Eurowag swings to pre-tax loss as debt rises

There are still no signs of dividends for WAG Payment Solutions' (WPS) shareholders. The lorry management software and fuel cards payment provider, which trades as Eurowag, said: "At this stage, the group does not intend to pay dividends; instead, it intends to prioritise investment in growth." No analysts predict payments before 2026.

Investors who haven't received a penny and have seen the company's share price sink since IPO might be frustrated, but the company's position is understandable. Rising wages, technology costs, impairment losses and a slump in revenue meant the company swung to a pre-tax loss in the last calendar year. Meanwhile, despite being heavily leveraged, Eurowag's loan-to-value ratio has increased.

The sinking sales will be a blow to investors who have bought into Eurowag's growth story. Analysts remain bullish, with consensus forecasts predicting earnings per share (EPS) will hit 3.91p by the end of this year and 5.68p by the end of 2025. If true, 2023 will be a blip rather than anything significant.

The difficulty with judging these predictions is how wafer-thin its margins are even when it isn't posting losses. As these results show, a minor setback can push the business into a loss. That wouldn't be so bad if Eurowag had a healthy balance sheet to fall back on, but it does not.

Still, as bleak as all this sounds, much of it has been factored into the price. The stock trades at 11 times EPS for 2024 and eight times EPS for 2025. Should those predictions prove correct, Eurowag looks undemanding, perhaps even cheap. However, considering the scale of this setback and its rising debt, we remain neutral. Hold.

Last IC view: Hold, 91p, 7 Sep 2023