13 March 2024
Keywords Studios plc
("Keywords Studios", "Keywords", the "Group")
Full Year Results for the
period to 31 December 2023
Resilient performance,
extending our market leadership position
Keywords Studios, the global
provider of creative and technology-enabled solutions to the video
games and entertainment industries, is pleased to announce its
results for the twelve months to 31 December 2023.
Financial Overview:
Results for the twelve-months ended 31
Dec
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2023
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2022
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Change
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Group revenue
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€ 780.4m
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€ 690.7m
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+ 13.0%
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Organic revenue growth
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1
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+ 5.6%
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Adjusted EBITDA
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2
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€ 158.3m
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€ 146.9m
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+ 7.8%
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Adjusted EBITDA margin
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20.3%
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21.3%
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EBITDA
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2
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€
109.2m
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€
120.9m
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(9.7)%
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Adjusted operating profit
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3
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€ 122.0m
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€ 114.6m
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+ 6.5%
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Adjusted operating profit
margin
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15.6%
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16.6%
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Operating profit
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€
46.8m
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€
71.8m
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(34.8)%
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Adjusted earnings per share
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4
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112.9c
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113.5c
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(0.5)%
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Earnings per share
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25.3c
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61.5c
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(58.9)%
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Final dividend per share
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1.76p
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1.60p
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+ 10.0%
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Adjusted cash conversion rate
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5
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82.3%
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100.1%
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Net cash / (net debt)
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€ (67.5)m
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€ 81.8m
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Finance and Operating Highlights:
· Full year
revenue growth of 13% to €780m (2022: €691m), 17% on a constant
currency basis, driven by robust organic growth and
acquisitions.
· Organic revenue growth1, excluding impact of US
strikes and FX, of ~9% (6% on a reported basis).
· Adjusted operating profit rose 6% to €122m (2022: €115m),
with margin of 15.6%, ahead of guidance (2022: 16.6%), reflecting
good cost control.
· Good
Adjusted free cash flow6 of €94m (2022: €112m) was
driven by strong H2 cash generation, with Adjusted cash conversion
of 82%, in line with guidance.
· Net
debt of €68m (2022: net cash of €82m) primarily reflecting another
year of strong acquisition activity.
· Recommended Final dividend of 1.76p per share (2022: 1.60p),
giving a total 2023 dividend of 2.61p (2022: 2.37p), an increase of
10%.
Strategic Highlights:
· Continue to outperform the market due to our diversified,
global platform, and strong strategic execution.
· Strategic partnerships bearing fruit, with revenues from Top
25 clients increasing comfortably ahead of the Group.
· Good
traction with clients as we further develop and scale our AI
post-production technology platform across Globalize and
Engage.
· Record year for M&A, with five high-quality acquisitions
for maximum consideration of €225m, extending high-value offerings
in Create and Engage and adding €90m of pro-forma
revenues.
· RCF
increased to $400m, with maturity extended to 2027, cementing our
long-term liquidity and flexibility to pursue our strong M&A
pipeline.
· Positive recognition of ESG practices, with rating increased
to AA at MSCI.
Current trading and outlook
· We
expect to deliver strong revenue and profit growth and further
extend our market leadership position 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.
· Extensive M&A pipeline of opportunities in 2024 and
confident of continuing our long track record of adding significant
value to our business and our clients through our highly value
accretive acquisition strategy.
Bertrand Bodson, Chief Executive Officer of Keywords Studios,
commented:
"In what was a difficult year for
the industry, we delivered resilient performance in 2023 and
continued to extend our market leadership position, reflecting our
role as a diversified enabler of the industry. Whilst the industry back-drop remains tough in the near term,
our diversified technology-enabled offering 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 made considerable progress
against our strategic objectives and delivered a record year of
M&A, bringing greater exposure to
higher growth and margin Create services, and have an extensive
pipeline of acquisitions in 2024. We will
continue to successfully navigate the current market conditions and
are excited by the opportunities that lie ahead as we deliver
against our plans and become a +€1bn revenue business in the coming
years."
Presentation and Webcast
A presentation of the full results
will be made to analysts and investors at 9.00am this morning and
the live webcast can be accessed via this link:
https://brrmedia.news/KWS_FYR23
To register for dial in access, or
for any enquiries, please contact MHP Group on
keywords@mhpgroup.com.
For
further information, please contact:
Keywords Studios
Giles Blackham
Director of Investor
Relations
+44 7714 134 681
gblackham@keywordsstudios.com
|
Deutsche Numis
Nomad & Joint Corporate
Broker
Stuart Skinner / Will
Baunton
+44 20 7260 1000
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MHP Group
Financial
Communications
Katie Hunt / Eleni Menikou /
Charles Hirst
+44 7884 494 112 / +44 20 3128
8100
keywords@mhpgroup.com
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Barclays
Joint Corporate Broker
Tom Macdonald / Stuart
Jempson
+44 20 7029 8000
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About Keywords Studios (www.keywordsstudios.com)
Keywords Studios is a global provider of creative and technology-enabled solutions
to the video games and entertainment industries. Established
in 1998, and now with over 70 facilities in 26 countries
strategically located in Asia, Australia, the Americas, and Europe,
it provides services across the entire content development life
cycle through its Create, Globalize and Engage Divisions to a large
blue-chip client base across the globe.
Keywords Studios has a strong
market position, providing services to 24 of the top 25 most
prominent games companies and contributing
to over 70% of the 2023 Game Awards winners. Across the games and entertainment industry, clients
include Activision Blizzard, Bandai Namco, Bethesda, Electronic
Arts, Epic Games, Konami, Microsoft, Netflix, Riot Games, Square
Enix, Supercell, TakeTwo, Tencent and Ubisoft. Recent titles worked
on include Starfield, Baldur's Gate 3, Diablo IV, Hogwarts Legacy,
Elden Ring, Fortnite, Valorant, League of Legends and Clash Royale.
Keywords Studios is listed on AIM, the London Stock Exchange
regulated market (KWS.L).
The Group reports a number of alternative performance
measures (APMs) to present the financial performance of the
business which are not GAAP measures as defined by International
Financial Reporting Standards (IFRS). The Directors believe these
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 refer to the APMs section at end of the
statement.
1
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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.
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2
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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. Adjusted EBITDA comprises EBITDA, adjusted
for share-based payments expense, costs of acquisition and
integration and non-controlling interest. In order to present the
measure consistently year-on-year, the impact of other income is
also excluded.
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3
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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.
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4
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The Adjusted earnings per share comprises the Adjusted profit
after tax divided by the non-diluted weighted average number of
shares as reported. 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.
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5
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The Adjusted cash conversion rate is the Adjusted free cash
flow as a percentage of the Adjusted profit before
tax.
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6
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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).
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CEO Statement
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.
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.
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.
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 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 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.
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.
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.
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
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 4 continents.
|
2023
|
2022
|
Change
|
Revenue €m
|
336.1
|
275.5
|
22.0%
|
Organic Revenue growth %
|
17.3%
|
25.9%
|
|
Adjusted EBITDA €m
|
94.1
|
69.7
|
35.0%
|
Adjusted EBITDA margin %
|
28.0%
|
25.3%
|
2.7%
|
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.
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.
Globalize
Globalize brings together our Audio,
Testing and Localization businesses to create a global provider,
with around 5,000 people across 5 continents.
|
2023
|
2022
|
Change
|
Revenue €m
|
279.5
|
300.9
|
(7.1)%
|
Organic Revenue growth %
|
(4.3)%
|
23.4%
|
|
Adjusted EBITDA €m
|
48.5
|
61.6
|
(21.3%)
|
Adjusted EBITDA margin %
|
17.4%
|
20.5%
|
(3.1%)
|
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 has 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.
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.
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.
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 3 continents.
|
2023
|
2022
|
Change
|
Revenue €m
|
164.8
|
114.3
|
44.2%
|
Organic Revenue growth %
|
2.3%
|
9.7%
|
|
Adjusted EBITDA €m
|
15.7
|
15.6
|
0.6%
|
Adjusted EBITDA margin %
|
9.5%
|
13.6%
|
|
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 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.
Financial and operating overview
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.
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:
|
2023
€m
|
2022
€m
|
Share-based payments
expense
|
22.0
|
18.7
|
Costs of acquisition and
integration
|
27.1
|
8.4
|
Amortisation of intangible
assets
|
26.1
|
16.8
|
Foreign exchange and other
items
|
4.5
|
0.1
|
Total
|
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.
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.
Cash flow and net debt
|
2023
€m
|
2022
€m
|
Change
€m
|
Adjusted EBITDA
|
158.3
|
146.9
|
11.4
|
MMTC, VGTR and similar
incentives
|
(11.3)
|
(3.6)
|
(7.7)
|
Working capital and other
items
|
(4.3)
|
0.6
|
(4.9)
|
Capex - property, plant and
equipment (PPE)
|
(30.7)
|
(27.0)
|
(3.7)
|
Capex - intangible
assets
|
(3.1)
|
(0.5)
|
(2.6)
|
Payments of principal on lease
liabilities
|
(15.0)
|
(11.4)
|
(3.6)
|
Operating cash flows
|
93.9
|
105.0
|
(11.1)
|
Interest paid net of
received
|
(7.1)
|
(1.5)
|
(5.6)
|
Free cash flow before tax
|
86.8
|
103.5
|
(16.7)
|
Taxation paid
|
(20.9)
|
(17.5)
|
(3.4)
|
Free cash flow
|
65.9
|
86.0
|
(20.1)
|
M&A - acquisition
spend
|
(194.7)
|
(113.3)
|
(81.4)
|
M&A - cost of acquisition and
integration cash outlay
|
(7.8)
|
(3.1)
|
(4.7)
|
Cash proceeds arising from
share-based payments
|
2.6
|
7.3
|
(4.7)
|
Other income
|
-
|
1.1
|
(1.1)
|
Company funded acquisition of
shares by EBT
|
(14.8)
|
-
|
(14.8)
|
Dividends paid
|
(2.2)
|
(2.0)
|
(0.2)
|
Underlying increase / (decrease) in net cash /
(debt)
|
(151.0)
|
(24.0)
|
(127.0)
|
FX and other items
|
1.6
|
0.2
|
1.4
|
Increase in net cash / (debt)
|
(149.4)
|
(23.8)
|
(125.6)
|
Opening net cash /
(debt)
|
81.8
|
105.6
|
|
Closing net cash / (debt)
|
(67.6)
|
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 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
Consolidated statement of comprehensive
income
|
|
Years ended 31
December
|
|
|
2023
|
2022
|
|
Note
|
€'000
|
€'000
|
Revenue from contracts with
customers
|
4
|
780,445
|
690,718
|
Cost of sales
|
5
|
(481,340)
|
(423,452)
|
Gross profit
|
|
299,105
|
267,266
|
Other income
|
5
|
-
|
1,098
|
Share-based payments
expense
|
23
|
(21,964)
|
(18,678)
|
Costs of acquisition and
integration
|
5
|
(27,140)
|
(8,413)
|
Amortisation of intangible
assets
|
11
|
(26,060)
|
(16,810)
|
Total of items excluded from
adjusted profit measures
|
|
(75,164)
|
(43,901)
|
Other administration
expenses
|
|
(177,111)
|
(152,653)
|
Administrative expenses
|
|
(252,275)
|
(196,554)
|
Operating profit
|
|
46,830
|
71,810
|
|
|
|
|
Financing income
|
6
|
614
|
1,986
|
Financing cost
|
6
|
(12,450)
|
(5,814)
|
Profit before taxation
|
|
34,994
|
67,982
|
Taxation
|
7
|
(15,042)
|
(20,612)
|
Profit after taxation
|
|
19,952
|
47,370
|
|
|
|
|
Other comprehensive
income:
|
|
|
|
Items that will not be reclassified subsequently to profit or
loss
|
|
|
|
Actuarial gain / (loss) on defined
benefit plans
|
|
12
|
286
|
Items that may be reclassified subsequently to profit or
loss
|
|
|
|
Exchange gain / (loss) in net
investment in foreign operations
|
|
(8,317)
|
(7,947)
|
Exchange gain / (loss) on
translation of foreign operations
|
|
(2,518)
|
6,144
|
Non-controlling interest; recycled
on disposal of subsidiary
|
|
-
|
162
|
Tax related to items taken to
other comprehensive income
|
7
|
1,238
|
-
|
Total comprehensive income /
(expense)
|
|
10,367
|
46,015
|
|
|
|
|
Profit / (loss) for the period
attributable to:
|
|
|
|
Owners of the parent
|
|
19,952
|
47,415
|
Non-controlling
interest
|
|
-
|
(45)
|
|
|
19,952
|
47,370
|
|
|
|
|
Total comprehensive income /
(expense) attributable to:
|
|
|
|
Owners of the parent
|
|
10,367
|
46,015
|
|
|
10,367
|
46,015
|
|
|
|
|
Earnings per share
|
|
€ cent
|
€
cent
|
Basic earnings per ordinary
share
|
8
|
25.28
|
61.54
|
Diluted earnings per ordinary
share
|
8
|
24.94
|
58.86
|
The notes 1 to 29 form an integral
part of these consolidated financial statements.
On behalf of the Board
Bertrand
Bodson
Rob Kingston
Director
Director
12 March 2024
Consolidated statement of financial
position
|
|
|
|
|
|
At 31
December
|
|
|
2023
|
2022
|
|
|
|
Restated
(note 21)
|
|
Note
|
€'000
|
€'000
|
Non-current assets
|
|
|
|
Intangible assets
|
11
|
632,176
|
469,953
|
Right of use assets
|
12
|
41,950
|
37,672
|
Property, plant and
equipment
|
13
|
50,237
|
44,784
|
Deferred tax assets
|
21
|
32,751
|
31,157
|
Investments
|
14
|
175
|
175
|
|
|
757,289
|
583,741
|
Current assets
|
|
|
|
Cash and cash
equivalents
|
|
59,862
|
81,886
|
Trade receivables
|
15
|
89,940
|
81,563
|
Other receivables
|
16
|
83,993
|
61,415
|
Corporation tax
recoverable
|
|
5,991
|
6,503
|
|
|
239,786
|
231,367
|
Current liabilities
|
|
|
|
Trade payables
|
|
14,294
|
15,878
|
Other payables
|
17
|
155,970
|
139,355
|
Loans and borrowings
|
18
|
-
|
45
|
Corporation tax
liabilities
|
|
27,081
|
22,028
|
Lease liabilities
|
19
|
13,865
|
12,414
|
|
|
211,210
|
189,720
|
Net current assets / (liabilities)
|
|
28,576
|
41,647
|
Non-current liabilities
|
|
|
|
Other payables
|
17
|
12,002
|
18,308
|
Employee defined benefit
plans
|
20
|
4,030
|
2,861
|
Loans and borrowings
|
18
|
127,380
|
6
|
Deferred tax
liabilities
|
21
|
10,307
|
17,017
|
Lease liabilities
|
19
|
33,107
|
30,105
|
|
|
186,826
|
68,297
|
Net assets
|
|
599,039
|
557,091
|
Equity
|
|
|
|
Share capital
|
22
|
939
|
924
|
Share capital - to be
issued
|
22
|
321
|
2,467
|
Share premium
|
22
|
54,518
|
47,021
|
Merger reserve
|
22
|
306,837
|
286,655
|
Foreign exchange
reserve
|
|
183
|
11,018
|
Shares held in Employee Benefit
Trust ("EBT")
|
22
|
(6,774)
|
-
|
Share-based payments
reserve
|
|
80,416
|
65,379
|
Retained earnings
|
|
162,599
|
143,627
|
Total equity
|
|
599,039
|
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
12 March 2024.
On behalf of the Board
Bertrand
Bodson
Rob Kingston
Director
Director
12 March 2024
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-based payments
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
|
At 01 January 2022
|
904
|
2,185
|
38,549
|
273,677
|
12,821
|
(1,997)
|
48,193
|
97,905
|
472,237
|
(117)
|
472,120
|
Profit / (loss) for the
period
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
47,415
|
47,415
|
(45)
|
47,370
|
Recycled on disposal of
subsidiary
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
162
|
162
|
Other comprehensive
income
|
-
|
-
|
-
|
-
|
(1,803)
|
-
|
-
|
286
|
(1,517)
|
-
|
(1,517)
|
Total comprehensive income for the period
|
-
|
-
|
-
|
-
|
(1,803)
|
-
|
-
|
47,701
|
45,898
|
117
|
46,015
|
Contributions by and contributions to the
owners:
|
|
|
|
|
|
|
|
|
|
|
|
Share-based payments
expense
|
-
|
-
|
-
|
-
|
-
|
-
|
18,577
|
-
|
18,577
|
-
|
18,577
|
Share options exercised
|
14
|
-
|
5,862
|
-
|
-
|
1,997
|
(1,492)
|
-
|
6,381
|
-
|
6,381
|
Employee Share Purchase
Plan
|
-
|
-
|
909
|
-
|
-
|
-
|
101
|
-
|
1,010
|
-
|
1,010
|
Dividends
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(1,979)
|
(1,979)
|
-
|
(1,979)
|
Acquisition-related issuance of
shares
|
6
|
282
|
1,701
|
12,978
|
-
|
-
|
-
|
-
|
14,967
|
-
|
14,967
|
Contributions by and contributions to the
owners
|
20
|
282
|
8,472
|
12,978
|
-
|
1,997
|
17,186
|
(1,979)
|
38,956
|
-
|
38,956
|
At 31 December 2022
|
924
|
2,467
|
47,021
|
286,655
|
11,018
|
-
|
65,379
|
143,627
|
557,091
|
-
|
557,091
|
Profit / (loss) for the
period
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
19,952
|
19,952
|
-
|
19,952
|
Other comprehensive
income
|
-
|
-
|
-
|
-
|
(10,835)
|
-
|
-
|
1,250
|
(9,585)
|
-
|
(9,585)
|
Total comprehensive income for the period
|
-
|
-
|
-
|
-
|
(10,835)
|
-
|
-
|
21,202
|
10,367
|
-
|
10,367
|
Contributions by and contributions to the
owners:
|
|
|
|
|
|
|
|
|
|
|
|
Share-based payments
expense
|
-
|
-
|
-
|
-
|
-
|
-
|
21,964
|
-
|
21,964
|
-
|
21,964
|
Cash proceeds arising from
share-based payments
|
5
|
-
|
1,462
|
-
|
-
|
-
|
1,145
|
-
|
2,612
|
-
|
2,612
|
Company funded acquisition of
shares (note 22)
|
-
|
-
|
-
|
-
|
-
|
(6,774)
|
(8,072)
|
-
|
(14,846)
|
-
|
(14,846)
|
Dividends
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(2,230)
|
(2,230)
|
-
|
(2,230)
|
Acquisition-related issuance of
shares
|
10
|
(2,146)
|
6,035
|
20,182
|
-
|
-
|
-
|
-
|
24,081
|
-
|
24,081
|
Contributions by and contributions to the
owners
|
15
|
(2,146)
|
7,497
|
20,182
|
-
|
(6,774)
|
15,037
|
(2,230)
|
31,581
|
-
|
31,581
|
At 31 December 2023
|
939
|
321
|
54,518
|
306,837
|
183
|
(6,774)
|
80,416
|
162,599
|
599,039
|
-
|
599,039
|
Consolidated statement of cash flows
|
|
Years ended 31
December
|
|
|
2023
|
2022
|
|
Note
|
€'000
|
€'000
|
Cash flows from operating activities
|
|
|
|
Profit after taxation
|
|
19,952
|
47,370
|
Income and expenses not affecting operating cash
flows
|
|
|
|
Depreciation and impairment -
property, plant and equipment
|
13
|
28,903
|
18,365
|
Depreciation and impairment -
right of use assets
|
12
|
15,948
|
14,585
|
Amortisation and impairment of
intangible assets
|
11
|
26,060
|
16,810
|
Taxation
|
7
|
15,042
|
20,612
|
Share-based payments
expense
|
23
|
21,964
|
18,678
|
Fair value movements in deferred
and contingent consideration
|
5
|
9,177
|
2,282
|
Non-cash movements included in
costs of acquisition and integration
|
5
|
2,677
|
-
|
Unwinding of discounted
liabilities - deferred consideration
|
6
|
3,279
|
2,922
|
Unwinding of discounted
liabilities - lease liabilities
|
6
|
1,447
|
969
|
Interest receivable
|
6
|
(614)
|
(309)
|
Fair value adjustments to employee
defined benefit plans
|
|
1,025
|
514
|
Interest expense
|
6
|
5,768
|
1,261
|
Unrealised foreign exchange (gain)
/ loss
|
|
(4,559)
|
766
|
|
|
126,117
|
97,455
|
Changes in operating assets and liabilities
|
|
|
|
Decrease / (increase) in trade
receivables
|
|
(284)
|
(11,771)
|
Decrease / (increase) in MMTC and
VGTR receivable
|
|
(11,260)
|
(3,591)
|
Decrease / (increase) in other
receivables
|
|
(6,785)
|
(6,457)
|
(Decrease) / increase in accruals,
trade and other payables
|
|
7,470
|
18,785
|
|
|
(10,859)
|
(3,034)
|
Taxation paid
|
|
(20,853)
|
(17,505)
|
Settlement of deferred and
contingent consideration related to continuous
employment
|
17
|
(3,900)
|
-
|
Net cash generated by / (used in)
operating activities
|
|
110,457
|
124,286
|
Cash flows from investing activities
|
|
|
|
Current year acquisition of
subsidiaries net of cash acquired
|
27
|
(160,380)
|
(87,494)
|
Settlement of deferred liabilities
on acquisitions
|
17
|
(30,428)
|
(25,800)
|
Acquisition of property, plant and
equipment
|
13
|
(30,689)
|
(27,007)
|
Investment in intangible
assets
|
11
|
(3,052)
|
(501)
|
Interest received
|
|
614
|
309
|
Net cash generated by / (used in)
investing activities
|
|
(223,935)
|
(140,493)
|
Cash flows from financing activities
|
|
|
|
Cash proceeds, where EBT shares
were utilised for the exercise of share-based payments
|
|
1,145
|
505
|
Repayment of loans
|
18
|
(97,379)
|
(79)
|
Drawdown of loans
|
18
|
227,322
|
-
|
Payments of principal on lease
liabilities
|
19
|
(15,038)
|
(11,361)
|
Interest paid on principal of
lease liabilities
|
19
|
(1,447)
|
(969)
|
Dividends paid
|
9
|
(2,230)
|
(1,979)
|
Company funded acquisition of
shares by EBT
|
|
(14,846)
|
-
|
Shares issued for cash
|
22
|
1,467
|
6,785
|
Interest paid
|
|
(6,282)
|
(828)
|
Net cash generated by / (used in)
financing activities
|
|
92,712
|
(7,926)
|
Increase / (decrease) in cash and cash
equivalents
|
|
(20,766)
|
(24,133)
|
Exchange gain / (loss) on cash and
cash equivalents
|
|
(1,258)
|
309
|
Cash and cash equivalents at
beginning of the period
|
|
81,886
|
105,710
|
Cash and cash equivalents at end
of the period
|
|
59,862
|
81,886
|
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.
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, re-measured 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).
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.
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.
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 FTSE250 Index (excluding investment trusts), and
threshold vesting (25% of the award) will be earned for TSR in line
with the Index and full vesting will be earned for exceeding the
Index TSR by 20% over the performance period. A prorated return
will be earned between 25% and 100% if the TSR exceeds the Index by
between 0% and 20%.
These are measured at fair value,
taking into account market vesting conditions but not non-market
vesting conditions, at the date of grant, measured by using the
Monte Carlo binomial model.
Salary Shares
Salary shares are measured at fair
value on the grant date. As the only vesting condition is
continuous service, the fair value of the shares is amortised over
the vesting period.
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.
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
|
3 - 5
years
|
Office furniture and
equipment
|
10
years
|
Leasehold improvements
|
over the
length of the lease
|
Gains and losses on disposals are
determined by comparing proceeds with carrying amount and are
included in the Consolidated statement of comprehensive
income.
Financial Assets
The Group's most significant
financial assets comprise trade and other receivables and cash and
cash equivalents in the Consolidated statement of financial
position, whereas the Company's most significant financial assets
comprise inter-group receivables.
Trade Receivables
Trade receivables, which
principally represent amounts due from customers, are recognised at
amortised cost as they meet the IFRS 9 classification test of being
held to collect, and the cash flow characteristics represent solely
payments of principal and interest. The Group's impairment
methodology is in line with the requirements of IFRS 9. The
simplified approach to providing for expected credit losses has
been applied to trade receivables, which requires the use of a
lifetime expected loss provision.
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.
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
o 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.
o 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.
o 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.
o 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 re-measurement required due to changes in the fair value
of the liability are recognised in the Consolidated statement of
comprehensive income.
o 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.
4 Segmental
Analysis and Revenue from Contracts with Customers
Segmental Analysis
|
|
2023
|
2022
|
|
|
€'000
|
€'000
|
Revenue from external customers
|
|
|
|
Create
|
|
336,069
|
275,570
|
Globalize
|
|
279,490
|
300,875
|
Engage
|
|
164,886
|
114,273
|
|
|
780,445
|
690,718
|
|
|
|
|
Segment operating profit
|
|
|
|
Create
|
|
94,118
|
69,748
|
Globalize
|
|
48,477
|
61,577
|
Engage
|
|
15,710
|
15,576
|
|
|
158,305
|
146,901
|
|
|
|
|
Reconciliation of Segment operating profit
|
|
|
|
Adjusted EBITDA^
|
|
158,305
|
146,901
|
Share-based payments
expense
|
|
(21,964)
|
(18,678)
|
Costs of acquisition and
integration
|
|
(27,140)
|
(8,413)
|
Amortisation of intangible
assets
|
|
(26,060)
|
(16,810)
|
Depreciation - property, plant and
equipment
|
|
(23,128)
|
(18,365)
|
Depreciation - right of use
assets
|
|
(13,907)
|
(14,585)
|
Bank charges
|
|
724
|
662
|
Other income
|
|
-
|
1,098
|
Operating profit
|
|
46,830
|
71,810
|
Financing income
|
|
614
|
1,986
|
Financing cost
|
|
(12,450)
|
(5,814)
|
Profit before taxation
|
|
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.
Geographical analysis of non-current assets from continuing
businesses*
|
|
|
|
|
|
2023
|
2022
|
|
|
€'000
|
€'000
|
United States
|
|
351,240
|
264,117
|
United Kingdom
|
|
216,416
|
121,556
|
Canada
|
|
49,997
|
57,652
|
Australia
|
|
49,179
|
51,869
|
Italy
|
|
15,308
|
16,471
|
Poland
|
|
12,859
|
12,561
|
Switzerland
|
|
9,786
|
10,025
|
China
|
|
9,573
|
9,296
|
India
|
|
7,495
|
4,974
|
France
|
|
7,044
|
7,150
|
Other
|
|
28,392
|
28,070
|
|
|
757,289
|
583,741
|
*The prior year comparatives have
been re-classified 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*
|
|
|
|
|
|
2023
|
2022
|
|
|
€'000
|
€'000
|
United States
|
|
174,550
|
120,722
|
Canada
|
|
158,199
|
155,509
|
United Kingdom
|
|
130,016
|
115,017
|
Poland
|
|
40,988
|
42,731
|
Australia
|
|
34,425
|
22,211
|
Italy
|
|
34,114
|
39,195
|
China
|
|
29,061
|
26,759
|
India
|
|
27,872
|
25,290
|
Japan
|
|
21,237
|
22,716
|
Philippines
|
|
20,591
|
20,074
|
Other
|
|
109,392
|
100,494
|
|
|
780,445
|
690,718
|
*The prior year comparatives have
been re-classified 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.
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
|
|
Total
undelivered
|
Scheduled completion within
1 year
|
Scheduled completion
1-2 years
|
Scheduled completion
2-5 years
|
|
|
€'000
|
€'000
|
€'000
|
€'000
|
At 31 December 2023
|
|
69,113
|
57,712
|
10,947
|
454
|
At 31 December 2022
|
|
82,060
|
77,448
|
4,612
|
-
|
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
|
|
2023
|
2022
|
Cost of sales
|
|
€'000
|
€'000
|
Operating expenses
|
|
499,186
|
430,475
|
Multimedia tax credits / video
games tax relief
|
|
(38,215)
|
(21,540)
|
Other direct costs
|
|
20,369
|
14,517
|
|
|
481,340
|
423,452
|
|
|
2023
|
2022
|
Operating profit is stated after charging /
(crediting):
|
|
€'000
|
€'000
|
Depreciation - property, plant and
equipment
|
|
23,128
|
18,365
|
Depreciation - right of use
assets
|
|
13,907
|
14,585
|
Amortisation of intangible
assets
|
|
26,060
|
16,810
|
Costs of acquisition and
integration
|
|
27,140
|
8,413
|
Auditor's remuneration
|
|
870
|
689
|
Short-term leases
|
|
2,550
|
2,140
|
Other income
|
|
-
|
(1,098)
|
|
|
2023
|
2022
|
Costs of acquisition and integration
|
|
€'000
|
€'000
|
Acquisition and integrations costs
re: current year acquisitions (note 27)
|
|
2,345
|
1,177
|
Acquisition and integrations costs
re: prior acquisitions
|
|
390
|
631
|
Fair value adjustments to
contingent consideration (note 17)
|
|
300
|
2,282
|
Deferred consideration related to
continuing employment
|
|
8,877
|
3,266
|
Costs associated with ceasing
operations in Russia (note 29)
|
|
3,893
|
-
|
Acquisition team and related
costs
|
|
593
|
671
|
Globalize restructuring - Right of
use assets impairment
|
|
2,041
|
-
|
Globalize restructuring -
Property, plant and equipment impairment
|
|
5,755
|
-
|
Globalize restructuring - Other
provisions
|
|
2,677
|
-
|
Other reorganisation and
restructuring costs
|
|
269
|
386
|
|
|
27,140
|
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.
|
|
2023
|
2022
|
Auditor's remuneration
|
|
€'000
|
€'000
|
Audit services:
|
|
|
|
Parent company
and Group audit
|
|
387
|
318
|
Subsidiary
companies audit
|
|
496
|
358
|
Non-audit services:
|
|
|
|
Audit-related
assurance services
|
|
11
|
13
|
|
|
894
|
689
|
|
|
2023
|
2022
|
Other income
|
|
€'000
|
€'000
|
Gain on disposal of
investment
|
|
-
|
(1,098)
|
|
|
-
|
(1,098)
|
Other income represents the gain
on disposal of the Group's investment in AppSecTest in April 2022
(including related Non-controlling interest re-cycled on
disposal).
6 Financing
Income and Cost
|
|
2023
|
2022
|
|
|
€'000
|
€'000
|
Financing income
|
|
|
|
Interest received
|
|
614
|
309
|
Foreign exchange gain
|
|
-
|
1,677
|
|
|
614
|
1,986
|
Financing cost
|
|
|
|
Bank charges
|
|
(724)
|
(662)
|
Interest expense
|
|
(5,768)
|
(1,261)
|
Unwinding of discounted
liabilities - lease liabilities
|
|
(1,447)
|
(969)
|
Unwinding of discounted
liabilities - deferred consideration
|
|
(3,279)
|
(2,922)
|
Foreign exchange loss
|
|
(1,232)
|
-
|
|
|
(12,450)
|
(5,814)
|
Net financing income /
(cost)
|
|
(11,836)
|
(3,828)
|
7
Taxation
|
|
2023
|
2022
|
|
|
€'000
|
€'000
|
Current income tax
|
|
|
|
Income tax on profits
|
|
26,469
|
25,844
|
Deferred tax (note 21)
|
|
(11,427)
|
(5,232)
|
|
|
15,042
|
20,612
|
The tax charge for the year can be
reconciled to accounting profit as follows:
|
|
2023
|
2022
|
|
|
€'000
|
€'000
|
Profit before tax
|
|
34,994
|
67,982
|
Tax charge based on the Effective
tax rate*
|
|
6,582
|
12,156
|
Income tax prior year (over) /
under provision
|
|
1,524
|
(653)
|
Deferred tax prior year (over) /
under provision and impact of change in tax rates
|
|
(602)
|
(204)
|
Items disallowed for tax
purposes
|
|
11,826
|
7,468
|
Exempt and non-taxable
income
|
|
26
|
(72)
|
Tax incentives
|
|
(4,220)
|
(924)
|
Current year tax losses
utilised
|
|
(17)
|
(250)
|
Current year tax losses where
deferred tax has not been provided
|
|
54
|
346
|
State and other direct
taxes
|
|
869
|
932
|
Other differences - net
|
|
(1,000)
|
1,813
|
Total tax charge
|
|
15,042
|
20,612
|
*Effective tax rate - being the
statutory tax rate relative to the profit before tax in each
jurisdiction
|
18.8%
|
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.
|
|
2023
|
2022
|
Tax effects relating to each component of other comprehensive
income
|
|
€'000
|
€'000
|
|
|
|
|
Exchange gain / (loss) in net
investment in foreign operations
|
|
(8,317)
|
(7,947)
|
Tax (expense) / benefit
|
|
1,238
|
993
|
Net of tax amount
|
|
(7,079)
|
(6,954)
|
|
|
|
|
Actuarial gain / (loss) on defined
benefit plans
|
|
12
|
286
|
Tax (expense) / benefit
|
|
-
|
-
|
Net of tax amount
|
|
12
|
286
|
|
|
|
|
Exchange gain / (loss) on
translation of foreign operations
|
|
(2,518)
|
6,144
|
Tax (expense) / benefit
|
|
-
|
-
|
Net of tax amount
|
|
(2,518)
|
6,144
|
8 Earnings
per Share
|
|
2023
|
2022
|
|
|
|
€ cent
|
€
cent
|
|
Basic
|
|
25.28
|
61.54
|
|
Diluted
|
|
24.94
|
58.86
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
|
|
€'000
|
€'000
|
|
Profit for the period from
continuing operations
|
|
19,952
|
47,370
|
|
|
|
|
|
|
Weighted average number of equity shares
|
|
Number
|
Number
|
|
Basic (i)
|
|
78,910,471
|
76,979,596
|
|
Diluting impact of share options
(ii)
|
|
1,084,796
|
3,502,301
|
|
Diluted (i)
|
|
79,995,267
|
80,481,897
|
|
|
|
|
|
|
(i) Includes (weighted average)
shares to be issued:
|
|
|
|
|
|
|
Number
|
Number
|
|
|
|
67,827
|
67,802
|
|
|
|
|
|
|
(ii) Contingently issuable
ordinary shares have been excluded where the conditions governing
exercisability have not been satisfied:
|
|
|
Number
|
Number
|
|
|
|
LTIPs
|
|
3,334,569
|
409,728
|
|
|
|
Share options
|
|
450,994
|
511,411
|
|
|
|
|
|
3,785,563
|
921,139
|
|
|
|
Details of the number of share
options outstanding at the year end are set out in note
23.
9
Dividends
|
|
In respect
of
|
Approval
date
|
€ cent per
share
|
Pence STG per
share
|
Total dividend
€'000
|
Payment
date
|
Dividends paid
|
|
Final
|
|
2021
|
Mar-22
|
1.70
|
1.45
|
1,305
|
Jun-22
|
Interim
|
|
2022
|
Sep-22
|
0.90
|
0.77
|
674
|
Oct-22
|
Dividends paid to shareholders
2022
|
|
|
|
2.60
|
2.22
|
1,979
|
|
Final
|
|
2022
|
Mar-23
|
1.85
|
1.60
|
1,461
|
Jun-23
|
Interim
|
|
2023
|
Sep-23
|
0.97
|
0.85
|
769
|
Oct-23
|
Dividends paid to shareholders 2023
|
|
|
|
2.82
|
2.45
|
2,230
|
|
|
|
|
|
|
|
|
|
|
|
In respect
of
|
Approval
date
|
Expected € cent per
share
|
Pence STG per
share
|
Expected total
dividend €'000
|
Expected payment
date
|
Recommended
|
|
Final
|
|
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.
10 Staff
Costs
|
|
2023
|
2022
|
Total staff costs (including Directors)
|
|
€'000
|
€'000
|
Salaries and related
costs
|
|
414,818
|
345,857
|
Social welfare costs
|
|
37,926
|
27,788
|
Pension costs
|
|
8,167
|
7,222
|
Share-based payments
expense
|
|
21,964
|
18,678
|
|
|
482,875
|
399,545
|
Average number of employees
|
|
2023
|
2022
|
Operations
|
|
11,307
|
10,272
|
General and
administration
|
|
1,033
|
869
|
|
|
12,340
|
11,141
|
|
|
2023
|
2022
|
Key management compensation
|
|
€'000
|
€'000
|
Salaries and related
costs
|
|
2,452
|
2,258
|
Social welfare costs
|
|
323
|
431
|
Pension costs
|
|
75
|
54
|
Share-based payments
expense
|
|
2,025
|
1,142
|
|
|
4,875
|
3,885
|
The key management compensation
comprises compensation to nine Directors of Keywords Studios plc
during the year (2022: ten).
11 Intangible
Assets
|
|
Goodwill
|
Customer
relationships
|
Intellectual property /
Development costs
|
Total
|
|
|
€'000
|
€'000
|
€'000
|
€'000
|
Cost
|
|
|
|
|
|
At 01 January 2022
|
|
325,037
|
68,325
|
4,114
|
397,476
|
Recognition on acquisition of
subsidiaries
|
|
70,482
|
34,695
|
25,914
|
131,091
|
Additions
|
|
-
|
-
|
501
|
501
|
Disposals
|
|
(159)
|
-
|
-
|
(159)
|
Exchange rate movement
|
|
1,373
|
1,317
|
(134)
|
2,556
|
At 31 December 2022
|
|
396,733
|
104,337
|
30,395
|
531,465
|
Recognition on acquisition of
subsidiaries
|
|
152,001
|
45,859
|
-
|
197,860
|
Additions
|
|
-
|
-
|
3,052
|
3,052
|
Adjustment to the carrying value
of prior year business combinations
|
(2,967)
|
-
|
-
|
(2,967)
|
Exchange rate movement
|
|
(7,352)
|
(3,353)
|
(899)
|
(11,604)
|
At 31 December 2023
|
|
538,415
|
146,843
|
32,548
|
717,806
|
Accumulated amortisation
|
|
|
|
|
|
At 01 January 2022
|
|
147
|
40,708
|
2,678
|
43,533
|
Amortisation charge
|
|
-
|
16,285
|
525
|
16,810
|
Disposals
|
|
(147)
|
-
|
-
|
(147)
|
Exchange rate movement
|
|
-
|
1,308
|
8
|
1,316
|
At 31 December 2022
|
|
-
|
58,301
|
3,211
|
61,512
|
Amortisation charge
|
|
-
|
20,142
|
5,918
|
26,060
|
Exchange rate movement
|
|
-
|
(1,826)
|
(116)
|
(1,942)
|
At 31 December 2023
|
|
-
|
76,617
|
9,013
|
85,630
|
|
|
|
|
|
|
Net book value
|
|
|
|
|
|
At 01 January 2023
|
|
396,733
|
46,036
|
27,184
|
469,953
|
At 31 December 2023
|
|
538,415
|
70,226
|
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.
A summary of the allocation of the
carrying value of goodwill by segment and by CGU is presented
below:
|
|
2023
|
2022
|
Segment
|
CGU
|
€m
|
€m
|
Create:
|
Game Development
|
296
|
218
|
|
Art Services
|
19
|
19
|
Globalize:
|
Functional Testing
|
14
|
15
|
|
Localization Testing
|
14
|
14
|
|
Audio
|
33
|
33
|
|
Localization
|
18
|
19
|
Engage:
|
Marketing
|
110
|
35
|
|
Player Engagement
|
34
|
44
|
|
|
538
|
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
|
|
|
|
|
|
|
|
|
|
|
Actual
|
|
Sensitivity analysis
|
|
|
2023
|
2022
|
|
2023
|
2022
|
2023
|
2022
|
|
|
|
|
|
|
|
|
|
1 to 5 year growth rate
assumption
|
|
10%
|
10%
|
|
15%
|
15%
|
5%
|
5%
|
Long-term growth rate
assumption
|
|
2%
|
2%
|
|
2%
|
2%
|
2%
|
2%
|
Value in use (€m) - all
CGUs
|
|
1,369
|
1,295
|
|
1,641
|
1,552
|
1,159
|
1,096
|
Carrying value - goodwill
(€m)
|
|
538
|
397
|
|
|
|
|
|
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.
|
|
2023
|
2022
|
|
|
€'000
|
€'000
|
Cost
|
|
|
|
At 01 January
|
|
65,849
|
63,840
|
Additions
|
|
14,074
|
15,249
|
Recognition on acquisition of
subsidiaries
|
|
6,151
|
580
|
De-recognition of expired
leases
|
|
(9,993)
|
(14,186)
|
Exchange rate movement
|
|
(389)
|
366
|
At 31 December
|
|
75,692
|
65,849
|
Accumulated depreciation
|
|
|
|
At 01 January
|
|
28,177
|
27,849
|
Depreciation charge
|
|
13,907
|
11,753
|
De-recognition of expired
leases
|
|
(9,993)
|
(14,186)
|
Impairment charge (note
5)
|
|
2,041
|
2,832
|
Exchange rate movement
|
|
(390)
|
(71)
|
At 31 December
|
|
33,742
|
28,177
|
|
|
|
|
Net book value
|
|
|
|
At 01 January
|
|
37,672
|
35,991
|
At 31 December
|
|
41,950
|
37,672
|
13 Property,
Plant and Equipment
|
|
Computers and
software
|
Office furniture and
equipment
|
Leasehold
improvements
|
Total
|
|
|
€'000
|
€'000
|
€'000
|
€'000
|
Cost
|
|
|
|
|
|
At 01 January 2022
|
|
43,049
|
9,214
|
14,928
|
67,191
|
Exchange rate movement
|
|
(94)
|
(109)
|
105
|
(98)
|
Additions
|
|
21,962
|
1,129
|
3,916
|
27,007
|
Acquisitions through business
combinations at fair value
|
|
243
|
131
|
48
|
422
|
Disposals
|
|
(1,132)
|
(490)
|
(828)
|
(2,450)
|
At 31 December 2022
|
|
64,028
|
9,875
|
18,169
|
92,072
|
Exchange rate movement
|
|
(1,509)
|
(165)
|
(394)
|
(2,068)
|
Additions
|
|
25,974
|
2,136
|
2,579
|
30,689
|
Acquisitions through business
combinations at fair value
|
|
2,792
|
393
|
277
|
3,462
|
Disposals
|
|
(3,757)
|
(304)
|
(450)
|
(4,511)
|
At 31 December 2023
|
|
87,528
|
11,935
|
20,181
|
119,644
|
Accumulated depreciation
|
|
|
|
|
|
At 01 January 2022
|
|
24,568
|
4,310
|
2,295
|
31,173
|
Exchange rate movement
|
|
47
|
71
|
82
|
200
|
Depreciation charge
|
|
12,539
|
799
|
5,027
|
18,365
|
Disposals
|
|
(1,133)
|
(490)
|
(827)
|
(2,450)
|
At 31 December 2022
|
|
36,021
|
4,690
|
6,577
|
47,288
|
Exchange rate movement
|
|
(2,084)
|
(51)
|
(138)
|
(2,273)
|
Depreciation charge
|
|
18,255
|
1,276
|
3,597
|
23,128
|
Impairment charge (note
5)
|
|
3,572
|
-
|
2,203
|
5,775
|
Disposals
|
|
(3,757)
|
(304)
|
(450)
|
(4,511)
|
At 31 December 2023
|
|
52,007
|
5,611
|
11,789
|
69,407
|
|
|
|
|
|
|
Net book value
|
|
|
|
|
|
At 01 January 2023
|
|
28,007
|
5,185
|
11,592
|
44,784
|
At 31 December 2023
|
|
35,521
|
6,324
|
8,392
|
50,237
|
14
Investments
|
|
2023
|
2022
|
|
|
€'000
|
€'000
|
Investments
|
|
175
|
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.
15 Trade
Receivables
|
|
2023
|
2022
|
|
|
€'000
|
€'000
|
Trade receivables
|
|
94,189
|
85,012
|
Provision for bad debts (note
24)
|
|
(4,249)
|
(3,449)
|
Financial asset held at amortised
cost
|
|
89,940
|
81,563
|
Trade receivables arise from
revenues derived from contracts with customers.
16 Other
Receivables
|
|
2023
|
2022
|
Current
|
|
€'000
|
€'000
|
Multimedia tax credits / video
games tax relief
|
|
37,081
|
25,756
|
Accrued income from contracts with
customers
|
|
18,307
|
13,220
|
Prepayments and rent
deposits
|
|
14,362
|
10,527
|
Tax and social security
|
|
7,263
|
6,538
|
Other receivables
|
|
6,980
|
5,374
|
|
|
83,993
|
61,415
|
Accrued income from contracts with
customers represent mainly contract assets in process and related
items.
17 Other
Payables
|
|
2023
|
2022
|
|
|
€'000
|
€'000
|
Current liabilities
|
|
|
|
Accrued expenses*
|
|
76,970
|
61,155
|
Deferred and contingent
consideration (i)
|
|
36,550
|
44,945
|
Other payables (ii)
|
|
30,105
|
26,099
|
Deferred and contingent
consideration related to continuous employment (i)*
|
|
7,273
|
3,579
|
Payroll taxes
|
|
5,072
|
3,577
|
|
|
155,970
|
139,355
|
Non-current liabilities
|
|
|
|
Deferred and contingent
consideration (i)
|
|
12,002
|
18,308
|
|
|
12,002
|
18,308
|
* Please note in 2022 Deferred and
contingent consideration related to continuous employment was
disclosed within Accrued expenses.
The movement in deferred and
contingent consideration during the financial year was as
follows:
|
|
2023
|
2022
|
|
|
€'000
|
€'000
|
€'000
|
€'000
|
|
|
Deferred and contingent
consideration
|
Deferred and contingent
consideration related to continuous employment
|
Deferred
and contingent consideration
|
Deferred
and contingent consideration related to continuous
employment
|
Carrying amount at the beginning of the
period
|
|
63,253
|
3,579
|
54,142
|
-
|
Consideration settled by
cash
|
|
(30,428)
|
(3,900)
|
(25,800)
|
-
|
Consideration settled by
shares
|
|
(11,716)
|
(1,238)
|
(8,040)
|
-
|
Unwinding of discount (note
6)
|
|
3,279
|
-
|
2,922
|
-
|
Additional liabilities from
current year acquisitions (note 27)
|
25,790
|
315
|
37,950
|
-
|
Fair value movements in contingent
consideration
|
|
300
|
-
|
2,282
|
-
|
Fair value movements in deferred
consideration related to continuous employment
|
-
|
8,562
|
-
|
3,579
|
Exchange rate movement
|
|
(1,926)
|
(45)
|
(203)
|
-
|
Carrying amount at the end of the period
|
|
48,552
|
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
|
|
2023
|
2022
|
Maturity analysis of Loans and borrowings
|
|
€'000
|
€'000
|
|
|
|
|
Current
|
|
|
|
Expiry within 1 year
|
|
-
|
-
|
Non-current
|
|
|
|
Expiry between 1 and 2
years
|
|
-
|
-
|
Expiry over 2 years
|
|
127,380
|
51
|
|
|
127,380
|
51
|
|
|
|
|
|
|
127,380
|
51
|
|
|
|
|
Currency denomination
|
|
|
|
US dollar
|
|
35,129
|
-
|
Sterling
|
|
92,251
|
-
|
Canadian dollar
|
|
-
|
51
|
|
|
127,380
|
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.
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:
|
|
Current
|
Non-current
|
Total
|
|
|
€'000
|
€'000
|
€'000
|
At 01 January 2022
|
|
81
|
48
|
129
|
Cash flows:
|
|
|
|
|
Repayments
|
|
(37)
|
(42)
|
(79)
|
Non-cash flows:
|
|
|
|
|
Exchange rate movement
|
|
1
|
-
|
1
|
At 31 December 2022
|
|
45
|
6
|
51
|
Cash flows:
|
|
|
|
|
Drawdowns
|
|
-
|
227,322
|
227,322
|
Repayments
|
|
(45)
|
(97,334)
|
(97,379)
|
Non-cash flows:
|
|
|
|
|
Exchange rate movement
|
|
-
|
(2,614)
|
(2,614)
|
At 31 December 2023
|
|
-
|
127,380
|
127,380
|
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:
|
|
2023
|
2022
|
|
|
€'000
|
€'000
|
Carrying amount at the beginning of the
year
|
|
42,519
|
37,635
|
Recognition on acquisition of
subsidiaries (note 27)
|
|
6,151
|
580
|
Liabilities recognised on new
leases in the period
|
|
14,074
|
15,244
|
Unwinding of discounted
liabilities - lease liabilities
|
|
1,447
|
969
|
Payment of principal and interest
on lease liabilities
|
|
(16,485)
|
(12,330)
|
Exchange rate movement
|
|
(734)
|
421
|
Carrying amount at the end of the year
|
|
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).
|
|
2023
|
2023
|
2023
|
|
2022
|
2022
|
2022
|
Maturity analysis of lease liabilities
|
|
€'000
|
€'000
|
€'000
|
|
€'000
|
€'000
|
€'000
|
|
|
Lease
payments
|
Finance
charges
|
Lease
liabilities
|
|
Lease
payments
|
Finance
charges
|
Lease
liabilities
|
Current
|
|
|
|
|
|
|
|
|
Not later than one year
|
|
15,164
|
1,299
|
13,865
|
|
12,740
|
326
|
12,414
|
Non-current
|
|
|
|
|
|
|
|
|
Later than one year and not later
than five years
|
30,546
|
2,189
|
28,357
|
|
26,491
|
1,447
|
25,044
|
Later than five years
|
|
4,900
|
150
|
4,750
|
|
5,317
|
256
|
5,061
|
|
|
35,446
|
2,339
|
33,107
|
|
31,808
|
1,703
|
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:
|
|
2023
|
2022
|
Lease payments not recognised as a
liability
|
|
€'000
|
€'000
|
|
|
|
|
Short-term leases
|
|
2,550
|
2,140
|
Leases of low value
assets
|
|
-
|
-
|
|
|
2,550
|
2,140
|
|
|
|
|
The future minimum lease payments related to these
leases
|
|
|
|
Not later than one year
|
|
1,081
|
1,282
|
Later than one year and not later
than five years
|
|
-
|
-
|
Later than five years
|
|
-
|
-
|
|
|
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.
20 Employee
Defined Benefit Plans
|
|
2023
|
2022
|
|
|
€'000
|
€'000
|
Liabilities under Employee defined
benefit plans
|
|
4,030
|
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:
|
|
|
2023
|
2023
|
2023
|
2022
|
2022
|
2022
|
|
|
|
€'000
|
€'000
|
€'000
|
€'000
|
€'000
|
€'000
|
|
|
|
|
|
|
Restated
|
Restated
|
Restated
|
|
|
|
Assets
|
Liabilities
|
Net
|
Assets
|
Liabilities
|
Net
|
Employee defined benefit
plans
|
|
|
125
|
10
|
115
|
308
|
124
|
184
|
Unused tax losses
|
|
|
13,417
|
-
|
13,417
|
10,664
|
13
|
10,651
|
Provisions
|
|
|
466
|
43
|
423
|
258
|
-
|
258
|
Property, plant and
equipment
|
|
|
780
|
1,715
|
(935)
|
1,092
|
1,983
|
(891)
|
Multimedia tax credits / video
games tax relief
|
171
|
6,406
|
(6,235)
|
-
|
3,879
|
(3,879)
|
Share-based payments
|
|
|
15,591
|
-
|
15,591
|
8,879
|
2,091
|
6,788
|
Goodwill
|
|
|
21,159
|
-
|
21,159
|
18,176
|
-
|
18,176
|
Customer relationships
|
|
|
-
|
21,091
|
(21,091)
|
-
|
17,147
|
(17,147)
|
Right of use assets and Lease
liabilities
|
|
9,867
|
9,867
|
-
|
8,400
|
8,400
|
-
|
Offset where legally enforceable
right of set off exists
|
(28,825)
|
(28,825)
|
-
|
(16,620)
|
(16,620)
|
-
|
|
|
|
32,751
|
10,307
|
22,444
|
31,157
|
17,017
|
14,140
|
|
|
01
January 2022*
|
Recognised in the income statement (note 7)*
|
Recognised in business combinations (note 27)*
|
31 December
2022*
|
Recognised in the income
statement (note 7)
|
Recognised in business
combinations (note 11, 27)
|
31 December
2023
|
|
|
Restated
|
Restated
|
Restated
|
Restated
|
|
|
|
|
|
€'000
|
€'000
|
€'000
|
€'000
|
€'000
|
€'000
|
€'000
|
Employee defined benefit
plans
|
|
328
|
(144)
|
-
|
184
|
(69)
|
-
|
115
|
Unused tax losses
|
|
1,077
|
1,000
|
8,574
|
10,651
|
(201)
|
2,967
|
13,417
|
Provisions
|
|
222
|
36
|
-
|
258
|
165
|
-
|
423
|
Property, plant and
equipment
|
|
116
|
(1,007)
|
-
|
(891)
|
(44)
|
-
|
(935)
|
Multimedia tax credits / video
games tax relief
|
(3,570)
|
(309)
|
-
|
(3,879)
|
(2,356)
|
-
|
(6,235)
|
Share-based payments
|
|
3,796
|
2,992
|
-
|
6,788
|
8,803
|
-
|
15,591
|
Goodwill
|
|
11,551
|
(194)
|
6,819
|
18,176
|
(2,030)
|
5,013
|
21,159
|
Customer relationships
|
|
(5,892)
|
2,086
|
(13,341)
|
(17,147)
|
7,159
|
(11,103)
|
(21,091)
|
|
|
7,628
|
4,460
|
2,052
|
14,140
|
11,427
|
(3,123)
|
22,444
|
Other amounts recognised in the income
statement:
|
|
|
|
|
|
|
Effect of tax rate
change
|
|
|
(13)
|
|
|
|
|
|
Adjustment in respect of prior
years
|
|
|
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.
|
|
Deferred tax
assets
|
Deferred tax
liabilities
|
Retained
earnings
|
|
|
€'000
|
€'000
|
€'000
|
At 31 December 2022 - as
reported
|
|
22,757
|
8,617
|
143,627
|
Adoption of Deferred Tax related
to Assets and Liabilities arising from a Single Transaction
(Amendments to IAS 12)
|
|
8,400
|
8,400
|
-
|
At 31 December 2022 - as restated
|
|
31,157
|
17,017
|
143,627
|
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
|
24-Jan-22
|
30.78
|
20,585
|
(20,585)
|
-
|
(634)
|
-
|
633
|
Heavy Iron
|
03-Feb-22
|
31.84
|
12,914
|
(12,914)
|
-
|
(411)
|
-
|
411
|
Heavy Iron related
adjustment
|
03-Feb-22
|
31.84
|
53
|
-
|
-
|
-
|
-
|
-
|
Jinglebell
|
11-Mar-22
|
25.94
|
11,564
|
(11,564)
|
-
|
(300)
|
-
|
300
|
Tantalus Media
|
04-Jul-22
|
31.03
|
28,473
|
-
|
-
|
-
|
884
|
-
|
Forgotten Empires
|
28-Jul-22
|
28.41
|
-
|
60,857
|
-
|
1,729
|
-
|
-
|
Forgotten Empires
|
28-Jul-22
|
27.44
|
-
|
26,881
|
-
|
738
|
-
|
-
|
Mighty Games
|
03-Aug-22
|
28.74
|
-
|
28,443
|
-
|
817
|
-
|
-
|
Climax Studios
|
08-Aug-22
|
28.71
|
135,559
|
-
|
2
|
-
|
-
|
3,889
|
AMC
|
31-Aug-22
|
33.49
|
25,081
|
(25,081)
|
-
|
(840)
|
-
|
840
|
Smoking Gun
|
05-Oct-22
|
25.78
|
-
|
107,025
|
-
|
2,759
|
-
|
-
|
Mighty Games
|
25-Oct-22
|
28.74
|
28,443
|
(28,443)
|
-
|
(817)
|
817
|
-
|
Smoking Gun
|
25-Oct-22
|
25.78
|
107,025
|
(107,025)
|
2
|
(2,759)
|
-
|
2,758
|
G-Net Media
|
25-Nov-22
|
33.56
|
114,038
|
-
|
2
|
-
|
-
|
4,147
|
Acquisition-related issuance of shares
|
|
|
483,735
|
17,594
|
6
|
282
|
1,701
|
12,978
|
Employee Share Purchase
Plan
|
|
|
33,372
|
-
|
-
|
-
|
909
|
-
|
Exercise of share
options
|
|
|
1,197,175
|
-
|
14
|
-
|
5,862
|
-
|
At 31 December 2022
|
|
|
77,990,057
|
87,738
|
924
|
2,467
|
47,021
|
286,655
|
Acquisition-related issuance of shares:
|
|
|
|
|
|
|
|
|
Heavy Iron
|
20-Jan-23
|
34.67
|
93,856
|
-
|
1
|
-
|
-
|
3,254
|
Climax Studios
|
17-Feb-23
|
27.18
|
21,428
|
-
|
-
|
-
|
-
|
582
|
Waste Creative
|
15-Mar-23
|
31.52
|
26,600
|
-
|
-
|
-
|
-
|
838
|
Digital Media
Management
|
29-Mar-23
|
30.92
|
-
|
301,170
|
-
|
9,311
|
-
|
-
|
Digital Media
Management
|
06-Apr-23
|
30.92
|
301,170
|
(301,170)
|
3
|
(9,311)
|
-
|
9,308
|
Hardsuit Labs
|
10-May-23
|
28.17
|
-
|
53,482
|
-
|
1,507
|
-
|
-
|
Hardsuit Labs
|
30-May-23
|
28.17
|
53,482
|
(53,482)
|
1
|
(1,507)
|
-
|
1,506
|
Tantalus Media
|
15-Jun-23
|
27.48
|
191,722
|
-
|
2
|
-
|
5,986
|
-
|
Playboss Interactive
|
30-Jun-23
|
24.48
|
-
|
13,118
|
-
|
321
|
-
|
-
|
Forgotten Empires LLC
|
03-Aug-23
|
28.41
|
60,856
|
(60,856)
|
1
|
(1,729)
|
-
|
1,728
|
Forgotten Empires LLC
|
03-Aug-23
|
30.72
|
59,559
|
-
|
1
|
-
|
-
|
1,828
|
Forgotten Software SL
|
03-Aug-23
|
27.45
|
26,881
|
(26,881)
|
-
|
(738)
|
-
|
738
|
Mighty Games
|
21-Nov-23
|
18.58
|
2,585
|
-
|
-
|
-
|
49
|
-
|
Kantan
|
12-Dec-23
|
32.56
|
12,254
|
-
|
1
|
-
|
-
|
400
|
Acquisition-related issuance of shares
|
|
|
850,393
|
(74,619)
|
10
|
(2,146)
|
6,035
|
20,182
|
Exercise of share
options
|
|
|
446,786
|
-
|
5
|
-
|
1,462
|
-
|
At 31 December 2023
|
|
|
79,287,236
|
13,119
|
939
|
321
|
54,518
|
306,837
|
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")
|
|
2023
|
2022
|
|
|
Shares
|
€'000
|
Shares
|
€'000
|
Carrying amount at the beginning of the
year
|
|
-
|
-
|
-
|
-
|
Company funded acquisition of
shares
|
|
748,655
|
14,846
|
-
|
-
|
Utilization for the exercise of
share-based payment plans
|
|
(340,170)
|
(8,072)
|
-
|
-
|
Carrying amount at the end of the year
|
|
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.
|
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:
|
|
2023
|
2022
|
|
|
€'000
|
€'000
|
Share option scheme
expense
|
|
1,354
|
2,689
|
LTIP option scheme
expense
|
|
20,485
|
15,888
|
Employee Share Purchase
Plan
|
|
125
|
101
|
Share-based payments
expense
|
|
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
|
|
19.79
|
(125,282)
|
|
19.17
|
(133,323)
|
Exercised
|
|
14.71
|
(102,197)
|
|
7.88
|
(704,426)
|
Outstanding at the end of the
period
|
|
18.99
|
1,358,340
|
|
18.78
|
1,585,819
|
Exercisable at the end of the
period
|
|
17.45
|
873,025
|
|
15.19
|
481,319
|
Weighted average share price at
date of exercise
|
|
25.87
|
|
|
23.57
|
|
Summary by year
Year of Option
|
2016
|
2017
|
2018
|
2019
|
2020
|
2021
|
2022
|
2023
|
Total
|
Exercise price
|
£2.54
|
£7.76
|
£17.10
|
£15.88
|
£15.93
|
£25.48
|
-
|
-
|
|
Outstanding at the beginning of
the period
|
14,339
|
41,550
|
151,519
|
320,650
|
546,350
|
511,411
|
-
|
-
|
1,585,819
|
Granted
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
Lapsed
|
(6,938)
|
-
|
-
|
(9,500)
|
(48,427)
|
(60,417)
|
-
|
-
|
(125,282)
|
Exercised
|
(7,401)
|
(6,800)
|
(22,845)
|
(36,428)
|
(28,723)
|
-
|
-
|
-
|
(102,197)
|
Outstanding at the end of the
period
|
-
|
34,750
|
128,674
|
274,722
|
469,200
|
450,994
|
-
|
-
|
1,358,340
|
Exercisable at 31 December
2023
|
-
|
34,750
|
128,674
|
274,722
|
280,700
|
154,179
|
-
|
-
|
873,025
|
Exercisable 2024
|
-
|
-
|
-
|
-
|
188,500
|
148,408
|
-
|
-
|
336,908
|
Exercisable 2025
|
-
|
-
|
-
|
-
|
-
|
148,407
|
-
|
-
|
148,407
|
Exercisable 2026
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
Exercisable 2027
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
The inputs into the Black-Scholes
model, used to value the options, are as follows:
Year of Option
|
2016
|
2017
|
2018
|
2019
|
2020
|
2021
|
2022
|
2023
|
Weighted
average
|
Weighted average share price
(£)
|
£2.54
|
£7.75
|
£17.22
|
£16.09
|
£16.00
|
£26.42
|
-
|
-
|
|
Weighted average exercise price
(£)
|
£2.54
|
£7.76
|
£17.10
|
£15.88
|
£15.93
|
£25.48
|
-
|
-
|
|
Fair value at measurement date
(€)
|
€0.40
|
€1.13
|
€3.79
|
€5.72
|
€6.06
|
€9.32
|
-
|
-
|
|
Average expected life
|
4
Years
|
4
Years
|
4
Years
|
4
Years
|
4
Years
|
4
Years
|
-
|
-
|
|
Expected volatility
|
27.17%
|
24.79%
|
35.87%
|
45.23%
|
50.15%
|
47.70%
|
-
|
-
|
|
Risk-free rates
|
0.58%
|
0.16%
|
0.89%
|
0.81%
|
0.07%
|
0.15%
|
-
|
-
|
|
Average expected dividend
yield
|
0.55%
|
0.21%
|
0.10%
|
0.10%
|
0.10%
|
0.10%
|
-
|
-
|
|
Weighted average remaining life of
options in months
|
-
|
-
|
-
|
-
|
4
|
16
|
-
|
-
|
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:
|
|
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
|
|
0.01
|
3,648,173
|
|
0.01
|
3,704,898
|
Granted
|
|
0.01
|
720,680
|
|
0.01
|
901,690
|
Lapsed
|
|
0.01
|
(124,047)
|
|
0.01
|
(130,241)
|
Exercised
|
|
0.01
|
(615,373)
|
|
0.01
|
(828,174)
|
Outstanding at the end of the
period
|
|
0.01
|
3,629,433
|
|
0.01
|
3,648,173
|
Exercisable at the end of the
period
|
|
0.01
|
1,276,229
|
|
0.01
|
741,212
|
Weighted average share price at
date of exercise
|
|
21.96
|
|
|
24.73
|
|
Summary by year
Year of Option
|
2016
|
2017
|
2018
|
2019
|
2020
|
2021
|
2022
|
2023
|
Total
|
Exercise price
|
£0.01
|
£0.01
|
£0.01
|
£0.01
|
£0.01
|
£0.01
|
£0.01
|
£0.01
|
|
Outstanding at the beginning of
the period
|
21,688
|
44,743
|
186,000
|
488,781
|
1,170,790
|
845,307
|
890,864
|
-
|
3,648,173
|
Granted
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
720,680
|
720,680
|
Lapsed
|
-
|
-
|
-
|
-
|
(25,400)
|
(49,500)
|
(41,750)
|
(7,397)
|
(124,047)
|
Exercised
|
(21,688)
|
(14,000)
|
(51,572)
|
(169,738)
|
(353,375)
|
(2,500)
|
(2,500)
|
-
|
(615,373)
|
Outstanding at the end of the
period
|
-
|
30,743
|
134,428
|
319,043
|
792,015
|
793,307
|
846,614
|
713,283
|
3,629,433
|
Exercisable at 31 December
2023
|
-
|
30,743
|
134,428
|
319,043
|
792,015
|
-
|
-
|
-
|
1,276,229
|
Exercisable 2024
|
-
|
-
|
-
|
-
|
-
|
793,307
|
-
|
-
|
793,307
|
Exercisable 2025
|
-
|
-
|
-
|
-
|
-
|
-
|
846,614
|
-
|
846,614
|
Exercisable 2026
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
713,283
|
713,283
|
The inputs into the Monte Carlo
binomial model, used to value the options, are as
follows:
Year of Option
|
2016
|
2017
|
2018
|
2019
|
2020
|
2021
|
2022
|
2023
|
Weighted
average
|
Weighted average share price
(£)
|
£2.56
|
£7.75
|
£17.24
|
£16.05
|
£16.00
|
£26.42
|
£22.31
|
£22.46
|
|
Weighted average exercise price
(£)
|
£0.01
|
£0.01
|
£0.01
|
£0.01
|
£0.01
|
£0.01
|
£0.01
|
£0.01
|
|
Fair value at measurement date
(€)
|
€1.74
|
€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
|
27.11%
|
24.79%
|
35.87%
|
45.26%
|
50.15%
|
47.70%
|
41.22%
|
38.05%
|
|
Risk-free rates
|
0.54%
|
0.16%
|
0.89%
|
0.81%
|
0.07%
|
0.13%
|
1.59%
|
3.58%
|
|
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:
|
|
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
|
|
0.01
|
259,623
|
|
0.01
|
26,738
|
Granted
|
|
0.01
|
622,627
|
|
0.01
|
237,676
|
Lapsed
|
|
0.01
|
(31,509)
|
|
0.01
|
(953)
|
Vested
|
|
0.01
|
(8,150)
|
|
0.01
|
(3,838)
|
Outstanding at the end of the
period
|
|
0.01
|
842,591
|
|
0.01
|
259,623
|
Summary by year
Year of Option
|
|
|
|
|
|
2021
|
2022
|
2023
|
Total
|
Exercise price
|
|
|
|
|
|
£0.01
|
£0.01
|
£0.01
|
|
Outstanding at the beginning of
the period
|
|
|
|
|
|
24,147
|
235,476
|
-
|
259,623
|
Granted
|
|
|
|
|
|
-
|
-
|
622,627
|
622,627
|
Lapsed
|
|
|
|
|
|
-
|
(22,105)
|
(9,404)
|
(31,509)
|
Vested
|
|
|
|
|
|
(953)
|
(7,197)
|
-
|
(8,150)
|
Outstanding at the end of the
period
|
|
|
|
|
|
23,194
|
206,174
|
613,223
|
842,591
|
Vesting 2024
|
|
|
|
|
|
23,194
|
203,635
|
-
|
226,829
|
Vesting 2025
|
|
|
|
|
|
-
|
2,539
|
573,342
|
575,881
|
Vesting 2026
|
|
|
|
|
|
-
|
-
|
39,881
|
39,881
|
Details of the awards by year are
as follows:
Year of Option
|
|
|
|
|
|
2021
|
2022
|
2023
|
Weighted
average
|
Weighted average share price
(£)
|
|
|
|
|
|
£27.40
|
£22.41
|
£22.08
|
|
Weighted average exercise price
(£)
|
|
|
|
|
|
£0.01
|
£0.01
|
£0.01
|
|
Fair value at measurement date
(€)
|
|
|
|
|
|
€32.08
|
€26.47
|
€25.41
|
|
Average expected life
|
|
|
|
|
|
3
Years
|
2
Years
|
3
Years
|
|
Weighted average remaining life of
options in months
|
|
|
|
|
|
8
|
5
|
23
|
18
|
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:
|
|
1%
|
1%
|
1%
|
1%
|
|
|
Strengthening
|
Weakening
|
Strengthening
|
Weakening
|
|
|
2023
|
2023
|
2022
|
2022
|
|
|
€'000
|
€'000
|
€'000
|
€'000
|
Interest expense
|
|
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
|
Not past
due
|
1-2 months past
due
|
More than 2 months past
due
|
|
|
€'000
|
€'000
|
€'000
|
€'000
|
At 31 December 2023
|
|
89,940
|
70,995
|
18,945
|
-
|
At 31 December 2022
|
|
81,563
|
59,532
|
16,803
|
5,228
|
A provision for doubtful debtors
is included within trade receivables and can be reconciled as
follows:
|
|
|
|
2023
|
2022
|
|
|
|
|
€'000
|
€'000
|
Provision at the beginning of the
year
|
|
|
|
3,449
|
1,768
|
Impairment of financial assets
(trade receivables) charged to administration expenses
|
|
531
|
1,733
|
Foreign exchange movement in the
year
|
|
|
|
275
|
79
|
Recognition on acquisition of
subsidiaries
|
|
|
|
331
|
-
|
Utilised
|
|
|
|
(337)
|
(131)
|
Provision at the end of the
year
|
|
|
|
4,249
|
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.
|
|
Total
|
Not past
due
|
1-2 months past
due
|
More than 2 months past
due
|
|
|
€'000
|
€'000
|
€'000
|
€'000
|
Trade receivables gross
|
|
94,189
|
71,712
|
19,680
|
2,797
|
Credit impaired
|
|
(3,307)
|
-
|
(538)
|
(2,769)
|
Expected credit losses
|
|
(942)
|
(717)
|
(197)
|
(28)
|
At 31 December 2023
|
|
89,940
|
70,995
|
18,945
|
-
|
|
|
|
|
|
|
|
|
Total
|
Not past
due
|
1-2 months past
due
|
More than 2 months past
due
|
|
|
€'000
|
€'000
|
€'000
|
€'000
|
Trade receivables gross
|
|
85,012
|
60,134
|
17,175
|
7,703
|
Credit impaired
|
|
(2,598)
|
-
|
(200)
|
(2,398)
|
Expected credit losses
|
|
(851)
|
(602)
|
(172)
|
(77)
|
At 31 December 2022
|
|
81,563
|
59,532
|
16,803
|
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:
|
|
Total
|
0-30 days
|
31-60 days
|
60+ days
|
|
|
€'000
|
€'000
|
€'000
|
€'000
|
At 31 December 2023
|
|
18,307
|
12,340
|
4,134
|
1,833
|
At 31 December 2022
|
|
13,220
|
10,124
|
3,096
|
-
|
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.
|
|
Total
|
0-30 days
|
31-60 days
|
60+ days
|
|
|
€'000
|
€'000
|
€'000
|
€'000
|
Accrued income from contracts with
customers gross
|
|
19,651
|
12,465
|
4,176
|
3,010
|
Credit impaired
|
|
(1,147)
|
-
|
-
|
(1,147)
|
Expected credit losses
|
|
(197)
|
(125)
|
(42)
|
(30)
|
At 31 December 2023
|
|
18,307
|
12,340
|
4,134
|
1,833
|
|
|
|
|
|
|
|
|
Total
|
0-30 days
|
31-60 days
|
60+ days
|
|
|
€'000
|
€'000
|
€'000
|
€'000
|
Accrued income from contracts with
customers gross
|
|
16,652
|
10,227
|
3,897
|
2,528
|
Credit impaired
|
|
(3,265)
|
-
|
(762)
|
(2,503)
|
Expected credit losses
|
|
(167)
|
(103)
|
(39)
|
(25)
|
At 31 December 2022
|
|
13,220
|
10,124
|
3,096
|
-
|
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.
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:
|
|
2023
|
2023
|
2022
|
2022
|
|
|
€'000
|
€'000
|
€'000
|
€'000
|
|
|
10%
Strengthening
|
10%
Weakening
|
10%
Strengthening
|
10%
Weakening
|
US dollar to euro
|
|
4,182
|
(4,617)
|
5,981
|
(4,894)
|
Sterling to euro
|
|
174
|
(254)
|
365
|
(299)
|
Canadian dollar to euro
|
|
301
|
(261)
|
591
|
(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
|
|
|
Total
|
|
Total
|
Within 1
year
|
1-2 years
|
2-5 years
|
Over 5
years
|
At 31 December 2023
|
|
€'000
|
|
€'000
|
€'000
|
€'000
|
€'000
|
€'000
|
Trade payables
|
|
14,294
|
|
14,294
|
14,294
|
-
|
-
|
-
|
Deferred and contingent
consideration (i)
|
55,825
|
|
89,347
|
53,653
|
33,764
|
1,930
|
-
|
Other payables
|
|
112,147
|
|
112,147
|
112,147
|
-
|
-
|
-
|
Loans and borrowings
|
|
127,380
|
|
127,380
|
-
|
-
|
127,380
|
-
|
Loan interest
|
|
-
|
|
26,418
|
8,806
|
8,806
|
8,806
|
-
|
Lease liabilities
|
|
46,972
|
|
50,609
|
15,164
|
11,117
|
19,428
|
4,900
|
Total
|
|
356,618
|
|
420,195
|
204,064
|
53,687
|
157,544
|
4,900
|
|
|
|
|
|
|
|
|
|
|
|
Carrying
value
|
|
Contractual cash flows
|
|
|
Total
|
|
Total
|
Within 1
year
|
1-2
years
|
2-5
years
|
Over 5
years
|
At 31 December 2022
|
|
€'000
|
|
€'000
|
€'000
|
€'000
|
€'000
|
€'000
|
Trade payables
|
|
15,878
|
|
15,878
|
15,878
|
-
|
-
|
-
|
Deferred and contingent
consideration (i)
|
63,253
|
|
66,598
|
45,115
|
20,031
|
1,452
|
-
|
Other payables
|
|
94,410
|
|
106,410
|
94,410
|
7,000
|
5,000
|
-
|
Loans and borrowings
|
|
51
|
|
51
|
45
|
6
|
-
|
-
|
Loan interest
|
|
-
|
|
2
|
2
|
-
|
-
|
-
|
Lease liabilities
|
|
42,519
|
|
44,548
|
12,740
|
9,267
|
17,224
|
5,317
|
Total
|
|
216,111
|
|
233,487
|
168,190
|
36,304
|
23,676
|
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
|
|
2023
|
2022
|
Group
|
|
€'000
|
€'000
|
Loans and borrowings (note
18)
|
|
127,380
|
51
|
Less: cash and cash
equivalents
|
|
(59,862)
|
(81,886)
|
Net debt / (net cash)
position
|
|
67,518
|
(81,835)
|
Total equity
|
|
599,039
|
557,091
|
Net debt / (net cash) to capital
ratio
|
|
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.
27 Business
Combinations
|
|
|
|
|
|
|
Digital Media Management
|
The Multiplayer
Group
|
Other
acquisitions
|
2023
|
2022
|
|
€'000
|
€'000
|
€'000
|
€'000
|
€'000
|
Details of goodwill and the fair value of net assets
acquired
|
|
|
|
|
|
Book value:
|
|
|
|
|
|
Property, plant and
equipment
|
608
|
2,492
|
362
|
3,462
|
422
|
Right of use assets
|
5,714
|
54
|
383
|
6,151
|
580
|
Trade and other receivables -
gross
|
3,321
|
6,800
|
2,702
|
12,823
|
6,145
|
Bad debt provision
|
(23)
|
(308)
|
-
|
(331)
|
-
|
Cash and cash
equivalents
|
14,296
|
9,025
|
3,628
|
26,949
|
5,401
|
Trade and other
payables
|
(1,340)
|
(2,928)
|
(787)
|
(5,055)
|
(4,762)
|
Deferred income
|
(1,120)
|
(4,240)
|
-
|
(5,360)
|
(3,461)
|
Lease liabilities
|
(5,714)
|
(54)
|
(383)
|
(6,151)
|
(580)
|
Book value of identifiable assets
and liabilities acquired
|
15,742
|
10,841
|
5,905
|
32,488
|
3,745
|
Fair value adjustments:
|
|
|
|
|
|
Identifiable intangible assets -
Customer relationships
|
22,148
|
21,200
|
2,511
|
45,859
|
34,695
|
Identifiable intangible assets -
Intellectual property
|
-
|
-
|
-
|
-
|
25,914
|
Deferred tax assets
|
-
|
-
|
5,013
|
5,013
|
15,393
|
Deferred tax
liabilities
|
(4,994)
|
(4,982)
|
(1,127)
|
(11,103)
|
(13,341)
|
Total fair value
adjustments
|
17,154
|
16,218
|
6,397
|
39,769
|
62,661
|
Net assets acquired
|
32,896
|
27,059
|
12,302
|
72,257
|
66,406
|
Goodwill from current year acquisitions
|
55,229
|
68,677
|
28,095
|
152,001
|
70,482
|
Total purchase consideration
|
88,125
|
95,736
|
40,397
|
224,258
|
136,888
|
% Share capital
acquired
|
100%
|
100%
|
100%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Details of purchase consideration and outflows from current
acquisitions
|
|
|
|
|
|
Cash
|
65,677
|
93,729
|
27,923
|
187,329
|
92,895
|
Equity instruments
|
9,311
|
-
|
1,507
|
10,818
|
-
|
Deferred cash
|
-
|
2,007
|
914
|
2,921
|
8,993
|
Deferred consideration contingent
on performance
|
13,137
|
-
|
9,732
|
22,869
|
28,957
|
Shares to be issued
|
-
|
-
|
321
|
321
|
6,043
|
Total purchase consideration
|
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
|
301,170
|
-
|
53,482
|
354,652
|
135,468
|
Fixed number of shares to be
issued
|
-
|
-
|
13,118
|
13,118
|
87,738
|
|
|
|
|
|
|
Net cash outflow arising on
acquisition:
|
|
|
|
|
|
Cash paid in the period
|
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
|
|
|
|
|
|
|
|
|
|
|
|
|
Details of pro forma revenues and profitability of current
acquisitions
|
|
|
|
|
|
Pre-acquisition revenue in
H1
|
6,413
|
19,648
|
5,644
|
31,705
|
19,329
|
Pre-acquisition revenue in
H2
|
-
|
19,453
|
-
|
19,453
|
12,070
|
Pre-acquisition revenue
|
6,413
|
39,101
|
5,644
|
51,158
|
31,399
|
Post-acquisition
revenue
|
19,165
|
1,165
|
18,894
|
39,224
|
9,106
|
Pro forma revenue
|
25,578
|
40,266
|
24,538
|
90,382
|
40,505
|
Pre-acquisition profit / (loss)
before tax
|
1,650
|
7,869
|
136
|
9,655
|
1,601
|
Post-acquisition profit / (loss)
before tax
|
2,154
|
290
|
5,144
|
7,588
|
3,440
|
Pro forma profit / (loss) before tax
|
3,804
|
8,159
|
5,280
|
17,243
|
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 €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.
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
|
USA
|
24-Nov-20
|
100%
|
251 Little Falls Drive,
Wilmington, New Castle, DE 19808, USA
|
47 Communications LLC
|
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
|
100%
|
4th Floor, 110 High Holborn,
London, WC1V 6JS, UK
|
AMC RO Studios S.R.L
|
Romania
|
11-Aug-21
|
100%
|
Stirbei Voda 36, etaj 1, sector 1,
Bucharest, Romania
|
Babel Media Limited *
|
UK
|
17-Feb-14
|
100%
|
4th Floor, 110 High Holborn,
London, WC1V 6JS, UK
|
Babel Media USA, Inc.
|
USA
|
17-Feb-14
|
100%
|
251 Little Falls Drive,
Wilmington, New Castle, DE 19808, USA
|
Bitsy SG Limited
|
UK
|
17-Aug-18
|
100%
|
4th Floor, 110 High Holborn,
London, WC1V 6JS, UK
|
Blindlight, LLC
|
USA
|
08-Jun-18
|
100%
|
1111 South Flower Street, Suite
101, Burbank, CA 91502, USA
|
Climax Development
Limited
|
UK
|
22-Apr-21
|
100%
|
4th Floor, 110 High Holborn,
London, WC1V 6JS, UK
|
Climax Studios Limited
|
UK
|
22-Apr-21
|
100%
|
4th Floor, 110 High Holborn,
London, WC1V 6JS, UK
|
Coconut Lizard LTD
|
UK
|
25-Jun-20
|
100%
|
4th Floor, 110 High Holborn,
London, WC1V 6JS, UK
|
Cord Worldwide LTD
|
UK
|
07-Apr-18
|
100%
|
4th Floor, 110 High Holborn,
London, WC1V 6JS, UK
|
d3t Development Limited
|
UK
|
30-Aug-18
|
100%
|
4th Floor, 110 High Holborn,
London, WC1V 6JS, UK
|
d3t LTD
|
UK
|
19-Oct-17
|
100%
|
4th Floor, 110 High Holborn,
London, WC1V 6JS, UK
|
Descriptive Video Works
Inc.
|
Canada
|
11-Jun-19
|
100%
|
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
|
Edugame Solutions Private
Limited
|
India
|
09-Oct-14
|
100%
|
3rd floor, Vardhman Orchard Plaza,
Plot No 4, LSC, West Enclave, Pitampura, New Delhi, 110034,
India
|
Electric Square Limited
|
UK
|
17-Aug-18
|
100%
|
4th Floor, 110 High Holborn,
London, WC1V 6JS, UK
|
Fire Without Smoke Inc
|
USA
|
29-May-18
|
100%
|
251 Little Falls Drive,
Wilmington, New Castle, DE 19808, USA
|
Fire Without Smoke LTD
|
UK
|
29-May-18
|
100%
|
4th Floor, 110 High Holborn,
London, WC1V 6JS, UK
|
Forgotten Empires LLC
|
USA
|
28-Jul-22
|
100%
|
8730 Cincinnati Dayton Rd. #1072,
West Chester, OH 45071, USA
|
Forgotten Software
S.L.U
|
Spain
|
28-Jul-22
|
100%
|
nº 1 - La Cala Del Moral Rincon De
La Victoria calle Murillo
|
GameSim Inc.
|
USA
|
16-May-17
|
100%
|
13501 Ingenuity Drive, Suite 310,
Orlando, FL 32826, USA
|
g-Net Media, Inc.
|
USA
|
24-Nov-20
|
100%
|
251 Little Falls Drive,
Wilmington, New Castle, DE 19808, USA
|
Hardsuit Labs, Inc
|
USA
|
10-May-23
|
100%
|
4025 Delridge Way SW, #210,
Seattle 98106, United States
|
Heavy Iron Studios, Inc
|
USA
|
12-Jan-21
|
100%
|
1600 Rosecrans Ave., Bldg 7 Ste
300, MBS Media Campus, Manhattan Beach CA, 90266, USA
|
Helpshift Inc
|
USA
|
15-Dec-22
|
100%
|
343 Sansome Street, Suite 500, San
Francisco, California, 94104, USA
|
Helpshift Information Technology
(Shanghai) Co. Ltd
|
China
|
15-Dec-22
|
100%
|
Southwest Area, 3rd Floor, No.
2123 Pudong Avenue, Shanghai, China
|
Helpshift Technologies Private
Limited
|
India
|
15-Dec-22
|
100%
|
3rd floor, Vardhman Orchard Plaza,
Plot No 4, LSC, West Enclave, Pitampura, New Delhi, 110034,
India
|
Keywords UK Limited (formerly
Helpshift UK Ltd)
|
UK
|
15-Dec-22
|
100%
|
4th Floor, 110 High Holborn,
London, WC1V 6JS, UK
|
High Voltage Software,
Inc.
|
USA
|
14-Dec-20
|
100%
|
2345 Pembroke Ave., Hoffman
Estates, IL 60169, USA
|
HVS Nola LLC
|
USA
|
14-Dec-20
|
100%
|
201 St. Charles Ave., Suite 2220,
New Orleans, LA 70170, USA
|
Ichi LTD
|
UK
|
26-Nov-19
|
100%
|
4th Floor, 110 High Holborn,
London, WC1V 6JS, UK
|
Indigo Pearl Limited
|
UK
|
15-Dec-20
|
100%
|
4th Floor, 110 High Holborn,
London, WC1V 6JS, UK
|
Itsy SGD Limited
|
UK
|
17-Aug-18
|
100%
|
4th Floor, 110 High Holborn,
London, WC1V 6JS, UK
|
Jinglebell S.r.l.
|
Italy
|
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
|
China
|
02-Apr-15
|
100%
|
Room 701, Building 5, No.860 Dong
Ti Yu Hui Road, Hongkou District, Shanghai, China
|
Keywords Asia Private
Limited
|
Singapore
|
15-Mar-16
|
100%
|
20 Kallang Avenue, #06-6A, Lobby
B, Pico Creative Centre, 339411, Singapore
|
Keywords Australia Holdings
Limited
|
UK
|
17-Mar-21
|
100%
|
4th Floor, 110 High Holborn,
London, WC1V 6JS, UK
|
Keywords Australia Pty Limited
~
|
Australia
|
18-Mar-21
|
85%
|
12 Spring Street, Fitzroy,
Victoria, 3065, Australia
|
Keywords Canada Holdings
Inc.
|
Canada
|
27-Oct-17
|
100%
|
1751 Richardson, Suite 8400,
Montreal, QC H3K 1G6, Canada
|
Keywords do Brasil Localização e
Tradução Ltda
|
Brazil
|
18-Jan-15
|
100%
|
Rua Professor Aprígio Gonzaga, 35
- 7º andar - São Judas - São Paulo - SP CEP: 04303-000,
Brazil
|
Keywords Germany Holdings
GmbH
|
Germany
|
06-Sep-19
|
100%
|
Moriz-Seeler-Strasse 5-7, Franz
Ehrlich Haus, 12489, Berlin, Germany
|
Keywords International Co.,
Limited.
|
Japan
|
30-Nov-10
|
100%
|
1-22-19 Izumi, Suginami-ku, Tokyo,
168-0063 Japan
|
Keywords International Limited
*
|
Ireland
|
13-May-98
|
100%
|
Whelan House, South County
Business Park, Leopardstown, Dublin 18, D18 T9P8,
Ireland
|
Keywords International Pte.
Limited
|
Singapore
|
24-Apr-14
|
100%
|
20 Kallang Avenue, #06-6A, Lobby
B, Pico Creative Centre, 339411, Singapore
|
Keywords International,
Inc.
|
USA
|
26-Sep-12
|
100%
|
251 Little Falls Drive,
Wilmington, New Castle, DE 19808, USA
|
Keywords Sperasoft LLC
|
Armenia
|
07-Apr-22
|
100%
|
18/1 Vardanants str., 3rd floor,
Yerevan 0010, Armenia
|
Keywords Studios B.C.,
Inc.
|
Canada
|
27-Oct-17
|
100%
|
2700 Commerce Place 10155 - 102
Street, Edmonton, AB, T5J 4G8
|
Keywords Studios d.o.o.
Beograd
|
Serbia
|
18-May-22
|
100%
|
Belgrade, BULEVAR MIHAJLA PUPINA
10L, floor 9, Belgrade-New Belgrade, NEW BELGRADE, 11070,
Serbia
|
Keywords Studios France
SAS
|
France
|
08-Jun-16
|
100%
|
59 Boulevard Exelmans, 75016
Paris, France
|
Keywords Studios India Private
Limited
|
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
|
South Korea
|
11-Jan-21
|
100%
|
16th Floor, Gangnam Building,
1321-1, Seocho-dong, Seocho-gu, Seoul 137-070, South
Korea
|
Keywords Studios Los Angeles,
Inc.
|
USA
|
08-May-14
|
100%
|
1115 Flower Street, Burbank, CA
91502, USA
|
Keywords Studios Malta
Limited
|
Malta
|
04-May-22
|
100%
|
Level 3, Valletta Buildings, South
Street, Valletta VLT 1103, Malta
|
Keywords Studios México, S. de
R.L. de C.V.
|
Mexico
|
16-Jul-15
|
100%
|
Torrente #75, Colonia Ampliación
Alpes, Del. Álvaro Obregón, CP. 01710, Ciudad de México,
México
|
Keywords Studios Netherlands
B.V.
|
Netherlands
|
05-Feb-19
|
100%
|
Van Limburg Stirumstraat 19,
Hilversum 1215HP, The Netherlands
|
Keywords Studios Poland Spolka
z.o.o.
|
Poland
|
04-Feb-21
|
100%
|
11 Ul. Na Zjezdzie, Krakow 30-527,
Poland
|
Keywords Studios QC-Games
Inc.
|
Canada
|
17-Feb-14
|
100%
|
1751 Richardson, Suite 8400,
Montreal, QC H3K 1G6, Canada
|
Keywords Studios QC-Interactive
Inc.
|
Canada
|
16-Nov-16
|
100%
|
1751 Richardson, Suite 8400,
Montreal, QC H3K 1G6, Canada
|
Keywords Studios QC-Tech
Inc.
|
Canada
|
06-Jan-15
|
100%
|
1751 Richardson, Suite 8400,
Montreal, QC H3K 1G6, Canada
|
Keywords Studios Romania
S.R.L.
|
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
|
100%
|
Julián Camarillo 6A, 3B, 28037
Madrid, Spain
|
Keywords Studios Texas,
LLC
|
USA
|
22-Jan-20
|
100%
|
7800 Shoal Creek Blvd. Suite 240S,
Austin, Texas 78757, USA
|
Keywords Studios Unlimited Company
*
|
Ireland
|
27-Mar-18
|
100%
|
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
|
Ireland
|
30-Nov-22
|
100%
|
Whelan House, South County
Business Park, Leopardstown, Dublin 18, D18 T9P8,
Ireland
|
Keywords UK Holdings
Limited
|
UK
|
28-Mar-18
|
100%
|
4th Floor, 110 High Holborn,
London, WC1V 6JS, UK
|
Keywords US Holdings
Inc.
|
USA
|
23-Oct-17
|
100%
|
251 Little Falls Drive,
Wilmington, New Castle, DE 19808, USA
|
Keywords Ventures
Limited
|
UK
|
06-Apr-18
|
100%
|
4th Floor, 110 High Holborn,
London, WC1V 6JS, UK
|
Laboratorio Comunicazione
S.r.l.
|
Italy
|
04-Nov-22
|
100%
|
Via Egadi 2, Milano, MI, 20144,
Italy
|
Laced Music LTD
|
UK
|
07-Apr-18
|
100%
|
4th Floor, 110 High Holborn,
London, WC1V 6JS, UK
|
Laced Publishing
Limited
|
UK
|
07-Apr-18
|
100%
|
4th Floor, 110 High Holborn,
London, WC1V 6JS, UK
|
Lakshya Digital Private Limited
*
|
India
|
09-Oct-14
|
100%
|
3rd floor, Vardhman Orchard Plaza,
Plot No 4, LSC, West Enclave, Pitampura, New Delhi, 110034,
India
|
Lakshya Digital Singapore Pte.
Limited
|
Singapore
|
09-Oct-14
|
100%
|
20 Kallang Avenue, #06-6A, Lobby
B, Pico Creative Centre, 339411, Singapore
|
Liquid Development, LLC
|
USA
|
19-Aug-15
|
100%
|
411 SW 2nd Ave Ste 300, Portland,
OR 97204, USA
|
Liquid Violet LTD *
|
UK
|
15-Jan-14
|
100%
|
4th Floor, 110 High Holborn,
London, WC1V 6JS, UK
|
Lonsdale Miller Limited
|
UK
|
15-Dec-20
|
100%
|
4th Floor, 110 High Holborn,
London, WC1V 6JS, UK
|
Maverick Media Limited
|
UK
|
27-Aug-20
|
100%
|
4th Floor, 110 High Holborn,
London, WC1V 6JS, UK
|
Mighty Developments Pty Limited
~~
|
Australia
|
03-Aug-22
|
85%
|
422 Brunswick Street, Fitzroy, VIC
3065, Australia
|
Mighty Games Group Pty Limited
~~
|
Australia
|
03-Aug-22
|
85%
|
422 Brunswick Street, Fitzroy, VIC
3065, Australia
|
Mighty Games Productions Pty
Limited ~~
|
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
|
100%
|
400-981 Wellington Street West,
Ottawa, Ontario, K1Y 2Y1, Canada
|
Sperasoft Poland Spólka
z.o.o.
|
Poland
|
13-Dec-17
|
100%
|
Kraj Polska, woj. Małopolskie,
powiat Kraków, miejsc. Kraków, ul. Na Kozłóce 27 30-664 Kraków,
Poland
|
Sperasoft Studios LLC
|
Russia
|
13-Dec-17
|
100%
|
196084, Russia, Saint-Petersburg,
Kievskaya street, 5 - building
|
Sperasoft, Inc.
|
USA
|
13-Dec-17
|
100%
|
251 Little Falls Drive,
Wilmington, New Castle, DE 19808, USA
|
SperaSystems LLC
|
USA
|
13-Dec-17
|
100%
|
2033 Gateway Pl Ste 500 San Jose,
CA 95110-3712, USA
|
SPOV Limited
|
UK
|
16-Feb-17
|
100%
|
4th Floor, 110 High Holborn,
London, WC1V 6JS, UK
|
Strongbox Limited
|
Seychelles
|
19-May-17
|
100%
|
306 Victoria House, Victoria,
Mahe, Seychelles
|
Studio Gobo Limited
|
UK
|
17-Aug-18
|
100%
|
4th Floor, 110 High Holborn,
London, WC1V 6JS, UK
|
Sunny Side Up Creative
Inc.
|
Canada
|
03-Jan-19
|
100%
|
1751 Richardson, Suite 8400,
Montreal, QC H3K 1G6, Canada
|
Synthesis Deutschland GmbH
*
|
Germany
|
12-Apr-16
|
100%
|
Holstenkamp 46 A, Bahrenfeld,
22525 Hamburg, Germany
|
Synthesis Global Solutions SA
*
|
Switzerland
|
12-Apr-16
|
100%
|
Corso Elvezia 16, 6900 Lugano,
Ticino, Switzerland
|
Tantalus Media Pty Limited
~
|
Australia
|
18-Mar-21
|
85%
|
12 Spring Street, Fitzroy,
Victoria, 3065, Australia
|
The Multiplayer Games Group
(Spain) S.R.L
|
Spain
|
16-Dec-23
|
100%
|
Calle Ferraz 11, 2nd Floor, left,
Madrid, 28008
|
The Multiplayer Group
(Canada) Inc.
|
Canada
|
16-Dec-23
|
100%
|
2700-10155, 102 Street NW,
Edmonton, Alberta, T5J 4G8.
|
The Multiplayer Group
Ltd
|
UK
|
16-Dec-23
|
100%
|
4th Floor, 110 High Holborn,
London, WC1V 6JS, UK
|
The Sound Lab LLC
|
USA
|
29-Sep-22
|
100%
|
3830 Monte Villa Parkway, Suite
200, Bothell, WA 98021
|
The Trailerfarm Limited
|
UK
|
13-Sep-18
|
100%
|
4th Floor, 110 High Holborn,
London, WC1V 6JS, UK
|
TV+SYNCHRON Berlin GmbH
|
Germany
|
01-Oct-19
|
100%
|
Moriz-Seeler-Strasse 5-7, Franz
Ehrlich Haus, 12489, Berlin, Germany
|
Waste Creative Limited
|
UK
|
16-Dec-21
|
100%
|
4th Floor, 110 High Holborn,
London, WC1V 6JS, UK
|
Waste Holdings Limited
|
UK
|
16-Dec-21
|
100%
|
4th Floor, 110 High Holborn,
London, WC1V 6JS, UK
|
Wicked Witch Software Pty Limited
~~
|
Australia
|
20-Dec-21
|
85%
|
Level 5, 990 Whitehorse Road, Box
Hill, Melbourne, VIC 3128, Australia
|
Wizcorp Inc.
|
Japan
|
18-Apr-19
|
100%
|
1-22-19 Izumi, Suginami-ku, Tokyo,
168-0063 Japan
|
Xcelerator Machine Translations
Limited
|
Ireland
|
12-Dec-19
|
100%
|
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 re-structured entities. Restructuring details
are set out below:
Name
|
Country of incorporation
|
Date of incorporation / acquisition
|
Ownership
|
Date of re-structuring
|
Re-structuring details
|
PT Limitless Indonesia
|
Indonesia
|
19-May-17
|
100%
|
23-Aug-23
|
Dissolved
|
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.
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.
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.
|
|
2023
|
2023
|
2022
|
2023
|
2023
|
|
|
Revenue
|
Revenue
|
Revenue
|
Growth
|
Growth
|
|
|
AER
|
CER
|
AER
|
AER
|
CER
|
|
|
€m
|
€m
|
€m
|
%
|
%
|
Create
|
|
336.1
|
350.5
|
275.5
|
22.0%
|
27.2%
|
Globalize
|
|
279.5
|
287.9
|
300.9
|
(7.1)%
|
(4.3)%
|
Engage
|
|
164.8
|
171.1
|
114.3
|
44.2%
|
49.7%
|
|
|
780.4
|
809.5
|
690.7
|
13.0%
|
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.
|
|
|
|
2023
|
2023
|
2023
|
|
|
|
|
Revenue
|
Pre-acquisition
revenue
|
Pro forma
revenue
|
|
|
|
|
AER
|
AER
|
AER
|
|
|
|
|
€m
|
€m
|
€m
|
Create
|
|
|
|
336.1
|
43.8
|
379.9
|
Globalize
|
|
|
|
279.5
|
1.0
|
280.5
|
Engage
|
|
|
|
164.8
|
6.4
|
171.2
|
|
|
|
|
780.4
|
51.2
|
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.
|
2022
|
2022
|
2022
|
2023
|
2023
|
2023
|
|
Revenue
|
Pre-acquisition revenue
|
Like for
like revenue
|
Revenue
growth
|
Revenue
|
Organic revenue
growth
|
|
AER
|
AER
|
AER
|
CER
|
CER
|
CER
|
|
€m
|
€m
|
€m
|
€m
|
€m
|
%
|
Create
|
275.5
|
23.2
|
298.7
|
51.8
|
350.5
|
17.3%
|
Globalize
|
300.9
|
-
|
300.9
|
(13.0)
|
287.9
|
(4.3)%
|
Engage
|
114.3
|
52.9
|
167.2
|
3.9
|
171.1
|
2.3%
|
|
690.7
|
76.1
|
766.8
|
42.7
|
809.5
|
5.6%
|
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.
|
|
2023
|
2022
|
Calculation
|
|
€'000
|
€'000
|
Administrative expenses
|
Consolidated statement of
comprehensive income
|
(252,275)
|
(196,554)
|
Share-based payments
expense
|
Consolidated statement of
comprehensive income
|
21,964
|
18,678
|
Costs of acquisition and
integration
|
Consolidated statement of
comprehensive income
|
27,140
|
8,413
|
Amortisation of intangible
assets
|
Consolidated statement of
comprehensive income
|
26,060
|
16,810
|
Depreciation - property, plant and
equipment
|
Note 13
|
23,128
|
18,365
|
Depreciation - right of use
assets
|
Note 12
|
13,907
|
14,585
|
Bank charges
|
Note 6
|
(724)
|
(662)
|
Adjusted operating costs
|
|
(140,800)
|
(120,365)
|
Adjusted operating costs as a % of revenue
|
|
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.
|
|
2023
|
2022
|
Calculation
|
|
€'000
|
€'000
|
Operating profit
|
Consolidated statement of
comprehensive income
|
46,830
|
71,810
|
Share-based payments
expense
|
Consolidated statement of
comprehensive income
|
21,964
|
18,678
|
Costs of acquisition and
integration
|
Consolidated statement of
comprehensive income
|
27,140
|
8,413
|
Amortisation of intangible
assets
|
Consolidated statement of
comprehensive income
|
26,060
|
16,810
|
Other income
|
Consolidated statement of
comprehensive income
|
-
|
(1,098)
|
Adjusted operating
profit
|
|
121,994
|
114,613
|
Adjusted operating profit as a % of revenue
|
|
15.6%
|
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.
|
|
2023
|
2022
|
Calculation
|
|
€'000
|
€'000
|
Operating profit
|
Consolidated statement of
comprehensive income
|
46,830
|
71,810
|
Amortisation of intangible
assets
|
Consolidated statement of
comprehensive income
|
26,060
|
16,810
|
Depreciation - property plant and
equipment
|
Note 13
|
23,128
|
18,365
|
Depreciation - right of use
assets
|
Note 12
|
13,907
|
14,585
|
Bank charges
|
Note 6
|
(724)
|
(662)
|
EBITDA
|
|
109,201
|
120,908
|
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.
|
|
2023
|
2022
|
Calculation
|
|
€'000
|
€'000
|
EBITDA
|
As above
|
109,201
|
120,908
|
Share-based payments
expense
|
Consolidated statement of
comprehensive income
|
21,964
|
18,678
|
Costs of acquisition and
integration
|
Consolidated statement of
comprehensive income
|
27,140
|
8,413
|
Other income
|
Consolidated statement of
comprehensive income
|
-
|
(1,098)
|
Adjusted EBITDA
|
|
158,305
|
146,901
|
Adjusted EBITDA as a % of revenue
|
|
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.
|
|
2023
|
2022
|
Calculation
|
|
€'000
|
€'000
|
Profit before taxation
|
Consolidated statement of
comprehensive income
|
34,994
|
67,982
|
Share-based payments
expense
|
Consolidated statement of
comprehensive income
|
21,964
|
18,678
|
Costs of acquisition and
integration
|
Consolidated statement of
comprehensive income
|
27,140
|
8,413
|
Amortisation of intangible
assets
|
Consolidated statement of
comprehensive income
|
26,060
|
16,810
|
Foreign exchange (gain) /
loss
|
Note 6
|
1,232
|
(1,677)
|
Unwinding of discounted
liabilities - deferred consideration
|
Note 6
|
3,279
|
2,922
|
Other income
|
Consolidated statement of
comprehensive income
|
-
|
(1,098)
|
Adjusted profit before tax
|
|
114,669
|
112,030
|
Adjusted profit before tax as a % of
revenue
|
|
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.
|
|
2023
|
2022
|
Calculation
|
|
€'000
|
€'000
|
Adjusted profit before
tax
|
As above
|
114,669
|
112,030
|
Taxation
|
Consolidated statement of
comprehensive income
|
15,042
|
20,612
|
Effective tax rate before tax on adjusting
items
|
Taxation / Adjusted profit before
tax
|
13.1%
|
18.4%
|
Tax arising on bridging items to
Adjusted profit before tax^
|
|
10,539
|
4,043
|
Adjusted taxation
|
|
25,581
|
24,655
|
Adjusted effective tax rate
|
Adjusted taxation / Adjusted
profit before tax
|
22.3%
|
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.
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.
|
|
2023
|
2022
|
Calculation
|
|
€'000
|
€'000
|
Adjusted profit before
tax
|
As above
|
114,669
|
112,030
|
Taxation
|
Consolidated statement of
comprehensive income
|
(15,042)
|
(20,612)
|
Tax arising on bridging items to
Adjusted profit before tax^
|
|
(10,539)
|
(4,043)
|
Adjusted profit after
tax
|
|
89,088
|
87,375
|
|
|
|
|
Weighted average number of equity
shares
|
|
Number
|
Number
|
Basic
|
Note 8
|
78,910,471
|
76,979,596
|
Diluted
|
Note 8
|
79,995,267
|
80,481,897
|
|
|
|
|
Adjusted earnings per share
|
|
€ c
|
€
c
|
Basic
|
|
112.90
|
113.50
|
% growth
|
|
(0.5%)
|
27.2%
|
Diluted
|
|
111.37
|
108.56
|
% growth
|
|
2.6%
|
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.
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.
|
|
2023
|
2022
|
Calculation
|
|
€'000
|
€'000
|
Adjusted profit before
tax
|
As above
|
114,669
|
112,030
|
Interest received
|
Note 6
|
(614)
|
(309)
|
Bank charges
|
Note 6
|
724
|
662
|
Interest expense
|
Note 6
|
5,768
|
1,261
|
Unwinding of discounted
liabilities - lease liabilities
|
Note 6
|
1,447
|
969
|
Pre-acquisition profits of current
year acquisitions
|
Note 27
|
9,655
|
1,601
|
Adjusted profit before tax including pre-acquisition profit
and excluding net interest
|
|
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)
|
Note 11
|
76,617
|
58,301
|
Deferred and contingent
consideration
|
Note 17
|
55,825
|
63,253
|
Loans and borrowings
|
Note 18
|
127,380
|
51
|
Cash and cash
equivalents
|
Consolidated statement of
financial position
|
(59,862)
|
(81,886)
|
Capital employed
|
|
803,029
|
599,671
|
|
|
|
|
Return on capital employed
|
Adjusted profit before tax
including pre-acquisition profit and excluding net interest
expense / capital employed
|
16.4%
|
19.4%
|
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.
|
|
2023
|
2022
|
Calculation
|
|
€'000
|
€'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
|
8,413
|
Fair value adjustments to
contingent consideration
|
Consolidated statement of cash
flows
|
(300)
|
(2,282)
|
Non-cash movements in Deferred and
contingent
consideration related to continuous
employment
|
Consolidated statement of cash
flows
|
(8,877)
|
(3,000)
|
Fair value adjustments to
property, plant
and equipment
|
Note 5
|
(5,755)
|
-
|
Fair value adjustments to right of
use assets
|
Note 5
|
(2,041)
|
-
|
Other fair value movements within
Cost of acquisition and integration
|
Note 5
|
(2,677)
|
-
|
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)
|
(501)
|
Other income
|
Consolidated statement of
comprehensive income
|
-
|
(1,098)
|
Settlement of deferred and
contingent consideration related to continuous
employment
|
Consolidated statement of cash
flows
|
3,900
|
-
|
Interest received
|
Consolidated statement of cash
flows
|
614
|
309
|
Interest paid
|
Consolidated statement of cash
flows
|
(7,729)
|
(1,797)
|
Payments of principal on lease
liabilities
|
Consolidated statement of cash
flows
|
(15,038)
|
(11,361)
|
Free cash flow after tax
|
|
65,953
|
85,962
|
Taxation paid
|
Consolidated statement of cash
flows
|
20,853
|
17,505
|
Free cash flow before tax
|
|
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).
|
|
2023
|
2022
|
Calculation
|
|
€'000
|
€'000
|
Free cash flow before
tax
|
As above
|
86,806
|
103,467
|
Capital expenditure in excess of
depreciation:
|
|
|
|
Acquisition of property, plant and
equipment
|
Consolidated statement of cash
flows
|
30,689
|
27,007
|
Depreciation - property, plant and
equipment
|
Note 5
|
(23,128)
|
(18,365)
|
Capital expenditure in excess of
depreciation
|
|
7,561
|
8,642
|
Adjusted free cash flow
|
|
94,367
|
112,109
|
Adjusted cash conversion
rate
The Adjusted cash conversion rate
is the Adjusted free cash flow as a percentage of the Adjusted
profit before tax:
|
|
2023
|
2022
|
Calculation
|
|
€'000
|
€'000
|
Adjusted free cash flow
|
As above
|
94,367
|
112,109
|
Adjusted profit before
tax
|
As above
|
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.
|
|
2023
|
2022
|
Calculation
|
|
€'000
|
€'000
|
Loans and borrowings
|
Consolidated statement of
financial position
|
127,380
|
51
|
Cash and cash
equivalents
|
Consolidated statement of
financial position
|
(59,862)
|
(81,886)
|
Net debt / (net cash) position
|
|
67,518
|
(81,835)
|