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Imagine More
Annual Report
and Accounts 2023
We Imagine More
for the global
video gaming
and entertainment
communities
We are trusted and relied upon by the
world’s leading video games and entertainment
companies to work alongside them during
the full content development cycle, from
concept through to launch and beyond,
to bring immersive content to life for the
joy of billions across the world.
Find out more on page 2
2023 Highlights
Revenue
€780m
13% year-on-year
EBITDA*
€109m
(10)% year-on-year
Operating Profit
€47m
(35)% year-on-year
Basic earnings per share
25.3c
(59)% year-on-year
Adjusted cash conversion rate*
82%
2022: 100%
Organic Revenue growth*
6%
2022: 22%
Adjusted EBITDA*
€158m
8% year-on-year
Adjusted Operating profit*
€122m
6% year-on-year
Margin 15.6% (2022: 16.6%)
Adjusted earnings per share*
112.9c
(1)% year-on-year
Total dividend per share
2.61p
10% year-on-year
Continuing to perform
— Resilient performance, extending
leadership position in the industry.
— Create division performed well,
with Globalize and Engage divisions
impacted by market conditions
and US entertainment strikes.
— Delivered five acquisitions for
a total maximum consideration
of €225 million.
Delivering against strategy to drive
long-term sustainable growth
— Enhanced strategic partner
relationships, with Top 25 revenues
increasing faster than Group.
— Growing traction with clients
around our AI post-production
technology suite.
—
Increased Group collaboration, with
leadership principles supporting
One Keywords culture.
Progress against ESG goals
— Renewed and strengthened
partnership with Women in Games.
—
—
Increased MSCI ESG
rating from A to AA.
Increased number of studios
on renewable tariffs by 50%.
Find out 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 page 152.
01
Overview
01 2023 Highlights
02 Who we are
03 What we do
04 Our footprint
06 Chair’s statement
Strategic Report
08 Chief Executive’s review
14 Strategy in action - Technology
16 Market review
18 Our business model
20 Our strategy
24 Strategy in action - Innovation
26 Key performance indicators
28 Divisional review
34 Financial and operating review
38 Responsible business review
46 Task Force on Climate-related
Financial Disclosures report
52 Section 172 (1) statement
54 Principal risks and uncertainties
61 Non-financial and sustainability
information statement
Governance
62 Chair’s introduction
64 Corporate governance report
68 Our Board of Directors
70 Nominations Committee report
72 Audit Committee report
75 Directors’ Remuneration report
90 ESG Committee report
92 Directors’ report
94 Statement of Directors’
responsibilities
Financial Statements
Independent Auditor’s report
95
101 Consolidated statement
of comprehensive income
102 Consolidated statement of
financial position
103 Consolidated statement of changes
in equity
104 Consolidated statement of
cash flows
105 Notes forming part of the
consolidated financial statements
144 Company statement of
financial position
145 Company statement of changes
in equity
146 Company statement of cash flows
147 Notes forming part of the Company
financial statements
Supplementary information
152 Alternative performance measures
160 Key disclaimers
161 Company information
Scan to visit us online
Keywords Studios plc
Annual Report and Accounts 2023
OverviewGovernanceStrategic ReportFinancial StatementsSupplementary Information
02
Who we are
We have an unrivalled collection
of connected studios across the
globe, who together offer world-
leading expertise and technology
to support our partners create the
richest, most immersive experience
for the +3 billion players globally.
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
creative and technology solutions for the video
games and entertainment industries, operating
sustainably and positively contributing to the
environment and our communities across the globe.
72%
of Game Awards winners
Keywords partnered on 13 of the 18 winning
titles (72%) at the 2023 Game Awards in
December, including two of the biggest
winners on the night, Baldur’s Gate 3
by Larian Studios and Alan Wake 2 by
Remedy Entertainment.
Our purpose
To bring to life content that entertains,
connects, challenges and educates
people worldwide
Our strategic priorities
Strategic partnerships
Form deeper strategic
client partnerships to
create and capture
more value together.
Technology
Harness technology to
do more for our clients
and stay at the forefront
of the industry.
One Keywords
Drive a “One Keywords”
entrepreneurial
culture and enhance
collaboration.
Talent & capabilities
Become the destination
for talent and career
development in
the industry.
Adjacent markets
Leverage our
capabilities to win in
closely adjacent markets
Find out more on page 20
Our responsible business pillars
People
Planet
Community
Client
Governance
Find out more on page 38
Annual Report and Accounts 2023
What we do
03
We Create
% of 2023
Group
revenue
Our connected network of 25 game
development and art studios across four
continents support global publishers in
designing and developing content for
some of the largest IPs in the world.
Find out more on page 28
43%
~4,500
People across 18 countries
We Globalize
% of 2023
Group
revenue
We provide a global offering encompassing
technology-enabled post-production
services - audio, testing and localization -
required by our clients to get their content
ready for markets across the globe.
36%
Find out more on page 30
~5,000
People across 18 countries
We Engage
% of 2023
Group
revenue
Our Engage division brings together
our Marketing Services and Player
Engagement businesses and is
responsible for attracting, retaining and
supporting fans across the video games
and entertainment industries. We are
experts in fandom.
Find out more on page 32
21%
~2,500
People across 14 countries
Keywords Studios plc
Annual Report and Accounts 2023
OverviewGovernanceStrategic ReportFinancial StatementsSupplementary Information 04
Our footprint
International scale and
diversification across markets
Americas
Countries
4
Brazil
Canada
Mexico
USA
26countries
+70studios across the world
#1creative and technology-solutions
provider to the video games industry
Keywords Studios plc
Annual Report and Accounts 2023
05
We operate in strategically important locations, which provide both
proximity to the world’s leading entertainment companies and good
access to skilled talent pools across five continents. Through the year
we focused on consolidating our footprint in key locations and creating
central hubs, whilst maintaining the individual identities of our studios.
Divisional representation
in the region
Create
Globalize
Engage
Europe
Countries
12
Asia-Pacific Countries
10
Armenia
England
France
Germany
Ireland
Italy
Malta
Poland
Romania
Scotland
Serbia
Spain
Abu Dhabi
Australia
China
India
Indonesia
Japan
Korea
Philippines
Singapore
Taiwan
Keywords Studios plc
Annual Report and Accounts 2023
OverviewGovernanceStrategic ReportFinancial StatementsSupplementary Information 06
Chair’s statement
Continued
growth. Forward
momentum.
Dear Shareholders,
It gives me great pleasure to write this letter
to shareholders for the first time as the Chair of
Keywords Studios, but it is tinged with sadness
at the untimely passing of Ross Graham, just two
weeks before he was due to pass the baton on
to me in May 2023. Ross had been Chairman of
Keywords since it listed in 2013, guiding it on its
remarkable journey from a small player in the
gaming market to the industry leader that it is
today, and we owe him deep gratitude for all that
he did in his time here. He is missed by many
people across the organisation.
Overview
The business continued to deliver against
its core strategic objectives this year, and
despite a number of macro environment
and industry challenges has further
extended its leadership position within
its markets. The strength and breadth
of the Group’s offering across the full
development cycle has allowed it to
successfully navigate a difficult time in
the video gaming industry, as it resets and
refocuses after experiencing extremely
strong growth during the Covid period.
We delivered revenues of €780m in 2023,
representing overall growth of 13%, and 17%
in constant currency*. Adjusted operating
profit rose by 6% and adjusted earnings
per share was broadly flat. Adjusted cash
conversion continued to remain strong at
82%, in line with expectations.
* Constant currency definition can be found in
Alternative Performance Measures, page 152.
Don Robert
Keywords Studios plc
Annual Report and Accounts 2023
07
Strategy
The Group has continued to deliver against
the five pillars of its strategy this year, as
well as extending its platform through M&A.
The significant focus on technology and
artificial intelligence (AI), one of the Group’s
strategic pillars, since the emergence
of Generative AI, has had a meaningful
impact on the Company’s share price due
to speculation about the potential impact
on the business. As a Board we believe
that AI will provide many opportunities and
continue to focus on the long-term value
generation of the business. I have been
pleased with the progress that the business
has made in developing its technology
solutions, specifically in the post-production
areas of the business. The Group is
also exploring the opportunities that lie
ahead across the full value chain. In my
experience, companies that are agile and
entrepreneurial are those that will emerge
from any significant technology changes
as clear winners. I believe that the team in
place and the culture of the organisation
is such that we are well placed to take
advantage of benefits that increasing
technology adoption will bring.
The Group has continued its disciplined
deployment of capital aimed at driving long-
term value. To support this, it extended its
Revolving Credit Facility to $400 million and
lengthened its maturity to 2027. This has
enabled the business to execute on high-
quality M&A opportunities, with five deals
completed during the year for a maximum
consideration of €225m, which has both
strengthened our position and extended
our offering for our clients.
The Board has recommended a final
dividend of 1.76p, making the total dividend
for the year ended 31 December 2023 2.61p
per share, an increase of 10% over the 2022
full year dividend (2022: 2.37p per share),
in line with its progressive policy. Subject to
shareholder approval at the 2024 Annual
General Meeting, the final dividend will be
paid on 28 June 2024.
The Board continues to believe that
allocating capital to drive high-quality
long-term growth provides the best returns
for shareholders, but regularly assesses
other opportunities to deploy capital in
a disciplined manner for the benefit of
our stakeholders.
Balance sheet flexibility
$400m
Corporate governance
Keywords is a young and dynamic company,
and the Board seeks to operate to high
governance and ethical standards. Further
detail is available in the Governance report
from page 62.
From a corporate governance perspective,
we have a knowledgeable and engaged
Board, marked by a good balance of
discussion and robust challenge on key
topics. We undertook a Board effectiveness
review in the second half of the year, which
confirmed that the Board continues to
function well and each Director continues
to provide valuable contributions in, and
outside of, Board meetings. During the
year, we were pleased to welcome Rob
Kingston to the Board as CFO in July. Rob
has had a lengthy career within content
and technology businesses and has already
made a positive impact. His arrival was part
of a long-planned strengthening of the
management team, allowing Jon Hauck to
move into the COO role at an important
juncture for the business.
To ensure the Board remains focused on
our strategic priorities, two key governance
enhancements were introduced in 2023.
Deep dive sessions on our clients were held
at every Board meeting, providing greater
insight into the interests of clients and how
we respond to them and build stronger
relationships. Secondly, in December, the
Board and executive leadership team held a
dedicated strategy day to review strategic
progress, a comprehensive three-year
plan for the Group, and the medium-term
opportunity, which remains significant for
the business. Further details of these can be
found in the Governance report on pages
64 and 65.
Increased size of revolving credit
facility from €150m to $400m
during the year, and lengthened
maturity to 2027.
Find out more on page 124
Sustainability
With around 13,000 people within the
Group, in addition to our freelancer
community, we place great emphasis on
engagement, diversity, well-being and
development and have seen progress across
the key metrics in each of these areas. We
have also improved our climate-related
disclosures, publishing our third Taskforce
on Climate-related Financial Disclosures
(TCFD) report and have enhanced our
monitoring of our emissions with the aim of
applying to join the Science Based Target
initiative (SBTi) by the end of 2025. We
are also integrating sustainability metrics
into the Executive team’s remuneration
packages this year as part of an overall
review of their remuneration, to bring that
into line with similar-sized businesses.
Summary
Keywords has delivered a robust year of
growth, despite the difficult backdrop,
and has enhanced its leadership position
in the market. The benefits of our strategy
are becoming more tangible, and we see
significant opportunities ahead for long-
term sustainable growth. On behalf of the
Board, I would like to thank all colleagues
for their dedication and professionalism
throughout the year. I look forward to
working with the Board and the Executive
Committee to execute against our strategic
objectives and to build on our position at
the centre of the gaming ecosystem.
Don Robert
Chair
As a Board we continue to focus on
the long-term value generation of the
business and have been pleased with the
progress that the business has made.
Keywords Studios plc
Annual Report and Accounts 2023
OverviewGovernanceStrategic ReportFinancial StatementsSupplementary Information 08
Chief Executive’s review
Extending our
leadership
position.
Bertrand Bodson
Despite pausing for breath in 2023,
we believe the medium-term
prospects for the industry remain
extremely attractive and will enable
the Group to thrive.
Performance
The Group delivered resilient performance
in 2023, with revenues growing 13% to
€780m, despite a 4% headwind from
foreign exchange, further extending our
market leadership position.
Reported organic revenue growth of 6%
included a 3% combined impact from
the US entertainment strikes on our
media and entertainment businesses, and
foreign exchange movements. Excluding
these factors, organic growth would
have been around 9%, slightly behind
our medium-term guidance, reflecting
the current market and macro dynamics,
which have led to pressures on certain
parts of the business.
Operating margins were ahead of
expectations at 15.6%, due to good
cost control, which delivered adjusted
operating profit of €122m (reported
operating profit was €47m). This was
6% higher than 2022, despite the
higher margin experienced in the
comparative period.
Keywords Studios plc
Annual Report and Accounts 2023
09
C A S E S T U D Y
One Keywords:
Starfield
Starfield was the much-anticipated
new space epic from Bethesda
Game Studios, the award-winning
creators of landmark blockbusters
The Elder Scrolls V: Skyrim and
Fallout 4.
It was the first entirely new universe
in over two decades from these
giants of the video game industry,
and Keywords was proud to have
worked alongside them every
step of the way to deliver a truly
groundbreaking game for their
legions of players worldwide.
The collaboration involved teams
from each of our Divisions working
in unison to provide best-in-class
services, whether technical
development, breath-taking
artwork, exceptional voiceovers,
testing and localization into a
range of languages, all to augment
Bethesda's own extraordinary
operations.
Scan to read more
Industry forecasts point to continuing
long-term growth in the vast video-gaming
market, with growth in the content creation
segment expected to be above the overall
market, with a five-year CAGR of 8%.
External service provision is still expected to
be the fastest growing segment, with a five-
year CAGR of over 9% (Source: IDG) and
this underpins our medium-term organic
growth expectations.
Delivering against strategy
As the key player in this market, at more
than 3x the size of the next largest
competitor, yet with market share of
6%, we believe we remain incredibly
well placed to grow our market share in
a highly fragmented market. To do so,
we are making good progress against
the five pillars of our strategy, including
utilising the power of our platform to drive
strategic partnerships with the key market
players, and investing in leading technology
solutions to better serve our clients and
enhance our economic and technology
moat against competitors.
We have continued to work more closely
with our largest clients as we seek to
evolve our relationships to more strategic
partnerships. This has seen increased
access to CXO suites, more in-depth
strategic partner reviews, and sessions
with key partners on developments
around AI, strengthening our position
as thought-leaders in this field. These
enhanced relationships are giving us the
opportunity to partner with our clients on
more projects, as well as taking on larger,
longer-term projects. During the year, we
were pleased to see revenues from our Top
25 clients grow meaningfully faster than
the Group, demonstrating the power of the
relationships and helping us to outperform
the market.
Technology, the second major pillar of
our strategy, goes hand-in-hand with our
strategic partnership initiatives, as an
important differentiator in the market,
providing real benefits to clients, whether
large or small. Our 4,500 dedicated
engineers and technical experts in Create
have a long track record of unlocking the
benefits of multiple generations of new
technologies to support the industry’s “race
to the top” to create the most immersive
experience for players and we continue
to build on our focus on responsibly
harnessing AI and other technologies in
recent years.
The performance of each of the Group’s
three Divisions reflected the varied
conditions in the market. We continued
to see strong demand in Create, which
now accounts for over 50% of Group
profitability, offset by a temporary
moderation of demand in our Globalize and,
to a lesser extent, Engage Divisions, due to
the current market conditions.
Cash generation remained strong, and as
normal, was H2 weighted, primarily due
to the timing of working capital, and we
delivered adjusted free cash flow of €94m,
giving an adjusted cash conversion rate
of 82%.
We had another successful year of M&A,
supported by our strong balance sheet,
cash generation and expanded revolving
credit facility, adding three high-quality
game development studios to Create,
and broadening Engage’s digital and PR
offerings, with two new US studios. As a
result of this activity, we moved from a net
cash position of €82m at December 2022
to a year-end net debt position of €68m,
with significant headroom remaining in our
facilities for further selective acquisitions.
Market opportunity
After a number of extremely strong years of
growth, in 2023, the video gaming industry
saw a mixed performance. Major titles that
had been in production for a number of
years were released to commercial success,
such as Hogwarts Legacy, Starfield, Diablo
IV and Baldur’s Gate 3, but the broader
industry saw publishers focus more on
profitability than on taking risks around
new content. This meant that we saw a
focus on core IPs and smaller scopes for
the launch of some titles, with an increase
in the number of games being delayed
or cancelled.
As we move into 2024, we expect a gradual
improvement to market conditions and
we remain confident in the medium-term
market backdrop. Player numbers continue
to rise, with another record year of average
in-game players on Steam, and games such
as Fortnite have attracted their highest
ever monthly average users during Q4,
demonstrating the popularity and longevity
of high-quality games. The mobile market,
which has been through a difficult period,
also appears to be returning to growth
after six consecutive quarters of declines.
Hardware challenges have eased, with the
PS5 now readily available and there is a
market expectation that when Nintendo
launches new hardware this will also drive
further growth in content.
Keywords Studios plc
OverviewGovernanceStrategic ReportFinancial StatementsSupplementary Information 10
Chief Executive’s review
C O N T I N U E D
Through a combination of M&A and internal
development, the business has also been
building a post-production platform of
AI-enabled products to meet client needs,
supported by over 250 product engineers,
enhancing our existing Globalize and
Engage services, and enabling us to do
more, faster, and more efficiently whilst
enhancing quality for clients.
We saw good traction with Mighty Games’
innovative AI-based testing solution, Mighty
Build & Test, who have scaled their footprint
and product offering, so that they are now
able to test on any game engine. Mighty is
increasingly becoming our internal testing
solution, increasing automation across our
game development studios globally and
has an exciting client pipeline and product
development roadmap ahead.
Helpshift, our digital first customer support
solution saw good growth, powered by its
ability to swiftly scale support for certain
high performing mobile games in H2.
The business has continued to broaden
its offering whilst delivering an average
of over 60% AI automation to clients. It
is integrating Gen AI to aid the customer
support journey, providing enhanced first
contact resolution, delivering insights and
providing sentiment analysis for clients.
We were also excited to launch LanguageAI
during the year, which is powered by
KantanAI’s machine translation technology
to enable more languages to be supported
Investment case
Keywords is a critical enabler of a
large, dynamic industry, and we
are building out our proprietary
technology platform to augment
our future growth.
Over time we have proven that
we can evolve our offering,
organically and through M&A,
to move up the value chain and
our entrepreneurial culture
enables us to continually adapt
and deliver leading services to
our clients to meet their current
and future needs.
within the Helpshift solution, and in early
2024, a VIP Services offering, utilising
Helpshift’s data insights to better support
high-spending players.
KantanAI has continued to grow its
partnership with Microsoft, and due to the
benefits of its unique AI-assisted workflow
with improved turn-around times and
quality of service, has become increasingly
embedded in service delivery for other
clients. We have also broadened the Kantan
suite of products, with Kantan Audiomate,
which manages and stores audio digital
assets, whilst automating and enhancing
audio workflows, now in production
with clients.
During the year, we recruited the former
Head of Gaming AI from AWS Games to
spearhead our AI Centre of Excellence
(CoE), as part of our Innovation at Keywords
team, led by Jamie Campbell. The CoE is
continually mapping the landscape for AI
tools that can be deployed in the game
development cycle, knowledge sharing and
coordinating the many initiatives across
our studios and building partnerships,
so that we can help clients navigate the
fast-moving landscape and shape their
AI strategies.
An example R&D initiative, sponsored
by the Innovation team was Project Ava,
where a team, initially from Electric Square
Malta, attempted to create a 2D game
solely using Gen AI. Over the six-month
process, the team shared their findings
across the Group, highlighting where Gen
AI has the potential to augment the game
development process, and where it lags
behind. Whilst the project team started
small, it identified over 400 tools, evaluating
and utilising those with the best potential.
Despite this, we ultimately utilised bench
resource from seven different game
development studios as part of the project,
as the tooling was unable to replace talent.
One of the key learnings was that whilst
Gen AI may simplify or accelerate certain
processes, the best results and quality
needed can only be achieved by experts in
their field utilising Gen AI as a new, powerful
tool in their creative process. As a research
project, the game will not be released to the
public, but has been an excellent initiative
to rapidly spread tangible learnings across
the Group, provide insights to clients and
it demonstrates the power and level of
cross-studio collaboration that currently
exists. Alongside Project Ava, the team is
undertaking a range of Gen AI R&D projects,
including around 3D assets, to ensure that
we are able to provide current insights in an
ever-evolving part of the market.
An important element of our technology
journey has been to ensure we have a
strong technology spine within the Group.
During the year, we have reshaped our
internal teams to ensure we can support
the different needs of each Division better
and have made targeted investments to
01
Compounding model has
driven a long-term track
record of growth
Since our listing in 2013, we have grown from €16m
of revenues to €780m in 2023. Over the last six
years, revenues have grown at a compound average
growth rate of over 30% through a combination
of strong organic growth and M&A. Over the same
time period, annual organic revenue growth has
tended to be in excess of 10% as we have benefitted
from both the growth in the video games industry
and growth in market share.
Our compounding growth model combines
medium-term double-digit organic growth driven by
high levels of repeat business and strong customer
relationships, with stable operating margins and
strong cash conversion. This enables us to re-invest
into value accretive M&A to drive future growth and
propels us towards our medium-term target of over
€1bn in annual revenues.
Keywords Studios plc
Annual Report and Accounts 2023
11
consolidate systems and begin to create
a global platform that will, over time,
enable enhanced customer experiences,
data insights and increasingly frictionless
customer collaboration.
Whilst the initiatives I have picked out are
not exhaustive, this gives a good flavour
of the success of the One Keywords pillar
in driving collaboration and advantage
across the Group. The consolidation of
our service lines into Divisions has been a
foundational step, for example in the Create
Division alone, over 30% of projects had
multiple studios working on them. With the
support of operational excellence initiatives
such as HR and IT business partnering and
cross-studio initiatives like Project Ava,
increased collaboration across our global
platform is set to continue and with it the
unique advantages it brings. We have also
continued to embed our new Leadership
Principles across the organisation,
with a broad-ranging communications
programme, and were very pleased with
the seamless transition of Sperasoft into
four new operating hubs in Eastern Europe,
with production in Russia ceasing.
Even in a year of wide-spread job losses,
it remains difficult to find high-quality
engineering talent and capabilities across
the industry. Despite this, Keywords
continued to grow, with our talent
acquisition programmes, supporting good
growth in this part of our business, with
targeted efforts to identify and attract
talent on a global basis. The recruitment of
Rob Kingston as CFO in July meant that Jon
Hauck was able to move across to the COO
role to support the long-term growth of the
business and complete the evolution of the
leadership team. I believe we are building
a leadership team and structure, with
good strength in depth, to drive the future
success of the business.
Our progress in adjacent markets has also
been very encouraging with Lively, our
dedicated LiveOps studio, experiencing
strong growth and demand from a wide
variety of clients. We also believe there
is a significant opportunity within virtual
production, both for turn-key services,
and as a virtual art department within
the broader production process and
have launched services to address this
opportunity. Towards the end of the year,
we won virtual production and animation
client mandates through both our Engage
and Create Divisions.
We extended our media and entertainment
offering in the US, through the acquisition
of Digital Media Management, which works
with some of the world’s biggest franchises,
including the recent Barbie movie, to
enhance their reach online and in social
media. With the convergence of gaming
and film and television, as underscored by
Disney’s recent $1.5bn investment in Epic
Games, we see meaningful opportunities
ahead for us here.
M&A
A key and long-standing element of
our strategy is to add significant value
by reinvesting our free cash flow into
consolidating a fragmented market in
four M&A focus areas: game development,
marketing, technology and adjacent
markets. We were pleased to deliver a
record year of M&A, acquiring five studios
for total maximum consideration, including
performance related contingent deferred
consideration, of €225m. In 2023, the
cash component of both the current and
previous years’ transactions amounted
to €195m.
In line with our focus areas, three of
the acquisitions broadened our game
development capabilities, with The
Multiplayer Group bringing extensive
multiplayer game expertise, Hardsuit Labs
bringing a deep understanding of Unreal
Engine and Playboss Interactive providing
one of our leading UK studios, Climax, a
second location to grow from. We also
broadened our Engage offering in the US,
the largest global market for gaming, with
the acquisitions of 47 Communications and
Digital Media Management (DMM), with both
enhancing our media and entertainment
offering, and DMM bringing market-leading
social media capabilities and an innovative
Creator-focused technology platform.
02
Market-leading position
Keywords is the only global provider of fully
integrated creative and technology-enabled solutions
to the global video games industry and is ~3x the
size of our nearest competitor. The industry is still
incredibly fragmented, with around 90% white space,
and there is a significant opportunity to grow our
market share, both organically and inorganically.
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.
3x the size of our
nearest competitor
Find out more on page 17
Keywords Studios plc
Annual Report and Accounts 2023
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Chief Executive’s review
C O N T I N U E D
The five acquisitions delivered pro forma
revenues of €90m in 2023 (including pre-
acquisition revenues), at margins above the
current Group, and are expected to grow
strongly in the coming years as we continue
to evolve the Group towards higher-value
services. We have a strong balance sheet
and an extensive pipeline of opportunities
that will lead to further attractive
acquisitions during 2024. We expect to
continue our long track record of adding
significant value to our business and our
clients through our highly value accretive
acquisition strategy for many years.
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. We have made solid progress
against our main priorities across the year,
with a range of initiatives designed to
enhance culture, employee engagement
and diversity and inclusion. These
included the expansion of our employee
engagement initiatives, together with
the continuing roll-out of our Leadership
Principles across the Group. We continued
to make progress with our diversity, equity,
inclusion and belonging agenda, increasing
the proportion of women in the Group
once again, supporting the growth of the
Women in Games Ambassador programme
to more than 1,700 people, and hosting
a very successful Women’s Summit in
Asia. We also began to increase efforts
around broader diversity, especially given
the prevalence of neurodiversity within
the video gaming sector, and undertook
training, and launched a thriving affinity
group - Brain Space - which is providing the
opportunity for connections and support.
In May, we celebrated 25 years of Keywords
by planting 25,000 trees across the world
and have continued to win a range of Best
Company to Work For awards in a number
of locations. We have continued our climate
journey, expanding our emissions reporting,
and enhancing our climate-related risk
reporting, within our annual report. Our
progress against our priorities has been
increasingly recognised by third-party ESG
rating agencies, with MSCI now rating the
business AA, the joint highest rating in
our category.
US entertainment strikes
Whilst Keywords’ primary market is video
gaming, it has an increasing exposure to the
broader media and entertainment industry,
with the crossover between the two
industries growing. Both our Globalize and
Engage Divisions generate revenues from
the media and entertainment industry, with
a large proportion of this in post-production
audio services and marketing in the US. In
May, the Writers Guild of America (WGA)
union commenced strike action following
the failure of union negotiations around
working conditions, residuals and AI usage.
The WGA was followed on strike by the
SAG-AFTRA union in mid-July, which meant
a near complete stoppage of content
generation in Hollywood.
These strikes continued for a number of
months, with the WGA returning to work in
September and SAG-AFTRA in November.
As a result, our US businesses saw
substantially reduced work volume, leading
to around €20 million in lost second-
half 2023 revenue. Whilst the strikes are
now over, there remains considerable
uncertainty around the pace of ramp-up
in 2024, as the industry returns to normal,
given the logistics involved in each project.
However, the Group believes it is very well
placed to benefit from the surge in demand,
as the industry looks to increase its content
output to meet viewer needs.
Investment case
03
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 was estimated
to be worth ~$38bn in 2023, 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.
04
Critical enabler of the massive
and growing video gaming and
entertainment ecosystem
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
video games market, without the risk of exposure to the performance
of individual game titles. This provides more consistent growth, and
our focus is on deepening our strategic relationships with the largest
players in the market. We already service 24 of the top 25 gaming
businesses and all of the top 10 mobile players.
We believe that these relationships, together with our technology
offering, will only serve to increase our competitive moat against our
smaller peers as the industry continues to grow and rely more and more
on external service providers to get high-quality games to market.
+3bn players driving
demand for content
+70% of the 2023 Game Awards winners
partnered with Keywords
Find out more on page 16
Find out more on page 18
Keywords Studios plc
Annual Report and Accounts 2023
13
I am, therefore, convinced that our
unique position at the heart of the largest
entertainment industries in the world,
combined with our ongoing investments to
augment our human creativity with leading
technology, will create significant value for
clients and shareholders.
Bertrand Bodson
Chief Executive Officer
Driving efficiencies
2023 was a difficult year for our Globalize
Division, and specifically for our Localization
and Localization Testing businesses, as
clients were particularly cost conscious,
and looked to manage budgets carefully
by focusing solely on those languages with
the highest return on investment. During
2023, we carefully managed our cost
base, more deeply integrating technology
and enhancing collaboration across our
locations. This process is continuing in
2024 and regrettably, we have rightsized
headcount in Globalize by around 5% as we
look to balance our costs and locations with
meeting client requirements. It is expected
that this programme, together with other
changes, will lead to a one-time exceptional
charge of €5m during 2024. Against this
backdrop, and changes in post-Covid
working patterns, we have also taken a non-
cash impairment charge of €10m relating
to onerous right-of-use leases, associated
office improvements and historic IT
investments. We have also launched a multi-
year efficiency programme to enhance
our operating model as we continue to
look to provide best-in-class delivery for
our clients and expect these actions to
deliver meaningful annual savings, with the
majority of the benefits being reinvested
into growth.
Outlook
In a challenging year for the industry, we
delivered resilient performance in 2023,
continuing to grow our leadership position,
reflecting our role as a diversified enabler of
the industry. Whilst the industry back-drop
remains tough in the near term, our leading
technology-enabled global platform and
strong client relationships means that we
are incredibly well-positioned to continue
to grow our market share as we support
clients in the creation of ever more exciting
and immersive experiences.
We had a record year of M&A in 2023,
which has brought greater exposure to
higher value Create services, and have an
extensive pipeline of acquisitions for 2024,
with our expanded RCF providing enhanced
flexibility to invest. Having made significant
strategic progress, we are better positioned
than ever to benefit as content production
in the video games and entertainment
industries re-accelerates. We remain
confident in our medium-term targets,
expect to deliver strong revenue and profit
growth in 2024 and are firmly on track to
become a +€1bn revenue business.
05
Inorganic growth engine
Since 2013, we have acquired over 65
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
below Keywords’ own rating, that support
our strategic ambitions.
+65 acquisitions completed
in the last 10 years
Find out more on page 11
Keywords Studios plc
Annual Report and Accounts 2023
OverviewGovernanceStrategic ReportFinancial StatementsSupplementary Information 14
Strategy in action - Technology
Imagine
More.
Capturing the benefits from AI
Unlocking
potential.
The video gaming industry has been using
technology and AI to fuel the increasing complexity
of games for many years. Devices are more powerful
than they have ever been, increasing the bounds of
the possible for new experiences and technology is
required to deliver what players demand.
At Keywords, we have been investing in AI for a number of years, and have built
a post-production platform of interconnected tools to support our clients.
We believe that responsible use of Generative AI will, in time, enable rich new
experiences in gaming, when both the tools and legal frameworks are more
developed, providing us greater opportunities to raise the game for clients.
Link to strategic priorities:
Technology
One Keywords
Talent and capabilities
Keywords Studios plc
Annual Report and Accounts 2023
potential.
15
C A S E S T U D Y
Project Ava – Gen AI R&D Initiative
A team from our Electric Square Malta studio, together
with our Innovation at Keywords team, is leading a broad
R&D initiative into how Gen AI could be used to support the
game creation process in future.
The aim of the project was to use bench resources to build
a high-quality game with limited budget using Gen AI to
establish a broad understanding of available tools, how
well they work and compare to existing techniques. The
learnings from the project would be used to educate our
studios across the globe and support clients.
We undertook a deep evaluation of the tools in the market
to understand their quality and consistency when creating
content, as well as their legal status. In total we identified
over 400 tools as part of the project, evaluating and using
those that had the most potential.
As the team progressed, they identified areas where new
tools could accelerate development, but many others
where they couldn't. The team’s original aim was to make
the game with three people, but it quickly became apparent
that the tools were unable to replace the skills of highly
trained people, and the team grew to nearly 30 people at its
peak, across seven game development studios.
One of the key learnings was that whilst Gen AI may simplify
certain processes, the best results can only be achieved
by domain experts utilising Gen AI as a powerful tool in
their creative process. The tools can provide good initial
outcomes, but in the hands of the inexperienced, Gen AI
tools get you running before you can walk, disrupting the
creative tension, critical to development of great games.
This has been an excellent initiative to rapidly spread
tangible learnings across the Group and it demonstrates
both the power of the network and the level of
collaboration across our studios. Once complete, the team
will continue their research, with further Gen AI initiatives.
7
game development
studios collaborating
across the Group, providing different
specialisms and experience to the
initiative and enabling learnings to be
embedded more broadly
Keywords Studios plc
Annual Report and Accounts 2023
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Market review
The video games and entertainment industries are large, vibrant and fast-moving.
The gaming industry received a significant boost to growth from COVID-19, as there
was an acceleration in both consumer spending and engagement, and the industry grew
significantly faster than was forecast. During both 2022 and 2023, it has seen a normalisation
of the growth trajectory as a result, but the medium-term outlook remains strong, and the
Group has continued to grow and extend its leadership position within the industry.
Demand trends
Market spending
Consumer spending on video games saw
moderate growth in 2023, with Newzoo
forecasting a 1% expansion to $184 billion.
This represents a 6% compound annual
growth rate (CAGR) over the past five
years. Newzoo predicts continued
medium-term expansion at a 2023-2026
CAGR of 4%.
There were divergent 2023 spending
trends between personal computer
(PC) and console games, up 2% and 4%
respectively, and mobile games, down
2%. Large PC and console releases
like Starfield, Diablo VI, and Hogwarts
Legacy drove growth, alongside ongoing
spending on live service and annual titles
such as Fortnite and EA Sports FC. The
mobile segment, accounting for just under
50% of total spend, extended its 2022
decline before stabilising in the second
half. This weaker mobile performance
stemmed from lower engagement and
spend levels across casual games.
Intensified cost-of-living pressures
and a crowded second-half release
calendar forced gamers to be selective,
concentrating spending on premier
franchises and titles. As a result, some
high-profile games underperformed
expectations. This led publishers and
developers to prioritise profitability over
growth to de-risk their investments,
spurring game delays and cancellations.
It has also led to significant industry job
losses during 2023 and in early 2024.
Global video game market
2026E
2023E
2022
2021
2020
2019
2018
$206bn
$184bn
$183bn
$193bn
$179bn
$146bn
$135bn
Addressable market
Within the vast video game ecosystem,
Keywords focuses on the critical
content creation segment. Spending on
video game content creation reached
approximately $38 billion in 2023
(Source: IDG). Despite the mixed year,
content creation spend still grew 4% and
externalised spend grew 5%. Historically,
most game development has occurred
in-house, but external provision has risen
markedly in recent years. Of total content
spend, externalised spend now represents
around one third, or ~$13 billion. With
2023 revenue of €780 million, Keywords
has grown its market share to over 6%,
and has a significant opportunity to
grow further.
IDG forecasts that Keywords' total
addressable market will grow above
broader industry levels as the trend
towards external providers continues and
the level of technical demands increases.
They expect the annual growth of content
creation to average ~8% growth between
2023-2028, whilst the externalised
services market will grow at ~9%. Game
development and art, the largest areas of
spend, remain the most internalised areas
of the value chain, with ~30% external
penetration, and IDG expects this will be
a key area of growth going forward. More
mature areas like audio and localization
are over 50% externalised.
We also continue to see game engine
technology increasingly being used in
other markets to improve their processes.
In the media and entertainment space, we
have seen virtual production, which uses
game engines to render backgrounds
onto large, high-resolution LED screens,
increase in use and we also see potential
opportunities in visual effects and
animation. These trends will remain
supportive over the medium term and
provide an opportunity for us to utilise our
expertise in broader sectors over time.
Addressable Content Market ($bn)
60
50
40
30
20
10
0
20
36
2028
External
~$20bn
(~37%)
In-house
~$36bn
(~63%)
13
25
2023
External
~$13bn
(~35%)
In-house
~$25bn
(~65%)
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Annual Report and Accounts 2023
17
Industry trends
Average concurrent users on Steam (m)
2023
2022
2021
2020
2019
2018
29.2
29.1
25.8
21.8
18.0
16.9
Player engagement
Despite marginal overall market growth in
2023, video game engagement remained
strong. On Steam, the leading PC gaming
platform, average concurrent users edged
higher, with peaks of over 34 million users
in January 2024. Full-year 2023 "in-game"
averages grew about 12% year-on-year,
with a peak of over 10 million in-game
players being achieved in January 2023.
For comparison, 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.
Subscription services like Microsoft’s
Game Pass and live service games such as
Fortnite also drove engagement. Microsoft
confirmed that Game Pass subscribers
logged a record number of play hours in
Q3 driven by new content on the platform,
and Fortnite saw record player numbers
during Q4.
Fragmented market
The gaming services ecosystem is highly
fragmented, with Keywords uniquely
positioned as the lone scaled player offering
breadth across the value chain. This allows
Keywords to meet diverse customer
needs whilst consolidating market share.
Industry players are attracted to Keywords
for stability, customer access, and service
breadth. Keywords holds over a 6%
market share, but is 3x larger than the next
competitor. Smaller rivals command 1-2%
overall share, but are focused on specific
offerings. In total, the Group believes that
around 90% of the services in the industry
are provided by small providers and as
the industry matures, it believes there is a
significant opportunity to consolidate the
industry and provide scaled services to
clients. Keywords’ relative size advantage
over competitors continues to grow. This
should enable closer partnerships with
top industry players needing large-scale,
complex project support going forward.
Market share versus competitors
(%)
~90%
white space
opportunity
#2
#3
#4
#5
US entertainment strikes
Whilst Keywords’ primary market is video
gaming, it has an increasing exposure to
the broader media and entertainment
industry, as there is an increasing cross-
over between the two industries, with
large gaming IPs becoming successful
movies and TV shows. There is also
considerable cross-over in the skills
required, both in post-production audio
services and marketing, and both Globalize
and Engage generate revenue from
media and entertainment clients, with the
majority of this US focused. As Keywords
expands in the broader entertainment
space alongside gaming, it faces industry
dynamics like union negotiations.
In 2023, the Writers Guild of America
(WGA), SAG-AFTRA, and SAG-AFTRA
Interactive Performers unions held talks
on working conditions, residuals, and AI
usage. When initial negotiations failed,
the WGA commenced strikes in May
followed by SAG-AFTRA in mid-July,
marking the industry’s first joint strike in
60 years and leading to a near complete
work stoppage. After months of talks, the
WGA reached a deal in September and
SAG-AFTRA in November, allowing actors
to resume work. SAG-AFTRA Interactive
Performers negotiations continue into
2024 without strike action having taken
place, and work continues as per normal.
These strikes severely impacted California’s
economy and Hollywood operations.
For Keywords, our US businesses saw
substantially reduced work volume, leading
to around €20 million in lost second-
half 2023 revenue. Whilst the strikes are
now over, there remains considerable
uncertainty around the pace of ramp-
up in 2024 before the industry returns
to business as usual, given the logistics
involved in each project.
Technology
The video gaming industry has long utilised
technology to enhance the quality of
the games that it produces, whether the
hardware games are played on or the
software that sits behind the game. This
constant innovation ratchets up games'
visual fidelity and immersion, requiring
more content spend and jobs in the
industry. During 2023, as in many other
industries, there was a significant focus
on the potential impact of Generative AI in
gaming and many believe that this new tool
will enable bigger and better games and
more immersive experiences for players,
bringing to life areas of the game, such as
non-player characters, where budgets and
current technology limit what is achievable.
Keywords believes AI represents a major
opportunity, but that it will take time before
the technology is of a high enough quality
to provide the experiences that a AAA
publisher requires, and before there are
settled legal frameworks around its use.
To date, our experience is that clients are
keen to understand the possibilities that
may be available but are not ready to utilise
them in the production process of the
game. In non-production areas, the Group
is seeing strong interest in the AI platform
it is creating across the testing, localization
and player engagement areas to enhance
efficiency in tandem with human expertise.
Keywords Studios plc
Annual Report and Accounts 2023
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Our business model
Creating value by
driving long-term
sustainable growth
Barriers to entry
What we do
Scale and flexibility
Clients increasingly need large reliable partners who
can provide scaled teams and specialist services to
support content production.
Reputation for quality
Our commitment to quality, delivery and partnership
is central to our customer value proposition.
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 whilst
remaining close to our customers.
Technology
The technology landscape continues to evolve and
requires investment into innovative client solutions,
as well as network and security infrastructure which
makes it difficult for smaller suppliers to compete.
Financial strength
Our strong financial performance and position
enables us to invest in building our technology
platform and gives our customers reassurance of
resilience in their supply chain and is part of our
attraction to businesses we acquire.
We Create
Our connected network of 25 game development
and art studios across four continents supports
global publishers in designing and developing
content for some of the largest IPs in the world.
Game Development
Art Services
Find out more on page 28
We Engage
Our Engage division brings together our Marketing
Services and Player Engagement businesses and is
responsible for attracting, retaining and supporting fans
across the video games and entertainment industries.
We are experts in fandom.
Player Engagement
Marketing Services
Find out more on page 32
Keywords Studios plc
Annual Report and Accounts 2023
19
At Keywords, we are using our passion for games, technology and entertainment
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 and we continue to evolve our
offerings to ensure we meet our clients' future needs.
We Globalize
We provide a global offering
encompassing technology-enabled
post-production services - audio,
testing and localization - required by
our clients to get their content ready
for markets across the globe in both
video gaming and TV/film.
Audio Services
Functional Testing
Localization
Localization Testing
Find out more on page 30
Creating value for
our stakeholders
Shareholders
Consistent track
record of delivering
revenue and profit
growth, augmented by
value-creating M&A.
Clients
Deepening and
broadening our
relationships with our
key clients.
Employees
Growing scale and
diversity of our teams
within the supportive
One Keywords culture.
2017-2023 revenue CAGR
+31%
Number of clients taking
3 or more services
150
Increase in average
number of employees
in 2023
+11%
% women in workforce
27%
Environment
Minimising our impact
on the planet through
Sustainable Studios
programme.
Number of studios
on renewable energy
increased by
+50%
Communities
Increasing support for
good causes focused
around advocacy,
environment and
education.
Amount raised and
matched for good causes
€86,000
Keywords Studios plc
Annual Report and Accounts 2023
OverviewGovernanceStrategic ReportFinancial StatementsSupplementary Information
20
Our strategy
Imagine More.
In 2022, we outlined a refreshed strategy to build on our position at the centre of
the video gaming ecosystem and made considerable progress against that strategy in
2023. We are continuing to grow our platform, capabilities, and technology-led offering
to deliver an ever-more compelling proposition globally for our partners in the video
games industry, and adjacent content markets.
The five priority areas of focus to take Keywords forward and
to drive accelerated sustainable growth and opportunity are:
Strategic partnerships
Technology
One Keywords
Talent & capabilities
Adjacent markets
Strategic
partnerships
We are aiming to develop 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.
We believe that as the leading global provider we are uniquely
placed to build strong strategic relationships and that our key
clients are looking to elevate their key relationships to enable
them to navigate the increasing complexity within the full game
development value chain. By facilitating greater cross-studio
collaboration, we aim to capture more value for all and unlock
opportunities to take on larger engagements with clients.
2023 Focus
— Enhancing our relationships
with our Top 25 clients
— Developing our strategic partnering
capability and capacity
— Win larger, more complex,
lighthouse deals with key clients
2023 Progress
—
Increased CXO access with revenues
from Top 25 clients meaningfully
outpacing the Group
— Building end-to-end offerings for
new entrants looking for white glove
game development services
— Signing of several lighthouse agreements
with AAA publishers for long-term testing
and game development services
Keywords Studios plc
Annual Report and Accounts 2023
21
Technology
We are harnessing new and existing
technologies to enable us to work smarter,
do more for our clients and stay at the
forefront of the industry. This includes
broadening our use of AI and automation
across our business and building an
integrated post-production technology
platform to enhance our client offering.
We are also strengthening our internal
capability to support growth and our ability
to deliver larger, more complex work ever
more seamlessly through better integration
of our systems across the business.
2023 Focus
— Guide responsible use
of Generative AI
— Create a broad AI post-
production technology
platform for clients
Progress in 2023
— Broadened AI capabilities,
through hiring of ex-AWS Head
of Gaming AI/ML to drive AI
Centre of Excellence, and
launched AI Council
— Project Ava launched as an R&D
initiative to assess current Gen
AI tools and feasibility of use in
production workflows
— Broaden capabilities and
depth of innovation teams
— Enhance internal tech spine
and commonality of systems
— Meaningful increase in
revenues derived from digital
product platform
—
Innovation team launched new
cross studio games accessibility
product, with good traction
with clients
C A S E S T U D Y
Developing Strategic Partnerships
Keywords continues to strive to be more strategic with its
customers, and broaden the number of services that it can
support them with. In 2021, we started working with a large
content provider for the first time within our video gaming
business. The work was initially focused on small titles and was
limited in nature, and due to it being across several services,
the client found it difficult to navigate the internal complexity.
In 2022, we introduced a Global Integrated Solutions
Producer dedicated to the client to help with retention,
manage client relations and along with the Client Partner,
delivery of projects across studios to help with growth of the
account. Challenges were resolved in early 2022 enabling
the relationship to flourish, and we experienced a significant
step up in activity. This continued into 2023, and during the
year Keywords provided localization services on over 30 titles
and our functional testing teams tested over 60 games for
the client. In 2024, we are looking to expand our relationship
from Globalize into Engage and have seen revenues increase
such across the period, that it has become a multi-million euro
relationship that we look to grow further.
Keywords Studios plc
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OverviewGovernanceStrategic ReportFinancial StatementsSupplementary Information 22
Our strategy
C O N T I N U E D
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. As part
of this we are developing our shared cultural values and
launched new leadership principles to facilitate platform
growth. We are amplifying the voice of our 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.
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 development and acquisition,
effective communication and engagement, alignment
of incentives and a broadening of our DEIB initiatives.
As part of this we are expanding our talent development
and acquisition activities across our global footprint to offer
the best opportunities, and are looking to develop a further
pool of talent to support studios around the world.
2023 Focus
— Embedding a unifying set of leadership principles
— Enhancing business partnering across the Group
— Driving collaboration initiatives to support both
Group and studio objectives
2023 Progress
— Leadership principles embedded into the
organisation, providing a frame of reference for
culture across the Group
—
IT & Digital team transformation providing basis
Divisional IT excellence
— One Keywords team supported the transition of
work out of Russia to create “Sperasoft 2.0”
— Meaningful increase in collaboration
within Create, with 30% of projects
multi-studio
2023 Focus
— Scale HR systems and compensation and benefit
practices to reflect scale of business
— Enhance employee engagement to support
talent related initiatives
— Scale talent acquisition and talent
development pathways
2023 Progress
— Supported the growth of average employee
base by more than 11%, including over 600
people joining through acquisitions
— Expanded the ambassador programme with
Women in Games and held third Women’s
Summit in Asia
— Global talent acquisition team accelerated
growth in Create, where talent remains scarce
Keywords Studios plc
Annual Report and Accounts 2023
23
Adjacent markets
We are targeting closely adjacent markets that are increasingly
utilising video games expertise, that naturally fit with our
current offering, or where we can benefit from or transfer our
gaming experience to other close verticals. We are developing
a dedicated LiveOps offering, to build on our existing offering,
as an increasing proportion of games have content that is
constantly iterated and developed after launch. Another key
area of focus unlocked by our mastery of game engines is
the opportunity in virtual production and animation, as the
technology is increasingly converging.
2023 Focus
— Broadened live operations offering to
take on larger roles
— Explore internal capabilities and route
to market for virtual production
— Enhance capabilities in media
and entertainment to capture
transmedia opportunities
2023 Progress
— Strong demand for Lively, our dedicated
LiveOps studio, which developed a full
“go to market” offering
— Acquisition of DMM broadened reach
into film and TV marketing, with
significant opportunity to expand their
gaming offering
— First virtual production and animation
client wins across both Create and Engage
C A S E S T U D Y
Painting the World Pink
Digital Media Management (DMM) partnered with Warner
Bros. to make a spectacular splash for the world-famous
Barbie on her cinematic debut, celebrate an icon and
reignite the timeless magic of the Barbie legacy in the hearts
of millions. DMM was tasked with bridging generational
gaps, speaking to both the nostalgic older audience
and the digitally-native younger viewers. To do this it
led a multifaceted digital strategy to carve a ubiquitous
Barbie digital identity, resonating across platforms and
demographics, cultivating visually stunning creatives
and strategically amplifying press efforts, to drive both
engagement and anticipation. DMM created a digital mosaic
of content where every piece resonated with a part of Barbie's
journey, including creating TikTok behind the scenes diaries
and took people on the global press tour by capturing the
ambience and narrating it through Instagram Stories. As she
strutted in her high heels to the big screen, Barbie made the
summer one to remember with 63 million engagements and
274 million impressions across Facebook, Twitter, Instagram
and TikTok. As the summer sizzled with their energy, Barbie
had the biggest opening of 2023 and soon reached over
$1 billion at the global box office. Through crafting a 360
campaign as lively and empowering as Barbie herself, DMM
gave everyone a chance to live out their Barbie pink dreams.
Scan to read more
Keywords Studios plc
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OverviewGovernanceStrategic ReportFinancial StatementsSupplementary Information 24
Strategy in action - Innovation
Imagine
More.
Making games accessible to all
Breaking
down barriers.
Driving the industry towards an accessible
future by giving developers and publishers the
tools they need to enable everyone to enjoy
gaming experiences as fully as possible.
Our aim is to create a one-stop, comprehensive resource
of capabilities to equip and empower developers to make
video games more accessible for players with disabilities,
as well as anyone who benefits from inclusive design and
accessibility features.
Link to strategic priorities:
Technology
One Keywords
Talent and capabilities
Keywords Studios plc
Annual Report and Accounts 2023
Scan to read more
25
C A S E S T U D Y
Advancing Accessibility
We believe everyone deserves to play. Our studios have
enabled developers to craft approachable, accessible
experiences for hundreds of games reaching billions of
players. Building on this, in 2023 we launched Advancing
Accessibility, part of our broader push to make games more
inclusive and our first product offering identified by our
Innovation at Keywords team.
This cross-disciplinary initiative was spearheaded by Player
Research, with four other studios taking part, spanning
accessible UX/UI, marketing, trailers, engineering, and
championing accessibility specialists across Keywords.
The goal is supporting inclusive game design, accessible
marketing, and provide wide-ranging support for testing
research and engineering teams. The programmes have
been designed in conjunction with disabled players and
will help bring the voice of disabled players into their
design process.
As part of the offering, our teams will deliver feedback on
content at every stage of game production. Alongside that,
a range of auditing and research services, inclusive design
consultancy, co-development of accessibility features,
professional audio description and closed caption support
for accessible game trailers will also be on offer.
Furthering these efforts, we unveiled Accessibility Quality
Assurance (AQA) to reinforce modern game accessibility
during production. Leveraging a novel “barrier severity”
prioritisation system, AQA specialists meticulously identify
barriers and provide technical assessments to ensure
seamless experiences. This first-of-its-kind service, with 30
cross-trained staff across Canada, Poland and India, delivers
both rapid audits and long-term cycle testing integrated into
traditional QA.
Find out more on page 41
+30
cross-trained staff
providing specialist
Accessibility Quality Assurance
delivering both rapid audits
and long-term accessibility
testing integrated into
traditional QA.
Keywords Studios plc
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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
13.0%
2023
13.0%
2022
2021
2020
2019
34.8%
37.1%
14.4%
30.2%
Reasons for choice
Quantifies the growth in
revenue from our operations
on a reported basis.
Objectives
The Group aims for
continued revenue growth
and development.
How we calculate
Increase year-on-year in
reported revenue.
Gross margin
38.3%
2023
2022
2021
2020
2019
38.3%
38.7%
39.1%
38.0%
36.8%
Reasons for choice
The Board believes this to be a
consistent measure of trading
performance.
Objectives
The Group aims for gross
margins in line with historic
norms.
How we calculate
Revenues from services
supplied to customers less
cost of sales, as a percentage
of revenue.
Organic revenue growth
5.6%
2023
5.6%
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.
Adjusted operating costs as a % of revenue
18.0%
2023
2022
2021
2020
2019
18.0%
17.4%
17.6%
18.1%
19.2%
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
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 2023
27
Link to strategy
Strategic partnerships
Technology
One Keywords
Talent and Capabilities
Adjacent markets
Adjusted EBITDA margin
Adjusted operating profit margin
20.3%
2023
2022
2021
2020
2019
Reasons for choice
Provides an indication of
how we are performing both
internally and relative to
our peers.
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
20.3%
21.3%
21.5%
19.9%
17.6%
and integration and non-
controlling interest, as a
percentage of revenues.
Objectives
The Group aims to increase
margins through operational
efficiencies.
15.6%
2023
2022
2021
2020
2019
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
Adjusted operating profit
margin 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,
15.6%
16.6%
17.3%
15.3%
13.2%
and amortisation of intangible
assets as a percentage of
revenues. In order to present
the measure consistently
year-on-year, the impact of
other income is also excluded.
Objectives
The Group aims for margins
at or above 15%.
Adjusted cash conversion rate
Growth in Adjusted EPS
82.3%
2023
2022
2021
2020
2019
82.3%
100.1%
107.3%
97.2%
(0.5)%
2023
(0.5)%
2022
2021
2020
2019
27.2%
24.9%
46.5%
80.2%
7.2%
Objectives
The Group aims to achieve an
annual cash conversion rate of
around 80% over the medium
term with a key focus on
cash generation and working
capital management.
Reasons for choice
Measures operating cash
generation and our capacity
to pay dividends, service debt
and fund acquisitions.
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 160.
Reasons for choice
Reports the underlying profit
growth generated on a per
share basis, demonstrating
the value being created for
shareholders.
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.
Keywords Studios plc
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Divisional review
Create
Create combines Game Development and Art Services
to deliver a range of content production services to clients
and partners globally. It represents around 4,500 people
across four continents.
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
€336m
+22%
Organic Revenue growth
17%
2022: 26%
Average operational staff
3,935
+15%
Keywords Studios plc
Annual Report and Accounts 2023
2023 Performance
Create performed strongly during the year,
with total revenues up by 22% to €336m
(2022: €276m) and Organic Revenue,
which excludes the impact of acquisitions,
growing by 17%, as we continued to see
strong demand for our high-end services. H1
performance was exceptionally strong, with
H2 normalising, as expected, given current
industry dynamics.
This growth was primarily driven by our
Australian and UK game development hubs,
as we continued to expand our footprint in
each region through a combination of new
satellite studios and headcount additions.
We also won a number of larger
engagements with key clients, both single
studio and wider collaborative efforts, as
we continue to demonstrate the benefits of
working with a multi-studio or geographic
set up to clients. Our art studios also
performed strongly across the period, with
enhanced collaboration between our game
development and art studios supported our
overall growth.
Aside from good execution at the studio
level, which contributed to this success, we
increased collaborations within the Division
as we reacted to the changes in the market
dynamics, keeping our utilisation high
by using bench resources and managing
recruitment cadence.
During the first half, Sperasoft completed
its transition out of Russia into four new
operating hubs in Eastern Europe. This was
a major undertaking, and we are delighted
that we were able to complete this with
limited disruption to existing projects for our
clients. Once the transition was complete,
we were able to take on new work and were
pleased with the growth during the second
half of the year as the team won a number
of new projects.
Adjusted EBITDA in Create grew 35%
to €94m in 2023 (2022: €70m), with
the Adjusted EBITDA margin of 28.0%
in 2023 higher than the previous period
(2022: 25.3%). This was primarily due to the
increased weighting of game development
in the Division, good central cost control
and strong revenue growth.
We welcomed three new game
development studios this year, The
Multiplayer Group (MPG) in Nottingham,
Hardsuit Labs in Seattle, and Playboss
Interactive in Liverpool. Together, these
acquisitions broadened our service offering,
footprint and added nearly 450 high-
quality game engineers and artists to the
Division. MPG is a market leader in providing
multiplayer services, Hardsuit has deep
expertise in Unreal Engine, and Playboss
provides Climax, one of our largest UK
studios, with a second location from which
to continue its growth trajectory.
Revenue €m
Organic Revenue growth %
Adjusted EBITDA €m
Adjusted EBITDA margin %
2023
336.1
17.3%
94.1
28.0%
2022
275.5
25.9%
69.7
25.3%
Change
22.0%
35.0%
2.7%
29
Outlook
Our expanded Create Division remains well
positioned to capitalise on the continuing
demand for its high-end services. We have
good pipeline visibility into 2024 across both
game development and art, with growth
weighted towards the second half of the
year. The increasing scale and depth of our
expertise in Create means we believe we
are uniquely placed to harness the benefits
of Generative AI as a tool to support our
clients if they wish to utilise it. We are seeing
limited utilisation to date, with copyright
and quality concerns currently a barrier to
adoption for AAA publishers. Over time, we
believe these technology advancements
will be able to augment the creativity of our
clients and teams and enable the delivery of
ever more content for our clients.
Percentage of
Group Revenue
43%
Percentage of Group
Adjusted EBITDA
59%
Keywords Studios plc
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30
Divisional review
C O N T I N U E D
Globalize
Globalize brings together our Audio, Testing and
Localization businesses to create a global provider,
with around 5,000 people across five continents.
Service offerings
Audio Services
Multi-language voiceover
recording, original language voice
production, music management
and sound effects to both the video
game and film and TV markets.
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
€280m
(7)%
Organic Revenue growth
(4)%
2022: 23%
Average operational staff
4,795
+5%
Keywords Studios plc
Annual Report and Accounts 2023
2023 Performance
Globalize experienced more difficult trading
conditions in 2023 and was impacted by
the US entertainment strikes and foreign
exchange movements, with total revenues
falling by 7% to €280m (2022: €301m).
Organic Revenue declined by 4% and
excluding the impact of the strikes, organic
growth would have declined slightly,
significantly outperforming the core
gaming post-production market, which was
estimated to have declined by 5% in 2023
(Source: IDG).
Whilst performance was below
expectations at the start of the year, it was
a resilient result given market conditions, as
there has been an elevated level of project
cancellations, delays and reduced scopes
which have impacted the Division given its
broad reach across the industry. In addition
to this, the US entertainment strikes, had a
significant impact on our audio businesses
during the second half of the year.
We were, however, pleased that Functional
testing continued to deliver robust results,
with the addition of some larger scale
contracts in lower cost locations such
as Poland and with our operations in
Mexico beginning to scale up. This was
offset by our embedded services testing
business and our localization businesses
which experienced a tougher period.
Localization clients were particularly cost
conscious and looked to manage their
budgets carefully, by only focusing on key
languages where the best returns could be
generated. Audio faced tough comparators
in H1 and then was heavily impacted by
the US entertainment strikes, which are
now resolved.
Revenue €m
Organic Revenue growth %
Adjusted EBITDA €m
Adjusted EBITDA margin %
We have continued to make good progress
in developing and integrating our post-
production technology platform. As part
of this we developed our Mighty Build and
Test solution and significantly scaled the
team and the product offering during 2023.
Mighty is now able to operate on Unreal,
Unity and custom/proprietary game engines
and has expanded its external client base as
well as operating as the QA tool at a number
of our large internal studios. We have an
exciting pipeline of client opportunities as
we move into 2024 and are continuing to
deliver against our product development
roadmap to broaden its functionality.
Adjusted EBITDA of €49m was 21% lower
than 2022 (€62m), with Adjusted EBITDA
margins of 17.4% moderately lower than
2022 (20.5%). Margins were expected to
normalise following exceptional demand
in 2022 and were impacted by the lower
utilisation of resources compared to
the 2022, with pricing more of a focus
for clients.
During 2023, we carefully managed our cost
base, whilst integrating technology more
deeply and enhancing collaboration across
studios. This process is continuing in 2024,
and, regrettably, we have rightsized the
headcount in Globalize by around 5% as we
look to balance our costs and locations with
client demands. We continuously look to
enhance our operating model to generate
efficiencies and provide best-in-class
delivery for our clients, reinvesting savings
into growth.
2023
279.5
(4.3)%
48.5
17.4%
2022
300.9
23.4%
61.6
20.5%
Change
(7.1)%
(21.3%)
(3.1%)
31
Outlook
Globalize has a leading position with
major publishers within the industry and
is well placed to benefit when the content
cycle turns and as Hollywood rebounds to
previous output levels through the year.
We also believe that there is a significant
opportunity over time to support clients
moving from fixed to variable costs as they
look to manage their budgets and cost
base. We will continue to carefully manage
our cost base, enhancing our delivery model
and efficiencies across our global footprint,
and will further integrate technology into
our workflows to differentiate our offering
in the market.
Percentage of
Group Revenue
36%
Percentage of Group
Adjusted EBITDA
31%
Keywords Studios plc
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OverviewGovernanceStrategic ReportFinancial StatementsSupplementary Information
32
Divisional review
C O N T I N U E D
Engage
Our Engage Division brings together our Marketing
Services and Player Engagement businesses to create
a holistic offering focused on attracting, retaining,
and supporting fans across the video games and
entertainment industries, encompassing around
2,500 people across three continents.
Service offerings
Marketing Services
Specialists in creative production
(including game trailers),
communications & PR and social
media & influencer marketing,
community management as well as
strategy and insights.
Player Engagement
Holistic multilingual player support
delivered via an end-to-end solution
that combines our proprietary
tech platform, Helpshift, and our
human expertise, in addition to
offering specialist VIP and Trust &
Safety Services.
Performance indicators
Service line revenue
€165m
+44%
Organic Revenue growth
2%
2022: 10%
Average operational staff
2,591
+14%
Keywords Studios plc
Annual Report and Accounts 2023
2023 Performance
Engage saw a resilient performance during
the year, with the higher revenue growth
of 44% to €165m (2022: €114m) driven by
a number of acquisitions as we built out
the capabilities of the Division. Organic
Revenue, which excludes the impact of
acquisitions, grew by 2% despite the
backdrop and the significant impact from
the US entertainment strike. Excluding the
impact of the strikes, organic growth would
have been around 9%.
Marketing delivered a robust performance,
despite the macroeconomic environment
leading to publishers reducing their
marketing activity, with lower budgets and
delays to projects. The US entertainment
strikes had a major impact on organic
revenue growth in H2, and despite the
continued subdued level of activity, we still
delivered strong underlying organic growth,
with large projects being delivered for
clients during the period.
We continue to enhance collaboration
across our studios, both in the UK and
in the US, in order to provide a more
solution-based model for our clients'
needs and enhance the cross-selling of
multiple services. We were delighted to
bring two high-quality US studios into
the service line during the period, with
Digital Media Management (DMM) and 47
Communications greatly enhancing our
social media, influencer and PR offerings
respectively. We believe that DMM in
particular is exceptionally well placed to
benefit from the increasing share of social
media in overall marketing budgets.
Player Engagement is primarily focused on
the mobile market and was impacted by
reduced player numbers and spend across
the broader mobile market, although this
stabilised during the second half. This
meant that certain clients reduced the
scale of the teams working on their games
to reflect the reduced activity, although
new business wins mitigated the reduced
demand. We saw very good traction,
despite the market, for our Helpshift AI
solution, which we acquired in late 2022,
and fully integrated into our existing offering
to create a unique end-to-end technology
enabled solution for clients. During the
year we launched Language AI, to enhance
our multi-lingual support offering, made
good progress with our trust and safety
offering in tandem with a number of
technology partners and launched our VIP
concierge service.
Adjusted EBITDA of €16m was slightly
higher than 2022 (€16m), with the Adjusted
EBITDA margin of 9.5% behind the prior
year period (2022: 13.6%). Margins were
impacted as the business has relatively
fixed costs and was scaled for growth,
but experienced lower utilisation rates as
projects were delayed and lower revenues
due to the US strikes. We have implemented
cost control measures in certain studios
and have reduced marketing headcount
Revenue €m
Organic Revenue growth %
Adjusted EBITDA €m
Adjusted EBITDA margin %
2023
164.8
2.3%
15.7
9.5%
2022
114.3
9.7%
15.6
13.6%
Change
44.2%
0.6%
33
by approximately 8%, whilst retaining
our capacity to support growth in future
periods, as well as rationalising our footprint
into larger hubs in London and Los Angeles.
Outlook
We continue to scale the Engage Division,
by building out the full-service capabilities
of our marketing offering and by creating
a holistic technology-enabled player
engagement offering through the addition
of Helpshift’s automated solutions. Whilst
the current market backdrop remains
tougher, and it will take time for Hollywood
to return to normal output, our Marketing
studios are increasingly well placed with
clients, our collaborative solutions are
gaining traction, and we are exploring
the use of AI and technology to support
our client offerings. The technology first
approach to Player Engagement, powered
by Helpshift and a range of partnerships
supporting offerings such as Trust & Safety
and VIP services, is expected to enable
continuing growth.
Percentage of
Group Revenue
21%
Percentage of Group
Adjusted EBITDA
10%
Keywords Studios plc
Annual Report and Accounts 2023
OverviewGovernanceStrategic ReportFinancial StatementsSupplementary Information 34
Financial and operating review
Good
performance.
Disciplined
approach.
Rob Kingston
Bertrand Bodson
Revenue
Revenue for 2023 increased by 13% to
€780m (2022: €691m). This performance
included the impact of acquisitions in
2022 and 2023 and a ~4% headwind
from the impact of currency movements,
when translating studio results from local
currency into the euro reporting currency.
Reported Organic Revenue growth (which
adjusts for the impact of acquisitions) was
6%. However, adjusting for the significant
impact from the US entertainment strikes
and from foreign exchange movements,
organic revenue growth would have been
9%. Continuing strong performance
in Create, was offset by more muted
performance in Engage and difficult
trading conditions in Globalize. Further
details of the trading performances of
each of the Divisions are provided in the
Divisional review.
Annual Report and Accounts 2023
35
Operating Profit
Reported Operating profit of €47m in
2023 was 35% lower than 2022 (€72m).
Adjusted operating profit, which adjusts for
the items described in the APMs section
above increased to €122m, 6% ahead of
2022 (€115m). Adjusted operating profit
margin of 15.6% was ahead of guidance,
albeit slightly behind 2022 (16.6%) due to
continuing investment in the business, the
larger office footprint, and the post-Covid
return to normal of travel and business
development costs.
Profit before taxation
Reported Profit before tax of €35m in
2023 was 49% lower than 2022 (€68m).
Adjusted profit before tax, which adjusts
for the items described in the APMs
section above increased to €115m, 2%
ahead of 2022 (€112m). This reflects lower
Adjusted operating profit margins and
increased interest payments linked to
acquisition activity.
Taxation
The tax charge reduced to €15m from
€21m in 2022, largely reflecting the
reduction 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 2023 was 22.3%, in line
with 2022 (22.0%).
Earnings per share
Basic earnings per share of 25 cents was
lower than 2022 (62 cents), primarily
reflecting the reduction 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 cents
(2022: 114c), broadly flat year-on-year, with
both Adjusted profit before tax and the
basic weighted average number of shares
increasing in similar proportions.
Gross profit and margin
Gross profit in 2023 was €299m (2022: €267m), representing an increase of 12%. The gross
margin of 38.3% was broadly in line with 2022 (38.7%) as the increased weighting of the
higher margin Create Division largely offset lower margins in Globalize and Engage.
Operating costs
Adjusted operating costs increased by 17% to €141m (2022: €120m), reflecting the larger
Group, but at 18.0% of revenue were slightly higher than 2022 (17.4%). This was due to
continuing investment in the business, the larger office footprint, and the post-Covid return
to normal of travel and business development costs.
EBITDA
EBITDA of €109m was 10% behind 2022 (€121m). Adjusted EBITDA increased 8% to €158m
compared with €147m in 2022. The Adjusted EBITDA margin in 2023 of 20.3% was slightly
lower than 2022 (21.3%), as expected, reflecting the lower gross margin and higher
operating costs.
Net finance costs
Net finance costs of €12m compared to €4m in 2022. The €8m increase was primarily driven
by interest costs due to the drawdown on the RCF to fund acquisitions, together with a €3m
negative year-on-year foreign exchange impact.
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
Total
2023
€m
22.0
27.1
26.1
4.5
2022
€m
18.7
8.4
16.8
0.1
79.7
44.0
A total of 1.37m options were granted under incentive plans in 2023. This, together with
grants from previous years, has resulted in a non-cash share-based payments expense of
€22m in 2023 (2022: €19m).
Costs associated with the acquisition and integration of businesses amounted to €27m
(2022: €8m). Of this, €10m was related to Globalize restructuring costs associated with
onerous leases, office improvements and historic IT spend. The balance was primarily due
to the accounting treatment of deferred consideration related to continuing employment,
which has led to a charge of €9m, and the costs associated with the exit from Russia of
€4m. Amortisation of intangible assets increased by €9m to €26m (2022: €17m) due to the
increased acquisition activity in recent years.
Foreign exchange and other items amounted to a net loss of €5m (2022: flat). This includes
€3m for the unwinding of discounted liabilities on deferred consideration (2022: €3m) and
a net foreign exchange loss of €1m (2022: gain of €2m). Keywords does not hedge foreign
currency exposures in relation to net current assets. Whilst 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 the report.
Keywords Studios plc
Annual Report and Accounts 2023
OverviewGovernanceStrategic ReportFinancial StatementsSupplementary Information 36
Financial and operating review
C O N T I N U E D
Cash flow and net debt
Adjusted EBITDA
MMTC and VGTR and similar incentives
Working capital and other items
Capex - property, plant and equipment (PPE)
Capex - intangible assets
Payments of principal on lease liabilities
Operating cash flows
Interest paid net of received
Free cash flow before tax
Taxation paid
Free cash flow
M&A - acquisition spend
M&A - cost of acquisition and integration cash outlay
Cash proceeds arising from share-based payments
Other income
Company funded acquisition of shares by EBT
Dividends paid
Underlying increase/(decrease) in net cash/(debt)
FX and other items
Increase in net cash/(debt)
Opening net cash/(debt)
Closing net cash/(debt)
2023
€m
158.3
(11.3)
(4.3)
(30.7)
(3.1)
(15.0)
93.9
(7.1)
86.8
(20.9)
65.9
(194.7)
(7.8)
2.6
–
(14.8)
(2.2)
(151.0)
1.6
(149.4)
81.8
(67.6)
Change
€m
11.4
(7.7)
(4.9)
(3.7)
(2.6)
(3.6)
(11.1)
(5.6)
(16.7)
(3.4)
(20.1)
(81.4)
(4.7)
(4.7)
(1.1)
(14.8)
(0.2)
(127.0)
1.4
(125.6)
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)
7.3
1.1
–
(2.0)
(24.0)
0.2
(23.8)
105.6
81.8
The Group generated Adjusted EBITDA of
€158m in 2023, an increase of €11m from
€147m in 2022. There was an €8m increase
in respect of the amounts due for Multi-
Media Tax Credits (MMTCs) and Video Game
Tax Credits (VGTRs), higher than 2022
(€4m), primarily due to timing of receipts
under new incentive regimes in Australia
and Serbia. Other working capital increased
by €5m as we saw an outflow of €4m,
compared to a small inflow in 2022, mainly
due to an increase in accrued income from
work in progress.
Investment in property, plant and
equipment increased by €4m to €31m
(2022: €27m) as we continued to invest
in the footprint of the business, the new
sites required to exit Russia, and took
advantage of favourable pricing to purchase
longer-term software licences. In addition,
we incurred €3m of capitalised research
and development costs as we developed
our technology platform. Property lease
payments of principal of €15m were €4m
higher than the prior period (2022: €11m)
mainly related to acquisitions in the period.
Operating cash flows of €94m were behind
2022 (€105m), primarily due to the change
in working capital and the increased capex
during the period.
There was a €3m increase in cash tax
paid to €21m (2022: €18m) as payment
schedules return to a more normal pattern.
Net interest payments, which largely relate
to interest from drawdowns on the RCF,
and arrangement costs for the facility, were
€7m compared to €2m in 2022.
This resulted in Free cash flow of €66m,
€20m behind 2022 (€86m). Adjusted
free cash flow, which adjusts for capital
expenditure that is supporting growth in
future periods, was €94m in 2023, behind
2022 (€112m), which resulted in an Adjusted
cash conversion rate of 82%, in line
with guidance.
Cash spent on acquisitions totalled €203m,
of which €34m was in respect of the cash
component of prior year acquisitions
and €8m was in relation to acquisition
and integration costs. This was €86m
higher than the spend in 2022 due to the
increased size and scale of acquisitions. The
Group also spent €15m purchasing shares
of behalf of the Employee Benefit Trust,
to manage dilution at current share prices
from long-term incentive plans.
This resulted in an increase in net debt of
€149m in 2023, leading to closing net debt
of €68m (2022: net cash €82m).
Balance sheet and liquidity
The Group funds itself primarily through
cash generation and a syndicated multi-
currency Revolving Credit Facility. In July
2023, the Group entered a new RCF of
$400m that matures in July 2027, replacing
the previous €150m facility. The new RCF
includes an accordion option to increase
Keywords Studios plc
Annual Report and Accounts 2023
37
the facility up to $500m and an option to
extend the expiry date by a further one-year
period (both subject to lender consent). The
majority of Group borrowings are subject to
two financial covenants, minimum interest
cover of 4x and maximum net leverage of
3x, that are calculated in accordance with
the facility agreement. The Group retained
considerable headroom against both of
these covenants at year end.
The Group entered the year with a strong
balance sheet and deployed €195m of cash
in the period to support its value accretive
M&A programme and made €15m of share
purchases on behalf of the Employee
Benefit Trust. At the end of 2023, Keywords
had net debt (excluding IFRS 16 leases)
of €68m (31 December 2022: net cash of
€82m) and undrawn committed facilities
of $260m. The undrawn facilities, together
with strong cash generation, leaves us
well placed to continue to execute on our
M&A programme.
Capital allocation
The Group continues be disciplined as it
allocates capital to drive shareholder value
creation. Its key priorities are to invest in
driving organic growth, delivering value
accretive M&A, whilst maintaining a strong
balance sheet and delivering shareholder
cash returns.
The Board is pleased to recommend a final
dividend of 1.76p per share (2022: 1.60p)
representing an increase of 10% on the
2022 final dividend. Together with the
interim dividend of 0.85p this will bring
the total dividend to 2.61p (2022: 2.37p).
This is in line with the Board's progressive
dividend policy which 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.
Payments will be made on 28 June 2024
to shareholders on the register on 24 May
2024 and the shares will go ex-dividend on
23 May 2024. The final dividend payment
will represent a total cost of approximately
€1.6m of cash resources. Link Market
Services Trustees Limited (Link) operates
a Dividend Reinvestment Plan (DRIP) for
the Group’s shareholders and instructions
for shareholders on how to apply for the
DRIP will be included in communications
regarding the dividend, and any queries
regarding the DRIP should be directed
to Link.
Following the €15m of purchases for the
Employee Benefit Trust in 2023, the Group
intends to use its Employee Benefit Trust
to undertake further market purchases of
Company shares in H1 2024, amounting
to an aggregate of up to €5m, in order to
satisfy future exercises of LTIPs or stock
options pursuant to relevant share plans,
and may look to increase this amount
during the year.
Guidance for 2024
We continue to trade robustly across the
Group in continuing tough markets and
expect to deliver strong revenue and profit
growth in 2024, driven by improving organic
growth, recent M&A, and the maintenance
of adjusted operating profit margins
above 15% as we continue to manage our
cost base and drive efficiencies across
the Group.
Our organic growth expectations are
unchanged, progressively improving from
H2 23 levels as we move through the year
and as the industry’s appetite for new
content returns, as well as allowing time for
the output from Hollywood to increase post
the 2023 strikes.
The adjusted Effective Tax rate for the
full year is expected to be in line with
2023 at around 22%. We continue to
anticipate capex to be between 4.5-5%
of annual revenues, as we continue to
invest in the business, but we still expect
a full year Adjusted Cash Conversion rate
of around 80%. Net finance charges will
fluctuate, depending on scale and timing
of acquisition activity, but based on the
current debt profile, we would expect
the charge to be approximately €10m for
the year.
Rob Kingston
Chief Financial Officer
Revenue
€780m
(2022: €691m)
Adjusted EBITDA
€158m
(2022: €147m)
Adjusted operating profit
€122m
(2022: €115m)
Keywords Studios plc
Annual Report and Accounts 2023
OverviewGovernanceStrategic ReportFinancial StatementsSupplementary Information 38
Responsible business review
Imagine
More. Positive
Impact.
At Keywords, we pride ourselves on conducting business with responsibility
by maintaining the highest ethical standards and integrity at every turn. We take
our broader corporate duty seriously, mindful of our role in society and impact on
the environment. Our large global team across 26 countries makes us extremely
proud in upholding our core principles, while engaging colleagues, customers
and communities.
Our priorities include:
People
Client
Page 39
Page 44
Planet
Governance
Page 42
Page 45
Community
Page 43
Highlights
During 2023, we made good progress
on our priority areas, with highlights
including:
— Broadened our Ambassador
Programme with Women in Games
—
Increased our proportion of
women in the workforce to 27%
— More than doubled charitable
donations matched through
Keywords Cares fund
—
Increased number of studios
using renewable tariffs by 50%
and progressed Sustainable
Studios initiative
Keywords Studios plc
Annual Report and Accounts 2023
39
Our key priorities
— Employee engagement
— Diversity, equity, inclusion
and belonging
— Health and safety
— Training and development
Link to 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
Decent work and
economic growth:
Promote sustained,
inclusive and sustainable
economic growth, full and
productive employment
and decent work for all
Reduced inequalities:
Reduce inequality within
and among countries
People
Our talented, passionate,
and dedicated employees
are our most valuable asset.
As a diverse, multicultural, global organisation, we embrace
uniqueness whilst collaborating across teams to deliver
the best service for each project and client. In 2023,
we focused on employee engagement, diversity, equity,
inclusion and belonging (DEIB), health and safety, and
training and development.
An average of 12,340 full-time employees made
up our global team in 2023, balanced across the
Americas, Europe and the Middle East, and Asia-
Pacific. We grew our average employee base by 11%
during the year, by attracting talent organically and
through acquisitions, ending 2023 at 13,017. We have
continued to invest in HR systems and capabilities to
support this expansion and extended our employee
engagement initiatives to keep teams energised
despite industry challenges. In 2023, we launched
our Leadership Principles to the entire Group to
reinforce our inclusive, entrepreneurial culture as we
continue developing our industry-leading platform.
Growth in average full-time
employees
Employee Net Promoter
Score (eNPS)
11%
(2022: 20%)
28
(2022: 30)
Keywords Studios plc
Annual Report and Accounts 2023
OverviewGovernanceStrategic ReportFinancial StatementsSupplementary Information 40
Responsible business review
C O N T I N U E D
On a more specific basis, in 2023 we
conducted our first game breaks, where
a pocket of employees spend time in an
informal manner with the CEO, as part of
his extensive engagement schedule with
employees and studios across the world.
The game breaks bring both new and
experienced employees together with the
CEO to discuss pertinent topics.
We adapted our annual employee survey
to solely include employees rather than our
freelance network. This meant that we had
a reduced number of respondents, and a
dip in participation to 61% (2022: 79%).
In our engagement survey we measure staff
satisfaction with areas such as total rewards,
team dynamics, development opportunities
and well-being. In respect of eNPS, our
score marginally dipped to 28 from 30,
although this is still considered to be at
the top end of “Good”. The lower result
was primarily due to our Globalize division,
which has experienced difficult trading
conditions this year and has been subject to
increased speculation around the impact of
AI on the business, which naturally impacts
on employee perspectives.
Key topics raised in the survey related
to opportunities for professional
growth and development as well as a
desire for increased recognition and
acknowledgment. To address these
needs, we are launching educational
and engagement campaigns to provide
employees with the necessary knowledge
and support.
We have also used shorter and more
efficient pulse surveys throughout the year
to make sure the data on eNPS and other
important questions is fresh and relevant
and have enhanced our use of our Microsoft
Viva channel to target areas of focus.
Training and development
We provide tailored training and
development programmes across the
Group to nurture our talented people. Most
initiatives are embedded within specific
studios and services to suit each discipline,
and we partner with universities where
relevant to support our leadership and skills
programmes. We have also undertaken
Group-wide training on DEIB as we seek
to make sure that our language and
behaviours build inclusion.
We expanded Art Academies in India
to include game development and ran
transitional skills bootcamps globally to
open more industry career paths. Our
testing business’s “Level Up” programme
enables ambitious testers to take on more
responsibility and progress. Partnerships
with institutes and professional bodies
facilitate broader online and in-person
management and skills training.
As part of our drive to ensure that our
teams continue to remain at the forefront
of the latest technological advancements,
we have a number of training projects
underway in different parts of the business.
Within Create, as a research project, we are
developing a game solely utilising AI tools to
understand and then educate our teams on
Our culture
Our talented, passionate and dedicated
employees and collaborators drive
our success through their skills and
commitment. Our new Leadership
Principles galvanise our humble,
entrepreneurial culture by facilitating
collaboration. We've already seen studios
working together more on client projects,
tangible proof of our One Keywords
initiative bearing fruit.
We ran a broad campaign through
the year to promote and embed the
Leadership Principles, and saw excellent
engagement across the Group. Bringing
stories of where studios or employees had
embodied a Principle brought the practical
implementation to life.
Health and safety
We care deeply about our people’s health
and well-being and provide safe work
environments for all. Our leaders hold
responsibility for health and safety in
the workplace, and all employees help
instil a positive safety culture to minimise
accidents. No task is so urgent that
compromising safety is permissible. We
operate a range of in-office, hybrid, and
remote work environments, with a flexible
studio-led approach to provide the best
balance of ensuring both employees’
and clients’ needs are met. We take a
progressive, proactive approach to mental
health and wellness so our people can
thrive. Employees are encouraged to
report threatening situations so we can
protect well-being proactively. Expanding
our employee assistance programme and
building a Well-being Champions Network
in the coming year will lay the foundation
for future health initiatives.
Employee engagement
A key area of focus for the Group is
to maintain consistent and high levels
of employee engagement. We run a
regular programme of well attended and
interactive global townhalls led by senior
management, and have created a Key
Communicator network, consisting of
around 200 managers, leaders and other
key roles across the organisation. Our goal
is to empower our Key Communicators by
sharing knowledge about Group activities
and use them as a conduit to enhance
information flow among our teams.
Keywords Studios plc
Annual Report and Accounts 2023
41
where the opportunities and limitations
of technology lie. We are also in the
process of establishing collaborations
with technology partners to be able to
provide our teams with early access to
new products and to become subject
matter experts, in much the same way as
they currently master existing tools.
In 2024, we are launching exciting
Leadership Capability and Inclusive
Leadership programmes to support
managers in exemplifying our Leadership
Principles launched in 2023.
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 our d3t, Coconut Lizard, Electric
Square, Indigo Pearl and Lively studios
were included in GamesIndustry.biz’s
2023 Best Places to Work Awards in the
UK. Our hub in Poland was named as a
“Friendly Workplace” by Manpower and
our studio in Mexico has been awarded
the Socially Responsible Company (SRC)
badge. Keywords Studios Manila has
recently been recertified as a Great
Place to Work in the Philippines. We have
also been recognised as a great partner,
winning QA/Localisation Partner of the
Year at the MCV Awards, Fire Without
Smoke and The Trailer Farm won three
out of five categories at the World Trailer
of the Year awards between them, and
SoundLab followed up last year’s Emmy
award by winning an Oscar for Sound
Design for their work on Pinocchio.
% women in the organisation
27%
(2022: 26%)
% women in leadership roles
34%
(Exco + Direct Reports - 2022: 33%)
Diversity, Equity, Inclusion and Belonging (DEIB)
During 2023 we continued our DEIB journey
as we work towards diversity and inclusion
by design. We aim to create a Keywords
where colleagues can feel proud to belong,
and DEIB principles are embedded in our
everyday business.
Our 2023 objectives were to build our
infrastructure, expand our activities, and
establish our three-year strategy, and we
saw good progress across each of our
core areas of focus including communities,
learning and development, and data.
During the year, we developed a DEIB data
dashboard to allow real time tracking of
indicators, which has allowed management
and our teams to identify gaps and areas
for improvement.
We place significant emphasis on
increasing gender diversity and,
importantly, Keywords has continued
its improving trend in the proportion of
women across the Group from 25% in 2021,
to 26% in 2022, and 27% in 2023. Currently,
1% of colleagues are non-binary and 72%
are men. Across our Group, Create has
the lowest proportion of women, and
Media and Entertainment the highest. At
the more senior level, we were pleased
to see a small increase in the percentage
of women in senior management, rising
from 33% to 34%. At the Board level, the
percentage of women fell from 29% to 25%
due to the appointment of Rob Kingston
to the Board as CFO. Please see the
Nominations Committee report on page 70
for further details.
As part of our efforts to improve our
diversity, we expanded our gender equity
focused events to strong positive feedback,
delivered a successful Keywords Women’s
Summit, and continue to build our Women
at Keywords Affinity group. A key project
in this area is our partnership with Women
in Games (WiG), where Keywords sponsors
the Individual Ambassador programme.
WiG events have had 13,000 registrations
since 2020, and in 2023 we hosted booths
at three WiG Careers Development and
Networking Expos. These events and our
Ambassador experiences are illustrative of
the impact that the programme is having
for women in the industry and in Keywords,
with the global community of Ambassadors
expanding by 31% to over 1,700 across 77
countries through 2023.
In addition to our Keywords WiG
Ambassadors group growing each quarter,
we have continued to strengthen our
Keywords DEIB communities in 2023.
Our Women at Keywords Affinity group
has become global and the Keywords
Collaborators team in Europe has seen a
successful year, with representatives from
each studio in Europe exchanging good
practices and cross-studio support on
DEIB, Corporate Social Responsibility, and
Communications projects.
It is well understood that the gaming
industry attracts a larger proportion
of neurodivergent people than other
industries and so supporting neurodiversity
inclusion is an important focus area for us.
In 2023 we hosted several neurodiversity
learning events and we have built a thriving
neurodiversity affinity group – Brain Space
- which is providing the opportunity for
connection, support and exchange.
We are still building awareness and
understanding of DEIB across the Group,
so that colleagues are equipped to
practice inclusivity. In 2023 we expanded
our DEIB learning programme, with
courses on inclusive communication,
psychological safety and accessibility.
Trainings and inclusion calendar learning
events have received strong positive
feedback and for the first time in 2023 we
have included dedicated DEIB sessions
and inclusive leadership workshops
within our management development
training programmes, such as Compass
in the Americas and the Game Changers
Academy in Poland.
We have now formalised our three-year
DEIB strategy, outlining our vision for a
more inclusive Keywords and our plan to
achieve this. Our strategic priorities for
2024 are based on input from communities
and teams across the business, and what
is required to progress our DEIB work.
These include increasing visibility to drive
engagement on, and participation in, DEIB
activities and practices at all levels. We
will also continue to educate, to achieve
a common level of awareness and shared
understanding of the value of diversity and
the purpose of inclusion across Keywords,
and lastly, we will augment guidance and
support in DEIB for studios and service lines
across the Group.
% women on the Board
Link to UN SDGs
25%
(2022: 29%)
Keywords Studios plc
Gender equality:
Achieve gender equality and empower all women and girls
Annual Report and Accounts 2023
OverviewGovernanceStrategic ReportFinancial StatementsSupplementary Information 42
Responsible business review
C O N T I N U E D
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.
In our efforts to minimise our impact on the planet, we are continuing
to progress towards achieving our emission reduction targets.
Sustainable Studios
In line with our established short-term
plans, we continued to focus on the use
of renewable energy and lowering energy
consumption across the Group for emission
reductions. This work is guided through
our Sustainable Studios programme, which
supports our studios in their efforts to
minimise greenhouse gas emissions and
reduce environmental impact.
This has seen the overall number of studios
that are on renewable energy tariffs globally
grow by 50% to 24, from 16 in the previous
year, and has brought a significant increase
in avoided carbon emissions.
Despite the increased number of studios on
renewable tariffs, during the year, we saw
a 21% increase in our Scope 1 & 2 emissions
(market-based), due to both the growth
of the business and number of locations,
and changes in working patterns in certain
locations as more employees worked from
offices in locations with high emission
factors, such as Poland. Our total energy
consumption grew by 11%, lower than both
our revenue and our headcount growth
in the equivalent period, demonstrating
the efficiencies we are beginning to see in
the Group.
Whilst we are disappointed that our revenue
intensity ratio has marginally increased
during the year, we remain well set to
achieve our longer-term target of reducing
by 50% our direct carbon emission intensity
ratio ahead of 2030 (tonnes of CO2e per
revenue €m).
More detailed information regarding our
GHG emissions can be found on pages
50 to 51.
We recognise that much more will be
needed in the longer term to achieve net
zero emissions ahead of 2050, and we
continue to enhance our systems and
processes to allow better control of our
overall carbon footprint.
Measuring and reporting
Another key area of focus has been our
ability to measure and effectively impact
our indirect, value chain emissions (Scope
3). To this end, we continue the reporting
of our Purchased Goods and Services
emission calculations, having refined the
methodology further, and have worked
on trialling estimations for Business Travel
and Employee Commuting/Work from
Home covering the past two years. These
categories will be added to the public
disclosures once system-driven data
collection is in place and will cater for
sufficiently granular detailed information.
During the year, we have implemented and
are currently in the process of deploying a
new carbon accounting system, integrated
in our global finance system. Starting from
the 2024 reporting period, all data will be
collected, analysed and reported through
the new system module, greatly enhancing
the quality and quantity of information at
our disposal.
This enhanced granularity of data is
an important element of the business'
ambition to apply for Science Based
Targets accreditation by the end of 2025.
For the second year now we have chosen
to disclose our environmental impact via
CDP and continued to obtain a score which
is on par with the peer and sector average.
Our key priorities
— Minimising environmental
footprint
— Sustainable Studios programme
— Sourcing of renewable energy
Link to UN SDGs
Climate Action:
Take urgent action to
combat climate change
and its impacts
In 2023, the Group fully offset its 2022
Scope 1 & 2 emissions across two projects.
The Luangwa Community Forests project in
Zambia conserves over one million hectares
of forest in the Luangwa River’s undammed
catchment area, providing a near
continuous wildlife corridor between five
national parks and working in unison with
Community Resources Boards and Village
Action Groups. We have also acquired and
retired offsets relating to the Katingan
Restoration and Conservation Project,
Indonesia which protects and restores
149,800 hectares of high conservation value
ecosystems that would have otherwise
been converted to fast-growing industrial
timber plantations.
Number of studios powered
by renewable energy
24
(2022: 16)
Keywords Studios plc
Annual Report and Accounts 2023
Community
At Keywords Studios, we encourage
support of causes that are
meaningful to our employees and
business partners.
We support them to do this by donating time,
services and financial resources.
and physical health programmes. Many
employees walked 60 kilometres in tribute
to the 60 men lost every hour to suicide to
promote awareness of this important topic.
In total, Keywords Movember participants
walked and ran 2,670 kilometres worldwide
and participants more than doubled our
2022 fundraising efforts with over €18,000
donated to the cause.
Our advocacy initiatives were broad-
ranging during the year, with the majority
of efforts focused on inclusion, accessibility
and supporting underrepresented
communities. In collaboration with
the International Game Developers
Association Foundation, studios
participated in its Virtual Exchange, a
development programme for grantees from
underrepresented communities worldwide.
Thirty-three Keywords Mentors across 20
studios and 10 different countries offered
six weeks of mentorship in the 2023 Virtual
Exchange. Subject Matter Experts from
Director level to junior leadership were
paired with grantees for the programme,
to uplift, educate and empower the next
generation of video game leaders.
Together with our 70+ studios across 26
countries, in 2023, we set out the objective
to align our core community efforts with
three overarching causes on a corporate
level, as sought by employees: Environment,
Health, and Advocacy.
To ensure such social initiatives are
impactful, Keywords offers a financial
assistance scheme through the Keywords
Cares donation matching programme
where Keywords employees can choose
a registered charity that is personally
meaningful to them. In 2023, through the
combined efforts of individual and team
charitable efforts, and matches through
Keywords Cares, we donated €88,600 to
registered charities around the world, a
material increase on the previous year.
Our key environmental initiative was a
global initiative linked to our historic roots.
It has been 25 years since the business was
founded, and to celebrate this anniversary,
Keywords partnered with One Tree Planted
to plant 25,000 trees in 2023. These
trees were planted across seven chosen
locations near to where Keywords has
studios in Ireland, Canada, Brazil, India,
the Philippines, Romania, and Australia.
The planted trees will contribute toward
forest fire recovery, resistance against
climate change, and supply food and
socioeconomic sustenance.
In terms of health, the Group supported
a range of initiatives, including focused
efforts on a global campaign in support
of Movember. Teams from eight different
countries, as well as individual participants,
spent a month fundraising, growing
moustaches, and taking part in fitness
challenges to benefit men's mental
43
Our key priorities
— Encouraging and enabling
support for good causes
— Aligning initiatives across
core areas
— Broadening involvement
across the Group
Link to 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
Contributed to charity
€88,600
2023
2022
2021
2020
2019
€26,500
€45,600
€46,000
€29,000
€88,600
Keywords Studios plc
Annual Report and Accounts 2023
OverviewGovernanceStrategic ReportFinancial StatementsSupplementary Information 44
Responsible business review
C O N T I N U E D
Client
Our clients and their projects
are at the heart of everything
we do at Keywords.
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 over 1,000
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 2023, we continued to enhance our
client solutions teams across our divisions,
introducing new roles to enable our clients
to navigate and access the Keywords
offerings as seamlessly as possible. We
have introduced a range of new services,
including Accessibility testing and Trust and
Safety, and are creating a post-production
technology platform covering testing,
localization and customer engagement
that we believe with provide a competitive
advantage and real value for clients.
During the year, we saw an increase in
concentration of revenues from our top
customers due to recent M&A activity in the
sector, with our Top 5 clients accounting
for 30.8% (2022: 30.1%) of the Group's
revenues. Importantly, revenues from our
Top 25 clients increased at a faster rate
than the rest of the Group, demonstrating
early signs of the benefits of our strategic
partnering approach.
During the year, we continued to look to
move our relationships with customers
from a tactical to a strategic one, and are
increasingly getting better access to the
CXO suites at our clients. Whilst no longer
the key measure of success, we have 150
customers using three or more services,
in line with 2022.
Our Top 25 clients take an average of six of
our services and over 75% take five or more
and we are focused on both broadening
our penetration and increasing our share of
wallet in the services we provide.
We also undertook our third voice of
customer survey. This survey delivered a
reduced overall customer NPS of 29, which
is at the upper end of good. We believe
the reduction is due to the pressures being
experienced within the industry, and more
specifically within the Globalize segment of
the market, where the largest proportion
of clients participate. Pleasingly, clients
continued to highlight that quality was the
leading reason for choosing Keywords.
Information security
Keywords' Information Security and Privacy
department has effectively managed twice
the number of security events compared
to the previous year. This improvement is
a direct result of our focused investments
in information security infrastructure.
Continual improvements have been made
to our security controls, aiming to align
with, and in many instances surpass, client
expectations in terms of data security
and privacy.
Central to our information security strategy
is the protection of our clients' Intellectual
Property and Personal Information. Our
Privacy & Security programme is rigorously
tailored to uphold these priorities. Aligning
with this commitment to data protection,
we have significantly invested in our
privacy programme. This initiative is aimed
at ensuring the long-term safeguarding
of Personal Information for both clients
and employees.
Our key priorities
— Pursuing strategic partnerships
—
Innovative client solutions
—
Information and cybersecurity
Link to 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
Alongside our commitment to security, we
have sustained our efforts in maintaining
and pursuing certifications such as ISO
27001, 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), and Netflix
Post Partner Program (NP3).
The progress and updates in our
information security practices are regularly
presented to the Audit Committee,
ensuring continuous oversight and strategic
guidance. Our approach to information
security and privacy is not only about
safeguarding our studios but also about
maintaining a resilient and trustworthy
framework for our clients and stakeholders.
Net Promoter Score (NPS)
29
(2022: 37)
Keywords Studios plc
Annual Report and Accounts 2023
45
Governance
Setting the highest standards of
positive behaviour, honesty and
integrity underpins everything we do.
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 was refreshed in 2023 following
the rollout of our Leadership Principles and
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 Corporate Governance
Code (QCA 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. Following an update to the
QCA Code during the year, the Board
reviewed its compliance and is satisfied that
it continues to comply in full with all the
provisions of the QCA Code. A summary of
the ways in which the Company complies
with the QCA Code is provided on page 67.
The Board takes seriously its responsibility
to engage with key stakeholder groups
and take account of their interests when
making key decisions. Further detail of our
key stakeholder groups and the Board’s
engagement with them is provided on
pages 52 and 53.
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. Our whistleblowing portal
allows colleagues and third parties to raise
concerns about possible financial or other
irregularities, anonymously should they wish
to. Further details are provided on page 74.
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.
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, which is also available to
view on the Group’s website.
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.
Our key priorities
— Corporate governance
and compliance
— Modern slavery
— Tax compliance
— Human rights
Link to 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
M&A
We are an acquisitive business and
apply strict financial and non-financial
criteria to investment decisions, and the
Board receives a detailed acquisition
report to support balanced and well-
informed decision-making. As part of a
thorough pre-acquisition due diligence
process, we conduct a review of the
diversity, equity, inclusion and belonging,
environmental and culture characteristics
and initiatives of acquisition targets. 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, whilst
taking into account reputational factors. Tax
risks are regularly reviewed by the Board
and the Audit Committee.
Keywords Studios plc
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Task Force on Climate-related Financial Disclosures report (TCFD)
This report sets out Keywords’ climate-
related financial disclosures, current
approach and future commitments.
The Group confirms its compliance
with the requirement of The Companies
(Strategic Report) (Climate-related
Financial Disclosures) Regulations 2022
and the Task Force on Climate-related
Financial Disclosures (TCFD).
We have carried out a considerable
work programme during 2023 to better
understand the climate-related risks and
opportunities that could impact our business,
as well as the resilience of our strategy
under different climate scenarios. This has
been overseen by the ESG Management
Committee with regular updates provided
to the Board's ESG Committee. At the same
time, we have worked towards further
integrating climate change into our overall
risk management processes.
Following this work, as disclosed in more
detail in the following sections, we have
provided disclosures consistent with all 11 of
TCFD’s recommended disclosures. We will
continue to improve our disclosures over
time and recognise that we have further
work to do to meet best practice. In 2024
we intend to broaden the proportion of the
Group covered by scenario analysis and
extend our Scope 3 disclosures to other
categories. In future years, we intend to
create a detailed net zero transition plan
to support our ambitions, and intend to
submit this plan to the Science Based
Target initiative.
Governance
Keywords has continued to evolve
and formalise its approach to its ESG
governance and oversight, including climate
change. The Board oversees our Group-
wide ESG strategy, with support from
the ESG Committee, formed in 2021 and
chaired by Georges Fornay. Further details
of the ESG Committee can be found on
pages 90 to 91.
TCFD recommended disclosures
Cross reference
Governance
Disclose the organisation’s governance around climate-related issues and opportunities.
(a) Describe the Board’s oversight of climate-related risks and opportunities.
Pages 46-47
(b) Describe management’s role in assessing and managing climate-related risks and opportunities.
Page 47
Strategy
Disclose the actual and potential impacts of climate-related risks and opportunities on the organisation’s business, strategy and financial
planning where such information is material.
(a)
Describe the climate-related risks and opportunities the organisation has identified over the short, medium and
long term.
Pages 47-48
(b) Describe the impact of climate-related risks and opportunities on the organisation’s business strategy and
Pages 47-48
financial planning.
(c) Describe the resilience of the organisation’s strategy, taking into consideration different climate-related
Pages 47-48
scenarios, including a two degrees or lower scenario.
Risk management
Disclose how the organisation identifies, assesses and manages climate-related risks.
(a) Describe the organisation’s processes for identifying and assessing climate-related risks.
(b) Describe the organisation’s process for managing climate-related risks.
Pages 48-49
Pages 48-49
(c) Describe how processes for identifying and managing climate-related risks are integrated into the organisation’s
Page 49
overall risk management.
Metrics and Targets
Disclose the metrics used to assess and manage relevant climate-related risks and opportunities where such information is material.
(a)
Disclose the metrics used to assess and manage relevant climate-related risks and opportunities in line with its
strategy and risk management process.
Pages 49-51
(b) Disclose Scope 1, Scope 2 and if appropriate Scope 3 greenhouse gas (GHG) emissions, and the related risks.
Page 50
(c) Describe the targets used by the organisation to manage climate-related risks and opportunities and
Page 51
performance against targets.
Keywords Studios plc
Annual Report and Accounts 2023
47
During the year, the Committee received
regular updates on progress across a range
of ESG KPIs, including climate, and a deep
dive on environmental progress. In addition
to this, the Audit Committee is responsible
for reviewing and monitoring the Group’s
overall risk profile and management of risk,
including climate-related risks, and the
effectiveness of internal controls.
The Audit Committee receives regular
updates on the risk register, with a deep
dive conducted annually. In the past year,
environmental risk, which was previously
monitored as an emerging risk, was
effectively embedded across our principal
risks, reflecting the potentially broad impact
of climate change on human, operational,
regulatory and reputational matters.
Mitigating actions were set to address those
risks and will be monitored by the Audit
Committee going forward.
The Group formed an ESG Management
Committee in 2021, led by the Chief
Operating Officer, which meets regularly
to drive progress across our ESG initiatives.
The Committee is composed of the relevant
functional leads for each of the pillars of the
ESG strategy, including finance, who provide
regular progress reports and delivery
against internal ESG targets and initiatives.
The outcomes from the ESG Management
Committee meetings are fed back to the
Board's ESG Committee.
Across Keywords, responsibility for
the oversight of climate-related risk
management and the implementation of
the Group’s Environmental Policy is shared
between the finance and shared service
functions. The Risk and Compliance
Committee (RCC), which reports into
the Audit Committee, is responsible for
approving the Environmental Policy with
local studios empowered to manage
their climate-related risks relevant to
their location. The RCC is supported in
its work by the Internal Audit function,
which assesses Group significant risk,
the effectiveness of risk management and
internal controls, and reports on principal
and emerging risks to the Audit Committee.
The Internal Audit function has a direct
reporting line to the Audit Committee Chair.
For further details of our approach to risk
management, refer to pages 54 to 60.
Our key climate-related organisational
governance structures and their roles are
summarised below:
The Board
Oversees Group-wide business and ESG strategy
Board Committees
The ESG Committee assists the Board with oversight and tracking of the Group's ESG plans and strategy, including climate.
The Audit Committee is responsible for reviewing and monitoring the overall Group risk profile.
ESG Management
Committee
Led by the COO, the Committee
reviews and guides the Group's
progress against ESG strategy and
KPIs, including emissions tracking and
reduction plans.
Risk and Compliance
Committee
Responsible for reviewing and
approving Group-wide policies,
including the Environmental Policy,
and assessing risks.
Internal Audit
Reporting to the CFO and Audit Chair
and supporting the Audit Committee
on principal and emerging risks.
Assesses the effectiveness of risk
management and internal controls.
Operations
Finance and Shared Services oversee the implementation of initiatives across the Group's operations to minimise emissions,
and manage reporting against client GHG obligations.
Strategy
Our strategy is to grow organically as well
as by expanding our footprint and services
through acquisition in order to do more with
our clients. As a service provider, we have a
relatively small carbon footprint compared
to other “harder to abate” sectors but
Keywords is playing its part in minimising
its impact on the environment, and we
have made good progress on reducing our
emissions intensity over the past few years.
The Board, supported by the CEO, COO
and CFO, and other senior leaders, ensures
that sustainability is an important part of
our strategy and through the Board’s ESG
Committee has received regular updates
on our sustainability initiatives and our
TCFD reporting.
Climate-related risks considered to be
significant are reviewed by the Board’s
Audit Committee, with regular updates
provided to the full Board. All material risks
are considered as part of our business
strategy development and financial
planning. Currently, we do not believe
that climate-related issues have had an
impact on our financial performance or
position, nor do we expect them to in the
foreseeable future.
As part of our ongoing process to expand
our understanding of potential climate-
related risks and their impacts, this year,
Keywords conducted its first climate-related
scenario assessment to both identify risks
that could impact the Group’s operations
and future strategy, as well as to understand
how each of these could develop under
different climate projections.
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Task Force on Climate-related Financial Disclosures report (TCFD)
C O N T I N U E D
To conduct this review, we engaged an external specialist to develop climate-risk profiles for a number of our key operating locations. These
locations were selected based on their significant current and expected future contribution to Group revenue and their geography, in addition
to representing a number of different Divisions. We further intend to utilise the results of this assessment as a set of indicators for other similar
locations. The assessment focused on reviewing potential physical and transitional risks occurring under the current global warming trajectory,
and identifying which of these were likely to impact Keywords’ operations. Risks were identified using a number of projections, including: the
International Energy Agency’s (IEAs) Stated Policies Scenario (STEPs); the Fifth Assessment Report of the Intergovernmental Panel on Climate
Change (IPCC); and the SSP projections from the World Bank, in addition to a variety of local climate models. These projections were chosen as
they are recognised as global benchmarks. These risks were then further considered under both a lower-carbon scenario in line with the Net
Zero Emissions by 2050 (NZE) target, and a higher-carbon scenario assuming a business-as-usual future.
Summary of our key climate-related risks and opportunities
Risk description
Risk type
Time period
Potential impact
Mitigating actions
s Lack of
k
s
i
R
compliance with
increasing regulatory
standards and
client requirements
l
a
n
o
i
t
i
s
n
a
r
T
Concerned or negative
perceptions from
stakeholders that we
have not responded
appropriately to
climate change
Cost of securing
reliable energy supply
to studios and/or
carbon pricing/taxes
s Sudden business
k
s
i
R
interruptions from
environmental disasters
l
a
c
i
s
y
h
P
Policy & Legal/
Reputational
Reputational
Market/Policy &
Legal
Acute/chronic
Increased costs due to additional
reporting requirements, or
mandatory reductions in carbon
emissions. Failure to comply with
this risk, which is relatively low,
could result in possible regulatory
fines, loss of business and
damage to our reputation.
Increased turnover of staff and
challenges in attracting new talent
or new business from clients
could lead to increased operating
costs and lower revenues.
Risk of energy shortages or rising
prices in different jurisdictions,
with potential for carbon taxes
to be implemented or increased
which will lead to higher
operating costs.
Good governance structures in
place to manage sustainability,
including the effects of climate
change on our business. We
continually monitor the regulatory
and legal environment and take
external advice as required.
Regular dialogue with key clients
around their climate requirements.
Group has launched its Sustainable
Studios plan to reduce emissions,
increased GHG reporting and
offsets Scope 1 & 2 emissions.
Intend to set Science Based
Targets in coming years.
Energy costs are a small
proportion of overall costs, but
the Group is moving to energy-
efficient premises and its reducing
footprint where possible.
Inability to operate from certain
business premises, or employees
unable to perform their roles due
to climatic conditions.
Business is set up to operate
remotely and given the scale can
re-allocate work across the Group
if required.
Market
n
o
i
t
i
s
n
a
r
T
y Keeping up with
social change
t
i
n
u
t
r
o
p
p
O
Companies with a leading
response to climate change could
attract new customers, investors
and employees.
We are raising the profile of our
Sustainable Studios programme
internally, and are increasingly
proactive with clients about our
sustainability initiatives. We are
also aiming to improve our ESG
rating agency profile, as well as
our CDP score.
Short term (0-2 years)
Medium term (3-7 years)
Long term (8-25 years)
Physical risk analysis
The assessment reviewed a number of physical risks, including heat stress, flooding and wildfires. The risk profiles varied significantly for each
of the three regions assessed. However, in all three locations, it was noted that the majority of the physical risks would likely have a greater
impact on our employees and communities than on our own facilities and operations.
Keywords Studios plc
Annual Report and Accounts 2023
49
The key risk identified for employees
stemmed from greater heat stress across
all three regions, presenting a growing
threat to health. In addition, higher
temperatures are likely to drive more
frequent temperature inversions that can
trap pollutants such as ozone and fine
particulate pollution close to the ground,
where they can reach dangerous levels. This
is of particular concern given the majority of
our largest studio locations are within dense
urban areas.
Whilst less at direct risk from heat stress,
several studio locations were identified
as being at risk from flooding, particularly
as tidelines rise in the longer term. This
presents the danger of loss of access to our
facilities, as well as damage to the hardware
and servers within them. This could disrupt
our ability to continue operations even on
a remote-working basis if employees lost
server-based files and systems.
The finalised risk profiles were then
presented to a cross-function working
group, consisting of representatives from
finance, shared services and operations.
This group further assessed the potential
impacts identified, their materiality to
the wider organisation, and the potential
response to be undertaken should these
risks eventuate. It was determined that none
of the physical impacts identified present a
material risk, based on the Group’s existing
materiality threshold, under any of the
scenarios assessed.
This determination was primarily based
on our ability to rapidly switch operations
both to remote working and between
studios, should a region be impacted.
Relocating operations is already factored
into our business continuity plans, which
are reviewed regularly, and would be
implemented in the event of an adverse
climate-related event. Whilst there is the
potential for some loss of on-site hardware,
this would incur little disruption to day-to-
day operations. To ensure any disruption is
minimised, we are also reviewing the use of
cloud-based servers to reduce the potential
impact stemming from damage to any
physical studio location.
Transitional risk analysis
The transitional risk review placed particular
focus on energy markets due to the integral
role that access to renewables will play
in our transition to net zero. Additional
transitional risks relating to regulatory and
supply chain impacts were also considered.
None of these potential risks were
considered to be material following review
by the cross-function working group.
The area presenting the greatest risk to the
Group continues to be client requirements,
as has been identified in previous years. The
increasing market concentration within the
video games industry means that failure
to meet specific client requirements could
lead to significant impacts on our revenue
if contracts were to be suspended. We are
continuing to cooperate with our clients
in support of their climate ambitions to
ensure this risk is minimised and as part of
this response, we are developing our own
transition strategy. This will be a Group-wide
plan to coordinate our existing Sustainable
Studios initiative with set milestones to our
net zero target. Demonstrating our climate
progress may also present an opportunity
with larger clients, as competitors may
not be able to demonstrate similar
advancement, and this could support
us being embedded as a key supplier.
Client requirements were not projected to
change dramatically under the different
climate scenarios.
Keywords recognises the limitations of any
scenario assessment and will continue to
review its findings as part of our ongoing
risk management process. Potential risks
will be analysed regularly to assess that our
materiality position remains correct. For
those risks not identified as material, we will
still endeavour to develop and implement
mitigations to minimise their impacts
both on our own operations and on our
employees. We will also be looking to roll
out this process across the wider Group in
the coming years as part of our continual
risk identification procedures.
Risk management
As the risks from climate change emerge
and develop, they are subject to the Group’s
standard risk management framework
and shall continue to be monitored
closely. Following on from our scenario
assessment, we will continue to identify
and analyse emerging climate-related
risks and opportunities in conjunction with
our risk management functions, such as
Internal Audit and the Risk and Compliance
Committee. Identified risks and their
potential impacts are assessed for their
materiality in line with our standard risk
management framework. Material risks
are prioritised based on their likelihood
of occurrence and the severity of their
potential impacts. Please refer to the
Principal Risks and Uncertainties section
on pages 54 to 60 for more information.
We will also continue to engage with
external specialists to support our internal
functions through scenario assessments
and the development of risk responses.
This includes the building of our net zero
transition strategy, and our alignment
with emerging reporting standards
and regulations.
All material risks are subject to our standard
risk management processes, which has
evolved to a three lines of defence model,
and our Internal Audit Policy. These
outline our risk prevention and mitigation
procedures and guidelines. Mitigations for
climate-related risks are often developed
at the local level, with support from
Group functions, in recognition of the
unique challenges that each region will
face. Oversight of the climate-related risk
management process remains with the
risk functions, including the Management
Risk and Compliance Committee and the
Board’s Audit Committee.
Metrics and targets
In line with the Streamlined Energy and
Carbon Reporting (SECR) disclosure,
Keywords undertook its fourth formal
review of the Group’s global energy usage,
resulting in the identification, assessment
and measurement of our energy and
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 2023 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. In
order to ensure the robustness of our data
and streamline our reporting procedures,
in 2023 we began the implementation of a
tailored sustainability reporting platform.
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 continued to collect data around
our Scope 3 – Category 1: Purchased goods
and services, and this year have included
Category 2: Capital goods.
Keywords Studios plc
Annual Report and Accounts 2023
OverviewGovernanceStrategic ReportFinancial StatementsSupplementary Information 50
Task Force on Climate-related Financial Disclosures report (TCFD)
C O N T I N U E D
GHG emissions data
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)
2023*
2022*
2021*
2020*
UK and
offshore
Global
UK and
offshore
Global
UK and
offshore
Global
UK and
offshore
6
294
218
5,181
8
277
239
4,021
4
188
201
3,401
0
171
Global
244
3,729
300
5,399
247
4,298
192
3,602
171
3,973
Scope 2 Market-based emissions reduction
(201)
(513)
Total Scope 1 and Scope 2 emissions
(Market-based)
99
4,886
(76)
171
(272)
4,026
(11)
181
(70)
3,532
26
471
23
379
17
290
–
171
15
(23)
3,950
317
Scope 3 – Category 3: Well-to-Tank (WTT) related
to Scope 1 and Transmission & Distribution (T&D)
related to Scope 2
Scope 3 – Category 3 Market-based emissions
reductions
Total – Scope 3: Category 3 (Market-based)
Total – Scope 1, 2 and Scope 3: Category 3
(Market-based)
(17)
(34)
(7)
(18)
(1)
(5)
(0)
(2)
9
437
108
5,323
16
187
361
4,387
16
197
285
3,817
15
186
315
4,265
*Reporting year end is 30 September. Data in italics has been restated from previous years' reporting due to more accurate information being available and changes
in the updated IEA factors.
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.
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.
In 2023, our global Scope 1 and 2 emissions (Location-based) were 5,399 tonnes CO2e, representing an increase of 26% on the prior year. UK
emissions accounted for 300 tonnes of CO2e, 21% higher than the previous year, and representing 6% of global emissions.
Following on from our initial reporting in 2022, we are continuing to use a spend-based method to calculate our Scope 3 – Category 1:
Purchased goods and services emissions in line with the US Supply Chain GHG Emission Factors for US Commodities and Industries, and in
2023 have expanded this to cover Scope 3 – Category 2: Capital goods. This area of reporting requires assumptions and estimations to be
taken where financial data did not accurately align with the factors available, but we continue to work on improving its accuracy.
Our Global Scope 3 – Category 1: Purchased goods and services and Global Scope 3 - Category 2: Capital goods emissions are set out below:
Tonnes of CO2e
Scope 3 – Category 1: Purchased goods and services
Scope 3 – Category 2: Capital goods
*Reporting year end is 30 September.
2023*
7,375
1,397
2022*
5,857
717
Scope 3 – Category 1 emissions for 2022 have been restated following updates to the US Supply Chain GHG Emissions Factors, in addition to the removal of capital
expenditure that had been included in this category previously.
Keywords Studios plc
Annual Report and Accounts 2023
51
2023*
2022*
2021*
2020*
UK and
offshore
34
Global
1,162
UK and
offshore
Global
UK and
offshore
Global
UK and
offshore
Global
43
1,471
21
1,061
2
1,307
Energy consumption (MWh)
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
1,452
14,546
1,277
13,085
1,418
13,384
1,234
11,614
884
905
9,812
10,873
735
737
10,289
11,596
*Reporting year end is 30 September. Data in italics has been restated from previous years' reporting due to more accurate information being available
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 2023, our global energy consumption was 14,546 MWh, with the UK representing 10% of our global energy consumption. In 2022, the UK
also represented 10% of our global energy consumption of 13,085 MWh.
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
2023*
0.40
6.38
58.60
2022*
0.38
6.26
57.55
2021*
0.39
7.47
68.64
2020*
0.48
10.88
100
*Reporting year end is 30 September. Data in italics has been restated from previous years' reporting due to more accurate information being available.
The intensity metric is calculated using Market-based emissions.
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.
In 2023 our revenue intensity regressed slightly, although still remains 41% down on our 2020 baseline. As such we remain well on track
to achieve our objective of a 50% reduction in our emissions to revenue (€m) index ahead of 2030. It should be noted that despite the
slight increase in revenue intensity, due to a 21% increase in Scope 1 & 2 emissions (market-based), the underlying increase in total energy
consumption for the period has been kept at 11%, below the corresponding revenue growth for the year. The primary difference between the
rate of consumption and emissions is due to growth in Poland, where we now have a large number of employees, who primarily work from the
office, and there are high emission factors, due to the grid composition. During the year, we also transitioned our Sperasoft operations out of
Russia, running dual offices in multiple locations for much of the year, leading to higher consumption. Whilst the new locations are in highly
energy efficient premises, the countries generally have much higher emission factors compared to Russia due to the energy source mix. In
general, the 2023 IEA emission factors have slightly worsened on average across the Group’s footprint compared to 2022.
Developments in our Sustainable Studios initiative remain focused on driving our environmental commitment forwards and have helped to
improve the levels of energy efficiency previously established. In 2023, eight more studios have been able to transition to renewable energy
sources and green tariffs, and we were pleased to see the amount of emissions offset through renewable energy consumption grow by 89%,
with a 164% increase in the UK market. We aim to continue to develop our practices by identifying practical changes that we can implement
and measure, 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.
In addition to our intensity targets and development of our transition plan, the Group will review whether further KPIs are required to
effectively respond to our identified climate risks.
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52
Section 172 (1) statement
We have set out below a summary of our key stakeholder groups, how the Board engages with them,
and how their interests relate to our strategic priorities and how we deliver value for them. We also
provide examples of three key strategic decisions made by the Board and how stakeholder interests
were considered as part of decision-making.
Key stakeholders
Investors
Clients
Equity investors and lenders
Top 25 and other publishers and developers
Link to strategic priorities:
Link to strategic priorities:
Direct engagement:
Direct engagement:
Direct engagement:
— Roadshows for direct
interaction with existing
and new investors
— Fireside chat on
AI to address key
investor queries
— AGM to connect with
— Semi-annual meetings
Information flowing to the Board:
all shareholders
between key lenders and
senior managers
— Ad hoc meetings with
top investors on specific
topics of interest
— Shareholder consultations
on remuneration matters
— Annual net promoter
score survey for
our clients' view of
our business
— Attendance at industry
events to connect with
existing and new clients
and partners
— Strategic partnership
— Informal meetings
meetings to build long-
term relationships
between executives
to discuss industry
trends and strategic
opportunities
Information flowing to the Board:
Information flowing to the Board:
— Performance information
provided to Directors
— Investor relations market
updates and feedback
reports
— Proxy ratings and reports,
including feedback from
engagements
— Detailed summaries
from Remuneration
Policy meetings
— Net Promoter Scores
— Feedback reports from
obtained from client base
client meetings
— Deep dives on top clients
at each Board meeting
— Reports on information
and cybersecurity and
service delivery
Principal decisions
Managing dilution
In March 2023, we announced the commencement of a market
purchase programme of Keywords' shares amounting to an
aggregate of up to €5m, which was extended in June 2023 up to an
aggregate value of €15m. These purchases were made on behalf of
the Keywords Studios Employee Benefit Trust (EBT), by the trustees
of the EBT, and all of the purchased shares will be used to satisfy
future exercises of LTIPs, RSUs or stock options pursuant to the
relevant Keywords’ share plan.
The Board was mindful of the interests expressed by some
shareholders during direct engagement sessions with Executive
Directors, specifically the desire for the effective management of
the dilutive impact of operating the share plans. The Board also
conducted a review of its capital allocation strategy to ensure the
Group was appropriately leveraged and had sufficient capability
to execute its M&A strategy. Given the strength of the balance
sheet and expected free cash generation, the Board deemed it
appropriate to conduct the EBT market purchase programme.
Efficient capital management
In July 2023, we announced the signing of a new unsecured
multicurrency revolving credit facility agreement (RCF) of $400
million. This new facility, supported by a group of seven global
lenders, replaced the Group's previous €150 million unsecured
multi-currency RCF.
The expanded RCF is more suitably scaled for the Group and,
given our continued strong pipeline of acquisitions, it provides
long-term liquidity and flexibility to pursue our growth strategy
whilst maintaining a well-balanced mix of equity and debt funding.
The Board was mindful of the importance of the Group’s growth
ambitions for shareholders. Strengthening relations with our lenders,
Keywords was able to demonstrate the strength of its credit profile
and, to provide deeper insight into the business as part of this
process, our lenders were invited to a presentation with members
of the Board and management team.
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Link to strategy
Strategic partnerships
Technology
One Keywords
Talent and Capabilities
Adjacent markets
Workforce
Communities
Permanent, temporary and freelance
Global entertainment community
and our studio locations
Link to strategic priorities:
Link to strategic priorities:
Direct engagement:
— Senior managers present
on key strategic matters
to the Board
— Global townhall events
— CEO Game Break for
employees across the
Group to talk informally
about key topics
of interest
Direct engagement:
— Group-wide
— Keywords Cares
— Board visits to studios
communications through
our internal channels
— Key Communicator
sessions to engage
with Executives
— Executive Director-led and
wider Board studio visits
programme showing
support for charitable
causes that our
colleagues care
most about
worldwide to understand
the local culture and
gaming industry dynamics
— Attendance at industry
events to learn about key
industry trends
Information flowing to the Board:
Information flowing to the Board:
— Group Employee Net
Promoter score and
pulse surveys
— KPIs for recruitment and
retention
— Diversity, Equity, Inclusion
and Belonging initiatives
— Workforce pay conditions
— Regular whistleblowing
updates
— ESG programmes
and metrics
— Data on gender, ethnic
and cognitive diversity
— Updates on Corporate
Social Responsibility
programmes
Value-add acquisitions
In March 2023, we announced the acquisition of Digital Media
Management (DMM) for up to $100m. DMM is a social media
marketing company founded in 2010 and headquartered in
Los Angeles, USA. DMM is an award-winning agency providing
integrated social media strategy, management as well as creative
and influencer solutions, for the entertainment and video games
sectors. The acquisition of DMM enhanced our Engage division and
enabled the Group to further its media and entertainment offering
with DMM bringing in expertise in social and concise video content,
community management and fostering partnerships with content
creators; all of which complement Keywords' proficiency in longer
trailer-format content.
In December 2023, we announced the acquisition of The Multiplayer
Group Limited (MPG), a multiplayer-focused game development
studio headquartered in Nottingham, UK, for £76.5 million. MPG
is one of the largest and most respected developers of AAA
multiplayer games and technology for some of the world's best-
known studios and publishers. MPG provides a range of services,
including both co-development and full game development, to a
global client base, and it also has functions working on data science,
new technology and AI.
A comprehensive due diligence process was undertaken, and
updates were provided to the Board on key matters throughout
the process, before making the final decision for both of these
significant acquisitions. The Board considered the interests of
shareholders, being satisfied that a fair price was being paid by
the Company for very high-quality businesses, as well as clients,
who would benefit from the additional strength of development
capability, particularly in multiplayer games, and our marketing
offering. The pre-acquisition due diligence process included a review
of the cultural fit between each acquisition and Keywords, and in this
case the Board was assured that they both had strong and capable
teams who would fit well within the Group.
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Principal risks and uncertainties
Our Board, management team, studios and shared services functions all play a role in the
identification, assessment and mitigation of risks to our business. We recognise that setting
an appropriate risk appetite and fostering a strong risk culture is crucial for the successful
delivery of our strategy.
Risk management
The Board, supported by the Audit Committee, is responsible
for oversight of the Group’s risks. The Executive Committee is
responsible for the day-to-day management of risks, and the
executive Risk and Compliance Committee is primarily responsible
for regular reviews of principal and emerging risks and onward
reporting to the Audit Committee.
We conduct a comprehensive top-down and bottom-up review of
our risks. The top-down element related to the Board’s setting and
oversight of our strategic objectives, risk appetite and risk culture,
as well as identification of strategic, reputational, financial and
operational risks. The Audit Committee conducts a dedicated deep
dive into the risk register once a year and receives presentations
on one or more principal or emerging risks at every meeting. The
bottom-up element relates to risk management being embedded
throughout our operations, with the identification and assessment
of current and emerging risks forming part of our strategy and
budget process.
Our risk management framework has evolved to a three lines of
defence model, which more clearly sets expectations around risk
appetite and culture and accountability for key roles. The first
line comprises our studios, where managers implement controls
and respond to day-to-day events, identifying and reporting risks
through the risk governance structure. The second line comprises
our Group functions who maintain oversight and provide guidance
to studios. The third line comprises the Internal Audit function, which
provides independent challenge, advice and assurance around risk
management and internal controls.
Overview of principal risks
Our principal risks are those risks which are identified as key factors
that may prevent the delivery of our strategic priorities or as having
a potentially material impact on the Group. They can relate to one
or more strategic, financial or operational matter. The inherent and
residual nature of each risk is evaluated on a regular basis, with
consideration given to the changing nature of the risk, whether
the source of the risk is internal or external, interdependencies
between risks and the target residual risk based on our risk
appetite. Operating controls and appropriate mitigations are set and
monitored for each principal risk.
Emerging risks are also identified and reviewed on a regular basis
to allow the Group to identify and effectively respond to new and
evolving risks in the operating environment. 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. Following a period of review, emerging risks
may be included as a new principal risk, added to an existing principal
risk, or deemed to be mitigated and removed. The climate change
emerging risk has now been integrated across several principal risks.
At the time of publication of this report, our emerging risks related to
intellectual property rights, talent and succession planning, and third-
party management.
A risk scoring matrix is used to ensure the likelihood and potential
impact of risks are assessed on a consistent quantitative and
comparative basis, and key insights influence strategic and
operational decision-making.
Further information on the activities of the Audit Committee during
the year can be read on pages 72 to 74.
Key year-on-year changes in risk profile*
Risk 10
Failure to deliver services
Risk 13
Client concentration risk
Risk 8
Negative impact of currency risk
Please see the relevant risk discussion for the
explanation of the change in the specific risk
profile during 2023.
*2023 v 2022 trend change
Keywords Studios plc
Annual Report and Accounts 2023
55
Link to strategy
Risk trend
Strategic partnerships
Technology
One Keywords
Increase
Stable
Decrease
Talent and Capabilities
Adjacent markets
Risk 1 - Sudden business interruption
Link to strategy
Description
Keywords is a global business
and needs to minimise business
interruptions and be able to continue
servicing customers.
This threat could be internal, such as a
major failure in its IT systems, physical
restrictions on staff, studios, production
equipment but also external, such as
natural disaster or the global pandemic,
when the Group was able to quickly
move to a work from home model, and
services remained robust throughout.
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.
Mitigation
The Group’s multiple, full-service delivery hubs
provide for a good level of contingency and,
supported by business continuity and disaster
recovery plans, the effects of such disasters
can be managed.
Keywords also operates a highly distributed
model, with operations in 26 countries. This, in
addition to the business successfully operating
as a hybrid working model, provides the Group
with the ability to service clients from different
locations, as required, along with experienced
IT teams to carry out recovery when needed.
Risk trend
The Group carries out scenario planning to
identify potential environmental changes at
key studio locations enabling the Group to plan
mitigating actions.
Risk 2 - Breaches to information and cybersecurity
Link to strategy
Description
The industry requires the highest
standards of security and privacy from
a company offering services such
as Keywords.
Exploitation of under-protected
software, hardware, information assets
or resources and inability to react and
resolve may lead to piracy, disruption
of customers’ marketing plans, loss of
competitive edge and could result in
compensation claims.
An increase in volume of client IP
naturally results in an increased threat
of leaks of unpublished IP, confidential
business or personal private data which
could potentially cause disruption.
Mitigation
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 and is a part of the
Group’s business continuity planning.
Keywords maintains physical and data security
and privacy policies and procedures which
are regularly audited by its larger customers
and seeks to maintain appropriate insurance
coverage to support the management of
potential threats and attacks. Due to the
increasing sophistication of cyber adversaries
and the techniques that they use, our internal
teams regularly test our systems to prepare
against potential malicious actors.
Risk trend
A dedicated Information Security team and
Global Head of Privacy 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 38 and in the Audit
Committee report on page 72.
The Group regularly provides comprehensive
security and privacy training to all employees
to ensure they understand their roles and
responsibilities in protecting sensitive
information.
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Principal risks and uncertainties
C O N T I N U E D
Risk 3 - Failure to manage human resources/talent effectively
Link to strategy
Description
Establishing Keywords as a leading
destination for talent is one of the
Group's key strategic focus areas and
is detailed in the strategy section on
page 20.
Keywords employed around 13,000
people in 26 countries across the
Group at the end of 2023, and people
management is key to performance and
service delivery.
Failure to attract, retain or develop high
quality entrepreneurial talent across the
business could impact on the attainment
of strategic objectives.
Mitigation
Keywords’ culture has been fundamental to
the Group's success as it binds teams together,
whilst preserving the individual cultures of
the studios. The Group has also introduced
a new People & Culture leadership team,
which is focused on talent development,
talent management and enhancing
employee engagement.
The Group works to develop and incentivise its
people and to support their passion to provide
the best service for clients. Special emphasis
is placed on the prevention of any form of
discrimination, harassment or malpractice in
the workplace. This is supported by the review
and consistent communication of employee
handbooks, global policies and Code of
Business Conduct.
Risk trend
In order to provide consistent long-term
access to talent, the Group is building local
talent development, and has dedicated talent
acquisition initiatives.
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 38 to 45.
Risk 4 - Failure to meet financial market expectations
Link to strategy
Description
Keywords floated on AIM in 2013 with
an expressed set of objectives of
growing the business organically and
by acquisition.
Unclear communication or under-
delivery against forecasts to the
market can lead to unrealistic market
expectations and missed targets.
Mitigation
The Group makes every effort to communicate
regularly with investors and analysts 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.
Risk trend
The Group maintains a conservative balance
sheet and through its Revolving Credit Facility
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
34 to 37.
Senior management and the Executive team
have monthly business reviews which include
updated forecasts for the full year as well
as the ongoing monitoring of the forecasts
against the market consensus.
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Annual Report and Accounts 2023
57
Risk 5 - Unsuitable large acquisition and/or failure of integration process
Link to strategy
Risk trend
Description
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.
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.
Mitigation
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.
Risk 6 - Non-compliance with legal, regulatory, and social standards
Link to strategy
Description
Reporting standards and disclosure
requirements regularly evolve, including
in areas such as climate change,
sustainability, whistleblowing and
sanctions.
A material failure to comply, anticipate
and respond in a timely manner to
applicable legal and social standards
could result in penalties, costs,
reputational harm and damage
to relationships with suppliers
and customers.
Mitigation
The Group’s Code of Business Conduct
guidelines were rolled out to all studios
during 2021, are reviewed every year, and
are supported by more detailed policies and
procedures, a number of which are published
on the Group's website.
The whistleblowing process is enhanced by
our Keywords Integrity line, a 24-7 online portal
for whistleblowing reporting and confidential
communications in line with recent EU and
other local requirements.
The shared services team support the Divisions
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
diligence report 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.
Risk trend
The Group has an increased focus on
environmental impact, with measures to
reduce energy consumption/carbon footprint
and is expanding its reporting of GHG
emissions. It is in the process of implementing
an automated tool to help calculate emissions,
which will support long-term ambitions to meet
net zero targets.
The Group works on monitoring and horizon
scanning of new legislation and standards and
any changes are discussed at Board and Audit
Committee meetings.
More details are contained in the Responsible
business review on page 38 and the Audit
Committee report on pages 72 to 74.
Risk 7 - Financial loss and reputational damage due to fraud
Link to strategy
Description
The strong reputation of Keywords
makes it attractive to clients and
potential employees. Fraud and
cybercrime in particular are becoming
more sophisticated which, if not
managed appropriately, could lead to
substantial impact on the Group.
Risk trend
Mitigation
The Group has invested in and continues
to invest in its financial reporting function,
treasury function and their systems to facilitate
strong reporting and management controls
as it grows, with a new consolidation and
forecasting tool implemented in 2022.
The Group’s procedures include regular
operating reviews, underpinned by a continual
focus on ensuring the effectiveness of internal
controls. Management provides a fraud
assurance letter to the Board as part of the
year-end reporting process each year, and ad
hoc updates are provided on areas of concern
by the Auditor and Internal Audit.
The whistleblowing hotline provides an
opportunity for suspected incidents to be
reported and investigated as soon as possible.
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Principal risks and uncertainties
C O N T I N U E D
Risk 8 - Negative impact of currency risk
Link to strategy
Description
The Group transacts in multiple
currencies and Keywords is exposed
to both short-term currency risks, in
addition to longer-term risk that could
develop between its functional currency
and its multiple billing currencies.
Risk trend
Mitigation
The Group serves a global customer base, with
production facilities spread across multiple
geographies and currencies.
The Group has a Treasury policy, and, where
possible, manages 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.
Risk 9 - Cross-contamination risk
Link to strategy
Description
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 services.
The risk of failure in one Division
contaminating the relationship with
the same customer across the other
Divisions increases.
Mitigation
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 against expectations and
identify any potential emerging issues so that
they can be addressed. The Group’s central
sales systems for clients and contracts provides
a high-level oversight of client numbers, large
clients and services performed within the sales
and customer teams. Also, revenue generated
from single customers across multiple services
is increasing.
Risk trend
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.
Risk 10 - Failure to deliver services
Link to strategy
Risk trend
Description
Most of Keywords’ services are of a
time-sensitive nature. Delays or service
delivery failures could potentially impact
the development or launch plans for
games or result in lost contracts and/or
idle capacity.
A rise in milestone-based projects,
which carry a higher risk than time and
materials projects, as well as increased
requirements from clients around
carbon and sustainability reporting
could potentially impact the reputation
of the Group.
Mitigation
Delivering on agreed deadlines is an integral
part of the Group's modus operandi, and we
prioritise timely delivery and flexible resourcing
to meet these deadlines, with Divisional
oversight of key projects 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.
The Group’s legal team is typically involved from
the onset of contract/project negotiations with
a view to ensuring that appropriate provisions
are included in our agreements with clients.
The Group’s management team also monitors
and reviews client requirements to ensure
relevant ESG expectations are met.
Keywords Studios plc
Annual Report and Accounts 2023
59
Risk trend
Risk 11 - Tax credits withdrawal risk
Link to strategy
Description
The Group receives multimedia tax
credits (MMTC) in Canada, video games
tax relief (VGTR) in the UK and similar
incentives in other jurisdictions. These
tax credit regimes are designed to
promote growth and investment in the
relevant regions.
Any reduction or cancellation of these
tax credits would increase the cost base
of the business and make the business
less competitive. The Group will need
to have the ability to pivot to a lower
cost base if incentives are changed
or eliminated.
Mitigation
The Group works closely with regulators,
gaming associations 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.
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.
Risk 12 - Global political risk and uncertainty
Link to strategy
Risk trend
Description
As a result of its 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.
Mitigation
Keywords is monitoring geopolitical trends
around the Group with management
conducting horizon scanning for political
changes across the Group. A business
continuity planning programme is being
embedded into the organisation with the
diversification and spread of activities
geographically to mitigate the risk of disruption
in any one location.
Risk 13 - Client concentration risk
Link to strategy
Description
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
2023 accounted for 30.8% of Group
revenue (2022: 30.1%), and whilst large
publishers may have the same parent
company, they are unlikely to become
insolvent at once, dependence on
individual clients can lead to revenue or
margin pressures.
Mitigation
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
more strategic with key clients. Despite their
size, clients tend to be composed of several
individual entities which have certain levels of
autonomy over purchasing decisions. Keywords
is also focused on maintaining and enhancing
both bottom up and top down relationships.
Risk trend
Our leadership team and studios are proactive
in reviewing client accounts, including the
breadth of services and debt recovery. We
continue to seek out and build relationships
with new clients and support the growth
ambitions of smaller clients.
Keywords Studios plc
Annual Report and Accounts 2023
OverviewGovernanceStrategic ReportFinancial StatementsSupplementary Information 60
Principal risks and uncertainties
C O N T I N U E D
Risk 14 - Negative impact of regulation on video games
Link to strategy
Description
Failure to anticipate and respond
to regulatory changes in respect of
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.
Changes and new requirements could
result in the delay or cancellation of
video games by customers.
Mitigation
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.
Risk trend
Responsible gaming issues arising during game
play can be identified by engaging with industry
trade associations as well as by the Player
Engagement 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.
Risk 15 - Threat from technology innovation and industry disruption
Link to strategy
Description
Innovations in the gaming industry
continue to evolve.
New technologies for automated
testing, machine translation and
other services, together with a failure
to maintain or update Keywords
technology, systems and applications
to reflect what is in the wider gaming
community, could pose a threat to the
Group in the long term.
Mitigation
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 8 and the Our strategy section
on page 20.
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.
Risk trend
The Group is also investing in existing tools and
conducting regular assessments of technology
debt and vulnerabilities whilst developing a
focused, balanced strategy for technology
acquisitions.
Keywords continues to strengthen the senior
management team in this area, led by our Chief
Digital Information Officer, as well as having a
standalone innovation team, led by a dedicated
Executive Committee member, to drive its
innovation agenda forward.
Keywords Studios plc
Annual Report and Accounts 2023
Non-financial and sustainability information statement
61
Our non-financial information statement is set out below on environmental matters, social and employee
matters, respect for human rights, and anti-bribery and corruption. Details of our business model can be
found on pages 18 and 19, and our principal risks are on pages 54 to 60. 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
Climate-related financial disclosures
Page 47 Taskforce on Climate-related Financial
Disclosures report
Pages 46 to 51 Taskforce on Climate-related
Financial Disclosures report
Social and employee matters
Code of Business Conduct
Pages 20 and 23 Our strategy
Pages 38 to 45 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 45 Responsible business review
Modern Slavery Policy
Anti-bribery and corruption
Anti-bribery and corruption Policy
Page 45 Responsible business review
Business model
Description of principal risks
and impact of business activity
Whistleblowing
Fraud Policy
Sanctions Policy
Pages 72 to 74 Audit Committee report
Pages 18 and 19 Business model
Pages 54 to 60 Principal risks and uncertainties
Non-financial key performance indicators
Pages 20 to 23 Our strategy
Pages 38 to 45 Responsible business review
The Strategic report was approved by the Board and signed on its behalf by:
Bertrand Bodson
Chief Executive Officer
13 March 2024
Keywords Studios plc
Annual Report and Accounts 2023
OverviewGovernanceStrategic ReportFinancial StatementsSupplementary Information
62
Chair’s introduction
I’m pleased to introduce
our Corporate
Governance Report for
the first time since my
appointment as Chair.
Dear Shareholders,
The Board is committed to robust oversight
and challenge of management, effective
engagement with our key stakeholders and
rigorous oversight of strategic, financial
and risk matters.
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. This report, when taken
together with each of the Board’s committees’ reports, provides
insight into how the Board operated during the year, its principal
activities and the key issues deliberated on.
Don Robert, Chair
Keywords Studios plc
Annual Report and Accounts 2023
63
Good corporate governance is key to promoting
the long-term success of the Company and
generating long-term value for our shareholders
and wider stakeholders.
Don Robert
Chair of the Board
Corporate governance
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; however, it also seeks to comply with the principles of the
UK Corporate Governance Code where possible and appropriate.
Following an update to the QCA Code in November 2023, we have
reviewed our compliance against the updated principles and I’m
pleased to confirm that we remain in full compliance with the
QCA Code.
Key stakeholders
The Board is mindful of its responsibility to all stakeholders, in
particular the creation of shareholder value and nurturing our most
important asset, our people. The Board is provided with regular
opportunities to engage with key stakeholder groups throughout
the year. This provides Directors with direct insight into the
Company’s culture and the interests of stakeholders, and adequate
information to ensure that relevant social and environmental issues
are integrated into the Company’s strategy, risk management and
business model. Further details of stakeholder engagement are
provided on pages 52 to 53.
Conclusion
I encourage all shareholders to vote their shares in favour of all
resolutions to be considered at our AGM in May 2024.
A summary of how Keywords complied with the QCA Code during
the year is provided on page 67.
Board composition
Annual reviews of the Board’s effectiveness and composition
help ensure the Board’s continued high performance, being
mindful of the desired mix of skills and diversity and the need to
ensure Directors remain independent and commit sufficient time
to discharge their duties. I joined the Board as a Non-Executive
Director and Chair Designate on 1 February 2023 and, following the
unfortunate passing of Ross Graham, I became Chair on 15 May
2023. Following a rigorous search process, we were delighted to
appoint Rob Kingston as CFO on 1 July 2023, at which time Jon Hauck
became COO.
I would like to thank all members of the Board for the considerable
time dedicated and valuable contributions to Keywords over the
past year.
Keywords Studios plc
Annual Report and Accounts 2023
OverviewGovernanceStrategic ReportFinancial StatementsSupplementary Information 64
Corporate governance report
Strategy and business model
A description of the Company’s strategy, business model and
supporting strategic pillars, along with key attributes of our
positioning within vibrant and growing industries, can be found
in the Strategic Report on pages 18 to 25.
Shareholder needs and expectations
The Board is committed to maintaining good communication and
constructive interaction with all shareholders throughout its annual
reporting cycle. It holds regular analyst and investor presentations,
roadshows and engagements, and published Regulatory News
Service announcements and other relevant information on its
website. The Executive Directors meet shareholders and other
investors at regular intervals during the year and host meetings from
time to time. The Chair is also available to meet with the largest
shareholders during the year without management present.
We regard the Annual General Meeting, as an opportunity for
the Board 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.
Through effective communication and close ongoing relationships
with its shareholders the Board welcome constructive dialogue. 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 2023 AGM, all
resolutions were passed comfortably. 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 2023 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 reduce our 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 90 to 91.
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 internal 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
52 to 53.
Culture
The Board recognises that its decisions regarding strategy and risk
may impact the corporate 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.
Keywords has established a set of five core leadership principles
under the rubric “Imagine More”. These principles guide employees
in our mission to deliver an ever-more compelling proposition
globally for our partners in the video games industry and adjacent
content markets, and 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. In 2023, our Leadership Principles were celebrated across
the Group with employees sharing their stories of challenges and
successes and discussing key topics with executives at global town
hall sessions.
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 remains in place.
The Board seeks to better understand the interests of employees
through an annual employee survey, pulse surveys throughout
the year 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 page 53.
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
54 to 60.
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. The Board continuously
monitors and upgrades its internal control procedures and risk
management mechanisms and conducts regular reviews of their
effectiveness. 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.
Keywords Studios plc
Annual Report and Accounts 2023
65
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 six times per year, receiving
reports on, and holding 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 Executive Committee and
senior leaders.
— A defined organisational structure with appropriate delegations
of authority.
— Annual Board Strategy day.
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 three Executive Directors, Bertrand Bodson
(CEO), Rob Kingston (CFO) and Jon Hauck (COO), and five Non-
Executive Directors, Don Robert (Chair), Charlotta Ginman (Senior
Independent Director), Georges Fornay, Marion Sears and Neil
Thompson. Director biographies and Committee memberships are
detailed on pages 68 to 69. Following a number of Board changes
in the year, our Board diversity is currently 25% female Directors.
The Company annually reviews its Board Diversity Policy, which
aims to improve skills, thought, gender and ethnic diversity on the
Board. Details of directorship changes in the year can be read in the
Nominations Committee report on pages 70 to 71.
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 Chair 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 three are at AIM quoted
entities, with less regulatory burden than premium listed companies,
and the Nominations Committee is therefore confident that
Charlotta Ginman has sufficient time to devote to her Keywords role.
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. During
the second half of the year 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 Chair 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 six 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 at
least one studio each year. Meetings are open and constructive,
with every Director participating fully. Senior managers 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. The
Non-Executive Directors meet regularly without the presence of
the Executive Directors and maintain ongoing communications with
Executive Directors between formal Board meetings. 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 Chair and CEO are separate and well defined. A copy of the
Chair/CEO Split of Responsibilities is available on the Company’s
website www.keywordsstudios.com.
Charlotta Ginman is the Senior Independent Director (SID) and 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. Details of the Directors’ experience and areas of expertise
are outlined on pages 68 and 69. 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 Chair is supported by the Group General Counsel and
Company Secretary 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,
corporate brokers, 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.
Keywords Studios plc
Annual Report and Accounts 2023
OverviewGovernanceStrategic ReportFinancial StatementsSupplementary Information 66
Corporate governance report
C O N T I N U E D
Governance structure
Board of Directors
CEO
Nominations
Committee
Audit
Committee
Remuneration
Committee
ESG
Committee
Executive Committee
Disclosure Committee
Investment Committee
Risk & Compliance Committee
ESG Management Committee
Nominations Committee
The Nominations Committee is chaired by Don Robert and its other
members are Charlotta Ginman, Georges Fornay, Marion Sears
and Neil Thompson. 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 68 and 69.
Audit Committee
The Audit Committee is chaired by Charlotta Ginman, and its other
members are Don Robert, Georges Fornay, Marion Sears and Neil
Thompson. The Audit Committee is responsible for overseeing
financial reporting, risk management and internal control procedures,
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 72 to 74.
Remuneration Committee
The Remuneration Committee is chaired by Marion Sears, and its
other members are Don Robert, Charlotta Ginman, Georges Fornay
and Neil Thompson. The Remuneration Committee is responsible
for determining the remuneration of the Chair (with the Chair
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 75 to 89.
ESG Committee
The ESG Committee is chaired by Georges Fornay and its other
members are Neil Thompson, Marion Sears, Bertrand Bodson, Don
Robert, Charlotta Ginman, Robert Kingston 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 90 and 91.
Governance documents
The Matters Reserved for the Board and terms of reference for all the
Committees are available on the Company’s website
www.keywordsstudios.com.
Board evaluation
In 2023, 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, by One Advisory Limited, and the Board is
committed to a periodic external evaluation.
The 2023 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 Chair with each Director. The Senior Independent Director held
discussions with each Director to review the performance of the
Chair. 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 Chair.
Progress made during the year
Four areas were identified for improvement in 2023, and comments
on progress made are included below.
— To review opportunities for enhancing engagement with
key stakeholders.
Progress made in the year: Opportunities to engage with
shareholders, the workforce, banking partners and clients have
been made available to the Board during the year.
— To offer Directors opportunities for development.
Progress made in the year: A dedicated session was held on
artificial intelligence, exploring a broad range of commercial,
operational and legal considerations. The Directors were able to
discuss training needs with the Chair and Company Secretariat.
— More time dedicated to reviewing (i) acquisition success and
integration activity, and (ii) competitors.
Progress made in the year: An integration update was added
to regular Board reports, and insights into the position and
experiences of competitors and the broader market were
included in deep dives and other updates, as appropriate.
— Succession planning for members of the Executive Committee.
Progress made in the year: 2023 saw a re-organisation of the
leadership team, which incorporated a review of the talent
pipeline as part of a Group diversity programme.
Keywords Studios plc
Annual Report and Accounts 2023
— To enhance Board papers and
Director
Following a review of the findings of the 2023
evaluation, the Board has highlighted the
following areas for attention in 2024:
— To continue to offer Directors a range
of opportunities for training and
development.
presentations with a strong focus on
strategic priorities, including key financial
and non-financial metrics.
— To enhance the Board’s oversight of
company culture and the risks inherent
in the business and the Group’s internal
controls framework.
— To continue to focus on succession
planning for Board roles.
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 2024 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, Deutsche
Numis, provides guidance on regulatory and
corporate governance matters to the Board,
as required.
In January 2024 the Company announced
the appointment of Barclays Bank plc as
joint Corporate Broker, alongside existing
Corporate Broker, Deutsche Numis.
The Company has retained Deloitte LLP, who
provide advice in relation to remuneration
matters. Additional information can be found
in the Directors’ Remuneration Report on
pages 75 to 89.
All Directors may receive independent
professional advice at Keywords’ expense,
if necessary, for the performance of
their duties.
67
Meetings and attendance
The following table shows the attendance of Directors at scheduled meetings of the Board
and its Committees during the calendar year ended 31 December 2023. The number of
attendances is shown next to the maximum number of meetings the Director was entitled
to attend.
Bertrand Bodson
Jon Hauck
Rob Kingston4
Don Robert1
Charlotta Ginman3
Georges Fornay3
Marion Sears5
Neil Thompson6
Ross Graham2
Board
Audit
Committee
Remuneration
Committee
Nominations
Committee
ESG
Committee
8/8
8/8
4/4
7/7
8/8
8/8
7/8
8/8
2/2
–
–
–
4/4
5/5
5/5
5/5
4/5
2/2
–
–
–
3/3
4/4
4/4
6/6
6/6
2/2
–
–
–
2/2
3/3
2/2
2/3
3/3
1/1
3/3
3/3
2/2
3/3
3/3
3/3
2/3
3/3
–
1 Don Robert joined the Board on 1 February 2023.
2 Ross Graham sadly passed away on 13 May 2023.
3 On 26 May 2023, Charlotta Ginman was appointed a member of the ESG Committee and Georges Fornay
was appointed a member of the Nominations Committee and Remuneration Committee.
4 Rob Kingston joined the Board on 1 July 2023.
5 Marion Sears was unable to attend one Board meeting, one Nominations Committee meeting and one
ESG Committee meeting due to a family emergency.
6 Neil Thompson was unable to attend one meeting of the Audit Committee due to a prior commitment.
QCA Corporate Governance Code
Principle
Establish a strategy and business model which promotes
long-term value
Promote a corporate culture that is based on ethical values
and behaviours
Disclosure within
this report
Pages 14-27
Pages 38-51
Seek to understand and meet shareholder needs and expectations
Pages 52-53
Take into account wider stakeholder interests and their implications
for long-term success
Pages 38-53
Embed effective risk management, internal controls and
assurance activities
Establish and maintain the board as a well-functioning, balanced
team led by the chair
Maintain appropriate governance structures and ensure that
individually and collectively the directors have the necessary
up-to-date experience, skills and capabilities
Evaluate board performance based on clear and relevant
objectives, seeking continuous improvement
Establish a remuneration policy which is supportive of long-term
value creation and the company’s purpose, strategy and culture
Communicate how the company is governed and is performing
by maintaining a dialogue with shareholders and other
relevant stakeholders
Pages 54-60
Pages 62-71
Pages 62-71
Pages 66-67
Pages 77-82
Pages 52-53,
62–67
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Keywords Studios plc
Annual Report and Accounts 2023
OverviewGovernanceStrategic ReportFinancial StatementsSupplementary Information 68
Our Board of Directors
Don Robert
Chair
Don brings a strong track record of building and leading
international businesses, including through acquisitions,
and a deep understanding of technology, data and
analytics. He was CEO of Experian plc, the global
information and analytics group, 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.
Don currently serves as Chair of the London Stock
Exchange Group (LSEG), where he has overseen the
transformation of LSEG into a leading global financial
markets infrastructure business. He is also involved in
several private technology focused businesses and holds
a variety of private equity roles.
Bertrand Bodson
Chief Executive Officer
Bertrand Bodson brings deep experience of driving
and executing growth strategies for international
businesses. He has a 23-year career in establishing new
business models and innovative platforms, developing
strategic partnerships, international expansion and
digital transformation. He was Chief Digital Officer
and a member of the executive committee for global
healthcare leader Novartis between 2018-2021, where
he led the digital transformation of the business, leading
large-scale teams, securing a number of strategic
partnerships and playing a key role in the development of
its corporate culture. Bertrand previously spent four years
as Chief Digital and Chief Marketing Officer at Sainsbury’s
Argos where he led the transformation from a traditional
catalogue business to the third-largest online retailer
in the UK. He subsequently led 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. Bertrand is a graduate of Harvard
Business School and McGill University. He is currently a
non-executive director of Tesco plc.
Rob Kingston
Chief Financial Officer
Rob comes with a strong track record of delivery across
international and acquisitive technology and media
companies. Prior to Keywords, he was CFO for the UK&I
Division of Flutter Entertainment plc. Previously, having
joined as a graduate, he worked at Sky plc for 25 years in
a variety of progressively senior finance and operational
roles across the business, including Finance Director for
the Content Division, Group Director of IR, and Executive
Director to the Group CEO. He has held positions on
a variety of Boards as well as being a member of the
Finance & General Purposes Committee of the National
Film and Television School. Rob holds a BA (Hons) in
Business Studies and is a Fellow of the Chartered Institute
of Management Accountants.
Jon Hauck
Chief Operating Officer
Jon joined Keywords in 2019 as CFO and in 2023,
moved to his current role of COO. He has a wealth of
finance, change management and M&A experience,
having held the role of Group Financial Controller and
Treasurer at Rentokil Initial plc between 2015-2019. He
joined Rentokil Initial in 2008 and, held several roles,
including Programme Director in North America where
he was responsible for leading a substantial integration
programme. He subsequently became Chief Financial
Officer of the North America operations. Prior to Rentokil
Initial, he worked in PriceWaterhouseCoopers’ Assurance
practice. Jon is a Fellow of the Institute of Chartered
Accountants of England and Wales.
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Keywords Studios plc
Annual Report and Accounts 2023
69
Georges Fornay
Independent
Non-Executive Director
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 from 1995 to 2011,
including as CEO of the French and Swiss divisions and
culminating as the Senior Vice President from 2004
to 2011. During this time he oversaw the launch of the
PlayStation Portable and PlayStation 3. Prior to this,
Georges spent nine years at Commodore, the last five
years of which were as CEO of Commodore France PC
Manufacturing and Distribution. Georges has also held
significant industry-wide roles, including four years on
the Board of France’s second largest independent games
publisher, Focus Home Interactive, which is listed on
the Alternext. Four years as President of SELL, France’s
Union of Entertainment Software Publishers, where
he was responsible for representing and advocating
the industry’s and its 31 members’ interests to the
French Government.
Charlotta Ginman
Independent Non-
Executive Director and Senior
Independent Director
Charlotta qualified as a Chartered Accountant before
spending a career in investment banking and commercial
organisations, principally in technology-related
businesses. Charlotta began her career at Ernst & Young
in 1989, and was then appointed to a series of senior roles
in investment banking with UBS, Deutsche Bank and
JP Morgan, both in London and Singapore, where she
gained considerable M&A transactional experience.
Charlotta has also held senior roles within Nokia
Corporation, including acting as Chief Financial Officer
of its luxury mobile phone division Vertu Corporation
Limited. Charlotta is an experienced NED, currently sitting
on the Boards of Gamma Communications plc, Pacific
Assets Trust plc, Polar Capital Technology Trust plc,
Unicorn AIM VCT plc and Boku Inc. As three of Charlotta’s
roles are with investment companies that require less
time to be dedicated throughout the year, and the rest
are AIM listed entities with less regulatory burden than
a company listed on the main market, Charlotta has
sufficient time to devote to each of her roles.
Marion Sears
Independent
Non-Executive Director
Marion had an extensive career in the City as an analyst
and subsequently in investment banking and international
M&A. Over the last 20 years she has served on a number
of private and public company boards as a Non-Executive
Director. She has acted as a Senior Independent
Director and has chaired Remuneration, Nomination and
Corporate Responsibility committees during this time,
giving her long-standing PLC experience and stakeholder
understanding. Marion is currently a Non-Executive
Director at Dunelm Group plc, where she has designated
responsibility for workforce engagement.
Neil Thompson
Independent
Non-Executive Director
Neil has over 25 years’ experience in the technology
sector, holding a number of senior positions within
Microsoft Corporation. He was part of the management
team that launched Xbox into 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. He is a Non-Executive Director at E.P.
Barrus Ltd. and acts as a board adviser to start-up
SaaS businesses.
Committee
membership
Audit
Nomination
Remuneration
ESG
Committee Chair
Keywords Studios plc
Annual Report and Accounts 2023
OverviewGovernanceStrategic ReportFinancial StatementsSupplementary Information 70
Nominations Committee report
The key area of focus during the year was
succession planning for essential roles.
Don Robert
Chair of the Nominations Committee
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. In 2023, the Board was satisfied that all Non-
Executive Directors continued to be independent.
The Board is committed to effectively managing leadership
succession and proactively engages with executives to assess the
wider senior manager talent pool. The Board and its committees
regularly interact with executives and senior managers throughout
the year. These interactions 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 in
delivering Keywords’ strategic objectives.
Below the Board, 2023 has seen a strong focus on succession
planning for executive roles, taking into account the strategic priorities
of the Group and the skills required to deliver them. The Board are
mindful of the need to continue to drive diversity and build a strong
talent pipeline for internal successors to key leadership roles.
Skills and experience
During the year, the Committee reviewed the size, composition and
skill set of the Board and concluded that there was an appropriate
mix of experience, skills and knowledge to provide effective
leadership of its business activities. It was acknowledged that Don
Robert offers considerable corporate governance expertise, strong
M&A and that financial expertise is provided by Charlotta Ginman,
considerable M&A and remuneration experience is contributed by
Marion Sears, and deep knowledge of the industry is provided by
Georges Fornay and Neil Thompson.
Full biographical details of our Directors can be read on pages
68 to 69.
Don Robert
Chair of the
Nominations Committee
Role and responsibilities
The Committee has written terms of reference which are available
to view on the Company’s website www.keywordsstudios.com. The
terms of reference clearly define the Committee’s responsibilities
and duties, and these were reviewed by the Committee and
approved by the Board in December 2023.
Composition and changes to the Board
and Committees
The Committee is comprised of Independent Non-Executive
Directors and is chaired by the Chair of the Board. On 1 February
2023, I was appointed as a Non-Executive Director and Chair
Designate. The former Chair, Ross Graham, sadly and unexpectedly
passed away in May and I became Chair on 15 May 2023, slightly
ahead of my planned succession at the AGM on 26 May 2023.
Following a review of the corporate governance arrangements of
the Company, it was decided to enhance the functioning of the
Board’s committees by appointing all Non-Executive Directors to sit
on all committees. This was welcomed by the Directors and, on 26
May 2023, Charlotta Ginman was appointed a member of the ESG
Committee and Georges Fornay was appointed a member of both
the Nominations Committee and Remuneration Committee.
Following a rigorous search process, we were delighted to appoint
Rob Kingston as CFO on 1 July 2023, at which time Jon Hauck
became COO.
Each year, we review the performance of the Board, reflecting on
successes and challenges and the contribution of Directors, and
agree actions to enhance the Board’s performance. Details of the
2023 internal performance review of the Board and its committees
are provided on page 66.
Keywords Studios plc
Annual Report and Accounts 2023
71
Induction and development
Rob Kingston was appointed to the Board on 1 July 2023 and followed
a comprehensive induction programme, including meetings with
management teams across the Group, key external stakeholders and
visits to a number of key studio locations. These experiences served
to provide Rob with a deep understanding of the business’ operations
and environment, internal controls and risk environment, investor
relations activities 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 performance reviews.
Governance
The Committee meets at least twice a year and at such other times
as the Chair or any member of the Committee may request.
Company Secretary
The Directors had direct access to the Group’s General Counsel
and Company Secretary, Andrew Kennedy, for advice on legal and
corporate governance matters.
2024 plan
The Committee has two meetings scheduled for 2024
and its attention will be remain focused on Non-Executive
Director recruitment.
Don Robert
Chair of the Nominations Committee
13 March 2024
Diversity
The Board sees championing diversity, equity, inclusion and
belonging as one of its key commitments, for the benefit of
our workforce, industry and society. We recognise the diversity
challenges of the industry and we remain focused on improving
diversity across the entire Group from the boardroom to the studio.
Following changes to the Board, 25% of Directors were women as
at 31 December 2023. Charlotta Ginman is our Senior Independent
Director as well as Chair of the Audit Committee, providing extensive
financial experience to the Board.
The Committee conducts an annual review of 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.
Information about diversity at Keywords can be found on pages
39 to 41.
Time commitment
During the year, the Committee reviewed the time commitments
of Board roles. 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 Director’s ability to dedicate the required time to Keywords.
As three of Charlotta’s roles are with investment companies that
require less time to be dedicated throughout the year, and the rest
are AIM listed entities with less regulatory burden than a company
listed on the main market, Charlotta has sufficient time to devote to
each of her roles.
Activities in the year
During the year, the Committee’s key activities included:
— The search and selection process for the CFO role, and
nomination of Rob Kingston.
— Conducting a Board effectiveness review.
— Assessing the skills, knowledge, experience and diversity
on the Board.
— Assessing the independence and time commitment of
each Director.
— Search for additional NED.
Keywords Studios plc
Annual Report and Accounts 2023
OverviewGovernanceStrategic ReportFinancial StatementsSupplementary Information 72
Audit Committee report
Continuing to oversee the implementation of
a fit for purpose Risk Assurance and Internal
Control Framework for the Group.
Charlotta Ginman
Chair of the Audit Committee
— Revenue recognition – we reviewed areas of material judgement
relating to revenue recognition in client contracts.
— Functional currency – we reviewed the functional currency
of the Company and presentation currency of the financial
statements in light of recent acquisitions.
— Taxation – we reviewed the Tax Policy Statement and Anti-Tax
Evasion Policy.
— Climate reporting – now a mandatory requirement for Keywords,
we reviewed the reporting regime, compliance statement and
materiality assessment. Our TCFD and CFD disclosures can be
read on pages 46 to 51.
— Accounting Policy changes and their impact on our accounts
were discussed. For more, see page 107.
Furthermore, the Committee discussed as well as received
comprehensive papers on explaining management’s estimates and
judgements in connection with material accounting issues including
bad debt provisioning (IFRS 9), impairments of onerous contracts,
deferred contingent liabilities, going concern and treasury activities.
For further detail on these, see the Notes forming part of the
consolidated financial statements on pages 105 to 142.
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 Chair’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.
— The Group’s internal control environment.
Charlotta Ginman
Chair of the
Audit Committee
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 2023. 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.
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 2023. 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.
Membership
The Committee is comprised of Independent Non-Executive
Directors and as a whole has competence relevant to the video
games industry. I am a Chartered Accountant and I also chair the
Audit Committees for other public companies. More information
about the Committee members and their attendance during the
year can be found on pages 67 to 69.
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, including purchase price
allocations for our newly acquired entities, used during the year.
— Valuation of goodwill and intangible assets – we received
goodwill impairment review results, and challenged the
underlying assumptions made.
Keywords Studios plc
Annual Report and Accounts 2023
73
The Group uses certain alternative performance measures (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 154 to 161.
As a result of the work performed, the Committee has concluded
that the Annual Report for the year ended 31 December 2023,
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 oversee the build and
enhancement of the Group’s risk assurance and internal controls
framework to ensure that following the Group’s rapid expansion a
strong framework is maintained. During the year, the Committee
considered and approved the implementation of a well documented,
three lines of defence model which will be appropriate to the size,
scale and growth trajectory of the Group. The first line of defence
is our studios, who are responsible for the day-to-day management
of risk and application of controls; the second line is independent
Group functions such as finance which oversees finance controls
and monitors risk management; and, finally, the third line is internal
audit, providing objective and independent assurance.
Our three lines of defence model:
The Board + Audit Committee + Remuneration Committee
+ Nominations Committee + ESG Committee
Executive Committee + Risk & Compliance Committee
First Line
Second Line
Third Line
Studio
Group functions
Internal audit
Own & manage risk
Day-to-day
management
Application
of controls
Responsible
& accountable
Set business
culture (leadership
principles)
Oversee &
specialise in risk
management
& compliance
Risk management
Financial
controls & IT
Policies, tools
& procedures
Reporting
& monitoring
Advise first
line of defence
Independent
assurance
Profile the
assessment &
management
of risk
Internal controls
testing
Advise first & second
lines of defence
Report to Audit,
CFO & other
committees
We have made significant progress during the year in developing and
rolling out risk and control matrices (RACMs) to systematically manage
and evaluate risks and controls. Various workshops were held for key
stakeholder groups to ensure RACMs were appropriate and training
sessions were conducted to ensure those responsible were provided
with the requisite skills and knowledge. RACMs will be monitored
with a combination of self assessment, testing, management letters
of assurance every year as well as periodic internal audits. We will
continue to map the implementation and advancement, and I will be
pleased to report progress in next year’s report.
Twice a year, at the time of the interim results and full year results, the
regional heads of operations, finance teams and Divisional directors
confirm to the Committee compliance in such areas as key policy
rollouts, risk reviews, internal controls and contract management.
The Committee regularly reviews the Company’s principal risks
on behalf of the Board, ensuring they remain relevant. Material
changes are promptly notified to the Board, and mitigation plans are
reviewed to ensure they are fit for purpose as appropriate. During
2023, the Committee reviewed the risk register of each principal
risk at each meeting and received a deep dive analysis into a chosen
principal risk, and in January a comprehensive review of principal
and emerging risks was conducted, structured as a top-down
Board risk overview and bottom-up leadership team review. In 2023,
the Committee received deep dives, including, Financial Crime
and Technology Obsolescence. A comprehensive overview of our
principal and emerging risks can be read on pages 54 to 60.
The Committee is supported by a management-led Risk and
Compliance Committee (RCC), formed in 2023, whose members
include key risk owners and functional heads from across the Group.
The RCC is chaired by Rob Kingston, CFO, and drives enhancements
to the internal controls and risk framework and reports on key
matters are delivered to the Committee on a regular basis.
Internal Audit
The Internal Audit function plays a crucial role within the Group’s
governance, risk management, and internal control framework.
The primary objective of this function is to assist the Board and
executive management in safeguarding the organisation’s assets,
reputation, and sustainability, whilst effectively managing and
mitigating risks. This involves evaluating whether significant risks
are identified and appropriately communicated by management to
the Board and executive team, and assessing the adequacy of their
control measures.
The Committee is responsible for overseeing and evaluating the
scope and effectiveness of the Group’s Internal Audit function.
During the year, Management obtained the support of external
resources to supplement the Internal Audit function, which has been
effective in ensuring continuity of delivery of the 2023 Internal Audit
Plan. The activities of the Internal Audit function are governed by
an Internal Audit Charter which was reviewed and approved by the
Committee during the year.
The Committee received regular updates on internal audit activities,
including:
—
Integration of recently acquired businesses;
—
Implementation and communication of Group policies;
— Reviews of whistleblowing procedures;
— RACMs work conducted, holding various workshops and
training sessions;
— Business assurance processes; and
—
IT and physical security.
Reports are presented at each Committee meeting, providing an
update on activities, progress against the internal audit plan, results
from audits and site visits.
Keywords Studios plc
Annual Report and Accounts 2023
OverviewGovernanceStrategic ReportFinancial StatementsSupplementary Information 74
Audit Committee report
C O N T I N U E D
Key policies
The Committee remains responsible for the review and approval of
the following policies, which were reviewed and approved during
the year:
— Non-Audit Services Policy.
— Employment of Former Employees of the External Auditor Policy.
Whistleblowing
Keywords operates an externally-facilitated whistleblowing portal
and has a dedicated internal cross-functional team which has proven
successful in co-ordinating responses to protected disclosures
received. It continues 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 whistleblowing 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 2023, twelve reports were received, which were fully
investigated and either substantiated and resolved or disproven
(2022: eight). 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 internal controls, accounting policies and areas of
critical accounting estimates and judgements and fees.
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.
There were no adverse matters brought to the Committee’s
attention in respect of the 2023 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. 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 2023.
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 €10,500 (2022: €13,000), 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 is satisfied
that the Auditor remains independent.
External audit tender
BDO has been the Group’s auditor for over 10 years; however,
Stephen McCallion has only acted as lead partner for four of the
six years he has been involved with the Company’s audit and we
therefore consider that he remains independent and able to carry on
as lead partner until 2024.
BDO will remain the Company’s auditor for the year ending 31
December 2024; however, a comprehensive tender process will
be undertaken during 2024, with the view of securing a new audit
mandate for the year ending 2025.
The Committee has therefore, in accordance with the 2019 Ethical
Standard, recommended to the Board that BDO continue to serve as
Auditor for the 2024 financial year.
Audit Committee effectiveness
During the second half of the year, an internal evaluation of the
effectiveness of the Board and its Committees was conducted. I
am glad to say that the Audit Committee had a positive outcome,
something I am hoping we will continue to enjoy going forward.
Focus for the coming year
The Committee has five meetings scheduled for 2024. Attention
will be focused on the external audit tender process and the
implementation of the three lines of defence model.
Charlotta Ginman FCA
Chair of the Audit Committee
13 March 2024
Keywords Studios plc
Annual Report and Accounts 2023
Directors’ Remuneration report
75
Focusing on fair pay for all employees,
competitive rates for the workforce and a
structure for the leadership that supports
long-term value creation and aligns with
shareholder experience.
Marion Sears
Chair of the Remuneration Committee
strong cash generation. Bertrand Bodson and Rob Kingston did
not receive any LTIP vesting as they joined the business in 2021
and 2023 respectively, but Jon Hauck received an LTIP vesting for
performance over the three years to May 2023 based on relative
TSR performance, together with the automatic vesting of tranches
of salary shares. Accordingly, the Single Figure remuneration earned
by the CEO was £777,700, that earned by the CFO was £231,300
and that earned by the COO was £1,177,500. The Single Figure
published for our COO, Jon Hauck, includes the LTIP at a face value
of £658,500 at the time of vesting in May 2023.
2023 Remuneration
Base salaries are reviewed each April and the salary for Bertrand
Bodson increased by 3.5% to £621,000 in April 2023. Jon Hauck did
not receive an increase in 2023 as CFO because he was promoted
to COO-designate in October 2022 and received an increase at that
time to £390,000. Rob Kingston joined on 1 July 2023 to succeed Jon
as CFO on a base salary of £375,000.
The bonus opportunity in 2023 under our old Policy represented
30% of base salary and was measured against financial metrics
(60%) and non-financial metrics (40%). Targets were set in line with
our budget and strategic priorities and achievement against targets
is described on page 85. This led to a payout of 18% of salary.
The LTIP represents 275% of salary for the Executive Directors and
the performance period has historically been three years to May.
From 2023, the LTIP performance period is aligned with the calendar
and financial year, more in line with market norms. Up to and
including awards made in 2023, the entire LTIP has been measured
against TSR relative to the FTSE 250 index excluding investment
trusts. Whilst in-flight LTIPs may not vest unless we deliver a share
price recovery, the 2023 LTIP vesting covered the performance
period May 2020-May 2023 and delivered 100% vesting to Jon
Hauck. No discretion was applied and Jon retained these shares
which count towards his required shareholding.
Workforce Remuneration
All employees received a regular salary increase on 1 April 2023.
Our workforce is complex in structure, being in 26 countries with pay
scales varying between hourly paid and flexible workers and highly
paid engineers and artists. For 2023 we again took the decision
to invest more in the pay of lower paid employees and the global
workforce average increase was 6.2% compared with a standard
increase for Board and Executive Committee (ExCo) of 3.5%.
Marion Sears
Chair of the
Remuneration Committee
Introduction from the Chair
I am pleased to present the Directors’ Remuneration Report for the
year ended 31 December 2023. The Company has chosen to adopt
the corporate governance Code for Small and Mid-sized Quoted
Companies published by the Quoted Companies Alliance; however,
we recognise 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. You will also
see that our new Remuneration Policy, set out in this report and under
which 2024 awards will be made, broadly follows the Principles and
Provisions of the UK Corporate Governance Code.
Business performance and Executive pay outcome
for 2023
The Group delivered resilient growth in a difficult year for the
industry that was impacted by a slow-down in player spend,
industry-wide cutbacks and US entertainment strikes. Against
this backdrop revenues were €780.4m, representing year-on-
year growth of 13.0% including our five acquisitions, and adjusted
operating profit increased 6.5% to €122.0m. We continued to grow
our market share and industry leadership position and management
made considerable progress against our strategic objectives. Cash
generation remained healthy and conversion was over 80%.
We saw strong performance in our Create division, however our
Globalize and Engage divisions experienced challenges due to US
strikes, lower client activity and delayed project work, reflecting the
current mixed market backdrop in the video gaming industry. This
performance and backdrop, together with an equity market focus
on the impact of AI on future performance, resulted in the share
price falling during the year. Whilst we expect to deliver strong
revenue and profit growth in 2024, the executive pay outcomes
for 2023 reflect performance and shareholder experience in the
year. The Committee awarded a bonus of 18% of salary which
it believes reflects the strategic progress in the year and the
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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 Group has delivered resilient growth in the context of a
difficult market backdrop.
— The Group continued to pay dividends to shareholders in line
with the dividend policy.
— The LTIP shares vesting in the year to the COO were retained
by him.
— The employee net promoter score (eNPS) remained at a good
level overall despite difficult market conditions.
— Lower-paid employees received higher percentage increases in
salary than management.
Remuneration policy review
During 2023, the Committee undertook a detailed review of the
executive remuneration framework which included consultation
with major shareholders, and we are grateful for the input provided
and support shown for our proposals. We listened to feedback
from shareholders and amended the final Policy structure as a
consequence. The new Policy will bring the remuneration structure
for our three Executive Directors into line with the increased size
and complexity of Keywords and provide the structure we need
to support our growth in the future. As part of this change we are
increasing maximum bonus opportunities to more competitive levels.
Awards will be subject to stretching performance targets, with 70%
of the bonus based on financial measures, and the measures for LTIP
awards updated to capture a broader assessment of performance,
including a return on capital employed (ROCE) underpin. To
strengthen the alignment with shareholder interests an element
of bonus deferral has been introduced for the CEO, and a holding
period will be introduced for LTIP awards. Details are set out on page
85 and shareholders can be assured that our overall philosophy
is unchanged, being to maintain a focus on pay for performance
and retain our weighting to long-term value creation and ensure
alignment with shareholders.
2024 remuneration
In line with our Policy, executive salaries increase in line with, or
below, any increase paid to the UK workforce. As such, on 1 April
2024 executive salaries will increase by 4%, whilst the salaries of
our colleagues based in the UK and Ireland will increase by at least
4.5%. In 2024, implementation of the new Policy will mean we award
higher bonus opportunities of 75% of salary to the CFO and COO
and 125% of salary to the CEO, with an increased weighting (70%) on
financial metrics to recognise the importance of sustainable annual
financial performance. We will award the same LTIP quantum as
before (275% of salary to all three Executive Directors) and 50% will
be measured against TSR relative to the FTSE 250 index (excluding
investment trusts), 35% will be measured against other financial
measures and 15% will be measured against important ESG targets.
We will explain bonus outcomes at the year end, and you can find
details of the LTIP targets for the period 2024-2026 which will be
used in forthcoming awards, on page 87.
Further engagement
We have engaged extensively with shareholders over the last few
years as we have reshaped our Remuneration Policy to reflect the
size and complexity of Keywords and to provide the framework we
need to support our growth in the future, and we now expect this
new Policy to remain in place for several years. You will see we have
incorporated feedback and set stretching targets and I look forward
to receiving your support at our 2024 AGM. In the meantime, if you
would like to discuss any aspect of our approach to remuneration,
please feel free to contact me via our Company Secretary.
Marion Sears
Chair of the Remuneration Committee
13 March 2024
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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 2023
Remuneration in 2024
Base salary
With effect from 1 January 2023
With effect from 1 January 2024
CEO: £600,000
CFO/COO Designate: £390,000
With effect from 1 April 2023
CEO: £621,000
CFO/COO Designate: £390,000
With effect from 1 July 2023
CEO: £621,000
COO: £390,000
CFO: £375,000
CEO: £621,000
COO: £390,000
CFO: £375,000
With effect from 1 April 2024
CEO: £645,800
COO: £405,600
CFO: £390,000
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:
— Financial targets, including turnover and profitability
(weighted 60%)
— 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 (excl.
investment trusts) over a three-year performance period
Shareholding requirements apply
CEO:
Target: 62.5% of salary
Maximum: 125% of salary
Partial bonus deferral applies – deferral of any bonus earned in excess
of 50% of maximum for at least one year
CFO and COO:
Target: 37.5% of salary
Maximum: 75% of salary
Measurement:
70% financial targets (including adjusted operating profit 50%,
total revenue 20%)
30% non-financial targets based on strategic measures
275% of base salary for Executive Directors, measured:
— 50% relative TSR (vs the FTSE 250 Index excl. investment trusts)
— 25% organic revenue growth
— 10% adjusted cash conversion rate
— 15% ESG targets
LTIP vesting is subject to a return on capital employed underpin
One-year holding period applies to 50% of 2024 awards vesting
Policy and principles
The Remuneration Committee determines the Company’s policy
on the remuneration structure for the Executive Directors and
Executive Committee members 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 good corporate
governance practice.
The Remuneration Committee believes these objectives are best
achieved by a remuneration structure whereby:
— Base salaries are targeted at up to median vs relevant
comparator groups. In 2021 and 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 targeted at up to median vs relevant
comparator groups, with a maximum of 125% of base salary for
the CEO and 75% of base salary for the COO and CFO;
— Long-term incentives are set at upper quartile, being the means
by which executives can earn significant rewards if shareholders
likewise have obtained a good return; and
— We consider the FTSE 250 overall to be a good comparator
group and use this for relative TSR measurement. We also
consider technology and AIM company peer groups when
setting remuneration.
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Section 1: Directors’ Remuneration Policy C O N T I N U E D
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.
New policy
During 2023, the Remuneration Committee reviewed the pay structure for the Executive Directors with a particular focus on how the
package incentivises management, appropriately reflects the strategic priorities of the Group (focused on continued strong growth), and the
appropriateness of the financial and non-financial performance conditions applied. The Chair of the Remuneration Committee consulted
with our largest shareholders to seek their views on the structure and proposed changes. As a result, the Committee amended the structure
to bring it in line with the increased size and complexity of the Group and revised performance conditions to more effectively link the
remuneration of Executive Directors with the long-term success of the Company and interests of shareholders.
Our new Policy is set out below. As we explained during consultation, the new Policy increases annual bonus opportunities to be more
competitive with market practice in FTSE 250 companies, increases the weighting on financial metrics for the bonus to recognise the
importance of sustainable annual financial performance and increases the number of LTIP metrics used whilst retaining our weighting to
the long term to ensure alignment with shareholders and a focus on long-term value creation. In conjunction with increased quantum, and
to ensure shareholder alignment, we have introduced a partial bonus deferral for the CEO, a ROCE underpin for LTIP vesting and a one-year
holding period following LTIP vesting.
Accordingly, we have increased CEO variable quantum to 400% of salary and CFO/COO quantum to 350% of salary. We recognise that
in conjunction with awarding a higher quantum, shareholders will expect us to set stretching targets and we envisage 50% of bonus will
pay out for on-target performance. This compares with previous years when all of the 30% of salary bonus has typically paid out for
on-target performance. Therefore, the on-target performance for the bonus for the CEO will increase from 30% to 62.5% of salary, and
for the CFO and COO will increase from 30% to 37.5% of salary, with most of the increased opportunity linked to targets for delivering
above-budget performance.
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, whilst
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 UK
workforce.
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Purpose and link to strategy
Operation
Opportunity
Performance measures
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.
Annual bonus
To provide an award where
individual and Company
performance have met or
exceeded expected levels.
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.
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 the UK).
Executives are eligible to
participate in an annual
bonus scheme.
Up to a maximum of 125% of base salary for
the CEO and 75% of base salary for the COO
and CFO.
The Remuneration Committee
reviews the range and
weightings of financial and
non-financial performance
measures each year.
For the CEO, any cash bonus in excess of half
of the maximum opportunity will be used to
purchase Company shares which would then
be held for at least one year.
For the COO and CFO, the bonus is paid
in cash.
The portion of bonus earned in any one year
depends on the Remuneration Committee’s
assessment of the overall performance
of the Company against predetermined
targets for the year. Performance targets
are 70% weighted on the Company’s
financial performance and 30% weighted on
performance against strategic targets. The
Remuneration Committee has discretion
over outcomes.
Maximum opportunity 275% of base salary.
Dividends are accrued over the vesting period.
LTIP grants are made annually
in the form of nominal value
share options which vest
subject to performance
conditions measured over
three years. Once vested,
awards may be exercised up
to 4 years from grant.
Malus and clawback
provisions apply.
A holding period of one year
applies to 50% of vested LTIP
awards granted in 2024 and
100% for vested LTIP awards
granted thereafter.
Vesting of LTIP awards is subject to
continued employment during the
performance period and the achievement
of performance conditions. 50% of the
LTIP is measured by relative-TSR, 35% by a
combination of other financial targets, and
15% by ESG targets.
LTIP vesting is subject to a ROCE underpin
where the Committee considers whether
the return generated is in line with the
Board’s expectations, and if not considers
reducing the vesting level. 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 one-year holding
period applies to LTIP shares vesting (after
tax and NI) and upon release at least 25%
must be held to build towards the required
shareholding of 250% of base salary. In the
first year of the holding period introduction
(2024), the holding period will only apply to
50% of shares vesting.
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Section 1: Directors’ Remuneration Policy C O N T I N U E D
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.
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. A one-year holding period applies
to 50% of any vested LTIP awards granted in 2024, and 100% for vested LTIP awards granted thereafter. On departure, an Executive Director
must continue to hold the required shareholding (or their actual shareholding if lower) for 12 months. These conditions preserve alignment of
Executive Director remuneration and the experience of shareholders.
Details of the Executive Directors’ current shareholdings are provided on page 88.
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.
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 2023.
Executive Director
Position
Date of appointment
Date of service agreement
Notice period
Bertrand Bodson
Jon Hauck
Rob Kingston
CEO
COO
CFO
1 Dec 2021
14 Oct 2019
1 July 2023
19 Sept 2021
30 Sept 2019
20 June 2023
6 months
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.
Keywords currently employs around 13,000 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 division; 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.
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.
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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 1,700 employees received share awards in 2023. 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.
Our all-employee savings scheme, the Employee Share Purchase Plan (ESPP), allows our employees to 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 2023, over 400 employees participated
in the ESPP.
The Board does not accept a pay differential between men and women in the same role and reviews annually an internal global gender pay
gap report. At 31 December 2023, there were around 13,000 employees globally, of which 26.7% were women (by voluntary disclosure), and
the Committee noted that gender balance varied by geography and division. In 2023, 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 belonging are an important focus for
our ESG Committee, and the Remuneration Committee has included targets relating to this topic in the LTIP ESG metrics for 2024.
The CEO pay ratio presented on page 87 relates to our UK workforce of 883 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. Executive Directors may not
accept any external appointment without the consent of the Board. Any associated fees are retained by the Executive Director.
Bertrand Bodson currently holds one non-executive position. Jon Hauck and Rob Kingston do not hold external appointments.
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 2023 AGM, as well as later
in 2023 to explain the intended changes to remuneration structure and measures, events during the year and priorities for the coming year.
The Committee will continue to engage with shareholders in advance of the 2024 AGM.
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, CFO and COO 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 2023. However, it should be noted that the value of LTIPs vesting has since reduced due to the share
price decline.
Potential reward opportunities are based on the Remuneration Policy, applied to current base salaries and incentive opportunities under this
new Policy. 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.
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Section 1: Directors’ Remuneration Policy C O N T I N U E D
Pay for performance scenario analysis continued
Bertrand Bodson
Jon Hauck
Max +50%
Maximum
£4,112k
Max +50%
£2,382k
£3,232k
Maximum
£1,829k
On-target
£1512k
On-target
£849k
Minimum
£672k
Minimum
£422k
Actual 2023
£777k
Actual 2023
£1,178k
0
1,000
2,000
3,000
4,000
0
1,000
2,000
3,000
4,000
Rob Kingston
Max +50%
Maximum
On-target
£815k
Minimum
£405k
Actual 2023
£231k
£2,287k
Assumptions:
£1,756k
Actual 2023: Fixed remuneration (2023 base salary, benefits and pension),
bonus paid for 2023 and LTIPs vesting in 2023.
Minimum: Fixed remuneration only (2024 base salary and pension).
On-target: Fixed remuneration as above, plus target bonus (50% of
maximum) and threshold LTIP vesting (25% of maximum opportunity).
Maximum: Fixed remuneration, plus maximum bonus (125% of base salary
for CEO and 75% salary for COO and CFO) 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.
0
1,000
2,000
3,000
4,000
Fixed
Short-term
Long-term
Chair and Non-Executive Director fee policy
The Chair and Non-Executive Directors receive fees for preparation for and 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. Following a comprehensive review in 2023, Non-Executive Director fees will rise in line
with Executive Director base salaries going forward.
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Section 2: Implementation of the Remuneration Policy in 2023
The Remuneration Committee
The members of the Remuneration Committee in 2023 were Marion Sears (Committee Chair), Neil Thompson, Charlotta Ginman, Ross Graham
(until 13 May 2023), Don Robert (following his appointment on 1 February 2023) and Georges Fornay (from 26 May 2023).
The members are all independent Non-Executive Directors. In the year ended 31 December 2023, 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 67. At the request of the Committee Chair, the CEO, CFO, COO, Chief People and Culture Officer, Head of Reward
and the Group’s external remuneration adviser may also attend meetings.
The Chair of the Remuneration Committee met with shareholders, key investors and relevant proxy agencies in 2023 to obtain input and
feedback on proposed changes to the Remuneration Policy.
The remit of the Committee is to determine and agree with the Board the framework for the remuneration of the Chair, Executive Directors,
the Executive Committee, 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 during the year. Deloitte has been the independent
advisor to the Committee since 2022 and were appointed by the Committee following a competitive tender process. Deloitte are signatories
to the Remuneration Consultants’ Code of Conduct, and the Committee is satisfied that the advice that it receives is objective and
independent. Total fees for advice provided to the Committee were £55,100 in the period to 31 December 2023 on a time and materials basis.
The Deloitte engagement partner and advisory team that provide remuneration advice to the Committee do not have any connections with
the Group or individual Directors that may impair their independence.
Directors’ emoluments
The remuneration for the Directors of the Company for the year ended 31 December 2023 is detailed in the table below:
2023 Fixed pay £’000
2023 Variable pay £’000
2023 Total
remuneration
Cash
salary/fee
Salary
Shares
Benefits
Pension
Total
Bonus
Director
Bertrand Bodson
Jon Hauck
Rob Kingston1
Ross Graham2
Don Robert3
Georges Fornay
Charlotta Ginman
Marion Sears
Neil Thompson
615.8
390.0
187.5
49.2
255.4
73.0
81.8
73.8
62.2
–
–
–
–
–
–
–
–
–
–
19.3
1.9
0.6
–
–
–
–
–
–
30.8
25.1
9.4
–
–
–
–
–
–
665.9
417.0
197.5
49.2
255.4
73.0
81.8
73.8
62.2
111.8
70.2
33.8
–
–
–
–
–
–
LTIP
–
658.5
–
–
–
–
–
–
–
Total
111.8
728.7
33.8
–
–
–
–
–
–
£’000
776.7
1,177.5
231.3
49.2
255.4
73.0
81.8
73.8
62.2
TOTAL
1,788.7
21.8
65.3
1,875.8
215.8
658.5
874.3
2,780.9
1. Rob Kingston was appointed a Director of the Company on 1 July 2023.
2. Ross Graham ceased to be a Director of the Company on 13 May 2023.
3. Don Robert was appointed a Director of the Company on 1 February 2023.
Keywords Studios plc
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OverviewGovernanceStrategic ReportFinancial StatementsSupplementary Information 84
Directors’ Remuneration report
C O N T I N U E D
Section 2: Implementation of the Remuneration Policy in 2023 C O N T I N U E D
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 Sedler1
Ross Graham
David Reeves2
Giorgio Guastalla3
Georges Fornay
Charlotta Ginman
Marion Sears
Neil Thompson
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
LTIP
–
Total
174.0
£’000
809.0
113.1
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
TOTAL
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.
Salaries in 2023
The salaries for the Executive Directors in 2023 were as set out below, following an increase of 3.5% in April for Bertrand Bodson at the time of
the annual review:
— Bertrand Bodson: £621,000
— Jon Hauck: £390,000
— Rob Kingston: £187,500 (appointed on 1 July 2023 on a annual salary of £375,000)
In May and September 2021, Jon Hauck was awarded salary shares to supplement his 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, 1,396 salary
shares vested automatically in May 2023 and 410 salary shares vested automatically in September 2023. In total, 2,662 salary shares remain
outstanding, with vesting dates in 2024 and 2025. The Committee does not intend to award further salary shares to Executives.
Pension
During 2023, the Executive Directors were paid pension contributions of 5% of salary, in line with the rest of the UK workforce.
Keywords Studios plc
Annual Report and Accounts 2023
85
Annual bonus outcome for 2023
During 2023, 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 with 60%
weighted against financial targets for the year in line with our financial KPIs (see pages 26 and 27) and 40% weighted on the assessment
against non-financial strategic targets.
The financial targets were based on revenue (weighted 20% of bonus), adjusted profit before tax (20%) and cash conversion (20%).
The non-financial objectives related to the strategic priorities for the business in 2023, 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 earned a bonus equating to 18% of salary, as shown in the table below.
2023 Executive Bonus outcomes
Bonus element
Target
Achievement
% Salary outcome
60% Financial
20%
20%
20%
40% Non-Financial
10%
10%
10%
10%
Total
Director
Bertrand Bodson
Jon Hauck
Rob Kingston*
Revenue
Below target threshold
Adjusted profit before tax
Below target threshold
Cash conversion
Exceeded maximum target of 80%
Strategic partnerships
Gained market share
M&A and adjacent markets
Technology, including cybersecurity
Accretive acquisitions, improved integration process
and return on capital employed of 16.4%
New leadership, improved cyber rating, automation/AI
increasingly used in client contracts
One Keywords and culture, talent and
capability
Increased gender %, good eNPS, HRIS business case,
Glassdoor score constant with lower frequency of
negative comments
0%
0%
6%
3%
3%
3%
3%
18%
Formulaic outcome, %
of base salary
Bonus for 2023
£'000
18%
18%
18%
111.8
70.2
33.8
* appointed 1 July 2023 so received bonus for six months pro rata.
Long-term incentives vesting in 2023
On 1 May 2020, Jon Hauck was awarded 25,000 LTIP options. Vesting of the awards required Keywords TSR to outperform the FTSE Small Cap
Index over a three-year period. Threshold vesting (10% of the award) required TSR performance in line with the Index and full vesting required
exceeding the Index TSR by 20% over the performance period. The Company’s TSR performance over this period substantially outperformed
that of the Index, resulting in full vesting in May 2023 of 25,000 shares in total. No discretion was applied.
Keywords Studios plc
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OverviewGovernanceStrategic ReportFinancial StatementsSupplementary Information 86
Directors’ Remuneration report
C O N T I N U E D
Section 2: Implementation of the Remuneration Policy in 2023 C O N T I N U E D
Long-term incentives outstanding and granted during 2023
LTIP awards granted to the Executive Directors in May 2021 and May 2022 remained outstanding during 2023 and in May 2023 Bertrand Bodson
and Jon Hauck were awarded LTIP shares equivalent to 275% salary. Vesting of all the awards require 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. The performance period for awards made in
2021 and 2022 is for three years to May, and the performance period for awards made in 2023 is three years to December 2025.
Bertrand Bodson’s LTIP award in 2021 was made on his appointment on 1 December 2021, and he 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. The 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.
Rob Kingston was granted an LTIP award on 2 August 2023 following his appointment, which will vest based on performance over the period to
31 December 2025, in line with other LTIP awards granted in 2023, subject to continued employment.
The number of performance-based LTIP shares granted to the Executive Directors in 2023 is summarised in the table below.
Director
Bertrand Bodson
Jon Hauck
Rob Kingston
Number of shares granted
at nominal value of £0.01
Value as % of salary
Performance period
Vest date
71,996
45,215
29,545
275%
1 January 2023 – 31 December 2025
19 May 2026
275%
1 January 2023 – 31 December 2025
19 May 2026
275%
1 January 2023 – 31 December 2025
2 August 2026
TSR value over 10 years
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.
Value of £100 invested in July 2013
£3,000
£2,500
£2,000
£1,500
£1,000
£500
£0
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
Keywords Studios
FTSE 250
FTSE Small Cap
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 883 (2022: 783) UK-based employees.
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 2023. 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 UK 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 2023.
Keywords Studios plc
Annual Report and Accounts 2023
87
The CEO pay ratio decreased slightly from 18 in 2022 to 17 in 2023. This low ratio was a result of Bertrand Bodson receiving a lower bonus
outcome in 2023 and, having joined in December 2021, not received the benefit of share awards vesting during 2023. Bertrand is due to
receive his first tranche of share awards vesting in 2024. However, a number of programmes have contributed to an overall improvement in pay
conditions for employees within the comparator group, including the addition of high-quality game development talent to the Group, as well as
talent within our enhanced support service functions, and a general focus over the past year on improving fair pay conditions for all employees
in the Group with a global workforce average salary increase of 6.2%.
Year
2023
2022
2021
Year
2023
Base Salary (£’000)
Total remuneration (£’000)
2022
Base Salary (£’000)
Total remuneration (£’000)
Methodology used
P25 (lower quartile)
P50 (median)
P75 (upper quartile)
Option A
Option A
Option A
23:1
27:1
51:1
17:1
18:1
38:1
P25 (lower quartile)
P50 (median)
P75 (upper quartile)
32
34
20
22
43
46
33
33
60
64
39
49
12:1
15:1
27:1
CEO
616
777
600
809
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 2024
Base salary
All employees are eligible for a base salary review effective 1 April
each year. On 1 April 2024, the Executive Directors will receive a 4%
salary increase, whilst the other Executive Committee members and
General Counsel and Company Secretary will also receive a standard
increase of 4%, subject to certain individual adjustments, and our
colleagues in the UK and Ireland will receive an average increase
of 4.5%.
Pension
The Executive Directors’ pensions will remain at 5% of base salary,
in line with the UK workforce.
Annual bonus
The CEO will be eligible to earn an annual bonus of up to 125% of
base salary, and the COO and CFO will be eligible to earn an annual
bonus of up to 75% of base salary. The outcome will be determined
with reference to targets set at the start of 2024 around financial
performance (weighted 70%) and non-financial performance
(weighted 30%). Performance measures will be consistent for the
CEO, COO and CFO and will reflect our strategic priorities, and will
be disclosed next year.
LTIP
The Committee intends to grant LTIP awards of 275% of base salary
to the Executive Directors which will be subject to the following
performance conditions, measured over three calendar years
2024-2026 and vesting on the third anniversary of the grant date.
A ROCE underpin applies to vesting of the LTIP whereby at vesting
the Committee will consider whether the Return generated is in line
with the Board’s expectations, and, if not, the vesting level may be
reduced. A one-year holding period applies to 50% of shares vesting
in December 2024.
LTIP %
award
50%
25%
10%
15% ESG:
• 5%
Measurement
TSR relative to the FTSE 250
index excluding investment
trusts
Organic revenue growth
% pa
Adjusted cash conversion
% pa
Minimum –
25% vesting
Maximum –
100% vesting
In line with
index
Exceeds
index by 20%
6%
13%
70%
80%
Carbon intensity reduction:
(Ratio of Scope 1 and 2
emissions to €m revenue –
tCO2eq/revenue)
6.25
6
• 5%
Group employee net
promoter score (eNPS)
29
35
• 5%
% female in leadership team 35%
39%
Total 100%
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Annual Report and Accounts 2023
OverviewGovernanceStrategic ReportFinancial StatementsSupplementary Information 88
Directors’ Remuneration report
C O N T I N U E D
Section 2: Implementation of the Remuneration Policy in 2023 C O N T I N U E D
Chair and Non-Executive Directors’ remuneration
Non-Executive Director fees were restructured during the year,
reflecting the increased commitment of all Non-Executive Directors
to serve on all of the Board’s committees. All Non-Executive Directors
(except the Chair) receive a basic fee, and additional fees are
provided for additional responsibilities (see below). Going forward,
Non-Executive Director fees will increase in line with the base salaries
of Executive Directors. As such, on 1 April 2024 Non-Executive
Director fees will increase by 4%.
On 19 January 2023, the Company announced the appointment
of Don Robert as a Non-Executive Director and Chair Designate,
and Don became Chair on 15 May 2023. The annual Chair fee for
Don Robert, which applied from the 2023 Annual General Meeting
was set at £400,000, inclusive of all Committee fees. The Chair fee
was set at a level that reflects the technology focus, complexity,
international scale and future growth ambition of the business and
Don has elected to apply his full Chair fee to purchase shares in
the Company, which is undertaken quarterly as part of an agreed
investment programme. Whilst the new Chair fee is an increase to
the annual fee paid to our previous Chair, we were conscious that
the Chair fee had remained largely unchanged since 2013 and had
fallen well below appropriate levels. Benchmarking conducted by
our remuneration adviser supported our decision and we were
pleased to attract an experienced Chair. As at 31 December 2023,
Don Robert held 8,159 shares.
Role
Board Chair (from 26 May 2023)
Non-Executive Director
2023 fee
£400,000
£62,700
Chair of Audit, Remuneration or ESG Committee
£12,400
Senior Independent Director
£10,000
Directors’ interest in shares
The interests of each person who was a Director of the Company
(together with interests held by his or her connected persons) 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 80), Jon Hauck, following
share awards which vested during the year but remain unexercised,
has achieved a shareholding of approximately 208% salary as at
31 December 2023. Bertrand Bodson purchased shares and has
achieved a shareholding of approximately 26% as at 31 December
2023, and will be required to build his shareholding from awards
vesting from December 2024. Rob Kingston, having joined during
the year, will be required to build his shareholding from awards
vesting from August 2026. A notional share price of £16.62 per
share as at 31 December 2023 has been used for the purpose of
calculating executive shareholding guidelines.
Director
Don Robert1
Ross Graham2
Jon Hauck3
Rob Kingston4
Bertrand Bodson
Georges Fornay
Charlotta Ginman
Marion Sears
Neil Thompson
FY23
8,159
64,376
48,847
nil
9,629
6,521
1,733
3,000
3,387
FY22
n/a
64,376
26,187
n/a
nil
6,521
1,733
2,000
3,387
109,950
90,954
1. Don Robert was appointed a Director of the Company on 1 February 2023.
2. Ross Graham ceased to be a Director of the Company on 13 May 2023.
3. Jon Hauck holds 50,000 LTIPs which are vested but unexercised. 26,500
shares are included for the purpose of calculating Jon’s interest in shares as
notional shares that could be held by Jon after satisfying applicable tax and
National insurance liabilities.
4. Rob Kingston was appointed a Director of the Company on 1 July 2023.
Keywords Studios plc
Annual Report and Accounts 2023
89
The share awards held by each Executive Director of the Company are, as follows:
LTIP awards
Director
Bertrand Bodson
Jon Hauck
Rob Kingston
Number at
31 December
2022
Number
granted during
the year
Number vested
during
the year
Number lapsed/
forfeited during
the year
Number
exercised
during the year
Number at 31
December 2023
Vesting
date
Current vesting
expectation1
61,156
70,392
–
–
–
71,996
25,000
35,586
–
–
–
–
45,215
29,545
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
61,156
5 May 2024
70,392
5 May 2025
71,996
19 May 2026
25,000
5 May 2024
35,586
5 May 2025
45,215
19 May 2026
29,545
19 May 2026
338,890
0%
0%
0%
0%
0%
0%
0%
Total
192,134
146,756
1. Vesting expectation (% of award) is based on the achievement of the TSR performance condition up to 28 February 2024.
Salary shares and restricted shares
Director
Jon Hauck
Bertrand Bodson2
Total
Number at
31 December
2022
Number
granted during
the year
Number vested
during
the year
Number lapsed/
forfeited during
the year
Number
exercised
during the year
Number at 31
December 2023
Next vesting
date1
Current vesting
expectation
1,087
821
2,560
22,239
26,707
–
–
–
–
–
543
410
853
–
1,806
–
–
–
–
–
543
410
853
–
544
5 May 2024
411
16 Sep 2024
1,707
5 May 2024
22,239
1 Nov 2024
1,806
24,901
100%
100%
100%
100%
1. Salary shares granted to Jon Hauck vest in one-third annual tranches over three years.
2. Restricted awards granted to Bertrand Bodson were granted as compensation for forfeited awards from previous employment and vest in full after three years
subject to continued employment.
Share Option Scheme
Executive Directors no longer receive awards under the Share Option Scheme. There are no awards outstanding under this scheme.
Keywords Studios plc
Annual Report and Accounts 2023
OverviewGovernanceStrategic ReportFinancial StatementsSupplementary Information 90
ESG Committee report
Progressing our ESG programme and
supporting initiatives across the Group.
Georges Fornay
Chair of the ESG Committee
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.
Activities in 2023
Three meetings were held during the year. The Committee
received presentations on each pillar, to understand initiatives
currently underway and those planned for 2024, and oversaw the
development of measures and multi-year targets for each pillar.
2023 ESG Committee activity
MAY
Committee meeting
• ESG metrics review
• Deep dive on Diversity, Equity, Inclusion and Belonging
JULY
Committee meeting
• ESG metrics review
• Environmental and climate reporting update
• Restructuring of the whistleblowing reporting framework
• Deep dive on People and Culture
OCTOBER
Committee meeting
• ESG metrics review
• Deep dive on Community
• Deep dive on Planet
• Terms of reference review
• Remuneration policy changes and ESG metrics
Georges Fornay
Chair of the
ESG Committee
Introduction from the Chair
As Chair of the ESG Committee, I’m very pleased to present our ESG
Committee Report for the year ended 31 December 2023.
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 operations. At Keywords, we recognise a collective
responsibility and accountability to consider the concerns of our
stakeholders and actively participate in our customers’ and the
broader industry’s environmental and social initiatives.
Composition and attendance
The Committee consists of eight members, namely Marion Sears,
Neil Thompson, Bertrand Bodson, Jon Hauck, Rob Kingston,
Charlotta Ginman, Don Robert, and myself. Further details about
the Committee members can be located on pages 68 and 69.
Throughout the financial year, the Committee convened on three
occasions, a comprehensive attendance report can be found on
page 67. These meetings were primarily conducted in person, with
select participants joining remotely through videoconferencing.
This approach enhanced the Committee’s efficiency and
facilitated the involvement of senior managers, regardless of their
geographical location.
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 approved and adopted by the Board in October
2023. In addition, with these terms of reference, the Committee
has devised an annual agenda that aligns with its meeting schedule.
This ensures that each ESG priority area receives the necessary
dedicated attention throughout the year.
Keywords Studios plc
Annual Report and Accounts 2023
91
ESG framework
The graphic below sets out the framework for our ESG programme,
including our pillars and key initiatives.
Planet
Sustainable
studios
Carbon
offsetting
Community
Keywords Cares
Hardship fund
Client
Client
satisfaction
Strategic
partnerships
People
Employee
satisfaction
Training
Mental health
Women in
games
Governance
Underpins the four pillars with high standards
of governance and business ethics.
Focus for the coming year
The Committee has three meetings scheduled for 2024. Attention
will be focused on monitoring initiatives and measuring progress
against targets. Deep dives into each pillar will be conducted
throughout 2024 to further enhance the Committee’s understanding
of key opportunities and challenges.
Georges Fornay
Chair of the ESG Committee
13 March 2024
A dashboard has been produced to aid the Committee in monitoring
ESG key performance indicators (KPIs) and targets. A number of
these KPIs have been disclosed in the responsible business report
on pages 38 to 45 but there are other targets that remain internal
as they are business sensitive. The Committee is also supported
by the ESG Management Committee who meet ahead of ESG
meetings, to review and monitor programmes and report progress
to the Committee.
A number of Group policies have been reviewed and updated to
support ESG initiatives, including:
— Supplier Code of Conduct
— Sanctions
— Grievance
— Business Travel
— Health and Safety
— Charitable Giving
Responsibility for oversight of these policies has migrated from
the Committee to the executive Risk & Compliance Committee
(RCC). The RCC has enhanced oversight of the risk, compliance and
internal controls environment, and reports to the Committee on
items relating to ESG areas. The Committee still holds the authority
for the approval of new Group policies and remains consulted on
and informed of changes to these existing policies.
Climate-related Financial Disclosures reporting
The Committee was updated on climate-related reporting, which
has now become mandatory for the Group, and have undertaken
the required steps to enhance our reporting in line with both TCFD
and the CFD requirements.
The Committee received progress updates from senior managers
regarding the implementation of our ESG programme. Notable
updates were given during deep dives into each ESG pillar
and included:
Planet - The continuous progress in enhancing our reporting
capability, with an additional Scope 3: Category 2 included in year-
end reporting, and Category 6 being calculated for the first time.
There has been good progress on the movement to renewables,
although overall emissions have risen due to our footprint and
certain location specific factors, however there are several great
sustainability initiatives in our studios which have gained positive
recognition by employees.
People - Progress on initiatives aimed at addressing diversity and key
areas of interest identified by the 2022 employee survey. Introduction
of agile pulse surveys four times a year, keeping the feedback loop
between Group and employees open.
Client - The continuing importance of building deep trusting
relationships with clients. Positive engagement on technology with a
range of clients.
Community - New Global Corporate Social Responsibility (CSR)
manager launched an expanded programme of activities. Twenty-five
charities have been supported across the world.
Governance - Our enhanced whistleblowing investigations portal has
operated smoothly.
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Annual Report and Accounts 2023
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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 2023.
Dividends
The results for the year are set out on pages 101 to 104. As described
in the Financial and operating overview section, the Board is
proposing a final dividend of 1.76 pence per share (2022: 1.60 pence
per share), bringing the total dividend for 2023 to 2.61 pence per
share (2022: 2.37 pence per share).
Directors and changes to the Board
The Directors of the Company during the year were Don Robert
(appointed on 1 February 2023), Bertrand Bodson, Georges Fornay,
Charlotta Ginman, Marion Sears, Neil Thompson, Jon Hauck, Rob
Kingston (appointed 1 July 2023) and Ross Graham (passed away on
13 May 2023). Biographical details of the current Directors are set out
on pages 68 to 69.
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
75 and 89. 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
Keywords continues to adopt 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 Code 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
54 to 60, as well as the Group’s budget for the 2024 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 noted:
— The net debt 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 debt of €68m and the undrawn balance of the
Revolving Credit Facility of $260m as at 31 December 2023.
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 54 to 60.
Articles of Association
Our Articles of Association can be amended by special resolution
and were last approved by shareholders in May 2023. 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 2023, the Company’s issued share capital was
79,287,236 ordinary shares of one pence each. There are 408,485
ordinary shares in the Company’s Employee Benefit Trust (EBT),
and the EBT has waived its right to exercise its voting rights and to
receive dividends in respect of these ordinary shares. Therefore, the
number of ordinary shares with voting rights is 78,878,751. Further
details of the Company’s issued share capital are given in note 2 to
the Consolidated Financial Statements on page 110. 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.
Keywords Studios plc
Annual Report and Accounts 2023
93
Significant shareholdings
At 29 February 2024, the Company was aware of the following
shareholdings of 3% or more of its issued share capital:
Name
Franklin Templeton
Capital Group
Liontrust Asset Management
Octopus Investments
Shares
7,343,891
6,665,780
4,289,548
4,123,809
T Rowe Price Global Investments
3,135,997
Global Alpha Capital Management
2,757,910
Swedbank Robur
Pictet Asset Management
2,682,054
2,489,700
%
9.30
8.44
5.43
5.22
3.97
3.49
3.40
3.15
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
141 to 144.
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 CEO’s
review on pages 8 to 13, the Divisional review on pages 28 to 33
and the Financial and operating overview on pages 34 to 37. Future
developments are described in the Strategy section of the Strategic
report on pages 20 to 23.
Post balance sheet events
There have been no material events affecting the Group since 31
December 2023.
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 81. 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 61.
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 12,340 during 2023.
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 38 to 45 and the
Section 172 statement on pages 52 and 53. The Company operates a
number of employee share plans to incentivise and retain employees
(see page 80) 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 23 to the
Financial Statements on page 130.
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
38 to 45.
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 2024 AGM will be held at 9:00 a.m. on 24 May
2024 at the offices of MHP Group Limited, 60 Great Portland Street.
The Notice of AGM accompanies this Annual Report and is available
online at www.keywordsstudios.com
By order of the Board
Rob Kingston
Chief Financial Officer
13 March 2024
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Statement of Directors’ responsibilities
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.
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
68 to 69, 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 8 to 61 and the Directors’ report
on pages 62 to 94 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.
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
Rob Kingston
Chief Financial Officer
13 March 2024
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Annual Report and Accounts 2023
95
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 consolidated undertakings (“the
Group”) for the year ended 31 December 2023, 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 notes to the financial statements, including the 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 Group financial statements give a true and fair view of the assets, liabilities and financial position of the Group as at 31 December 2023
and of its profit for the year then ended;
— the Company statement of financial position gives a true and fair view of the assets, liabilities and financial position of the Company as
at 31 December 2023;
— 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.
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 as a going concern 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 or 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.
Keywords Studios plc
Annual Report and Accounts 2023
OverviewGovernanceStrategic ReportFinancial StatementsSupplementary Information 96
Independent Auditor’s report C O N T I N U E D
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, Keywords Studios QC-Interactive Inc, Tantalus Media Pty Limited, High Voltage
Software Inc, D3T Limited, Climax Studios Limited and Forgotten Empires LLC.
Specified audit procedures
In addition, specific audit procedures have been completed in relation to certain material balances and transaction streams in Keywords
Canada Holdings Inc, Electric Square Limited, Studio Gobo, Keywords Manila, G-Net Media Inc, Lakshya Digital Private Limited, VMC
Embedded Services, Digital Media Management Inc and Smoking Gun Interactive Inc.
Specified audit procedures were performed to address the risks of material misstatement arising from key balances in non-significant
components, with testing performed on all material balances within these components.
The above full scope and specified audit procedure entities represent 72% of Group revenues.
Remaining components
All other components, not included in the above, were scoped in for analytical review procedures to confirm our conclusion that there were
no significant risks of material misstatement of the aggregated financial information.
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.
Our involvement with component auditors
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-Interactive Inc, VMC Embedded Services, Keywords Canada
Holdings Inc, G-Net Media Inc, High Voltage Software Inc, D3T Limited, Smoking Gun Interactive Inc, Digital Media Management Inc and
Forgotten Empires LLC.
The following components have been audited by BDO Member firms, under the direction, and supervision of the Senior Statutory Auditor,
Keywords Manila, Lakshya Digital Private Limited and Tantalus Media.
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. The Senior Statutory Auditor has also completed detailed reviews of selected working papers performed on significant risk areas.
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
and include the most significant assessed risks of material misstatement (whether or not due to fraud), 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. Acquisition accounting & purchase price allocation
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), €538m
(2022: €397m) 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.
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97
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.
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 €538m (2022: €397m), and intangibles carrying
value of €70m (2022: €73m). 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.
Keywords Studios plc
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Independent Auditor’s report C O N T I N U E D
to the members of Keywords Studios plc
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 2023 of €18.3m (2022: €13.2m). We focused on this area due to the risk of management manipulation of the timing of revenue
recognition and the cut off relating to accrued revenue at the year end.
Related Disclosures
Refer to note 2 of the accompanying consolidated financial statements for the accounting policies of the Group in relation to
Revenue Recognition.
Audit Response
We have performed audit procedures to understand the application of the revenue recognition accounting policies and to assess whether
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 define materiality as the magnitude of misstatement, including omissions, in the financial statements that, individually or in the
aggregate, could reasonably be expected to influence the economic decisions of a reasonably knowledgeable person taken on the basis of
the financial statements. We use materiality both in planning the scope of our audit work and in evaluating the results of our work.
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 €3.8m, which represents 3.3% of adjusted profit before tax. This
represents 6.2% of statutory profit before tax (excluding one time costs), and 11% of overall statutory profit before tax. 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 lower than the level we set
for the year ended 31 December 2022 (€5.7m), due to the lower profits of the Group.
We assessed the parent company’s materiality using a percentage 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 €3.8m, each component of the Group was audited to a lower level of
materiality within a range from €2.66m to €2.28m. 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 €190,000 (2022: €285,000). 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.
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 course of 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 solely on the work undertaken in the course of the audit, we report that:
— the information given in the Directors’ report is consistent with the financial statements; and
— the Directors’ report has been prepared in accordance with the Companies Act 2006.
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99
We have obtained all the information and explanations which, to the best of our knowledge and belief, are necessary for the purposes of
our audit.
In our opinion, the accounting records of the Company were sufficient to permit the financial statements to be readily and properly audited
and the Company statement of financial position in agreement with the accounting records.
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 for the financial statements
As explained more fully in the Directors’ responsibilities statement set out on page 94, 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 they 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 and the 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 management
either intends to liquidate the Group or the Company or to cease operations, or has 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 the aggregate, they could reasonably be
expected to influence the economic decisions of users taken on the basis of these financial statements.
Extent to which the audit was capable of detecting irregularities, including fraud
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.
Non-compliance with laws and regulations
Based on:
— Our understanding of the Group and the industry in which it operates;
— Discussion with management and those charged with governance and those responsible for legal and compliance procedures; and
— Obtaining and understanding of the Group’s policies and procedures regarding compliance with laws and regulations, we considered
the significant laws and regulations to be the reporting framework (UK adopted international accounting standards, UK GAAP and the
Companies Act 2006) and tax laws in key territories which the Group operates.
Our procedures in respect of the above included:
— Review of minutes of meeting of those charged with governance for any instances of non-compliance with laws and regulations;
— Review of correspondence with regulatory and tax authorities for any instances of non-compliance with laws and regulations;
— Review of financial statement disclosures and agreeing to supporting documentation;
—
Involvement of tax specialists in the audit; and
— Review of legal expenditure accounts to understand the nature of expenditure incurred.
The key laws and regulations we considered in this context included the UK Companies Act, Quoted Companies Alliance, AIM Listing Rules,
UK adopted international accounting standards and tax laws in key territories which the Group operates. We have no matters to report in
this regard.
Keywords Studios plc
Annual Report and Accounts 2023
OverviewGovernanceStrategic ReportFinancial StatementsSupplementary Information 100
Independent Auditor’s report C O N T I N U E D
to the members of Keywords Studios plc
Fraud
We assessed the susceptibility of the financial statements to material misstatement, including fraud. Our risk assessment
procedures included:
— Enquiry with management, those charged with governance and the Audit Committee regarding any known or suspected instances
of fraud;
— Obtaining an understanding of the Group’s policies and procedures relating to: – Detecting and responding to the risks of fraud; and –
Internal controls established to mitigate risks related to fraud;
— Review of minutes of meeting of those charged with governance for any known or suspected instances of fraud;
— Discussion amongst the engagement team as to how and where fraud might occur in the financial statements;
— Performing analytical procedures to identify any unusual or unexpected relationships that may indicate risks of material misstatement
due to fraud; and
— Considering remuneration incentive schemes and performance targets and the related financial statement areas impacted by these.
Our procedures in respect of fraud have included but are not limited to;
— Testing a sample of journal entries throughout the year, which met a defined risk criteria, by agreeing to supporting documentation;
— Assessing significant estimates made by management for bias;
— Performing analytical procedures to identify any unusual or unexpected relationships that may indicate risks of material misstatement
due to fraud; and
— Testing of revenue recognition, including the testing for existence, cut-off and the testing of journal entries specifically related to revenue
(as a response to the fraud risk raised in respect of improper revenue recognition), for further details, please see the Key Audit Matter
titled “Revenue Recognition - cut off” earlier in this report; and
— Detailed testing of other key areas of estimation uncertainty or judgement, for example; acquisition accounting, valuation of goodwill and
intangible assets, as set out in our Key Audit Matters Section.
We also communicated relevant identified laws and regulations and potential fraud risks to all engagement team members including
component engagement teams who were all deemed to have appropriate competence and capabilities and remained alert to any indications
of fraud or non-compliance with laws and regulations throughout the audit. For component engagement teams, we also reviewed the result
of their work performed in this regard. Our audit procedures were designed to respond to risks of material misstatement in the financial
statements, recognising that the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one
resulting from error, as fraud may involve deliberate concealment by, for example, forgery, misrepresentations or through collusion. There
are inherent limitations in the audit procedures performed and the further removed non-compliance with laws and regulations is from
the events and transactions reflected in the financial statements, the less likely we are to become aware of it. A further description of our
responsibilities is available 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.
The purpose of our audit work and to whom we owe our responsibilities
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
13 March 2024
Keywords Studios plc
Annual Report and Accounts 2023
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
Other comprehensive income:
Items that will not be reclassified subsequently to profit or loss
Actuarial gain / (loss) on defined benefit plans
Items that may be reclassified subsequently to profit or loss
Exchange gain / (loss) in net investment in foreign operations
Exchange gain / (loss) on translation of foreign operations
Non-controlling interest; recycled on disposal of subsidiary
Tax related to items taken to other comprehensive income
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
Earnings per share
Basic earnings per ordinary share
Diluted earnings per ordinary share
101
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
Years ended 31 December
2023
€’000
780,445
(481,340)
299,105
–
(21,964)
(27,140)
(26,060)
(75,164)
(177,111)
(252,275)
46,830
614
(12,450)
34,994
(15,042)
19,952
12
286
(8,317)
(2,518)
–
1,238
10,367
19,952
–
19,952
10,367
10,367
€ cent
25.28
24.94
(7,947)
6,144
162
–
46,015
47,415
(45)
47,370
46,015
46,015
€ cent
61.54
58.86
Note
4
5
5
23
5
11
6
6
7
7
8
8
The notes 1 to 29 form an integral part of these consolidated financial statements.
On behalf of the Board
Bertrand Bodson
Director
13 March 2024
Rob Kingston
Director
Keywords Studios plc
Annual Report and Accounts 2023
OverviewGovernanceStrategic ReportFinancial StatementsSupplementary Information
102
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
Total equity
Note
11
12
13
21
14
15
16
17
18
19
17
20
18
21
19
22
22
22
22
22
At 31 December
2023
€’000
2022
Restated (note 21)
€’000
632,176
41,950
50,237
32,751
175
757,289
59,862
89,940
83,993
5,991
239,786
14,294
155,970
–
27,081
13,865
211,210
28,576
12,002
4,030
127,380
10,307
33,107
186,826
599,039
939
321
54,518
306,837
183
(6,774)
80,416
162,599
599,039
469,953
37,672
44,784
31,157
175
583,741
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
17,017
30,105
68,297
557,091
924
2,467
47,021
286,655
11,018
–
65,379
143,627
557,091
The notes 1 to 29 form an integral part of these consolidated financial statements. The financial statements were approved and authorised for
issue by the Board on 13 March 2024.
On behalf of the Board
Bertrand Bodson
Director
13 March 2024
Keywords Studios plc
Rob Kingston
Director
Annual Report and Accounts 2023
103
Consolidated statement of changes in equity
Share
capital
– to be
issued
€’000
Share
premium
€’000
Share
capital
€’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 2022
904
2,185 38,549
273,677
12,821
(1,997)
48,193
97,905
472,237
(117)
472,120
–
–
–
–
–
14
–
–
6
–
–
–
–
–
–
–
–
–
–
–
–
–
5,862
909
–
–
–
–
–
–
–
–
–
282
1,701
12,978
–
–
(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
–
–
–
–
–
–
18,577
1,997
(1,492)
–
–
–
101
–
–
–
–
–
18,577
6,381
1,010
(1,979)
(1,979)
–
14,967
At 31 December 2022
924
2,467
47,021
286,655
11,018
20
282
8,472
12,978
–
1,997
17,186
(1,979)
38,956
–
–
–
–
5
–
–
–
–
–
–
–
–
–
–
–
–
–
1,462
–
–
10
(2,146)
6,035
20,182
–
–
–
–
65,379
143,627
557,091
–
–
19,952
19,952
1,250
(9,585)
–
21,202
10,367
–
–
–
(10,835)
–
(10,835)
–
–
–
–
–
–
–
–
–
–
21,964
–
1,145
(6,774)
(8,072)
–
–
–
–
–
–
–
21,964
2,612
(14,846)
(2,230)
(2,230)
–
24,081
At 31 December 2023
939
321
54,518
306,837
183
(6,774) 80,416 162,599
599,039
15
(2,146)
7,497
20,182
–
(6,774)
15,037
(2,230)
31,581
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
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
Cash proceeds arising
from share-based
payments
Company funded
acquisition of shares
(note 22)
Dividends
Acquisition-related
issuance of shares
Contributions by and
contributions to the
owners
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
18,577
6,381
1,010
(1,979)
14,967
38,956
557,091
19,952
(9,585)
10,367
21,964
2,612
(14,846)
(2,230)
24,081
31,581
599,039
Keywords Studios plc
Annual Report and Accounts 2023
OverviewGovernanceStrategic ReportFinancial StatementsSupplementary Information
104
Consolidated statement of cash flows
Cash flows from operating activities
Profit after taxation
Income and expenses not affecting operating cash flows
Depreciation and impairment – property, plant and equipment
Depreciation and impairment – right of use assets
Amortisation and impairment of intangible assets
Taxation
Share-based payments expense
Fair value movements in deferred and contingent consideration
Non-cash movements included in costs of acquisition and integration
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
Settlement of deferred and contingent consideration related to continuous employment
17
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
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-based
payments
Repayment of loans
Drawdown of loans
Payments of principal on lease liabilities
Interest paid on principal of lease liabilities
Dividends paid
Company funded acquisition of shares by EBT
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
27
17
13
11
18
18
19
19
9
22
Years ended 31 December
Note
2023
€’000
2022
€’000
19,952
47,370
13
12
11
7
23
5
5
6
6
6
6
28,903
15,948
26,060
15,042
21,964
9,177
2,677
3,279
1,447
(614)
1,025
5,768
(4,559)
126,117
(284)
(11,260)
(6,785)
7,470
(10,859)
(20,853)
(3,900)
110,457
(160,380)
(30,428)
(30,689)
(3,052)
614
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
(223,935)
(140,493)
1,145
(97,379)
227,322
(15,038)
(1,447)
(2,230)
(14,846)
1,467
(6,282)
92,712
(20,766)
(1,258)
81,886
59,862
505
(79)
–
(11,361)
(969)
(1,979)
–
6,785
(828)
(7,926)
(24,133)
309
105,710
81,886
Keywords Studios plc
Annual Report and Accounts 2023
105
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 2023.
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 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 cash and cash equivalents of €60m as at 31 December 2023,
and committed undrawn facilities of €237m 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 2023
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): The Group has implemented amendments to IAS
1 related 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. Whereas all
Significant Accounting Policies were disclosed in the past, the Group now discloses only material accounting policies in note 2.
— 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 are now recognised gross from the beginning of the earliest comparative period presented, As outlined in note 21, the comparative
periods presented have been re-stated to reflect the impact of adoption on the carrying value of Right of Use Assets and Lease Liabilities,
with any cumulative effect recognised as an adjustment to retained earnings or other components of equity.
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 2024:
— Lease Liability in a Sale and Leaseback (Amendment to IFRS 16); and
—
IAS 1 Presentation of Financial Statements (Amendment – Classification of Liabilities as Current or Non-Current, with Covenants).
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.
Keywords Studios plc
Annual Report and Accounts 2023
OverviewGovernanceStrategic ReportFinancial StatementsSupplementary Information 106
Notes forming part of the consolidated financial statements
C O N T I N U E D
2 Material 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. In general, in order for contingent consideration to become payable, pre-defined profit and/
or revenue targets must be exceeded. The fair value of contingent consideration at acquisition date is arrived at through discounting the
expected payment (based on scenario modelling) to present value. Where contingent consideration is dependent on the recipient remaining
in employment, the payment is accounted for as post-acquisition remuneration accrued over the retention period, as required under IFRS
3. At each balance sheet date, the fair value of the contingent consideration liabilities are 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.
Acquisition-related costs are recognised immediately as an expense in the periods in which the costs are incurred and the services
are received.
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, remeasured subsequently through the profit and loss. Goodwill is capitalised as an intangible
asset with any impairment in carrying value being charged to the Consolidated statement of comprehensive income.
Customer Relationships
Intangible assets, separately identified from goodwill acquired as part of a business combination (mainly Customer Relationships), are initially
stated at fair value. The fair value attributed is determined by discounting the expected future cash flows generated 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).
Keywords Studios plc
Annual Report and Accounts 2023
107
Other Intangible Assets
Other intangible assets include Intellectual Property and Music Licences, both acquired and internally developed. Other intangible assets are
recognised once they meet the criteria under IAS 38, and are amortised on a straight-line basis over the period of its expected benefit, starting
from the date of full commercial use of the product. Residual amounts, useful lives and the amortisation methods are reviewed at the end of
every accounting period.
Following initial recognition of 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. 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.
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.
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.
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.
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.
Keywords Studios plc
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OverviewGovernanceStrategic ReportFinancial StatementsSupplementary Information 108
Notes forming part of the consolidated financial statements
C O N T I N U E D
2 Material Accounting Policies continued
Revenue from Contracts with Customers continued
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 lines:
— Art Services – Art 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.
— 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.
— 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.
— 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.
— Player Engagement – Player Engagement relates to the live operations support services such as community management, player
engagement 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 Engagement contracts may also involve digital support platform software as a service. Revenue is recognised as the
related services are rendered.
Multimedia Tax Credits / Video Games Tax Relief and other tax credits related to staff costs
The multimedia tax credits (“MMTC”) received in Canada, and video games tax relief in the UK together with similar reliefs in other jurisdictions
(“VGTR”), 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.
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Annual Report and Accounts 2023
109
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.
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 certain vesting conditions. 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 FTSE 250 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.
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.
Deferred tax assets and liabilities associated with leases and decommissioning liabilities are recognised on a gross basis, in accordance with
IAS 12.
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.
Keywords Studios plc
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OverviewGovernanceStrategic ReportFinancial StatementsSupplementary Information 110
Notes forming part of the consolidated financial statements
C O N T I N U E D
2 Material Accounting Policies continued
Property, Plant and Equipment continued
Depreciation is calculated to write off the cost of fixed assets on a straight-line basis over the expected useful lives of the assets concerned.
The principal annual rates used for this purpose are:
Computers and software
Office furniture and equipment
Leasehold improvements
3 – 5 years
10 years
over the length of the lease
Gains and losses on disposals are determined by comparing proceeds with carrying amount and are included in the Consolidated statement of
comprehensive income.
Financial Assets
The Group’s most significant financial assets comprise trade and other receivables and cash and cash equivalents in the Consolidated
statement of financial position, whereas the Company’s most significant financial assets comprise inter-group receivables.
Trade Receivables
Trade receivables, which principally represent amounts due from customers, are recognised at amortised cost as they meet the IFRS 9
classification test of being held to collect, and the cash flow characteristics represent solely payments of principal and interest. The Group’s
impairment methodology is in line with the requirements of IFRS 9. The simplified approach to providing for expected credit losses has been
applied to trade receivables, which requires the use of a lifetime expected loss provision.
Accrued Income from Contracts with Customers
Other receivables include Accrued income from contracts with customers. The Group also applies the simplified approach to assessing
expected credit losses in relation to such assets, as their maturities are less than twelve months.
Share Capital
Financial instruments issued by the Group are treated as equity only to the extent that they do not meet the definition of a financial liability.
The Group’s ordinary shares are classified as equity instruments.
Financial Liabilities
Trade payables, bank borrowings and other 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.
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.
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Annual Report and Accounts 2023
111
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. Where such shares are utilised for employee share schemes, the cost of
the shares is transferred to the Share-based payment reserve, with any cash proceeds credited directly to the Share-based payment reserve.
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 and Presentation 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 of the Company. 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
mainly 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 when all factors are considered.
The Directors have determined the euro as the most appropriate presentation currency of the consolidated financial statements.
– 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.
– 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 after
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 remeasurement required due to changes in the fair value of the
liability are recognised in the Consolidated statement of comprehensive income.
– 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
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 games 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.
Keywords Studios plc
Annual Report and Accounts 2023
OverviewGovernanceStrategic ReportFinancial StatementsSupplementary Information 112
Notes forming part of the consolidated financial statements
C O N T I N U E D
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
Amortisation of intangible assets
Depreciation – property, plant and equipment
Depreciation – right of use assets
Bank charges
Other income
Operating profit
Financing income
Financing cost
Profit before taxation
2023
€’000
2022
€’000
336,069
275,570
279,490
300,875
164,886
114,273
780,445
690,718
94,118
48,477
15,710
69,748
61,577
15,576
158,305
146,901
158,305
146,901
(21,964)
(18,678)
(27,140)
(8,413)
(26,060)
(16,810)
(23,128)
(18,365)
(13,907)
(14,585)
724
–
46,830
614
662
1,098
71,810
1,986
(12,450)
(5,814)
34,994
67,982
^ 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, with Segment operating profit equating
to Adjusted EBITDA. A reconciliation of Adjusted EBITDA to the relevant GAAP measure is presented in the APMs section.
The Group is organised into three operating segments (as identified under IFRS 8 Operating Segments), and generates revenue across eight
service lines under three divisions:
— Create – Game Development and Art Services;
— Globalize – Functional Testing, Localization Testing, Audio and Localization; and
— Engage – Marketing and Player Engagement.
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, the Chief Operating Officer and the Chief Financial Officer.
Intersegment revenue is not material and thus not subject to separate disclosure.
Keywords Studios plc
Annual Report and Accounts 2023
Geographical analysis of non-current assets from continuing businesses*
United States
United Kingdom
Canada
Australia
Italy
Poland
Switzerland
China
India
France
Other
113
2023
€’000
351,240
216,416
49,997
49,179
15,308
12,859
9,786
9,573
7,495
7,044
2022
€’000
264,117
121,556
57,652
51,869
16,471
12,561
10,025
9,296
4,974
7,150
28,392
28,070
757,289
583,741
* The prior year comparatives have been reclassified to align to the current year ranking.
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*
United States
Canada
United Kingdom
Poland
Australia
Italy
China
India
Japan
Philippines
Other
2023
€’000
2022
€’000
174,550
120,722
158,199
155,509
130,016
40,988
34,425
34,114
29,061
27,872
21,237
20,591
115,017
42,731
22,211
39,195
26,759
25,290
22,716
20,074
109,392
100,494
780,445
690,718
* The prior year comparatives have been reclassified to align to the current year 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.
One customer was above 10% of revenues in 2023, accounting for 19.1% of total revenue (2022: 13.4%), with revenues spread across all divisions
and service lines. The increase in concentration has been primarily due to the customer’s acquisition activity over the past year.
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OverviewGovernanceStrategic ReportFinancial StatementsSupplementary Information
114
Notes forming part of the consolidated financial statements
C O N T I N U E D
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 2023
At 31 December 2022
Total undelivered
€’000
Scheduled completion
within 1 year
€’000
Scheduled completion
1-2 years
€’000
Scheduled completion
2-5 years
€’000
69,113
82,060
57,712
77,448
10,947
4,612
454
–
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 games tax relief
Other direct costs
Operating profit is stated after charging / (crediting):
Depreciation – property, plant and equipment
Depreciation – 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
Costs associated with ceasing operations in Russia (note 29)
Acquisition team and related costs
Globalize restructuring – Right of use assets impairment
Globalize restructuring – Property, plant and equipment impairment
Globalize restructuring – Other provisions
Other reorganisation and restructuring costs
2023
€’000
2022
€’000
499,186
430,475
(38,215)
(21,540)
20,369
14,517
481,340
423,452
2023
€’000
23,128
13,907
26,060
27,140
870
2,550
2022
€’000
18,365
14,585
16,810
8,413
689
2,140
–
(1,098)
2023
€’000
2,345
390
300
8,877
3,893
593
2,041
5,755
2,677
269
27,140
2022
€’000
1,177
631
2,282
3,266
–
671
–
–
–
386
8,413
In December 2023, the Board approved an initiative to enhance the Globalize operating model, by managing its cost base, more deeply
integrating technology and enhancing collaboration across our locations to provide best in class service delivery for clients. Against this
backdrop there was a charge of €10.5m relating to restructuring of the Globalize service line arising from €2.0m in Right of use assets,
€5.8m relating to property, plant and equipment and €2.7m of other related contracts that were identified as onerous or impaired.
Keywords Studios plc
Annual Report and Accounts 2023
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
115
2023
€’000
2022
€’000
387
499
11
897
2023
€’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
recycled 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
Foreign exchange loss
Net financing income / (cost)
2023
€’000
614
–
614
(724)
(5,768)
(1,447)
(3,279)
(1,232)
(12,450)
(11,836)
2022
€’000
309
1,677
1,986
(662)
(1,261)
(969)
(2,922)
–
(5,814)
(3,828)
Keywords Studios plc
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Notes forming part of the consolidated financial statements
C O N T I N U E D
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
2023
€’000
2022
€’000
26,469
25,844
(11,427)
15,042
(5,232)
20,612
2023
€’000
34,994
6,582
1,524
(602)
11,826
26
(4,220)
(17)
54
869
(1,000)
15,042
18.8%
2022
€’000
67,982
12,156
(653)
(204)
7,468
(72)
(924)
(250)
346
932
1,813
20,612
17.9%
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
2023
€’000
(8,317)
1,238
(7,079)
12
–
12
2022
€’000
(7,947)
993
(6,954)
286
–
286
(2,518)
6,144
–
–
(2,518)
6,144
Keywords Studios plc
Annual Report and Accounts 2023
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:
117
2023
€ cent
25.28
24.94
2022
€ cent
61.54
58.86
€’000
19,952
€’000
47,370
Number
Number
78,910,471
76,979,596
1,084,796
3,502,301
79,995,267
80,481,897
Number
Number
67,827
67,802
(ii) Contingently issuable ordinary shares have been excluded where the conditions governing exercisability have not been satisfied:
LTIPs
Share options
Details of the number of share options outstanding at the year end are set out in note 23.
Number
Number
3,334,569
409,728
450,994
511,411
3,785,563
921,139
9 Dividends
Dividends paid
Final
Interim
Dividends paid to shareholders 2022
Final
Interim
Dividends paid to shareholders 2023
Recommended
Final
In respect of
Approval date
€ cent per
share
Pence STG per
share
Total dividend
€’000
Payment date
2021
2022
2022
2023
Mar-22
Sep-22
Mar-23
Sep-23
1.70
0.90
2.60
1.85
0.97
2.82
1.45
0.77
2.22
1.60
0.85
2.45
1,305
674
1,979
1,461
769
2,230
Jun-22
Oct-22
Jun-23
Oct-23
In respect of
Approval date
Expected €
cent per share
Pence STG per
share
Expected
total dividend
€’000
Expected
payment date
2023
Mar-24
2.03
1.76
1,609
Jun-24
At 31 December 2023, Retained earnings available for distribution (being Retained earnings plus Share-based payments reserve) in the
Company were €94.5m (2022: €77.6m). In addition, certain amounts within Merger reserve are considered distributable (see note 22).
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.
Keywords Studios plc
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Notes forming part of the consolidated financial statements
C O N T I N U E D
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
2023
€’000
2022
€’000
414,818
345,857
37,926
8,167
21,964
27,788
7,222
18,678
482,875
399,545
2023
11,307
1,033
12,340
2023
€’000
2,452
323
75
2,025
4,875
2022
10,272
869
11,141
2022
€’000
2,258
431
54
1,142
3,885
The key management compensation comprises compensation to nine Directors of Keywords Studios plc during the year (2022: ten).
Keywords Studios plc
Annual Report and Accounts 2023
11 Intangible Assets
Cost
At 01 January 2022
Recognition on acquisition of subsidiaries
Additions
Disposals
Exchange rate movement
At 31 December 2022
Recognition on acquisition of subsidiaries
Additions
Adjustment to the carrying value of prior year business combinations
Exchange rate movement
At 31 December 2023
Accumulated amortisation
At 01 January 2022
Amortisation charge
Disposals
Exchange rate movement
At 31 December 2022
Amortisation charge
Exchange rate movement
At 31 December 2023
Net book value
At 01 January 2023
At 31 December 2023
119
Goodwill
€’000
Customer
relationships
€’000
Intellectual
property /
Development
costs
€’000
Total
€’000
325,037
70,482
–
(159)
1,373
68,325
34,695
–
–
1,317
4,114
397,476
25,914
131,091
501
–
(134)
501
(159)
2,556
396,733
104,337
30,395
531,465
152,001
45,859
–
197,860
–
(2,967)
(7,352)
–
–
3,052
3,052
–
(2,967)
(3,353)
(899)
(11,604)
538,415
146,843
32,548
717,806
147
–
(147)
–
–
–
–
–
40,708
16,285
–
1,308
58,301
20,142
(1,826)
76,617
2,678
525
–
8
3,211
5,918
43,533
16,810
(147)
1,316
61,512
26,060
(116)
(1,942)
9,013
85,630
396,733
538,415
46,036
70,226
27,184
469,953
23,535
632,176
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.
Adjustment to the carrying value of prior year business combinations
IFRS 3 allows a twelve-month measurement period from acquisition date to complete the initial accounting. When Keywords acquired
Helpshift in December 2022, a provisional estimate of deferred tax assets (“DTA”) was recognised related to pre-acquisition tax losses. As US
regulations limit the use of net operating losses in certain cases following ownership changes, an expert report was commissioned to clarify
the availability of the pre-acquisition losses to offset future tax liabilities. Following this study, an uplift of €3.0m in Helpshift DTAs was recorded
with a corresponding reduction in the Goodwill recognised on the Helpshift acquisition. As the adjustment is not significant the prior period
has not been restated.
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
1 to 5 year growth rate and a terminal value calculated using a long-term growth rate projection. The (pre-tax) discount rate used of 10.0%
(2022: 10.0%) 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, as outlined in note 4, determined in accordance
with IFRS 8 Operating Segments. The Board have determined the service lines as CGUs, and Goodwill acquired in business combinations has
been allocated to the CGUs that are expected to benefit from business combinations to date.
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Notes forming part of the consolidated financial statements
C O N T I N U E D
11 Intangible Assets continued
Impairment tests for goodwill continued
A summary of the allocation of the carrying value of goodwill by segment and by CGU is presented below:
Segment
Create:
Globalize:
Engage:
CGU
Game Development
Art Services
Functional Testing
Localization Testing
Audio
Localization
Marketing
Player Engagement
2023
€m
296
19
14
14
33
18
110
34
538
2022
€m
218
19
15
14
33
19
35
44
397
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
2023
10%
2%
1,369
538
2022
10%
2%
1,295
397
2023
15%
2%
1,641
2022
15%
2%
1,552
2023
5%
2%
1,159
2022
5%
2%
1,096
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 (note 5)
Exchange rate movement
At 31 December
Net book value
At 01 January
At 31 December
Keywords Studios plc
2023
€’000
2022
€’000
65,849
14,074
6,151
63,840
15,249
580
(9,993)
(14,186)
(389)
366
75,692
65,849
28,177
13,907
27,849
11,753
(9,993)
(14,186)
2,041
(390)
2,832
(71)
33,742
28,177
37,672
41,950
35,991
37,672
Annual Report and Accounts 2023
13 Property, Plant and Equipment
Cost
At 01 January 2022
Exchange rate movement
Additions
Acquisitions through business combinations at fair value
Disposals
At 31 December 2022
Exchange rate movement
Additions
Acquisitions through business combinations at fair value
Disposals
At 31 December 2023
Accumulated depreciation
At 01 January 2022
Exchange rate movement
Depreciation charge
Disposals
At 31 December 2022
Exchange rate movement
Depreciation charge
Impairment charge (note 5)
Disposals
At 31 December 2023
Net book value
At 01 January 2023
At 31 December 2023
14 Investments
Investments
121
Computers
and software
€’000
Office
furniture and
equipment
€’000
Leasehold
improvements
€’000
Total
€’000
43,049
9,214
14,928
67,191
(94)
21,962
243
(1,132)
64,028
(1,509)
25,974
2,792
(3,757)
(109)
1,129
131
(490)
9,875
(165)
2,136
393
(304)
105
3,916
48
(828)
(98)
27,007
422
(2,450)
18,169
92,072
(394)
(2,068)
2,579
30,689
277
(450)
3,462
(4,511)
87,528
11,935
20,181
119,644
24,568
4,310
47
12,539
(1,133)
36,021
(2,084)
18,255
3,572
(3,757)
52,007
71
799
(490)
2,295
82
5,027
(827)
31,173
200
18,365
(2,450)
4,690
6,577
47,288
(51)
1,276
–
(304)
5,611
(138)
(2,273)
3,597
2,203
(450)
23,128
5,775
(4,511)
11,789
69,407
28,007
35,521
5,185
6,324
11,592
8,392
44,784
50,237
2023
€’000
175
2022
€’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.
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Notes forming part of the consolidated financial statements
C O N T I N U E D
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
Accrued income from contracts with customers represent mainly contract assets in process and related items.
17 Other Payables
Current liabilities
Accrued expenses*
Deferred and contingent consideration (i)
Other payables (ii)
Deferred and contingent consideration related to continuous employment (i)*
Payroll taxes
Non-current liabilities
Deferred and contingent consideration (i)
2023
€’000
94,189
(4,249)
89,940
2022
€’000
85,012
(3,449)
81,563
2023
€’000
37,081
18,307
14,362
7,263
6,980
83,993
2022
€’000
25,756
13,220
10,527
6,538
5,374
61,415
2023
€’000
2022
€’000
76,970
36,550
30,105
7,273
5,072
61,155
44,945
26,099
3,579
3,577
155,970
139,355
12,002
12,002
18,308
18,308
* Please note in 2022 Deferred and contingent consideration related to continuous employment was disclosed within Accrued expenses.
Keywords Studios plc
Annual Report and Accounts 2023
123
The movement in deferred and contingent consideration during the financial year was as follows:
2023
2022
€’000
€’000
€’000
€’000
Deferred and
contingent
consideration
related to
continuous
employment
Deferred and
contingent
consideration
Deferred and
contingent
consideration
related to
continuous
employment
Deferred and
contingent
consideration
Carrying amount at the beginning of the period
Consideration settled by cash
Consideration settled by shares
Unwinding of discount (note 6)
Additional liabilities from current year acquisitions (note 27)
Fair value movements in contingent consideration
Fair value movements in deferred consideration related to continuous employment
Exchange rate movement
Carrying amount at the end of the period
63,253
3,579
54,142
(30,428)
(3,900)
(25,800)
(11,716)
(1,238)
(8,040)
3,279
25,790
300
–
(1,926)
48,552
–
315
–
8,562
(45)
2,922
37,950
2,282
–
(203)
–
–
–
–
–
–
3,579
–
7,273
63,253
3,579
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 Deferred and contingent consideration by €5.8m, while a 10%
reduction in expected performance would decrease the carrying value by €7.7m. A 10% increase in expected performance would increase
the carrying value of Deferred and contingent consideration related to continuous employment by €0.3m, while a 10% reduction in expected
performance would decrease the carrying value by €0.8m.
On an undiscounted basis, the Group may be liable for deferred and contingent consideration ranging from €9.4m to a maximum of €89.3m.
(i)
Other payables include deferred income from contracts with customers of €13.1m (2022: €9.1m), which mainly comprise items invoiced
prior to services being delivered. Excluding amounts recognised on acquisition of subsidiaries (€5,360k, 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
US dollar
Sterling
Canadian dollar
2023
€’000
2022
€’000
–
–
127,380
127,380
127,380
35,129
92,251
–
127,380
–
–
51
51
51
–
–
51
51
The carrying amount at the beginning of the period represents loans owed by Keywords Studios QC-Interactive Inc. These balances were
repaid in the period.
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Notes forming part of the consolidated financial statements
C O N T I N U E D
18 Loans and Borrowings continued
During July 2023, the Group negotiated a new unsecured multi-currency revolving credit facility agreement (“RCF”) of US$400m that matures
in July 2027. The new RCF includes an accordion option to increase the facility up to US$500m and an option to extend the expiry date by a
further one-year period (both subject to lender consent). The new facility is supported by a group of seven global lenders and replaces the
Group’s previous €150m unsecured multi-currency revolving credit facility. The RCF’s financial covenants remain consistent with the previous
facility. The new facility is denominated in US dollars to match the expected predominant currency of future borrowings.
The previous RCF allowed the Group to access financing of up to €150m, which could be drawn down in euro, sterling, US dollars or Canadian
dollars, and included an option to increase the facility by up to €50m to a total of €200m (subject to lender consent), at interest rates based
on a margin over currency benchmark rates, plus a separate margin charged for the unutilised facility.
Both the new and previous RCFs contain representations, warranties and financial covenants customary for facilities of this type. 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. In connection with the financial covenants, the Group is required to comply with and report interest cover and leverage ratios, each
half calendar year, calculated in accordance with the lenders’ facility agreement. The covenants provide that Net debt to an adjusted EBITDA
metric shall not exceed 3.0x and that EBIT to Net Finance Charges will be a minimum of 4.0x. Throughout the period, the Group operated well
within the applicable ratio terms of both the new and previous RCF agreements, with Net Debt to Adjusted EBITDA of 0.1x at the end of H1 and
0.4x at the end of H2, and with EBIT to Net Finance Charges of 18.1x and 16.6x respectively.
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 RCF
liabilities as non-current.
The movements in Loans and borrowings are as follows:
At 01 January 2022
Cash flows:
Repayments
Non-cash flows:
Exchange rate movement
At 31 December 2022
Cash flows:
Drawdowns
Repayments
Non-cash flows:
Exchange rate movement
At 31 December 2023
Current
€’000
Non-current
€’000
81
48
Total
€’000
129
(37)
(42)
(79)
1
45
–
6
1
51
–
227,322
227,322
(45)
(97,334)
(97,379)
–
–
(2,614)
(2,614)
127,380
127,380
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Annual Report and Accounts 2023
125
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
2023
€’000
2022
€’000
42,519
37,635
6,151
14,074
1,447
580
15,244
969
(16,485)
(12,330)
(734)
421
46,972
42,519
The value of leases not yet commenced to which the lessee is committed, which are not included in lease liabilities at 31 December 2023,
was €3.6m (2022: €nil).
Maturity analysis of lease liabilities
Current
Not later than one year
Non-current
2023
€’000
Lease
payments
2023
€’000
Finance
charges
2023
€’000
2022
€’000
Lease
liabilities
Lease
payments
2022
€’000
Finance
charges
2022
€’000
Lease
liabilities
15,164
1,299
13,865
12,740
326
12,414
Later than one year and not later than five years
Later than five years
30,546
4,900
35,446
2,189
150
2,339
28,357
4,750
33,107
26,491
5,317
31,808
1,447
256
1,703
25,044
5,061
30,105
At 31 December
50,610
3,638
46,972
44,548
2,029
42,519
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
2023
€’000
2,550
–
2,550
2022
€’000
2,140
–
2,140
1,081
1,282
–
–
–
–
1,081
1,282
The effect of variable lease payments and reinstatement costs on future cash outflows arising from leases is not material for the Group.
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Notes forming part of the consolidated financial statements
C O N T I N U E D
20 Employee Defined Benefit Plans
Liabilities under Employee defined benefit plans
2023
€’000
4,030
2022
€’000
2,861
In line with statutory requirements in France, Italy and India, we are required to maintain employee defined benefit termination payment
schemes. The Group commissions an actuarial valuation of the related liabilities in each jurisdiction annually. The liabilities at year end are
recorded as long term, while the actuarial gain or loss is recorded separately within Other comprehensive income.
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 and other disclosures
required by IAS 19 are 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.
Substantially all of the pension costs of €8.2m (2022: €7.2m) disclosed in note 10 relate to the Group’s defined contribution pension plans.
21 Deferred Tax
Details of the deferred tax assets and liabilities, and amounts recognised in the Consolidated statement of comprehensive income are as follows:
Employee defined benefit plans
Unused tax losses
Provisions
Property, plant and equipment
Multimedia tax credits / video games tax relief
Share-based payments
Goodwill
Customer relationships
Right of use assets and Lease liabilities
2023
€’000
2023
€’000
Assets
Liabilities
125
13,417
466
780
171
15,591
21,159
–
9,867
10
–
43
1,715
6,406
–
–
21,091
9,867
Offset where legally enforceable right of set off exists
(28,825)
(28,825)
2023
€’000
Net
115
2022
€’000
Restated
Assets
308
13,417
10,664
423
(935)
(6,235)
15,591
21,159
(21,091)
–
–
258
1,092
–
8,879
18,176
–
8,400
2022
€’000
Restated
Liabilities
124
13
–
1,983
3,879
2,091
–
17,147
8,400
(16,620)
(16,620)
2022
€’000
Restated
Net
184
10,651
258
(891)
(3,879)
6,788
18,176
(17,147)
–
–
32,751
10,307
22,444
31,157
17,017
14,140
Keywords Studios plc
Annual Report and Accounts 2023
127
Recognised
in the income
statement
(note 7)
Recognised
in business
combinations
(note 11, 27)
31 December
2023
€’000
€’000
€’000
115
–
31 December
2022*
Restated
€’000
184
8,574
10,651
Restated
€’000
–
–
–
–
–
6,819
(13,341)
(17,147)
2,052
14,140
258
(891)
6,788
18,176
(3,879)
(2,356)
(69)
(201)
165
(44)
8,803
(2,030)
7,159
11,427
2,967
13,417
–
–
–
–
5,013
423
(935)
(6,235)
15,591
21,159
(11,103)
(21,091)
(3,123)
22,444
Recognised
in the income
statement
(note 7)*
Recognised
in business
combinations
(note 27)*
01 January
2022*
Restated
€’000
328
1,077
222
116
(3,570)
3,796
11,551
(5,892)
7,628
Employee defined benefit plans
Unused tax losses
Provisions
Property, plant and equipment
Multimedia tax credits / video games
tax relief
Share-based payments
Goodwill
Customer relationships
Other amounts recognised in the
income statement:
Effect of tax rate change
Adjustment in respect of prior years
Restated
€’000
(144)
1,000
36
(1,007)
(309)
2,992
(194)
2,086
4,460
(13)
785
5,232
* The prior year has been restated to the current year presentation as the Directors believe this to be more meaningful.
The deferred tax asset not recognised on available losses at the period end is €3.3m (2022: €3.8m). 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.
The Group has adopted Deferred Tax related to Assets and Liabilities arising from a Single Transaction (Amendments to IAS 12) from 01 January
2023. These amendments 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 for leases and decommissioning liabilities, an
entity is required to recognise the associated deferred tax assets and liabilities on a gross basis 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 Group previously accounted for the deferred tax on leases and decommissioning liabilities on a net basis. Following the amendments,
the Group has recognised a separate deferred tax asset in relation to its lease liabilities and a deferred tax liability in relation to its right of use
assets. There was no impact on the opening retained earnings at 01 January in any period presented as a result of this change. The impact on
deferred tax assets and liabilities in each comparative period presented is detailed below.
At 31 December 2022 – as reported
Adoption of Deferred Tax related to Assets and Liabilities arising from a Single Transaction
(Amendments to IAS 12)
At 31 December 2022 – as restated
Deferred tax
assets
€’000
Deferred tax
liabilities
€’000
Retained
earnings
€’000
22,757
8,617
143,627
8,400
31,157
8,400
17,017
–
143,627
Keywords Studios plc
Annual Report and Accounts 2023
OverviewGovernanceStrategic ReportFinancial StatementsSupplementary Information
128
Notes forming part of the consolidated financial statements
C O N T I N U E D
22 Shareholders’ Equity
Share Capital
Issue date
Per share
€
Number of
ordinary
£0.01 shares
Number of
ordinary
£0.01
shares – to
be issued
Share
capital
€’000
Share
capital – to
be issued
€’000
Share
premium
€’000
Merger
reserve
€’000
At 01 January 2022
76,275,775
70,144
904
2,185
38,549 273,677
Acquisition-related issuance of shares:
Waste Creative
Heavy Iron
Heavy Iron related adjustment
Jinglebell
Tantalus Media
Forgotten Empires
Forgotten Empires
Mighty Games
Climax Studios
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
Acquisition-related issuance of shares:
Heavy Iron
Climax Studios
Waste Creative
Digital Media Management
Digital Media Management
Hardsuit Labs
Hardsuit Labs
Tantalus Media
Playboss Interactive
Forgotten Empires LLC
Forgotten Empires LLC
Forgotten Software SL
Mighty Games
Kantan
24-Jan-22
30.78
20,585
(20,585)
03-Feb-22
03-Feb-22
31.84
31.84
12,914
(12,914)
53
–
11-Mar-22
25.94
11,564
(11,564)
04-Jul-22
28-Jul-22
28-Jul-22
03-Aug-22
08-Aug-22
31.03
28.41
27.44
28.74
28.71
28,473
–
–
–
–
60,857
26,881
28,443
135,559
–
31-Aug-22
33.49
25,081
(25,081)
05-Oct-22
25-Oct-22
25-Oct-22
25.78
28.74
25.78
–
107,025
28,443
(28,443)
107,025
(107,025)
25-Nov-22
33.56
114,038
–
483,735
17,594
33,372
1,197,175
–
–
–
–
–
–
–
–
–
–
2
–
–
–
2
2
6
–
14
(634)
(411)
–
(300)
–
–
–
–
–
884
1,729
738
817
–
(840)
2,759
(817)
(2,759)
–
–
–
–
–
–
–
817
–
–
633
411
–
300
–
–
–
–
3,889
840
–
–
2,758
4,147
282
1,701
12,978
–
–
909
5,862
–
–
77,990,057
87,738
924
2,467
47,021 286,655
20-Jan-23
34.67
93,856
17-Feb-23
15-Mar-23
29-Mar-23
06-Apr-23
10-May-23
30-May-23
15-Jun-23
30-Jun-23
03-Aug-23
03-Aug-23
03-Aug-23
21-Nov-23
27.18
31.52
30.92
30.92
28.17
28.17
27.48
24.48
28.41
30.72
27.45
18.58
12-Dec-23
32.56
–
–
–
21,428
26,600
–
301,170
301,170
(301,170)
–
53,482
53,482
(53,482)
191,722
–
–
13,118
60,856
(60,856)
59,559
–
26,881
(26,881)
2,585
12,254
–
–
1
–
–
–
3
–
1
2
–
1
1
–
–
1
–
–
–
9,311
(9,311)
1,507
(1,507)
–
321
(1,729)
–
(738)
–
–
–
–
–
–
–
–
–
5,986
–
–
–
–
49
–
3,254
582
838
–
9,308
–
1,506
–
–
1,728
1,828
738
–
400
Acquisition-related issuance of shares
Exercise of share options
At 31 December 2023
850,393
(74,619)
446,786
–
10
5
(2,146)
6,035
20,182
–
1,462
–
79,287,236
13,119
939
321
54,518 306,837
Keywords Studios plc
Annual Report and Accounts 2023
129
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 26 May 2023 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 3,912,987 shares in respect of the Company’s incentive plans in place from time to time (5% of the Company’s issued share capital
as at 24 March 2023); and
b) Otherwise, up to 26,086,581 shares (33.3% of the Company’s issued share capital as at 24 March 2023).
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 2023 AGM will expire on the earlier of (i) the close of business on 26 August 2024; and (ii) the conclusion
of the 2024 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”)
Carrying amount at the beginning of the year
Company funded acquisition of shares
Utilisation for the exercise of share-based payment plans
Carrying amount at the end of the year
2023
2022
Shares
€’000
Shares
€’000
–
–
748,655
14,846
(340,170)
(8,072)
408,485
6,774
–
–
–
–
–
–
–
–
Reserves
The following describes the nature and purpose of each reserve within owners’ equity:
Reserve
Description and purpose
Retained earnings
Cumulative net gains and losses recognised in the Consolidated Statement of Comprehensive Income.
Foreign exchange reserve Gains or losses arising on retranslation of the net assets of the overseas operations into euro.
Share premium
The share premium account is the amount received for shares issued in excess of their nominal value, net of share
issuance costs.
Share-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, net of the cost of EBT shares utilised for employee share schemes
less any related cash proceeds.
Shares to be issued
For deferred consideration which is to be provided for by the issue of a fixed number of shares at a future defined
date, where there is no obligation on Keywords to offer a variable number of shares, the deferred consideration is
classified as an Equity Arrangement and the value of the shares is fixed at the date of the acquisition.
Merger reserve
The merger reserve was initially created following the Group reconstruction, when Keywords Studios plc acquired
the Keywords International Limited 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.
Keywords Studios plc
Annual Report and Accounts 2023
OverviewGovernanceStrategic ReportFinancial StatementsSupplementary Information
130
Notes forming part of the consolidated financial statements
C O N T I N U E D
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
2023
€’000
1,354
20,485
125
2022
€’000
2,689
15,888
101
21,964
18,678
Of the total Share-based payments expense, €2,025k relates to Directors of the Company (2022: €1,142k).
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:
2023
2022
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
18.78
1,585,819
15.65
2,423,568
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
–
19.79
14.71
–
(125,282)
(102,197)
18.99
1,358,340
873,025
17.45
25.87
–
(133,323)
(704,426)
1,585,819
481,319
–
19.17
7.88
18.78
15.19
23.57
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 2023
Exercisable 2024
Exercisable 2025
Exercisable 2026
Exercisable 2027
2016
2017
2018
2019
2020
2021
2022
2023
Total
£2.54
£7.76
£17.10
£15.88
£15.93
£25.48
14,339
41,550
151,519 320,650 546,350
511,411
–
(6,938)
–
–
–
–
–
–
–
(9,500)
(48,427)
(60,417)
(7,401)
(6,800)
(22,845)
(36,428)
(28,723)
–
–
–
–
–
–
–
34,750
128,674
274,722 469,200 450,994
34,750
128,674
274,722
280,700
154,179
–
–
–
–
–
–
–
–
–
–
–
–
188,500
148,408
–
–
–
148,407
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1,585,819
–
(125,282)
(102,197)
1,358,340
873,025
336,908
148,407
–
–
Keywords Studios plc
Annual Report and Accounts 2023
131
The inputs into the Black-Scholes model, used to value the options, are as follows:
2018
2019
2020
2021
2022
2023
Weighted
average
Year of Option
Weighted average share price (£)
Weighted average exercise price (£)
Fair value at measurement date (€)
2016
£2.54
£2.54
€0.40
2017
£7.75
£7.76
€1.13
£17.22
£16.09
£16.00
£26.42
£17.10
£15.88
£15.93
£25.48
€3.79
€5.72
€6.06
€9.32
Average expected life
4 Years
4 Years
4 Years
4 Years
4 Years
4 Years
Expected volatility
Risk-free rates
27.17% 24.79% 35.87% 45.23%
50.15%
47.70%
0.58%
0.16%
0.89%
0.81%
0.07%
Average expected dividend yield
0.55%
0.21%
0.10%
0.10%
0.10%
Weighted average remaining life of
options in months
–
–
–
–
4
16
0.15%
0.10%
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
7
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
2023
2022
Average
exercise price
in £ per share
0.01
0.01
0.01
0.01
Number of
options
3,648,173
720,680
(124,047)
(615,373)
0.01
3,629,433
0.01
1,276,229
21.96
Average
exercise price
in £ per share
0.01
0.01
0.01
0.01
0.01
0.01
24.73
Number of
options
3,704,898
901,690
(130,241)
(828,174)
3,648,173
741,212
Summary by year
Year of Option
Exercise price
Outstanding at the beginning of the
period
Granted
Lapsed
Exercised
2016
2017
2018
2019
£0.01
£0.01
£0.01
£0.01
2020
£0.01
2021
2022
2023
Total
£0.01
£0.01
£0.01
21,688
44,743
186,000
488,781
1,170,790 845,307 890,864
–
3,648,173
–
–
–
–
–
–
–
–
–
–
– 720,680
720,680
(25,400)
(49,500)
(41,750)
(7,397)
(124,047)
(21,688)
(14,000)
(51,572)
(169,738)
(353,375)
(2,500)
(2,500)
–
(615,373)
Outstanding at the end of the period
Exercisable at 31 December 2023
Exercisable 2024
Exercisable 2025
Exercisable 2026
–
–
–
–
–
30,743
134,428
319,043
792,015
793,307
846,614
713,283 3,629,433
30,743
134,428
319,043
792,015
–
–
–
–
–
–
–
–
–
–
–
–
–
793,307
–
–
–
–
846,614
–
–
–
1,276,229
793,307
846,614
–
713,283
713,283
Keywords Studios plc
Annual Report and Accounts 2023
OverviewGovernanceStrategic ReportFinancial StatementsSupplementary Information
132
Notes forming part of the consolidated financial statements
C O N T I N U E D
23 Share Incentive Schemes continued
Summary by year continued
The inputs into the Monte Carlo binomial model, used to value the options, are as follows:
Year of Option
Weighted average share price (£)
Weighted average exercise price (£)
Fair value at measurement date (€)
2016
£2.56
£0.01
€1.74
2017
£7.75
£0.01
2018
2019
2020
2021
2022
2023
£17.24
£16.05
£16.00
£26.42
£22.31
£22.46
£0.01
£0.01
£0.01
£0.01
£0.01
£0.01
€4.96
€11.83
€13.98
€13.28
€16.73
€15.70
€21.02
Average expected life
3 Years
3 Years
3 Years
3 Years
3 Years
3 Years
3 Years
3 Years
Expected volatility
Risk-free rates
27.11% 24.79% 35.87% 45.26%
50.15%
47.70%
41.22% 38.05%
0.54%
0.16%
0.89%
0.81%
0.07%
0.13%
1.59%
3.58%
Weighted
average
Weighted average remaining life of
options in months
–
–
–
–
–
4
17
29
11
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:
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 2024
Vesting 2025
Vesting 2026
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
2023
2022
Average
exercise price
in £ per share
0.01
0.01
0.01
0.01
0.01
Number of
options
259,623
622,627
(31,509)
(8,150)
842,591
Average
exercise price
in £ per share
0.01
0.01
0.01
0.01
0.01
Number of
options
26,738
237,676
(953)
(3,838)
259,623
2021
£0.01
2022
£0.01
2023
£0.01
Total
24,147
235,476
–
259,623
–
–
–
622,627
622,627
(22,105)
(9,404)
(31,509)
(953)
(7,197)
–
(8,150)
23,194
23,194
–
–
206,174
613,223
842,591
203,635
–
226,829
2,539
573,342
575,881
–
39,881
39,881
2021
£27.40
£0.01
€32.08
3 Years
8
2022
£22.41
£0.01
€26.47
2 Years
5
2023
£22.08
£0.01
€25.41
3 Years
23
Weighted
average
18
Keywords Studios plc
Annual Report and Accounts 2023
133
24 Financial Instruments and Risk Management
Interest Rate Risk
Interest rate risk is the risk that the value of financial instruments will fluctuate due to changes in market interest rates. The Group’s income
and operating cash flows are substantially independent of changes in market interest rates. The management monitors interest rate
fluctuations on a continuous basis and acts accordingly.
Where the Group has a significant amount of surplus cash, it invests in higher earning interest deposit accounts. Due to interest rate
conditions, the interest rates for short-term deposits are at similar levels to those achieved for longer terms.
The effect of a strengthening or a weakening of 1% in interest rates charged during the reporting period on the interest expense would have
resulted in the following pre-tax profit / (loss) impact for the year:
Interest expense
1%
Strengthening
2023
€’000
1%
Weakening
2023
€’000
1%
Strengthening
2022
€’000
1%
Weakening
2022
€’000
1,274
(1,274)
–
–
In 2022, there were no drawdowns on the RCF, therefore any strengthening or weakening of interest rates would have had no impact.
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 78.9% of the total trade receivables balance at the balance sheet date (2022: 73.0%).
The ageing of trade receivables can be analysed as follows:
Total
€’000
Not past due
€’000
1-2 months past
due
€’000
More than 2
months past due
€’000
At 31 December 2023
At 31 December 2022
89,940
81,563
70,995
59,532
18,945
16,803
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
Recognition on acquisition of subsidiaries
Utilised
Provision at the end of the year
2023
€’000
3,449
531
275
331
(337)
4,249
–
5,228
2022
€’000
1,768
1,733
79
–
(131)
3,449
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% (2022: 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.
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Notes forming part of the consolidated financial statements
C O N T I N U E D
24 Financial Instruments and Risk Management continued
Credit Risk continued
Trade Receivables continued
Trade receivables gross
Credit impaired
Expected credit losses
At 31 December 2023
Trade receivables gross
Credit impaired
Expected credit losses
At 31 December 2022
Total
€’000
Not past due
€’000
1-2 months
past due
€’000
More than 2
months past
due
€’000
94,189
(3,307)
(942)
71,712
19,680
–
(717)
(538)
(197)
89,940
70,995
18,945
2,797
(2,769)
(28)
–
Total
€’000
Not past due
€’000
85,012
(2,598)
(851)
60,134
–
(602)
81,563
59,532
16,803
1-2 months
past due
€’000
More than 2
months past
due
€’000
17,175
(200)
(172)
7,703
(2,398)
(77)
5,228
Accrued income from contracts with customers
Accrued income from contracts with customers 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 67.4% of the balance at the balance sheet date (2022: 76.6%).
The ageing of accrued income from contracts with customers can be analysed as follows:
At 31 December 2023
At 31 December 2022
Total
€’000
18,307
13,220
0-30 days
€’000
12,340
10,124
31-60 days
€’000
4,134
3,096
60+ days
€’000
1,833
–
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% (2022: 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 2023
Accrued income from contracts with customers gross
Credit impaired
Expected credit losses
At 31 December 2022
Total
€’000
0-30 days
€’000
31-60 days
€’000
60+ days
€’000
19,651
12,465
4,176
(1,147)
(197)
–
(125)
–
(42)
18,307
12,340
4,134
Total
€’000
16,652
(3,265)
(167)
0-30 days
€’000
10,227
–
(103)
31-60 days
€’000
3,897
(762)
(39)
13,220
10,124
3,096
3,010
(1,147)
(30)
1,833
60+ days
€’000
2,528
(2,503)
(25)
–
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.
Keywords Studios plc
Annual Report and Accounts 2023
135
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
2023
€’000
2023
€’000
2022
€’000
2022
€’000
10%
Strengthening
10%
Weakening
10%
Strengthening
10%
Weakening
4,182
(4,617)
174
301
(254)
(261)
5,981
365
591
(4,894)
(299)
(483)
Total Financial Assets and Liabilities
The carrying amount of the financial assets and liabilities shown in the Consolidated and Company Statements of financial position are stated
at amortised costs, with the exception of contingent consideration held at fair value.
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 €239.8m of current assets, including cash of €59.9m 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:
Carrying value
Contractual cash flows
At 31 December 2023
Trade payables
Deferred and contingent consideration (i)
Other payables
Loans and borrowings
Loan interest
Lease liabilities
Total
Total
€’000
14,294
55,825
112,147
14,294
89,347
112,147
127,380
127,380
–
26,418
46,972
50,609
Total
€’000
Within 1 year
€’000
1-2 years
€’000
2-5 years
€’000
Over 5 years
€’000
14,294
53,653
112,147
–
8,806
15,164
–
–
33,764
1,930
–
–
8,806
11,117
–
127,380
8,806
19,428
–
–
–
–
–
4,900
4,900
356,618
420,195
204,064
53,687
157,544
Keywords Studios plc
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136
Notes forming part of the consolidated financial statements
C O N T I N U E D
24 Financial Instruments and Risk Management continued
Liquidity Risk continued
At 31 December 2022
Trade payables
Deferred and contingent consideration (i)
Other payables
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
15,878
45,115
94,410
45
2
1-2 years
€’000
–
20,031
7,000
6
–
44,548
12,740
9,267
233,487
168,190
36,304
2-5 years
€’000
Over 5 years
€’000
–
1,452
5,000
–
–
17,224
23,676
–
–
–
–
–
5,317
5,317
(i) Deferred and contingent consideration at 31 December 2023 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 €89.3m. For further details see note 17.
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
2023
€’000
127,380
2022
€’000
51
(59,862)
(81,886)
67,518
(81,835)
599,039
557,091
11.3%
(14.7)%
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.
Keywords Studios plc
Annual Report and Accounts 2023
137
27 Business Combinations
Details of goodwill and the fair value of net assets acquired
Digital Media
Management
€’000
The
Multiplayer
Group
€’000
Other
acquisitions
€’000
2023
€’000
2022
€’000
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
608
5,714
3,321
(23)
14,296
(1,340)
(1,120)
(5,714)
2,492
54
6,800
(308)
9,025
(2,928)
(4,240)
(54)
362
383
3,462
6,151
2,702
12,823
–
(331)
3,628
26,949
(787)
–
(383)
(5,055)
(5,360)
(6,151)
Book value of identifiable assets and liabilities acquired
15,742
10,841
5,905
32,488
Fair value adjustments:
422
580
6,145
–
5,401
(4,762)
(3,461)
(580)
3,745
Identifiable intangible assets – Customer relationships
22,148
21,200
2,511
45,859
34,695
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
% Share capital acquired
Details of purchase consideration and outflows from current
acquisitions
Cash
Equity instruments
Deferred cash
Deferred consideration contingent on performance
Shares to be issued
Total purchase consideration
–
–
–
–
(4,994)
(4,982)
17,154
32,896
55,229
88,125
100%
16,218
27,059
68,677
95,736
100%
–
5,013
(1,127)
6,397
12,302
–
5,013
(11,103)
39,769
72,257
28,095
152,001
25,914
15,393
(13,341)
62,661
66,406
70,482
40,397
224,258
136,888
100%
65,677
93,729
27,923
187,329
92,895
9,311
–
–
2,007
13,137
–
–
–
1,507
914
9,732
321
10,818
2,921
22,869
321
–
8,993
28,957
6,043
88,125
95,736
40,397
224,258
136,888
Related acquisition costs charged to the Consolidated statement of
comprehensive income:
560
1,470
315
2,345
1,177
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
301,170
–
–
–
53,482
354,652
135,468
13,118
13,118
87,738
65,677
93,729
27,923
187,329
92,895
Less: cash and cash equivalent balances transferred
(14,296)
(9,025)
(3,628)
(26,949)
(5,401)
Net cash outflow arising on acquisition
51,381
84,704
24,295
160,380
87,494
Keywords Studios plc
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138
Notes forming part of the consolidated financial statements
C O N T I N U E D
27 Business Combinations continued
Details of pro forma revenues and profitability of current
acquisitions
Pre-acquisition revenue in H1
Pre-acquisition revenue in H2
Pre-acquisition revenue
Post-acquisition revenue
Pro forma revenue
Pre-acquisition profit / (loss) before tax
Post-acquisition profit / (loss) before tax
Pro forma profit / (loss) before tax
Digital Media
Management
€’000
The
Multiplayer
Group
€’000
Other
acquisitions
€’000
2023
€’000
2022
€’000
6,413
–
6,413
19,165
19,648
19,453
39,101
1,165
25,578
40,266
1,650
2,154
3,804
7,869
290
8,159
5,644
–
5,644
18,894
24,538
136
5,144
5,280
31,705
19,453
51,158
39,224
90,382
9,655
7,588
17,243
19,329
12,070
31,399
9,106
40,505
1,601
3,440
5,041
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%*, or the impact on goodwill is greater than 10% of
the closing balance for the period. Two of the business combinations completed during the prior period were considered individually material
and therefore warrant separate disclosure.
During the period, the Group completed five acquisitions, 47 Communications, Digital Media Management, Hardsuit Labs, Playboss and The
Multiplayer Group purchasing 100% 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 €224.3m includes amounts attributable to Digital Media Management €88.1m, Hardsuit Labs €15.7m, The
Multiplayer Group €95.7m and other acquisitions of €24.8m, while Goodwill from current year acquisitions of €152.0m includes amounts
related to Digital Media Management €55.2m, Hardsuit Labs €12.8m, The Multiplayer Group €68.7m and other acquisitions of €15.3m.
Identifiable intangible assets – Customer relationships of €45.9m includes amounts attributable to Digital Media Management €22.2m and
The Multiplayer Group €21.2m. The consideration and goodwill for Playboss is deemed immaterial to the accounts.
Please note that Total purchase consideration excludes €22.9m of Deferred and contingent consideration related to continuous employment,
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 17).
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 €22.2m
(for which a deferred tax asset has been recognised of €5.0m).
* 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 measure is presented in
the APM’s section.
Keywords Studios plc
Annual Report and Accounts 2023
139
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 2023 are set out below:
Name
Country of
incorporation
Date of
incorporation /
acquisition
Ownership^ Registered office
3455 Productions, LLC
47 Communications LLC
USA
USA
24-Nov-20
100%
251 Little Falls Drive, Wilmington, New Castle, DE 19808, USA
31-Jan-23
100%
5455 Wilshire Blvd, 22nd Fl, Los Angeles, CA 90036, USA
9409-2954 Québec Inc.
Canada
04-Dec-19
100%
1751 Richardson, Suite 8400, Montreal, QC H3K 1G6, Canada
Alset LTD
UK
17-Aug-18
AMC RO Studios S.R.L
Romania
11-Aug-21
Babel Media Limited*
Babel Media USA, Inc.
Bitsy SG Limited
Blindlight, LLC
UK
USA
UK
USA
Climax Development Limited UK
Climax Studios Limited
Coconut Lizard LTD
Cord Worldwide LTD
d3t Development Limited
d3t LTD
UK
UK
UK
UK
UK
17-Feb-14
17-Feb-14
17-Aug-18
08-Jun-18
22-Apr-21
22-Apr-21
25-Jun-20
07-Apr-18
19-Oct-17
Descriptive Video Works Inc. Canada
11-Jun-19
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
4th Floor, 110 High Holborn, London, WC1V 6JS, UK
Stirbei Voda 36, etaj 1, sector 1, Bucharest, Romania
4th Floor, 110 High Holborn, London, WC1V 6JS, UK
251 Little Falls Drive, Wilmington, New Castle, DE 19808, USA
4th Floor, 110 High Holborn, London, WC1V 6JS, UK
1111 South Flower Street, Suite 101, Burbank, CA 91502, USA
4th Floor, 110 High Holborn, London, WC1V 6JS, UK
4th Floor, 110 High Holborn, London, WC1V 6JS, UK
4th Floor, 110 High Holborn, London, WC1V 6JS, UK
4th Floor, 110 High Holborn, London, WC1V 6JS, UK
30-Aug-18
100%
4th Floor, 110 High Holborn, London, WC1V 6JS, UK
100%
100%
4th Floor, 110 High Holborn, London, WC1V 6JS, UK
400-725 Granville Street, PO Box 10325, Vancouver BC V7Y 1G5,
Canada
Digital Media Management
Inc
USA
29-Mar-23
100%
6555 Barton Ave., Suite 190 Los Angeles, CA 90038, USA
Eastern New Media Limited
Hong Kong
19-May-17
100%
4404, 44/F Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong
Kong
India
09-Oct-14
100%
3rd floor, Vardhman Orchard Plaza, Plot No 4, LSC, West Enclave,
Pitampura, New Delhi, 110034, India
Edugame Solutions Private
Limited
Electric Square Limited
Fire Without Smoke Inc
Fire Without Smoke LTD
Forgotten Empires LLC
UK
USA
UK
USA
Forgotten Software S.L.U
Spain
GameSim Inc.
g-Net Media, Inc.
Hardsuit Labs, Inc
Heavy Iron Studios, Inc
USA
USA
USA
USA
17-Aug-18
100%
4th Floor, 110 High Holborn, London, WC1V 6JS, UK
29-May-18
100%
251 Little Falls Drive, Wilmington, New Castle, DE 19808, USA
29-May-18
100%
4th Floor, 110 High Holborn, London, WC1V 6JS, UK
28-Jul-22
28-Jul-22
16-May-17
100%
100%
100%
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
24-Nov-20
100%
251 Little Falls Drive, Wilmington, New Castle, DE 19808, USA
10-May-23
100%
4025 Delridge Way SW, #210, Seattle 98106, United States
12-Jan-21
100%
1600 Rosecrans Ave., Bldg 7 Ste 300, MBS Media Campus, Manhattan
Beach CA, 90266, USA
Helpshift Inc
Helpshift Information
Technology (Shanghai) Co.
Ltd
Helpshift Technologies
Private Limited
Keywords UK Limited
(formerly Helpshift UK Ltd)
High Voltage Software, Inc.
HVS Nola LLC
USA
China
15-Dec-22
15-Dec-22
100%
100%
343 Sansome Street, Suite 500, San Francisco, California, 94104, USA
Southwest Area, 3rd Floor, No. 2123 Pudong Avenue, Shanghai, China
India
15-Dec-22
100%
3rd floor, Vardhman Orchard Plaza, Plot No 4, LSC, West Enclave,
Pitampura, New Delhi, 110034, India
UK
USA
USA
15-Dec-22
100%
4th Floor, 110 High Holborn, London, WC1V 6JS, UK
14-Dec-20
100%
2345 Pembroke Ave., Hoffman Estates, IL 60169, USA
14-Dec-20
100%
201 St. Charles Ave., Suite 2220, New Orleans, LA 70170, USA
Keywords Studios plc
Annual Report and Accounts 2023
OverviewGovernanceStrategic ReportFinancial StatementsSupplementary Information 140
Notes forming part of the consolidated financial statements
C O N T I N U E D
28 Subsidiaries continued
Name
Ichi LTD
Indigo Pearl Limited
Itsy SGD Limited
Jinglebell S.r.l.
Country of
incorporation
Date of
incorporation /
acquisition
Ownership^ Registered office
UK
UK
UK
Italy
26-Nov-19
100%
4th Floor, 110 High Holborn, London, WC1V 6JS, UK
15-Dec-20
100%
4th Floor, 110 High Holborn, London, WC1V 6JS, UK
17-Aug-18
100%
4th Floor, 110 High Holborn, London, WC1V 6JS, UK
10-Dec-20
100%
Via Marco d’Oggiono 12, 20123, Milan, Italy
Jurango Pty Limited ~~
Australia
20-Dec-21
85%
29 Thornton Crescent, Mitcham, VIC 3132, Australia
Keywords (Shanghai)
Information Technology
Limited
Keywords Asia Private
Limited
China
02-Apr-15
100%
Room 701, Building 5, No.860 Dong Ti Yu Hui Road, Hongkou District,
Shanghai, China
Singapore
15-Mar-16
100%
20 Kallang Avenue, #06-6A, Lobby B, Pico Creative Centre, 339411,
Singapore
Keywords Australia Holdings
Limited
UK
17-Mar-21
100%
4th Floor, 110 High Holborn, London, WC1V 6JS, UK
Australia
18-Mar-21
85%
12 Spring Street, Fitzroy, Victoria, 3065, Australia
Canada
27-Oct-17
100%
1751 Richardson, Suite 8400, Montreal, QC H3K 1G6, Canada
Brazil
18-Jan-15
100%
Rua Professor Aprígio Gonzaga, 35 – 7º andar – São Judas – São Paulo
– SP CEP: 04303-000, Brazil
Germany
06-Sep-19
100%
Moriz-Seeler-Strasse 5-7, Franz Ehrlich Haus, 12489, Berlin, Germany
Japan
30-Nov-10
100%
1-22-19 Izumi, Suginami-ku, Tokyo, 168-0063 Japan
Ireland
13-May-98
100%
Singapore
24-Apr-14
100%
Keywords International, Inc.
USA
26-Sep-12
Keywords Sperasoft LLC
Armenia
07-Apr-22
Keywords Studios B.C., Inc.
Canada
27-Oct-17
100%
100%
100%
Serbia
18-May-22
100%
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
2700 Commerce Place 10155 – 102 Street, Edmonton, AB, T5J 4G8
Belgrade, BULEVAR MIHAJLA PUPINA 10L, floor 9, Belgrade-New
Belgrade, NEW BELGRADE, 11070, Serbia
France
08-Jun-16
100%
59 Boulevard Exelmans, 75016 Paris, France
India
17-Feb-14
100%
3rd floor, Vardhman Orchard Plaza, Plot No 4, LSC, West Enclave,
Pitampura, New Delhi, 110034, India
Keywords Studios Italy S.R.L.
Italy
08-May-14
100%
Via Egadi 2, Milano, MI, 20144, Italy
Keywords Studios Korea
Corporation
Keywords Studios Los
Angeles, Inc.
Keywords Studios Malta
Limited
Keywords Studios México, S.
de R.L. de C.V.
Keywords Studios
Netherlands B.V.
South Korea 11-Jan-21
100%
16th Floor, Gangnam Building, 1321-1, Seocho-dong, Seocho-gu, Seoul
137-070, South Korea
USA
08-May-14
100%
1115 Flower Street, Burbank, CA 91502, USA
Malta
04-May-22
100%
Level 3, Valletta Buildings, South Street, Valletta VLT 1103, Malta
Mexico
16-Jul-15
100%
Torrente #75, Colonia Ampliación Alpes, Del. Álvaro Obregón, CP.
01710, Ciudad de México, México
Netherlands 05-Feb-19
100%
Van Limburg Stirumstraat 19, Hilversum 1215HP, The Netherlands
Keywords Studios plc
Annual Report and Accounts 2023
Keywords Australia Pty
Limited ~
Keywords Canada Holdings
Inc.
Keywords do Brasil
Localização e Tradução Ltda
Keywords Germany Holdings
GmbH
Keywords International Co.,
Limited.
Keywords International
Limited*
Keywords International Pte.
Limited
Keywords Studios d.o.o.
Beograd
Keywords Studios France
SAS
Keywords Studios India
Private Limited
141
Name
Keywords Studios Poland
Spolka z.o.o.
Keywords Studios QC-
Games Inc.
Keywords Studios QC-
Interactive Inc.
Keywords Studios QC-Tech
Inc.
Keywords Studios Romania
S.R.L.
Country of
incorporation
Date of
incorporation /
acquisition
Ownership^ Registered office
Poland
04-Feb-21
100%
11 Ul. Na Zjezdzie, Krakow 30-527, Poland
Canada
17-Feb-14
100%
1751 Richardson, Suite 8400, Montreal, QC H3K 1G6, Canada
Canada
16-Nov-16
100%
1751 Richardson, Suite 8400, Montreal, QC H3K 1G6, Canada
Canada
06-Jan-15
100%
1751 Richardson, Suite 8400, Montreal, QC H3K 1G6, Canada
Romania
15-Jun-21
100%
6-8 Corneliu Coposu Bvd., Unirii View Building, office 103, 1st floor, 3rd
district, Bucharest, Romania
Keywords Studios Spain SLU Spain
16-Jul-15
Keywords Studios Texas, LLC USA
22-Jan-20
Keywords Studios Unlimited
Company*
Ireland
27-Mar-18
100%
100%
100%
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
Keywords Studios US Inc
USA
24-Oct-17
100%
251 Little Falls Drive, Wilmington, New Castle, DE 19808, USA
Keywords Treasury Holdings
Limited
Keywords UK Holdings
Limited
Ireland
30-Nov-22
100%
Whelan House, South County Business Park, Leopardstown, Dublin
18, D18 T9P8, Ireland
UK
28-Mar-18
100%
4th Floor, 110 High Holborn, London, WC1V 6JS, UK
Keywords US Holdings Inc.
USA
Keywords Ventures Limited
UK
23-Oct-17
06-Apr-18
100%
100%
251 Little Falls Drive, Wilmington, New Castle, DE 19808, USA
4th Floor, 110 High Holborn, London, WC1V 6JS, UK
Laboratorio Comunicazione
S.r.l.
Laced Music LTD
Laced Publishing Limited
Lakshya Digital Private
Limited*
Lakshya Digital Singapore
Pte. Limited
Italy
04-Nov-22
100%
Via Egadi 2, Milano, MI, 20144, Italy
UK
UK
India
07-Apr-18
07-Apr-18
100%
100%
09-Oct-14
100%
Singapore
09-Oct-14
100%
4th Floor, 110 High Holborn, London, WC1V 6JS, UK
4th Floor, 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
Liquid Development, LLC
USA
Liquid Violet LTD*
Lonsdale Miller Limited
Maverick Media Limited
UK
UK
UK
19-Aug-15
15-Jan-14
100%
100%
411 SW 2nd Ave Ste 300, Portland, OR 97204, USA
4th Floor, 110 High Holborn, London, WC1V 6JS, UK
15-Dec-20
100%
4th Floor, 110 High Holborn, London, WC1V 6JS, UK
27-Aug-20
100%
4th Floor, 110 High Holborn, London, WC1V 6JS, UK
Mighty Developments Pty
Limited ~~
Mighty Games Group Pty
Limited ~~
Mighty Games Productions
Pty Limited ~~
Australia
03-Aug-22
85%
422 Brunswick Street, Fitzroy, VIC 3065, Australia
Australia
03-Aug-22
85%
422 Brunswick Street, Fitzroy, VIC 3065, Australia
Australia
03-Aug-22
85%
422 Brunswick Street, Fitzroy, VIC 3065, Australia
Player Research LTD
UK
26-Oct-16
100%
4th Floor, 110 High Holborn, London, WC1V 6JS, UK
Smoking Gun Interactive Inc Canada
05-Oct-22
100%
1100-333 Seymour St, Vancouver, BC V6B 5A6, Canada
Snowed In Studios, Inc
Canada
19-Jul-18
Sperasoft Poland Spólka
z.o.o.
Poland
13-Dec-17
Sperasoft Studios LLC
Russia
Sperasoft, Inc.
SperaSystems LLC
USA
USA
13-Dec-17
13-Dec-17
13-Dec-17
100%
100%
100%
100%
100%
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
251 Little Falls Drive, Wilmington, New Castle, DE 19808, USA
2033 Gateway Pl Ste 500 San Jose, CA 95110-3712, USA
Keywords Studios plc
Annual Report and Accounts 2023
OverviewGovernanceStrategic ReportFinancial StatementsSupplementary Information 142
Notes forming part of the consolidated financial statements
C O N T I N U E D
28 Subsidiaries continued
Name
Country of
incorporation
Date of
incorporation /
acquisition
Ownership^ Registered office
SPOV Limited
UK
16-Feb-17
Strongbox Limited
Seychelles
19-May-17
Studio Gobo Limited
UK
17-Aug-18
Sunny Side Up Creative Inc.
Canada
03-Jan-19
Germany
12-Apr-16
100%
100%
100%
100%
100%
4th Floor, 110 High Holborn, London, WC1V 6JS, UK
306 Victoria House, Victoria, Mahe, Seychelles
4th Floor, 110 High Holborn, London, WC1V 6JS, UK
1751 Richardson, Suite 8400, Montreal, QC H3K 1G6, Canada
Holstenkamp 46 A, Bahrenfeld, 22525 Hamburg, Germany
Switzerland 12-Apr-16
100%
Corso Elvezia 16, 6900 Lugano, Ticino, Switzerland
Tantalus Media Pty Limited ~ Australia
18-Mar-21
85%
12 Spring Street, Fitzroy, Victoria, 3065, Australia
Synthesis Deutschland
GmbH*
Synthesis Global Solutions
SA*
The Multiplayer Games
Group (Spain) S.R.L
The Multiplayer Group
(Canada) Inc.
The Multiplayer Group Ltd
The Sound Lab LLC
The Trailerfarm Limited
TV+SYNCHRON Berlin
GmbH
Waste Creative Limited
Waste Holdings Limited
Wicked Witch Software Pty
Limited ~~
Wizcorp Inc.
Xcelerator Machine
Translations Limited
Spain
16-Dec-23
100%
Calle Ferraz 11, 2nd Floor, left, Madrid, 28008
Canada
16-Dec-23
100%
2700-10155, 102 Street NW, Edmonton, Alberta, T5J 4G8.
UK
USA
UK
16-Dec-23
100%
4th Floor, 110 High Holborn, London, WC1V 6JS, UK
29-Sep-22
100%
3830 Monte Villa Parkway, Suite 200, Bothell, WA 98021
13-Sep-18
Germany
01-Oct-19
UK
UK
16-Dec-21
16-Dec-21
100%
100%
100%
100%
4th Floor, 110 High Holborn, London, WC1V 6JS, UK
Moriz-Seeler-Strasse 5-7, Franz Ehrlich Haus, 12489, Berlin, Germany
4th Floor, 110 High Holborn, London, WC1V 6JS, UK
4th Floor, 110 High Holborn, London, WC1V 6JS, UK
Australia
20-Dec-21
85%
Level 5, 990 Whitehorse Road, Box Hill, Melbourne, VIC 3128, Australia
Japan
Ireland
18-Apr-19
12-Dec-19
100%
100%
1-22-19 Izumi, Suginami-ku, Tokyo, 168-0063 Japan
DCU Alpha Innovation Campus, Old Finglas Road, Glasnevin, Dublin 11,
D11 KXN4, Ireland
Xloc, Inc.
USA
08-May-17
100%
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.
~ 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 restructured entities.
Restructuring details are set out below:
Name
Country of incorporation
Date of incorporation /
acquisition
Ownership
Date of restructuring
Restructuring details
PT Limitless Indonesia
Indonesia
19-May-17
100%
23-Aug-23
Dissolved
Keywords Studios plc
Annual Report and Accounts 2023
143
29 Significant Events and Events after the Reporting Date
Crisis in Ukraine
Since the crisis in Ukraine began in 2022, our priority has been to support our personnel and freelance suppliers located in the affected area,
while also contributing to broader humanitarian efforts in the region. As our Group had no business operations in Ukraine, the crisis primarily
impacted our Game Development teams in Russia, as well as our collaboration with several freelance suppliers based in Ukraine.
Through this period, we have continued to work with our customers, supporting their preferences for where their work should be performed,
while also remaining focused on mitigating any potential business interruption or other risks associated with our activities in Russia. As a result,
the volume of work produced in Russia has continued to reduce over time and we have been scaling down our operations accordingly.
In the period, the Group produced €4.9m of Revenue in Russia, which represents approximately 0.6% of Group revenue, down from 3.8% in
2022. During the year, we continued to transfer projects supported in Russia to other parts of the Group, as we further ramped up production
capacity in these locations with a combination of employees relocating from Russia and local hires. All production studios located in Russia
have now been closed. Costs of acquisition and integration includes severance and rationalisation costs of €3.9m associated with ceasing
operations in Russia.
The Group has never had significant receivables exposure in Russia, as work produced in Russia was contracted and collected in other
territories. The Group does not have significant amounts of working capital or non-current assets located in Russia. Thus, any exposure to
impairment of assets located in Russia is not considered material.
Events after the Reporting Date
There have been no significant events since the reporting date.
Keywords Studios plc
Annual Report and Accounts 2023
OverviewGovernanceStrategic ReportFinancial StatementsSupplementary Information 144
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
Deferred tax liabilities
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
42
38
39
39
40
41
42
41
22
22
22
22
At 31 December
2023
€’000
4,147
483
1,973
36,164
343,319
386,086
680
92,502
93,182
489
17,820
1,081
19,390
73,792
1,037
2,815
3,852
2022
Restated (note 42)
€’000
5,071
446
1,417
30,287
385,066
422,287
46
15,481
15,527
430
10,958
1,030
12,418
3,109
963
4,081
5,044
456,026
420,352
939
321
54,518
312,518
(6,774)
80,416
14,088
456,026
924
2,467
47,021
292,336
–
65,379
12,225
420,352
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 €4,093k (2022: profit of €14,682k).
The notes from page 147 onwards form an integral part of these Company financial statements. The financial statements were approved and
authorised for issue by the Board on 13 March 2024.
On behalf of the Board
Bertrand Bodson
Director
13 March 2024
Rob Kingston
Director
Keywords Studios plc
Annual Report and Accounts 2023
145
Company statement of changes in equity
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
At 01 January 2022
904
2,185
38,549
279,358
(1,997)
48,193
(478)
366,714
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
Profit / (loss) for the
period
Total comprehensive
income for the period
Contributions by and
contributions to the
owners:
Share-based payments
expense
Cash proceeds arising
from share-based
payments
Company funded
acquisition of shares (note
22)
Dividends
Acquisition-related
issuance of shares
Contributions by and
contributions to the
owners
At 31 December 2023
–
–
–
14
–
–
6
20
924
–
–
–
5
–
–
–
–
–
–
–
–
–
–
–
5,862
909
–
–
–
–
–
–
–
282
1,701
12,978
–
–
–
1,997
–
–
–
–
–
14,682
14,682
14,682
14,682
18,577
(1,492)
101
–
–
–
–
–
(1,979)
18,577
6,381
1,010
(1,979)
–
14,967
282
8,472
12,978
1,997
17,186
(1,979)
38,956
2,467
47,021
292,336
–
–
–
–
–
–
–
–
–
1,462
–
–
–
–
–
–
–
–
–
–
–
–
–
65,379
12,225
420,352
–
–
4,093
4,093
4,093
4,093
21,964
1,145
–
–
–
21,964
2,612
(14,846)
(6,774)
(8,072)
–
–
–
–
(2,230)
(2,230)
–
24,081
10
(2,146)
6,035
20,182
15
939
(2,146)
7,497
20,182
321
54,518
312,518
(6,774)
(6,774)
15,037
(2,230)
31,581
80,416
14,088
456,026
Keywords Studios plc
Annual Report and Accounts 2023
OverviewGovernanceStrategic ReportFinancial StatementsSupplementary Information
146
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
Unrealised foreign exchange (gain) / loss
Changes in operating assets and liabilities
(Increase) / decrease in other receivables
Increase / (decrease) in trade and other payables
Taxation refund / (paid)
Net cash generated by / (used in) operating activities
Cash flows from investing activities
Funding advanced to subsidiaries
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-based payments
Payments of principal on lease liability
Interest paid on principal of lease liability
Company funded acquisition of shares by EBT
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
Years ended 31 December
Note
2023
€’000
2022
€’000
4,093
14,682
37
36
37
22
9
22
4,681
(522)
2,050
147
1,096
(173)
7,279
34,697
6,301
40,998
40
52,410
(32,743)
(184)
(32,927)
1,145
(1,329)
(124)
(14,846)
(2,230)
1,467
(2,932)
(18,849)
634
46
680
3,838
203
1,249
304
510
(39)
6,065
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
Keywords Studios plc
Annual Report and Accounts 2023
147
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.
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
2023
€’000
4,363
627
139
21,964
27,093
2022
€’000
8,492
1,925
275
18,678
29,370
2023
2022
2
23
25
7
53
60
Keywords Studios plc
Annual Report and Accounts 2023
OverviewGovernanceStrategic ReportFinancial StatementsSupplementary Information
148
Notes forming part of the Company financial statements
C O N T I N U E D
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
37 Property, Plant and Equipment
Computers
and software
€’000
Office furniture and
equipment
€’000
Leasehold
improvements
€’000
Cost
At 01 January 2022
Additions
At 31 December 2022
Additions
At 31 December 2023
Accumulated depreciation
At 01 January 2022
Depreciation charge
At 31 December 2022
Depreciation charge
At 31 December 2023
Net book value
At 01 January 2023
At 31 December 2023
57
211
268
143
411
14
38
52
119
171
216
240
145
21
166
3
169
53
94
147
2
149
19
20
280
210
490
38
528
107
172
279
26
305
211
223
2023
€’000
2022
€’000
5,365
–
–
179
5,544
294
1,096
–
7
1,397
835
5,592
(825)
(237)
5,365
629
510
(825)
(20)
294
5,071
4,147
206
5,071
Total
€’000
482
442
924
184
1,108
174
304
478
147
625
446
483
Keywords Studios plc
Annual Report and Accounts 2023
38 Investment in Subsidiaries
149
2023
€’000
2022
€’000
36,164
30,287
Details of the Company’s direct and indirect subsidiaries as at 31 December 2023 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)
40 Other Payables
Current
Accrued expenses
Deferred and contingent consideration related to continuous employment (i)*
Other payables
Intercompany payables
(i) The movement in deferred and contingent consideration during the financial year was as follows:
Carrying amount at the beginning of the year
Fair value movements in deferred consideration related to continuous employment
Carrying amount at the end of the year
2023
€’000
88,521
3,880
59
42
2022
€’000
12,682
2,163
459
177
92,502
15,481
2023
€’000
2022
€’000
343,319
385,066
343,319
385,066
2023
€’000
4,208
3,581
447
9,584
17,820
2023
€’000
–
3,581
3,581
2022
€’000
3,226
–
158
7,574
10,958
2022
€’000
–
–
–
Keywords Studios plc
Annual Report and Accounts 2023
OverviewGovernanceStrategic ReportFinancial StatementsSupplementary Information
150
Notes forming part of the Company financial statements
C O N T I N U E D
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
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
2023
€’000
5,111
–
124
(1,453)
114
3,896
2022
€’000
Finance
charges
2022
€’000
216
5,591
33
(511)
(218)
5,111
2022
€’000
Lease liabilities
2023
€’000
2023
€’000
2023
€’000
2022
€’000
Lease
payments
Finance
charges Lease liabilities
Lease
payments
1,161
2,903
–
2,903
80
88
–
88
1,081
1,133
103
1,030
2,815
4,248
–
–
2,815
4,248
167
–
167
4,081
–
4,081
At 31 December
4,064
168
3,896
5,381
270
5,111
42 Deferred Tax
Deferred tax assets
Deferred tax arising on lease liabilities
Other deferred tax
Deferred tax liabilities
Deferred tax arising on right of use assets
2023
€’000
1,037
936
1,973
2023
€’000
1,037
1,037
2022
Restated
€’000
963
454
1,417
2022
€’000
963
963
As outlined in note 21, the Group has adopted Deferred Tax related to Assets and Liabilities arising from a Single Transaction (Amendments
to IAS 12) from 01 January 2023, and as a result the Company has recognised deferred tax on a gross basis on Right of use assets and Lease
liabilities 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. There was no impact on the opening retained earnings at 01 January in any period
presented as a result of this change. The impact on deferred tax assets and liabilities in each comparative period presented is detailed below.
At 31 December 2022 – as reported
Adoption of Deferred Tax related to Assets and Liabilities arising from a
Single Transaction (Amendments to IAS 12)
At 31 December 2022 – as restated
454
963
1,417
–
963
963
12,225
–
12,225
Deferred tax assets
€’000
Deferred tax liabilities
€’000
Retained earnings
€’000
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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 €343.3m (2022: €385.1m), 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 (2022: €nil).
Separately, the Company has balances of €88.5m (2022: €12.7m), 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 (2022: €nil).
The following are the contractual maturities (representing undiscounted contractual cash flows) of the Company’s financial liabilities:
At 31 December 2023
Trade payables
Deferred and contingent consideration related to
continuous employment
Other payables
Lease liabilities
Total
At 31 December 2022
Trade payables
Other payables
Lease liabilities
Total
Carrying value
Contractual cash flows
Total
€’000
489
3,581
14,239
3,896
22,205
Total
€’000
489
5,391
14,239
4,064
24,183
Within 1 year
€’000
1-2 years
€’000
2-5 years
€’000
Over 5 years
€’000
489
–
3,581
14,239
1,161
19,470
1,810
–
2,903
4,713
–
–
–
–
–
–
–
–
–
–
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
–
–
–
–
44 Related Parties
As at 31 December 2023 and 2022, 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)
2023
€’000
2022
€’000
343,319
385,066
88,521
12,682
431,840
397,748
2023
€’000
2022
€’000
343,319
385,066
88,521
12,682
431,840
397,748
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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. APM’s may not be calculated uniformly by all companies and therefore may not be directly comparable with similarly titled
measures and disclosures of other companies. As these measures frequently exclude significant recurring transactions that impact financial
performance (e.g. share-based payments expense), the adjusted measures will typically be higher than the corresponding IFRS measures and
should not be regarded as a complete picture of the Group’s financial performance, which is presented in the Total comprehensive income /
(expense) of the Group.
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, payments of principal on lease liabilities, interest and tax payments, settlement of deferred consideration related to
continuous employment 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.
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Divisional analysis
The following table presents revenue growth by division 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 2022 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
2023
Revenue
AER
€m
336.1
279.5
164.8
780.4
2023
Revenue
CER
€m
350.5
287.9
171.1
809.5
2022
Revenue
AER
€m
275.5
300.9
114.3
690.7
2023
Growth
AER
%
22.0%
(7.1)%
44.2%
13.0%
2023
Growth
CER
%
27.2%
(4.3)%
49.7%
17.2%
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
2023
Revenue
AER
€m
336.1
279.5
164.8
780.4
2023
Pre-acquisition
revenue
AER
€m
43.8
1.0
6.4
51.2
2023
Pro forma
revenue
AER
€m
379.9
280.5
171.2
831.6
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 2022 foreign exchange rates to both years, when translating studio results into the
euro reporting currency.
Create
Globalize
Engage
2022
Revenue
AER
€m
275.5
300.9
114.3
690.7
2022
Pre-acquisition
revenue
AER
€m
2022
Like-for-like
revenue
AER
€m
23.2
–
52.9
76.1
298.7
300.9
167.2
766.8
2023
Revenue
growth
CER
€m
51.8
(13.0)
3.9
42.7
2023
Revenue
CER
€m
350.5
287.9
171.1
809.5
2023
Organic
revenue
growth
CER
%
17.3%
(4.3)%
2.3%
5.6%
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Alternative performance measures
C O N T I N U E D
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, and deducting
bank charges.
Calculation
2023
€’000
2022
€’000
Administrative expenses
Consolidated statement of comprehensive income
(252,275)
(196,554)
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 – right of use assets
Bank charges
Adjusted operating costs
Adjusted operating costs as a % of revenue
Note 12
Note 6
21,964
27,140
26,060
23,128
13,907
18,678
8,413
16,810
18,365
14,585
(724)
(662)
(140,800)
(120,365)
18.0%
17.4%
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
2023
€’000
46,830
21,964
27,140
26,060
2022
€’000
71,810
18,678
8,413
16,810
Other income
Adjusted operating profit
Adjusted operating profit as a % of revenue
Consolidated statement of comprehensive income
–
(1,098)
121,994
15.6%
114,613
16.6%
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 – right of use assets
Bank charges
EBITDA
Note 12
Note 6
2023
€’000
46,830
26,060
23,128
13,907
2022
€’000
71,810
16,810
18,365
14,585
(724)
(662)
109,201
120,908
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Adjusted EBITDA
Adjusted EBITDA comprises EBITDA, adjusted for share-based payments expense, and costs of acquisition and integration. 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
Other income
Adjusted EBITDA
Adjusted EBITDA as a % of revenue
Consolidated statement of comprehensive income
2023
€’000
2022
€’000
109,201
120,908
21,964
27,140
–
18,678
8,413
(1,098)
158,305
146,901
20.3%
21.3%
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
Foreign exchange (gain) / loss
Unwinding of discounted liabilities – deferred
consideration
Note 6
Note 6
Other income
Adjusted profit before tax
Adjusted profit before tax as a % of revenue
Consolidated statement of comprehensive income
2023
€’000
34,994
21,964
27,140
26,060
2022
€’000
67,982
18,678
8,413
16,810
1,232
(1,677)
3,279
–
2,922
(1,098)
114,669
112,030
14.7%
16.2%
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
2023
€’000
2022
€’000
114,669
112,030
15,042
13.1%
10,539
25,581
22.3%
20,612
18.4%
4,043
24,655
22.0%
^
Being mainly the tax impact of share-based payments expense €4.2m, amortisation of intangible assets €4.4m and acquisition related costs €1.5m, with the prior
period being mainly the tax impact of share-based payments expense €0.4m and amortisation of intangible assets €4.0m less foreign exchange €0.4m.
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Alternative performance measures
C O N T I N U E D
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 either the basic or diluted weighted average number of
equity shares, as reported in note 8.
Calculation
Adjusted profit before tax
As above
Taxation
Consolidated statement of comprehensive income
Tax arising on bridging items to Adjusted profit
before tax^
Adjusted profit after tax
Weighted average number of equity shares
Basic
Diluted
Adjusted earnings per share
Basic
% growth
Diluted
% growth
Note 8
Note 8
2023
€’000
114,669
(15,042)
(10,539)
89,088
2022
€’000
112,030
(20,612)
(4,043)
87,375
Number
Number
78,910,471
76,979,596
79,995,267
80,481,897
€ c
112.90
(0.5%)
111.37
2.6%
€ c
113.50
27.2%
108.56
27.8%
^
Being mainly the tax impact of share-based payments expense €4.2m, amortisation of intangible assets €4.4m and acquisition related costs €1.5m, with the prior
period being mainly the tax impact of share-based payments expense €0.4m and amortisation of intangible assets €4.0m less foreign exchange €0.4m.
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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
Unwinding of discounted liabilities – lease liabilities
As above
Note 6
Note 6
Note 6
Note 6
Pre-acquisition profits of current year acquisitions
Note 27
Adjusted profit before tax including
pre-acquisition profit and excluding net interest
2023
€’000
2022
€’000
114,669
112,030
(614)
724
5,768
1,447
9,655
(309)
662
1,261
969
1,601
131,649
116,214
Total equity
Consolidated statement of financial position
599,039
557,091
Employee defined benefit plans
Consolidated statement of financial position
4,030
2,861
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
76,617
55,825
127,380
58,301
63,253
51
Consolidated statement of financial position
(59,862)
(81,886)
Adjusted profit before tax including pre-acquisition
profit and excluding net interest expense / capital
employed
803,029
599,671
16.4%
19.4%
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Alternative performance measures
C O N T I N U E D
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, settlement of deferred 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
2023
€’000
2022
€’000
Net cash generated by / (used in) operating activities
Consolidated statement of cash flows
110,457
124,286
Acquisition and integration cash outlay:
Costs of acquisition and integration
Consolidated statement of comprehensive income
27,140
Fair value adjustments to contingent consideration
Consolidated statement of cash flows
Non-cash movements in Deferred and contingent
consideration related to continuous employment
Consolidated statement of cash flows
Fair value adjustments to property, plant and equipment Note 5
Fair value adjustments to right of use assets
Other fair value movements within Cost of acquisition
and integration
Note 5
Note 5
(300)
(8,877)
(5,755)
(2,041)
(2,677)
8,413
(2,282)
(3,000)
–
–
–
Acquisition of property, plant and equipment
Consolidated statement of cash flows
(30,689)
(27,007)
Investment in intangible assets
Consolidated statement of cash flows
(3,052)
Other income
Consolidated statement of comprehensive income
–
Settlement of deferred and contingent consideration
related to continuous employment
Interest received
Interest paid
Consolidated statement of cash flows
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
(501)
(1,098)
–
309
(1,797)
(11,361)
85,962
17,505
3,900
614
(7,729)
(15,038)
65,953
20,853
86,806
103,467
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
Capital expenditure in excess of depreciation:
As above
Acquisition of property, plant and equipment
Consolidated statement of cash flows
Depreciation – property, plant and equipment
Note 5
Capital expenditure in excess of depreciation
Adjusted free cash flow
2023
€’000
2022
€’000
86,806
103,467
30,689
27,007
(23,128)
(18,365)
7,561
94,367
8,642
112,109
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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
As above
As above
2023
€’000
2022
€’000
94,367
112,109
114,669
112,030
Adjusted cash conversion ratio
Free cash flow before tax and capital expenditure in excess
of depreciation, as a % of Adjusted profit before tax
82.3%
100.1%
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
Consolidated statement of financial position
Cash and cash equivalents
Consolidated statement of financial position
Net debt / (net cash) position
2023
€’000
127,380
2022
€’000
51
(59,862)
(81,886)
67,518
(81,835)
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Key disclaimers
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,
certain of the Group’s plans and objectives, as well as management’s beliefs and assumptions. 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, next generation consoles and emerging technologies such as artificial intelligence, 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 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; risks associated with intellectual property rights, including potential infringement claims
or challenges to the Group’s proprietary technologies; the Group’s ability to meet its ESG and climate-related financial disclosure 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 dependence on key personnel and strategic partners; 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.
Keywords Studios plc
Annual Report and Accounts 2023
161
Company information
Directors
Don Robert
Bertrand Bodson
Jon Hauck
Rob Kingston
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
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
Amsterdam Branch
Bijlmerdreef 24,
1102 CT Amsterdam ZO, The Netherlands
Dublin Branch, Bank of China (Europe) S.A.
Styne House, Fifth Floor,
Hatch Street Upper, D02 DY27, Dublin 2, Ireland
Allied Irish Banks plc., Dublin Branch
10 Molesworth Street, Dublin 2, Ireland
Northern Bank Ltd trading as Danske Bank
Donegall Square West, BT1 6JS Belfast, Northern Ireland
The Governor and Company of the Bank of Ireland
40 Mespil Road, Dublin 4, Ireland
Nominated Adviser and Joint Corporate Broker
Deutsche Numis
45 Gresham Street,
London EC2V 7BF, UK
Joint Corporate Broker
Barclays Bank plc
1 Churchill Place, London, E14 5HP, UK
Financial PR Adviser
MHP Group
4th Floor, 60 Great Portland Street,
London W1W 7RT, UK
Solicitors
DLA Piper LLP
160 Aldersgate Street,
London EC1A 4HT, UK
Keywords Studios plc
Annual Report and Accounts 2023
OverviewGovernanceStrategic ReportFinancial StatementsSupplementary Information K
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Keywords Studios plc
4th Floor
110 High Holborn
London WC1V 6JS
United Kingdom
www.keywordsstudios.com