KWS Keywords Studios Plc

28 June 2024

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

Change in Presentational Currency

Keywords Studios, the global provider of creative and technology-enabled solutions to the video games and entertainment industries, today announces that it has decided to change its presentational currency from euro to US Dollar with effect from 1 January 2024.

The Company has historically reported its results in euros due its revenues being solely euro denominated in the early stages of its development. As the business has grown into a global business, it now operates in a range of currencies, with the proportion of the Group's revenues originating in US dollars growing to c.60% in recent years. As such, the Board believes that the change in presentational currency will provide investors and other stakeholders with greater transparency of the Group's performance and reduced foreign exchange volatility.

Dividends will continue to be declared in sterling and will continue to follow the existing progressive dividend policy.

As noted above, the change in the Group's presentational currency will be effective from 1 January 2024. Consequently, the Group's first half results for the six-month period ending 30 June 2024, and all subsequent financial information, will be prepared using US dollars as the presentational currency.

The Group's primary consolidated financial statements, together with alternative performance measures, for the financial years ended 31 December 2022 and 31 December 2023, and for the half ended on 30 June 2023 (collectively the 'Restated Financial Information'), has been re-presented in US dollars and is set out herein for comparative purposes.

 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, Take-Two, 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).

Unaudited (Restated) Consolidated statement of comprehensive income

Unaudited (Restated) Consolidated statement of financial position

Unaudited (Restated) Consolidated statement of cash flows

Notes forming part of the unaudited (restated) consolidated financial statements

1                     Basis of Preparation

The unaudited (restated) financial information should be read in conjunction with the Annual Report and Accounts for the year ended 31 December 2023; and the interim financial information for the six months ended 30 June 2023 all of which have been prepared in accordance with International Financial Reporting Standards ('IFRS'). The statutory accounts for the year ended 31 December 2023 were approved by the directors on 13 March 2024.

2                     Presentation Currency

Keywords Studios plc (the "Group") will present its consolidated financial statements for the year ending 31 December 2024 in US Dollars. In accordance with IAS 8, Accounting Policies, Changes in Accounting Estimates and Errors, this change in presentation currency will be applied retrospectively.

The unaudited (restated) financial information included herein will form the basis of the comparative financial information to be included in the Annual Report and Accounts of the Group for the year ending 31 December 2024 and all published financial information from 1 January 2024 onwards.

In accordance with the provisions of IAS 21, the Effects of Changes in Foreign Exchange Rates, in respect of changes in presentational currency, financial information has been restated from Euro to US Dollars as follows:

•         assets and liabilities in non-US denominated currencies were translated into US dollars at the rates of exchange ruling at the relevant balance sheet date;

•         non-US dollar income statements and cash flows were translated into US dollars at average rates of exchange for the relevant period;

•         share capital, share premium and all other equity items were translated at the historical rates prevailing at 1 January 2013, the date of transition to IFRS, or the subsequent rates prevailing on the date of each relevant transaction; and

•         the cumulative foreign exchange translation reserve was set to zero on 1 January 2013, the date of transition to IFRS and this reserve has been restated on the basis that the Group has reported in US dollars since that date.

 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 Restated Alternative performance measures should be read in conjunction with the Annual Report and Accounts for the year ended 31 December 2023; and the interim financial information for the six months ended 30 June 2023.

Divisional analysis

The following table presents revenue growth by division at actual exchange rates ("AER").

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.

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 prior period foreign exchange rates to the current periods, when translating studio results into the US Dollar reporting currency.

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.  

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.

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.

​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.

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, 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.

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.

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 of the 2023 Annual Report and Accounts and in the interim financial information for the 6 months ended 30 June 2023.

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.

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.

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). 

Adjusted cash conversion rate

The Adjusted cash conversion rate is the Adjusted free cash flow as a percentage of the Adjusted profit before tax:

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.