,760151,430

Cost of sales(68,791)(41,062)(96,345)

Gross profit

41,16022,69855,085

(835)

(416)

(1,426)(2,006)(461)(3,016)(3,095)(1,223)(3,038)(5,936)(2,100)(7,480)(24,742)(12,782)(31,170)(30,678)(14,882)(38,650)

10,482

7,816

16,435

Share option expense
Costs of acquisition andintegration
Amortisation of intangible
assets4

14

Items excluded from adjusted
profit measures

Other administration expenses
Administrative expenses
Operating profit
Financing income
Financing cost

6
6

859
(503)

55
(2,356)26(4,467)

Profit before taxation
Tax expense

710,838(3,088)5,515(2,025)

11,994(4,731)

7,750

3,490

7,263

834
(40)

(35)

(893)
(25)

6

(1,191)(3,598)

8,550

2,264

2,747

7,750
7,750

3,490
3,490

7,263
7,263

8,550
8,550

2,264
2,264

2,747
2,747

€ cent€ cent€ cent

9

12.10

6.08

12.37

9

11.62

5.83

11.87

Profit after tax
Other comprehensive income:Items that will not be reclassified
subsequently to profit or loss
Exchange gains / (loss) on capital
investments
Actuarial loss on defined benefit
Items that may be reclassified
subsequently to profit or loss
Exchange gains / (loss) on translationof foreign operations

Total comprehensive income:
Profit for the period attributable to:
Owners of the parent
Non-controlling interest
Total comprehensive income
attributable to:
Owners of the parent
Non-controlling interest

Earnings per share
Basic earnings per ordinary share (€cent)
Diluted earnings per ordinary share (€cent)

The notes on pages 15 to 38 form an integral part of these consolidated financial statements.

Interim consolidated statement of financial position
Unaudited
26 weeks
ended
30 Jun 18

Unaudited
26 weeks
ended
30 Jun 17

Audited52 weeks
ended
31 Dec 17

Non-current assets
Property, plant and equipment
Goodwill
Intangible assets
Investments in Associates
Deferred tax assets

Note
11
12
16

Current assets
Trade receivables
Other receivables
Cash and cash equivalents
Total assets
EquityShare capital
Share capital - To Be Issued
Share premium
Merger reserve
Foreign exchange reserve
Treasury shares held in EBTShare option reserve
Retained earnings

10

Non-controlling interest
Total equity
Current Liabilities
Trade payables
Other payables
Loans and Borrowings
Corporation tax liabilities
Non-current liabilities
Other payables
Employee Defined Benefit
Loans and Borrowings
Deferred tax liabilities

13

13

Total equity and liabilities

€'000

€'000

€'000

11,422
124,416
27,201114
1,265
164,418

5,951
52,7488,805
1,329
68,833

10,111109,007
23,5481,206
143,872

36,22630,11832,184
98,528262,946

18,766
10,505
14,48243,753
112,586

27,473
22,33530,37480,182224,054760
10,565102,158
35,290(2,664)(1,997)
3,362
27,694
175,168
175,168670
6,807
19,18627,922(204)(2,047)
1,646
17,19971,17971,179737
11,739102,054
28,878(3,504)(1,997)
2,545
20,679161,131
161,131

7,268
33,67632,084
2,877
75,905

5,408
14,193
13,043
3,058
35,702

7,310
23,005
18,943
3,245
52,503

1,035
1,233
45
9,560
11,873262,946

930
1,025
311
3,439
5,705
112,586

1,233
1,055
337
7,795
10,420224,054

The notes on pages 15 to 38 form an integral part of these consolidated financial statement

Consolidated Statement of Changes in Equity
ForeignSharecapitalSharesto beissuedShare

Mergerexchange

Treasurysharesheld

premium

reserve

reservein EBT

Total
attributable

Share
optionRetainedreserveearnings

Non

Total

to equity
holders ofparentControlling

equityInterest

€'000

€'000

€'000

€'000

€'000

€'000

€'000

€'000

€'000

€'000

€'000

654

8,792

19,983

22,109987(1,434)

1,305

14,30866,704066,704

Other comprehensive income

-

-

-

-

(1,191)

-

-

3,490
(35)

3,490
(1,226)-

3,490(1,226)

Total comprehensive income for the period

-

-

-

-

(1,191)

-

-

3,455

2,264

-

2,264

Share option expense

-

-

-

-

-

-

341

-

341

-

341

Share Options Exercised

-

-

-

-

-

(613)
-

-

(563)

(613)
(563)

-

(613)
(563)

Shares issued upon acquisition - GameSim Inc

2

-

-

184
1,392

-

-

-

-

184
1,394

-

184
1,394

Shares Issued on deferred settlement with Synthesis Group14(3,453)

0

3,439

0

-

0

-

1

-

1

-

1,468

-

-

-

-

-

-

1,468

-

1,468

-

-

(798)

798

-

-

-

-

-

-

-

Balance at 1 January 2017
Profit - 1st January 2017 to 30th June 2017

Contributions by and contributions to the owners:

Dividends paid
Shares issued upon acquisition - Xloc Inc

Shares to be issued (Red Hot Acquisition)
Reclassification of share premium on acquisitions to distributablereserves

Contributions by and contributions to the owners

16(1,985)

(798)

5,813

0

(613)

341

(563)

2,211

-

2,211

Balance at 30 June 2017

670

6,807

19,18527,922(204)(2,047)

1,646

17,19971,179-71,179Other comprehensive income

-

-

-

-

(3,300)

-

-

3,773
10

3,773
(3,290)-

3,773(3,290)Total comprehensive income for the period

-

-

-

-

(3,300)

-

-

3,783

483

-

483

61

-

82,261

-

-

-

-

-

82,322-82,322

Profit - 1st July 2017 to 31st December 2017

Contributions by and contributions to the owners:
Shares issued for cash

Share option expense
Share Options Exercised

6

-

608

-

-

50

899
-

-

899
664

-

899
664

Dividends paid

-

-

-

-

-

-

-

(304)

(304)

-

(304)

(0)
-

-

-

-

-

-

-

0

(0)
0

-

(0)
0

Shares issued upon acquisition - Lola

-

-

-

168

-

-

-

-

168

-

168

Shares issued upon acquisition - D3T
Shares issued upon acquisition - Asrec

-

-

-

686
101

-

-

-

-

686
101

-

686
101

Shares Issued on deferred settlement with Synthesis Group

-

-

-

-

-

-

-

0

0

-

0

Shares to be issued (Red Hot Acquisition)

-

(1)

-

-

-

-

-

0

(1)

-

(1)

Shares to be issued (Sperasoft Acquisition)

-

4,133

-

0

-

-

-

-

4,133

-

4,133

Shares to be issued (Around The Word & Dune Sound Acquisition)
Reclassification of share premium on acquisitions to distributablereserves

-

800

-

0

-

-

-

-

800

-

800

-

-

-

0

-

-

-

-

0

-

0

899

(303)

89,469-89,469

Shares issued upon acquisition - Xloc Inc
Shares issued upon acquisition - GameSim Inc

Contributions by and contributions to the owners

67

4,932

82,869956-

50

Balance at 31 December 2017

737

11,739102,054

28,878(3,504)(1,997)

2,545

20,679161,131-

161,131

Other comprehensive income

-

-

-

-

840

-

-

7,750
(40)

7,750
800

-

7,750
800

Total comprehensive income for the period

-

-

-

-

840

-

-

7,710

8,550

-

8,550

Share option expense

-

-

-

-

-

-

817

-

817

-

817

Share options Exercised

315(3,453)

104
-

4,533

-

-

-

-

107
1,095

-

107
1,095

Profit - 1st January 2018 to 30th June 2018-

Contributions by and contributions to the owners:

Shares Issued re Synthesis Group Acquisition

-

-

-

-

-

-

-

-

-

-

-

-

-

Shares Issued re Mindwalk Acquisition

6-(1,886)
-

-

1,880
-

-

-

-

-

(0)
-

-

(0)
-

Shares to be issued - Laced Music Limited

-

1,146
143

-

-

-

-

-

-

1,146
143

-

1,146
143

Shares to be issued - Fire Without Smoke Limited

-

1,549

-

-

-

-

-

-

1,549

-

1,549

Shares to be issued - Blindlight Inc

-

1,327
-

-

-

-

-

-

(696)

1,327
(696)

-

1,327
(696)

Contributions by and contributions to the owners

23

1,174

104

6,413

-

-

817

696

5,487

-

5,487

Balance at 30 June 2018

760

10,565102,158

35,290(2,664)(1,997)

3,362

27,694

175,168-

175,168

Shares to be issued - Cord Worldwide Limited

Dividends paid (Note 8)

Interim consolidated statement of Cash Flow
Unaudited
26 weeks
ended
30 Jun 18

Unaudited
26 weeks
ended
30 Jun 17

Audited52 weeks
ended
31 Dec 17

Profit/(loss) after tax
Income and expenses not affecting
operating cash flows

7,750

3,490

7,263

Depreciation

2,472

1,275

2,730

Note

Cash flows from operating activities

Intangibles amortisation

12

3,095

1,223

3,038

Income tax expense

7

3,088

2,144

4,731

835

416

1,426

Loss on disposal of fixed assets

-

218

103

Loss on deferred consideration

-

-

190

(65)

(55)

(26)
209

Share option expense

Interest receivable
Employee Benefit Costs

40

35

Interest expense

271

240

388

(1,057)

157

2,033

8,679

5,653

14,822(Increase)/ Decrease in trade receivables(7,700)(3,702)

2,506(Increase)/ Decrease in other receivables
Increase/ (Decrease) in trade and otherpayables(2,975)(2,515)(5,413)

Unrealised Foreign Exchange (Gains)/ Losses
Changes in operating assets and liabilities

1,228

1,572

(82)

(9,447)(4,645)(2,989)

Income taxes paid

(2,891)(2,204)(5,454)

Net cash provided by operating activities

4,091

2,294

13,642Acquisition of subsidiaries net of cash acquired(10,625)(6,666)(86,776)

Settlement of deferred liabilities on acquisitions(1,011)

(283)

(298)

(114)

-

-

(3,791)(1,824)(3,803)

Cash flows from investing activities(Acquisition)/disposal of Associate(Acquisition)/disposal of property, plant andequipment

16Interest received
Net cash used in investing activities(15,541)-

26(8,773)(90,851)

Cash flows from financing activities
Repayment of loans
Loan to finance acquisitions
Dividends paid

9

Financing EBT for share options exercised
Shares issued
Interest paid

6

(853)

-

(23)

13,7555,000

10,250

(696)

(563)

(867)

-

(613)

(563)

1,203

-

82,936

(144)

(79)

(279)

Net cash used in financing activities
Increase / (Decrease) in cash and cash
equivalents
Exchange gain/(loss) on cash and cash
equivalents
Cash and cash equivalents at beginning of theperiod13,265

3,745

91,454

1,815(2,734)

14,245

(5)

196

(891)

30,374

17,02017,020Cash and cash equivalents at end of period

32,184

14,48230,374

Notes forming part of the consolidated financial statements
1

Basis of preparation

Keywords Studios plc (the "Company") is a company incorporated in the UK. These consolidated financial statements include the financial
statements of the Company and its subsidiaries (the "Group") made up to 30 June 2018. The Group was formed on 8 July 2013 when
Keywords Studios Plc (formerly Keywords Studios Limited) acquired the entire share capital of Keywords International Limited through theissue of 31,901,332 ordinary shares.
The interim financial statements were approved by the Board of Directors on 14 September 2018. The interim results for the 26 weeks
ended 30 June 2018 and the 26 weeks ended 30 June 2017 are neither audited nor reviewed by our auditors and the accounts in thisinterim report do not therefore constitute statutory accounts in accordance with Section 434 of the Companies Act 2006. They do notinclude all of the information required for full annual financial statements, and should be read in conjunction with the consolidated
financial statements of Keywords Studios plc for the year ended 31 December 2017.
The consolidated statutory accounts of Keywords Studios for the year ended 31 December 2017 have been filed with the Companies
House. The report of the auditors on those accounts was unqualified, did not contain any statements under s.498 (2) or (3) of theCompanies Act 2006 and did not contain any matters to which the auditors drew attention without qualifying their report.
The same accounting policies, presentation and methods of computation are followed in these condensed consolidated financial
statements as were applied in the Keywords Studio plc latest annual audited financial statements.
In the current year the Group has adopted all of the new and revised standards and interpretations issued by the IASB and theInternational Financial Reporting Interpretations Committee (IFRIC) of the IASB, as they have been adopted by the European Union, thatare relevant to its operations and effective for accounting periods beginning on 1 January 2018. These include the adoption of IFRS 15,
Revenue from Contracts with Customers and IFRS 9 Financial Instruments. Our assessment of the implementation of these standards isthat the adoption has not had a material impact on the financial statements.
Going concern
In view of the Group's resources, cash at 30 June 2018 of €32.1m, cash flow from operations in the 26 weeks to 30 June 2018 of €4.1m,
and the overall financial condition of the Group, the Directors have reasonable expectation that the Group has adequate resources tocontinue in operation for the foreseeable future. For this reason, the Directors continue to adopt the going concern basis in preparing thefinancial statements.
New standards, interpretations and amendments not yet effective.
The group will adopt IFRS 16 Leases from 1 January 2019. There were no further new standards or interpretations available for early
adoption for the first time for periods beginning on or after 1 January 2018, which have been implemented by the Group.
The Interim ﬁnancial statements for 2018 have been prepared in thousands (€'000). The ﬁnancial statements are presented in Euro (€),
which is the functional currency of the Group.
2

Significant accounting policies

Other than the implementation of IFRS 9 and IFRS 15, there have been no changes to the accounting policies that were detailed in the2017 Annual Report. Over the period covered by the Interim Report the company has acquired new companies, resulting in the creationof both Intangible Assets and Goodwill. The accounting policies relating to Intangible Assets and Goodwill are detailed below.
Business Combinations
The consolidated ﬁnancial statements incorporate the results of the business combinations using the purchase method. In theConsolidated Statement of Financial Position, the acquiree's identiﬁable assets, liabilities and contingent liabilities are initially recognised
at their fair values at the acquisition date. The results of acquired operations are included in the consolidated income statement from thedate on which control is obtained.
Any contingent consideration payable is recognised at fair value at the acquisition date and is split between current liabilities and longterm liabilities. When the consideration becomes more certain, the fair value of the contingent consideration will be revalued and anychange will be recognised in the statements of comprehensive income.
For deferred consideration which is to be provided for by the issue of a ﬁxed number of shares at a future deﬁned date, where there is no
obligation on Keywords to oﬀer a variable number of shares, the deferred consideration is to be classiﬁed as an Equity Arrangement andthe value of the shares is fixed at the date of the acquisition.
Goodwill
Goodwill represents the excess of the cost of a business combination over, in the case of business combinations completed prior to 1
January 2010, the Group's interest in the fair value of identiﬁable assets, liabilities and contingent liabilities acquired and, in the case ofbusiness combinations completed on or after 1 January 2010, the total acquisition date fair value of the identiﬁable assets, liabilities andcontingent liabilities acquired.
For business combinations completed prior to 1 January 2010, cost comprised the fair value of assets given, liabilities assumed andequity instruments issued, plus any direct costs of acquisition. Changes in the estimated value of contingent consideration arising on
business combinations completed by this date were treated as an adjustment to cost and, in consequence, resulted in a change in thecarrying value of goodwill.
For business combinations completed on or after 1 January 2010, cost comprises the fair value of assets given, liabilities assumed andequity instruments issued, plus the amount of any non-controlling interests in the acquiree plus, if the business combination is achievedin stages, the fair value of the existing equity interest in the acquiree. Contingent consideration is included in cost at its acquisition datefair value and, in the case of contingent consideration classiﬁed as a ﬁnancial liability, re-measured subsequently through proﬁt or loss.
For business combinations completed on or after 1 January 2010, direct costs of acquisition are recognised immediately as an expense.
Goodwill is capitalised as an intangible asset with any impairment in carrying value being charged to the consolidated statement ofcomprehensive income.
Intangible Assets
Intangible assets, separately identiﬁed from goodwill acquired as part of a business combination, are initially stated at fair value. The fairvalue attributed is determined by discounting the expected future cashﬂows to be generated from net margin on the business from themain customers taken on at acquisition. The assets are amortised over their useful economic lives, which is deemed to be 5 years.
Revenue from Contracts with Customers
The Group implemented IFRS 15, Revenue from Contracts with Customers, as of 1 January 2018. The new standard sets out revenue
recognition requirements, and establishes principles for reporting information about the nature, amount, timing and uncertainty ofrevenue and cash ﬂows arising from the group's contracts with customers.
Following implementation of IFRS 15, there was no material impact of transition on retained earnings at 1 January 2018, on the Group's
interim statement of ﬁnancial position as at 30 June 2018, on its interim statement of proﬁt or loss and other comprehensive income, oron the cash flows for the period to 30 June 2018.
Keywords is predominantly a service company, charging clients for tasks or services completed.
For service lines on localization, functional testing, localisation testing, player support and audio, the nature of the work done is service
performance for clients and recognising revenue on the basis of measured and agreed service completion.
For Art and Engineering work, assets are created to order. Under the deﬁnitions in IFRS 15, the group do not have control over the assets
produced;
The Group does not retain IP over work produced-

The control of the assets that the Group produces remains with our customers-

The Group typically does not create assets that have an alternative use or can otherwise be traded

Performance obligations are satisfied over time in accordance with S. 35 of IFRS 15.
The revenue recognition policy of the group is as follows;
Revenue is recognised as work is performed
where measures of the progress of the work are reliably measured
where the work is supported by an identified contract
where the group are satisfied that it is probable that the group will collect the related consideration
Where there are multiple performance obligations outlined in a contract, each performance obligation is separately assessed, thetransaction price is allocated to each obligation, and related revenues are recognised over time accordingly.
In certain areas of speciﬁc service lines, Keywords charge for licences or rights over time. Related revenue is recognised over the periodof the license or right given, and amounts received in advance are deferred, pending performance.

Multi Media Tax Credits
The Multimedia Tax Credits received in Quebec Province on testing services are treated as a deduction against direct costs.
Financial Instruments

The Group implemented IFRS 9, Financial Instruments, as of 1 January 2018. The new standard sets out requirements for recognizing
and measuring financial assets.
The group introduced the 'expected credit loss' impairment model for ﬁnancial assets. For the group, the ﬁnancial assets that are
impacted are Trade Receivables.
At the end of each account period, at the consolidated level, the group assesses the requirement for the impairment of tradereceivables as a whole on the basis of the expected credit loss rate.
Having assessed the requirements according to the standards, the group have concluded that no additional impairment to the carrying
values of the assets was required at 1 January 2018, or at 30 June 2018.
This will be assessed again at December 31st.
At company level within the group, there is ongoing assessment on the requirement for impairment on intercompany balances under
the 'expected credit loss' model. To date, there is no impact on the group financial statements arising from this assessment.
3

Critical accounting estimates and judgements

There have been no material revisions to the nature and amount of changes in estimates of amounts reported in the annual ﬁnancial
statements 2017 for Keywords Studios Plc.
4

Segmental analysis

Management considers that the Group's activity as a single source supplier of Technical Services for Video Games constitutes one
operating and reporting segment, as defined under IFRS 8.
Management review the performance of the Group by reference to Group-wide proﬁt measures and the revenues derived from sevenmain service groupings:··

Art Creation - Art creation services relate to the production of graphical art assets for inclusion in the video game including concept
art creation along with 2D and 3D art asset production and animation.
Audio - Audio services relate to the audio production process for computer games and includes script translation, actor selection
and talent management through pre-production, audio direction, recording, and post-production, including native language Quality
Assurance of the recordings.

·
·
·
·
·

Localisation - Localisation services relate to translation and cultural adaptation of in-game text and audio scripts across multiple
game platforms and genres.
Functional Testing - Functional testing relates to quality assurance services provided to game producers to ensure games function
as required.
Localisation Testing - Localisation testing involves testing the linguistic correctness and cultural acceptability of computer games.
Player Support - Player support relates to the live operations support services such as community management, player support
and associated services provided to producers of games to ensure that consumers have a positive user experience.
Engineering - Engineering relates to software engineering services which are integrated with client processes to develop video
games.

There is no allocation of operating expenses, proﬁt measures, assets and liabilities to individual product groupings. Accordingly, thedisclosures below are provided on an entity-wide basis.
The group has considered IFRS 15 regarding the disclosure of disaggregated revenues.

Segmental analysis and disaggregated revenues are reported in a manner consistent with the internal reporting provided to the chief
operating decision-maker. The chief operating decision maker has been identiﬁed as the executive management team made up of the
Chief Executive Officer and the Chief Finance Officer.

Revenue by line of business

Revenue by line ofbusiness
Art creation
Audio
Localisation
Functional testing
Localisation testing
Customer support
Engineering

Unaudited
26 weeks
ended
30 Jun 18€'000

Unaudited
26 weeks
ended
30 Jun 17€'000

Audited52 weeks
ended
31 Dec 17€'000

18,15013,561
21,39523,061
9,570
15,3288,886
109,951

12,382
8,402
18,98910,964
8,682
3,817
525
63,76026,193
20,657
41,95930,033
19,848
9,168
3,572
151,430

Geographical analysis of revenues by jurisdiction
Analysis by geographical regions is made according to the Group's operational jurisdictions. This does not reflect the region of the Group's
customers, whose locations are worldwide.

Unaudited

Unaudited

26 weeks ended

26 weeks ended

30 Jun 18€'000

30 Jun 17€'001

Audited52 weeks
ended
31 Dec 17€'002

30,792

20,68945,648

17,774
7,284
5,805
1,529
26,429
3,648
4,610
1,377
2,433
2,392
479
532
886
3,981
109,951

15,371
7,217
5,906
2,643
3,079
2,652
1,370
832
613
2,522
483
270
84
29
63,76034,277
19,565
10,029
5,177
12,199
6,352
2,467
2,194
3,685
4,451
928
520
180
3,758
151,430

CanadaIreland
Switzerland
Italy
India
United States
Japan
United Kingdom
Spain
China
Singapore
Germany
BrazilMexicoFranceTotal revenues

Geographical analysis of non-current assets from continuing businesses
Unaudited
26 weeks
ended
30 Jun 18€'000
CanadaIreland
Switzerland
Italy
India
United States

9,254
1,120
11,057
11,581
2,423
91,509Unaudited

30 Jun 17€'000

Audited52 weeks
ended
31 Dec 17
€'000

8,445
4,616
12,191
11,851
2,865
12,307

8,889
1,064
11,158
11,723
2,588
77,17726 weeks endedJapan Kingdom
UnitedSpain
ChinaSingapore
Germany
BrazilMexicoFranceTotal revenues
PolandPhilippines
TaiwanGeographicalAnalysis
Investments in
Associates
Deferred tax assets
Total Non-Current
Assets5635
15,675
1,544
7,785
34
1,130
578
903
6,420
756
54
576
5
163,039

327
7,711
931
4,372
52
1,205
239
392
67,504565
10,011
1,520
7,707
42
1,168
231
892
6,531
866
58
472
4
142,666

163,039

67,504

142,666

114
1,265

1,329

1,206

164,418

68,833

143,872

Seasonal business

The video games industry is heavily impacted by sales of new releases of games and platforms during the traditional holiday season,
including the run up to Thanksgiving in the United States and Christmas in other parts of the world. As with all other service providers to
the video games industry, certain of Keywords Group's service lines typically experiences signiﬁcantly higher activity as part of thisrelease cycle, during the six months from June to November. This activity drives increased revenues in that period and generates higher
gross profit margins compared with the first six months of each calendar year.
Revenue for the 52 weeks ended 30 June 2018 totalled €198m (2017: 52 weeks ended 30 June 2017 €118m) and gross proﬁt for theequivalent period totalled €74m (2017: €44m).
Within the six months to 30 June 2018, Keyword's Group has completed 4 acquisitions, which are also included in the results above.
6

Financing income and costs

Unaudited
26 weeks
ended
30 Jun 18€'000
Finance income
Interest received
Foreign exchange gain

65
794
859

Finance cost
Bank charges
Interest expense
Foreign exchange losses

Net financing income/(cost)

7

Unaudited
26 weeks
ended
30 Jun 17€'000

Audited52 weeks
ended
31 Dec 17
€'000

55
- 55

26
26

(232)
(271)
(503)

(151)
(240)
(1,965)(2,356)

(320)
(578)
(3,569)(4,467)356(2,301)(4,441)

Taxation

Unaudited
26 weeks
ended
30 Jun 18€'000

Unaudited
26 weeks
ended
30 Jun 17€'000

Audited52 weeks
ended
31 Dec 17
€'000

-

-

-

2,686
402
3,088

2,745
(720)
2,025

5,762
(1,031)
4,731

Current income tax
Income tax on profits of parent
company
Income tax on profits ofsubsidiaries
Deferred tax

The tax is calculated for all of the Keyword's entities, across all geographies, which have generated proﬁts during the period, after taking
into account any tax losses brought forward. The tax is estimated in accordance with the tax laws of each jurisdiction.
8

Dividends Paid
Dividends Paid
Unaudited

Audited26 Weeks ended
30 Jun 2018
Per
share
Total
€ Cent€'000

Final Dividends Paid
Interim Dividends Paid
Dividends paid to shareholders

1.11
1.11

52 weeks ended
31 Dec 2017
Per
share
Total
€ Cent
€'000

696
696

1.01
0.54
1.55

563
304
867

In April 2017, Keywords Studios plc approved a dividend in respect of the ﬁnancial year ended 31 December 2016 of GBP pence 0.89/ €cent 1.01 per Ordinary share, or €563k in total, as a final dividend for 2016. The dividend was paid in June 2017.
In September 2017, Keywords Studios plc approved a dividend of -GBP pence 0.48/€ cent 0.54 per share, based on the shares in issue atthat time, or €304k in total, as an interim dividend for 2017. The dividend was paid in October 2017.
In June 2018, Keywords Studios plc approved a dividend in respect of the ﬁnancial year ended 31 December 2017 of GBP pence 0.98/ €cent 1.11 per Ordinary share, or €696k in total, as a final dividend for 2017. The dividend was paid in June 2018.
The Directors recommend an interim dividend of GBP pence 0.53 / € cent 0.60 per share in respect of the ﬁnancial year ended 31
December 2018 to be paid on 26 October 2018 to the shareholders who are on the register at 5 October 2018. The dividend is not
reﬂected in the ﬁnancial statements as it does not represent a liability as at 30 June 2018. The interim proposed dividend will reduceshareholders' funds by an estimated €0.4m.
9Earnings per share

Basic
DilutedProfit for the period from continuing
operations
Denominator (weighted average numberof equity shares)

Basic
DilutedUnaudited
26 Weeks ended

Unaudited
26 Weeks endedAudited52 weeks ended

30 Jun 2018Euro cent

30 Jun 2017
Euro cent

31 Dec 2017
Euro cent

12.10
11.62

6.08
5.83

12.37
11.87

€'000

€'000

€'000

7,750

3,490

7,263

Number
64,027,256
66,719,403

Number
57,395,949
59,851,814

Number
58,720,884
61,198,672

The dilutive impact of share options has been considered in calculating diluted earnings per share.
The basic and diluted weighted average denominators include the impact of the 702,424 (Dec 2017 2,188,608) Shares to be issued
relating to acquisitions.
10 Share Capital

Share Capital

Shares€'000

54,428,882

654

Ordinary Shares of £0.01 each issued on the firstanniversary of the acquisition of Synthesis

1,188,253

14

Ordinary Shares of £0.01 issued on acquisition of
Xloc

19,134-

Ordinary Shares of £0.01 issued on acquisition of
GameSim

151,7252

55,787,994

670

Ordinary Shares of £0.01 issued on acquisition of
Asrec

9,534

-

Ordinary Shares of £0.01 issued on acquisition of
d3t

42,368-

Ordinary Shares of £0.01 issued on acquisition ofLola

10,106-

5,357,143

61

501,060

6

61,708,205

737

Ordinary Shares of £0.01 each issued on the second
anniversary of the acquisition of Synthesis

1,239,825

14

Ordinary Shares of £0.01 each issued on the second
anniversary of the acquisition of Mindwalk

513,819

6

As at 01 January 2017

At 30 June 2017

Placing of ordinary Shares of £0.01 on the market
Issue of shares on exercise of share options
As at 1 January 2018

Issue of shares on exercise of share options

228,090
63,689,939

At 30 June 2018

3
760

On 09 April 2018, in accordance with the terms of the acquisitions of Cord and Laced, the Group committed to the Issue of 73,744 sharesin April 2020. This commitment, which is only dependant on the passage of time, is recorded as 'Shares to be Issued' at a value of£15.26 (€17.48) per share.
On 24 April 2018 the Group issued 1,188,263 of 1p shares in accordance with the terms of the 2016 acquisition of the Synthesis group.
These shares had already been included in the basic EPS denominator as they were considered 'Shares to be Issued', contingent only on
the passage of time.
The Group issued a further 51,562 shares to settle the cash value of €1m in accordance with the terms of the same 2016 acquisition of
the Synthesis group.
On 30 May 2018, in accordance with the terms of the acquisition of Fire Without Smoke, the Group committed to the Issue of 77,006
shares in May 2019. This commitment, which is only dependant on the passage of time, is recorded as 'Shares to be Issued' at a value of£17.53 (€20.11) per share.
On 11 June 2018, in accordance with the terms of the acquisition of Blindlight, the Group committed to the Issue of 64,521 shares in June
2019. This commitment, which is only dependant on the passage of time, is recorded as 'Shares to be Issued' at a value of £18.10(€20.57) per share.
On 12 June 2018 the Group issued 513,819 of 1p shares in accordance with the terms of the 2016 acquisition of the assets of Mindwalk.
These shares had already been included in the basic EPS denominator as they were considered 'Shares to be Issued', contingent only on
the passage of time.
Between 1 January 2018 and 30 June 2018, 45,669 share options and 182,421 LTIPs were exercised in accordance with the employee
incentive plans.
There is no limit to the number of shares which the company can issue.
11

Goodwill€'000
46,7997,484(1,535)52,74859,369(3,110)109,007
13,693
1,716
124,416

At 1 January 2017
Recognition on acquisition of subsidiaries
Revaluation on Exchange Rate Movement
At 30 June 2017
Recognition on acquisition of subsidiaries
Revaluation on Exchange Rate Movement
At 31 December 2017
Recognition on acquisition of subsidiaries
Revaluation on Exchange Rate Movement
At 30 June 2018

During the period goodwill arose on the acquisitions of Maximal, Cord, Laced, Fire Without Smoke and Blindlight.
The goodwill is tested for impairment on an annual basis. The impairment test will be performed as part of the year end process and any
adjustment required reported in the annual report. At 30 June 2018 the Board do not consider that there is an impairment required.
12 Intangible assets - customer relationships

Cost
At 1 January 2017
Additions
Revaluation on Exchange Rate
Movement

Purchased
Customer
SoftwareContracts Development Licences
€'000
€'000
€'000
11,630
1,465
147
-

Total
€'000
11,630
1,612

(386)

-

-

(386)

At 30 June 201712,709147-

12,856

Additions
Revaluation on Exchange Rate
Movement

17,350--17,350

(912)

(12)

-

(924)

At 31 December 201729,147135-

29,282

5,980

-

362

6,342

Additions
Revaluation on Exchange Rate
Movement
At 30 June 2018

Amortisation & Impairment
At 1 January 2017
Amortisation Charge
Revaluation on Exchange Rate
Movement
At 30 June 2017
Amortisation Charge
Exchange Rate Movement
At 31 December 2017
Amortisation Charge

504

4

-

508

35,631

139

362

36,132

Purchased
Customer
SoftwareContracts Development Licences
€'000
€'000
€'000
2,934
1,221
2
-

Total
€'000
2,934
1,223

(106)
4,049
1,800
(131)
5,718
3,075

2
15
(1)
16
14

6

(106)
4,051
1,815
(132)
5,734
3,095

Exchange Rate Movement
At 30 June 2018
Net Book ValueAt 30 June 2017
At 31 December 2017
At 30 June 2018

101
8,894

1
31

6

102
8,931

8,660
23,42926,737

145
119
108

356

8,805
23,54827,201Intangible Assets are amortised over 5 years from the point of acquisition on a straight line basis.
13

Loans and borrowings

In 2018 Keywords PLC expanded the revolving credit facility to €75,000,000 over a 3 year term, which can be used for both further
acquisitions and to fund working capital. There is an option to extend the facility to a maximum of €105,000,000, and extend theduration of the agreement up to a further 2 years.
At June 30, 2018, €32,000,000 was drawn down. The interest rate is 1.5% above Euribor and there is a 0.525% margin which is charged
for the unutilised facility.
There are charges over the assets of Keywords Studios plc, Keywords International Ltd, Keywords International Company Ltd (KK), Binari
Sonori S.R.L, Babel Games Services Inc., Babel Media Ltd, Synthesis Global Solutions SA, Liquid Development LLC, Alchemic Dream Inc.,
Keywords International Corporation Inc.(Canada), Keywords International Corporation Inc., Keywords Us Holdings Inc., VMC Consulting
Corporation, VMC Volt Information Sciences BC Inc., Volt Canada Inc, and Sperasoft Inc.
Loans outstanding are repayable over the following periods ;Expiry within 1 Year
Expiry between 1 and 2
years
Expiry over 2 years

Unaudited
26 weeks
ended
30 Jun 18€'000

Unaudited
26 weeks
ended
30 Jun 17€'000

Audited52 weeks
ended
31 Dec 17€'000

32,084

13,043

18,9434556

31

32,129255
13,354306
19,28014 Share options
In July 2013, at the time of the IPO, the Company put in place a Share Option Scheme and a Long Term Incentive Plan ("LTIP"). The
charge in relation to these arrangements is shown below, with further details of the schemes following:

Unaudited
26 Weeks ended

Unaudited
26 Weeks endedAuditedYear Ended

30 Jun 2018

30 Jun 201731 Dec 2017

€'000

€'000

€'000

Share Option Scheme
Expense

79

82

178

Share Option Scheme - LTIP
ExpenseTotal Share Option Expense

756
835

334
416

1,248
1,426

Of the Total Share Option Expense, €79k relates to Directors of the Company as at 30 June 2018, (2017: €85k for the period ending 30
June 2017).
Share option incentive plan scheme
Share options are granted to certain Directors and permanent employees. The exercise price of the granted options is equal to themarket price of the shares at the time of the award of the options. The Company has no legal or constructive obligation to repurchase or
settle the options in cash.
Movements in the number of share options outstanding and their related weighted average exercise prices are as follows:
Share
OptionSchemeDate ofOptionExercise
Price
Outstandingat 31 Dec
2017
GrantedForfeited
Exercised in
the year
Outstanding

12-Jul-13

01-Jun-15

10-May-16

15-May-17

18-May-18

£1.20

£1.58

£2.54

£7.76

£17.10285,311

636,816

180,074(1,897)(9,067)

273,000(18,000)

591,000(1,500)(5,176)(18,407)(22,086)

Total

1,375,201
591,000(30,464)(45,669)

at 30 June
2018
Exercisable
at 30 Jun
2018
Exercisable
2019
Exercisable
2020
Exercisable
2021
Exercisable
2022
Date ofOptionWeighted
Average
Share Price(£)
Weighted
Average
Exercise
Price (£)
Average
Expected
Life
Expected
Volatility
Risk Free
Rates
Average
Expected
Dividends
Yield
Weighted
Average
Remaining
Life ofOptions inMonths

280,135

616,512

148,921

255,000

589,500

1,890,068

280,135

563,728

34,917--878,780-

52,78457,00285,000-194,786--

57,00285,000196,500

338,502---85,000196,500

281,500

-

-

-

-

196,500

196,500

12-Jul-13

01-Jun-15

10-May-16

15-May-17

18-May-18

Total

£1.23

£1.64

£2.54

£7.74

£18.30

£1.20

£1.58

£2.54

£7.76

£17.10

3 Years

3 Years

3 Years

3 Years

3 Years

36.12%

28.03%

27.17%

24.79%

19.61%

0.50%

0.90%

0.58%

0.16%

0.75%

1.00%

0.75%

0.55%

0.21%

0.00%

-

1

13

23

35

15

Expected volatility was determined by reference to the Company's share price volatility. The expected life used in the model has beenadjusted on management's best estimate, for the effects of non-transferability and behaviour considerations.
Long term incentive plan scheme
An alternative share plan was introduced to give awards to Directors and staﬀ subject to outperforming the Numis Small Cap (excluding
Investment Trusts) index in terms of shareholder return over a three year period.
Movements in the number of share options outstanding and their related weighted average exercise prices are as follows:
Long Term
Investment
Plan
SchemeDate ofOptionExercise
Price
Outstandingat 31 Dec
2017

08-Jul-13£0.01

06-Jan-15£0.01

01-Jun-15£0.01

10-May-16

20-Nov-16

15-May-17

18-May-18

Total

£0.01

£0.01

£0.01

£0.01

£0.01

222,238

101,060

317,118

610,000

30,000696,000-

Granted

-

-

-

-

-

-

949,000

949,000

Forfeited

-

(165)

(11,033)(15,000)-(36,000)(6,400)(68,598)

Exercised
Outstandingat 30 June
2018
Exercisable
at 30 Jun
2018
Exercisable
2019
Exercisable
2020
Exercisable
2021
Date ofOptionWeighted
Average
Share Price(£)-(100,895)(81,526)

-

-

-

-

(182,421)

222,238-

224,559

595,000

30,000660,000

942,600

2,674,397

222,238-

224,559

-

-

-

-

446,797---595,000

30,000--625,000

-

-

-

-

-

660,000-

660,000

-

-

-

-

-

-

942,600

942,600

08-Jul-13

06-Jan-15

01-Jun-15

10-May-16

20-Nov-16

15-May-17

18-May-18

Total

£1.23

£1.43

£1.64

£2.54

£4.15

£7.74

£18.30

£0.01

£0.01

£0.01

£0.01

£0.01

£0.01

£0.01

3 Years

3 Years

3 Years

3 Years

3 Years

3 Years

3 Years

36.12%

31.20%

28.03%

27.17%

23.31%

24.79%

19.61%

0.50%

0.58%

0.90%

0.55%

0.08%

0.16%

0.75%

-

-

-

11

11

23

35

Weighted
Average
Exercise
Price (£)
Average
Expected
Life
Expected
Volatility
Risk Free
Rates
Weighted
Average
Remaining
Life ofOptions inMonths

1,976,416

20

LTIP's vest on the third anniversary of the grant, if the performance criteria are met.
LTIP's must be exercised before the seventh anniversary of the grant.
'Adjustments' relate to out of cycle changes and updates.

The options were valued using a Monte Carlo binomial model using the following inputs:
Expected volatility was determined by reference to the Company's share price volatility. The expected life used in the model has been adjusted based on
management's best estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations.
As any dividends earned are to be re-invested into the business the impact of dividends has been ignored in the calculation of the LTIP share option charge.

15 Acquisitions
Acquisition of Maximal StudioOn 22 March 2018, the Group acquired the entire issued share capital of Maximal Studio ("Maximal") an audio studio in Sao Paulo which
provides voice over recording for the video games and learning industries. The acquisition adds further scale to our audio capabilities in
the South American markets, providing us with our ﬁrst recording studio in Sao Paulo to complement our localisation business in Rio deJaneiro.
The amounts recognised in respect of the identifiable assets acquired and liabilities assumed are set out below:
MaximalFinancial Assets
Property, plant and equipment
Trade and other receivables
Cash and cash equivalents
Trade and other payables
Total identifiable assets
Goodwill
Total consideration

Book
Value
€'000

Fair Value
Adjustment
€'000

Fair
Value
€'000

14

-

14

22
112
(14)
134

-

22
112
(14)
134
390
524

Satisfied by:
Cash
Deferred consideration

345
179

Total consideration

524

Net cash outflow arising on acquisitionCash
Less: cash and cash equivalent balancestransferred

345
(112)
233

The main factors leading to recognition of goodwill on the acquisition of Maximal are the presence of intangible assets in the acquired
entity, which do not value for separate recognition, such as the expertise in Audio Services and reputation within the industry.
Maximal contributed €149k revenue and €35k profit before tax to the Group between the date of acquisition and the balance sheet date.
Maximal already had a trading relationship with the Keywords Group prior to acquisition. If the acquisition had been completed on theﬁrst day of the ﬁnancial year, minimal additional revenue would have been recorded for the group, as a large part of their business would
have been considered intercompany. If the acquisition had been completed on the ﬁrst day of the ﬁnancial year, €200k Proﬁt before Tax
would have been contributed to the Group.
Acquisition costs of €5k have been charged through the Statement of Comprehensive Income.

Acquisitions of Cord & Laced
On 9 April 2018 the Group acquired the entire issued share capital of Cord Worldwide Limited ("Cord") and Laced Music Limited ("Laced").
Based in London, Cord provides a range of music focused branding and strategic consulting services to large businesses and Laced is amusic services company and record label specialising within the video games industry.
The acquisitions of Cord and Laced are in line with Keywords' strategy to grow organically and by acquisition as it selectively consolidates
the highly fragmented market for video game services. The companies will bring additional talent, expertise and music industry
experience to Keywords' client base. Being able to oﬀer music services to our clients will further enhance our reputation as the leading
provider of services to the global video games industry.
The amounts recognised in respect of the identiﬁable assets acquired and liabilities assumed of both acquisitions are set out in the tablebelow:
Cord

Financial Assets
Property, plant and equipment
Identifiable intangible assets - IP & customer
relationships
Trade and other receivables

Book
Value
€'000

Fair Value
Adjustment
€'000

Fair
Value
€'000

79

-

79

362

2,163
-

2,525
4,582

4,582

1,803(4,903)

Cash
Trade and other payables
Deferred tax liabilities
Total identifiable assets
Goodwill
Total consideration

1,803(4,903)
(411)
3,675
2,378
6,053

(411)
1,752

1,923

Satisfied by:
Cash
Shares to be issued (65,550 shares of the parent
company)

4,907
1,146
6,053

Net cash outflow arising on acquisitionCash
Less: cash and cash equivalent balancestransferred

4,907(1,803)
3,104

Laced

Book
Value
€'000

Fair Value
Adjustment
€'000

Fair
Value
€'000

Financial Assets
Trade and other receivables

126

-

126

Cash and cash equivalents

40

-

40

Trade and other payables

(224)

-

(224)

Total identifiable assets
Goodwill
Total consideration

(58)

-

(58)
521
463

09-Apr-18

Satisfied by:
Cash

320

Shares to Be Issued (8,194 shares of theparent company)

143
463

Net cash outflow arising on
acquisition
Cash

320

Less: cash and cash equivalent balancestransferred

(40)
280

The main factors leading to the recognition of goodwill on the acquisition of The Cord and Laced acquisitions are the presence of certain
intangible assets in the acquired entities, which are not valued for separate recognition, such as the expertise and music industry
experience.
Cord & Laced contributed €1,180k revenue and €130k loss before tax to the Group between the date of acquisition and the balance sheet
date. If the acquisition had been completed on the ﬁrst day of the ﬁnancial year, revenue for the 6 months to 30 June 2018 of €2,947k
would have been contributed to the Group and €47k loss before tax.
A ﬁxed amount of 73,744 shares in Keywords Studio Plc will be issued as part of the deferred consideration. The shares have been valued
at the share price at the date of acquisition, €17.48, and €1,289k has been recorded as Shares to be Issued within Equity, in accordancewith IAS 32.16.
Acquisition costs of €77k have been charged through to the Statement of Comprehensive Income.

Acquisition of Fire Without Smoke
On 30 May 2018 the Group acquired the entire issued share capital of Fire Without Smoke Ltd ("Fire Without Smoke") . Headquartered in
London and with a studio in Montreal, Fire Without Smoke provides a full suite of creative and marketing services to game publishers anddevelopers, creating assets such as game trailers, marketing art and materials for esports events, and providing marketing consultancy
and general design services to the video game industry.
The acquisition is in line with its strategy of growing both organically and by acquisition to extend the Group's client base, market
penetration or service lines, where the Group can leverage its existing expertise, multi-service platform, scale and global reach togenerate synergies.
The amounts recognised in respect of the identifiable assets acquired and liabilities assumed are set out in the table below:

Fire Without Smoke

Book
Value
€'000

Fair Value
Adjustment
€'000

Fair
Value
€'000

11

-

11

-

1,404

1,404

542

-

542

Financial Assets
Property, plant and equipment
Identifiable intangible assets - customer relationships
Trade and other receivables

Cash and cash equivalents

1,123

-

Trade and other payables

(419)

-

(419)

(267)

(267)

1,137

2,394

Deferred tax liabilities
Total identifiable assets

1,257

1,123

Goodwill

4,455

Total consideration

6,849

Satisfied by:
Cash

4,725

Deferred Cash Contingent on performance
Shares to Be Issued (77,006 shares of the parent
company)

574
1,549

Total consideration transferred

6,849

Net cash outflow arising on acquisition
Cash

4,725

Less: cash and cash equivalent balances transferred(1,123)
3,602

The main factors leading to recognition of goodwill on the acquisition of Fire Without Smoke are the presence of certain intangible assets
in the acquired entity, which are not valued for separate recognition, such as the expertise in high end video game trailers and reputation
within the industry.
Fire Without Smoke contributed €683k revenue and €265k proﬁt before tax to the Group between the date of acquisition and the balance

sheet date. If the acquisition had been completed on the ﬁrst day of the ﬁnancial year, revenue for the 6 months to 30 June 2018 of€2,337k would have been contributed to the Group and €503k profit before tax.
A ﬁxed amount of 77,006 shares in Keywords Studio Plc will be issued as part of the deferred consideration. The shares have been valued
at the share price at the date of acquisition, €20.11, and €1,549k has been recorded as Shares to be Issued within Equity, in accordancewith IAS 32.16.
Acquisition costs of €70k have been charged through to the Comprehensive Income Statement.

Acquisition of Blindlight
On 11 June 2018 the Group acquired the entire issued share capital of Blindlight LLC ("Blindlight"). Founded in 2001 and based in
Hollywood, California, Blindlight enjoys a leading position in the provision of Hollywood production services for the video games industry.
The acquisition of Blindlight is in line with Keywords' strategy of growing both organically and by acquisition. The company works onbehalf of game publishers and developers in procuring specialised talent and managing the entire production processes for the parts ofgames that beneﬁt from Hollywood talent resources. The addition of Blindlight to the Group will increase the value of the services
provided by Keywords and contribute to making those services more accessible to a wider customer base.
The amounts recognised in respect of the identifiable assets acquired and liabilities assumed are set out in the table below:
Blindlight

Book
Value
€'000

Financial Assets
Property, Plant & Equipment
Identifiable intangible assets - customer relationships
Trade and other receivables
Cash and cash equivalents
Trade and other payables
Deferred tax liabilities
Total identifiable assets
Goodwill
Total consideration
Satisfied by:
Cash
Deferred Cash Contingent on performance
Shares to Be Issued (64,521 shares of the parent
company)

Fair Value
Adjustment
€'000

Fair
Value
€'000

4

-

4

256
96
(128)

2,413
-

2,413
256
96
(128)

228

(511)
1,902

(511)
2,130
5,949
8,079

-

3,097
3,655
1,327
8,079

Net cash outflow arising on acquisitionCash
Less: cash and cash equivalent balances transferred

3,097
(96)
3,001

The main factors leading to recognition of goodwill on the acquisition of Blindlight are the presence of certain intangible assets in theacquired entity, such as expertise in voiceover production, celebrity acquisition and rights management, game writing, music, sounddesign and motion capture.
Blindlight contributed €654k revenue and €316k proﬁt before tax to the Group between the date of acquisition and the balance sheet
date. If the acquisition had been completed on the ﬁrst day of the ﬁnancial year, revenue for the 6 months to 30 June 2018 of €1,793k
would have been contributed to the Group and €174k profit before tax.
A ﬁxed amount of 64,521 shares in Keywords Studio Plc will be issued as part of the deferred consideration. The shares have been valued
at the share price at the date of acquisition, €20.57, and €1,327k has been recorded as Shares to be Issued within Equity, in accordancewith IAS 32.16.
16 Investments
On 9 th May 2018, the group, through the newly established Keywords Ventures Ltd, invested £100k (€114k) in 15% of the share capital of
AppSecTest Limited.
Keywords Ventures Ltd will invest up to an additional £200k, dependent upon development milestones, in Series A funding for a 45%
shareholding in a pre-revenue company, AppSecTest Ltd, creator of AS Analyser, a cloud based automatic testing solution for mobile
apps, including games.
Due to the proximity to the period end of the investment, no adjustment has been made to its carrying value.
17 Events after the Reporting Date
Acquisition of Snowed In
On 20 July 2018 the group completed the acquisition of Snowed In. Based in Ottawa, Canada, Snowed In offers engineering and codevelopment services to the video-games industry and has a strong global reputation and well-established relationships with clients suchas Ubisoft and Bethesda.
Under the terms of the acquisition, Keywords is paying an initial CAD$2.67m in cash and will issue 37,983 new ordinary shares in
Keywords to the Sellers on the first anniversary of the acquisition. Deferred consideration of up to CAD$0.2m will be payable in cash to
the Sellers 18 months after the acquisition.
Acquisition of Yokazuna Data
On 23 July 2018 the group completed the acquisition of Yokazuna Data, a video games analytics company based in Tokyo.
Yokazuna Data have developed a range of cutting edge self-learning, predictive analytic models drawing on AI and machine learningtechnologies that predict individual player behaviour and adapt themselves in response to changes that are made in the game. This
technology can be used to reduce player attrition, maximise conversion, increase average spend, and materially impact the lifetime valueof players all while increasing the appeal of the game for the individual users.
Keywords has paid a total cash consideration of $1.5m for the business and all associated technology rights and trademarks.
Acquisition of Studio Gobo and Electric Square
On 20 August 2018 the group completed the acquisition of Studio Gobo and Electric Square. Gobo provides game development services
to video game developers and publishers around the world from its Studio Gobo and Electric Square studios based across three studiolocations in Brighton and Hove, UK.
Under the terms of the acquisition, Keywords is paying a total consideration of up to £26m. The initial consideration is £10.5m in cash
and 254,529 new ordinary shares in Keywords, which will be issued on the anniversary of completion and will then be subject to orderly
market provisions for a further 12 months. The remaining consideration of £11m is payable in a mix of cash and shares, subject to theachievement of a substantial increase in Gobo's EBITDA over the 12-month period following completion.
Acquisition of The TrailerFarm Ltd
On 13 September 2018 the group completed the acquisition of The TrailerFarm Ltd which produces trailers for the marketing and supportof video games, based in Brighton, UK.
Under the terms of the acquisition, Keywords is paying a total consideration of up to £2m. The initial consideration of £1.0m is being
satisﬁed by the payment of £790k in cash and 11,070 new ordinary shares in Keywords, which are to be issued to the sellers on the 1 stanniversary of the acquisition. The remaining consideration of up to £1m is payable in cash, subject to the increase in proﬁt before tax ofTrailerFarm over the 12 month period post acquisition.

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END

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