REG - Keywords Studios PLC - Final Results <Origin Href="QuoteRef">KWS.L</Origin> - Part 2
04/04/2017 07:06
- Part 2: For the preceding part double click ID:nRSD4493Ba
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Shares issued upon acquisition - Player Research Ltd 1 - 331 - - - - - 332 - 332
Shares issued upon acquisition - Sonox Audio Solutions SL - - 149 - - - - - 149 - 149
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Contributions by and contributions to the owners 8 8,792 1,441 - - (630) 686 (2,195) 8,102 1,370 9,472
Balance at 31 December 2016 654 8,792 19,983 22,109 987 (1,434) 1,305 14,308 66,704 - 66,704
Consolidated statement of cash flows
Years ended 31 December
Note 2016 2015
E'000 E'000
Cash flows from operating activities
Profit/(loss) after tax 6,212 3,254
Income and expenses not affecting operating cash flows
Depreciation 1,803 1,297
Intangibles amortisation 1,629 857
Income tax expense 3,223 1,832
Share option expense 686 392
Loss on disposal of fixed assets - 20
Loss on payment of deferred consideration 264 194
Interest receivable (94) (70)
Actuarial Loss on Employee Benefit 63
Share Issuance Expenses - 14
Interest expense 152 128
Net Foreign Exchange Losses on investments 55 -
7,781 4,664
Changes in operating assets and liabilities
(Increase)/ Decrease in trade receivables (3,788) 29
(Increase)/ Decrease in other receivables 3,245 (2,533)
Increase/ (Decrease) in trade and other payables 3,718 (646)
3,175 (3,150)
Income taxes paid (2,129) (1,362)
Net cash provided by operating activities 15,039 3,406
Cash flows from investing activities
Acquisition of subsidiaries net of cash acquired (19,109) (7,409)
Acquisition of remaining 50% of Kite (1,000) -
Settlement of deferred liabilities on acquisitions (995) -
(Acquisition)/disposal of short term investments 27 232
Acquisition/disposal of property, plant and equipment (2,306) (1,635)
Interest received 6 94 70
EBT share purchase 2 (804)
Net cash used in investing activities (23,287) (9,546)
Cash flows from financing activities
Repayment of loan to Directors of acquired company - (300)
Loan to finance Multi Media Tax Credits (1,157) 1,110
Repayment of loans (625) -
Loan to finance acquisitions 8,000 -
Dividends paid 10 (825) (737)
Share options exercised (632)
Shares issued 643 14,213
Share issuance expenses - (14)
Interest paid 6 (152) (128)
Net cash used in financing activities 5,252 14,144
Decrease in cash and cash equivalents (2,996) 8,004
Exchange gain/loss on cash and cash equivalents 998 -
Cash and cash equivalents at beginning of the period 19,018 11,014
Cash and cash equivalents at end of period 17,020 19,018
Adjustments to reconcile net income to net cash provided by operating activities
Notes forming part of the Consolidated Financial Statements
1 Basis of preparation
Keywords Studios plc (the "Company") is a company incorporated in the UK. The Group was formed on July 8, 2013 when
Keywords Studios Plc (formerly Keywords Studios Limited) acquired the entire share capital of Keywords International
Limited through the issue of 31,901,332 ordinary shares.
While the financial information included in the annual financial results announcement has been prepared in accordance with
the recognition and measurement principles of International Financial Reporting Standards as endorsed for use in the
European Union (IFRSs), this announcement does not contain sufficient information to comply with IFRSs.
The financial information set out above does not constitute the company's statutory accounts for the years ended 31
December 2016 or 2015, but is derived from those accounts. Statutory accounts for Keywords Studios plc for the year ended
31 December 2015 have been delivered to the Registrar of Companies and statutory accounts for the year ended 31 December
2016 will be delivered following the Company's annual general meeting.
The auditors have reported on those accounts; their reports were unqualified, did not include references to any matters to
which the auditors drew attention by way of emphasis without qualifying their reports.
Their reports for the year end 31 December 2016 and 31 December 2015 did not contain statements under s498 (2) or (3) of
the Companies Act 2006.
New standards, interpretations and amendments effective from 1 January 2016
There were no new standards or interpretations implemented by the group for the first time for periods beginning on or
after 1 January 2016. None of the amendments to Standards that are effective from that date had a significant effect on the
Group's financial statements.
New standards, interpretations and amendments not yet effective
There were no new standards or interpretations available for early adoption for the first time for periods beginning on or
after 1 January 2016, which have been implemented by the Group.
On review of IFRS 15, Revenue from Contracts with Customers, the five key points to recognise revenue have been assessed;
Step 1: Identify the contract(s) with a customer
Step 2: Identify the performance obligations in the contract
Step 3: Determine the transaction price
Step 4: Allocate the transaction price to the performance obligations in the contract
Step 5: Recognise revenue when (or as) the entity satisfies a performance obligation
On the basis of the contracts in place, the group do not envision a material change in reporting once IFRS 15 is
implemented.
There are a number of operating leases across the group. In accordance with IFRS 16 Leases, their change in treatment in
the financial statements from 1 January 2019 will impact the Statement of Financial Position, increasing both long term
assets and liabilities.
The financial statements for 2016 have been prepared in thousands (E'000) and the comparative numbers have also been
revised to the same format. In 2015 the financial statements were rounded to one (E). The financial statements are
presented in Euro (E) which is the functional currency of the Group.
2 Significant accounting policies
Basis of Consolidation
Where the company has control over an investee, it is classified as a subsidiary. The company controls an investee if all
three of the following elements are present; power over the investee, exposure to variable returns from the investee, and
the ability of the investor to use its power to affect those variable returns. Control is reassessed whenever facts and
circumstances indicate that there may be a change in any of these elements of control.
De-facto control exists in situations where the company has the practical ability to direct the relevant activities of the
investee without holding the majority of the voting rights. In determining whether de-facto control exists the company
considers all relevant facts and circumstances, including;
· The size of the company's voting rights relative to both the size and dispersion of other parties who hold voting
rights,
· Substantive potential voting rights held by the company and by other parties,
· Other contractual arrangements, and
· Historic patterns in voting attendance.
The consolidated financial statements present the results of the company and its subsidiaries ("the Group") as if they
formed a single entity. Intercompany transactions and balances between Group companies are eliminated in full.
The acquisition of Keywords International Limited was deemed to be a 'combination under common control' as ultimate control
before and after the acquisition was the same. As a result, these transactions were outside the scope of IFRS 3 "Business
combinations" and have been accounted for under the principles of merger accounting as set out under UK GAAP from the date
on which control is obtained until the date on which control ceases.
As part of the Group reconstruction in 2013, the Company issued 31,901,332 shares at a value of £1.23 each, being the
flotation price, as part of a share for share exchange with the shareholders of Keywords International Limited. The £0.01
nominal value of the shares issues was accounted for in Issued Share Capital. On the 2013 consolidated balance sheet, the
difference between the nominal value of shares issued by the company as consideration for the shares in Keywords
International Limited, and the nominal value of the shares in Keywords International Limited was treated as a merger
reserve arising on group reconstruction. On the Company balance sheet, the excess of net book value of the assets held by
Keywords International Limited, at the date of the share for share exchange, over the nominal value of the shares issued
was treated as a merger reserve.
Business Combinations
The consolidated financial statements incorporate the results of business combinations using the purchase method. In the
Consolidated Statement of Financial Position, the acquiree's identifiable assets, liabilities and contingent liabilities
are initially recognised at their fair values at the acquisition date. The results of acquired operations are included in
the consolidated income statement from the date on which control is obtained. They are deconsolidated until the date on
which control ceases.
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. At each balance sheet date the fair value of the
contingent consideration will be revalued and any change will be recognised in the statements 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 to be
classified as an Equity Arrangement and the value of the shares is fixed at the date of the acquisition.
Goodwill
Goodwill represents the excess of the cost of a business combination over, in the case of business combinations completed
prior to 1 January 2010, the Group's interest in the fair value of identifiable assets, liabilities and contingent
liabilities acquired and, in the case of business combinations completed on or after 1 January 2010, the total acquisition
date fair value of the identifiable assets, liabilities and contingent liabilities acquired.
For business combinations completed prior to 1 January 2010, cost comprised the fair value of assets given, liabilities
assumed and equity instruments issued, plus any direct costs of acquisition. Changes in the estimated value of contingent
consideration arising on business combinations completed by this date were treated as an adjustment to cost and, in
consequence, resulted in a change in the carrying value of goodwill.
For business combinations completed on or after 1 January 2010, 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 in cost at its acquisition date fair value and, in the case of contingent consideration
classified as a financial liability, re-measured subsequently through profit or loss. For business combinations completed
on or after 1 January 2010, direct costs of acquisition are recognised immediately as an expense.
Goodwill is capitalised as an intangible asset with any impairment in carrying value being charged to the consolidated
statement of comprehensive income.
Intangible Assets
Intangible assets, separately identified from goodwill acquired as part of a business combination, are initially stated at
fair value. The fair value attributed is determined by discounting the expected future cashflows to be generated from net
margin on the business from the main customers taken on at acquisition. The assets are amortised over their useful economic
lives, which is deemed to be 5 years.
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 ('CGU's). 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.
The Group has one CGU. This CGU represents the lowest level at which goodwill is monitored by the Group and the lowest
level at which management captures information for internal management reporting purposes about the benefits of the
goodwill. Impairment charges are included in profit or loss, except to the extent they reverse gains previously recognised
in other comprehensive income. An impairment loss recognised for goodwill is not reversed.
Foreign Currency
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. The
Functional currency for the Company is euro. 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 to this ruling when
the transactions took place. All assets and liabilities of overseas operations, including goodwill arising on the
acquisition of those operations, are translated at the rate ruling at the reporting date. Exchange differences arising on
translating the opening net assets at opening rate and the results of overseas operations at actual rate are recognised in
other comprehensive income and accumulated in the foreign exchange reserve.
Exchange differences recognised in profit or loss in Group entities' separate financial statements on the translation of
long-term items forming part of the Group's net investment in the overseas operation concerned are classified to other
comprehensive income and accumulated in the foreign exchange reserve on consolidation.
On disposal of a foreign operation, the cumulative exchange differences recognised in the foreign exchange reserve relating
to that operation up to the date of disposal are transferred to the consolidated statement of comprehensive income as part
of the profit or loss on disposal.
Revenue Recognition
Revenue recognised represents the consideration received or receivable for the rendering of services, net of sales taxes,
rebates discounts and after eliminating intercompany sales. Services are provided based on agreed client instructions and
when projects are in progress at the period end, revenue is recognised to the extent that services
have been provided net of any provisions.
Revenue is recognised on the basis of words translated, studio time completed, testing hours finished, or milestones
reached in art creation as a proportion of the estimate total to complete the projects, by the expected revenue accruing on
completion.
MMTC Grants
The Multimedia tax credits received in Montreal on testing services are a credit against staff costs. Accordingly they are
treated as a deduction against direct costs. The nature of the grants are such that they are not dependent on taxable
profits.
Share Based Payments
The Company issues equity settled share-based payments to certain employees and Directors under a share options plan and a
long term incentive plan ("LTIP").
The fair value determined at the grant date is expensed on a straight line basis over the vesting period, based on the
Company's estimate of shares that will eventually vest and adjusted for the effect of non-market-based vesting conditions.
At each reporting date, the Company revises its estimate of the number of equity instruments expected to vest as a result
of the effect of non-market based vesting conditions. The impact of the revision of the original estimates, if any, is
recognised in profit or loss such that the cumulative expense reflects the revised estimate, with a corresponding
adjustment to equity reserves. The Company has no legal or constructive obligation to repurchase or settle the options in
cash.
Where share-based payments are issued to employees of subsidiary companies, the annual cost of the option is expensed in
the subsidiary company, with a corresponding increase in capital contribution from the Company. This annual cost is
recorded as an increase in the Company's cost of investment in that subsidiary.
Share Option Plan
These are measured at fair value, taking into account market vesting conditions but not non-market vesting conditions 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 vest after four years. The only vesting condition is continuous
service. There is no requirement to revalue the option at any subsequent date. The charge that is recognised is adjusted
to reflect failure to vest due to non-achievement of a non-market vesting condition but not failure to vest due to the
non-achievement of a market vesting condition.
LTIP
An alternative share plan was introduced to give awards to Directors and staff, subject to outperforming the Numis Small
Cap (excluding Investment Trusts) index in terms of shareholder return over a three year period. There are three different
award levels; one third of the share options vest if the company shall exceed the Total Shareholder Return of the Numis
Small Cap Index by not less than 10%, two thirds if the shareholder return exceeds by over 20% and 100% of the share
options if the shareholder return exceeds by over 30%.
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. The charge that is recognised is adjusted to reflect
failure to vest due to non-achievement of a non-market vesting condition but not failure to vest due to the non-achievement
of a market vesting condition.
Dividend Distribution
Final dividends are recorded in the Group's financial statements in the period in which they are approved by the Group's
shareholders. Interim dividends are recognised when paid.
Income Taxes and Deferred Taxation
Provision for income taxes is calculated in accordance with the tax legislations and applicable tax rates in force at the
reporting date in the countries in which the Group companies have been incorporated.
Deferred tax assets and liabilities are recognised where the carrying amount of an asset or liability in the consolidated
statement of financial position differs from its tax base, except for differences arising on:
· the initial recognition of goodwill;
· 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.
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 33.33
Office furniture and equipment 10.00
Building and 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
Loans and Receivables
These assets are non-derivative financial assets with fixed or determinable payments that are not quoted in an active
market. They arise principally through the provision of services to customers (e.g. trade receivables), but also
incorporate other types of contractual monetary asset. They are initially recognised at fair value plus transaction costs
that are directly attributable to their acquisition or issue and are subsequently carried at amortised cost using the
effective interest rate method, less provision for impairment.
The Group's receivables comprise trade and other receivables and cash and cash equivalents in the statement of financial
position.
Trade receivables, which principally represent amounts due from customers, are initially recognised, thereafter, are
recognised at amortised cost. An estimate for doubtful debts is made when there is objective evidence that the Group will
not be able to collect amounts due according to the original terms of receivables. Bad debts are written off when
identified.
Cash and cash equivalents are necessary for the working capital requirements of the group. They include cash in hand,
deposits held at 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.
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 and other short-term monetary liabilities are initially recognised at fair value and subsequently carried at
amortised cost using the effective interest method.
Leased Assets
Where substantially all of the risks and rewards of ownership are not transferred to the Group ("operating lease"), the
total rental payables are charged to the consolidated statement of comprehensive income on a straight-line basis over the
term of the lease.
Finance Leases
Where substantially all of the risks and rewards incidental to ownership of a leased asset have been transferred to the
Group (a "finance lease"), the asset is treated as if it had been purchased outright. The amount initially recognised as an
asset is the lower of the fair value of the leased property and the present value of the minimum lease payments payable
over the term of the lease. The corresponding lease commitment is shown as a liability. Lease payments are analysed between
capital and interest. The interest element is charged to the consolidated statement of comprehensive income over the period
of the lease and is calculated so that it represents a constant proportion of the lease liability. The capital element
reduces the balance owed to the lessor.
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 Income. No gain or loss is recognised
in relation to the purchase, sale, issue or cancellation of the Parent Company's Ordinary Shares.
3 Critical accounting estimates and judgements
The preparation of consolidated financial statements under IFRS requires the Directors to make estimates and judgements
that effect the application of policies and reported amounts.
The areas requiring the use of estimates and critical judgements that may significantly impact the Group's earnings and
financial position are revenue recognition in respect of accrued income and computation of income taxes. Estimates and
judgements are continually evaluated and are based on historic experience and other factors including expectations of
future events that are believed to be reasonable. Actual results may differ from these estimates and assumptions.
Income Taxes
The Group is subject to income tax in several jurisdictions and judgement may be required in determining the provision for
income taxes. During the ordinary course of business, there are transactions and calculations for which the ultimate tax
determination may be uncertain. As a result, the company recognises tax liabilities based on an understanding of taxation
legislation in particular jurisdictions and any related estimates of whether taxes and/or interest will be due. This
assessment relies on estimates and assumptions and may involve a series of complex judgments about future events. To the
extent that the final tax outcome of these matters is different than the amounts recorded, such differences will impact
income tax expense in the period in which such determination is made.
Goodwill and intangible assets arising on acquisition
The value of goodwill and intangible assets recognised on the Group's acquisitions during the year, were derived from the
projected cashflows for those businesses at the time of acquisition, based on management forecasts. The accuracy of the
valuation would therefore be compromised by any differences between the forecasts and the levels of business activity that
the entity might actually have been able to generate in the absence of acquisition. The valuation will also be affected by
the accuracy of the discount factor used.
The carrying value of goodwill and intangibles assets is dependent on the accuracy of the inputs into the impairment test
detailed in note 12.
Multi Media Tax Credits
The submissions for the repayment of Multi-Media Tax Credits in Montreal are made on an annual basis to Investment Quebec
and Revenue Quebec. Both the costs and basis of the claim are subject to audit by the authorities prior to approval and
payment of the claim. While the group complete a detailed exercise in relation to the claim and to the accrual there may be
occasions where the actuals amounts may be more or less than accrued which will lead to a change in the amounts recognised
within the financial statements.
Employee Defined Retirement Benefit
In line with statutory requirements in Italy, the subsidiaries in Milan maintain Employee Defined Benefit schemes. On
leaving the company, each employee is entitled to 1/13.5 of their final salary for each year of service.
At year end, the Group commissioned an actuarial valuation of the related liability, based on salaries, length of service
and variables including employee turnover, estimated salary increases and cost of capital.
The liabilities at year end are recorded as long term. The actuarial loss is recorded separately as other comprehensive
income.
4 Segmental analysis
Management considers that the Group's activity as a single source supplier of Services to the gaming industry constitutes
one operating and reporting segment, as defined under IFRS 8.
Management review the performance of the Group by reference to Group-wide profit measures and the revenues derived from six
main service groupings:
· Localisation Services- Localisation services relate to translation and cultural adaptation of in-game text and audio
scripts across multiple game platforms and genres.
· Localisation Testing - Localisation Testing involves testing the linguistic correctness and cultural acceptability
of computer games.
· Audio / Voiceover Services - 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.
· Functional Testing - Functional Testing relates to quality assurance services provided to game producers to ensure
games function as required.
· Art Creation Services - Art creation services relate to the production of graphical art assets for inclusion in the
video game including concept art creation along with 2D and 3D art asset production and animation.
· Customer Support - Customer support relates to the live operations support services such as community management,
player support and associated services provided to producers of games to ensure that consumers have a positive user
experience.
There is no allocation of operating expenses, profit measures, assets and liabilities to individual product groupings.
Accordingly the disclosures below are provided on an group-wide basis.
Activities are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker.
The chief operating decision maker has been identified as the executive management team made up of the Chief Executive
Officer and the Finance Director.
2016 2015
E'000 E'000
Revenue by line of business
Art creation 16,559 8,211
Audio 17,263 7,157
Localisation 32,360 17,141
Functional testing 8,619 6,472
Localisation testing 16,204 15,021
Customer support 5,580 3,949
96,585 57,951
No single customer (2015: One) accounted for more than 10% of the Group's revenue during the year. Revenues generated from
that customer in 2015 was E7.2m.
Geographical Analysis of Revenues by Jurisdiction
Analysis by geographical regions is made according to the Group's operational jurisdictions. This does not reflect the
region of the Group's customers, whose locations are worldwide.
Geographical Analysis of Revenue by Jurisdiction
2016 2015
E'000 E'000
Ireland 25,570 14,167
Japan 4,886 3,324
Italy 7,269 8,343
Canada 22,053 17,438
United States 5,250 6,573
India 4,591 3,602
Singapore 4,787 3,083
United Kingdom 1,276 650
Brazil 619 465
Spain 2,167 306
Switzerland 17,838 -
Germany 163 -
Others 116 -
Total revenues 96,585 57,951
Geographical Analysis of Non-current Assets from Continuing Businesses
2016 2015
E'000 E'000
Ireland 4,779 284
Japan 43 32
Italy 12,188 8,984
Canada 8,937 1,981
United States 8,657 8,707
India 2,991 3,039
Singapore 60 83
United Kingdom 6,874 6,885
Brazil 259 204
Spain 1,475 867
Mexico 121 95
Switzerland 12,657 -
China 287 -
Germany 1,241 -
Philippines 424 -
60,993 31,161
5 Operating Profit
Operating profit is stated after charging: Years ended 31 December
2016 2015
E'000 E'000
Depreciation 1,803 1,297
Amortisation of Intangible Assets 1,630 857
Costs of Acquisitions & Integration 1,316 1,089
Operating lease repayments 2,371 1,663
One-time costs of E1,316 were incurred in acquiring and integrating the new entities into the group. The most significant
costs within the integration costs are for internal resource who have led the activities to integrate the new acquisitions
into the Group, and legal costs in relation to acquisitions.
2016 2015
E'000 E'000
Auditors' remuneration
Audit services
Parent company and Group audit 115 48
Subsidiary companies audit 111 95
Non-audit services
Accounting services -
Taxation compliance 52 12
Due diligence services -
278 155
6 Financing income and costs
2016 2015
E'000 E'000
Finance income
Interest received 94 70
94 70
Finance cost
Bank charges (229) (206)
Interest expense (152) (128)
Foreign exchange losses (1,737) (474)
(2,118) (808)
Net financing income/(cost) (2,024) (738)
7 Taxation
2016 2015
E'000 E'000
Current income tax
Income tax on profits of parent company 4 4
Income tax on profits of subsidiaries 3,928 1,518
Deferred tax (Note 29) (709) 310
3,223 1,832
The tax charge for the year can be reconciled to accounting profit as follows:
Years ended 31 December
2016 2015
E'000 E'000
Profit before tax 9,435 5,086
Expected tax charge based on the standard rate of taxation in the UK at 20% (2015: 23%) 1,887 1,170
Higher rates of current income tax in overseas jurisdictions 1,331 286
Lower rates of current income tax in overseas jurisdictions (555) (100)
Losses incurred 998 238
Effects of other timing differences (438) 238
Total tax charge 3,223 1,832
The Group's subsidiaries are located in different jurisdictions and are taxed on their residual profit in those
jurisdictions.
9 Earnings per share
2016 2015
Euro cent Euro cent
Basic 11.22 6.98
Diluted 10.87 6.87
E'000 E'000
Profit for the period from continuing operations 6,273 3,363
Denominator (weighted average number of equity shares) Number Number
Basic 55,918,481 48,192,371
Diluted 57,716,435 48,971,278
The basic and diluted weighted average denominators include the impact of the 2,376,518 and 513,190 shares to be issued
relating to the acquisitions of Synthesis and Mindwalk respectively.
The dilutive impact of share options has been considered in calculating diluted earnings per share. Details of the number
of share options outstanding at the year-end are set out in note 20.
10 Dividends
2016 2015
Per share Total Per share Total
E Cent E'000 E Cent E'000
Final Dividends Paid 1.03 561 1.03 482
Interim Dividends Paid 0.49 264 0.54 255
Dividends paid to shareholders 1.52 825 1.57 737
In June 2015, Keywords Studios plc approved a dividend of Stg 0.74/E1.03 per share, based on the shares in issue at that
time, or E482,333 in total, as a final dividend for 2014. The dividend was paid in June 2015.
In September 2015, Keywords Studios plc approved a dividend of Stg 0.40/E0.54 per share, based on the shares in issue at
that time, or E254,934 in total, as an interim dividend for 2015. The dividend was paid in October 2015.
In May 2016, Keywords Studios plc approved a dividend in respect of the financial year ended 31 December 2015 of Stg0.81p/
E1.034 per Ordinary share, or E561,000 in total, as a final dividend for 2015. The dividend was paid in June 2016.
In September 2016, Keywords Studios plc approved a dividend of Stg 0.44/E0.49 per share, based on the shares in issue at
that time, or E264,000 in total, as an interim dividend for 2016. The dividend was paid in October 2016.
The Directors' recommend a final dividend in respect of the financial year ended 31 December 2016 of Stg 0.89p per Ordinary
share, to be paid on 23 June 2017 to shareholders who are on the register at 2 June 2017. This dividend is not reflected
in these financial statements as it does not represent a liability at 31 December 2016. The final proposed dividend will
reduce shareholders' funds by an estimated E556,801.
There are no income tax consequences for the company in respect of the dividends proposed prior to issuance of the
Consolidated Financial Statements and for which a liability has not been recognised.
11 Staff Costs
Total staff costs (including Directors) comprise the following:
Years ended 31 December
2016 2015
Group E'000 E'000
Salaries and related costs 41,643 29,773
Share based payment costs 686 392
42,329 30,165
Key management compensation:
Years ended 31 December
2016 2015
E`000 E`000
Salaries and related costs 769 719
Social Welfare cost 97 88
Pension costs 29 5
Share based payment costs 42 135
937 947
947
The key management compensation includes compensation to six Directors of Keywords Studios plc during the year. (2015:
five).
Group 2016 2015
Average number of employees
Operations 1,886 1,169
General and administration 128 104
2,014 1,273
12 Goodwill
Group
Total
E'000
Cost and net book value
At 1 January 2015 14,711
Recognition on acquisition of subsidiaries 8,354
Revaluation on Exchange Rate movement 828
At 31 December 2015 23,893
Recognition on acquisition of subsidiaries 23,055
Revaluation on Exchange Rate movement (149)
At 31 December 2016 46,799
During the period goodwill arose on the acquisitions of Ankama Service Centre in Philippines, Mindwalk, Synthesis, Volta,
Player Research, GVGS trading as Enzyme and Sonox.
Key assumptions for the value in use calculations are as follows:
1-5 Year Growth Rate Long term Growth Rate Discount Rates
CGU 10% 2% 12.50%
As part of the value in use calculation, management prepared an initial cash flow forecast, approved by the Board of
Directors, covering the period to 31 December and the following five years. The long term growth rate has been used to
determine a terminal value for the CGU.
The Group has conducted a sensitivity analysis on the carrying value on the CGU. If the sales projections reduce by 16%,
the group will consider the possibility that the value of goodwill would be impaired.
The result of the value in use calculations was that no impairment is required in this period.
13 Intangible Assets - customer relationships
Total
E'000
Cost
As at 31 December 2013 -
Additions 3,434
As at 31 December 2014 3,434
Additions 1,511
Revaluation on Exchange Rate movement 187
As at 31 December 2015 5,132
Additions 6,509
Revaluation on Exchange Rate movement (11)
As at 31 December 2016 11,630
Amortisation and impairment
As at 31 December 2014 468
Amortisation charge 857
Revaluation on Exchange Rate movement 25
As at 31 December 2015 1,350
Amortisation charge 1,629
Revaluation on Exchange Rate movement (45)
As at 31 December 2016 2,934
Net book value
As at 31 December 2015 3,782
As at 31 December 2016 8,696
Customer relationships are amortised over 5 years from the point of acquisition on a straight line basis.
14 Property, plant and equipment
Group
Computers and software Office, furniture and equipment Leasehold improvements Total
E'000 E'000 E'000 E'000
Cost
At 1 January 2015 4,947 1,728 787 7,462
Currency revaluation 88 (15) (16) 57
Additions 1,191 373 71 1,635
Acquisitions through business combinations at fair value 86 247 16 349
Disposals (59) (14) (3) (76)
At 31 December 2015 6,253 2,319 855 9,427
Currency revaluation 131 99 80 310
Additions 1,370 597 376 2,342
Acquisitions through business combinations at fair value 798 145 416 1,359
Disposals (67) (2) (3) (73)
At 31 December 2016 8,485 3,158 1,724 13,367
Accumulated depreciation
Cost
At 1 January 2015 3,765 868 68 4,701
Currency revaluation 102 (76) (28) (2)
Depreciation charge 857 344 96 1,297
Disposals (55) (55)
At 31 December 2015 4,669 1,136 136 5,941
Currency revaluation (73) 225 18 170
Depreciation charge 1,205 429 169 1,803
Disposals (45) (45)
At 31 December 2016 5,756 1,790 323 7,869
Net book value
As at 31 December 2015 1,584 1,183 719 3,486
At 31 December 2016 2,729 1,368 1,401 5,498
15 Trade Receivables
2016 2015
Group E'000 E'000
Customers 14,347 7,825
Provision for Bad Debts (468) (306)
13,879 7,519
16 Other Receivables
As of 31 December
Group 2016 2015
E'000 E'000
Accrued Income 1,661 1,661
Prepayments 1,769 989
Other receivables 4,002 4,931
Other Tax and Social Security 346 394
Restricted cash (note 25) 345
7,778 8,320
17 Cash and cash equivalents
2016 2015
Group E'000 E'000
Cash at bank 17,020 19,018
Short term bank deposits
17,020 19,018
18 Short term investments
As of 31 December
2016 2015
Group E'000 E'000
Medium Term bank Deposits - 27
- 27
Medium term bank deposits relate to cash on deposit with maturity dates greater than three months, which cannot be accessed
before maturity.
19 Shareholder's Equity
Share Capital
Shares E'000
As at 1 January 2015 47,105,007 551
Ordinary Shares of £0.01 issued for earn out of Binari Sonori S.R.L 158,250 2
Ordinary Shares of £0.01 issued on acquisition of Liquid
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