Azelis Group NV — Interim / Quarterly Report 2022

Aug 9, 2022

Azelis Group NV

Interim Financial Report for the first six months of 2022

Table Of Contents

Report of the management	3
H1 2022 Highlights	4
Operational review	6
Financial review	9
Statement of the Board of Directors	12
Report on review of condensed consolidated interim financial statements	13
Unaudited condensed consolidated interim financial statements for the first six months of 2022	15
Alternative performance measures	33
Disclaimer	37

Report of the management

H1 2022 Highlights

• Revenue of EUR 2.0bn, representing year-on-year growth of 54.2%, of which 27.6% was organic. In Q2, revenue growth was 49.6%, with trends remaining strong across all regions.
• Five acquisitions completed in H1, representing total full year revenue of over EUR 190m¹ . Five more acquisitions representing additional total full year revenue of EUR 270m have been signed and expected to close in H2 2022.
• Gross profit of EUR 488.6m represents year-on-year growth of 64.9%, of which 37.7% was organic.
• Adjusted EBITA of EUR 242.6m represents a 90.7% increase and a 230 bp margin step-up. Conversion margin expanded by 673 bp compared to H1 2021, at 49.7%.
• Net profit of EUR 141.7m represents a year-on-year increase of 198.0%, driven by the strong topline growth, positive margin developments and lower financial costs.
• Free cash flow of EUR 139.2m shows an increase of 74.1%, despite continued investments in working capital to support strong growth.
• Leverage ratio was reduced to 2.3x at the end of June 2022, compared to 5.4x at the end of June 2021, and 2.7x at the end of December 2021.
• The Group expects to achieve full year 2022 adjusted EBITA in the range of EUR 410m-425m, versus the recently-upgraded consensus estimate of EUR 370m² .
• Tom Hallam has been appointed to the Board of Directors, and Chairman of the Audit and Risk Committee, succeeding Jürgen Buchsteiner, who is retiring from the Board after 4 years of service.

Azelis Group			Reported	Constant
(EUR m)	H1 2022	H1 2021	Change	Currency
Revenue	2,019.0	1,309.5	54.2%	49.9%
Gross Profit	488.6	296.4	64.9%	60.9%
Gross Profit Margin	24.2%	22.6%	157 bp	162 bp
Adjusted EBITDA1	255.0	136.4	86.9%	82.9%
Adjusted EBITDA Margin	12.6%	10.4%	221 bp	224 bp
Adjusted EBITA2	242.6	127.2	90.7%	86.7%
Adjusted EBITA Margin	12.0%	9.7%	230 bp	232 bp
Conversion Margin3	49.7%	42.9%	673 bp	672 bp
Net Profit	141.7	47.5	198.0%	193.5%
Earnings per share (EPS€)4	0.59	0.20	200.8%	193.1%
Operating Cash Flow	151.5	90.2
Free Cash Flow5	139.2	80.0
FCF Conversion ratio6	56.9%	62.4%
Net Working Capital / Revenue normalized for acquisitions7	15.4%	12.5%
Leverage Ratio	2.3	5.4

1 Adjusted EBITA before depreciation of property, plant and equipment

2 Operating profit or loss before amortization and impairment of intangible assets and excluding adjustments

3 Adjusted EBITA / Gross profit

4 Prior year adjusted for current number of shares

5 Adjusted EBITDA less lease payments, plus changes in Net Working Capital, plus changes in other assets, liabilities and provisions, less net capital expenditures

6 Free Cash Flow divided by Adjusted EBITDA less lease payments

7 Net Working Capital/Revenue including those from acquisitions for the full period

² Company compiled average consensus estimate as of July 20, 2022 (includes estimates of 9 sell-side analysts)

¹ Combined annual revenue in 2021.

Comment from Dr. Hans Joachim Müller, CEO: "I am pleased to present a strong set of H1 2022 results. In-line with our communication earlier in the year, the positive momentum in Q1 carried on to Q2, leading to revenue growth of 54% for the first half of the year. We delivered another set of record results, generating almost 28% organic growth and a trebling in net profit, whilst reducing our leverage. Despite the lingering macroeconomic uncertainty, we remain focused on strengthening our business with new or expanded principal mandates, value-enhancing acquisitions and investments in our digital and laboratory network. Based on the strong performance in H1 2022, as well as our confidence in the resilience of our business, we expect to exceed current consensus expectation and deliver adjusted EBITA in the range of EUR 410m-425m for the full year.

I would like to take this opportunity to welcome Tom Hallam, who has joined the Azelis Board of Directors, and will be chairing our Audit & Risk Committee. Tom's track record in finance leadership and his breadth of industry experience will be invaluable to Azelis as we continue to grow our business and strengthen our global footprint. We thank Jürgen Buchsteiner for his service to the Board and the wider Azelis family and seeing the Group through its various growth milestones culminating in the IPO in 2021. The entire Azelis leadership team is excited for the opportunities and challenges ahead, and we remain committed to achieving our mission to become the reference innovation service provider in the specialty chemicals distribution industry."

Operational review

Azelis Headline Results (EUR m)	H1 2022	H1 2021	F/X Translation	M&A Growth Contribution	Organic Growth	Total Growth
EMEA	916.4	598.6	-1.3%	22.0%	32.3%	53.1%
Americas	762.9	528.5	9.8%	11.5%	23.0%	44.3%
Asia Pacific	339.7	182.4	6.3%	54.4%	25.6%	86.3%
Group Revenue	2,019.0	1,309.5	4.2%	22.3%	27.6%	54.2%
EMEA	224.6	144.4	-1.0%	17.3%	39.4%	55.6%
Americas	196.9	114.5	9.8%	24.3%	37.8%	71.9%
Asia Pacific	67.1	37.6	5.6%	42.2%	30.5%	78.4%
Group Gross Profit	488.6	296.4	4.0%	23.2%	37.7%	64.9%

Azelis delivered total revenue of EUR 2.0bn, representing growth of 54.2% compared to H1 2021 (+49.9% in constant currency), driven by continued strength in end market demand and benefits from the Group's increasing scale. The positive trends in our business are reflected in organic growth of 27.6% generated by the Group's businesses during the period. Revenue growth contribution from acquisitions was 22.3%, whilst FX represented a 4.2% revenue tailwind.

Demand remains strong in life sciences, with revenue growing 50.6% year-on-year, driven by continued growth in Food & Nutrition and Personal Care, as well as the ongoing recovery trends in Pharma. Likewise, positive demand and pricing trends supported a 59.9% revenue growth in industrial chemicals.

Azelis EMEA			Reported			Reported	Constant
(EUR m)	Q2 2022	Q2 2021	Change	H1 2022	H1 2021	Change	Currency
Revenue	465.9	301.4	54.6%	916.4	598.6	53.1%	54.4%
Gross Profit	113.0	73.2	54.3%	224.6	144.4	55.6%	56.6%
Gross Profit Margin	24.3%	24.3%	-4 bp	24.5%	24.1%	39 bp	33 bp
Adjusted EBITDA	62.6	35.2	77.8%	125.2	71.3	75.5%	77.3%
Adjusted EBITDA Margin	13.4%	11.7%	176 bp	13.7%	11.9%	174 bp	181 bp
Adjusted EBITA	59.9	33.0	81.3%	120.0	67.1	78.9%	80.8%
Adjusted EBITA Margin	12.9%	11.0%	190 bp	13.1%	11.2%	189 bp	196 bp
Conversion Margin	53.0%	45.1%	790 bp	53.4%	46.5%	697 bp	736 bp

EMEA revenue increased by 53.1% to EUR 916.4m in H1 2022, on organic growth of 32.3%, supported by sustained positive momentum in life sciences, as well as growth acceleration in industrial chemicals due to recent mandate gains. Revenue growth contribution from acquisitions was 22.0%, whilst FX translation was a 1.3% headwind during the period.

In January, Azelis completed the acquisition of Umongo, a leading specialty distributor active in L&MWF in South Africa. In March, the acquisition of WhitChem, a specialty distributor in CASE and R&PA in the UK was completed. In May, we closed the acquisition of Tunçkaya, a leading distributor of specialty food ingredients and additives in Turkey. These companies generated combined annual revenue of over EUR 125m in 2021.

Gross profit increased 55.6% year-on-year to EUR 224.6m in H1 2022, representing a 39 bp margin uplift, as we continue to successfully manage the ongoing price inflation in the industry with our price-through policy. Adjusted EBITA grew 78.9% to EUR 120.0m, resulting in a 189 bp margin expansion to 13.1%, and a 697 bp increase in conversion margin, reflecting the benefit of our scale in the region as well as continuous efficiency improvements.

Azelis Americas			Reported			Reported	Constant
(EUR m)	Q2 2022	Q2 2021	Change	H1 2022	H1 2021	Change	Currency
Revenue	396.4	284.8	39.2%	762.9	528.5	44.3%	34.6%
Gross Profit	104.0	62.5	66.2%	196.9	114.5	71.9%	62.1%
Gross Profit Margin	26.2%	22.0%	427 bp	25.8%	21.7%	414 bp	414 bp
Adjusted EBITDA	60.3	33.2	81.7%	111.8	60.1	85.9%	76.2%
Adjusted EBITDA Margin	15.2%	11.6%	355 bp	14.7%	11.4%	328 bp	378 bp
Adjusted EBITA	58.2	31.8	82.8%	107.9	57.5	87.6%	77.9%
Adjusted EBITA Margin	14.7%	11.2%	350 bp	14.1%	10.9%	326 bp	327 bp
Conversion Margin	56.0%	50.9%	508 bp	54.8%	50.2%	457 bp	461 bp

Revenue in the Americas was EUR 762.9m, representing year-on-year growth of 44.3%, of which 23.0% was organic. Our life science business continued to be driven by strong end-market demand, whilst industrial chemicals was supported by both demand and positive pricing trends. In the Americas, revenue growth contribution from acquisitions was 11.5%, while the recent strengthening of the USD resulted in a 9.8% FX translation growth contribution.

In June, Azelis signed an agreement to acquire ROCSA, a leading specialty chemical distributor in South America. The acquisition represents the Group's entry into South America, and is an important milestone in its expansion strategy in the region. In 2021, ROCSA generated revenue of EUR 98m.

Gross profit in the region grew by 71.9% to EUR 196.9m, resulting in a 414 bp gross margin expansion versus H1 2021. During the period, adjusted EBITA increased 87.6% to EUR 107.9m, translating to a 326 bp margin uplift driven largely by the strong growth in topline and gross profit. Our businesses in the Americas delivered a 54.8% conversion margin in H1 2022, representing a 457 bp improvement over the previous year.

Azelis Asia Pacific			Reported			Reported	Constant
(EUR m)	Q2 2022	Q2 2021	Change	H1 2022	H1 2021	Change	Currency
Revenue	181.4	111.5	62.7%	339.7	182.4	86.3%	80.0%
Gross Profit	35.6	22.8	56.1%	67.1	37.6	78.4%	72.8%
Gross Profit Margin	19.6%	20.5%	-83 bp	19.7%	20.6%	-88 bp	-74 bp
Adjusted EBITDA	16.5	9.9	66.8%	31.5	15.8	99.7%	94.2%
Adjusted EBITDA Margin	9.1%	8.9%	22 bp	9.3%	8.6%	62 bp	68 bp
Adjusted EBITA	15.1	8.9	69.8%	28.6	13.9	105.7%	100.1%
Adjusted EBITA Margin	8.3%	8.0%	35 bp	8.4%	7.6%	79 bp	85 bp
Conversion Margin	42.3%	38.9%	340 bp	42.7%	37.0%	567 bp	568 bp

APAC remains the fastest-growing region in the Group, with revenue increasing by 86.3% to EUR 339.7m in H1 2022. The growth was driven by continued strength in life sciences, as well as a significant expansion

in the Group's footprint in industrial chemicals in the region from recent acquisitions. Organic growth in the region remained strong at 25.6% as the impact of lockdowns in China was offset by the strong performance in the rest of the region. Acquisitions contributed 54.4% of revenue growth, whilst FX translation represented a 6.3% tailwind in H1 2022.

In February, we completed the acquisition of Catalite, a specialty distributor in the Personal and Home Care market segments, in Thailand. In May, we closed the acquisition of Chemo India, a local specialty distributor active in CASE and R&PA market segments. These companies generated combined annual revenue of EUR 65m in 2021.

Gross profit in the region grew 78.4% to EUR 67.1m in H1 2022, implying an 88bp margin contraction due mostly to negative mix effect from recent acquisitions, which are expected to deliver continuous margin improvement following integration into the Azelis network. The temporary gross margin dilution was offset by scale efficiencies, as reflected in adjusted EBITA growth of 105.7%, resulting in a 567 bp expansion in conversion margin to 42.7%.

Holding companies	Q2 2022	Q2 2021	Reported Change	H1 2022	H1 2021	Reported Change	Constant Currency
Adjusted EBITA (EURm)	-6.6	-6.1	6.8%	-13.9	-11.3	23.3%	23.3%
As % of Group Revenues	-0.6%	-0.9%	25 bp	-0.7%	-0.9%	17 bp	-4 bp

Operating costs at the Group's holding companies, relating to the Group's non-operating entities as well as the head office in Belgium, were EUR 13.9m in H1 2022, compared to EUR 11.3m in the previous year. Relative to revenue, operating costs at the Group's holding companies show a marginal improvement at constant currency.

Outlook

Our strategy of driving growth is underpinned by a constantly strengthening lateral value chain, supported by continuous investments in innovation capabilities and digitalization, as well as a commitment to sustainability to create long-term value. In line with this, we are positive that we should be able to generate 8-10% of revenue growth and deliver 10-15 bps adjusted EBITA margin expansion per year in the medium-term.

Although uncertainty from ongoing supply chain disruptions as well as sustained inflation persist, the outlook for the remainder of 2022 remains positive for Azelis. Given the strong performance in the first half, the management expects to achieve adjusted EBITA in the range of EUR 410m-425m for the full year 2022.

Financial review

Azelis Group (EUR m)	H1 2022	H1 2021	F/X Translation	M&A Growth Contribution	Organic Growth	Total Growth
Revenue	2,019.0	1,309.5	4.2%	22.3%	27.6%	54.2%
Gross Profit	488.6	296.4	4.0%	23.2%	37.7%	64.9%

Azelis Group			Reported			Reported	Constant
(EUR m)	Q2 2022	Q2 2021	Change	H1 2022	H1 2021	Change	Currency
Life Sciences	615.8	430.1	43.2%	1,208.7	802.8	50.6%	46.8%
Industrial Chemicals	427.9	267.6	59.9%	810.4	506.7	59.9%	54.9%
Group Revenue	1,043.7	697.8	49.6%	2,019.0	1,309.5	54.2%	49.9%
Gross Profit	252.7	158.6	59.3%	488.6	296.4	64.9%	60.9%
Gross Profit Margin	24.2%	22.7%	147 bp	24.2%	22.6%	157 bp	162 bp
Adjusted EBITDA	133.0	72.4	83.8%	255.0	136.4	86.9%	82.9%
Adjusted EBITDA Margin	12.7%	10.4%	237 bp	12.6%	10.4%	221 bp	224 bp
Adjusted EBITA	126.6	67.6	87.3%	242.6	127.2	90.7%	86.7%
Adjusted EBITA Margin	12.1%	9.7%	244 bp	12.0%	9.7%	230 bp	232 bp
Conversion Margin	50.1%	42.6%	749 bp	49.7%	42.9%	673 bp	672 bp
Operating Profit	109.1	55.1	98.1%	211.8	104.7	102.2%	99.0%
Net Profit	70.4	23.4	201.1%	141.7	47.5	198.0%	193.5%

Revenue

Revenue increased 54.2% to EUR 2.0bn in H1 2022, supported by continued strong momentum across our businesses in all regions. Organic growth in Q2 was 23.3%, bringing organic growth for H1 2022 to 27.6%. Revenue growth from acquisitions was EUR 292m, representing topline growth contribution of 22.3% for the period. In addition, the Group benefitted from 4.2% of FX translation tailwind during the period.

Revenue in life sciences grew 50.6% in H1 2022 as demand remains strong in Food and Personal Care across all regions, and the recovery in Pharma has accelerated. Revenue in industrial chemicals increased 59.9%, driven by the Group's expanding footprint in the segment through recent acquisitions, in addition to supportive demand especially in CASE and R&PA, and continued positive pricing environment.

Across our geographic markets, organic growth remained strong, with EMEA, Americas and APAC delivering 32.3%, 23.0% and 25.6% organic growth respectively.

Profitability

In H1 2022, gross profit increased by 64.9% to EUR 488.6m. The 157 bp gross margin expansion to 24.2% was supported by our continuing price management initiatives to offset the impact from the ongoing price inflation across the industry, as well as a net positive mix effect from recent acquisitions.

Adjusted EBITA grew 90.7% to EUR 242.6m. The 230 bp margin expansion was largely driven by strong topline growth and scale benefits, mitigating the impact from continuing supply chain pressures. The strong profit expansion drove a 673 bp expansion in the Group's conversion margin to 49.7% in H1 2022.

Net financial expense in H1 2022 was EUR 21.1m, a 29.4% reduction compared to the previous year, due largely to a 34.3% reduction in interest expense from lower debt. Tax expense in H1 2022 was EUR 49m, implying an effective tax rate (ETR) of 25.7%, versus 37% in the previous year, as we progress towards a structure reflecting the Group's actual tax exposure in geographies where we generate our profits.

Adjusted net profit for H1 2022 was EUR 141.7m, an increase of 194.8% compared to H1 2021. Earnings per share for the period is EUR 0.59, representing a year-on-year increase of 200.8%.

Azelis Group
(EUR m)	H1 2022	H1 2021
Operating Profit	211.8	104.7
Net Financial Expense	-21.1	-29.8
Financial Income	0.3	2.7
Interest Income	0.2	0.2
Other Financial Gains	0.1	0.0
Financial Expense	-21.4	-32.5
Interest Expense on Bank Loans and Overdrafts	-12.2	-26.3
Interest Lease Commitments	-1.6	-1.4
Accelerated Amortization of Transaction Costs due to IPO	0.0	0.0
Other Financial Cost	-7.5	-4.8
Profit Before Tax	190.7	74.9
Tax Expense	-49.0	-27.3
Net Profit	141.7	47.5
One-off Cash and Non-cash Charges due to IPO:
IPO Cost	0.0	0.5
Accelerated Amortization of Transaction Costs due to IPO	0.0	0.0
Adjusted Net Profit	141.7	48.1

Cash flow and Financing

Net working capital to revenue normalized for acquisitions was 15.4% at the end of June 2022, compared to 15.3% at the end of December 2021 and 12.5% in the prior year. The elevated working capital intensity is due largely to the impact of new acquisitions that are not yet at Group level, as well as higher inventory to support the strong demand across our businesses. On our organic scope, NWC was 13.4% of revenue.

Despite the increase in working capital investments, the strong topline growth resulted in operating cash flow of EUR 151.5m in H1 2022, a 68.0% increase compared to the prior year. Capital expenditure increased 34.0% to EUR 8.5m, as the Group accelerated its investments in digital and IT infrastructure, and our laboratory network.

Free cash flow increased by 74.1% to EUR 139.2m, representing free cash flow conversion ratio of 56.9%, versus 62.4% in prior year. The decline in free cash flow conversion ratio was driven by the temporary increase in working capital investments to support the strong demand across our businesses.

At the end of June 2022, net debt was at EUR 990.8m and leverage ratio stood at 2.3x, versus 2.7x in December 2021, and 5.4x in June 2021. At the end of the period, the Group had liquidity of EUR 615.7m in both cash and unused revolving credit facility (RCF).

Azelis Group
(EUR m)	H1 2022	H1 2021
Operating Cash Flow	151.5	90.2
Free Cash Flow	139.2	80.0
FCF Conversion	56.9%	62.4%
Net Working Capital / Revenue normalized for acquisitions	15.4%	12.5%
Net Indebtedness	990.8	1,531.7
Net Leverage	2.3	5.4

Board appointment

Azelis has appointed Tom Hallam to the group's board of directors effective August 2, 2022. Mr. Hallam will serve as a non-executive and independent director and chair of the audit and risk committee. He succeeds Jürgen Buchsteiner, who will be retiring from the Azelis board after four years of valuable contributions as a board member and particularly steering the audit and risk committee.

Mr. Hallam's career spans over 30 years of experience in finance leadership roles. He is currently Chief Financial Officer at Givaudan, a global leader in Fragrance & Beauty and Taste & Wellbeing. He joined Givaudan in 2008 as Group Controller, with responsibility for financial reporting and compliance, strategic planning and management of Givaudan's business development process. He was appointed Chief Financial Officer effective January 1, 2017. Mr. Hallam began his career in the UK working in various industries and positions. He moved to Switzerland in 1996 to join Serono in Geneva, where he held a number of positions of increasing responsibility including Financial Director for Manufacturing Operations, and in 2001 he was appointed Vice President, Corporate Finance. A UK and Swiss national, Mr. Hallam holds a degree in Accounting and Finance from the University of Manchester and is a member of the Chartered Institute of Management Accountants (CIMA).

Including Mr. Hallam, Azelis' board of directors is comprised of eight directors, four of whom are nonexecutive and independent.

Post closing event

The Group completed the acquisition of ROCSA Colombia SA on the 1st of July, 2022.

Statement of the Board of Directors

To the best of their knowledge, the Board of Directors of Azelis Group NV declares, on behalf and for the account of the Company, that:

• the condensed consolidated interim financial statements are prepared in accordance with IAS 34 "Interim Financial Reporting" as adopted by the European Union, and give a true and fair view of the assets, liabilities, financial position and profit or loss of Azelis Group NV and its consolidated companies. These interim financial statements do not include all information required for full annual financial statements, and should be read in conjunction with the consolidated financial statements of the Azelis Group NV as at and for the year ended 31 December 2021;
• the management report includes a fair review of the development and performance of the business and the position of Azelis Group NV and the entities included in the consolidation as a whole, together with a description of the principal risks and uncertainties they face for the remaining six months of the financial year.

Belgium, Antwerp, 2 August 2022

For the Board of Directors,

Dr. Hans Joachim Müller Chief Executive Officer and Director Cloudworks BV, represented by Thijs Bakker Chief Financial Officer and Director

Report on review of condensed consolidated interim financial statements

Statutory auditor's report on review of condensed consolidated interim financial statements for the period ended 30 June 2022

Introduction

We have reviewed the accompanying consolidated statement of financial position of Azelis Group NV and its subsidiaries as of 30 June 2022 and the related consolidated income statement, consolidated statement of other comprehensive income, changes in equity and cash flows for the six-month period then ended, as well as the explanatory notes. The board of directors is responsible for the preparation and presentation of this condensed consolidated financial information in accordance with IAS 34, as adopted by the European Union. Our responsibility is to express a conclusion on this condensed consolidated financial information based on our review.

Scope of Review

We conducted our review in accordance with International Standard on Review Engagements 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity." A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing and, consequently, does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the accompanying condensed consolidated financial information is not prepared, in all material respects, in accordance with IAS 34, as adopted by the European Union.

Antwerp, 5 August 2022

The statutory auditor PwC Reviseurs d'Entreprises SRL/ Bedrijfsrevisoren BV Represented by

Peter Van den Eynde Réviseur d'Entreprises / Bedrijfsrevisor Unaudited condensed consolidated interim financial statements for the first six months of 2022

Table Of Contents

Consolidated Income Statement	17
Consolidated Statement of Other Comprehensive Income	18
Consolidated Statement of Financial Position	19
Consolidated Statement of Cash Flows	20
Consolidated Statement of Changes in Equity	21
Notes to the condensed consolidated interim financial statements	22
General information	22
Operating segments	26
Revenue	26
Business combinations	27
Net financial expenses	30
Loans and borrowings	30
Equity	31

Consolidated Income Statement

	Note	Jan-June 2022 Jan-June 2021
(in thousands of €)
Revenue	3	2,019,049	1,309,459
Other operating income		8,734	4,390
Total income		2,027,783	1,313,849
Costs for goods and consumables		-1,539,192	-1,017,468
Gross profit		488,591	296,381
Employee benefits expenses		-143,122	-104,951
External services and other expenses		-93,246	-60,250
Depreciation of property, plant and equipment		-12,363	-9,217
Amortization & impairment of intangible assets		-28,087	-17,222
Operating profit / loss (-)		211,773	104,741
Financial income	5	316	2,697
Financial expenses	5	-21,395	-32,542
Net financial expense		-21,079	-29,845
Profit / loss (-) before tax		190,694	74,896
Income tax income / expense (-)		-48,999	-27,349
Net profit / loss (-) for the period from continuing operations		141,695	47,547
Attributable to:
Equity holders of the parent		138,814	46,157
Non-controlling interests		2,881	1,390
Net profit / loss (-) for the period		141,695	47,547
		in Euro's	in Euro's
Basic earnings per share		0.59	0.20
Diluted earnings per share		0.59	0.20

The accompanying notes are an integral part of these condensed consolidated interim financial statements.

Consolidated Statement of Other Comprehensive Income

	Note	Jan-June 2022 Jan-June 2021
(in thousands of €)
Net profit / loss (-) for the period		141,695	47,547
Items that may be reclassified subsequently to profit or loss
Exchange differences on translation of foreign operations		123,418	25,744
Items that will not be reclassified subsequently to profit or loss
Actuarial gains / losses (-) on employee benefits		-	-
Income tax relating to these items		-	-
Total other comprehensive income		123,418	25,744
Total comprehensive income for the period		265,113	73,291
Attributable to:
Equity holders of the parent		261,160	71,901
Non-controlling interests		3,953	1,390
Total comprehensive income for the period		265,113	73,291

The accompanying notes are an integral part of these condensed consolidated interim financial statements.

Consolidated Statement of Financial Position

	Note	30 June 2022	31 December
			2021
(in thousands of €)
Assets
Goodwill	4	1,981,613	1,803,266
Intangible assets		1,085,243	1,004,258
Property, plant and equipment		57,086	53,008
Right of Use assets		81,107	65,582
Investments in associates		176	180
Other financial assets		752	1,355
Deferred tax assets		13,155	10,482
Total non-current assets		3,219,132	2,938,131
Inventories		610,973	467,473
Trade and other receivables		568,682	428,950
Income tax receivables		8,376	4,432
Other financial assets		4,486	1,522
Cash and cash equivalents		385,679	141,293
Total current assets		1,578,196	1,043,670
Total assets		4,797,328	3,981,801
Equity
Share capital		5,680,000	5,680,000
Reserves	7	-3,531,291	-3,617,020
Retained earnings		181,354	96,817
Unappropriated result		138,814	67,756
Issued capital and reserves attributable to owners of the parent		2,468,877	2,227,553
Non-controlling interests		44,603	23,792
Total equity		2,513,480	2,251,345
Loans and borrowings	6	1,173,150	840,030
Lease obligations		66,772	54,078
Employee benefit obligations		9,505	8,822
Provisions		4,990	4,127
Other non-current liabilities		46,151	9,655
Deferred tax liabilities		159,814	135,315
Total non-current liabilities		1,460,382	1,052,027
Bank overdrafts		27,416	40,524
Loans and borrowings	6	90,573	62,604
Lease obligations		17,775	15,200
Provisions		2,917	1,981
Income tax payables		28,467	17,046
Trade and other payables		656,318	541,074
Total current liabilities		823,466	678,429
Total liabilities		2,283,848	1,730,456
Total equity and liabilities		4,797,328	3,981,801

The accompanying notes are an integral part of these condensed consolidated interim financial statements.

Consolidated Statement of Cash Flows

	Note	Jan-June 2022 Jan-June 2021
(in thousands of €)
Cash flows from operating activities
Net profit / loss (-) for the period		141,695	47,547
Adjustments for:
Depreciation, amortisation and impairment expenses		40,450	26,439
Net financial expense		21,079	29,845
Cost of share-based payment	7	248	-
Income tax income / expense		48,999	27,349
Change in inventories		-82,286	-27,213
Change in trade and other receivables and other investments		-79,737	-74,862
Change in trade and other payables		59,294	60,439
Change in provisions		1,752	608
Cash flow from operating activities		151,494	90,152
Income tax paid		-38,807	-21,303
Interest paid		-16,647	-29,125
Net cash flow from operating activities		96,040	39,724
Cash flow from investing activities
Acquisition of property, plant and equipment and intangible assets		-8,463	-6,315
Acquisition of subsidiaries, net of cash acquired	4	-171,841	-460,372
Net cash flow from investing activities		-180,304	-466,687
Cash flows from financing activities
Payments of lease obligation		-10,403	-8,190
Proceeds from shareholders for issue of equity		-	50,000
Dividend payment to shareholders of the Group	7	-5,686	-
Purchase of treasury shares	7	-2,999	-
Proceeds from loans and borrowings	6	403,285	363,098
Repayments of loans and borrowings	6	-39,332	-27,213
Other cash flows from financing activities		-3,139	-2,475
Net cash flow from financing activities		341,726	375,220
Net (decrease) increase in cash and cash equivalents		257,462	-51,743
Effect of exchange rate fluctuations on cash held		32	-798
Cash and cash equivalents minus Bank overdraft at beginning of the period		100,769	139,693
Cash and cash equivalents minus Bank overdraft at 30 June		358,263	87,152

The accompanying notes are an integral part of these condensed consolidated interim financial statements.

Consolidated Statement of Changes in Equity

	Share capital	Share premium	Other reserves	Reserves available for distribution	Translation reserve	Retained earnings	Un appropriated result	Total equity holders of the parent	Non controlling interests	Total equity
(in thousands of €)
Balance as per 31 December 2021	5,680,000	-	-4,026,807	400,000	9,788	96,817		67,756 2,227,553		23,792 2,251,345
Appropriation of result prior year						67,756	-67,756	-		-
Written put options on non-controlling interests			-26,853					-26,853		-26,853
Share-based payment			248					248		248
Treasury shares			-2,999					-2,999		-2,999
Dividend attributed to shareholders of the Group				-7,012				-7,012		-7,012
Adjustments hyperinflation						16,781		16,781		16,781
Net profit / loss (-) for the period							138,814	138,814	2,881	141,695
Other comprehensive income					122,346			122,346	1,072	123,418
Other movements								-	16,858	16,858
Balance as per 30 June 2022	5,680,000	-	-4,056,411	392,988	132,134	181,354		138,814 2,468,877		44,603 2,513,480

	Share capital	Share premium	Other reserves	Reserves available for distribution	Translation reserve	Retained earnings	Un appropriated result	Total equity holders of the parent	Non controlling interests	Total equity
(in thousands of €)
Balance as per 31 December 2020		11,752 1,189,405	-	-	-80,958	24,669		70,962 1,215,829		2,072 1,217,901
Appropriation of result prior year						70,962	-70,962	-		-
Capital increase		50,000						50,000		50,000
Written put options on non-controlling interests			-29,929					-29,929		-29,929
Net profit / loss (-) for the period							46,157	46,157	1,390	47,547
Other comprehensive income					25,744			25,744		25,744
Other movements			292					292	16,676	16,968
Balance as per 30 June 2021		11,752 1,239,405	-29,637	-	-55,214	95,631		46,157 1,308,093		20,138 1,328,231

The accompanying notes are an integral part of these condensed consolidated interim financial statements.

Notes to the condensed consolidated interim financial statements

1. General information

Introduction

Azelis Group NV (the "Company"), formerly named Akita Midco 1 NV, was incorporated on 10th of June 2021 and is domiciled in Belgium. The address of the Company is Posthofbrug 12 box 6, 2600 Antwerp, Belgium. The Company's principal place of business is Belgium. The Company is registered in Belgium under the number 0769.555.240. The legal name of the Company was modified in 2021 with regard to the Company's IPO and the continuation of the Group with Azelis Group NV as consolidating company.

The (direct) parent company of Azelis Group NV is Akita I S.à r.l., 26A Boulevard Royal, 2449 Luxembourg. The ultimate controlling party of Azelis Group NV is EQT VIII Collect SCSp.

The unaudited condensed consolidated interim financial statements of the Company for the first six months of 2022 comprise the Company and its subsidiaries (together referred to as the "Group" or as "Azelis" being the trade name of the Group) and the Group's interest in associates.

Basis of preparation

Azelis prepares its condensed consolidated interim financial statements on a semi-annual basis, in accordance with IAS 34 "Interim Financial Reporting" as adopted by the European Union and as issued by the IASB. The accounting policies have been consistently applied to all the periods presented, and are in accordance with the policies as adopted for the preparation of Azelis' Annual Report 2021, with the exception of the estimation of income taxes (measurement during interim periods is based on estimated expected effective annual income tax rate for the full financial year). These condensed consolidated interim financial statements do not include all the information required for the preparation of the annual consolidated financial statements, and should be read in conjunction with Azelis' Annual Report 2021.

Apart from the new accounting policies described below, there were no significant changes in accounting policies applied by Azelis in these condensed consolidated interim financial statements compared to those used in Azelis' Annual Report 2021. New standards and interpretations applicable for the annual period beginning on 1 January 2022 did not have any material impact on these condensed consolidated interim financial statements. Azelis has not early adopted any other standard, interpretation, or amendment that has been issued but is not yet effective.

Capital reorganization under common control

As stated in note 2 of the 2021 Annual report, the Company has undergone a capital reorganization under common control, in relation to its IPO on Euronext Brussels and the related share transactions amongst the Group's shareholders and entities. Under the capital reorganization under common control, the predecessor value method has been applied. As a consequence, the comparative information presented in the Azelis Group NV consolidated financial statements represents the information of Azelis Holding S.à r.l. for prior periods, even though the legal life of Azelis Group NV as a company has started on 10 June 2021.

Turkey hyperinflation

As of the first half-year of 2022, Turkey is categorized as a country with a three-year cumulative inflation rate greater than 100%, which is an indicator for hyperinflation. Also considering qualitative indicators, the Turkish economy is considered to be hyper-inflationary. As a consequence, as of 30 June 2022, IAS 29 Financial Reporting in Hyperinflationary Economies is applied for those entities whose functional currency is the Turkish Lira.

Under IAS 29, the non-monetary assets and liabilities, the equity, and the income statement of subsidiaries operating in hyperinflationary economies are restated for changes in the general purchasing power of the local currency applying a general price index. These re-measured amounts are used for conversion into the group reporting currency at the period closing exchange rate. As a result, the balance sheet and net results of subsidiaries operating in hyperinflation economies are stated in terms of the measuring unit current at the end of the reporting period. In accordance with IAS 21 The Effects of Changes in Foreign Exchange Rates, multinational companies that have subsidiaries with the Turkish Lira as their functional currency are not required to restate comparative amounts as those were presented previously in a stable currency.

The application of IAS 29 has led to an increase in Azelis' equity of approx. €17 million, and a related increase that is mainly reflected in goodwill and intangible assets. As the majority of Azelis' operational activities in Turkey are settled in hard currencies (USD and EUR mainly), no material impact is observed in Azelis' income statement.

Equity-settled share-based payment

During the first six months of 2022, Azelis has launched a long-term incentive plan ("LTIP") for certain directors, employees and self-employed managers of the Azelis Group. Underthe LTIP, Azelis may decide to grant share awards to certain directors, employees and self-employed managers of the Azelis Group. The grant of any share awards is based on a three-year performance period and takes into account the following metrics and weightings: 50% relative total shareholders' return, 35% Adjusted EBITA and 15% sustainability-linked criteria. The awards are subject to a vesting period of at least three years.

In accordance with IFRS, the LTIP qualifies as an equity-settled share-based payment transaction. Equitysettled share-based payment transactions are transactions in which the entity receives goods or services in exchange for its own equity instruments (e.g. shares, options). Goods or services received in equitysettled share-based payment transactions are measured at their fair value, unless it cannot be estimated reliably, in which case it is determined in accordance with the fair value of the equity instruments granted. The fair value is determined at grant date and the value incorporates market conditions using a Monte Carlo calculation. This value remains unchanged over the vesting period. Service conditions and nonmarket conditions do not affect the fair value of the instruments granted, but are taken into account by adjusting the number of equity instruments included in the measurement of the transaction and this estimate is revised at each reporting date until the vesting period has lapsed. Azelis accounts for the equity-settled share-based payment transaction in the other reserves section of the equity, and its initial recognition and subsequent changes are accounted for in employee expenses.

Treasury shares

To cover future obligations under the LTIP, Azelis has purchased treasury shares on Euronext Brussels for a total amount of €3.0 million. Under IFRS, treasury share purchases are recognized as a deduction from equity (section other reserves). No gain or loss is recognized on the purchase, sale, issue or cancellation of treasury shares. Consideration paid or received is recognized directly in equity.

Reclassification Cost for goods and consumables

As stated in note 2 of the 2021 Annual report, the Company has reclassified certain internal production costs from Costs for goods and consumables to External services and other expenses. This reclassification affects the Costs for goods and consumables (decrease) to External services and other expenses (increase), as presented in the 2021 interim financial report, by €2.0 million.

Risk Management

The Group's risk management policies are established to identify and to analyze the risks faced by the Group, to set appropriate risk limits and controls and to monitor risks and adherence to limits. Azelis' risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Group's activities, including focus on credit risks, liquidity risks, market risks and operational risks. In addition, Azelis has appointed an Internal Auditor since 2019, who independently and directly reports to the Chairman of the Audit Committee.

Current main risks and uncertainties are in accordance with the assessment as has been disclosed in the Risk Management section of Azelis' Annual Report 2021, also taking into account the current economic, financial and geopolitical environment. Azelis' business is well positioned for the ongoing uncertainties given its diversified specialty chemicals portfolio. Azelis has been responding and expects going forward to respond quickly to the developments around the Covid-19 pandemic. Furthermore, direct revenue exposure in Russia and Ukraine remains very low, generating 1%-2% of Group revenue. Azelis is fully compliant with relevant restrictions and sanctions and continues to closely monitor the developments in the region.

Financial instruments: fair value and hierarchy

There are no significant new financial instruments. For financial instruments measured at fair value in Azelis' consolidated statement of financial position (i.e. derivatives), the fair values as at 30 June 2022 are not significantly different from the fair values as included in the consolidated financial statements for the year ended 31 December 2021. The carrying amount of all other financial assets and liabilities approximates their fair value. All instruments are Level 2, except for earnout liabilities and put options qualifying as Level 3 instruments.

On a selective basis, the Group has outstanding foreign exchange contracts to manage the exposure to foreign currency risk on outstanding foreign currency receivables/payables, as well as an interest rate cap contract relating to its variable interest rate risk.

Judgements and estimates

The accounting judgements and key sources of estimation uncertainty as included in the Annual Report 2021 remain applicable.

During the fourth quarter of 2021, the yearly impairment tests have been determined by discounting future cash flows projections from a five year detailed business plan which is approved by senior management. All units had sufficient headroom over their carrying amount including goodwill at the end of 2021, which led to the conclusion that there was no indication of an impairment loss per 31 December 2021. During the first six months of 2022, no triggering event has occurred which requires an update to the impairment test, confirming that the headroom for all cash generating units is sufficient and that no impairment is required per that date.

Seasonal patterns

Azelis' activities are not exposed to notable seasonal changes throughout the year apart from a moderate decrease in revenue during holiday seasons in Azelis' different jurisdictions. The Group's net working capital has a stable character with a moderate build-up towards the second quarter of the year and generally lower levels of net working capital in the fourth quarter, with related cash-release accordingly.

Related parties

The Group has a related party relationship with certain of its subsidiaries, shareholders, managers, executive officers and associates. The Group has Non-Controlling Interests.

During the reporting period, no material transactions with related parties occurred outside the normal course of business.

Legal and Tax

There are no tax and other contingencies per the end of June 2022 and June 2021. The impact of implementing IFRIC 23 in 2019 has not led to additional tax obligations.

Income tax expense increased to €49.0 million for the six-month period ended June 30, 2022 (H1 2021: €27.3 million), primarily due to the increase of profit before tax.

Subsequent events

Part of the growth trajectory of Azelis is expansion through strategic acquisitions, complementary to the corporate strategy of organic growth.

As at 1 July 2022, Azelis completed the acquisition of 63% of the shares of ROCSA Colombia S.A. ("ROCSA"), one of the leading specialty chemical distributors in Colombia, with a rapidly-growing presence in Peru and Central America. It is active in the life sciences market, primarily in Food & Nutrition, Personal Care, and Home Care & Industrial Cleaning, as well as in industrial chemicals, with a strong presence in CASE (coatings, adhesives, sealants, elastomers) and Plastic Additives.

To date, Azelis signed four other acquisitions, that were not completed per date of this report: (i) the proposed acquisition of 100% of the shares of Chemical Solutions Sdn Bhd ("ChemSol"), a Malaysian Personal Care raw materials distributor of products such as active ingredients, functional ingredients and colour cosmetics, as well as personal care packaging products (Asia-Pacific); (ii) the proposed acquisition in Turkey of the specialty lubricant (L&MWF) distribution assets of Ak-taş, including the oil additive business of Ak-taş as well as the base oil distribution business of Whitechem (EMEA); (iii) the proposed acquisition of 100% of the shares of the Belgian and Lebanese entities of Chemical Partners and Chempart Polymers ("Chemical Partners"), an independent distributor of specialty chemicals with a strong foothold in the industrial chemicals market, particularly in CASE and R&PA, in Africa and the Middle East (EMEA); and (iv) the proposed acquisition of a majority stake of the shares of Ashapura Aromas Private Limited ("Ashapura"), a leading distributor of ingredients in the Flavors & Fragrances ("F&F") market in India (Asia-Pacific).

These aforementioned acquisitions together generate approximately €270.0 million of revenues on an annual basis.

No subsequent events after 30 June 2022 have been identified that may have had a material or significant effect on the interim financial statements.

2. Operating segments

The Group's reportable segments are based on the regions in which it operates: EMEA, Americas and Asia-Pacific. This reflects the organization of the Group, providing its specialty chemicals distribution services in all these regions. Operating expenses of non-operating companies are reported in the segment Group Holding. Adjusted EBITA of Group Holding represents costs related to corporate activities and central support services, mainly at the Group's service center and headquarter in Belgium.

Results of the operating segments are reflected in the below table:

Jan-June 2022	EMEA	Americas	Asia-Pacific	Group Holding & other	Total
(in thousands of €)
Revenue	916,392	762,914	339,742	0	2,019,049
Gross profit	224,605	196,874	67,077	34	488,591
Adjusted EBITA	119,986	107,866	28,641	-13,885	242,608
Operating profit					211,773
Net Working Capital	185,474	279,769	173,786	-6,241	632,788

Jan-June 2021	EMEA	Americas	Asia-Pacific	Group Holding & other	Total
(in thousands of €)
Revenue	598,552	528,531	182,376	0	1,309,459
Gross profit	144,351	114,515	37,608	-93	296,381
Adjusted EBITA	67,058	57,504	13,927	-11,264	127,225
Operating profit					104,741
Net Working Capital	81,578	172,762	92,438	-6,608	340,170

3. Revenue

		Jan-June 2022 Jan-June 2021
(in thousands of €)
Revenue from sales, net of discounts	2,013,826	1,305,849
Revenue from commercial services	456	171
	2,014,281	1,306,020
Commissions received	4,767	3,440
	2,019,049	1,309,459

The Group revenues can be further specified as follows:

	Jan-June 2022		Jan-June 2021
(in thousands of €)
Life Sciences	1,208,652	59.9%	802,766	61.3%
Industrial Chemicals	810,396	40.1%	506,693	38.7%
	2,019,049	100.0%	1,309,459	100.0%

4. Business combinations

On 31 January 2022, Azelis acquired 90% of the shares of Umongo, a market-leading lubricants and metal working fluids distributor active in South Africa, providing technical support and innovative solutions through its application laboratory. The transaction reinforces Azelis' lateral value chain by expanding its product offering for the lubricants and metal working fluid end markets and strengthens the Group's foothold in industrial specialty chemicals in South Africa and the rest of the region. As Azelis gained control, Umongo is consolidated for 100%, and the minority interest has been recognized separately in the financial statements.

On 28 February 2022, Azelis acquired 51% of the shares of Catalite Co., Ltd. ("Catalite"), a well-established distributor of specialty chemicals in the Personal Care and Home Care market segments, as well as industrial formulators, intermediates and coatings, in Thailand. With an attractive portfolio of products from several key principals, Catalite serves a large, growing customer base from its site in Bangkok, providing the Group a solid platform to accelerate its growth in the domestic market, and the wider Asia Pacific region. As Azelis gained control, Catalite is consolidated for 100%, and the minority interest has been recognized separately in the financial statements.

On 14 March 2022, Azelis acquired 100% of the shares of Whitfield Chemical Group Limited, the ultimate parent company of WhitChem, a well-regarded distributor focused on CASE (coatings, adhesives, sealants and elastomers) and R&PA (rubber & plastic additives) in the UK. WhitChem's long-standing relationships with blue-chip principals and product portfolio strengthen Azelis' lateral value chain in the UK, whilst their wide customer base and strong local technical sales team further expands the Group's product offering and customer reach.

On 16 May 2022, Azelis acquired 100% of the shares of Tunçkaya, a prominent distributor of food ingredients and additives in Turkey, as well as a range of blended products for various segments of the food market, supported by longstanding relationships with principals. Tunçkaya's portfolio of products complements the Group's lateral value chain for the domestic market, thereby further expanding its expertise and product offering to customers.

On 31 May 2022, Azelis acquired the distribution assets of the Indian companies Chemo India and Unipharm Laboratories. Both companies are renowned local distributors of specialty chemicals and ingredients for the CASE (coatings, adhesives, sealants, elastomers), L&MWF (lubricants & metalworking fluids) and pharmaceutical market segments in India. The acquisition strengthens the Group's industrial chemicals portfolio and its footprint in the pharmaceutical market, further reinforcing Azelis' lateral value chain for these market segments. The transaction represents a solid fit with the Group's growth ambitions in India, as well as its wider strategic vision for the Asia Pacific region.

These aforementioned acquisitions together generate around €194.2 million of revenues on an annual basis. During the first six months of 2022, these acquisitions together have added €82.5 million of revenue, €15.0 million of gross profit, €10.8 million of Adjusted EBITA and a positive €7.8 million of net profit to the Group's net result.

	Total Jan June 2022	Total Jan December 2021
(in thousands of €)
Assets acquired and liabilities assumed
Distribution rights	60,092	175,571
Other intangible assets	439	3,384
Property, plant and equipment	2,815	18,665
Right-of-use assets	5,640	9,253
Deferred tax assets	632	3,598
Other long term receivables	-	466
Inventories	41,909	85,052
Trade and other receivables	61,574	116,726
Cash and cash equivalents	15,826	42,006
Assets classified as held for sale	-	22
Loans and borrowings non current	-210	-7,306
Lease liabilities non current	-4,562	-7,356
Deferred tax liabilities	-12,631	-22,291
Other non-current payables	-	-409
Trade and other payables	-48,019	-70,267
Loans and borrowings current	-11,959	-71,301
Lease liabilities current	-1,078	-1,897
Provisions	-121	-1,282
Employee benefit obligations	-488	-2,213
Total fair value identified assets acquired and liabilities assumed	109,860	270,422
Non-controlling interests	-17,442	-18,307
Estimated earnout liabilities	3,465	1,329
Deferred payments	5,544	34,972
Consideration paid in cash	165,636	597,282
Total consideration	174,645	633,584
Goodwill	82,227	381,469

The fair values of the acquired identifiable assets and liabilities and the value of the consideration paid are accounted for on a provisional basis. The purchase price allocations will be finalized at a later stage and may result in adjustments to provisional values as a result of completing the initial accounting from the acquisition date. The fair values of the acquired net assets, based on a provisional assessment, are summarized in the table above. No indemnification assets or contingent liabilities had to be recognized in the business combinations.

The acquisitions of distribution assets, without acquiring any shares, qualify as business combinations in conformity with IFRS 3, as the acquired assets consitute a business.

For acquisitions where a majority of the shares has been acquired and a non-controlling interest is remaining with the previous shareholders, a minority interest is recognized separately from the Group's equity. For the acquisition of Umongo and Catalite, Azelis has opted to measure the non-controlling interests at their proportionate share of the fair value of the acquiree's identifiable net assets.

The considerations are primarily paid for in cash and, depending on the acquisition, also consist of deferred payments and/or accruals for estimated earnout. For 2022 acquisitions, deferred payments and initial earnout liabilities, recognized as part of the consideration paid, total to €9.0 million. Earnout payments are all contingent on the profitability of the acquired company at a future point in time, and have been estimated based on the business plan of the acquired company. Not being part of the consideration paid, Azelis has also recognized put options related to the minority stakes in Catalite and Umongo, for an amount of €26.9 million.

Total goodwill of Azelis has increased by €178.3 million, of which €82.2 million is attributable to the abovementioned acquisitions. During the first six months of 2022, goodwill has increased by €3.4 million due to finalization of the purchase price allocations of Quimdis, WWRC, Friendship Chemical and Neupert, being acquisitions for which the initial accounting had not yet been completed upon 31 December 2021. The remainder is primarily attributable to currency translation and reflected in other comprehensive income, and to hyperinflation accounting for goodwill recognized in Azelis Turkey.

Acquisitions are accounted for using the acquisition method. Goodwill represents the excess of acquisition cost over the fair values of identified acquired assets and liabilities, and mainly represents the business knowledge and the qualified staff. The amortization of goodwill is not tax deductible. The distribution rights have been valued based upon the expected return being generated through strategic mandates.

The trade and other receivables include an amount of €0.9 million for expected credit loss provisions. Certain transactions relating to key employees' compensation plans are considered as separate transactions and are not included in the business combination accounting in accordance with IFRS 3.

If the above acquisitions would have occurred at the start of 2022, management estimates that, for the first six months of 2022, the consolidated revenue would have been €2,056.4 million, the consolidated gross profit would have been €510.9 million, the consolidated Adjusted EBITA would have been €258.1 million and the consolidated net result would have been €154.0 million.

During the first six months of 2022, the Group incurred acquisition-related expenses of €3.2 million (same period in 2021: €3.6 million) in total, in connection with the costs of external advisors, due diligence and fees paid to the institutions involved. These expenses are recognized in the consolidated income statement as part of external services, and are considered as part of adjustments to determine Adjusted EBITA of the period.

5. Net financial expenses

	Jan-June 2022 Jan-June 2021
(in thousands of €)
Financial income
Interest income	221	173
Foreign exchange gains	0	2,507
Other financial income	95	17
	316	2,697
Financial expenses
Interest expense on bank loans and overdrafts	-12,235	-26,311
Interest lease commitments	-1,634	-1,423
Fair value adjustment on financial liabilities	-31	0
Transaction costs for bank loans	-653	-2,032
Losses on changes in FV of derivative instruments	-445	0
Foreign exchange losses	-1,754	0
Other financial expenses	-4,643	-2,775
	-21,395	-32,542

The decrease of interest expenses on bank loans and overdrafts results from lower bank debt as a consequence of the repayment and new debt drawn (Term Loan Facility and Revolving Credit Facility (RCF)) in connection with the IPO transaction (refer to note 22 of the Annual report 2021), and lower interest rates as opposed to the Company's former bank debt.

Transaction costs for bank loans for both periods relate to the amortization of capitalized transaction costs related to bank borrowings, over the period. Amortization costs are lower in the first six months of 2022 given the total lower amount of capitalized transactions costs regarding the Group's refinancing in connection with the IPO transaction.

The foreign exchange results (gains or losses) include for the majority unrealized translation of intercompany loans, mainly with regard to non-EUR nominated loans to subsidiaries.

Other financial expenses relate to other bank fees and factoring fees.

6. Loans and borrowings

New Term Loan Facility & Revolving Credit Facility (RCF)

In 2021, within the context of the IPO on Euronext Brussels, and partly with the proceeds of the IPO, the Group had repaid its existing bank borrowings. At the same time the Group had attracted new bank borrowings from a new lender's syndicate in the form of a Term Loan Facility (€640 million and GBP 128.8 million) and a Revolving Credit Facility (€260 million). Refer to note 22.1 of the 2021 Annual report.

Incremental Facility & RCF extension

In April 2022, the Group has drawn an Incremental Facility of €260 million on its € Term Loan Facility by converting €260 million drawn on the RCF to the Term Loan, totaling to €900 million. At the same time, the Revolving Credit Facility was extended from €260 million to €350 million, of which €120 million drawn as at 30 June 2022.

Interest rate cap

In accordance with its policy on managing the risk related to interest rates (refer to the Risk management section in the Annual Report 2021) and taking into account the global interest rate developments in the first half year of 2022, Azelis has entered into two interest rate cap agreements for a total loan amount of €700 million, providing the Group with an interest rate cap of 3% on EURIBOR.

Covenants

The financing arrangements since September 2021 of Azelis Group NV and its subsidiaries contain a financial maintenance covenant, being the total Net Leverage Ratio, which needs to be less than 4.75 : 1.00 (decreasing to 4.50 : 1.00 in 2024) and is tested twice annually. As at 30 June 2022, the total Net Leverage Ratio is 2.3 : 1.0, therefore the Group complied with the financial covenants. The Group monitors the compliance with the covenants on the basis of the monthly reporting process.

Other facilities

In addition to cash balances as of 30 June 2022, the Group maintained the following lines of credit:

• €101.0 million (31 December 2021: € 95.3 million) uncommitted local credit facility, that concerns local credit lines given by local banks and can be revoked as any standard bank credit line. Interest would be payable at the maximum rate of EURIBOR plus 3.00%. Per 30 June 2022, €85.0 million (31 December 2021: €69.3 million) was utilized.
• €350 million Revolving Credit Facility, of which €120 million has been utilized per 30 June 2022 (31 December 2021: €40 million of €260 million drawn). Therefore, per 30 June 2022, €230 million (31 December 2021: €220 million) committed facility was unused. Interest would be payable at the maximum rate of EURIBOR plus 2.00% (currently 1.75%, leverage-based).

7. Equity

On the Annual General Meeting (AGM) of the Company, held on 9 June 2022, the shareholders have approved the payment of a gross dividend of €0.03 per share for the financial year 2021. The dividend has been determined pro rata, such that it only relates to the portion of the financial year for which the Company's shares are listed on Euronext Brussels.The total dividend amounts to €7.0 million of which €5.7 million has effectively been paid out, and the remainder will be paid out in the second half of the year (2021: no dividend paid).

In the first six months of 2022, the Company has purchased treasury shares on Euronext Brussels for a total amount of €3.0 million. Treasury share purchases are deducted in other reserves.

In the first six months of 2022, the Company has granted share awards to certain directors, employees and self-employed managers of the Azelis Group in the context of the long-term incentive plan (LTIP). These awards vest over 3 years and are subject to market- and non-market conditions. The Company has recognized €0.2 million in other reserves, reflecting the vesting over the period and based on a Monte Carlo calculation of the fair value of the awards.

The reported earnings per share for the first six months of 2021 is €0.20, while €0.04 was reported in the interim financial report of 2021. The difference originates in the weighted average number of shares used in the calculation, which has changed due to the IPO of Azelis Group NV in September 2021 and the related capital reorganization under common control. Management believes that the denominator for the earnings per share calculation best reflects the new legal structure (after IPO), for all periods presented. Refer also to note 21.2 of the 2021 Annual report.

Alternative performance measures

Throughout its interim financial report and in other financial communication (website, press releases, presentations, etc.), Azelis presents certain financial measures and adjustments that are not in accordance with IFRS, or any other internationally accepted accounting principles. Certain of these measures are termed "alternative performance measures" because they exclude amounts that are included in, or include amounts that are excluded from, the most directly comparable measure calculated and presented in accordance with IFRS, or are calculated using financial measures that are not calculated in accordance with IFRS.

The Group presents the APMs as (i) they are used by its management to measure operating performance, including profitability and liquidity, in presentations to its board members, and as a basis for strategic planning and forecasting, and (ii) they represent similar measures that are widely used by certain investors, securities analysts and other parties as supplemental measures of performance. These measures enhance management's and investors' understanding of the Group's financial performance, for example, by excluding items that are outside of ongoing operations such as income taxes, costs of capital and non-cash expenses.

For the Group's definitions of APM's, refer to the Annual report.

Reconciliations

EBITA, Adjusted EBITA, EBITDA, Adjusted EBITDA, Free Cash Flow

	H1 2022	H1 2021
(in thousands of € unless otherwise specified)
Revenue	2,019,049	1,309,459
Gross profit	488,591	296,381
Gross profit margin	24.2%	22.6%
Net profit/(loss) for the period	141,695	47,547
Income tax (income)/expense	48,999	27,349
Share of result of associates	0	0
Financial income	-316	-2,697
Financial expenses	21,395	32,542
Operating profit	211,773	104,741
Amortization and impairment of intangible assets	28,087	17,222
EBITA	239,860	121,963
Adjustments	2,747	5,213
Adjusted EBITA	242,607	127,176
Adjusted EBITA margin	12.0%	9.7%
Conversion margin	49.7%	42.9%
Depreciation of property, plant and equipment	12,363	9,217
Adjusted EBITDA	254,970	136,393
Adjusted EBITDA margin	12.6%	10.4%
Payments of lease obligations	-10,403	-8,190
Adjusted EBITDA less payments of lease obligations	244,567	128,203
Change in Net Working Capital, other assets, liabilities and provisions	-96,879	-41,929
Net capital expenditures	-8,463	-6,315
Free Cash Flow	139,225	79,959
Free Cash Flow Conversion	56.9%	62.4%

	H1 2022	H1 2021
(in thousands of €)
Transactions	3,178	3,610
IPO expenses	0	522
Employees	816	355
Property, plant and equipment	-2,623	172
Other	1,375	555
Adjustments	2,747	5,213

	H1 2022	H1 2021
(in thousands of €)
Change in inventories	-82,286	-27,213
Change in trade and other receivables and other investments	-79,737	-74,862
Change in trade and other payables	59,294	60,439
Change in provisions	1,752	608
Foreign currency translation	4,099	-901
Change in Net Working Capital, other assets, liabilities and provisions	-96,879	-41,929

	H1 2022	H1 2021
(in thousands of €)
Intangibles	6,010	3,950
Tangibles	2,453	2,366
Net capital expenditures	8,463	6,315

Net Working Capital

	H1 2022	H1 2021
(in thousands of € unless otherwise specified)
Current assets:
Inventories	610,973	335,970
Trade receivables	491,100	332,766
Current liabilities:
Trade payables	469,284	328,566
Net working capital	632,788	340,170
Annualized Revenue	4,038,098	2,618,918
Net working capital/revenue	15.7%	13.0%
Revenue normalised for revenue of acquisitions	4,112,776	2,732,024
Net Working Capital/revenue normalised for acquisitions	15.4%	12.5%

ROTIC (Return on tangible invested capital)

H1 2022	H1 2021
242,607	127,176
485,214	254,353
57,086	53,008
632,788	340,170
70.3%	64.7%

Revenue Growth

	H1 2022	H1 2021
Organic growth	27.6%	11.9%
Growth from acquisitions	22.3%	7.1%
Foreign currency translation impact	4.2%	-3.6%
Reported growth	54.2%	15.4%

Net indebtedness, Financing EBITDA and Net Leverage

	H1 2022	H1 2021
(in thousands of €)
Non-current borrowings and loans	1,246,556	1,563,410
Current borrowings and loans	102,503	55,424
Total gross debt	1,349,059	1,618,834
Cash and cash equivalents	-385,679	-116,369
Bank overdrafts	27,416	29,217
Net indebtedness	990,795	1,531,682

	H1 2022	H1 2021
(in thousands of €)
Adjusted EBITDA (last 12 months)	406,352	238,449
Earnings (before interest, taxation, depreciation and amortization) of entities acquired	14,919	41,390
Anticipated cost savings, expense reductions and synergies	1,536	2,144
Financing EBITDA (last 12 months)	422,807	281,983
	H1 2022	H1 2021

(in thousands of €)
Net indebtedness	990,795	1,531,682
Financing EBITDA (last 12 months)	422,807	281,983
Net Leverage (multiple)	2.3	5.4

Disclaimer

This interim financial report may contain statements relevant to Azelis Group NV (the "Company") and/or its affiliated companies (collectively "Azelis" or the "Azelis Group") which are not historical facts and are hereby identified as "forward-looking statements". Such forward looking statements, include, without limitation, those relating to the future business prospects, revenue, working capital, liquidity, capital needs, interest costs and income, in each case relating to the Azelis Group.

The forward-looking statements and estimates contained herein represent the judgement of and are based on the information available to the Board of Directors and the Company's management as of the date of this interim financial report. They involve a number of known and unknown risks, uncertainties and other factors that could cause actual results, performance or achievements to differ materially from those expressed or implied by the forward looking statements.

These forward-looking statements should not be considered as guarantees for future performance of the Azelis Group and should, therefore, be considered in light of various important factors that could cause actual results to differ materially from estimates or projections contained in the forward looking statements. These include without limitation economic and business cycles, the terms and conditions of the Azelis' financing arrangements, foreign currency rate fluctuations, competition in Azelis' key markets, acquisitions or disposals of businesses or assets and trends in Azelis' principal industries or economies.

The foregoing list of important factors is not exhaustive. When considering forward looking statements, careful consideration should be given to the foregoing factors and other uncertainties and events, as well as factors described in any other document published by the Company with the Belgian Financial Services and Markets Authority ("FSMA") or on the Azelis website (www.azelis.com/investor-relations) from time to time, including the prospectus related to the admission to trading of the securities of Azelis Group NV on the regulated market of Euronext Brussels dated 14 September 2021. No undue reliance should be placed on such forward looking statements which are relevant only as of the date of this announcement. Except as required by the FSMA, Euronext or otherwise in accordance with applicable law, the Company undertakes no obligation to update publicly or revise any forward looking statements, whether as a result of new information, future events or otherwise.

Certain financial information in this interim financial report has been rounded according to established commercial standards. As a result, this interim financial report may show minor rounding differences versus comparable periods as presented earlier.

This interim financial report has been prepared in the English language and was subsequently translated into Dutch. In the event of any differences or inconsistencies, the Dutch version of this interim financial report will prevail.