Hybrid Software Group PLC Annual Report 2022 Hybrid Software Group Strategic report Governance Financial statements Other information Hybrid Software Group PLC Annual Report 2022 76 77 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSA 1. REPORTING ENTITY Hybrid Software Group PLC (the "Company") and its subsidiaries (together the "Group") is a leading developer of software solutions for prepress, 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 amortised 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) These 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. Use 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) 2. 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 and liquidity position; the Group’s objectives, policies and processes for managing its capital; its financial risk management objectives; details of its financial instruments; and its exposure to credit risk and liquidity risk. As a result of multiple factors 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 of 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 Software 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 Germany, 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 able to operate within the level of existing cash resources. The 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 United 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 in 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 Directors’ 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 they fall due for at least 12 months from the date of approval of these financial 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 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 Board 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 Board presents EBITDA and adjusted financial results when reporting its financial results to provide 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.
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