The directors present the strategic report for the year ended 31 December 2025.

Critical Software Ltd ("the company") specialises in providing software and systems engineering services for safety, mission and business critical applications across a range of sectors, including aerospace, defence, energy, transport and space.

During the year ended 31 December 2025, the company operated in a more challenging commercial environment, particularly in the UK market, reflecting changes in the timing and scale of certain major programmes. Despite this, the company remained profitable and cash generative, supported by disciplined cost management, strong delivery performance and a continued focus on higher value engineering activities.

The company’s business development strategy continues to be based on three main pillars: focusing on customers and markets that most value its engineering capabilities, optimising engineering operations through continuous improvement and quality management, and investing in its people, culture and long term capabilities. This approach has allowed the company to maintain strong relationships with key customers and to adapt to changes in market demand.

While activity in the UK energy sector reduced during the year as major programmes matured, the company continued to support existing systems in live operation and maintained a presence in other strategic sectors, including transport and aerospace. Management also continued to invest in sales and business development activities aimed at diversifying the customer base and positioning the company for future growth.

Overall, the directors consider that the company remains well positioned, with a solid balance sheet, a skilled workforce and a growing sales pipeline, providing confidence in the company’s prospects beyond 2025.

The principal risks to the business continue to relate primarily to the availability, capability and retention of suitably skilled staff required to meet the demands of clients delivering complex and safety critical projects. This risk is mitigated through ongoing investment in recruitment, training, mentoring and employee engagement initiatives, as well as by maintaining a strong organisational culture and career development framework.

The company is exposed to fluctuations in customer demand, including the timing, scale and geographic distribution of major programmes. During 2025, this was particularly evident in the UK market, where certain large programmes reduced in scale as they reached maturity. This risk is mitigated through diversification across multiple sectors and customers, active management of the sales pipeline and close engagement with key clients to anticipate changes in demand.

The company also faces operational risks related to its reliance on third party technology platforms and infrastructure. These risks are managed through established business continuity and disaster recovery plans, redundancy arrangements and regular review of critical suppliers and systems.

Financial risks such as credit and liquidity risk are considered low due to the company’s strong balance sheet position, cash reserves and support from the wider group. Exposure to individual customers is monitored, and credit risk is managed through customer assessment procedures and ongoing monitoring.

The directors consider that, taken together, the company’s diversified market exposure, strong financial position and experienced management team provide appropriate mitigation against the principal risks identified above.

The operating profit margin was 23% (2024: 28%).

On behalf of the board

The directors present their annual report and financial statements for the year ended 31 December 2025.

The principal activity of the company continued to be that of information technology software consultancy.

The results for the year are set out on page 9.

No ordinary dividends were paid. The directors do not recommend payment of a final dividend.

The directors who held office during the year and up to the date of signature of the financial statements were as follows:

The company's activities expose it to a variety of financial risks: price risk, credit risk, liquidity risk among others. The company has in place a risk management programme which seeks to minimise potential adverse effects on the company's financial performance

Liquidity risk is the risk that the company will not be able to meet its financial obligations as they fall due. This risk is related to the parent company cash flow management, assuring the maintenance of sufficient cash in all its subsidiaries. If borrowing necessity arise, there is a flexible loan program from the parent company that can be used.

Credit risk is the potential negative deviation from the expected value of receivables arising from the non-payment or non-performance by a customer, due to that party’s insolvency, inability or lack of willingness to pay or perform, or due to events or measures taken by the political or monetary authorities of a particular country (country risk). Credit risk thus encompasses default risk and country risk, but also includes migration risk, which is the risk for adverse changes in credit ratings. The amount of exposure to any customer is subject to a limit according to the customer's D&B rating and insurance credit limit associated. For customers based outside OECD countries an insurance credit backed by Portuguese government is used to eliminate political risk. Each customer limit is reassessed regularly.

Price risk is treated like any other contract term with a systematic process for reviewing it and addressing any resulting issues. Risk-review milestones should be part of the contract, to allow teams to reassess risk with the customer and make any necessary adjustments. The process should is both systematic, and flexible enough to respond to changing situations. This review is regularly done and depends on the length of the projects.

The company carried out research and development work throughout the year. Costs are expensed to the profit and loss account as incurred.

The company’s strategy continues to focus on leveraging its core engineering capabilities across a diversified range of markets. Management is actively pursuing new opportunities both within existing customers and with new prospective clients.

Investment continues in sectors where the company has an established track record, including transport, aerospace and energy, while also developing opportunities in adjacent markets such as digital infrastructure, medical devices and other regulated industries that require high reliability and safety critical software.

Management believes that the combination of a strong technical reputation, an experienced workforce and an expanding sales pipeline provides a solid foundation for future development and growth in the medium term.

In accordance with the company's articles, a resolution proposing that HJS Accountants Limited be reappointed as auditor of the company will be put at a General Meeting.

So far as each person who was a director at the date of approving this report is aware, there is no relevant audit information of which the company’s auditor is unaware. Additionally, the directors individually have taken all the necessary steps that they ought to have taken as directors in order to make themselves aware of all relevant audit information and to establish that the company’s auditor is aware of that information.

This report has been prepared in accordance with the provisions applicable to companies entitled to the medium-sized companies exemption.

The directors are responsible for preparing the annual report and the financial statements in accordance with applicable law and regulations.

Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). 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 affairs of the company and of the profit or loss of the company for that period.

In preparing these financial statements, the directors are required to:

• select suitable accounting policies and then apply them consistently;

• make judgements and accounting estimates that are reasonable and prudent; and

• prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business.

The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the company’s transactions and disclose with reasonable accuracy at any time the financial position of the company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

We have audited the financial statements of Critical Software Ltd (the 'company') for the year ended 31 December 2025 which comprise the statement of comprehensive income, the balance sheet and notes to the financial statements, including significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (United Kingdom Generally Accepted Accounting Practice).

In our opinion the financial statements:

· give a true and fair view of the state of the company's affairs as at 31 December 2025 and of its profit for the year then ended;

· have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and

· have been prepared in accordance with the requirements of the Companies Act 2006.

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements section of our report. We are independent of the company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Conclusions relating to going concern

In auditing the financial statements, we have concluded that the directors' use of the going concern basis of accounting in the preparation of the financial statements is appropriate.

Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the company's ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.

Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.

Other information

The directors are responsible for the other information. The other information comprises the information included in the annual report, other than the financial statements and our auditor’s report thereon. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.

Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the financial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to

report that fact.

We have nothing to report in this regard.

Opinions on other matters prescribed by the Companies Act 2006

In our opinion, based on the work undertaken in the course of our audit:

· the information given in the directors' report for the financial year for which the financial statements are prepared is consistent with the financial statements; and

· the directors' report has been prepared in accordance with applicable legal requirements.

In the light of the knowledge and understanding of the company and its environment obtained in the course of the audit, we have not identified material misstatements in the directors' report.

We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion:

• adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us; or

• the financial statements are not in agreement with the accounting records and returns; or

• certain disclosures of directors' remuneration specified by law are not made; or

• we have not received all the information and explanations we require for our audit.

As explained more fully in the directors' responsibilities statement, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, the directors are responsible for assessing the 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 the directors either intend to liquidate the company or to cease operations, or have no realistic alternative but to do so.

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 an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not a 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 the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

The extent to which our procedures are capable of detecting irregularities, including fraud, is detailed below.

Based on our understanding of the company and industry, we identified that the principal risks of non-compliance with laws and regulations related to breaches of UK regulatory principles. We also considered the laws and regulations which have a direct impact on the financial statements such as the Companies Act 2006.

We evaluated management's incentives and opportunities for fraudulent manipulation of the financial statements (including the risk of override of controls), and determined that the principal risks were related to management bias in accounting estimates and judgmental areas of the financial statements.

Audit procedures performed by the audit engagement team included:

• Discussions with senior management, including consideration of known or suspected instances of noncompliance with laws and regulations or instances of fraud;

• Identifying and testing journal entries based on risk criteria;

• Designing audit procedures to incorporate unpredictability around the nature, timing or extent of our testing;

• Testing transactions entered into outside of the normal course of the company's business;

• Reviewing any potential litigation or claims against the entity which indicate any potential noncompliance issues.

There are inherent limitations in the audit procedures described above. We are less likely to become aware of instances of non-compliance with laws and regulations that are not closely related to events and transactions reflected in the financial statements. Also, the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery or intentional misrepresentations, or though collusion.

A further description of our responsibilities is available on the Financial Reporting Council’s website at: https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor's report.

Use of our report

This report is made solely to the company's member in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company's member those matters we are required to state to the member in an auditor's report 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 member, for our audit work, for this report, or for the opinions we have formed.

The profit and loss account has been prepared on the basis that all operations are continuing operations.

Critical Software Ltd is a private company limited by shares incorporated in England and Wales. The registered office is Tagus House, 9 Ocean Way, Southampton, Hampshire, United Kingdom, SO14 3TJ.

These financial statements have been prepared in accordance with FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland” (“FRS 102”) and the requirements of the Companies Act 2006.

The financial statements are prepared in sterling, which is the functional currency of the company. Monetary amounts in these financial statements are rounded to the nearest £.

The financial statements have been prepared under the historical cost convention. The principal accounting policies adopted are set out below.

Atruet the time of approving the financial statements, the directors have a reasonable expectation that the company has adequate resources to continue in operational existence for the foreseeable future. Thus the directors continue to adopt the going concern basis of accounting in preparing the financial statements.

Turnover represents the value of services supplied during the period, less value added tax. Turnover is recognised as contract activity progresses and the right to consideration is earned. Turnover which has been recognised but not invoiced by the balance sheet date is included in 'prepayments and accrued income'.

Tangible fixed assets are initially measured at cost and subsequently measured at cost or valuation, net of depreciation and any impairment losses.

Depreciation is recognised so as to write off the cost or valuation of assets less their residual values over their useful lives on the following bases:

The gain or loss arising on the disposal of an asset is determined as the difference between the sale proceeds and the carrying value of the asset, and is credited or charged to profit or loss.

At each reporting period end date, the company reviews the carrying amounts of its tangible assets. A provision is made for any impairment loss and taken to the profit and loss account.

Cash and cash equivalents are basic financial assets and include cash in hand, deposits held at call with banks, other short-term liquid investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities.

The company only enters into Basic financial instrument transactions.

Financial instruments are recognised in the company's balance sheet when the company becomes party to the contractual provisions of the instrument.

Financial assets and liabilities are offset, with the net amounts presented in the financial statements, when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle on a net basis or to realise the asset and settle the liability simultaneously.

Basic financial assets, which include debtors and cash and bank balances, are initially measured at transaction price including transaction costs and are subsequently carried at amortised cost using the effective interest method unless the arrangement constitutes a financing transaction, where the transaction is measured at the present value of the future receipts discounted at a market rate of interest.

Other financial assets, including investments in equity instruments which are not subsidiaries, associates or joint ventures, are initially measured at fair value, which is normally the transaction price. Such assets are subsequently carried at fair value and the changes in fair value are recognised in profit or loss, except that investments in equity instruments that are not publicly traded and whose fair values cannot be measured reliably are measured at cost less impairment.

Financial assets, other than those held at fair value through profit and loss, are assessed for indicators of impairment at each reporting end date.

Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows have been affected. If an asset is impaired, the impairment loss is the difference between the carrying amount and the present value of the estimated cash flows discounted at the asset’s original effective interest rate. The impairment loss is recognised in profit or loss.

If there is a decrease in the impairment loss arising from an event occurring after the impairment was recognised, the impairment is reversed. The reversal is such that the current carrying amount does not exceed what the carrying amount would have been, had the impairment not previously been recognised. The impairment reversal is recognised in profit or loss.

Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire or are settled, or when the company transfers the financial asset and substantially all the risks and rewards of ownership to another entity, or if some significant risks and rewards of ownership are retained but control of the asset has transferred to another party that is able to sell the asset in its entirety to an unrelated third party.

Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the company after deducting all of its liabilities.

Basic financial liabilities, including creditors, bank loans, loans from fellow group companies and preference shares that are classified as debt, are initially recognised at transaction price unless the arrangement constitutes a financing transaction, where the debt instrument is measured at the present value of the future payments discounted at a market rate of interest.

Derivatives, including interest rate swaps and forward foreign exchange contracts, are not basic financial instruments. Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently re-measured at their fair value. Changes in the fair value of derivatives are recognised in profit or loss in finance costs or finance income as appropriate, unless hedge accounting is applied and the hedge is a cash flow hedge.

Debt instruments that do not meet the conditions in FRS 102 paragraph 11.9 are subsequently measured at fair value through profit or loss. Debt instruments may be designated as being measured at fair value through profit or loss to eliminate or reduce an accounting mismatch or if the instruments are measured and their performance evaluated on a fair value basis in accordance with a documented risk management or investment strategy.

Financial liabilities are derecognised when the company’s contractual obligations expire or are discharged or cancelled.

Equity instruments issued by the company are recorded at the proceeds received, net of transaction costs. Dividends payable on equity instruments are recognised as liabilities once they are no longer at the discretion of the company.

Derivatives are initially recognised at fair value at the date a derivative contract is entered into and are subsequently remeasured to fair value at each reporting end date. The resulting gain or loss is recognised in profit or loss immediately unless the derivative is designated and effective as a hedging instrument, in which event the timing of the recognition in profit or loss depends on the nature of the hedge relationship.

A derivative with a positive fair value is recognised as a financial asset, whereas a derivative with a negative fair value is recognised as a financial liability.

The tax expense represents the sum of the tax currently payable and deferred tax.

The current tax liability is recognised for the tax payable on the taxable profit of the current and past periods. A current tax asset is recognised in respect of a tax loss that can be carried back to recover tax paid in a previous period.

Deferred tax balances are recognised in respect of all timing differences that have originated but not reversed by the balance sheet date, except that the recognition of deferred tax assets is limited to the extent that the company anticipates making sufficient taxable profits in the future to absorb the reversal of the underlying timing differences. Deferred tax balances are not discounted.

The costs of short-term employee benefits are recognised as a liability and an expense, unless those costs are required to be recognised as part of the cost of stock or fixed assets.

The cost of any unused holiday entitlement is recognised in the period in which the employee’s services are received.

Termination benefits are recognised immediately as an expense when the company is demonstrably committed to terminate the employment of an employee or to provide termination benefits.

Contributions to employee personal pension schemes are charged to the profit and loss account in the year in which they become payable.

Rentals payable under operating leases, including any lease incentives received, are charged to profit or loss on a straight line basis over the term of the relevant lease except where another more systematic basis is more representative of the time pattern in which economic benefits from the leases asset are consumed.

Rental income from operating leases is recognised on a straight line basis over the term of the relevant lease. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised on a straight line basis over the lease term.

Foreign currency transactions are translated into sterling at the rates ruling when they occurred. Foreign currency monetary assets and liabilities are translated at the rates ruling at the balance sheet date. Any differences are taken to profit and loss account.

Research and development

Research and development expenditure is written off to the profit and loss account in the year in which it is incurred.

An analysis of the company's turnover is as follows:

The average monthly number of persons (including directors) employed by the company during the year was:

Their aggregate remuneration comprised:

There are no key management personnel remunerations for the current year.

The actual charge for the year can be reconciled to the expected charge for the year based on the profit or loss and the standard rate of tax as follows:

The tax balance for 2024 included a claim for R&D for 2023 and 2022 which had not been agreed at the time of signing accounts for those years. At the reporting date a R&D claim is open with R&D specialist but the claim has not been finalised and therefore no provision for this has been included above.

The following are the major deferred tax liabilities and assets recognised by the company and movements thereon:

The deferred tax liability set out above is expected to reverse within 12 months and relates to accelerated capital allowances that are expected to mature within the same period.

The company operates a defined contribution pension scheme for all qualifying employees. The assets of the scheme are held separately from those of the company in an independently administered fund.

There were contributions of £12,288 (2024 - £10,334) outstanding at the balance sheet date.

At the reporting end date the company had outstanding commitments for future minimum lease payments under non-cancellable operating leases, which fall due as follows:

Critical Software S.A.

Critical Software S.A. is the immediate parent company.

In the year, the company made sales to the related party totalling £1,015,610 (2024: £1,037,214) and purchases from the related party of £7,544,693 (2024: £8,343,519).

At the balance sheet date, the company owes the related party £254,838 (2024: £567,044).

Critical Software GmbH

Critical Software GmbH is a fellow subsidiary within in the group.

In the year, the company made sales to the related party totalling £59,540 (2024: £104,120).

At the balance sheet date the related party owed the company £nil (2024: £10,345).

Critical Software US

Critical Software US is a fellow subsidiary within the group.

In the year, the company made sales to the related party totalling £69,420 (2024: £nil).

At the balance sheet date, the related party owed the company £6,245 (2024: £nil).

Parent Company

The immediate parent company is Critical Software S.A and its registered office is Parque Industrial De Taveiro, Lote 49, 3045-504 Coimbra, Portugal.

Critical Software S.A. now own 100% of the voting shares.

Ultimate Parent Company

The ultimate parent entity is Critical Holding S.A. a company incorporated in Portugal.

The results of this company are included in the consolidated accounts of Critical Holding S.A. and the consolidated accounts are available from their registered office Parque Industrial De Taveiro, Lote 49, 3045-504 Coimbra, Portugal.