Hybrid Software Group PLC annual report and ﬁnancial statements

for the year ended 31st December 2022.

The heart of industrial inkjet printing

Hybrid Software Group PLC is a public limited-liability company registered in England and Wales with its shares

traded on Euronext Brussels under stock code HYSG. It is headquartered near Cambridge, UK. The Company

employs approximately 300 employees worldwide and has a pedigree stretching back more than 30 years.

Hybrid Software Group develops innovative technology for industrial print manufacturing processes which use inkjet

and other printing techniques. The technology is critical because eciency and sustainability concerns are driving

the conversion of manufacturing processes from traditional analogue methods to just-in-time digital production

using inkjet printing. Applications for inkjet printing include a diverse range of goods, from labels and packaging, to

textiles, tiles, laminates, wall coverings, additive manufacturing and 3D printing applications.

Industrial print manufacturing is when printing technology is

used in broader manufacturing processes where it isn’t the print

itself that is being sold.

The Company is the only full stack supplier of all the critical

core technologies needed for inkjet printing. Our principal

customers are Original Equipment Manufacturers (OEMs)

of digital printing equipment, including high-speed digital

production presses, professional colour prooﬁng devices, wide

format colour printers, and industrial inkjet printers for ceramic

tiles, packaging, textiles and additive manufacturing, as well as

end users, primarily printing companies who purchase these

devices to print and convert labels and packaging materials.

Hybrid Software Group has traditionally provided software

components and printhead drive electronics to OEMs to enable

them to build their own solutions. However, the strategic

acquisitions made over the last several years now enable the

Company to provide full turnkey solutions for OEMs which

enable them to bring new digital printing devices to market

faster and with higher quality. These solutions are higher

value and provide more revenue to the Company per device

installed. Furthermore, the OEM business is synergistic with

the Company’s end-user products, accelerating revenue growth

and increasing the Company’s market share in the inkjet space.

Hybrid Software Group

Strategic report

Governance

Financial statements

Other information

Hybrid Software Group PLC Annual Report 2022

Hybrid Software Group

Our investment case

• Inkjet adoption is increasing rapidly across

multiple industry sectors.

• Analogue markets are converting to digital

production.

• Hybrid Software Group enables customers

to migrate their traditional manufacturing

processes to digital inkjet.

• Hybrid Software Group is the only vertically

integrated supplier to this market.

• Operating companies are award-

winning technology leaders.

• Synergies between companies in the Group,

following strategic acquisitions made

during the past 3 years, will accelerate

innovation and revenue growth.

Courtesy of HP PageWide

CONTENTS

Hybrid Software Group

Hybrid Software Group 1

Digital revolution in print manufacturing 2

The year in review 6

Our markets 8

Business segments 16

Company strategic report

Company strategic report 23

Chairman’s statement 24

CEO’s review 26

CFO’s review 28

Governance

Board of directors 44

Directors’ report 46

Corporate governance report 52

Audit committee report 54

Directors’ remuneration report 55

Independent auditor’s report to the members of Hybrid Software Group PLC 64

Consolidated ﬁnancial statements

Notes to the consolidated ﬁnancial statements 72

Company ﬁnancial statements 113

Notes to the Company ﬁnancial statements 114

Other information

Glossary 121

Hybrid Software Group PLC Annual Report 2022

THE DIGITAL REVOLUTION IN PRINT MANUFACTURING

Hybrid Software Group PLC Annual Report 2022

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The print manufacturing market is transitioning from analogue to digital at a rapid pace. A number of factors have

combined to accelerate this change: supply chain disruption caused by the COVID pandemic, changing consumer

demand for customised products, and the growing realisation that the way for manufacturing industries to do

business is to go digital. At the heart of this change in the printing market are the innovations taking place in digital

inkjet printing. Inkjet printing makes it possible to change what is being printed in real time on every object. It can be

inserted at dierent points in the production process, for instance during product decoration, packaging or labelling.

In addition, inkjet can print on any surface, resulting in a revolution in the way in which goods are produced and

packaged and the speed with which they are ready for market.

Prepress

Digital printer

Oset printer

Computer to plate

Jobﬁle

THE DIGITAL REVOLUTION IN PRINT MANUFACTURING

Printing is part of the manufacturing process for thousands of products that touch our everyday lives as the

illustration shows below. Inkjet is the technology driver for digital conversion of these processes and makes it

possible to produce products that were simply not possible with analogue processes such as customising vehicles,

garage doors, or even jetting onto the side of aircraft. Hybrid Software Group enables its customers to migrate

their traditional manufacturing processes to digital inkjet.

Specialised software is used to prepare the PDF ﬁle

for printing. This may include merging a data stream

to generate bar codes for product identiﬁcation or

security purposes; colour management to achieve

speciﬁc brand colours; layout tools to ensure

the most economical use of raw materials;

tools to proof the artwork on screen;

and enterprise software for workﬂow

automation.

Other software embedded in the printing process ensures high-quality

output through RIPping and screening depending on the speciﬁcations

of the printing device. As many as 7 colours plus white and clear inks

may be jetted with dierent sizes of ink drops to achieve the desired

output. All of these need calibrating with the printing device.

A typical labelling workﬂow

Analogue versus digital workﬂow

In an analogue workﬂow, graphic designs are

transferred to a printing plate which is fed to the

press to produce multiples of the same item.

In a digital workﬂow, a PDF ﬁle created by the

designer encapsulates all the data required for

printing. The PDF ﬁle is submitted to the digital

printing press via a digital front end (DFE).

Image supplied courtesy of FuturePrint https://www.futureprint.tech/

Photo credits bottom row left to right:

iC3D software; Amherst Labels, a

HYBRID Software customer; HP

PageWide, a Global Graphics Software

customer.

Photo credits

left to right:

Vollherbst,

a HYBRID

Software customer;

Mark Andy, a Global

Graphics Software

customer; Vollherbst.

Hybrid Software Group PLC Annual Report 2022

OUR VALUE PROPOSITIONS

Hybrid Software Group PLC Annual Report 2022

PRINTHEAD

ELECTRONICS

IMAGE PROCESSING

AND DEVICE CONTROL

OUTPUT QUALITY

AND SPEED

FILE PREPARATION

AND EDITING

WORKFLOW

AUTOMATION

RASTERIZATION

AND OUTPUT

Original Equipment Manufacturers (OEMs)

Our value proposition to OEMs of industrial digital printing

equipment, typically featuring inkjet technology, is to oer

turnkey solutions and individual components to enable them to

migrate analogue processes to digital and to bring new digital

printing devices to market

faster and with higher quality.

Hybrid Software Group is the only full stack supplier of all the critical core technologies needed for inkjet printing.

With a third of our headcount working in engineering and approximately a third of revenues reinvested in R&D, we

are dedicated to innovation on behalf of our customers we develop award winning software and maintain a strong

IP position with numerous patents.

PRINTHEAD

ELECTRONICS

IMAGE PROCESSING

AND DEVICE CONTROL

OUTPUT QUALITY

AND SPEED

FILE PREPARATION

AND EDITING

WORKFLOW

AUTOMATION

RASTERIZATION

AND OUTPUT

Print service providers and converters

Print service providers and converters are industrial manufacturers

of products, such as labels, cartons, tiles, displays, fabrics, ﬂooring,

décor, etc. which are typically produced using digital printers made

by OEMs.

Our value proposition here is to oer is a complete set of software

applications to maximise eciency in production workﬂows.

Label embellishments are rendered virtually in photo realistic

quality using iC3D Software

Hybrid Software Group

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Courtesy of HP PageWide. For illustration

purposes only.

DWS Printing & Packaging, a HYBRID Software

customer.

THE YEAR IN REVIEW

Hybrid Software Group PLC Annual Report 2022

Two acquisitions – the iC3D business from Creative Edge Software LLC and the technology and

intellectual property of Quadraxis – and two signiﬁcant anniversaries - Xitron and ColorLogic

– shaped the year. We expanded our patent portfolio, overcame shortages in semiconductor

chips, and increased the Company’s presence at numerous conferences and trade events to

demonstrate the unrivalled potential of our products and technology solutions.

Hybrid Software Group PLC Annual Report 2022

Hybrid Software Group

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Strategic report

Governance

Patent successes

Global Graphics Software was

granted three US patents during

the year covering multiple

inventions that maximise

eciency and quality for OEM

customers, one of which was

for technology that underlies

PrintFlat™.

Meteor Inkjet was granted a

US patent for an invention that

determines, in real-time, the

operational status of a nozzle in

a piezoelectric industrial inkjet

printhead.

Overcoming chip shortages

Meteor Inkjet fast-tracked the

development of a new electronics

platform to avoid reliance on

key computer chips that were in

worldwide short supply. Their new

platform brings with it increased

speed as well as the potential for

future functionality enhancements.

iC3D software acquisition

In March the Company acquired

the iC3D business whose software

generates photorealistic 3D virtual

mock-ups, of cartons, labels, ﬂexibles,

bottles, shrink sleeves and point of sale

displays. Pictured are Trevor Haworth

(centre), Managing Director of iC3D

with Mike Rottenborn and Guido Van

der Schueren.

Meeting investors

Executive Chairman Guido Van der Schueren and

CEO Mike Rottenborn represented the Company at

the annual VFB Happening in Antwerp in April. VFB

is the Flemish Federation of Investors.

20th anniversary

ColorLogic GmbH

celebrated its 20th

anniversary in March.

Starting out in a basement,

ColorLogic is now a

global leader in colour

management technology.

Teamwork on show!

Ready for action, Hybrid Software team at

LabelExpo Americas.

Global Graphics’ Hagiwara-san presents the

Company at the Japan Inkjet Technology Fair, Tokyo.

New CFO

Joachim Van Hemelen was

appointed CFO and Company

Director on 1st September.

He was formerly the CFO of

HYBRID Software.

Quadraxis acquisition

HYBRID Software closed the year by acquiring the

technology and intellectual property of Quadraxis, a French

company which developed pioneering technology in 3D

scanning and image processing.

Xitron celebrates 45 years

In 2022 Xitron celebrated 45 years

of supplying innovative tools to the

printing industry. Xitron started in

newspapers in 1977 and evolved

to develop solutions for almost all

printing markets, including RIPs,

workﬂows, computer-to-plate

interfaces, DFEs, and machine

controls for high-speed inkjet

presses.

Hybrid Software Group PLC Annual Report 2022

Hybrid Software Group

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OUR MARKETS

Innovation

It has been observed that the packaging industry seemed to use the pandemic as a platform for growth

and innovation

. There have certainly been many exciting developments in recent years with water-based

inks, paper pouches, ﬂexible ﬁlms and recycled materials. One such is Direct-to-Shape printing which

prints the product “label”, including full-colour images, text linework, and other special eects directly

onto cans, bottles, sleeves and other shaped objects as an in-line step in the manufacturing process.

Flexibility

Whilst packaging produced by the ﬂexographic process accounts for the largest share of the market in

Europe and the US, the share of digitally printed labels and packaging is rising signiﬁcantly. This is due

to a number of factors, not least its ﬂexibility whereby short runs can be produced quickly in response to

changing consumer demand. Most packaging in Asia is still printed with gravure cylinders, but this is also

migrating toward ﬂexographic and digital printing methods. Asia is projected to be one of the highest

growth areas for digital label printing in the near future.

Sustainability

The rising prominence of the ESG - Environmental, Social and Governance - agenda, new legislation,

and consumer pressure are fuelling practical measures to reduce environmental impacts. One of the

ﬁrst steps towards sustainability is the reduction of waste, and since digitally printed packaging can be

produced in very precise quantities, the digital conversion of packaging will continue to be driven by

sustainability initiatives.

Smart factories

As more consumer brands seek to incorporate inkjet printing into their production lines, the Company has

developed SmartDFE

a solution to add print into Smart Factory and Industry 4.0 environments via a Smart

Digital Front End. This solution went into full scale production with a number of OEM partners in 2022.

The Company operates in all digital printing and manufacturing segments, but sales and

marketing eorts target four strategic growth markets: packaging, ceramics, textiles, and 3D

printing & additive manufacturing. In each of these segments, inkjet technology is giving brands

the ﬂexibility to respond to changing customer demands by just-in-time digital production, and to

create products that would not be possible using analogue production methods. Set against the

transition to digital printing, another trend is at play: manufacturers of digital printing devices

are looking for turnkey software solutions that are fast and ﬂexible enough to power the next

generation of digital inkjet printers at blistering production speeds. The Company’s software

engineering expertise allows us to develop solutions to meet and exceed these requirements.

a. Dave Zwang https://whattheythink.com/articles/113241-time-thrive/

b. https://www.smithers.com/services/market-reports/ printing/the-

future-of-digital-printing-to-2032.

c. https://www.smithers.com/ en-gb/services/market-reports/printing/

the-future-of-package-printing-to-2027.

Hybrid Software Group PLC Annual Report 2022

Our markets continued...

iC3D software generates photorealistic 3D virtual mock-ups for

labels and packaging applications.

According to “The Future of Digital Printing to 2032

in 2032 digital print will account for almost a quarter of

the global value of all print and printed packaging by

value, worth $230.5 billion. The same report indicates

that inkjet accounted for 61.4% of digital print value

with 62.4% of volume in 2022 and predicts that this

will increase to 74.1% of value and 77.5% of volume

in 2032. Packaging will see the biggest change, with

digital print gaining traction in corrugated, cartons,

ﬂexible packaging, rigid plastics and metal.

In 2022, Smithers estimated that the overall package

printing market was worth $473.7 billion; and would

reach $551.3 billion by 2027 (constant 2021 prices),

with a growth rate of 3.1%

Packaging

This market requires

specialised knowledge and

advanced software solutions to

provide the speed and precision

required for high-volume production.

Hybrid Software Group oers OEMs

and print service providers the full

gamut of expertise required, from 3D

visualisation of packaging designs,

the faithful reproduction of brand

colours, layout and prooﬁng tools, to

the high-speed processing of variable

data for personalisation.

Hybrid Software Group PLC Annual Report 2022

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Inkjet becoming standard

Digital printing has revolutionised the decoration of ceramic tiles. Industrial inkjet systems are now

considered to be the industry standard and have rapidly replaced more than 90% of the screen printers

worldwide printing applications for ceramic tiles in most worldwide markets.

The ceramics market is heavily dependent on regional economic conditions and trends for new

construction and renovation projects. As residential or commercial construction projects spring up around

the globe there is more demand for ceramic tiles for interior and exterior decoration. China is a key

producer and consumer of ceramics although there is also a dynamic industry in Europe, and growth

opportunities in many other regions.

Economical and ﬂexible

Digital printing of ceramic tiles oers signiﬁcant cost advantages over analogue screen printing. Short

production runs become economically feasible due to lower set-up requirements and reduced stock of

ﬁnished goods. Other manufacturing beneﬁts include less breakage/waste due to non-contact printing

and ease of colour matching for repeat orders.

Inkjet-printed ceramic tiles oer attractive design beneﬁts including the ability to produce realistic images

of marble and other natural materials and to print large quantities of tiles without repeating patterns.

Our markets continued...

d. www.grandviewresearch.com/industry-analysis/ceramic-tiles-

market

The global ceramic tiles market size was

estimated at USD $355.31 billion in 2021

and is expected to witness a CAGR of 7.1%

from 2022 to 2030, powered by demand from

construction projects in emerging economies

of Asia Paciﬁc including China and India.

Although ceramics enjoys the highest

percentage of digital production of any

industrial inkjet segment, it is forseen that

new printhead designs and ink formulations

will enhance market penetration even further.

The use of inkjet will also increase for tile

decoration in the future as it will be used

not just for printing designs but also for

simulating textures and highlights on ceramic

tiles by applying glossy or matte ﬁnishes in

precise patterns.

Finally, ceramic tiles comply with green

building standards* and are gaining traction

in ﬂooring and walling applications,but

the majority of tile usage is still in ﬂooring

applications

Ceramics

Dedicated features

The Company’s software and electronics

solutions are compatible with all the

leading printheads used for ceramic tile

decoration. Meteor Inkjet’s printhead drive

electronics and software provide scalable,

customisable solutions for systems of

any size, speed, or complexity. Special

features for ceramic tile printers include

recirculating printheads and ink systems

to prevent the sedimentation and nozzle

blocking to which heavily-pigmented

ceramic inks are prone. The Company’s

products fully implement the control

functions required of such systems.

Hybrid Software Group PLC Annual Report 2022

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Many facets

The global digital textile printing market is segmented into clothing/apparel, home décor, soft signage,

and industrial. Clothing & apparel was the largest digital segment and made up of more than 53% of

digital textile production in 2021

. Digital textile printing processes include either Direct-to-Fabric where

the design is printed onto a roll of fabric that is later made into a garment, and Direct-to-Garment such

as the printing of designs onto t-shirts or promotional merchandise.

The disruption to supply chains caused by the global pandemic has led many to believe that a systemic

change to the textile supply chain has begun and that transformation is underway towards an increase

in digital production. In any event, the beneﬁts of printing on demand using digital inkjet are increasingly

appreciated by textile manufacturers. Smithers’ data show that as more print service providers invest in

dedicated inkjet textile presses, equipment sales will pass the €1 billion per year mark in 2026

A key driver

Sustainability is a key driver for digital inkjet production because it reduces water, energy usage, pollution

and waste. The latter is of special interest: the amount of textile production ending in landﬁll is a

particular focus for brands who are increasingly aware of their consumers’ demand for environmentally

and socially responsible business practices. It’s not only in retail where sustainability is a factor; there is

increasing demand for green credentials in the use of textiles for public sector spaces.

Shorter cycles beneﬁt fashion

Digital inkjet enables brands to respond to changing consumer behaviour as fashion cycles shorten

and more goods are purchased on-line with scope for personalisation. In 2022, additional supply

chain disruption and increasing de-globalisation has accelerated the trend towards producing closer

to the consumer. Digital production provides more control over inventory shortening supply chains and

facilitating smaller and more ﬂexible production runs.

e. Grand View Research. https://www.grandviewresearch.com/industry-analysis/

digital-textile-printing-market-report

f. The Future of Digital Textile Printing to 2026, Smithers. https://www.smithers.com/

services/market-reports/printing/the-future-of-digital-textile-printing-to-2026

https://www.graphicdisplayworld.com/categories/business/world-inkjet-printed

textile-market-to-grow-from-3-82-billion-to-6-95-billion-in-2026

Recent forecasts indicate that the global digital textile market

will see a compound annual growth rate of 12.7% by 2026,

pushing global value to €6.95 billion in 2026

This will see inkjet’s share of the total printed textile market –

52.7 billion square metres (2019) – rise from 6% to 10% over

the forecast period.

This represents a signiﬁcant opportunity for digital textile

OEMs: Smithers’ data shows that as more print service

providers invest in dedicated inkjet textile presses,

equipment sales will pass the €1 billion per year mark

in 2026.

Dramatic increases in energy prices have only served

to highlight the eciency beneﬁts of digital printing and

reduce the payback time for new investments in digital

textile printing.

Our markets continued...

Textiles

This steady transition

to digital production is resulting in

many new digital textile printers

coming to market. The Company’s

reputation for high-speed

software, colour management

technology, and expertise in inkjet

drive electronics enables us to

respond quickly to manufacturers’

demands for turnkey solutions to

drive these machines.

Hybrid Software Group PLC Annual Report 2022

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Our markets continued...

Beyond prototyping

Inkjet 3D printing is one of the most ﬂexible additive manufacturing technologies, supporting applications

that range from robust metal components to co-moulded parts fabricated from multiple materials,

including cutting edge “functional” printing for manufacturing electronics. This ability to create radical new

products is helping to drive 3D printing adoption in the traditional manufacturing space. An industry that

used to produce only prototypes is now shifting to volume production.

Agile and just-in-time

There are two types of inkjet additive manufacturing. The ﬁrst type is known as binder jetting - using

inkjet printheads to jet a glue or binder on a bed of sand or powder. The powder bed means there is

less need for adding supports to overhanging structures. The second type is materials jetting - heating

polymer ﬁlaments to a liquid state so they can be deposited in layers using inkjet printing technology,

then cured with UV light. Materials jetting using UV cured polymers has excellent detail and accuracy

and a unique capability for combining multiple materials and colours in a single print job. Materials jetting

is also the only additive manufacturing technology capable of functional printing for applications like

printed circuit boards, embedded electronics and batteries.

Inkjet additive manufacturing has all the beneﬁts of digital printing. It is Industry 4.0 compliant, makes

hardware development agile, enables just-in-time manufacturing for minimal inventory cost, and is

inherently low-waste with more opportunity for sustainability.

g. Extrapolated from “https://www.grandviewresearch.com/industry-

analysis/additive-manufacturing-market” Additive Manufacturing Market Size

Report, 2030

h. “https://www.fortunebusinessinsights.com/industry-reports/3d-printing-

market-101902” 3D Printing Market Size, Growth | Global Research Report [2029]

(fortunebusinessinsights.com)

i. “https://www.grandviewresearch.com/industry-analysis/additive-manufacturing-

market” Additive Manufacturing Market Size Report, 2030

The estimated global market size rose to USD $17 billion

in 2021 compared with USD $13.8 billion in 2020

CAGR estimates are quite optimistic, ranging from

around 21% to 30% over the next 7- 8 years. Key drivers

for growth are aerospace, bio-medical/healthcare and

automotive applications.

Additive manufacturing for production applications

represents 38% of the total additive manufacturing

market in 2021

, a signiﬁcant shift from the predominantly

prototyping use cases where additive manufacturing ﬁrst

gained traction.

Inkjet 3D printing is expected to grow from about 2% to

10% of the global market by 2027, driven by consumer

electronics, functional printing, biosensing and a

government drive to adopt digital printing policies

3D/Additive manufacturing

Through its subsidiary Meteor

Inkjet, the Company helps

manufacturers harness the

power of inkjet for additive

manufacturing applications

without the distraction of

having to design electronics

and software solutions in-

house. Meteor can radically

simplify the path through

development to production for

3D inkjet printer manufacturers

and integrators.

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Hybrid Software Group PLC Annual Report 2022

BUSINESS SEGMENTS

Hybrid Software Group PLC Annual Report 2022

Enterprise software

Under the HYBRID Software brand, we oer specialised production software designed primarily for labels and

packaging, including native PDF workﬂow and editing, variable data embellishment and imposition, enterprise

cloud and SaaS solutions, scalable technology with low cost of ownership, and direct integration with leading

Enterprise Resource Planning (ERP) systems and output devices.

HYBRID Software’s products are based on the company’s extensive experience in the labels and packaging

industry as well as their commitment to industry standards: no proprietary or legacy ﬁle formats are used by

HYBRID Software’s products, only industry standard formats like PDF and TIFF™. Our products are used by more

than 1,000 customers worldwide in all areas of pre-press and printing, including labels and packaging, folding

cartons, corrugated, and wide format. HYBRID Software’s products are used both for conventional and digital

printing processes.

Although HYBRID Software does have OEM customers who manufacture equipment for package printing, most

of its customers are end users: companies who print and convert labels and packaging to support brands and

consumer product companies. Selling directly to end users requires specially trained employees in all major

markets worldwide to provide sales, support, training, installation and integration services, and these employees

are critical to the success of HYBRID Software.

The Company’s business segments are:

Enterprise software – ﬁle preparation and workﬂow automation for print manufacturing

Printhead solutions – electronics and software for industrial inkjet devices

Printing software – graphic processing engines for fast and high-quality digital output

Enterprise software continued...

Executive Chairman Guido Van der Schueren

joins the team on the booth at Print4All, Milan.

HYBRID Software’s iC3D Suite was updated with new

features and enhancements including an optimised

shrink sleeve template. The award-winning iC3D Suite

was the ﬁrst all-in-one design software speciﬁcally

developed for packaging designers and converters.

HYBRID Software created a unique gateway to cutting-

edge solutions through access to the PACKZ and STEPZ

in-app solutions store. Available solutions enable users

to build prepress services quickly and more accurately

with ready-made dynamic marks, augmented infopanels,

swatch libraries, and colour books.

In action at Gulf

Print & Pack 2022

in Dubai.

Getting down to business at

ExpoPrint, Sao Paulo, Brazil.

HYBRID Software’s booth at Graphispag in Spain

was printed entirely on corrugated board.

Key Products

• CLOUDFLOW: A modular production workﬂow suite

for ﬁle processing, asset management, soft prooﬁng

and workﬂow automation. It is a ﬂexible application

platform speciﬁcally tailored for packaging graphics

with support for, among other things, PDF colour

separation, trapping, layout, and variable data as

well as rasterisation and screening using the

Company’s leading Harlequin Core RIP.

CLOUDFLOW can run on physical hardware as well

as in public or private cloud computing environments.

• PACKZ: The professional PDF editor for packaging

and label production using any printing method:

ﬂexography, oset lithography, gravure, as well as

digital printing. PACKZ operates on native PDF ﬁles

and utilizes 64-bit multi-processing and multi-

threading facilities for high performance.

PACKZ provides a “Swiss Army Knife” containing a

full set of tools for packaging pre-press, and its

support for native PDF eliminates the need for ﬁle

conversions or proprietary ﬁle formats.

• STEPZ: A specialised production tool derived from

PACKZ but with a feature set aimed speciﬁcally at

digital printing of labels and packaging. STEPZ

contains the same powerful tools for layout and

variable data as PACKZ but drops functionality such

as trapping which is not required for digital printing.

• iC3D is a full software suite that generates

photorealistic 3D virtual mock-ups and oers a large

library of modelling templates for digital packaging

design and prototyping.

Hybrid Software Group

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Printhead solutions

Under the brand of Meteor Inkjet, we develop and supply printhead drive electronics, software, tools and services for

industrial inkjet systems and printing devices. The industrial inkjet market is very broad and fast growing, and includes

ceramic tiles, ﬂooring and décor, wallpaper, labels and packaging, functional and 3D printing, product decoration, and

textiles. Our software and proprietary drive electronics send data to printheads inside inkjet devices to control the

output produced by these printheads. Printheads are a critical component of an inkjet press and generally contain

multiple nozzles for jetting ink or other ﬂuids onto substrates.

The major industrial printhead manufacturers are our route to identifying inkjet development projects around the

world. Consequently, we work closely with all leading printhead vendors, including Xaar, FUJIFILM Dimatix, Kyocera,

Konica Minolta, Memjet, Toshiba TEC, SII, Ricoh, Epson, and Xerox. We continually develop hardware and software

drivers for new printhead models and partner with printhead manufacturers and OEMs to accelerate their route to

production.

Our solutions are modular, scalable, and production-ready and are supported by a world-class technical team,

based near Cambridge, UK as well as in key markets including China and North America.

Hybrid Software Group PLC Annual Report 2022

Business segments continued...

Customers

Our solutions reduce development risk and time to

market for manufacturers building new industrial inkjet

printers. Among our customers in this segment are

Mark Andy, a leading label equipment manufacturer in

the US; Hymmen, a leading printed laminate equipment

manufacturer in Germany; and China’s leading ceramic

tile decoration equipment manufacturer.

Key Products

We support the leading printheads demanded by OEMs

and print system integrators worldwide with solutions

that provide high speed output, unmatched quality, and

rapid time to market for new product launches. Meteor

Inkjet collaborates closely with printhead manufacturers

to support the launch of new printheads with custom

drive electronics and software. Our products comprise:

• Electronics: powerful, ﬂexible and scalable drive

electronics for all major industrial inkjet printheads;

• Software: OEMs can license an application-tuned

Meteor Digital Front End or develop bespoke

software using a Meteor Software Development

Kit. Optional integrated Harlequin RIP and

ScreenPro Advanced Inkjet Screens are available,

along with NozzleFix™ and NozzleMask™ to

compensate for missing nozzles that cause artifacts

in printed output as well as the award-winning

patented PrintFlat™ software for output uniformity;

• Tools and services: DropWatcher™ for analysing

and tuning ink drops in ﬂight, as well as waveform

development services for optimised output quality of

any ink and substrate combination.

Printhead solutions continued...

Hybrid Software Group PLC Annual Report 2022

During the year Dyndrite™added Meteor Inkjet to the

Dyndrite Developer Council (DDC). Dyndrite provide

GPU-accelerated computation engines used to create next

generation digital manufacturing hardware and software.

The collaboration was expanded with the announcement of

Meteoryte, a 3D software tool that simpliﬁes the development

and adoption of inkjet technology for additive manufacturing

applications.

Tracey Brown,

Meteor’s Director of

Strategy & Marketing,

spoke about the latest

industrial inkjet print

quality innovations for

textiles at the ESMA

Print Textile Printing

and Sustainability

Conference.

Meteor Inkjet launched its new web site in 2022 in

Korean, Japanese and Chinese as well as English,

reﬂecting the growing importance of these markets.

Meteor Inkjet is

collaborating with Core

Technologie GmbH on

solutions for additive

manufacturing. Core

Technologie is a global

provider of 3D CAD data

conversion software for

additive manufacturing.

Inkjet is developing printhead drive electronics and software

for the new T3200, T1600 and D3000 printheads announced

by Epson. These solutions join Meteor’s existing products

to drive Epson S3200, S800, I3200 and I1600 printheads.

Meteor continues to provide the most complete range of

Epson industrial printhead driving solutions on the market.

Meteor Inkjet was granted

a US patent for “Inkjet

nozzle status detection”

by the United States

Patent and Trademark

Oce. The patent covers

a system and method for

determining, in real-time,

the operational status of

a nozzle in a piezoelectric

industrial inkjet printhead.

Matthew Pullen, Product Manager, runs a practical

demonstration of the Meteor DropWatcher with the Seiko

RC1536M printhead on the Inktester from People & Technology

at the People & Technology Technical Conference Europe 2022

in Castelló, Spain.

Photo credit: Nessan Cleary

Clive Ayling, Managing Director of Meteor Inkjet.

Hybrid Software Group

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Printing software continued...

Printing software

Before graphic designs can be printed or displayed on a monitor, they must be broken down into vector data

(mathematical drawing algorithms), raster data (image pixels), and/or screened data (calibrated areas of ink or

pigment representing image data). Our Global Graphics Software brand is one of the world’s foremost developers

of the graphic processing engines, known as Raster Image Processors or RIPs, that are used for these tasks.

Colour management is also required for high-quality output, a task which is especially dicult for digital printing

where the inks supported by the printer may not be capable of exactly matching brand-speciﬁc spot colours used

for packaging and corporate branding. Our ColorLogic brand provides a full set of products for these demanding

applications, as well as a Software Development Kit (SDK) which allows OEMs to produce their own customised

colour management tools.

We develop software components and workﬂow solutions for the high-speed digital printing of photo books, labels,

packaging, interior décor, textiles and ceramics. The company’s combination of software and ﬁrst-rate engineering

skills enables it to help press manufacturers to respond to technical challenges with innovation, meeting their

speed and quality requirements, and getting them to market quickly.

Hybrid Software Group PLC Annual Report 2022

Business segments continued...

Customers

Customers include Group companies HYBRID

Software, Meteor Inkjet, and Xitron plus OEMs such as

Hewlett Packard, Mimaki, Mutoh, Canon, Durst, Roland,

Agfa, Kodak, Kirk-Rudy, Postmark, Ryobi, Mitsubishi,

Memjet, Presstek, Printware and Neopost, as well as

many others who embed our printing software solutions

into their own branded Digital Front Ends (DFEs).

Licensing

Solutions are typically licensed under technology

agreements and reseller agreements. We are noted

for our ﬂexible approach to licensing technology and

pride ourselves on being a trusted commercial and

development partner. This is facilitated by a Technical

Services team who work to accelerate each customer’s

time to market, and also by an experienced product

support team.

Key Products

The product range includes:

• Harlequin Core: A Raster Image Processor (RIP),

specialised software that converts text and image

data from many ﬁle formats including PDF, TIFF™

or JPEG into a format that a printing device can

understand and output. It produces unmatched

quality without sacriﬁcing speed, which means

that printing devices which incorporate Harlequin

can be kept running at full rated speed, even on

the most complex jobs, without incurring high costs

for computing hardware;

• ScreenPro: Software that converts continuous tone

image data into ready-to-print halftones (dots

of varying size and spacing) in real-time with no

compromise on quality;

• Colour management software: colour accurate

matching of brand colours for digital production

using four or up to seven process colours. Products

include CoPrA, ColorAnt, ZePrA, as well as a full

SDK for OEM licensing;

• Mako SDK: Software that creates, rasterises,

converts, analyses and optimises many dierent

page description languages, allowing print software

developers full control over colour, fonts, text,

images, vector content and metadata with precision

and performance;

• Harlequin Direct™: Software that drives print data

directly to the printer electronics instead of buering

them on mass storage devices, allowing the

development of faster, wider and higher resolution

printing devices;

• SmartDFE™: A turnkey Digital Front End (DFE)

based on Harlequin Direct, CLOUDFLOW, and Meteor

for digital printing of labels and packaging within

Industry 4.0 automated manufacturing environments;

• Navigator Harlequin RIP and workﬂow: Software

that provides prepress environments with fast,

predictable, and reliable interpretation of PostScript,

PDF, and EPS format ﬁles;

• Navigator DFE: Software that helps prepare jobs,

manage colour, and control digital output devices

built with Memjet or any standard inkjet printhead;

• Output device interfaces: hardware and software

solutions to connect RIPs to Computer-to-Plate

devices, imagesetters, proofers, digital presses,

high-speed copiers, and inkjet printers, extending the

life of legacy equipment.

Xitron was selected as

Memjet’s exclusive Digital

Front End developer for

new print engine systems.

Global Graphics Software

launched SmartMedia

at Labelexpo Americas.

It’s a major upgrade to the

SmartDFE digital front end for

label and packaging presses

and removes complexity

from the process of colour

proﬁling to ensure the best

quality and colour output.

At Labelexpo Americas Xitron

launched its new Navigator Flexo

Suite for end-users, designed

as a powerful workﬂow for ﬂexo

label printers who have outgrown

basic RIPs and need more

automation.

Xitron completed the installation of the Navigator

DFE at IGT’s principal instant ticket printing

facility. IGT boasts the newest and largest

presses in the instant ticket printing industry.

Global Graphics Software partnered

with APS Engineering to create an

OPC UA-enabled ink delivery system

to communicate with any aspect of

an industrial inkjet ecosystem. OPC

UA is the standard for the secure and

reliable exchange of data in industrial

automation.

ColorLogic’s Product Manager, Dietmar

Fuchs, moderated a session “Multicolor

Packaging Implementations” at the FOGRA

Colour Management Symposium, the world’s

international day event for color management.

ColorLogic released upgrades to CoPrA, ZePrA and ColorAnt 9

bringing enhanced automation, new workﬂow features and additional

eciency to customers.

Industry standards

Hybrid Software Group plays an active role in the development

of new industry standards. PDF, for example is the most

commonly used ﬁle format for printing in all our strategic

markets. On behalf of the Company, Global Graphics’

Distinguished Technologist (Consultant), Martin Bailey, is

the primary UK expert to the ISO committees working on

standards for PDF, PDF/X and PDF/VT. He is co-chair of the

PDF Association’s PDF Technical Working Group (TWG), the

international organisation promoting awareness and adoption of

standards using PDF, and the PDF/VT TWG.

The Company is also active in the Ghent Workgroup and the

PDF Association.

Hybrid Software Group PLC Annual Report 2022

Hybrid Software Group

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Other information

The economic downturn following the outbreak of war in Ukraine aected our business

in 2022 after what had been a very strong start in terms of software sales. We were

disappointed that total revenue fell slightly to €46.7 million in 2022 (€48.6 million in 2021)

with net proﬁt from continuing operations falling to €1.3 million (€4.9 million in 2021). We

immediately took steps to manage the situation.

Fortunately, we are a resilient company. Product innovation continues, and investment in R&D

remains a top priority. We occupy a unique position in markets that are predicted to grow

signiﬁcantly. Two further strategic acquisitions in 2022 – iC3D and Quadraxis – ﬁlled gaps in

our technology portfolio and strengthened our product range in both packaging and additive

manufacturing. We have broadened our potential customer reach by oering successful

products for all digital printing applications.

KEY FIGURES (continuing operations)

COMPANY STRATEGIC REPORT

Image courtesy of Meteor

Total revenue

(thousand euros)

G&A

Sales, Maintenance & Support

R&D

102

146

Sta numbers as at 31st December 2022

10,000

20,000

30,000

40,000

50,000

46,693

48,562

2022

2021

1,000

2,000

3,000

4,000

5,000

48,562

2022

2021

4,914

1,300

Net proﬁt from

continuing

operations

(thousand euros)

2022

2021

2,000

4,000

6,000

8,000

10,000

12,000

14,000

10,895

12,211

EBITDA*

(thousand euros)

* For the EBITDA calculation see page 31

Hybrid Software Group PLC Annual Report 2022

Hybrid Software Group

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Other information

CHAIRMAN’S STATEMENT

2022 was a year of mixed results for Hybrid

Software Group. From a ﬁnancial standpoint we

fell short of our growth projections in both revenue

and net proﬁt. As both the Executive Chairman and

the majority shareholder of the company, I must

look at this situation from two separate and unique

perspectives. As a shareholder I expect year-over-

year growth in revenue and proﬁtability, but I must

also take a longer-term view toward maximising

the shareholder value of Hybrid Software Group.

Perhaps it’s appropriate to call this a “hybrid” view

of the company.

The year began with strong sales in most of our business

segments, but things changed quickly when the invasion of

Ukraine and rising energy prices in Europe triggered rapid

inﬂation in most worldwide markets. Printing companies

faced energy prices that tripled or quadrupled in just a few

months, which dampened their investments in software and

new printing presses. Even the label and packaging industry,

which weathered the pandemic with relative ease, was ﬁnally

aected by rising prices for energy, paper, ink, and labour.

Our business model has a degree of built-in resilience as we

sell both to OEMs who manufacture digital printing presses

and to end users, the printing companies who buy those

and conventional devices. However, the economic downturn

that started in 2022 impacted both our OEM and end user

revenues.

We acted quickly in response, tabling M&A activities and

taking prudent steps to conserve cash and reduce our cost

structure, especially external spending. We also slowed

the pace of hiring while accelerating the consolidation of

order processing, invoicing, and bookkeeping across our six

operating businesses. But we never sacriﬁced the long-term

value of Hybrid Software Group simply to deliver short-term

results to the market. We did not cut any of our key personnel

or reduce R&D spending, and if anything, we stepped up

our sales eorts and increased the company’s presence at

key trade shows and industry events. We gained signiﬁcant

market share during the pandemic, especially in our core

label and packaging sector, by leaning into the challenge and

partnering with our customers, and we intend to continue this

approach in the challenging environment of today.

Guido Van der Schueren, Executive Chairman

“One of our key

initiatives in 2022 which

continues today is

the “One Company”

concept embodied

by our name, Hybrid

Software Group”.

While nobody has a crystal ball, I predict a relatively short and shallow recession in most worldwide markets

with a recovery starting in the second half of 2023. With our end-user customers facing heavy price increases

in everything from energy to paper and packaging substrates, we have decided to support their businesses by

not increasing our prices for software or maintenance in 2023. We’ve also increased our focus on SaaS-based

production workﬂows which allow our customers to signiﬁcantly reduce IT spending and capital investment.

One of our key initiatives in 2022 which continues today is the “One Company” concept embodied by our name,

Hybrid Software Group. Although we have six separate businesses in the group, we are not a holding company.

We are a single company with a simple objective: to provide the core technology at the heart of digital printing for

all applications. We have the right technologies to deliver this and are adopting a more streamlined structure to

help us achieve it.

In closing, I would like to thank the stakeholders of Hybrid Software Group: our shareholders, our nearly 300

employees, our Board and management team, and last but certainly not least, our customers for their continued

support. We are ready for the challenges of 2023 and beyond, and I anticipate a much higher level of growth and

proﬁtability in the very near future.

Chairman’s statement continued...

Guido Van der Scheuren

Executive Chairman

Hybrid Software Group PLC is headquartered near Cambridge UK.

Photographed by Leathon Lagerwall, Software Test Engineer.

Hybrid Software Group PLC Annual Report 2022

CEO’S REVIEW

Hybrid Software Group PLC Annual Report 2022

Hybrid Software Group

Strategic report Governance Financial statements

Other information

Hybrid Software Group entered 2022 with bullish

growth projections as the pandemic receded as well

as signiﬁcant hiring plans to support that growth.

In March, we completed the all-cash acquisition of

iC3D, a long-standing partner of HYBRID Software

with products for 3D modelling and photorealistic

ray tracing of labels and packaging. We sold an old

and unused intangible asset (a large block of IPv4

addresses) for net €3.3 million, which covered the

cost of the iC3D purchase. The only headwind in

early 2022 was the fact that the global shortage

of semiconductor chips was beginning to aect

the Meteor Inkjet business as a key chip supplier

failed to meet their delivery commitments for long-

standing orders.

Meteor Inkjet had a stellar year in 2021, growing revenues

42% from the previous year with most of that growth coming

from ceramics production in China. But Chinese market

demand was much weaker in 2022 after two years of

pandemic lockdowns, and the chip shortages widely aected

Meteor as well as their customers. By the ﬁrst half of 2022,

Meteor’s revenue had fallen short of projections by more than

£4 million. The team quickly redesigned a critical circuit board

using a chip that was more widely available and continued

to build inventory in anticipation of market demand, but the

lost ﬁrst-half revenue was not fully recovered in 2022 and

Meteor’s results were well below expectations. On a more

positive note, 2023 has started very strongly for Meteor, with

revenues recovering to healthy levels and demand from China

increasing rapidly. We see the chip shortage receding and

expect good results from Meteor in 2023.

HYBRID Software continues to perform well, delivering the

bulk of our revenue and operating proﬁt for 2022. Two smaller

businesses also deserve special mention. ColorLogic GmbH

was acquired in late 2021 to provide software for colour

management and matching of custom brand colours with

the ﬁxed ink sets used in digital printing presses. ColorLogic

delivered the highest proﬁtability per employee in 2022, and

their software is currently being integrated into all of Hybrid

Software Group’s products. Also noteworthy is Xitron, which

grew revenues by 17% over the previous year with strong

demand for their software solutions for both digital and

conventional printing.

Mike Rottenborn, Chief Executive Ocer

CEO’s review continued...

“There’s no doubt that

Hybrid Software Group

is a stronger company

as we enter 2023. We

have a strong cash

position, a leaner and

more well-organised

R&D structure, and

successful products

that are helping our

customers every day.”.

Mike Rottenborn

Chief Executive Ocer

With more than one hundred software and hardware engineers on board, all the operating divisions of Hybrid

Software Group are continuously innovating to improve our products and develop new ones in response to market

needs. We make a concerted eort to announce new products and patents through frequent press releases, and

this letter is not the place for a comprehensive summary. However, I would like to highlight a few signiﬁcant events

here.

In late 2021, Global Graphics Software was granted a US patent for compensating for printer density and stability,

the basis of our award-winning PrintFlat™ software. This is a broad and important patent which was quickly

challenged by a competitor. We responded to their claims and defended it successfully, with the ﬁnal re-examination

certiﬁcate issued in September. In the fourth quarter, Meteor Inkjet was awarded both US and UK patents for a

very innovative invention to detect clogged nozzles and impending failures in inkjet printheads during normal print

operation. This was the culmination of almost three years of R&D and has broad applications for Meteor Inkjet and

their customers. One of our objectives in 2023 is to monetise our extensive patent portfolio for the beneﬁt of our

company and shareholders.

On the product front, I’ll highlight one new product that pulls together the best technology from all our operating

divisions: SmartDFE™. This product is an intelligent Digital Front End—software and hardware to translate

graphic designs into droplets of ink on a substrate—which targets the challenging label and packaging segment.

By integrating printhead drive electronics together with automated workﬂow software, fast rasterisation and dot

generation, and precise colour management for critical brand colours, SmartDFE™ allows manufacturers of digital

presses for labels, ﬂexible packaging, folding cartons, and corrugated boxes to accelerate their time to market and

provide greater functionality to their customers, especially in automated production environments.

We made one more small acquisition in late 2022, purchasing the intellectual property of the French company

Quadraxis. Their software for mapping graphics to thermoformed plastics and die-formed metal products nicely

augments the iC3D products we acquired in March and will be integrated more deeply into our packaging software

in 2023.

I’d like to close with a statement on sustainability. We’ve been carbon neutral since 2021 by planting trees to oset

our carbon footprint, and inkjet print manufacturing is itself a sustainable activity oering reduced waste, less

pollution, and just-in-time manufacturing. But sustainability is much more than that. True sustainability begins with

the sustainability of the overall business: our ﬁnancial health as a going concern, our sales activities to increase

market share, and most of all, our investments in R&D to make sure that Hybrid Software Group remains the

technology leader and “go to” company in each of our operating segments. This commitment to investment and

proﬁtable growth has never wavered, even in the challenging conditions of 2022.

There’s no doubt that Hybrid Software Group is a stronger company as we enter 2023. We have a strong cash

position, a leaner and more well-organised R&D structure, and successful products that are helping our customers

every day. I have deep conﬁdence that our business plan is sound, that our technology is best-in-class, and that

Hybrid Software Group is the only company that can deliver comprehensive software and electronics solutions for

all digital inkjet applications.

With 2022 in the rear-view mirror, I anticipate higher revenues, greater proﬁtability, and increased market share for

Hybrid Software Group in 2023 and for many years to come.

Hybrid Software Group PLC Annual Report 2022

CFO’S REVIEW

Financial highlights

Hybrid Software Group PLC Annual Report 2022

Hybrid Software Group

Strategic report Governance Financial statements

Other information

customers for a signiﬁcant portion of sales. In 2021, the

top 10 customers generated 56.9% of revenue (2021:

76.7%), with the top customer generating 21.9% of

revenue (2021: 48.2%).

Enterprise Software segment

Revenue for the Enterprise Software segment was

€22.78 million for the year (2021: €20.74 million).

Pre-tax result

The consolidated pre-tax result for continuing

operations was a proﬁt of €1.84 million compared

with a proﬁt of €4.57 million in 2021. The decrease in

proﬁtability of €2.73 million is due to:

• a decrease in revenue of €1.87 million;

• a decrease in cost of sales of €1.09 million;

• an increase in selling, general and administrative

expenses of €4.38 million;

• an increase in research and development expenses

of €0.78 million;

• a decrease in other operating expenses of €0.18

million;

• an increase in other income of €3.27 million;

• an increase in net ﬁnance expenses of €0.79 million;

and

• a decrease in foreign exchange losses of €0.55

million.

Gross proﬁt for the period increased to 84.2% of

revenue (2021: 82.5%), primarily due to the higher mix

of software related sales during the year, particularly

higher margin sales to end users by HYBRID Software.

Included in selling, general and administrative expenses

is amortisation of €1.17 million (2021: €0.84 million)

related to intangible assets recognised as a result of

acquisitions.

Research and development expenses includes the

capitalisation and amortisation of internally generated

intangible assets and the amortisation of certain

intangible assets recognised as a result of acquisitions.

During the period there was a net capitalisation of

development expenditure of €2.00 million (2021: €2.39

million) and amortisation of acquired intangible assets

of €5.10 million (2021: €3.93 million).

The net capitalisation of development expenditure

was comprised of €4.0 million (2021: €3.40 million) of

capitalised expenditure less €2.0 million (2021: €1.01

million) of amortisation.

The third quarter results were favourably impacted by

the sale of an unused asset (approximately 69,000

IPv4 internet addresses) for a net amount of €3.3

million which closed in July. Given the nature of the

sale this income is reported as “Other Income” and is

not included in our revenue ﬁgures, but it is accretive to

EBITDA.

Total operating expenses increased by €4.98 million,

or 14.1% compared to the same period in the prior

year. The increase is mainly to due to higher sales &

marketing related expenditures, increased amortization

expenses and higher sta cost resulting from the

acquisitions of ColorLogic and Hybrid Iberia in Q4

2021, and iC3D in Q1 2022.

Foreign exchange gains and losses are primarily due

to the revaluation of currency balances held at the

balance sheet date and the change in exchange rates

during the year.

Cash Flow

Cash ﬂow was negative for the year with a net cash

outﬂow of €2.74 million (2021: positive inﬂow of €1.91

million). Cash ﬂow from operating activities was positive

at €4.02 million (2021: €9.46 million).

During the period, €3.43 million of cash was used to fund

the acquisition of iC3D (see note 18) and inventory levels

were increased by €1.61 million to mitigate any further

electronic component supply issues.

Loan repayments of €0.55 million were made to Congra

Software SARL, consisting of €0.30 million in principal

repayments and €0.25 million of interest (see note 27).

The Group continues to generate sucient cash to

fund its day to day operational expenditure and capital

expenditure on property, plant and equipment and has

overdraft facilities available if required.

During the year the Group made two acquisitions; the IC3D

assets on 12 March 2022 and the Quadraxis intellectual

property rights on 18 November 2022. See note 34 to the

consolidated ﬁnancial statements for more details.

The following ﬁnancial information relates to continuing

operations.

Revenue

Revenue from continuing operations for the year was €46.69

million compared with €48.56 million in 2021, a decrease of €1.87

million (3.27%). Licence royalties accounted for 51.4% (2021:

49.6%) of revenue, driver electronics accounted for 15.9% (2021:

26.4%), maintenance and support accounted for 20.6% (2021:

15.1%), services accounted for 9.8% (2021: 7.2%), hardware and

consumables accounted for 2.2% (2021: 1.2%) and other items

accounted for 0.1% (2021: 0.5%).

Customer concentration and the dependence on a limited

number of customers improved this year. In 2022, the ten largest

customers represented 29.9% (2021: 42.3%) of the Group’s

revenue, the ﬁve largest customers represented 24.5% (2021:

35.1%) of the Group’s revenue and the single largest customer

represented 9.8% (2021: 13.9%) of the Group’s revenue. There

was no customer (2021: 1 customer totalling €6.74 million, in the

Printhead Solutions segment) during the year that represented

10% or more of total revenue.

The Group’s sales are made in several dierent currencies, thus

ﬂuctuations in exchange rates can aect the reported revenue.

During the year 35.9% (2021: 36.7%) were in euros, 40.5%

(2021: 31.2%) were in US dollars, 20.8% (2021: 30.1%) were in

pounds sterling, 0.5% (2021: 1.3%) were in Japanese yen and

2.3% (2021: 0.7%) were in other currencies.

Printing Software segment

Revenue for the Printing Software was €15.26 million for the

year (2021: €13.84 million). During 2022 a new contract was

agreed with an existing customer which resulted in €1.6 million

of revenue being recognised (in 2021 a new contract was agreed

with an existing customer which resulted in €2.70 million of

revenue being recognised in that year).

Printhead Solutions segment

Revenue for the Printhead Solutions segment was €8.66 million

for the year (2021: €13.98 million). This segment has been

severely impacted by the shortage of its most commonly used

chip. Furthermore it is quite dependent on a limited number of

* For the EBITDA calculation see page 31

For continuing operations:

Revenue

for the year was

€46.69 million

(2021: €48.56 million)

Gross proﬁt

for the year was

€39.31 million

(2021: €40.09 million)

Pre-tax proﬁt

for the year was

€1.84 million

(2021: €4.57 million)

EBITDA*

for the year was

€10.90 million

(2021: €12.21 million)

Cash at 31st

December was

€6.32 million

(2021: €9.23 million)

Joachim Van Hemelen, Chief Financial Ocer

CFO’s review continued...

Hybrid Software Group PLC Annual Report 2022

Hybrid Software Group

Strategic report Governance Financial statements

Other information

IFRS reported net proﬁt from continuing operations is adjusted as follows:

In thousands of euros 2022 2021

IFRS reported net proﬁt from continuing operations

Adjustments to operating result above

Tax eect of above-mentioned adjustments

1,300

(168)

(187)

4,914

2,538

(1,062)

Total adjustments to reported net proﬁt from continuing operations (355) 1,476

Adjusted net proﬁt from continuing operations 945 6,390

Adjusted net basic earnings per share for continuing operations

Adjusted net diluted earnings per share for continuing operations

€0.03

€0.20

EBITDA

EBITDA is also reported as an alternative measure of proﬁt and is calculated by adding back interest, tax,

depreciation and amortisation to net proﬁt from continuing operations.

EBITDA from continuing operations was €10.90 million (2021: €12.21 million) and is reconciled to IFRS reported

net proﬁt from continuing operations as follows:

In thousands of euros 2022 2021

IFRS reported net proﬁt from continuing operations

Net ﬁnance expenses

Tax charge / (credit)

Depreciation

Amortisation

1,300

390

535

1,559

7,111

4,914

463

(349)

1,394

5,789

EBITDA from continuing operations* 10,895 12,211

As a % of revenue from continuing operations 23% 25%

Alternative performance measures continued...

Adjusted operating result and net proﬁt continued...

In thousands of euros

Reported

2022

CER

2022

Reported

2021

Revenue from continuing operations

Adjusted operating result and net proﬁt

The Board believes that evaluating the Group’s ongoing results may not be as useful if it is limited to reviewing

only IFRS ﬁnancial measures, particularly because management uses adjusted ﬁnancial information to evaluate its

ongoing operations, for internal planning and forecasting purposes and for the measurement of performance related

bonuses.

The Group does not suggest that investors should consider these adjusted ﬁnancial results in isolation from, or as

a substitute for, ﬁnancial information prepared in accordance with IFRS. The Group presents adjusted ﬁnancial

results when reporting its ﬁnancial results to provide investors with additional performance measures to evaluate the

Group’s results in a manner that focuses on what the Group believes to be its underlying business operations. The

Group’s management believes that the inclusion of adjusted ﬁnancial results provides consistency and comparability

with past reports.

IFRS reported operating proﬁt or loss from continuing operations is adjusted as follows:

In thousands of euros 2022 2021

IFRS reported operating proﬁt from continuing operations

Add share-based remuneration expense (see note 30)

Deduct capitalised development expense (see note 16)

Add amortisation of capitalised development

Add amortisation of acquired intangibles

Add other operating expenses (see note 8)

Deduct other income (see note 9)

2,274

(3,981)

1,974

5,137

(3,301)

4,770

(3,396)

1,003

4,769

180

(33)

Total adjustments to reported operating proﬁt from continuing operations (168) 2,538

Adjusted operating proﬁt from continuing operations 2,106 7,308

ALTERNATIVE PERFORMANCE MEASURES

Alternative performance measures and adjusted ﬁnancial information has not been audited by the Group’s auditors.

Revenue

To eliminate the impact of currency movements when comparing the current year to the comparative, the current

year is restated at the comparative’s actual exchange rates.

At constant exchange rates (“CER”) (2022 restated at 2021 exchange rates):

46,693

45,305

48,562

*Included within this ﬁgure in the year ended 31 December 2022 is other income of €3,297,000 (2021: €nil). See Note 9 ‘Other Income’ for

further details.

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PRINCIPAL RISKS AND UNCERTAINTIES

The Group does not have a dedicated risk management or internal audit function, consequently the risk

management review is carried out by the executive management team.

The risks and uncertainties described below are not necessarily set out in order of priority or potential impact on

the Group’s ﬁnancial statements.

Global economic conditions

2022 was characterized by a persistent surge in inﬂation and the prolonged disruption in global supply chains due

to multiple economic factors playing out at the same time: continued stimulative monetary policies by the world’s

major central banks at the start of the year in combination with the war in Ukraine and the COVID-19 pandemic still

aecting mainly Asian countries.

In the course of the year the United States Federal Reserve reversed course imposing historically large and rapid

rise in interest rates, of which the speed and magnitude in monetary tightening were among the most aggressive

in history. 2023 likely will see the impact of these higher interest rates as tightening ﬂows through to economic

conditions. The eects presumably are coming, and if they don’t, expectedly more tightening will be required

until there is a sucient loosening of labour markets to bring wage inﬂation down to a level that is consistent with

sustainably achieving inﬂation targets. The eect of all this tightening expectedly results in a decrease in aggregate

demand and credit availability, both of which would be unfavourable to overall business conditions.

Europe and the UK face similar circumstances to the US, with the added complexity of the war in Ukraine and

its eects on energy markets and the knock-on eects on its ﬁscal balances. This has led to higher inﬂation

and weaker economies. To date, the European Central Bank and the Bank of England are lagging behind the

Federal Reserve in the tightening cycle and are beginning to recognize this. Expectedly the tightening pace will be

increased negatively aecting aggregate demand and credit availability after the typical time lag of about 9 to 18

months.

Russia’s invasion of Ukraine

The Group does not have any operations in Ukraine and does not generate any signiﬁcant revenue from either

Russia or Ukraine, thus is not directly aected by the current situation.

In the year since the invasion, the Board remains concerned about the economic and political uncertainty across

the world.

If the situation were to worsen and spread to other countries, there could be a negative impact on the demand for

the Group’s products and services, which could impact the Group’s revenue and proﬁtability.

The COVID-19 pandemic & disruptions in the supply chain

Since December 2019 the pandemic of the 2019 novel coronavirus (COVID-19) has aected countries globally and

has had signiﬁcant consequential eects on the global supply chain. Albeit as of the date of this report not a single

country continues to impose strict lockdowns on its population and the disruptions in global supply chains have

abated, another surge in both the pandemic as disruptions in global supply chains can’t be fully ruled out.

Another surge in the pandemic, for which the likelihood based on current tendencies seem low, may have a

signiﬁcant negative impact on the business of the Group. The severity of any new government-imposed lockdowns

and their duration in dierent countries might have an impact on the demand for products in those countries. The

Group is a software and hardware supplier and depends on the demand from customers for its products and

services to generate revenue. Any resulting reduction in demand from those customers will adversely aect the

Group’s revenue and proﬁtability. In the medium to long-term, the Group would be able to restructure its cost base

to mitigate an ongoing drop in demand.

Risks related to the Groups’s ﬁnancial situation

(a) The Group’s business, results of operations and ﬁnancial condition could be materially

aected by global economic and political conditions

The Group sells its products and services throughout the world and economic conditions that aect the

global economy or regional economies may signiﬁcantly impact the demand for printing technology and

therefore for the Group’s products and services.

The current uncertainty around the global economy, international trade and the pace of growth in the

countries and industries in which the Group’s existing and prospective customers and suppliers operate

may negatively aect the level of demand for the Group’s products and services. A reduced demand for

the Group’s products and services will reduce the Group’s revenue and proﬁtability.

(b) A signiﬁcant portion of the Group’s revenue comes from a small number of large

customers

The Group is dependent on a relatively small number of large customers for a signiﬁcant portion of its

revenue. For the year ended 31 December 2022, the Group’s ten largest customers represented 29.9%

(2021: 42.3%) of the Group’s revenue, with the single largest customer representing 9.8% (2021: 13.9%)

of the Group’s revenue. If one or more of these customers choose to source the products or services

supplied by the Group from an alternative vendor the eect on revenue, and therefore proﬁtability, could be

material.

production of certain of the Groups’ products and therefore impacts the Group’s business

activities and proﬁtability

On 5 December 2016, the Company announced that it had acquired the entire issued share capital of

TTP Meteor Limited (“Meteor”), specialists in printhead driver systems, from TTP Group plc (“TTP”)

based near Cambridge, UK. Following the acquisition of Meteor in 2016, the Group supplies electronic

controls to device manufacturers.

These products include some key electronic components which are subject to shortage of supply from

time to time. There is a risk that some of the Group’s products could not be manufactured if there

is a disruption to that supply, therefore customer orders could be delayed or cancelled, which could

result in a reduction in revenue and proﬁts in the Group. Revenue for these products is reported in the

Group’s Printhead Solutions segment and for the year ended 31 December 2022, revenue from external

customers for that segment was €8.66 million (2021: €13.98 million), which is equal to 18.55% (2021:

28.8%) of the Group’s total revenue.

Principal risks and uncertainties continued...

The impact of global supply chain disruptions on manufacturing, supply and distribution arrangements, including

those of third parties as a result of resource shortages and reduced supply capacity, may adversely impact the

Group’s operations. Such disruptions and any delay in the fulﬁlment of orders could delay or reduce revenue to

the Group.

Refer to note 2 to the consolidated ﬁnancial statements for further details about going concern.

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Risks related to the Group’s business activities and industry

(a) The Group is dependent on the graphic arts and digital printing industries

The Group derives all of its revenues from products and services provided to the graphic arts and digital

printing industries. Accordingly, the Group’s future success signiﬁcantly depends upon the continued demand

for its products within such industries.

The Board believes that an important factor to consider is the substantial change in the graphic arts and

digital printing industries, as evidenced by sustained growth in digital printing and low growth in conventional

printing. The shift in inkjet printing technology opens up opportunities to the Group when manufacturers

develop new products.

If this environment of change were to slow, the Group could experience reduced demand for its products

which could have a material adverse eect on its operational results.

(b) There is no assurance that the Group will identify and complete suitable acquisition

opportunities, on which its growth strategy relies, in a timely manner or at all

The Group operates in an industry where customer acquisition costs, as well as costs for such

customers to switch between suppliers, are signiﬁcant. Therefore, the Group signiﬁcantly focusses on

strategic acquisitions to achieve growth. The success of the Company’s business strategy is highly

dependent on its ability to identify sucient suitable acquisition opportunities and, once identiﬁed, to

complete such acquisitions. The Company cannot guarantee that it will be able to identify suitable

acquisition opportunities or complete such acquisitions at all within the next 12 months. If the Company

fails to complete a proposed acquisition (for example, because it has been outbid by a competitor) it

may be left with substantial unrecovered transaction costs, potentially including substantial break fees,

legal costs or other expenses. Furthermore, even if an agreement is reached relating to a proposed

acquisition, the Company may fail to complete such acquisition for reasons beyond its control. Any such

event will result in a loss to the Company of the related costs incurred, which could materially adversely

aect subsequent attempts to identify and acquire another target business.

Principal risks and uncertainties continued...

Risks related to the Group’s business activities and industry continued

and sensitive information and expose the Company to liability, which would cause the

Company’s business and reputation to suer

The Group and certain third parties that it relies on for its operations collect and store conﬁdential and

sensitive information, and their operations are highly dependent on information technology systems,

including internet-based systems, which may be vulnerable to breakdown, wrongful intrusions, data

breaches and malicious attack. This information includes, among other things, intellectual property (“IP”)

and proprietary information, source codes and commercially sensitive data, both of the Group and of its

customers.

Although the Group has appropriate measures in place (including appropriate insurance coverage) to

protect its business from any potential interruptions, any attack or breach could compromise the Company’s

networks or those of related third parties and stored information could be accessed, publicly disclosed,

lost, or stolen. For example, if the Group would as a result of such an attack be unable to access its source

code needed to develop new products, it might lose customers, which will have an impact on its operational

results. In addition, if IP were to be stolen from the Group, such stolen IP could be used by competitors to

improve their products or produce products which could reduce the Group’s competitive advantage and

therefore impact the Group’s operational results in the long term.

(d) Following the acquisition of HYBRID Software in 2021, the Group serves, in addition to its

traditional client base of original equipment manufacturers, directly end-user customers

and such customer mix needs to be carefully managed to avoid an adverse impact on its

business and results of operations

38.9% of the Group’s revenue for the year ending 31 December 2022 (2021: 46.5%) was generated

by customers that are original equipment manufacturers (“OEMs”), such as industrial inkjet press

manufacturers, who embed the Group’s software in their own products that they sell to end-users.

Although HYBRID Software does have a limited amount of OEM customers who manufacture products

for package printing, most of its customers are end-users (representing 96.1% of its revenue (2021:

97.4%)), i.e., companies that create packaging ﬁles and packaging converting companies. Those

companies purchase, in addition to the software of HYBRID Software, the systems and equipment from

OEMs including those who are customers of the Group. As a result of the HYBRID Software acquisition,

the Group directly serves certain clients of its own clients.

While the Board believes that this customer mix will not have an adverse eect on the group, as is

conﬁrmed by the fact that no OEM or end-user customers provided negative feedback on the acquisition,

its customer mix needs to be carefully managed in the future to avoid an impact on either the OEM sales

or end-user sales and therefore on the proﬁtability of the Group.

(e) The HYBRID Software acquisition made the environment in which the Group operates

more competitive, which could have a material adverse eect on the Group’s business and

results of operations

Because of the highly technical nature of the products produced by both the Group and HYBRID

Software, there is a high barrier for competitors to enter the market. As a result, the limited number of

competitors which do exist tend to be larger companies with sucient resources to compete in these

demanding market segments

The acquisition of HYBRID Software and merging its products and services mix with the products and

services of the Group, has increased the number of competitors the Group is facing, as companies

that were used to be only competitors of HYBRID Software will now also be competing with the Group.

In addition, companies that were traditionally only competitors of the Group might now also view the

activities of HYBRID Software in a more competitive way.

Although HYBRID Software has been a long-standing partner of the Group and such relationship was

already well known in the industry, it cannot be excluded that such increased competition could result

in a business disruption from both customers and suppliers of the Group which could have a material

adverse eect on the Group’s results of operations.

Principal risks and uncertainties continued...

Risks related to the Group’s ﬁnancial situation continued

(d) Certain contractual arrangements with customers contain extended payment terms which

lead to an increased credit risk on such customers

The Group sells its products and services to a range of established customers and generally takes

payments in advance for the sale of physical goods in the Printhead Solutions segment, thus

minimising the credit risk. In the Printing Software and Enterprise Software segments, certain licensing

arrangements allow, however for payments to be made over an extended period of time, up to ﬁve years

in some instances. These extended payment terms increase the credit risk and the chance that the

Group may not be paid. During the year ended 31 December 2022, €3.86 million (2021: €2.70 million)

of revenue was recognised in respect of a licensing arrangement that includes extended payment terms

of up to 5 years. To date, for licensing arrangements where revenue has been recognised in previous

years, all contractually due payments have been received in accordance with the contractual terms.

The current economic uncertainty has increased the likelihood of the materialization of such risk, as the

liquidity position of certain customers could be aected by the consequences of a downward economy

and the payment behaviour of certain customers could change.

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Risks related to the Group’s business activities and industry continued

(f) Recruitment and retention of key personnel

An important part of the Group’s future success depends on the continued service and availability of the

Group’s senior management, including its Chief Executive Ocer and other members of the executive

team. These individuals have acquired specialized knowledge and skills with respect to the Group. The

loss of any of these individuals could harm the Group’s business.

The Group’s business is also dependent on its ability to attract, retain, and motivate talented, highly

skilled personnel, notably in software development, electronic engineering and technical support areas.

Such personnel are in high demand and competition for their talents is intense. Should the Group be

unable to continue to successfully attract and retain key personnel, its business may be harmed. The

Group oers a competitive package of salary and beneﬁts to directors and employees and regularly

benchmarks them against similar businesses to ensure that they remain attractive to current and

prospective employees.

Legal and regulatory risk

(a) Failure to adequately protect the Group’s intellectual property could substantially harm its

business and operating results

The Group’s success is heavily dependent upon its proprietary technology. To protect its proprietary

rights, the Group relies on a combination of patent, copyright, trade secret and trademark laws, as well

as the early implementation and enforcement of non-disclosure and other contractual restrictions. As

part of its conﬁdentiality procedures, the Group enters into written non-disclosure agreements with its

employees, prospective customers, OEMs and strategic partners and takes steps to limit access to, and

distribution of, its software, intellectual property and other proprietary information.

Despite these eorts, if such agreements are not made on a timely basis, complied with or enforced, the

Group may be unable to eectively protect its proprietary rights and the enforcement of its proprietary

rights may be cost-prohibitive. Unauthorised parties may attempt to copy or otherwise obtain, distribute,

or use the Group’s products or technology. Monitoring unauthorised use of the Group’s software

products is dicult. Management cannot be certain that steps taken to prevent unauthorised use of

the Group’s proprietary technology, particularly in countries where the laws may not protect proprietary

rights as fully as in the UK, the EU or the United States, will be eective.

The Group’s source code is also protected as a trade secret. However, from time to time, the Group

licenses its source code to partners, which subjects it to the risk of unauthorised use or misappropriation

despite the contractual terms restricting disclosure, distribution, copying and use. In addition, it may be

possible for unauthorised parties to obtain, distribute, copy or use the Group’s proprietary information or

to reverse engineer its trade secrets.

The Group holds patents, and has patent applications pending, in the United States and in the EU. There

may be no assurance that patents held by the Group will not be challenged, that patents will be issued

from the pending applications or that any claims allowed from existing or pending patents will be of

sucient scope or strength to provide adequate protection for the Group’s intellectual property rights.

The failure to adequately protect the Group’s proprietary technology may adversely aect the Group’s

business, ﬁnancial position, result of operations and prospects.

Principal risks and uncertainties continued...

Legal and regulatory risk continued

(b) Enforcing, acquiring and defending intellectual property rights is costly and could have a

material adverse eect on the Group’s ﬁnancial position and result of operations

In connection with the enforcement of its own intellectual property rights, the acquisition of third-party

intellectual property rights or disputes relating to the validity or alleged infringement of third-party rights,

including patent rights, the Group may be in the future subject to claims, negotiations or protracted

litigation. Intellectual property disputes and litigation are typically very costly and can be disruptive to the

Group’s business operations by diverting the attention and energies of management and key technical

personnel. Although the Group has successfully defended or resolved past litigation and disputes, it

may not prevail in any future litigation and disputes.

Third-party intellectual property rights could subject the Group to signiﬁcant expenditures, require the

Group to enter into royalty and licensing agreements on unfavourable terms, prevent the Group from

licensing certain of its products, cause disruption to the markets where the Group operates or require

the Group to satisfy indemniﬁcation commitments with its customers including contractual provisions

under various license arrangements, any one of which could harm the Group’s business and have a

material adverse eect on the Group’s ﬁnancial position and results of operations.

the Company, which may render a potential takeover complex and costlier

As the Company is a public company limited by shares with its registered oce in the United Kingdom,

the provisions of the UK City Code on Takeovers and Mergers (the “UK City Code”) apply to the

Company. Simultaneously, as the Company’s shares are listed on the regulated market of Euronext

Brussels, a voluntary takeover bid for the Shares of the Company would also be subject to the Belgian

takeover legislation. Accordingly, any voluntary takeover bid for the Company would be governed by both

the UK and Belgian takeover legislation.

Contrary to what was the case before Brexit (where certain aspects were governed by UK law and

certain other aspects by Belgian law based on the provisions of the European Directive 2004/25/EC of

21 April 2004 (the EU Takeover Directive)), UK and Belgian takeover legislations apply in their entirety

to any potential voluntary takeover bid with respect to the Shares and it could not be excluded that

these regulations might be conﬂicting. This may have an impact on the information the potential bidder

must disclose, the envisaged timelines and the contents of the prospectus. Moreover, both the Financial

Services Market Authority (the “FSMA”) and the Panel on Takeovers and Mergers (the “Takeover Panel”)

would be competent authorities with respect to such takeover bid.

The process to make a successful bid could therefore be more complex and costlier. This could

potentially discourage potential bidders from launching a takeover attempt and thus deprive shareholders

of the opportunity to sell their Shares at a premium (which is typically oered in the framework of a

takeover bid).

Principal risks and uncertainties continued...

Hybrid Software Group PLC Annual Report 2022

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IT risk

(a) The Company cannot guarantee that its disaster recovery and business continuity plans

will adequately address any potential issue in the future

The Company cannot guarantee that the Group’s disaster recovery and business continuity plans will

be adequate in the future for its critical business processes nor that they will adequately address every

potential event. Although the Group has insured major risks, the Company can give no assurance that

the Group’s present insurance coverage is sucient to meet any claims to which it may be subject,

that it will in the future be able to obtain or maintain insurance on acceptable terms or at appropriate

levels or that any insurance maintained will provide adequate protection against potential liabilities. Any

losses that the Group incurs that are not adequately covered by insurance may decrease the Group’s

future operating income. In addition, defending the Group against such claims may strain management

resources, aect the Group’s reputation and require the Group to expend signiﬁcant sums on legal costs.

The Group’s business is currently operated from various locations across the UK, Europe, North

America, China and Japan. Some business critical IT infrastructure is concentrated at one site in the

UK with a continuous backup of those systems and data to a separate UK site. Business continuity

plans are intended to ensure that business-critical processes and data are protected from disruption

and will continue even after a disastrous event (such as a major ﬁre or weather, political or war event).

Without these plans, or if these plans prove to be inadequate, there is no guarantee that the Company

or any of its operating subsidiaries would be able to compete eectively or even to continue in business

after a disastrous event or major disruption to one or more of its operating subsidiaries. Accordingly, if

critical business processes fail or are materially disrupted as a result of a disastrous event or otherwise

and cannot recover quickly, this could have a material adverse eect on the Group’s business, ﬁnancial

condition and results of operations.

Principal risks and uncertainties continued...

KEY PERFORMANCE INDICATORS (KPIs)

The board monitors progress on the overall Company strategy and the individual strategic elements by reference

to ﬁnancial KPIs; speciﬁcally revenue, gross margin, operating expenses, adjusted operating proﬁt, EBITDA* and

cash. These KPIs have been addressed in more detail in the Business review and future developments section

above.

SECTION 172 (1)

The Directors have considered the requirements of section 172(1) of the Companies Act 2006 and it is a core duty

of the Directors above. The key considerations are set out below.

It is a core duty of the Directors to promote the success of the Company. To do so the Directors consider the

main issues and stakeholders when making signiﬁcant decisions. The Company has never paid a dividend, thus

shareholders are invested for capital growth and due to the nature of the business, employees are critical to the

success of the Company’s products. The CEO and CFO communicate regularly with analysts and shareholders are

encouraged to participate in an annual meeting.

Engagement with employees is two-way to ensure that employees are kept well-informed about the business and

valuable feedback is received to ensure continuation of being a trusted employer. Initiatives to ensure the well-

being of employees and their dependents are regularly reviewed and enhanced.

Considering the capital growth aims of shareholders, the Directors are focused on growing the revenue and

product portfolio to ensure that the Company continues to grow, whilst remaining proﬁtable, with the continuing

move to digital printing and manufacturing in the marketplace. This is done by development of new products, for

example ScreenPro™,PrintFlat™ and SmartDFE in recent years and by strategic acquisitions such as Meteor,

Xitron, HYBRID Software, ColorLogic and iC3D.

Products are developed based on an identiﬁed market demand: in the case of ScreenPro™ and PrintFlat™, the

identiﬁcation of quality issues when printing with inkjet technology and in the case of SmartDFE, the evolution of

smart factories and Industry 4.0.

Acquisitions are evaluated not only for their ﬁnancial merits, but on the basis that they ﬁt within the strategy and

culture of the Company and that synergies and further opportunities can be developed through integration.

Relationships with customers and key suppliers are fostered through a collaborative approach through the use

of technical services, evaluation software and products and customer-speciﬁc product development where

appropriate. Commercial contracts are written to further strengthen those relationships.

It is the Company’s policy to manage and operate worldwide business activities in conformity with applicable

laws and regulations as well as with the highest ethical standards. Both the Company’s Board of Directors and

executive management are determined to comply fully with the applicable law and regulations, and to maintain the

Company’s reputation for integrity and fairness in business dealings with third parties. A strict compliance with the

provisions of the Company’s Code of Ethics is mandatory for every member of the Company’s Board, executive

ocers, every senior executive and every employee at all locations.

The Directors consider the impact of the Company’s operations on the environment and consider how it can reduce

any negative impact it might have. The Company’s technology and products enable its customers to produce

more ecient and less resource consuming products and services, thus saving energy and raw materials and the

Company participates in a program to oset the carbon footprint of all its employees, in both their personal and

work lives. For more information see page 48.

* For the EBITDA calculation see page 31

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The Board of Directors is very aware of its

responsibilities towards the environment and to

employees and believes that driving sustainability goals

through the business is not only the right thing to do for

future generations but also makes for good business

practice. Indeed, in many of the Group’s key growth

markets, such as packaging and textiles, environmental

factors are inﬂuencing how those markets develop.

The Group’s business is to develop and market software

solutions for printing and electronics for inkjet printing

in particular. As a result, management believes the

Group has no activities that are likely to have signiﬁcant,

detrimental eects on the environment. In fact, an

application of some of the Group’s products is to limit

ink use when printing and inkjet printing is inherently

more sustainable than analogue printing: generating less

waste in all aspects of production. The Group has shown

leadership in the industry, advertising its commitment

to Net Zero, and giving presentations on “the Carbon

Footprint of Inkjet” at industry conferences.

For several years the Group has implemented policies

aimed at minimising the Group’s environmental

footprint, including recycling waste from paper, ink, toner

cartridges, other computer consumables and computer

hardware.

The Group is implementing policies to reduce Scope

1 and Scope 2 footprint such as sourcing renewable

energy and prioritising low-carbon forms of travel and

is talking with supply chains to measure and push down

on Scope 3 carbon footprint. Since 2021, through a

partnership with Ecologi, the Group now osets the

carbon footprint of all Group employees, whether from

personal activities at home or from (Scope 1 and Scope

2) activities at work. Ecologi facilitates the funding of

carbon oset projects and tree planting around the

world, to generate high quality carbon osets. Since

this partnership with Ecologi started, the Group has

achieved an oset of over 3,500 tonnes of CO2e and

funded over 48,000 trees, which have contributed to 24

environmental projects across the globe.

Starting in 2022, the Group has partnered with Octopus

Electric Vehicles to allow UK based

employees to lease

electric vehicles via a

salary sacriﬁce scheme.

To date 8 employees

have taken delivery of

their electric vehicle.

Other employee

events to encourage

sustainability included

hosting vegan lunches

with invited speakers to

discuss environment issues, a

green commute to work scheme,

litter-picking around local streets, and providing

support in kind to the River Rhee Interest Group (an

environmentalist group supporting the watercourse that

runs by one of our oces) and the Wildlife Trust (a UK-

based wildlife charity).

ENVIRONMENTAL MATTERS (INCLUDING CLIMATE CHANGE)

Hybrid Software Group PLC Annual Report 2022

SOCIAL COMMUNITY AND

HUMAN RIGHTS

Social and community

Sta are encouraged to participate in charitable and

community activities.

The Group contributes to employee-led fundraising

activities for local and national charities and sta are

permitted to take paid time o to participate in charitable

activities. Activities supported this year included the

BBC’s Children-in-Need Day and Save the Children’s

Christmas Jumper Day.

Donations to charities amounted to €13,975 (2021:

€7,750) during the year.

The Group operates a peer-to-peer recognition system

which allows UK employees to nominate awards to

colleagues for their outstanding performance. Some

operating divisions also issues employee of the quarter

awards.

Human rights

The Group respects all human rights and in conducting

its business the Group regards those rights relating

to non-discrimination, fair treatment and respect

for privacy to be the most relevant and to have the

greatest potential impact on its key stakeholder groups

of customers, employees and suppliers. As far as it

is aware, the Group did no business with Russian or

Belarusian companies in 2022.

Hybrid Software Group

Strategic report

Governance

Financial statements

Other information

Hybrid Software Group PLC Annual Report 2022

EMPLOYEE MATTERS

Employment policies

The Group places considerable value on the

involvement of its employees and has continued to keep

them informed on matters aecting them as employees

and on the various factors aecting the performance

of the Group. This is achieved through formal quarterly

company meetings presented by the CEO to all

employees.

The Group gives full and fair consideration to

applications for employment from all persons where

the candidate’s aptitudes and abilities meet the

requirements of the job. In the event of any sta

becoming disabled while employed by the Group, every

eort is made to ensure that their employment by the

Group continues and that appropriate adjustments are

made to their work environment. The Group provides

long-term health insurance for all sta if they are unable

to work due to illness or disability whilst in employment.

As a responsible employer, the Group provides modern

and professional working environments in all locations.

Compliant with all relevant human resources and

health and safety regulations, the Group strives to oer

competitive employment packages with opportunities for

personal and professional development. Sta surveys

are carried out with follow-up action plans alongside an

internal communications programme to provide regular

updates on performance.

Diversity

The Group does not discriminate on the grounds of

age, race, sex, sexual orientation or disability. It has a

clear and transparent recruitment process with annual

appraisals to provide feedback on sta performance

and to create individual objectives.

The table below shows the number of persons of each

sex who were directors, management and employees of

the Group as at 31 December 2022.

Mike Rottenborn

Chief Executive Ocer

Company level Number of females Number of males Total

Board

Management

Employees

204

251

Total 52 236 288

Celebrating the world of colour as sta from all operating companies get

together with ColorLogic to share product knowledge.

Team building and product training at ColorLogic’s oce in Rheine,

Germany.

At HYBRID Software’s Freiburg oce, sta enjoy a Grillfest.

Global Graphics Software and Meteor Inkjet are proud recipients of

Queen’s Awards in June the Company sponsored a horse race at the

Cambridgeshire County Day, organised in honour of Her Majesty’s

Platinum Jubilee.

Meteor Inkjet shows its support for Ukraine by donating supplies.

The Xitron team get together to celebrate the end of a very successful

Printing United exhibition.

By order of the board

Hybrid Software Group PLC Annual Report 2022

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Strategic report Governance Financial statements

Other information

BOARD OF DIRECTORS

Guido Van der Schueren has

been Chairman of the Board since

2014 and has close to 50 years

of experience in the graphic arts

industry. In 1992 he co-founded

Artwork Systems and from 1996 to

2007 served as Managing Director

and Chairman of the Board of

Artwork Systems Company. He

served as Vice Chairman of the

EskoArtwork Company from June

2007 until April 2011. He runs

Powergraph, an investment company

mainly active in graphic arts software

and technology. He is also the

Chairman of Congra Software, the

holding company which owns a

majority stake in Hybrid Software

Group PLC.

The Board of Directors guides

the Company to create growth

and shareholder value. With

decades of experience in

building successful companies

the Board supports the

talented individuals in the

senior management teams

to execute and deliver on

strategy.

Guido Van der Schueren

Executive Chairman

Mike Rottenborn took up the position

of Chief Executive Ocer in January

2020. He was formerly the President

and CEO of HYBRID Software Inc.,

which he founded in 2007. He has

spent more than 32 years working in

the graphic arts industry and began

his career as an electrical engineer

with DuPont Printing & Publishing.

After DuPont, he joined PCC Artwork

Systems to focus on prepress

workﬂow software for packaging and

commercial printing customers. He

received his Bachelor of Science

degree in Electrical Engineering

from Virginia Tech and his Master of

Science degree in Computer Science

from Villanova University.

Mike Rottenborn

Chief Executive Ocer

Joachim Van Hemelen was

appointed Chief Financial Ocer,

Company Director and a member

of the Company’s executive

team in September 2022. He has

management responsibility over the

ﬁrm’s global ﬁnance, treasury and

corporate development functions.

Prior to being appointed he was CFO

of HYBRID Software which he joined

in 2015.

Before this he worked as a corporate

ﬁnance advisor in an Antwerp based

family oce, Portolani, and as a

merger and acquisitions advisor in

a Flanders-based mid-market M&A

boutique. He started his professional

career in 2010 as a ﬁnancial

auditor at BDO. Joachim earned

his Master of Science in Business

Administration at the Lessius

Hogeschool Antwerp.

Joachim Van Hemelen

Chief Financial Ocer

Clare Findlay was appointed an

independent non-executive director

of the Company in March 2019.

She was previously a non-executive

director of the Company from June

2011 until 2014 and has more than

20 years’ experience at senior level

positions in the computer software

industry, including as managing

director of the UK operations of

Concentrix Corporation, the global

business process outsourcing

division of SYNNEX. In 2013 Clare

co-founded Purple Demand, a

Demand Creation Agency.

Clare Findlay

Non-executive Director

Luc De Vos was appointed an

independent non-executive director in

February 2021.

An engineer by training, Luc is

credited with championing the early

implementations of the internet in

Europe and was the founding father

of the ﬁrst sizeable pan-European

Internet Service Provider. A notable

business angel during the nineties’

new media and internet boom, he

was a key player in KPNQwest,

Stepstone, and Starlab, to, and

more recently, CarsOnTheWeb

(now ADESA Europe).

He has also been a non-executive

chairman to the ﬁrst mediatech

venture capital fund (Arkafund) in

Belgium as well as a director to the

global leasing and ﬂeet management

company Soﬁco, and advisor to

uniﬁed threat management security

provider AXS GUARD. In all, he has

worked with more than 60 companies

with a strong focus on growth and

corporate governance.

Luc De Vos

Non-executive Director

Hybrid Software Group PLC Annual Report 2022

DIRECTOR’S REPORT

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DIRECTORS

The board are responsible for the appointment of Directors and the amendment of articles of association (“Articles”) and

meet regularly throughout the year.

Subject to the provisions of the Company’s Articles, any person who is willing to act as a director, and is permitted by

law to do so, may be appointed to be a director by ordinary resolution, or by a decision of the Directors, either to ﬁll a

vacancy or as an addition to the existing board provided that the appointment does not result in the total numbers of

Directors exceeding any maximum number ﬁxed in accordance with the Company’s Articles.

At every annual general meeting all the Directors shall retire from oce. If the Company, at the meeting at which a

director retires under, does not ﬁll the vacancy, the retiring director shall, if willing to act, be deemed to have been

reappointed unless at the meeting it is resolved not to ﬁll the vacancy, or unless a resolution for the reappointment of the

director is put to the meeting and lost.

The Directors who held oce during the year under review were:

Guido Van der Schueren Executive Chairman

Michael Rottenborn Chief Executive Ocer

Joachim Van Hemelen* Chief Financial Ocer

Graeme Huttley** Chief Financial Ocer

Clare Findlay Non-executive Director

Luc De Vos Non-executive Director

The Company maintains director and ocers’ liability insurance.

SHAREHOLDINGS

Ordinary shares are entitled to one vote each in any circumstance. Each share is entitled pari passu to dividend

payments or any distribution. The shares are not redeemable and there are no transfer restrictions on the shares.

Subject to the Company’s Articles, but without prejudice to the rights attached to any existing ordinary share, the

Company may issue shares with such rights or restrictions as may be determined by ordinary resolution.

Hybrid Software Group PLC (formerly Global Graphics PLC) is a public limited-liability

company registered in England and Wales with its shares traded on Euronext Brussels

under stock code HYSG.

The Directors present their annual report and the audited ﬁnancial statements for the year

ended 31 December 2022.

The business review, principal risks and uncertainties, information about environmental

matters, the Group’s employees, social and community issues and key performance

indicators can be found in the Group strategic report, starting on page 23.

*Appointed with eect from 1 September 2022. **Resigned with eect from 31 August 2022.

The breakdown of the Company’s issued share capital as at 31 December 2022 was:

INVESTMENT IN OWN SHARES

The Company holds some of its own shares in treasury to meet its obligations arising from the Group’s employee

share programmes (see note 25 and 30 to the consolidated ﬁnancial statements).

The total number of shares held in treasury at 31 December 2022 was 58,996 (2021: 73,996). Further information

can be found in note 25 to the consolidated ﬁnancial statements.

During the year, the Company disposed of 15,000 treasury shares (2021: 39,000), transferred to employees to

satisfy the Company’s obligations under share schemes.

CORPORATE GOVERNANCE

Details of the Company’s corporate governance can be found in the Corporate governance report on page 52.

POLITICAL CONTRIBUTIONS

The Company made no political contributions during the year (2021: €nil).

DIVIDENDS

The Directors do not recommend the payment of a dividend (2021: €nil).

RESEARCH AND DEVELOPMENT

The Group spent €13.49 million (2021: €12.71 million) on research and development during the year. Under IAS

38 Intangible Assets, €4.0 million (2021: €3.40 million) of research and development was capitalised and €2.0

million (2021: €1.01 million) of capitalised research and development was amortised. There was no impairment

of capitalised research and development during the year (2021: €nil). The net eect of capitalisation, amortisation

and impairment on proﬁt in the year was a decrease in expense of €2.0 million (2021: €2.39 million decrease in

expense).

POST BALANCE SHEET EVENTS

Details of post balance sheet events are detailed in note 36 to the consolidated ﬁnancial statements.

FINANCIAL RISK MANAGEMENT

Details of the Company’s ﬁnancial risk management are disclosed in the Group strategic report and in note 31 to

the ﬁnancial statements.

In thousands of euros Number of ordinary shares % of issued share

capital

Congra Software S.à r.l.***

Friberg Christian

Company owned shares

Free ﬂoat

26,938,049

381,732

58,996

5,530,960

81.85%

1.16%

0.18%

16.81%

Total 32,909,737 100.00%

*** Congra Software S.à r.l. is controlled by Guido Van der Schueren, the Company’s Chairman. Michael Rottenborn (Chief Executive Ocer)

and Joachim Van Hemelen (Chief Finance Ocer) are also shareholders of Congra Software S.à r.l.

Director’s report continued...

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Strategic report Governance Financial statements

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STREAMLINED ENERGY AND CARBON REPORTING (SECR)

The following Streamlined Energy and Carbon Report (SECR) provides environmental impact information in

accordance with the Companies Act 2006 (Strategic Report and Director’s Report) Regulations 2013 and the

Companies (Directors’ Report) and Limited Liability Partnerships (Energy and Carbon Reporting) Regulations 2018.

Global energy use and greenhouse gas (“GHG”) emissions from activities for which the Company is responsible

for:

Director’s report continued...

2022 2021

Energy used (kwh)

Electricity (scope 2)

Gas (scope 1)

Fuel (scope 1)

364,332

191,969

946,099

356,803

156,683

579,544

Total energy used (kwh) 1,502,400 1,093,030

GHG emissions (CO2e tonnes)

Electricity (scope 2)

Gas (scope 1)

Fuel (scope 1)

98.9

34.8

242.5

107.5

28.4

137.3

Total GHG emissions (CO2e tonnes) (a) 376.2 273.2

Intensity ratio

Average number of employees 289

252

GHG emissions per employee (CO2e kilogram) 1,301 1,028

Eect of the carbon oset program with Ecologi (CO2e tonnes) (b) (2,751.0) (655.2)

Net GHG (oset)/emissions (CO2e tonnes) (a+b) (2,374.8) (382.0)

Electricity and gas are used to power and heat the Group’s oces and transport fuel is used by company cars

provided to some employees. Where possible, primary data has been sourced (meter readings and supplier

invoices), but where actual energy ﬁgures are not available a reasonable approximation has been used to estimate

energy usage.

There has been a continuation of the existing strategy to reduce the physical number of computers to consolidate

into more ecient servers where possible. A senior manager has been appointed to head up and implement

group-wide sustainability initiatives, including to reduce energy consumption across the Groups oces.

The Company continues to partner with Ecologi, the platform that facilitates the funding of carbon oset projects

and tree planting around the world, to oset its carbon footprint.

Since October 2021, the Group has been working towards compensating for the environmental footprint of every

employee in their work and personal life. At work, the Group is implementing policies to reduce Scope 1 and Scope

2 footprint such as sourcing renewable energy and low-carbon travel, and is talking with supply chains to measure

and push down on Scope 3 carbon footprint.

Through the partnership with Ecologi, the Group osets the carbon footprint of all Group employees, whether at

home or at work.

Dan Harvey, Electronic Engineer, working at a print test rig in

Meteor Inkjet’s main laboratory

Hybrid Software Group PLC Annual Report 2022

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STATEMENT OF DIRECTORS’ RESPONSIBILITIES IN RESPECT OF THE

ANNUAL REPORT AND THE FINANCIAL STATEMENTS

The Directors are responsible for preparing the Annual Report and the Group and parent Company ﬁnancial

statements in accordance with applicable law and regulations.

Company law requires the Directors to prepare Group and parent Company ﬁnancial statements for each ﬁnancial

year. Under that law they have elected to prepare the Group ﬁnancial statements in accordance with UK-adopted

international accounting standards and applicable law and have elected to prepare the parent Company ﬁnancial

statements in accordance with UK accounting standards and applicable law, including FRS 101 Reduced

Disclosure Framework. In addition, the Group ﬁnancial statements are required to be prepared in accordance with

International Financial Reporting Standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the

European Union (“IFRSs as adopted by the EU”).

Under company law the Directors must not approve the ﬁnancial statements unless they are satisﬁed that they give

a true and fair view of the state of aairs of the Group and parent Company and of the Group’s proﬁt or loss for

that period. In preparing each of the Group and parent Company ﬁnancial statements, the directors are required to:

• select suitable accounting policies and then apply them consistently;

• make judgements and estimates that are reasonable, relevant, reliable and prudent;

• for the Group ﬁnancial statements, state whether they have been prepared in accordance with UK-adopted

international accounting standards and IFRSs as adopted by the EU;

• for the parent Company ﬁnancial statements, state whether applicable UK accounting standards have been

followed, subject to any material departures disclosed and explained in the parent Company ﬁnancial

statements;

• assess the Group and parent Company’s ability to continue as a going concern, disclosing, as applicable,

matters related to going concern; and

• use the going concern basis of accounting unless they either intend to liquidate the Group or the parent

Company or to cease operations, or have no realistic alternative but to do so.

The Directors are responsible for keeping adequate accounting records that are sucient to show and explain the

parent Company’s transactions and disclose with reasonable accuracy at any time the ﬁnancial position of the

parent Company and enable them to ensure that its ﬁnancial statements comply with the Companies Act 2006.

They are responsible for such internal control as they determine is necessary to enable the preparation of ﬁnancial

statements that are free from material misstatement, whether due to fraud or error, and have general responsibility

for taking such steps as are reasonably open to them to safeguard the assets of the Group and to prevent and

detect fraud and other irregularities.

Under applicable law and regulations, the Directors are also responsible for preparing a Strategic Report and a

Directors’ Report that complies with that law and those regulations.

The Directors are responsible for the maintenance and integrity of the corporate and ﬁnancial information included

on the Company’s website. Legislation in the UK governing the preparation and dissemination of ﬁnancial

statements may dier from legislation in other jurisdictions.

The Directors are responsible for the preparation of the consolidated ﬁnancial statements in electronic format

in accordance with the ESEF requirements set out in the regulatory technical standards as laid down in the EU

Delegated Regulation nr. 2019/815 of 17 December 2018.

RESPONSIBILITY STATEMENTS UNDER THE DISCLOSURE AND

TRANSPARENCY RULES

We conﬁrm that to the best of our knowledge:

• the ﬁnancial statements, prepared in accordance with the applicable set of accounting standards, give a true

and fair view of the assets, liabilities, ﬁnancial position and proﬁt or loss of the Company and the undertakings

included in the consolidation taken as a whole; and

• the strategic report includes a fair review of the development and performance of the business and the position

of the issuer and the undertakings included in the consolidation taken as a whole, together with a description of

the principal risks and uncertainties that they face.

DISCLOSURE OF INFORMATION TO AUDITOR

The Directors conﬁrm that:

• so far as each director is aware there is no relevant audit information of which the Company’s Auditor is

unaware; and

• the Directors have taken all steps that they ought to have taken to make themselves aware of any relevant

audit information and to establish that the auditor is aware of that information.

AUDITOR

In accordance with Section 489 of the Companies Act 2006, a resolution for the re-appointment of KPMG LLP as

auditor of the company is to be proposed at the forthcoming Annual General Meeting.

By order of the board,

Michael Rottenborn, Director

2030 Cambourne Business Park

Cambourne

Cambridge

CB23 6DW

11 April 2023

Director’s report continued... Director’s report continued...

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Strategic report Governance Financial statements

Other information

CORPORATE GOVERNANCE REPORT

The content of this report is unaudited.

The Financial Conduct Authority’s Listing Rules (“the

Listing Rules”) require that listed companies (but

not companies traded on an overseas EU market)

incorporated in the UK should state in their report and

accounts whether they comply with the UK Corporate

Governance Code (“the Code”) and identify and give

reasons for any area of non-compliance. The Company

is listed on Euronext Brussels and therefore is not

required to comply with the Listing Rules or the Code,

however, several voluntary disclosures have been given.

The board supports the principles and aims of the Code

and intends to ensure that the Group observes the

provisions of the Code as it grows, as far as is practical.

However, the board considers that at this stage in the

Group’s development the expense of full compliance

with the Code is not appropriate.

DIRECTORS AND BOARD

The board comprises two executive directors, a

chairman and two non-executive directors. The

board considers that the non-executive directors are

independent. See page 44 for further details about the

Board of Directors.

The roles of chairman and chief executive ocer are

separate appointments and it is board policy that this

will continue. The non-executive directors bring their

independent judgement to bear on issues of strategy,

performance, appointments, resources and standards

of conduct.

BOARD COMMITTEES

Audit and remuneration committees provide additional

review and scrutiny of the Group’s activities.

RELATIONS WITH SHAREHOLDERS

The Company’s executive directors communicate regularly

with analysts and private investors are encouraged to

participate in the Annual General Meeting.

INTERNAL FINANCIAL CONTROL

The Company has established policies covering the key

areas of internal ﬁnancial control and the appropriate

procedures, controls, authority levels and reporting

requirements which must be applied throughout the

Company.

The key procedures that have been established in

respect of internal ﬁnancial control are:

• internal control: the directors review the

eectiveness of the Company’s system of internal

controls on a regular basis;

• ﬁnancial reporting: there is in place a comprehensive

system of ﬁnancial reporting based on the annual

budget approved by the board. The results for the

Company are reported monthly along with an

analysis of key variances to budget, and year-end

forecasts are updated on a regular basis; and

• investment appraisal: applications for signiﬁcant

expenditure of either a revenue or capital nature

are made in a format which places emphasis on the

commercial and strategic justiﬁcation as well as the

ﬁnancial returns.

All signiﬁcant projects require speciﬁc board approval.

No system can provide absolute assurance against

material misstatement or loss but the Company’s systems

are designed to provide reasonable assurance as to the

reliability of ﬁnancial information and ensuring proper

control over income and expenditure, assets and liabilities.

GOING CONCERN

The Directors have a reasonable expectation that

the Group has adequate resources to continue in

operational existence for the foreseeable future. The

Directors have prepared cash ﬂow forecasts for a

period of at least 12 months from the date of approval

of these ﬁnancial statements and have no reason to

believe that a material uncertainty exists that may cast

signiﬁcant doubt about the Group’s ability to continue

as a going concern, notably because of a cash position

of €6.32 million as at 31 December 2022 (2021: €9.23

million). Those forecasts take into account reasonably

possible downsides, including the potential impact

for increased costs of inﬂation. Thus, they continue

to adopt the going concern basis of accounting in

preparing the annual ﬁnancial statements.

Refer to note 2 to the consolidated ﬁnancial statements

for further details.

Xitron’s Brian Marolf assembles a USB interface (Blue Box)

destined for a Screen computer-to-plate user. Xitron has

shipped over 10,000 USB interfaces with more than half

driving Screen PT-R platesetters.

This report, prepared by the Remuneration Committee (the “Committee”),

is on the activities of the board in respect of the remuneration of directors

for the year ending 31 December 2022. It sets out the remuneration policy

and remuneration details for the executive and non-executive directors of the

Group. It has been prepared in accordance with Schedule 8 of The Large and

Medium-sized Companies and Groups (Accounts and Reports) Regulations

2008 (the “Regulations”).

The members of the Committee are the independent, non-executive directors,

Clare Findlay (Chair of the Committee) and Luc De Vos.

The report is split into three main areas: the statement by the chair of the

Committee, the annual report on remuneration and the policy report.

The policy report will be subject to a binding shareholder vote at the 2023

Annual General Meeting and the policy will take eect for the ﬁnancial year beginning on 1 January 2023. The annual

report on remuneration provides details on remuneration in the period and some other information required by the

Regulations. It will be subject to an advisory shareholder vote at the 2023 Annual General Meeting.

The Companies Act 2006 requires the auditors to report to the shareholders on certain parts of the Directors’

remuneration report and to state whether, in their opinion, those parts of the report have been properly prepared in

accordance with the Regulations.

Hybrid Software Group PLC Annual Report 2022

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Strategic report Governance Financial statements

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Hybrid Software Group PLC Annual Report 2022

DIRECTORS’ REMUNERATION REPORTAUDIT COMMITTEE REPORT

The Committee also considers signiﬁcant ﬁnancial reporting issues,

accounting policies and key areas of judgement or estimation. This

review also includes consideration of the clarity and completeness of

disclosures on the information presented in the

ﬁnancial statements.

Additionally, the Committee will:

• review the eectiveness of the Company’s system of internal ﬁnancial

controls and internal control systems,

• advise the Board on the Company’s risk strategy, risk policies and

current and emerging risk exposures, including the oversight of the

overall risk management framework and systems,

• assess the adequacy and security of the Company’s arrangements

for its employees and contractors to raise concerns, in conﬁdence,

about possible wrongdoing in ﬁnancial reporting or other matters and

to ensure proportionate and independent investigation of such

matters, and

• make recommendations to the Board as it deems appropriate on any

area within its remit where action or improvement is required.

The Committee operates with clarity, simplicity, fairness, predictability and

is aligned to the culture of the organisation.

Luc De Vos, Non-executive Director

THE CHAIRMAN’S ANNUAL STATEMENT

The information provided in this part of the Directors’ remuneration report is not subject to audit.The remuneration

committee reviewed the current level of board fees and salaries payable to the chairman, the CEO and CFO.

ANNUAL REPORT ON REMUNERATION

The information provided in this part of the Directors’ remuneration report is subject to audit.The remuneration of

the executive and non-executive directors of the Group in respect of services to the Group were as follows:

For the year ended 31 December 2022:

Luc De Vos, Chair of the Audit Committee

The Audit Committee (the

“Committee”) is appointed by

the Board and consists wholly

of the non-executive directors.

The Board has delegated to

the Committee responsibility for

overseeing ﬁnancial reporting,

the review and assessment of

the eectiveness of the internal

control and risk management

systems and maintaining an

appropriate relationship with the

external auditor.

The members of the Committee

are Luc De Vos (Chair of the

Committee) and Clare Findlay.

The Committee oversees the

relationship with the Company’s

external auditor, monitors its

eectiveness and independence

and makes recommendations

to the Board in respect of the

external auditor’s remuneration,

appointment and removal. The

Committee also reviews the

ﬁndings from the external auditor,

including discussion of signiﬁcant

accounting and audit judgements,

levels of errors identiﬁed and

overall eectiveness of the audit

process.

The Committee meets as

required, typically at least 3 times

per year; at the beginning of the

ﬁnancial year to agree on the

audit and risk operational plan for

that year, at mid-year to evaluate

any matters and issues that might

have arisen and at the close of

the ﬁnancial year to review the

ﬁndings of the auditor and to

ensure that the Company’s audit

and risk objectives have been

met.

Clare Findlay, Non-executive Director

In euros

Salary

and fees Beneﬁts Bonus LTIP Pension Total

Total

ﬁxed

Total

variable

Executive directors

Guido Van der Schueren

469,681 24,000 50,000 - 1,850 545,531 495,531 50,000

Michael Rottenborn, CEO 285,736 13,732 50,000 - 8,700 358,168 308,168 50,000

Joachim Van Hemelen,CFO

82,133 - 20,000 20,000 - 122,133 82,133 40,000

Graeme Huttley, CFO

123,439 6,129 - - 27,619 157,187 157,187 -

Total executive directors 960,989 43,861 120,000 20,000 38,169 1,183,019 1,043,019 140,000

Non-executive directors

Clare Findlay 21,605 - - - - 21,605 21,605 -

Luc De Vos 20,000 - - - - 20,000 20,000 -

Total non-executive

directors

41,605 - - - - 41,605 41,605 -

Total directors 1,002,594 43,861 120,000 20,000 38,169 1,224,624 1,084,624 140,000

includes the director’s daughter, who is also an employee of the Group.

appointed with eect from 1 September 2022

resigned with eect from 31 August 2022. Includes the director’s spouse, who is also an employee of the Group.

Hybrid Software Group PLC Annual Report 2022

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Strategic report Governance Financial statements

Other information

Annual report on remuneration continued...

In euros

Salary

and fees Beneﬁts Bonus LTIP Pension Total

Total

ﬁxed

Total

variable

Executive directors

Guido Van der Schueren

470,135 8,758 100,000 100,000 1,144 680,037 480,037 200,000

Michael Rottenborn, CEO 218,906 20,521 105,468 105,468 7,343 457,706 246,770 210,936

Graeme Huttley, CFO

175,967 9,153 53,541 53,541 39,136 331,338 224,256 107,082

Total executive directors 865,008 38,432 259,009 259,009 47,623 1,469,081 951,063 518,018

Non-executive directors

Clare Findlay 20,640

- - - -

20,640 20,640

Luc De Vos

17,500 - - - - 17,500 17,500 -

Total non-executive

directors

38,140 - - - - 38,140 38,140 -

Total directors 903,148 38,432 259,009 259,009 47,623 1,507,221 989,203 518,018

Salary and fees are the contracted annual salaries and board fees that are payable. Each executive director

received board fees, prorated where appointed or resigned during the year, which are included within the Salary

and fees column.

Beneﬁts include car allowance, travel allowance, home allowance and private medical insurance payments.

The executive directors’ total available bonus for the year was payable as follows:

• up to 50% against achieving the board approved revenue target; and

• up to 50% against achieving the board approved EBITDA target.

Payments are made after approval by the board. Whilst the board approved targets for the year were not

achieved, the remuneration committee has approved the bonus amounts in the table above due to the unexpected

contribution made from the sale of IP addresses. In addition, the challenging economic climate, which had a huge

impact particularly within Meteor with a signiﬁcant shortage of chips, neither of which could have been foreseen.

LTIP (long term incentive plan) is a cash award that will be payable after 3 years of continuous service from the

date of award.

Contributions totalling €27,000 (2021: €36,000) were made to the personal pension schemes of three (2021: three)

of the directors in accordance with their employment contracts. The Group operates a deﬁned contribution scheme

where contributions are calculated as a percentage of gross salary. There are no deﬁned beneﬁt schemes.

Scheme interests awarded during the ﬁnancial year

There were no share-based awards during the year and there are no outstanding share options as at

31 December 2022.

The aggregate amount of gains made by directors on the exercise of share options during the year was €nil (2021: €nil).

includes the director’s daughter, who is also an employee of the Group

. 6

includes the director’s spouse, who is also an employee of the Group

Luc De Vos appointed with eect from 15 February 2021

Annual report on remuneration continued...

Directors and their interests in shares of the Company

The directors held the following interests in the shares of Hybrid Software Group PLC as at 31 December 2022:

* The interests of Guido Van der Schueren are held in the name of Congra Software S.à r.l., Together with his wife

and children, he owns approximately 70% of the shares of Congra Software S.à. r.l..

** Michael Rottenborn is also a shareholder of Congra Software S.à r.l., he owns approximately 0.94% of the

shares of Congra Software S.à. r.l..

***Joachim Van Hemelen is also a shareholder of Congra Software S.à r.l., he owns approximately 0.27% of the

shares of Congra Software S.à. r.l..

The portion of the share-based compensation expenses which were attributable to the Group’s executive directors was:

The information provided in the following sub-sections of the Directors’ remuneration report are not subject to audit.

Performance graph

The following graph shows the Company’s ordinary share price performance compared with the performance of

the BEL ALL-SHARE index from 31 December 2016 to 31 December 2022. The BEL ALL-SHARE index has been

selected for this comparison because the Company has been a constituent of that index throughout the period. No

dividends have been paid by the Company, so total shareholder return is the change in value of the share price.

Over the above 6-year period, the Company’s share price has increased by 38.7% and the BEL ALL-SHARE index

has remained ﬂat.

In thousands of euros 2022 2021

Matching shares awarded for participating in the Share Incentive Plan - -

Total - -

Guido Van der

Schueren *

Michael

Rottenborn **

Joachim Van

Hemelen*** Clare Findlay Luc De Vos

Shares beneﬁcially owned 27,117,020 1,000 - 100 5,000

Total interest in shares 27,117,020 1,000 - 100 5,000

Hybrid Software Group Ordinary Shares

BEL ALL- Share

Dec - 2016

Dec - 2017 Dec - 2018

Dec - 2019

Dec - 2020

Dec - 2021

-30%

-20%

-10%

10%

20%

30%

40%

50%

60%

70%

Dec - 2022

For the year ended 31 December 2021:

Hybrid Software Group PLC Annual Report 2022

Hybrid Software Group

Strategic report Governance Financial statements

Other information

Statement of implementation of remuneration policy in the following ﬁnancial year

There are no signiﬁcant changes in the way that the remuneration policy will be implemented in the next ﬁnancial

year compared to how it was implemented during this ﬁnancial year.

The remuneration policy will be voted upon during the next AGM to be held during 2023.

REMUNERATION POLICY

The information provided in this part of the Directors’ remuneration report is not subject to audit.

The board determines the Group’s policy for employee, executive and non-executive remuneration and the

individual remuneration packages for executive directors. In setting the remuneration packages, the board

considers the pay and beneﬁts that are oered to existing Group employees and the salaries, bonuses and beneﬁts

available to directors of comparable companies and the continued commitment to the Group through appropriate

long-term incentive schemes, such as the award of shares and share options.

The board did not consult with employees when drawing up the remuneration policy set out in this part of the

report and no views about the policy have been expressed by shareholders of the Company to the board.

Remuneration of executive directors

Consistent with this policy, remuneration packages awarded to executive directors include a mix of basic salary

and performance related remuneration that is designed to incentivise the director to achieve the Group’s strategic

objectives. The remuneration packages usually include some or all of the following elements:

• base salary, as agreed by the board;

• bonus scheme, with performance measured against annually set targets and personal objectives all reviewed

and approved by the board;

• equity, by way of shares and share options;

• other beneﬁts, such as car allowance, company contribution into a personal pension scheme, private medical

insurance, life assurance and long-term sickness insurance; and

• recruitment fee, notice period for termination of contract or payments for loss of oce.

All of the above elements are negotiable between the board and the prospective director.

There are no ﬁxed term contracts and each director must resign and be reappointed at each AGM.

In the forthcoming year the above policy will be applied. The bonus payment for the Executive Chairman, CEO and

CFO is divided into 3 elements:

• up to 40% for achieving the board approved revenue target

• up to 40% for achieving the board approved EBITDA target and

• up to 20% for achieving speciﬁc KPIs as agreed and signed o the Remuneration Committee.

Remuneration of non-executive directors

The fees paid to non-executive directors are determined by the board. The non-executive directors do not receive

any other ﬁxed forms of remuneration or beneﬁts.

Annual report on remuneration

continued...

CEO remuneration table

The following table shows the CEO’s remuneration and percentage achievement of annual bonuses and long-term

incentives over the past 5 years:

Percentage change in remuneration of directors

The table below shows the percentage change over the preceding year, in the base payment currency of

remuneration for the directors and for all employees of the Group:

For further information with regards to the changes in 2020 and 2021, please refer to the annual report for the

relevant ﬁnancial year.

Relative importance of spend on pay

The main operating expense of the Group is the cost of its employees due to the nature of the work of the Group.

In order to attract and retain sta, pay and reward levels need to be competitive and commensurate with the highly

technical skills that are required.

The table below shows the amounts paid to employees (for continuing operations) and the amounts distributed to

shareholders.

2018 2019 2020 2021 2022

Total CEO remuneration (in thousands of euros) 549 523 325 458 358

Annual bonus pay-out against maximum opportunity 100% 75% 87.5% 100% 21%

Long term incentive vesting rates against maximum

opportunity

100% n/a n/a n/a n/a

Annual report on remuneration

continued...

Michael Rottenborn joined the Group in January 2020

Joachim Van Hemelen was appointed a Director in September 2022.

Graeme Huttley resigned as a Director in August 2022.

Clare Findlay joined the Group in March 2019.

Luc de Vos joined the Group in February 2021

Salary and fees Beneﬁts Bonus

Director 2020 2021 2022 2020 2021 2022 2020 2021 2022

Guido Van der Schueren 0.0% 37.1% 0.0% 0.0% 0.0% 0.0% 100% 128.6% (75.0%)

Michael Rottenborn

n/a 12.0% 5.0% n/a 33.0% 0.0% n/a 47.0% (75.0%)

Joachim Van Hemelen

n/a n/a n/a n/a n/a n/a n/a n/a n/a

Graeme Huttley

2.0% 19.9% 5.0% 0.0% 0.0% 0.0% 75.0% 28.5% n/a

Clare Findlay

0.0% 34.5% 5.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

Luc De Vos

n/a n/a 0.0% n/a n/a 0.0% n/a n/a 0.0%

All employees average 3.5% 1.8% 3.9% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

In thousands of euros 2022 2021 % change

Sta expenses (see note 13 to the consolidated ﬁnancial statements) 27,586 26,483 4.2%

Dividends paid to shareholders - - 0%

Hybrid Software Group PLC Annual Report 2022

Hybrid Software Group

Strategic report Governance Financial statements

Other information

FUTURE POLICY TABLE

The information provided in this part of the Directors’ remuneration report is not subject to audit.

The following table provides a summary of the key components of the remuneration package for executive

directors:

Salary and fees

Purpose Rewards skills and experience and provides the basis for a competitive remuneration package.

Operation Salaries and fees, including recruitment and loss of oce payments, are agreed with the

director with reference to the role, the individual's experience, and market practice and market

data.

Opportunity 100% of contractual salary and fees are paid for services rendered to the Group.

Performance

measures

Reviewed annually and executive directors' salaries are generally increased in line with com-

pany-wide pay increases. Exceptional changes are tied to signiﬁcant changes in the Group or

exceptional performance.

Recovery No provision for recovery or withholding of payments unless breach of contract.

Taxable beneﬁts

Purpose Protects against risks and provides other beneﬁts.

Operation The provision of beneﬁts to executive directors includes private medical cover, life insurance

and ill-health income protection.

Opportunity 100% of the premiums due are paid on behalf of the executive director.

Performance

measures

There are no performance measures associated with the beneﬁts other than being a current

executive director.

Recovery No provision for recovery or withholding of payments unless breach of contract.

Bonuses

Purpose Rewards delivery of the near-term business targets set each year, the individual performance

of the executive directors in achieving those targets, and contribution to delivering the Group's

strategic objectives.

Operation Bonuses are agreed in the employment contract with the executive director. The level of bonus

payable is determined based on the role, the individual's experience, and market practice and

market data.

Opportunity Generally 50% to 100% of the annual bonus is achievable on meeting the revenue and ex-

pense targets as set by the board. Adjustments can be made to the plan for speciﬁc, strategic

objectives.

Performance

measures

The performance objectives include only ﬁnancial measures. The ﬁnancial measures are gener-

ally related to revenue and controlling expenses.

Recovery Payment of annual bonuses is usually withheld until the Group's auditors have cleared the audit

and the board have approved payment of the bonuses.

Future policy table continued...

Share plans

Purpose Rewards execution of the Group's strategy and incentivises growth in shareholder value over a

multi-year period.

Operation Initial options are agreed in the employment contract with the executive director. The level

of options awarded is determined based on the role, the individual's experience, and market

practice and market data.

Opportunity Subject to achieving the vesting conditions, 100% of the options granted are achievable.

Performance

measures

Vesting conditions will be determined at the time the options are granted by the board to meet

the current strategic objectives of the Group.

Recovery Options are withheld until vesting and any other conditions are met.

Pension

Purpose Enables executive directors to build long term retirement savings.

Operation The Group pays deﬁned contributions into a pension plan on behalf of the executive director.

Opportunity 100% of the contributions due are paid directly to the pension company on behalf of the

executive director.

Performance

measures

There are no performance measures associated with the beneﬁts other than being a current

executive director.

Recovery No provision for recovery or withholding of payments unless breach of contract.

Board fees

Purpose Attract and retain individuals with the required skills, experience and knowledge so that the

board is able to eectively carry out its duties.

Operation Fees are paid monthly or quarterly.

Opportunity 100% of contractual fees are paid for services rendered to the Group.

Performance

measures

Reviewed annually and increased only in exceptional circumstances.

Recovery No provision for recovery or withholding of payments if performance obligations have been

fulﬁlled.

The following table provides a summary of the key components of the remuneration package for non-executive directors:

Recruitment remuneration

For the appointment of a new director, the aforementioned components will be included in their remuneration

package and negotiated with consideration of the role, their experience and market data. The fees that may be

agreed may include sign-on payments to incentivise the director to take the appointment. These sign-on fees will be

negotiated taking into consideration the role, their experience and market data.

Pay policy for other employees

The Company values its total workforce and aims to provide remuneration packages that are geographically

competitive, comply with any local statutory requirements and are applied fairly and equitably across the Group.

Image courtesy of Vollherbst, specialists in producing labels

with a dierence for the wine, spirits, leisure and creative

industries and a HYBRID Software customer.

Hybrid Software Group PLC Annual Report 2022

Hybrid Software Group

Strategic report Governance Financial statements

Other information

Where remuneration is not determined by statutory regulation, the following key principles are applied:

• to reward in a manner that allows for stability in the business and for sustainable long-term growth

• to reward fairly and consistently for each role with due regard to peers, the economy, the marketplace and the

technical skills required

Service contracts

It is the Group’s policy that executive directors should have contracts with an indeﬁnite term. Non-executive

directors are appointed for an initial six-year term, with provisions for extension, subject to mutual agreement.

All directors oer themselves for annual re-election at each AGM in accordance with the UK Corporate Governance

Code. Service agreements and letters of appointment are available for inspection at the registered oce address

of the Company. None of the directors are entitled to any speciﬁc indemnity which would be due or liable to be due

on termination of their appointment.

Date of

contract

Date of

appointment

Notice from

the Company

Notice from

the director

Unexpired

term on 31

December 2021

Guido Van der Schueren 4 April 2017 16 May 2014 12 months 12 months -

Michael Rottenborn 1 January 2020 2 January 2020 6 months 3 months -

Joachim Van Hemelen 1 January 2021 1 September 2022 12 months 12 months -

Clare Findlay 1 March 2019 1 March 2019 - - 38 months

Luc De Vos 4 February 2021 15 February 2021 - - 62 months

Application of the policy

The table below shows the level of remuneration that would be received by the directors

in accordance with the

directors’ remuneration policy in the ﬁrst year to which the policy applies.

Euro 000s

Minimum

performance

Medium

performance

Maximum

performance 2022 actual

Guido Van der Schueren 520 620 720 546

Michael Rottenborn 283 396 508 358

Joachim Van Hemelen

257 357 457 122

Graeme Huttley

- - - 157

Clare Findlay 22 22 22 22

Luc De Vos 20 20 20 20

The scenarios have been illustrated for each executive director based on the following:

Minimum performance • Base salary/fee increase by 5%, taxable beneﬁts and pension

• No bonus pay-out

• No long term incentive plan

Medium performance: • Base salary/fee increase by 5%, taxable beneﬁts and pension

• 50% bonus pay-out

• 50% long term incentive plan

Maximum performance: • Base salary/fee increase by 5%, taxable beneﬁts and pension

• 100% bonus pay-out

• 100% long term incentive plan

The report was approved by the board of directors on 11 April 2023 and signed on its behalf by:

including the chairman’s daughter and former CFO’s spouse, who are also employees of the Group.

appointed with eect from 1 September 2022

Clare Findlay, Chair of the Remuneration Committee

Hybrid Software Group PLC Annual Report 2022

Hybrid Software Group

Strategic report Governance Financial statements

Other information

1. Our opinion is unmodified

We have audited the financial statements of Hybrid

Software Group plc (“the Company”) for the year ended

31 December 2022 which comprise the Consolidated

Statement of Comprehensive Income, Consolidated

Statement of Financial Position and the Company

Balance Sheet, Consolidated and Company Statement of

Changes in Equity, Consolidated Statement of Cash

Flows and the related notes, including the accounting

policies in note 3.

In our opinion:

— 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 2022 and of

the Group’s profit for the year then ended;

— the Group financial statements have been properly

prepared in accordance with UK-adopted

international accounting standards;

— the parent Company financial statements have been

properly prepared in accordance with UK accounting

standards, including FRS 101 Reduced Disclosure

Frame work; and

— the financial statements have been prepared in

accordance with the requirements of the Companies

Act 2006.

Additional opinion in relation to IFRSs as adopted by the

As explained in note 2 to the Group Financial

Statements, the Group, in addition to complying with its

legal obligation to apply UK-adopted international

accounting standards, has also applied International

Financial Reporting Standards adopted pursuant to

Regulation (EC) No 1606/2002 as it applies in the

European Union (“IFRSs as adopted by the EU”).

In our opinion, the Group Financial Statements have

been properly prepared in accordance with IFRSs as

adopted by the EU.

Independent

auditor’s report

to the members of Hybrid Software Group plc

Overview

Materiality:

group financial

statements as a whole

€410,000 (2021: €372,000 )

0.87% (2021: 0.77%) of group

revenue

Coverage 93% (2021: 100%) of total profits

and losses that made up group

profit before tax

Key audit matters vs 2021

Recurring risk Recoverability of goodwill in

the Hybrid Software CGU and

of the parent Company’s

investment in Hybrid

Software Group SARL (2021:

Recoverability of goodwill in

the Global Graphics Software

CGU and of the parent

Company’s investment in

Global Graphics UK Limited)



Recurring risk Capitalisation of development

costs in FY22 in the Hybrid

Software CGU



Basis for opinion

We conducted our audit in accordance with International

Standards on Auditing (UK) (“ISAs (UK)”) and applicable law

and the terms of our engagement by the Company. Our

responsibilities are described below. We have fulfilled our

ethical responsibilities under, and are independent of the

Group in accordance with, UK ethical requirements including

the FRC Ethical Standard as applied to listed entities. We

believe that the audit evidence we have obtained is a sufficient

and appropriate basis for our opinion.

2. Key audit matters: our assessment of risks of material misstatement

Key audit matters are those matters that, in our professional judgment, were of most significance in the audit of the financial statements

and include the most significant assessed risks of material misstatement (whether or not due to fraud) identified by us, including those

which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the efforts of the

engagement team. We summarise below the key audit matters, in decreasing order of audit significance, in arriving at our audit opinion

above, together with our key audit procedures to address those matters and our findings ("our results") from those procedures in order

that the Company's members, as a body, may better understand the process by which we arrived at our audit opinion. These matters were

addressed, and our results are based on procedures undertaken, in the context of, and solely for the purpose of, our audit of the financial

statements as a whole, and in forming our opinion thereon, and consequently are incidental to that opinion, and we do not provide a

separate opinion on these matters.

[We continue to perform procedures over [identify key audit matter]. However, following [explain why risk is less significant this year], we

have not assessed this as one of the most significant risks in our current year audit and, therefore, it is not separately identified in our

report this year.]

The risk Our response

Recoverability of goodwill in the

Hybrid Software CGU and of the

parent Company’s investment in

Hybrid Software Group SARL

Group: Goodwill of

€53,952,000 (2021: €52,374,000):

Parent: included within parent

Company’s investments of

€101,121,000 (2021: €101,121,000)

Refer to pages 79 and 80 (accounting

policies), page 84 (critical accounting

estimates and judgements) and pages

92, 93 and 94 (financial disclosures)

Forecast-based assessment

Goodwill in the group’s Hybrid Software

CGU and the parent Company’s investment

in Hybrid Software Group SARL are

significant and at risk of irrecoverability due

to recent financial performance. The

estimated recoverable amount of these

balances is subjective due to the inherent

uncertainty involved in forecasting and

discounting future cash flows.

The effect of these matters is that, as part of

our risk assessment, we determined that the

value in use of goodwill in the Hybrid

Software CGU and the recoverable amount

of the cost of investment in Hybrid Software

Group SARL has a high degree of estimation

uncertainty, with a potential range of

reasonable outcomes greater than our

materiality for the financial statements as a

whole.

The financial statements (note 17) disclose

the sensitivity estimated by the Group.

We performed the detailed tests below rather than

seeking to rely on any of the Group’s controls

because our knowledge of the design of these

controls indicated that we would not be able to

obtain the required evidence to support reliance on

controls.

Our procedures included:

• Historical comparisons: We assessed the

reasonableness of the forecasts used by

considering the historical accuracy of previous

budgets.

• Benchmarking assumptions: We compared the

Group’s assumptions to externally derived data

in relation to key inputs, such as discount rates

and long-term growth rates.

• Our experience: We evaluated the revenue

growth rate and EBITDA margin assumptions

used in the forecasts by management. We

challenged management as to the achievability

of their forecasts, taking into account historical

financial performance and other specific

evidence to support the assumptions.

• Sensitivity analysis: We performed our own

sensitivity analysis on the key assumptions

within the cash flow forecasts. This included

sensitising the discount rate applied to the

future cash flows, revenue growth rates and

EBITDA margins in the forecast period, and the

long-term growth rate. We critically assessed

the extent to which a change in these

assumptions, both individually or in aggregate,

would result in an impairment and considered

the likelihood of such events occurring.

• Comparing valuations: We compared the sum

of the discounted cash flows to the Group’s

market capitalisation to assess the

reasonableness of those cash flows.

• Assessing transparency: We assessed whether

the Group’s disclosures about the sensitivity of

the outcome of the impairment assessment to

changes in key assumptions reflected the risks

inherent in the recoverable amount.

Our results

We found the goodwill balance in the Hybrid

Software CGU and the parent Company’s

investment in Hybrid Software Group SARL to be

acceptable (2021: acceptable).

Hybrid Software Group PLC Annual Report 2022

Hybrid Software Group

Strategic report Governance Financial statements

Other information

2. Key audit matters: our assessment of risks of material misstatement (Continued)

[We continue to perform procedures over [identify key audit matter]. However, following [explain why risk is less significant this year], we

have not assessed this as one of the most significant risks in our current year audit and, therefore, it is not separately identified in our

report this year.]

The risk Our response

Capitalisation of development costs

in FY22 in the Hybrid Software CGU

Included within other intangible

assets of €37,746,000 (2021:

€38,371,000)

Refer to pages 79 and 80 (accounting

policy), page 84 (critical accounting

judgements and estimates) and pages

91 and 92 (financial disclosures)

Subjective judgement

Eligible costs in respect of software

developers and contractors working to

develop new software products are

capitalised if the projects to which they

relate meet the relevant criteria, which

materially affects the Group’s profitability.

Within the Hybrid Software CGU there is

judgement involved in determining whether

projects meet the criteria for capitalisation

in the year and in determining the amount

of costs that meet the qualifying criteria.

The risk has reduced in the current year due

to the implementation of processes that are

in place to track the time spent on qualifying

projects.

We performed the detailed tests below rather than

seeking to rely on any of the Group’s controls

because our knowledge of the design of these

controls indicated that we would not be able to

obtain the required evidence to support reliance on

controls.

Our procedures included:

• Test of detail: Within the Hybrid Software CGU,

we selected a sample of capitalised costs in the

year based on the magnitude of development

spend capitalised. For the capitalised costs

selected:

(i) We critically assessed the judgement

made as to whether the development

constitutes a substantial enhancement to

the underlying assets by challenging

management on the functionality being

developed;

(ii) We critically assessed the time spent on

these developments by performing

inquiries with a sample of individual

developers and contractors to

independently corroborate the Group’s

quantification of time spent, and

challenged the job title and role of these

individuals to ascertain whether

development would be expected from

that role;

(iii) We created our own independent range

of development spend capitalised to

critically assess the judgements made by

the Group.

• Assessing transparency: We assessed the

adequacy of the Group’s disclosures in respect

of the judgement made in relation to capitalising

development costs.

Our results

— The results of our testing were satisfactory and

we considered the level of development spend

capitalised in the year within the Hybrid

Software CGU to be acceptable (2021:

acceptable).

We continue to perform procedures over the recoverability of goodwill in the Global Graphics Software CGU and the recoverability of

parent Company’s investment in Global Graphics (UK) Limited. However, following an assessment of the headroom in the models to

support the goodwill balance in the Global Graphics Software CGU and the investment in Global Graphics (UK) Limited, we have not

assessed these as the most significant risks in our current year audit and, therefore, they are not separately identified in our report this

year.

The valuation of separately identifiable intangible assets recognised in the Hybrid Software Group SARL acquisition is not a significant risk

or a KAM in the current year. The risk in how its valued is an issue on recognition and after the initial year it is no longer a significant risk

Group profit before tax

Group total assets

95%

(2021: 100%)

93%

(2021: 100%)

98%

(2021: 99%)

Key:

Full scope for group audit purposes 2022

Specified risk-focused audit procedures 2022

Full scope for group audit purposes 2021

Specified risk-focused audit procedures 2021

Residual components

Group revenue

3. Our application of materiality and an overview of

the scope of our audit

Materiality for the Group financial statements as a

whole was set at €410k (2021: €372k), determined

with reference to a benchmark of Group revenue from

continuing operations, of which it represents 0.87%

(2021: 0.77%).

We consider total revenue to be the most

appropriate benchmark as it provides a more stable

measure year on year than group profit before tax.

Materiality for the parent Company financial

statements as a whole was set at €369k (2021:

€168k), determined with reference to a benchmark

of Company total assets, of which it represents 0.8%

(2021: 0.17% of Company total assets).

In line with our audit methodology, our procedures

on individual account balances and disclosures were

performed to a lower threshold, performance

materiality, so as to reduce to an acceptable level the

risk that individually immaterial misstatements in

individual account balances add up to a material

amount across the financial statements as a whole.

Performance materiality was set at 65% (2021: 65%)

of materiality for the financial statements as a whole,

which equates to €266k (2021: €241.8k) for the

Group and €239.9k (2021: €109.2k) for the parent

Company. We applied this percentage in our

determination of performance materiality based on

the level of identified misstatements and control

deficiencies during the prior period.

We agreed to report to the Audit Committee any

corrected or uncorrected identified misstatements

exceeding €20.4k (2021: €18.6k), in addition to other

identified misstatements that warranted reporting

on qualitative grounds.

Of the Group’s 10 (2021: 10) reporting components,

we subjected 6 (2021: 5) to full scope audits for

group purposes and 0 (2021: 1) to specified risk-

focused audit procedures over revenue, inventory

and cash. The latter were not individually financially

significant enough to require a full scope audit for

group purposes but did present specific individual

risks that needed to be addressed.

The components within the scope of our work

accounted for the percentages illustrated on this

page

The remaining 5% (2021: 0%) of total Group revenue,

7% (2021: 0%) of total profits and losses that made

up group profit before tax and 2% (2021: 1%) of total

Group assets is represented by 4 (2021: 4) reporting

components, none of which individually represented

more than 7% (2021: 1%) of any of total Group

revenue, total profits and losses that made up group

profit before tax or total Group assets. For these

components, we performed analysis at an

aggregated group level to re-examine our

assessment that there were no significant risks of

material misstatement within these.

Revenue from continuing

operations

€46.6m (2021: €48.6m)

Group materiality

€410k (2021: €372k)

Reveue from continuing

operations

Group materiality

€410k

Whole financial

statements

materiality (2021:

€372k)

€266k

Whole financial

statements performance

materiality (2021: €241.8k)

€307.5k

Range of materiality at 6

components (€123k

- €307.5k)

(2021: €131k

- €242k)

€20.4k

Misstatements

reported to the

audit committee (2021: €18.6k)

Hybrid Software Group PLC Annual Report 2022

Hybrid Software Group

Strategic report Governance Financial statements

Other information

4. Going concern (continued)

We considered whether the going concern disclosure in note 2 to

the financial statements gives a full and accurate description of the

Directors’ assessment of going concern, including the identified

risks, and related sensitivities.

Our conclusions based on this work:

— we consider that the directors’ use of the going concern basis

of accounting in the preparation of the financi al statements is

appropria te;

— we have not identified, and concur with the directors’

assessment that there is not, a material uncertainty related to

events or conditions that, individua lly or collectively, may

cast significant doubt on the Group’s or Company's ability to

continue as a going concern for the going concern period; and

— we found the going concern di s closure in note 2 to be

acceptable

However, as we cannot predict all future events or conditions and

as subsequent eve n ts may result in outcomes that are in consistent

with judgements t h at were reasonable at the time they were

made, the above c onclusions are not a guarantee that the Group or

the Company will con tinue in operation.

5. Fraud and breaches of laws and regulations – ability to detect

Identifying and responding to risks of material misstatement due

to fraud

To identify risks of material misstatement due to fraud (“fraud

risks”) we assessed events or conditions that could indicate an

incentive or pressure to commit fraud or provide an opportunity to

commit fraud. Our risk assessment procedures included:

— Enquiring of directors and inspection of polic y documentation

as to the Group’s high-level policies and procedures to

prevent and detect fraud, as well as whether they have

knowledge of any actual, suspected or alleged fraud.

— Reading Board minutes.

— Considering remuner ation incentive schemes and

performance targets for management/ directors/ sales staff.

— Using analytical procedures to identify any unusual or

unexpected relationships.

We communicated identified fraud risks throughout the audit

team and remained alert to any indications of fraud throughout

the audit. This included commu nication from the Group to

component audit teams of relevant fraud ris k s identified at th e

Group level and request to component audit teams to report to

the Group audit team any instances of fraud that could give ris e to

a material misstatement at the Group level.

As required by auditing standards, and taking into account possible

pressures to meet profit targets and our overall knowledge of the

control environment, we perform procedures to address the risk of

management override of

controls and the risk of fraudulent

revenue recognition, in particular:

— the risk that Group management may be in a position to

make inappropriat e accounting entries;

— the risk that software revenue is recorded inaccurat ely and

that other revenue streams are recorded in the wrong period

We did not identify any additional fraud risks.

3. Our application of materiality and an overview of the scope

of our audit (continued)

The group team instructed component auditors as to the

significant areas to be covered, including the relevant risks detailed

above and the information to be reported back. The group team

approved the component materialities, which ranged from €123k

to €307.5k (2021: €131k to €242k), having regard to the mix of size

and risk profile of the Group across the com p onents.

The work on 1 of the 10 components (2021: 1 of the 10

components) was performed by component auditors and the rest,

including the audit of t h e parent Company, w as performed by the

Group team.

In regards to this component, the Group team visited the

component location in Belgium to assess the audit risk and

strategy. Video and telephone confer e n ce meetings were also

hel d with th e component auditor. At these visits and meetings,

the findings reported to the Group team were discussed in more

detail, and any further work required by the Group team was then

performed by the component auditor.

The scope of the audit work performed was predominately

substantive as we placed limited reliance upon the Group’s internal

control over financial reporting.

4. Going concern

The Directors have prepared the financial statements on the g oing

concern basis as they do not intend to liquidate the Group or the

Company or to cease their operations, and as they have concluded

that the Group’s and the Company’s financial position means that

this is realistic. They have also concluded that there are no material

uncertainties that could have cast significant doubt over their

ability to continue as a going c oncern for at least a year from the

date of approval of the financial statements (“the going concern

period”) .

We used ou r kn owledge of the Group, its industry, and the general

economic environment to identify the inherent risks to its business

model and analysed how those risks might affect the Group’s and

Company’s financial resources or ability to continue operati ons

over the g oing concern period.

The risks that we c onsidered most lik ely to adversely affect the

Group’s and Company’s availab le financial resources over this

period was a downturn in customer demand and rising

employment costs. We a lso considered less predictable but

realistic second order impacts such as raisi n g other costs to reflect

the inflationa ry considerations which co uld re sult in a rapid

reduction of available financial resources.

We considered whether these risks could plausibly affect the

liquidity in the g oing concern period by assessing the Di rectors’

sensitivities over the lev el of available financial resources indicated

by the Group’s financial forecasts tak ing account of s evere, but

plausible adverse effects that could arise from these risks

individually and collectively.

Our procedures also included:

— Assessing the reasonableness of the Group’s assumptions in

relation to key inputs, such as liquidity, in particular in

relation to operating profits, by comparing with our

knowledge of the industry, externally derived date and the

actual performance of the Group.

— Assessing whether the Directors’ downside scenario applied

mutual ly consistent assumptions in aggregate, using our own

assessment of t he possible ra ng e of each key assumption.

— Comparing past budgets to actual r esults to assess the

Directors’ track record of budgeting accurately.

5. Fraud and breaches of laws and regulations – ability to detect

(continued)

Context of the ability of the audit to detect fraud or breaches of

law or regulation

Owing to the inhere n t limitations of an audit, t here is an

unavoidable risk that we may not have detecte d some material

misstatements in the financial statements, even though we have

prope rly planned and performed our audit in accordance with

auditing standards. For example, the further removed non-

compliance with laws and regulations is from the events and

transactions reflected in the financial statements, the less likely the

inh e rently limited procedures required by auditing standards

would identify it.

In addition, as with any audit, there remained a higher risk of non-

detection of fraud, as fraud may involve collusion, forgery,

intentional omissions, misreprese ntations, or the override of

internal controls. Our audit procedures are designed to detect

material misstatem ent. We are not responsible for preventing non-

compliance or fraud an d cannot be expected to detect non-

compliance with all laws and regulations.

6. We have nothing to report on the other information in the

Annual Report

The directors are responsible for the other information presented

in the Annual Report together with the f inancial statements. Our

opinion on the financial statements does not cover the other

information and, accor dingly, we do not express an audit opinion

or, except as explicitly stated below, any form of assurance

conc lusion thereon.

Our responsibility is to read the o ther information and, in doing so,

consider whether, based on our financial statement s audit work,

the information therein is materially misstated or inconsistent with

the financial statements or our aud it knowledge . Based solely on

that work we have not identified material misstatements in the

other information.

Strategic report and directors’ report

Based solely on our work on the other information:

— we have not identified material misstatements in the

strategic report and the directors’ report;

— in our opinion the information given in those reports for the

financial year is consistent with the financial statements; and

— in our opinion those reports hav e been prepared in

accordance with the Companies Act 2006.

7. We have nothing to report on the other matters on which we

are required to report by exception

Under the Companies Act 2006, we are required to report to you if,

in our opinion:

— a dequate 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

— the parent Company financi al statements are not in

agreement with the accounting records and

returns;

— c ertain disclosur es of directors’ remuneration specified by

law are not made; or

— we have not received all the information and explanations we

require for our audit.

We have nothing to report in these respects

5. Fraud and breaches of laws and regulations – ability to detect

(continued)

Identifying and responding to risks of material misstatement due

to fraud (continued)

We performed procedures including:

— I dentifying journal entries to test for all full scope

components based on risk criteria and comparing the

identified entries to supporting documentation. These

included those posted to unexpected accounts.

— For software revenue, obtaining a sample of contracts and

support ing documentation to assess whether the asso ciated

revenue has been rec orded appropriately, and for other

revenue obtaining a sample of invoices and related

documentation around the year end to assess whether the

associated revenue has been recorded in the appropriat e

period.

— Evaluated the business purpose of significant unusual

transactions

— Assessing whet her the judgements made in making

accounting estimates are indicative of a potential bias

Identifying and responding to risks of material misstatement

related to compliance with laws and regulations

We identified areas of laws and regulations that could reasonably

be expected to have a material effect on the financi al statements

from o u r general commercial and sector e xperience and through

discussion with the direc tors (as required by audi ting standards),

and discussed with the directors and other management the

policies and procedures regarding compliance with laws a n d

regulations.

We communicated identified laws and regulations throughout our

team and r emained alert to any indications of non-compliance

throughout the audit. This included communication from the

Group to component audit teams of relevant laws and regulations

ide n tified at the Group level, and a request for compo nent

auditors to report to the Group team any instances of non-

compliance with laws and regulations that could give rise to a

material misstatement at th e Group level.

The potentia l effect of thes e laws and regulat ions on the financial

statements varies considerably.

Firstly, the Group is subject to laws and regulations that directly

affect the financial statements including financial re porting

legislation (including related companies legislation), distributable

profits legislation a nd taxation legislation and we assessed the

extent of compliance with these laws and regulations as part of our

procedur e s on the related financial statement item s.

Secondly, the Group is subject to many other laws and regulat ions

where the consequences of non-compliance could have

a mater ial

effect on amounts or d isclosures in the financial statements, for

instance through the imposition of fines or litiga t ion. We identified

the follow ing areas as those most likely to have such an effect:

GDPR compliance, health and safety, anti-bribery and corruption,

employment law, and certain aspects of company legislation

recognising the nature of the Group ’s activities and its legal form.

Auditing standards limit the required audit procedures to identify

non-compliance with these laws and regulations to enquiry of the

directors and insp e ction of regulatory and legal c orrespondence, if

any. Therefore if a br e ach of operational regulations is not

disclosed to us or evident from relevant correspondence, an audit

will not detect that breach.

Hybrid Software Group PLC Annual Report 2022

Hybrid Software Group

Strategic report Governance Financial statements

Other information

10. The purpose of our audit work and to whom we owe our

responsibilities

This report is made solely to the Company’s members, as a body,

in accordance with Chapter 3 of Part 16 of the Companies Act

2006 and the terms of our engagement by the Company. 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 the further matters we are

required to state to them in accordance with the terms agreed

with the Company, and for no other purpose. To the fullest

extent permitted by law, we do not accept or assume

responsibility to anyone other than the Company and the

Company’s members, as a body, for our audit work, for this

report, or for the opinions we have formed.

Matthew Radwell (Senior Statutory Auditor)

for and on behalf of KPMG LLP, Statutory Auditor

Chartered Accountants

Dragonfly House

2 Gilders Way

Norwich

NR3 1UB

11 April 2023

European Single Electronic Format (ESEF)

Hybrid Software Group plc has prepared consolidated financial

statements in the form of an electronic file in the European Single

Electronic Format (“ESEF”) (hereafter “digital consolidated financial

statements”), which comprise the the Consolidated Statement of

Comprehensive Income, Consolidated Statement of Financial Position,

Consolidated Statement of Changes in Equity, Consolidated Statement

of Cash Flows and the related notes. The requirements for this format

are set out in the regulatory technical standards as laid down in the EU

Delegated Regulation nr. 2019/815 of 17 December 2018 (hereafter

“Delegated Regulation”).

The Board of Directors are responsible for the preparation, in

accordance with the ESEF requirements in the Delegated Regulation, of

the digital consolidated financial statements identified.

We were engaged by Hybrid Software Group plc to report on whether

the digital consolidated financial statements are prepared, in all material

respects, in compliance with the ESEF regulation under the Delegated

Regulation. Under the terms of our engagement, we have audited the

digital consolidated financial statements in accordance with the draft

standard on the audit of compliance of the Financial Statements with

ESEF) as issued by the Belgian institute of Independent Auditors

(“IBR/IRE”) on 26 November 2021 (“the draft standard on the audit of

compliance of the Financial Statements with ESEF”). Our responsibility,

under the terms of our engagement, is to obtain sufficient and

appropriate information to conclude whether the format and the

tagging of the digital consolidated financial statements complies, in all

material respects, with the ESEF requirements under the Delegated

Regulation.

In our opinion, based on our work performed, the format and the

tagging of information in the digital consolidated financial statements

as per 31 December 2022, identified as ESEF-tagged XHTML 2022,

complies, in all material respects, with the ESEF requirements under the

Delegated Regulation.

. Respective responsibilities

Directors’ responsibilities

As explained more fully in their statement set out on page 50, the

directors are responsible for: the preparation of the financial statements

including being satisfied that they give a true and fair view; such internal

control as they determine is necessary to enable the preparation of

financial statements that are free from material misstatement, whether

due to fraud or error; assessing the Group and, parent Company’s ability

to continue as a going concern, disclosing, as applicable, matters related

to going concern; and using the going concern basis of accounting unless

they either intend to liquidate the Group or the parent Company or to

cease operations, or have no realistic alternative but to do so.

Auditor’s responsibilities

Our objectives are to obtain reasonable assurance about whether the

financial statements as a whole are free from material misstatement,

whether due to fraud or error, and to issue our opinion in an auditor’s

report. Reasonable assurance is a high level of assurance, but does not

guarantee that an audit conducted in accordance with ISAs (UK) will

always detect a material misstatement when it exists. Misstatements

can arise from fraud or error and are considered material if, individually

or in aggregate, they could reasonably be expected to influence the

economic decisions of users taken on the basis of the financial

statements.

A fuller description of our responsibilities is provided on the FRC’s

website at www

.frc.org.uk/auditorsresponsibilities.

Hybrid Software Group PLC Annual Report 2022

Hybrid Software Group

Strategic report Governance Financial statements

Other information

Hybrid Software Group PLC Annual Report 2022

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the year ended 31 December

In thousands of euros

Note

2022

2021

Continuing operations

Revenue

46,693

48,562

Cost of sales

(7,388)

(8,475)

Gross profit

39,305

40,087

Selling, general and administrative expenses

(26,841)

(22,457)

Research and development expenses

(13,488)

(12,713)

Other operating expenses

(3)

(180)

Other income

3,301

Operating profit

2,274

4,770

Finance income

870

Finance expenses

(424)

(466)

Net finance (expenses)/income

(381)

404

Foreign currency exchange losses

(58)

(609)

Profit before tax

1,835

4,565

Tax (charge)/credit

(535)

349

Profit from continuing operations

1,300

4,914

Other comprehensive (loss)/income

Items that may be reclassified subsequently to profit or loss:

Foreign currency translation differences

(282)

2,108

Other comprehensive (loss)/income for the year

(282)

2,108

Total comprehensive income attributable to equity holders

1,018

7,022

Earnings per ordinary share

Basic earnings per share (euro)

0.04

0.15

Diluted earnings per share (euro)

0.04

0.15

The notes on pages

76 to 112 are an integral part of these consolidated financial statements.

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

For the year ended 31 December

In thousands of euros

Note

2022

2021

ASSETS

Non-current assets

Property, plant and equipment

1,702

1,662

Right-of-use assets

2,912

3,606

Other intangible assets

43,959

45,205

Goodwill

65,927

64,678

Financial assets

955

935

Deferred tax assets

2,069

2,236

Trade and other receivables due after more than one year

3,718

3,682

Total non-current assets

121,242

122,004

Current assets

Inventories

3,913

2,308

Current tax assets

Trade and other receivables

10,893

10,915

Other current assets

425

297

Prepayments

1,611

1,684

Cash and cash equivalents

6,317

9,234

Total current assets

23,159

24,509

TOTAL ASSETS

144,401

146,513

EQUITY AND LIABILITIES

Equity attributable to owners of the Parent

Share capital

13,164

Share premium

1,979

Merger reserve

67,015

Treasury shares

(161)

(202)

Retained earnings

39,847

38,624

Foreign currency translation reserve

(10,911)

(10,629)

Total equity

110,933

109,951

Non-current liabilities

Deferred tax liabilities

8,664

9,646

Lease liabilities

2,560

3,060

Accrued liabilities

1,147

1,316

Other liabilities

3,931

7,407

Contract liabilities

7,28

427

Total non-current liabilities

16,346

21,856

Current liabilities

Current tax liabilities

1,366

821

Trade and other payables

2,919

1,931

Lease liabilities

834

761

Accrued liabilities

2,287

4,261

Other liabilities

5,881

3,767

Contract liabilities

7,28

3,835

3,165

Total current liabilities

17,122

14,706

Total liabilities

33,468

36,562

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

144,401

146,513

The notes on pages 76 to 112 are an integral part of these consolidated financial statements.

These financial statements on pages

72 to 75 were approved and authorised for issue by the Board of Directors on 11 April 2023 and were

signed on its behalf by:

Michael Rottenborn

Director

Company registered number: 10872426

Hybrid Software Group PLC Annual Report 2022

Hybrid Software Group

Strategic report Governance Financial statements

Other information

Hybrid Software Group PLC Annual Report 2022

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

In thousands of euros

Note

capital

premium

Merger

reserve

Treasury

Retained

earnings

Foreign

currency

translation

reserve

Total

equity

Balance at 31 December 2020

4,734

1,979

(309)

33,891

(12,737)

27,558

Total comprehensive income for the year

Net profit for the year

4,914

Foreign currency translation differences

2,108

Total comprehensive income for the year -

4,914

2,108

7,022

Transactions with owners

Share-based payment transactions

25,30

107

(92)

Acquisition – newly issued shares

25,34

8,430

67,015

(89)

75,356

Total transactions with owners

8,430

67,015

107

(181)

75,371

Balance at 31 December 2021 13,164

1,979

67,015

(202)

38,624

(10,629)

109,951

Total comprehensive income for the year

Net profit for the year

1,300

Foreign currency translation differences

(282)

Total comprehensive income for the year

1,300

(282)

1,018

Transactions with owners

Share-based payment transactions

(41)

Acquisition – newly issued shares

(36)

Total transactions with owners

(77)

(36)

Balance at 31 December 2022

13,164

1,979

67,015

(161)

39,847

(10,911)

110,933

The notes on

pages 76 to 112 are an integral part of these consolidated financial statements.

CONSOLIDATED STATEMENT OF CASH

FLOWS

For the year ended 31 December

In thousands of euros Note

2022 2021

Cash flows from operating activities:

Net profit for the year

1,300

4,914

Adjustments to reconcile net profit to net cash:

- Depreciation of property, plant, equipment and right-of-use assets

15,26

1,559

1,394

- Amortisation of other intangible assets

7,111

5,789

- Share-based remuneration expenses

- Gain on disposal of IPv4 addresses

(3,297)

- Net finance expense, net of loan forgiveness

381

463

- Net foreign currency exchange losses/(gains)

609

- Tax charge/(benefit)

535

(349)

- Change in fair value of contingent consideration

9,27

(4)

(3)

- Other items

104

(439)

Total adjustments to net profit

6,447

7,479

Change in operating assets and liabilities:

- Financial assets

(20)

(910)

- Inventories

(1,605)

(1,117)

- Trade and other receivables

20,22

(295)

(6,116)

- Other current assets

(128)

(78)

- Prepayments

(629)

- Trade and other payables

988

1,167

- Accrued liabilities

(2,143)

3,293

- Contract liabilities

287

2,023

Total change in operating assets and liabilities

(2,843)

(2,367)

Cash generated from operating activities

4,904

10,026

Interest received

Interest paid

(424)

(466)

Taxes paid

(504)

(107)

Net cash flow from operating activities

4,019

9,456

Cash flows from investing activities:

Capital expenditures on property, plant & equipment

(805)

(1,254)

Capital expenditures on other intangible assets

(75)

(77)

Capitalisation of development expenses

(3,981)

(3,396)

Proceeds on disposal of discontinued operation, net of cash disposed of

500

2,000

Proceeds on disposal of IPv4 addresses

3,297

Acquisition, net of cash acquired

(3,430)

(780)

Net cash flow used in investing activities

(4,494)

(3,507)

Cash flows from financing activities:

Repayment against loans and borrowings

(307)

(2,700)

Deferred consideration paid

(310)

Contingent consideration paid

(715)

(492)

Principal payments on lease liabilities

(935)

(849)

Net cash flow used in financing activities

(2,267)

(4,041)

Net (decrease)/increase in cash

(2,742)

1,908

Cash and cash equivalents at 1 January

9,234

6,855

Effect of exchange rate fluctuations on cash at 1 January

(175)

471

Cash and cash equivalents at 31 December

6,317

9,234

The notes on

pages 76 to 112 are an integral part of these consolidated financial statements.

Hybrid Software Group PLC Annual Report 2022

Hybrid Software Group

Strategic report Governance Financial statements

Other information

Hybrid Software Group PLC Annual Report 2022

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1. REPORTING ENTITY

Hybrid Software Group PLC

(the "Company") and its subsidiaries (together the "Group") is a leading developer of software solutions for pre-

press, printing and packaging conversion. It is also a leading supplier of drive electronics for industrial inkjet printing.

The Company is a

public limited company, registered in England and Wales, domiciled in the United Kingdom and is quoted on Euronext in

Brussels.

The Company's registered office address is 2030, Cambourne Business Park, Cambourne, Cambridge, CB23 6DW.

2. BASIS OF PREPARATION

Statement of compliance

These consolidated financial statements have been prepared in accordance with

UK-adopted international accounting standards and

International Financial Reporting Standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union.

These consolidated financial statements were authorised for issue by the Company

’s Board of Directors on 11 April 2023.

As defined in article 4 of the Transparency Directive (2004/109/EC), the official version of the annual financial report is the ESEF version.

Basis of measurement

These consolidated financial statements have been prepared on the historical cost basis

. Non-current assets are stated at the lower of

amortis

ed cost and fair value less disposal costs when applicable. The methods used to measure fair value are discussed in Note 4

‘Determination of fair values’.

Functional and presentation currency

The amounts included in the financial statements for each of the Group’s entities are measured using their respective functional currency,

which is then translated to euro using appropriate exchange rates.

The functional currency is determined for each of the Group’s entities based

on the primary economic environment in which each of the Group’s entities

operates and the primary currency used for transactions in those

entities. The functional currency for each of the entities in the Group is shown in the table below.

Company name

Functional currency

Hybrid Software Group PLC

Euro (EUR)

Global Graphics (UK) Limited

Pound sterling (GBP)

Global Graphics Software Limited

Pound sterling (GBP)

Global Graphics Software Incorporated

United States dollar (USD)

Global Graphics Kabushiki Kaisha

Japanese yen (JPY)

Global Graphics EBT Limited

Pound sterling (GBP)

Meteor Inkjet Limited

Pound sterling (GBP)

Xitron, LLC

United States dollar (USD)

HYBRID Software Group S.à r.l.

Euro (EUR)

eXplio NV

Euro (EUR)

HYBRID Software Development NV

Euro (EUR)

HYBRID Integration LLC

United States dollar (USD)

HYBRID Software NV

Euro (EUR)

HYBRID Software China Co. Limited

Chinese yuan (CNY)

HYBRID Software GmbH

Euro (EUR)

HYBRID Software Italy SRL

Euro (EUR)

HYBRID Software France SAS

Euro (EUR)

HYBRID Software UK Limited

Pound sterling (GBP)

HYBRID Software Australia Pty Limited

Australian dollar (AUD)

HYRBID Software Iberia S.L.U.

Euro (EUR)

ColorLogic GmbH

Euro (EUR)

The

se consolidated financial statements are presented in euros and all information which is presented in the following notes has been rounded

to the nearest thousand, unless otherwise specified.

se of accounting estimates

The preparation of the consolidated financial statements in conformity with IFRS requires management to make judgements, estimates and

assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual

results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in

which the estimates are revised and in any future periods affected.

Information about critical judgements in applying accounting policies that

have the most significant effect

on the amounts recognised in the consolidated financial statements is included in Note 5 ‘Critical accounting

estimates and judgements’.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

BASIS OF PREPARATION (CONTINUED)

Going concern

The Group’s business activities, together with the factors likely to affect its future development, performance and position

are set out in the

strategic report. The Directors’ report further describes the financial position of the Group; its cash flows an

d liquidity position; the Group’s

objectives, policies and processes for managing its capital; its financial risk management objectives; details of its financi

al instruments; and its

exposure to credit risk and liquidity risk.

As a result of multiple fac

tors playing out at the same time - the war in Ukraine, the COVID-19 pandemic still affecting mainly Asian countries,

rising inflation, energy and input prices, supply chain disruptions leading to various shortages

- there is more uncertainty across the global

economy.

Meteor Inkjet was severely impacted in the first half year due to the availability of components but has recovered since. The impact

the multitude of current economic headwinds did not prevent the other group components from growing their aggregate revenue, albeit new

business revenue was deemed subpar for the Global Graphics Software and HYBRID Software CGU’s. For the Global Graphics Softwa

CGU this was mainly driven by the absence of significant software development sales

and multiyear contract renewals. The HYBRID Software

CGU

’s new business development is prone to availability of capital expenditure budgets amongst its prospects and customers. Certainly in

Europe and especially Ge

rmany, the company experienced capital budgets being frozen in response to economic adversity which occurred

during the year.

The Group has considerable financial resources, together with long

-standing relationships with customers through its licence and support

sales model. The Group’s forecasts and projections, taking account of potential and realistic changes in trading performance,

and also including

worst case, severe, yet plausible downside scenarios, continue to indicate that the Group is ab

le to operate within the level of existing cash

resources.

he Directors have considered the impact of a significant reduction in sales against forecasts, which may arise if the economic conditions

further worsen in the company’s main markets, being the U

nited States, Europe & Asia. This impact has been considered against a backdrop

of rising

employment and operating costs due to inflation and increases in cost of living. The Directors have prepared Group cash flow forecasts

for a period of at least 12

months from the date of approval of these financial statements which indicate that, taking account of reasonably

possible downsides, the Group will have sufficient funds to meet its liabilities as they fall due for that period.

The Group is diversified i

n terms of products, customers and geographies served. Any reductions in revenue in one segment have generally

been offset by increased revenue in another segment. Across the Group, there have been no contract cancellations and to the D

irectors’

knowledge

none of the Group’s significant customers have failed.

Consequently, the Directors are confident that the Group will have sufficient funds to continue to meet its liabilities as th

ey fall due for at least

12 months from the date of approval of these fina

ncial statements and therefore have prepared these financial statements on a going concern

basis.

Alternative performance measures

The Strategic Report includes IFRS

revenue and profit, constant exchange rate (“CER”) revenue, adjusted profit and EBITDA. See page 30

for further details.

CER revenue eliminates the impact of currency movements when comparing the current year to the comparative year.

The current year is

restated at the comparative year’s actual exchange rates.

Adjusted profit, in management’s view, reflects the underlying

operating performance of the business and provides a more meaningful

comparison of how the business is managed and measured

from year to year by adjusting for non-recurring or uncontrollable factors which

affect the IFRS reported amounts.

EBITDA is also reported as an alternative measure of profit and is calculated by adding back interest, tax, depreciation and

amortisation to net

profit.

EBITDA is a common measure used by investors and analysts to comparatively evaluate the financial performance of companies.

The Board believes that evaluating the Group’s ongoing results may not be as useful if it is limited to reviewing only IFRS f

inancial measures,

particularly because management uses adjusted financial information to evaluate its ongoing operations, for internal planning

and forecasting

purposes and for the measurement of performance related bonuses.

The Board does not suggest that inv

estors should consider these adjusted financial results in isolation from, or as a substitute for, financial

information prepared in accordance with IFRS.

The Board presents EBITDA and adjusted financial results when reporting its financial results

to prov

ide investors with additional tools to evaluate the Group’s results in a manner that focuses on what the Board believes to be its underlying

business operations.

The Board believes that the inclusion of adjusted financial results provides consistency and comparability with past

reports.

Hybrid Software Group PLC Annual Report 2022

Hybrid Software Group

Strategic report Governance Financial statements

Other information

Hybrid Software Group PLC Annual Report 2022

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

BASIS OF PREPARATION (CONTINUED)

Parent Company financial statements

The parent Company financial statements present information about the Company as a separate e

ntity and not about its group. The Company

has elected to prepare its parent company financial statements in accordance with FRS 101. These are presented on pages

113 to 120.

3. SIGNIFICANT ACCOUNTING POLICIES

The principal accounting policies

applied in the presentation of these consolidated financial statements are set out below. These policies have

been consistently applied to all the years presented

There are no other new or amended interpretations

or standards effective for the financial year commencing 1 January 2022 that have had a

material impact on the Group.

Basis of consolidation

Subsidiaries

Subsidiaries are all entities controlled by the Group. The financial statements of subsidiaries are included in the consolida

ted financial

statements from the date that control commences until the date that control ceases.

Transactions eliminated on consolidation

Inter

-company balances and transactions, and any unrealised income and expenses arising from inter-company transactions, are eliminated

in preparing the consolidated financial statements. Unrealised losses are eliminated in the same way as unrealised gains, but

only to the extent

that there is no evidence of impairment.

Business combinations

Business combinations are

accounted for using the acquisition method as at the acquisition date, which is the date on which control is

transferred to the Group.

For business combinations with acquisition dates on or after 1 January 2022, the Group has determined whether a particular se

t of activities

and assets is a business

by assessing whether the set of assets and activities acquired includes, at a minimum, an input and substantive

process and whether

the acquired set has the ability to produce outputs. The Group has an option to apply a ‘concentration test’ that permits

a simplified assessment of whether an acquired set of activities and assets is not a busines

s. This election can be applied on a transaction by

transaction basis. The optional concentration test is met if substantially all of the fair value of the gross assets acquired

is concentrated in a

single identified asset or group of similar identifiable

assets.

Foreign currency translation

Foreign currency transactions

Transactions in foreign currencies are translated to the respective functional currencies of Group entities at exchange rates

at the dates of the

transactions. Monetary assets and liabili

ties denominated in foreign currencies at the reporting date are retranslated to the functional currency

at the exchange rate at that date. The foreign currency gain or loss on monetary items is the difference between amortised co

st in the functional

curre

ncy at the beginning of the year, adjusted for effective interest and payments during the year, and the amortised cost in foreign currency

translated at the exchange rate at the end of the year.

Non

-monetary assets and liabilities that are measured at fair value in a foreign currency are retranslated to the functional currency at the

exchange rate at the date that the fair value was determined. Non

-monetary items that are measured based on historical cost in a foreign

currency are translated using the exch

ange rate at the date of the transaction. Foreign currency differences arising on retranslation are

generally recognised in profit or loss.

Translation of financial statements of foreign operations

The assets and liabilities of foreign operations, includi

ng goodwill and fair value adjustments arising on acquisition, are translated to euro at

exchange rates at the reporting date. The income and expenses of foreign operations are translated

on a monthly basis to euro at average

exchange rates

for each month. Foreign currency differences are recognised in other comprehensive income and presented in the foreign

currency translation reserve in equity.

Financial instruments

Non

-derivative financial instruments

Non

-derivative financial instruments comprise trade and other receivables, other current assets, cash, trade payables, and other liabilities.

Non

-derivative financial instruments are recognised initially at fair value plus any directly attributable transaction costs. After initial recognition,

non

-derivative financial instruments are measured at amortised cost using the effective interest method, less any impairment losses.

Derivative financial instruments

The Group only uses derivative financial instruments (notably foreign currency forward and option cont

racts) to manage exposure to foreign

exchange risk. In accordance with guidelines established by the board, the Group does not permit the use of derivative financ

ial instruments

for speculative purposes.

Derivative financial instruments are

initially recognised at fair value at the date the derivative contract is entered into and are subsequently re-

measured to their fair value at each balance sheet date. The resulting gain or loss is recognised in the income statement imm

ediately. At 31

Dece

mber 2022 the Group had no derivative financial instrument contracts in place (2021: none).

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Property, plant and equipment

Property, plant and equipment are stated at cost, net of depreciation and any provision for impairment in value.

Ongoing repairs and

maintenance are expensed as incurred.

Depreciation is provided on all property, plant and equipment, at rates calculated to write off the cost,

less estimated residual value, of each asset on a straight

-line basis over its expected economic useful life. Depreciation is recognised within

operating expenses within the consolidated income statement.

The estimated useful lives fo

r the current and comparative years of significant items of property, plant and equipment are as follows:

• leasehold improvements 3 to 10 years, or the remaining lease term

• computer equipment and office equipment 3 to 5 years

• motor vehicles 5 years

Right

-of-use assets

Right

-of-use assets are stated at cost, net of depreciation, any provision for impairment in value and any remeasurement of the associated

lease liability.

Depreciation is provided on all right-of-use assets, at rates calculated to write off the cost, less estimated residual value, of each

asset on a straight

-line basis over the earlier of its expected useful life or the term of the lease. Depreciation is recognised within operating

expenses within the consolidated income statement.

Group as lessor

The Group only acts as a lessor in the context of sub

-lease arrangements. When the Group is an intermediate lessor, it accounts for its

interests in the head lease and the sub

-lease separately. It assesses the lease classification of a sub-lease as being either a finance lease or

an operating lease with reference to the right

-of-use asset arising from the head lease, not with reference to the underlying asset. To classify

each sub

-lease, an overall assessment is made as to whether the lease transfers to the lessee substantially all of the risks and rewards of

ownership incidental to ownership of the right

-of-use asset. If this is the case, then the lease is a finance lease; if not, then it is an operating

lease. As part of this assessment, t

he Group considers certain indicators such as whether the lease is for the major part of the economic life

of the asset.

The group recognises lease payments received under operating leases as income on a straight-line basis over the lease term as

part of

selling, general and administrative expenses within the consolidated income statement.

Goodwill and intangible assets

Goodwill

The acquisition method of accounting is used to account for the acquisition of subsidiaries by the Group. The cost of an

acquisition is measured

as the fair value of the assets acquired, equity instruments issued and liabilities incurred or assumed at the date of exchan

ge of control. For

acquisitions before IFRS

3 (revised) became effective, costs directly attributable to the acquisition are also included. Identifiable assets

acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair va

lues at the acquisition

date. The excess of the cost of acquisition over the f

air value of the Group's share of the identifiable net assets acquired is recorded as

goodwill. If the cost of acquisition is less than the fair value of the net assets of the subsidiary acquired,

thus giving rise to negative goodwill

(a bargain purchase),

the difference is recognised directly in the income statement within other income. Goodwill is stated at cost less any

accumulated impairment losses. Goodwill is allocated to cash

-generating units for the purposes of impairment testing. Goodwill is not amortised

but is tested annually for impairment or more frequently if facts and circumstances warrant a review. Gains and losses on the

disposal of an

entity include the carrying amount of goodwill relating to the entity, if any.

Other intangible

assets

Other intangible assets that are acquired by the Group and have finite useful lives are measured at cost less accumulated amo

rtisation and

any accumulated impairment losses.

The amortisation of patents is included in cost of sales, the amortisation charge for software technology

and driver electronics is included in research and development expenses and amortisation charges related to any other intangi

ble assets

acquired through business combinations are included in selling, general and administrativ

e expenses.

Trademarks, know

-how, patents and patent applications

Trademarks, know

-how, as well as patent and patent applications are carried at historical cost (which was estimated to be their fair value on

the

purchase date by the Group) less accumulated amortisation. Amortisation is calculated over their useful estimated lives from respective

acquisition dates, as follows:

• trademarks 10 years

• patents and patent applications 3 to 10 years

• know-how 1 year

Customer

relationships

Customer

relationships are carried at historical cost (which was estimated to be their fair value on the acquisition date by the Group) less

accumulated amortisation.

Amortisation is calculated over the estimated useful lives of the respective relationships, over periods ranging from

five

to ten years from respective acquisition dates.

Computer software technology

Computer software technology is capitalised on the basis of the costs

directly incurred to acquire and bring to use the specific software. These

costs are amortised over their estimated useful lives from respective acquisition dates over periods ranging from three to

twelve years. Costs

associated with maintaining existing computer software technology an

d programmes are recognised as an expense when incurred.

Hybrid Software Group PLC Annual Report 2022

Hybrid Software Group

Strategic report Governance Financial statements

Other information

Hybrid Software Group PLC Annual Report 2022

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Goodwill and intangible assets

(continued)

Driver electronics

Driver electronics technolog

y is capitalised on the basis of the costs incurred to acquire and bring to use the specific technology. These costs

are amortised over their estimated useful lives from respective acquisition dates, currently a period of five years. Costs as

sociated with

maintaining the existing driver

electronics are recognised as an expense when incurred.

Capitalised development costs

Direct costs incurred on development projects relating to the design and testing of new or improved products and technology a

re recognised

as intangible assets when all of the following criteria are met:

• it is technically feasible to complete the intangible asset so that it will be available for use;

• management intends to complete the intangible asset, and use or sell it;

• the Group has the ability to use or sell the intangible asset;

• it can be demonstrated how the intangible asset will generate probable future economic benefits;

• adequate technical, financial and other resources to complete the development and to use or sell the intangible asset are available;

and

• the expenditure attributable to the intangible asset during its development may be reliably measured.

Capitalised development costs recognised as intangible assets are amortised from the point the asset is ready for use on

a straight-line basis

over its estimated useful life

, over periods ranging from three (Printing Software segment) to twelve (Enterprise Software segment) years.

Printing Software technology has

existed for a longer period of time than Enterprise Software technology, therefore any development costs

are deemed to have a shorter useful life

. The amortisation charge is included in research and development expenses in the income statement.

Other development expenditures that do not meet these cr

iteria are recognised as an expense when incurred.

Impairment of non

-current assets

At each balance sheet date, the Group reviews the carrying amounts of its tangible and intangible assets to determine whether

there is any

indication that those assets ha

ve suffered any impairment. If any such indication exists, the recoverable amount of the asset (being the higher

of fair value less costs to sell and value in use) is estimated in order to determine the extent of any impairment. Any impai

rment loss is

reco

gnised as an expense in the income statement in the period in which it was identified. An impairment loss is reversed if the reversal can

be related objectively to an event occurring after the impairment loss was recognised through the income statement.

mpairment of financial assets

Financial assets

and contract assets are assessed at each reporting date to determine whether there is any objective evidence that it is

impaired.

When determining whether the credit risk of a financial asset has increased significantly since initial recognition and when estimating

expected credit losses, the Group considers reasonable and supportable information that is relevant and available without und

ue cost or effort.

This includes both quantitative and qualitative informa

tion and analysis, based on the Group’s historical experience and informed credit

assessment, that includes forward

-looking information.

The Group assumes that the credit risk on a financial asset has increased significantly if it is more than 90 days pa

st due. A financial asset i s

impaired if objective evidence indicates that one or more events have had a negative effect on the estimated future cash flow

s of that asset.

An impairment loss in respect of a financial asset measured at amortised cost is calc

ulated as the difference between the carrying amount,

and the present value of the estimated future cash flows discounted at the original effective interest rate.

Impairment of non

-financial assets

The carrying amounts of the

Group’s non-financial assets, other than deferred tax assets, are reviewed at each reporting date to determine

whether there is any indication of impairment. If such indication exists, then the asset’s recoverable amount is estimated.

The recoverable amount of an

asset or a cash-generating unit is the greater of its value in use and its fair value less costs to sell. In assessing

value in use, the estimated future cash flows are discounted to their present value using a pre

-tax discount rate that reflects current marke t

assessments of the time value of money and the risks specific to the asset.

For the purpose of impairment testing, assets are grouped together into the smallest group of assets that generates cash infl

ows fro m

continuing use that are largely indep

endent of the cash inflows of other assets or group of assets ("cash-generating unit"). An impairment loss

is recognised if the carrying amount of an asset or a cash

-generating unit exceeds its estimated recoverable amount. Impairment losses

recognised in respect of cash

-generating units are allocated first to reduce the carrying amount of any goodwill allocated to cash-generatin g

units and then, to reduce the carrying amount of the other assets i

n the unit on a pro rata basis. An impairment loss in respect of goodwill is

not reversed. In respect of other assets, impairment losses recognised in prior periods are assessed at each reporting date f

or any indications

that the loss had decreased or no longer exists. An impairment loss is reversed if

there has been a change in the estimates used to determine

the recoverable amount, but only to the extent that the carrying amount of the asset does not exceed the carrying amount that

would hav e

been determined, net of depreciation or amortisation, had n

o impairment loss been recognised.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Inventories

Inventories are stated at the lower of cost and net realisable value. The cost of inventories is based

on the first-in, first-out principle, and

includes expenditures incurred in acquiring the inventories and other costs incurred in bringing them to their existing locat

ion and condition.

Net realisable value is the estimated selling price in the ordinary c

ourse of business, less estimated costs expected to be incurred to complete

the sale.

Trade receivables

Trade receivables are recognised initially at fair value and subsequently held at amortised cost using the effective interest

rate method, less

provisi

on for impairment. Trade receivables are first assessed individually for impairment, or collectively where the receivables are not

individually significant. Where there is no objective evidence of impairment for an individual receivable, it is included in

a group of receivables

with similar credit risk characteristics and these are collectively assessed for impairment. Movements in the provision for d

oubtful debts are

recorded in the

statement of comprehensive income within selling, general and administrative expenses.

Cash

Cash comprises cash in hand and deposits held at call with banks at each reporting date.

Share capital

Ordinary shares

Ordinary shares, which are the only class of shares issued by the Company, are classified as equity.

Incremental costs directly attributable to

the issue of new ordinary shares (whether they are resulting from the exercise of share options or

the acquisition of a business) are recognised

as a deduction from equity, net of any tax effects.

Own share repurchases

When

share capital recognised in equity is repurchased, the consideration paid, including directly attributable costs, net of any tax effects, is

recognised as a deduction from equity.

When treasury shares are sold or reissued subsequently, the amount received is recognised as an

increase in equity.

Any resulting surplus over the purchase price is transferred to share premium and any deficit is transferred to retained

earnings.

Current liabilities

Trade payables and

accrued liabilities are recognised initially at fair value and are subsequently measured at amortised cost, using the effective

interest method. Trade payables and

accrued liabilities with a short duration are not discounted, as the carrying amount is a reasonable

approximation of fair value.

Employ

ee benefits

Pension obligations

Contributions to the Group’s defined contribution pension schemes and employees’ personal pension plans are charged to the in

come

statement

as employee benefit expenses when they are due. The Group has no further payment obligation once the contributions have been

paid.

As a result of the acquisition of ColorLogic GmbH (see

Note 34 ‘Acquisitions’) a pension liability and an associated asset have been acquired.

The associated asset

does not qualify as a plan asset and it is included as “Financial assets not classified as cash or cash equivalent” in

inancial assets in the Consolidated Statement of Financial Position (see Note 18 ‘Financial assets’). The pension obligation is for a one-time

amount

or the value of the associated asset, whichever is the higher and is included in accrued liabilities in the Consolidated Statement of

inancial Position. Any fair value adjustments to the financial asset or the accrued liability is adjusted through the Consolidated Statement of

omprehensive Income.

Termination benefits

Termination benefits are recognised as an expense when the Group is demonstrably comm

itted, without realistic possibility of withdrawal, to

a formal, detailed plan to either terminate employment before the normal retirement date, or to provide termination benefits

as a result of an

offer made to encourage voluntary redundancy. Termination

benefits for voluntary redundancies are recognised as an expense if the Group

has made an offer of voluntary redundancy, it is probable that the offer will be accepted, and the number of acceptances can

be measured

reliably.

Other short

-term employee benefits

Short

-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided. A

liability is recognised for the amount to be paid under short

-term cash bonus or commission plans if the Group has a present legal or

constructive obligation to pay this amount as a result of past service provided by the employee, and the obligation can be me

asured reliably.

Hybrid Software Group PLC Annual Report 2022

Hybrid Software Group

Strategic report Governance Financial statements

Other information

Hybrid Software Group PLC Annual Report 2022

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

-based payments

The Group operates equity

-settled, share-based compensation plans, consisting of a share option plan and share grant plans, which allow

employees to acquire shares of the Company. The fair value of the options and

shares granted is recognised as an employee expense, with

a corresponding increase in equity, and is measured at grant date and spread over the period during which the employees becom

unconditionally entitled to the options or shares. The fair value of th

e options granted is measured using an appropriate valuation model, taking

into account the terms and conditions upon which the options were granted. At each reporting date, the amount recognised as a

n expense is

adjusted to reflect the actual number of sh

are options or shares for which the related service and non-market conditions are met. The proceeds

received, net of any directly attributable transaction costs, are credited to share capital for the par value of the shares i

ssued and to share

premium for

the balance, when the share options are exercised.

Provisions

A provision is recognised if, as a result of a past event, the Group has a present legal or constructive obligation that can

be estimated reliably,

and it is probable that an outflow of economi

c benefits will be required to settle the obligation. Provisions are determined by discounting the

expected future cash flows at a pre

-tax rate that reflects current market assessments of the time value of money and the risks specific to the

liability.

provision for restructuring is recognised when the Group has approved a detailed and formal restructuring plan, and the restructuring has

either commenced or has been announced publicly. Future operating costs are not provided for.

Revenue recognition

ftware

The Group typically

licenses its software to equipment manufacturers through multi-year license and distribution agreements, or direct to end

users

by a mix of perpetual and subscription-based licences.

Multi

-year license and distribution agreements generally provide for the periodic payment of licence royalties, the unit value of which has been

contractually agreed at the outset of the agreement, and

which is typically based upon either the volume sold by the customer or the sale value

of those products into which the Group’s software has been integrated.

These agreements also include specific provisions with respect to the

delivery of maintenance and

after-sale support services over the duration of the agreement. Such services are rendered against the payment

of a fixed fee, which has been contractually agreed at the outset of the

agreement and is typically charged on the anniversary date of the

agreem

ent. These agreements may also provide for the delivery of engineering services to ensure a seamless integration of the Group’s

software into the customer’s products.

End user licences are typically accompanied by annual support and maintenance agreements

, which are usually renewed annually by

customers. The annual support and maintenance agreements provide technical support

and bug fixes.

Fees from arrangements involving licen

ces, after-sale customer support, and other related services such as training, are allocated to the

performance obligations identified in the contract.

The stand-alone selling price of each of the elements of the arrangement is typically

established by

the contract or the price charged when the same element is sold separately. Where there is no stand-alone selling price, a

percentage

estimation of the total licence value is performed to identify the stand-alone price.

The Group’s performance obligations under software contracts with customers are to deliver a

distribution licence, deliver a master copy of

the software, at times provide licen

ce keys to enable the use of software and to provide ongoing support and maintenance services. The Group

also provides engineering and consulting services under some contrac

ts to enhance functionality or assist with integration.

Revenues from software licen

ces or non-refundable minimum royalty agreements are recognised upon satisfaction of all the following criteria:

• signing of the license agreement

• no additional significant production, modification or customisation of the software is required

• performance obligations are complete

• the fee is fixed or determinable

Fees

from perpetual licences relating to software are recognised in the period in which the delivery to the end-customer takes place and based

on customer

-usage reports, at which point there is no further performance obligation of the Group. Revenue from time-limited licences to use

the software is recognised rateably over the period of the licen

ce only if there is an ongoing performance obligation for that licence on the

Group during th

e licence period. If there are no ongoing performance obligations, the licence revenue is recognised when the Group's

performance

obligation to deliver the software has been fulfilled. All licence fees are non-refundable.

oftware support and maintenance revenue is recognised over the duration of the support and maintenance period. Engineering and

consultancy services revenue is recognised upon satisfaction of the relevant performance obligation where the customer substa

ntially obtains

the benefit of the engineering or consultancy work and usually makes a payment for those services rendered.

Amounts received in advance

of the related services being performed are included in deferred revenue and recognised in revenue based on hours de

livered only when the

services are provided.

Fees are non

-refundable and are generally on payment terms of 30 days from date of invoice. For long-term engineering services, payments

will be due on the achievement of the performance obligation.

License agreements may have extended payment terms and support and

maintenance is payable in advance of the period of coverage.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Revenue recognition

(continued)

Physical goods

The Group’s performance obligations with respect to physical goods (principally the Printhead solutions segment) is to delive

r a finished

product to a customer. Control of the goods transfers to the customer at the point of despatch and r

evenue is recognised at that point in time.

Payment for physical goods is generally received in advance of despatch and is non

-refundable. If any item is found to be faulty it will eithe r

be returned by the customer for repair or replaced with a new item.

Contract assets and contract liabilities

Contract assets and liabilities will arise from scheduled payments specified in the contracts when measured against the recog

nition of revenu e

under the respective performance obligations.

Cost of

sales

Cost of

sales includes the costs of goods sold and services rendered. This includes finished goods, product packaging, royalties paid to third

parties, excess and obsolete inventory, amortisation

of patents acquired through acquisition, amortisation of purchased software, and

employee

costs associated with the direct manufacturing and shipping of the Group’s products or rendering of services provided.

Tax

Tax expense comprises current and deferred tax.

Current tax is recognised in profit or loss except to the extent that it relates to items

recognised directly in equity or in other

comprehensive income. Current tax is the expected tax payable on the taxable income for the year,

using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previ

ous tax years.

Deferred tax is r

ecognised using the balance sheet liability method on temporary differences between the carrying amounts of assets and

liabilities for financial reporting purposes and the amounts used for taxation purposes.

Deferred tax is not recognised for taxable temporary

differences arising on the initial recognition of goodwill, the initial recognition of assets or liabilities that affect neit

her accounting nor taxable

profit, or differences relating to investments in subsidiaries to the extent that they will probabl

y not reverse in the foreseeable future. Deferred

tax is measured at the tax rates that are expected to apply to temporary differences when they reverse, based on the laws tha

t have been

enacted or substantively enacted by the reporting date.

A deferred tax asset is recognised only to the extent that it is probable that future

taxable profits will be available against which the asset can be utilised.

Deferred tax assets are reviewed at each reporting date and are

reduced to the extent that it is no longer p

robable that the related tax benefit will be realised. Deferred tax assets and liabilities are offset if

there is a legally enforceable right to offset current tax liabilities and assets, they relate to income taxes levied by the

same tax authority on

the

same taxable entity, and they have similar maturities.

Earnings per share

The Group presents basic and diluted earnings per share ("EPS") data for its ordinary shares.

Basic EPS is calculated by dividing the profit or

loss attributable to ordinary shareho

lders of the Company by the weighted average number of ordinary shares outstanding during the reporting

period.

Diluted EPS is determined by adjusting the weighted average number of ordinary shares outstanding for the effects of all potential

dilutive ordi

nary shares.

Operating segments

Operating segments are reported in a manner consistent with the inte

rnal reporting provided to the chief operating decision-maker. The Group’s

chief operating decision

-maker has been identified as the Group’s Chief Executive Officer.

Government grants

Government grants are recognised where there is reasonable assurance that the grant will be

received, and all attached conditions will be

complied with. All such grants relate to expense items. The grant is recognised a

s other income on a systematic basis over the periods that

the related costs, for which it is intended to compensate, are expensed.

The grant income is disclosed in Other Income in the Consolidated

Statement of Comprehensive Income.

Effect of interpretations and amendments to existing and new standards

For the purposes of the preparation of these consolidated financial statements, the Grou

p has applied all standards and interpretations that

are effective for accounting periods beginning on or after 1

January 2022.

New standards which were not adopted by the

Group in 2022

A number of new standards and

amendments to standards are effective for annual periods beginning on or after 1 January 2023 and earlier

application is permitted; however, the Group has not early adopted the following new or amended standards in preparing these

consolidated

financial statements

for the year ended 31 December 2022 and they are not expected to have a significant impact on the Group’s consolidated

financial statements

Hybrid Software Group PLC Annual Report 2022

Hybrid Software Group

Strategic report Governance Financial statements

Other information

Hybrid Software Group PLC Annual Report 2022

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

New

standards which were not adopted by the Group in 2022 (continued)

• Deferred Tax related to Assets and Liabilities arising from a Single Transaction (Amendments to IAS 12)

• Classification of Liabilities as Current or Non-Current (Amendments to IAS 1)

• IFRS 17 Insurance Contracts and amendments to IFRS 17 Insurance Contracts

• Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice Statement 2)

• Definition of Accounting Estimates (Amendments to IAS 8)

4. DETERMINATION OF FAIR VALUES

Several of

the Group’s accounting policies and disclosures require the determination of fair value, for both financial and non-financial assets

and liabilities.

Fair values have been determined for measurement and/or disclosure purposes based on the following methods. Where

applicable, further information about the assumptions made in determining fair values is disclosed in the notes specific to that asset or liability.

Other intangible assets

The fair value of other intangible assets which were acquired in business

combinations is based on either the discounted cash flows expected

to be derived from the use of these intangible assets, or the average of the discounted cash flows and the total replacement cost

of these

intangible assets.

Non

-derivative financial instruments

The carrying values less impairment provision of trade

and other receivables, current tax assets, other current assets, cash, trade payables,

current tax liabilities, accrued liabilities, are assumed to approximate their fair values at each of the balance sheet dates presented herein.

-based payments

The fair value of share options which

are granted are valued by using a Black-Scholes valuation model. Measurement inputs include the share

price on the measurement date, the exercise price of the

share option, the expected volatility, the weighted average expected life of the option,

the expected absence of dividends, and a risk

-free interest rate (based on government bonds). Service and non-market performance conditions

attached to the transactions are not taken into account in determining fair value of the options.

5. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS

The preparation of financial information in conformity with IFRS requires the

Directors to make critical accounting estimates and judgements

that affect the application

of policies and reported amounts of assets and liabilities, income and expenses. An assessment of the impact of

these estimates and judgements on the financial statements is set out below.

Estimates and judgements are continually evaluated and based on historical experience and other factors, including expectations of future

events that are believed to be reasonable under the circumstances. Actual results could differ from these estimates and any subsequent

changes are accounted for with an effect on income at the time such updated information is available.

Estimates

Identification and valuation of separately identifiable intangibles related to acquisitions

Where a business combination is considered significant, the Group commissions and relies upon independent valuation reports to identify and

value the intangible assets related to that acquisition. For less significant business combinations, internal estimates to calculate a discount

rate

are determined by the Directors to apply a consistent approach with previous acquisitions. The key assumptions in relation to this estimate

for the iC3D acquisition were the discount rate, forecast revenue and forecast EBITDA margin.

Assessing whether goodwill and acquisition-

related intangibles have been impaired

The Group tests annually whether the goodwill

has been impaired and assesses acquisition-related intangible assets for indicators of

impairment

by reference to expected future generation of cash from the relevant intangible assets. In estimating the cash flow, the Directors

make estimates, based on forecasts, about the amount of future profits from the relevant products that will be generated and the timing of

when these will be realised. See Note 17 ‘Goodwill’ for further details.

Deferred tax recognition

Deferred tax assets are reviewed at each reporting date and are recognised only to the extent that it is probable that future taxable profits will

be available against which the asset can be utilised.

The Directors make estimates about future sales and expenses, and the timing of their

realisation, to derive an estimate of the future profits.

The Directors have recognised an amount that they expect to recover in the foreseeable

future of

€2.07 million (2021: €2.24 million) and if there was a reduction in this period by 2 years the impact would be to reduce the asset by

€0.82

million (2021: €0.33 million). See Note 19 ‘Tax’ for further details.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS (CONTINUED)

Estimates

(continued)

Provisions for obsolete inventory

Inventory items are reviewed at each reporting date for

possible obsolescence. Estimates are made in respect of the future demand and net

realisable value of items that are deemed to be slow moving.

The estimates of demand are based on a variety of factors, including the number

of customers for that have purchased that item and historical transactions.

As at 31 December the total gross inventory balance is €3,913,000

(2021: €2,308,000) and the provision against slow moving and obsolete inventory is €265

,000 (2021: €225,000).

Judgements

Assessing whether development costs meet the criteria for capitalisation

The point at which development costs meet the criteria for capitalisation is critically dependent on management

’s judgement of the point at

which technical feasibility is demonstrable

, that the asset will probably generate future economic benefit, the intention to complete the asset

and that the expenditure can be reliably measured.

Further

more, the useful economic lives of capitalised development costs are based on management’s knowledge of the life cycle of the Group’s

products and technology.

The carrying value of development assets also depends on management

’s ability to demonstrate the future economic benefits they will deliver.

This judgement requires assumptions about factors outside the business

’s control such as medium-term economic conditions, technological

developments, and market changes.

The Directors have made a judgement tha

t €3,981,000 (2021: €3,396,000) has been capitalised as eligible, qualifying expenditure for the

purposes of IAS 38. A movement of 10.0% in this judgement would result in a material misstatement. There is judgement in determining

whether development activity constitutes a substantial enhancement to the underlying assets, and in quantifying the time spen

t on these

substantial enhancement

s. The Group utilise a timesheet tracking system to monitor the nature of development being undertaken and the

time spent on this activity.

llocation of value to performance obligations in contracts with customers

The Group enters into contracts with customers, some of which include multiple performance obligations.

The allocation of the transaction

price to the performance obligations is subject to management’s judgement of the performance obligations that are both explicit and implied

in the contract and the subsequent stand-alone selling price of each of those performance obligations.

6. OPERATING SEGMENTS

Identification of reportable segments

Management has determined the operating segments based on the reports reviewed by the Group’s Chief Executive Off

icer (“CEO”) that are

used for deciding how to allocate resources and also in assessing both operating and financial performance of each segment. T

he Group’s

CEO is considered as the Group’s chief operating decision maker (“CODM”

The Group’s segments are:

• Enterprise Software, for enterprise workflow software used primarily for the production of labels & packaging (includes iC3D, see Note

34 ‘Acquisitions’);

• Printhead Solutions, for electronics and software developed for industrial inkjet printing;

• Printing Software, for digital printing and colour management software; and

• Group, for group related expenses that are not allocated to another segment.

Measurement of the operating segments’ profit is assessed against revenue forecasts and expense budgets, excluding non

-operating IFRS

items such as the amortisation of intangible assets acquired through acquisition.

The following tables provide information on

revenue, operating profit, interest, depreciation and amortisation and tax as reported to the CODM

for each of the

Group’s operating segments for the years ended 31 December 2021 and 31 December 2022. The Group has disclosed these

amounts for each reportable segment because they are regularly provided to the CODM or are required to be disclosed by IFRS 8.

Assets

and liabilities by segment are not regularly reported to the CODM, hence are not disclosed within this note.

Inter-

segment revenues are included in cost of sales for the reciprocal segment and are eliminated on consolidation. Unallocated amounts

relate to expenses

incurred by the Group’s parent company (HYBRID Software Group PLC) and exchange gains and losses that are not

attributable to a particular operating segment.

Segment EBITDA is calculated by adding back interest, depreciation, amortisation and tax to segment operating profit/(loss) after tax.

The operating segments are unchanged from the previous year, with the exception of the addition of iC3D into the Enterprise Software

segment, following the acquisition in the year.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

OPERATING SEGMENTS (CONTINUED)

Year ended 31 December 2022:

In thousands of euros

Printing

Software

Printhead

Solutions

Enterprise

Software

Group

Total

Revenue from external customers 15,262 8,657 22,774 - 46,693

Inter-segment revenue

274

109

383

Segment revenue

15,536

8,657

22,883

47,076

Segment operating profit/(loss) after tax

2,515

(414)

3,764

(591)

5,274

Included in the operating profit/(loss) after tax are:

Interest income

Interest expense (73) (26) (311) (15) (425)

Depreciation and amortisation

(2,265)

(564)

(747)

(3,576)

Tax expense

(1,150)

(5)

(500)

(1,655)

Segment EBITDA

5,969

180

5,322

(576)

10,895

The Printing Software segment EBTIDA in the year ended 31 December 2022 includes the gain on disposal of IPv4 addresses of €3,297,000

(2021: €nil). See Note 9 ‘Other Income’ for further details.

Year ended 31 December 2021:

In thousands of euros

Printing

Software

Printhead

Solutions

Enterprise

Software

Group

Total

Revenue from external customers

13,839

13,984

20,739

48,562

Inter-segment revenue

158

124

282

Segment revenue

13,997

13,984

20,863

48,844

Segment operating profit/(loss) after tax

1,374

3,210

5,313

(1,328)

8,569

Included in the operating profit/(loss) after tax are:

Interest income

Interest expense (87) (31) (342) (6) (466)

Depreciation and amortisation

(1,533)

(350)

(583)

(2,466)

Tax benefit/(expense)

149

(863)

(713)

Segment EBITDA

2,842

3,590

7,101

(1,322)

12,211

Reconciliation of reportable segments’ operating profit after tax to consolidated profit after tax:

In thousands of euros

2022

2021

Segment total operating profit after tax

5,274

8,569

Amortisation of acquired intangible assets

(5,094)

(4,717)

Tax effect of above-mentioned items

1,120

1,062

Consolidated profit after tax

1,300

4,914

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

7. REVENUE

Printing S

oftware segment

The segment licenses

its software directly to end users as a standalone software licence and directly to equipment manufacturers through

multi-

year license and distribution agreements, some of which provide for the periodic payment of license royalties, the unit value of which has

been contractually agreed at the outset of the agreement, and which is typically based upon either the

volume sold by the customer or the

sale value of those products into which the Group’s software has been integrated.

These multi-year agreements also include specific provisions

with respect to the delivery of maintenance and after

-sale support services over the duration of the agreement. Such services are rendered

against the payment of a fixed fee, which has been contractually agreed at the outset of the agreement and

is typically charged on the

anniversary date of the agreement. These agreements may also provide for the delivery of engineering services to ensure a seamless

integration of the Group’s software into the customer’s products.

Through its

RTI-RIPS.COM brand, the Printing Software segment also has revenue from related printing hardware and consumables sales.

Printhead

Solutions segment

Driver electronics and accompanying software are

initially sold as a development kit to a new customer. Once the customer has completed

their design process and their product is put into

production, they will typically issue a purchase order for a quantity of products and will draw-

down from that order as they require the inventory.

Enterprise

Software segment

nterprise workflow software is licensed primarily to end users by way of a perpetual software licence. Accompanying training and

implementation services are often sold

with the licences and customers increasingly purchase ongoing after-sale support services. Training

and implementation

services are rendered against the payment of a fixed fee, which has been contractually agreed in advance. On-going

support and maintenance agreements are annual agreements that renew automatically unless cancelled by the customer within the terms of

the cancellation provisions.

An analysis of external sales by revenue type, primary geographical market and timing of recognition is shown below. The table also

provides

a reconciliation of disaggregated revenue with the Group’s reportable segments.

Printing Software

Printhead

Solutions

Enterprise

Software

Total

In thousands of euros

2022

2021

2022

2021

2022

2021

2022

2021

Revenue type

Licence royalties

11,729

10,977

808

862

11,462

12,236

23,999

24,075

Maintenance and after-sale support

2,208

1,858

7,329

5,431

9,602

7,341

Services

318

339

360

226

3,893

2,934

4,571

3,499

Printer hardware and consumables

956

495

1,046

566

Driver electronics

7,424

12,844

7,424

12,844

Other items

170

237

Total sales

15,262

13,839

8,657

13,984

22,774

20,739

46,693

48,562

Primary geographical markets

United Kingdom

1,828

478

726

356

1,160

1,175

3,714

2,009

Europe, excluding United Kingdom

2,490

6,170

1,925

2,015

9,966

8,940

14,381

17,125

North & South America

9,217

5,869

2,312

2,656

10,684

9,447

22,213

17,972

Asia

1,727

1,322

3,694

8,957

964

1,177

6,385

11,456

Total sales

15,262

13,839

8,657

13,984

22,774

20,739

46,693

48,562

Timing of revenue recognition

Recognised at a point in time

12,736

11,642

8,232

13,706

14,278

12,242

35,246

37,590

Recognised over time

2,526

2,197

425

278

8,496

8,497

11,447

10,972

Total sales

15,262

13,839

8,657

13,984

22,774

20,739

46,693

48,562

Revenue recognised over time is for performance obligations that are performed over time and include maintenance and after

-sale support,

some services and some licence royalties that are not perpetual licences. All other revenue is recognised as a point in time.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

REVENUE (CONTINUED)

For continuing operations, the ten largest customers represented

29.9% (2021: 42.3%) of the Group’s revenue, the five largest customers

represented 24.

5% (2021: 35.1%) of the Group’s revenue and the single largest customer represented 9.8% (2021: 13.94%) of the Group’s

revenue.

There was no customer (2021: 1) during the year that represented 10% or more of total revenue. Revenue from that customer totalled

€

nil million (2021: 1 customer in the Printhead Solutions segment totalling €6.74 million).

Within the

North & South America geographical market, €18.13 million of revenue was generated in the United States of America (2021:

€1

6.98 million).

During the year a customer in the

Printing Software segment exercised an option in their contract, which extended the term of the contract

and resulted in €

1.65 million of revenue being recognised in the year. In 2021 a different customer exercised an option in their contract which

resulted in €2.

70 million of revenue being recognised in that year.

The following table shows revenue expected to be recognised in the future related to performance obligations that are unsatisfied (or partially

unsatisfied) as at 31 December 20

22.

In thousands of euros

next 12 months

12-24 months

after 24 months

Total

Products and services

1,015

After-sale support

2,458

251

155

2,864

Total

3,473

251

155

3,879

The Group applies the practical expedient in paragraph 63 of IFRS 15 and does not adjust the promised amount of consideration

for the effects

of a significant financing component for contracts where payments are due within one year.

Contract balances

The

following table provides information about receivables, accrued revenue and contract liabilities from contracts with customers.

In thousands of euros

2022

2021

Trade receivables (see notes 20 and 22)

6,563

7,050

Accrued revenue (see notes 20 and 22)

8,384

7,181

Contract liabilities (see note 28)

(3,879)

(3,592)

The movement in the Group’s provision for impairment of trade receivables and accrued revenue was €202,000 (2021: €119,000).

Revenue recognised in the year that was included in the contract liability balance at the beginning of the year was €1.

05 million (2021: €1.55

million).

8. OTHER OPERATING EXPENSES

Other operating expenses incurred during the year were:

In thousands of euros

2022

2021

Acquisition related expenses (see note 34)

180

Total other operating expenses

180

9. OTHER INCOME

In thousands of euros

2022

2021

Fair value adjustment to contingent consideration (see note 27)

Government grant

Gain on disposal of IPv4 addresses

3,297

Total other income

3,301

On 25 July 2022 the Group completed the sale of a range of IPv4 addresses that were no longer in use

and had an historic acquisition cost of

€nil

. The pre-tax proceeds after commissions were €3.30 million, which have been received in full.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

10. EXPENSES BY NATURE

In thousands of euros

2022

2021

Employee benefit expense (see note 13)

27,586

26,483

Depreciation expenses (see note 15 and 26)

1,559

1,394

Capitalisation of R&D expenses (see note 16)

(3,981)

(3,396)

Amortisation of intangible assets (see note 16)

7,101

5,779

Other operating expenses, net of other operating income

4,766

5,057

Total operating expenses, net of other operating income

37,031

35,317

11. SERVICES PROVIDED BY THE GROUP’S AUDITOR

In thousands of euros

2022

2021

For the audit of Parent and Consolidated Financial Statements

551

391

For the audit of the prior year Parent and Consolidated Financial Statements

114

For other services provided:

- audit of financial statements of subsidiaries of the company

109

Total fees payable to the Group’s auditor and its associates

774

484

12. REMUNERATION OF DIRECTORS

The aggregate amount of remuneration (all salary, fees and bonuses, sums paid by way of expense allowance and money value of other non

cash benefits) paid or

receivable by Directors for the year was €1,225,000 (2021: €1,507,000).

The aggregate value of

gains made by Directors during the year on the exercise of share options was €nil (2021: €nil).

The Group only operates defined contribution pension schemes

for the Directors. During the year, for two Directors (2021: two), €27,000

(20

21: €36,000) of pension contributions were paid.

Further information is available in the

Directors’ remuneration report on pages 55 to 62.

13. EMPLOYEE INFORMATION

The average number of people, including executive

Directors, employed by the Group during the year was:

2022

2021

By activity

Research and development

102

Sales, maintenance and support

146

126

General and administrative

Total average number of people employed

289

252

Employee benefit expenses were made up of:

In thousands of euros

2022

2021

Wages and salaries

22,942

22,137

Social security contributions

2,757

2,373

Medical insurance contributions

478

562

Pension contributions to defined contribution plans

986

867

Share-based payments (see note 30)

Other employee related expenses

423

529

Total employee benefit expenses

27,586

26,483

Of the total

employee benefit expenses, €1,243,000 (2021: €984,000) was recognised in cost of sales and €26,343,000 (2021: €25,499,000)

was recognised in operating expenses

within Selling, general and administrative expenses and Research and development expenses.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

14. FINANCE INCOME AND FINANCE EXPENSES

In thousands of euros

2022

2021

Interest income

Finance income on net investment in leases

Total interest income

Forgiveness of government-backed COVID support loans in the United States

867

Total finance income

870

Interest expense

(29)

(17)

Interest expense on loan from related undertaking (see note 32)

(245)

(286)

Interest on lease liabilities (see note 26)

(150)

(163)

Total finance expenses

(424)

(466)

Net finance (expenses)/income

(381)

404

Net finance expense, net of loan forgivenes

s of €513,000 (2021: €463,000) has been disclosed within cash generated from operating activities

in the consolidated statement of cash flows.

15. PROPERTY, PLANT AND EQUIPMENT

In thousands of euros

Leasehold

improvements

Computer

equipment

Office

equipment

Motor

vehicles

Total

Cost

At 31 December 2020

719

1,715

968

3,402

Additions

224

280

379

371

1,254

Additions – business combinations (see note 34)

118

187

367

Disposals

(170)

(27)

(75)

(272)

Effect of movement in exchange rates

122

255

At 31 December 2021

1,025

1,983

1,515

483

5,006

Additions

230

177

363

805

Additions – business combinations (see note 34)

Disposals

(9)

(117)

(72)

(198)

Effect of movement in exchange rates

(46)

(78)

(65)

(9)

(198)

At 31 December 2022

1,014

2,142

1,510

765

5,431

Depreciation

At 31 December 2020

652

1,325

851

2,828

Charge for the year

235

191

570

Disposals

(169)

(27)

(65)

(261)

Effect of movement in exchange rates

207

At 31 December 2021

762

1,483

1,081

3,344

Charge for the year

278

232

144

738

Disposals

(6)

(111)

(72)

(189)

Effect of movement in exchange rates

(39)

(68)

(55)

(2)

(164)

At 31 December 2022

807

1,687

1,147

3,729

Net book value

At 31 December 2021

263

500

434

465

1,662

At 31 December 2022

207

455

363

677

1,702

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

16. OTHER INTANGIBLE ASSETS

In thousands of euros

Software

technology

Customer

relation-

ships

Patents

Trade-

marks

Know-how

Driver

electronics

Total

Cost

At 31 December 2020

40,314

13,710

2,689

575

764

3,055

61,107

Additions – purchased

Additions – internally developed

2,963

433

3,396

Additions – business combinations (see note 34) 36,701

6,758

210

43,669

Effect of movement in exchange rates

3,034

1,008

190

224

4,556

At 31 December 2021

83,089

21,476

2,879

617

1,032

3,712

112,805

Additions – purchased

Additions – internally developed

3,349

632

3,981

Additions – business combinations (see note 34)

1,458

378

1,836

Effect of movement in exchange rates

(2,020)

(694)

(144)

(31)

(6)

(211)

(3,106)

At 31 December 2022

85,951

20,782

2,735

586

1,404

4,133

115,591

At 31 December 2020

37,633

13,530

2,537

575

764

2,494

57,533

Charge for the year

4,289

807

648

5,789

Effect of movement in exchange rates

2,796

996

188

198

4,278

At 31 December 2021

44,718

15,333

2,735

617

857

3,340

67,600

Charge for the year

5,512

908

458

223

7,111

Effect of movement in exchange rates

(2,025)

(705)

(137)

(31)

(6)

(175)

(3,079)

At 31 December 2022

48,205

15,536

2,608

586

1,309

3,388

71,632

Net book value

At 31 December 2021

38,371

6,143

144

175

372

45,205

At 31 December 2022

37,746

5,246

127

745

43,959

On 1

December 2022, the Group acquired the intellectual property of Quadraxis Technology (“Quadraxis”) from Quadraxis Technology

(“

Quadraxis Technology”) for €75,000. This acquisition strengthens Hybrid Software Group’s offering in 3D and additive manufacturing

solutions.

The Group plans to integrate Quadraxis software into its extensive portfolio which includes other 3D applications such as iC3D and

Met3D.

The amortisation of patents is included in cost of sales, the amortisation charge for software technology

and driver electronics is included in

research and development expenses

and amortisation charges related to any other intangible assets acquired through business combinations

are included in selling, general and administrative expenses.

The amortisation charge is recognised in the following

line items in the consolidated statement of comprehensive income:

In thousands of euros

2022

2021

Cost of sales

Selling, general and administrative expenses

1,366

842

Research and development expenses

5,735

4,937

Total amortisation charge

7,111

5,789

Intangible assets that are subject to amortisation are reviewed annually for

indicators of impairment or whenever events or changes in

accounting estimates indicate that the carrying amount may not be

recoverable. If an indicator of impairment is identified, a full impairment

review is performed with the calculations being

based on the discounted cash flows over the remaining period of amortisation of the capitalised

development expense and use the same

discount rate and exchange rates that were used for the impairment review of Goodwill (see Note 17

‘Goodwill’

). These intangible assets are also allocated to a CGU containing goodwill and are tested annually for impairment as part of the

goodwill impairme

nt review (see Note 17 ‘Goodwill’).

There was no significant change during the year to the

indicators that were used at 31 December 2021 to identify the requirement to impair

any of these intangible assets.

It was concluded that no impairment was required for the year ended 31 December 2022 (2021: €nil).

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

16.

OTHER INTANGIBLE ASSETS (CONTINUED)

For individual intangible assets material to the financial statements, the following table shows the remaining amortisation p

eriods and the

carrying amounts:

In thousands of euros

Remaining amortisation period

2022

2021

Cloudflow

10 years

17,480

18,555

ColorLogic

2.0 to 8.8 years

2,647

2,909

EDL

1.4 years

418

483

Harlequin RIP

1.7 years

1,649

1,304

iC3D

9.3 years

1,385

Other software

0.8 to 7 years

125

166

Packz

10 years

12,652

13,412

Xitron

1.0 to 2.8 years

1,390

1,542

Total software technology

37,746

38,371

Customer relationships

1.8 to 8.8 years

5,246

6,143

Patents

12 years

127

144

Know-how

0.3 years

175

Driver electronics

1.2 to 4.8 years

745

372

17. GOODWILL

In thousands of euros

Total Goodwill

Cost

At 31 December 2020

15,978

Additions – business combinations (see note 34)

53,576

Effect of movement in exchange rates

1,175

At 31 December 2021

70,729

Additions – business combinations (see note 34)

1,578

Effect of movement in exchange rates

(630)

At 31 December 2022

71,677

Amortisation or impairment

At 31 December 2020

5,638

Effect of movement in exchange rates

413

At 31 December 2021

6,051

Effect of movement in exchange rates

(301)

At 31 December 2022

5,750

Net book value

At 31 December 2021

64,678

At 31 December 2022

65,927

The Group is required to test annually whether goodwill and other intangible assets with indefinite useful lives have suffere

d any impairment

during the year in accordance with the policy set out in

Note 3 ‘Significant accounting policies’.

Goodwill is al

located to cash-generating units (CGUs) for the purposes of impairment testing. The CGUs identified were Global Graphics

Software,

Meteor Inkjet, Xitron, HYBRID Software and ColorLogic. HYBRID Software and ColorLogic were new in the year ended 31 December

2021 due to

the acquisitions of HYBRID Software Group S.à r.l. and ColorLogic GmbH.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

17.

GOODWILL (CONTINUED)

The table below shows the allocation of goodwill to the CGUs.

In thousands of euros

2022

2021

Global Graphics Software

6,721

7,052

Meteor Inkjet

2,195

2,310

Xitron 1,857 1,740

HYBRID Software

53,952

52,374

ColorLogic

1,202

Total goodwill

65,927

64,678

The recoverable amount of the CGUs has been determined using an estimate of their value in use as at 31 December 202

2. These calculations

employed cash flow projections based on financial forecasts approved by management covering a

five-year period ending 31 December 2027

and then into perpetuity using a terminal growth rate

. The financial forecasts are most sensitive to changes in the customer base and associated

revenues and to changes in staff costs.

Revenues were forecasted based on historical trends and anticipated growth. Staffing levels were

reviewed against the additional revenue and an average increase in staff costs was applied to account for future potential pay increases that

could be awarded to employees.

Projected cash flows were converted into euros based on the rates used for preparing the Group’s budget for the year ending 31 December

2022.

The exchange rates were determined with reference to market forecasts and were 1.1764 euros for 1 pound sterling, 1.0000 US dollars

for 1 euro, and 140 Japanese yen for 1 euro.

Management considers

that the use of a five-year forecast and then into perpetuity is justified because the core of the products and technology

that make up the

CGUs have been generating revenue for between 10 and 25 years. The Group’s technology has evolved to meet the changing

requirements of the industries in which it

operates, and it continues to do so. Combining acquisitions with the continual shift to digital printing

and manufacturers looking to differentiate their products, new opportunities continue to be created for the Group and its products.

Key assumptions

The following key assumptions have been adopted in the calculations.

Global Graphics Software CGU

• The pre-tax discount rate used was 14.83% (2021: 14.11%);

• Revenue growth rates used in the estimation process are consistent with the approved budget for 2023, outlook for periods between

2024 to 2027 was projected at 5.0%;

• Gross margin was reduced to 89% compared to recent actual gross margins (2021: 98%), mainly due to increased intercompany

sourcing of software components;

• The staff costs growth rate used was 1% (2021: 5%); and

• The terminal growth rate used was 2% (2021: 0%).

Meteor Inkjet CGU

• The pre-tax discount rate used was 15.06% (2021: 14.11%);

• Revenue growth rates used in the estimation process are consistent with the approved budget for 2023, outlook for periods between

2024 to 2027 was projected at 6.2%;

• Gross margin was aligned to recent actual gross margins of 58% (2021: 58%);

• The staff costs growth rate used was 4.5% (2021: 5%); and

• The terminal growth rate used was 0% (2021: 0%).

Xitron CGU

• The pre-tax discount rate used was 15.45% (2021: 15.66%);

• Revenue growth rates used in the estimation process are consistent with the approved budget for 2023, outlook for periods between

2024 to 2027 was projected at 5.0%;

• Gross margin was reduced to 63% compared to recent actual gross margins (2021: 66.9%);

• The staff costs growth rate used was 5.3% (2021: 5%); and

• The terminal growth rate used was 0% (2021: 0%).

HYBRID Software CGU

• The pre-tax discount rate used was 15.46% (2021: 15.24%);

• Revenue growth rates used in the estimation process are consistent with the approved budget for 2023, outlook for periods between

2024 to 2027 was projected at 8.1%;

• Gross margin was increased to 97.6% compared to recent actual gross margins (2021: 96.9%);

• The staff costs growth rate used was 7.5% (2021: 7.5%); and

• The terminal growth rate used was 3% (2021: 0%). HYBRID Software enjoys significant competitive advantages in the markets it is

active providing for above average pricing power hence the ability to grow its income more than the long term growth rates of the

countries in which it is active.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

17.

GOODWILL (CONTINUED)

ColorLogic CGU

• The pre-tax discount rate used was 14.30% (2021: 14.38%);

• Revenue growth rates used in the estimation process are consistent with the approved budget for 2023, outlook for periods between

2024 to 2027 was projected at 5.0%;

• Gross margin was reduced to 83% compared to recent actual gross margins (2021: 86.1%);

• The staff costs growth rate used was 5% (2021: 5%); and

• The terminal growth rate used was 0% (2021: 0%).

Sensitivity to changes in assumptions

Global Graphics Software CGU

For the Global Graphics Software CGU m

anagement has identified that a reasonably possible change in key assumptions could cause the

carrying amount to match the recoverable amount. The following table shows the amount by which these assumptions would need to change

individually for the estimated recoverable amount to be equal to the carrying amount.

The Directors believe there were no reasonably possible changes in the other key assumptions that could cause impairment.

Change required for carrying

amount to equal recoverable

2022

Revenue growth rate

(94bps)

Discount rate

356bps

HYBRID Software CGU

For the HYBRID Software CGU management has identified that a reasonably possible change in

key assumptions could cause the carrying

amount to match the recoverable amount. The following table shows the amount by which these assumptions would need to change

individually

for the estimated recoverable amount to be equal to the carrying amount.

The Directors believe there were no reasonably possible changes in the other key assumptions that could cause impairment.

Change required for carrying

amount to equal recoverable

2022

Revenue growth rate

(61bps)

EBITDA margin

(230bps)

Discount rate

201bps

ColorLogic CGU

For the ColorLogic

CGU management has identified that a reasonably possible change in key assumptions could cause the carrying amount

to match the recoverable amount. The following table shows the amount by which these assumptions would need to change individually for

the estimated recoverable amount to be equal to the carrying amount.

The Directors believe there were no reasonably possible changes in the other key assumptions that could cause impairment.

Change required for carrying

amount to equal recoverable

2022

Revenue growth rate

(232bps)

Discount rate

831bps

Meteor Inkjet

and Xitron CGU’s

For the Meteor Inkjet and Xitron CGUs, no reasonable change in assumptions would cause a material impairment and therefore no

sensitivity

analysis has been disclosed.

As a result of these projections, no impairment was required for goodwill for the year ended 31 December 2022 (2021: €

nil).

18. FINANCIAL ASSETS

Financial assets measured at amortised cost.

In thousands of euros

2022

2021

Rent and other deposits

Financial assets not classified as cash or cash equivalent

726

863

Non-current finance lease receivables (see note 26)

180

Total financial assets

955

935

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

19.

TAX

Corporation tax

Analysis of the tax (charge) / credit in the year:

In thousands of euros

2022

2021

Current tax

Current year charge

(1,579)

(657)

Withholding tax

(8) -

Total current tax

(1,587)

(657)

Deferred tax

Arising from the capitalisation and amortisation of development expenses

(269)

(264)

Impact of rate change

- (107)

Recognition of previously unrecognised tax losses

199

970

Origination and reversal of temporary differences

1,122

407

Total deferred tax

1,052

1,006

Total tax (charge) / credit

(535)

349

The tax (charge) /

credit for the year differs from that calculated by applying the standard rate of corporation tax of the Company to profit or

loss before taxation. The differences are as follows:

In thousands of euros

2022

2021

Profit before tax

1,835

4,565

Expected tax expense at the Company's tax rate of 19% (2021: 19%)

(349)

(867)

Effect of differences in tax rates in foreign jurisdictions

(527)

(373)

Effect of share-based payments

(3)

Effect of expenses not deductible and items not taxable

327

Deferred tax not recognised

(984) (509)

Impact of rate change

204

Effect of R&D enhanced expenditure

674

605

Effect of withholding tax

(8) (5)

Recognition of previously unrecognised tax asset

651

970

Total tax (charge) / credit recognised

(535)

349

An increase in the UK corporation tax rate from 19% to 25% (effective 1 April 2023) was substantively enacted on 24 May 2021.

Deferred tax

The Group had recognised deferred tax as follows:

In thousands of euros

2022

2021

Deferred tax assets

Capital allowances

1,677 1,529

Unused tax losses

1,109

1,227

Total recognised deferred tax assets before set-off

2,786

2,756

Deferred tax set-off

(717)

(520)

Net deferred tax assets

2,069

2,236

Deferred tax liabilities

Capitalised development expenses

834

571

As a result of business combinations

8,547 9,595

Total recognised deferred tax liabilities before set-off

9,381

10,166

Deferred tax set-off

(717)

(520)

Net deferred tax liabilities

8,664

9,646

Deferred tax assets are recognised for tax losses available for carrying forward to the extent that the realisation of the related tax benefit

through future taxable profits is probable.

Deferred tax is measured at the tax rates that are expected to apply to temporary differences when

they reverse, based on the laws that have been enacted or substantively enacted by the reporting date.

On 24 May 2021 the UK tax rate

increase from 19% to 25% from 1 April 2023

was substantively enacted. This will have a consequential effect on the group’s future tax charge,

but no estimates of the potential effect have been made.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

19.

TAX (CONTINUED)

The deferred tax asset at 31 December 2022 has been calculated based on the rates expected to

be in force at the time of utilisation. Th e

deferred tax liability at 31 December 2022 has been recognised as a result of acquisitions in different tax jurisdictions at the rates prevailing i n

those jurisdictions. The rates range from 17% to 30%.

Deferred tax assets on trading losses of €

21.25 million (2021: €17.50 million) and fixed asset temporary differences of €13.79 million (2021 :

€

14.40 million) have not been recognised.

The movement in deferred tax is as follows:

20. TRADE AND OTHER RECEIVABLES DUE AFTER MORE THAN ONE YEAR

In thousands of euros

2022

2021

Trade receivables

216

Accrued revenue

3,664

3,466

Total trade and other receivables due after more than one year

3,718

3,682

Under some licensing arrangements, the Group recognises revenue at the commencement of the contract and payments become due during

the term of the agreement.

21. INVENTORIES

In thousands of euros

2022

2021

Finished goods

2,174

1,930

Components

1,739

378

Total inventories

3,913

2,308

22. TRADE AND OTHER RECEIVABLES

In thousands of euros

2022

2021

Trade receivables

6,509

6,834

Accrued revenue

4,720

3,715

Deferred consideration receivable

500

Allowance for doubtful debts

(336)

(134)

Total trade and other receivables

10,893

10,915

Trade receivables less than 90 days past due are not considered impaired. The ageing analysis of

total trade receivables is as follows:

In thousands of euros

2022

2021

Under 90 days

6,213

6,283

Over 90 days and provided for

336

134

Over 90 days but not provided for

633

Total trade receivables

6,563

7,050

Impairment losses during the year were €

9,000 (2021: €nil).

In thousands of euros

2022

2021

Deferred tax assets

Balance as at 1 January

2,756

959

Amounts credited to profit & loss

199

315

As a result of business combinations (see note 34)

1,430

Foreign currency translation differences recognised in other comprehensive income

(169)

Total recognised deferred tax assets before set-off as at 31 December

2,786

2,756

Deferred tax liabilities

Balance as at 1 January

10,166

740

Amounts credited to profit & loss

(853)

(691)

As a result of business combinations (see note 34)

10,035

Foreign currency translation differences recognised in other comprehensive income

Total recognised deferred tax liabilities before set-off as at 31 December

9,381

10,166

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

22.

TRADE AND OTHER RECEIVABLES (CONTINUED)

Movements in the Group's provision for impairment of trade receivables are as follows:

In thousands of euros

2022

2021

At 1 January

134

Charge during the year

202

119

At 31 December

336

134

The

Directors have considered the nature of the customers, the historic levels of bad debts and the payment profile of customer contracts in

reaching the value of the expected credit losses above.

See Note 31 ‘Financial risk management’ for further disclosure regarding the credit

quality of the Group

’s trade debtors.

23. OTHER CURRENT ASSETS

In thousands of euros

2022

2021

VAT receivable

294

254

Current finance lease receivables (see note 26)

Other items

Total other current assets

425

297

24. CASH AND CASH EQUIVALENTS

In thousands of euros

2022

2021

Cash at bank and in hand

6,317

9,234

Total cash and cash equivalents

6,317

9,234

25. CAPITAL AND RESERVES

Ordinary shares

of €0.40 allotted, called up and fully paid:

2022

2021

In thousands of euros, except number of shares

Number

Value

Number

Valu e

As at 1 January

32,909,737

13,164

11,835,707

4,73 4

Issued in business combination (see note 34)

21,074,030

8,43 0

As at 31 December

32,909,737

13,164

32,909,737

13,16 4

premium:

In thousands of euros

2022

2021

As at 31 December

1,979

Merger reserve:

he acquisition of HYBRID Software Group S.à r.l. (“HYBRID Software”) (see Note 34 ‘Acquisitions’) was a common control transaction due

to the fact that both the Company and HYBRID Software were under the same parent company control

n accordance with section 612 of the Companies Act 2006, the premium over the par value of the consideration shares issued in exchange

for 100% of the issued share capital of HYBRID Software has been credited to a merger reserve instead of share premium.

The premium over par value is calculated as follows:

In thousands of euros

Contractual consideration (see note 34)

80,000

Fair value adjustment for consideration shares

(4,555)

Acquisition date market value of new shares issued as consideration (see note 34)

75,445

Par value of 21,074,030 shares issued

(8,430)

Premium over par value credited to merger reserve

67,015

In thousands of euros

2022

2021

As at 31 December

67,015

The fair value adjustment for the consideration shares is an adjustment to reflect the acquisition date fair value of the sha

res (see Note 34

‘Acquisitions’

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

25.

CAPITAL AND RESERVES (CONTINUED)

reasury shares:

The Company's investment in its own shares in treasury is as follows:

2022

2021

In thousands of euros, except number of shares

Number

Value

Number

Value

As at 1 January

73,996

202

112,996

309

Disbursement of shares to employees

(15,000)

(41)

(39,000)

(107)

As at 31 December

58,996

161

73,996

202

26. LEASES

Group as

lessee

The Group leases office facilities

and motor vehicles. The office leases typically run for a period of 6 years with an option to renew the lease

at the end of the term

and motor vehicle leases typically run for 3 years. Lease payments are agreed at the inception of the lease and at any

subsequent

renewal.

Right

-of-use assets

In thousands of euros

Land and

buildings

Motor

vehicles

Total

Balance at 31 December 2020

1,279

Additions

114

204

Additions – business combinations (see note 34)

1,303

119

1,422

Remeasurements

1,438

Depreciation charge for the year

(718)

(106)

(824)

Effect of movement in exchange rates

Balance at 31 December 2021

3,469

137

3,606

Additions

Remeasurements

123

Disposals

(11)

Depreciation charge for the year

(722)

(99)

(821)

Effect of movement in exchange rates

(36)

(16)

(52)

Balance at 31 December 2022

2,834

2,912

These right

-of-use assets are depreciated on a straight-line basis over the remaining term of the rental agreement. As at the date of these

financial statements, the remaining terms range from

6 months to 7 years. Remeasurements are the result of an extension to the term of an

existing lease.

Lease liabilities

In thousands of euros

2022

2021

Current

834

761

Non-current

2,560

3,060

Total lease liabilities

3,394

3,821

It is expected that as a lease matures it will either be extended or replaced by a new lease on similar terms

. There are no variable lease

payments, all lease payments are for fixed amounts agreed at the outset of the lease.

Amounts recognised in the Consolidated Statement of Comprehensive Income:

In thousands of euros

2022

2021

Interest on lease liabilities

150

163

Expenses relating to short-term leases

Total recognised in profit or loss

249

240

A short

-term lease is a lease that, at the commencement date, has a lease term of 12 months or less. The Group has elected to apply the

recognition exemption under paragraph 5 of IFRS 16 and recognise the associated payments in profit or loss.

The short-term leases are leases

for office space with a duration of 12 months or less.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

6. LEASES (CONTINUED)

Cash out flow for leases:

In thousands of euros

2022

2021

Lease liability interest

150

163

Principal payments

935

849

Total cash outflow for leases

1,085

1,012

Maturity analysis of contractual undiscounted cash flows for

lease payments:

In thousands of euros

2022

2021

Within 1 year

972

907

Between 1 and 2 years

919

853

Between 2 and 3 years

883

804

Between 3 and 4 years

527

781

Between 4 and 5 years

160

463

After 5 years

320

479

Total undiscounted lease liabilities at 31 December

3,781

4,287

Group as lessor

– finance leases

The Group has cancellable leases, as intermediate lessor, of motor vehicles.

The terms of these leases vary. The following amounts are

recognised in the Consolidated Statement of Com

prehensive Income:

In thousands of euros

2022

2021

Income received from subleasing right-of-use assets

Finance income on net investment in leases

(20)

(2)

Total amount recognised in profit or loss

Future minimum lease payments

receivable for motor vehicles under cancellable finance leases are set out below:

In thousands of euros

2022

2021

Within 1 year

103

Between 1 and 2 years

Between 2 and 3 years

Between 3 and 4 years

Between 4 and 5 years

After 5 years

Total undiscounted lease payments receivable

306

Unearned finance income

(41)

(3)

Net investment in the lease

265

In thousands of euros

2022

2021

Current (see note 23)

Non-current (see note 18)

180

Total finance lease receivable

265

27. OTHER LIABILITIES

Financial liabilities measured at fair value.

In thousands of euros

2022

2021

Contingent consideration

635

1,434

Deferred consideration

932

1,157

Other liabilities

152

183

Unsecured loan from related party (see note 32)

8,093

8,400

Total other liabilities

9,812

11,174

In thousands of euros

2022

2021

Current

5,881

3,767

Non-current

3,931

7,407

Total other liabilities

9,812

11,174

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100

101

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(CONTINUED)

27.

OTHER LIABILITIES (CONTINUED)

Contingent consideration

Certain assumptions about revenue growth were used when calculating the acquisition date fair value of contingent considerati

on for the

acquisition of TTP

Meteor Limited (now Meteor Inkjet Limited) in the year ending 31 December 2016. These assumptions were reviewed for

the year ended 31 December 202

2. Based on the revised forecasts, the review concluded that there was an increase in the present value of

those payments, thus

decreasing the liability on the balance sheet, of €4,000 (2021: decrease of €3,000).

During the y

ear, cash payments of €715,000 (2021: €492,000) were paid against the contingent consideration due for the acquisition of Meteor

Inkjet Limited.

The underlying liability is denominated in pounds sterling, thus there is a movement due to changes in exchange rates used to

convert to Euros at the reporting date.

Deferred consideration

Deferred consideration primarily relates to the acquisition of ColorLogic GmbH

(see Note 34 ‘Acquisitions’). During the year, cash payments

of €3

10,000 were paid against the deferred consideration.

Unsecured loan from related party

An unsecured loan has been granted by Congra to HYBRID Software

Development NV. (“HYBRID”). During the year, payments totalling

€

552,000 (2021: €2,986,000) have been made to Congra in respect of the loan. €307,000 (2021: €2,700,000) has been paid as a repayment

against the principal and €

245,000 (2021: €286,000) has been paid for interest. Interest is calculated and payable at a fixed rate of 3% per

annum on the outstanding balance and, as per the loan agreement,

capital repayments of €2,800,000 (2021: €2,800,000) are payable per

annum.

The balance of the loan outstanding at 31 December 2022 was €8,093,000 (2021: €8,400,000).

On 16 February 2023, an addendum to the loan agreement was closed in which an adjustment to the repayment scheme has been agreed to

Subject to the amended repayment scheme, €93,000 is to be repaid in 2023 and the balance in 4 equal instalments of €1,000,000

each in the

years ending 31 December 2025 and 2026.

The loan is due to be fully repaid on 31 December 2026.

28. CONTRACT LIABILITIES

In thousands of euros

2022

2021

Customer advances

1,015

1,617

Deferred revenue

2,864

1,975

Total contract liabilities

3,879

3,592

In thousands of euros

2022

2021

Current

3,835

3,165

Non-current

427

Total contract liabilities

3,879

3,592

The contract liabilities relate to consideration received in advance of the provision of goods and

services. Customer advances relate to

consideration received in advance of the provision of physical goods, engineering and consultancy services.

Deferred revenue relates to the

consideration received for support and maintenance performance obligations that will be recognised as revenue over a period of time.

Movements in the balance are driven by individual contracts and are not expected to necessarily be consistent year on year.

29. EARNINGS PER SHARE

The basic earnings per share is calculated by dividing the net profit attributable to equity holders of the Company by the weighted average

number of ordinary shares in issue during the year, excluding those held in treasury.

For diluted earnings per share, the weighted average

number of ordinary shares in issue

during the year, excluding those held in treasury, is adjusted to assume conversion of all dilutive potential

ordinary shares.

At the year end, those share options where the exercise price is less than the average market price of the Company’s ordinary

shares were the only dilutive

potential ordinary shares.

In thousands of euros unless otherwise stated

2022

2021

Weighted average number of shares (basic), in thousands of shares

32,850

32,198

Profit from continuing operations

1,300

4,914

Basic earnings per share, in euros

0.04

0.15

Diluted earnings per share, in euros

0.04

0.15

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

30. SHARE BASED PAYMENTS

At 31 December 20

22, the Group has the following shared based payment arrangements.

Free shares

On 24 April 2009 the Group established an HMRC approved Share Incentive Plan (

“SIP”) in the UK and also operates an Enterprise

Management Incentive Scheme (

“EMI”) to enable its UK employees and Directors to participate in a tax efficient manner in the ownership of

the Company

’s shares. Under these schemes, free shares can be granted by the board to eligible employees and Directors. For non-UK

employees and

Directors, free shares can be granted directly to the employee. Free shares granted by the board to employees and Directors,

either directly or through the SIP or EMI, have a 3 or 4 year vesting period and free shares granted outside of the SIP or EMI have v

esting

periods of either 12 or 24 months.

Employees participating in the SIP are also granted free matching shares in proportion to the partnership shares that they purchased through

a deduction from their gross pay before tax, subject to current HMRC limits.

The matching shares have a vesting period of 3 years.

The number of free shares granted, exercised, lapsed or withdrawn during the year was as follows:

As at 31 December

2021

Number

Granted

Number

Exercised

Number

Withdrawn

Number

Lapsed

Number

As at 31 December

2022

Number

SIP matching shares

28,313

(4,327)

(620)

23,366

Free shares granted

80,589

(21,857)

(620)

58,112

108,902

(26,184)

(1,240)

81,478

Measurement of fair value

The fair value of free shares granted as matching shares under the SIP was assumed to be equal to the purchase price of corre

sponding

partnership shares which were acquired by participants in

the SIP.

The fair value of free shares granted was assumed to be the closing price reported for the Company’s shares on the last trading day

immediately preceding the date when the shares were granted.

It was also considered that all of the grantees would be in employment at the

date of vesting.

During the year the G

roup recognised €nil (2021: €15,000) of share-based payment expense in these financial statements.

31. FINANCIAL RISK MANAGEMENT

The Group’s activities expose it to a variety of financial risks: market (notably foreign exchange risk), credit risk and

liquidity risk. The Group’s

overall financial risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse

effects on the Group’s financial performance.

Financial risk management is overseen by the Chief Financial Officer (CFO) under policies

approved by the board which has overall responsibility for the establishment and oversight of the Group’s risk management fra

mework

The board provides principles for overall risk management, covering specific areas such as foreign exchange risk and the use of derivative

financial instruments, whereas the CFO identifies, evaluates, and manages financial risks in close co

-operation with the Group’s operating

units.

The Group does not permit the use of derivative financial instruments for speculative purposes.

Market risk

The Group operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily

with respect to

the US dollar and the British pound. Foreign exchange risk arises from future commercial transactions, recognised assets (notably trade

receivables) and liabilities, as well as net investments in foreign operations.

The objective of market risk management is to manage and control market risk exposures within acceptable parameters

. To help manage

these foreign exchange risks the Group

may utilise foreign currency option or forward contracts transacted with high-credit-quality financial

institutions, after review and approval by the Group’s CFO

. There were no such contracts outstanding as at 31 December 2022 (2021: none).

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

1. FINANCIAL RISK MANAGEMENT (CONTINUED)

The Group had the following current assets and liabilities denominated in

currencies:

In thousands of euros

Euros

US dollars

Pounds

sterling

Japanese

yen

Canadian

dollars

Chinese

yuan

Australian

dollars

At 31 December 2022

Trade and other receivables

3,923

4,305

1,333

853

329

Other current assets

208

168

Trade and other payables

(1,626)

(614)

(654)

(10)

(13)

(2)

Accrued liabilities

(1,072)

(186)

(1,015)

(14)

Other liabilities

(5,462)

(419)

Net exposure

(4,029)

3,507

(587)

842

350

At 31 December 2021

Trade and other receivables

4,729

3,278

1,378

1,481

Other current assets

177

Trade and other payables

(1,009)

(409)

(469)

(11)

(33)

Accrued liabilities

(1,870)

(316)

(2,064)

(11)

Other liabilities

(3,055)

(712)

Net exposure

(1,116)

2,553

(1,690)

1,470

(8)

The Group had the following non

-current assets and liabilities denominated in currencies:

In thousands of euros

Euros

US dollars

Pounds

sterling

Japanese

yen

Canadian

dollars

Chinese

yuan

Australian

dollars

At 31 December 2022

Trade and other receivables

2,191

1,336

116

Accrued liabilities

(821)

(113)

(213)

Other liabilities

(3,714)

(217)

Net exposure

(2,344)

1,223

(417)

116

At 31 December 2021

Trade and other receivables

2,694

404

527

Accrued liabilities

(870)

(168)

(278)

Other liabilities

(6,734)

(673)

Net exposure

(4,910)

236

(937)

527

The average and year end exchange rates applied during the year

to convert currencies to Euros are as follows:

Average rate for

Rate at 31 December

2022

2021

2022

2021

US dollar

0.9506

0.8454

0.9382

0.8789

Pound sterling

1.1734

1.1628

1.1303

1.1898

Japanese yen

0.0073

0.0077

0.0071

0.0077

Canadian dollar

0.7303

0.6757

0.6897

0.6935

Chinese yuan

0.1413

0.1362

0.1354

0.1386

Australian dollar

0.6595

0.6337

0.6348

0.6411

If sales and results for the year had be

en converted using the exchange rates prevailing in the prior year, the Group’s 2022 sales would have

reduced

by approximately €1.39 million and the operating profit for the year would have increased by approximately €0.04 million.

Credit risk

Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet

its contractual obligations.

The Group is mainly exposed to credit risk from sales to customers.

It is Group policy to assess the credit risk of new customers before entering

contracts and to have a frequent and proactive collections process. Historically, bad debts across the Group have been

extremely low and full

or part

payment in advance by some customers helps to reduce the overall risk. Credit risk also arises from cash deposits held at banks. At

the year

-end, the Group’s cash deposits were held with major banks such as HSBC (UK and United States), Sumitomo Mitsui Banking

Corporation

(Japan), KBC Bank (Europe) and The PNC Financial Services Group (United States).

The Group’s exposure to credit risk is limited to the carrying amount of financial assets recognised at the balance sheet dat

e. These are

summarised within

Note 22 ‘Trade and other receivables’ and Note 24 ‘Cash and cash equivalents’. The Group’s management considers that

all the above financial assets that are not impaired at the balance sheet date under review are of good credit quality, inclu

ding those that are

past due.

NOTES TO THE CONSOLIDATED FINANCIAL STAT

EMENTS (CONTINUED)

31.

FINANCIAL RISK MANAGEMENT (CONTINUED)

The exposure to credit risk for trade receivables by type of counterparty was as follows:

In thousands of euros

2022

2021

Equipment manufacturers

4,063

4,895

Resellers and end users

6,830

6,020

Total trade receivables

10,893

10,915

At 31 December 20

22, the ten largest accounts receivable represented 24.2% (2021: 26.7%) of the Group’s accounts receivables and the

single largest accounts receivable

represented 5.9% (2021: 5.3%) of the Group's accounts receivables.

The Group measures the loss allowance for trade receivables at an amount equal to lifetime expected credit losses. The expect

ed credit losses

on trade receivables are estimated using a provision matrix by reference to past default experience of the debtor and adjusted for factors tha t

are specific to the debtor and general economic conditions of the industry in which the Group operates.

The Group has recognised a loss allowance of €

336,000 (2021: €134,000) against trade receivables. The loss allowance applies to debt over

days and relates to a small number of customers where none of the debt is expected to be recovered through normal trading. A provision

is made against trade receivables until such time as the Group believes the amount to be irrecoverable, after which the trade receivable

balance is written off.

The Directors consider that the carrying amount of trade and other receivables approximates their fair value.

Liquidity risk

Liquidity risk arises from th

e Group’s management of working capital. It is the risk that the Group will encounter difficulty in meeting its financial

obligations as they fall due. The board reviews an annual 12

-month financial projection and the CFO and CEO review cash balances and cash

flow forecasts regularly. At the balance sheet date liquidity risk was considered to be low, given the fact that the Group is

expected to be cash

generative and cash and cash equivalents are thought to be at acceptable levels. While the board considers

there to be no current need for

additional borrowing facilities, it continually monitors the Group’s cash requirements.

The Group's financial liabilities have contractual maturities as summarised below:

In thousands of euros

Within 1 year

Between 1 and

10 years

Total

At 31 December 2022

Trade payables

2,919

Accrued liabilities

2,287

1,147

3,434

Other liabilities

5,881

3,931

9,812

Total

11,087

5,078

16,165

At 31 December 2021

Trade payables

1,931

Accrued liabilities

4,261

1,316

5,577

Other liabilities

3,165

7,407

10,572

Total

9,357

8,723

18,080

Interest rate risk

The Group has no variable interest rate debt, therefore the Group currently has no interest rate risk.

Capital

risk

The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern to provide returns for

shareholders, maintain investor, creditor and market confidence, and sustain future development of the business.

There were no changes in

the Group’s

approach to capital risk management during the year ended 31 December 2022.

In thousands of euros

2022

2021

Capital

Total equity

110,933

109,951

Less cash and cash equivalents

6,317

9,234

104,616

100,717

Overall financing

Total equity

110,933

109,951

Plus borrowings

8,093

8,400

119,026

118,351

Capital to overall financing ratio

1:1.14

1:1.18

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105

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

31.

FINANCIAL RISK MANAGEMENT (CONTINUED)

Accounting classifications and fair values

The following table shows the carry

ing amounts and fair values of financial assets and financial liabilities, including their levels in the fair value

hierarchy. It does not

include fair value information for financial assets and financial liabilities not measured at fair value if the carrying amount

is a reasonable approximation of fair value.

Carrying amount

Fair value

In thousands of euros

FVTPL

Financial

assets at

amortised cost

Other financial

liabilities

Total

Level 2

At 31 December 2022

Financial assets not measured at fair value

Financial assets (see note 18)

955

Trade and other receivables (see notes 20 and 22)

14,611

Cash and cash equivalents (see note 24)

6,317

21,883

Financial liabilities measured at fair value

Contingent consideration (see note 27)

635

Deferred consideration (see note 27)

932

Other liabilities (see note 27)

152

Unsecured loan from related party (see note 27)

8,093

9,812

Financial assets not measured at fair value

Trade and other payables

2,919

At 31 December 2021

Financial assets not measured at fair value

Financial assets (see note 18)

935

Trade and other receivables (see notes 20 and 22)

14,597

Cash and cash equivalents (see note 24)

9,234

24,766

Financial liabilities measured at fair value

Contingent consideration (see note 27)

1,434

Deferred consideration (see note 27)

1,157

Other liabilities (see note 27)

183

Unsecured loan from related party (see note 27)

8,400

11,174

Financial assets not measured at fair value

Trade and other payables

1,931

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

32. RELATED PARTIES

The controlling party is

Congra Software S.à r.l. (“Congra”), which owns the majority of the voting rights of the Company. Congra is controlled

Powergraph BV “(Powergraph”) and Powergraph BV is controlled by the Group’s chairman, Guido Van der Schueren. Congra and

Powergraph do not produce consolidated financial statements that are publicly available.

Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not

disclosed.

Remuneration of k

ey management personnel

The remuneration paid to the Directors, who are key management personnel of the Group

, is detailed in the Directors' remuneration report on

pages 55 to 62.

service agreement between HYBRID Software Development NV and Powergraph BV provides an arrangement for the remuneration of

Guido Van der Schueren.

Michael Rottenborn

has an employment contract with Global Graphics Software that entitles him to salary, bonus and other benefits in addition

to board fees.

A service agreement between HYBRID Software Development NV and Bellevarde Financial BV provides an arrangement for

the remuneration of Joachim Van Hemelen.

Remuneration of key management personnel, including the Directors was as follows:

In thousands of euros

2022

2021

Short-term employee benefits

3,289

3,279

Post-employment benefits

172

289

Other long-term benefits

386

Share-based payments

Total key management personnel expenses

3,481

3,958

Congra

An unsecured loan has been granted by Congra to HYBRID Software

Development NV. (“HYBRID”). During the year, payments totalling

€552,000

(2021: €2,986,000) have been made to Congra in respect of the loan. €307,000 (2021: €2,700,000) has been paid as a repayment

against the principal and €

245,000 (2021: €286,000) has been paid for interest. Interest is calculated and payable at a fixed rate of 3% per

annu

m on the outstanding balance and, as per the loan agreement, capital repayments of €2,800,000 (2021: €2,800,000) are payable per

annum. The balance of the loan outstanding at 31 December 2022 was €8,093,000 (2021: €8,400,000).

On 16 February 2023, an addendum to the loan agreement was closed in which an adjustment to the repayment scheme has been agreed to.

Subject to the amended repayment scheme, €93,000 is to be repaid in 2023 and the balance in 4 equal

instalments of €1,000,000 each in the

years ending 31 December 2025 and 2026. The loan is due to be fully repaid on 31 December 2026.

Additionally, Congra recharges some minor expenses to HYBRID, which

totalled €8,000 (2021: €12,000). At 31 December 2022, €nil (2021:

€90,000) was owed to Congra in respect of these items.

Powergraph

A total of €

420,000 (2021: €221,000) was paid during the year by HYBRID to Powergraph in respect of the aforementioned service agreement

for

Guido Van der Schueren. This amount is included in the amounts presented in the Directors’ remuneration report on pages 55 to 62. No

amounts

(2021: €nil) were owed at the 31 December 2022.

Other related parties

Powergraph and Congra

have interests in other companies, namely Tallon Graphic Solutions NV, Brand Quadergy EAD, DSN NV, De

Schutter’Neroc BV, ZDSGN and Husky Marketing Planner

BV. During the year, HYBRID Software NV made sales of €11,000 (2021: €154,000)

to th

ese companies and at 31 December 2022 €nil (2021: €42,000) was owed to HYBRID Software NV by them, all of which is considered as

recoverable in full.

A total of €

256,000 (2021: €256,000) was paid during the year by HYBRID to Bellevarde Financial BV in respect of the aforementioned service

agreement for Joachim Van Hemelen.

For his pro-rata period of service as a director, €82,000 is included in the amounts presented in the

Directors’ remuneration report on pages 55 to 62. No amounts (2021: €nil) were owed at the 31 December 2022.

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107

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

33. GROUP ENTITIES

Ownership interest %

Company name

Registered office address

Country of

incorporation

2022

2021

Global Graphics (UK)

Limited

2030 Cambourne Business Park, Cambourne, CB23

6DW, UK

United Kingdom 100% 100%

Global Graphics Software

Limited*

2030 Cambourne Business Park, Cambourne, CB23

6DW, UK

United Kingdom 100% 100%

Global Graphics Software

Incorporated*

5996 Clark Center Avenue, Sarasota, FL 34238, USA

United States of

America

100% 100%

Global Graphics

Kabushiki Kaisha*

610 AIOS Nagatacho Bldg, 2-17-17 Nagatacho,

Chiyoda-ku, Tokyo 100-0014, Japan

Japan 100% 100%

Global Graphics EBT

Limited

2030 Cambourne Business Park, Cambourne, CB23

6DW, UK

United Kingdom 100% 100%

Meteor Inkjet Limited

Harston Mill, Royston Road, Harston, Cambridge,

CB22 7GG, UK

United Kingdom 100% 100%

Xitron, LLC*

4750 Venture Drive, Suite 200A, Ann Arbor, Michigan

48108, USA

United States of

America

100% 100%

HYBRID Software Group

S.à r.l.^

19-21 route d’Arlon, LU-8009 Strassen, Luxembourg Luxembourg 100% 100%

eXplio NV*~

Guldensporenpark 18, Block B, 9820 Merelbeke,

Belgium

Belgium 99.93% 99.93%

HYBRID Software

Development NV*

Guldensporenpark 18, Block B, 9820 Merelbeke,

Belgium

Belgium 100% 100%

HYBRID Integration LLC*

Eight Neshaminy Interplex, Suite 111, Trevose,

Pennsylvania 19053, USA

United States of

America

100% 100%

HYBRID Software NV*

Guldensporenpark 18, Block B, 9820 Merelbeke,

Belgium

Belgium 100% 100%

HYBRID Software China

Co. Limited*

Room 2504, 25

Floor, Building 2, No. 900 Yishan

Road, Xuhui District, Shanghai, China

China 100% 100%

HYBRID Software GmbH*

Uhlandstrabe 9, 79102 Freiburg, Germany

Germany

100%

HYBRID Software Italy

SRL*

Viale Sondrio 2, IT-20124 Milano, Italy Italy 100% 100%

HYBRID Software France

SAS*

15 Rue Marsollier, F-75002 Paris, France France 100% 100%

HYBRID Software UK

Limited*

2030 Cambourne Business Park, Cambourne, CB23

6DW, UK

United Kingdom 100% 100%

HYBRID Software

Australia Pty Limited*

Suite 2, Level 14, 9 Castlereagh Street, Sydney, NSW

2000, Australia

Australia 100% 100%

HYBRID Software Iberia

S.L.U.*

Riera dels Frares, 8 – E08907 L’Hospitalet, Barcelona,

Spain

Spain 100% 100%

ColorLogic GmbH

Landersumer Weg 40, D-48431 Rheine

Germany

100%

indirectly held the the Company.

eXplio NV is 9.93% owned by the Group. The comprehensive income and equity attributable to non-controlling interests in this subsidiary

are not material

HYBRID Software Group S.à r.l was acquired on 12 January 2021.

ColorLogic GmbH was acquired on 27 October 2021.

HYBRID Software Iberia S.L.U. was acquired on 21 December 2021.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

34. ACQUISITIONS

Acquisition of iC3D

On 12 March 2022,

the Group acquired the trade and assets of Creative Edge Software LLC (“iC3D”) from Creative Edge Software LLC

(“C

reative”).

3D and additive manufacturing applications are one of the Group’s

fastest-growing market segments for printhead drive electronics and

software, but visualisation of packaging designs in 3D was a gap in our technology portfolio. The acquisition of iC3D strengthens our 3D

offering and closes the loop between the design of high

-end labels and packaging and industrial print manufacturing. We already have an

integration of iC3D in our PACKZ and CLOUDFLOW software with a substantial installed base of users that have licensed the iC3

D option

and we look forward to broader integration of iC3D in our Digital Front Ends (DFEs) and other software products.

The acquisition date fair value of the consideration was made up of:

In thousands of euros

Cash, paid on closing

3,664

Working capital adjustment, cash receivable

(234)

Total consideration

3,430

The identifiable assets acquired and liabilities assumed were:

In thousands of euros

Book value

Fair value

adjustment

Total

Property, plant and equipment (see note 15)

Other intangible assets (see note 16)

1,836

Total identifiable net assets acquired

1,836

1,852

The intangible assets recognised have been valued as follows:

Intangible asset

Valuation method

Technology

The average of the present value of cashflows from operating activities in relation to owned technology over a 10

year period (using a post-tax discount rate of 15.40%, a forecasted profit level, an assumption that revenue will

grow during the valuation period and there will be a churn of recurring revenue over the forecast period).

Know how

The present value of cashflows from operating activities in relation to customer relationships existing at acquisition

date for the remaining terms of the agreements, using a post-tax discount rate of 15.40% and a forecasted profit

level.

Goodwill was recognised as a result of the acquisition as follows:

In thousands of euros

Total consideration payable

3,430

Fair value of identifiable net assets

(1,852)

Total Goodwill (see note 17)

1,578

The goodwill represents the ability to develop new technology, opportunities expected from access to potential new customers, any value of

intangible assets into perpetuity over their limited useful lives and the assembled workforce that does not meet separate rec

ognition criteria.

None of the goodwill recognised is expected to be deductible for tax purposes.

During the year, the Group incurred acquisition

-related costs of €3,000 in respect of this acquisition, which have been included in 'Other

operating expenses’ in the consolidated statement of comprehensive income.

For the period from acquisition to 31 December 202

2, the revenues and the loss before tax generated by this acquisition were €589,000 and

€135,000 respectively.

If the acquisition had taken effect at the beginning of the reporting period in which the acquisition occurred (1 January 202

2), on a pro forma

basis, revenue of the combined Group for the year ended 31 December 202

2 would have been increased by €341,000 and loss before tax

would have decreased by €173,000.

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109

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

34.

ACQUISITIONS (CONTINUED)

Acquisition of HYBRID

Software Group S.à r.l.

On 12 January 2021, the Group acquired the entire issued share capital of HYBRID Software Group S.à r.l.

(“HYBRID Software”) from Congra

Software S.à r.l. (“Congra”).

The

acquisition was a common control transaction due to the fact that both the Company and HYBRID Software were under the same parent

company control

(see Note 32 ‘Related parties’). An independent valuation report was commissioned by the Directors to enable them to

negotiate the contractual acquisition price of €80 million.

The consideration was satisfied in full by issuing 21,074,030 ordinary shares in the

Company to Congra.

The number of shares was calculated by reference to a trailing 30 trading-day volume weighted average price of the

Company’s shares as traded on Euronext Brussels.

Founded in 2007, headquartered in Luxembourg and with subsidiaries in Belgium, Germany, Italy, France, the UK and the USA, HY

BRID

Software is a software development company foc

used on innovative productivity tools for the graphic arts industry, predominantly print service

providers and converters in the labels and packaging segments.

HYBRID Software’s workflow software, editing software, and integration

products offer a unique s

et of advantages that include native PDF workflows, vendor-independent solutions based on industry standards,

scalable technology and low total cost of ownership. These products are used worldwide by customers in all areas of pre

-press and printing,

includ

ing labels and packaging, folding cartons, corrugated, wide format and digital printing.

This acquisition is strategically important for the Group because HYBRID Software has a large end

-user customer base supported by a

worldwide sales and service organi

sation in the growing labels and packaging market and brings enterprise software technology and solutions

to the Group.

The acquisition allows the Group to further develop its digital print strategy with a more complete offering of products to open up

new

markets and potential customers. The Group is an important partner to the industry’s leading manufacturers and HYBRID Software adds

to this capability, making a very compelling proposition in the market.

The acquisition date fair value of the consideration was made up of:

In thousands of euros

Acquisition date market value of new shares issued as consideration

75,445

Total consideration

75,445

The

Directors have considered the facts concerning a potential marketability discount and the relevant criteria in IFRS 13 and concluded that

a fair value adjustment for marketability is not appropriate in this situation.

This judgement is highly sensitive; a 0.5% discount would equate

to a discount of €377,000 and a material reduction in the goodwill at the acquisition date.

The identifiable assets acquired and liabilities assumed were:

In thousands of euros

Book value

Fair value

adjustment

Total

Property, plant and equipment

363

Right-of-use assets

1,375

Other intangible assets

5,114

34,485

39,599

Financial assets

Deferred tax assets

1,430

Inventories

Trade and other receivables

4,160

Prepayments

110

Cash and cash equivalents

2,142

Deferred tax liabilities

(8,824)

Trade and other payables

(1,720)

Accrued liabilities

(665)

Lease liabilities

(1,375)

)

(1,375)

Contract liabilities

(2,183)

Other liabilities

(11,204)

Total identifiable net (liabilities)/assets acquired

(2,442)

25,661

23,219

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

4. ACQUISITIONS (CONTINUED)

Acquisition of HYBRID Software Group S.à r.l. (continued)

The trade receivables comprised of contractual amounts due, all of which was expected to be collected at the date of acquisit

ion.

The intangible assets recognised have been valued as follows:

Intangible asset

Valuation method

Technology

The average of the present value of cashflows from operating activities in relation to owned technology over a 12

year period (using a discount rate of 9%, an historical profit % level, an assumption that revenue will grow year-on-

year during the valuation period and an obsolescence factor) and an estimate of the replacement cost (based on

estimates of the number of employees and man years required to design and develop the software).

Customer

relationships

The present value of cashflows from operating activities in relation to customer relationships existing at acquisition

date over an 8 year period, using a discount rate of 9%, an historical profit % level and an historical annual attrition

rate of those relationships.

Goodwill was recognised as a result of the acquisition as follows:

In thousands of euros

Total consideration payable

75,445

Fair value of identifiable net assets

(23,219)

Total Goodwill

52,226

The

goodwill represents the ability to develop new technology, opportunities expected from access to potential new customers, any value of

intangible assets into perpetuity over their limited useful lives and the assembled workforce that does not meet separate

recognition criteria.

None of the goodwill recognised is expected to be deductible for tax purposes.

During the

year, the Group incurred acquisition-related costs of €43,000 in respect of this acquisition, which have been included in 'Other

operating exp

enses’ in the consolidated statement of comprehensive income.

Costs of €

89,000 were incurred in the year ended 31 December 2021, related to the issue of the new shares were recognised directly in

retained earnings.

The costs incurred are in respect of a prospectus that is required to admit the new shares to trading on Euronext. Further

costs of €

36,000 were incurred in the year ended 31 December 2022 when the prospectus was published.

For the period from acquisition to 31 December 2021, the revenues and the profit before tax generated by this acquisition

were €20,739,000

and €

6,481,000 respectively.

If the acquisition had taken effect at the beginning of the reporting

period in which the acquisition occurred (1 January 2021), on a pro forma

basis, revenue of the combined Group for the year ended 31 December 2021 would have been increased by €

644,000 and profit before tax

would have increased by €

201,000.

Acquisition of

ColorLogic GmbH

On 27 October

2021, the Group acquired the entire issued share capital of ColorLogic GmbH (“ColorLogic”), a company with its registered

office in Rheine, Germany.

Founded in 200

2, ColorLogic has developed an extensive portfolio of colour profiling and conversion software. Its products are sold worldwide

to both end users with demanding requirements for colour quality, as well as to Original Equipment Manufacturers (OEMs) of pr

inting

equipment.

This acquisition is strategic

ally important for the Group because ColorLogic has long been respected as an industry leader in extended gamut

colour management, and their tools provide the perfect combination of speed and quality for these demanding applications.

The acquisition date

fair value of the consideration was made up of:

In thousands of euros

Cash

4,381

Total consideration

4,381

The consideration is payable in instalments; €3,

224,000 was paid on closing and €1,157,000 will be paid in 5 equal instalments on the

anniversary of the closing date

, starting in October 2022.

A condition of the acquisition was that the seller

, using a portion of the consideration received on closing, would procure €500,000 of the

Company’s shares from

an existing shareholder, Congra Software S.à r.l. (“Congra”). That condition was fulfilled by the seller and they acquired

101,176

shares of the Company from Congra on 21 January 2022. Under the terms of the acquisition, the seller requires the agreement of

the Company to sell, transfer or otherwise dispose of any of those shares

for a period of 12 months after the acquisition date of those shares.

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110

111

NOTES TO THE CONSOLIDATED FINANCIAL STA

TEMENTS (CONTINUED)

4. ACQUISITIONS (CONTINUED)

Acquisition of ColorLogic GmbH (continued)

The identifiable assets acquired and liabilities assumed were:

In thousands of euros

Book value

Fair value

adjustment

Total

Property, plant and equipment

Right-of-use assets

Other intangible assets

3,852

Financial assets

852

Trade and other receivables

406

Prepayments

Cash and cash equivalents

331

Deferred tax liabilities

(1,156)

Trade and other payables

(12)

(22)

(34)

Accrued liabilities

(1,084)

Lease liabilities

(47)

Total identifiable net assets acquired

505

2,674

3,179

The trade receivables comprised of contractual amounts due, all of which was expected to be

collected at the date of acquisition.

The intangible assets recognised have been valued as follows:

Intangible asset

Valuation method

Technology

The present value of cashflows from operating activities in relation to owned technology over a 10 year period,

using a discount rate of 11.43%, an historical profit % level and an assumption that revenue will grow year-on-year

during the valuation period.

Customer

relationships

The present value of cashflows from operating activities in relation to established long-term contracts existing at

acquisition date over a 10 year period, using a discount rate of 11.43%, an historical profit % level and an

assumption that revenue will conservatively grow year-on-year during the valuation period.

Goodwill was recognised as a result of the acquisition as follows:

In thousands of euros

Total consideration payable

4,381

Fair value of identifiable net assets

(3,179)

Total Goodwill

1,202

The goodwill represents the ability to develop new

technology, opportunities expected from access to potential new customers, any value of

intangible assets into perpetuity over their limited useful lives and the assembled workforce that does not meet separate rec

ognition criteria.

None of the goodwill rec

ognised is expected to be deductible for tax purposes.

During the year, the Group incurred

acquisition-related costs of €135,000 in respect of this acquisition, which have been included in 'Other

operating expenses’ in the consolidated statement of

comprehensive income.

For the period from acquisition to 31 December 2021, the revenues and the loss before tax generated by this acquisition were

immaterial in

the context of the Group’s revenues and profit before tax.

If the acquisition had taken effect at the beginning of the reporting period in which the acquisition occurred (1 January 202

1), on a pro forma

basis,

revenue of the combined Group for the year ended 31 December 2021 would have been increased by €1,288,000 and profit before tax

would have increased by €

388,000.

Acquisition of

HYBRID Iberia, S.L.U.

21 December 2021, the Group acquired the entire issued share capital of HYBRID Iberia, S.L.U. (“HYBRID Iberia”) a company with its

registered office in

Barcelona, Spain.

YBRID Iberia is a reseller of the Group’s products and has many customer relationships in Spain.

This acquisition

allows the Group to expand its distribution channel geographically under its own control and benefit from the existing

relationships that have been built up over the years.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

4. ACQUISITIONS (CONTINUED)

Acquisition of H

YBRID Iberia, S.L.U. (continued)

The acquisition date fair value o

f the consideration was made up of:

In thousands of euros

Cash

175

Pre-existing relationship

288

Total consideration

463

The

cash consideration is payable in instalments; €135,000 was paid on closing and €40,000 will be payable in instalments over the next five

years

. The pre-existing relationship was a trade payable owed to the Group by HYBRID Iberia.

The identifiable assets acquired and liabilities assumed were:

In thousands of euros

Book value

Fair value

adjustment

Total

Property, plant and equipment

Other intangible assets

218

Trade and other receivables

Prepayments

Cash and cash equivalents

106

Deferred tax liabilities

(55)

Trade and other payables

(57)

Other liabilities

(7)

Total identifiable net assets acquired

152

163

315

The trade receivables comprised of contractual amounts due, all of which was expected to be collected at the date of acquisit

ion.

The intangible assets recognised have

been valued as follows:

Intangible asset

Valuation method

Customer

relationships

The present value of cashflows resulting from sales to existing customers at acquisition date over a 7 year period,

using an historical profit % level and an assumption attrition of those customers during the valuation period.

Goodwill was recognised as a result of the acquisition as follows:

In thousands of euros

Total consideration payable

463

Fair value of identifiable net assets

315

Total Goodwill

148

During the year, the Group incurred

acquisition-related costs of €2,000 in respect of this acquisition, which have been included in 'Other

operating expenses’ in the consolidated

statement of comprehensive income.

For the period from acquisition to 31 December 2021, the revenues and the loss before tax generated by this acquisition were

immaterial in

the context of the Group’s revenues and profit before tax.

If the acquisition ha

d taken effect at the beginning of the reporting period in which the acquisition occurred (1 January 2021), on a pro forma

basis, revenue of the combined Group for the year ended 31 December 2021 would have been increased by €

434,000 and profit before tax

would have

decreased by €17,000.

Cash flows from investing activities

Acquisition, net of cash acquired per the consolidated statement of cash flows:

In thousands of euros

Cash acquired

Cash outflow

Net cash

outflow

HYBRID Software Group S.à r.l.

2,142

ColorLogic GmbH

331

(3,224)

(2,893)

HYBRID Iberia, S.L.

106

(135)

(29)

Total acquisition, net of cash acquired

2,579

(3,359)

(780)

Hybrid Software Group PLC Annual Report 2022

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113

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

35. MOVEMENTS IN LIABILITIES ARISING FROM FINANCING ACTIVITIES

In thousands of euros

Lease liabilities

Other liabilities

Total

Balance at 31 December 2021

3,821

11,174

14,995

Loan repayment

(307)

Deferred consideration paid

(310)

Contingent consideration paid

(715)

Principal payments of lease liabilities

(935)

Total cashflows

(935)

(1,332)

(2,267)

Contingent consideration fair value adjustment

(4)

Recognition of new lease liabilities

314

Remeasurement of existing lease liabilities

126

Other non-cash items*

138

(26)

112

Exchange rate effects

(70)

Total non-cash items

508

(30)

478

Balance at 31 December 2022

3,394

9,812

13,206

In thousands of euros

Lease liabilities

Other liabilities

Total

Balance at 31 December 2020

1,348

2,214

3,562

Loan repayment

(2,700)

Contingent consideration paid

(492)

Principal payments of lease liabilities

(849)

Total cashflows

(849)

(3,192)

(4,041)

Contingent consideration fair value adjustment

(3)

Recognition of new lease liabilities

1,674

Remeasurement of existing lease liabilities

1,438

Loans and borrowings acquired through business combinations

11,105

Recognition of deferred consideration

- 1,157

1,157

Other non-cash items*

164

(107)

Exchange rate effects

Total non-cash items

3,322

12,152

15,474

Balance at 31 December 2021 3,821 11,174

14,995

*Other non

-cash items include the unwinding of discounts on lease liabilities.

36. SUBSEQUENT EVENTS

The

re are no post balance sheet events requiring disclosure in the financial statements for the year ended 31 December 2022.

COMPANY BALANCE SHEET

For the year ended 31 December

In thousands of euros Note

2022

2021

Non-current assets

Investments

101,121

Total non-current assets

101,121

Current assets

Trade and other receivables (including €1,755,000 (2021: €597,000) due

after more than one year)

5 2,303

1,621

Cash and cash equivalents

Total current assets

2,342

1,640

Current Liabilities

Creditors: Amounts falling due within one year

(11,759)

(10,481)

Net current liabilities

(9,417)

(8,841)

Creditors: Amounts falling due in more than one year

(866)

(1,590)

Net assets

90,838

90,690

Capital and reserves

Called up share capital

13,164

Share premium account

1,979

Merger reserve

67,015

Treasury shares

(161)

(202)

Profit and loss account

8,841

8,734

Total shareholders' funds

90,838

90,690

The notes on

pages 115 to 119 form part of these financial statements.

Under section 408 of the Companies Act 2006 the Company is exempt from the requirement to present its own profit and loss account and

related notes. The

result for the year ended 31 December 2022 was a profit of €184,000 (2021: loss of €218,000).

There are no recognised gains or losses for the current year or preceding year other than those disclosed above.

These financial statements were approved and authorised for issue by the

board of Directors on 11 April 2023 and were signed on its behalf

by:

Michael Rottenborn

Director

Company registered number:

10872426

Hybrid Software Group PLC Annual Report 2022

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Other information

Hybrid Software Group PLC Annual Report 2022

114

115

COMPANY STATEMENT OF CHANGES IN EQUITY

In thousands of euros

Note

Called up

share capital

Share premium

account

Merger

reserve

Treasury

Profit and loss

account

Total equity

Balance at 31 December 2020 4,734

1,979

(309)

9,148

15,552

Total comprehensive loss for the year

Net loss for the year -

(218)

Total comprehensive income for the year -

(218)

Transactions with owners

Share-based payment transactions

107

(107)

Acquisition – newly issued shares 9 8,430

67,015

(89)

75,356

Total transactions with owners 8,430

67,015

107

(196)

75,356

Balance at 31 December 2021 13,164

1,979

67,015

(202)

8,734

90,690

Total comprehensive profit for the year

Net profit for the year -

184

Total comprehensive profit for the year -

184

Transactions with owners

Share-based payment transactions

(41)

Acquisition – newly issued shares

(36)

Total transactions with owners -

(77)

(36)

Balance at 31 December 2022 13,164

1,979

67,015

(161)

8,841

90,838

The notes

on pages 115 to 1119 form part of these financial statements.

NOTES TO THE COMPANY FINANCIAL STATEMENTS

PRINCIPAL ACCOUNTING POLICIES

Hybrid Software Group PLC

is a company incorporated and domiciled in the United Kingdom.

The following accounting policies have been applied consistently in dealing with items which are considered material in relat

ion to the

Company’s financial statements.

Basis of preparation

These financial statements were prepared in accordance with Financial Reporting Standard 101

- Reduced Disclosure Framework (“FRS

101”).

In preparing these financial statements, the Company applies the recognition, measurement and disclosure requirements of

UK-adopted

international

accounting standards but makes amendments where necessary to comply with Companies Act 2006 and has set out below where

advantage of the FRS 101 disclosure exemptions has been taken.

The Company is an ulti

mate parent undertaking and is included in the Company's consolidated financial statements. The consolidated financial

statements are prepared in accordance with

IFRS and are available to the public and may be obtained from 2030 Cambourne Business Park,

Cambourne, CB23 6DW.

In these financial statements, the company has applied the exemptions available under FRS 101 in respect of the following dis

closures:

 A Cash Flow Statement and related notes;

 Comparative period reconciliations for share capitals;

 Disclosures in respect of transactions with wholly owned subsidiaries;

 Disclosures in respect of capital management;

 The effects of new but not yet effective IFRS; and

 Disclosures in respect of the compensation of Key Management Personnel.

As the consolidated financial statements of

the Company include the equivalent disclosures, the Company has also taken the exemptions

under FRS 101 available in respect of the following disclosures:

 IFRS 2 Share Based Payments in respect of group settled share based payments;

 Certain disclosures required by IFRS 3 Business Combinations in respect of business combinations undertaken by the Company;

and

 Financial instruments.

The accounting policies set out below have, unless otherwise stated, been applied consistently to all periods presented in th

ese financial

statements

Investments

in subsidiary undertakings are stated at cost, less provision for any impairment in value.

Foreign currencies

The functional and prese

ntation currency of the Company is euro.

Transactions in foreign currencies are recorded using the rate of exchange ruling at the date of the transaction.

Monetary assets and liabilities

denominated in foreign currencies are translated using the rate of e

xchange ruling at the balance sheet date or at a contracted rate if applicable

and any exchange differences arising are taken to the profit and loss account.

Provisions

Provisions are recognised when the Company has a present obligation as a result of a

past event, and it is probable that the Company will be

required to settle that obligation.

Provisions are measured at the Directors’ best estimate of the expenditure required to settle the obligation at

the balance sheet date and are discounted to

present value where the effect is material.

Taxation

he charge for taxation is based on the profit or loss for the year and takes into account taxation deferred because of timing differences

between the treatment of certain items for taxation and account

ing purposes. Deferred taxation is recognised, without discounting, in respect

of all timing differences between the treatment of certain items for taxation and accounting purposes which have arisen but n

ot reversed by

the balance sheet date, except as req

uired by IAS 12.

Hybrid Software Group PLC Annual Report 2022

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Other information

Hybrid Software Group PLC Annual Report 2022

116

117

NOTES TO THE COMPANY FINANCIAL STATEMENTS (CONTINUED)

PRINCIPAL ACCOUNTING POLICIES (CONTINUED)

based payments

The share option programme allows employees

of the Group to acquire shares of the Company. The fair value of the options and shares

granted is recognised as an employee expense, with a corresponding increase in equity, and is measured at grant date and spre

ad over the

period during which the employees become unconditionally entitled to the options or shares.

The fair value of the options granted is measured

using an appropriate valuation model, taking into account the terms and conditions upon which the options were granted.

At each reporting

date, the amount recognised as an expense is adjusted to reflect the actual number of share opt

ions or shares for which the related service

and non

-market conditions are met. The proceeds received, net of any directly attributable transaction costs, are credited to share capital for

the par value of the shares issued and to share premium for the bal

ance, when the share options are exercised.

Going concern

The

Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable

future. The

Directors have prepared cash flow forecasts for a period of at least 12 months from the date of approval of these financial

statements and have no reason to believe that a material uncertainty exists that may cast significant doubt about the Group’s

ability to continue

as a going concern, notably beca

use of a cash position of €6.32 million as at 31 December 2022 (2021: €9.23 million). Those forecasts take

into account reasonably possible downsides, including the potential impact of the COVID

-19 pandemic. Thus, they continue to adopt the going

concern b

asis of accounting in preparing the annual financial statements. Refer to Note 2 ‘Basis of preparation’ of the consolidated financial

statements for further details.

EMPLOYEES AND REMUNERATION OF DIRECTORS

The Company employed an average of

nil employees (including executive Directors) during the year (2021: nil). Directors’ emoluments are

disclosed in the

Directors' remuneration report on pages 55 to 62 and in Note 12 ‘Remuneration of Directors’ of the consolidated financial

statements

SERVICES PROVIDED BY THE COMPANY'S AUDITOR

Fees payable to the Company’s auditor for the audit of the Company’s accounts and for other services are set out in

Note 11 ‘Services provided

by the Group’s auditor’

to the consolidated financial statements.

INVESTMENTS

In thousands of euros

Shares in

subsidiary

undertakings

Cost

At 31 December 2020

79,053

Additions – business combinations

79,826

At 31 December 2021

158,879

At 31 December 2022

158,879

Provision

At 31 December 2021 and 31 December 2022

57,758

Net book value

At 31 December 2021

101,121

At 31 December 2022

101,121

Additions from business combinations refer to the acquisitions of HYBRID Software Group S.à r.l. and ColorLogic GmbH. See Not

e 34

‘Acquisitions’ of the consolidated financial statements for further details.

nvestments are assessed at each reporting date to determine whether there is any objective evidence that they are impaired. An investment

is considered to be impaired if objective evidence indicates that one or more events have had a negative effect on the estima

ted future cash

flows of

that investment. An impairment loss in respect of an investment is measured as the difference between its carrying amount and the

present value of the estimated future cash flows.

The estimated fair va

lue of the investments has been determined by the present value of future cash flows over a five-year period from 2023

to 202

7 using the same discount rate and exchange rates that were used for the impairment review of Goodwill in the consolidated financial

statements (see

Note 17 ‘Goodwill’ of the consolidated financial statements). Management considers the use of a five-year period is justified

because the underlying businesses have been established for

between 10 and 25 years, have recurring revenues and continue to develop

new products and gain new custome

rs.

NOTES TO THE COMPANY FINANCIAL STATEMENTS (CONTINUED)

INVESTMENTS (CONTINUED)

At 31 December 202

1 the Company had the following interests in the ordinary share capital of group undertakings:

Class of

held

Ownership interest

Company name

Registered office address

Principal Activities

2022

2021

Global Graphics (UK)

Limited

2030 Cambourne Business Park,

Cambourne, CB23 6DW, UK

Dormant holding company. Ordinary

100%

Global Graphics

Software Limited*

2030 Cambourne Business Park,

Cambourne, CB23 6DW, UK

Computer software development,

sales and technical support.

Ordinary

100%

Global Graphics

Software Incorporated*

5996 Clark Center Avenue,

Sarasota, FL 34238,

USA

Computer software development,

sales and technical support.

Ordinary

100%

Global Graphics

Kabushiki Kaisha*

610 AIOS Nagatacho Bldg, 2-17-17

Nagatacho, Chiyoda-ku, Tokyo 100-

0014, Japan

Technical support of computer

software.

Ordinary

100%

Global Graphics EBT

Limited

2030 Cambourne Business Park,

Cambourne, CB23 6DW, UK

Dormant. Ordinary

100%

Meteor Inkjet Limited

Harston Mill, Royston Road, Harston,

Cambridge, CB22 7GG, UK

Design and supply of technology for

digital inkjet printing.

Ordinary 100%

100%

Xitron, LLC*

4750 Venture Drive, Suite 200A, Ann

Arbor, Michigan 48108, USA

Computer software development,

sales and technical support.

n/a 100%

100%

HYBRID Software

Group S.à r.l.^

19-21 route d’Arlon, LU-8009

Strassen, Luxembourg

Holding company. Ordinary

100%

eXplio NV*

Guldensporenpark 18, Block B, 9820

Merelbeke, Belgium

Computer software development,

sales and technical support.

Ordinary 99.93%

99.93%

HYBRID Software

Development NV*

Guldensporenpark 18, Block B, 9820

Merelbeke, Belgium

Computer software development,

sales and technical support.

Ordinary

100%

HYBRID Integration

LLC*

Eight Neshaminy Interplex, Suite 111,

Trevose, Pennsylvania 19053, USA

Computer software sales and

technical support.

Ordinary

100%

HYBRID Software NV*

Guldensporenpark 18, Block B, 9820

Merelbeke, Belgium

Computer software sales and

technical support.

Ordinary 100%

100%

HYBRID Software

China Co. Limited*

Room 2504, 25

Floor, Building 2, No.

900 Yishan Road, Xuhui District,

Shanghai, China

Computer software sales and

technical support.

Ordinary

100%

HYBRID Software

GmbH*

Uhlandstrabe 9, 79102 Freiburg,

Germany

Computer software sales and

technical support.

Ordinary

100%

HYBRID Software Italy

SRL*

Viale Sondrio 2, IT-20124 Milano, Italy

Computer software sales and

technical support.

Ordinary

100%

HYBRID Software

France SAS*

15 Rue Marsollier, F-75002 Paris,

France

Computer software sales and

technical support.

Ordinary

100%

HYBRID Software UK

Limited*

2030 Cambourne Business Park,

Cambourne, CB23 6DW, UK

Computer software sales and

technical support.

Ordinary

100%

HYBRID Software

Australia Pty Limited*

Suite 2, Level 14, 9 Castlereagh

Street, Sydney, NSW 2000, Australia

Computer software sales and

technical support.

Ordinary

100%

HYBRID Software Iberia

S.L.U.*

Riera dels Frares, 8 – E08907

L’Hospitalet, Barcelona, Spain

Computer software sales and

technical support.

Ordinary 100%

100%

ColorLogic GmbH

Landersumer Weg 40, D-48431

Rheine, Germany

Computer software development,

sales and technical support.

Ordinary 100%

100%

indirectly held by the Company.

HYBRID Software Group S.à r.l was acquired on 12 January 2021

ColorLogic GmbH was acquired on 27 October 2021

HYBRID Software Iberia S.L.U. was acquired on 21 December 2021

See Note 3

4 ‘Acquisitions’ of the consolidated financial statements for further details of these three acquisitions.

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119

NOTES TO THE COMPANY FINANCIAL STATEMENTS (CONTINUED)

TRADE AND OTHER RECEIVABLES

In thousands of euros

2022

2021

Deferred consideration receivable

500

Amounts owed by group undertakings

1,755

597

Other receivables

548

524

Total trade and other receivables

2,303

1,621

Included within amounts owed by group undertakings is €

1,755,000 (2021: €597,000) expected to be recovered in more than 12 months.

There are no formal intercompany agreements.

Amounts owed by group undertakings are interest free and would be repayable on demand.

CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR

In thousands of euros

2022

2021

Trade and other payables

Amounts owed to group undertakings

10,255

9,291

Accruals

762

231

Contingent consideration (see note 7)

411

670

Deferred consideration (see note 7)

259

284

Total creditors due within one year

11,759

10,481

There are no formal intercompany agreements.

Amounts owed to group undertakings are interest free and would be repayable on demand.

CREDITORS: AMOUNTS FALLING DUE IN MORE THAN ONE YEAR

In thousands of euros

2022

2021

Contingent consideration

224

716

Deferred consideration

642

874

Total other liabilities

866

1,590

Fair value adjustment to contingent consideration

Certain assumptions about revenue growth were used when calculating the acquisition date fair value of contingent considerati

on for the

acquisition of TTP

Meteor Limited (now Meteor Inkjet Limited) in the year ending 31 December 2016. These assumptions were reviewed for

the year ended 31 December 2021.

Based on the revised forecasts, the review concluded that there was an increase in the present value of

those payments, thus decreasing the liability on the balance sheet, of €

7,000 (2021: decrease of €3,000).

During the year, cash payments of

€717,000 (2021: €492,000) were paid against the contingent consideration due for the acquisition of Meteor

Inkjet Limited.

The underlying liability is denominated in pounds sterling, thus there is a movement due to changes in exchange rates used to

convert to Euros at the reporting date.

Deferred consideration

Deferred consideration primarily relates to the acquisition of ColorLogic GmbH (see Note 3

4 ‘Acquisitions’ of the consolidated financial

statements).

TAX

Defe

rred tax assets are recognised for tax losses available for carrying forward to the extent that the realisation of the related tax benefit

through futu

re taxable profits is probable. The Company had no recognised or unrecognised deferred tax assets as at 31 December 2022

(20

21: €nil).

SHARE CAPITAL AND RESERVES

Ordinary shares of €0.40 allotted, called up and fully paid:

2022

2021

In thousands of euros, except number of shares

Number

Value

Number

Value

As at 1 January

32,909,737

13,164

11,835,707

4,734

Issued in business combination

(see note 34 of the consolidated financial statements)

21,074,030

8,430

As at 31 December

32,909,737

13,164

32,909,737

13,164

Share premium:

In thousands of euros

2022

2021

As at 31 December

1,979

NOTES TO THE COMPANY FINANCIAL STATEMENTS (CONTINUED)

SHARE CAPITAL AND RESERVES (CONTINUED)

Merger reserve:

Pursuant to the acquisition of HYBRID Software Group S.à r.l. (“HYBRID Software”) (see

Note 34 ‘Acquisitions’ of the consolidated financial

statements

), in accordance with section 612 of the Companies Act 2006, the premium over the par value of the consideration shares issued

in exchange for 100% of the issued share capital of HYBRID Software has been credited to a merge

r reserve instead of share premium.

The premium over par value is calculated as follows:

In thousands of euros

Contractual consideration (see note 34 of the consolidated financial statements)

80,000

Fair value adjustment for consideration shares

(4,555)

Acquisition date market value of new shares issued as consideration (see note 34)

75,445

Par value of 21,074,030 shares issued

(8,430)

Premium over par value credited to merger reserve

67,015

The movement during the year is as follows:

In thousands of euros

2022

2021

As at 31 December

67,015

The fair value adjustment for the consideration shares is an adjustment to reflect the acquisition date fair value of the sha

res (see Note 35

‘Acquisitions’

of the consolidated financial statements).

Treasury shares

The Company's investment in its own

shares in treasury is as follows:

2022

2021

In thousands of euros, except number of shares

Number

Value

Number

Value

As at 1 January

73,996

202

112,996

309

Disbursement of shares to employees

(41,000)

(41)

(39,000)

(107)

As at 31 December

32,996

161

73,996

202

10.

SHARE BASED PAYMENTS

Information about share based payments for

Directors and employees is detailed in Note 30 ‘Share based payments’ of the consolidated

financial statements.

11.

RELATED PARTY TRANSACTIONS

The controlling party is

Congra Software S.à r.l. (“Congra”), which owns the majority of the voting rights of the Company. Congra is controlled

by Powergraph BV

and Powergraph BV is controlled by the Group’s chairman, Guido Van der Schueren.

The remuneration paid to the

Directors is detailed in the Directors’ remuneration report on pages 55 to 62. Other related party relationships

are detailed in

Note 32 ‘Related parties’ of the consolidated financial statements.

The Company has taken advantage of the exemption under

paragraph 8(k) of FRS 101 for transactions with wholly owned group companies.

12.

SUBSEQUENT EVENTS

Details of

post balance sheet events requiring disclosure in the financial statements for the year ended 31 December 2022 are in Note 36

‘Subsequent events’

of the consolidated financial statements.

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121

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Company strategic

report

Governance Financial statements

Other information

Additive manufacturing

Building physical product by digitally ‘printing’ it, often

with technology similar to the inkjet heads used for 2D

printing. The term “3D printing” is often used for home

and small-scale additive manufacturing.

Binder jetting

A class of additive manufacturing in which the solid form

is created by jetting a binder ﬂuid into a bed of powder.

This technique can be used for metals, polymers and

glass.

Colour separation

Colour can be speciﬁed in many dierent ways in the

digital world, but printing uses only a small set of inks.

All colours in the source document must be transformed

into a set of separations, one for each of the inks to be

used. Most commonly in commercial print, labels and

packaging this means Cyan, Magenta, Yellow and Black

(see also “Extended Gamut”).

Converting

The design for a label or package is converted from a

primary copy, such as a PDF ﬁle, through printing on

a substrate and then one or more processes such as

cutting, folding and gluing to create a label that can be

applied or a carton that can be ﬁlled.

CTP

Computer to Plate – imaging a printing plate directly

from digital data rather than imaging a ﬁlm and using

that to image the plate.

Digital Front End (DFE)

The controller that manages and drives a digital press,

consuming source ﬁles such as PDF, processing them

as necessary and sending colour separations to the

printhead.

Enterprise software

Computer programs that have common business

applications. In relation to printing these typically

manage customer relationships, estimation, billing,

production management and shipping.

EPS

Encapsulated PostScript; a subset of the PostScript PDL

with extra commenting rules designed to allow graphics

to be placed within a larger page in a design application.

Extended gamut

Printing in the commercial, labels and packaging

sectors is often done using four inks: Cyan, Magenta,

Yellow and Black (CMYK). Together these can deliver

good approximations of most colours. An extended

gamut ink set can be used to reproduce more vibrant

colours, including some brand colours. This is often

achieved by adding one or more of Orange, Green and

Violet inks to the CMYK set.

Flexo/Flexography

A conventional printing technology in which ﬂexible

plates with raised areas are used to transfer ink onto the

substrate. Widely used in labels and packaging.

Functional printing

Applying substances to a substrate that do more than

represent colour or some other aspect of appearance

such as gloss, using a process that’s normally used for

printing. Examples include conductive tracks for printed

electronics, or materials that change colour in the

presence of certain gases for food safety, etc.

Gravure

Conventional print technology in which a cylinder is

engraved with cells which carry ink to transfer it to

the substrate. Very expensive to prepare cylinders

for each job, so it’s most used for jobs with extremely

long run lengths (millions of copies), such as long-run

magazines and wall-coverings.

Image setter

Machine for imaging from digital data to ﬁlm or

photographic paper. The result would then be used

to image a plate. Obsolete for oset lithography

and increasingly so for other conventional press

technologies; replaced by plate setters.

Imposition

Laying out multiple pages or multiple jobs together to

maximise usage of the area of a printing press.

Industrial inkjet

A term that is used with various dierent meanings,

but is best applied to printing where the substance

being printed is a part of the ﬁnal product, as opposed

to carrying information (e.g. in commercial print)

orto protect a product (e.g. in packaging). Examples

of industrial print include applications of colour and

functional coatings to textiles, ceramics and other décor.

Glossary

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Hybrid Software Group

Company strategic

report

Governance Financial statements

Other information

Glossary continued...

Industry 4.0

A term for fully automated production, where equipment

performing dierent processes are interconnected and

share information.

Inkjet printing

Application of coloured or functional ﬂuids to a substrate

by jetting as drops.

JPEG

Joint Photographic Experts Company’; a committee

(ISO/IEC JTC1/SC29) and the format that they deﬁned

for storing images in a very compact way using (mainly)

compression. There are now variants such as JPEG

2000 and JPEG-XR that use rather dierent and

incompatible techniques.

Litho

Oset lithography – conventional printing press

technology using plates treated to make some areas

hydrophilic and others hydrophobic (attracting and

rejecting water) to control where ink will adhere to them.

‘Oset’ here means that the ink is transferred from the

plate to a blanket before then being applied to the media

being printed on.

Mass customisation

Mass produced products where every item is unique.

Examples include personalized labels, tee-shirts, phone

cases and the like.

OEM

OEM, or original equipment manufacturer, is an

organisation that makes devices from component parts

bought from other organisations.

Piezoelectric

Electricity resulting from pressure and latent heat.

Piezo printheads are all based on the principle that a

particular type of crystal expands or contracts when

an electric current is passed though it and switched o

again. This expansion/contraction is used as the basis

of a pump in the ink chamber.

PDF

Portable Document Format, a universal ﬁle format that

is maintained by the International Standards

Organisation. In printing it can contain all the

information required to produce an item that matches

exactly what the graphic designer intended in terms of

fonts, colour speciﬁcations etc.

PostScript

Page description language (PDL) created in the mid

1980s by Adobe Systems; the ﬁrst general PDL to be

widely adopted for both oce and production printing,

replacing proprietary languages from each vendor. Still

used for oce printing, but largely replaced by PDF for

production printing.

Pre-press

A department or series of software processes that

prepare ﬁles for printing.

Printhead driver solutions

Our software and proprietary driver electronics send

data to printheads inside inkjet devices to control the

printing process.

Printheads

Printheads are a component of an inkjet press and

generally contain multiple nozzles for jetting ink or other

ﬂuids onto substrates.

Proofer

Device used to make colour-managed prints conﬁgured

to match the appearance of the same job on a

production printing press for use in approval workﬂows.

Increasingly replaced by “soft prooﬁng”, using a

calibrated computer display for approval rather than

creating printed copy.

Rasterisation

The process of transforming a page description

language ( see PostScript), comprising text, vector

graphics, images and other complex constructs, into a

rectangular grid of pixels that is suitable for delivering

to an inkjet head, plate setter or other imaging device.

Often equated to ‘rendering’.

RIP/ RIPping

A Raster Image Processor converts graphic designs into

raster data (image pixels) for onward processing by the

printing device.

Screening

Screening (sometimes called halftone screening)

converts graphical designs from raster data (such as

that delivered by a RIP) into a slightly dierent format.

The process compensates for the fact that most printing

technology cannot represent more than a very small

number of dierent tints of each ink. Screening places

very small and carefully structured collections of areas of

ink in such a way that the human eye is fooled into seeing

additional tints from the intended viewing distance.

Glossary continued...

Screen printing

In screen printing ink is applied to a surface through a

stencil held on a mesh attached to a frame.

Smart factory

Smart factories are designed to autonomously run

the entire production process and this will include the

print subsystems.

Trapping

A process to avoid unpleasant visible eects when

the colour separations being printed are not perfectly

aligned with each other (in register). It typically works by

enlarging some objects slightly, and contracting others.

Variable data processing or VDP

Printing items where every instance varies at least

slightly from the others, often with some graphics in

common as well. Examples range from adding serial

numbers to labels, through direct mail and variations

designed to ensure that packaging has more shelf

appeal.

Waveform

The way in which the voltage applied to an inkjet head is

varied over time in order to deliver well-formed ink drops

of the desired size and at the desired speed.

Wide format

Printing on devices with a width that’s usually more than

50cm, usually using inkjet and often related in some

way to marketing or photo ﬁnishing, including banners,

stickers, soft signage and sportswear.

Enterprise software for industrial print manufacturing

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COUNTRY OF INCORPORATION: England and Wales

LEGAL FORM: Public limited company

COMPANY NUMBER: 10872426

DIRECTORS

Guido Van der Schueren

Michael Rottenborn

Joachim Van Hemelen

Clare Findlay

Luc De Vos

SECRETARY

Peter Goodwin

STOCK MARKET: Euronext Brussels

STOCK TICKER: HYSG

LEGAL ENTITY IDENTIFIER (LEI): 213800ZFW446QIHAB654

SHARES ISIN: GB00BYN5BY03

AUDITORS: KPMG LLP, Dragonﬂy House,

2 Gilders Way, Norwich, NR3 1UB

LAWYERS: Mills & Reeve LLP, Botanic House,

100 Hills Road, Cambridge, CB2 1AR

SHARE REGISTRAR: Link Company, 6th Floor,

65 Gresham Street, London, EC2V 7NQ

Hybrid Software Group PLC

2030 Cambourne Business Park

Cambourne, Cambridge

CB23 6DW UK

Tel: +44 (0) 1954 283100

www.hybridsoftware.group

investor-relations@hybridsoftware.group