Report of Management

 

Interim consolidated statement of cash flows                                                              

		Unaudited	Unaudited	Audited
		26 weeks ended	26 weeks ended	52 weeks ended
		30 Jun 2015	30 Jun 2014	31 Dec 2014
	Note	€	€	€
Cash flows from operating activities
Profit/(loss) after tax		1,428,494	(144,186)	2,220,187
Adjustments to reconcile net income to net cash provided by operating activities		(1,069,464)	(2,736,389)	202,302
Income taxes paid		(909,179)	(177,540)	(522,295)
Net cash provided by operating activities		(550,149)	(3,058,115)	1,900,194
Cash flows from investing activities
Acquisition of subsidiaries net of cash acquired	14	(1,044,349)	(6,603,062)	(8,889,170)
Acquisition of property, plant and equipment		(828,436)	(412,335)	(1,252,412)
(Acquisition)/disposal of short term investments		(1,158,958)	(5,568)	259,640
Interest received	6	40,670	26,574	49,405
EBT share purchase		(803,586)	-	-
Net cash used in investing activities		(3,794,659)	(6,994,391)	(9,832,537)
Cash flows from financing activities
Repayment of borrowings in acquired company		-	(2,996,110)	(2,996,110)
Dividends paid	8	(482,333)	-	(609,158)
Shares issued	10	-	7,341,700	7,341,700
Share issuance expenses		(14,175)	-	-
Interest paid	6	(33,937)	(13,020)	(60,681)
Net cash used in financing activities		(530,445)	4,332,570	3,675,751
Decrease in cash and cash equivalents		(4,875,253)	(5,719,936)	(4,256,592)
Cash and cash equivalents at beginning of the period		11,013,977	15,270,569	15,270,569
Cash and cash equivalents at end of period		6,138,724	9,550,633	11,013,977

 

 

Adjustments to reconcile net income to net cash provided by operating activities

 

	Unaudited	Unaudited	Audited
	26 weeks ended	26 weeks ended	52 weeks ended
	30 Jun 2015	30 Jun 2014	31 Dec 2014
	€	€	€
Income and expenses not affecting operating cash flows
Depreciation	607,672	294,794	868,308
Intangibles amortisation	383,710	150,711	467,786
Income tax expense	126,389	180,174	1,215,373
Share option expense	135,841	54,069	156,000
Foreign currency revaluation of fixed assets		-	(161,001)
Loss on disposal of fixed assets		-	65,965
Interest received	(40,670)	(26,574)	(49,405)
Share issuance costs	14,175	-	-
Interest paid	33,937	13,020	60,681
Changes in operating assets and liabilities
Increase in trade receivables	(1,671,710)	(2,152,672)	(2,929,983)
Increase in other receivables	(1,112,625)	(2,076,524)	(2,089,814)
Increase in trade and other payables	453,817	806,214	2,598,392
Increase in foreign exchange reserve	-	20,399	-
	(1,069,464)	(2,736,389)	202,302

 

 

Notes forming part of the consolidated financial statements

1	Basis of preparation

 

Keywords Studios plc (the "Company" is a company incorporated in the UK. These consolidated financial statements include the financial statements of the Company and its subsidiaries (the "Group") made up to June 30, 2015. The Group was formed on July 8, 2013 when Keywords Studios Plc (formerly Keywords Studios Limited) acquired the entire share capital of Keywords International Limited through the issue of 31,901,332 ordinary shares. 

 

The parent company financial statements present information about the Company as a separate entity and not about its Group.

 

The interim financial statements were approved by the Board of Directors on 21 September 2015.  The interim results for the 26 weeks ended 30 June 2015 and the 26 weeks ended 30 June 2014 are neither audited nor reviewed by our auditors and the accounts in this interim report do not therefore constitute statutory accounts in accordance with Section 434 of the Companies Act 2006.  They do not include all of the information required for full annual financial statements, and should be read in conjunction with the consolidated financial statements of Keywords Studios plc for the year ended 31 December 2014.

 

The consolidated statutory accounts of Keywords Studios for the year ended 31 December 2014 have been filed with the Companies House.  The report of the auditors on those accounts was unqualified, did not contain any statements under s.498 (2) or (3) of the Companies Act 2006 and did not contain any matters to which the auditors drew attention without qualifying their report.

 

The same accounting policies, presentation and methods of computation are followed in these condensed consolidated financial statements as were applied in the Keywords Studio plc latest annual audited financial statements.

 

In the current year the Group has adopted all of the new and revised standards and interpretations issued by the IASB and the International Financial Reporting Interpretations Committee (IFRIC) of the IASB, as they have been adopted by the European Union, that are relevant to its operations and effective for accounting periods beginning on January 1, 2013. The adoption of these standards has had no material impact on the financial statements.

 

New standards, interpretations and amendments not yet effective.

 

None of the new standards, interpretations and amendments, which are effective for periods beginning after January 1, 2014, have been adopted. No detailed review of the impact of IFRS 15 has taken place and therefore we are unable to conclude what impact it may have on the Group's future financial statements at this point.

 

 

2	Significant accounting policies

 

There have been no changes to the accounting policies detailed in the 2014 Annual Report. Over the period covered by the Interim Report the company has acquired new companies, resulting in the creation of both Intangible Assets and Goodwill. The accounting policies relating to Intangible Assets and Goodwill are detailed below.

 

 

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 the fair value of consideration paid, the excess is credited in full to the consolidated statement of comprehensive income on the acquisition date.

 

Intangible Assets

 

Intangible assets, separately identified from goodwill acquired as part of a business combination, are initially stated at fair value. The fair value attributed is determined by discounting the expected future cash flow to be generated from the asset at the risk adjusted average weighted cost of capital appropriate to the intangible asset.

The assets are estimated over their useful life which presently is 5 years starting from date the asset was capitalised.

 

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.

 

The multimedia tax credits received in Montreal on testing services are treated as a deduction against direct costs. The tax claims related to the periods 1 April 2013 to 16 February 2014, and 17 February to 31 December 2014 are in progress. Based on the work done to date, including feedback from the Montreal authorities, we have decreased the estimates of the amount to be received by €334,934 to €3,037,937.

 

Employee Benefit Trust

 

Ordinary Shares purchased by the Employee Benefit Trust on behalf of the Parent Company under the Terms of the Share Option Plan are deducted from equity on the face of the Consolidated Statement of Financial Income. No gain or loss is recognised in relation to the purchase, sale, issue or cancellation of the Parent Company's Ordinary Shares

 

 

3	Critical accounting estimates and judgements

 

There has been no material revisions to the nature and amount of changes in estimates of amounts reported in the annual financial statements 2014 for Keywords International Limited.

 

 

4	Segmental analysis

 

Management considers that the Group's activity as a single source supplier of Technical Services for Video Games constitutes one operating and reporting segment, as defined under IFRS 8. 

 

Management review the performance of the Group by reference to Group-wide profit measures and the revenues derived from six main service groupings:

 

·     Art Creation - Art creation services relate to the production of graphical art assets for inclusion in the video game including concept art creation along with 2D and 3D art asset production and animation.

·     Audio - Audio services relate to the audio production process for computer games and includes script translation, actor selection and talent management through pre-production, audio direction, recording, and post-production, including native language Quality Assurance of the recordings.

·     Localisation - Localisation services relate to translation and cultural adaptation of in-game text and audio scripts across multiple game platforms and genres.

·     Functional Testing - Functional testing relates to quality assurance services provided to game producers to ensure games function as required.

·     Localisation Testing - Localisation testing involves testing the linguistic correctness and cultural acceptability of computer games.

·     Customer Support - Customer support relates to the live operations support services such as community management, player support and associated services provided to producers of games to ensure that consumers have a positive user experience.

 

 

There is no allocation of operating expenses, profit measures, assets and liabilities to individual product groupings. Accordingly the disclosures below are provided on an entity-wide basis.

 

Activities are reported in a manner consistent with the internal reporting provided to the chief operating 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.

 

 

	Unaudited	Unaudited	Audited
	26 weeks ended	26 weeks ended	52 weeks ended
	30 Jun 2015	30 Jun 2014	31 Dec 2014
	€	€	€
Revenue by line of business
Art creation	2,780,401	-	612,486
Audio	2,302,374	1,419,660	5,080,460
Localisation	7,821,793	4,563,258	11,956,656
Functional testing	2,504,002	2,424,758	4,985,834
Localisation testing	6,815,839	5,310,450	14,657,743
Customer support	1,683,974	-	-
	23,908,383	13,718,126	37,293,179

 

 

Geographical analysis of revenues by jurisdiction

 

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

 

	Unaudited	Unaudited	Audited
	26 weeks ended	26 weeks ended	52 weeks ended
	30 Jun 2015	30 Jun 2014	31 Dec 2014
	€	€	€
Ireland	4,800,384	4,307,726	9,939,377
Japan	1,386,661	978,156	2,643,895
Italy	4,350,805	1,725,733	6,754,245
Canada	7,761,710	4,650,833	11,066,703
United States	2,259,187	1,859,432	5,838,019
India	2,792,756	-	612,485
Singapore	184,087	15,011	64,939
United Kingdom	176,049	181,235	373,516
Brazil	196,744	-	-
	23,908,383	13,718,126	37,293,179

 

Geographical analysis of non-current assets from continuing businesses

 

	Unaudited	Unaudited	Audited
	26 weeks ended	26 weeks ended	52 weeks ended
	30 Jun 2015	30 Jun 2014	31 Dec 2014
	€	€	€
Ireland	353,026	410,017	391,166
Japan	40,836	25,850	26,138
Italy	267,062	450,808	316,312
Canada	1,142,206	760,762	1,056,685
United States	337,633	238,853	249,190
India	822,556	88,213	602,975
Singapore	96,294	71,219	97,288
United Kingdom	15,169	11,898	21,152
Brazil	5,516	-	-
Spain	13,241	-	-
	3,093,539	2,057,620	2,760,906

 

 

 

5             Seasonal business

 

The video games industry, and in particular the console sector of the games industry, is heavily dependent on sales of new releases of games and consoles during the traditional holiday season, including the run up to Thanksgiving in the United States and Christmas in other parts of the world.  As with all other service providers to the video games industry, certain of Keywords Group's service lines typically experiences significantly higher activity as part of this release cycle during the six months from June to November.  This activity drives increased revenues in that period and generates higher Gross Profit margins compared with the other six months.       

 

Revenue for the 52 weeks ended 30^th June 2015 totalled €47,483,436 (2014: 52 weeks €23,719,492) and Gross Profit of €16,528,216 (2014: 52 weeks €7,782,555).

 

Please note that within the last 6 months to June 30^th, 2015, Keyword's Group has acquired 2 new entities which are also included in the results above.

 

 

6        Financing income and costs

         

	Unaudited	Unaudited	Audited
	26 weeks ended	26 weeks ended	52 weeks ended
	30 Jun 2015	30 Jun 2014	31 Dec 2014
	€	€	€
Finance income
Interest received	40,670	26,574	49,405
Foreign exchange gain	617,362	112,099	466,623
	658,032	138,673	516,028
Finance cost
Bank charges	(107,830)	(51,728)	(93,981)
Interest expense	(33,937)	(13,020)	(60,681)
	(141,767)	(64,748)	(154,662)
Net financing income	516,265	73,925	361,366

 

         

7        Taxation

         

	Unaudited	Unaudited	Audited
	26 weeks ended	26 weeks ended	52 weeks ended
	30 Jun 2015	30 Jun 2014	31 Dec 2014
	€	€	€
Current income tax
Income tax on profits	-	-	9,478
Income tax on profits of subsidiary operations	305,283	180,174	954,973
Deferred tax	(178,894)	-	250,922
	126,389	180,174	1,215,373

 

The tax is calculated for all of the Keyword's entities, across all geographies, which have generated profits during the period after taking into account any tax losses brought forward. A number of entities within the group have incurred losses during the period, on which no tax refund has been assumed.

 

 

8        Dividends

                                                                                                                                                                                            

	Unaudited			Unaudited			Audited
	26 weeks ended			26 weeks ended			52 weeks ended
	30 Jun 2015			30 Jun 2014			31 Dec 2014
	Per share	Total		Per share	Total		Per share	Total
	Euro Cent	€		Euro Cent	€		Euro Cent	€
Interim
Final	1.03	482,333		0.84	393,767		0.84	393,767
Interim	0.56	265,599		-	-		0.46	215,391
Dividends approved/paid to shareholders	1.59	747,932		0.84	393,767		1.30	609,158

         

In June 2014, Keywords International Limited approved a dividend of Stg 0.67 / €0.84 per share, based on the shares in issue at that time, or €393,767 in total, as a final dividend for 2013. The dividend was paid in July 2014.

 

In September 2014, Keywords International Limited approved a dividend of Stg 0.36 /€0.46per share, based on the shares in issue at that time, or €215,391 in total, as an interim dividend for 2014. The dividend was paid in October 2014.

 

The Directors' recommended a final dividend in respect of the financial year ended December 31, 2014 of Stg0.74p/ €1.03 per Ordinary share, or €482,333 to be paid on June 26, 2015 to shareholders who are on the register at June 5, 2015.

 

The Directors' recommend an interim dividend of £0.40 /€0.56 per share in respect of the financial year ended 31 December 2015 to the shareholders who are on the register at October 2nd, 2015.  The dividend is not reflected in the financial statements as it does not represent a liability at 30 June 2015. The interim dividend will reduce shareholders' funds by an estimated €265,599.

 

 

9        Earnings per share

	Unaudited	Unaudited	Audited
	26 weeks ended	26 weeks ended	52 weeks ended
	30 Jun 2015	30 Jun 2014	31 Dec 2014
	Euro cent	Euro cent	Euro cent
Basic	2.96	(0.34)	4.94
Diluted	2.92	(0.34)	4.93
	€	€	€
Profit for the period from continuing operations	1,398,376	(144,186)	2,220,187
Denominator (weighted average number of equity shares)	Number	Number	Number
Basic	47,247,519	42,758,232	44,955,503
Diluted	47,828,755	42,758,232	45,064,294

 

 

10      Shareholder's equity

         

Share capital
	Shares	€
At 1 January 2014	40,032,413	464,782
Ordinary Shares of £0.01 issued on acquisition of Babel Media Limited	1,516,944	18,525
Ordinary Shares of  £0.01 issued on acquisition of Binari Sonori S.R.L	1,555,650	18,895
Placing of ordinary Shares of  £0.01 on the market	4,000,000	48,944
At 30 June 2014	47,105,007	551,146
No share issues for the period	-	-
At 31 December 2014	47,105,007	551,146
Issued 158,250 @ £0.01 - Binari Sonori earn out	158,250	1,937
At 30 June 2015	47,263,257	553,083

 

 

On February 17 2014 the Group issued 1,516,944 of 1p shares which formed part of the consideration for the acquisition of Babel Media Limited.

 

On May 9 2014 the Group issued 1,555,650 of 1p shares which formed part of the consideration for the acquisition of Binari Sonori S.R.L.

 

On May 9 2014 the Group placed 4,000,000 of 1p shares into the market at a value of £1.50 (€1.83) per share.

On 19th January 2015 the Group issued 158,250 of 1p shares for the earn out agreement with Binari Sonori.

 

 

 

11           Goodwill

 

Group
	Liquid Violet Limited	Babel Media Limited	Binari Sonori Srl	Lakshya Digital Private Limited	Alchemic Dream	Reverb	Total
	€	€	€	€	€	€	€
Cost and net book value
At 1 January 2014	-	-	-	-	-	-	-
Recognised on acquisition of a subsidiary	937,719	4,206,114	6,835,657	-	-	-	11,979,490
At 30 June 2014	937,719	4,206,114	6,835,657	-	-	-	11,979,490
Recognised on acquisition of a subsidiary	105,135	168,562	794,772	1,662,750	-	-	2,731,219
At 31 December 2014	1,042,854	4,374,676	7,630,429	1,662,750	-	-	14,710,709
Recognised on acquisition of a subsidiary	-	-	-	79,942	457,102	282,994	820,038
Revaluation adjustment	173,541	657,923	-	144,900	1,553	(20,182)	957,735
At 30 June 2015	1,216,395	5,032,599	7,630,429	1,887,592	458,655	262,812	16,488,482

 

 

During 2014, an initial assessment of the Liquid Violet, Babel Media Limited and Binari Sonori Srl acquisitions was completed as at 30 June 2014, which resulted in the recognition of goodwill. Under IFRS 3 "Business Combinations", there is a 12 month period within which the acquisition accounting and calculation of goodwill can be completed, as a result, further adjustments in the period to 31 December 2014 arose, as set out above.

 

During the period goodwill arose on the acquisition of Alchemic Dream Inc. and Reverb Localização - Preparação de Documentos Ltda.

 

The goodwill is tested for impairment on an annual basis. The impairment test will be performed as part of the year end process and any adjustment required reported in the annual report.

 

 

12           Intangible assets - customer relations

 

Group
	Liquid Violet Limited	Babel Media Limited	Binari Sonori Srl	Lakshya Digital Private Limited	Alchemic Dream	Total
	€	€	€	€	€	€
Cost
As at 1 January 2014	-	-	-	-	-	-
Additions	203,770	964,287	1,791,281	-	-	2,959,338
As at 30 June 2014	203,770	964,287	1,791,281	-	-	2,959,338
Additions	-	-	-	474,985	-	474,985
As at 31 December 2014	203,770	964,287	1,791,281	474,985	-	3,434,323
Additions	-	-	-	-	214,485	214,485
Revaluation Adjustment	33,909	145,022	-	41,393	3,436	223,760
As at 30 June 2015	237,679	1,109,309	1,791,281	516,378	217,921	3,872,568
Amortisation and impairment
As at 1 January 2014	-	-	-	-	-	-
Amortisation charge	18,680	72,322	59,709	-	-	150,711
As at 30 June 2014	18,680	72,322	59,709	-	-	150,711
Amortisation charge	20,376	96,434	179,128	21,137	-	317,075
As at 31 December 2014	39,056	168,756	238,837	21,137	-	467,786
Amortisation charge	23,771	110,930	179,130	51,638	19,977	385,446
As at 30 June 2015	62,827	279,686	417,967	72,775	19,977	853,232
Net book value
As at 30 June 2014	185,090	891,965	1,731,572	-	-	2,808,627
As at 31 December 2014	164,714	795,531	1,552,444	453,848	-	2,966,537
As at 30 June 2015	174,852	829,623	1,373,314	443,603	197,944	3,019,336

 

Customer relationships are amortised over 5 years from the point of acquisition on a straight line basis.

 

13           Share options

 

In July 2013, at the time of the IPO, the Company put in place a Share Option Scheme and a Long Term Incentive Plan ("LTIP"). The charge in relation to these arrangements is shown below, with further details of the schemes following:

 

	Unaudited	Audited	Unaudited
	26 weeks ended	52 weeks ended	26 weeks ended
	30th Jun 2015	31st Dec 2014	30th Jun 2014
	€	€	€
Share Option Scheme Expense	59,528	65,945	54,069
Share Option Scheme - LTIP Expense	76,313	90,055	-
	135,841	156,000	54,069

 

 

Of the total share option charge, €19,898 relates to Directors of the Company as at June 30, 2015. (2014: €66,078). 

 

Share option scheme

 

Share options are granted to certain Directors and permanent employees. The exercise price of the granted options is equal to the market price of the shares at the time of the award of the options. The Company has no legal or constructive obligation to repurchase or settle the options in cash.

 

Movements in the number of share options outstanding and their related weighted average exercise prices are as follows:

 

Short term incentive plan scheme	30 Jun 2015		31 Dec 2014
	Average exercise price in £ per share	Number of options	Average exercise price in £ per share	Number of options
Outstanding at the beginning of the period	1.20	642,286	1.20	762,775
Granted	1.58	1,059,040	-	-
Lapsed	1.20	(18,684)	1.20	(120,489)
Exercised	-	-	-	-
Outstanding at the end of the period	1.44	1,682,642	1.20	642,286
Exercisable at the end of the period	-	-	-	-

 

 

There were 1,059,040 options granted during the period and 18,684 lapsed due to staff leaving.

 

All 1,682,642 options were granted at an average exercise price of £1.44. All options were granted to either employees or Directors of the Group. Of the total options granted, 207,868 are exercisable from July 12, 2015 to July 11, 2020, 207,867 are exercisable from July 12, 2016 to July 11, 2020, 207,867 are exercisable from July 12, 2017 to July 11, 2020, 353,014 are exercisable from May 31, 2017 to May 31, 2022, 353,013 are exercisable from May 31, 2018 to May 31, 2022 and 353,013 are exercisable from May 31, 2019 to May 31, 2022.

 

 

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 865,766 (2014: 376,226) 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:

 

	30 Jun 2015		31 Dec 2014
	Average exercise price in £ per share	Number of options	Average exercise price in £ per share	Number of options
Outstanding at the beginning of the period	0.01	376,226	0.01	392,037
Granted	0.01	489,540	0.01	50,000
Lapsed	-	-	0.01	(65,811)
Exercised	-	-	-	-
Outstanding at the end of the period	0.01	865,766	0.01	376,226
Exercisable at the end of the period	-	-	-	-

 

On January 6 2015, 101,060 options were granted at an exercise price of £0.01. All options were granted to either employees or Directors of the Group. The 101,060 options granted are exercisable from January 6, 2018 to January 5, 2022 if the market performance conditions are met as at January 6, 2018.

 

On June 1 2015, 388,480 options were granted at an exercise price of £0.01. All options were granted to either employees or Directors of the Group. The 388,480 options are exercisable from June 1, 2018 to May 31, 2022 if the market performance conditions are met as at June 1, 2018.

 

 

14           Acquisitions

 

Acquisition of Alchemic Dream Inc

 

On January 6, 2015 the Group acquired the entire issued share capital of Alchemic Dream Inc, a company registered in Canada, which specialises in providing live operations support to on-line games for a number of games publishers. The acquisition is in line with the Group's strategy to diversify into the provision of complementary services to the video game market and strengthens the Group's service of games already in production. Additionally the acquisition leverages the Group's existing expertise, locations, scale and global reach to extend the services provided by Alchemic Dream as well as generating synergies.

 

The amounts recognised in respect of the identifiable assets acquired and liabilities assumed are set out in the table below:

	Book	Fair Value	Fair
	Value	Adjustment	Value
	€	€	€
Financial Assets
Fixtures, fittings & equipment	37,829	(20,996)	16,833
Identifiable intangible assets - customer relationships	-	214,493	214,493
Trade and other receivable	802,019	(110,817)	691,202
Cash and cash equivalents	37,709	-	37,709
Trade and other payables	(517,034)	-	(517,034)
Deferred tax liabilities	-	(17,143)	(17,143)
Total identifiable assets	360,523	65,537	426,060
Goodwill			457,102
Total consideration			883,162
Satisfied by:
Cash			883,162
Less: cash and cash equivalent balances transferred			(37,709)
			845,453

 

The intangibles assets are to be amortised over their estimated useful lives of 5 years.

 

The main factors leading to recognition of goodwill on the acquisition of Alchemic Dream are the presence of certain intangible assets in the acquired entity which do not value for separate recognition such as the expertise in customer service, reputation within the industry, and, an unidentified proportion representing the balance contributing to profit generation

 

The sale purchase agreement includes a provision for an adjustment to the sales price based on working capital at the acquisition date. Management do not believe any further adjustment to the acquisition is necessary.

 

Alchemic Dream contributed € 1,843,543 revenue and €48,966 profit before tax to the Group between the date of acquisition and the balance sheet date. If the acquisition had been completed on the first day of the financial year, revenue of €1,904,904 would have been contributed to the Group and €60,354 profit before tax before taking into account fair value adjustments of €82,680.

 

Acquisition costs of €397,350 have been charged through the Comprehensive Income Statement.

 

 

Acquisition of Reverb Localização - Preparação de Documentos Ltda

 

On January 18, 2015 the Group acquired 100% of the issued share capital of Reverb Localização - Preparação de Documentos Ltda ("Reverb"), a company registered in Brazil. Reverb provides localisation and audio management services for Brazilian Portuguese for some of the leading games publishers. Reverb Studios was acquired to widen the scope of the Group's services business and to extend the Group's client base.

 

The amounts recognised in respect of the identifiable assets acquired and liabilities assumed are set out in the table below:

 

	Book	Fair Value	Fair
	Value	Adjustment	Value
	€	€	€
Financial Assets
Cash and cash equivalents	17,006	-	17,006
Total identifiable assets	17,006	-	17,006
Goodwill			282,994
Total consideration			300,000
Satisfied by:
Cash			200,000
Deferred consideration			100,000
Total consideration transferred			300,000
Cash consideration			200,000
Less: cash and cash equivalent balances transferred			(17,006)
			182,994

 

The main factors leading to recognition of goodwill on the acquisition of Reverb are the presence of certain intangible assets in the acquired entity which do not value for separate recognition such as the expertise in sound recording and localisation, reputation within the industry, and, an unidentified proportion representing the balance contributing to profit generation.

 

Reverb contributed €207,120 revenue (including €10,377 of intercompany sales subsequently billed onwards) and €89,972 profit before tax to the Group between the date of acquisition and the balance sheet date. If the acquisition had been completed on the first day of the financial year, revenue of €235,311 would have been contributed to the Group and €95,203 profit before tax.

 

 

 

15	Events after the reporting date

                                                

Acquisition of Kite Team

 

On July 16, 2015 the Group acquired 50% of the issued share capital of Kite Team, a company registered in Spain, which specialises in providing cost effective and flexible customer care services to video game publishers. The acquisition is in line with the Group's strategy to diversify into the provision of complementary services to the video game market and strengthens the Group's service of games already in production.

Under the terms of the acquisition, which will be immediately earnings enhancing, consideration of €500k in cash has been paid to the sellers for a 50% share with a further consideration of €295k being payable based on certain criteria.

 

KWS Group has the right to acquire the remaining 50% of the shares for a total maximum total consideration of €2,300,007 in cash or shares. The mix of consideration is at the discretion of Keywords Studios.

The book value acquired of net assets is as follows:

 

	Book
	Value
	€
Financial Assets
Property, plant and equipment	321,658
Trade and other receivable	377,292
Cash and cash equivalents	117,138
Trade and other payables	(290,680)
Long term loan	(624,794)
Total identifiable liabilities	(99,386)
Less non-controlling interest	49,693
KWS share of total identifiable liabilities	(49,693)
Goodwill	811,922
Total consideration	762,229
Satisfied by:
Cash	500,007
Deferred consideration	262,222
Total consideration transferred	762,229
Net cash outflow arising on acquisition
Cash consideration	500,007
Less: cash and cash equivalent balances transferred	(117,138)
	382,869

 

 

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.

 

 

Acquisition of Liquid Development LLC

 

On August 20, 2015 the Group acquired 100% of the issued share capital of Liquid Development, a company registered in USA, which specialises in providing out-sourced art services for the video games industry.

 

The acquisition is in line with the Group's strategy to diversify into the provision of complementary services to the video game market and strengthens the Group's service of games already in production. Additionally the acquisition leverages the Group's existing expertise, locations, scale and global reach to extend the services provided by Liquid Development as well as generating synergies.

 

Under the terms of the acquisition, which will be immediately earnings enhancing, a total consideration of USD $9.0m in cash and shares will be paid to the sellers.

At the date of authorisation of these financial statements the purchase price allocation process has not been completed. However, there is an expectation that the majority of the purchase price will be allocated against goodwill and intangibles.

 

	Book
	Value
	€
Total consideration	8,016,944
Satisfied by:
Cash	5,365,287
Equity instruments (1,074,440 shares of the parent company)	2,413,200
Deferred consideration	238,457
Total consideration transferred	8,016,944

 

At the date of authorisation of these financial statements the purchase price allocation process has not been completed. However, there is an expectation that the majority of the purchase price will be allocated against goodwill and intangibles.