Half-year Report

RNS Number : 6948M
Keywords Studios PLC
18 September 2019
 

Keywords Studios PLC ("Keywords Studios", "the Group")

 

Half year results for the six months to 30 June 2019

 

Excellent revenue growth and significant investment in expanding our service platform

 

Keywords Studios, the international technical and creative services provider to the global video games industry, today provides its half year results for the six months to 30 June 2019.

 

Financial overview:

Strong like for like growth, complemented by acquisitions

·    Revenue, including contribution from acquisitions, increased by 39.3% to €153.2m (H1 2018: €110.0m)

Like-for-like revenue at constant currency exchange rates, increased by 17.3%1 to €146.4m (H1 2018: €124.8m)

·    Gross profit margin of 36.1% (H1 2018: 37.4%) as a result of rapid recruitment and training, staffing of new facilities, and the impact of one significant project brought in through an acquisition

·    Adjusted EBITDA2 was €25.8m, on a pre IFRS 16 basis it was €22.3m (H1 2018: €18.7m)

·    Adjusted profit before tax3 was up 14.3% to €18.4m, on a pre IFRS 16 basis it was €18.6m (H1 2018: €16.1m)

·    Adjusted earnings per share4 was 18.36c, on a pre IFRS 16 basis it was 18.71c (H1 2018: 18.30c), resulting from the higher tax charge combined with the increase in the tax related to adjusted items offsetting the growth in Adjusted profit before tax

·    Annualised return on capital employed (ROCE)5 YE 30 June 2019 of 19.7% (YE 30 June 2018: 17.6%)

·    Operating cash conversion6 of 53%, on a pre IFRS 16 basis it was 34% (H1 2018: 40%)

·    Net debt of €9.0m (net cash H1 2018: €0.1m; net debt FY 2018: €0.4m) after €7.0m7 of net cash outlay on acquisitions and €5.1m capital expenditure on expanding facilities for future growth

·    10% increase in interim dividend to 0.58p per share (H1 2018: 0.53p)

 

Operational overview:

Investment in our platform to capture accelerating outsourcing demand in the growing video games market

·    Continued investment for growth:

Approximately 1,400 new work stations under preparation for 2019, representing approximately 25% of existing capacity, of which only c.200 were partially available during H1

The major beneficiaries of expansion investment are our studios in Montreal, Katowice, Manila, Brighton, Mexico City, Tokyo, Sao Paolo and New Delhi

Continued to develop the Group through acquisitions:

Four acquisitions during the half: Sunny Side Up, GetSocial, Wizcorp and Descriptive Video Works

Added scale and diversified Keywords' Marketing, Audio and Game Development service offerings

·    Considerable progress in cross-selling services with a 14% increase in clients buying 3 or more services to 113 (FY 2018: 99)

·    New revolving credit facility agreed for up to €140m with Barclays, HSBC, Citibank and Silicon Valley Bank

 

Post period end, current trading and outlook:

·    Trading in the second half has started well. The Board expects:

Strong organic revenue growth, at slightly slower growth rates than the first half, with particularly strong growth in Functional Testing, Game Development and Art Creation whilst Audio and Localisation Testing are not expected to see their typical seasonal peak in activity in the second half due to certain clients' shift to focus on new consoles expected in 2020.

Stronger margins in the second half as we incrementally benefit from first half investments in capacity expansion partially offset by an underperforming contract and continued commissioning of new facilities.

·    Announced separately today:

Acquisition of TV Synchron, a Berlin based dubbing and voice-over studio

·    We continue to selectively review a strong acquisition pipeline with an anticipated emphasis on Game Development and Marketing services

 

Andrew Day, Chief Executive of Keywords Studios, commented:

"The Group grew very strongly in the first half with increased demand across all of our service lines, and particularly strong performances from Functional Testing and Game Development, as the market accelerates its use of external development and service partners. 

"We invested in capacity to match this accelerating trend, with significant investments in new and enlarged and improved facilities which will come on stream incrementally during the second half and into 2020. This investment, combined with a ramp up in staffing to meet faster and earlier growth than previously expected in our Functional Testing service line, meant we carried additional direct and indirect operational costs in the first half. However, underlying margins remain in line with historic norms and we,therefore, expect margins to progress in the second half and through 2020 as we benefit from our first half and ongoing investments. 

"Trading in the second half has started well, with continued strong performances from our Game Development, Functional Testing and Art Creation service lines in particular.  Overall, this leaves us well placed to deliver revenues for the full year at the upper end of current market expectatons with our profit expectations broadly unchanged.

"Our organic investments leave us well positioned to capture the clear opportunity for Keywords to grow our relationships with the major games companies through increased capacity, new services and dedicated outsourced services and to increase margins to normal Group levels as we benefit from these investments during 2020.

"Our acquisition pipeline is very healthy and we are actively reviewing a number of attractive acquisition opportunities that would add critical mass, capacity, and extend our service offering or geographical penetration."

 

A presentation of the half year results will be made to analysts later this morning at MHP's offices.  There will also be a live, listen only webcast of the presentation and a recording will be made available via www.keywordsstudios.com.  To register for access, please contact Charles Hirst at MHP Communications on +44 20 3128 8193 or email keywords@mhpc.com.

 

For further information, please contact:

Keywords Studios (www.keywordsstudios.com)

Andrew Day, Chief Executive Officer

David Broderick, Chief Financial Officer

+353 190 22 730

 

Numis (Financial Adviser)

Stuart Skinner / Kevin Cruickshank (Nominated Adviser)

James Black / Tom Ballard (Corporate Broker)

 

020 7260 1000

 

MHP Communications (Financial PR)

Katie Hunt / Ollie Hoare / Nessyah Hart

 

020 3128 8100

 

Notes to Editors

Keywords Studios is an international technical services provider to the global video games industry. Established in 1998, and now with over 50 facilities in 21 countries strategically located in Asia, the Americas and Europe, it provides integrated art creation, game development, testing, localisation, audio and player support services across more than 50 languages and 16 games platforms to a blue-chip client base of approximately 950 clients across the globe.  It has a strong market position, providing services to 23 of the top 25 most prominent games companies, including Activision Blizzard, Bandai Namco, Bethesda, Electronic Arts, Epic Games, Konami, Riot Games, Sony, Square Enix, Supercell, TakeTwo and Ubisoft. Recent titles worked on include Uncharted 4: A Thief's End, Call of Duty: WWII, Mortal Combat X, Assassin's Creed Origins, Battlefield 1, League of Legends, Fortnite, Clash Royale and Rainbow Six-Siege. Keywords Studios is listed on AIM, the London Stock Exchange regulated market (KWS.L). 

 

The business uses a number of adjusted measures that are not defined or recognised under IFRS. For full definitions and explanations of these measures and a reconciliation to the most directly referenceable IFRS line item, please refer to the Supplementary Information in the 2018 Annual Report. In addition, the following footnotes apply throughout the announcement where referenced.

 

1

      Like-for-like revenue at constant currency exchange rates is calculated by adjusting the prior year revenues, adding pre-acquisition revenues for the corresponding period of ownership in the current year results, and applying the 2018 foreign exchange rates in both years

2

          EBITDA comprises profit before taxation, adding back depreciation, amortisation, both interest income and expense, and exchange gains and losses. Adjusted EBITDA is also before acquisition and integration expenses of €2.8m (H1 2018: €2.0m), share option charges of €4.0m (H1 2018: €0.8m) and non-controlling interests of €0.1m (H1 2018: €nil)

3

          Being Profit before Tax adjusted for acquisition and integration related expenses of €2.8m (H1 2018: €2.0m), share option charges of €4.0m (H1 2018: €0.8m), amortisation of intangibles of €3.5m (H1 2018: €3.1m), non-controlling interests €0.1m (H1 2018: €nil) and foreign currency exchange loss of €1.2m (H1 2018: gain of €0.8m)

4

      Being Earnings per Share with the calculation adjusted for acquisition and integration expenses of €2.8m (H1 2018: €2.0m), share option charges of €4.0m (H1 2018: €0.8m), amortisation of intangibles of €3.5m (H1 2018: €3.1m), foreign currency exchange loss of €1.2m (H1 2018: gain of €0.8m) and non-controlling interests of €0.1m (H1 2018: €nil) and deducting the tax associated with these adjusting items of €2.9m (H1 2018: €1.3m as restated to take into account the tax impact)

5

      The Annualised ROCE has been calculated for the 12 month period ending 30 June 2019 (as calculated on the same basis as defined in the 2018 Annual Report)

6

          The operating cash conversion ratio has been calculated as Adjusted Operating Cash Flow expressed as a percentage of the Adjusted Profit before Tax, formerly referred to as Adjusted Free Cash Flow and defined in the Supplementary Information in the 2018 Annual Report

7

          After payment of €5.2m net cash consideration for acquisitions (H1 2018: €10.6m) and deferred consideration of €1.8m (H1 2018: €1.0m)

8

       Being administrative expenses before non-operating costs including; share option costs, costs of acquisitions and integration, amortisation, depreciation, and including bank charges.

 

Chief Executive Officer's Overview

Excellent growth as we invested in a strengthened and more diversified services platform

The first half of the year has seen excellent growth, with like for like revenue up by 17.3%, on a constant currency basis, complemented by four acquisitions.  

The strongest performances were from Functional Testing and Game Development, which are now our two largest service lines. Having only entered Game Development through the acquisition of GameSim in May 2017, we have grown it to become a £30m revenue business, giving us both scale and an international platform from which to increase our share of this substantial and high growth market.

The increased demand for our services across the board, reflects the continued underlying growth in the video games industry, the accelerating trend towards video games developers and publishers outsourcing a greater proportion of their games' development and support, and our success in gaining an increased share of this outsourced market as we continue to grow and develop our client relationships.

We have also strengthened our position to continue to benefit from these trends by investing in expanding and diversifying the Group organically and by acquisition to better serve our global client base and position ourselves for further growth.

 

Delivering on Our Strategy

We continue to make good progress in pursuit of our strategy to build the world's leading technical and creative services platform focused on the most complex of interactive content - video games.  

The key pillars of our strategy are to grow organically and by acquisition to extend the Group's service capacity, capabilities and geographical reach in order to better serve our client base across all platforms, key geographies and languages, and a full range of services and solutions.

Positioning the Group as the leader of scale in an otherwise highly fragmented service provision market, despite the scale and global nature of the major video games publishers and developers, will enable us to continue to take advantage of the trend towards greater outsourcing as clients seek to manage the demands for increasingly sophisticated content whilst limiting their fixed costs. 

By investing in capacity expansion and generating synergies across our expanding multi-service global platform, we are increasingly becoming a strategically important partner to our clients who require a service provider of our scale and flexibility.

 

Organic Growth and Investment

We saw strong demand across all of our service lines, which grew revenues by between 5% to 33% in the period (on a like for like, constant current basis1), with particularly strong growth across our Game Development. Functional Testing, and Art Creation service lines,

We also continued to expand our client relationships by making good progress with cross selling our services reflected in a 14% increase in clients buying 3 or more services to 113 (FY 2018: 99).

As a result of strong demand for certain service lines, we incurred extra costs in areas such as recruitment, training, IT and HR in the first half as we brought forward our capacity expansion.  In particular, as a result of our Functional Testing service line growing faster, earlier in the year than expected, we incurred additional costs due to the steep ramp up in staffing in the first half, which we do not expect to repeat in the second half.

We have also continued to support the costs of the investment phase in our early stage technology businesses, Yokozuna Data and GetSocial, and our fledgling services in sound design, subtitling and dubbing for film and TV.

We continue to work on an under-performing, fixed price contract, that was entered into prior to the acquisition of one of our Game Development businesses and we expect to exit this contract by the end of the year.  This is incrementally freeing up resource for more profitable work in the second half and into 2020.

In addition, we invested in both expanding our operational capacity and enhancing the Group's infrastructure to scale up our business to support growth in future periods.  In addition to the c.1400 work stations being created, this has included investment in people, systems and marketing as we develop our IT and finance functions and enhance our global branding. The first half of 2019 also saw us invest substantially in the expansion of the Group's facilities in Mexico City, Katowice, and Tokyo, following substantial investments in Montreal, Sao Paolo, Brighton, New Delhi, Manila in the second half of 2018. We incurred additional start-up costs at the newly opened facilities in Katowice and Mexico City, particularly as we had duplicated sites during a transition period, which weighed on our margins in the first half. However, as those work stations come on stream we would expect to see those operations return to break even in the second half and generate normal operating margins thereafter. 

As we continue to bring on stream this additional capacity, our investment in new work stations will enable us to take advantage of the higher levels of activity that we are experiencing in a more cost efficient manner, whilst also allowing us to continue to increase our market share of the growing outsourced services market, positioning us well for both now and over the longer term.

                                                                                                                                       

Acquisitions

In line with our strategy, we continued to grow the business in the first half through four acquisitions, of Sunny Side Up, Get Social, Wizcorp and Descriptive Video Works. These have further diversified our service offering to the video games industry, adding the production of high-quality marketing assets in Canada; the development of cloud-based solutions for games developers to manage social interactions with their games; mobile Game Development services in Japan; and  accessibility services in North America to our Audio offering. All have served to further strengthen our position as the leading global player in the outsourced services market by expanding the breadth of the value-added services we are able to offer our clients.   

We have also made good progress with integrating prior period acquisitions, all of which are making good contributions to the Group. The Group's largest acquisition in 2018 (completed in August), Studio Gobo and Electric Square, have outperformed expectations while our  largest acquisition in 2017 (completed in October), VMC, was fully integrated in 2018, achieving margins in line with those of the Group, with the subsequent benefits of our additional scale demonstrated in the first half of the current year in the particularly strong growth in our Functional Testing service line.

 

Post period end events

We today announce the acquisition of TV Synchron, a Berlin based dubbing and voice over studio in German language for €3.7m, of which €2.8m is being paid in cash on completion and €0.9m in KWS shares to be issued on the first anniversary of completion.  TV Synchron, was founded in 1991 by Thomas Wolfert, a veteran of the German dubbing industry, and has a very solid pedigree in the entertainment industry, having worked on over 7,000 episodes and a quarter of a million minutes of voiced materials.  Its clients include TOEI Animation, VIZ, Turner, Discovery Channels, A&E and has recently had its production quality and processes recognized when it was granted a "gold rated" Netflix Post Partner Program certification ("NP3") by Netflix. The company is expected to generate revenues of €4.1m for the year ended December 2019.

 

Overall, the acquisitions and organic investments made to date leave us better placed than ever to support our video game developers and publishers from the very early concept stages of game design through to launch and live operations phases.

 

Financial overview

Revenue

The Group's very strong performance in the first half, with revenues increasing by 39.3% to €153.2m (H1 2018: €110.0m), reflected a combination of strong organic growth and our success in executing and integrating acquisitions.

 

Currency

Currency movements had a material impact in the first half, primarily the strengthening of the US dollar 7% against the Euro between H1 2018 and H1 2019 (in which approximately 55% of the Group's revenues were denominated).  On a constant currency basis, revenues would have been €6.7m lower at €146.4m. In order to provide a more meaningful H1 2018 and H1 2019 comparison of underlying performance, all like for like revenue figures in this report have been provided on a constant currency basis to exclude foreign exchange impacts.

 

Gross profit margin

The gross profit margin of 36.1% (H1 2018: 37.4%) was lower than the comparative period resulting from the particularly rapid recruitment and training of new staff to meet very strong demand for our Functional Testing and Game Development.  This was combined with  the impact in the current year of an underperforming, fixed price project which is not expected to be a drag as we move in to 2020.

 

Administrative expenses

Administrative expenses increased in the first half of the year to €35.9m, or 23.4% of revenue, (H1 2018: €24.7m or 22.5% of revenue). Excluding the impact of IFRS 16, Adjusted Operating Costs8 were €32.9m or 21.5% of revenue (H1 2018: €22.5m or 20.5% of revenue) reflecting the costs in the acquired entities and investments made in existing and new facilities,  strengthened management, support personnel and infrastructure. As the first half investments start to contribute in the second half, we expect to see our administrative expenses trending back towards our target of 20% as we move into 2020. Revenues and cost management remains a point of focus across the Group's activities as we drive synergies across the enlarged group.

 

Exceptional items

One-off costs of acquiring and integrating the newly acquired companies of €2.8m (H1 2018: €2.0m) were incurred in the period.  Included in net finance costs is a translational foreign exchange loss of €1.2m (H1 2018: €0.8m gain) in the first half of the current year which is primarily due to the effect of translating net current assets held in foreign currencies.

 

EBITDA

Adjusted EBITDA2 was €25.8m, on a pre IFRS 16 basis it was €22.3m, (H1 2018: €18.7m). EBITDA was €18.9m, on a pre IFRS 16 basis it was €15.3m, (H1 2018: €15.3m).

 

Profit before tax

Adjusted profit before tax3 for the first half of the current financial year increased by 14.3% to €18.4m, on a pre IFRS 16 basis it was €18.6m (H1 2018: €16.0m).  After these items, the Group reported a profit before tax for the period of €6.7m (H1 2018: €10.8m). 

 

Taxation

The tax charge in the period was €3.6m including a one off €0.5m tax charge relating to a legacy pre acquisition tax issue (H1 2018: €3.1m).   This represented an effective tax rate on the adjusted profit of 19.8% (H1 2018: 19.2%). We anticipate that the effective tax rate will return to lower levels over time.

 

Earnings per share

Adjusted earnings per share4 was 18.36c, on a pre IFRS 16 basis it was 18.71c (H1 2018: 18.30c), resulting from the higher tax charge combined with the increase in the tax related to adjusted items offsetting the growth in Adjusted profit before tax.  Basic earnings per share were down 61% to €4.7c (H1 2018: €12.1c), primarily due to increases in amortisation, share option and depreciation charges. The denominator used for these calculations includes the shares which will be issued for all of the outstanding deferred consideration for prior acquisitions, comprising those due to the sellers of Sunny Side Up and Descriptive Video Works.

 

Cashflows

In spite of a combination of the increased trading in the second quarter, and the Group entering a traditionally busy third quarter, where the Group typically has its maximum cash requirement for the year, the Group generated a net inflow of cash from operations of €9.2m, excluding the impact of IFRS 16 €5.7m (H1 2018: €6.0m). Debtor days improved to 46 days (H1 2018: 49) as a result of our continued focus on tightly managing cashflows.

In the period, the Group completed four acquisitions and a further investment in AppSecTest Ltd, reflected in a net cash outflow on consideration of €5.2m (H1 2018: €10.6m) and paid deferred consideration of €1.8m (H1 2018: €1.0m).  Capital expenditure was €1.3m higher than the prior period at €5.1m (H1 2018: €3.8m), reflecting the cost of increasing capacity in several studios and a continued refresh of IT equipment.

 

Funding and capital structure

As at 30 June 2019, the Group had cash balances at €37.8m (H1 2018: €32.2m) and borrowings of €46.8m (H1 2018: €32.1m), giving net debt of €9.0m (H1 2018: net cash of €0.1m).

To help fund acquisitions and general working capital requirements the Group has successfully agreed a new revolving credit facility, provided by Barclays Bank plc, Citibank N.A., HSBC and Silicon Valley Bank, for an initial €100m over a three-year term, with the option to extend the facility up to €140m and by a further two years. It replaces the existing €105m facility, on the same terms. 

 

Operational review

Following acquisitions during the first half and prior periods, Keywords is well diversified, both geographically and through a broader portfolio of services.

 

Art Creation (15% of group revenues in H1 2019)

Our Art Creation service line creates graphical art assets for video games including concept art creation, 2D and 3D art asset production and animation. Also included under our Art services business is the Marketing services business we have started building through the acquisitions of Fire Without Smoke, The Trailer Farm and Sunny Side Up.

Art Creation revenues grew by 50% to €22.2m (H1 2018: €14.8m, restated to exclude Sperasoft art resources) with the benefit of contributions from 2018 and 2019 acquisitions Fire Without Smoke, The Trailer Farm and Sunny Side Up.  On a like for like basis, Art Creation revenues were 15.8% higher than in H1 2018.

We expect Art Creation to continue to deliver strong growth in the second half. Marketing services is expected to be an area of particular focus for future acquisitions and, once it achieves sufficient scale through organic and acquisitive growth, we plan to report its results separately from Art Creation.

 

Game Development (formerly Engineering - 19% of group revenues in H1 2019)

Formerly called Engineering, our Game Development service line provides outsourced software engineering and game development services to publishers and developers .

Now our second largest service line, Game Development increased revenues by 129.5% to €29.6m in the first half (H1 2018: €12.9m after restating for certain art-related revenues in Sperasoft that are now classified under Game Development).  This increase reflected a marginal benefit  from the acquisition of Wizcorp in April 2019 and the benefit of full six month contributions from Studio Gobo, Electric Square and Snowed In. Like for like revenue increased 32.9% compared to H1 2018.

We expect Game Development to grow strongly as we move into the second half, although not at the same rate as the particular strong growth seen in the first half, albeit we do expect increases in pricing to reflect current market rates to underpin improving margins in the service line.

 

Audio Services (12% of group revenues in H1 2019)

Our Audio service line provides multi language voice-over, original language voice recording, music, sound design and related services.

Audio revenues rose by 30.9% in the period to €17.8m (H1 2018: €13.6m), with the full six month contributions from the acquisitions of Cord, Laced, Blindlight and Maximal in 2018 and that of Descriptive Video Works in 2019.  On a like for like basis revenues were up 6.7% compared to H1 2018.

The investment made in our Liquid Violet audio production facility in London's Covent Garden in 2018 is adding to the growth in that business as it establishes itself as a destination studio for English voice production. We were delighted that this studio and our Burbank, Los Angeles voice production facility were granted Netflix preferred vendor status in 2019 alongside that of Descriptive Video Works.

We expect Audio Services not to experience the marked seasonal peak in activity in the second half that it has experienced in previous years due to 'AAA' games normally being scheduled for release during the end of year gifting season.  This is due to the potential effect of the transition to the new consoles launching in 2020 on clients' games launch cycles and we have started to see some shifts in projects as certain clients choose to target the new consoles rather than existing devices.

 

Functional Testing (20% of group revenues in H1 2019)

Our Functional Testing service line provides quality assurance including the discovery and documentation of game defects, testing to ensure games are compatible with the various hardware devices and configurations they are played on and testing to verify that games comply with console manufacturers' specifications.

Functional testing revenues increased by 42% to €31.8m (H1 2018: €22.4m). Like for like revenues increased by 33.3%.

In the second half, we expect Functional Testing to continue to grow strongly without the same level of drag on margins seen in the first half from the steep ramp up in staff, albeit we will continue to invest as we move through the second half.  Overall, these investments will enable it to continue to strengthen its market leadership, in North America in particular.

 

Localisation (15% of group revenues in H1 2019)

Our Localisation service line provides translation of in-game text, audio scripts, cultural and local adaptation, packaging and marketing materials.

Localisation revenues grew by 7.9% to €23.1m (H1 2018: €21.4m).  On a like for like basis, Localisation revenues have grown by 4.6% as this service line continues to benefit from the movement towards continuous content generation for games in live operation.

We expect Localisation to continue to build on its leading market position in this market.

 

Localisation Testing (7% of group revenues in H1 2019)

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

Localisation Testing revenue increased by 7.3% to €10.3m (H1 2018: €9.6m). On a like for like basis, Localisation Testing was 4.7% higher compared to H1 2018.

Whilst we anticipate some growth in Localisation Testing in the second half, we are not expecting to see the seasonally typical higher peak in activity in the second half of the year due to potential shifts in games release schedules as certain clients focus more on the new games consoles to be launched in 2020.

 

Player Support (formerly called Customer Support - 12% of group revenues in H1 2019)

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

Player Support has been consolidating the extremely strong growth of 2018, investing in management talent and expanded facilities. None-the-less, its revenue increased by 19.6% to €18.3m (H1 2018: €15.3m) with like for like revenues up 11.3%.

We expect Player Support to continue to consolidate gains made in 2018 at the full year, as we aim to differentiate our video games specific services from other large providers in the wider customer support market.

 

Dividends

The Board is pleased to announce a 10% increase in its interim dividend payment, in line with its progressive dividend policy.  The interim dividend of 0.58p per share will be paid on 25 October 2019 to shareholders on the register on 4 October 2019 and will go ex-dividend on 3 October 2019. The interim dividend payment will absorb approximately €0.4m of cash resources. 

 

People

The average number of employees across the Group in the period grew to c.6,600 (H1 2018: c. 4,934) driven primarily by the very robust growth in our Functional Testing business.  This increase has been primarily focussed on North America and further growth is expected to flow through in Katowice, Poland and Mexico City as these new testing studios ramp up.

We are constantly striving to provide great working environments for all Keywordians around the world.  This can be seen in the central locations of our studios. Rather than seek out low cost locations and low cost facilities we feel the benefits of being able to attract the best talent in the most scalable manner outweigh any savings from lower operational costs.

Our continued growth and reputation for consistently delivering good quality service on highly agile engagements to demanding deadlines is testament to the Keywords culture and the skills and commitment of Keywords' talented and games-passionate employees and collaborators.

We are proud of the passion, commitment and professionalism of this invaluable resource of over 7,000 Keywordians which means there is a contribution from Keywords to most of the world's leading games - we would like to thank everyone involved for their valuable contribution to the continued success of the Group.

 

Current trading and outlook

Trading in the second half has started well, with continued strong performances in our Game Development, Functional Testing and Art Creation service lines in particular, whilst Audio and Localisation Testing are not expected to see their typical seasonal peak in activity in the second half due to certain clients' shift towards focussing on games for the new consoles expected to launch in late 2020.

One of the benefits of Keywords' model is that it is highly diversified by service line, geography and across all gaming platforms. As a result, we expect to benefit from the continued strong growth across mobile and PC games whilst we are already winning significant new business from the recent entrants in game streaming and subscription services.

 

We are seeing an accelerating trend towards outsourcing, including growing demand for co-development and full game development services and we have invested to match that demand and continue to increase our market share.

Much of our first half investment in enlarged and improved facilities will only come on stream incrementally during the second half and into 2020, despite carrying the additional costs in the first half. As such, with our underlying margins remaining in line with historic norms, we expect margins to progress incrementally in the second half and through to 2020 as we benefit from our first half and ongoing investments. 

 

Overall, our strong start to the second half and improving margins leave us well placed to deliver revenues for the full year at the upper end of current market expectatons with our profit expectations broadly unchanged.

Our acquisition pipeline is very healthy and we are actively reviewing a number of attractive acquisition opportunities that would add critical mass, capacity, and extend our service offering or geographical penetration, with an emphasis on game development and marketing services businesses in particular.

The acquisition of synergistic businesses, combined with our continued investment in additional talent and better facilities will enable us to build the 'go to' global games services platform. This will enable us to continue to lead the consolidation of a highly-fragmented market as we take advantage of the accelerating trend towards outsourced services in the growing video games market.

 

Condensed Interim Consolidated Statement of Comprehensive Income

 

 

 

Unaudited

Unaudited

Audited

 

 

26 weeks ended

26 weeks ended

52 weeks ended

 

 

30 Jun 19

30 Jun 18

31 Dec 18

 

 

€'000

€'000

€'000

 

 

 

 

 

Revenue from contracts with customers

5

153,190

109,951

250,805

 

 

 

 

 

Cost of sales

 

(97,950)

(68,791)

(154,997)

Gross profit

 

55,240

41,160

95,808

Share option expense

 

(4,011)

(835)

(4,129)

Costs of acquisition and integration

 

(2,804)

(2,006)

(5,296)

Amortisation of intangible assets

10

(3,491)

(3,095)

(6,872)

Total of items excluded from adjusted profit measures

 

(10,306)

(5,936)

(16,297)

Other administration expenses

 

(35,897)

(24,742)

(56,826)

Administrative expenses

 

(46,203)

(30,678)

(73,123)

Operating profit

 

9,037

10,482

22,685

 

 

 

 

 

Financing income

6

-

859

791

Financing cost

6

(2,354)

(503)

(1,316)

Share of post-tax profit / (loss) of equity accounted associates

 

-

-

(66)

Profit before taxation

 

6,683

10,838

22,094

Tax expense

 

(3,643)

(3,088)

(7,191)

Profit

 

3,040

7,750

14,903

Other comprehensive income:

 

 

 

 

Items that will not be reclassified subsequently to profit or (loss)

 

 

 

 

Actuarial gain / (loss) on defined benefit plans

 

13

(40)

27

Items that may be reclassified subsequently to profit or loss

 

 

 

 

Exchange gain / (loss) in net investment in foreign operations *

 

620

834

1,270

Exchange gain / (loss) on translation of foreign operations

 

2,895

6

771

Total comprehensive income

 

6,568

8,550

16,971

 

 

 

 

 

Profit / (loss) for the period attributable to:

 

 

 

 

Owners of the parent

 

3,132

7,750

14,903

Non-controlling interest

 

(92)

-

-

 

 

3,040

7,750

14,903

Total comprehensive income attributable to:

 

 

 

 

Owners of the parent

 

6,660

8,550

16,971

Non-controlling interest

 

(92)

-

-

 

 

6,568

8,550

16,971

Earnings per share

 

€ cent

€ cent

€ cent

Basic earnings per ordinary share

8

4.69

12.10

23.16

Diluted earnings per ordinary share

8

4.50

11.62

22.24

* Please note that "Exchange gain / (loss) in net investments in foreign operations in the comparative period to 30 June 2018, has been re-classified to correctly classify them as "Items that may be reclassified subsequently to profit or loss", within Other Comprehensive Income

 

The notes form an integral part of these consolidated financial statements.

 

Condensed Interim Consolidated Statement of Financial Position

 

 

Unaudited

Unaudited

Audited

 

 

26 weeks ended

26 weeks ended

52 weeks ended

 

 

30 Jun 19

30 Jun 18

31 Dec 18

 

 

 

Restated ^

 

 

 

€'000

€'000

€'000

Non-current assets

 

 

 

 

Property, plant and equipment

11

17,666

11,422

15,002

Right of use assets

18

20,410

-

-

Goodwill

10

163,372

123,471

154,202

Intangible assets

10

23,060

27,201

25,884

Investment in associate

19

-

114

160

Deferred tax assets

 

3,340

1,265

2,967

 

 

227,848

163,473

198,215

Current assets

 

 

 

 

Trade receivables

12

43,094

36,226

37,019

Other receivables

12

37,238

30,118

23,459

Cash and cash equivalents

 

37,763

32,184

39,871

 

 

118,095

98,528

100,349

Total assets

 

345,943

262,001

298,564

Equity

 

 

 

 

Share capital

13

773

760

763

Share capital - to be issued

13

8,679

10,446

15,648

Share premium

13

102,878

102,158

102,225

Merger reserve

13

44,342

35,290

35,996

Foreign exchange reserve

 

2,052

(2,664)

(1,463)

Shares held in Employee Benefit Trust ("EBT")

13

(1,997)

(1,997)

(1,997)

Share option reserve

 

10,685

3,362

6,674

Retained earnings

 

36,901

27,694

34,529

 

 

204,313

175,049

192,375

Non-controlling interest

 

56

-

-

Total equity

 

204,369

175,049

192,375

Current liabilities

 

 

 

 

Trade payables

 

7,068

7,268

7,142

Other payables

15

50,642

32,850

41,153

Loans and borrowings

16

46,584

32,084

40,071

Corporation tax liabilities

 

6,249

2,877

6,665

Lease liability

18

7,268

-

-

 

 

117,811

75,079

95,031

Non-current liabilities

 

 

 

 

Other payables

15

1,496

1,035

1,062

Employee defined benefit plans

 

1,489

1,233

1,378

Loans and borrowings

16

208

45

230

Deferred tax liabilities

 

7,196

9,560

8,488

Lease liability

18

13,374

-

-

 

 

23,763

11,873

11,158

Total equity and liabilities

 

345,943

262,001

298,564

 ^ Please note the comparative period to 30 June 2018 has been restated to reflect the Measurement Period Adjustment outlined in note 31 of the Annual Report 2018

 

The notes form an integral part of these consolidated financial statements.

 

Condensed Interim Consolidated Statement of Changes in Equity

 

Share capital

Share capital - to be issued

Share premium

Merger reserve

Foreign exchange reserve

Shares held in EBT

Share option reserve

Retained earnings

Total attributable to owners of parent

Non-controlling Interest

Total equity

 

€'000

€'000

€'000

€'000

€'000

€'000

€'000

€'000

€'000

€'000

€'000

Balance at 1 January 2018

737

11,739

102,054

28,878

(3,504)

(1,997)

2,545

20,679

161,131

-  

    161,131

Measurement period adjustment^

-

(119)

-

-

-

-

-

-

(119)

-  

(119)

Balance at 1 January 2018 re-stated

737

11,620

102,054

28,878

(3,504)

(1,997)

2,545

20,679

161,012

-

161,012

Profit for the period

                   -  

                   -  

                   -  

                   -  

-

                   -  

                   -  

             7,750

             7,750

                   -  

             7,750

Other comprehensive income

                   -  

                   -  

                   -  

                   -  

840

                   -  

                   -  

(40)

800

                   -  

800

Total comprehensive income for the period

                   -  

                   -  

                   -  

                   -  

840

                   -  

                   -  

7,710

8,550

                   -  

            8,550

Contributions by and contributions to the owners:

 

 

 

 

 

 

 

 

 

 

 

Share option expense

-

-

-

-

-

-

817

-

817

                   -  

                817

Share options exercised

3

-

104

-

-

-

-

-

107

                   -  

                107

Dividends paid

-

-

-

-

-

-

-

(696)

(696)

                   -  

(696)

Acquisition related issuance of shares

20

(1,174)

-

6,412

-

-

-

-

5,258

                   -  

            5,258

 

 

 

 

 

 

 

 

 

 

 

 

Contributions by and contributions to the owners

                 23

(1,174)

                104

            6,412

-

-

                817

(696)

            5,486

                   -  

            5,486

Balance at 30 June 2018

760

10,446

102,158

35,290

(2,664)

(1,997)

3,362

27,694

175,049

           -  

  175,049

Profit for the period

                   -  

                   -  

                   -  

                   -  

                   -  

                   -  

                   -  

             7,153

7,153

                   -  

             7,153

Other comprehensive income

                   -  

                   -  

                   -  

                   -  

1,201

                   -  

                   -  

67

1,268

                   -  

            1,268

Total comprehensive income for the period

                   -  

                   -  

                   -  

                   -  

1,201

                   -  

                   -  

7,220

            8,421

                   -  

            8,421

 

 

 

 

 

 

 

 

 

 

 

 

Contributions by and contributions to the owners:

 

 

 

 

 

 

 

 

 

 

 

Share option expense

-

-

-

-

-

-

3,312

-

3,312

-

3,312

Share options exercised

-

-

67

-

-

-

-

-

67

-

67

Dividends paid

-

-

-

-

-

-

-

(384)

(384)

-

(384)

Acquisition related issuance of shares

3

5,202

-

706

-

-

-

-

5,911

-

5,911

 

 

 

 

 

 

 

 

 

 

 

 

Contributions by and contributions to the owners

                    3

            5,202

                  67

               706

                   -  

                   -  

            3,312

(384)

8,906

-

           8,906

Balance at 31 December 2018

        763

    15,648

  102,225

   35,996

(1,463)

(1,997)

     6,674

34,529

192,375

-

  192,375

Adjustment from adoption of IFRS 16

           -  

           -  

           -  

           -  

           -  

           -  

           -  

-

-

-

           -  

Adjusted balance at 31 December 2018

        763

    15,648

  102,225

   35,996

(1,463)

(1,997)

     6,674

34,529

192,375

-

  192,375

Profit for the period

                   -  

                   -  

                   -  

                   -  

                   -  

                   -  

                   -  

            3,132

3,132

(92)

           3,040

Other comprehensive income

                   -  

                   -  

                   -  

                   -  

3,515

                   -  

                   -  

                  13

3,528

 

            3,528

Total comprehensive income for the period

                   -  

                   -  

                   -  

                   -  

3,515

                   -  

                   -  

3,145

           6,660

(92)

            6,568

Contributions by and contributions to the owners:

 

 

 

 

 

 

 

 

 

 

 

Share option expense

-

-

-

-

-

-

4,011

-

4,011

-

4,011

Share options exercised

4

-

543

-

-

-

-

-

547

-

547

Dividends paid

-

-

-

-

-

-

-

(773)

(773)

-

(773)

Acquisition related issuance of shares (note 13)

6

(6,969)

110

8,346

-

-

-

 

1,493

-

1,493

Liabilities on acquisition of AppSecTest

-

-

-

-

-

-

-

-

-

148

148

Contributions by and contributions to the owners

                  10

(6,969)

               653

           8,346

                   -  

                   -  

             4,011

(773)

5,278

148

            5,426

Balance at 30 June 2019

         773

     8,679

  102,878

   44,342

     2,052

(1,997)

    10,685

36,901

204,313

56

 204,369

 ^ Please note the comparative period to 30 June 2018 has been restated to reflect the Measurement Period Adjustment outlined in note 31 of the Annual Report 2018

 

Condensed Interim Consolidated Statement of Cash Flows

 

 

Unaudited

Unaudited

Audited

 

 

26 weeks ended

26 weeks ended

52 weeks ended

 

 

30 Jun 19

30 Jun 18

31 Dec 18

 

Note

Cash flows from operating activities

 

 

 

 

Profit after tax

 

3,040

7,750

14,903

Income and expenses not affecting operating cash flows

 

 

 

 

Depreciation - property, plant and equipment

11

3,168

2,472

5,316

Depreciation - right of use assets

18

3,467

-

-

Intangibles amortisation

10

3,491

3,095

6,872

Income tax expense

 

3,643

3,088

7,191

Share option expense

 

4,011

817

4,129

Costs of acquisition and integration *

 

2,804

2,006

5,296

Disposal of property, plant and equipment

 

-

-

63

Unwinding of discounted liabilities - deferred consideration *

6

177

127

311

Unwinding of discounted liabilities - lease liability *

 

338

-

-

Interest receivable

6

-

(65)

66

Employee benefit costs

 

138

40

279

Interest expense *

6

434

144

502

Unrealised foreign exchange (gain) / loss *

 

1,669

(1,039)

(992)

 

 

23,340

10,685

29,033

Changes in operating assets and liabilities

 

 

 

 

Decrease / (increase) in trade receivables

 

(5,521)

(7,700)

(7,680)

Decrease / (increase) in MMTC and VGTC receivable

 

(7,048)

(4,341)

(370)

Decrease / (increase) in other receivables

 

(5,129)

1,366

2,850

(Decrease) / increase in trade and other payables

 

4,320

1,228

(252)

 

 

(13,378)

(9,447)

(5,452)

Income taxes paid

 

(3,769)

(2,891)

(6,304)

Net cash provided by operating activities

 

9,233

6,097

32,180

Cash flows from investing activities

 

 

 

 

Current year acquisition of subsidiaries net of cash acquired *

20

(5,156)

(9,899)

(24,163)

Prior year acquisition of subsidiaries net of cash acquired *

 

-

(726)

(726)

Settlement of deferred liabilities on acquisitions

15

(1,808)

(1,011)

(1,603)

Investment in associate

 

-

(114)

(226)

Acquisition of property, plant and equipment

11

(5,061)

(3,791)

(9,440)

Investment in intangible assets

 

(332)

-

(1,599)

Acquisition and integration cash outlay

 

(1,677)

(2,006)

(4,530)

Net cash used in investing activities

 

(14,034)

(17,547)

(42,287)

Cash flows from financing activities

 

 

 

 

Repayment of loans

16

(500)

(853)

(10,835)

Payments of principal on lease liability

18

(3,236)

-

-

Interest paid on principal of lease liability

18

(338)

-

-

Loan to finance acquisitions

16

7,001

13,755

31,850

Dividends paid

9

(773)

(696)

(1,080)

Share options exercised

13

547

1,203

174

Interest paid

 

(394)

(144)

(502)

Net cash provided by financing activities

 

2,307

13,265

19,607

Increase / (decrease) in cash and cash equivalents

 

(2,494)

1,815

9,500

Exchange gain / (loss) on cash and cash equivalents

 

386

(5)

(3)

Cash and cash equivalents at beginning of the period

 

39,871

30,374

30,374

Cash and cash equivalents at end of period

 

37,763

32,184

39,871

* Please note that the comparative period to 30 June 2018 has been re-classified to reflect the presentation in the Annual Report 2018

 

Notes Forming Part of the Condensed Interim 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 30 June 2019. The Group was formed on 8 July 2013 when Keywords Studios PLC (formerly Keywords Studios Limited) acquired the entire share capital of Keywords International Limited through the issue of 31,901,332 ordinary shares.

The interim results for the 26 weeks ended 30 June 2019 and the 26 weeks ended 30 June 2018 are neither audited nor reviewed by our auditors and the accounts in this interim report do not therefore constitute statutory accounts in accordance with Section 434 of the Companies Act 2006. They do not include all of the information required for full annual financial statements, and should be read in conjunction with the latest annual audited financial statements of Keywords Studios PLC for the year ended 31 December 2018, which have been filed with Companies House. The report of the auditors on those accounts was unqualified, did not contain any statements under Section 498 (2) or (3) of the Companies Act 2006 and did not contain any matters to which the auditors drew attention without qualifying their report.

After making enquiries, the Directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the interim condensed consolidated financial statements.

Except as outlined in note 2, the same accounting policies, presentation and methods of computation are followed in these financial statements as were applied in the Keywords Studios PLC latest annual audited financial statements.

The interim financial statements made up to 30 June 2019 were approved by the Board of Directors on 17 September 2019.

 
2 Changes in Significant Accounting Policies 
 

The Group has adopted new accounting standards which have become effective 1 January 2019, as follows:

Impact of IFRS 16 Leases

IFRS 16 'Leases' replaces IAS 17 'Leases' along with three Interpretations (IFRIC 4 'Determining whether an Arrangement contains a Lease', SIC 15 'Operating Leases-Incentives' and SIC 27 'Evaluating the Substance of Transactions Involving the Legal Form of a Lease'). The new Standard has been applied using the modified retrospective approach, with the cumulative effect of adopting IFRS 16 being recognised in equity as an adjustment to the opening balance of retained earnings for the current period. Prior periods have not been restated.

From 1 January 2019, the Group now recognise a liability to make lease payments (i.e. the lease liability) and an asset representing the right to use the underlying asset during the lease term (i.e. the right of use asset), for all material lease arrangements over 12 months in duration. On transition, for leases previously accounted for as operating leases with a remaining lease term of less than 12 months and for leases of low value assets the Group has applied the optional exemptions to not recognise right of use assets but to account for the lease expense on a straight-line basis over the remaining lease term. For those leases previously classified as finance leases, the right of use asset and lease liability are measured at the date of initial application at the same amounts as under IAS 17 immediately before the date of initial application. Instead of performing an impairment review on the right of use assets at the date of initial application, the Group has relied on its historic assessment as to whether leases were onerous immediately before the date of initial application of IFRS 16. The impact of the application of IFRS 16 is outlined in note 18.

 
The following is a reconciliation of operating lease commitments at 31 December 2018 to the lease liabilities recognised at 1 January 2019:

 

 €m

Total operating lease commitments disclosed at 31 December 2018

                                              17

Recognition exemptions:

 

Leases of low value assets

 

Leases with remaining lease term of less than 12 months

( 1)

Lease payments for expected lease renewals extending payments beyond the minimum lease payment period

8

 

7

Operating lease liabilities before discounting

24

Discounted using incremental borrowing rate *

(1)

Operating lease liabilities

23

Finance lease obligations

 

Total lease liabilities recognised under IFRS 16 at 1 January 2019

23

* Weighted average incremental borrowing rate applied to lease liabilities on transition

3.1%

 
Impact of IFRIC 23

IFRIC 23 Uncertainty over Income Tax Positions, which was issued in June 2017, clarifies how to recognise and measure current and deferred income tax assets and liabilities when there is uncertainty over income tax treatments. The adoption of this standard has not had a material impact on the financial statements on transition to the new standard. 

Other New Standards, Interpretations and Amendments effective 1 January 2019 
Other accounting pronouncements which have become effective from 1 January 2019 have not had a material impact on the Group.
 

 

3 Significant Accounting Policies

 

These Financial Statements have been prepared in accordance with the accounting policies adopted in the Group's most recent annual financial statements for the year ended 31 December 2018, with the exception of the issues highlighted in note 2 above.

IFRS 16 Leases

As described in note 2, the Group has applied IFRS 16 using the modified retrospective approach and therefore comparative information has not been restated. This means comparative information is still reported under IAS 17 and IFRIC 4.

Accounting policy applicable from 1 January 2019

For any new contracts entered into on or after 1 January 2019, the Group considers whether a contract is, or contains a lease. 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 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.

Accounting policy applicable before 1 January 2019

Where substantially all of the risks and rewards of ownership are not transferred to the Group ("operating lease"), the total rental payables are charged to the Consolidated Statement of Comprehensive Income on a straight-line basis over the term of the lease.

Where substantially all of the risks and rewards incidental to ownership of a leased asset have been transferred to the Group (a "finance lease"), the asset is treated as if it had been purchased outright. The amount initially recognised as an asset is the lower of the fair value of the leased property and the present value of the minimum lease payments payable over the term of the lease. The corresponding lease commitment is shown as a liability. Lease payments are analysed between capital and interest. The interest element is charged to the Consolidated Statement of Comprehensive Income over the period of the lease and is calculated so that it represents a constant proportion of the lease liability. The capital element reduces the balance owed to the lessor.

 

4 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.

The judgements, estimates and assumptions applied in the Interim Financial Statements, including the key sources of estimation uncertainty, were the same as those applied in the Group's last Annual Financial Statements for the year ended 31 December 2018. The only exceptions are the estimate of tax liabilities which are determined in the Interim Financial Statements using the estimated annual effective tax rate applied to the pre-tax income of the interim period and the judgements related to lessee accounting outlined in note 3.

 

5 Revenue from Contracts With Customers and Segmental Analysis

 

Revenue from Contracts With Customers  

 

Revenue by line of business

Unaudited

Unaudited

Audited

 

26 weeks ended

26 weeks ended

52 weeks ended

 

30 Jun 19

30 Jun 18

31 Dec 18

 

€'000

€'000

€'000

 

 

 

 

Game Development (previously Engineering)

29,567

8,886

26,161

Art creation

22,245

18,150

41,688

Audio

17,815

13,561

34,190

Functional testing

31,815

23,061

49,128

Localisation

23,139

21,395

43,983

Localisation testing

10,288

9,570

19,751

Player support

18,321

15,328

35,904

 

153,190

109,951

250,805

 

Geographical analysis of revenues

Unaudited

Unaudited

Audited

 

26 weeks ended

26 weeks ended

52 weeks ended

 

30 Jun 19

30 Jun 18

31 Dec 18

 

€'000

€'000

€'000

Canada

26,283

30,792

69,536

United States

24,747

26,429

52,321

Ireland

49,337

17,774

47,203

United Kingdom

20,242

4,610

21,205

Switzerland

8,411

7,284

20,067

Italy

6,056

5,805

8,673

France

3,430

3,981

8,489

India

2,225

1,529

2,407

Japan

7,051

3,648

7,724

Spain

775

1,377

1,968

China

339

2,433

3,126

Singapore

2,199

2,392

5,046

Germany

396

479

741

Brazil

422

532

1,016

Mexico

523

886

936

Poland

754

-

347

 

153,190

109,951

250,805

 

 

 

 

 

 The value of undelivered performance obligations for contracts greater than one year in the current period was as follows:

 

 

 

Total undelivered

Scheduled completion within 1 year

Scheduled completion
1-2 years

Scheduled completion
2-5 years

 

€'000

 €'000

 €'000

 €'000

At 30 June 2019

38,859

31,523

6,893

443

 

 

Segmental Analysis

 

 

Geographical analysis of non-current assets from continuing businesses

Unaudited

Unaudited

Audited

 

26 weeks ended

26 weeks ended

52 weeks ended

 

30 Jun 19

30 Jun 18

31 Dec 18

 

 

Restated^

 

 

€'000

€'000

€'000

Canada

22,338

9,254

11,760

Ireland

4,694

1,120

3,542

Switzerland

12,264

11,057

11,117

Italy

12,554

11,581

11,650

India

2,723

2,423

2,321

United States

85,941

91,509

84,685

Japan

4,542

635

796

United Kingdom

48,656

15,675

48,929

Spain

5,776

1,544

1,535

China

8,999

7,785

7,850

Singapore

271

34

52

Germany

1,184

1,130

1,097

Brazil

1,303

578

888

Mexico

2,062

903

885

France

6,531

6,420

6,318

Russia

926

756

797

Poland

1,318

54

267

Philippines

2,356

576

595

Netherlands

66

-

-

Taiwan

4

5

4

 

224,508

163,039

195,088

Geographical analysis of non-current assets from continuing businesses

224,508

163,039

195,088

Investment in associate

-

114

160

Deferred tax assets

3,340

1,265

2,967

Non-current assets

227,848

164,418

198,215

 ^ Please note the comparative period to 30 June 2018 has been restated to reflect the Measurement Period Adjustment outlined in note 31 of the Annual Report 2018

 

 

6 Financing Income and Cost

 

 

 

Unaudited

Unaudited

Audited

 

26 weeks ended

26 weeks ended

52 weeks ended

 

30 Jun 19

30 Jun 18

31 Dec 18

 

 

Restated ^

 

 

 €'000

 €'000

 €'000

Financing income

 

 

 

Interest received

-

65

-

Foreign exchange gain

-

794

791

 

-

859

791

Financing cost

 

 

 

Bank charges

(246)

(232)

(503)

Interest expense

(434)

(144)

(502)

Unwinding of discounted liabilities - lease liability

(338)

-

-

Unwinding of discounted liabilities - deferred consideration*

(177)

(127)

(311)

Foreign exchange gain / (loss)

(1,159)

-

-

 

(2,354)

(503)

(1,316)

Net financing income / (cost)

(2,354)

356

(525)

*Please note the comparative period to 30 June 2018 has been restated to separate "Unwinding of discounted liabilities - deferred consideration" from "Interest expense", to be consistent with the presentation in note 6 of the Annual Report 2018. 

 

 

7 Seasonal Business

 

 

The video games industry is heavily impacted by sales of new releases of games and platforms during the traditional holiday season, including the run up to Thanksgiving in the United States and Christmas in other parts of the world. As with all other service providers to the video games industry, certain of Keywords Group's service lines typically experience significantly higher activity as part of this release cycle, during the six months from June to November. This activity drives increased revenues in that period and generates higher gross profit margins compared with the first six months of each calendar year.

 

Revenue and Gross Profit for the twelve months up to the end of the interim period and comparative information for the prior twelve-month period are presented below, which include the post-acquisition results of acquisitions completed in the current year. 

 

 

 

Unaudited

Unaudited

 

52 weeks ended

52 weeks ended

 

30 Jun 19

30 Jun 18

 

€'m

€'m

 

 

 

Revenue

294

198

Gross Profit

110

74

 

 

8 Earnings per Share

 

Unaudited

Unaudited

Audited

 

26 weeks ended

26 weeks ended

52 weeks ended

 

30 Jun 19

30 Jun 18

31 Dec 18

 

 € cent

 € cent

 € cent

Basic

4.69

12.10

23.16

Diluted

4.50

11.62

22.24

 

 

 

 

Adjusted Earnings per Share*

18.36

18.30

41.80

* Adjusted EPS for the periods endied 30 Jun 2018 and 31 Dec 2018 have been restated to be consistent with the revised 2019 calculation as presented in the notes regarding alternative performance measures4

 

 €'000

 €'000

 €'000

Profit for the period from continuing operations

3,040

7,750

14,903

 

 

Denominator (weighted average number of equity shares) 

 Number

 Number

 Number

Basic*

64,845,831

64,027,256

64,335,162

Diluting impact of Share Options

2,674,175

2,692,147

2,679,932

Diluted*

67,520,006

66,719,403

67,015,094

 

 

 

 

* Includes (weighted average) shares to be issued

733,900

702,424

1,321,707

 

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

 

 

Unaudited

Unaudited

Audited

 

26 weeks ended

26 weeks ended

52 weeks ended

 

30 Jun 19

30 Jun 18

31 Dec 18

 

 Number

 Number

 Number

LTIPs

948,200

978,600

951,800

Share options

1,239,400

568,500

544,900

 

2,187,600

1,547,100

1,496,700

 

The revised calculation with restated prior periods of Adjusted Earnings per Share is based on the following:

 

 

Unaudited

Unaudited

Audited

 

26 weeks ended

26 weeks ended

52 weeks ended

 

30 Jun 19

30 Jun 18

31 Dec 18

 

 €'000

 €'000

 €'000

Profit for the period from continuing operations

3,040

7,750

14,903

Cost of Acquisition & Integration

2,804

2,006

5,296

Share Option Expense

4,011

835

4,129

Amortisation of intangible assets

3,491

3,095

6,872

Foreign exchange (gain)/losses

1,159

(794)

(791)

Unwinding of discounted liabilities - deferred consideration

177

127

311

Non Controlling interest

92

n/a

n/a

Tax arising on the above items

(2,870)

(1,302)

(3,826)

Adjusted profit used for adjusted earnings per share for continuing operations

11,904

11,716

26,894

 

 

9 Dividends

 

Dividends paid

In respect of

Approval date

€ cent per share

Pence STG per share

Total dividend €'000

Payment date

Final

2018

May-19

                      1.21

               1.08

                 773

Jun-19

Dividends recommended

In respect of

 

Expected € cent per share

Pence STG per share

Expected total dividend €'000

Expected payment date

Interim

2019

 

                      0.65

               0.58

                 421

Oct-19

 

At 30 June 2019, Retained Earnings available for distribution (being retained earnings plus share option reserve) in the Company were €6.65m.  

Following on distributions made in 2016 and 2017 that were not fully in compliance with the Companies Act 2006, the Directors have implemented legal advice to ensure ongoing compliance and rectify the oversights in earlier periods, which was envisaged in the Annual Report and Accounts 2018. Following the approval by shareholders of a specific resolution at the 2019 AGM, the Company entered into deeds of release, to put all relevant parties in the position where they were always intended to be, had the relevant dividends been made in accordance with the Act. Interim accounts for the Company have also been filed at Companies House to support the payment of an interim dividend in 2019.

 

10 Goodwill and Intangible Assets

 

Goodwill

The movement of the carrying value of goodwill in the period was as follows:

 

Unaudited

 

26 weeks ended

 

30 Jun 19

 

 €'000

Carrying amount at the beginning of the period

154,202

Recognition on acquisition of subsidiaries (note 20)

7,001

Exchange rate movement

2,169

Carrying amount at the end of the period

163,372

 

While the Group performs a full assessment of the carrying value of goodwill on an annual basis, at 30 June 2019 an interim assessment was made based on the same underlying assumptions used in the last annual report, using updated forecasts and projections. Based on this interim review of the value in use calculations, no impairment is required in the period.

 

Intangible assets

The movement of the carrying value of intangible assets in the period was as follows:

 

Unaudited

 

26 weeks ended

 

30 Jun 19

 

 €'000

Carrying amount at the beginning of the period

25,884

Recognition on acquisition of subsidiaries (note 20)

150

Other additions

332

Amortisation charge

(3,491)

Exchange rate movement

185

Carrying amount at the end of the period

23,060

 

Intangible assets are principally comprised of customer relationships. While the Group performs a full assessment of the carrying value of customer relationships and other intangible assets on an annual basis, at 30 June 2019 an interim assessment was made based on the same underlying assumptions used in the last annual report, using updated forecasts and projections. Based on this interim review of the value in use calculations no impairment is required in the period.

 

11 Property, Plant and Equipment

 

The movement of the carrying value of property, plant and equipment in the period was as follows:

 

Unaudited

 

26 weeks ended

 

30 Jun 19

 

 €'000

Carrying amount at the beginning of the period

15,002

Recognition on acquisition of subsidiaries (note 20)

396

Other additions

5,061

Depreciation charge

(3,168)

Exchange rate movement

375

Carrying amount at the end of the period

17,666

 

12 Trade and Other Receivables

 

 

Unaudited

Unaudited

Audited

 

30 Jun 19

30 Jun 18

31 Dec 18

 

 €'000

 €'000

 €'000

Trade receivables derived from contracts with customers

44,058

36,555

38,736

Provision for bad debts (i)

(964)

(329)

(1,717)

Financial asset held at amortised cost

43,094

36,226

37,019

 

 

 

 

Accrued income from contracts with customers

8,029

7,109

6,317

Prepayments and rent deposits

3,002

5,609

2,490

Other receivables

4,534

1,622

2,459

Multimedia tax credits / video games tax credits

18,232

14,357

10,820

Tax and social security

3,441

1,421

1,373

Other receivables - short term

37,238

30,118

23,459

 

(i)            The movements in provision for bad debts in the current period were as follows:

 

 

 

Unaudited

 

26 weeks ended

 

30 Jun 19

 

 €'000

Provision at the beginning of the period

1,717

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

450

Amounts written off against the provision in the period

(1,209)

Foreign exchange movement

6

Provision at end of the period

964

Credit loss experience

0.50%

 

 

(i)  The composition of trade receivables at period end was as follows:

 

 

 

Unaudited

 

30 Jun 19

 

 €'000

Trade receivables gross

44,058

Credit impaired

(748)

Expected credit losses

(216)

At 30 June 2019

43,094



 

 

13 Share Capital

 

 

 Date

 Per share €

 Number of ordinary
£0.01 shares  issued

 Number of ordinary
£0.01 shares to be issued 

 Share capital
€'000 

 Share premium
 €'000

 Merger reserve
 €'000

 Shares held in EBT
€'000

 Shares to be issued
€'000

At 31 December 2018

 

 

63,788,286

923,139

763

102,225

35,996

(1,997)

15,648

 

 

 

 

 

 

 

 

 

 

Shares to be Issued on acquisition of Sunny Side Up

04-Jan

12.46

-

60,179

-

-

-

-

750

Shares issued on the anniversary of the acquisition of Sperasoft

18-Jan

16.48

243,442

(243,442)

2

-

4,010

-

(4,013)

Shares issued on the anniversary of the acquisition of Sperasoft re bonus to employees

18-Jan

14.13

7,801

-

-

110

-

-

-

Shares issued on the anniversary of the acquisition of Fire Without Smoke

30-May

20.12

77,006

(77,006)

1

-

1,548

-

(1,549)

Shares issued on the anniversary of the acquisition of Red Hot

04-Jun

9.12

160,297

(160,297)

2

-

1,461

-

(1,463)

Shares not issued on the anniversary of the acquisition of Red Hot

04-Jun

9.07

-

(545)

-

-

-

-

(5)

Shares to be issued on acquisition of Descriptive Video Works

12-Jun

17.93

-

35,560

-

-

-

-

638

Shares issued on the anniversary of the acquisition of Blindlight

21-Jun

20.57

64,521

(64,521)

1

-

1,327

-

(1,327)

 

 

 

 

 

 

 

 

 

 

Acquisition related issuance of shares

 

 

553,067

(450,072)

6

110

8,346

-

(6,969)

 

 

 

 

 

 

 

 

-

 

Issue of shares on exercise of share options

 

 

366,500

-

4

543

-

-

-

 

 

 

 

 

 

 

 

 

 

At 30 June 2019

 

 

64,707,853

473,067

773

102,878

44,342

(1,997)

8,679

 

14 Share Options

 

 Share option scheme

 Average exercise price in £ per share

 Number of options

Outstanding at 31 December 2018

                    7.11

1,832,701

Granted

                 15.88

738,400

Lapsed

                 13.02

(44,690)

Exercised

                    2.80

(87,871)

Outstanding at 30 June 2019

                    9.81

2,438,540

Exercisable at 30 June 2019

                    2.00

958,675

Weighted Average Share Price at date of exercise

                 16.88

 

 

 

 

 Long term incentive plan scheme

 Average exercise price in £ per share

 Number of options

Outstanding at 31 December 2018

                    0.01

2,677,467

Granted

                    0.01

1,212,621

Lapsed

                    0.01

(13,200)

Exercised

                    0.01

(108,500)

Outstanding at 30 June 2019

                    0.01

3,768,388

Exercisable at 30 June 2019

                    0.01

923,167

Weighted Average Share Price at date of exercise

                 17.50

 

 

15 Other Payables

 

Unaudited

Unaudited

Audited

 

30 Jun 19

30 Jun 18

31 Dec 18

 

 €'000

 €'000

 €'000

Current liabilities

 

 

 

Accrued expenses

21,697

17,020

16,671

Payroll taxes

3,553

2,061

2,338

Other payables

6,643

8,116

3,890

Deferred and contingent consideration (i)

18,749

5,653

18,249

Related party payable (ii)

-

-

5

 

50,642

32,850

41,153

Non-current liabilities

 

 

 

Other payables

1,383

-

5

Deferred and contingent consideration (i)

113

1,035

1,057

 

1,496

1,035

1,062

 

(i)            The movements in deferred and contingent consideration (Level 3 input in the fair value hierarchy), in the current period were as follows:

 

 

Unaudited

 

26 weeks ended

 

30 Jun 19

 

 €'000

19,306

(1,808)

177

Additional liabilities from current year acquisitions (note 20)

112

1,127

(52)

Carrying amount at the end of the period

18,862

 

 

In general, in order for contingent consideration to become payable, pre-defined profit and / or revenue targets must be exceeded. The valuation of contingent consideration is derived using data from sources that are not widely available to the public and involves a degree of judgement (Level 3 input in the fair value hierarchy). On an undiscounted basis, the Group may be liable for deferred and contingent consideration ranging from €0m to a maximum of €22m. A 10% movement in expected performance results, has no impact on the fair value of the contingent consideration, and hence there are no reasonably probable changes to the assumptions and inputs (including the discount rate), that would lead to a material change to the fair value of the total amount payable.

The contractual maturities of the Group's deferred and contingent consideration liabilities were as follows:

 

 

Unaudited

 

30 Jun 19

 

 €'000

Not later than one year

                                         18,749

Later than one year and not later than two years

                                                 113

Later than two years and not later than five years

                                                       -

 

18,862

 

(ii) The related party transactions in the current period were as follows:

 

 

Unaudited

 

26 weeks ended

 

30 Jun 19

 

 €'000

Canteen charges

30

Rental payments

12

 

16 Loans and Borrowings and Capital Management

 

The movements in loans and borrowings (classified as financial liabilities, held at amortised cost under IFRS 9), in the current period were as follows:

 

 

Unaudited

 

30 Jun 19

 

 €'000

Carrying amount at the beginning of the period

40,301

Drawdowns

7,001

Repayments

(500)

Exchange rate movement

(10)

Carrying amount at the end of the period

46,792

 

At the period end the debt to capital and net debt ratios were as follows:

 

 

Unaudited

 

30 Jun 19

 

 €'000

 

 

Loans and borrowings

46,792

Less: cash and cash equivalents

(37,763)

Net debt / (net cash) position

9,029

Total equity

204,313

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

4.4%

 

Throughout the period, the Group operated well within the interest cover and leverage ratio terms of the facilities agreement.

 

17 Financial Instruments

 

During the period there has been no change in the measurement basis of the financial assets and liabilities shown in the Group Statement of Financial Position. The carrying amounts of the financial assets and liabilities are stated at amortised costs, with the exception of contingent consideration (note 15) held at fair value.

 

18 Leasing

 

The Group has entered into leases, across the business, principally relating to property. These property leases have varying terms and renewal rights.  

Right of use assets

 

Unaudited

 

26 weeks ended

 

30 Jun 19

 

 €'000

Cost

 

At 1 January 2019

  -

Adjustments from adoption of IFRS 16

  22,750

Additions

412

Acquisitions through business combinations at fair value

262

Currency revaluation

450

At 30 June 2019

23,874

Accumulated depreciation

 

At 1 January 2019

  -

Depreciation charge

3,467

Currency revaluation

( 3)

At 30 June 2019

3,464

 

 

Net book value

 

At 1 January 2019

  -

At 30 June 2019

  20,410

 

 

 

Lease payments not recognised as a liability

The Group has elected not to recognise a lease liability for short term leases (leases with an expected term of 12 months or less) or 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:

 

Unaudited

 

30 Jun 19

 

 €'000

Short-term leases

                                   938

Leases of low value assets

                                        -  

 

938

 

 

 

The future minimum lease payments related to these leases at 30 June 2019 were as follows:

 

Unaudited

 

30 Jun 19

 

 €'000

Not later than one year

                                   713

Later than one year and not later than five years

                                        -  

Later than five years

                                        -  

 

713

 

 

 

Lease liability

The maturity analysis of the lease liability is as follows:

 

Unaudited

Unaudited

Unaudited

 

30 Jun 19

30 Jun 19

30 Jun 19

 

 €'000

 €'000

 €'000

 

Lease payments

Finance charges

Liability

Not later than one year

7,819

590

7,268

Later than one year and not later than five years

12,134

713

11,382

Later than five years

2,251

259

1,992

 

22,204

1,562

20,642

 

 

The value of leases not yet commenced to which the lessee is committed, which are not included in the lease liability at 30 June 2019, were €Nil.

The interest expense on the unwinding of the lease liability is presented in note 6, while the total cash outflow in relation to leases is presented in the Consolidated Statement of Cash Flows. 

 

Impact analysis

The impact of IFRS 16 on certain key metrics is as follows:

 

Unaudited

Unaudited

Unaudited

 

26 weeks ended

26 weeks ended

26 weeks ended

 

30 Jun 19

30 Jun 19

30 Jun 19

 

 €'000

 €'000

 € cent

IFRS performance measure

Operating Profit

Profit

Earnings Per Share

Calculated with reference to reported performance

9,037

3,040

4.69

Unwinding of liability (note 6)

-

338

0.52

Depreciation (note 18)

3,467

3,467

5.35

Leases expenses now reported under IFRS 16

(3,574)

(3,574)

(5.51)

Calculated excluding the impact of IFRS 16

8,930

3,271

5.05

 

19 Investment in Associate

 

 

Unaudited

 

 

26 weeks ended

 

 

30 Jun 19

 

Reconciliation of carrying amount of Investment in Associate

 €'000

 Cumulative Ownership %

Carrying amount at the beginning of the period

160

30%

Additional investment

114

45%

Post-acquisition changes in the Group's share of net assets

-

 

Recognised as a business combination (note 20)

(274)

 

 

 

 

Carrying amount at the end of the period

-

 

 

In May 2018, the Group, through the newly established Keywords Ventures Ltd, invested £100k (€114k) in 15% of the share capital of AppSecTest Limited. Incorporated in the UK, AppSecTest is creating a cloud based automatic testing solution for mobile apps, including games (principally for GDPR compliance). A further investment of £100K (€114K) was made in September 2018 bringing the total investment to 30% of the share capital of the company. Following on an additional investment 20 January 2019, the Group consider this to be a business combination, having acquired effective control over the entity.

 

20 Business Combinations / Acquisitions Completed in the Current Period

 

 

Sunny Side Up

GetSocial (i)

Wizcorp

Descriptive Video Works

Other (ii)

Total

 

€'000

€'000

€'000

€'000

€'000

€'000

Date of acquisition

04-Jan-19

21-Feb-19

18-Apr-19

11-Jun-19

 

 

Acquisition company jurisdiction

Canada

Netherlands

Japan

Canada

 

 

Book value of identifiable assets and liabilities

 

 

 

 

 

 

Property, plant and equipment

44

10

37

86

219

396

Intangible assets

-

125

25

-

-

150

Trade and other receivables - gross

84

-

352

165

2

603

Bad debt provision

-

-

-

-

-

-

Cash and cash equivalents

338

-

297

93

65

793

Trade and other payables

(218)

(19)

(847)

(83)

(16)

(1,183)

 Net book value 

248

116

(136)

261

270

759

Fair value adjustments

 

 

 

 

 

 

Identifiable intangible assets - customer relationships

-

-

-

-

-

-

Right of use assets

-

-

178

84

-

262

Lease liabilities

-

-

(178)

(84)

-

(262)

Deferred tax liabilities

-

-

-

-

-

-

Total fair value adjustments

-

-

-

-

-

-

Total identifiable assets

248

116

(136)

261

270

759

Less non-controlling interest

-

-

-

-

 (148)

(148)

Total identifiable assets attributable to the Group

248

116

(136)

261

122

611

Goodwill

3,845

54

1,088

1,862

152

7,001

Total consideration

4,093

170

952

2,123

274

7,612

% Share capital acquired

100%

n/a

100%

100%

45%

 

Satisfied by:

 

 

 

 

 

 

Cash

3,342

170

952

1,373

274

       6,111

Deferred cash

-

-

-

112

-

112

Shares to be issued

751

-

-

638

-

1,389

Total consideration transferred

4,093

170

952

2,123

274

7,612

 

 

 

 

 

 

 

Number of shares

 

 

 

 

 

 

Fixed amount agreed to be issued

60,179

-

-

35,560

-

95,739

 

 

 

 

 

 

 

Net cash outflow arising on acquisition

Sunny Side Up

GetSocial (i)

Wizcorp

Descriptive Video Works

Other (ii)

Total

 

€'000

€'000

€'000

€'000

€'000

€'000

Cash

3,342

170

952

1,373

112

5,949

Less: cash and cash equivalent balances transferred

(338)

-

(297)

 (93)

(65)

(793)

Net cash outflow - acquisitions

3,004

170

655

1,280

47

5,156

 

 

 

 

 

 

 

Related acquisition costs charged through to the Consolidated Statement of Comprehensive Income

93

7

5

24

-

129

 

 

 

 

 

 

 

Pre-acquisition revenue in H1

-

25

656

558

-

1,239

Post-acquisition revenue

1,164

63

386

86

-

1,699

Pro forma revenue

1,164

88

1,042

644

-

2,938

 

 

 

 

 

 

 

Pre-acquisition profit / (loss) before tax

-

 (23)

1

7

-

(15)

Post-acquisition profit / (loss) before tax

499

(45)

(99)

30

(167)

218

Pro forma profit / (loss) before tax

499

(68)

(98)

37

(167)

203

(i) We acquired the activities and net assets of GetSocial. This met the requirements of a business combination under IFRS 3

(ii) Other - relates to AppSecTest Limited which is now recognised as a business combination (note 19)

 

The main factors leading to the recognition of goodwill on the acquisitions are the presence of certain intangible assets in the acquired entities, which are not valued for separate recognition, such as

·              The experience and expertise in producing trailers for the marketing and support of video games in Sunny Side Up.

·              The experience and expertise in social media technology for the games industry in GetSocial.

·              The experience and expertise in engineering services in Wizcorp, in particular for the mobile development market in Japan.

·              The experience and expertise in audio description services for broadcast and over the top streamed programming in Descriptive Video Works.

The goodwill that arose from these business combinations is not expected to be deductible for tax purposes.

 

21 Events after the Reporting Date

 

Acquisition of TV+SYNCHRON Berlin GmbH

On 17 September 2019, Keywords Germany Holdings GmbH agreed to acquire the entire issued share capital of TV+SYNCHRON Berlin GmbH ("TVS") with an effective date of 1st of October 2019.  Based in Berlin, Germany, TVS is a leader in dubbing and localizing content into German across a wide range of entertainment formats with a track record spanning over 25 years.  The total consideration for the acquisition is €3.7m, of which €2.8m to be paid in cash on completion, and €0.9m to be met through the issue of new ordinary shares in Keywords on the first anniversary of the acquisition, which will then be subject to orderly market provisions for a further 12 months.


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