We are re-iterating our guidance for revenue and adjusted EPS for the full year. We expect revenue to grow to around €1 billion, and adjusted EPS¹ is expected of around €0.20. We now expect the level of investment (both CAPEX and OPEX) in our core technologies to be modestly higher than last year.

Financial review for the six-month period ended 30 June 2015

In the first half of 2015 the Group generated revenue of €470 million, which is €13 million higher compared with €457 million in the same period of 2014. The year on year growth in revenue came from strong growth in Telematics and Licensing revenue, partly offset by lower Automotive and Consumer revenue. Despite the growth in revenue, the Group’s gross margin and operating results were negatively impacted by the weakening of the euro against the US dollar.

Revenue

Consumer revenue for H1 '15 was €287 million compared with €294 million in H1 ‘14. PND and related content & services revenue slightly declined year on year but was partly offset for the most part by strong growth in sport revenue. Automotive hardware revenue, which is included in Consumer since last year, declined year on year mainly due to phasing out of certain customer contracts.

Automotive generated revenue of €50 million in H1 ‘15, down by 17% compared with €60 million in the first half year of 2014 mainly due to phasing out of certain customer contracts.

Licensing revenue in H1 '14 was €68 million compared with €53 million in H1 ’14. The higher revenue came mainly from additional customer wins.

Telematics revenue grew year on year by 30% from €51 million in H1 '14 to €66 million in H1 '15. The increase was mainly due to the growth in the WEBFLEET subscriber base, both organically and through recent acquisitions.

Gross margin

The gross profit for H1 '15 was €244 million, a decrease of €13 million compared with the same period last year. The gross margin in H1 '15 decreased to 52% from 56% in H1 '14 mainly as the result of the weakening of the euro against the US dollar.

Operating expenses

Operating expenses in H1 '15 were €249 million compared with €245 million in H1 '14. The year on year increase was mainly driven by higher R&D and marketing expenses partly offset by lower amortisation of technology and databases. Operating expenses include a positive one-off as a result of a litigation settlement, partly offset by higher expenses related to our employee-incentive programmes.

Operating result

The operating result for H1 '15 was a loss of €4.5 million compared with a gain of €11.7 million in H1 '14.

Financial result

The group recorded €0.4 million of interest expenses in H1 '15 compared with interest expenses of €1.0 million in the same period of 2014. The other finance result in H1 '15 was a loss of €2.3 million versus a loss of €1.5 million in H1 '14. The loss in H1 '14 mainly came from foreign exchange results from the revaluation of monetary balance sheet items.

Income taxes

In H1 '15, the group recorded an income tax gain of €2.6 million versus an income tax gain of €7.1 million in the same period last year. The effective tax rate for H1 ’15 was 37% versus -76% in H1 ‘14. The ETR in H1 ’14 reflects an income tax gain due to the release of a tax provision following the finalisation of an overseas tax audit.

Cash flow

The cash flow from operating activities was €15 million versus €19 million in the same period last year.

The cash flow used in investing activities during H1 ’15 was €68 million, an increase of €17 million compared with €51 million in the same period last year. The year on year increase mainly reflects our recent acquisition of a mapping company in Australia.

The cash flow from financing activities includes a cash inflow of €27 million from the exercise of 5.3 million options related to our long-term employee incentive programmes during H1 ’15.

Related party transactions

For related party transactions please refer to note 8 of our interim financial report.

Principal risks and uncertainties H1 2015

In the 2014 Annual Report, we described the key business risks and uncertainties which we are aware of, and which could have a material adverse effect on our financial position and results.

We have assessed the risks for the second half year of 2015 and believe that the risk categories and risk factors identified are in line with those presented in the 2014 Annual Report. Those are deemed incorporated and repeated in this report by reference.