RNS Number : 8314V
Keywords Studios PLC
11 April 2019

Correction: The following is a correction to the Final Results announcement for the year ended 31
December 2018 announced at 7 a.m. on 08.04.19 (RNS no: 3625V).
The changes relate to the cash conversion calculation in the Alternative Performance Measures,certain note numbers from note 19 onwards, as well as deletion of references in notes to theCompany Balance Sheet that is not presented in the RNS. The cash conversion ﬁgure has also
been updated in the highlights section.
The rest of the ﬁnal results announcement remains unchanged. The errors have been correctedin the final results for the year ended 31 December 2018 set out below.

8 April 2019
Keywords Studios plc ("Keywords", "the Group")
Full year results for the year to 31 December 2018

A strong performance and further expansion of new and existing services
Keywords Studios, the international technical services provider to the global video games
industry, today provides its full year results for the year to 31 December 2018.
Financial overview:· Group revenue increased by 66% to €250.8m (2017: €151.4m)· On a Constant Currency1 basis, revenue grew to €258.6m (2017: €151.4m)· Gross margin increased to 38.2% (2017: 36.4%)· Adjusted profit before tax 2 increased by 65% to €37.9m (2017: €23.0m)· Adjusted basic earnings per share 2 up by 53% to 47.75c (2017: 31.18c)· Return on capital employed (ROCE) 3 of 19.4% (2017: 15.8%)· Cash conversion of 87% (2017: 84%)
· Net debt4 of €0.4m (2017: €11.1m net cash)· Final dividend of 1.08p (2017: 0.98p); 10% increase in total dividend to 1.61p per share(2017: 1.46p)
Operational overview:· 10.1% increase in like-for-like 5 revenue or 14.9% excluding the impact of VMC· 8 acquisitions in 2018 completed and integrated, expanding new and existing service lines:o Integration of VMC across four service lines and five studios completed ahead of schedule,
giving us the benefits of scale in North Americao Significantly expanded our newer engineering service lineo Added marketing services, music management and predictive analytics to our range ofservices· Invested in capacity, adding 930 work stations across multiple studios to support organic
growth· 99 clients now using three or more services, up from 93 in 2017 indicating further crossselling success· Keywords Ventures launched to make modest investments in innovations that will benefit ourclients
Current trading and outlook:· An encouraging start to 2019, with the first quarter in line with our expectations· 2 further acquisitions made in 2019, adding scale in marketing services with Sunny Side Up
and user retention and social engagement services with GetSocial· Significant new business gains including our first key wins in game streaming· Capital expenditure expected to be lighter in 2019 than in 2018
· Healthy pipeline of acquisition opportunities, with a particular focus on building marketing,engineering and audio services
The business uses a number of adjusted measures that are not deﬁned or recognised under IFRS. For full deﬁnitions andexplanations of these measures and a reconciliation to the most directly referenceable IFRS line item, please refer to theend of the statement.
1 revenue in 2018 calculated at the currency rates consistent with those that applied in 2017
2 before acquisition and integration expenses of €5.6m (2017: €3.0m), share option charges of €4.1m (2017: €1.4m),
amortisation of intangibles of €6.9m (2017: €3.0m) and foreign currency exchange gain of €0.8m (2017: loss of €3.6m).
3
ROCE represents adjusted proﬁt before tax, including pre-acquisition proﬁt and excluding interest expense, expressed

as a percentage of the total capital employed which are both adjusted as if all the acquisitions made during each year
were made at the start of that year.
4 after payment of €24.9m net cash consideration for acquisitions (2017: €86.8m), €4.5m of acquisition costs andintegration expenses (2017: €3.0m).
5
like for like revenue at constant exchange rates is calculated by adjusting the prior year revenues comparison by adding
pre-acquisition revenues for the corresponding period of ownership in the current year results and applying consistentforeign exchange rates in both years.

Andrew Day, Chief Executive of Keywords Studios, commented:"The Group delivered a strong performance in 2018 as we increased our share of the growing
video games market and expanded our range of services. This considerable progress has further
improved our quality of earnings and moved us higher up the value chain with our customers.
"We have started 2019 promisingly, and we are seeing good overall demand for our services
across the Group. We are actively reviewing acquisitions from which we will continue to be
selective, with many businesses excited about the strong platform Keywords could potentiallyprovide for their services and people.
"This, combined with the likely increase in demand for content driven by the arrival of games
subscription and streaming services from new entrants such as Apple and Google, give us
confidence in the outcome for the full year.
"Our strengthened market leadership and breadth and scale of service oﬀering enable us to takeadvantage of the multiple growth opportunities aﬀorded by a market that continues to grow insize and sophistication."A presentation of the full year results will be made to analysts at 9.30am today at MHP's oﬃces.
There will also be a live, listen only webcast of the presentation and a video recording which will
be made available via www.keywordsstudios.com. To register for access or obtain alternative dial
in details, please email keywords@mhpc.com or contact Charles Hirst at MHP Communications on+44 20 3128 8193.
For further information, please contact:
Keywords
Studios(www.keywordsstudios.com)
Andrew Day, Chief Executive Officer
David Broderick, Chief Financial Officer+353 190 22 730

Numis (Financial Adviser)
StuartSkinner/
Kevin
Cruickshank(Nominated Adviser)
James Black / Tom Ballard (Corporate
Broker)+ 44 20 7260 1000

MHP Communications (Financial PR)
Katie Hunt / Ollie Hoare / Nessyah Hart /Charles Hirst+ 44 20 3128 8100
Keywords@mhpc.com

Certain information contained in this announcement would have constituted inside information(as deﬁned by Article 7 of Regulation (EU) No 596/2014) prior to its release as part of thisannouncement.
About Keywords Studios (www.keywordsstudios.com)
Keywords Studios is an international technical services provider to the global video games
industry. Established in 1998, and now with over 50 facilities in 21 countries strategically locatedin Asia, the Americas and Europe, it provides integrated art creation, software engineering,
testing, localization, audio and customer care services across more than 50 languages and morethan 16 games platforms to a blue-chip client base of approximately 850 clients across theglobe.
It has a strong market position, providing services to 23 of the top 25 most prominent games
companies, including Activision Blizzard, Bandai Namco, Bethesda, Electronic Arts, Konami, Riot

Games, Sony, Square Enix, Supercell, TakeTwo, Epic Games and Ubisoft. Recent titles worked on
include Uncharted 4: A Thief's End, Call of Duty: WWII, Mortal Combat X, Assassin's Creed Origins,
Battleﬁeld 1, League of Legends, Fortnite, Clash Royale and Rainbow Six Siege. Keywords Studios
is listed on AIM, the London Stock Exchange regulated market (KWS.L).
Chairman's Statement
Introduction2018 was a year of good, and perhaps underappreciated, progress in which we delivered a 65%
increase in Adjusted Proﬁt Before Tax to €37.9m (2017: €23.0m) which was within the range ofmarket expectations albeit it was held back by certain project deferrals into 2019 and, unusuallyfor us, bad debts of approximately €1.6m relating to four clients entering insolvency processes,
some of which were caused by the 'Fortnite eﬀect' on the industry (as explained in more detail in
the Chief Executive's Review).
The 53% increase in Adjusted Basic Earnings Per Share to 47.75c demonstrates how eﬀectively
the Company is deploying capital and managing its margins while growing so strongly. This
performance was delivered while continuing to develop the Group's strong positioning in thevideo games market and creating an even better balanced, more diversiﬁed business with theaddition of several new services including marketing services, music management, sound eﬀects
and game and predictive analytics. We also signiﬁcantly strengthened our relatively newengineering/game development services oﬀering and invested in the expansion of studios which
created an additional 930 work stations across Beijing, Chengdu, Katowice, Liverpool, London, Los
Angeles, Manila, Milan, Montreal, Seattle and Tokyo. The businesses that have joined the Groupthrough acquisitions have integrated well, embracing the dynamic and self-eﬀacing Keywords
culture.
Like-for-Like revenue growth 5 was 10.1%; without the expected drag in the year from the VMC
acquisition, Like-for-Like revenue growth would have been 14.9%. However, we are pleased withthe overall contribution from VMC which has been signiﬁcantly earnings enhancing. The Like-forLike growth reﬂected good performances across the business although Localization Testing
revenues declined unexpectedly at the end of the year as a number of projects slipped into 2019.
5 Calculated on the basis that the full year 2017 comparative included all of the 2017 and 2018 acquisitions, as if they had
been owned for the same period in 2017 as they have been in 2018 and applying consistent foreign exchange rates inboth years.

Multiple growth opportunities
Overall, Keywords is well positioned to take advantage of the multiple opportunities we see as thevideo games industry is predicted to continue to grow strongly, at a CAGR of c.9% (source:
Newzoo, October 2018), despite the short-term disruption caused by Fortnite last year, and thetrend towards outsourcing continues as video games companies aim to avoid substantially
increased ﬁxed costs to handle peaks in activity levels. Having extended our service oﬀering
further during the year, many of our blue-chip games producers and developer clients now see us
as an important and trusted business partner who can bring considerable value to their games'
development and creation process.
Importantly, as cloud gaming and other subscription models emerge, we expect to see strong
demand for our services to support the signiﬁcant growth in content that these services will drive.
Our strategic vision hasn't changed since the flotation on AIM in July 2013, and, pleasingly, we are
signiﬁcantly ahead of those early plans both in size and scope. We continue to see plenty ofopportunity in the video games market to support our growth both organically and throughselective acquisitions and the landscape remains fertile with a number of businesses expressing
interest in joining us, so they can participate in Keywords' compelling partnering and growthmodel.
Managing and funding growth
Keywords' ability to source, execute and integrate acquisitions eﬀectively is a core skill and, as
the Group expands, more of the management team are involved in these assimilation processes.
We look for a strong cultural ﬁt and focus on the people joining the Group, rather than just seeing
it as acquiring businesses, so that we engender a partnership through which both parties work
closely together to complement each other.
We are also highly focussed on maintaining the interest, drive and passion of those who join
Keywords, to make sure that they are stimulated by new opportunities as part of a much larger
organisation without losing their entrepreneurial drive. One of the ways in which we have done
this is by strengthening the Group's management team with the highly experienced people webring in through our acquisitions; this, in combination with developing our existing team, in turnprovides further bandwidth across the management team to support the ongoing growth of thebusiness.
The funding of our acquisitions is achieved both by cash generated organically and through bankfacilities.
We are continuously improving our proﬁt-to-cash conversion, assisted by thestreamlining of our banking arrangements around the Group and are working towards centralised
cash pooling and regular draw-downs as standard within the treasury function. The increase in
our bank facilities to up to €105m, which we secured during the year, gives us good headroom
and demonstrates the strong support we enjoy from our banks for our growth strategy, given thestrength of our financial performance and the recurring nature of many of the revenues.
As we grow, we have continued to develop our business processes and strengthen ourgovernance practices. We have had a particular focus in 2018 on developing our operating andﬁnancial systems in order to enhance the management information available and streamline ourreporting processes further; this remains work in progress. We have also improved ourgovernance procedures with the adoption of the Quoted Companies Association code, as outlined
in further detail later in the Annual Report. Ensuring we have the best internal systems andcontrols, as well as more integrated and eﬃcient processes with our clients, will remain a focus in
2019.
PeopleThe progress of Keywords and its successful transition from being a small company with twoservice lines into what it is today is a credit not just to the top team, but to everyone throughout
the organisation for their part in making it happen. On behalf of the Board, I would like to thankall of the team for their strong contributions.
The whole executive team led by CEO Andrew Day, has worked impressively and performed wellduring the year. The team is operating in an industry that is not only fast growing but is a leading
technological innovator in interactive technology; that Keywords is now a respected provider ofservices and increasingly of technical innovations shows how much we have become a key
partner to our customers, despite most being many times our size.
Dividend
The Board is pleased to recommend a ﬁnal dividend of 1.08p per share which, following theinterim dividend of 0.53p per share will make a total dividend for the year ending 31 December
2018 of 1.61p per share. This reﬂects an increase of 10% compared to 1.46p for 2017 and isconsistent with our progressive dividend policy whilst retaining suﬃcient resources to fund our
future growth. Subject to shareholder approval at the Group's AGM, the dividend will be paid on
21 June 2019, to shareholders on the register on 31 May 2019.
Current Trading and Outlook
We have started 2019 promisingly. In a year in which the games industry is likely to see somechanges with the arrival of games subscription and streaming services from new entrants likeApple and Google, we feel well placed to benefit from the likely increased demand for content.
The considerable progress we made in 2018 has improved our quality of earnings and moved us
higher up the value chain. Accordingly, as we continue to strengthen our market leadership andthe breadth and scale of our service oﬀering, we are well placed to take advantage of themultiple growth opportunities afforded by a market that is growing in size and sophistication.
Ross Graham
ChairmanStrategic Report and Chief Executive's Review
Well placed to beneﬁt from the growth in content that will be driven by streaming
games and next generation consoles
The Group produced another good performance during the year, albeit its growth was slightly
held back by the anticipated low growth of VMC combined with the 'Fortnite effect' and, late in theyear, certain unforeseen project delays and cancellations (both explained in more detail in theorganic growth and investment section of this review). Despite these reverses, the underlying
performance of all but one of the seven service lines has been strong. The exception was
Localization Testing where we were particularly impacted by delays at the tail end of 2018 someof which we are now working on in 2019. Overall, we continued to increase our share of thegrowing video games market, with customers attracted by our ability to ﬂexibly deliver highquality services, across an increased and unrivalled range of services and geographies. The
addition of music management and sound eﬀects, marketing services and data analytics throughacquisitions in the year will further extend relationships with our clients.
Delivering on our strategy
Our strategy of building the world's leading technical and creative services platform for the video
games market and beyond continues to yield rapid, synergistic growth.
Operating globally across the lifecycle of video games, we continue to beneﬁt from the major
structural drivers of a growing industry, combined with a trend towards the outsourcing ofservices to create, test, market, internationalise and support interactive content. The video
games services market remains highly fragmented despite the scale and global nature of the
major video games publishers and developers. We continue to believe that the services provisionmarket needs to consolidate further in order to support the needs of game publishers anddevelopers who are grappling with the challenges of producing more extensive content whilst
meeting demands for higher quality. This includes the provision and support of this content inmore markets, across more devices and delivered in a range of formats - which looks set toextend to cloud-based delivery in 2019 and beyond. The ability and ﬂexibility to expand teamsizes and to turn to specialists who are available as needed is essential for publishers looking tosatisfy these demands rapidly, thus making outsourced and embedded services ever more
attractive.
During 2018 we successfully acquired and integrated eight companies, investing €33.1m in cash
(gross) and €27.3m in deferred cash and in shares. These businesses extended our services into
new areas such as marketing services, music management and predictive analytics andsigniﬁcantly strengthened our existing service lines including a considerable scaling up of our
newer Engineering Service line.
In particular, our entry into the design and production of trailers used to promote games has
added a new pillar for growth through the acquisition of Fire Without Smoke and The TrailerFarm.
In the first few days of 2019, we also completed the acquisition of our third company in marketing
services, Sunny Side Up, and we hope to add further scale to this activity to turn it into our eighth
service line.
We added Snowed In and, more substantially, Studio Gobo and Electric Square to our Engineering
Service line which had been signiﬁcantly enhanced by the acquisition of Sperasoft in the lastweeks of 2017. Following these acquisitions, this service line generates annualised revenues of c.
€35.8m, demonstrating that we have been able to build a service line of scale that is now the
fourth largest of our seven service lines, in a very short space of time. We are continuing toreview further acquisitions in this area of our business while we further integrate the six studiosthat currently comprise the service line.
Our recent acquisitions of Yokozuna Data and GetSocial have brought back-end gaming platforms
and underlying analytics to the Group to help games companies keep gamers in their game forlonger and improve their monetisation of the games. Whilst these acquisitions are not currently
earnings enhancing, we believe that they can be developed into valuable additional technologies
and services for clients and, therefore, additional revenue generators.
In our Audio Service Line, we extended our service oﬀering outside our traditional localised voiceover services, a ﬁeld in which we lead the video games industry, to music management, soundeﬀects and sound design and original language voice production through the acquisition of Cordand Laced, the hiring of a complete team in SoundLab and the acquisition of Blindlight. This
broadened scope of services has already led to synergies and cross selling successes within theservice line and with other service lines.
The Group has now fully integrated VMC, which was acquired in October 2017 for $66.4m(€57.9m). This very thorough integration exercise across four service lines and ﬁve studiolocations was completed ahead of schedule. As a result, VMC has contributed signiﬁcantly to theGroup's achievement of a 15.1% operating margin, despite the pre-acquisition operating marginof VMC having been about 9%. Although initially a drag on revenue growth (as expected), it hasgiven us the beneﬁts of real scale in certain service lines in North America, where we are seeing
growing demand, and it is significantly earnings enhancing.
Keywords Ventures
In July 2018, we launched Keywords Ventures ("KWV") to make modest investments in companies
with innovative technologies and services that will beneﬁt our clients and where we can help
commercialise those products and services through access to our global platform, relationships
and funding. We would not expect our annual investment in KWV to exceed 5% of our annual
spend on acquisitions. Our ﬁrst investment was for £300,000, in a Series A funding for up to a

45% shareholding in a pre-revenue company, AppSecTest Ltd, which has created AS Analyser, acloud based automatic testing solution that analyses apps and mobile games for compliance with
the GDPR, and which launched in late 2018.
Organic growth and investment
We have continued to deliver organic growth, having achieved a 10.1% increase in Like-for-Likerevenue at constant exchange rates in 2018 During 2018, our Like-for-Like revenue growth on
this basis was negatively aﬀected by two principal factors including the contribution from VMC
where revenue declined in the year, as anticipated, and due to what we have labelled as the'Fortnite effect'.
The phenomenally successful Fortnite game attracted some 200 million players during the courseof the year and in so doing disrupted other games which we support, although we ourselves now
do a considerable amount of work on Fortnite. In some of those cases, the competitive eﬀect andloss of player base was material enough for clients to reduce their spending on supporting
games, to terminate games and, while it may not be the only contributing factor, a few
companies ceased trading altogether (or went into insolvency processes), including Telltale andStarbreeze. Localization was the service line most affected by the 'Fortnite Effect'.
The drag on the Group's revenue growth by VMC primarily aﬀected Functional Testing, Player
Support and, to a lesser extent, Localization Testing. However, having now fully integrated VMC,
we expect it to contribute to revenue growth and good margins in those divisions incrementally
during 2019.
Due to these impacts, the headline growth per service line in some instances masks theunderlying trends but we have attempted to provide those underlying trends, alongside thereported numbers, in the service line review section below.
We continue to make good progress in cross selling our services into our client base. For the 12month period under review we increased the number of clients using three or more of ourservices to 99 clients in 2018 from 93 clients in 2017.
The investment programmes in the existing businesses that we began in late 2017 weresuccessfully completed in 2018 and resulted in increased capacity to support the organic growthof the business. The additional work stations created are being well utilised already and havehelped to support our organic growth during the year. We expect to further increase ouravailable work space in certain locations in 2019 but anticipate the level of investment returning
to the ordinary course of business, in contrast to 2017 to 2018 when the demand pressures forspace came together in many geographies and service lines.
While we successfully consolidated some locations during the year, the results of organic andacquisition led expansion meant we ﬁnished the year with 52 operating units in 21 countries up
from 42 and 20 respectively in 2017.
Service line review

Revenue Mix €'000

Year
ended
31-Dec18

Year
ended
31Dec-18

Year
ended
31-Dec17

Year
ended
31Dec-17

Art Creation

41,68816.6%

26,193

17.3%

Engineering

26,161

10.4%

3,572

2.4%

Audio

34,19013.6%

20,657

13.6%

Functional Testing

49,12819.6%

30,03319.8%

Localization

43,983

17.6%

41,95927.7%

Localization Testing

19,751

7.9%

19,84813.1%

Player Support

35,904

14.3%

9,168

6.1%

Total

250,805 100%

151,430 100%As the Group made a number of acquisitions during the year, the following table also provides an
overview of revenues on a Pro Forma basis, which includes the annualised sales of all acquisitions
made in each year, in order to provide a better overview of the size and balance of the businessat the end of each year. The service line commentary which follows reports on the statutory
revenues unless otherwise stated.

Proforma Revenue
Mix €'000

Year
ended
31-Dec18

Year
ended
31Dec-18

Year
ended
31-Dec17

Year
ended
31Dec-17

Art Creation

43,978

16.6%

36,239

16.4%

Engineering

35,803

13.5%

17,059

7.7%

Audio

36,897

13.9%

24,573

11.1%

Functional Testing

49,12818.5%

48,18321.8%

Localization

43,98416.6%

43,323

19.6%

Localization Testing

19,751

7.4%

22,717

10.3%

Player Support

35,904

13.5%

28,626

13.0%

Total

265,445 100%

220,720 100%

Art Creation (16.6% of Group revenues for the year)
This service line creates video game graphical art, including concept art, 2D and 3D art asset
production & animation and provides marketing services including game trailers, marketing art
and materials.
Headed by Ashley Liu, based in Beijing, Art Creation services revenue grew 59.2% to €41.7m(2017: €26.2.m) reﬂecting full year contributions from the 2017 acquisitions, SPOV, Red Hot andpart of Sperasoft, and, since May and September 2018, the contributions from the acquisitions ofFire Without Smoke and The TrailerFarm respectively.
On a Like-for-Like basis, Art Creation grew by 11.9% year-on-year, having beneﬁted from ourinvestment in expanded capacity in late 2017 and into 2018 which enabled it to meet more of thedemand for its services. In addition, increasing integration across a greater number of studios in
the art service line has enabled us to take on and deliver work that we would not otherwise havebeen able to service.
During the year we added marketing services, including the production of game trailers andmarketing art and materials, to the range of services Art Creation is able to oﬀer through theacquisitions of Fire Without Smoke and The TrailerFarm. Just after the year end, Sunny Side Up,
another game trailer and marketing services business joined the Group through acquisition. We
are continuing to review other acquisition opportunities in this area and may establish a separate
services line to house these activities once it reaches the requisite scale.
Engineering (10.4% of Group revenue for the year)
Engineering provides software engineering, porting to diﬀerent platforms and game development
services to publishers and developers as well as access to exclusive technology platforms anddata analytics. It works with its clients in a number of engagement models from the provision oftrouble shooting services, team augmentation, game porting to diﬀerent target platforms, codevelopment, full game development services and the provision of live game operations
services.
The Engineering service line which only started in 2017 has grown to represent around 13.5% ofGroup revenues on a proforma basis in 2018. Principally due to acquisitions made in the year its
revenues grew seven-fold to €26.1m (2017: €3.6m) reﬂecting full year contributions fromGamesim, d3t and Sperasoft which were acquired during 2017, while Snowed In, and Studio Goboand Electric Square have contributed since July and August 2018, respectively. Jamie Campbell,
formerly CEO of d3t, assumed responsibility for this service line in July 2018.
On a Like-for-Like basis, its revenues grew by 23.3%. We now have a 333-strong team which iscurrently working on some very high-proﬁle titles for some leading game developers andpublishers and we were able to announce projects we had delivered in 2018 including signiﬁcant
work on Shenmue I & II for Sega; Assassin's Creed Odyssey, Rainbow Six: Siege, and For Honor for
Ubisoft; and Miami Street for Microsoft. While this service line is more project based and exhibits
a lumpier revenue proﬁle than the rest of the Keywords business, it is important for the Group as
it is highly valued by our customers and ensures we are even more integrated with theirdevelopment life cycles, often at an earlier stage. It is also expected to see signiﬁcant demand as
customers increasingly port games content to cloud gaming platforms for streaming. We are,therefore, actively assessing further acquisition opportunities in this area and as we build its
scale, we expect to achieve smoother and more predictable revenues for this service line.
Audio (13.6% of Group revenue for the year)

Our Audio service line provides multi-language voiceover recording, original language voice
production, Hollywood production, and music and related services.
It increased revenues by 65% to €34.2m (2017: €20.7m) including full year contributions from our2017 acquisitions in Paris (La Marque Rose, Around the Word, Dune Sound and asrec) and of Lola,and contributions from Cord and Laced, and Blindlight since they were acquired in April and June2018 respectively.
On a Like-for-Like basis, revenues in our Audio service line grew by 9.8%. This was achieved
despite the collapse of two companies which were important clients for the service line andcertain unexpected delays and scale backs in projects, all of which can in part be attributed to the'Fortnite eﬀect'. It reﬂects the beneﬁts of our previous investments in our Audio service line,
including new studios in Tokyo and London.
Our search for suitable premises in which to co-locate our four voice recording businesses in Parisis continuing but our continued focus on ensuring the premises are suitable and good valuemeans it is taking longer than previously envisaged to achieve this goal. In the meantime, thesebusinesses are operating well from their existing studio locations under common management
and reporting.
Led by Andrea Ballista, based in Milan, Italy, our Audio business extended its services offering intosound design, music management and original language voice recording (principally in
Hollywood) during 2018 and these new services are showing good promise in their own right, in
addition to bringing cross selling beneﬁts to the Group. Games music is a niche but growing
market and one example of our success in this area is that our games music record label, Laced
Records, saw strong forward orders for its four-vinyl album of the music from Doom. As anotherexample, Cord managed all the music elements for a highly anticipated upcoming game, in which
it arranged the composition of music and the licensing of previously published tracks on behalf ofthe developer.
Our audio studio in Tokyo, which we opened in 2017, had a good ﬁrst full year of operations andhas beneﬁtted from a recently strengthened team in preparation for an even busier 2019, andour new, larger studios in London are enabling us to meet the strong demand for their services.
Functional Testing (19.6% of Group revenue for the year)
Functional Testing provides quality assurance, including discovery and documentation of gamedefects and testing to verify the game's compliance with hardware manufacturers' and app
stores' specifications, as well as focus group and user experience testing and consulting.
Our Functional Testing service line grew by 64% to €49.1m (2017: €30.0m), including a full year's
contribution from VMC which was acquired in October 2017. The service line also grew by 6.4%
on a Like-for-Like basis despite the anticipated drag from the inclusion of c. 52% of VMC revenues(at the time of acquisition) falling within Functional Testing. Excluding VMC, we estimate that thisLike-for-Like growth would have been 26.5% as our functional testing business in North America
has become the "go to" provider.
The service line management team led by Mathieu Lachance, who is based in Montreal, Canada,
have done well in integrating the VMC business, having consolidated their facilities, improved theprocesses in the business and implemented common tools such that there is now no discernible
diﬀerence between what was VMC and what is the larger Keywords team today. We expect thefunctional testing activities of VMC to grow at the same rate as the underlying service line in 2019and beyond. The VMC brand along with that of Babel has been replaced by the Keywords name toreﬂect this complete integration. Enzyme Testing labs continues to have its own branding for
now, although this may be rebranded during 2019.
Localization (17.6% of Group revenue in the year)
Localization provides translations of in-game text, audio scripts, cultural and local adaption,accreditation, packaging and marketing materials in over 50 languages.
Our Localization activities increased revenues by 5% to €44.0m (2017: €42.0m). Like-for-Likerevenues grew by 3.5% despite suﬀering a signiﬁcant impact from clients reducing support forsome of their games, which we believe was in large part due to the 'Fortnite eﬀect'. In particular,
one client who was the top ranked client by revenue for this service line in 2017 reduced its
spend substantially compared to the prior year and our expectations, leaving the Localization
service line to make up a c.€6m deficit.
During the year, the Localization service line, led by Fabio Minazzi in Milan, continued to invest in
new functionality and the scalability of our proprietary "BPS" operating platform and worked with

our suppliers of translation memory systems to increase the robustness of these solutions to
support the ever-increasing workloads we are putting through them. We have continued to
explore machine translation solutions and while we have found few opportunities for the use ofthis technology in video games localization so far, we will none-the-less be more active in building
this capability into our workﬂows during 2019. Our XLOC globalization content management
product progressed further in 2018 and we recently launched XLOC 6.2 with more developer ﬁleformats supported and new user interfaces, including in both Chinese and Japanese, making it the
only product of this kind available for Asian developers.
Localization Testing (7.9% of Group revenue for the year)
Localization Testing tests for out of context translations, truncations, overlaps, spelling, grammar,
age rating issues, geopolitical and cultural sensitivities and console manufacturer compliancerequirements in over 30 languages using native speakers.
Our Localization Testing operations maintained revenues at €19.8m (2017: €19.8m) helped by
the full year contribution from VMC. On Like-for-Like-basis however, its revenues declined by
10.6%.
This performance in part reﬂects VMC's inclusion (if VMC were excluded, Like-for-Like sales would
have declined 8.7%), but the key impact was from some important titles, that were expected tocome in for testing in the last two months of the year, being delayed to Q1 2019. Consequentially,
the service line has started strongly in the first months of 2019.
In addition, we anticipate that longer sales cycles, as we have concentrated more eﬀort on multi
service line strategic client relationships, should bear fruit in 2019 and the management team,led by Thomas Barth from Dublin, Ireland, are continuing to focus on quality and costeﬃciencies. In line with this focus, they are exploring the option of establishing a localization
testing operation in Katowice, Poland, leveraging the management, personnel and facilities
infrastructure created there by the Player Support Group to access the local, high calibre, yetgood value talent.
Player Support (14.3% of Group revenue for the year)
Player Support provides 365/24/7, multilingual support for gamers when games are in live
operation, forum monitoring and moderation services and social media engagement on behalf ofthe game brand.
Revenues for this service line, which beneﬁtted signiﬁcantly from a full year contribution from
VMC, almost quadrupled to €35.9m (2017: €9.2m). The VMC business reduced the Like-for-Like
growth of the business, as expected. Without VMC Like-for-Like growth would have been 94.1%,
rather than 30.8% including the effect of VMC.
This excellent underlying performance led by Frederic Arens, who moved from Montreal to ourTokyo studio during the year, was driven by organic expansion, including the opening of a new
support centre in Katowice, Poland, making use of the nearby presence of Sperasoft in Krakow.
This facility now employs 200 people having commenced in June 2018. Our Manila operation has
also continued to grow strongly and now has 700 employees, double the number in the prior year.
Player support is planning for a year of consolidation in 2019, after the exceptional growth in
2018. The Player Support operations assumed from VMC are being stabilised, although somefurther attrition is expected in 2019, and we expect it to return to growth by next year.
Managing growth and developing our people
In July 2018, we strengthened the senior management team with the promotions of Igor Efremov,
previously from Sperasoft, and Jamie Campbell, previously with d3t, to the roles of Chief
Commercial Oﬃcer and Service Line Director, Engineering respectively.
In addition, we
appointed Andrew Brown, whose background is in marketing at Danone, Coca Cola, Johnston &Johnston and Activision, to the role of Chief Marketing Officer.
The Group employed an average of 5,238 people in 2018 (2017: 3,167). Of these around 1,100
are ﬂexibly resourced positions, most notably in our testing businesses, which enables us to scale
up and down with the demands of the projects. Across our three regions of the Americas, Europe
and Asia, we employed an average of 2,056, 1,267 and 1,915 respectively. By function, these
5,238 positions break down in to 1,199 artists, 333 engineers/software developers, 1,615 testers
and test engineers, 1,113 player support agents, 165 internal linguists, 100 audio engineers, and
255 project managers and supervisors. We also have 458 people in our support functions,
including in ﬁnance/accounting, HR, IT, facilities, administration, and general management. Our
increasingly broad and deep pool of highly experienced and games-passionate co-workers provide
a tremendous resource that our clients can access as needed in order to get their content
developed, localised, marketed and supported in live operations, in a ﬂexible and cost-eﬃcientmanner across the globe and in appropriate time zones.
While we continue to develop our own tools to improve productivity and to use best of breed
solutions where we can in our business, talent remains by far our most important asset. There isalways more to do in investing in our people, but we continue to make improvements withtraining, beneﬁt schemes, career planning and we monitor ourselves in line with our policies of
non-discrimination, to ensure we are providing equal opportunities.
We are particularly proud and protective of our culture. It acts as the glue that binds our coworkers around the world together. Empowered, relaxed, professional and humble with a focus on
doing the very best we can for each project entrusted to us, this culture creates an environment
in which games-passionate individuals can work as an extension of our client's organisations
together with like-minded colleagues, while enjoying the opportunity to collaborate on most of
the world's leading games ahead of their release.
We are an increasingly attractive employer for many in the wider games industry, as we oﬀer theopportunity for individuals to work on around 250 leading games at any time or over 600
throughout the year, giving them an excellent and sustainable variety of work as well as goodcareer advancement and opportunities to work in many diﬀerent locations. We are proud of andaim to develop and retain our home-grown talent, but we are equally proud that a healthy
proportion of our colleagues have, and will, go on to work in games publishing and development
within our clients' organisations, creating a Keywords' alumnus which is helpful to both us and thegames industry in general.
Our acquisition programme also brings fresh talent to the Group at all levels and we continue tobe successful at integrating our businesses, including providing opportunities for our staﬀ andcolleagues to move between our various studios and the countries in which we operate. Our
senior leadership team, which comprises four people from the original Keywords business, ten
people from acquired entities as well as six externally hired employees is itself testament to theopportunities provided across the Group and our ability to complement the leadership team withtalented individuals from acquired companies.
We continue to see demand for our services from outside of the games industry due to thespeciﬁc expertise we have in interactive content development, testing and support. Working on
diﬀerent forms of content can help to further expand the horizons of our colleagues as they get
the opportunity to tackle challenges in new but related ﬁelds such as ﬁlm and TV, retail,education, automotive, advertising, architecture, urban planning, theme parks and interactive
experiences. In time, we intend to more proactively target expansion into some of theseadjacent market sectors, building on the experience we are already gaining.
Current video games market trends
Bursting onto the scene in the last months of 2018 has been the promise of streaming of video
games or cloud-based gaming. While earlier attempts from companies like OnLive and Gaikai
stalled in the earlier part of this decade, Google has now entered the market with its newly
launched Stadia streaming service and Microsoft has indicated its plans for its games streaming
project, codenamed xCloud, to provide streaming access to over 3,000 current Xbox titles,
supported by its Azure cloud infrastructure of 54 data centres serving 140 countries. Apple alsoannounced in March 2019 its Arcade subscription-based gaming service which, although not a
streaming platform per se, does provider gamers with access to many games through this new
subscription platform.
The promise of these subscription platforms providing easy, mostly device independent access, toplay video games anywhere in the world is compelling and, if successful, will be a major
opportunity for new entrants (such as Google and Apple) and for potentially new monetisation
models. As the music and ﬁlm and TV industries have experienced when moving towards
streaming services, we expect to see an increased demand for content as these streaming
platforms compete to become the "Netﬂix of games" and endeavour to host the most and thebest content to attract and retain their player bases. While we can't rule out some short-term
disruption from this development, we believe that Keywords is well placed to beneﬁt from thistrend as games are repurposed to run well on the new streaming platforms and new content iscreated that best ﬁts their capabilities. Keywords started working on a number of projects directly
related to video game streaming in the second half of 2018 and we have further increased our
exposure in the ﬁrst months of this year, with a number of services being provided anddiscussions ongoing with existing and potential clients about how we might support future
projects.
Few industry observers expect these developments in cloud-based gaming to displace the video
game consoles and PCs, on which so many games are played, in the short term. This is expected
to change as internet bandwidth improves around the world and latency issues are overcome.
The current generation of Sony and Microsoft devices launched in November 2013 have beenrefreshed since but there is now speculation over a new generation of Xbox and PlayStation
consoles which could launch over the next two years. This would represent another milestone forthe games industry and one from which we believe Keywords is well placed to beneﬁt. At thetime of the last launch, there was a sudden switch of investment by publishers and developers
away from the previous generation of games. This time, given that games as a service is such a
feature of games now, we expect to see the current generation of games continue to besupported while new games are developed that take advantage of the enhanced capabilities of
the new consoles.
The astounding success of Fortnite and, to a lesser extent, Player Unknown Battleground("PUBG"), has been a disruptor in the market in 2018, helping to attract new video gamers to themarket while also outcompeting other games. While we expect the success of both to continue,
we think the market is more settled now with Fortnite, PUBG and more latterly, Apex Legends an
integral part of it.
The mobile games sector continues to grow faster than other platform types, with much of thisgrowth originating in Asia. Keywords is proud to be supporting many of the world's leading mobile
games and, as the quality, complexity and scale of individual mobile games grows, this beneﬁts
Keywords as the skills, scale and global reach of all its services from development to player
support become more relevant to them.
MagicLeap released their much-anticipated augmented reality headset for use commercially inAugust, albeit it was restricted to the US. Microsoft have conﬁrmed that their HoloLens 2
augmented reality headset will be launched later this year but augmented reality, much likevirtual reality, is showing signs of slower adoption in the games industry than many had thoughta few years ago. Keywords does work extensively on VR content (games and non-games) as wellas AR but we don't anticipate these being major growth drivers in 2019.
eSports continues to develop strongly, and we increased our exposure to this market in a small
way through our entry into marketing services with the acquisitions of Fire Without Smoke, The
TrailerFarm and Sunny Side Up. We continue to seek out ways in which we can participate in thissegment in a more meaningful manner.
Also, of note has been Epic Games (publisher of Fortnite) move into providing the market with alower cost route of getting games to market than the established platforms such as Steam. If
game developers and publishers reduce their costs of distribution and increase their margins as aresult, this may translate into higher spend on content creation, marketing and support which will
benefit Keywords.
Service provider market
The service provider market remains highly fragmented and, in addition to the continued growthin our end market driving demand, we continued to see a trend to outsourcing across all ourservice lines, with Art Creation, Functional Testing and Engineering likely to beneﬁt more given
the high proportion of this type of work that remains in house. In addition, we hope to further
increase market share and benefit from our larger scale as we further consolidate our market.
Outlook
We have had an encouraging start to 2019, with trading for the ﬁrst quarter being in line with our
expectations. Some important new business wins, including in the game streaming space, andgood overall demand for our services across the Group give us conﬁdence in the outcome for thefull year.
We expect 2019 to be lighter in capital expenditure than 2018, although we won't hesitate toinvest in growth and enabling technologies as the opportunities arise and as we see the business
requiring more space, people, tools, and systems.
Whilst we are listed in the UK, only a relatively small proportion of our business is in the UK where
we now employ a total of 317 people. As a highly international diversiﬁed business that operates
in a very global market we, therefore, do not expect Brexit to have a material impact on thebusiness.
Our acquisition program is continuing at pace, with a particular focus on building up ourmarketing, engineering and audio services. Having completed the acquisition of Sunny Side Up inearly January, we announced in February 2019 that we had acquired GetSocial, which brings to
the Group leading edge technology which drives user engagement, retention, acquisition andmonetisation through social interactions of players within the game. We are actively reviewing ahealthy pipeline of acquisition opportunities from which we will continue to be selective, withmany businesses excited about the strong platform Keywords could potentially provide for theirservices and people.

Our Keywords Ventures arm has an active pipeline of investment opportunities in areas that would
beneﬁt our video game client base and beyond. The application of artiﬁcial intelligence andmachine learning to the video games space is interesting and a number of these opportunities lie
in this general arena. We see potential to leverage the latest technologies and big data expertiseto provide services to our clients which help them better understand and inﬂuence player
behaviour, so they can attract players more cost eﬀectively, retain them for longer and better
monetise players while, at the same time, ﬁne tuning and improving the game experience forplayers.
As a more diversiﬁed, better balanced business with signiﬁcantly expanded range of services tooﬀer our clients, we look forward to developing our relationships with our clients throughincreased integration of services, the development of more strategic client relationships, acrossmultiple services, and through the provision of dedicated outsourced or embedded services.
Andrew Day
Group Chief Executive Officer

Financial and Operating Review
Strong results driven by good organic growth complemented by acquisitions
Group performance
2018 has seen the Group deliver another year of signiﬁcant increases in revenue, proﬁt andunderlying cash generation driven by strong organic growth, substantially complemented byacquisitions which have further extended its service oﬀering, market penetration and geographic
reach.
Revenue
Revenue for 2018 was up 66% at €250.8m (2017: €151.4m). Overall six of the seven service lines
grew, with Engineering and Player Support being particularly strong. This growth was generated
through a combination of both organic and acquisitive growth. On a Constant Currency basis,revenue grew to €258.6m (2017: €151.4m). The Like-for-Like revenue growth rate was 10.1% for
the year, down from 15% in 2017 due to the onboarding of the VMC business. Excluding VMC, theLike-for-Like revenue growth rate, was 15%, which was in line with our expectations and a strong
growth rate from a larger base.
Gross margin
Gross proﬁt for the year was €95.8m (2017: €55.1m). The gross margin percentage increased to38.2% (2017: 36.4%).
EBITDAEBITDA for the year was €34.3m (2017: €21.9m). Adjusted EBITDA is a measure of operating
proﬁt used by the Board, which excludes depreciation, amortisation, share option expenses andone-time costs related to acquisitions. For 2018, Adjusted EBITDA increased 66% to €43.7m
compared with €26.3m for 2017. As a percentage of revenue, Adjusted EBITDA has been
maintained at 17.4% compared to 17.4% for 2017.
Adjusted Operating Costs, which excludes depreciation, increased by €23.2m to €52m (2017:€28.8m) mainly as a result of the acquisitions made in 2017 and during the year. The continued
additional investment in strengthening Keywords' management to successfully manage thegrowth of the Group also contributed. These costs increased from 19.0% to 20.7% of revenue.
Net finance costs
During 2018, there was a net ﬁnance cost of €0.5m compared to a cost of €4.4m in 2017
primarily due to the impact of foreign exchange gains of €0.8m (2017: loss of €3.6m).
The
foreign exchange movements were largely due to the eﬀect of translating net current assets held
in foreign currencies. The interest expense of €0.5m (2017: €0.3m) related partly to thesyndicated revolving credit facility ("RCF") of up to €105m over a three-year period of which€40m was drawn down at the year end.
Profit before taxation
Proﬁt before tax for the year was €22.1m (2017: €12.0m). Adjusted Proﬁt Before Tax is used by
the Board to measure the more meaningful underlying proﬁt generation of the Group. Thismeasure adds back one-time expenses, including acquisition and integration expenses of €5.6m(2017: €3.0m), share option charges of €4.1m (2017: €1.4m), foreign currency exchange gains orlosses of €0.8m (2017: loss of €3.6m), and amortisation of intangibles of €6.9m (2017: €3.0m) to
the statutory proﬁt before tax. As a result, Adjusted Proﬁt Before Tax for 2018 increased by 65%
to €37.9m compared with €23.0m in 2017.
Revenue mix
Revenues increased across six of our seven lines of business in 2018, staying constant in
Localization Testing, resulting in our seven service lines accounting for the following proportion ofGroup sales in the year on a statutory and pro forma basis*:

Revenuemix %Art Creation
Engineering
Audio
Functional
Testing
Localization
Localization
Testing
Customer
SupportTotal

Revenue

Revenue

Proforma* revenue for theYear ended

Year ended

Year ended

31-Dec-18

31-Dec-17

31-Dec-18

%

%

%

16.6
10.4
13.6
19.6
17.6
7.9
14.3
100.0

17.3

16.6

2.4

13.5

13.6

13.9

19.8

18.5

27.7

16.6

13.1

7.4

6.1

13.5

100.0

100.0

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

Following acquisitions made in late 2017 and through 2018, the proportion of the Group's
revenues denominated in US Dollars is running at around 49%, while those in Euros and Canadian
Dollars are around 22% and 16% respectively. The UK has grown in importance to the Group as aresult of our investments in the more technical and creative areas of our business, resulting inannualised revenues denominated in Sterling of approximately 9%.
Taxation
The Group's eﬀective tax rate has decreased again in 2018. We continue to make steadyprogress in making better use of our Ireland-based operational headquarters in contracting andtreasury management such that we expect our eﬀective tax rate to continue to reduce despite
our exposure to higher tax jurisdictions in most of the territories we operate in. The Group's
adjusted eﬀective tax rate, based on the Adjusted measure of Proﬁt Before Taxation in the period(as set out in the financial overview above), was 19.0% (2017: 20.5%).
Basic earnings per share
Basic earnings per share based on the statutory proﬁt after tax was 23.16c (2017: 12.37c).
Adjusted Basic Earnings Per Share for the year, before one-time costs of acquisitions andintegration, share option charges, amortisation of intangibles, and foreign exchange movements,
increased by 53% to 47.8c compared with 31.2c for 2017.
Cash flow and debt
The Group generated operating cash flow of €32.2m for the year, up from €16.7m in 2017.
During the year the Group also received multi-media tax credits ("MMTCs") in Quebec of €10.9m(2017: €3.4m). MMTCs in relation to VMC for the years 2015 to 2017 were collected in 2018 andthe total MMTC accrual amounted to €9.2m as at 31 December 2018 (2017: €10.0m).
The Group made eight acquisitions to strengthen the business during the year with a related net
cash outﬂow on consideration payments of €24.1m, and an additional €4.5m in acquisition andintegration cash outlay.
Investment in ﬁxed assets amounted to €9.4m (2017: €3.8m) reﬂecting the ongoing costs of IT
across larger staﬀ numbers and cost of further increasing the capacity of the Montreal, Tokyo andManila studios, and improvements to both the Dublin and London studios. Additionally, there wereongoing purchases of games development and testing equipment.

Following the investment of €24.1m net cash consideration for acquisitions in 2018, cash andcash equivalents increased to €39.9m from €30.4m. The loans and borrowings were €40.3m at
31 December 2018 (2017: €19.3m) having utilised €40m of its €75m revolving credit facility,
giving a net debt position of €0.4m (2017: €11.1m net cash).
Capital Structure and Group Financing
The Keywords Group funds itself primarily through cash generation and a syndicated revolving
credit facility. The bank debt facility is a €75m RCF, with an option to increase this to €105m. The
Keywords Group had €40m drawn from the RCF at year-end 2018. The RCF matures in June 2021
and has an option to extend it for up to a further 2 years.
As at 31st December 2018, the Group had available cash balances and undrawn facilities which,aggregated, were c. €75M. These available funds and ongoing cash generation from activities
provide appropriate operational headroom and available funding for strategic purposes.
Key Financial Covenants
The majority of Group borrowings are subject to ﬁnancial covenants that are calculated inaccordance with the facility agreement:·

Leverage: A maximum Total Net Borrowings to Adjusted EBITDA ratio of 3 times; and·Interest Cover: A minimum Adjusted Operating Profit to Net Finance Costs ratio of 4 times.

The Group's performance against these covenants is the current and comparative year is set out
below:

Leverage
Interest CoverCovenant
Maximum 3.0
Minimum 4.0

2018
Times
0.19
40.29

2017
Times
-0.47
40

Foreign exchange
Keywords does not hedge foreign currency profit and loss translation exposures. The effect on theGroup's results of movements in exchange rates and the foreign gains and losses incurred during
the year mainly relate to the effect of translating net current assets held in foreign currencies.
Dividend
The Group has a progressive dividend policy, subject to the retention of funds needed to fundfuture growth of the Group's business and its strategic aims.
Following the interim dividend payment of 0.53p per share in October 2018, the Board has
recommended a ﬁnal dividend of 1.08p per share, which will make the total dividend for the year
ending 31 December 2018, 1.61p per share, a 10% increase over 2017. Subject to shareholder
approval at the Annual General Meeting, the ﬁnal dividend will be paid on 21 June 2019 to allshareholders on the register at 31 May 2019 and the shares will trade ex-dividend on 30 May
2019. The cash cost of the ﬁnal proposed dividend will be an estimated €0.8m, subject tocurrency fluctuations.
Review of distributable reserves and rectification of prior dividends
The Board has identiﬁed technical breaches in respect of certain interim and ﬁnal dividends
having been declared and paid otherwise than in accordance with the requirements of theCompanies Act 2006 (the "Act").
The Company has previously declared ﬁnal dividends and certain interim dividends relating to theﬁnancial years 2014 to 2016 without having had suﬃcient distributable reserves in the holding
company as required by the Companies Act 2016 due to a failure to make the necessary
upstream distributions from subsidiaries to the Company despite such reserves being available.
This was recognised during 2017 and a major distribution exercise was undertaken to rectify the
problem.
In addition to the above, no interim accounts were ﬁled at Companies House prior to the payment
of interim dividends previously paid by the Company in the years 2013 to 2018. This was
identified by the Board in August 2018 and legal advice obtained.
It is important to make clear that no party has been or is in a worse position as a result of theseoversights.

The Company is seeking authority to release all relevant parties from any potential liability via a
speciﬁc shareholder resolution to be put to the shareholders at the 2019 AGM. Accordingly, theappropriate resolution, if passed, will authorise the Company to enter into deeds of release to put
all relevant parties in the position in which they were always intended to be had the relevant
dividends been made in accordance with the Act.
Full details, including the form of the deeds of the release, will be included in the circular andnotice of the 2019 AGM to be sent to shareholders. For the avoidance of doubt, procedures are
now in place to ensure that this does not happen again in the future.
Events after the reporting period
On 3 January 2019, we announced that the Group acquired Sunny Side Up Creative Inc in Canada
for a total consideration of CAD 5.9m comprised of an initial cash consideration of CAD 4.75m oncompletion and the issue of 60,179 ordinary shares in Keywords. Sunny Side Up generated
Adjusted EBITDA of CAD 1.2m in the year to September 2018.
On 21 February 2019, we announced that the Group acquired GetSocial B.V. in Netherlands for a
total consideration of €0.2m.
David Broderick, FCCA
Chief Financial Officer

Consolidated Statement of Comprehensive Income

Years ended 31 December
2018

2017

Note

€'000

€'000

Revenue from contracts with customers

4

250,805

151,430

Cost of sales

5(154,997)(96,345)

95,80855,085Gross profit
Share option expense

17(4,129)(1,426)

Costs of acquisition and integration
Amortisation of intangible assets
Total of items excluded from adjusted profit
measures
Other administration expenses

512(5,296)(6,872)(3,016)(3,038)(16,297)(56,826)(7,480)(31,170)(73,123)(38,650)

22,685

16,435Administrative expenses
Operating profit
Financing income
Financing cost
Share of post-tax profit / (loss) of equity
accounted associates

6
6

791
(1,316)26(4,467)

27

(66)

-

Profit before taxation
Tax expense

722,094(7,191)

11,994(4,731)

14,903

7,263

27

(25)

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

19foreign
operations
Exchange
gain / *(loss) on translation offoreign operations
Total comprehensive income
Earnings per share
Basic earnings per ordinary share
Diluted earnings per ordinary share

8
8

1,270

(893)

771

(3,598)

16,971

2,747€ cent23.16
22.24€ cent12.37
11.87* Please note that "Exchange gains / (loss) on net investments in foreign operations" 2017, have been re-classified to correctlyclassify them as "Items that may be reclassified subsequently to profit or loss", within Other Comprehensive Income

All Proﬁt and Comprehensive Income is attributable to the shareholders. The notes form an
integral part of these consolidated financial statements.
On behalf of the Board
Andrew Day
DirectorDavid
BroderickDirector

8 April 2019

Consolidated Statement of Financial Position

Note
Non-current assets
Property, plant and equipment
Goodwill
Intangible assets
Investment in associate
Deferred tax assets
Current assets
Trade receivables
Other receivables
Cash and cash equivalents
Total assets
EquityShare capital
Share capital - to be issued
Share premium
Merger reserve
Foreign exchange reserve
Shares held in EBTShare option reserve
Retained earnings
Total equity
Current Liabilities
Trade payables
Other payables
Loans and borrowings
Corporation tax liabilities
Non-current liabilities
Other payables

At 31 December
2018
2017
Restated(note 31)
€'000
€'000

13
11
12
27
26

15,002
154,20225,884160
2,967
198,215

10,111
108,062
23,548
1,206
142,92714
15

37,01923,45939,871
100,349
298,564

27,473
22,33530,37480,182
223,109

16
16
16
16

763
15,648102,225
35,996(1,463)(1,997)
6,674
34,529192,375

737
11,620102,054
28,878(3,504)(1,997)
2,545
20,679161,012

7,142
41,15340,071
6,665
95,031

7,310
22,17918,943
3,245
51,677

1,062

1,233

18
20

18

Employeebenefit plans
Loans and definedborrowings
Deferred tax liabilities

19
20
26

1,378
230
8,488
11,158298,564

Total equity and liabilities

1,055
337
7,795
10,420223,109

The notes form an integral part of these ﬁnancial statements. The ﬁnancial statements wereapproved and authorised for issue by the Board on 8 April 2019.
On behalf of the Board
Andrew Day

David
BroderickDirector

Director
8 April 2019

Consolidated Statement of Changes in Equity

Balance at 1
January 2017
Profit for theperiodOther
comprehensive
incomeTotal
comprehensive
income for theperiodContributions
by andcontributions
to the owners:
Shares issued for
cash
Share option
expenseShare options
exercised
Dividends paid(note 9)Acquisition
related issuanceof shares (note16)
Reclassificationof sharepremium on
acquisitions tomerger reserve
Contributions
by andcontributions
to the owners
Balance at 31
December2017
Measurement
periodadjustment (note31)
Balance at 31
December2017 restatedProfit for theperiodOther
comprehensive
incomeTotal
comprehensive

SharecapitalSharecapital /shares to
be issued

Sharepremium

Mergerreserve

Foreignexchangereserve

Sharesheld in
EBT

Share
optionreserve

Retainedearnings

Total equity

€'000

€'000

€'000

€'000

€'000

€'000

€'000

€'000

€'000

654

8,792

19,983

22,109987(1,434)

1,305

14,30866,704

-

-

-

-

-

-

-

7,263

7,263

-

-

-

-

(4,491)

-

-

(25)

(4,516)

-

-

-

-

(4,491)

-

-

7,238

2,747

61

-

82,261

-

-

-

-

-

82,322

-

-

-

-

-

-

1,240

-

1,240

6

-

608

-

-

(563)

-

-

51

-

-

-

-

-

-

-

(867)

(867)

16

2,947

-

5,971

-

-

-

-

8,934

-

-

(798)

798

-

-

-

-

-

83

2,947

82,071

6,769

-

(563)

1,240

(867)

91,680737

11,739102,054

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

2,545

20,679161,131

-

(119)

-

-

-

-

-

-

(119)

737

11,620102,054

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

2,545

20,679161,012

-

-

-

-

-

-

-

14,903

14,903

-

-

-

-

2,041

-

-

27

2,068

income for theperiodContributions
by andcontributions
to the owners:
Shares issued for
cash
Share option
expenseShare options
exercised
Dividends paid(note 9)Acquisition
related issuanceof shares (note16)
Contributions
by andcontributions
to the owners
Balance at 31
December
2018

-

-

-

-

2,041

-

-

14,93016,971

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

4,129

-

4,129

3

-

171

-

-

-

-

-

174

-

-

-

-

-

-

-

(1,080)(1,080)

23

4,028

-

7,118

-

-

-

-

11,169

26

4,028

171

7,118

-

-

4,129

(1,080)14,392763

15,648102,225

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

6,674

34,529192,375

Consolidated Statement of Cash Flows
Years ended 31 December

Note

2018

2017

€'000

€'000

14,903

7,263

Cash flows from operating activities
Profit after tax
Income and expenses not affecting operating cash flows
Depreciation

13

5,316

2,730

Intangibles amortisation

12

6,872

3,038

Income tax expense

7

7,191

4,731

Share option expense

17

4,129

1,426

Costs of acquisition & integration *

5

5,296

3,016

63

103
266

Loss on disposal of fixed assets
Unwinding of present value adjustment on deferred consideration *6

311

Share of post-tax loss of equity accounted associates

27

66

-

Interest receivable

6

-

(26)

Employee benefit costs

19

279

209

Interest expense *

6

502

312

(992)

2,033

29,033

17,838(7,680)2,506

Unrealised foreign exchange (gain)/loss

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

(370)

(873)

Decrease / (increase) in other receivables

2,850(4,540)(Decrease) / increase in trade and other payables

(252)

(82)

(5,452)(2,989)

Income taxes paid

(6,304)(5,454)

Net cash provided by operating activities

32,18016,658(86,776)

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

28(24,163)

Prior year acquisition of subsidiaries net of cash acquired

29

(726)

-

Settlement of deferred liabilities on acquisitions

18(1,603)(298)

Investment in associate

27

(226)

-

Acquisition of property, plant and equipment

13(9,440)(3,803)

Investment in intangible assets

12(1,599)-Acquisition & integration cash outlay

5(4,530)(3,016)

Interest received
Net cash used in investing activities
Cash flows from financing activities-

26(42,287)(93,867)

Repayment of loans

30(10,835)(23)

Loan to finance acquisitions

30

31,850

10,250

Dividends paid

9

(1,080)(867)

Financing EBT for share options exercised
Shares issued for cash
Interest paid

16

-

(563)

174

82,936

(502)

(279)

Net cash provided by financing activities

19,60791,454

Increase / (decrease) in cash and cash equivalents

9,500

14,245

Exchange (loss) / gain on cash and cash equivalents

(3)

(891)

Cash and cash equivalents at beginning of the period

30,37439,871

17,02030,374

Cash and cash equivalents at end of period* Please note that comparatives have been re-classified to reflect current year presentation as the Directors consider this presentation to be more meaningful.

Notes Forming Part of the Consolidated Financial Statements
1.

Basis of Preparation

Keywords Studios PLC (the "Company") is a company incorporated in the UK. The consolidated
ﬁnancial statements include the ﬁnancial statements of the Company and its subsidiaries (the"Group") made up to 31 December 2018. The Group was formed on 8 July 2013 when Keywords
Studios PLC (formerly Keywords Studios Limited) acquired the entire share capital of Keywords
International Limited through the issue of 31,901,332 ordinary shares.
The consolidated ﬁnancial statements have been prepared in accordance with International
Financial Reporting Standards, International Accounting Standards and interpretations(collectively IFRS) issued by the International Accounting Standards Board (IASB) as adopted by
the European Union ("adopted IFRSs").
The ﬁnancial statements have been prepared in thousands (€'000) and the ﬁnancial statements
are presented in Euro (€) which is the functional currency of the Group.
New Standards, Interpretations and Amendments Effective 1 January 2018
Impact of IFRS 9
The Group implemented IFRS 9 Financial Instruments, as of 1 January 2018. The new standard
includes revised guidance on the classiﬁcation and measurement of ﬁnancial instruments. With
the exception of adopting the new expected credit loss model for calculating impairment on
ﬁnancial assets, the implementation of the new standard has not resulted in signiﬁcant change inthe relevant accounting policies for the Group. For the Group, the ﬁnancial instruments that are
impacted are trade receivables. At the end of each accounting period, the Group assesses therequirement for the impairment of trade receivables on the basis of the expected credit loss rate.
Having assessed the requirements according to the standards, the Group has concluded that no
signiﬁcant additional impairment to the carrying values of the assets was required at 1 January
2018, or at 31 December 2018. The new standard has not resulted in a signiﬁcant change in how
the Group records financial liabilities.
Impact of IFRS 15
The Group implemented IFRS 15 Revenue from Contracts with Customers, as of 1 January 2018.
The new standard sets out revenue recognition requirements, and establishes principles forreporting information about the nature, amount, timing and uncertainty of revenue and cash
ﬂows arising from the Group's contracts with customers. Following implementation of IFRS 15,
there was no material impact of transition on retained earnings at 1 January 2018, on the Group's
statement of ﬁnancial position as at 31 December 2018, on its statement of proﬁt or loss andother comprehensive income, or on the cash ﬂows for the period to 31 December 2018. The newstandard also introduces expanded disclosure requirements; however, the implementation of the
new standard did not result in a signiﬁcant change in the revenue recognition accounting policiesof the Group.
New Standards, Interpretations and Amendments Not Yet Effective
The Group has adopted the following standards from 1 January 2019. The Group does not expect
any other standards issued by the IASB, but not yet eﬀective, to have a material impact on theGroup.
Impact of IFRS 16
IFRS 16 Leases was issued in January 2016 and replaces IAS 17 Leases, IFRIC 4 Determining
Whether an Arrangement Contains a Lease, SIC-15 - Operating Leases - Incentives and SIC-27 Evaluating the Substance of Transactions Involving the Legal Form of a Lease. The new standard
is applicable from 1 January 2019.

The Group has entered into leases, across the business, principally relating to property. These
property leases have varying terms and renewal rights. The Group has adopted IFRS 16 from 1
January 2019, by applying the modiﬁed retrospective approach. In 2019, the Group now
recognise a liability to make lease payments (i.e. the lease liability) and an asset representing theright to use the underlying asset during the lease term (i.e. the right-of-use asset), for all material
lease arrangements over 12 months in duration.
The main impact on the ﬁnancial statements will be to recognise on 1 January 2019, assets andliabilities, in the Statement of Financial Position in relation to right-of-use assets and liabilities(previously considered as operating leases), of €22.8m. In the 2019 Consolidated Statement ofComprehensive Income, as the right-of-use assets are capitalised and depreciated over the termof the lease, with an associated ﬁnance cost applied to the lease liability, we anticipate operating
expenses will decrease, as lease payments of €7.1m (which is less than operating lease payments
disclosed in note 5 as short term leases will continue to be recognised under IAS 17), previously
recognised in administration expenses, are capitalised. In addition, depreciation expenses (alsorecognised in administration expenses) of €6.9m will be recognised, while ﬁnancing costs will
increase by €0.6m, under the new standard. This will lead to an improvement in EBITDA,
Operating proﬁt and Proﬁt before taxation. The Group's Cash Flow Statement in 2019 willseparate the interest and capital repayment elements of leases payments.
These ﬁnancial statements made up to 31 December 2018 have been prepared under IAS 17 as
outlined in note 2.
Impact of IFRIC 23
IFRIC 23 Uncertainty over Income Tax Positions, which was issued in June 2017, clariﬁes how torecognise and measure current and deferred income tax assets and liabilities when there is
uncertainty over income tax treatments. The new standard is applicable from 1 January 2019.
The Group do not anticipate a material impact on the ﬁnancial statements on transition to the
new standard.
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 indicatethat 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 therelevant activities of the investee without holding the majority of the voting rights. In determining
whether de-facto control exists, the Company considers all relevant facts and circumstances,including:····

The size of the Company's voting rights relative to both the size and dispersion of otherparties who hold voting rights;
Substantive potential voting rights held by the Company and by other parties;
Other contractual arrangements; andHistoric patterns in voting attendance.

The consolidated ﬁnancial statements present the results of the Company and its subsidiaries("the Group") as if they formed a single entity. Intercompany transactions and balances between
Group companies are eliminated in full.
Business Combinations
The consolidated ﬁnancial statements incorporate the results of business combinations using thepurchase method. In the Consolidated Statement of Financial Position, the acquired identiﬁable
assets, liabilities and contingent liabilities are initially recognised at their fair values at theacquisition date. The results of acquired operations are included in the consolidated income
statement from the date on which control is obtained. They are consolidated until the date on
which control ceases.
Any contingent consideration payable is recognised at fair value at the acquisition date and issplit between current liabilities and long-term liabilities depending on when it is due. The fairvalue of contingent consideration at acquisition date is arrived at through discounting the
expected payment (based on scenario modelling) to present value. In general, in order forcontingent 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 andany change recognised in the Statements of Comprehensive Income.
For deferred consideration which is to be provided for by the issue of a ﬁxed number of shares at
a future deﬁned date, where there is no obligation on Keywords to oﬀer a variable number ofshares, the deferred consideration is classiﬁed as an equity arrangement and the value of theshares is fixed at the date of the acquisition.
Equity accounted investments
The Group's investments in its associates are accounted for using the equity method from thedate signiﬁcant inﬂuence is deemed to arise until the date on which signiﬁcant inﬂuence / joint
control ceases to exist or when the interest becomes classified as an asset held for sale.
Goodwill
Goodwill represents the excess of the cost of a business combination over, in the case of businesscombinations completed prior to 1 January 2010, the Group's interest in the fair value ofidentiﬁable assets, liabilities and contingent liabilities acquired and, in the case of businesscombinations completed on or after 1 January 2010, the total acquisition date fair value of theidentifiable assets, liabilities and contingent liabilities acquired.
For business combinations completed prior to 1 January 2010, cost comprised the fair value of
assets given, liabilities assumed and equity instruments issued, plus any direct costs ofacquisition. Changes in the estimated value of contingent consideration arising on businesscombinations completed by this date were treated as an adjustment to cost and, in consequence,
resulted in a change in the carrying value of goodwill.
For business combinations completed on or after 1 January 2010, cost comprises the fair value of
assets given, liabilities assumed and equity instruments issued, plus the amount of any noncontrolling interests in the acquiree plus, if the business combination is achieved in stages, thefair value of the existing equity interest in the acquiree. Contingent consideration is included inacquisition date fair value and, in the case of contingent consideration classiﬁed as a ﬁnancial
liability, re-measured subsequently through proﬁt or loss. For business combinations completed
on or after 1 January 2010, direct costs of acquisition are recognised immediately as an expense.
Goodwill is capitalised as an intangible asset with any impairment in carrying value being
charged to the consolidated statement of comprehensive income.
Intangible Assets
The Group's Intangible Assets comprise Customer Relationships and Other Intangible Assets.
Customer Relationship
Intangible assets, separately identiﬁed from goodwill acquired as part of a business combination(mainly Customer Relationships), are initially stated at fair value. The fair value attributed isdetermined by discounting the expected future cashﬂows 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. A useful economic life of
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 andinternally developed. Other intangible assets are recognized as assets where it is probable thatthe use of the asset will generate future economic beneﬁts and where the costs of the asset canbe determined reliably. Other intangible assets that are acquired by the Group are stated at costless 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 isexpensed as incurred. Other intangible assets with deﬁnite useful lives are amortized from thedate they are available for use on a straight-line basis over their useful lives, being the estimatedperiod over which the Group will use the assets. Residual amounts, useful lives and theamortization 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 orsale;• 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 thedevelopment and to use or sell it;• the ability to measure reliably the expenditure attributable to the intangible asset during its
development.
Following initial recognition of the development expenditure as an intangible asset, the costmodel is applied requiring the intangible asset to be carried at cost, less any accumulated
amortization and accumulated impairment losses. The intangible asset is amortized on a straightline basis over the period of its expected beneﬁt, starting from the date of full commercial use of
the product. During the period of development, the asset is tested for impairment annually. If
speciﬁc events indicate that impairment of an item of intangible asset may have taken place, theitem's recoverability is assessed by comparing its carrying amount with its recoverable amount.
The recoverable amount is the higher of the fair value net of disposal costs and the value in use.
Impairment
Impairment tests on goodwill and other intangible assets with indeﬁnite useful economic lives areundertaken annually at the ﬁnancial year end. Other non-ﬁnancial assets are subject toimpairment tests whenever events or changes in circumstances indicate that their carrying
amount may not be recoverable. Where the carrying value of an asset exceeds its recoverable
amount (i.e. the higher of value in use and 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, theimpairment 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 to each of the Group's CGUs that are expected to beneﬁt from a businesscombination that gives rise to the goodwill.
The Group has one CGU. This CGU represents the lowest level at which goodwill is monitored by
the Group and the lowest level at which management captures information for internalmanagement reporting purposes about the beneﬁts of the goodwill. Impairment charges areincluded in proﬁt or loss, except to the extent they reverse gains previously recognised in othercomprehensive income. An impairment loss recognised for goodwill is not reversed.
Cash and Cash Equivalents
For the purpose of presentation in the Statement of Financial Position and on the Statement of
Cash Flows, cash and cash equivalents include cash on hand and on call deposits with ﬁnancial
institutions.
Foreign Currency
Transactions entered into by Group entities in a currency other than the currency of the primaryeconomic environment in which they operate (their "functional currency") are recorded at therates ruling when the transactions occur. The functional currency of the Company is Euro. Foreign
currency monetary assets and liabilities are translated at the rates ruling at the reporting date.
Exchange diﬀerences arising on the retranslation of unsettled monetary assets and liabilities arerecognised immediately in profit or loss.
On consolidation, the results of overseas operations are translated into Euro at rates
approximating to this ruling when the transactions took place. All assets and liabilities of overseas
operations, including goodwill arising on the acquisition of those operations, are translated at therate ruling at the reporting date. Exchange diﬀerences arising on translating the opening net
assets at opening rate and the results of overseas operations at actual rate are recognised inother 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 theforeign exchange reserve on consolidation. On disposal of a foreign operation, the cumulative
exchange diﬀerences recognised in the foreign exchange reserve relating to that operation up to
the date of disposal are transferred to the consolidated statement of comprehensive income aspart 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time-and-materials or milestone based. Most contracts are short term in duration (generally lessthan one month), however milestone based contracts are typically long term and extend to many
months (or over a year in many cases). Where there are multiple performance obligations
outlined in a contract, each performance obligation is separately assessed, the transaction priceis allocated to each obligation, and related revenues are recognised as services or assets aretransferred to the customer.
Revenue is derived from seven main service groupings:·

Art Creation Services - Art creation services relate to the production of graphical art assets
for inclusion in the video game including concept art creation along with 2D and 3D art
asset production and animation. Contracts can be either time-and-materials based, or
milestone based, with performance obligations satisﬁed over time. Contracts are generally
short term in duration, however for longer contracts the input method is used to measureprogress. Time and materials-based contract revenue is recognized as the related services
are rendered. For milestone-based contracts where progress can be measured reliably
towards complete satisfaction of the performance obligation, revenue is recognised using
the input method to measure progress. Where progress cannot be measured reliably,revenue is recognised on milestone acceptance.

·

Engineering - Engineering relates to software engineering services which are integrated
with client processes to develop video games. Contracts can be either time-and-materials
based, or milestone based, with performance obligations satisfied over time. Contracts are
generally long term in duration. Time and materials-based contract revenue is recognised
as the related services are rendered. For milestone-based contracts where progress can bemeasured reliably towards complete satisfaction of the performance obligation, revenue isrecognised using the input method to measure progress. Where progress cannot bemeasured reliably, revenue is recognised on milestone acceptance.

·

Audio / Voiceover Services - Audio Services relate to the audio production process forcomputer 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
licencing 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 isrecognised using the input method to measure progress. Where progress cannot bemeasured reliably, audio services revenue is recognised on milestone acceptance. Music
licencing and music soundtracks performance obligations are assessed separately, andrelated revenue is recognised on licence inception and on delivery of the soundtracks,
respectively.

·

Localization Services - 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-and-materials based and performance obligations are satisfied over time.
Contracts are generally short term in duration, however for longer contracts the input
method is used to measure progress. Localization contracts may also involve licencing
translation software as a service. Such revenue is assessed separately. Revenue isrecognised 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
and performance obligations are satisfied over time. Contracts are generally short term induration, however for longer contracts the input method is used to measure progress.
Revenue is recognised as the related services are rendered.

·

Functional Testing - Functional Testing relates to quality assurance services provided togame producers to ensure games function as required. Contracts are typically time-andmaterials based and performance obligations are satisfied over time. Contracts are
generally short term in duration, however for longer contracts the input method is used tomeasure progress. Revenue is recognised as the related services are rendered.

·

Player Support - Player support relates to the live operations support services such ascommunity management, player support and associated services provided to producers ofgames to ensure that consumers have a positive user experience. Contracts are typicallytime-and-materials based and performance obligations are satisfied over time. Contracts
are generally long term with the input method used to measure progress. Revenue isrecognised as the related services are rendered.

Due to the nature of the services provided and the competitive nature of the market, contracts

generally allocate speciﬁc transaction prices to separate performance obligations. Individual
services or individual milestones generally involve extensive commercial negotiation to arrive thespeciﬁc agreed-upon tasks, and the related pricing outlined in the contract. Such negotiations
extend further for milestone based contracts to also include the criteria involved in the periodic
and regular process of milestone acceptance by the customer. Such criteria may involve
qualitative, as well as quantitative measures and judgements.
In measuring progress towards complete satisfaction of performance obligations, the input
method is considered to be the most appropriate method to depict the underlying nature of thecontracts with customers, the interactive way the service is delivered and projects are managedwith the customer. For time-and-materials contracts, other than tracking and valuing time
expended, signiﬁcant judgement is not normally involved. For milestone based contracts,
progress is generally measured based on the proportion of contract costs incurred at the balance
sheet date, (e.g. worked days) relative to the total estimated costs of the contract, involving
estimates of the cost to completion etc. Added to this signiﬁcant judgement can be involved inmeasuring progress towards customer acceptance of the milestone. Signiﬁcant judgement may
also be involved where circumstances arise that may change the original estimates of revenues,
costs or extent of progress towards complete satisfaction of the performance obligations. In suchcircumstances estimates are revised. These revisions may result in increases or decreases inrevenue or costs and are reﬂected in income in the period in which the circumstances that giverise to the revision became known. When the outcome of a contract cannot be measured reliably,
contract revenue is recognised only to the extent that milestone have been accepted by thecustomer. 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 itis probable that consideration will be received. Where consideration is received and the related
revenue has not been recognised, the consideration received is recognised as a contract liability(Deferred Revenue), until either revenue is recognised or the consideration is refunded.
Multimedia Tax Credits / Video Game Tax Credits
The multimedia tax credits ("MMTC") received in Montreal and video games tax credits ("VGTC")
in the UK, are a credit related to staﬀ costs. Accordingly, they are treated as a deduction against
direct costs. The nature of the grants is such that they are not dependent on taxable proﬁts. Tax
credits have only been recognised where management believe that a tax credit will berecoverable based on their experience and the success of similar historical claims.
Share-based Payments
The Company issues equity settled share-based payments to certain employees and Directors
under a share options plan and a Long-Term Incentive Plan ("LTIP").
The fair value determined at the grant date is expensed on a straight-line basis over the vesting
period, based on the Company's estimate of shares that will eventually vest and adjusted for theeﬀect of non-market-based vesting conditions. At each reporting date, the Company revises its
estimate of the number of equity instruments expected to vest as a result of the eﬀect of nonmarket-based vesting conditions. The impact of the revision of the original estimates, if any, isrecognised in proﬁt or loss such that the cumulative expense reﬂects the revised estimate, with acorresponding adjustment to equity reserves. The Company has no legal or constructive
obligation to repurchase or settle the options in cash.
Where share-based payments are issued to employees of subsidiary companies, the annual costof the option is expensed in the holding company and recharged to the subsidiary company
through an inter-company charge.
Share Option Plan
These are measured at fair value, taking into account market vesting conditions but not nonmarket vesting conditions 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 theshare price, the current share price, the exercise price and the risk-free interest rate. The fairvalue of the option is amortised over the vesting period, with one-third of the options vesting after
two years, one-third after three years, and the balance vest after four years. The only vesting
condition is continuous service. There is no requirement to revalue the option at any subsequentdate. The charge that is recognised is adjusted to reﬂect failure to vest due to non-achievementof a non-market vesting condition, but not failure to vest due to the non-achievement of a market
vesting condition.
LTIP

An alternative share plan was introduced to give awards to Directors and staﬀ, subject tooutperforming the Numis Small Cap Index (excluding Investment Trusts) in terms of shareholder
return over a three-year period. For the awards up to 2015, there were three award levels: onethird of the share options vest if the Company shall exceed the Total Shareholder Returns of the
Numis Small Cap Index by not less than 10%, two-thirds if the shareholder return exceeds by over
20% and 100% if the shareholder return exceeds by over 30%. This was amended for the 2016
and 2017 awards to 100% if the shareholder return exceeds by over 45%, and a pro-rated return
between 10% and 100% if the shareholder return exceeds by between 0% and 45%.
These are measured at fair value, taking into account market vesting conditions but not nonmarket vesting conditions, at the date of grant, measured by using the Monte Carlo binomial
model. The charge that is recognised is adjusted to reﬂect failure to vest due to non-achievementof a non-market vesting condition, but not failure to vest due to the non-achievement of a market
vesting condition.
Dividend Distribution
Final dividends are recorded in the Group's ﬁnancial statements in the period in which they 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 fordifferences arising on:···

The initial recognition of goodwill;
The initial recognition of an asset or liability in a transaction which is not a businesscombination and at the time of the transaction affects neither accounting or taxable profit;
andInvestments in subsidiaries and jointly controlled entities where the Group is able to control
the timing of the reversal of the difference and it is probable that the difference will notreverse in the foreseeable future.

The amount of the asset or liability is determined using tax rates that have been enacted or
substantively enacted by the reporting date and are expected to apply when the deferred tax
liabilities / (assets) are settled / (recovered).
Deferred tax assets and liabilities are oﬀset when the Group has a legally enforceable right tooﬀset current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes
levied by the same tax authority on either:··

The same taxable Group company; orDifferent 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 inwhich significant amounts of deferred tax assets or liabilities are expected to be settled or
recovered.

Property, Plant and Equipment
Property, plant and equipment comprise computers, leasehold improvements, and oﬃce furnitureand equipment, and are stated at cost less accumulated depreciation. Carrying amounts arereviewed for impairment whenever events or changes in circumstances indicate that theircarrying amount may not be recoverable. Where the carrying amount of an asset is greater thanits estimated recoverable amount, it is written down immediately to its recoverable amount.
Property, plant and equipment acquired through business combinations are valued at fair valueon 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

33.33

Office furniture and equipment

10.00

Building and leasehold improvements

over the length of thelease

Gains and losses on disposals are determined by comparing proceeds with carrying amount andare included in the consolidated statement of comprehensive income.
Financial Assets
The Group's most signiﬁcant ﬁnancial assets comprise trade and other receivables and cash andcash equivalents in the statement of ﬁnancial position, whereas the Company's most signiﬁcant
financial assets comprise inter-group receivables.
Trade Receivables
Trade receivables, which principally represent amounts due from customers, are recognised 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 has been revised in line with the requirements of IFRS 9.
The simpliﬁed approach to providing for expected credit losses has been applied to tradereceivables, which requires the use of a lifetime expected loss provision. As part of the IFRS 9transition project, the Group assessed its existing trade and other receivables for impairment,using reasonable and supportable forward looking information that is available without undue
cost or eﬀort, to determine the credit risk of the receivables at the date on which they were
initially recognised and compared that to the credit risk as at 1 January 2018. This assessment
has not resulted in a material adjustment to trade and other receivables.
Trade receivables are written-oﬀ when there is no reasonable expectation of recovery, such as adebtor failing to engage in a repayment plan with the company.
There has been no signiﬁcant change to the carrying value of trade and other receivables as aresult of the implementation of IFRS 9.

Previous accounting policy for impairment of trade and other receivables
In the prior year, the impairment of trade receivables was assessed based on the incurred loss
model. Individual receivables which were known to be uncollectible were written oﬀ by reducing
the carrying amount directly. An estimate for doubtful debts was made when there was objective
evidence that the Group would not be able to collect amounts due according to the original termsof receivables. Bad debts were written off when identified.
Intercompany Receivables
Intercompany receivables are recognised at amortised cost as they meet the IFRS 9 classiﬁcation
test of being held to collect, and the cash ﬂow characteristics represent solely payments ofprincipal and interest.
The Group applies the general approach to applying the expected credit losses to its related partyloans. Under the General Approach, at each reporting date, the Group determines whether there
has been a Signiﬁcant Increase in Credit Risk (SICR) since initial recognition and whether the loanis credit impaired. This determines the amount of expected credit losses to be recognised.
There has been no signiﬁcant change to the carrying value of intercompany receivables upon theimplementation of IFRS 9.

Previous accounting policy for intercompany receivables
In the prior year, the impairment of intercompany receivables was based upon the incurred losses
model, whereby impairment losses were recognised when there was objective evidence that theGroup would not be able to collect amounts due to the original terms.
Cash and cash equivalents
Cash and cash equivalents are necessary for the working capital requirements of the Group. They
include cash in hand, deposits held at call with banks and other short-term highly liquid
investments. Where cash is on deposit with maturity dates greater than three months, it isdisclosed as short-term investments.
Contract Assets
Contract assets arising from Revenue from Contracts with Customers are recognised inaccordance with our Revenue Recognition policy, as discussed separately in this note. The Groupapplies the simpliﬁed approach to assessing expected credit losses in relation to contract assets,
as the maturities of such assets are less than 12 months. Based upon the recoverability ofcontract assets subsequent to the year end, no significant expected credit loss provision has been
applied.
Share Capital
Financial instruments issued by the Group are treated as equity only to the extent that they do
not meet the deﬁnition of a ﬁnancial liability. The Group's ordinary shares are classiﬁed as equity
instruments.
Financial Liabilities
Trade payables, bank borrowings and other short-term monetary liabilities are initially recognised
at fair value and subsequently carried at amortised cost using the effective interest method.
Leased Assets
Where substantially all of the risks and rewards of ownership are not transferred to the Group("operating lease"), the total rental payables are charged to the consolidated statement ofcomprehensive income on a straight-line basis over the term of the lease.
Finance Leases
Where substantially all of the risks and rewards incidental to ownership of a leased asset havebeen transferred to the Group (a "ﬁnance lease"), the asset is treated as if it had been purchased
outright. The amount initially recognised as an asset is the lower of the fair value of the leased
property and the present value of the minimum lease payments payable over the term of thelease. The corresponding lease commitment is shown as a liability. Lease payments are analysed
between capital and interest. The interest element is charged to the consolidated statement ofcomprehensive income over the period of the lease and is calculated so that it represents a
constant proportion of the lease liability. The capital element reduces the balance owed to thelessor.
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 theprocess of applying the entity's accounting policies and that have the most signiﬁcant eﬀect on
the amounts recognised in the financial statement, are outlined below.
·

Functional Currency: The directors have considered the requirements of IAS 21 indetermining the currency that most faithfully represents the economic effects of theunderlying transactions, events and conditions to determine the Group's functional
currency. Detailed consideration has been given to both the Primary and Secondary
Indicators in forming this conclusion. The Primary Indicators relate to revenues, regulation,competitive forces and costs, while the Secondary Indicators are primarily concerned withfinancing the business and the currency in which receipts from operating activities areusually retained. With a mix of currencies dominating the indicators, there is no clear single
currency that influences the Group, however the EUR remains marginally the mostdominant when all factors are considered. Therefore the directors consider the EUR as thecurrency that most faithfully represents the economic effects of the underlying
transactions, events and conditions.

·

Business Combinations: When acquiring a business, the Group is required to identify andrecognise intangible assets, the determination of which requires a significant degree ofjudgement. 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 notmeet the recognition requirements of IFRS and therefore form part of goodwill. Customer

relationships are recognised as separate assets where revenues are recurring in nature andmaterial revenues have been generated with the customer for a continuous period of 3
years. For the Engineering service line, the key asset acquired is typically "know-how", anasset that is not readily measurable and thus intrinsically linked to goodwill. Relationships
are typically short term contract based rather than relationship based. Therefore neither
customer contracts or customer relationships are typically recognised on the acquisition of
an Engineering business.
Estimates and assumptions
The estimates and assumptions that could have a signiﬁcant risk of causing a material
adjustment to the carrying amounts of assets and liabilities within the next ﬁnancial year, aremonitored by the Directors on an ongoing basis. A number of areas requiring the use of estimatesand critical judgements impact the Group's earnings and financial position. These include revenue
recognition, the computation of income taxes, the value of goodwill and intangible assets arisingon acquisitions, the valuation of multimedia tax credits / video game tax credits and the valuationof deﬁned retirement beneﬁts. The Directors consider that no reasonably possible changes toany of the assumptions used in the estimates would in the view of the Directors give rise tosigniﬁcant risk of a material adjustment to the carrying value of the associated balances in thesubsequent ﬁnancial year. While a number of these areas were highlighted in the 2017 Annual
Report, because the Directors consider that no reasonably possible changes to any of theassumptions used in the estimates would give rise to signiﬁcant risk of a material adjustment,these items have been removed from the Critical Accounting Estimates and Judgements.
4.

Revenue From Contracts With Customers and Segmental Analysis

Revenue From Contracts With Customers
Revenue recognised in the reporting period arises from contracts with customers, and is
predominantly recognised over time. There were no signiﬁcant amounts of revenue recognised in
the reporting period that were included in a contract liability balance at the beginning of thereporting period, or from performance obligations satisfied in the previous reporting period.

Revenue by line of businessArt creation
Audio
Localization
Functional testing
Localization testing
Customer support
Engineering

2018
€'000

2017
€'000

41,68834,19043,98349,12819,75135,904
26,161
250,805

26,193
20,657
41,95930,033
19,848
9,168
3,572
151,430

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

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

2018
€'000

2017
€'000

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

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

Poland
Philippines
Taiwan347
250,805

151,430

No single customer accounted for more than 10% (2017: None) of the Group's revenue during theyear.
For all service lines excluding Engineering, contracts do not extend to more than one year,
therefore we do not disclose information concerning unsatisﬁed performance obligations, asallowed under the practical expedient exemption under IFRS 15. This practical expedient is alsoavailed of for Engineering contracts of less than one year in duration. For Engineering contracts
that extend beyond one year the aggregate amount of the transaction price allocated to theperformance obligations that are unsatisﬁed (or partially unsatisﬁed) as of the end of thereporting period is as follows:
Value ofundelivered
performanceobligations forcontracts greaterthan one year
At 31 December
2018
At 31 December
2017

Scheduledcompletion Scheduled
Total
within 1 completion
undeliveredyear
1-2 years
€'000
€'000
€'000
10,417

9,112

1,305

-

-

-

The balances arise primarily in new acquisitions during 2018. There were no signiﬁcantundelivered performance obligations for contracts greater than one year in 2017.
Segmental Analysis
Management considers that the Group's activity as a single source supplier of Services to thegaming industry constitutes one operating and reporting segment, as defined under IFRS 8.
Management review the performance of the Group by reference to Group-wide proﬁt 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 theexecutive management team made up of the Chief Executive Officer and the Finance Director.
Geographical Analysis of Non-Current Assets from Continuing Businesses
2018

CanadaIreland
Switzerland
Italy
India
United States
Japan
United Kingdom
Spain
China
Singapore
Germany
BrazilMexicoFranceRussiaPoland€'000
11,760
3,542
11,117
11,6502,321
84,685796
48,929
1,535
7,850
52
1,097
888
885
6,318
797
267

2017
Restated (note
31)
€'000
8,889
119
11,158
11,723
2,588
77,177565
10,011
1,520
7,707
42
1,168
231
892
6,531
866
58

Philippines
TaiwanGeographical Analysis of Noncurrent
AssetsfromContinuing Businesses
Investment in associate
Deferred tax assets
Non-current assets

5.

595
4
195,088472
4
141,721

195,088160
2,967
198,215

141,721
1,206
142,927

Cost of Sales and Operating Profit
2018
€'000

Cost of sales
Operating expenses *Multimedia tax credits /video game tax credits

163,112(12,220)

2017
€'000
98,850(4,408)Other direct costs

1,903
4,105
154,997
96,345*Please note the comparative has been re-classiﬁed to be consistent with current year
presentation, as the Directors have determined this presentation to be more meaningful.
Operating profit is stated after charging:
2018
€'000
Depreciation
Amortisation of intangible
assetsCosts of acquisitions &integration
Operating lease payments

Costs of acquisitions& integration
Post-acquisition
integrations costs re:2018 acquisitions (note28)
Post-acquisition
integrations costs re:2017 acquisitions (note29)
Fair value adjustments
tocontingent
consideration
Deferred consideration
related to continuing
employment
Acquisition related andother borrowing costs
Acquisition team andrelated costs

Auditors'

5,316
6,872

2017
€'000
2,730
3,038
3,016

5,296
8,708

2,369

2018

2017

€'000

€'000

758

-

1,875

2,336

766

-

590

-

693

-

614
5,296

680
3,016

2018
€'000

2017
€'000

remuneration
Audit services
Parentcompanyand Group audit
Subsidiarycompanies audit
Non-audit services
Acquisition relateddue
diligenceservices
Audit
relatedassurance services
Taxationcompliance

6.

164

329

99

137

242

-

-

16

73

7
489

578

Financing Income and Cost
2018

Finance income
Interest received
Foreign exchange gain

€'000

2017
Restated
€'000

791
791

26
26

Finance cost
Bank charges
Interest expense
Unwinding of discounted liabilities *Foreign exchange losses

(503)
(320)
(502)
(312)
(311)
(266)
(3,569)(1,316)(4,467)
Net financing income / (cost)(525)(4,441)*Please note the comparative has been restated to separate "Unwinding of discounted liabilities"
from "Interest expense", as the Directors have determined this presentation to be moremeaningful.
7.

Taxation
2018

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

€'000

2017
Restated
€'000

9,592
(2,401)
7,191

5,762
(1,031)
4,731

The tax charge for the year can be reconciled to accounting profit as follows:
2018

Profit before tax
Tax charge based on the Effective Tax Rate*
Corporate tax prior year (over) / underprovision
Deferred tax prior year (over) / underprovision and impact of change in tax rates
Items disallowed for tax purposes
Exempt and non-taxable income
Tax incentives
Current year tax losses utilised
Current year tax losses where deferred tax
has not been provided
State and other direct taxes€'000
22,094
5,345

2017
Restated€'000
11,994
3,175

(352)

62

(368)

(55)

2,205
(588)
(1,035)
(131)
730

717
(259)
(222)
(40)
631

1,529

758

Otherdifferences
Total tax
charge - net*Eﬀective tax rate - being the statutory tax
rate relative to the proﬁt before tax in eachjurisdiction

(144)
7,191
24.2%

(36)
4,731
26.5%

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

2018
€'000
1,270

2017
€'000
(893)

1,270

(893)

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

27

(25)

6
33

7
(18)

Exchange gain / (loss) on translation offoreign operations
Tax (expense) / benefit
Net of tax amount771(3,598)771(3,598)Exchange gain / (loss) in net investments
foreign operations
Tax (expense) / benefit
Net of tax amount8.

Earnings per Share

Basic
DilutedProﬁt for
operations

theperiodfrom

Denominator(weighted
number of equity shares)
Basic *
Diluting impact of Share Options
Diluted *2018€ cent
23.16
22.24

2017
€ cent
12.37
11.87

€'000

€'000

14,903

7,263

Number64,335,162
2,679,932
67,015,094

Number
58,720,884
2,477,788
61,198,672

1,321,707

2,174,526

continuing

average* Includes (weighted average) shares to beissued (note 16)

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

LTIPs
Share options

2018
Number
951,800
544,900
1,496,700

2017
Number-Details of the number of share options outstanding at the year-end are set out in note 17.

9.

Dividends

Dividends
PaidIn
respect Approval
of
date

Pence
€ Cent per STG per
share
share

Total
dividend€'000

Payment
date

Final

2016

Apr-17

1.01

0.89

563

Jun-17

Interim
Dividends paid
to shareholders
2017

2017

Sep-17

0.54

0.48

304

Oct-17

1.55

1.37

867

Final

2017

Apr-18

1.11

0.98

696

Jun-18Interim
Dividends
paid
toshareholders
2018

2018

Sep-18

0.60

0.53

384

Oct-18

1.71

1.51

1,080

In
Expected €Pencerespect Approvalcent per STG per
Recommended
of
date
share
share
Final

2018

1.21

1.08

Expected
total Expected
dividend payment
€'000
date
774

Jun-19There are no income tax consequences for the Company in respect of the dividends proposed
prior to issuance of the Consolidated Financial Statements and for which a liability has not beenrecognised.
The Group does not recognise deferred tax on unremitted retained earnings, as in general,
retained earnings are continually re-invested by the Group and dividends are only remitted where
there are minimal tax consequences.
At 31 December 2018 Retained Earnings available for distribution (being retained earnings plus
share option reserve) in the Company were €4.1m (2017: €2.2m). The Directors do not foresee
any impediment in continuing to implement the dividend policy of the Group.
Following on distributions made in 2016 and 2017 that were not fully in compliance with theCompanies Act 2006, the Directors have implemented legal advice to ensure ongoing complianceand rectify the oversights in earlier periods.
10. Staff Costs
Total staff costs (including Directors) comprise the following:

Salaries & related costs
Share based payment costs

2018

2017

€'000

€'000

146,785 81,563
4,129
1,426
150,914 82,989

Key management compensation:
2018

2017

€'000907 €'000
690
99
79
27
4
501
141
1,534
914

Salaries & related costs
Social welfare costs
Pension costs
Share based payment costs

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

2018

2017

4,733 2,921
505
246
5,238 3,167

11. Goodwill

At 1 January 2017
Recognition on acquisition of subsidiaries (note 29)
Exchange rate movement
At 31 December 2017 as reported
Measurement period adjustment on Sperasoft
goodwill (note 31)
At 31 December 2017 restated
Recognition on acquisition of subsidiaries (note 28)
Exchange rate movement
At 31 December 2018€'000
46,79966,853(4,645)
109,007(945)
108,062
43,144
2,996
154,202

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

1-5 year growth
rateassumption
Long
term
growthrateassumption
Value in use(€m)
Carrying value goodwill (€m)

Actual2018 2017

Sensitivity analysis
2018 20172018 2017

10%

10%

15%

15%

5%

5%

2%

2%

2%

2%

2%

2%

445

371

532

399

378

284

154

108

The value in use calculations were consistently calculated year over year, with no signiﬁcantchanges in the assumptions made. The result of the value in use calculations was that no
impairment is required in this period.
12. Intangible Assets
CustomerIntellectualMusic
relationships
property
licences

Total€'000Cost
At 1 January 2017
Recognitiononacquisition
subsidiaries
Exchange rate movement
At 31 December 2017
Recognitiononacquisition
subsidiaries
AdditionsExchange rate movement
At 31 December 2018
Amortisation
At 1 January 2017
Amortisation charge
Exchange rate movement
At 31 December 2017
Amortisation charge
Exchange rate movement
At 31 December 2018
Net book value
At 31 December 2017
At 31 December 2018

€'000

€'000

€'000

11,630--

11,63018,962(1,310)29,282-- 18,962- (1,310)- 29,282

6,564
867
36,713

1,521
1,521

362
6,926
78
1,599
(4)
863
436 38,670

2,934
3,038
(238)
5,734
6,758
179
12,671

-

2,934
3,038
(238)
5,734
114
6,872
1
180
115 12,786

23,54824,042

1,521- 23,548
321 25,884

ofof

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

13. Property, Plant and Equipment
Group
Computers andsoftware€'000

Office furniture andequipment€'000

Leaseholdimprovements
€'000

Total
€'000

8,485

3,158

1,724

13,367

(685)

(216)

(222)

(1,123)

Additions
Acquisitions
throughbusiness
combinations
at fair value

2,514

772

601

3,887

2,214

603

1,350

4,167

DisposalsAt
31
December2017
Currency
revaluation

(54)

(1)

(29)

(84)

12,474

4,316

3,424

20,214

(114)

(15)

27

(102)

6,248

1,082

2,110

9,440

362

272

332

966

Cost
At 1 January
2017
Currency
revaluation

Additions
Acquisitions
throughbusiness
combinations
at fair valueDisposals
At
31
December
2018
Accumulated
depreciation
At 1 January
2017
Currency
revaluation
Depreciation
chargeDisposalsAt
31
December2017
Currency
revaluation
Depreciation
chargeDisposalsAt
31
December
2018
Net
book
value
At
31
December
2017
At
31
December
2018

(645)

(248)

(89)

(982)

18,325

5,407

5,804

29,536

5,756

1,790

323

7,869

(293)

(111)

(72)

(476)

1,795

543

392

2,730

(6)

-

(14)

(20)

7,252

2,222

629

10,103

(51)

11

74

34

3,805

643

868

5,316

(645)

(185)

(89)

(919)

10,361

2,691

1,482

14,534

5,222

2,094

2,795

10,111

7,964

2,716

4,322

15,002

14. Trade Receivables

Group

2018
€'000

2017
€'000

Trade receivables
Provision for bad debts
Financial asset held at amortised cost

38,736(1,717)37,01927,891(418)
27,473

Trade receivables arise from revenues derived from contracts with customers.
15. Other Receivables

Group Short Term*

Accruedincome from contracts withcustomers
Prepayments & rent deposits
Other receivablesMultimedia tax credits / video games tax
credits
Tax and social security

2018
€'000

2017
€'000

6,317
2,490
2,459

5,140
4,179
2,524

10,8201,373
23,45910,016476
22,335*Please note the comparative Group Short Term, "Other Receivables" has been re-classiﬁed to beconsistent with the current year presentation.
Accrued income from contracts with customers, represent mainly contract assets in process andrelated items. The movement in the year is comprised of transfers in and out as items areaccrued and subsequently invoiced to customers, with no signiﬁcant amounts written oﬀ orimpaired in the period.
16. Shareholders' Equity

Share Capital

Date
At 1 January
2017
Shares issued
on the ﬁrst
anniversary of
the acquisitionof Synthesis
Shares issued
on acquisitionof Xloc
Shares issued
on acquisitionof Gamesim
Shares to beissuedonacquisition of
Red Hot
Shares issued
on acquisitionof AsrecShares to beissuedonacquisition of
Aroundthe
Word
Shares issued
on acquisitionof d3tShares to beissuedonacquisition of
Sperasoft
Shares issued
on acquisitionof LolaAcquisition
relatedissuanceofsharesReclassificationofsharepremiumonacquisitions
Placingofshares on themarketIssue of shareson exercise ofshare options
At
31
December2017
Measurement
periodadjustment(note 31)At
31
December
2017
restated

Shares to beissuedonacquisition ofCord & Laced
Shares issued
on the second
anniversary of
the acquisitionof Synthesis

Per
share
€

Number ofordinary£0.01 shares
to be issued

Number ofordinary£0.01 shares

Sharecapital
€'000

Share
premium€'000

Sharesto beissued€'000

Mergerreserve€'000

54,428,882

2,889,707

654

19,983

22,109

8,792

13Apr

9.40

1,188,253(1,188,253)

14

-

3,440

(3,454)

10May

9.47

19,134

-

-

-

184

-

17May

9.20

151,725

-

2

-

1,392

-

22May

9.12

-

160,842

-

-

-

1,468

04Aug

13.12

9,534

-

-

-

101

-

04Aug

12.07

-

66,262

-

-

-

800

19Oct

14.46

42,368

-

-

-

686

-

13Dec

14.26

-

252,248

-

-

-

4,133

15Dec

16.56

10,106

-

-

-

168

-

1,421,120(708,901)

16

-

5,971

2,947

-

-

-

(798)

798

-

15.62

5,357,143-

61

82,261--1.23

501,060

-

6

608

-

-

61,708,205

2,180,806

737

102,054

28,878

11,739-(8,806)

-

-

-

(119)

737

102,054

28,878

24Oct

14.26

61,708,205

09Apr

24Apr

2,172,000

11,62017.48-

73,744

-

-

1,289

3,440

(3,455)2.91

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

15

Shares issued
on the second
anniversary of
the acquisitionof Synthesis inlieu of deferred
cash
Sharesto beissuedonacquisition ofFire
Without
Smoke
Shares issued
on the second
anniversary of
the acquisitionof Mindwalk
Shares to beissuedonacquisition of
Blindlight
Shares to beissuedonacquisition of
Snowed In
Shares to beissuedonacquisition ofStudio Gobo &Electric Square
Shares to beissuedonacquisition of
The Trailerfarm
Shares issued
on the ﬁrst
anniversary of
AroundtheWordAcquisition
relatedissuanceofshares

24Apr

19.39

51,562

-

1

999

-

-

1,550

1,880

(1,886)

-

1,327

-

743

-

5,024

-

236

-

01May

20.12

-

77,006

-

14Jun

3.67

513,189(513,189)

6

11Jun

20.57

-

64,521

-

20Jul

19.55

-

37,983

-

-

-

-

-

20Aug

19.74

-

254,529

-

18Sep

21.33

-

11,070

-

01Oct

12.07

66,262(66,262)

1

-

799

(800)

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

23

-

7,118

4,028

260,805

-

3

171

-

-

63,788,286

923,139763

102,225

35,996

15,648Issue of shareson exercise ofshare options

-

0.67

At December
2018

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

Ordinary shares held by
the EBT2017

Shares€'000

Shares€'000

335,425

1,997 335,425

1,997

Reserves
The following describes the nature and purpose of each reserve within owners' equity:
Reserve
Description and purpose
Retained earnings
Foreignreserve

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

exchange 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 forshares issued in excess of their nominal value, net ofshare issuance costs.
Share option reserve The share option reserve is the credit arising on sharebased payment charges in relation to the Company's shareoption schemes.
Shares to be issued

For deferred consideration which is to be provided for by
the issue of a ﬁxed number of shares at a future deﬁneddate, where there is no obligation on Keywords to oﬀer avariable number of shares, the deferred consideration isclassiﬁed as an Equity Arrangement and the value of theshares is fixed at the date of the acquisition.

Merger reserve

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

17. Share Options
In July 2013, at the time of the IPO, the Company put in place a Share Option Scheme and a LongTerm Incentive Plan ("LTIP"). The charge in relation to these arrangements is shown below, withfurther details of the schemes following:
2018
€'000

2017
€'000

Share option scheme expense

646

178

LTIP option scheme expense

3,483
4,129

1,248
1,426

Of the total share option expense, €501k relates to Directors of the Company (2017: €141k).
Share Option Scheme
Share options are granted to Executive Directors and to permanent employees. The exercise
price of the granted options is equal to the market price of the shares at the time of the award of
the options. The Company has no legal or constructive obligation to repurchase or settle theoptions in cash.
Movements in the number of share options outstanding and their related weighted average
exercise prices are as follows:
2018
Average
exercise pricein £ per share

2017
Average
Numberexerciseof price in £ per
Numberoptions
share of options

Outstanding at the beginningof the period

2.79 1,375,201

2.79 1,672,056

Granted17.10

591,000

7.76

282,000

Lapsed13.24(65,246)

3.56(30,000)

Exercised
Outstanding at the end of
the period

1.93(68,254)1.35(548,855)

7.11 1,832,701

2.79 1,375,201

Exercisable at the end of
the period
Weighted
averageshareprice at date of exercise

1.47

706,524

1.30

17.68

515,296

12.32

Summary by share option arrangement
DateofOptionExercise
Price
Outstandingatthebeginning of
the period

12-Jul1301-Jun1510-May1615-May1718-May18

£1.20

£1.58

£2.54

£7.76

£17.10

Total

285,311 636,816 180,074 273,000- 1,375,201
Granted- 591,000
591,000
Lapsed(2,371) (11,875) (4,500) (46,500)(65,246)
Exercised(9,827) (29,412) (29,015)(68,254)
Outstandingat the end of
the period
275,484 605,033 139,184 268,500 544,500 1,832,701
Exercisableat31
December2018
275,484 403,988
27,052
706,524
Exercisable2019- 201,045
56,06689,500346,611
Exercisable
2020
56,06689,500 181,500
327,066
Exercisable
2021
89,500 181,500
271,000
Exercisable2022- 181,500
181,500

The inputs into the Black-Scholes model, used to value the options are as follows:
12-Jul- 01-Jun101518Date of Option
13
15
May-16 May-17 May-18
Weighted
averageshare price (£)
£1.23
£1.64
£2.54
£7.74 £17.21
Weighted
average
exercise price (£)
£1.20
£1.58
£2.54
£7.76 £17.10
Fair
value
at
measurement
date
(€)
€0.81
€0.56
€0.40
€1.13
€3.79
Average expected life 3 Years 3 Years 3 Years 3 Years 3 Years
Expected volatility
36.12% 28.03% 27.17% 24.79% 35.87%
Risk free rates
0.50%
0.90%
0.58%
0.16%
0.89%
Average
expected
dividends yield
1.00%
0.75%
0.55%
0.21%
0.10%
Weighted
averageremaininglifeof
options in months
2
9
17
29

Total

12

Expected volatility was determined by reference to KWS volatility. The expected life used in themodel has been adjusted based on management's best estimate, for the eﬀects of nontransferability, exercise restrictions and behavioural considerations.

Long-term Incentive Plan Scheme
An alternative share plan was introduced to give awards to Directors and staﬀ subject tooutperforming the Numis Small Cap (excluding Investment Trusts) index in terms of shareholder
return over a three-year period.
Movements in the number of share options outstanding and their related weighted average
exercise prices are as follows:Summary by LTIP Arrangement
2018
Average exercise
price in £ per share

Number ofoptions

2017
Average exercise
price in £ per
share

0.01

1,976,416

0.01

1,443,691

Granted0.01

996,000

0.01

696,000

Lapsed0.01(102,398)

0.01(47,621)

Exercised
Outstanding at theend of the period
Exercisable at theend of the period
Weighted average
share price at dateof exercise

0.01(192,551)

0.01(115,654)

Outstanding at
beginningof
periodDate of option
Exercise price
Outstanding at the
beginning of theperiodNumber ofoptionsthethe0.01 2,677,467

0.01 1,976,416

0.01

0.01

436,66717.50

222,238

13.09

08-Jul13

06-Jan1501-Jun-15

10-May16

03-Oct16

15-May1718-May18

23-Jul18

£0.01

£0.01

£0.01

£0.01

£0.01

£0.01

£0.01

£0.01

£0.01

1,976,416

Total

222,238

101,060

317,118

610,000

30,000696,000--

Granted

-

-

-

-

-

-

990,000

6,000

996,000

Lapsed-(11,198)-(15,000)-(32,000)(44,200)-(102,398)

Exercised
Outstanding at theend of the period
Exercisable at 31
December 2018-(89,862)(102,689)

-

-

-

-

-

(192,551)

222,238-

214,429595,000

30,000664,000

945,800

6,000

2,677,467

222,238-

214,429

-

-

-

-

-

436,667

Exercisable 2019

-

-

-

595,000

30,000---625,000

Exercisable 2020

-

-

-

-

-

664,000--

664,000

Exercisable 2021

-

-

-

03-Oct16

15-May17

945,800
18-May18

6,000
23-Jul18

951,800

08-Jul13

06-Jan1501-Jun-15

10-May16

£1.23

£1.43

£1.64

£2.54

£4.15

£7.74

£17.21£18.56

£0.01

£0.01

£0.01

£0.01

£0.01

£0.01

£0.01

£0.01

€0.62

€1.10

€1.40

€1.73

€2.06

€4.96

€11.82€12.90Date of option
Weighted average
share price (£)
Weighted average
exercise price (£)
Fair
value
at
measurement date(€)
Average expectedlife

3 Years

3 Years

3 Years

3 Years

3 Years

3 Years

3 Years

3 Years

Expected volatility

36.12%

31.20%

28.03%

27.17%

23.31%

24.79%

35.87%

35.87%

Risk free rates

0.50%

0.58%

0.90%

0.55%

0.08%

0.16%

0.89%

0.80%

08-Jul13

06-Jan1501-Jun-15

10-May16

03-Oct16

15-May1718-May18

23-Jul18

-

4

9

17

29

31

Weighted averageremaining life of
options in months

-

-

Total

15

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

Group2018

2017
Restated
(note
31)
€'000
€'000

Current
Accrued expenses
16,671
Payroll taxes
2,338
Other payables (ii)3,890
Deferred and contingent consideration
18,249(i)Related party payable (note 22)541,153
Non-current
Other payables
5
Deferred and contingent consideration
1,057
(i)
1,062
(i)

15,229
1,530
2,986
2,425
9
22,179
16
1,217
1,233

The movement in deferred and contingent consideration during the financial year was asfollows:

Group

2018

€'000
Opening balance
3,642
Consideration settled by cash
(1,603)
Consideration settled by shares(1,000)
Unwinding of discount (note 6)311
Additional liabilities from current year
acquisitions (note 28, 29)
17,068Fair value adjustment (note 5)766
Translation adjustment
122
19,3062017
Restated
(note
31)
€'000
1,730
(298)
266
1,885
59
3,642

In general, in order for contingent consideration to become payable, pre-deﬁned proﬁt and/or
revenue targets must be exceeded. The valuation of contingent consideration is derived using
data from sources that are not widely available to the public and involves a degree of judgement(Level 3 input in the fair value hierarchy). On an undiscounted basis, the Group may be liable fordeferred and contingent consideration ranging from €0.6m to a maximum of €20.3m. A 10%
movement in expected performance results, has no impact on the fair value of the contingent
consideration, and hence there are no reasonably probable changes to the assumptions andinputs (including the discount rate), that would lead to a material change to the fair value of thetotal amount payable.
(ii)

Other payables includes deferred income from contracts with customers of €312K (2017:€nil), which mainly comprise items invoiced prior to services being delivered. The
movement in the year is comprised of transfers in and out as items are deferred andsubsequently recognised as revenue.

19. Employee Defined Benefit Plans
In line with statutory requirements in Italy and India we are required to maintain employee
defined benefit termination payment schemes.
In Italy, on leaving employment, each employee is entitled to 1/13.5 of their ﬁnal salary for eachyear of service.
In India, on retirement at age 60, each employee with over 5 years service is entitled to 15/26 of
their last drawn monthly salary for each year of service.
At year end, the Group commissioned an actuarial valuation of the related liability, based onsalaries, length of service and variables including employee turnover, estimated salary increases
and the cost of capital.

The liabilities at year end are recorded as long term. The actuarial loss is recorded separately
within other comprehensive income. The movements through the year are detailed:
Group
2018
2017
€'000
€'000
Opening liability Italy at 1 January
1,055
826
Liability India recognised 1 January 2018
188
Service cost *247
199
Interest cost32
11
Benefits paid
(117)
(6)
Actuarial (gain) / loss recorded(27)
25
Closing liability at 31 December
1,378
1,055
* Please note the comparative has been restated to reﬂect the current
year presentation as the Directors have determined this presentation to
be more meaningful.
The Directors have considered the key speciﬁc risk factors which the Group faces due to 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:·

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 withcurrent working capital as they fall due.

The Group has taken no speciﬁc actions to mitigate against these factors as due to the long-term
nature of the plans it is expected that there will be no sudden ﬁnancial impact on the Group's
results caused by any of these factors. A maturity proﬁle of the obligation is not presented as theliability is not significant in the context of the Group.
In 2019, the Group expects the costs of the employee beneﬁt plan to be in line with current year
levels, as staff levels in the Italian operations stay stable.
The actuarial valuation is based on the Projected Unit Credit Method, in line with IAS 19.

2018

Actuarial valuations

2017
Restated
€'000
€'000

Defined benefit obligations
1,378
1,055
Future service liability
3,214
2,977
Value of accrued benefits *
4,592
4,032
* Please note the comparative has been restated to reﬂect the current year
presentation as the Directors have determined this presentation to be moremeaningful.

Cost for year
Service cost
Interest cost
Actuarial (gain) / loss

2018
€'000
247
32
(27)
252

2017
€'000
199
11
25
235

Actuarial (gain) / loss
Change due to experience
Change due to demographical assumptions
Change due to financial assumptions

2018
€'000
2
(38)
9
(27)

2017
€'000
17
30
(22)
25

Assumptions Underlying the Actuarial Valuations and Sensitivities of the Assumptions
For the actuarial valuations the following demographic and economic and ﬁnancial assumptions

were applied:
Demographic Assumptions in respect of Italy, representing 84% of the overall liability;··

The probabilities of death were derived from the population demographics by age and sex, as
recorded by the relevant Government Statistics Offices and reduced by 25%, while other key
inputs were taken from relevant life assurance statistics.
Certain inputs were estimated by management includingo Employee attrition rates at 5.71% per annum.
o Cash advances estimated on the basis of company history of 2.42% incidence ofadvance per annum and a drawdown rate equal to 57.25%.

Economic & Financial Assumptions
Salary increase
Inflation
Discount rate

2018
3.08%
2.18%
2.43%

2017
2.76%
1.70%
1.54%

Staff number

558

98

Average age (years)

31.5

39.3

Average service (years)

3.4

4.5

Average defined benefit per staff (€)

2,301

8,595

Average salary for defined benefit (€)

8,647

34,438-0.25%

1,456

1,136

0.25%

1,308

983

-0.025%

1,379

1,056

0.025%

1,378

1,055

-0.50%

1,389

1,067

0.50%

1,369

1,045

-0.50%

1,370

1,029

0.50%

1,390

1,084

Key Statistics

Interest Rate Sensitivities

Mortality Rate Sensitivities

Staff Turn Over Rate Sensitivities

Staﬀ
SalarySensitivities

Increases

Rate

20. Capital Management, Loans and Borrowings(i)

Loans & Borrowings

Group

Expiry within 1 Year
Expiry between 1 and 2 years
Expiry over 2 years

2018
€'000

2017
€'000

40,071
230

18,94331306

40,301

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

Euro
Canadian Dollars
US Dollars

(ii)

2018
€'000

2017
€'000

40,000301
40,301

18,301
347
632
19,280Capital management

2018
€'000

Group

2017
€'000

Loans and borrowings
Less: cash and cash equivalents
Net debt / (net cash) position

40,301
19,280(39,871) (30,374)
430 (11,094)

Total equity

192,375

161,012

0.2%

-6.9%

Net debt / (net cash) to capitalratio (%)

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

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

Country ofincorporation

Date ofincorporation/ acquisition

Keywords International
Ltd
Keywords International
Co LtdIreland13-May-98

Proportionof votingrights andordinary
share
capitalheld
100%

Registered officeJapan

30-Nov-10

100%

Keywords International
Inc
KW Studios Limited

USA

26-Sep-12

100%

UK

29-May-13

100%

Liquid Violet LtdUK

19-Jan-14

100%

Keywords Studios QCGames Inc.
(Formerly BabelGames Services Inc.)
Babel Media USA Inc

Canada(Quebec)

17-Feb-14

100%

USA

17-Feb-14

100%

1751 Richardson Office 8400,
Montreal, Canada, H3K 1G6

Babel Media India
Private Limited

India

17-Feb-14100%

Babel Media Ltd

UK

18-Feb-14

100%

Keywords International
Pte. Limited

Singapore

24-Apr-14

100%

Keywords Studios Italy
S.R.L.
(Formerly Binari
Sonori S.R.L)
Binari Sonori America,
Inc
Binari Sonori Audio
Productions LLC
Lakshya Digital Private
Limited

Italy

08-May-14

100%

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

USA

08-May-14

100%

USA

08-May-14

100%

India

10-Oct-14

100%

Edugames Solutions
Private Limited
Lakshya Digital
Singapore Pte. Ltd

India

10-Oct-14

100%

Singapore

10-Oct-14

100%

Keywords Studios QCTech Inc.
(Formerly Alchemic
Dream Inc.)
Keywords
International
Barcelona SL
Keywords do Brasil
Localizacao eTraducao Ltda
(Formerly Reverb
Localizacao-Prearacao
de Documentos Ltda)
Keywords (Shanghai)
Information
Technology Ltd
Keywords Studios
Spain SLU
(Formerly Kite TeamSL)
Kite Team Mex S.de
R.L. de. CV(Currently in processof changing name to
Keywords Studios
Mexico, S. DE R.L.DE
C.V.)
Liquid Development

Canada(Quebec)

06-Jan-15

100%

Spain

09-Jan-15

100%

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

Brazil

18-Jan-15

100%

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

China

02-Apr-15

100%

Spain

16-Jul-15

100%

142 Room, Building 7, No.311 Jin
Gao Road, Pudong New District,
ShanghaiJulián Camarillo 6A, 3B, 28037
Madrid, Spain

Mexico16-Jul-15

100%

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

USA

20-Aug-15

100%

411 SW 2nd Ave #300, Portland,

Whelan House, South County
Business Park, Dublin 18, Ireland.
5F, Aoba No.1 Bldg. 2-3-1
Kudanminami, Chiyoda, Tokyo, 1020074 Japan.
18300 Redmond Way, Suite 120,
Redmond, WA 98052
201 Temple Chambers, 3-7 Temple
Avenue, London, England, EC4Y
0DT
Bryant House Bryant Road, Strood,
Rochester, Kent, ME2 3EW
1751 Richardson, suite 8400,
Montréal, Québec, Canada H3K1G6350 N. Glenoaks Blvd., Suite 305,
Burbank, CA 91502, USA
350 N. Glenoaks Blvd., Suite 305,
Burbank, CA 91502, USA
3rd floor, Vardhman Orchard Plaza,
Plot No 4, LSC, West Enclave,
Pitampura, New Delhi, 110034,
India
D - 3/C, Munirka Flats, New Delhi 110067
20 Kallang Avenue, #06-6A, Lobby
B, Pico Creative Centre, Singapore
339411
1751 Richardson Street Suite 8400
Montreal QC H3K 1G6 Canada

LLC
Keywords Asia Private
Ltd(Formerly Ankama
Asia Pte Ltd)
Synthesis Deutschland
GmbH
Sillabit S.R.L

OR 97204, USA
20 Kallang Avenue #06-6A, Lobby B
Pico Creative Centre
Singapore 339411

Singapore

22-Mar-16

100%

Germany

12-Apr-16

100%

Italy

12-Apr-16

100%

Synthesis Global
Solutions SAS
Keywords Studios
France SAS(Formerly Keywords
International SAS)
Player Research Ltd

Switzerland

12-Apr-16

100%

France08-Jun-16

100%

UK

26-Oct-16

100%

Keywords Studios QCInteractive Inc.
(Formerly Enzyme
Testing Lab Inc.)SPOV Ltd

Canada(Quebec)

16-Nov-16

100%

UK

17-Feb-17

100%

Xloc Inc.

USA

10-May-17

100%

GameSim Inc.

USA

17-May-17

100%

Strongbox Ltd

Seychelles

22-May-17

100%

Red Hot Software(Shanghai) Ltd

China

22-May-17

100%

Red Hot Software(Zhengzhou) Ltd

China

22-May-17

100%

Eastern New Media
LimitedHong Kong

22-May-17

100%

PT Limitless Indonesia

Indonesia

22-May-17

100%

205-209 Hackney Road, London,
England, E2 8JL
712 Presnell Court, Raleigh, NC
27615-1240, USA
12000 Research Parkway, Suite
436, Orlando, FL 32826, USA
Suites 103, 106 and 107 Premier
Building, Victoria, Mahe, Seychelles
Dong Ti Yu Hui Road #860, Building
5, 4th Floor, Shanghai,
China
Room 207, 11th Floor, Building No.
3, No. 57 Ke Xue Da Dao, Zheng
Zhou, He Nan, China
Flat/Rm 4304, 43F, China Resources
Building, 26 Harbour Road,
Wanchai, Hong Kong
JI. Timoho II, No. 32, Yogyakarta,

Around the WordGmbH
d3t Ltd

Germany

28-Jul-17

100%

Rosenstrasse 2, D-10178 Berlin

UK

19-Oct-17

100%

Keywords US Holdings
Inc

USA

23-Oct-17

100%

Keywords Canada
Holdings Inc.
(Formerly Volt Canada
Inc.)
Keywords Studios BC
Inc.
(Formerly VMC Volt
Information Sciences
BC Inc.)VMC Consulting
Corporation
Sperasoft Poland
Spólka z.o.o.
Sperasoft Studios LLC

Canada(Quebec)

27-Oct-17

100%

201 Temple Chambers, 3-7 Temple
Avenue, London, England, EC4Y
0DT
1209 Orange Street, Wilmington,
New Castle County, Delaware
19801, USA.
1751 Richardson Street Suite 8400
Montreal QC H3K 1G6 Canada

Canada (BC)27-Oct-17100%

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

27-Oct-17

100%

Poland13-Dec-17100%

Russia13-Dec-17

100%

Sperasoft Inc

USA

13-Dec-17

100%

Keywords Studios Ltd

Ireland27-Mar-18

100%

Keywords UK Holdings
LimitedUK

28-Mar-18

100%

Keywords Ventures
LimitedCord World Wide
Spain, SL
Laced Music Ltd

UK

06-Apr-18

100%

Spain

09-Apr-18

100%

UK

09-Apr-18

100%

Cord Worldwide Ltd

UK

09-Apr-18

100%

Cord Artists
Management Limited
Paleblue Limited

UK

09-Apr-18

100%

UK

09-Apr-18

100%

Fire Without Smoke

UK

30-May-18

100%

11611 Willows Road NE, Redmond,
WA 98052, United States of America
Ul. Na Kozłówce 27, 30-664 Kraków,
Poland196084, Russia, Saint-Petersburg,
Kievskaya street, 5 - building
1013 Centre Road, Suite 403-B,
Wilmington, DE 19805, USA
Whelan House, South County
Business Park, Dublin 18, Ireland.
201 Temple Chambers, 3-7 Temple
Avenue, London, England, EC4Y
0DT
8 Clifford Street, London, United
Kingdom, W1S 2LQ
Avenida Concha Espina 39 B28016,
Madrid, Spain
201 Temple Chambers, 3-7 Temple
Avenue, London, England, EC4Y
0DT
201 Temple Chambers, 3-7 Temple
Avenue, London, England, EC4Y
0DT
12-14 Denman Street, London,
England, W1D 7HJ
12-14 Denman Street, London,
England, W1D 7HJ
98 Chingford Mount Road, South

Holstenkamp 46 A, Bahrenfeld,
22525 Hamburg, Germany
Via Marco D'Oggiono, 12, Milano(MI) 20123, Italy
Corso Elvezia 16, 6900 Lugano,Ticino, Switzerland
11 rue Torricelli, 75017 Paris,
France

2nd Floor, Claremont House, 95
Queens Road, Brighton, England,BN1 3XE
1751 Richardson Street Suite 8400
Montreal QC H3K 1G6 Canada

Ltd Without Smoke
Fire
Inc.

USA

29-May-18

100%

Chingford,
London, E4
9AASuite
12701
Marblestone
Drive,
330, Woodbridge, Virgina, 22192
USA

Blindlight LLC

USA

11-Jun-18

100%

Snowed In Studios, Inc

Canada(Ontario)

19-Jul-18

100%

Studio Gobo LimitedUK

20-Aug-18

100%

Bitsy SG LimitedUK

20-Aug-18

100%

Electric Square LimitedUK

20-Aug-18

100%

Alset LtdUK

20-Aug-18

100%

Itsy SGD LimitedUK

20-Aug-18

100%

d3t Development Ltd

UK

30-Aug-18

100%

The
LimitedUK

18-Sep-18

100%8335 Sunset Blvd.
West Hollywood, CA 90069 USA
400 - 981 Wellington Street
West Ottawa, Ontario K1Y 2Y1
CanadaUnit 8 Hove Business Centre,
Fonthill Road, Hove, East Sussex,
BN3 6HA
Unit 8 Hove Business Centre,
Fonthill Road, Hove, East Sussex,
United Kingdom, BN3 6HA
Unit 8 Hove Business Centre,
Fonthill Road, Hove, East Sussex,
England, BN3 6HA
Unit 8, Hove Business Centre,
Fonthill Road, Hove, United
Kingdom, BN3 6HA
Unit 8, Hove Business Centre,
Fonthill Road, Hove, United
Kingdom, BN3 6HA
201 Temple Chambers, 3-7 Temple
Avenue, London, England, EC4Y
0DT
The Old Casino, 28 Fourth Avenue,
Hove, East Sussex, BN3 2PJ

TrailerFarm

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

Name

Country ofDate of
Proportion ReIncorporation incorporation of voting
structuring/ acquisitionrights and details
ordinary
share
capitalheld
MaximalBrazil
22-Mar-18
100%
Merged into
StudioKeywords do
Audiovisuais
BrasilLtda
Localizacao eTraducao
Ltda
Keywords
Canada22-Dec-10100%Merged into
International
Keywords
Corporation
CanadaInc.
Holdings Inc.
Volta
Canada28-Jul-16
100%
Merged into
Creation Inc.
Keywords
CanadaHoldings Inc.
Global Video Canada
16-Nov-16
100%
Merged intoGames
Keywords
Services Inc.
CanadaHoldings Inc.

Date ofrestructuring

La Marque
Rose SARLFrance04-Aug-17

100%

04-Oct-18

AsRec SAS

France28-Jul-17100%Dune Sound
SASFrance28-Jul-17

100%

Merged into
Keywords
Studios
France SAS
Merged into
Keywords
Studios
France SAS
Merged into
Keywords
Studios
France SAS

20-Sep-18

01-Jan-19

01-Jan-19

01-Jan-19

31-Aug-18

30-Nov-18

Around theWord SAS

FranceGVGSFranceEurope SARL

28-Jul-17100%

16-Nov-16

100%

Merged into
Keywords
Studios
France SAS
Dissolved

30-Nov-18

26-Dec-18

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

Operating Expenses
Canteen charges

2018
€'000

2017
€'000

44
44

57
57

2018
€'000

2017
€'000

5
5

9
9

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

Italicatessen Limited

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

Operating Expenses
Rental payment

2018
€'000

2017
€'000

22
22

22
22

The details of key management compensation (being the remuneration of the Directors) are set
out in note 10.
23. Financial Instruments and Risk Management
Interest Rate Risk
Interest rate risk is the risk that the value of ﬁnancial instruments will ﬂuctuate due to changes inmarket interest rates. The Group's income and operating cash ﬂows are substantiallyindependent of changes in market interest changes. The management monitors interest rate
fluctuations on a continuous basis and acts accordingly.
Where the Group has a signiﬁcant amount of surplus cash, it invests in higher earning interest
deposit accounts.
Due to interest rate conditions, the interest rates for short-term deposits are at similar levels to
those achieved for longer-terms. The Group is not unduly exposed to market interest rate
fluctuations, and no interest rate sensitivity analysis has been presented as a result.
Credit Risk
The Group's main ﬁnancial assets are cash and cash equivalents, as well as trade and 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 provisionat the balance sheet date amounting to 4.6% of gross trade receivables (2017: 1.5%), with the
majority of the year over year increase attributable to one customer. Customer credit risk ismanaged at appropriate Group locations according to established policies, procedures andcontrols. 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 assessed collectively. Receivables balances are unsecured and noninterest-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 74% of the total trade receivables balance at the balance sheet date (2017: 61%).
Trade and other receivables are carried on the statement of ﬁnancial position net of bad debt
provisions.
Group Treasury manage bank balances centrally, and monitors the credit rating and stability of
the institutions the Group banks with.
The ageing of trade receivables that are past due but not impaired can be analysed as follows:Group

At 31 December 2018
At 31 December 2017

Total

Not past
due

1-2 months
overdue

€'000

€'000

€'000

More
than 2months
past
due
€'000

37,01927,504

7,996

1,519

27,473

16,713

9,126

1,634

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

Provisionatthebeginning of the year
Impairment of financial
assets (tradereceivables) charged toadministration expenses
Foreign exchange
movement in the year
Utilised
Provision at end of the
year

2018
€'000

2017
€'000

418

468

2,055

3

(30)
(726)

(53)

1,717

418

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

Not past
due

1-2 months
overdue

€'000

€'000

€'000

More
than 2monthspast due€'000

Trade receivables
gross
Credit impaired
Expected
creditlossesAt 31 December
2018
Trade
receivables
gross
Credit impaired
Expected
creditlossesAt 31 December
2017

39,074(1,872)

27,874
(234)

8,586
(551)

2,614
(1,087)

(183)

(136)

(39)

(8)

37,01927,504

7,996

1,519

27,891(418)

16,713
-

9,126
-

2,052
(418)

-

-

-

-

27,473

16,713

9,126

1,634

Related party receivables of €nil were past due at 31 December 2018 (2017: €nil).
Currency Risk
Currency risk is the risk that the value of ﬁnancial instruments will ﬂuctuate due to changes inforeign exchange rates. The foreign exchange risk arises for the Group where assets andliabilities arise in a currency other than the functional currency of the entity.
The Group's policy, where possible, is for Group entities to manage foreign exchange risk at a
local level by matching the currency in 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 settlethem), cash already denominated in that currency will, where possible, be transferred from
elsewhere within the Group.
Over the course of the year the Group's currency exposure has increased and diversiﬁed due tothe addition of the newly-acquired subsidiaries. The Group is predominantly exposed to currency
risk on the balances held within working capital across the Group and the exposure isconcentrated in the movement of the Canadian Dollar, US Dollar and Sterling against the Euro.
The eﬀect of a strengthening and weakening of 10% in those currencies against the Euro at thereporting date on the working capital balances would, all other variables held constant, haveresulted in the following pre-tax profit / (loss) impact for the year:
10%
10%
10%
10%
Strengthening Weakening Strengthening Weakening
2018
2018
2017 *
2017 *
€'000
€'000
€'000
€'000
US Dollar to Euro

2,140
(1,946)2,363(2,148)Canadian Dollar to
Euro
2,026
(1,842)
1,267(1,152)
Sterling to Euro
884
(803)
620
(564)
* Please note the comparatives have been amended to reﬂect current year
presentation, as the Directors consider this presentation to be more meaningful
Total Financial Assets and Liabilities
The carrying amount of the ﬁnancial assets and liabilities shown in the Group statement ofﬁnancial position are stated at amortised costs, with the exception of contingent consideration
held at fair value.
Liquidity Risk
Liquidity risk arises from the Group's management of working capital and the ﬁnancial charges on
its debt instruments.
The Group's policy is to ensure that it will have suﬃcient cash to allow it to meet its liabilities
when they become due.
The following are the contractual maturities (representing undiscounted contractual cash flows) of
the Group's financial liabilities:

GroupYear ended 31 December 2018
Trade payables
Deferredandcontingent
consideration (i)Other payables
Loans and borrowings
Loan interest

Total
€'000
7,142

Within1 year
€'000
7,142

1-2
years
€'000
-

2-5
years
€'000
-

19,30622,90940,301
55

18,24922,90440,071
55

1,057
5
-

230
-

Total
€'000
7,310

Within 1
year 1-2 years
€'000
€'000
7,310
-

2-5
years
€'000
-

4,468
19,77019,28080

3,251
19,754
18,94380

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

contingent
1,217
16
31
-

306
-

Deferred and contingent consideration at 31 December 2018 has arisen on businesscombinations, and is based on set amounts to be paid in the future to sellers under sharepurchase agreements.
24. Operating Lease Commitments
The Group occupies a portfolio of leased properties. The terms of property leases vary fromcountry to country, although they all tend to be tenant repairing with rent reviews every two to
five years and typically have a five-year break clause, with options to renew.
The total future value of the minimum lease payments is as follows:Group

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

2018
€'000

2017
€'000

6,557

4,561

8,882

10,708

1,451
16,890

4,793
20,062

25. Finance Lease Commitments
The Group leases computer equipment and oﬃce telephone systems. Such assets are generallyclassiﬁed as ﬁnance leases, as the lease term equates to the estimated useful economic life of
the assets concerned, and often the Group has the right to purchase the assets outright at theend of the minimum lease term by paying a nominal amount. As the carrying value of assets
under finance lease commitments are negligible, the net book value of the assets is not disclosed.
The total future value of the minimum lease payments is as follows:Group
Minimum lease
payments€'000
2018
Not later

Interest

Present value

€'000

€'000

than one
year
Later
than oneyear andnot later
than ﬁve
years
Later
than ﬁve
years
2017
Not
later
than
one
year
Later than
one
year
and
not
later than
five years
Later than
five years

5

-

-

5

-

-

-

-

-

5

-

5

25

1

24

20

4

16

45

5

40

26. Deferred Tax
Details of the deferred tax assets and liabilities, and amounts recognised in the proﬁt or loss are
as follows:

Accelerated capital allowances
Deﬁnedbeneﬁttermination
payments
Available losses
Rent free period provisions
Fixed
asset
tax
base
versusaccounting book value
Deferred tax related to multimedia
tax credits
Deferred tax arising on items
deductible on a paid basis
Deferred tax arising on intangibles
Net tax assets / (liabilities)
Impact of change in tax rates
Prior year (over) / under provision
Total (credited) / charged toIncome Statement

Accelerated capital allowances
Deﬁnedbeneﬁttermination
payments
Available losses
Rent free period provisions
Fixed asset tax base versus
accounting book value

Asset

Liability

Net

2018
€'000
-

2018
€'000
1

2018
€'000
(1)

(Credited)/ charged
to IncomeStatement
2018
€'000
1

66
875
30

-

66
875
30

(3)
40
4

558

71

487

(100)

-

2,468

(2,468)

(112)

1,438
2,967
-

155
5,793
8,488
-

1,283
(5,793)(5,521)-(415)(1,448)(2,033)
(4)
(364)

-

-

-

(2,401)Asset

Liability

Net

2017
€'000
-

2017
€'000
1

2017
€'000
(1)

(Credited) /charged toIncomeStatement
2017
€'000
1

32
237
17

-

32
237
17

(2)
(162)
13

258

139

119

(33)

Deferredtax
relatedto
2,284(2,284)132
multimedia tax credits
Other temporary and deductible
differences
581
112
469
(225)
Deferredtax
arisingonintangibles
81
5,259(5,178)(700)
Net tax assets / (liabilities)
1,206
7,795
(6,589)(976)
Impact of change in tax rates
(149)
Prior
year
(over)/
underprovision
94
Total (credited) / charged toIncome Statement(1,031)
Please note that the comparative has been re-classified to reflect the current year presentation
as the Directors have determined this presentation to be more meaningful.

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

Opening Balance
Investment in AppSecTest Limited
Post-acquisition changes in the Group's shareof net assets

2018
€'000

2017
€'000

-

-

226

-

(66)

-

160

-

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

Date ofacquisition
Acquisition
company
jurisdiction
Book value ofidentifiable
assets andliabilities
Property, plant &equipment
Intangible assets
Trade and otherreceivables gross
Bad debt
provisionCash and cash
equivalents
Trade and otherpayablesNet book value
Fair value
adjustments
Identifiable

Cord

Laced

MaximalFire
Without
Smoke

€'000

€'000

€'000

€'000

€'000

€'000

€'000

€'000

09-Apr-18

09-Apr-18

22-Mar-18

30-May-18

11-Jun-18

19-Jul-18

20-Aug-18

18-Sep-18

UK

UK

BrazilUK

US

Canada

UK

UK

79

-

14

11

4

38

803

17

966

362

-

-

-

-

-

-

-

362

1,135

126

22

810

256

48

3,558

98

6,053

-

-

-

(268)

-

-

-

-

(268)

1,803

40

112

1,123

96

282

5,409

129

8,994

(1,455)

(224)

(271)

(419)

(128)

(122)

(1,404)(51)(4,074)

1,924

(58)

(123)

1,257

228

246

8,366

193

12,033Blindlight

Snowed In

Studio Gobo &Electric Square

The
Trailerfarm

Total
€'000

intangible assets- customer
relationships
Deferred tax
liabilities
Total fair value
adjustments
Total
identifiable
assetsGoodwill
Total
consideration% Share capitalacquired

2,163

-

-

1,404

2,413

584

-

-

6,564

(411)

-

-

(267)

(511)

(159)

-

-

(1,348)

1,752

-

-

1,137

1,902

425

-

-

5,216

3,676

(58)

(123)

2,394

2,130

671

8,366

193

17,249

2,377

521

647

4,455

5,949

2,003

25,8701,322

43,144

6,053

463

524

6,849

8,079

2,674

34,236

1,515

60,393

100%

100%

100%

100%

100%

100%

100%

100%

4,907

320

345

4,726

3,097

1,822

17,015925

33,157

-

-

-

-

-

109

1,033

-

1,142

-

-

179

574

3,655

-

11,164354

15,926

1,146

143

-

1,549

1,327

743

5,024

236

10,168

6,053

463

524

6,849

8,079

2,674

34,236

1,515

60,393

-

-

-

-

-

-

-

-

-

65,5508,194-

77,00664,521

37,983

254,529

11,070518,853

Blindlight

Snowed In

Studio Gobo &Electric Square

The
Trailerfarm

Total
2018

Satisfied by:
Cash
Deferred cash
Deferred cash
contingent on
performance
Shares to beissuedTotal
considerationtransferred
Number ofsharesIssued at thedate ofacquisition
Fixed amountagreed to beissuedNet cashoutflow arisingon acquisitionCash
Less: cash andcash equivalentbalancestransferred
Net cashoutflow acquisitions
Relatedacquisition
costs charged
through to theConsolidated
Statement ofComprehensive
IncomePre-acquisition
revenue in 2018
H1
Pre-acquisition
revenue in 2018
H2
Pre-acquisition
revenue with
Keywords Group
Post-acquisition
revenue2018 Pro forma
revenue
Pre-acquisition
profit / (loss)
before tax
Post-acquisition
profit / (loss)
before tax
Pro forma
profit / (loss)

Cord

Laced

MaximalFire
Without
Smoke

€'000

€'000

€'000

€'000

€'000

€'000

€'000

€'000

€'000

4,907

320

345

4,726

3,097

1,822

17,015925

33,157(1,803)

(40)

(112)

(1,123)

(96)

(282)

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

3,104

280

233

3,603

3,001

1,540

11,606796

24,163

104

20

8

138

4

57

388

39

758

1,721

47

243

1,653

1,139

1,013

7,286

534

13,636

-

-

-

-

-

-

2,064

331

2,395

-

-

(243)

-

-

-

-

-

(243)

2,864

510

180

2,641

2,653

1,210

8,195

662

18,915

4,585

557

180

4,294

3,792

2,223

17,545

1,527

34,703

93

(10)

82

238

(143)

325

4,065

246

4,896

(196)

36

319

820

785

420

2,878

243

5,305

before tax

(103)

26

401

1,058

642

745

6,943

489

10,201

The acquisitions made in the year are in line with the Group's strategy to grow organically and byacquisition, as it selectively consolidates the highly fragmented market for video game services.
The companies will bring additional talent, expertise and industry experience to Keywords' clientbase. Being able to oﬀer the additional services to our clients will further enhance our reputation
as the leading provider of services to the global video games industry.
The amounts recognised in respect of the identiﬁable assets acquired and liabilities assumed ofacquisitions in the year are set out in the table above.
The main factors leading to the recognition of goodwill on the acquisitions are the presence of
certain intangible assets in the acquired entities, which are not valued for separate recognition,such as:·····The expertise and music industry experience in Cord & Laced
The expertise in high end video game trailers and reputation within the industry in Fire
Without Smoke
The expertise in voiceover production, celebrity acquisition and rights management,
game writing, music, sound design and motion capture in Blindlight
The expertise and additional scale to Keywords' new and growing video gamedevelopment business in Snowed In and Studio Gobo & Electric Square
The experience and expertise in producing trailers for the marketing and support ofvideo games in The Trailerfarm

The total amount of goodwill arising on business combinations completed in the current year, thatis expected to be deductible for tax purposes was €nil.
29. Business Combinations / Acquisitions completed in 2017
Restated

Date ofacquisition
Acquisition
company
jurisdiction
Book value ofidentifiable
assets andliabilities
Property, plant &equipment
Trade and otherreceivables gross
Bad debt
provisionCash and cash
equivalents
Trade and otherpayablesCorporation tax
payableDeferred tax
liabilities

VMC
€'000

19-Oct-17

Aroundthe Word€'000

Spov Ltd.
€'000

XLOC
€'000

Gamesim€'000

17-Feb-17

10-May-17

17-May-17

Red Hot€'000
22-May17

UK

US

US

China

FranceFranceFrance

30

7

13

230

342

123

16

33

768

975

2,142

-

-

-

-

-

-

120

26

584

(139)

(73)

(353)

-

-

(93)

Restated

27-Oct-17

Sperasoft€'000
13-Dec1715-Dec-17

UK

US /CanadaRussia /US

Mexico

148

188

1,834

1,053

13

3,981

49

598

602

18,2553,890

147

27,475

-

-

-

-

(944)

-

(944)

497

76

494

802

-

587

43

3,229

(356)

(2,067)

(115)

(504)

(678)

(3,192)(2,710)(118)(10,305)

-

(64)

-

-

-

-

(150)

(86)

-

(300)

-

-

-

-

-

-

(1,408)(46)-(1,454)

-

-

(0)

-

-

-

-

-

(1,022)-(1,022)

87

454

1,369

914

133

736

914

15,339722

85

20,660

-

147

-

1,465

651

-

-

-

13,245

3,454-

18,962

-

(59)

-

(366)

(217)

-

-

-

(2,781)(691)-(4,114)

-

88

-

1,099

434

-

-

-

10,464

2,763-

14,848

(93)

175

454

2,468

1,348

133

736

914

25,8033,485

85

35,508

491

652

3,828

2,513

3,495

577

1,293

2,886

32,12818,206784

66,853-Loan
Net book value
Fair value
adjustments
Identifiableintangible assets- customer
relationships
Deferred tax
liabilities
Total fair value
adjustments
Total
identifiable
assetsGoodwill asreported
Measurement
periodadjustment (note31)
Goodwill(restated)Total
consideration% Share capitalacquired
Satisfied by:

d3t
€'000

28-Jul-17

Asrec
€'000
04-Aug17

Le
MarqueRose€'000
04-Aug17

Lola
€'000

Total
€'000

-

-

-

-

-

-

-

-

-

(945)

-

(945)

491

652

3,828

2,513

3,495

577

1,293

2,886

32,12817,261784

65,908

398

827

4,282

4,981

4,843

710

2,029

3,800

57,931

20,746869

101,416

100%

100%

100%

100%

100%

100%

100%

100%

100%

100%

Asset
Purchase

Cash
Equityinstruments
Deferred cash
(restated)
Shares to beissued (restated)Total
considerationtransferred
Number ofsharesIssued at thedate ofacquisition
Fixed amountagreed to beissuedNet cashoutflow arisingon acquisitionCash
Less: cash andcash equivalentbalancestransferred
Settled in 2018re 2017acquisitions
Net cashoutflow acquisitions
Relatedacquisition
costs charged
through to theConsolidated
Statement ofComprehensive
IncomePre-acquisition
revenue in 2017
H1*
Pre-acquisition
revenue in 2017
H2
Adjustment for
pre-acquisition
trading with
Keywords Group
Post-acquisition
revenue2017 Pro forma
revenue
Pre-acquisition
profit / (loss)
before tax*
Post-acquisition
profit / (loss)
before tax*
Pro forma
profit / (loss)
before tax

351

643

2,888

3,514

2,500

610

2,029

3,127

57,931

16,733405

90,731

-

184

1,394

-

-

100

-

673

-

-

-

2,351

47

-

-

-

1,543

-

-

-

-

-

295

1,885

-

-

-

1,467

800

-

-

-

-

4,013

169

6,449

398

827

4,282

4,981

4,843

710

2,029

3,800

57,931

20,746869

101,416-

19,134

151,725

-

-

9,534

-

42,368

-

-

-

-

-

160,842

66,262----

252,248

10,106

489,458

Asrec
€'000

Le
Marque
Rose
€'000

d3t
€'000

VMC
€'000

Sperasoft
€'000

Lola
€'000

Total
2017
€'000

222,761

Spov Ltd.
€'000

XLOC
€'000

Gamesim€'000

Red Hot€'000

Aroundthe Word
€'000

351

643

2,888

3,514

2,500

610

2,029

3,127

57,931

16,733405

90,731

-

(120)

(26)

(584)

(497)

(76)

(494)

(802)

-

(587)

(43)

(3,229)

-

-

-

(321)

-

-

-

-

-

-

(405)

(726)

351

523

2,862

2,609

2,003

534

1,535

2,325

57,931

16,146(43)

86,776

9

9

3

70

435

-

-

36

1,690

82

2

2,336

4

243

1,532

2,266

3,518

265

1,154

1,547

23,5828,902

449

43,462

-

-

-

-

588

44

193

903

16,9798,378

548

27,633

-

-

-

-

(575)

(43)

(189)

-

-

-

(997)

(1,804)

208

236

2,266

3,980

2,048

571

1,154

560

7,769

798

-

19,590

212

479

3,798

6,246

5,579

837

2,312

3,010

48,33018,078-88,881

(10)

82

64

305

(313)

(32)

(151)

120

2,358

(1,007)

68

1,484

(203)

(114)

397

848

313

141

191

(7)

804

(34)

-

2,336

(213)

(32)

461

1,153

-

109

40

113

3,162

(1,041)68

3,820* Restated to exclude revenue from one contract that did not novate to VMC post acquisition and information that was notavailable when preparing the FY17 Annual Report

The acquisitions made in the prior year are in line with the Group's strategy to grow organicallyand by acquisition, as it selectively consolidates the highly fragmented market for video game
services. The companies will bring additional talent, expertise and industry experience to
Keywords' client base. Being able to oﬀer the additional services to our clients will further
enhance our reputation as the leading provider of services to the global video games industry.
The amounts recognised in respect of the identiﬁable assets acquired and liabilities assumed of
our acquisitions in the year are set out in the table above.
The main factors leading to the recognition of goodwill on the acquisitions are the presence of
certain intangible assets in the acquired entities, which are not valued for separate recognition,such as
·
·
·
·
·
·

Expertise in art services and reputation within the industry in SpovExpertise in localization processes and reputation within the industry in XLOCThe expertise in simulation technology for the games industry in Gamesim
Broader access to the Chinese pool of video game art talent, which is the largest in theworld, and expertise in art service for the games industry in Red Hot
Expertise in audio service for the games industry and reputation in the French entities
A software development team with capabilities including HD re-mastering, porting,
optimisation, rendering and game systems and reputation within the industry in d3t

·Expertise in art and engineering services for the games industry and reputation in
Sperasoft.

The total amount of goodwill arising on business combinations completed in 2017, that is
expected to be deductible for tax purposes was €nil.
30. Supplementary Information to the Statement of Cash Flows
Group Movement on Loans
Noncurrent
€'000
€'000
8,025
345

€'000
8,370

10,250(23)-

10,250(23)632
59
18,943

51
(59)
337

683
19,280Current
Balance at 1 January 2017
Cash flows:
Cash received via additional loans in the year
Repayment of loans
Non-cash flows
Amounts recognised on business combinations
Non-current transferred to current
Balance at 31 December 2017
Cash flows:
Cash received via additional loans in the year
Repayment of loans
Non-cash flows
Foreign exchange difference on Canadian loans
Non-current transferred to current
Balance at 31 December 2018

31,850(10,835)
6
107
40,071

Total

31,850- (10,835)
(107)
230

6
40,301

31. Measurement Period Adjustment

Group

Deferred Shares Goodwill
consideration
to beissued
€'000
€'000
€'000
note 18 note 16

As reported
31 December
2017
Measurement
periodadjustment
Restated 31
December
2017

Other
payables(current)€'000

note 11

note 18

4,468

11,739109,007

23,005

(826)

(119)

(945)

(826)

3,642

11,620108,062

22,179Goodwill recognised on the acquisition of Sperasoft has been reduced by deferred cash
consideration withheld of €826K and a reduction in shares to be issued of €119K under anacquisition agreement warranty claim, which occurred within the measurement period.
Details of the restated purchase consideration and the restated goodwill are as follow:
Deferred Shares Goodwill
consideration
to beissuedSperasoft
Acquisition
Accounting- extract

€'000

€'000

€'000

As reported
31 December
2017

826

4,132

18,206

Measurement
periodadjustment31
Restated
December
2017

(826)
-

(119)

(945)

4,013

17,261

Full details of the restated purchase consideration, the restated goodwill and the fair value ofidentiﬁable assets and liabilities acquired as measured at the acquisition date, together with theother disclosures relevant to the acquisition as reported, are presented in note 29.
The 2017 Group comparatives have been restated in these ﬁnancial statements to include theeﬀect of the adjustments noted. Under paragraph 10(f) of IAS 1 Presentation of ﬁnancial
statements, this restatement would ordinarily require the presentation of a third consolidated
statement of ﬁnancial position as at 31 December 2017. However, as the restatement would haveno signiﬁcant eﬀect on the statement of ﬁnancial position as at that date, the Directors do notconsider that this would provide useful additional information and, in consequence, have notpresented a third consolidated statement of ﬁnancial position due to the restatement of priorperiod business combinations.

32. Events after the Reporting Date
Acquisition of Sunny Side Up Creative Inc.
On 4 January 2019, Keywords Canada Holdings Inc. acquired the entire issued share capital of
Sunny Side Up Creative Inc. ("Sunny Side Up"). Based in Quebec City, Canada, Sunny Side Up
produces high quality marketing assets for game publishers and developers including game
trailers, key art assets and motion graphic production. The total consideration for the acquisition
is CAD$5.9m, of which CAD$4.75m was paid in cash on completion, CAD$0.35m will be paid 18
months after the acquisition (subject to certain conditions being met) and the balance of theconsideration is to be met through the issue of 60,179 new ordinary shares in Keywords on theﬁrst anniversary of the acquisition and will then be subject to orderly market provisions for afurther 12 months.
Acquisition of the GetSocial business and assets
On 18 February 2019, Keywords Studios Netherlands BV and Keywords International Limited
acquired the assets and business of GetSocial B.V. ("GetSocial") a company based in The Hague,
Netherlands. GetSocial is a cloud-based software platform that provides a suite of functions thatenable games developers to manage all social interactions between their games and theirplayers plus their friends' networks. GetSocial works with Android, iOS and Unity apps, andsupports interactions on most social media and messaging platforms including Facebook,
Instagram and WhatsApp. The total consideration for the acquisition is €170K paid in cash.
Alternative Performance Measures
The group reports certain alternative performance measures that are not required under IFRS.
The group believes that these measures, in conjunction with our IFRS ﬁnancial information,
provide investors with meaningful understanding of the underlying ﬁnancial and operating
performance of the group. These measures are key for the ongoing assessment of performanceby the board and management of the group.
The measures are used to:-Assess and monitor the underlying trends of our results of our operations
Explain the group performance to the investor analyst community
Set internal management targets

These measures can have limitations as analytical tools and therefore should not be considered inisolation, or as a substitute for IFRS measures. Other companies may calculate similarly named
measures using different bases of calculations, and therefore they may not be comparable.
The principal measures used by the group, with reconciliations to reported IFRS measures asreported, are as follows:
Adjusted Operating Costs
This comprises administration expense as reported on the Consolidated Statement ofComprehensive Income, before non-operating costs including; share option costs, costs ofacquisitions and integration, amortisation, depreciation, and including bank charges.

Calculation

Administrative Expenses
Less Non-Operating
Costs
Share option expense
Costs of acquisition andintegration
Amortisation of
intangible assets
Non-controlling Interest
Depreciation
Bank Charges
Adjusted Operating
Costs
Revenue from contracts
with customers
Adjusted operating
costs as a % ofrevenue

Reference in Financial
Statements
Consolidated Statement ofComprehensive Income
Consolidated Statement ofComprehensive Income
Consolidated Statement ofComprehensive Income
Consolidated Statement ofComprehensive Income
Note 5Note 6

Consolidated Statement ofComprehensive Income

2018
€'000

2017
€'000

2016
€'000

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

52,01328,760 19,953

250,805 151,430

96,585

20.7%

20.7%

19.0%

Adjusted EBITDA
Adjusted EBITDA comprises gross proﬁt, less the adjusted operating costs, less the share of posttax losses on the equity accounted associate.
Calculation
Gross profit
Adjusted Operating
Costs
Share of post-tax profits
of equity accounted
associates
Adjusted EBITDA
Revenue from contracts
with customers
Adjusted EBITDA as a
% of revenue

Reference in Financial
Statements
Consolidated Statement ofComprehensive Income
As Above

2018
€'000

2017
€'000

2016
€'000

95,80855,08536,678(52,013) (28,760) (19,953)(66)

Consolidated Statement ofComprehensive Income

43,72926,325

16,725

250,805

151,430

96,585

17.4%

17.4%

17.3%

Adjusted Profit before Tax
Adjusted Profit before tax comprises adjusted EBITDA less interest and depreciation.
Adjusted proﬁt before tax comprises proﬁt before tax as reported on the Consolidated Statementof Comprehensive Income, before non-operating costs including share option costs, costs ofacquisitions and integration, amortisation, and foreign exchange gains and losses.
ReferenceStatements
As Abovein

Financial

Calculation
Adjusted EBITDA
Less
non-operating
Costs;
Interest Expense*
Note 6
Interest Received
Note 6
Depreciation
Note 5Adjusted Profit before
Tax
Revenue from contracts
with customers
Adjusted Profit before
Tax as a % of revenue

Consolidated Statement ofComprehensive Income

2018
€'000

2017
€'000

2016
€'000

43,72926,325

16,725(502)(5,316)37,911

(578)
(152)
26
94
(2,730) (1,803)
23,043 14,864

250,805 151,430

96,585

15.1%

15.4%

15.2%

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

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

ReferenceinFinancial
Statements
Adjusted Profit before Tax As AboveTax expense
Consolidated Statement ofComprehensive Income
Adjusted Effective Tax Calculation; Tax expense /Rate
Adjusted profit before Tax

2018
€'000

2017
€'000

2016
€'000

37,911
7,191

23,043 14,864
4,731
3,223

19.0%

20.5%

21.7%

Adjusted earnings per share
The adjusted proﬁt after tax comprises the adjusted proﬁt before tax, less the tax expense asreported on the Consolidated Statement of Comprehensive Income.
The adjusted earnings per share comprises the adjusted proﬁt after tax over the non-diluted
weighted average number of shares as reported on note 8.
2018
2017
2016
Calculation
Reference in Financial
€'000
€'000
€'000
Statements
Adjusted Profit
As Above
37,911
23,043
14,864
before Tax
Tax expense
Consolidated Statement(7,191)(4,731)(3,223)of Comprehensive
IncomeAdjusted Profit after
30,72018,312
11,641
Tax
Denominator
Note 864,335,162 58,720,884 55,918,481(weighted average
number of equity
shares)Adjusted Earnings Calculation; Adjusted
per Share
Profit after Tax /weighted average
number of shares
Adjusted Earnings
per Share %growth€ c per
share
47.75

€ c per
share
31.18

€ c per
share
20.59

53%

51%

62%

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

Calculation
Adjusted Profit before
Tax
Net Interest Cost
Bank Charges
Pre-Acquisition profits
of current year
acquisitions
Adjusted Profit
before Tax
Tax including preacquisition profit
excluding interest
expenseTotal equity
Retirement benefits
Cumulative
amortization on
acquired Intangibles
Acquisition Related
Liabilities
Borrowings
Cash and cash
equivalents
Capital Employed
Return on Capital
Employed

Reference inStatements
As Above

Financial

Note 6Note 6
Notes 28 and 29

Statement
Position
Note 19
Note 12ofFinancial

Note 18
Note 20
Statement
PositionofFinancial

2018
€'000

2017
€'000

2016
€'000

37,911

23,043

14,864

502
503
4,896

552
320
1,484

152
229
2,040

43,81225,39917,285

192,375

161,01266,704

1,378
12,786

1,055
5,734

826
2,934

19,306

3,642

1,730

40,301(39,871)

19,2808,370(30,374) (17,020)

226,275 160,349
Adjusted Profit before
Tax including preacquisition profit
excluding interest
expense / Capital
Employed

19.4%

15.8%

63,544
27.2%* The prior year comparative has not been re-classiﬁed to reﬂect current year presentation as the diﬀerences are notsignificant

Like for like revenue comparison at constant exchange rates
Like for like revenue at constant exchange rates is calculated by adjusting the prior year revenues
comparison, by adding pre-acquisition revenues for the corresponding period of ownership, as
presented in the current year results, and applying consistent foreign exchange rates in both
years.

Free cash flow
Free cash ﬂow represents net cash ﬂow provided by operating activities, plus income taxes paid,less capital expenditure.
Calculation

ReferenceinFinancial
Statements
Net cash provided by Consolidated Statement ofoperating activities
Cash Flows
Income taxes paid
Consolidated Statement of
Cash Flows
Acquisition of property, Consolidated Statement ofplant and equipment
Cash Flows
Free cash ﬂow before
tax

2018
€'000

2017
€'000

2016
€'000

32,18016,65814,822

6,304

5,454

2,129

(9,440)(3,803)(2,306)

29,04418,309 14,645

Adjusted free cash flow
Adjusted free cash ﬂow is a measure of cashﬂow adjusting for capital expenditure that is
supporting growth in future periods
as measured by capital expenditure in excess ofmaintenance capital expenditure and is represented by free cashﬂow before tax plus capitalexpenditure in excess of depreciation

Calculation
Free cashflow before tax
Capital Expenditure in
Excess of Depreciation Acquisition ofproperty, plant &equip.
Depreciation
Capital Expenditure in
Excess of Depreciation

2018

2017

2016

€'000

€'000

€'000

29,04418,30914,645

Consolidated Statement of
Cash Flows

9,440

3,803

2,306

Consolidated Statement of
Cash Flows(5,316)(2,730)(1,803)Calculation: Depreciation
less Capital Expenditure

4,124

1,073

503

ReferenceStatements
As Abovein

Financial

Adjusted Free cashflow

33,16819,382 15,148

Adjusted cash conversion rate
Adjusted cash conversion percentage is the adjusted free cash ﬂow as a percentage of theadjusted profit before tax:
Calculation
Adjusted Free cashflow
Adjusted Profit before
Tax
Adjusted Cash
Conversion Ratio

Reference in Financial
Statements
As Above
As AboveFree cashflow before tax &capex adjusted as a % of
Adjusted Profit Before Tax

2018
€'000

2017
€'000

2016
€'000

33,16837,911

19,382
23,043

15,14814,864

87%

84%

102%

Annual report and accounts
The annual report and accounts will be posted to shareholders shortly and will be available tomembers of the public at the Company's registered oﬃce at 8 Cliﬀord Street London W1S 2LQ
and on the Company's website http://www.keywordsstudios.com/en/investors.
Annual General Meeting
The Annual General Meeting of Keywords Studios plc will be held on 25 May 2019.

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a
Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further
information, please contact rns@lseg.com or visit www.rns.com.
END

FR KMGMDRGFGLZM