RNS Number : 0936R
Keywords Studios PLC
19 September 201719 September 2017

Keywords Studios plc ("Keywords Studios", "the Group")
Half year results for the six months to 30 June 2017
Keywords Studios, the international technical services provider to the global video games industry, today
provides its half year results for the six months to 30 June 2017.
Financial overview:· Revenue, including contribution from acquisitions, increased by 50% to €63.8m (H1 2016: €42.4m)· Adjusted profit before tax* up 60% to €9.6m (H1 2016: €6.0m)· Adjusted earnings per share* up 55% to 13.2c (H1 2016: 8.5c)· Net cash of €1.1m (H1 2016: €3.5m) after €6.9m of net cash outlay on acquisitions· 10% increase in interim dividend to 0.48p per share (2016: 0.44p)
Operational overview:·
17% increase in like for like** revenue, or 28% when excluding Synthesis in both periods reﬂects theunderlying growth of the group· Continued to invest in the development of the Group:o Acquisition of Spov, to enhance our Art offering, in Februaryo Acquisition of XLOC, bringing a specialist localisation content management system for videogames
development to the Group, in May
o Acquisition of Gamesim, which provides the Group with a ﬁrst step into software engineering services, inMayo Acquisition of the Chinese based art group, Red Hot, in May adding further capacity and providing reachto talent pools in second and third tier cities in Chinao Further strengthened the senior management team with the appointment of a Group HR Director, anewly created positiono Invested in facilities in India and Tokyo, adding up to 150 seats and audio / voice over recording studios
respectively in response to demand· Five year revolving credit facility of €35m with Barclays Bank Plc secured· 40% increase in clients using three or more services to 84 (H1 2016: 60)
Post period end, current trading and outlook:· Further investment in operational capacity and Group infrastructure to support growth in future periods:·
Three acquisitions of Paris based audio and localisation service providers in August giving Keywords amarket leading position in this key language·
Strengthened the Board and management team with the appointments of Georges Fornay andCharlotta Ginman as Non-Executive Directors·
Expansion plans supported by investment in 8 facilities to add up to 700 seats across Art, Player
Support, Functionality Testing, and Localisation Testing in the second half to accommodate organic
growth in response to market demands· Selectively reviewing a strong acquisition pipeline· Trading in the first three months of the second half has been in line with the Board's expectations
before acquisition and integration expenses of €0.5m (H1 2016: €0.7m), share option charges of €0.4m (H1 2016: €0.3m),
amortisation of intangibles of €1.2m (H1 2016: €0.6m) and foreign currency loss of €1.96m (H1 2016: €1.77m)** calculated on the basis that the H1 2016 comparative includes all of the 2016 and 2017 acquisitions as if they had been owned for thesame period in 2016 as they have been in 2017.
*

Andrew Day, Chief Executive of Keywords Studios, commented:"We have delivered another strong set of results for the ﬁrst six months of the year as we continue to pursue
our strategy of organic and acquisition led growth as we build our global games services business.""Our success in providing a wider range of services to our existing client base, which is comprised of 23 of the
25 leading video game companies around the world, is evidenced by a 40% increase in the number of clientsbuying three or more services from us."
"We continue to invest in larger facilities and additional talent in our existing business in support of organic
growth while welcoming new businesses to the group through our active strategy to lead the consolidation ofa highly-fragmented market."

A presentation of the half 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. A video of thepresentation will be available via Keywords Studios' website later today.

For further information, please contact:
Keywords
Studios(www.keywordsstudios.com)
Andrew Day, Chief Executive Officer
David Broderick, Chief Financial Officer+353 190 22 730

Numis (Financial Adviser)
StuartSkinner/
Kevin
Cruickshank(Nominated Adviser)
James Black / Tom Ballard (Corporate
Broker)020 7260 1000

MHP Communications (Financial PR)
Katie Hunt / Ollie Hoare / Nessyah Hart

020 3128 8100

Notes to Editors
Keywords Studios is an international technical services provider to the global video games industry.
Established in 1998, and now with 36 facilities in 18 countries strategically located in Asia, the Americas andEurope, it provides integrated art creation, software engineering, testing, localisation, audio and customer
care services across more than 50 languages and 16 games platforms to a blue-chip client base in more than
15 countries. It has a strong market position, providing services to 23 of the top 25 most prominent games
companies, including Activision Blizzard, Bandai Namco, Bethesda, Electronic Arts, Konami, Riot Games,
Sony, Square Enix, Supercell, TakeTwo, and Ubisoft. 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, Overwatch,
World of Warcraft: Legion, Hearthstone, Clash Royale, and Mobile Strike. Keywords Studios is listed on AIM,
the London Stock Exchange regulated market (KWS.L).
Introduction
The ﬁrst half of the ﬁnancial year has seen the Group deliver another period of strong organic growth,
substantially complemented by acquisitions which have further extended its service oﬀering and geographic
reach.
Like for like revenues increased by 17%, or 28% when excluding Synthesis in both periods, reﬂecting
continued strong underlying growth of the core business.
During the ﬁrst half, we have continued to invest in the business, with four acquisitions of Spov, XLOC,GameSim and Red Hot. These have extended the Group's market position as a leading provider of digital art
services; given the Group a content management system which allows it to provide integrated software andservices across the full text localisation cycle; provided a ﬁrst step into the market for video games related
software engineering services; and positioned the Group as the leading global player in the outsourced art
services market in terms of capacity and breadth and depth of service.
We have also made good progress with integrating prior period acquisitions, all of which are making good
contributions to the Group. We have continued to invest in both expanding our operational capacity andenhancing the Group's infrastructure in order to support growth in future periods. We have invested inpeople, systems and marketing including the appointment of a Group HR Director, a newly created position.
We are developing our IT and ﬁnance functions following the previous appointments of IT and ﬁnancedirectors and we are enhancing our branding. Over the course of the full year, we are investing in ten new or
expanded facilities which will ultimately provide capacity for up to 700 additional seats across the Group tocater for demand for our services. In addition, since the half year end, we have also strengthened the Board
with the appointments of Georges Fornay and Charlotta Ginman as Non-Executive Directors.
Financial overview
Group revenues increased by 50% to €63.8m (H1 2016: €42.4m). The increase was driven by the successful
integration and continued progress of the 2016 acquisitions, coupled with strong like for like growth acrossmost of our service lines.
The gross proﬁt margin of 35.6% (H1 2016: 35.1%) was stronger than the comparative period, albeit below
the level at the full year (FY 2016: 38%) due to a combination of the change in mix of services andseasonality.
Operating expenses increased in the ﬁrst half of the year to €12.8m (H1 2016: €8.8m) reﬂecting the costs of
the acquired entities. However, operating expenses as a proportion of sales reduced to 20.1% (H1 2016:
20.8%). The decrease is primarily driven by the Group management and central support costs being spread
across a larger revenue base, with cost management remaining a point of focus across the Group's studios.
One-oﬀ costs of acquiring and integrating the newly acquired companies of €0.5m (H1 2016: €0.7m) wereincurred in the period. Included in net ﬁnance costs is a translational foreign exchange loss of €1.96m (H1
2016: €1.77m loss) in the ﬁrst half of the current year which is primarily due to the strengthening of the Euroagainst most major global currencies.
Adjusted proﬁt before tax and acquisition-related costs, share option charges, amortisation of intangibles andforeign currency movements for the ﬁrst half of the current ﬁnancial year increased by 60% to €9.6m (H1
2016: €6.0m). After these items, the Group reported a proﬁt before tax for the period of €5.5m (H1 2016:€2.6m).
The estimated tax charge in the period is €2.0m (H1 2016: €1.3m), representing an eﬀective tax rate on theadjusted profit of 21.1% which is small reduction on the rate for 2016 (FY 2016: 21.7%, H1 2016: 21.4%).

Adjusted earnings per share (before tax and acquisition-related costs, share option charges, amortisation of
intangibles and foreign currency movements) were up 55% to €13.2c (H1 2016: €8.5c). Basic earnings per
share were up 152% to €6.08c (H1 2016: €2.42c). The denominator used for these calculations includes theshares which will be issued to the sellers of Synthesis, Mindwalk and Red Hot.
A combination of the increased trading in the second quarter and the Group entering a traditionally busy third
quarter, where the Group has its maximum cash requirement for the year, has led to a net inflow of cash fromoperations of €2.3m (H1 2016 €0.6m). In the period, the Group made four acquisitions with a net cash outﬂow
on consideration of €6.6m (H1 2016: €12.0m), the group settled a deferred consideration liability of €0.3m on
the 2015 acquisition of Liquid Development, and incurred an additional €0.5m (H1 2017: €0.7m) in acquisition
and integration costs. To help fund these and future acquisitions the Group has secured a credit facility with
Barclays of up to €35m over a ﬁve year period. The facility can also be used to fund working capital and, atthe end of the period, the amount drawn down was €13.0m giving the Group plenty of headroom. Investment
in ﬁxed assets amounted to €1.8m (H1 2016: €1.3m), reﬂecting in particular the cost of increasing capacity inseveral studios and a continued refresh of IT equipment.
Operational review
Following acquisitions during the ﬁrst half and prior periods, Keywords is a more diversiﬁed businessgeographically with a well balanced portfolio of services; based on recorded revenues rather than pro forma
revenues, Art Creation services represented 19% of group revenues, Audio services represented 13%,
Localisation services represented 30%, Functional Testing represented 17%, Localisation Testing represented
14%, Customer Support services represented 6% and the new Engineering service line represented 1% in thefirst half.

Art Creation
Our Art Creation service line creates graphical art assets for inclusion in video games including concept art
creation, 2D and 3D art asset production and animation.
Art Creation revenues grew by 85% to €12.4m (H1 2016: €6.7m) with the beneﬁt of contributions from
Mindwalk, which was acquired at the end of May 2016, and Red Hot, acquired in May 2017. On a like for likebasis, Art Creation grew sales by 22%, as Keywords continues to expand the range of services and capacity inthis area.
Following the acquisitions of Spov and Red Hot, we ﬁnished the ﬁrst half with c.920 artists on our payroll (H1
2016: c.530) of which c.870 are in India and China based in our Lakshya, Mindwalk and Red Hot studios, and,through Liquid Development and Volta, we manage further pools of freelance artists numbering about 230 intotal. We believe these acquisitions and our talent base make Keywords the leading global player in thehighly fragmented outsourced art services market in terms of capacity and breadth and depth of service.

Audio Services
Our Audio service line provides multi language voice-over, original language voice recording and related
services.
Audio revenue fell by 8% in the period to €8.4m (H1 2016: €9.1m). On a like for like basis, revenues fell by
25% reﬂecting an exceptionally strong performance in the comparatives from Synthesis in 2016, as reported
previously. Excluding Synthesis, like for like revenue declined in Audio by 10% primarily due to the phasing ofmajor titles.

Localisation
Our Localisation service line provides translation of in-game text, audio scripts, cultural, and local adaptation,accreditation, packaging and marketing materials.
The Localisation activities have had a strong ﬁrst half, growing revenues by 36% to €19.0m (H1 2016:€14.0m) with the beneﬁt of contributions from Synthesis, acquired in April 2016, Sonox, acquired in
December 2016 and XLOC, acquired in May 2017.
On a like for like basis, Localisation revenues have grown by 23%, against the very strong comparatives
driven by the Synthesis acquisition in 2016. Excluding Synthesis, like for like sales grew 36% as this service
line continued its very strong growth and continued to beneﬁt from the trend towards continuous content
generation in the games industry.
The acquisition of XLOC brings to the Group a proprietary software application that is embedded in to the
localisation processes of games developers and enables game developers and publishers to more eﬃciently
manage and automate the complex process of localising games content across multiple languages andplatforms for simultaneous global launches and continuous publishing. We are currently in the process of
integrating the software with our existing services, in addition to continuing to oﬀer XLOC as a standalone
solution which is relied upon from an earlier stage than Keywords Studios has typically been involved.

Functional Testing
Our Functional Testing service line provides quality assurance including the discovery and documentation ofgame defects and testing to verify the game's compliance with console manufacturers' specifications.
Functional testing revenues increased by over 200% to €11.0m (H1 2016: €3.3m), with the beneﬁt of thecontributions of the Player Research and Enzyme acquisitions completed in October and November 2016
respectively. On a like for like basis, Functional Testing revenues have still shown an increase of 70%. This
very strong performance is in part related to a signiﬁcant increase in volume associated with a managed

services arrangement with one of the Group's top clients.
We are investing behind this growth with facility expansions underway in Montreal, Tokyo and India toprovide additional capacity for this service line.

Localisation Testing
Our Localisation Testing service line identiﬁes out of context translations, truncations, overlaps, spelling,grammar, age rating issues, cultural issues and tests for console manufacturer compliance requirements inover 30 languages using native speakers.
The Group's historic reliance on Localisation Testing continued to reduce as planned such that it accounted
for 14% (H1 2016: 16%) of Group revenues during the ﬁrst half, however Keywords remains the largest
provider in the market. Sales increased by 26% to €8.7m (H1 2016: €6.9m), with the beneﬁt of contributions
from the acquisitions of Synthesis and Enzyme , acquired in April and November 2016 respectively. On a likefor like basis, Localisation Testing grew by 2.6%, or 6.4% excluding Synthesis. We typically expect
localisation testing to see a higher level of activity in the second half of the year and are encouraged bycurrent volumes and have a good pipeline of activity.
Enzyme has been successfully integrated and we plan to expand our facilities and capacity for Localisation
Testing in Dublin, Tokyo and Montreal during the second half.

Customer Support
Our Customer Support service line provides multi-lingual, cost eﬀective and ﬂexible customer care services
including managing communities of gamers across all forms of social media, within the games themselves
and on the official game forums.
Initially established through the acquisition of Alchemic Dream in January 2015, taking over the operations ofAnkama based in Manila in March 2016 extended the oﬀering further, including into live operations support
and promotions and fraud management. Customer Support sales increased by 58% to €3.8m in the ﬁrst half
(H1 2016: €2.4m). On a like for like basis, Customer Support grew by 57%, reﬂecting good continued
development of the business which has expanded successfully in Montreal, Japan and Manila, with investment
supporting further expansion planned in Tokyo, Montreal and Madrid in the second half.

Engineering
Our software Engineering service line provides outsourced software engineering services to game developers.
GameSim was acquired in May 2017, establishing engineering as part of the Group's oﬀering, and has
performed in line with our expectation having contributed €0.5m of sales in the ﬁrst half, which accounted for
1% of Group sales.
Dividends
The Board is pleased to announce a 10% increase in its interim dividend payment, in line with its progressive
dividend policy. The interim dividend of 0.48p per share will be paid on 27th October 2017 to shareholders
on the register on 6th October 2017. The interim dividend payment will absorb approximately €0.3m of cash
resources.
PeopleIn June, we appointed a Group HR director, a newly created position which further strengthens ourmanagement team complementing our recent hires of an IT director and Chief Customer Officer.
In September, we strengthened our Board with the appointments of Georges Fornay and Charlotta Ginman as
Non-Executive Directors with eﬀect from 1 September 2017. Georges brings over 30 years' experience in thetechnology and video games sectors and currently sits on the board of France's second largest Independent
games publisher, Focus Home Interactive, which is listed on the Alternext. Charlotta brings extensive M&A,
TMT sector and PLC experience with her having followed a career in investment banking prior to holding
senior roles within Nokia Corporation. She currently sits on the Boards of Paciﬁc Assets Trust plc, Polar Capital
Technology Trust plc, Unicorn AIM VCT plc, Motif Bio plc and Consort Medical plc.
The average number of employees across the Group has grown to c.2730 (H1 2016: c.1490) and ourcontinued growth and reputation for consistently delivering good quality service to demanding deadlines is
testament to the Keywords culture and the skills and commitment of Keywords' talented and games
passionate employees and collaborators. On behalf of the Board and shareholders we'd like to thankeveryone involved for their valuable contribution to the continued success of the Group.
Strategy
We have made strong progress in delivering on our strategy to grow Keywords Studios both organically andby selective acquisition to extend the Group's client base, service lines and geographical penetration, where
the Group can use its existing expertise, multi-service platform, scale and global reach to generate synergies
in a highly fragmented games services industry.
We are particularly pleased to have launched our newest service line, Engineering, through the acquisition of
GameSim which has provided an entry point into outsourced software engineering services and is highly
complementary to our existing essential services to game developers and publishers around the world. Our
intention is to use this as a platform from which to build a market leading engineering services capability forour clients.

In Art Creation we have also created greater scale, particularly in China through the acquisition of RedHot. Its
hub and spoke model now gives the company the advantage of broader access to the Chinese pool of video
game art talent, which is the largest in the world, while maintaining control and providing international
business access through Shanghai. In line with this approach, we are expanding our Chinese Art production
capabilities by moving to new premises in Zhengzhou, which has a lower cost base but is ideally locatedbetween Beijing and Shanghai, trebling our capacity there from 50 to 150 seats.
Today, we have a better balanced business across the seven service lines and are able to support video gamedevelopers and publishers from the very early concept stages through to the post launch, live operations
phases, in line with our aim to be the leading scale provider of services at all stages in the games lifecycle toour global customer base.
The Board believes that there is a clear opportunity for Keywords to continue to extend its existing
relationships with many of the major games companies both through providing additional services to existingcustomers and through providing dedicated outsourced services. During the ﬁrst half, we have achieved a
40% increase in clients using three or more services to 84 (H1 2016: 60). We maintain a strong acquisition
pipeline and we continue to review selective acquisitions opportunities that could further extend our service
offering or geographical penetration.
CURRENT TRADING AND OUTLOOKWe are pleased with our progress so far this year, and t rading in the ﬁrst three months of the second half ofthe year has been in line with the Board's expectations.
We continue to make good progress with our cross selling initiatives, and with growing our market share. We
are regularly seeing the benefits of our wider geographic reach and broader range of services as we introduce
additional services to established clients.
The investment in our businesses is continuing as we enlarge our talent pool and facilities and further
develop the Group's infrastructure to support growth in future periods. There will be an expected second half
weighting to that investment given our plans to invest in eight new or improved facilities in the second half.
The newest members of our Group are integrating and performing well and we continue to review a pipelineof high quality acquisition candidates. Overall, we therefore look forward to another full year of strong
progress as we continue to gain market share, beneﬁt from the trends towards outsourcing and consolidate
services to the growing video games industry.

Interim consolidated statement of comprehensive income
Unaudited Unaudited
26 weeks
26 weeks
ended
ended
30 Jun 1730 Jun 16
Note
€'000
€'000
Revenues

4

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

14

Administrative expenses
Operating profit
Financing income
Financing cost
Profit before taxation
Tax expense
Profit from Operations
Other comprehensive income:Exchange gains / (loss) on translationof foreign operations
Actuarial loss on defined benefit plan
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
Non-controlling interest

6
6
7

Audited52 weeks
ended
31 Dec 16€'000

63,76042,41096,585(42,649)
1,587(41,062)
22,698(28,244)734(27,510)
14,900(62,196)
2,289(59,907)
36,678(416)(461)(1,223)(12,782)

(284)
(702)
(615)
(8,802)(686)(1,316)(1,629)(21,588)(14,882)7,816(10,403)
4,497(25,219)
11,45955(2,356)
5,515(2,025)3,490

52(1,941)
2,608(1,280)1,328

94(2,118)9,435(3,223)
6,212(1,191)
(35)

332
-

489
(63)

2,264

1,660

6,638

3,490
3,490

1,328
1,328

6,273
(61)
6,212

2,264
-

1,660
-

6,699
(61)

Earnings per share
Basic earnings per ordinary share(Euro cent)Diluted earnings per ordinary share(Euro cent)

2,264

1,660

6,638

Euro centEuro centEuro cent

9

6.08

2.42

11.22

9

5.83

2.36

10.87

The notes on pages 12 to 32 form an integral part of these consolidated financial statements.

Interim consolidated statement of financial position
Unaudited Unaudited
26 weeks
26 weeks
ended
ended
30 Jun 1730 Jun 16
Note
€'000
€'000
Non-current assets
Property, plant and equipment
Goodwill
Intangible assets
Deferred tax assets

Audited52 weeks
ended
31 Dec 16
€'000

5,951
52,7488,805
1,329
68,8334,350
41,471
6,991
845
53,657

5,498
46,7998,696
880
61,87318,766
10,505
14,48243,753
112,586

17,733
8,271
314
7,547
33,86587,522

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

Non-controlling interest
Total equity

670
6,807
19,18627,922(204)(2,047)
1,646
17,19971,17971,179647
8,792
18,69120,800
830
(804)
903
11,06460,92360,923654
8,792
19,983
22,109987(1,434)
1,305
14,30866,70466,704Current Liabilities
Trade payables
Other payables

5,408
14,193

4,420
12,607

4,822
12,431

13,043
3,058
35,7024,000
1,370
22,397

8,025
2,552
27,830

930
1,025
311
3,439
5,705
112,586

1,380
2,822
4,202
87,522

1,592
826
345
3,253
6,016
100,550

11
12

Current assets
Trade receivables
Other receivables
Short-term investments
Cash and cash equivalents
Total Current Assets
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

Loans and Borrowings
Corporation tax liabilities

10

13

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

13

Total equity and liabilities

The notes on pages 12 to 32 form an integral part of these consolidated financial statement

Consolidated statement of changes in equity

Share

SharesShare

MergerForeign

TreasuryShareexchange

sharesheld

optionRetained

Total
attributable

Non

Total

to equity

Controlling

equitycapitalto be issued

premium

reserve

reservein EBT

reserveearnings

€'000

€'000

€'000

€'000

€'000

€'000

€'000

€'000

holders ofparent€'000

Balance at 1
January 2016

646-

18,542

22,109

498

(804)

619

10,293

Profit - 1st
January 2016 to30th June 2016

-

-

-

-

-

-

-

1,328

Interest
€'000

€'000

51,903(1,309)50,594

1,328

-

1,328

Othercomprehensive
income

-

-

-

-

332

-

-

-

332

-

332

Total
comprehensive
income for theperiod

-

-

-

-

332

-

-

1,328

1,660

-

1,660

-

-

-

-

-

-

284
-

(558)

284
(558)

-

284
(558)

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

6,906

-

-

-

-

-

-

6,906

-

6,906

-

1,886

-

-

-

-

-

-

1,886

-

1,886

Contributions
by andcontributions
to the owners:
Share option
expenseDividends paid
Treasury sharesring fenced for
EBT
Shares issued
for cash
Shares to beissued(Synthesis
Acquisition)
Shares to beissued (Mindwalk
Acquisition)
Elimination of
Minority Interest
in Kite Team
Shares Issued on
settlement with
Kite Team

-

-

-

-

-

-

-

(1,309)(1,309)

1,309

0

1

-

149

-

-

-

-

-

150

-

150

Contributions
by andcontributions
to the owners

1

8,792

149

-

-

-

284

(1,867)

7,359

1,309

8,668

Balance at 30
June 2016

647

8,792

18,692

22,109

830

(804)

903

9,754

60,923-60,923

-

-

-

-

-

-

-

4,944

4,944

(61)

4,883

-

-

-

-

157

-

-

(63)

94

-

94

-

4,881

5,038

61

4,977

Profit - 1st July
2016 to 31st
December 2016
Other
comprehensive
incomeTotal
comprehensive
income for theperiod-Contributions
by andcontributions
to the owners:
Share option
expenseShare Options
Exercised
Dividends paid(note 8)Treasury sharesring fenced for
EBTElimination of
Minority Interest
in Kite Team
Shares issued
for cash - Numis
Warrants
Shares issued
upon acquisition- Volta Creation
Inc.
Shares issued
upon acquisition- Player
Research
Shares issued
upon acquisition- Sonox Audio

-

-

-

157

-

-

-

-

-

-

-

402

-

402

-

402

-

-

-

-

-

(632)

-

-

(632)

-

(632)

-

-

-

-

-

-

-

(267)

(267)

-

(267)

-

-

-

-

-

2

-

-

2

-

2

-

-

-

-

-

-

-

(61)

(61)

61

-

5

-

643

-

-

-

-

-

648

-

648

1

-

169

-

-

-

-

-

170

-

170

1

-

331

-

-

-

-

-

332

-

332

-

-

149

-

-

-

-

-

149

-

149

Contributions
by andcontributions
to the owners

7

-

1,292

-

-

(630)

402

(328)

743

61

804

Balance at 31
December
2016

654

8,792

19,984

22,109

987

1,434

1,305

14,307

66,704-66,704

-

-

-

-

-

-

-

3,490

3,490

-

3,490

-

-

-

-

(1,191)

-

-

1,226

-

1,226

Profit for theperiodOther
comprehensive
income--35

Totalcomprehensive
income for theyear
Contributions
by andcontributions
to the owners:
Share Option
ExpenseShare Options
Exercised
Dividends paid(note 8)Treasury sharesring fenced for
EBT
Shares issued
upon acquisition- Xloc Inc.
Shares issued
upon acquisition- GameSim Inc.
Shares Issued ondeferred
settlement with
Synthesis Group
Shares to beissued (Red Hot
Acquisition)
Reserves
Reclass

-

-

-

-

(1,191)

-

-

3,455

2,264

-

2,264

-

-

-

-

-

-

341

-

341

-

341

-

-

-

-

-

(613)

-

-

(613)

-

(613)

-

-

-

-

-

-

-

(563)

(563)

-

(563)

-

-

-

-

-

-

-

-

-

-

-

-

-

-

184

-

-

-

-

184

-

184

2

-

-

1,392

-

-

-

-

1,394

-

1,394

14

(3,453)

-

3,439

-

-

-

-

-

-

-

-

1,468

-

-

-

-

-

-

1,468

-

1,468

-

-

(798)

798

-

-

-

-

-

-

-

Contributions
by andcontributions
to the owners

16(1,985)

(798)

5,813

-

(613)

341

(563)

2,211

-

2,211

Balance at 30
June 2017

670

6,807

19,18627,922(204)(2,047)

1,646

17,19971,179-71,179Interim consolidated statement of cash flows
Unaudited
26 weeks
ended
30 Jun 17

Unaudited
26 weeks
ended
30 Jun 16

Audited52 weeks
ended
31 Dec 16

€'000

€'000

€'000

3,490

1,328

6,212

1,275

802

1,803

1,223

615

1,629

2,144

1,279

3,223

416

284

686

218

-

-

(55)
(1,587)

(52)
(734)

264
(94)
(2,289)Actuarial Loss on Employee Benefit

35

-

63

Interest Expense
Net Foreign Exchange Losses on
Investments

240

69

152

157

1,703

55

4,066

3,966

5,492

Note

Cash flows from operating activities
Profit/(loss) after tax
Income and expenses not affecting
operating cash flows
Depreciation
Intangibles amortisation

12

Income tax expense
Share option expense
Loss on disposal of fixed assets
Loss on payment of deferredconsideration
Interest receivable
MMTC Credit

14Changes in operating assets andliabilities(Increase)/ Decrease in trade receivables(3,702)(9,423)(3,788)(Increase)/ Decrease in other receivables
Increase/ (Decrease) in trade and otherpayables

(928)

1,673

5,534

1,572

4,107

3,718

Total Changes(3,058)(3,644)

5,464

Income taxes paid

(2,204)(1,007)(2,129)Net cash provided by operating
activities

2,294

645

15,039(6,666)(12,020)(19,109)

(283)

-

(995)

-

(287)

27

(1,824)(1,254)(2,306)

Acquisition of interest in a subsidiary-(1,000)(1,000)Interest received

-

52

94

(613)

-

(630)

(9,386)(14,509)(23,919)

Repayment of loan to finance MultiMedia Tax Credits-(1,157)(1,157)

Repayment of loans

-

(625)

(625)

5,000
(563)

4,000
(557)

8,000
(825)

Cash flows from investing activities
Acquisition of subsidiaries net of cash
acquired
Settlement of deferred liabilities onacquisitions(Acquisition)/disposal of short term
investments
Acquisition/disposal of property, plantand equipment

EBT share purchase
Net cash used in investing activities

Cash flows from financing activities

Loan to finance acquisitions
Dividends paid
Shares issued

-

-

643

Interest paid

(79)

(69)

(152)

Net cash used in financing activities

4,358

1,592

5,884

Decrease in cash and cash
equivalents(2,734)(12,272)(2,996)

Exchange gain/loss on cash and cash
equivalents
Cash and cash equivalents at beginningof the period

196

801

998

17,02019,01819,018Cash and cash equivalents at end of
period14,482

7,547

17,020Notes forming part of the consolidated financial statements
1

Basis of preparation

Keywords Studios plc (the "Company") is a company incorporated in the UK. These consolidated ﬁnancial statements
include the ﬁnancial statements of the Company and its subsidiaries (the "Group") made up to 30 June 2017. The
Group was formed on 8 July 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.
The interim ﬁnancial statements were approved by the Board of Directors on 18 September 2017. The interim results
for the 26 weeks ended 30 June 2017 and the 26 weeks ended 30 June 2016 are neither audited nor reviewed by our
auditors and the accounts in this interim report do not therefore constitute statutory accounts in accordance with
Section 434 of the Companies Act 2006. They do not include all of the information required for full annual ﬁnancial
statements, and should be read in conjunction with the consolidated ﬁnancial statements of Keywords Studios plc forthe year ended 31 December 2016.
The consolidated statutory accounts of Keywords Studios for the year ended 31 December 2016 have been ﬁled with
the Companies House. The report of the auditors on those accounts was unqualiﬁed, did not contain any statements
under s.498 (2) or (3) of the Companies Act 2006 and did not contain any matters to which the auditors drew attention

without qualifying their report.
The same accounting policies, presentation and methods of computation are followed in these condensed consolidated
financial statements as were applied in the Keywords Studio plc latest annual audited financial statements.
In the current year the Group has adopted all of the new and revised standards and interpretations issued by the IASB
and the International Financial Reporting Interpretations Committee (IFRIC) of the IASB, as they have been adopted by
the European Union, that are relevant to its operations and eﬀective for accounting periods beginning on 1 January
2017. The adoption of these standards has had no material impact on the financial statements.
New standards, interpretations and amendments not yet effective.
The group will adopt IFRS 15, Revenue from Contracts with Customers and IFRS 16 Leases from 1 January 2019. There
were no further new standards or interpretations available for early adoption for the ﬁrst time for periods beginning on
or after 1 January 2017, which have been implemented by the Group. A detailed review of the impact of IFRS 15
Revenue from Contracts with Customers and IFRS 16 Leases has not been completed at this point, and therefore theGroup is unable to conclude on what impact they may have on the Groups financial statements.
The Interim ﬁnancial statements for 2017 have been prepared in thousands (€'000). The ﬁnancial statements arepresented in Euro (€) which is the functional currency of the Group.
2

Significant accounting policies

There have been no changes to the accounting policies detailed in the 2016 Annual Report. Over the period coveredby the Interim Report the company has acquired new companies, resulting in the creation of both Intangible Assets
and Goodwill. The accounting policies relating to Intangible Assets and Goodwill are detailed below.
Business Combinations
The consolidated ﬁnancial statements incorporate the results of the business combinations using the purchasemethod. In the Consolidated Statement of Financial Position, the acquiree's identiﬁable assets, liabilities andcontingent 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.
Any contingent consideration payable is recognised at fair value at the acquisition date and is split between current
liabilities and long term liabilities. When the consideration becomes more certain, 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 beclassified as an Equity Arrangement and the value of the shares is fixed at the date of the acquisition.
Goodwill
Goodwill represents the excess of the cost of a business combination over, in the case of business combinations
completed prior to 1 January 2010, the Group's interest in the fair value of identiﬁable assets, liabilities and contingent
liabilities acquired and, in the case of business combinations completed on or after 1 January 2010, the totalacquisition 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 ofcontingent consideration arising on business combinations completed by this date were treated as an adjustment tocost 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 businesscombinations completed on or after 1 January 2010, direct costs of acquisition are recognised immediately as an
expense.
Goodwill is capitalised as an intangible asset with any impairment in carrying value being charged to the consolidated
statement of comprehensive income.
Intangible Assets
Intangible assets, separately identiﬁed from goodwill acquired as part of a business combination, are initially stated atfair value. The fair value attributed is determined by discounting the expected future cashﬂows to be generated fromnet margin on the business from the main customers taken on at acquisition. The assets are amortised over theiruseful economic lives, which is deemed to be 5 years.
Revenue Recognition
Revenue recognised represents the consideration received or receivable for the rendering of services, net of sales
taxes, rebates discounts and after eliminating intercompany sales. Services are provided based on agreed client
instructions and when projects are in progress at the period end, revenue is recognised to the extent that services
have been provided net of any provisions.
Revenue is recognised on the basis of words translated, studio time completed, testing hours ﬁnished, or milestones
reached in art creation as a proportion of the estimate total to complete the projects, by the expected revenueaccruing on completion.
3

Critical accounting estimates and judgements

There has been no material revisions to the nature and amount of changes in estimates of amounts reported in theannual financial statements 2016 for Keywords Studios Plc.
4

Segmental analysis

Management considers that the Group's activity as a single source supplier of Technical Services for Video Games
constitutes one operating and reporting segment, as defined under IFRS 8.
Management review the performance of the Group by reference to Group-wide revenues derived from seven main
service groupings:
·
·
·
·
·
·
·

Art Creation - 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
Audio - Audio services relate to the audio production process for computer games and includes scripttranslation, actor selection and talent management through pre-production, audio direction, recording, and postproduction, including native language Quality Assurance of the recordings
Localisation - Localisation services relate to translation and cultural adaptation of in-game text and audio scripts
across multiple game platforms and genres
Functional Testing - Functional testing relates to quality assurance services provided to game producers toensure games function as required
Localisation Testing - Localisation testing involves testing the linguistic correctness and cultural acceptability ofcomputer games
Customer Support - Customer support relates to the live operations support services such as community
management, player support and associated services provided to producers of games to ensure that consumers
have a positive user experience
Engineering - Engineering relates to software engineering services which are integrated with client processes todevelop video games

There is no allocation of operating expenses, proﬁt measures, assets and liabilities to individual product groupings.
Accordingly, the disclosures below are provided on an entity-wide basis.
Activities are reported in a manner consistent with the internal reporting provided to the chief operating decisionmaker. The chief operating decision maker has been identiﬁed as the executive management team made up of the
Chief Executive Officer and the Chief Finance Officer.

Revenue by line ofbusiness
Art creation
Audio
Localisation
Functional testing
Localisation testing
Customer support
Engineering

Unaudited
26 weeks
ended
30 Jun 17€'000

Unaudited
26 weeks
ended
30 Jun 16€'000

Audited52 weeks
ended
31 Dec 16€'000

12,381
8,402
18,98910,964
8,682
3,817

6,660
9,148
14,035
3,265
6,928
2,374

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

525
63,76042,41096,585

Geographical analysis of revenues by jurisdiction
Analysis by geographical regions is made according to the Group's operational jurisdictions. This does not reflect theregion of the Group's customers, whose locations are worldwide.

CanadaIreland
Switzerland
Italy
India
United States
Japan
United Kingdom
Spain

Unaudited
26 weeks ended
30 Jun 17€'000

Unaudited
26 weeks ended
30 Jun 16€'000

Audited52 weeks ended
31 Dec 16€'000

20,68915,371
7,217
5,906
2,643
3,079
2,652
1,370
832

8,297
10,919
7,872
3,926
1,996
3,372
2,392
728
603

22,05325,57017,838
7,269
4,591
5,250
4,886
1,276
2,167

ChinaSingapore
Germany
BrazilMexicoFranceTotal revenues

613
2,522
483
270
84
29
63,760

1,823
55
375
52
42,410

24
4,787
163
619
92
96,585

Geographical analysis of non-current assets from continuing businesses
Unaudited
26 weeks ended
30 Jun 17€'000

Unaudited
26 weeks ended
30 Jun 16€'000

Audited52 weeks ended
31 Dec 16€'000

CanadaIreland
Switzerland
Italy
India
United States
Japan
United Kingdom
Spain
China

8,445
4,616
12,191
11,851
2,865
12,307
327
7,711
931
4,372

2,289
4,626
13,015
12,357
2,966
8,431
27
6,139
878
142

8,937
4,779
12,657
12,188
2,991
8,657
43
6,874
1,475
287

Singapore
Germany
BrazilMexicoPhilippines

52
1,205
239
392
67,504

346
1,283
231
82
52,812

60
1,241
259
121
424
60,993

5

Seasonal business

The video games industry and, in particular, the console sector of the games industry, remains heavily dependent onsales of new releases of games and consoles during the traditional holiday season, including the run up to
Thanksgiving in the United States and Christmas in other parts of the world. As with all other service providers to thevideo games industry, certain of Keywords Group's service lines typically experiences signiﬁcantly higher activity as
part of this release cycle during the six months from June to November. This activity drives increased revenues in that
period and generates higher gross profit margins compared with the first six months of each calendar year.
Revenue for the 52 weeks ended 30 June 2017 totalled €118m (2016: 52 weeks €76m) and gross proﬁt totalled €44m
(2016: 52 weeks €28m).
Within the six months to 30 June 2017, Keyword's Group has acquired 4 new entities which are also included in the
results above.
6

Financing income and costs

Finance income
Interest received

Finance cost
Bank charges
Interest expense
Foreign exchange losses

Net financing
income/(cost)

7

Unaudited
26 weeks
ended
30-Jun-17€'000

Unaudited
26 weeks
ended
30-Jun-16€'000

Audited52 weeks
ended
31-Dec-16
€'000

55

52

94

55

52

94

(151)
(240)
(1,965)(2,356)(101)(69)(1,771)(1,941)

(229)
(152)
(1,737)(2,118)(2,301)(1,889)(2,024)

Taxation
Unaudited
26 weeks
ended

Unaudited
26 weeks
ended

Audited52 weeks
ended

30-Jun-17

30-Jun-16

31-Dec-16

€'000

€'000

€'000

-

3

4

2,745
(720)
2,025

1,287
(10)
1,280

3,928
(709)
3,223

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

The tax is calculated for all of the Keyword's entities, across all geographies, which have generated proﬁts during theperiod, after taking into account any tax losses brought forward. The tax is estimated in accordance with the tax lawsof each jurisdiction.
8

Dividends Paid

Dividends

Unaudited
26 weeks
ended
30 Jun 2017
Per
share Total€ Cent €'000

Final Dividends Paid
Interim Dividends Paid
Dividends paid toshareholders

Unaudited
26 weeks
ended
30 Jun 2016
Per
share Total€ Cent €'000

Audited52 weeks
ended
31 Dec 2016
Per
share Total€ Cent €'000

1.01
-

563
-

1.03
-

561
-

1.03
0.49

561
264

1.01

563

1.03

561

1.52

825

In May 2016, Keywords Studios plc approved a dividend in respect of the ﬁnancial year ended 31 December 2015 of
Stg0.81p/ € cent 1.034 per Ordinary share, or €561k 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 0.44p/€ cent 0.49 per share, based on the sharesin issue at that time, or €264k in total, as an interim dividend for 2016. The dividend was paid in October 2016.
In April 2017, Keywords Studios plc approved a dividend in respect of the ﬁnancial year ended 31 December 2016 of
Stg0.89p/ € cent 1.01 per Ordinary share, or €563k in total, as a ﬁnal dividend for 2016. The dividend was paid in June
2017.
The Directors recommend an interim dividend of STG 0.48p /€ cent 0.55 per share in respect of the ﬁnancial year
ended 31 December 2017 to be paid on 27 October 2017 to the shareholders who are on the register at 6 October
2017. The dividend is not reﬂected in the ﬁnancial statements as it does not represent a liability as at 30 June 2017.
The interim proposed dividend will reduce shareholders' funds by an estimated €317k.
9

Earnings per share
Earnings Per Share

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

Basic
DilutedUnaudited
26 weeks
ended
30 Jun2017

Unaudited
26 weeks
ended
30 Jun2016

Audited52 weeks
ended
31 Dec
2016

6.08
5.83

2.42
2.36

11.22
10.87

€'000

€'000

€'000

3,489

1,328

6,273

Number
57,395,949
59,851,814

NumberNumber
54,979,778 55,918,481
56,282,210 57,716,435

The dilutive impact of share options has been considered in calculating diluted earnings per share.
The basic and diluted weighted average denominators include the impact of the 1,862,297 (Dec 2016 2,889,708)

Shares to be issued relating to the acquisitions of Synthesis, Mindwalk and Red Hot.
10 Share Capital

Share capital

Share capital

Shares €'000

At 1 January 2016
Ordinary Shares of £0.01 issued on acquisition of KiteTeam
At 30 June 2016
Ordinary Shares of £0.01 issued on acquisition of
Volta
Exercise of Numis Warrants
Ordinary Shares of £0.01 issued on acquisition ofPlayer Research
Ordinary Shares of £0.01 issued on acquisition ofSonox
At 31 December 2016
Ordinary Shares of £0.01 issued according to theterms of the 2016 acquisition of Synthesis
Ordinary Shares of £0.01 issued on acquisition of
XLOC
Ordinary Shares of £0.01 issued on acquisition ofGamesim
At 30 June 2017

53,837,697

646

55,50853,893,205

1647

45,192400,324

1
4

65,2801

24,881
54,428,882

1654

1,188,253

14

19,134-

151,725
55,787,994

2
670

On 13 April 2017 the Group issued 1,188,253 of 1p shares in accordance with the terms of the 2016 acquisition of theSynthesis group. These shares had already been included in the basic EPS denominator as they were considered'Shares to be Issued', contingent only on the passage of time. A further 1,188,253 shares will be issued in April 2018.
On 10 May 2017 the Group issued 19,134 of 1p shares at a value of 807p (€9.61) which formed the part of theconsideration for the acquisition of XLOC.
On 17 May 2017 the Group issued 151,725 of 1p shares at a value of 788p (€9.19) which formed the part of theconsideration for the acquisition of Gamesim.
On 22 May 2017, in accordance with the terms of the acquisition of Red Hot, the Group committed to the Issue of
160,642 shares in May 2019. This commitment, which is only dependant on the passage of time, is recorded as'Shares to be Issued' at a value of 804p (€9.12) per share.
There is no limit to the number of shares which the company can issue.
11

Goodwill

At 1 January 2016
Recognition on acquisition of subsidiaries
Revaluation on Exchange Rate Movement
At 30 June 2016
Recognition on acquisition of subsidiaries
Revaluation on Exchange Rate Movement
At 31 December 2016
Recognition on acquisition of subsidiaries
Revaluation on Exchange Rate Movement
At 30 June 2017

23,893
17,995(417)
41,4715,060
268
46,7997,484(1,535)52,748During the period goodwill arose on the acquisitions of Spov, XLOC, Gamesim and Red Hot.
The goodwill is tested for impairment on an annual basis. The impairment test will be performed as part of the year
end process and any adjustment required reported in the annual report. At 30 June 2016 the Board do not consider
that there is an impairment is required.
12 Intangible assets - customer relationships

Cost

Purchased
Customer
SoftwareContracts Development

At 1 January 2016
Additions
Revaluation on Exchange Rate Movement
At 30 June 2016
Additions

€'000
5,132
3,921
(147)
8,906
2,588

Revaluation on Exchange Rate Movement

136

€'000

Total
€'000
5,132
3,921
(147)
8,906
2,588
136

At 31 December 2016
Additions
Revaluation on Exchange Rate Movement

11,6301,465(386)
12,709

11,630
147
1,612
(386)
147 12,856

Amortisation
At 1 January 2016

€'000
1,350

Amortisation
Exchange adjustment
At 30 June 2016
Amortisation
Exchange adjustment
At 31 December 2016
Amortisation
Exchange adjustment
At 30 June 2017

615
(50)
1,915
1,014
5
2,934
1,221
(106)
4,049

Net Book ValueAt 30 June 2016
At 31 December 2016
At 30 June 2017

6,991
8,696
8,660

€'000

€'000
1,350

2

615
(50)
1,915
1,014
5
2,934
1,223
(106)
4,051

145

6,991
8,696
8,805

-

2

Intangible Assets are amortised over 5 years from the point of acquisition on a straight line basis.
13 Loans and borrowings
Since the end of the period, Keywords PLC expanded the revolving credit facility with Barclay's bank to €35,000,000
which can be used for both further acquisitions and to fund working capital. The interest rate is 1.75% above Euribor
and there is a 0.4% margin which is charged for unutilised facility. There are charges over the assets of Keywords
Studios plc, Keywords International Ltd, Binari Sonori S.R.L, Babel Games Services Inc., Synthesis and Liquid
Development LLC.
Loans outstanding are repayable over the following periods ;Expiry within 1 Year
Expiry between 1 Year and 2 Years
Expiry over 2 Years

Unaudited
26 weeks
ended
30-Jun-17€'000

Unaudited
26 weeks
ended
30-Jun-16€'000

Audited52 weeks
ended
31-Dec-16€'000

13,04356
255
13,354

4000
4,000

8,025
55
290
8,370

14 Share options
In July 2013, at the time of the IPO, the Company put in place a Share Option Scheme and a Long Term Incentive Plan("LTIP"). The charge in relation to these arrangements is shown below, with further details of the schemes following:
Unaudited
26 weeks
ended
30-Jun-17€'000

Unaudited
26 weeks
ended
30-Jun-16€'000

Audited52 weeks
ended
31-Dec-16
€'000

82

100

208

334

184

478

416

284

686

Share Option Scheme Expense
Share Option Scheme - LTIP
ExpenseOf the total share option charge, €85,459 relates to Directors of the Company as at 30 June 2017, (2016: €16,170 for
the period ending 30 June 2016).
Share option incentive plan scheme
Share options are granted to certain Directors and permanent employees. The exercise price of the granted options isequal to the market price of the shares at the time of the award of the options. The Company has no legal orconstructive 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:
Share Option scheme

Unaudited
26 weeks ended
30-Jun-17
Average
exercise
Number of
price in £options
per share

Outstanding at the beginningof the period
Granted
LapsedExercised
Outstanding at the end of theperiodExercisable at the end of theperiodUnaudited
26 weeks ended
30-Jun-16
Average
exercise
Numberprice in £of options
per share

Audited52 weeks ended
31-Dec-16
Average
exercise
Number of
price in £options
per share

1.58

1,672,056

1.44

1,642,242

1.20

1,642,242

7.76
1.47
1.42

283,500(2,909)(85,698)

2.45
1.72
1.16

223,200(9,580)(37,842)

2.45
1.67
1.31

223,200(44,547)(148,839)

2.45

1,866,949

1.57

1,818,020

1.58

1,672,056

1.27

486,959

1.19

143,5121.38

522,035

There were 283,500 options granted during the period and 2,909 lapsed due to staff leaving.
On 15 May 2017, 283,500 options were granted at an exercise price of £7.755. All options were granted to either
employees or Directors of the Group. Of the 283,500 options granted, 94,500 are exercisable from 15 May 2019 to 15
May 2024, 94,500 are exercisable from 15 May 2020 to 15 May 2024, and 94,500 are exercisable from 15 May 2021
to 15 May 2024
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
2,033,469 (June 2016: 1,514,552) nil price (1p) options are available to vest to Directors and to selected employees on
the basis of the number of options they are entitled to.
Movements in the number of share options outstanding and their related weighted average exercise prices are as
follows:
Long Term
Incentive Scheme

Unaudited

Unaudited

Audited26 weeks ended
30-Jun-17
Average
exercise
Number of
price in £options
per share

26 weeks ended
30-Jun-16
Average
exercise
Numberprice in £ of options
per share

52 weeks ended
31-Dec-16
Average
exercise
Number of
price in £options
per share

Outstanding at the
beginning of the period
Granted
LapsedExercised
Outstanding at the end of
the period
Exercisable at the end of
the period

0.01

1,443,691

0.01

860,206

0.01

860,206

0.01
0.01

696,000(106,222)

0.01
0.01
-

690,000(35,654)
-

0.01
0.01
0.01

720,000(105,654)(30,861)

0.01

2,033,469

0.01

1,514,552

0.01

1,443,691

0.01

295,365

-

-

0.01

295,365

On 15 May 2017, 696,000 options were granted at an exercise price of £0.01. All options were granted to either
employees or Directors of the Group. The 696,000 options granted are exercisable from 15 May 2020 to 15 May 2024
if the market performance conditions are met as at 15 May 2020.
15 Acquisitions
Acquisition of Spov Ltd
On 17 February 2017 the Group acquired the entire issued share capital of Spov Ltd ("Spov") a company registered in
the UK, which specialises in providing creative development, cinematics, UI, visual eﬀects and motion graphics
services to the video game and ﬁlm markets. The acquisition will further complement 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:

Spov Ltd.
Book

Fair Value

Fair

Value

Adjustment

Value

€'000

€'000

€'000

Property, plant and equipment

30

-

30

Trade and other receivable

16

-

16

Financial Assets

Trade and other Payables
Total identifiable assets

(139)
(93)

-

(139)

-

(93)

Goodwill

491

Total consideration

398

Satisfied by:
Cash

351

Deferred consideration

47
398

Net cash outflow arising on acquisition
Cash

351

The main factors leading to recognition of goodwill on the acquisition of Spov are the presence of intangible assets inthe acquired entity which do not qualify for separate recognition such as the expertise in Art Services and reputation
within the industry, and an unidentified proportion representing the balance contributing to profit generation.
In the opening set up period, Spov contributed €14,805 revenue and €116,889 loss before tax to the Group between
the date of acquisition and the balance sheet date.
If the acquisition had been completed on the ﬁrst day of the ﬁnancial year, total revenue for the six months of €19,143
would have been contributed to the Group, and a corresponding loss before tax of €126,995.
Acquisition costs of €2,630 have been charged through the Statement of Comprehensive Income.
Acquisition of XLOC
On 10 May 2017 the Group acquired the entire issued share capital of XLOC Inc, ("XLOC") a company registered in
Raleigh, North Carolina, USA. XLOC has developed the leading web-based integrated globalization content
management system for videogames (XLOC), supported by consulting and customisation services. The acquisition of
XLOC is in line with Keywords Studios' strategy to extend 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 tablebelow:XLOC

Book

Fair Value

Fair

Value

Adjustment

Value

€'000

€'000

€'000

7

-

7

Financial Assets
Property, plant and equipment
Identifiable intangible assets - IP

-

147

147

Trade and other receivables

33

-

33

Cash and cash equivalents

120

-

120

Trade and other Payables

(73)

-

(73)

Deferred tax liabilities

-

(59)

(59)

Total identifiable assets

87

88

175

Goodwill

652

Total consideration

827

Satisfied by:Cash
Equity Instruments (19,134 shares of the parent
company)643

Total consideration

827

184

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

643
(120)

523

The main factors leading to the recognition of goodwill on the acquisition of XLOC are the presence of certain
intangible assets in the acquired entity, which are not valued for separate recognition, such as the expertise inlocalisation processes and reputation within the industry.
XLOC contributed €25,464 revenue and €35,320 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 the 6months to 30 June 2017 of €268,534 would have been contributed to the Group and €46,843 profit before tax.
Acquisition costs of €4,738 have been charged through to the Statement of Comprehensive Income.

Acquisition of Gamesim
On 17 May 2017 the Group acquired the entire issued share capital of Gamesim Inc, ("Gamesim") a company
registered in Orlando, Florida, USA. Gamesim specialise in outsourced engineering services and technology platforms
for the video games industry and other virtual simulation applications. The acquisition is in line with its strategy of
growing both organically and by acquisition to extend the Group's client base, market penetration or service lines,
where the Group can leverage its existing expertise, multi-service platform, scale and global reach to generatesynergies.
The amounts recognised in respect of the identiﬁable assets acquired and liabilities assumed are set out in the tablebelow:

GamesimBook

Fair Value

Fair

Value

Adjustment

Value

€'000

€'000

€'000

Property, plant and equipment

13

-

13

Trade and other receivables

768

-

768

Cash and cash equivalents

26

-

26

Trade and other Payables

(353)

-

(353)

Total identifiable assets

454

-

454

Financial Assets

Goodwill

3,828

Total consideration

4,282

Satisfied by:Cash
Equity Instruments (151,725 shares of theparent company)

2,888

Total consideration transferred

4,282

1,394

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

2,888
(26)
2,862

The main factors leading to recognition of goodwill on the acquisition of Gamesim are the presence of certain
intangible assets in the acquired entity, which are not valued for separate recognition, such as the expertise insimulation technology for the Games Industry and reputation.
Gamesim contributed €524,860 revenue and €87,365 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 the
6 months to 30 June 2017 of €2,057,228 would have been contributed to the Group and €151,692 profit before tax.
Acquisition costs of €4,233 have been charged through to the Comprehensive Income Statement.
Acquisition of Red Hot
On 22 May 2017 the Group acquired the entire issued share capital of Strongbox Ltd, a holding company withsubsidiaries in China and Indonesia trading under the Red Hot CG ("Red Hot") . Red Hot are specialists in the
production of graphical art assets for video games.

The acquisition of Red Hot is in line with Keywords' strategy of growing both organically and by acquisition. It will
increase the capacity of Keywords' fast growing and higher margin Art Service Line, as well as bringing a number of
attractive new clients to the art business at Keywords.
The amounts recognised in respect of the identiﬁable assets acquired and liabilities assumed are set out in the tablebelow:Red Hot

Book

Fair Value

Fair

Value

Adjustment

Value

€'000

€'000

€'000

230

-

230

-

1,465

1,465

Trade and other receivable

975

-

975

Cash and cash equivalents

584

-

584

Trade and other Payables

(420)

-

(420)

(366)

(366)

1,099

2,468

Financial Assets
Property, Plant & Equipment
Identifiable intangible assets - customer relationships

Deferred tax liabilities
Total identifiable assets

1,369

Goodwill

2,513

Total consideration

4,981

Satisfied by:
Cash

3,514

Shares to Be Issued

1,468
4,981

Net cash outflow arising on acquisitionCash

Less: cash and cash equivalent balances transferred

3,514
(584)

2,930

The main factors leading to recognition of goodwill on the acquisition of Red Hot are the presence of certain intangible
assets in the acquired entity, broader access to the Chinese pool of video game art talent, which is the largest in theworld, and expertise in Art service for the Games Industry and reputation.
A ﬁxed amount of 160,842 shares in Keywords Studio Plc will be issued as part of the deferred consideration. The
shares have been valued at the share price at the date of acquisition, €9.12, and €1,467,580 has been recorded as
Shares to be Issued within Equity, in accordance with IAS 32.16.
Red Hot contributed €582,168 revenue and €14,433 proﬁt before tax to the Group between the date of acquisition andthe balance sheet date. If the acquisition had been completed on the ﬁrst day of the ﬁnancial year, revenue for the 6months to 30 June 2017 of €2,266,180 would have been contributed to the Group and €304,608 profit before tax.
Acquisition costs of €139,831 have been charged through to the Comprehensive Income Statement.
16 Events after the reporting date
Acquisition after the reporting Date
On 4 August 2017, the group announced the acquisitions of La Marque Rose SARL, Asrec SAS and the subsidiarycompanies of holding company, Dune Media SAS, trading as Dune Sound and Around the Word, which are all based in
Paris and provide audio recording and localisation services to the video games industry internationally.
The businesses being acquired have combined annual revenues of €9.0m and proﬁt before tax of €0.9m. The total
aggregate consideration payable is €6.6m on day one and up to a further €1.0m over the two years to 31 December
2019, based on meeting performance targets for the combined businesses. Of the total aggregate consideration of up
to €7.6m, up to €6.7m is being satisﬁed in cash, and the remainder through the issue of 75,796 new ordinary shares in
Keywords. Of this total, 9,534 new shares will be issued on day one (and are subject to a 12 month hard lock-in) andthe balance will be issued on the first anniversary of completion.

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