Hybrid Software Group PLC Annual Report 2022 Hybrid Software Group Strategic report Governance Financial statements Other information Hybrid Software Group PLC Annual Report 2022 110 111 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 34. 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 1 - 1 Right-of-use assets 47 - 47 Other intangible assets - 3,852 3,852 Financial assets 852 - 852 Trade and other receivables 406 - 406 Prepayments 11 - 11 Cash and cash equivalents 331 - 331 Deferred tax liabilities - (1,156) (1,156) Trade and other payables (12) (22) (34) Accrued liabilities (1,084) - (1,084) Lease liabilities (47) - (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 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 €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 2021), 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. On 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. HYBRID 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) 34. ACQUISITIONS (CONTINUED) Acquisition of HYBRID Iberia, S.L.U. (continued) The acquisition date fair value of 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 3 - 3 Other intangible assets - 218 218 Trade and other receivables 93 - 93 Prepayments 14 - 14 Cash and cash equivalents 106 - 106 Deferred tax liabilities - (55) (55) Trade and other payables (57) - (57) Other liabilities (7) - (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 acquisition. 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 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 €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 - 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)
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