www.keywordsintl.com

Keywords Studios plc

Annual Report and Accounts

Annual Report and Accounts 2013

Keywords International Ltd.
Whelan HouseSouth County Business Park
Dublin 18
Ireland
T: +353 190 22 730
F: +353 190 22 774

Keywords Studios plc

Keywords Studios plc

2013Contacts“We are well placed totake advantage of theindustry’s expected
growth and structuralchange in 2014 & 2015”
Andrew Day
Chief Executive

DublinKeywords International Ltd.
Whelan HouseSouth County Business Park
Dublin 18
IrelandTokyo
Keywords International Co., Ltd.
2F Toshin Building
4-33-10 Yoyogi, Shibuya-ku,
Tokyo 151-0053

Rome
Keywords Italia Srl
Via Tiberio Imperatore 1500145 Rome
ItaliaT: +353 190 22 730
F: +353 190 22 774

T: +81 3 4588 6760
F: +81 3 3375 1518

T: +39 06 44 20 25 21
F: +39 06 44 11 92 17

SeattleKeywords International Inc.
Plaza Center
10900 NE 8th Street, Suite 1000
Bellevue, Seattle, WA 98004

Montreal
Keywords International Corporation Inc.
410 St-Nicolas, Suite 600
Montréal, QC
H2Y 2P5
CanadaSingapore
Keywords International
1557 Keppel Road #03-28
Singapore 089066

T: +1 425 633 3226
F: +1 425 633 3228

Contents
Keywords at a glance

Chairman’s statement

24Strategic report

6

Case study: Game localisation

8

The market

8

Chief Executive’s review

12

Board of Directors

18

Financial and operating review
Directors’ report

Directors’ remuneration report

16

19

22

Directors’ remuneration
policy report

Independent Auditor’s report
Consolidated statementof comprehensive income
Consolidated statementof ﬁnancial position

Consolidated statementof changes in equity

Consolidated statementof cash ﬂows

24

26
28
29
30
31

Company statementof ﬁnancial position

Company statement ofchanges in equity

32
33

Company statement of cash ﬂows 34

Notes forming part of theConsolidated ﬁnancial statements 35

Company information
Contacts

55

56

Designed and produced by fourthquarter

T: +1 514 789 04 04
F: +1 514 843 43 52

Introduction

OVERVIEW

Keywords is an international technicalservices provider to the global games
industry. Established in 1998, and now
with operations in Dublin, Tokyo, Rome,Montreal, Seattle, London, New Delhi
and Singapore.

FinanCial StatementS

Visit the website for further information

GovernanCe

Its customers comprise many well-known
blue chip multinational games publishers
and developers including 15 out of the
25 most prominent games companies
listed by Gartner.

StrateGiC rePort

It provides integrated localisation, testing
and audio services across 40 languages
and 12 games platforms to a blue chipclient base in more than 15 countries.

www.keywordsintl.com

Keywords Studios plc – Annual Report 20141

At a glance
Keywords is an international technical services provider to the global
video games industry, with facilities in Dublin, Tokyo, Rome, Montreal,
Seattle, London, Singapore and New Delhi. It has built a strong
reputation across its service oﬀerings, which include:• Localisationtranslation and cultural
adaption including age
rating support acrossdiﬀerent platforms

Seattle• Localisation Testing

testing that the translated
and adapted content ﬁts
the games context

DUBlinmontreal• Audiooriginal voice recording,voice over recordings, preand post production as
well as actor selection
and management• Functional Testing

testing for defects andcompliance with console
speciﬁcations

lonDonrome

toKYo
neW DelHi

SinGaPore

Montreal

Dublin (HQ)

• Established in 1998
• Localisation, Localisation
QA, Audio Mgmt in
30+ languages

Rome• Amalgamated 2011
• Localisation & Audio

Singapore

SeattleLondon (Liquid Violet)

New Delhi (Babel Media)

Tokyo• Localisation QA,
Functional QA,
Localisation• Audio• Established in 2010
and expanded in 2014
through Babel acquisition• Established 2012
• Serviced oﬃces for 8,
scope to expand to 100• Onsite Localisation
QA Localisation

2• Acquired in Jan 2014
• Audio

Keywords Studios plc – Annual Report 2014

• Acquired Feb 2014
• Functional QA• Started April 2014
• Localisation, Audio,
Testing• Established in 2010
• Localisation QA,
Localisation & AudioProviding integrated
localisation, testing and audio
services across 40 languages

12

games platforms to a blue
chip client base in over
15 countries

15

clients serviced of the 25
most prominent games
companies

9

OVERVIEW

40

studios providing technicalservices to the global games
community

The Group provides integrated localisation, testing and audio services
across 40 languages and 12 games platforms to a blue chip clientbase in over 15 countries from its 9 studios on 3 continents.
StrateGiC rePort

As Keywords provides services to the global video games market,
across all platforms without the risks of game creation, the Company
is ideally placed to take advantage of the key growth drivers forthe industry:• Geographic expansion –in both digital and boxed
games across social
media, smartphoneplatforms such as iOS
and Android, and the
traditional console andhandheld platforms of
PlayStation 4, Xbox One,PlayStation Vita and
3DS, generating more
localisation and testing
across multiple platforms;• Dynamic content trend –the trend towards richer
and more dynamic
content and high quality
standards which require
high calibre localisationand testing; and• Increased outsourcing –the move, by major
publishers, to outsource
their technical services
as the complexity andcost of undertaking
these in-house becomesprohibitive.

Keywords clients
FinanCial StatementS

Divisional revenue
split 2013

• Growth in social media –GovernanCean expansion ofgeographic markets and,
therefore, the languages
that games content islocalised for andtranslated into;

Localisation Testing 58%
Localisation
32%
Audio
8%
Functional Testing2%

Keywords Studios plc – Annual Report 2014

3

Chairman’s statement
In this, my ﬁrst, statement as Chairman in the Company’s maiden
full year results as a public company following its admission to AIM
in July 2013, I would like to set the scene for investors’ own reviewof the Strategic Report and the other components of these Accounts
by outlining my initial view of the Company.
overview

Keywords has a highly motivated andskilled team of executives delivering ahigh calibre service to its international
client base within a fragmented service
provider market that is ripe forconsolidation. The trend for games
producers/developers to outsource
localisation activities (translation,
localisation testing and functional
testing) and related functions (such as
audio services) continues to gather pace,oﬀering good opportunities for organic
growth. We, therefore, believe that our
strategy of harnessing this organic
growth opportunity, complemented byacquisitions to extend the Group’s client
base, geographical presence and service
lines, will underpin the Group’s
signiﬁcant growth in the medium tolong term at stable margins.

We have made considerable progress inline with that strategy, both organicallyand through acquisition. In the year
ended 31 December 2013, we grew
revenue by 14.3% to €16.4m despite atransitional period in the games industry

Keywords timeline

1998

Keywords founded:by Teresa Luppino(ex Italian language
specialist working at
Microsoft) and Giorgio
Guastalla

4

2004

Localisation Testing:Company develops
localisation testingprocess for video
games with a key
client, coveringboth functional andlinguistic aspects
simultaneously

Keywords Studios plc – Annual Report 2014

2005

Video game focus:
Keywords adopts
strategy of focusing
on video game market,
earning a reputation
for delivering a quality,
tailored service

which was characterised by an
unexpected scaling back in the numberof next generation launch territories anddelays to some earlier generation games
releases due to the industry’s focus on
two major console releases at the very
end of the year.

Following the year end, Keywords
acquired in January 2014 Liquid Violet
Ltd, a London-based video games voice
production services company and in
February Babel Media Ltd, a leading
provider of outsourced video games
services with operations in Canada
and India. In March 2014 we started
operations in Singapore underpinned
by demand from Electronic Arts as theychose to outsource translation, audio
and testing services for South East Asian
languages to Keywords and we continue
to review a number of acquisition
opportunities. Adding these businesses
to the Group substantially extends its
capabilities, customer relationships andgeographic reach and we look forward
to taking advantage of the synergies
that they bring to Keywords.

2009

Key appointment:
Andrew Day
appointed CEO

New business wins:
Gained new strategic
customers

2010

Oﬃce expansion:
Moved to new,expanded premisesin Dublin

International openings:
Keywords Montreal
is opened to service
North America
Tokyo facility opened

OVERVIEW

People and culture

Shareholders and dividend

I would also like to thank shareholders
for their continued support as we
pursue a strategy which we believe willcontinue to enhance shareholder value
and we look forward to sharing an open
and prosperous partnership with our
new investors following our IPO.

In future years, the Board expects thatthe interim dividend will be around one
third of the total dividend for the year.

Italian integration:
Keywords Italia SRL,
Rome was integrated

2012

US integration:
Keywords Seattle
incorporated

2013

AIM listing:
Keywords Studios plc
listed on AIM. Flotation
raised £28m issuing newshares at 123p each.
Signiﬁcantly strengthenedboard#+(00(-,

With a leading market and ﬁnancial
position, Keywords is well placed totake advantage of this industry growth
and we expect it to make strong
progress, both organically and throughacquisition, in our ﬁrst full ﬁnancial
year as a listed company.

Ross K Graham
Chairman
7 April 2014

2014

Acquisitions:
Liquid Violet and Babel Media acquired
Singapore established:
Singapore Studio established with
Electronic Arts as an anchor client-"2+$,1

Keywords Studios plc – Annual Report 2014

5

FinanCial StatementS

2011

2014 is expected to be a year ofsigniﬁcant activity for the games
industry driven by games launches tosupport both the fast growing new
generation consoles and the existing
250m previous generation console
base, in addition to substantial growthin smartphone gaming.

GovernanCe

In line with its progressive dividend policy,
subject to the retention of funds needed
to fund future growth of the Group’sbusiness and its strategic aims, the Boardis pleased to recommend a ﬁnal dividendof 0.67p per share which, following themaiden interim dividend payment of
0.33p per share on 28 October 2013,
will make the total dividend for the year
ending 31 December 2013 1.00p per
share. Subject to shareholder approvalat the Annual General meeting, the ﬁnal
dividend will be paid on 25 July 2014
to all shareholders on the register at
4 July 2014.

looking ahead

StrateGiC rePort

Keywords has a distinct and strong
culture which engenders a ‘can do’attitude and is founded on the value
placed on our people; we trust them andwork hard to empower them to performthe best service for each project andeach client; we have an inclusive styleof management, with a ﬂat structure
and transparent project management
and performance measures; wemeasure ourselves and our colleagues
on the value they contribute to theorganisation. This culture underpins
Keywords’ success by providing the
ﬂexibility to respond quickly andeﬀectively to client requirements.
So I would like to pay tribute to allof our team – for their support,
hard work and commitment.

Strategic report
Keywords Studios’ strategy is to grow both organically and byacquisition to extend the Group’s client base, market penetrationand service lines, 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. The Board believes
that there is a clear opportunity for Keywords to extend its existing
relationships with many of the major games companies through:Geographical growth

Expanding its global presence, primarily through oﬃce expansion thereby
increasing headcount and expanding its global client base. In particular,
Asia Paciﬁc accounts for three out of the top four video games markets inthe world and is projected to be the fastest growing region during the next
ﬁve years, increasing to $40 billion in 2016 (2011: $24 billion) 1 and Spanish
speaking South America is a large growth market for video games.

Outsourcing

Capturing new blue chip customers who are looking to outsource
all their localisation requirements as it has become costly for
publishers and developers to deliver games localisation all aroundthe world, on multiple platforms in-house.

Acquisitions

Selective acquisitions which generate synergies or extend
its client base, geographical penetration or service lines

Adjacent activities

Expanding both downstream, into operational support services suchas customer services and payment services and upstream, into original
games content development, original language audio and motion capture.

Global videogame spending

1

90
80
Total spend, $bn

70
60
50
40
30
20
10
0

2010

2011

Asia Pacific
6

2012

EMEA

2013

North America

Keywords Studios plc – Annual Report 2014

2014

2015

Latin America

20161

Source: PwC Global Entertainment & Media Outlook 2012-2016.

Keywords is an outsourced services
company providing technical services tothe video games industry globally toassist developers and publishers todevelop, sell and operationally support
their games regardless of the deployment
platform or the genre of the game.

Currently, the business provides
translation, audio, localisation testing
and functional testing services to thevideo games market across all games
platforms including consoles, PCs, theinternet, mobile phones and tablets.

The geographical diﬀerences require
localisation service providers to diligently
consider the target gamers’ age range,
gender and linguistic variables as wellas the cultural and political context ofthe game. As such, Keywords employs
games-specialised translators andnative speakers who test in-gamecontent in more than 40 languages,
giving it a resource base of market
leading scale and which its clients

Overall, Keywords provides its essential
services on a variable cost basis to its
blue chip customer base to support
those developers and publishers
through challenging production
and game operation support needs.
It works in a highly ﬂexible and eﬃcientmanner and its revenues are derived
from the provision of these
professional services, which arecharged largely on a time andmaterials basis. As such, the Groupis not exposed to the successes andfailures of individual game titles.

The quantity and quality of gamecontent is the key driver of demand for
the Company’s services and, thanks to
the loyalty of its clients, who havetypically increased the percentage ofwork awarded to Keywords year on year,
the Company has grown rapidly over the
past ﬁve years with minimal investment
in business development.

The annual business cycle in the industry
varies depending on the market sector.

Delivering a premium service

localisation Services:translation of in game text,
audio scripts, language quality
control services andpackaging and marketing
materials

Low operational gearing has been
and will remain a feature of Keywords
business. As the Company undertakes
acquisitions it is likely that some ofthese businesses will operate lessﬂexibly than Keywords, in which case
the Directors will explore opportunities
to move their operating models closer
to those of Keywords.

Keywords is not a capital intensive
business but strives to make its people
and processes the most productive andeﬃcient. During 2013, the Company
invested a total of €0.4m in game testing
consoles, PCs and mobile devices tosupport its testing activities, theCompany invested a total of €0.4m in
2013. Cash ﬂow is a strong featureof the business, generally matching net
income. In 2013, net income excluding
the one-time costs of the IPO amounted
to €1.9m, generating operational cash
ﬂow of €2.2m.

testing Services:non language based
functional (core) quality
assurance, and localisation
testing in over 40 languages
using native speaking testers

FinanCial StatementS

The Company focuseson quality and deliveringa premium service
at a competitive priceacross the following
range of services:

As Keywords strengthens its original
language game production activities
including functional testing and original
voice recording (which take place earlier
in the game production cycle thanlocalisation services) and the Group
increases its penetration of the mobile
and social games market, the very
marked seasonal revenue curve
experienced until two years ago willcontinue to be oﬀset by greater activity
around the year.

audio Services:multi language voice over,original language voicerecording and related
services

Keywords Studios plc – Annual Report 2014

GovernanCe

Services provided by the various
Keywords studios are typicallydiﬀerentiated by language mix,
scalability, ﬂexibility, price and proximity
to clients. Localisation is not limited
to translation into multiple languages;
developers and publishers need totake into account the varied cultural,technical and legal diﬀerences of theirglobal consumers and the quality of
localisation is now viewed as a criticalfactor in the success of a new launch.

The Directors believe that, through thiscapability, Keywords has established
an industry reputation for quality.
The Company’s unique selling points,
including the use of games-specialised
native staﬀ for all languages, the ability
to oﬀer their services ﬂexibly on-site atclients’ premises or in its specialised andsecure global studios, its track record ofdelivery of services to many of the mostprominent games companies, together
with its integrated localisation, audio andtesting capabilities, diﬀerentiates
Keywords from its competitors.

Console and PC games largely follow
a seasonal pattern with titles being
published for the holiday period
including Thanksgiving and Christmas.
Mobile, social and online games do notfollow this pattern and are not driven
by particular release schedules.

STRATEGIC REPORT

These services are delivered through anumber of strategically located facilities(“studios”) or through the provision ofmanaged services on client’s premises.

would require substantial investment
to replicate in-house.

overvieW

Business model

7

The Market
The global video games market is predicted to grow signiﬁcantly, with
PwC forecasting a CAGR of 6.5 per cent, from $65.5 billion in 2013
to $82.9 billion in 20171. Spending on games software is predicted to
grow by solid double digit percentages during the next ﬁve years2.
In 2013, the market for each of the games platforms was as follows:
The proliferation of games platforms(beyond console and PCs to online,
social, mobile and cloud-based gaming),
and monetisation models (beyond
traditional retail sales to in-game
purchases and advertising and bolt-on
content models) which has been seenin the industry has resulted in a
number of key market growth drivers
for Keywords; it is taking video gaming
into new markets both geographicallyand demographically; it is making
content more dynamic and continuous,
as games developers seek to keep
users engaged for longer; and it isunderpinning a trend towards
outsourcing localisation and testing
services, as set out below.

The key drivers of this growth are:

A proliferation of games platforms:
although console and PC packaged
games currently represent the majorityof revenues in the video games market,
they are fast being overtaken bymobile social and online gaming.
This proliferation of gaming platforms
has increased accessibility andopened up new:• geographical markets, given theabsence of the requirement for
relatively expensive console systems
or landline based internet
connectivity. The development ofmobile gaming in particular has
opened up new geographical markets.
While the U.S.A. remains the largest
video games market in the world, highrates of growth are being seen indeveloping countries, such as Nigeria,
Kenya, India and Vietnam, which havelittle history of console or PC gaming.
• demographic markets, a recent
survey of the US entertainment
software market by the Entertainment
Software Association reveals that of

47% of all game players (video andcomputer games) are women and that
68% of games players are 18 years ofage or older, demonstrating that themarket has moved well beyond theaverage gamer being a young male.

Emerging monetisation models:the industry is shifting from thetraditional retail sales of static boxed
games, to new monetisation models
which include generating revenues
from in-game purchases of and digitally
distributed dynamic content,
advertising and ongoing upgrades
which are downloadable and extend
the lifetime value of the game. With
new content continually produced
by developers to support thesemodels, games content now evolves
considerably after its initial launchand has become richer / more complex
overall. Games content is, therefore,predicted to grow at a faster rate thanthe overall market, whilst the need for
localisation and testing support has
extended well beyond the games’ initialsale and towards a requirement forcontinuing operational support.

Global games market ($bn) – 2013/2017 estimate
2013 $bn
26.0

22.5

7.2

$ 65.6 bn

9.92017 $bn
31.2
Console games
1
2

30.3
Online games

PC games

7.0

14.4

Mobile games

PwC Global Entertainment & Media Outlook 2013-2017.
Gartner, Market Trends: Gaming Ecosystem goes mobile with new monetization models, 21 November 2012.

8

Keywords Studios plc – Annual Report 2014$82.9 bn

of games spend is on wirelessand online – expected toovertake console & PC games

47%of all players
are womenof gamers are
18 years ofage or older

In addition to the long term market
drivers outlined above, the console
launch cycle is an important factor in
the growth rate of software sales into
the console based gaming market.
Mainstream console releases generally
come in generations, and the Nintendo
Wii U was the ﬁrst release of what theindustry terms the eighth generationof home consoles. This was followedin November 2013 with the launch of
the Microsoft Xbox One and the SonyPlayStation 4. Both consoles are
selling well but are held back by lackof availability in certain territories.
On 18 March 2014, Microsoft
announced that Xbox One would
be launched in a further 26 countries
in September 2014.

of consumers are
forecasted to spend
online by 2017

The majority of the Group’s competitors
in the video games localisation industry
oﬀer either:(i) translation; or(ii) translation and audio; or(iii) testing (localisation and functional)

and often with limited geographicalreach. As such they do not provide thecomplete outsourced integration of
localisation and testing services that theGroup is able to provide internationally.
Babel Media which was acquired by
Keywords in February 2014 is regarded
by the Directors as the mostcomparable business in terms of spreadof services oﬀered and outright focus
on the games industry. Beyond these
services, the wider market for generalvideo games technical services is evenmore fragmented, with no specialised
provider oﬀering a complete video
games technical services solution.

GovernanCe

Despite an international and blue chipclient base, technical services for thegames industry remains a highly
fragmented market. The Directors
believe the Group is one of very few
international providers of the full rangeof localisation services – localisation,
audio and testing – with a pure focus
on the video games industry.

37%

STRATEGIC REPORT

Trend towards outsourcing:
As localisation and testing has become
more complex and resource-intensive,
due to the proliferation of devices,audiences, distribution channels,monetisation models and the increased
complexity of content, it has becomeless cost eﬀective for publishers tohave suﬃcient resources for in-house
localisation and testing and they areturning to trusted external providers.
Given the increased complexity ofgetting their products to market,
publishers are focusing their resourceson devising successful new businessmodels whilst aiming to optimise theirreturn on investment by ensuringcontent is delivered eﬃciently andsuccessfully across a growing numberof games platforms and geographicalmarkets, underpinning a continued
trend towards outsourcing technicalservices such as localisation and testing.

68%

overvieW

17%

Key market drivers• Opening new geographicalmarkets: high rates ofgrowth in developing
markets• Emerging monetisation
models: revenues fromin-game purchases, digitally
distributed dynamic
content, advertising andongoing upgrades which
extend the lifetime valueof the game• Growth rate: games content
is to grow at a faster rate thanthe overall market. Keywords
is dependent on industry
growth and not reliant on
individual client success.

• Live operations support:
Need for localisation andtesting support extended
well beyond the games’
initial sale

• Trend towards outsourcing:increased complexity ofgetting content to market;
multiple platforms, greater
geographies and newmonetisation models;developers focused on
new business models
and market strategies

Localisation needs to takeaccount of cultural, age range,
gender, linguistic, technical,
political and legal diﬀerencesof global consumers to
attract and maintain players
and quality of localisation isa critical factor
So it is less cost eﬀective forpublishers to suﬃciently
resource in-house
localisation and testing

Keywords Studios plc – Annual Report 2014

9

FinanCial StatementS• Proliferation of games
platforms: beyond console
and PCs to online, social,mobile and cloud-based
gamingCase study: Game localisation
Pro Evolution Soccer
Games developed in source language multiply many times byplatform, by language, service and over time...

Original language:
starts as single
title in original
language in thiscase, Japanese

Pro Evolution Soccer“World Soccer Winning Eleven”:
is a series of football video games
developed and published by Konami.
Every year, the game is released aroundlate September and/or early Octoberwith two diﬀerent titles: World Soccer:
Winning Eleven in Japan, and Pro
Evolution Soccer in other countries.

10 Keywords Studios plc – Annual Report 2014

The Japanese version is a localizedversion that features local leagues.
In 2007, the franchise began to use thename “Winning Eleven: Pro Evolution
Soccer” for the American market, which
was later changed to “Pro Evolution
Soccer” in 2008, dropping the “Winning
Eleven” moniker entirely for that region.

EnglishovervieW

FrenchItalianGermanMex Spanish
SpanishSTRATEGIC REPORT

Portuguese
Arabic
Greek
KoreanSwedishGovernanCe

TurkishRussianBrazilian
Chinese
Dutch

Target languages:
translated andculturally adapted
to target languages.

CC Platforms

Audio recording:in select target
languages.

CC Release cycles
Tested:in all languages
across all target
platforms.

Keywords Studios plc – Annual Report 2014 11

FinanCial StatementS

CC Languages

Chief Executive’s review
2013 was a year in which we invested in the business in the expectationthat the next generation console launches, in combination with games
development for the installed console base as well as social and mobile
platforms would underpin a substantial increase in activity levels
during the ﬁnancial year.
overview

The unexpected scale back in thenumber of next generation launch
territories, combined with delays tosome earlier generation games releases
due to the industry’s focus on the two
major console releases at the very endof the year, held margins back in 2013.
However, we are now well positioned
to take advantage of this investment;2014 and 2015, are expected to beperiods of signiﬁcant activity for thegames industry as it beneﬁts more fully
from the new generation of consoles
in line with the growth in the installedbase for these devices.

Overall, despite the uncertainty in theindustry, we delivered strong revenue
growth and have made considerable
progress in line with our strategy to
expand the Group’s oﬀering bothorganically and by acquisition.

2013 ﬁnancial performancehighlights

The Group’s revenues increased by
14% to €16.39m (2012: €14.34m) during
the period. This increase was primarily
driven by our largest service line,
Localisation Testing, which grew by
21% whilst Localisation Activities, grewmarginally, by 2%, and Audio andFunctional Testing, grew by 23.3% asoutlined in more detail in theoperational review.

12 Keywords Studios plc – Annual Report 2014

Operating expenses includes one-timecosts relating to the IPO of €1.12m(2012: €nil) and non-cash costs related
to share option expenses of €0.07m(2012: €nil). Operating expenses
excluding these two items increased bya total of €0.54m for the period to€3.25m (2012: €2.71m) arising from ourinvestment in expansion and increased
capacity. In particular, this reﬂected a€0.19m increase in operating costs in
Montreal and Seattle as we expanded
our Localisation and Testing capacity,and €0.28m incremental costs in the
Company related to the new Board andthe compliance costs of being a publiccompany. The depreciation expense
increased by €0.07m arising from theGroup’s continued modest investment
in testing equipment.

Whilst prices for the Company’s services
have mostly remained unchanged
during 2013, our investment inadditional capacity ahead of anticipatedhigher levels of activity in the second halfof 2013 as well as in start up costs in
our Managed Services operation in
Seattle led to Gross Proﬁt Margins forthe continuing businesses being heldback to 34.6% (2012: 38.5%).

One-time costs of €1.40m (2012: nil)were incurred in the year, relating to
expenses associated with the Group’s
IPO on 12 July 2013. €0.28m of this wascapitalised against the share premium
account, with the balance of €1.12m
included in operating expenses.

The Group reported adjusted proﬁt
before tax (before IPO expenses, shareoption charges and foreign currency
movements) for 2013 of €2.45m (2012:€2.85m). Statutory proﬁt before tax forthe period was €1.16m (2012: €2.74m).

The average tax rate on the proﬁt before
taxation (excluding losses before tax) in
the period was 14.8% (2012: 13.1%). The
increase is due to higher tax rates in the
USA on the Group’s Seattle operations.

The basic earnings per share, excluding
the one-time costs of the IPO, were 5.28c(2012: 7.30c). Basic earnings per sharefrom continuing operations were 2.14c.

operational review

During the year, the Group continued to
grow its market share and build on its
strong reputation for quality of service
and delivery, from secure facilities, asevidenced by an excellent client
retention record and client wins, which
include Blizzard Entertainment, Disney,
King and Supercell.

Increase inGroup revenues

We have also trialled, in 2013, and are
actively promoting in 2014, a service
to objectively advise clients on theadaptation of user interface anduser experience (UI/UX) design when
globalising their games; a new service
created through the collaboration of
our Tokyo and Montreal studios.

Functional Testing remained a small
contributor to Group revenue,
accounting for 2% in 2013 but grewby 17% to €0.35m from €0.30m on
the back of new client wins particularly
for higher value platform compliancetesting. The acquisition of Babel Mediain February 2014, will signiﬁcantly
extend Keywords’ functional testing
capability, in which the Group wasformerly underrepresented, thus
improving the balance of the Group’s
portfolio of services in 2014.

We intend to continue to extend ourservice lines in line with client andmarket demand both throughacquisitions and by leveraging theGroup’s existing internal skill sets todevelop additional services to taketo market.

Geographic expansion

Overall, the Group has signiﬁcantly
extended its range of services, depth ofcapability and market penetration whilst
adding new geographies organically andthrough acquisitions, as outlined below.

95%

Revenues derived
internationally

The Group has expanded geographicallyand now has nine studios in threecontinents providing full localisation
services to local and global clients.
This broad reach has enabled Keywords

1.00p €15.3m
Total dividend per sharefor the year

Net cash including net IPO
proceeds of €10.2m

Keywords Studios plc – Annual Report 2014 13

FinanCial StatementS

14%
Highlights

Our Audio activities, which account for
8% of Group revenues, grew by 25% to€1.25m (2012: €0.99m). This had been
a ﬂedgling operation for Keywords andthe acquisition of Liquid Violet, inJanuary 2014, was a signiﬁcant step inextending the scale and capability of thisimportant activity. Voice recordings invideo games lie at the richer end of thecontent spectrum and are anticipated to
be a strong growth activity, given thecapability of the new generation of
consoles to handle larger content loads,
combined with the expansion ofbroadband capacity and thatsmartphone devices and networks
are becoming more capable ofmanaging richer content.

GovernanCe

During the year we tested the majority ofSony published launch titles for PS4 andall Microsoft published launch titles forXbox One. Localisation (translation)
activities, which accounted for 32.5% ofGroup revenue, increased revenues
marginally, by 2%, to €5.32m (2012:€5.23m). Being less exposed to theconsole games market than our testing
operations, the translation businessderives the majority of its revenues frommobile, social and online games. It saw
an increased volume in mobile games,
which continues to grow strongly, oﬀset
by some softening in demand fromcertain clients in online and social games.King.com (Candy Crush Saga and other
titles), Kixeye (Vega Conﬂict, Backyard
Monsters and others), Supercell(Clash of Clans, Hay Day and other

Keywords has extended its range ofservices to include oﬀering multilingual
customer support, meaning that
Keywords is the ﬁrst line of customer
support to its clients’ communities ofgamers. This service leverages our
700 games and language specialised
staﬀ and our recruitment pipelines
for similarly proﬁled individuals. As
games transition through the production
and launch phases to ongoing live
operational support, Keywords teams ofnative language testers can follow thegame into the market, thereby exploiting
their deep knowledge of all aspects ofthe game to support players as they
engage with the content.

STRATEGIC REPORT

Localisation Testing operations, which
accounted for 58% of Group revenue,
grew by 21% to €9.47m (2012: €7.82m)
primarily driven by the launch of the newgeneration of consoles from Sony andMicrosoft as well as our newly created
operation in Seattle. Important newclient contributors to the division
included Disney Interactive, Blizzard
Entertainment and Pretty Simple Games.
During the year, the Company alsoestablished a managed services
operation for a major client in Seattlewith the Company managing localisation
testing operations on site at Microsoft.

Service line extensions

titles) all joined our stable of clientsduring the year.

overvieW

Despite a more turbulent than expected
year for the reasons described above,the company performed well in 2013,
growing organically and delivering a
14% increase in revenues.

Chief Executive’s review continued

to extend its localisation services into
more than 40 languages across 12
platforms to clients in over 15 countries.

Keywords’ 9 studios are strategicallylocated to provide services to key
gaming clusters in locations such as
Tokyo, Montreal, Seattle and London.
In addition, our newly acquired studioin New Delhi, India (a subsidiary ofBabel Media) represents an interesting
opportunity for our Group to explore
and further develop this location forthe provision of low cost oﬀshore
outsourced activities including functional
testing services as well as a base forcentral services to be provided to theGroup such as accounting and payroll
processing services. South America andChina are growing markets for games
and, as such, also represent attractive
markets for the Group to grow into intime. We are, therefore, exploring
options to establish in these territories
in a prudent manner.

acquisitions

Keywords acquired Liquid Violet andBabel Media in January and February
2014 respectively, as previously
announced. Both acquisitions
have performed in line with our
expectations.

2

Highlights

Acquisitions:3

Our focus with Liquid Violet, which is
subject to an earn out arrangement, ison integrating some back oﬃcefunctions whilst enabling the businessto beneﬁt from broader businessdevelopment opportunities as part of
Keywords, given its larger client base.
Early signs of the ability of Keywords tocross sell Liquid Violet services to its
existing client base are very encouraging.

We have already made good progresswith the integration of Babel Media’s
operations into Keywords. In the early
weeks since acquisition, initialrestructuring has targeted indirect
costs and we, have already achieved
annualised savings of $1.0m.

We expect acquisition activity to be afeature of the business for theforeseeable future as the company takes
advantage of its leadership position in
the market and continues to consolidate
carefully selected, earnings accretive
businesses. As such, Keywords continues
to review a number of acquisition
opportunities which, in line with theGroup’s strategy would bring something
new to the Group – geographic reach,new complementary services, deeper
market penetration in particular market
sectors and new technologies.

New studios:
1. London
2. New Delhi
3. Montreal

14 Keywords Studios plc – Annual Report 2014

500
Peak staﬀ

As we grow, we have continued to invest
in the infrastructure to support the larger
Group. We expanded our sales support,
growing from one dedicated businessdevelopment executive in 2013 to ﬁve
individuals in the sales team today, twoof which joined through the acquisitionof Babel Media in February 2014.
Investment in project management,
workﬂow management and ﬁnancial
reporting continues as these tools arerolled out to support all operations ina centralised and consistent manner,
facilitating strong management reportingand control. We also continue to invest in
talent and our growth helps us to retain
and attract talent, as candidates cansee attractive opportunities for career
progression throughout the Group.

Principal risks and uncertainties

Keywords is a relatively small Group,
operating in a fragmented, evolving
industry populated by a number of verylarge global game publishers as well as
many quite small developers. Keywords
has the objective of becoming theleading global supplier of localisation,
testing, audio and other related services
to the Industry. This background sets thescene on the type and number of risks
which the company faces in pursuingthis objective.

2014

Are expected to be periodsof signiﬁcant activity

overvieWThe Principal risks associated with theGroup’s strategy can be divided into

1. General business risks for any
international company
2. Industry related risks

The principal risks facing the Company
at the present time, as identiﬁed by the
management and the Board, refer
exclusively to categories 2 and 3;
they are set out below:

Sudden business interruption:
Keywords is a global business and needs
to minimise business interruptions andbe able to continue servicing customers.
This threat is largely external, forC) Financial risks
Adequate overseas ﬁnancial controls:
As a business like Keywords grows
rapidly, global ﬁnancial controls, andregular audits need to be in place toensure smooth, timely and accurate
reporting to satisfy the relevant
accounting bodies to local branches aswell as the Board. The Group is investing
in its ﬁnancial reporting functions tofacilitate strong reporting andmanagement control.

We, therefore, look forward to making
good progress as we realise the beneﬁts
of increased scale, of improving
utilisation across our business, of theacquisitions made following the year end
and of our 2013 client wins.

Andrew Day
Chief Executive
7 April 2014

Keywords Studios plc – Annual Report 2014 15

FinanCial StatementSConﬁdence of the city and investors:
Keywords ﬂoated on AIM in July 2013
with an expressed set of objectives ofgrowing the business organically and byacquisition. As a new company to theworld of public markets, maintaining
the conﬁdence of investors in what
the company is doing is crucial as is
performing in accordance withexpectations. Should the company lose
the conﬁdence of investors, thecompany’s rating will suﬀer and thisin turn will aﬀect its ability to raisemoney for or place shares to pay
for acquisitions.

Success of acquisitions:
Keywords has embarked on an
acquisition strategy to reinforce its global
growth. Managing such acquisitions
successfully and embedding the
Keywords culture will be a crucial
ingredient of success. Failure to do
so will have adverse consequences suchas management distraction, disposal
and reduced proﬁt. Whilst middle
management is relatively inexperienced
in this regard, this is mitigated by theconsiderable experience within the top
management and across the Board.

We have considerably strengthened
our market position, geographicalspread and service oﬀering througha combination of market share gains,organic investment and recent
acquisitions, leaving us well placed
to take advantage of industry growthand structural change which we expect
to lead to an increased use ofoutsourced services.

GovernanCe

A) External risks
Exposure to large customers:
The Company’s client base principally
comprises global game companies
whose revenues are in the billions andhundreds of millions of dollars. Our top
ﬁve clients account for 61% of thecompany’s revenues. These companies
have exacting standards and demand ahigh quality of service. Any failure in thisregard or breakdown in the relationships
at the top level could cause considerable
damage to the business. The potential
impact is partially mitigated through the
low operational gearing of the Company.

B) Internal risks
Security:
The Industry requires the highest
standards of security within a Company
oﬀering services such as Keywords.
Security breaches may lead to piracy,
disruption of clients’ marketing plans,
loss of competitive edge and could result
in compensation claims. Keywords
maintains physical and data security
policies and procedures which are
regularly audited by its larger clients.

Current trading and outlook
2014 is expected to be a year ofsigniﬁcant activity for the games industry
as it supports the fast growing new
generation hardware and the existing
250m installed console base, as well as
the signiﬁcant growth being seen insmartphone gaming. We have made asolid start to the year, in line withmanagement’s expectations and ourrecently acquired businesses, Liquid
Violet and Babel Media, are trading wellwith the change of ownership having
been received well by clients of all of
the businesses.

STRATEGIC REPORT

3. Those speciﬁc to the Keywords
Group and its strategy

instance caused by an IT failure or anatural disaster in a key location, as theGroup experienced and managed
during the 2011 Tokyo earthquake andtsunami. The Group’s multiple, fullservice, delivery hubs provide for a goodlevel of redundancy and supported bya solid business continuity plan andcomprehensive insurance, the eﬀects
of such disasters can be managed.

Financial and operating review
2013 was a year for transformation for the Group, where it listed on the
AIM market and when the latest generation of games console werereleased by Sony (PS4) and Microsoft (Xbox One). It was unprecedented in
the games industry for two major console releases to occur within weeks
of each other. This resulted in signiﬁcant turbulence in the games industry.
Gross margin

Gross proﬁt for the year was €5.66m(a 34.6% margin) against a gross proﬁtfor 2012 of €5.53m (a 38.5% margin).

It is against this industry backgroundthat the Group continued to expand its
geographic spread, with the opening ofa new operation in Seattle, USA, andcontinued its growth.

revenue

Revenue for 2013 at €16.4m was 14.3%
higher than for 2012 (€14.34m). This
was an encouraging growth rate, given
the market conditions which prevailed
in 2013.

revenue mix

All lines of business increased in 2013,
compared with 2012. Localisation
Testing grew by 21% from €7.82m to€9.47m and contributed 58% of Grouprevenue (2012: 55%). This growth was
driven by the next generation Console
releases in 2013.

The Console releases had less of an
impact on the Translation line ofbusiness, as a signiﬁcant portion ofthis business is from social andmobile games. Translation revenue
grew by 2% to €5.33m (2012:€5.23m).
The Translation line of business
contributed 33% of Group revenue(2012: 36%).

Audio grew by 25% to €1.25m (2012:€0.99m) and Functional Testing grew by
16% from €0.30m to €0.35m. Together
these lines of business contributed 10%of Group revenue (2012: 9%).
16 Keywords Studios plc – Annual Report 2014

Gross margins are subject to signiﬁcantvariation based on resource utilisation;eﬀectively a measure of productive
versus idle time. At the peak times ofthe year, during the summer, when
there is little down time the levels ofgross margins are signiﬁcantly higher
compared with the quieter months
from December to March. This isparticularly noticed in the Testing partof the business.

In 2012, the Group achieved higher
than normal gross margins comparedwith previous years. In particular theGroup undertook some large testing
projects in the ﬁrst quarter, outside thenormal production release cycle forthe games industry.

In 2013, the average utilisation rates
across the Group were lower than 2012,
resulting in the lower Gross marginachieved. Some of this was due to thesigniﬁcant ﬁrst quarter margins
achieved in 2012, and was anticipated,but as mentioned above the industry
and the Group anticipated increased
levels of activity and brought on
additional testing capacity ahead of the
anticipated launch of next generation
games consoles in November 2013.
The actual increased activity took place
later in the year than anticipated andat lower than anticipated levels due
to fewer launch territories, which
resulted in the Group generating
lower gross margins.

A further impact on gross margins
came from the opening of the new
operation in Seattle. In the earlymonths of the year, operation
testing resources were taken on andtraining and familiarisation resulted
in idle time, estimated at €0.10m,
which reduced the Group’s grossmargin by 0.6%.

operating proﬁt (“eBitDa”)

EBITDA is a measure of operating proﬁt
used by the Board, which excludes
depreciation, share option expenses
and one-time costs related to the IPO.
For 2013 EBITDA was €2.70m or 16.5%of revenue compared with €3.01m for2012 (21% of revenue).

Operating expenses, excluding
depreciation, increased by €0.45m
from €2.51m to €2.97m following ourinvestment in expansion and increased
capacity. In particular, this reﬂected a€0.19m increase in operating costs in
Montreal and Seattle as we expanded
our Localisation and Testing capacity,and €0.28m incremental costs in the
Company related to the new Boardand the compliance costs of beinga public company.

net ﬁnance costs

During 2013 there was slight decrease in
net ﬁnance expenses to €0.07m (2012:€0.08m). Foreign exchange losses ontranslation were improved slightly to€0.10m (2012: €0.11m) due to theweakening of the Canadian Dollar and
the Japanese Yen against the Euro, oﬀset
by gains in Sterling against the Euro.

adjusted proﬁt before tax

Adjusted proﬁt before tax is a measureof proﬁtability of the business used by
the Board to measure the moremeaningful recurring proﬁt generationof the Group. This measure excludes
one-time expenses, such as theexpenses of the IPO, and also shareoption expenses and foreign currency
gains or losses. Adjusted proﬁt before
tax for 2013 is €2.45m or 15.0% ofrevenue compared with €2.85m for2012, or 19.9% of revenue.

taxation

The average tax rate on the proﬁt
before taxation (excluding losses beforetax) in the period was 14.8% (2012:
13.1%). The increase in the average tax
rate reﬂects proﬁts being earned inhigher taxed jurisdictions, including inBasic earnings per share

Basic earnings per share for the year,
excluding the IPO expenses, is 5.28ccompared with 7.30c for 2012. Basicearnings per share after signiﬁcant
one-time expenses arising from the
IPO was 2.14c.

Cash ﬂow and debt

The issue of new shares in the IPO
generated gross proceeds of €11.63m.
Expenses related to the IPO amounted
to €1.40m, of which €0.28 wascapitalised against Share Premium.
Cash and cash equivalents increased
from €3.89m to €15.27m.

Keywords does not hedge foreign
currency proﬁt and loss translation
exposures and the Group’s results
therefore have been impacted by
movements in exchange rates.

Dividend

The Company has a progressive
dividend policy, subject to the retentionof funds needed to fund future growthof the Group’s business and its
strategic aims.

In future years, the Board expects thatthe interim dividend will be around one
third of the total dividend for the year.

On 24 March 2014, the Directors
incorporated Keywords International
PTE. Limited, a company registered in
Singapore, as part of the Group’s
continuing geographic expansion,and to allow it to service the games
industry in South East Asia.

Key performance indicators

We monitor our ﬁnancial performanceagainst a number of diﬀerent
benchmarks. These are set inagreement with the Board and used toevaluate progress against our strategy.

– Overhead costs by location
The Board monitors the overheads toensure the costs in each location are inline with the level of business being
generated.

– Adjusted EBITDA margin
The Board uses an adjusted measureof EBITDA to monitor the performanceof 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. Thismeasure similarly excludes foreignexchange gains or losses, any one time
expenses, and the cost of employee
share option awards.
Non-ﬁnancial performanceis measured by:– Resource utilisation rates
The Board reviews the utilisation rates
achieved to ensure the Group is making
the best use of resources, and toensure suﬃcient resources, but not
too much, are being deployed.

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

David O’Connor

Chief Financial Oﬃcer

7 April 2014

Financial performance is measured by:– Organic revenue growth
Revenue growth is measured ona Studio by Studio basis (by line ofbusiness and overall) against the Board’s
strategic goal to grow organically.
Keywords Studios plc – Annual Report 2014 17

FinanCial StatementS

Following its maiden interim dividend
payment of 0.33p per share on 28
October 2013, the Board recommends
a ﬁnal dividend of 0.67p per share,
which will make the total dividend forthe year ending 31 December 2013
1.00p per share. Subject to shareholder
approval at the Annual General
meeting, the ﬁnal dividend will be paidon 25 July 2014 to all shareholders on
the register at 4 July 2014. The ﬁnal
proposed dividend will cost an
estimated €0.34m.

On 17 February 2014 the Company
acquired the entire issued share capitalof Babel Media Limited, a company
registered in the UK, together with its
subsidiary companies. Babel Media is aleading provider of outsourced video
games services with operations in the
UK, Canada and India. Under the termsof the acquisition, which is expected tobe materially earnings enhancing in theﬁrst year, the Company has paid thesellers and settled the ﬁnancing
obligations of Babel to a total of£5.37m. This has been satisﬁed as to£2.22m by the issue of 1,516,944 newshares in Keywords Studios at a priceof 145.994 pence per share (being thevolume weighted average price overthe preceding 5 trading days) and cash
amounts to settle indebtedness toa total of £3.15m.

– Gross proﬁt
Gross proﬁt is a key measure of theGroups’ use of resources and its ability
to maintain billable resource utilisation

GovernanCe

Foreign exchange

On 15 January 2014 the Company
acquired the entire issued share capitalof Liquid Violet Limited, a video games
voice production services company,
registered in the UK. Liquid Violet
specialises in the management, on
behalf of major video game publishers,of the pre production and postproduction stages of localised
voice-over assets for incorporation in
the ﬁnished games. Under the terms of
the acquisition, which is immediately
earnings enhancing, Keywords Studios
has paid an initial cash consideration of£0.30m with a further £1.3m payablein cash contingent upon Liquid Violet
achieving certain ﬁnancial targets inthe three years to 31 March 2016.

STRATEGIC REPORTThe Group continues to operate
without any ﬁnancing debt. The Groupgenerated operating cash of €2.28m forthe year, compared with €1.90m for2012. Investment in ﬁxed assets
amounted to €0.39m (2012: €0.39m)
reﬂecting ongoing purchases of games
testing equipment.

events after the reporting period

overvieW

the Group’s new operations in Seattle
where Washington State and US
Federal Tax rates amount to 42% of
proﬁt earned.

Directors’ report: Board of Directors
ross Graham (66)

Independent Non-Executive Director
and Chairman

Ross Graham has extensive executive
and non-executive experience in thetechnology sector. He worked from1987 to 2003 at Misys plc, a global
ﬁnancial software product andsolutions provider. He joined
Misys as Finance Director upon its
ﬂotation, latterly becoming corporate
development director, where heplayed a key role in developing andimplementing its acquisition strategy.
Ross also held a non-executive
directorship at Psion plc from 2005
until 2012 when that company was
successfully sold to Motorola Solutions
Inc. During his time at Psion, he held
various roles including the seniorindependent directorship and chairmanof the audit and remunerationcommittees. He is currently anon-executive director at Wolfson
Microelectronics Plc and was previously
senior independent director and theaudit committee chairman. Ross
qualiﬁed as a chartered accountant
with Arthur Young in 1969 and wasmade a partner of that ﬁrm
in 1981. He is a Fellow of the Instituteof Chartered Accountants of England& Wales. Ross was appointed Director
and Chairman of Keywords prior to
the ﬂotation in July 2013.

Ross Graham

Andrew Day

18 Keywords Studios plc – Annual Report 2014

andrew Day (50)David reeves (67)Andrew has a background intechnology, manufacturing andbusiness services through corporate
development and general management
roles within both publicly quoted andprivate companies. Andrew started
his career in 1983 at Rothmans
International PLC in production
management. From 1986 to 1993
he had responsibility for corporate
development activities at Britannia
Security Group PLC, TIP Europe PLC
and Brent International PLC before
holding the position of Divisional
Managing Director at Brent
International PLC for six years.
Andrew was Chief Executive Oﬃcer ofinteractive retail software developer,
Unipower Solutions and Head of
Retail and CPG for EMEA at NYSE listed
advanced analytics business, FICO
before joining Keywords as its Chief
Executive Oﬃcer in April 2009.

David has spent over 30 years inmanagement roles within multinational
companies. He began his career as an
operational research consultant before
moving overseas with RJ Reynolds
Nabisco where he worked from 1979
to 1991, becoming the Marketing
Director in 1986 and Worldwide
Marketing Director in 1989. In 1991,
David served as the General Manager
and Vice President of Marketing inTokyo for Mitsubishi Shoji JV Technology
Company. David has considerable
experience in the computer
entertainment industry. David was theManaging Director for Sony ComputerEntertainment (PlayStation) from 1995
until his appointment as its Executive
Vice President in 1999 and President
in 2003. Throughout his career, David
has developed knowledge of thevarious working styles of European,
American and Asian corporations.
He was appointed to the Boardof Keywords Studios Limited on
29 May 2013.

Group Chief Executive OﬃcerDavid o’Connor (42)Group Finance Director

David is a chartered accountant who
has extensive experience in senior
management roles. He has recently
held two positions as Financial
Controller for international companies,
including Deecal International Limited(latterly named First Data Commercial
Services Limited). In his position as
Financial Controller, David has had
experience in creating corporateﬁnancial systems and procedures,
leading internal teams and developing
sales strategies. In 2012, David became
a consultant for Baker Tilly Ryan
Glennon, a ﬁrm of accountants andbusiness advisors in Ireland, before
being employed as Group Financial
Controller for Keywords in July 2012.

David O’Connor

Independent Non-Executive Director

Giorgio Guastalla (45)Non-Executive Director

Giorgio Guastalla is co-founder of
Keywords. Prior to establishing
Keywords in Ireland in 1998, Giorgio
held various positions in marketing and
IT at Brent International PLC based in
the US, Spain, UK and France. In 2002
Giorgio founded Italicatessen Ltd, acompany operating in the food sector.
Giorgio was CEO of Keywords until
2009 before concentrating on hisother business interests and moving
to a non-executive director roleat Keywords Studios.

David Reeves

Giorgio Guastalla

Directors’ report

Disclaimer

The purpose of this Annual Report & Accounts is to provide information to the members of the Company. The Annual Report& Accounts have been prepared for, and only for, the members of the Company, as a body, and no other persons. The
Company, its directors and employees, agents or advisers do not accept or assume responsibility to any other person towhom this document is shown or into whose hands it may come and any such responsibility or liability is expressly disclaimed.

overvieW

The Directors present their ﬁrst annual report together with the audited consolidated ﬁnancial statements for the year ended
31 December 2013.

The Annual Report & Accounts contain certain forward-looking statements with respect to the operations, performance andﬁnancial condition of the Group. By their nature, these statements involve uncertainty since future events and circumstances
can cause results and developments to diﬀer materially from those anticipated. The forward-looking statements reﬂect
knowledge and information available at the date of preparation of this Annual Report & Accounts and the Company
undertakes no obligation to update these forward-looking statements. Nothing in this Annual Report & Accounts should beconstrued as a proﬁt forecast.

The results for the year are set out on page 12. Dividends paid and proposed are set out on page 17. The Board is proposing
a ﬁnal dividend of 0.67p per share following the payment of an interim dividend of 0.33p per share on 28 October 2013.
The proposed total dividend for the year is therefore 1p per share.

Directors and changes to the board

The Company was formed on 29 May 2013, when Andrew Day, David O’Connor, David Reeves and Giorgio Guastalla wereappointed to the Board. Ross Graham was appointed to the Board on 8 July 2013. Details of members of the Board at
31 December 2013 are set out on page 18.

StrateGiC rePort

results and dividends

Going concern

In view of the Group’s resources, cash at 31 December 2013 of €15.27m, free cash ﬂow in 2013 of €1.95m, results ofoperations, excluding one-time costs related to the IPO, and the overall ﬁnancial condition of the Group, the Directors
have reasonable expectation that the Group has adequate resources to continue in operation for the foreseeable future.
For this reason, the Directors continue to adopt the going concern basis in preparing the ﬁnancial statements.
No political donations were made in the year.

Directors and their interests

A list of Directors, their interests in the ordinary share capital of the Company, their interests in its long-term performance
share plan and details of their options over the ordinary share capital of the Company are given in the Directors’ remuneration
report on page 23. No director had a material interest in any signiﬁcant contract, other than a service contract or contract
for services, with the Company or any of its operating companies at any time during the year.

GovernanCe

Political donations

The names of all persons who, at any time during the year, were Directors of the Company can be found on page 18 andabove, under The Board and Changes to the Board.

Corporate governance

The Board is responsible for the overall management of Keywords, our strategy and long-term objectives. It provides
leadership to Keywords having regard to the interests of shareholders and other stakeholders.

Audit Committee
The Audit committee is chaired by David Reeves. Ross Graham is the other Committee member. The Audit Committee is
responsible for assisting the Board in fulﬁlling its ﬁnancial and risk responsibilities. The Audit Committee oversees our ﬁnancial
reporting, risk management and internal control procedures, and reviews the work of external audit.

Remuneration Committee
The Remuneration Committee is responsible for determining the remuneration of the Chairman, Executive Directors,
the Company Secretary and senior executives of Keywords.

For further information please see pages 22 to 23.

Keywords Studios plc – Annual Report 2014 19

FinanCial StatementS

The Board
The Board is comprised of two Executive and three Non-Executive Directors. The Board considers that Ross Graham andDavid Reeves are independent in character and judgement and that there are no relationships or circumstances which
are likely to aﬀect their independent judgement.

Directors’ report continued

Internal controls and risk management
The Board has overall responsibility for the Group’s system of internal controls. The system is designed to manage, rather thaneliminate the risk of failure to achieve business objectives, and can only provide reasonable assurance against material
misstatement or loss.

The Directors believe that the Group has internal control systems in place appropriate to the size and nature of the business.
The key elements are:• Group Board Meetings, at a minimum of eight times per year, with reports from and discussions with senior executives
on performance and key risk area in the business• Monthly ﬁnancial reporting, for the Group and for each subsidiary, of actual performance compared to budget andthe prior year
• Annual budget setting• A deﬁned organisational structure with appropriate delegation of authority.

The Board also receives a report from the external auditor on matters identiﬁed in the course of the statutory audit.

Substantial shareholdings

At 30 December 2013, the Company had been notiﬁed, in accordance with the Disclosure and Transparency Rules, of thefollowing interests in its ordinary share capital:
Name

Shares%P.E.Q Holdings Limited

11,978,736

29.9

Schroder Investment Management

4,827,500

12.1

Liontrust Asset Management

2,845,087

7.1

Investco Perpetual

2,281,302

5.7

Andrew Day

Artemis Investment Management

Legal & General Investment Management
Hargrave Hale

5,325,028
3,250,000
2,700,000
1,315,939

13.2
8.1
6.7
3.3

Future developments

Important events since the ﬁnancial year end are described on page 4 of the Overview and future developments are describedin the strategy section of the Strategic report on pages 14 & 15.

People and organisation

Keywords is, and always has been, dependent on the quality and commitment of its entire staﬀ to provide and maintain thehigh levels of services expected by the Group’s clients.

The average headcount reached 371 for 2013 with peak employment of 511 in September 2013. Keywords permanent staﬀ
compliment averaged 110 during 2013. This permanent headcount is supplemented with employees on short term contracts
as activity changes throughout the year.

The Group continues to give full and fair consideration to applications for employment made by disabled persons, having
regard to their respective aptitudes and abilities. The policy includes, where practicable, the continued employment of those
who may become disabled during their employment and the provision of training and career development and promotion,
where appropriate. The Group has continued its policy of employee involvement by making information available toemployees on matters of concern to them. Many employees are stakeholders in the Company through participation in shareoption schemes and a long-term performance share plan.

Corporate responsibility

Keywords seeks to be a socially responsible Group which has a positive impact on the communities it operates in. By thenature of the business, we employ a diverse workforce, with many nationalities. No discrimination is tolerated, and we
endeavour to give all employees the opportunity to develop their capabilities. We provide an excellent working environment,
the latest technology and appropriate training.

20 Keywords Studios plc – Annual Report 2014

The Directors are responsible for preparing the Annual Report & Accounts.

Company law requires the Directors to prepare ﬁnancial statements for each ﬁnancial year. Under that law the Directors have
prepared the Group and Company ﬁnancial statements in accordance with International Financial Reporting Standards (“IFRS”)
as adopted by the European Union (“EU”).

overvieW

Statement of Directors’ responsibilities

Under company law the Directors must not approve the ﬁnancial statements unless they are satisﬁed that they give a trueand fair view of the state of aﬀairs of the Company and the Group and of the proﬁt or loss of the Group for that period.
The Directors are also required to prepare ﬁnancial statements in accordance with the rules of the London Stock Exchange
for companies trading securities on the Alternative Investment Market.
In preparing these ﬁnancial statements the Directors are required to:• Select suitable accounting policies and then apply them consistently;• Make judgements and estimates that are reasonable and prudent;• Prepare the ﬁnancial statements on a going concern basis, unless it is inappropriate to presume that the Company willcontinue in business.

The Directors are responsible for keeping adequate accounting records that are suﬃcient to show and explain the Company’stransactions and disclose with reasonable accuracy at any time the ﬁnancial position of the Company and the Group and toenable them to ensure that the ﬁnancial statements and the Directors’ remuneration report comply with the Companies Act
2006. They are also responsible for safeguarding the assets of the Company and the Group and hence for taking reasonable
steps for the prevention and detection of fraud and other irregularities.

StrateGiC rePort• State whether IFRS as adopted by the EU have been followed, subject to any material departures disclosed and explained in
the Group and Company ﬁnancial statements respectively; andThe Directors as at the date of this report, whose names and functions are listed in the Board of Directors on page 18,
conﬁrm that:• So far as any Director is aware, there is no relevant audit information of which the Company’s auditors are unaware; andThis conﬁrmation is given and should be interpreted in accordance with the provisions of section 418 of the Companies
Act 2006.

GovernanCe• The Director has taken all the steps that he or she ought to have taken as a director in order to make himself/ herself awareof any relevant audit information and to establish that the Company’s auditors are aware ofthat information.

Website publication
The Directors are responsible for ensuring the annual report and the ﬁnancial statements are made available on a website.
Financial statements are published on the Group’s websites in accordance with legislation in the United Kingdom governing
the preparation and dissemination of ﬁnancial statements, which may vary from legislation in other jurisdictions. The
maintenance and integrity of the Group’s websites is the responsibility of the Directors. The Directors’ responsibility also
extends to the ongoing integrity of the ﬁnancial statements contained therein.
By Order of the Board

FinanCial StatementSDavid O’Connor

Company Secretary

7 April 2014

Keywords Studios plc – Annual Report 2014 21

Directors’ remuneration report
Dear fellow shareholder,

It is my pleasure to present the ﬁrst Directors’ remuneration report for the period ended 31 December 2013.

It is my hope that you ﬁnd this a clear and comprehensive report and I look forward to hearing the views of our investors on
the information presented here over the coming months. We will carefully monitor emerging practice in this area as well as
guidance from investor representative groups.

We operate a simple remuneration structure made up of base salary and beneﬁts, a bonus plan and share option scheme,
and a long-term incentive plan, which provide a clear link between pay and our key strategic priorities.

the Board of Directors

The Board of Directors has a duty to act in the best interests of their shareholders when determining remuneration. It has a
responsibility to promote the long-term success of the company while also considering the employees, suppliers, customers
and other external factors which may be impacted by remuneration decisions.

Executive Directors will be responsible for developing and implementing remuneration strategy for the Group. Non-Executive
Directors will be responsible for constructively reviewing and contributing to this strategy. .

the remuneration Committee

The members of the Remuneration Committee are Giorgio Guastalla (committee Chairman), David Reeves and Ross Graham.
The members are all Non-Executive Directors.

The remit of the Committee is primarily to determine and agree with the Board the framework or broad policy for the
remuneration of the Company’s Executive Directors, and if required by the Board, the Senior Management of the Group.

Non-Executive Directors, who are the members of the remuneration committee, should oversee Executive remuneration.
The remuneration of the Chairman of the Board is determined by the Remuneration Committee (excluding the Chairman
himself). The remuneration of the Non-Executives is a matter for the Executive member of the Board in conjunction withthe committee Chairman.
No Director or Senior Manager is involved in any discussion or decision about his own remuneration.

The Remuneration Committee consists of Non-Executive Directors all of whom are independent with no personal ﬁnancial
interest, other than as shareholders, in the decisions of the Committee. The remuneration committee secretary will be thecompany human resource manager. By invitation, other members of the Board may attend the Committee’s meetings.

meetings

The Remuneration Committee is planned to meet at least three times a year. In the period from the formation of the Groupin July 2013 and the reporting date, the remuneration committee met on two occasions.

Directors’ emoluments and pension contributions

The Company was incorporated on 29 May 2013. The aggregate remuneration for the Directors of the Company, for service inall capacities during the period since incorporation was €197,965 (2012: €nil). The remunerations of individual Directors wereas follows.

Andrew Day
David O’Connor
David Reeves
Giorgio Guastalla
Ross Graham

2013

Salaryor fees€

Bonus€

Pension€183,700––

62,50047,50026,407
24,07023,22322 Keywords Studios plc – Annual Report 2014

–
–
–
–
–

–
–
–
–
–

Share
Options
€

2012

Total
€

Salaryor fees€

Bonus€

Pension€Share
Options€

Total

14,265 197,965

–

–

–

–

–

9,005
5,260
–
–
–

71,50552,76026,407
24,07023,223

–
–
–
–
–

–
–
–
–
–

–
–
–
–
–

–
–
–
–
–

€

–
–
–
–
–

The interests of each person who was a director of the Company as at 31 December 2013 (together with interests held by hisor her connected persons) were:
Giorgio Guastalla (1)Andrew Day
David Reeves
David O’Connor
Ross Graham
(1)

2013
Number

2012
Number16,105,890–

10,780,862
5,296,573
16,26012,195–

Giorgio Guastalla’s indirect shareholding arises out of his 90% holding in P.E.Q. Holdings Limited.

overvieW

Directors’ interest in shares

–
–
–
–
–

The outstanding awards granted to each director of the Company are as follows.

Andrew Day
David O’Connor
Share Option Plan
Andrew Day––

Start of year
numberAwardednumber

86,59365,811

152,404
Awardednumber–––21,167
21,167
21,168

–
–
–

4,490
4,490
4,490

63,502

13,47076,972

Vestednumber––

Vestednumber

–
–
–

–
–
–

Lapsednumber––Lapsednumber

–
–
–

–
–
–

End of year
numberVesting
date

86,59365,81112 July 201612 July 2016

End of year
numberVestingdate

152,404

21,167
21,167
21,16812 July 2015
12 July 201612 July 2017

4,490
4,490
4,490

12 July 2015
12 July 201612 July 2017

63,502

13,47076,972GovernanCe

David O’Connor

Start of year
numberStrateGiC rePort

Long Term Investment Plan

Awards of shares will vest on the dates shown. In the event that a director ceases to be an employee of the Group for reasons
other than death, retirement, redundancy, injury, ill-health or disability before the vesting date, then the rights to the award will
lapse, unless the Remuneration Committee recommend otherwise.
Awards are not subject to further performance conditions once granted.

transactions with Directors

All transactions between the Group and the Directors are set out in the notes to the ﬁnancial statements, including Note 22
on related party transactions.

Giorgio Guastalla

Chairman of the Remuneration Committee

7 April 2014

Keywords Studios plc – Annual Report 2014 23

FinanCial StatementS

During the year, there were no material transactions between the Company and the Directors, other than their emoluments.

Directors’ remuneration policy report
The Committee reserves the right to make any remuneration payments and payments for loss of oﬃce, notwithstanding thatthey are not in line with the policy set out below, where the terms of the payment were agreed (i) before the policy came into
eﬀect or (ii) at a time when the relevant individual was not a director of the Company and, in the opinion of the Committee, thepayment was not in consideration for the individual becoming a director of the Company. For these purposes “payments”
includes the Committee satisfying awards of variable remuneration and, in relation to an award over shares, the terms of thepayment are “agreed” at the time the award is granted.
The Remuneration Committee determines the Company’s policy on Executive Directors’ and if required, senior management
remuneration. The objectives of this policy are:
• To reward Executive Directors and senior management in a manner that ensures that they are properly incentivised andmotivated to perform in the best interests of shareholders.

• To provide a level of remuneration required to attract and retain high calibre executive directors and senior management.
• To encourage value creation through consistent and transparent alignment with the agreed company strategy.

• The Remuneration Committee takes into account the performance of the individual, comparisons with peer company
companies and reports from external independent consultants. The experience of the individual and his/ her level of
responsibility are also taken into account.

• Ensuring the total remuneration packages awarded to Executive Directors comprise of both performance-related andnon-performance-related remuneration, designed to motivate the individual, align interests with shareholders and comply
with corporate governance best practice.
• To ensure that any remuneration awarded is deserved and is aligned to the shareholders’ interests.

remuneration components

Various remuneration components are combined to ensure an appropriate and balanced remuneration package that reﬂects
the business unit, the employee’s position in the company and professional activity as well as market practice.

The remuneration components are comprised of the following elements:• Fixed remuneration (basic salary)• Performance-based remuneration (variable salary)• Pension schemes• Other beneﬁts• LTIP (long-term incentive plan)

For Non-Executive Directors there is only one component, a base fee.

Basic salaries and beneﬁts

Basic salaries should initially be determined to reﬂect ﬁrst the role and the responsibility of the individual within that role while
also upholding the principle of paying no more than is necessary.

The basic salaries of Executive Directors and senior management are reviewed annually having regard to personal
performance, company performance, signiﬁcant changes in their responsibilities and competitive market practice.

Any increases in basic salary should be disclosed and justiﬁed.

24 Keywords Studios plc – Annual Report 2014

Under current arrangements, which will be reviewed annually by the Remuneration Committee, Executive Directors and senior
management are eligible to participate in a bonus scheme. The bonus amount is a percentage of salary ranging from 20% to50%, which is subject to the attainment of speciﬁc targets set for each individual. The portion of bonus earned in any one year
depends on the Remuneration Committee’s assessment of each individual’s performance and the overall performance of thecompany against predetermined turnover and proﬁtability targets for the year.

overvieW

Performance bonus

Performance targets are weighted 80 per cent towards the Company’s ﬁnancial performance and 20 per cent towards
personal performance. The Remuneration Committee will review targets and the weighting of performance measures
each year.

The bonus may not exceed the agreed percentage of the ﬁxed salary, which level can only be achieved at a weighted target
achievement of 100 per cent. Furthermore, the bonus will be cancelled at a weighted target achievement of less than
80 per cent.

Pension entitlements

Beneﬁts

During the period since incorporation, the Company did not contribute to any Employment related beneﬁts.

Share options

StrateGiC rePort

The company does not operate any pension scheme or make pension provision for Non-Executive Directors. At the discretionof the remuneration committee the Executive Directors and senior management may participate in a pension scheme
facilitated by the Company.

Share option programmes are in place for permanent members of staﬀ, including the Senior Management. The focus of theshare option programmes is to retain and create long-term shareholder value. The intention of such grants is to ensure value
creation and fulﬁlment of the company’s long-term goals.

long term incentive Plan (ltiP)

The purpose of the LTIP is to incentivise delivery against total shareholder return. Share awards further the alignmentof executives’ and shareholders’ interests.

leaver treatment

Fair treatment will be extended to departing executives. Executives who resign or are dismissed for cause are, by default,
not eligible for an annual bonus if they have left or are under notice at date of payment, and forfeit all LTIP shares.

GovernanCe

LTIP grants can be made annually to a range of senior employees across the company. Awards are made in the form of shareoptions which vest subject to performance conditions. Performance conditions are measured over three ﬁnancial years andare not retested. Conditions are reviewed annually.

At the Committee’s discretion good leavers (normally including such circumstances as retirement, death, disability, andredundancy) may be eligible for an annual bonus for the proportion of the bonus year served. However performance will
be tested in line with the normal performance schedule.

FinanCial StatementS

Keywords Studios plc – Annual Report 2014 25

Independent Auditor’s report
To the Members of Keywords Studios PLC

We have audited the financial statements of Keywords Studios plc for the year ended 31 December 2013 which comprise theGroup and Parent Company Statements of Financial Position, the Group and Parent Company Statements of Comprehensive
Income, the Group and Parent Company Statements of Cash Flow, the Group and Parent Company Statements of Changes in
Equity and the related notes. The financial reporting framework that has been applied in their preparation is applicable law
and International Financial Reporting Standards (IFRSs) as adopted by the European Union and, as regards the Parent
Company financial statements, as applied in accordance with the provisions of the Companies Act 2006.

This report is made solely to the Company’s members, as a body, in accordance with Chapter 3, Part 16 of the Companies Act
2006. Our audit work has been undertaken so that we might state to the Company’s members those matters we are required
to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept orassume responsibility to anyone other than the Company and the Company’s members as a body, for audit work, for thisreport or for opinions we have formed.
Respective responsibilities of Directors and Auditor
The Directors are responsible for preparing the annual report and the financial statements in accordance with applicable law
and regulations.

Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors haveelected to prepare the Group and Company financial statements in accordance with International Financial Reporting Standards(IFRSs) as adopted by the European Union. Under company law the Directors must not approve the financial statements unlessthey are satisfied that they give a true and fair view of the state of affairs of the Group and Company and of the profit or loss of
the Group and Company for that period. The Directors are also required to prepare financial statements in accordance with therules of the London Stock Exchange for companies trading securities on the Alternative Investment Market.

In preparing these financial statements, the Directors are required to:• select suitable accounting policies and then apply them consistently;• make judgements and accounting estimates that are reasonable and prudent;• state whether they have been prepared in accordance with IFRSs as adopted by the European Union, subject to any material
departures disclosed and explained in the financial statements;• prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company willcontinue in business.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the company’stransactions and disclose with reasonable accuracy at any time the financial position of the company and enable them toensure that the financial statements comply with the requirements of the Companies Act 2006. They are also responsible forsafeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud andother irregularities.

Website publication
The Directors are responsible for ensuring the annual report and the financial statements are made available on a website.
Financial statements are published on the company’s website in accordance with legislation in the United Kingdom governing
the preparation and dissemination of financial statements, which may vary from legislation in other jurisdictions. The
maintenance and integrity of the company’s website is the responsibility of the Directors. The Directors’ responsibility also
extends to the ongoing integrity of the financial statements contained therein.

Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law andInternational Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s(APB’s) Ethical Standards for Auditors.

26 Keywords Studios plc – Annual Report 2014

Opinion on financial statements
In our opinion:

OVERVIEW

Scope of the audit of the financial statements
A description of the scope of an audit of financial statements is provided on the FRC’s website at www.frc.org.uk/auditscopeukprivate.

• the financial statements give a true and fair view of the state of the Group’s and of the Parent Company’s affairs as at
31 December 2013 and of the Group’s and the Parent Company’s profit for the period then ended;• the Group financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union;• the Parent Company financial statements have been properly prepared in accordance with IFRSs as adopted by theEuropean Union and as applied in accordance with the provisions of the Companies Act 2006; and• the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.

Matters on which we are required to report by exception
We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if,
in our opinion:• adequate accounting records have not been kept by the Parent Company, or returns adequate for our audit have not been
received from branches not visited by us; or

STRATEGIC REPORTOpinion on other matters prescribed by the Companies Act 2006
In our opinion the information given in the Strategic Report and the Directors’ Report for the financial year for which thefinancial statements are prepared is consistent with the financial statements.

• the Parent Company financial statements are not in agreement with the accounting records and returns; or• certain disclosures of Directors’ remuneration specified by law are not made; or• we have not received all the information and explanations we require for our audit.

GOVERNANCE

Teresa Morahan (Senior statutory auditor)
for and on behalf of BDO, Statutory Auditor
Mercer Street Lower
Dublin 2
Ireland7 April 2014

FINANCIAL STATEMENTS

Keywords Studios plc – Annual Report 2014 27

Consolidated statement of comprehensive income
Years ended 31 December
Note

Revenues
Operating costs

4

Gross profit

Administrative expenses

Operating profit
Financing income
Financing cost

5

6

6

Profit before taxation
Tax expense

Profit for the year
Other comprehensive income:Exchange gains / (losses) on translation of foreign operations

7

Earnings per share

Basic earnings per Ordinary share (Euro cent)Diluted earnings per Ordinary share (Euro cent)

Note
9

9

The notes on pages 35 to 54 form an integral part of these consolidated financial statements.

On behalf of the Board

7 April 2014

14,342,949(8,817,284)(1,123,566)(70,755)(3,246,276)––(2,710,903

David O’Connor
Director

28 Keywords Studios plc – Annual Report 2014

5,525,665(4,440,597)(2,710,903)

1,158,063(393,720)

2,738,690(410,597)

1,224,438
59,335(125,710)

2,814,762
50,470(126,542)

764,3432,328,093

848,934

2,241,367

Euro centEuro cent

84,591

Total comprehensive income for the year attributable to the owners of the parent

2012€

16,386,991(10,721,956)
5,665,035

Costs of Initial Public Offering
Share option expense
Other administration expenses

Andrew Day
Director

2013
€

2.14
2.12

(86,726)

7.30
7.30

Consolidated statement of ﬁnancial positionNon-current assets
Property, plant and equipment
Current assets
Trade receivables
Other receivables
Cash and cash equivalents
Short term investments

Note

2013
€

2012
€

12

600,415

490,404

1,303,462
1,125,451
15,270,569
518,506

1,397,248
907,3023,892,089
505,585

18,818,403

7,192,628

13
14
15
16

Total assets

17

18

Total equity

18,217,988

19
20

188
–
–
(61,737)–
6,072,372

503,634
816,595
4,627

701,197
480,608–

1,324,856

18,818,403

6,010,823

1,181,805
7,192,628

The notes on pages 35 to 54 form an integral part of these consolidated financial statements. The financial statements
were approved and authorised for issue by the Board on 7 April 2014.
On behalf of the Board

Andrew Day
Director

7 April 2014

GOVERNANCE

Total equity and liabilities

6,702,224

464,782
11,249,637(370,069)
22,85470,755
6,055,588

17,493,547

Current liabilities
Trade payables
Other payables
Corporation Tax liabilities

490,404

STRATEGIC REPORT

EquityShare capital
Share premium
Merger Reserve
Foreign Exchange Reserve
Share Option Reserve
Retained earnings

600,415OVERVIEW

Years ended 31 DecemberDavid O’Connor
Director

FINANCIAL STATEMENTS

Keywords Studios plc – Annual Report 2014 29

Consolidated statement of changes in equity

Balance at 1 January 2012
Total comprehensive income for the year
Dividends paid (Note 10)

Balance at 31 December 2012
Total comprehensive income for the year
Share option expense (Note 18)
Dividends paid (Note 10)
Shares Issued (Note 17)
Share issuance cost capitalised
Merger Reserve arising onGroup reconstruction (Note 17)
Balance at 31 December 201330 Keywords Studios plc – Annual Report 2014

Sharecapital€Foreign
Exchangereserve€

Shareoptionreserve
€

–
–
–
–
–
–

(61,737)
84,591––––––70,755–––

6,072,372 6,010,823
764,343848,934–
70,755(781,127) (781,127)– 11,995,283–(281,052)(370,069)

22,85470,755

6,055,588 17,493,547

Sharepremium€

Mergerreserve
€

188
–
–
–
–
–
–
–
464,594 11,530,689–(281,052)

188
–
–

–

–
–
–

–

464,782 11,249,637–––(370,069)

24,989(86,726)
–

–

–
–
–

–

Retainedearnings€

Total equity€

4,119,761 4,144,938
2,328,093 2,241,367(375,482) (375,482)–(370,069)

Consolidated statement of cash ﬂows

Cash flows from operating activities
Profit after tax

Income and expenses not affecting operating cash flows
Depreciation
Foreign currency revaluation of fixed assets
Share option expense
Interest received
Share issuance cost
Income tax expense
Income taxes paid

Note

12
12
18
6
7

Net cash provided by operating activities

Cash flows from investing activities
Acquisition of property, plant and equipment
Acquisition of short term investments
Interest received
Net cash used in investing activities

Net cash provided by / (used in) financing activities
Increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year

16
6

10
17
5

15

764,3432,328,093

272,470
11,20970,755(59,335)
1,123,566
393,720

198,267––(50,470)–
410,597(359,104)(748,546)

93,786(248,138)
138,424
84,591(155,810)(172,307)
127,811(86,726)

2,286,287

1,850,909(393,690)(12,921)59,335(390,855)(505,585)
50,470(781,127)
11,625,214(1,404,618)(375,482)––

11,378,480
3,892,089

629,457
3,262,632(347,326)

9,439,469

15,270,569(845,970)(375,482)

GOVERNANCE

Cash flows from financing activities
Dividends paid
Issue of share capital
Share issuance expenses

12

2012
€

STRATEGIC REPORT

Changes in operating assets and liabilities
Decrease/(increase) in trade receivables
Increase in other receivables
Increase in trade and other payables
Increase / (decrease) in foreign exchange reserve

2013€

OVERVIEW

Years ended 31 December

3,892,089

FINANCIAL STATEMENTS

Keywords Studios plc – Annual Report 2014 31

Company statement of ﬁnancial position
Years ended 31 December

Non-current assets:
Investment in Subsidiaries
Current assets:
Other receivables
Cash and cash equivalents

Note

2013
€

2012
€

21

5,735,481–

1,898,008
10,722,542

–
–

14
15

Total assets

5,735,481

12,620,550

18,356,031

Equity:Share capital
Share premium
Merger reserve
Share option reserve
Retained earnings

17
18

Total equity

20

Total equity and liabilities

Andrew Day
Director

7 April 2014

David O’Connor
Director

32 Keywords Studios plc – Annual Report 2014–––

22,650337,897––

18,356,031–

360,547

The notes on pages 35 to 54 form an integral part of these consolidated financial statements. The financial statements
were approved and authorised for issue by the Board on 7 April 2014.
On Behalf of the Board–

464,782
11,249,637
5,312,892
70,755
897,418

17,995,484

Current liabilities
Corporation tax liabilities
Other payables

–

–
–
–

–

Company statement of changes in equity
Share
premium€

Mergerreserve€

Share option
reserve€

Retainedearnings€

Total
equity€Balance at 31 December 2012–
Total comprehensive income for the year–
Share option expense (Note 18)–
Dividends paid (Note 10)–
Shares issued (Note 17)464,782
Share issue costs capitalised–
Merger reserve arising onGroup reconstruction (Note 17)
–

–
–
–
–
11,530,689(281,052)

–
–
–
–
–
–

–
–
70,755––––
1,054,027–(156,609)–––
1,054,027
70,755(156,609)
11,995,471(281,052)

5,312,892

70,755

897,418

17,995,484

Balance at 1 January 2012
Total comprehensive income for the year
Dividends paid (Note 10)464,782––––

11,249,637–––

5,312,892

–
–
–

–

–
–
–

–

–
–
–

5,312,892

STRATEGIC REPORT

Balance at 31 December 2013–––

OVERVIEW

Sharecapital€GOVERNANCE
FINANCIAL STATEMENTS

Keywords Studios plc – Annual Report 2014 33

Company statement of cash ﬂows
Years ended 31 December

Cash flows from operating activities
Profit after tax

Note

Income and expenses not affecting operating cash flows
Share option expense
Share Issuance expense
Interest receivable
Income tax expense
Changes in operating assets and liabilities
Increase in other receivables
Increase in trade and other payables
Net cash provided by operating activities

Net cash provided by investing activities
Cash flows from financing activities
Dividends paid
Issue of share capital
Share issuance expense

Net cash provided by financing activities

Increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year

34 Keywords Studios plc – Annual Report 20142012€

1,054,027–

18,423
1,123,566(14,175)
22,650––––(1,898,008)
337,897

Income taxes paid

Cash flows from investing activities
Interest received

2013€

643,380
6

10
17
5

15

–
–
–
–

14,175–(156,609)
11,625,214(1,404,618)––

14,175–

10,063,987–

10,722,542–

10,722,542–––

Notes forming part of theconsolidated ﬁnancial statements
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 31 December 2013. The Group wasformed 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.

OVERVIEW

1 Basis of preparation

The Parent Company financial statements present information about the Company as a separate entity and not about its Group.
The consolidated and Company financial statements has been prepared in accordance with International Financial ReportingStandards, International Accounting Standards and interpretations (collectively IFRS) issued by the International AccountingStandards Board (IASB) as adopted by the European Union (“adopted IFRSs”).

New standards, interpretations and amendments not yet effective
None of the new standards, interpretations and amendments, which are effective for periods beginning after 1 January 2014
and which have not been adopted early, are expected to have a material effect on the Group’s future financial statements.

STRATEGIC REPORTIn the current year the Group has adopted all of the new and revised standards and interpretations issued by the IASB and theInternational 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 2013. The adoption ofthese standards has had no material impact on the financial statements.

2 Signiﬁcant accounting policies

Basis of consolidation
Where the Company has the power, either directly or indirectly, to govern the financial and operating policies of another entity
or business so as to obtain benefits from its activities, it is classified as a subsidiary. Intercompany transactions and balances
between Group companies are therefore eliminated in full.

Keywords Studios Limited was incorporated on 29 May 2013. Accordingly, although the units which comprise the Group did
not form a legal group for the entire year, the current year comprises the results and balances of the subsidiary companies
and the Company as if the Group had been in existence throughout the entire period and comparative results and balances
comprise the consolidated results and balances of Keywords International Limited.

Business combinations
The consolidated financial statements incorporate the results of business combinations using the purchase method. In theConsolidated Statement of Financial Position, the acquiree’s identifiable assets, liabilities and contingent liabilities are initiallyrecognised 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.

Foreign currency
Transactions entered into by Group entities in a currency other than the currency of the primary economic environment inwhich 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 thereporting date. Exchange differences arising on the retranslation of unsettled monetary assets and liabilities are recognised
immediately in profit or loss.

Keywords Studios plc – Annual Report 2014 35

FINANCIAL STATEMENTS

As part of the Group reconstruction, the Company issued 31,901,332 shares at a value of £1.23 each, being the flotation price,as part of a share for share exchange with the shareholders of Keywords International Limited. The £0.01 nominal value of theshares issues is accounted for in Issued Share Capital. On the consolidated balance sheet, the difference between the nominal
value of shares issued by the company as consideration for the shares in Keywords International Limited, and the nominal
value of the shares in Keywords International Limited has been 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 dateof the share for share exchange, over the nominal value of the shares issued has been treated as a merger reserve.

GOVERNANCE

The acquisition of Keywords International Limited is deemed to be a ‘combination under common control’ as ultimate control
before and after the acquisition was the same. As a result, these transactions are outside the scope of IFRS 3 “Businesscombinations” and have been accounted for under the principles of merger accounting as set out under UK GAAP.

Notes forming part of the consolidated ﬁnancial statements continued

2 Signiﬁcant accounting policies continued

On consolidation, the results of overseas operations are translated into euro at rates approximating to this ruling when thetransactions took place. All assets and liabilities of overseas 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 operationsat actual rate are recognised in other comprehensive income and accumulated in the foreign exchange reserve.

Exchange differences recognised in profit or loss in Group entities’ separate financial statements on the translation of
long-term items forming part of the Group’s net investment in the overseas operation concerned are classified to othercomprehensive income and accumulated in the foreign exchange reserve on consolidation.

On disposal of a foreign operation, the cumulative exchange differences recognised in the foreign exchange reserve relating tothat operation up to the date of disposal are transferred to the consolidated statement of comprehensive income as part ofthe profit or loss on disposal.
Revenue recognition
Revenue is recognised, net of sales taxes, when the service is rendered. When projects are in progress at the period end,
revenue is recognised to the extent that services have been provided.

Share based payments
The Company issues equity settled share-based payments to certain employees and Directors under a share options plan anda 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 theeffect of non-market based vesting conditions. The impact of the revision of the original estimates, if any, is recognised in profit
or loss such that the cumulative expense reflects the revised estimate, with a corresponding adjustment to equity reserves.
The Company has no legal or constructive obligation to repurchase or settle the options in cash.

Where share-based payments are issued to employees of subsidiary companies, the annual cost of the option is expensed in
the subsidiary company, with a corresponding increase in capital contribution from the Company. This annual cost is recorded
as an increase in the Company’s cost of investment in that subsidiary.

Share option plan
These are measured at fair value, taking into account market vesting conditions but not non-market vesting conditions on the
grant date using a Black-Scholes option pricing model which calculates the fair value of an option by using the vesting period,
the expected volatility of the share price, the current share price, the exercise price and the risk free interest rate. The fair valueof the option is amortised over the vesting period, with one third of the options vesting after two years, one third after three
years, and the balance vest after four years. The only vesting condition is continuous service. There is no requirement to revalue
the option at any subsequent date. The charge that is recognised is adjusted to reflect failure to vest due to non-achievement of
a non-market vesting condition but not failure to vest due to the non-achievement of a market vesting condition.

LTIP
An alternative share plan was introduced to give awards to Directors and staff, subject to outperforming the Numis Small Cap(excluding Investment Trusts) index in terms of shareholder return over a three year period. There are three different award
levels; one third of the share options vest if the company shall exceed the Total Shareholder Return of the Numis Small Cap
Index by not less than 10%, two thirds if the shareholder return exceeds by over 20% and 100% of the share options if theshareholder return exceeds by over 30%.

These are measured at fair value, taking into account market vesting conditions but not non-market vesting conditions, at thedate of grant, measured by using the Monte Carlo binomial model. The charge that is recognised is adjusted to reflect failure
to vest due to non-achievement of a non-market vesting condition but not failure to vest due to the non-achievement of amarket vesting condition.

36 Keywords Studios plc – Annual Report 2014

OVERVIEW

2 Signiﬁcant accounting policies continued

Dividend distribution
Final dividends are recorded in the Group’s financial statements in the period in which they are approved by the Group’s
shareholders. Interim dividends are recognised when paid.

Income taxes and deferred taxation
Provision for income taxes is calculated in accordance with the tax legislations and applicable tax rates in force at the reporting
date in the countries in which the Group companies have been incorporated.

Deferred tax assets and liabilities are recognised where the carrying amount of an asset or liability in the consolidated
statement of financial position differs from its tax base, except for differences arising on:• the initial recognition of goodwill;• investments in subsidiaries and jointly controlled entities where the Group is able to control the timing of the reversal of thedifference and it is probable that the difference will not reverse in the foreseeable future.

The amount of the asset or liability is determined using tax rates that have been enacted or substantively enacted by thereporting date and are expected to apply when the deferred tax liabilities/(assets) are settled/(recovered).

Deferred tax assets and liabilities are offset when the Group has a legally enforceable right to offset current tax assets andliabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority on either:

STRATEGIC REPORT• the initial recognition of an asset or liability in a transaction which is not a business combination and at the time of thetransaction affects neither accounting or taxable profit; and• the same taxable Group company; or• different Group entities which intend either to settle current tax assets and liabilities on a net basis, or to realise the assets
and settle the liabilities simultaneously, in each future period in which significant amounts of deferred tax assets or liabilities
are expected to be settled or recovered.

Depreciation is calculated to write off the cost of fixed assets on a straight line basis over the expected useful lives of theassets concerned. The principal annual rates used for this purpose are:
Computers and software

Office furniture and equipment

Building and leasehold improvements

GOVERNANCE

Property, plant and equipment
Property, plant and equipment comprise computers, leasehold improvements, and office furniture and equipment, and arestated at cost less accumulated depreciation. Carrying amounts are reviewed for impairment whenever events or changes incircumstances indicate that their carrying amount may not be recoverable. Where the carrying amount of an asset is greaterthan its estimated recoverable amount, it is written down immediately to its recoverable amount.

%

33.33

10.00

over the length of the lease

Goodwill
Goodwill is capitalised as an intangible asset with any impairment in carrying value being charged to the consolidated
statement of comprehensive income. Where the fair value of identifiable assets, liabilities and contingent liabilities exceed thefair value of consideration paid, the excess is credited in full to the consolidated statement of comprehensive income on theacquisition date.
Impairment
Non-financial assets are subject to annual impairment tests whenever events or changes in circumstances indicate that theircarrying amount may not be recoverable. Where the carrying value of an asset exceeds its recoverable amount (i.e. – thehigher of value in use and fair value less costs to sell), the asset is written down accordingly.

Keywords Studios plc – Annual Report 2014 37

FINANCIAL STATEMENTS

Gains and losses on disposals are determined by comparing proceeds with carrying amount and are included in the
consolidated statement of comprehensive income.

Notes forming part of the consolidated ﬁnancial statements continued

2 Signiﬁcant accounting policies continued

Where it is not possible to establish the recoverable amount of an individual asset, the impairment test is carried out on theasset’s cash generating unit (i.e. – the lowest group of assets in which the asset belongs for which there are separately
identifiable cash flows).

Impairment charges are included in the administrative expenses line item in the consolidated statement of comprehensive income.

Financial assets
Loans and receivables
These assets are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market.
They arise principally through the provision of services to customers (e.g. trade receivables), but also incorporate other typesof contractual monetary asset. They are initially recognised at fair value plus transaction costs that are directly attributable totheir acquisition or issue and are subsequently carried at amortised cost using the effective interest rate method, lessprovision 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 tocollect amounts due according to the original terms of receivables. Bad debts are written off when identified.

Cash and cash equivalents includes cash in hand, deposits held at call with banks and other short term highly liquid
investments with original maturities of three months. Where cash is on deposit with maturity dates greater than three months,
it is disclosed as short-term bank deposits.
Share capital
Financial instruments issued by the Group are treated as equity only to the extent that they do not meet the definition of afinancial 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 atamortised cost using the effective interest method.

Leased assets
Where substantially all of the risks and rewards of ownership are not transferred to the Group (“operating lease”), the total rental
payables are charged to the consolidated statement of comprehensive income on a straight-line basis over the term of the lease.

3 Critical accounting estimates and judgements

The preparation of consolidated financial statements under IFRS requires the Directors to make estimates and judgementsthat effect the application of policies and reported amounts.

The areas requiring the use of estimates and critical judgements that may significantly impact the Group’s earnings andfinancial position are revenue recognition in respect of accrued income and computation of income taxes. Estimates andjudgements are continually evaluated and are based on historic experience and other factors including expectations of future
events that are believed to be reasonable. Actual results may differ from these estimates and assumptions.

Accrued income
Judgement is required in respect of the amount of accrued income recognised at the reporting date. The amount of accrued
income is determined based on an assessment of the expected amount of unbilled time costs in respect of work commenced
prior to the close of a particular year end that will be invoiced to customers after that year end date.

38 Keywords Studios plc – Annual Report 2014

Income taxes
The Group is subject to income tax in several jurisdictions and judgement may be required in determining the provision forincome taxes. During the ordinary course of business, there are transactions and calculations for which the ultimate tax
determination may be uncertain. As a result, the company recognises tax liabilities based on an understanding of taxation
legislation in particular jurisdictions and any related estimates of whether taxes and/or interest will be due. This assessment
relies on estimates and assumptions and may involve a series of complex judgments about future events. To the extent thatthe final tax outcome of these matters is different than the amounts recorded, such differences will impact income tax
expense in the period in which such determination is made.

OVERVIEW

3 Critical accounting estimates and judgements continued

4 Segmental analysis

Management review the performance of the Group by reference to Group-wide profit measures and the revenues derived
from four main service groupings:• Localisation – Localisation Services relate to translation and cultural adaptation of in-game text and audio scripts acrossmultiple game platforms and genres.

• Localisation Testing – Localisation Testing involves testing the linguistic correctness and cultural acceptability of computer games.

STRATEGIC REPORTManagement considers that the Group’s activity as a single source supplier of Localisation and Localisation Testing Services
constitutes one operating and reporting segment, as defined under IFRS 8.

• Audio – Audio Services relate to the audio production process for computer games and includes script translation, actor
selection and talent management through pre-production, audio direction, recording, and post-production, including native
language Quality Assurance of the recordings.
• Functional Testing – Functional Testing relates to quality assurance services provided to game producers to ensure games
function as required.

Activities are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker.
The chief operating decision maker has been identified as the executive management team made up of the Chief Executive
Officer and the Finance Director.
Revenue by line of business
Localisation testing
Localisation
Audio
Functional testing

Years ended 31 December
2013€

9,465,989
5,324,995
1,246,669
349,338

2012€

7,820,445
5,229,733
993,581299,190

14,342,949

Included in Localisation Testing is €152,260 (2012: €nil) of revenue related to multimedia tax credits.

Two (2012: Three) customers accounted for more than 10% of the Group’s revenue during the year. Revenues generated fromthose customers were €3.4m and €2.9m (2012: €3.3m, €2.4m and €1.9m).

Keywords Studios plc – Annual Report 2014 39

FINANCIAL STATEMENTS

16,386,991

GOVERNANCE

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.

Notes forming part of the consolidated ﬁnancial statements continued

4 Segmental analysis continued

Geographical analysis of revenues by jurisdiction
Analysis by geographical regions is made according to the Group’s operational jurisdictions. This does not reflect the regionof the Group’s customers, whose locations are worldwide.
Years ended 31 December

IrelandJapan
Italy
CanadaUnited States

Total revenues
Geographical analysis of non-current assets from continuing businesses

Ireland
CanadaJapan
Italy
United States

2013€

10,904,474
1,208,392
345,884
1,128,720
2,799,521
16,386,991

10,882,112
2,412,747
662,764
385,326–
14,342,949

Years ended 31 December
2013€

452,958
106,360
11,60228,939556
600,415

2012
€

2012
€

357,277
84,101
23,57524,837614
490,404

5 Operating proﬁt

Operating profit is stated after charging:
Depreciation
Costs of Initial Public Offering

Years ended 31 December
2013€

272,470
1,123,566

2012€

198,267–

One-time costs of €1,404,618 (2012: €nil) were incurred as in the Company’s IPO. €281,052 (2012: €nil) of these costs were
capitalised against the share premium account.
Years ended 31 December

Auditors’ remuneration
Audit services– Parent company and Group audit– Subsidiary companies audit
Non-audit services– Accounting and Taxation compliance– Corporate finance fees related to IPO

40 Keywords Studios plc – Annual Report 2014

2013
€

2012
€

38,00020,00020,000–278,063

22,50014,962
205,101

2,500–

Years ended 31 December
2013
€

2012
€

59,33550,470Finance cost
Bank charges
Foreign exchange losses(24,703)(101,007)(13,578)(112,964)

Net financing (expense)/income(66,375)(76,072)

Finance income
Interest received

59,335(125,710)

50,470(126,542)

Years ended 31 December

Current income tax
Income tax on profits
Income tax on profits of subsidiary operations
Previous year taxes

2013
€

2012
€

22,650371,070––
383,796
26,801

393,720

The tax charge for the year can be reconciled to accounting profit as follows:

410,597

Years ended 31 December

2012€

Profit before tax

1,158,063

2,738,690

Total tax charge

393,720

410,597

Expected tax charge based on the standard rate of taxation in the UK at 23% (2012: 23%)
Higher rates of current income tax in overseas jurisdictions
Lower rates of current income tax in overseas jurisdictions
Losses incurred in overseas jurisdictions
Used of tax losses carried forward
Permanent differences on non-deductible IPO expenses
Effects of other timing differences

266,354
20,702(234,220)148,755–
258,420(66,291)

629,899
18,403(308,288)
90,183(19,600)––

Deferred tax is not material to the Group, and no deferred tax asset or liability is recorded.

8 Proﬁt attributable to shareholders of the Parent Company

In accordance with Companies Act 2006, the Company is availing of the exemption from presenting its individual Statement ofComprehensive Income to the annual general meeting and from filing it with Companies House. The amount of profit after tax
dealt with in the parent undertaking is €1,054,027 (2012: €nil).

Keywords Studios plc – Annual Report 2014 41

FINANCIAL STATEMENTS

The Group’s subsidiaries are located in different jurisdictions and are taxed on their residual profit in those jurisdictions.
The majority of profits arise in Ireland.

GOVERNANCE

2013€

STRATEGIC REPORT

7 Taxation

OVERVIEW

6 Financing income and costs

Notes forming part of the consolidated ﬁnancial statements continued

9 Earnings per share

Years ended 31 December

Basic
Diluted

Denominator (weighted average number of equity shares)
Basic
Diluted

10 Dividends

Dividends paid to shareholders

2012Euro cent

2013
€

2012
€

2.14
2.12

Profit for the period from continuing operations

Interim
Final
Interim2013
Euro centPer share
Euro cent842.003,379.00
0.39
4,221.39

2013

Total
€

124,518
500,000
156,609781,1277.30
7.30

764,3432,328,093

NumberNumber

35,778,042
36,062,393

31,902,332
31,902,332

Per share
Euro cent2,538.00––
2,538.00

2012

Total
€

375,482––
375,482

In November 2012, Keywords International Limited distributed €25.38 per share, based on the shares in issue at that time,or, €375,482 in total, as an interim dividend for 2011.

In May 2013, Keywords International Limited distributed €8.42 per share, based on the shares in issue at that time, or€124,518 in total, as a special dividend for 2011.

In June 2013, Keywords International Limited distributed €33.79 per share, based on the shares in issue at that time, or€500,000 in total, as a final dividend for 2012.

In October 2013 Keywords Studios plc distributed its maiden dividend of Stg0.33p / €0.39c per share, based on the shares inissue at that time, or €156,609, as an interim dividend for 2013.

The Directors’ recommend a final dividend in respect of the financial year ended 31 December 2013 of Stg0.67p per Ordinary
share, to be paid on 25 July 2014 to shareholders who are on the register at 4 July 2014. This dividend is not reflected in thesefinancial statements as it does not represent a liability at 31 December 2013. The final proposed dividend will reduceshareholders’ funds by an estimated €337,554.

42 Keywords Studios plc – Annual Report 2014

Total staff costs (including Directors) comprise the following:

Years ended 31 December
2013€

Salaries and related costs
Share based payment costs

8,704,709
70,775
8,775,464

Key management compensation:

6,129,835–
6,129,835

Years ended 31 December
2013€

394,800
17,72454,80024,582491,9062012€

321,300–
114,909–436,209

The key management compensation includes the five Directors of Keywords Studios plc (2012: four Directors of Keywords
International Limited).

STRATEGIC REPORT

Salaries and related costs
Social Welfare cost
Pension costs
Share based payment costs

2012€

OVERVIEW

11 Staﬀ costs

The breakdown of Directors’ remuneration for the Company is included in the Directors’ Remuneration report on pages 22 and 23.
Years ended 31 December

2012

350
21

201
16

Computers andsoftware€

Office, furnitureand equipment
€

Total
€

563,825
385,863

110,110
4,992

673,935
390,855

Average number of employees
Operations
General and administration

12 Property, plant and equipment
Group

Cost
At 1 January 2012
Additions

At 31 December 2013

949,688(15,283)(39,455)
314,481

1,209,431

115,102(5,196)39,45579,209228,570217

1,064,790(20,479)–
393,690
1,438,001

Keywords Studios plc – Annual Report 2014 43

FINANCIAL STATEMENTS

At 31 December 2012
Currency revaluation
Transfer
Additions

371

GOVERNANCE

2013

Notes forming part of the consolidated ﬁnancial statements continued

12 Property, plant and equipment continued
Accumulated depreciation
At 1 January 2012
ChargeAt 31 December 2012
Currency Revaluation
Transfer
ChargeAt 31 December 2013

Net book value
As at 31 December 2012

As at 31 December 201313 Trade receivables
Group

Customers
Provision for bad debts (Note 23)

14 Other receivables
Group

Accrued Income
Prepayments
Other receivables
Other tax and social security
Restricted cash (Note 22)
Related party receivable (Note 22)
Corporation tax receivableCompany

Intercompany receivables (Note 22)
Restricted cash (Note 22)
Prepayments
Other receivables
Other tax and social security

44 Keywords Studios plc – Annual Report 2014

Computers andsoftware€

Office, furnitureand equipment
€

Total
€

330,409
187,344

45,71010,923376,119
198,267

747,765

89,821

837,586

517,753(6,796)(11,738)
248,546

431,935

461,666

56,633(2,474)
11,73823,924574,386(9,270)–272,470

58,469490,404

138,749

600,415

Years ended 31 December
2013€

1,384,750(81,288)
1,303,462

2012€

1,463,056(65,808)
1,397,248

As of 31 December
2013€

209,743
215,364
295,427
104,721300,196––

1,125,451

As of 31 December

2012€

231,997
231,965
158,750
7,580–
247,02129,989907,302

2013
€

2012
€

1,898,008–

1,483,464
300,196
31,1398,340
74,869–––––As of 31 December
2013
€

Group

2012
€

Cash at bank
Short term bank deposits

2,121,135
13,149,434

1,235,561
2,656,528

Company
Cash at bank
Short term bank deposits

522,760
10,199,782––

15,270,569

3,892,089

10,752,542–

As of 31 December
2013
€

Group

Medium term bank deposits

518,5062012€

STRATEGIC REPORT

Short term bank deposits relate to cash on deposit with maturity dates less than three months, or which can be accessed
before on demand.

16 Short term investments

OVERVIEW

15 Cash and cash equivalents

505,585

518,506

505,585

Medium term bank deposits relate to cash on deposit with maturity dates greater than three months, which cannot be
accessed before maturity.

Share capitalAt the end of the period

2013

2012

€

Shares no.

14,797

188

14,797

188

1,000

12

–

–

(188)

–

–

31,901,332(14,797)

8,130,081

40,032,413

370,257

94,513464,782–

14,797€–188

On 29 May 2013 the Group issued 1,000 Ordinary shares of 1p each on incorporation, at nominal value.

On 8 July 2013, as part of the Group reconstruction, the Group issued a further 31,901,332 Ordinary shares of 1p each,as part of a share for share exchange with the shareholders of Keywords International Limited.

The comparative period shows the issued shares of Keywords International Limited prior to the Group’s reconstruction
on 8 July 2013.

Keywords Studios plc – Annual Report 2014 45

FINANCIAL STATEMENTS

At the start of the period
Ordinary Shares of €0.012697 eachIssued during the period
Ordinary Shares of Stg £0.01 each issued
on incorporation
Ordinary Shares of Stg £0.01 each issued
on reconstruction
Ordinary Shares of €0.012697 each eliminatedon reconstruction
Ordinary Shares of Stg £0.01 each issued
on flotation

Shares no.

GOVERNANCE

17 Shareholder’s equity

Notes forming part of the consolidated ﬁnancial statements continued

17 Shareholder’s equity continued

On 10 July 2013, Keywords Studios issued 8,130,081 new shares of 1p each for £1.23 per share, raising £10m / €11.625m ingross cash for the Group. Keywords Studios plc was admitted to the Alternative Investment Market (AIM) of the London Stock
Exchange. Share trading commenced on 12 July 2013.
Reserves
The following describes the nature and purpose of each reserve within owner’s equity:
Reserve

Description and purpose

Foreign exchange reserve

Gains or losses arising on retranslation of the net assets of the overseas operations into euro.

Retained earnings
Share premium

Share option reserve
Merger reserve

Cumulative net gains and losses recognised in the consolidated statement of comprehensive income

The Share Premium account is the amount received for shares issued in excess of their nominal
value, net of share issuance costs
The Share option reserve is the credit arising on share based payment charges in relation to theCompany’s share option schemes.

The merger reserve was created following the Group reconstruction, when Keywords Studios plc
acquired the Keywords International Limited group of companies.

18 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:
Share Option Scheme expense
Share Option Scheme – LTIP expense

2013
€

2012
€

70,755–43,07927,676––Of the total share option charge, €24,582 relates to Directors of the Company as at 31 December 2013.

Share option scheme
Share options are granted to Directors and to permanent employees. The exercise price of the granted options is equal tomanagement’s 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:

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

46 Keywords Studios plc – Annual Report 2014

Average exercise
price in £ per share

–
1.20
–
–
1.20
–

2013

Number ofoptions

Average exercise
price in £ per share

762,775––
762,775
–
–
–

–
–
–
–
–

2012

Numberof options

–
–
–
–
–
–

Details of the options granted during the year are as follows:

All 762,775 options were granted on 12 July 2013 at an average exercise price of £1.20. All options were granted to either
employees or Directors of the Group. Of the total options granted, 254,258 are exercisable from 12 July 2015 to 11 July 2020,
254,258 are exercisable from 12 July 2016 to 11 July 2020 and 254,259 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:

2013

2012

1.23
1.20
3 years
36.12%
0.5%
1.00%

–
–
–
–
–
–

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 2013 was 2 years 6 months(2012: nil). All of the outstanding options can be exercised at an average of £1.20 over a 3 to 5 year period.

STRATEGIC REPORT

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

OVERVIEW

18 Share options continued

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 392,037 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:

Outstanding at the end of the year
Exercisable at the end of the year

–
0.01
–
–
0.01
–

2013

Number ofoptions

Average exercise
price in £ per share

392,037––
392,037
–
–
–

–
–
–
–
–

2012

Numberof options

–
–
–
–

GOVERNANCE

Outstanding at the beginning of the year
Granted
LapsedExercised

Average exercise
price in £ per share––

Details of the options granted during the year are as follows:

Keywords Studios plc – Annual Report 2014 47

FINANCIAL STATEMENTS

All 392,037 options were granted on 12 July 2013 at an exercise price of £0.01. All options were granted to either employees or
Directors of the Group. Of the total options granted, 392,037 are exercisable from 12 July 2016 to 11 July 2020 if the market
performance conditions are met as at 12 July 2016.

Notes forming part of the consolidated ﬁnancial statements continued

18 Share options continued

The options were valued using a Monte Carlo binomial model using the following inputs:
Weighted average share price (£)
Weighted average exercise price (£)
Average expected life
Expected volatility
Risk free rates

2013

2012

1.23
0.01
3 years
36.12%
0.5%

–
–
–
–
–

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 calculationof the LTIP share option charge.
The weighted average remaining contractual life of the options outstanding at 31 December 2013 was 2 years 6 months(2012: nil). All of the outstanding options can be exercised at £0.01 over a 4 year period.

19 Trade payables
Group

Suppliers

20 Other payables
Group

As of 31 December
2013€

503,634
503,634

As of 31 December
2013
€

2012
€

701,197
701,1972012€

Accrued expenses
Payroll taxes
Other payables
Related party payable (Note 22)277,179
137,461
392,7139,242

346,952
118,711
14,945–Company
Accrued expenses
Payroll taxes
Other payables

21,503
16,133
300,261–––

48 Keywords Studios plc – Annual Report 2014

816,595

337,897

480,608–

As of 31 December

Company

Investment in Subsidiaries
Share Option Expense related to Subsidiary Companies

2013
€

2012
€

5,735,481–

5,683,149
52,332OVERVIEW

21 Investments in Subsidiaries––

The investment in subsidiaries reflects the net book value of the assets held by Keywords International Limited at the date of
the share for share exchange, in accordance with IAS 27, Consolidated and Separate Financial Statements.
Details of the Company and Group’s subsidiaries as at 31 December 2013 are set out below:

Proportion of
voting rights
and ordinary
share capital held

Nature of businessJapan

30-11-2010

99%

Trading Company

Keywords Italia Srl.

Italy

18-05-2011

100%

Trading Company

KW Studios Limited

United Kingdom

29-05-2013

100%

Dormant Company

Name

Keywords International Limited

Ireland

Keywords International Corporation Inc.

CanadaKeywords International Co. Limited

Keywords International Inc.

United States

13-05-1998
22-12-2010
26-09-2012

100%
100%

100%

STRATEGIC REPORTCountry ofincorporation

Date of
Incorporation/acquisition

Trading Company
Trading Company
Trading Company

22 Related parties and shareholders

The following transactions arose with Italicatessen Limited, which provides canteen services to Keywords International Limited.
Moreover, Italicatessen is a related party debtor as at 31 December 2012 because of an outstanding loan from Keywords
International Limited of €238,100 and reimbursable charges paid by Keywords International Limited on behalf of Italicatessen
Limited. There is no interest payable on this loan. The loan was repaid during the year.
As of 31 December

Operating expenses
Canteen charges

Italicatessen Limited

Total related party debtors
Italicatessen Limited

Total related party creditors

2012€

67,02850,313As of 31 December
2013
€

2012
€

–

247,021

9,242

–

–

9,242

247,021–

Keywords Studios plc – Annual Report 2014 49

FINANCIAL STATEMENTS

The following are year-end balances:

2013€

GOVERNANCE

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 30 December 2013, P.E.Q Holdings Limited owned 29.9% of the Company. In
addition, Mr. Giorgio Guastalla is a Director of Italicatessen Limited, P.E.Q. Holdings Limited and the Company, and owns, orcontrols, 90% of the share capital of P.E.Q Holdings Limited.

Notes forming part of the consolidated ﬁnancial statements continued

22 Related parties and shareholders continued

The Company paid the following amounts to Mr. Giorgio Guastalla, Director of the Company, and shareholder of P.E.Q
Holdings Limited, in respect of rent on premises occupied by the employees of the Group in Dublin.
Operating expenses
Rental payment

2013
€

2012
€

18,00018,000

The Company entered into a deed of undertaking and indemnity on 8 July 2013 with Mr. Andrew Day, CEO and Director of theCompany 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 is repayable to Mr. Day on 8 January 2016 if no liability
arises in that period. There is a corresponding liability included in Other Payables.

The details of key management compensation (being the remuneration of the Directors) are set out in Note 11.

As at 31 December 2013 and 2012, the Company had amounts receivable from its subsidiaries, amounting to €1,483,464(2012: €nil) relating to intergroup trading activities.

23 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.

As described in Note 17, the Company raised €11.625m in cash through an IPO with the strategy of making acquisitions ofsuitable companies. The proceeds, net of share issuance costs, are held in short term deposits and demand accounts, to be
used in acquisitions, as required. Note 25 includes information on the events since the reporting date, which include the useof some of the funds on hand.

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 beenpresented as a result.
Credit risk
Credit risk arises when a failure by counterparties to discharge their obligations could reduce the amount of future cash
inflows from financial assets on hand at the reporting date.

The Group closely monitors the activities of its counterparties and maintains regular contact which enables it to ensure theprompt collection of customers’ balances.

The Group’s main financial assets are cash and cash equivalents as well as trade and other receivables and represent theGroup’s maximum exposure to credit risk in connection with its financial assets. Trade and other receivables are carried on thestatement of financial position net of bad debt provisions estimated by the Directors based on prior year experience and anevaluation 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.

50 Keywords Studios plc – Annual Report 2014

OVERVIEW

23 Financial Instruments and risk management continued

The ageing of trade and receivables that are past due but not impaired can be analysed as follows:Group

As at 31 December 2012

As at 31 December 2013

Total
€

1,397,248

1,303,462

Not past due€

1-2 months
overdue€

More than 2months past due€

923,224

295,408

84,8301,009,472

199,583

188,193

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:

65,80815,480–

Provision at end of the year

81,288

2012€

54,246
11,562–65,808STRATEGIC REPORT

Provision at the beginning of the year
Charged to income statement
Utilised2013€

Related party receivables of €nil were not past due at 31 December 2013 (2012: €247,021).

Company
Intercompany receivables of €1,483,464 were not past due at 31 December 2013 (2012: €nil).

Currency risk
Currency risk is the risk that the value of financial instruments will fluctuate due to changes in foreign exchange rates.

The Group’s policy, where possible, is for Group entities to manage foreign exchange risk at a local level by matching thecurrency in which revenue is generated and the expenses incurred and by settling liabilities denominated in their functional
currency with cash generated from their own operations in that currency. In order to monitor the Group’s exposure to foreignexchange risk, the board receives a monthly analysis of the major currencies held by the Group, and of liabilities due forsettlement and expected cash reserves.

GOVERNANCE

The foreign exchange risk arises for the Group where assets and liabilities arise and are held in overseas subsidiaries in acurrency other than the euro and to a lesser extent where individual Group entities enter into transactions denominated incurrency other that their functional currency.

The Group is predominantly exposed to currency risk on the proceeds of the IPO, which are retained as sterling deposits.
The effect of a 10% strengthening of sterling against the euro at the reporting date on the sterling denominated bank balances
carried at that date would, all other variables held constant, have resulted in a decrease in post-tax profit for the year and adecrease of net assets of €1,191,870 (2012: €nil). A 10% weakening in the exchange rate would, on the same basis haveincreased post-tax profit and increased net assets by €975,095 (2012: €nil).
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.

Keywords Studios plc – Annual Report 2014 51

FINANCIAL STATEMENTS

The Group’s policy is not to enter into any currency hedging transactions.

Notes forming part of the consolidated ﬁnancial statements continued

23 Financial instruments and risk management continued

The following are the contractual maturities (representing undiscounted contractual cash flows) of the Group’s andCompany’s financial liabilities:
Group
Year ended 31 December 2013
Trade payables
Other accounts payableYear ended 31 December 2012
Trade payables
Other accounts payableCompany
Year ended 31 December 2013
Other accounts payableYear ended 31 December 2012
Other accounts payable

Total
€

Within 1 year€

1-2 years€

2-5 years
€

Total
€

Within 1 year€

1-2 years€

2-5 years
€

Total
€

Within 1 year€

1-2 years€

2-5 years
€

Total
€

Within 1 year€

1-2 years€

2-5 years€

503,634
671,507

701,197
361,897

321,764–

503,634
671,507

701,197
361,897

321,764

–

–
–

–
–

–

–

–
–

–
–

–

–

24 Operating lease commitments

The Group maintains a portfolio of leased properties. The terms of property leases vary from country to country, although
they all tend to be tenant repairing with rent reviews every 2 to 5 years and some have break clauses.
The total future value of the minimum lease payments is due as follows:Group

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

52 Keywords Studios plc – Annual Report 2014

2013€

553,465
1,629,476
498,477
2,681,419

2012€

617,198
1,793,215
788,249
3,198,661

OVERVIEW

25 Events after the reporting date

Acquisition of Liquid Violet Limited
On 15 January 2014 the Company acquired the entire issued share capital of Liquid Violet Limited, a video games voice
production services company, registered in the UK. Liquid Violet specialises in the management, on behalf of major video
game publishers and the acquisition is in line with the Group’s strategy of growing both organically and by acquisition toextend the Group’s client base, market penetration or service lines, where the Group can use its existing expertise,multi-service platform, scale and global reach to generate synergies.

Under the terms of the acquisition, which will be immediately earnings enhancing, Keywords Studios has paid an initial cash
consideration of £300,000 with a further £1.3 million payable in cash contingent upon Liquid Violet achieving certain financial
targets in the three years to 31 March 2016.
The book value of the net assets acquired is as follows:€

17,42813,017
12,995(69,297)
95,153

Fair value of consideration paid
Goodwill

1,298,814
1,229,518

Total

69,296

STRATEGIC REPORT

Property plant and equipment
Trade receivables
Other receivables
PayablesCash

At the date of authorisation of these financial statements a detailed assessment of the fair value of the identifiable net assets
has not been 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.
Fair value of consideration payable

361,337
937,477

1,298,814

GOVERNANCE

Cash
Deferred consideration€

Acquisition of Babel Media GroupOn 17 February 2014, the Company acquired the entire issued share capital of Babel Media Limited, a company registered in
the UK, together with its subsidiary companies. Babel Media is a leading provider of outsourced video games services with
operations in the UK, Canada and India.

The acquisition will extend the Group’s client base, market penetration or service lines, where the Group can use its existing
expertise, multi-service platform, scale and global reach to generate synergies.

FINANCIAL STATEMENTS

Keywords Studios plc – Annual Report 2014 53

Notes forming part of the consolidated ﬁnancial statements continued

25 Events after the reporting date continued
The book value of the net assets acquired is as follows:€

Property plant and equipment
Trade receivables
Other receivablesMultimedia tax credit receivable
Bank overdraft
Trade and other payables
Finance leases

678,076
499,512714,516
1,200,172(677,785)(4,377,693)(76,628)

Fair value of consideration paid
Goodwill

2,686,057(4,725,887)

Total(2,039,830)

At the date of authorisation of these financial statements a detailed assessment of the fair value of the identifiable net assets
has not been 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.
Fair value of consideration payable
Shares issued€

2,686,057

2,686,057

Incorporation of Keywords International Pte. Limited
On 24 March 2014, the Directors incorporated Keywords International Pte. Limited, a company registered in Singapore,as part of the Group’s continuing geographic expansion, and to allow it to service the games industry in South East Asia.

54 Keywords Studios plc – Annual Report 2014

Company information

Andrew John Day(Chief Executive Officer)

David Alan O’Connor(Group Financial Director)

David Alan Reeves(Non-Executive Director)*
Giorgio Guastalla(Non-Executive Director)* Denotes independent director

Dublin office:Whelan HouseSouth County Business Park
Dublin 18 Ireland
Company Secretary
David O’Connor

Financial PR Adviser
MHP Communications
60 Great Portland Street
London W1W 7RT

Solicitors to the Company
Brown Rudnick LLP
London office:8 Clifford Street
London W1S 2LQ

Squire Sanders (UK) LLP
7 Devonshire Square
London EC2M 4YH

Registrars
Capita Asset Services
The Registry
34 Beckenham Road
Beckenham
Kent BR3 4TU

Capita Asset Services is our registrar
and they offer many services to makemanaging your shareholding easierand more efficient.

Share portal
The Share Portal is a secure online
site where you can manage yourshareholding quickly and easily. You can:• View your holding and get anindicative valuation• Change your address• Arrange to have dividends paid into
your bank account• Request to receive shareholder
communications byemail rather than post

• View your dividend payment history• Make dividend payment choices• Buy and sell shares and access a
wealth of stock market news andinformation• Register your proxy voting instruction• Download a stock transfer form.

To register for the Share Portal just visit
www.capitashareportal.com. All you
need is your investor code, which canbe found on your share certificate or
your dividend tax voucher.

By email –shareholderenquiries@capita.co.uk
By post – Capita Asset Services,
The Registry, 34 Beckenham Road,
Beckenham, Kent, BR3 4TU.

Sign up to electronic communications
Help us to save paper and get yourshareholder information quickly andsecurely by signing up to receive yourshareholder communications by email.

Registering for electronic
communications is very straightforward.
Just visit www.capitashareportal.com.
All you need is your investor code,
which can be found on your sharecertificate or your dividend tax voucher.
Donate your shares to charity
If you have only a small number ofshares which are uneconomical to sell
you may wish to donate them to charity
free of charge through ShareGift(Registered Charity10528686). Find out
more at www.sharegift.org.uk or bytelephoning 020 7930 3737.

Share fraud warning
Share fraud includes scams where
investors are called out of the blue andoffered shares that often turn out to be
worthless or non-existent, or an inflated
price for shares they own. These calls
come from fraudsters operating in ‘boiler
rooms’ that are mostly based abroad.

While high profits are promised, those
who buy or sell shares in this way
usually lose their money.

The Financial Conduct Authority (FCA)
has found most share fraud victims areexperienced investors who lose an
average of £20,000, with around £200m
lost in the UK each year.
Keywords Studios plc – Annual Report 2014 55

FINANCIAL STATEMENTS

Dublin office:Alexandra House
The Sweepstakes
Ballsbridge
Dublin 4 Ireland

Solicitors to the Nominated Adviser
Dorsey & Whitney (Europe) LLP
21 Wilson Street
London EC2M 2TD

By phone – UK – 0871 664 0300 (UKcalls cost 10p per minute plus network
extras). From overseas – +44 20 8639
3399. Lines are open 9.00am to
5.30pm, Monday to Friday, excluding
public holidays.

GOVERNANCE

Nominated Adviser and Broker
Numis Securities Limited
The London Stock Exchange Building
10 Paternoster Square
London EC4M 7LT

Auditors
BDO
Beaux Lane House
Mercer Street
Lower Dublin 2 Ireland

Customer support centre
Alternatively, you can contact Capita’s
Customer Support Centre which isavailable to answer any queries you
have in relation to your shareholding:

STRATEGIC REPORT

Registered office andprincipal place of business
London office:8 Clifford Street
London W1S 2LQ

Reporting accountant
BDO LLP
55 Baker Street
London W1U 7EU

OVERVIEW

Directors
Ross King Graham(Non-Executive Chairman)*Company information continued

PROTECT YOURSELF
If you are offered unsolicited
investment advice, discounted shares,a premium price for shares you own,
or free company or research reports,
you should take these steps before
handing over any money:• Get the name of the person andorganisation contacting you.

• Check the Financial Services Registerat http://www.fca.org.uk/ to ensure
they are authorised.
• Use the details on the FCA Registerto contact the firm.

• Call the FCA Consumer Helpline on
0800 111 6768 if there are no contact
details on the Register or you are told
they are out of date.
• Search our list of unauthorised firms
and individuals to avoid doing
business with.

REMEMBER: if it sounds too good tobe true, it probably is!

If you use an unauthorised firm to buy
or sell shares or other investments, youwill not have access to the Financial
Ombudsman Service or Financial
Services Compensation Scheme (FSCS)
if things go wrong.
REPORT A SCAM
If you are approached about a sharescam you should tell the FCA using
the share fraud reporting form at
http://www.fca.org.uk/ scams, where
you can find out about the latest
investment scams. You can also call theConsumer Helpline on 0800 111 6768.

If you have already paid money to share
fraudsters you should contact Action
Fraud on 0300 123 2040.

56 Keywords Studios plc – Annual Report 2014

Identity theft
Tips for protecting your shares in thecompany:• Ensure all your certificates are kept
in a safe place or hold your shares
electronically in CREST via a nominee.
• Keep correspondence from us andCapita in a safe place and destroy
any unwanted correspondence by
shredding.

• If you change address, inform Capita
in writing or update your address
online via the shareholder portal.
If you receive a letter from Capita
regarding a change of address but
have not moved, please contact
them immediately.
• Consider having your dividend paid
directly into your bank. This will
reduce the risk of the cheque being
intercepted or lost in the post. If youchange your bank account, inform
Capita of the details of your new
account. You can do this by post or
online via the shareholder portal.
• If you are buying or selling shares,
only deal with brokers registeredand authorised to carry out thattype of business.

• Be wary of phone calls or e-mails
purporting to come from us or Capita
asking you to confirm personal details
or details of your investment in ourshares. Neither we nor Capita will
ever ask you to provide informationin this way.

Contacts“We are well placed totake advantage of theindustry’s expected
growth and structuralchange in 2014 & 2015”
Andrew Day
Chief Executive

DublinKeywords International Ltd.
Whelan HouseSouth County Business Park
Dublin 18
IrelandTokyo
Keywords International Co., Ltd.
2F Toshin Building
4-33-10 Yoyogi, Shibuya-ku,
Tokyo 151-0053

Rome
Keywords Italia Srl
Via Tiberio Imperatore 1500145 Rome
ItaliaT: +353 190 22 730
F: +353 190 22 774

T: +81 3 4588 6760
F: +81 3 3375 1518

T: +39 06 44 20 25 21
F: +39 06 44 11 92 17

SeattleKeywords International Inc.
Plaza Center
10900 NE 8th Street, Suite 1000
Bellevue, Seattle, WA 98004

Montreal
Keywords International Corporation Inc.
410 St-Nicolas, Suite 600
Montréal, QC
H2Y 2P5
CanadaSingapore
Keywords International
1557 Keppel Road #03-28
Singapore 089066

T: +1 425 633 3226
F: +1 425 633 3228

Contents
Keywords at a glance

Chairman’s statement

24Strategic report

6

Case study: Game localisation

8

The market

8

Chief Executive’s review

12

Board of Directors

18

Financial and operating review
Directors’ report

Directors’ remuneration report

16

19

22

Directors’ remuneration
policy report

Independent Auditor’s report
Consolidated statementof comprehensive income
Consolidated statementof ﬁnancial position

Consolidated statementof changes in equity

Consolidated statementof cash ﬂows

24

26
28
29
30
31

Company statementof ﬁnancial position

Company statement ofchanges in equity

32
33

Company statement of cash ﬂows 34

Notes forming part of theConsolidated ﬁnancial statements 35

Company information
Contacts

55

56

Designed and produced by fourthquarter

T: +1 514 789 04 04
F: +1 514 843 43 52

www.keywordsintl.com

Keywords Studios plc

Annual Report and Accounts

Annual Report and Accounts 2013

Keywords International Ltd.
Whelan HouseSouth County Business Park
Dublin 18
Ireland
T: +353 190 22 730
F: +353 190 22 774

Keywords Studios plc

Keywords Studios plc

2013