24 March 2022

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

Preliminary Results for the year ended 31 December 2021

STRONG GROWTH IN LINE WITH IPO GUIDANCE

Financial highlights

The Group achieved key financial objectives on its medium-term financial guidance.

·      Net energy and services¹ sales up by 19.1% at €153.1m, with organic growth¹ of 17.1% year-on-year

·      Payment solutions¹ segment up by 20.2% at €113.1m and mobility solutions¹ segment up by 15.9% at €40.0m

·      Adjusted EBITDA¹ up by 18.9% at €69.7m resulting in adjusted EBITDA margin¹ at 45.5%

·      Strong progress on transformational capital expenditure¹ plan with €23.3m spent

·      Net cash¹ position of €61.7m as at 31 December 2021 providing for significant leverage headroom to take advantage of strategic opportunities

Growing scale and network within a high quality payments-oriented business model and highly diversified revenue base underpinned strong net energy and services sales growth.

·      Average active payment solutions customers¹ up by 13.9% at 15,020

·      Average active payment solutions trucks¹ up by 13.4% at 82,640

·      Payment solutions transactions¹ up by 11.7% at 32.5m

·      Net revenue retention¹ for 2017-2021 over 110%

Operational and strategic highlights

·      Listed on the London Stock Exchange, raised €200m in equity capital to support inorganic growth and technology transformation, and improved company profile to attract talent

·      Strengthened the management team and established a Board of Directors with UK plc experience

·      Completed the acquisition of ADS and commenced customer portfolio integration

·      Acquired stakes in KomTeS, Drivitty and Last Mile Solutions, and announced the intended acquisition of WebEye

·      Launched mobile payments pilot and enabled payments for charging stations on Sygic GPS Navigation

·      Launched EETS operations in Austria and Belgium in 2021, followed by a pilot in Germany in 2022

·    Expanded the acceptance network for roadside service payments

·      Expanded the Road Lords application for use in the office and on the road, and introduced the Eurowag mobile application for easy access to customer account

·      Deployed telematics features for fleet management to the on-board unit for toll payments, with anti-fraud protection for energy payments

·      Rolled out digital onboarding and the Automated Credit Approval System

·      Offered new supply-chain financing solutions via third parties and hybrid financing for tax refunds

·      Introduced methodical approach to ESG, established baseline for reporting and set future goals for carbon reduction, Diversity, Equity, and Inclusion, and employee engagement

·      Expanded the indirect sales channel to provide navigation systems to automotive OEMs

Paul Manduca, Independent Non-Executive Director and Chair said:

"I am pleased to be introducing Eurowag's first set of annual results as a company listed on the London Stock Exchange. Despite macro-economic challenges the Group has delivered growth in line with guidance. The Company is in a good position to continue to broaden its technological foundations and capabilities. With its accelerated growth plans, the Company is committed to its mandate from shareholders to make select strategic acquisitions and expand our market offering. Despite the volatile geopolitical situation which may have a negative impact on the European economy, Eurowag continues to be a fast growing, profitable, cash generative business. The Board will continue to monitor the humanitarian tragedy in Ukraine and our thoughts are with the Ukrainian people at this time. "

Martin Vohánka, CEO and Founder said:

"We delivered strong organic growth in 2021 and enter 2022 with clear momentum, and confidence in the business. Eurowag has built a large payments acceptance network in Europe integrated with complementary mobility services putting it at the forefront of digital transformation of the Commercial Road Transportation industry. The shocking act of unprovoked and unjustified aggression from the Russian Federation against Ukraine is unfolding as we publish this report. Following the invasion the Group took immediate steps to comply with sanctions and suspend all services we provided in Russia. Notwithstanding the uncertain operating environment, the management remains focused on strategic priorities, drawing on the strength of our business model and its resilience proven over previous economic cycles."

Outlook

In 2021 we delivered a strong performance with all key financial metrics in line with our mid-term financial guidance. As we move into 2022, we expect to continue to increase penetration in our existing markets supported by effective go-to-market strategies which will be enhanced by our digital sales channel.

Early in the current financial year the Group has delivered growth in line with management expectations, and is focused on executing our strategy investing into technology transformation. We estimate net energy and services sales for Q1 2022 of at least €39m with strong LTM growth at 19% YoY. Q1 2022 growth of 12% YoY has been affected by changing seasonality, resulting in a very strong comparator. We expect our growth rate to accelerate in H2 2022 as comparators soften.

The Group has limited exposure to Russia and Ukraine, which together accounted for less than 0.1% of group net energy and services sales in 2021. We discontinued our payments network in Russia and we continue our operations in Ukraine to the extent supplies are available. Direct impact of discontinued or disrupted operations is immaterial to the Group's revenues.

Current trading is demonstrating the resilience of our business despite headwinds such as continuing Covid-related supply chain disruptions, occasional fuel shortages in some regions of Eastern Europe caused by the war in Ukraine, and the price cap on retail fuel sales in Hungary. Eurowag has been able to respond pro-actively to emerging risks and opportunities given our strong pan-European network, long-standing relationships with suppliers, the mission-critical nature of products and services we provide to our customers, and management with experience proven throughout the cycle.

Based on current trading, and assuming no worsening of the current environment, our expectations for 2022 are unchanged, and we anticipate delivering results in line with our mid-term financial guidance. However, the economic outlook in our key regions is uncertain and the management continues to monitor and evaluate the potential impact of the Russian invasion of Ukraine on the out-turn for the full year.

A virtual presentation and Q&A session for investors and analysts will be held at 9.00am GMT on 24 March 2022. The presentation and webcast details are available on the Group's website at https://investors.eurowag.com/

Please register to attend the investor presentation (full link below).

https://www.lsegissuerservices.com/spark/WAGPAYMENTSOLUTIONS/events/a50b3cb7-49df-4992-9c74-0159557213eb

ENQUIRIES

Eurowag

Tomáš Novotný (Head of Investor Relations)

[email protected]

Michal Malysa (Head of Group Communications)

[email protected]

+420 775 70 80 86

About Eurowag

Eurowag was founded in 1995 and is a leading pan-European integrated payments & mobility platform focused on the commercial road transportation industry. Eurowag's innovative solutions makes life simpler for small and medium businesses in the Commercial Road Transportation industry across Europe through its unique combination of payments solutions, seamless technology, a data-driven digital eco-system and high-quality customer service. www.eurowag.com

Operational and strategic review

We are delighted to have achieved very strong results this year, in line with guidance we presented during our IPO on the London Stock Exchange in October 2021. We delivered strong revenue and adjusted profits growth from our two segments of payment and mobility solutions. Operating in an economic environment that is still dealing with the headwinds of the pandemic and supply-chain disruptions, this demonstrates the resilience of our business model, and the mission-critical nature of our customer value proposition. Throughout the year, we have also continued to invest in our future by building the skills within our organisation, and through strategic investments such as accelerating the development of our digital platform through Road Lords and Eurowag applications, or completing the acquisition of ADS and executing new M&A transactions.

True to our purpose, we continued to innovate the Road Transportation Industry and enable energy transition in Europe, by introducing mobile payments and enabling payments for charging stations on the Sygic GPS Navigation. To build-out the integrated nature of our offering, we deployed new telematics features for fleet management on our On Board Unit for toll payments and improved anti-fraud protection for fuel card payments through geolocation. To further expand our platform, we added payments for roadside services to the acceptance network, enabled hybrid financing of tax refunds and introduced a new solution for supply chain financing via third parties.

From a geographic perspective, core markets in our Central Cluster continue to account for nearly 50% of net energy and services sales. The Southern Cluster grew the fastest in 2021, now accounting for 30% of net energy and services sales, driven predominantly by successful market penetration in Romania. We continue to see opportunity for growth in the Western Cluster, especially in cross-sell and up-sell to ADS customers during the integration phase, supported by investment into direct, indirect and digital sales channels. To accelerate customer onboarding and complete their digital journey, we launched a pilot of the Automated Credit Approval System for small exposures in France.

The IPO was a significant milestone in the company's development enabling us to take advantage of the benefits of listing in a number of ways. First, the capital raise will enable us to accelerate the execution of our strategic objectives. Second, our status as a publicly listed company provides a clear signal of our ambitions and confidence in our prospects. And third, it will help us attract the talented people we need to maintain our growth trajectory.

Sustainability, which was already at the heart of how we run our business, has also benefitted. Strengthening our governance credentials means even greater transparency and rigour in our reporting and controls. We have further formalised our ESG strategy and made sure it involves all relevant stakeholders, collected baseline data for more detailed reporting and have set ourselves specific targets within areas where we can produce the greatest potential impact. The ESG-related KPIs commit us to a 50% reduction of Scope 1 and Scope 2 emissions from our operations by 2030, on a 2019 baseline. We have also set a target to achieve 40% female representation in leadership roles by 2025, and reach the top 25% of European technology companies for employee engagement in the same timeframe.

We can now state three distinctive ambitions for our business each benefiting broader society. The first is to help predominantly small and medium commercial road transport companies prosper and improve the wellbeing of their people. The second is to contribute to making our industry cleaner by promoting decarbonisation and enabling efficiency gains, such as truck utilisation, better routing and driver performance. The third is to grow the value of our business for investors, while helping our employees develop as professionals with fulfilling roles, ensuring both groups benefit from a productive journey with Eurowag.

The Culture Manifesto we presented in 2020 contains four fundamental values that inspire us to achieve success, happiness and personal growth in our work and private lives. We encourage employees at every step of their journey with us, from the interview process through to day-to-day operations. We are also investing to ensure our culture becomes the 'tone from the top', and have appointed a new Board of Directors and strengthened the Executive Committee. We have introduced programmes to make Eurowag a great place to work and have accordingly been able to recruit very talented people.

We are set up to succeed by supporting many current industry trends and aligning to new regulations. The most notable of these is the transition to clean mobility, promoted by the Renewables Energy Directive II and Alternative-Fuels Infrastructure Regulation among others. This stimulates better industry cooperation with greater potential for alliances and partnerships, with substantial funding being channelled into new low-carbon powertrain solutions and the related infrastructure. The accelerating digitalisation of payments is extending the transformation from cash-to-card to card-to-virtual and increasing the penetration of alternative payment methods. Implementation of the European Electronic Toll Service (EETS) also progressed with pilot launches in Austria and Belgium in 2021, and Germany launching in 2022. Finally, we are expanding and developing our relationships with vehicle manufacturers as they shift their business models towards the concept of Transportation-as-a-Service.

Our strategy remains focused on five key areas:

1.         Growth from existing customers. Through further innovation in core payment services, and integration and cross-selling with mobility services, we can retain and expand our existing customer relationships by continuing to solve their evolving needs.

2.         Geographic expansion and penetration. We apply our scalable business model to new markets serving both existing and new customers, thus expanding market share.

3.         Go-to-market channel expansion. We continue to acquire new customers through a marketing strategy based on geographic clusters and three sales channels - digital, telesales and field - with an increasing focus on digital sales.

4.         Digital platform development. We continue to develop our end-to-end platform to be a conduit for intermediating payments and data exchange between all parties, thereby connecting digital services and physical assets. This allows us to expand our client base to include shippers and freight forwarders, and to integrate third-party providers and financiers seamlessly into our platform, thereby facilitating frictionless interactions among industry participants to create a fully connected marketplace.

5.         Accretive M&A. We continue to seek acquisition targets that will create cross-sell and up-sell opportunities, generate cost and revenue synergies, and develop our product and technology capabilities.

At the outset of 2021, we acquired the remaining minority stake in ADS, allowing for the full migration of the ADS portfolio onto our platform. This means ADS customers now have access to our broader portfolio of services. We have also strengthened our critical skillset by acquiring a minority stake in the Lithuanian firm Drivitty. This brings in-house expertise of digital payments, allowing customers to execute transactions using mobile devices and On Board Units and accelerates our progress towards providing fully integrated payments and mobility solutions. With Last Mile Solutions, the rapidly growing leader in e-mobility, we are expanding our platform by offering EV charging and smart energy management services for e-mobility businesses in Europe. We also announced the intended acquisition of WebEye, a leading provider of fleet management solutions in Hungary and Romania. Although the transaction was not approved by the Hungarian Ministry of Interior in March 2022, we are looking for ways how to facilitate the acquisition to expand our customer base, generate cross-sell and up-sell opportunities, and obtain data from the connected trucks which will provide more insights for optimising the development of new and improved solutions.

Response to the war in Ukraine

The shocking act of unprovoked and unjustified aggression from the Russian Federation against Ukraine is unfolding as we publish this report. Following the invasion the Group took immediate steps to comply with sanctions and suspend all services we provided in Russia. Our response to the humanitarian aspect of this crisis benefited from strong support of all our employees. We offered help to colleagues with origins or family members from the affected regions and have created a Ukraine Aid fund on their behalf. The Group is matching charitable donations made by our employees, over and above our ongoing commitment to distribute 1% of EBIT each year to charitable causes. We are also providing fuelling for humanitarian convoys.

Although the Group has limited exposure to Russia and Ukraine, which together account for less than 0.1% of Group net revenue, the economic outlook in our key regions is uncertain and we continue to monitor and evaluate the potential impacts as the situation evolves. Should the conflict escalate and materially affect European economies, we may observe lower demand for our products and services. The impacts of recent events on global supply chain disruptions are not yet over, and the Group could be affected by energy-supply shortages in the region hindering industrial production and mobility. Additional risks to the business include a potential shortage of drivers and regulatory measures such as retail fuel price caps that may have an impact on margins.

We therefore continue to diligently monitor the areas we can control and mitigate. Primarily, this is by further diversifying energy-supply partnerships, while acknowledging the dependency on Russian-originated sources across Central and Eastern Europe and the Balkan region. To mitigate the impacts of a potential economic downturn, we can apply cost-saving measures and implement actions to stimulate revenue growth learnt and used during the last two global economic crises. These include actions to promote customer loyalty, readiness of our customers to pay a premium for mission-critical products and services, and increased interest of our customers in efficiency gains and cost-saving solutions which the Group provides.

Financial review

It has been a year of rapid growth and change for Eurowag. We are proud of the way the business has dealt with the challenges arising from continued Covid pandemic restrictions and its agility in responding to the opportunities presented. We have delivered a strong set of results in a truly exceptional year, listed the Group on the London Stock Exchange, completed several business acquisitions and are delivering on our technology transformation plans.

Throughout the year, the business executed at pace against the strategy that we set out at the time of the IPO. We delivered strong performance with all key financial metrics on a positive trajectory, reflecting the resilience and strength of our business. Group Net energy and services sales growth of 19.1% year-on-year was delivered through further expanding our customer base in the payment solutions segment (average number of active customers up by 13.9%), enhanced by effective cross selling of our mobility solutions. Resilience and strength of our business is supported by average number of services per customer of 2.83 (2020: 2.82)². Our growth through these turbulent times is a testimony to the essential nature of the CRT industry, the efficiencies that our products and services deliver to our customers, the strength of our revenue retention and the geographic and product revenue diversity of our business enhanced by strong customer relationships.

Adjusted EBITDA increased 18.9% year-on-year to €69.7m (2020: €58.6m). Adjusted EBITDA margin was unchanged year on year at 45.5% (2020: 45.6%) in line with our mid-term guidance. Adjusted EBITDA performance reflects strong operating leverage inherent in the business while we continue to invest in the organisation focusing on priority hires, upskilling the organisation and technology related spend. Adjusted basic EPS increased 19.5% year-on year to 5.77 (2020: 4.83) cents per share in line with adjusted EBITDA growth.

On a statutory basis, profit before tax decreased by 38.5% to €17.7m (2020: €28.8m) and basic EPS decreased by 59.0% to 1.54 (2020: 3.76) cents per share due to a significant amount of adjusting items including non-recurring IPO-related expenses, pre-IPO share-based compensation schemes and strategic transformation costs. Basic EPS has reduced more than profit before tax due to a higher effective tax rate in 2021 which is further discussed in Taxation section.

Due to our IPO equity raise and supported by our underlying highly cash generative business model, our overall financial position has significantly strengthened, and we closed the year with a net cash position of €61.7m. Our absolute focus on credit risk management and cash collection contributed to improvement in credit losses ratio from 0.2% to 0.1%³. Against the backdrop of business performance and strong cash generation we continued to invest into our digital transformation (with transformational capital expenditure reaching €23.3m) and inorganic growth (with investments in subsidiaries, associates and acquisition of non-controlling interests reaching €38.9m).

As we embark on the next year of implementing the Group's strategy, our robust financial position and disciplined approach to capital allocation will ensure that the business is well positioned to leverage the benefits of industry digital disruption and many opportunities that lie ahead. We have strong conviction around our purpose to create sustainable financial and technological solutions for the benefit of our industry, society and the environment.

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

The Group's total revenues increased by 31.4% year-on-year to €1 646.1m driven by growing scale of our payment solutions complemented by higher energy prices (a corresponding growth was reported for costs of energy sold).

The Group delivered double-digit Net energy and services sales growth and strong Contribution margins in both segments. Growth in organic Net energy and services sales was 17.1% and overall Net energy and services sales were up by 19.1%.

Payment solutions Net energy and services sales grew by 20.2% year-on-year, driven by strong new customer and truck acquisitions complemented by Net revenue retention.

The Group saw growth in new customer acquisition across all geographic clusters, as the strength of the Group's payments network and effectiveness of the go-to-market strategy enabled us to increase market penetration. The Group also expanded into new sales channels including digital and enabled fully online customers onboarding.

Mobility solutions Net energy and services sales grew by 15.9% year-on-year, driven by effective cross sell supported by inorganic growth of telematics Net energy and services sales.

On 1 January 2021, the Group acquired 51% of the share capital in KomTeS, a value-added reseller of the Group's telematics solutions. The transaction will ensure the highest level of support, service, and value to the Group and KomTeS customers in the Czech Republic and Slovakia.

Corporate expenses

The above table is relevant for segmental review while below table summarises corporate expenses based on statutory financials categories:

Employee expenses increased by 34.5% to €55.7m as the Group focused on priority hires, talent retention, strengthening the structure and remuneration schemes appropriate for a listed company. Adjusting items included in employee expenses amounted to €8.6m in 2021.

Impairment losses of financial assets decreased by 24.4% to €3.1m thanks to a focus on credit risk management and cash collection.

Technology expenses increased by 70.0% to €6.8m as a consequence of the Group's focus on cloud transition and expenses related to the new generation ERP system. Adjusting items included in technology expenses amounted to €0.6m in 2021.

Other operating expenses increased by 67.9% to €41.3m mainly due to non-recurring IPO costs.

Depreciation and amortisation increased by 20.3% to €21.9m primarily as a result of increased transformational technology being put into production. Adjusting items included in depreciation and amortisation amounted to €7.1m in 2021.

Net finance expense

Net finance expense in 2021 was €6.7m (2020: €8.3m). The decrease in 2021 reflects the lower interest charge on Senior Facilities Agreement (weighted average interest rate in 2021 2.4% compared to 3.3% in 2020) and improved result on revaluation of derivatives partially offset by higher factoring fees related to higher average factoring limits utilization throughout the year.

Taxation

The Group tax charge of €8.0m (2020: €5.9m) represents an effective tax rate of 45.4% in 2021 (2020: 20.4%). Corporate income tax for companies in the Czech Republic and United Kingdom for the years 2020 and 2021 was 19%, corporate income tax in Spain for the years 2020 and 2021 was 24%. They represent the major tax regimes in which the Group operates.

The Group's effective tax rate is impacted by the tax impact of Adjusting items. It is therefore helpful to consider the underlying and adjusting items affecting tax rates separately:

·      The effective tax rate on Adjusted earnings¹ before tax for the year increased to 24.8% (2020: 20.2%) largely due to the fact that 2020 effective tax rate was influenced by newly recognized deferred tax assets in the year.

·      The effective tax rate for Adjusting items was 12.7% (2020: 20.4%) and was driven mainly by non-deductible IPO-related expenses and share-based payments.

We adopt a prudent approach to our tax affairs, aligned to business transactions and economic activity. We have a constructive and good working relationship with the tax authorities in the countries in which we operate and there are no outstanding tax audits except for France.

EPS

Basic EPS for 2021 was 1.54 cents per share (a decrease of 59.0% relative to 2020) due to a significant amount of Adjusting items including non-recurring IPO-related expenses and pre-IPO share-based compensations.

Adjusted basic EPS¹ for 2021 was 5.77 cents per share (an increase of 19.5% relative to 2020) based on the weighted average number of ordinary shares in issue during the year of 595,582,785. After accounting for the impact of PSP, adjusted diluted earnings per share was 5.76 cents per share. Adjusting items are as described above.

Investments in associates

In 2021, the Group acquired 28% interest in Threeforce BV (Last Mile Solutions) and 20% interest in UAB "Tankita" (Drivitty).

Last Mile Solutions is a fast growing eMobility platform in Europe and the investment supports the Group's position in the eMobility market and confirms our focus on sustainable transportation solutions. Key financials for 2021 were as follows:

Drivitty is a mobile services integration leader in the commercial transportation market. With this strategic partnership the Group aims to accelerate its path towards providing fully seamless mobile payments experience to its customers. Drivitty financials are currently immaterial to the Group.

Balance sheet

Net assets of the Group increased by 344.2% to €284.7m mainly reflecting the IPO proceeds of €196.1m, retained earnings increase of €12.3m, other comprehensive income increase of €5.1m and exercised share options impact of €3.8m.

Intangible assets of the Group excluding goodwill increased by €20.7m to €88.3m in 2021 predominantly due to investments into the strategic IT transformation.

Goodwill comprises mainly CGU¹ Energy of €40.2m, CGU Navigation of €34.6m and CGU Telematics of €26.0m. Goodwill is tested for impairment on an annual basis, no impairment loss was identified in 2021.

Trade and other receivables increased by €64.2m to €300.6m mainly due to changes to phasing of tax refund receivables collection (year-on-year impact of €29.9m), higher volume of transactions and increased energy prices in 2021.

Trade and other payables increased by €8.6m to €314.5m mainly due to higher volume of transactions and increased energy prices in 2021.

Cash performance

At 31 December 2021, the Group had net cash of €61.7m compared to net debt of €53.1m as of 31 December 2020.

The increase in the level of cash is due to the proceeds from new shares issued and strong underlying cash generation offset by IPO related expenses, acquisition of subsidiaries and associates and transformational capital expenditure.

Net cash flows from operating activities decreased from €86.7m in 2020 to €(9.6)m primarily due to adverse working capital movements related to phasing of tax refund receivables collection €(29.9)m and overall higher volume of transactions and increased fuel prices affecting 2021 receivables, there was further impact of €15.4m related to Adjusting items in 2021.

Interest paid decreased to €4.5m reflecting lower cost of debt.

Tax paid increased by €2.9m due to higher tax advances paid.

Net cash used in investing activities increased by €19.9m in 2021 to €43.1m largely due to the outflows in connection with capital expenditure related to investment in the development of technology (increase of €6.3m) and outflows related to investments in subsidiaries and associates (increase of €11.9m).

Net cash from financing activities amounted to an inflow of €187.8m in 2021 (2020: €5.4m), largely driven by the proceeds from new shares issued and the net movement in borrowings offset by an outflow related to the acquisition of the remaining minority interest of ADS (€27.0m).

The cash impact of Adjusting items was €7.6m for IPO-related expenses, €0.8m for M&A-related expenses and €2.7m for strategic transformation expenses.

Capital expenditure

Capital expenditure in the year amounted to €33.8m compared with €22.0m for the year ended 31 December 2020. The marked increase reflects the transformational investment into our technology platform.

The Group's transformational investment programme totaling €23.3m (2020: €16.4m) continued to focus on expanding the customer and products capabilities for the Group, including the digital customer journey, new generation ERP, EETS Toll and OBU, Telematics and the integrated offering.

The Group's ordinary capital expenditure in 2021 was €10.4m (2020: €5.1m) representing reinvestment into the platform and assets base and amounted to 6.8% of Net energy and services sales compared to 4.0% in the previous year.

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.

Costs arising in connection with the IPO have been separately identified in recognition of the nature, infrequency and materiality of this capital markets transaction. IPO had very limited impact on expenses in 2020 and will not have any impact on expenses in 2022.

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

Strategic transformation expenses are costs relating to broadening the skill bases of the Group's employees (including executive search and recruiting costs) as well as costs related to transformation of key IT systems. As previously announced, the strategic transformation is expected to complete in 2023.

In addition, adjustment has been made for the compensations provided to the Group's management before 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 will apply 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 non-cash element of annual remuneration package. This includes costs of €0.4m in 2021 relating to a grant in connection with the 2024 PSP.

Amortisation of acquired intangibles represents amortisation of assets recognized at the time of an acquisition (primarily ADS and Sygic). The item is prone to volatility from period to period depending on the level of M&A.

Amortisation due to transformational useful life changes represents accelerated amortisation of assets being replaced by strategic transformation of the Group. The Group expects this adjustment to be relevant until 2024.

Capital allocation

Our priority will continue to be organic and inorganic investment to drive long term sustainable growth. As previously advised, the Group will incur aggregated transformational capital expenditures of €50m during 2022 and 2023 to develop our integrated end to end digital platform and invest in the quality of our integrated product and service offering. Our transformational capex is firmly on track to complete in 2023, by which point we will have the most modern, complete and modular tech stack and product offering in the industry. We will continue to consider value-accretive M&A opportunities in our current and adjacent markets and in product and technology areas that will accelerate growth. We will only look to make acquisitions where the acquisition is complementary to our strategy and in line with our acquisition criteria. We will also maintain a 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

The Group maintains a disciplined approach to its financing and is committed to maintain a net debt to EBITDA leverage ratio of 1.5-2.5 times over the medium term.

The Group holds financial debt under the Senior Multicurrency Term and Revolving Facilities Agreement ("Syndicated Facilities Agreement"), which consists of the following tranches:

·      Amortizing EUR term loan facility for a maximum amount of €47.5m

·      Non-amortizing EUR term loan facility for a maximum amount of €47.5m

·      Amortizing EUR term loan facility for a maximum amount of €95.0m (Acquisition/CAPEX)

·      Multicurrency revolving credit facility for a maximum amount of €120.0m, split as

o  €45.0m Revolving Credit Facility

o  €15.0m Multicurrency Overdraft Facility

o  €60.0m Bank Guarantee Facilities

Subject to certain conditions, the Group can request to raise additional debt under the Syndicated Facilities Agreement up to an amount of €100.0m, of which up to €50.0m can be used to finance certain acquisitions which are specifically permitted under the Syndicated Facilities Agreement and the remaining €50.0m can be used to finance or refinance working capital of companies, businesses or undertakings acquired as a result of such permitted acquisition or utilized by way of a guarantee, documentary or stand-by letter of credit. As of 31 December 2021, €29m has been drawn to establish limits for Bank Guarantees, with the remainder of €21m to be drawn in Q1 2022 for the same purpose. The Incremental Facility is not committed.

The Syndicated Facilities Agreement contains financial covenants at the level of W.A.G. payment solutions, a.s. some of which were amended at IPO:

·      Interest Cover (the ratio of Adjusted EBITDA to finance charges), which replaced the previous cashflow cover (the ratio of cashflow to debt service), is not less than 5.00:1 for each twelve-month period ending on the last day of each financial quarter. As at 31 December 2021, Interest Cover was at 11.81.

·      Net Leverage (measured quarterly on the basis of Total Net Debt on the measurement date and rolling twelve months Adjusted EBITDA) does not exceed 3.75:1 for each twelve-month period ending on the last day of each financial quarter in 2021. As at 31 December 2021, Net Leverage was at 2.12.

·      Adjusted Net Leverage (measured quarterly on the basis of Adjusted Total Net Debt on the measurement date and rolling twelve months Adjusted EBITDA) does not exceed 6.50:1 for each twelve-month period ending on the last day of each financial quarter. As at 31 December 2021, Adjusted Net Leverage was at 3.49.

·      Borrowing Base (the ratio of the sum of outstanding amount of revolving facility less cash and cash equivalents, to trade receivables) which was amended to exclude the outstanding bank guarantees and must not exceed 1:1 in relation to any three-month period ending on the last day of each financial quarter. As at 31 December 2021, Borrowing Base was at 0.46.

During 2021 the Group repaid €18.4m of the Syndicated Facilities Agreement borrowings and drew down €39.5m to finance acquisitions and capital expenditures resulting in a notional debt of €165m outstanding under the SFA as of 31 December 2021.

The Group concentrates cash on bank accounts held with financial institutions that participate in the Syndicated Facilities Agreement. Balances may be held on bank accounts with other financial institutions to fund outgoing payments especially in countries outside of the Economic and Monetary Union.

Sustainability

In 2021, Eurowag introduced its ESG strategy to support the Group's purpose to create sustainable financial and technological solutions for the benefit of the Commercial Road Transportation Industry, society and the environment.

While ESG principles have always been at the core of Eurowag purpose, we have formalized our approach to help our customers prosper, make road transport cleaner, more efficient and safer, and help our employees and communities thrive in a healthy environment.

Highlights of progress in 2021

·      Formalised a new sustainability strategy including commitments that focus on helping our customers compete and grow in a low-carbon, digital future.

·      Established a sustainability function and strengthened sustainability governance, including the appointment of Susan Hooper as the Board-level champion.

·      Set new targets including:

o  A carbon reduction target to reduce emissions from our own operations (Scope 1 and Scope 2) by 50% by 2030 on a 2019 baseline; with a scope 3 target under development

o  A Diversity, Equity, and Inclusion target to have 40% female representation in managerial roles by 2025 on a 2021 baseline.

o  Achievement of a top 25% of employee engagement score as compared to EU Tech companies benchmark by 2025.

·      Expanded the scope of reporting in line with TCFD requirements.

We continue to embed sustainability into our core business as well as enhance and create a successful, resilient, sustainable future for the CRT industry, our customers, as well as our colleagues, communities and company.

Financial statements

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

(EUR '000)

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

(EUR '000)