RNS Number : 4493B
Keywords Studios PLC
04 April 2017

4 April 2017
Keywords Studios plc ("Keywords Studios", "the Group")
Full year results for the year to 31 December 2016
Keywords Studios, the international technical services provider to the global video games industry, today provides its full year results forthe year to 31 December 2016.
Financial overview:· Group revenue (including effect of acquisitions) increased by 67% to €96.6m (2015: €58.0m)· Gross margin further improved to 38.0% (2015: 37.6%)· Adjusted profit before tax* increased by 86% to €14.9m (2015: €8.0m)· Adjusted basic earnings per share* up by 61% to 20.59c (2015: 12.81c)· Net cash flow from operating activities of €15.0m (2015: €3.4m)· Net cash** of €8.7m (2015: €17.3m)· 10% increase in dividend to 1.33p per share (2015: 1.21p)*before acquisition and integration expenses of €1.3m (2015: €1.1m), share option charges of €0.7m (2015: €0.4m), amortisation of
intangibles of €1.6m (2015: €0.9m), and foreign currency loss of €1.7m (2015: loss of €0.5m)**after payment of €21.1m net cash consideration for acquisitions (2015:
expenses (2015: €1.1m), and including €8.4m of bank borrowings.

€7.4m) and €1.3m of acquisition costs and integration

Operational overview:· 24% increase in like for like*** revenue includes very strong performance by Synthesis· Eight acquisitions completed in the year as we continue to invest in the development of the Group:o Acquisition of customer support business, Ankama, in Marcho Acquisition of Beijing-based art creation business, Mindwalk, in May
o Localisation, audio and localisation testing business, Synthesis, acquired in Aprilo Acquired the 50% of Kite Team it did not already own in Aprilo Acquisition of Quebec City-based concept art specialist, Volta, in Julyo Acquisition of consulting and user testing business, Player Research, in Octobero Acquired functional and localisation testing business in Montreal and St-Jerome, Enzyme, in Novembero Acquisition of Madrid-based audio and localisation services firm, Sonox Audio, completed in December· 25% increase in clients using three or more services from 51 to 64******* calculated on the basis of revenues being included for 2016 acquisitions from the date of acquisition and for the equivalent period in
the prior year.
**** measured on a rolling 12-month basis, comparing 12 months ended December 2016 to the 12 months ended December 2015.
Post period end / current trading:· Trading in the first two months of the year has been in line with the Board's expectations·
Terms agreed for a revolving credit facility of up to €35m with Barclays Bank, which will provide further headroom for selective
acquisitions· Continue to selectively review a strong acquisition pipelineo Acquisition of London-based Art creation agency, SPOV, providing services including; cinematics, UI, visual eﬀects and motion
graphics in February 2017
Andrew Day, Chief Executive of Keywords Studios, commented:"2016 saw Keywords continue to grow strongly, both organically and through acquisitions which increased our capacity and scale inexisting service lines and expanded our service capabilities and geographical reach.
"This performance has seen the Group grow from full year revenues of just over €14m prior to its IPO in July 2013, derived from four
service lines and ﬁve studios across three continents, to revenues of nearly €100m derived from six service lines and 27 studios acrossfour continents at the end of 2016.
"We fully expect to make continued good progress during 2017 as we take advantage of the synergies aﬀorded by our enlarged platform
and as we make further selective acquisitions, with the support of our strong cash generation and enlarged debt facilities."

A presentation of the full year results will be made to analysts later this morning at MHP's oﬃces. To register to attend, please contact
Nessyah Hart at MHP Communications on 020 3128 8156.
For further information, please contact:
Keywords
Studios(www.keywordsstudios.com)
Andrew Day, Chief Executive Officer
David Broderick, Chief Financial Officer
Numis (Financial Adviser)
StuartSkinner/
Kevin
Cruickshank(Nominated Adviser)
James Black / Tom Ballard (Corporate
Broker)MHP Communications (Financial PR)
Katie Hunt / Ollie Hoare / Nessyah Hart

+353 190 22 730

020 7260 1000

020 3128 8100
Keywords@mhpc.com

Certain information contained in this announcement would have constituted inside information (as deﬁned by Article 7 of Regulation (EU)No 596/2014) prior to its release as part of this announcement.

Notes to Editors
Keywords Studios is an international technical services provider to the global video games industry. Established in 1998, and now withfacilities in Dublin, Rio de Janeiro, Montreal, Quebec City, Portland, Mexico City, Los Angeles, Seattle, Tokyo, Singapore, New Delhi, Pune,
Rome, Milan, Barcelona, Madrid, Taipei, Shanghai, Beijing, Manila, Hamburg, Paris and London, it provides integrated art creation,
localisation, testing, audio and customer care services across 50 languages and 14 games platforms to a blue chip client base in morethan 15 countries. It has a strong market position, providing services to 21 of the top 25 most prominent games companies, including
Activision Blizzard, Bandai Namco, Bethesda, Electronic Arts, Konami, Riot Games, Sony, Square Enix, Supercell, TakeTwo, andUbisoft. Recent titles worked on include Uncharted 4: A Thief's End, Call of Duty: Inﬁnite Warfare, Mortal Combat X, Assassin's Creed
Syndicate, Battleﬁeld 1, World of Warcraft: Legion, Hearthstone, Clash Royale, and Mobile Strike. Keywords is listed on AIM, the London
Stock Exchange regulated market (KWS.L).
www.keywordsstudios.com

Chairman's Statement
Keywords performed ahead of previous expectations in 2016 as a result of another year of strong organic and acquisitive growth which
has seen the Group grow from full year revenues of just over €14m, derived from four service lines and ﬁve studios across threecontinents prior to the IPO in July 2013, to revenues of nearly €100m derived from six service lines and 27 studios across four continents
at the end of 2016.
The Group's successful expansion is testimony not just to the dynamic and innovative nature of the Keywords business model but,perhaps more importantly, to the disciplined and eﬀective execution of the Company's strategy by our CEO, Andrew Day, and his
expanded executive team. It is rare for a company to exceed the ambitious strategic expectations set out at the time of its ﬂotation but
Keywords has achieved that feat in terms of both organic and acquisitive growth.
During 2016, the Group delivered further strong revenue growth reﬂecting the contributions of the eight acquisitions completed during
the year as well as continued strong like for like revenue growth, whilst also maintaining operating margins.
The acquisitions the Group has made since the beginning of 2016 have expanded our art creation, audio, localisation, functional andlocalisation testing oﬀerings; added new capabilities including player experience analysis and design, focus group testing, animation andcinematics for both the video game and film markets; and given the Group solid operating bases in China and the Philippines.
This continued strong proﬁtable growth reﬂects Keywords' resilience to global upheavals, such as Brexit, as its key drivers remain thegrowth of the global video games market and its ability to increase its share of video games companies' spend on services that are
fundamental to their customers' experiences. Increases in the penetration of smart phones and other mobile devices and in consumer
spend on video games continue unabated, supporting strong demand for Keywords as the leading international creative and technicalservices platform for the industry. In addition, Keywords' recent early steps to take a more inﬂuential position in technology and player
experience consulting through the acquisition of Player Research, provides the Group with the opportunity to become ever more
embedded in how the world of electronic gaming evolves. This is, genuinely, an exciting development.
Managing and funding growthManaging growth successfully requires a balance between nurturing entrepreneurialism and innovation whilst providing a strong
technology, ﬁnancial and operational infrastructure. Progress has been made during 2016 to improve the Group's technology
infrastructure and select the systems (for ﬁnance and operations) that will be robust and scalable enough to support the Group to
multiply in size over the next few years. To that end we have recently appointed new Group Finance and IT directors, both resident in
Dublin, the Group's operational head oﬃce, in addition to strengthening the operational management team over recent years as a resultof the strong managerial talent that acquisitions have brought into the business.
In May 2016, we secured a ﬁve year revolving credit facility of up to €15m with Barclays Bank Plc to provide funds for both the Group's
working capital and acquisition ﬁnancing as it continues to grow, and since the period end and in keeping with the growth in the business
we have agreed terms on an enlarged facility of up to €35m, which gives us further headroom for selective acquisitions.
Culture of quality and people
Keywords has established itself as the "go to" provider of creative and technical services for electronic games. This is not just a functionof the team; average number of employees having grown from 1,273 to 1,818 people over the last year; the Keywords studios mustdeliver consistently good quality service in everything we do to a demanding set of customers against tight deadlines. The Group's trackrecord shows a high level of customer satisfaction, which is testament to the Keywords culture, where the customer always comes ﬁrst,
and the skill and commitment of Keywords' operatives. The cultural tone, set by the top team at Keywords, is radiated throughout thestudios and is shared by all businesses that join the Group. There is a real sense at our annual Strategy Conferences that Keywords willcontinue to consolidate its market leadership. On behalf of the Board and shareholders I'd like to thank everyone involved for theirindividual contributions both last year and for the future.
Shareholders and dividend
In line with its progressive dividend policy, and allowing for the need to retain resources to fund future growth of the Group's businessand its strategic aims, the Board is pleased to recommend a ﬁnal dividend of 0.89p per share which, following the interim dividend
payment of 0.44p per share, will make the total dividend for the year ending December 31, 2016 1.33p per share, an increase of 10% on
2015. Subject to shareholder approval at the Annual General Meeting, the ﬁnal dividend will be paid on June 23rd , 2017 to allshareholders on the register at June 2 nd, 2017 and the shares will trade ex-dividend on June 1 st, 2017.
Current trading and outlook
Trading in the ﬁrst two months of the year has been in line with the Board's expectations. With the beneﬁt of an expanded and morediversiﬁed business, and a strong market and ﬁnancial position in a growing yet still fragmented industry, we are conﬁdent that we cancontinue to make strong progress in line with our organic and acquisitive growth strategy and, at this early stage, maintain our current
expectations for 2017.
Looking longer term, we maintain a watching brief on the medium to long term potential for the Group in closely adjacent markets suchas e-learning, ﬁlm and television, and other content rich sectors where our expertise in the most interactive form of content, video
games, is highly relevant and transferable.

Ross Graham
Chairman
4 April 2017

Chief Executive's Review
Strong growth complemented by acquisitions
2016 saw Keywords continue to grow strongly, both organically and through acquisitions, which increased our capacity and scale inexisting service lines and expanded our service capabilities and geographical reach. The eight acquisitions completed in 2016 are in linewith the Group's strategy to lead the consolidation of the industry to become the "go to" global service delivery platform for the video
games industry. They comprised: Synthesis, which positioned Keywords as the global leader in localisation and voice-over recording;
Volta and Mindwalk Studios which reinforced the Group's strong art creation oﬀering; Player Research which added new capabilities inplayer experience analysis and design; Enzyme Testing Labs which brought focus group testing services to the Group as well as
increased scale to both functional and localization testing; Sonox which strengthened the Group's Audio services in the Spanish and Latin
American markets; and Ankama Asia, which added a presence in the Philippines. The Group also acquired the 50% of Kite Team it did notalready own during the year.
All acquisitions have or are being integrated into the Group by service line and by geographic region. The global management structure,
which provides for globally managed service lines supported by strong regional, country and studio management, was implemented in
mid-2015 and has been instrumental in providing the management focus and capacity to execute the acquisition strategy and drive theoperational performance of and synergies within the business.
The Group ﬁnished the year with 27 operating locations around the world, compared with 17 at the beginning of 2016, giving it further
geographical diversiﬁcation across its revenues. Of its €96.6m revenues in 2016, 48% were denominated in USD, 35% in Euros, just 3%
were denominated in Sterling, with the remainder being a mix of Japanese Yen, Canadian Dollars and others, meaning the Group has
been largely unaffected by the UK's decision to withdraw from the EU.
Results Overview
Including the eﬀect of acquisitions, the Group's revenues increased by 67% to €96.6m (2015: €58.0m) during the period, reﬂecting
growth across all lines of business as outlined in the Operational Review below.
Using a like-for-like measure of organic revenue growth in the businesses that Keywords now owns, which provides a 2015 comparative
as if all of the 2016 acquisitions had been owned for the same period in 2015 as they have been in 2016, organic growth was 24% in2016 (20% in 2015). This like-for-like growth is a key focus and was driven primarily by our Localisation and Audio Service lines, both ofwhich beneﬁtted additionally from the very strong performance of Synthesis, acquired in April, and by Art, Customer Support, andFunctional testing which all grew well, while Localisation Testing posted like for like growth of 8%.
Gross proﬁt margins increased to 38.0% (2015: 37.6%) reﬂecting a combination of the Group's revenue mix and continued good margin
management.
Adjusted proﬁt before tax (before share option charges, amortisation of intangible assets, costs of acquisition and integration, andforeign currency movements) increased by 86% to €14.9m in 2016 (2015: €8.0m). Statutory proﬁt before tax for the period was €9.5m(2015: €5.2m).
The Group's eﬀective tax rate has decreased as we make better use of our brands, operating models and tools from our Dublin
operational headquarters in support of our business around the world, much of which is in higher tax rate jurisdictions including Canada,
the US, Japan, India and Italy. The Group's eﬀective tax rate based on Keywords Studios' measure of proﬁt before taxation in the period(as set out in the financial overview below) was 21.7% (2015: 22.9%).
Adjusted basic earnings per share for the year (before one-time costs of acquisitions and integration, share option charges, amortisationof intangibles, and foreign exchange movements), increased to 20.59c compared with 12.81c for 2015. After these items, the basic
earnings per share from continuing operations was 11.22c (2015: 6.98c).
The group delivered strong operating cash ﬂow in the year of €15.0m, with the beneﬁt of €1.6m of multimedia tax credit ("MMTC")
payments from 2013 and 2014, up from €3.4m in 2015. Following the investment of €21.1m net cash consideration for the eightacquisitions completed in 2016, the Group had €17m in cash at the year end, having utilised €8m of its €15m revolving credit facility,
giving a net cash position of €8.7m.
Since the year end, terms have been agreed to replace our existing €15m facility with a revolving credit facility of €35m for an initial 3
year term, with the opportunity to extend by a further 2 years. This new facility is on very similar terms to the existing arrangement andgives us additional headroom to support our acquisition strategy.
Operational Review
In contrast to 2014 and 2015, during which we added Customer Support and Art, 2016 was focussed on adding capabilities, geographiesand scale to, and deriving synergies from, our existing six service lines. Whilst there is plenty more to do, we were pleased to havemade some good progress in achieving synergies across the Group, with teams increasingly combining the Group's services, resourcesand dual-shore delivery eﬀectively to meet clients' needs. This is reﬂected in a 25% increase in the number of clients using 3 or more of
the Group services to 51 from 64 during the year.

Art Creation (17% of Group revenues in the year)
Art creation services revenue grew 102% to €16.6m (2015: €8.2m) reﬂecting underlying growth particularly at Lakshya Digital and postacquisition contributions from both Mindwalk and Volta acquired in June and October respectively. On a like-for-like basis, Art grew byapproximately 34% year on year, reﬂecting strong market demand in the second half of the year, particularly in our Asian studios. We
ﬁnished the year with 650 artists on our payroll of which 600 are in India and China. Through Liquid Development and Volta, we manage
further pools of freelance artists numbering about 200 in total. This talent base makes Keywords one of the largest art services
businesses in the highly fragmented global video games market.
We continue to see excellent synergistic beneﬁts between our concept art studio, Volta, which operates at the earliest stages of thegame production lifecycle and our other studios which operate further downstream in the production of art assets for ﬁnal incorporation
into the games. Furthermore, all studios are working with each other to leverage their respective capacities, and capabilities, to deliver
top quality work to their global client base.
The objective for our Art Creation services line is to grow capacity to meet demand, whilst maintaining our reputation for quality andreliability of delivery to our customers' timescales. In addition, we aim to extend our capabilities in areas such as visual special eﬀects,
user interface design, cinematics and motion graphics, which we have started to do with the acquisition of Spov after the year end.

Audio (18% of Group revenue for the year)
Our Audio business increased revenues by approximately 140% to €17.3m (2015: €7.2m) including contributions from Synthesis andSonox which were acquired in April and December respectively. On a like-for-like basis, revenues in our Audio service line grew byapproximately 20%.
During the year, we strengthened the management of our Mexican audio studio; consolidated Synthesis Iberia, Kite Team and Sonox
under Kite Team in Madrid; completed the earn out of Liquid Violet in London; and, this year, we are opening an audio recording studio inTokyo, Japan.
The current, well-documented strike of video game voice actors in Los Angeles, which started in October, has had little direct eﬀect on
our audio business as it is focussed more on multi language "dubbing" rather than original language, US English recording.

Localisation (33% of Group revenue in the year)
Our Localisation activities, including contributions from Synthesis and Sonox which were acquired in the year, increased revenues byapproximately 89%, to €32.3m (2015: €17.1m), and continued its excellent record of growth with a like for like increase of 33%.
Operating from 17 studios, our localisation business employed 85 project managers and 70 language specialists and editors andmanaged a network of approximately 1,000 games specialised translators in-territory around the world, giving it the scale to respondflexibly to client's needs to translate into multiple territories simultaneously. The business translated around 210m words during the year.
Our Localisation service line continued to beneﬁt from the trend towards 'games as a service' which necessitates fresh content being
added to the game on a frequent basis to expand the game worlds and keep players engaged. We are the leading localisation provider
for video games and enjoy a strong position in the fast-growing mobile games segment of the market, where content additions to themany leading games that we support result in continuous localisation work for the Group in as many as 30 languages.

Functional Testing (9% of Group revenue for the year)
Our Functional Testing services grew by 33% to €8.6m (2015: €6.5m), including a six-week contribution from Enzyme which was acquiredin November 2016, and grew by 23% on a like-for-like basis.
Staﬀ utilisation remains a strong point for this service line which needs to react ﬂexibly to changes in game production schedules withlast minute alterations in testing team composition required. The ability to combine large, multi-month testing projects and small
projects of a few days' duration while keeping non-billable time to a minimum is greatly enhanced by scale and we expect to see
continued improvement in this as we integrate the functional testing activities of Enzyme in 2017.
In October we acquired Player Research, a Brighton, UK based business that provides user testing and consultancy services to gamedevelopers and publishers to help them optimise their games for increased player retention and monetisation. Although Player
Research's business spans many of our service lines we have chosen to report its results within Functional Testing due to the play testingelement of its service offering which has natural synergies with this service line.

Localisation Testing (17% of Group revenue in the year)
Our Localisation Testing operations grew by 8% on both absolute and like-for-like bases to €16.2m (2015: €15.0m). The acquisition of
Synthesis in April 2016 and Enzyme in November 2016 added acquired revenues to this service line for the ﬁrst time since the acquisitionof Babel Media in February 2014. Integration of both businesses is progressing well.
With secure localisation testing studios in Montreal, Dublin, Milan, Singapore and Tokyo we believe this service line is the largest providerof localisation testing in the video games market. We look forward to continuing to serve our clients around the world while optimising
our production eﬃciency, assisted by our increased scale, and developing our talent pool of games passionate professionals of over 30
different nationalities.

Customer Support (6% of Group revenue for the year)
Revenues for this service line grew by 44% to €5.6m (2015: €3.9m). On a like-for-like basis, the business grew 17% to account for 6% of
total revenues.
Our Customer Support and Community Management business commenced in January 2015 with the acquisition of Alchemic Dream.
Originally using a network of multi lingual agents working remotely but connected through a technology platform, this business hasdeveloped another operating model using teams of agents, employed and housed in our studios in Montreal, Dublin and Tokyo, often
including teams which, having been involved with testing, already have a deep knowledge of the games. Since acquiring a Manila,
Philippines, based customer support operation from one of our clients, Ankama, in March 2016, this English only operation has been
expanded from 23 people to close to 120 as further clients have been added to this studio.
Whilst our Customer Support service line remains a relatively small part of the Group, we believe our specialist teams oﬀer an attractive
alternative to existing large customer support call centres. Our customers, as ever, are highly focussed on keeping gamers in theirgames for longer. We believe our model of using teams with deep knowledge of the games provides improved user satisfaction and will
enable us to grow our share of this market over time.
Delivering Our Strategy
We have made strong progress in delivering on our strategy to grow Keywords Studios both organically and by acquisition to extend theGroup's client base, service lines and geographical penetration. This allows the Group to use its existing expertise, multi-service platform,
scale and global reach to generate synergies in a highly fragmented games services industry. We have not only expanded our Art
Creation, Audio, Localisation, Functional and Localisation Testing service lines but we have also added new capabilities including inplayer experience analysis and design, focus group testing, animation and cinematics for both the video game and ﬁlm markets. In
addition, we have established significant operations in China and the Philippines.
As a more diversiﬁed, better balanced business with an expanded range of services and locations to oﬀer our clients, we see many
opportunities to extend our existing relationships with major games companies both through providing additional services to existingcustomers and through providing dedicated outsourced services. We have made good progress in this regard with a signiﬁcant increasein the number of our clients buying multiple services from the Group.
PeopleThe Group employed an average 1,818 people in 2016 (2015: 1,273). This talent pool is a particular strength of our Group as it provides
a broad and deep pool of high quality expertise that our clients can use at the appropriate time to help them get their products andservices to market with a flexible, cost efficient and trusted partner.
For our staﬀ, the Group oﬀers a welcoming home amongst other games passionate colleagues, in which the games come to them.
Working on around 150 games at any time in the year and around more than 500 in total throughout the year, Keywords provides an
excellent and sustainable variety of work, good career advancement opportunities and, increasingly, opportunities to work in many
diﬀerent locations. We are proud to serve as a stepping stone for those that go on to make their careers in games production andpublishing and are fortunate to have an excellent alumni of Keywordians employed by many of our client companies.
Our acquisition programme also brings fresh talent to the Group at all levels and we have been successful at integrating our businesses
including providing opportunities for staﬀ to move between our various studios. This is reﬂected in our senior leadership team, which
comprises four people from the original Keywords business, three from Binari Sonori, one from Lakshya, one from Babel Media, one from
Liquid Development as well as four externally hired employees.
Current market trends
2016 saw the ﬁrst of what many believe will be a number of refreshes of the PlayStation ® and Xbox consoles with the launch of the PS4
Pro and the Xbox One S as well as the launches of various ﬁrst generation, virtual reality hardware devices including Facebook's Oculus
Rift, Valve/HTC's Vive, Sony's PS VR and Samsung's Gear VR. While the VR hardware did not sell as well at launch as some analysts were
expecting, and we have not assumed stronger demand for our services in this area in 2017 compared to 2016, the backing of large
groups such as Facebook, Google, Sony and others supports the potential for the continued development of the hardware andapplications that will lead to mass adoption over time. Overall, we expect VR to be just one factor in the continued growth in content
over time.
January 2017 saw the launch of Nintendo's Switch which we hope will establish itself as a major platform along with PS4 and Xbox One,leading to additional services work for Keywords as we support the content destined for this exciting new platform.
OutlookAfter a strong ﬁnish to 2016 in which we saw record activity in some of our studios including our largest, Montreal, the Group's
performance in the first two months of the current financial year has been positive and in line with the Board's expectations.
High demand for our art outsourcing services, particularly at Lakshya in India and Mindwalk in China, has returned in the second half of2016 and into 2017. Collaboration between all four of our art studios is going well and in many cases, clients are requesting that wework across a number of our studios to conﬁgure services that meet their needs in terms of speciﬁc capabilities as well as scale. Our
unique ability to blend services delivered to clients from near shore studios in the US or Canada combined with lower cost production inIndia and China is working well and we remain conﬁdent of good growth from this service line during 2017. The addition in February thisyear of Spov with its focus on highly creative motion graphics and cinematics for video games and for ﬁlm further extends ourcapabilities and capacity and we expect this expansion to lead to further increases in demand for Keywords Art services.

Each service line is pursuing a growth strategy formulated for its own market opportunity, with some including a larger acquisition
component than others and with the aim of a good balance between all 6 service lines over time. The synergies available to us across theGroup, from sharing access to our talented people and production facilities, to leveraging our established client relationships, global
sales force and marketing spend across all service lines, provide us with a solid platform for continued organic and acquisition led growth.
We fully expect to make continued good progress during 2017 as we take advantage of the synergies aﬀorded by our enlarged platform
and as we make further selective acquisitions, with the support of our strong cash generation and increased debt facilities.
Andrew Day
Group Chief Executive Officer
4 April 2017

Financial Review
Group Performance2016 has seen the Group deliver another year of good organic growth, substantially complemented by acquisitions which have further
extended its service offering, market penetration and geographic reach.
During the year, we have continued to invest in the business having expanded our customer support oﬀering with the acquisition of aPhilippines-based team from Ankama; consolidated our Spanish and Latin American presence by acquiring both the remaining 50% ofaudio and localisation ﬁrm, Kite Team and Madrid based Sonox Audio; established the group as the global leader in localisation andvoice-over recording through the acquisition of Synthesis; and acquired China-based ﬁrm, Mindwalk as well as Quebec City-based, Volta
which significantly enlarged the scale of our art services business line.
We have also made good progress integrating prior period acquisitions, all of which are making good contributions to the Group. We havecontinued to invest in our management structure in order to support future growth, with the appointment of senior managers to lead ourart services and strategic outsourcing offerings as well as a Group IT Director.
Keywords' geographic reach continued to increase through acquisitions in St.Jerome, Quebec City, Taipei, Brighton, and Manila.
Revenue
Revenue for 2016 was up 67% at €96.6m (2015: €58.0m) due to both organic growth and acquisitions. The like for like revenue growthrate, which provides a 2015 comparative as if all of the 2016 acquisitions had been owned for the same period in 2015 as they have been
in 2016, was 24% for the year which was up from 20% in 2015 and demonstrates the strong momentum the studios have managed tomaintain throughout the year.
Revenue Mix
Revenues increased across all lines of business in 2016, resulting in our six service lines accounting for the following proportion of Group
Sales in the year:
Year
ended
31
December
2016%

Year ended31
December
2015%

Proforma* forthe year
ended 31
December
2016%

Functional Testing

8.9

11.2

13.2

Localisation Testing

16.8

25.9

15.8

Localisation

33.5

29.6

32.3

Audio

17.9

12.4

16.6

Customer Support

5.8

6.8

4.9

Art Creation

17.1

14.1

17.2

Total

100

100

100

*Pro forma includes the annualised sales of all acquisitions made in 2016 in order to give a better overview of the balance of the business as we head into
2017.

The sales mix by region based on the Group's operational jurisdictions are as follows:Year EndedYear Ended

31 December 201631 December 2015%%

Europe

56

41

Asia

15

17

Americas

29

42

100

100

Gross Margin
Gross profit for the year was €36.7m (2015: €21.8m). The gross margin percentage increased to 38.0% (2015: 37.6%).
Operating Profit ("EBITDA")
Adjusted EBITDA is a measure of operating proﬁt used by the Board, which excludes depreciation, amortisation, share option expenses
and one-time costs related to acquisitions. For 2016, adjusted EBITDA increased 78% to €16.7m, compared with €9.4m for 2015. As a

percentage of revenue, adjusted EBITDA has increased from 16.2% to 17.3%, reﬂecting the improvement in the Group's gross margin
partially offset by an increase in operating expenses as described below.
Operating Proﬁt and Adjusted Proﬁt Before tax for Year
Ended 31 December 2016
Year Ended Year Ended
2016
2015
€'000s€'000sStatutory profit before tax
Add back costs excluded from Group's
measure of PBT*
Add back loss attributable to non-controllinginterest
KWS measured Profit before tax
Add back Depreciation and Interest
Earnings
beforedepreciation
and amortisation

Interest,

tax,

9,435

5,086

5,368

2,812

61

109

14,864

8,007

1,861

1,355

16,7259,362*acquisition and integration expenses of €1.3m (2015: €1.1m), share option charges of €0.7m (2015: €0.4m), amortisation of intangibles of €1.6m (2015:€0.9m), and foreign currency loss of €1.7m (2015: loss of €0.5m).

Operating expenses excluding depreciation, increased by €7.5m to €19.8m (2015: €12.3m) mainly as a result of the new acquisitions
made during the year. The continued additional investment in strengthening Keywords management to successfully manage the growthof the Group also contributed. However, the continued drive on achieving synergies across the Group helped these costs decrease from
21.3% to 20.5% of revenue, with teams increasingly combining the Group's services and resources eﬀectively to meet clients' needs. We
expect the operating costs as a percentage of revenue to trend towards 20% as we manage additional volume from organic andacquisition led growth within the established framework of the Group.
Net Finance Costs
During 2016 there was a net ﬁnance cost of €2.0m compared to a cost of €0.7m in 2015 primarily due to the impact of foreign exchange
losses. Foreign exchange losses of €1.7m (2015: loss of €0.5m) were in large part due to exchange rates losses on cash deposits
resulting from the £10.5m Placing in November 2015 and inter-company loans. The increase in interest expense to €0.2m (2015: €0.1m)
is largely due to a secured credit facility with Barclays of up to €15m over a ﬁve-year period of which €8m was drawn down at the year
end.
Adjusted Profit before Tax
Adjusted Proﬁt before Tax is used by the Board to measure the more meaningful underlying proﬁt generation of the Group. This measureexcludes one-time expenses, such as acquisition and integration costs, share option expenses, foreign currency gains or losses andamortisation of intangibles. Adjusted profit before tax for 2016 increased by 86% to €14.9m compared with €8.0m in 2015.
Taxation
The Group's eﬀective tax rate reduced to 21.7% (2015: 22.9%) as the Group looked to charge more services from Ireland in the year.
This will continue during the next year and we would anticipate a further slight reduction in the effective tax rate.
Basic Earnings per share
Basic earnings per share for the year, before one-time costs of acquisitions and integration, share option charges, amortisation of
intangibles, and foreign exchange movements, increased by 61% to 20.59c compared with 12.81c for 2015. Basic earnings per sharebased on the statutory profit after tax was 11.22c (2015: 6.98c).
Cash flow and debt
The Group generated operating cash ﬂow of €15m for the year, up from €3.4m in 2015, with the beneﬁt of €1.6m of MMTC paymentsfrom 2013 and 2014. During the year the Group also accumulated MMTCs in Quebec of €2.8m (2015: €1.3m). Previous delays in receiving
the multimedia tax credits were not encountered in 2016 and this signiﬁcantly improved the cash collection levels year on year. The
total multimedia tax credit accrual amounted to €2.9m as at December 31, 2016 (2015: €3.9m).
The Group made eight acquisitions to strengthen the business during the year with a net cash outﬂow on consideration payments of€21.1m, and an additional €1.3m in acquisition and integration expenses.
Investment in ﬁxed assets amounted to €2.3m (2015: €1.6m) reﬂecting the cost of increasing the capacity of the Montreal studio,
improvements to both the Dublin and Manila studios and investment in the Art service line for both Lakshya Digital and Mindwalk.
Additionally, there were ongoing purchases of games testing equipment.
Cash and cash equivalents decreased to €17.0m from €19.0m excluding accrued multimedia tax credits of €2.9m (2015: €3.9m). The
loans and borrowings were €8.4m at 31 December 2016 (2015: €1.7m)
Foreign Exchange
Keywords does not hedge foreign currency proﬁt and loss translation exposures. The eﬀect on the Group's results of movements in
exchange rates and the foreign gains and losses incurred during the year, which mainly relate to cash deposits resulting from the £10.5m
Placing in November 2015 and inter-company loans, are set out in the net finance costs section above.
Dividend
The Company has a progressive dividend policy, subject to the retention of funds needed to fund future growth of the Group's businessand its strategic aims.
Following the interim dividend payment of 0.44p per share on 28 th October, 2016, the Board has recommended a ﬁnal dividend of 0.89p
per share, which will make the total dividend for the year ending December 31 st, 2016 1.33p per share, a 10% increase over 2015.
Subject to shareholder approval at the Annual General meeting, the ﬁnal dividend will be paid on June 23rd , 2017 to all shareholders on
the register at June 2nd, 2017. The cash cost of the ﬁnal proposed dividend will be an estimated €0.83m, subject to currency
fluctuations.
Events after the reporting period
On February 17th, 2017 the Group acquired the entire share capital of Spov Ltd. ("Spov") for a total consideration of up to £1.16m in cash

from its founder, Allen Leitch. Based in London, UK, Spov provides creative development, cinematics, UI, visual eﬀects and motion
graphics services to the video game and film markets.
The Group has agreed heads of terms on a revolving credit facility with Barclays for €35m for an initial 3 year term, with the opportunity
to extend by a further 2 years. The new facility replaces the existing €15m facility and is on similar terms. This increased facility is in
keeping with the growth of the Group and its financial performance and provides support for the Group's ongoing acquisition strategy.
Key performance Indicators
We monitor our ﬁnancial performance against a number of diﬀerent benchmarks. These are set in agreement with the Board and used toevaluate progress against our strategy.
Financial performance is measured by-

Revenue growth
Revenue growth is measured by line of business and overall against the Board's strategic goal to grow organically and byacquisition.

-

Gross profit
Gross profit is a key measure of the Group's pricing strategies, use of resources and its ability to optimise resource utilisation.

-

Overhead costs
The Board monitors the overheads to ensure the costs of the Group are in line with the level of business being generated.

-

Adjusted EBITDA margin
The Board uses an adjusted measure of EBITDA to monitor the performance of the Group. This measure excludes foreign exchange
gains or losses, any one-time expenses and the cost of employee share option awards.

-

Adjusted operating profit margin
The Board also uses an adjusted measure of operating proﬁt to monitor the performance of the Group. This measure similarly
excludes foreign exchange gains or losses, any one time expenses, and the cost of employee share option awards.

Non-financial performance is measured by-

Resource deployment
The Board reviews the eﬃciency at which the Group is utilising its staﬀ resources to ensure optimum staﬃng strategies are
deployed and to maximise utilisation rates.

-

Business won/lost
The Board reviews the levels of new business won and lost, and monitors the reasons for both, to ensure that the services being
offered to the market are appropriately priced and relevant.

-Customer satisfaction and quality of service delivery
The Board monitors the quality and timeliness of service delivery on an ongoing basis and reviews the level of repeat revenue fromexisting customers, typically around 80%, as a key measure of customer satisfaction.

David Broderick
Chief Financial Officer
4 April 2017

Consolidated Statement of comprehensive income

Revenues

Note

2016
€'000

2015
€'000

4

96,58557,951(62,196)
2,289(59,907)
36,678(37,460)
1,287(36,173)
21,778(686)(1,316)(1,629)(21,588)(392)(1,089)(857)(13,616)(25,219)
11,459(15,954)5,824

94(2,118)9,435(3,223)
6,212

70
(808)
5,086
(1,832)
3,254

Operating costs
Multimedia tax credits
Net Operating Costs
Gross profit
Share option expense
Costs of acquisition and integration
Amortisation of intangible assets
Other administration expenses

20

Administrative expenses
Operating profit
Financing income
Financing cost
Profit before taxation
Tax expense
Profit from Operations
Other comprehensive income:Exchange gains on translation of foreign
operations
Actuarial loss on defined benefit
Total comprehensive income:
Profit for the period attributable to:
Owners of the parent
Non-controlling interest
Total comprehensive income attributable to:
Owners of the parent

6
6
7

489

763

(63)
6,638

4,017

6,273
(61)
6,212

3,363
(109)
3,254

6,699

4,126

Non-controlling interest
Earnings per share
Basic earnings per ordinary share (Euro cent)Diluted earnings per ordinary share (Euro
cent)

(61)
6,638

(109)
4,017

9

Euro cent
11.22

Euro cent
6.98

9

10.87

6.87

Consolidated Statement of financial position
Years ended 31
December
2016
€'000

2015
€'000

14
12
13

5,498
46,7998,696
880
61,873

3,486
23,893
3,782
971
32,132

15
16
18
17

13,8797,778
17,02038,677
100,550

7,519
8,320
27
19,01834,88467,016

19

654
8,792
19,983
22,109987(1,434)
1,305
14,30866,70466,704646
18,542
22,109
498
(804)
619
10,29351,903(1,309)50,594

4,822
12,431
8,025
2,552
27,830

2,761
7,862
1,163
752
12,538Note
Non-current assets
Property, plant and equipment
Goodwill
Intangible assets
Deferred tax assets
Current assets
Trade receivables
Other receivables
Short-term investments
Cash and cash equivalents
Total assets
EquityShare capital
Share capital - To Be Issued
Share premium
Merger reserve
Foreign exchange reserve
Treasury shares held in EBTShare option reserve
Retained earnings
Non-controlling interest
Total equity
Current Liabilities
Trade payables
Other payables
Loans and Borrowings
Corporation tax liabilities

21
23

Non-current liabilities
Other payables
Employee Defined Benefit
Loans and Borrowings

21
22
23

1,592
826
345

300
590
571

Deferred tax liabilities

29

3,253
6,016
100,550

2,423
3,884
67,016

Total equity and liabilities

Consolidated Statement of changes in equity
Foreign
Share

Mergerexchange

capitalSharesto beissuedTreasurysharesheld

premium

reserve

reservein EBT

reserve

€'000

€'000

€'000

€'000

€'000

€'000

€'000

551

-

18,542

5,297

(265)

-

-

-

-

-

-

-

-

-

-

Total comprehensive
income for the year

-

-

-

Contributions by andcontributions to theowners:Share option expense(note 19)
Dividends paid (note 10)
Shares bought for EBT
Shares issued for cash

78

-

-

Share

Balance at 1 January
2015
Profit for the period
Other comprehensive
incomeTotal
attributable

Share

Non

Total

Controlling

equityearnings

to equity
holders ofparent

€'000

€'000

€'000

€'000

227

7,667

32,019-32,019

-

-

3,363

3,363

(109)

3,254

763

-

-

-

763

-

763

-

763

-

-

3,363

4,126

(109)

4,017

14,118

-

(804)
-

392
-

(737)
-

392
(737)
(804)
14,196

-

392
(737)
(804)
14,196

optionRetained

Interest

Shares issued uponacquisitions
Liabilities on acquisitionof Kite Team
Purchase of Put Option remaining 50% Kite
Team

17

-

-

2,694

-

-

-

-

2,711

-

2,711

-

-

-

-

-

-

-

-

-

(50)

(50)

-

-

-

-

-

-

-

-

-

(1,150)(1,150)Contributions by andcontributions to theownersBalance at 31
December 2015

95

-

646

-

16,812

-

(804)

392

(737)

15,758(1,200)14,55818,542

22,109

498

(804)

619

10,29351,903

1,309

50,594

6,273

6,273

61

6,212

Profit for the period
Other comprehensive
income

489

(63)

426

-

426

Total comprehensive
income for the year

489

6,210

6,699

61

6,638

Contributions by andcontributions to theowners:Share option expense(note 19)
Share Options Exercised
Dividends paid (note 8)
Treasury shares
ringfenced for EBT
Shares issued for cash Numis Warrants(note19)
Shares issued uponacquisition - Volta
Creation Inc
Shares to be issued(Synthesis Acquisition)
Shares to be issued(Mindwalk Acquisition)
Elimination of Minority
Interest in Kite Team
Shares Issued on
settlement with Kite
Team
Keywords France
Incorporation
Shares issued uponacquisition - Player
Research Ltd
Shares issued uponacquisition - Sonox
Audio Solutions SL

-

-

-

-

-

(632)
-

686
-

(825)

686
(632)
(825)

-

686
(632)
(825)

-

-

-

-

-

2

-

-

2

-

2

5

-

643

-

-

-

-

-

648

-

648

1

-

169

-

-

-

-

-

170

-

170

-

6,906

-

-

-

-

-

-

6,906

-

6,906

-

1,886

-

-

-

-

-

-

1,886

-

1,886

-

-

-

-

-

-

-

(1,370)(1,370)

1,370

0

1

-

149

-

-

-

-

-

150

-

150

-

-

-

-

-

-

-

-

-

-

-

1

-

331

-

-

-

-

-

332

-

332

-

-

149

-

-

-

-

-

149

-

149

1,370

9,472

Contributions by andcontributions to theownersBalance at 31
December 2016

8

8,792

1,441

-

-

(630)

686

(2,195)

8,102

654

8,792

19,983

22,109987(1,434)

1,305

14,30866,704

Consolidated statement of cash flows

Note

Cash flows from operating
activities
Profit/(loss) after tax
Income and expenses not affecting
operating cash flows
Depreciation
Intangibles amortisation
Income tax expense
Share option expense
Loss on disposal of fixed assets
Loss on payment of deferredconsideration
Interest receivable
Actuarial Loss on Employee Benefit
Share Issuance Expenses
Interest expense
Net Foreign Exchange Losses oninvestments

Years ended 31
December
2016
2015
€'000
€'000

6,212

3,254

1,803
1,629
3,223

1,297
857
1,832

686
-

392
20

264
(94)
63
152

194
(70)

55
7,781

4,664

14
128

-

66,704

Changes in operating assets
and liabilities(Increase)/
Decrease in tradereceivables(Increase)/ Decrease in otherreceivables
Increase/ (Decrease) in trade and otherpayablesIncome taxes paid
Net cash provided by operating
activities(3,788)29

3,245(2,533)

3,718
3,175
(2,129)(646)(3,150)(1,362)

15,0393,406

Cash flows from investing
activities
Acquisition of subsidiaries net ofcash acquired(19,109)
Acquisition of remaining 50% of Kite
(1,000)
Settlement of deferred liabilities onacquisitions(995)(Acquisition)/disposal of short term
investments
27
Acquisition/disposal of property, plant andequipment(2,306)
Interest received
6
94
EBT share purchase2
Net cash used in investing
activities(23,287)
Cash flows from financing
activities
Repayment of loan to Directors of acquiredcompany
Loan to finance Multi Media Tax
Credits
Repayment of loans
Loan to finance acquisitions
Dividends paid
10
Share options exercised
Shares issued
Share issuance expenses
Interest paid
6
Net cash used in financing
activities
Decrease in cash and cash
equivalents
Exchange gain/loss on cash and cash
equivalents
Cash and cash equivalents at beginning of
the period
Cash and cash equivalents at
end of period(7,409)232(1,635)70(804)(9,546)-(300)(1,157)
(625)
8,000
(825)
(632)
643
(152)

1,110
(737)
14,213
(14)
(128)

5,252

14,144(2,996)

8,004

998

-

19,01811,014

17,02019,018Adjustments 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 theamendments 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 (€'000) and the comparative numbers have also been revised to the same format. In 2015
the financial statements were rounded to one (€). The financial statements are presented in Euro (€) 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 arepresent; 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 ofthe 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 ofmerger 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 forshare 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 sharesin 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 forshare 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 thedate 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, theGroup's interest in the fair value of identiﬁable assets, liabilities and contingent liabilities acquired and, in the case of business combinations completed on orafter 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 weretreated 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 costsof 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 isdetermined 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 nonﬁnancial 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 thegroup'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 inother 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 theGroup's net investment in the overseas operation concerned are classiﬁed to other comprehensive income and accumulated in the foreign exchange reserveon consolidation.
On disposal of a foreign operation, the cumulative exchange diﬀerences recognised in the foreign exchange reserve relating to that operation up to the dateof 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 isrecognised 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, ifany, 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 acorresponding increase in capital contribution from the Company. This annual cost is recorded as an increase in the Company's cost of investment in thatsubsidiary.

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 torevalue 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 shallexceed 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 byusing 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 arerecognised 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; andinvestments in subsidiaries and jointly controlled entities where the Group is able to control the timing of the reversal of the difference and it isprobable 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 toapply 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; orDifferent 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 berecoverable. 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
Office furniture and equipment
Building and leasehold improvements

%
33.33
10.00
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 throughthe provision of services to customers (e.g. trade receivables), but also incorporate other types of contractual monetary asset. They are initially recognised atfair 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 ofreceivables. 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 andother 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 theconsolidated 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 istreated 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 areanalysed between capital and interest. The interest element is charged to the consolidated statement of comprehensive income over the period of the leaseand 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 fromequity 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 ofpolicies 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 historicexperience and other factors including expectations of future events that are believed to be reasonable. Actual results may diﬀer from these estimates andassumptions.

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 bedue. 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 suchdetermination 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 thosebusinesses 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 thecosts 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 isentitled 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 gameplatforms 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 therecordings.
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 associatedservices 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 areprovided 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 makerhas been identified as the executive management team made up of the Chief Executive Officer and the Finance Director.

Revenue by line of businessArt creation
Audio
Localisation
Functional testing
Localisation testing
Customer support

2016
€'000

2015
€'000

16,55917,26332,3608,619
16,204
5,580
96,585

8,211
7,157
17,141
6,472
15,021
3,949
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€7.2m.

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
€'000

2015
€'000

IrelandJapan
Italy
CanadaUnited States
India
Singapore
United Kingdom
BrazilSpain
Switzerland
Germany
Others

25,5704,886
7,269
22,053
5,250
4,591
4,787
1,276
619
2,167
17,838163
116

14,1673,324
8,343
17,438
6,573
3,602
3,083
650
465
306
-

Total revenues

96,58557,951

Geographical Analysis of Non-current Assets from Continuing
Businesses

Ireland
Japan
Italy
CanadaUnited States
India
Singapore
United Kingdom
BrazilSpain
MexicoSwitzerland
China
Germany
Philippines

5

2016
€'000
4,779
43
12,188
8,937
8,657
2,991
60
6,874
259
1,475
121
12,657
287
1,241
424
60,993

2015
€'000
284
32
8,984
1,981
8,707
3,039
83
6,885
204
867
95
31,161

Operating Profit

Operating profit is stated after
charging:

Years ended 31 December
2016
€'000

Depreciation
Amortisation of Intangible Assets
Costs of Acquisitions & Integration
Operating lease repayments

2015
€'000

1,803

1,297

1,630

857

1,316

1,089

2,371

1,663

One-time costs of €1,316 were incurred in acquiring and integrating the new entities into the group. The most significant costs within the integration costs arefor internal resource who have led the activities to integrate the new acquisitions into the Group, and legal costs in relation to acquisitions.

2016
€'000

2015
€'000

Auditors' remuneration
Audit services
Parent company and Group audit
Subsidiary companies audit

48

115

95

111

Non-audit services
Accounting services
Taxation compliance

1252

Due diligence services

155

278

6

Financing income and costs

Finance income
Interest received

Finance cost
Bank charges
Interest expense
Foreign exchange losses

Net financing income/(cost)

7

2016
€'000

2015
€'000

94

70

94

70

(229)
(152)
(1,737)(2,118)

(206)
(128)
(474)
(808)

(2,024)

(738)

2016
€'000

2015
€'000

Taxation

Current income tax
Income tax on profits of parent company
Income tax on profits of subsidiaries
Deferred tax (Note 29)

4
3,928
(709)
3,223

4
1,518
310
1,832

The tax charge for the year can be reconciled to accounting profit as follows:
Years ended 31 December

Profit before tax
Expected tax charge based on the standard
rate of taxation in the UK at 20% (2015: 23%)
Higher rates of current income tax inoverseas jurisdictions
Lower rates of current income tax in overseas
jurisdictions
Losses incurred
Effects of other timing differences
Total tax charge

2016
€'000

2015
€'000

9,435

5,086

1,887

1,170
286

1,331

(100)

(555)
998
(438)
3,223

238
238
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

Basic
Diluted

2016

2015

Euro cent
11.22
10.87

Euro cent
6.98
6.87

€'000

€'000

6,273

3,363

Number
55,918,481
57,716,435

Number
48,192,371
48,971,278

Profit for the period from continuing
operations
Denominator (weighted average numberof equity shares)

Basic
DilutedThe 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 ofSynthesis 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€ Cent

Total
€'000

Per share€ Cent

Total
€'000

Final Dividends Paid
Interim Dividends Paid

1.03
0.49

561
264

1.03
0.54

482
255

Dividends paid toshareholders

1.52

825

1.57

737

In June 2015, Keywords Studios plc approved a dividend of Stg 0.74/€1.03 per share, based on the shares in issue at that time, or€482,333 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/€0.54 per share, based on the shares in issue at that time, or€254,934 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/ €1.034 per
Ordinary share, or €561,000 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/€0.49 per share, based on the shares in issue at that time, or€264,000 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, tobe 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 €556,801.
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
DecemberGroup
Salaries and related costs

2016
€'000

2015
€'000

41,643

Share based payment costs

29,773686

392

42,32930,165

Key management compensation:

Years ended 31 December

2016

2015

€’000

€’000

Salaries and related costs

769

719

Social Welfare cost

97

88

Pension costs

29

5

42

135

937

947

Share based payment costs

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

General and administration

12

1,169

128

104

2,014

1,273

Goodwill

Group
Total
€'000
Cost and net book value
At 1 January 2015
Recognition on acquisition of subsidiaries
Revaluation on Exchange Rate movement
At 31 December 2015
Recognition on acquisition of subsidiaries
Revaluation on Exchange Rate movement
At 31 December 2016

14,711
8,354
828
23,89323,055(149)
46,799During 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 RateLong term
Growth Rate

10%

2%

CGU

Discount
Rates
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
€'000
Cost
As at 31 December 2013
Additions
As at 31 December 2014
Additions
Revaluation on Exchange Rate movement
As at 31 December 2015
Additions
Revaluation on Exchange Rate movement
As at 31 December 2016

3,434
3,434
1,511
187
5,132
6,509
(11)
11,630

Amortisation and impairment
As at 31 December 2014
Amortisation charge
Revaluation on Exchange Rate movement
As at 31 December 2015
Amortisation charge

468
857
25
1,350
1,629

Revaluation
on Exchange
Rate movement
As at 31 December
2016

(45)
2,934

Net book value
As at 31 December 2015
As at 31 December 2016

3,782
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

€'000

Office,furnitureandequipment
€'000

4,947

1,728

787

88

(15)

(16)

57

1,191

373

71

1,635

86

247

16

349

Computers
andsoftwareLeaseholdimprovements

Total

€'000

€'000
7,462

Cost
At 1 January 2015
Currency revaluation
Additions
Acquisitions throughbusiness combinations atfair value
Disposals

(59)

(14)

(3)

(76)

At 31 December 2015

6,253

2,319

855

9,427

Currency revaluation
Additions

131
1,370

99
597

80
376

310
2,342

798

145

416

1,359

Acquisitions throughbusiness combinations atfair value
Disposals

(67)

(2)

(3)

(73)

At 31 December 2016

8,485

3,158

1,724

13,367

4,701

Accumulated
depreciation
Cost
At 1 January 2015

3,765

868

68

Currency revaluation

102

(76)

(28)

(2)

Depreciation charge

857

344

96

1,297

4,669

1,136

136

5,941

Currency revaluation

(73)

225

18

170

Depreciation charge

1,205

429

169

1,803

1,790

323

7,869

Disposals(55)

At 31 December 2015

Disposals

(55)

(45)

At 31 December 2016

(45)

5,756

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

Group
Customers
Provision for Bad Debts

2016
€'000

2015
€'000

14,347(468)
13,879

7,825
(306)
7,519

16 Other Receivables
As of 31 December
Group

2016
€'000

2015
€'000

Accrued Income

1,661

1,661

Prepayments

1,769

989

Other receivables

4,002

4,931

346

394

7,778

8,320

Other Tax and Social Security
Restricted cash (note 25)

17

345

Cash and cash equivalents

2016

2015

Group

€'000

€'000

Cash at bank

17,02019,01817,02019,018

Short term bank deposits

18

Short term investments
As of 31
DecemberGroup
Medium Term bank
Deposits

2016
€'000

-

2015
€'000
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

As at 1 January 2015
Ordinary Shares of £0.01 issued for earn out ofBinari Sonori S.R.L
Ordinary Shares of £0.01 issued on acquisitionof Liquid Development LLC.
Placing of ordinary Shares of £0.01 on themarket
As at 31 December 2015
Ordinary Shares of £0.01 issued on acquisitionof remaining 50% of Kite Team shares
Ordinary Shares of £0.01 issued on acquisitionof Volta
Exercise of Numis Warrants
Ordinary Shares of £0.01 issued on acquisitionof Player Research
Ordinary Shares of £0.01 issued on acquisitionof Sonox
As at 31 December 2016

Shares€'000

47,105,007

551

158,2502

1,074,440

15

5,500,000

78

53,837,697

646

55,5081

45,192

1

400,324

4

65,2801

24,881

1

54,428,882

654

On 6 April, 2016 the Group issued 55,508 of 1p shares at a value of 215p (€2.70) 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 (€4.21) 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 (€1.61).
On 26 October 2016, the Group issued 65,280 of 1p shares at a value of 432p (€4.86) 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 (€6.03) which formed the part of the consideration for the acquisition ofSonox.
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)
Ordinary Shares held by the EBT

2016
Number €'000
399,026
802

2015
Number €'000
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 theoverseas operations into euro.

Share premium

The Share Premium account is the amount received for sharesissued in excess of their nominal value, net of share issuancecosts.

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 theissue 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 fixedat 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 the 100%
consideration for the acquisition of an entity, the value of theshares in excess of the nominal value, net of share issuancecosts are now also recorded within this reserve, in line with
S612 of the 2006 UK Companies Act.

Non-Controlling Interest
Reserve

20

The non-controlling interest reserve represents the share of net
assets / (liabilities) at the reporting date which is attributable tothe holders of the non-controlling interest.

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 thesearrangements is shown below, with further details of the schemes following:

Share Option Scheme Expense
Share Option Scheme - LTIP
Expense

2016
€'000

2015
€'000

208

157

478
686

235
392

Of the total share option charge, €45k relates to Directors of the Company as at 31 December, 2016. (2015: €55k).

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 ofoptions

Average exercise
price in £ per share

Number ofoptions

1.2

1,642,242

1.2

642,286

Outstanding at the
beginning of theyear
Granted2.45

223,200

1.58

1,059,040

Lapsed1.67(44,547)

1.2(32,553)

Exercised
Outstanding at theend of the year
Exercisable at theend of the year

1.31

(148,839)

1.2(26,531)

1.58

1,672,056

1.2

1,642,242

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 ofthese 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 Groupof 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 theoptions 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

Weighted average share price (£)
Weighted average exercise price (£)
Average Expected Life
Expected Volatility
Risk free rates
Average expected dividends yield

2016

2015

1.23
1.20
3 years
36.12%
0.5%
1.00%

1.23
1.20
3 years
36.12%
0.5%
1.00%

2016

2015

1.64
1.58
3 years
28.03%
0.9%
0.75%

1.64
1.58
3 years
28.03%
0.9%
0.75%

2016

2015

2.54
2.535

-

Share Options granted in 2015

Weighted average share price (£)
Weighted average exercise price (£)
Average Expected Life
Expected Volatility
Risk free rates
Average expected dividends yield
Share Options granted in 2016

Weighted average share price (£)
Weighted average exercise price (£)-

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 in2015 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 in2016 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 andto 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
Average
exercise pricein £ per share

Numberofoptions

2015
Average Number
exercise priceofin £ per shareoptions

Outstanding at the beginning of the year

0.01

860,206

0.01

376,226

Granted0.01

720,000

0.01

489,540

Lapsed0.01(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 June2018 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 exercisedin 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

Weighted average share price (£)
Weighted average exercise price (£)
Average Expected Life
Expected Volatility
Risk free rates

2016

2015

1.23
0.01
3 years
36.12%

1.23
0.01
3 years
36.12%

0.5%

0.5%

2016

2015

1.60
0.01
3 years
35.52%
0.5%

1.60
0.01
3 years
35.52%
0.5%

2016

2015

1.43
0.01
3 years
31.2%
0.58%

1.43
0.01
3 years
31.2%
0.58%

2016

2015

LTIPS granted in 2014

Weighted average share price (£)
Weighted average exercise price (£)
Average Expected Life
Expected Volatility
Risk free rates

LTIPS granted in January, 2015

Weighted average share price (£)
Weighted average exercise price (£)
Average Expected Life
Expected Volatility
Risk free rates

LTIPS granted in June, 2015

Weighted average share price (£)
Weighted average exercise price (£)
Average Expected Life
Expected Volatility
Risk free rates

1.64
0.01
3 years
28.03%
0.9%

1.64
0.01
3 years
28.03%
0.9%

LTIPS granted in May, 2016

Weighted average share price (£)

2016

2015

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 theoutstanding options can be exercised at £0.01 over a 4 year period.

21

Other payables

Group
Current
Accrued expenses
Payroll Taxes
Other payables
Contingent Consideration
Related party payable (Note 25)

2016
€'000

2015
€'000

7,702
542
3,927
251
9
12,431

3,268
482
2,124
1,979
9
7,862

113
1,479
1,592

55
245
300

Non-current
Other payables
Contingent Consideration

During 2015 an amount of €590,000 relating to the Italian defined benefit pension was included within other current payables. This item has been shown as aseparate 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 isentitled 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 theyear are detailed;Group
Opening liability position as at 1 JanuaryService cost
Interest cost
Benefits paid
Branch transfer
Actuarial loss recorded
Closing liability position as at 31 December

2016
€'000
590
193
10
(30)
63
826

2015
€'000
490
94
7
(67)
57
9
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.

Actuarial valuations
Defined benefit obligations
Current concern provision
Current concern provision surplus /(deficit)
Value of accrued benefits
Future service liability

2016
€'000
826
654
(172)
3,318
2,492

Cost for year
Service cost
Interest cost
Actuarial loss

193
10
63
266

Actuarial losses
Change due to experience
Change due to demographicalassumptions
Change due to financial
assumptions

30
5
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 beenplaced 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
Inflation
Discount rate

2.50%
1.73%
1.29%

Key Statistics
Staff Number
Average Age
Average Service
Average Defined Benefit per staff
Average Salary for Defined Benefit

97
38.2
3.6
6,745
31,723

Actuarial Losses
Change due to Experience
Change due to Demographical assumption
Change due to Financial assumption
Actuarial Losses

2016
€'000
32
5
30
67

Interest Rate Sensitivities-0.50%
0.50%

882
776

Mortality Rate Sensitivities-0.025%0.025%

827
782

Staff Turn Over Rate Sensitivities-0.50%
0.50%

835
818

Staff Salary Increases Rate Sensitivities-0.50%
0.50%

808
845

23

Loans and borrowings

Group

2016
€'000

2015
€'000

Expiry within 1 Year
Expiry between 1 Year and 2 Years
Expiry over 2 Years

8,025
55
290
8,370

1,163
350
221
1,734

A loan with RBC bank in Canada of CAD $1.7m (€1.1m) at 31 December 2015 was repaid on 15 April 2016.
The loans in Kite Team of €0.6m 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 €15 million. At year end, €8 million was drawn down.
The group also took on loans on the acquisition of Enzyme of CAD $0.5m (€0.4m).
The currencies of these loans are as follows;Euro
Canadian Dollars

2016
€'000

2015
€'000

8,000
370
8,370

621
1,113
1,734

4 Investment in Subsidiaries
2016
€'000
Opening 1 January 2016
Acquisition of Synthesis
Closing 31 December 2016

12,765
17,89430,659The 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
Keywords International Limited
Keywords International Co. Limited
Keywords International Corporationinc
Keywords Italia Srl
Keywords International Inc
KW Studios Limited
Liquid Violet Limited
Babel Media Limited
Babel Games Services Inc
Babel Media India Private limited
Babel Media USA Inc
Keywords International Pte. Limited
Binari Sonari SRL
Binari Sonari Inc
Lakshya Digital Private Limited
Lakshya Digital Singapore Pte Ltd
Edugames Solutions Private Limites
Alchemic Dream Inc
Keywords International Barcelona SL
Reverb Localizacao - Prearacao deDocumentos Ltda
Keywords (Shanghai) Information
Technology
Kite Team SL
Kite Team Mex S. de R.L. de. CV
Liquid Development LLC
Ankama Asia Pte. Ltd
Synthesis Global Solutions
Synthesis Deutschland
Sillabit S.R.L
Keywords International SAS
Volta Creation Inc
Player Research
Global Video-Games Services Inc.,
trading as Enzyme Testing Labs
Sonox Audio Solutions S.L.U.
25

Proportionof votingrights andordinary
Date ofshareCountry ofincorporation
capitalincorporation / acquisition
held
Ireland
13/05/1998
100%
Japan
30/11/2010
100%
CanadaItaly

22/12/2010
18/05/2011

100%
100%

United States
UnitedKingdom
UnitedKingdom
UnitedKingdom
CanadaIndia
United States
Singapore
Italy
United States
India
Singapore
India
CanadaSpain

26/09/2012

100%

29/05/2013

100%

15/01/2014

100%

17/02/2014
17/02/2014
17/02/2014
17/02/2014
24/04/2014
08/05/2014
08/05/2014
10/10/2014
10/10/2014
10/10/2014
06/01/2015
09/01/2015

100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%

Brazil18/01/2015

100%

China
Spain
MexicoUnited States
Singapore
Switzerland
Germany
Italy
FranceCanadaUnitedKingdom

02/04/2015
16/07/2015
16/07/2015
20/08/2015
22/03/2016
12/04/2016
12/04/2016
12/04/2016
08/06/2016
29/07/2016

100%
100%
100%
100%
100%
100%
100%
100%
100%
100%

26/10/2016

100%

CanadaSpain

16/11/2016
22/12/2016

100%
100%

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
€'000

2015
€'000

53
53

24
24

2016
€'000

2015
€'000

9
9

9
9

Operating Expenses
Canteen Charges

The following are year-end balances:

Italicatessen Limited

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 onpremises occupied by the employees of the Group in Dublin.

2016
€'000

2015
€'000

22
22

22
22

Operating Expenses
Rental Payment

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 €20,454,923 (2015: €€20,598,567) relating tointergroup 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 handat 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 tocredit 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

As at 31 December 2016
As at 31 December 2015

Not pastdue

1-2
monthsoverdue€'000

Morethan 2months
past
due
€'000

€'000

€'000

13,87912,877

907

95

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:

Provision at the beginning of the year

2016
€'000

2015
€'000

306

260

Charged to income statement
Utilised

188
(26)

46
-

Provision at end of the year

468

306

Related party receivables of €nil 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 toa 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 isgenerated and the expenses incurred and by settling liabilities denominated in their functional currency with cash generated from their own operations in thatcurrency. 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 theCanadian Dollar, US dollar and Sterling against the Euro. The eﬀect of a strengthening and weakening of 10% of these currencies against the euro at thereporting 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
€'000

10%
Weakening€'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

€'000

Within1 year€'000

Trade payables

4,822

4,822

Contingent Consideration

1,730

251

1,479

Employee Defined Benefit
Other accounts payable826
12,293

12,180113

Year ended 31 December 2015

Total
€'000

Within1 year
€'000

1-2
years
€'000

Trade payables

2,761

2,761

Contingent Consideration

2,224

1,979

Employee Defined Benefit
Other accounts payable

590
5,938

-

-

5,883

55

Year ended 31 December 2016

Total

1-2
years
€'000

2-5
years
€'000

826

2-5
years
€'000

245
590

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 repairingwith 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

Not later than one year
Later than one year and not later than five years
Later than five years

28

2016
€'000
2,318
6,031
903
9,252

2015
€'000
1,563
4,224
476
6,263

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:Group2016
Not later than one year
Later than one year and not later than
five years
Later than five years

2015
Not later than one year
Later than one year and not later than
five years
Later than five years

29

Minimum
Present
Lease
Interest
Value
Payments
€'000
31

2

29

18
49

1
3

17
46

120

8

112

61
181

3
11

58
170

Deferred Tax

Details of the deferred tax assets and liabilities, and amounts recognised in the profit or loss are as follows:

Asset

Liability

Net

2016
€'000

2016
€'000

2016
€'000

(Charged)/ credited
to profit
or loss
2016€'000

Accelerated capital allowances
Personal severance indemnity
Available losses
Rent - free inducement
Fixed asset excess of tax overaccounting
Deferred tax related to Multi MediaTax Credits
Other temporary and deductible
differences
Deferred Tax arising on intangibles

109
44
-

9
116

(9)
109
44
(116)

4
100
(243)
(66)

173

3

170

42

5

796

(791)

501

300

19

281

(88)

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
€'000
Opening Balance
Liabilities of Kite Team attributable to shareholder at theacquisition date
Loss of Kite team attributable to the shareholders of thegroup
Contingent Consideration for the purchase of the remaining
50% of Kite Team
Settlement of Non-Controlling Interest

2015
€'000

(1,309)

-

-

(50)

(61)

(109)

1,370

(1,150)-(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 €1,370,000; comprising thesettlement of the put and call option of €1,150,000 through €1,000,000 in cash and €150,000 in KWS shares, plus €220,000 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 isbased 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

€'000

€'000

€'000

Financial Assets
Identifiable intangible assets - customer
relationships
Trade and other receivable
Cash and cash equivalents

120

Trade and other Payables(81)

Deferred tax liabilities
Total identifiable assets

44
6
120
(81)
(7)

44
6

(7)
45

37

82

Goodwill

214

Total consideration

296

Satisfied by:
Cash
Less: cash and cash equivalent balancestransferred

296

(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 theacquired 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 €527,856 revenue and €17,288 loss before tax to the Group between the date of acquisition and thebalance sheet date. If the acquisition had been completed on the ﬁrst day of the ﬁnancial year, revenue for 2016 of €540,693 would havebeen contributed to the Group and loss before tax of €18,022.
Acquisition costs of €39,140 have been charged through the Statement of Comprehensive Income.
Acquisition of Synthesis GroupThe Group acquired the business of the Synthesis Group of Companies on 12 April 2016, includingo 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 ando 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 theGroup'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 GroupBook

Fair Value

Fair

Value

Adjustment

Value

€'000

€'000

€'000

Financial Assets
Property, plant and equipment
Identifiable intangible assets - customer
relationships

236

236
2,774

2,774

(92)

1,624

Trade and other receivables

1,716

Cash and cash equivalents

992

992

Trade and other payables(1,856)(1,856)

Deferred tax asset
Deferred tax liabilities
Total identifiable assets

1,088

(538)

(538)

2,144

3,232

Goodwill

14,664

Total consideration

17,896

Satisfied by:
Cash

10,200Shares to be Issued

6,906

Deferred consideration
Total consideration transferred

790
17,896

Net cash outflow arising on acquisitionCash
Less: cash and cash equivalent balancestransferred

10,200(992)
9,208

Deferred Cash Consideration of €1,000,000 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 andreputation 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 beenvalued at the share price at the date of acquisition, £2.32 (€2.91). €6,906,000 has been recorded as Shares to be Issued within equity..
The Synthesis Group of companies contributed €18,012,547 revenue and €3,494,458 proﬁt before tax to the Group between the date ofacquisition and the balance sheet date.
If the acquisition had been completed on the ﬁrst day of the ﬁnancial year, total revenue for 2016 of €20,662,464 would have been
contributed to the Group, and a corresponding profit before tax of €3,887,462.

Acquisition costs of €254,698 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 to extend the Group's client base in this service.
The amounts recognised in respect of the identifiable assets acquired and liabilities assumed are set out in the table below:

MindwalkBook

Fair Value

Fair

Value

Adjustment

Value

€'000

€'000

€'000

Financial Assets
Property, plant and equipment
Identifiable intangible assets - customer
relationships

465

Trade and other receivables

581

Cash and cash equivalents

442

(333)

132

1,100

1,100

(39)

542

(30)

412

Deferred tax asset
Deferred tax liabilities
Total identifiable assets

1,488

83

83

(137)

(137)

644

2,132

Goodwill

3,117

Total consideration

5,249

Satisfied by:
Cash

3,048

Deferred Cash Consideration

315

Shares to be Issued

1,886

Total consideration transferred

5,249

Net cash outflow arising on acquisitionCash
Less: cash and cash equivalent balancestransferred

3,048
(412)
2,636

The main factors leading to recognition of goodwill on the acquisition of Mindwalk are the presence of certain intangible assets in theacquired entity, which are not valued for separate recognition, such as the expertise in art creation service and reputation of the staﬀ
within the industry. The fair value of the shares to be issued as part of the acquisition has been determined as being the share price on
the date of the transaction.
A ﬁxed amount of 513,189 shares will be issued as part of the deferred consideration. The shares have been valued at the share price atthe date of acquisition, £2.80 (€3.67) and €1,886,000 has been recorded as Shares to be Issued in reserves.
Deferred Cash Consideration of USD$500,000 is due for payment on 5 April 2019 in accordance with the 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.
Mindwalk contributed €3,166,196 revenue and €227,528 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, revenue for 2016 of €4,825,497 would have been
contributed to the Group and €301,165 profit before tax.
Acquisition costs of €199,312 have been charged through to the Comprehensive Income Statement.
Acquisition of Volta Création Inc.
On 28 July 2016, the Group acquired 100% of the issued share capital of Volta Création Inc., a company registered in Canada, which
specialises in Art Creation for the Games industry. Volta was acquired to increase the capabilities and capacity of the art creation service
and in particular to strength to the Groups offering in concept art.
The amounts recognised in respect of the identifiable assets acquired and liabilities assumed are set out in the table below:
Volta
Book

Fair Value

Fair

Value

Adjustment

Value

€'000

€'000

€'000

761

761

Financial Assets
Fixtures, Fittings & Equipment

74

Identifiable intangible assets - customer relationships

74

Trade and other receivable

513

513

Cash and cash equivalents

(31)

(31)

Trade and other Payables(322)

Deferred tax liabilities
Total identifiable assets

234

(322)
(202)
559

(202)
793

Goodwill

2,701

Total consideration

3,494

Satisfied by:

Cash

3,324

Equity Instruments (45,192 shares of the parent company)

170
3,494

Net cash outflow arising on acquisition
Cash

3,324

Less: cash and cash equivalent balances transferred

31
3,355

The main factors leading to the recognition of goodwill on the acquisition of Volta Création Inc. are the presence of certain intangible
assets in the acquired entity, which are not valued for separate recognition, such as the expertise in Art and Art Services and reputationof the staff within the industry.
Volta Création Inc. contributed €1,181,050 revenue and €209,305 proﬁt before tax to the Group between the date of acquisition and thebalance sheet date. If the acquisition had been completed on the ﬁrst day of the ﬁnancial year, revenue for 2016 of €2,406,878 would
have been contributed to the Group and profit before tax of €277,687.
Acquisition costs of €19,298 have been charged through the Statement of Comprehensive Income.
Acquisition of Player Research Ltd
On 26 October 2016, the Group acquired 100% of the issued share capital of Player Research Ltd., a company registered in the United
Kingdom, which is an industry-leading user research and playtesting specialist . The acquisition is in line with the Group's strategy toextend its services, with the objective of providing end to end services to its global client base covering all aspects of game production
and live operations support.
The amounts recognised in respect of the identifiable assets acquired and liabilities assumed are set out in the table below:
Player Research
Book

Fair Value

Fair

Value

Adjustment

Value

€'000

€'000

€'000

158

158

Financial Assets
Fixtures, Fittings & Equipment

45

Identifiable intangible assets - customer relationships

45

Trade and other receivable

169

Cash and cash equivalents

489

489

Trade and other Payables

(133)

(133)

Deferred tax liabilities
Total identifiable assets

169

(32)
570

126

(32)
696

Goodwill

1,014

Total consideration

1,710

Satisfied by:
Cash

1,128

Deferred Cash
Equity Instruments (65,280 shares of the parent
company)

265
317
1,710

Net cash outflow arising on acquisition
Cash

1,128

Less: cash and cash equivalent balances transferred

(489)
639

Deferred Cash Consideration of STG £300,000 is due for payment on 26 October 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 Player Research Ltd. are the presence of certain intangible
assets in the acquired entity, which are not valued for separate recognition, such as the expertise in user research and playtesting andreputation within the industry.
Player Research contributed €182,820 revenue and €64,525 proﬁt before tax to the Group between the date of acquisition and thebalance sheet date. If the acquisition had been completed on the ﬁrst day of the ﬁnancial year, revenue for 2016 of €921,339 would havebeen contributed to the Group and profit before tax of €307,592.
Acquisition costs of €40,785 have been charged through the Statement of Comprehensive Income.
Acquisition of Global Video-Games Services Inc., trading as Enzyme Testing Labs
On 16 November 2016, the Group acquired 100% of the issued share capital of Global Video-Games Services Inc., trading as Enzyme
Testing Labs, a company incorporated under the laws of Quebec. Enzyme's strengths are in functional QA and localisation testing ofvideo games for leading game publishers and developers. In addition, it provides localisation services and focus group testing, all ofwhich will significantly strengthen Keywords' service offerings to the global video games market.
The amounts recognised in respect of the identifiable assets acquired and liabilities assumed are set out in the table below:
EnzymeBook

Fair Value

Fair

Value

Adjustment

Value

€'000

€'000

€'000

929

(13)

916

Financial Assets
Fixtures, Fittings & Equipment

Identifiable intangible assets - customer relationships
Trade and other receivable

1,669
2,546

1,669
2,546

Cash and cash equivalents

695

695

Trade and other Payables(2,334)(2,334)

Deferred Tax Assets
Deferred tax liabilities
Total identifiable assets

1,837

3

3

(761)

(761)

899

2,735

Goodwill

731

Total consideration

3,466

Satisfied by:
Cash

3,466

Net cash outflow arising on acquisition
Cash

3,466

Less: cash and cash equivalent balances transferred

(695)
2,771

The main factors leading to the recognition of goodwill on the acquisition of Enzyme are the presence of certain intangible assets in theacquired entity, which are not valued for separate recognition, such as the expertise in functional QA and localisation testing.
Enzyme contributed €1,094,913 revenue and €59,820 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, revenue for 2016 of €8,632,254 would have been
contributed to the Group and profit before tax of €954,332.
Acquisition costs of €243,774 have been charged through the Statement of Comprehensive Income.
Acquisition of Sonox Audio Solutions S.L.U.
On 22 December 2016, the Group acquired 100% of the issued share capital of Sonox Audio Solutions S.L.U. ("Sonox"), a company
incorporated under the laws of Spain. Sonox provides Audio and Localisation for Spain and Mexico. Sonox already provides certain
services to the Group and its acquisition will enable the Group to capture the margins on those services.
The amounts recognised in respect of the identifiable assets acquired and liabilities assumed are set out in the table below:
Sonox
Book

Fair Value

Fair

Value

Adjustment

Value

€'000

€'000

€'000

Financial Assets
Fixtures, Fittings & Equipment22

Trade and other receivable

268

268

Cash and cash equivalents

177

177

Trade and other Payables

(411)

(411)

Identifiable intangible assets - customer relationships

Deferred tax liabilities
Total identifiable assets

36

36

Goodwill

614

Total consideration

650

Satisfied by:

500

Cash
Equity Instruments (24,881 shares of the parent
company)

150
650

Net cash outflow arising on acquisition
Cash

500

Less: cash and cash equivalent balances transferred

(177)
323

The main factors leading to the recognition of goodwill on the acquisition of Sonox are the presence of certain intangible assets in theacquired entity, which are not valued for separate recognition, such as the expertise in audio and localisation.
Sonox contributed €52,032 revenue and €87,969 additional proﬁt before tax to the Group between the date of acquisition and thebalance sheet date. If the acquisition had been completed on the ﬁrst day of the ﬁnancial year, revenue for 2016 of €1,308,004 would
have been contributed to the Group and profit before tax of €454,827.
Acquisition costs of €21,687 have been charged through the Statement of Comprehensive Income.
32 Business Combinations completed in 2015

Acquisition of Alchemic Dream Inc.
On 6 January, 2015 the Group acquired the entire issued share capital of Alchemic Dream Inc., a company registered in Canada, which specialises in providing
live operations support to on-line games for a number of game publishers. The acquisition is in line with the Group's strategy to diversify into the provision ofcomplementary services to the video game market and strengthens the Group's service of games already in production. Additionally the acquisition leverages
the Group's existing expertise, locations, scale and global reach to extend the services provided by Alchemic Dream as well as generating synergies.
The amounts recognised in respect of the identifiable assets acquired and liabilities assumed are set out in the table below:
Alchemic Dream
Book
Value
€'000

Fair Value
Adjustment
€'000

Fair
Value
€'000

Financial Assets
Property, plant and equipment
Identifiable intangible assets - customer
relationships
Trade and other receivable
Cash and cash equivalents
Trade and other Payables
Deferred tax liabilities
Total identifiable assets
Goodwill
Total consideration

38

802
38

(21)

17

286
(111)

286
691
38

(802)
75

(802)
(36)
194
690
883

(36)
118

Satisfied by:
Cash

883

Net cash outflow arising on acquisitionCash
Less: cash and cash equivalent balancestransferred

883
(38)
845

The intangibles 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 Alchemic Dream are the presence of certain intangible assets in the acquired entity
which do not value for separate recognition such as the expertise in customer service, reputation within the industry, and, an unidentified proportion
representing the balance contributing to profit generation.
During 2015 Alchemic Dream contributed €4,100,036 revenue and €348,608 profit before tax to the Group. If the acquisition had been completed on the firstday of the financial year, revenue of €4,161,397 would have been contributed to the Group and €359,996 profit before tax before taking into account fairvalue adjustments of €154,193 in 2015.
Acquisition costs of €67,146 were charged through the Comprehensive Income Statement in 2015.
Acquisition of Reverb Localização - Preparação de Documentos Ltda
On 18 January, 2015 the Group acquired 100% of the issued share capital of Reverb Localização - Preparação de Documentos Ltda ("Reverb"), a company
registered in Brazil. Reverb provides localisation and audio management services for Brazilian Portuguese for some of the leading games publishers. ReverbStudios was acquired to widen the scope of the Group's services business and to extend the Group's client base.
The amounts recognised in respect of the identifiable assets acquired and liabilities assumed are set out in the table below:
Book
Value
€'000
Financial Assets
Trade and other receivable
Cash and cash equivalents
Total identifiable assets
Goodwill
Total consideration

Fair Value
Adjustment
€'000

Fair
Value
€'000

14
12
26

14
12
26
274
300

Satisfied by:
Cash
Deferred consideration
Total consideration transferred

200
100
300

Net cash outflow arising on acquisition
Cash consideration
Less: cash and cash equivalent balancestransferred

200
(12)
188

The main factors leading to recognition of goodwill on the acquisition of Reverb were the presence of certain intangible assets in the acquired entity which did
not value for separate recognition such as the expertise in sound recording and localisation, reputation within the industry, and, an unidentiﬁed proportion
representing the balance contributing to profit generation.
During 2015, Reverb contributed €544,043 revenue (including €79,097 of intercompany sales subsequently billed onwards) and €238,539 proﬁt before tax to
the Group. If the acquisition had been completed on the ﬁrst day of the ﬁnancial year, revenue of €572,234 would have been contributed to the Group and€243,770 profit before tax in 2015.
Acquisition costs of €1,224 were charged through the Comprehensive Income Statement in 2015.
Acquisition of Kite TeamOn 16 July, 2015 the Group acquired 50% of the issued share capital of Kite Team, a company registered in Spain. Kite provides localisation and audio
management services for some of the leading games publishers. The acquisition is in line with the Group's strategy to diversify into the provision ofcomplementary services to the video game market and strengthens the Group's service of games already in production.
The Directors of the Group have reviewed IFRS 10 (Consolidated Financial Statements) and are satisﬁed that the Group has eﬀective control of Kite Team andaccordingly at the date of acquisition it is treated as a subsidiary within the consolidation. This conclusion has been determined with particular consideration
given to the inﬂuence over the acquired entity, exposure to variable returns, and the ability to inﬂuence the entity to aﬀect the amount of the variable returns.
At the date of acquisition the Group set up a put and call option to acquire the remaining 50% of the share capital of Kite Team by the end of 2017. The termsof the contract are such that the original owners retain an active interest in the business until such time that the put or call option is exercised, and have theability to participate in the variable returns of the business. On that basis the Directors have concluded that it is appropriate to record the remaining 50% as a
Non-controlling interest in the business.
As a consequence of the put option a ﬁnancial liability was recognised as at 31 December, 2015 which was based on the anticipated cash and sharesettlement, which was calculated by reference to anticipated earnings. The fair value of this ﬁnancial liability at 31 December 2015 was €1,150,000, and wasrecorded in other payables in accordance with IAS 32. This amount was agreed to be settled in 2016, and was settled as €1m in cash and €150,000 in equity
instruments in Keywords Studios. As the amounts were known prior to the ﬁnalisation of the signing of the 2015 annual report, and agreed to be settled during
2016, this represented the fair value of the liability recorded as at 31 December 2015.
During 2016, the remaining 50% interest in Kite Team was acquired via the settlement of the €1.15m liability as noted above.
The amounts recognised in respect of the identifiable assets acquired and liabilities assumed are set out in the table below:
Acquisition of Kite TeamBook

Fair Value

Fair

Value

Adjustment

Value€'000

€'000

€'000

Financial Assets
Property, plant and equipment

322

322

Trade and other receivable

377

377

Cash and cash equivalents

117

117

Trade and other payables

(291)

(291)

Long term loan

(625)

(625)

Total identifiable liabilities

(100)

(100)

Less non-controlling interest
KWS share of total identifiable liabilities

50

50

(50)

(50)

Goodwill

550

Total consideration

500

Satisfied by:
Cash

500

Net cash outflow arising on acquisition
Cash consideration

500

Less: cash and cash equivalent balances transferred

(117)
383

The main factors leading to recognition of goodwill on the acquisition of Kite are the presence of certain intangible assets in the acquired entity which did notvalue for separate recognition such as the expertise in sound recording and localisation, reputation within the industry, and, an unidentiﬁed proportion
representing the balance contributing to profit generation.
During 2015 Kite contributed €610,307 revenue (including €304,681 of intercompany sales subsequently billed onwards) and €217,721 of a loss before non controlling interest to the Group. If the acquisition had been completed on the ﬁrst day of the ﬁnancial year, revenue of €1,149,460 would have been
contributed to the Group and €301,124 of a loss before non-controlling interest in 2015.
Acquisition costs of €70,174 were charged through the Comprehensive Income Statement in 2015.

Acquisition of Liquid Development LLC
On 20 August 2015 the Group acquired 100% of the assets of Liquid Development through the purchase of the membership interests. The company registeredin USA specialises in providing art creation services for the video games industry. The acquisition is in line with the Group's strategy to diversify into theprovision of complementary services to the video game market and strengthens the Group's service of games already in production.
The Directors of the Group have reviewed the requirements of IFRS 3 (Business Combinations) paragraph B5 - B12 and concluded that as Liquid Development
constitutes an on-going business within the Group that it should be accounted for as a business combination.
The amounts recognised in respect of the identifiable assets acquired and liabilities assumed are set out in the table below:

Financial Assets
Property, plant and equipment
Identifiable intangible assets - customer relationships
Trade and other receivable
Cash and cash equivalents
Trade and other payables
Deferred tax liabilities
Total identifiable liabilities

Book
Value

Fair Value
Adjustment

Fair
Value

€'000

€'000

€'000

108
1,225

108
1,225
340
269
(185)

(541)
792

(541)
1,216

340
269
(185)
424

Goodwill
Total consideration

6,801
8,017

Satisfied by:Cash
Equity instruments (1,074,440 shares of the parent
company)
Deferred consideration settled in 2017
Total consideration transferred

5,365
2,413
239
8,017

Net cash outflow arising on acquisition
Cash consideration
Less: cash and cash equivalent balances transferred

5,365
(269)
5,096

The deferred consideration recorded within other payables on the 2015 balance sheet represented the fair value amount of the balance due.
The main factors leading to recognition of goodwill on the acquisition of Liquid Development are the presence of certain intangible assets in the acquired
entity which do not value for separate recognition such as the expertise in art creation services, reputation within the industry, and, an unidentified proportion
representing the balance contributing to profit generation. The fair value of the shares issued as part of the acquisition has been determined as being theshare price on the date of the transaction.
During 2015, Liquid Development contributed €1,999,469 revenue and €345,591 profit before tax to the Group. If the acquisition had been completed on thefirst day of the financial year, revenue of €6,068,150 would have been contributed to the Group and €1,169,440 profit before tax in 2015.
Acquisition costs of €63,145 were charged through the Comprehensive Income Statement in 2015.
33

Events after the reporting date

Acquisition of Spov Ltd
On 16 February 2017 the Group acquired the entire issued share capital of Spov Ltd, a company registered in the United Kingdom, a specialist animation
studio. It is expected that the acquisition will strengthen the group's market position as a leading global provider of digital art services and will contribute to
the continuing growth in this area.
Under the terms of the acquisition, a total consideration of not more than STG 1.16m (€1.36m) was agreed. STG 0.3m (€0.351m) was paid on acquisition, theremaining consideration will be paid to a maximum of STG 0.816m (€0.955m) over two years to March 2018.
The book value acquired of net assets is as follows:€'000
Financial Assets & Liabilities

Fixed Assets
Trade Receivables
Trade Payables
Overdraft
Net Liabilities
Goodwill
Total Consideration

30
16
(120)
(18)
(93)
1,450
1,357

Satisfied by
CashDeferred Consideration

351
1,006

Net Cash outflow arising on acquisition
Cash
Overdraft

351
18
369

At the date of authorisation of these financial statements a detailed assessment of the fair value of the identifiable net assets has notbeen completed. Information on the revenue and impact on profit due to this acquisition has not been disclosed as it is impracticable to
do so at this point in time.

Annual report and accounts
The annual report and accounts will be posted to shareholders shortly and will be available to members of the public at the Company's
registered office at 8 Clifford Street London W1S 2LQ and on the Company's website http://www.keywordsstudios.com/en/investors.

Annual General Meeting
The Annual General Meeting of Keywords Studios plc will be held on 25 May 2017.

This information is provided by RNS
The company news service from the London Stock Exchange
END
FR SSSFUDFWSELL