Wag Payment Regulatory News (WPS)

7 September 2023

W.A.G payment solutions plc ("Eurowag" or the "Group")

Interim results for the six months ended 30 June 2023

Robust growth despite macro pressures, large-scale digital transformation continues

W.A.G payment solutions plc ("Eurowag" or the "Group"), today announces its interim results for the six-month period ended 30 June 2023.

H1 financial highlights

· Net revenue1 up 36.9% year-on-year to €119.1m, with organic growth2 of 14.4%.

-  Payment solutions revenue1 grew by 14.1% year-on-year to €72.4m, with organic growth2 of 12.5%. Economic headwinds have impacted the Commercial Road Transport ("CRT") industry, with fewer kilometres driven.

-  Mobility solutions revenue1 grew 98.6% year-on-year to €46.7m, with organic growth2 of 19.9%; reflecting strong sales across all our mobility products.

· Adjusted EBITDA1 up 43.5% year-on-year to €50.2m, with margin1 of 42.2%, reflecting the impact of acquisitions. Organic adjusted EBITDA1 up 21.6% to €42.6m, with margins at 43.3% (H1 2022: 40.7%); Excluding the benefit from the foreign exchange gain as a result of our prudent currency risk management3, organic adjusted EBITDA was €36.6m.

· Transformational capex of €11.7m and ordinary capex of €12.9m, with our transformational programme on track to finish at the end of the year, in-line with guidance.

· On a statutory basis, profit before tax was €8.5m, a decrease of 36.7% year-on-year; due to higher depreciation from our transformational capital expenditure programme, the inclusion of our new acquisitions, and higher interest costs following the acquisition of Grupa Inelo S.A. ("Inelo").

· Net debt position of €300.9m (H1 2022: cash position of €28.7m); leverage increased as expected to 2.9x net debt to adjusted EBITDA4.

Martin Vohánka, Founder and CEO, commented:

"We delivered strong double-digit organic growth in the first half of the year. This was in spite of the macroeconomic headwinds across Europe which are impacting the CRT industry through a notable slowdown in freight demand, in turn delivering a reduction in kilometres driven. Our performance against this backdrop continues to demonstrate the resilience of our business model which delivers significant growth through the cycle and that our products are truly mission critical to our customers.

This year we have entered a new transformation phase. Our priority is the integration of our newly acquired businesses to ensure we fully capture the synergies and cross sell opportunities, as well as deliver on our vision of providing the industry's first end-to-end digital platform next year. Our transformational capex programme, which remains on track to finish at the end of this year, has allowed us to develop and expand our product and service capabilities, strengthen our business operations, and build a unique and scalable technology platform, which we look forward to discussing further at our Capital Markets Day in October.

There is still a lot of work to do, but I am pleased with the progress made so far this year. We have moved closer to the launch of our integrated platform, which, together with the integration of our acquisitions, gives me confidence that we can unlock further value for both our customers and our shareholders."

H1 financials

H1 operational highlights

H1 strategic highlights

· M&A strategy adding key capabilities and services:

· Completed the acquisition of Inelo in March;

· JITpay GmbH's ("JITPay") call option exercised in July to buy an additional 18.01%, taking total ownership to 28% once completed.

· Integration of WebEye Telematics Zrt. ("Webeye") and Inelo:

· Webeye organisation integrated, including moving their sales force into Eurowag as one agile sales team;

· Inelo integration workstreams in place to ensure seamless transition, focus on cross-sell initiatives.

· Grow core services:

· European Electronic Toll Service ("EETS") certification in the Czech Republic and Hungary.

· Expand platform capability:

· Improving customer self-care portal to support end-to-end digital user experience;

· Continue to develop our financial platform capability, for e-wallet launch in FY 2024;

· Good progress made on data lake to improve data analytics and reporting governance.

Outlook and update to medium term guidance

Eurowag entered 2023 in a strong position and continues to grow, in spite of the macroeconomic environment currently impacting the CRT industry across Europe. This includes high inflation and interest rates, and a slowdown of product manufacturing which has led to a notable slowdown in freight demand and therefore fewer kilometres driven by our customers. Anticipated challenges have arisen from our decision taken last year, following the Russian invasion of Ukraine, to adapt our business operations to a level beyond the restrictions the sanctions imposed and withdrew all operations and fuel purchases with any exposure to Russia, which has impacted fuel pricing in some of our markets. Our robust results in the first half are therefore a reflection of the strength of our business model in that we have a loyal and growing customer base and provide truly mission-critical products and services. With the combination of market headwinds and the transformative programme we are undergoing, we expect in the near-term net revenue percentage growth to be around mid-teens. In the medium-term, we expect revenue percentage growth to return to high-teens, reflecting the value creation from our platform through the growth in customers, the cross-sell opportunities and the full extraction of acquisition synergies.

In the first half, excluding a favourable foreign exchange gain, organic adjusted EBITDA grew 4.6% with margins of 37.2%. Organic adjusted EBITDA margins were impacted in the first half due to our cost increases being ahead of net revenue growth, with net revenues expected to be second half weighted due to our usual seasonality. Along with the net revenue weighting in the second half and cost actions already proactively taken through headcount reduction in anticipation of integrating Webeye and Inelo into our organisational structure, we expect margin levels to be in-line with FY 2022, at around 43%. We still expect our margin in the medium-term to move to high-forties as operational leverage and acquisition synergies are realised.

We expect to finalise our transformational capex programme at the end of the year, on time and in budget, having invested significantly in the last few years in developing the industry's first digitally integrated end-to-end platform. We will continue to invest in the business through ordinary capex. Following the acquisition of Inelo and Webeye, we expect ordinary capex to move just above 10 percent of net revenues for the end of this financial year. Inelo and Webeye have historically invested a higher percentage of net revenues, with Inelo spending half of its capex on hardware. As results of these acquisitions, we are updating our medium-term ordinary capex guidance to be around 10 percent of net revenues. We do anticipate reducing duplications across IT, hardware, and technology over time through a combination of integration and the transition to a single technology platform.

With the recent acquisition of Inelo, our leverage ratio at the half year increased as expected to 2.9x net debt to adjusted EBITDA. It is still a priority to return to within our targeted leverage ratio range of 1.5x to 2.5x.

The next two years are important to us, with the delivery of the integrated platform as well as the transformation of the business, including the integration of those businesses we have acquired recently. With further growth opportunities through cross-sell and geographic expansion, and the value we see being unlocked for customers through the new platform, we are confident that we can continue to deliver strong growth for all stakeholders.

The Board's expectations for the full year remain unchanged.

Notes:

1. Please refer to the section Explanation of Alternative Performance Measures for a definition and see note 9.

2. Organic growth excludes Webeye and Inelo performance and recurring Inelo integration expenses.

3. We use forward currency contracts to mitigate any Euro foreign exchange fluctuations.

4. Net debt includes lease liabilities and derivative liabilities.

5. An active customer or truck is defined as using the Group's payment solutions products at least once in a given month.

6. Number of payment solutions transactions represents the number of payment solutions transactions (fuel and toll transactions) processed by the Group for customers in that period.

Investor and analyst presentation today

Martin Vohánka (CEO) and Oskar Zahn (CFO) will host a virtual presentation and a Q&A session for investors and analysts today, 07 September 2023, at 9.00am BST. The presentation and webcast details are available on the Group's website at https://investors.eurowag.com

Please register to attend the investor presentation via the following link: https://www.lsegissuerservices.com/spark/WAGPAYMENTSOLUTIONS/events/1f78cd93-d600-4b62-9427-d827694c8ded 

Should you want to ask questions at the end of the presentation, please use the following link:

https://services.choruscall.za.com/DiamondPassRegistration/register?confirmationNumber=7451850&linkSecurityString=1306449012

We are hosting our Capital Markets Day on 11 October 2023 from 8.30 to 13.00 in London. Please contact the investor relations team (investors@eurowag.com) if you would like to register to attend in person, or for those who are not based in London, we can provide a video link for the event. We would encourage investors and analysts to attend in person, as you will have the opportunity to meet the Executive team and you will be able to interact with some of our colleagues who will be showcasing some of our products and services.

ENQUIRIES

EurowagCarla Bloom

Head of Investor Relations and Communications

+44 (0) 789 109 4542

investors@eurowag.com

Instinctif Partners

Tim McCall, Galyna Kulachek, Bryn Woodward

IR and international media

+44 (0)20 7457 2020

eurowag@instinctif.com

About Eurowag

Eurowag was founded in 1995 and is a leading pan-European integrated payments and mobility platform focused on the CRT industry. Eurowag's innovative solutions makes life simpler for small and medium businesses in the CRT industry across Europe through its unique combination of payments solutions, seamless technology, a data-driven digital ecosystem and high-quality customer service. https://investors.eurowag.com

Chief Executive Officer's Review

Eurowag's purpose has always been about driving change within the CRT industry, helping it to become clean, fair, and efficient. The only way to achieve this is by digitising the industry through a digitally integrated solution. Today, the industry is still heavily reliant on analogue solutions and has a highly fragmented product and services eco-system. Eurowag has been innovating for three decades, evolving with its customers' needs and expanding its suite of missional critical products and services to keep them on the road. To help digitise the industry, Eurowag has more recently acquired or developed data solutions which our customers rely on to do their job. Innovation and M&A has accelerated Eurowag's transformation from a domestic fuel card provider to a pan-European integrated payments and mobility platform. Whilst Eurowag has integrated its legacy solutions, such as fuel cards, tolls and VAT refund solutions, its recent acquisitions still require integration, including people, technology, and products. The ambition of launching an integrated digital end-to-end platform has evolved with every new acquisition, and the first application is expected to launch in FY 2024. We will provide more details on our Capital Markets Day, on 11 October.

With the evolution of the business and change of revenue mix, a new strategic framework was set out at the start of the year, with the following strategic priorities:

1) Be in every truck (attract)

· We have signed our third OEM partnership, which will install the Eurowag app in every new truck produced. The three OEM partnerships cover around 45% of the European truck market today;

· Integration plans are on track, with Webeye sales teams integrated into agile sales teams.

2) Drive customer centricity (engage)

· We have improved our customer self-care portal, further supporting an end-to-end digital user experience;

· Mobile payments roll-out doubled, and we now have 800 acceptance points ready for self-authorisation.

3) Grow core services (monetise)

· We have expanded our EETS certification in the Czech Republic and Hungary;

· We have maintained strong net average revenue retention, at over 110%.

4) Expand platform capability (retain)

· We have continued to develop our financial platform capability, in preparation of our e-wallet launch;

· Our ERP implementation is on track for launch in the first quarter of 2024; this will bring significant operational efficiencies.

Operational Review

Payment solutions

The Payment solutions business segment currently represents the largest part of our ecosystem, and in the first half of 2023, contributed 61% of total net revenues, a figure we expect to reduce to approximately 55% with the full annualisation of the Inelo acquisition into our mobility segment. Payment solutions includes energy payments through pre- or post-paid fuel cards and toll payments. This is often the first introduction customers have to our services.

Energy payments

During the first half of the year, we have added 1,030 locations to our acceptance network ('POS'), taking our total active POS at the end of June to 12,000 stations across 23 European countries. During the first half, we have also completed the termination of a co-branded card scheme with WEX, which provided access to 5,450 sites. This long-term strategic move enabled us to arrange direct relationships with merchants, and streamline our network access to core international routes, which many of these sites were not. As a consequence, we maintain the strength and relevance of our network, and managed to overall improve user experience and security. In the first half, we also focused our efforts on opening more acceptance points in Germany, following our expansion into the DACH region last year, which supports our efforts to establish an important presence in one of Europe's vital trucking markets as well as cover the hotspots our customers' travel. In the second half of the year, we are focused on POS rollouts in Portugal, where a recent regulatory change to fuel prices facilitated expansion in this market.

We continue to focus on reducing carbon emissions and supporting our customers in the transition to alternative fuels; our liquefied natural gas1 (LNG) acceptance network currently comprises 398 contracted stations (representing more than 50% of the European market), while our compressed natural gas2 (CNG) acceptance network has 212 contracted stations. We recently opened two Eurowag-owned LNG bunkering stations in the Czech Republic, and we have seen positive momentum in both: in June of this year, 11% of our LNG sales were completed in these locations, compared to 2% in January. The majority of customers fuelling through these stations are from the Czech Republic and Slovakia, and more recently from Poland.

Notes:

1. Liquefied natural gas (LNG) is natural gas that has been cooled down to liquid form. Natural gas burns significantly cleaner; produces lower emissions of sulphur, nitrogen, and carbon dioxide into the atmosphere.

2. Compressed natural gas (CNG) is a natural gas under pressure that remains odourless, clear, and non-corrosive. Therefore, it is a greener, cheaper, and more efficient fuel.

Toll payments

Following the EETS certification received in the Czech Republic at the beginning of the year, we have also expanded to Hungary, where we now offer post-paid toll services. Both the Czech Republic and Hungary provide us with a solid foundation to continue our cross-selling efforts. As a consequence of this, in the first half of the year, we have seen a 46% increase in EVA onboarding units ("OBUs") sold, compared to the first half of 2022. We are also working on finalising the implementation of our direct relationship with toll chargers in Spain and Portugal and expect to be operational in these countries in the second half of the year.

We are in the final EETS certification phase in Slovakia, who will eventually turn off their national toll system. This means that Slovakia will be the first country in Europe to be serviced by certified EETS providers. As Eurowag will be among the first providers to be certified, we are well placed to sustain and potentially grow our current market share.

We have additional tailwinds in our toll business, with more European countries starting to implement mandatory CO2 reduction regulations, creating a favourable impact on our revenues.

Mobility solutions

The mobility solutions segment offers our customers Software as a Service (SaaS) solutions, such as fleet management, work time management, transport management, location-based products, navigation apps and tax refund services. In the first half of 2023, the mobility business segment represented 39% of total net revenue, a figure we expect to grow to approximately 45% with the full annualisation of the Inelo acquisition. Mobility solutions revenue is largely subscription based, representing a resilient and predictable revenue stream.

SaaS mobility solutions

Fleet management

Our fleet management services provide dispatchers and truck drivers with an enhanced understanding of their vehicles, through monitoring maintenance schedules, tracking fuel usage, driving times, loads and other important metrics, resulting in efficiency improvements and material cost and emissions reduction.

In the first half of the year, we have enhanced the Eurowag mobile application and introduced Cold Chain monitoring. This feature allows the safe transportation of fresh and frozen food products, medicine, and cosmetics.

Work time management

Inelo's work time management is a proprietary software enabling analysis and settlement of drivers' working time. Some of its key functionalities include downloading, archiving, and analysing data sourced from record sheets, driver cards, and digital tachographs. This allows for preparation of driver work hours settlements, while also detecting any potential manipulations.

Through work time management, enforcement authorities responsible for checking drivers' time can ensure that users stay up to date with any regulation. The software is used by over 4,500 inspectors in 25 EU countries.

Transport management

Inelo's transport management software is all about profitability management, as it allows automation and control of profitability over a single transport order. It covers transportation route planning, delivery coordination and driver controlling, supporting the entire order processing workflow. The software streamlines end-to-end order management, through order acceptance, monitoring delivery, and settlement and reporting, while also automating all logistics processes by allowing users to store data on all shippers, suppliers, carriers and end customers.

Location-based products and services

We offer smart navigation products, location-based services and mobile navigation apps through our Sygic brand, one of the leaders in providing smart routing worldwide for both individual truck drivers and various vehicle sizes fleets.

During the first half of the year, we have continued to add improvements and updates to our Sygic Navigation app: truck drivers can now see fuel prices directly on the map, for ease of decision making. Sygic GPS Navigation is now available on Visteon's AllGo app store. Sygic's Road Lords application has been downloaded over 200,000 times in the first half of the year, with daily active users of just over 27,000.

In the first half of 2023 we signed a third contract with a European truck manufacturer; from next year, they will install Eurowag's application into every new dashboard before sale.

Tax refund services

During the first half of the year, we expanded our array of services to provide VAT refunds for Croatian customers and we have enhanced the user interface to optimise the experience for our customers.

Post-acquisition integrations

Following the acquisitions of Webeye (in mid-2022) and Inelo (in early 2023), the first half of the year was focused on integrating the new businesses both on an operational and personnel level whilst pursuing the first level of cross-sell opportunities stemming from the merged sales organisations.

At Webeye, several integration and consolidation workstreams have been created, to ensure a seamless transition. The Webeye and Eurowag sales teams are already working as one under agile, multi-competency sales teams, with ongoing lead generation campaigns, enabling cross-sell opportunities in both product portfolios. Webeye's core functions have been integrated within Eurowag's organisational structure, with further unification required in IT and HR processes.

While Inelo was acquired more recently, integration workstreams have been deployed. Inelo's management team are now reporting to the Eurowag executive team. The sales teams have seen good momentum on early cross-sell initiatives and continue to work on full integration into Agile sales teams by January 2024. Further levers for cross-sell are expected, following the introduction of the new platform during FY 2024.

Sustainability

Our sustainability plan underpins our strategy and is focused on four areas: climate action, customer success and well-being, company governance, and culture and community impact. Eurowag's purpose is to make the CRT industry clean, fair, and efficient.

Aligning to our internal targets of reducing emissions, in the first half of 2023, we have switched the Prague office to renewable energy, saving nearly 500 tonnes of CO2 emissions.

As part of our ESG targets, our solutions also help our customers to reduce their own emissions. Our SME customers are often unaware of the CO2 from their use of fuel, and as a result we have launched a free CO2 calculator to help them understand their carbon footprint.

As a way to further support our drivers, our integration with Inelo brings working time management capabilities, ensuring the well-being of drivers and compliance of drivers' pay with labour regulations across Europe. Together with the Inelo team, we drew on their experience with road enforcement agencies to train and inform our customers about changes in EU Transport legislation.

As the integration of Webeye and Inelo continues, we have gained more data and more vehicles, and thus greater insights, helping our customers understand the impact of driving behaviour and load utilisation on fuel costs, emissions, and fleet maintenance.

At Eurowag, we recognise that diversity and inclusion are key pillars of achieving a rich culture, where people from all backgrounds are celebrated and together, they contribute to our success. We have recently evolved our People and Culture Ambassadors network, a community of Eurowag employees that is helping to drive improvement in our culture and employee engagement and experience. We have also launched our Women at Eurowag network, fostering a supportive community for personal and professional growth for our colleagues that identify as female.

We have also just concluded our 2023 Philanthropy & You programme for employee-led charitable donations and have over 1,000 employees engaged, supporting over 200 causes in over 14 countries.

Financial Review

In the face of challenging market and macro-economic conditions in Europe, Eurowag delivered a robust performance in the first half of 2023, demonstrating once again the inherent resilience of our business model and the mission critical nature of our services.

In the first half of 2023, at a headline level, net revenues grew by 36.9%, with payment solutions up 14.1% and mobility solutions up 98.6%. Adjusted EBITDA grew 43.5%. This strong growth was driven by robust underlying growth and contribution from recent acquisitions.

In the first half of 2023, organic net revenue growth was 14.4%, with organic payment solutions net revenue up 12.5%, and organic mobility solutions net revenue up 19.9%. Economic headwinds have impacted the CRT industry, with fewer kilometres driven and a slowdown in freight demand.

In the first half of 2023, our adjusted EBITDA increased by 43.5% to €50.2m (H1 2022: €35.0m) with adjusted EBITDA margin of 42.2% (H1 2022: 40.2%). Organic adjusted EBITDA was up 21.6% to €42.6m, with margins at 43.3% (H1 2022: 40.7%). Excluding the benefit from our currency risk management, organic adjusted EBITDA growth was 4.6%. The organic cost increases were mainly driven by employee expenses, of which half was from salary inflation increases, and technology expenses. 

On a statutory basis, profit before tax decreased by 36.7% year-on-year to €8.5m (H1 2022: €13.4m), mainly as a result of higher adjusting items, depreciation and amortisation and interest. Basic EPS decreased by 41.1% to 0.76 cents per share (H1 2022: 1.29 cents). Adjusted basic EPS increased year-on-year to 2.90 cents per share (H1 2022: 2.35 cents) driven mainly by profit of Inelo acquisition.

Net debt at the end of the reporting period was €300.9m (H1 2022: cash position of €28.7m). Our net leverage ratio, as expected, increased to 2.9x net debt to adjusted EBITDA.

In the first half of 2023, our transformational capital expenditure totalled €11.7m, while investments in our subsidiaries, associates, and financial investments amounted to €273.5m, which consists of the Inelo (€265.7m), Webeye (€7.6m), and JITPay (€0.2m) acquisitions.

Performance review

Below is a summary of the segmental performance and explanatory notes related to items including corporate expenses, alternative performance measures, taxation, interest, investment, and cash flow generation. 

Segments

 Note:

1. Please refer to the section Explanation of Alternative Performance Measures for a definition and see note 9.

The Group's total revenues decreased by 12.3% year-on-year to €1,017.6m, driven by lower energy prices compared to the comparative period and lower volume of energy sales. Lower volumes of energy sales were driven by overall economic headwinds and the regulatory changes in Portugal. Despite the drop in energy sales prices, overall energy margin levels enabled the Group to grow net energy sales in the Payment solutions segment. 

The Group delivered double-digit net revenue growth and strong contribution margins in both segments. Growth in organic net revenue was 14.4%, while the overall net revenue increased by 36.9% year-on-year, which includes €7.4m contribution from Webeye and €13.3m from Inelo.

Payment solutions net revenue grew by 14.1% year-on-year. This increase reflects strong new customer and truck acquisitions, underpinned by strong average net revenue retention. Our underlying organic payments solution business was impacted by economic headwinds and changes in fuel regulation in Portugal.

Mobility solutions net revenue grew by 98.6% year-on-year, and organic mobility solutions net revenue was up 19.9%. This strong growth is the result of effective cross-selling, as well as sales to automotive partners and Webeye and Inelo consolidation. 

Corporate expenses

The table above is from the segmental review, while the table below summarises corporate expenses based on statutory financial categories.

Employee expenses increased by 41.7% year-on-year to €46.4m; excluding our acquisitions and adjusting items, organic employee expenses increased by 18.9% This growth was driven by salary increases communicated at the start of the year, as well as hiring the right people to support the business through the next phase of our transformation. Adjusting items included in employee expenses amounted to €4.8m for H1 2023 (H1 2022: €4.2m) and included pre-IPO share based remunerations (H1 2023: €3.7m and H1 2022: €3.3m).

Technology expenses increased by 123.6% year-on-year to €8.7m (H1 2022: €3.9m); excluding our acquisitions, organic technology expenses increased by 58.4%. This increase reflects the Group's focus on technology transformation, cloud transition, and expenses related to the new generation ERP system. Adjusting items included in technology expenses amounted to €1.9m in H1 2023 (H1 2022: €0.2m).

Impairment losses of financial assets amounted to €4.2m (H1 2022: €2.7m). The increase is connected primarily with our key markets, such as Poland, Romania, and Portugal, where the credit loss ratio increased slightly from 0.2% last year to 0.3% at the end of June 2023. Nevertheless, our overall receivables portfolio and cash collection remained robust.

Other operating expenses increased by 44.3% year-on-year to €26.4m (H1 2022: €18.3m), mainly due to acquisition-related expenses, with Webeye consolidation adding €1.4m and Inelo acquisition adding €3.9m. Adjusting items included in other operating expenses amounted to €3.3m for H1 2023 (H1 2022: €1.1m) and included expenses related to acquisitions of €2.2m (H1 2022: €0.5m) and strategic transformation costs of €1.1m (H1 2022: €0.5m).

Other operating income increased by 273.8% year-on-year to €6.8m (H1 2022: €0.2m), mainly driven by a favourable foreign exchange gain of €6.0m, as a result of our prudent currency risk management.

Depreciation and amortisation grew by 106.8% year-on-year to €25.7m (H1 2022: €12.4m) primarily due to the amortisation of acquired assets of Inelo and Webeye and partly due to transformational technology being put into production. Adjusting items included in depreciation and amortisation amounted to €6.8m for H1 2023 (H1 2022: €3.4m).

Net finance expense

Net finance expense in the first half of 2023 amounted to €5.7m (H1 2022: €3.3m). The increase mainly reflects higher factoring fees related to higher average factoring limits utilisation throughout the year, as well as higher interest costs related to increased borrowings.

Taxation

The Group tax charge of €2.9m (H1 2022: €4.3m) represents an effective tax rate of 34.2% (H1 2022: 31.7%). The tax charge in the first half of 2023 was influenced positively by lower profit for the six months period, lower taxes paid in respect of prior years and negatively by tax non-deductibility of adjusting items (mainly M&A related expenses and equity-settled share-based payments). Adjusted effective tax rate decreased to 18.3% (2022: 24.4%) largely due to lower taxes paid in respect of prior years. Adjusted effective tax rate calculation is presented in Note 13 of the condensed interim financial statements.

Corporate income tax for companies in the Czech Republic in 2022-2023 was 19%, in the UK the rate was 19% in 2022 and 25% in 2023, while in Spain it was set at 24%. These represent the major tax regimes in which the Group operates.

We adopted a prudent approach to our tax affairs, aligned with business transactions and economic activity. We have a constructive and good working relationship with the tax authorities in the countries in which we operate. There are outstanding tax audits in Italy, Bulgaria, Poland, and Romania, where no significant issues are expected.

EPS

Basic EPS for the first half of 2023 was 0.76 cents per share, a 41.1% year-on-year decrease. This was due to lower profit for the six months' period, with increased EBITDA reduced by higher depreciation and amortisation and increased finance expenses.

Adjusted basic EPS for the reporting period was 2.90 cents per share, which is an increase relative to the corresponding period last year. Weighted average number of ordinary shares in issue amounted to 688,911,333 in both H1 2023 and H1 2022, while diluted weighted average number of ordinary shares was 691,208,069 in H1 2023 (H1 2022: 689,429,273). After accounting for the impact of PSP, adjusted diluted earnings per share was 2.89 cents per share. Adjusting items are as described below in the Alternative performance measures section.

Investments in subsidiaries and associates

Acquisition of Inelo

Further to the subsequent events described in the 2022 Annual Report and Accounts, the acquisition of Inelo was completed on 15 March 2023.

The Group paid €215.3m in cash upon the acquisition of 100% of the share capital of Inelo on 15 March 2023 and repaid Inelo's bank borrowings of €53.6m on 16 March 2023. In addition, the Group will pay an additional consideration of €8.4m related to the final price adjustment to Inelo's acquisition of FireUp TMS subsidiary and €2.1m related to other purchase price adjustments identified at completion. There is also a contingent consideration, based on Inelo's EBITDA performance for the year to 31 December 2022, capped at €12.5m, which will (if applicable) become payable in the second half of 2023, following approval of the audited consolidated financial statements of Inelo. Full amount of contingent consideration was recognised as of 30 June 2023. The Group will either pay €12.5m or no consideration is payable.

Given the short period of time between the acquisition and preparation of the condensed interim financial statements, the amounts recorded below for the acquisition are provisional. Purchase price allocation activities are ongoing, and the preliminary fair value of assets and liabilities will be further revised.

The provisionally determined fair values of identifiable assets and liabilities of subsidiaries of Inelo as at the date of acquisition were:

From the date of acquisition until 30 June 2023, Inelo's subsidiaries contributed €13.3m of revenue and €3.5m profit after tax.

If the acquisition had occurred on 1 January 2023, consolidated revenue and consolidated profit after tax of Inelo's entities for the half year ended 30 June 2023 would have been €21.0m and €3.8m respectively. Excluding amortisation of acquired intangibles and adjusting items, the adjusted profit after tax would have been €7.1m.

Pay-out of deferred consideration

On 27 April 2023, the Group paid a contingent acquisition consideration of €2.1m related to the acquisition of Webeye. The consideration was subject to achievement of integration related milestones.

Further, on 17 May 2023, the Group paid a deferred acquisition consideration of €5.5m related to the acquisition of Webeye.

JITpay call option

On 4 July 2023, the Group announced it exercised its call option to acquire an additional 18.01% stake in JITpay's share capital from its founders, management, and Volksbank eG Braunschweig Wolfsburg, on a pro rata basis. The proceeds from the primary capital will be used to fund JITpay's further expansion.

The Group entered a strategic partnership with JITpay on 27 September 2022, when it acquired a 9.99% stake for an initial consideration of €14.3m, of which €3.5m was used as primary capital. As per the original agreement, the Group had a call option to acquire an additional 18.01% share, which could be exercised by 3 July 2023 for a consideration of €25.7m, of which €6.5m will be used as primary capital.

The purchase of the additional 18.01% stake in JITpay will be funded from existing funds and the transaction is subject to customary closing conditions, including clearance by the German Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin), and is expected to complete in the first half of 2024. The Transaction constitutes a Class 2 transaction for the purposes of the UK Financial Conduct Authority's Listing Rules. Following receipt of the German authorities' clearance, the investment in JITpay would change to an associate (28% equity interest).

The remaining 72% stake will continue to be held by existing shareholders. There are Call and Put arrangements in place that give the Group the option to acquire the remaining 72% stake of JITpay's share capital from 2025 onwards. The price of the Put or Call payable by the Group for the remainder of JITpay's share capital will be based on a multiple of 10x of the average of JITpay's profit before tax over the twelve-month period to 31 December 2024 and 31 December 2025 with the Put being subject to a cap of €129.3m.

Pay-out of deferred consideration related to Inelo

On 31 August 2023, the Group paid a deferred acquisition consideration of €8.4m related to the final price adjustment to Inelo's acquisition of FireUp TMS subsidiary.

Balance sheet

Net assets of the Group increased by 3.4% to €327.4m, mainly reflecting profit for 2023 and share-based payments impact.

Intangible assets of the Group excluding goodwill increased by €105.9m to €236.9m in the reporting period, predominantly due to the Inelo acquisition and investments in strategic technology transformation.

Goodwill comprises mainly CGU Energy of €40.2m, CGU Navigation of €34.6m and CGU Fleet management solutions (excluding Inelo) of €59.4m. Provisionally determined goodwill arising on the acquisition of Inelo is €205.1m. Goodwill is tested for impairment on an annual basis; as at 30 June 2023, the Group performed impairment test for the CGU Fleet management systems (excluding Inelo) as the recoverable amount of this CGU was closer to the carrying amount than all other CGUs as at 31 December 2022, no impairment was posted in the first half of 2023 (H1 2022: no impairment posted).

Inventories decreased by €1.3m to €19.0m, mainly due to lower value of energy stock corresponding to lower energy prices.

Trade and other receivables increased by €15.1m to €393.2m. Out of this, €6.0m is attributable to the Inelo acquisition, and the remaining increase is mainly due to seasonality, with December being our quietest month.

Trade and other payables increased by €28.5m to €426.7m, primarily due to deferred acquisition consideration either related to a new transaction in the first half of 2023 or to previous transactions which became payable in less than 12 months. There was a further impact of consolidating Inelo as at 30 June 2023 (€16.9m).

Cash performance 

As at 30 June 2023, the Group's net debt position stood at €300.9m, compared with net cash position of €28.7m as at 30 June 2022.

The decrease in the level of cash is due to the cash outflows used in the acquisition of Inelo, in investing activities, including technology transformation investments, as well as repayments of borrowings.

Net cash flows from operating activities decreased to €1.5m from €16.4m in H1 2023, primarily due to working capital movement. The impact related to Adjusting items in the reporting period amounted to an outflow of €7.4m (H1 2022: €7.7m) and included €5.0m for acquisitions related expenses and €2.4m for strategic transformation expenses.

Interest paid increased to €7.6m (H1 2022: €2.3m), driven by a higher level of borrowings in the first half of 2023.

Tax paid increased to €4.0m (H1 2022: €3.2m), which also includes an impact of the Inelo consolidation of €0.8m.

Net cash used in investing activities increased by €249.5m to €297.0m, largely due to the outflows in connection with investment in acquisitions and investments in transformational technology and asset base.

Net cash from financing activities amounted to an inflow of €200.0m in the reporting period, representing the drawdowns of borrowings partially offset by borrowings repayments and lease payments. 

Capital expenditure

Capital expenditure in the first half of 2023 amounted to €24.7m (H1 2022: €19.9m), of which €11.7m was spend relating to our transformational capex programme and €5.6m relating to the capital investment in Inelo and Webeye, which drove the year-on-year increase.

The Group's ordinary capital expenditure was €12.9m (H1 2022: €6.6m), including the €5.6m capex investment in Inelo and Webeye. Both businesses have historically invested a higher percentage of net revenues, with Inelo spending half of its capex on hardware, and therefore our ordinary capital expenditure as a percent of net revenue increased to 10.9%.

The Group's transformational investment programme was €11.7m (H1 2022: €13.3m) and continued to focus on enhancing our sales and customer touchpoint channels, expanding our product capabilities, and building a cloud-based data system for the Group. This year we continued to improve our EETS product offering and continue to enhance our financing capabilities, enabling further automation and real-time finance management. We are also investing in building a cloud-base data system, which will encapsulate the large volumes of customer information we receive from all our products and services, allowing us to better utilise this data for both our business processes and customers.

With regards to our ERP implementation, which is being delivered in stages, the first stage launched last year and included energy billing, pricing, sales, and purchases, while the second stage is still on track to launch in Q1 2024 and includes improving our capabilities in our general ledger and group reporting processes.

We expect to finalise our transformational capex programme at the end of the year, on time and in budget. We will continue to invest in the business through ordinary capex, which we expect to be around 10 percent of net revenues, given the slightly higher capex ratio Inelo operates at. Through a combination of integration and the transition to a single technology platform, we expect to reduce duplications across IT, hardware, and technology processes over time.

Alternative performance measures

The Group has identified certain Alternative Performance Measures ("APMs") that it believes provide additional useful information to the readers of Consolidated Financial Statements and enhance the understanding of the Group's performance. These APMs are not defined within IFRS and are not considered to be a substitute for, or superior to, IFRS measures. These APMs may not be necessarily comparable to similarly titled measures used by other companies. Directors and management use these APMs alongside IFRS measures when budgeting and planning, and when reviewing business performance. Executive management bonus targets include an adjusted EBITDA measure and long-term incentive plans include an adjusted basic EPS measure. 

Acquisition-related expenses are fees and other costs relating to the Group's M&A activity. Acquisition-related expenses differ every year based on the acquisition activity of the Group. Exclusion of these costs allows for better comparability.

Strategic transformation expenses are costs relating to broadening the skill bases of the Group's employees (including executive search and recruiting costs, and were relevant for H1 2022), as well as costs relating to transformation of key IT systems. In 2023, Inelo integration costs were also included.

In addition, adjustment has been made for the compensation provided to the Group's management before the IPO. These legacy incentives comprise a combination of cash and share-based payments, and those that have not yet vested will vest across each of the subsequent financial years ending 31 December 2024. The Group believes that it is appropriate to treat these costs as an adjusting item as they relate to a one-off award, designed and implemented whilst the Group was under private ownership (and are reasonably typical of that market and appropriate in that context). The Group now operates in a new environment and the Remuneration Committee has applied the Remuneration Policy in a listed- company context; hence, similar awards are not expected in future. For clarity, where share-based payment charges arise as a consequence of the operation of the Group's post-IPO Remuneration Policy, these are not treated as adjusting items as they represent a non-cash element of the annual remuneration package. This includes costs of €2.0m in the first half of 2023 relating to grants in connection with the awards vesting in 2024 and 2025.

Amortisation of acquired intangibles represents amortisation of assets recognised at the time of an acquisition (primarily ADS, Sygic, Webeye and Inelo). It is prone to movement from period-to-period depending on the level of M&A activity.

Amortisation due to transformational useful-life changes represents accelerated amortisation of assets being replaced by the strategic transformation of the Group. No such adjustment was relevant for the first half of 2023.

Capital allocation

Our priority will continue to be organic and inorganic investment to drive long term sustainable growth. Our transformational capital expenditure of €50m, during 2022 and 2023, to develop our integrated end-to-end digital platform, remains on track to complete at the end of this year. We will continue to invest in the platform in parallel with integrating the businesses we acquired, which will require ordinary capital expenditure of around 10 percent of net revenues. With the delivery of the platform next year, along with integrating the technologies and products of our acquired businesses, we expect to reduce duplications across IT, hardware, and technology processes over time.

With the recent acquisition of Inelo, our leverage ratio, as expected, has exceeded the top end of our medium-term guidance range of 1.5x to 2.5x net debt to adjusted EBITDA, to 2.9x at the end of the period. Our priority is to return to within the target range. M&A is still important to us, and we will continue to consider value-accretive M&A opportunities in our current and adjacent markets, and in product and technologies that will accelerate growth. However, we remain disciplined and want to maintain our strong and robust balance sheet. As set out in our financial guidance, the Group does not intend to pay dividends, as we continue to prioritise investment in growth.

Treasury management 

As part of the refinancing project last September for our new Multicurrency Term and Revolving Facilities Agreement, we have agreed with the lenders to incorporate some of our medium term ESG targets within the KPIs. These include reduction of GHG emissions for us and our customers and increased female leadership in the organisation. Under the terms of the agreement, applicable margin adjustments relating to our committed facilities will be contingent on meeting our ESG targets. The first applicable year will be from FY 2024, based on FY 2023 results. This commitment will further drive incentivisation across our organization to ensure we meet our targets and shows our commitment to making the industry clean, fair, and efficient.

In May 2023, the Group utilised €50m under the uncommitted Incremental Facility, which was secured as part of the refinancing last year, and supported capital expenditure initiatives.

The maturity period for all term loan facilities and for the revolving credit facility is 5 years. Facility A of €150m and B of €180m will amortise in quarterly repayments starting on 31 March 2023, with a €45m and €54m balloon respectively. Incremental Facility I of €50m will amortise in quarterly repayments, starting on 30 September 2023, with a €15m balloon.

The new club financing agreement contains financial covenants at the Group level. Financial covenants are governed by financial definitions under the agreement. Financial covenants are tested semi-annually based on announced financials.

1. The covenant shall not exceed 3.75 in 2024 and 3.50 in 2025 and onwards.

The Group has effectively managed its floating EURIBOR interest rate exposure on existing term loans through the execution of zero floor interest rate swaps. The swaps were structured with varying hedge ratios, providing Facility A and Facility B coverage of 100% in 2023 and 2024, 75% in 2025, 50% in 2026, and 25% in 2027. Incremental Facility I has not been hedged. This strategic approach demonstrates the Group's proactive risk management practices and commitment to financial stability.

With respect to Facility A, interest rate swaps executed in 2019 for the amount of €120.0m (unamortised) have an effective payable fixed rate of 0.1% and are expected to expire in 2024. Interest rate swaps executed in 2022 but effective in 2023 for the amount of €30.0m (amortised) have an effective payable fixed rate of 2.7% and are expected to expire in 2027. The latter have a complementary amortizing profile in order to achieve the above-mentioned hedge ratio.

With respect to Facility B, interest rate swaps executed in 2023 for the amount of €173.0m (amortised) have an effective payable fixed rate between 3.2% and 3.5% and are expected to expire by 2027.

Throughout 2023, the Group has effectively managed its working capital needs through the use of uncommitted factoring facilities, with average financing limits of €124m and average utilisation of 77.8% (H1 2022: €97.6m and 58.1% respectively). This demonstrates the Group's proactive approach to maintaining a strong financial position, and its ability to optimise working capital.

Directors' responsibility statement

We confirm that to the best of our knowledge:

The unaudited condensed consolidated financial statements have been prepared in accordance with UK-adopted IAS 34 Interim Financial Reporting.

The interim management report includes a fair review of the information required by:

(a) DTR 4.2.7R of the Disclosure Guidance and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements; and a description of the principal risks and uncertainties for the remaining six months of the year; and

(b) DTR 4.2.8R of the Disclosure Guidance and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the entity during that period; and any changes in the related party transactions described in the last annual report in the Financial statements dated 16 March 2023 that could do so.

On behalf of the Board of Directors

Martin Vohánka

Chief Executive Officer

Financial statements

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

(EUR '000)

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

(EUR '000)

The accompanying notes form an integral part of these financial statements.