Strengthening
our market leading
position

Annual Report and Accounts 2018

Support | Deliver | Evolve

The video games industry
represents the pinnacle ofinteractive digital content.
At Keywords, we are using our passion
for games, technology and media
to create a global services platform
for video games and beyond.
Our vision is to be the world’s leading
technical and creative services platform forthe video games industry and beyond.

Support | Deliver | Evolve

Visit the website for further informationwww.keywordsstudios.com

2018 Highlights

Contents
Strategic Report 	

Proforma Revenue1(€m)

Revenue (€m)

1–33

Highlights1
2018

250.8

2017
2016

2018

265.4

2017

151.4
96.6

2016

220.7
112.8

€250.8m €265.4m
+66%

+20%

(growth in 2018 on 2017)(growth in 2018 on 2017)

At a Glance

2

Investment Summary4

Chairman’s Statement

6

Our Culture

8Market Overview

12

Our Business Model

14

Our Strategy

16

Chief Executive’s Review

18

Financial and Operating Review

27

KPIs30
Principal Risks and Uncertainties

Adjusted Profit Before Tax2 (€m)
2018

37.9

2017
2016

Adjusted Basic Earnings Per Share2 (c)
2018

47.75

2017

23.0
14.9

2016

31.18
20.59

€37.9m

47.75c(growth in 2018 on 2017)(growth in 2018 on 2017)

+65%

+53%

Dividend per share (p)
2018

1.61

2017
2016

1.46
1.33

1.61p
+10%

(growth in 2018 on 2017)

Governance

32

34–55

Board of Directors

34

Chairman’s Introduction

36

Corporate Governance

37

Directors’ Report

40Statement of Directors’ Responsibilities 42
Audit Committee Report

43

Directors’ Remuneration Report

46

Report of the Nomination Committee

55

Financial Statements

56-104

Independent Auditor’s Report

56

Consolidated Statement ofComprehensive Income

60

Consolidated Statementof Financial Position

61

Consolidated Statementof Changes in Equity

62

Consolidated Statementof Cash Flows

63

Company Statementof Financial Position

64

Company Statementof Changes in Equity

65

Company Statementof Cash Flows

66

Notes Forming Part of theConsolidated and Company
Financial Statements

67

Alternative Performance Measures
The business uses a number of adjusted measures that are not defined or recognised under IFRS.
For full definitions and explanations of these measures and a reconciliation to the most directly
referenceable IFRS line item, please see pages 105 to 107.

Supplementary
Information

1

Alternative Performance Measures

105Company Information

108

2

Pro forma revenue includes the annualised sales of all acquisitions made in each year, inorder to provide a better overview of the balance of the business at the end of each year.
Adjusted Earnings Per Share and Profit Before Tax are calculated before one-time costs ofacquisitions and integration, share option charges, amortisation of intangibles, and foreignexchange movements.

105-108

Annual Report and Accounts 20181

Strategic Report

At a Glance

A global, integrated
service provider
The Group now has more than 50 studios strategically located in 40 cities worldwide
providing full, integrated services by combining a presence that is local to our clientsin key gaming clusters with lower cost production sites across four continents.
Since the beginning of 2018, we have expanded further organically and by acquisitions,adding to our capabilities in regions where we have an existing presence, including Brighton,
Los Angeles, Sao Paulo, Katowice, Ottawa and London.

6,000+ 50+
People on the payroll
at peak time

23

Providing services acrossmore than 50 languages

Liverpool

52

Serving 23 out of the top 25
games companies measured
by revenue

Studios in 21 countries

Brighton
St. Petersburg
LondonTokyo

Beijing
Montreal

Quebec City

The Hague
Paris

Krakow

Zhengzhou

OttawaSeattleKatowice
Raleigh

PortlandSaint Jerome

OrlandoLos Angeles
Mexico City

BarcelonaSão Paulo

See key on opposite page.
Keywords Studios plc

Rome

DalianChengduShanghai
New Delhi

Milan

MadridHamburg
Rio de Janeiro

2

VolgogradDublin (HQ)

Pune

Taipei

ManilaSingapore

Yogyakarta

Keywords Studios continues to build world-leading capabilities in services that video game and similar interactive content
creators need. We stand shoulder-to-shoulder with our clients working as their external or co-development partner toprovide dedicated outsourced or embedded services, providing access to our teams of experts where and when needed,so they don’t have to carry unnecessary fixed costs to cater for peaks in activity. Today we have breadth and depth inseven service lines.

Revenue breakdown by service:
Audio

Player Support

Engineering

Multi-language voiceoverrecording, original language
voice production, Hollywood
production, music management,sound effects & related services.

365/24/7, multilingual support
for gamers when games are inlive operation, forum monitoringand moderation services & social
media engagement on behalfof the game brand.

Game development services
including full game development,
co-development, porting of games
from one platform to anotherincluding remastering, tool
development and consulting
services on a work for hire basis.

2018

2018

2018

+66%

+292%

+632%

This also includes our proprietary
software solutions for analytics,
social media integration,
procedural generation of art
assets and player behaviour
research consulting services€34.2m €35.9m €26.1m(growth in 2018 on 2017)

Art Creation(growth in 2018 on 2017)

Functional Testing(growth in 2018 on 2017)

Localization

Localization Testing

The creation of video gamegraphical art, including concept art,
2D and 3D art asset production &animation. Marketing services
including game trailers, marketingart and materials.

Quality assurance, including
discovery and documentation ofgame defects and testing to verify
the game’s compliance withhardware manufacturers’ andapp stores’ specifications, as wellas crowd based and focus Group
testing solutions.

Translation of in-game text,
audio scripts, cultural andlocal adaption, accreditation,
packaging and marketing
materials in over 50 languages.

Testing for out of context
translations, truncations,overlaps, spelling, grammar,
age rating issues, geopoliticaland cultural sensitivities andconsole manufacturer compliancerequirements in over 30 languages
using native speakers.

2018

2018

2018

2018

+59%

+64%

+5%

0%

€41.7m €49.1m €44.0m €19.8m(growth in 2018 on 2017)(growth in 2018 on 2017)(growth in 2018 on 2017)(growth in 2018 on 2017)
Annual Report and Accounts 20183

Strategic Report

Investment Summary

A furtherstrengthened offeringfrom which to grow
Keywords is better placed than ever to continue to capture share of
our robustly growing market by deepening our relationships withclients that already trust us with their high value IP, having significantly
extended our services and geographical reach during the year.

4

Keywords Studios plc

We are a trusted partner to leading companies around the world, witha strong market position, providing services to 23 of the top 25 games
companies and 9 of the top 10 mobile games publishers by revenue, including:Access to a dynamic
growth market

Keywords operates in a dynamic growthmarket but has minimal direct exposure to
the successes or failures of individual game
titles. Our focus on content means we areplatform agnostic and well positioned to takeadvantage of the opportunities presented
by mobile gaming, cloud streaming, next
generation consoles and AR / VR. The
increased sophistication of games andcomplexity of the video games market isdriving demand for larger, professional,
outsourced specialists, such as Keywords,
in a highly fragmented supplier market.
Outsourcing such work is attractive todevelopers and producers because it converts
their fixed costs into variable costs, helps
remove bottle-necks in capacity by providing
access to talent as required and enables
them to focus on their core competencies.

Market leading position

Keywords has a market leading position as
the only global provider of fully integrated
outsourced creative and technical services
to the global video games industry. With anindustry reputation for quality, reliability andflexibility, our scale and reputation mean weare well placed to take advantage of the trend
for clients to move to more collaborative
partnerships with fewer, larger suppliers.

Strong growth record

We continue to deliver strong Like-for-Like
growth as we benefit from both the growthin our market and the trend towards greater
outsourcing of our services. In addition, we
have successfully acquired and integrated
37 acquisitions since IPO. The eightacquisitions we completed in 2018 bolstered
our capabilities, particularly in engineering,data analytics, music and marketing services.
In addition to extending our existing service
lines to bring us even closer to our clients,
we have continued to expand ourgeographical reach.

Opportunity to grow further

Having made strong progress in extending
the Group’s client base, market penetration,
geographic footprint and service lines, we now
see significant potential for increased crosspollination of our service lines and geographic
locations, including taking advantage of our dual
shore capabilities which enable us to be close
to our customers and provide services fromlower cost studios, as we increasingly become
strategic partners to our clients.

A strong business model

Keywords’ flexible resourcing and charging
model, with charges levied for time or output
rather than a fixed price, combined withrelatively low working capital and capital
expenditure requirements support its ability
to grow the business whilst also achieving
strong cash conversion.

Adjacent market potential

Our expertise in providing outsourced
solutions to the video games industry
is already being sought after in adjacentmarkets such as film and television, andKeywords is well placed to deliver this.

Annual Report and Accounts 20185

Strategic Report

Chairman’s Statement

International scale
and flexibility acrossmarkets are key
We are well placed to take advantage of the multiple opportunities
afforded by our market as it grows in size and sophistication.

Introduction2018 was a year of good, and perhaps
underappreciated, progress in which wedelivered a 65% increase in Adjusted Profit
Before Tax to €37.9m (2017: €23.0m) which
was within the range of market expectations
albeit it was held back by certain project
deferrals into 2019 and, unusually for us, baddebts of approximately €1.6m relating to fourclients entering insolvency processes, someof which were caused by the ‘Fortnite effect’on the industry (as explained in more detailin the Chief Executive’s Review).
The 53% increase in Adjusted Basic Earnings
Per Share to 47.75c demonstrates how
effectively the Company is deploying capitaland managing its margins while growing sostrongly. This performance was delivered
while continuing to develop the Group’s
strong positioning in the video games market
and creating an even better balanced, morediversified business with the addition ofseveral new services including marketing
services, music management, sound effects
and game and predictive analytics. We alsosignificantly strengthened our relatively newengineering / game development services
offering and invested in the expansion ofstudios which created an additional 930 work
stations across Beijing, Chengdu, Katowice,
Liverpool, London, Los Angeles, Manila,
Milan, Montreal, Seattle and Tokyo. The
businesses that have joined the Group
3

6through acquisitions have integrated well,embracing the dynamic and self-effacing
Keywords culture.
Like-for-Like revenue growth3 was 10.1%;
without the expected drag in the year fromthe VMC acquisition, Like-for-Like revenue
growth would have been 14.9%. However, weare pleased with the overall contribution from
VMC which has been significantly earnings
enhancing. The Like-for-Like growth reflected
good performances across the businessalthough Localization Testing revenues
declined unexpectedly at the end of the year
as a number of projects slipped into 2019.

Multiple growth opportunities

Overall, Keywords is well positioned to takeadvantage of the multiple opportunities we
see as the video games industry is predicted
to continue to grow strongly, at a CAGR of
c.9% (source: Newzoo, October 2018), despite
the short-term disruption caused by Fortnite
last year, and the trend towards outsourcing
continues as video games companies aim
to avoid substantially increased fixed costs
to handle peaks in activity levels. Having
extended our service offering further during
the year, many of our blue-chip games
producer and developer clients now see us
as an important and trusted business partner
who can bring considerable value to theirgames’ development and creation process.

Importantly, as cloud gaming and othersubscription models emerge, we expect tosee strong demand for our services to support
the significant growth in content that these
services will drive.
Our strategic vision hasn’t changed since theflotation on AIM in July 2013, and pleasingly,
we are significantly ahead of those earlyplans both in size and scope. We continue tosee plenty of opportunity in the video games
market to support our growth both organicallyand through selective acquisitions and thelandscape remains fertile with a number ofbusinesses expressing interest in joining us
so they can participate in Keywords’
compelling partnering and growth model.

Managing and funding growth
Keywords’ ability to source, execute andintegrate acquisitions effectively is a coreskill and, as the Group expands, more of
the management team are involved in theseassimilation processes. We look for a strong
cultural fit and focus on the people joining theGroup, rather than just seeing it as acquiring
businesses, so that we engender a partnership
through which both parties work closely
together to complement each other.

Calculated on the basis that the full year 2017 comparative included all of the 2017 and 2018 acquisitions, as if they had been owned for the same period in 2017 as they havebeen in 2018 and applying consistent foreign exchange rates in both years.
Keywords Studios plc

We are also highly focused on maintaining
the interest, drive and passion of those whojoin Keywords, to make sure that they are
stimulated by new opportunities as part ofa much larger organisation without losing
their entrepreneurial drive. One of the ways inwhich we have done this is by strengthening
the Group’s management team with the highly
experienced people we bring in throughour acquisitions; this, in combination with
developing our existing team, in turn provides
further bandwidth across the management
team to support the ongoing growth of
the business.
The funding of our acquisitions is achieved
both by cash generated organically and throughbank facilities. We are continuously improving
our profit-to-cash conversion, assisted by thestreamlining of our banking arrangements
around the Group and are working towards
centralised cash pooling and regular drawdowns as standard within the treasury function.
The increase in our bank facilities to up to€105m, which we secured during the year,
gives us good headroom and demonstrates
the strong support we enjoy from our banks
for our growth strategy, given the strengthof our financial performance and the recurring
nature of many of the revenues.
As we grow, we have continued to develop
our business processes and strengthen ourgovernance practices. We have had a particularfocus in 2018 on developing our operating
and financial systems in order to enhance
the management information available andstreamline our reporting processes further;
this remains work in progress. We have also
improved our governance procedures with the
adoption of the Quoted Companies Association
Corporate Governance Code, as outlined infurther detail later in the Annual Report.
Ensuring we have the best internal systems
and controls, as well as more integrated andefficient processes with our clients, will remain
a focus in 2019.

the interim dividend of 0.53p per share will
make a total dividend for the year ending
31 December 2018 of 1.61p per share. This
reflects an increase of 10% compared to 1.46p
for 2017 and is consistent with our progressive
dividend policy whilst retaining sufficient
resources to fund our future growth. Subject
to shareholder approval at the Group’s AGM,
the dividend will be paid on 21 June 2019, toshareholders on the register on 31 May 2019.

PeopleCurrent Trading and Outlook

The progress of Keywords and its successfultransition from being a small company
with two service lines into what it is today
is a credit not just to the top team, but toeveryone throughout the organisation for
their part in making it happen. On behalfof the Board, I would like to thank all of
the team for their strong contributions.
The whole executive team led by Andrew
Day, our CEO, has worked impressively andperformed well during the year. The teamis operating in an industry that is not only
fast growing but is a leading technologicalinnovator in interactive technology; that
Keywords is now a respected provider,
not only of services, but also in technicalinnovation, shows how much we havebecome a key partner to our customers,
despite most being many times our size.

Dividend

The Board is pleased to recommend a final
dividend of 1.08p per share which, following

We have started 2019 promisingly. In a year
in which the games industry is likely to seesome changes with the arrival of games
subscription and streaming services from newentrants like Apple and Google, we feel wellplaced to benefit from the likely increased
demand for content.
The considerable progress we made in 2018
has improved our quality of earnings andmoved us higher up the value chain.
Accordingly, as we continue to strengthen
our market leadership and the breadth andscale of our service offering, we are wellplaced to take advantage of the multiple
growth opportunities afforded by a market
that is growing in size and sophistication.

Ross Graham
Chairman
8 April 2019
Annual Report and Accounts 20187

Strategic Report

Our Culture

Pride in our people
Our culture acts as the glue that binds all Keywordians around theworld together – relaxed, professional and humble with a focus on
doing the very best we can for each and every project entrusted to us.

8

Keywords Studios plc

People that work at Keywords are passionate,
talented, committed and resourceful. This
culture creates an environment in whichgames-passionate individuals can work
together with likeminded colleagues while
enjoying the opportunity to work on most of theworld’s leading games ahead of their releases.
Working on around 250 games at any time inthe year and more than 600 in total throughthe year, Keywords provides an excellent
and sustainable variety of work, strong career
progression and opportunities to work in manydifferent locations.

There is a common thread to the cultureof Keywords.
We recognise our role as professional services
providers. We approach this humbly, doing thevery best we can for our clients’ projects withthe confidence borne out of our deep expertise.
We value our people; we trust them and work
to support their passion to perform the best
service for each project and each client.
We have an inclusive style of management
and run a tight ship.

Our priorities and areas offocus are summarised below:

Our People• Training and development• Integration• Diversity• Career advancement• Equal opportunities

Our Customers• Integrated efficient service• Customer satisfaction• Repeat businessAnnual Report and Accounts 20189

Strategic Report

Our Culture continued

We design our facilities as open plan topromote engagement and encourageknowledge sharing. At the core of our culture
are our operating principles that we call the“Keywords Rule of 9”.
The Keywords Rule of 9
1. Communication – We communicate openly
and in a timely fashion. We do not hide
things from colleagues or clients and we
avoid office politics.
2. Project Focus – We focus on projects,
delivering the best we can for the benefitof each and every product we touch.
3. Client Centricity – We act as an extensionof the client’s organisation, moulding ourprocesses and procedures to fit theirrequirements whilst sharing ourknowledge of best practices.
4. Empowerment – We empower our people
to perform to the best of their ability byproviding them with the resources andenvironment to do their jobs and the tools
to track and measure their performance.
5. Passion for Games – We are passionate
about games and are proud of our rolein helping to deploy them and we play
an active role in the wider industry.
6. Client Intimacy – We love our clients(all of them) and want the best for themat all times.
7. Positivity – We have a “can do” attitude
and rise to the challenge of solving ourclients’ problems.
8. Flexibility – We recognise the importanceof flexibility and actively embrace it despite
the obvious challenges. Flexibility is why
we exist at all. Without it, clients would
perform those tasks we do, themselves.
9. Learning & Growing – We learn at every
opportunity and grow ourselves throughexperience, training and tackling newchallenges.

10

Keywords Studios plc

Our People

An average of 5,238 employees make up ourhighly diverse and multicultural team and are
well balanced across our three regions; 2,056
in The Americas, 1,267 in Europe, 1,915 inAsia. The number and diversity of people andskills in our workforce allows us to be perfectly
placed to deploy these skills across theindustry to meet all of our customers’ needs.
As the growing games industry continues to
produce more content and as industries asdiverse as retail, urban planning, advertising,education, architecture and automotive,
adopt the use of game engines to make theircontent more interactive and engaging, we see
the demand for the skills we offer increase.

Our acquisition programme also brings fresh
talent to the Group at all levels on a regularbasis. We continue to be successful at
integrating these new businesses and thetalent they bring with them whilst providing
opportunities for them to grow their careers
across the Group and move between our
various studios. This year we have added
game programmers, game designers,
software engineers, data scientists andmachine learning specialists to our evergrowing Keywords family.
We provide equal opportunities for all of
our colleagues, demonstrated by our seniorleadership team, which comprises four people
from the original Keywords business, ten
people from acquired entities as well as six
externally hired employees.

Real experiences“The value of the Company isthe value of its employees, andyou certainly can say that for
Keywords. Every colleague isa friend and, at the same time,a talented professional always
ready to help. When you couple
this great environment withthe best products of the video
game industry, satisfaction
and motivation are thenatural outcome.”
Riccardo
QA & Support Co-Ordinator, Dublin

Our Customers

We are fortunate to be able to count mostof the top global games developers as ourcustomers. These companies expect thehighest level of service and our diverse
capabilities allow us to satisfy our customers’
needs every time. Increasingly, thesecustomers prefer to outsource multiple services
to one service provider and this is where weare uniquely positioned to meet expectations.
We offer our clients flexible, scalable solutions
that match their project requirements. Throughour dedicated embedded services, we partnerwith our clients to provide the expertise of an
in-house team and deliver flexible, in-houseout-sourced solutions.

Keywords Studios
Extra Life 2018

Community involvement and supporting goodcauses – throughout our local studios staff
support local charities and good causes.
One activity that involved multiple sites was
Extra Life 2018 – In 2018, Keywords staff
participated in a 24-hour gaming marathon
which supports Children’s Miracle Network
Hospitals, raising over $10,000 for the cause.

Joining the Keywords Family

We are a highly acquisitive business and havesome very strict criteria for our acquisition
targets, by far the most important being
cultural fit. Typically, if we think that there
is a cultural misalignment then we won’t
even open the dialogue with the Company.
Once we set our sights on an acquisition
there is a process that we follow during thedue diligence phase and after closing theacquisition to ensure seamless integrationof the new studio and most importantly the
new people, to ensure that from day one,they feel like part of the Keywords family,
while, at the same time, appreciating thehistory and richness that the new company
brings. A mark of our integration success isthat half our senior executive team joined
us through acquired companies.
Keywordians with their drive and talent
make Keywords the global service provider
that it is today, and it is essential for usthat we continue to support our unique anddiverse culture, which includes welcoming
new faces and ensuring they feel just as
supported and welcomed as their moreestablished colleagues.

Keywords Studios –Extra Life 2018$10,7363
9
40+
187
raisedteams with 40+ members

different locations in 5 countries

games played through 16 live streams

over 187 hours played

Annual Report and Accounts 201811

Strategic ReportMarket Overview

Providing a global services
platform to support thevideo games market
Keywords operates in an exciting high growth market, with exposure to mostof the world’s leading video games across all devices and all genres.

Continued market growth

The global games market for video games
is fast moving and continually evolving.
New gaming platforms, genres, monetisation
models, distribution channels, and audiences
keep coming. Not only this, but all mannerof content providers are seeking to maketheir content more impactful and engaging.
Interactive content is emerging everywhere
and the lines between video games ande-learning, film and TV, simulation ande-retail are becoming increasingly blurred.
Video games represent the most interactiveof content types, and the tools, skills andproduction facilities needed to produce video
games are now in demand from a much wider
market. Keywords is hardware agnostic;rather our services support the production,
the marketing and the support of the content
itself in live operation.

12

Keywords Studios plc

Content revenues in the global games market
reached $134.9bn in 2018 and are forecast
to increase to $174.0bn in 2021. (Source:
NewZoo Global Games Market 2018). The
mobile games segment continues to growfastest, and the Chinese market is now
larger than the US despite the hiccup in 2018that saw Chinese authorities blocking the
publication of new games for 9 months –a situation which now appears to be gettingback to normal.

The move towards ‘games
as a service’ continues

The move towards ‘games as a service’continues and unlike the sale of one-time
packaged product, this requires ongoing
maintenance of the content, continually
updating it with new worlds, characters,
and items to purchase or win. The market forthe provision of services to the games industry
is evolving too. While the industry remains
highly fragmented, customers are increasingly
willing to outsource multiple services to provenproviders of scale who can offer all of theseunder one umbrella, by way of strategic
partnerships, as well as exploring moreco-development, in which significant parts of,or even full games, are developed on behalfof game developers or game publishers.
The trend towards increasing outsourcing at
a more strategic level benefits Keywords as
the largest and broadest provider, making it
an increasingly attractive home for service
providers with a narrower focus.

A high growth global video games market
Global market
2018$134.9bn

Cloud gaming is poised to expand themarket on a scale not seen since theintroduction of mobile gaming.

+10.8%(growth on 2017 – ($121.7bn))

YoY ($Bn)
2021

174.0
160.5

2020
2019
2018

148.1
134.9

c.9% CAGRPeter Warman, CEO Newzoo, November 2018

There are 2 billion people who play video games on theplanet today. We’re not going to sell 2 billion consoles. Manyof those people don’t own a television; many have neverowned a PC. For many people on the planet, the phone istheir compute device. It’s really about reaching a customer
wherever they are, on the devices that they have.
Phil Spencer, Microsoft’s Vice President of Gaming (March 2019)(Source Newzoo, 2018)

Cloud gaming / streaming and subscription platforms
Streaming games, Netflix style, and subscription platforms are a hugely exciting prospect following the initial publicity in January regarding
Microsoft’s streaming service, xCloud, the unveiling of Google’s Stadia gaming platform in March 2019 and Apple’s launch of its Arcade
subscription-based games platform in March 2019. Presently, gaming can be costly for the user, with the requirement for high end gaming PCs,
expensive consoles and high-end smartphones limiting the access to and uptake of some games. Streaming, and subscription services, havethe potential to provide highly cost-effective distribution of content, making it available to more players, on more devices, in more countries,
in more languages. All this requires more services; engineering to port games to new streaming platforms; localization into more languages;
increased player support services; and of course, as the competition amongst these streaming platforms intensifies, demand for new content
production is expected to grow just as it has done in film and TV with the likes of Netflix, Amazon, Apple, Disney, and Hulu.

New generation consoles
The current generation of PlayStation and Xbox games consoles first launched in 2013. Both companies are expected to launch completely
new devices, with market rumours currently suggesting 2020 or 2021 are the most likely years for this. Unlike in the last console generationtransition, in which publishers shifted very rapidly from content for the previous generation to new content for the current generation, this time
we expect to see a different evolution thanks to the ‘games as a service’ model. We anticipate game publishers will want to continue to support
existing content that is commercially successful while simultaneously producing new content that takes advantage of the power and featuresof the new consoles. We anticipate this doubling up will create added demand for our services.

Augmented reality, virtual reality and mixed reality
While VR in its first form didn’t catch on as some were expecting, the hardware providers are continuing to reduce the size of the headsets
and uncouple them from the PC or console. As these advances continue, so we expect video game content providers to continually explore thepossibilities for this most immersive of experiences. In the meantime, we continue to work extensively in the field not only with game content
but more and more in non-game related content of an educational and experiential nature. Augmented Reality, as represented by a range ofsolutions either on existing devices like mobile phones or with specialised headsets such as the Microsoft’s HoloLens or Magic Leap One offers
perhaps more immediate promise as seen with the early success of Pokémon Go but we don’t see this a major driver for the business in 2019.
Annual Report and Accounts 201813

Strategic Report

Our Business Model

Creating value
and growth throughoperational efficiency
The video games industry represents the pinnacle of interactive digital content.
At Keywords, we use our passion for games, technology and media to create
a global services platform for video games and beyond.
Our key strengths
Global presence

Provides access to the best talent andenables us to deliver projects acrossstudios in multiple time zones, allowing
seamless 24-hour turnarounds whilst
remaining close to our customers.

Flexible resource model

Keywords’ presence in each stage of the games development cycle
creates multiple opportunities for cross selling and revenue growth.

#1Pre-production#2
Early stage gamedevelopment• Concept art• Level design• Game design

•
•
•
•
•
•
•
•
•
•
•
•
•

Particularly true of our testing business,this allows us to scale up or down tomeet demand, mirroring the seasonalityof games production.

Knowledge and expertise

Our talented people have deep gamesspecific knowledge and experience,
enabling them to add value to our clients’
games at all stages in the development
lifecycle.

Co-development
Programming
Art production
Cinematics / visual effects
Audio production
Original language voice production
Engineering
Development quality assurance
Game demo trailers
Music scoring
Sound design
Story writing
Motion capture

Reputation for quality

At the heart of our culture is ourcommitment to quality, reliability andintegrating with our clients’ processes
promoting long-term customer relationships.

Financial strength

Our strong financial performance andposition gives our customers reassuranceof resilience in their supply chain andis part of our attraction to businesses
we acquire.

#6
New content for games
•
•
•
•
•
•
•
•

Game extensions
Level expansions
Art
Audio
Testing
Localization
MarketingIssue patches

Acquisition track record

We have a strong track record in
identifying acquisitions with a good fit
with Keywords in terms of culture as well
as expertise or geography and integratingthem effectively to support their growth.
14

Keywords Studios plc Services offeredby Keywords#5
Ongoing live
operations support
•
•
•
•
•
•
•
•
•

Customer support
Community management
Data analytics
Payments processing
Game analytics
Social integration
Customer retention
Payments processing
Promotions management Services added by Keywords
in 2018 –2019 Services not currently
offered by Keywords

Our Business Model is supported by our Strategic Pillars:

Extendingour rangeof services

Selective
acquisitions

Organic
growth andcross selling

Growing
market share

Expandinggeographic
reachIntroducing
technology

Creating value for our stakeholders#3
Later stage gamedevelopment

•
•
•
•
•
•
•

Functional testing
Text localization
Audio localization
Localization testing
Player research
Game porting
Music branding
and strategy

By working as their external development
partner, we enable leading content creatorsand publishers to leverage our expertiseand capacity across the lifecycle ofinteractive content.
In so doing we enable our clients who
are operating in complex and fast-moving
environments to remain lean and agile,and to focus on creating and monetising
the most engaging experiences.

Investors

Consistent track recordof delivering earnings anddividend growth.
Opportunity to invest in the
exciting video games market,
without the risk of exposure
to the successes or failuresof individual game titles.

#4
Launch• Certification testing• Official game trailers• Soundtrack andmerchandise• Marketing services• Customer acquisition
Increase in Adjusted
EPS since 20144

53.7%

We are trusted and relied upon by many of theworld’s leading video game companies to work
alongside them during concept, development
and live operations by leveraging the breadthand depth of our industry leading service lines
every step of the way.
Keywords’ presence in each stage of thegames development cycle creates multiple
opportunities for cross selling andrevenue growth.

Customers

Our involvement across the video
games cycle means that we canbe a “one-stop-shop” for our
global customers, meeting theirrequirements with a combinationof on-demand and dedicatedservices facilitated through a wide
geographic reach to talent and aflexible resource model. This allows
our customers to outsource most
aspects of game development
enabling our customers to reduce
the number of permanent staff
that would otherwise be required
to cater for peak activity, thereby
converting fixed to variable costs
and minimising their overall
operating costs.

Employees

Keywords provides employeeswith an excellent and sustainablevariety of work, good careeradvancement opportunities and,increasingly, opportunities towork in many different locations.
Our customers can access aworld class talent base without
incurring any of the usual
variable costs.

Customers using
3 or more services

Average numberof employees

up from 30 in 2014

up from 978 in 2014

99

5,238

4	Before acquisition and integration expenses, share option charges, amortisation of intangibles, and foreign currency exchange.
Annual Report and Accounts 201815

Strategic Report

Our Strategy
To be the world’s leading technical and creative services
platform for the video games industry and beyond.
We continue to pursue our proven strategy of
growing organically and through acquisitions
to extend the Group’s range of services,
geographic reach and client base to achieve
scale and become the “go to” services provider
for each of our service lines. Where the Groupcan use its existing expertise, we continue
to cross over into neighbouring markets suchas film and television, e-learning and wider
uses of interactive content more generally,
generating synergies in a highly fragmented
games service industry.
Each year, we continue to become morediversified and better balanced as a business,with an expanding range of services and withfurther locations to offer our clients. We see
many opportunities to extend our existing
relationships and become a strategic partner
to major games companies, both throughproviding additional services to existingcustomers and through providing dedicatedoutsourced services.

Strategic Pillars
Extending ourrange of services

Progress in 2018
•
•

•
•

•

Selective
acquisitions••

Organic growthand cross selling•

Growing
market share•

Expandinggeographic reach

•

•

•

•

•

Introducing
technology

•

•

16

Keywords Studios plc

Entered the marketing services arena with three acquisitionsof video game trailer production companies.
Added music management capability for the first timeenabling us to offer a service which is complementary to our
voiced audio, game development and marketing services.
Landed a leading sound design and sound effects team andinvested in studios to support them.
Welcomed a leading voice production company to the Group
which also brings with it writing and motion capture
management experience.
We are now offering video game analytics services andautomated app testing for GDPR compliance.
Completed eight acquisitions during the year which added
additional scale and expertise in our Engineering and Art
services lines as well as in our Audio business.
These acquisitions are being integrated within the service
lines as well as within the country and regional management
structures and our global finance, accounting, HR and
IT functions.
Like-for-Like revenue grew by 10.1% in 2018 or 14.9%
Like-for-Like excluding VMC.
While this growth was lower than the Group had targeted,
we faced some considerable market related headwinds in2018 and we remain hopeful of double-digit growth in 2019.

We continued to grow our service lines aiming to make them
the “go to” providers for their respective sets of services.
We have considerable headroom in each of our service lines
to continue to grow our market share.

Opened our third location in Eastern Europe improving accessto important talent pools.
Increased presence on the West Coast of the US, with
operations in Hollywood and Burbank in Los Angeles, which
again provide access to talent but also get us closer to thevideo game producers and publishers on the West Coast.
Grew our presence in the UK, given its reputation for creative
and technical video game talent.
Continuous development of tools for internal use in making
processes more efficient and in managing our businesses
more effectively.
Our acquisitions of XLoc, Yokozuna Data, GetSocial and ourinvestment in and exclusive commercialisation of AS Analyser
provide access to technology solutions that can be provided
as a service to clients.

Priorities in 2019
•

•

•

•

•

•

•
•

•

With gaps in most of our services which can be filled with niche
services, we will continue to acquire and invest in 2019 in expanding
our palette of services.
Most notably, marketing services is likely to be the recipient of further
investment in growth in 2019 and may come to form our eighth fully
fledged service line during the year.

The Group’s acquisition programme continues to be an importantfeature and we anticipate that 2019 will yield a similar number
and value of acquisitions as previous years.
We are mindful of the integration challenges and therefore
acquisitions will likely be spread across geographies and acrossservices lines to avoid management overstretch.

Measures of our Success7

Seven service lines, up from two in 2009, four in 2013 and six in 2016.

4-10

Between 4-10 acquisitions per year.
€30m to €80m invested.

Our principal focus will remain on organic growth, as in previous years,
and we expect to grow faster than the market for our services as we
capture market share.
A key measure of our success is how ‘relevant’ we are to our clients,
as evidenced by the growth in the number of our clients and also how
many services each of our clients is using.

Organic growth materially ahead of market growth.

We have much to do to grow all our service lines to the point
Localization Services has reached in being the “go to” provider.
We will seek to add to our capabilities in marketing, in Engineeringand in Audio as we have been doing over the last year, as well
as more in Player Support.
Our testing businesses have achieved critical mass in North America
but remain underweight in Europe and Asia and we will seek torebalance this over the coming years.

Critical mass in each service line provides scale, increased flexibility, improved
efficiencies and deeper expertise.

In 2018, the number of clients buying three or more services from us increased once
again, to 99 from 93 in 2017.
Overall customer numbers increased by 31% to 846 compared to 646 in 2017.

Achieving critical mass comes through organic growth, led by cross selling andnew client acquisition activities, and can be accelerated by selective acquisitionsof similar businesses.

•

Geographic reach has been a decreasing driver for us as we have now
expanded our reach onto many of our key target regions and while
we would like to have a presence in territories like Korea, and a widerbase in Eastern Europe, these aren’t essential priorities for 2019.

We have a good spread of talent across three continents, with about 39% of our people
in North America, 24% in Europe and 37% in Asia.

•

Keywords will continue to develop and acquire software solutions
to support the services we provide to game developers andgame publishers.
Keywords Ventures (which is described in more detail in the Chief
Executive’s Review) is also active in assessing technologies being
developed for games or related markets where we believe we can
add value in terms of modest financial support coupled with ourglobal market reach in games.

Supporting internal innovation and tool development including our newly initiatedKeywords Innovate programme.

•

Selective acquisitions of software solutions that complement our services.
Yokozuna Data was acquired in July 2018. GetSocial acquired in February 2019.
Venture investments and associated commercial agreements such as the recent
investment in GDPR compliance testing solution, AS Analyser, by Keywords Ventures.

Annual Report and Accounts 201817

Strategic Report

Chief Executive’s Review

A strong
performance18

Keywords Studios plc

ENGINEERING
Well placed to benefit fromthe growth in content that will be
driven by streaming games andnext generation consoles

Starting with the acquisitionof GameSim in May 2017,
our Engineering Services
Line now comprises 7
companies in 8 locations.
Possibly better described as gamedevelopment services, we collaborate
with our clients to deliver richer definition
for their video gaming titles, learning
applications or visualisation and simulation
experiences. We provide a range ofservices from the creation of complete
games; the co-development of games
alongside our clients in which we assume
responsibility for a part of the game;ongoing live support in which we continue
to add features, expansions, new items,
new characters to the game; the portingof games from one platform to another orfrom one hardware generation to another,with or without remastering of the content;
troubleshooting services; and the provisionof teams to work alongside our clients as
an extension to their teams.

The Group produced another good
performance during the year, albeit its growth
was slightly held back by the anticipated
low growth of VMC combined with the‘Fortnite effect’ and, late in the year, certain
unforeseen project delays and cancellations(both explained in more detail in the organic
growth and investment section of thisreview). Despite these reverses, theunderlying performance of all but one of
the seven service lines has been strong.
The exception was Localization Testing
where we were particularly impacted bydelays at the tail end of 2018 some of which
we are now working on in 2019. Overall,
we continued to increase our share of thegrowing video games market, with customers
attracted by our ability to flexibly deliver highquality services, across an increased andunrivalled range of services and geographies.
The addition of music management and soundeffects, marketing services and data analytics
through acquisitions in the year will further
extend relationships with our clients.

Delivering on our strategy

Our strategy of building the world’s leading
technical and creative services platform
for the video games market and beyond
continues to yield rapid, synergistic growth.
Operating globally across the lifecycle ofvideo games, we continue to benefit fromthe major structural drivers of a growing
industry, combined with a trend towards
the outsourcing of services to create, test,
market, internationalise and support
interactive content. The video games services
market remains highly fragmented despite
the scale and global nature of the major
video games publishers and developers. We
continue to believe that the services provisionmarket needs to consolidate further in orderto support the needs of game publishers anddevelopers who are grappling with thechallenges of producing ever extending
content whilst meeting demands for higher
quality. This includes the provision andsupport of this content in more markets,

across more devices and delivered in a rangeof formats – which looks set to extend to
cloud-based delivery in 2019 and beyond.
The ability and flexibility to extend teamsizes and to turn to specialists who areavailable as needed is essential for publishers
looking to satisfy these demands rapidly, thus
making outsourced and embedded services
ever more attractive.

Annual Report and Accounts 201819

Strategic Report

Chief Executive’s Review
continued
Acquisitions since early 2018
Year

Art Creation

SoftwareEngineering

Audio

2018

Fire Without
Smoke
The TrailerFarm

Snowed In
Studio Gobo
Electric Square
Yokozuna Data

MaximalCord
Laced
Blindlight2019

Sunny Side Up

GetSocial

During 2018 we successfully acquired andintegrated eight companies, investing €33.1m
in cash (gross) and €27.3m in deferred cash
and in shares. These businesses extended
our services into new areas such as marketing
services, music management and predictive
analytics and significantly strengthened ourexisting service lines including a considerable
scaling up of our newer Engineering Service line.
In particular, our entry into the design andproduction of trailers used to promote games
has added a new pillar for growth throughthe acquisition of Fire Without Smoke and
The TrailerFarm. In the first few days of 2019,
we also completed the acquisition of our third
company in marketing services, Sunny Side Up,
and we hope to add further scale to this activity
to turn it into our eighth service line.
We added Snowed In and, more substantially,
Studio Gobo and Electric Square to ourEngineering Service line which had beensignificantly enhanced by the acquisition
of Sperasoft in the last weeks of 2017.
Following these acquisitions, this service line
generates annualised revenues of c. €35.8m,
demonstrating that we have been able tobuild a service line of scale that is now the
fourth largest of our seven service lines, in avery short space of time. We are continuing
to review further acquisitions in this areaof our business while we further integrate
the six studios that currently comprise theservice line.
Our recent acquisitions of Yokozuna Data and
GetSocial have brought back-end gaming
platforms and underlying analytics to the Groupto help games companies keep gamers in their
game for longer and improve their monetisationof the games. Whilst these acquisitions are notcurrently earnings enhancing, we believe thatthey can be developed into valuable additional
technologies and services for clients and,
therefore, additional revenue generators.

20

Keywords Studios plc

Functional
Testing

Localization

In our Audio Service Line, we extended ourservice offering outside our traditional localised
voice-over services, a field in which we lead thevideo games industry, to music management,sound effects and sound design and original
language voice production through theacquisition of Cord and Laced, the hiring of acomplete team in SoundLab and the acquisitionof Blindlight. This broadened scope of services
has already led to synergies and cross selling
successes within the service line and withother service lines.
The Group has now fully integrated VMC, which
was acquired in October 2017 for $66.4m(€57.9m). This very thorough integration exercise
across four service lines and five studio locations
was completed ahead of schedule. As a result,
VMC has contributed significantly to the Group’s
achievement of a 15.1% operating margin,despite the pre-acquisition operating marginof VMC having been about 9%. Although initiallya drag on revenue growth (as expected), it hasgiven us the benefits of real scale in certain
service lines in North America, where we areseeing growing demand, and it is significantly
earnings enhancing.

Keywords Ventures

In July 2018, we launched Keywords Ventures(“KWV”) to make modest investments incompanies with innovative technologies
and services that will benefit our clients
and where we can help commercialise those
products and services through access to ourglobal platform, relationships and funding.
We would not expect our annual investment
in KWV to exceed 5% of our annual spend
on acquisitions. Our first investment wasfor £300,000, in a Series A funding for up
to a 45% shareholding in a pre-revenue
company, AppSecTest Ltd, which has created
AS Analyser, a cloud based automatic testing
solution that analyses apps and mobile
games for compliance with the GDPR,
and which launched in late 2018.

Localization
Testing

Customer
SupportMUSIC SERVICES
With the acquisitionof Cord and Laced in
April 2018, we entered
the whole field ofmusic services.
Taking the expertise developed by
Cord over many years of working withadvertising agencies and directly withmajor brands in advising, sourcing,commissioning and managing music,
including all licencing issues, we havestarted to introduce these specialised
services to the games industry. Early
successes in 2018 have included
managing all the music requirements
for a much-anticipated upcoming new
game. Laced is a record label which
specialises in helping game companies
maximise returns from their investment
in music by licencing it back andpublishing albums of game music. One of
the highlights of 2018 for Laced was thesell-out of its 4-album collection of musicfrom the video game, Doom.

Organic growthand investment

We have continued to deliver organic growth,having achieved a 10.1% increase in Like-for-Likerevenue at constant exchange rates in 2018.
During 2018, our Like-for-Like revenue growthon this basis was negatively affected by two
principal factors including the contribution from
VMC where revenue declined in the year, as
anticipated, and due to what we have labelled
as the ‘Fortnite effect’.
The phenomenally successful Fortnite gameattracted some 200 million players during thecourse of the year and in so doing disrupted othergames which we support, although we ourselves
now do a considerable amount of work on
Fortnite. In some of those cases, the competitiveeffect and loss of player base was material
enough for clients to reduce their spending on
supporting games, to terminate games and, while
it may not be the only contributing factor, a few
companies ceased trading altogether (or went
into insolvency processes), including Telltale andStarbreeze. Localization was the service line
most affected by the ‘Fortnite Effect’.
The drag on the Group’s revenue growth by VMC
primarily affected Functional Testing, Player
Support and, to a lesser extent, Localization
Testing. However, having now fully integrated
VMC, we expect it to contribute to revenue
growth and good margins in those divisions
incrementally during 2019.

Due to these impacts, the headline growth
per service line in some instances masks theunderlying trends but we have attempted toprovide those underlying trends, alongside
the reported numbers, in the service line
review section below.
We continue to make good progress in crossselling our services into our client base.
For the 12-month period under review weincreased the number of clients using threeor more of our services to 99 clients in 2018from 93 clients in 2017.
The investment programmes in the existing
businesses that we began in late 2017 weresuccessfully completed in 2018 and resulted
in increased capacity to support the organic
growth of the business. The additional work
stations created are being well utilised alreadyand have helped to support our organic growthduring the year. We expect to further increase
our available work space in certain locationsin 2019 but anticipate the level of investment
returning to the ordinary course of business,in contrast to 2017 to 2018 when the demandpressures for space came together in many
geographies and service lines.
While we successfully consolidated somelocations during the year, the results of organic
and acquisition led expansion meant we finished
the year with 52 operating units in 21 countries
up from 42 and 20 respectively in 2017.

Service line review
Year ended
31-Dec-18

Year ended
31-Dec-18

Year ended
31-Dec-17

Year ended
31-Dec-17

Art Creation
Engineering
Audio
Functional Testing
Localization
Localization Testing
Player Support

41,68826,161
34,19049,12843,98319,75135,904

16.6%
10.4%
13.6%
19.6%
17.6%
7.9%
14.3%

26,193
3,572
20,65730,033
41,95919,848
9,168

17.3%
2.4%
13.6%
19.8%
27.7%
13.1%
6.1%

Total

250,805100%

151,430

100 %Revenue Mix €’000

GAMES SCIENCES
Since the beginning of
2018, Keywords has
added meaningfully to
its activities in the fieldof player behaviour
analysis capabilities.
All of which translate into helping ourclients make better games, target themost appropriate new players, retain
players for longer and monetise theirgames better. Player Research, ourfirst business in this field acquiredin October 2016 was complemented
with the acquisition of Tokyo-based
predictive analytics and machinelearning business, Yokozuna Data in
July 2018. In February 2019, GetSocial
joined the Group, bringing with it asoftware platform for mobile games
providing all the social media featuresand supporting analytics to player-led
customer acquisition, social sharing,
rewarding and push notifications tomobile game developers. As games
continue to transition to a service
model from a product model, the useof sophisticated game sciences tounderstand player behaviour andto facilitate and automate in-gameactions will become increasingly
valuable to our clients.

As the Group made a number of acquisitions during the year, the following table also provides
an overview of revenues on a Pro Forma basis, which includes the annualised sales of all
acquisitions made in each year, in order to provide a better overview of the size and balanceof the business at the end of each year. The service line commentary which follows reportson the statutory revenues unless otherwise stated.
Year ended
31-Dec-18

Year ended
31-Dec-18

Year ended
31-Dec-17

Year ended
31-Dec-17

Art Creation
Engineering
Audio
Functional Testing
Localization
Localization Testing
Player Support

43,97835,80336,897
49,12843,98419,75135,904

16.6%
13.5%
13.9%
18.5%
16.6%
7.4%
13.5%

36,23917,05924,57348,18343,32322,71728,626

16.4%
7.7%
11.1%
21.8%
19.6%
10.3%
13.0%

Total

265,445100%

220,720

100%

Proforma Revenue Mix €’000

Annual Report and Accounts 201821

Strategic Report

Chief Executive’s Review
continued
Service line review

Headed by Ashley Liu, basedin Beijing, Art Creation
services revenue grew 59.2%
to €41.7m (2017: €26.2.m)
reflecting full year contributions
from the 2017 acquisitions,
SPOV, Red Hot and part of
Sperasoft, and, since May
and September 2018, thecontributions from theacquisitions of Fire Without
Smoke and The TrailerFarm
respectively.
On a Like-for-Like basis,
Art Creation grew by 11.9%
year-on-year, having benefited
from our investment in expanded
capacity in late 2017 and into
2018 which enabled it to meet
more of the demand for its
services. In addition, increasing
integration across a greaternumber of studios in the art
service line has enabled us totake on and deliver work that
we would not otherwise havebeen able to service.
During the year we added
marketing services, including the
production of game trailers andmarketing art and materials, tothe range of services Art Creation
is able to offer through theacquisitions of Fire Without
Smoke and The TrailerFarm. Just
after the year end, Sunny SideUp, another game trailer andmarketing services businessjoined the Group throughacquisition. We are continuing
to review other acquisition
opportunities in this areaand may establish a separate
services line to house these
activities once it reaches therequisite scale.

The Engineering services line
which only started in 2017
has grown to represent around
13.5% of Group revenues on
a proforma basis in 2018.
Principally due to acquisitions
made in the year its revenues
grew seven-fold to €26.2m(2017: €3.6m) reflecting full year
contributions from Gamesim, d3t
and Sperasoft which were acquired
during 2017, while Snowed In, andStudio Gobo and Electric Square
have contributed since July andAugust 2018, respectively. Jamie
Campbell, formerly CEO of d3t,
assumed responsibility for thisservice line in July 2018.
On a Like-for-Like basis, revenues
grew by 23.3%. We now have a
333-strong team which is currently
working on some very high-profile
titles for some leading gamedevelopers and publishers and wewere able to announce projects
we had delivered in 2018 including
significant work on Shenmue I & II
for Sega; Assassin’s Creed Odyssey,
Rainbow Six: Siege, and For Honor
for Ubisoft; and Miami Street for
Microsoft. While this service line
is more project based and exhibits
a lumpier revenue profile than
the rest of the Keywords business,
it is important for the Group as it
is highly valued by our customers
and ensures we are even more
integrated with their development
life cycles, often at an earlier stage.
It is also expected to see significant
demand as customers increasingly
port games content to cloud
gaming platforms for streaming.
We are, therefore, actively
assessing further acquisition
opportunities in this area and as webuild its scale, we expect to achievesmoother and more predictablerevenues for this service line.

Audio revenues increased by
65% to €34.2m (2017: €20.7m)
including full year contributions
from our 2017 acquisitions in
Paris (La Marque Rose, Around
the Word, Dune Sound and AsRec)and of Lola, and contributions
from Cord and Laced, andBlindlight since they wereacquired in April and June 2018
respectively.
On a Like-for-Like basis, revenues
in our Audio service line grew by
9.8%. This was achieved despite
the collapse of two companies
which were important clientsfor the service line and certain
unexpected delays and scale
backs in projects, all of which
can in part be attributed tothe ‘Fortnite effect’. It reflects
the benefits of our previous
investments in our Audio service
line, including new studios inTokyo and London.
Our search for suitable premises
in which to co-locate our four
voice recording businesses
in Paris is continuing but ourcontinued focus on ensuring
the premises are suitable andgood value means it is taking
longer than previously envisaged
to achieve this goal. In themeantime, these businesses areoperating well from their existingstudio locations under common
management and reporting.

Led by Andrea Ballista, based in
Milan, Italy, our Audio businessextended its services offering
into sound design, music
management and original
language voice recording(principally in Hollywood) during
2018 and these new services areshowing good promise in theirown right, in addition to bringing
cross selling benefits to theGroup. Games music is a niche but
growing market and one example
of our success in this area is thatour games music record label,
Laced Records, saw strong
forward orders for its four-vinyl
album of the music from Doom.
As another example, Cord
managed all the music elements
for a highly anticipated upcoming
game, in which it arranged thecomposition of music and thelicensing of previously publishedtracks on behalf of the developer.
Our audio studio in Tokyo, which
we opened in 2017, had a goodfirst full year of operations andhas benefitted from a recently
strengthened team in preparation
for an even busier 2019, and ournew, larger studios in London areenabling us to meet the strong
demand for their services.

Art Creation

Engineering

Audioof Group revenue for the yearof Group revenue for the yearof Group revenue for the year

16.6%
22

Keywords Studios plc

10.4%

13.6%

Our Functional Testing service
line grew by 64% to €49.1m(2017: €30.0m), including afull year’s contribution from
VMC which was acquired in
October 2017. The service line
also grew by 6.4% on a Like-forLike basis despite the anticipateddrag from the inclusion of c.52%
of VMC revenues (at the timeof acquisition) falling within
Functional Testing. Excluding VMC,
we estimate that this Like-for-Like
growth would have been 26.5%
as our functional testing businessin North America has become the“go to” provider.

Our Localization activities
increased revenues by 5%
to €44.0m (2017: €42.0m).
Like-for-Like revenues grew by
3.5% despite suffering a significant
impact from clients reducing
support for some of their games,
which we believe was in largepart due to the ‘Fortnite effect’.
In particular, one client who was
the top ranked client by revenue
for this service line in 2017
reduced its spend substantiallycompared to the prior year andour expectations, leaving the
Localization service line to makeup a c.€6m deficit.

The service line management
team led by Mathieu Lachance,
who is based in Montreal, Canada,
have done well in integrating
the VMC business, having
consolidated their facilities,
improved the processes in thebusiness and implemented
common tools such that there
is now no discernible difference
between what was VMC and whatis the larger Keywords team today.
We expect the functional testing
activities of VMC to grow at thesame rate as the underlying
service line in 2019 and beyond.
The VMC brand along with thatof Babel has been replaced by
the Keywords name to reflect thiscomplete integration. Enzyme
Testing labs continues to have its
own branding for now, although
this may be rebranded during 2019.

During the year, the Localization
service line, led by Fabio Minazziin Milan, continued to invest in new
functionality and the scalability ofour proprietary “BPS” operating
platform and worked with our
suppliers of translation memory
systems to increase the robustnessof these solutions to support theever-increasing workloads we are
putting through them. We havecontinued to explore machinetranslation solutions and while wehave found few opportunities forthe use of this technology in video
games localization so far, we will
none-the-less be more active inbuilding this capability into our
workflows during 2019. Our XLOC
globalization content management
product progressed further in 2018
and we recently launched XLOC
6.2 with more developer fileformats supported and new userinterfaces, including in both
Chinese and Japanese, making it
the only product of this kindavailable for Asian developers.

Functional Testing

Localization

Localization Testing

Player Supportof Group revenue for the yearof Group revenue for the yearof Group revenue for the year

19.6%

of Group revenue for the year

17.6%

Our Localization Testing
operations maintained
revenues at €19.8m (2017:€19.8m) helped by the fullyear contribution from VMC.
On a Like-for-Like-basis
however, its revenues
declined by 10.6%.
This performance in part reflects
VMC’s inclusion (if VMC were
excluded, Like-for-Like sales would
have declined 8.7%), but the key
impact was from some important
titles, that were expected tocome in for testing in the last twomonths of the year, being delayed
to Q1 2019. Consequentially, theservice line has started strongly
in the first months of 2019.
In addition, we anticipate that
longer sales cycles, as we haveconcentrated more effort on multi
service line strategic client
relationships, should bear fruit in2019 and the management team,led by Thomas Barth from Dublin,
Ireland, are continuing to focus on
quality and cost efficiencies. In linewith this focus, they are exploring
the option of establishing a
localization testing operationin Katowice, Poland, leveraging
the management, personnel andfacilities infrastructure createdthere by the Player Support Groupto access the local, high calibre,
yet good value talent.

7.9%

Revenues for this service line,
which benefitted significantly
from a full year contribution
from VMC, almost quadrupledto €35.9m (2017: €9.2m).
The VMC business reduced theLike-for-Like growth of thebusiness, as expected. Without
VMC Like-for-Like growth would
have been 94.1%, rather than
30.8% including the effect of VMC.
This excellent underlying
performance led by Frederic Arens,
who moved from Montreal to ourTokyo studio during the year, wasdriven by organic expansion,
including the opening of a new
support centre in Katowice, Poland,
making use of the nearby presenceof Sperasoft in Krakow. This facility
now employs 200 people having
commenced in June 2018. Our
Manila operation has also
continued to grow strongly andnow has 700 employees, double
the number in the prior year.
Player support is planning for ayear of consolidation in 2019, after
the exceptional growth in 2018.
The Player Support operations
assumed from VMC are beingstabilised, although some further
attrition is expected in 2019, andwe expect it to return to growthby next year.

14.3%

Annual Report and Accounts 201823

Strategic Report

Chief Executive’s Review
continued
Managing growth anddeveloping our people

In July 2018, we strengthened the senior
management team with the promotions ofIgor Efremov, previously with Sperasoft, andJamie Campbell, previously with d3t, to theroles of Chief Commercial Officer and Service
Line Director, Engineering respectively. In
addition, we appointed Andrew Brown, whosebackground is in marketing at Danone, CocaCola, Johnson & Johnson and Activision, tothe role of Chief Marketing Officer.
The Group employed an average of 5,238
people in 2018 (2017: 3,167). Of thesearound 1,100 are flexibly resourced positions,most notably in our testing businesses, whichenables us to scale up and down with thedemands of the projects. Across our three
regions of the Americas, Europe and Asia, we
employed an average of 2,056, 1,267 and1,915 respectively. By function, these 5,238
positions break down in to 1,199 artists,
333 engineers / software developers, 1,615
testers and test engineers, 1,113 player
support agents, 165 internal linguists, 100
audio engineers, and 255 project managers
and supervisors. We also have 458 people inour support functions, including in finance /accounting, HR, IT, facilities, administration,and general management. Our increasingly
broad and deep pool of highly experienced
and games-passionate co-workers provide
a tremendous resource that our clients canaccess as needed in order to get their content
developed, localised, marketed and supported
in live operations, in a flexible and costefficient manner across the globe and in
appropriate time zones.
While we continue to develop our own tools
to improve productivity and to use best of
breed solutions where we can in our business,talent remains by far our most important
asset. There is always more to do in investingin our people, but we continue to make
improvements with training, benefit schemes,
career planning and we monitor ourselves inline with our policies of non-discrimination, toensure we are providing equal opportunities.
We are particularly proud and protectiveof our culture. It acts as the glue that binds
our co-workers around the world together.
Empowered, relaxed, professional and humble
with a focus on doing the very best we canfor each project entrusted to us, this culture

24

Keywords Studios plc

creates an environment in which gamespassionate individuals can work as anextension of our client’s organisations
together with like-minded colleagues, while
enjoying the opportunity to collaborate on
most of the world’s leading games aheadof their release.
We are an increasingly attractive employer
for many in the wider games industry, as weoffer the opportunity for individuals to workon around 250 leading games at any timeor over 600 throughout the year, giving theman excellent and sustainable variety of work
as well as good career advancement andopportunities to work in many different
locations. We are proud of and aim to develop
and retain our home-grown talent, but weare equally proud that a healthy proportionof our colleagues have, and will, go on towork in games publishing and development
within our clients’ organisations, creating a
Keywords’ alumnus which is helpful to bothus and the games industry in general.
Our acquisition programme also brings fresh
talent to the Group at all levels and wecontinue to be successful at integrating ourbusinesses, including providing opportunities
for our staff and colleagues to move between
our various studios and the countries in which
we operate. Our senior leadership team,which comprises four people from the original
Keywords business, ten people from acquired
entities as well as six externally hired
employees is itself testament to theopportunities provided across the Groupand our ability to complement the leadershipteam with talented individuals fromacquired companies.
We continue to see demand for our services
from outside of the games industry due tothe specific expertise we have in interactive
content development, testing and support.
Working on different forms of content canhelp to further expand the horizons of ourcolleagues as they get the opportunity totackle challenges in new but related fields
such as film and TV, retail, education,
automotive, advertising, architecture,urban planning, theme parks and interactive
experiences. In time, we intend to moreproactively target expansion into someof these adjacent market sectors, buildingon the experience we are already gaining.

MARKETING SERVICES
Fire Without Smoke (FWS),The TrailerFarm andSunny Side Up make up
our marketing services
business which iscurrently housed within
our Art Services Line.
Our activities here are primarily the
production of marketing trailers to
support the launch of games, promote
the addition of expansion content,
introduce new characters, and support
community outreach. In addition, we
also provide marketing consultancy
services, key art production (such as
billboard advertising) and e-Sports
marketing materials. The combinationof creative and technical services
represented by this activity sits wellwithin the Keywords family while also
expanding our contacts within ourclients to include the marketing
departments for the first time.

Current video games
market trends

Bursting onto the scene in the last months of2018 has been the promise of streaming ofvideo games or cloud-based gaming. Whileearlier attempts from companies like OnLive
and Gaikai stalled in the earlier part of thisdecade, Google has now entered the market
with its newly launched Stadia streaming
service and Microsoft has indicated its plansfor its games streaming project, codenamed
xCloud, to provide streaming access to over
3,000 current Xbox titles, supported by its
Azure cloud infrastructure of 54 data centres
serving 140 countries. Apple also announced
in March 2019 its Arcade subscription-based
gaming service which, although not a streaming
platform per se, does provider gamers withaccess to many games through this new
subscription platform.
The promise of these subscription platforms
providing easy, mostly device independent
access, to play video games anywhere in theworld is compelling and, if successful, will bea major opportunity for new entrants (suchas Google and Apple) and for potentially newmonetisation models. As the music and film andTV industries have experienced when moving
towards streaming services, we expect to see
an increased demand for content as thesestreaming platforms compete to become the“Netflix of games” and endeavour to host themost and the best content to attract and retain
their player bases. While we can’t rule out someshort-term disruption from this development,
we believe that Keywords is well placed
to benefit from this trend as games are
repurposed to run well on the new streaming
platforms and new content is created that best
fits their capabilities. Keywords started working

on a number of projects directly related to video
game streaming in the second half of 2018
and we have further increased our exposurein the first months of this year, with a numberof services being provided and discussions
ongoing with existing and potential clients
about how we might support future projects.
Few industry observers expect thesedevelopments in cloud-based gaming todisplace the video game consoles and PCs, on
which so many games are played, in the shortterm. This is expected to change as internet
bandwidth improves around the world andlatency issues are overcome. The current
generation of Sony and Microsoft devices
launched in November 2013 have been
refreshed since but there is now speculation
over a new generation of Xbox and PlayStation
consoles which could launch over the next two
years. This would represent another milestone
for the games industry and one from which we
believe Keywords is well placed to benefit. At
the time of the last launch, there was a sudden
switch of investment by publishers anddevelopers away from the previous generationof games. This time, given that games as aservice is such a feature of games now, we
expect to see the current generation of games
continue to be supported while new games aredeveloped that take advantage of the enhanced
capabilities of the new consoles.
The astounding success of Fortnite and, to alesser extent, Player Unknown Battleground(“PUBG”), has been a disruptor in the market
in 2018, helping to attract new video gamers
to the market while also outcompeting othergames. While we expect the success of both tocontinue, we think the market is more settled
now with Fortnite, PUBG and more latterly,
Apex Legends, an integral part of it.

The mobile games sector continues to growfaster than other platform types, with muchof this growth originating in Asia. Keywords
is proud to be supporting many of the world’s
leading mobile games and, as the quality,
complexity and scale of individual mobile games
grows, this benefits Keywords as the skills,
scale and global reach of all its services fromdevelopment to player support become more
relevant to them.
MagicLeap released their much-anticipatedaugmented reality headset for use commerciallyin August, albeit it was restricted to the US.
Microsoft have confirmed that their HoloLens 2
augmented reality headset will be launched later
this year but augmented reality, much like virtual
reality, is showing signs of slower adoption in
the games industry than many had thought a
few years ago. Keywords does work extensively
on VR content (games and non-games) as wellas AR but we don’t anticipate these being major
growth drivers in 2019.
eSports continues to develop strongly, andwe increased our exposure to this market ina small way through our entry into marketing
services with the acquisitions of Fire Without
Smoke, The TrailerFarm and Sunny Side Up.
We continue to seek out ways in which we
can participate in this segment in a moremeaningful manner.
Also, of note has been Epic Games (publisherof Fortnite) move into providing the market witha lower cost route of getting games to market
than the established platforms such as Steam.
If game developers and publishers reduce theircosts of distribution and increase their margins
as a result, this may translate into higher spend
on content creation, marketing and support
which will benefit Keywords.
Annual Report and Accounts 201825

Strategic Report

Chief Executive’s Review
continued
Service provider market

The service provider market remains highly
fragmented and, in addition to the continued
growth in our end market driving demand,
we continue to see a trend to outsourcing
across all our service lines, with Art Creation,
Functional Testing and Engineering likely
to benefit more given the high proportionof this type of work that remains in house.
In addition, we hope to further increase
market share and benefit from our larger
scale as we further consolidate our market.

Outlook

We have had an encouraging start to 2019,with trading for the first quarter being inline with our expectations. Some importantnew business wins, including in the gamestreaming space, and good overall demandfor our services across the Group give us
confidence in the outcome for the full year.
We expect 2019 to be lighter in capital
expenditure than 2018, although we won’t
hesitate to invest in growth and enabling
technologies as the opportunities arise andas we see the business requiring more space,people, tools, and systems.

26

Keywords Studios plc

Whilst we are listed in the UK, only arelatively small proportion of our businessis in the UK where we now employ a totalof 317 people. As a highly international
diversified business that operates in a very
global market we, therefore, do not expect
Brexit to have a material impact on the business.
Our acquisition program is continuing at pace,with a particular focus on building up ourmarketing, engineering and audio services.
Having completed the acquisition of SunnySide Up in early January, we announced
in February 2019 that we had acquired
GetSocial, which brings to the Group leadingedge technology which drives user engagement,
retention, acquisition and monetisation
through social interactions of players within
the game. We are actively reviewing ahealthy pipeline of acquisition opportunities
from which we will continue to be selective,
with many businesses excited about thestrong platform Keywords could potentiallyprovide for their services and people.
Our Keywords Ventures arm has an active
pipeline of investment opportunities in areasthat would benefit our video game client baseand beyond. The application of artificial
intelligence and machine learning to the video
games space is interesting and a number ofthese opportunities lie in this general arena.

We see potential to leverage the latest
technologies and big data expertise toprovide services to our clients which help
them better understand and influence player
behaviour, so they can attract players morecost effectively, retain them for longer andbetter monetise players while, at the sametime, fine tuning and improving the game
experience for players.
As a more diversified, better balanced
business with significantly expanded range ofservices to offer our clients, we look forward
to developing our relationships with ourclients through increased integration ofservices, the development of more strategicclient relationships, across multiple services,and through the provision of dedicatedoutsourced or embedded services.

Andrew Day
Group Chief Executive Officer
8 April 2019

Financial and Operating Review

Strong results driven
by good organic growthcomplemented by acquisitions

Group performance

2018 has seen the Group deliver anotheryear of significant increases in revenue,
profit and underlying cash generation driven
by good organic growth, substantiallycomplemented by acquisitions which havefurther extended its service offering, market
penetration and geographic reach.

Revenue

Revenue for 2018 was up 66% at €250.8m(2017: €151.4m). Overall six of the sevenservice lines grew, with Engineering andPlayer Support being particularly strong.
This growth was generated through a
combination of both organic and acquisitive
growth. On a constant currency basis,revenue grew to €258.6m (2017: €151.4m).
The Like-for-Like revenue growth rate was
10.1% for the year, down from 15% in 2017
due to the onboarding of the VMC business.
Excluding VMC, the Like-for-Like revenue
growth rate, was 14.9%, which was in linewith our expectations and a strong growthrate from a larger base.

Gross margin

Gross profit for the year was €95.8m (2017:€55.1m). The gross margin percentage
increased to 38.2% (2017: 36.4%).

EBITDAEBITDA for the year was €34.3m (2017:€21.9m). Adjusted EBITDA is a measure ofoperating profit used by the Board, which
excludes depreciation, amortisation, shareoption expenses and one-time costs related
to acquisitions. For 2018, Adjusted EBITDA
increased 66% to €43.7m compared with
€26.3m for 2017. As a percentage of revenue,
Adjusted EBITDA has been maintained at
17.4% compared to 17.4% for 2017.
Adjusted Operating Costs, which excludes
depreciation, increased by €23.2m to €52m
(2017: €28.8m) mainly as a result of theacquisitions made in 2017 and during theyear. The continued additional investment
in strengthening Keywords’ management tosuccessfully manage the growth of the Groupalso contributed. These costs increased from
19.0% to 20.7% of revenue.

Net finance costs

During 2018, there was a net finance costof €0.5m compared to a cost of €4.4m
in 2017 primarily due to the impact of foreignexchange gains of €0.8m (2017: loss of€3.6m). The foreign exchange movements
were largely due to the effect of translating
net current assets held in foreign currencies.
The interest expense of €0.5m (2017: €0.3m)
related partly to the syndicated revolving
credit facility (“RCF”) of up to €105m overa three-year period of which €40m was
drawn down at the year end.

Profit before taxation

Profit before tax for the year was €22.1m(2017: €12.0m). Adjusted Profit Before
Tax is used by the Board to measure themore meaningful underlying profit generationof the Group. This measure adds back one-time
expenses, including acquisition and integration
expenses of €5.6m (2017: €3.0m), share option
charges of €4.1m (2017: €1.4m), foreign
currency exchange gains of €0.8m (2017: lossof €3.6m), and amortisation of intangibles of€6.9m (2017: €3.0m) to the statutory profit
before tax. As a result, Adjusted Profit Before
Tax for 2018 increased by 65% to €37.9m
compared with €23.0m in 2017.

Annual Report and Accounts 201827

Strategic Report

Financial and Operating Review
continued
Revenue mix

Revenues increased across six of our seven lines of business in 2018, staying constant in Localization Testing, resulting in our seven service
lines accounting for the following proportion of Group sales in the year on a statutory and pro forma basis*:
RevenueYear ended
31-Dec-18%

RevenueYear ended
31-Dec-17%

Proforma*
revenue for theYear ended
31-Dec-18%

Art Creation
Engineering
Audio
Functional Testing
Localization
Localization Testing
Customer Support

16.6
10.4
13.6
19.6
17.6
7.9
14.3

17.3
2.4
13.6
19.8
27.7
13.1
6.1

16.6
13.5
13.9
18.5
16.6
7.4
13.5

Total

100.0

100.0

100.0

Revenue mix %*Pro forma includes the annualised sales of all acquisitions made in 2018 in order to give a better overview of the balance of the business at the start of 2019. Total pro
forma revenue for 2018 on this basis was €265.4m (2017: €220.7m).

Following acquisitions made in late 2017 and through 2018, the proportion of the Group’s revenues denominated in US Dollars is running at around49%, while those in Euros and Canadian Dollars are around 22% and 16% respectively. The UK has grown in importance to the Group as a result of ourinvestments in the more technical and creative areas of our business, resulting in annualised revenues denominated in Sterling of approximately 9%.

Taxation

The Group’s effective tax rate has decreased
again in 2018. We continue to make steadyprogress in making better use of our Irelandbased operational headquarters in contracting
and treasury management such that we expect
our effective tax rate to continue to reduce
despite our exposure to higher tax jurisdictions
in most of the territories we operate in. The
Group’s adjusted effective tax rate, based on
the Adjusted measure of Profit Before Taxationin the period (as set out in the financial
overview above), was 19.0% (2017: 20.5%).

Basic earnings per share

Basic earnings per share based on thestatutory profit after tax was 23.16c (2017:12.37c). Adjusted Basic Earnings Per Sharefor the year, before one-time costs ofacquisitions and integration, share option
charges, amortisation of intangibles, andforeign exchange movements, increased by
53% to 47.8c compared with 31.2c for 2017.

Cash flow and debt

The Group generated operating cash flow of€32.2m for the year, up from €16.7m in 2017.
During the year the Group also received multimedia tax credits (“MMTCs”) in Quebec of€10.9m (2017: €3.4m). MMTCs in relation
to VMC for the years 2015 to 2017 werecollected in 2018 and the total MMTC accrual
amounted to €9.2m as at 31 December 2018(2017: €10.0m).

28

Keywords Studios plc

The Group made eight acquisitions tostrengthen the business during the year witha related net cash outflow on consideration
payments of €24.1m, and an additional €4.5m
in acquisition and integration cash outlay.
Investment in fixed assets amounted to€9.4m (2017: €3.8m) reflecting the ongoingcosts of IT across larger staff numbers andthe cost of further increasing the capacityof the Montreal, Tokyo and Manila studios,and improvements to both the Dublin andLondon studios. Additionally, there wereongoing purchases of games, development
and testing equipment.
Following the investment of €24.1m net cash
consideration for acquisitions in 2018, cash
and cash equivalents increased to €39.9m
from €30.4m. The loans and borrowings
were €40.3m at 31 December 2018 (2017:€19.3m) having utilised €40m of its €75m
revolving credit facility, giving a net debt
position of €0.4m (2017: €11.1m net cash).

Capital Structureand Group Financing

The Keywords Group funds itself primarily
through cash generation and a syndicatedrevolving credit facility. The bank debt facility
is a €75m RCF, with an option to increase thisto €105m. The Keywords Group had €40m
drawn from the RCF at year-end 2018. The
RCF matures in June 2021 and has an option
to extend it for up to a further 2 years.

As at 31 December 2018, the Group had
available cash balances and undrawn
facilities which, aggregated, were c.€75M.
These available funds and ongoing cash
generation from activities provide appropriate
operational headroom and available funding
for strategic purposes.

Key Financial Covenants

The majority of Group borrowings are subject
to financial covenants that are calculated
in accordance with the facility agreement:• Leverage: A maximum Total Net
Borrowings to Adjusted EBITDA ratioof 3 times; and• Interest Cover: A minimum Adjusted
Operating Profit to Net Finance Costs
ratio of 4 times.
The Group’s performance against thesecovenants in the current and comparative
year is set out below:
Covenant

Leverage Maximum 3.0
Interest
Cover
Minimum 4.0

Foreign exchange

2018
Times

2017
Times

0.19

-0.47

40.29

40

Keywords does not hedge foreign currency
profit and loss translation exposures. The
effect on the Group’s results of movements
in exchange rates and the foreign gains andlosses incurred during the year mainly relate
to the effect of translating net current assets
held in foreign currencies.

Dividend

The Group has a progressive dividend policy,
subject to the retention of funds needed tofund future growth of the Group’s businessand its strategic aims.
Following the interim dividend payment of
0.53p per share in October 2018, the Board
has recommended a final dividend of 1.08p
per share, which will make the total dividend
for the year ending 31 December 2018 1.61p
per share, a 10% increase over 2017. Subject
to shareholder approval at the Annual General
Meeting, the final dividend will be paid on
21 June 2019 to all shareholders on the registerat 31 May 2019 and the shares will trade
ex-dividend on 30 May 2019. The cash cost of
the final proposed dividend will be an estimated€0.8m, subject to currency fluctuations.

Review of distributablereserves and rectificationof prior dividends

The Board has identified technical breaches
in respect of certain interim and final
dividends having been declared and paid
otherwise than in accordance with therequirements of the Companies Act 2006
(the “Act”).
The Company has previously declared final
dividends and certain interim dividends
relating to the financial years 2014 to 2016
without having had sufficient distributablereserves in the holding company as requiredby the Companies Act 2016 due to a failure
to make the necessary upstream distributions
from subsidiaries to the Company despite
such reserves being available. This wasrecognised during 2017 and a major
distribution exercise was undertaken to
rectify the problem.
In addition to the above, no interim accounts
were filed at Companies House prior to thepayment of interim dividends previously paidby the Company in the years 2013 to 2018.

This was identified by the Board in August
2018 and legal advice was obtained.
It is important to make clear that no party
has been or is in a worse position as a resultof these oversights.
The Company is seeking authority to release
all relevant parties from any potential liability
via a specific shareholder resolution to be
put to the shareholders at the 2019 AGM.
Accordingly, the appropriate resolution, if
passed, will authorise the Company to enter
into deeds of release to put all relevant
parties in the position in which they werealways intended to be had the relevant
dividends been made in accordance with
the Act.
Full details, including the form of the deedsof the release, will be included in the circularand notice of the 2019 AGM to be sent toshareholders. For the avoidance of doubt,
procedures are now in place to ensure that
this does not happen again in the future.

Events after thereporting period

On 3 January 2019, we announced that theGroup acquired Sunny Side Up Creative Inc in
Canada for a total consideration of CAD 5.9m
comprised of an initial cash consideration of
CAD 4.75m on completion and the issue of
60,179 ordinary shares in Keywords. SunnySide Up generated Adjusted EBITDA of CAD
1.2m in the year to September 2018.
On 21 February 2019, we announced that
the Group acquired GetSocial B.V. in the
Netherlands for a total consideration of €0.2m.

David Broderick
Chief Financial Officer
8 April 2018

Annual Report and Accounts 201829

Strategic Report

KPIs
FINANCIAL KPIs
We monitor our financial performance against a number of different
benchmarks and these are set in agreement with the Board.

Like-for-Like
Revenue Growth

Revenue Growth

2018

2018

10.1%
10.1%

2017

15.1%

66%
2017

Adjusted Operating
Costs as a % of Sales

Gross Margin

38.2%
66%
57%

20.7%

2018

38.2%

2018

2017

36.4%

2017

20.7%
19.0%

Reasons for choice
Due to the number of acquisitions
the Group makes and because
it integrates them quickly,
this provides the mostmeaningful measure ofunderlying revenue growth.

Quantifies the growth in revenue
to external customers.

The Board believes this tobe a consistent measure of
trading performance.

The Board monitors theoverhead to ensure theoperating costs of the Groupare in line with the level ofbusiness being generated.

Calculated increase in sales
year on year.

Sales revenue from contracts
with customers less cost of sales.

Administration expenses,
before non-operating costs
including share option costs,
costs of acquisitions andintegration, amortisation,
depreciation, and includingbank charges, as a percentageof revenues.

The Group expects FY19 to beanother year of revenue growthand development.

The Group expects tokeep margins in line withprevious years.

The Group will continue to seek
to control these closely and inline with the level of businessbeing generated.

How we calculate
Calculated by adjusting the prioryear revenues comparison, byadding pre-acquisition revenues
for the corresponding period ofownership, as presented in thecurrent year results, and applying
consistent foreign exchange
rates in both years.

Outlook
The Group expects to achieve likefor like growth materially aheadof market growth.

30

Keywords Studios plc

Adjusted operating
profit margin

Adjusted Operating
Cash Conversion

15.1%

87%

Growth in Adjusted EPS

ROCE

53%

19.4%

2018

15.1%

2018

87%

2018

53%

2018

2017

15.2%

2017

84%

2017

51%

2017

19.4%
15.8%

The Board believes this to bea consistent measure of trading
performance, aligned with theinterests of our shareholders.

Measures cash generation andour capacity to pay dividends
and service debt.

Reports the underlying profit
generated on a per share basis,demonstrating the value being
created for shareholders. Also
links to the Group’s dividend
policy and gives an indication of
our ability to pay dividends fromunderlying profit.

Provides an indication of how
we are performing relative
to our peers and against our
cost of capital.

Operating profit before foreignexchange gains or losses,
amortisation, any one time
expenses and the cost of
employee share option awards.

Adjusted Free Cashflow asa percentage of the Adjusted
Profit Before Tax.

The Adjusted Profit After Tax
comprises the Adjusted Profit
Before Tax, less the tax expense
as reported on the Consolidated
Statement of Comprehensive
Income.

ROCE is the continuing Adjusted
Profit Before Tax as a percentage
of total capital employed, which
are both adjusted as if all theacquisitions made during eachyear were made at the startof that year. The calculation
is described in more detail on
pages 106 and 107.

The Adjusted Earnings Per Sharecomprises the Adjusted profit
after tax over the non-diluted
weighted average number ofshares, as reported on note 8.

The Group expects tokeep margins in line withprevious years.

Cash generation and working
capital management will remaina key focus in FY19.

The Group expects that FY19
will be another year of growthin Adjusted Earnings Per Share.

The achievement of returns
on capital employed in excessof the Group’s cost of capital willcontinue to be key in order toensure the efficient generationof cash to fund organic growth,acquisitions and dividend growth.

Annual Report and Accounts 201831

Strategic Report

Principal Risks and Uncertainties
The principal risks associated with the Group’s strategy can be divided into:
General business risks for any international company;
Industry-related risks; andThose specific to the Keywords Group and its strategy.
The principal risks to which the Group is exposed are set out below, together withdetails of their potential impact; the likelihood of occurrence (on a scale of 1 to 3,
with 1 being the most likely); an indication of whether the trend in the risk exposure isincreasing, decreasing or broadly unchanged; and the actions taken to mitigate the risk.
Trend

Links to Strategic Pillars:

Increase
No change
Extending ourrange of services

Selective
acquisitions

Internal risks

Organic growthand cross selling

Growing
market share

Expandinggeographic reachIntroducing
technology

Decrease

Likelihood Actions

Acquisition risks

3

Keywords has an active acquisition strategy to reinforce its global growth. Managing suchacquisitions successfully and embedding the Keywords culture is a crucial ingredient of
success, and as Keywords continues to make larger acquisitions, the risk associated isheightened. Failure to do so will have adverse consequences such as management distraction,
disposal and reduced profit. Since IPO, the Company has involved a broader number of senior
managers in the acquisition and integration process, building on the considerable experiencethat exists at Board level thus providing further bandwidth to identify, execute and integrateacquisitions.

Failure to deliver
services

3

Most of Keywords’ services are of a time-critical nature with delays or service delivery failurespotentially impacting the development or launch plans for games. Timely delivery and theresourcing flexibility to enable delivery to tight deadlines has been an integral part of theCompany’s modus operandi, and Keywords’ approach to project management is applied acrossthe Group. With the expansion of the Group, measures are being taken to assess ongoing delivery
performance beyond the regular project post-mortems that are routinely conducted.

Cross contamination

2

As the Group succeeds in delivering multiple services to the same clients, so the risk of failure
in one service line contaminating the relationship with the client across the other service lines
increases. Whilst the introduction of co-development adds to this risk in some respects, it also
helps to mitigate it. Adhering to Keywords’ strong standards of delivery and efficient
communication across service lines is key to managing this risk

External risks
Exposure to large
clients

32

Keywords Studios plc

Likelihood Actions
3

The Company’s client base principally comprises global game companies whose revenues are in
the billions and hundreds of millions of dollars. Our top five clients account for 25.6% (2017: 29%)of the Company’s revenues. These companies have exacting standards and demand a high qualityof service. Any failure in this regard or breakdown in the relationships at the top level could cause
considerable damage to the business. The potential impact is partially mitigated through theCompany’s highly flexible resource base and its expansion continues to reduce its exposure to
any single large client.

Trend

Trend

External risks

Likelihood Actions

Trend

Financial performance– failure to meet
expectations

2

Keywords floated on AIM in July 2013 with an expressed set of objectives of growing thebusiness organically and by acquisition. Should the Company lose the confidence of investors,
the Company’s rating will suffer and this in turn will affect its ability to raise money for or place
shares to pay for acquisitions. However, the Company makes every effort to communicate
regularly with investors via announcements and face-to-face contact and this effective
communication of the continued opportunities for growth in the sector, how it continues to
execute on its stated strategy and successfully integrate the businesses it acquires should
continue to maintain the confidence of its investors.

Sudden businessinterruption

3

Keywords is a global business and needs to minimise business interruptions and be able tocontinue servicing customers. This threat could be internal such as a major failure in its IT
systems but also external such as the Group experienced and managed during the 2011 Tokyo
earthquake and tsunami. The Group’s multiple, full-service, delivery hubs provide for a good levelof contingency and, supported by a solid business continuity plan and comprehensive insurance,
the effects of such disasters can be managed.

Breaches toTechnology andinformation security

2

The Company uses various third party and proprietary tools and technologies for processcontrol and productivity purposes. Continued investment in these tools is important to ensure
the Group’s effectiveness. New technologies for automated testing, machine translation andcrowdsourcing, could pose a threat to the Group in the long-term. The Company participates
directly and with clients in various pilot programmes for new technologies to keep abreast of
the state of the art and we have a technology innovation initiative called Keywords Innovate
which distils ideas from across the Group to develop technologies that can support ourservices. This is further underpinned through the formation of Keywords Ventures which is
focused on new, emerging technologies that may impact the Group in the future. The industry
requires the highest standards of security within a company offering services such as
Keywords. Cyber security breaches may lead to piracy, disruption of clients’ marketing plans,
loss of competitive edge and could result in compensation claims. Keywords maintains physicaland data security policies and procedures which are regularly audited by its larger clients.

Global political risk
and uncertainty

3

We operate and own assets in a large number of geographic regions and countries, and, asa result, we are exposed to a wide range of political, economic, regulatory, social and tax
environments. Policies or laws in the countries in which we do business may change in amanner that may be adverse for us, even those with stable political environments e.g. many
governments have sought additional sources of revenue by increasing rates of taxation.
However the diversification and spread of activities geographically mitigates the risk of
disruption in any one location and the tax strategy adopted is designed for improved efficiency
and we eschew aggressive or artificial practices.

Brexit
The Board has assessed the risk of Brexit on Keywords and concluded that for now, this does
not constitute a risk for the Group as its UK operations are small relative to the rest of the Group.

Financial risks

Likelihood Actions

Trend

Inadequate financial
and operational
controls

3

As a business like Keywords grows rapidly, global financial controls and regular audits need to bein place to ensure smooth, timely and accurate reporting to satisfy the relevant accounting bodies
to local branches as well as the Board. Failure to accurately report or forecast financial results
through error or fraud would damage the Group’s reputation. Therefore, the Group has invested
and continues to invest in its financial reporting functions to facilitate strong reporting andmanagement control as it grows. The Group intends to appoint a new Global Internal Audit
Manager was appointed in 2019 to further drive improvements.

Failure to
manage humanresources / talenteffectively

2

Keywords management structure has been fundamental to the Group’s success, enabled byembedding a Group culture that binds the teams together, with a common set of standards.
In addition, special emphasis is placed on workplace harmony and the prevention of any formsof discrimination, harassment, or malpractice in the workplace recognising that any sense of
dissatisfaction can be very disruptive. As a separate dimension, failure to attract, retain or develop
high quality entrepreneurial management across the business could impact on the attainment ofstrategic objectives. The Group is focused on these areas with the implementation of globally
managed service lines, management development and remuneration programmes, incorporating
long and short-term incentives. Regular staff surveys are undertaken.

Non-compliancewith legal andethical standards

2

A material failure to comply with applicable legal and ethical standards could result in penalties,
costs, reputational harm and damage to relationships with suppliers and customers. The Group
promotes a culture of “Doing the right Thing” in all activities. Business conduct guidelines are inplace and are supported by more detailed policies and procedures where needed.

Annual Report and Accounts 201833

Governance

Board of Directors: Biographies

Ross Graham (71)Andrew Day (55)David Broderick (44)David Reeves (72)Length of service with
the Group (as at 8 April 2019):
5 years

Length of service with
the Group (as at 8 April 2019):
10 years

Length of service with
the Group (as at 8 April 2019):
3 years

Length of service with
the Group (as at 8 April 2019):
5 years

Experience:
Ross has extensive executive and
Non-Executive experience in thetechnology sector. From being apartner in Arthur Young from 1981
to 1987, he joined Misys PLC, a
global software business as FinanceDirector upon its flotation, latterly
becoming Corporate Development
Director; throughout he playeda key role in developing andimplementing the very successful
Misys acquisition strategy. Since
retiring from Misys, Ross has
held a number of Non-Executive
directorships including those atPsion PLC from 2005 until 2012
(when it was successfully sold toMotorola Solutions Inc.), at Wolfson
Microelectronics PLC from 2004
to 2013 (prior to its sale to Cirrus
Logic Inc.), and several others. His
experience in these companies has
included being Senior Independent
Director, Chairman of the Audit
Committee and Chairman of theRemuneration Committee. Ross
was appointed Director andChairman of Keywords shortly
prior to its flotation in July 2013.
With his wealth of experience andChairing skills, Ross creates theenvironment for dynamic Board
discussion. He has helped elevatethe governance processes without
destroying the entrepreneurial
essence of Keywords.

Experience:
Andrew has a background intechnology, manufacturing
and business services throughcorporate development andgeneral management roles withinboth publicly quoted and privatecompanies. Andrew started his
career in 1983 at Rothmans
International PLC in production
management. From 1986 to 1993
he had responsibility for corporate
development activities at Britannia
Security Group PLC, TIP Europe
PLC and Brent International PLC
before holding the position of
Divisional Managing Director
at Brent International PLC for
six years. Andrew was Chief
Executive Officer of interactive
retail software developer,
Unipower Solutions and Headof Retail and CPG for EMEA, a
NYSE-listed advanced analytics
business, FICO, before joining
Keywords as its Chief Executive
Officer in April 2009.

Experience:David Broderick is the Chief
Financial Officer. He joined theGroup, and was appointed to
the Board, in October 2016.
Prior to joining Keywords hewas the Chief Financial Officer
of Dublin-based Arconics, ahigh-growth aviation software
company. In 2013 David joined
Stobart Air (formerly Aer Arann)
as the Finance Director of theEuropean regional airline during
a period of significant growth.
Before this he spent eight years
at Ryanair Holdings plc, Europe’s
largest low-cost airline, the lattersix years of which he was the
Head of Investor relations andoversaw the Group’s Inflight Sales
Unit’s finances and operations.
He is a qualified certified
accountant, with extensive
experience of capital markets
and financial management in
an international environment.

Experience:David has over 30 years global
experience in management roles
within multinational companies.
He began his career with ICI in the
UK and then moved to RJ Reynolds
Nabisco where he worked from1979 to 1991, becoming theworldwide Marketing Director in
the USA in 1989. In 1991, David
served as the General Manager
and Vice President of Marketingin Tokyo for Mitsubishi Shoji JVTechnology Company before
moving into the Computer gameIndustry, opening and setting
up the PlayStation Company
in Germany, Switzerland andAustria. He was appointed
Executive Vice President in 1999
and President and CEO of Sony
Computer Entertainment (Europe)in 2003 where he remained until
2009. David now runs his own
Management Consultancy practiceas well as being on the Board of
three major Charities in the UK.
He brings a global knowledgeof growing multinational
Companies, experience of thevideo game industry, Corporate
Governance and an understandingof working with companies todevelop global strategies in
Europe, Asia, North America and
LATAM. He was appointed to
the Board of Keywords Studios
Limited on 29 May 2013.

Independent Non-Executive
Director and Chairman

34

Keywords Studios plc

Group Chief
Executive Officer

Chief Financial Officer

Senior Independent Non-Executive
Director

Giorgio Guastalla (50)Georges Fornay (62)Charlotta Ginman (53)Length of service with
the Group (as at 8 April 2019):
20 years

Length of service with
the Group (as at 8 April 2019):
2 years

Length of service with
the Group (as at 8 April 2019):
2 years

Experience:
Giorgio Guastalla is co-founder of
Keywords. Prior to establishing
Keywords in Ireland in 1998,
Giorgio held various positions
in marketing and IT at Brent
International PLC based in the US,
Spain, the UK and France. In 2002
Giorgio founded Italicatessen
Ltd, a company operating in thefood sector. Giorgio was CEO
of Keywords until 2009 before
concentrating on his otherbusiness interests and moving
to a Non-Executive Directorrole at Keywords Studios. With
over twenty years’ experiencein the industry, Giorgio brings
a wealth of understanding andknowledge to Keywords.

Experience:
Georges has over 30 years’
experience in the technology andvideo games sectors and currently
sits on the board of France’s
second largest Independent
games publisher, Focus HomeInteractive, which is listed on
the Alternext. Georges worked
in senior management at Sony
Computer Entertainment from1995 to 2011, including as CEOof the French and Swiss divisions
and culminating as the SeniorVice President from 2004-2011.
During this time he oversaw
the launch of the PlayStation
Portable and PlayStation 3.
Prior to this, Georges spent nine
years at Commodore, the last
five years of which were as
CEO of Commodore France PC
Manufacturing and Distribution.
Georges has also held significant
industry-wide roles including
four years as President of SELL,
France’s Union of Entertainment
Software Publishers, where he
was responsible for representing
and advocating the industry’s
and its 31 members’ interests
to the government. Georges
was appointed a Director of
Keywords in September 2017.

Experience:
A fellow of the Institute ofChartered Accountants in Englandand Wales, Charlotta is Chair of
the Audit Committee. She is a NonExecutive Director and Chair of the
Audit Committee of Polar Capital
Technology Trust PLC, Pacific
Asset Trust PLC and Motif Bio
PLC. She is also a Non-Executive
Director of Consort Medical
PLC and Unicorn AIM VCT PLC.
Charlotta has held senior positionsin the investment banking andtechnology / telecom sectors.

Non-Executive Director

Independent Non-Executive
Director

Independent Non-Executive
Director and Chairman of
the Audit Committee

As three out of Charlotta’s six NonExecutive directorships are withquoted investment companies
that involve less time commitment
than trading companies, Charlotta
is able to devote sufficient time toall of her appointments. Charlotta
was appointed a Director of
Keywords in September 2017.

Committee Membership
Audit Committee
Nomination Committee
Remuneration Committee
Disclosure Committee
None

Annual Report and Accounts 201835

Governance

Chairman’s Introduction

The Board is committed
to the highest standardsof corporate governance

Dear Shareholders
As Chairman of the Board of Directors of
Keywords Group plc, I am pleased to introduce
the Group’s corporate governance report.
The corporate governance statement
provides an insight into how the Board
operated during the year and the key issues
considered. The Board is committed to thehighest standards of corporate governance.
Our approach to governance is set by the
Board and our Executive Directors ensurethat the approach is effectively implemented
across the business. Effective and robust
governance remains central to the ongoing
success of the Group.
It is my responsibility to ensure that theGroup has both sound corporate governanceand an effective Board. As Chairman of theCompany, my responsibilities include leading
the Board effectively, overseeing the Group’s
corporate governance model, communicatingwith shareholders and ensuring that good
information flows freely between the
Executive and Non-Executive Directors
in a timely manner.
The Directors of the Company recognise
the value of good corporate governancein every part of its business. The Company
has adopted the Quoted Companies AllianceCorporate Governance Code (“QCA Code”),
which we believe is the most appropriate for
a company the size and stage of development
as Keywords.

36

Keywords Studios plc

The Board will provide annual updates on
our compliance with the QCA Code. During
the year, the following changes were madeto the Group’s key corporate governancearrangements:• Appointment of ONE Advisory Limited(“Company Secretary”) as Keywords’
Company Secretary in June 2018
• First Board Performance Evaluation
conducted• Formation of Nominations Committee• Appointment of David Reeves as Senior
Independent Director
The Board considers that the Group complies
with the QCA Code in all applicable respects.
An explanatory report of how we haveapplied the QCA Code guidance, anddisclosures of any areas of non-compliance,
can be found on our website at: www.
keywordsstudios.com. The Board understands
that the application of the QCA Code supports
the Group’s medium to long-term successwhilst simultaneously managing risks andprovides an underlying framework ofcommitment and transparent communications
with stakeholders.
The main Group-wide governance documents
are our Core Values and the Code of Conduct,
which set out the values and standards
that we expect of our employees. These
documents, together with our policies, govern
how we conduct our business and set thestandards that drive performance. Compliancetraining helps to enforce this. Board oversight,
reviews and audits form part of the monitoringand supervision process.
Risk processes are embedded and reviewed
by the Board on an ongoing basis acrossthe business. The important governancedevelopments at Keywords over the lastyear are outlined below.
My ambitions for the composition of theBoard are to maintain, and where applicable,
broaden the range of expertise, experienceand diversity. The Board continues to ensurethat effective succession plans are in place.
I encourage all shareholders to attend theAGM, which will be held at MHP, 6 Agar
Street, London, WC2N 4HN on 20 May 2019.
This event provides an excellent opportunity
to meet the Executive and Independent
Non-Executive Directors.

Ross Graham
Chairman
8 April 2019

Corporate Governance
Strategy
A description of the Company’s strategy, business model and supporting strategic pillars, along with key strengths can be found in the strategic
report on pages 14-17.
Internal controls and risk management
The Company’s principal risks, along with key challenges in the execution of the Company’s strategy, can be found in the Strategic Report on page32-33.
The Board is responsible for the monitoring of financial performance against budget and forecast and the formulation of the Group’s risk appetite
including the identification, assessment and monitoring of the Group’s principal risks. The Audit Committee has been delegated responsibility for theoversight of the Company’s risk management and internal controls and procedures, as well as determining the adequacy and efficiency of internal
control and risk management systems. The Board continuously monitors and upgrades its internal control procedures and risk management mechanisms
and conducts regular reviews, when it assesses both for effectiveness. This process enables the Board to determine if the risk exposure has changed
during the year and these disclosures are included in the Annual Report. In setting and implementing the Company’s strategies, the Board, having
identified the risks, seeks to limit the extent of the Company’s exposure to them having regard to both its risk tolerance and risk appetite.
The Directors believe that the Group has internal control systems in place appropriate to the size and nature of the business. The key elements are:• Group Board Meetings, at a minimum of eight times per year, with reports from and discussions with senior executives on performance andkey risk areas in the business;• Monthly financial reporting, for the Group and for each subsidiary, of actual performance compared to budget and the prior year;• Annual budget setting;• Annual strategy conference with top management team; and• A defined organisational structure with appropriate delegation of authority.
Further information on the Company’s approach to risk management and internal controls can be also found in the Audit Committee Reporton page 43.
The Board
The Board, as a whole, is responsible for the overall management of the Group and for its strategic direction, including approval of the Group’s
strategy, its annual business plans and budgets, the interim and full year financial statements and reports, any dividend proposals, theaccounting policies, major capital projects, any investments or disposals, its succession plans and the monitoring of financial performanceagainst budget and forecast and the formulation of the Group’s risk appetite including the identification, assessment and monitoring of
Keywords’ principal risks.
Director biographies and committee memberships are set out on pages 34-35.
The Board comprises the CEO, Andrew Day, the CFO, David Broderick, 1 Non-Independent Non-Executive Director, Giorgio Guastalla, and4 Independent Non-Executive Directors, Georges Fornay, Charlotta Ginman, Ross Graham and David Reeves. David Reeves is the Company’s
Senior Independent Director (“SID”), and Ross Graham is the Company’s Chairman. Letters of appointment of all Directors are available forinspection at the Company’s registered office during normal business hours. The Executive Directors work full time for the Company. All the
Non-Executive Directors are expected to dedicate at least 30 days per annum to the Company, rising to 40 days if they also chair a Committee,
and the Chair is expected to dedicate 60 days per annum. The Company has adopted a policy whereby all members of the Board are subject tore-election at each AGM.
The Board is satisfied that it has a suitable balance between independence, on the one hand, and knowledge of the Company, on the other,and that no individual or group may dominate the Board’s decisions. The Non-Executive Directors have both a breadth and depth of skills andexperience to fulfil their roles. The Company believes that the current balance of skills in the Board as a whole reflects a very broad range of
personal, commercial and professional experience, and notes the range of financial and managerial skills. All Directors are encouraged to use
their independent judgement and to challenge all matters, whether strategic or operational, enabling the Board to discharge its duties andresponsibilities effectively.
The Board meets a minimum of 8 times a year and a calendar of meetings and principal matters to be discussed are agreed at the beginning ofeach year. In order to be efficient, the Directors meet formally and informally both in person and by telephone. Board and Committee document
authors are made aware of proposed monthly deadlines through the calendar of meetings assembled at the beginning of the year. Board
papers are collated by the Company Secretary, compiled into a Board / Committee Pack, and circulated at least one week before meetings,
allowing time for full consideration and necessary clarifications before the meetings. The Board also utilizes a fully-functioning Board Portal,
which ensures the provision of timely and efficient distribution of Board and Committee papers as well as an effective means of Communication
for the Board.
Management supply the Board with appropriate and timely information and the Directors are free to seek any further information they
consider necessary.

Annual Report and Accounts 201837

GovernanceCorporate Governance continued
Senior Independent Director
David Reeves acts as the Senior Independent Director (“SID”) to the Company, serving as a sounding board to the Chairman and acting as anintermediary for the other directors. The SID is also available to shareholders and other Non-Executive directors to address any concerns or
issues they feel have not been adequately dealt with through the usual channels of communication.
Audit Committee
The Audit Committee is responsible for assisting the Board in fulfilling its financial and risk responsibilities. The Audit Committee oversees thefinancial reporting, risk management and internal control procedures. The Audit Committee advises the Board on the appointment and removalof the external auditor and discusses the nature, scope and results of the audit with the auditors. The Audit Committee reviews the extent of
non-audit services provided by the auditors and reviews with them their independence and objectivity.
Remuneration Committee
The Remuneration Committee is responsible for determining the remuneration of the Chairman, Executive Directors, the Company Secretaryand senior executives of Keywords. The Remuneration Committee is responsible for making recommendations to the Board of Directors’ andsenior executives’ remuneration. Non-Executive Directors’ remuneration and conditions are considered and agreed by the Board. Financial
packages for Executive Directors are established by reference to those prevailing in the employment market for executives of equivalent status
both in terms of level of responsibility of the position and their achievement of recognized job qualifications and skills. The Committee will also
have regard to the terms, which may be required to attract an equivalent experienced executive to join the Board from another company.
Nominations Committee
The Nominations Committee monitors and reviews the structure, size and composition (including the skills, knowledge and experience) required of
the Board compared to its current position and makes recommendations to the Board with regard to any recommended changes. The Nominations
Committee also gives full consideration to succession planning for directors and other senior executives in the course of its work, taking into
account the challenges and opportunities facing the company, and what skills and expertise are therefore needed on the Board in the future.
The role and responsibilities of the Nominations Committee can be found in the Nominations Committee Report on page 55.
Disclosure Committee
The Disclosure Committee has been established to assist in the design, implementation and evaluation of the Company’s disclosure controls
and procedures. The first Disclosure Committee meeting is scheduled for the first half of 2019.
Terms of reference of all Keywords’ Committees are available to view on the Company’s website at: www.keywordsstudios.com.
The table below sets out attendance statistics for each Director at Board, and where relevant, Committee meetings held during the financial year.

Director

Ross Graham
Andrew Day
David Broderick
Giorgio Guastalla
Georges Fornay
Charlotta Ginman
David Reeves*Board
10 meetings held

Audit
Committee
6 meetings held

Remuneration
Committee
3 meetings held

Nomination
Committee
4 meetings held

10
10
10
10
10
10
10

6
–
–
–
4*
6
6

3
–
–
–
–
3
3

4
4
–
–
–
4
4

Appointed to Audit Committee in June 2018.

The Non-Executive Directors meet without the presence of the Executive Directors during the year, and also maintain ongoing communications
with Executives between formal Board meetings.
Meetings are open and constructive, with every Director participating fully. Senior management can also be invited to meetings, providing theBoard with a thorough overview of the Company.
In addition to their general Board responsibilities, Non-Executive Directors are encouraged to be involved in specific workshops or meetings,
in line with their individual areas of expertise. The Board is kept abreast of developments of governance and AIM regulations. The Company
Secretary provides updates on governance issues, and the Company’s Nomad provides annual Board AIM Rules refresher training as well as
the initial training as part of a new Director’s on-boarding.
The Board shall review annually the appropriateness and opportunity for continuing professional development, whether formal or informal.

38

Keywords Studios plc

Advisors
The Board has regular contact with its advisors to ensure that it is aware of changes in corporate governance procedures and requirements
and that the Group is, at all times, compliant with applicable rules and regulations. The Company holds appropriate insurance cover in respectof possible legal action against its Directors. The Company’s Nomad supports the Board’s development, specifically providing guidance on
corporate governance and other regulatory matters, as required.
Keywords’ Company Secretary is responsible for ensuring that Board procedures are followed and that the Company complies with allapplicable rules, regulations and obligations governing its operation, as well as helping the Chairman to maintain excellent standards ofcorporate governance. The Company Secretary also provides Board support through assistance with shareholder meetings and MAR
compliance.
The Company has also enlisted the support of Mercer-Kepler, who provides advice in relation to remuneration. Additional information canbe found in the Company’s Remuneration Report on page 46.
All Directors may receive independent professional advice at Keywords’ expense, if necessary, for the performance of their duties.
Board Performance Evaluation
Details of the Company’s Board Performance Evaluation for the year can be found in the Report of the Nomination Committee on page 55.
CultureThe Board recognises that its decisions regarding strategy and risk may impact the corporate culture of the Company as a whole and that thiswill impact the performance of the Company. The Board is also aware that the tone and culture set by the Board can have an impact on the
Company as a whole and on the way that employees behave. The corporate governance arrangements that the Board has adopted aredesigned to ensure that the Company delivers long term value to its shareholders and that shareholders are able to express their views andexpectations for the Company in a manner that encourages open dialogue with the Board.
A large part of the Company’s activities are centred upon an open and respectful dialogue with employees, clients and other stakeholders.
Therefore, the importance of sound ethical values and behaviours is crucial to the ability of the Company to successfully achieve its corporate
objectives. The Board places great importance on this aspect of corporate life and seeks to ensure that this flows through all that the Company
does. The Directors consider that the Company has an open culture facilitating comprehensive dialogue and feedback, which enables positiveand constructive challenge.
The Company operates in a manner that encourages an open and respectful dialogue with employees, customers and other stakeholders
and the Board considers that sound ethical values and behaviours are crucial to the ability of the Company to achieve its corporate objectives.
The Board places great importance on this aspect of corporate life and seeks to ensure that this flows through all that the Company does.
The Directors believe that the Company has an open culture facilitating comprehensive dialogue and feedback and enabling positive andconstructive challenge.
Further information on the Company’s culture can be found in the Strategic Report pages 8-11.

Annual Report and Accounts 201839

GovernanceDirectors’ Report
The Directors present the Annual Report together with both the audited consolidated financial statements and the parent company (Keywords
Studios PLC) financial statements for the year ended 31 December 2018.
Disclaimer
The purpose of this Annual Report & Financial Statements is to provide information to the members of the Company. The Annual Report &Financial Statements have been prepared for, and only for, the members of the Company, as a body, and no other persons. The Company, its
Directors and employees, agents or advisers do not accept or assume responsibility to any other person to whom this document is shown orinto whose hands it may come and any such responsibility or liability is expressly disclaimed.
The Annual Report & Financial Statements contain certain forward-looking statements with respect to the operations, performance andfinancial condition of the Group. By their nature, these statements involve uncertainty since future events and circumstances can cause results
and developments to differ materially from those anticipated. The forward-looking statements reflect knowledge and information available
at the date of preparation of this Annual Report & Financial Statements and the Company undertakes no obligation to update these forwardlooking statements. Nothing in this Annual Report & Financial Statements should be construed as a profit forecast.
Dividends
The results for the year are set out on page 60. Dividends paid and proposed are set out on page 78. The Board is proposing a final dividend
1.08p per share following the payment of an interim dividend of 0.53p per share in October 2018.
Directors and changes to the Board
The Directors of the Company during the year were Ross Graham, Andrew Day, David Reeves, Giorgio Guastalla, Georges Fornay, Charlotta
Ginman and David Broderick. Details of members of the Board at 31 December 2018 are set out on pages 34 and 35.
Going concern
In view of the Group’s resources, cash at 31 December 2018 of €40m, cash flow from operations in 2018 of €32.2m, and the overall financial
condition of the Group, the Directors have reasonable expectation that the Group has adequate resources to continue in operation for theforeseeable future. For this reason, the Directors continue to adopt the going concern basis in preparing the financial statements.
Political donations
No political donations were made in the year.
Directors and their interests
A list of Directors, their interests in the ordinary share capital of the Company, their interests in its long-term performance share plan anddetails of their options over the ordinary share capital of the Company are given in the Directors’ Remuneration Report on pages 46 to 54.
No Director had a material interest in any significant contract, other than a service contract or contract for services, with the Company or
any of its operating companies at any time during the year.
Significant shareholdings
At 31 December 2018, the Company had been notified, in accordance with the Disclosure and Transparency Rules, of the following interests
in its ordinary share capital*:
Name

P.E.Q Holdings
Octopus Investments
Andrew Day
Oberweiss Asset Management
Canaccord Genuity Wealth management
T Rowe Price Global Investments
Franklin Templeton
Kames Capital*

Shares%4,000,736
3,650,758
3,296,573
2,944,000
2,820,855
2,788,693
2,695,000
2,247,262

6.3
5.7
5.2
4.6
4.4
4.4
4.2
3.5

As recorded in the Company’s share register.

Future developments
Important events since the financial year end are described on page 29 of the Strategic Report and future developments are described in thestrategy section of the Strategic Report on pages to 16 and 17.
People and organisation
Keywords is, and always has been, dependent on the quality and commitment of its entire staff to provide and maintain the high levels ofservices expected by the Groups’ clients.
Keywords average number of employees was 5,238 during 2018. This permanent headcount is supplemented with employees on short-term
contracts as activity changes throughout the year.

40

Keywords Studios plc

The Group continues to give full and fair consideration to applications for employment made by disabled persons, having regard to theirrespective aptitudes and abilities. The policy includes, where practicable, the continued employment of those who may become disabled during
their employment and the provision of training and career development and promotion, where appropriate. The Group has continued its policyof employee involvement by making information available to employees on matters of concern to them. Many employees are stakeholders in
the Company through participation in share option schemes and a long-term performance share plan.
The Group has not disclosed further details on employment of disabled persons or employee involvement as it has fewer than 250 employees
within the UK.
Corporate responsibility
Keywords seeks to be a socially responsible Group which has a positive impact on the communities in which operates. By the nature of thebusiness, we employ a diverse workforce, with many nationalities. No discrimination is tolerated and we endeavour to give all employees theopportunity to develop their capabilities. We provide an excellent working environment, the latest technology and appropriate training.
Website publication
The Directors are responsible for ensuring the Annual Report and Financial Statements are made available on a website. Financial statements
are published on the Group’s websites in accordance with legislation in the United Kingdom governing the preparation and dissemination offinancial statements, which may vary from legislation in other jurisdictions. The maintenance and integrity of the Group’s websites is the
responsibility of the Directors. The Directors’ responsibility also extends to the ongoing integrity of the financial statements contained therein.
By order of the board

David Broderick, FCCA
Chief Financial Officer
8 April 2019

Annual Report and Accounts 201841

GovernanceStatement of Directors’ Responsibilities
The Directors are responsible for preparing the Annual Report & Financial Statements.
Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have prepared theGroup and Company financial statements in accordance with International Financial Reporting Standards (“IFRS”) as adopted by the European
Union (“EU”).
Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of thestate of affairs of the Company and the Group and of the profit or loss of the Group for that period. The Directors are also required to prepare
financial statements in accordance with the rules of the London Stock Exchange for companies trading securities on the Alternative Investment
Market.
In preparing these financial statements the Directors are required to:• Select suitable accounting policies and then apply them consistently;• Make judgements and estimates that are reasonable and prudent;• State whether IFRS as adopted by the EU have been followed, subject to any material departures disclosed and explained in the Group andCompany financial statements respectively; and• Prepare the financial statements on a going concern basis, unless it is inappropriate to presume that the Company will continue in business.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company’s transactions anddisclose with reasonable accuracy at any time the financial position of the Company and the Group and to enable them to ensure that the financial
statements and the Directors’ remuneration report comply with the Companies Act 2006. They are also responsible for safeguarding the assetsof the Company and the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The Directors as at the date of this report, whose names and functions are listed in the Board of Directors on pages 34 and 35, confirm that:• So far as the Director is aware, there is no relevant audit information of which the Company’s auditors are unaware; and• The Director has taken all the steps that he or she ought to have taken as a Director in order to make himself / herself aware of any relevant
audit information and to establish that the Company’s auditors are aware of that information.
This confirmation is given and should be interpreted in accordance with the provisions of section 418 of the Companies Act 2006.
Website publication
The Directors are responsible for ensuring the Annual Report and Financial Statements are made available on a website. Financial statements
are published on the Group’s websites in accordance with legislation in the United Kingdom governing the preparation and dissemination offinancial statements, which may vary from legislation in other jurisdictions. The maintenance and integrity of the Group’s websites is the
responsibility of the Directors. The Directors’ responsibility also extends to the ongoing integrity of the financial statements contained therein.
By order of the Board

Liam O’Donoghue
Company Secretary
8 April 201942

Keywords Studios plc

Audit Committee Report
Introduction from the Chair

As Chair, I am pleased to present the Audit Committee report for the year ended 31 December 2018. This report details the work of theCommittee over the past year, fulfilling our responsibilities to provide effective governance over the Group’s financial activities.
Committee Composition
The Committee members, apart from myself, are Ross Graham, David Reeves and Georges Fornay who joined the Committee during the year.
The Audit Committee, as a whole, has competence relevant to the video games industry, both Ross Graham and I are Chartered Accountants
and I also chair the Audit Committee for other public companies. More information about the Committee members can be found on pages 34
and 35.
The Committee met 6 times during the financial year, and discussions included the following key items:• internal control framework including financial systems roll out• risk assurance• treasury• taxation• accounting policies• financial results• alternative performance measures• treatment of special items• asset Impairment (including goodwill)• going concern review• internal audit function• engagement and review of performance of external auditors• review of audit and non audit services and fees
• cyber risk, data protection and disaster recovery plans• whistleblowing, tax evasion, anti-bribery / corruption and modern slavery policies• review of Audit Committee terms of reference
Committee Role and Responsibilities
The Committee has written Terms of Reference, which are available to view on the website, www.keywordsstudios.com. The Terms ofReference clearly define the Committee’s responsibilities and duties. In addition to the Terms of Reference, the Committee has developed
an annual agenda which corresponds with the meeting schedule, to ensure all key responsibilities are completed and managed.

Significant Issues Considered by the Audit Committee During the Year

Internal Control and Risk Assurance Framework
The Audit Committee has been actively reviewing and challenging the upgrades that have taken place during the year to the Company’s
internal control and risk assurance framework ensuring that following its rapid expansion, the Company operates within a fit for purpose
framework. The Committee is pleased to see the progress made in the global automated financial systems roll-out, allowing eventually a fully
integrated automated reporting system to operate seamlessly across the Group, replacing manual consolidation processes that are both labour
intensive and prone to human error. The recruitment of a treasury team in Dublin during the year with a cash pooling platform being introduced
will allow better control of Group cash and the optimisation of cash management.
During the year the Audit Committee has introduced a regular review of the Company’s main risks on behalf of the Board, ensuring key risks are
top of mind and relevant and mitigation plans are in place where possible and, over time, the Company proposes to adopt a similar frameworkright through the organisation.
Internal Audit
To complement the above efforts, the Audit Committee has commenced working closely with management to recruit an Internal Audit Manager
in 2019. They will be tasked with establishing an internal audit function, to embrace all aspects of operating and financial efficiency, and willreport to the Audit Committee chair.

Annual Report and Accounts 201843

Governance

Audit Committee Report continued
Key Accounting Issues
During the year and as part of the year end procedures, the Committee considered the following key financial and internal control mattersin relation to the Group’s financial statements and disclosures with input from both management and the external auditor:• Revenue recognition• Functional reference currency• Business combinations• The valuation of intangible assets• Leases• Financial instruments• Alternative performance measures• Segmental reporting (if relevant)• Application and impact of new standards IFRS 9 (financial instruments), IFRS 15 (revenue recognition) and IFRS 16• Taxation• Going concern
For further detail on these, see notes 2 and 3.
Financial Reporting Council
The Company received a letter from the Financial Reporting Council’s (FRC) in November 2018, which raised questions on certain aspects of
its annual report and accounts for the year ended 31 December 2017. The Company responded fully to the matters raised in the FRC’s letter,enabling it to conclude its enquiry. The principal changes to the Company’s annual report and accounts for the year ended 31 December 2018
resulting from the FRC’s enquiry were as follows:• Improvements to the level of detail included in the strategic report, including added analysis on movements in working capital;• Revising the tax reconciliation in note 7 so that it starts from the weighted average statutory tax rate that applies in the jurisdictions
in which the Group pays tax; and• Improving the disclosure of critical accounting estimates and judgements in note 3.
In addition, the FRC highlighted to the Company that it the payment of dividends in 2016 and 2017 were not supported by the correct Relevant
Accounts, as required under UK company law. Further information on this and how the issue has been addressed can be found on page 78.
The FRC’s enquiry did not result in any change to reported profit or net assets.
Scope and limitations of the FRC’s review
The Company recognises that the FRC’s review was based on a review of its annual report and accounts for the year ended 31 December 2017and did not benefit from detailed knowledge of the Company’s business or an understanding of the underlying transactions entered into. The
FRC’s review provides no assurance that the Company’s annual report and accounts are correct in all material respects; the FRC’s role is not toverify the information provided but to consider compliance with reporting requirements. The FRC’s letters are written on the basis that it (andits officers, employees and agents) accepts no liability for reliance on them by the Company or any third party, including but not limited toinvestors and shareholders.
Annual Report and Financial Statements
The Board has asked the Committee to confirm that in its opinion the Annual Report as a whole can be taken as fair, balanced andunderstandable and provides the information necessary for shareholders to assess the Group’s financial position, performance, business modeland strategy. In doing so the Committee has given consideration to:• The way the Strategic Reports (including the Chairman’s Statement and Reports of the CEO and CFO) presents the Group – its business,financial and business model and the metrics management uses to measure performance• whether suitable accounting policies have been adopted and have challenged the robustness of significant management judgements andestimates reflected in the financial results• the comprehensive control framework around the production of the Annual Report, including the verification processes in place to deal withthe factual content;• the extensive levels of review that are undertaken in the production process, by both management and advisers• the Group’s internal control environment
In 2018, the Company became aware that certain interim dividends paid during the period 2013 to 2018 had been made otherwise than inaccordance with the Companies Act 2006 because interim accounts had not been prepared and filed at Companies House prior to payment.
Additionally, the Company also became aware of a technical issue relating to the levels of distributable reserves and the payment of the interim
dividend to the shareholders in October 2016, as explained in more detail in the director’s report. The Committee was fully involved in resolving
the matter and oversaw the thorough review by management into the historical issues and the administrative steps taken to rectify the issues.
As a result of the work performed, the Committee has concluded that the Annual Report for the year ended 31 December 2018, taken as awhole, is fair, balanced and understandable and provides the information necessary for Shareholders to assess the Group’s performance,business model and strategy, and it has reported on these findings to the Board.

44

Keywords Studios plc

Whistleblowing
During the year, the Audit Committee reviewed and approved the whistleblowing policy and accompanying process the Company has rolled out
globally. The policy allows employees wherever they are to raise any concerns they may have about possible financial or other irregularities
confidentially.
The Group is committed to the highest level of integrity and accountability and the prevention of bribery and corruption.
External Auditor
BDO, the Company’s current auditor, was first appointed on 29 May 2013. This is the first year John O’Callaghan is acting as audit partner
following Teresa Morahan having stepped down as audit partner after five years.
The Audit
The scope of the annual audit was agreed in advance with the Committee with a focus on areas of audit risk and the appropriate level of audit
materiality. The Committee also had discussions with the auditor on fees, internal controls, accounting policies and areas of critical accounting
estimates and judgements. The Auditors reported to the Audit Committee on the results of the audit work and highlighted any issue which theaudit work had discovered, or the Committee had previously identified as significant or material in the context of the Financial Statements.
There were no adverse matters brought to the Audit Committee’s attention in respect of the 2018 audit, which were material or significant or
which should be brought to Shareholders’ attention.
Effectiveness
The Audit Committee monitored and evaluated the effectiveness of the Auditors under the terms of their appointment based on an assessmentof their performance, qualification, knowledge, expertise and resources. The Auditors’ effectiveness was also considered along with otherfactors such as audit planning and interpretations of accounting standards and separate discussions with Management (without the auditor
present) and with the auditors (without Management present). The Chair of the Audit Committee also had discussions with the audit partner
outside the formal meetings throughout the year.
The Committee was satisfied that the audit was effective and that BDO continues to demonstrate the skills and experience needed to fulfill its
duties effectively.
Independence
In order to fulfil the Committee’s responsibility regarding independence of the Auditor, the Committee reviewed the senior staffing of the audit,
the Auditor’s arrangements concerning any conflicts of interest, the extent of any non-audit services, the Auditor’s independence statement
and any other issues that may affect the Auditor’s independence. The Committee was satisfied that the auditor remains independent.
Non–audit services
The Audit Committee’s established during the year a policy on the provision of non-audit services by the Auditors. The policy is produced in linewith the FRC ethical standards and any non-audit services are required to be pre-approved by the Audit Committee.
During the year BDO provided non-audit services to the Company of €23,000, as per the note 5.

Charlotta Ginman, FCA
Chair of the Audit Committee
8 April 2019

Annual Report and Accounts 201845

GovernanceDirectors’ Remuneration Report
Dear fellow Shareholders,
As Chairman of the Remuneration Committee, it is my pleasure to present the Directors’ Remuneration Report for the period ended
31 December 2018.
Keywords Studios PLC has chosen to apply the Corporate Governance Code for Small and Mid-size Quoted Companies published by the Quoted
Companies Alliance. Although the Company is currently AIM quoted, the Board recognises the importance of shareholder transparency andstandards of governance. Therefore, this report contains all the information required to be disclosed as an AIM quoted Company and also
contains some additional information that would be applicable were the Company listed on the London Stock Exchange main market, andincludes:• The Directors’ Remuneration Policy; and• Our annual report on remuneration, detailing director remuneration in 2018 and that set for 2019.
It is my hope that you find this a clear and comprehensive report and I look forward to hearing the views of our investors on the information
presented here over the coming months. We will carefully monitor emerging practice in this area as well as guidance from investor
representative groups.
We operate a simple Executive Director remuneration structure made up of base salary and pension, a bonus plan and a long-term incentive
plan (“LTIP”) which provides a clear link between pay and our key strategic priorities.
The Remuneration Committee intends to keep its approach to remuneration under regular review for continued appropriateness taking accountof regulatory requirements and corporate governance best practices as applicable to the Company over time. To this end, it is relevant to note
our decision made in 2018 to change the LTIP performance condition for 2019 awards.

Dr David Reeves
Chairman, Remuneration Committee
8 April 201946

Keywords Studios plc

Section 1: Directors’ Remuneration Policy

Policy and principles
The Remuneration Committee determines the Company’s policy on the structure of the remuneration for Executive Directors and Senior
Management Team (“SMT”) and is responsible for governing the remuneration policy for the broader employee population.
The objectives of this policy are to:• Reward Executive Directors and the SMT in a manner that ensures that they are properly incentivised and motivated to perform in the bestinterests of shareholders.
• Provide a level of remuneration required to attract and motivate high-calibre Executive Directors and SMT members.
• Encourage value creation through consistent and transparent alignment of incentive arrangements with the agreed company strategy overthe long term.
• Ensure the total remuneration packages awarded to Executive Directors and SMT members, comprising both performance-related andnon-performance-related remuneration, are designed to motivate the individual, align interests with shareholders and comply withcorporate governance best practices.
The Board and the Remuneration Committee believe the foregoing objectives are best achieved by a remuneration structure whereby:• Basic pay is set at a below-median level albeit sufficient for the challenges and pressures of the role.
• Annual bonuses are set at modest levels with a maximum of 30% of salary on the premise that an annual bonus doesn’t influence thebehaviour or commitment of a senior executive (this does not apply to sales executives).
• Long-term incentives are the means by which executives can earn significant rewards if, but only if, shareholders likewise have obtained
a good return.
Remuneration components for Executive Directors and SMT (the ‘Executives’)
Various remuneration components are combined to ensure an appropriate and balanced remuneration package which reflects the size andcomplexity of the Group, the Executive’s experience, responsibility and position in the Company as well as market practice. For this, theRemuneration Committee takes into account the performance of the individual, comparisons with peer companies and, where consideredappropriate, reports from external independent consultants.
The remuneration package comprises the following elements:• Fixed remuneration (basic salary and, for some Executives, pension);• Performance-based remuneration (annual bonus and LTIP):
Purpose and link to Strategy

Operation

Opportunity

Performance measures

Base salaries are reviewed by
the Committee annually, andbenchmarked periodicallyagainst comparable roles atcomparable companies of similar
size and complexity.

Salaries are set on a case-bycase basis to reflect the role, theexperience and qualifications of
the individual, and are targeted
at below market median.

n/aBase salary
To attract and retain talented
Executives to deliver the Group’s
strategy, by ensuring basesalaries and the implied total
package are competitive in
relevant talent markets, while
not overpaying.

Base salary increases for the
Executives take into accountpersonal performance, Company
performance, significant
changes in responsibilities, theaverage increase awarded to
the wider workforce, andcompetitive market practice.

Pension and Benefits
To provide an appropriate
structure and level of postretirement benefit for
Executives in a cost-efficientmanner that reflects local
market norms in the relevant
jurisdiction.

At the discretion of theRemuneration Committee, theExecutives may participate in a
pension scheme facilitated by
the Company.
The Company also provides
access to Group Benefit
schemes where appropriate
by Region which may include
moderate contribution towards
private health insurance, deathin service and other Group
based benefits.

The Company provides access topension schemes based on local
legal requirements or whereexpected by local labour
markets. Contributions meet theminimum requirements or are ofa modest level.

n/aBasic additional benefits may
also be provided whereavailable and where considered
the norm for managerial
positions in similar businesses.

Annual Report and Accounts 201847

GovernanceDirectors’ Remuneration Reportcontinued
Purpose and link to Strategy

Operation

Opportunity

Performance measures

Executives are eligible toparticipate in an annual bonus
scheme.

Up to a maximum of 30% ofsalary (excluding sales plans
where the maxima may vary).

The portion of bonus earned inany one year depends on the
Remuneration Committee’s
assessment of each individual’s
performance and the overall
performance of the Company
against predetermined turnoverand profitability targets forthe year.

Annual Bonus
To provide a modest award
where individual and company
performance have been at or
above expected levels.

The Remuneration Committee
reviews targets and theweighting of performancemeasures each year. The
Company also offers commission
arrangements for Executives insales roles.

Performance targets are
typically weighted 80% on
the Company’s financial
performance and 20% on
personal performance (however,if the Company’s financial
performance is considered to beunsatisfactory, the element
based on personal performanceis likely to be foregone).

LTIP
To incentivise delivery against
total shareholder return targets
and align the interests of
Executives and shareholders ingrowing the value of the Groupover the long-term.

LTIP grants are made annually inthe form of conditional awardsof shares or nil-cost shareoptions which vest subject toperformance conditions
measured over three years.
Once vested, awards may be
exercised for a period of up to 7
years from grant.
Malus provisions apply in certain
circumstances.

LTIP awards are granted as anumber of shares.

Vesting of the LTIP is subject tocontinued employment during
the performance period and theachievement of performance
conditions based on Total
Shareholder Return (“TSR”).
The Committee has the power of
discretion to adjust the outcome
in exceptional circumstances sothat it is a fair reflection of theunderlying performance of theGroup. Further details, including
the performance targets
attached to the LTIP in respectof each year will be disclosed in
the relevant Implementation
Report on Remuneration(subject to these being
considered not to becommercially sensitive).

Malus policy
For any awards granted since 2016, malus may be applied to LTIP awards in cases of fraud, dishonesty or deceit, gross misconduct or material
financial misstatement in the audited financial results of the Group. The Remuneration Committee may determine that an Award is cancelledin its entirety or be reduced to the extent they see fit.
Use of Discretion
The Remuneration Committee may apply its discretion when agreeing remuneration outcomes, to help ensure that the implementation of ourremuneration policy is consistent with underlying Company performance and is equitable to all parties.

48

Keywords Studios plc

Executive Director service contracts
In accordance with general market practice, each of the Executive Directors has a rolling service contract. The following table shows the date of
the service contract for each executive director served during the year:
Executive director

Position

Date of appointment

Date of service agreement

Notice period

Andrew Day
David Broderick

CEO
CFO

1 Apr 2009
3 Oct 2016

21 Jun 2013
8 Sep 2016

6 months
6 months

Remuneration for the wider workforce
The remuneration policy for other employees is based on principles consistent with those that are applied to Executive remuneration, with thecommon objective of driving financial performance and the achievement of strategic objectives and contributing to the long-term success of theGroup. Remuneration supports our ability to attract, motivate and retain skilled and dedicated individuals whose contribution continues to bea key factor in the Company’s success.
Annual salary reviews take into account Company performance, local pay and market conditions plus salary levels for similar roles incomparable companies. Some employees below Executive level are eligible to participate in annual bonus schemes; opportunities andperformance measures may vary by organisational level, geographical region and an individual’s role. An annual survey is conducted to ensure
gender equality as it relates to employee compensation.
The Company performs equal pay and gender pay gap analyses across all its locations. In particular, the Board of Directors discussed the resultsof the latest analyses in August 2018 and are satisfied that there is equal pay given location and role.
LTIP programmes are used for senior permanent members of staff, in which approximately 10% of the workforce participate. The focus of the
LTIP is to retain talent and create long-term shareholder value consistent with fulfilment of the Company’s long-term strategic goals.
External appointments held by Executives
Executives may not accept any external appointment without the consent of the Board.
Consideration of shareholder views
The Remuneration Committee will take into consideration all shareholder views during the year and at the annual general meeting each year
as well as guidance from shareholder representative bodies more broadly, in shaping the Company’s implementation of its Remuneration Policy
as well as future changes to the Policy.
Leaver treatment
Fair treatment will be extended to departing executives. The Group’s policy on termination payments is to consider the circumstances on acase-by-case basis, taking into account the relevant contractual terms in the Executive’s service contract and the circumstances of termination.
Executives who resign or are dismissed for cause are, by default, not eligible for an annual bonus if they have left or are under notice at dateof payment and forfeit all unvested LTIP shares.
At the Remuneration Committee’s discretion good leavers (normally including such circumstances as retirement, death, disability andredundancy) may be allowed to exercise a proportion of unvested LTIPs post-termination when, or to the extent that, the underlying LTIPs meetthe performance criteria for vesting.
On a change of control, unvested LTIP awards may be exercised at the time of the event subject to achievement of any performance conditions.

Annual Report and Accounts 201849

GovernanceDirectors’ Remuneration Reportcontinued
Pay for performance scenario analysis
The charts that follow provide an estimate of the potential future reward opportunities for the Executive Directors, and the potential split
between the different elements of remuneration under three different performance scenarios: ‘Maximum’, ‘On target’ and ‘Minimum’. These
charts illustrate how performance-orientated and long-term the Company’s remuneration arrangements are, with the majority of the
remuneration opportunity being delivered only under a ‘Maximum’ scenario. We have also included a bar showing the value of the actual
package in 2018.
Potential reward opportunities are based on the Remuneration Policy, applied to 2019 base salaries and incentive opportunities. Note that
the LTIP awards granted in a year will not normally vest until the third anniversary of the date of grant, and the projected value excludes
the impact of share price movement.

2019
Scenarios

CEO

CFO

Actual 2018

Actual 2018

Minimum

Minimum
2019
Scenarios

On Target

On Target
Maximum

Maximum
200

400

600

800

1000

200

(€’000)400

600(€’000)

Fixed pay

Bonus

LTIP

PensionAssumptions:‘Actual 2018’: Fixed remuneration (2018 base salary, pension), bonus granted in 2018 and LTIP vesting in 2018.
‘Minimum’: Fixed remuneration only (2019 base salary, pension), being the only element of Executive Directors remuneration not linked to performance.
‘On Target’: Fixed remuneration as above, plus target bonus (18% of base salary) and threshold LTIP vesting (10% of maximum) at the 3-month average share price to
31 December 2018.
‘Maximum’: Fixed remuneration, plus maximum bonus (30% of salary) and full vesting of proposed 2019 LTIP awards at 3-month average share price to 31 December 2018.

Non-Executive Director fee policy
Non-Executive Directors receive fees for attendance at board meetings and its sub-committees. The Company does not operate any pension
scheme for Non-Executive Directors nor do they participate in any variable pay plan. Any reasonable business expenses (including tax thereon)
may be reimbursed.

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Keywords Studios plc

Section 2: Implementation of the Remuneration Policy in 2018

The Remuneration Committee
The members of the Remuneration Committee in 2018 were David Reeves (Committee Chairman), Charlotta Ginman (joined at 24 October 2017)
and Ross Graham. The members are all Independent Non-Executive Directors. In the year ended 31 December 2018, the Remuneration
Committee met on three occasions. All three members of the Committee attended the committee meetings throughout the year together with,on occasion, the CEO, the CFO, the COO the Global HR Director, all at the request of the Committee Chairman.
The Company Chairman and the Chairman of the Remuneration Committee also met with key investors on several occasions in 2018 to obtain
input and feedback on Executive and Company-wide remuneration.
The remit of the Committee is to determine and agree with the Board the framework for the remuneration of the Company Chairman (Ross
Graham is not involved in related discussions), Executive Directors, Company Secretary and other members of the Senior Management of theGroup, and also oversee the remuneration policy for the wider workforce. No Director is involved in any discussion or decision about his or her
own remuneration.
Mercer-Kepler supports the Remuneration Committee on remuneration related matters and is a member of the Remuneration Consultants’Group and, as such, voluntarily operates under the Code of Conduct in relation to Executive remuneration consulting in the UK. Mercer-Kepler
does not have any other association with the Company and is considered independent by the Committee.
Directors’ emoluments
The remuneration for the Directors of the Company for the period year ended 31 December 2018 is detailed in the table below:
2018

Andrew Day
David Broderick
Ross Graham
David Reeves
Giorgio Guastalla
Georges Fornay
Charlotta Ginman

2017
Total €

Salary or
fees €

Bonus €

Pension €LTIP €

Total €

–
–
–
–
–
–
–

252,142
180,537
76,29368,30050,55255,29968,300208,925
141,830
69,24464,46848,691
17,603
21,742

62,67743,050
–
–
–
–
–

–
3,587
–
–
–
–
–

–
–
–
–
–
–
–

271,602
188,467
69,24464,46848,691
17,603
21,742–

751,422572,503

105,727

3,587–

681,818

Salary or
fees €

Bonus €

Pension €LTIP 1 €

230,195
158,227
76,29368,30050,55255,29968,30021,036
14,460
–
–
–
–
–

911
7,850
–
–
–
–
–

707,165

35,496

8,761

1. Based on 3-month average share price to 31 December 2018.

Annual bonus outcome for 2018
During 2018, the Executive Directors participated in the annual bonus scheme, and were eligible to earn awards of up to 30% of salary, subject
to the attainment of specific targets set for each individual. The portion of bonus earned in the year was dependent on Company performance(weighted 80%) against turnover and profitability targets for the year and on the Remuneration Committee’s discretionary assessment of eachindividual’s performance (weighted 20%).
The table below summarises the bonus earned by the Executive Directors for the year:
Director

Maximum Opportunity

Bonus for 2018

Andrew Day
David Broderick

30% of salary
30% of salary

7.5% of salary=£18,624
7.5% of salary=€14,460

Annual Report and Accounts 201851

GovernanceDirectors’ Remuneration Reportcontinued
Long-term incentives vesting in 2018
In June 2015, the CEO was granted an award of 35,000 shares under the LTIP the vesting of which was based on the Company’s TSR
performance versus the Numis Smaller Companies (excluding Investment Trusts) Index over the 3-year period ending on 1 June 2018. One-thirdof the award vests for achieving Index TSR+10%, two-thirds vests at Index TSR+20%, with full vesting for Index TSR+30% over three years.
The Company’s TSR performance over this period significantly outperformed that of the Index (by c.920%) resulting in full vesting of theseawards on 1 June 2018.
TSR over the 3-year performance period
2015-2018 LTIP
NSCI ex. Inv Trusts: 29%
Full vesting (Index +30%)

Keywords: 952%

Other long-term incentives outstanding during 2018
LTIP awards granted to the Executive Directors in May 2016 and May 2017 remained outstanding during 2018. The full vesting of theseawards requires Keywords TSR to outperform the Numis Smaller Companies (excluding Investment Trusts) Index over the 3-year period by 45%.
Based on performance up to 31 December 2018 when the share price was £11.92, these awards would fully vest (see chart below).
Long-term incentives granted during 2018
In May 2018, the Executive Directors were granted awards under the LTIP the vesting of which is based on the Company’s TSR performanceversus the Numis Smaller Companies (excluding Investment Trusts) Index over the 3-year period ending on 18 May 2021.
During 2018, and prior to the grant of these awards, the Remuneration Committee reviewed the TSR condition set for LTIP awards anddetermined, given the significant increase in the Company’s share price since the 2017 LTIP awards, that the performance level required
for full vesting of future LTIP awards would be set at a 20% outperformance of the benchmark.
Therefore, for the 2018 awards, threshold vesting (10% of the award) will vest for TSR in line with the Index and full vesting will be earned forexceeding the Index TSR by 20% over the performance period. The number of shares granted to the CEO and CFO was 50,000 and 25,000
respectively. Based on performance up to 31 December 2018 when the share price was £11.92, these awards would not vest (see chart below).
TSR performance up to 31 December 20182016-2019 LTIP
NSCI ex. Inv Trusts: 23%
Keywords: 317%
2017-2020 LTIP
NSCI ex. Inv Trusts: 4%
Keywords: 36%

2018-2021 LTIP
NSCI ex. Inv Trusts: -12%
Keywords: -39%

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Keywords Studios plc

TSR performance
The charts below show (i) the Company’s TSR since listing versus the FTSE Small Cap and Numis Smaller Companies indices, and (ii) the
shareholder value created each financial year based on share price growth and dividends paid.
Value of £100 invested in July 2013

Shareholder value created each year £m

1200

600

1000

400

800
200
600
0
400
-200
200

0

11 Jul 2013 31 Dec 2013 31 Dec 2014 31 Dec 2015 31 Dec 2016 31 Dec 2017 31 Dec 2018
Keywords

FTSE Small Cap

-400

2013

2014

2015

2016

2017

2018

Shareholder value created each year is based on the increase inshare price plus dividends paid over each financial year multipliedby the shares outstanding at the start of each year

Numis Small Cap

Implementation of the Remuneration Policy in 2019
SalaryWith effect from 1 March 2019, salary increases of 16% and 5% have been awarded to the CEO and CFO, such that their salaries will be£240,000 and €168,695 respectively. The Remuneration Committee consider the increases to be appropriate given the very material rise in thesize and complexity of the business during 2018. Even after the salary increases, the Executive Directors still have base salaries in the bottom
quartile for a company of equivalent size, consistent with the Company’s Remuneration Policy.
Annual Bonus
The Executive Directors will be eligible to earn annual bonuses of up to 30% of salary in line with previous years.
LTIP
The Remuneration Committee intends to make awards under the LTIP to the Executive Directors in line with previous years to the CEO and CFO
respectively. The Remuneration Committee considered the TSR benchmark for the LTIP awards and concluded that from 2019, awards will vest
based on the Company’s TSR performance versus the FTSE Small Cap Index (previously the Numis Smaller Companies (excluding Investment Trusts)
Index) over a 3-year period, it being considered a more visible and accessible representative index of similar companies. Threshold vesting (10% of
the award) will vest for TSR in line with the Index and full vesting will be earned for exceeding the Index TSR by 20% over the performance period.
Non-Executive Directors’ remuneration
The Board has reviewed the Non-Executive Director fee structure and has agreed a specific fee card based on the roles and responsibilities ofthe directors (see table below) to take effect 1 March 2019. The Committee reviewed the Chairman fee during 2018 and approved an increase
from £69,244 to £90,000 in line with the increased scale of the business and after considering relevant internal and external benchmarks.
The Board considers this revised fee structure to be more appropriate given the material rise in the size and visibility of the Company.
Role

Board Chairman

Ross Graham*David Reeves

Giorgio Guastalla

Charlotta Ginman

Georges Fornay£48,000£48,000£48,000£90,000

Senior Independent Director fee£5,000Non-Executive Director basic fee£48,000

Additional fees:
Chairman of the Audit Committee£12,000

Chairman of the Remuneration Committee
Member of:
Audit Committee
Remuneration Committee
Total£12,000£3,000£3,000£3,000£90,000£68,000£48,000£63,000£51,000*Ross Graham receives no additional fees on top of his Board Chairman fee for his membership of the sub-committees

Annual Report and Accounts 201853

GovernanceDirectors’ Remuneration Reportcontinued
Directors’ interest in shares
The interests of each person who was a Director of the Company (together with interests held by his or her connected persons) were:

Giorgio Guastalla 1
Andrew Day
Ross Graham
David Reeves
Georges Fornay
Charlotta Ginman

1

At 31 Dec 18

At 31 Dec 173,600,662
3,296,573
58,44032,4005,142
1,733

3,600,662
3,296,573
58,44032,4403,142
1,071

6,994,950

6,992,288

Giorgio Guastalla’s indirect shareholding arises out of his 90% holding in P.E.Q. Holdings Limited.

The outstanding LTIP and Option awards held by each Executive Director of the Company are as follows.
LTIP

Andrew Day

David Broderick

Number at
31 Dec 17

Number granted
during the year

Number vesting
during the year

Number lapsed
during the year

Number at
31 Dec 18

Vesting dateCurrent vesting
expectation**

86,59335,00060,00052,000–30,00030,000–––––50,000––25,000–35,000
–
–
–
–
–
–

–
–
–
–
–
–
–
–

86,59335,00060,00052,00050,00030,00030,00025,00012 Jul 2016*
01 Jun 2018*
10 May 201915 May 2020
18 May 2021
03 Oct 201915 May 2020
18 May 2021

100%
100%
0%
100%
100%
0%

293,593

75,00035,000–368,593*Awards have vested**Vesting expectation (% of award) is based on the achievement of the TSR performance condition up to 31 December 2018
The awards in the table above vesting in 2019 and 2020 were granted subject to the Company’s TSR performance versus the Numis Smaller Companies (excluding Investment
Trusts) Index over a 3-year period with a 4-year exercise window and continuous employment; threshold vesting (10% of the award) will vest for TSR in line with the Indexand full vesting will be earned for exceeding the Index TSR by 45% over the performance period. The awards in the table above vesting in 2021 were granted subject to the
TSR condition as described in the Section above “Long-term incentives granted during 2018” being the same criteria save that full vesting applies for exceeding the same
Index by 20% (previously 45%).

Share Option Plan

Andrew Day

Number at
31 Dec 17

Number granted
during the year

Number exercised
during the year

Number lapsed
during the year

Number at
31 Dec 18

Vesting date

21,167
21,167
21,168

–
–
–

–
–
–

–
–
–

21,167
21,167
21,16812 Jul 2015
12 Jul 201612 Jul 2017

63,502–––63,502

Executive Directors no longer receive awards under the Share Option Plan. Awards of options in the table above have all vested and shall lapse
the day before the seventh anniversary of the Date of Grant (12 July 2013), assuming it is not exercised before then and no event occurs tocause it to lapse earlier under the Rules.

Dr David Reeves
Chairman of the Remuneration Committee

54

Keywords Studios plc

Report of the Nomination Committee
Roles and responsibilities
The role of the Committee is to develop and maintain a formal, rigorous and transparent procedure for making recommendations on
appointments and re-appointments to the Board. In addition, it is responsible for reviewing the succession plans for the Executive Directors
and the Non-Executive Directors. This involves:• Reviewing the structure, size and composition of the Board and making recommendations to the Board with regard to any changes.
• Assessing the effectiveness and performance of the Board and each of its Committees including consideration of the balance of skills,
experience, independence and knowledge of the Company on the Board, its diversity, including gender, how the Board works together
as a unit, and other factors relevant to its effectiveness.
• Considering succession planning for directors and members of the Executive Management Team.
• Identifying and nominating new members to the Board.
• Reviewing the results of the Board performance evaluation process that relate to the composition of the Board.
• Reviewing annually the time input required from Non-Executive Directors.
Diversity
The Committee reviews the Board Diversity Policy annually and did so most recently at its 28 June 2018 meeting. The policy acknowledges thatan effective Board will include and make good use of differences in the skills, regional and industry experience, background, race, gender andother distinctions between Directors and emphasises that in identifying suitable candidates for appointment to the Board, the Committee willconsider candidates on merit against objective criteria, with due regard for the benefits of diversity on the Board.
Governance processes
The Committee meets at least 1 time a year and at such other times as the Committee Chair or any member of the Committee may request. In 2018,
the Committee met 4 times. The Committee has formal terms of reference which can be viewed on the Company’s website, www.keywordsstudios.com.
Main activities
Succession
The Board is committed to effectively managing leadership succession and proactively engages with the senior management team to assess
the executive talent pool. The Committee and the Board receives regular contributions from individuals in the wider executive group at
meetings of the Board and Committees throughout the year. These contributions are valuable for our decision making and have helped theNon-Executive Directors to develop a clear understanding of the strength of the management team.
Succession planning is designed to consider the planned process of transition to new leadership over time and also the potential for unforeseenchange over a shorter timeframe. The Committee keeps in touch with the talent development process throughout the organisation, conscious of
the strategic importance of promoting from within as far as possible to support the Company’s growth plans as set out in the Strategic Report.
Senior management succession planning will continue to be a focus for 2019.
Board and Committee Composition
The Committee also reviewed the size, composition and skill set of the Board during the year and concluded that there was an appropriate mix
of experience, skills and knowledge to provide strong and effective leadership.
Board Performance Evaluation
The Board, on the Committee’s recommendation conducted a board evaluation at the end of 2018. The findings from this evaluation, based on
an in-depth questionnaire issued to each Director, were very positive and provided a number of valuable insights and recommendations which
we will follow up on in 2019.
Role of the Company Secretary
In light of the growth of the business and the increasing complexity of the regulatory environment the Committee considered that the Company
had reached the point where the Company Secretariat merited dedicated resource, independent of the finance function. On 28 June 2018,
Liam O’Donoghue of ONE Advisory was appointed company Secretary, reporting to the Chairman and CEO.
Annual evaluation of the Nomination Committee’s performanceThis year’s annual internal Board and Committee evaluation exercise was designed and led by the Company Secretary, working closely with the
Chairman of the Board in order to provide objectivity. The areas covered were: structure & skills, operating effectiveness, operating efficiency, qualityof information and ongoing development. The Board evaluation exercise identified a number of positive areas including the appointment of additional
Non-Executive Directors during the year, the appointment of an independent Company Secretary and application of corporate governance practices.
Although the Board and sub-committees are working well, areas highlighted for improvement include the need to spend more time discussing theeffectiveness of the Company’s strategy from a day-to-day standpoint, and more site visits to the Company’s studio locations. These matters will be
addressed during the 2019 financial year. In addition, individual reviews of Non-Executive Director’s performances were carried out by the Chairman,
and the performance of the Chairman was reviewed by the rest of the Directors. This concluded that overall the Chairman devotes adequate timeof the Company’s business, stays abreast of developments affecting the Company, and shows a strong understanding of the business.

Ross Graham
Chairman of the Nomination Committee
8 April 2019

Annual Report and Accounts 201855

Financial Statements

Independent Auditor’s Reportto the members of Keywords Studios plc
OpinionWe have audited the financial statements of Keywords Studios plc (the ‘parent company’) and its subsidiaries (the ‘group’) for the year ended
31 December 2018 which comprise the Group and Parent Company Statements of Financial Position, the Group Statement of Comprehensive
Income, the Group and Parent Company Statements of Cash Flows, the Group and Parent Company Statements of Changes in Equity, and thenotes to the financial statements, including a summary of significant accounting policies.
The financial reporting framework that has been applied in the preparation of the financial statements is applicable law and International
Financial Reporting Standards (IFRSs) as adopted by the European Union and, as regards the parent company financial statements, as appliedin accordance with the provisions of the Companies Act 2006.
In our opinion:• the financial statements give a true and fair view of the state of the group’s and of the parent company’s affairs as at 31 December 2018
and of the group’s profit for the year then ended;• the group financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union;• the parent company financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union and as
applied in accordance with the provisions of the Companies Act 2006; and• the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities underthose standards are further described in the Auditor’s responsibilities for the audit of the financial statements section of our report. We are
independent of the group in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK,
including the FRCs Ethical Standard as applied to listed entities, and we have fulfilled our other ethical responsibilities in accordance with theserequirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Conclusions relating to going concern
We have nothing to report in respect of the following matters in relation to which the ISAs (UK) require us to report to you where:• the directors’ use of the going concern basis of accounting in the preparation of the financial statements is not appropriate; or• the directors have not disclosed in the financial statements any identified material uncertainties that may cast significant doubt about thegroup’s or the parent company’s ability to continue to adopt the going concern basis of accounting for a period of at least twelve months
from the date when the financial statements are authorised for issue.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statementsof the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) we identified,including those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit; and directing the effortsof the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming
our opinion thereon, and we do not provide a separate opinion on these matters.
1 Revenue Recognition – cut off
Key Audit Matter
Although the majority of the Groups revenue contracts are non complex in nature, there is a material accrued revenue balance as at
31 December 2018 of €6.3m (2017: €5.1m). We focused on this area due to the risk of management manipulation of the timing of revenue
recognition and the cut off relating to accrued revenue at the year end.
Related Disclosures
Refer to note 2 of the accompanying consolidated financial statements for the accounting policies of the Group in relation to
Revenue Recognition.
Audit Response
We have performed audit procedures to understand the application of the revenue recognition accounting policies and to assess whether foreach material revenue stream, that revenue has been recognized correctly in accordance with the Group Revenue Recognition policy. We havecompleted a substantive based audit approach across all full scope locations and completed specific audit procedures on a sample basis on lesssignificant components of the group.
Our audit work included, but was not restricted to, validating a sample of transactions both throughout the year and around the year end,
to assess that the stage of completion and therefore accrued revenue is reflective of the underlying project status. We have tested thesetransactions to supporting documentation such as sales orders and contracts from customers, project status evidence, and subsequentbilling. When examining samples of transactions around the year end we have assessed whether the revenue has been recognised in thecorrect period.

56

Keywords Studios plc

2 Business Combinations
Key Audit Matter
The Group has entered into a significant number of acquisitions and business combinations throughout the year, which have had a material
and extensive impact on the group’s financial performance and position.
Following the purchase price allocations (in which identifiable assets and liabilities assumed were recognised at fair value), €154m (2017:€108m) of goodwill has been recognised cumulatively to date. The fair value of certain identifiable assets acquired and liabilities assumed ina business combination is different from their carrying amounts in the acquired statements of financial position which can give rise to fair value
adjustments as part of the purchase price allocations of these business combinations. Accordingly, the cumulative acquisitions are material andsignificant judgement is required in relation to the purchase price allocations including the resulting goodwill.
Management determined the fair value of the identifiable assets and liabilities and notably the value of the customer relationships.
The valuation of these assets was primarily based upon the expected future cash flows related to these acquisitions.
A number of these acquisitions have also included deferred consideration in the form of shares and cash payments at future dates, which add
further complexity with regard to the acquisition-date fair value of such consideration as part of the consideration transferred in exchange forthe acquisitions and business combinations.
Related Disclosures
Refer to note 2 of the accompanying consolidated financial statements for the accounting policy in relation to business combinations.
In addition, detailed disclosures have been made in relation to each business combination in note 28 to the financial statements.
Audit Response
We have reviewed the underlying contracts and share purchase agreements relating to each acquisition to assess whether the basis for treatmentof the acquisitions is in accordance with the accounting policy and International Financial Reporting Standard 3 – Business Combinations.
We have assessed the carrying value of each material balance at the date of acquisition, and have reviewed management’s assessments of thefair value of the assets and liabilities acquired, and in particular, the methodology applied in the valuation of intangible assets and goodwill.
Our procedures included;• We reviewed the methodology applied to identify the categories of intangible assets,• We evaluated whether the cash flow forecasts used in the valuation are consistent with information approved by the Boardand have reviewed the historical accuracy of management’s forecasts in order to assess the reliance which can be placed upon
managements forecasting,• We have challenged the key assumptions such as the growth factors and discount rates by comparing them to relevant market rates
and historic acquisitions to verify that management had been consistent in its approach to valuations, and• We assessed the adequacy of the acquisition disclosures in the Group’s financial statements.
In addition, we have examined the terms of all business combinations to assess whether the fair value of any deferred / contingent
consideration is treated appropriately in accordance with the group accounting policy and IFRS 3.
We also examined the key post combination employment contracts of former shareholders of the acquired entities, reviewing the substanceof the transactions and considered whether they have been appropriately accounted for in line with the group accounting policy and therequirements of IFRS 3.
3 Valuation of goodwill and intangible assets
Key Audit Matter
As a result of both the current year and prior year acquisitions, the group has amassed significant intangible assets and goodwill balances.
These balances are material to the financial statements, with goodwill carrying value of €154m (2017: €108m), and intangibles carrying valueof €25.9m (2017: €23.5m).
The valuation of goodwill and other intangible assets is significant to our audit due to the fact that the impairment test calculations are basedon several key assumptions which are estimated by management, and are by nature judgemental. Key assumptions include the expected future
cash flows for the forecasting period, the discount rates and perpetual growth rate.
The Directors have concluded that there is one cash generating unit (“CGU”) in the group, for the purposes of impairment assessment.
Related Disclosures
Refer to note 2 of the accompanying consolidated financial statements for the accounting policy in relation to business combinations,intangible assets and goodwill. In addition, detailed disclosures have been made in relation to each business combination in notes 28 and
29 to the financial statements. Detailed disclosures are made in note 11 relating to goodwill, and note 12 in relation to intangible assets.

Annual Report and Accounts 201857

Financial Statements

Independent Auditor’s Reportcontinued
3 Valuation of goodwill and intangible assets continued
Audit Response
We have reviewed the Directors assessment of the carrying value of goodwill and intangible assets. We have challenged the Directors
assumptions in relation to CGU identification, cash flow forecasting, discount rates applied, and future growth rates.
Our procedures included;• We have evaluated that the CGU identified is the lowest level at which management monitors goodwill and intangible assets,• We have reviewed the accuracy of the cash flow forecasts used, and ensured that these represent those which are reviewed by the Board,• We have reviewed and assessed the accuracy of the historical forecasts prepared by the Group,• We have assessed the key estimates and inputs into the discounted cash flow models, including the growth rates assumed, and tested
these where possible to supporting evidence such as post year end activities,• We have completed sensitivity analyses in relation to the cash flow models and have stress tested all key assumptions used, and• We have considered the appropriateness of the disclosures relating to the valuation of goodwill and intangible assets in the financial
statements.
Our application of materiality
We apply the concept of materiality both in planning and performing our audit, and in evaluating the effect of misstatements. We consider
materiality to be the magnitude by which misstatements, including omissions in the financial statements, could influence the economic
decisions of reasonable users that are taken on the basis of the financial statements.
Importantly, misstatements below these levels will not necessarily be evaluated as immaterial as we also take into account the nature ofidentified misstatements, and in particular the circumstances of their occurrence, when evaluating their effect on the financial statements
as a whole.
We determined materiality for the financial statements as a whole to be €2.2m, which represents 10% of profit before taxation and represents
less than 2% of equity. We consider profit before income tax to be the most significant determinant of the group’s financial performance usedby shareholders and other users and therefore consider this as an appropriate basis for materiality. Our materiality is higher than the level we
set for the year ended 31 December 2017 (€1.2m), due to the increased profits and equity position of the group.
We agreed with the Audit Committee that we would report to the Committee all individual differences identified during the course of our audit
in excess of €110,000, (2017: €60,000). We also agreed to report differences below this threshold that, in our view, warranted reporting on
qualitative grounds.
An overview of the scope of our audit
Our audit was scoped by obtaining an understanding of the Group and its environment, including the group wide controls, and assessing therisks of material misstatement identified at group level. The Group has operations in 21 countries, and 66 wholly owned subsidiary entities.
Based on our assessment, we have completed full scope audit procedures in relation to the following entities; Keywords Studios plc, Keywords
International Limited, Sillabit S.R.L, Sperasoft Studios LLC, Cord Worldwide Limited, Studio Gobo Limited, Bitsy SG Limited, Electric Square
Limited, Itsy SGD Limited, Alset Limited, and Keywords Studios Italia S.R.L (formerly Binari Sonori S.R.L).
In addition, specific audit procedures have been completed in relation to certain material balances and transaction streams in Keywords Studios
QC-Games Inc (formerly Babel Games Services Inc), VMC Consulting Corporation, Keywords Canada Holdings Inc (formerly Volt Canada Inc),
Keywords Studios QC-Tech Inc (formerly Alchemic Dream Inc), Keywords (Shanghai) Information Technology Ltd, Synthesis Global Solutions SAS,
Keywords Studios QC-Interactive Inc (formerly Enzyme Testing Lab Inc), Sperasoft Inc, and Lakshya Digital Private Limited.
The above entities represent 73% of group revenues and over 90% of profit before tax.
Whilst materiality for the financial statements as a whole was €2.2m, each component of the group was audited to a lower level of materiality.
Audits of these components were performed at a materiality level calculated by reference to a proportion of group materiality appropriate to
the relative scale of the business concerned.
The Group auditor, BDO Dublin, has audited Keywords Studios plc, Keywords International Limited, Cord Worldwide Limited, Studio Gobo Limited
Bitsy SG Limited, Electric Square Limited, Itsy SGD Limited, Alset Limited, and Keywords Studios QC-Interactive Inc (formerly Enzyme Testing
Lab Inc). Their involvement in the work performed by other component auditors varies by location and involves, at a minimum, direction of
the audit procedures to be completed, and review of the reports received in relation to the results of the audit work undertaken by component
audit teams.
In the current year, the Senior Statutory auditor or senior members of the Group audit team have visited the following reporting locations onplanned visits: Canada (Babel Media, Volt), Russia (Sperasoft Studios LLC and Sperasoft Inc), and China (Keywords Shanghai). These visits are
to direct and review the work performed by component auditors.
At the parent company level we have also tested the consolidation process and carried out additional procedures to confirm our conclusion that
there were no significant risks of material misstatement of the aggregated financial information of the remaining components not subject to fullscope or specific procedures.
58

Keywords Studios plc

Other information
The directors are responsible for the other information. The other information comprises the information included in the annual report, otherthan the financial statements and our auditor’s report thereon. Our opinion on the financial statements does not cover the other information
and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. In connection
with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the otherinformation is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to bematerially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether
there is a material misstatement in the financial statements or a material misstatement of the other information. If, based on the work we have
performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing
to report in this regard.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of the audit:• the information given in the strategic report and the directors’ report for the financial year for which the financial statements are preparedis consistent with the financial statements; and• the strategic report and the directors’ report have been prepared in accordance with applicable legal requirements.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the group and the parent company and its environment obtained in the course of the audit,
we have not identified material misstatements in the strategic report or the directors’ report.
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in
our opinion:• adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received frombranches not visited by us; or• the parent company financial statements are not in agreement with the accounting records and returns; or• certain disclosures of directors’ remuneration specified by law are not made; or• we have not received all the information and explanations we require for our audit.
Responsibilities of directors
As explained more fully in the directors’ responsibilities statement set out on page 42 the directors are responsible for the preparation of
the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine
is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the group’s and the parent company’s ability to continue as agoing concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors
either intend to liquidate the group or the parent company or to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit
work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an auditor’sreport and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than thecompany and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed.
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement,
whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance,
but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in aggregate, they could reasonably be expected
to influence the economic decisions of users taken on the basis of these financial statements.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s website at:www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.

John O’Callaghan (Senior Statutory Auditor)
For and on behalf of BDO, Statutory Auditor
Dublin 2, Ireland
8 April 2019

Annual Report and Accounts 201859

Financial Statements

Consolidated Statement of Comprehensive Income
Years ended 31 December
2018
€’000

2017
€’000

250,805(154,997)

151,430(96,345)

95,80855,085(4,129)(5,296)(6,872)(1,426)(3,016)(3,038)(16,297)(56,826)(7,480)(31,170)

Administrative expenses(73,123)(38,650)

Operating profit

22,685

16,43526(4,467)–

Note

Revenue from contracts with customers
Cost of sales

45Gross profit
Share option expense
Costs of acquisition and integration
Amortisation of intangible assets

17
5
12

Total of items excluded from adjusted profit measures
Other administration expenses

Financing income
Financing cost
Share of post-tax profit / (loss) of equity accounted associates

27

791(1,316)(66)

Profit before taxation
Tax expense

722,094(7,191)

11,994(4,731)

14,903

7,263

27

(25)

1,270
771

(893)
(3,598)

16,971

2,747€ cent€ cent

23.16
22.24

12.37
11.87

6
6

ProfitOther comprehensive income:Items that will not be reclassified subsequently to profit or loss
Actuarial gain / (loss) on defined benefit plans
Items that may be reclassified subsequently to profit or loss
Exchange gain / (loss) in net investments foreign operations *Exchange gain / (loss) on translation of foreign operations

19

Total comprehensive income
Earnings per share

Basic earnings per ordinary share
Diluted earnings per ordinary share

88*	Please note that “Exchange gain / (loss) on net investments in foreign operations” 2017, have been re-classified to correctly classify them as “Items that may bereclassified subsequently to profit or loss”, within Other Comprehensive Income.

All Profit and Comprehensive Income is attributable to the shareholders. The notes from page 67 onwards form an integral part of these
consolidated financial statements.
On behalf of the Board

Andrew Day			David Broderick
Director				Director
8 April 201960

Keywords Studios plc

Consolidated Statement of Financial Position
At 31 December

Note

Non-current assets
Property, plant and equipment
Goodwill
Intangible assets
Investment in associate
Deferred tax assets
Current assets
Trade receivables
Other receivables
Cash and cash equivalents

13
11
12
27
26

14
15

Total assets
EquityShare capital
Share capital – to be issued
Share premium
Merger reserve
Foreign exchange reserve
Shares held in EBTShare option reserve
Retained earnings

16
16
16
16

Total equity
Current liabilities
Trade payables
Other payables
Loans and borrowings
Corporation tax liabilities
Non-current liabilities
Other payables
Employee defined benefit plans
Loans and borrowings
Deferred tax liabilities
Total equity and liabilities

18
20

18
19
20
26

2018
€’000

2017
Restated(note 31)€’000

15,002
154,20225,884160
2,967

10,111
108,062
23,548–1,206

198,215

142,927

37,01923,45939,871

27,473
22,33530,374

100,349

80,182

298,564

223,109763
15,648102,225
35,996(1,463)(1,997)
6,674
34,529737
11,620102,054
28,878(3,504)(1,997)
2,545
20,679192,375

161,012

7,142
41,15340,071
6,665

7,310
22,17918,943
3,245

95,031

51,677

1,062
1,378
230
8,488

1,233
1,055
337
7,795

11,158

10,420298,564

223,109

The notes from page 67 onwards form an integral part of these consolidated financial statements. The financial statements were approved andauthorised for issue by the Board on 8 April 2019.
On behalf of the Board

Andrew Day			David Broderick
Director				Director
8 April 2019

Annual Report and Accounts 201861

Financial Statements

Consolidated Statement of Changes in Equity

Share
capital
€’000

Share
capital /shares to beissued€’000

Sharepremium€’000

Mergerreserve€’000

Foreignexchangereserve€’000

Sharesheld in
EBT
€’000

Share
optionreserve€’000

Retainedearnings
€’000

Total
equity€’000

Balance at 1 January 2017

654

8,792

19,983

22,109987(1,434)

1,305

14,30866,704

Profit for the period
Other comprehensive income

–
–

–
–

–
–

–
–

–
(4,491)

–
–

–
–

7,263
(25)

7,263
(4,516)

Total comprehensive income forthe period

–

–

–

–

(4,491)

–

–

7,238

2,747

61
–
6
–

–
–
–
–

82,261
–
608
–

–
–
–
–

–
–
–
–

–
–
(563)
–

–
1,240
–
–

–
–
–
(867)

82,322
1,240
51
(867)

16

2,947

–

5,971

–

–

–

–

8,934

–

–

(798)

798

–

–

–

–

–

83

2,947

82,071

6,769

–

(563)

1,240

(867)

91,680737

11,739102,054

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

2,545

20,679161,131

–

(119)

–

–

–

–

–

–

(119)

737

11,620102,054

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

2,545

20,679161,012

Profit for the period
Other comprehensive income

–
–

–
–

–
–

–
–

–
2,041

–
–

–
–

14,90327

14,903
2,068

Total comprehensive income forthe period

–

–

–

–

2,041

–

–

14,93016,971

Contributions by andcontributions to the owners:
Shares issued for cash
Share option expense
Share options exercised
Dividends paid (note 9)
Acquisition related issuance ofshares (note 16)
Reclassification of share premium on
acquisitions to merger reserve
Contributions by andcontributions to the owners
Balance at 31 December 2017
Measurement period adjustment(note 31)
Balance at 31 December 2017
restatedContributions by andcontributions to the owners:
Shares issued for cash
Share option expense
Share options exercised
Dividends paid (note 9)
Acquisition related issuance ofshares (note 16)

–
–
3
–

–
–
–
–

–
–
171
–

–
–
–
–

–
–
–
–

–
–
–
–

–
4,129
–
–

–
–
–
(1,080)

–
4,129
174
(1,080)

23

4,028

–

7,118

–

–

–

–

11,169Contributions by andcontributions to the owners

26

4,028

171

7,118

–

–

4,129

(1,080)14,392

Balance at 31 December 2018

763

15,648102,225

35,996(1,463)(1,997)

6,674

34,529192,375

62

Keywords Studios plc

Consolidated Statement of Cash Flows
Years ended 31 December
Note

Cash flows from operating activities
Profit after tax
Income and expenses not affecting operating cash flows
Depreciation
Intangibles amortisation
Income tax expense
Share option expense
Costs of acquisition & integration*
Loss on disposal of fixed assets
Unwinding of present value adjustment on deferred consideration*
Share of post-tax loss of equity accounted associates
Interest receivable
Employee benefit costs
Interest expense*
Unrealised foreign exchange (gain) / loss

13
12
7
17
5
6
27
6
19
6

Changes in operating assets and liabilities
Decrease / (increase) in trade receivables
Decrease / (increase) in MMTC and VGTC receivable
Decrease / (increase) in other receivables(Decrease) / increase in trade and other payables

2018
€’000

2017
€’000

14,903

7,263

5,316
6,872
7,191
4,129
5,296
63
311
66
–
279
502
(992)

2,730
3,038
4,731
1,426
3,016
103
266
–
(26)
209
312
2,033

29,033

17,838(7,680)
(370)
2,850
(252)

2,506
(873)
(4,540)(82)(5,452)(2,989)

Income taxes paid

(6,304)(5,454)

Net cash provided by operating activities

32,18016,658(24,163)(726)(1,603)(226)(9,440)(1,599)(4,530)–(86,776)–(298)–(3,803)–(3,016)26(42,287)(93,867)(10,835)
31,850(1,080)
–
174
(502)

(23)
10,250(867)(563)
82,936(279)

Net cash provided by financing activities

19,60791,454

Increase / (decrease) in cash and cash equivalents
Exchange (loss) / gain on cash and cash equivalents
Cash and cash equivalents at beginning of the period

9,500
(3)
30,374

14,245(891)
17,020Cash and cash equivalents at end of period

39,87130,374

Cash flows from investing activities
Current year acquisition of subsidiaries net of cash acquired
Prior year acquisition of subsidiaries net of cash acquired
Settlement of deferred liabilities on acquisitions
Investment in associate
Acquisition of property, plant and equipment
Investment in intangible assets
Acquisition & integration cash outlay
Interest received

28
29
18
27
13
12
5

Net cash used in investing activities
Cash flows from financing activities
Repayment of loans
Loan to finance acquisitions
Dividends paid
Financing EBT for share options exercised
Shares issued for cash
Interest paid

*

30
30
9
16

Please note that comparatives have been re-classified to reflect current year presentation as the Directors consider this presentation to be more meaningful.

Annual Report and Accounts 201863

Financial Statements

Company Statement of Financial Position
At 31 December
Note

Non-current assets
Property, plant and equipment
Investment in subsidiaries
Other receivables
Current assets
Other receivables
Cash and cash equivalents

13
21
15

15

Total assets
EquityShare capital
Share capital – to be issued
Share premium
Merger reserve
Shares held in EBTShare option reserve
Retained earnings
Current liabilities
Trade payables
Other payables
Loans and borrowings
Corporation tax liabilities
Non-current liabilities
Other payables
Total equity and liabilities

16
16
16

18
20

18

2018
€’000

2017
€’000

389
30,670175,5091
30,6593,300

206,568

33,9601,737
438

129,153
6,261

2,175

135,414208,743

169,374763
15,648102,225
41,677(1,997)
6,674(2,538)737
11,739102,054
34,561(1,997)
2,545
(311)

162,452

149,328285
5,435
40,0003

215
1,578
18,250345,72320,046

568–

208,743

169,374

In accordance with Companies Act 2006, the Company is availing of the exemption from presenting its individual Statement of Comprehensive
Income to the Annual General Meeting and from filing it with Companies House. The amount of (loss) / profit after tax dealt with in the parent
undertaking is (€1,147k), (2017: €9,161k).
The notes on pages 67 onwards form an integral part of these financial statements. The financial statements were approved and authorisedfor issue by the Board on 8 April 2019.
On behalf of the Board

Andrew Day			David Broderick
Director				Director
8 April 201964

Keywords Studios plc

Company Statement of Changes in Equity

Balance at 1 January 2017

Sharecapital
€’000

Share
capital /shares to
be issued
€’000

Share
premium€’000

Mergerreserve
restructuring€’000

Mergerreserveacquisitions€’000

Shares held
by EBT€’000

Share
optionreserve€’000

Retainedearnings
€’000

Total
equity
€’000

654

8,792

19,983

5,313

22,479(1,434)

1,305(8,605)48,487

Profit / (loss) for the period

–

–

–

–

–

–

–

9,161

9,161

Total comprehensive income forthe period

–

–

–

–

–

–

–

9,161

9,161

61
–
6
–

–
–
–
–

82,261
–
608
–

–
–
–
–

–
–
–
–

–
–
(563)
–

–
1,240
–
–

–
–
–
(867)

82,322
1,240
51
(867)

16

2,947

–

–

5,971

–

–

–

8,934

–

–

(798)

–

798

–

–

–

–
91,680Contributions by andcontributions to the owners:
Shares Issued for cash
Share option expense
Share options exercised
Dividends paid (note 9)
Acquisition related issuance ofshares (note 16)
Reclassification of share premium on
acquisitions to merger reserves
Contributions by andcontributions to the owners

83

2,947

82,071

–

6,769

(563)

1,240

(867)

Balance at 31 December 2017

737

11,739102,054

5,313

29,248(1,997)2,545(311) 149,328

Profit / (loss) for the period

–

–

–

–

–

–

–

(1,147)(1,147)

Total comprehensive income forthe period

–

–

–

–

–

–

–

(1,147)(1,147)

Contributions by andcontributions to the owners:
Share option expense
Share options exercised
Dividends paid (note 9)
Acquisition related issuance ofshares (note 16)

–
3
–

–
–
–

–
171
–

–
–
–

–
–
–

–
–
–

4,129
–
–

–
–
(1,080)4,129
174(1,080)

23

3,909

–

–

7,116

–

–

–

11,048Contributions by andcontributions to the owners

26

3,909

171

–

7,116

–

4,129

(1,080)14,271

Balance at 31 December 2018

763

15,648102,225

5,313

36,364(1,997)

6,674(2,538) 162,452

Annual Report and Accounts 201865

Financial Statements

Company Statement of Cash Flows
Years ended 31 December
Note

Cash flows from operating activities
Profit / (loss) after tax
Income and expenses not affecting operating cash flows
Share option expense
Interest income
Share issuance costs
Interest expense
Depreciation
Amounts written off financial assets

13

Changes in operating assets and liabilities(Increase) / decrease in other receivables
Increase / (decrease) in trade and other payables

2018
€’000

2017
€’000

(1,147)

9,161

255
(12)
–
669
27
127

100
(268)
203
366
–
–

1,066

401

2,393
4,505

(10,400)
228

6,898

(10,172)––

Net cash generated / (used) by operating activities

6,817

(610)

Cash flows from investing activities
Acquisition of property, plant and equipment
Interest received

(415)
12

–
–

Net cash used in investing activities

(403)

–

(10,100)(32,401)
31,850(1,080)
174
–
(680)

–
(85,604)
10,250(867)
82,936(563)(229)

Net cash generated / (used) in financing activities(12,237)

5,923

Increase / (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of the period(5,823)
6,261

5,313
948

438

6,261

Income taxes paid / (refunded)

Cash flows from financing activities
Repayment of loans
Financing the acquisition of subsidiaries
Loan to finance acquisitions
Dividends paid
Shares issued
Financing EBT for share options exercisedInterest paid

Cash and cash equivalents at end of period

66

Keywords Studios plc

30
9
16

Notes Forming Part of the Consolidated and Company Financial Statements
1 Basis of Preparation
Keywords Studios PLC (the “Company”) is a company incorporated in the UK. The consolidated financial statements include the financial
statements of the Company and its subsidiaries (the “Group”) made up to 31 December 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 throughthe issue of 31,901,332 ordinary shares.
The parent company financial statements present information about the Company as a separate entity and not the Group.
The consolidated and Company financial statements have been prepared in accordance with International Financial Reporting Standards,
International Accounting Standards and interpretations (collectively IFRS) issued by the International Accounting Standards Board (IASB)
as adopted by the European Union (“adopted IFRSs”).
The financial statements have been prepared in thousands (€’000) and the financial statements are presented in Euro (€) which is thefunctional currency of the Group.
New Standards, Interpretations and Amendments Effective 1 January 2018
Impact of IFRS 9
The Group implemented IFRS 9 Financial Instruments, as of 1 January 2018. The new standard includes revised guidance on the classificationand measurement of financial instruments. With the exception of adopting the new expected credit loss model for calculating impairment on
financial assets, the implementation of the new standard has not resulted in significant change in the relevant accounting policies for theGroup. For the Group, the financial instruments that are impacted are trade receivables, and for the Company are inter-group receivables. At theend of each accounting period, the Group assesses the requirement for the impairment of trade receivables on the basis of the expected credit
loss rate. Having assessed the requirements according to the standards, the Group has concluded that no significant additional impairment tothe carrying values of the assets was required at 1 January 2018, or at 31 December 2018. The Company assesses the requirement for the
impairment of inter-group receivables on the basis of the expected credit loss rate, and a small provision was recorded as at 31 December 2018
(note 23). The new standard has not resulted in a significant change in how the Group records financial liabilities.
Impact of IFRS 15
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 of revenue andcash 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 statement of financial position as at 31 December 2018, on its statement of profit orloss and other comprehensive income, or on the cash flows for the period to 31 December 2018. The new standard also introduces expandeddisclosure requirements; however, the implementation of the new standard did not result in a significant change in the revenue recognition
accounting policies of the Group.
New Standards, Interpretations and Amendments Not Yet Effective
The Group has adopted the following standards from 1 January 2019. The Group does not expect any other standards issued by the IASB, but
not yet effective, to have a material impact on the Group.
Impact of IFRS 16
IFRS 16 Leases was issued in January 2016 and replaces IAS 17 Leases, IFRIC 4 Determining Whether an Arrangement Contains a Lease, SIC-15– Operating Leases – Incentives and SIC-27 – Evaluating the Substance of Transactions Involving the Legal Form of a Lease. The new standard isapplicable from 1 January 2019.
The Group has entered into leases, across the business, principally relating to property. These property leases have varying terms andrenewal rights. The Group has adopted IFRS 16 from 1 January 2019, by applying the modified retrospective approach. In 2019, the Groupnow recognise a liability to make lease payments (i.e. the lease liability) and an asset representing the right to use the underlying asset during
the lease term (i.e. the right-of-use asset), for all material lease arrangements over 12 months in duration.
The main impact on the financial statements will be to recognise on 1 January 2019, assets and liabilities, in the Statement of Financial Position
in relation to right-of-use assets and liabilities (previously considered as operating leases), of €22.8m. In the 2019 Consolidated Statementof Comprehensive Income, as the right-of-use assets are capitalised and depreciated over the term of the lease, with an associated financecost applied to the lease liability, we anticipate operating expenses will decrease, as lease payments of €7.1m (which is less than operatinglease payments disclosed in note 5 as short term leases will continue to be recognised under IAS 17), previously recognised in administration
expenses, are capitalised. In addition, depreciation expenses (also recognised in administration expenses) of €6.9m will be recognised, while
financing costs will increase by €0.6m, under the new standard. This will lead to an improvement in EBITDA, Operating profit and Profit before
taxation. The Group’s Cash Flow Statement in 2019 will separate the interest and capital repayment elements of leases payments.
These financial statements made up to 31 December 2018 have been prepared under IAS 17 as outlined in note 2.
Impact of IFRIC 23
IFRIC 23 Uncertainty over Income Tax Positions, which was issued in June 2017, clarifies how to recognise and measure current and deferredincome tax assets and liabilities when there is uncertainty over income tax treatments. The new standard is applicable from 1 January 2019.
The Group do not anticipate a material impact on the financial statements on transition to the new standard.
Annual Report and Accounts 201867

Financial Statements

Notes Forming Part of the Consolidated and Company Financial Statements
continued
2 Significant Accounting Policies
Basis of Consolidation
Where the Company has control over an investee, it is classified as a subsidiary. The Company controls an investee if all three of the following elements
are present: power over the investee, exposure to variable returns from the investee, and the ability of the investor to use its power to affect thosevariable returns. Control is reassessed whenever facts and circumstances indicate that there may be a change in any of these elements of control.
De-facto control exists in situations where the Company has the practical ability to direct the relevant activities of the investee without
holding the majority of the voting rights. In determining whether de-facto control exists, the Company considers all relevant facts andcircumstances, including:• The size of the Company’s voting rights relative to both the size and dispersion of other parties who hold voting rights;• Substantive potential voting rights held by the Company and by other parties;• Other contractual arrangements; and• Historic patterns in voting attendance.
The consolidated financial statements present the results of the Company and its subsidiaries (“the Group”) as if they formed a single entity.
Intercompany transactions and balances between Group companies are eliminated in full.
Business Combinations
The consolidated financial statements incorporate the results of business combinations using the purchase method. In the Consolidated
Statement of Financial Position, the acquired 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 the date on which control is
obtained. They are consolidated until the date on which control ceases.
Any contingent consideration payable is recognised at fair value at the acquisition date and is split between current liabilities and long-term
liabilities depending on when it is due. The fair value of contingent consideration at acquisition date is arrived at through discounting the expected
payment (based on scenario modelling) to present value. In general, in order for contingent consideration to become payable, pre-defined profit and /or revenue targets must be exceeded. At each balance sheet date, the fair value of the contingent consideration is revalued, with the expected
pay-out determined separately in respect of each individual acquisition and any change 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 classified as an equity arrangement and the valueof the shares is fixed at the date of the acquisition.
Equity accounted investments
The Group’s investments in its associates are accounted for using the equity method from the date significant influence is deemed to arise
until the date on which significant influence / joint control ceases to exist or when the interest becomes classified as an asset held for sale.
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 of businesscombinations completed on or after 1 January 2010, the total acquisition date fair value of the identifiable assets, liabilities and contingent
liabilities acquired.
For business combinations completed prior to 1 January 2010, cost comprised the fair value of assets given, liabilities assumed and equity
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 and equity
instruments issued, plus the amount of any non-controlling interests in the acquiree plus, if the business combination is achieved in stages,
the fair value of the existing equity interest in the acquiree. Contingent consideration is included in acquisition date fair value and, in the caseof 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 statementof comprehensive income.
Intangible Assets
The Group’s Intangible Assets comprise Customer Relationships and Other Intangible Assets.
Customer Relationship
Intangible assets, separately identified from goodwill acquired as part of a business combination (mainly Customer Relationships), are initially stated
at fair value. The fair value attributed is determined by discounting the expected future cashflows generated from the net margin of the businessfrom the main customers taken on at acquisition. The assets are amortised on a straight-line basis (to administration expenses) over their useful
economic lives. A useful economic life of five years is deemed appropriate, however, this is re-examined for each acquisition.

68

Keywords Studios plc

2 Significant Accounting Policies continued
Other Intangible Assets
Other intangible assets include Intellectual Property and Music Licences, both acquired and internally developed. Other intangible assets arerecognized as assets where it is probable that the use of the asset will generate future economic benefits and where the costs of the asset canbe determined reliably. Other intangible assets that are acquired by the Group are stated at cost less accumulated amortization (see below) and
impairment losses, if any. Subsequent expenditures on capitalised intangible assets are capitalised only when they increase the future economic
benefits embodied in the specific assets to which they relate. All other expenditure is expensed as incurred. Other intangible assets with definite
useful lives are amortized from the date they are available for use on a straight-line basis over their useful lives, being the estimated period overwhich the Group will use the assets. Residual amounts, useful lives and the amortization methods are reviewed at the end of every accounting period.
Development costs are capitalised as an intangible asset if all of the following criteria are met:
• the technical feasibility of completing the intangible asset so that it will be available for use or sale;• the intention to complete the intangible asset and use or sell it;• the ability to use or sell the intangible asset;• the asset will generate probable future economic benefits and demonstrate the existence of a market or the usefulness of the intangible
asset if it is to be used internally;• the availability of adequate technical, financial and other resources to complete the development and to use or sell it;• the ability to measure reliably the expenditure attributable to the intangible asset during its development.
Following initial recognition of the development expenditure as an intangible asset, the cost model is applied requiring the intangible asset
to be carried at cost, less any accumulated amortization and accumulated impairment losses. The intangible asset is amortized on a straight-line
basis over the period of its expected benefit, starting from the date of full commercial use of the product. During the period of development,
the asset is tested for impairment annually. If specific events indicate that impairment of an item of intangible asset may have taken place,the item’s recoverability is assessed by comparing its carrying amount with its recoverable amount. The recoverable amount is the higherof the fair value net of disposal costs and the value in use.
Impairment
Impairment tests on goodwill and other intangible assets with indefinite useful economic lives are undertaken annually at the financial year
end. Other non-financial assets are subject to impairment tests whenever events or changes in circumstances indicate that their carrying
amount may not be recoverable. Where the carrying value of an asset exceeds its recoverable amount (i.e. the higher of value in use and fairvalue less costs to sell), the asset is written down accordingly.
Where it is not possible to estimate the recoverable amount of an individual asset, the impairment test is carried out on the smallest groupof assets to which it belongs for which there are separately identifiable cash flows; its cash generating units (“CGUs”). Goodwill is allocatedon initial recognition to each of the Group’s CGUs that are expected to benefit from a business combination that gives rise to the goodwill.
The Group has one CGU. This CGU represents the lowest level at which goodwill is monitored by the Group and the lowest level at which
management captures information for internal management reporting purposes about the benefits of the goodwill. Impairment charges areincluded in profit or loss, except to the extent they reverse gains previously recognised in other comprehensive income. An impairment loss
recognised for goodwill is not reversed.
Cash and Cash Equivalents
For the purpose of presentation in the Statement of Financial Position and on the Statement of Cash Flows, cash and cash equivalents include
cash on hand and on call deposits with financial institutions.
Foreign Currency
Transactions entered into by Group entities in a currency other than the currency of the primary economic environment in which they operate(their “functional currency”) are recorded at the rates ruling when the transactions occur. The functional currency of the Company is Euro.
Foreign currency monetary assets and liabilities are translated at the rates ruling at the reporting date. Exchange differences arising on theretranslation of unsettled monetary assets and liabilities are recognised immediately in profit or loss.
On consolidation, the results of overseas operations are translated into Euro at rates approximating to this ruling when the transactions took
place. All assets and liabilities of overseas operations, including goodwill arising on the acquisition of those operations, are translated at therate ruling at the reporting date. Exchange differences arising on translating the opening net assets at opening rate and the results of overseas
operations at actual rate are recognised in other comprehensive income and accumulated in the foreign exchange reserve.
Exchange differences recognised in profit or loss in Group entities’ separate financial statements on the translation of long-term items forming
part of the Group’s net investment in the overseas operation concerned are classified to other comprehensive income and accumulated in theforeign exchange reserve on consolidation. On disposal of a foreign operation, the cumulative exchange differences recognised in the foreignexchange reserve relating to that operation up to the date of disposal are transferred to the consolidated statement of comprehensive income
as part of the profit or loss on disposal.

Annual Report and Accounts 201869

Financial Statements

Notes Forming Part of the Consolidated and Company Financial Statements
continued
2 Significant Accounting Policies continued
Revenue from Contracts with Customers
Contracts are typically for services, performing agreed-upon tasks for a customer and can be time-and-materials or milestone based. Most
contracts are short term in duration (generally less than one month), however milestone based contracts are typically long term and extend
to many months (or over a year in many cases). Where there are multiple performance obligations outlined in a contract, each performanceobligation is separately assessed, the transaction price is allocated to each obligation, and related revenues are recognised as services orassets are transferred to the customer.
Revenue is derived from seven main service groupings:• Art Creation Services – 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. Contracts can be either time-and-materials based or milestone based, withperformance obligations satisfied over time. Contracts are generally short term in duration, however for longer contracts the input method is used
to measure progress. Time and materials based contract revenue is recognized as the related services are rendered. For milestone based contracts
where progress can be measured reliably towards complete satisfaction of the performance obligation, revenue is recognised using the input
method to measure progress. Where progress cannot be measured reliably, revenue is recognised on milestone acceptance.
• Engineering – Engineering relates to software engineering services which are integrated with client processes to develop video games. Contracts
can be either time-and-materials based or milestone based, with performance obligations satisfied over time. Contracts are generally long termin duration. Time and materials based contract revenue is recognised as the related services are rendered. For milestone based contracts where
progress can be measured reliably towards complete satisfaction of the performance obligation, revenue is recognised using the input method
to measure progress. Where progress cannot be measured reliably, revenue is recognised on milestone acceptance.
• Audio / Voiceover Services – 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 therecordings. Audio contracts may also involve music licencing or selling music soundtracks. Audio service contracts are typically milestone based, withperformance obligations satisfied over time. Audio services contracts are generally short term in duration, however for longer contracts where
progress towards complete satisfaction of the performance obligation can be measured reliably, revenue is recognised using the input method tomeasure progress. Where progress cannot be measured reliably, audio services revenue is recognised on milestone acceptance. Music licencing andmusic soundtracks performance obligations are assessed separately, and related revenue is recognised on licence inception and on delivery of thesoundtracks, respectively.
• Functional Testing – Functional Testing relates to quality assurance services provided to game producers to ensure games function as required.
Contracts are typically time-and-materials based and performance obligations are satisfied over time. Contracts are generally short term induration, however for longer contracts the input method is used to measure progress. Revenue is recognised as the related services are rendered.
• Localization Services – Localization services relate to translation and cultural adaptation of in-game text and audio scripts across multiple gameplatforms and genres. Contracts are typically time-and-materials based and performance obligations are satisfied over time. Contracts are generally
short term in duration, however for longer contracts the input method is used to measure progress. Localization contracts may also involve licencing
translation software as a service. Such revenue is assessed separately. Revenue is recognised as the related services are rendered.
• Localization Testing – Localization Testing involves testing the linguistic correctness and cultural acceptability of computer games. Contracts are
typically time-and-materials based and performance obligations are satisfied over time. Contracts are generally short term in duration, however
for longer contracts the input method is used to measure progress. Revenue is recognised as the related services are rendered.
• Player Support – Player support relates to the live operations support services such as community management, player support and associatedservices provided to producers of games to ensure that consumers have a positive user experience. Contracts are typically time-and-materials based
and performance obligations are satisfied over time. Contracts are generally long term with the input method used to measure progress. Revenue isrecognised as the related services are rendered.
Due to the nature of the services provided and the competitive nature of the market, contracts generally allocate specific transaction prices
to separate performance obligations. Individual services or individual milestones generally involve extensive commercial negotiation to arrive
the specific agreed-upon tasks, and the related pricing outlined in the contract. Such negotiations extend further for milestone based contracts
to also include the criteria involved in the periodic and regular process of milestone acceptance by the customer. Such criteria may involve
qualitative, as well as quantitative measures and judgements.
In measuring progress towards complete satisfaction of performance obligations, the input method is considered to be the most appropriate
method to depict the underlying nature of the contracts with customers, the interactive way the service is delivered and projects are managedwith the customer. For time-and-materials contracts, other than tracking and valuing time expended, significant judgement is not normally
involved. For milestone based contracts, progress is generally measured based on the proportion of contract costs incurred at the balance sheet
date, (e.g. worked days) relative to the total estimated costs of the contract, involving estimates of the cost to completion etc. Added to thissignificant judgement can be involved in measuring progress towards customer acceptance of the milestone. Significant judgement may also
be involved where circumstances arise that may change the original estimates of revenues, costs or extent of progress towards complete
satisfaction of the performance obligations. In such circumstances estimates are revised. These revisions may result in increases or decreases
in revenue or costs and are reflected in income in the period in which the circumstances that give rise to the revision became known. When theoutcome of a contract cannot be measured reliably, contract revenue is recognised only to the extent that milestone have been accepted by
the customer. Contract costs are recognised as incurred. When it is probable that total contract costs will exceed total contract revenue, theexpected loss is recognised immediately.
Revenue recognised represents the consideration received or receivable, net of sales taxes, rebates discounts and after eliminatingintercompany sales. Revenue is recognised only where it is probable that consideration will be received. Where consideration is received andthe related revenue has not been recognised, the consideration received is recognised as a contract liability (Deferred Revenue), until either
revenue is recognised or the consideration is refunded.
70

Keywords Studios plc

2 Significant Accounting Policies continued
Multimedia Tax Credits / Video Game Tax Credits
The multimedia tax credits (“MMTC”) received in Montreal and video games tax credits (“VGTC”) in the UK, are a credit related to staff costs.
Accordingly, they are treated as a deduction against direct costs. The nature of the grants is such that they are not dependent on taxable profits.
Tax credits have only been recognised where management believe that a tax credit will be recoverable based on their experience and the successof similar historical claims.
Share-based Payments
The Company issues equity settled share-based payments to certain employees and Directors under a share options plan and a Long-Term
Incentive Plan (“LTIP”).
The fair value determined at the grant date is expensed on a straight-line basis over the vesting period, based on the Company’s estimate of sharesthat will eventually vest and adjusted for the effect of non-market-based vesting conditions. At each reporting date, the Company revises its
estimate of the number of equity instruments expected to vest as a result of the effect of non-market-based vesting conditions. The impact of
the revision of the original estimates, if any, is recognised in profit or loss such that the cumulative expense reflects the revised estimate, witha corresponding adjustment to equity reserves. The Company has no legal or constructive obligation to repurchase or settle the options in cash.
Where share-based payments are issued to employees of subsidiary companies, the annual cost of the option is expensed in the holding
company and recharged to the subsidiary company through an inter-company charge.
Share Option Plan
These are measured at fair value, taking into account market vesting conditions but not non-market vesting conditions on the grant date using aBlack-Scholes option pricing model which calculates the fair value of an option by using the vesting period, the expected volatility of the share price,
the current share price, the exercise price and the risk-free interest rate. The fair value of the option is amortised over the vesting period, with
one-third of the options vesting after two years, one-third after three years, and the balance vest after four years. The only vesting condition iscontinuous service. There is no requirement to revalue the option at any subsequent date. The charge that is recognised is adjusted to reflect failure
to vest due to non-achievement of a non-market vesting condition, but not failure to vest due to the non-achievement of a market vesting condition.
LTIP
An alternative share plan was introduced to give awards to Directors and staff, subject to outperforming the Numis Small Cap Index (excluding Investment
Trusts) in terms of shareholder return over a three-year period. For the awards up to 2015, there were three award levels: one-third of the share options
vest if the Company shall exceed the Total Shareholder Returns of the Numis Small Cap Index by not less than 10%, two-thirds if the shareholder return
exceeds by over 20% and 100% if the shareholder return exceeds by over 30%. This was amended for the 2016 and 2017 awards to 100% if theshareholder return exceeds by over 45%, and a pro-rated return between 10% and 100% if the shareholder return exceeds by between 0% and 45%.
These are measured at fair value, taking into account market vesting conditions but not non-market vesting conditions, at the date of grant,measured by using the Monte Carlo binomial model. The charge that is recognised is adjusted to reflect failure to vest due to non-achievementof a non-market vesting condition, but not failure to vest due to the non-achievement of a market vesting condition.
Dividend Distribution
Final dividends are recorded in the Group’s financial statements in the period in which they are approved by the Group’s shareholders.
Interim dividends are recognised when paid.
Income Taxes and Deferred Taxation
Provision for income taxes is calculated in accordance with the tax legislations and applicable tax rates in force at the reporting date in the
countries in which the Group companies have been incorporated.
Deferred tax assets and liabilities are recognised where the carrying amount of an asset or liability in the consolidated statement of financial
position differs from its tax base, except for differences arising on:• The initial recognition of goodwill;• The initial recognition of an asset or liability in a transaction which is not a business combination and at the time of the transaction affects
neither accounting or taxable profit; and• Investments in subsidiaries and jointly controlled entities where the Group is able to control the timing of the reversal of the difference andit is probable that the difference will not reverse in the foreseeable future.
The amount of the asset or liability is determined using tax rates that have been enacted or substantively enacted by the reporting date andare expected to apply when the deferred tax liabilities / (assets) are settled / (recovered).
Deferred tax assets and liabilities are offset when the Group has a legally enforceable right to offset current tax assets and liabilities and thedeferred tax assets and liabilities relate to taxes levied by the same tax authority on either:• The same taxable Group company; or• Different Group entities which intend either to settle current tax assets and liabilities on a net basis, or to realise the assets and settle the liabilities
simultaneously, in each future period in which significant amounts of deferred tax assets or liabilities are expected to be settled or recovered.

Annual Report and Accounts 201871

Financial Statements

Notes Forming Part of the Consolidated and Company Financial Statements
continued
2 Significant Accounting Policies continued
Property, Plant and Equipment
Property, plant and equipment comprise computers, leasehold improvements, and office furniture and equipment, and are stated at cost lessaccumulated depreciation. Carrying amounts are reviewed for impairment whenever events or changes in circumstances indicate that theircarrying amount may not be recoverable. Where the carrying amount of an asset is greater than its estimated recoverable amount, it is written
down immediately to its recoverable amount.
Property, plant and equipment acquired through business combinations are valued at fair value on the date of acquisition.
Depreciation is calculated to write off the cost of fixed assets on a straight-line basis over the expected useful lives of the assets concerned.
The principal annual rates used for this purpose are:%

Computers and software
Office furniture and equipment
Building and leasehold improvements

33.33
10.00
over the length of the lease

Gains and losses on disposals are determined by comparing proceeds with carrying amount and are included in the consolidated statement ofcomprehensive income.
Financial Assets
The Group’s most significant financial assets comprise trade and other receivables and cash and cash equivalents in the statement of financial
position, whereas the Company’s most significant financial assets comprise inter-group receivables.
Trade Receivables
Trade receivables, which principally represent amounts due from customers, are recognised at amortised cost as they meet the IFRS 9
classification test of being held to collect, and the cash flow characteristics represent solely payments of principal and interest.
The Group’s impairment methodology has been revised in line with the requirements of IFRS 9. The simplified approach to providing for
expected credit losses has been applied to trade receivables, which requires the use of a lifetime expected loss provision. As part of the IFRS 9transition project, the Group assessed its existing trade and other receivables for impairment, using reasonable and supportable forward
looking information that is available without undue cost or effort, to determine the credit risk of the receivables at the date on which they were
initially recognised and compared that to the credit risk as at 1 January 2018. This assessment has not resulted in a material adjustment totrade and other receivables.
Trade receivables are written-off when there is no reasonable expectation of recovery, such as a debtor failing to engage in a repayment planwith the company.
There has been no significant change to the carrying value of trade and other receivables as a result of the implementation of IFRS 9.
Previous accounting policy for impairment of trade and other receivables
In the prior year, the impairment of trade receivables was assessed based on the incurred loss model. Individual receivables which were known
to be uncollectible were written off by reducing the carrying amount directly. An estimate for doubtful debts was made when there wasobjective evidence that the Group would not be able to collect amounts due according to the original terms of receivables. Bad debts were
written off when identified.
Intercompany Receivables
Intercompany receivables are recognised at amortised cost as they meet the IFRS 9 classification test of being held to collect, and the cash flow
characteristics represent solely payments of principal and interest.
The Group applies the general approach to applying the expected credit losses to its related party loans. Under the General Approach, at eachreporting date, the Group determines whether there has been a Significant Increase in Credit Risk (SICR) since initial recognition and whether
the loan is credit impaired. This determines the amount of expected credit losses to be recognised.
There has been no significant change to the carrying value of intercompany receivables upon the implementation of IFRS 9.
Previous accounting policy for intercompany receivables
In the prior year, the impairment of intercompany receivables was based upon the incurred losses model, whereby impairment losses wererecognised when there was objective evidence that the Group would not be able to collect amounts due to the original terms.
Cash and cash equivalents
Cash and cash equivalents are necessary for the working capital requirements of the Group. They include cash in hand, deposits held at callwith banks and other short-term highly liquid investments. Where cash is on deposit with maturity dates greater than three months, it isdisclosed as short-term investments.

72

Keywords Studios plc

2 Significant Accounting Policies continued
Contract Assets
Contract assets arising from Revenue from Contracts with Customers are recognised in accordance with our Revenue Recognition policy, as
discussed separately in this note. The Group applies the simplified approach to assessing expected credit losses in relation to contract assets,
as the maturities of such assets are less than 12 months. Based upon the recoverability of contract assets subsequent to the year end, no
significant expected credit loss provision has been applied.
Share Capital
Financial instruments issued by the Group are treated as equity only to the extent that they do not meet the definition of a financial liability.
The Group’s ordinary shares are classified as equity instruments.
Financial Liabilities
Trade payables, bank borrowings and other short-term monetary liabilities are initially recognised at fair value and subsequently carried atamortised cost using the effective interest method.
Leased Assets
Where substantially all of the risks and rewards of ownership are not transferred to the Group (“operating lease”), the total rental payables
are charged to the consolidated statement of comprehensive income on a straight-line basis over the term of the lease.
Finance Leases
Where substantially all of the risks and rewards incidental to ownership of a leased asset have been transferred to the Group (a “financelease”), the asset is treated as if it had been purchased outright. The amount initially recognised as an asset is the lower of the fair valueof the leased property and the present value of the minimum lease payments payable over the term of the lease. The corresponding leasecommitment is shown as a liability. Lease payments are analysed between capital and interest. The interest element is charged to theconsolidated statement of comprehensive income over the period of the lease and is calculated so that it represents a constant proportionof the lease liability. The capital element reduces the balance owed to the lessor.
Employee Benefit Trust
Ordinary shares purchased by the Employee Benefit Trust on behalf of the parent company under the Terms of the Share Option Plan are
deducted from equity on the face of the Consolidated Statement of Financial Position. No gain or loss is recognised in relation to the purchase,sale, issue or cancellation of the parent company’s ordinary shares.
3 Critical Accounting Estimates and Judgements
The Group makes certain estimates and assumptions regarding the future. Estimates and judgements are continually evaluated based on
historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.
In the future, actual experience may differ from these estimates and assumptions.
Judgements
The judgements, apart from those involving estimations, that management have made in the process of applying the entity’s accounting
policies and that have the most significant effect on the amounts recognised in the financial statement, are outlined below.
• Functional Currency: The directors have considered the requirements of IAS 21 in determining the currency that most faithfully represents
the economic effects of the underlying transactions, events and conditions to determine the Group’s functional currency. Detailed
consideration has been given to both the Primary and Secondary Indicators in forming this conclusion. The Primary Indicators relate torevenues, regulation, competitive forces and costs, while the Secondary Indicators are primarily concerned with financing the businessand the currency in which receipts from operating activities are usually retained. With a mix of currencies dominating the indicators, there isno clear single currency that influences the Group, however the EUR remains marginally the most dominant when all factors are considered.
Therefore the directors consider the EUR as the currency that most faithfully represents the economic effects of the underlying
transactions, events and conditions.
• Business Combinations: When acquiring a business, the Group is required to identify and recognise intangible assets, the determination ofwhich requires a significant degree of judgement. Acquisitions may also result in intangible benefits being brought into the Group, some ofwhich qualify for recognition as intangible assets while other such benefits do not meet the recognition requirements of IFRS and therefore
form part of goodwill. Customer relationships are recognised as separate assets where revenues are recurring in nature and material
revenues have been generated with the customer for a continuous period of 3 years. For the Engineering service line, the key asset acquired
is typically “know-how”, an asset that is not readily measurable and thus intrinsically linked to goodwill. Relationships are typically shortterm contract based rather than relationship based. Therefore neither customer contracts or customer relationships are typically recognisedon the acquisition of an Engineering business.
• Expected Credit Loss Provision on Company Receivables From Subsidiaries: As outlined in note 22, the Company has significant
receivables from subsidiaries primarily related to investments in acquisitions. The Directors have assessed that they view a significant
increase in credit risk to exist if there is evidence that a loan is 30 days past due its recoverable date, or if there is external or internal
indicators that the subsidiary will not be in a position to repay its loan balances as it falls due. Similarly, the Group will conclude that a loan
is in default if the scheduled repayments of either principal or interest are not being met. The Directors have assessed that loans due fromsubsidiaries of €175.5m (within Stage 1 of the IFRS 9 impairment assessment model), are within their repayment terms, and no significant
increase in credit risk is noted. Furthermore having assessed the ongoing expected recovery strategy of these loans, the Directors haveconcluded that no material provision for expected credit losses is required. Separately the Company has balances of €1.6m, which aretechnically repayable upon demand. These loans are within Stage 3 of the IFRS 9 impairment assessment model. The Directors havereviewed in detail the recovery strategy in relation to these loans and have concluded that the majority of these loans will be recoverable
Annual Report and Accounts 201873

Financial Statements

Notes Forming Part of the Consolidated and Company Financial Statements
continued
3 Critical Accounting Estimates and Judgements continued
Judgements continued
and therefore there is no material expected credit loss provision required. A small number of such loans are technically in a credit-impaired
status. An expected credit loss of €183k (2017: nil) has been recognised in relation to these balances. Following on the rapid expansion of
the Group, the Directors have commenced a re-structuring program with a view to optimising the Group structure, facilitate tax efficient
repatriation of cash and re-payment of loans throughout the Group. The Directors have taken into account both the re-structuring program andthe cash generating capacity of the Group, in concluding that all such loans are recoverable and the expected credit loss provisions are adequate.
Estimates and assumptions
The estimates and assumptions that could have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within
the next financial year, are monitored by the Directors on an ongoing basis. A number of areas requiring the use of estimates and critical judgements impact
the Group’s earnings and financial position. These include revenue recognition, the computation of income taxes, the value of goodwill and intangible assets
arising on acquisitions, the valuation of multimedia tax credits / video game tax credits and the valuation of defined retirement benefits. The Directors
consider that no reasonably possible changes to any of the assumptions used in the estimates would in the view of the Directors give rise to significant riskof a material adjustment to the carrying value of the associated balances in the subsequent financial year. While a number of these areas were highlighted
in the 2017 Annual Report, because the Directors consider that no reasonably possible changes to any of the assumptions used in the estimates would giverise to significant risk of a material adjustment, these items have been removed from the Critical Accounting Estimates and Judgements.
4 Revenue From Contracts With Customers and Segmental Analysis
Revenue From Contracts With Customers
Revenue recognised in the reporting period arises from contracts with customers, and is predominantly recognised over time. There were no
significant amounts of revenue recognised in the reporting period that were included in a contract liability balance at the beginning of thereporting period, or from performance obligations satisfied in the previous reporting period.

Revenue by line of businessEngineering
Art creation
Audio
Functional testing
Localization
Localization testing
Player support

2018
€’000

2017
€’000

26,161
41,68834,19049,12843,98319,75135,904

3,572
26,193
20,65730,033
41,95919,8489,168

250,805

151,430

Analysis by geographical regions is made according to the Group’s operational jurisdictions. For many contracts, operations are completed in
multiple sites. Revenue is associated with the jurisdiction from which the final invoice to the client is raised. This does not reflect the regionof the Group’s customers; whose locations are worldwide.

CanadaIreland
Switzerland
Italy
India
United States
Japan
United Kingdom
Spain
China
Singapore
Germany
BrazilMexicoFranceRussiaPolandPhilippines
TaiwanNo single customer accounted for more than 10% (2017: None) of the Group’s revenue during the year.
74

Keywords Studios plc

2018
€’000

2017
€’000

69,53647,20320,067
8,673
2,407
52,321
7,724
21,205
1,968
3,126
5,046
741
1,016
936
8,489
–
347
–
–

45,64834,277
19,565
10,029
5,177
12,199
6,352
2,467
2,194
3,685
4,451
928
520
180
3,758
–
–
–
–

250,805

151,430

4 Revenue From Contracts With Customers and Segmental Analysis continued
For all service lines excluding Engineering, contracts do not extend to more than one year, therefore we do not disclose information concerning
unsatisfied performance obligations, as allowed under the practical expedient exemption under IFRS 15. This practical expedient is also availedof for Engineering contracts of less than one year in duration. For Engineering contracts that extend beyond one year the aggregate amount of
the transaction price allocated to the performance obligations that are unsatisfied (or partially unsatisfied) as of the end of the reporting period
is as follows:
Value of undelivered performance obligations for contracts greater than one year

At 31 December 2018
At 31 December 2017

Total
undelivered€’000

Scheduledcompletion
within 1 year€’000

Scheduledcompletion
1-2 years€’000

10,417
–

9,112
–

1,305
–

The balances arise primarily in new acquisitions during 2018. There were no significant undelivered performance obligations for contracts
greater than one year in 2017.
Segmental Analysis
Management considers that the Group’s activity as a single source supplier of Services to the gaming industry constitutes one operating andreporting 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 seven main
service groupings.
There is no allocation of operating expenses, profit measures, assets and liabilities to individual product groupings. Accordingly, the disclosures
above are provided on a Group-wide basis.
Activities 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 Finance Director.
Geographical Analysis of Non-Current Assets from Continuing Businesses

2018
€’000

2017
Restated(note 31)€’000

11,760
3,542
11,117
11,6502,321
84,685796
48,929
1,535
7,850
52
1,097
888
885
6,318
797
267
595
4

8,889
119
11,158
11,723
2,588
77,177565
10,011
1,520
7,707
42
1,168
231
892
6,531
866
58
472
4

195,088

141,721

Geographical Analysis of Non-current Assets from Continuing Businesses
Investment in associate
Deferred tax assets

195,088160
2,967

141,721–
1,206

Non-current assets

198,215

142,927

CanadaIreland
Switzerland
Italy
India
United States
Japan
United Kingdom
Spain
China
Singapore
Germany
BrazilMexicoFranceRussiaPolandPhilippines
TaiwanAnnual Report and Accounts 201875

Financial Statements

Notes Forming Part of the Consolidated and Company Financial Statements
continued
5 Cost of Sales and Operating Profit
Cost of sales
Operating expenses *Multimedia tax credits / video game tax credits
Other direct costs

2018
€’000

2017
€’000

163,112(12,220)
4,105

98,850(4,408)
1,903

154,997

96,345*	Please note the comparative has been re-classified to be consistent with current year presentation, as the Directors have determined this presentation to be more meaningful.

Operating profit is stated after charging:
Depreciation
Amortisation of intangible assets
Costs of acquisitions & integration
Operating lease payments
Costs of acquisitions & integration
Post-acquisition integrations costs re: 2018 acquisitions (note 28)
Post-acquisition integrations costs re: 2017 acquisitions (note 29)
Fair value adjustments to contingent consideration
Deferred consideration related to continuing employment
Acquisition related and other borrowing costs
Acquisition team and related costs

Auditors’ remuneration
Audit services
Parent company and Group audit
Subsidiary companies audit
Non-audit services
Acquisition related due diligence services
Audit related assurance services
Taxation compliance

2018
€’000

2017
€’000

5,316
6,872
5,296
8,708

2,730
3,038
3,016
2,369

2018
€’000

2017
€’000

758
1,875
766
590
693
614

–
2,336
–
–
–
680

5,296

3,016

2018
€’000

2017
€’000

329
137

164
99

–
16
7

242
–
73

489

578

2018
€’000

2017
Restated
€’000

–
791

26
–

791

26

(503)
(502)
(311)
–

(320)
(312)
(266)
(3,569)(1,316)(4,467)(525)(4,441)

6 Financing Income and Cost

Finance income
Interest received
Foreign exchange gain
Finance cost
Bank charges
Interest expense
Unwinding of discounted liabilities *Foreign exchange loss
Net financing income / (cost)*	Please note the comparative has been restated to separate “Unwinding of discounted liabilities” from “Interest expense”, as the Directors have determined thispresentation to be the more meaningful.

76

Keywords Studios plc

7 Taxation
2018
€’000

2017
Restated
€’000

–
9,592
(2,401)–
5,762(1,031)

7,191

4,731

2018
€’000

2017
Restated€’000

Profit before tax

22,094

11,994

Tax charge based on the Effective Tax Rate*
Corporate tax prior year (over) / under provision
Deferred tax prior year (over) / under provision and impact of change in tax rates
Items disallowed for tax purposes
Exempt and non taxable income
Tax incentives
Current year tax losses utilised
Current year tax losses where deferred tax has not been provided
State and other direct taxes
Other differences – net

5,345
(352)
(368)
2,205
(588)
(1,035)
(131)
730
1,529
(144)

3,175
62
(55)
717
(259)
(222)
(40)
631
758
(36)

Total tax charge

7,191

4,731

* Effective tax rate – being the statutory tax rate relative to the profit before tax in each jurisdiction

24.2%

26.5%

Current income tax
Income tax on profits of parent company
Income tax on profits of subsidiaries
Deferred tax (note 26)

The tax charge for the year can be reconciled to accounting profit as follows:

Please note the reconciliation of Profit before tax to the Total tax charge for 2017 has been restated to present the note with reference to theeffective tax rate, whereas in the 2017 financial statements the note was presented with reference to the UK tax rate, as the Directors havedetermined this presentation to be more meaningful.
The Group’s subsidiaries are located in different jurisdictions and are taxed on their residual profit in those jurisdictions. The effective tax rate
will vary year-on-year due to the effect of changes in tax rates and changes in the proportion of profits in each jurisdiction.
Tax effects relating to each component on other comprehensive income
2018
€’000

2017
€’000

Exchange gain / (loss) in net investments foreign operations
Tax (expense) / benefit

1,270
–

(893)
–

Net of tax amount

1,270

(893)

27
6

(25)
7

Actuarial gain / (loss) on defined benefit plansTax (expense) / benefit
Net of tax amount

33

(18)

Exchange gain / (loss) on translation of foreign operations
Tax (expense) / benefit

771–(3,598)–Net of tax amount771(3,598)Annual Report and Accounts 201877

Financial Statements

Notes Forming Part of the Consolidated and Company Financial Statements
continued
8 Earnings per Share2018€ cent2017€ cent

23.16
22.24

12.37
11.87

€’000

€’000

14,903

7,263

NumberNumberDenominator (weighted average number of equity shares)
Basic*
Diluting impact of share options

64,335,162
2,679,932

58,720,884
2,477,788

Diluted*67,015,094

61,198,672* Includes (weighted average) shares to be issued (note 16)

1,321,707

2,174,526

Basic
DilutedProfit for the period from continuing operations

Contingently issuable Ordinary Shares are excluded from the computation of diluted earnings per Ordinary Share where the conditions
governing exercisability have not been satisfied:

LTIPs
Share options

2018
Number

2017
Number

951,800
544,900––

1,496,700–

Details of the number of share options outstanding at the year-end are set out in note 17.
9 Dividends

Dividends paid

FinalInterimIn respectofApprovaldate€ Cent per
share

Pence STG
£ per share

Total
dividend€’000

Payment
date

2016
2017

Apr-17
Sep-17

1.01
0.54

0.89
0.48

563
304

Jun-17Oct-17

1.55

1.37

867

1.11
0.60

0.98
0.53

696
384

1.71

1.51

1,080

Expected €cent per share

Pence STG
£ per share

Expected total
dividend€’000

Expected
payment date

1.21

1.08

774

Jun-19Dividends paid to shareholders 2017
2017
2018

Final
InterimApr-18
Sep-18Dividends paid to shareholders 2018

Recommended

In respect
of

2018

Final

Approvaldate

Jun-18Oct-18There are no income tax consequences for the Company in respect of the dividends proposed prior to issuance of the Consolidated Financial
Statements and for which a liability has not been recognised.
The Group does not recognise deferred tax on unremitted retained earnings as in general retained earnings are continually re-invested by
the Group and dividends are only remitted where there are minimal tax consequences.
At 31 December 2018 Retained Earnings available for distribution (being retained earnings plus share option reserve) in the Company were
€4.1m (2017: €2.2m). The Directors do not foresee any impediment in continuing to implement the dividend policy of the Group.
Following on distributions made in 2016 and 2017 that were not fully in compliance with the Companies Act 2006, the Directors have
implemented legal advice to ensure ongoing compliance and rectify the oversights in earlier periods.

78

Keywords Studios plc

10		 Staff Costs
Total staff costs (including Directors) comprise the following:

Salaries & related costs
Share based payment costs

Key management compensation:
Salaries & related costs
Social welfare costs
Pension costs
Share based payment costs

2018
€’000

2017
€’000

146,785
4,129

81,563
1,426

150,91482,989

2018
€’000

2017
€’000

907
99
27
501

690
79
4
141

1,534

914

The key management compensation includes compensation to seven Directors of Keywords Studios PLC during the year (2017: seven).
Group
Average number of employees
Operations
General & administration

2018

2017

4,733
505

2,921
246

5,238

3,167

2018

2017

–
13

–
8

13

8

Company
Average number of employees
Operations
General & administration

Annual Report and Accounts 201879

Financial Statements

Notes Forming Part of the Consolidated and Company Financial Statements
continued
11		

Goodwill€’000

At 1 January 2017
Recognition on acquisition of subsidiaries (note 29)
Exchange rate movement

46,79966,853(4,645)

At 31 December 2017 as reported
Measurement period adjustment on Sperasoft goodwill (note 31)

109,007(945)

At 31 December 2017 restated
Recognition on acquisition of subsidiaries (note 28)
Exchange rate movement

108,062
43,144
2,996

At 31 December 2018

154,202

The Group assesses the carrying value of goodwill each year on the basis of budget projections for the coming year extrapolated using a one to
five year growth rate and a terminal value calculated using a long term growth rate projection. The discount rates used of 12.5% (2017: 12.5%)
is based on the Board’s assessment of the WACC of the Group. The WACC assessment is supported by an annual independently calculated
report, using the Capital Asset Pricing Model. However, the Board have excluded the impact of short term market volatility on these calculations
in determining the Group WACC.
Key Assumptions
ActualSensitivity Analysis

2018

2017

2018

2017

2018

2017

1-5 year growth rate assumption
Long term growth rate assumption

10%
2%

10%
2%

15%
2%

15%
2%

5%
2%

5%
2%

Value in use (€m)

445

371

532

399

378

284

Carrying value – goodwill (€m)

154

108

The value in use calculations were consistently calculated year over year, with no significant changes in the assumptions made. The result of
the value in use calculations was that no impairment is required in this period.
12		

Intangible Assets

Customer
relationships€’000Intellectual
property
€’000

Music
licences
€’000

Total
€’000

Cost
At 1 January 2017
Recognition on acquisition of subsidiaries
Exchange rate movement

11,63018,962(1,310)

–
–
–

–
–
–

11,63018,962(1,310)At 31 December 2017
Recognition on acquisition of subsidiaries
AdditionsExchange rate movement

29,282
6,564
–
867

–
–
1,521
–

–
362
78
(4)

29,282
6,926
1,599
863

At 31 December 2018

36,713

1,521

436

38,670

Amortisation
At 1 January 2017
Amortisation charge
Exchange rate movement

2,934
3,038
(238)

–
–
–

–
–
–

2,934
3,038
(238)

At 31 December 2017
Amortisation charge
Exchange rate movement

5,734
6,758
179

–
–
–

–
114
1

5,734
6,872
180

At 31 December 201812,671–

115

12,786

Net book value
At 31 December 2017

23,548––23,548At 31 December 2018

24,042

1,521

321

25,884

Customer relationships, intellectual property and music licences are amortised on a straight-line basis over five years. Customer-relationships andmusic licence amortisation commences on acquisition, whereas intellectual property amortisation commences when the product is launched.

80

Keywords Studios plc

13		 Property, Plant and Equipment
Group

Computers andsoftware€’000

Office furnitureand equipment€’000

Leaseholdimprovements
€’000

Total
€’000

Cost
At 1 January 2017
Currency revaluation
Additions
Acquisitions through business combinations at fair value
Disposals

8,485
(685)
2,514
2,214
(54)

3,158
(216)
772
603
(1)

1,724
(222)
601
1,350
(29)

13,367(1,123)
3,887
4,167
(84)

At 31 December 2017
Currency revaluation
Additions
Acquisitions through business combinations at fair value
Disposals

12,474
(114)
6,248
362
(645)

4,316
(15)
1,082
272
(248)

3,424
27
2,110
332
(89)

20,214
(102)
9,440
966
(982)

At 31 December 2018

18,325

5,407

5,804

29,536

Accumulated depreciation
At 1 January 2017
Currency revaluation
Depreciation charge
Disposals

5,756
(293)
1,795
(6)

1,790
(111)
543
–

323
(72)
392
(14)

7,869
(476)
2,730
(20)

At 31 December 2017
Currency revaluation
Depreciation charge
Disposals

7,252
(51)
3,805
(645)

2,222
11
643
(185)

629
74
868
(89)

10,103
34
5,316
(919)

At 31 December 2018

10,361

2,691

1,482

14,534

Net book value
At 31 December 2017

5,222

2,094

2,795

10,111

At 31 December 2018

7,964

2,716

4,322

15,002Computers andsoftware€’000

Office furnitureand equipment€’000

Leaseholdimprovements
€’000

Total
€’000

Cost
At 1 January 2017
Additions

2
–

–
–

–
–

2
–

At 31 December 2017
Currency revaluation
Additions

2
–
2

–
–
145

–
–
268

2
–
415

At 31 December 2018

4

145

268

417

Accumulated depreciation
At 1 January 2017
Depreciation charge

–
1

–
–

–
–

–
1

At 31 December 2017
Depreciation charge

1
1

–
8

–
18

1
27

At 31 December 2018

2

8

18

28

Company

Net book value
At 31 December 2017

1

–

–

1

At 31 December 2018

2

137

250

389

Annual Report and Accounts 201881

Financial Statements

Notes Forming Part of the Consolidated and Company Financial Statements
continued
14		 Trade Receivables
Group
2018
€’000

2017
€’000

Trade receivables
Provision for bad debts

38,736(1,717)27,891(418)

Financial asset held at amortised cost

37,01927,473

2018
€’000

2017
€’000

6,317
2,490
2,459
10,820
1,373

5,140
4,179
2,524
10,016476

23,45922,335

2018
€’000

2017
€’000

1,600
109
28

129,056
45
52

1,737

129,153

2018
€’000

2017
€’000

175,5093,300

175,5093,300

Trade receivables arise from revenues derived from contracts with customers.
15		 Other Receivables
Group Short Term*

Accrued income from contracts with customers
Prepayments & rent deposits
Other receivablesMultimedia tax credits / video games tax credits
Tax and social security

Company Short Term

Intercompany receivables (financial assets held at amortised cost)
Prepayments
Other receivables

Company Long Term

Intercompany receivables (financial assets held at amortised cost)*

Please note the comparative Group Short Term, “Other Receivables” has been re-classified to be consistent with the current year presentation.

Accrued income from contracts with customers, represent mainly contract assets in process and related items. The movement in the year iscomprised of transfers in and out as items are accrued and subsequently invoiced to customers, with no significant amounts written off or
impaired in the period.

82

Keywords Studios plc

16		 Shareholders’ Equity
Share Capital

Date

Per
share
€

At 1 January 2017
Shares issued on the first anniversary of theacquisition of Synthesis
Shares issued on acquisition of Xloc
Shares issued on acquisition of Gamesim
Shares to be issued on acquisition of Red Hot
Shares issued on acquisition of Asrec
Shares to be issued on acquisition of Around
the Word
Shares issued on acquisition of d3t
Shares to be issued on acquisition of Sperasoft
Shares issued on acquisition of Lola

Number ofordinary£0.01 shares
to be issued

Sharecapital
€’000

Share
premium€’000

Mergerreserve€’000

Shares to
be issued€’000

54,428,882

2,889,707

654

19,983

22,1098,792

13-Apr
10-May17-May22-May04-Aug

9.40
9.47
9.20
9.12
13.12

1,188,253
19,134
151,725–
9,534(1,188,253)––
160,842
–

14
–
2
–
–

–
–
–
–
–

3,440
184
1,392
–
101

(3,454)
–
–
1,468
–

04-Aug
19-Oct13-Dec15-Dec

12.07
14.46
14.26
16.56

–
42,368–
10,106

66,262–
252,248
–

–
–
–
–

–
–
–
–

–
686
–
168

800
–
4,133
–

1,421,120(708,901)

16

–

5,971

2,947

15.62
1.23

–
5,357,143
501,060

–
–
–

–
61
6

(798)
82,261
608

798
–
–

–
–
–

14.26

61,708,205–

2,180,806(8,806)737 102,054 28,878–––

11,739(119)

61,708,205

2,172,000

737 102,054 28,878

11,62017.48–

73,744

–

–

–

1,289

2.91

1,188,263(1,188,263)

15

–

3,440

(3,455)19.39

51,562

–

1

–

999

–

20.12

–

77,006

–

–

–

1,550

3.67
20.57
19.55

513,189––(513,189)
64,521
37,983

6
–
–

–
–
–

1,880
–
–

(1,886)
1,327
743

19.74

–

254,529

–

–

–

5,024

21.33

–

11,070

–

–

–

236

12.07

66,262(66,262)

1

–

799

(800)

1,819,276(1,248,861)

23

–

7,118

4,028

260,805

–

3

171

–

–

63,788,286

923,139763 102,225 35,996

15,648Acquisition related issuance of shares
Reclassification of share premium on
acquisitions
Placing of shares on the market
Issue of shares on exercise of share options

Number ofordinary£0.01 shares

24-OctAt 31 December 2017
Measurement period adjustment (note 31)
At 31 December 2017 Restated
Shares to be issued on acquisition ofCord & Laced
09-AprShares issued on the second anniversary of theacquisition of Synthesis
24-AprShares issued on the second anniversary of theacquisition of Synthesis in lieu of deferred cash 24-Apr
Shares to be issued on acquisition of Fire
Without Smoke
01-MayShares issued on the second anniversary of theacquisition of Mindwalk
14-JunShares to be issued on acquisition of Blindlight
11-JunShares to be issued on acquisition of Snowed In
20-JulShares to be issued on acquisition of Studio
Gobo & Electric Square
20-AugShares to be issued on acquisition of The
TrailerFarm
18-SepShares issued on the first anniversary of
Around the Word
01-OctAcquisition related Issuance of shares
Issue of shares on exercise of share options
At December 2018

0.67

There is no limit to the number of shares which the Company can issue, nor are there are any restrictions on dividends or distributions
on such shares.
Shares to be issued are valued at the share price at the date of acquisition, and are recorded as shares to be issued, in accordancewith IAS 32.16.
Shares held in the Employee Benefit Trust (“EBT”)
2018

Ordinary shares held in the EBT

2017

Shares€’000

Shares€’000

335,425

1,997

335,425

1,997

Annual Report and Accounts 201883

Financial Statements

Notes Forming Part of the Consolidated and Company Financial Statements
continued
16		 Shareholders’ Equity continued
Reserves
The following describes the nature and purpose of each reserve within owners’ equity:
Reserve

Description and purpose

Retained earnings

Cumulative net gains and losses recognised in the Consolidated Statement of Comprehensive Income.

Foreign exchange reserve

Gains or losses arising on retranslation of the net assets of the overseas operations into Euro.

Share premium

The share premium account is the amount received for shares issued in excess of their nominal value, net ofshare issuance costs.

Share option reserve

The share option reserve is the credit arising on share-based payment charges in relation to the Company’s
share option schemes.

Shares to be issued

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 deferredconsideration is classified as an Equity Arrangement and the value of the shares is fixed at the date of theacquisition.

Merger reserve

The merger reserve was initially created following the Group reconstruction, when Keywords Studios PLC
acquired the Keywords International Limited Group of companies.
When the Group uses Keywords Studios PLC shares as consideration for the acquisition of an entity, the valueof the shares in excess of the nominal value (net of share issuance costs) is also recorded within this reserve,in line with S612 of the Companies Act 2006.

17		 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:

Share option scheme expense
LTIP option scheme expense

2018
€’000

2017
€’000

646
3,483

178
1,248

4,129

1,426

Of the total share option expense, €501k relates to Directors of the Company (2017: €141k).
Share Option Scheme
Share options are granted to Executive Directors and to permanent employees. The exercise price of the granted options is equal to the market
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 theoptions in cash.
Movements in the number of share options outstanding and their related weighted average exercise prices are as follows:
2018
Average
exercise price in£ per share

2017
Number ofoptions

Average
exercise price in£ per share

Number ofoptions

2.79
17.10
13.24
1.93

1,375,201
591,000(65,246)(68,254)

2.79
7.76
3.56
1.35

1,672,056
282,000(30,000)(548,855)

7.11

1,832,701

2.79

1,375,201

Exercisable at the end of the period

1.47

706,5241.30

515,296Weighted average share price at date of exercise

17.68

Outstanding at the beginning of the period
Granted
LapsedExercised
Outstanding at the end of the period

84

Keywords Studios plc

12.32

17		 Share Options continued
Summary by share option arrangement
Date of Option

12-Jul-13

01-Jun-15

10-May-16

15-May-17

18-May-18

Exercise Price

£1.20

£1.58

£2.54

£7.76

£17.10

Total

Outstanding at the beginning of the period
Granted
LapsedExercised285,311––(9,827)

636,816–(2,371)(29,412)

180,074–(11,875)(29,015)

273,000–(4,500)––591,000(46,500)–

1,375,201
591,000(65,246)(68,254)

Outstanding at the end of the period

275,484

605,033

139,184

268,500

544,500

1,832,701

Exercisable at 31 December 2018
Exercisable 2019
Exercisable 2020
Exercisable 2021
Exercisable 2022

275,484––––

403,988
201,045–––

27,05256,06656,066–––89,50089,50089,500–––181,500
181,500
181,500

706,524
346,611
327,066
271,000
181,500

Total

The inputs into the Black-Scholes model, used to value the options are as follows:
Date of Option

12-Jul-13

01-Jun-15

10-May-16

15-May-17

18-May-18

Weighted average share price (£)
Weighted average exercise price (£)
Fair value at measurement date (€)
Average expected life
Expected volatility
Risk free rates
Average expected dividends yield

£1.23
£1.20
€0.81
3 Years
36.12%
0.50%
1.00%

£1.64
£1.58
€0.56
3 Years
28.03%
0.90%
0.75%

£2.54
£2.54
€0.40
3 Years
27.17%
0.58%
0.55%

£7.74
£7.76
€1.13
3 Years
24.79%
0.16%
0.21%£17.21£17.10€3.79
3 Years
35.87%
0.89%
0.10%

–

2

9

17

29

Weighted average remaining life of options in months

12

Expected volatility was determined by reference to KWS volatility. The expected life used in the model has been adjusted basedon management’s best estimate, for the effects of non-transferability, exercise restrictions and behavioural 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:
Summary by LTIP Arrangement
2018
Average
exercise price in£ per share

Outstanding at the beginning of the period
Granted
LapsedExercised
Outstanding at the end of the period

2017
Number ofoptions

Average
exercise price in£ per share

Number ofoptions

0.01
0.01
0.01
0.01

1,976,416
996,000(102,398)(192,551)

0.01
0.01
0.01
0.01

1,443,691
696,000(47,621)(115,654)

0.01

2,677,467

0.01

1,976,416

Exercisable at the end of the period

0.01

436,667

0.01

222,238

Weighted average share price at date of exercise

17.50

13.09

Annual Report and Accounts 201885

Financial Statements

Notes Forming Part of the Consolidated and Company Financial Statements
continued
17		

Share Options continued

Date of Option

08-Jul-13

06-Jan-15

01-Jun-15

10-May-16

03-Oct-16

15-May-17

18-May-18

23-Jul-18

Total

£0.01

£0.01

£0.01

£0.01

£0.01

£0.01

£0.01

£0.01

£0.01

101,060
317,118––(11,198)–(89,862) (102,689)

610,000–(15,000)–

30,000–––696,000–(32,000)––
990,000(44,200)–– 1,976,416
6,000 996,000– (102,398)– (192,551)

Exercise Price
Outstanding at the beginningof the period
Granted
LapsedExercised

222,238–––

Outstanding at the end of
the period

222,238–

214,429595,000

30,000664,000

945,800

6,000 2,677,467

Exercisable at 31 December 2018
Exercisable 2019
Exercisable 2020
Exercisable 2021

222,238
–
–
–

–
–
–
–

214,429––––595,000–––
30,000––––664,000––––
945,800

–
–
–
6,000

Date of Option

08-Jul-13

06-Jan-15

01-Jun-15

10-May-16

03-Oct-16

15-May-17

18-May-18

23-Jul-18

Weighted average share price (£)
Weighted average exercise price (£)
Fair value at measurement date (€)
Average expected life
Expected volatility
Risk free rates

£1.23
£0.01
€0.62
3 Years
36.12%
0.50%

£1.43
£0.01
€1.10
3 Years
31.20%
0.58%

£1.64
£0.01
€1.40
3 Years
28.03%
0.90%

£2.54
£0.01
€1.73
3 Years
27.17%
0.55%

£4.15
£0.01
€2.06
3 Years
23.31%
0.08%

£7.74
£0.01
€4.96
3 Years
24.79%
0.16%£17.21£0.01€11.82
3 Years
35.87%
0.89%£18.56£0.01€12.90
3 Years
35.87%
0.80%

08-Jul-13

06-Jan-15

01-Jun-15

10-May-16

03-Oct-16

15-May-17

18-May-18

23-Jul-18

Total

–

–

–

4

9

17

29

31

15

Weighted average remaining life of
options in months

436,667
625,000
664,000
951,800

LTIP’s vest on the third anniversary of the grant, if the performance criteria are met. LTIPs must be exercised before the seventh anniversaryof the grant.
The options were valued using a Monte Carlo binomial model using the following inputs:
Expected volatility was determined by reference to KWS 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 shareoption charge.
18		 Other Payables
Group

Current
Accrued expenses
Payroll taxes
Other payables (ii)Deferred and contingent consideration (i)Related party payable (note 22)
Non-current
Other payables
Deferred and contingent consideration (i)86

Keywords Studios plc

2018
€’000

2017
Restated(note 31)€’000

16,671
2,338
3,890
18,2495

15,229
1,530
2,986
2,425
9

41,153

22,179

5
1,057

16
1,217

1,062

1,233

18		 Other Payables continued
Company

Current
Intercompany payable
Accrued expenses
Payroll taxes
Other payables
Deferred and contingent consideration (i)Non-current
Intercompany payable
Deferred and contingent consideration (i)

2018
€’000

2017
€’000

4,572
784
66
13
–

174
382
–
51
971

5,435

1,578

568
–

–
–

568

–

2018
€’000

2017
Restated(note 31)
€’000

3,642
(1,603)(1,000)311
17,068
766
122

1,730
(298)
–
266
1,885
–
59

19,306

3,642

2018
€’000

2017
€’000

971
(1,000)
29

860
–
111

–

971

(i) The movement in deferred and contingent consideration during the financial year was as follows:
Group

Opening balance
Consideration settled by cash
Consideration settled by shares
Unwinding of discount (note 6)
Additional liabilities from current year acquisitions (notes 28, 29)
Fair value adjustment (note 5)
Translation adjustment

Company

Opening balance
Consideration settled by shares
Unwinding of discountIn general, in order for contingent consideration to become payable, pre-defined profit and / or revenue targets must be exceeded. The valuationof contingent consideration is derived using data from sources that are not widely available to the public and involves a degree of judgement(Level 3 input in the fair value hierarchy). On an undiscounted basis, the Group may be liable for deferred and contingent consideration ranging
from €0.6m to a maximum of €20.3m. A 10% movement in expected performance results, has no impact on the fair value of the contingent
consideration, and hence there are no reasonably probable changes to the assumptions and inputs (including the discount rate), that would
lead to a material change to the fair value of the total amount payable.
(ii) Other payables includes deferred income from contracts with customers of €312K (2017: €nil), which mainly comprise items invoiced prior toservices being delivered. The movement in the year is comprised of transfers in and out as items are deferred and subsequently recognised
as revenue.

Annual Report and Accounts 201887

Financial Statements

Notes Forming Part of the Consolidated and Company Financial Statements
continued
19		 Employee Defined Benefit Plans
In line with statutory requirements in Italy and India we are required to maintain employee defined benefit termination payment schemes.
In Italy, on leaving employment, each employee is entitled to 1/13.5 of their final salary for each year of service.
In India, on retirement at age 60, each employee with over 5 years service is entitled to 15/26 of their last drawn monthly salary for each yearof service.
At year end, the Group commissioned an actuarial valuation of the related liability, based on salaries, length of service and variables including
employee turnover, estimated salary increases and the cost of capital.
The liabilities at year end are recorded as long term. The actuarial loss is recorded separately within other comprehensive income.
The movements through the year are detailed:
Group
2018
€’000

2017
€’000

Opening liability Italy at 1 January
Liability India recognised 1 January 2018
Service cost*
Interest cost
Benefits paid
Actuarial (gain) / loss recorded

1,055
188
247
32
(117)
(27)

826
–
199
11
(6)
25

Closing liability at 31 December

1,378

1,055

*

Please note the comparative has been restated to reflect the current year presentation as the Directors have determined this presentation to be more meaningful.

The Directors have considered the key specific risk factors which the Group faces due to the employee defined benefit plans which are in place.
Having fully considered all specific elements of these plans the Directors believe that the key issues faced are as follows:• The plan is currently 100% unfunded, there are no specific assets to meet the future liabilities as they fall due, as such there will be a cash
flow impact as the liabilities must be met with current working capital as they fall due.
The Group has taken no specific actions to mitigate against these factors as due to the long-term nature of the plans it is expected that there
will be no sudden financial impact on the Group’s results caused by any of these factors. A maturity profile of the obligation is not presented
as the liability is not significant in the context of the Group.
In 2019, the Group expects the costs of the employee benefit plan to be in line with current year levels, as staff levels in the Italian operations
stay stable.
The actuarial valuation is based on the Projected Unit Credit Method, in line with IAS 19.
2018
€’000

2017
Restated€’000

Actuarial valuations
Defined benefit obligations
Future service liability

1,378
3,214

1,055
2,977

Value of accrued benefits*

4,592

4,032

*

Please note the comparative has been restated to reflect the current year presentation as the Directors have determined this presentation to be more meaningful.

Cost for year
Service cost
Interest cost
Actuarial (gain) / loss
Actuarial (gain) / loss
Change due to experience
Change due to demographical assumptions
Change due to financial assumptions

88

Keywords Studios plc

247
32
(27)

199
11
25

252

235

2
(38)
9

17
30
(22)

(27)

25

19		 Employee Defined Benefit Plan continued
Assumptions Underlying the Actuarial Valuations and Sensitivities of the Assumptions
For the actuarial valuations the following demographic and economic and financial assumptions were applied.
Demographic Assumptions in respect of Italy, representing 84% of the overall liability• The probabilities of death were derived from the population demographics by age and sex, as recorded by the relevant Government
Statistics Offices and reduced by 25%, while other key inputs were taken from relevant life assurance statistics.
• Certain inputs were estimated by management including-- Employee attrition rates at 5.71% per annum.
-- Cash advances estimated on the basis of company history of 2.42% incidence of advance per annum and a drawdown rate equal to 57.25%.
2018

2017

3.08%
2.18%
2.43%

2.76%
1.70%
1.54%

558
31.5
3.4
2,301
8,647

98
39.3
4.5
8,595
34,438-0.25%
0.25%
Mortality Rate Sensitivities

1,456
1,308

1,136
983

-0.025%0.025%
Staff Turn Over Rate Sensitivities

1,379
1,378

1,056
1,055

-0.50%
0.50%
Staff Salary Increases Rate Sensitivities

1,389
1,369

1,067
1,045

-0.50%
0.50%

1,370
1,390

1,029
1,084

Economic & Financial Assumptions
Salary increase
Inflation
Discount rate
Key Statistics
Staff (number)
Average age (years)
Average service (years)
Average defined benefit per staff (€)
Average salary for defined benefit (€)
Interest Rate Sensitivities

Annual Report and Accounts 201889

Financial Statements

Notes Forming Part of the Consolidated and Company Financial Statements
continued
20		 Capital Management, Loans and Borrowings(i) Loans & Borrowings
Group
Expiry within 1 Year
Expiry between 1 and 2 years
Expiry over 2 years

2018
€’000

2017
€’000

40,071–
230

18,94331
306

40,301

19,280In 2017, the Company had a facility in place with Barclays Bank which allowed financing of up to €25m of which €18.25m was drawn down at
31 December 2017. In 2018 the Company entered into a new Syndicated Bank revolving credit facility (‘RCF’), completely replacing the existing
facility. This transaction has been accounted for as an extinguishment of a financial liability under IFRS 9, along with the recognition of a newliability with the new lenders. There was no significant difference between the carrying value of the financial liability at the time ofextinguishment and the settlement value of the loan.
The RCF allows financing of up to €75 million, with an option to increase this by €30m to a total of €105 million. The RCF extends to June 2021,
with an option to extend this maturity date by a further 2 years.
As part of the facilities agreement, there are charges over the assets of the major subsidiaries of the Group and lenders require the Group tomonitor and report interest cover and leverage ratios. Throughout the period, both ratios were well within permitted levels. Non-compliancewith terms of the facilities agreement could result in lenders refusing to advance more funds, or in the worst case, calling in outstanding loans.
There were a number of drawdowns during the year to fund new acquisitions. Towards the end of 2018, excess funds of €10.1m were used tomake a partial repayment of outstanding loans. As at 31 December 2018 the Group had €40 million outstanding, at a rate based on a margin
over EURIBOR, plus a separate margin charged for the unutilised facility.
Loans owed by Enzyme at the end of 2017 of €0.4m reduced to €0.3m during 2018. Amounts owed by Sperasoft Inc. at the end of 2017
amounting to €0.6m were repaid during 2018.
Loans and borrowings (classified as financial liabilities under IFRS 9), are held at amortised cost. Interest expenses which are calculated using
the effective interest method, are disclosed in note 6.
The currencies of these loans are as follows:
Group
Euro
Canadian Dollars
US Dollars

CompanyEuro(ii) Capital management
Group
Loans and borrowings
Less: cash and cash equivalents
Net debt / (net cash) position
Total equity
Net debt / (net cash) to capital ratio (%)

2018
€’000

2017
€’000

40,000301–

18,301
347
632

40,301

19,280

2018
€’000

2017
€’000

40,00018,25040,00018,250

2018
€’000

2017
€’000

40,301(39,871)

19,280(30,374)430(11,094)

192,3750.2%

161,012-6.9%

The Group manages capital by monitoring debt to capital and net debt ratios. This debt to capital ratio is calculated as net debt to total equity.
Net debt is calculated as total debt (as shown in the consolidated statement of financial position) less cash and cash equivalents. The liquidity risk
and cash management for the Group is managed centrally by the Group treasury function. The Board receives projections on a monthly basis as wellas information regarding cash balances. The Group’s strategy is to preserve a strong cash base and secure access to finance at reasonable cost by
maintaining a good credit rating.

90

Keywords Studios plc

21		 Investment in Subsidiaries
Company
2018
€’000

2017
€’000

30,67030,659The results and financial position of all the subsidiaries are included in the consolidated statements.
Details of the Company and Group’s subsidiaries as at 31 December 2018 are set out below:

Country ofincorporation

Date ofincorporation /acquisition

Proportion of
voting rights andordinary sharecapital held

Keywords International Ltd
Keywords International
Co LtdKeywords International Inc
KW Studios Limited

IrelandJapan

13-May-98
30-Nov-10

100%
100%

USA
UK

26-Sep-12
29-May-13

100%
100%

Liquid Violet Ltd
Keywords Studios QCGames Inc. (Formerly
Babel Games Services Inc.)
Babel Media USA Inc
Babel Media India Private
LimitedBabel Media Ltd
Keywords International
Pte. Limited
Keywords Studios Italy
S.R.L. (Formerly Binari
Sonori S.R.L)
Binari Sonori America, Inc
Binari Sonori Audio
Productions LLC
Lakshya Digital Private
LimitedEdugames Solutions Private
LimitedLakshya Digital Singapore
Pte. Ltd
Keywords Studios QC-Tech
Inc. (Formerly Alchemic
Dream Inc.)
Keywords International
Barcelona SL
Keywords do Brasil
Localizacao e Traducao
Ltda (Formerly Reverb
Localizacao-Prearacao deDocumentos Ltda)
Keywords (Shanghai)
Information Technology
Ltd
Keywords Studios Spain
SLU (Formerly Kite
Team SL)
Kite Team Mex S.de R.L. de.
CV (Currently in process ofchanging name to
Keywords Studios Mexico,
S. DE R.L.DE C.V.)
Liquid Development LLC

UK
Canada(Quebec)

19-Jan-14
17-Feb-14

100%
100%

USA
India

17-Feb-14
17-Feb-14

100%
100%

UK
Singapore

18-Feb-14
24-Apr-14

100%
100%

Italy

08-May-14

100%

1751 Richardson Office 8400, Montreal, Canada, H3K 1G6
3rd floor, Vardhman Orchard Plaza, Plot No 4, LSC,
West Enclave, Pitampura, New Delhi, 110034, India
Fifth Floor, 6 St. Andrew Street, London, EC4A 3AE
20 Kallang Avenue, #06-6A, Lobby B, Pico Creative Centre,
Singapore 339411
Via Egadi 2, Milano, MI, 20144, Italy

USA
USA

08-May-14
08-May-14

100%
100%

350 N. Glenoaks Blvd., Suite 305, Burbank, CA 91502, USA
350 N. Glenoaks Blvd., Suite 305, Burbank, CA 91502, USA

India

10-Oct-14

100%

India

10-Oct-14

100%

3rd floor, Vardhman Orchard Plaza, Plot No 4, LSC,
West Enclave, Pitampura, New Delhi, 110034, India
D – 3/C, Munirka Flats, New Delhi – 110067

Singapore

10-Oct-14

100%

Canada(Quebec)

06-Jan-15

100%

Spain

09-Jan-15

100%

Passeig de Gràcia 49, 1er2a, 08007 Barcelona, Catalonia, Spain

Brazil

18-Jan-15

100%

Av. Churchill, 109 – Sala 204 – Centro, Rio de Janeiro-RJ,
Brazil CEP: 20020-050

China

02-Apr-15

100%

142 Room, Building 7, No.311 Jin Gao Road,
Pudong New District, Shanghai

Spain

16-Jul-15

100%

Julián Camarillo 6A, 3B, 28037 Madrid, Spain

Mexico16-Jul-15

100%

Av. Insurgentes Sur 1853, Guadalupe Inn,
01020 Ciudad de México, CDMX Mexico

USA

20-Aug-15

100%

411 SW 2nd Ave #300, Portland, OR 97204, USA

Name

Registered office

Whelan House, South County Business Park, Dublin 18, Ireland.
5F, Aoba No.1 Bldg. 2-3-1 Kudanminami, Chiyoda, Tokyo,
102-0074 Japan
18300 Redmond Way, Suite 120, Redmond, WA 98052
201 Temple Chambers, 3-7 Temple Avenue, London,
England, EC4Y 0DT
Bryant House Bryant Road, Strood, Rochester, Kent, ME2 3EW
1751 Richardson, suite 8400, Montréal, Québec,Canada H3K1G6

20 Kallang Avenue, #06-6A, Lobby B, Pico Creative Centre,
Singapore 339411
1751 Richardson Street Suite 8400 Montreal QC H3K 1G6
CanadaAnnual Report and Accounts 201891

Financial Statements

Notes Forming Part of the Consolidated and Company Financial Statements
continued
21		

Investment in Subsidiaries continued

Country ofincorporation

Date ofincorporation /acquisition

Proportion of
voting rights andordinary sharecapital held

Keywords Asia Private Ltd(Formerly Ankama Asia
Pte Ltd)
Synthesis Deutschland
GmbH
Sillabit S.R.L
Synthesis Global Solutions
SAS
Keywords Studios France
SAS (Formerly Keywords
International SAS)
Player Research Ltd

Singapore

22-Mar-16

100%

20 Kallang Avenue #06-6A, Lobby B Pico Creative Centre
Singapore 339411

Germany

12-Apr-16

100%

Holstenkamp 46 A, Bahrenfeld, 22525 Hamburg, Germany

Italy
Switzerland

12-Apr-16
12-Apr-16

100%
100%

Via Marco D’Oggiono, 12, Milano (MI) 20123, Italy
Corso Elvezia 16, 6900 Lugano, Ticino, Switzerland

France08-Jun-16

100%

11 rue Torricelli, 75017 Paris, FranceUK26-Oct-16

100%

Keywords Studios QCInteractive Inc.
SPOV Ltd
Xloc Inc.
GameSim Inc.
Strongbox Ltd

Canada(Quebec)
UK
USA
USA
Seychelles

16-Nov-16

100%

17-Feb-17
10-May-17
17-May-17
22-May-17

100%
100%
100%
100%

Red Hot Software(Shanghai) Ltd
Red Hot Software(Zhengzhou) Ltd
Eastern New Media
LimitedPT Limitless Indonesia
Around the Word GmbH
d3t Ltd

China

22-May-17

100%

2nd Floor, Claremont House, 95 Queens Road, Brighton,
England, BN1 3XE
1751 Richardson Street Suite 8400 Montreal QC H3K 1G6
Canada205-209 Hackney Road, London, England, E2 8JL
712 Presnell Court, Raleigh, NC 27615-1240, USA
12000 Research Parkway, Suite 436, Orlando, FL 32826, USA
Suites 103, 106 and 107 Premier Building, Victoria,
Mahe, Seychelles
Dong Ti Yu Hui Road #860, Building 5, 4th Floor, Shanghai, China

China

22-May-17

100%

Hong Kong

22-May-17

100%

Indonesia
GermanyUK

22-May-17
28-Jul-17
19-Oct-17

100%
100%
100%

Keywords US Holdings Inc

USA

23-Oct-17

100%

Keywords Canada Holdings Canada
Inc. (Formerly Volt
(Quebec)
Canada Inc.)
Keywords Studios BC Inc.
Canada (BC)(Formerly VMC Volt
Information Sciences
BC Inc.)VMC Consulting Corporation USA

27-Oct-17100%

27-Oct-17100%

400-725 Granville Street, Vancouver, BC V7G 1G5, Canada

27-Oct-17

100%

Sperasoft Poland Spólka z.o.o.
Sperasoft Studios LLC
Sperasoft Inc
Keywords Studios Ltd
Keywords UK Holdings
LimitedKeywords Ventures Limited
Cord World Wide Spain, SL
Laced Music Ltd

PolandRussiaUSA
IrelandUK

13-Dec-17
13-Dec-17
13-Dec-17
27-Mar-18
28-Mar-18

100%
100%
100%
100%
100%

UK
Spain
UK

06-Apr-18
09-Apr-18
09-Apr-18

100%
100%
100%

Cord Worldwide Ltd

UK

09-Apr-18

100%

Cord Artists Management
LimitedPaleblue Limited
Fire Without Smoke Ltd
Fire Without Smoke Inc.

UK

09-Apr-18

100%

11611 Willows Road NE, Redmond, WA 98052, United States ofAmerica
Ul. Na Kozłówce 27, 30-664 Kraków, Poland
196084, Russia, Saint-Petersburg, Kievskaya street, 5 – building
1013 Centre Road, Suite 403-B, Wilmington, DE 19805, USA
Whelan House, South County Business Park, Dublin 18, Ireland.
201 Temple Chambers, 3-7 Temple Avenue, London, England,
EC4Y 0DT
8 Clifford Street, London, United Kingdom, W1S 2LQ
Avenida Concha Espina 39 B28016, Madrid, Spain
201 Temple Chambers, 3-7 Temple Avenue, London, England,
EC4Y 0DT
201 Temple Chambers, 3-7 Temple Avenue, London, England,
EC4Y 0DT
12-14 Denman Street, London, England, W1D 7HJ

UK
UK
USA

09-Apr-18
30-May-18
29-May-18

100%
100%
100%

Name

92

Keywords Studios plc

Registered office

Room 207, 11th Floor, Building No. 3, No. 57 Ke Xue Da Dao,
Zheng Zhou, He Nan, China
Flat/Rm 4304, 43F, China Resources Building, 26 Harbour Road,
Wanchai, Hong Kong
JI. Timoho II, No. 32, Yogyakarta,
Rosenstrasse 2, D-10178 Berlin
201 Temple Chambers, 3-7 Temple Avenue, London, England,
EC4Y 0DT
1209 Orange Street, Wilmington, New Castle County, Delaware
19801, USA.
1751 Richardson Street Suite 8400 Montreal QC H3K 1G6
Canada12-14 Denman Street, London, England, W1D 7HJ
98 Chingford Mount Road, South Chingford, London, E4 9AA
12701 Marblestone Drive, Suite 330, Woodbridge, Virgina,
22192 USA

21		

Investment in Subsidiaries continued

Name

Blindlight LLC
Snowed In Studios, Inc

Country ofincorporation

Date ofincorporation /acquisition

Proportion of
voting rights andordinary sharecapital held

11-Jun-18
19-Jul-18

100%
100%

Studio Gobo Limited

USA
Canada(Ontario)UK

20-Aug-18

100%

Bitsy SG LimitedUK

20-Aug-18

100%

Electric Square LimitedUK

20-Aug-18

100%

Alset LtdUK

20-Aug-18

100%

Itsy SGD LimitedUK

20-Aug-18

100%

d3t Development Ltd

UK

30-Aug-18

100%

The TrailerFarm LimitedUK

18-Sep-18

100%

Registered office8335 Sunset Blvd. West Hollywood, CA 90069 USA
400 – 981 Wellington Street West Ottawa, Ontario
K1Y 2Y1 Canada
Unit 8 Hove Business Centre, Fonthill Road, Hove, East Sussex,
BN3 6HA
Unit 8 Hove Business Centre, Fonthill Road, Hove, East Sussex,
United Kingdom, BN3 6HA
Unit 8 Hove Business Centre, Fonthill Road, Hove, East Sussex,
England, BN3 6HA
Unit 8, Hove Business Centre, Fonthill Road, Hove, United
Kingdom, BN3 6HA
Unit 8, Hove Business Centre, Fonthill Road, Hove, United
Kingdom, BN3 6HA
201 Temple Chambers, 3-7 Temple Avenue, London, England,
EC4Y 0DT
The Old Casino, 28 Fourth Avenue, Hove, East Sussex, BN3 2PJ

Post acquisition the Group reviews entities acquired to streamline activities and close any dormant entities acquired. Re-structuring details are
set out below:

Name

Country ofIncorporation

Date ofincorporation /acquisition

Proportion of
voting rights
and ordinary
share capital
heldMaximal Studio Audiovisuais Ltda

Brazil

22-Mar-18

100%

Keywords International Corporation Inc.
Volta Creation Inc.
Global Video Games Services Inc.
La Marque Rose SARLAsRec SAS
Dune Sound SAS
Around the Word SAS
GVGS Europe SARL

CanadaCanadaCanadaFranceFranceFranceFranceFrance22-Dec-10
28-Jul-16
16-Nov-16
04-Aug-17
28-Jul-17
28-Jul-17
28-Jul-17
16-Nov-16

100%
100%
100%
100%
100%
100%
100%
100%

Date ofre-structuring

Re-structuring details

Merged into Keywords do Brasil Localizacao
e Traducao Ltda
Merged into Keywords Canada Holdings Inc.
Merged into Keywords Canada Holdings Inc.
Merged into Keywords Canada Holdings Inc.
Merged into Keywords Studios France SAS
Merged into Keywords Studios France SAS
Merged into Keywords Studios France SAS
Merged into Keywords Studios France SAS
Dissolved

20-Sep-18
01-Jan-19
01-Jan-19
01-Jan-19
04-Oct-18
31-Aug-18
30-Nov-18
30-Nov-18
26-Dec-18

22		 Related Parties and Shareholders
Italicatessen Limited, a company registered in Ireland is related by virtue of a common significant shareholder. P.E.Q. Holdings Limited is 100%
owner of Italicatessen Limited. At 31 December 2018, P.E.Q. Holdings Limited owned 6.3% (2017: 6.5%) of the Company. In addition, Mr. Giorgio
Guastalla is a Director of Italicatessen Limited, P.E.Q. Holdings Limited and the Company, and owns, or controls, 90% of the share capital of P.E.Q.
Holdings Limited.
The following transactions arose with Italicatessen Limited, which provides canteen services to Keywords International Limited, on an arms
length basis:

Operating Expenses
Canteen charges

2018
€’000

2017
€’000

44

57

44

57

2018
€’000

2017
€’000

5

9

5

9

The following are year-end balances owing by the Group:

Italicatessen Limited

The Company paid the following amounts, on an arms length basis, to Mr. Giorgio Guastalla, Director of the Company, and shareholder of P.E.Q.
Holdings Limited, in respect of rent on premises occupied by employees of the Group in Dublin.
Annual Report and Accounts 201893

Financial Statements

Notes Forming Part of the Consolidated and Company Financial Statements
continued
22		

Related Parties and Shareholders continued

Operating Expenses
Rental payment

2018
€’000

2017
€’000

22

22

22

22

2018
€’000

2017
€’000

175,509
1,600

117,732
14,624

177,109132,356

2018
€’000

2017
€’000

1,600
175,509

129,056
3,300

177,109132,356

The details of key management compensation (being the remuneration of the Directors) are set out in note 10.
As at 31 December 2018 and 2017, the Company had amounts receivable from its subsidiaries as follows:
Company
Receivables from subsidiaries related to investment in acquisitions
Receivables from subsidiaries relating to trading activities

Company
Company Short Term
Company Long Term

23		 Financial Instruments and Risk Management
Interest Rate Risk
Interest rate risk is the risk that the value of financial instruments will fluctuate due to changes in market interest rates. The Group’s income
and operating cash flows are substantially independent of changes in market interest changes. The management monitors interest rate
fluctuations on a continuous basis and acts accordingly.
Where the Group has a significant amount of surplus cash, it invests in higher earning interest deposit accounts.
Due to interest rate conditions, the interest rates for short-term deposits are at similar levels to those achieved for longer-terms. The Groupis not unduly exposed to market interest rate fluctuations, and no interest rate sensitivity analysis has been presented as a result.
Credit Risk
The Group’s main financial assets are cash and cash equivalents, as well as trade and other receivables, which represent the Group’s maximum
exposure to credit risk in connection with its financial assets.
Credit risk arises when a failure by counterparties to discharge their obligations could reduce the amount of future cash inflows from financial
assets on hand at the reporting date. Credit risk arising in the context of the Group’s operations is not significant with the total bad debt
provision at the balance sheet date amounting to 4.6% of gross trade receivables (2017: 1.5%), with the majority of the year over year increase
attributable to one customer. Customer credit risk is managed at appropriate Group locations according to established policies, procedures
and controls. Customer credit quality is assessed and credit limits are established where appropriate. Outstanding customer balances are
regularly monitored and a review for indicators of impairment (evidence of financial difficulty of the customer, payment default, breach ofcontract etc.) is carried out at each reporting date. Significant balances are reviewed individually while smaller balances are grouped andassessed collectively. Receivables balances are unsecured and non-interest-bearing. The trade receivables balances disclosed comprisea large number of customers spread across the Group’s activities and geographies with balances classified as “Not past due” representing 74%
of the total trade receivables balance at the balance sheet date (2017: 61%). Trade and other receivables are carried on the statement offinancial position net of bad debt provisions.
Group Treasury manage bank balances centrally, and monitors the credit rating and stability of the institutions the Group banks with.

94

Keywords Studios plc

23		 Financial Instruments and Risk Management continued
The ageing of trade receivables that are past due but not impaired can be analysed as follows:
Group
Total
€’000

Not past due€’000

1-2 months
overdue€’000

More than 2months past due€’000

37,01927,47327,504
16,713

7,996
9,126

1,519
1,634

2018
€’000

2017
€’000

Provision at the beginning of the year
Impairment of financial assets (trade receivables) charged to administration expenses
Foreign exchange movement in the year
Utilised

418
2,055
(30)
(726)

468
3
–
(53)

Provision at end of the year

1,717

418

At 31 December 2018
At 31 December 2017

A provision for doubtful debtors is included within trade receivables and can be reconciled as follows:

Trade receivables loss allowance is estimated using a practical expedient to arrive at lifetime expected credit losses. Overdue receivables
are evaluated to calculate an expected credit loss using a historical credit loss experience of 0.5% (2017: nil). Taking into account internal andexternal information, the historical credit loss experience may be adjusted where it is determined that there has been a significant increase incredit risk. Where there is evidence that a receivable is credit impaired, the impairment is recognised immediately, and impaired balances are
removed from the expected credit loss calculation.
More than
2 months
past due
€’000

Total
€’000

Not past due€’000

1-2 months
overdue€’000

Trade receivables grossCredit impaired
Expected credit losses

39,074(1,872)(183)

27,874
(234)
(136)

8,586
(551)
(39)

2,614
(1,087)(8)

At 31 December 2018

37,01927,504

7,996

1,519

Trade receivables grossCredit impaired
Expected credit losses

27,891(418)–

16,713
–
–

9,126
–
–

2,052
(418)
–

At 31 December 201727,473

16,713

9,126

1,634

Related party receivables of €nil were past due at 31 December 2018 (2017: €nil).
Company
As presented in note 22, receivables from subsidiaries relating to investments in acquisitions, comprise term loans extended to subsidiaries,
while receivables from subsidiaries relating to trading activities, comprise trading balances repayable on demand. Balances are analysed interms of the risk profile of the subsidiary. A small number of balances were deemed to be technically credit impaired under IFRS 9, and an
expected credit loss of €183K (2017: nil), was recognised in the period related to these receivables. Taking into account internal and external
information, it was determined that a significant increase in credit risk had not occurred in the reporting period for the remaining receivablesfrom subsidiaries. A 12 month expected credit loss of €nil (2017: €nil) was recognised in the period related to these receivables.
Currency Risk
Currency risk is the risk that the value of financial instruments will fluctuate due to changes in foreign exchange rates. The foreign exchange
risk arises for the Group where assets and liabilities arise in a currency other than the functional currency of the entity.
The Group’s policy, where possible, is for Group entities to manage foreign exchange risk at a local level by matching the currency in whichrevenue is generated with the expenses incurred and by settling liabilities denominated in their functional currency with cash generated fromtheir own operations in that currency. Where Group entities have liabilities denominated in a currency other than their functional currency (andhave insufficient reserves of that currency to settle them), cash already denominated in that currency will, where possible, be transferred from
elsewhere within the Group.

Annual Report and Accounts 201895

Financial Statements

Notes Forming Part of the Consolidated and Company Financial Statements
continued
23		 Financial Instruments and Risk Management continued
Currency Risk continued
Over the course of the year the Group’s currency exposure has increased and diversified due to the addition of the newly-acquired subsidiaries.
The Group is predominantly exposed to currency risk on the balances held within working capital across the Group and the exposure isconcentrated in the movement of the Canadian Dollar, US Dollar and Sterling against the Euro. The effect of a strengthening and weakeningof 10% in those currencies against the Euro at the reporting date on the working capital balances would, all other variables held constant, haveresulted in the following pre-tax profit / (loss) impact for the year:

US Dollar to Euro
Canadian Dollar to Euro
Sterling to Euro*

10%
Strengthening
2018
€’000

10%
Weakening
2018
€’000

10%
Strengthening*
2017
€’000

10%
Weakening*
2017
€’000

2,140
2,026
884

(1,946)(1,842)
(803)

2,363
1,267
620

(2,148)(1,152)(564)

Please note the comparatives have been amended to reflect current year presentation, as the Directors consider this presentation to be more meaningful.

Total Financial Assets and Liabilities
The carrying amount of the financial assets and liabilities shown in the Group and Company statements of financial position are stated
at amortised costs, with the exception of contingent consideration held at fair value.
Liquidity Risk
Liquidity risk arises from the Group’s management of working capital and the financial charges on its debt instruments.
The Group’s policy is to ensure that it will have sufficient cash to allow it to meet its liabilities when they become due.
The following are the contractual maturities (representing undiscounted contractual cash flows) of the Group’s and Company’s financial liabilities:
Group
Year ended 31 December 2018

Trade payables
Deferred and contingent consideration (i)Other payables
Loans and borrowings
Loan interest
Year ended 31 December 2017

Trade payables
Deferred and contingent consideration (i)Other payables
Loans and borrowings
Loan interest

Total
€’000

Within 1 year€’000

1-2 years€’000

2-5 years
€’000

7,142
19,30622,90940,30155

7,142
18,24922,90440,071
55

–
1,057
5
–

–
–
230

Total
€’000

Within 1 year€’000

1-2 years€’000

2-5 years
€’000

7,310
4,468
19,77019,280
80

7,310
3,251
19,754
18,943
80

–
1,217
16
31

–
–
306

Total
€’000

Within 1 year€’000

1-2 years€’000

2-5 years
€’000

285
–
6,003
40,000
55

285
–
5,435
40,000
55

–
–
–
–

–
–
568
–

Total
€’000

Within 1 year€’000

1-2 years€’000

2-5 years
€’000

215
971
607
18,250
80

215
971
607
18,250
80

–
–
–
–

–
–
–
–

Company
Year ended 31 December 2018

Trade payables
Deferred and contingent consideration (i)Other payables
Loans and borrowings
Loan interest
Year ended 31 December 2017

Trade payables
Deferred and contingent consideration (i)Other payables
Loans and borrowings
Loan interest

Deferred and contingent consideration at 31 December 2018 has arisen on business combinations, and is based on set amounts to be paid in
the future to sellers under share purchase agreements.

96

Keywords Studios plc

24		 Operating Lease Commitments
The Group occupies a portfolio of leased properties. The terms of property leases vary from country to country, although they all tend
to be tenant repairing with rent reviews every two to five years and typically have a five year break clause, with options to renew.
The total future value of the minimum lease payments is as follows:Group
Not later than one year
Later than one year and not later than five years
Later than five years

2018
€’000

2017
€’000

6,557
8,882
1,451

4,561
10,708
4,793

16,89020,06225		 Finance Lease Commitments
The Group leases computer equipment and office telephone systems. Such assets are generally classified as finance leases, as the lease term
equates to the estimated useful economic life of the assets concerned, and often the Group has the right to purchase the assets outright at theend of the minimum lease term by paying a nominal amount. As the carrying value of assets under finance lease commitments are negligible,
the net book value of the assets is not disclosed.
The total future value of the minimum lease payments is as follows:
Group

2018
Not later than one year
Later than one year and not later than five years
Later than five years
2017
Not later than one year
Later than one year and not later than five years
Later than five years

Minimum lease
payments€’000

Interest€’000

Present value
€’000

5
–
–

–
–
–

5
–
–

5

–

5

25
20
–

1
4
–

24
16
–

45

5

40

Annual Report and Accounts 201897

Financial Statements

Notes Forming Part of the Consolidated and Company Financial Statements
continued
26		 Deferred Tax
Details of the deferred tax assets and liabilities, and amounts recognised in the profit or loss are as follows:
Asset
2018
€’000

Liability
2018
€’000

Net
2018
€’000

(Credited) /charged toIncomeStatement
2018
€’000

Accelerated capital allowances
Defined benefit termination payments
Available losses
Rent free period provisions
Fixed asset tax base versus accounting book value
Deferred tax related to multimedia tax credits
Deferred tax arising on items deductible on a paid basis
Deferred tax arising on intangibles

–
66
875
30
558
–
1,438
–

1
–
–
–
71
2,468
155
5,793

(1)
66
875
30
487
(2,468)
1,283(5,793)

1
(3)
40
4
(100)
(112)
(415)
(1,448)Net tax assets / (liabilities)

2,967

8,488

(5,521)(2,033)

Impact of change in tax rates
Prior year (over) / under provision

–
–

–
–

–
–

(4)
(364)

Total (credited) / charged to Income Statement

–

–

–

(2,401)

Asset
2017
€’000

Liability
2017
€’000

Net
2017
€’000

(Credited) /chargedto IncomeStatement
2017
€’000

–
32
237
17
258
–
581
81

1
–
–
–
139
2,284
112
5,259

(1)
32
237
17
119
(2,284)469(5,178)

1
(2)
(162)
13
(33)
132
(225)
(700)

1,206

7,795

(6,589)(976)

Impact of change in tax rates
Prior year (over) / under provision

–
–

–
–

–
–

(149)
94

Total (credited) / charged to Income Statement

–

–

–

(1,031)

Accelerated capital allowances
Defined benefit termination payments
Available losses
Rent free period provisions
Fixed asset tax base versus accounting book value
Deferred tax related to multimedia tax credits
Other temporary differences
Deferred tax arising on intangibles
Net tax assets / (liabilities)**

Please note that the comparative has been re-classified to reflect the current year presentation as the Directors have determined this presentation to be more meaningful.

The deferred tax not recognised on available losses at the period end is €3.9m (2017: €3.1m).
27		

Investment in Associate

Opening balance
Investment in AppSecTest Limited
Post-acquisition changes in the Group’s share of net assets

2018
€’000

2017
€’000

–
226
(66)

–
–
–

160

–

In May 2018, the Group, through the newly established Keywords Ventures Ltd, invested £100k (€113k) in 15% of the share capital of
AppSecTest Limited. Incorporated in the UK, AppSecTest is creating a cloud based automatic testing solution for mobile apps, including games(principally for GDPR compliance). A further investment of £100K (€113K) was made in September 2018 bringing the total investment to 30%of the share capital of the company. Under a shareholder agreement the Group is entitled to appoint one director to the board. Based on thesefactors, the Group consider that it has the power to exercise significant influence.

98

Keywords Studios plc

28		

Business Combinations / Acquisitions Completed in the Current Year

Cord
€’000

Laced
€’000

Maximal€’000

Fire
Without
Smoke
€’000

09-Apr-18

09-Apr-18

22-Mar-18

30-May-18

11-Jun-18

19-Jul-18

20-Aug-18

18-Sep-18

UK

UK

BrazilUK

US

CanadaUK

UK

Book value of identifiable assets
and liabilities
Property, plant & equipment
Intangible assets
Trade and other receivables – gross
Bad debt provision
Cash and cash equivalents
Trade and other payables

79
362
1,135
–
1,803
(1,455)

–
–
126
–
40
(224)

14
–
22
–
112
(271)

11
–
810
(268)
1,123
(419)

4
–
256
–
96
(128)

38
–
48
–
282
(122)

803
–
3,558
–
5,409
(1,404)

17
–
98
–
129
(51)

966
362
6,053
(268)
8,994
(4,074)

Date of acquisition
Acquisition company jurisdiction

Blindlight€’000

SnowedIn€’000

Studio Gobo
& Electric
Square€’000

The
TrailerFarm
€’000

Total
€’000

Net book value

1,924

(58)

(123)

1,257

228

246

8,366

193

12,033

Fair value adjustments
Identifiable intangible assets –customer relationships
Deferred tax liabilities

2,163
(411)

–
–

–
–

1,404
(267)

2,413
(511)

584
(159)

–
–

–
–

6,564
(1,348)

Total fair value adjustments

1,752

–

–

1,137

1,902

425

–

–

5,216

Total identifiable assets

3,676

(58)

(123)

2,394

2,130

671

8,366

193

17,249Goodwill

2,377

521

647

4,455

5,949

2,003

25,8701,322

43,144

Total consideration

6,053

463

524

6,849

8,079

2,674

34,236

1,515

60,393% Share capital acquired
Satisfied by:
Cash
Deferred cash
Deferred cash contingent on
performance
Shares to be issued

100%

100%

100%

100%

100%

100%

100%

100%

4,907
–

320
–

345
–

4,726
–

3,097
–

1,822
109

17,015
1,033

925
–

33,157
1,142

–
1,146

–
143

179
–

574
1,549

3,655
1,327

–
743

11,164
5,024

354
236

15,926
10,168

6,053

463

524

6,849

8,079

2,674

34,236

1,515

60,393–65,550

–
8,194

–
–

–
77,006–64,521–
37,983–
254,529–
11,070–518,853

Total consideration transferred
Number of shares
Issued at the date of acquisition
Fixed amount agreed to be issued

Annual Report and Accounts 201899

Financial Statements

Notes Forming Part of the Consolidated and Company Financial Statements
continued
28		 Business Combinations / Acquisitions Completed in the Current Year continued
Net cash outflow arising on acquisition
Cord
€’000

Laced
€’000

Maximal€’000

Fire
Without
Smoke
€’000

4,907

320

345

4,726

Blindlight
€’000

3,097

Snowed In€’000

Studio Gobo
& Electric
Square€’000

The
TrailerFarm€’000

Total 2018
€’000

1,822

17,015925

33,157Cash
Less: cash and cash equivalentbalances transferred(1,803)

(40)

(112)

(1,123)

(96)

(282)

(5,409)(129)(8,994)

Net cash outflow – acquisitions

3,104

280

233

3,603

3,001

1,540

11,606796

24,163

Related acquisition costs charged
through to the Consolidated
Statement of Comprehensive
Income

104

20

8

138

4

57

388

39

758

Pre-acquisition revenue in H1
Pre-acquisition revenue in H2
Pre-acquisition revenue with
Keywords Group
Post-acquisition revenue

1,721
–

47
–

243
–

1,653
–

1,139
–

1,013
–

7,286
2,064

534
331

13,636
2,395

–
2,864

–
510

(243)
180

–
2,641

–
2,653

–
1,210

–
8,195

–
662

(243)
18,915

Pro forma revenue

4,585

557

180

4,294

3,792

2,223

17,545

1,527

34,703Pre-acquisition profit / (loss)
before tax
Post-acquisition profit / (loss)
before tax

93

(10)

82

238

(143)

325

4,065

246

4,896

(196)

36

319

820

785

420

2,878

243

5,305

Pro forma profit / (loss)
before tax

(103)

26

401

1,058

642

745

6,943

489

10,201

The acquisitions made in the year are in line with the Group’s strategy to grow organically and by acquisition, as it selectively consolidates thehighly fragmented market for video game services. The companies will bring additional talent, expertise and industry experience to Keywords’
client base. Being able to offer the additional 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 acquisitions in the year are set out in thetable above.
The main factors leading to the recognition of goodwill on the 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 in Cord & Laced.
• The expertise in high end video game trailers and reputation within the industry in Fire Without Smoke.
• The expertise in voiceover production, celebrity acquisition and rights management, game writing, music, sound design and motion capturein Blindlight.
• The expertise and additional scale to Keywords’ new and growing video game development business in Snowed In and Studio Gobo &Electric Square.
• The experience and expertise in producing trailers for the marketing and support of video games in The TrailerFarm.
The total amount of goodwill arising on business combinations completed in the current year, that is expected to be deductible for tax purposes
was €nil.

100

Keywords Studios plc

29		

Business Combinations / Acquisitions completed in 2017
Restated

RestatedLe
Marque
Rose
€’000

d3t
€’000

VMC
€’000

Sperasoft
€’000

Lola
€’000

28-Jul-17 04-Aug-17 04-Aug-17

19-Oct-17

27-Oct-17

13-Dec-17

15-Dec-17

Aroundthe Word€’000

Spov Ltd.
€’000

XLOC
€’000

Gamesim€’000

Red Hot€’000

17-Feb-17

10-May-17

17-May-17

22-May-17

UK

US

US

China

FranceFranceFrance

30

7

13

230

342

123

148

188

1,053

13

3,981

16
–
–
(139)
–
–
–

33
–
120
(73)
–
–
–

768
–
26
(353)
–
–
–

975
2,142
–
–
584
497
(356) (2,067)
(64)
–
–
–
(0)
–

49
–
76
(115)
–
–
–

598
–
494
(504)
–
–
–

602 18,255
3,890
–
–
(944)
802
–
587
(678) (3,192) (2,710)
–
(150)
(86)
–
(1,408)(46)––(1,022)

147
–
43
(118)
–
–
–

27,475(944)
3,229(10,305)(300)(1,454)(1,022)

(93)

87

454

1,369

914

133

736

914

15,339722

85

20,660

Deferred tax liabilities

–
–

147
(59)

–
–

1,465
(366)

651
(217)

–
–

–
–

–
–

13,245(2,781)

3,454
(691)

–
–

18,962(4,114)

Total fair value adjustments

–

88

–

1,099

434

–

–

– 10,464

2,763–

14,848

Total identifiable assets

(93)

175

454

2,468

1,348

133

736

914 25,803

3,485

85

35,508Goodwill as reported
Measurement period
adjustment (note 31)

491

652

3,828

2,513

3,495

577

1,293

2,886 32,128

18,206784

66,853

–

–

–

–

–

–

–

(945)

–

(945)

Date of acquisition
Acquisition Company
Jurisdiction

Asrec
€’000

US /
UK Canada

Total
€’000

Russia /US MexicoBook value of identifiable
assets and liabilities
Property, plant & equipment
Trade and other receivables– gross
Bad debt provision
Cash and cash equivalents
Trade and other payables
Corporation tax payable
Deferred tax liabilities
Loan
Net book value
Fair value adjustments
Identifiable intangible assets– customer relationships

–

1,834

–

Goodwill (restated)

491

652

3,828

2,513

3,495

577

1,293

2,886 32,128

17,261784

65,908

Total consideration

398

827

4,282

4,981

4,843

710

2,029

3,800 57,931

20,746869

101,416

100%

100%

100%

100%

100%

100%

100%

100%

100%

100%

Asset
Purchase

Shares to be issued (restated)

351
–
47
–

643
184
–
–

2,888
1,394
–
–

3,514
–
–
1,467

2,500
–
1,543
800

610
100
–
–

2,029
–
–
–

3,127
673
–
–

57,931–––

16,733
–
–
4,013

405
–
295
169

90,731
2,351
1,885
6,449

Total considerationtransferred

398

827

4,282

4,981

4,843

710

2,029

3,800 57,931

20,746869

101,416

19,134 151,725

–

–

9,534

– 160,842 66,262–% Share capital acquired
Satisfied by:Cash
Equity instruments
Deferred cash (restated)

Number of shares
Issued at the date ofacquisition
Fixed amount agreed to beissued–––– 42,368––

222,767–– 252,248 10,106

489,458–

Annual Report and Accounts 2018101

Financial Statements

Notes Forming Part of the Consolidated and Company Financial Statements
continued
29		 Business Combinations / Acquisitions completed in 2017 continued
Net cash outflow arising on acquisition
Spov Ltd.
€’000

XLOC
€’000

Gamesim
€’000

Red
Hot
€’000

Around the
Word
€’000

Asrec
€’000

Le Marque
Rose
€’000

d3t
€’000

VMC
€’000

Sperasoft
€’000

Lola
€’000

Total 2017
€’000

351

643

2,888

3,514

2,500

610

2,029

3,127

57,931

16,733405

90,731

–

(120)

(26)

(584)

(497)

(76)

(494)

(802)

–

(587)

(43)

(3,229)

–

–

–

(321)

–

–

–

–

–

–

(405)

(726)

351

523

2,862

2,609

2,003

534

1,535

2,325

57,931

16,146(43)

86,776

9

9

3

70

435

–

–

36

1,690

82

2

2,336

4

243

1,532

2,266

3,518

265

1,154

1,547

24,7548,902

449

43,462

–

–

–

–

588

44

193

903

17,822

8,378

548

27,633Post-acquisition revenue

–
208

–
236

–
2,266

–
3,980

(575)
2,048

(43)
571

(189)
1,154

–
560

–
7,769

–
798

(997)
–

(1,804)
19,5902017 Pro forma revenue

212

479

3,798

6,246

5,579

837

2,312

3,010

50,345

18,078–88,881Cash
Less: cash and cash
equivalent balancestransferred
Settled in 2018 re 2017acquisitions
Net cash outflow –acquisitions
Related acquisition costs
charged through to theConsolidated
Statement ofComprehensive Income
Pre-acquisition revenue in2017 H1
Pre-acquisition revenue in2017 H2Adjustment for preacquisition trading with
Keywords Group

Pre-acquisition profit /(loss) before tax*
Post-acquisition profit /(loss) before tax*

(10)

82

64

305

(313)

(32)

(151)

120

2,358

(1,007)

68

1,484

(203)

(114)

397

848

313

141

191

(7)

824

(34)

–

2,336

Pro forma profit / (loss)
before tax

(213)

(32)

461

1,153

–

109

40

113

3,182

(1,041)

68

3,820

*

Restated to exclude revenue from one contract that did not novate to VMC post acquisition and information that was not available when preparing the FY17 Annual Report.

The acquisitions made in the prior year are in line with the Group’s 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 industry experience to
Keywords’ client base. Being able to offer the additional services to our clients will further enhance our reputation as the leading providerof services to the global video games industry.
The amounts recognised in respect of the identifiable assets acquired and liabilities assumed of our acquisitions in the year are set out in thetable above.
The main factors leading to the recognition of goodwill on the acquisitions are the presence of certain intangible assets in the acquired entities,
which are not valued for separate recognition, such as:• Expertise in art services and reputation within the industry in Spov.
• Expertise in localization processes and reputation within the industry in XLOC.
• The expertise in simulation technology for the games industry in Gamesim.
• Broader access to the Chinese pool of video game art talent, which is the largest in the world, and expertise in art service for the games
industry in Red Hot.
• Expertise in audio service for the games industry and reputation in the French entities.
• A software development team with capabilities including HD re-mastering, porting, optimisation, rendering and game systems andreputation within the industry in d3t.
• Expertise in art and engineering services for the games industry and reputation in Sperasoft.
The total amount of goodwill arising on business combinations completed in 2017, that is expected to be deductible for tax purposes was €nil.

102

Keywords Studios plc

30		 Supplementary Information to the Statement of Cash Flows
Group Movement on Loans

Balance at 1 January 2017
Cash flows:
Cash received via additional loans in the year
Repayment of loans
Non-cash flows
Amounts recognised on business combinations
Non-current transferred to current
Balance at 31 December 2017
Cash flows:
Cash received via additional loans in the year
Repayment of loans
Non-cash flows
Foreign exchange difference on Canadian loans
Non-current transferred to current

Current€’000

Non-current
€’000

Total
€’000

8,025

345

8,370

10,250(23)––

10,250
(23)

632
59

51
(59)

683
–

18,943337

19,28031,850(10,835)

31,850(10,835)

6
107

(107)

6
–

40,071

230

40,301

Deferredconsideration€’000

Shares to beissued€’000

Goodwill€’000

Other payables(current)€’000

As reported 31 December 2017
Measurement period adjustment

4,468
(826)

11,739(119)

109,007(945)

23,005(826)

Restated 31 December 2017

3,642

11,620108,062

22,179Balance at 31 December 201831		 Measurement Period Adjustment
Group

Goodwill recognised on the acquisition of Sperasoft has been reduced by deferred cash consideration withheld of €826K and a reduction inshares to be issued of €119K under an acquisition agreement warranty claim, which occurred within the measurement period.
Details of the restated purchase consideration and the restated goodwill are as follows:
Sperasoft Acquisition Accounting – extract

As reported 31 December 2017
Measurement period adjustment
Restated 31 December 2017

DeferredConsideration€’000

Shares to beissued€’000

Goodwill
€’000

826
(826)

4,132
(119)

18,206
(945)

–

4,013

17,261

Full details of the restated purchase consideration, the restated goodwill and the fair value of identifiable assets and liabilities acquired
as measured at the acquisition date, together with the other disclosures relevant to the acquisition as reported, are presented in note 29.
The 2017 Group comparatives have been restated in these financial statements to include the effect of the adjustments noted. Under
paragraph 10(f) of IAS 1 Presentation of financial statements, this restatement would ordinarily require the presentation of a third consolidated
statement of financial position as at 31 December 2017. However, as the restatement would have no significant effect on the statementof financial position as at that date, the Directors do not consider that this would provide useful additional information and, in consequence,
have not presented a third consolidated statement of financial position due to the restatement of prior period business combinations.
The Company statement of financial position as at 31 December 2017 has not been restated, as the restatement would have no significant
effect on the statement of financial position as at that date.

Annual Report and Accounts 2018103

Financial Statements

Notes Forming Part of the Consolidated and Company Financial Statements
continued
32		 Events after the Reporting Date
Acquisition of Sunny Side Up Creative Inc.
On 4 January 2019, Keywords Canada Holdings Inc. acquired the entire issued share capital of Sunny Side Up Creative Inc. (“Sunny Side Up”).
Based in Quebec City, Canada, Sunny Side Up produces high quality marketing assets for game publishers and developers including game
trailers, key art assets and motion graphic production. The total consideration for the acquisition is CAD$5.9m, of which CAD$4.75m was paidin cash on completion, CAD$0.35m will be paid 18 months after the acquisition (subject to certain conditions being met) and the balance ofthe consideration is to be met through the issue of 60,179 new ordinary shares in Keywords on the first anniversary of the acquisition andwill then be subject to orderly market provisions for a further 12 months.
Acquisition of the GetSocial business and assets
On 18 February 2019, Keywords Studios Netherlands BV and Keywords International Limited acquired the assets and business of GetSocial B.V.
(“GetSocial”) a company based in The Hague, Netherlands. GetSocial is a cloud-based software platform that provides a suite of functions thatenable games developers to manage all social interactions between their games and their players plus their friends’ networks. GetSocial works
with Android, iOS and Unity apps, and supports interactions on most social media and messaging platforms including Facebook, Instagram andWhatsApp. The total consideration for the acquisition is €170K paid in cash.

104

Keywords Studios plc

Supplementary Information

Alternative Performance Measures
The group reports certain alternative performance measures that are not required under IFRS. The group believes that these measures, inconjunction with our IFRS financial information, provide investors with meaningful understanding of the underlying financial and operating
performance of the group. These measures are key for the ongoing assessment of performance by the board and management of the group.
The measures are used to:• Assess and monitor the underlying trends of our results of our operations• Explain the group performance to the investor analyst community• Set internal management targets
These measures can have limitations as analytical tools and therefore should not be considered in isolation, or as a substitute for IFRS measures.
Other companies may calculate similarly named measures using different bases of calculations, and therefore they may not be comparable.
The principal measures used by the group, with reconciliations to reported IFRS measures as reported, are as follows:
Adjusted Operating Costs
This comprises administration expense as reported on the Consolidated Statement of Comprehensive Income, before non-operating costs
including; share option costs, costs of acquisitions and integration, amortisation, depreciation, and including bank charges.
2018
€’000

2017
€’000

2016
€’000

Consolidated Statement of Comprehensive Income

73,12338,65025,219Consolidated Statement of Comprehensive Income
Consolidated Statement of Comprehensive Income
Consolidated Statement of Comprehensive Income(4,129)(5,296)(6,872)–(5,316)503(1,426)(3,016)(3,038)–(2,730)320(686)(1,316)(1,629)(61)(1,803)229

52,01328,76019,953250,805

151,430

96,585

20.7%

19.0%

20.7%

Calculation

Reference in Financial Statements

Administrative expenses
Less non-operating costs
Share option expense
Costs of acquisition and integration
Amortisation of intangible assets
Non-controlling Interest
Depreciation
Bank charges

Note 5Note 6

Adjusted operating costs
Revenue from contracts with customers

Consolidated Statement of Comprehensive Income

Adjusted operating costs
as a % of revenue

EBITDAEBITDA comprises profit before taxation, adjusted for depreciation, amortisation, both interest income and expense, and exchange gains
and losses.
Calculation

Reference in Financial Statements

Profit before taxation
Financing cost
Financing income
Depreciation
Amortisation
Bank charges

Consolidated Statement of Comprehensive Income
Note 6Note 6Note 5
Consolidated Statement of Comprehensive Income
Note 6

EBITDA

2018
€’000

2017
€’000

2016
€’000

22,094
1,316
(791)
5,316
6,872
(503)

11,994
4,467
(26)
2,730
3,038
(320)

9,435
2,118
(94)
1,803
1,629
(229)

34,304

21,883

14,662Adjusted EBITDA
Adjusted EBITDA comprises gross profit, less the adjusted operating costs, less the share of post-tax losses on the equity accounted associate.
Calculation

Reference in Financial Statements

Gross profit
Adjusted operating costs
Share of post-tax profits of equity
accounted associates

Consolidated Statement of Comprehensive Income
As above

Adjusted EBITDA
Revenue from contracts with customers
Adjusted EBITDA as a % of revenue

Consolidated Statement of Comprehensive Income

2018
€’000

2017
€’000

2016
€’000

95,808(52,013)55,085(28,760)

36,678(19,953)

(66)

–

–

43,72926,325

16,725

250,80517.4%

151,430
17.4%

96,585
17.3%

Annual Report and Accounts 2018

105

Supplementary Information

Alternative Performance Measurescontinued
Adjusted Profit before Tax
Adjusted Profit before tax comprises adjusted EBITDA less interest and depreciation.
Adjusted profit before tax comprises profit before tax as reported on the Consolidated Statement of Comprehensive Income, before nonoperating costs including share option costs, costs of acquisitions and integration, amortisation, and foreign exchange gains and losses.
2018
€’000

2017
€’000

2016
€’000

As above

43,72926,325

16,725Note 6Note 6Note 5(502)–(5,316)(578)
26(2,730)(152)
94(1,803)37,911

23,043

14,864

250,805

151,430

96,585

15.1%

15.2%

15.4%

Calculation

Reference in Financial Statements

Adjusted EBITDA
Less non-operating costs;
Interest expense*
Interest received
Depreciation
Adjusted profit before tax
Revenue from contracts with customers

Consolidated Statement of Comprehensive Income

Adjusted profit before tax
as a % of revenue* The prior year comparative has not been re-classified to reflect current year presentation as the differences are not significant.

Adjusted Effective Tax Rate
The Adjusted effective tax rate is the tax expense as reported on the Consolidated Statement of Comprehensive Income, as a percentage of theadjusted profit before tax.
Calculation

Reference in Financial Statements

Adjusted profit before tax
Tax expense
Adjusted effective tax rate

As Above
Consolidated Statement of Comprehensive Income
Calculation; Tax expense / Adjusted profit before Tax

2018
€’000

2017
€’000

2016
€’000

37,911
7,191
19.0%

23,043
4,731
20.5%

14,864
3,223
21.7%

Adjusted earnings per share
The adjusted profit after tax comprises the adjusted profit before tax, less the tax expense as reported on the Consolidated Statement ofComprehensive Income.
The adjusted earnings per share comprises the adjusted profit after tax over the non-diluted weighted average number of shares as reported
on note 8.
Calculation

Reference in Financial Statements

Adjusted profit before tax
Tax expense

As Above
Consolidated Statement of Comprehensive Income

Adjusted profit after tax
Denominator (weighted average numberof equity shares)

Adjusted earnings per share
Adjusted earnings per share % growth

Note 8Calculation; Adjusted profit after tax / weighted
average number of shares

2018
€’000

2017
€’000

2016
€’000

37,911(7,191)

23,043(4,731)

14,864(3,223)30,72018,312

11,64164,335,162

58,720,884

55,918,481€ c per share€ c per share€ c per share

47.75

31.18

20.59

53%

51%

62%

Return on Capital Employed (ROCE)ROCE represents adjusted profit before tax, including pre acquisition profit and excluding interest expense, expressed as a percentage of theaverage total capital employed. As the group continue to make multiple acquisitions each year, the calculation adjusts the profit before tax
and the capital employed as if all the acquisitions made during each year were made at the start of that year.
Total adjusted profit before tax (continuing) therefore comprises adjusted profit before tax, plus the add backs of net interest costs and bankcharges, plus pre-acquisition profits of current year acquisitions.
Capital employed represents equity as reported on the statement of financial position adding back cumulative amortisation of intangible assets
and retirement benefits, acquisition related liabilities and adding the net borrowings.

106

Keywords Studios plc

Return on Capital Employed (ROCE) continued
Calculation

Reference in Financial Statements

Adjusted profit before tax
Net interest cost*
Bank charges
Pre-acquisition profits of current year acquisitions

As Above
Note 6Note 6
Notes 28 and 29

Adjusted profit before tax including pre-acquisition
profit excluding interest expense
Total equity
Retirement benefits
Cumulative amortization on acquired Intangibles
Acquisition related liabilities
Borrowings
Cash and cash equivalents

Statement of Financial Position
Note 19
Note 12Note 18
Note 20
Statement of Financial Position

Capital employed

Return on capital employed

Adjusted profit before tax including preacquisition profit excluding interest expense /
capital employed

2018
€’000

2017
€’000

2016
€’000

37,911
502
503
4,896

23,043
552
320
1,484

14,864
152
229
2,040

43,81225,39917,285

192,375
1,378
12,786
19,30640,301(39,871)

161,012
1,055
5,734
3,642
19,280(30,374)

66,704
826
2,934
1,730
8,370
(17,020)226,275

160,349

63,544

19.4%

15.8%

27.2%

* The prior year comparative has not been re-classified to reflect current year presentation as the differences are not significant.

Like-for-Like revenue comparison at constant exchange rates
Like for like revenue at constant exchange rates is calculated by adjusting the prior year revenues comparison, by adding pre acquisition
revenues for the corresponding period of ownership, as presented in the current year results, and applying consistent foreign exchange rates
in both years.
Free Cash Flow
Free cash flow represents net cash flow provided by operating activities, plus income taxes paid, less capital expenditure.
Calculation

Reference in Financial Statements

Net cash provided by operating activities
Income taxes paid
Acquisition of property, plant and equipment

Consolidated Statement of Cash Flows
Consolidated Statement of Cash Flows
Consolidated Statement of Cash Flows

Free cash flow before tax

2018
€’000

2017
€’000

2016
€’000

32,1806,304(9,440)16,6585,454(3,803)

14,8222,129(2,306)

29,04418,30914,645Adjusted free cash flow
Adjusted free cash flow is a measure of cashflow adjusting for capital expenditure that is supporting growth in future periods as measured bycapital expenditure in excess of maintenance capital expenditure and is represented by free cashflow before tax, plus capital expenditure inexcess of depreciation.
2018
€’000

2017
€’000

2016
€’000

As Above

29,04418,30914,645

Consolidated Statement of Cash Flows
Consolidated Statement of Cash Flows

9,440(5,316)

3,803(2,730)2,306(1,803)Calculation: Depreciation less Capital Expenditure

4,124

1,073

503

33,16819,382

15,148

2018
€’000

2017
€’000

2016
€’000

33,16837,911

19,382
23,043

15,14814,864

87%

84%

102%

Calculation

Reference in Financial Statements

Free cash flow before tax
Capital expenditure in excess of depreciation –Acquisition of property, plant & equipment
Depreciation
Capital expenditure in excess of depreciation
Adjusted free cash flow

Adjusted cash conversion rate
Adjusted cash conversion percentage is the adjusted free cash flow as a percentage of the adjusted profit before tax:
Calculation

Reference in Financial Statements

Adjusted free cash flow
Adjusted profit before tax

As Above
As Above

Adjusted cash conversion ratio

Free cash flow before tax & capex adjusted
as a % of adjusted profit before tax

Annual Report and Accounts 2018107

Supplementary Information

Company Information
Directors

David Broderick
Andrew Day
Georges Fornay
Charlotta Ginman
Ross Graham
Giorgio Guastalla
David Reeves

Secretary

Liam O’Donoghue

Registered Number

8548351

Registered Office

201 Temple Chambers
3-7 Temple Avenue
LondonEC4Y 0DT

Auditors

BDO
Registered Auditors
Beaux Lane House
Mercer Street Lower
Dublin 2

Remuneration Consultants

Mercer Kepler
Tower Place West
LondonEC3R 5BU

Principal Bankers

Barclays Bank
27 Soho Square
LondonW1D 3QRHSBC Bank PLC
1 Grand Canal Square,
Grand Canal Harbour,
Dublin 2
Lloyds Bank PLC
25 Gresham Street,
LondonEC2V 7HN
Citibank Europe Plc
1 North Wall Quay
Dublin 1

Nominated Adviser and Broker

Numis Securities Limited
The London Stock Exchange Building
10 Paternoster Square
LondonEC4M 7LT

Financial PR Adviser

MHP Communications
6 Agar Street
LondonWC2N 4HN

Solicitors

DWF LLP
20 Fenchurch Street
LondonEC3M 3AG

108

Keywords Studios plc

Keywords Studios PLC
Whelan HouseSouth Country Business Park
Dublin 18
Ireland
T: +353 190 22 730

www.keywordsstudios.com