REG - Keywords Studios PLC - Final Results <Origin Href="QuoteRef">KWS.L</Origin> - Part 3
04/04/2017 07:06
- Part 3: For the preceding part double click ID:nRSD4493Bb
Development LLC. 1,074,440 15
Placing of ordinary Shares of £0.01 on the market 5,500,000 78
As at 31 December 2015 53,837,697 646
Ordinary Shares of £0.01 issued on acquisition of remaining 50% of Kite Team shares 55,508 1
Ordinary Shares of £0.01 issued on acquisition of Volta 45,192 1
Exercise of Numis Warrants 400,324 4
Ordinary Shares of £0.01 issued on acquisition of Player Research 65,280 1
Ordinary Shares of £0.01 issued on acquisition of Sonox 24,881 1
As at 31 December 2016 54,428,882 654
On 6 April, 2016 the Group issued 55,508 of 1p shares at a value of 215p (E2.70) which formed part of the consideration for
the acquisition of the remaining 50% of Kite Team.
On 28 July, 2016 the Group issued 45,192 of 1p shares at a value of 321p (E4.21) which formed the part of the consideration
for the acquisition of Volta.
On 18 August 2016, Numis exercised warrants of 400,324 of 1p shares at a value of 138.5p (E1.61).
On 26 October 2016, the Group issued 65,280 of 1p shares at a value of 432p (E4.86) which formed the part of the
consideration for the acquisition of Player Research.
On 22 December 2016, the Group issued 24,881 of 1p shares at a value of 508p (E6.03) which formed the part of the
consideration for the acquisition of Sonox.
There is no limit to the number of shares which the company can issue.
Shares held by the Employee Benefit Trust (EBT)
Shares Held by the Employee Benefit Trust (EBT) 2016 2015
Number E'000 Number E'000
Ordinary Shares held by the EBT 399,026 802 400,000 804
Reserves
The following describes the nature and purpose of each reserve within owner's 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 option reserve The Share option reserve is the credit arising on share based payment charges in relation to the Company's share option schemes.
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 to be classified as an
Equity Arrangement and the value of the shares is fixed at the date of the acquisition.
Merger reserve Non-Controlling Interest 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 the 100% consideration for the
acquisition of an entity, the value of the shares in excess of the nominal value, net of share issuance costs are now also recorded within this reserve, in line with S612 of the 2006 UK Companies Act. The non-controlling interest reserve represents the
share of net assets / (liabilities) at the reporting date which is attributable to the holders of the non-controlling interest.
20 Share Options
In July 2013, at the time of the IPO, the Company put in place a Share Option Scheme and a Long Term Incentive Plan
("LTIP"). The charge in relation to these arrangements is shown below, with further details of the schemes following:
2016 2015
E'000 E'000
Share Option Scheme Expense 208 157
Share Option Scheme - LTIP Expense 478 235
686 392
Of the total share option charge, E45k relates to Directors of the Company as at 31 December, 2016. (2015: E55k).
Share Option Scheme
Share options are granted to 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:
2016 2015
Average exercise price in £ per share Number of options Average exercise price in £ per share Number of options
Outstanding at the beginning of the year 1.2 1,642,242 1.2 642,286
Granted 2.45 223,200 1.58 1,059,040
Lapsed 1.67 (44,547) 1.2 (32,553)
Exercised 1.31 (148,839) 1.2 (26,531)
Outstanding at the end of the year 1.58 1,672,056 1.2 1,642,242
Exercisable at the end of the year 1.38 522,035 1.2 178,133
There were 203,200 options granted on 10 May 2016 at an exercise price of £2.54. All options were granted to employees of
the Group, of which 12,800 of these options lapsed due to staff leaving in the period. Of the total options 190,400
remaining at 31 December, 2016, 63,466 are exercisable from 10 May 2018 to 9 May 2023, 63,466 are exercisable from 10 May
2019 to 9 May 2023 and 63,467 are exercisable from 10 May, 2020 to 9 May, 2023.
There were an opening balance of 1,054,780 options granted on 1 June 2015 at an exercise price of £1.58. All options were
granted to employees of the Group of which 8,520 of these options lapsed due to staff leaving in the year and 50,000
options were exercised. A further 20,000 options were granted in relation to the June 2015 tranche at an exercisable price
of £1.58. Of the total options of 1,016,260 remaining at 31 December, 2016, 250,000 are exercisable as at 31 December 2016
to 9 Oct, 2021, 300,000 are exercisable from10 October, 2017 to 9 October 2021, 55,420 are exercisable from 1 June 2018 to
31 May, 2023, 300,000 are exercisable from 10 October, 2018 to 9 October 2021, 55,420 are exercisable from 1 June 2019 to
31 May 2023, and 55,420 are exercisable from 1 June 2020 to 31 May 2023.
There was an opening balance of 587,462 of options that were granted on 12 July 2013 at an average exercise price of £1.20.
During the year 23,227 of the options lapsed due to staff leaving and 98,839 options were exercised. All options were
granted to either employees or Directors of the Group. Of the total 465,396 options granted remaining at 31 December, 2016,
136,018 are exercisable as at 31 December 2016 to 11 July 2020, 136,017 are exercisable as at 31 December 2016 to 11 July
2020 and 193,361 are exercisable from 12 July 2017 to 11 July 2020.
The inputs into the Black-Scholes model, used to value the options are as follows:
Share Options granted in 2013
2016 2015
Weighted average share price (£) 1.23 1.23
Weighted average exercise price (£) 1.20 1.20
Average Expected Life 3 years 3 years
Expected Volatility 36.12% 36.12%
Risk free rates 0.5% 0.5%
Average expected dividends yield 1.00% 1.00%
Share Options granted in 2015
2016 2015
Weighted average share price (£) 1.64 1.64
Weighted average exercise price (£) 1.58 1.58
Average Expected Life 3 years 3 years
Expected Volatility 28.03% 28.03%
Risk free rates 0.9% 0.9%
Average expected dividends yield 0.75% 0.75%
Share Options granted in 2016
2016 2015
Weighted average share price (£) 2.54 -
Weighted average exercise price (£) 2.535 -
Average Expected Life 3 years -
Expected Volatility 27.17% -
Risk free rates 0.551% -
Average expected dividends yield 0.58% -
Expected volatility was determined by calculating the historical volatility of two similar listed companies over the
previous 3 years. 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.
The weighted average remaining contractual life of the options outstanding at 31 December 2016 granted in 2013 was 3 months
(2015: 6 months), granted in 2015 was 11 months (2015: 2 years and 7 months), and granted in 2016 was 2 years and 4
months. All of the outstanding options granted in 2013 can be exercised at an average of £1.20 over a 1 to 3 year period,
for those granted in 2015 can be exercised at £1.58 over a 3 to 5 year period, for those granted in 2016 can be exercised
at £2.535 over a 3 to 5 year period.
Long term incentive plan scheme
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. A total of 1,443,691 (2015:
860,206) nil price (1p) options are available to vest to Directors and to selected employees on the basis of the number of
options they are entitled to.
Movements in the number of share options outstanding and their related weighted average exercise prices are as
follows:
2016 2015
Average exercise price in £ per share Number of options Average exercise price in £ per share Number of options
Outstanding at the beginning of the year 0.01 860,206 0.01 376,226
Granted 0.01 720,000 0.01 489,540
Lapsed 0.01 (105,654) 0.01 (5,560)
Exercised 0.01 (30,861)
Outstanding at the end of the year 0.01 1,443,691 0.01 860,206
Exercisable at the end of the year 0.01 295,365
On 10 May 2016 670,000 options were granted at an exercise price of £0.01 to Directors and employees of the Group. The
options are exercisable from 10 May 2019 to 10 May 2023 if the market performance conditions are met as at 10 May 2019. Of
the options granted on 1 June 2015, 40,000 have lapsed.
On 1 June 2015 388,480 options were granted at an exercise price of £0.01 to Directors and employees of the Group. The
options are exercisable from 1 June 2018 to 1 June 2022 if the market performance conditions are met as at 1 June 2018. Of
the options granted on 1 June 2015, 51,680 have lapsed.
A further 20,000 options were granted in relation to the June 2015 tranche at an exercise price of £0.01 to either
employees or Directors of the Group.
On 6 January 2015, 101,060 options were granted at an exercise price of £0.01 to employees of the Group. The options are
exercisable from 6 January 2018 to 6 January 2022 if the market performance conditions are met as at 6 January 2018. Of the
options granted on 1 June 2015, 19,534 have lapsed.
On 12 July 2013, 326,226 options were granted at an exercise price of £0.01 to employees or Directors of the Group. Of
these, 30,861 options were exercised in the year. The remaining 295,365 options granted are exercisable from 31 December
2016 to July 11, 2020.
Additionally 50,000 options granted at an exercise price of £0.01 to a director of the Group on 3 July 2014 remain as at 31
December, 2016. The options are exercisable from 3 July 2017 to 3 July 2021 if the market performance conditions are met as
at 3 July 2017.
The options were valued using a Monte Carlo binomial model using the following inputs:
LTIPS granted in 2013
2016 2015
Weighted average share price (£) 1.23 1.23
Weighted average exercise price (£) 0.01 0.01
Average Expected Life 3 years 3 years
Expected Volatility 36.12% 36.12%
Risk free rates 0.5% 0.5%
LTIPS granted in 2014
2016 2015
Weighted average share price (£) 1.60 1.60
Weighted average exercise price (£) 0.01 0.01
Average Expected Life 3 years 3 years
Expected Volatility 35.52% 35.52%
Risk free rates 0.5% 0.5%
LTIPS granted in January, 2015
2016 2015
Weighted average share price (£) 1.43 1.43
Weighted average exercise price (£) 0.01 0.01
Average Expected Life 3 years 3 years
Expected Volatility 31.2% 31.2%
Risk free rates 0.58% 0.58%
LTIPS granted in June, 2015
2016 2015
Weighted average share price (£) 1.64 1.64
Weighted average exercise price (£) 0.01 0.01
Average Expected Life 3 years 3 years
Expected Volatility 28.03% 28.03%
Risk free rates 0.9% 0.9%
LTIPS granted in May, 2016
2016 2015
Weighted average share price (£) 2.54 -
Average Expected Life 3 years -
Expected Volatility 27.17% -
Risk free rates 0.55% -
Expected volatility was determined by calculating the historical volatility of two similar listed companies over the
previous 3 years. 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 re-invested into the business the impact of dividends has been ignored in the calculation
of the LTIP share option charge.
The weighted average remaining contractual life of the options outstanding at 31 December 2016 was 2 years 4 months (2015:
1 years 8 months). All of the outstanding options can be exercised at £0.01 over a 4 year period.
21 Other payables
Group 2016 2015
E'000 E'000
Current
Accrued expenses 7,702 3,268
Payroll Taxes 542 482
Other payables 3,927 2,124
Contingent Consideration 251 1,979
Related party payable (Note 25) 9 9
12,431 7,862
Non-current
Other payables 113 55
Contingent Consideration 1,479 245
1,592 300
During 2015 an amount of E590,000 relating to the Italian defined benefit pension was included within other current
payables. This item has been shown as a separate line item on the face of the Statement of Financial Position during 2016,
and as a result the classification in the 2015 comparative figures have been regrouped.
22 Employee Defined Benefit Plan
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. The movements through the year are detailed;
Group 2016 2015
E'000 E'000
Opening liability position as at 1 January 590 490
Service cost 193 94
Interest cost 10 7
Benefits paid (30) (67)
Branch transfer - 57
Actuarial loss recorded 63 9
Closing liability position as at 31 December 826 590
The Directors have considered the key specific risk factors which the Group faces due to the employee defined benefit plan
which is in place. Having fully considered all specific elements of these plans the directors believe that the key issues
faced are as follows:
· The plan is currently 100% unfunded, there are no specific assets to meet the future liabilities as they fall due.
As such there will be a significant cash flow impact as the liabilities must be met with current working capital as they
fall due.
The Group has taken no specific actions to mitigate against 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 Groups results caused by any of these factors.
In 2017, the group expects the costs of the employee benefit plan to be in line with current year levels, as staff levels
in the Italian operations stay stable.
The actuarial valuation is based on the Projected Unit Credit Method, in line with IAS 19.
2016
Actuarial valuations E'000
Defined benefit obligations 826
Current concern provision 654
Current concern provision surplus / (deficit) (172)
Value of accrued benefits 3,318
Future service liability 2,492
Cost for year
Service cost 193
Interest cost 10
Actuarial loss 63
266
Actuarial losses
Change due to experience 30
Change due to demographical assumptions 5
Change due to financial assumptions 28
63
The Directors have considered the key specific risk factors which the Group faces due to the employee defined benefit plan
which is in place. Having fully considered all specific elements of these plans the directors believe that the key issues
faced are as follows:
· The plan is currently 100% unfunded, there are no specific assets to meet the future liabilities as they fall due.
As such there will be a significant cash flow impact as the liabilities must be met with current working capital as they
fall due.
The Group has taken no specific actions to mitigate against 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 Groups results caused by any of these factors.
In 2017, the group expects the costs of the employee benefit plan to be in line with current year levels, as staff levels
in the Italian operations stay stable.
The actuarial valuation is based on the Projected Unit Credit Method, in line with IAS 19.
Assumptions underlying the Actuarial Valuations and Sensitivities of the Assumptions
For the actuarial valuations the following demographic and economic & financial assumptions were applied;
Demographic Assumptions
· The probabilities of death were derived from the bill of the Italian population by age and sex, as recorded by the
Government Statistics Office in 2000 and reduced by 25%
· The probabilities of elimination for absolute and permanent disability of the employee are taken from the disability
tables currently used in practice separate reinsurance for age and sex
· The probabilities of employees leaving due to resignations and dismissals in accordance with company management have
been placed at 6% per annum
· The probabilities of requesting an advance have been estimated on the basis of company history 2010 to 2016, and
placed equal to 2.94% per annum with an average rate of advance equal to 54.38%
· For retirement for the general working population, it is assumed that the first of the pension requirements is
valid for the mandatory general insurance
Economic & Financial Assumptions
Salary Increase 2.50%
Inflation 1.73%
Discount rate 1.29%
Key Statistics
Staff Number 97
Average Age 38.2
Average Service 3.6
Average Defined Benefit per staff 6,745
Average Salary for Defined Benefit 31,723
2016
Actuarial Losses E'000
Change due to Experience 32
Change due to Demographical assumption 5
Change due to Financial assumption 30
Actuarial Losses 67
Interest Rate Sensitivities
-0.50% 882
0.50% 776
Mortality Rate Sensitivities
-0.025% 827
0.025% 782
Staff Turn Over Rate Sensitivities
-0.50% 835
0.50% 818
Staff Salary Increases Rate Sensitivities
-0.50% 808
0.50% 845
23 Loans and borrowings
Group 2016 2015
E'000 E'000
Expiry within 1 Year 8,025 1,163
Expiry between 1 Year and 2 Years 55 350
Expiry over 2 Years 290 221
8,370 1,734
A loan with RBC bank in Canada of CAD $1.7m (E1.1m) at 31 December 2015 was repaid on 15 April 2016.
The loans in Kite Team of E0.6m at 31 December 2015 were settled in March 2016.
The company entered into a loan agreement with Barclay's Bank. The agreement allows financing up to E15 million. At year
end, E8 million was drawn down.
The group also took on loans on the acquisition of Enzyme of CAD $0.5m (E0.4m).
The currencies of these loans are as follows;
2016 2015
E'000 E'000
Euro 8,000 621
Canadian Dollars 370 1,113
8,370 1,734
4 Investment in Subsidiaries
2016
E'000
Opening 1 January 2016 12,765
Acquisition of Synthesis 17,894
Closing 31 December 2016 30,659
The results and financial position of all the subsidiaries are included in the consolidated statements.
Details of the Company and Group's subsidiaries as at 31 December 2016 are set out below:
Name Country of incorporation Date of incorporation / acquisition Proportion of voting rights and ordinary share capital held
Keywords International Limited Ireland 13/05/1998 100%
Keywords International Co. Limited Japan 30/11/2010 100%
Keywords International Corporation inc Canada 22/12/2010 100%
Keywords Italia Srl Italy 18/05/2011 100%
Keywords International Inc United States 26/09/2012 100%
KW Studios Limited United Kingdom 29/05/2013 100%
Liquid Violet Limited United Kingdom 15/01/2014 100%
Babel Media Limited United Kingdom 17/02/2014 100%
Babel Games Services Inc Canada 17/02/2014 100%
Babel Media India Private limited India 17/02/2014 100%
Babel Media USA Inc United States 17/02/2014 100%
Keywords International Pte. Limited Singapore 24/04/2014 100%
Binari Sonari SRL Italy 08/05/2014 100%
Binari Sonari Inc United States 08/05/2014 100%
Lakshya Digital Private Limited India 10/10/2014 100%
Lakshya Digital Singapore Pte Ltd Singapore 10/10/2014 100%
Edugames Solutions Private Limites India 10/10/2014 100%
Alchemic Dream Inc Canada 06/01/2015 100%
Keywords International Barcelona SL Spain 09/01/2015 100%
Reverb Localizacao - Prearacao de Documentos Ltda Brazil 18/01/2015 100%
Keywords (Shanghai) Information Technology China 02/04/2015 100%
Kite Team SL Spain 16/07/2015 100%
Kite Team Mex S. de R.L. de. CV Mexico 16/07/2015 100%
Liquid Development LLC United States 20/08/2015 100%
Ankama Asia Pte. Ltd Singapore 22/03/2016 100%
Synthesis Global Solutions Switzerland 12/04/2016 100%
Synthesis Deutschland Germany 12/04/2016 100%
Sillabit S.R.L Italy 12/04/2016 100%
Keywords International SAS France 08/06/2016 100%
Volta Creation Inc Canada 29/07/2016 100%
Player Research United Kingdom 26/10/2016 100%
Global Video-Games Services Inc., trading as Enzyme Testing Labs Canada 16/11/2016 100%
Sonox Audio Solutions S.L.U. Spain 22/12/2016 100%
25 Related parties and shareholders
Italicatessen Limited, a company registered in Ireland is related by virtue of a common significant shareholder. P.E.Q.
Holdings Limited is 100% owner of Italicatessen Limited. At 31 December 2016, P.E.Q Holdings Limited owned 22.2% (2015:
24.5%) of the Company. In addition, Mr. Giorgio Guastalla is a Director of Italicatessen Limited, P.E.Q. Holdings Limited
and the Company, and owns, or controls, 90% of the share capital of P.E.Q Holdings Limited.
The following transactions arose with Italicatessen Limited, which provides canteen services to Keywords International
Limited
2016 2015
E'000 E'000
Operating Expenses
Canteen Charges 53 24
53 24
The following are year-end balances:
2016 2015
E'000 E'000
Italicatessen Limited 9 9
9 9
The company paid the following amounts to Mr. Giorgio Guastalla, Director of the Company, and shareholder of P.E.Q Holdings
Limited, in respect of rent on premises occupied by the employees of the Group in Dublin.
2016 2015
E'000 E'000
Operating Expenses
Rental Payment 22 22
22 22
The Company entered into a deed of undertaking and indemnity on 8 July 2013 with Mr. Andrew Day, CEO and Director of the
Company related to possible liabilities which might arise due to the restructuring of the Group prior to its IPO on 12 July
2013. As part of this deed of undertaking and indemnity, Mr. Day deposited £250,000 as security for the Company. This is
included as Restricted Cash in Other Receivables of the Company. This amount has been repaid to Mr. Day in 2016. There was
a corresponding liability included in Other Payables in 2015.
The details of key management compensation (being the remuneration of the Directors) are set out in note 11.
As at 31 December 2016 and 2015, the Company had amounts receivable from its subsidiaries, amounting to E20,454,923 (2015:
EE20,598,567) relating to intergroup trading activities.
26 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 changes.
The management monitors interest rate fluctuations on a continuous basis and acts accordingly.
Where the Group has a significant amount of surplus cash, it will invest 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 Group is not unduly exposed to market interest rate fluctuations, and no interest rate sensitivity
analysis has been presented as a result.
Credit Risk
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.
The Group closely monitors the activities of its counterparties and maintains regular contact which enables it to ensure
the prompt collection of customers' balances.
The Group's main financial assets are cash and cash equivalents as well as trade and other receivables and represent the
Group's maximum exposure to credit risk in connection with its financial assets. Trade and other receivables are carried
on the statement of financial position net of bad debt provisions estimated by the Directors based on prior year experience
and an evaluation of prevailing economic circumstances.
Whenever possible and commercially practical the Group invests cash with major financial institutions in each jurisdiction
where it operates. The Group periodically monitors the credit rating and stability of these institutions.
The ageing of trade and receivables that are past due but not impaired can be analysed as follows:
Group
Total Not past due 1-2 months overdue More than 2 months past due
E'000 E'000 E'000 E'000
As at 31 December 2016 13,879 12,877 907 95
As at 31 December 2015 7,519 5,313 2,049 157
The above balances relate to customers with no default history.
A provision for doubtful debtors is included within trade receivables that can be reconciled as follows:
2016 2015
E'000 E'000
Provision at the beginning of the year 306 260
Charged to income statement 188 46
Utilised (26) -
Provision at end of the year 468 306
Related party receivables of Enil were past due at 31 December 2016 (2015: nil).
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 and are held in overseas subsidiaries in
a currency other than the euro and to a lesser extent where individual Group entities enter into transactions denominated
in currency other that their functional currency.
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 and 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.
Over the course of the year the Group's currency has increased and diversified due to the addition of the newly acquired
subsidiaries. The Group is predominantly exposed to currency risk on the balances held within working capital within the
Group and the exposure is concentrated in the movement of the Canadian Dollar, US dollar and Sterling against the Euro. The
effect of a strengthening and weakening of 10% of these currencies against the euro at the reporting date on the working
capital balances held at this date would, all other variable held constant, have resulted in the following pre-tax profit
/(loss) impact for the year as follows:
10% Strengthening 10% Weakening
E'000 E'000
United States Dollar to Euro 549 (499)
Canadian Dollar to Euro 209 (190)
Sterling to Euro 129 (117)
Total financial assets and liabilities
The carrying amount of the financial assets and liabilities shown in the Group and Company statements of financial position
are stated 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 following are the contractual maturities (representing undiscounted contractual cash flows) of the Group's and
Company's financial liabilities:
Group
Year ended 31 December 2016 Total Within 1 year 1-2 years 2-5 years
E'000 E'000 E'000 E'000
Trade payables 4,822 4,822
Contingent Consideration 1,730 251 1,479
Employee Defined Benefit 826 826
Other accounts payable 12,293 12,180 113
Year ended 31 December 2015 Total Within 1 year 1-2 years 2-5 years
E'000 E'000 E'000 E'000
Trade payables 2,761 2,761 -
Contingent Consideration 2,224 1,979 245
Employee Defined Benefit 590 - - 590
Other accounts payable 5,938 5,883 55
Contingent considerations at 31 December 2016 have arisen on business combinations. They are based on set amounts to be
paid in the future to sellers under the purchase agreements.
27 Operating Lease Commitments
The Group maintains a portfolio of leased properties. The terms of property leases vary from country to country, although
they all tend to be tenant repairing with rent reviews every 2 to 5 years and some have break clauses.
The total future value of the minimum lease payments is due as follows:
Group 2016 2015
E'000 E'000
Not later than one year 2,318 1,563
Later than one year and not later than five years 6,031 4,224
Later than five years 903 476
9,252 6,263
28 Finance Lease Commitments
The Group has leased computer equipment and office telephone systems. Such assets are generally classified as finance
leases as the rental period amounts to the estimated useful economic life of the assets concerned and often the Group has
the right to purchase the assets outright at the end of the minimum lease term by paying a nominal amount.
The total future value of the minimum lease payments is due as follows:
Group Minimum Lease Payments Interest Present Value
E'000
2016
Not later than one year 31 2 29
Later than one year and not later than five years 18 1 17
Later than five years - - -
49 3 46
2015
Not later than one year 120 8 112
Later than one year and not later than five years 61 3 58
Later than five years - - -
181 11 170
29 Deferred Tax
Details of the deferred tax assets and liabilities, and amounts recognised in the profit or loss are as follows:
Asset Liability Net (Charged) / credited to profit or loss
2016 2016 2016 2016
E'000 E'000 E'000 E'000
Accelerated capital allowances - 9 (9) 4
Personal severance indemnity 109 - 109 100
Available losses 44 - 44 (243)
Rent - free inducement - 116 (116) (66)
Fixed asset excess of tax over accounting 173 3 170 42
Deferred tax related to Multi Media Tax Credits 5 796 (791) 501
Other temporary and deductible differences 300 19 281 (88)
Deferred Tax arising on intangibles 249 2,310 (2,061) 459
Net tax assets / (liabilities) 880 3,253 (2,373) 709
All deferred tax assets have been classified in non-current assets in 2016.
30 Non-Controlling Interest
2016 2015
E'000 E'000
Opening Balance (1,309) -
Liabilities of Kite Team attributable to shareholder at the acquisition date - (50)
Loss of Kite team attributable to the shareholders of the group (61) (109)
Contingent Consideration for the purchase of the remaining 50% of Kite Team - (1,150)
Settlement of Non-Controlling Interest 1,370
-
- (1,309)
Keywords International Limited acquired 50% of the issued share capital of Kite Team in 2015, a company registered in
Spain.
In March 2016, Keywords International Limited acquired the remaining 50% of shares in Kite Team. The settlement value was
E1,370,000; comprising the settlement of the put and call option of E1,150,000 through E1,000,000 in cash and E150,000 in
KWS shares, plus E220,000 transfer of losses from Minority Interest.
31 Acquisitions completed in the current year
Acquisition of Ankama Asia Pte Ltd.
On 22 March 2016 the Group acquired the entire issued share capital of Ankama Asia Pte Ltd ("Ankama"), a company registered
in Singapore, which specialises in providing services to support the live operations of the games of Ankama France. The
company has a four year agreement for the continued provision to service to Ankama and also plans to significantly increase
the scale of the Studio, which is based in Manila, to service new and existing clients of Keywords. The acquisition will
strengthen Keywords range of customer service offerings to customers with online and mobile games.
The amounts recognised in respect of the identifiable assets acquired and liabilities assumed are set out below:
Ankama Asia Pte
Book Fair Value Fair
Value Adjustment Value
E'000 E'000 E'000
Financial Assets
Identifiable intangible assets - customer relationships 44 44
Trade and other receivable 6 6
Cash and cash equivalents 120 120
Trade and other Payables (81) (81)
Deferred tax liabilities (7) (7)
Total identifiable assets 45 37 82
Goodwill 214
Total consideration 296
Satisfied by:
Cash 296
Less: cash and cash equivalent balances transferred (120)
176
The intangible assets are to be amortised over their estimated useful lives of 5 years.
The main factors leading to recognition of goodwill on the acquisition of Ankama Asia Pte Ltd are the presence of
intangible assets in the acquired entity which do not value for separate recognition such as the expertise in customer
service and an unidentified proportion representing the balance contributing to profit generation.
Ankama Asia Pte Ltd contributed E527,856 revenue and E17,288 loss before tax to the Group between the date of acquisition
and the balance sheet date. If the acquisition had been completed on the first day of the financial year, revenue for 2016
of E540,693 would have been contributed to the Group and loss before tax of E18,022.
Acquisition costs of E39,140 have been charged through the Statement of Comprehensive Income.
Acquisition of Synthesis Group
The Group acquired the business of the Synthesis Group of Companies on 12 April 2016, including
o 100% of the share capital of Sillabit SRL, a company registered in Italy,
o 100% of the share capital of Synthesis Deutschland GmBH, a company registered in Germany and
o 100% of the share capital of Synthesis Global Solutions SA, (SGSS) a company registered in Switzerland.
The Synthesis Group provide localization and audio services to some of the leading games publishers, and was acquired to
extend the Group's client base and global reach.
The amounts recognised in respect of the identifiable assets acquired and liabilities assumed are set out in the table
below:
Synthesis Group
Book Fair Value Fair
Value Adjustment Value
E'000 E'000 E'000
Financial Assets
Property, plant and equipment 236 236
Identifiable intangible assets - customer relationships 2,774 2,774
Trade and other receivables 1,716 (92) 1,624
Cash and cash equivalents 992 992
Trade and other payables (1,856) (1,856)
Deferred tax asset
Deferred tax liabilities (538) (538)
Total identifiable assets 1,088 2,144 3,232
Goodwill 14,664
Total consideration 17,896
Satisfied by:
Cash 10,200
Shares to be Issued 6,906
Deferred consideration 790
Total consideration transferred 17,896
Net cash outflow arising on acquisition
Cash 10,200
Less: cash and cash equivalent balances transferred (992)
9,208
Deferred Cash Consideration of E1,000,000 is due for payment on 12 April 2018 in accordance with the share purchase
agreement. The deferred consideration recorded within as contingent consideration within non-current other payables on the
2016 balance sheet represented the fair value amount at the balance due.
The main factors leading to the recognition of goodwill on the acquisition of the Synthesis Group are the presence of
certain intangible assets in the acquired entity, which are not valued for separate recognition, such as the expertise in
sound recording and localisation and reputation of the staff within the industry.
A fixed amount of 2,376,518 Keywords Studios Plc shares will be issued as part of the deferred consideration. The shares
have been valued at the share price at the date of acquisition, £2.32 (E2.91). E6,906,000 has been recorded as Shares to
be Issued within equity..
The Synthesis Group of companies contributed E18,012,547 revenue and E3,494,458 profit before tax to the Group between the
date of acquisition and the balance sheet date.
If the acquisition had been completed on the first day of the financial year, total revenue for 2016 of E20,662,464 would
have been contributed to the Group, and a corresponding profit before tax of E3,887,462.
Acquisition costs of E254,698 have been charged through the Statement of Comprehensive Income.
Acquisition of Mindwalk Studios Inc. and Mindwalk Studios Ltd.
On 31 May 2016 the Group acquired 100% of the assets, the business and the customer contracts of Mindwalk Studios Inc., a
company registered in China, and Mindwalk Studios Ltd, a company registered in the British Virgin Islands. The companies
trade as one business entity and specialise in the provision of art creation services for the video games industry. The
acquisition is in line with the Group's strategy to further strengthen art services and
- More to follow, for following part double click ID:nRSD4493BdRecent news on Keywords Studios
See all newsREG - Keywords Studios PLC - Total Voting Rights
AnnouncementREG - Keywords Studios PLC - Block Admission
AnnouncementREG - Keywords Studios PLC - Publication of Annual Report and Accounts
AnnouncementREG - Keywords Studios PLC - Issue of Shares
AnnouncementREG - Keywords Studios PLC - Total Voting Rights
Announcement