Keywords Studios plc / Annual Report and Accounts 2020

Passion  is the key

Keywords Studios plc / Annual Report and Accounts 2020

Our purpose> We bring to life digital content
that entertains, connects, challenges,
and educates people worldwide
At Keywords Studios, we bring passion to every pixel, every project, every aspect of technology
and media. Working hand-in-hand with our clients, our diverse group of digitally-native Keywordians
provide technology-enabled services that turn extraordinary ideas into great interactive content.
We’re on a mission to be the world’s leading technical and creative services platform for the video
games industry and beyond, and a sustainable business that positively contributes to the environmentand our communities across the globe.
Welcome to our open and evolving world!

On a  

quest
Andrew Day
Group Chief Executive Officer

Overview

New Game
Continue?

2020 highlights

Overview

Revenue (€m)

01
02
08
10
12

€373.5m +14.4% +11.7%

2020 highlights
Meet the Keywordians
Company overview
Chairman’s statement
Investment case

Strategic report
14
18
20
22
24
26
32
36

46
50

Chief Executive Officer’s review
Market outlook
Business model
Our strategy
Key performance indicators
Service line review
Our people, our culture
Responsible business report38
People39
Diversity & inclusion
40
Client centricity & innovation
41
Environment
42
Community
43	Corporate governanceand business ethics
44
Non-financial information statement
44
Section 172(1) statement
Financial and operating review
Principal risks and uncertainties

Governance
54
56
57
60
63
78
79
81

Board of Directors
Chairman’s introduction
Corporate governance
Audit Committee report
Director’s remuneration report
Report of the Nomination Committee
Director’s reportStatement of Directors' responsibilities

Financial statements

00/01

Organic Revenue growth* (€m)

2020

€373.5m

2020+11.7%

2019€326.5m2019+15.5%

2018€250.8m

2018+10.1%EBITDA* (€m)

€66.8mAdjusted EBITDA* (€m)

+53.9%€74.2m+28.8%

2020€66.8m2020€74.2m2019€43.4m2019€57.6mMargin: 17.9% (2019: 13.3%)

Margin: 19.9% (2019: 17.6%)

Profit before tax* (€m)

Adjusted profit before tax* (€m)

€32.5m+87.1%€55.0m+34.3%

2020€32.5m2020€55.0m2019€17.4m2019€40.9m2018€22.1m2018€37.9mMargin 14.7% (2019: 12.5%)

Basic earnings per share (c)Adjusted earnings per share* (c)30.32c60.93c+99.1%+24.9%

82	Independent Auditor’s report to themembers of Keywords Studios plc
87	Consolidated statement ofcomprehensive income
88	Consolidated statement offinancial position
89	Consolidated statement ofchanges in equity
90 Consolidated statement of cash flows
91 Company statement of financial position
92 Company statement of changes in equity
93 Company statement of cash flows
94	Notes forming part of the consolidated
and company financial statements

2020

30.32c2020

60.93c201915.23c2019

48.78c201823.16c201845.50c2020

0.0p

Supplementary
information

2019

0.58p

2018

1.61p

136 Alternative performance measures
144 Company information

Total dividend per share (p)0.0p*Alternative performance measures
The Group reports certain alternative performancemeasures (APMs) to present the financial performanceof the business which are not GAAP measures as
defined by International Financial Reporting Standards(IFRS). The Directors believe these measures provide
valuable additional information for the users of thefinancial information to understand the underlying
trading performance of the business. In particular,
adjusted profit measures are used to provide the usersof the financial statements with a clear understandingof the underlying profitability of the business over time.
For full definitions and explanations of these measuresand a reconciliation to the most directly referenceable
IFRS line item, please see pages 136 to 143.

Keywords Studios plc / Annual Report and Accounts 2020

Meet the Keywordians> At Keywords Studios, we bring passion
to every pixel, every project, every aspectof technology and media

A sandbox of  creativi
Art Creation & MarketingGame Development

Audio

The creation of video gamegraphical art, including concept
art, 2D and 3D art asset
production and animation.
Marketing services include
game trailers, marketing art
and materials, PR and fullbrand campaign strategies.

Game development services
including full game development,
co-development, porting of games
from one platform to another andremastering, tool development
and consulting services on awork-for-hire basis. This includes
additional services such as
proprietary software solutions foranalytics, social media integration,
procedural generation of art
assets and player behaviour
research consulting services.

Multi-language voiceoverrecording, original language
voice production, music
management, sound effects
and related services for thevideo games industry, film
and TV.

Revenue in 2020

Revenue in 2020

Revenue in 2020

15.3%

21.4%

12.6%

€57.3mof total revenue€80.0mof total revenue€47.2mof total revenueOverview 02/03

ityFrancis-Xavier Martin
Lead Artist at Electric Square
Brighton, UK“I’ve been passionate about
drawing and creating since
I was very young, so I love
when I see something wecreate as a team come to life
and the public enjoys it.”On a daily basis, between meeting withproducers and the team, my job focuses
on reviewing artwork and making sure
it is at the highest quality for our clients.
After work, I like to keep fit and workon my special power, magic, a hobbyof mine for a number of years.

Keywords Studios plc / Annual Report and Accounts 2020

Meet the Keywordians continued> Our diverse group of digitally-native
Keywordians provide technology-enabled
services that turn extraordinary ideas
into great interactive content

Mechanics of  the gam
Functional Testing

Localization

Localization Testing

Quality assurance, including
discovery and documentationof game defects and testing toverify the game’s compliancewith hardware manufacturers’
and distribution platforms’
specifications, as well as test
automation tools and services,
crowd based and focus group
testing solutions.

Translation of in-game text,
audio scripts, cultural andlocal adaptation, accreditation,
packaging and marketing
materials in over 50 languages.
Includes our proprietary
technologies for content
management, machinetranslation, crowd sourcing
and workflow management.

Testing for out of context
translations, truncations,overlaps, spelling, grammar,
age rating issues, geopoliticaland cultural sensitivities,
and console manufacturer
compliance requirementsin over 30 languages using
native speakers.

Revenue in 2020

Revenue in 2020

Revenue in 2020

21.0%

12.2%

6.3%

€78.5mof total revenue€45.4mof total revenue€23.3mof total revenueOverview 04/05

me
Roxana Moore
Director of Embedded Services
Redmond, WA, United States“We are a unique team that are
more like family than co-workers,
working mostly on evergreen
projects that are always
challenging and ever changing.”
I oversee Keywords' Embedded Services
Team, supporting a variety of insourced
managed services that span a numberof our service line activities, at ourclients' sites.
Between sports, cooking, family andfriends, my spare time is also spent on
moving my languages skills from being
bilingual to trilingual.

Keywords Studios plc / Annual Report and Accounts 2020

Meet the Keywordians continued> We are committed to building a sustainablebusiness that positively contributes to theenvironment and our communities acrossthe globe

Community  

drivenPlayer Support

Omnichannel and multilingual customer
support delivered 365/24/7 in-game andon-digital community and social platforms,
where we engage, moderate, analyse, report,
prevent fraud and cheating. Utilising AI,
bots, automated support tools, and selfhelp portals to ensure we can deliver thebest customer experience and support forgamers, when games are in live operation,
ensuring our customers have a safe player
environment and making their games loved
by their players.

Revenue in 2020

€41.8m11.2%

of total revenueOverview 06/07

Eric Aguilar
Player Support Manager
for North America
Montreal, Canada“It is always fulfilling to see theteam grow, helping them deliverfor our clients while becoming
a better version of themselvesprofessionally.”
I now oversee Player Support in
North America but started my careerin Keywords Manila, where we grew theteam from 50 employees in 2016 to over
850 in 2020.
Once, I experienced the electrificationof a lightning strike when hiking in
the Philippines, but today I keep myadventures closer to home with mywife and son.

Keywords Studios plc / Annual Report and Accounts 2020

Company overview> Welcome to our open and evolving world!
It’s our mission to be the world’s leading technicaland creative services platform for the video games
industry and beyond. Welcome to our open andevolving world.

SeattleChicagoOttawaVancouverMexico City

Montreal

AustinKeywords Studios now has 69 studios, in over 40 cities,
across 22 different countries worldwide. We provide a fullset of integrated services, combining a presence that is local
to our clients in key gaming clusters with good access to
skilled talent pools across five continents.

Quebec City
Orlando

New Orleans

A solid

platforSaint Jerome

Raleigh

Los Angeles

69

Portlandstudios in 22 countries
São Paulo

8,353

average number of employees in 2020

Rio de JaneiroOverview 08/09

Service lines
Art Creation & Marketing

Functional Testing

Localization TestingGame Development

Localization

Player Support

Audio
Dublin (HQ)

Liverpool
Leamington Spa

Newcastle
Brighton
LondonBeijing
BerlinDalianKatowicem

Melbourne
New Delhi
Pune

MadridChengduBarcelona

Volgograd

Zhengzhou

ParisSaint Petersburg

The Hague
Hamburg

Krakow

Milan

Tokyo
Rome
Singapore

Yogyakarta

ManilaTaipeiShanghaiKeywords Studios plc / Annual Report and Accounts 2020

Chairman’s statement

Many of the strengths of
Keywords' business model
have shone throughThis time last year noone predicted the difficult
conditions brought about
by the pandemic.
Yet, many of the strengths of Keywords'
business model have shone through, as it
moved quickly to remote working, putting
the wellbeing of our people first, anddelivering the projects entrusted to us.

Ross K Graham
Chairman

The flexibility shown by management andstaff alike in adapting to new businesspractices, the continued strong demand forour services and the discipline shown overmanaging our cost base, enabled underlying
revenues, margin and profit growth. Thiswas despite organic growth having been
held back by the COVID-19 production
constraints that faced the Group.
Early in the crisis, the Board recognised
the potential that this crisis gave us forenhanced expansion. Accordingly, €110m
was raised in an equity placing, well
supported by shareholders, to provide
the Company with flexibility to capitaliseon the strong pipeline and a unique
opportunity in the market.

Overview

This support was vindicated both by theGroup’s performance in the year and by
the eight acquisitions since the placing,which further strengthen our Game
Development, Marketing and Audio
services in line with our strategy. In otherways, the teams in Keywords very much"stood up to the plate", as shown in theannual employee survey. The results
showed a welcome appreciation of theefforts made to improve communication,
staff recognition and engagement. Thisremains a focus, as does our Responsible
Business agenda more broadly.
We were fortunate to have held our annual
Strategy Conference in London in February2020 before the pandemic really took hold.
Thereafter the Board has not been able
to make its customary visits to overseas
locations and so much reliance has beenplaced on technologies such as Zoom
and Teams to facilitate virtual face-to-facecontact. It is our fervent hope that weshall be allowed to meet our colleagues
in person before long and we look forward
to the enhanced camaraderie and informal
intellectual stimulation that this brings.
The video games industry has benefitted
from an expanded gaming population
as more people have spent more of theirleisure time on gaming. For our part, we
continue to build scale in our existing
activities and to identify new facets ofvideo games service infrastructure that
we can assist our clients with, supporting
our continued expansion within video
games. In addition, we continue to examine
opportunities in adjacent sectors andour work in the broader media andentertainment sector with Netflix, Amazon,Apple TV+ and others has increased
accordingly. We will continue to review
opportunities that supplement our
growth in video games to ensure we takeadvantage of the increasing convergenceof content and leverage our masteryof the most interactive of all mediums,
video games.

Every year I look back and think "wehave done pretty well, but it could havebeen better". It is this determination
for continuous improvement that helps
underpin the Keywords' culture which
views each year as a stepping stone to
the next.
The appointment, in January 2021, of
a top class Chief Operating Officer, Sonia
Sedler, with relevant experience in global
outsourced professional services, is anotherimportant step in the quest to continually
improve the Group’s operational excellence.
With around 9,000 employees in 22 different
countries Keywords is becoming a sizeable
enterprise and the internal operational
infrastructure needs to be fit for purpose.
I am delighted to welcome Sonia who in the
short period since her appointment in midJanuary has already started to make anappreciable difference.
On 15 March 2021, we announced that
we have agreed for Andrew Day, CEO,to take a temporary leave of absencefrom the business for health reasons,with immediate effect. During the interim
period, Jon Hauck, who has become a key
member of the senior team driving theGroup’s strategic development since hejoined in 2019 as CFO, and Sonia Sedler
have been appointed as joint interim
CEOs by the Board, ably supported by theGroup’s strong service line and regional
management teams. Whilst Andrew
has been a driving force in building
Keywords, a key part of his role has
been the development of an exceptional
leadership team who we are confident
are well equipped to continue to bothdrive the Company's strategy forwardand manage the Group’s operational
performance. Andrew is expected toreturn to his position following a periodof recovery and he will remain a memberof the Board of Directors.

10/11

As mentioned earlier, our management
and staff have both performed admirably
during an unprecedented year and thefinancial results are a testimony to thecommitment of everyone involved, allof whom deserve a round of applause.
Interestingly, some of the new ways ofworking have also identified opportunities
to improve the way we do things for the
benefit of both ourselves and our clients.
Having previously suspended our dividend
programme, we continue to expect toresume our progressive dividend policyin the 2021 financial year.
On behalf of the Board, we are extremely
appreciative of the efforts across thebusiness in the past year. This dedication,
combined with our strong market positionand scale, leaves Keywords well placed in abuoyant video games market which is driving
increased demand for content creation
and a structural trend towards outsourcing.
With a strong balance sheet and an excellent
leadership team in place, we look forward
to the coming year with confidence as we
continue to actively review a healthy pipelineof acquisition opportunities and cement
our status as the "go to" global video games
services platform.

Ross K Graham
Chairman

Keywords Studios plc / Annual Report and Accounts 2020

Investment case

Spoiler alert> Strengthened platform in a growth market
Keywords is better placed than ever to continue to capture an increasing
share of our robustly growing market, by deepening our relationships withcustomers who already trust us with their high value IP, having significantly
extended our services and geographical reach during the year.

1

2

3

Access toa dynamic
growth market

Market leading
position

Strong growthrecordKeywords has minimal direct exposure
to the successes or failures of individual
game titles. Our focus on content
means we are platform agnostic andwell positioned to take advantageof the opportunities presented bymobile gaming, cloud streaming, next
generation consoles and AR/VR. The
increasing sophistication of games andthe development of new platforms
all add to the complexity of the video
games market which is driving demand
for larger, professional, outsourced
specialists, such as Keywords, in a highly
fragmented supplier market.

As a digitally native company, providing
technology-enabled services, Keywords
has a market leading position as the
only global provider of fully integrated
outsourced creative and technicalservices to the global video games
industry. With an industry reputation
for quality, reliability and flexibility,
our scale and reputation mean we are
well placed to take advantage of thetrend for customers to move to morecollaborative partnerships with fewer,
larger suppliers.

We continue to deliver strong organic
revenue growth as we benefit fromboth the growth in the video games
industry and the trend towards greater
outsourcing of our services. In addition,
we have successfully completed 52
acquisitions since IPO. The eightacquisitions announced since 2020bolstered our capabilities, particularly
in Game Development and Marketing
services, while bringing us even closer
to our customers around the world.

4

5

6

Opportunity
to grow further

A strongbusiness model

Adjacent market
potential

Having made strong progress inextending the Group’s client base,market penetration, geographic
footprint and service lines, we are now
beginning to realise the significant
potential for increased cross-pollinationof our service lines and geographic
locations, including taking advantage
of our dual-shore capabilities whichenable us to be close to our customers
and provide services from lower coststudios, as we increasingly becomea strategic partner to our customers.

Keywords’ flexible resourcing andcharging model, with charges levied
for time or output, combined withrelatively low working capital andcapital expenditure requirements,
support our ability to grow the business
whilst also achieving strong underlying
cash conversion.

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.

Our business model also provides anopportunity to invest in the exciting
video games market, without the riskof exposure to the successes or failuresof individual game titles.

Video games represent the pinnacle
of interactive content. Our mastery ofthis most interactive of content forms
positions us well as other forms ofcontent continually seek ways to be
more interactive and engaging.

Overview
7
Trusted partner
We are a trusted partner to leading companies around the world, with a leading market position,
providing services to 23 of the top 25 games companies and all 10 of the top 10 mobile games
publishers by revenue, including:

Sources: Newzoo, Top 25 public companies by game revenues in Q3 2020; and App Annie, Top publishers of 2020/21.

12/13

Keywords Studios plc / Annual Report and Accounts 2020

Chief Executive Officer’s review

Strong performance,
despite COVID-19
constraints
Keywords delivered a strong
performance in 2020, withrevenues up by 14.4%
to €373.5m, or by 11.7%
on an organic constantcurrency basis.
This performance reflected our team’s hard
work to deliver on the continued robust
demand for our services, despite significant
COVID-19 related production constraints
which delayed the flow of some content incertain service lines. We are prouder thanever of the dedication of all our talented
Keywordians through this challenging year,
as we reacted with agility to fundamental
changes to our ways of working, whilst
continuing to deliver the excellent service
which our clients have come to expect.

Jon Hauck
Joint Interim
Chief Executive Officer

The Group‘s global footprint meant that
we first experienced disruption from the
COVID-19 pandemic in China from January,
before experiencing a broader shutdownof the majority of its studios across theGroup from March. Having learnt fromour experience early on in China, we wereable to quickly move the vast majority ofour business to a remote working model.
However, this was more of a challenge
in our Testing and Audio businesses
which had previously required work to be
performed in secure or physical studios.
During this period, the Group received€9.2m of COVID-19 related subsidies,largely in the Americas, which supported
the continued employment of staff despite
the interruption to the flow of work. The
Group has since been able to facilitate andagree alternative solutions with our clients,
allowing us to provide remote testing
services in a work from home model andundertake some audio recordings virtually.
This enabled us to stabilise trading at theend of the first half of the year and deliver
15.0% Organic Revenue growth in thesecond half of the year (H1: 8.0%), despitesome ongoing operational constraints.

Strategic report

14/15

Reported revenue growth

14.4%
11.7%
Organic Revenue growth

Having exited 2020 with the majority ofour business still working remotely, theseworkarounds are proving highly effective
and will enable us to support customers
for as long as remote working is needed.
Demand remained robust throughout
the year and the video games industry
has enjoyed significant increases in bothplayer acquisition and gameplay during
lockdowns. However, our business relieson the production of content and both we,and publishers, have been held back by
operational constraints which have limited
the flow of new content, as set out in moredetail in our service line reviews. We do
expect that, with the benefit of increased
players and funds following recent demand,the current year will see publishers focus
more on developing new content to keep
gamers engaged.
Game Development continued its strong
performance with Organic Revenues
growing by 17.1% which, combined withrecent acquisitions, positions it as amarket leader of some scale with Pro
Forma Revenues of €98m at the end of2020 (before the inclusion of Heavy Iron
and Tantalus Media that completed in
January and March 2021, respectively).
This excellent performance was delivered
despite strong comparatives as we moved
into the second half and the obvious
challenges of recruiting and managing
complex projects in a work from homemodel. Game Development received
significant further investment during theyear as we continue to build this businessto scale across the major geographic
territories. We were pleased, therefore, tobe able to welcome to the Group throughacquisition, Coconut Lizard (Newcastle,UK), High Voltage (Chicago and New
Orleans, USA), Heavy Iron (Los Angeles,
USA) and our recent acquisition Tantalusthat gives us our first market entry into
the Australian game development market.
We enter 2021 with Game Development
being our largest service line and, with ahealthy acquisitions pipeline, we hope to

see further development of this service line
through the year.
Our Art Creation & Marketing service line
also performed well in the period, despitesome significant early COVID-19 impact,
particularly affecting our businesses in
China and India. Our Marketing Services
businesses have continued to benefit fromongoing investment in acquisitions and wewere delighted to welcome Maverick Media(London, UK), g-Net (Los Angeles, USA) andIndigo Pearl (London, UK) into this groupduring the year. As a result, Marketing
Services has now achieved sufficient scale,with Pro Forma Revenues of c. €35m andover 190 people employed globally acrosseight studios, and we intend to report on it
as a separate service line from the first halfof 2021.
As expected, our Player Support businessreturned to growth during the year
benefitting from new business wins andsome increase in demand from certain of
its existing contracts as they benefitted
from increased game playing activity since
lockdown commenced.
Whilst demand was strong for most of ourservices, COVID-19 related operationaland market disruption was particularly
apparent in our Localization service line,
where the flow of content into the business
was affected, and in our Testing and Audio
service lines, where the use of facilities was
significantly curtailed. However, the strong
operational response to these challenges
led to significantly higher Organic Revenue
growth in Functional Testing and Audioin H2, of 20.6% (H1: 10.7%) and 8.7% (H1:0.5%) respectively, while our Localization
Testing business delivered growth of 5.9%
and Localization returned to growth in H2.
As a result, we enter 2021 in a much better
position and do not expect to be impacted
in the same way, despite the continued
COVID-19 related challenges ahead.
The Group’s Adjusted EBITDA increasedby 28.8% to €74.2m, representing a
2.3% pts improvement in margin to 19.9%.

This was driven by some operational
leverage despite the recruitment constraints
experienced in the year and continued good
cost control, together with a reduction incertain costs due to COVID-19, such as traveland marketing costs.
We are pleased that this profit performance
has also resulted in strong cash generation,with €53.4m of Adjusted Free Cash Flow
representing a 97.2% Adjusted Cash
Conversion rate in the period (2019: 80.2%),
albeit 2020 included some phasing benefits
as a result of COVID-19. This demonstrates
the strong cash generating characteristicsof the business in a challenging period
which provides the Group with further
resources to fund its acquisition strategy.
We enter 2021 very confident in theGroup’s opportunity for growth througha continued trend towards outsourcing,an increased focus on content creation ina growing video games market, and in ourability to increase our market share.

Delivering on our strategy
Structural trends to outsourcing
driving organic growth
Keywords strategy is to become the “go to”
provider of technical and creative services
to the video games industry in a market
where increased outsourcing has becomea structural trend.
Through successful development bothorganically and through acquisitions,
the Group increasingly stands out as theleader in a market characterised by highly
fragmented, local, single-service providers,
despite the growing needs of the major
video games publishers and developers
who act globally.
These customers are increasingly turning
to external development and support
services as a way of managing the demandsof generating more sophisticated content
whilst limiting their fixed costs, and so theyrequire the quality, flexibility, and securityof a full service provider of scale.

Keywords Studios plc / Annual Report and Accounts 2020

Chief Executive Officer’s review continued“We see the future
as a hybrid of creating
vibrant, engaging andsafe studio space,and enabling people
to work securely
and constructively
from home”

Our strategic pillars
The key pillars of our strategy are to
grow organically and by acquisition toextend the Group’s service capacity,
capabilities and geographical reach.

Building our platform

New consoles spearheading increased
demands for content and support
Demand for video games has accelerated
during the pandemic, with International
Data Corporation (IDC) estimating that
global revenues grew by 20% in 2020. For
2021, this is being driven forward by thelaunch of next generation games consoles,
which is expected to refresh the entire
console based gaming sector after a sevenyear run of the PS4 and Xbox One console
generation. This is likely to result in an
enlarged market for video games content
over the coming years and an associateddemand for new content creation, which
in turn drives demand for Keywords
services. Further development of new andexisting video games streaming platforms
will also increase demand for content andits ongoing support in live operation.
Keywords provides services to the leading
game developers and publishers across all
platforms including mobile, console, PC,
streaming, and VR. The Group, therefore,
benefits from the secular trends in gaming,with exposure to all the major gaming
companies and all the leading platforms
without the “hit or miss” risk often
associated with an individual platformor franchise.
Highly successful M&A
programme continuing

Selective acquisitions
and integration

Organic growthand cross selling

For more information on
our strategy see pages 22 and 23.

We remain determined not to allow
COVID-19 to halt our highly successful
M&A programme that has always been
an integral part of our strategy. Since
our strongly supported €110m placingin May, we are pleased to have beenable to welcome eight high quality newcompanies to the Keywords family, further
strengthening the breadth and depthof the Group’s value-added services.
These brought three high quality studios
into Game Development (High Voltage,
Heavy Iron, Coconut Lizard), added
significant scale to Marketing Services(g-Net, Maverick Media, Indigo Pearl) andenhanced our offering in Audio ( Jinglebell).
This has been supplemented by the recent
acquisition of Tantalus which gives us our
first entry point into the Australian Game
Development market and provides us witha further platform for both organic andacquisition led growth in the region.
These acquisitions have been in line with
our stated strategy to focus on buildingout our Game Development and Marketing
service lines, as we seek to grow these
services to become the suppliers of choicefor our global client base, whilst selectively
acquiring in other service lines.

The total consideration for theseacquisitions including performance
related contingent deferred consideration
elements (including the acquisition of
Heavy Iron that completed in January 2021
and more recently Tantalus in March 2021)
is up to a maximum of c. €137m. This iscomprised of €66m in cash, €23m throughthe issue of shares and €48m payable in a
mixture of cash and shares subject to thebusinesses meeting certain performancetargets or other conditions over the first
24 months post completion. We continue
to actively review a healthy pipeline offurther acquisition opportunities.

Embracing new ways of working
The senior management team at Keywords
has long been used to working distanced
from one another but, like many otherbusinesses, COVID-19 has forced thesame ways of working on the majority of
Keywordians around the globe. In fact, by
the end of the year, out of approximately
9,000 Keywordians, c.6,900 were working
from home, representing a dramaticchange in the working environment.
We continue to review how we can best
utilise our physical studio footprint once
we are through COVID-19 restrictions, andwe are constantly consulting those who
really matter: our Keywordians. In ourrecent annual employee survey, 43% of
people expressed a preference to continue
to work from home, 10% would rather
return to office based working, with 47%
preferring a combination of working fromthe office and from home.
We see the future as a hybrid of creating
vibrant, engaging and safe studio space,and enabling people to work securely andconstructively from home. There is clearlya role for physical studios for the Group,particularly to allow for the exchange ofcreative ideas, for training, and in our
Testing and Audio service lines. We have,therefore, continued to invest in newstudios in Mexico City, New Delhi, Katowice
and Singapore as well as opening a sixth
studio in China in order to support our
growth today and into the future.
We also continue to work hard toengage with and recognise the effortsof our Keywordians and to support theirwellbeing, including communication
to increase the awareness of Employee
Assistance Programmes, with a numberof new initiatives having been introduced
during the year including guest speakers
on mental health, virtual yoga and dance
lessons, Friday evening online events,
and team quiz nights to name but a few.

Strategic report

Cash conversion

97.2%
2020 Pro Forma Revenue€409.2m

Responsible Business
At Keywords we have always beencommitted to conducting our business
responsibly and operating to the highest
standards of honesty, integrity and ethicalconduct. We take our wider corporate
responsibility seriously and are consciousof the role that our business plays in ourcommunities and the impact it has on theenvironment. During 2020 we made good
progress on our six priority areas of People,
Diversity, Customer Centricity & Innovation,
Communities and the Environment,
underlined by Corporate Governanceand Business Ethics:–– Our Code of Conduct was refreshed andrelaunched and is now available on our
website in 12 languages–– We have established a Global Diversity& Inclusivity Council and introduced
unconscious bias training for individuals
in hiring roles–– The Keywords Cares matching
programme was launched in which
Keywords will match funds raised forgood causes by our teams aroundthe world–– We put in place a US$500,000 hardshipfund to support colleagues experiencing
financial hardship as a result of COVID-19–– For the first time we have quantified ourgreenhouse gas emissions focusing on
scope 1 and 2 emissions
We have established a Responsible
Business Board Committee and we lookforward to reporting on the progress ineach of our priority areas going forward.

Outlook
Trading in 2021 has started well despite
the ongoing COVID-19 related constraints.
The vast majority of our business continues
to operate a remote working modelthat we have supported efficiently androbustly and, having put in place effective
alternative remote solutions for our Audioand Testing service lines, the Group iswell placed to support its clients throughfurther restrictions.
On an ongoing basis, we are adopting
an approach tailored to a studio’s needs
in each of the 65+ locations in which wehave our production operations. Eachstudio continually assesses the needs
and desires of its staff, local guidelines,
and the requirements of our customers
in determining how much, if any, of its
operations move back into studios. As
such, we are retaining a very flexible
approach to where and how we work inorder to adapt to the evolving COVID-19
related challenges and keep Keywordianssafe over the months ahead.
The underlying drivers of growth acrossthe video games market have been
accentuated during the pandemic.
Publishers have experienced strong growthin both the number of players and theamount of game play, yet they have faced
content production constraints through the
pandemic. As such, we expect them to turntheir focus in the near to medium term toincreased development of new content tokeep their expanded player base engaged.
We are already experiencing strong
demand across all our service lines, as
we are starting to see the benefit of the
newly launched PlayStation 5 and Xbox
Series X|S consoles, alongside the ongoingdevelopment of new subscription andstreaming platforms.
We also continue to see strong evidence ofthe trend to outsourcing, in which context
we are delighted to have been joined on
the Board by Sonia Sedler as Group COO,
and subsequently as Joint Interim CEO.
Sonia brings significant operational andbusiness development experience forlarge, global professional services and BPO
companies such as Accenture, Sutherland
and Diebold Nixdorf to the Group. Her
appointment provides further breadth
to the management team, as we drive theGroup’s continued organic and acquisition
led growth in the years ahead.
Having acquired eight high quality
businesses since our successful placingin May, deploying total capital of up to c.
€137m, the cash generative nature of thebusiness means we remain well placed tocontinue to execute on selective acquisition

16/17

opportunities. We have a dedicatedacquisition team who work with the Service
Line Directors and the Regional Managing
Directors to identify high quality targets to
help build out our global service platform.
We will continue to invest in scaling ourMarketing Services and Game Development
businesses to the point where they areseen as the “go to” providers. We will alsoseek to acquire businesses in our service
lines to add specific expertise, access to
new talent pools or where doing so leads
to meaningful operational synergies.
We maintain an active interest inneighbouring markets such as film andtelevision services where we are seeing
an increased convergence towards gametechnology and where our mastery of AI
game engines, localization, audio, visual
effects and art creation for the mostcomplex and interactive form of content
can be readily deployed. Throughout
2020, we have made steady progress indeveloping our subtitling, dubbing, audio
description and sound design services
primarily for over the top (OTT) providers
such as Netflix and Amazon, and we arepleased to see the increasing adoption ofvideo game based production techniques
as these industries look for faster and morecost effective ways of generating content.
The Group’s strong position in the buoyant
video games market, our increasingly
sought after 9,000-people strong resource
base, a robust business model that has
proven to be not just resilient in the faceof the pandemic but capable of continued
rapid growth, together with our financial
strength, place us well for further growthand long-term success.

Jon Hauck
Joint Interim Chief Executive Officer

Keywords Studios plc / Annual Report and Accounts 2020

Market outlook> Keywords provides essential
technology and creative
services to the high growth,
dynamic video games market.
We work with the world’s
leading games publishers anddevelopers helping them create,
adapt and support their content
in live operation.

Increasing trend to outsource

Forecasted industry CAGR

So far, much of the outsourcing in theindustry has been undertaken on atactical basis, meaning the video games
service provider market remains highly
fragmented. This in turn provides anopportunity for the selective consolidationof this part of the industry, which Keywords
continues to lead. This consolidation inturn brings benefits of scale enabling us
to achieve operational synergies throughmore efficient use of resources, leveraging
tools and technologies and leading
innovation in the industry.

9.4%

A large and growing industry
The COVID-19 pandemic accelerated bothrevenue and player engagement trends
across the video games industry in 2020,
with revenue growth of 19.6% to $175bn.
Games industry analysts, New Zoo haverecently increased their overall industry
growth forecasts to a CAGR of 9.4%
(previously 8.1%) with revenue forecast
to increase to $217.9bn in 2023 (Source:
NewZoo Global Games Market, for theperiod 2018-23).
Whilst Keywords has experienced strong
demand during this period, the exceptional
impact of the global pandemic has notdirectly translated into more content
being created, which is what drives our
growth. In fact, well-publicised delays in the
production schedules of some games andmore general disturbances to the flow ofcontent caused by the pandemic probably
held back the growth of our addressable
market in 2020. This is potentially creating
a “deficit” between the expansion in gameplaying and associated high monetisationand the rate of content development. This
could point to pent up demand for newcontent and is likely to lead to a shifted
pattern of demand for our services in 2021
and 2022 as publishers and developers
accelerate content production rates tocapture the increased player engagement.

Keywords is benefitting from both
structural trends to outsourcing fromvideo games publishers and developers
to service providers, and the ongoing
consolidation of the services industry,
which it continues to lead.
The video games industry has traditionallybeen highly vertically integrated with mostproduction activity still conducted in-houseby major publishers and developers.
As the market continues to grow andbecomes ever more complex, games
publishers and developers are increasingly
seeking to avoid expanding their own
teams and a higher proportion of work
is being entrusted to third party service
companies like Keywords. The video games
publishing cycles are inherently lumpy,
requiring significant resources to delivercomplex projects on a tight timeline. Thisis resulting in a trend towards increasing
outsourcing at a more strategic level which
benefits Keywords as the market’s leading
provider of scale. This includes a growing
demand for co-development and full gamedevelopment services, and we are investing
to match that demand and continue toincrease our market share.

As the only service provider of scale withdepth and breadth in all areas, Keywords is
uniquely placed to support our customers’
needs with a balanced business acrossmultiple different technology-enabled
services and geographies. This is proving
a virtuous circle, as a key part of theattraction for acquisition targets is thedesire to be part of a larger group withaccess to a wider customer base andservice offering. It also means we are
increasingly benefitting from our scale
relative to competitors, as we further
consolidate our market, and can respondflexibly to increasingly large scale projects
from our customers.

Strategic report

18/19

Key trends in 2021 and beyond“Keywords is uniquelyplaced to support ourcustomers’ needs.”

Global games revenues forecasted
to reach $218bn by 2023
2023

$217.9bn

2020$174.9bn

2019$146.2bn

2018$138.8bn

Source: Newzoo 2020 Global Games Market Report, November 2020

1

2

Next generation consoles

Games as a service

The recent launches of the PlayStation
5 and Xbox Series X|S represent a
structural growth opportunity for
Keywords. New console cycles typicallyprovide a catalyst for increased content
creation as newer games require
ever more complex visual and audio
support due to the increasing level ofsophistication in graphics and gameplay.
There is also likely to be a longer
overlap with the previous generation of
consoles, as publishers look to maintainengagement on existing games throughcontinued content production as wellas producing new content for the newconsoles, further increasing the demandfor our support services.

Games are increasingly being operated
as live services – Games as a Service.
The outsourcing of parts of these
operationally intensive live operations
services, including the introductionof new features, new characters,
producing marketing materials, plus
further localization and testing andof course player support has resulted
in this becoming an important, stablerevenue source for Keywords. Today an
estimated 30-40% of our revenues are
currently generated from “evergreen”
services, titles operated on a “games
as a service” basis.
The transition to next generation
consoles will this time be smoothedby the trend to the “games as aservice” and free to play models. We
anticipate game publishers will want tocontinue to support existing content
that is commercially successful while
simultaneously producing new content
that takes advantage of the power andfeatures of the new consoles.

3
Wider adoption ofsubscription and cloud
gaming platforms
In addition to next generation consoles
and PCs, publishers are also looking to
expand beyond these traditional market
endpoints given the wider market
opportunity in subscription and cloud
gaming platforms including Microsoft,
Apple, Google and Amazon.
Presently, gaming can be costly for theuser, with the requirement for highend gaming PCs, expensive consoles
and high end smartphones limiting theaccess to and uptake of some games.
Subscription and cloud services havethe potential to provide highly costeffective distribution of content, making
it available to more players, on more
devices, in more countries, and in
more languages.
Now more than ever, video gametechnologies are also being used inother markets including e-learning, film
and TV, and architectural visualisationas content providers continue to seek
ways to make their content moreinteractive and thereby more impactfuland engaging. Keywords is uniquely
positioned to support interactive
content of any type through the skills
and experience it has accrued in themost interactive of all content markets –video games.

Keywords Studios plc / Annual Report and Accounts 2020

Business model> Creating value
and growth throughoperational efficiency

In so doing we enable our customers 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.

The video games industry represents the pinnacle of interactive
digital content. At Keywords, we are using our passion for games,
technology and media to create a global, integrated services
platform of scale for video games and beyond.
By working as their external development partner, we enableleading content creators and publishers to leverage our expertiseand capacity across the lifecycle of interactive content.

Outsourcing such work is attractive to developers and publishers
because it converts their fixed costs into variable costs, helps
remove bottlenecks in capacity by providing access to talent as
required and enables them to focus on their core competencies.
We are trusted and relied upon by most of the world’s leading
video game companies to work alongside them during concept,
development and live operations by leveraging the breadth anddepth of our industry leading service lines every step of the way.

Barriers to entry

What we do

Scale and flexibility

Keywords’ presence in each stage of the games development cycle creates
multiple opportunities for cross delivery and revenue growth, with theservices offered by Keywords outlined below:

Large customers need large
reliable suppliers with flexible
resourcing to match their needs.
Particularly true in testing, allowing
us to scale up or down to meetdemand, mirroring the seasonalityof games production.

Reputation for quality
At the heart of our culture is ourcommitment to quality, reliability
and integrating with our customers’
processes, promoting long-term
customer relationships.

Knowledge and expertise
Our talented people have deep
games-specific knowledge andexperience, enabling them to add
value to our customers’ games
at all stages in the development
lifecycle.

Global presence
Provides access to the best talentand enables us to deliver projects
across studios in multiple timezones, allowing seamless 24-hourturnarounds whilst remaining close
to our customers.

Technology
Necessity of regular investment
in technology and security makes
it difficult for smaller suppliers
to compete. The importanceof resilience and security isshown through in our robust IT
infrastructure.

Financial strength
Our strong financial performanceand position gives our customers
reassurance of resilience in their
supply chain, and is part of ourattraction to businesses weacquire.

1

Pre-production

4

Concept art, level design and game design.

Early stage gamedevelopment2

Full game development, co-development,art production, cinematics/visual effects,
audio production, original language voice
production, engineering, development
quality assurance, game demo trailers,music scoring, sound design, story writing.

Later stage gamedevelopment

Certification testing, official game trailers,soundtrack publishing, marketing services
and customer acquisition.

Ongoing live
operations support
5

Player support, community management,
data analytics, payments processing, gameanalytics, social integration and customer
retention.

63

Functional testing, text localization, audio
localization, localization testing, player
research, game porting and remastering,music branding and strategy.

LaunchNew content for games

Game extensions, level expansions, art,
audio, testing, localization and marketing.

Supported by ourStrategic
pillars
Building
our platform
Selective acquisitions
and integration
Organic growthand cross selling
Read more on

p.22–23

Responsible& sustainable
operations

CultureKeywords conducts its
business to the highest
standards of honesty,
integrity and ethics while
taking its wider corporate
responsibility, role insociety and environmental
impact seriously.

Our culture acts as
the glue that binds all
Keywordians around theworld together. At theheart of our culture are
our operating principles,the “Keywords Rule of 9”.

Read more on

Read more on

p.36–45

p.32–35

Strategic report

Supporting the full Game Development Life Cycle

20/21

Creating value for stakeholders

Shareholders

1– Consistent track record of delivering
revenue and profit growth.

Pre-production

Service lines
Art Creation & Marketing

LocalizationGame Development

Localization Testing

Audio

Player Support

Functional Testing– Access to a structural revenue growth
opportunity driven by industry growth
and a trend towards outsourcing.
– Proven disciplined M&A track record
to consolidate a fragmented global
supplier base.
– Opportunity to invest in the exciting
video games market, without the riskof exposure to the successes or failuresof individual game titles.

39%

CAGR in Adjusted EPS
since 2014*

Customers– Keywords’ involvement across the video
games cycle means that we can be a “onestop-shop” for our global customers.
– Match customer requirements witha combination of on-demand anddedicated services facilitated.

62

New content
for games

Early stage gamedevelopment

5
3
Later
stage gamedevelopment

Ongoing live
operations
support4
Launch– W ide geographic reach provides accessto the best pools of talent and enables
a flexible resource model.
– Multiple opportunities for cross selling
and revenue growth.

120

customers using
3 or more services(up from 30 in 2014)

Employees– Keywords provides employees with anexcellent and sustainable variety of work.
– Good career advancement
opportunities both within and acrossour seven service lines.
– Opportunities to work on the leading
global game titles.
– Diverse, passionate games colleagues

8,353

Average numberof employees(up from 978 in 2014)*	Adjusted earnings per share comprises theadjusted profit after tax divided by the nondiluted weighted average number of sharesas reported in the APMs.

Keywords Studios plc / Annual Report and Accounts 2020

Our strategy

On a quest
To become the “go to” technical and creative services
provider for the video games industry and beyond.

Strategic pillars
The key pillars of our strategy
are to grow organically and byacquisition to extend the Group’s
service capacity, capabilities andgeographical reach in order tobetter serve our client base acrossall platforms, key geographiesand languages, with a full rangeof services and solutions.
Positioning the Group as theprovider of scale in an otherwise
highly fragmented service provisionmarket, despite the global scaleand nature of the major video
games publishers and developers,
will enable us to continue totake advantage of the trend
towards greater externalising ofdevelopment and support services
as customers seek to manage thedemands for increasingly frequentand sophisticated content in a costeffective manner. By investing in
expanding capacity and acrossour multi-service global platform,
we are increasingly becoming astrategically important partner
to our customers who requirea service provider of our scale
and flexibility.

Building
our platform

Progress in 2020
– We continued to grow our service lines, aiming to make them
the “go to” providers for their respective sets of services.
– Our largest service line, Game Development, has benefitted
from three further investments in acquisitions and organic
openings of new studios.
– Continued to enhance our marketing services capabilities(first entered in 2018) with three acquisitions during theyear, bringing the number of Keywords specialist marketingstudios to eight.
– E xpanded and grew our global testing capabilities in newand existing regions with facilities opened in Katowice,
Mexico City, and New Delhi, improving further our access toimportant talent pools.
– COVID-19 also highlighted the resilience of our platform, withcurrently c. 6,900 Keywordians (approximately 80%) working
from home.

Selective acquisitions
and integration– A nnounced seven acquisitions during the year which added
to our existing scale and capabilities in Game Development,
Marketing and Audio services.
– T hese acquisitions are being integrated within the service
lines as well as within the country and regional management
structures into our global finance, accounting, HR and
IT functions.
– Increased our presence in North America with selective
acquisitions bringing operations in Chicago and New Orleansthat provide access to important talent pools in those locations.
– Made good progress with integrating prior periodacquisitions, which are making good contributions to
the Group.

As we develop positions of scale
within our chosen markets, ourfocus moves to new areas where
we see opportunities to expand
through a mixture of organic
and acquisitive growth.

Organic growthand cross selling– Despite the challenges of COVID-19, Organic Revenue
grew by 11.7% in 2020 (2019: 15.5%).
– Resilient growth performance given the significant
disruption from COVID-19 and the resulting disruption
to content production in the industry.
– Continued to expand our client relationships by making good
progress with cross selling our services. In 2020, the numberof clients buying three or more services from us increased
once again, to 120 from 108 in 2019.

Strategic report

22/23

Priorities in 2021

Measures of our success– In 2021, we will continue to build our platform so we are increasingly
a strategically important partner to our customers.

7

5

8,353

service lines, up
from two in 2009,four in 2013 andsix in 2016.

continents inwhich we haveoperations. We
now have 43%of our people inNorth America andSouth America,
26% in Europe and
31% in Asia andAustralia.

average numberof employees
in 2020.

– We plan to make further acquisitions in the game development space,
as we build this business into the provider of choice.
– Marketing services should see further acquisition opportunities, as we
continue to widen the range of services we can offer and expand thegeographies we can cover.
– A dditionally, given the scale of our marketing services, we plan to breakout Marketing Services into a separate service line from the first halfof 2021.
– We anticipate a gradual return to the office in 2021, while engaging
with customers and employees on retaining a mix to these new ways
of working where security and productivity considerations allow.
– 2021 will also see prudent investment as we develop our platformto service our clients’ projects across our expanding multi-service
global platform.

– T he Group’s acquisition programme continues to be an important
strategic pillar and we anticipate that 2021 will again contain a numberof acquisitions.
– A im to continue the pace of acquisitions, investing between €40m to€80m per year.
– Our service lines are ever developing, and there are gaps in most of them.
We will continue to make selective acquisitions that further enhanceand extend each service’s capabilities in 2021, particularly in Marketing
services and Game Development.

€137m 852

maximum
consideration
for acquisitions
since placing inMay 2020.

acquisitions
since IPO.

acquisitions sinceplacing in May
2020.

– We are mindful of the integration challenges and therefore acquisitions
will likely be spread across geographies and across services lines to avoid
management overstretch.
– Keywords will continue to develop and invest in technologies that support
the services we provide to game developers and game publishers.
– F ollowing considerable success expanding into the key global video games
markets, geographical expansion remains a lower priority driver in 2021
as we continue our focus on enhancing our capabilities in regions where
we already have a presence.
– O rganic growth remains our priority focus and we expect to grow fasterthan the market for our services as we benefit from the trend towards
outsourcing and capture market share.
– Looking to benefit from an increasing demand for new content following
COVID-19 disruption in 2020 and the new console cycle.
– Cross-selling within our services is vital and we have continued to see
noticeable growth in the number of customers that are benefittingfrom the use of three or more of our services, a key reflection of our“relevance” to customers.

11.7% 968

120

Organic
Revenue growth.

customers using
three or more
service lines. Up
11% from 2019.

customers in 2020,
versus 978 in 2019.

Keywords Studios plc / Annual Report and Accounts 2020

Key performance indicators

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

Revenue
growthOrganic
Revenue growthGrossmarginAdjusted operating
costs as a % of revenue

14.4%

11.7%

38.0%

18.1%

2020

14.4%

2020

11.7%

2020

38.0%

2020

18.1%

2019

30.2%

2019

15.5%

2019

36.8%

2019

19.2%

Reasons for choice
Quantifies the growth inrevenue from our operations
on a reported basis.

Due to the number ofacquisitions the Group makes
and because it integrates
them quickly, this provides themost meaningful measure ofunderlying revenue growth
without the distortion offoreign currency movements.

The Board believes thisto be a consistent measureof trading performance.

The Board monitors overheads
to ensure the operating costsof the Group are in line withthe level of business being
generated.

Calculated by adjusting theprior year revenues, adding
pre-acquisition revenues forthe corresponding period ofownership to provide a likefor like comparison with thecurrent year, and applying theprior year’s foreign exchange
rates to both years.

Revenues from services
supplied to customers less costof sales, as a percentage ofrevenue.

Administration expenses,
before non-operating costs
including share option
expense, costs of acquisition
and integration, amortisationand impairment of intangible
assets, depreciation, noncontrolling interest and bankcharges, expressed as apercentage of revenue.*

The Group aims to achieve
Organic Revenue growthahead of market growth.

The Group aims for grossmargins in line with historic
norms.

The Group will continue to seek
to control these costs closely
and in line with the level ofbusiness being generated.

How we calculate
Increase year on year inreported revenue.

Objectives
The Group aims for continued
revenue growth anddevelopment.

*

In order to present the measure consistently year-on-year, the impact of COVID-19 government subsidies claimed and where relevant, investment income is also excluded.

Strategic report

Adjusted
EBITDA margin

Adjusted profit before
tax margin

Adjusted cash
conversion rate

Growth inadjusted EPS

19.9%

14.7%

97.2%

24.9%

24/25

2020

19.9%

2020

14.7%

2020

97.2%

2020

24.9%

2019

17.6%

2019

12.5%

2019

80.2%

2019

7.2%

Provides an indication of
how we are performing bothinternally and relative to ourpeers.

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

Measures operating cash
generation and our capacity to
pay dividends, service debt andfund acquisitions.

Reports the underlying profit
growth generated on a pershare basis, demonstrating
the value being created forshareholders.

Comprises EBITDA (operating
profit, adjusted for amortisationand impairment of intangible
assets, depreciation, while
deducting bank charges)
adjusted for share option
expense, costs of acquisition
and integration and noncontrolling interest, as apercentage of revenues.*

Comprises profit before
taxation adjusted for shareoption expense, costs ofacquisition and integration,amortisation and impairmentof intangible assets, noncontrolling interest, foreignexchange gains and losses,
and unwinding of discounted
liabilities.*

Adjusted free cash flow before
tax as a percentage of theadjusted profit before tax. The
calculation is described in moredetail on page 143.

The Adjusted profit after
tax comprises the Adjusted
profit before tax, less the tax
expense as reported on theConsolidated statement ofcomprehensive income, further
adjusted for the tax arising on
the bridging items to Adjusted
profit before tax.

The Group aims to increase
margins through operational
efficiencies.

The Group aims for margins inline with historic norms.

Cash generation and working
capital management willremain a key focus.

*

The Adjusted earnings per
share comprises the Adjusted
profit after tax over the nondiluted weighted average
number of shares as reported
in note 8.

The Group aims for continued
growth in Adjusted earnings
per share.

In order to present the measure consistently year-on-year, the impact of COVID-19 government subsidies claimed and where relevant, investment income is also excluded.

Keywords Studios plc / Annual Report and Accounts 2020

Service line review

A gateway
to growthWith the exception of our Localization
business, which was held back byscheduling delays further upstream,
all our service lines grew during
2020, despite the pandemic and theoperational challenges it continues
to present.

The following table provides a summary of
our revenues by service line, their growth
rates on a reported basis and Organic
Revenue growth. We have also presented
Pro Forma Revenue by service line, which
includes the annualised revenue of all
acquisitions made in the year, to provide
a better overview of the size and balanceof the business at the end of the year.
The service line commentary which follows
reports on the statutory reported revenues
unless otherwise stated.

2019
Revenue€m

2020
Revenue€mChangefrom 2019%2020
Organic
Revenue growth%

2020
Pro Forma
Revenue€m

Art Creation & Marketing

43.6

57.3

31.4%

17.9%

73.2

Game Development

66.3

80.0

20.7%

17.1%

98.0

Audio*

41.9

47.2

12.6%

5.8%

48.6

Functional Testing

68.9

78.5

13.9%

16.1%

78.5

Revenue

Localization*

47.1

45.4

(3.6)%(4.0)%

45.8

Localization Testing

22.6

23.3

3.1%

4.4%

23.3

Player Support

36.1

41.8

15.8%

17.5%

41.8

326.5

373.5

14.4%

11.7%

409.2

Total

*	The prior year comparative has been re-classified to reflect the current year presentation as the Directors consider this to be more meaningful.

Strategic report

26/27

Art Creation & Marketing
Percentage of 2020
Group revenue

15.3%
2020: €57.3m
2019: €43.6m+ 31.4%2020 Organic Revenue
growth (%)

17.9%

Pro Forma Revenue (€m)

€73.2mAverage operational staff

1,294

Our Art Creation service line creates graphical art assets for video
games including concept art creation, 2D and 3D art asset production
and animation. Also included under Art Creation is Marketing services
including game trailers, marketing art and materials, PR and full brandcampaign strategies which we are building through acquisitions, andsubsequent organic growth.

2020 performance
Following some initial operational and commercial disruption from thevery early stages of the COVID-19 pandemic, which forced the closureof studios in China and India particularly and some delays to early stage
marketing planning, Art Creation has seen strong demand across all of its
businesses and has settled firmly into new ways of working.
Art Creation & Marketing revenues grew by 31.4% to €57.3m (2019:€43.6m) with the benefit of full year contributions from 2019 acquisitions,
Sunny Side Up and Ichi, and from the acquisitions of Maverick Media,
g-Net and Indigo Pearl, made in August, November and December 2020
respectively. Organic Revenue, which excludes the impact of currency
movements and acquisitions, grew by 17.9% for Art Creation & Marketingwith a marked acceleration in H2, where revenues grew by 28.3%
organically, reflecting more settled operations, some catch up demand
from H1 and strong underlying client demand.
During the year we added significant scale to our Marketing services linewith the acquisition of three high quality businesses:–– Maverick Media – one of the longest established video game creative
agencies in Europe, based in London. It has an impressive 25-year trackrecord in TV commercials, live action projects, video game trailers,
key art and social media work for some of the world’s leading games
publishers, developers and brands.
–– g-Net – a Los Angeles based, multi-award-winning studio providing
creative and strategic marketing services for leading games publishers
and media and entertainment companies. The 85-strong talented teambrings significant scale and experience of working with some of themost iconic games franchises to the Group’s Marketing Services line.
–– Indigo Pearl – a full service PR agency specialising in the video game
sector, based in London. It supports its clients across traditional PR,
social media and influencer driven campaigns, and technology-enabled
PR and marketing asset management solutions.

The market opportunity and outlook
Art Creation & Marketing services operate in large addressable markets
which remain highly fragmented. This is particularly true of Marketing,given the range of services provided both internally and externally whichrange from key art, trailer creation, advertising, PR, branding, campaign
management, influencer marketing and management through tomarketing analytics and community management. Our broad geographicalspread enables us to transfer work between locations as needed, thereby
offering greater business continuity than many of our competitors andpositioning us well with our customers.
Through our ongoing organic efforts and further acquisitions, our aim is toestablish our highly specialised video games Marketing Services businessas the partner of choice for games publishers and developers whenlooking for global reach and deep expertise in a sector, which itself stands
out due to the interactive nature of the product and the strength of thegaming communities that form around the games.
For both Art and Marketing we are starting 2021 with better than normal
revenue visibility partly due to some carry forward from 2020 but perhaps
also signalling a year of even stronger demand ahead.
As previously stated, we will be reporting separately on our Marketing
service line at our first half 2021 results.

Keywords Studios plc / Annual Report and Accounts 2020

Service line review continued

Game Development
Percentage of 2020
Group revenue

Our Game Development service line provides external development services togame developers and publishers including full game development, co-development,
porting and general software engineering consultancy.

2020 performance

21.4%
2020: €80.0m
2019: €66.3m+ 20.7%2020 Organic Revenue
growth (%)

17.1%

Pro Forma Revenue (€m)

€98.0mAverage operational staff

1,036

Now our largest service line, Game Development increased revenues by 20.7% to€80.0m (2019: €66.3m). This increase reflected a full contribution from Wizcorp,
which was acquired in April 2019 and contributions from Coconut Lizard and High
Voltage acquired in June and December 2020 respectively. Game Development
transitioned smoothly to a work from home model from March onwards in response
to COVID-19 related lockdowns in the various cities in which we operate. Whilst we
continue to work under restrictions in most of the countries in which we operate,
Game Development achieved a 17.1% increase in Organic Revenue (which excludes
the impact of currency movements and acquisitions), compared to 2019, despite
strong comparatives as we moved into the second half of the year. As with otherparts of our Group, Game Development was held back in 2020 due to the challenges
of COVID-19, which affected our recruitment, training and on-boarding activities
as well as curtailing our usual trade show-centric, business development activities.
Nonetheless, we have started to benefit from our expansion in the latter part of2019 and early in 2020 into Leamington Spa in the UK, Singapore and Austin, Texas.
Despite the challenges of the global pandemic, demand for these services remains
very strong and we are continuing to build our Game Development service line
through organic expansion as well as through acquisitions, where we maintain afocus on accessing pools of talent from which we can expand organically, as theindustry continues to make greater use of external development services.
During the year we have announced three high quality businesses to grow anddiversify our Game Development offering:–– Coconut Lizard – a well-regarded provider with particularly deep expertise in
the video game development environment, Unreal Engine. Based in Gatesheadnear Newcastle, UK, Coconut Lizard draws from a regional talent pool that is wellserved by the local universities in the area.
–– Heavy Iron – a specialised game development business primarily focused on highend console and PC games, based in Los Angeles. The acquisition was announced
in September 2020 and closed in January 2021.
–– High Voltage – an end to end full service AAA game developer with a 27 year
track record of game development across all platform types and genres ofgames, based in Chicago, Illinois and New Orleans, Louisiana. High Voltage fits
well geographically with our other North American studios, which are based in
Orlando, Austin, Los Angeles and Ottawa, enabling us to draw on a broader spreadof local talent.
In addition, we recently announced the acquisition of an 85% stake in Tantalus.
Tantalus is a leading and prolific developer of high quality, multi-platform titles basedin Melbourne, Australia and provides us with access to a new talent pool and offers
an excellent entry point into the Australian market for further expansion in theregion, both organically and through a healthy pipeline of acquisition opportunities.

The market opportunity and outlook
Game Development is our largest addressable market. The market is growing strongly
and has the lowest proportion of services outsourced of all of the Group’s service
lines. Characterised by “per project” engagements, rather than the ongoing service
provision for many of our other service lines, Game Development revenues can be
impacted by the transitions from one project to another. As a result of COVID-19, we
have witnessed some delays in new projects flowing to our Game Development team,which may hold this service line back from maintaining the previously very strong
growth rates, particularly against strong comparatives, albeit the underlying trend
in this area of our business remains extremely positive with demand for its services
very strong.
As previously communicated, Game Development remains an area of particular focus
in our M&A programme, where we continue to assess companies that provide accessto strong pools of talent to help support the fast pace of organic growth.

Strategic report

Functional Testing

Audio
Percentage of 2020
Group revenue

12.6%
2020: €47.2m
2019: €41.9m+ 12.6%28/29

2020 Organic Revenue
growth (%)

5.8%

Pro Forma Revenue (€m)

€48.6mAverage operational staff

230

Our Audio service line provides multi language voice-over,original language voice recording, music, sound design,accessibility and related services to the video games, film
and TV industries.

2020 performance
Audio revenues rose by 12.6% in the period to €47.2m (2019:€41.9m), with the benefit of full contributions from the 2019acquisitions of Descriptive Video Works, TV+SYNCHRON,
and Syllabes and just a few days of contribution from theDecember 2020 acquisition of Jinglebell in Milan, Italy.
Jinglebell added a boutique recording studio that provides
audio recording, music production and sound design for video
games and advertisements to a strong client base. Organic
Revenue, which excludes the impact of currency movements
and acquisitions, increased by 5.8% compared to 2019.
Our Audio services business was held back throughout theyear but particularly in the first half by the closure of theirrecording studios during the lockdowns in their respective
cities. We were able to partially mitigate the effects of theseclosures by introducing a remote recording solution. Whilst
this is not our preferred method, it has proved a very reliable
alternative. H2 Organic Revenue growth improved to 8.7%,
following the 0.5% growth achieved in H1.

The market opportunity and outlook
Whilst COVID-19 restrictions continue during 2021, ouradoption of a reliable remote recording solution will enable
us to continue to deliver on our clients’ needs.
Beyond the near term, the audio services market remains
highly fragmented in terms of service provision, with clientsand voice actors favouring professional, high quality soundstudios for optimal voice recording. This represents anopportunity for us to grow our market share organically,
as well as make acquisitions over time as we did with theacquisition of Jinglebell at the end of the year.
Our music management services, sound design and soundeffects businesses have continued to grow as did our work in
subtitling and dubbing of film and TV content where we serve
clients such as Netflix, Amazon and other streaming providers.

Percentage of 2020
Group revenue

21.0%
2020: €78.5m
2019: €68.9m+ 13.9%2020 Organic Revenue
growth (%)

16.1%

Pro Forma Revenue (€m)

€78.5mAverage operational staff

2,703

Functional Testing is our second largest service line andprovides quality assurance including the discovery anddocumentation of game defects; testing to ensure games
are compatible with the various hardware devices andconfigurations they are played on; and testing to verify thatgames comply with console manufacturers’ specifications.

2020 performance
Functional Testing revenues increased by 13.9% to €78.5m(2019: €68.9m). Organic Revenue, which excludes the impactof currency movements and acquisitions, increased by 16.1%.
This represented a strong performance, given that this service
line was considerably constrained at the beginning of the
lockdowns in H1, as we worked through our agreements withour clients to reflect the new security protocols required
in a remote working environment, rather than our normof conducting these services in our secure testing studios.
During H2 and into 2021, we are continuing to operate thisbusiness with a remote working structure, focusing our limited
use of our secure facilities for recruitment, training and alimited amount of testing, where it is safe to do so.

The market opportunity and outlook
Despite the limited use of our facilities and some constraints
on our ability to recruit and train staff, Functional Testing
scaled well into the seasonal peak months of September andOctober, delivering a strong 20.6% Organic Revenue growthrate in H2, despite the strong comparatives of H2 2019.
We remain a leading player in this large and growing areaof the market that is seeing an accelerating trend towards
outsourcing. Our scale, flexibility, geographical spreadand proven robustness, even in the most challenging of
circumstances, positions us well as games companies continue
to increase the proportion of functional testing that theyoutsource.

Keywords Studios plc / Annual Report and Accounts 2020

Service line review continued

Localization
Percentage of 2020
Group revenue

12.2%
2020: €45.4m
2019: €47.1m(3.6)%

2020 Organic Revenue
growth (%)(4.0)%Pro Forma Revenue (€m)

€45.8mAverage operational staff

375

Our Localization service line provides translation of in-game
text, audio scripts, cultural and local adaptation, packaging
and marketing materials. We have also recently added neuralmachine translation technology and a global crowd-sourcing
translation platform, through the acquisition of Kantan in
December 2019.

2020 performance
Localization revenues were down by 3.6% to €45.4m (2019:€47.1m). Organic Revenue, which excludes the impact of
currency movements and acquisitions, was down by 4.0%.
This reflected some delays in the receipt of content in H1, as
production schedules further upstream were disrupted atsome of our clients. However, Localization returned to Organic
Revenue growth in H2, which was up 0.3% on the comparative
period in 2019.

The market opportunity and outlook
Having strengthened our sales efforts, we expect to build on
the improvement seen in H2 2020 as we move into 2021.
The Localization market remains highly fragmented andcharacterized by most competitors being single language
providers without the scale to deliver simultaneous multijurisdictional localization projects for our global video games
customer base. In this context, we plan to build on our team’s
leading market position through an increasingly differentiatedoffering. This combines the market leading expertise we havebuilt up in localization over the past 20 years, with proprietary
software tools, like XLoc, and the recently acquired Artificial
Intelligence (AI) and Machine Learning (ML) technology from
Kantan, which enables us to manage a greater volume ofcontent for our clients.

Strategic report

Localization Testing
Percentage of 2020
Group revenue

6.3%
2020: €23.3m
2019: €22.6m+ 3.1%

30/31

Player Support
2020 Organic Revenue
growth (%)

4.4%

Pro Forma Revenue (€m)

€23.3mAverage operational staff

591

Percentage of 2020
Group revenue

11.2%
2020: €41.8m
2019: €36.1m+ 15.8%2020 Organic Revenue
growth (%)

17.5%

Pro Forma Revenue (€m)

€41.8mAverage operational staff

1,539

Our Localization Testing service line identifies out of context
translations, truncations, overlaps, spelling, grammar,
age-rating and cultural issues and tests for console
manufacturer compliance requirements in over 30
languages using native speakers.

Our Player Support service line provides multi-lingual, costeffective and flexible customer care services including
managing communities of gamers across all forms of social
media, within the games themselves and on the official
game forums.

2020 performance2020 performance

Localization Testing revenue increased by 3.1% to €23.3m(2019: €22.6m). On an Organic basis, which excludes theimpact of currency movements, Localization Testing was
4.4% higher compared to 2019.

Player Support increased revenue by 15.8% to €41.8m (2019:€36.1m) and Organic Revenue, which is on a constant currency
basis, by 17.5%.

Localization Testing experienced the same operational
disruption and constraints seen in our Functional Testing
division during H1, compounded by some lack of availabilityof native language resources due to people returning to bewith their families in their home countries and the subsequent
travel restrictions. However, as in the case of Functional
Testing, we have successfully transitioned the majority ofpeople to remote working and are also now using our studios
for priority activities, where it is safe to do so.
Localization Testing experienced good demand in the second
half in relation to a number of AAA game releases, including
some for the new Microsoft and Sony console releases.
Whilst the pandemic continues to present challenges for the
recruitment and training of native language testers, our efforts
to mitigate these enabled higher Organic Revenue growthin H2 2020 of 5.9% compared to H2 2019.

The market opportunity and outlook
Having worked to mitigate the operational constraints
experienced in 2020, we expect Localization Testing to buildon the momentum seen in H2 during 2021.
In this service line, the Group’s scale, breadth of languages,
multi-location operations and resourcing agility enable it tooffer a cost effective, flexible and high quality service which
is difficult for smaller competitors to replicate. Our market
leadership positions us well for further growth as we continue
to develop our operations in Montreal, Dublin, Katowice, Milan,
Singapore and Tokyo.

Player Support returned to growth in H1, and successfullytransitioned its teams around the world to remote working
arrangements enabling it to provide continuous support toits clients. Good demand throughout H2, with this service
line being a more direct beneficiary of increased gameplay, combined with well-focused business development
campaigns, helped Organic Revenues grow 29.7% in H2
compared to H2 2019.

The market opportunity and outlook
Player Support’s progress in the year demonstrates the benefitsof our strategy to differentiate it from the large generalist callcentre operators and immerse ourselves even further into
gaming communities. This has been achieved by extending ourservices to cover more “touch points” of gamer engagement,
and by developing our systems and tools to enable us to
manage increased volumes of transactions efficiently.
Our specialist video games “DNA”, extensive range ofcapabilities and fundamental understanding of what is
important to players, continues to position us well in terms of
the quality of our service delivery compared to more generalist
providers, and we expect to make further progress in 2021
albeit at a more moderate growth rate.

Keywords Studios plc / Annual Report and Accounts 2020

Our people, our culture

Our people – at thecore of what we do
Our culture acts as the glue thatbinds all Keywordians aroundthe world together – relaxed,
professional and humble
with a focus on doing the very
best we can for our clients
through each and every
project they entrust to us.

Our people
At Keywords, an average of 8,353 fulltime equivalent employees make up ourinternational, digital-first, highly diverseand multicultural team and we are wellbalanced across our three regions; 43% inNorth and South America, 26% in Europe
and 31% in Asia. The number and diversityof people and skills in our workforce allows
us to be well placed to deploy these skills
across the industry to meet all of ourcustomers’ needs.
Our continued growth and reputation for
consistently delivering good quality service,on highly agile engagements, to demanding
deadlines, is testament to the Keywords
culture, and the skills and commitmentof our talented and games-passionate
employees and collaborators.
We are proud of the passion, commitment
and professionalism of this valuable
resource of ~9,000 Keywordians whichmeans there is a contribution from
Keywords to most of the world’s leadinggames. COVID-19 demonstrated theresilience of all Keywordians and we would
like to thank everyone involved for theirincredible contribution to the continued
success of the Group.

Keywords Rule of 9
At Keywords, we encourage our people to engage with each other not
only across our studios but across our regions and global network.
Through knowledge sharing and open plan offices, we encourage ourcolleagues to be the very best at what they do. At the heart of ourculture are our operating principles, the “Keywords Rule of 9”.

1
2
3
4
5
6
7
8
9

Communication

We communicate openly and in a timely fashion. We do not hide
things from colleagues or clients and we avoid office politics.

Project Focus

We focus on projects, delivering the best we can forthe benefit of each and every product we touch.

Client Centricity

We act as an extension of the client’s organisation, moulding
our processes and procedures to fit their requirements whilst
sharing our knowledge of best practices.

Empowerment

We empower our people to perform to the best of their ability
by providing them with the resources and environment to dotheir jobs and the tools to track and measure their performance.

Passion for GamesWe are passionate about games and are proud of our role inhelping to deploy them and we play an active role in the wider
industry.

Client Intimacy

We love our clients (all of them) and want the bestfor them at all times.

Positivity

We have a “can do” attitude and rise to the challengeof solving our clients’ problems.

Flexibility

We recognise the importance of flexibility and actively embraceit despite the obvious challenges. Flexibility is why we exist at all.
Without it, clients would perform the tasks we do, themselves.

Learning & Growing

We learn at every opportunity and grow ourselves throughexperience, training and tackling new challenges.

Strategic report

Working with our customers

Diversity and Inclusion

We are fortunate to be able to count 23of the top 25 global games developers andall of the top 10 mobile games publishers
by revenue as our customers. These
companies expect the highest level ofservice and our diverse capabilities allow
us to satisfy our customers’ needs every
time. Increasingly, these customers prefer
to outsource multiple services to one
provider, and this is where we are uniquely
positioned to meet expectations.

Members of our Localization service line
come to us from literally around the world,
representing their respective regions andlanguages. This year, the Montreal based
Localization team delivered pro bonotranslation services to the Black Academic
Scholarship Fund, in its mission to enhancethe economic status of Black students
to pursue post-secondary education.

We offer our clients flexible, scalable
solutions that match their overallrequirements.
Year on year, we find ourselves more
embedded with these clients, having accessto their development environments andintegrated further into their workflows.

Joining the Keywords family
We are a highly acquisitive business andhave strict criteria for our acquisition
targets, by far the most important of thesebeing cultural fit. Before acquiring an
acquisition target we complete detailed
due diligence that ensures the seamlessintegration of the new studio and mostimportantly the new colleagues. From day
one, we want them to feel like part of the
Keywords family, while, at the same time,
appreciating the history and richness thatthe new studio brings to Keywords. One
mark of our integration success is that overhalf our senior executive team joined us
through acquired companies.
Our people, with their drive and talent,
make Keywords the global service provider
that it is today, and it is essential for us that
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.

Supporting our communities
Through our studios across 22 countries,
we place the support of our local
communities, including our employees,
at the heart of what we do. In order todo more to support good causes acrossthe communities that we are a part of,
we have set aside an annual central fundof €100,000 under the Keywords Cares
initiative. Throughout 2020, Keywordianswith the support of Keywords Cares,
raised funds of over €46,000 andsupported various community andemployee-led events.

In the UK, Studio Gobo and Electric
Square launched a new BAME in Games
Mentorship programme designed to help
minority ethnicities in the video games
industry, as part of their Developing
Minds initiative. The programme currently
consists of 30 mentors and over 40
mentees. The Developing Minds initiative
will also develop video and articles fromexperts, with volunteers going out toschools, events and universities to speak
about the industry.
In Los Angeles, Keywords matchedemployee donations to combat racism,through the work of the National
Association for the Advancement ofColored People (NAACP) and the Equal
Justice Initiative. Keywords Montreal
donated to the DESTA Black Youth
Network, which provides employment
and educational support for Black youth.
Celebrating Pride is an annual summer
tradition at Keywords. While parades
were cancelled around the world due
to COVID-19 restrictions, the festivities
would not be forgotten. At Keywords wecelebrated LGBTQIA+ employees andcommunity by creating our own Pridearound the World: online edition. 92
employees from studios around the worldsubmitted photos and messages, sharedcolourful images, and messages of how
Pride is meaningful to them.
Studio Gobo and Electric Square joined
forces organising and participating in a
Pride quiz. The studio made a donation
to Mind Out in support of LGBTQIA+
mental health resources, while
Interligne, a similar organisation
received a donation from theMontreal studio.

32/33

Case study

4

Empowerment
During the Chinese New Year holidays in
2020, Keywords’ studios in China faceda challenging situation with COVID-19
concerns and employees about to resume
work. To allow for their safe return,management immediately created an
emergency response team and began
the extremely difficult task of sourcing
face masks, hand sanitiser, disinfectant
and other personal protective equipment(PPE) items over the holidays. Fortunately
they found a local supplier who provided
over 10,000 masks, enough to ensure that
more than 50% of Keywordians in China
could return to studios on 10 February,
as planned.

Painting by Jon Youseman – Lead Engineer
By early March, as China was making
significant progress in the battle against
COVID-19, other countries were starting
to experience outbreaks. With this, thethoughts and focus of our Chinese studios
soon turned towards our colleagues insister studios and how to share theirexperiences. A purchasing team foroverseas studios was set up to help ship
PPE to Keywords locations around theworld and despite the many unknown
challenges, our studios in Ireland, Canada,
UK, Japan, Philippines, Poland, US and Italy
received successful deliveries.

Keywords Studios plc / Annual Report and Accounts 2020

Our people, our culture continued

Natural disaster relief
When our teams in Manila learned of thehomes destroyed by the eruption of the Taal
volcano in February 2020, they knew theyneeded to lend a hand. Employees donatedface masks, blankets, food, toiletries, bottled
water, medication and more. They rallied
together again following Typhoon Ulysses,
later in the year. Employees travelled from
Manila to deliver the much needed items,
where evacuees welcomed them withgratitude and open arms.

Case study

8

Flexibility

Staying connected

COVID-19
Keywordians in China created an
emergency response team to source facemasks, hand sanitiser, disinfectant andother PPE items. When the local demand
was met, in learning that PPE became
increasingly difficult to obtain worldwide,
the team helped to ship PPE to sisterstudios as far as Europe and the Americas,
to keep our employees safe (more detailin our case study on page 33).
A favourite perk often cited by Keywordiansin Montreal is the daily delivery of fresh
fruit. In the quick shift to working from
home, many corporations began cancellingorders, putting these businesses at risk.
Instead of adding to food waste and thevendors’ predicament, our Montreal teamre-routed CAD$4,000 of fresh fruit toessential workers at a nearby hospital.
With an increased demand on resourcesof non-profits and charities, there has been
more emphasis on sanitary measures thanever. To help stop the spread of COVID-19
in Montreal, our studio partnered with
two local manufacturers; one to create
sanitiser dispensers, and another tosupply the sanitiser. We proudly donated
two industrial dispensers and a totalof 30 gallons of hand sanitiser to local
chapters of non-profits L’Itinéraire andDoctors of the World, to help them support
community members in need.

Keywords introduced a series of gratitude
e-cards allowing Keywordians to send
personalised thank you e-cards to other
Keywordians for their help and continued
support. Since launch, over 2,500 e-cards
have been sent globally, with kind thoughts
keeping our people connected while apart.
As a social group, with the migration to
working from home, team outings andseasonal events have unfortunately been
put on hold in most locations. To keep
connected, a number of our studios began
hosting employee-exclusive webinars
every week.
In Montreal, these webinars ranged fromMonster Sounds and Prop Art in video
games, to a Haitian cooking class and“Happiness in the time of COVID-19”.

Communityand charitable activities
Game professionals of the future can comefrom anywhere. In keeping with our annual
tradition in Dublin, we welcomed the annual
group of postgraduate students to attend
a workshop on careers in Localization.
In Madrid, we proudly volunteered at
Prodis, and donated to Fundacion ALAPAR,
promoting career training for Spanish
youth, while our UK studio d3t participatedin the Get in the Game university tour,
offering students insight into Keywords
and the games industry.
Descriptive Video Works donated theirstudio with staff also volunteering tosupport the Blind Beginnings Harvesting
Hope Online Gala which included a songfrom some of the kids at Blind Beginnings
that they wrote the lyrics and music for“I see differently”.

When India announced its COVID-19
lockdown in March 2020, our IT teams
were faced with the overnight challengeof moving 700+ Keywordians into a workfrom home setup. Initially this challengecame with shipping our secure desktops toeach employee safely while adhering to thehighest data security and VPN standards.
But once at home, our IT teams were facedwith bandwidth and VPN issues that often
required us to upgrade our employees’internet connection.
At the start of April, due to the increasinglevel of queries arising from remote
working (IT, HR, finance, food andlogistics), a helpline was set up. This
helpline team ensured that employees
need not worry with all requests,
including food delivery, fulfilled withutmost priority.
All through COVID-19, our IT and helpdesk
teams across the Group have delivered
day in, day out, allowing Keywordians toperform to the best of their abilities whileproviding world class IT infrastructure
despite a challenging environment.

Examples of the Keywords
e-cards below

Strategic report

34/35

Case study

9

Learning& Growing

Leaving the comfort of their desks for workin a warehouse, 13 Keywords employees
from our Montreal studio spent a day
volunteering at Moisson Montreal, an
organisation which supplies food to lowincome individuals around the city. The daybrought the team closer, helped reducefood waste, and fed community members
who may have otherwise gone hungry.
Pictionary, quizzes, bingo, auctions andmore, our Electric Square studio is a
close-knit and generous group. Througha dozen fundraising initiatives in 2020,
this studio raised and donated £6,000
in support of frontline workers, hospital
staff and patients, youth experiencing
homelessness, and food banks.
In Tokyo, Keywordians held fundraisers andsponsored a team in the Virtual Run for
the Cure/Walk for Life marathon for breast
cancer research, while in Italy we donatedto scientific research for paediatric cancers.
In Mexico, in addition to cash donations,employees wrote holiday greetings tochildren in the Salvation Army orphanage.

Gaming for good
Following the Australian wildfires, animallovers in our player support teams in
Seattle hosted a fundraising activity.
They spent 16 hours streaming games,
and taking on hot-sauce related challenges,
proudly raising US$2,500 for the Koala
Hospital.

In Singapore, we sponsored employee
participation in a gaming tournament withproceeds going to the Singapore Children’sSociety.
Surpassing their goal of sponsoring one
gaming console, through a series of events
including a pool tournament, bake sale andraffle, Electric Square raised enough for agaming console for a hospital in Brighton
as well as Worthing.
The team at d3t raised funds for the Sports
Relief initiative, with a series of apt andengaging activities including table tennis.
Our studio in Manila hosted a Leagueof Legends tournament. The winning team
got a cash prize plus a donation to theirnominated hospital, the San Juan hospital,
along with supplies for their front line
workers.
The biggest gaming tournament of the year,
Extra Life featured 80 Keywords gamersfrom around the world, who streamed over
250 hours of gameplay, raising a whopping
US$7,000 for the Children’s Miracle
Network of hospitals.
Although we work with the biggest names
in video games, we support independent
US developers in offering their games tostaff in monthly staff giveaways. Proceedsfrom these titles support a new charity
every month, including World Reader, Girls
INC, Gamehead, World Wildlife and more.

Providing growth opportunities for
Keywordians is always important but due to
COVID-19, traditional in-person approaches
became more challenging. In Canada, ourLearning and Development team rose tothis challenge, pivoting towards offering
virtual training and adapting existing
content for eLearning. They truly embraced
one of Keywords Rule of 9 principles,
Learning & Growing, by subsequently
launching a learning platform where
employees all over Canada can accessvarious learning opportunities:–– Interactive eLessons developed by ourtalented contributors.
–– Live training workshops with ourexperienced facilitators.
–– Various resources for professional andpersonal growth.
–– Personal eLearning content.
Building on this learning platform, ourteam is now collaborating with studios
across Canada to provide relevant growth
opportunities for all employees in theregion.

Keywords Studios plc / Annual Report and Accounts 2020

Responsible Business report> Keywords conducts its
business to the highest
standards of honesty,
integrity and ethical conduct.

Top five UN Sustainable
Development Goals (SDGs)
thought most relevant to
Keywords by employees

Goal 5:
GenderEquality

67%
Goal 3:
Good Health& Well-being

Goal 8:Decent Work
& Economic Growth

61%

59%

Goal 9:Industry, Innovation& Infrastructure

Goal 10:
ReducedInequalities

45%

45%

Progress in 2020
We at Keywords have always beencommitted to conducting our business
responsibly, operating to the highest
standards of honesty, integrity andethical conduct. We take our wider
corporate responsibility seriously,
and are conscious of the role ourbusiness plays in our communities andin the impact our business has on theenvironment. We are very proud of thethousands of Keywordians, across 22
countries of operations, for upholding
the highest standards and behaving inaccordance with our “Keywords Ruleof 9” as we engage and grow with ourwork colleagues, our customers andour communities.
As more investor attention falls on thiscritical aspect of business, so we at
Keywords are working to bring to the fore
the existing behaviours and characteristics
of our business that already make us
a great place to work, a business thatcares for its people, its communities andthe environment and a business thatrecognises there is much more we could
and should be doing.
At the start of the year, as a first step, we
worked with an independent third party
to carry out a materiality assessmentwith our senior team and the Board.
The process included a materiality
workshop, as part of our strategy week,
providing the Board and senior executives
with the opportunity to identify anddebate matters of material importanceto them based on potential impacts
to the business and its stakeholders.
Some of the issues commonly identified
included customer centricity, successful
integration of acquisitions, cyber security
and data, culture, service delivery,
diversity, employee engagement and theenvironment, given its importance to ourpeople and other stakeholders. This was
supplemented by a responsible businessemployee survey, where we sampled
a representative group of Keywordiansto get their views and understand what
is important to them. We also asked
our employees to rank what top five
UN Sustainable Development Goals(SDGs) they thought are most relevant
to Keywords, with the results highlighted
on the left.

Strategic report

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Our six responsible business priorities

Keywords
PeopleCares
Community

Diversity & inclusion

Keywords’
Priorities

Environment

Client centricity& innovation

GovernanceThis process identified our six responsible
business priorities of People, Diversity& Inclusion, Customer Centricity &Innovation, Communities and theEnvironment underpinned by Corporate
Governance and Business Ethics. We also
mapped our priority areas to the UN SDGs
as set out in each of the priority areas.
We have identified a number of performance
metrics in each of our priority areas tomeasure our progress and we believe by
fully embedding these into our businessstrategy we can build a more robust andsustainable business for all our stakeholders(shareholders, employees, customers,
suppliers and community participants).

During 2020 we made good progresson our priority areas:–– Our Code of Conduct was refreshed andrelaunched and is now available on our
website in 12 languages.
–– We have established a Global Diversity& Inclusivity Council and introduced
unconscious bias training for individuals
in hiring roles and we are taking steps toautomatically redact job applications tofurther ensure unbiased assessmentof these.
–– The Keywords Cares matching programme
was launched in which Keywords will
match funds raised for good causes by
our teams around the world.
–– We put in place a US$500,000 hardshipfund to support colleagues experiencing
financial hardship issues as a result of
the COVID-19 pandemic.

–– For the first time we have quantified ourgreenhouse gas emissions focusing on
scope 1 and 2 emissions.
To monitor our progress going forward wehave established a Responsible Business
Board Committee, comprising of Georges
Fornay (NED and Chair), Giorgio Guastalla(NED), Jon Hauck (Chief Financial Officer)
and Sonia Sedler (Chief Operating Officer).
The committee will meet quarterly andprovide regular updates to the Board on
progress. We are also in the process ofestablishing regional committees to ensurethat initiatives are rolled out and fully
embedded throughout our local studios.
The committee recognises there is morework to be done, but we have establisheda solid base and look forward to reportingon the progress in each of our priority areas.

Keywords Studios plc / Annual Report and Accounts 2020

Responsible Business report continued

PeoplePeople are our largest and mostvaluable asset. We value them; wetrust them and we work with themto support their passion to provide
the best service for each projectand customer. The key areas offocus are: health & safety, employee
engagement, and training anddevelopment.

Health & Safety
Since the start of the COVID-19 outbreak,our priority has been the health, safety
and wellbeing of all Keywordians andtheir families, reinforcing our ongoingcommitment to providing a safe andhealthy workplace for all of our employees.
In addition to our China based studios
sourcing and shipping personal protective
equipment and sanitiser to their sisterstudios and their employees throughout
the Group, we have worked hard andhave fully complied with all enhanced
national legislation on Health & Safety
requirements, while providing information,
education and training to those returning
to an office environment. In our annual
employee engagement survey, we took
the opportunity to seek feedback on thebusiness’s response to COVID-19. We arepleased that 96% confirmed that theirstudios responded appropriately to the
COVID-19 pandemic.
COVID-19 has also brought new pressuresaround working from home, resulting in
the potential for an increase in mental
health issues. In response to mental
health and overall wellness, we increased
the awareness of Employee Assistance
Programmes at our larger locations andother locations have arranged programmes

UN SDGs
Ensure healthy lives
and promote well-being
for all at all ages

Ensure inclusive andequitable quality
education and promote
lifelong learning
opportunities for all
Promote sustained,
inclusive and sustainableeconomic growth, full andproductive employment
and decent work for all

locally. Examples of some of these included
guest speakers on mental health, virtualyoga and dance lessons, Friday evening
online events, and team quiz nights. We
are particularly proud of how Keywordiansaround the world have responded to theseshort-term challenges to keep everybody
safe while making extra efforts to staying
connected with each other (more detailset out on pages 32 to 35).
We welcome employee input into all
programmes and openly share initiatives
across the organisation as we seek tomeet the changing needs of our people.
As an example, to provide some additional
support in instances where some of ourcolleagues were particularly financially
impacted as a result of COVID-19, weestablished our own US$500,000 hardshipfund in the earlier months of the pandemic
to support those experiencing more acute
financial issues. This fund remains active
and accessible by all.

Employee engagement
Our annual employee engagement survey
took place in October 2020 with 5,941 of
our colleagues responding, representing a
68% response rate (2019: 54%). In responseto the survey feedback in 2019, some of
the actions we took included introducing
our Keywords Cares programme tosupport staff in helping their communities,
continued with programmes of training
and mobility to support development
and growth, and updated our employee
recognition programmes.
The 2020 survey continued with strong
themes of teamwork and accomplishmentwith 94% responding that they were proud
to be a member of their team, 91% feelingpersonally motivated to contribute to thesuccess of their project/team, and 90%
having clearly defined goals and objectives
in their role. Areas for improvementfor 2021 relate to communications andbetter feedback from managers to theirteams; more opportunities for careerdevelopment and growth (similar to 2019);
and easier access to information andpolicies. We have set up focus groups
for 2021 to examine the results of thesurvey and to propose initiatives to further
improve overall employee engagement.
We also sought feedback on working fromhome arrangements with 43% of people
expressing a preference for continuing towork from home, 10% preferring to returnto office based working and 47% preferring
a combination of working from the office
and working from home.

Employee
feedback

Continue to work from home

43%

Return to office based working

10%

Combination of home and office working

47%

There is clearly a role for physical studios
for the Group, particularly to allow for theexchange of creative ideas, for training, andwhere the added security environment andhighly specialised set-ups of our testing
and audio studios are so important. Post
COVID-19, we see the future as a hybrid ofcreating vibrant, engaging and safe studiospace whilst also enabling people to work
securely and productively from homewhere this can be facilitated.

Training and development
We value our people; we trust them andwork to support their passion to provide
the best service for each project andeach customer. However, there is always
more that can be done to invest in ourpeople and we continue to focus on
making improvements with training anddevelopment, benefit schemes and careerplanning. Across Keywords, we provide
training and development programmes,
appropriate to the service line and theprofessional disciplines involved therein. As
examples of this, in 2020, with so many staff
working from home due to the COVID-19
pandemic, our Montreal team developed
an online learning hub, Keywords Academy
Canada, to provide access to learningmaterial, book courses and view monthly
topics of interest. We also increased ourlicences with LinkedIn Learning to provide
employees around the world with access tohundreds of courses online.

68%

Employee engagement survey
response rate
(2019: 54%)

Strategic report

38/39

Diversity & Inclusion
Human talent is our most valuableasset and as a multicultural business,
we thrive on diversity, celebrate
uniqueness and collaborate as a teamwhether we are physically together
in one of our 65+ studios around theworld or working together virtually.
We continually challenge ourselves
to ensure that we provide a working
environment that treats people with
dignity and respect, is free fromdiscrimination and promotes fairness
and equal opportunities.

We recognise that we can do more to drive
the Diversity & Inclusion agenda, and to that
end, in 2020 we created a Global Diversity &Inclusivity Council. We have also introduced
unconscious bias training for individuals in
hiring roles and are taking steps to redact
job applications to further ensure unbiased
assessment of potential candidates atthe start of the recruitment process. This
technology is not currently available and so
the HR team is working with their colleagues
in the test automation team to develop atool to support this process.

Board Diversity

In 2020 the Group was composed of 26%
women and 74% men (2019: 25%/75%).
We recognise that the video games industry
traditionally attracts more male than female
employees and this demographic is mainly
due to the higher proportion of males insome parts of our business. Our support
functions have a more equal split of womenand men (45% and 55%, respectively). A key
continued focus going forward will be tolook at opportunities to highlight Keywords
as an attractive career choice for women.
With the recent appointment of Sonia
Sedler to the Board as Chief Operating
Officer, 33% of Board executives are now
female, while the Keywords’ overall Boardof Directors includes eight Directors, twobeing women (25%).

UN SDGs
Achieve gender equality
and empower all womenand girls

Reduce inequality within
and among countries

Female25% (2 Board members)

Male

75% (6 Board members)Group Diversity

Female

26%

Male

74%

Global Diversity & Inclusivity Council
Mission: The Global Diversity & Inclusivity Council’s mission is to evolve Keywords’ approach to diversity and inclusion on a global,
regional, and local level in order to have a measurable positive impact on people’s everyday lives. We recognise there is no one-sizefits-all solution but by actively listening to our people and having open, frank conversations we can learn from one another and build
actionable objectives for our various Keywordian teams to implement. We aim to show our progress as we continue to foster an
inclusive culture where all of our employees have the sense of belonging and the opportunity to realise their full potential.
4 – Monica Dalla ValleTeam Manager
Dublin, Ireland

8 – Fumiko Okura
General Manager
Tokyo, Japan

9 – Xandra Bautista
HR Business Partner
Philippines
7 – Kah Hui Teo
Global Localization Manager
Singapore

1 – Frankie Knowles
Account Handler &Campaign Manager
Vancouver, Canada

5 – Natania Boyce
Operation Manager
London, UK

6 – Chiara Stracchi
Audio Service line manager – Global
Milan, Italy

2 – Detroit Burns
FQA Manager
Montreal, Canada
3 – Amanda Rodrigues
FQA Manager
Montreal, Canada

1

2

3

4

5

6

7

8

9

Keywords Studios plc / Annual Report and Accounts 2020

Responsible Business report continued

Client centricity & innovation
Our clients and their projects areat the heart of everything we do at
Keywords and we are focused oncontinually improving the engagement
and experience of our clients wheninteracting with Keywords. We always
seek to better understand our clients’needs so that we can fully meet their
expectations for each and every project.
We are fortunate to be able to include
the majority of the top global games
publishers and developers as our clients.
These companies expect the highest
levels of service and confidentiality. At theheart of our culture is our commitment
to quality, reliability and integratingwith our customers’ processes which
when combined, promotes long-term,
sustainable relationships. Continuing tocreate and maintain the right culture iscore to Keywords’ future sustainability andis embedded in our operating principles,the “Keywords Rule of 9”. We encourage all
Keywordians to embrace these principles,
as we will always do the very best we canfor our customers and those with whom
we interact.
Our top five customers account for 29.1%(2019: 28.1%) of the Company’s revenues
with 120 customers using three or more
service lines, up 11% from 2019. Fromthe start of 2019, we have started to seek
feedback from our customers through acustomer net promoter score (NPS) survey
with an overall customer net promoter score(NPS) of 48 in H1 2020 (a score of between
30-70 is considered “great” by Retently).

UN SDGs
Promote sustained,
inclusive and sustainableeconomic growth, full andproductive employment
and decent work for all
Build resilient
infrastructure, promote
inclusive and sustainableindustrialization and foster
innovation

Information technology
As a global business providing services
for the video gaming and media industries,
Keywords relies heavily on technology. It is
critical that this technology environment
can continue to operate effectively,
efficiently and securely. To ensure thisis the case, Keywords has a dedicatedInformation Security & Privacy team andfollows a comprehensive global Information
Security & Privacy framework with policies,
guidelines and procedures, covering
industry best practices that all systems
and colleagues must adhere to.
This framework incorporates compliancechecks to ensure that our studios meet the
Keywords standard security requirements.
Supplementary penetration tests are also
executed as required, in addition to external
compliance assessments and audits
performed by our third party customers
on an ongoing basis. The activities include:–– Managing the Security & Privacy
framework–– Monitoring of Keywords Studios’
information systems and infrastructure

Each service line is constantly developing andusing technology to improve client service
and drive internal productivity. An exampleof this is in Localization, where we plan tobuild an increasingly differentiated offering.
This combines the market leading expertise
we have built up in localization over the past
20 years, with proprietary software tools,
such as XLoc, and recently acquired Artificial
Intelligence (AI) and Machine Learning (ML)technology from Kantan, which enables us
to manage a greater volume of digital content
for our clients. We are also developing the
Kantan technology to provide more efficient
multi-language capabilities in our Player
Support business.

29.1%
2019: 28.1%–– Security & Privacy incident management–– Raising employee awareness–– Client Security & Privacy assessments–– Testing of internal privacy and security
controls
Several studios hold and maintain, or arein the process of acquiring, information
security and privacy related certifications,
including, but not limited to: Trusted
Partner Network (TPN), Supplier Security
and Privacy Assurance (SSPA), Payment
Card Industry Data Security Standard(PCI-DSS), International Organization forStandardization standard number 27001
on Information Security (ISO 27001),
System and Organization Controls 2 (SOC 2),
Netflix Post Partner Program (NP3).

Our top five customers
account for 29.1% (2019:28.1%) of the Group’s
revenues with 120 customers
using three or more service
lines, up 11% from 2019.

Strategic report

40/41

Environment
We are committed to minimising
our impact on the environmentand recognise the importanceof meeting globally recognised
corporate responsibility standards.
As a responsible employer, we areresponding to the demands of ourpeople to build a sustainable businessmodel, mainly through the impacts ofour studio configurations and businesstravel activities.
We accept that in a global organisation
our people will need to travel. However, in
2020, as a result of the COVID-19 pandemic
our business travel was greatly reduced.
We increased our usage of collaborative
tools such as video conferencing and will
endeavour to retain these practices to agreater degree post the pandemic. When we
do return to travelling, we will continue ourexisting policy for everybody to fly economy
and encourage the use of public transport
where practical.

Sustainable studios
Sustainability is a core focus for Keywords,
as it is for all of our studios across all our
territories. Local studios are encouraged
to minimise their energy usage, andreduce and recycle waste. Local initiatives
in 2020 included:–– Following on from Electric Square’s
Carbon Balance certification, the studiohas now ventured into their local
community, cleaning up the nearby
public beach in Brighton.
–– Meanwhile, Studio Gobo swapped
disposable soap dispensers for thefive litre reusable kind.
–– Keywords Seattle had construction
material to dispose of, and rather thansending it to a landfill, they managed tohave it all recycled.
–– Montreal will no longer use disposable
utensils in the cafeteria. Instead, their
Green Committee implemented a change
where everyone in the studio received
reusable Keywords travel mugs, anda set of reusable cutlery, completewith chopsticks.

UN SDGTake urgent action tocombat climate change
and its impacts

Energy and carbon reporting
To develop this area further, in 2020 Keywords commenced its first formal review of theGroup’s global energy usage, resulting in the identification, assessment and measurementof our energy and greenhouse gas emissions.
We have used the GHG Protocol Corporate Accounting and Reporting standard (revised
edition) and emission factors from the UK Government’s GHG Conversion Factors for
Company Reporting 2020 and International Energy Agency (IEA) conversion factors for
non-UK electricity to calculate the below disclosures. The standard requires a statement ofrelevant intensity ratios, which are an expression of the quantity of emissions in relation toa quantifiable factor of the business activity. Keywords has identified its intensity ratio, as set
out below. These figures were calculated from data available to the Group and extrapolated
to take account of smaller or mixed tenant locations.

GHG emissions data for the period 1 October 2019 to 30 September 2020
Tonnes of CO2eUK

GlobalCombustion of fuels and operation of facility(Scope 1)

0.4

271

Emissions from purchase of electricity, heat, steam,and cooling purchased for own use (Scope 2)*

175

4,015

Total emissions under Scope 1 and 2

175

4,286

Energy consumption used to calculate emissions –kWh (million)

692

11,527*	Includes emissions only from the use of electricity.

In 2020, UK emissions accounted for 175 tonnes of CO2e, representing 4% of global emissions
and the UK energy represented 6% of our global energy consumption.

Intensity ratio (tonnes of CO2e per unit)
Ratio of carbon emissions to employees

0.52

Ratio of carbon emissions to revenue (€m)

11.8

Many of our studios were less occupied during 2020 and therefore this may not be
an accurate baseline to measure our carbon emissions. Nonetheless, in 2021, we areestablishing work streams focused on driving our environmental commitment forwards, byidentifying practical changes that we can implement and set measurable business targets
against. This will start with a Group-wide environmental policy, covering both our energy
and recycling practices. This policy will support our studios in their efforts to minimise
energy and natural resource usage, to reduce, reuse and recycle, and to ensure the legal
disposal of waste – helping us deliver our long-term ambition to reach net zero carbon
emissions ahead of the UK Government’s target of 2050.
We are also monitoring the development of the Task Force on Climate-related Disclosures(TFCD) framework, with a view to incorporating this into our reporting framework over time.

Keywords Studios plc / Annual Report and Accounts 2020

Responsible Business report continued

Community€46,000

Raised by employees for charity(2019: €29,000)

Here at Keywords, we encouragecommunity involvement andsupporting good causes throughout
our local studios. In order to do moreto support good causes across thecommunities that we are a part of,under the Keywords Cares initiative
we have set aside an annual central
fund of €100,000. This can be applied
to match funds raised for community
outreach and charitable initiatives by
our local teams around the world. In thisway, we hope to encourage even more
support for our local communities.

In 2020, we were delighted again to see
so many Keywordians giving their timeand energy in support of the numerous
initiatives that so many of us feel strongly
about, whether it’s local charities,
not-for-profit programmes, educational
initiatives or community outreachprogrammes. Some of the many proudexamples of our community efforts
in 2020 are set out in more detailon pages 33 to 35.

Supporting communities–– Keywordians volunteered significant
hours in an effort to help our neighbours–– Uniting and inspiring, making
communities stronger–– Ensuring player safety and wellbeing, ourPlayer Support Agents and Community
Managers have reported hundreds ofonline threats

UN SDGs–– Raised funds for various community
needs
Ensure healthy lives andpromote well-being for all
at all ages

Achieve gender equality
and empower all womenand girls

Reduce inequality within
and among countries

Take urgent action tocombat climate change
and its impacts

Celebrating cultures–– 70+ international holidays observed,
including National Day, Diwali,International Women’s Day, Chinese New
Year, Revolution Day, Independence Day,Day of National Unity and many more–– Honouring the backgrounds of ourteams located across 22 countries
and four continents–– 65+ studios supporting diversity
and inclusion

6

studios supported diversity
and inclusion programmes,
to improve the quality of life
for marginalised communities

8

studios supported local
schools and education needs

6studios supported green
initiatives in their studios
and communities

7

studios supported emergency
relief measures, related tonatural disasters and COVID-19

Strategic report

42/43

Corporate governance and business ethics
Our business strategy is aligned to our
Responsible Business priorities and the
expectations of our key stakeholders,as outlined in our Code of BusinessConduct (the “Code”).
This Code provides the basic foundations
which guide our ethical conduct at
Keywords setting the highest standardsof behaviour and respecting the dignityof others. We are committed to conducting
our business responsibly and operating
to the highest standards of honesty,
integrity and ethical conduct. We recognise
the value of good corporate governancein every part of the business and haveadopted the Quoted Companies Alliance(QCA) Corporate Governance Code, which
is appropriate for the size and maturityof our business.
Ethics: The Group is committed to thehighest levels of integrity, accountability andthe prevention of bribery and corruption.
In 2020, we refreshed our Code of BusinessConduct, and published it on the Company
website in 12 languages. We also engage
with an external compliance software
vendor to help with the ongoing training
and awareness of our anti-bribery andcorruption policy, in addition to otherpolicies and eLearning activities. In 2018,
we adopted a whistleblowing policy that has
been rolled out globally. This policy allows allcolleagues, wherever they are, to raise any
concerns about possible financial or otherirregularities confidentially. During 2020, nowhistleblowing disclosures were reported,following three in 2019 which were all
investigated and satisfactorily resolved.

UN SDGs
Promote sustained,
inclusive and sustainableeconomic growth, full andproductive employment
and decent work for all
Build resilient
infrastructure, promote
inclusive and sustainableindustrialization andfoster innovation

Human rights: At Keywords, we donot tolerate any form of modern slavery
or human trafficking in any part of ourbusiness. In 2017, the Board adopted
a Modern Slavery Policy and our annual
Modern Slavery Statement is publishedon the Company website. We operate
to international standards and principles
including the International Bill of Human
Rights, the UN’s Guiding Principles
on Business and Human Rights, theInternational Labour Organization’s
Declaration on Fundamental Principles
and Rights at Work and the Children’s
Rights and Business Principles. The
Group continues to make all reasonableendeavours to ensure all employees andagents within our supply chains are notsubject to any form of forced, compulsory/
bonded labour or human trafficking
through our Modern Slavery Policy and theaccompanying Supplier Code of Conduct.
Data privacy: Keywords is committed
to processing data in accordance with
its responsibilities under applicable dataprotection legislation, and has created the
Keywords Privacy Framework, based on the
General Data Protection Regulation (GDPR).
This framework is constantly updated totake into account other applicable privacy
regulations, and it applies to all of its
subsidiaries regardless of geographicallocation or service line. We regard thelawful and correct processing of personal
information by the company as very
important to our successful operations
and for maintaining confidence between
our clients and ourselves.
M&A: We are a highly acquisitive businessand have strict criteria for our acquisition
targets, by far the most important being
cultural fit. Before acquiring an acquisition
target we complete detailed due diligence
and all acquisitions are approved by the
Board prior to completion. We have atried-and-tested integration process anddetailed integration plans tailored to eachcompany, with the involvement of those
who will implement it. This is designed
to ensure a seamless integration of the
new studio and most importantly, our newcolleagues, so that from day one, they feellike part of the Keywords family and adopt
our Group policies.

Tax governance: The Group takes abalanced approach to the managementof its tax affairs and has a tax policy which
is approved by the Board. Our overall
strategy is to meet our tax obligations
and ensure that long term shareholder
returns are responsibly optimised bystructuring our business and transactions
in a tax efficient manner, whilst taking into
account reputational factors. Tax risks are
regularly reviewed by the Board and the
Audit Committee. The Group’s approachin relation to the management of tax issues
is to ensure that:–– we comply with all applicable laws,
disclosure requirements and regulationsin the territories in which we dobusiness;–– all tax positions adopted are adequately
and fairly disclosed in tax filings;–– we have an open and transparent
working relationship with the relevant tax
authorities around the world;–– where disputes arise with tax authorities,
we seek to reach a resolution as soon
as possible in an open and constructive
manner;–– where considered appropriate, theGroup takes advice from professionalfirms;–– tax risks are appropriately managedin accordance with the tax policy; and–– our tax planning is aligned with theGroup’s commercial and businessactivities and the tax treatment ofbusiness transactions is optimised.

Keywords Studios plc / Annual Report and Accounts 2020

Responsible Business report continued

Non-financial information statement
Our non-financial information statement is set out below on environmental matters, social andemployee matters, respect for human rights, and anti-corruption and anti-bribery. Details of ourbusiness model can be found on pages 20 and 21, and our principal risks are on pages 50 to 53.
Our Modern Slavery Policy and Code of Business Conduct can be found on our website.

Reporting requirement

Policies and standards
which govern our approach

Page reference

Environmental matters

Environmental statement

Page 41 Responsible BusinessSocial and employee matters

Code of Business Conduct

Pages 22 and 23 Our strategy

Recruitment policy

Pages 32 to 35 Our people, our culture

Employee handbook

Pages 36 to 45 Responsible Business

Diversity and equal opportunity
Grievance policy
Employee assistance programme
Health & safety policy
Data protection
Respect for human rights

Supplier Code of Conduct

Page 43 Responsible Business

Modern Slavery Policy
Anti-bribery and corruption

Anti-bribery and corruption policy

Page 43 Responsible Business

Whistleblowing

Page 60 Audit Committee

Business model

Pages 20 and 21 Business model

Description of principal risks
and impact of business activity

Page 36 Responsible Business

Non-financial key performance indicators

Pages 22 and 23 Our strategy

Pages 50 to 53 Principal risks and uncertainties

Pages 36 to 45 Responsible Business

Section 172(1) statement
The Directors have acted in a way that they consider, in good faith, would be most likely to promote
the success of the Company for the benefit of its members as a whole, in line with Section 172 of theCompanies Act 2006.
This section of the Strategic Report describes how the Directors continue to have regard for:–– the likely consequences of any decision in the long term;–– the interests of the Company’s employees;–– the need to foster the Company’s business relationships with suppliers, customers and others;–– the impact of the Company’s operations on the community and the environment;–– the desirability of the Company maintaining a reputation for high standards of business conduct; and–– the need to act fairly as between members of the Company.

Strategic report

The Directors are fully aware of theseduties and responsibilities, and have set out
below how they are fulfilling those duties inrespect of each of their key stakeholders. Inline with our Responsible Business report(more detail on pages 36 to 45), the Board
identifies the Group’s key stakeholders
as shareholders, employees, customers,
suppliers and community participants, and
it is committed to effective engagementwith these stakeholders.

Shareholders
Our Annual General Meeting (AGM) is an
important part of effective shareholder
communication, with all shareholders
having the opportunity to hear from theCompany and ask questions. The Board
welcomes the opportunity to engage with
our shareholders, typically providing a brief
update presentation at each AGM and withall Directors available to answer questions.
In 2020, the Board was unfortunately
unable to permit its shareholders tophysically attend the AGM due to COVID-19
restrictions. As the Company’s articles ofassociation were amended at the 2020
AGM to enable “hybrid meetings” (withsome attendees in a physical locationand others attending by electronic means),
at the 2021 AGM the Board intends tofacilitate shareholder attendance via
videoconference for as long as COVID-19
restrictions remain in place. The Company
also intends to increase the audience of theCapital Markets Day by broadcasting these
events to selected stakeholders in orderto encourage greater engagement.
Throughout the year the CEO and CFO
meet with shareholders, with the Board
receiving regular updates from both the
CEO and CFO on these engagements.
Additionally, both the Senior Independent
Director and the Chairman have met, andwill continue to meet, with institutional
shareholders to discuss updates on theGroup including strategy, remunerationand other key issues that are vital to thesestakeholders in the future. An example
would be the emerging importance tosome stakeholders of environmental,social, and governance (ESG) factors.

Employees
The Board receives regular updates inrelation to employees, in addition to theresults from the Group’s global employee
survey (further details on page 38).
Additionally, the Group holds a seriesof annual strategy days and, as the Board
is in attendance, it is able to get bothformal and informal instant feedback

from the Senior Management team. Due to
COVID-19, the Board was unable to engage
with the Group’s employees in its normalmanner but it hopes to resume these visits
to key locations in the near future.

Customers
During the year, the Board receives updates
from senior management on key customers
via the business reviews. Prior to COVID-19,
the CEO and selected members of theBoard normally meet existing and potential
clients at the key video games events (e.g.
E3, GDC, XDS, Gamescom, Tokyo Games
Show) to seek their input and gauge theircurrent and future requirements. The
CEO independently also regularly meetswith the top echelon of key customers
to strengthen relationships.

Suppliers
The Board recognises the important rolethat our suppliers play in helping us deliver
our services, as this group comprises
individual contractors in addition to a rangeof support service suppliers. In respect ofour broader base of suppliers, the Board
has developed a Supplier Code of Conduct,
complemented by the adoption of aModern Slavery Policy since 2017.

Community participants
The Board recognises the need toincrease our community engagement andto support the communities that we arepart of. With this in mind, Keywords has
pledged up to €100,000 per year to match
funds raised for community outreachand charitable initiatives so that we cancontinue to support our local communities(further details on pages 33 to 35).

Decision making
We set out below the Group’s remuneration
policy and Responsible Business interactions
as examples of how the Directors have had
regard to the matters set out in section
172(1)(a)-(f) when discharging their duties
under section 172 and the effect of thaton certain decisions taken by them.
Remuneration policy:
The Group’s Remuneration Committee, on
behalf of the Board, is responsible for thedetermination and implementation of the
Directors’ remuneration policy, applicable
to Executive and Non-Executive Directors.
During 2020, the Remuneration Committee
reviewed the pay structure for the Executive
Directors, with a particular focus on how the
package compares with companies of similar

44/45

scale and complexity to Keywords. Further
details can be found in the Directors’
remuneration report, pages 63 to 77.
The Remuneration Committee Chairand other members of the Remuneration
Committee engaged with a number of ourlargest shareholders and relevant proxyagencies regarding these revisions, andtook into account the feedback from thesemeetings in finalising the details of thechanges. The Board believes this regulardialogue with our shareholders is critical toensure our remuneration policy aligns with
their expectations wherever possible, andwe found this engagement meaningful anduseful in achieving that aim.
Responsible Business:
Over the course of 2020, the Board
recognised and discussed the increasing
importance of ESG matters for a numberof our stakeholders. As a first step, we
worked with an independent third party
to carry out a materiality assessmentwith our senior team and the Board.
This assessment was supplemented bya Responsible Business employee survey
to understand their views and what is
important to them. Once complete, thisprocess identified our six Responsible
Business priorities of People, Diversity& Inclusion, Customer Centricity &Innovation, Communities and theEnvironment underpinned by Corporate
Governance and Business Ethics. Further
details on this process and priorities canbe found in the Responsible Business
report, pages 36 and 37.
In addition, in order for the Board tomonitor progress in this important area,
the Board has established a Responsible
Business Committee comprising of
Georges Fornay (NED and Chair), Giorgio
Guastalla (NED), Jon Hauck (Chief Financial
Officer) and Sonia Sedler (Chief Operating
Officer). The Group is also in the process ofestablishing regional committees to ensurethat initiatives are rolled out and fully
embedded throughout our local studios.

Keywords Studios plc / Annual Report and Accounts 2020

Financial and operating review

Resilient performancein a period of significant
disruption
Revenue
Revenue for 2020 increased by 14.4% to€373.5m (2019: €326.5m). This growth was
supplemented by the full year impact ofacquisitions in 2019 and the acquisitions
made in 2020, but offset by the impactof currency movements, particularly the
weakening of the US dollar in the second
half of the year, and certain service lines
having been held back by COVID-19
disruptions during the year.
Organic Revenue growth (which adjustsfor the impact of currency movements
and acquisitions) was up 11.7%. This was
driven by a robust performance in mostservice lines, despite being held back in
the first half of the year due to the studioclosures, particularly in our Testing andAudio businesses, and short term clientside disruption to content flowing into
Localization. The business delivered astronger performance in the second halfof the year with Organic Revenue growthof 15.0% (H1: 8.0%) driven by continued
strong demand for most of our services
and with all businesses settling down into
the new ways of working.

Gross margin
Jon Hauck
Chief Financial Officer

Gross margin in 2020 was €141.8m(2019: €120.2m) representing an increaseof 17.9%. The gross profit margin improvedby 1.2% pts to 38.0% (2019: 36.8%) despite
the margin improvement having been
held back by the revenue shortfalls fromMarch onwards compared to pre-COVID-19
expectations, particularly in our Testing,
Audio and Localization service lines.

Operating costs
Adjusted operating costs increased by
7.9% to €67.6m (2019: €62.6m), reflecting
a larger Group, but reduced to 18.1% ofrevenue versus 19.2% in 2019. This was
driven by operational leverage and good
cost control, together with a reductionin certain costs due to COVID-19, suchas travel and marketing costs.

Strategic report

Organic Revenue growth

46/47

Revenue (€m)

+11.7%€373.5m

EBITDA+14.4%

2020€373.5m

2019€326.5m

2018€250.8m

Adjusted EBITDA increased 28.8% to €74.2m compared with€57.6m for 2019 resulting in an improvement in Adjusted EBITDA
margin of 2.3% pts to 19.9% (2019: 17.6%). As noted above, themargin partly benefitted from a reduction in certain costs during
COVID-19, albeit it was held back by the revenue shortfalls fromMarch onwards versus previously anticipated levels.

2.3m of options were granted under the Share Option Schemeand Long Term Incentive Plan in H1 2020. This, together with
grants from previous years, has resulted in a non-cash shareoption expense of €15.4m in 2020 (2019: €9.8m). The increaseis largely due to an increase in the fair value charge for the more
recent grants compared to previous years reflecting the increasein the share price.

Net finance costs

One-off costs associated with the acquisition and integrationof businesses amounted to €2.6m (2019: €4.3m).

Net finance costs increased by €4.4m to €8.6m (2019: €4.2m)
largely driven by a €4.4m increase in the net foreign exchange loss
which is described in more detail below. Underlying interest costs
on bank debt (excluding IFRS 16 interest, deferred consideration
discount unwind, bank charges and foreign exchange) increasedby €0.1m to €1.0m (2019 €0.9m). This reflected the repayment ofdrawings on the RCF following the successful €110m placing in May,
since when we have maintained a strong net cash position despite
the Group’s acquisition spend.

Alternative performance measures (APMs)
The Group reports a number of APMs to present the financial
performance of the business which are not GAAP measures as
defined by IFRS. The Directors believe these measures provide
valuable additional information for the users of the financial
information to understand the underlying trading performanceof the business. In particular, adjusted profit measures are used
to provide the users of the accounts a clear understanding of theunderlying profitability of the business over time. A breakdownof the adjusting factors is provided in the table below:
2020
€m

2019
€m

Share option expense

15.4

9.8

Acquisition and integration costs

2.6

4.3

Amortisation and impairmentof intangible assets

8.8

7.3

COVID-19 government
subsidies claimed

(9.2)

–

Investment income

(1.4)

–

Foreign exchange and other items

6.3

2.1

22.5

23.5

The amortisation and impairment charge of €8.8m (2019: €7.3m)
includes a €2.1m non-cash charge relating to an impairmentof intangible assets in certain pre-revenue businesses. Thesebusinesses have potentially exciting prospects but their speed
to market has been hampered by COVID-19.
During the year the Group benefitted from €9.2m of COVID-19
related government subsidies, largely in the Americas aimed at
supporting employment during the COVID-19 crisis. In addition,
the Group made a €1.4m gain on the disposal of an investment
in Hutch Games that was acquired with the acquisition of Liquid
Development in 2015. Due to the one off nature of both items
the income was excluded in arriving at the adjusted profit
measures in order to assist with the understanding of theunderlying trading performance.
Foreign exchange and other items amounted to a net charge of€6.3m (2019: €2.1m). Keywords does not hedge foreign currency
exposures. The effect on the Group’s results of movements in
exchange rates and the foreign exchange gains and losses incurred
during the year mainly relate to the effect of translating net current
assets held in foreign currencies. This resulted in a net foreignexchange loss of €6.1m, recorded within financing cost(2019: €1.7m loss).
A more detailed explanation of the measures used together witha reconciliation to the corresponding GAAP measures is provided
in the APMs section at the end of the statement.

Profit before taxation
Profit before tax increased by €15.1m (+87.1% year on year) to€32.5m (2019: €17.4m). Adjusted Profit Before Tax, which adjustsfor the items described in the APMs section above increased by€14.1m (+34.5% year on year) to €55.0m compared with €40.9m
in 2019. This represents an improvement in Adjusted Profit Before
Tax margin of 2.2% pts to 14.7% (2019: 12.5%) and is in line with ourhistorical margin delivery of between 14–15%.

Keywords Studios plc / Annual Report and Accounts 2020

Financial and operating review continued

Taxation

Earnings per share

The tax charge increased by €3.5m to €11.0m (2019: €7.5m) largely
reflecting the increase in the profit before tax of the business. After
adjusting for the items noted in the APMs section above and thetax impact arising on the bridging items, the Adjusted Effective Tax
Rate for 2020 was 21.5% (H1 2020: 21.5%) compared with the rateof 22.4% in 2019. This improvement was partly driven by the nonrepeat of a legacy pre-acquisition tax charge of €0.5m incurred in
the prior year.

Basic earnings per share increased by 99.1% to 30.32c (2019: 15.23c)reflecting the increase in the statutory profit after tax of 116.6%,
partially offset by an 8.8% increase in the weighted average numberof shares following the 10.5% equity placing in May of 2020. Fully
diluted earnings per share, reflecting the impact of unvested shareoptions, increased by 94.9% to 28.71c (2019: 14.73c).
Adjusted earnings per share, which adjusts for the items noted in the
APMs section and the tax impact arising on the bridging items above,was 60.93c representing an increase of 24.9% (2019: 48.78c).

Cash flow and net debt
Cash flow statement

2020
€m

2019
€m

Change€m

Adjusted EBITDA

74.2

57.6

16.6

MMTC and VGTR

0.6

(5.9)

6.5

Working capital and other items

(2.2)

(1.7)

(0.5)

Capex – property, plant and equipment (PPE)(13.9)(13.1)(0.8)

Capex – intangible assets

(0.3)

(0.4)

0.1

Payments of principal on lease liabilities

(8.2)

(7.4)

(0.8)

COVID-19 employment support subsidies

9.2

–

9.2

Operating cash flows

59.4

29.1

30.3

Net interest paid

(1.6)

(2.1)

0.5

Free cash flow before tax

57.8

27.0

30.8

Tax

(4.5)

(13.3)

8.8

Free cash flow

53.3

13.7

39.6

M&A – acquisition spend(39.9)(27.8)(12.1)

M&A – acquisition and integration costs

(2.3)

(3.8)

1.5

Investment income

1.4

–

1.4

–

(1.2)

1.2

Shares issued for cash

111.7

0.8

110.9

Underlying increase/(decrease) in net cash/(debt)

124.2(18.3)

142.5

(3.4)

0.8

(4.2)

120.8

(17.5)

138.3

Dividends paid

FX and other items
Increase in net cash/(debt)
Opening net cash/(debt)(17.9)(0.4)

Closing net cash/(debt)

102.9(17.9)The Group generated Adjusted EBITDA of €74.2m in 2020, an increase of €16.6m from €57.6m in 2019. There was a €0.6m inflow in respectof the amounts due for Multi-Media Tax Credits (MMTC) that are earned in the year of production, and are collected a year in arrears,
and Video Games Tax Relief (VGTR). This includes ~€2.5m of accelerated receipts as a result of COVID-19 that would otherwise have been
received in 2021. Other working capital outflows of €2.2m were broadly in line with the prior year with trade receivable days improvingby 2 days to 42 days (2019: 44 days).

Strategic report

Investment in property, plant and equipment amounted to€13.9m (2019: €13.1m) reflecting a 22.3% increase in the levelof equipment expenditure driven by the increased revenuesof the business and the working from home arrangements that
required some additional investment in equipment, partially
offset by a reduction in the level of expansionary capex relative
to the prior year. Property lease payments of principal of €8.2m
were 10.8% higher than the prior year (2019: €7.4m) reflecting
the increased size of the business.
COVID-19 government employment retention subsidies amounted
to €9.2m, resulting in operating cash flows of €59.4m(2019: €29.1m), an increase of €30.3m on 2019.
Interest payments were €1.6m, a decrease of €0.5m on 2019as a result of the repayment of drawings on the RCF following theplacing in May. Tax payments amounted to €4.5m (2019: €13.3m),
a reduction of €8.8m on 2019. 2019 included tax payments ofapproximately €5m relating to previous years and the Grouphas benefitted from other timing differences resulting in lesspayments in the year in respect of the 2020 tax payable.
This resulted in Free Cash Flow of €53.3m (2019: €13.7m), an
increase of €39.6m on 2019. Adjusted Free Cash Flow, which
adjusts for capital expenditure that is supporting growth in future
periods and the COVID-19 government employment retention
subsidies, was €53.4m in 2020, an increase of €20.6m (+62.8%)
on the levels delivered in 2019. This resulted in an Adjusted Cash
Conversion rate of 97.2% (2019: 80.2%) albeit as noted above, 2020
benefitted from some timing differences as a result of COVID-19.
Cash spent on acquisitions totalled €42.2m of which €39.9m
was in respect of the cash component of both current and prioryear acquisitions and €2.3m was in relation to acquisition andintegration costs. In addition the Group received €1.4m fromthe disposal of an investment in Hutch Games that was brought
into the Group via an acquisition in 2015, as noted earlier. These
items, together with the strong Free Cash Flow generation andthe €110m received from the successful equity placing in May andforeign exchange movements of €3.4m, resulted in an increase in
cash of €120.8m in 2020 (2019: increase in net debt: €17.5m) andresulted in closing net cash of €102.9m (2019: net debt €17.9m).

Balance sheet and liquidity
The Group funds itself primarily through cash generation anda syndicated revolving credit facility (RCF) of €100m, with anaccordion option to increase this up to €140m. The RCF maturesin October 2022 with an option to extend it for up to a further
two years.

The Group entered the year with a strong balance sheet, with net
debt (excluding IFRS 16 leases) of €17.9m as at 31 December 2019representing a net debt to Adjusted EBITDA ratio of 0.3x. In May,
the Group placed 6,900,000 new ordinary shares representing
c.10.5% of the Group’s issued share capital, generating net
proceeds of approximately €110m. The placing has allowed
the Group to continue to pursue its value accretive acquisition
strategy whilst maintaining a strong balance sheet.
The funds were used to repay drawings under the RCF and tosupport the value accretive M&A programme, with €40m of cash
deployed in the year. At the end of 2020, the Group had net cashof €102.9m and undrawn committed facilities of €100m.

Dividend
The Group has delivered a robust performance in the year
and has demonstrated the resilience of the Group’s businessmodel, the benefit of its diversified services platform, and thecontinued strong demand for its services. Our service lines have
performed well given the operational and market disruption
caused by COVID-19, delivering revenue and profit growth alongwith continued cash generation. The Board intends to resume
its progressive dividend policy in 2021.

Guidance for 2021
We have made a good start to the year with the Organic Revenue
growth momentum in the second half of 2020 flowing into 2021,
offset by the full year impact of the weakening of the US dollar
in the second half of 2020 assuming rates remain at their current
levels. In addition, 2021 revenue will benefit from the additional
contribution from the Tantalus acquisition announced in March.
Adjusted Profit Before Tax margins are expected to be maintained
following the improvements in 2020 and within the 14–15%
historical range and the Adjusted Effective Tax rate is expected
to be in line with the 2020 rate of ~21%.
We are anticipating capex at a higher level to 2020 relative torevenue reflecting some expansionary capex and investment
in equipment to support the new console cycle, and an overall
Adjusted Cash Conversion rate of ~80% representing a slight
reduction on 2020 and reflecting the unwinding of some of thephasing benefits in 2020 as a result of COVID-19.
With the exception of the incremental impact of the Tantalus
acquisition announced recently, all of the above items are reflectedin the current revenue and profit market consensus for 2021.

The majority of Group borrowings are subject to two financial
covenants that are calculated in accordance with the facility
agreement:–– Leverage: Maximum Total Net Borrowings to Adjusted EBITDA
ratio of 3 times; and–– Interest cover: Minimum Adjusted Operating Profit to Net
Finance Costs ratio of 4 times.

48/49

Jon Hauck
Chief Financial Officer

Keywords Studios plc / Annual Report and Accounts 2020

Principal risks and uncertainties

Getting with the program
The principal risks to which the Group is exposed are set out below, together with details of theirpotential impact; the likelihood of occurrence (on a scale of 1 to 4, with 4 being the most likely); an
indication of whether the trend in the risk exposure is increasing, decreasing or broadly unchanged
since last year; and the actions taken to mitigate the risk.
We operate a top-down and bottom-up approach torisk management, where current and emerging risks
are identified and assessed as part of our Strategy andBudget process, and the results are reviewed in detailat Board and Audit Committee on an ongoing basis
throughout the year.

The principal risks associated with the Group’s strategy are divided into:–– Those specific to the Keywords Group and its strategy;–– Industry-related risks; and–– General business risks for any international company.

Group and strategy risks
Risk

Description and Impact

Mitigation

Unsuitable acquisition
and/or failure of
integration process

Keywords has an active acquisition agenda
to support its strategy of becoming the“go to” global provider of services to thevideo games industry. Selecting the rightacquisitions, managing them successfullyand embedding the Keywords culture
is a crucial ingredient of success. Failure
to do so could result in the businessnot achieving the expected financial
and operational benefits and adversely
impact growth, profitability and cash flow.

Since IPO, the Company has involved abroader number of senior managers in theacquisition and integration process, buildingon the considerable experience that exists
at Board and senior management level, thus
providing further bandwidth to identify,
execute and integrate acquisitions effectively.

Most of Keywords’ services are of atime-critical nature with delays or service
delivery failures potentially impacting thedevelopment or launch plans for games
or lost contracts and idle capacity.

Timely delivery and the resourcing flexibility
to enable delivery to tight deadlines has been
an integral part of the Company’s modus
operandi, and Keywords’ approach to project
management is applied across the Group.

Link to Strategy

Likelihood

Failure todeliver services
Link to Strategy

During 2020, client contracts were updated
to enable work from home where previously
services needed to be made in secure
locations.

Likelihood

Cross contamination risk
Link to Strategy

Our dedicated M&A team conduct due
diligence and we use earn-out clauses
where appropriate. Acquisition reports
are approved at Board level, and postacquisition performance is monitored.

As the Group succeeds in delivering
multiple services to the same customers,
so the risk of failure in one service line
contaminating the relationship with thecustomer across the other service lines
increases.

Adhering to Keywords’ strong standards ofdelivery and efficient communication acrossservice lines is key to managing this risk.

The Company’s client base principally
comprises global game companies whose
revenues are in the billions and hundredsof millions of dollars. Our top five customers
account for 29.1% (2019: 28.1%) of theCompany’s revenues. These companies
have exacting standards and demand ahigh quality of service. Any failure in thisregard or breakdown in the relationships
at the top level could cause considerable
damage to the business.

The potential impact is partially mitigatedthrough the Company’s highly flexible
resource base and its expansion continues
to reduce its exposure to any single large
client, with no single customer accounting
for more than 7.5% (2019: 6.2%) of revenues.

Likelihood

Client concentration risk
Link to Strategy

Likelihood

TrendStrategic report

Links to Strategic Pillars:
Building
our platform

50/51

Trend since last year:

Selective acquisitions
and integration

Organic growthand cross selling

No change

Increase

Decrease

Group and strategy risks continued
Risk

Description and Impact

Mitigation

Failure to meetmarket expectations

Keywords floated on AIM in July
2013 with an expressed set ofobjectives of growing the businessorganically and by acquisition.
Should the Company lose theconfidence of investors, this willaffect its ability to raise moneyfor or place shares to pay for
acquisitions.

The Company makes every effort to communicate
regularly with investors via announcements andface-to-face contact. This effective communicationof the continued opportunities for growth in the
sector, how the Group continues to execute on
its stated strategy and successfully integrate thebusinesses it acquires, should continue to maintainthe confidence of its investors.

Keywords has grown rapidly and
it is important that global financial
controls are in place to ensuresmooth, timely and accurate
reporting of financial results to satisfy
our external reporting obligations
as well as the Board. Failure toaccurately report or forecast financial
results through error or fraud would
damage the Group’s reputation.

The Group has invested and continues to invest
in its financial reporting function and systems
to facilitate strong reporting and management
control as it grows.

Keywords employs an averageof 8,353 in 69 studios across theGroup, and people management
is key to our performance andservice delivery.

Keywords’ management structure has been
fundamental to the Group’s success, enabled byembedding a Group culture that binds the teams
together, with a common purpose and set ofstandards.

Failure to attract, retain or develop
high quality entrepreneurial
management across the businesscould impact on the attainmentof strategic objectives. The
Group is focused on these areas
with the implementation of
globally managed service lines,
management development andremuneration programmes,
incorporating long and shortterm incentives. But with an everincreasing workforce this becomes
more demanding.

We constantly work to develop and incentivise ourpeople and to support their passion to performthe best service for each project and client, withregular staff surveys undertaken too. In addition,
special emphasis is placed on workplace harmony
and the prevention of any forms of discrimination,harassment, or malpractice in the workplace,recognising that any sense of dissatisfaction
can be very disruptive.

A material failure to comply
with applicable legal and ethicalstandards could result inpenalties, costs, reputationalharm and damage to relationships
with suppliers and customers.
New standards and disclosure
requirements are evolving suchas in environmental and climatechange reporting.

The Group promotes a culture of “Doing the rightthing” in all activities. Code of Business Conduct
guidelines were refreshed during 2020 andpublished on our website, and are supported
by more detailed policies and procedures where
needed. More details are contained in the
Responsible Business section on page 37.

Link to Strategy

Likelihood

Inadequate financial
and operational controls
Link to Strategy

Likelihood

Failure to manage
human resources/talent effectively
Link to Strategy

Likelihood

Non-compliance withlegal and ethicalstandards
Link to Strategy

Likelihood

The Group maintains a good mix of equity anddebt funding which gives it the flexibility andheadroom to invest in the business. During 2020
we successfully raised new capital with the shareplacing, proving that, even during a global crisis,
Keywords is a high quality investment proposal.

The Group introduced an Internal Audit function
in 2019 and the recent new Board appointmentof a Chief Operating Officer will drive further
improvements.

This year we have established a Global Diversity& Inclusivity Council, comprised of employees who
work closely with senior leaders, to connect D&I
activities to the broader business strategy. Moredetails can be found on page 39.

TrendKeywords Studios plc / Annual Report and Accounts 2020

Principal risks and uncertainties continued

Industry-related risks
Risk

Description and Impact

Mitigation

Breaches to informationand cybersecurity

The industry requires the highest standards of
security and privacy within a company offering
services such as Keywords. Cyber attacks
and security breaches, which are happening
with increased frequency globally, may leadto piracy, disruption of customers’ marketing
plans, loss of competitive edge and could result
in compensation claims.

The Company uses various third party
and proprietary tools and technologies
for process control and productivity
purposes. Continued investment inthese tools is important to ensure theGroup’s effectiveness.

Link to Strategy

Likelihood

Keywords maintains physical anddata security and privacy policies andprocedures which are regularly audited
by its larger customers.
A dedicated Information Security
team set policies, conduct regular
penetration testing, monitor activity
and rapidly respond to any incidents
that arise. More details are containedin the Strategic report on page 40.

Technology innovationand industry disruption
Link to Strategy

Innovations in the gaming industry continue
to evolve, together with new technologies forautomated testing, machine translation andcrowdsourcing could pose a threat to theGroup in the long term.

The Company is constantly developing
technology tools to deliver its services
more effectively and participates
directly with customers in various pilot
programmes for new technologies
to keep abreast of the technology
developments. We are investing in
advances such as machine translationin Localization described in the Service
line review on page 30.

Changes in regulation on video games, suchas those seen in the Chinese market which
imposed curfews on minors, could result in
the delay or cancellation of video games by
our customers. Requirements to address
responsible gaming in the industry introducescomplexity for our clients.

In relation to the Chinese market,
Keywords has limited revenue
exposure to games destined solely for
the Chinese market. In addition, any
potential impact is partially mitigatedthrough the Company’s diverse revenue
base (no single client larger than 7.5%
(2019: 6.2%)). Responsible gaming
issues arising during game play can be
identified by our Player Support teams,
trained to handle and report safetyincidents, see page 31.

The Company receives multimedia tax credits(MMTC) in Canada and video games tax relief(VGTR) in the UK relating to qualifying costs in
those markets. These tax credit regimes aredesigned to promote growth and investmentin the relevant regions. Any reduction orcancellation of these tax credits would increase
the cost base of the business and make thebusiness less competitive.

The Group works closely with regulatorsand governments in relation to relevant
country tax credits and has been givenno indication that these tax credits will
be removed in the medium term. The
Group has a geographically diversified
operating platform and retains theability to move to other operating
centres if material changes were made.

Likelihood

Negative impactof regulation onvideo games
Link to Strategy

Likelihood

Tax credits
withdrawal risk
Link to Strategy

Likelihood

TrendStrategic report

Links to Strategic Pillars:
Building
our platform

52/53

Trend since last year:

Selective acquisitions
and integration

Organic growthand cross selling

No change

Increase

Decrease

General business risks
Risk

Description and Impact

Mitigation

Sudden businessinterruption

Keywords is a global business and needs tominimise business interruptions and be able
to continue servicing customers. This threat
could be internal such as a major failure in its
IT systems but also external such as the Groupexperienced and managed during the 2011
Tokyo earthquake and tsunami or currently
with COVID-19 (see below).

The Group’s multiple, full-service
delivery hubs provide for a good level ofcontingency and, supported by business
continuity plans, the effects of suchdisasters can be managed.

Link to Strategy

Likelihood

COVID-19: During 2020 and into 2021 theGroup’s production studios have been
impacted by the COVID-19 pandemic resulting
in most of the Group’s studios either being
temporarily closed and/or operating at
reduced capacity. Demand for the Group’s
services has remained robust throughout
the pandemic. The Group has demonstrated
strong resilience and the ability to quickly
move to working from home arrangements
in order to continue servicing our customers.

COVID-19: The Group has been able tomove c. 6,900 employees to work fromhome arrangements which allowed
production to continue across mostof the Group’s operations throughout
the pandemic. In certain Service lines,
alternative ways of working have been
introduced to allow continued service
whilst physical studios are closed (e.g.
remote Audio recording).
As studios have reopened, increased
health & safety protocols and changes
to studio layouts have been introduced
to allow for safe working whilst social
distancing measures are in place.
Further details on how the Group is
responding to the challenge faced
by COVID-19 is provided in the Chief
Executive’s review section on pages
14 to 17 and in the Service line review
on pages 26 to 31.

Global political risk
and uncertainty
Link to Strategy

Likelihood

Negative impactof currency risk
Link to Strategy

Likelihood

We operate and own assets in a large numberof geographic regions and countries, and, asa result, we are exposed to a wide range ofpolitical, 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, eventhose with stable political environments.
BrexitThe UK accounts for 15.6% of Group revenue,
with 458 employees of the Group’s 8,353 basedin the UK. The Board has assessed the risk of
Brexit on Keywords and concluded that for
now, this does not constitute a significant risk.
The Group transacts in multiple currencies,
given our customers are located globally.
Keywords is therefore exposed to short-termcurrency risks, in addition to longer-term riskthat could develop between our functional
currency (Euro) and our multiple billingcurrencies. The Group’s largest exposure isto the US Dollar followed by the Canadian
Dollar and Sterling.

The Strategic Report was approved by the Board and signed on its behalf by:

Jon Hauck
Joint Interim Chief Executive Officer
24 March 2021

The diversification and spread ofactivities geographically mitigates therisk of disruption in any one location.

The Group does not hedge its
currency risk because Keywords’
main movements in exchange related
gains or losses relate to the effect oftranslating net current assets held
in foreign currencies. We also havethe ability to offset adverse foreignexchange currency movements throughincreasing prices.

TrendKeywords Studios plc / Annual Report and Accounts 2020

Board of Directors

Selecting the right teamRoss Graham FCA (73)Andrew Day (57)

Independent Non-Executive Director and Chairman

Group Chief Executive Officer

Skills and Experience
Ross has extensive Executive and Non-Executive
experience in the technology sector. Since retiringfrom Misys plc, he has held a number of NonExecutive directorships including Psion plc andWolfson Microelectronics plc. Ross was appointed
Director and Chairman of Keywords shortly prior
to its IPO in July 2013. Ross creates the necessary
environment for dynamic Board discussion and hashelped elevate the governance processes without
destroying the entrepreneurial essence of Keywords.

Skills and Experience
Andrew has a background in technology, manufacturing
and business services through corporate development
and general management roles within both publicly
quoted and private companies. Andrew was Chief
Executive Officer of interactive retail softwaredeveloper, Unipower Solutions, and Head of Retailand CPG for EMEA, at NYSE-listed advanced analytics
business, FICO, before joining Keywords as its Chief
Executive Officer in April 2009.

Committee

Tenure (years)

Attendance

8

13/13

Jon Hauck (47)

Committee

Tenure (years)

Attendance

12

13/13

Sonia Sedler (52)

Joint Interim CEO and Chief Financial Officer

Joint Interim CEO and Chief Operating Officer

Skills and Experience
Jon has a wealth of finance, change management
and M&A experience, having held a variety of roles
at Rentokil Initial plc since 2008. Over that time he
was responsible for leading a substantial integration
programme and CFO in North America and from 2015
he held the role of Group Financial Controller andTreasurer. Prior to Rentokil Initial, he worked in PwC’s
Assurance practice. Jon is a Fellow of the ICAEW.

Skills and Experience
Sonia has 20 years of experience in scaling up
businesses internationally, most recently as Global
Head of Managed Services and Banking Strategy at
Diebold Nixdorf. She joined Diebold Nixdorf from
Sutherland Global Services, where she acted as
Managing Director for the EMEA region and led thetransformation of customer journeys for a numberof blue chip businesses. Her previous leadershiproles with digital transformation organisations
also include HCL and Accenture.

Committee

Tenure (years)

Attendance

1.5

13/13

Committee

Tenure (years)

Attendance

0.25

-/-

Please reference our website, www.keywordsstudios.com, for a full biography on each Director.

Governance

54/55

Committee MembershipDavid Reeves (74)

Audit Committee

Disclosure Committee

Nomination Committee

Responsible Business Committee

Remuneration Committee

Chairman of Committee

Charlotta Ginman FCA (55)

Senior Independent Non-Executive Director

Independent Non-Executive Director

Skills and Experience
David has over 30 years’ global experience inmanagement roles within multinational companies.
In 1999, he was appointed Executive Vice President ofSony Computer Entertainment (Europe) and President
and CEO in 2003. He brings to Keywords a global
knowledge of growing multinational companies,
experience of the video game industry, Corporate
Governance and an understanding of working withcompanies to develop global strategies.

Skills and Experience
Charlotta is Chair of the Audit Committee and has
held senior positions in the investment banking andtechnology/telecom sectors. She is a Non-Executive
Director and Chair of the Audit Committee of two
Investment Trusts: Polar Capital Technology Trust PLC
and Pacific Asset Trust PLC. She is also a Non-Executive
Director of Unicorn AIM VCT PLC, a Venture Capital Trust,and two AIM listed companies: Boku Inc and Gamma
Communications plc. As three of Charlotta’s roles arewith investment companies that have only 4-5 meetingsa year and the other companies are all AIM listed, withless regulatory burden than a premium listing, Charlotta
has sufficient time to devote to each of her roles.

Committee

Tenure (years)

Attendance

8

13/13

Committee

Georges Fornay (64)Tenure (years)

Attendance

4

13/13

Giorgio Guastalla (52)

Independent Non-Executive Director

Non-Executive Director

Skills and Experience
Georges has over 30 years’ experience in thetechnology and video games sectors and is currently
Deputy CEO of Qobuz, the French high quality
music streaming service. Georges worked in senior
management at Sony Computer Entertainment(Europe), culminating as the Senior Vice President
from 2004 to 2011. Georges has also held significant
industry-wide roles including President of SELL,
France’s Union of Entertainment Software Publishers.

Skills and Experience
Giorgio 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. In 2002 Giorgio founded Italicatessen Limited,
a company operating in the food sector. Giorgio
was CEO of Keywords until 2009 before moving toa Non-Executive Director role. With over 20 years’
experience in the industry, Giorgio brings a wealthof understanding and knowledge to Keywords.

Committee

Tenure (years)

Attendance

4

13/13

Committee

Tenure (years)

Attendance

22

11/13

Keywords Studios plc / Annual Report and Accounts 2020

Chairman’s introduction

Principle

Ross Graham
Chairman

The Board is committed
to the highest standardsof corporate governance
Dear shareholders
As Chairman of the Board of Directors of Keywords Group plc(“Keywords”, or the “Company/Group” as the context requires),
I am pleased to introduce the Group’s corporate governancereport. 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 the highest standards ofcorporate governance. Our approach to governance is set by the
Board and our Executive Directors ensure that the approach iseffectively implemented across the business. Effective and robust
governance remains central to the ongoing success of the Group.
It is my responsibility to ensure that the Group has both soundcorporate governance and a Board which operates mindful of its
responsibility to all stakeholders but particularly the creation ofshareholder value. As Chairman of the Company, my responsibilities
include leading the Board effectively, overseeing the Group’s
corporate governance model, communicating with shareholders
and ensuring that good information flows freely between the
Executive and Non-Executive Directors in a timely manner.
Needless to say, 2020 has been a difficult year and the normalinteractions in physical locations have, for the most part, had tobe suspended with virtual meetings becoming the norm – these
are no substitute for the real thing albeit they enable a senseof business as usual. References are made in the relevant places
where we have had to make do in 2020 and we are looking
forward to restoration of face-to-face interactions as soon
as vaccination-enabled normality is resumed.
The Directors of the Company recognise the value of good corporate
governance in every part of its business. The Company has
adopted the Quoted Companies Alliance Corporate Governance
Code (QCA Code), which we believe is the most appropriate for
a company with the size and stage of development of Keywords.
The Board provides annual updates on our compliance with the
QCA Code.
The Board considers that the Group complies with the QCA Codein all applicable respects. Our QCA Code disclosures within thisAnnual Report are summarised in the table to the right. In addition,
an explanatory statement of how we have applied the QCA Codeguidance, and disclosures of any areas of non-compliance, can befound on our website at: www.keywordsstudios.com.

Disclosure
within thisreport1

Establish a strategy and business model which promote
long-term value for shareholders.

Page 20

2

Seek to understand and meet shareholder needs andexpectations.

Page 45

3

Take into account wider stakeholder and social responsibilities
and their implications for long-term success.

Page 36

4

Embed effective risk management, considering both
opportunities and threats, throughout the organisation.

Page 50

5Maintain the board as a well-functioning, balanced team ledby the chair.

Page 57

6

Ensure that between them the directors have the necessary
up-to-date experience, skills and capabilities.

Page 54

7

Evaluate board performance based on clear and relevant
objectives, seeking continuous improvement.

Page 788

Promote a corporate culture that is based on ethical values
and behaviours.

Page 32

9

Maintain governance structures and processes that are fit
for purpose and support good decision-making by the board.

Page 57

10

Communicate how the company is governed and is performingby maintaining a dialogue with shareholders and other relevant
stakeholders.

Page 45

The Board understands that the application of the QCA Codesupports the Group’s medium to long-term success whilst
simultaneously managing risks and provides an underlying frameworkof commitment and transparent communications with stakeholders.
The main Group-wide governance documents are our Core Values
and the Code of Business Conduct, which set out the values andstandards that we expect of our employees. These documents,
together with our policies, govern how we conduct our businessand set the standards that drive performance. Compliance training
helps to enforce this. Board oversight, reviews and audits form
part of the monitoring and supervision process.
Risk processes are embedded and reviewed on an ongoing basis
across the business. The important governance developments
at Keywords over the last year are outlined below.
My ambitions for the composition of the Board are to maintain,
and where applicable, broaden the range of expertise, experienceand diversity. The Board continues to ensure that effective succession
plans are in place at both executive and non-executive level
through effective evaluations of the Board and its Committees
and one-on-one reviews.
Given current government instructions regarding COVID-19 and therestrictions on social contact, public gatherings and non-essential
travel, this year’s Annual General Meeting (AGM) will be held via
videoconference on 26 May 2021. Shareholders will be able toattend the meeting virtually using the details provided below; as inperson attendance is not expected. We recommend shareholders
attend the meeting by registering for the videoconference
using this URL: www.keywordsstudios.com/agm2021/. Should ashareholder have a question that they would like to raise at theAGM, the Board would ask that they either ask the question inadvance of the AGM by sending an email to agm@keywordsstudios.
com by the 24 of May 2021 or by attending the AGM virtually andasking the question at the meeting using the ‘Q&A’ function. The
Board of Directors strongly encourages shareholders to vote byproxy in lieu of attending in person. Additionally, the Board will lookat opportunities to meet with shareholders later in the year where
possible and only if and when it is deemed safe to do so.

Ross K Graham
Chairman
24 March 2021

Governance

56/57

Corporate governance

Strategy
A description of the Company’s strategy, business model andsupporting strategic pillars, along with key attributes of ourpositioning and growing maturity, can be found in the Strategic
report on pages 20 to 23.

Internal controls and risk management
The Board recognises the need for an effective and well-definedrisk management process and it oversees and regularly reviews
the current risk management and internal control mechanisms.
The Company’s principal risks, along with key challenges in theexecution of the Company’s strategy and controls implemented
to mitigate them, can be found in the Strategic report on
pages 50 to 53.
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. Continuous
improvement is the aim and although 2020 has evidenced
improved practices we know there are still areas where we cando better. The Board continuously monitors and upgrades its
internal control procedures and risk management mechanisms andconducts regular reviews, when it assesses both for effectiveness.
This process enables the Board to determine whether the risk
exposure has changed during the year and these disclosures areincluded in the Annual Report. In setting and implementing theCompany’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 and key risk areas in the business;–– Monthly financial reporting, for the Group and for each service line,of actual performance compared to budget and the prior year;–– Visits to key locations (not practical in 2020);–– Annual budget setting;–– Tight cash management;

The Board is supported with the oversight of its internal control
systems and risk management through the appointment of a Headof Internal Audit in August 2019. The recent limitations over travel
have hampered a more extensive roll-out of the Internal Audit
programme – progress has nonetheless been made.
Further information on the Company’s approach to risk management
and internal controls can be also found in the Audit Committee
report on pages 60 to 62.

The Board
The Board, as a whole, is responsible for the overall management of
the Group and for its strategic direction, including approval of theGroup’s strategy (including corporate and business development),
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
performance against budget and the formulation of the Group’s
risk appetite including the identification, assessment andmonitoring of Keywords’ principal risks.
Director biographies and committee memberships are set out
on pages 54 and 55. Charlotta Ginman currently has six NED roles.
Of those, three are investment companies that generally only havefour to five meetings a year, therefore Charlotta has sufficient time
to devote to her Keywords role.
The Board comprises Andrew Day CEO, Jon Hauck CFO, one nonindependent Non-Executive Director, Giorgio Guastalla, and four
independent Non-Executive Directors, Georges Fornay, Charlotta
Ginman, Ross Graham and David Reeves. David Reeves is theCompany’s Senior Independent Director (SID), and Ross Grahamis the Company’s Chairman. Since the year end we have recruited
Sonia Sedler as COO and a member of the Board. This is a crucial
appointment reflecting the growing maturity of the business.
Letters of appointment of all Directors are available for inspection
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 chaira Committee, and the Chair is expected to dedicate 60 days perannum. The Company has adopted a policy whereby all membersof the Board are subject to re-election at each AGM.

–– Annual strategy conference with top management team; and–– A defined organisational structure with appropriate delegationof authority.

Keywords Studios Board of Directors

Audit
Committee

Nomination
Committee
Chief Executive
OfficerInternal
Audit

Executive
Directors

Remuneration
Committee

Disclosure
Committee

Responsible
Business Committee

Keywords Studios plc / Annual Report and Accounts 2020

Corporate governance continued

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 theBoard’s decisions. The Non-Executive Directors have both abreadth and depth of skills and experience 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 rangeof 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 and responsibilities effectively.
By June/July 2022 Ross Graham and David Reeves will each have
served nine years on the Company’s Board and the successors
will need to be appointed to maintain the balance between the
independent and non-independent Directors. A process has
already been initiated to identify suitable successors.
The Board meets a minimum of eight times a year and a calendarof meetings and principal matters to be discussed are agreed at
the beginning of each year. In order to be efficient, the Directors
meet formally and informally both in person (limited in 2020) andby telephone. Board and Committee document authors are madeaware of proposed monthly deadlines through the calendar of
meetings assembled at the beginning of the year. Board papers arecollated by the relevant personnel (Chair, Company Secretary, CFO,
Committee Chair), compiled into a Board/Committee Pack, andcirculated at least three working days before meetings, allowing
time for full consideration and necessary clarifications before themeetings. The Board also utilises a fully-functioning Board Portal,
which ensures the provision of timely and efficient distributionof Board and Committee papers as well as an effective means ofcommunication 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.
David Reeves acts as the Senior Independent Director (SID) of theCompany, serving as a sounding board for the Chairman and acting
as an intermediary 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 withthrough the usual channels of communication.

Audit Committee
The Audit Committee is chaired by Charlotta Ginman, and its othermembers are Ross Graham, David Reeves and Georges Fornay.
The Audit Committee is responsible for assisting the Board in
fulfilling its financial and risk responsibilities. The Audit Committee
oversees the financial reporting, risk management and internal
control procedures of the Company. The Audit Committee also
advises the Board on the appointment and removal of 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 withthem their independence and objectivity. Further informationon the Audit Committee can be found in the Audit Committee
report on pages 60 to 62.

Remuneration Committee
The Remuneration Committee is chaired by David Reeves, andits other members are Charlotta Ginman and Ross Graham.
The Remuneration Committee is responsible for determining
the remuneration of the Chairman (who does not participate
in such discussions), Executive Directors and senior Executivesof Keywords. The Remuneration Committee is responsible formaking recommendations to the Board of Directors’ and senior
Executives’ remuneration. Non-Executive Directors’ remunerationand 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 theposition and their achievement of recognised 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. Further information on
the Remuneration Committee can be found in the Remuneration
Committee report on pages 63 to 77.

Nomination Committee
The Nomination Committee is chaired by Ross Graham. Charlotta
Ginman, David Reeves and Andrew Day are the other members.
Further information on the Nomination Committee, including
its role and responsibilities, can be found in the Report of theNomination Committee on page 78.

Disclosure Committee
The Disclosure Committee is responsible for assisting in thedesign, implementation and evaluation of the Company’s disclosure
controls and procedures. The Disclosure Committee is chairedby Andrew Day and its other members are Charlotta Ginman,
David Reeves, Ross Graham, Jon Hauck and Sonia Sedler.

Responsible Business Committee
In 2021, we have established the Responsible Business Committee
chaired by Georges Fornay. Giorgio Guastalla, Jon Hauck andSonia Sedler are the other members. Further information on
the Responsible Business Committee, including its role andresponsibilities, can be found in the Responsible Business
report on page 36.
Terms of reference of all Keywords’ Committees are available toview on the Company’s website at: www.keywordsstudios.com.
The table overleaf sets out attendance statistics for each Director
at scheduled Board, and where relevant, Committee meetings
held during the financial year.
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
the Board 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 on governance and AIM
regulations. ONE Advisory Limited, Keywords’ Company Secretary,
provide updates on governance issues, and the Company’s
Nominated Adviser (Nomad), Numis Securities, provides annual
Board AIM Rules refresher training as well as the initial training
as part of a new Director’s on-boarding.

Governance

58/59

Meetings and attendance
Board
(13)

Audit
Committee(5)

Remuneration
Committee(7)Nomination
Committee(2)Disclosure
Committee(4)

Ross Graham

13

5

7

2

4

Andrew Day

13

–

–

2

4

Jon Hauck

13

–

–

–

4

David Reeves

13

5

7

2

2

Charlotta Ginman

13

5

7

2

2

Georges Fornay

13

5

–

–

–

Giorgio Guastalla

11

–

–

–

–

Director

Figures in brackets represent the scheduled meetings held in the year.

The Board reviews annually the appropriateness and opportunity
for continuing professional development, whether formal orinformal.

Advisors
The Board has regular contact with its advisors to ensure that
it is aware of changes in corporate governance procedures andrequirements and that the Group is, at all times, compliant withapplicable rules and regulations. The Company has Director andOfficers’ liability insurance cover in place throughout the year and
it is intended for the policy to continue for the year ending 31
December 2021 and subsequent years. Additionally, the Company
provides an indemnity in respect of all the Company’s Directors
or other officers of the Company against all costs, charges, losses,
expenses and liabilities incurred by them in the execution anddischarge of their duties. The Company’s Nomad supports theBoard’s development, specifically providing guidance on corporate
governance and other regulatory matters, as required.
ONE Advisory Limited is Keywords’ Corporate Company Secretary.
ONE Advisory Limited is responsible for ensuring that Board
procedures are followed and that the Company complies withall applicable rules, regulations and obligations governing its
operation, as well as helping the Chairman to maintain excellent
standards of corporate governance. ONE Advisory Limited also
provides Board support through assistance with shareholder
meetings and Market Abuse Regulation (MAR) compliance.
The Company has also enlisted the support of Ellason LLP, whoprovides advice in relation to remuneration. Additional information
can be found in the Remuneration report on pages 63 to 77.
All Directors may receive independent professional advice at
Keywords’ expense, if necessary, for the performance of their duties.

Board and Committees performance evaluations
Details of the Company’s Performance Evaluations for the year canbe found in the Report of the Nomination Committee on page 78.

CultureThe Board recognises that its decisions regarding strategy andrisk may impact the corporate culture of the Company as a whole.
The Board is also aware that the tone and culture set by the Board
can have an important influence on the Company as a whole andin the way that employees behave. The corporate governancearrangements that the Board has adopted are designed to ensurethat the Company delivers long term value to its shareholders
while being cognisant of the interests of other stakeholders.
Shareholders are encouraged to express their views andexpectations for the Company in open dialogue with the Board.
A large part of the Company’s activities are centred upon an
open and respectful dialogue with employees, customers andother stakeholders. Therefore, the importance of sound ethicalvalues and behaviours is crucial to the ability of the Company tosuccessfully 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
positive and constructive challenge. The Board recognises thatsustaining this culture will be a crucial element of the long-term
success of the business.
Further details can be found in the Our people, our culture(pages 32 to 35) and the Responsible Business report (pages 36
to 45) sections of the Strategic report.

Keywords Studios plc / Annual Report and Accounts 2020

Audit Committee report

The Committee updated the non-audit services policy in line withthe revised Ethical Standards and does not at this time recommend
any change to the current practices employed in the external audit
process in response to these reviews, but will continue to monitor
developments as they unfold.

Charlotta Ginman
Chair of the Audit Committee

Introduction from the Chair
I am pleased to present, as Chair of the Audit Committee,
the report for the year ended 31 December 2020. This reportdetails the work of the Committee over the past year, fulfilling
our responsibilities to provide effective governance over theGroup’s financial activities.
Composition and attendance in 2020
The Committee members, apart from myself, continue to be Ross
Graham, David Reeves and Georges Fornay. The Audit Committee,
as a whole, has competence relevant to the video games industry,both Ross Graham and I are Chartered Accountants and I alsochair the Audit Committee for other public companies. Moreinformation about the Committee members can be found on pages
54 and 55. The Committee met five times during the financial yearwith all members in attendance. The majority of the meetings
have been completed remotely by the use of technology, suchas videoconferencing and board portal software. I am pleased
to confirm that this has worked well, with Committee members
able to operate as effectively as before.
Committee role and responsibilities
The Committee has written terms of reference, which are available
to view on the Company’s website www.keywordsstudios.com. The
terms of reference clearly define the Committee’s responsibilities
and duties and were reviewed by the Board during 2020 and
updated accordingly. In addition to the Terms of Reference, theCommittee has developed an annual agenda which correspondswith the meeting schedule, to ensure all key responsibilities arecompleted and managed.

Significant issues considered by the
Audit Committee during the year
Audit Regulation
In the year since my last report to you, the UK audit sector has
been subject to a number of reviews, such as those conductedby the Competition and Markets Authority into the Statutory Audit
Market and the Kingman Review of the FRC which have resulted
in a number of recommendations for the Department of Business,
Enterprise, Industry and Skills to consider. The Audit Committee
has considered the recommendations and how they may affect
the Company should they be implemented. These reviews
have also coincided with the FRC’s own consultation proposing
important changes to the UK’s Ethical and Auditing Standards
which led to the publication of revised Standards effective from
15 March 2020. In addition to this, the Committee also reviews
the outcomes of the FRC’s annual Audit Quality Reviews anddiscusses the findings with our Auditor.

COVID-19 and Going Concern
As a result of the COVID-19 pandemic and the associatedeconomic uncertainty, the Financial Reporting Panel (FRC) has
asked companies and boards to pay particularly attention to
the potential impact of the pandemic on a business’s financial
reporting. In particular, on any areas of judgement that are
impacted by the potential uncertainly from the COVID-19 pandemic
and specifically in the context of going concern disclosures.
The Audit Committee reviewed the Going Concern assessment
including management prepared stress testing to the Group’s
cash flow projections to evaluate the Group’s ability to withstanda prolonged period of studio closures as a result of the COVID-19
pandemic, and the economic impact on the industry as a whole.
Whilst the Group has performed very resiliently through the
COVID-19 crisis we have assessed the main potential risks as
bad debt risk, recognition of COVID-19 subsidies claimed andgoodwill impairment which were discussed and monitored by
the Audit Committee during the year. Further details are provided
in note 1 of the financial statements.
Internal Audit
The Head of Internal Audit reports into the Audit Committee Chairwith a dotted reporting line into the Group CFO. The activitiesof the Internal Audit function are governed by an Internal Audit
Charter. During 2020 the Internal Audit plan was revised totake into account the impact of COVID-19. The Audit Committee
received updates on the results of Internal Audit work including:–– post acquisition reviews and completion of integration plans;–– implementation and communication of Group policies including
the relaunch of the Code of Business Conduct;–– sales process mapping to identify key controls within selected
Service lines; and–– improvements in the risk management framework.
In December 2020, the Audit Committee approved the Internal
Audit plan for 2021, which will focus on:–– review of key processes in financial reporting and talentmanagement;–– review of financial reporting systems;–– review of the integration of a selection of acquisitions; and–– review of key finance controls at significant studios.
This plan aims to address some of the internal and financial risks
and uncertainties identified on pages 50 to 53 such as:–– acquisition and integration risk – how new entities are integrated
into the Keywords business;–– adequacy of and compliance with financial and operating
controls to ensure smooth, timely and accurate reporting; and–– failure to manage human resources/talent effectively.

GovernanceInternal control and risk assurance framework
The Audit Committee has continued to review and challenge theupgrades that have taken place during the year to the Company’s
internal control and risk assurance framework to ensure that
following its rapid expansion, the Company operates withina fit for purpose framework.
Last year’s exercise of management confirmation by both theheads of operations and finance per region to the CFO of key
policies implemented and financial controls expected to be inplace and operational in all of the businesses across the Grouphas become an annual exercise and going forward will be adapted
to the audit themes each year.
The Committee is pleased to see continued progress made in the
global financial systems roll-out which will eventually allow a fully
integrated reporting system to operate seamlessly across theGroup. During 2020 the focus has been on key locations in Europe
and Asia, and the majority of studios (representing 87% revenue
as at December 2020 from 72% as at December 2019) are now
migrated to the new system. To complement the system roll out,
a project has been initiated to implement a consolidation, reportingand planning tool to replace the current manual consolidation
process. This is expected to be in place by H1 2021.
The work on our Group cash pooling platform continues,
providing us with better control and visibility of Group cash andthe optimisation of cash management. During 2020 the focus has
been on Europe and acquisitions are on-boarded when internal
prerequisites are met.
The industry requires the highest standards of security within
a company offering services such as Keywords. During 2020 theCommittee received regular cybersecurity updates from the IT
function to review both the physical and data security policies
and procedures.
During the year the Audit Committee has continued its regularreview of the Company’s principal risks on behalf of the Board,
ensuring these are top of mind and relevant, and mitigationplans are in place where possible. For 2020 the risk assessment
framework was further improved both by deepening the analysis
and the individual risk scoring of each risk as well as ensuring the
top down Board risk overview is complemented by a bottom up
senior leadership team review. Further details of the principal
risks and uncertainties faced by Keywords are identified on
pages 50 to 53.
Key accounting issues
During the year and as part of the year end procedures, theCommittee considered the following key financial and internal
control matters in relation to the Group’s financial statements
and disclosures with input from both management and theexternal Auditor:

60/61

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 forshareholders to assess the Group’s financial position, performance,business model and strategy. In doing so the Committee has given
consideration to:–– The way the Strategic report (including the Chairman’s statement
and reports of the CEO and CFO) presents the Group andits business, financial and business model and the metrics
management uses to measure performance;–– Whether suitable accounting policies have been adopted andhave challenged the robustness of significant management
judgements and estimates reflected in the financial results;–– The comprehensive control framework around the productionof the Annual Report, including the verification processes inplace to deal with the factual content;–– The extensive levels of review that are undertaken in the
production process, by both management and advisors; and–– The Group’s internal control environment.
The Group uses certain APMs to present its results. These are
non-GAAP measures but are designed to provide the users of thefinancial statements with a better understanding of the underlying
trading performance of the business. An explanation of the APMs
and a reconciliation to the nearest statutory equivalent measure
is provided on pages 136 to 143.
As a result of the work performed, the Committee has concluded
that the Annual Report for the year ended 31 December 2020,
taken as a whole, is fair, balanced and understandable andprovides 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.
Group policies
The individual Group policies are reviewed and monitored
regularly by the Audit Committee, and during 2020 Keywords
relaunched the Code of Business Conduct. The Code documents
the responsibilities to staff, business partners, shareholders andthe wider community and the standards expected in return. It istranslated into 12 languages and published on the Group website(www.keywordsstudios.com), more details of which are provided in
the Responsible Business section on page 37. The following Group
policies are reviewed each year:–– Protected disclosures (whistleblowing) policy–– Grievance policy–– Business travel policy–– Anti-Bribery and Corruption–– Revenue recognition–– Non-audit services policy–– Functional reference currency–– Employment of former auditors policy–– Business combinations–– Anti-tax evasion policy–– The valuation of goodwill and intangible assets–– Delegation of Authority–– Financial instruments

Whistleblowing
During the year, the Audit Committee reviewed and reapproved
the whistleblowing policy and accompanying process the Grouphas rolled out globally. The policy allows employees wherever
they are, to raise any concerns they may have about possible
financial or other irregularities confidentially. During 2020, nowhistleblowing disclosures were reported (2019: three, whichwere fully investigated and satisfactorily resolved).

–– Alternative performance measures and KPIs–– Segmental reporting–– Taxation–– Going concern
For further detail on these, see notes 2 and 3 of the financial
statements.

Keywords Studios plc / Annual Report and Accounts 2020

Audit Committee report continued

External Audit
Audit services
The Auditor is appointed by the shareholders to provide an opinion
on financial statements prepared by the Directors. BDO, theCompany’s current Auditor, was first appointed on 29 May 2013.
The BDO lead partner will rotate in 2021, and it is intended that theaudit will go to tender in 2022, in advance of the 10 year guideline,
to comply with best practice corporate governance and auditor
independence.
The scope of the current annual audit was agreed in advancewith the Committee with a focus on areas of audit risk and theappropriate 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 auditor attends all meetings of the Audit Committee andreported to the Audit Committee on the results of the audit workand highlighted any issue which the audit work had discovered,or the Committee had previously identified as significant ormaterial in the context of the financial statements.
There were no adverse matters brought to the Audit Committee’s
attention in respect of the 2020 audit, which were material orsignificant or which should be brought to shareholders’ attention.
Effectiveness
The Audit Committee monitored and evaluated the effectivenessof the Auditor under the current terms of appointment basedon an assessment of the Auditor’s performance, qualification,knowledge, expertise and resources and in light of current
COVID-19 restrictions. The Auditor’s effectiveness was also
considered along with other factors such as audit planning andinterpretations of accounting standards and separate discussions
with Management (without the Auditor present) and with the
Auditor (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 fulfil its duties effectively.

Independence and non-audit fees
A non-audit services policy was established in 2018, and updated
during 2020, in line with the FRC ethical standards. Any non-audit
services are required to be pre-approved by the Audit Committee.
During the year BDO provided non-audit services to the Companyof €13,000 (2019: €12,000).
In order to fulfil the Committee’s responsibility regarding
independence of the Auditor, the Committee reviewed the seniorstaffing of the audit, the Auditor’s arrangements concerning any
conflicts of interest, the extent of any non-audit services, thefact that no per assurance letters former external auditors havebeen employed in the business, and the Auditor’s independence
statement. The Committee was satisfied that the Auditor remains
independent.

Charlotta Ginman, FCA
Chair of the Audit Committee
24 March 2021

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Directors’ remuneration report

Dear fellow shareholders

David Reeves
Chair of theRemuneration Committee

In order to improve the clarity of our policies and outcomes,
I have included a summary of Keywords’ main action points
in 2020 and 2021:–– No change to the strategic positioning of Executive Director
remuneration: salary (targeted at market lower quartile) plus
pension (where appropriate) plus modest bonus (capped at
maximum 30% of salary), with emphasis on LTIP awards (vestingon Keywords’ relative TSR performance).
–– CEO, CFO, and all NEDs took 20% salary/fee cuts April to July
2020 due to COVID-19.
–– Executive Director salaries were assessed to have fallen
materially below 25th percentile versus peers; addressed in
2021 by a cash salary increase and the introduction of salaryshares vesting in 1/3 annual tranches. Salary shares do not
qualify for bonus, pension, or other basic salary-related rights.
–– Major shareholders and proxy agencies briefed on salarystructure changes.
–– New COO joined 18 January 2021 on cash salary of £295k
plus £10k salary shares; also awarded 25,000 LTIP sharesas compensation for incentives lapsing from previous
employment.
–– The Remuneration Committee has recommended, in agreementwith the CEO and CFO, that bonuses earned for CEO and CFO
will not be paid.
–– Bonuses for 2021 for CEO and CFO to be based on clear
Financial targets and Non-Financial objectives.
–– LTIP awards granted in 2020 at £16.00, with vesting based on
TSR vs FTSE Small Cap index.
–– LTIP grant value not affected by the 2021 salary increases orsalary shares, and windfall gains avoided, as based on a fixed
number of shares. Remuneration Committee to take into
account the share price at grant when determining the numberof shares to be granted.
–– LTIPs in 2021 to vest on three-year relative TSR performancevs the FTSE 250 (excl. investment trusts) with vesting of 25%
at median TSR and full vesting at 20% outperformance.
–– New global employee share-save scheme starts 2021.
–– NED fees subject to 3% increase in 2021 following freeze in 2020
plus introduction of fees for membership of new Responsible
Business Committee.
–– CEO’s single figure of total remuneration disclosed 2013–2020.
–– CEO pay ratio disclosed. Reduction in ratio 2019 to 2020. CEO
took 20% reduction in salary April to July during COVID-19.
–– NED base fees and Committee membership fees disclosed.
–– Directors’ interest in shares disclosed.
–– LTIPs exercised by Executive Directors disclosed.
–– US$500,000 hardship fund set up to support any COVID-19
affected employees.

As Chairman of the Remuneration Committee, it is my pleasure
to present the Directors’ remuneration report for the period
ended 31 December 2020. Keywords Studios plc has chosen to
apply the Corporate Governance Code for Small and Mid-size
Quoted Companies published by the Quoted Companies Alliance.
The Company is currently AIM quoted and the Board recognises
the importance of shareholder transparency and standards ofgovernance. 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.
We have operated a simple Executive Director remuneration
structure made up of base salary and pension, a bonus plan anda Long Term Incentive Plan (“LTIP”) which provides a clear link
between pay and our key strategic priorities. Keywords offers apension consistent with that required by local legal requirements,
and the pensions offered to Executive Directors is the same as thatoffered to the local workforce.
During 2020, the Remuneration Committee reviewed the pay
structure for the Executive Directors, with a particular focus
on how the package compares with companies of similar scaleand complexity to Keywords, taking into account Keywords’
very significant growth in recent years, particularly with regard
to the Company valuation which has increased from c.£150m
to c.£2bn over the last five years. Notwithstanding the factthat the Committee fundamentally avoids using regular pay
benchmarking to adjust pay levels, we concluded that somechanges are required to help ensure fixed pay is consistent with
our philosophy of targeting salaries at the lower quartile of relevant
comparator groups, as it was evident from our benchmarking(against three broad groups relevant to our talent market andinvestor base, including the FTSE 250, UK Tech Companies andGlobal Gaming Companies) that the Keywords CEO and CFO
salaries were materially (35% on average) lower than this target
position. Having considered the alternative approaches, theCommittee approved a one-off increase to Executive Directors’
cash salaries above the level which would normally be applied,
and the introduction of “salary shares”, an annual award of shares
vesting in one-third annual tranches over three years subject tocontinued employment.
Our philosophy is based around using pay to reinforce long-term
decision making and alignment with shareholders, so we prefer toreset the fixed pay through this combination of cash increases andsalary shares which inherently support our philosophy. Together,
these changes bring our current Executive Directors’ salaries in linewith our target position (market lower quartile). The Committee
recognises that shareholders generally prefer to avoid significant
fixed pay increases, and hence we have adopted this new structure
to be more aligned with shareholders in that half of the current gap
to market is closed with shares, rather than cash (also consistent
with the powerful alignment of pay with performance). The numberof salary shares granted annually going forward will vary based on
the share price at grant, and the assessed gap to market, but it is
the current intention that the value of these shares in future years
will be broadly the same as it is in 2021. The starting point will be todeliver overall salaries (cash plus salary shares) at up to the market
lower quartile level for the CEO and CFO.

Keywords Studios plc / Annual Report and Accounts 2020

Directors’ remuneration report continued

The Committee will use its discretion to determine whether thisdefault is appropriate, taking into account the circumstances of
the individual executive and how the market data has moved. For
example, if there is a material increase in the market data then theCommittee will consider the appropriate timing for any increases
to the salary share component, based on the circumstances atthat time. The Committee recognises the general market backdrop
around the impact of COVID-19 on companies’ share prices and theneed to avoid windfall gains if prices have declined significantly, andwill take necessary action as required, including a reduction in thenumber of salary shares at grant if deemed appropriate. The salaryshare component will not impact the value of cash bonuses or LTIP
award levels as LTIP awards are based broadly on fixed number ofshares, and are therefore not affected by salary increases.
On behalf of the Committee, I discussed these revisions withseveral of Keywords’ largest shareholders and relevant proxyagencies, and took into account the feedback from thesemeetings in finalising the details of the changes. We thank thoseshareholders who contributed to this exercise for their time andfeedback which was useful in shaping the design. No other changes
are intended in relation to the implementation of our Executive
Director remuneration policy in 2021.
The Group delivered a very strong performance in 2020 withgood growth in revenue and profit and strong cash generation
despite the disruption caused by the COVID-19 pandemic. The
performance reflects both the resilience of the Group and theteam’s hard work and agility to continue to deliver to our customers
whilst dealing with the unprecedented COVID-19 production
constraints with the majority of our ~9,000 people transitioning
to remote working at some time during the year. Following thewell-supported €110m placing in May the Group also delivered
eight high quality acquisitions in Australia, the US, the UK and Italy,
further strengthening the breadth and depth of the Group’s valueadded services offered to our global video games clients.
Where we were not able to provide work for all our colleagues,
particularly in the earlier months of the pandemic, we were
fortunate in being able to help them access enhanced
unemployment benefits in various territories in which we operate
while they were temporarily laid off, and we are pleased to havebeen able to bring the vast majority of our people back to work.
In addition, we established our own US$500,000 hardship fundto support those experiencing more acute financial issues as aresult of COVID-19. During 2020, our studios implemented various

local initiatives to help colleagues feel connected, engaged andappreciated while working from home. Gift packs, online social
events, access to wellbeing counselling and the provision of
helplines are just some of these many initiatives.
Bonuses for the 2020 financial year were based on a scorecardof financial (70% weighting) and non-financial measures (30%).
The outcome as determined by the Committee would havegenerated bonuses of c.26% of salary for the CEO and CFO.
However, given the general backdrop of the global pandemic, theCommittee, in agreement with the CEO and CFO, considered it
appropriate that no bonuses be paid to the Executive Directors.
We are delighted Sonia Sedler has joined Keywords as Chief
Operating Officer in January 2021. Sonia’s pay is consistent withthe remuneration policy for Executive Directors, with a cash
salary of £295,000, salary shares of £10k, pension of 5% of salary,a maximum bonus of 30% of salary, and an annual LTIP awardof 35,000 shares. Sonia was also granted a one-off LTIP award
of 25,000 shares in compensation for the incentive awards she
has forfeited on joining Keywords, the value of which is basedon the expected outcomes of the awards forfeited.
The Committee reviewed the LTIP TSR comparison approach inearly 2021 and approved a change to the TSR benchmark for future
cycles to take into account the current size of Keywords (whichat the start of 2021 is equivalent to FTSE 180) to be the FTSE 250(excluding investment trusts).
Equity ownership across all organisational levels is important to
the philosophy of pay at Keywords, and during 2021, Keywords will
be introducing a new all-employee share-save scheme which will
enable staff at all levels to purchase Keywords shares, in common
with the arrangements used at many of our peers. The Committee
will continue in 2021 to keep the remuneration policy and its
execution under review to ensure it delivers pay which is consistent
with the shareholder experience and our strategic objectives,
particularly in light of the continuing COVID-19 pandemic.
It is my hope that you find this a clear and comprehensive reportand I look forward to hearing the views of our investors on theinformation presented here over the coming months.

Dr David Reeves
Chair of the Remuneration Committee
24 March 2021

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Executive Directors’ remuneration at a glance
The following is a summary of the key components of Keywords’ Executive Director remuneration, including changes and implementationin the financial year.
Element

Remuneration in 2020

Remuneration in 2021

SalaryWith effect from 1 March 2020:

With effect from 1 March 2021:

CEO: £244,800 (2% increase)

CEO: £325,000 (33% increase)

CFO: £204,000 (2% increase)

CFO: £245,000 (20% increase)
COO: £295,000

Salary sharesn/aShares will be granted with the following values:
CEO: £75,000
CFO: £40,000
COO: £10,000

PensionAnnual bonus

CEO: 3% of salary

No change for the CEO and CFO

CFO: 5% of salary

COO: 5% of salary

Maximum opportunity of 30% of salary based on:

No change to opportunity or measures

Financial targets including turnover and profitability(weighted 70%)
Discretionary individual performance (weighted 30%)
The Committee determined 2020 performance
warranted bonuses of c.26% of salary, but discretion
was applied to reduce the bonuses to zero after
taking into account the general backdrop of thepandemic
LTIP

50,000 and 25,000 LTIPs granted to the CEO
and CFO respectively.
Three-year performance period
Vesting based on Total Shareholder Return
performance against FTSE Small Cap Index

The Remuneration Committee intends to makeLTIP awards in line with previous years to the CEO
and CFO respectively, with an award of 35,000
shares intended also for the COO who will also be
granted a one-off LTIP award over 25,000 sharesin compensation for the incentive awards she has
forfeited on joining Keywords

Keywords Studios plc / Annual Report and Accounts 2020

Directors’ remuneration report continued
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 the
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 they are properly incentivised and motivated to performin the best interests 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 transparentalignment of incentive arrangements with the agreed Company
strategy over the long term.
–– Ensure the total remuneration packages awarded to Executive
Directors and SMT members, comprising both performancerelated and non-performance-related remuneration, aredesigned to motivate the individual, align interests withshareholders and comply with corporate governance bestpractices.
The Board and the Remuneration Committee believe the foregoing
objectives are best achieved by a remuneration structure whereby:–– Basic pay is targeted at the lower quartile of relevant comparatorgroups albeit sufficient for the challenges and pressures of
the role; from 2021, awards of Salary Shares used to ensure
target position is achieved in a structure which is aligned withshareholders;–– Annual bonuses are set at modest levels with a maximum of 30%
of salary on the premise that an annual bonus should not unduly
encourage short-term behaviour or commitment of a senior
Executive (this does not apply to sales executives); andRemuneration 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 and complexity of the Group, the Executive’s experience,
responsibility and position, as well as market practice. For this,the Remuneration Committee takes into account the performanceof the individual, comparisons with peer companies and, whereconsidered appropriate, reports from external independent
consultants.
The remuneration package comprises the following elements:–– Fixed remuneration (basic salary and, from 2021, salary shares,
and for some Executives, pension)–– Performance-based remuneration (annual bonus capped at 30%
of salary and LTIP)
During 2020, the Remuneration Committee reviewed the pay
structure for the Executive Directors, with a particular focus
on how the package compares with companies of similar scaleand complexity to Keywords, taking into account Keywords’ verysignificant growth in recent years. The Committee concluded
that some changes were required to help ensure fixed pay isconsistent with our philosophy of targeting salaries at the lower
quartile of relevant comparator groups, as it was evident fromour benchmarking that the Keywords CEO and CFO salaries weresignificantly lower than this target position. Having considered thealternative approaches, the Committee approved a change to theprevious policy, to include the introduction of ‘salary shares’, anannual award of shares vesting in one-third annual tranches overthree years subject to continued employment. No other changes
have been made to the Policy.

–– Long-term incentives are the means by which executives canearn significant rewards if, but only if, shareholders likewise haveobtained a good return.

Purpose and link to Strategy

Operation

Opportunity

Performance measures

Base salaries are reviewed by
the Committee annually, andbenchmarked periodically againstcomparable roles at comparable
companies of similar size andcomplexity.

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

n/aBase salary
To attract and retain talented
Executives to deliver theGroup’s strategy, by ensuringbase salaries and the implied
total package are competitivein relevant talent markets,
while not overpaying.

Paid in cash.

Base salary increases for the
Executives take into account personal
performance, Group performance,
significant changes in responsibilities,
the average increase awarded to thewider workforce, and competitivemarket practice.

GovernancePurpose and link to Strategy

Operation

Opportunity

Performance measures

Annual awards of shares, thevesting of which is subject tocontinued employment overthree years, with annual one-third
vesting.

Set at a level which helps ensure
an Executive’s fixed pay is aroundthe lower quartile of relevantbenchmarks.

n/a

66/67

Salary shares
To supplement the basesalary to ensure fixed pay iscompetitive in relevant talentmarkets, and is structured toalign with shareholders.

Salary shares are not bonusable
nor pensionable (both of which are
based only on base salary).
Malus provisions apply in certain
circumstances.

It is anticipated the value in any
one financial year will not exceed£120,000 on an individual basis,but this level may be exceeded
based on the Committee’s regularreview of market pay levels.

Pension and benefits
To provide an appropriate
structure and level ofpost-retirement 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 ina pension scheme facilitatedby the Company.
The Company also provides accessto Group benefit schemes whereappropriate by region which may
include moderate contribution
towards private health insurance,
death in service cover and otherGroup based benefits.

The Company provides access topension schemes based on local legal
requirements or where expected by
local labour markets. Contributions
meet the minimum requirements
or are of a modest level.

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

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

Executives are eligible toparticipate in an annual bonus
scheme.

Up to a maximum of 30% of salary.

The Remuneration Committee
reviews targets and the weightingof performance measures eachyear. The Company also offers
commission arrangements for
Executives in sales roles.

The portion of bonus earned in any
one year depends on the Remuneration
Committee’s assessment of eachindividual’s performance and the overall
performance of the Company against
predetermined turnover and profitability
targets for the year.
Performance targets are typicallyweighted 70% on the Company’s financial
performance and 30% on personal
performance (however, if the Company’s
financial performance is considered to
be unsatisfactory, the element basedon personal performance is likely to beforegone or reduced).

LTIP
To incentivise delivery against
total shareholder returntargets and align the interestsof Executives and shareholders
in growing the value of theGroup over the long term.

LTIP grants are made annuallyin the form of conditional awardsof shares or nil-cost share options
which vest subject to performance
conditions measured over three
years. Once vested, awards may
be exercised for a period of up
to seven years from grant.
Malus provisions apply in certain
circumstances.

LTIP awards are granted as a numberof shares, which is subject to periodic
review by the Committee to ensure
the level is appropriate (as evidenced
through the reduction in the LTIP
shares granted to the CEO overthe last several cycles).

Vesting of the LTIP is subject tocontinued employment during theperformance period and the achievementof performance conditions based on
Total Shareholder Return (“TSR”).
The Committee has the power of
discretion to adjust the outcome in
exceptional circumstances so that it
is a fair reflection of the underlying
performance of the Group. Further
details, including the performance targets
attached to the LTIP in respect of eachyear will be disclosed in the relevant
implementation report on remuneration(subject to these being considered not
to be commercially sensitive).

Keywords Studios plc / Annual Report and Accounts 2020

Directors’ remuneration report continued
Section 1: Directors’ remuneration policy continued
Executive Director shareholding guidelines
Executive Directors are encouraged to build and maintain over time a shareholding in the Company with a value equivalent to at least
100% of their base salary to be met through the retention of vested LTIP shares. Details of the Executive Directors’ current shareholdings
are provided on page 75.

Malus policy
Malus may be applied to LTIP awards in cases of fraud, dishonesty or deceit, gross misconduct or material financial misstatementin the audited financial results of the Group. The Remuneration Committee may determine that an award is cancelled in 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 implementationof our remuneration policy is consistent with underlying Company performance and is equitable to all parties.

Process for determining the remuneration policy
The Remuneration Committee periodically, typically annually, reviews the remuneration policy to ensure it reflects, if appropriate, trends
in remuneration design and governance developments, taking into account market practices, best practices, and revisions to the pay
guidelines published by major investors and their representative bodies. In approving any changes to the policy, the Committee considers
the impact on individual Executive Directors and as well as the consistency of pay structures and levels throughout the organisation.
The Committee uses specific pay benchmarking studies, when relevant, to ensure Keywords’ remuneration levels are positioned at theappropriate level. If major changes are considered for Executive Director remuneration, the Committee will undertake a consultationof major shareholders and relevant proxy agencies to ensure their feedback is taken into account before implementation.

Executive Director service contracts
In accordance with general market practice, each of the Executive Directors has a rolling service contract. The following table shows thedate of the service contract for each Executive Director in post for 2021:
Executive Director

Position

Date of appointment

Date of service agreement

Notice period

Andrew Day

CEO

1 Apr 200921 Jun 2013

6 months

Jon Hauck

CFO

14 Oct 201930 Sep 2019

6 months

Sonia Sedler

COO

18 Jan 2021

7 Dec 2020

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 the common objective of driving financial performance and the achievement of strategic objectives and contributing to the longterm success of the Group. Remuneration supports our ability to attract, motivate and retain skilled and dedicated individuals whose
contribution continues to be a key factor in the Group’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 toensure gender equality as it relates to employee compensation.
The Group complies with equal pay directives across all its locations, conducting periodic assessments and analysis. The Board is satisfied
that there is equal pay given location and roles. In particular, the Board of Directors discussed the results of the latest UK Gender Pay Gap
analysis in December 2020 and noted the reduction in gaps from 2019 for mean and median hourly pay.
Employee Stock Option Plans (LTIPs and Stock Options) are used for senior permanent members of staff, in which approximately 10%of the workforce participate (3.3% in the LTIP and 6.7% in Stock Options). The focus of the ESOPs is to retain talent and create long-term
shareholder value consistent with fulfilment of the Company’s long-term strategic goals.
During 2020, the Committee reviewed how share ownership could be further enhanced throughout the organisation. In 2021, Keywords
will be introducing a new all-employee share-save plan which will enable staff at all levels to purchase Keywords shares, in common withthe arrangements used at many of our peers.

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 took into consideration major shareholder views, and those of their representative agencies, during the year
and will further do so at the AGM, in shaping the Company’s implementation of its Remuneration Policy as well as the changes to the Policy.

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Leaver treatment
Fair treatment will be extended to departing Executives. The Group’s policy on termination payments is to consider the circumstances
on a case-by-case basis, taking into account the relevant contractual terms in the Executive’s service contract and the circumstancesof 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 noticeat date of payment and forfeit all unvested LTIP shares including Salary 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 and Salary shares in the 12 months post-termination when,or to the extent that, the performance criteria for vesting, are met.
On a change of control, unvested LTIP awards and Salary shares may be exercised at the time of the event subject to the rules of Keywords
Studios plc Long Term Incentive Plan.

Pay for performance scenario analysis
The charts below provide an estimate of the potential future reward opportunities for the Executive Directors, and the potential split
between the different elements of remuneration under four different performance scenarios: “Minimum”, “On-target”, “Maximum”
and “Maximum +50% (share price appreciation)”. 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 the “Maximum” scenarios.
We have also included a bar showing the value of the actual package paid for 2020, the fixed pay of which is below the “Minimum” scenario
due to the four-month salary reduction during 2020.
Potential reward opportunities are based on the Remuneration Policy, applied to 2021 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 except in the “Maximum +50%” scenario.

CEO

CFO

Actual 2020

Actual 2020

Minimum

Minimum

On-target

2021
scenarios

Maximum
Maximum + 50%

On-target

2021
scenarios

Maximum
Maximum + 50%

0

500

1,000

1,500

2,000

(£’000)

0

250

500

750

1,000

1,250

(£’000)COO
Actual 2020
Minimum
On-target

2021
scenarios

Maximum

Fixed pay
Bonus
LTIP

Maximum + 50%
0

500

1,000

1,500

(£’000)Assumptions:“Actual 2020”: Fixed remuneration (2020 base salary, pension), bonus paid for 2020 and LTIP vesting in 2020.
“Minimum”: Fixed remuneration only (2021 base salary, salary shares, pension).
“On-target”: Fixed remuneration as above, plus target bonus (18% of base salary) and threshold LTIP vesting (10% of maximum) at the three-month average share priceto 31 December 2020 (of £23.05).
“Maximum”: Fixed remuneration, plus maximum bonus (30% of salary) and full vesting of proposed 2021 LTIP awards at three-month average share price to 31 December 2020.
“Maximum+50%”: As per Maximum scenario but with an assumption of share price growth of 50% over the three-year performance period for LTIP awards.

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.

Keywords Studios plc / Annual Report and Accounts 2020

Directors’ remuneration report continued
Section 2: Implementation of the remuneration policy in 2020
The Remuneration Committee
The members of the Remuneration Committee in 2020 were David Reeves (Committee Chairman), Charlotta Ginman and Ross Graham.
The members are all Independent Non-Executive Directors. In the year ended 31 December 2020, the Remuneration Committee met oneight occasions. All three members of the Committee attended the Committee meetings throughout the year together with, on occasion,
the CEO, the CFO, the COO and 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 and relevant proxy agencies in2020 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
the Group, 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 supported the Remuneration Committee on remuneration related matters in 2020. Following the lead advisor leaving to join
Ellason LLP, the Committee appointed Ellason LLP to provide independent advice to the Committee from 1 January 2021. Mercer Kepler
and Ellason are members of the Remuneration Consultants’ Group and, as such, voluntarily operate under the Code of Conduct in relation
to Executive remuneration consulting in the UK. Mercer Kepler and Ellason LLP do not have any other association with the Company andare considered independent by the Committee.

Directors’ emoluments
The remuneration for the Directors of the Company for the period year ended 31 December 2020 is detailed in the table below:

2020 Fixed pay £’000
Director

Salary/fee

Benefits

2020 Variable pay £’000

Pension

Total

228

7

235

Jon Hauck

190

10

200

200

Ross Graham

84

84

84

David Reeves

63

63

63

Giorgio Guastalla

45

45

45

Georges Fornay

48

48

48

Charlotta Ginman

59

59

59

TOTAL

717

17

Bonus

734

1.

The Directors took a 20% reduction in salary for April to July related to the COVID-19 crisis.

2.

Based on share price vesting date of 15 May 2020 @£14.95 for 52,000 LTIPs.

LTIP

2020 Total remuneration

Andrew Day

1

2

Total

£’000

777

777

1,012

777

777

1,511

The remuneration for the Directors of the Company for the period year ended 31 December 2019 is detailed in the table below:
2019 Fixed pay £’000
Director

Salary/fee

Benefits

2019 Variable pay £’000

Pension

Total

Andrew Day

234

2

236

Jon Hauck

50

3

53

Bonus

2019 Total remuneration

LTIP

Total

£’000

962

962

1,198

6

59

6

Ross Graham

92

92

92

David Reeves

68

68

68

Giorgio Guastalla

48

48

48

Georges Fornay

51

51

51

Charlotta Ginman

63

63

63

TOTAL

606

5

611

6

962

968

1,579

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70/71

Annual bonus outcome for 2020
During 2020, 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 70%) against financial targets for the year in line with our financial KPIs (see pages 24 and 25) and on the
Remuneration Committee’s discretionary assessment of each individual’s performance (weighted 30%).
The financial targets were based on Revenue (weighted 25% of total bonus), PBT (25%), Gross Contribution (15%), and Adjusted Cash
Conversion (5%). Performance against the targets set for the year was assessed by the Committee, and the Committee determined thatfull-vesting of the financial component was warranted. The targets are not disclosed due to commercial sensitivities.
The discretionary element takes into account the Director’s performance for the year against non-financial targets, under various
categories.
–– The CEO’s 2020 non-financial objectives included four categories, each weighted 7.5% of the overall bonus opportunity, including
Organisational Development, Global Operating Systems, Client & Investor Relations, and M&A. The Committee assessed the CEO’s
achievement at 18% out of 30%.
–– The CFO’s 2020 non-financial objectives included five categories, each weighted 6% of the overall bonus opportunity, including
Management Accounts, ESG (Environment, Society, Governance), Internal Control Framework, Treasury Management Function, andFinancial Systems. The Committee assessed the CFO’s achievement at 15% out of 30%.
The outcome against the targets set for the year would have generated bonuses of 26.4% and 25.5% of salary for the CEO and CFO
respectively. However, given the general backdrop of the global pandemic, the Committee, in agreement with the CEO and CFO, considered
it appropriate that no bonuses be paid to the Executive Directors.
Director

Bonus 2020 formulaic outcome

Outcome after application of discretion

Bonus for 2020

Andrew Day

26.4% of salary
25.5% of salary

0% of salary
0% of salary£nil

Jon Hauck£nil

Long-term incentives vesting in 2020
In May 2017, Andrew Day was granted an LTIP award over 52,000 shares, the vesting of which was based on the Company’s TSR
performance versus the Numis Smaller Companies (excluding Investment Trusts) Index over the three-year period ending on 15 May 2020.
The full vesting of the awards required Keywords TSR to outperform the Numis Smaller Companies (excluding Investment Trusts) Index
over the performance period by 45%. The Company’s TSR performance over this period significantly outperformed that of the Index (by105.2%) resulting in full vesting of these awards in 2020.

Other long-term incentives outstanding during 2020
LTIP awards granted to the Executive Directors in May 2018, May 2019 and September 2019 remained outstanding during 2020.
The full vesting of the 2018 awards requires Keywords TSR to outperform the Numis Smaller Companies (excluding Investment Trusts)
Index over the three-year period by 20%. Based on performance up to 31 December 2020, these awards would fully vest.
Vesting of the 2019 awards requires Keywords TSR to outperform the FTSE Small Cap Index over a three-year period. Threshold vesting(10% of the award) will be earned for TSR in line with the Index and full vesting will be earned for exceeding the Index TSR by 20% over the
performance period. Based on performance up to 31 December 2020, these awards would fully vest (see TSR performance chart nextpage).

Long-term incentives granted during 2020
In 2020, the Executive Directors were awarded LTIPs, the vesting of which is based on the Company’s TSR performance versus the FTSE
Small Cap Index over a three-year performance period. Threshold vesting (10% of the award) will be earned for TSR in line with the Indexand full vesting will be earned for exceeding the Index TSR by 20% over the performance period.
The number of shares granted to the Executive Directors is summarised in the table below.
Director

Number of shares

Value as % of salary

Performance period

Vest dateAndrew Day

50,000325%

1 May 2020 – 30 April 2023

1 May 2023

Jon Hauck

25,000195%

1 May 2020 – 30 April 2023

1 May 2023

Keywords Studios plc / Annual Report and Accounts 2020

Directors’ remuneration report continued
Section 2: Implementation of the remuneration policy in 2020 continued
The 2020 awards were granted at a share price of £16.00 (note 17). Based on performance up to 31 December 2020, these awards would
fully vest (see chart below).

TSR performance up to 31 December 2020, in-flight LTIP awards
NSCI ex. Inv Trusts: -3.4%

2018 – 2021 LTIP

2019 – 2022 LTIP
(May grant)

FTSE Small Cap: 8%

2019 – 2022 LTIP
(Sept grant)

FTSE Small Cap: 6.6%

Keywords: 38.5%

Keywords: 91.5%

Keywords: 52.5%

FTSE Small Cap: 15.9%2020 – 2023 LTIP
-20%

0%

20%

Keywords: 57.9%

40%

60%

80%

100%

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
£2,500£2,000£1,500£1,000

£500

£0
July
2013

December
2013
Keywords Studios PLC

December
2014

December
2015

December
2016

FTSE Small Capitalisation Index

December
2017

December
2018

NSCX Including Investment Trusts Capital Gains

December
2019

December2020

Governance

72/73

2019

2020

Shareholder value created each year, £m
1,200
1,000
800
600
400
200
–

2018
2014

2015

2016

2017

-200
-400
-600

Note: Shareholder value created each year is based on the change in share price plus dividends paid over each financial year multiplied by the numberof shares outstanding at the start of each year.

The table below illustrates the CEO’s single figure of total remuneration over the same period as the charts above.
FY13

FY14

FY15

FY16

FY17

FY18

FY19

FY20

Single figure (£’000)

52

146

213

449

397

820

1,198

1,012

Annual bonus outcome (% of max)

N/A

100%

100%

100%

100%

30%

0%

0%

LTIP vesting (% of max)

N/A

N/A

N/A

100%

N/A

100%

100%

100%

SOP vesting (% of max)

N/A

N/A

100%

100%

100%

N/A

N/A

N/A

Chief Executive Officer pay ratio
The table below provides disclosure of the ratio between the CEO’s total remuneration and that of the lower quartile, median and upper
quartile of our 458 (2019: 380) UK-based employees.
Year

Methodology used

P25 (lower quartile)P50 (median)

P75 (upper quartile)

2020

Option A

33:1

25:1

18:1

2019

Option A

38:1

30:1

21:1

Year

2020
2019

P25 (lower quartile)P50 (median)

P75 (upper quartile)

CEO

Salary (£’000)

27

35

50

228

Total remuneration (£’000)

31

40

57

1012

Salary (£’000)

26

35

50

240

Total remuneration (£’000)

32

41

57

1198

Keywords Studios plc / Annual Report and Accounts 2020

Directors’ remuneration report continued
Section 2: Implementation of the remuneration policy in 2020 continued
The lower, median and upper quartile employees were determined using calculation methodology A which involved calculating the actual
full-time equivalent remuneration for all UK employees for the year ended 31 December 2020. From this analysis, three employees werethen identified as representing the 25th, 50th and 75th percentile of the UK employee population. Keywords chose this method as it is thepreferred approach of the Government and that of shareholders, and the Company had the systems in place to undertake this method.
As the drafting of this report was earlier than the final determination of bonuses for the wider population, the bonus outcomes have been
based on the financial forecasts in December 2020.
The reduction in the ratio between 2019 and 2020 is a result of Andrew Day taking a reduction in salary during April to July related to the
COVID-19 crisis, and an increasing proportion of higher paid engineering and marketing service staff among our UK employees.
The CEO pay ratio is based on comparing the CEO’s pay to that of Keywords’ UK-based workforce, a large proportion of whom areengineers, artists, and support staff. The Committee expects that the ratios will be largely driven by the CEO’s incentive pay outcomes,
which will likely lead to greater variability in his pay than that observed at lower levels who, consistent with market practices, have a greater
proportion of their pay linked to fixed components. The Committee takes into account these ratios when making decisions around the
Executive Director pay packages, and Keywords takes seriously the need to ensure competitive pay packages across the organisation.
Annual percentage change in remuneration of Directors compared to employees
The table below shows the percentage change in salary, taxable benefits and annual bonus set out in the single figure of remunerationtables paid to each Director in respect of the 2019 and 2020 financial years compared to that of the average pay of all employeesof the Group.
Salary/fees% change

Benefits% change

Annual bonus% change

Andrew Day

-2.6%

0%

N/A**

Jon Hauck*

-5.0%

0%

-100%

Ross Graham

-6.7%

N/A

N/A

David Reeves

-6.7%

N/A

N/A

Giorgio Guastalla

-6.7%

N/A

N/A

Georges Fornay

-6.7%

N/A

N/A

Charlotta Ginman

-6.7%

N/A

N/A

Average all employees

3.0%

0%

3.0%

Director

The reduction reflects the Directors taking a reduction of 20% during the first four months of the COVID-19 crisis.
*

Jon Hauck’s 2019 salary was only from his joining date and is prorated for 2019 comparison. He also took a 20% reduction from April to July 2020.

**

Andrew Day, in addition to taking the four-month salary reduction, waived his bonus for 2019.

Implementation of the remuneration policy in 2021
SalaryWith effect from 1 March 2021, base salary increases of 33% and 20% have been awarded to the CEO and CFO respectively, such that their2021 base salaries will be £325,000 and £245,000 respectively. On her appointment to the Board in January, the COO’s base salary will be£295,000.
Salary shares
In line with the changes implemented to the Remuneration Policy in 2021, the Executive Directors will be granted awards of Salary sharesat the same time as LTIP awards are granted. The number of Salary shares will be based on the share price at the time of grant, and will
be based on grant values intended to ensure total salaries (base salary plus salary shares) are consistent with our targeted remuneration
position, which will mean Salary share awards over the following amounts in 2021: CEO £75,000, CFO £40,000, COO £10,000. Awards willvest in one-third annual tranches over three years and be subject to continued employment over this period.
Pension
The Executive Directors’ pensions remain unchanged at 3% and 5% of salary for the CEO and CFO respectively. On her appointment to theBoard, the COO will receive a pension of 5% of salary.
Annual bonus
The Executive Directors will be eligible to earn an annual bonus of up to 30% of salary in line with previous years. The outcome will be
determined with reference to targets set at the start of 2021 around financial performance (revenue and profit, weighted 70%) andpersonal performance (weighted 30%).

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LTIP
The Remuneration Committee intends to make awards under the LTIP to the Executive Directors in line with previous years, with vesting
based on the Company’s three-year TSR performance versus the FTSE 250 (excluding investment trusts) index, with threshold vesting(25% of the award) for TSR in line with the Index and full vesting for exceeding the Index TSR by 20% over the performance period. The
Committee reviewed the TSR comparison approach in early 2021 and approved a change to the TSR benchmark to take into account thecurrent size of Keywords (which at the start of 2021 is equivalent to FTSE 180). The COO will receive an LTIP award of 35,000 shares.
Appointment of Chief Operating Officer
Sonia Sedler joined the Board on 18 January 2021. The remuneration package for the COO is as described above. She will also be granted
a one-off LTIP award of 25,000 shares in compensation for the incentive awards she is forfeiting on joining Keywords, the value of which
is based on the expected outcomes of the awards forfeited. This one-off award will vest according to Keywords relative TSR performance,in line with other LTIP awards granted in 2021.
Non-Executive Directors’ remuneration
Non-Executive Director fees are based on the roles and responsibilities of the Directors (see table below). The base fees have been
increased by c.3% for the Non-Executive Directors in 2021 to reflect the increased scale of the business and the consequent increased
time requirement of the Directors.

Role

Ross
Graham*Board Chairman£93,000

David
ReevesSenior Independent Director fee£5,000Non-Executive Director basic fee£49,500

Giorgio
Guastalla

Charlotta
GinmanGeorges
Fornay£49,500£49,500£49,500

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

Chairman of the Remuneration Committee£12,000

Chairman of the Responsible Business Committee£12,000

Member of:
Audit Committee£3,000£3,000

Remuneration Committee£3,000

Responsible Business Committee
Total*£3,000£93,000£69,500£52,500£64,500£64,500

Ross Graham receives no additional fees on top of his Board Chairman fee for his membership of the sub-committees.

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:
At 31 Dec 20

At 31 Dec 19

Andrew Day

3,296,573

3,296,573

Giorgio Guastalla1

3,150,662

3,150,662

Ross Graham

59,81958,440David Reeves

33,08932,400Georges Fornay

6,521

5,142

Charlotta Ginman

1,733

1,733

6,548,397

6,544,950

1

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

Keywords Studios plc / Annual Report and Accounts 2020

Directors’ remuneration report continued
Section 2: Implementation of the remuneration policy in 2020 continued
The outstanding LTIP and Option awards held by each Executive Director of the Company are as follows.

LTIP
During the year, Andrew Day exercised the LTIP awards granted to him in 2013 as they had reached the end of their exercise period (sevenyears from grant).

Number at
31 December
2019

Numbergrantedduringthe year

Numbervestingduringthe year

Numberlapsed/forfeited
during theyear

Numberexercisedduring theyear

Number at
31 December
2020

86,593–––86,593–35,000––––35,00060,000––––60,000 10 May 2019*52,000–52,000––52,000 15 May 2020*

50,000––––50,00050,000

–

–

–

–

–

50,000–––25,000––––43,936––––25,000––402,52975,00052,000–Andrew Day

Jon Hauck
Total

Current
Vesting
vesting
date expectation**

1 Jun 2018*18 May 2021

100%

50,000

3 May 2022

100%

50,000

1 May 2023

100%

25,00030 Sept 2022

100%

–

43,93630 Sept 2022

100%

–

25,000

1 May 2023

100%

86,593

390,936*

Awards have vested.

**

Vesting expectation (% of award) is based on the achievement of the TSR performance condition up to 31 December 2020.

On 3 June 2020 Andrew Day exercised 86,593 options dating from the time of the Company’s IPO in 2013, at a price of £17.70. The exercise
price of these options, granted under the LTIP, was 1p each.

Governance

76/77

The unvested LTIP awards in the table above vest according to Keywords TSR performance vs the Numis Smaller Companies (excluding
Investment Trusts) Index (for awards vesting in 2021) and vs the FTSE Small Cap Index (for awards vesting in 2022 and 2023).

Share Option Scheme

Number at
31 December
2019

Numbergrantedduring theyear

Numberlapsed/forfeited
during theyear

Numberexercisedduring theyear

Number at
31 December
2020

Vesting dates

21,167––

21,167–12 Jul 2015

Andrew Day

21,167––

21,167–12 Jul 2016

21,168––21,168–12 Jul 2017

Total

63,502––63,502–On 3 June 2020 Andrew Day exercised 63,502 options dating from the time of the Company’s IPO in 2013, at a price of £17.70. The exercise
price of these options was £1.23 each.
Executive Directors no longer receive awards under the Share Option Scheme. During the year, Andrew Day exercised all the option awards
above granted to him in 2013 as they had reached the end of their exercise period (seven years from grant).

Keywords Studios plc / Annual Report and Accounts 2020

Report of the Nomination Committee

Roles and responsibilities

Board and Committee composition

The role of the Committee is to develop and maintain a formal,
rigorous and transparent procedure for making recommendations
on appointments and reappointments to the Board. In addition, it
is responsible for reviewing the succession plans for the Executive
Directors and the Non-Executive Directors. This involves:

The Committee reviewed the size, composition and skill setof the Board during the year and concluded that there was an
appropriate mix of experience, skills and knowledge to provide
strong and effective leadership.

–– Reviewing the structure, size and composition of the Boardand making recommendations to the Board with regard to any
changes.
–– Assessing the effectiveness and performance of the Board andeach of its Committees including consideration of the balance ofskills, 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 membersof 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 and theperformance of individual Directors.
–– Reviewing annually the time input required from Non-Executive
Directors.

Diversity
The Committee reviews the Board diversity policy regularly, withthe last review in March 2020. The policy acknowledges that aneffective Board will include and make good use of differences in theskills, regional and industry experience, background, race, genderand other distinctions between Directors and emphasises that in
identifying suitable candidates for appointment to the Board, theCommittee will consider candidates on merit against objective
criteria, with due regard for the benefits of diversity on the Board.

Governance processes
The Committee meets at least twice a year and at such other times
as the Committee Chair or any member of the Committee may
request. In 2020, the Committee met twice. 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 andthe Board receive regular contributions from individuals in thewider Executive Group at meetings of the Board and Committees
throughout the year. These contributions are valuable for ourdecision making and have helped the Non-Executive Directors todevelop a clear understanding of the strength of the management
team.
Succession planning is designed to consider the planned processof transition to new leadership over time and also the potential
for unforeseen change over a shorter time frame. The Boardand the Committee keep 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 2021.

The Committee also recognises that by June/July 2022, Ross
Graham and David Reeves will have completed nine years.
An active process is in hand to find successors.

Role of the Company Secretary
The Directors have access to Company Secretarial support throughONE Advisory Limited, the appointed Company Secretary, whose
experienced qualified Company Secretaries also provide advice
on corporate governance matters.

Annual evaluation of the Board andCommittees’ performanceThis year’s annual Board and Committee evaluation exercise wasconducted on an independent basis by ONE Advisory Limited(ONE Advisory).
The areas covered included structure and skills, operating
effectiveness, operating efficiency, quality of information andongoing development. The evaluation process involved detailed
questionnaires for the Board (including feedback on the overall
contribution of each Director), review of the Chairman and a survey
regarding each of the Board’s main Committees. An independent
report upon the findings of the Board and Committee surveys was
prepared by ONE Advisory.
The evaluation process confirmed that the Board and its
Committees are working well and identified a number ofareas which had improved during the prior year including theappointment of Sonia Sedler as COO.
The Board will review the findings of the survey in the first halfof 2021 and will develop an action plan to address the areas
highlighted for attention in the coming year. These areas included:–– greater engagement with members of the Senior Management
Team (recognising that a number of intended visits to company
locations had to be cancelled in 2020 due to COVID-19);–– as the Group has expanded so the strategic options for
Keywords have become more complex; these will require greater
analysis in 2021 than heretofore; and–– succession planning in light of the expected retirements of the
Chairman and Senior Independent Director during 2022.
The Chairman will incorporate feedback on the overall contributionof each Director into individual reviews of the performance of the
Non-Executive Directors. The contribution of the Chairman will be
reviewed by the rest of the Directors in the first half of 2021.

Ross K Graham
Chair of the Nomination Committee
24 March 2021

Governance

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Directors’ report

The Directors present the Annual Report together withboth the audited consolidated financial statements andthe parent Company (Keywords Studios plc) financial
statements for the year ended 31 December 2020.
Disclaimer
The purpose of this Annual Report and financial statements are toprovide information to the members of the Company. The Annual
Report and 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 advisors do
not accept or assume responsibility to any other person to whom
this document is shown or into whose hands it may come and any
such responsibility or liability is expressly disclaimed.
The Annual Report and financial statements contain certain
forward-looking statements with respect to the operations,performance and financial condition of the Group. By their nature,these statements involve uncertainty since future events andcircumstances 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 and financial statements andthe Company undertakes no obligation to update these forwardlooking statements. Nothing in this Annual Report and financial
statements should be construed as a profit forecast.

Dividends
The results for the year are set out on page 87. As described in the
CFO’s report, the Board is not proposing a final dividend for 2020
but intends to resume dividend payments in 2021.

Directors and changes to the Board
The Direc‑tors of the Company during the year were Ross Graham,
Andrew Day, David Reeves, Giorgio Guastalla, Georges Fornay,Charlotta Ginman, and Jon Hauck. Sonia Sedler was appointed as
Chief Operating Officer and member of the Board from 18 January
2021. Details of members of the Board are set out on pages 54
and 55.

Going concern
The Directors have performed an assessment, including a review of
the Group’s budget for the 2021 financial year and its longer termplans. After making enquiries, the Directors consider it appropriate
to continue to adopt the going concern basis in preparing theconsolidated and Company financial statements. In doing so, theDirectors have considered the uncertain nature of the current
COVID-19 pandemic, but have noted:–– the strong cash flow performance of the Group through the year;–– the continued demand for the Group’s services;–– the ability to operate most of its services in a work from homemodel where studios are temporarily closed;–– the historical resilience of the broader video games industry
in times of economic downturn; and,–– the ability of the Group to flex its cost base in response
to a reduction in trading activity.

The Directors have also considered the Group’s strong liquidity
position, with net cash of €103m and committed undrawn facilities
under the RCF of €100m as at 31 December 2020. The Directors
have applied downside sensitivities to the Group’s cash flow
projections to evaluate the Group’s ability to withstand a further
prolonged period of studio closures as a result of the COVID-19
pandemic, leading to a reduction in production capability.
Under this severe case the Group would have sufficient liquidity
and remain within its banking covenants. The Directors have areasonable expectation that the Company and the Group haveadequate resources to continue to operate and meet their liabilities
as they fall due for the foreseeable future, a period considered
to be at least 12 months from the date of these interim financial
statements and therefore the going concern basis of preparation
continues to be appropriate.

Financial risk management
The Group’s approach to capital management is shown in note 24of the financial statements. The Group’s exposure and approach
to liquidity, credit, interest rate and foreign currency risk isshown in note 23 of the financial statements. Our approach torisk management generally and our principal risks can be foundin the Strategic report on pages 50 to 53.

Political donations
No political donations were made in the year, in line with our
corporate policy.

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 shareplan and details of their options over the ordinary share capital of
the Company are given in the Directors’ remuneration report on
pages 63 to 77. 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.

Keywords Studios plc / Annual Report and Accounts 2020

Directors’ report continued

Significant shareholdings

Employment policy

At 31 December 2020, the Company had been notified, in
accordance with the Disclosure Guidance and Transparency Rules,of the following interests in its ordinary share capital*:

Keywords has a range of employment policies covering such issues
as diversity, employee wellbeing and equal opportunities. The
Group continues to give full and fair consideration to applications
for employment made by disabled persons, having regard totheir particular skills and experience. Appropriate arrangements
are made for the continued employment and training, careerdevelopment and promotion of disabled persons employed by theGroup including making reasonable adjustments where required.
In the event of any colleague becoming disabled during their careerat Keywords, every effort is made by the Group to ensure theircontinued employment and engagement with the business.

Name

Shares%Franklin Templeton

5,829,171

7.87

Liontrust Asset Management

4,440,282

6.00

Octopus Investments

3,654,566

4.93

P.E.Q. Holdings Limited**

3,500,736

4.73

Andrew Day

3,296,573

4.45

T Rowe Price Global Investments

3,083,453

4.16

Capital Group

2,910,794

3.93

Aberdeen Standard Investments

2,464,855

3.33

TimesSquare Capital Management

2,290,636

3.09*

As recorded on the Company’s share register.

**Giorgio Guastalla has a 90% holding in P.E.Q. Holdings Limited.

Future developments
Important events since the financial year end are described in note
29 of the financial statements, the Chief Executive Officer’s review
on page 17, the service line review on pages 27 to 31 and the
Financial and operating overview on page 49. Future developments
are described in the Strategy section of the Strategic report on
pages 22 and 23.

Disclosures concerning emissions
The disclosures relating to emissions are set out in the Responsible
Business report on page 41.

People and organisation
Keywords is, and always has been, dependent on the quality andcommitment of its entire staff to provide and maintain the highlevels of services expected by the Group’s customers.
Keywords’ average number of employees was 8,353 during 2020.
This permanent headcount is supplemented with staff on
short-term contracts as activity changes throughout the year.

Employee involvement
The Group provides employees with information on matters ofconcern to them so that their views can be taken into accountwhen making decisions that are likely to affect their interests.
A summary of the methods we use to engage with our employees
are provided in the Our people, our culture section of the Annual
Report on pages 32 to 35, the Responsible Business report on
pages 36 to 44 and the Section 172(1) statement on pages 44
and 45. Approximately 10% of the workforce participate in the
Employee Share Option Plan (see page 68). We continue to review
options to expand participation in employee share schemes.

Corporate responsibility
Keywords seeks to be a socially responsible Group which has
a positive impact on the communities in which it operates.
By the nature of the business, we employ a diverse workforce,with many nationalities. No discrimination is tolerated and we
endeavour to give all employees the opportunity to develop theircapabilities. We provide an excellent working environment, thelatest technology and appropriate training. Further details areprovided in the Responsible Business report on pages 36 to 45.

Website publication
The Directors are responsible for ensuring the Annual Reportand financial statements are made available on a website. Financial
statements are published on the Group’s website in accordancewith legislation in the United Kingdom governing the preparationand dissemination of financial statements, which may vary fromlegislation in other jurisdictions. The maintenance and integrityof the Group’s website is the responsibility of the Directors.
The Directors’ responsibility also extends to the ongoing integrityof the financial statements contained therein.
By order of the Board

Jon Hauck
Chief Financial Officer
24 March 2021

Governance

80/81

Statement of Directors’ responsibilities

The Directors are responsible for preparing theAnnual Report and financial statements.
Company law requires the Directors to prepare financial
statements for each financial year. Under that law the Directors
have prepared the Group and Company financial statements inaccordance with international accounting standards in conformity
with the requirements of the Companies Act 2006.
Under company law the Directors must not approve the financial
statements unless they are satisfied that they give a true and fairview of the state of affairs of the Company and the Group and of
the profit or loss of the Group for that period. The Directors arealso required to prepare financial statements in accordance withthe rules of the London Stock Exchange for companies trading
securities on the Alternative Investment Market.

Website publication
The Directors are responsible for ensuring the Annual Report andfinancial statements are made available on a website. Financial
statements are published on the Group’s website in accordancewith legislation in the United Kingdom governing the preparationand dissemination of financial statements, which may vary fromlegislation in other jurisdictions. The maintenance and integrityof the Group’s website is the responsibility of the Directors. The
Directors’ responsibility also extends to the ongoing integrity of thefinancial statements contained therein.
By order of the Board

In preparing these financial statements the Directors are required to:–– select suitable accounting policies and then apply themconsistently;–– make judgements and estimates that are reasonable andprudent;–– state whether international accounting standards in conformity
with the requirements of the Companies Act 2006 have been
followed, subject to any material departures disclosed andexplained in the Group and Company financial statements
respectively; and–– prepare the financial statements on a going concern basis,
unless it is inappropriate to presume that the Company willcontinue in business.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Company’stransactions and disclose 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 assets of the Company
and the Group and hence for taking reasonable steps for theprevention and detection of fraud and other irregularities.
The Directors as at the date of this report, whose names andfunctions are listed in the Board of Directors section on pages 54
and 55, 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 havetaken 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 accordancewith the provisions of section 418 of the Companies Act 2006.

Jon Hauck
Chief Financial Officer
24 March 2021

Keywords Studios plc / Annual Report and Accounts 2020

Independent auditor’s report to 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 2020 which comprise the Group and Parent Company Statements of Financial Position, the Group Statement ofComprehensive Income, the Group and Parent Company Statements of Cash Flows, the Group and Parent Company Statements of
Changes in Equity, and the notes 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
Accounting Standards in conformity with the requirements of the Companies Act 2006 and, as regards the parent company financial
statements, as applied in 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 2020and of the group’s profit for the year then ended;–– the group financial statements have been properly prepared in accordance with International Accounting Standards in conformity withthe requirements of the Companies Act 2006;–– the parent company financial statements have been properly prepared in accordance with International Accounting Standards inconformity with the requirements of the Companies Act 2006 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
under those 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 statementsin the UK, including the FRCs Ethical Standard as applied to listed entities, and we have fulfilled our other ethical responsibilities inaccordance with these requirements. 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
In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of accounting in the preparationof the financial statements is appropriate.
Our evaluation of the Directors assessment of the Company’s ability to continue to adopt the going concern basis of accounting in the
preparation of the financial statements included:–– We considered as part of our risk assessment the nature of the company, its business model and related risks including, where relevant,the impact of the Covid-19 pandemic, the requirements of the applicable financial reporting framework and the system of internal
control.
–– We have reviewed the Directors’ assessment of the Group and Company’s ability to continue as a going concern, challenging theunderlying data and key assumptions used to make the assessment, and stress tested the directors’ plans for future actions in relation
to their going concern assessment.
–– We have reviewed the historical accuracy of budgeting and forecasts made by the Group and Company as an indicator as to theirreliability,–– We have reviewed the performance of the business in the year, including its cash flow performance, liquidity position, and financing
facilities, up to and including the date of signing the audit opinion.
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 theefforts of the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and informing 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 2020 of €9.2m (2019: €7.0m). 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.

Financial Statements

82/83

Audit Response
We have performed audit procedures to understand the application of the revenue recognition accounting policies and to assess whether
for each material revenue stream, that revenue has been recognised correctly in accordance with the Group Revenue Recognition policy.
We have completed a substantive based audit approach across all full scope locations and completed specific audit procedures on asample basis on less significant components of the group.
Our audit work included, but was not restricted to, reviewing 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.

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), €212m (2019:€176m) of goodwill has been recognised cumulatively to date. The fair value of certain identifiable assets acquired and liabilities assumed
in a business combination is different from their carrying amounts in the acquired statements of financial position which can give rise tofair value adjustments as part of the purchase price allocations of these business combinations. Accordingly, the cumulative acquisitions
are material and significant 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 for the 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 the current year business combinations in note 27 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 fortreatment of 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 assessmentsof the fair value of the assets and liabilities acquired, and in particular, the methodology applied in the valuation of intangible assets andgoodwill.
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 Board and havereviewed 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 evaluate whether 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 thesubstance of the transactions and considered whether they have been appropriately accounted for in line with the group accounting
policy and the requirements of IFRS 3.

Keywords Studios plc / Annual Report and Accounts 2020

Independent auditor’s report to the members of Keywords Studios plc continued

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 €212m (2019: €176m), and intangibles carrying
value of €28.8m (2019: €21.1m).
The valuation of goodwill and other intangible assets is significant to our audit due to the fact that the impairment test calculations are
based on several key assumptions which are estimated by management, and are by nature judgemental. Key assumptions include theexpected 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 the current year business combinations
in note 27 to the financial statements. Detailed disclosures are made in note 11 relating to goodwill and intangible assets.
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 thefinancial statements.

4 Functional currency
Key Audit Matter
The functional currency of the group is considered a key audit matter due to the fact that there is significant judgment in this area.
There are multiple currencies influencing the group, which have been assessed in detail by the Directors. The Directors have concluded
that the functional currency remains Euro. This is deemed to be a key judgement area.
Related Disclosures
Please refer to the accounting policy in note 2, and discussion in relation to judgements in note 3.
Audit Response
We have reviewed the Directors assessment of the currencies which are influencing the group, in accordance with the requirementsof IAS 21. We have agreed the underlying data used in this analysis to the source information, to ensure that the assessment is being
completed on an accurate basis. We have assessed the key indicators and the currencies influencing each. In addition, we have reviewed
the disclosures in relation to the judgements applied in this area, as set out in note 3.
We have concluded that while there are mixed indicators in relation to the functional currency of the group, the conclusion reached by
the Directors that Euro remains the functional currency, and the disclosures in this area, are reasonable.

Financial Statements

84/85

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 €3m, which represents 9% 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 performanceused by shareholders and other users and therefore consider this as an appropriate basis for materiality. Our materiality is higher than thelevel we set for the year ended 31 December 2019 (€1.75m), due to the increased profits of the group.
We assessed the parent company’s materiality using a % of net assets as the most appropriate benchmark as the parent company does
not trade. However we capped this at the equivalent of group materiality being the lower of the thresholds in both the current and prioryear.
Whilst materiality for the financial statements as a whole was €3m, each component of the group was audited to a lower level of materiality
within a range from €2.1m to €1.8m. 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.
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 €150,000 (2019: €87,500). 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
the risks of material misstatement identified at group level. The Group has operations in 21 countries, and 84 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, Sperasoft Studios LLC, Cord Worldwide Limited, Studio Gobo Limited, Electric Square Limited, Keywords
Studios QC-Games Inc (formerly Babel Games Services Inc), Keywords France, Keywords China, Sperasoft Inc, D3T and Keywords Studios
Italia S.R.L (formerly Binari Sonori S.R.L & Sillabit S.R.L).
In addition, specific audit procedures have been completed in relation to certain material balances and transaction streams in VMC
Embedded Services, Keywords Canada Holdings Inc (formerly Volt Canada Inc), Keywords Studios QC-Tech Inc (formerly Alchemic DreamInc), and Keywords Studios Japan.
The above entities represent 73% of group revenues. Analytical review procedures have been performed on the remaining non-significant
components in the group.
The Group auditor, BDO Dublin, has audited Keywords Studios plc, Keywords International Limited, Cord Worldwide Limited, Studio Gobo
Limited, Electric Square Limited and D3T. Their involvement in the work performed by other component auditors varies by location andinvolves, at a minimum, direction of the audit procedures to be completed, and review of the reports received in relation to the resultsof the audit work undertaken by component audit teams.
In the current year, as a result of current travel restrictions, the Senior Statutory auditor or senior members of the Group audit team havecompleted their oversight and review work of other locations remotely.
At the parent company level we have also tested the consolidation process and carried out additional procedures to confirm ourconclusion that there were no significant risks of material misstatement of the aggregated financial information of the remaining
components not subject to full scope or specific procedures.
Other information
The directors are responsible for the other information. The other information comprises the information included in the annual report,other than the financial statements and our auditor’s report thereon. Our opinion on the financial statements does not cover the otherinformation 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 other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise
appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required todetermine 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.

Keywords Studios plc / Annual Report and Accounts 2020

Independent auditor’s report to the members of Keywords Studios plc continued

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 areprepared is 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 theaudit, 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
from branches 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 81 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 a going 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
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.
Our audit procedures were designed to respond to risks of material misstatement in the financial statements, recognising that the risk of
not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve
deliberate concealment by, for example, forgery, misrepresentations or through collusion. There are inherent limitations in the audit
procedures performed and the further removed non-compliance with laws and regulations is from the events and transactions reflectedin the financial statements, the less likely we are to become aware of it.
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.
Use of our report
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 inan auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone
other than the company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed.

John O’Callaghan (Senior Statutory Auditor)
For and on behalf of BDO, Statutory Auditor
Dublin 2, Ireland
24 March 2021

Financial Statements

86/87

Consolidated statement of comprehensive income

Years ended 31 December
Note

2020
€’000

2019
€’000

Revenue from contracts with customers

4373,538

326,463

Cost of sales

5(231,766)(206,234)

141,772

120,229

Gross profit
Investment income

5

1,437

-

Share option expense

17(15,350)(9,775)

Costs of acquisition and integration

5(2,650)(4,348)

Amortisation and impairment of intangible assets

11(8,808)(7,318)COVID-19 government subsidies claimed

28

9,231

-

(17,577)(21,441)

Total of items excluded from adjusted profit measures
Other administration expenses(84,513)(77,246)

Administrative expenses(102,090)(98,687)

41,11921,542

Operating profit
Financing income

6

76

74

Financing cost

6

(8,701)(4,245)32,494

17,371(11,027)(7,462)

21,467

9,909

(421)

(167)

Profit before taxation
Taxation

7

ProfitOther comprehensive income:Items that will not be reclassified subsequently to profit or loss
Actuarial gain/(loss) on defined benefit plans

19

Items that may be reclassified subsequently to profit or loss
Exchange gain/(loss) in net investment in foreign operations(4,909)

1,267

Exchange gain/(loss) on translation of foreign operations(10,843)

5,960

5,294

16,96921,552

10,022

(85)

(113)

21,4679,909

Owners of the parent

5,379

17,082

Non-controlling interest

(85)

(113)

5,294

16,969€ cent€ centTotal comprehensive income/(expense)
Profit/(loss) for the period attributable to:
Owners of the parent
Non-controlling interest

Total comprehensive income/(expense) attributable to:Earnings per share

Basic earnings per ordinary share

8

30.32

15.23

Diluted earnings per ordinary share

8

28.71

14.73

The notes from page 94 onwards form an integral part of these consolidated financial statements.
On behalf of the Board

Jon Hauck
Director		
24 March 2021

Sonia Sedler
Director

Keywords Studios plc / Annual Report and Accounts 2020

Consolidated statement of financial position

At 31 December

Note

2020
€’000

2019
Restated(note 16)€’000

Property, plant and equipment

13

26,41922,163Right of use assets

12

27,807

21,469Intangible assets

11

240,810

196,769

Deferred tax assets

22

Non-current assets

14,6495,060

309,685

245,461

Current assets
Trade receivables

14

47,832

43,243

Other receivables

15

38,66535,413

Cash and cash equivalents

103,070

41,827

189,567

120,483

Current liabilities
Trade payables

8,170

8,027

Other payables

18

62,95838,712Loans and borrowings

20

73

80

12,5682,732

Corporation tax liabilities
Lease liabilities

21

Net current assets/(liabilities)

7,361

7,741

91,13057,292

98,437

63,191

Non-current liabilities
Other payables

18

1,994

285

Employee defined benefit plans

19

2,693

2,049

Loans and borrowings

20

122

59,671

Deferred tax liabilities

22

10,575

9,523

Lease liabilities

21

Net assets

21,503

14,16636,887

85,694

371,235

222,958

EquityShare capital

16

879

780

Share capital – to be issued

16

13,047

5,310

Share premium

16

22,951

20,718Merger reserve16

250,276

132,712(9,988)5,764

Foreign exchange reserve
Shares held in Employee Benefit Trust ("EBT")(1,997)(1,997)

Share option reserve

31,79916,449Retained earnings
Non-controlling interest
Total equity

64,31843,187371,285

222,923(50)

35371,235

222,958

The notes from page 94 onwards form an integral part of these consolidated financial statements. The financial statements were approved
and authorised for issue by the Board on 24 March 2021.
On behalf of the Board

Jon Hauck
Director		
24 March 2021

Sonia Sedler
DirectorFinancial Statements 88/89
Consolidated statement of changes in equity

Share
capital
€’000

Share
capital– to beissued€’000

Retainedearnings
€’000

Total
attributableto owners ofparent€’000

Noncontrollinginterest
€’000

Total
equity€’000

At 01 January 2019

763

6,674

34,529192,375–

192,375

Reclassification of
Share premium within
Reserves (note 16)
At 01 January 2019(restated)

–

–

–

–

–

–

(1,463)(1,997)

6,674

34,529192,375–

192,375

–

–

–

–

10,022

10,022

(113)

9,909

–

–

7,227

–

–

(167)

7,060

–

7,060

–

–

–

7,227

–

–

9,855

17,082(113)

16,969

–

–

–

–

–

–

9,775

–

9,775

–

9,775

Share options
exercised

7

–

754

–

–

–

–

–

761

–

761

Dividends

–

–

–

–

–

–

–

(1,197)(1,197)–(1,197)

Acquisition related
issuance of shares

10(10,338)–

14,455

–

–

–

–

4,127

–

4,127

Net assets on
acquisition ofAppsectest

–

–

–

–

–

–

–

–

–

148

148

Contributions by
and contributions to
the owners

17(10,338)754

14,455

–

–

9,775

(1,197)

13,466

148

13,614

At 31 December
2019 (restated)

780

5,310

20,718132,712

5,764(1,997) 16,449

43,187

222,92335

222,958

Profit/(loss) for theperiod

–

–

–

–

–

–

–

21,552

21,552(85)

21,467

Other comprehensive
income––––(15,752)

–

–

(421)

(16,173)–(16,173)

Total comprehensive
income for theperiod––––(15,752)––

21,131

5,379

(85)

5,294

Shares issued for
cash

77

–

–

109,372

–

–

–

–

109,449–

109,449

Share option expense

–

–

–

–

–

–

15,350–15,350–15,350Share options
exercised

16

–

2,233

–

–

–

–

–

2,249

–

2,249

Acquisition related
issuance of shares

6

7,737

–

8,192

–

–

–

–

15,935–

15,935Contributions by
and contributions to
the owners

99

7,737

2,233

117,564––

15,350–142,983–

142,983

At 31 December
2020

879

13,047

22,951

250,276(9,988)(1,997) 31,799

64,318371,285(50)

371,235

Share
premium€’000

Foreign
Merger exchange
reserve
reserve
€’000
€’000

Sharesheld in
EBT
€’000

Share
optionreserve€’000

15,648102,225

35,996(1,463)(1,997)––(82,261)

82,261–763

15,64819,964

118,257

Profit/(loss) for theperiod–––Other comprehensive
income––Total comprehensive
income for theperiod–Share option expense

Contributions by
and contributions to
the owners:

Contributions by
and contributions to
the owners:

Keywords Studios plc / Annual Report and Accounts 2020

Consolidated statement of cash flows

Years ended 31 December
Note

2020
€’000

2019
€’000

21,467

9,909

Cash flows from operating activities
Profit after tax
Income and expenses not affecting operating cash flows
Depreciation – property, plant and equipment

13

8,983

7,295

Depreciation – right of use assets

12

8,402

7,849

Amortisation and impairment of intangible assets

11

8,808

7,318

Taxation

7

11,027

7,462

Share option expense

1715,3509,775

Fair value adjustments to contingent consideration

5

(66)

493

Fair value adjustments to right of use assets

12

434

–

Disposal of property, plant and equipment

13

–

200

Unwinding of discounted liabilities – deferred consideration

6

132

330

Unwinding of discounted liabilities – lease liabilities

6

843

694

Interest receivable

6

(76)

(74)

Fair value adjustments to employee defined benefit plans

19

354

504

Interest expense

6

1,071

934

1,874

(577)

57,13642,203(4,255)(4,370)555(5,913)

Decrease/(increase) in other receivables(3,902)(2,162)(Decrease)/increase in accruals, trade and other payables

9,878

6,402

2,276

(6,043)

Taxation paid

(4,459)(13,288)

Net cash generated by/(used in) operating activities

76,42032,781

Unrealised foreign exchange (gain)/loss
Changes in operating assets and liabilities
Decrease/(increase) in trade receivables
Decrease/(increase) in MMTC and VGTR receivable

Cash flows from investing activities
Current year acquisition of subsidiaries net of cash acquired

27(37,447)(13,051)

Settlement of deferred liabilities on acquisitions

18(2,489)(14,711)

Acquisition of property, plant and equipment

13(13,908)(13,145)

Investment in intangible assets

11

(259)

(391)

Interest received
Net cash generated by/(used in) investing activities

76

74(54,027)(41,224)

Cash flows from financing activities
Repayment of loans

20(64,030)(7,973)

Drawdown of loans

20

4,500

27,000

Payments of principal on lease liabilities(8,170)(7,355)

6

(843)

(694)

–

(1,197)

16

111,698

761

(879)

(1,436)

Net cash generated by/(used in) financing activities

42,276

9,106

Increase/(decrease) in cash and cash equivalents

64,669663

Interest paid on principal of lease liabilities
Dividends paid
Shares issued for cash*
Interest paid

Exchange gain/(loss) on cash and cash equivalents(3,426)

1,293

Cash and cash equivalents at beginning of the period

41,82739,871

Cash and cash equivalents at end of the period

103,070

41,827*

Please note Shares issued for cash includes net proceeds of €109.5m related to the share placing in May 2020 (see note 16), being gross proceeds of €111.7m (£100m )less transaction costs of €2.2m (£2m).

Financial Statements

90/91

Company statement of financial position

At 31 December

Note

2020
€’000

2019
Restated(note 16)€’000

Property, plant and equipment

13

317

357

Investment in subsidiaries

25

30,67030,670

Other receivables

15

258,536

208,352

Right of use assets

12

389

619

Non-current assets

Deferred tax assets

379–

290,291

239,998

Current assets
Other receivables

15

Cash and cash equivalents

5,821

16,09630,696599

36,517

16,695

61

139

Current liabilities
Trade payables
Other payables

18

9,979

11,298

Lease liabilities

21

197

204

10,237

11,641

26,280

5,054

–

5,561

Net current assets/(liabilities)
Non-current liabilities
Other payables

18

Loans and borrowings

20–

59,500

Lease liabilities

21

202

422

202

65,483

316,369

179,569780

Net Assets
EquityShare capital

16

879

Share capital – to be issued

16

13,047

5,310

Share premium

16

22,951

20,718

255,957

138,393

Merger reserve
Shares held in Employee Benefit Trust (“EBT”)(1,997)(1,997)

Share option reserve

31,79916,449Retained earnings(6,267)(84)

316,369

179,569

Total equity

16

In accordance with Companies Act 2006, the Company is availing of the exemption from presenting its individual Statement ofcomprehensive income to the Annual General Meeting and from filing it with Companies House. The amount of loss after tax dealt within the parent undertaking is €6,183k (2019: profit of €3,651k).
The notes from page 94 onwards form an integral part of these consolidated financial statements. The financial statements were approved
and authorised for issue by the Board on 24 March 2021.
On behalf of the Board

Jon Hauck
Director		
24 March 2021

Sonia Sedler
Director

Keywords Studios plc / Annual Report and Accounts 2020

Company statement of changes in equity

Share
capital
€’000

Share
capital– to beissued€’000

Sharepremium€’000

Mergerreserve€’000

Sharesheld in
EBT
€’000

Share
optionreserve€’000

Retainedearnings
€’000

Total
equity€’000

763

15,648102,225

41,677(1,997)

6,674(2,538)

162,452––(82,261)

82,261

–

–

–

–

763

15,64819,964

123,938(1,997)

6,674(2,538)

162,452

Profit for the period

–

–

–

–

–

–

3,651

3,651

Total comprehensive income for theperiod

–

–

–

–

–

–

3,651

3,651

Share option expense

–

–

–

–

–

9,775

–

9,775

Share options exercised

7

–

754

–

–

–

–

761

At 01 January 2019
Reclassification of Share premium within
Reserves (note 16)
At 01 January 2019 (restated)

Contributions by and contributions to
the owners:

Dividends

–

–

–

–

–

–

(1,197)(1,197)

Acquisition related issuance of shares

10(10,338)–

14,455

–

–

–

4,127

Contributions by and contributions to
the owners

17(10,338)754

14,455–

9,775(1,197)

13,466

At 31 December 2019 (restated)

780

5,310

20,718138,393(1,997)

16,449(84)

179,569

Profit for the period

–

–

–

–

–

–

(6,183)(6,183)

Total comprehensive income for theperiod

–

–

–

–

–

–

(6,183)(6,183)

77––

109,372–––

109,449

Share option expense

–

–

–

–

–

15,350–15,350Share options exercised

16

–

2,233

–

–

–

–

2,249

Acquisition related issuance of shares

6

7,737

–

8,192

–

–

–

15,935Contributions by and contributions to
the owners

99

7,737

2,233

117,564–

15,350–142,983

At 31 December 2020

879

13,047

22,951

255,957(1,997)31,799(6,267)

316,369

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

92/93

Company statement of cash flows

Years ended 31 December
Note

2020
€’000

2019
€’000

(6,183)

3,651

621

693

Cash flows from operating activities
Profit/(loss) after tax
Income and expenses not affecting operating cash flows
Share option expense
Interest receivable

(6)

(1)

Interest expense

946

984

Depreciation – property, plant and equipment

13

47

45

Depreciation – right of use assets

12

200

200

–

92

1,808

2,013

(Increase)/decrease in other receivables

29,329(17,200)

Increase/(decrease) in trade and other payables(6,944)

10,641

22,385(6,559)––18,010(895)(39,142)(16,368)

(7)

(13)

6

1

(39,143)(16,380)

Amounts written off financial assets
Changes in operating assets and liabilities

Taxation paid
Net cash generated by/(used in) operating activities
Cash flows from investing activities
Funding advanced to subsidiaries^
Acquisition of property, plant and equipment

13

Interest received
Net cash generated by/(used in) investing activities
Cash flows from financing activities
Repayment of loans

20(64,000)(7,500)Loan to finance acquisitions

20

4,500

27,000

Payments of principal on lease liability

(194)

(192)

Interest paid on principal of lease liability

(12)

(16)
(1,197)

Dividends paid

9–

Shares issued for cash*

16

111,698

761

(762)

(1,420)Net cash generated by/(used in) financing activities

51,23017,436

Increase/(decrease) in cash and cash equivalents

30,097

161

Cash and cash equivalents at beginning of the period

599

438

30,696599

Interest paid

Cash and cash equivalents at end of the period^*

Please note Funding advanced to subsidiaries has been re-designated to Cash flows from investing activities, as the Directors consider this to be more appropriate.
Please also note Shares issued for cash includes net proceeds of €109.5m related to the share placing in May 2020 (see note 16), being gross proceeds of€111.7m (£100m ) less transaction costs of €2.2m (£2m).

Keywords Studios plc / Annual Report and Accounts 2020

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 2020. 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 accounting standards inconformity with the requirements of the Companies Act 2006.
The financial statements have been prepared in thousands (’000) and the financial statements are presented in Euro (€) which is thefunctional currency of the Group.
Please note there has been an amendment to the previous year reserves to reclassify certain reserves within Share premium to Merger
reserve, as outlined in note 16.
Going Concern Basis of Accounting
After making enquiries, the Directors consider it appropriate to continue to adopt the going concern basis in preparing the consolidated
and company financial statements. In doing so, the Directors have considered the uncertain nature of the current COVID-19 pandemic,
but have noted:–– the strong cash flow performance of the Group through the year;–– the continued demand for the Group’s services;–– the ability to operate most of its services in a work from home model where studios are temporarily closed;–– the historical resilience of the broader video games industry in times of economic downturn; and,–– the ability of the Group to flex its cost base in response to a reduction in trading activity.
The Directors have also considered the Group’s strong liquidity position with net cash of €102.9m as at 31 December 2020, and committed
undrawn facilities of €100m under the Revolving Credit Facility (“RCF”).
The Directors have applied downside sensitivities to the Group’s cash flow projections to evaluate the Group’s ability to withstanda further prolonged period of studio closures as a result of the COVID-19 pandemic, leading to a reduction in production capability.
Under this severe case the Group would have sufficient liquidity and remain within its banking covenants. The Directors have a reasonable
expectation that the Company and the Group have adequate resources to continue to operate and meet liabilities as they fall due forthe foreseeable future, a period considered to be at least 12 months from the date of these financial statements and therefore the going
concern basis of preparation continues to be appropriate.
New Standards, Interpretations and Amendments effective 1 January 2020
A number of new amendments and interpretations to accounting standards are effective from 1 January 2020 including:–– Definition of Material – amendments to IAS 1 and IAS 8–– Definition of a Business – amendments to IFRS 3–– Revised Conceptual Framework for Financial Reporting–– Interest Rate Benchmark Reform – amendments to IFRS 9, IAS 39 and IFRS 7
These amendments and interpretations would not have resulted in the accounting applied by the Group changing and would not have had
a material effect on the Group’s financial statements.
On 28 May 2020, the IASB issued amendments to IFRS 16: COVID-19 Related Rent Concessions. These amendments introduce a practical
expedient available to lessees in accounting for rent concessions (e.g. rent holidays and deferrals of lease payments) that are a directconsequence of the COVID-19 pandemic and that satisfy certain other criteria. As the relevant topics have not had a material impact
on the Group’s financial statements, the Group has not availed of these practical expedients.
Other accounting pronouncements which have become effective from 1 January 2020 have not had a material impact on the Group.
New Standards, Interpretations and Amendments not yet effective
There are a number of standards, amendments to standards, and interpretations which have been issued by the IASB that are effective
in future accounting periods that the Group has decided not to adopt early.
The following amendments are effective for the period beginning 1 January 2022:–– Onerous Contracts – Cost of Fulfilling a Contract (Amendments to IAS 37);–– Property, Plant and Equipment: Proceeds before Intended Use (Amendments to IAS 16);–– Annual Improvements to IFRS Standards 2018-2020 (Amendments to IFRS 1, IFRS 9, IFRS 16 and IAS 41); and–– References to Conceptual Framework (Amendments to IFRS 3).
The Group does not expect any other standards issued by the IASB, but not yet effective, to have a material impact on the Group.

Financial Statements

94/95

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 thefollowing 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 those variable 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 fairvalues 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 considerationis revalued, with the expected pay-out determined separately in respect of each individual acquisition and any change recognised in theStatements 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 isno obligation on Keywords to offer a variable number of shares, the deferred consideration is classified as an equity arrangement and thevalue of the shares is fixed at the date of the acquisition. Deferred consideration may also be in the form of cash consideration payable at
a future defined date. Such consideration is recognised at fair value at the acquisition date and is split between current liabilities and noncurrent liabilities depending on when it is due.
Intangible Assets
The Group’s Intangible Assets comprise Goodwill, Customer Relationships and Other Intangible Assets.
Goodwill
Goodwill represents the excess of the cost of a business combination over the total acquisition date fair value of the identifiable assets,
liabilities and contingent liabilities acquired. The 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 fairvalue of the existing equity interest in the acquiree. Contingent consideration is included at fair value on the acquisition date and, in thecase of contingent consideration classified as a financial liability, re-measured subsequently through the profit and loss. Acquisitionrelated costs are recognised immediately as an expense in the periods in which the costs are incurred and the services are received.
Goodwill is capitalised as an intangible asset with any impairment in carrying value being charged to the consolidated statement ofcomprehensive income.
Customer Relationships
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 cash flows generated fromthe net margin of the business from the main customers taken on at acquisition. The assets are amortised on a straight-line basis (toadministration expenses) over their useful economic lives (typically five years is deemed appropriate, however, this is re-examined foreach acquisition).

Keywords Studios plc / Annual Report and Accounts 2020

Notes forming part of the consolidated and company financial statements continued

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
are recognised as assets where it is probable that the use of the asset will generate future economic benefits and where the costs of theasset can be determined reliably. Other intangible assets that are acquired by the Group are stated at cost less accumulated amortisation(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 amortised from the date they are available for use on a straight-line basis over theiruseful lives, being the estimated period over which the Group will use the assets. Residual amounts, useful lives and the amortisation
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 theintangible 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 amortisation and accumulated impairment losses. The intangible asset is amortised ona 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 higher of 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 andfair value 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
are included 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 Statements of financial position and on the Statements of cash flows, cash and cash equivalents
include cash on hand and on call deposits with financial institutions.
Foreign Currency
The Consolidated Financial Statements are presented in Euro, which is the presentation currency of the Group and the functional currencyof the Parent Company.
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. Foreign currency monetary assets andliabilities are translated at the rates ruling at the reporting date. Exchange differences arising on the retranslation 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 the rate ruling at the reporting date. Exchange differences arising on translating the opening net assets at opening rate and the resultsof 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 andaccumulated in the foreign exchange reserve on consolidation. On disposal of a foreign operation, the cumulative exchange differences
recognised in the foreign exchange 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.

Financial Statements

96/97

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 can be longer term andextend to several months (or in some cases over a year). Where there are multiple performance obligations outlined in a contract, eachperformance obligation is separately assessed, the transaction price is allocated to each obligation, and related revenues are recognised
as services or assets are transferred to the customer. Performance obligations are typically satisfied over time, as the majority of contracts
meet the criteria outlined in IFRS 15 paragraph 35 (a) and (c).
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 at 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. Suchcriteria 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 mostappropriate method to depict the underlying nature of the contracts with customers, the interactive way the service is delivered andprojects are managed with 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 this significant judgement can be involved in measuring progress towards customer acceptanceof the milestone. Significant judgement may also be involved where circumstances arise that may change the original estimates ofrevenues, 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 the outcome of a contract cannot be measured reliably, contract
revenue is recognised only to the extent that milestones 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, the expected 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
and the 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.
Revenue is derived from seven main service groupings:–– Art Creation & Marketing – Art Creation & Marketing 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-andmaterials based or milestone based, with performance obligations satisfied over time. Contracts are generally short term in duration,
however for longer term contracts the input method is used to measure progress (e.g. worked days relative to the total expected inputs).
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.
–– Game Development – Game Development 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 longer term in 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 performanceobligation, revenue is recognised using the input method to measure progress. Where progress cannot be measured reliably, revenue
is recognised on milestone acceptance.
–– Audio – Audio services relate to the audio production process for computer games and includes script translation, actor selection
and talent management through pre-production, audio direction, recording, and post-production, including native language quality
assurance of the recordings. Audio contracts may also involve music licensing or selling music soundtracks. Audio service contracts
are typically milestone based, with performance obligations satisfied over time. Audio services contracts are generally short termin duration, however for longer term contracts where progress towards complete satisfaction of the performance obligation can bemeasured reliably, revenue is recognised using the input method to measure progress. Where progress cannot be measured reliably,audio services revenue is recognised on milestone acceptance. Music licensing and music soundtracks performance obligations areassessed separately, and related revenue is recognised on licence inception and on delivery of the soundtracks, 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 in duration, however for longer term contracts the input method is used to measure progress. Revenue is recognised as therelated services are rendered.
–– Localization – 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 licensing translation software as a service. Such revenue is assessed separately. Revenue is recognised as the related
services are rendered.

Keywords Studios plc / Annual Report and Accounts 2020

Notes forming part of the consolidated and company financial statements continued

2 Significant Accounting Policies continued
Revenue from Contracts with Customers continued–– 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 shortterm in duration, however for longer term 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 andassociated services provided to producers of games to ensure that consumers have a positive user experience. Contracts are typicallytime-and-materials based and performance obligations are satisfied over time. Contracts are generally long term with the input method
used to measure progress. Revenue is recognised as the related services are rendered.
Multimedia Tax Credits/Video Game Tax Relief
The multimedia tax credits (“MMTC”) received in Canada and video games tax relief (“VGTR”) in the UK, are a tax credit related to staff
costs. Tax credits are recognised as income over the periods necessary to match the credit on a systematic basis with the costs that it isintended to compensate. Thus credits are taken as a deduction against direct costs each period, but typically paid in the following financial
year once the claims have been submitted and agreed. The nature of the grants is such that they are not dependent on taxable profits,
and are recognised (under IAS 20), at their fair value when there is a reasonable assurance that the grant will be received and all attachingconditions have been complied with.
Government Subsidies
Government subsidies are recognised at their fair value when there is a reasonable assurance that the subsidy will be received and all
attaching conditions have been complied with. Subsidies are recognised in the period the subsidy is designated to compensate.
Share-based Payments
The Company issues equity settled share-based payments to certain employees and Directors under a share options plan and a LongTerm Incentive Plan (“LTIP”).
The fair value determined at the grant date is expensed on a straight-line basis over the vesting period. Other than continuous service,
grants do not have non-market-based vesting conditions. At each reporting date the Company adjusts for unvested forfeitures and theimpact is recognised in profit or loss, with a 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 options are recharged to thesubsidiary company through an inter-company re-charge.
Share Option Plan
These are measured at fair value on the grant date using a Black-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 vesting after four years. The only vesting condition is continuous service. There is no requirement to revalue
the option at any subsequent date.
LTIP
The exercise of LTIP awards are subject to the Company’s share price (stock symbol: KWS) performance versus the designated Share Index
in terms of shareholder return over a three-year period. For the awards granted up to 2015, one-third of the share options vested if theCompany exceeded the Total Shareholder Returns (“TSR”) of the Numis Small Cap Index (excluding Investment Trusts) by 10%, two-thirds
if the TSR exceeded the Index by 20% and full vesting if the TSR exceeded the Index by 30%. This was amended for the 2016 and 2017
awards to 100% vesting if the shareholder return exceeds the Index by 45%, and a pro-rated return between 10% if the TSR matches theIndex, to 100% if the TSR exceeds the Index by 45%. The scheme was further amended in 2018 to 100% vesting if the TSR exceeds theIndex by 20%, and a pro-rated return between 10% and 100% if the TSR exceeds by between 0% and 20%. In 2019 the benchmark Index
was amended for future grants to be the FTSE Small Cap Index, with the same performance conditions as 2018.
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.
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 datein 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 statementof financial position differs from its tax base, except for differences arising on:–– 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
and it 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
and are expected to apply when the deferred tax liabilities/(assets) are settled/(recovered).

Financial Statements 98/99

Deferred tax assets and liabilities are offset when the Group has a legally enforceable right to offset current tax assets and liabilities andthe deferred 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 besettled or recovered.
Property, Plant and Equipment
Property, plant and equipment comprise computers, leasehold improvements, and office furniture and equipment, and are stated at costless accumulated depreciation. Carrying amounts are reviewed for impairment whenever events or changes in circumstances indicate that
their carrying 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
Leasehold improvements

3 – 5 years
10 years
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 of comprehensive income.
Financial Assets
The Group’s most significant financial assets comprise trade and other receivables and cash and cash equivalents in the Consolidated
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 is 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.
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 each reporting date, the Group determines whether there has been a Significant Increase in Credit Risk (SICR) since initial recognition
and whether any balances are credit impaired. This determines the amount, if any, of expected credit losses to be recognised.
Cash and Cash Equivalents
Cash and cash equivalents are held to meet the working capital requirements of the Group. They include cash in hand, deposits held atcall with banks and other short-term highly liquid investments. Where cash is on deposit with maturity dates greater than three months,
it is disclosed as short-term investments.
Accrued Income from Contracts with Customers
Accrued income from contracts with customers, arising from Revenue from Contracts with Customers, is recognised in accordance with
our Revenue Recognition policy, as discussed separately in this note. The Group applies the simplified approach to assessing expectedcredit losses in relation to such assets, as their maturities are less than 12 months. Based upon the recoverability of contract assets atyear 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
Contingent consideration is initially recognised at fair value and subsequently re-measured through the profit and loss. Trade payables,bank borrowings and other monetary liabilities are initially recognised at fair value and subsequently carried at amortised cost using theeffective interest rate method.

Keywords Studios plc / Annual Report and Accounts 2020

Notes forming part of the consolidated and company financial statements continued

2 Significant Accounting Policies continued
Leased Assets
A lease is defined as ‘a contract, or part of a contract, that conveys the right to use an asset (the underlying asset) for a period of timein exchange for consideration’.
At lease commencement date, the Group recognises a right of use asset and a lease liability on the balance sheet. The right of use asset
is measured at cost, which is made up of the initial measurement of the lease liability, any initial direct costs incurred by the Group, anestimate of any costs to dismantle and remove the asset at the end of the lease, and any lease payments made in advance of the leasecommencement date (net of any incentives received).
The Group depreciates the right of use assets on a straight-line basis from the lease commencement date to the earlier of the end of theuseful life of the right of use asset or the end of the lease term. The Group also assesses the right of use asset for impairment when such
indicators exist. At the commencement date, the Group measures the lease liability at the present value of the lease payments unpaid atthat date, discounted using the interest rate implicit in the lease if that rate is readily available or at the Group’s incremental borrowing
rate. Lease payments included in the measurement of the lease liability are made up of fixed payments (including in-substance fixed),
variable payments based on an index or rate, amounts expected to be payable under a residual value guarantee, and payments arisingfrom purchase and extension options reasonably certain to be exercised.
Subsequent to initial measurement, the liability will be reduced for payments made and increased for interest. It is remeasured to reflect
any reassessment or modification, or if there are changes to in-substance fixed payments. When the lease liability is remeasured, thecorresponding adjustment is reflected in the right of use asset, or profit and loss if the right of use asset is already reduced to zero.
The Group has elected to account for short-term leases and leases of low-value assets using the practical expedients. Instead ofrecognising a right of use asset and lease liability, the payments in relation to these are recognised as an expense in profit or loss ona straight-line basis over the lease term.
The Group has applied judgement to determine the lease term for contracts in which it is a lessee that include renewal options. The
assessment of whether the Group is reasonably certain to exercise such options impacts the lease term, which significantly affects thelease liabilities and right of use assets recognised.
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.
The Group makes certain estimates and assumptions regarding the future. Estimates and judgements are continually evaluated basedon historical experience and other factors, including expectations of future events that are believed to be reasonable under thecircumstances. In the future, actual experience may differ from these estimates and assumptions.

3 Critical Accounting Estimates and Judgements
Judgements
The judgements, apart from those involving estimations, that management have made in the process of applying the Group’s accounting
policies and that have the most significant effect on the amounts recognised in the financial statements, are outlined below.
–– Group–– 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 to revenues, regulation, competitive forces and costs, while the Secondary Indicators are primarily concerned withfinancing the business and the currency in which receipts from operating activities are usually retained. With a mix of currencies
dominating the indicators, there is no clear single currency that influences the Group, however the EUR remains marginally the mostdominant 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, thedetermination of which requires a significant degree of judgement. Acquisitions may also result in intangible benefits being brought
into the Group, some of which 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 theGame Development 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 short term contract based rather than relationship based. Therefore neither
customer contracts nor customer relationships are typically recognised on the acquisition of a Game Development business.
–– IFRS 16 Leases: The Group has determined that the Group’s incremental borrowing rate is the appropriate rate to use to discountlease liabilities. The Group has applied judgement to determine the lease term for contracts in which it is a lessee that include
renewal options. The assessment of whether the Group is reasonably certain to exercise such options impacts the lease term,
which significantly affects the lease liabilities and right of use assets recognised.
–– Significant Events and Transactions: The effects of COVID-19 have required significant judgements and estimates to be made.
These issues are considered in note 28 in the context of the impact the pandemic has had on the Group.

Financial Statements 100/101–– Company–– Expected Credit Loss Provision on Company Receivables from Subsidiaries: As outlined in note 26, the Company has significant
receivables from subsidiaries primarily related to investments in acquisitions. The Directors have taken into account both the ongoingacquisition integration program and the cash generating capacity of the Group, in concluding (in note 23) that all such loans arerecoverable and the expected credit loss provisions are adequate.
Estimates and Assumptions
The Group makes certain estimates and assumptions regarding the future. Estimates and judgements are continually evaluated basedon historical experience and other factors, including expectations of future events that are believed to be reasonable under thecircumstances. In the future, actual experience may differ from these estimates and assumptions.
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 valuationof multimedia tax credits/video game tax relief, leasing and the valuation of defined retirement benefits. The Directors consider that noreasonably 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.

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 wereno significant amounts of revenue recognised in the reporting period that were included in a contract liability balance at the beginning of
the reporting period, or from performance obligations satisfied in the previous reporting period.

Revenue by line of business

2020
€’000

2019
€’000

Art Creation & Marketing

57,32443,601

Game Development

80,017

66,290

Audio*

47,232

41,856Functional Testing

78,47968,930Localization*

45,35747,060Localization Testing

23,323

22,638Player Support

41,80636,088373,538

326,463*

The prior year comparative has been re-classified to reflect the current year presentation as the Directors consider this to be more meaningful.

Keywords Studios plc / Annual Report and Accounts 2020

Notes forming part of the consolidated and company financial statements continued

4 Revenue from Contracts with Customers and Segmental Analysis continued
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 theregion of the Group’s customers; whose locations are worldwide.
2020
€’000

2019
€’000

Ireland149,185

118,095

United States

62,89052,265

United Kingdom

56,932

41,768Canada37,564

48,112

Switzerland

17,82319,045

Japan

17,51815,501

Italy

7,960

9,395

France

6,341

7,606

India

5,171

6,355

Germany

4,973

1,920

Singapore

2,159

1,637

Spain

1,293

1,588

Mexico1,158

398

Poland

943

1,285

China

857

691

Geographical analysis of revenues

Brazil771

802

373,538

326,463

No single customer accounted for more than 10% of the Group’s revenue during the year in either year presented.
Revenue Expected to be Recognised
For Game Development, games are developed to an agreed specification and time schedule, and often have delivery schedules and/or
milestones that extend well into the future. The following are Game Development revenues expected to be recognised for contracts with aschedule of work that extends beyond one year, representing the aggregate amount of the transaction price allocated to the performanceobligations that are unsatisfied (or partially unsatisfied) as of the end of the reporting period:

Total undelivered€’000

Scheduledcompletion
within 1 year€’000

Scheduledcompletion
1-2 years€’000

At 31 December 2020

13,53812,991547

At 31 December 2019

24,64523,593

1,052

Revenue expected to be recognised

For all service lines excluding Game Development, contracts do not extend to more than one year, therefore information concerning
unsatisfied performance obligations are not disclosed, as allowed under the practical expedient exemption under IFRS 15. This practical
expedient is also availed of for Game Development contracts of less than one year in duration.
Segmental Analysis
Management considers that the Group’s activity as a single source supplier of services to the gaming industry constitutes one operating
and reporting segment, as defined under IFRS 8.
Management review the performance of the Group by reference to Group-wide profit measures and the revenues derived from sevenmain service groupings.
There is no allocation of operating expenses, profit measures, assets and liabilities to individual product groupings. Accordingly, thedisclosures above are provided on a Group-wide basis.

Financial Statements 102/103

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 Chief
Financial Officer.
2020
€’000

2019
€’000

United States

131,405

84,139

United Kingdom

57,611

52,233

Canada27,09429,772

Italy

13,48012,222

Switzerland

10,116

10,644

Ireland13,514

9,296

China

7,491

8,776

France

7,302

6,725

Geographical analysis of non-current assets from continuing businesses

Spain

5,101

5,924

Germany

5,291

5,250

Japan

5,551

3,905

Philippines

2,110

2,798

India

2,182

2,526

Mexico

1,901

2,164

Poland

1,777

1,563

Brazil

835

1,247

Russia681

925

Singapore

1,532

225

Netherlands

59

64

Taiwan3

3295,036

240,401

Geographical analysis of non-current assets from continuing businesses

295,036

240,401

Deferred tax assets

14,6495,060

Non-current assets

309,685

245,461

2020
€’000

2019
€’000

Operating expenses

238,664

213,011Multimedia tax credits/video game tax relief(15,593)(16,063)

5 Cost of Sales and Operating Profit
Cost of sales

Other direct costs

8,695

9,286

231,766

206,234

Operating profit is stated after charging/(crediting):

2020
€’000

2019
€’000

Depreciation – property, plant and equipment

8,983

7,295

Depreciation – right of use assets

8,402

7,849

Amortisation of intangible assets

8,808

7,318

Costs of acquisition and integration

2,650

4,348

553

499

Short term leases

1,747

1,616

Investment income(1,437)–

Auditor’s remuneration

Keywords Studios plc / Annual Report and Accounts 2020

Notes forming part of the consolidated and company financial statements continued

5 Cost of Sales and Operating Profit continued
2020
€’000

2019
€’000

Acquisition and integrations costs re: current year acquisitions (note 27)

307

535

Costs of acquisition and integration

Acquisition and integrations costs re: prior acquisitions

743

406

Fair value adjustments to contingent consideration (note 18)

(66)

493

Deferred consideration related to continuing employment

649

567

–

262

Acquisition team and related costs

247

550

Fair value adjustments to right of use assets (note 12)

434–

Other re-organisation and restructuring costs

336

1,535

2,650

4,348

2020
€’000

2019
€’000

Parent company and Group audit

290

285

Subsidiary companies audit

250

202

Acquisition related and other borrowing costs

Auditor’s remuneration

Audit services:

Non-audit services:
Audit related assurance services

13

12

553

499

Investment income

2020
€’000

2019
€’000

Gain on disposal of investment(1,437)–(1,437)–

The Group acquired a minor holding in Hutch Games Limited, when Keywords purchased Liquid Development studio in 2015. During
2020, Hutch Games was acquired and the Group received proceeds of USD$1.7m (€1.4m) in December, and will become entitled to receive
further consideration of up to USD$450K over the period 2022 through 2025, subject to earn out targets being met.

6 Financing Income and Cost
2020
€’000

2019
€’000

76

74

76

74

Financing income
Interest received
Financing cost
Bank charges

(552)

(629)

Interest expense(1,071)(934)

Unwinding of discounted liabilities – lease liabilities

(843)

(694)

(132)

(330)

Foreign exchange loss

Unwinding of discounted liabilities – deferred consideration(6,103)(1,658)(8,701)(4,245)

Net financing income/(cost)(8,625)(4,171)

Financial Statements 104/105

7 Taxation
2020
€’000

2019
€’000

Current income tax
Income tax on profits of parent company–(3)

Income tax on profits of subsidiaries

13,899

8,523

Deferred tax (note 22)(2,872)(1,058)11,027

7,462

2020
€’000

2019
€’000

Profit before tax

32,494

17,371

Tax charge based on the Effective tax rate*

8,071

4,519

–

491

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

Tax settlement regarding a pre-acquisition issue
Income 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(1,302)

(929)

402

(369)

3,846

4,354

Exempt and non-taxable income

258

(133)

Tax incentives(892)(1,524)(3)(1,176)

Current year tax losses where deferred tax has not been provided

477

1,064

State and other direct taxes

548

1,473

Other differences – net

(378)

(308)

Current year tax losses utilised

Total tax charge

11,027

7,462* Effective tax rate – being the statutory tax rate relative to the profit before tax in each jurisdiction

24.8%

26.0%

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 of other comprehensive income

2020
€’000

2019
€’000

Exchange gain/(loss) in net investments foreign operations(4,909)

1,267

614

–

(4,295)

1,267

(421)

(167)

–

5

(421)

(162)

(10,843)

5,960

–

–

(10,843)

5,960

Tax (expense)/benefit
Net of tax amount
Actuarial gain/(loss) on defined benefit plansTax (expense)/benefit
Net of tax amount
Exchange gain/(loss) on translation of foreign operations
Tax (expense)/benefit
Net of tax amountKeywords Studios plc / Annual Report and Accounts 2020

Notes forming part of the consolidated and company financial statements continued

8 Earnings per Share2020€ cent2019€ cent

Basic

30.32

15.23

Diluted

28.71

14.73

Earnings

€’000

€’000

21,467

9,909

Profit for the period from continuing operations
Weighted average number of equity shares

NumberNumberBasic (i)70,800,455

65,081,403

Diluting impact of Share options (ii)3,959,878

2,187,083

Diluted (i)74,760,333

67,268,486

(i)

(ii)

Includes (weighted average) shares to be issued:
NumberNumber

242,077

510,350

Contingently issuable Ordinary Shares have been excluded where the conditions governing exercisability have not been satisfied:
NumberNumber

LTIPs–

2,067,536

Share options–

1,128,000–

3,195,536

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

9 Dividends

In respect ofApprovaldate€ cent per
share

Pence STG
per share

Total
dividend€’000

Payment
date

Final

2018

Apr-19

1.21

1.08

773

Jun-19Interim2019

Sep-19

0.65

0.58

424

Oct-19

1.86

1.66

1,197

Dividends paid

Dividends paid to shareholders 2019

At 31 December 2020, Retained earnings available for distribution (being retained earnings plus share option reserve) in the Company
were €25.5m (2019: €16.4m). In addition, certain amounts within Merger reserve are considered distributable (see note 16).
In light of COVID-19 the Directors have not recommended any dividend payments for 2020, however the Directors do not foresee any
impediment in continuing to implement the dividend policy of the Group moving forward.
The Group does not recognise deferred tax on unremitted retained earnings, as in general, retained earnings (as dividends) are only
remitted where there are minimal or no tax consequences.

Financial Statements 106/107

10 Staff Costs
Group

Company

2020
€’000

2019
€’000

2020
€’000

2019
€’000

Salaries and related costs

198,064

177,156

2,626

1,658

Social welfare costs

21,623

19,340312

197

Pension costs

5,212

4,662

96

61

Total staff costs (including Directors)

Share option expense

15,3509,775

15,3509,775

240,249

210,933

18,384

11,691

2020

Group

Company

Average number of employees

2020

2019

Operations

7,768

6,778

4

–

General and administration*

585

646

22

26

8,353

7,424

26

26

Key management compensation

2020
€’000

2019
€’000

Salaries and related costs

1,188

1,384

Social welfare costs

366

140

*

2019

In 2020 certain support functions (approximately 80 staff) that are managed by Operations were re-designated to Operations.

Pension costs
Share option expense

45

35

1,604

943

3,203

2,502

The key management compensation includes compensation to seven Directors of Keywords Studios PLC during the year (2019: eight), andalso includes additional executives of the Group.

Keywords Studios plc / Annual Report and Accounts 2020

Notes forming part of the consolidated and company financial statements continued

11 Intangible Assets

Goodwill€’000

Customer
relationships€’000Intellectual
property/
Development
costs
€’000

At 1 January 2019

154,20236,713

1,521

436

192,872

Recognition on acquisition of subsidiaries

16,950

–

1,615

–

18,565

–

–

391

–

391

Music licences
€’000

Total
€’000

Cost

AdditionsExchange rate movement

4,487

907

–

18

5,412

At 31 December 2019

175,639

37,6203,527

454

217,240

47,112

17,673––64,785

Recognition on acquisition of subsidiaries
Additions

–

–

259

–

259

Exchange rate movement(10,587)(2,870)13–(13,444)

At 31 December 2020

212,164

52,4233,799

454

268,840

At 1 January 2019–12,671–

115

12,786

Amortisation charge

–

7,001

–

317

7,318

Exchange rate movement

–

346

–

21

367

At 31 December 2019–

20,018–453

20,471

Amortisation charge

–

6,421

327

–

6,748

Impairment charge

147

–

1,913

–

2,060

Exchange rate movement–(1,261)11

1(1,249)At 31 December 2020

147

25,1782,251454

28,030

At 1 January 2020

175,639

17,6023,527

1

196,769

At 31 December 2020

212,017

27,245

1,548–

240,810

Accumulated amortisation

Net book value

Customer relationships, intellectual property/development costs and music licences are amortised on a straight-line basis over five years.
Customer relationships and music licence amortisation commences on acquisition, whereas intellectual property/development costs
amortisation commences when the product is launched.
Impairment tests for goodwill
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 rate used of 12.5%(2019: 12.5%) is based on the Board’s assessment of the weighted average cost of capital (“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 theimpact of short term market volatility on these calculations in determining the Group WACC.
Key assumptions
ActualSensitivity analysis

2020

2019

2020

2019

2020

2019

1 to 5 year growth rate assumption

10%

10%

15%

15%

5%

5%

Long term growth rate assumption

2%

2%

2%

2%

2%

2%

Value in use (€m)

532

469

636

560

452

398

Carrying value – goodwill (€m)

212

176

The value in use calculations were consistently calculated year over year, with no significant changes in the assumptions made. The resultof the value in use calculations was that no impairment is required in this period. The Directors consider that no reasonably probablechange in the assumptions would result in an impairment.
Specific impairment reviews
Specific impairment reviews were performed for other intangible asset classes where it was considered COVID-19 had the potential totrigger an impairment. Due to the uncertainty caused by COVID-19 an impairment charge of €2,060k (2019: €nil) was recognised in the
period, related to intangible assets in certain early technology pre-revenue businesses, fully impairing their carrying value.

Financial Statements 108/109

12 Right of Use Assets
The Group has entered into leases, across the business, principally relating to property. These property leases have varying terms andrenewal rights.
Group
2020
€’000

Company
2019
€’000

2020
€’000

2019
€’000

29,384

–

825

–

–

23,138–785

15,035

4,315

–

–

Recognition on acquisition of subsidiaries

2,376

990

–

–

Exchange rate movement(2,703)

941

(44)

40

At 31 December

44,092

29,384

781

825

At 1 January

7,915

–

206

–

Depreciation charge

8,402

7,849

200

200

Cost
At 1 January
Adjustments from adoption of IFRS 16
Additions

Accumulated depreciation

Impairment charge

434

–

–

–

Exchange rate movement

(466)

66

(14)

6

16,285

7,915

392

206

At 1 January

21,469–619–

At 31 December

27,807

21,469389

619

At 31 December
Net book value

Keywords Studios plc / Annual Report and Accounts 2020

Notes forming part of the consolidated and company financial statements continued

13 Property, Plant and Equipment
Group
Computers andsoftware€’000

Office furnitureand equipment€’000

Leaseholdimprovements
€’000

Total
€’000

At 1 January 201918,325

5,407

5,804

29,536

Exchange rate movement

1,042

275

497

1,814

Additions

6,815

1,657

4,673

13,145

300

232

231

763

Cost

Acquisitions through business combinations at fair value
Disposals(1,639)

(824)

(44)

(2,507)

At 31 December 201924,843

6,747

11,16142,751

Exchange rate movement(2,058)(155)(1,339)(3,552)

Additions

8,338

541

5,029

13,908

523

125

197

845

Disposals(2,440)

(352)

(136)

(2,928)At 31 December 2020

29,206

6,906

14,91251,024

10,361

2,691

1,482

14,534

Acquisitions through business combinations at fair value

Accumulated depreciation
At 1 January 2019
Exchange rate movement

639

160

267

1,066

Depreciation charge

5,226

703

1,366

7,295

Disposals(1,501)

(803)

(3)

(2,307)

At 31 December 2019

14,725

2,751

3,112

20,588Exchange rate movement(1,378)35(695)(2,038)Depreciation charge

5,979

868

2,136

8,983

Disposals(2,440)

(352)

(136)

(2,928)At 31 December 2020

16,886

3,302

4,417

24,605

At 1 January 2020

10,118

3,996

8,049

22,163

At 31 December 2020

12,3203,604

10,495

26,419Net book value

Financial Statements 110/111

Company
Computers andsoftware€’000

Office furnitureand equipment€’000

Leaseholdimprovements
€’000

Total
€’000

At 1 January 2019

4

145

268

417

Additions

1

–

12

13

At 31 December 2019

5

145

280

430

Additions

7

–

–

7

At 31 December 2020

12

145

280

437

At 1 January 2019

2

8

18

28

Depreciation charge

1

15

29

45

At 31 December 2019

3

23

47

73

Depreciation charge

2

15

30

47

At 31 December 2020

5

38

77

120

At 1 January 2020

2

122

233

357

At 31 December 2020

7

107

203

317

2020
€’000

2019
€’000

49,81444,526

Cost

Accumulated depreciation

Net book value

14 Trade ReceivablesGroup

Trade receivables
Provision for bad debts (note 23)(1,982)(1,283)Financial asset held at amortised cost

47,832

43,243

Trade receivables arise from revenues derived from contracts with customers.

Keywords Studios plc / Annual Report and Accounts 2020

Notes forming part of the consolidated and company financial statements continued

15 Other Receivables
Group – Short term

2020
€’000

2019
€’000

Accrued income from contracts with customers

9,202

7,010

Prepayments

4,608

4,089

Rent deposits and other receivables

4,816

3,151

Multimedia tax credits/video games tax relief

16,668

17,626

Tax and social security

3,371

3,537

38,66535,413Company – Short term

2020
€’000

2019
€’000

Intercompany receivables (financial assets held at amortised cost, see note 23)

5,126

15,220Prepayments

556

702

Other receivables

Company – Long term

Intercompany receivables (financial assets held at amortised cost, see note 23)

139

174

5,821

16,096

2020
€’000

2019
€’000

258,536

208,352

258,536

208,352

Accrued income from contracts with customers, represent mainly contract assets in process and related items. The movement in the year
is comprised 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, or no significant amounts recognised on the acquisition of subsidiaries.

Financial Statements 112/113

16 Shareholders’ Equity and Prior Year Restatement of Share Premium to Merger Reserve
Share Capital

Issue datePer
share €

At 01 January 2019 (restated)

Number ofordinary£0.01 shares

Number ofordinary£0.01 shares– to beissuedSharecapital€’000

Share capital– to beissued€’000

Sharepremium€’000

Mergerreserve€’000

63,788,286

923,139763

15,64819,964

118,257

Acquisition related issuance ofshares:Sunny Side Up

04–Jan–19

12.46

–

60,179

–

750

–

–

Sperasoft

16–Jan–19

16.48

243,442(243,442)

3(4,013)–

4,010

Sperasoft re: bonus to employees

16–Jan–19

14.13

7,801

–

–

–

–

110

Fire Without Smoke

04–Jun–19

20.12

77,006(77,006)

1(1,549)–1,548

Red Hot

06–Jun–19

9.12

160,297(160,842)

2(1,468)–

1,461

Descriptive Video Works

11–Jun–19

17.93

–

35,560

–

638

–

–

Blindlight

26–Jun–19

20.57

64,521(64,521)

1(1,327)–

1,326

Snowed In

12–Aug–19

19.55

37,983(37,983)

–

(743)

–

743

Studio Gobo and Electric Square

20–Aug–19

19.74

254,949(254,529)

3(5,024)–

5,021

The Trailerfarm

24–Sep–19

21.31

11,070(11,070)

–

(236)

–

236

TV+SYNCHRON

01–Oct–19

13.12

–

68,608

–

900

–

–

Ichi

26–Nov–19

15.94

–

70,246

–

1,120

–

–

Kantan12–Dec–19

15.86

–

41,382

–

614

–

–

857,069(573,418)

10(10,338)–

14,455567,160

–

7

–

754

–

65,212,515

349,721

780

5,310

20,718132,71260,179(60,179)

1

(750)

–

749

Acquisition related issuance ofsharesIssue of shares on exercise of shareoptions

1.34

At 31 December 2019 (restated)
Acquisition related issuance ofshares:Sunny Side Up

06–Jan–20

12.46

Laced

14–Apr–20

17.48

8,194

(8,194)

–

(143)

–

143

Cord Worldwide

14–Apr–20

17.48

65,550(65,550)1(1,145)–

1,145

Descriptive Video Works

12–Jun–20

17.93

35,560(35,560)

–

(638)

–

637

Coconut Lizard

25–Jun–20

20.23

–

19,739

–

399

–

–

Studio Gobo and Electric Square

19–Aug–20

16.72

198,576

–

2

–

–

3,319

Maverick Media

26–Aug–20

24.63

–

13,579

–

334

–

–

TV+SYNCHRON

05–Oct–20

13.12

68,608(68,608)

1

(900)

–

899

Ichi

02–Dec–20

15.95

55,612(55,612)

1

(886)

–

886

G-Net Media

24–Nov–20

23.26

–

130,448

–

3,034

–

–

Jinglebell

10–Dec–20

25.94

–

11,564

–

300

–

–

High Voltage Software

14–Dec–20

26.06

–

307,597

–

8,017

–

–

Indigo Pearl

15–Dec–20

26.27

–

20,125

–

529

–

–

Kantan22–Dec–20

15.86

26,085(26,085)

–

(414)

–

414

518,364

183,264

6

7,737

–

8,192

20–May–20

16.23

6,900,000

–

77

–

–

109,3720.96

1,448,364

–

16

–

2,233

–

74,079,243

532,985879

13,047

22,951

250,276

Acquisition related issuance ofsharesShare placing
Issue of shares on exercise of shareoptions
At 31 December 2020

Keywords Studios plc / Annual Report and Accounts 2020

Notes forming part of the consolidated and company financial statements continued

16 Shareholders’ Equity and Prior Year Restatement of Share Premium to Merger Reserve continued
Subject to applicable law, the Company’s articles of association and any relevant authority of the Company passed by the shareholders ingeneral meeting, 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. In the context of the Company’s general meeting authorities, at the AGM of 27 May 2020, shareholders gave
the Directors the authority to allot shares (or grant rights to subscribe for, or convert any security into, shares) in the Company up to:a) 3,283,791 shares in respect of the Company’s Long Term Incentive Plan and Share Option Plan (5% of the Company’s issued sharecapital as at 20 April 2020); andb) otherwise, up to 21,870,054 shares (33.3% of the Company’s issued share capital as at 20 April 2020).
This authority is considered prudent as it gives the Company flexibility to take advantage of possible opportunities which may arise fromtime to time. The authority granted at the 2020 AGM will expire on the earlier of (i) 15 months after 27 May 2020; and (ii) the conclusionof the 2021 AGM.
Shares to be issued are valued at the share price at the date of acquisition, and are recorded in accordance with IAS 32.16.
Shares held in the Employee Benefit Trust (“EBT”)
2020

Ordinary shares held in the EBT

2019Shares€’000

Shares€’000

335,425

1,997

335,425

1,997

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 of share issuance costs.

Share option reserve

The share option reserve is the credit arising on share-based payment charges in relation to theCompany’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 afuture defined date, where there is no obligation on Keywords to offer a variable number of shares, thedeferred consideration is classified as an Equity Arrangement and the value of the shares is fixed at thedate of the acquisition.

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 value of 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.

Financial Statements 114/115

Prior Year Restatement of Share Premium to Merger Reserve
In May 2020, the Company completed a placing of 6,900,000 new ordinary shares issued at a price of €16.23 (£14.50) per share,
representing approximately 10.5% of the issued share capital prior to the placing. Net of transaction costs, the placing raised proceeds ofapproximately €110m (£98m). The placing was made via a cash box structure, resulting in the Company acquiring the proceeds via a sharefor share exchange and hence the premium on the issuance of new shares of €109.5m has been credited to Merger reserve (in accordancewith S610 of the Companies Act 2006). At the time of the placement, the proceeds were not allocated to a specific acquisition or specificpurpose, and thus this reserve is considered distributable. The new shares rank pari passu in all respects with the existing ordinary sharesof the Company, including the right to receive all future dividends and other distributions declared or paid after the date of placing.
Following completion of the share placement via the cash box structure in May 2020, a review of the Company’s merger reserves was
performed. It was identified that the premium on shares issued as part of the share placement in 2017 of €82.3m, was incorrectly recorded
in non-distributable share premium. As the placing was also made via a cash box structure, resulting in the Company acquiring theproceeds via a share for share exchange, the premium on the issuance of new shares of €82.3m should have been credited to Merger
reserve (in accordance with S610 of the Companies Act 2006). At the time of the placing the proceeds were identified as allocated to
specific acquisitions. Hence the reserve is not considered distributable, but may become distributable in the future. The premium has
been re-designated to Merger reserve and the prior period balances have been restated accordingly.
Share premium€’000

Merger reserve€’000

At 1 January 2019 – as reported

102,225

35,996

Reclassification of Share premium within Reserves(82,261)

82,261

At 1 January 2019 – as restated

19,964

118,257

Prior period restatement

It was further identified that the share premium of €14.4m on the share placement in 2015, again via a cash box structure, that was posted
to Merger reserve in 2015, is in fact distributable (as at the time of the placement the proceeds were not allocated to a specific purpose).
For clarity, this transaction for €14.4m, together with the €109.5m from the share placement in 2020 (totalling €123.9m) that are includedin the Merger reserve, are considered distributable.

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 as follows:
2020
€’000

2019
€’000

Share option scheme expense

2,576

1,520

LTIP option expense

12,7748,255

15,3509,775

Of the total share option expense, €1,007k relates to Directors of the Company (2019: €754k).

Keywords Studios plc / Annual Report and Accounts 2020

Notes forming part of the consolidated and company financial statements continued

17 Share Options continued
Share Option Scheme
Share options are granted to Executive Directors and to permanent employees. The exercise price of the granted options is equal to themarket price of the shares at the time of the award of the options. The Company has no legal or constructive obligation to repurchase or
settle the options in cash.
Movements in the number of share options outstanding and their related weighted average exercise prices are as follows:
2020

2019

Average
exercise price in£ per share

Number ofoptions

Average
exercise price in£ per share

Number ofoptions

9.97

2,148,102

7.11

1,832,701

Granted15.93

822,000

15.88

729,000

Lapsed15.64(179,151)

14.74(175,807)

Exercised

4.55(445,713)

2.66(237,792)

Outstanding at the end of the period

12.66

2,345,238

9.96

2,148,102

Exercisable at the end of the period

4.39

638,238

1.89

809,440

Weighted average share price at date of exercise

17.91

Outstanding at the beginning of the period

15.98

Summary by year
Year of Option

2013

2015

2016

2017

2018

2019

2020

Exercise price

£1.23

£1.58

£2.54

£7.76

£17.10£15.88£15.93

Outstanding at the beginning of the period

Total

178,559

544,481

91,229205,833

469,500

658,500–

2,148,102

Granted

–

–

–

–

–

–

822,000

822,000

Lapsed–(1,420)(1,601)(10,139)(36,839)(69,713)(59,439)(179,151)

Exercised(178,559)(84,448)(55,332)(68,660)(57,679)

(787)

(248)

(445,713)

Outstanding at the end of the period–

458,613

34,296

127,034

374,982

588,000

762,313

2,345,238

Exercisable at 31 December 2020–

458,613

34,29653,034

91,982–

313

638,238

Exercisable 2021

–

–

–

74,000141,500

196,000–

411,500

Exercisable 2022

–

–

–

–

141,500

196,000

254,000

591,500

Exercisable 2023

–

–

–

–

–

196,000

254,000

450,000

Exercisable 2024

–

–

–

–

–

–

254,000

254,000

Total

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

2013

2015

2016

2017

2018

2019

2020

Weighted average share price (£)

£1.23

£1.64

£2.54

£7.75

£17.22£16.09£16.00Weighted average exercise price (£)

£1.23

£1.58

£2.54

£7.76

£17.10£15.88£15.93

Fair value at measurement date (€)

€0.81

€0.56

€0.40

€1.13

€3.79

€5.72

€6.06

Average expected life

4 Years

4 Years

4 Years

4 Years

4 Years

4 Years

4 Years

Expected volatility

36.12%

28.03%

27.17%

24.79%

35.87%

45.23%

50.15%

Risk free rates

0.50%

0.90%

0.58%

0.16%

0.89%

0.81%

0.07%

Average expected dividend yield

1.00%

0.75%

0.55%

0.21%

0.10%

0.10%

0.10%

–

–

–

5

17

29

41

Weighted average remaining life of options
in months

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.

24Financial Statements 116/117

Long Term Incentive Plan Scheme
LTIP share awards are subject to KWS performance versus the designated share index over a three-year period.
Movements in the number of share options outstanding and their related weighted average exercise prices are as follows:
2020
Average
exercise price in£ per share

Outstanding at the beginning of the period
Granted2019
Number ofoptions

Average
exercise price in£ per share

Number ofoptions

0.01

3,445,868

0.01

2,677,467

0.01

1,428,000

0.01

1,298,136

Lapsed0.01(178,400)

0.01(200,367)

Exercised

0.01(1,002,651)

0.01(329,368)

Outstanding at the end of the period

0.01

3,692,817

0.01

3,445,868

Exercisable at the end of the period

0.01

373,6480.01

732,299

Weighted average share price at date of exercise

17.34

16.17

Summary by year
Year of Option

2013

Exercise price

£0.01

£0.01

£0.01

£0.01

Outstanding at the beginning of the period 204,273

200,959

327,067

644,000–––

Granted
Lapsed

2015

–

2016

2017

2018

2019

2020

Total

£0.01

£0.01

£0.01

857,000

1,212,569–

3,445,868––

1,428,000

1,428,000

–

–

–

–

(58,000)(76,600)(43,800)(178,400)(204,273)(153,601)(196,807)(447,970)–––(1,002,651)

Outstanding at the end of the period–

47,358130,260

196,030

799,000

1,135,969 1,384,200

3,692,817

Exercisable at 31 December 2020–

47,358130,260

196,030–––

373,648

Exercisable 2021

–

–

–

–

799,000––

799,000

Exercisable 2022

–

–

–

–

–

1,135,969–

1,135,969

Exercisable 2023

–

–

–

–

–

–

1,384,200

1,384,200

Exercised

The inputs into the Monte Carlo binomial model, used to value the options are as follows:Year of Option

2013

2015

2016

2017

2018

2019

2020

Weighted average share price (£)

£1.23

£1.60

£2.56

£7.75

£17.24£16.05£16.00Weighted average exercise price (£)

£0.01

£0.01

£0.01

£0.01

£0.01

£0.01

£0.01

Fair value at measurement date (€)

€0.62

€1.38

€1.74

€4.96

€11.83€13.98€13.28Average expected life

3 Years

3 Years

3 Years

3 Years

3 Years

3 Years

3 Years

Expected volatility

36.12%

28.21%

27.11%

24.79%

35.87%

45.26%

50.15%

Risk free rates

0.50%

0.88%

0.54%

0.16%

0.89%

0.81%

0.07%

–

–

–

–

5

17

29

Weighted average remaining life of options
in months

Total

17

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 share option charge.
LTIP’s vest on the third anniversary of the grant, if the market performance criteria are met. LTIPs must be exercised before the seventh
anniversary of the grant.

Keywords Studios plc / Annual Report and Accounts 2020

Notes forming part of the consolidated and company financial statements continued

18 Other Payables
Group

Company

2020
€’000

2019
€’000

2020
€’000

2019
€’000

Accrued expenses

31,08622,8091,053

818

Payroll taxes

2,563

3,833

412

118

Current liabilities

Other payables (ii)

10,501

6,104

33

271

Deferred and contingent consideration (i)18,808

5,966

–

–

–

–

8,481

10,091

62,95838,712

9,979

11,298

–

216

–

–

1,994

69

–

–

–

–

–

5,561

1,994

285

–

5,561

Intercompany payables
Non-current liabilities
Other payables (ii)Deferred and contingent consideration (i)Intercompany payables(i) The movement in deferred and contingent consideration during the financial year was as follows:Group

Company

2020
€’000

2019
€’000

2020
€’000

2019
€’000

Carrying amount at the beginning of the year

6,035

19,306––

Consideration settled by cash

(2,489)(14,711)––

Consideration settled by shares(3,321)–––

Unwinding of discount (note 6)

132

330

–

–

21,131

238–

Additional liabilities from current year acquisitions (note 27)
Fair value adjustments

(66)

493

–

–

Exchange rate movement

(620)

379

–

–

20,802

6,035

–

–

Carrying amount at the end of the year

In general, in order for contingent consideration to become payable, pre-defined profit and/or revenue targets must be exceeded. The
valuation of contingent consideration is derived using data from sources that are not widely available to the public and involves a degreeof 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 €0.2m to a maximum of €26.4m. A 10% movement in expected performance results, has no impact on the fairvalue of the contingent consideration, and hence there are no reasonably probable changes to the assumptions and inputs (including thediscount 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 €2,967k (2019: €2,609k), which mainly comprise items
invoiced prior to services being delivered. The movement in the year is comprised of transfers in and out as items are deferred andsubsequently recognised as revenue.

19 Employee Defined Benefit Plans
In line with statutory requirements in France, Italy and India, we are required to maintain employee defined benefit termination
payment schemes.
In France, employees are entitled to a lump-sum on retirement or early termination, based on salary and length of service (‘Indemnité deFin de Carrière’ or IFC), entitling the Group’s French employees to benefits of up to 2 month’s salary per year of service.
In Italy, on leaving employment, each employee is entitled to 1/13.5 of their final salary for each year of service (‘Trattamento di Fine
Rapporto’ or TFR).

Financial Statements 118/119

In India, in compliance with statutory requirements, employees with over 5 years service are entitled a termination benefit of 15/26
of monthly salary for each year of service (‘Gratuity’ benefits).
The Group commissions an actuarial valuation of the related liabilities in each jurisdiction annually.
The liabilities at year end are recorded as long term. The actuarial gain or loss is recorded separately within Other comprehensive income.
The movements through the year are as follows:

Opening liabilities at 1 January
Liabilities in France recognised at 1 January 2019
Service cost

2020
€’000

2019
€’000

2,049

1,378

–

210

354

307

Interest cost30

35

Benefits paid

(110)

(48)

Actuarial (gain)/loss recorded

421

167

Exchange rate movement
Closing liabilities at 31 December

(51)

–

2,693

2,049

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 bea 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 notpresented as the liability is not significant in the context of the Group, and due to the age profile of employees a significant outlay is not
anticipated for the foreseeable future.
In 2021, the Group expects the costs of the employee benefit plan to be in line with current year levels, as staff levels are anticipated
to not change significantly in the period.
The actuarial valuation is based on the Projected Unit Credit Method, in line with IAS 19.

Cost for year

2020
€’000

2019
€’000

Service cost

354

307

Interest cost

30

35

Liabilities in France recognised at 1 January 2019–

210

Actuarial (gain)/loss

421

167

805

719

2020
€’000

2019
€’000

Change due to experience9828

Change due to demographical assumptions

(93)

(24)

416

163

421

167

Actuarial (gain)/loss

Change due to financial assumptions

Keywords Studios plc / Annual Report and Accounts 2020

Notes forming part of the consolidated and company financial statements continued

19 Employee Defined Benefit Plans 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:–– Mortality probabilities were derived from the population demographics, as recorded by the Government Statistics Offices ineach jurisdiction.
–– Disability, retirement age and other relevant demographic assumptions were taken from relevant life assurance statistics.
–– Certain inputs were estimated by management including:–– Employee attrition rates, estimated based on company experience in each jurisdiction.
–– In Italy, TFR rules allow for early drawdown of benefits in certain circumstances. Such advances were estimated on the basisof company experience.
Economic and Financial Assumptions

2020

2019

Staff salary increase rate

3.63%

3.38%

Inflation rate

2.93%

2.06%

Discount rate

1.23%

1.64%

Key Statistics

2020

2019

Staff (number)

782

749

Average age (years)

31

31

Average service (years)

44Interest Rate Sensitivities

2020
€’000

2019
€’000

(0.25)%

2,842

2,179

0.25%

2,568

1,964

Mortality Rate Sensitivities

2020
€’000

2019
€’000

(0.025)%

2,696

2,056

0.025%

2,693

2,054

Staff Turn Over Rate Sensitivities

2020
€’000

2019
€’000

(0.50)%

2,726

2,090

0.50%

2,664

2,046

Staff Salary Increase Rate Sensitivities

2020
€’000

2019
€’000

(0.50)%

2,703

2,033

0.50%

2,745

2,103

Financial Statements 120/121

20 Loans and Borrowings
Group
Maturity analysis of Loans and borrowings

Company

2020
€’000

2019
€’000

2020
€’000

2019
€’000

–

80

–

–

Current
Expiry within 1 year
Non-current
Expiry between 1 and 2 years
Expiry over 2 years

–

–

–

–

195

59,671–59,500195

59,671–59,500195

59,751–59,500–59,500–59,500

195

251

–

–

195

59,751–59,500Currency denomination
Euro
Canadian Dollars

In 2019 the Company amended and extended it’s existing Syndicated Bank revolving credit facility (‘RCF’). The RCF allows financing of up
to €100m, with an option to increase this by up to €40m to a total of €140m, at a rate based on a margin over EURIBOR, plus a separate
margin charged for the unutilised facility. The RCF extends to October 2022, with an option to extend this maturity date by up to a further
2 years. While technically any borrowings are repaid and re-borrowed multiple times during the term of the RCF, so long as the Groupremains compliant with the financial covenants and certain other terms of the RCF, the debt is rolled from one period to another, withthe legal and commercial substance of a multi-year committed facility. Hence the Group presents liabilities under the RCF as non-current.
In the prior period, the original RCF arrangement which was presented as a current liability during the process of being re-negotiated,
was re-designated to non-current following re-negotiation.
In connection with the RCF, security has been granted over the major subsidiaries of the Group and the lenders also require the Groupto comply with and report interest cover and leverage ratios in connection with its financial covenants. Non-compliance with terms of the
RCF could result in lenders refusing to advance more funds, or in the worst case, calling in outstanding loans. Throughout the period, theGroup operated well within the interest cover and leverage ratio terms of the RCF agreement.
The movements in loans and borrowings is as follows:Group

Company

Current€’000

Non-current
€’000

Total
€’000

Current€’000

Non-current
€’000

Total
€’000

40,071

230

40,30140,000–40,000Drawdowns–

27,00027,000–27,00027,000

Repayments(71)(7,902)(7,973)–(7,500)(7,500)

–

402

402

–

–

–

At 1 January 2019
Cash flows:

Non-cash flows:
Recognition on acquisition of subsidiaries
Current re-designated to non-current(39,920)

39,920–(40,000)

40,000–Exchange rate movement

–

21

21

–

–

–

At 31 December 201980

59,67159,751–59,50059,500Drawdowns

–

4,500

4,500

–

4,500

4,500

Repayments–(64,030)(64,030)–(64,000)(64,000)

Exchange rate movement

(7)

(19)

(26)

–

–

–

At 31 December 2020

73

122

195

–

–

–

Cash flows:

Non-cash flows:

Following the share placing in May 2020, the balance of the RCF was repaid in June 2020, with the residual balance being loans owed
by Keywords Studios QC-Interactive Inc.
Loans and borrowings (classified as financial liabilities under IFRS 9), are held at amortised cost. Interest expenses which are calculatedusing the effective interest method, are disclosed in note 6.

Keywords Studios plc / Annual Report and Accounts 2020

Notes forming part of the consolidated and company financial statements continued

21 Lease Liabilities
The Group has entered into leases, across the business, principally relating to property. These property leases have varying terms andrenewal rights. Management applies judgement in determining whether it is reasonably certain that a renewal or termination option will
be exercised.
The movement in lease liabilities during the financial year was as follows:Group

Company

2020
€’000

2019
€’000

2020
€’000

2019
€’000

Carrying amount at the beginning of the year

21,907–626–

Recognition on acquisition of subsidiaries (note 27)

2,376

990

–

–

Adjustments from adoption of IFRS 16–

23,138–785

Liabilities recognised on new leases in the period

15,035

4,315

–

–

Unwinding of discounted liabilities – lease liabilities

843

694

12

16

Payment of principal and interest on lease liabilities(9,013)(8,049)

(206)

(208)

Exchange rate movement(2,284)

819

(33)

33

Carrying amount at the end of the year

28,864

21,907399

626

The value of leases not yet commenced to which the lessee is committed, which are not included in lease liabilities at 31 December 2020,
were €10.3m (2019: €nil).
Group
2020
€’000

2020
€’000

2020
€’000

2019
€’000

2019
€’000

2019
€’000

Lease
payments

FinancechargesLeaseliabilities

Lease
payments

FinancechargesLeaseliabilities

8,291

930

7,361

8,281

582

7,741

Later than one year and not later than five years

18,715

1,013

17,702

12,321

216

12,152Later than five years

5,307

1,506

3,801

2,718

703

2,014

Maturity analysis of lease liabilities

Current
Not later than one year
Non-current

At 31 December

24,0222,519

21,503

15,039919

14,16632,3133,449

28,86423,3201,501

21,907

2020
€’000

2020
€’000

2020
€’000

2019
€’000

2019
€’000

2019
€’000

Lease
payments

FinancechargesLeaseliabilities

Lease
payments

FinancechargesLeaseliabilities

204

7

197

216

12

204

204

2

202

431

9

422

–

–

–

–

–

–

204

2

202

431

9

422

408

9

399

647

21

626

Company

Maturity analysis of lease liabilities

Current
Not later than one year
Non-current
Later than one year and not later than five years
Later than five years
At 31 December

The Group has elected not to recognise a lease liability for short term leases (leases with an expected term of 12 months or less) or forleases of low-value assets. Payments made under such leases are expensed on a straight-line basis. The expenses in the period relating
to payments not included in the measurement of the lease liability were as follows:Financial Statements 122/123

Group

Company

Lease payments not recognised as a liability

2020
€’000

2019
€’000

2020
€’000

2019
€’000

Short-term leases

1,747

1,616

–

–

–

–

–

–

1,747

1,616

–

–

991

651

–

–

Later than one year and not later than five years

–

–

–

–

Later than five years

–

–

–

–

991

651

–

–

Leases of low-value assets
The future minimum lease payments related tothese leases
Not later than one year

The effect of variable lease payments and re-instatement costs on future cash outflows arising from leases, is not material for the Group.

22 Deferred Tax
Details of the deferred tax assets and liabilities, and amounts recognised in the Income statement are as follows:
2020
€’000

Defined benefit termination payments

2020
€’000

AssetsLiabilities

2020
€’000

2020
€’000

Net

(Credited)/chargedto incomestatement

69

–

69

(19)

1,157

–

1,157

293

Rent free period provisions

75

–

75

(64)

Fixed asset tax base versus accounting book value

603

704

(101)

104

Deferred tax related to tax credits

38

2,144

(2,106)(1,057)

Deferred tax arising on items deductible on a paid basis

3,344

1,405

1,939

(949)

Recognition on acquisition of subsidiaries

9,363

3,970

5,393

–

–

2,352

(2,352)(1,451)

14,64910,575

4,074(3,143)Available losses

Deferred tax arising on intangibles
Net tax assets/liabilities
Impact of change in tax rates

289

Prior year (over)/under provision(18)

Total (credited)/charged to income statement(2,872)

Keywords Studios plc / Annual Report and Accounts 2020

Notes forming part of the consolidated and company financial statements continued

22 Deferred Tax continued
2019
€’000

Accelerated capital allowances
Defined benefit termination payments

2019
€’000

2019
€’000

2019
€’000

AssetsLiabilities

Net(Credited)/chargedto incomestatement

–

–

–

(1)

50

–

50

16

1,450

–

1,450

(575)

Rent free period provisions

11

–

11

19

Fixed asset tax base versus accounting book value

578

575

3

484

Deferred tax related to tax credits

474

3,637

(3,163)

695

2,497

1,507

990

469

–

3,803

(3,803)(1,990)

5,060

9,522

(4,462)(883)

Available losses

Deferred tax arising on items deductible on a paid basis
Deferred tax arising on intangibles
Net tax assets/(liabilities)
Impact of change in tax rates
Prior year (over)/under provision
Total (credited)/charged to income statement

The deferred tax asset not recognised on available losses at the period end is €3.2m (2019: €3.1m).

(80)
(95)
(1,058)Financial Statements 124/125

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 rates. 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 effect of a strengthening or a weakening of 1% in interest rates charged during the reporting period on the interest expense would
have resulted in the following pre-tax profit/(loss) impact for the year:

Interest expense

1%
Strengthening
2020
€’000

1%
Weakening
2020
€’000

1%
Strengthening
2019
€’000

1%
Weakening
2019
€’000

(290)

257

(503)

503

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 fromfinancial 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% of net trade receivables (2019: 3.0%). Customer credit risk is managedat appropriate Group locations according to established policies, procedures and controls. Customer credit quality is assessed andcredit limits are established where appropriate. Outstanding customer balances are regularly monitored and a review for indicatorsof impairment (evidence of financial difficulty of the customer, payment default, breach of contract etc.) is carried out at each reporting
date. Significant balances are reviewed individually while smaller balances are grouped and assessed collectively. Receivables balances
are unsecured and non-interest-bearing. The trade receivables balances disclosed comprise a large number of customers spread acrossthe Group’s activities and geographies with balances classified as “Not past due” representing 79% of the total trade receivables balanceat the balance sheet date (2019: 84%). Trade and other receivables are carried on the Consolidated statement of financial position net
of bad debt provisions.
The ageing of trade receivables can be analysed as follows:
Group
Total
€’000

Not past due€’000

1-2 months past
due
€’000

More than 2months past due€’000

At 31 December 2020

47,83237,936

7,678

2,218

At 31 December 201943,24336,208

6,136

899

2020
€’000

2019
€’000

Provision at the beginning of the year

1,283

1,717

Impairment of financial assets (trade receivables) charged to administration expenses

1,293

500

Foreign exchange movement in the year

(284)

54

Utilised

(310)

(988)

Provision at the end of the year

1,982

1,283

A provision for doubtful debtors is included within trade receivables and can be reconciled as follows:Keywords Studios plc / Annual Report and Accounts 2020

Notes forming part of the consolidated and company financial statements continued

23 Financial Instruments and Risk Management continued
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% (2019: 0.5%). Taking into account internaland external information, the historical credit loss experience may be adjusted where it is determined that there has been a significant
increase in credit risk. Where a receivable is credit impaired, the impairment is recognised immediately, and impaired balances are
removed from the expected credit loss calculation. Due to the pandemic, Credit impaired receivables provisions were increased to €1.7m
at 31 December 2020.

Total
€’000

Not past due€’000

1-2 months past
due
€’000

More than 2months past due€’000

Trade receivables gross

49,814

38,150

7,887

3,777

Credit impaired(1,733)

(23)

(170)

(1,540)

Expected credit losses

(249)

(191)

(39)

(19)

At 31 December 2020

47,83237,936

7,678

2,218

Total
€’000

Not past due€’000

1-2 months past
due
€’000

More than 2months past due€’000

Trade receivables gross

44,52636,386

6,166

1,974

Credit impaired(1,071)––(1,071)

Expected credit losses

(212)

(178)

(30)

(4)

At 31 December 201943,24336,2086,136

899

Related party receivables of €nil were past due at 31 December 2020 (2019: €nil).
Company
As presented in note 26, receivables from subsidiaries relating to investments in acquisitions, comprise term loans extended tosubsidiaries, while receivables from subsidiaries relating to trading activities, comprise trading balances repayable on demand. Balances
are analysed in terms of the risk profile of the subsidiary.
The Directors have assessed the ongoing expected recovery strategy of loans due from subsidiaries of €258.5m (2019: €208.4m), within
Stage 1 of the IFRS 9 impairment assessment model. Having noted that such loans are within their repayment terms, the Directors haveconcluded that no provision for expected credit losses is required (2019: €nil).
Separately the Company has balances of €5.1m (2019: €15.2m), which are technically repayable upon demand. These loans are within Stage
3 of the IFRS 9 impairment assessment model. The Directors have reviewed in detail the recovery strategy in relation to these loans andconcluded that a small number of such loans are technically in a credit-impaired status. An expected credit loss of €218k (2019: €218k)
has been recognised in relation to these balances.
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
from their own operations in that currency. Where Group entities have liabilities denominated in a currency other than their functional
currency (and have insufficient reserves of that currency to settle them), cash already denominated in that currency will, where possible,
be transferred from elsewhere within the Group.
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 or weakeningof 10% in those currencies against the Euro at the reporting date on the working capital balances would, all other variables held constant,have resulted in the following pre-tax profit/(loss) impact for the year:

US Dollar to Euro

2020
€’000

2020
€’000

2019
€’000

2019
€’000

10%
Strengthening

10%
Weakening

10%
Strengthening

10%
Weakening

4,712(3,855)

3,052(2,497)

Canadian Dollar to Euro

594

(486)

1,779

(1,455)

Sterling to Euro

835

(683)

1,535

(1,256)

Financial Statements 126/127

Total Financial Assets and Liabilities
The carrying amount of the financial assets and liabilities shown in the Consolidated and Company Statements of financial position arestated 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 Directors consider liquidity risk is
mitigated by the strong working capital position, with €190m of current assets, including cash of €103m available to settle liabilities as theyfall due.
The following are the contractual maturities (representing undiscounted contractual cash flows) of the Group’s and Company’s
financial liabilities:
Group
Carrying value

Contractual cash flows

At 31 December 2020

Total
€’000

Total
€’000

Within 1 year€’000

1-2 years€’000

2-5 years€’000

Over 5 years€’000

Trade payables

8,170

8,170

8,170

–

–

–

Deferred and contingent consideration (i)20,802

26,442

20,699

5,743

–

–

Other payables

44,15044,15044,150–––Loans and borrowings

195

195

73

122

–

–

Loan interest

10

10

5

5

–

–

Lease liabilities

28,86432,313

8,291

7,153

11,562

5,307

Total

102,191

111,280

81,38813,023

11,5625,307

1-2 years€’000

2-5 years€’000

Over 5 years€’000

Carrying value
At 31 December 2019

Total
€’000

Contractual cash flows*
Total
€’000

Within 1 year€’000

Trade payables

8,027

8,027

8,027

–

–

–

Deferred and contingent consideration (i)

6,035

6,035

5,966

69

–

–

Other payables

32,96232,962

32,746216––

Loans and borrowings

59,75159,75180–

59,671–

Loan interest

102

102

102

–

–

–

Lease liabilities

21,90723,320

8,240

5,078

7,858

2,144

Total

128,784

130,197

55,161

5,363

67,5292,144*

Please note the prior year comparative has been re-designated to reflect the current year presentation as the Directors consider this to be more appropriate.

Keywords Studios plc / Annual Report and Accounts 2020

Notes forming part of the consolidated and company financial statements continued

23 Financial Instruments and Risk Management continued
Company
Carrying value
At 31 December 2020

Total
€’000

Contractual cash flows
Total
€’000

Within 1 year€’000

1-2 years€’000

2-5 years€’000

Over 5 years€’000

Trade payables

61

61

61

–

–

–

Other payables

9,979

9,979

9,979

–

–

–

Lease liability

399

408

204

204

–

–

10,43910,448

10,244

204

–

–

Total
€’000

Total
€’000

Within 1 year€’000

1-2 years€’000

2-5 years€’000

Over 5 years
€’000

139

139

139

–

–

–

Total

Carrying value
At 31 December 2019

Trade payables

Contractual cash flows*

Other payables

16,85916,85911,298

–

5,561

–

Loans and borrowings

59,50059,500––59,500

–

102

102

102

–

–

–

Loan interest
Lease liability
Total
*

626

647

216

216

215

–

77,226

77,247

11,755216

65,276–

Please note the prior year comparative has been re-designated to reflect the current year presentation as the Directors consider this to be more appropriate.

(i) Deferred and contingent consideration at 31 December 2020 has arisen on business combinations, and is based on set amounts to be
paid in the future to sellers under share purchase agreements. In general, in order for contingent consideration to become payable,
pre-defined profit and/or revenue targets must be exceeded. On an undiscounted basis, the Group may be liable for deferred andcontingent consideration up to a maximum of €26.4m.

24 Capital Management
Group

2020
€’000

2019
€’000

Loans and borrowings (note 20)

195

59,751

Less: cash and cash equivalents(103,070)(41,827)

Net debt/(net cash) position(102,875)

17,924

Total equity

371,235

222,958

Net debt/(net cash) to capital ratio (%)(27.7)%

8.0%

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 loans and borrowings (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. Group Treasury
manage bank balances centrally, and monitors the credit rating and stability of the institutions the Group banks with. The Board receives
projections on a monthly basis as well as information regarding cash balances. The Group’s strategy is to preserve a strong cash base andsecure access to finance at reasonable cost by maintaining a good credit rating.

Financial Statements 128/129

25 Investment in Subsidiaries
Company

2020
€’000

2019
€’000

30,67030,670

The results and financial position of all the subsidiaries are included in the consolidated financial statements.
Details of the Company’s direct and indirect subsidiaries as at 31 December 2020 are set out below:

Name

Country ofincorporation

Date ofincorporation/acquisition

Keywords International Ltd

Ireland13-May-98

100%

Whelan House, South County Business Park, Dublin 18,
Ireland.

Keywords International Co., Ltd.

Japan

30-Nov-10100%

2-3-1 Kudanminami, Chiyoda-ku, Tokyo 102-0074, Japan

Keywords International, Inc.

USA

26-Sep-12

100%

251 Little Falls Drive, Wilmington, New Castle, DE 19808,
USA

Liquid Violet Ltd*UK

15-Jan-14

100%

201 Temple Chambers, 3-7 Temple Avenue, London,
England, EC4Y 0DT

Keywords Studios QC-Games Inc.

Canada(Quebec)

17-Feb-14

100%

1751 Richardson, suite 8400, Montréal, Québec, Canada
H3K1G6Babel Media USA, Inc.

USA

17-Feb-14

100%

251 Little Falls Drive, Wilmington, New Castle, DE 19808,
USA

Babel Media India Private Limited

India

17-Feb-14

100%

3rd floor, Vardhman Orchard Plaza, Plot No 4, LSC, West
Enclave, Pitampura, New Delhi, 110034, India

Babel Media Ltd*UK

17-Feb-14

100%

201 Temple Chambers, 3-7 Temple Avenue, London,
England, EC4Y 0DT

Keywords International Pte. Limited

Singapore

24-Apr-14

100%

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

Keywords Studios Italy S.R.L.

Italy

08-May-14

100%

Via Egadi 2, Milano, MI, 20144, Italy

Keywords Studios Los Angeles, Inc.

USA

08-May-14

100%

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

Lakshya Digital Private Limited*India

09-Oct-14

100%

3rd floor, Vardhman Orchard Plaza, Plot No 4, LSC, West
Enclave, Pitampura, New Delhi, 110034, India

Edugame Solutions Private LimitedIndia

09-Oct-14

100%

D – 3/C, Munirka Flats, New Delhi – 110067

Lakshya Digital Singapore Pte. Ltd

Singapore

09-Oct-14

100%

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

Keywords Studios QC-Tech Inc.

Canada(Quebec)

06-Jan-15

100%

1751 Richardson, suite 8400, Montréal, Québec, Canada
H3K1G6

Keywords International Barcelona SL

Spain

09-Jan-15

100%

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

Keywords do Brasil Localizacao e Traducao Ltda Brazil

18-Jan-15

100%

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

Keywords (Shanghai) Information Technology
Ltd

China

02-Apr-15

100%

7TH Floor, Building A, Dong Ti YuHui Road, Hongkou
District, Shanghai, China

Keywords Studios Spain SLU

Spain

16-Jul-15

100%

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

Keywords Studios México,
S. de R.L. de C.V.

Mexico16-Jul-15

100%

Torrente #75, Colonia Ampliación Alpes, Del. Álvaro
Obregón, CP. 01710, Ciudad de México, México

Liquid Development, LLC

USA

19-Aug-15

100%

411 SW 2nd Ave Ste 300, Portland, OR 97204, USA.

Keywords Asia Private Ltd

Singapore

15-Mar-16

100%

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

Synthesis Deutschland GmbH*Germany

12-Apr-16

100%

Holstenkamp 46 A, Bahrenfeld, 22525 Hamburg,
Germany

Synthesis Global Solutions SA*

Switzerland

12-Apr-16

100%

Corso Elvezia 16, 6900 Lugano, Ticino, Switzerland

Keywords Studios France SAS

France08-Jun-16

100%

59 Boulevard Exelmans, 75016 Paris, France

Player Research Ltd

UK

26-Oct-16

100%

201 Temple Chambers, 3-7 Temple Avenue, London,
England, EC4Y 0DT

Keywords Studios QC-Interactive Inc.

Canada(Quebec)

16-Nov-16

100%2031 boul. du Curé-Labelle, Saint-Jérôme (Québec)J7Y1S5, Canada

SPOV LtdUK

16-Feb-17

100%

201 Temple Chambers, 3-7 Temple Avenue, London,
England, EC4Y 0DT

Xloc, Inc.

USA

08-May-17

100%8801 Fast Park Drive, Suite 301, Raleigh, NC 27617, USA

Ownership^

Registered officeKeywords Studios plc / Annual Report and Accounts 2020

Notes forming part of the consolidated and company financial statements continued

25 Investment in Subsidiaries continued

Name

Country ofincorporation

Date ofincorporation/acquisition

GameSim Inc.

USA

16-May-17

100%13501 Ingenuity Drive, Suite 310, Orlando, FL 32826,
USA.

Strongbox Ltd

Seychelles

19-May-17

100%

Suites 103, 106 and 107 Premier Building, Victoria,
Mahe, Seychelles

Red Hot Software (Shanghai) Ltd

China

19-May-17

100%

7TH Floor, Building A, Dong Ti YuHui Road, Hongkou
District, Shanghai, China

Red Hot Software (Zhengzhou) Ltd

China

19-May-17

100%

Room 207, 11th Floor, Building No. 3, No. 57 Ke Xue Da
Dao, Zheng Zhou, He Nan, China

Eastern New Media Limited

Hong Kong

19-May-17

100%

Flat/Rm 4304, 43F, China Resources Building, 26
Harbour Road, Wanchai, Hong Kong

PT Limitless Indonesia

Indonesia

19-May-17

100%

JI. Timoho II, No. 32, Yogyakarta, Indonesia

Around the Word GmbHGermany

03-Aug-17

100%

Rosenstrasse 2, D-10178 Berlin

d3t LtdUK

19-Oct-17

100%

201 Temple Chambers, 3-7 Temple Avenue, London,
England, EC4Y 0DT

Keywords US Holdings Inc.

USA

23-Oct-17

100%

251 Little Falls Drive, Wilmington, New Castle, DE 19808,
USA

VMC Consulting CorporationUSA

24-Oct-17

100%

251 Little Falls Drive, Wilmington, New Castle, DE 19808,
USA

Keywords Canada Holdings Inc.

Canada(Quebec)

27-Oct-17

100%

1751 Richardson Street Suite 8400 Montreal QC H3K
1G6 Canada

Keywords Studios B.C., Inc.

Canada(BC)

27-Oct-17

100%

1700-1075 West Georgia Street, Vancouver, BC, Canada
V6E 3C9

Sperasoft Poland Spólka z.o.o.

Poland13-Dec-17100%

Ul. Na Kozłówce 27, 30-664 Kraków, Poland

Sperasoft Studios LLC

Russia13-Dec-17

100%196084, Russia, Saint-Petersburg, Kievskaya street,5 – building

Sperasoft, Inc.

USA

13-Dec-17

100%

251 Little Falls Drive, Wilmington, New Castle, DE 19808,
USA

SperaSystems LLC

USA

13-Dec-17

100%2033 Gateway Pl Ste 500 San Jose, CA 95110-3712, USA

Keywords Studios Ltd*

Ireland27-Mar-18

100%

Whelan House, South County Business Park, Dublin 18,
Ireland.

Keywords UK Holdings Limited

UK

28-Mar-18

100%

201 Temple Chambers, 3-7 Temple Avenue, London,
England, EC4Y 0DT

Keywords Ventures Limited

UK

06-Apr-18

100%

201 Temple Chambers, 3-7 Temple Avenue, London,
England, EC4Y 0DT

Laced Music Ltd

UK

07-Apr-18

100%

201 Temple Chambers, 3-7 Temple Avenue, London,
England, EC4Y 0DT

Cord Worldwide Ltd

UK

07-Apr-18

100%

201 Temple Chambers, 3-7 Temple Avenue, London,
England, EC4Y 0DT

Paleblue Limited

UK

07-Apr-18

100%

201 Temple Chambers, 3-7 Temple Avenue, London,
England, EC4Y 0DT

Fire Without Smoke Ltd

UK

29-May-18

100%

201 Temple Chambers, 3-7 Temple Avenue, London,
England, EC4Y 0DT

Fire Without Smoke Inc

USA

29-May-18

100%

251 Little Falls Drive, Wilmington, New Castle, DE 19808,
USA

Blindlight, LLC

USA

08-Jun-18

100%8335 Sunset Blvd, West Hollywood, CA 90069, USA.

Snowed In Studios, Inc

Canada19-Jul-18

100%

400-981 Wellington Street West, Ottawa, Ontario, K1Y
2Y1Studio Gobo Limited

UK

17-Aug-18

100%

201 Temple Chambers, 3-7 Temple Avenue, London,
England, EC4Y 0DT

Bitsy SG Limited

UK

17-Aug-18

100%

201 Temple Chambers, 3-7 Temple Avenue, London,
England, EC4Y 0DT

Electric Square Limited

UK

17-Aug-18

100%

201 Temple Chambers, 3-7 Temple Avenue, London,
England, EC4Y 0DT

Alset LtdUK

17-Aug-18

100%

201 Temple Chambers, 3-7 Temple Avenue, London,
England, EC4Y 0DT

Itsy SGD Limited

UK

17-Aug-18

100%

201 Temple Chambers, 3-7 Temple Avenue, London,
England, EC4Y 0DT

d3t Development Ltd

UK

30-Aug-18

100%

201 Temple Chambers, 3-7 Temple Avenue, London,
England, EC4Y 0DT

Ownership^

Registered office

Financial Statements 130/131

Name

Country ofincorporation

Date ofincorporation/acquisition

The Trailerfarm Limited

UK

13-Sep-18

100%

201 Temple Chambers, 3-7 Temple Avenue, London,
England, EC4Y 0DT

Sunny Side Up Creative Inc.

Canada03-Jan-19

100%

410 Boulevard Charest Est, Suite 410, Québec, Québec,Canada, G1K 8G3.

Appsectest LtdUK

22-Jan-19

48%

Unit 13 Orton Enterprise Centre, Bakewell Road,
Peterborough, Cambridgeshire, United Kingdom, PE2
6XU

Keywords Studios Netherlands B.V.

Netherlands

05-Feb-19

100%

Wilhelmina van Pruisenweg 35, 2595AN The Hague, theNetherlands

Wizcorp Inc.

Japan

18-Apr-19

100%

3-10-14, Higashi-Nihonbashi 3-chome, Sunrise
Tachibana 6F, Chuo-ku, Tokyo ZIP 103-0004

Descriptive Video Works Inc.

Canada11-Jun-19

100%

400-725 Granville Street, PO Box 10325, Vancouver BC
V7Y 1G5, Canada

Keywords Germany Holdings GmbHGermany

06-Sep-19

100%

Moriz-Seeler-Strasse 5-7, Franz Ehrlich Haus,12489
Berlin, Germany

TV+SYNCHRON Berlin GmbHGermany

01-Oct-19

100%

Moriz-Seeler-Strasse 5-7, Franz Ehrlich Haus,12489
Berlin, Germany

Ichi Holdings Limited (in liquidation)UK

26-Nov-19

100%

201 Temple Chambers, 3-7 Temple Avenue, London,
England, EC4Y 0DT

Ichi Limited

UK

26-Nov-19

100%

201 Temple Chambers, 3-7 Temple Avenue, London,
England, EC4Y 0DT

Ichi Creative Ltd

USA

26-Nov-19

100%

251 Little Falls Drive, Wilmington, New Castle, DE 19808,
USA

9409-2954 Québec Inc.

Canada04-Dec-19

100%

1751 Richardson Street, Suite 8400, Montreal, Quebec,
H3K 1G6, Canada

Xcelerator Machine Translations
LimitedIreland12-Dec-19

100%

Invent, Dublin City University, Glasnevin, Dublin 9,
IrelandMarching Cube, LLC

USA

22-Jan-20

100%

815A Brazos #334 Austin, TX 78701-2502, USA

Coconut Lizard LimitedUK

25-Jun-20

100%

201 Temple Chambers, 3-7 Temple Avenue, London,
England, EC4Y 0DT

Maverick Media LimitedUK

27-Aug-20

100%

201 Temple Chambers, 3-7 Temple Avenue, London,
England, EC4Y 0DT

g-Net Media, Inc.

USA

24-Nov-20

100%

251 Little Falls Drive, Wilmington, New Castle, DE 19808,
USA

3455 Productions, LLC

USA

24-Nov-20

100%

251 Little Falls Drive, Wilmington, New Castle, DE 19808,
USA

Jinglebell S.r.l.

Italy

10-Dec-20

100%

Via Marco d’Oggiono 12, Milan, Italy

High Voltage Software, Inc.

USA

14-Dec-20

100%2345 Pembroke Ave., Hoffman Estates, IL 60169, USA

HVS Nola LLC

USA

14-Dec-20

100%

201 St. Charles Ave., Suite 2220, New Orleans, LA 70170,
USA

Indigo Pearl LimitedUK

15-Dec-20

100%

201 Temple Chambers, 3-7 Temple Avenue, London,
England, EC4Y 0DT

Lonsdale Miller LimitedUK

15-Dec-20

100%

201 Temple Chambers, 3-7 Temple Avenue, London,
England, EC4Y 0DT

Ownership^

Registered office*indicates a direct subsidiary (all other holdings are indirect, being subsidiaries of various intermediate group holding companies).

^

Proportion of voting rights and ordinary share capital held

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

Name

Country ofincorporation

Date ofincorporation/acquisition

Project Titanium Funding Limited

Jersey06-May-20

Binari Sonori Audio Productions LLC

USA

08-May-14

Descriptive Video Works USA Inc.

USA

KW Studios Limited*

UK

Cord Artists Management Limited

UK

Date ofre-structuring

Re-structuring
details

100%

22-May-20

Liquidated

100%

06-Sep-20

Dissolved

11-Jun-19

100%

07-Oct-20

Dissolved

29-May-13

100%

24-Nov-20

Struck off

07-Apr-18

100%

24-Nov-20

Struck off

Ownership^Keywords Studios plc / Annual Report and Accounts 2020

Notes forming part of the consolidated and company financial statements continued

26 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 2020, P.E.Q. Holdings Limited owned 4.73% (2019: 5.37%) 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 anarm’s length basis:
2020
€’000

2019
€’000

13

73

13

73

2020
€’000

2019
€’000

–

13

–

13

Operating expenses
Canteen charges

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

Italicatessen Limited

The Group paid the following amounts, on an arm’s 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.
2020
€’000

2019
€’000

22

25

22

25

2020
€’000

2019
€’000

258,536

208,352

5,126

15,220263,662

223,572

2020
€’000

2019
€’000

Company – Short term (note 15)

5,126

15,220Company – Long term (note 15)258,536

208,352

263,662

223,572

Operating expenses
Rental payments

The details of key management compensation (being the remuneration of the Directors) are set out in note 10.
As at 31 December 2020 and 2019, the Company had amounts receivable from its subsidiaries as follows:

Receivables from subsidiaries related to investment in acquisitions
Receivables from subsidiaries relating to trading activities

Financial Statements 132/133

27 Business Combinations
2020
€’000

2019
€’000

872

722

2,376

990

Details of goodwill and the fair value of net assets acquired
Book value:
Property, plant and equipment
Right of use assets
Intangible assets
Trade and other receivables – gross
Bad debt provision

–

125

4,069

1,559

–

–

Cash and cash equivalents

9,477

2,112

Trade and other payables(4,904)(3,295)

Lease liabilities(2,376)

(990)

Loan

–

(402)

9,514

821

17,673

1,490

(27)

41

9,363

–

Trade and other payables

1,003

432

Deferred tax liabilities(3,970)–Total fair value adjustments

24,042

1,963

Net assets acquired

33,556

2,784

–

(148)

Goodwill from current year acquisitions

47,112

16,950Total purchase consideration

80,66819,58646,924

15,323

Book value of identifiable assets and liabilities acquired
Fair value adjustments:
Identifiable intangible assets
Identifiable tangible assets
Deferred tax assets

Non-controlling interest

Details of purchase consideration and cash outflows from current acquisitions
Cash

41

238

Deferred consideration contingent on performance

Deferred cash

21,090–Shares to be issued

12,613

4,025

Total purchase consideration

80,66819,586

Fixed number of shares to be issued

503,052

275,975

Cash paid in the period

46,924

15,163

Less: cash and cash equivalent balances transferred(9,477)(2,112)

Net cash outflow arising on acquisition

37,447

13,051

307

535

35,729

7,167

–

(68)

Post-acquisition revenue

7,208

6,066

Pro forma revenue

42,937

13,165Pre-acquisition profit before tax

9,399

151

Post-acquisition profit before tax

2,561

(170)

Pro forma profit before tax

11,960(19)

Related acquisition costs charged through to the Consolidated statement ofcomprehensive income
Details of pro forma revenues and profitability of current acquisitions
Pre-acquisition revenue
Pre-acquisition revenue with Keywords GroupKeywords Studios plc / Annual Report and Accounts 2020

Notes forming part of the consolidated and company financial statements continued

27 Business Combinations continued
The acquisitions made in the 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 acquisitions in the year are set out in thetable [see previous page].
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. These include expertise in the acquired entities, enhancing and growing ourservices capabilities, broadening our service offering, and extending our geographical footprint, further building out our global platform.
The total amount of goodwill arising on business combinations completed in 2020, that is expected to be deductible for tax purposes
was €21.6m.

28 Significant Events and Transactions
The COVID-19 pandemic resulted in restrictions being put in place requiring most of the Group’s studios to be temporarily closed fromMarch onwards. The Group has been able to move most employees to work from home arrangements and whilst this has resulted in someshort term disruption, particularly in the Audio and Testing service lines, it has allowed production to continue across most of the Group’s
operations. Since June, most of the Group’s Audio studios have reopened and from July some activities started to operate from Testingstudios, however at the year end the majority of employees were still working from home.
The Group has demonstrated a strong financial resilience during the period, with continued demand for most of the Group’s services albeit
certain service lines have been held back by COVID-19 operational and market disruption particularly in Testing, Audio and Localization.
The significant events and transactions (together with relevant judgements, estimates and assumptions) that have occurred in the period
relating to the effects of the COVID-19 pandemic are summarised below:
Impairment review:As presented in note 11, the Group performs a full assessment of the carrying value of goodwill on an annual basis. Through the year
interim assessments were made using updated forecasts and projections taking into account the impact of COVID-19. The result of theseassessments was that no impairment was required.
In addition specific impairment reviews were performed for other intangible asset classes where it was considered COVID-19 had thepotential to trigger an impairment. As outlined in note 11, due to the uncertainty caused by COVID-19 an impairment charge of €2,060k
was recognised in the period, related to intangible assets in certain early technology pre-revenue businesses.
Credit risk:
The Group’s exposure to credit risk is limited to the carrying amount of financial assets (Trade receivables) recognised at the balance sheet
date. The Group has not seen a significant increase in credit risk during the pandemic, largely due to the resilience of the broader video
games industry. However as outlined in note 23, due to the uncertainty caused by the pandemic, the Group has taken a conservative viewon the recoverability of overdue receivables, when calculating Credit impaired receivables, and thus impaired receivables have increasedto €1.7m at 31 December 2020. Credit risk continues to be monitored and managed closely by the Group, with a heightened awarenessdue to the pandemic.
Government subsidies claimed:
The Group applied for COVID-19 government subsidies in various jurisdictions, introduced in response to the global pandemic. Judgement
has been applied in determining both the eligibility for these programs, and the presentation of the subsidies in the financial statements.
In certain jurisdictions COVID-19 supports displaced ongoing government incentives and reliefs, principally MMTC. In these instances,
the Group has elected to present the ongoing incentives as if they have been received, reducing the amounts recognised as COVID-19
government subsidies accordingly. Included in the Consolidated statement of comprehensive income are government subsidies recognisedof €9.2m (net of amounts recognised as other government incentives). The supports relate to wage subsidies designed to help prevent job
losses and better position companies to resume normal operations following the crisis.

29 Events after the Reporting Date
Acquisition of Heavy Iron
On 17 September 2020, the Group announced that it had entered into a conditional agreement to acquire the entire issued share capitalof Heavy Iron Studios, Inc. (“Heavy Iron”), a provider of specialised game development services, for total consideration of up to US$13.3m.
Under the terms of the acquisition, subject to certain closing conditions, Keywords agreed to pay initial consideration of US$4m in cash
and the equivalent of US$0.5m in new ordinary shares to the seller on the first anniversary of the acquisition. In addition, deferredconsideration of up to US$8.8m is payable to the seller, in a mix of cash and shares, based on performance targets being met by the firstand second year anniversaries of the acquisition. Following on the resolution of the closing conditions, on 13 January 2021 Keywords
announced that it completed the acquisition of Heavy Iron for the terms envisaged under the conditional agreement.

Financial Statements 134/135

Acquisition of Tantalus
On 18 March 2021, the Group announced the acquisition of Tantalus Media Pty Ltd (“Tantalus”), for a total consideration of up to
US$46.8m. Tantalus is a leading and prolific developer of high quality, multi-platform titles. The acquisition marks Keywords’ entry into theAustralian video games market. Under the terms of the 85% investment, Keywords will pay a maximum amount of US$46.8m, comprising
initial consideration of US$30.6m (US$18.4m in cash from existing resources and the equivalent of US$12.2m in new ordinary shares) anddeferred consideration of up to US$16.2m, in a mix of cash and new ordinary shares, based on performance targets for Tantalus over two
years. The new ordinary shares to be issued as part of the initial consideration and the deferred consideration will be subject to a oneyear lock-in period and orderly market provisions for a further one year period. Keywords has acquired 85% of the issued share capitalof Tantalus’ parent company, Keywords Australia Pty Ltd (“Keywords Australia”), a new company set up for this transaction. Put and call
options are in place that would allow the Group to buy the 15% shareholding in Keywords Australia in 3 years from the vendor’s wholly
owned investment company.

Keywords Studios plc / Annual Report and Accounts 2020

Alternative performance measures

The Group reports a number of alternative performance measures (“APMs”) to present the financial performance of the business, that are
not GAAP measures as defined under IFRS. The Directors believe that these measures, in conjunction with the IFRS financial information,
provide the users of the financial statements with additional information to provide a more meaningful understanding of the underlying
financial and operating performance of the Group. The measures are also used in the Group’s internal strategic planning and budgeting
processes and for setting 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.
The principal measures used by the Group are set out below:
Organic revenue growth – Acquisitions are a core part of the Group’s growth strategy. Organic revenue growth measures are used
to help understand the underlying trading performance of the Group excluding the impact of acquisitions. Organic revenue growth iscalculated by adjusting the prior year revenues, adding pre-acquisition revenues for the corresponding period of ownership to provide
a like for like comparison with the current year, and applying the prior year’s foreign exchange rates to both years.
Constant exchange rates (“CER”) – Given the international nature of the Group’s operations, foreign exchange movements can have an
impact on the reported results of the Group when they are translated into the Group’s reporting currency of Euros. In order to understandthe underlying trading performance of the business, revenue is also presented using rates consistent with the prior year in order toprovide year over year comparability.
Adjusted profit and earnings per share measures – Adjusted profit and earnings per share measures are used to provide
management and other users of the financial statements with a clear understanding of the underlying profitability of the business overtime. Adjusted profit measures are calculated by adding the following items back to the equivalent GAAP profit measures:–– Amortisation of intangible assets – Customer relationships and music licence amortisation commences on acquisition, whereas
intellectual property/development costs amortisation commences when the product is launched. These costs, by their nature, can varyby size and amount each year. As a result, amortisation of intangibles is added back to assist with the understanding of the underlying
trading performance of the business and to allow comparability across regions and categories.
–– Costs of acquisition and integration – The level of acquisition activity can vary each year and therefore the costs associated withacquiring and integrating businesses are added back to assist with the understanding of the underlying trading performance of
the Group.
–– Share-based payments – The Group uses share-based payments as part of remuneration to align the interests of senior management
and employees with shareholders. These are non-cash charges and the charge is based on the Group’s share price which can change.
The costs are therefore added back to assist with the understanding of underlying trading performance.
–– Foreign exchange gains and losses – The Group does not hedge foreign currency translation exposures. The effect on the Group’s
results of movements in exchange rates can vary each year and are therefore added back to assist with understanding the underlying
trading performance of the business.
–– COVID-19 government subsidies claimed – The Group applied for COVID-19 government subsidies in various jurisdictions,introduced in response to the global pandemic. These subsidies have been added back in order to present adjusted profit and cash flow
measures consistently year-on-year.
–– Investment income – The Group acquired a minor holding in Hutch Games Limited, when Keywords purchased Liquid Development
studio in 2015. In 2020 Hutch Games Limited was acquired and the Group received €1.4m proceeds in December. As the gain has arisen
outside the normal trading activities of the Group, the income has been added back to assist with the understanding of the underlying
trading performance.
Free cash flow measures – The Group aims to generate sustainable cash flow (Free cash flow) in order to support its acquisition program
and to fund dividend payments to shareholders. Free cash flow is measured as Net cash generated by/(used in) operating activities after
capital expenditure, payments of principal on lease liabilities, interest and tax payments, but before acquisition and integration cash
outlay, investment income and dividend payments. Adjusted free cash flow is a measure of cash flow adjusting for capital expenditure thatis supporting growth in future periods (represented by capital expenditure in excess of depreciation). In the current year the measure has
also been adjusted for COVID-19 subsidies claimed given the one-time nature of the income.
The remainder of this section provides a reconciliation of the APMs with the relevant IFRS GAAP equivalent.

Supplementary information 136/137

Service line analysis
The following table presents revenue growth by service line at both actual exchange rates (“AER”) and constant exchange rates (“CER”).
Constant exchange rates are calculated by retranslating current year reported numbers at the corresponding 2019 foreign exchange rates,in order to give management and other users of the financial statements better visibility of underlying trading performance against theprior year.
2020
Revenue
AER
€m

2020
Revenue
CER€m

Art Creation & Marketing

57.3

58.5

Game Development

80.0

81.0

Audio*

47.2

47.8

41.9

Functional Testing

78.5

80.0

68.9

13.9%

16.1%

Localization*

45.4

45.9

47.1

(3.6)%(2.5)%

Localization Testing

23.3

23.6

22.6

3.1%

4.4%

Player Support*

2019
Revenue
AER
€m

2020
GrowthAER%

2020
Growth
CER
%

43.6

31.4%

34.2%

66.3

20.7%

22.2%

12.6%

14.1%

41.8

42.4

36.1

15.8%

17.5%

373.5

379.2

326.5

14.4%

16.1%

The prior year comparative has been re-classified to reflect the current year presentation as the Directors consider this to be more meaningful.

Pro forma revenue
Pro forma revenue is calculated by adding pre-acquisition revenues of current year acquisitions to the current year revenue numbers,
to illustrate the size of the Group had the acquisitions been included for a full financial year.

2020
Revenue
AER
€m

2020
Pre-acquisition
revenue
AER
€m

2020
Pro forma
revenue
AER€m

Art Creation & Marketing

57.3

15.9

73.2

Game Development

80.0

18.0

98.0

Audio

47.2

1.4

48.6

Functional Testing

78.5

–

78.5

Localization

45.4

0.4

45.8

Localization Testing

23.3

–

23.3

Player Support

41.8

–

41.8

373.5

35.7

409.2

Keywords Studios plc / Annual Report and Accounts 2020

Alternative performance measures continued

Organic revenue at constant exchange rates
Organic revenue at constant exchange rates is calculated by adjusting the prior year revenues, adding pre-acquisition revenues for thecorresponding period of ownership, and applying the 2019 foreign exchange rates to both years.

2019
Revenue
AER
€m

2019
Pre-acquisition
revenue
AER
€m

2019
Like for likerevenue
AER
€m

2020
Revenue
growthCER€m2020
Revenue
CER
€m

2020
Organic
revenue growth
CER%

Art Creation & Marketing

43.6

6.0

49.6

8.9

58.5

17.9%

Game Development

66.3

2.9

69.2

11.8

81.0

17.1%

Audio*

41.9

3.3

45.2

2.6

47.8

5.8%

Functional Testing

68.9

–

68.9

11.1

80.0

16.1%

Localization*

47.1

0.7

47.8

(1.9)

45.9

(4.0)%

Localization Testing

22.6

–

22.6

1.0

23.6

4.4%

Player Support

36.1

–

36.1

6.3

42.4

17.5%

326.5

12.9

339.4

39.8

379.2

11.7%

*

The prior year comparative has been re-classified to reflect the current year presentation as the Directors consider this to be more meaningful.

Adjusted operating costs
This comprises Administrative expenses as reported in the Consolidated statement of comprehensive income, adding back share option
expense, costs of acquisition and integration, amortisation and impairment of intangible assets, depreciation, non-controlling interest anddeducting bank charges. In order to present the measure consistently year-on-year, the impact of COVID-19 government subsidies claimed
is also excluded.
2020
€’000

2019
€’000

Consolidated statement of comprehensive income(102,090)(98,687)

Consolidated statement of comprehensive income

15,3509,775

Costs of acquisition and integration

Consolidated statement of comprehensive income

2,650

4,348

Amortisation and impairment of intangible assets

Consolidated statement of comprehensive income

8,808

7,318

Depreciation – property, plant and equipment

Note 13

8,983

7,295

Depreciation – right of use assets

Note 12

8,402

7,849

Non-controlling interest

Consolidated statement of comprehensive income

85

113

Bank charges

Note 6

(552)

(629)

COVID-19 government subsidies claimed

Consolidated statement of comprehensive income

Calculation

Reference in Financial Statements

Administrative expenses
Share option expense

Adjusted operating costs
Revenue from contracts with customers
Adjusted operating costs as a % of revenue

Consolidated statement of comprehensive income(9,231)–(67,595)(62,618)

373,538

326,463

18.1%

19.2%

Supplementary information 138/139

Adjusted operating profit
The Adjusted operating profit consists of the Operating profit as reported in the Consolidated statement of comprehensive income,adjusted for share option expense, costs of acquisition and integration and amortisation and impairment of intangible assets. In orderto present the measure consistently year-on-year, the impact of investment income and COVID-19 government subsidies claimed arealso excluded.

Calculation

Reference in Financial Statements

2020
€’000

2019
€’000

Operating profit

Consolidated statement of comprehensive income

41,11921,542

Share option expense

Consolidated statement of comprehensive income

15,3509,775

Costs of acquisition and integration

Consolidated statement of comprehensive income

2,650

4,348

Amortisation and impairment of intangible assets

Consolidated statement of comprehensive income

8,808

7,318

Investment income

Consolidated statement of comprehensive income(1,437)–COVID-19 government subsidies claimed

Consolidated statement of comprehensive income

Adjusted operating profit
Revenue from contracts with customers

Consolidated statement of comprehensive income

Adjusted operating profit as a % of revenue(9,231)–

57,25942,983

373,538

326,463

15.3%

13.2%

EBITDAEBITDA comprises Operating profit as reported in the Consolidated statement of comprehensive income, adjusted for amortisation andimpairment of intangible assets, depreciation, and deducting bank charges.

Calculation

Reference in Financial Statements

2020
€’000

2019
€’000

Operating profit

Consolidated statement of comprehensive income

41,11921,542

Amortisation and impairment of intangible assets

Consolidated statement of comprehensive income

8,808

7,318

Depreciation – property plant and equipment

Note 13

8,983

7,295

Depreciation – right of use assets

Note 12

8,402

7,849

Bank charges

Note 6

EBITDA

(552)

(629)

66,76043,375

Keywords Studios plc / Annual Report and Accounts 2020

Alternative performance measures continued

Adjusted EBITDA
Adjusted EBITDA comprises EBITDA, adjusted for share option expense, costs of acquisition and integration and non-controlling interest.
In order to present the measure consistently year-on-year, the impact of investment income and COVID-19 government subsidies claimed
are also excluded.
2020
€’000

2019
€’000

As above

66,76043,375

Consolidated statement of comprehensive income

15,3509,775

Costs of acquisition and integration

Consolidated statement of comprehensive income

2,650

4,348

Non-controlling interest

Consolidated statement of comprehensive income

85

113

Investment income

Consolidated statement of comprehensive income(1,437)–COVID-19 government subsidies claimed

Consolidated statement of comprehensive income(9,231)–

74,17757,611

Consolidated statement of comprehensive income

373,538

326,463

19.9%

17.6%

Calculation

Reference in Financial Statements

EBITDA
Share option expense

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

Adjusted profit before tax
Adjusted profit before tax comprises Profit before taxation as reported in the Consolidated statement of comprehensive income, adjusted
for share option expense, costs of acquisition and integration, amortisation and impairment of intangible assets, non-controlling interest,
foreign exchange gains and losses, and unwinding of discounted liabilities. In order to present the measure consistently year-on-year, theimpact of investment income and COVID-19 government subsidies claimed are also excluded.
2020
€’000

2019
€’000

Consolidated statement of comprehensive income

32,494

17,371

Share option expense

Consolidated statement of comprehensive income

15,3509,775

Costs of acquisition and integration

Consolidated statement of comprehensive income

2,650

4,348

Amortisation and impairment of intangible assets

Consolidated statement of comprehensive income

8,808

7,318

Non-controlling interest

Consolidated statement of comprehensive income

85

113

Foreign exchange (gain)/loss

Note 6

6,103

1,658

Unwinding of discounted liabilities – deferredconsideration

Note 6132

330

Investment income

Consolidated statement of comprehensive income(1,437)–COVID-19 government subsidies claimed

Consolidated statement of comprehensive income(9,231)–

54,95440,913

373,538

326,463

14.7%

12.5%

Calculation

Reference in Financial Statements

Profit before tax

Adjusted profit before tax
Revenue from contracts with customers
Adjusted profit before tax as a % of revenue

Consolidated statement of comprehensive income

Supplementary information 140/141

Adjusted effective tax rate
The Adjusted effective tax rate is the Taxation expense as reported in the Consolidated statement of comprehensive income, adjusted forthe tax impact of the adjusting items in arriving at Adjusted profit before tax, as a percentage of the Adjusted profit before tax.
2020
€’000

2019
€’000

As above

54,95440,913

Taxation

Consolidated statement of comprehensive income

11,027

7,462

Effective tax rate before tax on adjusting items

Taxation/Adjusted profit before tax

20.1%

18.2%

785

1,703

11,812

9,165

21.5%

22.4%

Calculation

Reference in Financial Statements

Adjusted profit before tax

Tax arising on bridging items to Adjusted profit
before tax^
Adjusted taxation
Adjusted effective tax rate

Adjusted taxation/Adjusted profit before tax^	Being mainly the tax impact of amortisation of intangible assets €1.8m, foreign exchange €1.2m, share option expense €0.7m, less COVID-19 government subsidies claimed€2.6m and investment income €0.3m, while in the prior year the tax impact was mainly due to amortisation of intangible assets €1.7m.

Adjusted earnings per share
The Adjusted profit after tax comprises the Adjusted profit before tax, less the Taxation expense as reported in the Consolidated
statement of comprehensive income, adjusted for the tax impact of the adjusting items in arriving at Adjusted profit before tax.
The Adjusted earnings per share comprises the Adjusted profit after tax divided by the non-diluted weighted average number of sharesas reported in note 8.
2020
€’000

2019
€’000

As above

54,95440,913

Consolidated statement of comprehensive income(11,027)(7,462)(785)(1,703)43,142

31,74870,800,455

65,081,403

Calculation

Reference in Financial Statements

Adjusted profit before tax
TaxationTax arising on bridging items to Adjusted profit
before tax^
Adjusted profit after tax
Denominator (weighted average number of
equity shares)

Note 8€c€c

Adjusted earnings per share

60.93

48.78

Adjusted earnings per share % growth

24.9%

7.2%

^	Being mainly the tax impact of amortisation of intangible assets €1.8m, foreign exchange €1.2m, share option expense €0.7m, less COVID-19 government subsidies claimed€2.6m and investment income €0.3m, while in the prior year the tax impact was mainly due to amortisation of intangible assets €1.7m.

Keywords Studios plc / Annual Report and Accounts 2020

Alternative performance measures continued

Return on capital employed (“ROCE”)
ROCE represents the Adjusted profit before tax (excluding net interest costs, unwinding of discounted lease liabilities and bank charges,
and also adjusted to include pre-acquisition profits of current year acquisitions), expressed as a percentage of the capital employed. As theGroup continues to make multiple acquisitions each year, the calculation further adjusts the Adjusted profit before tax and the capital
employed as if all the acquisitions made during each year were made at the start of that year.
Capital employed represents Total equity as reported on the Consolidated statement of financial position adding back employee defined
benefit plan liabilities, cumulative amortisation of intangible assets (customer relationships), acquisition related liabilities (deferred andcontingent consideration), together with loans and borrowings, while deducting cash and cash equivalents.
2020
€’000

2019
€’000

54,95440,913Calculation

Reference in Financial Statements

Adjusted profit before tax

As above

Interest received

Note 6(76)(74)

Bank charges

Note 6552

629

Interest expense

Note 6

1,071

934

Unwinding of discounted liabilities – lease liabilities

Note 6843

694

Pre-acquisition profits of current year acquisitions

Note 27

9,399

151

66,74343,247371,235

222,958

Adjusted profit before tax including
pre-acquisition profit and excluding net interest
Total equity

Consolidated statement of financial position

Employee defined benefit plans

Consolidated statement of financial position

2,693

2,049

Cumulative amortisation of intangibles assets(customer relationships)

Note 11

25,17820,017

Deferred and contingent consideration

Note 18

20,802

6,035

Loans and borrowings

Note 20

195

59,751

Cash and cash equivalents

Consolidated statement of financial position

Capital employed
Return on capital employed

Adjusted profit before tax including pre acquisition
profit and excluding net interest expense/capital
employed(103,070)(41,827)

317,033

268,983

21.1%

16.1%

Supplementary information 142/143

Free cash flow^
Free cash flow represents Net cash generated by/(used in) operating activities as reported in the Consolidated statement of cash flows,
adjusted for acquisition and integration cash outlay, capital expenditure, net interest paid, payments of principal on lease liabilities andis presented both before and after taxation paid. In order to present the measure consistently year-on-year, the impact of investment
income is also excluded.
2020
€’000

2019
€’000

Consolidated statement of cash flows

76,42032,781

Costs of acquisition and integration

Consolidated statement of comprehensive income

2,650

4,348

Fair value adjustments to contingent consideration

Consolidated statement of cash flows

66

(493)

Fair value adjustments to right of use assets

Consolidated statement of cash flows

(434)

–

Acquisition of property, plant and equipment

Consolidated statement of cash flows(13,908)(13,145)

Investment in intangible assets

Consolidated statement of cash flows

(259)

(391)

Investment income

Consolidated statement of comprehensive income(1,437)–

Interest received

Consolidated statement of cash flows

76

74

Interest paid

Consolidated statement of cash flows(1,722)(2,130)

Payments of principal on lease liabilities

Consolidated statement of cash flows(8,170)(7,355)53,282

13,6894,459

13,28857,741

26,977

Calculation

Reference in Financial Statements

Net cash generated by/(used in) operating activities
Acquisition and integration cash outlay:

Free cash flow after tax
Taxation paid

Consolidated statement of cash flows

Free cash flow before tax^	Please note Free cash flow is presented on a pre IFRS 16 basis as the Directors consider this to be more meaningful.

Adjusted free cash flow^
Adjusted free cash flow is a measure of cash flow adjusting for capital expenditure that is supporting growth in future periods (asmeasured by capital expenditure in excess of maintenance capital expenditure). In order to present the measure consistently year-on-year,
the impact of COVID-19 government subsidies claimed is also excluded.

Calculation

Reference in Financial Statements

2020
€’000

2019
€’000

Free cash flow before tax

As above

57,741

26,977

Acquisition of property, plant and equipment

Consolidated statement of cash flows

13,90813,145

Depreciation – property, plant and equipment

Consolidated statement of cash flows(8,983)(7,295)

4,925

5,850

(9,231)–53,43532,827

2020
€’000

2019
€’000

Capital expenditure in excess of depreciation:

Capital expenditure in excess of depreciation
COVID-19 government subsidies claimed

Consolidated statement of comprehensive income

Adjusted free cash flow^	Please note Adjusted free cash flow is presented on a pre IFRS 16 basis as the Directors consider this to be more meaningful.

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

Calculation

Reference in Financial Statements

Adjusted free cash flow

As above

53,43532,827

Adjusted profit before tax

As above

54,95440,913Adjusted cash conversion ratio

Free cash flow before tax and capital expenditure
in excess of depreciation, as a % of Adjusted profit
before tax

97.2%

80.2%

^

Please note the prior year has been adjusted to the current year presentation as the Directors consider this to be more meaningful.

Keywords Studios plc / Annual Report and Accounts 2020

Company information

Directors

Andrew Day
Georges Fornay
Charlotta Ginman
Ross Graham
Giorgio Guastalla
Jon Hauck
David Reeves
Sonia Sedler

Secretary

One Advisory Limited
201 Temple Chambers
3-7 Temple Avenue
LondonEC4Y 0DT

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

Ellason LLP
1 Park Road
Hampton Wick
Kingston upon Thames
SurreyKT1 4AS

Principal Bankers

Barclays Bank
27 Soho Square
LondonW1D 3QR
Citibank Europe plc
1 North Wall Quay
Dublin 1
HSBC Bank plc
1 Grand Canal Square
Grand Canal Harbour
Dublin 2
Silicon Valley Bank
14-18 Finsbury Square
LondonEC2A 1BR

Nominated Adviser and Broker

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

Financial PR Adviser

MHP Communications
60 Great Portland Street
LondonW1W 7RT

Solicitors

DWF LLP
20 Fenchurch Street
LondonEC3M 3AG

Printed on Evolution Indigo,a 100% recycled paper stock.

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

www.keywordsstudios.com