Apator S A : Report of the Executive Board on Acitivity of Apator Group in 2022

Report of the Executive Board on Activity of Grupa Apator in 2022

Covering the Report of the Management Board on the activities of Apator SA

Toruń, 27 April 2023

Report of the Executive Board on Activity of Grupa Apator in 2022

Table of contents
1.	Business model and organisation of the group of companies	4
2.	Business strategy	8
3.	Business segments of the Apator Group	9
4.	Consolidated results of the Apator Group	26
5.	The parent company - Apator S.A	37
6.	List of major events in 2022	44
7.	Major events after 31 December 2022	48
8.	Risk and threat factors	49
9.	Credits, loans, guarantees	57
10.	Pending proceedings before a court, arbitration body or public administration body	60
11.	Transactions with related entities	60
12.	Entities subject to consolidation as of 31 December 2022	61
13.	Management Board statements	62
14.	Statements of the Supervisory Board	63
15.	Corporate governance in Apator S.A	64
16.	Report on non-financial information	86

Name of the organisational unit:		Apator Group
Period covered by the financial statements:	1 January 2022 - 31	Reporting currency:	polish zloty (PLN)
December 2022
Rounding level:	all amounts are expressed in thousands of PLN (unless stated otherwise)

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Report of the Executive Board on Activity of Grupa Apator in 2022

Apator Group as of 2022

PLN 1,081.8 million	PLN 72.3 million
Sales	CAPEX
revenue
PLN 101.7 million	PLN 264.7 million
EBITDA*	Working capital
PLN 21.8 million	2.08 x
Net profit*	Net debt/EBITDA*

Business segments

electricity (EE)

PLN 440 million revenue

• PLN 34 million EBITDA
• 78% of national revenue
• higher y-o-y turnover in all main product groups in the country and in exports

Water & Heat

million revenue

PLN 49 million EBITDA

• 61% of revenue from export
• record sales, highest profitability among segments
• completion of relocation projects (Jaryszki, Słupsk)

*) EBITDA and net profit adjusted by the impact of one-off events

Name of the organisational unit:
Period covered by the financial statements:	1 January 2022 - 31
December 2022

gas

• PLN 281 million revenue
• PLN 23 million EBITDA*
• 69% of revenue from export
• main foreign markets: UK, Belgium, Germany
• material impact of write-downs on results

Segment share in total sales

Apator Group

Reporting currency:

polish zloty (PLN)

Rounding level:

all amounts are expressed in thousands of PLN (unless stated otherwise)

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Report of the Executive Board on Activity of Grupa Apator in 2022

1. Business model and organisation of the group of companies

1.1. Organisation of the Apator Group

The Apator Group is an international group of manufacturers and distributors of measuring devices and systems, as well as suppliers of innovative solutions for the automation of the power, water and gas networks.

11 national and	9 production	2.4 thousand	7
international
facilities	employees	R&D offices
companies

The companies of the Apator Group are part of the electromechanical sector and focus their activity on manufacturing and sales of measuring equipment (electricity meters, gas meters, water meters and heat meters), control and measurement instruments, distribution and control equipment, IT systems of SCADA class and their supporting telemechanics devices, security and other network devices for distributed systems ensuring the possibility of remote control and supervision of the power grid in the full voltage range, as well as data reading and transmission devices. The Apator Group also implements solutions supporting energy transformation and the development of renewable energy (e.g. automation equipment, RES supervision systems, energy storage facilities).

The parent entity of the Apator Group of Companies is Apator S.A. with its headquarters in Toruń.

listed on the	included	dividend
Warsaw Stock Exchange	in the sWIG80 index
company
for 26 years
and WIGdiv

1.2. Composition of the Apator Group

The structure of the Apator Group as of 31 December 2022, and at the date of publication of this report is as follows:

Name of the organisational unit:		Apator Group
Period covered by the financial statements:	1 January 2022 - 31	Reporting currency:	polish zloty (PLN)
December 2022
Rounding level:	all amounts are expressed in thousands of PLN (unless stated otherwise)

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Report of the Executive Board on Activity of Grupa Apator in 2022

1.3. Changes in the organisation of the Apator Group

Acquisitions

Acquisition of shares of Apator Telemetria Sp. z o.o.

On 21 January 2022, the subsidiary Apator Powogaz S.A. acquired 248 shares from two natural persons (partners of Apator Telemetria Sp. z o.o.) for the total price of PLN 5.9 million. Due to the above, the subsidiary Apator Powogaz S.A. currently holds 71.89% of the share capital of Apator Telemetria Sp. z o. o. and 71.89% of the total number of votes.

After taking the above transaction into account, Apator S.A. and Apator Powogaz S.A. hold 92.69% of the share capital of Apator Telemetria Sp. z o. o. and 92.69% of the total number of votes.

Apator Telemetria Sp. z o.o., which has been part of the Group of Companies since 2009, is one of the main R&D facilities of the Apator Group. In view of its significant importance for the development of the product offer and remote reading systems, the decision was taken to increase the capital involvement in this company.

Mergers

Merger of Apator S.A. with Apator Elkomtech S.A.

On 3 January 2022, the Regional Court in Toruń, 7th Commercial Division of the National Court Register, noted the merger of Apator S.A. with its headquarters in Toruń with its subsidiary Apator Elkomtech S.A. with its headquarters in Łódź. Due to the fact that Apator S.A. was the owner of 100% shares of Apator Elkomtech S.A., the merger took place under a simplified procedure based on Art. 516, sec. 6 of the Code of Commercial Companies, without the increase of the share capital of the Issuer and without the issue of new shares.

The merger was conducted in accordance with Art. 492, sec. 1 pt 1 of the Code of Commercial Companies through the transfer of all assets of Apator Elkomtech S.A. to Apator S.A. On the date of entry of the merger into the register of entrepreneurs of the National Court Register, Apator S.A. gained all rights and obligations of Apator Elkomtech S.A. In connection with the above, from 3 January 2022, Apator Elkomtech S.A., together with its branches, is within the structures of Apator S.A.

Apator Elkomtech S.A. specialised in the production of SCADA class control and supervision systems and specialist devices supporting the management of the power grid. The company was made up of combined resources from the following locations: Łódź (headquarters), Toruń (former Apator Control Sp. z o.o., incorporated into Apator Elkomtech S.A. in 2019) and Poznań, i.e., the IT team taken over from Atrem SA (which joined the company in 2020), which allowed to expand the competence and offer of the line in the field of devices and software for the gas sector.

The incorporation of Apator Elkomtech S.A. into Apator S.A. is the next stage of consolidation of the Electricity segment planned in the business strategy of the Apator Group. This undertaking makes it possible to develop comprehensive solutions for the market (hardware + ICT), and to take full advantage of new market opportunities in the RES and energy efficiency areas.

Sale

Sale of AO Teplovodomer shares

On 20 May 2022, Apator Powogaz S.A. sold the entire block of shares (i.e. 18,018 shares) of AO Teplovodomer with its headquarters in Russia (constituting 50% of the share capital) for RUB 5 million, i.e., approximately EUR 75 thousand (according to the Bank of Russia exchange rate from 19 May 2022.), i.e. PLN 348 thousand. As of 30 April 2022, the book value, based on the financial statements of Apator Powogaz S.A., of the sold shares was PLN 314 thousand, while the valuation (using the equity method), based on the consolidated statement of the Apator Group amounted to PLN 717 thousand.

Name of the organisational unit:		Apator Group
Period covered by the financial statements:	1 January 2022 - 31	Reporting currency:	polish zloty (PLN)
December 2022
Rounding level:	all amounts are expressed in thousands of PLN (unless stated otherwise)

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