Imagine More
K
e
y
w
o
r
d
s
S
t
u
d
i
o
s
p
l
c
A
n
n
u
a
l
R
e
p
o
r
t
a
n
d
A
c
c
o
u
n
t
s
2
0
2
2
Keywords Studios plc
Annual Report and Accounts 2022
Keywords Studios plc Annual Report and Accounts 2022
We Imagine More
for the global
video gaming and
entertainment
communities
We are trusted and relied upon by the
world’s leading video game companies to
work alongside them during the full game
development cycle, from concept through
to launch and beyond, to bring immersive
content to life for the joy of billions of
gamers across the world.
Read more on page 02
What's inside
Overview
01 2022 Highlights
02 Who we are
04 Our footprint
06 Chair's statement
08
Investment case
Strategic report
10 Chief Executive’s review
16 Market review
18 Business model
20 Our strategy
26 Strategy in action
32 Key performance indicators
34 Service line review
40 Responsible business review
56 Section 172( 1) statement
58 Financial and operating overview
62 Principal risks and uncertainties
69 Non-financial information statement
Governance
70 Corporate governance report
70 Board of Directors
74 Chairman's introduction
80 Nominations Committee report
82 Audit Committee report
86 Directors' Remuneration report
102 ESG Committee report
104 Directors’ report
106 Statement of Directors’ responsibilities
Financial statements
107 Independent Auditor’s Report
113 Consolidated statement
of comprehensive income
114 Consolidated statement
of financial position
115 Consolidated statement
of changes in equity
116 Consolidated statement of cash flows
117 Notes forming part of the
consolidated financial statements
157 Company statement of financial position
158 Company statement of changes in equity
159 Company statement of cash flows
160 Notes forming part of the Company
financial statements
Supplementary information
165 Alternative performance measures
171 Key disclaimers
172 Company information
Overview
2022 Highlights
2022 Highlights
01
Excellent performance
underpinned by strong
organic revenue growth
Revenue
Organic Revenue growth*
€690.7m
+34.8% year-on-year
21.8%
2021: +19.0%
EBITDA*
Profit before tax
€120.9m
+41.1% year-on-year
€68.0m
+41.7% year-on-year
Adjusted EBITDA*
Adjusted profit before tax*
€146.9m
+33.4% year-on-year
Margin 21.3% (2021: 21.5%)
€112.0m
+30.2% year-on-year
Margin 16.2% (2021: 16.8%)
Basic earnings per share
Adjusted earnings per share*
61.54c
+36.3% year-on-year
113.50c
+27.2% year-on-year
Adjusted cash conversion rate*
Total dividend per share
100.1%
2021: 107.3%
2.37p
+10.0% year-on-year
Continuing to perform
• Strong performance driven by healthy
demand for our services.
• Divisional results now reported across
three segments, each of which
performed well.
• Five acquisitions for a total maximum
consideration of €140 million**.
Refreshed strategy to drive
long-term sustainable growth
• Driving strategic partnerships, whilst
adopting new technologies that enable
us to do more for our clients as well as
exploring adjacent markets.
• Simplified structure to drive culture,
collaboration and support talent acquisition.
Tangible progress against
ESG goals
• Client net promoter score increased to 37.
• Renewed and strengthened partnership
with Women in Games.
• Reduced emissions intensity (CO2e per
€m) by 16% during 2022.
Read more on page 10
* Alternative performance measures
The Group reports a number of alternative
performance measures (APMs) to present the
financial performance of the business which are
not Generally Accepted Accounting Principles
(GAAP) measures as defined by International
Financial Reporting Standards (IFRS). The Directors
believe these measures provide valuable additional
information for the users of the financial information
to understand the underlying trading performance
of the business. In particular, adjusted profit
measures are used to provide the users of the
financial statements a clear understanding of the
underlying profitability of the business over time.
For full definitions and explanations of these
measures and a reconciliation to the most directly
referenceable IFRS line item, please see pages
165 to 170.
** Excluding cash acquired of €5.4 million.
Overview
Who we are
02
Who we are
About us
From art creation to game development,
localization to launch, we're helping to
define the games and entertainment
landscape and ultimately the experiences
of over three billion players worldwide.
Combining our expertise and imagination,
we're more than the sum of our parts.
Together we have the power to unlock
the potential of gaming and beyond.
We’re on a mission to Imagine More…
more for our clients, more for our
studios, more for our people and more
for the games that we work on.
We aim to be the world’s most trusted
partner in technical and creative solutions
for the video games and entertainment
industries. We want to be a sustainable
business that positively contributes to the
environment and our communities across
the globe.
What we do
Our connected network of game
development and art studios
across four continents deliver the full
suite of production services
to clients across the globe.
Our services range from creation
of concept art, 2D and 3D asset
production and animation to full and
co-development of games across
all major platforms, porting and
remastering and consulting services.
In Create, each studio maintains its
own brand, due to the strength of
their reputations and relationships
with their clients.
Globalize
Globalize brings together our
audio, testing and localization
businesses to create a global
offering encompassing all the post-
production services required by
clients to get a game to launch.
Globalize works to make sure
that the initial game experience
is as great as possible and both
supports global launches and
opens new markets by making
games accessible in languages
from around the world. These
technology-enabled services
are generally branded under the
Keywords banner.
Engage is a collective of studios that
operate across the marketing and
player experience spectrum to make
sure the games they work on captivate
and engage their players.
In a world where games continue
to evolve after launch, successful
and continued engagement with
players is critical to the long-
term success of a game. Engage
creates world-class trailers and
PR campaigns, as well as offering
community management and more.
Its leading player support business
incorporates in-game automated
solutions twinned with a customer
service team of over 2,000 people.
23
Studios
32
Studios
29
Studios
~3,500
People across 42 cities
~5,000
People across 27 cities
~2,500
People across 23 cities
Read more on page 34
Read more on page 36
Read more on page 38
Keywords Studios plc Annual Report and Accounts 2022 Overview
03
Our purpose
We bring to life
digital content that
entertains, connects,
challenges and educates
people worldwide
Our strategic priorities
Strategic
partnerships
Technology
One
Keywords
Talent and
capabilities
Adjacent
markets
Read more on page 20
Our responsible business pillars
People
Planet
Community
Client
Governance
Read more on page 40
Page Title Overview
Our footprint
04
Our footprint
A global business
International
scale and
diversification
across markets
We operate in strategically important locations,
which provide both proximity to the world’s leading
video game companies and good access to skilled
talent pools across five continents. Through the
year we extended our global reach into three new
countries as we continue to fully support our clients’
production needs.
#1
technical and creative
solutions provider to the
video games industry
26
countries
70+
studios
~12k
employees
Seattle
Chicago
Cincinnati
Vancouver
Mexico City
Saint Jerome
Austin
Orlando
Ottawa
Montreal
Quebec City
New York
Raleigh
New Orleans
Rio de Janeiro
Portland
Los Angeles
San Francisco
São Paulo
Create
Globalize
Engage
* Offices closing in 2023
Keywords Studios plc Annual Report and Accounts 2022 Overview
05
Portsmouth
Leamington Spa
Liverpool
Newcastle
Dublin (HQ)
London
Berlin
Katowice
Beijing
Kunshan
Yanjiao
Warsaw
Yerevan
Bucharest
Volgograd*
Changsha
St Petersburg*
Dalian
Seoul
Tokyo
Brighton
Madrid
Barcelona
Paris
The Hague
Belgrade
Hamburg
Krakow
Milan
Rome
Valetta
Manila
New Delhi
Pune
Bangalore
Chengdu
Zhengzhou
Brisbane
Melbourne
Adelaide
Singapore
Yogyakarta
Taipei
Shanghai
Qingdao
Page Title Overview
Chair's statement
06
Chairman's statement
This is my tenth and will be my last
Chairman's statement since I joined
Keywords just before the IPO in July
2013, and what a journey it has been!
Ross Graham
Chairman
Looking back with
pride &
respect
Keywords Studios plc Annual Report and Accounts 2022 Overview
I can look back on those 10 years with a
combination of pride and respect – pride for
having overseen such a remarkable journey
from a small company with three studios and
a turnover of just €16m to where it is today at
the very centre of the video games industry,
and respect for all the people who made
it happen.
This last year, 2022, has, in many ways, been
the most rewarding of all. Finding a new CEO
is always a hazardous enterprise, especially
given the unplanned circumstances of the
retirement of Andrew Day, who had been the
driving force behind the growth of Keywords
until ill-health forced him to stand down.
We were fortunate to have real strength in
depth across our leadership team, allowing
time to undertake a comprehensive process
to appoint a high calibre successor with the
requisite experience and expertise.
In Bertrand Bodson we have found the
embodiment of everything for which I was
looking for, with the enthusiasm, energy,
understated charisma and ambition to lead
Keywords through the next phase of its
development; the aim is simply for Keywords
to become an ever more integral part of
the industry which it serves. Rarely has the
passing of a mantle been achieved with
such panache.
pride &
respect
07
For many companies 2022 was a difficult
year. I think it says much for the resilience
of the video games industry and Keywords’
positioning within it that we are able to report
another record year of results, with revenue
growth of ~35% and with the cash generation
of the business continuing to impress. For an
acquisitive business this crucial dynamic is a
fundamental aspect of the business model.
Acquisition activity continued apace with five
high-quality acquisitions spread across each
of our service lines. Perhaps to me the most
pleasing aspect of the acquisitions was the
greater influence of technology, which will
contribute to keeping us at the forefront of
our industry.
Earlier, I referred to the major influence of
Bertrand in creating a new sense of ambition
within the business. The areas identified
in collaboration with senior management
formed the basis for the evolved strategy set
out at the capital markets day in June 2022
(and is detailed on pages 20 to 31 of this
report) and involves:
• A shift to more of a strategic partner
relationship with clients.
• A focus on enhancing service delivery
through greater use of technology.
•
Increased coordination of activities
between service lines through the
concept of a "One Keywords" mindset.
• Talent management.
Also more analysis has been undertaken on
attractive adjacent industries where gaming
technologies are already, or likely to have a
major future role and where the technology/
expertise is already embedded throughout
Keywords. Media and Entertainment is a
natural area to target but the management
team has been careful to balance the natural
attraction of expanding our overall target
market with opportunities to extend its
position as the leading service provider to
the video games industry. As Keywords still
represents less than 10% of the growing
market of provision of external services to
the video games industry, there remains
ample scope for Keywords to continue
its own exciting growth trajectory, within
this market.
From the foregoing it will be apparent that, in
my opinion, the Keywords business is better
positioned than it was a year earlier, with a
clear strategy to take the business forward.
What is more, the senior leadership team
under Bertrand has a far stronger sense of
cohesion and common purpose. As already
announced, Jon Hauck is taking on the
position of COO having operated alongside
Bertrand for most of the year and assisted in
the streamlining of the operational structures
at the senior management level. During this
period Jon has also continued as CFO (helped
immensely by the finance team) and has
been in charge of M&A. Our search for a CFO
continues, and the comprehensive process
has identified a range of highly qualified
candidates for the role.
Success doesn’t happen by chance and
during 2022 some hurdles have had to be
overcome. Not least of these has been
the necessary relocation of our Russian-
based game development operation –
now largely completed with new centres
established in Serbia, Armenia and Malta
– a major accomplishment. For all that has
been achieved overall, great credit must
go to the senior management personnel
throughout the organisation and, of course,
every employee who has put in such effort.
My thanks are extended to you all.
I also want to pay tribute to my fellow
Directors who have been a great support to
the executives under Bertrand and to me as
Chairman. Working with these talented and
hard-working people has been immensely
satisfying and great fun. Together we have
visited a number of studios, including Dublin,
Milan and Tokyo, and benefited from the
insights provided by the local teams – in turn,
I hope we have given something back.
Finally, and with a certain sense of sadness
(but knowing the time is right for a change),
I hand over the Keywords torch to Don
Robert, my successor as Chairman. I pass to
him, Bertrand, and all Keywordians, my good
wishes and all good fortune for the next
phase in the life of Keywords, now in its 25th
year. During my 10-year tenure as Chairman
most of the relevant statistics have multiplied
by at least 20 times – so no pressure, Don!
Ross Graham
Chairman
Page Title Overview
Investment case
08
Investment case
Market-leading
position
Keywords is the only global provider of fully integrated creative and
technical solutions to the global video games industry and is ~3x the
size of our nearest competitor. With an industry reputation for quality,
reliability and flexibility, our global scale, full-service offering and
technology platform mean we are well placed to take advantage of the
trend for customers to move to more collaborative partnerships with
fewer, larger suppliers.
Read more on page 17
Access to a
large, dynamic
growth market
We operate in a growing industry that services the needs of over three
billion players, and requires the ongoing creation of engaging content.
The content creation market is estimated to be worth ~$36bn, with
around one third of this spent with external providers like us, presenting
a large growth opportunity. Our focus on content means we are
platform agnostic and the increasing complexity of games and consoles
is driving demand for larger providers, such as Keywords.
Read more on page 17
Strong growth
track record
Since our listing in 2013, we have grown from €16m of revenues to
€691m in 2022. Over the last five years, revenues have grown at a
compound average growth rate of ~35% through a combination of
strong organic growth and M&A. Over the same time period, organic
revenue growth has averaged ~15% as we have benefited from both the
growth in the video games industry and the trend towards greater use
of our services.
Read more on page 32
~3x
the size of
nearest competitor
3bn
players driving
demand for content
35%
five-year Revenue
compound annual
growth rate
Keywords Studios plc Annual Report and Accounts 2022 Overview
09
Trusted
partner
We are trusted by the leading players in the industry to work with them
on their biggest franchises and releases. We currently provide a range
of services to 24 of the top 25 games companies and all 10 of the top
10 mobile games publishers by revenue and are increasingly looking to
deepen these relationships.
Read more on page 21
Diversified
enabler of
the industry
Our business model means we provide services and solutions to a broad
client base rather than owning the intellectual property of a game. This
means we have exposure to the underlying growth in the overall exciting
video games market, without the risk of exposure to the performance of
individual game titles. This is then supplemented by the increasing trend
for developers and publishers to utilise external service providers.
Read more on page 18
Inorganic
growth engine
Since 2013, we have acquired over 60 businesses to augment our
customer offerings, consolidate a fragmented market, extend our
geographic reach and continually improve the quality of our earnings.
The M&A pipeline continues to be very healthy, and we are selectively
pursuing value accretive acquisitions, at valuations well below Keywords'
own rating, that support our strategic ambitions.
Read more on page 14
24/25
Trusted partner to
24 of the top 25
games companies
150
clients take three
or more of our
services
>60
Completed over
60 acquisitions in
the last 10 years
Page Title Strategic report
Chief Executive’s review
10
Chief Executive’s review
2022 marked my first full year as CEO
of Keywords, and what a year it was.
We delivered extremely strong growth
and continued to build out our platform,
furthering our position at the forefront of
the industry and delivering the solutions our
clients require to support the success of
their games.
Bertrand Bodson
Chief Executive Officer
Taking us to the
Keywords Studios plc Annual Report and Accounts 2022 5
new strategic
priorities designed
to drive long-term
sustainable growth
Read more on page 20
In June, we set out our evolved strategy to take
the business to the next level, and have made
great initial progress delivering against those
ambitions. We also unveiled a new, simplified
structure to strengthen collaboration
across our Group, sharpened our focus
on technology, and welcomed five high-
quality businesses with over 300 employees,
providing further scale and new capabilities
to build out our platform. None of this would
have been possible without the tireless efforts
of our 12,000 Keywordians who consistently
Imagine More to deliver high-quality, engaging
content and services for our clients.
I spent a considerable part of 2022 visiting
our studios across the world with other
members of the management team;
between us, we have been to Keywords
businesses across four continents. Having
the opportunity to visit the vast majority
of our teams has confirmed to me the
fantastic culture and leadership across the
organisation and given me great insight
into the incredible energy and enthusiasm
of our people across the globe. I've also
immersed myself in the industry, as coming
from a digital but non-gaming background,
it was important for me to develop a deeper
understanding of the complexities of such a
vibrant industry. I thank those who have given
their time to support me in this endeavour,
and of course, our clients for trusting us to
work on their precious content.
I also wholeheartedly extend my thanks to
Ross Graham, our departing Chairman, who
has offered tremendous guidance to me
in my first 12 months. Ross has been with
Keywords since the very beginning of our life
as a public company, and it is with sadness
that we see him retire. Ross has been an
exemplary guardian of the business, and we
cannot thank him enough for all that he has
given to Keywords over the last 10 years. We
wish him a long and happy retirement. Whilst
we are sad to see Ross go, we are delighted
that he is being replaced by someone as
experienced and talented as Don Robert.
His success in scaling global technology
businesses will be invaluable for us as we
look to Imagine More for this business.
I look forward to working with him over
the coming years.
11
Performance
2022 was another exceptional year. We
delivered revenues of €690.7m, representing
growth of 34.8%, with organic revenue
growth of 21.8%, helped by foreign exchange
movements. We also saw a good margin
performance with adjusted profit before tax
of €112.0m (profit before tax was €68.0m),
a margin of 16.2%. As guided, this margin
was lower than the 16.8% that we delivered
in 2021, as a number of cost savings made
due to COVID-19 naturally dissipated, and
we incurred meaningful costs relating
to the change in operating environment
around our single Russia-based business,
and our subsequent relocation of staff and
operations out of the country. Together,
these costs offset the benefit from the
strong US dollar on our margins.
During the year we consolidated our eight
service lines into a more simplified structure
of just three; Create, Globalize and Engage. All
three service lines, which will be discussed in
more detail later in this report, demonstrated
good growth against the previous year which
had benefited strongly from post COVID-19
trends. Organic growth was particularly
pleasing in our Create and Globalize
businesses, driven by strong demand for our
services. We also delivered excellent cash
generation in the year, which supported our
ongoing M&A activities. Our adjusted free
cash flow of €112.1m meant that despite
spending €116.4m on acquisitions, the total of
the cash component of both the current and
previous years’ transactions, we ended the
year with net cash of €81.8m, providing a solid
foundation for future M&A. This demonstrates
the highly cash generative nature of this
business, with cash conversion of 100.1% for
the year, ahead of our guidance of 80%.
Market opportunity
Whilst 2023 has so far seen mixed news from
the video games industry, we must not forget
the industry’s journey in recent years. The
video gaming sector is larger than the media
and entertainment industry and has grown by
over 25% since the start of the pandemic.
In 2022, the industry consolidated gains
it had made and, due to a lighter release
schedule, changes to mobile privacy and the
availability of out-of-home entertainment
once again, shrank slightly compared to
2021. Despite this, we continue to see
industry forecasts for strong growth over the
medium-term, with video games continuing
to offer incredibly good value on a per-hour
of entertainment basis, compared to other
forms of entertainment.
12
Chief Executive’s review continued
In the content generation segment of
the industry, where we focus, we believe
demand remains robust as our clients
seek to continue to engage and captivate
consumers. Demand for high quality,
engaging games, which our business is
skewed towards, is still very strong as
evidenced by record sales across some
of the industry's key franchises over the
important holiday period.
The ongoing shift towards live operations,
where games are nurtured through regular
content updates, will also mean there will
be increasing demand for new content from
consumers that publishers and developers
will have to meet; we will be there to
support them.
The trend towards external partnering
within the industry is ongoing as it becomes
increasingly complex and challenging
to bring a game to market. This growing
complexity, combined with a shortage of
industry talent, means that publishers are
increasingly leaning on trusted large-scale
partners like us to help them.
We are by far the largest player in our space,
and yet remain at only a 6% share of a highly
fragmented market. We believe that we
have a significant opportunity to continue
to take market share organically, as larger
developers and publishers will want to work
with larger providers with geographic scale,
and to consolidate through our successful
acquisition programme.
Delivering against evolved strategy
As I detailed at our capital markets day in
June, we have set out an evolved strategy
which seeks to build on the highly successful
platform created over the last few years.
The aim of this is to better position the
business to serve our clients by enhancing
collaboration and the use of technology
across our platform.
In addition, we are seeking to build our talent
pool, not only by attracting some of the best
talent in the industry, but also by retaining
and developing key talent ourselves.
We also believe that there is a significant
opportunity in markets closely adjacent
to gaming in which the technologies
we already use are increasingly being
deployed; with a key focus on the media
and entertainment space.
Across each of these areas we have
dedicated project teams who are embedding
key initiatives and workstreams across
the organisation in collaboration with our
leaders. Taking the core elements of the
evolved strategy in turn:
Strategic partnerships
We are working hard to shift our
relationships with key clients from tactical
to strategic partnerships. In this way, we
can provide more value for our clients and
expand the range of services that they
utilise from across our business.
Our new leadership
principles will help us to
collaborate, and Imagine
More for our partners,
ourselves, the games
industry and beyond.”
Bertrand Bodson
Chief Executive Officer
During the year, we initiated strategic
partner reviews with our key clients, where
senior members from each side can come
together for open discussions about how
we can work together over the longer-
term. This process, which is ongoing, has
already significantly improved our clients'
understanding of how we can support their
growth, and in turn is improving our visibility
of activity.
We have also increased our specialist
resourcing within the service lines, so that
we are better able to respond to client
needs with a more holistic offering. I have
spent a significant portion of my time
obsessively getting to know our clients and
their leadership teams. We believe that
having both a bottom-up, as well as a top-
down approach, will best support long-term
relationship building and value creation.
Technology
The technology landscape continues
to evolve at a rapid pace, and we must
continue to adopt new technologies into our
workstreams to remain at the forefront of
the industry. Having a background in digital,
it was immediately clear to me that Keywords
has an opportunity to better utilise the
technology that exists within the business,
both to enhance its internal systems and
provide more comprehensive customer
solutions. This will also support the scalability
of the business longer-term and ensure
we maintain our leadership in the industry.
Through utilising existing technologies more,
as we have with the KantanAI partnership
with Microsoft, and bringing exciting new
technologies into the Group through the
acquisitions of Mighty Games and Helpshift,
we have already made real progress. Both of
these acquisitions complement our existing
offerings and enable us to broaden our
solutions for our clients.
To support our adoption of technology,
we have created a standalone innovation
team, which is scouring both our business
to surface innovations within individual
studios, and the broader industry, to ensure
that we are able to continually enhance our
client offering and ways of working within
our business.
Keywords Studios plc Annual Report and Accounts 2022Strategic ReportPage Title 6%
market share in a
highly fragmented
industry
Read more on page 16
13
One Keywords
Through our One Keywords initiative we
are seeking to galvanise and leverage the
Group's culture of entrepreneurism and
collaboration. We have already seen tangible
benefits from the simplification of our
structure, which helps us to serve our clients
more effectively and ensure employees
get the full benefit of being part of the
wider Group.
With the support of our new solution
architects, we have been able to go to our
clients with broader offerings from across
many studios, something that was previously
difficult to achieve. We have also refreshed
our executive team and brought in new
talent to lead our Engage business, drive our
technology strategy and hired our first Chief
People and Culture Officer. In addition, we
have launched a studio hub model to allow
studio heads to participate in and have a
voice at leadership events.
We have also refreshed our previous set of
company values, by putting in place a simple
set of five leadership principles, which are
designed as a practical tool to be applied to
everyday working life:
• Power of Partnership
• One Keywords
• Raise the Game
• Embrace an Open World
• Trust through Transparency
These are guiding actions which create the
conditions for us to collaborate, and Imagine
More for our partners, ourselves, the games
industry and beyond, whilst supporting the
individual cultures that exist within each of
our studios and service lines.
Talent and capabilities
We have enhanced our engagement with
our 12,000 employees, establishing global
town halls, a key communicators network
to empower regional management and
consistent messaging across the Group.
We have also added dedicated resource
to address some of the industry’s key
issues, such as diversity, equity, inclusion
and belonging.
We have also put in place dedicated teams
to support talent acquisition in an industry
where this remains a challenge, yet is critical
to our growth trajectory. Internally, we are
seeking to develop our talent by expanding
our in-game academies and boot camps
which offer the opportunity for people
to enter or progress within the industry.
Longer-term, we are building a pipeline
of talent, specifically in India, where we
have an agreement with the government
to expand our Academy, which is currently
focused on art, into game development,
taking advantage of the quantity of high-
quality engineering talent emerging from
Indian universities.
Adjacent markets
Gaming remains our core market, and one in
which we see huge opportunity for growth
over the coming years. It is still a highly
fragmented market, and our focus remains
on ensuring we grow our market leading
position. However, gaming technologies are
increasingly being utilised in other industries,
primarily media and entertainment, where
virtual production and visual effects
(VFX) are increasingly using game engine
technology. We believe this shift will present
opportunities for us and we are looking at
ways to capture these opportunities over
time. We already serve elements of this
market through our Globalize business,
primarily providing dubbing and subtitling
services to companies such as Netflix, and
have seen strong growth during the year.
The trend towards live operations, with the
aim of keeping a game live and engaging
consumers for as long as possible, has
continued during the year. Across Keywords,
we are able to support clients as they
nurture games to stay live, and we continue
to augment the Group to deliver the right
offering for clients in this regard. We have
also started to explore ways in which we
can service clients in respect of longer-
term opportunities such as the metaverse
where we see emerging opportunities for
the Group.
14
Chief Executive’s review continued
M&A
Complementary to the five pillars of our
strategy is our M&A approach, which has
added significant value to the business
over the past ten years and something we
believe is a key differentiator for us. In 2022,
we completed five high-quality acquisitions
in the US, Australia, Canada and Italy,
meaning we have now completed over 60
transactions in the past 10 years. In that time,
we have carefully deployed almost €600m
on M&A, predominantly funded from free
cash generation, systematically expanding
our initial localization and testing offering,
into the only service provider able to deliver
across the full game development cycle.
We continue to take a strategic approach
to M&A and are looking to extend our
capabilities and geographical reach in our
Create and Engage service lines, as well
as scaling our technology offering and
exploring opportunities to enter adjacent
markets. During 2022, three acquisitions
were game development studios (Forgotten
Empires, Smoking Gun and Mighty Games),
with Mighty Games also bringing an
automated testing technology solution,
and one in marketing (LabCom). We also
acquired Helpshift, which has developed
a market leading software-as-a-service
customer support automation tool to resolve
customer issues in real-time within its
clients’ mobile apps and complements our
Player Support offering within the Engage
service line. In early 2023 we acquired 47
Communications, a leading US-based PR and
communications agency to further enhance
Engage’s marketing and PR offering.
Russia
Sadly, the humanitarian crisis in Ukraine is
ongoing. At the start of 2022, we had one
game development studio, Sperasoft, with
offices in Russia and Poland, which was purely
working for international gaming businesses,
rather than serving domestic Russian clients.
In discussion with our clients and to support
colleagues, in the first half of 2022 we
commenced relocating the majority of our
people and work from Russia to alternative
locations, including Poland, together with
Serbia, Armenia and Malta, where we have
established new operations.
This was a major project, requiring cross
functional support and a project team
which has dedicated considerable time and
resource to making this transition as smooth
as possible for all, with the second half of
2022 having been the key transition phase.
Their efforts enabled us to relocate over 400
people from Russia by the year-end to the
new locations in Europe, a true example of
what is possible when teams come together
in adversity and look for long-term solutions.
We have already started to organically grow
our headcount in the new locations, with
client work having transitioned to alternative
locations successfully. In H1 2023, we will
continue to look to transition further staff
out of Russia, before closing our operations.
Responsible business
Our responsible business agenda is centred
around five key areas; our people, planet,
community and our clients, underpinned
by our commitment to good governance
and ethics.
During the year we continued to make
good progress with these priorities. In an
organisation of over 12,000 people, our
people are our largest and most valuable
asset and rightly have high expectations of
us. A good culture, in which our people feel
rewarded, trusted, and included, is critical
for our long-term success. We believe that
having a diverse workforce is the best way
to provide highly creative solutions for our
clients and have made meaningful progress
in establishing this. We have renewed our
partnership with Women in Games after
a successful first year of our ambassador
programme and have a full schedule of
events planned for 2023.
In 2022, the Group was composed of 26%
women, 73% men, with according to current
data, a collective 1% of colleagues identifying
as non-binary or declining to disclose their
gender (2021: 25%/74%/1%). Our support
functions have a more balanced split of
women and men (44% and 55%, respectively,
with 1% non-binary/not disclosed).
Media and Entertainment
Emmy award winners
Sound Lab, one of our media and
entertainment focused audio studios
based in Los Angeles, won a Children's
and Family Emmy for their work for Maya
and the Three. The programme was a
nine-part animated fantasy streaming
series on Netflix. The team at the studio
took home the award for 'Outstanding
Sound Mixing and Sound Editing for
an Animated Program'.
Gender diversity, and addressing under-
representation remain a focus for the Group
and Board both across our business and the
wider industry. Following changes to Board
composition during the year, the percentage
of women Directors on the Board at year-
end of 29% was marginally lower than in
2021 (30%). We continue to apply inclusive
appointment processes, in line with our
Board Diversity Policy.
Internally we have created a three-year
roadmap with dedicated resourcing to
provide more structure to our diversity,
equity, inclusion and belonging (DEIB)
initiatives and believe we will start to
see tangible benefits from this as we go
forward. We have also continued to win
best workplace awards across the globe,
demonstrating the efforts made to make
sure Keywords is a great place to work
for all.
Keywords Studios plc Annual Report and Accounts 2022Strategic ReportPage Title 15
We have made positive steps in our
Sustainable Studios initiative to identify
the areas where we can reduce our impact
on the planet, something of importance
to all our stakeholders. During our review,
we identified moving to renewable energy
supplies, wherever possible, as having the
most significant positive impact, and we are
exploring this on a studio-by-studio basis.
We made progress in switching tariffs to
renewable providers, with 16 of our studios
now on green tariffs. Going forward, we
will also ensure that all new office and
studio space meets modern environmental
building requirements.
We are working towards a target of reducing
the intensity of our emissions (tonnes of
CO2e per €m of revenue) by 50% by 2030
and in 2022, achieved a 16% reduction. In
the meantime, we have continued to expand
the greenhouse gas inventory that we report
against and, during the year, we offset our
2021 operational emissions through a highly
respected carbon offset project in Tanzania.
5
acquisitions
completed in
2022
Read more on page 27
We have also continued to make a positive
impact through our Keywords Cares
initiative, which is an annual central fund
which can be applied to match funds raised
by our local teams. This year our teams
raised over €45,000 for a range of causes
across the globe, undertaking our first global
initiative in November. It was great to see so
many different activities taking place across
the Group, with over 35 different charitable
and community activities being completed,
more than double the number in 2021.
Outlook
We delivered an excellent performance in
2022, demonstrating the strength of our
platform and the dedication and hard work
of the 12,000 people within Keywords.
Whilst mindful of the increasing uncertainty
within the broader industry and potential for
foreign exchange movements, we are excited
about the opportunity ahead with our
business model, highly diversified client base,
adoption of technology and geographic
reach. We are increasingly well positioned to
support our clients in generating engaging
content for their leading franchises and
trading has started well, in line with our
expectations for the year.
We expect to continue to see robust demand
for content generation as our clients seek to
capture the imagination of the three billion
gamers globally. We continue to have a
healthy pipeline of acquisition opportunities
to broaden our capabilities, geographic
footprint and service offerings. This, together
with our organic growth, will enable us
to continue to grow market share, and
build upon our position as the partner of
choice for the global video games industry,
and beyond.
Bertrand Bodson
Chief Executive Officer
Market review
16
Market review
The video games and entertainment industries are large, vibrant and fast
moving. Due to COVID-19, there was a significant acceleration in many of
the broader demand and industry trends. These have provided further
opportunity for the Group to grow and consolidate its position as the
leading services provider to the global video games industry.
Demand trends
Following two extremely strong years,
where demand grew over 20% in 2020 and
8% off an elevated base in 2021, trends
in gaming spend in 2022 reflected the
normalisation of the industry. In November
2022, Newzoo released updated market
forecasts for 2022 predicting a 4% decline
year-on-year. Key factors contributing to
the decline include the impact of privacy
changes on mobile spending, fewer AAA
releases and the impact of the cost of
living increases on disposable income,
leading to lower discretionary spend
by consumers.
In addition, as the first “post-COVID-19”
year, consumers had a range of alternative
leisure activities available. With mobile the
most impacted by reduced disposable
spend, compounded by privacy changes,
this market is expected to see a 6% decline
in 2022. By comparison, Newzoo forecasts
the console market to fall 4% and expects
a small increase of +0.5% in the PC market.
Although lower than the previous year,
it is worth noting that, overall, the total
revenue generated from 2020 to 2022 is
still $43bn higher than original forecasts
and the industry is still 26% larger than
pre-pandemic.
Even with the slowing demand backdrop
Keywords has continued to experience
excellent demand for its services, with
organic growth of 21.8%, as there is
an ever-increasing need for content
development to satisfy consumer
demands. With the supply shortages
of the next generation consoles largely
resolved and a healthy pipeline of AAA
and indie releases scheduled for 2023, we
believe the demand for new content will
continue to be supportive to demand for
our services, despite the pressures on cost
of living, as publishers and developers look
to drive increased player engagement.
Global video game market
2022E
2021
2020
2019
2018
$184bn
$193bn
$179bn
$146bn
$135bn
Source: Newzoo estimates
Whilst the overall market value has
contracted during 2022, predominantly
driven by the mobile market, and to a
lesser extent a slower release cycle in the
first half of the year, there continues to be
growth in key areas of the market. Within
the PC gaming market, player engagement
through the Steam platform, which is the
leading platform through which PC games
are distributed and played, has continued
to rise. Player engagement increased
significantly during the pandemic years,
and rather than falling back in 2022,
we continued to see engagement rise
through 2022, reaching an all-time high in
January 2023 of over 33 million concurrent
users. This is up from a previous peak of 28
million users in December 2021, or a 17%
rise in engagement. At the same time, the
number of players “in-game” breached 10
million for the first time in January 2023.
In the week prior to the pandemic being
declared in March 2020, concurrent
players were at just over 20 million, with
around 6 million being “in-game”.
Average concurrent
players on Steam
2022
2021
2020
2019
2018
Source: SteamDB
21.8m
18.0m
16.9m
29.1m
25.8m
Keywords Studios plc Annual Report and Accounts 2022Strategic Report 17
Industry trends
The video gaming market has historically conducted the
majority of the game development cycle in-house, for a variety
of reasons. Over the past 25 years, Keywords has been at the
forefront of the liberalisation of the industry, as publishers and
developers increasingly utilise external partners to support the
launches of their games. This process started with the more
functional or specialist areas of the game development cycle,
such as audio, testing and localization and in aggregate external
providers now account for around 50% of these segments.
This trend has accelerated in recent years as the video games
publishing cycle requires significant and skilled resources to
deliver increasingly complex projects to a tight timeline.
Games publishers and developers are either unable to, or are
seeking to avoid, expanding their own teams and a higher
proportion of work is being entrusted to third party service
companies like Keywords.
Over the past few years Keywords has built a significant game
development platform around the world. We now have one
of the largest game development teams in the world and
with our reputation for high-quality service, we believe we will
benefit from our position as the market's leading provider of
scale, as there is a trend towards increasing partnerships at
a more strategic level. This includes a growing demand for
co-development and full game development services, and we
are investing to continue to grow our offering and increase our
market share.
As we operate in a highly fragmented market, our position as
the only service provider of scale with depth and breadth in all
areas, means we are uniquely placed to support our customers’
needs whilst also consolidating the market. Industry players
are attracted to joining the Group as they see the benefits
of our stability, access to a wider customer base and service
offering. Our continued M&A success means we are increasingly
benefiting from our scale relative to competitors, and we believe
this will enable us to get closer to the largest players in the
industry as they look for support on their large-scale complex
projects going forward.
Following work completed with the research company IDG,
we believe that Keywords’ addressable market in video game
content creation stood at ~US$36bn in 2022. Of this work,
broadly one third, or ~US$12bn, is completed by service
providers, with Keywords being the largest player. Our 2022
revenue of €691 million implies our market share has grown to
~6% of the market, with the second largest player in the market
believed to be around one third of our size.
The total addressable market (TAM) is expected to grow faster
than industry growth levels as the trend towards external
providers continues and the level of technical support increases.
IDG forecasts that this growth will average around 9% over the
next five years, compared to industry growth averaging around
5%. Game development remains the most internalised service,
with around 20% of the market taken up by external provision
and IDG expects this will be a key area of growth going forward,
even with the current trends in the market.
We also continue to see game engine technology, which
underpins our industry, increasingly being used in other markets
to improve their processes. In the media and entertainment
space, we have seen virtual production, which uses game
engines to render the backgrounds onto large, high resolution
LED screens, increase in use and we also see potential in visual
effects (VFX) and animation. These trends will remain supportive
over the medium-term and provide an opportunity for us to
utilise our expertise in broader sectors over time.
External
~$12bn (~33%)
TAM
~$36bn
Inhouse
~$24bn (~66%)
We operate in a large, highly
fragmented industry, where the
medium-term growth prospects
remain highly exciting.”
Bertrand Bodson
Chief Executive Officer
Business model
18
Business model
Creating value by
driving long-term
sustainable growth
1
2
What we do
Barriers to entry
Scale and flexibility
Customers increasingly need large reliable suppliers
with flexible resourcing to match their needs,
allowing scaling up and down to meet demand,
mirroring the seasonality of games production.
Reputation for quality
At the heart of our culture is our commitment
to quality, reliability and integrating with our
customers’ processes, promoting long-term
customer relationships.
Knowledge and expertise
Our talented people have deep games-specific
knowledge and experience, enabling them to add
value to our customers’ games at all stages in the
development lifecycle.
Global presence
Providing access to the best talent enables us to
deliver projects across studios in multiple time
zones, allowing global workflow capabilities while
remaining close to our customers.
Technology
Necessity of regular investment in technology and
security makes it difficult for smaller suppliers to
compete. The importance of resilience and security
is demonstrated by our robust IT infrastructure.
Financial strength
Our strong financial performance and position
gives our customers reassurance of resilience in
their supply chain and is part of our attraction to
businesses we acquire.
Game Development
Includes full and co-development,
porting and remastering,
tool development and
consulting services
Art Services
Creation of video game
graphical art, including
concept, 2D and 3D asset
production and animation
Player Support
Holistic multilingual support
delivered in game, on digital
community and social platforms
and through our proprietary tech
platform, Helpshift
Marketing Services
Creation of game trailers,
marketing art and materials,
PR and full brand campaign
strategies
Keywords Studios plc Annual Report and Accounts 2022Strategic Report 19
At Keywords, we are using our passion for games, technology and media to
create a global, integrated services platform of scale for video games and beyond.
By working as their external development partner, we enable leading content
creators and publishers to leverage our expertise.
Our presence across the full game development cycle creates multiple
opportunities to support our clients though the below service lines.
3
Creating value for
our stakeholders
Shareholders
Consistent track record of
delivering revenue and profit
growth, augmented by value
creating M&A.
Customers
Deepening and broadening
our relationships with
our clients.
35%
five-year revenue
CAGR
150
customers taking
three or more
services
Employees
Growing scale and diversity of our teams
within the supportive One Keywords culture.
17%
increase in average
number of employees
in 2022
26%
of workforce
are women
Environment
Minimising our impact on the
planet through Sustainable
Studios programme.
16%
GHG intensity
reduction in 2022
Communities
Increasing community
involvement and support for
good causes.
38
projects
supported, more
than double 2021
Audio Services
Multi-language voiceover recording, original language voice
production, music management and sound effects
Functional Testing
Quality assurance, testing for defects, compliance with hardware/
platform specifications, as well as test automation tools and services
Localization
Translation of in-game text, audio scripts, cultural and local adaptation,
accreditation, packaging and marketing materials in 50+ languages
Localization Testing
Testing for out of context translations, truncations, overlaps,
spelling, grammar, geopolitical and cultural sensitivities and
compliance requirements
Our strategy
20
Our strategy
Imagine More...
In 2022, we set out how we intend to build on our strong foundations
to further unlock Keywords’ considerable potential and deliver an
ever-more compelling proposition globally for our partners in the
video games industry, and adjacent content markets.
Our strategy from
2019 to 2021
2022 and beyond
Cementing
our position
Moving to
the next level
Cementing our position as the “go to”
technical and creative services provider
for the global video games industry.
Our key areas of focus to take Keywords
forward and to drive accelerated sustainable
growth and opportunity are:
Building our platform
Growing the number of services and
locations within the organisation to create
a full service offering for our clients.
Selective acquisitions
and integration
Extending the Group's service capacity,
capabilities and geographical reach in
order to serve our client base.
Organic growth
and cross selling
Driving the organic growth of the service
lines and increasing the number of clients
taking three or more services.
Key achievements for the period
27%
Revenue
CAGR
22%
increase in
employees
CAGR
21
acquisitions
completed
Strategic
partnerships
Technology
One Keywords
Talent and
capabilities
Adjacent markets
Keywords Studios plc Annual Report and Accounts 2022 21
Discover how we
collaborate with
our partners
Read more on page 12
1
Strategic
partnerships
We are developing deeper strategic client partnerships at all levels to
create and capture more value together, driving success for our clients
and more demand for Keywords’ services.
Progress
•
•
Introduced Client Partner roles to
lead overall relationships with our
strategic partners.
Integrated Solution Producers now
coordinate the delivery of complex
cross service line solutions for clients.
• Established Service Line Architects to
create value-based solutions based on
deep client and industry knowledge.
Lighthouse deals
We are targeting the generation of 5–10
multi-service line, long-term engagements
with key players in the industry that create
and deliver improved solution offerings
and strategic advantage.
Progress
• Enhanced capability to deliver cross
service line bid responses to support
clients’ needs.
• Ongoing discussions with a range of
clients about complex multi-service
line projects.
Priorities
Managing our top 25
strategic partners
As the leader in the industry, we already
work with 24 of the top 25 games
publishers and all of the top 10 mobile
publishers.
A clear theme from our client discussions
is to elevate our relationships, make them
more strategic and enhance our ability to
cross-sell solutions that benefit their needs
as the industry evolves.
Progress
• Commenced strategic partnership
reviews with key clients to share and
discuss ambitions for the mid-to-
long term.
• Created consolidated client IP-level
data views providing clearer total
relationship insight.
•
Improved internal capability to
support collaborative responses to
client requests.
Developing our strategic
partnering capability
and capacity
We have enhanced our capability to deliver
a more coordinated end-to-end offer to
meet our clients’ longer-term needs. By
facilitating greater cross service line and
studio collaboration, we aim to capture
more value for all throughout the content
development lifecycle.
22
Our strategy continued
2
Technology
We are harnessing new and existing technologies to enable Keywords
to work smarter, do more for our clients and stay at the forefront of
the industry. This includes broadening our use of AI, Machine Learning
and automation across our global platform enabling us to scale
and enhance our offering.
Priorities
Internal tech spine
While we have robust systems already in
place, we are strengthening our internal
capability to support ongoing growth and
our ability to deliver larger, more complex
work ever more seamlessly through
better integration of our systems across
the business.
Progress
• Acquisition of Mighty Games brought a
proprietary AI-based testing technology
platform to complement our existing
capabilities.
• Acquisition of Helpshift has provided
a propriety customer support AI
automation tool to resolve issues within
clients’ mobile apps, complementing
our Player Support capabilities.
• Dan McCormick joined as Chief Digital
and Information Officer to spearhead
deeper integration of technology
across the Group.
• Enhancing our systems to provide
richer insights and reporting
capabilities as well as supporting cross
service line collaboration.
• Scaling proven systems across our
global platform for more integrated
planning and delivery.
Innovation
Innovation is very much part of the
entrepreneurial spirit of our 70+ studios
with many smart solutions already adding
value to clients across our global platform.
We have a global initiative to leverage our
shared innovation mindset and activity
across Keywords to ensure we have the
best technology and solutions in each
of our service lines and remain at the
forefront of the industry.
Progress
• Created a dedicated stand-alone
innovation team led by an Executive
Committee member.
• Launching Labs @ Keywords Studios to
identify and develop future tech-based
solutions.
•
Integrating KantanAI into Helpshift
to expand the number of languages
supported on platform.
Service line automation
We have been identifying and investing
in automation opportunities and proven
capabilities across our service lines to
enable us to deliver more for clients.
When appropriate, we will augment our
offering by acquiring innovative technology
to develop.
Progress
• Built and expanding an end-to-end
automated solution for a key client
to enhance their localization using
our KantanAI technology to deliver
translations in over 30 languages.
Discover how
we are building
our technology
platform
Read more on page 26
Keywords Studios plc Annual Report and Accounts 2022Strategic ReportPage Title 23
3
One
Keywords
We are galvanising the Group’s “One Keywords” culture of
entrepreneurialism and collaboration to make it easier to navigate
our comprehensive service and studio platform and facilitate more
collaboration and scalability.
Discover our new
leadership principles
Read more on page 43
M&A integration
Enhancing our strong track record of M&A
execution with deeper integration of post-
transaction processes to support future
value creation and realise synergies.
Progress
• Development of updated M&A
integration memorandum.
• Creation of a London marketing
hub, bringing all recently acquired
studios under one roof to enhance
collaboration.
• Encouraging collaboration between
newly acquired studios and other
locations and service lines to identify
opportunities to expand services and
create new integrated solutions.
Priorities
Values and leadership principles
Developing our shared cultural values
and leadership principles to facilitate
platform growth.
Progress
• Launched new Leadership Principles
capturing the essence of the
Group, while retaining unique studio
characteristics.
• Established Key Communicators
network to enhance engagement
and enable transparent and open
communication across the Group.
• Established quarterly Group-wide town
hall sessions to share organisation-wide
key themes.
Spine business partnering
One of the key strengths of our business
is its entrepreneurial spirit. To retain this,
we are amplifying the voice of the studios
to ensure we have a global platform that
combines invaluable local knowledge
with the benefits of our strong ‘spine’ of
shared services to support the growth of
our studios.
Progress
•
Introduced a regional hub model to
create centres of excellence.
• Scaled our strategic and tactical Shared
Services to empower every studio with
the expertise of the Group.
24
Our strategy continued
4
Talent and
capabilities
We aim to establish Keywords as the destination for talent and career
development in the industry. Our goal is to enhance our employee value
proposition to support the growth of our global and increasingly diverse
workforce. We will do this through talent acquisition and development, effective
communication and engagement, and a broadening of our DEIB initiatives.
Keywords academies
Expanding our talent development across
our global footprint to offer the best
opportunities for talent, aligned with
in-demand industry growth areas.
We are also seeking to replicate the
success of our Art Academy, which has
been highly successful in developing talent
for our studios in India, by creating training
courses to develop a further pool of talent
to support studios around the world.
Progress
• Memorandum of Understanding
with the National Skill Development
Corporation in India to jointly fund,
promote, and support the expansion of
the InGame Art Academy, to develop
a further pool of talent to support our
game development studios around
the world as part of our Destination
India initiative.
• Expanded Bootcamps which look to
provide those with some industry
experience in games with the skills to
become ‘AAA’ game developers.
Priorities
Compensation and benefits
We are working on aligning and better
communicating our incentives.
Progress
• Mid-year review and benchmarking of
compensation across the globe.
• Remuneration Committee review of pay
scales and incentives emphasising fair
pay and rewarding strong performance.
• Evolving emphasis of long-term awards
at the service line level to provide
clearer link between performance
and reward.
Specialised recruitment
and development pathways
We are investing in and expanding our
talent acquisition and development
success stories across our global footprint
to enable our studios to grow faster,
particularly within strategically important
capabilities like Game Development, where
demand and competition for talent is more
pronounced across the industry.
Progress
• Established a global talent acquisition
team modelled on the successful
approach used at Snowed In Studios.
• Building out our talent development
strategy based on our new Leadership
Principles.
• Piloting leadership skills training
in partnership with a leading
industry provider.
Discover how
we are building
talent pipelines
for the future
Read more on page 28
Keywords Studios plc Annual Report and Accounts 2022Strategic ReportPage Title 25
5
Adjacent
markets
We are leveraging the Group’s capabilities to target closely adjacent
markets that are increasingly utilising video games expertise, that
naturally fit with our current offering, or where we can transfer our
gaming experience to other close verticals.
Discover how
we are capturing
new opportunities
Read more on page 13
•
Investing in broadening current
audio offering to media and
entertainment clients.
• Exploring M&A opportunities to
leverage game engine capabilities
in the media and entertainment space.
Metaverse
Opportunity to leverage our existing
service propositions to meet metaverse
requirements such as large-scale art, live
Q&A, and player/user support or act as a
consultant to large non-gaming brands
and render their proposition digitally.
Progress
• Developing metaverse presence to use
as a test bed for future support.
• Continue to review opportunity set to
support clients’ needs in the metaverse.
Priorities
Live operations
We are developing a dedicated LiveOps
offering, to build on our existing offering,
as an increasing proportion of games are
released as Games as a Service (GaaS),
where content is constantly iterated
and developed.
Progress
• Expanded our Lively studio in
Leamington Spa focused on LiveOps
offering.
• Broadened LiveOps capabilities
through the acquisition of Smoking
Gun in Vancouver.
•
Investing in our data and analytics
capabilities.
Media and entertainment
The TV/film market is predicted to be
almost $150bn by 2025 (Source: IDG
Consulting 2021) and we are seeing
convergence of both the customer base
and the technology, with game engines
increasingly being used to create content
through virtual production and animation.
Progress
• Demonstrated our in-house Virtual
Production (VP) skill set through the
end-to-end production of video using
VP techniques.
Strategy in action
26
Strategy in action
Embracing new and existing technologies
to enable Keywords to work smarter, do
more for our clients, and to enable us to
stay at the forefront of the industry, is
critical to our long‑term success.
Read more on page 22
Keywords Studios plc Annual Report and Accounts 2022Strategic Report 27
Case study
Building our technology stack
During 2022, we made technology one of the key areas
of focus for our M&A activity and successfully completed
two acquisitions that significantly built out our
technology platform. Both acquisitions were different
to our normal profile in that the solutions they provide
are highly scalable and have the potential to automate
traditional processes in the game lifecycle, whilst being
highly complementary to our current offering.
Mighty Games brought an innovative set of AI-led tools to
help developers go from build to test using ‘zero touch’ tech
and automation. These tools automatically test the quality
of code on multiple machines and produce automatic
feedback on defects, bugs and errors. Currently focused
on mobile games, we are investing to broaden the TestBot’s
capabilities into other game engines and will be able to
utilise it within our internal processes to give our clients a
further quality control oversight, as well as providing it as a
solution to clients' internal development studios.
Effective customer support is at the core of making sure a
player remains engaged, and with Helpshift’s combination
of smart segmentation and conversational AI, we are
able to facilitate a positive customer support journey
without leaving the game. Helpshift can either solve an
issue outright, or direct the customer to one of our 2,000
agents to provide tailored support in the consumer's
own language, thanks to the capabilities of KantanAI, our
machine translation solution.
We will continue to broaden our technology stack and
are integrating technology to enhance our offering and
increase automation to support the scaling of our business
as a key part of our long-term strategy.
Link to strategic pillars
28
Strategy in action continued
Imagine More
Building on the success of our InGame Art
Academy in India, we are looking to provide
opportunity and development for graduates
within the exciting and ever‑evolving game
development industry.
Read more on page 24
Keywords Studios plc Annual Report and Accounts 2022Strategic ReportPage Title 29
Case study
Strengthening our
talent pipeline
In an industry where there is a significant shortage
of available talent, we have a long track-record of
developing our own.
Our Lakshya art studio in India, has grown from
270 people in 2014 to over 700 people across
four cities today. A large part of their growth has
been through their highly successful InGame Art
Academy, where we have offered structured training
programmes to graduates. As part of this we also
run programmes designed especially for women to
encourage more women to be part of the industry.
In 2022, we decided to expand the academy concept
into Game Development, given the critical shortage
of talent, and to take advantage of the near one
million engineers graduating in India each year. In
collaboration with a number of our game development
studios in the UK, Australia and US, and in conjunction
with the Ministry for Skills Development and
Entrepreneurship, we have built on the learnings from
the Art Academy and created a tailored programme
that provides specific training for recent graduates to
be able to work in the video gaming industry.
This isn’t an overnight process, and once they have
graduated from the academy, we will continue to train
the graduates to enable them to provide the quality of
output that our studios require to satisfy our clients and
create a long-term career in the industry.
Link to strategic pillars
30
Strategy in action continued
Imagine More
Imagine working with the biggest titles
and best people in the industry.
Human talent is our most valuable resource
and as a business we thrive on diversity and
collaboration, and work as teams to create
world‑class entertainment and empower
people to fulfill their potential.
Read more on page 46
Keywords Studios plc Annual Report and Accounts 2022Strategic ReportPage Title 31
Case study
Supporting diversity and
representation in gaming
The video games industry has not traditionally attracted or
retained a diverse talent pool and we believe we have a key
role to play in making it a more attractive career choice for
people of all backgrounds and characteristics.
Whilst still early in our journey, we are already seeing
notable progress in certain areas of our business around
gender equality. One of our UK studios, Lively, which started
life as part of Electric Square, already has a workforce
of 70 people having been operating for only two years.
Importantly, 37% of those staff are women and over half of
those women have been hired or promoted into senior or
leadership roles, including two of Lively’s directors.
In India, in what has traditionally been a workforce of
predominantly men, we saw the first all-woman cohort go
through our InGame Art Academy during 2022. This was part
of a specific initiative targeted at increasing the participation
of women in the space. The women completed a three-
month paid internship programme, with the curriculum
designed for women who aspire to excel in 3D Game Art,
providing the support and inspiration for them to leave a
mark in the industry once they are fully employed at Lakshya.
Members of our team have also been instrumental in setting
up the Women in Games (WIG) chapter in Asia. Keywords
is the proud sponsor of the Women in Games Individual
Ambassador programme, with 30+ Keywordians part of this
community of women making an impact within the industry
globally. This creates a strong foundation for us to continue
to drive the agenda in the coming years, and expand our
support for more underrepresented groups.
Link to strategic pillars
Key performance indicators
32
Key performance indicators
We monitor our financial performance against a number
of different benchmarks and these are set in agreement
with the Board.
Revenue growth
34.8%
2022
2021
2020
14.4%
34.8%
37.1%
2019
30.2%
Reasons for choice
Quantifies the growth in revenue from our operations on a reported basis.
How we calculate
Increase year-on-year in reported revenue.
Objectives
The Group aims for continued revenue growth and development.
Organic Revenue growth
21.8%
2022
2021
2020
2019
21.8%
19.0%
11.7%
15.5%
Reasons for choice
Due to the number of acquisitions the Group makes, and because it
integrates them quickly, this provides the most meaningful measure of
underlying revenue growth.
How we calculate
Organic revenue at constant exchange rates is calculated by adjusting
the prior year revenues, adding pre-acquisition revenues for the
corresponding period of ownership, and applying the prior year foreign
exchange rates to both years, when translating studio results into the
euro reporting currency.
Objectives
The Group aims to achieve Organic Revenue growth in excess of 10% per
annum over the medium-term.
Gross margin
38.7%
2022
2021
2020
2019
Adjusted operating
costs as a % of revenue
17.4%
38.7%
39.1%
38.0%
36.8%
2022
2021
2020
2019
17.4%
17.6%
18.1%
19.2%
Reasons for choice
The Board believes this to be a consistent measure of trading
performance.
Reasons for choice
The Board monitors overheads to ensure the operating costs of the
Group are in line with the level of business being generated.
How we calculate
Revenues from services supplied to customers less cost of sales,
as a percentage of revenue.
Objectives
The Group aims for gross margins in line with historic norms.
How we calculate
Administration expenses, adding back non-operating costs including
share-based payments expense, costs of acquisition and integration,
amortisation of intangible assets, depreciation and impairment, non-
controlling interest and deducting bank charges, expressed as a
percentage of revenue.*
Objectives
The Group will continue to seek to control these costs closely and in
line with the level of business being generated.
Keywords Studios plc Annual Report and Accounts 2022Strategic Report 33
Link to strategic priorities
Strategic
partnerships
Technology
One
Keywords
Talent and
Capabilities
Adjacent
markets
Adjusted EBITDA margin
21.3%
2022
2021
2020
2019
21.3%
21.5%
19.9%
17.6%
Adjusted profit
before tax margin
16.2%
2022
2021
2020
2019
16.2%
16.8%
14.7%
12.5%
Reasons for choice
Provides an indication of how we are performing both internally and
relative to our peers.
Reasons for choice
The Board believes this to be a consistent measure of trading
performance, aligned with the interests of our shareholders.
How we calculate
Comprises EBITDA (operating profit, adjusted for amortisation of
intangible assets, depreciation and impairment, while deducting
bank charges) adjusted for share-based payments expense, costs of
acquisition and integration and non-controlling interest, as a percentage
of revenues.*
Objectives
The Group aims to increase margins through operational efficiencies.
How we calculate
Comprises profit before taxation adjusted for share-based payments
expense, costs of acquisition and integration, amortisation and
impairment of intangible assets, non-controlling interest, foreign
exchange gains and losses, and unwinding of discounted liabilities.*
Objectives
The Group aims for margins in line with historic norms.
Adjusted cash conversion rate
Growth in Adjusted EPS
100.1%
2022
2021
2020
2019
100.1%
107.3%
97.2%
27.2%
2022
2021
2020
27.2%
24.9%
46.5%
80.2%
2019
7.2%
Reasons for choice
Measures operating cash generation and our capacity to pay dividends,
service debt and fund acquisitions.
Reasons for choice
Reports the underlying profit growth generated on a per share basis,
demonstrating the value being created for shareholders.
How we calculate
Adjusted free cash flow before tax as a percentage of the Adjusted profit
before tax. The calculation is described in more detail on page 170.
Objectives
Cash generation and working capital management will remain a
key focus.
How we calculate
The Adjusted profit after tax comprises the Adjusted profit before
tax, less the tax expense as reported on the Consolidated statement
of comprehensive income, further adjusted for the tax arising on the
bridging items to Adjusted profit before tax.
The Adjusted earnings per share comprises the Adjusted profit after
tax divided by the non-diluted weighted average number of shares as
reported in note 8.
Objectives
The Group aims for continued growth in Adjusted earnings per share.
*
In 2020, in order to present the measure consistently year-on-year, the impact of COVID-19 government subsidies claimed is also excluded.
Service line review
34
Service line review
At a glance
Service offerings
Game Development
Includes full and co-development, porting
and remastering, tool development and
consulting services.
Art Services
Creation of video game graphical art,
including concept, 2D and 3D asset
production and animation.
Performance indicators
Service line revenue
€275.5m
+46.4%
Organic Revenue growth
25.9%
Average operational staff
3,417
+26.3%
Keywords Studios plc Annual Report and Accounts 2022Strategic Report 35
The market opportunity
and outlook
The video games market remains robust,
with strong player engagement on major
platforms and titles. Whilst there is potential
for large publishers to have a narrower
focus on major titles, we continue to believe
there will be a focus on the generation of
new content to ensure that players remain
engaged for longer.
We expect continued robust demand across
our Create service line, as the industry
remains capacity constrained in terms of
access to highly-skilled talent as games
continue to increase in complexity. This has
meant that clients are increasingly seeking
external support to deliver the required,
engaging content for their projects. While we
are starting to see a more cautious approach
to investment in new games at the beginning
of the year, the Create service line remains
resilient, due to the quality of our studios and
talent, its strong client relationships globally,
and the mix of franchises we work on.
Percentage of
Group Revenue
Percentage of Group
Adjusted EBITDA
The Create service line combines Art Services and
Game Development to deliver a range of services to
clients and partners globally. It represents around
3,500 people in 23 studios across 42 cities.
2022 Performance
Create performed strongly during the year,
with total revenues up by 46.4% to €275.5m
(2021: €188.2m). Organic Revenue, which
excludes the impact of acquisitions, grew
by 25.9%, as the service line continued to
benefit from the strong industry demand
for new content creation and the increasing
complexity of games.
The performance was driven by strong
growth in a number of Create studios,
with increased headcount enabling our
game development studios to take on
more work and meet demand, with the
UK and Australia seeing strong growth in
particular. In Art Services, we continued
to experience very strong performance in
Quebec and in our Indian business. We have
also begun to benefit from the increased
collaboration between Art Services and
Game Development, with studios increasingly
utilising each other's services to support the
needs of clients.
Due to the industry-wide shortage of talent
within the game development and art
sectors, we have established a dedicated
talent acquisition team to complement
local efforts and have started a number
of local talent development initiatives.
These combined efforts, together with our
extensive geographic footprint allowing us to
hire from around the world, has meant that
we have been able to meaningfully grow our
Create team during the period, and better
support our clients.
Despite Game Development being the
most directly affected by the situation in
Ukraine, the scale and broad footprint of
the business has meant that the service line
continued to perform well during the period.
During the year, we started to relocate
people and work from our single Russia-
based business, Sperasoft, to alternative
locations in Europe. Sperasoft purely works
for international gaming businesses, rather
than serving domestic Russian clients.
The majority of this transition took place
in the second half of the year, and in total
we have moved over 400 people to new
locations as of the year end. The situation in
Ukraine meant that our initial growth plans
for Sperasoft, that had been resourced,
could not be fulfilled, and the focus for the
year was on completing existing projects
and undertaking the transition. This had a
meaningful impact on profitability of the
business. Due to the successful transition,
and pace of new hires in the new locations,
we are now able to start to take on new
projects as well as continuing to support
our existing clients. In H1 2023, we will
continue to look to transition further staff
out of Russia, before closing our operations.
As a result, we will continue to incur costs
from the transition into the year, as well
as a modest one-off charge relating to
the closure.
Revenues derived from Russia represented
3.8% of Group revenues (€26.3m), down
from 5.7% in 2021 and in December 2022,
represented just 1.7% of Group revenues.
Adjusted EBITDA in Create grew 40.2% to
€69.7m in 2022 (2021: €49.7m), with the
Adjusted EBITDA margin of 25.3% in 2022
lower than the previous period (2021: 26.4%)
due to the impact of the transition of people
and work from Russia in the second half
of the year. This was largely offset by the
benefit of foreign exchange movements.
We welcomed three new Game Development
studios this year, Forgotten Empires, the
small game development team at Mighty
Games and Smoking Gun Interactive. Each
of the acquisitions bring different skills
and capabilities to our business. Forgotten
Empires brings extensive experience in
real-time strategy games. Smoking Gun
has a long track record in developing
highly rated, cross platform games and
gives access to talent in Vancouver, a game
development hub. The Mighty Games team
also support the scaling of our broader
Australian business.
Revenue €m
Organic Revenue growth %
Adjusted EBITDA €m
Adjusted EBITDA margin %
2022
275.5
69.7
25.3%
2021
188.2
49.7
26.4%
Change
46.4%
25.9%
40.2%
36
Service line review continued
At a glance
Service offerings
Audio Services
Multi-language voiceover recording,
original language voice production, music
management and sound effects.
Functional Testing
Quality assurance, testing for defects,
compliance with hardware/platform
specifications, as well as test automation
tools and services.
Localization
Translation of in-game text, audio scripts,
cultural and local adaptation, accreditation,
packaging and marketing materials in 50+
languages.
Localization Testing
Testing for out of context translations,
truncations, overlaps, spelling, grammar,
geopolitical and cultural sensitivities and
compliance requirements.
Performance indicators
Service line revenue
€300.9m
+29.8%
Organic Revenue growth
23.4%
Average operational staff
4,562
+6.9%
Keywords Studios plc Annual Report and Accounts 2022Strategic ReportPage Title 37
Globalize brings together our Audio,
Testing and Localization businesses to
create a global business with around
5,000 people in 32 studios across
27 cities.
Percentage of
Group Revenue
Percentage of Group
Adjusted EBITDA
2022 Performance
Globalize performed well in 2022 with total
revenues up by 29.8% to €300.9m (2021:
€231.9m). Organic Revenue, which excludes
the impact of acquisitions, grew by 23.4%.
Each of the lines of business within Globalize
performed well during the year, and our
increased scale and footprint meant we were
well positioned to capitalise on the industry’s
healthy demand for post-production
services, despite it being a slower period
for new launches.
In Functional Testing we saw strong growth,
as our Polish operations relocated to a new
state-of-the-art facility enabling increased
recruitment, and Montreal performed well.
We also benefited from several large testing
contracts in the second half of the year
that we were able to fulfil due to our scale
and footprint. Our broad footprint across
different time zones allows clients access to
a global workflow, and access to different
cost to serve models. This enables us to
continue to mitigate the impact of increasing
costs, with considered pricing adjustments.
Our footprint also provides the opportunity
to grow our talent base and maintain high-
quality output for our clients.
Mighty Games was added to the portfolio to
be able to offer automated games testing
solutions and expertise to our clients. This
acquisition illustrates our commitment to
utilise technology to provide more value-
added services to our client base and stay
at the forefront of our industry.
In Localization, performance was also strong
as we benefited from the deployment of a
specific AI-driven text localization workflow
in H1 for a key client. Audio localization
saw a good second half of the year, which
offset weaker H1 performance from delays
to certain projects. Our Audio media and
entertainment business continued to grow
rapidly as we expanded our capabilities
and relationships with several large
industry players, including Netflix.
Adjusted EBITDA in Globalize grew 30.0%
to €61.6m in 2022 (2021: €47.4m), with the
Adjusted EBITDA margin maintained at 20.5%
in 2022 compared to 20.4% in 2021.
The market opportunity and
outlook
During the year we saw the trend towards
external service provision continue across
each of our Globalize lines of business. We
believe that even in a more constrained
market environment this trend will continue
over the medium-term, as the opportunity to
move from fixed to variable costs for certain
functions will become more attractive for
clients. Due to the scale of the service line
we are now able to meet the needs of our
largest clients, across the globe, and in a
rapid manner, which should further enable
us to capture increasing demand across the
service line.
Revenue €m
Organic Revenue growth %
Adjusted EBITDA €m
Adjusted EBITDA margin %
2022
300.9
61.6
20.5%
2021
231.9
47.4
20.4%
Change
29.8%
23.4%
30.0%
38
Service line review continued
At a glance
Service offerings
Marketing Services
Creation of game trailers, marketing
art and materials, PR and full brand
campaign strategies.
Player Support
Holistic multilingual support delivered
in game, on digital community and
social platforms and through our
proprietary tech platform, Helpshift.
Performance indicators
Service line revenue
€114.3m
+24.1%
Organic Revenue growth
9.7%
Average operational staff
2,292
+21.2%
Keywords Studios plc Annual Report and Accounts 2022Strategic ReportPage Title 39
Percentage of
Group Revenue
Percentage of Group
Adjusted EBITDA
Our Engage service line brings together
our Marketing Services and Player
Support businesses to create a holistic
offering focused on player engagement,
encompassing around 2,500 people in
29 studios across 23 cities.
Adjusted EBITDA grew 20.0% to €15.6m in
2022 (2021: €13.0m), with the 2022 Adjusted
EBITDA margin of 13.6% slightly behind the
previous year period (2021: 14.1%).
The market opportunity
and outlook
Our ambition for Engage is to create the next
generation of connected companies that
encompass the marketing, communications,
and player-centred aspects of the games
industry. This will enable us to offer a holistic
solution focused on driving and maintaining
player engagement with our clients’ games.
We will continue to broaden our marketing
offerings, both geographically and to ensure
that we have all of the capabilities our global
clients need.
In Player Support, the nature of the business
means that clients need to focus on keeping
players engaged and supported within
their games. The Helpshift acquisition,
whilst early in its integration, provides an
exciting opportunity to scale our business,
by providing a market-leading solution for
clients, although it will take the majority of
2023 before we believe we will be able to
demonstrate meaningful traction with clients
due to the longer sales cycle in this segment.
As highlighted previously, the successful
integration of KantanAI, our Machine
Translation solution, into Player Support,
provides further opportunities for the
business to provide cost effective and high-
quality solutions to meet industry needs.
2022 Performance
Engage saw robust growth during the year,
with revenues up by 24.1% to €114.3m (2021:
€92.1m). Organic Revenue, which excludes
the impact of acquisitions, grew by 9.7%.
Player Support performed strongly across
the year, with the addition of a number of
new clients and healthy growth across our
top clients. Social Media and Trust and Safety
Services also continue to grow and are
developing into a key part of our offering. In
December, we were delighted to announce
the acquisition of Helpshift, which will
transform our player support business into
a unique market-leading holistic offering
for our clients. Helpshift brings a market-
leading customer support automation tool
to resolve customer issues in real-time within
its clients’ mobile apps, which together with
our existing player support capabilities, and
KantanAI machine translation capability, will
create an unrivalled player support offering
for customers.
Our Marketing studios delivered a more
modest performance, in part due to
the exceptional performance in 2021,
during which the business experienced
significant growth of over 150% and organic
growth of ~34%. In addition, the 2022
performance was impacted by some client-
specific project delays and cancellations,
particularly in our North American studios.
In December, we were pleased to extend
the geographic spread of our PR offering,
with the acquisition of LabCom in Italy,
complementing our UK-based PR agency,
Indigo Pearl and the January 2023 acquisition
of 47 Communications in the US opens
up opportunities in the world’s largest
gaming market. Increasingly, our marketing
studios are collaborating to provide broader
solutions to clients as well as working with
player support to provide a holistic offering.
Revenue €m
Organic Revenue growth %
Adjusted EBITDA €m
Adjusted EBITDA margin %
2022
114.3
15.6
13.6%
2021
92.1
13.0
14.1%
Change
24.1%
9.7%
20.0%
Responsible business review
40
Responsible business review
We conduct our business responsibly,
operating to the highest standards of
honesty, integrity and ethical conduct. We
take our wider corporate responsibility
seriously and are conscious of the role we
play in our communities and our impact
on the environment. We are very proud of
the thousands of Keywordians, across 26
countries, for upholding the highest standards
as we engage and grow with our colleagues,
our customers and our communities.
Highlights
During 2022, we made good
progress on our priority areas,
with highlights including:
• Renewed partnership with
Women in Games Ambassador
programme and formalised
our DEIB journey.
• Increased net promoter score
to 37 across our client base.
• More than doubled charitable
and community activities to
38 initiatives across our studios.
• Reduced carbon intensity by
16% and progressed Sustainable
Studios initiative.
Keywords Studios plc Annual Report and Accounts 2022Strategic Report 41
People
Page 42
Planet
Page 48
Our largest and
most valuable asset
Minimising our impact
Priorities
• Employee engagement
• Health and safety
Priorities
• Minimising environmental footprint
• Diversity, equity, inclusion
• Training and development
• Sustainable Studios programme
and belonging
Key highlight
30
employee Net Promoter Score (eNPS)
• Renewable energy sourcing
Key highlight
16%
reduction in GHG intensity in 2022
Community
Page 52
Client
Page 54
Making a positive impact
through Keywords Cares
Priorities
• Supporting good causes
• Celebrating across cultures
• Employee support fund
Key highlight
€45.6k
raised for good causes
At the heart of
everything we do
Priorities
• Pursuing strategic partnerships
• Delivering client-led solutions
• Cybersecurity
Key highlight
37
Net Promoter Score (NPS)
Governance
Setting the highest standards of
positive behaviour, honesty and
integrity underpins everything we do
Page 55
Priorities
• Corporate governance and compliance
• Modern slavery
• Tax compliance
• Human rights
42
Responsible business review continued
01
Our people
People are our largest and most valuable
asset. We value them; we trust them and
we work with them to support their passion
to provide the best service for each project
and customer. As a multicultural business,
we thrive on diversity, celebrate uniqueness
and collaborate as a team across our
70+ studios around the world. We aim to
provide a respectful and inclusive working
environment free from discrimination
and with fair and equal opportunities.
The key areas of focus are: employee
engagement, health and safety, training
and development, and diversity, equity,
inclusion and belonging.
Our people
An average of 11,141 full-time equivalent employees made up our
global team in 2022, balanced across three regions; 38% in North
and South America, 30% in Europe and 32% in Asia and Australia.
The number of people and the diversity of skills in our workforce
allows us to deploy these resources across the industry to meet our
customers’ needs.
We have continued to grow the size of the business, both organically
and through acquisition, with our average overall workforce growing
by 17% during the year, and we ended the year with 11,969 people. It
is important to manage this growth accordingly and we have invested
in growing our human resources capacity, systems and capabilities
as part of this. We have also meaningfully grown our employee
engagement initiatives as set out below to make sure that our people
remain informed, included and energised at Keywords, as well as
taking steps to more deeply embed diversity, equity, inclusion and
belonging (DEIB) across our business.
This year we have refreshed our operating principles to be more in
line with our strategic priorities, help our employees understand what
is expected of them, and to reinforce our common culture across
the Group. We believe this will support our hard-won reputation for
delivering high-quality service, to demanding deadlines in an ever
evolving industry.
UN SDGs
Good health
and well-being:
Ensure healthy lives and promote
well-being for all at all ages
Decent work and economic growth:
Promote sustained, inclusive and sustainable
economic growth, full and productive
employment and decent work for all
Gender
equality:
Achieve gender equality and
empower all women and girls
Reduced
inequalities:
Reduce inequality within
and among countries
Keywords Studios plc Annual Report and Accounts 2022Strategic ReportPage Title 43
79% 30 180+
Employee engagement
survey response rate
(2021: 69%)
eNPS
(2021: 42)
people in the Key
Communicator
Network
Our culture
The success of our business is testament to the Keywords culture,
and the skills and commitment of our talented and games-passionate
employees and collaborators, and as the business scales we
continue to curate that culture and ensure it resonates across all
aspects of our multi-faceted business. Through our One Keywords
initiative we are looking to galvanise the Group's humble culture
of entrepreneurialism by facilitating more collaboration through
the simplification of structures. We have already seen tangible
benefits of these changes, which help us to serve our clients more
effectively and ensure our employees get the most out of being part
of the Group.
As part of this we have also refreshed our operating principles,
replacing the old Rule of Nine, with a simpler set of five Leadership
Principles. These are designed as a practical tool that we can apply
to everyday working life, whilst supporting the individual cultures that
exist within each of our studios and service lines.
Our people, with their drive and talent, make Keywords the global
service provider that it is today, and it is essential for us that we
continue to foster a diverse organisation and an inclusive culture,
which includes welcoming new faces and ensuring they feel just as
supported and welcomed as their more established colleagues.
Our Leadership Principles act as a practical tool we can apply in our everyday working life, guiding our actions and creating
the conditions for us to collaborate, to Imagine More for our partners, ourselves, the games industry and beyond.
Leadership Principles
Power of partnership
One Keywords
Raise the game
We collaborate with our clients as an
extension of their team. With shared
passion and purpose, we proactively
support them in bringing their stories
to life.
We believe in a network with efficiency
at its core. Combining the strength of a
global platform with the agility of local
studios creates our superpower.
We embrace technology, innovation
and our entrepreneurial spirit to help
our clients and the industry thrive.
Leveraging the sum of our experience
brings new value to gaming and beyond.
Embrace an open world
Trust through transparency
We champion diversity of talent
and ideas from every corner of our
global community. Inclusivity makes
us stronger and enables us to deliver
world-class entertainment creation to
our partners.
We pursue open and honest
relationships with our people, clients,
and communities. Clear and authentic
communication is foundational as we
create success together.
44
Responsible business review continued
Health and safety
We care about the health and well-being of our people and
endeavour to provide a safe and healthy work environment for all.
Our global and local leadership teams are responsible for health
and safety in the workplace and all Keywords’ people are involved in
helping create a positive safety culture to minimise accidents. We do
not believe that any task is so urgent as to merit compromising the
safety of our people or any visitors to one of our studios.
As part of our efforts to support our employees we have taken a
measured approach to returning to the office post the COVID-19
lockdowns and have continued to support our employees based
in regions of the world which have experienced major mobility
restrictions during the year. Where practical, our studios operate a
hybrid work environment, with some studios likely to remain primarily
as virtual offices due to employee feedback. We believe our flexible,
studio-led approach provides the best balance of ensuring both
employees’ and clients’ needs are met.
Global Trust and Safety
Keeping players and
moderators safe
Keeping players safe and healthy online is an increasingly important
facet of the gaming world, and it is more important than ever for
game developers to curate positive experiences for their players.
At the same time, it is vital to look after those teams who are
responsible for moderating those online interactions.
Keywords has set up a dedicated global Trust and Safety team to
help ensure our moderation teams have all the necessary tools to
keep our clients’ players safe online, and, in some cases, real life.
This is important because online interactions and their moderation
are constantly happening, some of them are entirely positive but
many others are not.
We seek to offer progressive and proactive support when it comes
to mental health and wellbeing to prevent ill-health and to foster a
working environment that facilitates our people to feel and perform
at their best. We encourage our employees to take reasonable care
of their own and other people’s welfare and to report any situation
that may pose a threat to the wellbeing of any other person to their
appropriate manager.
Gamers play video games to find a space to hang out with
friends and have a fun, engaging experience. With transparent
and clear guidelines from our clients, Keywords can act upon
cases that prevent players from having the best experience,
expanding their community, improving gaming safety and creating
valuable experiences for players as well as protecting our clients'
reputations.
We deliver customised and specific training to our moderators (or
Superheroes as they are known internally), across all of our studios
to make sure that processes, actions and well-being practices are
adopted and ensure that the everyday mental health of our teams
is supported.
We also continue to explore the use of technology to protect
players and Superheroes, but where our people come across
unlawful and toxic content, we have put in place a process for them
to easily access psychological help and to uplift our Superheroes
with kindness, empathy, and compassion.
Our ambition is to establish Keywords as a Trust and Safety industry
leader, with a full-cycle wellness programme for Superheroes and
a partnership network with moderation tech companies in order to
benefit our Superheroes, players and our clients.
We have been conscious that the return to offices may have an
impact on employees’ mental health, both positively or negatively,
depending on the circumstances. As such we have increased our
engagement around mental health and wellbeing. We have employee
assistance programme coverage in many studios, to make sure
employees have the best care we can give, and are looking to build a
Wellbeing Champions Network in 2023 to create the foundation for
future wellness initiatives.
Employee engagement
We undertook our fifth annual survey, and heard from the highest
percentage of employees to date with 9,223 of our colleagues
responding, representing a 79% response rate (2021: 69%). We
believe our improved and increased communications has driven
the higher engagement. Compensation in a high inflationary
environment, permanent or hybrid work from home solutions and
future career plans are all key topics for employees.
In respect of eNPS, our score fell from 42 to 30, although this is still
considered to be at the top end of “Good” and is still well ahead of
pre-pandemic levels. Generally, organisations saw an uptick in eNPS
during the pandemic as employees were responsive to the way that
employers reacted to protect them. In 2022, we saw the reverse, as
people returned to the office post-COVID-19, and felt inflationary
pressures, which has lowered the score. One of the key findings is
that there has been a higher degree of passives (score 7-8) than
in previous years, and we will focus on turning these passives into
promoters with our actions in 2023.
Keywords Studios plc Annual Report and Accounts 2022Strategic ReportPage Title 45
Integrating acquisitions into Keywords
We have completed over 60 acquisitions as a public company,
buying five companies in 2022 alone, across three continents. Whilst
we use a range of strict criteria to ensure we only buy high-quality,
responsibly operating companies, the critical factor in proceeding
with a transaction is the cultural fit. We want the businesses we buy
to thrive post acquisition, and they will only do that by having people
who feel that they belong within the Group. We respect the history
and individual culture that each new studio brings to Keywords whilst
making sure they feel a part of our long-term success. The benefits of
this approach are evident by the fact that a significant proportion of
our broader executive team joined us through acquired companies.
Great Place to Work
We continue to work hard to make Keywords a great place to work,
with our initiatives increasingly recognised. As an example of this, we
are delighted that both our D3T Studio in Runcorn and Indigo Pearl
in London were included in GamesIndustry.biz’s 2022 Best Places to
Work Awards. Keywords Studios in Mexico has been awarded the
Socially Responsible Company (SRC) badge and Keywords Studios
Manila has recently been recertified as a Great Place to Work in
the Philippines with 91% of employees saying it is a great place to
work. D3T was also awarded the title as Best Creative Provider at
the Develop Star Awards in Brighton, with Keywords Studios being
awarded Best QA and Localization Provider.
Staying connected
In 2020, Keywords started a partnership with our art studios to
create a series of gratitude e-cards, allowing our people to send
personalised thank you e-cards to other employees for their help
and continued support. With a focus on inclusivity, we expanded the
programme to include seven language options, offering a new set of
card designs and messaging each quarter, from celebrated holidays
and fun, to care and wellbeing. Over 20,000 gratitude e-cards
were sent to employees, from each other, throughout the year,
a significant increase from the 4,500 cards sent in 2021.
Whilst eNPS is a clear quantitative measure, we received a range of
qualitative feedback through the survey and as we communicate and
survey more efficiently, we will be able to better understand areas of
focus in need of immediate attention and improvement. We plan to
use shorter and more efficient pulse surveys throughout the year to
make sure the data on eNPS and other important questions is fresh
and relevant.
Over the past year, enhancing our global employee engagement
has become a key area of focus for our Chief People and Culture
Officer. In order to help with this, our Key Communicator network
was established last year and now consists of 180+ managers,
leaders and other key roles across the organisation. This network
enables transparent and open communication, and was created
in order to share pertinent news in advance of a global internal
announcement to all employees. Our goal is to empower our Key
Communicators and to share knowledge and spark information
flow among our teams.
We have also started to undertake global town halls, led by senior
management. More than 4,500 of our employees joined each of our
three global town halls last year that were held twice in different time
zones to accommodate people from all over the globe. In addition to
these communication channels, we started using Yammer in January
2022 as an internal communication tool. Since then, we have grown
to over 10,000 active members, with 3,500 employees also visiting
our Communications Hub every month.
Training and development
Across Keywords, we provide training and development programmes
to support the development of our talented employees. The majority
of this training, whether management or technical, is embedded
within our studios and service lines so that it is appropriate to the
function and the professional disciplines involved therein. We have
also undertaken Group-wide training on DEIB as we seek to make
sure that our language and behaviours build inclusion.
However, there is always more that can be done to invest in our people
and to support the development of careers, which is why we have
invested in broadening our Art Academies in India to include Game
Development, as well as running bootcamps in a range of locations to
support people in transitioning their skills into a different area of the
industry. Within our testing business we run a level up programme,
enabling functional testers who wish to make a career out of testing,
the opportunity to take on responsibility and ultimately progress
in the organisation. We continue to partner with local institutes
and professional bodies with online and in-person management
development and skills programmes throughout Keywords.
46
Responsible business review continued
Diversity, Equity, Inclusion and Belonging (DEIB)
Keywords is a team of ~12,000 employees spread over 70+ studios
serving a global gaming community. Diversity is a key feature of
our identity, and we are committed to building a more diverse and
inclusive Group, with equitable practices and processes, where our
people can feel proud to belong. We set up our first Global Diversity
and Inclusion Council in 2020 and since then we have been on a
purposeful diversity, equity, inclusion, and belonging journey. We are
in a stage of learning and building, focusing on establishing a strong
base for our DEIB programme for 2022-2025 and catalysing industry
impact through our partnerships.
In 2022 we accelerated this process by hiring the first dedicated
member of our DEIB Team, and in 2023 this role will be expanded
to lead our global DEIB efforts. Over the year we refined our DEIB
operational model, established governance and reporting processes
and set out our roadmap of activities to 2025.
Keywords has slightly increased the proportion of women across the
Group, up from 25% in 2021 to 26% in 2022. According to current
data a collective 1% of colleagues identify as non-binary or decline to
disclose their gender and 73% are men. Our Shared Services teams
have a more balanced split with (44%) women and (55%) men. Within
our service lines, Create has the lowest proportion of women, with
our media and entertainment business, within Globalize, having the
highest, at over 50% women.
Our DEIB talent acquisition and talent development activities are
designed to address under-representation. Recognising that the
video games industry has not traditionally attracted or retained
a more diverse talent pool; it is essential to focus on looking for
opportunities to highlight Keywords, and the gaming industry
as a whole, as an attractive career choice for a diverse range of
talent. Following changes to Board composition during the year,
the percentage of women on the Board was 29% at year-end
(2021: 30%).
26%
% women in the organisation
(2021: 25%)
33%
% women in leadership
roles (Exco + Direct Reports)
(2021: 33%)
29%
% women on the Board
(2021: 30%)
UN SDGs
Gender
equality:
Achieve gender equality and
empower all women and girls
Keywords Studios plc Annual Report and Accounts 2022Strategic ReportPage Title 47
Accessibility in video gaming
Making games accessible
We are at the forefront of providing Audio Description (AD) or
Described Video (DV) for video games through our Descriptive
Video Works studio in Canada. We provide AD or DV for video
games, TV, feature films, sports, live events and many other
forms of media.
This rich narration provides information about key visual
elements so that those who are blind, have low vision, or
experience sensory processing issues, can fully enjoy the
content. Descriptive Video Works also works closely with a
global advisory council of activists, gamers, filmmakers, writers
and voice actors to increase awareness, develop new resources
and services, and make advancements in Audio Description, as
well as working to highlight and address accessibility issues and
systematic barriers for people who are blind or have low vision.
We have partnered with Netflix, Ubisoft and many other industry
leaders on accessibility services across many platforms. In
working with our clients, one thing we regularly hear from those
utilising Audio Description for the first time is how it completely
changes their entertainment experience.
With over a billion people worldwide with a vision, hearing,
motor, or cognitive disability, we want to increase awareness
and our range of services to ensure that everyone, regardless
of ability or disability, can enjoy media, games, and other
new technology.
We invest in improving industry diversity, representation, and
inclusion through our renewed partnership with Women in Games.
We sponsor their Individual Ambassador Programme that provides a
safe space to connect and exchange knowledge and perspectives to
activate change. In fact, we are proud to have 30+ Women in Games
Ambassadors at Keywords and the impact they are having in the
industry. Keywords continues to be a proud UKIE #RaiseTheGame
pledge partner.
We reached some important milestones over the year, especially in
terms of communities. We established our first Keywords Affinity
Group, Women @ Keywords and are now growing this globally.
This is in addition to our Asia Women’s Empowerment Programme,
which is designed to support women and increase their presence in
leadership roles within Keywords. The empowerment programme
is now in its second year, with participants consistently reporting
positive career impact.
A global inclusion calendar of events and awareness raising was
implemented spanning the whole of 2022. In March we celebrated
International Women’s Day with local and global events, such as the
#Breakthebias Women’s Summit, and kicked off nominations for the
Inspiring Women at Keywords project.
June to August was Pride season at Keywords; with studios
participating in parades, hosting events, fundraising, and sharing
knowledge. A key part of this is supporting our Keywords and
gaming industry communities, ensuring Keywordians of all sexual
orientations, gender identities, and gender expressions feel
welcomed and appreciated whilst acknowledging the discrimination
and inequalities the LGBTQ+ community continues to face.
2022 was also a time of learning, with training and learning sessions
covering DEIB themes. A Dignity at Work course was launched across
Europe for colleagues and managers to foster a safer and more
inclusive Keywords. Towards the end of the year a global inclusive
language course and style guide for Keywordians was released to
facilitate inclusive communications across the Group.
Our Global Diversity and Inclusion Council continues to represent
voices from around Keywords, with growing regional chapters. The
Council provides invaluable insights and support in the development
of the Keywords DEIB programme.
Celebrating Pride
Waste Creative merchandise
Waste Creative marked Pride Month in June with the launch of a
bespoke range of merchandise, created by its in-house creatives
and designers. All proceeds from sales went to a UK-based
charity providing support for gender-diverse kids, young people
and their families.
48
Responsible business review continued
02
Planet
Whilst we are not a large emitter of
greenhouse gases (GHG), we recognise our
responsibility to minimise our impact on the
planet as well as to respond to our stakeholder
needs. We are taking concrete actions to do
this and during the year set long-term GHG
intensity reduction targets.
Taskforce on Climate-related Financial
Disclosures ("TCFD")
This section sets out Keywords’ reporting against the TCFD
requirements. As an Alternative Investment Market (AIM) listed
company, we are not currently required to report against TCFD but
have set out the following disclosures as part of our journey towards
future compliance. The following section endeavours to provide
the information set out under the four pillars of the disclosures to
provide transparency to our stakeholders relating to our governance,
strategy, risks and targets for climate-related impacts.
Sustainable Studios
Our Sustainable Studios programme, aimed at supporting our studios
in their efforts to minimise greenhouse gas emissions and reduce
their environmental impact, continued to make good progress in the
year. As part of this we completed our first Group-wide environmental
assessment of all studios, which showed a good level of adherence
to best practices across many studios.
We have started to roll out a number of initiatives focused on
implementing the Group's Environmental Policy guidelines on energy
consumption and waste reduction. Amongst these, the highest
priority has been given to switching to renewable energy sources
wherever possible.
In a number of countries, including Spain, Japan, Germany, Australia,
the UK and Italy, most studios are now on 100% renewable electricity,
and other countries are working on implementing the conversion.
Overall 16 of our studios are now on renewable tariffs globally.
We recognise that significantly reducing our carbon emissions will
take time and that the plans will need to evolve and adapt in the
future in response to both challenges as well as new opportunities.
Therefore, during the year, in the path to reaching our goal of
achieving net zero carbon emissions ahead of 2050, we have built
a transition plan with near-term actions to 2025. This is aligned with
our longer-term target of reducing by 50% our carbon emission
intensity ratio ahead of 2030 (tonnes of CO2e per revenue €m).
Governance
Over the past two years, Keywords has made substantial steps in
formalising its ESG governance and oversight, including around
potential climate change impacts. In 2020, the Group conducted its
first materiality assessment, identifying the Planet as a key pillar of its
Responsible business approach and subsequently reporting its GHG
emissions for the first time. During 2021, the Responsible Business
Committee was formed and subsequently re-named the ESG
Management Co (ESG MgtCo), led by Jon Hauck along with senior
regional and functional executives. This committee is designed to
implement and support Group initiatives across the five Responsible
business pillars. As part of its work, the Committee formulated the
Group’s first Environmental Policy and has supported the roll-out
of this throughout the business in 2022, through the Sustainable
Studios initiative. Going forward, this policy will be used as a basis
for all studios to ensure they work on introducing environmental
initiatives to conserve natural resources and reduce our emissions.
In tandem with the formation of the ESG MgtCo, the Board recognised
the increasing importance of ESG matters and the need to have
a clear focus on the Group’s impact on its stakeholders and the
environment. To support this, Keywords established an ESG Board
Committee in 2021. Further details of the ESG Committee can be
found on pages 102 to 103. During 2022, the ESG Committee received
presentations from various Keywords leads across each of the
Responsible business pillars including Planet. These presentations
were designed to provide a “deep dive” into the progress across the
key initiatives and ensure that the ESG Committee had sufficient
opportunity to review and scrutinise progress across the year. In
terms of Planet, Management presented the review that had been
undertaken of the environmental footprint of each of our 70+ studios
across the world, action plans to embed initiatives into local business
plans, and overall carbon reduction strategies and ambitions.
UN SDGs
Climate
Action:
Take urgent action to combat
climate change and its impacts
Keywords Studios plc Annual Report and Accounts 2022Strategic ReportPage Title 49
Strategy
The video games industry has a relatively low carbon footprint
compared to other “harder to abate” sectors but Keywords is playing
its part in minimising its impact on the environment.
Whilst still only an emerging risk, the Company has taken steps
to address its climate impact by extending the activities of its
Sustainable Studios programme. From our engagement with our
clients and people, climate is an important reputational factor for
each stakeholder group, with investors also focused on the issue.
In particular, a large client has made commitments to reduce their
value chain emissions which may directly impact us. We are engaging
with them and taking the appropriate actions. Over time we may see
other clients look to make similar commitments. However, the Group
does not consider climate change to be of significant risk to the
demand for our own products and services. Conversely, we do not
expect it to increase demand either, as we see limited climate-related
growth opportunities in external services to the video games market.
We recognise that investors are increasingly looking at the climate
standards and policies of potential investment opportunities, and
that there are also increasing reporting requirements around climate
which we will need to continue to adhere to. Over time we intend to
enhance both our data collection and external reporting accordingly,
and participated in CDP for the first time this year.
During the year we conducted an employee survey in Australia to
better understand the issues our local employees cared most about.
Climate and the environment was one of the leading issues and as
such our Australian hub of studios has accelerated a range of actions,
including local carbon offsetting, to ensure that we are addressing
the issue appropriately for our staff. As we move forward, we expect
climate to continue to be an important issue for employees.
During the year, as part of our Sustainable Studios programme led
by our Chief Administration Officer, we undertook an assessment of
all our studios to gain a comprehensive view of our emissions and
energy consumption across the business. Following this we have
created an initial transition plan with both near-term targets and a
longer-term intensity target of reducing our Scope 1 and 2 emissions
intensity per euro millions of revenue by 50% ahead of 2030. Please
see the metrics section for more details.
Within our operational carbon footprint, our Scope 2 emissions are
significantly larger than our Scope 1 emissions as the majority of our
studios rely on purchased energy. As a result, the key opportunity for
us to reduce emissions will be to move to renewable energy tariffs
where possible and to increase our energy efficiency within our
studios to reduce overall usage. Despite the energy crisis, during the
year we made progress in switching tariffs to renewable providers,
with 16 of our studios now on green tariffs. As our footprint grows,
we expect to add or expand facilities in emerging markets such as
India and the Philippines, which have limited opportunities to move
to renewable tariffs and will explore other opportunities to reduce
emissions in these geographies.
For properties under landlord managed services, we are aiming to
transition leases over time to more energy efficient buildings, where
landlords already procure electricity from renewable sources, if
possible. As part of this process, we have established a policy that
outlines the requirements that all new property locations must meet
certain environmental standards. As an example, we’ve moved our
largest European studio in Katowice, Poland, to new leased premises
which will host over 1,200 employees in a state of the art modern
building which has the highest credentials in terms of land use and
ecology, technology for energy saving, water saving, and meets the
requirements for BREEAM certification at the Outstanding level.
Keywords continues to offset any remaining emissions where it is
not operationally possible to eliminate them completely. In 2022,
Keywords continued to offset our operational carbon impact through
purchasing credits in respect of its 2021 emissions, from the Ntakata
REDD+ project in Tanzania, chosen by our employees, which helps to
limit deforestation.
In terms of Scope 3, value chain emissions, we have reported the
impact of our purchased goods and services for the first time and
intend to expand the number of categories we report against to
other categories that may be material, including business travel and
employee commuting/work from home impacts.
We believe that business travel is likely to be a material contributor to
our overall carbon impact and have taken steps to limit this, aiming to
travel only when it is necessary. When we do travel, we fly economy
(where flights are shorter than five hours), we do not have company
cars and encourage the use of public transport, where practical, for
all our colleagues.
Due to almost all roles within Keywords being able to complete their
work from home, as evidenced during the pandemic, Keywords
should prove resilient to any climate-related events facing the
business, with only a limited number of studios needing more
complex plans to ensure the security of server infrastructure or
computer hardware.
Risk management
As climate is classed as an emerging risk it is subject to the Group’s
risk management framework and shall continue to be monitored
closely. More details of the risk management framework can be
found on page 62.
The Board believes that there is not a significant direct material
risk to Keywords from climate change beyond the general global
impacts that will be felt across society. As a digital-led business we
have flexibility to respond to extreme weather events that render our
properties, our sole source of operations, unusable. Over the past
few years, we have been able to conduct operations in a largely work
from home environment without interruption and in a number of
locations our employees will remain as remote workers permanently,
with others generally undertaking a hybrid approach. This, together
with our global reach further reduces the risk from physical impacts.
Where we continue to see direct physical risk from climate-related
weather events, is around our server facilities and computer
hardware which are housed in our premises. Keywords locations
known to be at risk, as well as the broader Group locations, are in the
process of creating a system to record all hardware/software assets
which is anticipated to be live in 2023, and will be used to inform the
existing disaster recovery plans already in place across our locations.
With an increasingly interconnected global economy, there
are potentially indirect climate impacts that could represent a
potential issue for the Group. The semiconductor shortage that
impacted the global economy throughout 2021 and for much of
2022 demonstrated the vulnerability of existing supply chains to
unexpected disruptions, both climate related and geo-political. In
turn, this shortage impacted production of the next generation of
gaming consoles dampening the short-term demand for games
published by our customers. These shortages have now eased but
may materialise again in the future.
50
Responsible business review continued
Climate-related risks are factored into our risk assessments, which
are reviewed throughout the year. Any new risks are included and
monitored to ensure the plans remain effective and ensure the
safety of both our colleagues and business. Financial risks are taken
into consideration by our existing top-down and bottom-up risk
management processes each year, details of which can be found on
page 62 of our Principal risks and uncertainties.
Metrics and targets
In line with the Streamlined Energy and Carbon Reporting (SECR)
disclosure, Keywords undertook its third formal review of the Group’s
global energy usage, resulting in the identification, assessment and
measurement of our energy and greenhouse gas (GHG) emissions.
In keeping with previous years, we have used the GHG Protocol
Corporate Accounting and Reporting standard (revised edition) and
emission factors from the UK Government’s GHG Conversion Factors
for Company Reporting 2022 and International Energy Agency (IEA)
conversion factors for non-UK electricity to calculate our disclosures.
As well as absolute emissions figures, the information is presented
as an intensity ratio against Scope 1 and Scope 2 emissions once
market-based deductions have been accounted for, against both
employee numbers and our revenue in €m. These figures were
calculated from data available from regional offices across the
Group. Where direct consumption data was not available, data has
been extrapolated in line with GHG Protocol allowances. Our data
collection processes continue to grow more robust each year, with
more accurate data in 2022 than has previously been available.
We continue to report on Scope 3 – Category 3: Well-to-Tank
emissions (WTT) related to the combustion of fuels and operation
of facilities related to our Scope 1 and Transmission & Distribution
emissions (T&D) in relation to the purchase of electricity related to
Scope 2. In addition, we have started to collect data around our
Scope 3 – Category 1: Purchased goods and services for 2022.
GHG emissions data
Case study
Enhancing our office footprint
In 2022, we opened a new state of the art office in Katowice,
Poland, which will host around 1,200 people, nearly 10% of the
Group’s overall workforce. This office is our largest in Europe
and meets the requirements for BREEAM certification at the
Outstanding level, and is designed to ensure high energy
efficiency in order to limit energy and water consumption.
Tonnes of CO2e
Scope 1 – Combustion of fuels and operation of facilities
Scope 2 – Emissions from purchase of electricity, heat,
steam, and cooling purchased for own use
Total Scope 1 and Scope 2 emissions (Location-based)
Scope 2 Market-based emissions reduction
Total Scope 1 and Scope 2 emissions (Market-based)
Scope 3 – Category 3: Well-to-Tank (WTT) related to Scope 1
and Transmission & Distribution (T&D) related to Scope 2
Total – Scope 1, 2 and Scope 3: Category 3 (Market-based)
Reporting year –
1 October 2021 to
30 September 2022
Comparison year –
1 October 2020 to
30 September 2021
Comparison year –
1 October 2019 to
30 September 2020
UK and
offshore
8
239
247
(76)
171
24
195
Total
Global
268
4,026
4,294
(267)
4,027
367
4,394
UK and
offshore
4
188
192
(11)
181
17
198
Total
Global
201
3,406
3,607
(63)
3,544
339
3,883
UK and
offshore
1
171
172
–
172
14
186
Total
Global
244
3,734
3,978
(23)
3,955
316
4,271
Scope 1 – Includes emissions from the combustion of fuels and the operation of our facilities.
Scope 2 – Our Scope 2 emissions are derived from the purchase of electricity. This has been split between Location- and Market-based to account for those operations
switching to green and renewable tariffs. Changes to previous years' reporting are as a result of more accurate data being available and changes in the updated IEA factors.
Scope 3 – Our Scope 3 reporting includes emissions in relation to our operations, Transmission & Distribution, and Well-to-Tank. Changes to previous years' reporting are as a
result of changes in the updated IEA factors as well as the removal of Well-to-Tank figures for electricity following the cessation of the publication of relevant UK Government
conversion factors for other countries.
Keywords Studios plc Annual Report and Accounts 2022Strategic ReportPage Title 51
In 2022, our global Scope 1 and 2 emissions (Location-based) were 4,294 tonnes CO2e. UK emissions accounted for 247 tonnes of CO2e,
representing 6% of global emissions.
This year we have also continued to work on the development of our emissions reporting, specifically focusing on Scope 3 – Category 1:
Purchased goods and services. Though this remains a complex area, we have been able to use a spend-based method in line with the US
Supply Chain GHG Emission Factors for US Commodities and Industries. This area of reporting required assumptions and estimations to be
taken where financial data did not accurately align with the factors available, and we will continue to work on improving its accuracy in the
coming year.
In 2022, our Global Scope 3 – Category 1: Purchased goods and services emissions are set out below:
Tonnes of CO2e
Scope 3 – Category 1: Purchased goods and services
Energy consumption (MWh)
Reporting year –
1 October 2021 to
30 September 2022
6,055
Energy consumption (MWh)
Scope 1 – Energy consumption from the combustion of fuels
and operation of facilities
Scope 2 – Energy consumption from purchase of electricity,
heat, steam, and cooling purchased for own use
Total Energy consumption
Reporting year –
1 October 2021 to
30 September 2022
Comparison year –
1 October 2020 to
30 September 2021
Comparison year –
1 October 2019 to
30 September 2020
UK and
offshore
Total
Global
UK and
offshore
Total
Global
UK and
offshore
Total
Global
43
1,379
21
1,057
2
1,303
1,276
1,319
11,606
12,985
865
886
9,812
10,869
690
692
10,289
11,592
Total energy consumption includes all activities for which the Group is responsible, as Scope 1 and 2.
The energy consumption is calculated using electricity purchased (kWh) and fuel volumes converted to kWh using the UK Government GHG Conversion Factors for Company
Reporting, presented in MWh.
In 2022, our global energy consumption was 12,985 MWh, with the UK representing 10% of our global energy consumption.
Intensity ratio (tonnes of CO2e per unit)
Ratio of Scope 1 & 2 emissions to employees
Ratio of Scope 1 & 2 emissions to revenue (€m)
Index of Scope 1 & 2 emissions to revenue (€m) relative to
baseline year
Reporting year –
1 October 2021 to
30 September 2022
Comparison year –
1 October 2020 to
30 September 2021
Comparison year –
1 October 2019 to
30 September 2020
0.38
6.26
57.49
0.39
7.49
68.78
0.48
10.9
100
The intensity metric is now calculated using Market-based emissions with previous periods restated due to more accurate information being available.
The baseline used for the intensity reduction target is 2020. The Group may choose to restate the baseline in future depending on acquisitions and if more accurate
information becomes available.
Revenue and employee numbers adjusted to align to the emissions reporting period from 1 October through to the 30 September of each year.
Following the return to more normal operations post-COVID-19, the progress in our revenue intensity has slowed slightly in 2022. However,
we still reduced our revenue intensity by 16% during the year. As such we remain well on track to achieve the objective of a 50% reduction of
Scope 1 & 2 emissions to revenue (€m) ahead of 2030. Emissions per employee reduced marginally during the year to 0.38 tonnes per person
(2021: 0.39).
Developments in our Sustainable Studios initiative have focused on driving our environmental commitment forwards and helped to ensure
we have maintained the levels of emissions efficiency established during the pandemic. These initiatives will continue to develop the Group’s
sustainability by identifying practical changes that we can implement and measure against targets, supporting transformation at the local
studio level and thus helping us deliver our long-term ambition to reach net zero carbon emissions well ahead of the UK Government’s target
of 2050.
52
Responsible business review continued
03
Community
At Keywords, we encourage community
involvement and support good causes
throughout our local studios across 26
countries. In order to do more to support
good causes across the communities that
we are a part of, we have set aside an annual
central fund under the Keywords Cares
initiative which can be applied to match funds
raised by our local teams.
Throughout 2022, Keywordians, with the support of Keywords Cares,
raised funds of over €45,000 and supported numerous initiatives,
ranging from local charities, not-for-profit programmes, educational
initiatives, or community outreach programmes.
In 2022, 38 charitable and community activities took place
across 21 studios, more than double the previous year. Keywords
Cares has also extended its matching programme to allow for a
more rapid support process in the event of a natural disaster or
humanitarian crisis.
We have continued to extend the use of our support fund that we
set up during COVID-19 to support those experiencing more acute
financial issues. This remains accessible by all and provided €38,000
in the year to applicants. The majority of the funding in 2022 went to
those affected by the Ukraine crisis and staff who were experiencing
specific family related issues.
We were also pleased to participate in our first global event –
Movember – which is dedicated to making a difference in mental
health and suicide prevention – and became our highest group
fundraising event to date. Whether it was rowing in London, running
in Mexico City, walking in Orlando, or growing moustaches around
the world, 51 Keywordians participated in Movember fundraising this
year, with countless others supporting by donation to the cause.
UN SDGs
Good health
and well-being:
Ensure healthy lives and promote
well-being for all at all ages
Gender
equality:
Achieve gender equality and
empower all women and girls
Reduced
inequalities:
Reduce inequality within
and among countries
Keywords Studios plc Annual Report and Accounts 2022Strategic ReportPage Title 53
Broader initiatives
Lakshya India conducted an Eye Camp at Red Rose Public School,
Gijhore, and Bhawani Shankar Inter college in December, and
simultaneously conducted a Women's Health and Hygiene camp
in Sector 78, Noida. They partnered with the NGO, Smile India
Trust, to create the initiative as part of their CSR commitment to
local communities.
Contributed to charity€45,600
Our Taipei studio held their first ever CSR activity, partnering with the
National Museum of Marine Science, a member of ICC (International
Costal Cleanup) and Taiwan Ocean Cleanup Alliance, with a beach
clean-up day at the Northern Coast of Keelung.
Electric Square chose Special Effect as their charity of the year, who
enable physically disabled people to use technology to improve their
quality of life. Throughout the year, the team held charity quizzes and
board game nights, sold tote bags to raise funds, organised charity
lunches and a silent auction, all to benefit this worthy organisation.
Snowed In holds a community month each year and this year their
focus was on Operation Come Home! OCH is an organisation that
supports Ottawa’s homeless youth. Donations go towards their
drop-in programme, educational support, substance use assistance,
housing support, food bank, and more. Over the course of the
month, they accepted donations, they sent volunteers to do work in
person and they not only supported the organisation, but also gained
useful knowledge along the way.
A team of volunteers from Keywords Studios Manila gave their time
and energy to travel to Balagbag Elementary School in Rodriguez,
Rizal to deliver food and supplies for the Forest Guards there. Once
our volunteers had joined the trekking programme to Mt. Balagbag,
they were lucky to witness the beauty of the Sierra Madre mountain
range from the summit before handing over all donations, including
30 sleeping bags, 65 first aid kits and 10 packs of rice.
2022
2021
2020
2019
€45,600
€46,000
€26,500
€29,000
Climax Studios held a Game Jam to support the mental health
charity, Mind. Participants were challenged to design, craft, and
code a game in 48 hours. All funds raised during this virtual Jam went
towards improving awareness of mental health issues, advice call
lines and resources, and supporting community projects.
Avid runners at Keywords Montreal joined in the Terry Fox Run for
cancer research, raising funds to support the charity.
Keywords Italy organised a 24-hour Game Marathon in support of
Emergency, who offer free treatment to victims of war, landmines
and poverty. The team felt they had the opportunity to do this by
using our greatest passion, video games.
Our teams in India teamed up with ‘A Giggles Welfare Organization’
and distributed blankets to under-privileged families in and around
Delhi and to children at the Don Bosco Ashalayam orphanage. We
hope this can support them through the cold nights that can reach
around zero degrees.
Lakshya India supporting a women's health camp in India
Keywords Manila supporting the Forest Guards
54
Responsible business review continued
04
Client
Our clients and their projects are at the heart
of everything we do at Keywords and we
are focused on continually deepening our
engagement and enhancing the experience
of our clients. We always seek to better
understand their needs so that we can fully
meet expectations for each and every project.
We have a broad client list of around 1,000 gaming companies and
due to the strength and breadth of our offering we are a trusted
partner to almost all of the top global games publishers and
developers. These companies rightfully demand the highest levels of
service and confidentiality from us and we are set up to deliver that.
During 2022, we introduced a number of new roles to be able to
better service our clients’ needs and ensure they have access
to our broader offering, whilst maintaining our “One Keywords”
collaborative culture. We have also introduced new Leadership
Principles, which are a practical tool we apply in our everyday
working life to Imagine More for our partners.
Our top five customers account for 30.1% (2021: 30.0%) of the
Group's revenues, with 150 customers using three or more services,
up from 133 in 2021. In 2022, we launched our strategic partnering
approach as we look to get closer to our key customers and move
from a tactical approach to a more strategic relationship. A key
element of this was beginning to undertake Strategic Partner
Reviews which involve the leadership of both Keywords and the
client, and are designed to identify how we can better serve the
needs of each of our key customers. We also undertook the
second iteration of a more involved feedback survey with all of our
customers, gathering a range of feedback. This survey delivered
an increased overall customer NPS of 37 compared to 30 in 2021
(a score of between 30-70 is considered “great” by Retently) and
highlighted that quality was the number one reason for choosing
Keywords over other providers.
Information technology
Keywords has a dedicated Information Security and Privacy
department which follows a comprehensive global Information
Security and Privacy framework with policies, guidelines and
procedures, covering industry best practices that all studios must
adhere to.
This framework incorporates compliance checks to ensure that
our studios meet the Keywords standard security requirements.
Supplementary penetration tests are also executed as required, in
addition to external compliance assessments and audits performed
by our third-party customers on an ongoing basis. The activities
include managing the Security and Privacy framework, monitoring of
information systems and infrastructure, security and privacy incident
management, client security and raising employee awareness.
We continue to invest in our information security and back-up
infrastructure and report on the Group’s information security to the
Audit Committee at least twice a year.
Several studios hold and maintain, or are in the process of acquiring,
information security and privacy-related certifications, including,
but not limited to: Trusted Partner Network (TPN), Supplier Security
and Privacy Assurance (SSPA), Payment Card Industry Data Security
Standard (PCI-DSS), System and Organization Controls 2 (SOC-2),
Netflix Post Partner Program (NP3).
As part of our strategy we look to introduce new technologies that
will enable Keywords to stay at the forefront of the industry. During
the year we made two key technology acquisitions to enhance our
client offering. The first, Mighty Games, has an innovative AI testing
solution that enables game developers to have real-time feedback
on the quality of their coding and is complementary to our current
functional testing capabilities. We also acquired Helpshift, that
has developed a market-leading proprietary software-as-a-service
customer support automation tool that resolves customer support
issues in real-time within its clients’ mobile apps. Helpshift, together
with Keywords' existing player support offering, and our KantanAI
machine translation capabilities, provides a unique, holistic player
experience solution for our clients.
During 2022, we also continued to build out our internal technology
spine with investments in shared technology platforms, integration of
new financial tools, and the creation of an innovation team to look to
harness scalable innovations created within the organisation.
UN SDGs
Decent work and
economic growth:
Promote sustained, inclusive and sustainable
economic growth, full and productive
employment and decent work for all
Industry, innovation
and infrastructure:
Build resilient infrastructure, promote
inclusive and sustainable industrialisation
and foster innovation
Keywords Studios plc Annual Report and Accounts 2022Strategic ReportPage Title 55
05
Governance
The Group continues to make all reasonable endeavours to ensure
all employees and suppliers are not subject to any form of forced,
compulsory/bonded labour or human trafficking through our
Supplier Code of Conduct.
Data privacy
Keywords is committed to processing data in accordance with its
responsibilities under applicable data protection legislation, and has
created the Keywords Privacy Framework, based on the General
Data Protection Regulation (GDPR). This framework is constantly
updated to take into account other applicable privacy regulations.
We regard the lawful and correct processing of personal information
by the Group as very important to our successful operations and for
maintaining confidence between our clients and ourselves.
M&A
We are a highly acquisitive business and apply strict financial and
non-financial criteria, including reviewing ESG areas such as DEIB,
environmental initiatives and culture of our acquisition targets.
Before acquisition, we complete a thorough due diligence process
and the Board receives a detailed acquisition report to support
decision-making. We operate a comprehensive integration process
post-acquisition, formalised by an agreed integration plan tailored to
the relevant business designed to ensure seamless integration.
Tax governance
The Group takes a balanced approach to the management of its
tax affairs and has a tax policy which is approved by the Board. Our
overall strategy is to meet our tax obligations and ensure that long-
term shareholder returns are responsibly optimised by structuring
our business and transactions in a tax efficient manner, while taking
into account reputational factors. Tax risks are regularly reviewed by
the Board and the Audit Committee.
Our Code of Business Conduct (the “Code”)
provides the backbone for the way we
conduct business, underpinned by our
Leadership Principles and aligned with the
expectations of our key stakeholders.
Business ethics
The Code sets the highest standards of behaviour when interacting
with internal and external stakeholders.
Corporate governance
We recognise the value of good corporate governance in every part
of the business and, whilst we have adopted the Quoted Companies
Alliance (QCA) Corporate Governance Code, which is appropriate for
the size and maturity of our business, we meet the provisions of the
UK Corporate Governance Code where possible and appropriate.
The Board takes seriously its responsibility to take account of the
interests of key stakeholders in its decision-making. The ways in
which the Board engages with key stakeholders to understand their
interests are described on pages 56 and 57.
Whistleblowing
The Group is committed to the highest levels of integrity and
accountability and fosters an environment where employees feel
confident and supported by the Group in speaking up and shining
a light on unethical behaviour. In 2022, we implemented a new
whistleblowing portal which allows colleagues and third parties to
raise any concerns about possible financial or other irregularities,
anonymously should they wish to. Further details are provided on
page 84.
Human rights
At Keywords, we do not tolerate any form of modern slavery or
human trafficking in any part of our business. Our annual Modern
Slavery Statement is published on the Group's website. We operate
to international standards and principles, including the International
Bill of Human Rights, the UN’s Guiding Principles on Business and
Human Rights, the International Labour Organization’s Declaration
on Fundamental Principles and Rights at Work and the Children’s
Rights and Business Principles.
UN SDGs
Decent work and
economic growth:
Promote sustained, inclusive and sustainable
economic growth, full and productive
employment and decent work for all
Industry, innovation
and infrastructure:
Build resilient infrastructure, promote
inclusive and sustainable industrialisation
and foster innovation
Section 172(1) statement
56
Section 172(1) statement
We have set out below a summary of our key stakeholder groups, how the Board
engages with them, how they are addressed by our strategic priorities as well as how
we measure the outcomes of our engagements. We also explain how key strategic
decisions made by the Board considered stakeholder interests.
Key stakeholders
Investors
Clients
Individuals and institutions
Top 25 and other publishers and developers
Engagement mechanisms
Q&A at the AGM and capital markets day covering key topics of interest,
including technology and continued focus on growth.
Important information provided in regulatory and media announcements.
Annual net promoter score survey highlighted areas for improvement.
Strategic partnership meetings to build closer relationships and
a deeper understanding of needs and opportunities.
Meetings with top shareholders and institutional investors to discuss key
matters of interest, including strategy and capital allocation.
Attendance at industry events to connect with existing
and prospective clients.
Annual remuneration consultation on implementation and plans.
Measures
AGM voting outcome
NPS
Read further on page 76
Read further on page 54
Link to strategic priorities
Principal decisions
Acquisition of Helpshift Inc.
In December 2022, Keywords announced the
acquisition of Helpshift, a market-leading
proprietary software-as-a-service customer
support automation tool.
The acquisition of Helpshift enables Keywords
to cover the full spectrum of support needs and
service levels, further executing on the Group's
strategy to enhance our technology offering for
the benefit of our strategic partners. The strategy
had been presented to shareholders at the capital
markets day in June 2022, with a very positive
response to our application of KantanAI to our
Globalize service line offering.
The Board, and Keywords as a whole, is constantly
striving to understand our clients’ needs so that
we can enhance our capability to deliver solutions
tailored to their needs. By combining the highly
complementary capabilities of our experienced
player support agents, KantanAI and Helpshift’s
platform, Keywords created a market-leading
customer support platform to better serve our
clients’ needs.
It was proposed that Helpshift be integrated into
Keywords’ Player Support business and build on a
long-standing partnership and natural cultural fit.
Working more closely together and developing
the combined offering presented opportunities
for both teams who were excited to get started.
To ensure the seamless integration of Helpshift
into the Group, both teams worked closely
together to develop an intimate understanding
of each other’s capabilities, identify synergies,
and define the combined solution for clients. This
meant teams were able to hit the ground running
once the acquisition completed.
Taking account of the balance of interests of
key stakeholders, the Board determined that the
acquisition of Helpshift presented an opportunity
to promote the long-term success of the Group,
having numerous prospective benefits for clients,
employees and shareholders.
Appointment of Chair Designate
In January 2023, Keywords announced the
appointment of Don Robert as a Non-Executive
Director and Chair Designate, to succeed Ross
Graham following the 2023 AGM.
In deciding how to manage the succession of
the Chair role through 2022, the Directors were
mindful of the interests of all stakeholders, but
in particular the CEO, who was new in role, in
ensuring stability during any transition period.
These interests were known from the CFO
and SID’s periodic engagements with major
shareholders and the executive team. As such,
the Board requested that Ross remain a Director
beyond the standard nine-year tenure, to allow
for a suitable successor to be secured and an
orderly handover to be conducted.
Being mindful of the interests of shareholders
in good corporate governance, the Board
emphasised the need to strongly consider
diversity in the search process and to
assess candidates on the strength and
breadth of their experience for the role.
Keywords Studios plc Annual Report and Accounts 2022Strategic Report 57
Strategic priorities
Strategic partnerships
Technology
One Keywords
Talent and capabilities
Adjacent markets
Workforce
Communities
Permanent, temporary and freelance
Global gaming community and our studio locations
Board visits to studios worldwide, to discuss strategic and operational
matters with senior managers and learn about projects and teams.
Board visits to studios worldwide to understand gaming culture in
different countries.
Annual eNPS survey highlighted workers’ concerns about the rising cost
of living.
Attendance at industry events provided an opportunity to learn about key
industry trends.
The Board spent two days with senior leaders at an Executive Summit,
discussing culture and sharing ideas on strategic opportunities. Global
townhalls were attended by Directors to hear about topics of key interest.
Keywords Cares programme provided funds to charitable causes our
employees care most about.
eNPS
Keywords Cares matching
Read further on page 43
Read further on page 52
Don presented a strong track record of building
and leading international businesses, including
through acquisitions, and a deep understanding
of technology, data and analytics. The Board
regarded his experience to be very well aligned
with the Group’s strategic priorities around
growth and technology, which shareholders had
supported at the capital markets day.
Throughout the recruitment process, Don
stood out due to his experience of growing
global businesses, both organically and through
acquisitions, his deep knowledge of the
technology landscape and his strong leadership.
His extensive experience will complement and
enhance the skills of the existing Board and
leadership team and he built a good rapport
with each Director during the interview process.
Don was regarded as an excellent cultural fit for
the Board and executive team, adding expertise
in several areas to further strengthen the Board.
The Board were confident that Don was the best
candidate to promote the long-term success
of Keywords.
Transitioning our Russia-based business
In September, Keywords announced that it was
in the process of transitioning people and work
from our Russia-based business, Sperasoft, to new
locations outside Russia, including Poland, Serbia,
Armenia and Malta. This was part of an existing
strategy for Sperasoft, revised and accelerated in
light of the situation in Ukraine.
The Board’s priority was to reassure employees
and their families that their interests were
being considered. Information was gathered
on the morale and interests of employees and
freelancers working in Russia, Ukraine and
neighbouring countries, to inform strategies
for operational transition and engagement.
A working group was established to deliver as
smooth a transition as possible and ensure a
good flow of communication, from the studio to
the boardroom.
It was also important for the Group to implement
a smooth transition to ensure continued service
to Sperasoft’s international clients. This required
regular, open communication on the Group's
response to the situation and solution for
supporting ongoing and planned projects.
While we have moved a significant number
of people and work at year-end, this was
predominantly second half weighted, and
remains ongoing. To date the transition has been
smooth and mitigated many of the operational
and financial risks, however it has naturally led
to increased costs, which have impacted on
Group margins.
In global townhalls and management meetings,
employees also communicated a desire for
greater flexibility to donate to humanitarian
causes in Ukraine. In response, the Board
supported changes to the Keywords Cares
programme, including to the level of matching
funds available and list of authorised charities.
Ultimately, the ongoing transition was regarded
as necessary to promote the long-term success
of the Company, protecting our workforce
and business.
Financial and operating overview
58
Financial and operating overview
We delivered another year of strong
financial performance, driven by healthy
demand for our services and careful
management of our cost base.
Jon Hauck
Chief Financial Officer
Investing in
our
platform
Keywords Studios plc Annual Report and Accounts 2022Strategic Report 59
Revenue
Revenue for 2022 increased by 34.8% to
€690.7m (2021: €512.2m). This performance
included the impact of acquisitions in
2021 and 2022 and an ~8% benefit from
the impact of currency movements,
when translating studio results from local
currency into the euro reporting currency,
and particularly the strengthening of the
US dollar.
Organic Revenue growth (which adjusts for
the impact of acquisitions) was 21.8%. This
was driven by a strong performance across
all service lines, against the comparative
period in 2021, particularly in our Create and
Globalize Service Lines. Excluding the impact
of currency, when converting amounts billed
by studios in US dollars into local currency
organic revenue growth would have been
approximately 3% lower. Further details of
the trading performances of each of the
Service Lines are provided in the Service
Line Review.
Gross profit and margin
Gross profit in 2022 was €267.3m (2021:
€200.1m) representing an increase of 33.6%.
The gross margin of 38.7% was broadly in line
with 2021 (39.1%). While currency movements
mentioned above were also supportive to
margins, the uplift was predominantly offset
by the cost and disruption of building up
our capacity in new locations to migrate
work previously performed within Russia,
to outside of the country.
Operating costs
Adjusted operating costs increased by 33.8%
to €120.4m (2021: €90.0m), reflecting the
larger Group, but at 17.4% of revenue were
slightly lower than 2021 (17.6%). This was
driven by continued good cost control, as
the Group looked to manage the impact of
increased travel and business development
costs as these activities increased with the
easing of COVID-19 restrictions.
EBITDA
EBITDA increased 41.1% to €120.9m (2021: €85.7m). Adjusted EBITDA increased 33.4% to
€146.9m compared with €110.1m for 2021. The Adjusted EBITDA margin in 2022 of 21.3%
was marginally lower than 2021 (21.5%) reflecting the lower gross margin.
Net finance costs
Net finance costs were €1.4m higher at €3.8m (2021: €2.4m), primarily driven by a €1.0m
increase in the unwinding of discounted liabilities relating to deferred consideration.
Alternative performance measures (APMs)
The Group reports a number of APMs to present the financial performance of the business
which are not GAAP measures as defined by IFRS. The Directors believe these measures
provide valuable additional information for the users of the financial information to
understand the underlying trading performance of the business. In particular, adjusted profit
measures are used to provide the users of the financial statements a clear understanding of
the underlying profitability of the business over time. A breakdown of the adjusting factors is
provided in the table below:
Share-based payments expense
Costs of acquisition and integration
Amortisation of intangible assets
Foreign exchange and other items
2022
€m
18.7
8.4
16.8
0.1
44.0
2021
€m
16.4
8.0
13.7
–
38.1
1.14m options were granted under incentive plans in 2022. This, together with grants from
previous years, has resulted in a non-cash share-based payments expense of €18.7m in 2022
(2021: €16.4m).
One-off costs associated with the acquisition and integration of businesses amounted to
€8.4m (2021: €8.0m). Amortisation of intangible assets increased by €3.1m to €16.8m (2021:
€13.7m) reflecting the recent levels of acquisition activity.
Foreign exchange and other items amounted to a net loss of €0.1m (2021: €nil). This includes
€2.9m for the unwinding of discounted liabilities on deferred consideration (2021: €1.9m)
offset by a net foreign exchange gain of €1.7m (2021: €2.0m) and other income of €1.1m
(2021: €nil). Keywords does not hedge foreign currency exposures in relation to net current
assets. While more material movements in foreign exchange can be impactful on revenues
and expenses, the net impact on the Group's results of movements in exchange rates and
the foreign exchange gains and losses incurred during the year mainly relate to the effect of
translating net current assets held in foreign currencies.
A more detailed explanation of the measures used together with a reconciliation to the
corresponding GAAP measures is provided in the APMs section at the end of this report.
platform
our
60
Financial and operating overview continued
Profit before taxation
Profit before tax increased by €20.0m
(+41.7% year-on-year) to €68.0m (2021:
€48.0m). Adjusted profit before tax, which
adjusts for the items described in the
APMs section above increased by €26.0m
(+30.2% year-on-year) to €112.0m compared
with €86.0m in 2021. This reflects a small
reduction in Adjusted profit before tax
margin of 0.6% points to 16.2% ( 2021:
16.8%). This was due to costs and disruption
associated with the relocation of our Russia-
based operations to outside of the country,
which impacted margins by ~2% points,
together with the return of travel, business
development and return to office costs (~1%)
post COVID-19. Largely offsetting these was
a ~2.5% point margin benefit from foreign
exchange, particularly the strong US dollar
during the period as we invoice more than
50% of our sales in US dollars.
Taxation
The tax charge increased by €6.7m to
€20.6m (2021: €13.9m) largely reflecting
the increase in the Profit before tax of the
business. After adjusting for the items noted
in the APMs section above and the tax
impact arising on these items, the Adjusted
effective tax rate for 2022 was 22.0%, slightly
higher than the rate of 21.6% in 2021.
Earnings per share
Basic earnings per share increased by 36.3%
to 61.54c (2021: 45.16c) primarily reflecting
the 38.9% increase in the statutory Profit
after tax. Adjusted earnings per share which
adjusts for the items noted in the APMs
section above and the tax impact arising
on these items was 113.50c (2021: 89.24c),
representing an increase of 27.2%, with the
rise in Adjusted profit before tax of 30.2%
partially offset by a 1.9% increase in the basic
weighted average number of shares.
Cash flow and net debt
Adjusted EBITDA
MMTC and VGTR
Working capital and other items
Capex – property, plant and equipment (PPE)
Capex – intangible assets
Payments of principal on lease liabilities
Operating cash flows
Net interest paid
Free cash flow before tax
Tax
Free cash flow
M&A – acquisition spend
M&A – acquisition and integration costs
Other income and other items
Dividends paid
Shares issued for cash
Underlying increase/(decrease)
in net cash/(debt)
FX and other items
Increase in net cash/(debt)
Opening net cash/(debt)
Closing net cash/(debt)
The Group generated Adjusted EBITDA of
€146.9m in 2022, an increase of €36.8m
from €110.1m in 2021. There was a €3.6m
outflow in respect of the amounts due for
Multi-Media Tax Credits (MMTCs) and Video
Game Tax Credits (VGTRs), lower than 2021,
as we saw a return to more normal phasing
of payments in H2 2022. MMTCs and VGTRs
are subsidies that are recognised as work
is performed but are typically paid in the
second half of the following year. Other
working capital saw an inflow of €0.6m, a
€10.7m change from 2021, mainly due to an
increase in accrued income associated with
the strong performance of the business at
the end of the year offset by a reduction in
debtor days.
2022
€m
146.9
(3.6)
0.6
(27.0)
(0.5)
(11.4)
105.0
(1.5)
103.5
(17.5)
86.0
(113.3)
(3.1)
1.6
(2.0)
6.8
(24.0)
0.2
(23.8)
105.6
81.8
Change
€m
36.8
0.9
(10.7)
(7.6)
(0.2)
(1.4)
17.8
1.2
19.0
6.4
25.4
(50.2)
(0.7)
1.6
(1.4)
1.5
(23.8)
(2.7)
(26.5)
2021
€m
110.1
(4.5)
11.3
(19.4)
(0.3)
(10.0)
87.2
(2.7)
84.5
(23.9)
60.6
(63.1)
(2.4)
–
(0.6)
5.3
(0.2)
2.9
2.7
102.9
105.6
Investment in property, plant and equipment
increased by €7.6m to €27.0m (2021:
€19.4m) as we continued to invest in growing
the business. Property lease payments
of principal of €11.4m were 14.0% higher
than the prior period (2021: €10.0m) mainly
related to acquisitions in the period.
Operating cash flows of €105.0m were
ahead of 2021 (€87.2m), primarily due
to the €36.8m increase in Adjusted
EBITDA, partially offset by the change in
working capital.
There was a €6.4m reduction in cash tax
paid to €17.5m (2021: €23.9m) as payment
schedules return to a more normal
pattern following pandemic related timing
differences in 2021. Net interest payments,
which largely relate to fees on the Revolving
Credit Facility (RCF), were €1.5m compared
to €2.7m in 2021.
Keywords Studios plc Annual Report and Accounts 2022Strategic ReportPage Title 61
Capital allocation
The Board's progressive dividend policy
seeks to reflect the Group's continued
growth in earnings and strong cash
generation, balanced with the need to retain
the resources to fund growth opportunities,
particularly M&A, in line with our strategy.
Guidance for 2023
We have made a good start to 2023, with
trading in line with our expectations for the
year. As previously guided, we continue to
expect organic growth to moderate from
2022 levels but remain above the medium-
term guidance of 10%+.
Following the interim dividend payment of
0.77p per share in September 2022, the
Board has recommended a final dividend of
1.60p per share, which will make the total
dividend for the year ended 31 December
2022 of 2.37p per share, an increase of 10%
over the 2021 full year dividend (2021: 2.15p
per share).
Subject to shareholder approval at the
2023 Annual General Meeting, the final
dividend will be paid on 30 June 2023 to
all shareholders on the register at 2 June
2023 and the shares will trade ex-dividend
on 1 June 2023. The final dividend payment
will represent a total cost of approximately
€1.4m of cash resources subject to currency
fluctuations.
The Group has authorised the Link Market
Services Trustees Limited (‘Link’) to operate
a Dividend Reinvestment Plan (DRIP) for the
Group's shareholders for the final dividend
and going forward, to provide greater
flexibility for shareholders to manage their
dividends. Instructions for shareholders on
how to apply for the DRIP will be included in
communications regarding the final dividend,
and any queries regarding the DRIP should
be directed to Link.
The Group also intends to use its Employee
Benefit Trust to undertake market purchases
of Company shares in H1 2023, amounting
to an aggregate of up to €5m, in order to
satisfy future exercises of LTIPs or stock
options pursuant to the relevant share plan.
Adjusted profit before tax margin normalised
during 2022 and is expected to remain
around 15% in 2023 as previously guided,
excluding the potential impact of any debt
we take on in the future to fund acquisitions.
Moving forward, and against a backdrop of
higher interest rates globally, we will focus
future guidance on Adjusted operating
profit, which historically has been very similar
to Adjusted PBT, and we expect this to be
around 15% in 2023.
During 2022, we benefited from the strength
of the US dollar and are mindful that there
remains potential volatility in the foreign
exchange markets beyond our control that
may impact on our performance through
the year. The transition out of Russia will
also continue during 2023 and will result
in a modest one-off charge relating to the
closure of our operations in the country.
The Adjusted Effective Tax rate is expected
to be in line with the 2022 rate of ~22%. We
are anticipating capex to be slightly ahead of
2022 relative to revenue, reflecting continued
expansionary capex and investment in our
platform to support future growth, with an
overall Adjusted Cash Conversion rate of at
least 80%.
Jon Hauck
Chief Financial Officer
This resulted in Free cash flow of €86.0m,
€25.4m ahead of 2021 (€60.6m). Adjusted
free cash flow, which adjusts for capital
expenditure that is supporting growth in
future periods was €112.1m in 2022, ahead of
2021 (€92.3m). The Adjusted cash conversion
rate of 100.1% was below 2021 (107.3%), but
ahead of our guidance for the year of 80%.
Cash spent on acquisitions totalled €116.4m,
of which €25.8m was in respect of the cash
component of prior year acquisitions and
€3.1m was in relation to acquisition and
integration costs. This was €50.9m higher
than the spend in 2021 due to the timing
of acquisitions.
This resulted in a reduction in net cash of
€23.8m in 2022, leading to closing net cash
of €81.8m (2021: €105.6m).
Balance sheet and liquidity
The Group funds itself primarily through cash
generation and a syndicated RCF of €150m
that matures in December 2024. The RCF
includes an accordion option to increase the
facility up to €200m and an option to extend
the term by two further one-year periods
(both subject to lender consent). During
the year the first one-year extension was
exercised. The majority of Group borrowings
are subject to two financial covenants that
are calculated in accordance with the facility
agreement:
• Leverage: Maximum Total Net Borrowings
to Adjusted EBITDA ratio of three times;
and
•
Interest cover: Minimum Adjusted
Operating Profit to Net Finance Costs
ratio of four times.
The Group entered the year with a strong
balance sheet, with net cash (excluding IFRS
16 leases) of €105.6m as at 31 December
2021. Following €116.4m of cash deployed
in the period to support the Group’s value
accretive M&A programme, at the end of
2022, Keywords had net cash (excluding IFRS
16 leases) of €81.8m and undrawn committed
facilities of €150m. The Group has no
exposure to Silicon Valley Bank.
Principal risks and uncertainties
62
Principal risks and uncertainties
The principal risks to which the Group is exposed are set out below, together with details
of their potential impact; the likelihood of occurrence (on a scale of 1 to 4, with 4 being the
most likely); an indication of whether the trend in the risk exposure is materially increasing,
decreasing or broadly unchanged since last year; and the actions taken to mitigate the risk.
We operate a top-down and bottom-up approach to risk management,
where current and emerging risks are identified and assessed as part of
our strategy and budget process, and semi-annually the senior executives
formally review and assess the risks for their business areas, and update
as necessary. The results are reviewed and discussed in detail at the Audit
Committee on an ongoing basis throughout the year. Furthermore, once
a year in January, we have a dedicated deep dive risk session at the Audit
Committee where the Committee analyses current and emerging risks in
more detail and their links to our overall strategy. Read further details on
the activities of the Audit Committee on pages 82 to 85.
The principal risks associated with the Group’s strategy are divided into:
• Those specific to the Keywords Group and its strategy;
•
Industry-related risks; and
• General business risks for any international company.
Key year-on-year changes in risk profile*
Global political risk and uncertainty
Failure to manage human resources/
talent effectively
Client concentration risk
Please see the relevant risk discussion for the
explanation of the change in the specific risk
profile during 2022.
* 2022 v 2021 trend change
Group and strategy risks
Unsuitable acquisition and/or failure of integration process
Description and Impact
Mitigation
Keywords has an active acquisition agenda
which complements its strategic ambitions.
Selecting the right acquisitions, managing
them successfully and embedding the
Keywords culture is a crucial ingredient
of success.
Impact
Failure to do so could result in the business
not achieving the expected financial and
operational benefits and adversely impact
growth, profitability and cash flow.
The Group has a focused M&A strategy targeting attractive industry segments where it
has built detailed knowledge. The key areas of focus are Game Development, Marketing,
Technology, and certain adjacent elements of the Media and Entertainment industry.
For each acquisition, the Group has an established process led by a dedicated corporate
development team, which involves the relevant senior management in the acquisition process
to lead the detailed due diligence.
The shared services team support the service lines with the integration process and have
issued an updated integration manual to support both Keywords and the acquired business
in the process.
Management regularly presents the acquisition pipeline to the Board and provide a detailed
acquisition memorandum ahead of formal approvals, which incorporates the integration plan
for the business.
The Group also uses earn-out structures linked to future performance as part of its acquisition
consideration, including equity, in order to incentivise good performance as well as promote
retention of key staff.
Link to
Strategy
Likelihood
2
Trend
Keywords Studios plc Annual Report and Accounts 2022Strategic Report 63
Group and strategy risks continued
Failure to deliver services
Description and Impact
Mitigation
Most of Keywords’ services are of a time-critical
nature.
Impact
Delays or service delivery failures could
potentially impact the development or launch
plans for games or result in lost contracts and/
or idle capacity.
Delivering on tight deadlines is integral to the Group's modus operandi, and we prioritise
timely delivery and flexible resourcing to meet these deadlines, with Keywords’ approach to
project management applied across the Group. The Group also utilises technology to support
the scheduling of its resources on a studio-by-studio basis.
Post-pandemic, the business has adapted its contracts and processes to ensure that it is able
to complete contracts in a hybrid manner to provide more flexibility and support its ability to
deliver against contracts.
Link to
Strategy
Likelihood
2
Trend
Cross-contamination risk
Description and Impact
Mitigation
One of the Group’s strategic focus areas is
to create strategic partnerships with key
industry players to enable closer long-term
collaboration and enhance the ability of the
Group to cross-sell services to each of its
key clients. Keywords also intends to sign
“Lighthouse deals” with key clients that will
involve complex service delivery across multiple
service lines.
Adhering to Keywords’ strong standards of delivery and efficient communication across
service lines is key to managing this risk.
As the Group forms strategic partnerships with major customers, it is conducting regular
reviews with them to ensure Keywords continues to deliver to expectations and identify any
potential emerging issues so that they can be addressed.
Keywords has also introduced new roles within the organisation that are designed to develop
the appropriate solutions for clients at the outset of a project, as well as new roles that
support the service delivery to key clients.
Impact
The risk of failure in one service line
contaminating the relationship with the
same customer across the other service
lines increases.
Link to
Strategy
Likelihood
2
Trend
Client concentration risk
Description and Impact
Mitigation
The majority of the Group’s revenues come
from global gaming companies whose revenues
tend to greatly exceed those of Keywords.
These companies have exacting standards and
demand a high quality of service.
Keywords’ top five customers in 2022
accounted for 30% (2021: 30%) of the
Group’s revenues.
Impact
Any failure or breakdown in the relationships
with key strategic partners could cause
considerable damage to the business.
With a renewed focus on Strategic Partnerships with top clients to create and capture more
value together, Keywords’ client concentration may increase over the medium-term. In
addition, industry consolidation between two clients may lead to an increase in concentration.
The potential impact is partially mitigated through the Group’s highly flexible resource base.
The Group continues to expand its footprint and is seeking to make relationships with key
clients more strategic. Despite their size, clients tend to be comprised of several individual
entities which have certain levels of autonomy over purchasing decisions. Keywords is also
focused on developing both bottom up and top down relationships.
The Group’s exposure to a single customer remains limited at 7.4%, slightly higher than 2021
(6.5%) due to M&A activity.
Link to
Strategy
Likelihood
2
Trend
64
Principal risks and uncertainties continued
Group and strategy risks continued
Failure to meet market expectations
Description and Impact
Mitigation
Keywords floated on AIM in 2013 with an
expressed set of objectives of growing the
business organically and by acquisition.
Impact
Should the Group lose the confidence
of investors, this will affect its ability to
raise money for or place shares to pay
for acquisitions.
The Group makes every effort to communicate regularly with investors via announcements,
face-to-face contact and virtual meetings. This effective communication of the continued
opportunities for growth in the sector, how the Group continues to execute on its stated
strategy and successfully integrate the businesses it acquires, should continue to maintain
the confidence of its investors.
The Group maintains a conservative balance sheet and through its Revolving Credit Facility,
negotiated during 2021 and extended in 2022, has access to substantial debt funding which
gives it the flexibility and headroom to invest in the business. More details can be found in the
Financial and operating overview on pages 58 to 61.
Link to
Strategy
Likelihood
2
Trend
Inadequate financial and operational controls
Description and Impact
Mitigation
Keywords has grown rapidly and it is important
that global financial controls are in place to
ensure smooth, timely and accurate reporting
of financial results to satisfy external reporting
obligations as well as the Board.
Impact
Failure to accurately report or forecast financial
results through error or fraud would damage
the Group’s reputation.
The Group has invested in and continues to invest in its financial reporting function and
systems to facilitate strong reporting and management control as it grows, with a new
consolidation and forecasting tool implemented in 2022.
During 2022, Keywords reformulated and extended the Executive Committee to broaden
its leadership capabilities. As part of this the Group has made a number of senior hires and
internal appointments. To simplify operations and enhance oversight, the Group decided to
streamline its structure from eight to three services lines – Create, Globalize and Engage.
Link to
Strategy
Likelihood
2
Trend
Keywords Studios plc Annual Report and Accounts 2022Strategic ReportPage Title 65
Group and strategy risks continued
Failure to manage human resources/talent effectively
Description and Impact
Mitigation
Keywords employed an average of 11,141 people
in 26 countries across the Group in 2022, and
people management is key to performance and
service delivery.
Impact
Failure to attract, retain or develop high
quality entrepreneurial talent across the
business could impact on the attainment of
strategic objectives. The Group is focused
on these areas with the implementation of
globally managed service lines, management
development and remuneration programmes,
incorporating long and short-term incentives.
But with an ever-increasing workforce this
becomes more demanding.
Establishing Keywords as a leading destination for talent is one of the Group's key strategic
focus areas and is detailed in the Our strategy section on page 24.
Keywords’ culture has been fundamental to the Group's success as it binds teams together,
whilst preserving the individual cultures of the studios. To facilitate this in the growing Group,
Management recently introduced new Leadership Principles as a practical tool to support a
collaborative culture. The Group has also introduced a new Culture leadership team, which
includes talent acquisition and development, responsible business initiatives as well as
enhancing employee engagement.
The Group works to develop and incentivise its people and to support their passion to provide
the best service for clients, with regular staff surveys undertaken. In addition, special emphasis
is placed on the prevention of any form of discrimination, harassment, or malpractice in the
workplace, recognising that any sense of dissatisfaction can be very disruptive.
In order to provide consistent long-term access to talent, the Group is building local
talent development, specifically in India, in segments where talent is scarce, such as
game development, and is extending its bootcamp initiative to attract talent from
adjacent industries.
The Group’s Diversity, Equity, Inclusion and Belonging agenda for 2023-2025 includes targeted
initiatives for talent acquisition and development to increase women's participation in its
workforce and at senior levels in the business. More details of the employee survey and DEIB
agenda can be found in the Responsible business review on pages 44 to 46.
Link to
Strategy
Likelihood
2
Trend
Non-compliance with legal and ethical standards
Description and Impact
Mitigation
New standards and disclosure requirements
are evolving such as in environmental and
climate change reporting, whistleblowing
and sanctions.
Impact
A material failure to comply with applicable
legal and ethical standards could result in
penalties, costs, reputational harm and damage
to relationships with suppliers and customers.
The Group promotes a culture of “Doing the right thing” in all activities. Code of Business
Conduct guidelines were rolled out to all studios during 2021 and are supported by more
detailed policies and procedures where needed, which are published on the Group's website.
During 2022, the existing whistleblowing process was enhanced through the launch of the
Keywords Integrity line, a 24-7 online portal for whistleblowing reports, and management of
confidential communications in line with recent EU and local requirements.
Due to Keywords’ presence in Russia, the Group also has had to adhere to the evolving
sanctions regime that has been placed on the country. Keywords has put in place a clear
process to monitor any changes to sanctions and adapt its processes in order to ensure
compliance. The Group has also significantly reduced its presence in Russia during the year,
and will continue to do so in 2023.
More details are contained in the Responsible business review on page 55 and the Audit
Committee report on pages 82 to 85.
Link to
Strategy
Likelihood
3
Trend
66
Principal risks and uncertainties continued
Industry-related risks
Description and Impact
Mitigation
The industry requires the highest standards of
security and privacy from a company offering
services such as Keywords.
The Group uses various third party and proprietary tools and technologies for process control
and productivity purposes. Continued investment in these tools is important to ensure the
Group’s effectiveness.
Impact
Cyber attacks and security breaches, which are
happening with increased frequency globally,
may lead to piracy, disruption of customers’
marketing plans, loss of competitive edge and
could result in compensation claims.
Keywords maintains physical and data security and privacy policies and procedures which are
regularly audited by its larger customers.
A dedicated Information Security team sets policies, conducts regular penetration testing,
monitors activity and rapidly responds to any incidents that arise. More details are contained in
the Responsible business review on page 54 and in the Audit Committee report on page 82.
Link to
Strategy
Likelihood
4
Trend
Description and Impact
Mitigation
Innovations in the gaming industry continue
to evolve.
Impact
New technologies for automated testing,
machine translation and crowdsourcing could
pose a threat to the Group in the long-term.
As a key strategic focus area, the Group is focused on effectively utilising technology for the
benefit of the Group and its clients. More details can be found in the Chief Executive's review
on page 10 and the Our strategy section on page 22 .
The Group is constantly innovating to create and adopt technology tools to deliver its services
more effectively and participates directly with customers in various pilot programmes for new
technologies to keep abreast of technological developments.
Keywords has strengthened the senior management team in this area with the appointment
of a new Chief Digital Information Officer and created a standalone innovation team, led by a
dedicated Executive Committee member to drive its innovation agenda forward.
In addition, two technology-led acquisitions were completed during the year. These
businesses bring AI-led technologies that will augment the client offering and complement
the existing offering.
Link to
Strategy
Likelihood
3
Trend
Description and Impact
Mitigation
Changes in regulation on video games, such
as those seen in the Chinese market which
imposed curfews on minors, and requirements
to address responsible gaming in the industry
introduces complexity for clients.
Impact
Changes and new requirements could result
in the delay or cancellation of video games
by customers.
In relation to the Chinese market, Keywords has limited revenue exposure to games destined
solely for the Chinese market. In addition, any potential impact is partially mitigated through
the Group’s diverse geographic revenue base (no single client larger than 7.4% (2021: 6.5%)).
Responsible gaming issues arising during game play can be identified by the
Player Support teams, who have a dedicated Trust and Safety team trained to
handle and report safety incidents as well as support the team members exposed
to such incidents.
Link to
Strategy
Likelihood
2
Trend
Negative impact of regulation on video gamesTechnology innovation and industry disruptionBreaches to information and cybersecurityKeywords Studios plc Annual Report and Accounts 2022Strategic ReportPage Title 67
Industry-related risks continued
Description and Impact
Mitigation
The Group receives multimedia tax credits (MMTC) in
Canada and video games tax relief (VGTR) in the UK,
relating to qualifying costs in those markets. These tax
credit regimes are designed to promote growth and
investment in the relevant regions.
Impact
Any reduction or cancellation of these tax credits would
increase the cost base of the business and make the
business less competitive.
The Group works closely with regulators and governments in relation to relevant
country tax credits and has been given no indication that these tax credits will
be removed in the medium term, but increased scrutiny has lead to some delays
in payments.
The Group has seen the introduction of a number of new subsidy regimes in the past
year, including Australia and Ireland, and other jurisdictions are considering whether
to do the same. Due to the Group’s geographically diversified operating platform it
retains an element of flexibility in being able to move work to other operating centres
if material changes were made.
Link to
Strategy
General business risks
Likelihood
2
Trend
Description and Impact
Mitigation
Keywords is a global business and needs to minimise
business interruptions and be able to continue servicing
customers.
The Group’s multiple, full-service delivery hubs provide for a good level of contingency
and, supported by business continuity plans, the effects of such disasters can be
managed.
Keywords also operates a highly distributed model, with operations in 26 countries
and in over 60 cities. This, in addition to the business successfully operating as a
hybrid working model in 2022, provides the Group with the ability to service clients
from different locations as required.
This threat could be internal, such as a major failure
in its IT systems, but also external, such as the Group
experienced and managed during the 2011 Tokyo
earthquake and tsunami or more recently 2020-2022
with COVID-19, when the Group was able to quickly
move to a work from home model, and services
remained robust throughout the pandemic.
Impact
Without access to key systems, data or dedicated
work locations, services to clients and/or the ability
to report to investors on a timely basis could be
adversely affected.
Link to
Strategy
Likelihood
3
Trend
Sudden business interruptionTax credits withdrawal risk 68
Principal risks and uncertainties continued
General business risks continued
Description and Impact
Mitigation
Keywords operates and owns assets in a large number
of geographic regions and countries.
The diversification and spread of activities geographically mitigate the risk of
disruption in any one location.
The Group operates a single Russia-based business,
Sperasoft, which is reported within the Group’s Create
service line, but has no operations in Ukraine.
Impact
As a result of this geographic spread, the Group
is exposed to a wide range of political, economic,
regulatory, social and tax environments. Policies or
laws, as well as armed conflict involving the countries in
which Keywords operates, may change in a manner that
may be adverse for the Group, even those with stable
political environments.
During the year Keywords undertook a process to relocate people and work from
Sperasoft to alternative locations (Poland, Serbia, Armenia and Malta). At the year-
end the Group had relocated over 400 people to new locations and commenced
hiring in those locations to rebuild the business. Keywords has focused on making the
transition as smooth as possible for both its people and international clients. Revenue
derived from the Russia-based business represented 3.8% (€26.3m) of Group
revenues during 2022 down from 5.7% in 2021, and in December 2022 it accounted
for 1.7% of Group revenues due to the reduction of its footprint in the country.
Keywords is monitoring other geopolitical trends around the Group.
Link to
Strategy
Likelihood
3
Trend
Description and Impact
Mitigation
The Group transacts in multiple currencies, given its
customers are located globally. The Group’s largest
exposure is to the US dollar followed by the euro
and sterling.
Impact
Keywords is exposed to short-term currency risks,
in addition to longer-term risk that could develop
between its functional currency (euro) and its multiple
billing currencies.
The Group serves a global customer base, with production facilities spread across
multiple geographies and currencies.
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 incurred and by settling liabilities denominated in their functional currency
with cash generated from their own operations in that currency.
Where entities invoice in a foreign currency, studios have the ability to offset adverse
foreign exchange currency movements through increasing prices. Hence the Group
does not hedge its currency risk.
In addition to revenues and expenses being impacted by movements in exchange
rates, the Group is also exposed to gains or losses related to the effect of translating
net current assets held in foreign currencies.
Link to
Strategy
Likelihood
3
Trend
Other risks have been classified as emerging risks for the Group, such as climate change, specific aspects of talent management risks such
as talent acquisition and unionisation, lack of a standard operating system and the growth risks associated with acquisitions and organic
growth. More details on these areas and how we are mitigating them through our strategic and ESG initiatives are in the Our strategy section
on pages 20 to 31 and the Responsible business review on pages 40 to 55. These risks and how they evolve over time are discussed at the
Audit Committee and continue to be monitored closely by senior management and addressed throughout the year.
Negative impact of currency risk Global political risk and uncertaintyKeywords Studios plc Annual Report and Accounts 2022Strategic Report Non-financial information statement
69
Non-financial information statement
Our non-financial information statement is set out below on environmental matters, social and
employee matters, respect for human rights, and anti-corruption and anti-bribery. Details of
our business model can be found on pages 18 and 19, and our principal risks are on pages 62 to
68. Our Modern Slavery Policy and Code of Business Conduct can be found on our website.
Reporting requirement
Policies and standards which govern our approach
Page reference
Environmental matters
Environmental Policy
Page 48 Responsible business review
Social and employee matters
Code of Business Conduct
Pages 23 and 24 Our strategy
Pages 40 to 55 Responsible business review
Recruitment Policy
Employee handbook
Diversity and equal opportunity
Grievance Policy
Employee assistance programme
Health & Safety Policy
Data protection
Respect for human rights
Supplier Code of Conduct
Page 55 Responsible business review
Modern Slavery Policy
Anti-bribery and corruption
Anti-bribery and corruption Policy
Page 55 Responsible business review
Whistleblowing
Fraud Policy
Sanctions Policy
Business model
Description of principal risks
and impact of business activity
Non-financial key performance indicators
Pages 82 to 85 Audit Committee report
Pages 18 and 19 Business model
Pages 62 to 68 Principal risks
and uncertainties
Page 20 Our strategy
Pages 40 to 55 Responsible business review
The Strategic report was approved by the Board and signed on its behalf by:
Bertrand Bodson
Chief Executive Officer
15 March 2023
Governance
Corporate governance report
Board of Directors
70
Corporate governance report
Leadership
& experience
Chairman
The Board is comprised of Directors
who contribute extensive and diverse
skills, knowledge and experience. It is
responsible for the overall management
of the Group, its long-term objectives
and strategy, culture and reputation.
Committee memberships
Audit
Nomination
Remuneration
ESG
Committee Chair
Ross
Graham
Appointment
July 2013
Skills and Experience
Ross has extensive executive and non-executive
experience in the technology sector. Since retiring
from Misys plc, he has held a number of non-
executive directorships, including Psion plc and
Wolfson Microelectronics plc. Ross was appointed
Director and Chairman of Keywords shortly prior to
its IPO in July 2013.
External Appointments
None.
Meeting attendance
100%
Committee membership
Keywords Studios plc Annual Report and Accounts 2022 71
Chief Executive Officer
Chief Financial Officer and
Chief Operating Officer Designate
Senior Independent
Non-Executive Director
Bertrand
Bodson
Appointment
December 2021
Jon
Hauck
Appointment
October 2019
Skills and Experience
Bertrand brings deep experience in
driving and executing growth strategies
for international businesses. He was Chief
Digital Officer for Novartis and previously
spent four years as Chief Digital and
Chief Marketing Officer at Sainsbury’s
Argos, leading the integration of Argos
into the Sainsbury’s store network. Early
experience includes senior roles involved
with content creation and entertainment
at EMI Group, Bragster (which he co-
founded) and Amazon.
External Appointments
He is currently a Non-Executive Director
of Tesco plc and Wolters Kluwer N.V.
It is intended that Bertrand will step down
from the board of Wolters Kluwer N.V. at
its AGM in May 2023.
Skills and Experience
Jon has a wealth of finance, change
management and M&A experience,
having held a variety of roles at Rentokil
Initial plc. Over that time, he was CFO
in North America and was responsible
for leading a substantial integration
programme, and from 2015 he held the
role of Group Financial Controller and
Treasurer. Prior to Rentokil Initial plc, he
worked in PwC’s Assurance practice. Jon
is a Fellow of the ICAEW.
External Appointments
None.
Charlotta
Ginman
Appointment
September 2017
Skills and Experience
A Chartered Accountant, Charlotta has over
30 years of experience working in investment
banking and commercial organisations,
principally within the technology and
telecom sectors. Charlotta has held senior
positions with UBS, Deutsche Bank,
JP Morgan and Nokia Corporation.
External Appointments
Charlotta is a Non-Executive Director
and Chair of the Audit Committee of two
investment trusts, Polar Capital Technology
Trust PLC and Pacific Asset Trust PLC,
as well as Gamma Communications plc
(an AIM-listed company). She is also a
Non-Executive Director of Unicorn AIM VCT
PLC, a venture capital trust, and Boku Inc.
As three out of Charlotta’s six non-executive
directorships are with investment
companies that require less time
commitment throughout the year, and the
rest are AIM-listed companies with overall
less regulatory burden than a company
listed on the main market, the Board is
satisfied that Charlotta has sufficient time
to devote to each of her appointments.
Meeting attendance
Meeting attendance
Meeting attendance
100%
100%
100%
Committee membership
Committee membership
Committee membership
72
Corporate governance report continued
Independent
Non-Executive Director
Independent
Non-Executive Director
Independent
Non-Executive Director
Georges
Fornay
Appointment
September 2017
Marion
Sears
Appointment
August 2021
Neil
Thompson
Appointment
August 2021
Skills and Experience
Georges has over 30 years’ experience
in the technology and video games
sectors and is currently Deputy CEO of
Qobuz, the French high-quality music
streaming service. Georges worked in
senior management at Sony Computer
Entertainment (Europe), culminating
as Senior Vice President from 2004 to
2011. Georges has also held significant
industry-wide roles, including President
of SELL, France’s Union of Entertainment
Software Publishers.
External Appointments
None.
Skills and Experience
Marion brings extensive investment
banking and international M&A
experience. She has many years serving
on a number of public company boards
as a non-executive director, senior
independent director, committee
chair and People NED, giving her long-
standing listed company experience and
stakeholder understanding.
External Appointments
Marion is currently a Non-Executive
Director at Dunelm Group plc and
WH Smith plc and is Senior Independent
Director at abrdn New Dawn Investment
Trust plc.
Skills and Experience
Neil held a number of senior positions
within Microsoft Corporation, including
as part of the management team
that launched Xbox in Europe and
for a number of years ran Microsoft’s
Consumer and Devices business across
EMEA. He has extensive experience
of scaling new businesses across
international territories and building
resilient organisations in constantly
changing environments.
External Appointments
He is a Non-Executive Director at
E.P. Barrus Ltd. and acts as a board
adviser to start-up SaaS businesses.
Meeting attendance
Meeting attendance
Meeting attendance
100%
100%
100%
Committee membership
Committee membership
Committee membership
Keywords Studios plc Annual Report and Accounts 2022 73
ESG
4/4
4/4
–
–
4/4
4/4
4/4
–
–
1/1
–
Independent Non-Executive
Director and Chair Designate
Attendance at 2022 Board and Committee meetings
Principle
Overall
Board
Audit Remuneration Nominations
Committees
Bertrand Bodson
Jon Hauck
Ross Graham
Charlotta Ginman
Georges Fornay
Marion Sears
Neil Thompson
Don Robert
Sonia Sedler
David Reeves
Giorgio Guastalla
It is noted that:
100%
100%
100%
100%
100%
100%
100%
n/a
67%
100%
100%
11/11
11/11
11/11
11/11
11/11
11/11
11/11
–
2/3
5/5
1/1
–
–
5/5
5/5
5/5
5/5
5/5
–
–
2/2
–
–
–
6/6
6/6
–
6/6
6/6
–
–
3/3
–
–
–
3/3
3/3
–
3/3
3/3
–
–
2/2
–
• Sonia Sedler retired from the Board on 18 March 2022.
• David Reeves retired from the Board on 20 May 2022.
• Giorgio Guastalla retired from the Board on 26 January 2022.
• Don Robert joined the Board on 1 February 2023.
Directors with experience in our
geographic regions (of 8 maximum)
Europe
7
Americas
6
Asia Pacific
3
Europe
Americas
Asia Pacific
Directors with relevant
experience against our
strategic pillars (of 8 maximum)
Women on the Board
(as at 31 December)
Talent and capabilities
7
2022
Strategic partnerships
Technology
One Keywords
Adjacent markets
6
6
6
6
2021
2020
14%
29%
30%
Don
Robert
Appointment
February 2023
Skills and Experience
Don was CEO of Experian plc for nine
years, during which time he more than
doubled operating profits and scaled
the business into a global market leader.
He subsequently became Chair of
Experian between 2014-2019. He has
also served as a Non-Executive Director
of Court for the Bank of England and
Senior Independent Director of Compass
Group. Prior to joining Experian, Don held
executive positions with First American
Financial Corp. and U.S. Bank.
External Appointments
Don currently serves as Chair of the
London Stock Exchange Group (LSEG).
He is also involved in several private
technology-focused businesses.
It is intended that Don will become Chair
at Keywords' Annual General Meeting
on 26 May 2023 as part of the planned
succession for Ross Graham.
Meeting attendance
N/A
Committee membership
Governance
Chairman's introduction
74
Chairman's introduction
The Board encourages good corporate
governance and an enterprising culture to
promote the long-term success of Keywords.
Ross Graham
Chairman of the Board
It gives me great pleasure to introduce,
for the last time before my retirement, the
Corporate Governance Report for 2022.
The Board is committed to the highest
standards of corporate governance, effective
engagement with our stakeholders and
rigorous oversight of strategic, financial
and risk matters, to promote the long-
term success of this exciting business.
This report will provide insight into how the
Board operated during the year, its principal
activities and the key issues considered.
As Chairman of the Board, it is my
responsibility to ensure that the Group has
both sound corporate governance and a
Board which is mindful of its responsibility
to all stakeholders, and in particular to the
creation of shareholder value and nurturing
our most important asset, our people. My
responsibilities include leading the Board
effectively, overseeing the Group’s corporate
governance model, communicating
with shareholders and ensuring that
good information flows freely between
management and Non-Executive Directors in
a timely manner. An internal Board evaluation
conducted in 2022 concluded that the Board
continues to operate well, and some minor
actions were agreed to further enhance the
Board’s operational effectiveness in 2023.
The Board recognises the value of good
corporate governance in promoting the long-
term success of the Company. The Company
adheres to the Quoted Companies Alliance
"Corporate Governance Code" (QCA Code),
which we believe is the most appropriate for
Keywords. The Board regards the application
of the QCA Code as a valuable tool to
underpin the Board’s effective operation and
the Group’s long-term success; however,
the Board is also committed to the highest
standards of corporate governance and, as
such, seeks to comply with the principles of
the UK Corporate Governance Code 2018
where possible and appropriate.
The Board is assured that the Company
continues to comply with the QCA Code
in all applicable respects. Our QCA Code
disclosures within this Annual Report are
summarised in the following table and the
following pages present a comprehensive
statement of how we have applied the QCA
Code during the year.
I am confident that, when he succeeds me
as Chairman at the 2023 AGM, Don Robert
will continue to ensure strong corporate
governance practice at Keywords.
Keywords Studios plc Annual Report and Accounts 2022 75
Corporate governance report continued
QCA Corporate Governance Code
Principle
1
2
3
4
5
6
7
8
9
Establish a strategy and business model which promotes long-term value for shareholders
Seek to understand and meet shareholder needs and expectations
Take into account wider stakeholder and social responsibilities and their implications for long-term success
Embed effective risk management, considering both opportunities and threats, throughout the organisation
Maintain the Board as a well-functioning, balanced team led by the chair
Ensure that between them the directors have the necessary up-to-date experience, skills and capabilities
Evaluate Board performance based on clear and relevant objectives, seeking continuous improvement
Promote a corporate culture that is based on ethical values and behaviours
Maintain governance structures and processes that are fit for purpose and support good decision-making
by the Board
10
Communicate how the company is governed and is performing by maintaining a dialogue with shareholders
and other relevant stakeholders
Disclosure
within this report
Pages 18–33
Pages 56–57
Pages 40–57
Pages 62–68
Pages 70–81
Page 73
Page 79
Pages 42–47
Pages 74–79
Pages 76–79
Governance structure
Board
CEO
Nominations
Committee
Audit
Committee
Remuneration
Committee
ESG
Committee
Executive
Committee
Disclosure
Committee
Investment
Committee
Risk &
Compliance
Committee
ESG
Management
Committee
Governance
76
Corporate governance report continued
Strategy and business model
A description of the Company’s strategy,
business model and supporting strategic
pillars, along with key attributes of our
positioning and growing maturity, can
be found in the Strategic report on
pages 1 to 69.
Shareholder needs and
expectations
The Board is committed to maintaining
good communication and constructive
interaction with all shareholders. In addition
to its regulatory disclosure obligations,
the Executive Directors and divisional
management meet shareholders, potential
investors and market participants at regular
intervals, through analyst and investor
presentations, roadshows and attendance
at investor conferences. The Group has a
dedicated investor relations function, which
is responsible for managing relationships
with all market participants throughout
the year and there is an investor relations
section of the corporate website which hosts
corporate disclosures and other pertinent
information. The Chairman is also available
to meet with the largest shareholders during
the year without management present.
The whole Board attends the Annual
General Meeting, which we regard as an
opportunity to meet, listen and present to
our shareholders, and all shareholders are
encouraged to attend and ask questions.
Shareholders who were unable to attend
were also given the opportunity to submit
questions to the Board in advance via email,
and a videoconferencing facility was made
available for shareholders to pose questions
live at the meeting. The Board were pleased
that this approach generated constructive
engagement between the Board and
shareholders at the meeting, and that it
took into account the accessibility needs
of our shareholders.
The Board is committed to maintaining
effective communication and having
constructive dialogue with its shareholders.
The Company aspires to have close ongoing
relationships with its private shareholders,
institutional shareholders and analysts,
and for them to have the opportunity to
discuss issues and provide feedback at
meetings with the Company. The Company
receives reports from proxy voting agencies,
reviews their findings and meets to discuss
shareholder matters. The Board maintains
that, if there is a resolution passed at a
general meeting with 20% votes cast
against, the Company will seek to
understand the reason for the result and,
where appropriate, take suitable action.
At the 2022 AGM, all resolutions were
passed comfortably except Resolution 2
which passed with 66.3% of votes in favour.
The Company issued an announcement
providing an explanation as to the result
and inviting shareholders to submit their
interests to the Company, which were then
considered by the Board, and the Chair of
the Remuneration Committee was charged
with engaging with those shareholders
in early 2023. The votes on all resolutions
were taken on a poll to ensure that full
shareholder representation was reflected.
All corporate documents, including historical
annual reports, notices of general meetings
and details of the 2022 AGM results, can be
found online at www.keywordsstudios.com.
Investors have access to current information
about the Company through the Company’s
website, www.keywordsstudios.com.
The Company promotes electronic
communications with shareholders
to be more efficient and mindful of its
environmental impact.
Wider stakeholder and social
responsibilities
The corporate governance arrangements
that the Board has adopted are designed
to ensure that the Company delivers
long-term value to its shareholders whilst
being cognisant of the interests of other
stakeholders. The Board recognises that
the long-term success of the Company
relies upon good relations with other key
stakeholders, identified as our workforce,
clients, suppliers and communities. The
Board has put in place a range of processes
to ensure it maintains close contact with
these key stakeholders.
The ESG Committee is responsible for
oversight of Group initiatives designed
to promote the long-term success of the
Company as a sustainable, well-governed
and responsible employer, partner, supplier
and customer. A summary of its activities is
presented on pages 102 and 103.
The Company has developed close
relationships with many of its key
stakeholders and provides them with the
opportunity to raise issues and provide
feedback to the Company. Examples include
customer feedback surveys, strategy
discussions with key clients, employee
surveys and a variety of communication
sessions to cater for various employee
groups. Full details of the Company’s and the
Board’s engagement with its stakeholders is
presented on pages 56 and 57.
Culture
The Board recognises that its decisions
regarding strategy and risk may impact the
culture of the Group and that this may impact
the performance of the Company. The Board
is also aware that the tone and culture set by
the Board can have an important influence on
employee behaviour.
In 2022, our "Rule of Nine" corporate
values were reviewed and replaced with a
new set of five core leadership principles
under the rubric “Imagine More”. These
underpin our corporate culture and promote
entrepreneurial and open ways of working, so
we can build close, trusting relationships with
colleagues, suppliers, partners and clients.
A whistleblowing process operates across
the Group to encourage employees and
other stakeholders to report suspected
misconduct, illegal acts or failures to act. The
aim of this is to create a safe environment
for employees and others who have serious
bona fide concerns about any aspect of the
Group’s work to come forward and voice
those concerns without personal risk of
retribution or reprisal. The Board reviewed
the operation of the whistleblowing portal
and received regular reports of incidents and
investigations, and is confident that a robust
process is in place.
The Board seeks to better understand
the interests of employees through an
annual employee survey, which in 2022 had
over 8,000 employees across the Group
participating (approximately 79% of all
employees), and regular town hall meetings
which provide a forum for management
to present important matters and respond
directly to feedback from employees. Further
details can be read on pages 44 and 45.
The ESG Committee is responsible for
overseeing workforce matters, including
corporate culture, further details of which
can be read in the ESG Committee report on
pages 102 and 103.
Keywords Studios plc Annual Report and Accounts 2022 77
Internal controls and
risk management
The Board recognises the need for an
effective and well-defined risk management
process and it oversees and regularly
reviews the Group’s risk management and
internal control mechanisms. The status of
our principal risks, as well as any emerging
risks, is recorded in a comprehensive
risk register for discussion at the Audit
Committee. The Company’s principal risks,
along with key challenges in the execution
of the Company’s strategy, and along with
the controls implemented to mitigate them,
can be found on pages 62 to 68.
The Audit Committee is responsible
for the oversight of the Company’s risk
management and internal controls and
procedures, as well as determining the
adequacy and efficiency of internal control
and risk management systems. This process
enables the Board to determine whether the
risk exposure has changed during the year.
When setting and implementing strategy,
the Board takes into account the principal
risks and seeks to limit the extent of the
Company’s exposure to them, having regard
to both its risk tolerance and risk appetite,
through appropriate mitigations.
The Directors believe that the Group has
internal control systems in place appropriate
to the size and nature of its business. The key
elements are:
• Board meetings are held at least eight
times per year, with which contain reports
from and discussions with management
on performance and key risk areas in
the business.
• Monthly financial reporting, for the
Group and for each service line, of actual
performance compared to budget and
the prior year and a dashboard of Key
Performance Indicators.
• Visits to key studio locations.
• Annual budget setting.
• Robust cash management.
• Annual strategy conference with the
senior leadership team.
• A defined organisational structure with
appropriate delegations of authority.
The Board
The Board, as a whole, is responsible for the
overall management of the Group and for its
strategic direction, including approval of the
Group’s strategy (including corporate and
business development), its corporate culture,
its annual business plans and budgets, the
interim and full year financial statements
and reports, any dividend proposals, the
accounting policies, major capital projects,
treasury management policies, any
investments or disposals, its succession plans
and the monitoring of financial performance
against budget and the formulation of
the Group’s risk appetite, including the
identification, assessment and monitoring
of Keywords’ principal risks.
The Board comprises two Executive
Directors, Bertrand Bodson (CEO) and
Jon Hauck (CFO), and six Non-Executive
Directors, Ross Graham (Chairman),
Charlotta Ginman (Senior Independent
Director), Georges Fornay, Marion Sears,
Neil Thompson and Don Robert (who joined
the Board on 1 February 2023). Director
biographies and Committee memberships
are detailed on pages 70 to 73. Details of
directorship changes in the year can be read
in the Nominations Committee report on
page 81.
Letters of appointment of all Directors are
available for inspection at the Company’s
registered office during normal business
hours. The Executive Directors work full-
time for the Company. All Non-Executive
Directors are expected to dedicate at least
30 days per annum to the Company, rising to
40 days if they also chair a committee, and
the Chairman is expected to dedicate 60
days per annum. The Company has adopted
a policy whereby all members of the Board
are subject to re-election at each AGM. In
practice, all the Non-Executive Directors
spend more than the minimum number of
days on Company business.
Charlotta Ginman currently holds six non-
executive directorships. Of those, three roles
are at investment companies that generally
only have four to five meetings a year, and
the other three are at AIM-listed entities, with
less regulatory burden than premium listed
companies, and the Nominations Committee
is therefore confident that Charlotta has
sufficient time to devote to her Keywords
role. In particular, during 2022 Charlotta
dedicated additional time in leading the
Chairman search and audit tender process.
The Board is satisfied that it has a suitable
balance between independence and
knowledge of the Company, and that no
individual or group may dominate the
Board’s decisions. The Non-Executive
Directors have both the breadth and depth
of skills, and experience, to effectively
discharge their responsibilities. The Board
conducted a comprehensive review of its
skills, knowledge, experience and diversity,
and concluded that the current balance of
skills on the Board, as a whole, reflects a
broad range of personal, commercial and
professional experience, including a variety
of financial and managerial skills. The graphic
on page 73 shows the strength of experience
relating to our strategic priorities.
The Chairman fosters healthy debate in the
boardroom by encouraging all Directors to
use their independent judgement and to
robustly challenge management on strategic
and operational matters.
The Board meets a minimum of eight times
a year and a forward schedule of meetings
and matters is fixed to ensure the Board
considers a broad range of appropriate
matters. Given the global nature of our
business, the Directors meet in person
and remotely, as required, with senior
managers across the business and visit
one or two studios each year. Meetings are
open and constructive, with every Director
participating fully. Executives are invited to
present deep dives on particular areas of
interest to the Board, providing the Board the
opportunity to engage directly with senior
managers and maintain a comprehensive
view of the business. Management supply
the Board with appropriate and timely
information and the Directors are free to
seek any further information they
consider necessary.
In line with good corporate governance
practice, the responsibilities of the Chairman
and CEO are separate and well defined.
A copy of the Chairman/CEO Split of
Responsibilities is available on the Company’s
website www.keywordsstudios.com.
Governance
78
Corporate governance report continued
Charlotta Ginman succeeded David Reeves
as the Senior Independent Director (SID)
of the Company, serving as a sounding
board for the Chairman and acting as an
intermediary for the other Directors. The SID
is also available to shareholders and other
Non-Executive Directors to address any
concerns or issues they feel have not been
adequately dealt with through the usual
channels of communication. The Board has
the mix of skills, experience and capabilities
required to fulfil its responsibilities. The
Company believes that the current balance
of skills in the Board as a whole reflects a
broad range of commercial and professional
skills across geographies and industries
and each of the Directors has experience in
public markets.
The Non-Executive Directors meet
without Executive Directors present and
maintain ongoing communications with
Executive Directors between formal Board
meetings. In addition to their general Board
responsibilities, Non-Executive Directors
are encouraged to be involved in specific
workshops or meetings, in line with their
individual areas of expertise.
The Chairman is supported by the General
Counsel and Company Secretary, Andrew
Kennedy, in maintaining excellent standards
of corporate governance and providing
necessary updates to the Board on
corporate governance developments and
AIM regulations.
The Directors have access to the Company’s
nominated adviser, company secretary,
lawyers and auditors and are able to obtain
external advice, as required. The Directors
are entitled to take independent legal advice
and if the Board is informed in advance, the
cost of the advice will be reimbursed by
the Company.
The Board reviews annually the
appropriateness and opportunity for
continuing professional development,
whether formal or informal.
Nominations Committee
The Nominations Committee is chaired
by Ross Graham and its other members
are Charlotta Ginman, Marion Sears, Neil
Thompson and Don Robert. The Nominations
Committee is responsible for keeping under
review the structure, size and composition
of the Board, its Committees, and the
Executive Committee. Further information
on the Nominations Committee, including its
role and responsibilities, can be found in the
Nominations Committee Report on pages
80 to 81.
Audit Committee
The Audit Committee is chaired by Charlotta
Ginman, and its other members are Ross
Graham, Georges Fornay, Marion Sears
and Neil Thompson. The Audit Committee
is responsible for overseeing financial
reporting, risk management, internal control
procedures and internal audit, as well as the
appointment, removal and scope of work
of the external Auditor (including non-audit
services, independence and objectivity).
Further information on the Audit Committee
can be found in the Audit Committee Report
on pages 82 to 85.
Remuneration Committee
The Remuneration Committee is chaired
by Marion Sears, and its other members
are Ross Graham, Charlotta Ginman
and Neil Thompson. The Remuneration
Committee is responsible for determining
the remuneration of the Chairman (with
the Chairman absenting himself), Executive
Directors and senior executives of Keywords.
The Remuneration Committee is responsible
for making recommendations to the
Board on Directors’ and senior executives’
remuneration. Non-Executive Directors’
remuneration is determined by the Executive
Directors. Further information on the
Remuneration Committee can be found in
the Directors’ Remuneration Report on pages
86 to 101.
ESG Committee
The ESG Committee is chaired by Georges
Fornay and its other members are Neil
Thompson, Marion Sears, Bertrand Bodson
and Jon Hauck. The remit of the ESG
Committee is to oversee the following areas
which have been identified as environmental,
social and governance priorities: (i) people;
(ii) client; (iii) community; and (iv) planet; and
all underpinned by (v) corporate governance.
Further information on the ESG Committee,
including its role and responsibilities, can be
found in the ESG Committee report on pages
102 and 103.
The Matters Reserved for the Board and
terms of reference for all the Committees
are available on the Company’s website
www.keywordsstudios.com.
Executive structure
During the year, the governance structure
of the executive management was reviewed
to enhance support of the Board and its
Committees. The Disclosure Committee,
managing market disclosures, and the
ESG Management Committee, driving ESG
programmes, were reconstituted. We also
established the Investment Committee,
responsible for key decisions of the Group,
and Risk & Compliance Committee, reviewing
risk and financial controls and legal and
regulatory compliance.
Keywords Studios plc Annual Report and Accounts 2022Page Title 79
Advisers
The Board has regular contact with its
advisers to ensure that it is aware of changes
in corporate governance procedures and
requirements and that the Group is, at all
times, compliant with applicable rules and
regulations. The Company had Director and
Officers’ liability insurance cover in place
throughout the year and it is intended for
the policy to continue for the year ending
31 December 2023 and subsequent years.
Additionally, the Company provides an
indemnity in respect of all the Company’s
Directors or other officers of the Company
against all costs, charges, losses, expenses
and liabilities incurred by them in the
execution and discharge of their duties.
The Company’s nominated adviser, Numis,
provides guidance on regulatory and
corporate governance matters to the Board,
as required.
The Company has retained Deloitte LLP, who
provide advice in relation to remuneration
matters. Additional information can be found
in the Remuneration Report on page 94.
Directors may receive independent
professional advice at Keywords’ expense,
if necessary, for the performance of
their duties.
Board evaluation
In 2022, an internal evaluation of the
effectiveness of the Board and its
Committees was conducted with the support
of the Company Secretary, which concluded
that the Board and its Committees continue
to operate effectively. An externally
facilitated evaluation was last conducted
in 2021 and the Board is committed to a
periodic external evaluation.
The 2022 evaluation exercise comprised
two stages. The first stage was a detailed
questionnaire to gather feedback from
each Director on the overall performance
of the Board and the Board’s Committees.
The second stage was a series of individual
discussions held between the Chairman
with each Director and the Senior
Independent Director with the Chairman.
The areas addressed by the evaluation were:
composition and skills, culture and integrity,
operating effectiveness and efficiency,
stakeholder engagement, quality of
information and ongoing development,
the overall contribution of each Director
and the effectiveness of the Chairman.
Progress was noted for all areas highlighted
for attention in 2022, as follows:
• Succession planning for the Chairman,
COO and CFO roles included an
assessment of candidates with media and
entertainment, technology or videogame
experience.
• More time at Board meetings was
dedicated to discussions on culture and
long-term strategic and operational plans.
• Contact between the Board and senior
management team was enhanced with
three Board visits to studios during 2022,
two executive summits, and a series of
subject matter deep dives presented by
senior managers to the Board.
Following a review of the findings of the 2022
evaluation, the Board has highlighted the
following areas for attention in 2023:
• To review opportunities for enhancing
engagement with key stakeholders.
• To offer Directors a range of opportunities
for development.
• More time dedicated at meetings
to review (i) acquisition success and
integration activity, and (ii) competitors.
• Succession planning for members of the
executive committee.
Governance
Nominations Committee report
80
Nominations Committee report
We are pleased to welcome
Don Robert as a Non-Executive
Director and Chair Designate.
Ross Graham
Chairman of the Nominations Committee
At a glance
Committee membership
The Committee is comprised of
Independent Non-Executive Directors and
is chaired by the Chairman of the Board.
The biographical details of the members
of the Committee and their attendance at
meetings during the year can be found on
pages 70 to 73.
Key responsibilities
• Review the structure, size and
composition of the Board
• Consider succession planning for
Directors, the Company Secretary
and Executive DIrectors
• Evaluate the balance of skills,
experience, knowledge on the
Board, as well as its independence
and diversity
• To review the time commitments
of Directors
Succession planning
Ross
Graham
Charlotta
Ginman
Georges
Fornay
Marion
Sears
Neil
Thompson
Don
Robert
Tenure (years)
Keywords Studios plc Annual Report and Accounts 2022 81
Changes to the Board
and Committees
On 27 January 2022, Giorgio Guastalla
resigned as a Non-Executive Director and, on
18 March 2022, Sonia Sedler stepped down
as Chief Operating Officer. At the Company’s
AGM on 20 May 2022, David Reeves retired
as a Director following the completion of
nine years of service, at which time Charlotta
Ginman and Marion Sears succeeded him
as Senior Independent Director and Chair of
the Remuneration Committee, respectively.
We were pleased to announce in October
2022 that Jon Hauck had been appointed as
Chief Operating Officer Designate and would
continue in his CFO role until a successor is
appointed to ensure a smooth transition of
responsibilities.
In July 2022, I completed nine years’ service
but agreed to remain in the Chairman
position for a further year as the Committee,
supported by the whole Board, deemed it
necessary to ensure the continued smooth
operation of the Board and provide robust
support for Bertrand Bodson as the recently
appointed CEO. In February 2023, Don
Robert joined the Board as a Non-Executive
Director and Chair Designate, to succeed me
as Chairman following the 2023 AGM. Don
brings a strong track record of building and
leading international businesses.
Details of the independent evaluation of the
Board’s and Committees’ performance can
be read on page 79.
Succession
Succession planning is designed to consider
the planned process of transition to new
leadership over time and also the potential
for unforeseen change over a shorter time
frame. In respect of the longer-term Board
composition, as Board members progress
through their tenure, the Committee
continues to consider their independence.
The tenure of Non-Executive Directors is
shown on page 80.
Charlotta Ginman chaired a sub-committee
charged with the search for my successor
and, following a search facilitated by
Lygon Group (having no other connection
with the Company or Directors) and a
rigorous selection process, Don Robert was
appointed as a Non-Executive Director and
Chair Designate.
Following the appointment of Jon Hauck as
COO, a comprehensive process is underway
to identify a suitable candidate for the CFO
role and the search criteria emphasises
financial, technology and international
experience. The Committee is mindful of
current diversity guidelines for UK
listed companies.
The Board and its committees receive
regular contributions from executives and
senior managers throughout the year.
These contributions are valuable for the
Board’s decision-making and have helped
the Non-Executive Directors to develop a
clear understanding of the strength of the
management team.
Skills and experience
The Committee is responsible for keeping
under review the composition of the Board
and succession to it. It reviewed the size,
composition and skill set of the Board during
the year and concluded that there was an
appropriate mix of experience, skills and
knowledge to provide effective leadership
of its business activities. Consideration
was given to the deep industry knowledge
provided by Georges Fornay and Neil
Thompson, strong financial knowledge
provided by Ross Graham and Charlotta
Ginman and broad experience of technology
and growing global businesses.
Full biographical details of our Directors,
and details of Board composition and mix
of relevant skills and experience against our
strategic priorities, can be read on pages
70 to 73.
Diversity
The Board sees championing diversity,
equity, inclusion and belonging as one of its
key commitments. Our Board composition
was 29% women Directors at 31 December
2022, 25% on 1 February 2023 following the
appointment of Don Robert and will be 29%
following the 2023 AGM, when Ross Graham
steps down as a Director. Charlotta Ginman
is our Senior Independent Director as well
as Chair of the Audit Committee, providing
extensive financial experience to the Board.
The Committee regularly reviews the Board
Diversity Policy, which acknowledges that an
effective Board will include and make good
use of differences in the skills, geographic
and industry experience, background,
ethnicity, gender and other distinctions
between Directors. It emphasises that,
in identifying suitable candidates for
appointment to the Board, the Committee
will consider candidates on merit against
objective criteria, with due regard for the
benefits of diversity on the Board and
the skills, experience, independence and
knowledge which the Board as a whole
requires to be effective.
The Company is focused on improving
diversity across the entire Group from the
boardroom to the studios. Information about
diversity across the Group can be found on
pages 46 and 47.
External appointments held by Directors
were considered and assessed as providing
valuable experience and insights for
Directors to apply to their role at Keywords,
and do not impact a Directors' ability to
dedicate the required time to Keywords.
Activities in the year
During the year, the Committee’s key
activities included:
• The search for the Chairman role;
• The search and selection process for the
COO role, and nomination of Jon Hauck;
• The search for the CFO role;
• Conducting a Board effectiveness
review; and
• Assessing the skills, knowledge and
experience and diversity on the Board
and the time commitments of Directors.
Induction and development
Don Robert was appointed to the Board on
1 February 2023 and is currently engaged
in a comprehensive induction programme,
including meetings with each of the
Directors, executives and key external
stakeholders, to obtain a deep understanding
of the business’ operations and environment,
corporate governance matters, investor
relations and M&A.
Non-Executive Directors are encouraged
to be involved in specific workshops or
meetings, in line with their individual areas of
expertise. Further training and development
needs are assessed on a periodic basis and
as part of Board and Committee evaluations.
Governance
The Committee meets at least twice a year
and at such other times as the Committee
Chair or any member of the Committee
may request. The Committee has formal
terms of reference which can be
viewed on the Company’s website,
www.keywordsstudios.com.
Company Secretary
The Directors had direct access to the
General Counsel and Company Secretary,
Andrew Kennedy, for advice on legal and
corporate governance matters.
2023 plan
The Committee has two meetings scheduled
for 2023. Its attention will be focused
immediately on succession planning for the
CFO role, and afterwards reviewing the balance
of skills, knowledge, experience and diversity
on the Board to identify areas of focus for
future Non-Executive Director recruitment.
The Board is committed to effectively
managing leadership succession and
proactively engages with executives to
assess the wider senior manager talent pool.
Time commitment
During the year, the Committee reviewed
the time commitments of Board roles.
Ross Graham
Chairman of the Nominations Committee
15 March 2023
Governance
Audit Committee report
82
Audit Committee report
Focusing on financial performance, balanced
reporting, risk oversight, and effective
internal and external audit activities.
Charlotta Ginman
Chair of the Audit Committee
At a glance
Key responsibilities
• Oversight of integrity of financial
reporting, including significant
judgements and an assessment of
fair, balanced and understandable
disclosures
• Monitor the risk management system,
including principal and emerging risks
• Review effectiveness of the internal
audit function and oversight of internal
control systems
• Review the effectiveness of the external
audit, including independence and
objectivity
• Set the audit fee and services and
review engagements for non-audit
services
Membership and attendance
• The Committee members are Charlotta
Ginman, Ross Graham, Georges Fornay,
Marion Sears and Neil Thompson. Ross
will remain on the Committee for 2023
until he retires from the Board
• More information about the Committee
members and their attendance during
the year can be found on pages 70
to 73
Non-audit services (€)
2022
2021
2020
675,613
13,000
591,650
13,350
540,000
13,000
Audit fee
Non-audit services
Keywords Studios plc Annual Report and Accounts 2022 83
Introduction from the Chair
I am pleased to present, once again as Chair
of the Audit Committee, the report for the
year ended 31 December 2022. This report
details the work of the Committee over
the past year, fulfilling our responsibilities
to provide effective governance over the
Group’s financial activities.
Composition and attendance
The Audit Committee, as a whole, has
competence relevant to the video games
industry, both Ross Graham and I are
Chartered Accountants and I also chair
the Audit Committees for other public
companies. The Committee met five times
during the financial year and all members
attended all Committee meetings. Meetings
have been held in person, with some invitees
attending remotely via videoconferencing,
which has enabled the Committee to operate
effectively and allow senior managers to
participate in meetings from whichever
region they are located.
Role and responsibilities
The Committee has written terms of
reference which are available to view on the
Company’s website www.keywordsstudios.
com. The terms of reference clearly define
the Committee’s responsibilities and duties
and these were reviewed by the Committee
and approved by the Board in December
2022. In addition to the terms of reference,
the Committee has developed an annual
agenda which corresponds with the meeting
schedule, to ensure all key responsibilities are
completed and managed.
Significant matters considered by
the Committee during the year
Key reporting issues
During the year and as part of the year-end
procedures, the Committee considered
the following key financial matters in
relation to the Group’s financial statements
and disclosures with input from both
management and the external auditor:
• Business combinations – we reviewed,
the key business combination accounting
assumptions used during the year.
• Valuation of goodwill and intangible assets
– we received goodwill impairment review
results, and challenged the underlying
assumptions made. In particular, we held
robust discussions around suggested
changes to the Company WACC and the
justifications and implications of this.
• Segmental reporting – in particular,
changes to segmental reporting to align
with the new organisational and reporting
structures: Create, Globalize and Engage.
• Revenue recognition – we reviewed, as
part of the regular CFO update, areas of
material judgement relating to revenue
recognition in client contracts.
• Functional currency – we reviewed papers
supporting the functional currency of
the Group.
• Taxation – we considered tax
management practices across the Group
and reviewed the updated Tax Policy
Statement and Anti-Tax Evasion Policy.
• During the year, we continued to closely
monitor the impact the Ukraine crisis has
on the Group.
Furthermore, the Committee discussed
management estimates and judgements in
connection with bad debt provisioning (IFRS
9), going concern, taxation and treasury.
For further detail on these, see the Notes
forming part of the consolidated financial
statements on pages 117 to 156.
Annual report and
financial statements
The Board has asked the Committee to
confirm that, in its opinion, this Annual
Report as a whole can be taken as fair,
balanced and understandable and provides
the information necessary for shareholders
to assess the Group’s financial position,
performance, business model and strategy.
In doing so, the Committee has given
consideration to:
• the way the Strategic Report (including
the Chairman’s statement and reports of
the CEO and CFO) presents the Group
and its operations, financial and business
model and the metrics management uses
to measure performance;
• whether suitable accounting policies have
been adopted and have challenged the
robustness of significant management
judgements and estimates reflected in
the financial results;
• the comprehensive control framework
around the production of the Annual
Report, including the verification
processes in place to deal with the
factual content;
• the extensive levels of review that are
undertaken in the production process, by
both management and advisers; and
• the Group’s internal control environment.
The Group uses certain APMs to present
its results alongside the statutory financial
statements. These are non-GAAP measures
used by management and the Board
designed to provide the users with a further
understanding of the trading performance
of the business. An explanation of the APMs
and a reconciliation to the nearest statutory
equivalent measure is provided on
pages 165 to 170.
As a result of the work performed, the
Committee has concluded that the Annual
Report for the year ended 31 December
2022, taken as a whole, is fair, balanced and
understandable and provides the information
necessary for shareholders to assess the
Group’s performance, business model
and strategy, and it has reported on these
findings to the Board.
Internal control and risk
assurance framework
The Committee has continued to review
and challenge the upgrades that have
and are taking place during the year to
the Company’s internal control and risk
assurance framework to ensure that
following its rapid expansion, the Company
operates within a fit-for-purpose framework.
Twice a year, at the time of the interims
and full year results, the regional heads of
operations, finance teams and service line
directors provide to the CFO, management
confirmations of compliance in such areas
such as key policy rollouts, risk reviews,
internal controls and contract management.
The Committee was pleased to see
the implementation of a performance
management system, which unified
budgeting, forecasting, consolidation, and
performance reporting activities across
the Group.
The industry and our clients require the
highest standards of security. During 2022,
Keywords updated the Group Information
Security Framework to align to industry
standards. A deep dive review of information
security and cybersecurity was undertaken.
For 2023, the security programme will place
strategic focus on building the technology
spine of the business, in line with the
Technology strategic priority, and further
enhancements including security controls
and a global risk assessment framework.
Governance
84
Audit Committee report continued
Group policies
Key Group policies relating to financial and
compliance processes are reviewed annually
by the Committee, including:
• Protected disclosures (whistleblowing)
Following the audit, BDO reported to the
Committee on the results of the audit work
and highlighted any issues identified, or that
the Committee had previously identified as
significant or material in the context of the
financial statements.
• Anti-bribery and corruption
• Non-audit services
• Employment of former auditors
• Anti-tax evasion
• Anti-fraud and theft
•
Information security and cybersecurity
• Data protection
Whistleblowing
During the year, a new externally facilitated
whistleblowing portal was implemented
to co-ordinate responses to protected
disclosures received and to securely
handle confidential or anonymous reports
in line with data privacy rules and the
latest whistleblowing legislation in relevant
jurisdictions where we operate.
The portal gives employees and third parties
the opportunity to raise any concerns they
may have about possible financial or other
irregularities confidentially, anonymously if
they wish. During 2022, eight reports were
received, which were fully investigated
and either substantiated and resolved or
disproven (2021: three). The greater number
of reports received in the year gives the
Committee confidence that employees are
aware of the whistleblowing portal and are
confident to use it without fear of retribution.
External audit
Audit services
The Auditor is appointed by the shareholders
annually to provide an opinion on financial
statements prepared by the Directors.
BDO, the Company’s current Auditor, was
first appointed in 2013. Currently, Stephen
McCallion acts as our lead partner.
The Auditor attends all Committee meetings.
The scope of the current annual year-
end audit was agreed in advance with the
Committee with a focus on areas of audit risk
and the appropriate level of audit materiality.
The Committee also had discussions with
the auditor on fees, internal controls,
accounting policies and areas of critical
accounting estimates and judgements.
There were no adverse matters brought
to the Committee’s attention in respect of
the 2022 audit, which were material and
which should be brought to the Company’s
shareholders’ attention.
Effectiveness
The Committee monitored and evaluated
the effectiveness of the Auditor under the
current terms of appointment based on an
assessment of the Auditor’s performance,
qualification, knowledge, expertise and
resources and in light of current COVID-19
restrictions. The Auditor’s effectiveness was
also considered along with other factors
such as audit planning and interpretations
of accounting standards and separate
discussions with management (without
the Auditor present) and with the Auditor
(without management present). I also
held discussions with the audit partner
throughout the year outside of
Committee meetings.
The Committee was satisfied that the audit
was effective and that BDO continues to
demonstrate the skills and experience
needed to fulfil its duties effectively.
Independence and non-audit fees
The non-audit services policy was reviewed
and updated in 2022. Any non-audit
services are required to be pre-approved
in advance by the Committee. During the
year, BDO provided non-audit services to
the Company of €13,000 (2021: €13,350),
representing work done in association with
the interim accounts.
In order to fulfil the Committee’s
responsibility regarding independence of
the Auditor, the Committee reviewed the
senior staffing of the audit, the Auditor’s
arrangements concerning any conflicts of
interest, the extent of any non-audit services,
the fact that no former external auditors
have been employed in the business, and
the Auditor’s independence statement. The
Committee was satisfied that the Auditor
remains independent.
During the year, the Committee continued
its regular review of the Company’s principal
risks on behalf of the Board, ensuring these
are top of mind and relevant, and mitigation
plans are in place where appropriate. During
2022, the Committee reviewed the Risk
Register at each meeting and conducted a
deep dive review in January 2022 and 2023,
considering the principal and emerging risks
identified from both the top-down Board
risk overview and the bottom-up senior
leadership team review. A comprehensive
overview of our principal risks, and changes
in the year, can be read on pages 62 to 68.
There was greater emphasis on the risk of
fraud during the year. The Committee took
comfort from a report from management,
as part of its year-end procedures, on the
low likelihood of a material misstatement of
the financial results caused by fraud, error
or omission and mitigating controls and
procedures in place to prevent
this happening.
Internal audit
The Head of Internal Audit reports into me,
the Chair of the Audit Committee, with a
dotted line into the CFO. The activities of the
internal audit function are governed by an
Internal Audit Charter which was re-approved
and signed off by the Committee during the
year. The 2022 internal audit plan was revised
to take into account the ability to conduct
site visits in person. The Committee received
updates on the results of internal audit
work, including:
•
•
integration of recently acquired
businesses;
implementation and communication of
Group policies;
• business assurance processes; and
•
IT and physical security.
During 2022, the Head of Internal Audit
continued to benefit from dedicated support
from Deloitte Ireland to provide a risk
assessment and internal control review of
the Group, to:
• gain an external view of the material risks,
including financial and operational risks;
• review our internal controls framework
for three key process areas: customer
onboarding, intercompany transactions,
and hire-to-retire practices; and
•
implementing remediation plans and
alternative controls.
The results of this review were presented to
the Committee at each meeting throughout
the year and helped us to scope the 2023
internal audit plan.
Keywords Studios plc Annual Report and Accounts 2022Page Title 85
Audit tender
During 2022, as stated in our 2021 Annual
Report, the Company had initial discussions
with a number of potential Irish audit firms
we had hoped would participate in an audit
tender during the second part of the year.
It became apparent during those discussions
that the Irish audit market is experiencing
a turbulent time, with no one qualifying
firm able to fully commit to partaking in a
tender this year. Reasons stated were acute
staff shortages in the Irish audit market.
This, coupled with our pending change
of CFO following the current recruitment
process, led us to believe that forcing an
audit tender during the year could seriously
risk the quality of our audit for next year. We
held extensive discussions with BDO, and
together concluded that the best option for
the Company was to delay the audit tender
for a year or possibly two, allowing the Irish
audit market to settle down. Whilst BDO
has been our auditor for 10 years (and best
practice would be to run a tender), Stephen
McCallion has only acted as lead partner for
three of the five years he has been involved
with the Company’s audit. We therefore
believe he remains independent and able to
carry on as lead partner for a maximum two
more years. BDO Ireland has confirmed to us
that they share this view and this potential
continuation is not in breach with their
internally set independence guidelines.
The Audit Committee has therefore, in
accordance with the 2019 Ethical Standard,
recommended to the Board that BDO should
in these exceptional circumstances be
proposed to remain the Company auditor
for 2023 at the upcoming AGM.
Focus for the coming year
The Committee has five meetings scheduled
for 2023. Attention will be focused on
reviewing the internal controls framework for
other key process areas and overseeing the
enhancement of compliance processes.
Charlotta Ginman FCA
Chair of the Audit Committee
15 March 2023
Case Study
Principal risk deep dive:
Information and cybersecurity
In October 2022, the Board held a deep dive session with the Information
and Cybersecurity team to discuss the current state of maturity of the
Group, progress made in the year and the strategic priorities for the future.
The Board recognises information and cybersecurity as one of the Group's
principal risks, assessed as having a high likelihood and severe potential
impact. As such, regular updates are presented to the Board and each year
a deep dive is conducted to review this fast-evolving area.
Areas that were the subject of focused discussion included:
• the level of investment in the information and cybersecurity programme;
• the maturity of the Group;
•
lessons learned from past incidents;
• the standardisation of policies and processes across the Group;
• communications with clients regarding Keywords' programme and
incidents; and
•
internal training for employees.
The Board were pleased to note the growing team supporting our studios
around the world, and the continued investment in technological solutions,
which together were enhancing the Group's visibility of, and ability to
respond to, cyber incidents. The key priority for the coming year was
agreed: to develop a crisis management plan, asset management framework
and risk impact assessments across the Group.
Furthermore, additional feedback loops to the Board on security incidents
and penetration testing activity were implemented to ensure Directors
remain up-to-date on information and cybersecurity matters, in light of
their strategic and operational importance.
Governance
Directors' Remuneration report
86
Directors' Remuneration report
Focusing on fair pay for all employees, competitive
rates for the wider workforce and a balanced
structure with incentives for executives that align
with shareholder experience.
Marion Sears
Chair of the Remuneration Committee
At a glance
Committee membership
The members of the Committee are
Non-Executive Directors (all of whom
are independent) and the Chairman of
the Board. The Committee will continue
to monitor its composition to ensure it
remains appropriate and reinforces our
ability to provide independent oversight.
The members of the Committee and their
attendance at meetings during the year
are disclosed on pages 70 to 73, together
with their biographical details.
Key responsibilities
• Set the Remuneration Policy
• Set measures for short and long-term
incentives and measure performance,
including the use of discretion
• Review Group-wide pay conditions,
including equality and the gender
pay gap
Taking care of our
lowest-paid colleagues
c.4,000
received additional interim
salary increases
c.5,000
received a one-off thank you payment
to support the cost of living
Keywords Studios plc Annual Report and Accounts 2022 87
Introduction from the Chair
I became Chair of the Remuneration
Committee in May 2022 and I am pleased to
present the Directors’ Remuneration Report
for the year ended 31 December 2022.
The Company has chosen to adopt the
Corporate Governance Code for Small and
Mid-size Quoted Companies published by
the Quoted Companies Alliance. However,
the Board recognises the importance
of transparency and high standards of
corporate governance, so this report
contains disclosures similar to those required
by the UK Corporate Governance Code 2018.
We have continued to implement a simple
Executive Director remuneration structure
comprising base salary at a level median or
below FTSE 250, pension in line with the
workforce, lower quartile annual bonus, and
upper quartile long-term share incentive
plan. This structure provides a clear and
direct link between pay and our strategic
priorities, it takes into account the wider
workforce remuneration and employment
conditions and it is aligned with
shareholders’ experience.
During the year, a number of directorship
changes took place. Sonia Sedler stepped
down from the Board in March 2022 and
Sonia's exit arrangements were set out
in the 2021 Annual Report and Accounts.
These are described again on page 97 but
since they were the subject of engagement
a year ago, and the subject of voting at the
2022 AGM, we hope they will not influence
voting at the forthcoming AGM. In November
2022, Jon Hauck, our CFO, was promoted
to COO Designate in addition to his CFO
responsibilities, which he retains until a
new CFO is appointed. This report explains
how we addressed Jon's promotion, taking
the opportunity to harmonise all Executive
Director compensation arrangements.
Full details of directorship changes can be
read on page 81.
Executive pay outcome for 2022
The Group delivered a strong performance
in 2022 with good growth in revenue of
34.8% to €690.7m. Adjusted pre-tax profit
increased 30.2% to €112.0 and adjusted
cash conversion rate of 100.1%. We made
five acquisitions during the year, further
strengthening the breadth and depth of the
Group’s value-added services offered to
our global video games clients. This strong
performance was achieved in contrast to
a more difficult period for the technology
sector as a whole, which has cut back
on employees and investment due to
lower consumer spending and economic
headwinds. During the year our new CEO,
Bertrand Bodson, focused on shaping his
leadership team, prioritising our integrated
services offer, embracing greater use of
technology and building relationships
with customers.
In the context of the strong business
performance the Committee awarded a
high bonus pay-out which it believes fairly
reflects achievements in the year. Bertrand
Bodson did not receive any LTIP vesting as
he joined the business in 2021 but Jon Hauck
received an LTIP vesting for the three years
to September 2022, based on relative total
shareholder return ("TSR") performance,
together with the vesting of an additional
LTIP granted on his appointment to Keywords
in 2019 to compensate for remuneration left
behind at his previous employer. Accordingly
the single figure remuneration earned by
the CEO was £809,000 and the single figure
remuneration earned by the CFO
was £2,092,800.
Salary
Bertrand Bodson, our CEO, did not receive a
base salary increase in the year as he joined
in December 2021.
In October, when we announced that
Jon Hauck would take on the COO role,
the Committee took the opportunity to
harmonise executive remuneration such
that going forward our CEO, our COO
and our new CFO (when appointed) will all
have the same elements making up their
compensation. We decided to restructure
Jon’s pay by removing the historical salary
share element and increasing base salary to a
more market-competitive level. Accordingly
Jon’s salary increased from £365,000 p.a.
(being £305,000 salary plus £60,000 salary
shares) to £390,000 p.a. with effect from
1 November 2022, and will remain at this level
until the review in April 2024. Having proved
himself in role over the last three years
since appointment, Jon now has increased
commercial responsibility as COO Designate
and remains in charge of the demanding
M&A programme. Therefore, commensurate
with the increased scale and complexity of
Keywords, the Remuneration Committee
concluded this change was appropriate,
fair and in the interests of all stakeholders.
Bonus
The bonus represents 30% of base salary and
was measured against financial metrics (60%)
and non-financial metrics (40%). Targets
were set in line with our strategic priorities
and, as described above, management
performed strongly. Achievement against
targets is described on page 96 and this
led to a 98% payout (equating to 29%
salary). The Committee determined that the
outcome reflected performance in the year
and therefore decided that no discretion
would be applied.
LTIP
The LTIP represents 275% of salary for the
Executive Directors and the performance
period is three years. Bertrand joined in
December 2021, and therefore no LTIP
vesting has yet occurred for Bertrand. Jon
Hauck received LTIPs vesting relating to
the performance period September 2019-
2022 which vested in full, measured against
relative TSR against FTSE Small Cap, relating
to a regular award and a one-off LTIP which
was awarded to him in compensation for
remuneration foregone when he left his
previous employer. Total shares vesting
to Jon Hauck under these awards in 2022
amounted to 68,936 shares; the Committee
considers that Jon has performed well since
appointment in 2019 and has been paid a low
base salary, therefore these awards vesting
are fair and acceptable and no discretion
was applied.
Workforce remuneration
All employees received a regular salary
increase on 1 April 2022, and around 4,000
employees on lower salaries received a
further raise, taking their total increase up
to 10% by way of salary following a mid-year
review in October 2022. In addition, all lower-
paid employees received a one-off thank you
payment at the end of the year to support
cost of living. This was calculated according
to location and salary level and on average
amounted to around $300. The overall
effect was to increase the pay of lower-paid
employees by a higher percentage than
our management teams, who received an
average 3.5% increase in the year. As a result
we are seeing positive employee feedback
and reduced attrition.
Governance
88
Directors' Remuneration report continued
Introduction from the Chair continued
Shareholder engagement
The former Chair of the Remuneration
Committee and I engaged with our major
shareholders in January and March to discuss
2021 remuneration and plans for 2022 and
there was good support for our Policy and
Implementation. Specific engagement
relating to the AGM vote clarified that the
2022 AGM vote reflected dissatisfaction with
the presentation of the leaving arrangements
for our COO and we have noted this
feedback (full details of payments made and
treatment of share awards on departure are
disclosed in the 2021 Annual Report). Further
engagement with shareholders has since
taken place and the Committee is confident
that our current remuneration structure is
in line with the interests of shareholders and
consistent with good corporate governance
practice in the UK.
The Committee will continue to keep its
Remuneration Policy under continuous
review to ensure it delivers a positive
workforce pay philosophy.
I hope you find this Directors’ Remuneration
Report provides you with a clear, concise
and comprehensive insight of remuneration
matters at Keywords and I hope you will
support the remuneration report resolution
at the AGM.
Marion Sears
Chair of the Remuneration Committee
15 March 2023
Stakeholder considerations
The Committee has balanced the interests
of shareholders and employees in reaching
a determination that the remuneration
outcomes described above are fair and
reasonable and that no discretion needed to
be exercised to adjust outturns or to address
windfall gains. In coming to this conclusion,
the Committee took into account the
following factors:
• The financial performance of the Group
had been strong. Financial performance
in the year can be read on pages 58 to 61.
• The Group continued to pay dividends
to shareholders in line with the dividend
policy. Dividends are described further on
page 131.
• 2019 LTIP awards were not made at a
significantly lower level than those in
2018 and any gain received during the
year is due to consistently strong share
price performance, reflecting the robust
growth of the business.
• The employee net promoter score (eNPS)
remained at a good level. Employee
engagement is described further on
pages 43 and 44.
• Lower-paid employees received higher
percentage increases in salary than
management through an additional mid-
year review, plus a one-off thank you
payment to support cost of living.
• Employee feedback positivity has
improved and attrition has fallen.
2023 remuneration
No decision has yet been taken in respect
of Executive Director salary increases in
2023 but in line with our Policy executive
salaries will only increase in line with the
wider UK workforce as a maximum. In 2023,
the maximum bonus opportunity will again
remain at 30% of base salary, based on 60%
financial objectives and 40% non-financial
objectives. During the year, we reviewed
whether it was appropriate to maintain
relative TSR as a single metric for the LTIP
and after taking advice and considering
other metrics, including ESG targets, we
decided not to make any change at this
time. Therefore in 2023 LTIP awards will
be granted at 275% base salary (measured
against TSR vs FTSE 250 index (excluding
investment trusts)).
Keywords Studios plc Annual Report and Accounts 2022 89
Section 1: Directors’ Remuneration Policy
Executive Directors’ remuneration at a glance
The following is a summary of the key components of Executive Director remuneration, including changes and implementation in the
forthcoming financial year.
Element
Remuneration in 2022
Base salary
With effect from 1 January 2022
CEO: £600,000
CFO: £295,000
COO: £295,000
With effect from 1 March 2022
CEO: £600,000 (no increase)
CFO: £305,325 (3.5% increase)
COO: £305,325 (3.5% increase until departure on 18 March 2022)
With effect from 1 November 2022
CEO: £600,000 CFO/COO Designate: £390,000
Remuneration in 2023
CEO: £600,000
CFO/COO Designate: £390,000
With effect from 1 April 2023
CEO: Salary increase to be decided in late March 2023
CFO/COO Designate: Salary will not be reviewed until 1 April 2024
New CFO: to be appointed
Salary shares
Shares were granted with the following values:
No intention to grant salary shares to Executive Directors
CEO: nil
CFO: £60,000
COO: nil
Pension
5% of base salary for all Executive Directors, in line with UK workforce No change
Annual bonus
Maximum opportunity of 30% of base salary based on:
No change
• Financial targets, including turnover and profitability (weighted 60%)
•
Individual performance vs Non-Financial Objectives (weighted 40%)
LTIP
275% of base salary for Executive Directors, subject to the Company’s
TSR performance versus the FTSE 250 Index (excluding investment
trusts) over a three-year performance period
No change
Shareholding requirements apply
Policy and principles
The Remuneration Committee determines the Company’s policy on the remuneration structure for the Executive Directors and Executive
Committee members (ExCo) plus the Company Secretary and is responsible for oversight of the Remuneration Policy for the broader
employee population.
The objectives of this policy are to:
• reward executives in a manner that ensures they are properly incentivised and motivated to perform in the best interests of shareholders;
• provide a level of remuneration required to attract, motivate and retain high-calibre individuals;
• encourage value creation, through consistent and transparent alignment of incentive arrangements with the agreed Company strategy over
the long term; and
• ensure the total remuneration packages, comprising both performance-related and non-performance-related remuneration, are designed to
motivate the individual, align interests with shareholders and comply with corporate governance best practice.
The Remuneration Committee believes the foregoing objectives are best achieved by a remuneration structure whereby:
• base salaries are targeted at up to median vs relevant comparator groups. In 2021 and early 2022, the award of salary shares was used to
compensate for base salaries at the lower quartile of relevant comparator groups and to ensure a more competitive position is achieved
in a structure aligned with shareholders. From November 2022 we moved to a more typical market-competitive base salary structure and
there is no intention to use salary shares going forward;
• annual bonuses are set at a low level, with a maximum of 30% of base salary; and
•
long-term incentives are set at upper quartile, being the means by which executives can earn significant rewards if, but only if,
shareholders likewise have obtained a good return.
Governance
90
Directors' Remuneration report continued
Section 1: Directors’ Remuneration Policy continued
Executive Director remuneration components
Various remuneration components are combined to ensure an appropriate and balanced remuneration package which reflects the size
and complexity of the Group, the executive’s experience, responsibility and position, as well as wider market conditions. For this, the
Remuneration Committee takes into account the performance of the individual, comparisons with peer companies and, where considered
appropriate, reports from external independent consultants.
The remuneration package comprises the following elements:
• Fixed remuneration (base salary, benefits and pension)
• Performance-based remuneration (annual bonus and share awards)
These elements are detailed in the table below, which refers to the structure used for the Executive Directors; the structure is cascaded
down to the ExCo and leadership team with variation in quantum according to level.
During 2022, the Remuneration Committee reviewed the pay structure for the Executive Directors with a particular focus on how the
package appropriately reflects the strategic priorities of the Group (focused on continued strong growth), and the appropriateness of the
performance conditions applied to long-term incentives (including a review of ESG-related measures). The Committee concluded that the
current structure continued to be appropriate and effectively linked the remuneration of Executive Directors with the long-term success of
the Company and interests of shareholders.
Purpose and link to strategy
Operation
Opportunity
Performance measures
Base salary
To attract and retain talented
executives to deliver the Group’s
strategy, by ensuring base salaries
and the implied total package
are competitive in relevant talent
markets, while not overpaying.
Base salaries are reviewed by
the Committee annually and
benchmarked periodically against
comparable roles at comparable
companies of similar size and
complexity.
Paid in cash.
Salaries are set on a case-by-case basis
to reflect the role, the experience and
qualifications of the individual.
n/a
Base salary increases for the executives
take into account personal performance,
Group performance, significant changes
in responsibilities, the average increase
awarded to the wider workforce, and
competitive market practice.
In the normal course, the expectation is
that base salary will increase annually in
line with, or below, any increase paid to the
wider workforce.
Pension and benefits
To provide an appropriate
structure and level of post-
retirement benefit for executives
in a cost-efficient manner that
reflects local market norms in the
relevant jurisdiction.
At the discretion of the
Remuneration Committee, an
executive may participate in a
pension scheme facilitated by
the Company.
The Company provides access to pension
schemes based on local legal requirements
or where expected by local labour
markets. Contributions meet the minimum
requirements or are of a modest level.
n/a
The Company also provides access
to Group benefit schemes where
appropriate by region which may
include moderate contribution
towards private health insurance,
death in service cover and other
Group-based benefits.
Basic additional benefits may also be
provided where available and where
considered the norm for managerial
positions in similar businesses.
An amount is paid equivalent to a
percentage of base salary not exceeding
the average paid in respect of the local
workforce (currently 5% in UK).
Annual bonus
To provide a modest award
where individual and Company
performance have been at or
above expected levels.
Executives are eligible to
participate in an annual
bonus scheme.
The Remuneration Committee
reviews the range and weightings
of financial and non-financial
performance measures each year.
Up to a maximum of 30% of base salary.
Paid in cash.
The portion of bonus earned in any one year
depends on the Remuneration Committee’s
assessment of each individual’s performance
and the overall performance of the
Company against predetermined targets
for the year.
Performance targets are 60% weighted
on the Company’s financial performance
and 40% weighted on performance
against strategic and personal targets.
The Remuneration Committee has
discretion over outcomes; for example, if
the Company’s financial performance is
considered to be unsatisfactory, the element
based on personal performance is likely to
be foregone or reduced.
Keywords Studios plc Annual Report and Accounts 2022 91
Purpose and link to strategy
Operation
Opportunity
Performance measures
LTIP
To incentivise delivery against
total shareholder return targets
and align the interests of
executives and shareholders in
growing the value of the Group
over the long term.
LTIP grants are made annually in
the form of conditional awards of
shares or nil-cost share options
which vest subject to performance
conditions measured over three
years. Once vested, awards may
be exercised up to 10 years
from grant.
Malus and clawback provisions
apply.
Maximum opportunity 275% of base salary.
Dividends are accrued over the
vesting period.
Vesting of LTIP awards is subject to
continued employment during the
performance period and the achievement
of performance conditions based on TSR.
The Committee has the discretion to adjust
the outcome in exceptional circumstances
to ensure it is a fair reflection of underlying
performance. Further details, including
the performance targets attached to
the LTIP in respect of each year will be
disclosed in the relevant implementation
report on remuneration (subject to these
being considered not to be commercially
sensitive).
For Executive Directors, a proportion
(currently 25%) of LTIP shares vesting after
tax and NI must be held to build towards
the required shareholding.
Executive Director shareholding guidelines
Executive Directors are encouraged to build and maintain over time a shareholding in the Company. To align the interests of Executive
Directors with those of shareholders, and to promote long-term thinking, the Remuneration Committee imposes shareholding requirements
which apply to all LTIP awards made to Executive Directors. The Committee has adopted shareholding requirements which apply both during
employment and for a period following employment, although the Remuneration Committee retains the right to waive this requirement in
exceptional circumstances such as death, ill health or severe financial hardship.
At the time of Jon Hauck’s promotion to COO Designate the Committee decided to harmonise Executive Director shareholding guidelines
which had been higher for the CEO (250%) and lower for other Directors (100% in 2021 and 200% in 2022). In conjunction with Jon Hauck’s
salary increase in November 2022, the Committee decided that all Executive Directors are required to build a shareholding equivalent to
250% of base salary. This may be built over time, but with a requirement to hold 25% of any LTIP shares vesting (after tax and NI) until the
required shareholding level is achieved. On departure, an Executive Director must continue to hold the required shareholding (or their actual
shareholding if lower) for 12 months.
Details of the Executive Directors’ current shareholdings are provided on page 100.
Recovery provisions (malus and clawback)
Recovery provisions may be applied to the annual bonus and LTIP awards in cases of fraud, dishonesty or deceit, gross misconduct or material
financial misstatement in the audited financial results of the Group. The Remuneration Committee may determine that an award is cancelled in
its entirety or be reduced to the extent they see fit.
Malus provisions apply which enable the Committee to determine before the payment of an annual bonus or the vesting of an LTIP award,
that the bonus opportunity or LTIP award may be cancelled or reduced. Clawback provisions apply which enable the Committee to
determine for up to two years following the payment of a cash bonus or the vesting of an LTIP award, that the amount of the bonus paid may
be recovered and the LTIP or share award may be cancelled or reduced (if it has not been exercised) or recovery may be applied to it (if it has
been exercised).
Use of discretion
The Remuneration Committee may apply its discretion when agreeing any remuneration outcomes, to help ensure that the implementation
of our Remuneration Policy is consistent with underlying Company performance and is equitable to all parties.
Process for determining the Remuneration Policy
The Committee periodically reviews the Remuneration Policy to ensure it reflects, if appropriate, trends in remuneration design and
governance developments, taking into account market practices, best practices, and revisions to the pay guidelines published by major
investors and their representative bodies. In approving any changes to the policy, the Committee considers the impact on individual
Executive Directors and as well as the consistency of pay structures and levels throughout the organisation. The Committee uses specific
pay benchmarking studies, when relevant, to ensure Keywords’ remuneration levels are positioned at the appropriate level. If major changes
are considered for Executive Director remuneration, the Committee will undertake a consultation of major shareholders and relevant proxy
agencies to ensure their feedback is taken into account before implementation.
Governance
92
Directors' Remuneration report continued
Section 1: Directors’ Remuneration Policy continued
Executive Director service contracts
In accordance with general market practice, each of the Executive Directors has a rolling service contract. The following table shows the
date of the service contract for each Executive Director in post during 2022:
Executive Director
Position
Date of appointment
Date of service
agreement
Bertrand Bodson
Jon Hauck
CEO
CFO
1 Dec 2021
19 Sep 2021
14 Oct 2019
30 Sep 2019
Notice period
6 months
6 months
Remuneration for the wider workforce
In addition to determining the pay of the Executive Directors and ExCo members plus the Company Secretary, the Committee is responsible
for overseeing the pay conditions of the wider workforce. The Committee seeks to understand the interests of the workforce by receiving
reports from management on the global employee survey and town hall events, and benchmarking surveys provide a view of pay conditions
in the context of the broader environment. In 2022, the workforce supported enhanced pay-for-performance measures and expressed
concerns over the rising cost of living and other inflation-related pressures.
Keywords currently employs over 12,000 people in 26 countries on a variety of permanent and flexible contract types, and salary levels
range across our service lines from minimum wage equivalent to highly paid technical experts. The complexity of this matrix means that
remuneration is necessarily structured by country and service line however, consistent principles are applied in doing so, and the Committee
provides support, advice and guidance to management in determining the appropriate structure across the Group.
Annual salary reviews normally take place to account for high performance, local pay and market conditions. In light of the high rates
of inflation seen in many of our operating territories, the Committee supported management in conducting a review of the lowest-paid
employee groups during the year and in applying salary increases where considered appropriate to help employees avoid any potential
hardship. In addition, in light of the high rates of inflation seen in many of our operating territories, a one-off payment was made to the
lowest-paid employees to support cost of living.
Many permanent employees are eligible to participate in the annual bonus scheme. Performance metrics for the bonus are set to reflect an
individual’s specific objectives and are designed to reward over-performance and collaboration.
The remuneration principles applied for senior managers and senior roles are consistent with those applied to executive remuneration – to
promote growth, achieve strategic objectives and contribute to the long-term success of the Group.
As such, objectives and performance conditions set for the bonus and share awards of Executive Directors are cascaded through the
organisation to align the whole workforce strategically. In total, over 1,200 employees received share awards in 2022. Two types of share
award are used: LTIPs and RSUs. LTIPs vest after a three-year performance period and are subject to continued employment and the same
performance measures applied to executive awards. These are principally used for senior managers who have a role in executing Group
strategic objectives and ensures alignment across the entire senior leadership team. RSUs are not subject to a performance measure but are
subject to continued employment over two years. These are principally used as a retention mechanism for key roles across the Group.
In 2022, our all-employee savings scheme, the Employee Share Purchase Plan (ESPP) was amended to increase the discount at which
employees can purchase shares. Under the Plan, our employees can save up to £416 per month and at the end of a defined savings period
purchase Keywords shares at a 15% discount. The ESPP is a benefit provided on equal terms to all employees in eligible countries and offers a
savings opportunity and promotes share ownership by our employees. In 2022, over 550 employees participated in the ESPP.
The Board does not accept a pay differential between men and women in the same role. At 31 December 2022, there were over 12,000
employees globally, of which 26% were women (by voluntarily disclosure), and the Committee noted that gender balance varied by
geography and service line. In 2022, there was continued focus on the recruitment of women and our continued sponsorship of Women
in Games demonstrates our commitment to improving the gender balance in the industry as a whole. The Group complies with equal
pay directives across all its locations, conducting periodic assessments and analysis, and the Board is satisfied that there is equal gender
pay given location and roles. Gender, diversity, inclusion, equity and behaviour are an important focus for our ESG Committee and the
Remuneration Committee has included targets relating to this topic in the bonus non-financial objectives for 2023.
The CEO pay ratio presented on page 99 relates to our UK workforce of 783 employees as this is considered the most appropriate
comparator group for the purpose of the ratio.
External appointments held by Executive Directors
The Board believes that external appointments can be useful in providing wider commercial context and providing a personal development
opportunity for an Executive Director however, any external time commitments must be carefully considered. Executives may not accept any
external appointment without the consent of the Board. Any associated fees are retained by executives.
Upon appointment in 2021, Bertrand Bodson held two non-executive positions which he was given permission to retain. Since the year end,
Bertrand has informed us that he will step down from his board role at Wolters Kluwer N.V. in May 2023 and therefore going forward he will
only have one external appointment. Jon Hauck has no external appointments.
Keywords Studios plc Annual Report and Accounts 2022 93
Consideration of shareholder views
AGM voting and other shareholder feedback is important in shaping the Company’s implementation of its Remuneration Policy as well as any
changes to the Policy. The Committee engaged with shareholders and representative agencies before and after the 2022 AGM to explain
changes to remuneration structure and measures, events during the year and priorities for the coming year. The Committee has continued
to engage with shareholders in 2023.
Leaver treatment
Fair treatment will be extended to departing executives. The Group’s policy on termination payments is to consider the circumstances on a case-
by-case basis, taking into account the relevant contractual terms in the executive’s service contract and the circumstances of termination.
Executives who resign or are dismissed for cause are, by default, not eligible for an annual bonus if they have left or are under notice at date
of payment and forfeit all unvested LTIP shares, including salary shares.
Good leavers (normally including such circumstances as retirement, death, disability and redundancy) are permitted to exercise unvested
LTIP awards, reduced pro rata to reflect the remaining vesting period (unless such reduction is waived by the Remuneration Committee) and
to the extent that the performance criteria are met over the full performance period. At its discretion, the Remuneration Committee may
allow the acceleration of vesting to the termination date, for which the achievement of the performance condition would be at the discretion
of the Committee.
On a change of control, all unvested LTIP awards and salary shares may be exercised in full at the time of the event subject to discretion by
the Remuneration Committee. It is intended that the Committee would only apply discretion to reduce vesting if the change of control took
place due to poor underlying performance. A rollover of unvested awards into new awards may also be offered.
Pay for performance scenario analysis
The charts below provide an estimate of the potential future reward opportunities for the CEO and CFO/COO-designate and the potential
split between the different elements of remuneration under four different performance scenarios: “Minimum”, “On-target”, “Maximum” and
“Maximum +50% (share price appreciation)”. These charts illustrate how performance-orientated and long term the Company’s remuneration
arrangements are, with the majority of the remuneration opportunity being delivered only under the “Maximum” scenarios. We have also
included a bar showing the value of the actual package paid for 2022. A graph is not provided for Sonia Sedler as she left the Company on
18 March 2022 and her single figure remuneration for 2022 is provided on page 94.
Potential reward opportunities are based on the Remuneration Policy, applied to 2023 base salaries and incentive opportunities. Note that
the LTIP awards granted in a year will not normally vest until the third anniversary of the date of grant, and the projected value excludes the
impact of share price movement except in the “Maximum +50%” scenario.
Bertrand Bodson
Jon Hauck
Max +50%
Maximum
£3,285k
Max +50%
£2,135k
£2,460k
Maximum
£1,599k
On-target
£1,133k
On-target
£736k
Minimum
£630k
Minimum
£410k
Actual 2022
£809k
Actual 2022
£2,093k
0
1,000
2,000
3,000
4,000
0
1,000
2,000
3,000
4,000
Fixed
Short-term
Long-term
Fixed
Short-term
Long-term
Assumptions:
Actual 2022: Fixed remuneration (2022 base salary, salary shares, benefits and pension), bonus paid for 2022 and LTIP vesting in 2022.
Minimum: Fixed remuneration only (2022 base salary and pension).
On-target: Fixed remuneration as above, plus target bonus (50% of maximum) and threshold LTIP vesting (25% of maximum).
Maximum: Fixed remuneration, plus maximum bonus (30% of base salary) and full vesting of LTIP awards.
Maximum+50%: As per Maximum scenario but with an assumption of share price growth of 50% over the three-year performance period for LTIP awards.
Chairman and Non-Executive Director fee policy
The Chairman and Non-Executive Directors receive fees for preparation for an attendance at Board and Committee meetings. The Company
does not operate any pension scheme for Non-Executive Directors nor do they participate in any variable pay plan. Any reasonable business
expenses (including tax thereon) may be reimbursed.
Governance
94
Directors' Remuneration report continued
Section 2: Implementation of the Remuneration Policy in 2022
The Remuneration Committee
The members of the Remuneration Committee in 2022 were Marion Sears (who succeeded as Committee Chair in May 2022), Neil
Thompson, Charlotta Ginman and Ross Graham. David Reeves (former Committee Chair) stepped down from the Board on 20 May 2022 and
Neil Thompson joined the Committee at that time.
The members are all independent Non-Executive Directors. In the year ended 31 December 2022, the Remuneration Committee met on six
scheduled occasions. Members attended all Committee meetings for which they were eligible to attend throughout the year. Full attendance
details are provided on page 73. At the request of the Committee Chair, the CEO, CFO, COO, Chief People and Culture Officer and
remuneration advisor may also attend meetings.
The Chairman and the Chair of the Remuneration Committee met with shareholders, key investors and relevant proxy agencies in 2022 to
obtain input and feedback on executive and wider workforce remuneration.
The remit of the Committee is to determine and agree with the Board the framework for the remuneration of the Chairman, Executive
Directors, the General Counsel and Company Secretary, and also oversee the share awards and Remuneration Policy for the wider workforce.
No Director is involved in any discussion or decision about his or her own remuneration.
The Committee engaged Deloitte LLP to provide independent advice to the Committee from 1 November 2022. Ellason LLP also provided
advice to the Committee until 31 October 2022. Neither advisor has any other association with the Company and both are considered
independent, are members of the Remuneration Consultants Group and, as such, voluntarily operate under the Code of Conduct in relation
to executive remuneration consulting in the UK.
Directors’ emoluments
The remuneration for the Directors of the Company for the year ended 31 December 2022 is detailed in the table below:
Director
Bertrand Bodson
Jon Hauck
Sonia Sedler 1
Ross Graham
David Reeves2
Giorgio Guastalla3
Georges Fornay
Charlotta Ginman
Marion Sears
Neil Thompson
TOTAL
2022 Fixed pay £’000
2022 Variable pay £’000
2022 Total
remuneration
Cash
salary/fee
600.0
317.7
514.2
95.7
29.6
4.3
66.4
69.4
65.6
59.7
Salary
Shares
–
60.0
–
–
–
–
–
–
–
–
Benefits
Pension
Total
5.0
2.0
1.0
–
–
–
–
–
–
–
30.0
15.9
–
–
–
–
–
–
–
–
635.0
395.6
515.2
95.7
29.6
4.3
66.4
69.4
65.6
59.7
Bonus
174.0
113.1
LTIP
–
Total
174.0
£’000
809.0
1,584.1
1,697.2
2,092.8
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
515.2
95.7
29.6
4.3
66.4
69.4
65.6
59.7
1,822.6
60.0
8.0
45.9
1,936.5
287.1
1,584.1
1,871.2
3,807.7
1. Sonia Sedler left the Company on 18 March 2022 and her cash salary figure includes payments made on leaving.
2. David Reeves stepped down as a Director on 20 May 2022.
3. Giorgio Guastalla stepped down as a Director on 26 January 2022.
Keywords Studios plc Annual Report and Accounts 2022Page Title 95
The remuneration for the Directors of the Company for the period year ended 31 December 2021 is detailed in the table below:
2021 Fixed pay £’000
2021 Variable pay £’000
2021 Total
remuneration
Director
Bertrand Bodson1
Jon Hauck2
Sonia Sedler 2,3
Andrew Day7
Ross Graham5
David Reeves5
Giorgio Guastalla
Georges Fornay
Charlotta Ginman5
Marion Sears6
Neil Thompson6
TOTAL
Cash
salary/fee
Salary
Shares
Benefits
Pension
50
279.8
319.3
61.2
132.5
94.3
51.8
62.3
89.3
22.8
21.3
–
77.5
47.5
–
–
–
–
–
–
–
–
1,184.6
125.0
–
–
–
–
–
–
–
–
–
–
–
–
2.5
14.3
15.9
4.9
Total
52.5
371.6
382.7
66.1
132.5
94.3
51.8
62.3
89.3
22.8
21.3
Bonus
15.0
84.0
95.8
–
–
–
–
–
–
–
–
LTIP
–
–
–
Total
15.0
84.0
95.8
1,226.0
1,226.0
–
–
–
–
–
–
–
–
–
–
–
–
–
–
£’000
67.5
455.6
478.5
1,292.1
132.5
94.3
51.8
62.3
89.3
22.8
21.3
37.6
1,347.2
194.8
1,226.0
1,420.8
2,768.0
1. Bertrand Bodson was appointed on 1 December 2021. His one-off award of restricted stock granted on appointment is not included as this award is compensation for
awards forfeited at a previous employer.
2. Cash salary includes one-off £37,500 as co-CEO allowance; Salary Shares include one-off £37,500 as co-CEO allowance.
3. Sonia Sedler was appointed on 18 January 2021 and left the Company since the year end on 18 March 2022.
4. Andrew Day retired on 14 June 2021; his salary shares granted in FY21 do not appear in the table as these lapsed on his retirement.
5. Ross Graham, Charlotta Ginman and David Reeves all received an additional fixed fee to reflect the additional work undertaken in relation to the change of CEO and other
new director appointments during the year. Ross Graham received £40,000 and Charlotta Ginman and David Reeves each received £25,000.
6. Marion Sears and Neil Thompson were appointed as Non-Executive Directors on 13 August 2021.
7. 50,000 LTIP shares, granted to Andrew Day in 2018, fully vested on 18 May 2021 due to Keywords’ three-year TSR exceeding the full vesting level. The value shown in the
table is based on the vest-date share price of £24.52, and 30% of which is based on the gain in the share price over the period (from a grant price of £17.22).
Salaries in 2022
The following cash salaries were applied in 2022:
• Bertrand Bodson: £600,000
•
Jon Hauck: cash salary of £295,000 plus salary shares of £60,000 for the period to 1 March 2022, and £305,325 to 1 November 2022,
increased to a cash salary of £390,000 thereafter
• Sonia Sedler: £295,000 prorated for the period up to her departure on 21 March 2022
In May and September 2021, Jon Hauck was awarded salary shares to supplement base salary, which were subject to phased vesting with
one third of the award vesting on the anniversary of the date of grant each year, subject to continued employment. Accordingly, 543 salary
shares vested automatically in May 2022 and 410 salary shares vested automatically in September 2022. In total, 4,468 salary shares remain
outstanding, with vesting dates between 2023 and 2025.
Pension
During 2022, the Executive Directors were paid pension contributions of 5% of salary, in line with the rest of the UK workforce.
Annual bonus outcome for 2022
During 2022, the Executive Directors participated in the annual bonus scheme, and were eligible to earn awards of up to 30% of base salary,
subject to the attainment of specific targets. The portion of bonus earned in the year was dependent on Company performance (weighted 60%)
against financial targets for the year in line with our financial KPIs (see pages 32 and 33) and on the Remuneration Committee’s discretionary
assessment against non-financial strategic targets (weighted 40%).
The financial targets were based on revenue (weighted 20% of bonus), adjusted profit before tax (20%) and cash conversion (20%).
The discretionary element considers the Director’s performance for the year against non-financial targets, under various categories. The non-
financial objectives related to the strategic priorities for the business in 2022, including strategic partnerships, M&A, technology and cybersecurity
and One Keywords (culture and talent). Performance against all the targets set for the year was assessed by the Committee, and the Committee
determined that each Director had achieved 98% of the bonus, equating to 29% of salary.
Governance
96
Directors' Remuneration report continued
Section 2: Implementation of the Remuneration Policy in 2022 continued
The table below shows each element of the executive bonus for 2022, the achievement for each element, and the total achievement and value.
2022 Executive Bonus outcomes
Bonus element
Target
Achievement
% Outcome
60% Financial
20%
20%
20%
40% Non-Financial
10%
10%
10%
10%
Total (out of 100%)
Director
Bertrand Bodson
Jon Hauck
Revenue
34.8% growth, exceeded budget
Adjusted profit before tax
30.3% growth, exceeded budget
Cash conversion
Exceeded stretched target
Strategic partnerships
M&A
Increased customer NPS, strategic partnership reviews
in place, new business growth
Five acquisitions added sales, profits, and technology,
improved service offer
Technology and cybersecurity
Key recruitment, success with automation
One Keywords (talent and culture)
eNPS high for Create & Engage, lower attrition rate,
focus on fair pay
20%
20%
20%
10%
10%
9%
9%
98%
Formulaic outcome, %
of base salary
Bonus for 2022
£'000
29%
29%
174.0
113.1
Long-term incentives vesting in 2022
Jon Hauck joined Keywords in October 2019. At that time, he received 25,000 LTIP shares as part of regular awards to Executive Directors,
and an additional 43,936 LTIP shares as a one-off grant in compensation for awards forfeited on joining Keywords. The full vesting of the LTIP
awards required Keywords TSR to outperform the Numis Smaller Companies (excluding Investment Trusts) Index by 20% over the three year
performance period. The Company’s TSR performance over this period outperformed that of the Index by 34.4% resulting in full vesting of
both awards in September 2022 and amounted to 68,936 shares in total. No discretion was applied.
Long-term incentives outstanding and granted during 2022
LTIP awards granted to the Executive Directors in May 2020 and May 2021 remained outstanding during 2022. Vesting of the 2020 awards
requires Keywords TSR to outperform the FTSE Small Cap Index over a three-year period. Threshold vesting (10% of the award) will be earned
for TSR in line with the Index and full vesting will be earned for exceeding the Index TSR by 20% over the performance period. Vesting of
the 2021 award requires Keywords TSR to outperform the FTSE 250 Index (excluding investment trusts) over a three-year period. Threshold
vesting (25% of the award) will be earned for TSR in line with the Index and full vesting will be earned for exceeding the Index TSR by 20%
over the performance period.
Bertrand Bodson was granted his LTIP award on his appointment on 1 December 2021, and was also awarded a one-off grant of restricted
shares with a face value of 100% of salary in compensation for awards forfeited on joining Keywords. These conditional LTIP shares will vest
based on performance over the period to May 2024, in line with other LTIP awards granted in 2021, and the restricted shares will vest in
December 2024 subject to continued employment.
In 2022, the Executive Directors were awarded LTIP shares, the vesting of which is based on the Company’s TSR performance versus
the FTSE 250 Index (excluding investment trusts) over a three-year performance period. Given Keywords’ growth during the period the
Committee deemed it appropriate to use the FTSE 250 as the Index against which TSR should be measured. Threshold vesting (25% of the
award) will be earned for TSR in line with the Index and full vesting will be earned for exceeding the Index TSR by 20% over the performance
period. The number of performance-based LTIP shares granted to the Executive Directors in 2022 is summarised in the table below.
Director
Bertrand Bodson
Jon Hauck
Number of
shares granted at
nominal value of £0.01
Value as % of salary
Performance period
Vest date
70,392
35,586
275%
275%
5 May 2022 – 4 May 2025
5 May 2022 – 4 May 2025
5 May 2025
5 May 2025
Keywords Studios plc Annual Report and Accounts 2022 97
TSR performance up to 28 January 2023 for in-flight LTIP awards
2022–2025
Expected vesting: 100%
FTSE 250
-5%
Keywords
17%
2021–2024
Expected vesting: 60%
FTSE 250
-6%
Keywords
6%
FTSE SmallCap
18%
2021–20241
Expected vesting: 100%
2020–2023
Expected vesting: 100%
Keywords
FTSE SmallCap
Keywords
39%
102%
91%
-20%
0%
20%
40%
60%
80%
100%
120%
Keywords
FTSE 250
FTSE SmallCap
1. This relates to a 2021 grant to Sonia Sedler on joining the Company.
Sonia Sedler leaving arrangements
Sonia left the company on 18 March 2022 due to personal reasons and was treated as a good leaver. Sonia received base pay and benefits up
to 18 March and received her bonus in respect of 2021. Upon departure Sonia received a payment of £183,536 plus payment in lieu of notice
of £147,500. Sonia retains the 25,000 LTIP award made in respect of compensation foregone at her joining and this award will vest subject
to performance conditions at the normal vesting date. The May award of 35,000 LTIP shares was prorated according to time served under
our new good leaver provisions and Sonia retains 10,144 LTIP shares which will also vest subject to performance conditions at the normal
vesting date in 2024. All salary shares lapsed. We note that the 2022 AGM vote reflected dissatisfaction with the presentation of Sonia's
leaving arrangements and we have noted this feedback. Further engagement with shareholders has since taken place and the Committee
is confident that our current remuneration structure is in line with the interests of shareholders and consistent with good corporate
governance practice in the UK.
TSR performance
The chart below shows the Company’s TSR since listing versus relevant indices.
Value of £100 invested in July 2013
£2,500
£2,000
£1,500
£1,000
£500
£0
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
Keywords Studios
FTSE 250
FTSE SmallCap
Governance
98
Directors' Remuneration report continued
Section 2: Implementation of the Remuneration Policy in 2022 continued
The chart below shows shareholder value created each year, based on the change in share price plus dividends paid over each financial year
multiplied by the number of shares outstanding at the start of each year.
Shareholder value created each year, £m
2022
2021
2020
2019
2018
-337
2017
2016
2015
2014
3
126
280
176
34
15
1,009
664
-400
-200
0
200
400
600
800
1000
1200
The table below illustrates the CEO’s single figure of total remuneration over the same period as the charts above.
Director
Single figure (£’000)1
Annual bonus outcome
(% of max)2
LTIP vesting (% of max)3
SOP vesting (% of max)
FY14
146
FY15
213
100%
100%
N/A
N/A
N/A
100%
FY16
449
100%
100%
100%
FY17
397
100%
N/A
100%
FY18
820
30%
100%
N/A
FY19
1,198
0%
100%
N/A
FY20
1,012
0%
100%
N/A
FY21
1,532
100%
100%
N/A
FY22
809
98%
100%
N/A
1. The numbers in the table for FY14-FY20 are for Andrew Day; FY21 is based on a combination of Andrew Day, Bertrand Bodson, Jon Hauck and Sonia Sedler; FY22 figures
relate to Bertrand Bodson.
2. 100% bonus outcome reflects the bonus outcome for those individuals performing the role of CEO in FY21 (Andrew Day, who retired in FY21, was not paid a bonus).
3. Of those who performed the CEO role during FY21, only Andrew Day benefited from an LTIP vesting in FY21.
Keywords Studios plc Annual Report and Accounts 2022 99
Chief Executive Officer pay ratio
The table below provides disclosure of the ratio between the CEO’s total remuneration and that of the lower quartile, median and upper
quartile of our 783 (2021: 679) UK-based employees. The CEO pay data in 2021 includes all income paid to Andrew Day up to his retirement,
the co-CEO cash salary and Salary Shares paid to the CFO and COO and any bonus earned for the cash element of this, and all income
paid to Bertrand Bodson from 1 December excluding his one-off award of restricted shares paid as compensation for forfeited awards at a
previous employer.
Year
2022
2021
2020
Year
2022
Base Salary (£’000)
Total remuneration (£’000)
2021
Base Salary (£’000)
Total remuneration (£’000)
Methodology used
P25 (lower quartile)
P50 (median)
P75 (upper quartile)
Option A
Option A
Option A
27:1
51:1
33:1
18:1
38:1
25:1
P25 (lower quartile)
P50 (median)
P75 (upper quartile)
20
22
27
30
33
33
35
40
39
49
50
57
15:1
27:1
18:1
CEO
600
809
261
1,532
The lower, median and upper quartile employees were determined using calculation methodology Option A which involved calculating the
actual full-time equivalent remuneration for all UK employees for the year ended 31 December 2022. From this analysis, three employees
were then identified as representing the 25th, 50th and 75th percentile of the UK employee population. Keywords chose this method as it is
the preferred approach of the Government and that of shareholders, and the Company had the systems in place to undertake this method.
As the drafting of this report was earlier than the final determination of bonuses for the wider population, the bonus outcomes have been
based on the financial forecasts in December 2022.
The CEO pay ratio decreased from 38 in 2021 to 18 in 2022, primarily as a result of the significant vest-date value of the LTIP award vesting in
2021 to Andrew Day (£1.2m) due to the strength of the share price growth over the vesting period of the LTIP awards granted in May 2018, and
Bertrand Bodson, having joined in December 2021, not receiving the benefit of share awards vesting during 2022.
The CEO pay ratio is based on comparing the CEO’s pay to that of Keywords’ UK-based workforce, a large proportion of whom are engineers,
artists and support staff. The Committee expects that the ratios will be largely driven by the CEO’s incentive pay outcomes, which will likely
lead to greater variability in his pay than that observed at lower levels who, consistent with market practices, have a greater proportion of
their pay linked to fixed components. The Committee considers these ratios when making decisions around the Executive Director pay
packages, and Keywords takes seriously the need to ensure competitive pay packages across the organisation. The Company believes the
median pay ratio for the relevant financial year is consistent with the pay, reward and progression policies for the Company’s UK employees
taken as a whole.
Implementation of the Remuneration Policy in 2023
Base salary
All employees are eligible for a base salary review effective 1 April each year. At this stage no decision has been taken with regard to a salary
increase for Bertrand Bodson. Any increase will be in line with or below that of the UK workforce. The CFO/COO Designate will receive a
salary of £390,000 as awarded with effect from 1 November 2022, and the salary for this role will not be reviewed until 1 April 2024.
Salary shares
No grants of salary shares will be made to Executive Directors in 2023.
Pension
The Executive Directors’ pensions will remain at 5% of base salary, in line with the UK workforce.
Annual bonus
The CEO and CFO will be eligible to earn an annual bonus of up to 30% of base salary in line with previous years. The outcome will be
determined with reference to targets set at the start of 2023 around financial performance (weighted 60%) and non-financial performance
(weighted 40%). These follow the same structure as the targets for 2022, reflecting our strategic priorities, and will be disclosed next year.
LTIP
The Committee intends to grant LTIP awards of 275% of base salary to the CEO and CFO/COO Designate, with vesting based on the
Company’s three-year TSR performance relative to the FTSE 250 Index (excluding Investment Trusts), with threshold vesting (25% of the
award) for TSR in line with the Index and full vesting for exceeding the Index TSR by 20% over the performance period.
For simplicity, it is planned to align the LTIP performance period to the fiscal year and therefore the LTIP awards in May 2023, will be
measured over the three calendar years 2023-2025. Vesting will not take place until three years have elapsed following award and shares
vesting will be subject to Executive Director shareholding requirements.
Governance
100
Directors' Remuneration report continued
Section 2: Implementation of the Remuneration Policy in 2022 continued
Chairman and Non-Executive Directors’ remuneration
Non-Executive Director fees are based on the roles and responsibilities of the Directors (see table below) and are reviewed annually. The next
review of Non-Executive Director fees will take place in late March 2023 and will take into account the scale of the business and the time
requirement of the Non-Executive Directors.
On 19 January 2023, the Company announced the appointment of Don Robert as a Non-Executive Director and Chair Designate and proposed,
subject to his election by shareholders at the 2023 AGM and the passing of a resolution to amend the Articles of Association of the Company
at that time, to increase the Board Chair annual fee to £400,000. This increase, compared with the fee paid to our previous Chairman, reflects
benchmarking we have conducted as well as expected tenure, our growth ambition, our strategic complexity and our international positioning.
Role
Board Chairman
(up to 26 May 2023)
Board Chairman
(from 26 May 2023)
Non-Executive Director
Directors’ interest in shares
Fee
Role
Additional fees:
£96,255
£400,000
£51,232.50
Member of Audit, Remuneration or ESG Committee
Chair of Audit, Remuneration or ESG Committee
Senior Independent Director
Fee
£3,105
£12,420
£5,175
The interests of each person who was a Director of the Company (together with interests held by his or her connected persons) at the end of
each financial year (or the time the Director departed the Board, if relevant) is set out below. In line with our Executive Director shareholding
guidelines (detailed on page 91), Jon Hauck, following share award vestings during the year and changes to his salary and applicable
shareholding requirements, has achieved a shareholding of approximately 1x salary as at 31 December 2022. Having joined in December 2021,
Bertrand Bodson will be required to build his shareholding from awards vesting from December 2024.
Director
Giorgio Guastalla1
Ross Graham
David Reeves3
Jon Hauck
Sonia Sedler2
FY22
n/a
64,376
n/a
12,937
n/a
FY21
Director
500,736
Bertrand Bodson
59,819
Georges Fornay
33,464
Charlotta Ginman
nil
nil
Marion Sears
Neil Thompson
FY22
nil
6,521
1,733
2,000
3,387
FY21
nil
6,521
1,733
1,000
2,496
90,954
3,902,342
1 Giorgio Guastalla stepped down as a Director on 26 January 2022. His indirect shareholding related to his 90% holding in P.E.Q. Holdings Limited.
2
Sonia Sedler left the Company on 18 March 2022.
3 David Reeves stepped down as a Director on 20 May 2022.
The outstanding LTIP awards held by each Executive Director of the Company are as follows.
LTIP
Director
Number at
31 December
2021
Number
granted during
the year
Number vesting
during
the year
Number lapsed/
forfeited
during the year
Number
exercised
during the year
Number at
31 December
2022
First vesting
date
Current vesting
expectation1
Bertrand Bodson
61,156
–
–
70,392
Jon Hauck
25,000
43,936
25,000
25,000
–
–
–
–
–
35,586
–
–
25,000
43,936
–
–
–
Total
180,092
105,978
68,936
–
–
–
–
–
–
–
–
–
–
–
61,156
5 May 2024
70,392
5 May 2025
25,000 30 Sep 2022
43,936
– 30 Sep 2022
–
–
–
25,000
1 May 2023
25,000
5 May 2024
35,586
5 May 2025
43,936
242,134
60%
100%
–
–
100%
60%
100%
1. Vesting expectation (% of award) is based on the achievement of the TSR performance condition up to 28 February 2023.
Keywords Studios plc Annual Report and Accounts 2022Page Title 101
Salary shares and restricted shares
Director
Jon Hauck2
Sonia Sedler3
Bertrand Bodson2
Total
Number at
31 December
2021
Number
granted during
the year
Number vesting
during
the year
Number lapsed/
forfeited
during the year
Number
exercised
during the year
Number at
31 December
2022
First vesting
date for one-
third tranche1
Current vesting
expectation
1,630
1,231
–
407
1,231
22,239
26,738
–
–
2,560
–
–
–
543
410
–
–
–
–
2,560
953
–
–
–
407
1,231
–
1,638
543
410
–
–
–
–
1,087
5 May 2022
821
16 Sep 2022
2,560
5 May 2023
–
–
-
-
100%
100%
100%
-
-
22,239
1 Nov 2024
100%
953
26,707
1. Salary shares granted to Jon Hauck vest in one-third annual tranches over three years.
2. Restricted awards granted to Jon Hauck and Bertrand Bodson were granted as compensation for forfeited awards from previous employment and vest in full after three
years subject to continued employment.
3. Sonia Sedler’s salary shares lapsed on her leaving on 18 March 2022.
Share Option Scheme
Executive Directors no longer receive awards under the Share Option Scheme. There are no awards outstanding under this scheme.
Governance
ESG Committee report
102
ESG Committee report
Setting the framework for our ESG
programme and supporting initiatives
across the Group.
Georges Fornay
Chair of the ESG Committee
At a glance
Committee membership
The members of the ESG Committee
are Georges Fornay, Marion Sears,
Neil Thompson, Bertrand Bodson and
Jon Hauck.
The members of the Committee and their
attendance at meetings during the year,
as well as full biographies of each member
can be found on pages 70 to 73.
Key responsibilities
• Oversight of ESG priorities: People
(including diversity, equity, inclusion and
belonging), Client, Community, Planet
and Corporate Governance
• Setting metrics and targets
• Oversight of related policies
and frameworks
• Supporting related activities
Our framework
People
Planet
Community
Client
Governance
See pages 40 to 55 for
details of our ESG initiatives
Keywords Studios plc Annual Report and Accounts 2022 103
The following examples, described in more
detail in our Responsible Business Report
on pages 40 to 55, illustrate progress made
during the year:
• Planet – assessed opportunities for
carbon offsetting, assessed scope 1
and 2 carbon emissions and identify
environmental initiatives been undertaken
at studios
• People – enhanced engagement with
employees though regular town
hall events
• Client – increased number of strategy
discussions with key clients
• Community – enhancing the process for
matching charitable donations
• Governance – implementing a new
whistleblowing portal
Key activities during the year
Four meetings were held during the year.
The Committee received presentations on
each pillar, to understand initiatives currently
underway and those planned for 2023, and
oversaw the development of measures and
multi-year targets for each pillar. A number
of Group policies have been reviewed
and updated to support ESG initiatives,
listed below.
• Supplier Code of Conduct
• Sanctions
• Grievance
• Business Travel
• Health and Safety
• Charitable Giving
Responsibility for oversight of these policies
has migrated from the Audit Committee
to reflect the ESG Committee’s enhanced
interest and oversight in those aspects of the
Group's operations. The Audit Committee
remains consulted on and informed of
changes to these policies.
Framework
The table below sets out our ESG programme pillars and key metrics. Further details,
including targets and initiatives, can be found on pages 40 to 55.
People
Planet
Community
Client
• Employee
satisfaction
• Training
• Mental health
• Women in
Games
• Sustainable
• Keywords
Cares
• Client
satisfaction
• Hardship fund
• Strategic
partnerships
studios
• Carbon
offsetting
Governance
Underpins the four pillars with high standards of governance and business ethics.
Focus for the coming year
The Committee has four meetings scheduled for 2023. Attention will be focused on
monitoring initiatives and measuring progress against targets. Deep dives into each pillar will
be conducted throughout 2023, to further enhance the Committee’s understanding of key
opportunities and challenges.
Georges Fornay
Chair of the ESG Committee
15 March 2023
Introduction from the Chair
As Chair of the ESG Committee, I’m very
pleased to present our ESG Committee
Report for the first full calendar year of
its operation.
The global focus on ESG matters is
sharpening, and we acknowledge that
our shareholders, employees, customers
and suppliers are becoming increasingly
interested in our ESG programme. We see
this as a positive development because
we’re conscious of the social impact
of our business, as well as the impact
climate change may have on our business.
At Keywords, we recognise a collective
responsibility and accountability to take
account of the interests of our stakeholders
and to contribute positively to the
environmental and social initiatives of our
customers and wider industry.
Composition and attendance
The Committee members are Marion Sears,
Neil Thompson, Bertrand Bodson, Jon
Hauck and myself. More information about
the Committee members can be found
on pages 70 to 73. The Committee met
four times during the financial year and all
members attended all Committee meetings.
Attendance is reported in detail on page
73. Meetings have been held in person,
with some invitees attending remotely via
videoconferencing, which has enabled the
Committee to operate effectively and allow
senior managers to participate in meetings
from whichever region they are located.
Role and responsibilities
The Committee has written terms of
reference which are available to view on the
Company’s website www.keywordsstudios.
com. The terms of reference clearly define
the Committee’s responsibilities and
duties and were reviewed by the Board in
December 2022. In addition to the terms of
reference, the Committee has developed
an annual agenda, which corresponds with
the meeting schedule, to ensure each ESG
priority area receives appropriate dedicated
focus during the year.
The role of the Committee is to implement
and oversee initiatives across the Group,
which aim to improve the Group’s impact
on the areas, which have been identified
as ESG priorities for our business and key
stakeholders. These pillars are Planet, People,
Clients and Communities, which are all
underpinned by our Governance practices.
Governance
Directors’ report
104
Directors’ report
The Directors present the Annual Report
together with both the audited consolidated
financial statements and the parent Company
(Keywords Studios plc) financial statements
for the year ended 31 December 2022.
Dividends
The results for the year are set out on page
59 to 61. As described in the Financial and
operating overview section, the Board is
proposing a final dividend of 1.60 pence per
share (2021: 1.45 pence 2022 per share),
bringing the total dividend for 2023 to 2.37
pence per share (2021: 2.15 pence per share).
Directors and changes
to the Board
The Directors of the Company during the
year were Ross Graham, Bertrand Bodson,
David Reeves (resigned on 24 May 2022),
Giorgio Guastalla (resigned on 26 January
2022), Georges Fornay, Charlotta Ginman,
Marion Sears, Neil Thompson, Jon Hauck,
Sonia Sedler (stepped down on 18 March
2022) and Don Robert (appointed on
1 February 2023). Biographical details of
current members of the Board are set out on
pages 70 to 73.
The business of the Company is managed by
the Board, which may exercise all the powers
of the Company subject to the Company’s
Articles of Association and the Companies
Act 2006.
A list of Directors, their interests in the
ordinary share capital of the Company, their
interests in its long-term performance share
plan and details of their options over the
ordinary share capital of the Company are
given in the Directors’ remuneration report on
pages 100 and 101. No Director had a material
interest in any significant contract, other than
a service contract or contract for services,
with the Company or any of its operating
companies at any time during the year.
Corporate governance statement
During the year, Keywords adopted the
principles set out in the Quoted Companies
Alliance Corporate Governance Code
(QCA Code). Our Corporate Governance
Statement, prepared in accordance with
rule 7.2 of the Financial Conduct Authority’s
Disclosure Guidance and Transparency rules
setting out how the Group has complied with
the QCA can be read in full on the Company’s
website at www.keywordsstudios.com
Directors’ indemnity provisions
As permitted by the Company’s Articles of
Association and the Companies Act 2006,
the Directors had the benefit of an indemnity
from the Company in respect of liability
incurred as a result of their office throughout
the financial period and at the date of
approval of these financial statements.
The Group also purchased and maintained
throughout the financial period Directors’
and Officers’ liability insurance in respect of
itself and its Directors.
Going concern
The Directors have performed an
assessment, including a review of the Group’s
business activities, performance, position,
principal risks and uncertainties (as set out
in the Strategic report on pages 62 to 68),
as well as the Group’s budget for the 2023
financial year and its longer-term plans. After
making enquiries, the Directors consider it
appropriate to continue to adopt the going
concern basis in preparing the consolidated
and Company financial statements. In
doing so, the Directors have considered the
uncertain nature of the Ukrainian crisis, but
have noted:
• the net cash position of the Group;
• the strong cash flow performance of the
Group through the year;
• the historical resilience of the broader
video games industry in times of
economic downturn; and
• the ability of the Group to flex its cost
base in response to a reduction in
trading activity.
The Directors have also considered the
Group’s strong liquidity position, with net
cash of €81.8m and committed undrawn
facilities under the Revolving Credit Facility
of €150m as at 31 December 2022.
The Directors have a reasonable expectation
that the Company and the Group have
adequate resources to continue to operate
and meet their liabilities as they fall due for
the foreseeable future, a period considered
to be at least 12 months from the date
of these full-year financial statements
and therefore the going concern basis of
preparation continues to be appropriate.
Financial risk management
The Group’s approach to capital
management is shown in Note 25 of the
financial statements. The Group’s exposure
and approach to liquidity, credit, interest rate
and foreign currency risk is shown in Note 24
of the financial statements. Our approach to
risk management generally and the principal
risks facing the Group can be found in the
Strategic report on pages 62 to 68.
Articles of Association
Our Articles of Association can be amended
by special resolution. They are available on
the Company’s website at
www.keywordsstudios.com
Political donations
No political donations were made in the year.
Share capital structure
At 31 December 2022, the Company’s issued
share capital was 77,990,057 ordinary shares
of one pence each. Further details of the
Company’s issued share capital are given
in Note 2 to the Consolidated Financial
Statements on page 123. The Company’s
ordinary shares rank pari passu in all
respects with each other, including for voting
purposes and for all dividends and each
share carries the right to one vote at general
meetings of the Company.
Significant shareholdings
At 28 February 2023, the Company was aware of the following shareholdings of 3% or more
of its issued share capital:
Name
Capital Group
Franklin Templeton
Octopus Investments
Liontrust Asset Management
T Rowe Price Global Investments
Perone Limited SCSP
Swedbank Robur
abrdn
Shares
6,583,780
5,120,715
3,953,686
3,093,992
3,080,992
2,489,700
2,455,900
2,445,566
%
8.43
6.56
5.06
3.96
3.95
3.19
3.14
3.13
Keywords Studios plc Annual Report and Accounts 2022 105
Disclosure of information
to auditor
As far as the Directors are aware, there
is no relevant audit information (that is,
information needed by the Group’s Auditor
in connection with preparing their report) of
which the Group’s Auditor is unaware, and
each Director has taken all reasonable steps
that they ought to have taken as a Director
in order to make themselves aware of any
relevant audit information and to establish
that the Group’s Auditor is aware of that
information.
Annual general meeting
It is intended that the 2023 AGM will be held
at 9.30 a.m. on 26 May 2023 at the offices
of DLA Piper UK LLP at 160 Aldersgate
Street, London EC1A 4HT, United Kingdom.
The Notice of AGM accompanies this Annual
Report and is available online at
www.keywordsstudios.com
By order of the Board
Jon Hauck
Chief Financial Officer
15 March 2023
Subsidiary undertakings
A list of the Group’s subsidiary undertakings
and non-UK branches is provided in the Note
28 of the financial statements on pages 152
to 155.
Significant events and
future developments
Important events and changes to the Group
since the financial year end are described
in Note 29 of the financial statements, the
Chief Executive Officer’s review on pages 10
to 15, the service line review on pages 34 to
39 and the Financial and operating overview
on page s 58 to 61. Future developments
are described in the Strategy section of the
Strategic report on pages 20 to 25.
Post balance sheet events
There have been no material events affecting
the Group since 31 December 2022.
Change of control
Information on agreements between
the Company and its Directors providing
for compensation for loss of office of
employment (including details of change
of control provisions in share schemes) is
set out on page 93. Otherwise, there are no
agreements between the Company and its
employees providing for compensation for
loss of office or employment that occurs
because of a takeover bid.
Non-financial information
Information providing an understanding
of our development, performance and
position on key non-financial matters are
incorporated within the Strategic report by
reference and can be read on page 69.
People and organisation
Keywords is, and always has been,
dependent on the quality and commitment
of its entire staff to provide and maintain
the high levels of services expected by the
Group’s customers.
Keywords’ average number of employees
was 11,141 during 2022. We are committed
to positively contributing to our company
culture and helping our Keywordians fulfil
their complete potential. This permanent
headcount is supplemented with staff on
short-term contracts as activity changes
throughout the year.
Employment policy
A key imperative of the Group is to attract,
develop and retain high calibre individuals.
Keywords has a range of employment
policies covering such issues as diversity,
equity, inclusion and belonging, well-
being and equal opportunities. The Group
continues to give full and fair consideration
to applications for employment made
by disabled persons, having regard to
their particular skills and experience.
Appropriate arrangements are made for the
continued employment and training, career
development and promotion of people living
with disabilities employed by the Group,
including making reasonable adjustments
where required.
Employee involvement
The Group provides employees with
information on matters of concern to
them so that their views can be taken into
account when making decisions that are
likely to affect their interests. A summary
of the methods we use to engage with our
employees are provided in the Responsible
business report on pages 40 to 55 and the
Section 172 statement on pages 56 and
57. The Company operates a number of
employee share plans to incentivise and
retain employees (see page 92). We continue
to review options to expand participation
in employee share schemes to improve
incentives and align them with the long-term
success of the Group.
Employee share plans
Details of employee share plans are set out in
Note 10 to the Financial Statements on
page 115.
Corporate responsibility
Keywords seeks to be a socially responsible
Group which has a positive impact on the
communities in which it operates. By the
nature of the business, we employ a diverse
workforce, with many nationalities working
closely together at our studio locations
globally. No discrimination is tolerated and
we endeavour to give all employees the
opportunity to develop their capabilities. We
provide an inclusive working environment
and appropriate training. Further details are
provided in the Responsible business report
on pages 42 to 47.
Website publication
The Directors are responsible for ensuring
the Annual Report and financial statements
are made available on a website. Financial
statements are published on the Group’s
website in accordance with legislation in the
United Kingdom governing the preparation
and dissemination of financial statements,
which may vary from legislation in other
jurisdictions. The maintenance and integrity
of the Group’s website is the responsibility
of the Directors. The Directors’ responsibility
also extends to the ongoing integrity of the
financial statements contained therein.
By order of the Board
Jon Hauck
Chief Financial Officer
15 March 2023
Governance
Statement of Directors’ responsibilities
106
Statement of Directors’ responsibilities
Disclosure of information
to the auditors
This confirmation is given and should be
interpreted in accordance with the provisions
of section 418 of the Companies Act 2006.
The Directors as at the date of this report,
whose names and functions are listed in the
Board of Directors section on pages 70 to 73,
confirm that:
• so far as the Director is aware, there is no
relevant audit information of which the
Company’s auditors are unaware; and
• the Director has taken all the steps
that he or she ought to have taken as a
Director in order to make himself/herself
aware of any relevant audit information
and to establish that the Company’s
auditors are aware of that information.
We confirm that to the best of our
knowledge:
• the financial statements, prepared in
accordance with the applicable set of
accounting standards, give a true and
fair view of the assets, liabilities, financial
position and profit or loss of the Company
and the undertakings included in the
consolidation taken as a whole;
• the Strategic report on pages 2 to 69
and the Directors’ report on pages
70 to 106 include a fair review of the
development and performance of the
business and the position of the Group
and the undertakings included in the
consolidation taken as a whole, together
with a description of the principal risks
and uncertainties that they face; and
• the Annual Report and financial
statements taken as a whole, are fair,
balanced and understandable, and
provide the information necessary
for shareholders to assess the
Group’s performance, business
model and strategy.
Financial statements and
accounting records
The Directors are responsible for preparing
the Annual Report and financial statements
in accordance with the applicable law
and regulations.
Company law requires the Directors to
prepare financial statements for each
financial year. Under that law the Directors
have prepared the Group and Company
financial statements in accordance with UK-
adopted international accounting standards
in conformity with the requirements of the
Companies Act 2006.
Under company law, the Directors must not
approve the Annual Report and financial
statements unless they are satisfied that
they give a true and fair view of the state of
affairs of the Company and the Group and
of the profit or loss of the Group for that
period. The Directors are also required to
prepare financial statements in accordance
with the rules of the London Stock Exchange
for companies trading securities on the
Alternative Investment Market.
In preparing these financial statements the
Directors are required to:
• select suitable accounting policies and
then apply them consistently;
• make judgements and estimates that
are reasonable and prudent;
• state whether international accounting
standards in conformity with the
requirements of the Companies Act
2006 have been followed, subject to
any material departures disclosed and
explained in the Group and Company
financial statements respectively; and
• prepare the financial statements on
a going concern basis, unless it is
inappropriate to presume that the
Company will continue in business.
The Directors are responsible for keeping
adequate accounting records that are
sufficient to show and explain the Company’s
transactions and disclose with reasonable
accuracy at any time the financial position of
the Company and the Group and to enable
them to ensure that the financial statements
and the Directors’ remuneration report
comply with the Companies Act 2006.
The Directors also responsible for
safeguarding the assets of the Company and
the Group and hence for taking reasonable
steps for the prevention and detection of
fraud and other irregularities.
Keywords Studios plc Annual Report and Accounts 2022 Financial statements
Independent Auditor’s Report
107
Independent Auditor’s Report
To the members of Keywords Studios plc
Opinion
We have audited the financial statements of Keywords Studios plc (the ‘parent company’) and its subsidiaries (the ‘group’) for the year
ended 31 December 2022 which comprise the Group and Parent Company Statements of Financial Position, the Group Statement of
Comprehensive Income, the Group and Parent Company Statements of Cash Flows, the Group and Parent Company Statements of
Changes in Equity, and the notes to the financial statements, including a summary of significant accounting policies.
The financial reporting framework that has been applied in the preparation of the financial statements is applicable law and United Kingdom
adopted international accounting standards, and as regards the Parent company financial statements, as applied in accordance with the
provisions of the Companies Act 2006.
In our opinion:
• the financial statements give a true and fair view of the state of the group’s and of the parent company’s affairs as at 31 December 2022
and of the group’s profit for the year then ended;
• the group financial statements have been properly prepared in accordance with UK adopted international accounting standards in
conformity with the requirements of the Companies Act 2006;
• the parent company financial statements have been properly prepared in accordance with UK adopted international accounting
standards in conformity with the requirements of the Companies Act 2006 and as applied in accordance with the provisions of the
Companies Act 2006; and
• the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities
under those standards are further described in the Auditor’s responsibilities for the audit of the financial statements section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Independence
We are independent of the Group and Parent Company in accordance with the ethical requirements that are relevant to our audit of the
financial statements in the UK, including the FRCs Ethical Standard as applied to listed entities, and we have fulfilled our other ethical
responsibilities in accordance with these requirements.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of accounting in the preparation of
the financial statements is appropriate.
Our evaluation of the Directors assessment of the group and parent company’s ability to continue to adopt the going concern basis of
accounting in the preparation of the financial statements included;
• We considered as part of our risk assessment the nature of the company, its business model and related risks, the requirements of the
applicable financial reporting framework and the system of internal control.
• We have reviewed the Directors’ assessment of the Group and Company’s ability to continue as a going concern, challenging the
underlying data and key assumptions used to make the assessment, and stress tested the directors’ plans for future actions in relation to
their going concern assessment.
• We have reviewed the historical accuracy of budgeting and forecasts made by the Group and Company as an indicator as to their
reliability.
• We have reviewed the performance of the business in the year, including its cash flow performance, liquidity position, and financing
facilities, up to and including the date of signing the audit opinion.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually
or collectively, may cast significant doubt on the group’s and parent company's ability to continue as a going concern for a period of at least
twelve months from when the financial statements are authorised for issue.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.
An overview of the scope of our audit
The Group has diverse international operations. Our audit was scoped by obtaining an understanding of the Group and its environment,
including the group wide controls, and assessing the risks of material misstatement identified at group level. We also assessed the risk
of management override of internal controls, including assessing whether there was evidence of bias by the Directors that may have
represented a risk of material misstatement.
Financial statements
108
Independent Auditor’s Report continued
To the members of Keywords Studios plc
Significant components
Based on our assessment, we have completed full scope audit procedures in relation to the following entities; Keywords Studios plc,
Keywords International Limited, Keywords Studios QC Games, Tantalus Media Pty Limited, High Voltage Software Inc, Heavy Iron Inc,
G-Net Media Inc and Climax Studios Limited.
Specified audit procedures
In addition, specific audit procedures have been completed in relation to certain material balances and transaction streams in VMC
Embedded Services, Keywords Canada Holdings Inc (formerly Volt Canada Inc), Keywords Studios QC-Tech Inc (formerly Alchemic Dream
Inc), D3T Limited, Electric Square Limited and Studio Gobo.
The above full scope and specified audit procedure entities represent 85% of group revenues.
Desktop review procedures have been performed on the remaining non-significant components in the group.
The Group auditor, BDO Dublin, has audited Keywords Studios plc, Keywords International Limited, Studio Gobo Limited, Electric Square
Limited, Climax Studios, Keywords Studios QC-Games Inc, Keywords Studios QC-Tech Inc, VMC Embedded Services, Keywords Canada
Holdings Inc, G-Net Media Inc, High Voltage Software Inc, Heavy Iron Inc and D3T Limited. Their involvement in the work performed by other
component auditors varies by location and involves, at a minimum, direction of the audit procedures to be completed, and review of the
reports received in relation to the results of the audit work undertaken by component audit teams. In the current year the Group Auditor
visited Montreal to assess the audit work completed for several North American entities.
Parent Company and consolidation
At the parent company level we have also tested the consolidation process and carried out additional procedures to confirm our conclusion
that there were no significant risks of material misstatement of the aggregated financial information of the remaining components not
subject to full scope or specific procedures.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements
of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) we identified,
including those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit; and directing the efforts
of the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming
our opinion thereon, and we do not provide a separate opinion on these matters.
1 Business Combinations
Key Audit Matter
The Group has entered into a significant number of acquisitions and business combinations throughout the year, which have had a material
and extensive impact on the group’s financial performance and position.
Following the purchase price allocations (in which identifiable assets and liabilities assumed were recognised at fair value), €397m (2021 :
€325m) of goodwill has been recognised cumulatively to date. The fair value of certain identifiable assets acquired and liabilities assumed
in a business combination is different from their carrying amounts in the acquired statements of financial position which can give rise to fair
value adjustments as part of the purchase price allocations of these business combinations. Accordingly, the cumulative acquisitions are
material and significant judgement is required in relation to the purchase price allocations including the resulting goodwill.
Management determined the fair value of the identifiable assets and liabilities and notably the value of the customer relationships and
Intellectual property. The valuation of these assets was primarily based upon the expected future cash flows related to these acquisitions.
A number of these acquisitions have also included deferred consideration in the form of shares and cash payments at future dates, which
add further complexity with regard to the acquisition-date fair value of such consideration as part of the consideration transferred in
exchange for the acquisitions and business combinations.
Related Disclosures
Refer to note 2 of the accompanying consolidated financial statements for the accounting policy in relation to business combinations. In
addition, detailed disclosures have been made in relation to the current year business combinations in note 27 to the financial statements.
Audit Response
We have reviewed the underlying contracts and share purchase agreements relating to each acquisition to assess whether the basis for
treatment of the acquisitions is in accordance with the accounting policy and International Financial Reporting Standard 3 – Business
Combinations.
We have assessed the carrying value of each material balance at the date of acquisition, and have reviewed management’s assessments
of the fair value of the assets and liabilities acquired, and in particular, the methodology applied in the valuation of intangible assets
and goodwill.
Keywords Studios plc Annual Report and Accounts 2022Page Title Financial statements
109
Our procedures included;
• We reviewed the methodology applied to identify the categories of intangible assets,
• We evaluated whether the cash flow forecasts used in the valuation are consistent with information approved by the Board and have
reviewed the historical accuracy of management’s forecasts in order to assess the reliance which can be placed upon management’s
forecasting,
• We have challenged the key assumptions such as the growth factors and discount rates by comparing them to relevant market rates and
historic acquisitions to evaluate whether management had been consistent in its approach to valuations, and
• We assessed the adequacy of the acquisition disclosures in the Group’s financial statements.
In addition, we have examined the terms of all business combinations to assess whether the fair value of any deferred/contingent
consideration is treated appropriately in accordance with the group accounting policy and IFRS 3.
We also examined the key post combination employment contracts of former shareholders of the acquired entities, reviewing the substance
of the transactions and considered whether they have been appropriately accounted for in line with the group accounting policy and the
requirements of IFRS 3.
2 Valuation of goodwill and intangible assets
Key Audit Matter
As a result of both the current year and prior year acquisitions, the group has amassed significant intangible assets and goodwill balances.
These balances are material to the financial statements, with goodwill carrying value of €397m (2021: €325m), and intangibles carrying
value of €73m (2021: €29m). The valuation of goodwill and other intangible assets is significant to our audit due to the fact that the
impairment test calculations are based on several key assumptions which are estimated by management, and are by nature judgemental.
Key assumptions include the expected future cash flows for the forecasting period, the discount rates and perpetual growth rate.
The Directors have concluded that there are eight cash generating units (“CGU’s”) in the group, for the purposes of impairment assessment.
Related Disclosures
Refer to note 2 of the accompanying consolidated financial statements for the accounting policy in relation to business combinations,
intangible assets and goodwill. In addition, detailed disclosures have been made in relation to the current year business combinations in note
27 to the financial statements. Detailed disclosures are made in note 11 relating to goodwill and intangible assets.
Audit Response
We have reviewed the Director’s assessment of the carrying value of goodwill and intangible assets. We have challenged the Directors
assumptions in relation to CGU identification, cash flow forecasting, discount rates applied, and future growth rates.
Our procedures included;
• We have evaluated that the CGU’s identified are the lowest level at which management monitors goodwill and intangible assets,
• We have reviewed the accuracy of the cash flow forecasts used, and ensured that these represent those which are reviewed by the Board,
• We have reviewed and assessed the accuracy of the historical forecasts prepared by the Group,
• We have assessed the key estimates and inputs into the discounted cash flow models, including the growth rates assumed, and tested
these where possible to supporting evidence such as post year end activities,
• We have completed sensitivity analyses in relation to the cash flow models and have stress tested all key assumptions used, and
• We have considered the appropriateness of the disclosures relating to the valuation of goodwill and intangible assets in the financial
statements.
3 Revenue Recognition – cut off
Key Audit Matter
We have assessed revenue recognition under all eight revenue streams individually including the cut off risk of revenue, trade receivables
and deferred revenue.
Although the majority of the Group’s revenue contracts are non complex in nature, there is a material accrued revenue balance as at
31 December 2022 of €13.2m (2021: €10m). We focused on this area due to the risk of management manipulation of the timing of revenue
recognition and the cut off relating to accrued revenue at the year end.
Related Disclosures
Refer to note 2 of the accompanying consolidated financial statements for the accounting policies of the Group in relation to Revenue
Recognition.
Page Title Financial statements
110
Independent Auditor’s Report continued
To the members of Keywords Studios plc
Audit Response
We have performed audit procedures to understand the application of the revenue recognition accounting policies and to assess whether
for each material revenue stream, that revenue has been recognised correctly in accordance with the Group Revenue Recognition policy.
We have completed a substantive based audit approach across all full scope locations and completed specific audit procedures on a sample
basis on less significant components of the group.
Our audit work included, but was not restricted to, reviewing a sample of transactions both throughout the year and around the year end,
to assess that the stage of completion and therefore accrued revenue is reflective of the underlying project status. We have tested these
transactions to supporting documentation such as sales orders and contracts from customers, project status evidence, and subsequent
billing. When examining samples of transactions around the year end we have assessed whether the revenue has been recognised in the
correct period.
Our application of materiality
We apply the concept of materiality both in planning and performing our audit, and in evaluating the effect of misstatements. We consider
materiality to be the magnitude by which misstatements, including omissions in the financial statements, could influence the economic
decisions of reasonable users that are taken on the basis of the financial statements.
Importantly, misstatements below these levels will not necessarily be evaluated as immaterial as we also take into account the nature of
identified misstatements, and in particular the circumstances of their occurrence, when evaluating their effect on the financial statements as
a whole.
We determined materiality for the financial statements as a whole to be €5.7m, which represents 5% of adjusted profit before tax, 8% of
profit before taxation, and represents approximately 1% of equity. We consider profit before income tax, and adjusted profit before tax, to be
the most significant determinant of the group’s financial performance used by shareholders and other users and therefore consider this as
an appropriate basis for materiality. Our materiality is higher than the level we set for the year ended 31 December 2021 (€4.4m), due to the
increased profits of the group.
We assessed the parent company’s materiality using a % of net assets as the most appropriate benchmark as the parent company is an
investment holding Company. However we capped this same level as the group materiality.
Whilst materiality for the financial statements as a whole was €5.7m, each component of the group was audited to a lower level of materiality
within a range from €3.9m to €3.4m. Audits of these components were performed at a materiality level calculated by reference to a
proportion of group materiality appropriate to the relative scale of the business concerned.
We agreed with the Audit Committee that we would report to the Committee all individual differences identified during the course of
our audit in excess of €285,000 (2021: €220,000). We also agreed to report differences below this threshold that, in our view, warranted
reporting on qualitative grounds.
Other information
The directors are responsible for the other information. The other information comprises the information included in the annual report, other
than the financial statements and our auditor’s report thereon. Our opinion on the financial statements does not cover the other information
and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether
the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears
to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine
whether there is a material misstatement in the financial statements or a material misstatement of the other information. If, based on the
work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of the audit:
• the information given in the strategic report and the directors’ report for the financial year for which the financial statements are
prepared is consistent with the financial statements; and
• the strategic report and the directors’ report have been prepared in accordance with applicable legal requirements.
Keywords Studios plc Annual Report and Accounts 2022Page Title Financial statements
111
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the group and the parent company and its environment obtained in the course of the
audit, we have not identified material misstatements in the strategic report or the directors’ report.
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in
our opinion:
• adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from
branches not visited by us; or
• the parent company financial statements are not in agreement with the accounting records and returns; or
• certain disclosures of directors’ remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit.
Responsibilities of directors
As explained more fully in the directors’ responsibilities statement set out on page 106 the directors are responsible for the preparation of
the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is
necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the group’s and the parent company’s ability to continue
as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the
directors either intend to liquidate the group or the parent company or to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement,
whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance,
but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in aggregate, they could reasonably be expected to
influence the economic decisions of users taken on the basis of these financial statements.
The objectives of our audit, in respect to fraud, are; to identify and assess the risks of material misstatement of the financial statements
due to fraud; to obtain sufficient appropriate audit evidence regarding the assessed risks of material misstatement due to fraud, through
designing and implementing appropriate responses; and to respond appropriately to fraud or suspected fraud identified during the audit.
However, the primary responsibility for the prevention and detection of fraud rests with both those charged with governance of the entity
and management.
Our approach was as follows:
• We obtained an understanding of the legal and regulatory frameworks that are applicable to the Group and Company. We determined
that the most significant which are directly relevant to specific assertions in the financial statements are those related to the reporting
framework (United Kingdom adopted International Accounting Standards and the Companies Act 2006).
• We understood how the Group and Company are complying with those legal and regulatory frameworks by making enquiries to
management and those responsible for legal and compliance procedures and the Company secretary. We corroborated our enquiries
through our review of board minutes.
• We assessed the susceptibility of the Group and Company’s financial statements to material misstatement, including how fraud might
occur by meeting with management from various parts of the business to understand where it is considered there was a susceptibility
of fraud. We considered the programs and controls that the Group and Company have established to address risks identified, or that
otherwise prevent, deter and detect fraud; and how senior management monitors those programs and controls. Where the risk was
considered to be higher, we performed audit procedures to address each identified fraud risk. These procedures included testing manual
journals and were designed to provide reasonable assurance that the financial statements were free of fraud or error.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s website at:
https://www.frc.org.uk/auditors/audit-assurance/auditor-s-responsibilities-for-the-audit-of-the-fi/description-of-the-auditor%E2%80%99s-
responsibilities-for. This description forms part of our auditor’s report.
Page Title Financial statements
112
Independent Auditor’s Report continued
To the members of Keywords Studios plc
Use of our report
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our
audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an
auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other
than the company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed.
Stephen McCallion (Senior Statutory Auditor)
For and on behalf of BDO, Statutory Auditor
Dublin 2, Ireland
15 March 2023
Keywords Studios plc Annual Report and Accounts 2022Page Title Financial statements
Consolidated statement
of comprehensive income
113
Consolidated statement of comprehensive income
Revenue from contracts with customers
Cost of sales
Gross profit
Other income
Share-based payments expense
Costs of acquisition and integration
Amortisation of intangible assets
Total of items excluded from adjusted profit measures
Other administration expenses
Administrative expenses
Operating profit
Financing income
Financing cost
Profit before taxation
Taxation
Profit after taxation
Note
4
5
5
23
5
11
6
6
7
Years ended 31 December
2022
€'000
690,718
(423,452)
267,266
1,098
(18,678)
(8,413)
(16,810)
(43,901)
(152,653)
(196,554)
71,810
1,986
(5,814)
67,982
(20,612)
47,370
2021
€'000
512,200
(312,086)
200,114
–
(16,394)
(7,972)
(13,688)
(38,054)
(111,695)
(149,749)
50,365
2,045
(4,427)
47,983
(13,875)
34,108
Other comprehensive income:
Items that will not be reclassified subsequently to profit or loss
Actuarial gain/(loss) on defined benefit plans
20
286
27
Items that may be reclassified subsequently to profit or loss
Exchange gain/(loss) in net investment in foreign operations
Exchange gain/(loss) on translation of foreign operations
Non-controlling interest; recycled on disposal of subsidiary
Total comprehensive income/(expense)
Profit/(loss) for the period attributable to:
Owners of the parent
Non-controlling interest
Total comprehensive income/(expense) attributable to:
Owners of the parent
Non-controlling interest
Earnings per share
Basic earnings per ordinary share
Diluted earnings per ordinary share
8
8
The notes from page 117 onwards form an integral part of these consolidated financial statements.
On behalf of the Board
Bertrand Bodson
Director
15 March 2023
Jon Hauck
Director
(7,947)
6,144
162
46,015
47,415
(45)
47,370
46,015
–
46,015
€ cent
61.54
58.86
8,228
14,581
–
56,944
34,175
(67)
34,108
57,011
(67)
56,944
€ cent
45.16
42.98
Financial statements
Consolidated statement
of financial position
114
Consolidated statement of financial position
Non-current assets
Intangible assets
Right of use assets
Property, plant and equipment
Deferred tax assets
Investments
Current assets
Cash and cash equivalents
Trade receivables
Other receivables
Corporation tax recoverable
Current liabilities
Trade payables
Other payables
Loans and borrowings
Corporation tax liabilities
Lease liabilities
Net current assets/(liabilities)
Non-current liabilities
Other payables
Employee defined benefit plans
Loans and borrowings
Deferred tax liabilities
Lease liabilities
Net assets
Equity
Share capital
Share capital – to be issued
Share premium
Merger reserve
Foreign exchange reserve
Shares held in Employee Benefit Trust ("EBT")
Share-based payments reserve
Retained earnings
Non-controlling interest
Total equity
Note
11
12
13
21
14
15
16
17
18
19
17
20
18
21
19
22
22
22
22
22
2022
€'000
469,953
37,672
44,784
22,757
175
575,341
81,886
81,563
61,415
6,503
231,367
15,878
139,355
45
22,028
12,414
189,720
41,647
18,308
2,861
6
8,617
30,105
59,897
557,091
924
2,467
47,021
286,655
11,018
–
65,379
143,627
557,091
–
557,091
2021
€'000
353,943
35,991
36,018
21,468
175
447,595
105,710
68,067
49,110
6,764
229,651
11,122
108,423
81
12,635
11,217
143,478
86,173
18,254
3,088
48
13,840
26,418
61,648
472,120
904
2,185
38,549
273,677
12,821
(1,997)
48,193
97,905
472,237
(117)
472,120
The notes from page 117 onwards form an integral part of these consolidated financial statements. The financial statements were approved
and authorised for issue by the Board on 15 March 2023.
On behalf of the Board
Bertrand Bodson
Director
15 March 2023
Jon Hauck
Director
Keywords Studios plc Annual Report and Accounts 2022
Financial statements
Consolidated statement
of changes in equity
115
Consolidated statement of changes in equity
Share
capital
– to be
issued
€'000
Share
capital
€'000
Share
premium
€'000
Merger
reserve
€'000
Foreign
exchange
reserve
€'000
Shares
held in
EBT
€'000
Share-
based
payments
reserve
€'000
Total
attributable
to owners
of parent
€'000
Non-
controlling
interest
€'000
Retained
earnings
€'000
Total
equity
€'000
At 01 January 2021
879
13,047
22,951
250,276
(9,988)
(1,997)
31,799
64,318
371,285
(50)
371,235
–
–
–
–
–
–
22,809
–
22,809
–
–
–
–
11
–
–
–
–
–
–
–
–
–
–
4,929
398
–
–
–
–
–
–
–
–
–
–
14
(10,862)
10,271
23,401
–
–
–
–
–
–
–
–
–
34,175
34,175
(67)
34,108
–
27
22,836
–
22,836
–
34,202
57,011
(67)
56,944
16,394
–
–
–
–
–
–
–
(615)
16,394
4,940
398
(615)
–
22,824
–
–
–
–
–
16,394
4,940
398
(615)
22,824
At 31 December 2021
904
2,185
38,549
273,677
12,821
(1,997)
48,193
97,905
472,237
(117)
472,120
25
(10,862)
15,598
23,401
–
–
16,394
(615)
43,941
–
43,941
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(1,803)
–
–
–
–
(1,803)
–
–
–
–
–
–
–
47,415
47,415
(45)
47,370
–
–
162
162
286
(1,517)
–
(1,517)
–
47,701
45,898
117
46,015
–
14
–
–
6
–
–
–
–
–
5,862
909
–
–
–
–
–
282
1,701
12,978
–
–
–
–
–
–
18,577
1,997
(1,492)
–
–
–
101
–
–
–
–
–
18,577
6,381
1,010
(1,979)
(1,979)
–
14,967
20
282
8,472
12,978
–
1,997
17,186
(1,979)
38,956
–
–
–
–
–
–
–
18,577
6,381
1,010
(1,979)
14,967
38,956
557,091
At 31 December 2022
924
2,467
47,021
286,655
11,018
–
65,379
143,627
557,091
Profit/(loss) for the period
Other comprehensive
income
Total comprehensive
income for the period
Contributions by
and contributions
to the owners:
Share-based
payments expense
Share options exercised
Employee Share
Purchase Plan
Dividends
Acquisition-related
issuance of shares
Contributions by and
contributions to the
owners
Profit/(loss) for the period
Recycled on disposal
of subsidiary
Other comprehensive
income
Total comprehensive
income for the period
Contributions by
and contributions
to the owners:
Share-based
payments expense
Share options exercised
Employee Share
Purchase Plan
Dividends
Acquisition-related
issuance of shares
Contributions by
and contributions
to the owners
Financial statements
Consolidated statement of cash flows
116
Consolidated statement of cash flows
Cash flows from operating activities
Profit after taxation
Income and expenses not affecting operating cash flows
Depreciation – property, plant and equipment
Depreciation and impairment – right of use assets
Amortisation and impairment of intangible assets
Taxation
Share-based payments expense
Fair value adjustments to contingent consideration
Unwinding of discounted liabilities – deferred consideration
Unwinding of discounted liabilities – lease liabilities
Interest receivable
Fair value adjustments to employee defined benefit plans
Interest expense
Unrealised foreign exchange (gain)/loss
Changes in operating assets and liabilities
Decrease/(increase) in trade receivables
Decrease/(increase) in MMTC and VGTR receivable
Decrease/(increase) in other receivables
(Decrease)/increase in accruals, trade and other payables
Taxation paid
Net cash generated by/(used in) operating activities
Cash flows from investing activities
Current year acquisition of subsidiaries net of cash acquired
Settlement of deferred liabilities on acquisitions
Acquisition of property, plant and equipment
Investment in intangible assets
Other investment
Interest received
Net cash generated by/(used in) investing activities
Cash flows from financing activities
Cash proceeds, where EBT shares were utilised for the exercise
of share options
Repayment of loans
Payments of principal on lease liabilities
Interest paid on principal of lease liabilities
Dividends paid
Shares issued for cash
Interest paid
Net cash generated by/(used in) financing activities
Increase/(decrease) in cash and cash equivalents
Exchange gain/(loss) on cash and cash equivalents
Cash and cash equivalents at beginning of the period
Cash and cash equivalents at end of the period
Note
13
12
11
7
23
5
6
6
6
20
6
27
17
13
11
14
22
18
6
22
Years ended 31 December
2022
€’000
47,370
18,365
14,585
16,810
20,612
18,678
2,282
2,922
969
(309)
514
1,261
766
97,455
(11,771)
(3,591)
(6,457)
18,785
(3,034)
(17,505)
124,286
(87,494)
(25,800)
(27,007)
(501)
–
309
2021
€’000
34,108
11,661
10,473
13,688
13,875
16,394
5,567
1,882
985
(62)
419
1,040
583
76,505
(15,117)
(4,502)
3,341
20,158
3,880
(23,948)
90,545
(48,697)
(14,393)
(19,360)
(315)
(175)
62
(140,493)
(82,878)
505
(79)
(11,361)
(969)
(1,979)
6,785
(828)
(7,926)
(24,133)
309
105,710
81,886
–
(80)
(9,953)
(985)
(615)
5,338
(1,753)
(8,048)
(381)
3,021
103,070
105,710
Keywords Studios plc Annual Report and Accounts 2022
Financial statements
Notes forming part of the
consolidated financial statements
117
Notes forming part of the consolidated financial statements
1 Basis of Preparation
Keywords Studios plc (the “Company”) is a company incorporated in the United Kingdom. The consolidated financial statements include the
financial statements of the Company and its subsidiaries (the “Group”) made up to 31 December 2022.
The consolidated financial statements have been prepared in accordance with UK-adopted international accounting standards, and in
conformity with the requirements of the Companies Act 2006.
Unless otherwise stated, the financial statements have been prepared in thousands (’000) and the financial statements are presented in euro
(€) which is the functional currency of the Company.
Going Concern Basis of Accounting
After making enquiries, the Directors consider it appropriate to continue to adopt the going concern basis in preparing the Consolidated and
Company financial statements. In doing so, the Directors have considered the following:
• The net cash position of the Group;
• The strong cash flow performance of the Group through the year;
• The continued demand for the Group’s services;
• The ability to operate most of its services in a work from home model where studios are temporarily closed;
• The historical resilience of the broader video games industry in times of economic downturn; and
• The ability of the Group to flex its cost base in response to a reduction in trading activity.
The Directors have also considered the Group’s strong liquidity position with net cash of €81.8m as at 31 December 2022, and committed
undrawn facilities of €150m under the Revolving Credit Facility (“RCF”).
The Directors have applied downside sensitivities to the Group’s cash flow projections to assess the Group’s resilience to adverse outcomes.
This assessment included a reasonable worst-case scenario in which the Group's principal risks manifest to a severe but plausible level.
Even under the most severe case, the Group would have sufficient liquidity and remain within its banking covenants. The Directors have a
reasonable expectation that the Company and the Group have adequate resources to continue to operate and meet liabilities as they fall due
for the foreseeable future, a period considered to be at least twelve months from the date of these financial statements and therefore the
going concern basis of preparation continues to be appropriate.
New Standards, Interpretations and Amendments effective 01 January 2022
A number of new amendments and interpretations to accounting standards are effective from 01 January 2022 including:
• Onerous Contracts – Cost of Fulfilling a Contract – amendments to IAS 37;
• Property, Plant and Equipment: Proceeds before Intended Use – amendments to IAS 16;
• Annual Improvements to IFRS Standards 2018-2020 – amendments to IFRS 1, IFRS 9, IFRS 16 and IAS 41; and
• References to Conceptual Framework – amendments to IFRS 3.
These amendments and interpretations have not resulted in any Group accounting policy changes, and have not had a material effect on the
Group’s financial statements.
Other accounting pronouncements which have become effective from 01 January 2022 have not had a material impact on the Group.
New Standards, Interpretations and Amendments not yet effective
There are a number of standards, amendments to standards, and interpretations which have been issued by the IASB that are effective in
future accounting periods that the Group has decided not to adopt early.
The following amendments effective for the period beginning 01 January 2023 are expected to be impactful on the Group moving forward:
• Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice Statement 2): These amendments relate to the application of
materiality in relation to the disclosure of accounting policies, requiring companies to disclose their material accounting policies rather
than their significant accounting policies, clarifying that accounting policies related to immaterial transactions, other events or conditions
are themselves immaterial and as such need not be disclosed; and clarifying that not all accounting policies that relate to material
transactions, other events or conditions are themselves material to a company’s financial statements. The Board will consider these
amendments in the context of the 2023 Annual Report.
• Deferred Tax related to Assets and Liabilities arising from a Single Transaction (Amendments to IAS 12): Amendments effective 01 January
2023, narrow the scope of the initial recognition exemption so that it does not apply to transactions that give rise to equal and offsetting
temporary differences e.g. Right of use assets and Lease liabilities. As a result in 2023, deferred tax assets and liabilities associated with
leases will need to be recognised gross from the beginning of the earliest comparative period presented, with any cumulative effect
recognised as an adjustment to retained earnings or other components of equity at that date. The estimated impact of adoption based on
the carrying value of Right of use assets and Lease liabilities at 31 December 2022 would result in additional Deferred tax assets of €9.6m
and Deferred tax liabilities of €8.4m being recognised.
Financial statements
118
1 Basis of Preparation continued
Other amendments effective for the period beginning 01 January 2023:
• Classification of Liabilities as Current or Non-current – Amendments to IAS 1;
• Definition of Accounting Estimate – Amendments to IAS 8.
The Group does not expect these other amendments, or any other standards issued by the IASB but not yet effective, to have a material
impact on the Group.
2 Significant Accounting Policies
Basis of Consolidation
Where the Company has control over an investee, it is classified as a subsidiary. The Company controls an investee if all three of the following
elements are present: power over the investee, exposure to variable returns from the investee, and the ability of the investor to use its power
to affect those variable returns. Control is reassessed whenever facts and circumstances indicate that there may be a change in any of these
elements of control.
De facto control exists in situations where the Company has the practical ability to direct the relevant activities of the investee without
holding the majority of the voting rights. In determining whether de facto control exists, the Company considers all relevant facts and
circumstances, including:
• The size of the Company’s voting rights relative to both the size and dispersion of other parties who hold voting rights;
• Substantive potential voting rights held by the Company and by other parties;
• Other contractual arrangements; and
• Historic patterns in voting attendance.
The consolidated financial statements present the results of the Company and its subsidiaries (“the Group”) as if they formed a single entity.
Intercompany transactions and balances between Group companies are eliminated in full.
Business Combinations
The consolidated financial statements incorporate the results of business combinations using the purchase method. The results of acquired
operations are included in the consolidated financial statements from the date on which control is obtained. They are consolidated until the
date on which control ceases. In the Consolidated statement of financial position, the acquired identifiable assets, liabilities and contingent
liabilities are initially recognised at their fair values at the acquisition date. If the initial accounting for a business combination is incomplete by
the end of the reporting period in which the combination occurs, the Group reports provisional amounts for the items for which the valuation
of the fair value of assets and liabilities acquired is still in progress. Those provisional amounts are adjusted when additional information is
obtained about facts and circumstances which would have affected the amounts recognised as of that date, and any adjustments to the
provisional values allocated to the consideration, identifiable assets or liabilities (and contingent liabilities, if relevant) are made within the
measurement period, a period of no more than one year from the acquisition date.
Any contingent consideration payable is recognised at fair value at the acquisition date and is split between current liabilities and long-term
liabilities depending on when it is due. The fair value of contingent consideration at acquisition date is arrived at through discounting the
expected payment (based on scenario modelling) to present value. In general, in order for contingent consideration to become payable,
pre-defined profit and/or revenue targets must be exceeded. At each balance sheet date, the fair value of the contingent consideration
is revalued, with the expected pay-out determined separately in respect of each individual acquisition and any change recognised in the
statement of comprehensive income.
For deferred consideration which is to be provided for by the issue of a fixed number of shares at a future defined date, where there is no
obligation on Keywords to offer a variable number of shares, the deferred consideration is classified as an equity arrangement and the value
of the shares is fixed at the date of the acquisition. Deferred consideration may also be in the form of cash consideration payable at a future
defined date. Such consideration is recognised at fair value at the acquisition date and is split between current liabilities and non-current
liabilities depending on when it is due.
Intangible Assets
The Group’s Intangible Assets comprise Goodwill, Customer Relationships and Other Intangible Assets.
Goodwill
Goodwill represents the excess of the cost of a business combination over the total acquisition date fair value of the identifiable assets,
liabilities and contingent liabilities acquired. The cost comprises the fair value of assets given, liabilities assumed and equity instruments
issued, plus the amount of any non-controlling interests in the acquiree plus, if the business combination is achieved in stages, the fair value
of the existing equity interest in the acquiree. Contingent consideration is included at fair value on the acquisition date and, in the case of
contingent consideration classified as a financial liability, re-measured subsequently through the profit and loss. Acquisition-related costs are
recognised immediately as an expense in the periods in which the costs are incurred and the services are received. Goodwill is capitalised as
an intangible asset with any impairment in carrying value being charged to the Consolidated statement of comprehensive income.
Notes forming part of the consolidated financial statements continuedKeywords Studios plc Annual Report and Accounts 2022Page Title Financial statements
119
Customer Relationships
Intangible assets, separately identified from goodwill acquired as part of a business combination (mainly Customer Relationships), are initially
stated at fair value. The fair value attributed is determined by discounting the expected future cash flows generated from the net margin of
the business from the main customers taken on at acquisition. The assets are amortised on a straight-line basis (to administration expenses)
over their useful economic lives (typically five years is deemed appropriate, however, this is re-examined for each acquisition).
Other Intangible Assets
Other intangible assets include Intellectual Property and Music Licences, both acquired and internally developed. Other intangible assets
are recognised as assets where it is probable that the use of the asset will generate future economic benefits and where the costs of the
asset can be determined reliably. Other intangible assets that are acquired by the Group are stated at cost less accumulated amortisation
(see below) and impairment losses, if any. Subsequent expenditures on capitalised intangible assets are capitalised only when they increase
the future economic benefits embodied in the specific assets to which they relate. All other expenditure is expensed as incurred. Other
intangible assets with definite useful lives are amortised from the date they are available for use on a straight-line basis over their useful
lives, being the estimated period over which the Group will use the assets. Residual amounts, useful lives and the amortisation methods are
reviewed at the end of every accounting period.
Development costs are capitalised as an intangible asset if all of the following criteria are met:
• The technical feasibility of completing the intangible asset so that it will be available for use or sale;
• The intention to complete the intangible asset and use or sell it;
• The ability to use or sell the intangible asset;
• The asset will generate probable future economic benefits and demonstrate the existence of a market or the usefulness of
the intangible asset if it is to be used internally;
• The availability of adequate technical, financial and other resources to complete the development and to use or sell it; and
• The ability to measure reliably the expenditure attributable to the intangible asset during its development.
Following initial recognition of the development expenditure as an intangible asset, the cost model is applied requiring the intangible asset to
be carried at cost, less any accumulated amortisation and accumulated impairment losses. The intangible asset is amortised on a straight-line
basis over the period of its expected benefit, starting from the date of full commercial use of the product. During the period of development,
the asset is tested for impairment annually. If specific events indicate that impairment of an item of intangible asset may have taken place,
the item’s recoverability is assessed by comparing its carrying amount with its recoverable amount. The recoverable amount is the higher of
the fair value net of disposal costs and the value in use.
Impairment
Impairment tests on goodwill and other intangible assets with indefinite useful economic lives are undertaken annually at the financial year
end. Other non-financial assets are subject to impairment tests whenever events or changes in circumstances indicate that their carrying
amount may not be recoverable. Where the carrying value of an asset exceeds its recoverable amount (i.e. the higher of value in use and fair
value less costs to sell), the asset is written down accordingly.
Where it is not possible to estimate the recoverable amount of an individual asset, the impairment test is carried out on the smallest group of
assets to which it belongs for which there are separately identifiable cash flows: its cash generating units (“CGUs”). Goodwill is allocated on
initial recognition to each of the Group’s CGUs that are expected to benefit from a business combination that gives rise to the goodwill.
Impairment charges are included in profit or loss, except to the extent they reverse gains previously recognised in other comprehensive
income. An impairment loss recognised for goodwill is not reversed.
Investments
Investments are held at cost where the Group does not have control and is not able to exercise significant influence over the investee.
Cash and Cash Equivalents
For the purpose of presentation in the Statements of financial position and in the Statements of cash flows, cash and cash equivalents
include cash on hand and on-call deposits with financial institutions.
Foreign Currency
The consolidated financial statements are presented in euro, which is the presentation currency of the Group and the functional currency of
the Parent Company.
Transactions entered into by Group entities in a currency other than the currency of the primary economic environment in which they
operate (their “functional currency”) are recorded at the rates ruling when the transactions occur. Foreign currency monetary assets and
liabilities are translated at the rates ruling at the reporting date. Exchange differences arising on the retranslation of unsettled monetary
assets and liabilities are recognised immediately in profit or loss.
Page Title Financial statements
120
2 Significant Accounting Policies continued
On consolidation, the results of overseas operations are translated into euro at rates approximating when the transactions took place. All
assets and liabilities of overseas operations, including goodwill arising on the acquisition of those operations, are translated at the rate
ruling at the reporting date. Exchange differences arising on translating the opening net assets at opening rate and the results of overseas
operations at actual rate are recognised in other comprehensive income and accumulated in the foreign exchange reserve.
Exchange differences recognised in profit or loss in Group entities’ separate financial statements on the translation of long-term items
forming part of the Group’s net investment in the overseas operation concerned are classified to other comprehensive income and
accumulated in the foreign exchange reserve on consolidation. On disposal of a foreign operation, the cumulative exchange differences
recognised in the foreign exchange reserve relating to that operation up to the date of disposal are transferred to the consolidated
statement of comprehensive income as part of the profit or loss on disposal.
Revenue from Contracts with Customers
Contracts are typically for services, performing agreed-upon tasks for a customer and can be time-and-materials or milestone-based. Most
contracts are short term in duration (generally less than one month); however, milestone-based contracts can be longer term and extend to
several months (or in some cases over a year). Where there are multiple performance obligations outlined in a contract, each performance
obligation is separately assessed, the transaction price is allocated to each obligation, and related revenues are recognised as services
or assets are transferred to the customer. Performance obligations are typically satisfied over time, as the majority of contracts meet the
criteria outlined in IFRS 15 paragraph 35 (a) and (c).
Due to the nature of the services provided and the competitive nature of the market, contracts generally allocate specific transaction prices
to separate performance obligations. Individual services or individual milestones generally involve extensive commercial negotiation to arrive
at the specific agreed-upon tasks, and the related pricing outlined in the contract. Such negotiations extend further for milestone-based
contracts to also include the criteria involved in the periodic and regular process of milestone acceptance by the customer. Such criteria may
involve qualitative, as well as quantitative, measures and judgements.
In measuring progress towards complete satisfaction of performance obligations, the input method is considered to be the most appropriate
method to depict the underlying nature of the contracts with customers, the interactive way the service is delivered and projects are
managed with the customer. For time-and-materials contracts, other than tracking and valuing time expended, significant judgement is not
normally involved. For milestone-based contracts, progress is generally measured based on the proportion of contract costs incurred at the
balance sheet date (e.g. worked days), relative to the total estimated costs of the contract, involving estimates of the cost to completion
etc. Added to this, significant judgement can be involved in measuring progress towards customer acceptance of the milestone. Significant
judgement may also be involved where circumstances arise that may change the original estimates of revenues, costs or extent of progress
towards complete satisfaction of the performance obligations. In such circumstances estimates are revised. These revisions may result in
increases or decreases in revenue or costs and are reflected in income in the period in which the circumstances that give rise to the revision
became known. When the outcome of a contract cannot be measured reliably, contract revenue is recognised only to the extent that
milestones have been accepted by the customer. Contract costs are recognised as incurred. When it is probable that total contract costs will
exceed total contract revenue, the expected loss is recognised immediately.
Revenue recognised represents the consideration received or receivable, net of sales taxes, rebates discounts and after eliminating
intercompany sales. Revenue is recognised only where it is probable that consideration will be received. Where consideration is received and
the related revenue has not been recognised, the consideration received is recognised as a contract liability (Deferred Revenue), until either
revenue is recognised or the consideration is refunded.
Revenue is derived from eight main service groupings:
• Art Creation – Art Creation services relate to the production of graphical art assets for inclusion in the video game, including concept art
creation along with 2D and 3D art asset production and animation. 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 measure progress (e.g. worked days relative to the total expected inputs). Time-and-materials based contract revenue
is recognised as the related services are rendered. For milestone-based contracts where progress can be measured reliably towards
complete satisfaction of the performance obligation, revenue is recognised using the input method to measure progress. Where progress
cannot be measured reliably, revenue is recognised on milestone acceptance.
• Marketing – Marketing services include game trailers, marketing art and materials, PR and full brand campaign strategies. 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 measure progress. Time-and-materials based contract
revenue is recognised as the related services are rendered. For milestone-based contracts where progress can be measured reliably
towards complete satisfaction of the performance obligation, revenue is recognised using the input method to measure progress. Where
progress cannot be measured reliably, revenue is recognised on milestone acceptance.
• Game Development – Game Development relates to software engineering services which are integrated with client processes to develop
video games. Contracts can be either time-and-materials based or milestone-based, with performance obligations satisfied over time.
Contracts are generally longer term in duration. Time-and-materials based contract revenue is recognised as the related services are
rendered. For milestone-based contracts where progress can be measured reliably towards complete satisfaction of the performance
obligation, revenue is recognised using the input method to measure progress. Where progress cannot be measured reliably, revenue is
recognised on milestone acceptance.
Notes forming part of the consolidated financial statements continuedKeywords Studios plc Annual Report and Accounts 2022Page Title Financial statements
121
• Audio – Audio services relate to the audio production process for computer games and includes script translation, actor selection
and talent management through pre-production, audio direction, recording, and post-production, including native language quality
assurance of the recordings. Audio contracts may also involve music licensing or selling music soundtracks. Audio service contracts are
typically milestone-based, with performance obligations satisfied over time. Audio services contracts are generally short term in duration;
however, for longer contracts where progress towards complete satisfaction of the performance obligation can be measured reliably,
revenue is recognised using the input method to measure progress. Where progress cannot be measured reliably, audio services revenue
is recognised on milestone acceptance. Music licensing and music soundtracks performance obligations are assessed separately, and
related revenue is recognised on licence inception and on delivery of the soundtracks, respectively.
• Functional Testing – Functional Testing relates to quality assurance services provided to game producers to ensure games function as
required. Contracts are typically time-and-materials based and performance obligations are satisfied over time. Contracts are generally
short term in duration. Revenue is recognised as the related services are rendered.
• Localization – Localization services relate to translation and cultural adaptation of in-game text and audio scripts across multiple game
platforms and genres. Contracts are typically time-and-materials based and performance obligations are satisfied over time. Contracts
are generally short term in duration; however, for longer contracts the input method is used to measure progress. Localization contracts
may also involve licensing translation software as a service. Such revenue is assessed separately. Revenue is recognised as the related
services are rendered.
• Localization Testing – Localization Testing involves testing the linguistic correctness and cultural acceptability of computer games.
Contracts are typically time-and-materials based and performance obligations are satisfied over time. Contracts are generally short term
in duration. Revenue is recognised as the related services are rendered.
• Player Support – Player Support relates to the live operations support services such as community management, player support and
associated services provided to producers of games to ensure that consumers have a positive user experience. Contracts are typically
time-and-materials based and performance obligations are satisfied over time. Contracts are generally long term in duration. Player
Support contracts may also involve digital support platform software as a service. Revenue is recognised as the related services are
rendered.
Multimedia Tax Credits/Video Game Tax Relief
The multimedia tax credits (“MMTC”) received in Canada and video games tax relief (“VGTR”) in the UK are tax credits related to staff costs.
Tax credits are recognised as income over the periods necessary to match the credit on a systematic basis with the costs that it is intended
to compensate. Thus, credits are taken as a deduction against direct costs each period, but typically paid in the following financial year
once the claims have been submitted and agreed. The nature of the grants is such that they are not dependent on taxable profits, and are
recognised (under IAS 20), at their fair value when there is a reasonable assurance that the grant will be received and all attaching conditions
have been complied with.
Share-based Payments
The Company issues equity-settled share-based payments to certain employees and Directors under a Share Option Scheme and a Long-Term
Incentive Plan (“LTIP”). Conditional awards under the rules of the LTIP Plan (“Salary Shares”) are also issued to certain employees and Directors.
The fair value determined at the grant date is expensed on a straight-line basis over the vesting period. Other than continuous service, grants
do not have non-market-based vesting conditions. At each reporting date the Company adjusts for unvested forfeitures and the impact is
recognised in profit or loss, with a corresponding adjustment to equity reserves. The Company has no legal or constructive obligation to
repurchase or settle the options in cash.
Additional employer costs, including social security taxes, in respect of options and awards are expensed over the vesting period with a
corresponding liability recognised. The liability recognised depends on the number of options that are expected to be exercised, and the
liability is adjusted by reference to the fair value of the options at the end of each reporting period.
Where share-based payments are issued to employees of subsidiary companies, the annual cost of the options are recharged to the
subsidiary company through an inter-company recharge.
Employee Share Purchase Plan
In 2021, the Group introduced an Employee Share Purchase Plan (“ESPP”). The ESPP allows individual employees the possibility to save up
to €500 monthly and acquire KWS shares discounted by 10% on the market price at the date of purchase. The plan has bi-annual purchase
periods, with share-based benefits expensed within the period.
Page Title Financial statements
122
2 Significant Accounting Policies continued
Share Option Plan
These are measured at fair value on the grant date using a Black-Scholes option pricing model which calculates the fair value of an option
by using the vesting period, the expected volatility of the share price, the current share price, the exercise price and the risk-free interest
rate. The fair value of the option is amortised over the vesting period, with one-third of the options vesting after two years, one-third after
three years, and the balance vesting after four years. The only vesting condition is continuous service. There is no requirement to revalue the
option at any subsequent date.
LTIP
The exercise of LTIP awards is subject to the Company's share price (stock symbol: KWS) performance versus the designated Share Index
in terms of shareholder return over a three-year period. For the awards granted up to 2015, one-third of the share options vested if the
Company exceeded the Total Shareholder Returns (“TSR”) of the Numis Small Cap Index (excluding Investment Trusts) by 10%, two-thirds if
the TSR exceeded the Index by 20% and full vesting if the TSR exceeded the Index by 30%. This was amended for the 2016 and 2017 awards
to 100% vesting if the shareholder return exceeds the Index by 45%, and a prorated return between 10% if the TSR matches the Index, to
100% if the TSR exceeds the Index by 45%. The scheme was further amended in 2018 to 100% vesting if the TSR exceeds the Index by 20%,
and a prorated return between 10% and 100% if the TSR exceeds the Index by between 0% and 20%. In 2019, the benchmark Index was
amended for future grants to be the FTSE Small Cap Index, with the same performance conditions as 2018. In 2021, the benchmark Index was
amended to be the FTSE250 Index (excluding investment trusts) and threshold vesting (25% of the award) will be earned for TSR in line with
the Index and full vesting will be earned for exceeding the Index TSR by 20% over the performance period. A prorated return will be earned
between 25% and 100% if the TSR exceeds the Index by between 0% and 20%.
These are measured at fair value, taking into account market vesting conditions but not non-market vesting conditions, at the date of grant,
measured by using the Monte Carlo binomial model.
Salary Shares
Salary shares are measured at fair value on the grant date. As the only vesting condition is continuous service, the fair value of the shares is
amortised over the vesting period.
Dividend Distribution
Final dividends are recorded in the Group’s financial statements in the period in which they are approved by the Group’s shareholders. Interim
dividends are recognised when paid.
Income Taxes and Deferred Taxation
Provision for income taxes is calculated in accordance with the tax legislations and applicable tax rates in force at the reporting date in the
countries in which the Group companies have been incorporated.
Deferred tax assets and liabilities are recognised where the carrying amount of an asset or liability in the consolidated statement of financial
position differs from its tax base, except for differences arising on:
• The initial recognition of an asset or liability in a transaction which is not a business combination and at the time of the transaction affects
neither accounting or taxable profit; and
•
Investments in subsidiaries and jointly controlled entities where the Group is able to control the timing of the reversal of the difference
and it is probable that the difference will not reverse in the foreseeable future.
The amount of the asset or liability is determined using tax rates that have been enacted or substantively enacted by the reporting date and
are expected to apply when the deferred tax liabilities/(assets) are settled/(recovered).
Deferred tax assets and liabilities are offset when the Group has a legally enforceable right to offset current tax assets and liabilities and the
deferred tax assets and liabilities relate to taxes levied by the same tax authority on either:
• The same taxable Group company; or
• Different Group entities which intend either to settle current tax assets and liabilities on a net basis, or to realise the assets and settle the
liabilities simultaneously, in each future period in which significant amounts of deferred tax assets or liabilities are expected to be settled
or recovered.
Notes forming part of the consolidated financial statements continuedKeywords Studios plc Annual Report and Accounts 2022Page Title Financial statements
123
Property, Plant and Equipment
Property, plant and equipment comprise computers, leasehold improvements, and office furniture and equipment, and are stated at cost
less accumulated depreciation. Carrying amounts are reviewed for impairment whenever events or changes in circumstances indicate that
their carrying amount may not be recoverable. Where the carrying amount of an asset is greater than its estimated recoverable amount, it is
written down immediately to its recoverable amount.
Property, plant and equipment acquired through business combinations are valued at fair value on the date of acquisition.
Depreciation is calculated to write off the cost of fixed assets on a straight-line basis over the expected useful lives of the assets concerned.
The principal annual rates used for this purpose are:
Computers and software
Office furniture and equipment
3–5 years
10 years
Leasehold improvements
over the length of the lease
Gains and losses on disposals are determined by comparing proceeds with carrying amount and are included in the Consolidated statement
of comprehensive income.
Financial Assets
The Group’s most significant financial assets comprise trade and other receivables and cash and cash equivalents in the Consolidated
statement of financial position, whereas the Company’s most significant financial assets comprise inter-group receivables.
Trade Receivables
Trade receivables, which principally represent amounts due from customers, are recognised at amortised cost as they meet the IFRS 9
classification test of being held to collect, and the cash flow characteristics represent solely payments of principal and interest. The Group’s
impairment methodology is in line with the requirements of IFRS 9. The simplified approach to providing for expected credit losses has been
applied to trade receivables, which requires the use of a lifetime expected loss provision.
Cash and Cash Equivalents
Cash and cash equivalents comprise cash in hand, deposits held on call with banks and other short-term highly liquid investments. Where
cash is on deposit with maturity dates greater than three months, it is disclosed as short-term investments.
Accrued Income from Contracts with Customers
Accrued income from contracts with customers, arising from Revenue from contracts with customers, is recognised in accordance with our
Revenue Recognition policy, as discussed separately in this note. The Group applies the simplified approach to assessing expected credit
losses in relation to such assets, as their maturities are less than twelve months. Based upon the recoverability of contract assets at year end,
no significant expected credit loss provision has been applied.
Share Capital
Financial instruments issued by the Group are treated as equity only to the extent that they do not meet the definition of a financial liability.
The Group’s ordinary shares are classified as equity instruments.
Financial Liabilities
Contingent consideration is initially recognised at fair value and subsequently re-measured through the profit and loss. Trade payables, bank
borrowings and other monetary liabilities are initially recognised at fair value and subsequently carried at amortised cost using the effective
interest rate method.
Leased Assets
A lease is defined as "a contract, or part of a contract, that conveys the right to use an asset (the underlying asset) for a period of time in
exchange for consideration".
At lease commencement date, the Group recognises a right of use asset and a lease liability on the balance sheet. The right of use asset
is measured at cost, which is made up of the initial measurement of the lease liability, any initial direct costs incurred by the Group, an
estimate of any costs to dismantle and remove the asset at the end of the lease, and any lease payments made in advance of the lease
commencement date (net of any incentives received).
The Group depreciates the right of use assets on a straight-line basis from the lease commencement date to the earlier of the end of the
useful life of the right of use asset or the end of the lease term. The Group also assesses the right of use asset for impairment when such
indicators exist. At the commencement date, the Group measures the lease liability at the present value of the lease payments unpaid at that
date, discounted using the interest rate implicit in the lease if that rate is readily available or at the Group’s incremental borrowing rate.
Page Title Financial statements
124
2 Significant Accounting Policies continued
Lease payments included in the measurement of the lease liability are made up of fixed payments (including in-substance fixed), variable
payments based on an index or rate, amounts expected to be payable under a residual value guarantee, and payments arising from purchase
and extension options reasonably certain to be exercised.
Subsequent to initial measurement, the liability will be reduced for payments made and increased for interest. It is remeasured to reflect
any reassessment or modification, or if there are changes to in-substance fixed payments. When the lease liability is remeasured, the
corresponding adjustment is reflected in the right of use asset, or profit and loss if the right of use asset is already reduced to zero.
The Group has elected to account for short-term leases and leases of low-value assets using the practical expedients. Instead of recognising
a right of use asset and lease liability, the payments in relation to these are recognised as an expense in profit or loss on a straight-line basis
over the lease term.
The Group has applied judgement to determine the lease term for contracts in which it is a lessee that include renewal options. The
assessment of whether the Group is reasonably certain to exercise such options impacts the lease term, which significantly affects the lease
liabilities and right of use assets recognised.
Employee Benefit Trust
Ordinary shares purchased by the Employee Benefit Trust on behalf of the parent company under the Terms of the Share Option Plan
are deducted from equity on the face of the Consolidated statement of financial position. No gain or loss is recognised in relation to the
purchase, sale, issue or cancellation of the parent company’s ordinary shares.
3 Critical Accounting Estimates and Judgements
The Group makes certain estimates and assumptions regarding the future. Estimates and judgements are continually evaluated based on
historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.
In the future, actual experience may differ from these estimates and assumptions.
Judgements
The judgements, apart from those involving estimations, that management have made in the process of applying the Group’s accounting
policies and that have the most significant effect on the amounts recognised in the financial statements, are outlined below.
• Group
– Functional Currency: The Directors have considered the requirements of IAS 21 in determining the currency that most faithfully
represents the economic effects of the underlying transactions, events and conditions to determine the 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 with financing the business
and the currency in which receipts from operating activities are usually retained. With a mix of currencies dominating the indicators,
there is no clear single currency that influences the Group; however, the euro remains marginally the most dominant when all factors
are considered. Therefore, the Directors consider the euro as the currency that most faithfully represents the economic effects of the
underlying transactions, events and conditions.
– Business Combinations (Customer relationships): When acquiring a business, the Group is required to identify and recognise
intangible assets, the determination of which requires a significant degree of judgement. Acquisitions may also result in intangible
benefits being brought into the Group, some of which qualify for recognition as intangible assets while other such benefits do not
meet the recognition requirements of IFRS and therefore form part of goodwill. Customer relationships are recognised as separate
assets where revenues are recurring in nature and material revenues have been generated with the customer for a continuous period
of three years. For the Game Development service line, the key asset acquired is typically “know-how”, an asset that is not readily
measurable and thus intrinsically linked to goodwill. Relationships are typically fixed term contract based rather than relationship
based. Therefore, neither customer contracts nor customer relationships are typically recognised on the acquisition of a Game
Development business.
– IFRS 16 Leases: The Group has determined that the Group’s incremental borrowing rate is the appropriate rate to use to discount
lease liabilities. The Group has applied judgement to determine the lease term for contracts in which it is a lessee that include
renewal options. The assessment of whether the Group is reasonably certain to exercise such options impacts the lease term, which
significantly affects the lease liabilities and right of use assets recognised.
Notes forming part of the consolidated financial statements continuedKeywords Studios plc Annual Report and Accounts 2022Page Title Financial statements
125
– Business Combinations (put and call options over Non-controlling interest): The Group acquired an 85% interest in Tantalus in March
2021, with the sellers retaining a minority shareholding. The shareholder agreement (signed with the purchase agreement) includes
put and call options (“the Forward”) that require the sellers to sell, or require the Group to buy, the remaining 15% shareholding in
three years using a pre-determined valuation methodology linked to post-acquisition performance. IFRS 3 does not provide specific
guidance on how such contracts should be accounted for in a business combination. The Board determined, taking into consideration
all the contracts’ terms and conditions, that the impact of the Forward put the Group in a similar position as if the Group had acquired
a 100% interest in the subsidiary on the acquisition date, with deferred contingent consideration payable at a future date. In doing
so, the Board considered whether the risks and rewards of ownership reside with the Non-controlling interest or had effectively
transferred to the Group, and concluded that the Non-controlling interest arising on the acquisition had been extinguished by a
combination of the Forward and other conditions in the agreements. Therefore, the Group has accounted for the acquisition as if a
100% interest was acquired on acquisition, accounting for the initial investment and the Forward as a single linked transaction in which
100% control is gained, with the Forward recognised at fair value, as a financial liability within Deferred and contingent consideration
(note 17), and no Non-controlling interest recognised on the acquisition. Any subsequent re-measurement required due to changes in
the fair value of the liability will be recognised in the Consolidated statement of comprehensive income.
– Operating Segments: While previously it was considered that the Group’s activity, as a single-source supplier of services to the
gaming industry, constituted one operating and reporting segment (as defined under IFRS 8 Operating Segments), following on recent
executive and organisational changes, the Board consider it more meaningful to present information by segment aligning to the new
organisational and reporting structures:
Create – Game Development and Art Creation;
Globalize – Functional Testing, Localization Testing, Audio and Localization; and
Engage – Marketing and Player Support.
The Operating segments are reported in note 4, in a manner consistent with the new internal organisational and management
structure, and the internal reporting information provided to the Chief Operating Decision Maker (“CODM”) who is responsible
for allocating resources and assessing performance of the operating segments. The CODM has been identified as the executive
management team made up of the Chief Executive Officer and the Chief Financial Officer. As a corollary, the Board also considered
how the change in segmental reporting impacted the Group’s cash generating units (“CGUs”). CGUs represent the lowest level at
which goodwill is monitored for internal management purposes and are not larger than the operating segments determined in
accordance with IFRS 8. While previously the Group was considered to have one CGU, the change in segmental reporting requires
the Group’s CGUs to be reconsidered. The Board determined that monitoring goodwill for impairment at the line of business level
(i.e. Art Creation, Game Development etc.) would be the most appropriate (see note 11).
– Goodwill: Goodwill is required to be tested for impairment at least annually or more frequently if changes in circumstances or the
occurrence of events indicating potential impairment exist. The Group uses the present value of future cash flows to determine
recoverable amounts. In calculating the value in use, significant judgement and estimation is required in forecasting cash flows of
CGUs, in determining terminal growth values and in selecting an appropriate discount rate.
Estimates and Assumptions
The Group makes certain estimates and assumptions regarding the future. Estimates and judgements are continually evaluated based on
historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.
In the future, actual experience may differ from these estimates and assumptions.
A number of areas requiring the use of estimates and critical judgements impact the Group’s earnings and financial position. These include
revenue recognition, the computation of income taxes, the value of goodwill and intangible assets arising on acquisitions, the valuation
of multimedia tax credits/video game tax relief, leasing and the valuation of defined retirement benefits. The Directors consider that no
reasonably possible changes to any of the assumptions used in the estimates would in the view of the Directors give rise to significant risk of
a material adjustment to the carrying value of the associated balances in the subsequent financial year.
Page Title Financial statements
126
4 Segmental Analysis and Revenue from Contracts with Customers
Segmental Analysis*
Revenue from external customers
Create
Globalize
Engage
Segment operating profit
Create
Globalize
Engage
Reconciliation of Segment operating profit
Adjusted EBITDA^
Share-based payments expense
Costs of acquisition and integration
Non-controlling interest
Other income
Amortisation of intangible assets
Depreciation – property plant and equipment
Depreciation and impairment – right of use assets
Bank charges
Operating profit
Financing income
Financing cost
Profit before taxation
2022
€'000
275,570
300,875
114,273
690,718
69,748
61,577
15,576
146,901
146,901
(18,678)
(8,413)
–
1,098
(16,810)
(18,365)
(14,585)
662
71,810
1,986
(5,814)
67,982
2021
€'000
188,178
231,901
92,121
512,200
49,730
47,383
12,987
110,100
110,100
(16,394)
(7,972)
(67)
–
(13,688)
(11,661)
(10,473)
520
50,365
2,045
(4,427)
47,983
*
^
The prior year comparatives have been re-classified to present information by segment, aligning to the new organisational and reporting structures (see note 3).
The Group reports a number of alternative performance measures (“APMs”), including Adjusted EBITDA, to present the financial performance of the business, that are
not GAAP measures as defined under IFRS. Segmental results are reported in a manner consistent with these measures. A reconciliation of Adjusted EBITDA to the
relevant GAAP measure is presented in the APMs section.
Operating segments are reported in a manner consistent with the internal organisational and management structure, and the internal
reporting information provided to the Chief Operating Decision Maker (“CODM”) who is responsible for allocating resources and assessing
performance of the operating segments. The CODM has been identified as the executive management team made up of the Chief Executive
Officer and the Chief Financial Officer.
Notes forming part of the consolidated financial statements continuedKeywords Studios plc Annual Report and Accounts 2022Page Title
Financial statements
Geographical analysis of non-current assets from continuing businesses*
United States
United Kingdom
Canada
Australia
Italy
Poland
Ireland
Switzerland
China
France
Other
127
2022
€'000
264,117
121,556
57,652
51,869
16,471
12,561
10,311
10,025
9,296
7,150
14,333
575,341
2021
€'000
171,126
114,871
31,096
45,528
15,612
3,275
8,422
10,025
8,296
7,548
31,796
447,595
*
The prior year comparatives have been re-classified to align to the current year presentation and ranking, as the Directors consider this measure to be more meaningful.
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 the
reporting period, or from performance obligations satisfied in the previous reporting period.
Geographical analysis of revenues, by production location*
Canada
United States
United Kingdom
Poland
Italy
China
Russia
India
Japan
Australia
Other
2022
€'000
155,509
120,722
115,017
42,731
39,195
26,759
26,281
25,290
22,716
22,211
94,287
690,718
2021
€'000
97,748
96,060
94,426
21,397
32,448
20,350
29,424
18,640
21,898
7,408
72,401
512,200
*
The prior year comparatives have been re-classified to align to the current year presentation and ranking by production location.
For many contracts, operations are completed across multiple sites. Analysis of revenues by geographical regions is presented by production
location, which may not reflect the jurisdiction from which the final invoice to the client is raised, or the region of the Group’s customers,
whose locations are worldwide.
No single customer accounted for more than 10% of the Group’s revenue in either year presented.
Page Title
Financial statements
128
4 Segmental Analysis and Revenue from Contracts with Customers continued
Revenue Expected to be Recognised
For Game Development, games are developed to an agreed specification and time schedule, and often have delivery schedules and/or
milestones that extend well into the future. The following are Game Development revenues expected to be recognised for contracts with a
schedule of work that extends beyond one year, representing the aggregate amount of the transaction price allocated to the performance
obligations that are unsatisfied (or partially unsatisfied) as at the end of the reporting period:
Revenue expected to be recognised
At 31 December 2022
At 31 December 2021
Total
undelivered
€'000
82,060
55,294
Scheduled
completion within
1 year
€'000
77,448
44,973
Scheduled
completion
1–2 years
€'000
4,612
9,319
Scheduled
completion
2–5 years
€'000
–
1,002
For all service lines excluding Game Development, contracts do not extend to more than one year, therefore information concerning
unsatisfied performance obligations are not disclosed, as allowed under the practical expedient exemption under IFRS 15. This practical
expedient is also availed of for Game Development contracts of less than one year in duration.
5 Cost of Sales and Operating Profit
Cost of sales
Operating expenses
Multimedia tax credits/video game tax relief
Other direct costs
Operating profit is stated after charging/(crediting):
Depreciation – property, plant and equipment
Depreciation and impairment – right of use assets
Amortisation of intangible assets
Costs of acquisition and integration
Auditor's remuneration
Short-term leases
Other income
Costs of acquisition and integration
Acquisition and integrations costs re: current year acquisitions (note 27)
Acquisition and integrations costs re: prior acquisitions
Fair value adjustments to contingent consideration (note 17)
Deferred consideration related to continuing employment
Acquisition team and related costs
Other reorganisation and restructuring costs
2022
€'000
430,475
(21,540)
14,517
423,452
2022
€'000
18,365
14,585
16,810
8,413
689
2,140
(1,098)
2022
€'000
1,177
631
2,282
3,266
671
386
8,413
2021
€'000
320,159
(20,966)
12,893
312,086
2021
€'000
11,661
10,473
13,688
7,972
605
1,531
–
2021
€'000
1,099
191
5,567
454
313
348
7,972
Notes forming part of the consolidated financial statements continuedKeywords Studios plc Annual Report and Accounts 2022Page Title
Financial statements
Auditor's remuneration
Audit services:
Parent company and Group audit
Subsidiary companies audit
Non-audit services:
Audit-related assurance services
Other income
Gain on disposal of investment
129
2021
€'000
314
278
13
605
2021
€'000
–
–
2022
€'000
318
358
13
689
2022
€'000
(1,098)
(1,098)
Other income represents the gain on disposal of the Group’s investment in AppSecTest in April 2022 (including related Non-controlling
interest re-cycled on disposal).
6 Financing Income and Cost
Financing income
Interest received
Foreign exchange gain
Financing cost
Bank charges
Interest expense
Unwinding of discounted liabilities – lease liabilities
Unwinding of discounted liabilities – deferred consideration
Net financing income/(cost)
2022
€'000
309
1,677
1,986
(662)
(1,261)
(969)
(2,922)
(5,814)
(3,828)
2021
€'000
62
1,983
2,045
(520)
(1,040)
(985)
(1,882)
(4,427)
(2,382)
Page Title
Financial statements
130
7 Taxation
Current income tax
Income tax on profits
Deferred tax (note 21)
The tax charge for the year can be reconciled to accounting profit as follows:
Profit before tax
Tax charge based on the Effective tax rate*
Income tax prior year (over)/under provision
Deferred tax prior year (over)/under provision and impact of change in tax rates
Items disallowed for tax purposes
Exempt and non-taxable income
Tax incentives
Current year tax losses utilised
Current year tax losses where deferred tax has not been provided
State and other direct taxes
Other differences – net
Total tax charge
* Effective tax rate – being the statutory tax rate relative to the profit before tax in each jurisdiction
2022
€'000
25,844
(5,232)
20,612
2022
€'000
67,982
12,156
(653)
(204)
7,468
(72)
(924)
(250)
346
932
1,813
20,612
17.9%
2021
€'000
17,632
(3,757)
13,875
2021
€'000
47,983
10,527
(261)
148
3,430
(174)
(951)
(363)
204
658
657
13,875
21.9%
The Group’s subsidiaries are located in different jurisdictions and are taxed on their residual profit in those jurisdictions. The effective tax rate
will vary year on year due to the effect of changes in tax rates and changes in the proportion of profits in each jurisdiction.
Tax effects relating to each component of other comprehensive income
Exchange gain/(loss) in net investment in foreign operations
Tax (expense)/benefit
Net of tax amount
Actuarial gain/(loss) on defined benefit plans
Tax (expense)/benefit
Net of tax amount
Exchange gain/(loss) on translation of foreign operations
Tax (expense)/benefit
Net of tax amount
2022
€'000
(7,947)
993
(6,954)
286
–
286
6,144
–
6,144
2021
€'000
8,228
(1,029)
7,199
27
–
27
14,581
–
14,581
Notes forming part of the consolidated financial statements continuedKeywords Studios plc Annual Report and Accounts 2022Page Title
Financial statements
8 Earnings per Share
Basic
Diluted
Earnings
Profit for the period from continuing operations
Weighted average number of equity shares
Basic (i)
Diluting impact of share options (ii)
Diluted (i)
(i) Includes (weighted average) shares to be issued:
2022
€ cent
61.54
58.86
€'000
47,370
Number
76,979,596
3,502,301
80,481,897
Number
67,802
(ii) Contingently issuable ordinary shares have been excluded where the conditions governing exercisability have not been satisfied:
LTIPs
Share options
Number
409,728
511,411
921,139
Details of the number of share options outstanding at the year-end are set out in note 23.
9 Dividends
Dividends paid
Interim
Dividends paid to shareholders 2021
Final
Interim
Dividends paid to shareholders 2022
In respect of
Approval date
2021
Sep-21
2021
2022
Mar-22
Sep-22
€ cent
per share
Pence STG
per share
Total dividend
€'000
0.81
0.81
1.70
0.90
2.60
0.70
0.70
1.45
0.77
2.22
615
615
1,305
674
1,979
Recommended
Final
In respect of
Approval date
2022
Mar-23
Expected
€ cent
per share
1.80
Pence STG
per share
Expected total
dividend
€'000
Expected
payment date
1.60
1,406
Jun-23
At 31 December 2022, Retained earnings available for distribution (being Retained earnings plus Share-based payments reserve) in the
Company were €77.6m (2021: €47.7m). In addition, certain amounts within Merger reserve are considered distributable (see note 22).
In light of COVID-19 the Directors did not recommend any dividend payments for 2020. Dividend payments were resumed in 2021, and the
Directors do not foresee any impediment in continuing to implement the dividend policy of the Group moving forward.
The Group does not recognise deferred tax on unremitted retained earnings, as, in general, retained earnings (as dividends) are only remitted
where there are minimal or no tax consequences.
131
2021
€ cent
45.16
42.98
€'000
34,108
Number
75,526,296
3,826,990
79,353,286
Number
219,146
Number
903,656
–
903,656
Payment
date
Oct-21
Jun-22
Oct-22
Page Title
Financial statements
132
10 Staff Costs
Total staff costs (including Directors)
Salaries and related costs
Social welfare costs
Pension costs
Share-based payments expense
Average number of employees
Operations
General and administration
Key management compensation
Salaries and related costs
Social welfare costs
Pension costs
Share-based payments expense
2022
€'000
345,857
27,788
7,222
18,678
399,545
2022
10,272
869
11,141
2022
€'000
2,258
431
54
1,142
3,885
2021
€'000
263,036
30,455
6,685
16,394
316,570
2021
8,821
672
9,493
2021
€'000
1,569
201
25
698
2,493
The key management compensation comprises compensation to ten Directors of Keywords Studios plc during the year (2021: eleven).
Notes forming part of the consolidated financial statements continuedKeywords Studios plc Annual Report and Accounts 2022Page Title
Financial statements
11
Intangible Assets
Cost
At 01 January 2021
Recognition on acquisition of subsidiaries
Additions
Exchange rate movement
At 31 December 2021
Recognition on acquisition of subsidiaries
Additions
Disposals
Exchange rate movement
At 31 December 2022
Accumulated amortisation
At 01 January 2021
Amortisation charge
Exchange rate movement
At 31 December 2021
Amortisation charge
Disposals
Exchange rate movement
At 31 December 2022
Net book value
At 01 January 2022
At 31 December 2022
133
Total
€'000
268,386
109,420
315
19,355
397,476
131,091
501
(159)
2,556
531,465
27,576
13,688
2,269
43,533
16,810
(147)
1,316
61,512
353,943
469,953
Goodwill
€'000
212,164
97,918
–
14,955
325,037
70,482
–
(159)
1,373
396,733
147
–
–
147
–
(147)
–
–
324,890
396,733
Customer
relationships
€'000
Intellectual property/
Development costs
€'000
52,423
11,502
–
4,400
68,325
34,695
–
–
1,317
104,337
25,178
13,261
2,269
40,708
16,285
–
1,308
58,301
27,617
46,036
3,799
–
315
–
4,114
25,914
501
–
(134)
30,395
2,251
427
–
2,678
525
–
8
3,211
1,436
27,184
Customer relationships and intellectual property/development costs are amortised on a straight-line basis over five years. Customer
relationships amortisation commences on acquisition, whereas intellectual property/development costs amortisation commences when
the product is launched.
Impairment tests for goodwill
The Group assesses the carrying value of goodwill each year on the basis of budget projections for the coming year extrapolated using
a one to five year growth rate and a terminal value calculated using a long-term growth rate projection. The (pre-tax) discount rate used of
10.0% (2021: 12.5%) is based on the Board’s assessment of the weighted average cost of capital (“WACC”) of the Group.
A cash-generating unit (“CGU”) is the smallest identifiable group of assets that generates cash inflows that are largely independent of the
cash inflows from other assets or group of assets. The CGUs represent the lowest level within the Group at which the associated goodwill
is assessed for internal management purposes and are not larger than the operating segments determined in accordance with IFRS 8
Operating Segments. As outlined in note 3, the Board have determined the lines of business as CGUs, and Goodwill acquired in business
combinations has been allocated to the CGUs that are expected to benefit from business combinations to date.
Page Title Financial statements
134
Intangible Assets continued
11
A summary of the allocation of the carrying value of goodwill by segment and by CGU is presented below:
Segment
Create:
CGU
Game Development
Art Creation
Globalize:
Functional Testing
Engage:
Localization Testing
Audio
Localization
Marketing
Player Support
2022
€m
218
19
15
14
33
19
35
44
397
2021
€m
177
19
14
13
32
17
42
11
325
The value in use calculations were consistently calculated year over year, with no significant changes in the assumptions made. The result of
the value in use calculations was that no impairment is required in this period.
Key assumptions
1 to 5 year growth rate assumption
Long-term growth rate assumption
Value in use (€m) – all CGUs
Carrying value – goodwill (€m)
Actual
Sensitivity analysis
2022
10%
2%
1,295
397
2021
10%
2%
792
325
2022
15%
2%
1,552
2021
15%
2%
947
2022
5%
2%
1,096
2021
5%
2%
673
Sensitivity analysis has been performed across all the CGUs to flex the growth rate by 5% and separately to flex the discount rate by 1%.
Under both scenarios there would have been no requirement for the Group to recognise any impairment charge in either period presented,
in any individual CGU. The Directors consider that no reasonably probable change in the assumptions would result in an impairment.
12 Right of Use Assets
The Group has entered into leases, across the business, principally relating to property. These property leases have varying terms and
renewal rights.
Cost
At 01 January
Additions
Recognition on acquisition of subsidiaries
De-recognition of expired leases
Exchange rate movement
At 31 December
Accumulated depreciation
At 01 January
Depreciation charge
De-recognition of expired leases
Impairment charge
Exchange rate movement
At 31 December
Net book value
At 01 January
At 31 December
2022
€'000
63,840
15,249
580
(14,186)
366
65,849
27,849
11,753
(14,186)
2,832
(71)
28,177
35,991
37,672
2021
€'000
44,092
15,392
1,402
–
2,954
63,840
16,285
10,473
–
–
1,091
27,849
27,807
35,991
Notes forming part of the consolidated financial statements continuedKeywords Studios plc Annual Report and Accounts 2022Page Title
Financial statements
13 Property, Plant and Equipment
Cost
At 01 January 2021
Exchange rate movement
Additions
Acquisitions through business combinations at fair value
Disposals
At 31 December 2021
Exchange rate movement
Additions
Acquisitions through business combinations at fair value
Disposals
At 31 December 2022
Accumulated depreciation
At 01 January 2021
Exchange rate movement
Depreciation charge
Disposals
At 31 December 2021
Exchange rate movement
Depreciation charge
Disposals
At 31 December 2022
Net book value
At 01 January 2022
At 31 December 2022
14 Investments
Investments
Computers
and software
€'000
Office furniture
and equipment
€'000
Leasehold
improvements
€'000
29,206
2,877
13,492
304
(2,830)
43,049
(94)
21,962
243
(1,132)
64,028
16,886
2,342
8,170
(2,830)
24,568
47
12,539
(1,133)
36,021
18,481
28,007
6,906
783
1,444
266
(185)
9,214
(109)
1,129
131
(490)
9,875
3,302
603
590
(185)
4,310
71
799
(490)
4,690
4,904
5,185
14,912
1,289
4,424
2
(5,699)
14,928
105
3,916
48
(828)
18,169
4,417
676
2,901
(5,699)
2,295
82
5,027
(827)
6,577
12,633
11,592
2022
€'000
175
135
Total
€'000
51,024
4,949
19,360
572
(8,714)
67,191
(98)
27,007
422
(2,450)
92,072
24,605
3,621
11,661
(8,714)
31,173
200
18,365
(2,450)
47,288
36,018
44,784
2021
€'000
175
From time to time, the Group (via Keywords Ventures Limited) has made modest investments in businesses developing innovative
technologies and services that will benefit its clients, while further accelerating the success of investee companies through access to its
global platform and relationships.
Page Title Financial statements
136
15 Trade Receivables
Trade receivables
Provision for bad debts (note 24)
Financial asset held at amortised cost
Trade receivables arise from revenues derived from contracts with customers.
16 Other Receivables
Current
Multimedia tax credits/video games tax relief
Accrued income from contracts with customers
Prepayments and rent deposits
Tax and social security
Other receivables
2022
€'000
85,012
(3,449)
81,563
2022
€'000
25,756
13,220
10,527
6,538
5,374
61,415
Accrued income from contracts with customers represent mainly contract assets in process and related items.
17 Other Payables
Current liabilities
Accrued expenses
Payroll taxes
Deferred and contingent consideration (i)
Other payables (ii)
Non-current liabilities
Deferred and contingent consideration (i)
2022
€'000
64,734
3,577
44,945
26,099
139,355
2022
€'000
18,308
18,308
2021
€'000
69,835
(1,768)
68,067
2021
€'000
22,860
9,997
7,114
4,936
4,203
49,110
2021
€'000
53,526
2,666
35,888
16,343
108,423
2021
€'000
18,254
18,254
Notes forming part of the consolidated financial statements continuedKeywords Studios plc Annual Report and Accounts 2022Page Title
Financial statements
(i) The movement in deferred and contingent consideration during the financial year was as follows:
Carrying amount at the beginning of the year
Consideration settled by cash
Consideration settled by shares
Unwinding of discount (note 6)
Additional liabilities from current year acquisitions (note 27)
Adjustment arising from prior year business combinations
Exchange rate movement
Carrying amount at the end of the year
137
2022
€'000
54,142
(25,800)
(8,040)
2,922
37,950
2,282
(203)
63,253
2021
€'000
20,802
(14,393)
(2,838)
1,882
40,059
5,567
3,063
54,142
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). A 10% increase in expected performance would increase the carrying value of contingent
consideration by €1.0m, while a 10% reduction in expected performance would decrease the carrying value by €4.0m. On an undiscounted
basis, the Group may be liable for deferred and contingent consideration ranging from €7.7m to a maximum of €66.6m.
(ii) Other payables includes deferred income from contracts with customers of €9,127k (2021: €3,470k), which mainly comprise items
invoiced prior to services being delivered. Excluding amounts recognised on acquisition of subsidiaries (€3,461k, see note 27), the movement
in the year comprises transfers in and out as items are deferred and subsequently recognised as revenue.
18 Loans and Borrowings
Maturity analysis of Loans and borrowings
Current
Expiry within 1 year
Non-current
Expiry between 1 and 2 years
Expiry over 2 years
Currency denomination
Canadian dollars
2022
€'000
2021
€'000
–
–
51
51
51
51
–
–
129
129
129
129
The Company has an unsecured revolving credit facility (“RCF”) in place with a syndicate of four lenders. The RCF is a committed facility that
allows financing of up to €150m, which may be drawn down in euro, sterling, US dollars or Canadian dollars, with an option (subject to lender
consent), to increase the facility by up to €50m to a total of €200m, at interest rates based on a margin over currency benchmark rates, plus
a separate margin charged for the unutilised facility. The RCF agreement extends to December 2024, with an option to extend the term by
two further one-year periods. The first extension (to 2025) was triggered during 2022.
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. While technically any borrowings are repaid and re-borrowed multiple times during the
term of the RCF, so long as the Group remains compliant with the financial covenants and certain other terms of the RCF, any debt is rolled
from one period to another, with the legal and commercial substance of a multi-year committed facility. Hence the Group presents any RCF
liabilities as non-current.
In connection with the financial covenants of the RCF, the Group is required to comply with and report certain interest cover and leverage
ratios. Non-compliance with RCF terms could result in lenders refusing to advance funds under the facility or, in the worst case, calling
in outstanding loans. Throughout the period, the Group operated well within the applicable ratio terms of both the new and previous
RCF agreements.
Page Title
Financial statements
138
18 Loans and Borrowings continued
The movements in Loans and borrowings are as follows:
At 01 January 2021
Cash flows:
Drawdowns
Repayments
Non-cash flows:
Exchange rate movement
At 31 December 2021
Cash flows:
Drawdowns
Repayments
Non-cash flows:
Recognition on acquisition of subsidiaries (note 27)
Exchange rate movement
At 31 December 2022
Current
€'000
Non-current
€'000
73
–
–
8
81
–
(37)
–
1
45
122
–
(80)
6
48
–
(42)
–
–
6
Total
€'000
195
–
(80)
14
129
–
(79)
–
1
51
There were no drawdowns on the RCF during 2022. Loans outstanding refer to amounts owed by Keywords Studios QC-Interactive Inc.
19 Lease Liabilities
The Group has entered into leases, across the business, principally relating to property. These property leases have varying terms and renewal
rights. Management applies judgement in determining whether it is reasonably certain that a renewal or termination option will be exercised.
The movement in lease liabilities during the financial year was as follows:
Carrying amount at the beginning of the year
Recognition on acquisition of subsidiaries (note 27)
Liabilities recognised on new leases in the period
Unwinding of discounted liabilities – lease liabilities
Payment of principal and interest on lease liabilities
Exchange rate movement
Carrying amount at the end of the year
2022
€'000
37,635
580
15,244
969
(12,330)
421
42,519
2021
€'000
28,864
1,402
15,392
985
(10,938)
1,930
37,635
The value of leases not yet commenced to which the lessee is committed, which are not included in lease liabilities at 31 December 2022,
was €nil (2021: €nil).
Maturity analysis of lease liabilities
Current
Not later than one year
Non-current
Later than one year and not later than five years
Later than five years
At 31 December
2022
€'000
Lease
payments
2022
€'000
Finance
charges
2022
€'000
2021
€'000
Lease
liabilities
Lease
payments
2021
€'000
Finance
charges
2021
€'000
Lease
liabilities
12,740
326
12,414
12,059
842
11,217
26,491
5,317
31,808
44,548
1,447
256
1,703
2,029
25,044
5,061
30,105
42,519
21,299
7,000
28,299
40,358
1,488
393
1,881
2,723
19,811
6,607
26,418
37,635
Notes forming part of the consolidated financial statements continuedKeywords Studios plc Annual Report and Accounts 2022Page Title Financial statements
139
The Group has elected not to recognise a lease liability for short-term leases (leases with an expected term of twelve months or less) or for
leases of low-value assets. Payments made under such leases are expensed on a straight-line basis. The expenses in the period relating to
payments not included in the measurement of the lease liability were as follows:
Lease payments not recognised as a liability
Short-term leases
Leases of low value assets
The future minimum lease payments related to these leases
Not later than one year
Later than one year and not later than five years
Later than five years
2022
€'000
2,140
–
2,140
1,282
–
–
1,282
2021
€'000
1,531
–
1,531
516
–
–
516
The effect of variable lease payments and reinstatement costs on future cash outflows arising from leases is not material for the Group.
20 Employee Defined Benefit Plans
In line with statutory requirements in France, Italy and India, we are required to maintain employee defined benefit termination payment
schemes.
In France, employees are entitled to a lump sum on retirement or early termination, based on salary and length of service (“Indemnité de Fin
de Carrière” or “IFC”), entitling the Group's French employees to benefits of up to two months’ salary per year of service.
In Italy, on leaving employment, each employee is entitled to 1/13.5 of their final salary for each year of service (“Trattamento di Fine
Rapporto” or ”TFR”).
In India, in compliance with statutory requirements, employees with over five years’ service are entitled to a termination benefit of 15/26 of
monthly salary for each year of service (“Gratuity” benefits).
The Group commissions an actuarial valuation of the related liabilities in each jurisdiction annually.
The liabilities at year end are recorded as long term. The actuarial gain or loss is recorded separately within Other comprehensive income.
The movements through the year are as follows:
Opening liabilities at 01 January
Service cost
Interest cost
Benefits paid
Actuarial (gain)/loss
Exchange rate movement
Closing liabilities at 31 December
2022
€'000
3,088
514
51
(155)
(286)
(351)
2,861
2021
€'000
2,693
419
33
(141)
(27)
111
3,088
The Directors have considered the key specific risk factors which the Group faces due to the employee defined benefit plans which are in
place. Having fully considered all specific elements of these plans, the Directors believe that the key issues faced are as follows:
• The plan is currently 100% unfunded, there are no specific assets to meet the future liabilities as they fall due; as such, there will be a cash
flow impact as the liabilities must be met with current working capital as they fall due.
The Group has taken no specific actions to mitigate these factors as due to the long-term nature of the plans it is expected that there will
be no sudden financial impact on the Group’s results caused by any of these factors. A maturity profile of the obligation is not presented as
the liability is not significant in the context of the Group, and due to the age profile of employees a significant outlay is not anticipated for the
foreseeable future.
Page Title
Financial statements
140
20 Employee Defined Benefit Plans continued
In 2023, the Group expects the costs of the employee defined benefit plan to be in line with current year levels, as staff levels are not
anticipated to change significantly in the period.
The actuarial valuation is based on the Projected Unit Credit Method, in line with IAS 19.
Cost for year
Service cost
Interest cost
Actuarial (gain)/loss
Actuarial (gain)/loss
Change due to experience
Change due to demographical assumptions
Change due to financial assumptions
2022
€'000
514
51
(286)
279
2022
€'000
80
(89)
(277)
(286)
2021
€'000
419
33
(27)
425
2021
€'000
41
(9)
(59)
(27)
Assumptions Underlying the Actuarial Valuations and Sensitivities of the Assumptions
For the actuarial valuations, the following demographic and economic and financial assumptions were applied:
• Mortality probabilities were derived from the population demographics, as recorded by the government statistics offices in each jurisdiction.
• Disability, retirement age and other relevant demographic assumptions were taken from relevant life assurance statistics.
• Certain inputs were estimated by management, including:
– Employee attrition rates, estimated based on company experience in each jurisdiction.
– In Italy, TFR rules allow for early drawdown of benefits in certain circumstances. Such advances were estimated on the basis of
company experience.
Economic and financial assumptions
Staff salary increase rate
Inflation rate
Discount rate
Key statistics
Staff (number)
Average age (years)
Average service (years)
Interest rate sensitivities
(0.25)%
0.25%
Mortality rate sensitivities
(0.025)%
0.025%
Staff turnover rate sensitivities
(0.50)%
0.50%
2022
4.87%
4.87%
3.62%
2022
945
32
4
2022
€'000
2,987
2,782
2022
€'000
2,876
2,875
2022
€'000
2,886
2,863
2021
4.07%
3.04%
1.67%
2021
874
31
4
2021
€'000
3,176
2,880
2021
€'000
3,018
3,015
2021
€'000
3,049
2,985
Notes forming part of the consolidated financial statements continuedKeywords Studios plc Annual Report and Accounts 2022Page Title
Financial statements
141
Staff salary increase rate sensitivities
(0.50)%
0.50%
2022
€'000
2,849
2,916
2021
€'000
2,976
3,072
21 Deferred Tax
Details of the deferred tax assets and liabilities, and amounts recognised in the Consolidated statement of comprehensive income are
as follows:
Defined benefit termination payments
Available losses
Rent-free period provisions
Fixed asset tax base versus accounting book value
Deferred tax related to tax credits
Deferred tax arising on items deductible on a paid basis
Recognition on acquisition of subsidiaries
Deferred tax arising on intangibles
Offset where legally enforceable right of set off exists
Net tax assets/liabilities
Impact of change in tax rates
Prior year (over)/under provision
Total (credited)/charged to income statement
Defined benefit termination payments
Available losses
Rent-free period provisions
Fixed asset tax base versus accounting book value
Deferred tax related to tax credits
Deferred tax arising on items deductible on a paid basis
Recognition on acquisition of subsidiaries
Deferred tax arising on intangibles
Offset where legally enforceable right of set off exists
Net tax assets/liabilities
Impact of change in tax rates
Prior year (over)/under provision
Total (credited)/charged to income statement
2022
€'000
Assets
308
2,830
258
1,092
( 2)
8,879
15,393
11,293
(17,294)
22,757
2021
€'000
Assets
328
1,817
222
1,818
–
5,557
2,539
9,187
–
21,468
2022
€'000
Liabilities
124
13
–
1,983
3,877
2,091
13,341
4,482
(17,294)
8,617
2021
€'000
Liabilities
–
–
–
1,702
3,570
1,761
3,006
3,801
–
13,840
2022
€'000
Net
184
2,817
258
(891)
(3,879)
6,788
2,052
6,811
–
14,140
2021
€'000
Net
328
1,817
222
116
(3,570)
3,796
(467)
5,386
–
7,628
2022
€'000
(Credited)/charged to
income statement
144
(1,000)
(36)
1,007
309
(2,992)
–
(1,892)
–
(4,460)
13
(785)
(5,232)
2021
€'000
(Credited)/charged to
income statement
(259)
(660)
(147)
(217)
1,464
(1,857)
–
(2,345)
–
(4,021)
189
75
(3,757)
The deferred tax asset not recognised on available losses at the period end is €3.8m (2021: €3.2m). Deferred tax assets and deferred tax
liabilities are offset where a legally enforceable right to offset the recognised amounts exists, the deferred tax assets and deferred tax
liabilities relate to taxes levied by the same taxation authority, and the Group anticipates they will be settled either at the same time, or on
a net basis.
Page Title
Financial statements
142
22 Shareholders’ Equity
Share Capital
Per share
€
Number of
ordinary
£0.01 shares
Issue date
Number of
ordinary
£0.01 shares
– to be
issued
Share capital
– to be
issued
€'000
Share capital
€’000
Share
premium
€’000
Merger
reserve
€’000
At 01 January 2021
74,079,243
532,985
879
13,047
22,951
250,276
Acquisition-related issuance of shares:
High Voltage Software
Heavy Iron
Tantalus
Tantalus
Climax Studios
Climax Studios
Ichi
Coconut Lizard
Kantan
Kantan related adjustment
AMC
Maverick Media
Coconut Lizard
G-Net Media
G-Net Media related adjustment
Waste
Indigo Pearl
High Voltage Software
12-Jan-21
12-Jan-21
18-Mar-21
15-Apr-21
21-Apr-21
17-May-21
28-May-21
25-Jun-21
02-Jul-21
02-Jul-21
11-Aug-21
27-Aug-21
07-Sep-21
06-Dec-21
06-Dec-21
16-Dec-21
22-Dec-21
24-Dec-21
26.06
307,597
(307,597)
31.84
27.87
27.87
33.53
33.53
15.94
18.24
15.86
15.86
33.49
25.35
28.44
23.26
23.26
30.78
26.27
29.77
–
–
12,914
368,750
368,750
(368,750)
–
232,517
232,517
(232,517)
14,635
19,739
12,614
–
–
36,211
7,962
(14,635)
(19,739)
(12,614)
(2,683)
25,080
(13,579)
–
130,410
(130,410)
–
–
20,125
69,130
(38)
20,585
(20,125)
–
Acquisition-related issuance of shares
1,219,690
(462,841)
13,982
962,860
–
–
4
–
–
4
–
3
–
–
–
–
–
–
–
2
–
–
–
1
14
–
11
(8,017)
411
10,275
(10,275)
7,797
(7,797)
(233)
(399)
(200)
–
840
(334)
–
(3,034)
(1)
634
(529)
–
(10,862)
–
–
–
–
–
10,271
–
–
–
–
–
–
–
–
–
–
–
–
–
–
10,271
398
4,929
8,013
–
–
–
–
7,794
233
399
200
–
–
918
227
3,032
–
–
528
2,057
23,401
–
–
Employee Share Purchase Plan
Exercise of share options
At 31 December 2021
Acquisition-related issuance of shares:
Waste
Heavy Iron
Heavy Iron related adjustment
Jinglebell
Tantalus Media
Forgotten Empires
Forgotten Empires
Mighty Games
Climax
AMC
Smoking Gun
Mighty Games
Smoking Gun
G-Net Media
Acquisition-related issuance of shares
Employee Share Purchase Plan
Exercise of share options
At 31 December 2022
76,275,775
70,144
904
2,185
38,549
273,677
24-Jan-22
03-Feb-22
03-Feb-22
11-Mar-22
04-Jul-22
28-Jul-22
28-Jul-22
03-Aug-22
08-Aug-22
31-Aug-22
05-Oct-22
25-Oct-22
25-Oct-22
25-Nov-22
30.78
31.84
31.84
25.94
31.03
28.41
27.44
28.74
28.71
33.49
25.78
28.74
25.78
33.56
20,585
(20,585)
12,914
(12,914)
53
11,564
28,473
–
–
–
135,559
–
(11,564)
–
60,857
26,881
28,443
–
25,081
(25,081)
–
107,025
28,443
(28,443)
107,025
(107,025)
114,038
483,735
33,372
1,197,175
–
17,594
–
–
77,990,057
87,738
–
–
–
–
–
–
–
–
2
–
–
–
2
2
6
–
14
924
(634)
(411)
–
(300)
–
1,729
738
817
–
(840)
2,759
(817)
(2,759)
–
282
–
–
–
–
–
–
884
–
–
–
–
–
–
817
–
–
1,701
909
5,862
633
411
–
300
–
–
–
–
3,889
840
–
–
2,758
4,147
12,978
–
–
2,467
47,021
286,655
Notes forming part of the consolidated financial statements continuedKeywords Studios plc Annual Report and Accounts 2022Page Title
Financial statements
143
Subject to applicable law, the Company’s articles of association and any relevant authority of the Company passed by the shareholders in
general meeting, there is no limit to the number of shares which the Company can issue, nor are there are any restrictions on dividends
or distributions on such shares. In the context of the Company’s general meeting authorities, at the Company’s AGM on 20 May 2022 its
shareholders gave the Directors the authority to allot the following number of shares (or grant rights to subscribe for, or convert any security
into, shares) in the capital of the Company:
a) Up to 3,818,215 shares in respect of the Company’s Long Term Incentive Plan and Share Option Plan (5% of the Company’s issued share
capital as at 4 April 2022); and
b) Otherwise, up to 25,454,768 shares (33.3% of the Company’s issued share capital as at 4 April 2022).
This authority is considered prudent as it gives the Company flexibility to take advantage of possible opportunities which may arise from time
to time. The authority granted at the 2022 AGM will expire on the earlier of (i) fifteen months after 20 May 2022; and (ii) the conclusion of the
2023 AGM.
Shares to be issued are valued at the share price at the date of acquisition, and are recorded in accordance with IAS 32.16.
Shares held in the Employee Benefit Trust (“EBT”)
Ordinary shares held in the EBT
2022
Shares
–
€'000
–
2021
Shares
335,425
€'000
1,997
During the period all of the shares held in the EBT were utilised for the exercise of share options.
Reserves
The following describes the nature and purpose of each reserve within owners’ equity:
Reserve
Retained earnings
Description and purpose
Cumulative net gains and losses recognised in the Consolidated Statement of Comprehensive
Income.
Foreign exchange reserve
Gains or losses arising on retranslation of the net assets of the overseas operations into euro.
Share premium
The share premium account is the amount received for shares issued in excess of their nominal
value, net of share issuance costs.
Share-based payments reserve
The Share-based payments reserve is the credit arising on share-based payment charges in relation
to the Company’s share and share option schemes.
Shares to be issued
Merger reserve
For deferred consideration which is to be provided for by the issue of a fixed number of shares at a
future defined date, where there is no obligation on Keywords to offer a variable number of shares,
the deferred consideration is classified as an Equity Arrangement and the value of the shares is fixed
at the date of the acquisition.
The merger reserve was initially created following the Group reconstruction, when Keywords Studios
plc acquired the Keywords International Limited group of companies.
When the Group uses Keywords Studios plc shares as consideration for the acquisition of an entity
and has secured at least a 90% equity holding in the acquisition, the value of the shares in excess of
the nominal value (net of share issuance costs) is also recorded within this reserve, in line with S612 of
the Companies Act 2006.
Within Merger reserve are balances related to the share premium on the share placements in 2015
and 2020, of €14.4m and €109.5m respectively, both completed via a cash box structure, with
the Company acquiring the net proceeds via a share-for-share exchange. In both cases, the share
premium on the issuance of new shares was credited to Merger reserve (in accordance with S610
of the Companies Act 2006). At the time of the placements, the proceeds were not allocated to a
specific acquisition or specific purpose, and thus, amounts totalling €123.9m included in the Merger
reserve are considered distributable.
Page Title
Financial statements
144
23 Share Incentive Schemes
In July 2013, at the time of the IPO, a Share Option Scheme and a Long-Term Incentive Plan (“LTIP”) was put in place, while in 2021, the Group
introduced an Employee Share Purchase Plan. The charge in relation to these arrangements is as follows:
Share option scheme expense
LTIP option scheme expense
Employee Share Purchase Plan
Share-based payments expense
2022
€'000
2,689
15,888
101
18,678
2021
€'000
3,446
12,904
44
16,394
Of the total Share-based payments expense, €1,142k relates to Directors of the Company (2021: €698k).
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 the options in cash.
Movements in the number of share options outstanding and their related weighted average exercise prices are as follows:
Outstanding at the beginning of the period
Granted
Lapsed
Exercised
Outstanding at the end of the period
Exercisable at the end of the period
Weighted average share price at date of exercise
2022
2021
Average exercise
price in £ per share
Number of options
Average exercise
price in £ per share
Number of options
15.65
–
19.17
7.88
18.78
15.19
23.57
2,423,568
–
(133,323)
(704,426)
1,585,819
481,319
12.66
25.48
18.96
11.46
15.68
6.74
27.42
2,345,238
616,000
(163,791)
(373,879)
2,423,568
668,734
Summary by year
Year of Option
Exercise price
Outstanding at the
beginning of the period
Granted
Lapsed
Exercised
Outstanding at the
end of the period
Exercisable at
31 December 2022
Exercisable 2023
Exercisable 2024
Exercisable 2025
Exercisable 2026
2015
£1.58
2016
£2.54
2017
£7.76
2018
£17.10
£15.88
£15.93
£25.48
2019
2020
2021
2022
Total
385,295
20,577
57,000
244,924
452,750
698,022
565,000
–
(4,442)
–
–
–
–
–
–
–
–
(8,000)
(11,270)
(56,022)
(53,589)
(380,853)
(6,238)
(15,450)
(85,405)
(120,830)
(95,650)
–
–
–
–
–
–
–
14,339
41,550
151,519
320,650
546,350
511,411
14,339
41,550
151,519
153,150
120,350
411
–
–
–
–
–
–
–
–
–
–
–
–
167,500
213,000
170,333
–
–
–
213,000
170,333
–
–
170,334
–
–
–
–
–
–
–
–
–
–
–
–
2,423,568
–
(133,323)
(704,426)
1,585,819
481,319
550,833
383,333
170,334
–
Notes forming part of the consolidated financial statements continuedKeywords Studios plc Annual Report and Accounts 2022Page Title
Financial statements
145
The inputs into the Black-Scholes model, used to value the options, are as follows:
Year of Option
2015
2016
2017
2018
2019
2020
2021
2022
Weighted
average
Weighted average
share price (£)
Weighted average
exercise price (£)
Fair value at
measurement date (€)
£1.64
£2.54
£7.75
£17.22
£16.09
£16.00
£26.42
£1.58
£2.54
£7.76
£17.10
£15.88
£15.93
£25.48
€0.56
€0.40
€1.13
€3.79
€5.72
€6.06
€9.32
Average expected life
4 Years
4 Years
4 Years
4 Years
4 Years
4 Years
4 Years
Expected volatility
Risk-free rates
Average expected
dividend yield
Weighted average
remaining life of
options in months
28.03%
0.90%
27.17%
0.58%
24.79%
35.87%
45.23%
0.16%
0.89%
0.81%
50.15%
0.07%
47.70%
0.15%
0.75%
0.55%
0.21%
0.10%
0.10%
0.10%
0.10%
–
–
–
–
5
17
29
–
–
–
–
–
–
–
–
16
Expected volatility was determined by reference to KWS volatility. The expected life used in the model has been adjusted based on
management’s best estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations.
Long-term Incentive Plan Scheme
LTIP share awards are subject to KWS performance versus the designated share index over a three-year period.
Movements in the number of share options outstanding and their related weighted average exercise prices are as follows:
Outstanding at the beginning of the period
Granted
Lapsed
Exercised
Outstanding at the end of the period
Exercisable at the end of the period
Weighted average share price at date of exercise
2022
2021
Average exercise
price in £ per share
Number of options
Average exercise
price in £ per share
Number of options
0.01
0.01
0.01
0.01
0.01
0.01
24.73
3,704,898
901,690
(130,241)
(828,174)
3,648,173
741,212
0.01
0.01
0.01
0.01
0.01
0.01
27.62
3,692,817
932,656
(312,006)
(608,569)
3,704,898
559,506
Summary by year
Year of Option
Exercise price
Outstanding at the
beginning of the period
Granted
Lapsed
Exercised
Outstanding at the
end of the period
Exercisable at
31 December 2022
Exercisable 2023
Exercisable 2024
Exercisable 2025
2015
£0.01
2016
£0.01
2017
£0.01
2018
£0.01
2019
£0.01
2020
£0.01
2021
£0.01
2022
£0.01
Total
39,000
85,888
105,036
329,582
1,018,536
1,223,200
903,656
–
3,704,898
–
–
–
–
–
–
–
–
–
–
–
901,690
901,690
(8,656)
(52,410)
(58,349)
(10,826)
(130,241)
(39,000)
(64,200)
(60,293)
(143,582)
(521,099)
–
–
–
(828,174)
–
–
–
–
–
21,688
44,743
186,000
488,781
1,170,790
845,307
890,864
3,648,173
21,688
44,743
186,000
488,781
–
–
–
–
–
–
–
–
–
–
–
–
–
1,170,790
–
–
–
–
845,307
–
–
–
741,212
1,170,790
845,307
–
890,864
890,864
Page Title
Financial statements
146
23 Share Incentive Schemes continued
The inputs into the Monte Carlo binomial model, used to value the options, are as follows:
Year of Option
2015
2016
2017
2018
2019
2020
2021
2022
Weighted
average
Weighted average
share price (£)
Weighted average
exercise price (£)
Fair value at
measurement date (€)
£1.60
£2.56
£7.75
£17.24
£16.05
£16.00
£26.42
£22.31
£0.01
£0.01
£0.01
£0.01
£0.01
£0.01
£0.01
£0.01
€1.38
€1.74
€4.96
€11.83
€13.98
€13.28
€16.73
€15.70
Average expected life
3 Years
3 Years
3 Years
3 Years
3 Years
3 Years
3 Years
3 Years
Expected volatility
Risk-free rates
Weighted average
remaining life of
options in months
28.21%
0.88%
27.11%
0.54%
24.79%
35.87%
45.26%
0.16%
0.89%
0.81%
50.15%
0.07%
47.70%
41.22%
0.13%
1.59%
–
–
–
–
–
5
17
29
13
Expected volatility was determined by reference to KWS share price volatility. The expected life used in the model has been adjusted based
on management’s best estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations. As any dividends
earned are to be reinvested into the business, the impact of dividends has been ignored in the calculation of the LTIP share option charge.
LTIPs vest on the third anniversary of the grant, if the market performance criteria are met. LTIPs must be exercised before the seventh
anniversary of the grant.
Salary Shares
Conditional awards under the rules of the LTIP Plan (“Salary Shares”), are issued to certain employees and Directors, where the only vesting
condition is continuous service.
Movements in the number of share options outstanding and their related weighted average exercise prices are as follows:
2022
2021
Average exercise
price in £ per share
Number of options
Average exercise
price in £ per share
Number of options
Outstanding at the beginning of the period
Granted
Lapsed
Vested
Outstanding at the end of the period
Summary by year
Year of Option
Exercise price
Outstanding at the beginning of the period
Granted
Lapsed
Vested
Outstanding at the end of the period
Vesting 2023
Vesting 2024
Vesting 2025
0.01
0.01
0.01
0.01
0.01
26,738
237,676
(953)
(3,838)
259,623
2021
£0.01
26,738
–
(953)
(1,638)
24,147
–
24,147
–
–
0.01
–
–
0.01
2022
£0.01
–
237,676
–
(2,200)
235,476
5,928
225,740
3,808
–
26,738
–
–
26,738
Total
26,738
237,676
(953)
(3,838)
259,623
5,928
249,887
3,808
Notes forming part of the consolidated financial statements continuedKeywords Studios plc Annual Report and Accounts 2022Page Title
Financial statements
147
Details of the awards by year are as follows:
Year of Option
Weighted average share price (£)
Weighted average exercise price (£)
Fair value at measurement date (€)
Average expected life
Weighted average remaining life of options in months
24 Financial Instruments and Risk Management
Interest Rate Risk
2021
£27.40
£0.01
€32.08
3 Years
20
2022
Weighted average
£22.41
£0.01
€26.47
2 Years
17
17
Interest rate risk is the risk that the value of financial instruments will fluctuate due to changes in market interest rates. The Group’s income
and operating cash flows are substantially independent of changes in market interest rates. Management monitor 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.
As there were no drawdowns on the RCF in either period presented, any strengthening or weakening of interest rates would not have been
impactful on the pre-tax profit/(loss) reported for the year.
Credit Risk
The Group’s main financial assets are cash and cash equivalents, as well as trade and other receivables which represent the Group’s
maximum exposure to credit risk in connection with its financial assets.
Credit risk arises when a failure by counterparties to discharge their obligations could reduce the amount of future cash inflows from
financial assets on hand at the reporting date. Customer credit risk is managed at appropriate Group locations according to established
policies, procedures and controls. Customer credit quality is assessed and credit limits are established where appropriate. Outstanding
customer balances are regularly monitored and a review for indicators of impairment (evidence of financial difficulty of the customer,
payment default, breach of contract, etc.) is carried out at each reporting date. Significant balances are reviewed individually while smaller
balances are grouped and assessed collectively. Receivables balances are unsecured and non-interest-bearing.
Credit risk arises on trade receivables and accrued income from contracts with customers (reported within other receivables). Trade and
other receivables are carried on the Consolidated statement of financial position net of provisions.
Trade Receivables
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 73.0% of the total trade receivables balance at the balance sheet date (2021: 77.5%).
The ageing of trade receivables can be analysed as follows:
At 31 December 2022
At 31 December 2021
Total
€'000
81,563
68,067
Not past due
€'000
59,532
52,753
A provision for doubtful debtors is included within trade receivables and can be reconciled as follows:
Provision at the beginning of the year
Impairment of financial assets (trade receivables) charged to administration expenses
Foreign exchange movement in the year
Utilised
Provision at the end of the year
1–2 months
past due
€'000
16,803
14,192
2022
€'000
1,768
1,733
79
(131)
3,449
More than
2 months past due
€'000
5,228
1,122
2021
€'000
1,982
821
63
(1,098)
1,768
Page Title
Financial statements
148
24 Financial Instruments and Risk Management continued
Trade receivables loss allowance is estimated using a practical expedient to arrive at lifetime expected credit losses. Overdue receivables are
evaluated to calculate an expected credit loss using a historical credit loss experience of 1.0% (2021: 1.0%). Taking into account internal and
external information, the historical credit loss experience may be adjusted where it is determined that there has been a significant increase in
credit risk. Where a receivable is credit impaired, the impairment is recognised immediately.
Trade receivables gross
Credit impaired
Expected credit losses
At 31 December 2022
Trade receivables gross
Credit impaired
Expected credit losses
At 31 December 2021
Total
€'000
85,012
(2,598)
(851)
81,563
Total
€'000
69,835
(1,070)
(698)
68,067
Not past due
€'000
60,134
–
(602)
59,532
Not past due
€'000
53,286
–
(533)
52,753
1–2 months
past due
€’000
More than
2 months past due
€'000
17,175
(200)
(172)
16,803
7,703
(2,398)
(77)
5,228
1–2 months
past due
€'000
More than
2 months past due
€'000
14,502
(165)
(145)
14,192
2,047
(905)
(20)
1,122
Accrued income from contracts with customers
Accrued income from contracts with customers balances comprise a large number of projects in process spread across the Group’s
activities and geographies, with balances classified as aged “0-30 days” representing 76.6% of the balance at the balance sheet date
(2021: 74.1%).
The ageing of accrued income from contracts with customers can be analysed as follows:
At 31 December 2022
At 31 December 2021
Total
€'000
13,220
9,997
0–30 days
€'000
10,124
7,412
31–60 days
€'000
3,096
2,162
60+ days
€'000
–
423
Accrued income from contracts with customers loss allowance is estimated using a practical expedient to arrive at lifetime expected credit
losses using a historical credit loss experience of 1.0% (2021: 1.0%). Taking into account internal and external information, the historical credit
loss experience may be adjusted where it is determined that there has been a significant increase in credit risk. Where a receivable is credit
impaired, the impairment is recognised immediately.
Accrued income from contracts with customers gross
Credit impaired
Expected credit losses
At 31 December 2022
Accrued income from contracts with customers gross
Credit impaired
Expected credit losses
At 31 December 2021
Total
€'000
16,652
(3,265)
(167)
13,220
Total
€'000
12,582
(2,459)
(126)
9,997
0–30 days
€'000
10,227
–
(103)
10,124
0–30 days
€'000
7,487
–
(75)
7,412
31–60 days
€'000
3,897
(762)
(39)
3,096
31–60 days
€'000
2,663
(474)
(27)
2,162
60+ days
€'000
2,528
(2,503)
(25)
–
60+ days
€'000
2,432
(1,985)
(24)
423
Accrued income from contracts with customers represent mainly contract assets in process and related items. Excluding movements in the
provision, the movement in the year comprises transfers in and out as items are accrued and subsequently invoiced to customers, with no
significant amounts recognised on the acquisition of subsidiaries.
Related Party Receivables
There were no related party receivables at the end of either period presented.
Notes forming part of the consolidated financial statements continuedKeywords Studios plc Annual Report and Accounts 2022Page Title
Financial statements
149
Currency Risk
Currency risk is the risk that the value of financial instruments will fluctuate due to changes in foreign exchange rates. The foreign exchange
risk arises for the Group where assets and liabilities arise in a currency other than the functional currency of the entity.
The Group’s policy, where possible, is for Group entities to manage foreign exchange risk at a local level by matching the currency in which
revenue is generated with the expenses incurred and by settling liabilities denominated in their functional currency with cash generated
from their own operations in that currency. Where Group entities have liabilities denominated in a currency other than their functional
currency (and have insufficient reserves of that currency to settle them), cash already denominated in that currency will, where possible, be
transferred from elsewhere within the Group.
The Group is predominantly exposed to currency risk on the balances held within working capital across the Group and the exposure is
concentrated in the movement of the US dollar, sterling and Canadian dollar against the euro. The effect of a strengthening or weakening of
10% in those currencies against the euro at the reporting date on the working capital balances would, all other variables held constant, have
resulted in the following pre-tax profit/(loss) impact for the year:
US dollar to euro
Sterling to euro
Canadian dollar to euro
Total Financial Assets and Liabilities
2022
€'000
2022
€'000
2021
€'000
2021
€'000
10% Strengthening
10% Weakening
10% Strengthening
10% Weakening
5,981
365
591
(4,894)
(299)
(483)
5,545
(1,333)
169
(4,536)
1,091
(138)
The carrying amount of the financial assets and liabilities shown in the Consolidated and Company Statements of financial position are stated
at amortised costs, with the exception of contingent consideration held at fair value.
Liquidity Risk
Liquidity risk arises from the Group’s management of working capital and the financial charges on its debt instruments.
The Group’s policy is to ensure that it will have sufficient cash to allow it to meet its liabilities when they become due. The Directors consider
liquidity risk is mitigated by the strong working capital position, with €44.6m of current assets, including cash of €81.9m available to settle
liabilities as they fall due.
The following are the contractual maturities (representing undiscounted contractual cash flows) of the Group’s financial liabilities:
At 31 December 2022
Trade payables
Deferred and contingent consideration (i)
Other payables (ii)
Loans and borrowings
Loan interest
Lease liabilities
Total
Carrying value
Contractual cash flows
Total
€'000
15,878
63,253
94,410
51
–
42,519
216,111
Total
€'000
Within 1 year
€'000
15,878
66,598
106,410
51
2
44,548
233,487
15,878
45,115
94,410
45
2
12,740
168,190
1–2 years
€'000
–
20,031
7,000
6
–
9,267
36,304
2–5 years
€'000
Over 5 years
€'000
–
1,452
5,000
–
–
17,224
23,676
–
–
–
–
–
5,317
5,317
Page Title
Financial statements
150
24 Financial Instruments and Risk Management continued
At 31 December 2021
Trade payables
Deferred and contingent consideration (i)
Other payables (ii)
Loans and borrowings
Loan interest
Lease liabilities
Total
Carrying value
Contractual cash flows
Total
€'000
11,122
54,142
72,535
129
–
37,635
175,563
Total
€'000
11,122
61,223
72,535
129
6
40,358
185,373
Within 1 year
€'000
11,122
37,953
72,535
81
4
12,059
133,754
1–2 years
€'000
–
14,008
–
48
2
8,257
22,315
2–5 years
€'000
Over 5 years
€'000
–
9,262
–
–
–
13,042
22,304
–
–
–
–
–
7,000
7,000
(i) Deferred and contingent consideration at 31 December 2022 has arisen on business combinations, and is based on contracted amounts
to be paid in the future to sellers under share purchase agreements. In general, in order for contingent consideration to become payable,
pre-defined profit and/or revenue targets must be exceeded. On an undiscounted basis, the Group may be liable for deferred and
contingent consideration up to a maximum of €66.6m.
(ii) Other payables contractual cash flows include liabilities of €15.0m (2021: €8.0m), for Deferred and contingent consideration related to
continuous employment at Helpshift and Waste, where the purchase agreement for those acquisitions included deferred consideration
contingent on both pre-defined profit and/or revenue targets being exceeded and also tied to the retention of key staff, that are
considered post-acquisition expenses under IFRS 3.
25 Capital Management
Group
Loans and borrowings (note 18)
Less: cash and cash equivalents
Net debt/(net cash) position
Total equity
Net debt/(net cash) to capital ratio
2022
€'000
51
(81,886)
(81,835)
557,091
(14.7)%
2021
€'000
129
(105,710)
(105,581)
472,120
(22.4)%
The Group manages capital by monitoring debt to capital and net debt ratios. This debt to capital ratio is calculated as net debt to total
equity. Net debt is calculated as loans and borrowings (as shown in the Consolidated statement of financial position) less cash and cash
equivalents. The liquidity risk and cash management for the Group is managed centrally by the Group Treasury function. Group Treasury
manage bank balances centrally, and monitors the credit rating and stability of the institutions the Group banks with. The Board receives
projections on a monthly basis as well as information regarding cash balances. The Group's strategy is to preserve a strong cash base and
secure access to finance at reasonable cost by maintaining a good credit rating.
26 Related Parties and Shareholders
The details of key management compensation (being the remuneration of the Directors) are set out in note 10.
Notes forming part of the consolidated financial statements continuedKeywords Studios plc Annual Report and Accounts 2022Page Title Financial statements
27 Business Combinations
Details of goodwill and the fair value of net assets acquired
Book value:
Property, plant and equipment
Right of use assets
Trade and other receivables – gross
Bad debt provision
Cash and cash equivalents
Trade and other payables
Deferred income
Lease liabilities
Book value of identifiable assets and liabilities acquired
Fair value adjustments:
Identifiable intangible assets – Customer relationships
Identifiable intangible assets – Intellectual property
Deferred tax assets
Deferred tax liabilities
Total fair value adjustments
Net assets acquired
Goodwill from current year acquisitions
Total purchase consideration
Details of purchase consideration and outflows from current acquisitions
Cash
Deferred cash
Deferred consideration contingent on performance
Combination put/call options to acquire residual 15% of Tantalus
Shares to be issued
Total purchase consideration
Related acquisition costs charged to the Consolidated statement of comprehensive income:
Number of shares:
Shares issued on acquisition
Fixed number of shares to be issued
Net cash outflow arising on acquisition:
Cash paid in the period
Less: cash and cash equivalent balances transferred
Net cash outflow arising on acquisition
Details of pro forma revenues and profitability of current acquisitions
Pre-acquisition revenue in H1
Pre-acquisition revenue in H2
Pre-acquisition revenue
Pre-acquisition revenue with Keywords Group
Post-acquisition revenue
Pro forma revenue
151
2022
€'000
2021
€'000
422
580
6,145
–
5,401
(4,762)
(3,461)
(580)
3,745
34,695
25,914
15,393
(13,341)
62,661
66,406
70,482
136,888
92,895
8,993
28,957
–
6,043
136,888
1,177
135,468
87,738
92,895
(5,401)
87,494
19,329
12,070
31,399
–
9,106
40,505
572
1,402
7,439
(7)
10,618
(8,245)
–
(1,402)
10,377
11,502
–
2,539
(3,006)
11,035
21,412
97,918
119,330
59,314
1,565
33,726
4,768
19,957
119,330
1,099
621,852
37,994
59,314
(10,617)
48,697
10,779
5,566
16,345
(1,908)
24,990
39,427
Page Title
Financial statements
152
27 Business Combinations continued
Pre-acquisition profit before tax
Post-acquisition profit before tax
Pro forma profit before tax
2022
€'000
1,601
3,440
5,041
2021
€'000
2,573
9,653
12,226
Disclosures required by IFRS 3 Business Combinations are provided separately for those individual acquisitions that are considered to be
material, and in aggregate for individually immaterial acquisitions. Acquisitions are considered individually material if the impact on the
Group's Revenue and Adjusted Profit Before Tax measures (on an annualised basis) is greater than 5%*. None of the business combinations
completed during the period were considered individually material and therefore warrant separate disclosure.
During the period, the Group completed five acquisitions, Forgotten Empires, Mighty Games, Smoking Gun, LabCom, and Helpshift,
purchasing 100% of the share capital of these businesses. The aggregate amounts recognised in respect of the identifiable assets acquired
and liabilities assumed on acquisitions completed in the period are set out in the table above. Details of the purchase consideration and
other information relevant to the evaluation of the financial effect of the acquisitions are also presented.
Total purchase consideration of €136.9m includes amounts attributable to Forgotten Empires €35.0m, Mighty Games €6.5m, Smoking Gun
€30.2m and Helpshift €63.0m, while Goodwill from current year acquisitions of €70.5m includes amounts related to Forgotten Empires
€11.8m, Mighty Games €6.1m, Smoking Gun €22.4m, and Helpshift €29.3m. Identifiable intangible assets – Customer Relationships of
€34.7m includes amounts attributable to Forgotten Empires €17.8m, Smoking Gun €9.1m and Helpshift €7.8m, while Identifiable intangible
assets – Intellectual property of €25.9m is mainly attributable to Helpshift.
Total purchase consideration excludes €6.0m of Deferred and contingent consideration related to continuous employment at Helpshift,
where the purchase agreement includes deferred consideration contingent on both pre-defined profit and/or revenue targets being
exceeded and which is also tied to the retention of key staff, that are considered post-acquisition expenses under IFRS 3 (note 24).
The main factors leading to the recognition of goodwill on the acquisitions are the presence of certain intangible assets in the acquired
entities, which are not valued for separate recognition. These include expertise in the acquired entities, enhancing and growing our service
capabilities, broadening our service offering, and extending our geographical footprint, further building out our global platform.
The goodwill that arose from business combinations completed in the period that is expected to be deductible for tax purposes was €30.3m
(for which a deferred tax asset has been recognised of €7.2m).
*
The Group reports a number of alternative performance measures ("APMs") including Pro forma revenue and Adjusted Profit Before Tax, to present the financial
performance of the business, that are not GAAP measures as defined under IFRS. A reconciliation of these measures to the relevant GAAP measures is presented
in the APMs section.
28 Subsidiaries
The results and financial position of all the subsidiaries are included in the consolidated financial statements. Details of the Company’s direct
and indirect subsidiaries as at 31 December 2022 are set out below:
Name
3455 Productions, LLC
9409-2954 Québec Inc.
Alset Limited
AMC RO Studios S.R.L
Babel Media Limited *
Babel Media USA, Inc.
Bitsy SG Limited
Blindlight, LLC
Climax Development Limited
Climax Studios Limited
Coconut Lizard Limited
Cord Worldwide Limited
d3t Development Limited
d3t Limited
Country of
incorporation
Date of
incorporation/
acquisition
Ownership^
Registered office
USA
Canada
UK
Romania
UK
USA
UK
USA
UK
UK
UK
UK
UK
UK
24-Nov-20
04-Dec-19
17-Aug-18
11-Aug-21
17-Feb-14
17-Feb-14
17-Aug-18
08-Jun-18
22-Apr-21
22-Apr-21
25-Jun-20
07-Apr-18
30-Aug-18
19-Oct-17
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
251 Little Falls Drive, Wilmington, New Castle, DE 19808, USA
1751 Richardson, Suite 8400, Montreal, QC H3K 1G6, Canada
110 High Holborn, London, WC1V 6JS, UK+
Stirbei Voda 36, etaj 1, sector 1, Bucharest, Romania
110 High Holborn, London, WC1V 6JS, UK+
251 Little Falls Drive, Wilmington, New Castle, DE 19808, USA
110 High Holborn, London, WC1V 6JS, UK+
1111 South Flower Street, Suite 101, Burbank, CA 91502,USA
110 High Holborn, London, WC1V 6JS, UK+
110 High Holborn, London, WC1V 6JS, UK+
110 High Holborn, London, WC1V 6JS, UK+
110 High Holborn, London, WC1V 6JS, UK+
110 High Holborn, London, WC1V 6JS, UK+
110 High Holborn, London, WC1V 6JS, UK+
Notes forming part of the consolidated financial statements continuedKeywords Studios plc Annual Report and Accounts 2022Page Title Financial statements
153
Name
Country of
incorporation
Date of
incorporation/
acquisition
Ownership^
Registered office
Descriptive Video Works Inc.
Canada
11-Jun-19
100%
Eastern New Media Limited
Hong Kong
19-May-17
100%
400-725 Granville Street, PO Box 10325, Vancouver BC V7Y
1G5, Canada
4404, 44/F Hopewell Centre, 183 Queen’s Road East,
Wanchai, Hong Kong
Edugame Solutions Private Limited
Electric Square Limited
Fire Without Smoke Inc
Fire Without Smoke Limited
Forgotten Empires LLC
Forgotten Software S.L.U
GameSim Inc.
g-Net Media, Inc.
Heavy Iron Studios, Inc
Helpshift Inc
India
UK
USA
UK
USA
Spain
USA
USA
USA
USA
09-Oct-14
100%
3rd floor, Vardhman Orchard Plaza, Plot No 4, LSC,
West Enclave, Pitampura, New Delhi, 110034, India
17-Aug-18
29-May-18
29-May-18
28-Jul-22
28-Jul-22
16-May-17
24-Nov-20
12-Jan-21
100%
100%
100%
100%
100%
100%
100%
100%
110 High Holborn, London, WC1V 6JS, UK+
251 Little Falls Drive, Wilmington, New Castle, DE 19808, USA
110 High Holborn, London, WC1V 6JS, UK+
8730 Cincinnati Dayton Rd. #1072, West Chester, OH 45071,
USA
nº 1 – La Cala Del Moral Rincon De La Victoria calle Murillo
13501 Ingenuity Drive, Suite 310, Orlando, FL 32826, USA
251 Little Falls Drive, Wilmington, New Castle, DE 19808, USA
1600 Rosecrans Ave., Bldg 7 Ste 300, MBS Media Campus,
Manhattan Beach CA, 90266, USA
15-Dec-22
100%
343 Sansome Street, Suite 500, San Francisco, California,
94104, USA
Helpshift Information Technology (Shanghai)
Co. Ltd
China
15-Dec-22
100%
Helpshift Technologies Private Limited
India
15-Dec-22
100%
Southwest Area, 3rd Floor, No. 2123 Pudong Avenue,
Shanghai, China
3rd floor, Vardhman Orchard Plaza, Plot No 4, LSC, West
Enclave, Pitampura, New Delhi, 110034, India
Helpshift UK Ltd
High Voltage Software, Inc.
HVS Nola LLC
Ichi Limited
Indigo Pearl Limited
Itsy SGD Limited
Jinglebell S.r.l.
Jurango Pty Limited ~~
UK
USA
USA
UK
UK
UK
Italy
15-Dec-22
100%
New Penderel House 4th Floor, 283-288 High Holborn,
London, WC1V 7HP, United Kingdom
14-Dec-20
14-Dec-20
26-Nov-19
15-Dec-20
17-Aug-18
10-Dec-20
100%
100%
100%
100%
100%
100%
2345 Pembroke Ave., Hoffman Estates, IL 60169, USA
201 St. Charles Ave., Suite 2220, New Orleans, LA 70170, USA
110 High Holborn, London, WC1V 6JS, UK+
110 High Holborn, London, WC1V 6JS, UK+
110 High Holborn, London, WC1V 6JS, UK+
Via Marco d’Oggiono 12, 20123, Milan, Italy
Australia
20-Dec-21
85%
29 Thornton Crescent, Mitcham, VIC 3132, Australia
Keywords (Shanghai) Information
Technology Limited
China
02-Apr-15
100%
Keywords Asia Private Limited
Singapore
15-Mar-16
100%
Keywords Australia Holdings Limited
Keywords Australia Pty Limited ~
Keywords Canada Holdings Inc.
UK
Australia
Canada
Keywords do Brasil Localização e Tradução Ltda
Brazil
17-Mar-21
18-Mar-21
27-Oct-17
18-Jan-15
100%
85%
100%
100%
Keywords Germany Holdings GmbH
Germany
06-Sep-19
100%
Keywords International Co., Limited.
Keywords International Limited *
Japan
Ireland
30-Nov-10
13-May-98
100%
100%
Keywords International Pte. Limited
Singapore
24-Apr-14
100%
Keywords International, Inc.
Keywords Sperasoft LLC
USA
Armenia
26-Sep-12
07-Apr-22
100%
100%
Room 701, Building 5, No.860 Dong Ti Yu Hui Road, Hongkou
District, Shanghai, China
20 Kallang Avenue, #06-6A, Lobby B, Pico Creative Centre,
339411, Singapore
110 High Holborn, London, WC1V 6JS, UK+
12 Spring Street, Fitzroy, Victoria, 3065, Australia
1751 Richardson, Suite 8400, Montreal, QC H3K 1G6, Canada
Rua Professor Aprígio Gonzaga, 35 – 7º andar – São Judas –
São Paulo – SP CEP: 04303-000, Brazil
Moriz-Seeler-Strasse 5-7, Franz Ehrlich Haus, 12489, Berlin,
Germany
1-22-19 Izumi, Suginami-ku, Tokyo, 168-0063 Japan
Whelan House, South County Business Park, Leopardstown,
Dublin 18, D18 T9P8, Ireland
20 Kallang Avenue, #06-6A, Lobby B, Pico Creative Centre,
339411, Singapore
251 Little Falls Drive, Wilmington, New Castle, DE 19808, USA
18/1 Vardanants str., 3rd floor, Yerevan 0010, Armenia
Page Title Financial statements
154
28 Subsidiaries continued
Name
Country of
incorporation
Date of
incorporation/
acquisition
Ownership^
Registered office
Keywords Studios B.C., Inc.
Canada
27-Oct-17
100%
Keywords Studios d.o.o. Beograd
Serbia
18-May-22
100%
Keywords Studios France SAS
Keywords Studios India Private Limited
France
India
08-Jun-16
17-Feb-14
Keywords Studios Italy S.R.L.
Italy
08-May-14
Keywords Studios Korea Corporation
South Korea
11-Jan-21
100%
100%
100%
100%
1700-1075 West Georgia Street, Vancouver, BC, V6E 3C,
Canada
Belgrade, BULEVAR MIHAJLA PUPINA 10L, floor 9, Belgrade-
New Belgrade, NEW BELGRADE, 11070, Serbia
59 Boulevard Exelmans, 75016 Paris, France
3rd floor, Vardhman Orchard Plaza, Plot No 4, LSC, West
Enclave, Pitampura, New Delhi, 110034, India
Via Egadi 2, Milan, MI, 20144, Italy
16th Floor, Gangnam Building, 1321-1, Seocho-dong, Seocho-
gu, Seoul 137-070, South Korea
Keywords Studios Los Angeles, Inc.
Keywords Studios Malta Limited
USA
Malta
08-May-14
100%
1115 Flower Street, Burbank, CA 91502, USA
04-May-22
100%
Level 3, Valletta Buildings, South Street, Valletta VLT 1103,
Malta
Keywords Studios México, S. de R.L. de C.V.
Mexico
16-Jul-15
100%
Keywords Studios Netherlands B.V.
Netherlands
05-Feb-19
100%
Keywords Studios Poland Spolka z.o.o.
Keywords Studios QC-Games Inc.
Keywords Studios QC-Interactive Inc.
Keywords Studios QC-Tech Inc.
Poland
Canada
Canada
Canada
04-Feb-21
17-Feb-14
16-Nov-16
06-Jan-15
Keywords Studios Romania S.R.L.
Romania
15-Jun-21
Keywords Studios Spain SLU
Keywords Studios Texas, LLC
Keywords Studios Unlimited Company*
Keywords Studios US Inc
Keywords Treasury Holdings Limited
Keywords UK Holdings Limited
Keywords US Holdings Inc.
Keywords Ventures Limited
Laboratorio Comunicazione S.r.l.
Laced Music Limited
Laced Publishing Limited
Lakshya Digital Private Limited *
Spain
USA
Ireland
USA
Ireland
UK
USA
UK
Italy
UK
UK
India
16-Jul-15
22-Jan-20
27-Mar-18
24-Oct-17
30-Nov-22
28-Mar-18
23-Oct-17
06-Apr-18
04-Nov-22
07-Apr-18
07-Apr-18
09-Oct-14
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
Lakshya Digital Singapore Pte. Limited
Singapore
09-Oct-14
100%
Liquid Development, LLC
Liquid Violet Limited *
Lonsdale Miller Limited
Maverick Media Limited
Mighty Developments Pty Limited ~~
Mighty Games Group Pty Limited ~~
Mighty Games Productions Pty Limited ~~
Player Research Limited
USA
UK
UK
UK
Australia
Australia
Australia
UK
19-Aug-15
15-Jan-14
15-Dec-20
27-Aug-20
03-Aug-22
03-Aug-22
03-Aug-22
100%
100%
100%
100%
85%
85%
85%
Torrente #75, Colonia Ampliación Alpes, Del. Álvaro
Obregón, CP. 01710, Ciudad de México, México
Wilhelmina van Pruisenweg 35, 2595AN The Hague,
The Netherlands
11 Ul. Na Zjezdzie, Krakow 30-527, Poland
1751 Richardson, Suite 8400, Montreal, QC H3K 1G6, Canada
1751 Richardson, Suite 8400, Montreal, QC H3K 1G6, Canada
1751 Richardson, Suite 8400, Montreal, QC H3K 1G6, Canada
6-8 Corneliu Coposu Bvd., Unirii View Building, office 103,
1st floor, 3rd district, Bucharest, Romania
Julián Camarillo 6A, 3B, 28037 Madrid, Spain
7800 Shoal Creek Blvd. Suite 240S, Austin, Texas 78757, USA
Whelan House, South County Business Park, Leopardstown,
Dublin 18, D18 T9P8, Ireland
251 Little Falls Drive, Wilmington, New Castle, DE 19808, USA
Whelan House, South County Business Park, Leopardstown,
Dublin 18, D18 T9P8, Ireland
110 High Holborn, London, WC1V 6JS, UK+
251 Little Falls Drive, Wilmington, New Castle, DE 19808, USA
110 High Holborn, London, WC1V 6JS, UK+
Via Lazzaro Spallanzani 6, 20129 Milan, Italy
110 High Holborn, London, WC1V 6JS, UK+
110 High Holborn, London, WC1V 6JS, UK+
3rd floor, Vardhman Orchard Plaza, Plot No 4, LSC, West
Enclave, Pitampura, New Delhi, 110034, India
20 Kallang Avenue, #06-6A, Lobby B, Pico Creative Centre,
339411, Singapore
411 SW 2nd Ave Ste 300, Portland, OR 97204, USA
110 High Holborn, London, WC1V 6JS, UK+
110 High Holborn, London, WC1V 6JS, UK+
110 High Holborn, London, WC1V 6JS, UK+
29 Thornton Crescent, Mitcham, VIC 3132, Australia
29 Thornton Crescent, Mitcham, VIC 3132, Australia
29 Thornton Crescent, Mitcham, VIC 3132, Australia
26-Oct-16
100%
110 High Holborn, London, WC1V 6JS, UK+
Notes forming part of the consolidated financial statements continuedKeywords Studios plc Annual Report and Accounts 2022Page Title Financial statements
Name
PT Limitless Indonesia
Smoking Gun Interactive Inc
Snowed In Studios, Inc
155
Country of
incorporation
Date of
incorporation/
acquisition
Ownership^
Registered office
Indonesia
19-May-17
Canada
Canada
05-Oct-22
19-Jul-18
100%
100%
100%
Sperasoft Poland Spólka z.o.o.
Poland
13-Dec-17
100%
Sperasoft Studios LLC
Russia
13-Dec-17
100%
Sperasoft, Inc.
SperaSystems LLC
SPOV Limited
Strongbox Limited
Studio Gobo Limited
Sunny Side Up Creative Inc.
USA
USA
UK
13-Dec-17
13-Dec-17
16-Feb-17
Seychelles
19-May-17
UK
Canada
17-Aug-18
03-Jan-19
Synthesis Deutschland GmbH *
Germany
12-Apr-16
Synthesis Global Solutions SA *
Switzerland
12-Apr-16
Tantalus Media Pty Limited ~
The Trailerfarm Limited
TV+SYNCHRON Berlin GmbH
Waste Creative Limited
Waste Holdings Limited
Australia
UK
Germany
UK
UK
18-Mar-21
13-Sep-18
01-Oct-19
16-Dec-21
16-Dec-21
100%
100%
100%
100%
100%
100%
100%
100%
85%
100%
100%
100%
100%
JI. Timoho II, No. 32, Muja Muju, Kota Yogyakarta, Indonesia
1100-333 Seymour St, Vancouver, BC V6B 5A6, Canada
400-981 Wellington Street West, Ottawa, Ontario, K1Y 2Y1,
Canada
Kraj Polska, woj. Małopolskie, powiat Kraków, miejsc. Kraków,
ul. Na Kozłóce 27 30-664 Kraków, Poland
196084, Russia, Saint-Petersburg, Kievskaya Street,
5 - building 4
251 Little Falls Drive, Wilmington, New Castle, DE 19808, USA
2033 Gateway Pl Ste 500 San Jose, CA 95110-3712, USA
110 High Holborn, London, WC1V 6JS, UK+
306 Victoria House, Victoria, Mahe, Seychelles
110 High Holborn, London, WC1V 6JS, UK+
410 Boulevard Charest Est, Suite 410, Québec, Québec, G1K
8G3, Canada
Holstenkamp 46 A, Bahrenfeld, 22525 Hamburg, Germany
Corso Elvezia 16, 6900 Lugano, Ticino, Switzerland
12 Spring Street, Fitzroy, Victoria, 3065, Australia
110 High Holborn, London, WC1V 6JS, UK+
Moriz-Seeler-Strasse 5-7, Franz Ehrlich Haus, 12489, Berlin,
Germany
110 High Holborn, London, WC1V 6JS, UK+
110 High Holborn, London, WC1V 6JS, UK+
Wicked Witch Software Pty Limited ~~
Australia
20-Dec-21
85%
29 Thornton Crescent, Mitcham, VIC 3132, Australia
Wizcorp Inc.
Xcelerator Machine Translations Limited
Xloc, Inc.
Japan
Ireland
USA
18-Apr-19
12-Dec-19
08-May-17
100%
100%
100%
1-22-19 Izumi, Suginami-ku, Tokyo, 168-0063 Japan
Invent, Dublin City University, Glasnevin, Dublin 9, Ireland
8801 Fast Park Drive, Suite 301, Raleigh, NC 27617, USA
*
Indicates a direct subsidiary (all other holdings are indirect, being subsidiaries of various intermediate group holding companies).
^ Proportion of voting rights and ordinary share capital ultimately held by Keywords Group.
+ The registered office address was changed on 1 February 2023.
~
A combination of put and call options are in place requiring the sellers to sell, or the Group to buy the remaining 15% shareholding three years from acquisition.
The Group has accounted for the acquisition as if a 100% interest was acquired on acquisition (see note 3).
~~ Wholly owned subsidiary of Keywords Australia Pty Limited. The Group has accounted for the company as if a 100% interest was held (see note 3).
Post-acquisition, the Group reviews entities to streamline activities and close any dormant entities acquired or re-structured entities.
Restructuring details are set out below:
Name
Country of incorporation
AppSecTest Limited
Ichi Creative Limited
UK
USA
Date of incorporation/
acquisition
22-Jan-19
26-Nov-19
Ownership
Date of re-structuring
Re-structuring details
49%
100%
13-Apr-22
15-Dec-20
Dissolved
Dissolved
Page Title Financial statements
156
29 Significant Events and Events after the Reporting Date
Crisis in Ukraine
In 2022, the Group’s operations have been impacted by the tragic events in Ukraine. Whilst the Group do not have operations in Ukraine, the
Group does have Game Development teams in Russia, and also works with a number of freelance suppliers in Ukraine. Our priority has been
to support our people and our freelance suppliers in the territory, whilst contributing to the wider humanitarian efforts in the region.
In the period, the Group produced €26.3m of Revenue in Russia, down from €29.4m in 2021, and represents approximately 3.8% of Group
revenue, down from 5.7% in 2021. During the period, a significant number of projects supported in Russia have been transferred to other
parts of the Group, as we ramp up production capacity in these locations with a combination of employees relocating from Russia and local
hires. As a consequence, revenues produced in Russia were approximately 1.7% of Group revenue in December 2022.
We continue to work with our customers supporting their preferences for where their work should be performed. We also remain focused
on mitigating any potential business interruption or other risks associated with our activities in Russia. As a consequence, we expect the
volume of work produced in Russia to continue to reduce over time.
The Group does not have significant receivables exposure in Russia, as work produced in Russia is contracted and collected in other
territories. In addition, the Group does not have significant amounts of net current assets or non-current assets located in Russia. Thus any
exposure to impairment of assets located in Russia is not considered material.
As a consequence of the crisis, an additional impairment assessment was performed in the Game Development CGU, to evaluate any
potential Goodwill impairment resulting from the crisis. The result of the value in use calculations was that no impairment would be required
even in a worst-case scenario where the contribution from all Russian-located production capacity was excluded from projections, assuming
no further work is able to be transferred to other parts of the Group.
Acquisition of 47
On 1 February 2023, the Group announced the acquisition of 47 Communications LLC ("47"), a leading US-based PR and communications
agency with expertise in the video game, technology, entertainment and digital lifestyle sectors. For the twelve months to 30 September
2022, 47 generated revenues of approximately USD $11 million. The consideration payable for the Company is in line with Keywords' targeted
valuation range. The terms of the transaction include contingent consideration payable in a mix of cash and new ordinary shares depending
on the future performance of the Company over the three years from completion. The new ordinary shares to be issued will be subject to
orderly market provisions for a year.
Notes forming part of the consolidated financial statements continuedKeywords Studios plc Annual Report and Accounts 2022Page Title Financial statements
Company statement of financial position
157
Company statement of financial position
Non-current assets
Right of use assets
Property, plant and equipment
Deferred tax assets
Investment in subsidiaries
Other receivables
Current assets
Cash and cash equivalents
Other receivables
Current liabilities
Trade payables
Other payables
Lease liabilities
Net current assets/(liabilities)
Non-current liabilities
Other payables
Lease liabilities
Net assets
Equity
Share capital
Share capital – to be issued
Share premium
Merger reserve
Shares held in Employee Benefit Trust ("EBT")
Share-based payments reserve
Retained earnings
Total equity
Note
36
37
38
39
39
40
41
40
41
22
22
22
22
At 31 December
2022
€'000
5,071
446
454
30,287
385,066
421,324
46
15,481
15,527
430
10,958
1,030
12,418
3,109
–
4,081
4,081
420,352
924
2,467
47,021
292,336
–
65,379
12,225
420,352
2021
€'000
206
308
657
30,175
335,511
366,857
17,043
7,468
24,511
1,127
19,651
216
20,994
3,517
3,660
–
3,660
366,714
904
2,185
38,549
279,358
(1,997)
48,193
(478)
366,714
In accordance with the Companies Act 2006, the Company is availing of the exemption from presenting its individual Statement of
comprehensive income to the Annual General Meeting and from filing it with Companies House. The amount of profit after tax dealt with in
the parent undertaking is €14,682k (2021: profit of €6,404k).
The notes from page 160 onwards form an integral part of these Company financial statements. The financial statements were approved and
authorised for issue by the Board on 15 March 2023.
On behalf of the Board
Bertrand Bodson
Director
15 March 2023
Jon Hauck
Director
Financial statements
Company statement of changes in equity
158
Company statement of changes in equity
At 01 January 2021
Profit/(loss) for the period
Total comprehensive income for the period
Contributions by and contributions to the owners:
Share-based payments expense
Share options exercised
Employee Share Purchase Plan
Dividends
Acquisition-related issuance of shares
Contributions by and contributions to the owners
At 31 December 2021
Profit/(loss) for the period
Total comprehensive income for the period
Contributions by and contributions to the owners:
Share-based payments expense
Share options exercised
Employee Share Purchase Plan
Dividends
Acquisition-related issuance of shares
Contributions by and contributions to the owners
At 31 December 2022
Share
capital
€'000
Share
capital – to
be issued
€'000
Share
premium
€'000
Merger
reserve
€'000
Shares
held in
EBT
€'000
Share-
based
payments
reserve
€'000
Retained
earnings
€'000
Total
equity
€'000
879
13,047
22,951
255,957
(1,997)
31,799
(6,267)
316,369
–
–
–
11
–
–
14
25
–
–
–
–
–
–
–
–
–
4,929
398
–
–
–
–
–
–
–
(10,862)
10,271
23,401
(10,862)
15,598
23,401
–
–
–
–
–
–
–
–
–
–
6,404
6,404
6,404
6,404
16,394
–
–
–
–
–
–
–
(615)
16,394
4,940
398
(615)
–
22,824
16,394
(615)
43,941
904
2,185
38,549
279,358
(1,997)
48,193
(478)
366,714
–
–
–
14
–
–
6
20
924
–
–
–
5,862
909
–
–
–
–
–
–
–
1,701
12,978
–
–
–
–
–
–
282
282
–
–
–
–
–
14,682
14,682
14,682
14,682
18,577
1,997
(1,492)
–
–
–
101
–
–
–
–
–
18,577
6,381
1,010
(1,979)
(1,979)
–
14,967
8,472
12,978
1,997
17,186
(1,979)
38,956
2,467
47,021
292,336
–
65,379
12,225
420,352
Keywords Studios plc Annual Report and Accounts 2022 Financial statements
Company statement of cash flows
159
Company statement of cash flows
Cash flows from operating activities
Profit/(loss) after tax
Income and expenses not affecting operating cash flows
Share-based payments expense, net of amounts recharged to subsidiary companies
Taxation
Interest expense
Depreciation – property, plant and equipment
Depreciation – right of use assets
Amounts written off financial assets
Unrealised foreign exchange (gain)/loss
Changes in operating assets and liabilities
(Increase)/decrease in other receivables
Increase/(decrease) in trade and other payables
Taxation paid
Net cash generated by/(used in) operating activities
Cash flows from investing activities
Funding advanced to subsidiaries
Current year acquisition of subsidiaries net of cash acquired
Acquisition of property, plant and equipment
Net cash generated by/(used in) investing activities
Cash flows from financing activities
Cash proceeds, where EBT shares were utilised for the exercise
of share options
Payments of principal on lease liability
Interest paid on principal of lease liability
Dividends paid
Shares issued for cash
Interest paid
Net cash generated by/(used in) financing activities
Increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of the period
Cash and cash equivalents at end of the period
Note
37
36
37
9
22
Years ended 31 December
2022
€’000
14,682
3,838
203
1,249
304
510
–
(39)
2021
€’000
6,404
4,099
–
935
54
204
(126)
34
6,065
5,200
78,075
(12,825)
65,250
–
85,997
(105,815)
–
(442)
(106,257)
505
(478)
(33)
(1,979)
6,785
(1,537)
3,263
(16,997)
17,043
46
25,123
14,232
39,355
–
50,959
(64,200)
(3,124)
(45)
(67,369)
–
(206)
(7)
(615)
5,338
(1,753)
2,757
(13,653)
30,696
17,043
Financial statements
Notes forming part of the Company
financial statements
160
Notes forming part of the Company financial statements
30 Basis of Preparation
The Company financial statements have been prepared in accordance with UK-adopted international accounting standards, and in
conformity with the requirements of the Companies Act 2006.
Unless otherwise stated, the financial statements have been prepared in thousands (’000) and the financial statements are presented
in euro (€).
Please refer to the Group financial statements for additional information concerning the basis of preparation. References in the Company
financial statements to notes numbered earlier than note 30, refer directly to specific notes in the Group financial statements.
31 Significant Accounting Policies
Intercompany Receivables
Intercompany receivables are recognised at amortised cost as they meet the IFRS 9 classification test of being held to collect, and the cash
flow characteristics represent solely payments of principal and interest.
The Company applies the general approach to applying the expected credit losses to its related party loans. Under the General Approach, at
each reporting date, the Company determines whether there has been a Significant Increase in Credit Risk (“SICR”) since initial recognition
and whether any balances are credit impaired. This determines the amount, if any, of expected credit losses to be recognised.
Other Significant Accounting Policies
The Company applies consistent accounting policies to those applied by the Group. Please refer to the Group financial statements for
disclosure of other relevant accounting policies.
32 Critical Accounting Estimates and Judgements
The Company makes certain estimates and assumptions regarding the future. Estimates and judgements are continually evaluated based on
historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.
In the future, actual experience may differ from these estimates and assumptions.
Judgements
The judgements, apart from those involving estimations, that management have made in the process of applying the Company’s accounting
policies and that have the most significant effect on the amounts recognised in the Company financial statements, are outlined below.
• Company
– Expected Credit Loss Provision on Company Receivables from Subsidiaries: As outlined in note 39, the Company has significant
receivables from subsidiaries, primarily related to investments in acquisitions. The Directors have taken into account both the ongoing
acquisition integration programme and the cash-generating capacity of the Group, in concluding (in note 43) that all such loans are
recoverable and the expected credit loss provisions are adequate.
– Other Judgements: The Company applies consistent judgements to those applied by the Group. To the extent that judgements
are relevant to both Group and Company financial statements, please refer to the Group financial statements for other relevant
judgements.
33 Auditor Statutory Disclosure
The audit fee for the Company is outlined in note 5 of the Group financial statements.
34 Dividends and Distributable Reserves
Details of dividends and distributable reserves of the Company are presented in note 9 of the Group financial statements.
Keywords Studios plc Annual Report and Accounts 2022 Financial statements
35 Staff Costs
Total staff costs (including Directors)
Salaries and related costs
Social welfare costs
Pension costs
Share-based payments expense
Average number of employees
Operations
General and administration
36 Right of Use Assets
The Company has entered into leases, principally relating to property.
Cost
At 01 January
Additions
De-recognition of expired leases
Exchange rate movement
At 31 December
Accumulated depreciation
At 01 January
Depreciation charge
De-recognition of expired leases
Exchange rate movement
At 31 December
Net book value
At 01 January
At 31 December
161
2021
€'000
5,221
525
88
16,394
22,228
2021
3
34
37
2021
€'000
781
–
–
54
835
392
204
–
33
629
389
206
2022
€'000
8,492
1,925
275
18,678
29,370
2022
7
53
60
2022
€'000
835
5,592
(825)
(237)
5,365
629
510
(825)
(20)
294
206
5,071
Page Title
Financial statements
162
Notes forming part of the Company financial statements continued
37 Property, Plant and Equipment
Computers
and software
€'000
Office furniture
and equipment
€'000
Leasehold
improvements
€'000
Cost
At 01 January 2021
Additions
At 31 December 2021
Additions
At 31 December 2022
Accumulated depreciation
At 01 January 2021
Depreciation charge
At 31 December 2021
Depreciation charge
At 31 December 2022
Net book value
At 01 January 2022
At 31 December 2022
38 Investment in Subsidiaries
12
45
57
211
268
5
9
14
38
52
43
216
145
–
145
21
166
38
15
53
94
147
92
19
280
–
280
210
490
77
30
107
172
279
173
211
2022
€'000
30,287
Total
€'000
437
45
482
442
924
120
54
174
304
478
308
446
2021
€'000
30,175
Details of the Company’s direct and indirect subsidiaries as at 31 December 2022 are set out in note 28 of the Group financial statements.
39 Other Receivables
Current
Intercompany receivables (financial assets held at amortised cost, see note 44)
Prepayments
Other receivables
Tax and social security
Non-current
Intercompany receivables (financial assets held at amortised cost, see note 44)
2022
€'000
12,682
2,163
459
177
15,481
2022
€'000
385,066
385,066
2021
€'000
5,099
1,702
478
189
7,468
2021
€'000
335,511
335,511
Keywords Studios plc Annual Report and Accounts 2022Page Title
Financial statements
40 Other Payables
Current
Accrued expenses
Payroll taxes
Other payables
Intercompany payables
Non-current
Intercompany payables
163
2022
€'000
3,226
–
158
7,574
10,958
2022
€'000
–
–
2021
€'000
1,915
164
253
17,319
19,651
2021
€'000
3,660
3,660
41 Lease Liabilities
The Company has entered into leases principally relating to property. Management applies judgement in determining whether it is reasonably
certain that a renewal or termination option will be exercised.
The movement in lease liabilities during the financial year was as follows:
Carrying amount at the beginning of the year
Liabilities recognised on new leases in the period
Unwinding of discounted liabilities – lease liabilities
Payment of principal and interest on lease liabilities
Exchange rate movement
Carrying amount at the end of the year
2022
€'000
216
5,591
33
(511)
(218)
5,111
2021
€'000
399
–
7
(213)
23
216
Maturity analysis of lease liabilities
Current
Not later than one year
Non-current
Later than one year and
not later than five years
Later than five years
At 31 December
2022
€'000
Lease payments
2022
€'000
Finance charges
2022
€'000
Lease liabilities
2021
€'000
Lease payments
2021
€'000
Finance charges
2021
€'000
Lease liabilities
1,133
103
1,030
4,248
–
4,248
5,381
167
–
167
270
4,081
–
4,081
5,111
218
–
–
–
218
2
–
–
–
2
216
–
–
–
216
42 Loans and Borrowings
Loans and borrowings (classified as financial liabilities under IFRS 9), are held at amortised cost. Details of the Company’s credit facilities are
outlined in note 18 of the Group financial statements. There were no drawdowns on the RCF during 2022.
Page Title
Supplementary information
164
Notes forming part of the Company financial statements continued
43 Risk Management
A description of the Group’s financial risk management objectives and policies is provided in note 24 to the Group financial statements.
These financial risk management objectives and policies also apply to the Company.
Credit Risk
As presented in note 39, receivables from subsidiaries relating to investments in acquisitions comprise term loans extended to subsidiaries,
while receivables from subsidiaries relating to trading activities comprise trading balances repayable on demand. Balances are analysed in
terms of the risk profile of the subsidiary.
The Directors have assessed the ongoing expected recovery strategy of loans due from subsidiaries of €385.1m (2021: €335.5m), within
Stage 1 of the IFRS 9 impairment assessment model. Having noted that such loans are within their repayment terms, the Directors have
concluded that no provision for expected credit losses is required (2021: €nil).
Separately, the Company has balances of €12.7m (2021: €5.1m), which are technically repayable upon demand. These loans are within Stage 3 of
the IFRS 9 impairment assessment model. The Directors have reviewed in detail the recovery strategy in relation to these loans and concluded
that none are credit-impaired, and therefore no expected credit loss has been recognised in relation to these balances (2021: €nil).
The following are the contractual maturities (representing undiscounted contractual cash flows) of the Company’s financial liabilities:
At 31 December 2022
Trade payables
Other payables
Lease liability
Total
At 31 December 2021
Trade payables
Other payables
Lease liability
Total
Carrying value
Contractual cash flows
Total
€'000
430
10,958
5,111
16,499
Total
€'000
430
10,958
5,381
16,769
Within 1 year
€'000
1–2 years
€'000
2–5 years
€'000
Over 5 years
€'000
430
10,958
1,133
12,521
–
–
1,133
1,133
–
–
3,115
3,115
–
–
–
–
Carrying value
Contractual cash flows
Within 1 year
€'000
1–2 years
€'000
2–5 years
€'000
Over 5 years
€'000
Total
€'000
1,127
23,311
216
Total
€'000
1,127
23,311
218
1,127
23,311
218
24,654
24,656
24,656
44 Related Parties
As at 31 December 2022 and 2021, the Company had amounts receivable from its subsidiaries as follows:
Receivables from subsidiaries related to investment in acquisitions
Receivables from subsidiaries relating to trading activities
Non-current (note 39)
Current (note 39)
–
–
–
–
–
–
–
–
–
–
–
–
2022
€'000
385,066
12,682
397,748
2022
€'000
385,066
12,682
397,748
2021
€'000
335,511
5,099
340,610
2021
€'000
335,511
5,099
340,610
Keywords Studios plc Annual Report and Accounts 2022Page Title
Supplementary information
Alternative performance measures
165
Alternative performance measures
The Group reports a number of alternative performance measures (“APMs”) to present the financial performance of the business, that are
not GAAP measures as defined under IFRS. The Directors believe that these measures, in conjunction with the IFRS financial information,
provide the users of the financial statements with additional information to provide a more meaningful understanding of the underlying
financial and operating performance of the Group. The measures are also used in the Group’s internal strategic planning and budgeting
processes and for setting internal management targets. These measures can have limitations as analytical tools and therefore should not be
considered in isolation, or as a substitute for IFRS measures.
The principal measures used by the Group are set out below:
Organic revenue growth – Acquisitions are a core part of the Group’s growth strategy. Organic revenue growth measures are used to help
understand the underlying trading performance of the Group excluding the impact of acquisitions. Organic revenue growth is calculated
by adjusting the prior year revenues, adding pre-acquisition revenues for the corresponding period of ownership to provide a like-for-like
comparison with the current year, and applying the prior year’s foreign exchange rates to both years, when translating studio results into the
euro reporting currency.
Constant exchange rates (“CER”) – Given the international nature of the Group’s operations, foreign exchange movements can have an
impact on the reported results of the Group when they are translated into the Group’s reporting currency, the euro. In order to understand
the underlying trading performance of the business, revenue is also presented using rates consistent with the prior year in order to provide
year-over-year comparability.
Adjusted profit and earnings per share measures – Adjusted profit and earnings per share measures are used to provide management and
other users of the financial statements with a clear understanding of the underlying profitability of the business over time. Adjusted profit
measures are calculated by adding the following items back to the equivalent GAAP profit measures:
– Amortisation of intangible assets – Customer relationships and music licence amortisation commences on acquisition, whereas
intellectual property/development costs amortisation commences when the product is launched. These costs, by their nature, can vary
by size and amount each year. As a result, amortisation of intangibles is added back to assist with the understanding of the underlying
trading performance of the business and to allow comparability across regions and categories.
– Costs of acquisition and integration – The level of acquisition activity can vary each year and therefore the costs associated with
acquiring and integrating businesses are added back to assist with the understanding of the underlying trading performance of the
Group.
– Share-based payments – The Group uses share-based payments as part of remuneration to align the interests of senior management
and employees with shareholders. These are non-cash charges and the charge is based on the Group’s share price which can change.
The costs are therefore added back to assist with the understanding of the underlying trading performance.
– Foreign exchange gains and losses – The Group does not hedge foreign currency translation exposures. The effect on the Group’s
results of movements in exchange rates can vary each year and are therefore added back to assist with understanding the underlying
trading performance of the business.
– Other income – Other income comprises gains on investments or other non-trading income. As the gains have arisen outside the
normal trading activities of the Group, the income has been added back to assist with the understanding of the underlying trading
performance.
Free cash flow measures – The Group aims to generate sustainable cash flow (free cash flow) in order to support its acquisition programme
and to fund dividend payments to shareholders. Free cash flow is measured as net cash generated by/(used in) operating activities after
capital expenditure, non-cash movements in deferred and contingent consideration related to continuous employment, payments of
principal on lease liabilities, interest and tax payments, but before acquisition and integration cash outlay, other income and dividend
payments. Adjusted free cash flow is a measure of cash flow adjusting for capital expenditure that is supporting growth in future periods
(represented by capital expenditure in excess of depreciation).
Net debt – The Group manages capital by monitoring debt to capital and net debt ratios. Net debt is calculated as loans and borrowings less
cash and cash equivalents, and excludes lease liabilities. The debt to capital ratio is calculated as net debt as a percentage of total equity.
The remainder of this section provides a reconciliation of the APMs with the relevant IFRS GAAP equivalent.
Supplementary information
166
Alternative performance measures continued
Service line analysis*
The following table presents revenue growth by service line at both actual exchange rates (“AER”) and constant exchange rates (“CER”). Constant
exchange rates are calculated by retranslating current-year reported numbers at the corresponding 2021 foreign exchange rates, in order to
give management and other users of the financial statements better visibility of underlying trading performance against the prior year.
Create
Globalize
Engage
2022
Revenue
AER
€m
275.5
300.9
114.3
690.7
2022
Revenue
CER
€m
255.9
286.2
108.9
651.0
2021
Revenue
AER
€m
188.2
231.9
92.1
512.2
2022
Growth
AER
%
46.4%
29.8%
24.1%
34.8%
2022
Growth
CER
%
36.0%
23.4%
18.2%
27.1%
*
The prior year comparatives have been reclassified to present information by service line in alignment with the new organisational and reporting structures (see note 3).
Pro forma revenue
Pro forma revenue is calculated by adding pre-acquisition revenues of current-year acquisitions to the current-year revenue numbers, to
illustrate the size of the Group had the acquisitions been included from the start of the financial year.
Create
Globalize
Engage
2022
Revenue
AER
€m
275.5
300.9
114.3
690.7
2022
Pre-acquisition
revenue
AER
€m
2022
Pro forma revenue
AER
€m
14.0
–
17.4
31.4
289.5
300.9
131.7
722.1
Organic revenue at constant exchange rates*
Organic revenue at constant exchange rates is calculated by adjusting the prior year revenues, adding pre-acquisition revenues for the
corresponding period of ownership, and applying the 2021 foreign exchange rates to both years, when translating studio results into the
euro reporting currency.
Create
Globalize
Engage
2021
Revenue
AER
€m
188.2
231.9
92.1
512.2
2021
Pre-acquisition
revenue
AER
€m
2021
Like for like
revenue
AER
€m
2022
Revenue growth
CER
€m
15.0
–
7.2
22.2
203.2
231.9
99.3
534.4
52.7
54.3
9.6
116.6
2022
Revenue
CER
€m
255.9
286.2
108.9
651.0
2022
Organic
revenue growth
CER
%
25.9%
23.4%
9.7%
21.8%
*
The prior-year comparatives have been reclassified to present information by service line in alignment with the new organisational and reporting structures (see note 3).
Keywords Studios plc Annual Report and Accounts 2022Page Title
Supplementary information
167
Adjusted operating costs
This comprises Administrative expenses as reported in the Consolidated statement of comprehensive income, adding back share-based
payments expense, costs of acquisition and integration, amortisation of intangible assets, depreciation and impairment, non-controlling
interest and deducting bank charges.
Calculation
2022
€'000
2021
€'000
Administrative expenses
Consolidated statement of comprehensive income
(196,554)
(149,749)
Share-based payments expense
Consolidated statement of comprehensive income
Costs of acquisition and integration
Consolidated statement of comprehensive income
Amortisation of intangible assets
Consolidated statement of comprehensive income
Depreciation – property, plant and equipment
Note 13
Depreciation and impairment – right of use assets Note 12
Non-controlling interest
Consolidated statement of comprehensive income
Bank charges
Adjusted operating costs
Note 6
Adjusted operating costs as a % of revenue
18,678
8,413
16,810
18,365
14,585
–
(662)
16,394
7,972
13,688
11,661
10,473
67
(520)
(120,365)
(90,014)
17.4%
17.6%
Adjusted operating profit
The Adjusted operating profit consists of the Operating profit as reported in the Consolidated statement of comprehensive income, adjusted
for share-based payments expense, costs of acquisition and integration, and amortisation of intangible assets. In order to present the
measure consistently year-on-year, the impact of other income is also excluded.
Calculation
Operating profit
Consolidated statement of comprehensive income
Share-based payments expense
Consolidated statement of comprehensive income
Costs of acquisition and integration
Consolidated statement of comprehensive income
Amortisation of intangible assets
Consolidated statement of comprehensive income
Other income
Adjusted operating profit
Adjusted operating profit as a % of revenue
Consolidated statement of comprehensive income
2022
€'000
71,810
18,678
8,413
16,810
(1,098)
114,613
16.6%
2021
€'000
50,365
16,394
7,972
13,688
–
88,419
17.3%
EBITDA
EBITDA comprises Operating profit as reported in the Consolidated statement of comprehensive income, adjusted for amortisation of
intangible assets, depreciation and impairment, and deducting bank charges.
Calculation
Operating profit
Consolidated statement of comprehensive income
Amortisation of intangible assets
Consolidated statement of comprehensive income
Depreciation – property plant and equipment
Note 13
Depreciation and impairment – right of use assets Note 12
Bank charges
EBITDA
Note 6
2022
€'000
71,810
16,810
18,365
14,585
(662)
120,908
2021
€'000
50,365
13,688
11,661
10,473
(520)
85,667
Page Title
Supplementary information
168
Alternative performance measures continued
Adjusted EBITDA
Adjusted EBITDA comprises EBITDA, adjusted for share-based payments expense, costs of acquisition and integration and non-controlling
interest. In order to present the measure consistently year-on-year, the impact of other income is also excluded.
Calculation
EBITDA
As above
Share-based payments expense
Consolidated statement of comprehensive income
Costs of acquisition and integration
Consolidated statement of comprehensive income
Non-controlling interest
Consolidated statement of comprehensive income
Other income
Adjusted EBITDA
Adjusted EBITDA as a % of revenue
Consolidated statement of comprehensive income
2022
€'000
120,908
18,678
8,413
–
(1,098)
146,901
21.3%
2021
€'000
85,667
16,394
7,972
67
–
110,100
21.5%
Adjusted profit before tax
Adjusted profit before tax comprises Profit before taxation as reported in the Consolidated statement of comprehensive income, adjusted
for share-based payments expense, costs of acquisition and integration, amortisation of intangible assets, non-controlling interest, foreign
exchange gains and losses, and unwinding of discounted liabilities. In order to present the measure consistently year-on-year, the impact of
other income is also excluded.
Calculation
Profit before taxation
Consolidated statement of comprehensive income
Share-based payments expense
Consolidated statement of comprehensive income
Costs of acquisition and integration
Consolidated statement of comprehensive income
Amortisation of intangible assets
Consolidated statement of comprehensive income
Non-controlling interest
Foreign exchange (gain)/loss
Unwinding of discounted liabilities – deferred
consideration
Other income
Adjusted profit before tax
Adjusted profit before tax as a % of revenue
Consolidated statement of comprehensive income
Note 6
Note 6
Consolidated statement of comprehensive income
2022
€'000
67,982
18,678
8,413
16,810
–
(1,677)
2,922
(1,098)
112,030
16.2%
2021
€'000
47,983
16,394
7,972
13,688
67
(1,983)
1,882
–
86,003
16.8%
Adjusted effective tax rate
The Adjusted effective tax rate is the Taxation expense as reported in the Consolidated statement of comprehensive income, adjusted for the
tax impact of the adjusting items in arriving at Adjusted profit before tax, as a percentage of the Adjusted profit before tax.
Calculation
Adjusted profit before tax
As above
Taxation
Consolidated statement of comprehensive income
Effective tax rate before tax on adjusting items
Taxation/Adjusted profit before tax
Tax arising on bridging items to
Adjusted profit before tax^
Adjusted taxation
Adjusted effective tax rate
Adjusted taxation/Adjusted profit before tax
2022
€'000
112,030
20,612
18.4%
4,043
24,655
22.0%
2021
€'000
86,003
13,875
16.1%
4,729
18,604
21.6%
^
Being mainly the tax impact of share-based payments expense €0.4m and amortisation of intangible assets €4m less foreign exchange €0.4m, with the prior period
being mainly the tax impact of share-based payments expense €2.8m, amortisation of intangible assets €2.1m, less foreign exchange €0.2m.
Keywords Studios plc Annual Report and Accounts 2022Page Title
Supplementary information
169
Adjusted earnings per share
The Adjusted profit after tax comprises the Adjusted profit before tax, less the Taxation expense as reported in the Consolidated statement
of comprehensive income, adjusted for the tax impact of the adjusting items in arriving at Adjusted profit before tax.
The Adjusted earnings per share comprises the Adjusted profit after tax divided by the non-diluted weighted average number of shares as
reported in note 7.
Calculation
Adjusted profit before tax
As above
Taxation
Consolidated statement of comprehensive income
2022
€'000
112,030
(20,612)
(4,043)
87,375
2021
€'000
86,003
(13,875)
(4,729)
67,399
Tax arising on bridging items to
Adjusted profit before tax^
Adjusted profit after tax
Denominator (weighted average
number of equity shares)
Adjusted earnings per share
Adjusted earnings per share % growth
Note 8
76,979,596
75,526,296
€ c
113.50
27.2%
€ c
89.24
46.5%
^
Being mainly the tax impact of share-based payments expense €0.4m and amortisation of intangible assets €4m less foreign exchange €0.4m, with the prior period
being mainly the tax impact of share-based payments expense €2.8m, amortisation of intangible assets €2.1m, less foreign exchange €0.2m.
Return on capital employed (ROCE)
ROCE represents the Adjusted profit before tax (excluding net interest costs, unwinding of discounted lease liabilities and bank charges,
and also adjusted to include pre-acquisition profits of current year acquisitions), expressed as a percentage of the capital employed. As
the Group continues to make multiple acquisitions each year, the calculation further adjusts the Adjusted profit before tax and the capital
employed as if all the acquisitions made during each year were made at the start of that year.
Capital employed represents Total equity as reported on the Consolidated statement of financial position, adding back employee defined
benefit plan liabilities, cumulative amortisation of intangible assets (customer relationships), acquisition-related liabilities (deferred and
contingent consideration), together with loans and borrowings, while deducting cash and cash equivalents.
Calculation
Adjusted profit before tax
Interest received
Bank charges
Interest expense
As above
Note 6
Note 6
Note 6
Unwinding of discounted liabilities – lease liabilities
Note 6
Pre-acquisition profits of current year acquisitions
Note 27
Adjusted profit before tax including pre-acquisition
profit and excluding net interest
Total equity
Consolidated statement of financial position
Employee defined benefit plans
Consolidated statement of financial position
Cumulative amortisation of intangibles assets
(customer relationships)
Deferred and contingent consideration
Loans and borrowings
Cash and cash equivalents
Capital employed
Return on capital employed
Note 11
Note 17
Note 18
Consolidated statement of financial position
Adjusted profit before tax including pre-acquisition
profit and excluding net interest expense/capital
employed
2022
€'000
2021
€'000
112,030
86,003
(309)
662
1,261
969
1,601
(62)
520
1,040
985
2,573
116,214
91,059
557,091
2,861
58,301
63,253
51
(81,886)
599,671
472,120
3,088
40,708
54,142
129
(105,710)
464,477
19.4%
19.6%
Page Title
Supplementary information
170
Alternative performance measures continued
Free cash flow
Free cash flow represents Net cash generated by/(used in) operating activities as reported in the Consolidated statement of cash flows,
adjusted for acquisition and integration cash outlay, capital expenditure, non-cash movements in deferred and contingent consideration
related to continuous employment, net interest paid, payments of principal on lease liabilities and is presented both before and after
taxation paid. In order to present the measure consistently year-on-year, the impact of other income is also excluded.
Calculation
Net cash generated by/(used in) operating activities Consolidated statement of cash flows
Acquisition and integration cash outlay:
Costs of acquisition and integration
Consolidated statement of comprehensive income
Fair value adjustments to contingent consideration Consolidated statement of cash flows
Non-cash movements in Deferred and contingent
consideration related to continuous employment
Acquisition of property, plant and equipment
Consolidated statement of cash flows
Investment in intangible assets
Consolidated statement of cash flows
Other income
Interest received
Interest paid
Consolidated statement of comprehensive income
Consolidated statement of cash flows
Consolidated statement of cash flows
Payments of principal on lease liabilities
Consolidated statement of cash flows
Free cash flow after tax
Taxation paid
Free cash flow before tax
Consolidated statement of cash flows
2022
€'000
124,286
8,413
(2,282)
(3,000)
(27,007)
(501)
(1,098)
309
(1,797)
(11,361)
85,962
17,505
103,467
2021
€'000
90,545
7,972
(5,567)
–
(19,360)
(315)
–
62
(2,738)
(9,953)
60,646
23,948
84,594
Adjusted free cash flow
Adjusted free cash flow is a measure of cash flow adjusting for capital expenditure that is supporting growth in future periods (as measured
by capital expenditure in excess of maintenance capital expenditure).
Calculation
Free cash flow before tax
As above
Capital expenditure in excess of depreciation:
Acquisition of property, plant and equipment
Consolidated statement of cash flows
Depreciation – property, plant and equipment
Consolidated statement of cash flows
Capital expenditure in excess of depreciation
Adjusted free cash flow
Adjusted cash conversion rate
The Adjusted cash conversion rate is the Adjusted free cash flow as a percentage of the Adjusted profit before tax:
Calculation
Adjusted free cash flow
Adjusted profit before tax
Adjusted cash conversion ratio
As above
As above
Free cash flow before tax and capital expenditure
in excess of depreciation, as a % of Adjusted profit
before tax
2022
€'000
103,467
27,007
(18,365)
8,642
112,109
2021
€'000
84,594
19,360
(11,661)
7,699
92,293
2022
€'000
112,109
112,030
2021
€'000
92,293
86,003
100.1%
107.3%
Net debt
The Group manages capital by monitoring debt to capital and net debt ratios. Net debt is calculated as Loans and borrowings (as shown in
the Consolidated statement of financial position) less Cash and cash equivalents, and excludes Lease liabilities.
Calculation
Loans and borrowings
Cash and cash equivalents
Net debt/(net cash) position
Consolidated statement of financial position
Consolidated statement of financial position
2022
€'000
51
(81,886)
(81,835)
2021
€'000
129
(105,710)
(105,581)
Keywords Studios plc Annual Report and Accounts 2022Page Title
Supplementary information
Key disclaimers
Key disclaimers
171
References to “Keywords”, “Keywords Studios” or the “Group” are to Keywords Studios Plc (the “Company”) and its subsidiaries unless
otherwise stated. The “Keywords Studios” word and logo marks are trademarks owned by Keywords International Limited, a member of the
Group. Other product and company names mentioned herein may be the trademarks of their respective owners.
This report contains “forward-looking statements” with respect to the Group’s financial condition, results of operations and businesses
and certain of the Group’s plans and objectives. In particular, such forward-looking statements include, but are not limited to, statements
with respect to: expectations regarding the Group’s financial condition or results of operations and the guidance for a financial year; the
Group’s sustainable business strategy and targets; expectations for the Group’s future performance generally; expectations regarding the
operating environment and market conditions and trends, including customers, new game launches and next generation consoles, adjacent
markets, games-as-a-service, competitive position and macroeconomic pressures, price trends, commercial momentum and opportunities in
specific geographic markets; expectations regarding the integration or performance of current and future investments and newly acquired
businesses. Forward-looking statements are sometimes, but not always, identified by their use of a date in the future or such words as “will”,
“anticipates”, “could”, “may”, “should”, “expects”, “believes”, “estimates”, “intends”, “plans” “projects” or “targets” (in each case including in their
negative form or other variations or their comparable terminology). By their nature, forward-looking statements include matters that are
not historical facts and are inherently predictive, speculative and involve risk and uncertainty because they relate to events, and depend on
circumstances, that may or may not occur in the future. No reliance whatsoever should be placed on any forward-looking statements.
There are a number of factors that could cause actual results and developments to differ materially from those expressed or implied by
these forward-looking statements. These factors include, but are not limited to, the following: changes in economic, financial, political and
regulatory conditions; factors that contribute to uncertainty and volatility, including natural and man-made disasters, civil unrest, pandemics
(e.g. the coronavirus (COVID-19) pandemic (the “COVID-19 pandemic”)) and geopolitical uncertainty; the ability of the Group to successfully
recover from a disaster, force majeure event or other business continuity problem including, but not limited to, due to a hurricane, flood,
earthquake, terrorist attack, war, pandemic, security breach, cyber-attack, insider threats or supplier breach, disclosure or misuse of
confidential information, power loss, data loss, telecommunications failure or other natural or man-made event; any governmental or other
third party policies or actions to maintain the functioning of national or global economies and markets; changes to legal, regulatory and tax
environments; increased competition; the Group’s ability to generate and grow revenue; the Group’s ability to meet its ESG-related goals
and targets; the Group’s ability to adapt to rapid advances in technology; the Group’s ability to attract and retain customers; reductions or
changes in customer trends or spending and increased pricing pressure; the Group’s ability to attract and retain talent and wage inflation;
the Group’s ability to realise expected benefits or synergies from acquisitions; acquisitions and divestments of Group businesses and
assets and the pursuit of new, unexpected strategic opportunities; the Group’s ability to integrate acquired business or assets; the extent
of any future write-downs or impairment charges on the Group’s assets, or restructuring charges incurred as a result of an acquisition
or disposition; developments in the Group’s financial condition, earnings and distributable funds and other factors that the Board takes
into account in determining the level of dividends; the Group’s ability to satisfy working capital requirements; and changes in foreign
exchange rates.
Supplementary information
Company information
172
Company information
Directors
Ross Graham
Don Robert
Bertrand Bodson
Jon Hauck
Georges Fornay
Charlotta Ginman
Marion Sears
Neil Thompson
Secretary
Andrew Kennedy
Registered Number
8548351
Registered Office
Fourth Floor,
110 High Holborn,
London WC1V 6JS, UK
Auditors
BDO Registered Auditors
Block 3, Miesian Plaza,
50-58 Lower Baggot Street,
Dublin 2, Ireland
Registrars
Link Group
10th Floor,
Central Square,
29 Wellington Street,
Leeds LS1 4DL, UK
Remuneration Consultants
Deloitte LLP
1 New Street Square,
London EC4A 3HQ, UK
Principal Bankers
Citibank, N.A., London Branch
Citigroup Centre, Canada Square,
Canary Wharf,
London E14 5LB, UK
Fifth Third Bank
National Association Representative Office,
38 Fountain Square Plaza, Cincinnati,
Ohio 45263, USA
HSBC Continental Europe
38 Avenue Kléber,
75116 Paris, France
ING Bank N.V., Dublin Branch
Block 4, Dundrum Town Centre,
Sandyford Road, Dundrum, Dublin 16, Ireland
Nominated Adviser and Broker
Numis Securities Limited
45 Gresham Street,
London EC2V 7BF, UK
Financial PR Adviser
MHP Group
4th Floor, 60 Great Portland Street,
London W1W 7RT, UK
Solicitors
DWF LLP, 20 Fenchurch Street,
London EC3M 3AG, UK
Keywords Studios plc Annual Report and Accounts 2022
CBP018164
Printed by a Carbon Neutral Operation (certified: CarbonQuota) under the PAS2060 standard.
Printed on material from well-managed, FSC™ certified forests and other controlled sources.
This publication was printed by an FSC™ certified printer that holds an ISO 14001 certification.
100% of the inks used are HP Indigo ElectroInk which complies with RoHS legislation and meets
the chemical requirements of the Nordic Ecolabel (Nordic Swan) for printing companies, 95% of
press chemicals are recycled for further use and, on average 99% of any waste associated with
this production will be recycled and the remaining 1% used to generate energy.
The paper is Carbon Balanced with World Land Trust, an international conservation charity,
who offset carbon emissions through the purchase and preservation of high conservation value
land. Through protecting standing forests, under threat of clearance, carbon is locked-in, that
would otherwise be released.
K
e
y
w
o
r
d
s
S
t
u
d
i
o
s
p
l
c
A
n
n
u
a
l
R
e
p
o
r
t
a
n
d
A
c
c
o
u
n
t
s
2
0
2
2
Keywords Studios plc
4th Floor
110 High Holborn
London WC1V 6JS
United Kingdom
www.keywordsstudios.com