T R U LY
I M M E R S I V E
KEYWORDS STUDIOS PLC

2021 ANNUAL REPORT AND ACCOUNTSOVERVIEW

S T R AT E G I C R E P O R T

GOVERNANCEF I N A N C I A L S TAT E M E N T S

S U P P L E M E N TA R Y I N F O R M AT I O N

WELCOMES TA R T N E W
C A M P A I G N ?
YESNO

KEYWORDS STUDIOS PLC

ANNUAL REPORT AND ACCOUNTS 2021

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 handin hand with our clients, our diverse group of digitally native
Keywordians provide technology-enabled solutions that turn
extraordinary ideas into great interactive content.
We’re on a mission to be the world’s most trusted partner intechnical and creative solutions for the video games industry
and beyond. We will be a sustainable business that positively
contributes to the environment and our communities acrossthe globe.
Welcome to our open and evolving world that brings yourstories to life!

Overview

Governance

02
03
04
05
07

59
61
62
66
69
82
84
86
88

2021 highlights
Company overview
Meet the new Keywordian
Chairman’s statement
Investment case

Strategic report
10
15
16
20
22
25
34
37

53
57

Chief Executive Officer’s review
Market opportunity
Our business model
Our strategy
Key performance indicators
Service line review
Our people, our culture
Responsible business report
39
People (including DE&I)
42
Client43
Planet47
Community
48
Governance50
Non-financial information
statement
51
Section 172(1) statement
Financial and operating review
Principal risks and uncertainties

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

Financial statements
89I ndependent Auditor’s report to themembers of Keywords Studios plc
94 Consolidated statement of comprehensive
income95 Consolidated statement of financial
position
96 Consolidated statement of changes inequity97 Consolidated statement of cash flows
98 Notes forming part of the consolidated
financial statements
126 Company statement of financial position
127 Company statement of changes in equity
127 Company statement of cash flows
128 Notes forming part of the Company
financial statements
Supplementary information

BERTRAND BODSONCHIEF EXECUTIVE OFFICER

132 Alternative performance measures
138 Key disclaimers
138 Company information

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GOVERNANCEF I N A N C I A L S TAT E M E N T S

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TRULY IMMERSEDMEET THE KEYWORDIANS

01

PRISCILA DE F R E I TA S C A I A D O A LM E I DASTUD IO HEAD F OR B R AZ I L
TERESÓ PO LIS , B R AZ I LLEVELKEYWORDS STUDIOS PLC

ANNUAL REPORT AND ACCOUNTS 2021

72

P R I S C I L A
SKILLS:M O T I VAT I N GGAME GENRE:A C T I O N -A D V E N T U R E

STRENGTH:C O M M U N I C AT I O N –IT'S KEY TO BUILDINGT R U S T, A N D W I T H T R U S T
W E C R E AT E B E T T E R
R E L AT I O N S H I P S

K E Y W O R D S H I G H L I G H T:
D E F I N I T E LY T H E P E O P L E
I W O R K W I T H E V E R Y D AY.
T E A M AW E S O M E ! M U I T O
FORTE! (WHICH MEANS" VERY STRONG" )E N E R G Y:
M O R E G A M E A C C E S S I B I L I T Y,
INCLUSIVIT Y AND
T E C H I N N O VAT I O N

I'm proud of growing ourteam in Brazil to be thebest in the region

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GOVERNANCEF I N A N C I A L S TAT E M E N T S

S U P P L E M E N TA R Y I N F O R M AT I O N

2021 HIGHLIGHTSKEYWORDS STUDIOS PLC

ANNUAL REPORT AND ACCOUNTS 2021

02

D E L I V E R I N G
A N O T H E R W I N N I N G
P E R F O R M A N C E
FINANCIALREVENUE€512.2m
A DJ U ST E D E B ITDA*€110.1mB A SI C E A R N I N GS P ER
SH A R E

45.16c21€512.2m

O RGAN IC RE VE N UE GROWTH* 21

19.0%

20

€373.5m

20

11.7%

19
+37.1%€326.5m

19
+19%

15.5%

21

€110.1m

20€74.2m19+48.4%€57.6mMargin 21.5% (2020: 19.9%)21

45.16c20

30.32c19+48.9%

15.23c19.0%
PRO F IT BE FO RE TAX*

€48.0mADJUSTE D E ARN IN GS PE R
SHARE*

89.24c21€48.0m20€32.5m19+47.7%€17.4m21

89.24c2060.93c19+46.5%

48.78cE B I TDA*

€85.7mA DJ U STE D P RO F I T B E FO RE
TA X*€86.0mTOTA L D I V I D E N D P E R
S HA RE2.15p

21€85.7m20€66.8m19+28.3%€43.4mMargin 16.7% (2020: 17.9%)
21€55.0m19+56.4%€40.9mMargin 16.8% (2020: 14.7%)
21

2.15p

20

–

19
+56.5%

0.58p*** Alternative performance measures** Interim dividend only
The Group reports certain alternative performance measures (APMs) to present the financial performance of the business which are not GAAP measures as defined by International Financial Reporting Standards (IFRS). The Directors believe these measuresprovide valuable additional information for the users of the financial information to understand the underlying trading performance of the business. In particular, adjusted profit measures are used to provide the users of the financial statements with a clear
understanding of the underlying profitability of the business over time.
For full definitions and explanations of these measures and a reconciliation to the most directly referenceable IFRS line item, please see pages 133 to 137.

€86.0m20

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GOVERNANCEF I N A N C I A L S TAT E M E N T S

S U P P L E M E N TA R Y I N F O R M AT I O NCOMPANY OVERVIEWService lines

Seattle03

ST U D I O S I N
2 3 CO U N T R I E S

ChicagoMexico City

74

Liverpool

Dublin HQ
OttawaVancouver

Leamington Spa
Newcastle

Montreal

AustinRaleigh

Portsmouth

Quebec City

OrlandoBrighton

KEYWORDS STUDIOS PLC

ANNUAL REPORT AND ACCOUNTS 2021

New Orleans

TH E

Art Services
Marketing Services
Game Development
Audio Services
Functional Testing
Localization
Localization Testing
Player Support

LondonSaint Jerome

Beijing

Bucharest
BerlinYanjiao
DalianKatowice

M I SSIO N
Melbourne
New Delhi

Los Angeles

Pune

PortlandBangalore

MadridChengduBarcelona

It’s our mission to be the world’s
leading technical and creative
solutions platform for the video
games industry and beyond.
Welcome to our open andevolving world.
Keywords Studios now has 74 studios, in over
40 cities, across 23 different countries worldwide.
We provide a full set of integrated services,
combining a presence that is local to our clientsin key gaming clusters with good access to skilled
talent pools across five continents.

Volgograd

Zhengzhou

ParisSaint Petersburg

The Hague
Hamburg

Krakow

Tokyo

Milan
São Paulo
Rio de Janeiro

SingaporeRome

AVE R AG E N U MB E R O F
E MPLOY E E S I N 2021

9,493

Yogyakarta

ManilaTaipeiShanghai
KunshanOVERVIEW

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GOVERNANCEF I N A N C I A L S TAT E M E N T S

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MEET THE NEW KEYWORDIAN

04

Q C O N G R AT S B E R T R A N D !
C A N YO U T E L L U S A B O U T
W H AT F I R S T AT T R A C T E D
YO U TO T H I S R O L E ?

KEYWORDS STUDIOS PLC

ANNUAL REPORT AND ACCOUNTS 2021

Keywords presented such an interesting
opportunity to someone with my background andit felt like the perfect match for me and my skillset.
Over the years, I have spent much of my career
leading on broader digital transformations, mostrecently at Novartis, and I have been fortunate
enough to drive growth strategies acrossbusinesses of scale.

Q W H AT A R E T H E S K I L L S
A N D EX P E R I E N C E S YO U
BRING TO KEYWORDS?
What I bring to Keywords is a global outlook,experience of developing strategic partnerships,
and the ability to drive the business forward whileleveraging technology. I know the Board was
keen to bring in an outside perspective to thebusiness and to make a hire that matched theirambitions and I truly believe in their outlook forthis incredible organisation.

them get to market with their ever-advancing
intellectual property to meet the exacting
standards of video gamers today.
Third, while Keywords already has scale with over
10,000 talented people across the business, there
are clear opportunities to build on the Group’s
strong platform to continue to drive significant andsustainable growth.

Q W H AT D O Y O U S E E A S
THE KEY OPPORTUNITIESFOR THIS BUSINESS?

We have amazing, talented people at Keywords
and there has never been demand like there istoday for our talent. So, we are looking at how we
can continue to be a magnet for talent, what we
can do to enhance career journeys at Keywords
and how we can elevate the right people acrossour service lines to help propel us forward.
Finally, we are also keen to explore some adjacentmarket opportunities – we have already started
building an internal Media & Entertainment
Dubbing and Subtitling capability and there may
be opportunities to build on this through M&A as
the broader entertainment industries increasingly
converge with the video games industry’s models.
We are also looking at how we could support
developments in e-learning and the metaverse, as
well as other areas, where we see a clear overlap
between our skillset and service line capabilities.

Q&A

When I look at a business, I always look to join
one that has strong underlying assets and thatis certainly the case with Keywords. It has great
foundations as a proven market leader that
supplies almost all of the major developers in asector that has huge growth potential.

That would be exciting enough but, on top of that,
I believe the quality of the platform that’s been
built, and its attractiveness to potential partners
and acquisition targets, provides the Group with aclear opportunity to continue to grow its services
and scale in a global market for which service
provision remains highly fragmented.

Put together, these offer a hugely exciting
opportunity and I'm looking forward to leading theGroup's ambitious team to deliver an ever morecompelling proposition for the buoyant video
games market, and beyond.

While I have no direct video games experience,
I have multiple years of digital transformation,technology, media and social experience. In
addition, the Group already has over 10,000
passionate gamers and a strong team of industry
experts in senior positions across the businessand I really believe that my diverse experiences
will help to bring a fresh perspective to the Group,
as well as a strong strategic focus on leading
Keywords to deliver an ever more compelling
proposition for this buoyant market, and beyond.

Q W H AT A R E Y O U R
INITIAL IMPRESSIONSOF KEYWORDS?

While it is still very early days, I have spentmuch of my time meeting people across thebusiness, visiting studios around the worldand speaking to our clients and it has made a
few things abundantly clear. First, Keywords
is full of incredibly talented, experienced andentrepreneurial leaders who have a serious
passion for video games and a clear desire to takethis business forward.
Second, the Group is in an enviable market
leading position, in a high growth industry that
continues to move towards external service
provision. Keywords has an impressive base oflong-standing clients, with almost all the leading
publishers and developers relying on us to help

Growing this business through selective acquisitions
remains an integral part of the Keywords strategy andwe continue to see an opportunity to build out our
scale in Game Development which has strong growthprospects and is still undersized relative to what
our customers spend on Game Development. We also
want to continue to build out our marketing capabilities
where our current offering only provides about a thirdof the services that our clients need in this area.
Elsewhere, we are always on the look-out for goodquality businesses in our other service lines. A good
example of this was the AMC Art acquisition in 2021,
which gave us access to the talent pool in Romania
and the potential to expand into Player Support andTesting in that country. We’re constantly looking forbusinesses and people who are like-minded andshare our drive and when it feels right we’re really
happy to bring them into our Keywords family.
Digital transformation is also a clear opportunity,
and we are keen to explore technologies that wecan bring in to make our services more efficientand deliver additional value for our customers, aswell as to expand our services.

The business is fortunate to already work with
23 of the top 25 publishers. This allows us to build
strategic partnerships with them, as we have aplace at the table from which we can create andcapture more value together.

BERTRAND BODSONCHIEF EXECUTIVE OFFICEROVERVIEW

S T R AT E G I C R E P O R T

GOVERNANCEF I N A N C I A L S TAT E M E N T S

S U P P L E M E N TA R Y I N F O R M AT I O N

CHAIRMAN’S STATEMENT

05

KEYWORDS STUDIOS PLC

ANNUAL REPORT AND ACCOUNTS 2021

Keywords staff of some 10,000
have very much put their collective"shoulder to the wheel"

T H E
G E N E R A L
ROSS GRAHAM CHAIRMANL E V E L 74
XP 8This, my ninth Chairman's
statement since Keywords’
IPO in July 2013, looks back onanother year of strong results
and delivery on our strategy,
and looks forward to one of reenergisation with new ambition.
The increase in revenues to €512.2m represented
actual growth of 37.1% and Organic Revenue
growth of 19.0%. Adjusted EBITDA grew 48.4%
versus 2020, albeit assisted by a low level ofcosts as a result of COVID-19. While the final
Adjusted PBT margin of 16.8% benefitted fromthese reduced costs, it nonetheless evidences our
medium to long-term margin expectations of c.15%
is very achievable.
The Group completed six high quality acquisitions
in Australia, UK, Romania, and the US in 2021,
extending its scale and capabilities to Game
Development, Art Creation and Marketing, inline with our strategy to become the external
provider of choice across all our service lines forour global client base and giving the Group Pro
Forma Revenue of €528.5m as it exited 2021 (2020:€409.2m).
In the context of the Group’s ongoing strong
financial performance we are recommending a final
dividend of 1.45p, giving a total dividend of 2.15p
for the full year (having suspended our dividend
programme in 2020).
Following the early retirement for health reasonsof Andrew Day, I would like to express the Board’s
gratitude to all of Keywords’ Senior Management
Team for ensuring that the Group continued
to deliver exceptional results in 2021 and forPage 1/2

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CHAIRMAN’S STATEMENT CONTINUEDKEYWORDS STUDIOS PLC

ANNUAL REPORT AND ACCOUNTS 2021

06

enabling a smooth transition to the appointment
of Bertrand Bodson as the Group’s new CEO in
December 2021. In Bertrand, the Group has a new
CEO whose talents, expertise and leadership skills
are uniquely tailored to take Keywords forward forthe next phase of its remarkable journey. Indeed,
it is testimony to the unparalleled positioning of
Keywords in the video games world that we havebeen able to attract someone of Bertrand's calibre.
My fellow Non-Executive Directors also deservemy thanks for their support in directing thebusiness during the transition to a new CEO, andensuring we had an effective CEO recruitment
process. In addition, we have recruited two new
Non-Executive Directors in anticipation of theretirements of David Reeves (Senior Independent
Director and Chair of the Remuneration
Committee) at the next AGM and of Giorgio
Guastalla, the Keywords founder, as announced
recently. In Marion Sears, who is going to takeover the role of Chairman of the Remuneration
Committee, and Neil Thompson we have, I believe,
found two exceptional Directors who will be wellable to provide the necessary support to the
Executives. When David Reeves stands down at
the next AGM, Charlotta Ginman will be appointed
as Senior Independent Director; she has servedwith distinction on the Keywords Board for four
years and is Chair of the Audit Committee. On
behalf of the Board, I would like to thank David forhis considerable contributions to the Group andto Giorgio; without him and his wife Teresa there
would not be a Keywords. Given the changes
to the Board during the year, the Board has
requested, and I have agreed, that I extend mychairmanship by a year beyond a nine-year term,with the view to retiring at the 2023 AGM.

In a year when we have seen the transition ofCEOs, the Keywords staff of some 10,000 havealso very much put their collective "shoulder
to the wheel". My thanks go to each and every
Keywordian who has supported the business in
the last 12 months.
In October 2021, an Executive Summit took place
which was designed to act as a celebration of
the achievements of Keywords over the last few
years and to re-calibrate the strategic directionof the business. We were fortunate that Bertrand
was able to attend the Summit and have his firsttaste of the culture, talent and ambition within
the Senior Management Team. A further strategy
conference is planned in the near future to buildon the actions from the Executive Summit and toact as a springboard for Bertrand’s vision on how
the business should evolve.
As the Group continues to grow, Bertrand andthe executive team will be focussed on driving
operational efficiency, making better use oftechnology in the way services are delivered, andestablishing a more strategic relationship with the
major publishers, our clients.
Having completed his first 100 days at the helmof Keywords, Bertrand has already earned
the respect of staff and customers alike. He is
incredibly excited and enthused by the prospects
for, and opportunities available to, the businessand I share that enthusiasm. These opportunities
are not limited to the video games industry,where Keywords now has a pivotal role in the way
services are delivered, but also in adjacent markets
where “gamification” know-how and expertise ineffectively delivering content to multiple markets
can have a real influence.

Indeed, I believe that Keywords has really only
just started its remarkable story and will continue
to go from strength to strength as it builds
on its strong platform to grow organically andby acquisition.
Since the year end Sonia Sedler, our COO, hasleft the business and her role on the Board for
personal reasons. Having joined the business as
COO during the COVID-19 pandemic, Sonia became
joint interim CEO with Jon Hauck at short noticewhen Andrew Day retired early. We are gratefulfor her contribution and she leaves with our best
wishes for the future.

W E A R E FO C U S E D
O N T H E F U T U R E

Summary
We have a strong and energized leadership teamin place and are well positioned to continue to
execute on our clear opportunities in the buoyant
video games market, as we capitalize on theGroup's unique full service platform, powered by
our incredibly talented team of Keywordians. Ourstrong balance sheet will enable us to continue
to execute on a healthy pipeline of acquisition
opportunities, complementing our ongoingorganic growth.

ROSS GRAHAM CHAIRMAN

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T H E

P E R F ECTPAC KStrengthened platform in a growth market

KEYWORDS STUDIOS PLC

ANNUAL REPORT AND ACCOUNTS 2021

Keywords is better placed than ever to continue to capture
an increasing share of our growing market, by deepening our
relationships with customers who already trust us with theirhigh value intellectual property, having significantly extended
our services and geographical reach during the year.

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01

02

03

04

ACCESS TOA DY N A M I CGROWTH MARKET

MARKETLEADINGPOSITIONSTRONGGROWTHRECORDOPPORTUNITYTO GROW
FURTHERWe operate in a US$180bn industry,
growing at an 8-9% CAGR. Within this,spend on our services is estimated atcirca US$35bn, of which only US$11bn isexternalised, leaving us with a substantial
opportunity for growth. Our focus oncontent means we are platform agnostic
and well positioned to take advantageof the opportunities presented by next
generation consoles, mobile gaming,
cloud streaming, AR/VR, and themetaverse. The increasing sophisticationof video games and the development of
new platforms all add to the complexityof the market, which drives demand forlarger, professional, specialist external
providers, such as Keywords, in a highly
fragmented supplier market.

As a digitally native company providing
technology-enabled solutions, Keywords
has a market-leading position as the
only global provider of fully integrated
creative and technical services to theglobal video games industry. With anindustry reputation for quality, reliability
and flexibility, our scale and reputation
mean we are well placed to takeadvantage of the trend for customers tomove to more collaborative 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 greateruse of our services. In addition, we havesuccessfully completed 56 acquisitions
since IPO. The six acquisitions completed
in 2021 further bolstered our capabilities,
particularly in Game Development,
Marketing and Art services, whilebringing us ever closer to our customers
around the world.

Having made further progress inextending the Group’s client base, market
penetration, geographic footprint andservice lines, we are looking to unlock
the significant potential for increased
cross-pollination of our service linesand geographic locations. This would
include taking advantage of our dualshore capabilities, which enable us to
be close to our customers and provide
services from lower cost studios, as we
increasingly become a strategic partner
to our customers.

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KEYWORDS STUDIOS PLC

ANNUAL REPORT AND ACCOUNTS 2021

08
05

06

A STRONG BUSINESS MODEL

ADJACENT MARKET POTENTIAL

Keywords’ flexible resourcing and charging
model, with charges levied for time or output,
combined with relatively low working capitaland capital expenditure requirements, support
our ability to grow the business while alsoachieving strong underlying cash conversion.

Our expertise in providing technical solutions
to the video games industry is already sought
after in adjacent markets such as film andtelevision, and Keywords is well placed todeliver this.

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

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

07

08

T R U S T E D PA R T N E R

ACQUISITION PROGRAMMEWe are a trusted partner to leading companies around the world, with aleading 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:

Keywords continues to consider selective
acquisitions in line with its objective to become
the “go to ” technical and creative solutions
provider for the video games industry andbeyond. Since its IPO in June 2013, the Group
has successfully made 56 acquisitions whichhave significantly extended its geographic
reach, capacity and expertise.

The Directors maintain a healthy pipelineof selected acquisition candidates which
are considered value enhancing where they
enlarge the Group’s client base, market
penetration and/or service lines and where
the Group can use its existing expertise, multiservice platform, scale and global reach togenerate synergies and increase profitability.

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TRULY IMMERSEDMEET THE KEYWORDIANS

09

DIE TRICH QUE M A D O
REGIONAL D IR ECTOR F OR SOU T H EAST ASI A
MANILA , PHILI P P I N ESLEVELKEYWORDS STUDIOS PLC

ANNUAL REPORT AND ACCOUNTS 2021

55

D I E T R I C HSKILLS:PROGRESSIONGAME GENRE:
FIRST PERSON SHOOTERSSTRENGTH:
PA S S I O N F O R G A M E S – I A M
PROUD OF HOW MY ROLE ISHELPING OUR SERVICE LINESSUPPORT OUR CLIENTS.
PRODUCT KNOWLEDGE
A N D E X P E R I E N C E I S V I TA L
TO THE SUCCESS OF ALL
OF OUR EMPLOYEESK E Y W O R D S H I G H L I G H T:
GROWING OUR MANILASTUDIO TO OVER 1,000
EMPLOYEES AND GET TINGO U R F I R S T C E R T I F I C AT I O N
F O R G R E AT P L A C E T O W O R K

WISDOMS:
FOCUS ON GOALS, NEVER
G I V E U P, Y O U C A N A LWAY S
PA U S E , TA K E A S T E P B A C K
O R R E S PAW N , A N D H AV E
LOTS OF FUN

I see Keywords as
progressive in adapting
and aligning itself toan ever-evolving video
games industry

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CHIEF EXECUTIVE OFFICER’S REVIEW

10
I am delighted to have joined
Keywords at a time when thebusiness is performing so well

The Group has delivered strongorganic growth, driven byhigh levels of demand for ourservices, and further extended
our capabilities, reach and scale
through selective acquisitions.

KEYWORDS STUDIOS PLC

ANNUAL REPORT AND ACCOUNTS 2021

While it is early days for me as a Keywordian,
I have spent a great deal of my time meetingpeople across the business, visiting studios
around the world and speaking to our clients andit has made a few things abundantly clear.

T H E
T A C T I C I A NFirst, Keywords is full of incredibly talented,
experienced and entrepreneurial leaders who havea serious passion for video games and a clear
desire to take the business forward.
Second, the Group is in an enviable market leading
position, in a high growth industry that continues
to move towards external service provision andfor which access to talent is becoming ever morecritical. Keywords is proud to count almost all theleading publishers and developers as its clientsand proud also that these longstanding clients put
their trust in Keywords to get their ever-advancing
content to market and to meet and exceed theexacting standards of video gamers today.
Third, while Keywords already has scale with over
10,000 talented people across the business there
are clear opportunities to capitalise on the Group's
unique full service platform to continue to drive
significant and sustainable growth.

BERTRAND BODSON CEOLEVEL 46
XP <1Page 1/5

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CHIEF EXECUTIVE OFFICER’S REVIEW CONTINUEDKEYWORDS STUDIOS PLC

ANNUAL REPORT AND ACCOUNTS 2021

11

I’ll come on to set out some initial thoughts on
ways in which we can continue to deliver anever-more compelling proposition globally for ourpartners in the buoyant video games market, andadjacent content industries, and to invest in theplatform and our people to build further on theGroup's successful organic and acquisitive growth
track record.
We are very mindful of the tragic events in
Ukraine, which we are deeply saddened by andour thoughts are with all those affected. While
we have no operations in Ukraine, our US Game
Development business, Sperasoft, continues
to operate from Russia but entirely focused on
critical work for non-Russian clients. In parallel,
and in close partnership with our clients, wehave been actively looking at relocating work toother locations across the Group, benefiting fromour global footprint (including in Poland, acrossEurope, and the Keywords network more broadly).
We are monitoring the situation very closely, and I
will come on to provide more detail on our support
for both our people and others that have been
affected in the region. Our colleagues across theregion are all valued members of Keywords andour priority is to do all that we can to support ourpeople, and freelancers, wherever they are located,while contributing to wider humanitarian efforts in
the region.
The Group has started 2022 well, with strong
demand across all of our service lines. We arevery confident in the Group's opportunity for
growth as we continue to capitalise on our clients’focus on selecting the right external services
provider, increased expenditure on content
creation in a growing video games market, andour ability to increase our market share boththrough organic growth and the execution of
our acquisition strategy.

Excellent growth supported by a buoyant
video games market
Keywords delivered a strong performance in
FY2021, with revenues up by 37.1% to €512.2m.
Organic Revenue for the Group, which excludes theimpact of acquisitions and currency movements,
grew by 19.0% in 2021 (FY 2020: 11.7%), withall service lines performing well against thecomparative period. This strong performancereflects the high levels of demand for all service
lines, driven by the buoyant video games market,
the industry's focus on new content creation,
the continued trend in the industry towards
external service provision supported by a softer
comparative in the first half of 2020 when theGroup experienced disruption to our services atthe earlier stages of the COVID-19 pandemic. The
Group’s strong organic growth was complemented
by contributions from the six acquisitions wecompleted through the year.
While all of our service lines experienced growth,
our Marketing and Game Development service
lines delivered exceptional growth, of 151.1% and73.6% respectively, reflecting strong organic
performances (33.7% and 16.0% respectively)
complemented by contributions from acquisitions.
These service lines have been a particular focus
of our acquisition strategy in recent years and, as
they have a significant role at the earlier stages ofa video game’s development cycle, have benefitted
through the year from the industry returning
to focus on creating new content to keep its
expanding player base engaged in exciting new
games. The performance by each service line isset out in more detail later in this review.
The Group's Adjusted PBT increased by 56.4%
to €86.0m, representing a 2.1% pts improvement
in margin to 16.8%. This reflected operational
leverage and continued good cost control, and thebenefit of reduced costs due to COVID-19, primarily
relating to remote working and reduced property,

travel and business development costs, which we
expect to return with the anticipated easing ofrestrictions in 2022, alongside further investment
in our platform and people.

The strength and breadth of our platform isenabling us to capitalise on increased demandfor our services due to a number of key trends
in our market:

Our robust business model has ensured thisprofit performance translated into strong cash
generation, with €92.3m of Adjusted Free Cash
Flow (FY 2020: €53.4m) representing a 107.3%
Adjusted Cash Conversion rate in the period(FY 2020: 97.2%). This demonstrates the strong
cash-generating characteristics of the businessand provides the Group with further resources tocontinue to invest in the business and fund ouracquisition strategy.

–

The industry’s focus returning to content
creation in 2021, having had to concentrateon the monetisation of existing content due
to production constraints across the industry
in the earlier stages of the pandemic–

The number of players and amount of gameplay having expanded during the pandemic–

The shift towards “Games as a service”,
which requires ongoing content expansion tocontinuously deepen the gaming experienceand extend the lifespan of a game, creating
higher levels of continuous activity–

The launch and subsequent maturing of thenext generation games consoles, PlayStation
5 and Xbox Series X/S. While the launch of
the new consoles has been held back by
supply constraints, we are seeing a refreshof the entire console-based gaming sector
after a seven-year run of the PS4 and XboxOne console generation, which we expect
to result in an enlarged market for video
games content over the coming years and an
associated demand for new content creation–

Further development of new and existing
video games streaming platforms increasing
demand for both content generation andongoing in game support

We are exceptionally proud of the efforts of ourtalented Keywordians who have worked tirelessly
throughout this period to support our clients
while continuing to deliver the excellent quality ofservice for which we are known.
Delivering on our strategy
The continued buoyant demand for video games,
our clients' renewed focus on content creation andthe impetus for external service provision have
only accentuated the opportunities afforded byour strategy.
In a fragmented market characterised by
predominantly local, single-service providers,
Keywords continues to build its market-leading
services platform and cement its position as
the partner of choice for games publishers anddevelopers when looking for global reach and deep
expertise in video games. This, together with thescale to deliver the quality, flexibility and securityof service required to meet high levels of demandfor ever more sophisticated and immersive
content, differentiates Keywords from its
competitors. We continue to leverage the uniquebreadth of our platform by bringing the rightcombination of capabilities to support customers'
individual objectives, enabling us to cross-sell abroader range of our services.

We continue to invest in the business, bothorganically and through targeted acquisitions toposition the Group as an increasingly strategic
partner to our clients and as the “go to” provider
to the video games industry across our service
lines and key geographies.

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During the year, we have invested in newstudios in Bangalore and Manila, as well as intwo new studios in second-tier cities in China,
and refurbished some of our sites while thestudios have been quieter, to support our growth
today and into the future. We have upgradedand expanded studios in a number of locations
including Quebec, Austin, Los Angeles and Tokyoand brought together certain studios whereconsolidation into one, larger space made sense, in
Los Angeles and Milan. We also agreed leases for
new, expanded facilities in Katowice, Warsaw andOttawa that will support expansion in the current
financial year.
We are also delighted to have welcomed six new
businesses to the Keywords family in 2021. Heavy
Iron Studios, Tantalus, Climax Studios and Wicked
Witch add substantial scale and capabilities to ourGame Development service line as well as reach
into, and access to talent in, the US West Coastand Australia. AMC adds significant expertise to
Art Creation and a new presence in Romania for
the Group, from which we can access a new talentpool and build out our other service lines. We
have also continued to enhance our Marketing
service line, which we split out as a standalone
service line for the first time at the interim resultsin September, having completed the acquisitionof Waste Creative, a London-based studio, at theend of the year. Waste Creative brings expertisein strategy and creative production services,
including player community management, formobile video game creators, which will help us
meet the growing demand from our clients forgames as a service marketing support with afocus on community growth and fan retention. We
continue to actively review a healthy pipeline offurther acquisition opportunities.

Evolving our strategy
One of the things that attracted me to Keywords
was the Board’s vision for the business; I share its
plan to grow the platform on a global scale and I
believe Keywords has huge potential in the video
games industry, and that it can also operate justas effectively in many adjacent content sectors.
I am privileged to have joined a business that hassuch strong foundations in that it is already a
proven market leader with unrivalled scale, reachand range of capabilities across its 74 studios in
23 countries. It also already supplies almost all of
the major developers in a sector that has huge
growth potential.
The quality of the platform that has been built,
and its attractiveness to potential partners andacquisition targets, provides the Group with a clear
opportunity to continue to grow its services andscale in a global market for which service provision
remains highly fragmented.
I'm looking forward to leading the Group's
ambitious team to deliver an ever more compelling
proposition for the buoyant video games market,
and beyond.
As part of my first 100 days programme in thebusiness, I have been looking at how we build on
the Group’s incredibly strong foundations to take it
forward to new levels of scale and success.
Right at the start of this process, I brought 60
leaders from across the business together as partof my induction, to ensure we drive the evolutionof the strategy together. Working closely withthem, we have launched five workstreams acrossthe business to kickstart the process for taking
Keywords to the next level, as follows:

1.	Strategic partnerships: As we enter 2022,
Keywords has over 900 clients and 23 of
the top 25 publishers are our customers.
Moving forward, we will look to build on these
relationships so we can create and capture
more value together. To do this, we will ascertain
the areas in our service line offering that are
currently missing so we can continue to build
the platform of choice for our clients and learn
how Keywords can be an increasingly attractive
strategic partner which should in turn enable us
to capture more value. Also, we are re-examining
our various “customer propositions” to ensure
a proper correspondence between the services
we can provide and the value customers
should expect.
2.	Technology: We will explore how to deploy theright tools and technology to enable our studios
to continue to enhance their performance sothat they can bring more value to our clients,
while at the same time ensuring our internal
operational structures can scale to support
Keywords’ growth ambitions.
3.	Adjacent markets: We continue to examine
opportunities in adjacent sectors and ourwork in the broader media and entertainment
sector with Netflix and others has increased
accordingly. We will continue to review
opportunities that supplement our growth invideo games to ensure we take advantage ofthe increasing convergence of content andleverage our mastery of this most interactiveof all mediums, as gamification is increasingly
seen as a route to delivering content in a moreengaging way for a whole range of applications
including education, retail and construction, and,of course, for the many potential applications in
the metaverse.

4.	One Keywords: Keywords has a unique andentrepreneurial culture and is full of highly
talented, driven people across many different
geographies. It remains vital that we retain
this core of “One Keywords” that will help us
to keep growing. So, we are looking at how we
can preserve this entrepreneurial culture, while
continuing to build an operational backbonethat supports the growth of the business
into the future thereby enabling us to takeadvantage of all the different skill sets acrossthe business.
5.	Talent: In 2021, we grew the number of people
in this business to over 10,000 at the end of theyear, which makes it clear that this business isable to attract talented people. Our employee
net promoter score (eNPS) increased to 42 lastyear (from 22 in 2020), demonstrating highlevels of engagement and satisfaction. Despite
this, there has never been demand like there
is today for talent in this industry. As such, weare looking at how we can continue to be an
attractive destination for talent, what we can doto enhance career journeys at Keywords andhow we can elevate the right people across ourservice lines to help propel us forward.
We will provide a further update on our progresswith these five strategic work streams, as well assome of the outcomes, at our Capital Markets Day
in London this Summer (8 June 2022).

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Evolving our ways of working

Responsible businessOur remote working capabilities remain highly
effective, enabling us to support customers foras long as remote working is needed, and wherereturning to studios is not feasible. As restrictions
lift around our geographies and, having consulted
those who really matter– our Keywordians – weare now adopting a hybrid model of offering
vibrant, engaging and safe studio space, while
also enabling our people to work securely andconstructively from home.

We remain committed to conducting our business
responsibly and operating to the highest levels ofhonesty, integrity and ethical conduct.

There remains a clear role for physical studios
for the Group, particularly to support a strong,collaborative culture and enhance the exchange ofcreative ideas, for training, and in our Testing andAudio service lines, where certain clients continue,
for reasons of security, to prefer a studio-based
service. We have, therefore, continued to invest
in new studios and to refurbish some of our sites
while the studios have been quieter, to ensure ourstudios remain attractive places for our people tocome together.

Commitment to improving
diversity across the video
games industry

Having set out in 2020 our five priority areasof People (including DE&I), Customer Centricity& Innovation, Communities and the Planet,
underlined by Corporate Governance and Business
Ethics, we have continued to make progress withthese in 2021.
We have received a rating of ‘A’ (on a scale of AAACCC) in our 2021 MSCI ESG Ratings assessment,
which has improved from BBB previously. Thisrating, which analyses our resilience to longterm, industry material environmental, social andgovernance risks, was pleasing but clearly shows
there is more we can do if we are to become aleader within the industry.
Leading this work is our ESG Committee and wewere pleased to announce in 2021 that in addition
to Bertrand Bodson, both of our most recently
appointed Non-Executive Directors, Marion Sears
and Neil Thompson, have joined the Committee,
bringing strong expertise and experience to thisimportant area of focus for the Group.
The gender diversity of our business is a focus
for the Board and we monitor appointments bygender. The diversity of our Board changed in
2022 due to changes to the Board’s composition.
Following the departure of Sonia Sedler, female
directors now represent 25% of the Board but
this percentage will rise to 29% when David
Reeves retires at the forthcoming AGM and wewill continue to consider diversity as part of ourdecision making in any future appointments.

We have also shown our commitment to improving
diversity across the video games industry byentering into a partnership with Women in Games
in 2021, which sees Keywords help power their
500 strong Ambassador programme across
52 countries, allowing us to be more active in
addressing the underrepresentation of women in
our industry. Women in Games is a not-for-profit
organisation founded in 2009, with the mission to
identify and effect the lasting change needed tobring about full gender equality, equity and parityof opportunity within the gaming sector and toencourage more women to consider games andeSports as a career.
With this partnership now established, we havea number of planned initiatives to leverage our
global platform and client relationships in 2022
and beyond to enhance and accelerate thepopular ambassador initiative, enabling it toscale through additional projects and research,
events, exclusive materials and services for
Women in Games ambassadors.
Following the quantification of our greenhousegas emissions for the first time in 2020, in 2021 wehave developed the Group's first Environmental
Policy covering our energy and recycling practices.
The policy will help further develop our SustainableStudios programme and support our studios intheir efforts to minimise energy usage and to
reduce, recycle and reuse wherever possible.

As we look to achieve net zero carbon emissions,
we recognise these initiatives for SustainableStudios will take time. Therefore, we will initially
offset our carbon impact with credits towards the
Ntakata Mountains REDD+ project, which protects
forests. The revenue earned from the sale ofcertified carbon credits is paid directly to forest
communities in Tanzania, empowering them tomanage their own development needs.
We continue to work hard to make Keywords
a great place to work, with some of ourinitiatives recognised through accolades such
as Manila having been certified by Great Place
To Work® Philippines, Keywords being named
among Ireland’s 150 Best Employers for 2021
and a number of our UK studios winning UK
GamesIndustry.biz Best Places To Work Awards
during the year. Since the year end, we weredelighted that Keywords Studios in Mexico has
been awarded the Socially Responsible Company(SRC) badge.
We also launched various initiatives to help
support colleagues, including through COVID-19
vaccine clinics which, for instance, have provided
vaccines for colleagues and their families in India,
support for colleagues impacted by the hurricane
in New Orleans, including re-housing some of ourcolleagues, and through the hardship fund that
we launched at the beginning of the pandemic tosupport colleagues experiencing financial hardshipas a result of COVID-19.
Following recent events, supporting our people
as the humanitarian crisis unfolds in Ukraine is
our top priority. We have established an employee
hardship fund to provide support to the small
number of colleagues directly impacted bythis crisis.

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We are also doing all that we can to provide
broader support to those affected by the tragic
situation in Ukraine. We have boosted our
corporate social responsibility (CSR) fund to €250k,
which we will dedicate to humanitarian causes
in support of Ukraine. We are also creating jobs
for refugees as they move into neighbouring
countries, and we are providing support at the
Ukrainian border through the donations ofessential items.
Further updates will be made on the progress weare making against our five priority areas at our
Capital Markets Day later this year.

KEYWORDS STUDIOS PLC

ANNUAL REPORT AND ACCOUNTS 2021

Outlook
Trading in the first quarter has started well,and we continue to see strong demand acrossall of our service lines. We expect the Group’s
trading momentum in the second half of 2021
to continue through 2022, with the increased
flow of content to our later stage service lines
alongside further strong demand for our earlier
stage services such as Game Development, Art
Creation and Marketing.

Financial strength toinvest in our platform

The underlying video games market remains
buoyant, with 2022 expected to be a particularly
strong year for new game launches, asdevelopers and publishers look to capitalise on
higher player numbers and create ever moresophisticated content to engage players in theirgames for longer.
While we are not immune to the inflationarypressures and competition for talent being seen
in some of our earlier stage services lines, we
are well positioned to continue to attract skilled
professionals due to the unrivalled, sustained
variety of exciting work we do for our clients andthe opportunities for career advancement andworking internationally we are able to offer, andwe will continue to take account of our costs as weagree projects with our clients, who are well awareof the industry-wide talent challenge.
Our flexible hybrid working model is now wellestablished across all of our service lines and 70+
locations, and with the lifting of restrictions aroundthe world, we will see studios reopen and thepreviously experienced limitations in some service
lines removed. We are encouraged by the numberof Keywordians returning to studios around theworld and look forward to seeing levels increase in
the months to come.

As we continue to build our platform, we are
actively reviewing acquisitions that would add
expertise, particularly in Game Development andMarketing, access to talent or technology, while
retaining an interest in adjacent markets such as
media and entertainment, which are increasingly
converging with video game development
technology and marketing strategies.
The Board is confident Keywords remains wellplaced to continue its rapid growth and in its
long-term success thanks to its strong position ina buoyant video games market, its increasingly
sought after 10,000-people strong resource base,its robust business model with a diversified rangeof services that are well balanced across thevideo games development cycle, and the financial
strength to invest in our platform and people tobuild further on the Group's successful organic andacquisitive growth track record.

BERTRAND BODSONCHIEF EXECUTIVE OFFICER

Notwithstanding the situation in Russia, given
the strong underlying trading across the Group
aided, in part, by favourable currency movements,
we are confident of delivering a performancefor the full year towards the top end of current
market expectations.

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Resilient and growing
Consumer spending on video games has remained
resilient with 2021 marking the industry’s biggest
year yet. Even after delivering 20% growth in2020, games industry analysts Newzoo estimate
2021 will still have grown by 1.4% year on year.
Looking forward, Newzoo forecast an overall
industry growth CAGR of 8.7% (previously 9.4%)
with revenue forecast to increase to $218.8bn by2024 (Source: Newzoo Global Games Market, forthe period 2019-2024 issued in January 2022).
Keywords has continued to experience strong
demand given the content “deficit” createdbetween the expansion in game playing in 20202021 and the rate of content development. Added
to the well-publicised delays in AAA content, we
believe the pent-up demand for new content
will result in sustained demand for our services
in 2022 as publishers and developers continue
to focus on content production to capture theincreased player engagement.
Increasing trend to external partnerships
Keywords is benefitting from both a structural
trend to external partnerships from video games
publishers and developers and the ongoing
consolidation of the services industry, which it
continues to lead.
The video games industry has traditionally beenhighly vertically integrated with most production
activity still conducted in-house by major publishers
and developers. As the market continues to growand becomes ever more complex, games publishers
and developers are increasingly seeking to avoid
expanding their own teams and a higher proportionof work is being entrusted to third party service
companies like Keywords.

The video games publishing cycle requires
significant and skilled resources to deliver everexpanding complex projects to a tight timeline.
This is resulting in a trend towards increasing
partnerships at a more strategic level which
benefits Keywords as the market’s leading providerof scale. This includes a growing demand for codevelopment and full game development services,and we are investing to match that demand andcontinue to increase our market share.
So far, much of the external services in the industry
has been undertaken on a tactical basis, meaning
the video games service provider market remains
highly fragmented. This in turn provides anopportunity for the selective consolidation of thispart of the industry, which Keywords continues
to lead. This consolidation in turn brings benefitsof scale, enabling us to achieve operational
synergies through more efficient use of resources,
leveraging tools and technologies and leading
innovation in the industry.
As the only service provider of scale with depth andbreadth in all areas, Keywords is uniquely placed
to support our customers’ needs with a balanced
business across multiple different technologyenabled services and geographies. This is proving
a virtuous circle, as a key part of the attraction
for acquisition targets is the desire to be part ofa larger group with access to a wider customer
base and service offering. It also means we are
increasingly benefitting from our scale relative tocompetitors as we further consolidate our market
and are able to respond flexibly to increasingly
large-scale projects from our customers.

Addressable market
Following work completed with the researchcompany IDG, we now see a maximum addressable
market for video game content for Keywords,
excluding the domestic China market, of ~US$35bn.
External service providers account for ~US$11bn of
this work today, or circa one third of the market.
The total addressable market is expected to growbroadly in line with industry growth; however,within this, IDG forecast the trend towards external
providers to grow closer to 10% as the level oftechnical support needed increases. With bothgame development and art & marketing remaining
the most internalised services, IDG expect theseareas to see the most growth for external service
providers in the coming years.
Game Development, our largest service line,
has the largest addressable market with anestimated value of ~$17bn. Less than 20% of gamedevelopment services are supplied by external
service providers.
Art & Marketing, which together account for almost
20% of our revenues, is estimated to be valued
at over US$8bn, with just ~40% of these services
currently supplied by external service providers.
At the Keywords Capital Markets Day this summer,
we will provide further granularity on this overall
addressable market, the opportunities we see andmarket dynamics across key service lines.
Adjacent market opportunities are increasing too,
as video game technologies are also being usedin other markets including e-learning, film and
TV. The demand from content providers to maketheir content ever more interactive, impactful andengaging continues to grow.
Keywords is uniquely positioned to support
interactive content of any type through theskills and experience it has accrued in the mostinteractive of all content markets – video games.

Keywords is uniquelyplaced to support ourcustomers’ needs.
G LO B A L G A ME S RE V E N U E S
FO REC A STE D TO RE AC H $ 219B N
BY 2024
24
21$218.8bn$180.3bn

20$177.8bn

19$144.4bn

MA RK E T O P P O RTU N I TY

$35bn
Art & Marketing – 23%
Game Development – 49%

EXTE RN A L S E RV I C E P ROV I D E R S$35bn
External service
providers – $11bn

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16

Creating value and growth throughO P E R AT I O N A L
E F F I C I E N C YKEYWORDS STUDIOS PLC

ANNUAL REPORT AND ACCOUNTS 2021

At Keywords, we are using our passion for games, technology andmedia to create a global, integrated services platform of scale forvideo 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.

Our business model in brief
01

02

03

W H AT W E D O

C R E AT I N G
VA L U E F O R
S TA K E H O L D E R S

BARRIERSTO ENTRY

G A M E D E V E LO P M E N T CYC L E

See pg_17

See pg_18

See pg_19

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1701

W H AT W E D O
GAME DEVELOPMENT CYCLE
05

Keywords’ presence in each stage of the games development
cycle creates multiple opportunities for cross-delivery andrevenue growth, with the below services offered by Keywords:

06
04

Service line integration

KEYWORDS STUDIOS PLC

ANNUAL REPORT AND ACCOUNTS 2021

Art Services
Marketing Services

Game Development
Audio

Functional Testing
Localization

Localization Testing
Player Support

03
01

02

01

02

03

04

05

06

PRE-PRODUCTIONE A R LY- S TA G E G A M E
DEVELOPMENT

L AT E R - S TA G E G A M E
DEVELOPMENTLAUNCHNEW CONTENTFOR GAMES

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

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

ONGOING LIVEO P E R AT I O N SSUPPORT

Concept art, level design andgame design.

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

Customer support, community
management, data analytics,
payments processing, gameanalytics, social integrationand customer retention.

Game extensions, level expansions,art, audio, testing, localizationand marketing.

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C R E AT I N G VA L U E
F O R S TA K E H O L D E R S
02SHAREHOLDERSCUSTOMERSE M P LOY E E S– Consistent track record of delivering revenue andprofit growth.

– Keywords’ involvement across the video games
cycle means that we can provide an end to end
solution for our global customers.

– Keywords provides employees with an excellent
and sustainable variety of work.

– Access to a structural revenue growth opportunity
driven by industry growth and a trend towards
external services.

– Match customer requirements with a combinationof on-demand and dedicated service facilities.

– Proven disciplined M&A track record to consolidatea fragmented global supplier base.

– Wide geographic reach to talent and a flexible
resource model.

– Opportunity to invest in the exciting video games
market, without the risk of exposure to the successes
or failures of individual game titles.

– Multiple opportunities for cross-selling andrevenue growth.

CAG R I N ADJ U STED EP S SINCE 2014*

C USTO ME R S USIN G THRE E O R MO RE SE RVIC ES(UP FROM 30 CUS TOMERS IN 2014)

40%

133

*	Before acquisition and integration expenses, share option charges, amortisation of intangibles, and foreign currency effects.

– Good career advancement opportunities bothwithin and across our eight service lines.
– Opportunities to work on the leading global game
titles with diverse passionate games colleagues.

AV E R AG E N U MB E R O F E MP LOY E E S( U P F R OM 978 IN 2014)

9,493

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SCALE ANDFLEXIBILITYR E P U TAT I O N
FOR QUALITYKNOWLEDGE
AND EXPERTISE

Large customers need large reliablesuppliers with flexible resourcing tomatch their needs, allowing scaling up
and down to meet demand, mirroring
the seasonality of games production.

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

Our talented people have deep gamesspecific knowledge and experience,
enabling them to add value to ourcustomers’ games at all stages in thedevelopment lifecycle.

03

BARRIERS TO ENTRY

GLOBALPRESENCETECHNOLOGYFINANCIAL
STRENGTH

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

Necessity of regular investment intechnology and security makes it
difficult for smaller suppliers to compete.
The importance of resilience andsecurity is shown through in our robust
IT infrastructure.

Our strong financial performanceand position gives our customers
reassurance of resilience in their supply
chain, and is part of our attraction tobusinesses we acquire.

OVERVIEW

S T R AT E G I C R E P O R T

GOVERNANCEF I N A N C I A L S TAT E M E N T S

S U P P L E M E N TA R Y I N F O R M AT I O N

OUR STRATEGY

Strategic pillars

20

To cement our position as the“go to” technical and creative
services provider for the
global video games industry
and beyond.

KEYWORDS STUDIOS PLC

ANNUAL REPORT AND ACCOUNTS 2021

The key pillars of our strategy
are to grow organically and byacquisition to extend the Group's
service capacity, capabilities
and geographical reach inorder to serve our client basebetter across all platforms, key
geographies and languages,
with a full range of services
and solutions.
By investing in expanding
capacity, capability andtechnology across our multiservice global platform, we
are increasingly becoming astrategically important partner
to our customers who require aservice provider of our scale andflexibility in an otherwise highly
fragmented market.
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 andacquisitive growth.

BUILDING OUR
PLATFORM

SELECTIVE ACQUISITIONSAND INTEGRATIONORGANIC GROWTH
AND CROSS SELLING

Progress in 2021

Progress in 2021

Progress in 2021– We continued to grow our service lines, as we cement our position
as the “go to” provider in each of our respective sets of services.

– Completed six acquisitions during the year, adding to our existing
scale and capabilities in game development, marketing and art.

– Organic Revenue grew by 19.0% in 2021 (2020: 11.7%).

– Our largest service line, Game Development, benefitted fromfurther organic expansion of studios, as well as the geographic
expansion into Australia.

– These acquisitions are being integrated within the service lines aswell as within the country and regional management structures
and within our global finance, accounting, HR and IT functions.

– Expanded the reach of our art capabilities with an acquisition in
Romania that also gives Keywords the potential to access talent
for our testing and Player Support service lines.

– Expanded our presence into Australia with two acquisitions in
Melbourne that provide access to important talent pools.

– Strong organic growth performance given the continued
disruption from COVID-19 and the resulting disruption to content
production in the industry.
– Strong growth across all service lines, reflecting high levels of
demand for our services, driven by the buoyant video games
market and the industry's focus on new content creation.

– Made good progress with integrating prior period acquisitions,which are making good contributions to the Group.

– Continued to expand our client relationships by making good
progress with cross-selling our services. In 2021, the number ofclients buying three or more services from us increased once
again, to 133 from 120 in 2020.

Priorities in 2022

Priorities in 2022

Priorities in 2022– In 2022, we will continue to build and enhance our platform so
we are increasingly a strategically important partner to ourcustomers.

– The Group’s acquisition programme continues to be an important
strategic pillar and we anticipate that 2022 will again contain anumber of acquisitions.

– Increased focus on building out common standards for eachservice line.

– Aim to continue the pace of acquisitions, investing between €50m
to €100m per year.

– Organic growth remains our priority focus and we expect to growfaster than the market for our services as we benefit from theindustry's move towards external service provision and capture
market share.

– Marketing services should see further acquisition opportunities, as
we continue to widen the range of services and capabilities we canoffer and expand the geographies we cover.

– Our service lines are ever developing and will continue to makeselective acquisitions that further enhance and extend eachservice line’s capabilities in 2022, particularly in Marketing, Art andGame Development.

– Expanded and grew our global testing capabilities in new facilities(Pune and Bangalore) and existing locations in Katowice and Mexico
City, improving further our access to important talent pools.
– COVID-19 highlighted the continued resilience of our platform, with
~9,000 Keywordians working from home at the end of 2021.

– Additionally, we see opportunities for selective acquisition in art
and adjacent markets such as media and entertainment.
– We anticipate a further gradual return to the office in 2022, while
engaging with customers and employees on retaining a mix tothese new ways of working where security and productivity
considerations allow.
– 2022 will also see investment as we develop our platform toservice our clients' projects across our expanding multi-service
global platform.

Measures of our success– We are mindful of the integration challenges and therefore aim to
spread acquisitions across our existing geographies and acrossservice lines to avoid management overstretch.
– Keywords will continue to develop and invest in technologies
that support the services we provide to game developers andgame publishers.

– Building strategic partnerships with our clients, so that we cancreate and capture more value together.
– Reviewing our customer propositions.
– Looking to benefit from a continued increase in demand for newcontent following COVID-19 disruption 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
benefitting from the use of three or more of our services, a key
reflection of our “relevance” to customers.

– Following considerable success expanding into the key global
video games markets, geographical expansion remains a lower
priority driver in 2022 as we continue our focus on enhancing ourcapabilities in regions where we already have a presence.

Measures of our successMeasures of our success

8

5

9,493

€126m

6

56

19.0%

1,017

133

service lines, up
from two in 2009

continents in which wehave operations. We now
have 39% of our people inNorth America and SouthAmerica, 30% in Europe and
31% in Asia and Australia

average number of
employees in 2021

maximum
consideration for
acquisitions in 2021

acquisitions completed
in 2021. All are
successfully being
integrated into ourplatform

acquisitions since
IPO from 2020

Organic Revenue
growthcustomers in 2021,
up from 968 in 2020

customers using threeor more service lines.
Up 11% from 2020

OVERVIEW

S T R AT E G I C R E P O R T

GOVERNANCEF I N A N C I A L S TAT E M E N T S

S U P P L E M E N TA R Y I N F O R M AT I O N

TRULY IMMERSEDMEET THE KEYWORDIANS

21

A DA M RUSHQA PARTNERSH I P M AN AG ER
MONTREA L , C AN ADALEVELKEYWORDS STUDIOS PLC

ANNUAL REPORT AND ACCOUNTS 2021

64

A D A MSKILLS:V E R SAT I LI T Y

GAME GENRE:R O L E - P L AY I N GSTRENGTH:
CLIENT CENTRICIT Y – THE
MORE WE CAN ALIGN OUR
P R O C E S S E S T O A PA R T N E R ,THE EASIER IT IS FOR US TO
FEEL LIKE AN EXTENSIONO F T H E I R O R G A N I S AT I O N ,AND THE EASIER IT IS
FOR KEY WORDS TO GROWWITH THEMK E Y W O R D S H I G H L I G H T:
I ’ M I M M E N S E LY P R O U D
OF THE GROWTH OF OUR
G L O B A L B E TA T E S T I N G
N E T W O R K T H AT WA S
L AUNCHED MORE THAN 10
YEAR S AGO. THIS TEAMCONTINUES TO COMPLETECOMPLEX CLIENT REQUESTSW I T H S U C C E S S F U L B E TAI N I T I AT I V E S

E N E R G Y:
A S A N AV I D G A M E R , I T
F E E L S AW E S O M E T O B E
B E H I N D T H E C U R TA I N O N
W H AT I S C O M I N G N E X T

What gets me out of bed
in the morning is solving
a partner's problems

OVERVIEW

S T R AT E G I C R E P O R T

GOVERNANCEF I N A N C I A L S TAT E M E N T S

S U P P L E M E N TA R Y I N F O R M AT I O N

KEY PERFORMANCE INDICATORS

22

We monitor our financial performance against
a number of different benchmarks and theseare set in agreement with the Board.

01

R E V E N U E GR OW T H

02

KEYWORDS STUDIOS PLC

ANNUAL REPORT AND ACCOUNTS 2021

37.1%

Page 1/2

O RGAN IC RE VE N UE GROWTH

19.0%

03

GRO SS MARG I N

04

39.1%

A DJ U STE D O P E R ATI N G CO STS
A S A % O F RE V E N U E

17.6%

21

37.1%

21

19.0%

21

39.1%

21

17.6%

20

14.4%

20

11.7%

20

38.0%

20

18.1%

19

30.2%

19

15.5%

19

36.8%

19

19.2%

Reasons for choice

Reasons for choice

Reasons for choice

Reasons for choice

Quantifies the growth in revenue fromour operations on a reported basis.

Due to the number of acquisitions theGroup makes and because it integrates
them quickly, this provides the mostmeaningful measure of underlying
revenue growth without the distortionof foreign currency movements.

The Board believes this to be a consistentmeasure of trading performance.

The Board monitors overheads to ensure
the operating costs of the Group arein line with the level of business being
generated.

How we calculate

How we calculate

How we calculate

How we calculate

Increase year on year in reported
revenue.

Calculated by adjusting the prior year
revenues, adding pre-acquisition
revenues for the corresponding periodof ownership to provide a like-for-likecomparison with the current year,
and applying the prior year’s foreignexchange rates to both years.

Revenues from services supplied tocustomers less cost of sales, as apercentage of revenue.

Administration expenses before
non-operating costs, including sharebased payments expense, costs ofacquisition and integration, amortisationand impairment of intangible assets,
depreciation, non-controlling interest anddeducting bank charges, expressed as apercentage of revenue.*

Objectives

Objectives

Objectives

Objectives

The Group aims for continued revenue
growth and development.

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

The Group aims for gross margins in linewith historic norms.

The Group will continue to seek to control
these costs closely and in line with thelevel of business being generated.

* 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.

OVERVIEW

S T R AT E G I C R E P O R T

GOVERNANCEF I N A N C I A L S TAT E M E N T S

S U P P L E M E N TA R Y I N F O R M AT I O N

KEY PERFORMANCE INDICATORS CONTINUED

23
Page 2/2

05

A DJ U STED EBIT DA M AR GIN

KEYWORDS STUDIOS PLC

ANNUAL REPORT AND ACCOUNTS 2021

21.5%

06

ADJUSTE D PRO F IT
BE FO RE TAX MARGIN

07

16.8%

ADJUSTE D C A S H
CO N VE R SION R ATE

08

107.3%G ROWTH I N A DJ U STE D E P S

46.5%

21

21.5%

21

16.8%

21

107.3%

21

46.5%

20

19.9%

20

14.7%

20

97.2%

20

24.9%

19

17.6%

19

12.5%

19

80.2%

19

7.2%

Reasons for choice

Reasons for choice

Reasons for choice

Reasons for choice

Provides an indication of how we are
performing both internally and relative
to our peers.

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

Measures operating cash generationand our capacity to pay dividends,
service debt and fund acquisitions.

Reports the underlying profit growth
generated on a per share basis,demonstrating the value being
created for shareholders.

How we calculate

How we calculate

How we calculate

How we calculateComprises EBITDA (operating profit,
adjusted for amortisation and impairmentof intangible assets, depreciation, while
deducting bank charges) adjusted
for share-based payments expense,
costs of acquisition and integration andnon-controlling interest, as a percentageof revenues.*

Comprises profit before taxation
adjusted for share-based payments
expense, costs of acquisition andintegration, amortisation andimpairment of intangible assets, noncontrolling interest, foreign exchange
gains and losses, and unwinding of
discounted liabilities.*

Adjusted free cash flow before tax as
a percentage of the adjusted profit
before tax. The calculation is describedin more detail on page 137.

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

Objectives

Objectives

Objectives

Objectives

The Group aims to increase margins
through operational efficiencies.

The Group aims for margins in linewith historic norms.

Cash generation and working capitalmanagement will remain a key focus.

The Group aims for continued growthin Adjusted earnings per share.

The Adjusted earnings per sharecomprises the Adjusted profit after tax
over the non-diluted weighted average
number of shares as reported in note 8.

* 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.

OVERVIEW

S T R AT E G I C R E P O R T

GOVERNANCEF I N A N C I A L S TAT E M E N T S

S U P P L E M E N TA R Y I N F O R M AT I O N

TRULY IMMERSEDMEET THE KEYWORDIANS

24

MA NV E NDR A S HUKULC EO, LA K SHYA DI G I TALGURG AON, INDI ALEVELKEYWORDS STUDIOS PLC

ANNUAL REPORT AND ACCOUNTS 2021

75

M A N V E N D R A

SKILLS:D E V E LO P M EN T

GAME GENRE:
ADVENTURE

STRENGTH:POSITIVITY IS A KEY
ELEMENT TO HOW WE
CONDUCT OUR BUSINESSAND MANAGE THE TEAM.
A P O S I T I V E AT T I T U D E
HELPS ME FIND SOLUTIONSK E Y W O R D S H I G H L I G H T:
C O N T I N U I N G T O E X PA N D
OUR PRESENCE IN INDIA ANDW O R K I N G T O WA R D S M A K I N G
INDIA THE BACKBONE OF
KEY WORDS’ GROWTHE N E R G Y:
C R E AT I N G T E A M S
AND NEW BUSINESSES

Keywords gives me
the independence to dowhat I think is right forthe business

OVERVIEW

S T R AT E G I C R E P O R T

GOVERNANCEF I N A N C I A L S TAT E M E N T S

S U P P L E M E N TA R Y I N F O R M AT I O NSERVICE LINE REVIEW25

G AT E W A Y
T O G R O W T H

SELECT LEVELA RT C RE ATI O N

26

KEYWORDS STUDIOS PLC

ANNUAL REPORT AND ACCOUNTS 2021

All our service lines grew well during 2021, despite the ongoing impact ofthe pandemic and the operational challenges it continues to present.

MA RK E TI N G

The following table provides a summary of our revenues by service line,with growth rates on a reported and Organic Revenue growth basis.

27

G A ME D E V E LO P ME N T

28

AU D I O

29

Revenue

Art Creation*% of 2021
Group revenue

2021
Revenue€m

2020
Revenue€mChangefrom 2020%2021 Organic
Revenue growth%2021 Pro Forma
Revenue€m2021 Average
number ofoperational staff
by service line

9.6%

49.3

38.9

26.7%

24.4%

50.9

1,309

Marketing*

9.0%

46.2

18.4

151.1%

33.7%

52.4

189

Game Development

27.1%

138.9

80.0

73.6%

16.0%

147.4

1,396

Audio

12.0%

61.3

47.2

29.9%

27.4%

61.3

245

Functional Testing

18.1%

92.7

78.5

18.1%

17.2%

92.7

2,996

Localization

9.9%

50.8

45.4

11.9%

12.2%

50.8

382

Localization Testing

5.3%

27.1

23.3

16.3%

16.7%

27.1

646

Player Support

9.0%

45.9

41.8

9.8%

12.7%

45.9

1,702

100.0%

512.2

373.5

37.1%

19.0%

528.5

Total

F U N CTI O N A L TE STI N G

30

LO C A L I ZATI O N

31LO C A L I ZATI O N TE STI N G

32

P L AY E R S U P P O RT

33

*The prior year comparatives have been re-classified to separately report Marketing services, previously reported within the Art Creation service line.

OVERVIEW

S T R AT E G I C R E P O R T

GOVERNANCEF I N A N C I A L S TAT E M E N T S

S U P P L E M E N TA R Y I N F O R M AT I O NSERVICE LINE REVIEW CONTINUED

26

Art Creation
Our Art Creation service line creates graphicalart assets for video games including concept
art creation, 2D and 3D art asset production
and animation.

KEYWORDS STUDIOS PLC

ANNUAL REPORT AND ACCOUNTS 2021

FY 2021 performance
Art Creation performed well with revenues up
by 26.7% to €49.3m (FY 2020: €38.9m). Organic
Revenue, which excludes the impact of currency
movements and acquisitions, grew by 24.4% for
Art Creation, following a continuation of strong
underlying client demand across all art studios.
This strong performance was driven by
exceptional growth in India where the studios
were able to effectively manage the increased
demand by rapidly hiring new talent, somethingthat is not as easily replicated in other markets.
In other territories, our North American studios
also benefitted from remote working andthe ability to extend remote teams throughfreelancers and sister studios, which enabledstudios to meet the increased demand in
the market.
We have continued to expand this service
line, with the addition of two new studios insecond-tier cities in China and new studios in
Bangalore and Manila, which provide us withadditional access to talent to support the workfor our clients.

In August, we added the Group’s first presencein Romania through the acquisition of AMC. AMC
is a long-established, high-quality specialist art
studio servicing both US and European clients
and we believe it will add significant expertise andexperience to this service line, as well as access to
an attractive market for talent in Romania.
The market opportunity and outlook
Art Creation operates in a large addressable
market, which remains highly fragmented.
Increasingly, clients seek partners who are able
to deliver higher value solutions through morecreative, technical, and managed services.
Our clients’ needs also continue to evolve andwe expect the demand for real-time 3D art togrow through the year ahead and beyond.
While it is very early days we expect that thedevelopment of the metaverse will drive evenmore demand for digital and related content and
we are committed to helping our clients navigate
through this opportunity.
This year, we have already seen many more crossstudio and cross-service line collaborations andwe expect Art Creation to continue to deliver
strong growth in 2022 with our global platform
positioning Keywords in a strong position to scale
up to meet continued buoyant client demand.

% O F G RO U P RE V E N U E FO R THE Y E A R

9.6%
2021 RE V E N U E€49.3m€49.3m21
20€38.9m+26.7%

2021 O RG A N I C RE V E N U E G ROWTH

24.4%

2021 P RO FO RMA RE V E N U E€50.9mAV E R AG E O P E R ATI O N A L STA F F

1,309

OVERVIEW

S T R AT E G I C R E P O R T

GOVERNANCEF I N A N C I A L S TAT E M E N T S

S U P P L E M E N TA R Y I N F O R M AT I O NSERVICE LINE REVIEW CONTINUEDKEYWORDS STUDIOS PLC

ANNUAL REPORT AND ACCOUNTS 2021

27

Marketing
Following its recent growth and scale within theGroup, Marketing was reported as a standalone
service line for the first time at the interim results in
September 2021, so this represents its maiden year
as a separately reported service line.

Marketing services includes PR
and full brand campaign strategies,
game trailers and marketing art
and materials, which we are building
through acquisitions, and subsequentorganic growth.

During the year, we continued to add scale to ourMarketing services line through the acquisitionof Waste Creative, a digital creative marketing
agency based in London. The studio expands ourmobile marketing capabilities in player acquisition
and retention, community management and rapid,
high quality content creation.
The market opportunity and outlook

FY 2021 performance
FY 2021 was a transformational year for ourMarketing service line. Revenues grew by 151.1%
to €46.2m (FY 2020: €18.4m) in 2021 following aperiod of fantastic growth. On an organic basis,
which excludes the impact of currency movements
and acquisitions, revenues were up 33.7% during
the year.
The service line performed exceptionally well
despite the absence of in-person events and amore limited number of game launches due todelays. In 2021, Marketing also benefited fromthe successful integration of the acquisitions ofMaverick Media and g-Net, now the two largest
studios in the service line, and Indigo Pearl, which
was completed in the second half of 2020.

Having transformed the scale of our Marketing
services business, it has already become theprovider of choice for games publishers anddevelopers looking for a partner with deep
specialist expertise in the sector, a broad range ofthe services that will enable the success of theirgames, and the global reach to execute acrossdifferent time zones and cultures.
In a highly fragmented industry, this scale andreach will provide real competitive advantage as
we bring together more of our services to meet
our client’s objectives. As many of the marketing
services help clients at the very early stages ofgame development, when concepts are being
developed and positioned for greenlighting, ourmarketing colleagues also have the opportunity
to offer and cross-sell other Keywords’ services,
as appropriate, at the outset for new titles.

% O F G RO U P RE V E N U E FO R THE Y E A R

An extensive range of marketing services are
currently provided in this fragmented market
both internally and externally from key art, trailer
creation, advertising, PR, branding, campaign
management, influencer marketing and social
media management through to marketing
analytics and community management. So, while2021 represented a transformational year inbuilding out our Marketing services platform, there
is a substantial opportunity to build further, so wewill continue to seek to grow the business throughselective acquisitions in order to enable us toprovide a full suite of services at scale and acrossdifferent time zones.
We expect Marketing will continue to growstrongly in FY 2022, albeit with growth rates
moderating from the exceptionally high levelsof growth seen in 2021.

9.0%
2021 RE V E N U E€46.2m€46.2m21
20€18.4m+151.1%2021 O RG A N I C RE V E N U E G ROWTH

33.7%

2021 P RO FO RMA RE V E N U E€52.4mAV E R AG E O P E R ATI O N A L STA F F

189OVERVIEW

S T R AT E G I C R E P O R T

GOVERNANCEF I N A N C I A L S TAT E M E N T S

S U P P L E M E N TA R Y I N F O R M AT I O NSERVICE LINE REVIEW CONTINUED

28

Game Development
Our largest service line, Game Development,
provides external development services to gamedevelopers and publishers including full gamedevelopment, co-development, porting andgeneral software engineering consultancy.

KEYWORDS STUDIOS PLC

ANNUAL REPORT AND ACCOUNTS 2021

FY 2021 performance
Game Development increased revenues by 73.6%
to €138.9m (FY 2020: €80.0m). This increase partly
reflected contributions from acquisitions made in
2021, including Heavy Iron, Tantalus, and Climax,
with Wicked Witch having been acquired at thevery end of the year. Game Development remains
our largest service line with 16 studios in ninecountries and over 1,500 developers.
Organic Revenue (which excludes the impact of
currency movements and acquisitions) grew by
16.0% driven by the renewed focus on content
creation, meaning strong demand for our services
around the world despite the curtailment of ourusual tradeshow-centric, business development
activities. With game lifecycles now extending
through downloadable content and live – ops andthe next generation of consoles now maturingfollowing the late 2020 release, there is an everincreasing variety of opportunities for our Game
Development studios.
While our ability to meet demand is constrainedby a challenging recruitment climate, we were able
to continue to recruit skilled professionals who
are attracted to the range of high profile, exciting
projects we work on for our clients.

In FY 2021, we completed the acquisition of fourhigh quality businesses to grow and diversify ourGame Development offering further:
–

–

–

–

Heavy Iron – based in Los Angeles, California,
the industry veteran’s team of 43 developers
has provided full game development, codevelopment, live operations and porting
services for the video games industry
since 1999.
Tantalus – a leading and prolific developerof high quality, multi-platform titles basedin Melbourne, Australia which provides
us with access to a new talent pool andoffers an excellent entry point into theAustralian market for further expansion
in the Pacific region, both organically andthrough acquisitions.
Climax – one of the longest established gamedevelopment businesses in the UK, offering
full game development, co-development,
porting and technical consulting services tosome of the world’s largest games publishers
through a team of 109 talented developers.
Wicked Witch – our second acquisition in
Melbourne, Australia, Wicked Witch is a73-person video game development studiowhich has an established track recordin video game and graphic application
development on a range of platforms
including PC, mobile, PlayStation, Xboxand Switch.

The market opportunity and outlook
Game Development is our largest addressable
market. The market is growing strongly and, of allof the Group’s service lines, this market has thelowest proportion of external service provision.
There is a high level of demand for talented
developers and our studios will remain focused on
recruitment and retention throughout 2022.
We remain a highly attractive prospect for gamedeveloper talent, who recognise the opportunities
that Keywords provides for a sustainable variety of
exciting work, as well as good career advancement,
including the option to work across our expanding
international footprint, and to be part of a strong
culture amongst like-minded, games-passionate
colleagues. Given the strong demand for talent,
we expect to see some wage inflation and we willcontinue to take account of our cost structure as
we agree each project with our clients, who are only
too aware of the talent challenge themselves.
Our US Game Development business, Sperasoft,is the only studio within Keywords to operate in
Russia with locations in St Petersburg, Volgogradand Moscow. Revenues from these studios are
entirely from non-Russian clients. We continue
to monitor the situation closely and in close
partnership with our clients, we have been actively
looking at relocating work to other locations
across the Group, benefiting from our global
footprint (including in Poland, across Europe, andthe Keywords network more broadly).
Demand remains very strong and we entered2022 with a higher than normal level of confirmed
revenue, so we expect continued growth for Game
Development during the year as we use our global
platform to enable the business to service asmuch of that demand as possible.
As previously communicated, Game Development
remains an area of particular focus in our M&A
programme, where we continue to assess companies
that provide access to strong pools of talent to help
support the fast pace of organic growth.

% O F G RO U P RE V E N U E FO R THE Y E A R

27.1%
2021 RE V E N U E€138.9m€138.9m

21
20€80.0m

+73.6%

2021 O RG A N I C RE V E N U E G ROWTH

16.0%

2021 P RO FO RMA RE V E N U E€147.4m

AV E R AG E O P E R ATI O N A L STA F F

1,396

OVERVIEW

S T R AT E G I C R E P O R T

GOVERNANCEF I N A N C I A L S TAT E M E N T S

S U P P L E M E N TA R Y I N F O R M AT I O NSERVICE LINE REVIEW CONTINUEDKEYWORDS STUDIOS PLC

ANNUAL REPORT AND ACCOUNTS 2021

29

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

FY 2021 performance

The market opportunity and outlook

Audio revenues rose by 29.9% in the period to€61.3m (FY 2020: €47.2m), with Organic Revenue,
which excludes the impact of currency movements
and acquisitions, increasing by 27.4% compared to
FY 2020.

Our Audio services business has started 2022
well, with high levels of demand for our studios
continuing into the first quarter. Our ability to
produce industry leading quality for our clientsmeans Keywords remains the partner of choicefor video games clients seeking partners who
can support them on all of their audio needs.
We expect the streaming platforms to continue
to drive strong demand for our Audio services
line too.

Despite the challenges presented by the global
pandemic and the need for our studios to adapt tovarious lockdowns and changes in local health andsafety guidelines, our Audio services business saw
a strong performance in 2021. This performance
was delivered across all the studios and thebusiness was able to expand through the additionof new clients and the growth of all its coreservices (subtitling, accessibility, dubbing, voice
over, audio post and music).
Our music management services, sound designand sound effects businesses have continued togrow, as did our work in subtitling and dubbingof film and TV content where we serve clientssuch as Netflix, as well as many of the other key
streaming providers, which have invested heavily
in their original content strategy which helped todrive higher demand for our services.

Beyond the near term, we expect our Audiobusiness to continue to be in high demand
and the market remains highly fragmented
in terms of service provision, with clients andvoice actors favouring professional, high quality
sound studios for optimal voice recording. This
represents an opportunity for us to grow ourmarket share organically, as well as make selectacquisitions over time, as we seek to expand into
new geographies to meet the growing demand,
as audio content increases for both console andmobile games.

% O F G RO U P RE V E N U E FO R THE Y E A R

12.0%
2021 RE V E N U E€61.3m€61.3m21
20€47.2m+29.9%

2021 O RG A N I C RE V E N U E G ROWTH

27.4%

2021 P RO FO RMA RE V E N U E€61.3mAV E R AG E O P E R ATI O N A L STA F F

245

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GOVERNANCEF I N A N C I A L S TAT E M E N T S

S U P P L E M E N TA R Y I N F O R M AT I O NSERVICE LINE REVIEW CONTINUEDKEYWORDS STUDIOS PLC

ANNUAL REPORT AND ACCOUNTS 2021

30

Functional Testing
Functional Testing is our second largest service line
and provides quality assurance, including discovery anddocumentation of game defects and testing to verify
the game’s compliance with hardware manufacturers’
and distribution platforms’ specifications, as well as test
automation tools and services, crowd-based and focus
group testing solutions.
FY 2021 performance

The market opportunity and outlook

Functional Testing revenues increased by 18.1% to€92.7m (FY 2020: €78.5m) and Organic Revenue,
which excludes the impact of currency movements
and acquisitions, increased by 17.2%. The growth
was supported by a weaker comparative in H1
2020 which was particularly disrupted at the earlystages of the COVID-19 pandemic. Demand for ourFunctional Testing services improved as we moved
through the year, as this service line started tobenefit more fully from content flowing to thelater stage service lines in the second half of 2021,
following the industry’s return to focus on newcontent creation in the first half of 2021.

As the newer generation of consoles mature,
the industry’s drive to create new content forthis generation is expected to increase further,something that will continue to benefit ourFunctional Testing business which operates at thelater stages of the game development cycle.

We have built out our Functional Testing
operations over time, beyond Montreal, toinclude Tokyo, New Delhi, Singapore, Katowice,Saint Jerome (Canada), Mexico City and Seattle,
giving us a well-diversified production base, with“follow the sun” time zones and some lower costproduction sites.
Our strong relationships with clients and the
optimisation of capacity across these studios
enabled the Functional Testing business to meetgrowing demand and it was pleasing to see
volumes in studios across Poland, India and Mexico
double in 2021.

In 2022, we expect our global footprint withstudios in the key locations for talent around theworld will continue to appeal to our clients, as weare able to offer flexible solutions depending on
our customer needs, timelines and budgets.
We remain a leading player in this large andgrowing area of the market that is seeing an
accelerating trend towards external service
provision. Our scale, flexibility, geographicalspread and proven robustness, even in the mostchallenging of circumstances, positions us well
as games companies continue to increase theproportion of functional testing that they workwith external providers on.
We expect to deliver continued growth into 2022
as more content flows to our later stage service
lines following the return to new content creationin 2021 and as we see more new content being
launched during the year.

% O F G RO U P RE V E N U E FO R THE Y E A R

18.1%
2021 RE V E N U E€92.7m
€92.7m21
20€78.5m+18.1%

2021 O RG A N I C RE V E N U E G ROWTH

17.2%

2021 P RO FO RMA RE V E N U E€92.7mAV E R AG E O P E R ATI O N A L STA F F

2,996

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GOVERNANCEF I N A N C I A L S TAT E M E N T S

S U P P L E M E N TA R Y I N F O R M AT I O NSERVICE LINE REVIEW CONTINUEDKEYWORDS STUDIOS PLC

ANNUAL REPORT AND ACCOUNTS 2021

31

Localization
Our Localization service line provides translation of ingame text, audio scripts, cultural and local adaptation,accreditation, packaging and marketing materials
in over 50 languages. It includes our proprietary
technologies for content management, machinetranslation, crowd sourcing and workflow management.
FY 2021 performance

The market opportunity and outlook

Localization revenues were up 11.9% to €50.8m(FY 2020: €45.4m) and Organic Revenue, which
excludes the impact of currency movements
and acquisitions, was up by 12.2%. This reflecteda higher level of demand for our Localization
services as we moved through the year, as thisservice line started to benefit more fully fromcontent flowing to the later stage service lines inthe second half of 2021, following the industry’s
return to focus on new content creation in the firsthalf of 2021.

The Localization market remains highly
fragmented and characterized by mostcompetitors being single language providers
without the scale to deliver simultaneous multijurisdictional localization projects for our global
video games customer base.

In October, we announced that Romina
Franceschina joined Keywords to lead our
Localization service line, bringing more than 20
years’ experience in the localization industry andin delivering operational excellence and innovation,across a number of industries.
In 2021, Localization launched KantanStream, acrowd-sourced machine translation management
platform that combines artificial intelligence andour global community of professional translators
to deliver the speed and flexibility of machinetranslation with the quality only native speakers
can deliver.
Localization’s strong relationships with clientsand exceptional output saw it receive awards
from Tencent and Yozoo for being the best audio
services provider and the business also won
the Best Localization and QA Provider at StarAwards 2021.

Our clients are increasingly looking to Keywords
for a more streamlined and distributed production
process so internal innovation to introduce
workflow efficiencies and automation will be a key
area of focus for Localization.
Clients are already adopting our game asset
management system, XLoc, which in turn ensures
we are ever more integrated into their workflows.
Combining the market leading expertise we havebuilt up in localization over the past 20 years,
with proprietary software tools, like XLoc, andartificial intelligence (AI) and machine learning(ML) technology from Kantan, will enable usto effectively manage a greater volume ofcontent for our clients, at a greater speed,
and in more languages.
We expect to deliver continued growth into 2022
as more content flows to our later stage service
lines following the return to new content creationin 2021, alongside the underlying momentum ina video games market that is producing an everincreasing level of content, that is localised to agreater degree, for communities of video gameplayers that reside in every corner of the world.

% O F G RO U P RE V E N U E FO R THE Y E A R

9.9%
2021 RE V E N U E€50.8m€50.8m21
20€45.4m

+11.9%

2021 O RG A N I C RE V E N U E G ROWTH

12.2%

2021 P RO FO RMA RE V E N U E€50.8mAV E R AG E O P E R ATI O N A L STA F F

382

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GOVERNANCEF I N A N C I A L S TAT E M E N T S

S U P P L E M E N TA R Y I N F O R M AT I O NSERVICE LINE REVIEW CONTINUEDKEYWORDS STUDIOS PLC

ANNUAL REPORT AND ACCOUNTS 2021

32

Localization Testing
Our Localization Testing service line identifies out ofcontext translations, truncations, overlaps, spelling, grammar,
age rating issues, geopolitical and cultural sensitivities, andconsole manufacturer compliance requirements inover 30 languages using native speakers.

FY 2021 performance

The market opportunity and outlook

Localization Testing revenue increased by 16.3%
to €27.1m (FY 2020: €23.3m). On an organic
basis, which excludes the impact of currency
movements, Localization Testing was 16.7% higher
compared to FY 2020.

In this service line, we continue to develop ouroperations in Tokyo, Singapore, Katowice, Milan,
Dublin, Montreal and Ottawa, which gives us thescale, breadth of languages, multi-location andtime zone operations, and resourcing agility toenable it to offer a flexible, high quality and costeffective service which is difficult for competitors
to replicate.

As in the case of Functional Testing, Localisation
Testing started to benefit more fully from content
flowing into our later stage services in H2 2021,
following the industry’s return to focusing on
new content generation in H1 2021 after the
disruption to game production cycles caused by
the pandemic in 2020.
Localization Testing benefitted from improvements
to its global resourcing market, an increasingly
flexible team structure and a higher proportionof work being shared across multiple studios
in different geographies, which aided capacityand enabled the service line to meet heightened
demand in a timely, flexible manner.

With our offering well established as a leading
global player, we expect the Localization Testing
service line to benefit from the strong underlying
market, a continued rise in external service
provision, and an increased flow of content toour later stage services in 2022. We are alreadyreceiving ever larger opportunities from ourclients who recognise Keywords as a global
partner of choice.

% O F G RO U P RE V E N U E FO R THE Y E A R

5.3%
2021 RE V E N U E€27.1m€27.1m21
20€23.3m+16.3%

2021 O RG A N I C RE V E N U E G ROWTH

16.7%

2021 P RO FO RMA RE V E N U E€27.1mAV E R AG E O P E R ATI O N A L STA F F

646

OVERVIEW

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GOVERNANCEF I N A N C I A L S TAT E M E N T S

S U P P L E M E N TA R Y I N F O R M AT I O NSERVICE LINE REVIEW CONTINUEDKEYWORDS STUDIOS PLC

ANNUAL REPORT AND ACCOUNTS 2021

33

Player Support
Our Player Support service line provides multi-lingual,cost effective and flexible customer care services,
including managing communities of gamers acrossall forms of social media, within the games themselves
and on the official game forums, ensuring ourcustomers have a safe player environment.
FY 2021 performance

The market opportunity and outlook

Player Support increased revenue by 9.8% to€45.9m (FY 2020: €41.8m) and Organic Revenue,
which is on a constant currency basis, by 12.7%.

Player Support growth is expected to continue in
2022, with the benefit of an expanded client baseand more diverse services.

Player Support brought on a significant numberof new clients and continued to strengthen its
services in areas such as social media, quality
control and consulting. It has continued to
grow revenues from its social media services inparticular, which have a high level of synergy with
the Group’s Marketing Studios. For instance, ouracquisition of Waste Creative in December 2021
provides particular opportunities for synergies
with Player Support due to its focus on player
community management and retention for mobile
video game creators. Together, our services offer acompelling and highly differentiated proposition to
our clients who are ever more focused on keeping
gamers happy and engaged with their games.

As gaming becomes ever more social, our capacity
to moderate user generated content is becoming
critical for our clients. In this context, social
media is expected to continue its progression in
2022, while adding trust & safety services to ourunique offer will address increasing demand fromour clients.

Our remote working arrangements have continued
to prove highly effective, enabling us to seamlessly
support clients across the world without any
disruption, and Player Support has above industry
average levels of employee retention, with thestrength of its culture also borne out in a strong
employee net promoter score.

Having launched consulting services in 2021, weplan to support more of our clients with this, tohelp them shape how customer support can bebetter integrated to their upcoming games and besupported by the most relevant tools available.
Keywords’ deep games knowledge and focus,
combined with its global footprint, means weremain the most appropriate cultural fit for ourclients for these services.
Our capacity to recruit from more countries will
improve our recruitment pipeline and enable us tohelp our clients scale in their desired languages,
while our machine translation engine, Kantan,
provides an effective and efficient tool to support
people-driven services.

% O F G RO U P RE V E N U E FO R THE Y E A R

9.0%
2021 RE V E N U E€45.9m€45.9m21
20€41.8m+9.8%2021 O RG A N I C RE V E N U E G ROWTH

12.7%

2021 P RO FO RMA RE V E N U E€45.9mAV E R AG E O P E R ATI O N A L STA F F

1,702

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S U P P L E M E N TA R Y I N F O R M AT I O N

OUR PEOPLE, OUR CULTURE

34

O U R P E O P L E – AT T H E C O R E
O F W H AT W E D O
Our culture acts as the glue that binds all
Keywordians around the world together –relaxed, creative, professional and humble witha focus on doing the very best we can for ourclients through each and every project they
entrust to us.

KEYWORDS STUDIOS PLC

ANNUAL REPORT AND ACCOUNTS 2021

Our people
At Keywords, an average of 9,493 full timeequivalent employees make up our international,
digital-first, diverse and multicultural team and weare well balanced across our three regions; 39% inNorth and South America, 30% in Europe and 31%
in Asia and Australia. The number and diversityof people and skills in our workforce allows us tobe well placed to deploy these skills across theindustry to meet all of our customers’ 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 commitment of our talented andgames-passionate employees and collaborators.
We are proud of the passion, commitment andprofessionalism of this valuable resource of
Keywordians who help to contribute to most of
the world’s leading video games. Our smoothtransition to remote and flexible working during
COVID-19 demonstrated the continued resilienceof all Keywordians and we would like to thankeveryone involved for their incredible contribution
to the continued success of the Group.

Keywords Rule of 9

At Keywords, we encourage our people to engage witheach other not only across our studios but acrossour regions and global network. Through knowledge
sharing, online community spaces and open plan
offices, we encourage our colleagues to be the very
best at what they do. At the heart of our culture are
our operating principles, the “Keywords Rule of 9”.
1 Communication
We communicate openly and in a timely fashion.
We do not hide things from colleagues or clients
and we avoid office politics.
2 Project Focus
We focus on projects, delivering the best we canfor the benefit of each and every product we touch.
3 Client Centricity
We act as an extension of the client’s organisation, moulding
our processes and procedures to fit their requirements
while sharing our knowledge of best practices.
4 Empowerment
We empower our people to perform to the best of
their ability by providing them with the resourcesand environment to do their jobs and the tools to
track and measure their performance.
5 Passion for GamesWe are passionate about games and are proud of
our role in helping to deploy them and we play anactive role in the wider industry.
6 Client Intimacy
We love our clients (all of them) and want the bestfor them at all times.
7 Positivity
We have a “can do” attitude and rise to the challengeof solving our clients’ problems.
8 Flexibility
We recognise the importance of flexibility and actively
embrace it despite the obvious challenges. Flexibility
is why we exist at all. Without it, clients would perform thetasks we do themselves.
9 Learning & Growing
We learn at every opportunity and grow ourselves
through experience, training and tackling new challenges.

Working with our customers

Supporting our communities

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

Through our studios across 23 countries, we place
the support of our local communities, including
our employees, at the heart of what we do. Inorder to do more to support good causes acrossthe communities that we are a part of, we haveset aside an annual central fund of €250,000
under the Keywords Cares initiative. Throughout
2021, Keywordians with the support of Keywords
Cares raised funds of over €26,500 and supported
various local community and employee-led events.

Year on year, we find ourselves more embeddedwith these clients, having access to theirdevelopment environments and integrated
further into their workflows.

Diversity, Equality and Inclusivity

Joining the Keywords family
We are a highly acquisitive business and havestrict criteria for our acquisition targets, by
far the most important of these being culturalfit. Before acquiring an acquisition target wecomplete detailed due diligence that ensures
the seamless integration of the new studio and,most importantly, our new colleagues. From day
one, we want them to feel part of the Keywords
family, while, at the same time, appreciating thehistory and richness that the new studio brings to
Keywords. One mark of our integration success isthat over half our senior management team joined
us through acquired companies.
Our people, with their drive and talent, makeKeywords the global service provider that it istoday, and it is essential for us that we continue
to foster a unique and diverse culture, which
includes welcoming new faces and ensuring they
feel just as supported and welcomed as their moreestablished colleagues.

As a multi-cultural business serving a global
gaming community, we naturally thrive on
diversity, celebrate uniqueness and collaborate
as a team. We encourage all Keywordians tolearn more about LGBTQIA+ communities andsupport an environment of self-expression
through our Global Diversity Equality & Inclusivity(DE&I) Council.
As part of this, celebrating Pride is an annual
summer tradition at Keywords. While many
parades remained cancelled around the world due
to COVID-19 restrictions, the festivities were notforgotten at Keywords. We encouraged our teams
to show their colours throughout the year and our
local HR and studio management teams organised
activities in June to raise awareness among
Keywordians and beyond.
To increase local awareness, our studio in Manila
organised a contest to create a background forTeams calls. The winner, Alyzza Jeanne Naguit,said of her creation (shown below): “This art showsthat different people can celebrate and be unitedwhen celebrating Pride Month.”OVERVIEW

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GOVERNANCEF I N A N C I A L S TAT E M E N T S

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OUR PEOPLE, OUR CULTURE CONTINUED

35

Bernadette Belle Wu Ong’s cape grabbed theattention of the fashion world in 2021 but did you
know that the costume’s powerful message has
been hand-painted by a Keywordian? Our Player
Support Agent Paulo Pilapil Espinosa and designer
Arwin Meriales worked on the design together
with Paulo hand-painting the words.

KEYWORDS STUDIOS PLC

ANNUAL REPORT AND ACCOUNTS 2021

On International Women’s Day, Electric Square held
a 200km walking challenge to help raise money for
RISE (Refuge, Information, Support and Education), a
domestic abuse charity based in Brighton and Hove.
Many of our studios around the world changed
their logos on websites and social media
channels to raise awareness for Pride and here
are some examples:

Mindfulness

Supporting the fight against COVID-19

This is an area that has been more important
than ever over the last year due to COVID-19
restrictions to people's personal and professional
lives. Electric Square was awarded Gold in the
Mind’s Workplace Wellbeing Index 2020–2021,
given their achievements in successfully
embedding mental health into their policies andpractices, while demonstrating a long-term andin-depth commitment to staff mental health.

Keywordians in India organised a COVID-19
Vaccination Camp for all its employees from
Lakshya and Babel at our Gurgaon Studio in
June 2021. In total, around 200 people were
vaccinated, including our support staff, security,
housekeeping, and their family members. The
camp was organised in association with C K Birla
Hospital, Gurgaon.

Sachin Gulia, from our Lakshya Gurgaon team
took a step back to reflect on the past year
and decided to break the monotony of staying
at home with an adventurous expedition on
his bicycle from Meerut (Uttar Pradesh) to Leh(Ladakh) covering more than 1,000km to reachan altitude of almost 12,000 feet.

Lakshya has remained committed to keeping
the safety of its staff the utmost priority andhave continued to work remotely. Many of ouremployees moved to their hometowns to takecare of loved ones and continued to work fromthere. Today, our employees work seamlessly frommultiple cities across India, this could not havebeen possible without our IT, office administration,and production teams who rose to the COVID-19
and work from home challenge.
Staying connected

Great Place to WorkIn 2020, Keywords started a partnership with ourart studios to create a series of gratitude e-cards,
allowing Keywordians to send personalised thankyou e-cards to other Keywordians for their help
and continued support. In 2021, over 4,500 e-cards
were sent globally, almost double the prior year,with kind thoughts and thank you messages
keeping our people connected while apart.

Keywords Studios in Manila has been certified
in 2021 by Great Place To Work® Philippines, inrecognition of their great employee experience.
Dietrich Quemado, our Manila studio head isfeatured on page 9, where he talks about thisachievement and his passion for games.

With the migration to working from home, teamoutings and seasonal events have unfortunately
remained on hold in most locations. To keep
connected, a number of our studios hosted
employee-exclusive webinars and invited people
from around the Group to join in as well.

Rhys Lloyd, Head of Studio at Descriptive VideoWorks, highlighted in an industry article that as thevideo game industry takes steps toward inclusivity,
audio description is the next step on this journeyand calls out accessibility as one of the defining
trends of 2021. Rhys is featured on page 38.

In Ireland, Keywords was named among Ireland’s
150 Best Employers for 2021 while a number of
our UK studios (Studio Gobo, Indigo Pearl, d3t andElectric Square) were also big winners in the UK
GamesIndustry.biz Best Places To Work Awards.

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36

In the Philippines, our studio organised a money,
toy and food donation drive for paediatric cancer
patients staying at Bahay Aruga, a shelter forpatients being treated in hospitals around Manila.

KEYWORDS STUDIOS PLC

ANNUAL REPORT AND ACCOUNTS 2021

For Earth Day 2021, our team in Montreal
contributed 100 computer monitors to Insertech
Angus’ hardware donation campaign, helping
support Insertech efforts to provide work experience
to young people struggling to find employment.
In our Mexico studio, the weekly “State of theUnion” floor meetings moved online, as theteam recognised the continued importanceof sharing what is going on across Keywords
as well as building a sense of community
with acknowledgments of outstanding
performance, celebrating birthdays and warmly
welcoming newcomers.
2021 was Keywords’ first full year on Instagram
and we shared lots of personal moments andoffice insights from our studios, including our firstever global drawing event for all Keywordians,no matter if they worked at an art studio or justsketched for fun. Follow us for 2022 insights:@keywordsstudiosfamily
Community and charitable activities
Winters in North India can be tough for theunderprivileged, so our studios there helped theless fortunate in and around Delhi. By teaming
up with A Giggles Welfare Organization (a nongovernmental organisation), we distributed
blankets to women and children at the Don Bosco
Ashalayam orphanage.
Our Keywords team in Montreal participated ina food drive in March 2021, with volunteer drivers
picking up packages of food and toiletries in theirneighbourhoods, while teammates collected
and sorted donations for redistribution to thosein need.

Gaming for good
The biggest gaming tournament of the year,
Extra Life featured 23 Keywordian gamers fromaround the world, who streamed over 135 hours
of gameplay, raising almost US$6,000 for theChildren’s Miracle Network of hospitals.
MO N E Y R AISE D FOR THE K I D S$5,849N UMBE R O F KE YWORD I A N S
JO IN IN G O UR TE AM

23

F RO M VARIO US LO C ATI O N S I N

A 24-hour football tournament was organised byour team at Keywords’ Headquarters in Dublin
to raise money for Irish Motor Neurone Disease
Association with Nord Anglia International School
Dublin kindly offering their football pitches free ofcharge for this event.
Keywords Player Support team in Manila
gave their time, energy and hearts to help
192 families in the Philippines that were hit bytyphoon Ulysses. The team visited the families
to distribute food items and toiletries as well as
second-hand clothes.

8 countries
THAN K YO U TO OV E R 1 ,0 0 0 V I E WE R S
WHO E N CO UR AGE D U S A N D L E F T
DO N ATIO N S .

In September, Keywords held a Solidarity Cup
online gaming tournament for employees acrossAsia Pacific, attracting support from our studios
in Manila, Singapore, Tokyo, Taipei, China, India,
Australia, Indonesia and Korea. A total of US$5,000
was collected from participating studios and wasused to buy medical supplies for Sardjito Hospitalin Indonesia. In addition to the medical supplies,
over US$2,000 was donated to UNICEF – Indonesia
from a combination of employee donations andKeywords Cares matching.

After being involved with Grads In Games fora number of years, d3t became the headline
sponsors for the 2020-2021 academic year, an
initiative that helps graduates kick-start theircareers in the video games industry.
Keywords Studios in Italy held informative
meetings with young students’ parents on the useof video games by children and teenagers thatprovided useful tips to parents on how to protect
their children from some pitfalls and dangers within-game open chats. The studio also supported
disadvantaged students by helping them toprepare for their eighth-grade exams.

OVERVIEW

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S U P P L E M E N TA R Y I N F O R M AT I O NRESPONSIBLE BUSINESS REPORT

37

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

Progress in 2021

KEYWORDS STUDIOS PLC

ANNUAL REPORT AND ACCOUNTS 2021

U N SD G s

Ensure healthy lives andpromote well-being

Achieve gender equality
and empower all womenand girls

Industry, innovationand infrastructure: Build
resilient infrastructure,promote inclusive
and sustainableindustrialization andfoster innovation

Ensure inclusive andequitable quality educationand promote lifelong
learning opportunities for all

Promote sustained, inclusive
and sustainable economic
growth, full and productive
employment and decent
work for all

Reduce inequality within
and among countries

Climate action:
Take urgent action tocombat climate change
and its impacts

We at Keywords have always been committed to conducting
our business responsibly, operating to the highest standards ofhonesty, integrity and ethical conduct. We take our wider corporate
responsibility seriously and are conscious of the role our businessplays in our communities and in the impact our business has on theenvironment. We are very proud of the thousands of Keywordians,
across 23 countries of operations, for upholding the highest
standards and behaving in accordance with our “Keywords Rule of9” as we engage and grow with our work colleagues, our customers
and our communities.
As more investor attention falls on this critical aspect of business,so we at Keywords are working to bring to the fore the existing
behaviours and characteristics of our business that already makeus a great place to work, a business that cares for its people, its
communities and the environment and a business that recognises
there is much more we could and should be doing.
In 2021, we established an Environmental, Social and Governance(ESG) Committee, which meets quarterly and provides regular
updates to the Board on progress. Details of the membershipand activities in the year can be found on page 84. The ESG
Committee has identified a number of performance metrics in eachof our priority areas to measure our progress and we believe by
fully embedding these into our business strategy we can build
a more robust and sustainable business for all our stakeholders(shareholders, employees, customers, suppliers and community
participants). While recognising there is more work to be done, the
ESG Committee believes a solid base has been established and looks
forward to reporting on the progress in each of our priority areas.

The ESG Committee also builds on materiality assessment workthat our senior managers and the Board carried out in 2020. That
process included a materiality workshop, as part of our Executive
Summit, providing the Board and senior managers with theopportunity to identify and debate matters of material importanceto them based on potential impacts to the business and its
stakeholders. This was supplemented by a responsible businessemployee survey, where we sampled a representative group of
Keywordians to get their views and understand what is importantto them. This process identified our five Responsible businesspriorities of People (including Diversity, Equality & Inclusivity (DE&I)),
Client, Community, and the Planet underpinned by Governance.
We also mapped our priority areas to the UN SDGs (United
Nations sustainable development goals) as set out in each of thepriority areas.
During 2021, we made good progress on our priority areas, withhighlights including:–

Employee NPS score increasing to 42 from 22 in 2020, andpositive employee survey feedback–

Health and wellbeing supported ongoing COVID-19 assistance,and more mental health initiatives–

Partnership with Women in Games Ambassador programme–

Planet: Environmental policy, Sustainable Studios, Carbon offset,
Task Force on Climate-related Financial Disclosures (TCFD)–

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38

RHYS LLOYDSTUD IO HEAD AT DESCRI P T I V E V I DEO WOR KS
VA NCOUVER, C AN ADALEVELKEYWORDS STUDIOS PLC

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58

R H Y SSKILLS:
ACC ES S I B I LI T Y
A N D I N C LUS I O N

GAME GENRE:
SPORTS

STRENGTH:
LEARNING AND GROWING– SINCE I BEGAN WORKINGI N A C C E S S I B I L I T Y, I H AV E
LEARNED A TREMENDOUS
AMOUNT FROM MYCOLLEAGUES AND THE
AUDIENCE WE SERVE.
A S A C O M PA N Y, W E A R E
C O N S TA N T LY I N N O VAT I N G
AND SPEARHEADINGCHANGES IN THE
ACCESSIBILIT Y INDUSTRYK E Y W O R D S H I G H L I G H T:
PROVIDING LIVE AUDIODESCRIPTION FOR THE
T O K Y O O LY M P I C S A N D
PA R A LY M P I C S , W H I C H L E D
T O N B C W I N N I N G A N AWA R D
FOR BEST LIVE DESCRIPTIONFROM THE AMERICANCOUNCIL OF THE BLINDE N E R G Y:I H AV E T H E O P P O R T U N I T Y
TO WORK WITH AN
I N C R E D I B L E T E A M T H AT I S
D E D I C AT E D T O B R I D G I N G
THE ACCESSIBILIT Y GAP FORPEOPLE WHO ARE BLIND OR
LOW VISION

We regularly hear from
our audience how Audio
Description makes ameaningful differencein their life, and it’s aprivilege to do this

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(INCLUDING DE&I)
People are our largest and mostvaluable asset. We value them;
we trust them and we work withthem to support their passion toprovide the best service for eachproject and customer.

As a multicultural business, we thrive on diversity,celebrate uniqueness and collaborate as a teamwhether we are physically together in one of our
70+ studios around the world or working together
virtually. We continually challenge ourselves toensure that we provide a working environmentthat treats people with dignity and respect,free from discrimination and with fair and equal
opportunities. The key areas of focus are: health& safety, employee engagement, training anddevelopment and diversity, equality and inclusivity.
Health & Safety

U N SD G s
Ensure healthy lives andpromote well-being
Ensure inclusive and equitable
quality education and promote
lifelong learning opportunities
for all
Achieve gender equality andempower all women and girls
Promote sustained, inclusive andsustainable economic growth,
full and productive employment
and decent work for all
Reduce inequality within
and among countries

Since the start of the COVID-19 pandemic,
our priority has been the health, safety andwellbeing of all Keywordians, reinforcing ourongoing commitment to providing a safe andhealthy workplace for all of our employees.
We have worked hard to fully comply with allenhanced national legislation on health andsafety requirements, while providing information,
education and training to those returning to an
office environment.
COVID-19 has also brought new pressures aroundworking 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 (EAP) at our larger locations andother locations have arranged programmes
locally. Examples of some of these included guest
speakers on mental health awareness and various
team or online events that encourage activenessand mindfulness, such as dance lessons andvirtual yoga. Many of our EAP providers alsooffer online courses to help build resilience andpersonal development in areas of mental healthand wellbeing. We are particularly proud of how
Keywordians around the world have responded
to these challenges to keep everybody safe
while making extra efforts to staying connectedwith each other (more detail is set out on
pages 34 to 36).
We welcome employee input into all programmes
and openly share initiatives across theorganisation as we seek to meet the changing
needs of our people. As an example, to provide
some additional support in instances where someof our colleagues were particularly financially
impacted as a result of COVID-19, we established
our own US$500,000 hardship fund in the earlier
months of the pandemic to support thoseexperiencing more acute financial issues. To date,the hardship fund has provided US$75,000 insupport for our staff and families affected by
COVID-19 and other general financial difficulties.
This fund remains active and accessible by all.

E MP LOY E E E N G AG E ME N T
S U RV E Y RE S P O N S E R ATE

69%
21

69%
68%

20

eNPS

42
42

21
20

22

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Employee engagement
Our annual employee engagement survey
took place in September 2021 with 6,565 of ourcolleagues responding, representing a 69%
response rate (2020: 68%). In response to thesurvey feedback in 2020, some of the actions wetook included creating a Health and Wellbeing
Committee, adding further support to CSR(Corporate Social Responsibility) activities withthe addition of Regional CSR roles, began routine
global messaging from senior executives andamplified our gratitude e-card programme with theaddition of cultural awareness dates.
We were delighted to see our global employee net
promoter score (eNPS) increasing to 42 from 22 in
2020. We are also pleased to see all global service
lines, support teams and regional eNPS scores
increasing over the prior year. This score is used toexpress the strength of the relationship between
Keywords and its employees and is calculated
based on the answer to a simple question: “Would
you recommend Keywords Studios as a goodplace to work?” Generally, a score within thebracket of 10 to 30 is considered good and a scoreof 50 is excellent.

The 2021 survey continued with strong themesof accomplishment and teamwork with 93%
responding that they were proud to be amember of their team, 93% of our employees
feel Keywords is striving to create a diverse andinclusive environment for all employees and
92% feel they are treated fairly in the workplace.
Areas for improvement for 2022 relate to more
opportunities for career development andgrowth (similar to 2020), more support aroundmental health and wellbeing and easier accessto information and policies. The top three mostimportant workplace benefits were compensationand salary, flexible work/life balance and being
recognised and valued. We have set up focus
groups for 2022 to examine the results of thesurvey and to propose initiatives to further
improve overall employee engagement. The
survey results were also reviewed by the ESG
Committee and key themes were discussed andconsidered when determining initiatives andmetrics for 2022.
The survey also sought feedback on working
environments and whether employees felt
productive in their roles, knowing that for many,
this meant a work from home arrangement.
82% of people expressed a positive response,
compared to 77% in 2020.

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We believe there is clearly a role for physical studios for the Group,particularly to allow for the exchange of creative ideas, training anddevelopment, healthy social interaction by peers and where theadded security environment and highly specialised set-ups of our
testing and audio studios are so important. Post COVID-19, we see
the future as a hybrid of creating vibrant, engaging and safe studiospace while also enabling people to work securely and productively
from home where this can be facilitated.
Training and development
We value our people; we trust them and work to support their
passion to provide the best service for each project and eachcustomer. However, there is always more that can be done to invest
in our people and we continue to focus on making improvementswith training and development, benefit schemes and careerplanning. Across Keywords, we provide training and development
programmes appropriate to the service line and the professional
disciplines involved therein. With so many staff working from home
due to the COVID-19 pandemic, our Montreal team has continued
to enhance the online learning hub, Keywords Academy Canada,
which allows employees to provide access to learning materials,
book courses and view monthly topics of interest. Internationally,
we use LinkedIn Learning to provide employees around the world
with access to hundreds of courses online in their local language.
We continue to partner with local institutes and professional bodies
with online and in-person management development and skills
programmes throughout the Keywords Group.

Diversity Equality & Inclusivity
In 2020, we created a Global Diversity Equality & Inclusivity (DE&I)
Council as we recognised that we could do more to drive thisagenda and evolve our approach at a global, regional and local
level in order to have a positive impact on people’s everyday lives.
During 2021, the Council focused on projects around education, HR
support, community, and communication. These included piloting
Affinity Groups and the partnership with Women in Games. We
are piloting unconscious bias training for individuals in hiring roles
and are taking steps to redact job applications to further ensure
unbiased assessment of potential candidates at the start of therecruitment process.
In 2021, the Group was composed of 25% women, 74% men and 1%
non-binary/not disclosed (2020: 26%/74%), this ratio is mainly due
to the higher proportion of males in some parts of our business.
Our support functions have a more equal split of women and men(44% and 56%, respectively). We recognise that the video games
industry traditionally attracts more male than female employees;
therefore, a continuing focus going forward will be to look atopportunities to highlight Keywords, and the gaming industry as awhole, as an attractive career choice for women. Following changes
to Board composition during the year, 25% of Board executives are
now female.
Keywords is fully committed to initiatives and activities thatencourage women to pursue a career in video games, and to help
address the underrepresentation of women in our industry. As
part of this, in August 2021, Keywords Studios announced a newpartnership with Women in Games, to help power their over 600
strong ambassador programme under the heading, “Ambassador
Programme Powered by Keywords”.

Partnership with Women in Games
Women in Games is a not-for-profit organisation
founded in 2009 with the mission to identify and effectthe lasting change needed to bring about full genderequality, equity and parity of opportunity within thegaming sector and to encourage more women to
consider games and eSports as a career.
Its Individual Ambassador Programme, which was
founded in 2016, brings together individuals, industry
and educators under one umbrella, all focused ondiversifying and strengthening the sector. In 2022, wewill leverage our global platform and client relationships
to enhance and accelerate the Ambassador
programme, while working closely with Women in
Games on a number of projects, events and initiatives.

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CLIENT
Our clients and their projects
are at the heart of everything
we do at Keywords and we arefocused on continually improving
the engagement and experienceof our clients when interactingwith Keywords. We always seek
to better understand our clients’needs so that we can fully meettheir expectations for each andevery 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 the heartof our culture is our commitment to quality, reliability and integratingwith our customers’ processes which, when combined, promotes
long-term, sustainable relationships. Continuing to create andmaintain the right culture is core to Keywords’ future sustainability
and is 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 can for our customers and thosewith whom we interact.

This framework incorporates compliance checks 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:

Our top five customers account for 30.0% (2020: 29.1%) of theCompany’s revenues, with 133 customers using three or more
service lines, up from 120 in 2020. In 2021, we launched a more
involved feedback survey with our customers through a customer
net promoter score (NPS) survey with an overall customer NPS of
30 (a score of between 30-70 is considered “great” by Retently).
The survey highlighted that quality was the number one reason forchoosing Keywords over other providers.
Information technology

U N SD G s
Promote sustained, inclusive and sustainableeconomic growth, full and productive employment
and decent work for all

Build resilient infrastructure, promote inclusive
and sustainable industrialization and foster
innovation

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 tooperate effectively, efficiently and securely. To ensure this is
the case, Keywords has a dedicated Information Security &Privacy department which reports on the Group’s’ security
posture to the Audit Committee at least twice a year. In 2021,
an independent third party also conducted a detailed review of
the current information security environment at Keywords andthe department’s future plans.
The department follows a comprehensive global Information
Security & Privacy framework with policies, guidelines andprocedures, covering industry best practices that all studios
must adhere to.

–Managing the Security & Privacy framework–

Monitoring of Keywords Studios’ information systems
and infrastructure–

Security & Privacy incident management–

Raising employee awareness–

Client Security & Privacy assessments–

Testing of internal privacy and security controls

Several studios hold and maintain, or are in the process of acquiring,
information security and privacy-related certifications, including, but
not limited to: Trusted Partner Network (TPN), Supplier Security andPrivacy Assurance (SSPA), Payment Card Industry Data Security
Standard (PCI-DSS), System and Organization Controls 2 (SOC-2),
Netflix Post Partner Program (NP3).
Each service line is constantly developing and using technology to
improve client service and drive internal productivity. An exampleof this is in Localization, where we plan to build 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 ofdigital content for our clients. We are also developing the Kantan
technology to provide more efficient multi-language capabilities in
our Player Support business.

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Sustainable studios

We are committed to minimising
our impact on the planet andrecognise the importance ofmeeting globally recognised
corporate responsibility
standards. As a responsible
employer, we are responding
to the demands of our people
to build a sustainable businessmodel, mainly through the impactof our studio configurations andbusiness travel activities.

We developed the Group's first Environmental
Policy in 2021, covering our energy and recycling
practices. The policy will help further develop our
Sustainable Studios programme and support
our studios in their efforts to minimise energy
usage and to reduce, reuse and recycle wherever
possible. As part of this, Keywords has started its
first environmental assessment of all studios tocreate a baseline and a proactive guide towards
next actions and goals.
In addition to these local initiatives to reduceenergy usage and our environmental impact, in
the UK and Italy a number of our studios have
moved to 100% renewable electricity and moreare expected to follow in 2022 once their existingcommitments finish.
Sustainable Studios will help to reduce our carbon
emissions but we recognise these initiatives
take time. Therefore, in our 2021 Employee
Engagement Survey we asked staff their preferred
method to minimise our environmental impact in
the near-term and 70% chose forest protection.

U N SD G sTake urgent action to combat
climate change and its impacts

As a result, Keywords offset its 2020 carbon
impact with 4,715 credits (2020 emissions +10%) towards the Ntakata Mountains REDD
project which protects forests. The revenue
earned from the sale of these certified carbon
credits is paid directly to forest communities in
Tanzania, empowering them to manage theirown development needs. We believe this projectis a good match for Keywords given its focus on
the education of women and improved health in
the community.

The project was recently recognised with theaward for “Innovation in nature conservation– land management” from the United Nations
Development Programme (UNDP) and theInternational Union for Conservation of Nature(IUCN). Additional information on Carbon Tanzania
and the great work it does in forest conservationin the Ntakata Mountains can be found here:
www.carbontanzania.com
We accept that in a global organisation ourpeople will need to travel. However, in 2020 and
2021, as a result of the COVID-19 pandemic, ourbusiness travel was greatly reduced. We increased
our usage of collaborative tools such as videoconferencing and will endeavour to retain thesepractices to a greater degree post the pandemic.
When we do return to travelling, we will continue
to encourage everybody to fly economy and use
public transport where practical.

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Sustainable steps

Our future sustainable steps
with the environmental sideof Environmental, Social andGovernance (ESG) are evolving
and will centre around the fourmain pillars of the Task Forceon Climate-related Financial
Disclosures (TCFD).

KEYWORDS STUDIOS PLCU N SD G s

Ensure healthy lives and promote well-being

Ensure inclusive and equitable quality educationand promote lifelong learning opportunities for all

Promote sustained, inclusive and sustainableeconomic growth, full and productive employment
and decent work for all

This section sets out Keywords' reporting
against the TCFD requirements. As an Alternative
Investment Market (AIM) listed company, we are
not currently required to report against TCFD, but
we have endeavoured to provide the information
set out under the guidelines, to give a high level of
information and transparency to our stakeholders,
as to our governance, strategy, risks and targets
for climate related impacts.
GovernanceOver the course of 2020, the Board recognised,and discussed, the increasing importance of
ESG matters for our stakeholders. The Board
acknowledged the need to have a clear focus on
its impact on resources and the environment. To
support this undertaking and to have a clear focus
on the area of ESG, in 2021 Keywords establishedan ESG Committee. Further details of the ESG
Committee can be found on page 84.
In addition to our ESG committee, we haveestablished a Responsible Business (RB)Committee comprising of Jon Hauck along withsenior regional executives, to inform the Board aswell as implement and support Group initiatives
such as Sustainable Studios and the DE&I Council.
Keywords recognises that to embed responsible
business and environmental initiatives agreed
by the committees, a clear link to our local
studios must be in place to enable these to be
successfully implemented. To support this, weare currently establishing CSR representatives
in each of our three regions to ensure initiatives
rolled out are fully embedded locally. These
representatives will report both to their regional

directors and through HR, while communicating
their findings and recommendations to the RB
Committee. The longer-term objective is to haveregionally led RB initiatives being supported by
the senior leadership.
One of the first actions of the RB committee
in 2021 was to develop the Group’s first
Environmental Policy covering measures to cut
greenhouse gas (carbon) emissions, energy,
waste, and other environmental impacts. Throughour Sustainable Studios programme, we will belooking to roll out the Environmental Policy andembed it across the business in 2022. Goingforward, this policy will be used as a basis for
all Keywords studios to ensure they work on
introducing environmental initiatives to conserve
natural resources and reduce our emissions.
In 2020, ESG factors were introduced into theChief Financial Officer's non-financial objectives
across five categories, each weighted 6% of theoverall bonus opportunity, including Management
Accounts, ESG Internal Control Framework, Internal
Control Framework, Treasury Management
Function, and Financial Systems. In 2021, the CFO’s
non-financial objectives remained the same andincluded ESG, with each weighted 6%.
Strategy
The video games industry has a relatively
low carbon footprint compared to other “harder
to abate” sectors but Keywords is committed
to playing its part in minimising its impact on
the environment. Sustainability is a core focus
for Keywords, as it is for all the studios acrossour regions.

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Sustainable steps
In 2020, to establish which ESG issues wheremost material to our business, we worked
with an independent third party to carry out amateriality assessment with our senior team andthe Board. This assessment was supplemented
by a Responsible business employee survey tounderstand their views and what is important tothem. Once complete, this process identified our five
Responsible business priorities of People (includingDE&I), Client, Community and the Planet underpinned
by Governance. For further details on our
Responsible business priorities, please see page 37.
Climate change has been classified as an emerging
risk for the Company, and shall continue to bemonitored closely; however, with our minimal risks
from the impacts of climate change, as well as
our own smaller carbon footprint, it is consideredby the Board as secondary to our social policies.
2021 has demonstrated the ongoing issues of
discrimination and harassment that exist within
the gaming industry, and combating inequality anddiscrimination remains Keywords’ primary goal.
Although this may be the case, Keywords is still
committed to reviewing how best it can reduce its
climate impact. As part of our Sustainable Studioprogramme, we have started to assess all ourstudios to gain a better understanding of ourenergy consumption and other greenhouse gas
emitting activities. Once this has been completed,
we will have a comprehensive view of our emissions
across the business, with a view to building a plan toreduce our environmental impacts. This transition
plan will consist of near-term and longer-term plans
to support us in reaching our goal of achieving net

zero carbon emissions ahead of 2050. Led by our
Chief Administration Officer, this groundwork will be
used to develop specific initiatives to monitor our
progress on reducing our climate impacts.
From the current data we have, the largest
considerations are our energy consumption frompurchased electricity and business travel. Last year
was the first time we captured data and reported
on our emissions, which showed that the majorityof our emissions are covered by Scope 2, purchased
electricity. To reduce our energy usage in this area,
our strategy over the next few years is to transition
electricity contracts on our premises to green or
renewable tariffs. A number of our UK studios haveswitched to renewable tariffs in 2021 and feasibility
investigations are being conducted for several otherproperties. In regions where local renewable power
is not available, we are looking into cross-border
power purchase agreements.
For properties under landlord managed services,
we will look to transition leases over time tomore energy efficient buildings, where landlords
already procure electricity from renewable sources.
As part of this process, we have establisheda policy that outlines the requirements that
all new property locations must meet certain
environmental standards.
Keywords will also look to offset any remaining
emissions where it is not operationally possible
to eliminate emissions completely. For 2020
emissions, Keywords employees chose to offset
our carbon impact through credits from the
Ntakata REDD+ project in Tanzania, which helps
to limit deforestation.

In addition to our Group-wide ambition, we
encourage initiatives at the studio level to minimise
energy usage, reduce and recycle waste, and to use
the most efficient communication and collaboration
tools to eliminate unnecessary travel. When we dotravel, we fly economy (where flights are shorter
than six hours), we do not have company carsand encourage the use of public transport, wherepractical, for all our colleagues. Going forward we
will look to capture our emissions from business
air travel.
The pandemic has forced us to adopt far morevirtual meetings, significantly cutting down on
our business travel. We intend to, where possible,
maintain this system so as to travel only when it isnecessary. Due to almost all roles within Keywords
being fully able to complete their work from home,as evidenced during the pandemic, Keywords should
prove fully resilient to any climate-related events
facing the business, with only a limited numberof studios needing more complex plans to ensure
the security of server infrastructure or computer
hardware. Going forward, Keywords will look to
expand the data captured to report against Scope 3
emissions associated with working from home andpurchased goods and services..

Risk management
At this point Keywords does not believe theeffects of climate change present a significant
direct material risk to Keywords beyond thegeneral global impacts that will be felt acrosssociety. Our near totally digital operations give ushigh levels of flexibility to respond to any extreme
weather event that could render our properties,
our sole source of operations, unusable. The
COVID-19 pandemic has proven the speed andefficiency with which our colleagues can switch
our operations to working from home with minimal
disruption to our output. Such a transition could
be implemented again with relative ease should
climate risks reach a significant enough level as topresent a risk to working from our offices.
We anticipate our biggest area of risk is ourserver facilities and computer hardware which arehoused in our premises. The growing challenges
of climate-related weather events, particularly
flooding and wildfires, presents an emerging
risk to the safety of our operations with thepotential for loss or damage to vital hardware.
Keywords locations known to be at risk will look
to conducting a review into how best to secure
any onsite hardware to minimise any potential
disruption, with any findings being used to update
the existing disaster recovery plans already inplace across our locations.

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Beyond the threats to Keywords directly,
secondary impacts from the effects of climatechange on other industries could represent a
potential issue for the Group. The semiconductor
shortage that has impacted the global
economy throughout 2021 has demonstrated
the vulnerability of existing supply chainsto unexpected disruptions – this is likely tocontinue into the future. Keywords, like manyother businesses in our sector, had challenges
to source some key pieces of hardware amid
the competition for semiconductors. While we
expect the current situation to alleviate in 2022,
it represents an example of potential issues
our industry could face in the future. Such risks
will be assessed and reviewed by the Board toensure contingency plans are in place, and that
Keywords’ operations are able to continue withminimal disruption.
We recognise that investors are increasingly
looking at the climate standards and policies
of potential investment opportunities, andcustomers, many of whom are looking to minimise
the emissions in their own supply chains, may
seek out suppliers who can offer a “greener”
service. However, the Company does not consider
climate change to be of significant risk to thedemand for our own products and services.
Conversely, we do not expect it to increasedemand either, as we see limited climate-related
growth opportunities in external services to thevideo games market.
Any risks deemed significant enough to thebusiness are communicated to the Board whocome to a determination as to whether the riskpresents a material threat. If the risk is deemed to
do so, a mitigation/contingency plan is formulated,then implemented in the regions deemed to be
at risk. A guidance system will be put into place
to advise colleagues on the best practices tominimise these climate impacts.

Climate-related risks are factored into our risk
assessments, which is reviewed throughout theyear. Any new risks are included and monitored
to ensure the plans remain effective and ensure
the safety of both our colleagues and business.
Financial risks are taken into consideration
by our existing top-down and bottom-up risk
management processes each year, details of
which can be found on page 57 of our Principal
risks and uncertainties section.

GHG emissions data

Metrics and targets
In line with the Streamlined Energy and Carbon
Reporting (SECR) disclosure, Keywords undertook
its second formal review of the Group’s global
energy usage, resulting in the identification,assessment and measurement of our energy andgreenhouse gas (GHG) 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 2021 and International Energy
Agency (IEA) conversion factors for non-UK
electricity to calculate the below disclosures. As
well as absolute emissions figures, the information
is presented as an intensity ratio against Scope
1 and Scope 2 emissions only, an index of both
employee numbers and our revenue in €m. Thesefigures were calculated from data available to theGroup and extrapolated to take account of smalleror mixed tenant locations.
This year we have reported on Scope 3 emissions(WTT and T&D) related to the combustion offuels and operation of facilities under Scope 1
and in relation to the purchase of electricity,
Scope 2. In 2020, these Scope 3 emissions werecombined with our Scope 1 and 2 reporting but
for transparency this has now been split out
as a separate line, and our previously reported
2020 Scope 1 and 2 figure has therefore changed.
In addition, the 2020 Global energy figure has
increased slightly due to improved data capture.

Current Reporting Year –1 October 2020 to
30 September 2021
Tonnes of CO 2 e

Scope 1 – Combustion of fuels and operation of facilities (Scope 1)

Comparison Reporting Year –1 October 2019 to
30 September 2020

UK andoffshore

Total
GlobalUK andoffshore

Total
Global

1

200

0

244

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

184

3,411

161

3,746

Total emissions under Scope 1 and 2

185

3,611

161

3,990

Scope 3 – Transmission & Distribution (T&D) and Well to Tank (WTT)
related to our scope 1 and scope 2.

69

1,226

38

938

* Includes emissions only from the use of electricity.

In 2021, our global Scope 1 and 2 emissions (location based) were 3,611 CO2e, UK emissions accounted
for 185 tonnes of CO2e, representing 5% of global emissions
Energy 2021
Energy consumption (MWh)Scope 1 – Energy consumption from the combustion of fuels
and operation of facilities

Energy 2020

UK andoffshore

Total
GlobalUK andoffshore

Total
Global

6

1,053

2

1,313

Total Scope 2 – Energy consumption from purchase of electricity,heat, steam, and cooling purchased for own use (Scope 2)*

865

9,793

690

10,245

Total Energy consumption

871

10,846692

11,558

Total energy consumption – includes all activities for which the company is responsible, as Scope 1 and 2.
The energy consumption is calculated using electricity purchased (kWh) and fuel volumes converted to
kWh using the UK government GHG Conversion Factors for Company Reporting, presented in MWh.
In 2021, our global energy consumption was 10,846 MWh, the UK energy represented 8% of our global
energy consumption.
Intensity ratio (tonnes of CO2e per unit)
2021

2020

Ratio of carbon emissions to employees

0.40

0.49

Ratio of carbon emissions to revenue (€m)

7.6

11.0

Many of our studios remained less occupied during 2021 and therefore we believe that neither 2020
nor 2021 would be an accurate baseline to measure our carbon emissions. Nonetheless, in 2022 ourSustainable Studios initiative will focus on driving our environmental commitment forwards, by identifying
practical changes that we can implement and set measurable business targets against, helping us deliver
our long-term ambition to reach net zero carbon emissions ahead of the UK Government’s target of 2050.

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47

COMMUNITY

ANNUAL REPORT AND ACCOUNTS 2021

Here at Keywords, we encouragecommunity involvement andsupporting good causes
throughout our local studios.

In order to do more to support good causes
across the communities that we are a part of,
we have set aside an annual central fund of€250,000 under the Keywords Cares initiative.
This can be applied to match funds raised forcommunity outreach and charitable initiatives
by our local teams around the world. In this way,
we hope to encourage even more support for our
local communities.

Celebrating cultures–

Honouring the backgrounds of ourteams located across 23 countries
and five continents.

In 2021, we were delighted again to see so many
Keywordians giving their time and energy insupport of the numerous initiatives that somany of us feel strongly about, whether it’s local
charities, not-for-profit programmes, educational
initiatives or community outreach programmes.

–

70+ studios supporting diversity
and inclusivity.

U N SD G s
Good health and well-being: Ensure healthy lives
and promote well-being for all at all ages

Some of the many proud examples of ourcommunity efforts during the year are set out inmore detail on pages 34 to 36.

Reduced inequalities: Reduce inequality
within and among countries

Gender equality: Achieve gender equality
and empower all women and girls

Climate action: Take urgent action to combat
climate change and its impacts

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.

Annual Global Charity Event – our 5thyear participating in Extra Life, gaming
for a good cause.
–Children's Miracle Network Hospitals
raise funds and awareness for 170
member hospitals that provide 32 million
treatments each year to children acrossthe US and Canada.

–

Donations stay local to fund criticaltreatments and healthcare services,paediatric medical equipment andcharitable care.

Keywords Cares has also extended its matching
programme to include Keywords Cares Plus thatallows for a more rapid support process in theevent of a natural disaster or humanitarian crisis.

Supporting communities
KEYWORDS STUDIOS PLC––

Keywords Studios fundraisers joined us
from Canada, the US, Mexico, Germany,
France, Italy and the UK.

Uniting and inspiring, making
communities stronger.

–

Over 1000 views.

–

200 + hours of gameplay.

–

Ensuring player safety and wellbeing, ourPlayer Support Agents and Community
Managers have reported hundreds ofonline threats.

–

Fundraising efforts are captured in
our overall numbers above.

–Raised funds for various community needs.

–

Keywordians volunteered significant hours
in an effort to help our neighbours.

–

R A I S E D BY E MP LOY E E S
FO R C HA RI TY€26,500(2020: €46,000, 2019: €29,000)

STU D I O S S U P P O RTE D
LO C A L S C HO O L S A N D
E D U C ATI O N N E E D S

5STU D I O S S U P P O RTE D
G RE E N I N I TI ATI V E S I N THE I R
STU D I O S A N D CO MMU N I TI E S

4STU D I O S S U P P O RTE D
D I V E R S I TY A N D I N C LU S I V I TY
P RO G R A MME S , TO I MP ROV E
THE Q UA L I TY O F L I F E FO R
MA RG I N A L I S E D CO MMU N I TI E S

4STU D I O S S U P P O RTE D
E ME RG E N CY RE L I E F ME A S U RE S ,RE L ATE D TO N ATU R A L
D I SA STE R S A N D COV I D -19

4

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ANNUAL REPORT AND ACCOUNTS 2021

48

GOVERNANCE
Our business strategy is aligned
to our Responsible businesspriorities and the expectations ofour key stakeholders, as outlined
in our Code of Business Conduct(the “Code”).

This Code provides the basic foundations which
guide our ethical conduct at Keywords, setting thehighest standards of behaviour and respecting the
dignity of others. We are committed to conducting
our business responsibly and operating to thehighest standards of honesty, integrity and ethicalconduct. We recognise the value of good corporate
governance in every part of the business and haveadopted the Quoted Companies Alliance (QCA)
Corporate Governance Code, which is appropriate
for the size and maturity of our business.
Ethics: The Group is committed to the highest
levels of integrity, accountability and theprevention of bribery and corruption. In 2020,
we refreshed our Code of Business Conduct,
and published it on the Company website in 12
languages. We also engaged with an external
compliance software vendor to help with theongoing training and awareness of our antibribery and corruption policy, in addition to otherpolicies and eLearning activities. In 2018, we
adopted a whistleblowing policy that has beenrolled out globally. This policy allows all colleagues,
wherever they are, to raise any concerns
about possible financial or other irregularities
confidentially. During 2021, two whistleblowing
disclosures were reported (2020: none), whichwere all fully investigated and are being resolved.

U N SD G s
Decent work and economic growth: Promote sustained,
inclusive and sustainable economic growth, full andproductive employment and decent work for all
Industry, innovation and infrastructure: Build resilient
infrastructure, promote inclusive and sustainableindustrialization and foster innovation

Human rights: At Keywords, we do not tolerate
any form of modern slavery or human trafficking
in any part of our business. In 2017, the Board
adopted a Modern Slavery Policy and our annual
Modern Slavery Statement is published on the
Company website. We operate to international
standards and principles, including theInternational 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 Workand the Children’s Rights and Business Principles.
The Group continues to make all reasonableendeavours to ensure all employees and agentswithin our supply chains are not subject to any
form of forced, compulsory/bonded labour orhuman trafficking through our Modern Slavery
Policy and the accompanying Supplier Codeof Conduct.
Data privacy: Keywords is committed toprocessing data in accordance with its
responsibilities under applicable data protection
legislation, and has created the Keywords
Privacy Framework, based on the General Data
Protection Regulation (GDPR). This framework is
constantly updated to take into account otherapplicable privacy regulations, and it applies toall of its subsidiaries regardless of geographicallocation or service line. We regard the lawful andcorrect processing of personal information by theCompany as very important to our successful
operations and for maintaining confidence
between our clients and ourselves.

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49

G O V E R N A N C E CONTINUED
M&A: We are a highly acquisitive business andhave 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 areapproved by the Board prior to completion. We
have a tried-and-tested integration process
and detailed integration plans tailored to eachcompany, with the involvement of those whowill implement it. This is designed to ensure aseamless integration of the new studio and mostimportantly, our new colleagues, so that from day
one, they feel like part of the Keywords family andadopt our Group policies.
Tax governance: The Group takes a balanced
approach to the management of its tax affairs andhas 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 by structuring our businessand transactions in a tax efficient manner, while
taking into account reputational factors. Tax risks
are regularly reviewed by the Board and the Audit
Committee. The Group’s approach in relation to the
management of tax issues is to ensure that:–

we comply with all applicable laws, disclosure
requirements and regulations in the
territories in which we do business;–

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, the Grouptakes advice from professional firms;–

tax risks are appropriately managed inaccordance with the tax policy; and–our tax planning is aligned with the Group’scommercial and business activities andthe tax treatment of business transactions
is optimised.

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50

NON-FINANCIAL
I N F O R M AT I O N S TAT E M E N T
Our non-financial information statement is
set out below on environmental matters,social and employee matters, respect forhuman rights, and anti-corruption and antibribery. Details of our business model canbe found on pages 16 to 19, and our principal
risks are on pages 57 to 58. 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 Policy

Page 43 Responsible businessSocial and employee matters

Code of Business Conduct

Page 20 Our strategy

Recruitment policy

Pages 34 to 36 Our people, our culture

Employee handbook

Pages 37 to 49 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 48 Responsible business

Modern Slavery Policy
Anti-bribery and corruption

Anti-bribery and corruption policy

Page 48 Responsible business

Whistleblowing

Pages 66 to 68 Audit Committee

Fraud policy
Sanctions policy
Business model

Pages 16 to 19 Business model

Description of principal risks
and impact of business activity

Page 37 Responsible business

Non-financial key
performance indicators

Page 20 Our strategy

Pages 57 to 58 Principal risks and uncertainties

Pages 37 to 49 Responsible business

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S E C T I O N 1 7 2 ( 1 ) S TAT E M E N T

KEYWORDS STUDIOS PLC

ANNUAL REPORT AND ACCOUNTS 2021

The Directors have acted in a way that they
consider, in good faith, would be most likely
to promote the success of the Company forthe benefit of its members as a whole, in linewith Section 172 of the Companies 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 forhigh standards of business conduct; and–the need to act fairly as between members of the Company.

The Directors are fully aware of these duties and responsibilities,
and have set out below how they are fulfilling those duties
in respect of each of their key stakeholders. In line with our
Responsible business report (more detail on pages 37 to 49), theBoard identifies the Group’s key stakeholders as its shareholders,
employees, customers, suppliers and community participants, and it
is committed to effective engagement with these stakeholders.
Shareholders
Our Annual General Meeting (AGM) is an important part of effective
shareholder communication, with all shareholders having theopportunity to hear from the Company and ask questions. The
Board welcomes the opportunity to engage with our shareholders,typically providing a brief update presentation at each AGM andwith all Directors available to answer questions. In 2021, the Board

was unfortunately unable to permit its shareholders to attend theAGM in person due to COVID-19 restrictions. As the Company’s
articles of association were amended at the 2020 AGM to enable“hybrid meetings” (with some attendees in a physical location andothers attending by electronic means), the Board was able to invite
shareholder participation via videoconference. For the 2022 AGM, theBoard hopes to welcome our shareholders back to meet in person
but will maintain the ability for shareholders to participate remotely,
to ensure maximum opportunity for participation and engagement.
The Company also intends to increase the audience of the CapitalMarkets Day by broadcasting these events to selected stakeholders
in order to encourage greater engagement.
Throughout the year, the CEO, CFO and COO meet withshareholders, with the wider Board receiving regular updates
following these engagements. Additionally, both the Senior
Independent Director and the Chair have met, and will continue tomeet, with institutional shareholders to discuss updates on theGroup, including strategy, remuneration and other key issues thatare vital to these stakeholders in the future. An example would be
the emerging importance to some stakeholders of environmental,social and governance (ESG) factors.
Employees
The Board receives regular updates in relation to employees, inaddition to the results from the Group’s global employee survey(further details on page 39) and, acknowledging that remuneration
is an important matter for our people, the Directors requested an
update on pay equality. Additionally, the Group holds a series ofannual strategy days and, as the Board is in attendance, it is able
to get both formal and informal instant feedback from the senior
management team, in addition to discussing strategic development
in an open, collaborative forum. Due to COVID-19, the Board was
unable to engage with the Group’s employees in its normal manner
during 2021, but have resumed visits to key Keywords locationsin 2022.

Understanding that some of our employees experienced
considerable economic pressure because of the pandemic, the Board
is proud to have supported the establishment of a hardship fundto support our employees who needed additional financial support.
Further details of this initiative can be found on page 40.
The ESG Committee, established in 2021, will be responsible forclosely monitoring the interests of our workforce on a continuous
basis. Further details of our priorities relating to our people are
discussed in the ESG Committee report on page 84, and details of
the initiatives already in place across the Group are presented on
pages 37 to 49.
Customers
The Board regards strong engagement with our customers andbuilding long-term strategic relationships, by developing an intimate
understanding of their evolving needs and understanding theirchallenges, as critical to the success of the Company. During theyear, the Board received updates from senior management on key
customers via its regular business reviews. Prior to COVID-19, theCEO and selected members of the Board normally met existingand potential clients at the key video games events (e.g. E3, DICE,GDC, XDS, Gamescom, Tokyo Games Show) to seek their input andgauge their current and future requirements. The CEO and COO also
regularly meet with key customers to strengthen relationships andcommunicate our deep expertise, the flexibility afforded by our scale
and ability to provide a multi-service line platform.
During the year the Group formally adopted a Sanctions Policy inrespect of its customer relationships, documenting its commitment
to complying with the economic and trade sanctions laws andregulations of the United Nations, European Union, United Statesof America, United Kingdom and Office of Foreign Assets Control(OFAC), as well as all applicable sanctions laws and regulations in
the jurisdictions in which the Group operates (Sanction Regulations).
The minimum standards that the Group must comply with to meetthe obligations set out in the Sanctions Policy include:OVERVIEW

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ANNUAL REPORT AND ACCOUNTS 2021––

screening customers against Sanction Regulations using
a compliance solution offered by a reputable third party
service provider;prohibiting or restricting business activities or transactions
with customers, or commencing customer relationships,that the Group believes may violate applicable Sanction
Regulations, whether directly or indirectly; andblocking or rejecting business activities or transactions withcustomers where the Group is obligated to do so underapplicable Sanction Regulations.

Suppliers
The Board recognises the important role that our suppliers play inhelping us deliver our services, as this group comprises individual
contractors in addition to a range of support service suppliers. In
respect of our broader base of suppliers, the Board has developed,
and regularly reviews, a Supplier Code of Conduct, complemented
by the adoption of a Modern Slavery Policy since 2017. Engagementwith our suppliers is primarily managed by the COO and importantmatters are brought to the attention of the Board as they arise.
Community participants
The Board recognises the need to increase our community engagement
and to support the communities that we are part of. With this in mind,
Keywords has pledged up to €250,000 per year to match funds raisedfor community outreach and charitable initiatives so that we cancontinue to support our local communities (further details on page 47).
Decision making
We set out below the interim dividend and new marketing service
line as examples of principal decisions where the Directors have
had regard to the matters set out in Section 172(1)(a)–(f) and theinterests of our key stakeholder groups (named above) when
discharging their duties. Principal decisions are those regarded to bematerial to the Group’s strategy.

Interim dividendMarketing service line

Following a period of robust growth and increased profitability
and cash generation, and reflecting the Board’s confidence in the
future, the Board was pleased to declare an interim dividend of
0.70p per share which was paid to shareholders on 29 October
2021. This represented an increase of 20.7% on the 2019 interim
dividend. Owing to the uncertain global economic situation in 2020,
no dividends were declared during 2020. The Board’s progressive
dividend policy seeks to reflect the Group’s continued growth inearnings and strong cash generation, balanced with the need toretain the resources to fund growth opportunities, in line with
our strategy.

During 2021, the Board supported a proposal from the management
team to report Marketing as a standalone service line, following its
recent growth and scale within the Group, and to focus on building
the service line both through acquisitions and organic growth.

To support each dividend approved by the Board, detailed updates
are received from senior management relating to financial resilience,
performance outlook and external views, and the Board has anopportunity to discuss those and other stakeholder considerations.
The Board receives regular updates on investor relations and invites
questions from shareholders. The Board considered that while
shareholders have not communicated to the Company a preference
to receive dividends, or otherwise, many shareholders do require
our continuation of the dividend policy. In addition, there are anumber of employee shareholders (as a result of the Company’s
wider workforce remuneration policy to align remuneration with
the Company’s long-term success), and the Board considers thoseas also having an expectation of receiving dividends. Overall, theBoard sees the implementation of a progressive dividend policy as
an important element of the Company’s future success and, having
regard to the considerations noted above, determined that recommencing the payment of dividends was in the best interests of
its shareholders and wider stakeholders.

The Marketing services sector is particularly fragmented, given
the range of services provided both internally and externallyfrom key art, trailer creation, advertising, PR, branding, campaign
management, influencer marketing and social media management
through to marketing analytics and community management.
The Board recognised that establishing a highly specialised video
games Marketing services business would better position Keywords
as the partner of choice for our games publisher and developer
customers who are interested in a reliable supplier with global reachand deep expertise.
The Board decided to respond to the needs of our customers andenhance our value proposition as a multi-service line platform,
which supports the Group’s long-term strategy communicatedto shareholders, and creates long-term value for them. With theacquisitions of g-Net and Maverick Media, now the two largest
studios in the Marketing service line, Keywords has a considerably
expanded platform from which to further build the breadth of ourcapabilities, organically and through selective acquisitions.
For our employees within the Marketing service line, thisdevelopment has provided a valuable opportunity for them tocreate stronger relationships with existing customers and foster
relationships with other Keywords customers. The resulting
volume and variety of work offers an opportunity for personal andprofessional development, as well as development opportunities
for individuals supporting the new service line, and ultimately
recognises the excellent work of all our colleagues within theMarketing service line.

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O RG A N I C RE V E N U E G ROWTH

Resilient performancein a period of significant
disruption+19.0%RE V E N U E ( € M)

€512.2m

KEYWORDS STUDIOS PLC

ANNUAL REPORT AND ACCOUNTS 2021

+37.1%

RevenueTHE
M AT H E M AT I C I A N

JON HAUCK CFOLEVEL 48
XP 20,000

Revenue for 2021 increased by 37.1% to €512.2m(2020: €373.5m). This growth was supplemented
by the full year impact of acquisitions in 2020 andthe acquisitions made in 2021, but offset by the
impact of currency movements, particularly the
weakening of the US dollar in the second half ofthe year.
Organic Revenue growth (which adjusts for the
impact of currency movements and acquisitions)
was up 19.0% (H1: 22.9%, H2: 15.5%, 2020: 11.7%).
This was driven by a robust performance acrossall service lines, against a comparative period
where, in H1 2020, certain service lines were more
severely held back at the early stages of COVID-19,
particularly in our Testing and Audio businesses.
Further details of the trading performancesof each of the service lines are provided in the
CEO Review.

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Gross margin

Alternative performance measures (APMs)

Gross margin in 2021 was €200.1m (2020: €141.8m)
representing an increase of 41.1%. The grossmargin improved by 1.1% pts to 39.1% (2020:
38.0%) driven by certain cost savings as a resultof working from home measures and the revenue
shortfalls in the early stages of the pandemic in
the prior year, particularly in our Testing, Audioand Localization service lines that held backmargins in 2020.

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 thefinancial information to understand the underlying
trading performance of the business. In particular,
adjusted profit measures are used to provide theusers of the accounts a clear understanding of theunderlying profitability of the business over time.
A breakdown of the adjusting factors is provided
in the table below:

KEYWORDS STUDIOS PLC

ANNUAL REPORT AND ACCOUNTS 2021

Operating costs
Adjusted operating costs increased by 33.1% to€90.0m (2020: €67.6m), reflecting a larger Group,
but reduced to 17.6% of revenue versus 18.1% in
2020. This reduction was driven by continued
good cost control, together with reductions incertain costs due to COVID-19, primarily resulting
from remote working and lower travel, businessdevelopment and marketing costs.
Adjusted EBITDA
Adjusted EBITDA increased 48.4% to €110.1m
compared with €74.2m for 2020. The Adjusted
EBITDA margin in 2021 reflects the improved
revenue noted above and this, combined withthe benefit of ongoing reduction in certain costs
due to COVID-19, resulted in an improvement in
Adjusted EBITDA margin of 1.6% pts to 21.5%(2020: 19.9%).
Net finance costs
Net finance costs reduced by €6.2m to €2.4m(2020: €8.6m), largely driven by a €8.1m swing in
the net foreign exchange loss which is describedin more detail below. Underlying interest costs onbank debt (excluding IFRS 16 interest, deferredconsideration discount unwind, bank charges andforeign exchange) remained in line with the prioryear at €1.0m (2020: €1.0m).

2021
€m

2020
€m

Share-based payments expense

16.4

15.4

Acquisition and integration costs

8.0

2.6

Amortisation and impairmentof intangible assets

13.7

8.8

COVID-19 government
subsidies claimed

–

(9.2)

Foreign exchange andother items

–

4.9

38.1

22.5

1.58m of options were granted under the Share
Option Scheme and Long-Term Incentive Plan in
2021. This, together with grants from previous
years, has resulted in a non-cash share-based
payments expense of €16.4m in 2021 (2020:€15.4m). The increase is largely due to an increasein the fair value charge for the more recent grantscompared to previous years reflecting the increasein the share price.

One-off costs associated with the acquisition andintegration of businesses amounted to €8.0m(2020: €2.6m). This includes a one-off charge
for fair value movements in respect of deferredconsideration of €5.6m that is required to be taken
through the profit and loss account (and therefore
the cash outlay is €2.4m). Amortisation andimpairment of intangible assets charge increasedby €4.9m to €13.7m (2020: €8.8m), reflecting therecent increased levels of acquisition activity.
Foreign exchange and other items amounted toa net charge of zero (2020: €4.9m). This includes€1.9m for the unwinding of discount liabilities ondeferred consideration (2020: €0.1m) offset by a
net foreign exchange gain of €2.0m (2020: €6.1m
loss). Keywords does not hedge foreign currency
exposures. The effect on the Group’s results ofmovements in exchange rates and the foreignexchange gains and losses incurred during theyear mainly relate to the effect of translating net
current assets held in foreign currencies.
A more detailed explanation of the measures used
together with a reconciliation to the corresponding
GAAP measures is provided in the APMs section at
the end of the statement.

Taxation
The tax charge increased by €2.9m to €13.9m(2020: €11.0m), largely reflecting the increase in the
profit before tax of the business. After adjustingfor the items noted in the APMs section above andthe tax impact arising on the bridging items, theAdjusted Effective Tax Rate for 2021 was 21.6%
compared with the rate of 21.5% in 2020.
Earnings per share
Basic earnings per share increased by 48.9% to45.16c (2020: 30.32c), reflecting the increase in
the statutory profit after tax of 58.9%, partially
offset by an 6.7% increase in the weighted average
number of shares reflecting the full year impactof the 10.5% equity placing in May of 2020. Fully
diluted earnings per share, reflecting the impactof unvested share options, increased by 49.7% to42.98c (2020: 28.71c).
Adjusted earnings per share, which adjustsfor the items noted in the APMs section and thetax impact arising on the bridging items above,was 89.24c, representing an increase of 46.5%(2020: 60.93c).

Profit before taxation
Profit before tax increased by €15.5m (+47.7% year
on year) to €48.0m (2020: €32.5m). Adjusted Profit
Before Tax, which adjusts for the items describedin the APMs section above increased by €31.0m(+56.4% year on year) to €86.0m compared with
€55.0m in 2020. This represents an improvementin Adjusted profit before tax margin of 2.1% pts
to 16.8% (2020: 14.7%). This is above the Group’s
historical margin delivery of between 14% and 15%
and partly reflects the short-term benefit fromcertain costs savings as a result of COVID-19 noted
earlier that are not expected to continue.

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55

Cash flow and net debt
Cash flow statement

2021
€m

2020
€m

Change€m

Adjusted EBITDA

110.1

74.2

35.9

MMTC and VGTR

(4.5)

0.6

(5.1)

Working capital and other items

11.3

(2.2)

13.5

Capex – property, plant and equipment (PPE)(19.4)(13.9)(5.5)

Capex – intangible assets

(0.3)

(0.3)

0.0

Payments of principal on lease liabilities(10.0)

(8.2)

(1.8)

KEYWORDS STUDIOS PLC

ANNUAL REPORT AND ACCOUNTS 2021

COVID-19 employment support subsidies

-

9.2

(9.2)

Operating cash flows

87.2

59.4

27.8

Net Interest paid

(2.7)

(1.6)

(1.1)

Free cash flow before tax

84.5

57.8

26.7
(19.4)

Tax(23.9)(4.5)

Free cash flow

60.6

53.3

7.3

M&A – acquisition spend(63.1)(39.9)(23.2)

M&A – acquisition and integration costs

(2.4)

(2.3)

(0.1)

–

1.4

(1.4)

Investment income
Dividends paid

(0.6)

–

(0.6)

Shares issued for cash

5.3

111.7

(106.4)

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

(0.2)

124.2

(124.4)

FX and other items

2.9

(3.4)

6.3

Increase in net cash / (debt)

2.7

120.8

(118.1)

Opening net cash / (debt)

102.9(17.9)

Closing net cash / (debt)

105.6

102.9

The Group generated Adjusted EBITDA of €110.1m
in 2021, an increase of €35.9m from €74.2m in
2020. There was a €5.1m decrease 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). Working capital andother items resulted in an increase of €13.5m
compared to 2020 with working capital increasingby €6.7m, mainly due to lower accrued income,while other items improved by €6.8m fromphasing differences.
Investment in property, plant and equipment
amounted to €19.4m (2020: €13.9m), reflecting a39.60% increase and reflecting a return to morenormal levels of spending following the COVID-19
disruption in the prior period that resulted
in a reduction in both the level of equipment
expenditure and expansionary capex. Property
lease payments of principal of €10.0m were 22.0%
higher than the prior period (2020: €8.2m), mainly
related to acquisitions in the period.
The Group received no COVID-19 government
employment retention subsidies in 2021, resulting
in operating cash flows of €87.2m (2020: €59.4m),
and an increase of €27.8m on 2020.

This resulted in Free Cash Flow of €60.6m (2020:€53.3m), an increase of €7.3m on the prior period.
Adjusted Free Cash Flow before tax, which adjustsfor capital expenditure that is supporting growthin future periods and the COVID-19 government
employment retention subsidies in the prioryear, was €92.3m in 2021, an increase of €38.9m(+72.8%) on the levels delivered in 2020. This
resulted in an Adjusted Cash Conversion rate of
107.3% (2020: 97.2%). A reconciliation of Free Cash
Flow to Adjusted Free Cash flow before tax isprovided in the Alternative Performance Measures(APMs) note.
Cash spent on acquisitions totalled €65.5m
of which €63.1m was in respect of the cash
component of both current and prior year
acquisitions and €2.4m was in relation toacquisition and integration costs.
These items, together with foreign exchange
movements of €2.9m resulted in an increase of net
cash of €2.7m in 2021 (2020: increase in net cash:€120.8m) and a closing net cash of €105.6m (2020:
net cash €102.9m).

Net interest payments were €2.7m, an increase of€1.1m on 2020 as a result of the fees associatedwith the refinancing of the Revolving Credit Facility
which is discussed further below. Tax payments
amounted to €23.9m (2020: €4.5m) an increaseof €19.4m on the same period when the Groupbenefitted from timing differences that resulted
in fewer payments in the period in respect ofthe 2020 tax payable which were subsequently
settled in 2021.

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ANNUAL REPORT AND ACCOUNTS 2021

56

Balance sheet and liquidity

Dividend

The Group funds itself primarily through cash
generation and a Revolving Credit Facility (RCF).
In December 2021, the Group entered into a
new €150m unsecured multicurrency RCF witha syndicate of four lenders, which replaces theCompany’s previous €100 million secured RCF.
The lender group is made up of Citi Commercial
Bank, Fifth Third Bank, National Association, HSBC
Continental Europe and ING Bank N.V., Dublin
Branch. The new facility is for an initial three-year
tenor to December 2024, with an option to extend
the term by two further one-year periods at theCompany's request, subject to lender consent.
The new RCF has financial covenants that areconsistent with the previous facility and has anaccordion feature that allows it to be increased
by a further €50 million again subject to lenderconsent. The RCF is subject to two financial
covenants that are calculated in accordance withthe facility agreement:

The Board's progressive dividend policy seeks toreflect the Group's continued growth in earnings
and strong cash generation, balanced with theneed to retain the resources to fund growth
opportunities, in line with our strategy.

Leverage: Maximum Total Net Borrowings to
Adjusted EBITDA ratio of 3 times; andInterest cover: Minimum Adjusted Operating Profit
to Net Finance Costs ratio of 4 times.
The Group entered the year with a strong balance
sheet, with net cash (excluding IFRS 16 leases)of €102.9m as at 31 December 2020. Following€65.5m of cash deployed in the period to support
the Group’s value accretive M&A programme,at the end of 2021, the Group had net cash
(excluding IFRS 16 leases) of €105.6m and undrawn
committed facilities of €150m.

Following the interim dividend payment of
0.70p per share in October 2021, the Board
has recommended a final dividend of 1.45p per
share, which will make the total dividend forthe year ending 31 December 2021, 2.15p per
share, an increase of 10% per annum over the2018 full year dividend (2018: 1.61p per share).
Subject to shareholder approval at the Annual
General Meeting, the final dividend will be paidon 17 June 2022 to all shareholders on the registerat 27 May 2022 and the shares will trade exdividend on 26 May 2022. The cash cost of the
final proposed dividend will be an estimated €1.3m,
subject to currency fluctuations.

We are anticipating capex in line with 2021 relative
to revenue, reflecting continued expansionary
capex and investment in equipment to support
the new console cycle and an overall Adjusted
Cash Conversion rate of ~80%, representing a
reduction on 2021 as some of the phasing benefits
in 2021 unwind.
Notwithstanding the situation in Russia, given thestrong underlying trading across the Group aided,in part, by favourable currency movements, weare confident of delivering a performance for thefull year towards the top end of current market
expectations*.

Guidance for 2022
We have made a good start to the year with
the Organic Revenue growth momentum in thesecond half of 2021 flowing into 2022, and total
revenue benefitting from favourable currency
movements compared to 2021.

JON HAUCKCHIEF FINANCIAL OFFICER

2021 Adjusted profit before tax margins havebenefitted from certain COVID-19 costs savings
that are not sustainable and are hence expected
to move back towards the 14–15% historical range
during 2022 and the Adjusted Effective Tax rate is
expected to be in line with the 2021 rate of ~21%.

Page 4/4* As at 28 March 2022, company compiled analysts' forecasts gave a consensus for FY 2022 of €597m of revenue (range: €587-610m) and €92m of adjusted profit before tax (range: €90-95m).

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Links to Strategic Pillars:
Building
our platform

57

Selective acquisitions
and integration

Trend since last year:
Organic growthand cross selling

Same

Increase

Decrease

Furthermore, once a year in January, we have a special deep dive risk session at the Audit Committee
where we try to analyse current and emerging risks in more detail and link to our overall strategy.

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.

The principal risks associated with the Group’s strategy are divided into:

We operate a top-down and bottom-up approach to risk management, where current and emerging
risks are identified and assessed as part of our Strategy and Budget process, and the results arereviewed and discussed in detail at the Audit Committee on an ongoing basis throughout the year.

–

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

Unsuitableacquisition 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 doso could result in the business not achieving
the expected financial and operational
benefits and adversely impact growth,
profitability and cash flow.

Since IPO, the Company has involved a broad
panel of senior managers in the acquisition andintegration process, building on the considerable
experience that exists at Board and senior
management level, thus providing further
bandwidth to identify, execute and integrateacquisitions effectively.
Our dedicated M&A team conducts due diligence
and we use earn-out clauses where appropriate.
Acquisition reports are approved at Board level,and post-acquisition performance is monitored.

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

Timely delivery and the resourcing flexibility toenable delivery to tight deadlines has been an
integral part of the Company’s modus operandi,
and Keywords’ approach to project management isapplied across the Group.
During 2020, client contracts were reviewed toenable work from home. In 2021, contracts for new
business included this ability by default (whereappropriate).

As the Group succeeds in delivering multiple
services to the same customers, so the riskof failure in one service line contaminating
the relationship with the customer acrossthe other service lines increases.

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

ANNUAL REPORT AND ACCOUNTS 2021

Link to Strategy

Likelihood

Failure to deliver
services
Link to Strategy

Likelihood

Cross
contamination risk
Link to Strategy

KEYWORDS STUDIOS PLC

Link to Strategy

Likelihood

Risk

Description and Impact

Mitigation

Failure tomeet market
expectations

Keywords floated on AIM in July 2013
with an expressed set of objectives ofgrowing the business organically andby acquisition. Should the Company
lose the confidence of investors, this willaffect its ability to raise money for orplace shares to pay for acquisitions.

The Company makes every effort to communicate
regularly with investors via announcements and faceto-face contact. This effective communication of thecontinued opportunities for growth in the sector, how theGroup continues to execute on its stated strategy andsuccessfully integrate the businesses it acquires, should
continue to maintain the confidence of its investors.
The Group maintains a good mix of equity and debt
funding which gives it the flexibility and headroom toinvest in the business. During 2021, we successfully
negotiated a new Revolving Credit Facility, improving
liquidity. More details can be found in the Financial andoperating overview on page 56.

Inadequate financial Keywords has grown rapidly and it isand operational
important that global financial controls
controls
are in place to ensure smooth, timely
and accurate reporting of financial
Link to Strategy
results to satisfy our external reporting
obligations as well as the Board.
Failure to accurately report or forecast
financial results through error or fraud
Likelihood
would damage the Group’s reputation.

The Group has invested and continues to invest in its
financial reporting function and systems to facilitatestrong reporting and management control as it grows.
During 2021, we made new Board appointments, withfurther appointments at the senior management levels
to drive our operations.

Failure to manage
human resources/talent effectively

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 of standards.
We constantly work to develop and incentivise ourpeople and to support their passion to perform thebest service for each project and client, with regularstaff surveys undertaken too. In addition, special
emphasis is placed on workplace harmony and theprevention of any forms of discrimination, harassment,or malpractice in the workplace, recognising that any
sense of dissatisfaction can be very disruptive.
In 2021, we established a Global Diversity, Equality &Inclusivity Council, comprising employees who work
closely with senior leaders, to connect DE&I activities
to the broader business strategy. More details of
our survey and DE&I Council can be found in the
Responsible business report on pages 39 and 41.

Link to Strategy

Likelihood

Link to Strategy

Likelihood

Clientconcentration risk

Trend

The Group’s client base principally
comprises global game companies whose
revenues are in the billions and hundreds ofmillions of dollars. Our top five customers
in 2021 account for 30.0% (2020: 29.1%) of
the Group’s revenues. These companies
have exacting standards and demand a highquality of service. Any failure in this regardor breakdown in the relationships at the top
level could cause considerable damage tothe business.

The potential impact is partially mitigated throughthe Group’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 6.5% (2020: 7.5%) ofrevenues in 2021.

Likelihood

Keywords employs an average of
9,493 in 74 studios across the Group,and people management is key to our
performance and service delivery.
Failure to attract, retain or develop highquality entrepreneurial management
across the business could impact on
the attainment of strategic objectives.
The Group is focused on these areas
with the implementation of globally
managed service lines, management
development and remuneration
programmes, incorporating long andshort-term incentives. But with anever-increasing workforce this becomes
more demanding.

Trend

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PRINCIPAL RISKS AND UNCERTAINTIES CONTINUED
Links to Strategic Pillars:
Building
our platform

58

Industry-related risks
Description and Impact

Mitigation

Non-compliancewith legal andethical standards

A material failure to comply withapplicable legal and ethical standards
could result in penalties, costs,
reputational harm and damage torelationships with suppliers andcustomers. New standards anddisclosure requirements are evolving
such as in environmental and climatechange reporting.

The Group promotes a culture of “Doing the right thing”
in all activities. Code of Business Conduct guidelines wererolled out to all studios during 2021 and are supported bymore detailed policies and procedures where needed, andpublished on our website. More details are contained in
the Responsible business report on page 48.

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 lead to piracy, disruptionof customers’ marketing plans, loss ofcompetitive edge and could result incompensation claims.

The Company uses various third party and proprietary
tools and technologies for process control andproductivity purposes. Continued investment in thesetools is important to ensure the Group’s effectiveness.
Keywords maintains physical and data security andprivacy policies and procedures which are regularly
audited by its larger customers.
A dedicated Information Security team sets policies,
conducts regular penetration testing, monitors activity andrapidly responds to any incidents that arise. More details arecontained in the Responsible business report on page 42.

Likelihood

Breaches toinformation andcybersecurity

ANNUAL REPORT AND ACCOUNTS 2021

Link to Strategy

Likelihood

Technology
Innovations in the gaming industry
continue to evolve, together with new
innovation andindustry disruption technologies for automated testing,machine translation and crowdsourcing
Link to Strategy
could pose a threat to the Group in thelong term.

Same

Increase

Decrease

Trend

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).
COVID-19: Since 2020, the Group’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 theability to quickly move to working from homearrangements in order to continue servicing ourcustomers, and have gradually reopened studios
where local restrictions allowed.

The Group’s multiple, full-service delivery hubs
provide for a good level of contingency and,supported by business continuity plans, theeffects of such disasters can be managed.
COVID-19: During 2020, the Group moved ~9,000
employees to work from home arrangements
which allowed production to continue acrossmost of the Group’s operations throughout the
pandemic. In certain service lines, alternative
ways of working were introduced to allow
continued service while physical studios areclosed (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
while social distancing measures are in place.
Further details on how the Group responded
to the challenge posed by COVID-19 is provided
in the Chief Executive Officer’s review section
on pages 10 to 14 and in the Service line review
on pages 26 to 33.

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 inwhich we do business may change in a mannerthat may be adverse for us, even those withstable political environments.

The diversification and spread of activities
geographically mitigate the risk of disruption in
any one location.
We are monitoring the situation in Russia, where
our teams continue to work for non-Russianclients, with our continuity planning benefittingfrom the scale and flexibility afforded by our
global footprint.

The Group transacts in multiple currencies, given
our customers are located globally. Keywords istherefore exposed to short-term currency risks,in addition to longer-term risk that could develop
between our functional currency (euro) and ourmultiple billing currencies. The Group’s largest
exposure is to the US dollar followed by the
Canadian dollar and sterling.

The Group does not hedge its currency risk
because Keywords’ main movements in
exchange-related gains or losses relate to theeffect of translating net current assets held
in foreign currencies. We also have the ability
to offset adverse foreign exchange currency
movements through increasing prices.

Link to Strategy

Likelihood

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. Technology is one of the five strategic
workstreams detailed in the Chief Executive Officer’s
review on page 12.

Global political risk
and uncertainty
Link to Strategy

Likelihood

Trend

Likelihood

Negative impactof regulation onvideo games
Link to Strategy

Likelihood

KEYWORDS STUDIOS PLC

Trend since last year:
Organic growthand cross selling

General business risks continued

Risk

Link to Strategy

Selective acquisitions
and integration

Changes in regulation on video games,such as those seen in the Chinese
market which imposed curfews on
minors, could result in the delay orcancellation of video games by ourcustomers. Requirements to address
responsible gaming in the industry
introduces complexity 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 mitigated through the Group’s diverse
geographic revenue base (no single client larger than
6.5% (2020: 7.5%)). Responsible gaming issues arisingduring game play can be identified by our Player Support
teams, trained to handle and report safety incidents.

General business risks
Tax credits
withdrawal risk
Link to Strategy

Likelihood

The Company receives multimedia tax
credits (MMTC) in Canada, video games
tax relief (VGTR) in the UK, and Digital
Interactive Media (DIM) tax credits
in the US relating to qualifying costsin those markets. These tax credit
regimes are designed to promote
growth and investment in the relevant
regions. Any reduction or cancellationof these tax credits would increase thecost base of the business and make thebusiness less competitive.

The Group works closely with regulators andgovernments in relation to relevant country tax credits
and has been given no indication that these tax credits
will be removed in the medium term. The Group hasa geographically diversified operating platform andretains the ability to move to other operating centres ifmaterial changes were made.

Negative impactof currency risk
Link to Strategy

Likelihood

Other risks have been classified as emerging risks for the Company, such as climate change and thirdparty risk. These are discussed at the Audit Committee and continue to be monitored closely.
The Strategic report was approved by the Board and signed on its behalf by:

BERTRAND BODSONCHIEF EXECUTIVE OFFICER

30 March 2022

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CHOOSEYO U R P L AY E RTeam Keywordians

KEYWORDS STUDIOS PLCLEVEL AGE
XP TENURE
COMMITTEE

DA

Audit

N

Nomination

R

Remuneration

E

ESG
Committee
Chair

ROSS GRAHAM FCAINDEPENDENT NON-EXECUTIVEDIRECTOR & CHAIRMANBERTRAND BODSONCHIEF EXECUTIVE OFFICER

THE MATHEMATICIANTHE TACTICIANTHE GENERALANNUAL REPORT AND ACCOUNTS 2021

Page 1/2

JON HAUCK FCA
CHIEF FINANCIAL OFFICER

D AV I D R E E V E S
SENIOR INDEPENDENTNON-EXECUTIVE DIRECTOR

Skills & Experience

Skills & Experience

Skills & Experience

Skills & Experience

Ross has extensive Executive and
Non-Executive experience in thetechnology sector. Since retiring from
Misys plc, he has held a number of
Non-Executive directorships including
Psion plc and Wolfson Microelectronics
plc. Ross was appointed Director andChairman of Keywords shortly prior to
its IPO in July 2013. Ross creates thenecessary environment for dynamic
Board discussion and has helped elevatethe governance processes without
destroying the entrepreneurial essenceof Keywords.

Bertrand brings deep experience indriving and executing growth strategies
for international businesses. He was
Chief Digital Officer for Novartis andpreviously spent four years as Chief
Digital and Chief Marketing Officer
at Sainsbury’s Argos, leading the
integration of Argos into the Sainsbury’s
store network. Early experience includes
senior roles involved with contentcreation and entertainment at EMI Group,
Bragster (which he co-founded) andAmazon. He is currently a non-executive
director of Tesco plc and Wolters
Kluwer N.V..

Jon has a wealth of finance, change
management and M&A experience,
having previously held a variety of roles
at Rentokil Initial plc. 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
and Treasurer. Prior to Rentokil Initial, he
worked in PwC’s Assurance practice. Jon
is a Fellow of the ICAEW.

David has over 30 years’ global
experience in management roles within
multinational companies. In 1999, he
was appointed Executive Vice Presidentof Sony 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 governanceand an understanding of working withcompanies to develop global strategies.
David will retire from the Board at
the AGM.

L E V E L 74
XP 8

COMMITTEEANRLEVEL 46
XP <1

COMMITTEEELEVEL 48
XP 2

COMMITTEEELEVEL 75
XP 8

COMMITTEEANROVERVIEW

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CHOOSEYO U R P L AY E RTeam Keywordians

KEYWORDS STUDIOS PLC

ANNUAL REPORT AND ACCOUNTS 2021

Page 2/2

LEVEL AGE
XP TENURE
COMMITTEE

DA

Audit

N

Nomination

R

Remuneration

E

ESG
CommitteeChair

C H A R L O T TA G I N M A N F C A
INDEPENDENTNON-EXECUTIVE DIRECTORG E O R G E S F O R N AY
INDEPENDENTNON-EXECUTIVE DIRECTOR

MARION SEARSINDEPENDENTNON-EXECUTIVE DIRECTOR

NEIL THOMPSONINDEPENDENTNON-EXECUTIVE DIRECTOR

Skills & Experience

Skills & Experience

Skills & Experience

Skills & Experience

Charlotta is Chair of the Audit Committee
and has held senior positions in theinvestment banking and technology/
telecom sectors. She is a Non-Executive
Director and Chair of the Audit Committeeof two investment trusts, Polar Capital
Technology Trust PLC and Pacific
Asset Trust PLC, as well as Gamma
Communications plc (an AIM listedcompany). She is also a Non-Executive
Director of Unicorn AIM VCT PLC, aventure capital trust, and Boku Inc (an AIM
listed company). As three of Charlotta’s
roles are with investment companies
that require less time to be dedicatedthroughout the year, and the rest are AIM
listed entities with less regulatory burden
than a company listed on the main market,
Charlotta has sufficient time to devote toeach of her roles.

Georges has over 30 years’ experiencein the technology and video games
sectors and is currently Deputy CEO of
Qobuz, the French high quality musicstreaming service. Georges worked insenior management at Sony ComputerEntertainment (Europe), culminatingas Senior Vice President from 2004
to 2011. Georges has also held
significant industry-wide roles including
President of SELL, France’s Union ofEntertainment Software Publishers.

Marion brings extensive investmentbanking and international M&A
experience from many years serving
on a number of public company boards
as a non-executive director, seniorindependent director and committee
chair, giving her long-standing listedcompany experience and stakeholder
understanding. Marion is currently
a Non-Executive Director at Dunelm
Group plc and WH Smith plc and is Senior
Independent Director at Aberdeen
New Dawn Investment Trust plc. She
is also Senior Independent Director at
Fidelity European Trust plc but will retire
from that Board on 10 May 2022 after
completing nine years’ tenure.

Neil held a number of senior positions
within Microsoft Corporation, including
as part of the management team thatlaunched Xbox in Europe and for a numberof years ran Microsoft’s Consumer andDevices business across EMEA. He has
extensive experience of scaling new
businesses across international territories
and building resilient organisations inconstantly changing environments. He is a
Non-Executive Director at E.P. Barrus Ltd.
and acts as a board adviser to start-up
SaaS businesses.

Marion will succeed David Reeves
as Remuneration Committee Chairfollowing the AGM.

Charlotta will succeed David Reeves as
Senior Independent Director following
the AGM.
LEVEL 56
XP 4

COMMITTEEANRLEVEL 65
XP 4

COMMITTEEAELEVEL 59
XP <1

COMMITTEE
A

N

R

E

LEVEL 55
XP <1

COMMITTEE
A

N

R

E

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CHAIRMAN'S INTRODUCTIONKEYWORDS STUDIOS PLC

ANNUAL REPORT AND ACCOUNTS 2021

61
The Board is committed
to the highest standardsof corporate governance

The main Group-wide governance documents are our Core Values and the Code of Business Conduct,
which underpins the culture of the Company. These documents, together with our policies, govern how we
conduct our business and set the standards that drive performance. Board oversight, reviews and audits
form part of the monitoring and supervision process. A risk register is used to monitor our principal andemerging risks and risk processes are embedded and reviewed on an ongoing basis across the business.
A newly established ESG Committee provides dedicated focus for the Board on environment, workforce,
community and governance matters to ensure the long-term sustainable success of the Company. The
important corporate governance developments at Keywords over the last year are outlined below, including
the addition of two new Directors, adding diverse experience and knowledge to the Board, and numerouschanges to remuneration arrangements to bring our executive remuneration in line with best practice.

ROSS GRAHAMCHAIRMAN OF THE BOARD

In July 2022, I will have served as Chairman for nine years. Following a rigorous assessment of my performanceand independence, in light of the recent executive-level changes, I have been asked by the Board to remain as
Chairman for a further year to ensure the smooth running of the Board and an orderly succession process for
the Chair position. As such, I will be presenting myself for re-election as a Director at the 2022 AGM.

Dear shareholders
As Chairman of the Board of Directors of Keywords Group plc, I am pleased to introduce the Group’s
corporate governance report. The corporate governance statement provides an insight into how the
Board operated during the year and the key issues considered. The Board is committed to robust
corporate governance and it remains central to the ongoing success of the Group.
It is my responsibility to ensure that the Group has both sound corporate governance and a Board
which operates mindful of its responsibility to all stakeholders but particularly to 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. An externally facilitated Board evaluation process in 2021 concluded that the Board
operates effectively and actions were agreed to further enhance the Board’s operations. Further details
can be read on page 64.
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 Keywords; however, we strive to comply with the UK
Corporate Governance Code where possible and practicable. The Board provides annual updates on ourcompliance with the QCA Code.
The Board considers that the Group complies with the QCA Code in all applicable respects. Our QCA
Code disclosures within this Annual Report are summarised in the table to the right. In addition, an
explanatory statement of how we have applied the QCA Code guidance, and disclosures of any areas ofnon-compliance, can be found on our website at: www.keywordsstudios.com.
The Board understands that the application of the QCA Code supports the Group’s long-term successwhile simultaneously managing risks and provides an underlying framework of commitment andtransparent communications with stakeholders.

ROSS GRAHAMCHAIRMAN OF THE BOARD

30 March 2022

Principle

Disclosure
within thisreport1

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

Pages 7–20

2

Seek to understand and meet shareholder needs and expectations.

Pages 51–52, 64

3Take into account wider stakeholder and social responsibilities and their implications for longterm success.

Pages 34–52, 64

4Embed effective risk management, considering both opportunities and threats, throughout
the organisation.

Pages 57–58, 66–68

5

Maintain the board as a well-functioning, balanced team led by the chair.

Pages 59–63

6

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

Pages 59–60, 82–83

7

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

Page 648

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

Pages 34–36, 65

9Maintain governance structures and processes that are fit for purpose and support gooddecision-making by the board.

Pages 48–49, 62–63

10 Communicate how the company is governed and is performing by maintaining a dialogue withshareholders and other relevant stakeholders.

Pages 51–52

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Strategy

The Board

A description of the Company’s strategy, business model and supporting strategic pillars, alongwith key attributes of our positioning and growing maturity, can be found in the Strategic reporton pages 1 to 58.

The Board, as a whole, is responsible for the overall management of the Group and for its strategic
direction, including approval of the Group’s strategy (including corporate and business development),
its annual business plans and budgets, the interim and full year financial statements and reports, any
dividend proposals, the accounting policies, major capital projects, any investments or disposals, its
succession plans and the monitoring of financial performance against budget and the formulation of theGroup’s risk appetite, including the identification, assessment and monitoring of Keywords’ principal risks.

Internal controls and risk management

KEYWORDS STUDIOS PLC

ANNUAL REPORT AND ACCOUNTS 2021

The Board recognises the need for an effective and well-defined risk management process and it
oversees and regularly reviews the Group’s risk management and internal control mechanisms. The
status of our principal risks is recorded in a comprehensive risk register and shared regularly with the
Audit Committee, with key updates reported to the full Board. The Company’s principal risks, along withkey challenges in the execution of the Company’s strategy and controls implemented to mitigate them,can be found in the Strategic report on pages 7 to 20.
The Audit Committee has been delegated responsibility for the oversight 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 although2021 has evidenced improved practices we know there are still areas where we can do better. The Board
continuously monitors and upgrades its internal control procedures and risk management mechanisms
and conducts regular reviews, when it assesses both for effectiveness. This process enables the Board
to determine whether the risk exposure has changed during the year. 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 andnature 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 performancecompared to budget and the prior year;
Visits to key locations (not practical in 2021);
Annual budget setting;Tight cash management;
Annual strategy conference with top management team; andA defined organisational structure with appropriate delegation of authority.

The Company continues to strengthen its internal controls and cyber security policies and processes
with maturing internal audit and cyber security functions with the support of specialist third
party advisers.
Further information on the Company’s approach to risk management and internal controls can be also
found in the Audit Committee report on pages 66 to 68.

Director biographies and committee memberships are set out on pages 59 and 60. Charlotta Ginman
currently has six NED roles. Of those, three are investment companies that generally only have four tofive meetings a year, and her other three roles are with AIM listed entities, with less regulatory burden
than premium listed companies, and therefore Charlotta has sufficient time to devote to her Keywords
role. Director time availability for each director is, however, something we assess on an annual basis aspart of our Board evaluation.
The Board comprises two Executive Directors, Bertrand Bodson (CEO) and Jon Hauck (CFO), and six
Independent Non-Executive Directors, Ross Graham (Chairman), David Reeves (Senior Independent
Director), Georges Fornay, Charlotta Ginman, Marion Sears and Neil Thompson. Following a number ofBoard changes in the year, our Board diversity is currently 25% female Directors. The Company has
approved an enhanced Board Diversity Policy, which demonstrates our commitment to improving gender
diversity at Keywords and in the industry and a reflection of the changing demographic of our global
gaming community. Details of Board changes in the year can be read in the Nomination Committee reporton pages 82 and 83.

Keywords Studios Board of Directors
Audit
Committee

Nomination
Committee
Chief Executive Officer

Internal Audit

Executive Director

Remuneration
Committee

ESG
Committee

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Letters of appointment of all Directors are available for inspection at the Company’s registered officeduring normal business hours. The Executive Directors work full-time for the Company. All the NonExecutive Directors are expected to dedicate at least 30 days per annum to the Company, rising to 40
days if they also chair a Committee, and the Chairman is expected to dedicate 60 days per annum. The
Company has adopted a policy whereby all members of the Board are subject to re-election at each AGM.
In practice, all the Independent Non-Executive Directors spend more than the minimum number of days on
Company business and additional time has been dedicated by all Non-Executive Directors since Andrew
Day’s departure, to ensure effective oversight of the Company’s activities and good communications withkey stakeholders during a period of change.

ANNUAL REPORT AND ACCOUNTS 2021

The Board is satisfied that it has a suitable balance between independence, on the one hand, andknowledge of the Company, on the other, and that no individual or group may dominate the Board’s
decisions. The Non-Executive Directors have both a breadth and depth of skills and experience to fulfil theirroles. The Company believes that the current balance of skills in the Board as a whole reflects a very broad
range of personal, commercial and professional experience, and notes the range of financial and managerial
skills. All Directors are encouraged to use their independent judgement and to challenge all matters,
whether strategic or operational, enabling the Board to discharge its duties and responsibilities effectively.

The Remuneration Committee is chaired by David Reeves, and its other members are Ross Graham,Charlotta Ginman and Marion Sears. Neil Thompson was appointed to the Committee in February 2022.
When David Reeves steps down as a Director at the 2022 AGM, Marion Sears will succeed him as Chairof the Remuneration Committee. The Remuneration Committee is responsible for determining the
remuneration of the Chair (who does not participate in such discussions), Executive Directors and senior
executives of Keywords. The Remuneration Committee is responsible for making recommendations to
the Board on 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 equivalentstatus both in terms of level of responsibility of the position 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 69 to 81.
Nomination Committee

The Board meets a minimum of eight times a year and a calendar of meetings and principal mattersto be discussed are agreed at the beginning of each year. In order to be efficient, the Directors meetformally and informally both in person (limited in 2021) and by telephone or videoconference. The
COVID-19 pandemic has continued to restrict our ability to meet in person; however, the Directors,
similarly to the Company’s workforce working from home, have been able to continue to engage
effectively with other Directors, shareholders and stakeholders using remote, videoconference,
communications. Meetings are open and constructive, with every Director participating fully. Senior
management are invited to meetings, providing the Board with a thorough overview of the Company.
The Non-Executive Directors meet without the presence of the Executive Directors and maintainongoing communications with Executive Directors between formal Board meetings.

The Nomination Committee is chaired by Ross Graham. Charlotta Ginman, David Reeves, Marion Sears
and Neil Thompson are the other members. Neil Thompson and Marion Sears were appointed to theCommittee in February 2022. Further information on the Nomination Committee, including its role andresponsibilities, can be found in the Report of the Nomination Committee on pages 82 and 83.

Management supply the Board with appropriate and timely information and the Directors are free toseek any further information they consider necessary.

ESG Committee

David Reeves acts as the Senior Independent Director (SID) of the Company, serving as a sounding
board for the Chair and acting as an intermediary for the other Directors. The SID is also available toshareholders and other Non-Executive Directors to address any concerns or issues they feel have notbeen adequately dealt with through the usual channels of communication.
Audit Committee

KEYWORDS STUDIOS PLC

Remuneration Committee

The Audit Committee is chaired by Charlotta Ginman, and its other members are Ross Graham, David
Reeves, Georges Fornay, Marion Sears and Neil Thompson. The Audit Committee is responsible forassisting 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 anddiscusses the nature, scope and results of the audit with the auditors, and the auditor’s performanceand remuneration. The Audit Committee reviews the extent of non-audit services provided by theauditors and reviews with them their independence and objectivity. Further information on the Audit
Committee can be found in the Audit Committee report on pages 66 to 68.

Disclosure Committee
The Disclosure Committee, responsible for assisting in the design, implementation and evaluationof the Company’s disclosure controls and procedures, was reconstituted in 2022 as a sub-committeeof the executive committee, in order to enhance the Company’s ability to comply with the Market
Abuse Regulation.
Established in 2021, the ESG Committee is chaired by Georges Fornay. Neil Thompson, Marion Sears,
Bertrand Bodson and Jon Hauck are the other members. The remit of the ESG Committee is tooversee the following areas which have been identified as environmental, social, and governancepriorities: (i) people; (ii) diversity and inclusion; (iii) customer/client centricity and innovation;(iv) community; (v) environment; and (vi) corporate governance and business ethics. Further informationon the ESG Committee, including its role and responsibilities, can be found in the ESG Committee reporton pages 84 and 85.
Terms of reference of all Keywords’ Committees are available to view on the Company’s website at: www.
keywordsstudios.com.
The table on page 65 sets out attendance statistics for each Director at scheduled Board, and where
relevant, Committee meetings held during the year.

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Stakeholder engagement

Annual evaluation of the Board and Committees’ performance

The Board recognises that the long-term success of the Company relies upon good relations with otherstakeholders, including employees, its contractors, customers, suppliers, regulators and community
participants. The Board has put in place a range of processes and systems to ensure that there isclose oversight and contact with its key resources and relationships. The ESG Committee enhances theBoard’s ability to oversee Group initiatives designed to promote the long-term success of the Company
as a sustainable, well governed, responsible employer.

This year’s annual Board and Committee evaluation exercise was conducted on an independent basis by
ONE Advisory Limited (ONE Advisory).

KEYWORDS STUDIOS PLC

ANNUAL REPORT AND ACCOUNTS 2021

The Company has close ongoing relationships with a broad range of its stakeholders and provides themwith the opportunity to raise issues and provide feedback to the Company. The Company conducts
frequent customer feedback surveys, which broadens communication while simultaneously embracing
influential developers and producers in the games industry and determining Company perception. In
addition, client partners foster close relations with our key customers to achieve an understanding of
their needs, interests and expectations in a holistic way spanning all of the Company’s service lines.
The Board is committed to maintaining good communication and constructive interaction with allshareholders throughout its annual reporting cycle, holding analyst and investor presentations,
Regulatory News Service releases, and information published on the Company’s website. The Chair
offers to meet with the largest shareholders during the year without management present. The
Executive Directors meet shareholders and other investors/potential investors at regular intervals
during the year and host broker and analyst meetings from time to time. The whole Board attends theAGM, which we regard as an opportunity to meet, listen and present to shareholders, and shareholders
are encouraged to attend and ask questions. Although Director and shareholder attendance in person
was restricted at the 2021 AGM due to ongoing government restrictions caused by the COVID-19
pandemic, shareholders were given the opportunity to submit questions to the Board in advance via
email and a video conferencing facility was made available for shareholders and Directors to attend
remotely. As a result, engagement between the Board and its shareholders was not impeded by theongoing outbreak and subsequent changes to AGM arrangements. In addition, the Company receives
reports and updates from proxy voting agencies on corporate governance and general meetingshareholder voting recommendations.
Full details of the Company’s and the Board’s engagement with its stakeholders is presented in theStrategic report on pages 51 and 52.

The areas covered included structure and skills, operating effectiveness, operating efficiency, quality of
information and ongoing development. The evaluation process involved detailed questionnaires for the
Board (including feedback on the overall contribution of each Director), review of the Chair and a survey
regarding each of the Board’s main Committees. An independent report on the findings of the Board
and Committee surveys was prepared by ONE Advisory.
The evaluation process confirmed that the Board and its Committees, including the new ESG Committee,
are working well and progress was noted for all areas highlighted for attention in 2021, as follows:–––

Several members of the Senior Management Team presented at Board and Committee meetings,
and a two-day Executive Summit was held in October 2021 which was attended by the entire
Board and Senior Management Team.
Further analysis of the strategic options for the Company, with Bertrand Bodson conducting acomprehensive review as part of his 100-day plan.
Succession planning for the Chair and Senior Independent Director positions.

The Board will review the findings of the survey in the first half of 2022 and will develop an action plan toaddress the areas highlighted for attention in the coming year. These areas included:–––

Succession planning to focus on candidates with media and entertainment, technology orvideogame experience;
More time at Board meetings dedicated to discussing (i) culture, and (ii) long-term strategic andoperational plans; andContinue to enhance contact between the Board and Senior Management Team.

The Chairman will incorporate feedback on the overall contribution of 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 2022.

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Advisers
The Board has regular contact with its advisers to ensure that it is aware of changes in corporate
governance procedures and requirements and that the Group is, at all times, compliant with applicable
rules and regulations. The Company had Director and Officers’ liability insurance cover in placethroughout the year and it is intended for the policy to continue for the year ending 31 December 2022
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 and discharge of their duties. The Company’s Nomad supports theBoard’s development, specifically providing guidance on corporate governance and other regulatory
matters, as required.
The Company has retained Ellason LLP, who provide advice in relation to remuneration matters.
Additional information can be found in the Remuneration report on pages 69 to 81.
All Directors may receive independent professional advice at Keywords’ expense, if necessary, for the
performance of their duties.

KEYWORDS STUDIOS PLC

ANNUAL REPORT AND ACCOUNTS 2021

CultureThe Board recognises that its decisions regarding strategy and risk may impact the corporate cultureof the Company as a whole and that this will impact the performance of the Company. The Board is also
aware that the tone and culture set by the Board can have an important influence on the Company as awhole and in the way that employees behave. The corporate governance arrangements that the Board
has adopted are designed to ensure that 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 and expectations for the Company in open dialogue with the Board.
During the year, the Board sponsored a new Group programme to develop the leadership skills of the
Senior Management Team, thereby enabling an evolution of the Company’s culture to reflect its growing
size and increasing complexity.
With each new acquisition, we deploy our Integration Memorandum, a unified communication package
delivered by an existing member of the Keywords executive team, in order to ensure a smoothtransition into the Keywords family. This is designed to provide a consistency of culture throughout theGroup, and also facilitates two-way communications.
A large part of the Company’s activities is centred upon an open and respectful dialogue with
employees, customers and other stakeholders. Therefore, the importance of sound ethical values andbehaviours is crucial to the ability of the Company to successfully achieve its corporate objectives.
The Board places great importance on this aspect of corporate life and seeks to ensure that this flows
through all that the Company does. The Directors consider that the Company has an open culture
facilitating comprehensive dialogue and feedback, which enables positive and constructive challenge.
The Board recognises that sustaining this culture will be a crucial element of the long-term success ofthe business.
The Group operates a whistleblowing policy to encourage the reporting by employees of suspected
misconduct, illegal acts or failures to act within the Group. The aim of this Policy is to create a safe
environment for employees and others who have serious bona fide concerns about any aspect of theGroup’s work to come forward and voice those concerns without personal risk of penalisation or reprisal.

The Group also promotes employee engagement and receives feedback from employees through anannual employee survey, which is available for completion by all employees in the Group. The resultsof the survey are fed back for the consideration of the Board. In the survey conducted in 2021, we weredelighted that, despite working from home arrangements implemented due to COVID-19, the feedback
from our employees was positive overall and an improvement on results of previous years.
Further details can be found in the Our people, our culture (pages 34 to 36) and the Responsible
business report (pages 37 to 49) sections of the Strategic report.
The ESG Committee is responsible for overseeing workforce matters, including corporate culture, further
details of which can be read in the ESG Committee report (page 84).
Meetings and attendance
The following table shows the attendance of Directors at scheduled meetings of the Board and its
Committees. The number of attendances is shown next to the maximum number of meetings the
Director was entitled to attend.
Director

Board

Audit
Committee

Remuneration
Committee

Nomination
Committee

Ross Graham

ESG
Committee

Disclosure
Committee

2/2

11/11

5/5

7/7

4/4

–

Bertrand Bodson

1/1

–

–

–

1/1

–

Andrew Day

2/5

–

–

–

–

1/1

Jon Hauck

11/11

–

–

–

4/4

2/2

Sonia Sedler

11/11

–

–

–

4/4

2/2

David Reeves

11/11

5/5

7/7

4/4

–

2/2

Charlotta Ginman

11/11

5/5

7/7

4/4

–

2/2

Georges Fornay

11/11

5/5

–

–

4/4

–

Marion Sears

4/4

2/2

3/3

–

2/2

–

Neil Thompson

4/4

2/2

–

–

2/2

–

Giorgio Guastalla

11/11

–

–

–

3/4

–

It is noted that:
–
–
–
–
–

Sonia Sedler joined the Board on 18 January 2021 and retired from the Board on 18 March 2022.
Andrew Day retired from the Board on 14 June 2021.
Marion Sears and Neil Thompson both joined the Board on 13 August 2021.
Bertrand Bodson joined the Board on 1 December 2021.
Giorgio Guastalla retired from the Board on 26 January 2022.

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AUDIT COMMITTEE REPORT

Significant issues considered by the Audit Committee during the year

66
Effective oversight of financial
reporting, risk management andinternal controls systems andthe external auditor

Key Reporting Issues
During the year and as part of the year end procedures, the Committee considered the following key
financial matters in relation to the Group’s financial statements and disclosures with input from bothmanagement and the external Auditor:–––C H A R L O T TA G I N M A N
CHAIR OF THE AUDIT COMMITTEE–

Revenue recognition – we reviewed, as part of the regular CFO report, any areas of judgement
relating to revenue recognition in client contracts;
Business combinations – we reviewed, as part of the regular CFO report, the key businesscombination accounting assumptions;
Valuation of goodwill and intangible assets – we received goodwill impairment review results, andchallenged the underlying assumptions made; andFunctional currency – we reviewed papers supporting the functional currency of the Group on asemi-annual basis.

KEYWORDS STUDIOS PLC

ANNUAL REPORT AND ACCOUNTS 2021

Furthermore, we also spent time talking about management estimates and judgements in connection
with bad debt provisioning (IFRS 9), going concern, taxation and treasury, and segmental reporting. For
further detail on these, see notes 2 and 3 of the financial statements.
Introduction from the Chair
I am pleased to present once again as Chair of the Audit Committee, the report for the year ended
31 December 2021. This report details the work of the Committee over the past year, fulfilling our
responsibilities to provide effective governance over the Group’s financial activities.
Composition and attendance in 2021
The Committee members, Ross Graham, David Reeves, Georges Fornay and myself, were joined by
Marion Sears and Neil Thompson from September 2021. Ross will remain on the Committee for 2022,
while David is due to retire during the year. The Audit Committee, as a whole, has competence relevantto the video games industry, both Ross Graham and I are Chartered Accountants and I also chair theaudit committees for other public companies. More information about the Committee members canbe found on pages 59 and 60. The Committee met five times during the financial year and the four
members in place at the beginning of the financial year attended all Committee meetings throughout
the year, with Marion Sears and Neil Thompson attending all meetings following their appointment.
The majority of the meetings have been a hybrid of in-person and remote meetings by the use oftechnology, such as videoconferencing and board portal software. I am pleased to confirm that this has
continued to work 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 andduties and are reviewed by the Board annually. In addition to the Terms of Reference, the Committee
has developed an annual agenda which corresponds with the meeting schedule, to ensure all key
responsibilities are completed and managed.

Annual Report and financial statements
The Board has asked the Committee to confirm that, in its opinion, the Annual Report as a whole can betaken as fair, balanced and understandable and provides the information necessary for shareholders
to assess the Group’s financial position, performance, business model and strategy. In doing so, theCommittee has given consideration to:
–

–
–
–
–

The way the Strategic report (including the Chairman’s statement and reports of the CEO andCFO) presents the Group and its operations, financial and business model and the metrics
management uses to measure performance;
Whether suitable accounting policies have been adopted and have challenged the robustnessof significant management judgements and estimates reflected in the financial results;
The comprehensive control framework around the production of the Annual Report, including theverification processes in place to deal with the factual content;
The extensive levels of review that are undertaken in the production process, by bothmanagement and advisers; andThe Group’s internal control environment.

The Group uses certain APMs to present its results alongside the statutory financial statements.
These are non-GAAP measures used by management and the Board designed to provide the users
with a further understanding of the trading performance of the business. An explanation of the APMs
and a reconciliation to the nearest statutory equivalent measure is provided on pages 132 to 137.
As a result of the work performed, the Committee has concluded that the Annual Report for theyear ended 31 December 2021, taken as a whole, is fair, balanced and understandable and provides
the information necessary for shareholders to assess the Group’s performance, business model andstrategy, and it has reported on these findings to the Board.

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67

Internal control and risk assurance framework

Internal audit

The Audit Committee has continued to review and challenge the upgrades that have and are taking
place during the year to the Company’s internal control and risk assurance framework to ensure that
following its rapid expansion, the Company operates within a fit-for-purpose framework.

The Head of Internal Audit reports into the Audit Committee Chair with a dotted reporting line into theGroup CFO. The activities of the Internal Audit function are governed by an Internal Audit Charter which
was re-approved and signed off by the Audit Committee during the year. The 2021 Internal Audit plan
was revised to take into account the continuing impact of COVID-19. The Audit Committee received
updates on the results of Internal Audit work including:

The semi-annual management confirmation by regional heads of operations and finance teams to the
CFO, was extended to service line directors from June. Themes for 2021 included key policy roll-outs, risk
reviews, internal controls and contract management. Management confirmed new procedures are inplace and provided updates on key risks where applicable.

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ANNUAL REPORT AND ACCOUNTS 2021

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 the Group. During2021, the focus has been on the remaining locations in Europe and Asia and recent acquisitions, withthe majority of studios (representing 92% of revenue as at December 2021, from 87% as at December2020) are now migrated to the Netsuite system. To complement the system roll out, a project has
been initiated to implement a consolidation, reporting and planning tool to replace the current manual
consolidation process. This is expected to be in place by Q1 2022.
The work on our Group cash pooling platform continues, providing us with better control and visibilityof Group cash and the optimisation of cash management. During 2021, the European studios continued
to cash pool in key currencies, with new cash pools set up in North America, where we have multiple
studios in the same jurisdiction.
The industry and our clients require the highest standards of security. During 2021, Keywords updated
the Group Information Security Framework, to align to industry standards, and this security programme
has been reviewed by an independent third party. The Audit Committee receives regular updates fromthe IT function on the state of the cybersecurity programme and the results of the external assurance
review. Keywords continues to invest in its information security environment focusing on five key areas:
Asset Management, Identity & Access Management, Governance Risk & Compliance, Security Operations
and Resilience.
During the year, the Audit Committee has continued its regular review of the Company’s principal risks
on behalf of the Board, ensuring these are top of mind and relevant, and mitigation plans are in place
where possible. For 2021, the Audit Committee dedicated one of their five meetings to the risk register,
considering the principal and emerging risks identified from both the top-down Board risk overview andthe bottom-up Senior Leadership Team review. Climate change has been classified as an emerging risk
for the Company and shall continue to be monitored closely. Further details of the principal risks anduncertainties faced by Keywords are identified on pages 57 and 58.

–
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Post acquisition reviews and completion of integration plans for acquisitions made in 2020;
Implementation and communication of Group policies including the new whistleblowing portal (seebelow);
Sales and people process mapping in selected service lines;
Review of access controls to key information; andEntity level controls mapped to the Committee of Sponsoring Organisations (COSO) framework.

In October 2021, the Audit Committee engaged Deloitte Ireland to provide a Risk Assessment andInternal Control review of the Group in co-ordination with Internal Audit, to:––Gain an external view of the material risks, including financial and operational risks; andDevelop and document an internal controls framework (expected controls by risk category) for
five in-scope process areas.

Preliminary results of this review were presented to the Audit Committee in December 2021 and the final
output will form part of the considerations for the 2022 Internal Audit plan, once complete.
Group policies
Key individual Group policies are reviewed and re-approved annually by the Audit Committee, including:
–
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Protected disclosures (whistleblowing) policy
Anti-bribery and corruption policy
Fraud and anti-theft policy
Non-audit services policy
Employment of former auditors policy
Anti-tax evasion policy
General information security & cybersecurity policies

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Whistleblowing policy
During the year, Keywords engaged with an external provider to introduce a new whistleblowing portal
to co-ordinate responses to protected disclosures received, and to securely handle confidential oranonymous reports in line with data privacy rules and the latest whistleblowing legislation in relevant
jurisdictions where we operate.
The Audit Committee reviewed and approved the updated whistleblowing policy and the accompanying
new process that the Group is rolling out globally. The policy allows a wide definition of employees
and third parties, to raise any concerns they may have about possible financial or other irregularities
confidentially. During 2021, two whistleblowing disclosures were reported, which were fully investigatedand are currently being resolved (2020: none).

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Audit regulation
In the year since my last report to you, the UK Department of Business, Energy & Industrial Strategy
issued its white paper for consultation in March 2021, which proposes important charges for both
corporate directors, audit committees and the external audit sector. The Audit Committee has
considered the proposals and how they may affect the Company and await the publication of the
final legislation.
External audit
Audit services
The Auditor is appointed by the shareholders annually to provide an opinion on financial statements
prepared by the Directors. BDO, the Company’s current Auditor, was first appointed in 2013. Currently,
Stephen McCallion acts as our lead partner, following partner rotation last year. The Audit Committee
will run a tender process during 2022, in line with best practice for corporate governance andauditor independence.
The auditor attends Audit Committee meetings. The scope of the current annual year-end audit wasagreed in advance with the Committee with a focus on areas of audit risk and the appropriate levelof audit materiality. The Committee also had discussions with the auditor on fees, internal controls,
accounting policies and areas of critical accounting estimates and judgements. Following the audit, BDO
reported to the Audit Committee on the results of the audit work and highlighted any issue which thework had discovered, or the Committee had previously identified as significant or material in the context
of the financial statements.
There were no adverse matters brought to the Audit Committee’s attention in respect of the 2021 audit,
which were material and which should be brought to shareholders’ attention.

Effectiveness
The Audit Committee monitored and evaluated the effectiveness of the Auditor under the current
terms of appointment based on 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 and interpretations 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 theskills and experience needed to fulfil its duties effectively.
Independence and non-audit fees
The non-audit services policy was last updated in 2020 in line with the FRC ethical standards,
and reviewed again during 2021. Any non-audit services are required to be pre-approved by the
Audit Committee. During the year BDO provided non-audit services to the Company of €13,350(2020: €13,000).
In order to fulfil the Committee’s responsibility regarding independence of the Auditor, the Committee
reviewed the senior staffing of the audit, the Auditor’s arrangements concerning any conflicts ofinterest, the extent of any non-audit services, the fact that no former external auditors have been
employed in the business, and the Auditor’s independence statement. The Committee was satisfied that
the Auditor remains independent.

C H A R L O T TA G I N M A N F C A
CHAIR OF THE AUDIT COMMITTEE

30 March 2022

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69
In order to improve the clarityof our policies and outcomes,
I have included a summary of
Keywords’ main action points
in 2021 and 2022

ANNUAL REPORT AND ACCOUNTS 2021

D AV I D R E E V E S
CHAIR OF THE
R E M U N E R AT I O N C O M M I T T E E––

FY 2022––––
Strategic Policy–

Continued positioning of Executive Directors’ remuneration: cash salary targeted at lower quartile
to median, modest bonus capped at maximum 30% of base salary, salary shares for selected
executives, 5% of base salary pension, continued emphasis on Long-Term Incentive Plan (LTIP)
awards vesting on relative Total Shareholder Return (“TSR”) performance.

FY 2021––––KEYWORDS STUDIOS PLC

–

–

–

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CEO took extended leave from March due to illness and retired in June. Treated as a good leaver.
Appointment of incumbent COO and CFO as Interim Joint CEOs with clear, redefined
responsibilities and financial and non-financial objectives from 15 March to 30 November 2021.
Awarded acting-up allowances of £75,000 each, split 50% cash and 50% salary shares.
LTIP awards granted to Executive Directors in 2021 with vesting based on Relative TSR, with achange to the benchmark for awards granted in May from the FTSE Small Cap to the FTSE 250
Index (excluding Investment Trusts).
Appointment of new CEO from 1 December 2021. Remuneration in line with policy and comprising
median salary (of £600,000) relative to relevant industry benchmarks, bonus of up to 30%
of base salary, pension of 5% of base salary, plus 275% of base salary LTIP awards. An LTIP
grant was made for 2021, together with an additional restricted stock award to compensate forremuneration foregone at his previous employer.
Increase of £50,000 in base salary for incumbent CFO to £295,000, based on defined expanded
role and increased responsibility for M&A programme from 1 December. Resulting harmonisationof COO and CFO remuneration packages.
COO and CFO overall single figure remuneration for 2021 did not include any LTIP vesting but
reflected 100% bonus pay-out for each executive for achieving financial and non-financial
objectives, and salary shares.
New CEO FY21 bonus of 30% of base salary (one month pro rata).
CEO’s single composite pay ratio disclosed (includes Andrew Day until end March 2021, co-CEOs
for the period April-November, Bertrand Bodson from 1 December 2021).

New global employee share-save scheme established in 2021.
No UK Government support was received in 2021 in respect of COVID-19; modest government
support was received in three overseas operations and which will be repaid.
US$500,000 hardship fund to support COVID-19 affected employees (uptake $72,820 at end
December 2021) and will be continued in 2022.
NED base fees and Committee membership fees disclosed.
Directors’ interest in shares disclosed.

–

–
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–
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–

Base salary increases of 3.5% in March awarded to COO and CFO, in line with or below the levelof increase for Keywords studio staff in UK and Ireland. No increase for new CEO given his
recent appointment.
Sonia Sedler stepped down from the Board on 18 March 2022 and left the company for personalreasons. Treated as a good leaver.
Salary share award of £60,000 for CFO, to supplement lower quartile base salary which
attracts neither pension nor bonus, and which vests in annual one-third increments subject tocontinued employment.
Clear financial and non-financial objectives for the bonus (weighted 60/40) set for Executive
Directors based on the Group’s Strategic objectives (pages 73 and 77).
LTIPs in 2022 to vest, as before, on three-year relative TSR performance versus the FTSE 250(excluding Investment Trusts), with vesting of 25% at median TSR and full vesting at 20%
outperformance.
Increased shareholding requirements for Executive Directors, plus the introduction of a one-year
post employment requirement (page 74).
Share plans for workplace remuneration will provide a competitive advantage for Keywords inattracting talent versus smaller independent studios.
Continued oversight of wider Group pay mechanics to ensure retention of employees.
Clear, direct links between each remuneration element and our strategic objectives as
demonstrated in the remuneration policy table (page 73).
Clear cognisance taken of workforce pay versus Executive Director remuneration.
LTIP grants based on percentages of base salary level from 2022.

Dear fellow shareholders
As Chair of the Remuneration Committee, it is my pleasure to present the Directors’ remuneration report forthe period ended 31 December 2021. 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 but the Board recognises the importance of shareholder transparency andstandards of governance. Therefore, as with last year, this report contains all the information required tobe disclosed as an AIM quoted Company and also contains some additional information that would beapplicable were the Company listed on the London Stock Exchange main market.
We have continued to implement a simple Executive Director Remuneration structure comprising basesalary, pension, annual bonus capped at 30% of base salary, salary shares to supplement if salaries are
below the 25th percentile, and a LTIP. This structure provides a clear and direct link between pay and our
key strategic priorities and is aligned with shareholders’ interests; the majority of the overall remuneration
opportunity is performance-based, primarily reflecting Total Shareholder Return (“TSR”). The pension
offered to Executive Directors, of 5% of base salary, is the same as that offered to the local workforce, andwe are incorporating updates to our Remuneration Policy in keeping with best practice.

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The Group delivered a very strong performance in 2021 with good growth in revenue and profit, andexceptional strong cash generation despite the continued industry disruption caused by the COVID-19
pandemic. We completed six acquisitions during the year, further strengthening the breadth and depthof the Group’s value-added services offered to our global video games clients.
During the year and since the year end, a number of executive changes also took place and ourremuneration report explains how we addressed these. In the year, our Founder CEO, Andrew Day,
retired due to illness, and the Board appointed Jon Hauck, CFO, and Sonia Sedler, COO, as interimco-CEOs. Following a search process, Bertrand Bodson joined as our new CEO on 1 December 2021,
following which Jon and Sonia returned to their roles of CFO and COO respectively. Also, in December,Jon’s role was expanded to include M&A, as described below. Since the year end Sonia has left thecompany for personal reasons and her exit arrangements are described on page 78.
2021 remuneration and vesting outcomes

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ANNUAL REPORT AND ACCOUNTS 2021

Andrew Day acted as CEO until 15 March 2021 when he took a leave of absence due to illness, andsubsequently retired from the business on 14 June 2021. Andrew’s exit remuneration arrangements aredescribed on page 78.
Jon Hauck and Sonia Sedler acted as CFO and COO respectively until they were appointed as interimco-CEOs on 15 March, an arrangement that lasted until 30 November. In this interim period, Jon andSonia each received supplementary remuneration of £75,000, paid as cash of £37,500 and salary sharesof £37,500. Salary shares are subject to continued employment, vest in one-third annual tranches overthree years, and attract neither pension nor bonus.
On 1 December 2021, the responsibilities of Jon Hauck, CFO, were expanded to include M&A, which had
previously been specifically under the direction of Andrew Day. Jon’s base salary was increased by£50,000 in recognition of his increased responsibilities.
Bonuses for the 2021 financial year were based on a scorecard of financial (weighted 70%) and nonfinancial (weighted 30%) measures. The outcomes, as determined by the Committee, and directly linked
to the Group’s strategic objectives, have generated bonuses of 30% of salary for the Executive Directors,
except for Andrew Day who did not earn a bonus for FY21, as described on page 77.
An LTIP award granted to Andrew Day in 2018 vested on 18 May 2021. These awards vested basedon TSR performance vs the Numis Smaller Companies (excluding Investment Trusts) Index. Fullvesting required Keywords TSR to outperform the Index over the three-year period by 20%. Based on
Keywords’ TSR performance, these awards vested in full.
No LTIP was due to vest in the year for the CFO or COO. Overall, during the year, Jon Hauck, CFO, earned
a single figure remuneration of £456k, and Sonia Sedler £479k. These amounts include the salary sharesawarded as a supplement to base salary, the 2021 bonus vesting plus the supplementary remuneration
awarded for their co-CEO tenures, including further salary shares.
On 1 December, Bertrand Bodson joined as our new CEO and his remuneration was disclosed at that time.
This is further set out on page 78; it follows the same structure as for the other Executive Directors andis in line with our Policy. Bertrand’s base salary is median for FTSE250 companies; we chose to incentivise
him by awarding a 2021 LTIP equivalent to 275% of salary, and restricted shares to the value of 100%
salary (subject to employment) to compensate on a like-for-like basis for remuneration foregone at
his previous employer. We have also applied increased shareholding requirements and adopted postcessation shareholding requirements to Bertrand’s remuneration, in line with good practice.

Stakeholder considerations
The Committee has considered the experience of each stakeholder group in 2021 and determined thatthe remuneration outcomes described above are fair and reasonable and that no discretion needed to
be exercised to adjust outturns or to address windfall gains. In coming to this conclusion, the Committee
took into account the following factors:
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–
–

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–

The financial performance of the Group has been strong;
The Group resumed paying a dividend at the half-year and has declared a full-year dividend inline with the dividend policy, as noted on page 56;
No UK Government support was received in 2021 in respect of COVID-19; the modest government
support which was received in 2021 in three of our overseas operations (totalling c.€330k) in
respect of COVID-19 will be repaid;
The employee engagement score increased;
All staff received a pay review according to local market conditions, performance and tenure; andThe establishment of a hardship fund available to employees suffering as a result of COVID-19.

2022 Remuneration
Our philosophy for future years will continue to be based around using pay to reinforce long-term
decision making and alignment with shareholders, and we have an established structure which is
cascaded through the organisation to align the leadership and management teams. The use of salaryshares, which attract neither pension nor bonus, to supplement salaries which are below lower quartile
also provides flexibility and aids long-term retention.
In 2022, the CEO’s salary will remain at the level upon appointment, while the base salary of the CFO and
COO increased by 3.5% with effect from 1 March, in line with or below the increases for the UK workforce.
Since the year end Sonia has left Keywords. We will award salary shares of £60,000 to Jon Hauck
to help compensate for the below 25th percentile positioning of his cash salary, and ensure overall
a competitive level of fixed pay in line with our stated philosophy. The pension supplement, at 5% ofsalary for all executives, will be in line with the UK workforce average in 2022, and the bonus opportunity
will remain at 30% of salary. Bonuses for the CEO and CFO in 2022 will be based 60% on financial
metrics and 40% on well-defined and disclosed non-financial objectives and will be directly linked to ouroverall strategic objectives (pages 72 and 73).
The Committee reviewed the LTIP grant policy during 2021 and concluded that awards from 2022
would be granted on the basis of face value, rather than the fixed-number of shares approach used inprevious years. The Committee took this decision after considering feedback from shareholders as well
as desiring a greater consistency with market practice. We intend to award an LTIP in 2022 to the CEO
and CFO equal to 275% of base salary (which is broadly consistent with the values we have granted overprior years), using the same TSR metric to govern vesting as in 2021. As flagged in last year’s report,
the Committee reviewed the LTIP TSR comparison approach in early 2021 and approved a change to the
TSR benchmark for future cycles to take into account the current size of Keywords (which at the startof 2021 was equivalent to FTSE 170 and AIM top 10) to be the FTSE 250 excluding investment trusts.
Overall, the remuneration package for 2022 places our Executive Directors between lower quartile tomedian for base salary plus salary shares, at lower decile for annual bonus opportunity, but in the upper
quartile for the LTIP award quantum. The Committee believes the package puts emphasis on increasing
value for shareholders, and incentivises exceptional performance.

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Shareholder Engagement

Executive Directors’ remuneration at a glance

On behalf of the Committee, I discussed our plans for 2021 remuneration with Keywords’ largest
shareholders and relevant proxy agencies in January 2021 and considered the feedback from thesemeetings in finalising the details of the changes. I notified major shareholders in March 2021 of ourconclusions; this engagement also provided the foundation for the further work we have conductedwith regard to updating the Remuneration Policy and LTIP rules this year. Our remuneration structureis broadly consistent with FTSE main market good practice, and we thank those shareholders who
contributed their time and feedback, which was useful in shaping the design.

The following is a summary of the key components of Keywords’ Executive Director remuneration,
including changes and implementation in the forthcoming financial year.
Element

Remuneration in 2021

Remuneration in 2022

BasesalaryWith effect from 1 January 2021:

With effect from 1 March 2022

CEO (A Day): £325,000

CEO (B Bodson): £600,000 (no increase)

CFO: £245,000

CFO: £305,325 (3.5% increase)

COO: £295,000 (from 18 January 2021)

COO: £305,325 (3.5% increase until
departure on 18 March)

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ANNUAL REPORT AND ACCOUNTS 2021

Policy and LTIP updates

With effect from 15 March 2021

In 2021, as we addressed executive change, we took the opportunity to update our Remuneration
Policy to include certain best practice developments. Accordingly, the Committee adopted an updated
Policy in December 2021; the main elements of this include increased shareholding requirements, theintroduction of a post-cessation shareholding requirement, and updated malus and clawback provisions.
Our LTIP rules have also been updated; the main amendments are updated malus and clawback
provisions, clarification around the use of Remuneration Committee discretion in the event of a changeof control, and alignment with best practice in the leaver arrangements.
Workforce remuneration
We have provided more disclosure in this year’s report describing the Committee’s oversight ofworkforce remuneration. Equity ownership across all organisational levels, not just the Executive
Directors, is important to the philosophy of pay at Keywords, and we regard it as a competitive
advantage for our recruitment and M&A brand. During 2021, Keywords introduced a new all-employee
share-save scheme which enabled staff at all levels to purchase Keywords shares, in common with thearrangements used at many of our peers. The Company will be looking to continue this scheme in 2022
as well as keeping the Remuneration Policy and its execution under constant review to ensure it delivers
a workforce pay philosophy which is consistent with that of the Executive Directors, promotes theretention of staff in a competitive industry, enhances the shareholder experience and is directly alignedwith our strategic objectives, particularly in light of the continuing COVID-19 pandemic.
It is my hope that you find this a clear and comprehensive report and I look forward to hearing the viewsof our investors on the information presented here over the coming months.
After nine years as a Non-Executive Director at Keywords, I am stepping down from my positions
as a Director, Remuneration Committee Chair and Senior Independent Director at the 2022 AGM.
I will be succeeded as Remuneration Committee Chair by Marion Sears, who joined the Committeein August 2021.

CFO: £282,500
COO: £332,500
Both increases to reflect co-CEO duties
With effect from 1 December 2021
CEO (B Bodson): £600,000 (on appointment)
CFO: £295,000 (increased to reflect additional responsibilities)
COO: £295,000 (i.e. reversion to regular COO level)

SalarysharesRegular awards

Regular awards

Shares were granted with the following values:

Shares will be granted with the following values:

CEO (A Day): £75,000

CEO: nil

CFO: £40,000

CFO: £60,000

COO: £10,000
Awards to reflect additional responsibility
Shares were granted with the following values:
Co-CEO (J Hauck): additional award of £37,500
Co-CEO (S Sedler): additional award of £37,500

Pension CEO (A Day): 3% of base salary
COO: 5%CEO (B Bodson): 5%

Annual Maximum opportunity of 30% of base salary based on:
bonus – Financial targets, including turnover and profitability

LTIP

30 March 2022

Maximum opportunity of 30% of base salary
based on:(weighted 70%)
– Individual performance vs Non-Financial Objectives(weighted 30%)
The Committee determined 2021 performance warranted bonusesof 30% of base salary for all the Executive Directors in role at theyear end. The bonus for B Bodson was pro-rated to reflect his
tenure in the role. No bonus was paid to A Day– Financial targets, including turnoverand profitability (weighted 60%)
– Individual performance vs Non-Financial
Objectives (weighted 40%)

CEO (A Day): 50,000 shares

275% of base salary for all Executive Directors

Same performance conditions as for the 2021
regular award
COO: 35,000 shares as a regular award, plus a further 25,000
shares as compensation for forfeited awards at previous employer
CFO: 25,000 shares

D R D AV I D R E E V E S
C H A I R O F T H E R E M U N E R AT I O N C O M M I T T E E

5% of base salary for all Executive Directors

CFO: 5%CEO (B Bodson): a regular LTIP award of 275% of base salary,plus time-vesting restricted stock of 100% of base salary ascompensation for forfeited awards at previous employer
All regular LTIP awards vest on TSR vs the FTSE250 (the COO’s
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72Policy and principles

Executive Director remuneration components

The Remuneration Committee determines the Company’s policy on the remuneration structure
for the Executive Directors and Senior Management Team, and is responsible for oversight of the
remuneration policy for the broader employee population.
The objectives of this policy are to:

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 theperformance of the individual, comparisons with peer companies and, where considered appropriate,
reports from external independent consultants.

–

The remuneration package comprises the following elements:––

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ANNUAL REPORT AND ACCOUNTS 2021–

Reward executives in a manner that ensures they are properly incentivised and motivated toperform in the best interests of shareholders;
Provide a level of remuneration required to attract, motivate and retain high-calibre individuals;
Encourage value creation, through consistent and transparent alignment of incentive
arrangements with the agreed Company strategy over the long term; andEnsure the total remuneration packages, comprising both performance-related and nonperformance-related remuneration, are designed to motivate the individual, align interests withshareholders and comply with corporate governance best practices.

The Board and the Remuneration Committee believe the foregoing objectives are best achieved by aremuneration structure whereby:–––

Base salaries are targeted at the lower quartile of relevant comparator groups albeit sufficient forthe challenges and pressures of the role; from 2021, awards of salary shares have been used toensure a more competitive position is achieved in a structure which is aligned with shareholders;Annual bonuses are set at modest levels, with a maximum of 30% of base salary, on the premisethat an annual bonus should not unduly encourage short-term behaviour or commitment of asenior executive; andLong-term incentives are the means by which executives can earn significant rewards if, but only
if, shareholders likewise have obtained a good return.

––

Fixed remuneration (base salary, pension and, where appropriate, salary shares)
Performance-based remuneration (annual bonus and LTIP grants)

These elements are detailed in the table below, which refers to the structure used for the Executive
Directors; the structure is cascaded down to the Senior Management Team albeit with some variation toreflect the typical market practice for this executive level.
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 scale and complexity
to Keywords, taking into account Keywords’ very significant growth in recent years. The Committee
concluded that some changes were required to help ensure fixed pay is consistent with our philosophyof targeting cash salaries at the lower quartile of relevant comparator groups, as it was evident that
the Keywords CEO and CFO salaries were significantly lower than this target position. Following
shareholder consultation in January 2021, the Committee approved the introduction of ‘salary shares’
where base salaries are below lower quartile. Salary shares were awarded in 2021 and it is envisaged
that the Committee may need to make an annual award of salary shares for the CFO. Salary shares
vest in one-third annual tranches over three years subject to continued employment. Salary shares are
not intended to be part of the regular CEO remuneration package as his cash salary is approximately
median level versus our comparator companies.
During 2021, the Remuneration Committee updated the Policy and LTIP scheme rules further toincorporate shareholding requirements, including a post-cessation extension. The terms relating to
the use of Remuneration Committee discretion in determining vesting levels in the event of change ofcontrol were also updated, as were malus and clawback, and leaver treatment provisions.

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Executive Director Remuneration Components continued
The updated LTIP scheme and the Policy updates are described below.
Purpose and link to Strategy

Operation

Opportunity

Performance measures

Base salaries are reviewed by the Committee annuallyand benchmarked periodically against comparable roles
at comparable companies of similar size and complexity.
Paid in cash.

Salaries are set on a case-by-case basis to reflect the role,
the experience and qualifications of the individual.
Base salary increases for the executives take into accountpersonal performance, Group performance, significant
changes in responsibilities, the average increase awarded
to the wider workforce, and competitive market practice.
In the normal course, the expectation is that base salarywill increase annually in line with, or below, any increase
paid to the wider workforce.

n/aAnnual awards of shares, the vesting of which is over three
years subject to continued employment, with annual onethird vesting.
Salary shares are not bonusable or pensionable (both ofwhich are based only on base salary).
Malus provisions apply in certain circumstances.

Set at a level which helps ensure an executive’s fixed pay isat least at the 25th percentile of relevant benchmarks.
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 regular review ofmarket pay levels.

n/a

At the discretion of the Remuneration Committee, an
executive may participate in a pension scheme facilitatedby the Company.
The Company also provides access to Group benefit
schemes where appropriate by region which may include
moderate contribution towards private health insurance,
death in service cover and other Group-based benefits.

The Company provides access to pension schemes
based on local legal requirements or where expected by
local labour markets. Contributions meet the minimum
requirements or are of a modest level.
Basic additional benefits may also be provided whereavailable and where considered the norm for managerial
positions in similar businesses.
An amount is paid equivalent to a percentage of basesalary not exceeding the average paid in respect of thelocal workforce (currently 5% in UK).

n/a

Executives are eligible to participate in an annual
bonus scheme.
The Remuneration Committee reviews targets and theweighting of performance measures each year.

Up to a maximum of 30% of base salary. Paid in cash.

The portion of bonus earned in any one year depends on the Remuneration
Committee’s assessment of each individual’s performance and the overall
performance of the Company against predetermined targets for the year.
Performance targets are majority weighted on the Company’s financial
performance and minority weighted on performance against strategic andpersonal targets. The Remuneration Committee has discretion over outcomes; forexample, if the Company’s financial performance is considered to be unsatisfactory,
the element based on personal performance is likely to be foregone or reduced.

LTIP grants are made annually in the form of conditional
awards of shares or nil-cost share options which vest
subject to performance conditions measured over three
years. Once vested, awards may be exercised for a periodof up to 10 years from grant.
Malus and clawback provisions apply.

Maximum opportunity 300% of base salary. Dividends are
accrued over the vesting period.

Vesting of LTIP awards is subject to continued employment during theperformance period and the achievement of performance conditions basedon Total Shareholder Return (TSR).
The Committee has the discretion to adjust the outcome in exceptional
circumstances to ensure it is a fair reflection of underlying performance. 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).
For Executive Directors, a proportion (currently 25%) of LTIP shares vesting
after tax and NI must be held to build towards the required shareholding.

Base salary
To attract and retain talented executives to deliver theGroup’s strategy, by ensuring base salaries and the implied
total package are competitive in relevant talent markets,
while not overpaying.

Salary shares

KEYWORDS STUDIOS PLC

ANNUAL REPORT AND ACCOUNTS 2021

To supplement the base salary to ensure fixed pay iscompetitive in relevant talent markets and is structured toalign with shareholders.

Pension and benefits
To provide an appropriate structure and level of postretirement benefit for executives in a cost-efficient mannerthat reflects local market norms in the relevant jurisdiction.

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

LTIP
To incentivise delivery against total shareholder returntargets and align the interests of executives andshareholders in growing the value of the Group overthe long term.

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Executive Director shareholding guidelines

Executive Director service contracts

Executive Directors are encouraged to build and maintain over time a shareholding in the Company.
To align the interests of Executive Directors with those of shareholders, and to promote long-term
thinking, the Remuneration Committee introduced shareholding requirements which apply to all
LTIP awards made to Executive Directors with effect from 1 December 2021. The Committee has
adopted shareholding requirements which apply both during employment and for a period following
employment, although the Remuneration Committee retains the right to waive this requirement inexceptional circumstances such as death, ill health or severe financial hardship.

In accordance with general market practice, each of the Executive Directors has a rolling service contract.
The following table shows the date of the service contract for each Executive Director in post during 2022:

The CEO is required to build a shareholding equivalent to 250% of base salary, and other Executive
Directors 200% of base salary, to be built over time, but with a requirement to hold 25% of any LTIP
shares vesting (after tax and NI) until the required shareholding level is achieved. On departure, an
Executive Director must continue to hold the required shareholding (or their actual shareholding iflower) for 12 months. These requirements will be first applied to LTIP shares granted in 2022 andbeyond, and not applied to salary shares.

ANNUAL REPORT AND ACCOUNTS 2021

Details of the Executive Directors’ current shareholdings are provided on page 80.
Recovery provisions (malus and clawback)
Recovery provisions may be applied to the annual bonus and LTIP awards in cases of fraud, dishonesty
or deceit, gross misconduct or material financial misstatement in the audited financial results of theGroup. The Remuneration Committee may determine that an award is cancelled in its entirety or be
reduced to the extent they see fit.
Malus provisions apply which enable the Committee to determine before the payment of an annual
bonus or the vesting of an LTIP award, that the bonus opportunity or LTIP award may be cancelled
or reduced. Clawback provisions apply which enable the Committee to determine for up to two years
following the payment of a cash bonus or the vesting of an LTIP award, that the amount of the bonus
paid may be recovered and the LTIP or share award may be cancelled or reduced (if it has not been
exercised) or recovery may be applied to it (if it has been exercised).
Use of discretion
The Remuneration Committee may apply its discretion when agreeing any remuneration outcomes, tohelp ensure that the implementation of our remuneration policy is consistent with underlying Company
performance and is equitable to all parties.

KEYWORDS STUDIOS PLC

Process for determining the remuneration policy
The Remuneration Committee periodically, typically annually, reviews the remuneration policy toensure 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 structuresand levels throughout the organisation. The Committee uses specific pay benchmarking studies,when relevant, to ensure Keywords’ remuneration levels are positioned at the appropriate level. If
major changes are considered for Executive Director remuneration, the Committee will undertake aconsultation of major shareholders and relevant proxy agencies to ensure their feedback is taken into
account before implementation.

Executive Director

Position

Date of appointment

Date of service agreement

Notice period

Bertrand BodsonCEO

1 Dec 2021

19 Sep 2021

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 Committee receives information about the composition of the wider workforce, it has
visibility of the overall pay structures in place throughout the Group and it has specific responsibility
for senior management LTIP and Stock Option awards. The remuneration policy for all employees isbased on principles consistent with those that are applied to executive remuneration, with the common
objectives of driving financial performance, achieving strategic objectives and contributing to the longterm success of the Group. Objectives and performance conditions are set for Executive Directors andas far as possible are cascaded through the organisation to align the whole workforce strategically. We
regard the use of share plans in management remuneration as a competitive advantage for Keywords
Studios: LTIP and Stock Option awards create alignment with shareholders, incentivising and retaining,
and, in total, 1,019 employees received share awards in 2021, an increase of 20% vs 2020.
Keywords Studios currently employs over 10,000 people in 23 countries on a variety of permanent andflexible contract types, and salary levels range across our service lines from minimum wage equivalent
to highly paid technical experts. The complexity of this matrix means that remuneration is structured bycountry for employment type, local salary awards, pensions and bonus, and centrally by banding for thewider leadership team globally, with input and guidelines provided by the Remuneration Committee.
Annual salary reviews take into account performance, local pay and market conditions plus salary forsimilar levels for similar roles in comparable companies and this is reviewed on a country level during thebudget process. Most permanent employees are eligible to participate in annual bonus schemes.
For the senior leadership team, the remuneration structure mirrors that for Executive Directors
comprising salary, pension in line with local workforce, bonus up to 30% of salary, and LTIP or Stock
Options. Performance metrics for the bonus are set to reflect an individual’s specific objectives but theperformance conditions for all LTIP awards are the same throughout the company. In 2021, awards
over 1.1% of share capital were made under the LTIP to 400 members of the senior leadership team,and awards over 0.8% of the share capital were made under the Employee Stock Option Plan to 619
members of the management team. The LTIP awards cover a three year performance period and are
subject to performance conditions as well as continued employment, whereas the Employee Stock
Options do not carry a performance condition but are subject to employment with vesting after two,
three and four years.
In 2021, an all-employee share-save plan was introduced under which our employees can save up to£416 per month over a six-month period and subsequently invest in shares at a 10% discount to theshare price on the date their plan period ends.

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The total employee population at 31 December 2021 of 10,509 consists of 74% male and 25% female
employees (with the remaining 1% choosing not to disclose), although there is wide variation of genderbalance by geography. There is an ongoing focus on female recruitment and the Group is proud to havebecome a sponsor for Women in Games during 2021. The Group complies with equal pay directives
across all its locations, conducting periodic assessments and analysis, and the Board is satisfied that
there is equal gender pay given location and roles. The latest data (for 2021) shows that our gender
pay gap has reduced to ~3% for both our mean and median hourly rate pay. In particular, the Board of
Directors recently discussed the results of the 2021 Global Gender Equality Pay Review and noted thatdifferences in favour of males or females were accounted for by seniority, experience, length of service,and speciality within roles.
The CEO pay ratio disclosed relates only to our UK workforce of 679 employees. The ratio for 2021 of
38:1 is a composite number reflecting a year of change; in the period Andrew Day served six months
as CEO, Sonia Sedler and Jon Hauck together served eight months as Joint Interim CEOs and Bertrand
Bodson served one month as our new CEO.

Pay for performance scenario analysis
The charts below provide an estimate of the potential future reward opportunities for the CEO and
CFO and the potential split between the different elements of remuneration under four different
performance scenarios: “Minimum”, “On-target”, “Maximum” and “Maximum +50% (share priceappreciation)”. 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 2021.A graph is not provided for Sonia Sedler as she left the company on 18 March 2022 and her
single figure remuneration for 2021 is provided on page 76.
Potential reward opportunities are based on the Remuneration Policy, applied to 2022 base salaries andincentive 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.

KEYWORDS STUDIOS PLC

ANNUAL REPORT AND ACCOUNTS 2021

External appointments held by Executive Directors
Executive Directors may not accept any external appointment without the consent of the Board. Any
associated fees are retained by executives and the Board approved Bertrand Bodson’s other Board
appointments at the time of his appointment.
Consideration of shareholder views
The Remuneration Committee took into consideration major shareholder views, and those of theirrepresentative agencies, during the year and will continue to do so in 2022. AGM voting and othershareholder feedback is important in shaping the Company’s implementation of its Remuneration Policy
as well as any changes to the Policy.
Leaver treatment
Fair treatment will be extended to departing executives. The Group’s policy on termination payments
is to consider the circumstances on a case-by-case basis, taking into account the relevant contractual
terms in the executive’s service contract and the circumstances of termination.

CEO

CFO

Actual 2021

Actual 2021

Minimum

Minimum

On-target

On-target

Maximum

Maximum

Max +50%

Max +50%
0

1,000

2,000

3,000

4,000

0

£000

500

1,000

1,500

2,000

£000

Fixed pay
Short-term variable pay
Long-term variable pay
Scenarios 2022
Assumptions:Executives who resign or are dismissed for cause are, by default, not eligible for an annual bonus if
they have left or are under notice at date of payment and forfeit all unvested LTIP shares, includingsalary shares.

“Actual 2021”: Fixed remuneration (2021 base salary, salary shares, pension), bonus paid for 2021 and LTIP vesting in 2021.

Good leavers (normally including such circumstances as retirement, death, disability and redundancy)
are permitted to exercise unvested LTIP awards, reduced pro rata to reflect the remaining vesting
period (unless such reduction is waived by the Remuneration Committee) and to the extent that theperformance criteria are met over the full performance period. At its discretion, the Remuneration
Committee may allow the acceleration of vesting to the termination date, for which the achievement of
the performance condition would be at the discretion of the Committee.

“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.

On a change of control, all unvested LTIP awards and salary shares may be exercised in full at the timeof the event subject to discretion by the Remuneration Committee. It is intended that the Committee
would only apply discretion to reduce vesting if the change of control took place due to poor underlying
performance. Awards would be reduced pro rata to reflect the remaining vesting period unless such
reduction is waived by the Remuneration Committee. A rollover of unvested awards into new awards
may also be offered.

“Minimum”: Fixed remuneration only (2022 base salary, salary shares, pension).
“On-target”: Fixed remuneration as above, plus target bonus (50% of maximum) and threshold LTIP vesting (25% of maximum)“Maximum”: Fixed remuneration, plus maximum bonus (30% of base salary) and full vesting of 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 inany variable pay plan. Any reasonable business expenses (including tax thereon) may be reimbursed.

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The Remuneration Committee
The members of the Remuneration Committee in 2021 were David Reeves (Committee Chair), Charlotta
Ginman, Marion Sears and Ross Graham. The members are all independent Non-Executive Directors.
In the year ended 31 December 2021, the Remuneration Committee met on seven occasions. The
three members in place at the beginning of the year financial year attended all Committee meetings
throughout the year, with Marion Sears attending all meetings following her appointment on 13 August.
On occasion, the CEO, the CFO, the COO and the Global HR Director attended meetings, all at the requestof the Committee Chair.

ANNUAL REPORT AND ACCOUNTS 2021

As the financial year 2021 is his ninth year as a Non-Executive Director, David Reeves intends to step
down from his role as Remuneration Committee Chair following the May 2022 AGM. This is following theguidance in the UK Corporate Governance Code that a Non-Executive Director is no longer considered
independent if he has been in the position for nine years. Following the AGM, the role of Remuneration
Committee Chair will then be held by Marion Sears, who will have been a member of the Remuneration
Committee since August 2021.

The Committee appointed Ellason to provide independent advice to the Committee from 1 January 2021.
Ellason supported the Remuneration Committee on remuneration-related matters during the year.
Ellason is a member of the Remuneration Consultants Group and, as such, voluntarily operates under
the Code of Conduct in relation to executive remuneration consulting in the UK. Ellason does not haveany other association with the Company and is considered independent by the Committee.
Directors’ emoluments
The remuneration for the Directors of the Company for the period year ended 31 December 2021 isdetailed in the table below:

KEYWORDS STUDIOS PLC

Cashsalary/fee

Director

Bertrand Bodson1

SalaryShares50

Benefits

Pension

Total

Bonus

LTIP 7

Total

Benefits

Pension

Total

Bonus

LTIP 751.8

51.8

Georges Fornay

62.3

62.3

62.3

Charlotta Ginman5

89.3

89.3

89.3

Marion Sears6

22.8

22.8

22.8

Neil Thompson6

21.3

21.3

TOTAL

1,184.6

125.0

37.6

1,347.2

21.3
194.8

1,226.0

2,768.0

2. Cash salary includes one-off £37,500 as co-CEO allowance; Salary Shares include one-off £37,500 as co-CEO allowance.
3. Sonia Sedler was appointed on 18 January 2021 and left the company since the year end on 18 March 2022.

2021 Total
remuneration£’000

6. Marion Sears and Neil Thompson were appointed as Non-Executive Directors on 13 August 2021.
7. 50,000 LTIP shares, granted to Andrew Day in 2018, fully vested on 18 May 2021 due to Keywords’ three-year TSR exceeding thefull vesting level. The value shown in the table is based on the vest-date share price of £24.52, and 30% of which is based on thegain in the share price over the period (from a grant price of £17.22).

The remuneration for the Directors of the Company for the year ended 31 December 2020 is detailed in
the table below:
2020 Fixed pay £’000
Director

Salary/fee1

Benefits

Pension

Total

Andrew Day

228

7

235

10

Bonus

200

200

84

84

David Reeves

63

63

63

Giorgio Guastalla

45

45

45

Georges Fornay

48

48

48

Charlotta Ginman

59

TOTAL

717

59
17

734

15.0

15.0

67.5

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

84.0

455.6

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

Sonia Sedler2,3

319.3

47.5

15.9

382.7

95.8

95.8

478.5

1,226.0

1,292.1

132.5

132.5

David Reeves

94.3

94.3

94.3

1,012

84

84.0

61.2

£’000

777

190

52.5

132.5

Total

777

Jon Hauck371.6

Andrew Day 4

LTIP2

Ross Graham

2.5

Ross Graham52020 Total
remuneration

2020 Variable pay £’000

14.3

5

1,420.8

1. Bertrand Bodson was appointed on 1 December 2021. His one-off award of restricted stock granted on appointment is notincluded as this award is compensation for awards forfeited at a previous employer.

77.5

1,226.0

£’000

51.8

279.8

66.1

Total

Giorgio Guastalla

Jon Hauck 2

4.9

2021 Total
remuneration

2021 Variable pay £’000

5. Ross Graham, Charlotta Ginman and David Reeves all received an additional fixed fee to reflect the additional work undertaken
in relation to the change of CEO and other new director appointments during the year. Ross Graham received £40,000 andCharlotta Ginman and David Reeves each received £25,000.

The remit of the Committee is to determine and agree with the Board the framework for the
remuneration of the Company Chair (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 ordecision about his or her own remuneration.

2021 Variable pay £’000

Director

SalaryShares

4. Andrew Day retired on 14 June 2021; his salary shares granted in FY21 do not appear in the table as these lapsed on his retirement.

The Company Chair and the Chair of the Remuneration Committee also met with key investors
and relevant proxy agencies in 2021 to obtain input and feedback on executive and Company-wide
remuneration.

2021 Fixed pay £’000

2021 Fixed pay £’000
Cashsalary/fee

59
777

777

1,511

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The following cash salaries were applied in 2021:––––

Andrew Day: £244,800
Jon Hauck: £204,000 up to 1 March, £245,000 between 1 March and 30 November, and £295,000
to reflect the CFO’s additional responsibilities from 1 December
Sonia Sadler: £295,000 on her appointment in January
Bertrand Bodson: £600,000 on his appointment in December

The following salary shares were granted in 2021:–––

Andrew Day: £75,000 (but which subsequently lapsed on his departing the Board)
Jon Hauck: £40,000
Sonia Sadler: £10,000

ANNUAL REPORT AND ACCOUNTS 2021

The salary shares vest, subject to continued employment, in annual one-third tranches startingin May 2022 (see note below).

The Remuneration Committee considered performance against all the non-financial objectives set
for the Executive Directors, and the difficult circumstances of the executive changes, and determinedthat each Director had achieved full vesting under this component of the bonus.
Bertrand Bodson’s bonus has been prorated to reflect time served during the 2021 financial year.
As a result of his retirement, Andrew Day was not eligible to be paid a bonus for 2021.
Formulaic outcome,% of base salary

Bonus for 2021

Bertrand Bodson

30%£15,000

Andrew Day

n/a

£nil

Jon Hauck30%£83,950

Sonia Sedler

30%£95,778

In addition, to reflect their contribution to the co-CEO role during the year, Jon Hauck and Sonia Sedler
also were each granted one-off allowances as follows:

Director––

Additional cash salary: £37,500
Additional salary shares: £37,500, vesting in one-third annual tranches starting September 2022
(see note below).

Note: when the salary shares were originally introduced, the Remuneration Committee intended thatthe awards would be granted at the same time as LTIP awards, and vest in one-third annual increments.
The complications around CEO succession in FY21 presented certain logistical challenges which meantthe ‘regular’ salary shares (i.e. not the one-off co-CEO top-up allowances) were granted later than LTIP
awards. The one-off co-CEO top-up salary shares were stated in the RNS at time of grant to vest after
two years. The Committee has subsequently harmonised the vesting schedule under the new LTIP rules
so that all salary shares granted in FY21 will be subject to one-third annual vesting, and with the vest
dates for the regular salary share awards to be as if they had been granted at the same time as the
FY21 LTIP awards (in May 2021).
PensionKEYWORDS STUDIOS PLC

The discretionary element considers the Director’s performance for the year against non-financial
targets, under various categories. The non-financial objectives for the CFO included Management
Accounts targets (6% of bonus), ESG (6%), Internal control (6%), Treasury management (6%) and
Financial Systems (6%). The non-financial objectives for the COO included those based on organisational
development (6% of bonus), global operating systems (6%), operational KPIs (7.5%), contact with
operational heads of major clients (3.5%), tiered vendor structure (4%) and specific key project
implementation (3%). As Bertrand Bodson was appointed only in December, his non-financial component
was based on a discretionary assessment by the Remuneration Committee of the achievement of his‘first 100-day objectives’ to the extent they were relevant over this first 30-day period.

During 2021, the Executive Directors were paid pension contributions of 5% of salary, except for
Andrew Day who was paid 3%.
Annual bonus outcome for 2021
During 2021, the Executive Directors participated in the annual bonus scheme, and were eligible to earnawards of up to 30% of base 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 22 and 23) and on the
Remuneration Committee’s discretionary assessment of each individual’s performance (weighted 30%).
The financial targets were based on Revenue (weighted 20% of bonus), Gross Margin (20%), EBITDA
margin (15%), working capital as % of revenue run rate (10%) and overall EBITDA from acquisitions (5%).
Performance against the targets set for the year was assessed by the Committee, and the Committee
determined that 100% of the financial component was warranted. The targets are not disclosed due tocommercial sensitivities.

Long-term incentives vesting in 2021
In May 2018, Andrew Day was granted an LTIP award over 50,000 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 18 May 2021, with 10% vesting for TSR in line with
the Index and full vesting for 20% outperformance. Based on Keywords’ TSR performance, which
outperformed the Index by 27.7%, the awards fully vested.
Other long-term incentives outstanding during 2021
LTIP awards granted to the Executive Directors in May 2019, September 2019 and May 2020 remained
outstanding during 2021. Vesting of the 2019 and 2020 awards requires Keywords TSR to outperformthe 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 2021, the 2019 and 2020 awards would
fully vest (see TSR performance chart on page 78).
Long-term incentives granted during 2021
In 2021, the Executive Directors were awarded LTIPs, the vesting of which is based on the Company’s
TSR performance versus the FTSE 250 Index (excluding investment trusts) over a three-year
performance period. Given Keywords’ growth during the period the Committee deemed it appropriate touse the FTSE 250 as the Index against which TSR should be measured. Threshold vesting (25% of theaward) 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.

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Bertrand Bodson was granted his LTIP award on his appointment on 1 December 2021, and was also
awarded a one-off grant of restricted shares with a face value of 100% of salary in compensation forawards forfeited on joining Keywords. These conditional LTIP shares will vest based on performanceover the period to May 2024, in line with other LTIP awards granted in 2021, and the restricted shares
will vest in December 2024 providing he is still employed by Keywords.
On her appointment, Sonia Sedler was also awarded a one-off grant of 25,000 shares in compensation
for awards she forfeited on joining Keywords. Following her departure in March 2022, these awards havebeen treated in accordance with Good Leaver rules and Sonia’s exit remuneration is described opposite.
This award over 25,000 shares will vest according to Keywords relative TSR performance vs the FTSE
Small Cap Index over the three years to January 2024, in line with LTIP awards granted in 2020.
The number of performance-based LTIP shares granted to the Executive Directors in 2021 issummarised in the table below.

ANNUAL REPORT AND ACCOUNTS 2021

Director

Number of shares

Value as % of salary

Performance period

Vest date

Bertrand Bodson

61,156275%

5 May 2021 – 4 May 2024

5 May 2024

Jon Hauck

25,000260%

5 May 2021 – 4 May 2024

5 May 2024

35,000302%

5 May 2021 – 4 May 2024

5 May 2024

25,000236%

29 Jan 2021 – 28 Jan 2024

29 Jan 2024

50,000392%

5 May 2021 – 4 May 2024

5 May 2024

Sonia Sedler1
Andrew Day2

The 2021 awards granted in May were granted at a share price of £25.48; those granted to Sonia Sedler
in January were granted at a share price of £27.48. Based on performance up to 31 December 2021,
these awards would not vest (see chart below).
1. The treatment of the awards to Sonia Sedler as part of her exit arrangements is described opposite
2. Andrew Day was granted an award on 5 May 2021, prior to the announcement that he would bring forward his plan to retire on
14 June 2021

47.0%
140.1%
43.1%

KEYWORDS STUDIOS PLC

2019–2022 LTIP
(Sept grant)

85.7%
48.1%

2020–2023 LTIP

97.3%
31.4%

2021–2024 LTIP
(COO Jan grant)

20.7%
13.5%
8.9%

2021–2024 LTIP
020%
FTSE Small Cap

40%
FTSE 250

60%
Keywords

80%

100%

Andrew retired from the Board in June 2021. Andrew received base pay and benefits up to 31 March 2021
and was on unpaid leave up to his leaving date of 14 June 2021, at which time a payment of £162,500 inlieu of 6 months’ notice was made. Andrew is not eligible for a bonus for 2021, but as a good leaver, andunder the previous 2013 LTIP rules, his outstanding LTIP awards will continue and vest on the normal
vest dates subject to performance over the normal period. The salary shares granted to Andrew in 2021
lapsed on his leaving.
Sonia Sedler leaving arrangements
Sonia left the company on 18 March 2022 due to personal reasons and was treated as a good leaver.
Sonia received base pay and benefits up to 18 March and received her bonus in respect of 2021. Upon
departure Sonia was awarded an ex-gratia payment of £183,536 plus payment in lieu of notice of£147,500. Sonia retains the 25,000 LTIP award made in respect of compensation foregone at her joining
and this award will vest subject to performance conditions at the normal vesting date. The May award of
35,000 LTIP shares was pro-rated according to time served under our new good leaver provisions andSonia retains 10,144 LTIP shares which will also vest subject to performance conditions at the normal
vesting date in 2024. All salary shares lapsed.
Bertrand Bodson remuneration package on appointment
Bertrand was appointed as CEO on 1 December 2021 on a salary of £600,000. His annual bonus
opportunity is in line with the other executives at 30% of salary, as are awards under the LTIP.
Bertrand was granted an award under the LTIP in 2021 with a face value of 275% of salary, with vesting
determined by TSR performance against the FTSE 250. Bertrand will receive a pension contribution of
5% of salary, in line with the other executives and the UK workforce. Bertrand also received a one-off
conditional award of 100% of salary in restricted shares, granted on a like-for like basis for foregoneawards from his previous position of employment, and vesting on continued employment after
three years.
TSR performance
The chart opposite show (i) the Company’s TSR since listing versus relevant indices, and (ii) the
shareholder value created each financial year based on share price growth and dividends paid.

TSR performance up to 31 December 2021, in-flight LTIP awards
2019–2022 LTIP
(May grant)

Andrew Day leaving arrangements

120%

140%

160%

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

Value of £100 invested in July 2013
£2,500
Keywords

FTSE Small Cap

Numis Small Cap£2,000£1,500

FY13

FY14

FY15

FY16

FY17

FY18

FY19

FY20

FY21

Single figure (£’000) 1

52

146

213

449

397

820

1,198

1,012

1,532

Annual bonus outcome (% of max)

N/A

100%

100%

100%

100%

30%

0%

0%

100% 2

LTIP vesting (% of max)

N/A

N/A

N/A

100%

N/A

100%

100%

100%

100% 3

SOP vesting (% of max)

N/A

N/A

100%

100%

100%

N/A

N/A

N/A

N/A

1. The numbers in the table for FY13-FY20 are for Andrew Day; FY21 is based on a combination of Andrew Day, Bertrand Bodson,
Jon Hauck and Sonia Sedler (see further explanation in CEO pay ratio section).
2. 100% bonus outcome reflects the bonus outcome for those individuals performing the role of CEO in FY21 (Andrew Day, who
retired in FY21, was not paid a bonus).

£1,0003. Of those who performed the CEO role during FY21, only Andrew Day benefitted from an LTIP vesting in FY21.

Chief Executive Officer pay ratio

ANNUAL REPORT AND ACCOUNTS 2021

£500

£0
2013

2014

2015

2016

2017

2018

2019

2020

2021

As at 31 December

Shareholder value created each year, £m

YearMethodology used

P25 (lower quartile)P50 (median)

P75 (upper quartile)

2021

Option A

51:1

38:1

27:1

2020

Option A

33:1

25:1

18:1

1,200
Year

1,009

1,000
800

664

600
400
KEYWORDS STUDIOS PLC

The table below provides disclosure of the ratio between the CEO’s total remuneration and that of thelower quartile, median and upper quartile of our 679 (2020: 458) UK-based employees. The CEO pay data
in 2021 includes all income paid to Andrew Day up to his retirement, the co-CEO cash salary and Salary
Shares paid to the CFO and COO and any bonus earned for the cash element of this, and all income
paid to Bertrand Bodson from 1 December excluding his one-off award of restricted shares paid ascompensation for forfeited awards at a previous employer.

280
176

200
0

15

34

2014

2015

2016

126
2017

2018

2019

2020

2021

-200
-400

)337(

Shareholder value created each year is based on the change in share price plus dividends paid over each financial year multipliedby the number of shares outstanding at the start of each year.

P25 (lower quartile)P50 (median)

P75 (upper quartile)

CEO

2021

Base Salary (£’000)

27

35

50

261

Total remuneration (£’000)

30

40

57

1,532

2020

Base Salary (£’000)

27

35

50

228

Total remuneration (£’000)

31

40

57

1,012

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 2021. From this analysis, three employees were then 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 inplace to undertake this method. As the drafting of this report was earlier than the final determinationof bonuses for the wider population, the bonus outcomes have been based on the financial forecasts in
December 2021.
The CEO pay ratio increased from 25 in FY20 to 38 in FY21 primarily as a result of the significant
increase in the vest-date value of the LTIP award vesting in the year to Andrew Day (£1.2m in FY21
compared to £777k in FY20) due to the strength of the share price growth over the vesting period of
the LTIP awards granted in May 2018.

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The CEO pay ratio is based on comparing the CEO’s pay to that of Keywords’ UK-based workforce,a large proportion of whom are engineers, artists and support staff. The Committee expects thatthe 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 agreater proportion of their pay linked to fixed components. The Committee considers these ratios when
making decisions around the Executive Director pay packages, and Keywords takes seriously the needto ensure competitive pay packages across the organisation.
Implementation of the remuneration policy in 2022

KEYWORDS STUDIOS PLC

ANNUAL REPORT AND ACCOUNTS 2021

Base salaryWith effect from 1 March 2022, base salary increases of 3.5% were awarded to the CFO and COO, suchthat their 2022 base salaries would both be £305,325 and this increase is in line with or below that of
the UK workforce. Since the year end, Sonia Sedler has left the company on 18 March 2022. Bertrand
Bodson’s base salary will remain at £600,000, having joined on 1 December 2021.

Non-Executive Directors’ remuneration
Non-Executive Director fees are based on the roles and responsibilities of the Directors (see tablebelow).The fees have been increased by 3.5% for the Non-Executive Directors with effect from 1 March
2022, in line with or below that of the UK workforce and to reflect the increased scale of the businessand the consequent increased time requirement of the Directors.
Role

Fee

Board Chairman£96,255

Senior Independent Director fee£5,175

Non-Executive Director basic fee£51,233

Additional fees:
Chair of the Audit Committee£12,420

Chair of the Remuneration Committee£12,420

Salary shares
The CFO will be granted an award of salary shares over £60,000, at 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 bebased on grant values intended to ensure total salaries (cash salary plus salary shares) are consistent
with our targeted remuneration position. The award will vest in one-third annual tranches over three
years and be subject to continued employment over this period.

Chair of the ESG Committee£12,420

The Committee’s review of pay benchmarks for the Executive Directors, suggest the total salary (cashand salary shares) for each individual will be lower quartile vs FTSE 250 and broadly median vs market(based on a combination of UK technology peers, global gaming peers and the FTSE 250).

Directors’ interest in shares

Pension
The Executive Directors’ pensions will remain at 5% of base salary, in line with the UK workforce.
Annual bonus
The CEO and CFO will be eligible to earn an annual bonus of up to 30% of base salary in line withprevious years. The outcome will be determined with reference to targets set at the start of 2022
around financial performance (weighted 60%) and non-financial performance (weighted 40%).
LTIP
The Remuneration Committee intends to grant LTIP awards of 275% of base salary to the CEO and
CFO, with vesting based on the Company’s three-year TSR performance versus the FTSE 250 Index(excluding Investment Trusts), with threshold vesting (25% of the award) for TSR in line with the Indexand full vesting for exceeding the Index TSR by 20% over the performance period.
The Committee reviewed the LTIP grant policy during 2021 and concluded that awards going forward would
be granted on the basis of face value, rather than the fixed-number of shares approach used in previous
years. The Committee took this decision after considering feedback from shareholders as well as desiring
greater consistency with market practice. The proposed award levels, at 275% of base salary, take into
account typical market practice for LTIP levels as well as Keywords low bonus opportunity (which, at 30% ofbase salary, is significantly below the lower quartile). All LTIP awards made under our new Policy and LTIP
rules from 2022 will include higher shareholding requirements and one year post-cessation holding.

Member of:
Audit Committee£3,105

Remuneration Committee£3,105ESG Committee£3,105The interests of each person who was a Director of the Company (together with interests held by his or
her connected persons) at the end of each financial year (or the time the Director departed the Board, if
relevant) were:
At 31 December 2021

At 31 December 2020

Andrew Day1

3,296,573

3,296,573

Giorgio Guastalla2

500,736

3,150,662

Ross Graham

59,81959,819David Reeves

33,46433,089Jon Hauck

nil

nil

Sonia Sedler

nil

n/a

Bertrand Bodson

nil

n/a

Georges Fornay

6,521

6,521

Charlotta Ginman

1,733

1,733

Marion Sears3

1,000

n/a

Neil Thompson

2,496

n/a

3,902,342

6,548,397

1. Andrew Day was no longer a Director of the Company at the end of the 2021 financial year.
2. Giorgio Guastalla’s indirect shareholding arises out of his 90% holding in P.E.Q. Holdings Limited.
3. Since 31 December 2021, Marion Sears has acquired a further 1,000 shares.

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LTIP

Number at
31 December
2020

Bertrand Bodson–
35,000ANNUAL REPORT AND ACCOUNTS 2021

Andrew Day

KEYWORDS STUDIOS PLC

Salary shares and restricted shares

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

Jon Hauck

Sonia Sedler
Total

Numbergrantedduring theyear

61,156–

Numbervestingduring the
year

–
–

Numberlapsed/forfeited
during the
year

–
–

Numberexercisedduring the
year

–
–

Number at
31 December
2021

61,15635,000

Number at
31 December
2020

Numbergrantedduring theyear

Numbervestingduring theyear

Numberlapsed/forfeited
during the
year

–

2,983

–

2,983

–

–

–

1,630

–

–

–

1 Jun 2018

–

1,231

–

–

–

407

–

First vestingdate

Current
vesting
expectation1

5 May 2024

60,000––––60,00010 May 201952,000–-––52,00015 May 2020

50,000–50,000––50,00018 May 2021

50,000––––50,000

3 May 2022

0%

Andrew Day
Jon Hauck

Sonia Sedler

Numberexercisedduring theyear

Number at
31 December
2021

First vestingdate for one-third
tranche1

Current
vesting
expectation

1,630

5 May 2022

100%

–

1,231

16 Sep 2022

100%

–

–

407

5 May 2022

100%

–

1,231

–

–

–

1,231

16 Sep 2022

100%

Bertrand Bodson1–

22,239–––22,2391 Dec 2024

100%

100%

Total

–

29,721

–

2,983

–

26,738

1. All awards above vest in one-third annual tranches over three years, except those granted to Bertrand Bodson, which were
granted as compensation for forfeited awards from his previous employment and which vest in full after three years subject
to continued employment.

50,000––––50,000

1 May 2023

100%

–

50,000–––50,000

5 May 2024

0%25,000––––25,00030 Sep 2022

100%

43,936––––43,93630 Sep 2022

100%

Andrew Day’s salary shares lapsed on his leaving during 2021.

25,000––––25,000

1 May 2023

100%

Sonia Sedler’s salary shares lapsed on her leaving on 18 March 2022.

–

25,000–––25,000

5 May 2024

0%

Share Option Scheme–

25,000–––25,00029 Jan 2024

0%–35,0002–––35,000

5 May 2024

0%

Executive Directors no longer receive awards under the Share Option Scheme. There are no awards
outstanding under this scheme.

390,936

196,156

50,000––637,092

1. Vesting expectation (% of award) is based on the achievement of the TSR performance condition up to 31 December 2021.
2. Sonia Sedler’s award of 35,000 shares has been reduced as part of her departure arrangements and with effect from18 March 2022, 10,144 LTIP shares remain under this award.

Andrew Day retired from the Board on 14 June 2021. The awards disclosed above remain outstanding.

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S U P P L E M E N TA R Y I N F O R M AT I O NREPORT OF THE NOMINATION COMMITTEE

82

Diversity

Continued focus on succession
planning, having consideration
for diversity and the skills,
knowledge and experience of
the Board as a whole

ANNUAL REPORT AND ACCOUNTS 2021

ROSS GRAHAM
C H A I R O F T H E N O M I N AT I O N C O M M I T T E E

Roles and responsibilities
The role of the Committee is to develop and maintain a formal, rigorous and transparent procedure
for making recommendations on appointments and 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:
–
–

–
–
–

KEYWORDS STUDIOS PLC–

Reviewing the structure, size and composition of the Board and making recommendations to theBoard with regard to any changes.
Assessing the effectiveness and performance of the Board and each of its Committees including
consideration of the balance of skills, experience, independence and knowledge of the Company
on the Board, its diversity, including gender, how the Board works together as a unit, and otherfactors relevant to its effectiveness.
Considering succession planning for Directors and members of the Executive Management Team.
Identifying and nominating new members to the Board.
Reviewing the results of the annual Board performance evaluation process that relate to thecomposition of the Board and the performance of individual Directors.
Reviewing annually the time input required from Non-Executive Directors.

Following Board changes made in the year, our Board composition is 25% female Directors. The
Company is committed to improving gender diversity at Keywords and in the industry. Information
about gender diversity across the Group can be read on pages 34, 35 and 41.
The Committee reviews the Board Diversity Policy regularly and during the year it approved several
enhancements. The policy acknowledges that an effective Board will include and make good use ofdifferences in the skills, regional and industry experience, background, ethnicity, gender and otherdistinctions between Directors and emphasises that in identifying suitable candidates for appointment
to the Board, the Committee will consider candidates on merit against objective criteria, with due regard
for the benefits of diversity on the Board and the skills, experience, independence and knowledge which
the Board as a whole requires to be effective.
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 2021, the Committee met twice. The Committee has formal
terms of reference which can be viewed on the Company’s website, www.keywordsstudios.com.
Board and Committee composition
The Committee reviewed the size, composition and skill set of the Board during the year and concluded
that there was an appropriate mix of experience, skills and knowledge to provide strong and effective
leadership. Consideration was given to the appropriate mix of industry, financial and geographicalknowledge and experience on the Board and Committees. The biographies of our Directors can be readon pages 59 and 60.
Andrew Day brought forward his retirement plan for health reasons and left the Company in June
2021. Following that, Jon Hauck (CFO) and Sonia Sedler (appointed as an Executive Director and COO in
January 2021) acted as Joint Interim CEOs and continued to drive the Group’s strategic development,
acquisition strategy and operational performance until the appointment of Bertrand Bodson as CEO
in December 2021. Neil Thompson and Marion Sears were both appointed as Non-Executive Directors
in August 2021, adding considerable technology, industry and corporate experience and stakeholder
understanding. In March 2022, Sonia Sedler stepped down as a Director and left the Company due topersonal circumstances. Giorgio Guastalla resigned as a Director on 26 January 2022.
The Committee also recognises that by May and July 2022 respectively, David Reeves and Ross Graham
will each have completed nine years tenure. An active process is in hand to find a successor for the Chairrole, led by Charlotta Ginman and the Committee believes it is appropriate for Ross Graham to remain in
his role for a further year to ensure the smooth operation of the Board and to provide robust supportfor Bertrand Bodson during his first year as CEO. David Reeves will not seek re-election at the 2022 AGM
and Charlotta Ginman will succeed David as Senior Independent Director.
The Committee believes that, as a result of the changes in the year, the Board has a good balance ofqualities and capabilities required to promote the long term success of the Company.
Details of the independent evaluation of the Board’s and Committees’ performance can be read on
page 64.

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83

Succession
The Board is committed to effectively managing leadership succession and proactively engages with
the Senior Management Team to assess the executive talent pool. The Committee and the Board
receive regular contributions from individuals in the wider executive group at meetings of the Board andCommittees throughout the year. These contributions are valuable for our decision making and havehelped the Non-Executive Directors to develop a clear understanding of the strength of the executive
team and the business of the Group as a whole.
Succession planning is designed to consider the planned process of transition to new leadershipover time and also the potential for unforeseen change over a shorter time frame. The Board andthe Committee keep in touch with the talent development teams throughout the organisation, andare conscious of the strategic importance of promoting from within as far as possible to support theCompany’s growth plans, as set out in the Strategic report. During the year, the Board sponsored a newprogramme to develop the leadership skills of the Senior Management Team.

KEYWORDS STUDIOS PLC

ANNUAL REPORT AND ACCOUNTS 2021

Induction and development
All new Directors receive a comprehensive induction programme upon joining the Board, tailored to thespecific needs of the individual. This includes meetings with key senior management personnel and key
external stakeholders, to obtain a deep understanding of Keywords' operations and environment. The
Company’s Nominated Adviser (Nomad), Numis Securities Ltd, provides the initial corporate governancetraining as part of a new Director’s on-boarding. Non-Executive Directors are encouraged to be involvedin specific workshops or meetings, in line with their individual areas of expertise. Further training anddevelopment needs are assessed on a periodic basis and as part of Board and Committee evaluations.
Information on some of the Bertrand’s activities during his first 100-days with Keywords can be readon page 12.
Role of the Company Secretary
The Directors had access to the Company Secretary for advice on corporate governance matters.
Since the year end, we have appointed Andrew Kennedy, our General Counsel, as Company Secretary.
2022 plan
The Committee has two meetings scheduled for 2022. Attention will continue to be focused on the
Senior Management Team in addition to succession planning for the Chair role.

ROSS GRAHAM
C H A I R O F T H E N O M I N AT I O N C O M M I T T E E

30 March 2022

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84
As Chair of the ESG Committee,
I’m very pleased to present our
first ESG Committee Report

KEYWORDS STUDIOS PLC

ANNUAL REPORT AND ACCOUNTS 2021

G E O R G E S F O R N AYCHAIR OF THE ESG COMMITTEE

The global focus on environmental, social and governance (ESG) matters is sharpening, and we
acknowledge that our shareholders, employees, customers and suppliers are becoming increasinglyinterested in our ESG programme. We see this as a positive development because we’re conscious of
the impact climate change may have on our business, as well as the social impact of our business. At
Keywords, we recognise a collective responsibility and accountability to take account of the interestsof our stakeholders and to contribute positively to the environmental and social initiatives of ourcustomers and wider industry.
Established in 2021, this was the first year of activity for the ESG Committee but we’re already proud of
the progress we’ve made. The following examples, described in more detail in our Responsible business
report on pages 37 to 49, illustrate our progress in the year:
–

–
–

–

People – we conduct an annual Global Employee Engagement Survey and our eNPS score
improved from 22 in 2020 to 42 in 2021, showing a strong improvement in almost all our studiolocations. The survey had a 69% response rate
Planet – rollout of the Group's first Environmental Policy
Gender diversity – this remains a major challenge across the gaming industry, particularly the lackof female senior managers and engineers, and we have plans to improve this – our partnership with
Women in Games demonstrates our commitment to making this a business priority
MSCI ESG Rating improved to A from BBB

Let me thank the members of the Committee, the management team and over 10,000 Keywordians
across the world for their support and continued efforts in driving our ESG programmes forward.

Roles and responsibilities
The role of the ESG Committee is to implement and monitor initiatives across the Group which aim to
improve the Group’s impact on its people, communities and the planet. The remit of the ESG Committee
is to oversee the following areas which have been identified as environmental, social, and governancepriorities for our business and key stakeholders: people, planet, client, community and governance.
The ESG Committee is supported by an executive subcommittee, the Responsible Business Committee,
which itself is supported by regional responsible business committees and the DE&I Committee.
Activities during the year
Four meetings were held during the year. The Committee received presentations on the investor
context and existing initiatives across the Group (including Women in Games) and agreed the strategy,
framework and priorities for the ESG programme. Various Group policies have been reviewed andupdated to support initiatives to be rolled out in 2022.
Given the importance of people to Keywords, immediate focus was given to social areas of the ESG
programme. A comprehensive global employee survey was conducted to measure our employee net
promoter score (eNPS), with a response rate of 69%, and the results were discussed in full by theCommittee. Several action plans have been developed to address key themes arising from this survey,
including Group communications, wellness and professional development programmes.
Details of our initiatives can be found in the Responsible business report on pages 37 to 49.

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ANNUAL REPORT AND ACCOUNTS 2021

85

Framework
The table below sets out the framework for our ESG programme, including our five pillars, key initiatives
and metrics.

PeoplePlanetClientCommunity

Governance

Promote a positive workplaceenvironment and be a leader inattracting a diverse, equal, andinclusive workforce

Reduce our impact
through SustainableStudios

Improve client
experience throughtechnology andinnovation

Encourage teamoutreach andsupport in local
communities

Operate to thehighest standards ofhonesty, integrity,and ethical conduct

DE&I– Sustainablestudios– Global DE&I
– Environmental
Councilpolicy– Women inGames– Femaleempowerment
programme– Affinity groups– Data security– Strategic
partnerships–– Keywords
Cares matching
programme–– Outreach–activities– Scholarships– Local volunteering– Board diversity – GHG recording– Group diversity– Customer– Keywords Cares
programme
satisfaction
scoresmonitoring– Number of clientswith three ormore services

People– Mental healthand well-being
programme– Training anddevelopment– Hardship fund
– Employee
Recognition(e-cards)– Staff surveys(annual andpulse)– Glassdoor
monitoring

Code of Conduct
awareness
Policy training
Whistleblowing
awareness– Compliancereports– Whistleblowing
reports2022 plan
The Committee has five meetings scheduled for 2022. Attention will be focused on enhancing initiatives
across our five priority areas and establishing the targets and key performance indicators to monitor andreport on our progress. This will include work on a three-year plus plan (current year plus 2023–2025).

G E O R G E S F O R N AYCHAIR OF THE ESG COMMITTEE

30 March 2022

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S U P P L E M E N TA R Y I N F O R M AT I O N

DIRECTORS’ REPORT86

The Directors present the Annual Report together with both the audited consolidated financial
statements and the parent Company (Keywords Studios plc) financial statements for the year ended
31 December 2021.
Dividends
The results for the year are set out in the Financial Statements section of this report. As described in
the Financial and operating overview section, the Board is proposing a final dividend of 1.45 pence pershare (2020: nil), bringing the total dividend for 2021 to 2.15 pence per share (2020: nil).
Directors and changes to the Board

KEYWORDS STUDIOS PLC

ANNUAL REPORT AND ACCOUNTS 2021

The Directors of the Company during the year were Ross Graham, Bertrand Bodson (appointed on 1
December 2021), Andrew Day (retired on 14 June 2021), David Reeves, Giorgio Guastalla (resigned on
26 January 2022), Georges Fornay, Charlotta Ginman, Marion Sears (appointed on 13 August 2021), Neil
Thompson (appointed on 13 August 2021), Jon Hauck and Sonia Sedler (appointed on 18 January 2021
and stepped down as a Director on 18 March 2022). Details of current members of the Board are set out
on pages 59 and 60.
A list of Directors, their interests in the ordinary share capital of the Company, their interests in its
long-term performance share plan and details of their options over the ordinary share capital of theCompany are given in the Directors’ remuneration report on pages 69 to 81. No Director had a materialinterest in any significant contract, other than a service contract or contract for services, with theCompany or any of its operating companies at any time during the year.
Directors’ indemnity provisions
As permitted by the Articles of Association and the Companies Act, the Directors had the benefit of anindemnity from the Company in respect of liability incurred as a result of their office throughout thefinancial period and at the date of approval of these financial statements. The Group also purchased
and maintained throughout the financial period Directors’ and Officers’ liability insurance in respect ofitself and its Directors.
Going concern
The Directors have performed an assessment, including a review of the Group’s business activities,
performance, position, principal risks and uncertainties (as set out in the Strategic report on pages
1 to 58), as well as the Group’s budget for the 2022 financial year and its longer term plans. Aftermaking 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 haveconsidered the uncertain nature of the Ukrainian crisis and the COVID-19 pandemic, but have noted:
–
–
–
–
–
–

The net cash position of the GroupThe 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 aretemporarily closed
The historical resilience of the broader video games industry in times of economic downturn
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 €105.6m andcommitted undrawn facilities under the Revolving Credit Facility (RCF) of €150m as at 31 December 2021.
The Directors have applied downside sensitivities to the Group’s cash flow projections to evaluate theGroup’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 and a worst case scenario of withdrawing fromthe Group's operations in Russia. Under this severe case the Group would have sufficient liquidity andremain 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 their liabilities as they fall due
for the foreseeable future, a period considered to be at least 12 months from the date of these full year
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 25 of the financial statements. The
Group’s exposure and approach to liquidity, credit, interest rate and foreign currency risk is shown innote 24 of the financial statements. Our approach to risk management generally and our principal risks
can be found in the Strategic report on pages 57 and 58.
Political donations
No political donations were made in the year, in line with our Group policy.
Share capital structure
At 31 December 2021, the Company’s issued share capital was 76,275,775 ordinary shares of one penceeach. Further details of the Company’s issued share capital are given in note 22 to the Consolidated
Financial Statements on pages 115 to 117. The Company’s ordinary shares rank pari passu in all respects
with each other, including for voting purposes and for all dividends and each share carries the right toone vote at general meetings of the Company.
Significant shareholdings
At 28 February 2022, the Company was aware of the following shareholdings of 3% or more of its issued
share capital on that date:
Name

Shares%6,362,547

8.33

Franklin Templeton

6,241,117

8.17

Liontrust Asset Management

3,943,686

5.17

Octopus Investments

3,849,284

5.04

Andrew Day

2,946,573

3.86

T Rowe Price Global Investments

2,665,401

3.49

Aberdeen Standard Investments

2,662,367

3.49

Comgest2,298,232

3.01

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Subsidiary undertakings

Employee involvement

A list of the Group’s subsidiary undertakings and non-UK branches is provided in the note 28 of thefinancial statements on pages 123 and 124.
Important events since the financial year end are described in note 29 of the financial statements, theChief Executive Officer’s review on pages 10 to 14, the service line review on pages 25 to 33 and the
Financial and operating overview on page 53 to 56. Future developments are described in the Strategy
section of the Strategic report on page 20.

The Group provides employees with information on matters of concern to them so that their views
can be taken into account when making decisions that are likely to affect their interests. A summaryof the methods we use to engage with our employees are provided in the Our people, our culture
section of the Annual Report on pages 34 to 36, the Responsible business report on pages 37 to 41
and the Section 172(1) statement on pages 51 and 52. Approximately 9% of the workforce participate
in employee share schemes operated by the Company (see page 74). We continue to review options to
expand participation in employee share schemes to improve incentives and align them with the longterm success of the Group.

Change of control

Corporate responsibility

Information on agreements between the Company and its Directors providing for compensation for lossof office of employment (including details of change of control provisions in share schemes) is set out
on page 75. Otherwise, there are no agreements between the Company and its employees providing forcompensation for loss of office or employment that occurs because of a takeover bid.

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 manynationalities. No discrimination is tolerated and we endeavour to give all employees the opportunity
to develop their capabilities. We provide an excellent working environment, the latest technology andappropriate training. Further details are provided in the Responsible business report on pages 37 to 49.

Significant events and future developments

KEYWORDS STUDIOS PLC

ANNUAL REPORT AND ACCOUNTS 2021

Disclosures concerning emissions
The disclosures relating to emissions are set out in the Responsible business report on page 46.
People and organisation
Keywords is, and always has been, dependent on the quality and commitment of its entire staff toprovide and maintain the high levels of services expected by the Group’s customers.
Keywords’ average number of employees was 9,493 during 2021. This permanent headcount is
supplemented with staff on short-term contracts as activity changes throughout the year.

Disclosure of information to auditor
As far as the Directors are aware, there is no relevant audit information (that is, information needed by
the Group’s Auditor in connection with preparing their Report) of which the Group’s Auditor is unaware,and each Director has taken all reasonable steps that they ought to have taken as a Director in orderto make themself aware of any relevant audit information and to establish that the Group’s Auditor isaware of that information.
By order of the Board

Employment policy
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 to their particular skills and experience.
Appropriate arrangements are made for the continued employment and training, career development
and promotion of disabled persons employed by the Group, including making reasonable adjustments
where required. In the event of any colleague becoming disabled during their career at Keywords, every
effort is made by the Group to ensure their continued employment and engagement with the business.
JON HAUCKCHIEF FINANCIAL OFFICER

30 March 2022

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STATEMENT OF DIRECTORS’ RESPONSIBILITIES88

The Directors are responsible for preparing the Annual Report and financial statements.

Website publication

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 in accordance
withUK adopted international accounting standards in conformity with the requirements of theCompanies Act 2006.

The Directors are responsible for ensuring the Annual Report and financial statements are madeavailable on a website. Financial statements are published on the Group’s website in accordance withlegislation in the United Kingdom governing the preparation and dissemination of financial statements,
which may vary from legislation in other jurisdictions. The maintenance and integrity of the Group’s
website is the responsibility of the Directors. The Directors’ responsibility also extends to the ongoing
integrity of the financial statements contained therein.

Under company law the Directors must not approve the financial statements unless they are satisfied
that they give a true and fair view 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 are also required to prepare financial statementsin accordance with the rules of the London Stock Exchange for companies trading securities on the
Alternative Investment Market.

By order of the Board

In preparing these financial statements the Directors are required to:

ANNUAL REPORT AND ACCOUNTS 2021

–
–
–

–

The Directors are responsible for keeping adequate accounting records that are sufficient to show andexplain the Company’s transactions 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 andthe Directors’ remuneration report comply with the Companies Act 2006. They are also responsible forsafeguarding 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 and functions are listed in the Board of
Directors section on pages 59 and 60, confirm that:––

KEYWORDS STUDIOS PLC

Select suitable accounting policies and then apply them consistently;
Make judgements and estimates that are reasonable and prudent;
State whether international accounting standards in conformity with the requirements of
the Companies Act 2006 have been followed, subject to any material departures disclosed
and explained in the Group and Company financial statements respectively; andPrepare the financial statements on a going concern basis, unless it is inappropriate topresume that the Company will continue in business.

So far as the Director is aware, there is no relevant audit information of which the Company’s
auditors are unaware; andThe Director has taken all the steps that they ought to have taken as a Director in order to makethemself aware of any relevant audit information and to establish that the Company’s auditors
are aware of that information.

This confirmation is given and should be interpreted in accordance with the provisions of section 418 of
the Companies Act 2006.

JON HAUCKCHIEF FINANCIAL OFFICER

30 March 2022

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OpinionConclusions relating to going concern

We have audited the financial statements of Keywords Studios plc (the ‘parent company’) and its
subsidiaries (the ‘group’) for the year ended 31 December 2021 which comprise the Group and Parent
Company Statements of Financial Position, the Group Statement of Comprehensive Income, theGroup and Parent Company Statements of Cash Flows, the Group and Parent Company Statementsof Changes in Equity, and the notes to the financial statements, including a summary of significant
accounting policies.

In auditing the financial statements, we have concluded that the directors’ use of the going concern
basis of accounting in the preparation of the financial statements is appropriate.

The financial reporting framework that has been applied in the preparation of the financial isapplicable law and United Kingdom adopted international accounting standards, and as regards the
Parent company financial statements, as applied in accordance with the provisions of the Companies
Act 2006.

Our evaluation of the Directors assessment of the group and parent company’s ability to continue toadopt 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 businessmodel and related risks including, where relevant, the impact of the Covid-19 pandemic, therequirements 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 the underlying data and key assumptions used to make theassessment, and stress tested the directors’ plans for future actions in relation to their going
concern assessment.

ANNUAL REPORT AND ACCOUNTS 2021

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 2021 and of the group’s profit for the year then ended;–

We have reviewed the historical accuracy of budgeting and forecasts made by the Group andCompany as an indicator as to their reliability,–

the group financial statements have been properly prepared in accordance with UK adopted
international accounting standards in conformity with the requirements of the Companies
Act 2006;–

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.

–

the parent company financial statements have been properly prepared in accordance with
UK adopted international accounting standards in conformity with the requirements of theCompanies Act 2006 and as applied in accordance with the provisions of the Companies Act
2006; andBased on the work we have performed, we have not identified any material uncertainties relating toevents or conditions that, individually or collectively, may cast significant doubt on the group’s andparent company's ability to continue as a going concern for a period of at least twelve months fromwhen the financial statements are authorised for issue.

–

the financial statements have been prepared in accordance with the requirements of theCompanies 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 believe that theaudit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

KEYWORDS STUDIOS PLC

Independence
We are independent of the Group and Parent Company in accordance with the ethical requirementsthat are relevant to our audit of the financial statements in the UK, including the FRCs EthicalStandard as applied to listed entities, and we have fulfilled our other ethical responsibilities inaccordance with these requirements.

Our responsibilities and the responsibilities of the directors with respect to going concern are
described in the relevant sections of this report.
An overview of the scope of our audit
The Group has diverse international operations. Our audit was scoped by obtaining an understandingof the Group and its environment, including the group wide controls, and assessing the risks ofmaterial misstatement identified at group level. We also assessed the risk of management override ofinternal controls, including assessing whether there was evidence of bias by the Directors that may
have represented a risk of material misstatement.
Significant components

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, Studio Gobo
Limited, Electric Square Limited, Keywords Studios QC-Games Inc, Keywords France, Sperasoft Inc, D3T
Limited, Tantalus Media Pty Limited and Keywords Studios Italia S.R.L (formerly Binari Sonori S.R.L &Sillabit S.R.L).

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Specified audit procedures

1 Business Combinations

In addition, specific audit procedures have been completed in relation to certain material balances andtransaction streams in VMC Embedded Services, Keywords Canada Holdings Inc (formerly Volt Canada
Inc), Keywords Studios QC-Tech Inc (formerly Alchemic Dream Inc), High Voltage Software Inc, andKeywords Studios Japan.

Key Audit Matter

The above full scope and specified audit procedure entities represent 70% of group revenues.

Following the purchase price allocations (in which identifiable assets and liabilities assumed wererecognised at fair value), €325m (2020: €212m) 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 to fair value adjustments as part of the purchase price allocations of these businesscombinations. Accordingly, the cumulative acquisitions are material and significant judgement isrequired in relation to the purchase price allocations including the resulting goodwill.

Desktop review procedures have been performed on the remaining non-significant components in
the group.

KEYWORDS STUDIOS PLC

ANNUAL REPORT AND ACCOUNTS 2021

The Group auditor, BDO Dublin, has audited Keywords Studios plc, Keywords International Limited,
Studio Gobo Limited, Electric Square Limited and D3T Limited. Their involvement in the work
performed by other component auditors varies by location and involves, at a minimum, direction of
the audit procedures to be completed, and review of the reports received in relation to the results of
the audit work undertaken by component audit teams.
In the current year, as a result of the ongoing Covid 19 restrictions, the Senior Statutory auditor orsenior members of the Group audit team have completed their oversight and review work of otherlocations remotely.
Parent Company and consolidation

At the parent company level we have also tested the consolidation process and carried out additional
procedures to confirm our conclusion that there were no significant risks of material misstatementof the aggregated financial information of the remaining components not subject to full scope or
specific procedures.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in
our audit of the financial statements of the current period and include the most significant assessedrisks of material misstatement (whether or not due to fraud) we identified, including those which had
the greatest effect on: the overall audit strategy, the allocation of resources in the audit; and directing
the efforts of the engagement team. These matters were addressed in the context of our audit of thefinancial statements as a whole, and in forming our opinion thereon, and we do not provide a separate
opinion on these matters.

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.

Management determined the fair value of the identifiable assets and liabilities and notably the valueof 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 andcash payments at future dates, which add further complexity with regard to the acquisition-date fairvalue 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 inrelation to business combinations. In addition, detailed disclosures have been made in relation to thecurrent year business combinations in note 27 to the financial statements.
Audit Response

We have reviewed the underlying contracts and share purchase agreements relating to eachacquisition to assess whether the basis for treatment of the acquisitions is in accordance with theaccounting 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 havereviewed management’s assessments of the fair value of the assets and liabilities acquired, and inparticular, the methodology applied in the valuation of intangible assets and goodwill.
Our procedures included;–

We reviewed the methodology applied to identify the categories of intangible assets,–

We evaluated whether the cash flow forecasts used in the valuation are consistent withinformation approved by the Board and have reviewed the historical accuracy of management’s
forecasts in order to assess the reliance which can be placed upon management’s 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.

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In addition, we have examined the terms of all business combinations to assess whether the fair valueof any deferred / contingent consideration is treated appropriately in accordance with the groupaccounting policy and IFRS 3.
We also examined the key post combination employment contracts of former shareholders of theacquired entities, reviewing the substance 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.
2 Valuation of goodwill and intangible assets
Key Audit Matter

KEYWORDS STUDIOS PLC

ANNUAL REPORT AND ACCOUNTS 2021

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 €325m (2020: €212m), and intangibles carrying value of €29m (2020:€28.8m). The valuation of goodwill and other intangible assets is significant to our audit due to thefact that the impairment test calculations are based on several key assumptions which are estimatedby management, and are by nature judgemental. Key assumptions include the expected future cash
flows for the forecasting period, the discount rates and perpetual growth rate.
The Directors have concluded that there is one cash generating unit (“CGU”) in the group, for the
purposes of impairment assessment.
Related Disclosures

Refer to note 2 of the accompanying consolidated financial statements for the accounting policy inrelation 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 Director’s 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 stresstested all key assumptions used, and–We have considered the appropriateness of the disclosures relating to the valuation of goodwill
and intangible assets in the financial statements.

3 Revenue Recognition – cut off
Key Audit Matter

Although the majority of the Group’s revenue contracts are non complex in nature, there is a material
accrued revenue balance as at 31 December 2021 of €10m (2020: €9.2m). We focused on this area dueto the risk of management manipulation of the timing of revenue recognition and the cut off relating
to accrued revenue at the year end.
Related Disclosures

Refer to note 2 of the accompanying consolidated financial statements for the accounting policies of
the Group in relation to Revenue Recognition.
Audit Response

We have performed audit procedures to understand the application of the revenue recognition
accounting policies and to assess whether for each material revenue stream, that revenue has beenrecognised 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 a sample basis on less significant components of the group.
Our audit work included, but was not restricted to, reviewing a sample of transactions boththroughout 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 these transactions
to supporting documentation such as sales orders and contracts from customers, project statusevidence, and subsequent billing. When examining samples of transactions around the year end wehave assessed whether the revenue has been recognised in the correct period.
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 of identified 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 €4.4m, which represents
5% of adjusted profit before tax, 9% of profit before taxation, and represents less than 1% of equity.
We consider profit before income tax, and adjusted profit before tax, to be the most significant
determinant of the group’s financial performance used by shareholders and other users and therefore
consider this as an appropriate basis for materiality. Our materiality is higher than the level we set for
the year ended 31 December 2020 (€3m), 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 is an investment holding Company. However we capped this samelevel as the group materiality.

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Whilst materiality for the financial statements as a whole was €4.4m, each component of the group
was audited to a lower level of materiality within a range from €3.1m to €2.6m. Audits of thesecomponents were performed at a materiality level calculated by reference to a proportion of groupmateriality appropriate to the relative scale of the business concerned.

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; orWe 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 €220,000 (2020: €150,000). We also agreed toreport differences below this threshold that, in our view, warranted reporting on qualitative grounds.

–

the parent company financial statements are not in agreement with the accounting records
and returns; orOther information–

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.

ANNUAL REPORT AND ACCOUNTS 2021

The directors are responsible for the other information. The other information comprises theinformation 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 other information and, except
to the extent otherwise explicitly stated in our report, we do not express any form of assurance
conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the otherinformation and, in doing so, consider whether the other information is materially inconsistent withthe 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 to determine whether there is a material misstatement in the financial statements or amaterial misstatement of the other information. If, based on the work we have performed, we conclude
that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of the audit:–

the information given in the strategic report and the directors’ report for the financial year forwhich the financial statements are prepared is consistent with the financial statements; and–the strategic report and the directors’ report have been prepared in accordance with applicablelegal requirements.

KEYWORDS STUDIOS PLC

Matters on which we are required to report by exception
In the light of the knowledge and understanding of the group and the parent company and its
environment obtained in the course of the audit, we have not identified material misstatementsin the strategic report or the directors’ report.

Responsibilities of directors
As explained more fully in the directors’ responsibilities statement set out on page 88 the directors
are responsible for the preparation of the financial statements and for being satisfied that they givea 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 tofraud or error.
In preparing the financial statements, the directors are responsible for assessing the group’s and theparent company’s ability to continue as a going concern, disclosing, as applicable, matters related togoing concern and using the going concern basis of accounting unless the directors either intend toliquidate 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 reportthat includes our opinion. Reasonable assurance is a high level of assurance, but is not a guaranteethat 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 inaggregate, they could reasonably be expected to influence the economic decisions of users takenon the basis of these financial statements.
The objectives of our audit, in respect to fraud, are; to identify and assess the risks of material
misstatement of the financial statements due to fraud; to obtain sufficient appropriate audit
evidence regarding the assessed risks of material misstatement due to fraud, through designingand implementing appropriate responses; and to respond appropriately to fraud or suspected fraud
identified during the audit. However, the primary responsibility for the prevention and detection of
fraud rests with both those charged with governance of the entity and management.

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ANNUAL REPORT AND ACCOUNTS 2021

93

Our approach was as follows:–

We obtained an understanding of the legal and regulatory frameworks that are applicable to
the Group and Company. We determined that the most significant which are directly relevantto specific assertions in the financial statements are those related to the reporting framework(United Kingdom adopted International Accounting Standards and the Companies Act 2006).

–

We understood how the Group and Company are complying with those legal and regulatory
frameworks by making enquiries to management and those responsible for legal andcompliance procedures and the Company secretary. We corroborated our enquiries throughour review of board minutes.

–

We assessed the susceptibility of the Group and Company’s financial statements to material
misstatement, including how fraud might occur by meeting with management from various
parts of the business to understand where it is considered there was a susceptibility of fraud.
We considered the programs and controls that the Group and Company have established toaddress risks identified, or that otherwise prevent, deter and detect fraud; and how senior
management monitors those programs and controls. Where the risk was considered to behigher, we performed audit procedures to address each identified fraud risk. These procedures
included testing manual journals and were designed to provide reasonable assurance that thefinancial statements were free of fraud or error.

A further description of our responsibilities for the audit of the financial statements is located on the
Financial Reporting Council’s website at: https://www.frc.org.uk/auditors/audit-assurance/auditor-sresponsibilities-for-the-audit-of-the-fi/description-of-the-auditor%E2%80%99s-responsibilities-for.
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 ofPart 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to
the company’s members those matters we are required to state to them in an auditor’s report andfor 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, forthis report, or for the opinions we have formed.

S T E P H E N M C C A L L I O N ( S E N I O R S TAT U T O R Y A U D I T O R )F O R A N D O N B E H A L F O F B D O , S TAT U T O R Y A U D I T O R
DUBLIN 2, IRELAND

30 March 2022

OVERVIEW

S T R AT E G I C R E P O R T

GOVERNANCEF I N A N C I A L S TAT E M E N T S

S U P P L E M E N TA R Y I N F O R M AT I O N

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

94

Years ended 31 December
Note

Years ended 31 December
2020
€'000

2021
€ cent2020€ cent4

512,200

373,538

Basic earnings per ordinary share

8

45.16

30.32

Cost of sales

5(312,086)(231,766)

Diluted earnings per ordinary share

8

42.98

28.71

200,114141,772

Investment income

5

–

1,437

Share-based payments expense

23(16,394)(15,350)

Costs of acquisition and integration

5(7,972)(2,650)

Amortisation and impairment of intangible assets

11(13,688)(8,808)COVID-19 government subsidies claimed
Total of items excluded from adjusted profit measures

–

9,231

(38,054)(17,577)

Other administration expenses(111,695)(84,513)Administrative expenses(149,749)(102,090)

Operating profit

50,365

41,119Financing income

6

2,045

76

Financing cost

6

(4,427)(8,701)

47,98332,494(13,875)(11,027)

34,10821,46727(421)

Profit before taxation
Taxation

7

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

20

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

8,228(4,909)   Exchange gain/(loss) on translation of foreign operations

14,581(10,843)

Total comprehensive income/(expense)

56,944

5,294

34,17521,552

Profit/(loss) for the period attributable to:
KEYWORDS STUDIOS PLC

Earnings per share

Revenue from contracts with customers

Gross profit

ANNUAL REPORT AND ACCOUNTS 2021

2021
€'000

Owners of the parent
Non-controlling interest

(67)

(85)

34,10821,467

Owners of the parent

57,011

5,379

Non-controlling interest

(67)

(85)

56,944

5,294

Total comprehensive income/(expense) attributable to:

The notes from pages 98 to 125 form an integral part of these consolidated financial statements.
On behalf of the Board

BERTRAND BODSONDIRECTOR

30 March 2022

JON HAUCKDIRECTOROVERVIEW

S T R AT E G I C R E P O R T

GOVERNANCEF I N A N C I A L S TAT E M E N T S

S U P P L E M E N TA R Y I N F O R M AT I O N

CONSOLIDATED STATEMENT OF FINANCIAL POSITION95

At 31 December

At 31 December

Note

2021
€’000

2020
€’000

Intangible assets

11353,943

240,810

Share capital

22

904

879

Right of use assets

12

35,99127,807

Share capital – to be issued

22

2,185

13,047

Property, plant and equipment

13

36,01826,419

Share premium

22

38,54922,951

Deferred tax assets

21

21,468

14,649Merger reserve22273,677

250,276

Investments

14

12,821(9,988)175–

447,595

309,685

ANNUAL REPORT AND ACCOUNTS 2021

Cash and cash equivalents

KEYWORDS STUDIOS PLC

Foreign exchange reserve
Shares held in Employee Benefit Trust (“EBT”)
Share-based payment reserve

Current assets
105,710103,070

Trade receivables

15

68,067

47,832Other receivables

16

49,11038,665

6,764–

229,651

189,567

11,122

8,170

108,423

62,958

Corporation tax recoverable

Current liabilities
Trade payables
Other payables

17

Loans and borrowings

18

Corporation tax liabilities
19

Net current assets/(liabilities)

81

73

12,635

12,568

11,217

7,361

143,478

91,13086,17398,437

Non-current liabilities
Other payables

17

18,254

1,994

Employee defined benefit plans

20

3,088

2,693

Loans and borrowings

18

48

122

Deferred tax liabilities

21

13,840

10,575

Lease liabilities

19

Net assets

2021
€’000

2020
€’000

EquityNon-current assets

Lease liabilities

Note

26,41821,50361,64836,887472,120

371,235

Retained earnings

Non-controlling interest
Total equity

22(1,997)(1,997)48,19331,79997,90564,318472,237

371,285

(117)

(50)

472,120

371,235

The notes from pages 98 to 125 form an integral part of these consolidated financial statements.
The financial statements were approved and authorised for issue by the Board on 30 March 2022.
On behalf of the Board

BERTRAND BODSONDIRECTOR

30 March 2022

JON HAUCKDIRECTOROVERVIEW

S T R AT E G I C R E P O R T

GOVERNANCEF I N A N C I A L S TAT E M E N T S

S U P P L E M E N TA R Y I N F O R M AT I O N

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

96
At 01 January 2020

Share capital€’000

Share capital–
to be issued
€’000

Share
premium€’000

Mergerreserve€’000

Foreignexchangereserve€’000

Shares held
in EBT€’000

Share-based
payments reserve€’000

Retainedearnings€’000

Total attributableto ownersof parent€’000

Non-controllinginterest
€’000

Total
equity€’000

222,958

780

5,310

20,718132,712

5,764(1,997)

16,44943,187

222,923

35

Profit/(loss) for the period

–

–

–

–

–

–

–

21,552

21,552(85)

21,467

Other comprehensive income

–

–

–

–

(15,752)

–

–

(421)

(16,173)–(16,173)

Total comprehensive income for the period

–

–

–

–

(15,752)––

21,131

5,379

(85)

5,294

KEYWORDS STUDIOS PLC

ANNUAL REPORT AND ACCOUNTS 2021

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

77

–

–

109,372

–

–

–

–

109,449–

109,449

Share-based payments 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

371,235879

13,047

22,951

250,276(9,988)(1,997)31,79964,318371,285(50)

Profit/(loss) for the period

–

–

–

–

–

–

–

34,17534,175(67)

34,108Other comprehensive income

–

–

–

–

22,809––27

22,836–

22,836

Total comprehensive income for the period

–

–

–

–

22,809––34,20257,011(67)

56,944

Share-based payments expense

–

–

–

–

–

–

16,394–

16,394–

16,394

Share options exercised

11

–

4,929

–

–

–

–

–

4,940

–

4,940

Employee Share Purchase Plan

–

–

398

–

–

–

–

–

398

–

398

Dividends

–

–

–

–

–

–

–

(615)

(615)

–

(615)
22,824Contributions by and contributions to the owners:

Acquisition-related issuance of shares

14(10,862)

10,271

23,401––––

22,824–Contributions by and contributions to the owners

25(10,862)

15,59823,401––

16,394(615)

43,941–

43,941

At 31 December 2021

904

2,185

38,549273,677

12,821(1,997)48,19397,905472,237(117)

472,120

OVERVIEW

S T R AT E G I C R E P O R T

GOVERNANCEF I N A N C I A L S TAT E M E N T S

S U P P L E M E N TA R Y I N F O R M AT I O N

CONSOLIDATED STATEMENT OF CASH FLOWS

97

Years ended 31 December
Note

Years ended 31 December

2021
€’000

2020
€’000

34,10821,467

Profit after taxation

ANNUAL REPORT AND ACCOUNTS 2021

Income and expenses not affecting operating cash flows

2020
€’000

Repayment of loans

18

(80)

(64,030)

Drawdown of loans

18

–

4,500

(9,953)(8,170)

(985)

(843)

8,983

Payments of principal on lease liabilities

10,473

8,402

Interest paid on principal of lease liabilities

13,6888,808

Dividends paid

13,875

11,027

Shares issued for cash

23

16,394

15,350Interest paid

(1,753)

(879)

5

5,567

(66)

Net cash generated by/(used in) financing activities(8,048)42,27612–

434

Increase/(decrease) in cash and cash equivalents(381)

64,669

6

1,882

132

Exchange gain/(loss) on cash and cash equivalents

3,021(3,426)

6

985

843

Cash and cash equivalents at beginning of the period

103,070

41,827

Cash and cash equivalents at end of the period

105,710103,070

Depreciation – property, plant and equipment

13

Depreciation – right of use assets

12

Amortisation and impairment of intangible assets

11

Taxation

7

Share-based payments expense
Fair value adjustments to contingent consideration
Fair value adjustments to right of use assets
Unwinding of discounted liabilities – deferred consideration
Unwinding of discounted liabilities – lease liabilities

11,661

Interest receivable

6

(62)

(76)

Fair value adjustments to employee defined benefit plans

20

419

354

Interest expense

6

1,040

1,071

Unrealised foreign exchange (gain)/loss

583

1,874

76,505

57,136(4,255)

Changes in operating assets and liabilities
Decrease/(increase) in trade receivables(15,117)

Decrease/(increase) in MMTC and VGTR receivable(4,502)555

Decrease/(increase) in other receivables

3,341(3,902)(Decrease)/increase in accruals, trade and other payables

20,158

9,878

3,880

2,276

Taxation paid

(23,948)(4,459)Net cash generated by/(used in) operating activities

90,54576,420(37,447)

Cash flows from investing activities
KEYWORDS STUDIOS PLC

2021
€’000

Cash flows from financing activities

Cash flows from operating activities

Current year acquisition of subsidiaries net of cash acquired

27(48,697)

Settlement of deferred liabilities on acquisitions

17(14,393)(2,489)Acquisition of property, plant and equipment

13(19,360)(13,908)

Investment in intangible assets

11

(315)

(259)

Other investment

(175)

–

Interest received

62

76(82,878)(54,027)

Net cash generated by/(used in) investing activities

Note

6

22

(615)

–

5,338

111,698

OVERVIEW

S T R AT E G I C R E P O R T

GOVERNANCEF I N A N C I A L S TAT E M E N T S

S U P P L E M E N TA R Y I N F O R M AT I O NNOTES FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS

98

1 Basis of Preparation

New Standards, Interpretations and Amendments effective 01 January 2021

Keywords Studios plc (the “Company”) is a company incorporated in the United Kingdom. The
consolidated financial statements include the financial statements of the Company and its subsidiaries(the “Group”) made up to 31 December 2021.

A number of new amendments and interpretations to accounting standards are effective from
01 January 2021, including:

The consolidated financial statements have been prepared in accordance with UK-adopted
international accounting standards, and in conformity with the requirements of the Companies
Act 2006.

– Interest Rate Benchmark Reform – further amendments to IFRS 9, IAS 39 and IFRS 7.

Unless otherwise stated, the financial statements have been prepared in thousands (’000) and thefinancial statements are presented in euro (€) which is the functional currency of the Group.
Going Concern Basis of Accounting

KEYWORDS STUDIOS PLC

ANNUAL REPORT AND ACCOUNTS 2021

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 haveconsidered the uncertain nature of the Ukrainian crisis and the COVID-19 pandemic, but have noted:– COVID-19-Related Rent Concessions – further amendment to IFRS 16;

These amendments and interpretations have not resulted in any Group accounting policy changes,
and have not had a material effect on the Group’s financial statements.
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 toadopt early.
The following amendments are effective for the period beginning 01 January 2022:– The net cash position of the Group;– Onerous Contracts – Cost of Fulfilling a Contract – amendments to IAS 37;– The strong cash flow performance of the Group through the year;– Property, Plant and Equipment: Proceeds before Intended Use – amendments to IAS 16;– The continued demand for the Group’s services;– Annual Improvements to IFRS Standards 2018–2020 – amendments to IFRS 1, IFRS 9, IFRS 16 andIAS 41; and– The ability to operate most of its services in a work from home model where studios aretemporarily 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 €105.6m
as at 31 December 2021, and committed undrawn facilities of €150m under the Revolving Credit
Facility (“RCF”).
The Directors have applied downside sensitivities to the Group’s cash flow projections to evaluate theGroup’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 and a worst case scenario of withdrawing
from the Group’s operations in Russia. Under this severe case, the Group would have sufficientliquidity 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 for the foreseeable future, a period considered to be at least twelve months from thedate of these financial statements and therefore the going concern basis of preparation continues tobe appropriate.

– References to Conceptual Framework – amendments to IFRS 3.
The Group does not expect these amendments or any other standards issued by the IASB, but not
yet effective, to have a material impact on the Group.
2 Significant Accounting Policies
Basis of Consolidation

Where the Company has control over an investee, it is classified as a subsidiary. The Company
controls an investee if all three of the following elements are present: power over the investee,
exposure to variable returns from the investee, and the ability of the investor to use its power toaffect 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 defacto control exists, the Company considers all relevant facts and circumstances, 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.

OVERVIEW

S T R AT E G I C R E P O R T

GOVERNANCEF I N A N C I A L S TAT E M E N T S

S U P P L E M E N TA R Y I N F O R M AT I O NNOTES FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

99

2 Significant Accounting Policies continued

Goodwill

The consolidated financial statements present the results of the Company and its subsidiaries (“theGroup”) as if they formed a single entity. Intercompany transactions and balances between Group
companies are eliminated in full.

Goodwill represents the excess of the cost of a business combination over the total acquisition datefair 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 fair value of the existing equity interest in the acquiree. Contingent consideration is includedat fair value on the acquisition date and, in the case of contingent consideration classified as afinancial liability, re-measured subsequently through the profit and loss. Acquisition-related costs arerecognised 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 of comprehensive income.

KEYWORDS STUDIOS PLC

ANNUAL REPORT AND ACCOUNTS 2021

Business Combinations

The consolidated financial statements incorporate the results of business combinations using thepurchase method. The results of acquired operations are included in the consolidated financial
statements from the date on which control is obtained. They are consolidated until the date on which
control ceases. In the Consolidated statement of financial position, the acquired identifiable assets,
liabilities and contingent liabilities are initially recognised at their fair values at the acquisition date.
If the initial accounting for a business combination is incomplete by the end of the reporting period
in which the combination occurs, the Group reports provisional amounts for the items for which
the valuation of the fair value of assets and liabilities acquired is still in progress. Those provisionalamounts are adjusted when additional information is obtained about facts and circumstances which
would have affected the amounts recognised as of that date, and any adjustments to the provisional
values allocated to the consideration, identifiable assets or liabilities (and contingent liabilities, if
relevant) are made within the measurement period, a period of no more than one year from theacquisition date.
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 ofcontingent consideration at acquisition date is arrived at through discounting the expected payment(based on scenario modelling) to present value. In general, in order for contingent consideration to
become payable, pre-defined profit and/or revenue targets must be exceeded. At each balance sheet
date, the fair value of the contingent consideration is revalued, with the expected pay-out determined
separately in respect of each individual acquisition and any change recognised in the statement ofcomprehensive income.
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,
the deferred consideration is classified as an equity arrangement and the value of the shares is fixedat 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 dateand is split between current liabilities and non-current liabilities depending on when it is due.
Intangible Assets

The Group’s Intangible Assets comprise Goodwill, Customer Relationships and Other Intangible Assets.

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 isdetermined by discounting the expected future cash flows generated from the net margin of thebusiness from the main customers taken on at acquisition. The assets are amortised on a straightline basis (to administration expenses) over their useful economic lives (typically five years is deemed
appropriate, however, this is re-examined for each acquisition).
Other Intangible Assets

Other intangible assets include Intellectual Property and Music Licences, both acquired and internallydeveloped. Other intangible assets are recognised as assets where it is probable that the use of theasset will generate future economic benefits and where the costs of the asset can be determinedreliably. Other intangible assets that are acquired by the Group are stated at cost less accumulated
amortization (see below) and impairment losses, if any. Subsequent expenditures on capitalised
intangible assets are capitalised only when they increase the future economic benefits embodied in
the specific assets to which they relate. All other expenditure is expensed as incurred. Other intangible
assets with definite useful lives are amortised from the date they are available for use on a straightline basis over their useful lives, being the estimated period over which the Group will use the assets.
Residual amounts, useful lives and the amortization methods are reviewed at the end of every
accounting period.
Development costs are capitalised as an intangible asset if all of the following criteria are met:
– The technical feasibility of completing the intangible asset so that it will be available for use or sale;– The intention to complete the intangible asset and use or sell it;– The ability to use or sell the intangible asset;– The asset will generate probable future economic benefits and demonstrate the existence of amarket or the usefulness of the intangible asset if it is to be used internally;– The availability of adequate technical, financial and other resources to complete the development
and to use or sell it; and– The ability to measure reliably the expenditure attributable to the intangible asset during
its development.

OVERVIEW

S T R AT E G I C R E P O R T

GOVERNANCEF I N A N C I A L S TAT E M E N T S

S U P P L E M E N TA R Y I N F O R M AT I O NNOTES FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

100

2 Significant Accounting Policies continued

Foreign Currency

Following initial recognition of the development expenditure as an intangible asset, the cost model isapplied requiring the intangible asset to be carried at cost, less any accumulated amortization andaccumulated impairment losses. The intangible asset is amortised on a straight-line basis over theperiod 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 assessedby comparing its carrying amount with its recoverable amount. The recoverable amount is the higherof the fair value net of disposal costs and the value in use.

The consolidated financial statements are presented in euro, which is the presentation currency of theGroup and the functional currency of the Parent Company.

Impairment

ANNUAL REPORT AND ACCOUNTS 2021

Impairment tests on goodwill and other intangible assets with indefinite useful economic lives areundertaken 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 berecoverable. Where the carrying value of an asset exceeds its recoverable amount (i.e. the higher ofvalue in use and fair 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 group of assets to which it belongs for which there are separately
identifiable cash flows; its cash generating units (“CGUs”). Goodwill is allocated on initial recognition toeach 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 theGroup 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 orloss, except to the extent they reverse gains previously recognised in other comprehensive income.
An impairment loss recognised for goodwill is not reversed.
Investments

Investments are held at cost where the Group does not have control and is not able to exercise
significant influence over the investee.
Cash and Cash Equivalents

KEYWORDS STUDIOS PLC

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.

Transactions entered into by Group entities in a currency other than the currency of the primaryeconomic environment in which they operate (their “functional currency”) are recorded at the rates
ruling when the transactions occur. Foreign currency monetary assets and liabilities 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 approximatingwhen 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 results ofoverseas 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 statementson the translation of long-term items forming part of the Group’s net investment in the overseas
operation concerned are classified to other comprehensive income and accumulated in the foreignexchange 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 ofdisposal are transferred to the consolidated statement of comprehensive income as part of the profit
or loss on disposal.
Revenue from Contracts with Customers

Contracts are typically for services, performing agreed-upon tasks for a customer and can be timeand-materials or milestone based. Most contracts are short term in duration (generally less than one
month); however, milestone based contracts can be longer term and extend to several months (orin some cases over a year). Where there are multiple performance obligations outlined in a contract,each performance obligation is separately assessed, the transaction price is allocated to eachobligation, 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 specificagreed-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 processof milestone acceptance by the customer. Such criteria may involve qualitative, as well as quantitative
measures and judgements.

OVERVIEW

S T R AT E G I C R E P O R T

GOVERNANCEF I N A N C I A L S TAT E M E N T S

S U P P L E M E N TA R Y I N F O R M AT I O NNOTES FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDKEYWORDS STUDIOS PLC

ANNUAL REPORT AND ACCOUNTS 2021

101

2 Significant Accounting Policies continued
In measuring progress towards complete satisfaction of performance obligations, the input method
is considered to be the most appropriate method to depict the underlying nature of the contracts
with customers, the interactive way the service is delivered and projects are managed with thecustomer. 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 completionetc. Added to this, significant judgement can be involved in measuring progress towards customer
acceptance of the milestone. Significant judgement may also be involved where circumstancesarise that may change the original estimates of revenues, costs or extent of progress towards
complete satisfaction of the performance obligations. In such circumstances estimates are revised.
These revisions may result in increases or decreases in revenue or costs and are reflected in incomein the period in which the circumstances that give rise to the revision became known. When theoutcome of a contract cannot be measured reliably, contract revenue is recognised only to the extent
that 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 eliminating intercompany sales. Revenue is recognised only where it is probablethat consideration will be received. Where consideration is received and the related revenue has notbeen 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 eight main service groupings:– Art Creation – Art Creation services relate to the production of graphical art assets for inclusionin the video game, including concept art creation along with 2D and 3D art asset production andanimation. Contracts can be either time-and-materials based or milestone based, with performanceobligations satisfied over time. Contracts are generally short term in duration; however, for longer
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.
– Marketing – Marketing services include game trailers, marketing art and materials, PR and full brandcampaign strategies. Contracts can be either time-and-materials based or milestone based, withperformance obligations satisfied over time. Contracts are generally short term in duration; however,for longer contracts the input method is used to measure progress. Time-and-materials based
contract revenue is 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 progresscannot be measured reliably, revenue is recognised on milestone acceptance.

– Game Development – Game Development relates to software engineering services which areintegrated with client processes to develop video games. Contracts can be either time-andmaterials 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 performance obligation, revenue is recognised using
the input method to measure progress. Where progress cannot be measured reliably, revenue isrecognised 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 term in duration; however, for longer contracts where
progress towards complete satisfaction of the performance obligation can be measured reliably,revenue is recognised using the input method to measure progress. Where progress cannot bemeasured reliably, audio services revenue is recognised on milestone acceptance. Music licensing
and music soundtracks performance obligations are assessed separately, and related revenue isrecognised on licence inception and on delivery of the soundtracks, respectively.
– Functional Testing – Functional Testing relates to quality assurance services provided to gameproducers 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.
Revenue is recognised as the related services are rendered.
– Localization – Localization services relate to translation and cultural adaptation of in-game text
and audio scripts across multiple game platforms and genres. Contracts are typically time-andmaterials based and performance obligations are satisfied over time. Contracts are generally shortterm 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.
– Localization Testing – Localization Testing involves testing the linguistic correctness andcultural acceptability of computer games. Contracts are typically time-and-materials based andperformance obligations are satisfied over time. Contracts are generally short term in duration.
Revenue is recognised as the related services are rendered.
– Player Support – Player Support relates to the live operations support services such as community
management, player support and associated services provided to producers of games to ensurethat consumers have a positive user experience. Contracts are typically time-and-materials based
and performance obligations are satisfied over time. Contracts are generally long term in duration.
Revenue is recognised as the related services are rendered.

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2 Significant Accounting Policies continued

LTIP

Multimedia Tax Credits/Video Game Tax Relief

The exercise of LTIP awards is subject to the Company’s share price (stock symbol: KWS) performanceversus the designated Share Index in terms of shareholder return over a three-year period. For theawards granted up to 2015, one-third of the share options vested if the Company exceeded the Total
Shareholder Returns (“TSR”) of the Numis Small Cap Index (excluding Investment Trusts) by 10%, twothirds 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 the Index, to 100% if the
TSR exceeds the Index by 45%. The scheme was further amended in 2018 to 100% vesting if the TSR
exceeds the Index by 20%, and a pro-rated return between 10% and 100% if the TSR exceeds theIndex 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. In 2021, the benchmark
Index was amended to be the FTSE250 Index (excluding investment trusts) and threshold vesting(25% of the award) will be earned for TSR in line with the Index and full vesting will be earned forexceeding the Index TSR by 20% over the performance period. A pro-rated return will be earned
between 25% and 100% if the TSR exceeds the Index by between 0% and 20%.

The multimedia tax credits (“MMTC”) received in Canada and video games tax relief (“VGTR”) in the UK
are tax credits 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 is intended 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 thatthey 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 attaching conditions have been
complied with.
Share-based Payments

ANNUAL REPORT AND ACCOUNTS 2021

The Company issues equity-settled share-based payments to certain employees and Directors undera share options plan and a Long-Term Incentive Plan (“LTIP”). In 2022, a number of Executive Directors
also received conditional awards under the rules of the LTIP Plan (“Salary Shares”).
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 the impact is recognised
in profit or loss, with a corresponding adjustment to equity reserves. The Company has no legal orconstructive obligation to repurchase or settle the options in cash.
Additional employer costs, including social security taxes, in respect of options and awards are
expensed over the vesting period with a corresponding liability recognised. The liability recognised
depends on the number of options that are expected to be exercised, and the liability is adjusted byreference to the fair value of the options at the end of each reporting period.
Where share-based payments are issued to employees of subsidiary companies, the annual cost of
the options are recharged to the subsidiary company through an inter-company recharge.
Employee Share Purchase Plan

In 2021, the Group introduced an Employee Share Purchase Plan (“ESPP”). The ESPP allows individual
employees the possibility to save up to €500 monthly and acquire KWS shares discounted by 10% on
the market price at the date of purchase. The plan has bi-annual purchase periods, with share-based
benefits expensed within the period.

KEYWORDS STUDIOS PLC

Share Option Plan

These are measured at fair value on the grant date using a Black-Scholes option pricing model whichcalculates the fair value of an option by using the vesting period, the expected volatility of the shareprice, the current share price, the exercise price and the risk-free interest rate. The fair value of theoption 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 iscontinuous service. There is no requirement to revalue the option at any subsequent date.

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.
Salary Shares

Salary shares are measured at fair value on the grant date. As the only vesting condition iscontinuous service, the fair value of the shares is amortised over the vesting period.
Dividend Distribution

Final dividends are recorded in the Group’s financial statements in the period in which they areapproved by the Group’s shareholders. Interim dividends are recognised when paid.
Income Taxes and Deferred Taxation

Provision for income taxes is calculated in accordance with the tax legislations and applicable tax rates
in force at the reporting date in the countries in which the Group companies have been incorporated.
Deferred tax assets and liabilities are recognised where the carrying amount of an asset or liability
in the consolidated statement of financial position differs from its tax base, except for differences
arising on:– The initial recognition of 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 thetiming of the reversal of the difference and it is probable that the difference will not reverse in theforeseeable 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).

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2 Significant Accounting Policies continued

Trade Receivables

Deferred tax assets and liabilities are offset when the Group has a legally enforceable right to offset
current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by thesame tax authority on either:

Trade receivables, which principally represent amounts due from customers, are recognised atamortised 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.

– 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 whichsignificant amounts of deferred tax assets or liabilities are expected to be settled or recovered.
Government Subsidies

Government subsidies are recognised at their fair value when there is a reasonable assurance thatthe subsidy will be received and all attaching conditions have been complied with. Subsidies arerecognised in the period the subsidy is designated to compensate.

ANNUAL REPORT AND ACCOUNTS 2021

Property, Plant and Equipment

Property, plant and equipment comprise computers, leasehold improvements, and office furniture andequipment, and are stated at cost less 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 areincluded in the Consolidated statement of comprehensive income.

KEYWORDS STUDIOS PLC

Financial Assets

The Group’s most significant financial assets comprise trade and other receivables and cash andcash equivalents in the Consolidated statement of financial position, whereas the Company’s mostsignificant financial assets comprise inter-group receivables.

Cash and Cash Equivalents

Cash and cash equivalents comprise cash in hand, deposits held on call with banks and other shortterm highly liquid investments. Where cash is on deposit with maturity dates greater than threemonths, 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 expected credit losses in relation to such
assets, as their maturities are less than twelve months. Based upon the recoverability of contract
assets at year end, no significant expected credit loss provision has been applied.
Share Capital

Financial instruments issued by the Group are treated as equity only to the extent that they
do not meet the definition of a financial liability. The Group’s ordinary shares are classified as
equity instruments.
Financial Liabilities

Contingent consideration is initially recognised at fair value and subsequently re-measured throughthe profit and loss. Trade payables, bank borrowings and other monetary liabilities are initiallyrecognised at fair value and subsequently carried at amortised cost using the effective interest
rate method.
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 time in exchange for consideration’.
At lease commencement date, the Group recognises a right of use asset and a lease liability on thebalance sheet. The right of use asset is measured at cost, which is made up of the initial measurementof the lease liability, any initial direct costs incurred by the Group, an estimate of any costs todismantle and remove the asset at the end of the lease, and any lease payments made in advanceof the lease commencement 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 the useful 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 at that date, discounted using the interest rate implicit in the lease if that rate isreadily available or at the Group’s incremental borrowing rate.

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2 Significant Accounting Policies continued
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 bepayable under a residual value guarantee, and payments arising from 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 toin-substance fixed payments. When the lease liability is remeasured, the corresponding adjustment isreflected in the right of use asset, or profit and loss if the right of use asset is already reduced to zero.

KEYWORDS STUDIOS PLC

ANNUAL REPORT AND ACCOUNTS 2021

The Group has elected to account for short-term leases and leases of low-value assets using thepractical expedients. Instead of recognising a right of use asset and lease liability, the payments
in relation to these are recognised as an expense in profit or loss on a straight-line basis over thelease 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 the lease 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.
3 Critical Accounting Estimates and Judgements
The Group makes certain estimates and assumptions regarding the future. Estimates andjudgements are continually evaluated based on historical experience and other factors, including
expectations of future events that are believed to be reasonable under the circumstances. In the
future, actual experience may differ from these estimates and assumptions.
Judgements

The judgements, apart from those involving estimations, that management have made in the processof 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 thecurrency that most faithfully represents the economic effects of the underlying transactions, eventsand conditions to determine the Group’s functional currency. Detailed consideration has been given toboth 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 with financing the business and the currency in which receipts from operating activities areusually retained. With a mix of currencies dominating the indicators, there is no clear single currency
that influences the Group; however, the euro remains marginally the most dominant when all factors
are considered. Therefore, the Directors consider the euro as the currency that most faithfully
represents the economic effects of the underlying transactions, events and conditions.
– Business Combinations (Customer relationships): When acquiring a business, the Groupis required to identify and recognise intangible assets, the determination of which requires asignificant 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 periodof three years. For the Game 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 fixed term contract based rather than relationship based. Therefore,
neither customer contracts nor customer relationships are typically recognised on the acquisitionof 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 discount lease liabilities. The Group has applied judgement todetermine 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 thelease term, which significantly affects the lease liabilities and right of use assets recognised.
– Business Combinations (Put and call options over Non-controlling interest): The Groupacquired an 85% interest in Tantalus in March 2021, with the sellers retaining a minority
shareholding. The shareholder agreement (signed with the purchase agreement) includes put
and call options (“the Forward”) that require the sellers to sell, or require the Group to buy, theremaining 15% shareholding in three years using a pre-determined valuation methodology
linked to post-acquisition performance. IFRS 3 does not provide specific guidance on how suchcontracts should be accounted for in a business combination. The Board determined, taking into
consideration all the contracts’ terms and conditions, that the impact of the Forward put the Groupin a similar position as if the Group had acquired a 100% interest in the subsidiary on the acquisitiondate, with deferred contingent consideration payable at a future date. In doing so, the Board
considered whether the risks and rewards of ownership reside with the Non-controlling interestor had effectively transferred to the Group, and concluded that the Non-controlling interest arisingon the acquisition had been extinguished by a combination of the Forward and other conditions in
the agreements. Therefore, the Group has accounted for the acquisition as if a 100% interest was
acquired on acquisition, accounting for the initial investment and the Forward as a single linked
transaction in which 100% control is gained, with the Forward recognised at fair value, as a financial
liability within Deferred and contingent consideration (note 17), and no Non-controlling interest
recognised on the acquisition. Any subsequent re-measurement required due to changes in the fairvalue of the liability will be recognised in the Consolidated statement of comprehensive income.

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3 Critical Accounting Estimates and Judgements continued

For many contracts, operations are completed across multiple sites. Analysis of revenues bygeographical regions is presented by producing location, which may not reflect the jurisdiction fromwhich the final invoice to the client is raised, or the region of the Group’s customers, whose locations
are worldwide.

Estimates and Assumptions

The Group makes certain estimates and assumptions regarding the future. Estimates andjudgements are continually evaluated based on historical experience and other factors, including
expectations of future events that are believed to be reasonable under the circumstances. In the
future, actual experience may differ from these estimates and assumptions.

Geographical analysis of revenues, by producing location *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 valueof goodwill and intangible assets arising on acquisitions, the valuation of multimedia tax credits/
video game tax relief, leasing and the valuation of defined retirement benefits. The Directors consider
that no reasonably possible changes to any of the assumptions used in the estimates would in theview of the Directors give rise to significant risk of a material adjustment to the carrying value of theassociated balances in the subsequent financial year.

ANNUAL REPORT AND ACCOUNTS 2021

2020
€’000

Canada97,74888,713

United States

96,06050,504

United Kingdom

94,426

58,645

Italy

32,44825,210Russia29,42427,987

Japan

21,89820,944

Poland21,397

12,121

Revenue from Contracts with Customers

China

20,35018,429

Revenue recognised in the reporting period arises from contracts with customers, and is
predominantly recognised over time. There were no significant amounts of revenue recognised in thereporting 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.

India

18,64011,369Ireland13,94812,291

Philippines

13,461

12,021

Spain

10,331

7,642

France

8,436

7,771

Singapore

7,856

6,798

4 Revenue from Contracts with Customers and Segmental Analysis

KEYWORDS STUDIOS PLC

2021
€’000

Revenue by line of business

2021
€’000

2020
€’000

Art Creation*

49,32638,903Marketing*

46,183

18,421

Game Development

138,852

80,017

Audio

61,333

47,232Functional Testing

92,68678,479Localization

50,79145,357

Localization Testing

27,091

23,323Player Support

45,93841,806512,200

373,538*	The prior year comparatives have been re-classified to separately report Marketing services, previously reported within the
Art Creation service line.

Australia

7,408

–

Other

18,36913,093512,200

373,538*	The prior year comparatives have been re-classified from billing entity location to producing entity location to align to thecurrent year presentation, as the Directors consider this measure to be more meaningful.

No single customer accounted for more than 10% of the Group’s revenue in either year presented.

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4 Revenue from Contracts with Customers and Segmental Analysis continued
Geographical analysis of non-current assets from continuing businesses *Revenue Expected to be Recognised

For Game Development, games are developed to an agreed specification and time schedule, andoften have delivery schedules and/or milestones that extend well into the future. The following areGame Development revenues expected to be recognised for contracts with a schedule of work that
extends beyond one year, representing the aggregate amount of the transaction price allocatedto the performance obligations that are unsatisfied (or partially unsatisfied) as at the end of thereporting period:

Total undelivered€’000

Scheduledcompletion within
1 year€’000

Scheduledcompletion
1–2 years€’000

Scheduledcompletion
2–5 years€’000

At 31 December 2021

55,29444,973

9,319

1,002

At 31 December 2020

13,53812,991547–

KEYWORDS STUDIOS PLC

ANNUAL REPORT AND ACCOUNTS 2021

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 forGame 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 reviews the performance of the Group by reference to Group-wide profit measuresand the revenues derived from seven main service groupings.
There is no allocation of operating expenses, profit measures, assets and liabilities to individual
product groupings. Accordingly, the disclosures above are provided on a Group-wide basis.
Activities are reported in a manner consistent with the internal reporting provided to the chief
operating decision-maker. The chief operating decision-maker has been identified as the executive
management team made up of the Chief Executive Officer and the Chief Financial Officer.

2021
€’000

2020
€’000

United States

171,126

133,026

United Kingdom

114,871

58,414Australia

45,528–Canada31,09627,882

Italy

15,612

13,928

Switzerland

10,025

10,117

France

7,548

7,302

China

8,296

7,492

Ireland

8,422

22,860Germany

5,336

5,391

Spain

4,988

5,502

Japan

6,955

6,359

India

4,001

2,379

Romania

2,763–

Poland

3,275

1,839

Mexico

2,452

1,958

Other

5,301

5,236

447,595

309,685*	The prior year comparatives have been re-classified to align to the current year presentation, as the Directors consider thismeasure to be more meaningful.

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5 Cost of Sales and Operating Profit
Investment income

KEYWORDS STUDIOS PLC

ANNUAL REPORT AND ACCOUNTS 2021

Cost of sales

2021
€’000

2020
€’000

Operating expenses

320,159

238,664

Multimedia tax credits/video game tax relief(20,966)(15,593)

Other direct costs

12,893

8,695

312,086

231,766

Operating profit is stated after charging/(crediting):

2021
€’000

2020
€’000

Depreciation – property, plant and equipment

11,661

8,983

Gain on disposal of investment

10,473

8,402

13,688

8,808

Costs of acquisition and integration

7,972

2,650

Auditor’s remuneration

605

553

Short-term leases

1,531

1,747

Investment income–(1,437)

Costs of acquisition and integration

2021
€’000

2020
€’000

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

1,099

307

191

743

Fair value adjustments to contingent consideration (note 17)

5,567

(66)

Foreign exchange loss

Deferred consideration related to continuing employment

454

649

Acquisition team and related costs

313

247

Other re-organisation and restructuring costs

Auditor’s remuneration

–

434

348

336

7,972

2,650

2021
€’000

2020
€’000

Audit services:
Parent company and Group audit

314

290

Subsidiary companies audit

278

250

Non-audit services:
Audit-related assurance services

13

13

605

553

–

(1,437)–(1,437)

6 Financing Income and Cost

Amortisation of intangible assets

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

2020
€’000

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 2020, and will become entitled to receive further
consideration of up to USD$450K over the period 2022 through 2025, subject to earnout targets
being met.

Depreciation – right of use assets

Acquisition and integrations costs re: prior acquisitions

2021
€’000

2021
€’000

2020
€’000

62

76

Financing income
Interest received
Foreign exchange gain

1,983

–

2,045

76

Financing cost
Bank charges

(520)

(552)

Interest expense(1,040)(1,071)

Unwinding of discounted liabilities – lease liabilities

(985)

(843)

Unwinding of discounted liabilities – deferred consideration(1,882)(132)–(6,103)(4,427)(8,701)(2,382)(8,625)

2021
€’000

2020
€’000

Income tax on profits of subsidiaries

17,632

13,899Deferred tax (note 21)(3,757)(2,872)

13,875

11,027

Net financing income/(cost)

7 Taxation

Current income tax

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GOVERNANCEF I N A N C I A L S TAT E M E N T S

S U P P L E M E N TA R Y I N F O R M AT I O NNOTES FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

108

7 Taxation continued

8 Earnings per Share

The tax charge for the year can be reconciled to accounting profit as follows:
2021
€’000

Profit before tax

47,983

Tax charge based on the Effective tax rate*

10,527

8,071

Income tax prior year (over)/under provision(261)(1,302)

ANNUAL REPORT AND ACCOUNTS 2021

Deferred tax prior year (over)/under provision and impact of change in tax rates

KEYWORDS STUDIOS PLC

2020
€’000

32,494148402

Items disallowed for tax purposes

3,430

3,846

Exempt and non-taxable income

(174)

258

Tax incentives

(951)

(892)

Current year tax losses utilised

(363)

(3)

Current year tax losses where deferred tax has not been provided

204

477

State and other direct taxes

658

548

Other differences – net

657

(378)

13,875

11,027

Total tax charge* Effective tax rate – being the statutory tax rate relative to the profit before tax ineach jurisdiction

21.9%

24.8%

The Group’s subsidiaries are located in different jurisdictions and are taxed on their residual profit inthose 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

2021
€’000

2020
€’000

8,228

(4,909)Tax (expense)/benefit(1,029)614

Net of tax amount

7,199(4,295)

Actuarial gain/(loss) on defined benefit plans

27

(421)

Tax (expense)/benefit––

Net of tax amount

27

(421)

14,581(10,843)

Tax (expense)/benefit
Net of tax amount2020€ cent

Basic

45.16

30.32

Diluted

42.98

28.71

Earnings

Profit for the period from continuing operations

Weighted average number of equity shares––

14,581(10,843)

€’000

€’000

34,10821,467

NumberNumberBasic (i)75,526,296

70,800,455

Diluting impact of share options (ii)

3,826,990

3,959,878

Diluted (i)79,353,286

74,760,333(i) Includes (weighted average) shares to be issued:

NumberNumber219,146

242,077(ii) Contingently issuable ordinary shares have been excluded where the conditions governing exercisability have not beensatisfied:LTIPs

Exchange gain/(loss) in net investments foreign operations

Exchange gain/(loss) on translation of foreign operations

2021€ centShare options

NumberNumber903,656–––

903,656–

Details of the number of share options outstanding at the year-end are set out in note 23.
9 Dividends
Dividends paid

InterimIn respect ofApproval date€ cent per
share

Pence STG
per share

Total dividend€’000

Payment date2021

Sep-21

0.81

0.70

615

Oct-21

0.81

0.70

615

Dividends paid to shareholders 2021

Recommended

Final

In respect ofApproval date

Expected€ cent per
share

Pence STG
per share

Expected
total dividend€’000

Expected
payment
date

2021

Mar-22

1.72

1.45

1,299

Jul-22OVERVIEW

S T R AT E G I C R E P O R T

GOVERNANCEF I N A N C I A L S TAT E M E N T S

S U P P L E M E N TA R Y I N F O R M AT I O NNOTES FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

109

9 Dividends continued
At 31 December 2021, Retained earnings available for distribution (being Retained earnings plus
Share-based payments reserve) in the Company were €47.7m (2020: €25.5m). In addition, certain
amounts within Merger reserve are considered distributable (see note 22).

ANNUAL REPORT AND ACCOUNTS 2021

Goodwill€’000

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

Total*€’000

175,639

37,6203,527

216,786

47,112

17,673–64,785

–

–

259

259

In light of COVID-19, the Directors did not recommend any dividend payments for 2020. Dividend
payments were resumed in 2021, and the Directors do not foresee any impediment in continuing
to implement the dividend policy of the Group moving forward.

Cost

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.

AdditionsExchange rate movement(10,587)(2,870)13(13,444)

10 Staff Costs

At 31 December 2020

212,164

52,423

3,799

268,386

Recognition on acquisition of subsidiaries

97,918

11,502–

109,420

–

–

315

315

At 01 January 2020
Recognition on acquisition of subsidiaries

2021
€’000

2020
€’000

Salaries and related costs

263,036

198,064

Exchange rate movement

14,9554,400–

19,355Social welfare costs

30,455

21,623

At 31 December 2021

325,037

68,325

4,114

397,476

Pension costs

6,685

5,212

Accumulated amortisation

16,394

15,350

At 01 January 2020–

20,018–20,018316,570

240,249

Amortisation charge

–

6,421

327

6,748

Impairment charge

147

–

1,913

2,060

Total staff costs (including Directors)

KEYWORDS STUDIOS PLC

11 Intangible Assets

Share-based payments expense

Average number of employees

Operations
General and administration

Additions

2021

2020

Exchange rate movement–(1,261)11(1,250)

8,821

7,768

At 31 December 2020

147

25,1782,251

27,576

672

585

Amortisation charge–

13,261427

13,688

9,493

8,353

Exchange rate movement

–

2,269

–

2,269

147

40,7082,678

43,533

At 01 January 2021

212,017

27,245

1,548

240,810

At 31 December 2021

324,890

27,617

1,436

353,943

At 31 December 2021
Key management compensation

2021
€’000

2020
€’000

Salaries and related costs

1,569

1,188

Social welfare costs

201

366

Pension costs

25

45

Share-based payments expense

698

1,604

2,493

3,203

The key management compensation comprises compensation to eleven Directors of Keywords
Studios plc during the year (2020: seven). For more information, please refer to the Director’s
remuneration report on page 69.

Net book value*	Please note: fully depreciated Music licences have been removed from the prior year comparatives.

Customer relationships and intellectual property/development costs are amortised on a straightline basis over five years. Customer relationships amortisation commences on acquisition, whereas
intellectual property/development costs amortisation commences when the product is launched.

OVERVIEW

S T R AT E G I C R E P O R T

GOVERNANCEF I N A N C I A L S TAT E M E N T S

S U P P L E M E N TA R Y I N F O R M AT I O NNOTES FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

110

11 Intangible Assets continued

12 Right of Use Assets

Impairment tests for goodwill

The Group has entered into leases, across the business, principally relating to property.
These property leases have varying terms and renewal rights.

The Group assesses the carrying value of goodwill each year on the basis of budget projections forthe coming year extrapolated using a one to five year growth rate and a terminal value calculatedusing a long-term growth rate projection. The discount rate used of 12.5% (2020: 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 has excluded the impact of short-term market volatility on thesecalculations in determining the Group WACC.
Key assumptions

KEYWORDS STUDIOS PLC

ANNUAL REPORT AND ACCOUNTS 2021

ActualSensitivity analysis

2021

2020

2021

2020

2021

2020

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)

792

532

947

636

673

452

Carrying value – goodwill (€m)

325

212

The value in use calculations were consistently calculated year over year, with no significant changes
in the assumptions made. The result of the value in use calculations was that no impairment
is required in this period. The Directors consider that no reasonably probable change in theassumptions would result in an impairment.

2021
€’000

2020
€’000

At 01 January

44,092

29,384

Additions

15,392

15,035

Recognition on acquisition of subsidiaries

1,402

2,376

Exchange rate movement

2,954(2,703)

At 31 December

63,84044,092

Cost

Accumulated depreciation
At 01 January

16,285

7,915

Depreciation charge

10,473

8,402

Impairment charge–

434

Exchange rate movement

1,091

(466)

At 31 December

27,84916,285Net book value

Specific impairment reviews

At 01 January

27,807

21,469In the prior year, due to the uncertainty caused by COVID-19, an impairment charge of €2,060k wasrecognised, related to intangible assets in certain early technology pre-revenue businesses, fully
impairing their carrying value.

At 31 December

35,99127,807OVERVIEW

S T R AT E G I C R E P O R T

GOVERNANCEF I N A N C I A L S TAT E M E N T S

S U P P L E M E N TA R Y I N F O R M AT I O NNOTES FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

111

15 Trade Receivables

13 Property, Plant and Equipment
Computers andsoftware€’000

Office furniture andequipment€’000

Leaseholdimprovements
€’000

Total
€’000

Cost
At 01 January 2020

24,843

6,747

11,161

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

Additions

8,338

541

5,029

13,908

523

125

197

845

ANNUAL REPORT AND ACCOUNTS 2021

Acquisitions through business combinations atfair value

42,751

Disposals(2,440)

(352)

(136)

(2,928)At 31 December 2020

29,206

6,906

14,91251,024

Exchange rate movement

2,877

783

1,289

4,949

Additions

13,492

1,444

4,424

19,360Acquisitions through business combinations atfair value
Disposals
At 31 December 2021

304

266

2

572

(2,830)(185)(5,699)(8,714)

2020
€’000

Trade receivables

69,83549,814

Provision for bad debts (note 24)(1,768)(1,982)Financial asset held at amortised cost

68,067

47,832Current

2021
€’000

2020
€’000

Accrued income from contracts with customers

9,997

9,202

Prepayments

7,114

4,608

Trade receivables arise from revenues derived from contracts with customers.
16 Other Receivables

Rent deposits and other receivables

4,203

4,816

Multimedia tax credits/video games tax relief

22,86016,668Tax and social security

4,936

3,371

49,11038,66543,0499,214

14,92867,191

At 01 January 2020

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

Accrued income from contracts with customers represent mainly contract assets in process andrelated items. The movement in the year comprises transfers in and out as items are accrued andsubsequently invoiced to customers, with no significant amounts written off or impaired in the period,or no significant amounts recognised on the acquisition of subsidiaries.

Disposals(2,440)

(352)

(136)

(2,928)17 Other Payables

At 31 December 2020

16,886

3,302

4,417

24,605

Exchange rate movement

2,342

603

676

3,621

Accumulated depreciation

2021
€’000

2020
€’000

31,086

Current liabilities

Depreciation charge

8,170

590

2,901

11,661

Disposals(2,830)(185)(5,699)(8,714)

Accrued expenses

53,526

At 31 December 2021

24,568

4,310

2,295

31,173

Payroll taxes

2,666

2,563

Deferred and contingent consideration (i)35,88818,808Net book value
KEYWORDS STUDIOS PLC

2021
€’000

At 01 January 2021

12,3203,604

10,495

26,419At 31 December 2021

18,481

4,904

12,63336,01816,343

10,501

108,423

62,95818,254

1,994

18,254

1,994

Non-current liabilities

14 Investments

Investments

Other payables (ii)Deferred and contingent consideration (i)
2021
€’000

2020
€’000

175

–

The Group (via Keywords Ventures Limited) has made modest investments in businesses developing
innovative technologies and services that will benefit its clients, while further accelerating the successof investee companies through access to its global platform and relationships.

OVERVIEW

S T R AT E G I C R E P O R T

GOVERNANCEF I N A N C I A L S TAT E M E N T S

S U P P L E M E N TA R Y I N F O R M AT I O NNOTES FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

112

17 Other Payables continued(i) The movement in deferred and contingent consideration during the financial year was as follows:
2021
€’000

Carrying amount at the beginning of the year

20,802

6,035

Consideration settled by cash

(14,393)(2,489)Consideration settled by shares(2,838)(3,321)

Unwinding of discount (note 6)

1,882

132

Additional liabilities from current year acquisitions (note 27)

40,05921,131

Adjustment arising from prior year business combinations

5,567

–

–

(66)

Fair value adjustments

ANNUAL REPORT AND ACCOUNTS 2021

2020
€’000

Exchange rate movement

3,063

(620)

Carrying amount at the end of the year

54,14220,802

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 fromsources that are not widely available to the public and involves a degree of judgement (Level 3 input
in the fair value hierarchy). A 10% increase in expected performance would increase the carrying valueof contingent consideration by €1.7m, while a 10% reduction in expected performance would decrease
the carrying value by €6.3m. On an undiscounted basis, the Group may be liable for deferred andcontingent consideration ranging from €0.2m to a maximum of €61.2m.
(ii) Other payables includes deferred income from contracts with customers of €3,470k (2020: €2,967k),
which mainly comprise items invoiced prior to services being delivered. The movement in the year
comprises transfers in and out as items are deferred and subsequently recognised as revenue.
18 Loans and Borrowings
Maturity analysis of Loans and borrowings

2021
€’000

2020
€’000

Under the previous RCF, security was granted over the major subsidiaries of the Group. As part ofputting the new unsecured RCF in place, all security arrangements relating to the previous revolving
credit facility have now been released.
In connection with the financial covenants of both the new and previous RCF, the Group are required
to comply with and report certain interest cover and leverage ratios. Non-compliance with RCF terms
could result in lenders refusing to advance funds under the facility or, in the worst case, calling inoutstanding loans. Throughout the period, the Group operated well within the applicable ratio termsof both the new and previous RCF agreements.
While technically any borrowings are repaid and re-borrowed multiple times during the term of the
RCF, so long as the Group remains compliant with the financial covenants and certain other terms of
the RCF, any debt is rolled from one period to another, with the legal and commercial substance of amulti-year committed facility. Hence the Group presents any RCF liabilities as non-current.
The movements in Loans and borrowings are as follows:

At 01 January 2020

Current€’000

Non-current
€’000

Total
€’000

80

59,67159,751

Cash flows:
Drawdowns

–

4,500

4,500

Repayments–(64,030)(64,030)

Non-cash flows:

Current

Exchange rate movement

(7)

(19)

(26)

Expiry within 1 year

At 31 December 2020

73

122

195

–

(80)

(80)

–

–

Cash flows:

Non-current
KEYWORDS STUDIOS PLC

In December 2021 the Company put a new unsecured revolving credit facility (“RCF”) in place witha syndicate of four lenders, which replaced its previous €100m secured revolving credit facility.
The new RCF is a committed facility that allows financing of up to €150m, which may be drawn downin euro, sterling, US dollars or Canadian dollars, with an option (subject to lender consent), to increase
the facility by up to €50m to a total of €200m, at interest rates based on a margin over currency
benchmark rates, plus a separate margin charged for the unutilised facility. The new RCF extends
to December 2024, with an option to extend the term by two further one-year periods.

Expiry between 1 and 2 years
Expiry over 2 years–

Repayments

129

195

Non-cash flows:

129

195

Exchange rate movement

8

6

14

129

195

At 31 December 2021

81

48

129

–

–

129

195

129

195

–

Currency denomination

Euro
Canadian dollars

Following the share placing in May 2020, the balance of the previous 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 calculated using the effective interest method are disclosed in note 6.

OVERVIEW

S T R AT E G I C R E P O R T

GOVERNANCEF I N A N C I A L S TAT E M E N T S

S U P P L E M E N TA R Y I N F O R M AT I O NNOTES FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

113

19 Lease Liabilities
Lease payments not recognised as a liability

The Group has entered into leases, across the business, principally relating to property. These
property leases have varying terms and renewal rights. Management applies judgement indetermining whether it is reasonably certain that a renewal or termination option will be exercised.

Not later than one year

ANNUAL REPORT AND ACCOUNTS 2021
KEYWORDS STUDIOS PLC

2021
€’000

2020
€’000

Carrying amount at the beginning of the year

28,864

21,907

Recognition on acquisition of subsidiaries (note 27)

1,402

2,376

Liabilities recognised on new leases in the period

15,392

15,035

Unwinding of discounted liabilities – lease liabilities

985

843

Payment of principal and interest on lease liabilities(10,938)(9,013)

Exchange rate movement

1,930(2,284)

Carrying amount at the end of the year

37,63528,864The value of leases not yet commenced to which the lessee is committed, which are not included inlease liabilities at 31 December 2021, was €nil (2020: €10.3m).

516

991

Later than one year and not later than five years––

Later than five years

–

–

516

991

The effect of variable lease payments and re-instatement costs on future cash outflows arising fromleases is not material for the Group.
20 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 salaryand length of service ("Indemnité de Fin de Carrière" or "IFC"), entitling the Group’s French employees
to benefits of up to two months' salary per year of service.
In Italy, on leaving employment, each employee is entitled to 1/13.5 of their final salary for each yearof service ("Trattamento di Fine Rapporto" or "TFR").

2021
€’000

2021
€’000

2021
€’000

2020
€’000

2020
€’000

2020
€’000

Lease
payments

FinancechargesLeaseliabilities

Lease
payments

FinancechargesLeaseliabilities

12,059842

11,217

8,291

930

7,361

Current
Not later than one year

2020
€’000

The future minimum lease payments related to these leases

The movement in lease liabilities during the financial year was as follows:

Maturity analysis of lease liabilities

2021
€’000

In India, in compliance with statutory requirements, employees with over five years' service
are entitled to 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:

Non-current
Later than one year andnot later than five years

21,2991,488

19,811

18,715

1,013

17,702Later than five years

7,000

393

6,607

5,307

1,506

3,801

28,2991,881

26,41824,0222,519

21,503

Opening liabilities at 01 January

At 31 December

40,3582,723

37,63532,3133,449

28,864Service cost
Interest cost33

30

Benefits paid

(141)

(110)

Actuarial (gain)/loss

(27)

421

Exchange rate movement

111

(51)

3,088

2,693

The Group has elected not to recognise a lease liability for short-term leases (leases with an expected
term of twelve months or less) or for leases 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:

Closing liabilities at 31 December
Lease payments not recognised as a liability

2021
€’000

2020
€’000

Short-term leases

1,531

1,747

Leases of low value assets

–

–

1,531

1,747

2021
€’000

2020
€’000

2,693

2,049

419

354

OVERVIEW

S T R AT E G I C R E P O R T

GOVERNANCEF I N A N C I A L S TAT E M E N T S

S U P P L E M E N TA R Y I N F O R M AT I O NNOTES FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

114

20 Employee Defined Benefit Plans continued– Certain inputs were estimated by management, including:

The Directors have considered the key specific risk factors which the Group faces due to theemployee defined benefit plans which are in place. Having fully considered all specific elements ofthese plans, the Directors believe that the key issues faced are as follows:– Employee attrition rates, estimated based on company experience in each jurisdiction.

– The plan is currently 100% unfunded, there are no specific assets to meet the future liabilities as
they fall due; as such, there will be a cash flow impact as the liabilities must be met with current
working capital as they fall due.
The Group has taken no specific actions to mitigate 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 causedby any of these factors. A maturity profile of the obligation is not presented as the liability is not
significant in the context of the Group, and due to the age profile of employees a significant outlay
is not anticipated for the foreseeable future.

KEYWORDS STUDIOS PLC

ANNUAL REPORT AND ACCOUNTS 2021

In 2022, the Group expects the costs of the employee defined benefit plan to be in line with current
year levels, as staff levels are not anticipated to change significantly in the period.

– In Italy, TFR rules allow for early drawdown of benefits in certain circumstances. Such advanceswere estimated on the basis of company experience.
Economic and financial assumptions

2021

2020

Staff salary increase rate

4.07%

3.63%

Inflation rate

3.04%

2.93%

Discount rate

1.67%

1.23%

Key statistics

2021

2020

Staff (number)

874

782

Average age (years)

31

31

Average service (years)

44Interest rate sensitivities

2021
€’000

2020
€’000

The actuarial valuation is based on the Projected Unit Credit Method, in line with IAS 19.
Cost for year

2021
€’000

2020
€’000

Service cost

419

354

Interest cost

33

30

Actuarial (gain)/loss

(27)

421

425

805

(0.25)%

3,176

2,842

0.25%

2,880

2,568

Mortality rate sensitivities

2021
€’000

2020
€’000

(0.025)%

3,018

2,696

0.025%

3,015

2,693
2020
€’000

2021
€’000

2020
€’000

Change due to experience41

98

Staff turnover rate sensitivities

2021
€’000

Change due to demographical assumptions

(9)

(93)

(0.50)%

3,049

2,726

0.50%

2,985

2,664

Staff salary increase rate sensitivities

2021
€’000

2020
€’000

(0.50)%

2,976

2,703

0.50%

3,072

2,745

Actuarial (gain)/loss

Change due to financial assumptions

(59)

416

(27)

421

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 thegovernment statistics offices in each jurisdiction.
– Disability, retirement age and other relevant demographic assumptions were taken from relevant
life assurance statistics.

OVERVIEW

S T R AT E G I C R E P O R T

GOVERNANCEF I N A N C I A L S TAT E M E N T S

S U P P L E M E N TA R Y I N F O R M AT I O NNOTES FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

115

21 Deferred Tax

22 Shareholders’ Equity

Details of the deferred tax assets and liabilities, and amounts recognised in the Consolidated
statement of comprehensive income are as follows:

Share Capital

2021 €’000

AssetsLiabilities

Net(Credited)/chargedto incomestatement

Defined benefit termination payments

328

–

328

(259)

Available losses

1,817

–

1,817

(660)

Rent-free period provisions

222

–

222

(147)

Fixed asset tax base versus accounting book value

1,818

1,702

116

(217)

–

3,570

(3,570)1,464

Deferred tax arising on items deductible on a paid basis

5,557

1,761

3,796

(1,857)

ANNUAL REPORT AND ACCOUNTS 2021

Deferred tax related to tax credits

Per share €At 01 January 2020

Number ofordinary£0.01 shares– to be issued

Sharecapital
€’000

Share
capital – tobe issued
€’000

Share
premium€’000

Mergerreserve€’000

65,212,515

349,721

780

5,310

20,718132,712749

Acquisition-related
issuance of shares:
Sunny Side Up

06-Jan-20

12.46

60,179(60,179)

1

(750)

–

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

20.23

–

19,739

–

399

–

–
3,319

25-Jun-20

Recognition on acquisition of subsidiaries

2,539

3,006

(467)

–

Studio Gobo andElectric Square

19-Aug-20

16.72

198,576

–

2

–

–

Deferred tax arising on intangibles

9,187

3,801

5,386

(2,345)Maverick Media

26-Aug-20

24.63

–

13,579

–

334

–

–

Net tax assets/liabilities

21,468

13,8407,628(4,021)TV+SYNCHRON

05-Oct-20

13.12

68,608(68,608)

1

(900)

–

899

Impact of change in tax rates

189

G-Net Media

24-Nov-20

23.26

–

130,448

–

3,034

–

–

Prior year (over)/under provision

75

Ichi

02-Dec-20

15.95

55,612(55,612)

1

(886)

–

886

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

–

–

109,372

Total (credited)/charged to income statement(3,757)2020 €’000

Defined benefit termination payments
Available losses

AssetsLiabilities

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
KEYWORDS STUDIOS PLC

Issue date

Number ofordinary£0.01 shares

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)

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

289
(18)
(2,872)The deferred tax asset not recognised on available losses at the period end is €3.2m (2020: €3.2m).

Acquisition-related
issuance of shares
Share placing
Exercise of shareoptions
At 31 December 2020

0.96

1,448,364

–

16

–

2,233

–

74,079,243

532,985879

13,047

22,951

250,276OVERVIEW

S T R AT E G I C R E P O R T

GOVERNANCEF I N A N C I A L S TAT E M E N T S

S U P P L E M E N TA R Y I N F O R M AT I O NNOTES FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

116

22 Shareholders’ Equity continued

Issue date

Per share €Number ofordinary£0.01 shares

Number ofordinary£0.01 shares– to be issued

Sharecapital
€’000

Share
capital – tobe issued
€’000

Share
premium€’000

Mergerreserve€’000

ANNUAL REPORT AND ACCOUNTS 2021

Acquisition-related
issuance of shares:
High Voltage Software

12-Jan-21

26.06

307,597(307,597)

4(8,017)–

8,013

Heavy Iron

12-Jan-21

31.84

–

12,914

–

411

–

–

a) Up to 3,723,243 shares in respect of the Company’s Long Term Incentive Plan and Share Option Plan
(5% of the Company’s issued share capital as at 8 April 2021); andTantalus

18-Mar-21

27.87

–

368,750–

10,275––b) Otherwise, up to 24,796,802 shares (33.3% of the Company’s issued share capital as at 8 April 2021).

Tantalus

15-Apr-21

27.87

368,750(368,750)

4(10,275)

10,271–

Climax Studios

21-Apr-21

33.53

–

232,517

–

7,797

–

–
7,794

This authority is considered prudent as it gives the Company flexibility to take advantage of possible
opportunities which may arise from time to time. The authority granted at the 2021 AGM will expire on
the earlier of (i) fifteen months after 26 May 2021; and (ii) the conclusion of the 2022 AGM.

Climax Studios

17-May-21

33.53

232,517(232,517)

3(7,797)–Ichi

28-May-21

15.94

14,635(14,635)

–

(233)

–

233

Coconut Lizard

25-Jun-21

18.24

19,739(19,739)

–

(399)

–

399

Kantan02-Jul-21

15.86

12,614(12,614)

–

(200)

–

200

Kantan related
adjustment

02-Jul-21

15.86

–

(2,683)

–

–

–

–

AMC

11-Aug-21

33.49

–

25,080

–

840

–

–

Maverick Media

27-Aug-21

25.35

36,211(13,579)

–

(334)

–

918

Coconut Lizard

07-Sep-21

28.44

7,962

–

–

–

–

227

130,410(130,410)

2(3,034)–

3,032

G-Net Media

06-Dec-21

23.26

G-Net Media related
adjustment

06-Dec-21

23.26

–

(38)

–

(1)

–

–

Waste

16-Dec-21

30.78

–

20,585

–

634

–

–

Indigo Pearl

22-Dec-21

26.27

20,125(20,125)

–

(529)

–

528

High Voltage Software

24-Dec-21

29.77

69,130

–

1

–

–

2,057

1,219,690(462,841)

14(10,862)

10,271

23,401

13,982

–

–

–

398

–

Acquisition-related
issuance of shares
Employee Share
Purchase PlanKEYWORDS STUDIOS PLC

Subject to applicable law, the Company’s articles of association and any relevant authority of theCompany passed by the shareholders in general 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 onsuch shares. In the context of the Company’s general meeting authorities, at the Company’s AGM on
26 May 2021 its shareholders gave the Directors the authority to allot the following number of shares(or grant rights to subscribe for, or convert any security into, shares) in the capital of the Company:

Exercise of shareoptions
At 31 December 2021

962,860

–

11

–

4,929

–

76,275,775

70,144904

2,185

38,549273,677

Shares to be issued are valued at the share price at the date of acquisition, and are recorded inaccordance with IAS 32.16.
Shares held in the Employee Benefit Trust (“EBT”)
2021

Ordinary shares held in the EBT

2020

Shares€’000

Shares€’000

335,425

1,997

335,425

1,997

OVERVIEW

S T R AT E G I C R E P O R T

GOVERNANCEF I N A N C I A L S TAT E M E N T S

S U P P L E M E N TA R Y I N F O R M AT I O NNOTES FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDKEYWORDS STUDIOS PLC

ANNUAL REPORT AND ACCOUNTS 2021

117

22 Shareholders’ Equity continued

23 Share Incentive Schemes

Reserves
The following describes the nature and purpose of each reserve within owners’ equity:

In July 2013, at the time of the IPO, a Share Option Scheme and a Long-Term Incentive Plan (“LTIP”)
was put in place, while in 2021, the Group introduced an Employee Share Purchase Plan. The charge
in relation to these arrangements is as follows:

Reserve

Description and purpose

Retained earnings

Cumulative net gains and losses recognised in the Consolidated Statementof 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 excessof their nominal value, net of share issuance costs.

Share-based payments reserve

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

Shares to be issued

For deferred consideration which is to be provided for by the issue of a fixed numberof shares at a future defined date, where there is no obligation on Keywords to offer
a variable number of shares, the deferred consideration is classified as an Equity
Arrangement and the value of the shares is fixed at the date of the acquisition.

Merger reserve

The merger reserve was initially created following the Group reconstruction,
when Keywords Studios plc acquired the Keywords International Limited groupof companies.
When the Group uses Keywords Studios plc shares as consideration for theacquisition of an entity and has secured at least a 90% equity holding in theacquisition, the value of the shares in excess of the nominal value (net of shareissuance costs) is also recorded within this reserve, in line with S612 of theCompanies Act 2006.
Within Merger reserve are balances related to the share premium on the shareplacements in 2015 and 2020, of €14.4m and €109.5m respectively, both completed
via a cash box structure, with the Company acquiring the net proceeds via a sharefor share exchange. In both cases, the share premium on the issuance of new shares
was credited to Merger reserve (in accordance with S610 of the Companies Act
2006). At the time of the placements, the proceeds were not allocated to a specificacquisition or specific purpose, and thus, amounts totalling €123.9m included in the
Merger reserve are considered distributable.

2021
€’000

2020
€’000

Share option scheme expense

3,446

2,576

LTIP option expense

12,904

12,774

Employee Share Purchase Plan

44–

Share-based payments expense

16,394

15,350Of the total Share-based payments expense, €698k relates to Directors of the Company (2020: €1,007k).
Share Option Scheme

Share options are granted to Executive Directors and to permanent employees. The exercise price ofthe granted options is equal to the market price of the shares at the time of the award of the options.
The Company has no legal or constructive obligation to repurchase or settle the options in cash.
Movements in the number of share options outstanding and their related weighted average exercise
prices are as follows:
2021
Average exercise
price in £ per share

Outstanding at the beginning of the period

12.66

Granted2020

Number of options

Average exercise
price in £ per share

Number of options

2,345,238

9.97

2,148,102

25.48

616,000

15.93

822,000

Lapsed18.96(163,791)

15.64(179,151)

Exercised

11.46(373,879)

4.55(445,713)

Outstanding at the end of the period

15.68

2,423,568

12.66

2,345,238

Exercisable at the end of the period

6.74

668,734

4.39

638,238

Weighted average share price at date of exercise

27.42

17.91

OVERVIEW

S T R AT E G I C R E P O R T

GOVERNANCEF I N A N C I A L S TAT E M E N T S

S U P P L E M E N TA R Y I N F O R M AT I O NNOTES FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDKEYWORDS STUDIOS PLC

ANNUAL REPORT AND ACCOUNTS 2021

118

23 Share Incentive Schemes continued

Long-term Incentive Plan Scheme

Summary by year
Year of Option

2015

2016

2017

2018

2019

2020

2021

Exercise price

£1.58

£2.54

£7.76

£17.10£15.88£15.93£25.48

Outstanding at
the beginningof the period

Total

LTIP share awards are subject to KWS performance versus the designated share index over athree‑year period.
Movements in the number of share options outstanding and their related weighted average exercise
prices are as follows:

458,613

34,296

127,034

374,982

588,000

762,313–

2,345,238

Granted

–

–

–

–

–

–

616,000

616,000

Lapsed

–

–

(500)

(11,000)(37,000)(64,291)(51,000)(163,791)

Exercised(73,318)(13,719)(69,534)(119,058)(98,250)––(373,879)

Outstanding at theend of the period

385,295

20,57757,000244,924452,750

698,022565,000

2,423,568

2021

2020

Average exercise
price in £ per share

Number of options

Average exercise
price in £ per share

Outstanding at the beginning of the period

0.01

3,692,817

0.01

3,445,868

Granted0.01

932,656

0.01

1,428,000

Lapsed0.01(312,006)

0.01(178,400)

Exercised

0.01(608,569)

0.01(1,002,651)

Number of options

Exercisable at
31 December 2021

385,295

20,57757,000111,590

93,750522–

668,734

Outstanding at the end of the period

0.01

3,704,898

0.01

3,692,817

Exercisable 2022

–

–

–

133,334

179,500

232,500–

545,334

Exercisable at the end of the period

0.01

559,506

0.01

373,648

Exercisable 2023

–

–

–

–

179,500

232,500

188,333

600,333

Weighted average share price at date of exercise

27.62

Exercisable 2024

–

–

–

–

–

232,500

188,333

420,833

Exercisable 2025

–

–

–

–

–

–

188,334

188,334

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

Weighted average
share price (£)
Weighted average
exercise price (£)
Fair value atmeasurement
date (€)

2015

2016

2017

2018

2019

2020

2021

£1.64

£2.54

£7.75

£17.22£16.09£16.00£26.42

£1.58

€0.56

£2.54

€0.40

£7.76

€1.13

£17.10€3.79£15.88€5.72£15.93€6.06

Weighted
average£25.4817.34

Summary by year
Year of Option

2015

2016

2017

2018

2019

2020

2021

Exercise price

£0.01

£0.01

£0.01

£0.01

£0.01

£0.01

£0.01

Outstanding at
the beginningof the period

Total

47,358132,293

196,030

799,000

1,133,936

1,384,200–

Granted

–

–

–

–

–

–

932,656

3,692,817
932,656

Lapsed

–––(6,606)(115,400)(161,000)(29,000)(312,006)

Exercised(8,358)(46,405)(90,994)(462,812)–––(608,569)€9.32

Outstanding at theend of the period

39,00085,888105,036

329,582

1,018,536

1,223,200

903,656

3,704,898

39,00085,888105,036

329,582–––559,506

–

–

–

–

1,018,536––

1,018,536

Average expectedlife

4 Years

4 Years

4 Years

4 Years

4 Years

4 Years

4 Years

Exercisable at
31 December 2021

Expected volatility

28.03%

27.17%

24.79%

35.87%

45.23%

50.15%

47.70%

Exercisable 2022

Risk-free rates

0.90%

0.58%

0.16%

0.89%

0.81%

0.07%

0.15%

Average expected
dividend yield

0.75%

0.55%

0.21%

0.10%

0.10%

0.10%

0.10%

Weighted averageremaining life of
options in months

–

–

–

5

17

29

41

22

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.

Exercisable 2023

–

–

–

–

–

1,223,200–

1,223,200

Exercisable 2024

–

–

–

–

–

–

903,656

903,656OVERVIEW

S T R AT E G I C R E P O R T

GOVERNANCEF I N A N C I A L S TAT E M E N T S

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119

23 Share Incentive Schemes continued

24 Financial Instruments and Risk Management

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

Interest Rate Risk

KEYWORDS STUDIOS PLC

ANNUAL REPORT AND ACCOUNTS 2021

Year of Option

2015

2016

2017

2018

2019

2020

2021

Weighted average
share price (£)

£1.60

£2.56

£7.75

£17.24£16.05£16.00£26.42

Weighted average
exercise price (£)

£0.01

£0.01

£0.01

£0.01

£0.01

£0.01

£0.01

Fair value atmeasurement
date (€)

€1.38

€1.74

€4.96

€11.83€13.98€13.28€16.73

Average expectedlife

3 Years

3 Years

3 Years

3 Years

3 Years

3 Years

3 Years

Expected volatility

28.21%

27.11%

24.79%

35.87%

45.26%

50.15%

47.70%

Risk-free rates

0.88%

0.54%

0.16%

0.89%

0.81%

0.07%

0.13%

–

–

–

–

5

17

29

Weighted averageremaining life of
options in months

Weighted
average

Interest rate risk is the risk that the value of financial instruments will fluctuate due to changes inmarket interest rates. The Group’s income and operating cash flows are substantially independentof changes in market interest rates. The management monitors interest rate fluctuations on acontinuous 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 similarlevels 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
2021
€’000

1%
Weakening
2021
€’000

1%
Strengthening
2020
€’000

1%
Weakening
2020
€’000

–

–

(290)

257

14

Credit Risk

Expected volatility was determined by reference to KWS share price volatility. The expected life
used in the model has been adjusted based on management’s best estimate, for the effects of nontransferability, 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.
Salary Shares

In 2021, a total of 26,738 Salary Shares were granted to a number of Executive Directors under the
LTIP plan, with 2,462 shares vesting two years after the grant date, and 24,276 shares vesting three
years after the grant date. The average fair value of the shares at the grant date was €32.08.

The Group’s main financial assets are cash and cash equivalents, as well as trade and otherreceivables 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 theamount of future cash inflows from financial assets on hand at the reporting date. Credit risk arising in
the context of the Group’s operations is not significant with the total bad debt provision at the balance
sheet date amounting to 2.5% of net trade receivables (2020: 4%). Customer credit risk is managedat appropriate Group locations according to established policies, procedures and controls. Customer
credit quality is assessed and credit limits are established where appropriate. Outstanding customer
balances are regularly monitored and a review for indicators of impairment (evidence of financial
difficulty of the customer, payment default, breach of contract etc.) is carried out at each reporting
date. Significant balances are reviewed individually while smaller balances are grouped and assessedcollectively. Receivables balances are unsecured and non-interest-bearing. The trade receivables
balances disclosed comprise a large number of customers spread across the Group’s activities
and geographies with balances classified as “Not past due” representing 77.5% of the total tradereceivables balance at the balance sheet date (2020: 79%). Trade and other receivables are carried on
the Consolidated statement of financial position net of bad debt provisions.

OVERVIEW

S T R AT E G I C R E P O R T

GOVERNANCEF I N A N C I A L S TAT E M E N T S

S U P P L E M E N TA R Y I N F O R M AT I O NNOTES FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

120

24 Financial Instruments and Risk Management continued

Currency Risk

The ageing of trade receivables can be analysed as follows:

Currency risk is the risk that the value of financial instruments will fluctuate due to changes in foreignexchange rates. The foreign exchange risk arises for the Group where assets and liabilities arise in acurrency other than the functional currency of the entity.

Total
€’000

Not past due€’000

1–2 months
past due€’000

More than 2 months
past due€’000

At 31 December 2021

68,06752,753

14,192

1,122

At 31 December 2020

47,83237,936

7,678

2,218

KEYWORDS STUDIOS PLC

ANNUAL REPORT AND ACCOUNTS 2021

A provision for doubtful debtors is included within trade receivables and can be reconciled as follows:
2021
€’000

2020
€’000

Provision at the beginning of the year

1,982

1,283

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

821

1,293

Foreign exchange movement in the year

63

(284)

Utilised(1,098)(310)

Provision at the end of the year

1,768

1,982

Trade receivables loss allowance is estimated using a practical expedient to arrive at lifetime expectedcredit losses. Overdue receivables are evaluated to calculate an expected credit loss using a historicalcredit loss experience of 1.0% (2020: 0.5%). Taking into account internal and external information,
the historical credit loss experience may be adjusted where it is determined that there has been asignificant 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.
Total
€’000

Not past due€’000

1–2 months
past due€’000

More than 2 months
past due€’000

Trade receivables gross

69,83553,286

14,502

2,047

Credit impaired(1,070)

–

(165)

(905)

Expected credit losses

(698)

(533)

(145)

(20)

At 31 December 2021

68,06752,753

14,192

1,122

Total
€’000

Not past due€’000

1–2 months
past due€’000

More than 2 months
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

There were no related party receivables at the end of either period presented.

The Group’s policy, where possible, is for Group entities to manage foreign exchange risk at a
local level by matching the currency in which revenue is generated with the expenses incurredand by settling liabilities denominated in their functional currency with cash generated from theirown 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 capitalacross the Group and the exposure is concentrated in the movement of the US dollar, sterlingand Canadian dollar against the euro. The effect of a strengthening or weakening of 10% in thosecurrencies against the euro at the reporting date on the working capital balances would, all othervariables held constant, have resulted in the following pre-tax profit/(loss) impact for the year:
2021
€’000

2020
€’000

10%
Strengthening

10%
Weakening

10%
Strengthening

10%
Weakening

US dollar to euro

5,545

(4,536)

4,712(3,855)

Sterling to euro

(1,333)

1,091

835

(683)

169

(138)

594

(486)

Canadian dollar to euro

OVERVIEW

S T R AT E G I C R E P O R T

GOVERNANCEF I N A N C I A L S TAT E M E N T S

S U P P L E M E N TA R Y I N F O R M AT I O NNOTES FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

121

25 Capital Management

24 Financial Instruments and Risk Management continued
Total Financial Assets and Liabilities

The carrying amount of the financial assets and liabilities shown in the Consolidated and Company
Statements of financial position are stated at amortised costs, with the exception of contingent
consideration held at fair value.

Group

129

195

Less: cash and cash equivalents(105,710)(103,070)

Liquidity Risk

Net debt/(net cash) position(105,581)(102,875)

Liquidity risk arises from the Group’s management of working capital and the financial charges on its
debt instruments.

Total equity

472,120

371,235

Net debt/(net cash) to capital ratio(22.4)%(27.7)%

The following are the contractual maturities (representing undiscounted contractual cash flows) of theGroup’s financial liabilities:
ANNUAL REPORT AND ACCOUNTS 2021

2020
€’000

Loans and borrowings (note 18)

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 €229.7m of current assets, including cash of €105.7m available to settle liabilities as theyfall due.

KEYWORDS STUDIOS PLC

2021
€’000

Carrying value

Contractual cash flows

At 31 December 2021

Total
€’000

Total
€’000

Within 1 year€’000

1–2 years€’000

2–5 years€’000

Over 5 years€’000

Trade payables

11,122

11,122

11,122–––

Deferred and contingent
consideration (i)54,142

61,22337,95314,008

9,262–

Other payables

72,53572,53572,535

–

–

–

129

129

81

48

–

–

–

6

4

2

–

–

Loans and borrowings
Loan interest
Lease liabilities

37,63540,35812,0598,257

13,042

7,000

Total

175,563

185,373

133,754

22,31522,3047,000

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

Carrying value

Contractual cash flows

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

–

–

–

195

195

73

122

–

–

Loans and borrowings
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

11,562

5,307(i) Deferred and contingent consideration at 31 December 2021 has arisen on business combinations, and is based oncontracted 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 and contingent consideration up to a maximum of €61.2m.

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 shownin 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.
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 2021,
P.E.Q. Holdings Limited owned 0.66% (2020: 4.73%) 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. Mr. Giorgio Guastalla retired from the Board of theCompany in January 2022.
There were no transactions in the period with Italicatessen Limited (2020: €13k), who provided
canteen services to Keywords International Limited on an arm’s length basis. This activity ceased in
2020, and there were no balances owing to Italicatessen Limited at the end of either period presented.
In addition, on an arm’s length basis, the Group paid rent of €22k in 2020, in respect of premises
occupied by employees of the Group in Dublin to Mr. Giorgio Guastalla, Director of the Company, andshareholder of P.E.Q. Holdings Limited. This activity also ceased in 2020, and there were no balances
owing at the end of either period presented in respect of this activity.
The details of key management compensation (being the remuneration of the Directors) are set out
in note 10.

OVERVIEW

S T R AT E G I C R E P O R T

GOVERNANCEF I N A N C I A L S TAT E M E N T S

S U P P L E M E N TA R Y I N F O R M AT I O NNOTES FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

122

27 Business Combinations

Pre-acquisition revenue

16,34535,729Pre-acquisition revenue with Keywords Group

(1,908)–24,9907,208Property, plant and equipment

572

872

Right of use assets

1,402

2,376

Trade and other receivables – gross

7,439

4,069

Post-acquisition revenue

Business Combinations continued
Details of pro forma revenues and profitability of current acquisitions

Book value:

Pro forma revenue(7)–39,42742,937

Cash and cash equivalents

10,618

9,477

Pre-acquisition profit before tax

2,573

9,399

Trade and other payables(8,245)(4,904)Post-acquisition profit before tax

9,653

2,561

Lease liabilities(1,402)(2,376)

12,226

11,96010,377

9,514

11,502

17,673

Bad debt provision

Book value of identifiable assets and liabilities acquired
Fair value adjustments:
Identifiable intangible assets
ANNUAL REPORT AND ACCOUNTS 2021

2020
€’000

2020
€’000

Details of goodwill and the fair value of net assets acquired

Identifiable tangible assets
Deferred tax assets
Trade and other payables

–

(27)

2,539

9,363

–

1,003

Deferred tax liabilities(3,006)(3,970)Total fair value adjustments

11,03524,042

Net assets acquired

21,41233,556

Goodwill from current year acquisitions

97,91847,112

Total purchase consideration

119,330

80,66859,31446,924

Details of purchase consideration and outflows from current acquisitions
Cash
Deferred cash

1,565

41

Deferred consideration contingent on performance

33,72621,090Combination put/call options to acquire residual 15% of Tantalus

4,768

–

Shares to be issued

19,957

12,613

119,330

80,668

1,099

307

Total purchase consideration
KEYWORDS STUDIOS PLC

2021
€’000

2021
€’000

Related acquisition costs charged through to the Statement of comprehensive income:Number of shares:
Shares issued on acquisition

621,852–

Fixed number of shares to be issued

37,994503,052

Cash paid in the period

59,31446,924

Less: cash and cash equivalent balances transferred(10,617)(9,477)

48,69737,447

Net cash outflow arising on acquisition:

Net cash outflow arising on acquisition

Pro forma profit before tax

During the period, the Group completed six acquisitions, Heavy Iron, Tantalus, Climax Studios, AMC,
Waste and Wicked Witch, purchasing 100% of the share capital of these businesses, except in thecase of Tantalus where the Group acquired an 85% interest. A combination of put and call options
are in place requiring the sellers to sell, or the Group to buy, the remaining 15% shareholding in three
years. The Group has recognised a contingent consideration liability at fair value, being the Group’s
estimate of the present value of the amount required to settle the liability, and has accounted for theacquisition as if a 100% interest was acquired on acquisition (see note 3).
The aggregate amounts recognised in respect of the identifiable assets acquired and liabilities
assumed on acquisitions completed in the period are set out in the table above. Details of thepurchase consideration and other information relevant to the evaluation of the financial effect of theacquisitions are also presented.
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 our service capabilities, broadening ourservice offering, and extending our geographical footprint, further building out our global platform.
The goodwill that arose from business combinations completed in the period that is expected to be
deductible for tax purposes was €9.1m.

OVERVIEW

S T R AT E G I C R E P O R T

GOVERNANCEF I N A N C I A L S TAT E M E N T S

S U P P L E M E N TA R Y I N F O R M AT I O NNOTES FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDKEYWORDS STUDIOS PLC

ANNUAL REPORT AND ACCOUNTS 2021

123

28 Subsidiaries
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 2021 are
set out below:

Name

Date ofCountry ofincorporation/
incorporation acquisition

Ownership^

Registered officeName

Date ofCountry ofincorporation/
incorporation acquisition

Ownership^

Registered office3455 Productions, LLC

USA

24 Nov 20

100%

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

Ichi LimitedUK

26 Nov 19100%

1st Floor, 39 Earlham Street, London, WC2H 9LT, UK

9409–2954 Québec Inc.

Canada04 Dec 19100%

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

Indigo Pearl LimitedUK

15 Dec 20

100%

1st Floor, 39 Earlham Street, London, WC2H 9LT, UK

Itsy SGD LimitedUK

17 Aug 18

100%

1st Floor, 39 Earlham Street, London, WC2H 9LT, UK

Jinglebell S.r.l.

Italy

10 Dec 20

100%

Via Marco d’Oggiono 12, Milan, Italy

Jurango Pty Limited ~~Australia

20 Dec 21100%

29 Thornton Crescent, Mitcham, VIC 3132, Australia

Keywords (Shanghai)
China
Information Technology Limited

02 Apr 15

100%

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

Keywords Asia Private Limited

Singapore

15 Mar 16

100%

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

Keywords Australia
Holdings Limited

UK

17 Mar 21

100%

1st Floor, 39 Earlham Street, London, WC2H 9LT, UK

Keywords Australia Pty
Limited ~Australia

18 Mar 21

85%

12 Spring Street, Fitzroy, Victoria, 3065, Australia

Keywords Canada Holdings Inc.

Canada27 Oct 17100%

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

Keywords do Brasil
Localização e Tradução Ltda

Brazil18 Jan 15

100%

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

Keywords Germany
Holdings GmbHGermany

06 Sep 19

100%

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

Alset LimitedUK

17 Aug 18

100%

1st Floor, 39 Earlham Street, London WC2H 9LT, UK

Appsectest LimitedUK

22 Jan 19

48.8%

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

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 Limited *UK

17 Feb 14

100%

1st Floor, 39 Earlham Street, London, WC2H 9LT, UK

Babel Media USA, Inc.

USA

17 Feb 14

100%

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

Bitsy SG LimitedUK

17 Aug 18

100%

1st Floor, 39 Earlham Street, London, WC2H 9LT, UK

Blindlight, LLC

USA

08 Jun 18100%8335 Sunset Blvd, Ste 307, West Hollywood, CA 90069, USA

Climax Development LimitedUK

22 Apr 21

100%

1st Floor, 39 Earlham Street, London, WC2H 9LT, UK

Climax Studios LimitedUK

22 Apr 21

100%

1st Floor, 39 Earlham Street, London, WC2H 9LT, UK

Coconut Lizard LimitedUK

25 Jun 20

100%

1st Floor, 39 Earlham Street, London, WC2H 9LT, UK

Cord Worldwide LimitedUK

07 Apr 18

100%

1st Floor, 39 Earlham Street, London, WC2H 9LT, UK

d3t Development LimitedUK

30 Aug 18

100%

1st Floor, 39 Earlham Street, London, WC2H 9LT, UK

d3t LimitedUK

19 Oct 17

100%

1st Floor, 39 Earlham Street, London, WC2H 9LT, UK

Descriptive Video Works Inc.

Canada11 Jun 19100%

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

Keywords International Co.,
LimitedJapan

30 Nov 10

100%

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

Eastern New Media Limited

Hong Kong 19 May 17

100%4404, 44/F Hopewell Centre, 183 Queen’s Road East,
Wanchai, Hong Kong

Keywords International Limited

Ireland

13 May 98

100%

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

Edugame Solutions
Private LimitedIndia

09 Oct 14

100%

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

Keywords International
Pte. Limited

Singapore

24 Apr 14

100%

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

Electric Square LimitedUK

17 Aug 18

100%

1st Floor, 39 Earlham Street, London, WC2H 9LT, UK

Keywords International, Inc.

USA

26 Sep 12100%

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

Fire Without Smoke Inc

USA

29 May 18

100%

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

Keywords Studios B.C., Inc.

Canada27 Oct 17100%

Fire Without Smoke Limited

UK

29 May 18

100%

1st Floor, 39 Earlham Street, London, WC2H 9LT, UK

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

GameSim Inc.

USA

16 May 17100%13501 Ingenuity Drive, Suite 310, Orlando, FL 32826, USA

Keywords Studios France SAS

France08 Jun 16

100%

59 Boulevard Exelmans, 75016 Paris, France

g-Net Media, Inc.

USA

24 Nov 20

100%

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

Keywords Studios Italy S.R.L.

Italy

08 May 14

100%

Via Egadi 2, Milano, MI, 20144, Italy

High Voltage Software, Inc.

USA

14 Dec 20100%2345 Pembroke Ave., Hoffman Estates, IL 60169, USA

Keywords Studios
Korea Corporation

South
Korea

11 Jan 21

100%

16th Floor, Gangnam Building, 1321-1, Seocho-dong, Seochogu, Seoul 137-070, South Korea

HVS Nola LLC

USA

14 Dec 20

100%

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

08 May 14100%1115 Flower Street, Burbank, CA 91502, USA

USA

26 Nov 19100%

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

Keywords Studios
Los Angeles, Inc.

USA

Ichi Creative Ltd

OVERVIEW

S T R AT E G I C R E P O R T

GOVERNANCEF I N A N C I A L S TAT E M E N T S

S U P P L E M E N TA R Y I N F O R M AT I O NNOTES FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDKEYWORDS STUDIOS PLC

ANNUAL REPORT AND ACCOUNTS 2021

124

28 Subsidiaries continued
Name

Date ofCountry ofincorporation/
incorporation acquisition

Ownership^

Registered officeName

Date ofCountry ofincorporation/
incorporation acquisition

Ownership^

Registered office

Keywords Studios Limited *Ireland

27 Mar 18

100%

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

Sperasoft Studios LLC

Russia13 Dec 17100%196084, Russia, Saint-Petersburg, Kievskaya street,5 – building

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

Sperasoft, Inc.

USA

13 Dec 17100%

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

SperaSystems LLC

USA

13 Dec 17100%2033 Gateway Pl Ste 500 San Jose, CA 95110-3712, USA

Keywords Studios
Netherlands B.V.

Netherlands 05 Feb 19

SPOV LimitedUK

16 Feb 17

100%

1st Floor, 39 Earlham Street, London, WC2H 9LT, UK

Strongbox Limited

Seychelles

19 May 17100%

306 Victoria House, Victoria, Mahe, Seychelles

Studio Gobo LimitedUK

17 Aug 18

100%

1st Floor, 39 Earlham Street, London, WC2H 9LT, UK

04 Feb 21

100%

Keywords Studios
Poland Spolka z.o.o.

PolandKeywords Studios
QC-Games Inc.

Canada17 Feb 14

100%

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

Sunny Side Up Creative Inc.

Canada03 Jan 19100%

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

Keywords Studios
QC-Interactive Inc.

Canada16 Nov 16

100%

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

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 QC-Tech Inc.

CanadaTantalus Media Pty Limited ~Australia

18 Mar 21

100%

13 Spring Street, Fitzroy, Victoria, 3065, Australia

The Trailerfarm LimitedUK

13 Sep 18

100%

1st Floor, 39 Earlham Street, London, WC2H 9LT, UK

TV+SYNCHRON Berlin GmbHGermany

01 Oct 19

100%

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

VMC Consulting Corporation

USA

24 Oct 17100%

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

Waste Creative LimitedUK

16 Dec 21

100%

1st Floor, 39 Earlham Street, London, WC2H 9LT, UK

Waste Holdings LimitedUK

16 Dec 21

100%

1st Floor, 39 Earlham Street, London, WC2H 9LT, UK

Wicked Witch Software Pty
Limited~~

Australia

20 Dec 21100%

29 Thornton Crescent, Mitcham, VIC 3132, Australia

Wizcorp Inc.

Japan

18 Apr 19100%

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

06 Jan 15

100%

Wilhelmina van Pruisenweg 35, 2595AN The Hague,
The Netherlands

100%

11 Ul. Na Zjezdzie, Krakow 30-527, Poland

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

Keywords Studios Spain SLU

Spain

16 Jul 15

100%

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

Keywords UK Holdings Limited

UK

28 Mar 18

100%

1st Floor, 39 Earlham Street, London, WC2H 9LT, UK

Keywords US Holdings Inc.

USA

23 Oct 17100%

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

Keywords Ventures LimitedUK

06 Apr 18

100%

1st Floor, 39 Earlham Street, London, WC2H 9LT, UK

Laced Music LimitedUK

07 Apr 18

100%

1st Floor, 39 Earlham Street, London, WC2H 9LT, UK

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

Lakshya Digital
Singapore Pte. Limited

Singapore

09 Oct 14100%

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

Liquid Development, LLC

USA

19 Aug 15100%

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

12 Dec 19

100%

Invent, Dublin City University, Glasnevin, Dublin 9, IrelandUK

15 Jan 14

100%

1st Floor, 39 Earlham Street, London, WC2H 9LT, UK

Xcelerator MachineTranslations Limited

IrelandLiquid Violet Limited *Lonsdale Miller LimitedUK

15 Dec 20

100%

1st Floor, 39 Earlham Street, London, WC2H 9LT, UK

Xloc, Inc.

USA

08 May 17100%

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

Marching Cube, LLC

USA

22 Jan 20

100%815A Brazos #334, Austin, TX 78701, USA

Maverick Media LimitedUK

27 Aug 20

100%

1st Floor, 39 Earlham Street, London, WC2H 9LT, UK*		Indicates a direct subsidiary (all other holdings are indirect, being subsidiaries of various intermediate groupholding companies)

Paleblue LimitedUK

07 Apr 18

100%

1st Floor, 39 Earlham Street, London, WC2H 9LT, UK^		 Proportion of voting rights and ordinary share capital ultimately held by Keywords Group

Player Research LimitedUK

26 Oct 16

100%

1st Floor, 39 Earlham Street, London, WC2H 9LT, UK

PT Limitless Indonesia

Indonesia

19 May 17

100%

JI. Timoho II, No. 32, Yogyakarta, Indonesia+		The registered office address was changed from 201 Temple Chambers, 3–7 Temple Avenue, London, EC4Y 0DT, England on
26 January 2022

Snowed In Studios, Inc

Canada19 Jul 18100%

400–981 Wellington Street West, Ottawa, Ontario, K1Y 2Y1,
CanadaSperasoft Poland Spólka z.o.o.

Poland13 Dec 17100%

Ul. Na Kozłówce 27, 30-664 Kraków, Poland~		A combination of put and call options are in place requiring the sellers to sell, or the Group to buy the remaining 15%
shareholding in three years. The Group has accounted for the acquisition as if a 100% interest was acquired on acquisition(see note 3).
~~ Acquired by Keywords Australia Pty Limited

OVERVIEW

S T R AT E G I C R E P O R T

GOVERNANCEF I N A N C I A L S TAT E M E N T S

S U P P L E M E N TA R Y I N F O R M AT I O NNOTES FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

125

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

Name

Ichi Holdings Limited

Country ofincorporation

Date ofincorporation/acquisition

Ownership

Date of restructuring

Re-structuring
details

Liquidated

UK

26-Nov-19

100%

16-Dec-21

Keywords International Barcelona SL

Spain

09-Jan-15

100%

23-Nov-21

MergedRed Hot Software (Shanghai) Limited

China

19-May-17

100%

30-Jun-21

Dissolved

Red Hot Software (Zhengzhou) Limited

China

19-May-17

100%

21-Oct-21

Dissolved

29 Events after the Reporting Date

KEYWORDS STUDIOS PLC

ANNUAL REPORT AND ACCOUNTS 2021

Crisis in Ukraine

Since the year end, the Group’s operations have been impacted by the tragic events in Ukraine. While
the Group does not have operations in Ukraine, the Group does have Game Development teams in a
number of locations in Russia working exclusively for customers located outside of the country. The
Group also works with a number of freelance suppliers in Ukraine. Our immediate priority has been to
do all that we can to support our people and our freelance suppliers in the territory, while contributing
to the wider humanitarian efforts in the region.
Revenues delivered from the Group’s operations in Russia are presented in note 4. In 2021, the Groupdelivered €29.4m of revenue in Russia, up from €28.0m in 2020, and represents approximately 5.7%of Group revenue. While we continue to focus on serving our customers, we are also focused on
mitigating any potential business interruption or other risks associated with this activity.
Geographical analysis of non-current assets from continuing businesses is also presented in note
4. Approximately €1.4m of the amount presented within the “Other” category relates to Russian
located property, plant and equipment, being mainly computer equipment. The Group does not havesignificant receivables exposure in Russia, as work produced in Russia is contracted and collected inother territories. In addition, the Group does not have significant amounts of other current assets orright of use assets located in Russia. Thus, any exposure to impairment of assets located in Russia is
not considered material.
The Directors have applied downside sensitivities to the Group’s projections to evaluate any potential
goodwill impairment resulting from the crisis. The result of the value in use calculations was that no
impairment would be required even in a worst case scenario where all Russian located production
capacity was excluded from projections.

OVERVIEW

S T R AT E G I C R E P O R T

GOVERNANCEF I N A N C I A L S TAT E M E N T S

S U P P L E M E N TA R Y I N F O R M AT I O NCOMPANY STATEMENT OF FINANCIAL POSITION126

At 31 December
Note

2021
€’000

2020
€’000

Non-current assets
Right of use assets

36

206

389

Property, plant and equipment

37

308

317

657

379

Investment in subsidiaries

38

30,17530,670

Other receivables

39

Deferred tax assets

335,511

258,536

366,857

290,291

17,04330,696

In accordance with the Companies Act 2006, the Company is availing of the exemption frompresenting its individual Statement of comprehensive income to the Annual General Meeting and fromfiling it with Companies House. The amount of profit after tax dealt with in the parent undertaking is€6,404k (2020: loss of €6,183k).
The notes from page 128 onwards form an integral part of these Company financial statements.
The financial statements were approved and authorised for issue by the Board on 30 March 2022.
On behalf of the Board

Current assets
Cash and cash equivalents

KEYWORDS STUDIOS PLC

ANNUAL REPORT AND ACCOUNTS 2021

Other receivables

39

7,468

5,821

24,511

36,517

Current liabilities
Trade payables
Other payables

40

Lease liabilities

41

Net current assets/(liabilities)

1,127

61

19,651

9,979

216

197

20,994

10,237

3,517

26,280

3,660

–

–

202

Non-current liabilities
Other payables

40

Lease liabilities

41

Net assets

3,660

202

366,714316,369

EquityShare capital

22

904

879

Share capital – to be issued

22

2,185

13,047

Share premium

22

Merger reserve
Shares held in Employee Benefit Trust (“EBT”)
Share-based payments reserve
Retained earnings
Total equity

22

38,54922,951

279,358

255,957(1,997)(1,997)48,19331,799(478)(6,267)366,714316,369

BERTRAND BODSONDIRECTOR

30 March 2022

JON HAUCKDIRECTOROVERVIEW

S T R AT E G I C R E P O R T

GOVERNANCEF I N A N C I A L S TAT E M E N T S

S U P P L E M E N TA R Y I N F O R M AT I O NCOMPANY STATEMENT OF CHANGES IN EQUITY

127
At 01 January 2020
Profit/(loss) for the period
Total comprehensive income
for the period

COMPANY STATEMENT OF CASH FLOWS

Sharecapital
€’000

Share
capital – tobe issued
€’000

Share
premium€’000

Mergerreserve€’000

Sharesheld in
EBT€’000

Share-based
payments
reserve
€’000

780

5,310

20,718138,393(1,997)

–

–

–

–

–

Years ended 31 December

Retainedearnings€’000

Total equity€’000

16,449(84)

179,569

Cash flows from operating activities–(6,183)(6,183)

Profit/(loss) after tax

–

–

–

–

–

–

(6,183)(6,183)

Shares issued for cash

77

–

–

109,372–––

109,449

Share-based payments expense

–

–

–

–

–

15,350–15,350Share options exercised

16

–

2,233

–

–

–

–

2,249

ANNUAL REPORT AND ACCOUNTS 2021
KEYWORDS STUDIOS PLC

6

7,737

–

8,192

–

–

–

15,935Contributions by andcontributions 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

–

–

–

–

–

–

6,404

6,404

Profit/(loss) for the period
Total comprehensive income
for the period

2021
€’000

2020
€’000

6,404

(6,183)

4,099

621

Income and expenses not affecting operating cash flows

Contributions by andcontributions to the owners:

Acquisition-related issuanceof shares

Note

–

–

–

–

–

–

6,404

6,404

Contributions by andcontributions to the owners:

Share-based payments expense, net of amounts re-charged to subsidiary companies
Interest receivable–(6)Interest expense

935

946

Depreciation – property, plant and equipment

37

54

47

Depreciation – right of use assets

36

204

200

(126)

–

Amounts written off financial assets
Unrealised foreign exchange (gain)/loss

34

–

5,200

1,808

(Increase)/decrease in other receivables

25,12329,329

Increase/(decrease) in trade and other payables

14,232(6,944)39,35522,385

Changes in operating assets and liabilities

Taxation paid
Net cash generated by/(used in) operating activities

Share-based payments expense

–

–

–

–

–

16,394–

16,394

Share options exercised

11

–

4,929

–

–

–

–

4,940

Employee Share Purchase Plan

–

–

398

–

–

–

–

398

Dividends

–

–

–

–

–

–

(615)

(615)

Acquisition-related issuanceof shares

14(10,862)

10,271

23,401–––

22,824Contributions by andcontributions to the owners

25(10,862)

15,59823,401–

16,394615

43,941

At 31 December 2021

904

2,185

38,549279,358(1,997)48,193(478)

366,714––50,95918,010(64,200)(39,142)

Cash flows from investing activities
Funding advanced to subsidiaries
Current year acquisition of subsidiaries net of cash acquired
Acquisition of property, plant and equipment

37

Interest received
Net cash generated by/(used in) investing activities(3,124)

–

(45)

(7)

–

6

(67,369)(39,143)

Cash flows from financing activities
Repayment of loans

42–(64,000)

Loan to finance acquisitions

42

–

4,500

Payments of principal on lease liability

(206)

(194)

Interest paid on principal of lease liability

(7)

(12)

Dividends paid

9

(615)

–

Shares issued for cash

22

5,338

111,698

Interest paid

(1,753)(762)

Net cash generated by/(used in) financing activities

2,757

51,230

Increase/(decrease) in cash and cash equivalents(13,653)

30,097

Cash and cash equivalents at beginning of the period

30,696599

Cash and cash equivalents at end of the period

17,04330,696OVERVIEW

S T R AT E G I C R E P O R T

GOVERNANCEF I N A N C I A L S TAT E M E N T S

S U P P L E M E N TA R Y I N F O R M AT I O NNOTES FORMING PART OF THE COMPANY FINANCIAL STATEMENTS

128

30 Basis of Preparation
The Company financial statements have been prepared in accordance with UK-adopted international
accounting standards, and in conformity with the requirements of the Companies Act 2006.
Unless otherwise stated, the financial statements have been prepared in thousands (’000) and thefinancial statements are presented in euro (€).

ANNUAL REPORT AND ACCOUNTS 2021

Other Judgements: The Company applies consistent judgements to those applied by theGroup. To the extent that judgements are relevant to both Group and Company financial
statements, please refer to the Group financial statements for other relevant judgements.

Please refer to the Group financial statements for additional information concerning the basis ofpreparation. References in the Company financial statements to notes numbered earlier than note 30,
refer directly to specific notes in the Group financial statements.

–

31 Significant Accounting Policies

33 Auditor Statutory Disclosure

Intercompany Receivables

The audit fee for the Company is outlined in note 5 of the Group financial statements.

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.

KEYWORDS STUDIOS PLC

Company– Expected Credit Loss Provision on Company Receivables from Subsidiaries: As outlined
in note 39, the Company has significant receivables from subsidiaries, primarily related toinvestments in acquisitions. The Directors have taken into account both the ongoing acquisition
integration program and the cash-generating capacity of the Group, in concluding (in note 43)that all such loans are recoverable and the expected credit loss provisions are adequate.

The Company applies the general approach to applying the expected credit losses to its related
party loans. Under the General Approach, at each reporting date, the Company 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 tobe recognised.

34 Dividends and Distributable Reserves
Details of dividends and distributable reserves of the Company are presented in note 9 of the Groupfinancial statements.
35 Staff Costs
Total staff costs (including Directors)

2021
€’000

2020
€’000

Salaries and related costs

5,221

2,626

Other Significant Accounting Policies

Social welfare costs

525

312

The Company applies consistent accounting policies to those applied by the Group. Please refer tothe Group financial statements for disclosure of other relevant accounting policies.

Pension costs

88

96

16,394

15,35022,22818,3842021

2020

Share-based payments expense

32 Critical Accounting Estimates and Judgements
The Company makes certain estimates and assumptions regarding the future. Estimates andjudgements are continually evaluated based on historical experience and other factors, including
expectations of future events that are believed to be reasonable under the circumstances. In the
future, actual experience may differ from these estimates and assumptions.
Judgements

The judgements, apart from those involving estimations, that management have made in the processof applying the Company’s accounting policies and that have the most significant effect on theamounts recognised in the Company financial statements, are outlined below.

Average number of employees

Operations

3

4

General and administration

34

22

37

26

OVERVIEW

S T R AT E G I C R E P O R T

GOVERNANCEF I N A N C I A L S TAT E M E N T S

S U P P L E M E N TA R Y I N F O R M AT I O NNOTES FORMING PART OF THE COMPANY FINANCIAL STATEMENTS CONTINUED

129

36 Right of Use Assets

38 Investment in Subsidiaries

The Company has entered into leases, principally relating to property.
2021
€’000

2020
€’000

781

825

Cost
At 01 January
Exchange rate movement

54

(44)

At 31 December

835

781

ANNUAL REPORT AND ACCOUNTS 2021

Accumulated depreciation

2020
€’000

30,17530,670Details of the Company’s direct and indirect subsidiaries as at 31 December 2021 are set out in note 28of the Group financial statements.
39 Other Receivables
Current

2021
€’000

2020
€’000

At 01 January

392

206

Intercompany receivables (financial assets held at amortised cost, see note 44)

5,099

5,126

Depreciation charge

204

200

Prepayments

1,702

556

Exchange rate movement

33

(14)

Other receivables

478–

At 31 December

629

392

Tax and social security

189

139

7,468

5,821

At 01 January

389

619

At 31 December

206

389

2021
€’000

2020
€’000

335,511

258,536

335,511

258,536

Current

2021
€’000

2020
€’000

Accrued expenses

1,915

1,053

Payroll taxes

164

412

Other payables

253

33

17,3198,481

19,651

9,979

Non-current

2021
€’000

2020
€’000

Intercompany payables

3,660

–

3,660

–

Net book value

Non-current

37 Property, Plant and Equipment

Intercompany receivables (financial assets held at amortised cost, see note 44)
Computers andsoftware€’000

Office furniture andequipment€’000

Leaseholdimprovements
€’000

Total
€’000

5

145

280

430

Cost
At 01 January 2020
Additions

7

–

–

7

At 31 December 2020

12

145

280

437

Additions

45

–

–

45

At 31 December 2021

57

145

280

482

At 01 January 2020

3

23

47

73

Depreciation charge

2

15

30

47

At 31 December 2020

5

38

77

120

40 Other Payables

Intercompany payables

Accumulated depreciation

KEYWORDS STUDIOS PLC

2021
€’000

Depreciation charge

9

15

30

54

At 31 December 2021

14

53

107

174

At 01 January 2021

7

107

203

317

At 31 December 2021

43

92

173

308

Net book value

OVERVIEW

S T R AT E G I C R E P O R T

GOVERNANCEF I N A N C I A L S TAT E M E N T S

S U P P L E M E N TA R Y I N F O R M AT I O NNOTES FORMING PART OF THE COMPANY FINANCIAL STATEMENTS CONTINUED

130

41 Lease Liabilities

43 Risk Management

The Company has entered into leases principally relating to property. Management applies judgement
in determining whether it is reasonably certain that a renewal or termination option will be exercised.

A description of the Group’s financial risk management objectives and policies is provided in note 24
to the Group financial statements. These financial risk management objectives and policies also apply
to the Company.

ANNUAL REPORT AND ACCOUNTS 2021

The movement in lease liabilities during the financial year was as follows:
2020
€’000

Carrying amount at the beginning of the year

399

626

Unwinding of discounted liabilities – lease liabilities

7

12

Payment of principal and interest on lease liabilities

(213)

(206)

Exchange rate movement

23

(33)

Carrying amount at the end of the year

216

399

2021
€’000
Maturity analysis of lease liabilities Lease payments

2021
€’000
Finance charges

2021
€’000
Lease liabilities

2020
€’000
Lease payments

2020
€’000
Finance charges

2020
€’000
Lease liabilities

218

2

216

204

7

197

Later than one year andnot later than five years

–

–

204

2

202

Later than five years

–

–

–

–

–

–

–

–

–

204

2

202

218

2

216

408

9

399

Current
Not later than one year
Non-current

At 31 December

42 Loans and Borrowings

As presented in note 39, receivables from subsidiaries relating to investments in acquisitions compriseterm loans extended to subsidiaries, while receivables from subsidiaries relating to trading activities
comprise trading balances repayable on demand. Balances are analysed in terms of the risk profile ofthe subsidiary.
The Directors have assessed the ongoing expected recovery strategy of loans due from subsidiariesof €335.5m (2020: €258.5m), within Stage 1 of the IFRS 9 impairment assessment model. Having notedthat such loans are within their repayment terms, the Directors have concluded that no provision for
expected credit losses is required (2020: €nil).
Separately, the Company has balances of €5.1m (2020: €5.1m), 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 and concluded that a small
number of such loans are technically in a credit-impaired status. No expected credit loss has beenrecognised in relation to these balances (2020: €218k).
The following are the contractual maturities (representing undiscounted contractual cash flows) of theCompany’s financial liabilities:
Carrying value
At 31 December 2021

1,127

–

–

–

23,311–––

Drawdowns

–

4,500

4,500

Repayments–(64,000)(64,000)

At 31 December 2020

–

–

–

At 31 December 2021

–

–

–

Details of the Company’s credit facilities are outlined in note 18 of the Group financial statements.

216

218

218

–

–

–

24,65424,656

24,656

–

–

–

Total
€’000

Within 1 year€’000

2–5 years€’000

Over 5 years
€’000

Total
€’000

Cash flows:

Over 5 years
€’000

1,127

Carrying value

59,500

2–5 years€’000

23,311

Total
€’000

59,500

1–2 years
€’000

1,127

Lease liability–

Within 1 year€’000

23,311Total

At 01 January 2020

Contractual cash flows
Total
€’000

Trade payables

The movement in loans and borrowings is as follows:
Non-current
€’000

Total
€’000

Other payables

Loans and borrowings (classified as financial liabilities under IFRS 9), are held at amortised cost.

Current€’000

KEYWORDS STUDIOS PLC

Credit Risk
2021
€’000

At 31 December 2020

Contractual cash flows
1–2 years€’000

Trade payables

61

61

61

–

–

–

Other payables

9,979

9,979

9,979

–

–

–

Lease liability
Total

399

408

204

204

–

–

10,43910,448

10,244204––

OVERVIEW

S T R AT E G I C R E P O R T

GOVERNANCEF I N A N C I A L S TAT E M E N T S

S U P P L E M E N TA R Y I N F O R M AT I O NNOTES FORMING PART OF THE COMPANY FINANCIAL STATEMENTS CONTINUEDKEYWORDS STUDIOS PLC

ANNUAL REPORT AND ACCOUNTS 2021

131

44 Related Parties
As at 31 December 2021 and 2020, the Company had amounts receivable from its subsidiaries
as follows:
2021
€’000

2020
€’000

Receivables from subsidiaries related to investment in acquisitions

335,511

258,536

Receivables from subsidiaries relating to trading activities

5,099

5,126

340,610

263,662

2021
€’000

2020
€’000

Non-current (note 39)335,511

258,536

Current (note 39)

5,099

5,126

340,610

263,662OVERVIEW

S T R AT E G I C R E P O R T

GOVERNANCEF I N A N C I A L S TAT E M E N T S

S U P P L E M E N TA R Y I N F O R M AT I O N

ALTERNATIVE PERFORMANCE MEASURES132

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 theGroup’s internal strategic planning and budgeting processes and for setting internal managementtargets. These measures can have limitations as analytical tools and therefore should not be
considered in isolation, or as a substitute for IFRS measures.

–

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 eachyear and are therefore added back to assist with understanding the underlying trading
performance of the business.

–

COVID-19 government subsidies claimed – In 2020 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.

The principal measures used by the Group are set out below:–

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 2020. 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.

KEYWORDS STUDIOS PLC

ANNUAL REPORT AND ACCOUNTS 2021

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 theGroup excluding the impact of acquisitions. Organic revenue growth is calculated by adjusting theprior year revenues, adding pre‑­acquisition revenues for the corresponding period of ownership toprovide 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, foreignexchange movements can have an impact on the reported results of the Group when they aretranslated into the Group’s reporting currency, the euro. In order to understand the underlying trading
performance of the business, revenue is also presented using rates consistent with the prior year inorder to provide year over year comparability.
Adjusted profit and earnings per share measures – Adjusted profit and earnings per sharemeasures are used to provide management and other users of the financial statements with a clear
understanding of the underlying profitability of the business over time. Adjusted profit measures arecalculated by adding the following items back to the equivalent GAAP profit measures:–

Amortisation of intangible assets – Customer relationships and music licence amortisationcommences on acquisition, whereas intellectual property/development costs amortisationcommences when the product is launched. These costs, by their nature, can vary by size
and amount each year. As a result, amortisation of intangibles is added back to assist withthe 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 andtherefore the costs associated with acquiring 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 the underlying
trading performance.

Free cash flow measures – The Group aims to generate sustainable cash flow (Free cash flow) inorder 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 andintegration cash outlay, investment income and dividend payments. Adjusted free cash flow is ameasure of cash flow adjusting for capital expenditure that is supporting growth in future periods(represented by capital expenditure in excess of depreciation). In the prior year, the measure has also
been adjusted for COVID-19 subsidies claimed given the one-time nature of this income.
Net debt – The Group manages capital by monitoring debt to capital and net debt ratios. Net debt
is calculated as Loans and borrowings less Cash and cash equivalents, and excludes Lease liabilities.
The debt to capital ratio is calculated as net debt as a percentage of total equity.
The remainder of this section provides a reconciliation of the APMs with the relevant IFRSGAAP equivalent.

OVERVIEW

S T R AT E G I C R E P O R T

GOVERNANCEF I N A N C I A L S TAT E M E N T S

S U P P L E M E N TA R Y I N F O R M AT I O N

ALTERNATIVE PERFORMANCE MEASURES CONTINUED

133

Service line analysis

Organic revenue at constant exchange rates

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 2020 foreign exchange rates, in order to give
management and other users of the financial statements better visibility of underlying trading
performance against the prior year.

Organic revenue at constant exchange rates is calculated by adjusting the prior year revenues, adding
pre-acquisition revenues for the corresponding period of ownership, and applying the 2020 foreignexchange rates to both years.

KEYWORDS STUDIOS PLC

ANNUAL REPORT AND ACCOUNTS 2021

Art Creation*

2020
Revenue
AER
€m

2020
Pre-acquisition
revenue
AER
€m

2020
Like for likerevenue
AER
€m

2021
Revenue
growthCER€m2021
Revenue
CER
€m

2021
Organic revenue
growth
CER
%

24.4%

2021
Revenue
AER
€m

2021
Revenue
CER
€m

2020
Revenue
AER
€m

2021
GrowthAER%

2021
Growth
CER%

Art Creation*

38.9

0.9

39.8

9.7

49.5

Marketing*

18.4

16.3

34.7

11.7

46.4

33.7%

49.3

49.5

38.9

26.7%

27.2%

Game Development

80.0

40.7

120.7

19.3

140.0

16.0%
27.4%

Marketing*

46.2

46.4

18.4

151.1%

152.2%

Audio

47.2

1.4

48.6

13.3

61.9

Game Development

138.9

140.0

80.0

73.6%

75.0%

Functional Testing

78.5

–

78.5

13.5

92.0

17.2%

Audio

61.3

61.9

47.2

29.9%

31.1%

Localization

45.4

0.4

45.8

5.6

51.4

12.2%

Functional Testing

92.7

92.0

78.5

18.1%

17.2%

Localization Testing

23.3

–

23.3

3.9

27.2

16.7%

Localization

50.8

51.4

45.4

11.9%

13.2%

Player Support

41.8

–

41.8

5.3

47.1

12.7%

Localization Testing

27.1

27.2

23.3

16.3%

16.7%

373.5

59.7

433.2

82.3

515.5

19.0%

Player Support

45.9

47.1

41.8

9.8%

12.7%

512.2

515.5

373.5

37.1%

38.0%

*	The prior year comparatives have been re-classified to separately report Marketing services, previously reported within the
Art Creation service line.

Pro forma revenue

Pro forma revenue is calculated by adding pre-acquisition revenues of current year acquisitions to thecurrent year revenue numbers, to illustrate the size of the Group had the acquisitions been included
from the start of the financial year.
2021
Revenue
AER
€m

2021
Pre-acquisition
revenue
AER
€m

2021
Pro forma
Revenue
AER
€m

50.9

Art Creation

49.3

1.6

Marketing

46.2

6.2

52.4

Game Development

138.9

8.5

147.4

Audio

61.3

–

61.3

Functional Testing

92.7

–

92.7
50.8

Localization

50.8

–

Localization Testing

27.1

–

27.1

Player Support

45.9

–

45.9

512.2

16.3

528.5

*	The prior year comparatives have been re-classified to separately report Marketing services, previously reported within the Art
Creation service line. The equivalent 2020 organic growth rates were 30.8% for Marketing and 13.0% for Art Creation respectively.

OVERVIEW

S T R AT E G I C R E P O R T

GOVERNANCEF I N A N C I A L S TAT E M E N T S

S U P P L E M E N TA R Y I N F O R M AT I O N

ALTERNATIVE PERFORMANCE MEASURES CONTINUED

134

Adjusted operating costs

EBITDAThis comprises Administrative expenses as reported in the Consolidated statement ofcomprehensive income, adding back share-based payments expense, costs of acquisition andintegration, amortisation and impairment of intangible assets, depreciation, non-controlling interestand deducting bank charges. In order to present the measure consistently year-on-year, the impact
of COVID-19 government subsidies claimed is also excluded.

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

ANNUAL REPORT AND ACCOUNTS 2021

Calculation

2020
€’000

Administrative expenses

Consolidated statement of comprehensive income(149,749)(102,090)

Share-based payments expense

Consolidated statement of comprehensive income

16,394

15,350Costs of acquisition and integration

Consolidated statement of comprehensive income

7,972

2,650

Amortisation and impairment ofintangible assets

Consolidated statement of comprehensive income

Depreciation – property, plantand equipment

Note 13

Depreciation – right of use assets

Note 12

Non-controlling interest

Consolidated statement of comprehensive income

13,688Bank charges

Note 6COVID-19 government subsidies claimed

Consolidated statement of comprehensive income

Adjusted operating costs
Adjusted operating costs as a % of revenue

8,808

11,661

8,983

10,473

8,402

67

85

(520)

(552)

–

(9,231)(90,014)(67,595)

17.6%

18.1%

Adjusted operating profit

The Adjusted operating profit consists of the Operating profit as reported in the Consolidated
statement of comprehensive income, adjusted for share-based payments expense, costs ofacquisition and integration, and amortisation and impairment of intangible assets. In order to present
the measure consistently year-on-year, the impact of investment income and COVID-19 government
subsidies claimed are also excluded.
2021
€’000

2020
€’000

Consolidated statement of comprehensive income

50,365

41,119Calculation

Operating profit
KEYWORDS STUDIOS PLC

2021
€’000

Share-based payments expense

Consolidated statement of comprehensive income

16,394

15,350Costs of acquisition and integration

Consolidated statement of comprehensive income

7,972

2,650

Amortisation and impairmentof intangible assets

Consolidated statement of comprehensive income
13,6888,808

Investment income

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

Consolidated statement of comprehensive income–(9,231)

Adjusted operating profit

88,41957,259Adjusted operating profit as a % of revenue

17.3%

15.3%

Calculation

Operating profit

Consolidated statement of comprehensive income

Amortisation and impairmentof intangible assets

Consolidated statement of comprehensive income

Depreciation – property plantand equipment

Note 13

Depreciation – right of use assets

Note 12

Bank charges

Note 6

EBITDA

2021
€’000

2020
€’000

50,365

41,11913,688

8,808

11,661

8,983

10,473

8,402

(520)

(552)

85,667

66,760Adjusted EBITDA

Adjusted EBITDA comprises EBITDA, adjusted for share-based payments expense, costs ofacquisition 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 arealso excluded.
Calculation

2021
€’000

2020
€’000

EBITDAAs above

85,667

66,760Share-based payments expense

Consolidated statement of comprehensive income

16,394

15,350Costs of acquisition and integration

Consolidated statement of comprehensive income

7,972

2,650

Non-controlling interest

Consolidated statement of comprehensive income

67

85

Investment income

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

Consolidated statement of comprehensive income–(9,231)

Adjusted EBITDA

110,100

74,177

Adjusted EBITDA as a % of revenue

21.5%

19.9%

OVERVIEW

S T R AT E G I C R E P O R T

GOVERNANCEF I N A N C I A L S TAT E M E N T S

S U P P L E M E N TA R Y I N F O R M AT I O N

ALTERNATIVE PERFORMANCE MEASURES CONTINUED

135

Adjusted profit before tax

Adjusted earnings per share

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

The Adjusted profit after tax comprises the Adjusted profit before tax, less the Taxation expense asreported in the Consolidated statement of comprehensive income, adjusted for the tax impact of theadjusting items in arriving at Adjusted profit before tax.

KEYWORDS STUDIOS PLC

ANNUAL REPORT AND ACCOUNTS 2021

Calculation

2021
€’000

2020
€’000

Profit before taxation

Consolidated statement of comprehensive income

47,98332,494

Share-based payments expense

Consolidated statement of comprehensive income

16,394

15,350Costs of acquisition and integration

Consolidated statement of comprehensive income

7,972

2,650

Amortisation and impairmentof intangible assets

Consolidated statement of comprehensive income
13,688

8,808

Non-controlling interest

Consolidated statement of comprehensive income

Foreign exchange (gain)/loss

Note 6

Unwinding of discounted liabilities –deferred consideration

Note 6

Investment income

Consolidated statement of comprehensive income

COVID-19 government subsidies claimed

Consolidated statement of comprehensive income

Adjusted profit before tax
Adjusted profit before tax as a % of revenue

67

85(1,983)

6,103

Adjusted profit before tax

As above

86,003

54,954

Taxation

Consolidated statement of comprehensive income(13,875)(11,027)

Tax arising on bridging items
to Adjusted profit before tax^

(4,729)(785)

Adjusted profit after tax

67,39943,14275,526,296

70,800,455

Denominator (weighted average
number of equity shares)

Note 8132€ cent€ cent(1,437)

Adjusted earnings per share

89.24

60.93

–

(9,231)86,003

54,954

Adjusted earnings per share %growth

46.5%

24.9%

16.8%

14.7%

2021
€’000

2020
€’000

Adjusted profit before tax

As above

86,003

54,954

Taxation

Consolidated statement of comprehensive income

13,875

11,027

Effective tax rate before
tax on adjusting items

Taxation/Adjusted profit before tax
16.1%

20.1%

Tax arising on bridging items
to Adjusted profit before tax^

4,729

785

Adjusted taxation

18,604

11,812

21.6%

21.5%

Adjusted taxation/Adjusted profit before tax

2020
€’000

–

The Adjusted effective tax rate is the Taxation expense as reported in the Consolidated statement ofcomprehensive income, adjusted for the tax impact of the adjusting items in arriving at Adjusted profit
before tax, as a percentage of the Adjusted profit before tax.

Adjusted effective tax rate

2021
€’000

Calculation

1,882

Adjusted effective tax rate

Calculation

The Adjusted earnings per share comprises the Adjusted profit after tax divided by the non-diluted
weighted average number of shares as reported in note 8.

^	B eing mainly the tax impact of share-based payments expense €2.8m, amortisation of intangible assets €2.1m, lessforeign exchange €0.2m, with the prior year being mainly the tax impact of amortisation of intangible assets €1.8m, foreignexchange €1.2m, share-based payments expense €0.7m, less COVID-19 government subsidies claimed €2.6m and investment
income €0.3m.

^	B eing mainly the tax impact of share-based payments expense €2.8m, amortisation of intangible assets €2.1m, less foreignexchange €0.2m, with the prior year being mainly the tax impact of amortisation of intangible assets €1.8m, foreign exchange €1.2m,
share-based payments expense €0.7m, less COVID-19 government subsidies claimed €2.6m and investment income €0.3m.

OVERVIEW

S T R AT E G I C R E P O R T

GOVERNANCEF I N A N C I A L S TAT E M E N T S

S U P P L E M E N TA R Y I N F O R M AT I O N

ALTERNATIVE PERFORMANCE MEASURES CONTINUED

136

Return on capital employed (ROCE)Free cash flow

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 the Group continues to makemultiple acquisitions each year, the calculation further adjusts the Adjusted profit before tax and thecapital employed as if all the acquisitions made during each year were made at the start of that year.

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

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 and contingent consideration),
together with loans and borrowings, while deducting cash and cash equivalents.

Calculation

Net cash generated by/(used in)operating activities

2021
€’000

2020
€’000

90,54576,420

7,972

2,650

(5,567)

66

–

(434)

(19,360)(13,908)

Consolidated statement of cash flows

Acquisition and integration cash outlay:
2021
€’000

ANNUAL REPORT AND ACCOUNTS 2021

Calculation

Adjusted profit before tax

As above

Interest received

Note 6

Bank charges

Note 6520

552

Interest expense

Note 6

1,040

1,071

86,003

54,954(62)(76)

Costs of acquisition and integration

Consolidated statement of comprehensive income Fair value adjustments to contingent
consideration

Consolidated statement of cash flows Fair value adjustments to rightof use assets

Consolidated statement of cash flows
Consolidated statement of cash flows

Unwinding of discounted liabilities – lease liabilities Note 6

985

843

Acquisition of property, plantand equipment

Pre-acquisition profits of current year acquisitions Note 27

2,573

9,399

Investment in intangible assets

Consolidated statement of cash flows

Investment income

Consolidated statement of comprehensive income

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

91,05966,743

Total equity

Consolidated statement of financial position

472,120

371,235

Employee defined benefit plans

Consolidated statement of financial position

3,088

2,693

Cumulative amortisation of intangibles
assets (customer relationships)

Note 11

Deferred and contingent consideration

Note 17

Loans and borrowings

Note 18

Cash and cash equivalents

Consolidated statement of financial position

Capital employed
Return on capital employed

KEYWORDS STUDIOS PLC

2020
€’000

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

40,70825,17854,14220,802129

195(105,710)(103,070)

464,477

317,033

19.6%

21.1%

(315)

(259)

–

(1,437)

Interest received

Consolidated statement of cash flows

62

76

Interest paid

Consolidated statement of cash flows(2,738)(1,722)

Payments of principal on lease liabilities

Consolidated statement of cash flows

Free cash flow after tax
Taxation paid
Free cash flow before tax

Consolidated statement of cash flows(9,953)(8,170)60,64653,282

23,9484,459

84,59457,741OVERVIEW

S T R AT E G I C R E P O R T

GOVERNANCEF I N A N C I A L S TAT E M E N T S

S U P P L E M E N TA R Y I N F O R M AT I O N

ALTERNATIVE PERFORMANCE MEASURES CONTINUED

137

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 (as measured 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.
2021
€’000

2020
€’000

As above

84,59457,741

Acquisition of property, plant and equipment

Consolidated statement of cash flows

19,36013,908Depreciation – property, plant and equipment

Consolidated statement of cash flows(11,661)(8,983)

7,699

4,925

Calculation

Free cash flow before tax
Capital expenditure in excess of depreciation:

Capital expenditure in excess of depreciation

KEYWORDS STUDIOS PLC

ANNUAL REPORT AND ACCOUNTS 2021

COVID-19 government subsidies claimed

Consolidated statement ofcomprehensive income

Adjusted free cash flow–

(9,231)

92,29353,435Adjusted cash conversion rate

The Adjusted cash conversion rate is the Adjusted free cash flow as a percentage of the Adjusted
profit before tax:
2021
€’000

Calculation

2020
€’000

Adjusted free cash flow

As above

92,29353,435Adjusted profit before tax

As above

86,003

54,954

Adjusted cash conversion ratio

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

107.3%

97.2%

Net debt

The Group manages capital by monitoring debt to capital and net debt ratios. Net debt is calculated
as Loans and borrowings (as shown in the Consolidated statement of financial position) less Cashand cash equivalents, and excludes Lease liabilities.
2021
€’000

Calculation

Loans and borrowings

Note 18

Cash and cash equivalents

Consolidated statement of financial position

Net debt/(net cash) position

2020
€’000

129

195

(105,710)(103,070)(105,581)(102,875)

OVERVIEW

KEYWORDS STUDIOS PLC

ANNUAL REPORT AND ACCOUNTS 2021

138

S T R AT E G I C R E P O R T

GOVERNANCEF I N A N C I A L S TAT E M E N T S

S U P P L E M E N TA R Y I N F O R M AT I O N

KEY DISCLAIMERSCOMPANY INFORMATION

References to “Keywords”, “Keywords Studios” or the “Group” are to Keywords Studios Plc (the“Company”) and its subsidiaries unless otherwise stated. The “Keywords Studios” word and logo
marks are trademarks owned by Keywords International Limited, a member of the Group. Other
product and company names mentioned herein may be the trademarks of their respective owners.

Directors

Ross Graham, Bertrand Bodson, Jon Hauck, Georges Fornay,Charlotta Ginman, David Reeves, Marion Sears, Neil Thompson

Secretary

Andrew Kennedy

This report contains “forward-looking statements” with respect to the Group’s financial condition,
results of operations and businesses and certain of the Group’s plans and objectives. In particular, suchforward-looking statements include, but are not limited to, statements with respect to: expectations
regarding the Group’s financial condition or results of operations and the guidance for a financial year;
the Group’s sustainable business strategy and targets; expectations for the Group’s future performance
generally; expectations regarding the operating environment and market conditions and trends,
including customers, new game launches and next generation consoles, adjacent markets, games-as-aservice, competitive position and macroeconomic pressures, price trends, commercial momentum andopportunities in specific geographic markets; expectations regarding the integration or performanceof current and future investments and newly acquired businesses. Forward-looking statements
are sometimes, but not always, identified by their use of a date in the future or such words as “will”,“anticipates”, “could”, “may”, “should”, “expects”, “believes”, “estimates”, “intends”, “plans” “projects”
or “targets” (in each case including in their negative form or other variations or their comparable
terminology). By their nature, forward-looking statements include matters that are not historical facts
and are inherently predictive, speculative and involve risk and uncertainty because they relate to events,
and depend on circumstances, that may or may not occur in the future. No reliance whatsoever shouldbe placed on any forward-looking statements.

Registered Number

8548351

Registered OfficeFirst Floor, 39 Earlham Street, London WC2H 9LT, UK

Auditors

BDO
Registered Auditors, Beaux Lane House, Mercer Street,
Lower Dublin 2, Ireland

Registrars

Link Group
10th Floor, Central Square, 29 Wellington Street, Leeds LS1 4DL, UK

Remuneration Consultants

Ellason LLP
1 Park Road, Hampton Wick, Kingston upon Thames, Surrey
KT1 4AS, UK

Principal Bankers

Citibank, N.A., London Branch
Citigroup Centre, Canada Square, Canary Wharf, London E14 5LB, UK

There are a number of factors that could cause actual results and developments to differ materiallyfrom those expressed or implied by these forward-looking statements. These factors include, but are
not limited to, the following: changes in economic, financial, political and regulatory conditions; factorsthat contribute to uncertainty and volatility, including natural and man-made disasters, civil unrest,
pandemics (e.g. the coronavirus (COVID-19) pandemic (the “COVID-19 pandemic”)) and geopoliticaluncertainty; the ability of the Group to successfully recover from a disaster, force majeure event orother business continuity problem including, but not limited to, due to a hurricane, flood, earthquake,terrorist attack, war, pandemic, security breach, cyber-attack, insider threats or supplier breach,power loss, telecommunications failure or other natural or man-made event; any governmental orother third party policies or actions to maintain the functioning of national or global economies andmarkets; changes to legal, regulatory and tax environments; increased competition; the Group’s
ability to generate and grow revenue; slower than expected customer growth, reduced customer
retention, reductions or changes in customer spending and increased pricing pressure; the Group’s
ability to attract and retain talent and wage inflation; the Group’s ability to realise expected benefits
or synergies from acquisitions; acquisitions and divestments of Group businesses and assets andthe pursuit of new, unexpected strategic opportunities; the Group’s ability to integrate acquired
business or assets; the extent of any future write-downs or impairment charges on the Group’s
assets, or restructuring charges incurred as a result of an acquisition or disposition; developmentsin the Group’s financial condition, earnings and distributable funds and other factors that the Board
takes into account in determining the level of dividends; the Group’s ability to satisfy working capitalrequirements; and changes in foreign exchange rates.

Fifth Third Bank, National Association Representative Office
38 Fountain Square Plaza, Cincinnati, Ohio 45263, USA
HSBC Continental Europe
38 Avenue Kléber, 75116 Paris, France
ING Bank N.V., Dublin Branch
Block 4, Dundrum Town, Sandyford Road, Ireland
Nominated Adviser and Broker

Numis Securities Limited
45 Gresham Street, London EC2V 7BF, UK

Financial PR Adviser

MHP Communications
60 Great Portland Street, London W1W 7RT, UK

Solicitors

DWF LLP
20 Fenchurch Street, London EC3M 3AG, UK

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

www.keywordsstudios.com