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Report of the Executive Board on activity of Grupa Apator in 2018
Entity name: Grupa Apator
Period covered by the financial statements: 01.01.2017 – 31.12.2017 Reporting currency: Polish zloty (PLN)
Level of rounding: all amounts are expressed in thousands of Polish zlotys (unless indicated otherwise)
Page 1 of 84
Report of the Executive Board on activity of Grupa Apator in 2018 Torun, 29th April 2019
Report of the Executive Board on activity of Grupa Apator in 2018
Entity name: Grupa Apator
Period covered by the financial statements: 01.01.2018 – 31.12.2018 Reporting currency: Polish zloty (PLN)
Level of rounding: all amounts are expressed in thousands of Polish zlotys (unless indicated otherwise)
Page 2 of 84
Table of contents
1. General information .................................................................................................................................. 7
1.1. Organisation of Apator Group ................................................................................................................. 7
1.2. Composition of Apator Group and its business segments ...................................................................... 7
1.3. Entities subject to consolidation as at 31 December 2018...................................................................... 8
1.4. Changes in the organisation of Apator Group in 2018 .......................................................................... 10
1.5. Headcount ............................................................................................................................................. 11
2. Financial results ...................................................................................................................................... 11
2.1. Significant achievements of Apator Group in 2018 ............................................................................... 11
2.2. Implementation of the forecast of consolidated financial results ........................................................... 13
2.3. Analysis and sales structure .................................................................................................................. 13
2.4. Purchasing process, sources of supply ................................................................................................. 16
2.5. Analysis of the profit and loss account .................................................................................................. 17
2.6. Analysis of financial situation ................................................................................................................ 19
2.6.1. Evaluation of financial resource ........................................................................................................ 20
2.6.2. Assessment of financial resources management ............................................................................ 21
3. Forecast of consolidated financial results for 2019 ................................................................................ 22
4. List of major events that took place in 2018 ........................................................................................... 23
Report of the Executive Board on activity of Grupa Apator in 2018
Entity name: Grupa Apator
Period covered by the financial statements: 01.01.2018 – 31.12.2018 Reporting currency: Polish zloty (PLN)
Level of rounding: all amounts are expressed in thousands of Polish zlotys (unless indicated otherwise)
Page 3 of 84
5. List of events that occurred after the 31st December 2018 ................................................................... 25
6. Industry situation and business development prospects taking into account the elements of the
strategy ................................................................................................................................................... 26
7. Risk and hazard factors .......................................................................................................................... 30
▪ Risk of economic and political changes ............................................................................................ 30
Significant influence on activity and sales volume of Apator Group has economic and political situation in
Poland and on foreign markets. On the domestic market, due to a significant share in revenues of the
energy sector, energy policy, infrastructural investments have a particularly important impact. and a
high concentration of customers in this sector. ...................................................................................... 30
In order to reduce the impact of customer concentration, the Group expands into foreign markets and
searches for selected products and services for sales opportunities outside the energy sector (in
industry). At present, the Group focuses on strengthening its market position in the EMEA area, which
is experiencing significant sales growth. ................................................................................................ 30
▪ Regulatory and legislative risks ......................................................................................................... 30
Energy Flexibility 'EU Winter Package'. - a package of documents (published by the European
Commission at the end of November 2016) outlining new expectations of the European Commission
with regard to the implementation of the EU climate and energy objectives for 2030 in four main areas:
security of supply, internal energy market, energy efficiency and energy transformation. The package
introduces, among other things, a broader concept of energy flexibility, i.e. the ability to flexibly reduce
and increase demand, as well as the ability to flexibly reduce energy production. As a consequence of
the introduced changes, the implementation of Smart Grid and Smart Metering technologies in Europe
is expected to accelerate. ...................................................................................................................... 30
Energy Law (in progress) - in 2018, deep changes in the Energy Law were consulted on the introduction of
a schedule for the implementation of smart metering in Poland, the final shape of which has not yet
been approved. The introduction of the function of Measurement Information Operator was also
discussed. Approval of the above changes will have an impact not only on the change in
measurement technology, but also on the increase in the importance of automation of distribution
networks. ............................................................................................................................................... 31
The amendment to the Law on Measures introduces the possibility of re-verification of legalisation of a
homogeneous batch of measuring instruments using the statistical method. This method consists in
taking at random from each homogeneous batch of measuring instruments a sample of those
instruments and checking each individual measuring instrument from the sample taken. At present,
reverification of a measuring instrument can only be carried out by checking each individual measuring
instrument. The Act applies first to gas meters, then to electricity meters and may may in the future
reduce the number of tenders announced by distribution system operators. On the other hand,
regulation favours manufacturers of high-quality measuring instruments (such as the Apator group)
that maintain stable conditions measuring over a long time horizon. ................................................... 31
The EU Regulation 2016/679 (GDPR) has introduced new responsibilities for the processing, use and
storage of energy consumption measurement data into personal data. This has led to a change in
expectations of clients with regard to the level of security of data collected and transmitted by devices
and systems, going far beyond the standard provision of encrypted communication. In terms of safety
level the products of Apator Group meet new technical and market requirements. ............................. 31
▪ Risk of availability of employees ........................................................................................................ 31
The activity of Apator Group depends on competence and knowledge of employees, especially in R&D
departments and on availability of production employees. In order to minimize the risk resulting from
limitations of the labour market, Apator Group performs actions to acquire and maintain the staff,
including those related to building the employer's brand, creation of retention programmes,
Report of the Executive Board on activity of Grupa Apator in 2018
Entity name: Grupa Apator
Period covered by the financial statements: 01.01.2018 – 31.12.2018 Reporting currency: Polish zloty (PLN)
Level of rounding: all amounts are expressed in thousands of Polish zlotys (unless indicated otherwise)
Page 4 of 84
development of competences and improvement of organisation and work efficiency. However,
regardless of the actions taken, taking into account the tendencies to strengthen the employee market,
we must also take into account the need for further, progressive automation of production. ................ 31
▪ Risk of delivery of electronic components ....................................................................................... 31
▪ Declining trend in prices of gas and electricity meters.................................................................... 31
▪ Risk of development of electronic measurement technology and adjustment of the product
offer ....................................................................................................................................................... 32
▪ Risk of commercialization of development projects ....................................................................... 32
▪ Risk of loss of economic value of expenditure on development projects .................................... 32
▪ Risk of contractual penalties and warranty repairs .......................................................................... 32
▪ Risk of impairment of acquired assets .............................................................................................. 33
▪ Risks related to Apator Rector and its influence on the results of Apator Group ........................ 33
▪ Currency risk ........................................................................................................................................ 34
▪ Liquidity risk ......................................................................................................................................... 34
▪ Tax risk .................................................................................................................................................. 35
▪ Risk of lower utilisation of deferred income tax assets ................................................................... 35
8. Description of material off-balance sheet items and investments .......................................................... 36
8.1. Description of the structure of major capital investments or major capital investments made within
Grupa Apator in 2018. ........................................................................................................................... 36
8.2. Investments ........................................................................................................................................... 36
9. Credits, loans, sureties, guarantees ....................................................................................................... 37
9.1. Credits ................................................................................................................................................... 37
9.2. Loans ..................................................................................................................................................... 38
9.3. Sureties ................................................................................................................................................. 38
9.4. Guarantees ............................................................................................................................................ 39
10. Proceedings pending before a court, arbitration body or public administration authority ...................... 39
11. Transactions with related parties ............................................................................................................ 40
12. Material contract ..................................................................................................................................... 40
12.1. Agreements concluded with members of managing bodies ................................................................. 40
12.2. Agreements concluded between shareholders of Apator SA................................................................ 40
12.3. Commercial agreements ....................................................................................................................... 41
12.4. Cooperation or cooperation agreements ............................................................................................... 41
12.5. Insurance agreements ........................................................................................................................... 41
13. Statement of the Management Board .................................................................................................... 43
13.1. Statement of the Executive Board of Apator SA on the preparation of the financial statement and the
report of the Executive Board ................................................................................................................ 43
13.2. Statement of the Executive Board of Apator SA on the selection of the entity authorized to audit
financial statements ............................................................................................................................... 43
14. Supervisory Board Statement ................................................................................................................ 44
Report of the Executive Board on activity of Grupa Apator in 2018
Entity name: Grupa Apator
Period covered by the financial statements: 01.01.2018 – 31.12.2018 Reporting currency: Polish zloty (PLN)
Level of rounding: all amounts are expressed in thousands of Polish zlotys (unless indicated otherwise)
Page 5 of 84
14.1. Supervisory Board's assessment of the financial statements and the Management Board's report .... 44
14.2. Statement of the Supervisory Board of Apator SA with respect to the Audit Committee ...................... 44
15. Corporate governance in Apator SA ...................................................................................................... 45
15.1. Corporate governance rules in force since 2016 .................................................................................. 45
15.2. Shareholders of Apator SA having directly or indirectly significant blocks of shares ............................ 45
15.3. Dividend ................................................................................................................................................. 46
15.4. Description of the main features of the internal control and risk management systems applied with
respect to the process of preparing financial statements and consolidated financial statements ....... 46
15.5. Demonstration of holders of any securities that give special control rights, together with a description
of such rights ......................................................................................................................................... 48
15.6. Restrictions on the exercise of voting rights attached to shares ........................................................... 49
15.7. Demonstration of any limitations concerning the transfer of ownership rights to shares of Apator SA 49
15.7.1. Information on the issue of securities of Apator SA ................................................................. 49
15.7.2. Information on contracts, which may result in changes to the financial statements in the
proportions of shares held by the existing shareholders ............................................................... 49
15.7.3. Control system of employee share ownership schemes .......................................................... 49
15.8. Description of rules concerning appointment and dismissal of managing persons and their rights, in
particular the right to make decisions on the issue or redemption of shares ........................................ 50
15.8.1. General Meeting ............................................................................................................................. 50
15.8.2. Supervisory Board ......................................................................................................................... 50
15.8.3. The Management Board ................................................................................................................ 51
15.9. Description of the principles of amendments to the Statute of Apator SA ............................................ 52
15.10. Principles of operation of the General Meeting ..................................................................................... 52
15.11. Personal composition of managing and supervising bodies of Apator SA and the changes that
occurred in it during the last financial year with the description of activity ............................................ 54
15.11.1. The structure of the authorities of Apator SA as of 31st December 2018. .............................. 54
15.11.2. Supervisory Board ......................................................................................................................... 54
15.11.3. Audit Committee of the Supervisory Board of Apator SA ......................................................... 56
15.11.4. The Management Board ................................................................................................................ 59
15.12. Remuneration policy in Apator SA ........................................................................................................ 61
15.13. Diversity policy in Apator SA ................................................................................................................. 61
15.14. Sponsorship policy in Apator SA ........................................................................................................... 62
16. Statement of Grupa Apator on non-financial information for 2018 ......................................................... 63
16.1. Business model ..................................................................................................................................... 63
16.2. Employee issues ................................................................................................................................... 68
16.3. Anti-corruption and anti-bribery ............................................................................................................. 73
16.4. Respect for human rights ...................................................................................................................... 75
16.5. Environmental area ............................................................................................................................... 77
16.6. Social issues .......................................................................................................................................... 80
Report of the Executive Board on activity of Grupa Apator in 2018
Entity name: Grupa Apator
Period covered by the financial statements: 01.01.2018 – 31.12.2018 Reporting currency: Polish zloty (PLN)
Level of rounding: all amounts are expressed in thousands of Polish zlotys (unless indicated otherwise)
Page 6 of 84
Signatures ......................................................................................................................................................... 83
Report of the Executive Board on activity of Grupa Apator in 2018
Entity name: Grupa Apator
Period covered by the financial statements: 01.01.2018 – 31.12.2018 Reporting currency: Polish zloty (PLN)
Level of rounding: all amounts are expressed in thousands of Polish zlotys (unless indicated otherwise)
Page 7 of 84
1. General information
1.1. Organisation of Apator Group
Apator SA is the parent entity of Apator Group. As of the reporting date, the group consists of 16 entities*.
The companies of Apator Group focus their activity in the electrical engineering industry and their activity
concentrates on production and sale of measuring instruments, control and measurement, distribution and
control apparatus, SCADA class IT systems and cooperating with them telemechanics devices, protections
and other network devices for distributed systems, providing the possibility of remote control and supervision
of power network in full range of voltages and devices reading and transmitting the data.
1.2. Composition of Apator Group and its business segments
The structure of the group as of 31 December 2018 was as follows:
The companies of Apator Group concentrate their activity within the electromechanical industry,
in the following business segments and lines:
(*) 1 April 2019. The District Court in Łódź, XX Commercial Division of the National Court Register, made the entry of the merger of two subsidiaries of Apator SA, i.e. Apator Elkomtech SA and Apator Control sp. z o.o., therefore since that moment the number of entities included in Grupa Apator decreased to 15.
Report of the Executive Board on activity of Grupa Apator in 2018
Entity name: Grupa Apator
Period covered by the financial statements: 01.01.2018 – 31.12.2018 Reporting currency: Polish zloty (PLN)
Level of rounding: all amounts are expressed in thousands of Polish zlotys (unless indicated otherwise)
Page 8 of 84
1.3. Entities subject to consolidation as at 31 December 2018.
▪ parent entity: Apator SA, which operates in the connection line and measurement of electric energy,
▪ subsidiaries (direct and indirect) consolidated using the full method:
Segment Business line Company Office Share
in capital
Relation to Apator SA
Electricity Electricity metering
FAP Pafal SA Świdnica 100% Subsidiary company of Apator SA
Electricity
ICT Apator Rector Sp. z o. o. Zielona Góra 100% Subsidiary company of Apator SA
Control and monitoring systems
Apator Elkomtech SA Łódź 100% Subsidiary company of Apator SA
Apator Control Sp. z o. o.* Toruń 100% Subsidiary company of Apator SA
Switchgear Apator GmbH Berlin
(Germany) 100%
Subsidiary company of Apator SA
Electricity / Gas
Electricity and gas metering
Apator GmbH Berlin
(Germany) 100%
Subsidiary company of Apator SA
Water and heating
Metering
water and heating
Apator Powogaz SA Poznań 100% Subsidiary company of Apator SA
Apator Metra s. r. o. Sumperk (Czech
100% Indirect subsidiary of Apator SA through Apator Powogaz SA
Report of the Executive Board on activity of Grupa Apator in 2018
Entity name: Grupa Apator
Period covered by the financial statements: 01.01.2018 – 31.12.2018 Reporting currency: Polish zloty (PLN)
Level of rounding: all amounts are expressed in thousands of Polish zlotys (unless indicated otherwise)
Page 9 of 84
Segment Business line Company Office Share
in capital
Relation to Apator SA
Republic) Indirect share through Apator Powogaz SA
Apator Miitors ApS Aarhus
(Denmark) 100%
Indirect subsidiary of Apator SA through Apator Powogaz SA
Indirect share through Apator Powogaz SA
TOV Apator Metroteks Kiev (Ukraine) 61%
Indirect subsidiary of Apator SA through Apator Powogaz SA
Indirect share through Apator Powogaz SA
Apator Telemetria Sp. z o. o. Słupsk 61.8%**
Indirect subsidiary of Apator SA through Apator Powogaz SA
Indirect share through Apator Powogaz SA
Gas Gas metering
Apator Metrix SA Tczew 100% Subsidiary company of Apator SA
GWi Ltd. Coventry (UK) 100%
Indirect subsidiary of Apator SA
through Apator Metrix SA
Indirect share through Apator Metrix SA
Discontinued operation
Mining line Apator Mining Sp. z o. o.** Katowice 100% Subsidiary company of Apator SA
*) On the 1st April 2019 Apator Control Sp. z o. o. ceased to exist - it was taken over by Apator Elkomtech SA. On the day of the merger Apator Elkomtech SA entered into all rights and obligations of Apator Control Sp. z o.o. In connection with the described takeover within the new Strategy of Apator Group for the years 2019-2023 in the segment of Electricity the separation of the line of control equipment to which Apator Control was included so far was abandoned. For the period of the merger the activity of both companies and after the merger the activity of Apator Elkomtech S.A. (the acquiring company) is qualified to the line of control and supervision systems. **) Changes in shares in the capital of Apator Telemetria Sp. z o.o. and changes in Apator Mining Sp. z o.o. are described in point 1.4
below.
▪ and the following jointly controlled entities measured using the equity method:
Segment Business line Company Office Share
in capital
Relation to Apator SA
Water and heating
Water and heating metering
ZAO Teplovodomer Mytishi
(Russia) 50%
Jointly controlled indirectly by Apator SA through Apator Powogaz SA
Indirect share through Apator Powogaz SA
Gas Gas metering INDA d.o.o. Ljubljana (Slovenia)
35%
Jointly controlled indirectly by Apator SA through Apator Metrix S.A.
Indirect share through GWI
Report of the Executive Board on activity of Grupa Apator in 2018
Entity name: Grupa Apator
Period covered by the financial statements: 01.01.2018 – 31.12.2018 Reporting currency: Polish zloty (PLN)
Level of rounding: all amounts are expressed in thousands of Polish zlotys (unless indicated otherwise)
Page 10 of 84
1.4. Changes in the organisation of Apator Group in 2018
Beginning from the 1st January 2018 there was a change in classification of activity of Apator Group
companies within new segments determined by the type of customer:
− Electricity* including: electricity metering, switchgear, ICT
and control and monitoring systems,
− Water and heating,
− Gas.
The activities were also continued (started in the first half of 2017) aiming at phasing out of production
activity of Apator Mining Sp. z o.o. by selling its production assets
and change of the activity profile. In 2018, the company ceased its activity related to the manufacture of
equipment
mining. Currently, it only provides services and commercial activities. Target is 2020. Apator Mining Sp. z o.
o. will cease to provide services and lease of equipment and trade in goods. Apator Mining Sp. z o.o. will
remain the commercial law company managing the block of 3.6 million shares of Apator SA.
In accordance with the intention announced in Q1 2018, on April 1, 2019 the District Court in Łódź, XX
Commercial Division of the National Court Register, registered the merger of two subsidiaries operating in
the Elektryczna Energy segment, i.e. Apator Control Sp. z o.o. with its registered office in Toruń and Apator
Elkomtech SA with its registered office in Łódź. Apator Elkomtech SA was the taking-over company and the
aim of the merger was to increase the efficiency of management and to achieve synergy effects in the
operational area by optimal use of resources of both companies. The merger was performed pursuant to art.
492 § 1 point 1 of the Commercial Companies Code by transferring all assets of Apator Control Sp. z o.o. to
Apator Elkomtech SA in exchange for shares in the increased share capital of Apator Elkomtech SA. On the
day of registration of the merger in the register of entrepreneurs of the National Court Register, Apator
Elkomtech SA entered into all rights and obligations of Apator Control Sp. z o.o.
On 20 September 2018 Apator Powogaz SA signed the contracts of purchase of 254 shares in total in
Apator Telemetria Sp. z o. o. from two minority shareholders of the company. As a result of the transaction
the share of Apator Powogaz SA in Apator Telemetria Sp. z o. o. increased from 51.5% to 61.8%.
However, there have been no changes in the structure of the business entity, including business
combinations, acquisitions or disposals of entities in the issuer's capital group, long-term investments,
demergers, restructurings and discontinued operations. The amount of capital exposure in individual
companies has not changed either.
*) The previous name of the smart grid segment has been changed in accordance with the nomenclature of the new Strategy of Apator Group.
Report of the Executive Board on activity of Grupa Apator in 2018
Entity name: Grupa Apator
Period covered by the financial statements: 01.01.2018 – 31.12.2018 Reporting currency: Polish zloty (PLN)
Level of rounding: all amounts are expressed in thousands of Polish zlotys (unless indicated otherwise)
Page 11 of 84
for years 2019-2023. In the segment, the separation of control equipment lines was abandoned at the same time, as explained above.
1.5. Headcount
Employment in Grupa Apator as of 31st December 2018 was 2,549 persons and it was by 31 persons more
in relation to the level as at 31 December 2017.
Comparable year-to-year level of employment is the result of employment growth in two manufacturing
companies of Grupa Apator (Apator SA and Apator Powogaz) and limitation of the number of employees in
relation
with the restructuring activities performed in 2018 (mainly in FAP Pafal, Apator Elkomtech, Apator Rector)
aimed at adjusting the potential of particular companies of Grupa Apator to the current market situation and
improvement of operational efficiency by greater use of synergy effects in Grupa Apator. The decrease of
employment in Apator Mining results from gradual termination of the production activity of the Company.
Employment at the end of 2018 and 2017, broken down by individual companies, is presented in the table
below.
Headcount in the Grupa Apator at 31.12.2018 at 31.12.2017 Dynamics y/y
persons persons %
Apator SA 756 605 125
Apator Powogaz group 774 757 102
Apator Metrix group 500 560 89
Apator Rector Sp. z o. o. 124 136 91
Apator Elkomtech SA 150 175 86
FAP Pafal SA 183 193 95
Apator Mining Sp. z o. o. 5 27 19
Apator Control Sp. z o. o. 51 59 86
Apator GmbH 6 6 100
Conclusions 2 549 2 518 101
2. Financial results
2.1. Significant achievements of Apator Group in 2018
The year 2018 in Grupa Apator was a period of decisive actions in terms of increasing effectiveness:
organizational changes, consistent cost control and optimization of the product portfolio. At the same time,
the results of the IT companies still burdening the entire Group in 2017 significantly improved: Apator Rector
developed the results in accordance with the assumptions and Apator Elkomtech noted revenues and profits
significantly above the assumed budget. Thanks to the above mentioned factors - even with slightly lower
sales revenues than in the previous year - all financial results of Grupa Apator for 2018, both in terms of
mass of profits and profitability ratios, turned out to be better than in 2017. Profit on sales increased year on
year by 26.1 million PLN (36.2%), EBITDA result by 30.4 million PLN and net profit by 26.5 million PLN*,
which means that it was more than 60% higher than in the previous year. Sales in the Electricity and Gas
segments were more profitable y/y (excluding profit margin), while in the Water and Heat segments,
traditionally high profitability levels were maintained. As a result, the 2018 net profit target was reached at
101% (taking into account the upper limit of the forecast) and at over 108% (referring to the lower limit).
Report of the Executive Board on activity of Grupa Apator in 2018
Entity name: Grupa Apator
Period covered by the financial statements: 01.01.2018 – 31.12.2018 Reporting currency: Polish zloty (PLN)
Level of rounding: all amounts are expressed in thousands of Polish zlotys (unless indicated otherwise)
Page 12 of 84
*) Analogical changes for continued operations were, respectively: profit on sales of PLN 26.6 million (38%), EBITDA of PLN 30.9 million, net profit of PLN 26.7 million.
Operational activities, aimed primarily at searching for possible areas of optimization, and consequently
improvement of current effectiveness, were accompanied by intensive work
of strategic (long-term) nature. The Group worked, among others, on building a portfolio of orders for
subsequent periods*, conducted intensive development work on new products and finally worked on a new
strategy for 2019-2023.
In the first of these areas, the 2019 backlog provides an optimistic outlook for the future thanks to the orders
acquired in 2018 (taking into account the orders acquired earlier). Apator Group will supply (taking into
account only the largest contracts) electricity meters for PGE Dystrybucja, innogy Stoen Operator and
Tauron Dystrybucja and meters for German market, bellows gas meters for Polska Spółka Gazownictwa and
gas meters for Dutch market (under contracts from 2015-2016 concluded by Apator Metrix and its subsidiary
GWi) and water meters, heat meters and cost allocators e.g. for Russian market under framework
cooperation agreement for 2019 signed by Apator Powogaz. (with its subsidiary ZAO Teplovodomer with its
registered office in Mytiszczi
in Russia).
As a result of the development work carried out in 2018, a new smart electricity meter - OTUS - was
developed, equipped with modern communication modules NB IoT and Cat.M1. The offer of smart
disconnectors, controllers and protections for automation of power network operation was developed and an
innovative FDIR system for automatic restoration of ee network voltage was implemented. In the fourth
quarter of 2018 the works on the final variants of the microBEL short-circuit current flow indicator were
completed. The Group also worked on new products from the Ultrimis ultrasonic water meters family, and in
the Gas segment on new intelligent gas meters, two-tube gas meter and industrial multi-tube gas meters.
Works on new strategy of Grupa Apator for years 2019-2023 (started in the first quarter of 2018
and consistently continued in the following months) resulted in its approval on 17th October 2018 by the
Supervisory Board of Apator SA. According to the adopted assumptions, Grupa Apator plans to significantly
increase the scale of operations (EBITDA at 220 million PLN and sales revenues at 1,4 billion PLN in 2023),
which will be driven by the development of existing businesses and development of product portfolio towards
technologically advanced solutions for management of energy media, including smart solutions and systems
for active management of distribution networks. The financial objectives will be achieved on the basis of
maintaining a strong position on the domestic market, growth of shares on strategic markets (Germany,
Central and Eastern Europe) and use of sales opportunities on other European markets. Apator will put
emphasis on segments of customers with high sales potential and profitability and will develop sales of high-
margin products, including intelligent solutions. Achievement of the assumed financial objectives will also be
possible thanks to further improvement of operational efficiency and cost optimisation through the use of
synergy effects, for which a solid premise may be achieved so far, the effects of which are visible in the good
results of the current period. After the strategy was published, work on it was continued - after the completion
of a multi-layered diagnosis of the situation on the market and in the Group, the strategy was started to be
operationalised - subsequent strategic initiatives were gradually launched, some of which are already in the
implementation phase. In 2019, work within the framework of already undertaken initiatives will be continued
and at the same time new activities will be launched, both in terms of building the offer for customers, and in
terms of
and internal processes (operational efficiency).
Report of the Executive Board on activity of Grupa Apator in 2018
Entity name: Grupa Apator
Period covered by the financial statements: 01.01.2018 – 31.12.2018 Reporting currency: Polish zloty (PLN)
Level of rounding: all amounts are expressed in thousands of Polish zlotys (unless indicated otherwise)
Page 13 of 84
*) Winning tenders and signing contracts were reported in subsequent quarterly reports.
2.2. Implementation of the forecast of consolidated financial results
Implementation of the forecast of consolidated financial results
The most important factors influencing the financial results of Grupa Apator in 2018 in relation to 2017 are
the improvement of profitability at all levels (achieved among others due to consistent optimization and
control of costs and organizational changes in Grupa Apator) and also significant improvement of results of
Apator Elkomtech and Apator Rector (the companies whose losses in 2017 strongly burdened the financial
result of Grupa Apator). As a result, with lower revenues than in 2017, all results are significantly better, both
in terms of weight of profits and profitability ratios, which reached their highest levels since the record-
breaking in many respects in 2014.
2.3. Analysis and sales structure
Main customers
Grupa Apator sells its products mainly to institutional customers and industry:
▪ electricity segment
− electricity metering line - sales revenues from distribution system operators (power plants) obtained
mainly through winning tenders; on foreign markets (mainly EU countries) a dispersed group of
customers,
− switching equipment - two main groups of customers are electrical wholesalers and electrical
installation and assembly companies,
− line of control and supervision systems - sales revenues are obtained to a large extent from
distribution system operators (power plants); a large, dispersed group of customers (construction,
metallurgy, industry, railways, mining) in the area of control equipment*,
− ICT line - customers are mainly distribution system operators (power plants),
▪ gas segment:
− gas metering line - the main group of customers are institutional customers and gas companies,
▪ water and heating segment:
− water and heat metering line - a large, dispersed group of customers (waterworks, heat energy
companies, housing cooperatives and communities, construction, industry).
In 2018 none of the individual customers exceeded the value of 10% of revenues from sales in total Grupa
Apator.
Specification Forecast for 2018 Performance 2018 Progress
Consolidated revenues from continued and discontinued operations
850 000 - 880 000 844 043 95.9% - 99.3%
Consolidated net profit on continued and discontinued operations
65 000 - 70 000 70 405 100.6% - 108.3%
Report of the Executive Board on activity of Grupa Apator in 2018
Entity name: Grupa Apator
Period covered by the financial statements: 01.01.2018 – 31.12.2018 Reporting currency: Polish zloty (PLN)
Level of rounding: all amounts are expressed in thousands of Polish zlotys (unless indicated otherwise)
Page 14 of 84
*) Integration of a previously separated line of control apparatus into the line of control and supervision systems is related to with the merger of Apator Control Sp. z o.o. with Apator Elkomtech S.A. described in point 1.4.
Sales analysis by segments
In 2018 the revenues of Apator Group (including discontinued operations) were lower
by PLN 63 million (7%) as compared to 2017, mainly due to lower turnover in the Gas segment (due to the
completion of a large contract in the UK with a relatively high turnover value and low margin).
The table below presents the structure of sales of Apator Group by segments with a breakdown by country
and export (sales to EU countries, including Great Britain and other countries) and
including discontinued operations:
Specification
Performance Performance
2018 2017 Change y/y Dynamics
(PLN thousand)
(PLN thousand)
(PLN thousand)
(%)
Electricity segment 385 922 348 082 37 840 110.9%
country 315 933 260 205 55 728 121.4%
export 69 989 87 877 - 17 888 79.6%
ratio of exports in the segment EE in total sales revenue 8.3% 9.7%
Gas segment 183 536 271 925 - 88 389 67.5%
country 29 894 33 238 - 3 344 89.9%
export 153 642 238 687 - 85 045 64.4%
ratio of exports in the segment Gas in total sales revenue 18.2% 26.3%
Water and heating segment 258 344 263 189 - 4 845 98.2%
country 103 239 95 610 7 629 108.0%
export 155 105 167 579 - 12 474 92.6%
ratio of exports in the segment W&H in total sales revenue 18.4% 18.5%
Total revenues from continuing operations 827 802 883 196 - 55 394 93.7%
country 449 066 389 053 60 013 115.4%
export 378 736 494 143 - 115 407 76.6%
share of export of continued operations in total revenues 44.9% 54.5%
Discontinued operation (Apator Mining)* 16 241 23 706 - 7 465 68.5%
Total sales revenues 844 043 906 902 - 62 859 93.1%
country 465 299 411 936 53 363 113.0%
export 378 744 494 966 - 116 222 76.5%
share of total exports in total revenues 44.9% 54.6%
*) Sale in discontinued operations includes mining equipment.
As regards the product sales structure, throughout 2018 the Electricity segment stood out positively, with a
positive annual sales growth rate of 11%. As a result, the share of the segment
in total revenues from operations (continued and discontinued) reached almost 46%, whereas
in 2017 was less than 39%. The second place was taken by the Water and Heat segment, whose turnover in
2018 was only 1.8% lower than in 2017 and whose share in total revenues from the Group's operations in
2018 reached 30.6% (29.0% in 2017). The Gas segment generated 21.7% of total revenue for the year as a
whole (vs. 30.0% a year earlier).
Changes in sales of particular segments were as follows:
▪ Electricity segment - growth (by 10.9% y/y) due to significantly higher turnover
in Apator Control (sales in 2018 at the level of 45.1 million PLN ver. 27.0 million PLN in 2017, +67%
y/y), switchgear and control and supervision systems (Apator Elkomtech), as well as reconstruction of
Report of the Executive Board on activity of Grupa Apator in 2018
Entity name: Grupa Apator
Period covered by the financial statements: 01.01.2018 – 31.12.2018 Reporting currency: Polish zloty (PLN)
Level of rounding: all amounts are expressed in thousands of Polish zlotys (unless indicated otherwise)
Page 15 of 84
sales in ICT line (Apator Rector) with simultaneous lower sales of electricity meters (lower export of
induction meters),
▪ Gas segment - decrease (by 32.5% y/y) resulting both from lower exports (by 35.6% y/y, due to the
following factors
with the completion of a large contract in the UK) as well as lower domestic sales
(down by 10.1% y/y),
▪ Water and Heat segment - decrease (by 1.8% y/y) resulting from lower export turnover (by 7.4% y/y)
by higher by 8.0% y/y of domestic sales,
▪ discontinued operations (Apator Mining) - decrease by 31.5% y/y (due to gradual phasing out of
production activities).
Geographical structure of sales
In terms of realized sales, 2018 was characterized by very high dynamics of turnover in the country (increase
in revenues from continued and discontinued operations by 13.0% y/y), particularly pronounced after much
weaker results from previous years (dynamics of domestic turnover at the level of +1% y/y)
emissions in 2016 and a decrease by 5% y/y in 2017). The reversal of the negative downward trend is
mainly due to the Electricity segment, whose domestic sales increased in 2018 compared to the following
year's figures
by more than 21% by 2017, which was possible due to higher turnover in all lines of the segment without
exception (electricity meters, switchgear, control and supervision systems, ICT and Apator Control -
previously the line of control equipment).
Domestic revenue growth (by 8% y/y) was also recorded by the Water and Heat segment, while domestic
turnover in the Gas segment alone was 10.1% lower than in the previous year. Since the Group's very good
results on the domestic market were accompanied by weaker export performance (a drop in sales in the
scope of continued operations
and discontinued y/y by 23.5%), the latter's share in total revenue decreased from 54.6% in 2017 to 44.9% in
2018. Lower exports are primarily related to a decrease in sales of the Gas segment.
(following the completion of a major contract in the UK) in which it traditionally plays a decisive role as the
main source of revenue. At the same time, export revenues of the other two segments decreased relatively
strongly. In the measurement of water and heat this resulted, among others, from
emissions from lower sales on the French, Spanish and Italian markets (saturation of the French market in
2017, lack of adequate regulation, including compulsory metering of all radiators, in Spain
and in Italy). In the Electricity segment, exports of induction meters were lower (no sales to Morocco).
Report of the Executive Board on activity of Grupa Apator in 2018
Entity name: Grupa Apator
Period covered by the financial statements: 01.01.2018 – 31.12.2018 Reporting currency: Polish zloty (PLN)
Level of rounding: all amounts are expressed in thousands of Polish zlotys (unless indicated otherwise)
Page 16 of 84
The main sales market of Apator Group in 2018 was Poland (similarly as in previous periods), however its
share in revenues from operations (continued and discontinued) in total increased - due to high dynamics of
sales - by 10 percentage points in relation to 2017. The second place among the Group's trading partners is
occupied by the European Union, with the dominant share of the British, Dutch and Czech
and German markets. Particularly important, taking into account, among others, the assumptions of new
Strategy of Apator Group*, is the last of the mentioned markets on which in 2018 almost 6% increase in
turnover was recorded. It took place mainly due to higher sales of newer generation municipal meters and
higher turnover in switchgear (Apator SA and operating on the German market Apator GmbH) with the
simultaneous significant decrease in demand (and consequently sales) for traditional induction meters
manufactured by FAP Pafal. Increased y/y sales to Germany were also recorded in the segment of
Water and heating.
The next two places among the Group's export markets were Russia and Ukraine (with the following shares
in 2018 at the levels of 6.9% and 5.4% of total exports respectively), which confirms the already signalled in
earlier reports positive tendency to rebuild sales to the eastern markets. The year-on-year increase in sales
concerns not only the Ukrainian market (where it is particularly pronounced - by over PLN 3.7 million, as a
result of which the market share in total exports increased by 2 percentage points), but also other markets of
Central, Eastern and Southern Europe, including, among others, Georgia, Romania, Croatia, Bulgaria, and
Turkey. Thanks to the continued high sales dynamics in these countries, the share of each of them in the
Group's total exports in 2018 was higher than in the previous year, and the period's turnover reached from
less than PLN 2.9 million (0.8% of total exports) for Croatia to nearly PLN 11.1 million in the case of Turkey
and over PLN 10.1 million for Romania (2.9% respectively).
and 2.7% of total export).
2.4. Purchasing process, sources of supply
The basic raw materials which are used in the production process of Grupa Apator companies are
metallurgical products, electronic components, plastic and plastic elements.
Grupa Apator supplies itself with materials, services and goods both on the domestic market and abroad and
in the majority of cases from economic entities registered in Poland. Due to the import of raw materials and
components, whose prices are predominantly denominated in USD, the cost of goods purchased depends to
a large extent on the currency exchange rate. The situation with respect to material prices in the world
economy in 2018 was characterised by a relatively stable price level of electronic components (referring to
the source currency USD) with an upward trend for some product groups (mainly MLCC ceramic capacitors)
with drastically increasing delivery times. Prices of plastics remained basically stable, except for one
polyamide grade.
55%
31%
14%
2018
Polska UE Pozostałe
45%
41%
14%
2017
Polska UE Pozostałe
Report of the Executive Board on activity of Grupa Apator in 2018
Entity name: Grupa Apator
Period covered by the financial statements: 01.01.2018 – 31.12.2018 Reporting currency: Polish zloty (PLN)
Level of rounding: all amounts are expressed in thousands of Polish zlotys (unless indicated otherwise)
Page 17 of 84
*) In which the German market is regarded as one of the strategic markets.
As a result of the disruption in the supply chain of components for its production, the availability of
components for its production has been reduced,
and prices have risen by up to 15%. The increase in the price of non-ferrous metals (copper) in USD was
compensated in 80% by the appreciation of the zloty. The appreciation of PLN against USD in 2018 also
positively influenced the reduction of costs of electronic components in PLN.
Dependence on suppliers
The line of electricity metering in the range of electronic meters depends on the manufacturers of silicon
systems (mainly microcontrollers), which is associated with the lack of equivalents with identical technical
parameters. Stopping supplies from the producer in the first phase would make it necessary to buy these
elements at higher prices from the distribution and brokerage markets (increased risk of receiving out-of-date
or recycled chips), and when they are exhausted, the production of electronic meters could be stopped. A
possible solution would be, based on other silicon systems, to produce a different type of already developed
meter (with the customer's consent) or to implement a new meter. In addition, the imbalance in the supply
market and the extension of the delivery dates of key components, mainly from Chinese manufacturers, puts
domestic (as well as European) electronics manufacturers in a less favourable position compared to Asian
producers with shorter delivery dates. The phenomenon is particularly burdensome for companies supplying
electronic products through public procurement (e.g. electricity meters). This asymmetry may be crucial in
subsequent tenders on the European market.
In the line of control and supervision systems, there is some dependence on the supplier of one of the
communication products (the possible substitution of this supplier with another could temporarily disrupt the
production process schedule).
In other lines: water and heat meters, gas meters, switchgear, ICT there is no dependence on one or more
suppliers. Moreover none of the suppliers supplying Grupa Apator in 2018 exceeded 10% of the value of
revenues from sales of Grupa Apator in 2018.
2.5. Analysis of the profit and loss account
In 2018 Apator Group obtained the following financial results:
Specification
2018 2017 Change y/y Dynamics
(PLN thousand)
(PLN thousand)
(PLN thousand)
(%)
Sales revenue 844 043 906 902 - 62 859 93.1%
Cost of goods sold 583 516 667 041 - 83 525 87.5%
Gross sales profit 260 527 239 861 20 666 108.6%
Selling costs 42 242 44 882 - 2 640 94.1%
General and administrative costs 120 011 122 850 - 2 839 97.7%
Sales profit 98 274 72 129 26 145 136.2%
Result on other operating activities - 7 087 - 8 669 1 582 81.8%
Share in profits of companies consolidated using the equity method
1 342 1 149 193 116.8%
Operating profit 92 529 64 609 27 920 143.2%
EBITDA 134 311 103 893 30 418 129.3%
Result on financial activity 649 - 4 513 5 162 -
Report of the Executive Board on activity of Grupa Apator in 2018
Entity name: Grupa Apator
Period covered by the financial statements: 01.01.2018 – 31.12.2018 Reporting currency: Polish zloty (PLN)
Level of rounding: all amounts are expressed in thousands of Polish zlotys (unless indicated otherwise)
Page 18 of 84
Profit before tax 93 178 60 096 33 082 155.0%
Current income tax - 17 193 - 15 676 - 1 517 109.7%
Deferred income tax - 5 580 - 512 - 5 068 1089.8%
Net profit 70 405 43 908 26 497 160.3%
Profitability ratio:
Gross profit margin on sales 30.9% 26.4%
Profit margin on sales 11.6% 8.0%
Margin EBITDA 15.9% 11.5%
Net profit margin 8.3% 4.8%
The financial results with a separation of the result on discontinued operations were as follows:
Specification
2018 2017 Change y/y Dynamics
(PLN thousand)
(PLN thousand)
(PLN thousand)
(%)
Sales revenue 827 802 883 196 - 55 394 93.7%
Cost of goods sold 568 897 647 280 - 78 383 87.9%
Gross sales profit 258 905 235 916 22 989 109.7%
Selling costs 42 023 44 116 - 2 093 95.3%
General and administrative costs 120 012 121 550 1 538 98.7%
Sales profit 96 870 70 250 26 620 137.9%
Result on other operating activities - 7 087 - 8 669 1 582 81.8%
Share in profits of companies consolidated using the equity method
1 342 1 149 193 116.8%
Operating profit 91 125 62 730 28 395 145.3%
EBITDA 132 907 102 014 30 893 130.3%
Result on financial activity 649 - 4 513 5 162 -
Profit before tax 91 744 58 217 33 557 157.6%
Current income tax - 16 958 - 15 209 - 1 749 111.5%
Deferred income tax - 5 580 - 512 - 5 068 1089.8%
Net profit from continuing operations 69 236 42 496 26 740 162.9%
Net profit from discontinued operations 1 169 1 412 - 243 82.8%
Net profit 70 405 43 908 26 497 160.3%
Profitability ratio:
Gross profit margin on sales 31.3% 26.7%
Profit margin on sales 11.7% 8.0%
Margin EBITDA 16.1% 11.6%
Net profit margin 8.5% 5.0%
Summarising the results in 2018 compared to 2017 Grupa Apator noted:
▪ very good results in the key segment of the Electricity Group (increase in gross margin y/y from 24.9%
to 30.8%, EBITDA margin from 7.0% to 15.4%), including
− in the ee metering line, where, despite a decrease in turnover, EBITDA is higher than in 2017, which is
related to improved sales structure (replacement of older and newer meters) and measures aimed at
reducing production costs, including a higher level of automation (new automatic line launched in the
fourth quarter of 2017) and better coverage of departmental costs,
Report of the Executive Board on activity of Grupa Apator in 2018
Entity name: Grupa Apator
Period covered by the financial statements: 01.01.2018 – 31.12.2018 Reporting currency: Polish zloty (PLN)
Level of rounding: all amounts are expressed in thousands of Polish zlotys (unless indicated otherwise)
Page 19 of 84
− in the line of control and supervision systems (Apator Elkomtech), in which higher turnover was
accompanied by a significant increase in EBITDA being the effect of more favourable product mix
(higher sales of high-margin licences and works)*,
▪ very high dynamics of turnover in the country (increase in revenues from continuing operations)
and discontinued by 13.0% y/y), mainly in the Electricity segment (increase by over 21% y/y), thanks to
sales growth in all lines of the segment,
▪ improved profitability at the level of gross profit on sales and EBITDA in the Gas segment (increase in
gross margin y/y from 19.7% to 22.3%, EBITDA margin from 10.1% to 14.1%), mainly as a result of
higher margin on export of household electronic gas meters,
▪ maintaining very attractive margins in the segment of water and heat metering (gross margin 38.3%,
EBITDA margin 19.4%),
▪ decrease in selling costs (5.9% y/y) and general overheads (2.3% y/y) due to consistent maintenance of
cost discipline,
▪ improvement of the result on financial activities, mainly due to positive exchange rate differences and
foreign exchange transactions.
In 2018 the activities of Grupa Apator were focused on, among others, consistent optimization and control of
costs and organizational changes aimed at improvement of operational efficiency. The activities initiated in
2017 in connection with the reorganisation of Apator Elkomtech (where the cost structure was consistently
optimised) and Apator Rector (with the reorganisation) were also continued.
and stabilizing the situation in both key contracts, actions were taken to improve the financial standing of the
company, including its current liquidity). Thanks to the efforts made, the results of both companies
in 2018 they did not burden the financial result of Grupa Apator as it was in 2017.
2.6. Analysis of financial situation
Cash and cash equivalents of Apator Group as of 31st December 2018 amounted to 29 331 000 PLN and in
relation to the end of 2017 it decreased (by 12.3 million PLN). Cash and cash equivalents were influenced by
the following factors:
▪ increase in net working capital mainly as a result of a significant increase in inventories (related, inter
alia, to the extension of the delivery cycle, especially in the area of electronics, implementation of IFRS
15 and change in the delivery policy to improve the availability and timeliness of delivered products) and
release of provisions (including provisions for uncompleted contracts and guarantees) partially offset by
a decrease in receivables (due to lower turnover),
▪ negative cash flows from investment activities as a result of capital expenditures, mainly for automation
and improvement of production processes, implementation of new products and development works, as
well as expenditures for acquisition of subsidiaries (PLN 8.4 million),
▪ negative balance of financial flows related mainly to payment of dividends (PLN 37.0 million), repayment
of loans and interest (PLN 8.9 million), repayment of lease liabilities (PLN 5.9 million) and acquisition of
own shares (PLN 4.7 million).
*) Increase of profitability y/y in the line of control and supervision systems (Apator Elkomtech) is related, apart from the above mentioned improvement of product mix, also with one-off adjustments (write-offs due to development works, inventories, works in progress due to adjustment of cost base to new market conditions) which burdened the result of the Company in 2017.
Report of the Executive Board on activity of Grupa Apator in 2018
Entity name: Grupa Apator
Period covered by the financial statements: 01.01.2018 – 31.12.2018 Reporting currency: Polish zloty (PLN)
Level of rounding: all amounts are expressed in thousands of Polish zlotys (unless indicated otherwise)
Page 20 of 84
2.6.1. Evaluation of financial resource
In 2018, similarly like in the previous year, Grupa Apator financed its activity in majority with own capital,
whose share in the balance sheet total increased from 54% to 57%. In the structure of external capital, the
share of short-term liabilities increased at the expense of long-term debt, which is related to the repayment of
successive investment credit ratings, decrease in long-term provisions (including provisions for deferred
income tax), slightly greater use of working capital and an increase in the level of other short-term liabilities
(mainly factoring liabilities and investment liabilities), while the balance of trade liabilities at the end of 2018
was PLN 2.4 million lower than in 2017.
The method of financing the activity of Grupa Apator is presented in the table below:
Specification 2018 2017 Change
% % p. p.
Share of equity in balance sheet total 57% 54% 3.0
Share of outside capital in balance sheet 43% 46% - 3.0
The net financial results achieved result in a systematic increase in equity (increase in 2018).
PLN 21,486 thousand in relation to 2017), which also affects its permanent share in the structure of financing
activities.
Both liquidity ratios, both in 2017 and in 2018 were at the optimum level, which confirms that Grupa Apator
had no problems with timely repayment of current liabilities. The Group's financial standing is stable, allowing
it to conduct investment activities and share its profit with shareholders in the form of dividends.
Other key indicators 2018 2017 Formula
Report of the Executive Board on activity of Grupa Apator in 2018
Entity name: Grupa Apator
Period covered by the financial statements: 01.01.2018 – 31.12.2018 Reporting currency: Polish zloty (PLN)
Level of rounding: all amounts are expressed in thousands of Polish zlotys (unless indicated otherwise)
Page 21 of 84
Other key indicators 2018 2017 Formula
Current liquidity ratio 1.24 1.19 current assets/short-term liabilities
Quick liquidity ratio 0.68 0.79 (current assets - inventories)/short-term liabilities
Return on assets ROA 8.39% 5.22% net profit/average total assets calculated as the average value from the opening and closing balance sheet
Return on equity ROE 15.10% 9.77% net profit/average value of equity calculated as the average value from the opening and closing balance sheet
Net Debt (PLN thousand) 133 912 126 361 loans and borrowings - cash and equivalents - loans granted
Net Debt/LTM EBITDA* 1.00 1.22 (credits and loans - cash and equivalents - granted loans)/LTM EBITDA*
Capex (PLN thousand) 47 282 58 325 tangible and intangible investment expenditure
Working capital (PLN thousand) 183 233 154 136 (current assets - cash) - (short-term liabilities - short-term loans and borrowings)
*LTM EBITDA for continued and discontinued operations.
The net working capital increased by 18.9% y/y, mainly due to higher inventory levels. Net debt also
increased (by 6.0% compared to the end of 2017), mainly as a result of increased debt (especially in the
Water and Heat segment) and lower cash. Despite a higher level of debt, thanks to a significant
improvement in financial results (including EBITDA), the net debt/EBITDA ratio in 2018 once again (similarly
as in 2017) decreased significantly and stood at 1.0 (compared to 1.2
in 2017 and 1.7 in 2016).
2.6.2. Assessment of financial resources management
Management of financial resources in Grupa Apator is performed on the basis of the following criteria:
▪ verifying the financial situation of current and potential clients (using the information published in Monitor
Sądowy i Gospodarczy and reports of business intelligence),
▪ management of trade credit on the basis of accepted principles,
▪ monitoring the status of settlements with counterparties,
▪ the application of the procedure for the recovery of late payment,
▪ setting as favourable contractual deadlines as possible for the settlement of obligations,
▪ optimal management of the trade finance area.
In order to increase the financial security of Grupa Apator in selected domestic companies of Grupa Apator
there is an umbrella credit for current activity financing, limits for guarantees and letters of credit and
purchase of receivables by the bank. The loan allowed for flexible liquidity management
The Group's pricing of current banking operations was unified and the effects of the virtual netting service
were used, which brings additional financial benefits. Moreover, in order to counteract potential irregularities
in management of financial resources, the rules of conduct in such areas as: sales, trade credit, monitoring
of receivables, current information of the management boards of particular companies on financial situation
were defined in companies of Grupa Apator.
Report of the Executive Board on activity of Grupa Apator in 2018
Entity name: Grupa Apator
Period covered by the financial statements: 01.01.2018 – 31.12.2018 Reporting currency: Polish zloty (PLN)
Level of rounding: all amounts are expressed in thousands of Polish zlotys (unless indicated otherwise)
Page 22 of 84
Moreover, in order to ensure proper coordination of activities in the area of finance in Grupa Apator, there is
the Finance Committee, which consists mainly of the chief accountants and finance directors of particular
subsidiaries of Grupa Apator. The Committee's tasks include analysis of the needs for development of the
financial area in the Group, analysis and monitoring of the regulatory environment and development of
uniform standards for financial processes. Apart from the Financial Committee, the Financial Risk Committee
was also established, whose main objective is to support the control mechanisms of uniform financial risk
management in the Group. The Committee is composed of the employees of financial divisions of Apator SA
and subsidiaries. The Committee's task shall be, in particular to:
▪ monitoring the security of foreign currency exposure, interest exposure and hedging policy,
▪ recommending the level of budget rates together with the analysis of changes in spot rates,
▪ analysing risks while hedging IRS rates,
▪ analysis of trends and situation on currency markets,
▪ reporting on an ongoing basis to the Chief Financial Officer.
The basic assumption concerning the management of financial resources of Grupa Apator is to maintain
strong and safe position in the scope of financial liquidity of individual companies. Maintaining financial
liquidity is the basis for trust on the part of trading partners, lenders and the market, and enables the
implementation of the assumed plans. It is also the basis for future development of each company and the
whole Grupa Apator. The companies monitor on an ongoing basis the amounts influencing the amount of
their financial resources, aiming at maximum acceleration of cash flow, both by analysing the cycles of
inventory turnover,
as well as the fastest possible collection of receivables.
In 2017 the new model of management in the area of finance in Grupa Apator was implemented which is
conducive to the development of the financial process as the function of support. On the 1st February 2018
the internal auditor of Grupa Apator was appointed. The main objective of internal audit is to support the
Management Board in risk management and to improve the operations of the companies of Grupa Apator
and to bring added value to the performance of strategy of Grupa Apator and to increase its value. This
objective is achieved by assurance, control and advisory activities performed by the audit (with the consent
of the Audit Committee). The internal auditor is authorized to perform audits of various nature in the
companies of Grupa Apator
(including financial audits). The reports on performed audits are transferred to the President of Executive
Board of Apator SA, Supervisory Board of Apator SA and Supervisory Board and President of Executive
Board of the Company,
in which the audit was carried out. The annual plan of work of the internal audit is approved each time by the
Audit Committee of the Supervisory Board of Apator SA.
3. Forecast of consolidated financial results for 2019
The forecast of consolidated financial results for 2019 is as follows:
Specification 2019 forecast 2018 performance Dynamics
Consolidated revenues from sales of products, goods and materials
880 000 – 920 000 844 043* 104% - 109%
Consolidated net profit 72 000 – 75 000 70 405* 102% - 107%
*) Including the results of discontinued operations.
The forecast for 2019 is based on the following main assumptions:
Report of the Executive Board on activity of Grupa Apator in 2018
Entity name: Grupa Apator
Period covered by the financial statements: 01.01.2018 – 31.12.2018 Reporting currency: Polish zloty (PLN)
Level of rounding: all amounts are expressed in thousands of Polish zlotys (unless indicated otherwise)
Page 23 of 84
− main revenue increases assumed in the Gas segment and in the electricity metering line in the
Electricity segment,
− further improvement of results in the companies Apator Rector and Apator Elkomtech,
− significant increase in investment outlays y/y
− average exchange rates: 4.20 PLN/EUR, 3.60 PLN/USD, 4.80 PLN/GBP.
4. List of major events that took place in 2018
1. On 17th April 2018, in the course of works on the consolidated annual report, the Executive Board of
Apator SA made the decision to establish provisions in the burden of the result for 2017 in the total
amount of 12.6 million PLN. The main items of the provisions were security for the penalty for Tauron
Dystrybucja SA in connection with ongoing court settlement negotiations and costs of warranty repairs.
2. In April Apator SA concluded contracts with seven branches of PGE Dystrybucja SA, the subject of
which was the supply of 1-phase and 3-phase electricity meters with the value of 24,8 million PLN. in
2018. The right of option provided for an additional possibility to increase the order by PLN 32.5 million
net with deliveries in 2019. In October 2018 Apator SA received confirmation of its use by six of seven
branches of PGE. In November 2018, a similar confirmation was sent by the last of the branches. The
execution of contracts is proceeding according to the schedule, approximately 70% of the value of
supplies has been completed.
3. On 28 May 2018, the Ordinary General Meeting of Shareholders adopted a resolution on the payment of
dividend from the profit for 2017 in the amount of PLN 1.20 gross per share. Other (after advance
payment
in December 2017) part of the dividend in the amount of PLN 0.85 gross per share was paid to
shareholders on 25 June 2018.
4. 30 May 2018 The Executive Board of Apator SA adopted the resolution on the implementation of the
Programme of repurchase of own shares in order to redeem them and decrease the share capital. An
amount not exceeding PLN 20 million has been earmarked for the implementation of the Programme.
The implementation of the Programme will last until 31 May 2019 at the latest. The redemption of shares
is executed through Erste Securities Polska S.A. with its registered office in Warsaw. From the beginning
of the share buyback until 31 October 2018, 187,800 own shares were bought back, giving 187,800
votes at the General Meeting of Shareholders, constituting in total 0.5673% of the share capital and
0.3407% of the total number of votes at the General Meeting of Shareholders. The number of shares
purchased as at 28 April 2012 amounted to 246,100, constituting in total 0.7433% of the share capital
and 0.4465% of the total number of votes at the General Meeting of Shareholders.
5. On 5th June 2018 the settlement between Tauron Dystrybucja SA and Consortium with participation of
subsidiary - Apator Rector sp. z o.o., whose leader is Comarch S.A. was concluded. According to the
concluded settlement Tauron Dystrybucja SA reduced the demand for payment of contractual penalties
for delay in performance of the contract for performance and implementation of the Network Assets
Management System from the amount of 30.2 million PLN to the amount of 11.1 million PLN, renouncing
further investigation of the calculated contractual penalties. The penalties agreed between the parties will
be settled by contractual deductions from receivables for payment of remuneration for additional works
identified by Tauron, which will be performed in 2018-2022. On 8 June, the agreement was approved by
the competent District Court for Kraków-Śródmieście in Kraków. Once the settlement agreement has
been signed, the work is progressing according to the agreed schedule - at the end of September 2018
the scope of the ZMS project was completed and in the following months (also according to the plan)
additional works specified in the settlement agreement were completed.
Report of the Executive Board on activity of Grupa Apator in 2018
Entity name: Grupa Apator
Period covered by the financial statements: 01.01.2018 – 31.12.2018 Reporting currency: Polish zloty (PLN)
Level of rounding: all amounts are expressed in thousands of Polish zlotys (unless indicated otherwise)
Page 24 of 84
6. On the 13th June 2018 the offer of Apator SA was selected as the most advantageous in the tender for
the supply of 1- and 3-phase utility meters announced by other Stoen Operator Sp. z o.o.
with the Ordering Party with a net value of PLN 20.9 million was concluded on 9 July 2018. Deliveries of
meters will be carried out until March 30, 2020. The execution of the contract is proceeding according to
the schedule, ca. 55% of its value has already been completed.
7. On 18 June 2018 Apator SA concluded the contract with Energa Operator SA, the subject of which is the
delivery of 1-phase and 3-phase municipal electricity meters of the value 29,6 m PLN till the end of 2018
with the possibility to extend the deadline to 30 June 2019. Energa used the right to extend the
implementation period, therefore the contract should be completed by the end of June this year. By the
date of publication of this report, approximately 50% of its value had been realised.
8. On 22nd June 2018 the offer of Apator Metrix SA with the value of 26,8 million PLN was selected as the
most advantageous in six tasks being a part of the tender for supply of bellows gas meters for Polska
Spółka Gazownictwa sp. z o.o. The agreement between Apator Metrix SA and Polska Spółka
Gazownictwa sp. z o.o. was concluded on 16th July this year. Its object is the supply of 26.8 million PLN
worth of bellows gas meters. The terms and conditions of the contract provide for the right of option
consisting in the possibility to increase the order by a maximum of 40%. Therefore, the potential
maximum value of the contract is PLN 37.5 million.
9. On 29th June 2018 the conversion of 100.001 registered shares of Apator SA into ordinary bearer
shares was carried out. On 12 July the above shares were assimilated and introduced to stock exchange
trading.
10. 30th August 2018 between ING Bank Śląski SA and the following companies of Apator Group: Apator
SA, Apator Powogaz SA, Apator Metrix SA, FAP Pafal SA, Apator Elkomtech SA, Apator Control Sp. z
o.o., Apator Rector Sp. z o.o., Apator Telemetria Sp. z o.o. an annex to the Multiproduct Agreement of
22nd June 2016 was concluded under which the credit period was extended by another 2 years and the
revolving limit of umbrella credit granted to the group was increased to 140 million PLN (from 120 million
PLN previously in force)*.
11. On 3 September 2018 The Extraordinary General Meeting of Shareholders of Apator Rector sp. z o.o.
adopted the resolution by virtue of which the share capital of the Company was increased from the
amount of 1 million PLN to 2 million PLN by creation of 1 000 new shares of nominal value 1 000 PLN
each. Newly created shares were taken up by Apator SA for cash contribution in the amount of 30 million
PLN and the surplus of the value of the contribution to cover the shares over their nominal value (29
million PLN) was transferred to the supplementary capital of the Company. Obtained as a result of the
above transaction, Apator Rector allocated the funds for repayment of the loan (in the amount of 30
million PLN) granted to it by Apator SA in November 2017.
12. On 17 October 2018 The Supervisory Board of Apator SA approved the Strategy of Apator Group for the
years 2019-2023.
13. On 31 October 2018 Apator SA concluded with Towarzystwo Ubezpieczeń Euler Hermes S.A. an annex
to the Agreement on granting contractual guarantees within the revolving limit of 19th November 2009.
Under the annex, a new limit was established for contract guarantees for the Company in the amount of
PLN 20 million.
14. On 15 November 2018. The Executive Board of Apator SA made the decision and then the Supervisory
Board of Apator SA granted the consent to make the advance payment towards the expected dividend
from the profit for 2018 in the amount of 0,40 PLN gross per share. The advance was paid on 21
December 2018.
15. 22 November 2018 Apator Metrix signed a statement on submission to execution under the procedure of
777 of the Civil Procedure Code in favour of Bank Handlowy SA up to the maximum amount of GBP 4.8
million (i.e. PLN 23.2 million at the average exchange rate of the National Bank of Poland of 21
November 2018). The declaration shall constitute a security for the framework contract
Report of the Executive Board on activity of Grupa Apator in 2018
Entity name: Grupa Apator
Period covered by the financial statements: 01.01.2018 – 31.12.2018 Reporting currency: Polish zloty (PLN)
Level of rounding: all amounts are expressed in thousands of Polish zlotys (unless indicated otherwise)
Page 25 of 84
(October 11, 2017) for a revolving line for granting bank guarantees to secure a loan taken out by GWi
for early repayment of a loan granted by BI Group PLC to the company.
16. On 22 November 2018. Apator SA received the information about the results of the tender for the supply
of 3-phase electricity meters for the German market in which Apator GmbH (subsidiary of Apator SA)
took part. The value of contracts awarded to the company amounted to approximately EUR 2.2 million
(i.e. approximately PLN 9.5 million at the average exchange rate of the National Bank of Poland of 21
November 2018) with the delivery date in 2019. The terms of the tender also provide for the right of
option with respect to deliveries in the years 2020-2021 with a total value of EUR 7.4 million (approx.
PLN 31.8 million). Apator GmbH concluded the contract with the contractor on 27 February 2019.
*) Earlier, i.e. under the annex to the Multi-Product Agreement signed on 20 June 2018, the 2-year term of the agreement was extended by three months, until 22 September 2018.
17. On 22 November 2018. Apator SA received the information about the results of the tender for the supply
of 3-phase electricity meters for the German market in which Apator GmbH (subsidiary of Apator SA)
took part. The value of contracts awarded to the company amounted to approximately EUR 2.2 million
(i.e. approximately PLN 9.5 million at the average exchange rate of the National Bank of Poland of 21
November 2018) with the delivery date in 2019. The terms of the tender also provide for the right of
option with respect to deliveries in the years 2020-2021 with a total value of EUR 7.4 million (approx.
PLN 31.8 million). Apator GmbH concluded the contract with the contractor on 27 February 2019.
18. On 6th December 2018 the offer of Apator SA was selected as the most advantageous in the tender for
the supply of 3-phase electricity meters organized by Tauron Dystrybucja SA. Both Agreements
with the Ordering Party of the total net value of PLN 30.4 million were concluded on 18 January 2019.
Deliveries will be made until December 2019. The agreements provide for the right of option consisting in
the possibility of increasing orders by the total amount of PLN 9.1 million net with deliveries in 2019.
19. 14 December 2018 The Supervisory Board of Apator SA decided to extend the composition of the
Executive Board of Apator SA to two persons and appointed it as of 1st January 2019. Arkadiusz
Chmielewski entrusting him with the position of Director for Business Development of Apator Group.
In the analysed period there were no other factors and events, including untypical ones, which would
have significant influence on the results of Apator Group.
5. List of events that occurred after the 31st December 2018
1. On 10th January 2019 Apator Powogaz SA concluded with associated company ZAO Teplovodomer
with the seat in Mytiszczi (Russia) the framework cooperation agreement for 2019. The net value of the
contract amounts to EUR 6 million, i.e. PLN 25.8 million (according to the average exchange rate of the
National Bank of Poland of 10 January 2019), and its object is the supply of water meters, heat meters
and cost allocators to ZAO Teplovodomer.
2. Decision of 13 February 2019. The Minister of Entrepreneurship and Technology changed the
permission for Apator SA to conduct business activity in the Pomeranian Special Economic Zone by
extension of the deadlines for completion of the investment, incurring the investment expenses.
and to employ staff until 31 December 2021.
3. On 1 March 2019 The Executive Board of Apator SA recommended the payment of dividend from the
profit for the financial year 2018 in the amount of 1,30 PLN gross per share.
4. 1 March 2019 Apator SA published the forecast of consolidated financial results for Grupa Apator for
2019.
5. 28 March 2019 Energa Operator SA selected the offer of Apator SA in the tender for the supply of 1-
phase and 3-phase electricity meters. The net value of the offer is PLN 20.8 million, and deliveries will be
Report of the Executive Board on activity of Grupa Apator in 2018
Entity name: Grupa Apator
Period covered by the financial statements: 01.01.2018 – 31.12.2018 Reporting currency: Polish zloty (PLN)
Level of rounding: all amounts are expressed in thousands of Polish zlotys (unless indicated otherwise)
Page 26 of 84
made within 12 months from the date of signing the agreement with the possibility of extension for a
period not longer than 6 months.
6. On the 1st April 2019th the District Court in Łódź, XX Commercial Division of the National Court Register
made the entry of the merger of subsidiaries of Apator SA, i.e. Apator Elkomtech SA
with the seat in Łódź and Apator Control sp. z o. o. with the seat in Toruń. The merger was performed
pursuant to art. 492 § 1 point 1 of the Commercial Companies Code by transferring all assets of Apator
Control Sp. z o.o. to Apator Elkomtech SA in exchange for shares in the increased share capital of
Apator Elkomtech SA. On the day of registration of the merger in the register of entrepreneurs of the
National Court Register, Apator Elkomtech SA entered into all rights and obligations of Apator Control
Sp. z o.o.
7. On 15 April 2019 the Supreme Administrative Court in Warsaw received the cassation complaint from
the Director of National Treasury Information against the judgment of Voivodship Administrative Court in
Gorzów Wielkopolski of 6 February 2019 regarding the complaint against the individual interpretation of
the Director of National Treasury Information of 1 October 2018 regarding the corporate income tax
regarding the recognition by Apator Rector sp. z o.o. fine due to the delay in the contract Tauron
Dystrybucja as tax deductible costs. The case will be settled before the Supreme Administrative Court in
Warsaw. The waiting period for the complaint to be considered is at least 2 years.
6. Industry situation and business development prospects
taking into account the elements of the strategy
Among the factors that will determine the development of Grupa Apator to the greatest extent in the
perspective of next periods, it is necessary to mention:
▪ macroeconomic situation,
▪ symptoms of worsening situation in the construction industry,
▪ growing orders of the so-called green energy sector in Poland (by about 40%),
▪ increase in energy prices for enterprises in Poland,
▪ exchange rate fluctuations of USD (costs of purchase of electronic materials), EUR and GBP (revenues
from export sales) as well as the effects of the implemented exchange rate hedging policy,
▪ technological changes and trends in the industry,
▪ legislative changes and regulatory requirements,
▪ situation on the labour market, access to qualified staff (especially in the area of R&D) and production
workers,
▪ progressing automation and robotisation of production processes aimed at increasing the production
capacity and increasing the operational efficiency of manufacturing companies of Apator Group,
▪ constant review of the product portfolio and its optimisation in terms of reduction of TKW - redesign to
cost.
▪ increase in prices of electronic components.
Electricity segment
Apator Group generates significant part of its revenues in the sector of products and services addressed to
the companies operating in the energy sector, among which they are: Distribution System Operators (power
plants), electricity wholesalers, electrical assembly and installation companies. A smaller group of customers
are industrial plants.
Report of the Executive Board on activity of Grupa Apator in 2018
Entity name: Grupa Apator
Period covered by the financial statements: 01.01.2018 – 31.12.2018 Reporting currency: Polish zloty (PLN)
Level of rounding: all amounts are expressed in thousands of Polish zlotys (unless indicated otherwise)
Page 27 of 84
The share of the Electricity segment in the total revenues of (for continued and discontinued operations)
amounted to approx. 46% in the period in question (of which almost 82% of the segment's revenues were
generated in Poland).
The main factors influencing the operation of the Electricity segment in Poland include
− dynamics of economic development and construction development,
According to the Central Statistical Office (GUS), the sold production of energy meters in 2018 was
27% higher than in 2017. The number of building permits issued in this period increased by 2.7%,
while the number of buildings and flats delivered increased by 3.6% y/y; despite the revival, the
construction sector faces difficulties such as shortage of skilled workers and rising costs of materials
and payment delays,
− preference for public investment - emphasis on the development and modernisation of electricity
grid infrastructure,
− work on a new Energy Law, which is to include a timetable for the implementation of smart metering
in Poland,
− a clear upward trend in green energy and energy-efficient lighting procurement, According to the
new Strategy Apator Group will strive to develop new attractive areas related to local energy
management (dispersed "green" energy sources require the application of advanced solutions for
local measurement, monitoring, monitoring, etc.).
and automatic energy management in clusters). Intelligent lighting, on the other hand, uses modern
communication technologies and remote reading and control systems, which are also used in smart
metering. It is possible to extend their scope of application also to smart urban lighting networks.
Apator builds the offer in this respect in order to meet the market trends,
− the trend towards increased energy efficiency (the need for large energy consumers to conduct
energy audits and better management of media consumption, which translates into investments in
automation and energy management systems) and the flexibility of energy consumption and
network flexibility (forcing DSOs to invest in the modernisation and expansion of grid infrastructure
and smart metering solutions). The trend is supported by the increase in energy prices for
companies,
− permanent legalization replacements of municipal electronic meters (in connection with the end of
the legalization period),
− Imbalances in the supply market - increasing delivery times for key components, mainly from
Chinese manufacturers (up to several dozen weeks), which puts European electronics
manufacturers at a disadvantage compared to Asian manufacturers with shorter delivery times. The
phenomenon is particularly burdensome for companies supplying electronic products through public
procurement (e.g. electricity meters). This asymmetry may be crucial in subsequent tenders on the
European market,
− influence of new regulations concerning Power Market on implementation of smart metering -
industrial and commercial customers were obliged by the act to monitor ee consumption in remote
mode (hourly readings, data transmission in daily mode), which in consequence means the
necessity to install electricity meters with additional functionalities that Apator has in its offer. The
introduction of an additional consumption threshold in the Act has reduced the number of industrial
customers obliged to remotely measure,
− the forthcoming auctions for participation in the Power Market and the introduction of a capacity fee
for the modernisation and construction of new professional power plants and DSM/DSR demand
management services resulting in a significant revival of the power generation and transmission
market (environmental aspects related to the BAT Directive). This recovery is conducive to
Report of the Executive Board on activity of Grupa Apator in 2018
Entity name: Grupa Apator
Period covered by the financial statements: 01.01.2018 – 31.12.2018 Reporting currency: Polish zloty (PLN)
Level of rounding: all amounts are expressed in thousands of Polish zlotys (unless indicated otherwise)
Page 28 of 84
investments in automation of power generation and transmission, creating good sales prospects for
active network asset management systems (EAM) in subsequent periods and increasing demand
for automated switching equipment,
− rising electricity prices in Poland temporarily inhibited for the household segment by regulations
lowering excise duty on energy. Reduction of fixed charges in electricity bills and increase in the
share of charges directly related to energy consumption will be conducive to more effective energy
management, which in turn favours the development of sales of metering equipment and systems
analysing energy consumption in the offer of Apator Group,
*)DSM (Demand Side Management) - Demand management, DSR (Demand Side Response) - response of the demand side to signals coming from the market stimulated by the transmission system operator. DSR mechanisms require from entities voluntarily participating in the system to limit the power of receiving equipment at the command of the operator.
− a significant increase in the activity of companies related to the construction of the future
infrastructure of the electric motorization, the construction of RES sources, in particular photovoltaic
installations, as well as large wind farms, the development of platforms for industry 4.0, the area of
energy efficiency and the development of platforms for autonomous energy clusters, requires an
increasing use of systems and equipment for the supervision and control of the network. Connecting
new, unstable RES sources and so called "restless" receivers, which include EV charging stations,
requires not only strengthening the network, but also making it more flexible, which can only be
achieved by using SCADA systems enriched with DSM functionality. We expect that the demand for
HES microsystems for remote metering used on more complex charging stations will increase.
Apator Group adjusts its offer aiming at covering also these new emerging segments of the market.
The increase in energy prices in industry that occurred in 2018 may contribute to an increase in
demand for small metering systems for industry such as MONITORUS,
− The dynamic development of the photovoltaic market in Poland - caused by favourable tax
regulations and the introduction of a very ambitious Clean Air programme - was favourable in 2018.
and is likely to continue to encourage in 2019 an increase in the purchase of measuring equipment
and connection ee as well as heat meters. More prosumer connections should translate into
increased demand for electronic meters with bidirectional energy metering and a greater number of
disconnectors.
In addition, the increasing saturation of distributed energy sources should in the long term result in the
necessary automation of the power grid on the low-voltage side and include more and more areas of this
network in monitoring and supervision.
The key foreign market for the Electricity segment is the German market, where the replacement of
electronic meters with smart meters takes place at the pace set by the regulator. The trend related to the
development of smart grids in the near future will also appear on the fastest growing eastern markets
(Lithuania, Latvia, Ukraine). For Lithuanian customer, within the pilot program, Apator delivered meters with
modules working in NB IoT technology together with the system collecting data sent from devices. Apator's
solution enables reading data from electricity meters but also from gas meters.
Export sales in the line of switchgear is stable, at the same time work is in progress to expand the market to
Scandinavia.
Report of the Executive Board on activity of Grupa Apator in 2018
Entity name: Grupa Apator
Period covered by the financial statements: 01.01.2018 – 31.12.2018 Reporting currency: Polish zloty (PLN)
Level of rounding: all amounts are expressed in thousands of Polish zlotys (unless indicated otherwise)
Page 29 of 84
Water and heating segment
The water and heat metering market in Poland is characterized by large dispersion on the demand side.
Apator Group delivers its products to wide group of customers, among which are waterworks, heat energy
companies, cooperatives and housing communities, as well as entities from construction and industry sector.
The share of the Water and Heat segment in total sales (for continued and discontinued operations) was in
2018. 30.6% (of which export sales accounted for 60% of the total turnover of this segment).
The main factors influencing the operations of the Water and Heat segment include
− dynamics of economic development and construction development,
According to the Central Statistical Office (GUS), in 2018 the segment of water meters saw a decrease in
production sold by ca. 14.5% y/y. At the same time, an increase in the number of connections to the heating
network in Poland was noted, which is likely to be prolonged for the following years. In recent years, the
market has been developing steadily (an average growth of ca. 4-5% y/y), which is related to the
development of construction and, in the case of heat meters, also to the liquidation of low emissions,
resulting in an increase in the number of connections to heating networks (the importance of this factor in
Poland has been systematically increasing),
− competition from both local and foreign suppliers,
− decrease in demand for cost allocators related to saturation of this market segment, compensated
by an increase in demand for electronic heat meters,
− increasing demand for more accurate measurement methods such as ultrasonic water meters and
planned replacements of mechanical water meters with ultrasonic meters in Middle East countries
(Saudi Arabia, United Arab Emirates, Jordan),
− increase in popularity of smart technology both in relation to water meters and heat meters,
− aid programmes from the EU and the World Bank for African countries to extend access to drinking
water.
Gas segment
The customers of Apator Group companies in the Gas segment are institutional customers and gas
companies. This segment was used in 2018. 21.7% of total sales (for continued and discontinued
operations), of which almost 84% of sales in this segment were generated abroad).
The situation of the gas metering line is primarily characterised by the following characteristics:
− dynamics of economic development and construction development,
According to the Central Statistical Office (GUS) data, in 2018 there was a 23% decrease in the
production of gas meters sold.
On an EU-wide basis, a slight but steady downward trend in demand for natural gas through
pipelines from the east and a significant increase in demand for natural gas in Asia (China, Korea,
Japan) is forecast for the coming years. In Europe, natural gas from the east will gradually be
replaced by LNG imported by sea transport and stored in gas terminals and increasingly used
subsequently also as network gas. In Western Europe (e.g. France), the share of biogas in grid gas
as well as hydrogen from renewable sources, which will gradually replace traditional natural gas due
to decarbonisation and the EU's "climate" objectives, will increase in the coming years. As a
consequence of these changes, network gas consumption in Europe is expected to stabilise while
prices are expected to fall slightly (new fields in Qatar and Tobago and increased imports from the
USA),
Report of the Executive Board on activity of Grupa Apator in 2018
Entity name: Grupa Apator
Period covered by the financial statements: 01.01.2018 – 31.12.2018 Reporting currency: Polish zloty (PLN)
Level of rounding: all amounts are expressed in thousands of Polish zlotys (unless indicated otherwise)
Page 30 of 84
− increase in demand (and consequently sales) on Western European markets on gas meters with
additional functionalities (remote reading, gas flow shut-off functions, temperature and pressure
correction) and increase in queries about static gas meters in ultrasonic technology
and mass-thermal. The Netherlands, the first market in Europe where the regulator forced the use of
smart gas meters instead of traditional ones, was joined by France, Great Britain.
and Italy, the largest gas meter markets in Europe, but also smaller ones such as Luxembourg and
Belgium,
− implementation of intelligent gas meters in Poland,
− electronic auctions and consolidation of contracts by different DSOs in a single tender,
− the need to obtain additional certificates confirming the security of data transmission and the
interoperability of gas meters,
− a significant drop in gas meter prices, especially on the Italian, British and Dutch markets; for both
traditional and smart gas meters.
7. Risk and hazard factors
Risk management in Apator Group is to ensure that all significant risk factors are identified, analyzed and
controlled on an ongoing basis. The order in which the main risks are presented below does not reflect the
likelihood of their occurrence. The table below presents the most significant risks related to the business
activity of Apator Group.
▪ Risk of economic and political changes
Significant influence on activity and sales volume of Apator Group has economic and political situation in
Poland and on foreign markets. On the domestic market, due to a significant share in revenues of the energy
sector, energy policy, infrastructural investments have a particularly important impact.
and a high concentration of customers in this sector.
In order to reduce the impact of customer concentration, the Group expands into foreign markets and
searches for selected products and services for sales opportunities outside the energy sector (in industry). At
present, the Group focuses on strengthening its market position in the EMEA area, which is experiencing
significant sales growth.
▪ Regulatory and legislative risks
Due to the regulated nature of the energy market, the significant impact on the sales of Apator Group are the
legislative changes. An additional risk factor is the systematically increasing volatility of the law in force.
Increasingly frequent drafts of new legal acts and/or amendments to existing ones intensify the natural
uncertainty among companies, which in such a situation is more and more difficult to plan their future actions
and anticipate their effects, which is reflected, inter alia, in the implementation of their investments.
Energy Flexibility 'EU Winter Package'. - a package of documents (published by the European
Commission at the end of November 2016) outlining new expectations of the European Commission with
regard to the implementation of the EU climate and energy objectives for 2030 in four main areas: security of
supply, internal energy market, energy efficiency and energy transformation. The package introduces,
among other things, a broader concept of energy flexibility, i.e. the ability to flexibly reduce and increase
Report of the Executive Board on activity of Grupa Apator in 2018
Entity name: Grupa Apator
Period covered by the financial statements: 01.01.2018 – 31.12.2018 Reporting currency: Polish zloty (PLN)
Level of rounding: all amounts are expressed in thousands of Polish zlotys (unless indicated otherwise)
Page 31 of 84
demand, as well as the ability to flexibly reduce energy production. As a consequence of the introduced
changes, the implementation of Smart Grid and Smart Metering technologies in Europe is expected to
accelerate.
Energy Law (in progress) - in 2018, deep changes in the Energy Law were consulted on the introduction of
a schedule for the implementation of smart metering in Poland, the final shape of which has not yet been
approved. The introduction of the function of Measurement Information Operator was also discussed.
Approval of the above changes will have an impact not only on the change in measurement technology, but
also on the increase in the importance of automation of distribution networks.
The amendment to the Law on Measures introduces the possibility of re-verification of legalisation of a
homogeneous batch of measuring instruments using the statistical method. This method consists in taking at
random from each homogeneous batch of measuring instruments a sample of those instruments and
checking each individual measuring instrument from the sample taken. At present, reverification of a
measuring instrument can only be carried out by checking each individual measuring instrument. The Act
applies first to gas meters, then to electricity meters and may
may in the future reduce the number of tenders announced by distribution system operators. On the other
hand, regulation favours manufacturers of high-quality measuring instruments (such as the Apator group)
that maintain stable conditions measuring over a long time horizon.
The EU Regulation 2016/679 (GDPR) has introduced new responsibilities for the processing, use and
storage of energy consumption measurement data into personal data. This has led to a change in
expectations of clients with regard to the level of security of data collected and transmitted by devices and
systems, going far beyond the standard provision of encrypted communication. In terms of safety level the
products of Apator Group meet new technical and market requirements.
▪ Risk of availability of employees
The activity of Apator Group depends on competence and knowledge of employees, especially in R&D
departments and on availability of production employees. In order to minimize the risk resulting from
limitations of the labour market, Apator Group performs actions to acquire and maintain the staff, including
those related to building the employer's brand, creation of retention programmes, development of
competences and improvement of organisation
and work efficiency. However, regardless of the actions taken, taking into account the tendencies to
strengthen the employee market, we must also take into account the need for further, progressive
automation of production.
▪ Risk of delivery of electronic components
Deregulation of the global market for the supply of electronic components, intensified by the intensive growth
of demand for rare earth metals, the negative impact of U.S. customs and import tariffs policies and the
tightening of EU environmental regulations, have an impact on the extension of delivery times and price
levels of some electronic components. The probability of disruptions in the supply of these components is
high
and may cause temporary operational difficulties, but given the purchasing policy, supply and technology
diversification applied, the materialisation of risk should not have a significant impact on quality
and timeliness of product deliveries.
▪ Declining trend in prices of gas and electricity meters
Report of the Executive Board on activity of Grupa Apator in 2018
Entity name: Grupa Apator
Period covered by the financial statements: 01.01.2018 – 31.12.2018 Reporting currency: Polish zloty (PLN)
Level of rounding: all amounts are expressed in thousands of Polish zlotys (unless indicated otherwise)
Page 32 of 84
As a result of the commoditization of solutions and technologies, a very competitive market and high
purchasing power of distribution system operators (centralisation of purchases, supplementing tenders with
auction system, allocation of 1-2-year contracts with one supplier), the electricity and gas meter market has
been on a downward trend in prices for a long time. On the gas metering market there is an increased price
competition resulting, among other things, from the limitation of the market for gas meters with mechanical
counter and the emergence of new, strong competition in the area of smart gas meters. The decrease in
profitability in some areas is due to both increased competition and smaller quantities of gas meters
produced due to the termination of sales to India under the licence agreement. Apator Group is quite well
prepared to the competition in the area of prices and in order to adjust to the prevailing market conditions it
consequently works on systematic optimization of costs and its product offer.
▪ Risk of development of electronic measurement technology and adjustment of the product offer
The speed of technological changes, legislative requirements regarding energy efficiency, change in
customer expectations concerning the reduction of the service of measuring devices and low prices influence
changes in electronic measurement technology and shortening of the product life cycle. Market trends
indicate a growing interest in static metering technologies based solely on electronic (vs. mechanical)
systems for gas and water. There is also a trend towards automation, remote network control and remote
energy accounting. The lack of sufficiently rapid and at the same time properly targeted development of
know-how in this area within the Group may result in the emergence of a technology gap which is difficult to
fill.
▪ Risk of commercialization of development projects
The situation on the most developed markets in the EU in the field of gas metering, i.e. The UK and Italy
have changed dramatically. Acquisitions and concentration on the part of suppliers of measuring
instruments, the organisation of large tenders for long-term supplies and, as a result, the conclusion of large
contracts in Belgium, Italy and the Netherlands have led to a fall in price levels. Therefore, there is a risk of
incomplete commercialisation of development works.
▪ Risk of loss of economic value of expenditure on development projects
In Apator Group significant expenditures on development projects aiming at expansion of product portfolio by
designing new products, IT solutions and technologies directed to developing markets of utility media in
Poland and abroad are incurred. Decisions to invest in new projects are made on the basis of analysis of
market trends and business plans. Expenditures incurred are recognized as intangible assets based on their
purchase price/manufacturing cost less accumulated depreciation and impairment losses. There is a risk
associated with
with the possible need to make impairment losses in the event of a decrease in the scale of demand or an
increase in competition in the markets in which the Group companies operate.
▪ Risk of contractual penalties and warranty repairs
The risk is a result of, among others, the speed at which technological and product changes are introduced
on the market
(i.e. smart meters, ultrasonic water meters, communication technologies) and quality defects of components.
It concerns mainly the execution of significant, long-term contracts with customers, in particular
as part of foreign tenders. It is associated with failure to meet product quality standards and delivery dates,
Report of the Executive Board on activity of Grupa Apator in 2018
Entity name: Grupa Apator
Period covered by the financial statements: 01.01.2018 – 31.12.2018 Reporting currency: Polish zloty (PLN)
Level of rounding: all amounts are expressed in thousands of Polish zlotys (unless indicated otherwise)
Page 33 of 84
which may result in the imposition of high contractual penalties*, loss of good image or even loss of
customers. An additional factor exacerbating this type of risk is the increasing complexity of procurement
logistics, including longer delivery times for electronic components, limiting the possibility of their full control
and verification.
▪ Risk of impairment of acquired assets
Goodwill is recognised as an asset and is tested for impairment at least once a year. Goodwill of subsidiaries
as at 31.12.2018 in the consolidated financial statements amounts to PLN 120.2 million, including:
*) The Group informed in the Annual Report of the Management Board for 2017 about provisions for contractual penalties and warranty repairs related to quality defects detected in selected gas meters. The case of complaint concerning gas meters delivered to the Dutch market was finally closed by signing by Apator Metrix in July this year a settlement specifying the final amount to be paid. As the agreed amount does not exceed the value of provisions created for this purpose, it did not affect the current result of the company.
− Apator Rector – PLN 43.1 million,
− Apator Elkomtech – PLN 34.4 million,
− Apator Powogaz – PLN 17.9 million,
− Apator Miitors – PLN 18.7 million
− GWI - PLN 3.4 million,
− other companies - PLN 2.7 million.
The risk is related to a possible decrease in the potential to generate cash by subsidiarys/cash generating
units (CGUs) within the timeframe defined by the business plan's perspective.
▪ Risks related to Apator Rector and its influence on the results of Apator Group
Under the agreements signed, Apator Rector finalizes the performance of two large IT contracts for Energa
Operator and Tauron Dystrybucja commenced respectively in 2010 and 2012.
In the TD project, on the basis of the settlement agreement (subsequently approved on 5 June 2018).
In accordance with the content of the approved settlement, Tauron lowered the demand for payment of
contractual penalties for delay in performance of the agreement from PLN 30.2 million to PLN 11.1 million,
renouncing further investigation of accrued contractual penalties. At the same time it was established that
the penalties will be paid by Apator Rector and will be settled by contractual deductions with receivables for
payment of remuneration for additional works of total value The works in the TD contract have been greened
into four sub-projects. InSeptember 2018. (in accordance with the planned date) the implementation of the
first of them - Implementation of ZMS - was completed and the subcontracting documentation was received
by the client. The work on the remaining projects is carried out according to the schedule and no significant
risks have been identified here. Currently, parallel to the finalisation of the remaining three projects covered
by the basic Settlement Agreement, modification planning is underway as part of the development service,
which will be a part of the additional work provided for in the Arrangement.
In the EOP project, the final acceptance of all contracts was completed in November 2018, as previously
announced, so that the running time could start on 1 December 2018
12-month warranty period for the SID system. The amount of contractual penalties due to the client has been
paid in full, as already announced in the interim report for three quarters of 2018.
Report of the Executive Board on activity of Grupa Apator in 2018
Entity name: Grupa Apator
Period covered by the financial statements: 01.01.2018 – 31.12.2018 Reporting currency: Polish zloty (PLN)
Level of rounding: all amounts are expressed in thousands of Polish zlotys (unless indicated otherwise)
Page 34 of 84
Along with organizing and stabilization of the situation in both key contracts for Apator Rector, the actions
aiming at improvement of the financial situation of the company (related mainly to
with a high level of indebtedness and liquidity constraints). In September 2018, after the increase of
supplementary capital of Apator Rector, taking up its newly issued shares by Apator SA and allocation of
funds obtained thanks to it for repayment of the loan (in the amount of 30 million PLN) granted by Apator SA
in November 2017, the level of debt of Apator Rector was significantly decreased (from 47.9 million PLN at
the end of June to 16.9 million PLN at the end of September 2018). In the following months, thanks to,
among other things, unblocking payments from TD and other current inflows (including new orders), the
company not only settled its current liabilities on time, but also repaid part of its previous debt*.
Currently, Apator Rector executes new contracts, participates in next tenders, obtains new orders, which
deadline goes beyond 2019.
*) The total amount of debt consisted of bank credit and loan granted by Apator SA under the contract of 14th December 2018. (the agreement replaced the previous loan agreements signed with Apator SA, which was terminated on 14th and 17th December with appropriate agreements). Out of the total amount of loan granted in the amount of PLN 10 million, as at 31.12.2018, PLN 4,194 thousand was disbursed.
▪ Currency risk
Currency risk occurs due to the significant value of export sales as well as import of materials and
components. The risk is related to financial market instability and high volatility of exchange rates, as well as
exchange rate differences. A change in exchange rates may permanently affect the competitiveness and
market value of the company (a change in exchange rates may result in a significant growth of the
company).
(e.g. costs or decline in planned revenues from foreign trade operations).
In 2018, a favourable trend in the PLN/USD exchange rate was recorded, which affected the costs of raw
materials and consumables. The average PLN/USD exchange rate in 2018 was 3.61; whereas the average
PLN/USD exchange rate in 2017 was 3.78.
In terms of shaping the currency of EUR in relation to PLN, the tendency of strengthening of the euro acts
favourably on the situation of Apator Group causing the increase of income from export, however, the
changes in the level of euro exchange rate in 2018 were very insignificant (average exchange rate of
EUR/PLN in 2018 was at the level of 4.26 similar as in 2017), hence their influence on the situation of Apator
Group and the amount of denominated income
in euro was relatively limited. In order to minimize currency risk, Apator Group conducts effective hedging
policy in the scope of EUR and USD exchange rate. Situation on the 31st December:
− the balance of EUR hedging future contracts amounted to EUR 47,400 thousand with execution dates in
2018-2020 at the average exchange rate of PLN 4.44,
− the balance of USD hedging transactions amounted to USD 3,100 thousand with execution dates in 2019
at the average exchange rate of PLN 3.49.
− balance of CNY hedging transactions: the balance of USD hedging transactions amounted to USD 4,050
thousand with execution dates in 2019 at the average exchange rate of PLN 0.54.
▪ Liquidity risk
The risk is managed through current and periodic analysis of receivables inflow, as well as timely payment of
liabilities and maintenance of appropriate levels of covenants specified in credit agreements.
Apator Group has correct financial liquidity. In 2016, it implemented a multi-product (umbrella) loan, which
allows for flexible management of the liquidity of individual companies of the Group. On
Report of the Executive Board on activity of Grupa Apator in 2018
Entity name: Grupa Apator
Period covered by the financial statements: 01.01.2018 – 31.12.2018 Reporting currency: Polish zloty (PLN)
Level of rounding: all amounts are expressed in thousands of Polish zlotys (unless indicated otherwise)
Page 35 of 84
30 August 2018, the multi-product agreement was annexed by extending the loan term by another 2 years
and increasing the revolving limit of the umbrella loan granted to the group from PLN 120 million previously
in force to PLN 140 million.
▪ Tax risk
Provisions concerning value added tax, corporate income tax, personal income tax or social security
contributions are subject to changes and their interpretation by tax authorities is subject to change. As a
result, there is often no reference to established regulations or legal precedents or the approach of tax
authorities to tax transactions changes. The current regulations also contain ambiguities, which cause
differences of opinion as to the legal interpretation of tax regulations both between state authorities and
between state authorities
and companies. Tax and other settlements (e.g. customs or foreign exchange settlements) may be subject to
control by the authorities, which are entitled to impose significant penalties, and the additional amounts of
liabilities determined as a result of the control must be paid together with interest.
Delivery of technologically advanced products for the most demanding customers in Poland
and abroad of the Republic of Poland is currently an important factor of business development in the group,
bringing stable profits, however, due to the scale and pace of development achieved, as well as the fact that
the complexity of the subject matter of contracts for the supply of products often requires participation in
international consortia, automatically increases the financial risks associated with conducting international
activities. One of the elements of these risks are tax risks related to the flow of goods between companies
cooperating in the execution of contracts and coming from different countries, and thus the tax
interpretations accompanying these transactions.
Tax settlements may be audited for a period of five years. As a result, the amounts shown as follows
in the financial statements may be changed at a later date after they are finally determined by the tax
authorities. Apator Group takes the position that adequate reserves were created
in relation to probable and quantifiable risks of liabilities.
▪ Risk of lower utilisation of deferred income tax assets
In the consolidated financial statements, deferred income tax assets are recognised, which mainly relate to
them:
− zone relief resulting from conducting business activity in the Pomeranian Special Economic Zone by the
dominant entity,
− tax shield existing in the companies of Apator Group.
The level of this asset is determined on the basis of multiannual financial plans and reflects the amount to be
deducted from income tax in the future. An asset is subject to periodic analysis of its usability.
On 31st December 2018 the amount of assets of Apator Group is 33.5 million PLN and it has confirmation in
business plans.
PLN 33.5 million (including the value of the tax loss asset of PLN 15.5 million) and is confirmed in the
business plans. However, there is a risk of under-utilisation of the asset if the objectives are not fully
achieved or if the tax loss cannot be deducted from income in subsequent years.
Report of the Executive Board on activity of Grupa Apator in 2018
Entity name: Grupa Apator
Period covered by the financial statements: 01.01.2018 – 31.12.2018 Reporting currency: Polish zloty (PLN)
Level of rounding: all amounts are expressed in thousands of Polish zlotys (unless indicated otherwise)
Page 36 of 84
8. Description of material off-balance sheet items and investments
The information on significant off-balance sheet items of Grupa Apator was included in the consolidated
financial statement (Annual Report RS - 2018).
8.1. Description of the structure of major capital investments or major capital
investments made within Grupa Apator in 2018.
In 2018 capital investments of Grupa Apator were related to:
▪ Apator SA:
− took up 1,000 new shares with a nominal value of PLN 1,000 each and a total nominal value of PLN 1
million
in the increased share capital of Apator Rector sp. z o.o. (subsidiary of Apator SA). The shares were
taken up for cash contribution in the amount of 30 M PLN and the surplus (agio) between the nominal
value of shares and the value of the contribution for their coverage was transferred to supplementary
capital of Apator Rector. The investment caused the increase of financial fixed assets (other financial
assets) of Apator SA on the position of shares in Apatpor Rector sp. z o.o. from 44,3 million PLN at the
end of 2017 to 74,3 million PLN at the end of 2018,
− sold FAP Pafal SA (subsidiary of Apator SA) 110,000 registered shares of FAP Pafal SA for the total
amount of 2.9 million PLN in order to redeem and decrease the share capital. The investment caused the
decrease of financial fixed assets (other financial assets) of Apator SA on the position of shares in FAP
Pafal SA from the amount of 7.5 million PLN at the end of 2017 to 4.6 million PLN at the end of 2018,
▪ Apator Powogaz SA:
− purchased in total 254 shares in Apator Telemetria Sp. z o.o. from two minority shareholders of the
company. As a result of the transaction the share of Apator Powogaz SA in Apator Telemetria Sp. z o. o.
increased from 51.5% to 61.8%.
8.2. Investments
Non-financial assets:
In 2018 investments of Grupa Apator exceeded 47 million PLN, including mainly:
▪ PLN 20 million - investment in development and building new product portofolio,
▪ PLN 10 million - modernization and reconstruction purchases of machinery and equipment,
▪ PLN 3 million - investment in IT hardware,
▪ PLN 8 million - other investment expenditures, including primarily expenditures on ukierunkowane
for increasing production capacity and efficiency.
The investment plan of Grupa Apator for 2019 is 96 million PLN and applies to it:
▪ PLN 21 million - investment in new products,
▪ PLN 18 million - outlays on R&D works,
▪ PLN 33 million - modernisation of machinery and equipment and expenditure on increasing production
capacity,
▪ PLN 7 million - investment in IT,
▪ PLN 17 million - other outlays.
Report of the Executive Board on activity of Grupa Apator in 2018
Entity name: Grupa Apator
Period covered by the financial statements: 01.01.2018 – 31.12.2018 Reporting currency: Polish zloty (PLN)
Level of rounding: all amounts are expressed in thousands of Polish zlotys (unless indicated otherwise)
Page 37 of 84
Because the investment plans provide for a significant increase in expenditures in relation to the amounts
spent
in the previous years, the possibility of their partial financing with the participation of external resources (in
accordance with the assumptions of new strategy of Grupa Apator) is taken into consideration. When
planning the financial assembly of future projects, the Group will take into account the financial capabilities of
individual companies in such a way that the incurred expenses, even increased by debt service costs, do not
threaten their financial liquidity, in particular with respect to timely payment of liabilities.
Financial assets
Although Grupa Apator analyses the new acquisition opportunities on current basis, no binding actions
related to possible acquisitions have been taken so far.
9. Credits, loans, sureties, guarantees
9.1. Credits
In 2018 none of the companies of Grupa Apator concluded new contracts of credits. Twice, the Multi-
Production Agreement of 22 June 2016 was annexed. First, under the annex of 20th June 2018, the 2-year
period of the contract was extended by three months until 22nd September 2018, then 30th August 2018
between ING Bank Śląski SA and the following companies of Grupa Apator: Apator SA, Apator Powogaz SA,
Apator Metrix SA, FAP Pafal SA, Apator Elkomtech SA, Apator Control Sp. z o.o., Apator Rector Sp. z o.o.,
Apator Telemetria Sp. z o.o., an annex was concluded by virtue of which the credit period was extended by
another 2 years (till 21st September 2020) and the revolving limit of the umbrella credit granted to Grupa was
increased to 140 M PLN (from 120 M PLN previously in force). The limit interest rate is based on WIBOR 1M
plus bank margin. The following collaterals shall apply within the framework of the contract:
▪ registered pledges on the Companies' inventories with a total value of PLN 75.6 million,
▪ registered pledges on the fixed assets of the Companies with a total value of PLN 32.7 million,
▪ registered pledges on the Company's bank accounts maintained by ING Bank Śląski SA,
▪ mortgage on the real estate of the Companies up to the total value according to the Bank's valuation of
PLN 8.9 million,
▪ assignment of rights under the insurance policy of the above collaterals,
▪ blank promissory notes together with promissory notes issued by borrowers.
Liabilities resulting from the granted limit shall be jointly and severally charged to the Company, up to a
maximum amount of PLN 140 million. On 31st December 2018 the debt of Apator Group due to concluded
multi-product contract was PLN 111.2 million.
28th September 2018th the company Apator SA before the date resulting from the Contract repaid the last
installment of the long-term loan received on 19th March 2014 from Bank Handlowy S.A. in Warsaw,
intended to finance the acquisition of 100% shares of Apator Elkomtech SA. The original repayment date of
the last instalment of the loan was on the last day of December 2018.
The balance of debt under the annexed Multi-Product Agreement and other loans contracted in previous
years is presented in the table below.
Specification as at 31.12.2018 as at 31.12.2017
Long-term loans and receivables 24 007 32 310
Report of the Executive Board on activity of Grupa Apator in 2018
Entity name: Grupa Apator
Period covered by the financial statements: 01.01.2018 – 31.12.2018 Reporting currency: Polish zloty (PLN)
Level of rounding: all amounts are expressed in thousands of Polish zlotys (unless indicated otherwise)
Page 38 of 84
Specification as at 31.12.2018 as at 31.12.2017
payable over 1 to 2 years 11 540 8 303
payable over 2 to 5 years 12 467 24 007
payable over 5 years - -
Short-term loans and borrowings 139 286 135 653
Total loans and borrowings 163 293 167 963
In 2018 none of the banks terminated the credit agreement with Grupa Apator and the companies of Grupa
Apator fulfilled their obligations under the credit agreements.
Information on all loan agreements is provided in the consolidated financial statements in point 8.18 (RS
Annual Report 2018).
9.2. Loans
In 2018 the companies of Grupa Apator did not grant loans to entities from outside Grupa Apator.
The balance of granted and received loans of Apator Group companies as at 31.12.2018 is as follows:
1. Apator Powogaz SA has a receivable under the consolidated loan in the amount of 1.052,25 000 EUR
and with maturity to 31.12.2020, which replaced in December 2017 three earlier loans granted to the
subsidiary Apator Miitors ApS. The interest rate of the loan is based on Euribor 12M plus a margin of
1.21%.
For the title Amount of the
loan Date of the loan
As at 31.12.2018 (including
interest
Currency Maturity Date Interest rate
loan granted to finance the repayment of bonds and current operations of the company
1 052 250 19.12.2017 1 063 186 EUR 31.12.2020 EURIBOR
12M+1,21%
Total 1 052 250 1 063 186 EUR
As at 31.12.2018, the outstanding amount of the loan (including interest) was EUR 1,063.2 thousand (i.e.
EUR 1,060.5 thousand). 4.6 million PLN according to the average exchange rate of the National Bank of
Poland as of 31 December 2018 equal to 1 EUR = 4.3000 PLN). Interest shall be paid at the end of each
calendar year.
2. On 14th December 2018, Apator SA granted to Apator Rector Sp. z o.o. the loan in the amount of 10 m
PLN
with a maturity until 13 December 2019. The interest rate of the loan is based on Wibor 1M plus a margin
of 3.76%. As at 31.12.2018, the amount of the loan remaining to be repaid, increased by interest due,
amounted to PLN 4.2 million. At the same time two earlier contracts of loans granted by Apator Rector SA
to Apator Rector were terminated under the signed agreements: the agreement of 14th December 2018
the contract of loan of 27th November 2017 was terminated, the agreement of 17th December 2018 the
contract of loan of 26th January 2018 was terminated. Each agreement confirms the full repayment of the
loan.
9.3. Sureties
In 2018 the companies of Grupa Apator did not grant any sureties to entities from outside Grupa Apator.
Sureties granted as at 31 December 2018 were as follows:
Report of the Executive Board on activity of Grupa Apator in 2018
Entity name: Grupa Apator
Period covered by the financial statements: 01.01.2018 – 31.12.2018 Reporting currency: Polish zloty (PLN)
Level of rounding: all amounts are expressed in thousands of Polish zlotys (unless indicated otherwise)
Page 39 of 84
− the subsidiary Apator Powogaz SA is the guarantor of the credit contracted in ING Bank Śląski SA
for the subsidiary Apator Telemetria sp. z o.o. up to the amount of 3,5 million PLN for the period till
30.11.2022.
9.4. Guarantees
As at 31 December 2018 the balance of guarantees granted is as follows:
− subsidiary of Apator Metrix SA:
▪ guarantee to the subsidiary George Wilson Industries Ltd (GWi) up to a maximum amount of GBP 6,7
million, i.e. PLN 32.1 million (according to the average exchange rate of the National Bank of Poland as
of 31 December 2018 equal to GBP 1 = PLN 4.7895) for the period until 31 August 2021. The guarantee
secures the cooperation between GWi
and National Grid Gas Plc as part of repairs, overhauls and supplies of gas meters and regulators,
▪ guarantee for Apator GmbH up to the maximum amount of EUR 2.0 million, i.e. PLN 8.6 million
(according to the average exchange rate of the National Bank of Poland as of 31 December 2018, equal
to 1 EUR = 4.3000 PLN), for a period of 3 years, i.e. until 31 December 2019. The guarantee secures the
cooperation between Apator GmbH and THUGA Aktiengesellschaft in the supply of gas meters. The
guarantee fee is 0.8% per annum.
▪ guarantee to the subsidiary George Wilson Industries Ltd (GWi) up to a maximum amount of GBP 4
million, i.e. PLN 19.2 million (according to the average exchange rate of the National Bank of Poland of
31 December 2018 equal to 1 GBP = 4.7895 PLN) for the period until 31.10.2019. The guarantee
relates to a loan granted to GWI by Citi Bank to repay, among others, loans previously granted by NIG
and Metrix. The guarantee was issued on the basis of the revolving agreement concluded between
Apator Metrix and Citi Handlowy.
On 31st December 2018 Apator Group had also active guarantees issued by insurers and banks*. The list of
these guarantees is included in the consolidated financial statements in point 8.35 (RS annual report - 2018).
10. Proceedings pending before a court, arbitration body or public
administration authority
The conducted proceedings (including two or more proceedings) concerning liabilities or receivables of
Apator SA pending before the court, competent authority for arbitration proceedings or public administration
authority concerning the issuer are not significant.
On 8th June 2018 with the approval of the settlement by the District Court for Kraków-Śródmieście in Kraków
the conciliation proceedings with the application of Tauron Dystrybucja SA of 30th October 2017 against the
Consortium with the participation of Apator Rector Sp. z o.o. for calling for a conciliatory trial related to the
delay in the performance and implementation of the contract for the performance and implementation of the
Network Assets Management System in Tauron Dystrybucja SA** were finished. In accordance with the
content of the approved settlement, Tauron lowered the demand for payment of contractual penalties for
delay in performance of the agreement from PLN 30.2 million to PLN 11.1 million, renouncing further
investigation of accrued contractual penalties. Additionally, it was established that the penalties will be paid
by Apator Rector sp. z o.o. and will be settled by contractual deductions with receivables for payment of
Report of the Executive Board on activity of Grupa Apator in 2018
Entity name: Grupa Apator
Period covered by the financial statements: 01.01.2018 – 31.12.2018 Reporting currency: Polish zloty (PLN)
Level of rounding: all amounts are expressed in thousands of Polish zlotys (unless indicated otherwise)
Page 40 of 84
remuneration for additional works identified by TD of the total value of about 24 million PLN, which will be
performed in 2018-2022.
11. Transactions with related parties
The cooperation in business areas, in terms of support functions (IT, finance) and in terms of financial activity
is performed between the companies being members of Apator Group. Within this cooperation in 2018,
similarly as in previous periods, neither Apator SA nor any other entity dependent on it concluded
transactions with related entities, which would be concluded on
Data on transactions conducted with related parties and information on outstanding balances are presented
in the table presented in point 8.34 of the Annual Consolidated Financial Statements.
Dividends are transferred between the companies of Apator Group in the scope of financial activity. In 2018
Apator SA received from subsidiaries the dividend in total amount of 48.044 000 PLN, i.e. by 25,7% higher
than in 2017. Dividends from companies included the following amounts:
▪ 34 973 000 PLN from the results of 2017,
▪ 2.104 thousand PLN advance payment for dividend paid by Apator Mining from 2018 results,
▪ 10.967 k PLN from the reserve capital of Apator Mining allocated for dividend payment.
In turn, Apator SA paid to the subsidiary Apator Mining sp. z o.o. the following dividends:
▪ 3,060,000 PLN due to the second part of the dividend from the profit for 2017,
▪ 1.440 thousand PLN on account of advance payment of dividend from the results of 2018.
*) From 31 October 2018, according to the annex to the Contractual Guarantee Agreement concluded between the Company and its subsidiaries with Towarzystwo Ubezpieczeń Euler Hermes S.A., Apator SA applies a new limit for contract guarantees amounting to 20 million PLN. **) The information on the ongoing proceedings was included in the Consolidated quarterly report of Grupa Apator for the first quarter of 2018.
12. Material contract
12.1. Agreements concluded with members of managing bodies
In the companies of Grupa Apator there are no untypical contracts concluded between these companies and
managing persons in the scope of compensation in case:
▪ resignation or dismissal from the position held without an important reason,
▪ if the cancellation or dismissal occurs due to a merger of the issuer by acquisition.
12.2. Agreements concluded between shareholders of Apator SA
The Company Apator SA has no information about any agreements concluded between the shareholders.
Report of the Executive Board on activity of Grupa Apator in 2018
Entity name: Grupa Apator
Period covered by the financial statements: 01.01.2018 – 31.12.2018 Reporting currency: Polish zloty (PLN)
Level of rounding: all amounts are expressed in thousands of Polish zlotys (unless indicated otherwise)
Page 41 of 84
12.3. Commercial agreements
In 2018 the companies of Grupa Apator concluded the following significant for the activity of Grupa Apator
commercial contracts:
▪ on 16th January 2018 Apator Powogaz SA concluded with the associated company ZAO Teplovodomer
with the seat in Mytiszczi (Russia) the framework agreement on cooperation for 2018 with the value of 7
million EUR net, i.e. with the affiliated company ZAO Teplovodomer with the seat in Mytiszczi (Russia)
the framework agreement on cooperation for 2018 with the value of 7 million EUR net. PLN 29.2 million
(at the average exchange rate of the National Bank of Poland as of 15 January 2018, 1 EUR = 4.1696
PLN). The subject of the agreement was the supply of water meters, heat meters and cost allocators to
ZAO Teplovodomer.
▪ in April 2018. Apator SA concluded the contracts with seven branches of PGE Dystrybucja SA, the
subject of which was the supply of 1-phase and 3-phase electricity meters worth 24,8 M PLN. in 2018.
The option right provided for an additional possibility to increase the order by PLN 32.5 million net with
deliveries in 2019. In October 2018 Apator SA received confirmation of its use by six of seven branches
of PGE. In November 2018, a similar confirmation was sent by the last of the branches.
▪ on 18 June 2018. Apator SA concluded the contract with Energa Operator SA on delivery of 1-phase and
3-phase municipal electricity meters with the value of 29,6 million PLN until the end of 2018 with the
possibility to extend the deadline to 30th June 2019.
▪ 9 July 2018 Apator SA concluded the contract for delivery of 1- and 3-phase municipal meters for innogy
Stoen Operator Sp. z o.o. worth 20,9 million PLN net. Deliveries of meters within the framework of the
signed contract will be made until 30 March 2020.
▪ On 16th July 2018 the contract between Apator Metrix SA and Polska Spółka Gazownictwa sp. z o.o.
was concluded. The subject of the contract is the supply of bellows gas meters worth 26.8 m PLN. The
terms and conditions of the contract provide for the right of option consisting in the possibility to increase
the order by a maximum of 40%. Therefore, the potential maximum value of the contract is PLN 37.5
million.
12.4. Cooperation or cooperation agreements
In 2018 Grupa Apator did not conclude any significant agreements on cooperation or cooperation.
12.5. Insurance agreements
In the period from 1 July 2017 to 30 June 2018 policies were in force under comprehensive insurance
program that covers property, civil liability, civil liability of authorities of companies and motor insurance of
companies of Grupa Apator:
1) Agreements concluded with PZU S.A./STU Ergo Hestia S.A. in the scope of insurance:
▪ civil liability in connection with the activity conducted and the product introduced to the market,
▪ property from all risks,
▪ loss of profit from all-risk property insurance,
▪ machines from damage,
▪ electrical machines from electrical damage,
▪ of electronic equipment from all risks,
▪ property in national transport,
Report of the Executive Board on activity of Grupa Apator in 2018
Entity name: Grupa Apator
Period covered by the financial statements: 01.01.2018 – 31.12.2018 Reporting currency: Polish zloty (PLN)
Level of rounding: all amounts are expressed in thousands of Polish zlotys (unless indicated otherwise)
Page 42 of 84
▪ property in international transport.
The total value of companies' premiums under the above insurance amounts to PLN 591 thousand, while the
total sum insured amounts to PLN 1.4 million.
2) Contracts concluded with PZU S.A. with respect to motor insurance.
The total value of companies' premiums under the above insurance amounts to PLN 364 thousand, while the
total sum insured amounts to PLN 4.3 million.
3) Contract concluded with Chubb European Group Ltd. Sp. z o.o. o Branch in Poland in the scope of
travel insurance.
The total value of companies' premiums under the above insurance is PLN 9.5 thousand and the total
amount of insurance is USD 20 million.
4) Agreement concluded with PZU S.A. concerning additional NNW insurance.
The total value of companies' premiums under the above insurance is PLN 0.2 thousand and the total sum
insured is PLN 100 thousand.
5) Agreements concluded with AIG Europe Limited Sp. z o.o. under the primary policy and Chubb
European Group Ltd. Sp. z o.o. o. Branch in Poland, HCC International Insurance Company PLC and TUiR
Allianz Polska S.A. within the surplus policy, within the scope of liability insurance of members of company
authorities.
The total value of companies' premiums under the above insurance amounts to PLN 103 thousand, while the
total sum insured amounts to PLN 100 million.
From 1st July 2018 to 30th June 2019 policies are in force under comprehensive insurance programme that
covers property, civil liability, civil liability of authorities of companies and motor insurance of companies in
Grupa Apator:
1) Agreements concluded with PZU S.A./STU Ergo Hestia S.A. in the scope of insurance:
▪ civil liability in connection with the activity conducted and the product introduced to the market,
▪ property from all risks,
▪ loss of profit from all-risk property insurance,
▪ machines from damage,
▪ electrical machines from electrical damage,
▪ of electronic equipment from all risks,
▪ property in national transport,
▪ property in international transport.
The total value of companies' premiums under the above insurance amounts to PLN 546 thousand, while the
total sum insured amounts to PLN 1.5 million.
2) Contracts concluded with PZU S.A. with respect to motor insurance.
The total value of companies' premiums under the above insurance amounts to PLN 62 thousand, while the
total sum insured amounts to PLN 1.1 million.
3) Contract concluded with Chubb European Group Ltd. Sp. z o.o. o Branch in Poland in the scope of
travel insurance.
The total value of companies' premiums under the above insurance is PLN 9.3 thousand and the total
amount of insurance is USD 20 million.
4) Agreement concluded with Colonnade Insurance Societe Anonyme Branch in Poland on basic liability
insurance for members of corporate bodies and agreement with Chubb European Group Limited Sp. z o.o.
Report of the Executive Board on activity of Grupa Apator in 2018
Entity name: Grupa Apator
Period covered by the financial statements: 01.01.2018 – 31.12.2018 Reporting currency: Polish zloty (PLN)
Level of rounding: all amounts are expressed in thousands of Polish zlotys (unless indicated otherwise)
Page 43 of 84
Branch in Poland, HCC International Insurance Company PLC and TUiR Allianz Polska S.A. - excess liability
insurance for members of company governing bodies.
The total value of companies' premiums under the above insurance amounts to PLN 103 thousand, while the
total sum insured amounts to PLN 100 million.
13. Statement of the Management Board
13.1. Statement of the Executive Board of Apator SA on the preparation of the
financial statement and the report of the Executive Board
The Executive Board of Apator SA declares that according to the best knowledge of the Executive Board, the
consolidated financial statement for 2018 and comparable data were prepared in accordance with
International Accounting Standards (IAS), International Financial Reporting Standards (IFRS) and related
interpretations announced in the form of regulations of the European Commission. Grupa Apator applies the
provisions of the Accounting Act and executive regulations issued on its basis in the scope not regulated by
IAS/IFRS.
The annual consolidated financial statement reflects in a true, reliable and clear way the property and
financial situation of Grupa Apator and its financial result. Detailed principles of preparation of these financial
statements are included in the explanatory notes to the consolidated annual financial statements.
The annual consolidated report of the Management Board contains a true picture of the development,
achievements and situation of the Group, including the description of basic risks and threats.
13.2. Statement of the Executive Board of Apator SA on the selection of the entity
authorized to audit financial statements
The Management Board of Apator SA declares that:
a) entity authorized to audit financial statements, the company PricewaterhouseCoopers Polska Spółka
z ograniczoną odpowiedzialnością Audyt Sp. k. (formerly: PricewaterhouseCoopers Sp. z o.o.),
which audited the annual consolidated financial statements, was selected in accordance with legal
regulations, including those regarding the selection and procedure of the audit firm. The selection of
the entity to audit and review the financial statements was made by the Supervisory Board of Apator
SA on 11th May 2017 on the basis of the recommendation of the Audit Committee and pursuant to §
20 of the Statute of Apator SA i.e. in the manner ensuring its independence in performance of the
tasks entrusted to it,
b) PricewaterhouseCoopers Polska Spółka z ograniczoną odpowiedzialnością Audyt Sp. k.
- entered into the register of entities authorized to audit financial statements under number KIBR
144, as well as members of its Management Board and statutory auditors performing the financial
audit for Apator SA and its related entities, fulfilled the conditions to prepare the impartial and
independent report on the audit of the annual financial statement in accordance with the binding
regulations, professional standards and rules of professional ethics,
c) comply with applicable rules related to the rotation of the audit firm and the key statutory auditor and
with mandatory grace periods,
Report of the Executive Board on activity of Grupa Apator in 2018
Entity name: Grupa Apator
Period covered by the financial statements: 01.01.2018 – 31.12.2018 Reporting currency: Polish zloty (PLN)
Level of rounding: all amounts are expressed in thousands of Polish zlotys (unless indicated otherwise)
Page 44 of 84
d) the company has a policy for the selection of the audit firm and a policy for the provision of additional
non-audit services by the audit firm, an entity affiliated with the audit firm or a member of its network,
including services that are conditionally exempt from the audit firm's prohibition.
For more information on compensation for the audit firm, see Section 8.37 of the Annual Consolidated
Financial Statements.
President of the Management Board Member of the board
Mirosław Klepacki Arkadiusz Chmielewski
14. Supervisory Board Statement
14.1. Supervisory Board's assessment of the financial statements and the
Management Board's report
The Supervisory Board supervised the process of preparing financial statements. The Supervisory Board on
the basis of positive recommendation of the Audit Committee of 26th April 2019 made the assessment of the
financial statements and reports of the Management Board on activity of Apator SA and Grupa Apator
prepared by the Management Board. The Supervisory Board states that the financial data presented in the
periodical reports are reliable, correct and reliable
and actual and shall be drawn up in accordance with the books, documents and facts, and
the applicable accounting principles, applied in a continuous manner, on the basis of the books of account
kept.
14.2. Statement of the Supervisory Board of Apator SA with respect to the Audit
Committee
The Supervisory Board of Apator SA declares that:
a) the rules concerning the appointment, composition and functioning of the audit committee are
complied with, including the fulfilment by its members of independence criteria and requirements
regarding the knowledge and skills of the industry in which the issuer operates and accounting or
auditing,
b) the audit committee performed the tasks of the audit committee provided for in the applicable
regulations.
Chairman of the Supervisory Board
Janusz Niedźwiecki
Report of the Executive Board on activity of Grupa Apator in 2018
Entity name: Grupa Apator
Period covered by the financial statements: 01.01.2018 – 31.12.2018 Reporting currency: Polish zloty (PLN)
Level of rounding: all amounts are expressed in thousands of Polish zlotys (unless indicated otherwise)
Page 45 of 84
15. Corporate governance in Apator SA
Starting from 1 January 2016, the binding set of corporate governance rules is the "Code of Best Practice for
WSE Listed Companies 2016", which was adopted pursuant to Resolution No. 26/1413/2015 of the Warsaw
Stock Exchange Supervisory Board of 13 October 2015.
The current set of corporate governance rules and its archival versions are available on the website of the
Warsaw Stock Exchange at the address: https://www.gpw.pl/dobre_praktyki_spolek_regulacje.
15.1. Corporate governance rules in force since 2016
According to the Code of Best Practices for WSE Listed Companies 2016, the Company applies all detailed
rules except for the following:
▪ II.Z.3: "At least two members of the supervisory board meet the independence criteria referred to in Rule
II.Z.4.
Motivation: 22 June 2015 The General Meeting of Shareholders of the Company elected six members of
the Supervisory Board for a new five-year term of office, one of whom meets the independence criteria
set forth in Rule II.Z.4.
In addition, the company does not apply any recommendations:
▪ recommendation IV.R.2: "Where justified by the shareholder structure or the shareholders' expectations
expressed to the company, and where the company is able to provide the technical infrastructure
necessary for the smooth running of the general meeting by electronic means, it should enable
shareholders to participate in the general meeting by such means, in particular by means of electronic
communication:
1) real-time transmission of General Meetings in real time,
2) two-way communication in real time, where shareholders may take the floor during a General Meeting
from a location other than the General Meeting venue,
3) exercising, in person or by proxy, the right to vote during the General Meeting".
Justification: the above recommendation is not applied due to legal conditions
and technical. The Statute of Apator SA in the form currently in force does not provide for the possibility
to participate in the General Meeting with the use of means of electronic communication in particular
through two-way communication in real time. In order to enable shareholders to familiarise themselves
with the proceedings, the company broadcasts the proceedings in real time, and a video record of the
proceedings is posted on its website at www.apator.com.
15.2. Shareholders of Apator SA having directly or indirectly significant blocks of
shares
Below are presented the shareholders of Apator SA holding directly or indirectly significant blocks of shares
(above 5% of votes at the General Meeting) with indication of the number of shares held by these entities,
their percentage share in the share capital, number of votes resulting from them and their percentage share
in the total number of votes at the General Meeting in accordance with the state as of 31st December 2018.
Specification
As at 31 December 2018
Registered
shares Bearer shares
Total number
of shares
Number of
votes Share in capital Share in votes
Mariusz Lewicki 1 187 376 1 000 624 2 188 000 5 750 128 6.61% 10.43%
Report of the Executive Board on activity of Grupa Apator in 2018
Entity name: Grupa Apator
Period covered by the financial statements: 01.01.2018 – 31.12.2018 Reporting currency: Polish zloty (PLN)
Level of rounding: all amounts are expressed in thousands of Polish zlotys (unless indicated otherwise)
Page 46 of 84
Specification
As at 31 December 2018
Registered
shares Bearer shares
Total number
of shares
Number of
votes Share in capital Share in votes
Tadeusz Sosgórnik 993 102 907 401 1 900 503 4 879 809 5.74% 8.85%
Danuta Guzowska 954 214 566 065 1 520 279 4 382 921 4.59% 7.95%
Zbigniew Jaworski 760 848 610 152 1 371 000 3 653 544 4.14% 6.63%
Apator Mining Sp. z o. o.
- 3 600 000 3 600 000 3 600 000 10.87% 6.53%
Janusz Marzygliński 818 092 110 080 928 172 3 382 448 2.80% 6.14%
Kazimierz Piotrowski with spouse
674 774 159 181 833 955 2 858 277 2.52% 5.19%
Others 1 948 595 18 816 524 20 765 119 26 610 027 62.73% 48.28%
Conclusions 7 337 031 25 770 027 33 107 028 55 118 031 100.00% 100.00%
15.3. Dividend
Dividend from the profit for 2017:
On 28 May 2018. The Ordinary General Meeting of Shareholders adopted a resolution on the payment of
dividend from the generated profit for the financial year 2017 in the amount of PLN 1.20 gross per share. All
shares were entitled to dividend payment, i.e. 33.107.028 shares excluding own shares acquired by Apator
SA for redemption under the share repurchase programme.
The advance payment on account of the dividend from the profit for 2017 in in the total amount of PLN
11,587,459.80, i.e. PLN 0.35 gross per share, was paid on 22 December 2017 to shareholders who held
shares on 15 December 2017 The remaining part of the dividend in the total amount of PLN 28,139,443.80,
i.e. PLN 0.85 gross per share, was paid on 25 June 2018*.
Declaration of dividend payment from the profit for 2018
The declared amount of dividend from the generated profit for the financial year 2018 is to amount to PLN
1.30 gross per share. The final decision will be made at the Ordinary General Meeting of Shareholders of
Apator SA in 2019.
On 21 December 2018, an advance payment was made towards the above dividend in the total amount of
PLN 13,170,811.20, i.e. PLN 0.40 gross per share**.
*) As on the day of establishing the right to dividend the number of shares purchased by Apator SA was 1 800. **) According to the status on the day of establishing the right to advance payment for dividend, the number of shares purchased by Apator SA was 180 000.
15.4. Description of the main features of the internal control and risk management
systems applied with respect to the process of preparing financial statements
and consolidated financial statements
Individual financial statements of Apator SA and consolidated financial statements of Grupa Apator are
prepared by Accounting and Tax Department of Apator SA, functioning in the division of Financial Director of
Grupa Apator. These statements are prepared in accordance with the International Accounting Standards
Report of the Executive Board on activity of Grupa Apator in 2018
Entity name: Grupa Apator
Period covered by the financial statements: 01.01.2018 – 31.12.2018 Reporting currency: Polish zloty (PLN)
Level of rounding: all amounts are expressed in thousands of Polish zlotys (unless indicated otherwise)
Page 47 of 84
(IAS), International Financial Reporting Standards (IFRS) and related interpretations published in the form of
regulations of the European Commission. Moreover, the financial statements prepared are based on the
Regulation of the Minister of Finance of 29 March 2018 on current and periodic information provided by
issuers of securities and on conditions under which information required by legal regulations of a third
country may be recognised as equivalent (Journal of Laws of 2018, item 757).
Reporting and accounting in Pafal SA, Apator Metrix SA, Apator Powogaz SA and Apator Control Sp. z o.o.
is performed with the use of Integrated Management System BaaN IV and Apator SA, Apator Elkomtech SA
and Apator Rector sp. z o.o. uses newer, compatible version of ERP Infor LN system whose configuration
corresponds to the binding accounting principles and contains instructions
and controls to ensure consistency and integrity of data, including but not limited to: data consistency
checks, empowerment checks. The Integrated Management System enables the control of the correctness
of the recorded operations, allows the identification of persons entering and accepting individual
transactions. Access to financial data is restricted by a system of rights. Access rights to the system are
granted to the extent depending on the assigned role and responsibility of the person concerned and are
subject to strict control.
The entities being part of Grupa Apator conduct the accounting policy on the basis of own rules (accounting
policy) adopted in the entity. They define the main principles of the event logging. However, the basic
elements of the process of preparing the statements are common accounting principles adopted for all
entities of Grupa Apator, based mainly on the solutions applied
in the parent company of Apator SA. As a consequence of the kept records, accounting books of individual
companies are created, which are then the basis for preparing individual financial statements by all entities
of the Group.
Individual financial statements are the basis for the preparation of consolidated financial statements of Grupa
Apator.
In the process of consolidation of the statements, uniform principles and procedures for consolidation of
financial data are applied, which are ensured, among others, by unified electronic reports and automatic
validation of data consistency in these reports.
The supervision over the correctness of reporting and accounting processes, ensuring the correctness of
financial information contained in the financial statements and the correctness of the manner of their
presentation is carried out by the internal control systems. The system examines compliance with financial
law regulations and internal regulations, as well as the quality and correctness of performance of particular
activities (segregation of duties, multi-stage data authorization, verification of the correctness of data
received).
The Executive Board of Apator SA assesses the effectiveness of the internal control system on current
basis. Moreover, in order to increase the safety of management of financial reporting at the level of Grupa
Apator SA, since 2016 between Apator SA and Apator Metrix SA, Apator Elkomtech SA, FAP Pafal SA and
Apator Rector sp. z o.o. framework agreements for provision of services by Apator SA covering financial
management, including co-creation of accounting policy and chart of accounts, optimization of operational
processes in accounting, development and implementation of mechanisms of effective and efficient
operation of accounting services and preparation of periodic reports on financial situation are in force.
At each stage of preparation of financial statements one of the basic control mechanisms (external) is
periodical verification of financial statements by independent chartered auditor, in particular audit (Apator
SA) and review (other companies of Grupa Apator) of semi-annual statements and audit of annual
statements (all companies of Grupa Apator). The entity which is to perform the function of certified auditor in
Apator SA and Grupa Apator is elected by the Supervisory Board of Apator SA in such way to ensure
independence in performance of the tasks entrusted to it. All subsidiaries are audited by the same entity
Report of the Executive Board on activity of Grupa Apator in 2018
Entity name: Grupa Apator
Period covered by the financial statements: 01.01.2018 – 31.12.2018 Reporting currency: Polish zloty (PLN)
Level of rounding: all amounts are expressed in thousands of Polish zlotys (unless indicated otherwise)
Page 48 of 84
authorised to audit financial statements. The results of reviews and audits are presented by the auditor to the
Management Board and the Audit Committee of the Supervisory Board.
The Audit Committee of the Supervisory Board of Apator SA participates in the process of monitoring the
effectiveness of the internal control system. Its main task is to advise the Supervisory Board on monitoring
issues:
▪ separate and consolidated financial reporting,
▪ effectiveness of internal control systems, internal audit, risk management, compliance,
▪ carrying out financial audit activities (in particular, carrying out an audit by an audit firm, taking into
account any conclusions and findings of the Audit Supervisory Commission resulting from the audit
carried out in the audit firm),
▪ the independence of the statutory auditor and audit firm.
Financial data, which are the basis for the preparation of financial statements and periodic reports, are also
used for monthly financial and operational reporting. After the accounting closing of the monthly settlement
period, the senior management (management board, management) under supervision of the supervisory
board performs monthly analysis of financial results of Apator SA, individual companies of Grupa Apator and
consolidated results of Grupa Apator. The analysis of the achieved results is made by comparing them with
the business assumptions included in the annual budget, budget of a given period and in the adopted
development strategy. The identified deviations are analyzed on current basis from the point of view of their
influence on current results of the Company and Grupa Apator and in connection with that possible
corrective actions are taken. All senior and middle management is involved in the budgeting process,
covering all areas of functioning. Prepared budgets are adopted by the Management Boards of individual
companies and approved by their Supervisory Boards. The budget of Grupa Apator is adopted by the
Executive Board of Apator SA and then approved by the Supervisory Board of the Company.
On the basis of the assessment of the applied procedures, the Executive Board of Apator SA states that on
31st December 2018 there were no circumstances that could negatively influence the effectiveness of
internal control in the scope of preparation of financial statements.
15.5. Demonstration of holders of any securities that give special control rights,
together with a description of such rights
Each bearer share gives the right to one vote, whereas registered shares are preferred shares in such a way
that one share gives the right to four votes at the General Meeting of Shareholders. The principles of
disposal of registered shares and their conversion are regulated by the Statute of Apator SA.
As at 31 December 2018, the share capital of the company consisted of 33,107,028 shares with a nominal
value of PLN 0.10 each. The table below presents the structure of shares of Apator SA at the end of 2018.
As at 31 December 2018
Number of shares
Share structure % Number of votes Vote structure %
Registered shares 7 337 031 22.2% 29 348 004 53.2%
Bearer shares 25 770 027 77.8% 25 770 027 46.8%
Total shares 33 107 028 100.00% 55 118 031 100.00%
The structure of shares of Apator SA presented in the table above did not change on the day of publication
of this report.
Report of the Executive Board on activity of Grupa Apator in 2018
Entity name: Grupa Apator
Period covered by the financial statements: 01.01.2018 – 31.12.2018 Reporting currency: Polish zloty (PLN)
Level of rounding: all amounts are expressed in thousands of Polish zlotys (unless indicated otherwise)
Page 49 of 84
15.6. Restrictions on the exercise of voting rights attached to shares
There are no restrictions on the exercise of voting rights, such as:
▪ limitation of the exercise of voting rights by holders of a specified part or number of votes,
▪ time limitations concerning the exercise of voting rights,
▪ provisions according to which, in cooperation with the company, capital rights related to securities are
separated from the holding of securities.
15.7. Demonstration of any limitations concerning the transfer of ownership rights to
shares of Apator SA
Preferred registered shares are subject to restrictions on their disposal. These shares may be sold by
shareholders and their heirs or successors in title only to shareholders holding registered shares. Sale of
registered shares to persons other than shareholders holding registered shares requires a permit from the
Management Board. If the Management Board does not consent to the transfer of shares, it should, within 60
days: indicate another purchaser, determine the price in line with the price of bearer shares as at the date of
filing the application. If the Management Board does not take a position within 60 days from the date of the
written request for approval of the disposal of shares, the disposal of shares is not subject to any restrictions.
Bearer shares are not subject to any restrictions on the transfer of ownership rights.
15.7.1. Information on the issue of securities of Apator SA
In 2018 Apator SA did not issue any securities.
15.7.2. Information on contracts, which may result in changes to the financial
statements
in the proportions of shares held by the existing shareholders
Apator SA does not have any information about any agreements, including the ones that could be concluded
after the balance sheet date, as a result of which changes in proportions of shares held by the existing
shareholders and bondholders can occur in the future (Apator SA did not issue bonds).
15.7.3. Control system of employee share ownership schemes
Apator SA does not perform the employee share program.
Report of the Executive Board on activity of Grupa Apator in 2018
Entity name: Grupa Apator
Period covered by the financial statements: 01.01.2018 – 31.12.2018 Reporting currency: Polish zloty (PLN)
Level of rounding: all amounts are expressed in thousands of Polish zlotys (unless indicated otherwise)
Page 50 of 84
15.8. Description of rules concerning appointment and dismissal of managing
persons and their rights, in particular the right to make decisions on the issue
or redemption of shares
15.8.1. General Meeting
Pursuant to the Statute of Apator SA, it is the sole competence of the General Shareholders Meeting of
Apator SA to make the decision on the following:
▪ issue of shares, convertible bonds or bonds with priority right,
▪ acquisition of shares for the purpose of their redemption,
▪ increase or decrease of the share capital,
▪ determining the number, election and dismissal of Supervisory Board Members.
15.8.2. Supervisory Board
The Supervisory Board of Apator SA acts on the basis of the provisions of the Commercial Companies
Code, the Statute of Apator SA and the Regulations of the Supervisory Board of Apator SA. The Statute and
the Regulations of the Supervisory Board of Apator SA are available on the website of Apator SA:
www.apator.com in the Investor Relations section.
The supervisory board exercises permanent supervision over all areas of the activities of the company.
There is no right to issue binding instructions to the Management Board concerning the conduct of the
Company's affairs. The Supervisory Board performs its duties collectively, however, it may delegate its
Members to independently perform supervisory activities.
The members of the Supervisory Board of Apator SA are appointed and dismissed by the General
Shareholders Meeting which determines the number of members of the Supervisory Board and their
remuneration. Members of the Supervisory Board should have appropriate knowledge and experience. The
Supervisory Board may consist of 5 to 7 members elected by the General Meeting for a period of 5 years for
a joint term of office. Decreasing the number of Supervisory Board members during the term of office to not
less than 5 members shall not result in the necessity to supplement the composition of the Supervisory
Board.
At its first meeting, the Supervisory Board shall elect a Chairman and a Deputy Chairman from among its
members.
Members of the Supervisory Board are bound by a competition ban. Members of the Supervisory Board may
not be: Member of the Management Board, Proxy, Chief Accountant, Legal Adviser or Advocate employed
by the company, persons who are directly subordinated to a Member of the Management Board. In addition,
Members of the Supervisory Board may not be Members of the Management Board of a subsidiary
company.
It is permissible for the Supervisory Board to adopt resolutions in writing or using means of direct remote
communication. For resolutions of the Supervisory Board to be valid, it is required that all Members of the
Supervisory Board be notified of the content of the resolution of the Supervisory Board. Adoption of
resolutions in this manner does not apply to the election of the Chairperson and Deputy Chairperson of the
Supervisory Board, appointment of a Member of the Management Board and dismissal and suspension
in the activities of a Member of the Management Board.
Resolutions, including resolutions in writing or by means of instantaneous communications, shall be adopted
by an absolute majority of votes cast in favour:
Report of the Executive Board on activity of Grupa Apator in 2018
Entity name: Grupa Apator
Period covered by the financial statements: 01.01.2018 – 31.12.2018 Reporting currency: Polish zloty (PLN)
Level of rounding: all amounts are expressed in thousands of Polish zlotys (unless indicated otherwise)
Page 51 of 84
▪ at least 3 members with five members of the Supervisory Board,
▪ at least 4 members with more than 5 members.
Resolutions of the Supervisory Board shall be adopted by an absolute majority of votes cast by those
present.
The General Meeting adopts the Regulations of the Supervisory Board.
The Supervisory Board has no powers to make decisions on the issue or redemption of shares.
15.8.3. The Management Board
The Executive Board of Apator SA acts on the basis of the provisions of the Commercial Companies Code,
the Statute of the Company and the Regulations of the Executive Board of Apator SA. The Statute of the
Company and the Regulations of the Executive Board of Apator SA are available on the website of Apator
SA: www.apator.com in the Investor Relations section.
The members of the Executive Board of Apator SA are appointed and dismissed according to the provisions
of the Commercial Companies Code and the Statute of the Company. The Executive Board of Apator SA
consists of one to six members appointed for three years by the Supervisory Board for common tenure. The
Supervisory Board adopts resolutions
concerning the issue:
▪ determine the number of members of the Management Board of the company,
▪ appointing the President of the Management Board, and then, at the request of the President, other
members of the Management Board,
▪ dismissal of members of the Management Board of the Company,
▪ suspend all or individual members of the Management Board from their duties for important reasons,
▪ delegate members of the Supervisory Board to temporarily perform the duties of members of the
Management Board,
▪ determining the remuneration for the Management Board, taking into account its motivational character.
Members of the Management Board may be dismissed at any time by the Supervisory Board or the General
Meeting before the end of their term of office. It does not prejudice their claims under the employment
contract.
The Management Board manages the entire activity of the company, represents the company outside,
manages its assets and all matters not reserved for other authorities, is responsible for proper accounting of
the company and strictly observes the provisions of the Statute, Regulations of the Management Board and
resolutions of the company's authorities. The Management Board
in its actions it takes into account both the interest of the Company and the whole Grupa Apator. The works
of the Management Board are managed by the President of the Management Board. Resolutions shall be
adopted by an absolute majority of votes. In case of equal number of votes, the vote of the President of the
Management Board is decisive.
Member of the Management Board acting jointly, are authorised to make statements regarding the
Company's property rights and obligations and to signatures
with the Proxy or two Proxies acting jointly. Each member of the Management Board has the right and
obligation to conduct the affairs of the company, not exceeding the scope of ordinary activities of the
company.
The proxy is appointed by the Management Board. Any Member of the Management Board may revoke the
granted power of attorney.
Report of the Executive Board on activity of Grupa Apator in 2018
Entity name: Grupa Apator
Period covered by the financial statements: 01.01.2018 – 31.12.2018 Reporting currency: Polish zloty (PLN)
Level of rounding: all amounts are expressed in thousands of Polish zlotys (unless indicated otherwise)
Page 52 of 84
Members of the Management Board and Proxies are bound by the non-competition clause.
The Supervisory Board adopts the Regulations of the Management Board.
The Company's Management Board has no authority to make decisions on the issue or redemption of
shares.
15.9. Description of the principles of amendments to the Statute of Apator SA
Amendment of the Statute of Apator SA should be in accordance with par. 14 point 14 of the Statute of the
Company for the competence of the General Shareholders Meeting and can be adopted by the majority of
three quarters of votes. In the event of an intention to amend the Articles of Association, the announcement
of convening the General Meeting shall refer to the provisions in force so far, as well as the content of the
proposed amendments. In a resolution amending the Articles of Association, the General Meeting may
authorize the Supervisory Board to determine the consolidated text of the Articles of Association or to
introduce other editorial changes.
The amendment to the Articles of Association becomes effective upon entry of the amendments into the
National Court Register. The obligation to report amendments to the Articles of Association rests with the
Management Board of the company. According to the couples. 430 pairs. Pursuant to Par. 430.2 of the
Polish Companies Act, the Management Board is obliged to report an amendment to the Articles of
Association not later than within 3 months from the adoption of a relevant resolution by the General
Shareholders Meeting, however, Art. 22 of the Act on the National Court Register obliges to file an
application for entry into the Register not later than within 7 days from the date of the event justifying the
entry.
15.10. Principles of operation of the General Meeting
The manner of operation of the General Meeting and its basic powers as well as the description of
shareholders' rights and the manner of exercising them, in particular the principles resulting from the General
Meeting's by-laws, unless the information in this respect results directly from the provisions of law are
included below.
The General Shareholders Meeting acts on the basis of the provisions of the Commercial Companies Code,
the Company's Statute and the Regulations of the General Shareholders Meeting of Apator SA. The Statute
of the Company and the Regulations of General Meetings of Shareholders of Apator SA are available on the
website of Apator SA: www.apator.com in the Investor Relations section.
There are ordinary and extraordinary General Meetings. An Ordinary General Meeting of Shareholders shall
be convened annually, at the latest by the end of June.
General Meetings are convened by way of an announcement in the manner specified in the Commercial
Companies Code for public companies, at least 26 days before the date of the General Meeting. The right to
participate in the General Meeting is vested only in persons being the company's shareholders 16 days prior
to the date of the General Meeting (date of registration of participation in the General Meeting):
▪ entitled from registered shares and temporary certificates as well as pledgees and users who have the
right to vote have the right to participate in the General Meeting, if they are entered into the share book
on the day of registration of participation in the General Meeting;
Report of the Executive Board on activity of Grupa Apator in 2018
Entity name: Grupa Apator
Period covered by the financial statements: 01.01.2018 – 31.12.2018 Reporting currency: Polish zloty (PLN)
Level of rounding: all amounts are expressed in thousands of Polish zlotys (unless indicated otherwise)
Page 53 of 84
▪ list of persons entitled under bearer shares to participate in the General Meeting is determined on the
basis of the list prepared by the National Depository for Securities (KDPW SA) on the principles specified
by the Commercial Companies Code.
Shareholders may participate in the General Meeting and exercise their voting rights in person or by proxy;
they may also vote differently for each of the shares held. Each registered share of A series is privileged and
has four votes, while each bearer share has one vote.
Shareholders representing at least half of the share capital or at least half of the total number of votes
in the company may convene an Extraordinary General Meeting of Shareholders appointing the Chairperson
of the Meeting.
A shareholder or shareholders representing at least 1/20 of the share capital may:
▪ demand that an Extraordinary General Meeting be convened and that certain issues be included in the
agenda of the Meeting. The request to convene the Extraordinary General Meeting should be submitted
to the Management Board in writing or in the electronic form;
▪ demand that certain issues be placed on the agenda of the next General Meeting of Shareholders. The
request should be submitted to the Management Board not later than 21 days before the scheduled date
of the Meeting. The Management Board is obliged to immediately, but not later than 18 days before the
scheduled date of the General Meeting, announce changes in the agenda introduced at the request of
shareholders. The announcement shall be made in the manner appropriate for convening the General
Meeting;
▪ before the date of the General Meeting, submit to the company, in writing or using electronic means of
communication, draft resolutions concerning matters included in the agenda of the General Meeting or
matters which are to be included in the agenda. The Company shall immediately publish draft resolutions
on its website. Each shareholder may propose draft resolutions concerning the matters introduced in the
agenda during the General Meeting.
At the General Meeting should be present:
▪ members of the Supervisory Board and the Management Board of the Company in a composition
enabling them to provide substantive answers to questions asked during the General Meeting,
▪ a certified auditor, if the subject of the proceedings is to be the financial matters of the company.
The General Meeting is valid regardless of the number of shareholders present and the shares represented
at the General Meeting, unless the provisions of the Commercial Companies Code provide otherwise.
The General Meeting may adopt resolutions only on matters included in the agenda, except for resolutions
on organisational matters, which may concern only issues related to the conduct of the meeting. A resolution
not to consider an issue placed on the agenda may be adopted only by the following persons
where there are compelling reasons for doing so. A request to that effect must be justified. The General
Meeting may not adopt a resolution on removing an issue from the agenda or on abandoning the
consideration of an issue placed on the agenda at the request of shareholders.
Resolutions are adopted by an absolute majority of votes, unless the provisions of the Company's Statute or
the Commercial Companies Code provide otherwise. Votes are open, except for the situations specified in
Art. 420 of the CCC, i.e. secret ballots are ordered:
▪ during elections and motions for dismissal of members of the company's governing bodies,
▪ on applications to hold such persons liable,
▪ in personal matters,
▪ at the request of at least one shareholder or proxy present at the General Meeting.
Report of the Executive Board on activity of Grupa Apator in 2018
Entity name: Grupa Apator
Period covered by the financial statements: 01.01.2018 – 31.12.2018 Reporting currency: Polish zloty (PLN)
Level of rounding: all amounts are expressed in thousands of Polish zlotys (unless indicated otherwise)
Page 54 of 84
Resolutions of the General Meeting are binding for all shareholders.
15.11. Personal composition of managing and supervising bodies of Apator SA and
the changes that occurred in it during the last financial year with the
description of activity
15.11.1. The structure of the authorities of Apator SA as of 31st December 2018.
15.11.2. Supervisory Board
The composition of the Supervisory Board of Apator SA in 2018 was as follows:
▪ Janusz Niedźwiecki - Chairman of the Supervisory Board
▪ Mariusz Lewicki - Deputy Chairman of the Supervisory Board
▪ Janusz Marzygliński - Member of the Supervisory Board,
▪ Danuta Guzowska - Member of the Supervisory Board
▪ Kazimierz Piotrowski – Member of the Supervisory Board
▪ Marcin Murawski – Member of the Supervisory Board
GENERAL MEETING
Supervisory Board
Janusz Niedźwiecki,
Mariusz Lewicki, Janusz Marzygliński, Danuta Guzowska, Kazimierz Piotrowski, Marcin Murawski
Management Board
Mirosław Klepacki
Report of the Executive Board on activity of Grupa Apator in 2018
Entity name: Grupa Apator
Period covered by the financial statements: 01.01.2018 – 31.12.2018 Reporting currency: Polish zloty (PLN)
Level of rounding: all amounts are expressed in thousands of Polish zlotys (unless indicated otherwise)
Page 55 of 84
The current term of office of the Supervisory Board ends on the day of the General Meeting of Shareholders
in 2020.
The number of shares held by the Members of the Supervisory Board at the end of 2018 was as follows:
Specification As at 31 December 2018
Shares Shares face values Votes Share in capital Share in votes
Janusz Niedźwiecki 302 810 30 281.00 947 117 0.92% 1.72%
Mariusz Lewicki 2 188 000 218 800.00 5 750 128 6.61% 10.43%
Janusz Marzygliński 928 172 92 817.20 3 382 448 2.80% 6.14%
Danuta Guzowska 1 520 279 152 027.90 4 382 921 4.59% 7.95%
Kazimierz Piotrowski 597 147 59 714.70 2 147 853 1.80% 3.90%
Marcin Murawski 0 0 0 0.00% 0.00%
Conclusions 5 536 408 553 640.80 16 610 467 16.72% 30.14%
The members of the Supervisory Board do not have any shares in other companies of Grupa Apator.
During 2018 The members of the Supervisory Board of Apator SA performed also the functions in the
supervisory bodies of the companies of Grupa Apator:
▪ Mariusz Lewicki - Chairman of the Supervisory Board of Apator Mining Sp. z o. o..,
Chairman of the Supervisory Board Apator Metrix SA,
Deputy Chairman of the Supervisory Board of Apator Elkomtech SA,
▪ Janusz Marzygliński - Chairman of the Supervisory Board of Apator Rector Sp. z o. o..,
Chairman of the Supervisory Board Apator Powogaz SA,
▪ Kazimierz Piotrowski - Deputy Chairman of the Supervisory Board of Apator Metrix SA,
Member of Supervisory Board of Apator Mining Sp. z o. o.
The remuneration of the Members of the Supervisory Board did not constitute a significant item of the
Company's operating expenses and did not have a material impact on the Company's financial result. The
salaries and wages earned in 2018 are as follows:
Specification Remuneration from
Apator SA
Remuneration from other companies of
Grupa Apator Total remuneration
In thousand PLN In thousand PLN In thousand PLN
Janusz Niedźwiecki 84.0 0.0 84.0
Mariusz Lewicki 84.0 87.4 171.4
Janusz Marzygliński 84.0 74.0 158.0
Danuta Guzowska 84.0 0.0 84.0
Marcin Murawski 84.0 0.0 84.0
Kazimierz Piotrowski 84.0 50.4 134.4
Conclusions 504.0 211.8 715.8
The mode of operation of the Supervisory Board is defined in the Commercial Companies Code, the Statute
of Apator SA and
in the Regulations of the Supervisory Board of Apator SA. The Statute and the Regulations are placed on the
website of Apator SA at www.apator.com in the Investor Relations section.
Pursuant to the provisions of the Statute, the Supervisory Board meets once a quarter or more frequently, if
necessary, at the invitation of the Chairman of the Supervisory Board. In 2018, 28 meetings of the
Supervisory Board were held. Members of the Supervisory Board performed their duties in person in a
composition enabling the adoption of resolutions.
Report of the Executive Board on activity of Grupa Apator in 2018
Entity name: Grupa Apator
Period covered by the financial statements: 01.01.2018 – 31.12.2018 Reporting currency: Polish zloty (PLN)
Level of rounding: all amounts are expressed in thousands of Polish zlotys (unless indicated otherwise)
Page 56 of 84
The members of the Executive Board of Apator SA participated in the session of the Supervisory Board in
the composition enabling to provide substantive answers to the questions. Moreover, the Executive Board
provided the Supervisory Board with exhaustive information on all important matters concerning the activity
of Apator SA and Grupa Apator.
At the meetings of the Supervisory Board, resolutions were adopted on matters which were listed in the
agenda sent to the members of the Supervisory Board in their notifications on the meetings.
The activity of the Supervisory Board was focused on matters of importance for the activity of Apator SA and
Grupa Apator. The Supervisory Board shall exercise permanent supervision over the Company's operations
and the work of the Management Board through:
▪ analysing the materials received from the Management Board, which the Supervisory Board requested
to be provided,
▪ obtaining information and detailed explanations from Members of the Management Board and other
employees of the Company
during the meetings of the Supervisory Board,
▪ participation of members of the Supervisory Board in meetings of the Management Board,
▪ activities of the Audit Committee,
▪ activities of the certified auditor who, on behalf of the Supervisory Board, reviewed and audited the
financial and accounting documentation and the financial statements prepared on its basis.
The Audit Committee operates within the Supervisory Board, but no nomination or remuneration committees
have been established.
15.11.3. Audit Committee of the Supervisory Board of Apator SA
The Supervisory Board of Apator SA on 23rd September 2009 appointed the Audit Committee which is
composed of three members including the Chairman appointed from among the members of the Supervisory
Board.
The purpose of the Audit Committee is to cooperate with statutory auditors and to provide advice to the
Supervisory Board on issues related to the Company's operations:
▪ separate and consolidated financial reporting,
▪ internal control and risk management,
▪ internal audit and auditing.
The main tasks of the Audit Committee include:
▪ monitoring the financial reporting process (including: auditing the adopted accounting standards,
information flow, prepared documents and planned changes in this respect),
▪ monitoring the effectiveness of internal control systems, internal audit, risk management and
compliance,
▪ monitoring the performance of financial audit activities,
▪ monitoring the independence of the certified auditor to audit financial statements.
Detailed rules of work of the Audit Committee are defined in the Regulations of the Audit Committee of the
Supervisory Board of Apator SA, which is available on the website of Apator SA: www.apator.com in the
Investor Relations section.
The term of office of the Audit Committee is common for its members and coincides with the term of office of
the Supervisory Board.
Report of the Executive Board on activity of Grupa Apator in 2018
Entity name: Grupa Apator
Period covered by the financial statements: 01.01.2018 – 31.12.2018 Reporting currency: Polish zloty (PLN)
Level of rounding: all amounts are expressed in thousands of Polish zlotys (unless indicated otherwise)
Page 57 of 84
In the period from 1 January 2018 to 31 December 2018, the Audit Committee acted in the following
composition:
▪ Marcin Murawski - Chairman of the Committee,
▪ Mariusz Lewicki - Committee member,
▪ Kazimierz Piotrowski - Committee member:
To the extent specified in the Act of 11 May 2017 on Statutory Auditors, Audit Firms and Public Supervision:
▪ Marcin Murawski and Kazimierz Piotrowski meet the criteria of independence from Apator SA.
▪ Marcin Murawski and Mariusz Lewicki have knowledge and skills in the field of accounting or auditing
financial statements:
− Marcin Murawski graduated in Management and Marketing from the Faculty of Management at the
University of Warsaw (specialization: Enterprise Finance), since 2003 he has been a Certified Public
Accountant (KIBR no. 90053), since 2000 he has been a Certified British Certified Public Accountant
(ACCA no. 0251448) and a Certified Internal Auditor (exam in 2005). Additionally, Marcin Murawski has
professional experience in the field of accounting resulting from the following functions:
✓ 1997-2005 - Employee in the audit department of PWC (since 2002 as a manager),
✓ 2006 - 2012 - Director of the Internal Audit Department of Warta SA Insurance Group,
✓ since 2012 independent member of Supervisory Boards and member of Audit Committees of
companies listed on WSE (CCC SA (Chairman of Audit Committee), Apator SA (Chairman of
Audit Committee), GTC SA (Chairman of Audit Committee), Seco/Warwick SA (Member of KA),
as well as BZWBK Aviva TU SA and BZWBK Aviva TUnŻ SA (Chairman of Audit Committee).
− Mariusz Lewicki graduated from the Faculty of Economics at the Nicolaus Copernicus University,
Faculty of Economics
in Toruń in the field of economics and production organization, Postgraduate Studies in Tax Law
and Postgraduate Studies in Commercial Law at the Faculty of Law and Administration of the Nicolaus
Copernicus University. Additionally, Mariusz Lewicki has professional experience in the field of
accounting resulting from the following functions:
✓ 1991 - 1999 - Head of Accounting Department in state enterprise PZAE Apator and Apator SA
(legal successor of PZAE Apator),
✓ 1994 - 2001 - Chief Accountant at Reuther Polska Sp. z o.o. and Rotar Poland Sp. z o.o,
✓ 1993 - 2013 - Chief Accountant in ZPDZ "Nagro",
✓ 2001 - 2007 - Financial Director, Proxy in Apator Control sp. z o.o. (subsidiary of Apator SA),
✓ 2007-2013 - Financial Advisor at Z.P.H.U. Walter,
✓ 2008 - 2018 - Deputy Chairman of the Supervisory Board of PHS Hydrotor SA (2008-06.2014),
Chairman of the Supervisory Board of PHS Hydrotor SA (07.2014-06.2018), Chairman of the
Audit Committee of PHS Hydrotor SA (since 06.2009), Member of the Audit Committee of PHS
Hydrotor SA (07.2017-06.2018),
✓ from 2015 to the present - Deputy Chairman of the Supervisory Board of Agromet ZEHS Lubań
SA (06.2015-06.2018), Chairman of the Supervisory Board of Agromet ZEHS Lubań SA (from
07.2018),
✓ since 2009 till now - Chairman of Audit Committee of Apator SA (2009-2015), Member of Audit
Committee of Apator SA (since 2016).
▪ all members of the Audit Committee have knowledge and skills in the field of industry in which
Apator SA operates:
− Marcin Murawski has the knowledge and skills in the branch in which Apator SA operates, acquired
during the performance of the following functions:
Report of the Executive Board on activity of Grupa Apator in 2018
Entity name: Grupa Apator
Period covered by the financial statements: 01.01.2018 – 31.12.2018 Reporting currency: Polish zloty (PLN)
Level of rounding: all amounts are expressed in thousands of Polish zlotys (unless indicated otherwise)
Page 58 of 84
✓ since 2013 till now - Member of the Supervisory Board of Apator SA - knowledge of the
electrical machinery sector in the area of production of devices and measurement systems for
energy distribution companies (metering of electricity and switchgear),
✓ from 2015 to the present - Member of the Supervisory Board and Member of the Audit
Committee of Seco/Warwick SA - knowledge of the electrical machinery sector in the area of
mechanical engineering.
− Mariusz Lewicki has the knowledge and skills in the branch in which Apator SA operates, acquired
during the performance of the following functions:
✓ since 2000 till now - Member of the Supervisory Board of Apator SA, since 2010 Deputy
Chairman of the Supervisory Board - knowledge of the electrical machinery sector in the area of
production of devices and measurement systems for energy distribution companies (electricity
metering and switchgear),
✓ since 2005 till now - Chairman of the Supervisory Board of Apator Mining sp. z o.o. (subsidiary
of Apator SA) - knowledge of the electrical machinery sector in the area of production of
machinery and equipment for mining,
✓ since 2007 till now - Chairman of the Supervisory Board of Apator Metrix SA (entity dependent
on Apator SA) - knowledge of the electrical machinery sector in the area of production metering
gear for energy distribution companies (gas metering),
✓ from 2014 till now - Member of the Supervisory Board of Apator Elkomtech SA (entity
dependent on Apator SA) - knowledge of the electrical machinery sector in the area of
production system supporting the work of energy services in the field of transmission and
energy distribution (control and supervision systems),
✓ 2008 until now - Deputy Chairman of the Supervisory Board of PHS Hydrotor SA (2008-
06.2014), Chairman of the Supervisory Board of PHS Hydrotor SA (07.2014-06.2018),
Chairman of the Audit Committee of PHS Hydrotor SA (since 06.2009), Member of the Audit
Committee of PHS Hydrotor SA (07.2017-06.2018), President of the Management Board of
PHS Hydrotor S.A. (since 07.2018)
- knowledge of the electrical machinery sector in the area of mechanical equipment
manufacturing.
− Kazimierz Piotrowski has the knowledge and skills in the branch in which Apator SA operates
acquired during the performance of the following functions:
✓ since 2015 till now - Member of the Supervisory Board of Apator SA, Member of the Audit
Committee - knowledge of the electrical machinery sector in the area of production of
equipment and measurement systems for energy distribution companies (electricity metering
and switchgear),
✓ from 2013 till now - Member of the Supervisory Board of Apator Metrix SA (entity dependent on
Apator SA) - knowledge of the electrical machinery sector in the area of production metering
gear for energy distribution companies (gas metering),
✓ since 2001 till now - Member of the Supervisory Board of Apator Mining sp. z o.o. (subsidiary of
Apator SA) - knowledge of the electrical machinery sector in the area of machine manufacturing
and mining equipment,
✓ years 2009 - 2013 - Chairman of the Supervisory Board of FAP Pafal SA (subsidiary of Apator
SA) - knowledge of the electrical machinery sector in the area of production of metering
equipment for energy distribution companies (metering of electricity),
✓ 2005 - 2008 - President of the Management Board of Apator Metrix SA (subsidiary of Apator
SA) - knowledge of the electrical machinery sector in the area of production metering gear for
energy distribution companies (gas metering),
Report of the Executive Board on activity of Grupa Apator in 2018
Entity name: Grupa Apator
Period covered by the financial statements: 01.01.2018 – 31.12.2018 Reporting currency: Polish zloty (PLN)
Level of rounding: all amounts are expressed in thousands of Polish zlotys (unless indicated otherwise)
Page 59 of 84
✓ 1993-2000 - Member of the Executive Board of Apator SA, including Administrative Director
(from 1993 to 1998) and Financial Director (1998-2000) - knowledge of the electromechanical
sector in the area of production of measuring devices and systems for energy distribution
companies (electricity metering and switchgear).
In accordance with the regulations, the Audit Committee meetings are held at least twice a year, before the
company publishes its financial statements (half-yearly and annual). In 2018, 10 meetings of the Committee
were held.
In the first half of 2017 The Audit Committee developed and conducted the procedure of selecting the
statutory auditor. On its basis, on 11 May 2017, he made a recommendation to the Supervisory Board
regarding the selection of the company:
− KPMG Audyt spółka z ograniczoną odpowiedzialnością sp.k. with its registered office in Warsaw to be
reviewed
and audit of separate and consolidated financial statements for 2017,
− PricewaterhouseCoopers sp. z o.o. (currently PricewaterhouseCoopers Polska Spółka z ograniczoną
odpowiedzialnością Audyt Sp. k.) with its registered office in Warsaw for review and unitary audit
and consolidated financial statements for the years 2018 - 2020.
Transparent and clear selection criteria shall be used in the selection of an audit firm for the audit of financial
statements. The main ones are:
− experience in auditing financial statements of similar capital groups (in relation to the size of GK Apator,
dispersed geographical structure and branch in which GK Apator operates),
− experience in the area of risk management, internal control, IT and corporate governance control,
− maintaining the principles of impartiality and independence of the audit firm,
− no conflict of interest,
− optimization of costs of auditing financial statements.
The selection of audit firms shall be carried out on a rotating basis over a period of not more than five years.
Authorised non-audit services may be provided only to an unrelated extent
with the tax policy of the Company, after the approval of the Audit Committee and risk assessment
and independence safeguards. The scope of other non-audit services is fully covered by the Act of 11 May
2017 on Statutory Auditors, Audit Firms and Public Supervision.
Since the entry into force of the Act of 11 May 2017 on Statutory Auditors, Audit Firms and Public
Supervision, an audit firm that audits financial statements has not provided other allowed non-audit services.
The Audit Committee systematically monitors the processes of financial reporting and auditing and presents
relevant information to the Supervisory Board.
15.11.4. The Management Board
From 1 January 2018 The Management Board acted in the following two-person composition:
▪ Mirosław Klepacki - President of the Management Board,
▪ Piotr Nowak – Board Member.
Since the tragic death of Piotr Nowak on 3 January 2018. The Executive Board of Apator SA is composed of
one person:
▪ Mirosław Klepacki - President of the Management Board.
Report of the Executive Board on activity of Grupa Apator in 2018
Entity name: Grupa Apator
Period covered by the financial statements: 01.01.2018 – 31.12.2018 Reporting currency: Polish zloty (PLN)
Level of rounding: all amounts are expressed in thousands of Polish zlotys (unless indicated otherwise)
Page 60 of 84
14 December 2018 The Supervisory Board of Apator SA decided to extend since 1st January 2019 the
composition of the Executive Board to two persons appointing Arkadiusz Chmielewski as a member of the
Executive Board. Due to the above, since the 1st January 2019 the Executive Board of Apator SA operates
in the following composition:
▪ Mirosław Klepacki - President of the Management Board, General Manager
▪ Arkadiusz Chmielewski - Member of the Management Board, Director for Business Development of
Apator Group.
The current term of office of the Management Board ends on the date of the General Meeting of
Shareholders in 2019.
In 2018 in Apator SA the following persons had the power of attorney granted to them:
▪ Krzysztof Malec - Chief Operating Officer,
▪ Tom Ruhan - Adviser to the Management Board (until 9 February 2018),
▪ Jolanta Dombrowska - Director of the Management and Investor Relations Office,
▪ Małgorzata Mazurek - Financial Director of Grupa Apator (since 4th January 2018),
▪ Artur Bratkowski - Director for Apparatus and Measurement Systems (since January
17th
2018 )
During 2018 Members of the Management Board and Proxies were members of the governing bodies of
subsidiaries:
▪ Mirosław Klepacki - Chairman of the Supervisory Board of Apator Elkomtech SA,
Member of Supervisory Board of Apator Rector sp. z o.o.
▪ Piotr Nowak - Deputy Chairman of the Supervisory Board of Apator Powogaz SA
(from January 3rd 2018),
Member of Supervisory Board of Apator Metrix SA (do 3 stycznia
2018),
▪ Krzysztof Malec - Member of the Supervisory Board of FAP Pafal SA,
▪ Tom Ruhan - Member of the Board of Directors of Apator Miitors (until 2 July
2018),
▪ Jolanta Dombrowska - Member of the Supervisory Board of Apator Powogaz SA,
Deputy Chairman of the Supervisory Board of Apator Control
sp. z o. o. o. (as of 30 March 2018).
The Executive Board of Apator SA on 31st December 2018 did not have any shares of Apator SA.
When making decisions in matters concerning the company, Members of the Management Board act within
the limits of justified economic risk, i.e. after consideration of all information, analyses and opinions, which in
the opinion of the Management Board should be taken into account in a given case in view of the interest of
the company. They take into account the long-term justified interests of shareholders, creditors, employees
and other entities and persons cooperating with the company in the field of business activity, as well as the
interests of local communities. The Management Board acts with particular care to ensure that all
transactions with persons whose interests affected the interest of the Company are carried out on market
terms.
Report of the Executive Board on activity of Grupa Apator in 2018
Entity name: Grupa Apator
Period covered by the financial statements: 01.01.2018 – 31.12.2018 Reporting currency: Polish zloty (PLN)
Level of rounding: all amounts are expressed in thousands of Polish zlotys (unless indicated otherwise)
Page 61 of 84
15.12. Remuneration policy in Apator SA
The members of the Executive Board of Apator SA are employed on the basis of the contract of employment
for an indefinite period of time. The remuneration system in 2018 for the members of the Executive Board of
Apator SA consisted of fixed remuneration - basic and variable - annual bonuses granted by the Supervisory
Board. In order to increase the motivational character of the bonus and to link the bonus system of the
members of the Executive Board with the performance of Strategy of Grupa Apator, the bonus of the
members of the Executive Board depends on the degree of performance of tasks entrusted to each member
of the Executive Board and agreed between the member of the Executive Board and Supervisory Board of
Apator SA at the beginning of each year. The degree of performance of tasks is the basis for granting the
annual bonus for the Executive Board of Apator SA.
A non-financial component of the remuneration for the members of the Management Board and key
managers of the company is the use of company cars for private purposes and medical packages.
Upon termination of the employment relationship, Members of the Management Board are entitled to
severance pay in the amount of 3 months' gross basic salary and compensation under a competition
prohibition clause.
Remuneration of the Management Board Members obtained in 2018 for the period of performing the function
is as follows:
Specification
Remuneration from Apator SA Remuneration
from other companies of Grupa Apator
Total remuneration
basic salary 2017 bonuses paid
in 2018
Severance payments,
annual leave payments etc.
In thousand PLN
In thousand PLN In thousand
PLN In thousand PLN In thousand PLN
Mirosław Klepacki 600.0 213.2 - 96.5 909.7
Piotr Nowak * 49.1 316.2 55.8 0.9 422
Conclusions 649.1 529.4 55.8 97.4 1 331.7
*) Remuneration paid to the heirs.
Remuneration of Management Board Members is determined on the basis of transparent procedures and
rules, taking into account their motivational nature and ensuring effective and smooth management of the
company. Remuneration meets the responsibility criteria of the function and is reasonable in relation to the
level of remuneration of board members in similar companies in a comparable market.
15.13. Diversity policy in Apator SA
The objective of diversity policy in Apator SA is to build awareness and organizational culture open to
diversity which leads to increase of effectiveness of work and counteracts discrimination. Based on
o the functioning Code of Ethics the basis for diversity management in Apator SA is to create equal
opportunities in access to professional development and promotion.
When selecting the company's governing bodies and key managers, the company strives to ensure
versatility
and diversity, particularly in the areas of gender, fields of study, age and work experience. The decisive
aspect here is, above all, the high qualifications and substantive preparation for the performance of a specific
function.
Report of the Executive Board on activity of Grupa Apator in 2018
Entity name: Grupa Apator
Period covered by the financial statements: 01.01.2018 – 31.12.2018 Reporting currency: Polish zloty (PLN)
Level of rounding: all amounts are expressed in thousands of Polish zlotys (unless indicated otherwise)
Page 62 of 84
15.14. Sponsorship policy in Apator SA
The sponsoring activity is aimed at supporting Young Talents and local initiatives in the area of sport, culture
and science. Its main objectives are:
▪ increasing the positive perception of the company on the local, national and international level,
▪ creating the image of a modern and dynamic company, operating on the basis of innovative solutions
and technologies, which promotes development and creative initiatives,
▪ building positive relations with the local environment by supporting valuable initiatives
and cultural, artistic and sporting activities.
In 2018 in accordance with the adopted policy, assuming allocation of 0,5% of net profit of Apator SA to the
sponsoring activity, the Company performed the following activities:
▪ science
− Pasjopolis Master grant programme - proprietary programme of Apator SA addressed to students of the
Nicolaus Copernicus University, UKW,
− support for scientific events: Toruń Festival of Science and Art, Startup Weekend, patronage over the
Euroelektra Olympics,
▪ culture
− leading event: Toffifest Festival - Apator is the exclusive Sponsor of the music band,
− support for cultural events (Nova Muzyka i Architektura Festival, International Biennale of Children and
Youth Graphics, Probaltica Festival, Young Cinema Festival and others),
▪ sport
− leading action: Twarde Pierniki - sponsor of youth teams,
− sport sponsorship (nationwide fencing tournaments for children and youth, local children's football
teams),
▪ charity activity
− campaigning activity: support for Children's Hospice Hope - funds allocated for the purchase of a cough
assistant and the construction of a branch,
− other support: Fundacja Piękniejszego Świata Skłudzewo, Fundacja Pomoc Rodzinie i Ziemi,
Stowarzyszenie Opieki Nad Dziećmi Opuszczonymi Oratorium im. Bł. Ks. Br. Markiewicza, Children’s
Fundation „Zdążyć z pomocą”.
Report of the Executive Board on activity of Grupa Apator in 2018
Entity name: Grupa Apator
Period covered by the financial statements: 01.01.2018 – 31.12.2018 Reporting currency: Polish zloty (PLN)
Level of rounding: all amounts are expressed in thousands of Polish zlotys (unless indicated otherwise)
Page 63 of 84
16. Statement of Grupa Apator on non-financial information for 2018
16.1. Business model
Capital Group Apator runs its activity within the machinery industry in the following segments and business
lines:
Report of the Executive Board on activity of Grupa Apator in 2018
Entity name: Grupa Apator
Period covered by the financial statements: 01.01.2018 – 31.12.2018 Reporting currency: Polish zloty (PLN)
Level of rounding: all amounts are expressed in thousands of Polish zlotys (unless indicated otherwise)
Page 64 of 84
The new division into segments (determined by the type of customer), effective since the beginning of 2018,
includes the following segments and business lines:
▪ Electricity* and within it: electricity metering, switching equipment, ICT
and control and monitoring systems,
▪ Water and heating,
▪ Gas.
As at 31 December 2018, the Group comprised 16 entities**. The dominant entity is Apator SA. The
structure of the Group is shown in the diagram below:
*) The previous name of the smart grid segment was changed in accordance with the nomenclature of the new Strategy of Grupa Apator for the years 2019-2023. In the segment, the separation of control equipment lines was abandoned at the same time, as explained above. **) 1 April 2019 The District Court in Łódź, XX Economic Department of the National Court Register, made the entry of the merger of two subsidiaries of Apator SA, i.e. Apator Elkomtech SA and Apator Control sp. z o.o., therefore since that moment the number of entities included in Grupa Apator decreased to 15.
Report of the Executive Board on activity of Grupa Apator in 2018
Entity name: Grupa Apator
Period covered by the financial statements: 01.01.2018 – 31.12.2018 Reporting currency: Polish zloty (PLN)
Level of rounding: all amounts are expressed in thousands of Polish zlotys (unless indicated otherwise)
Page 65 of 84
The Group's activity focuses on the production and sale of measuring instruments, control and
measurement, switchgear and control equipment, SCADA class IT systems and cooperating systems
with them telemechanical devices, protections and other network devices for distributed systems, ensuring
the possibility of remote control and supervision of the power grid in the full range of voltages and devices
reading and transmitting data.
The business model of Grupa Apator in 2018 was presented in the following way:
Report of the Executive Board on activity of Grupa Apator in 2018
Entity name: Grupa Apator
Period covered by the financial statements: 01.01.2018 – 31.12.2018 Reporting currency: Polish zloty (PLN)
Level of rounding: all amounts are expressed in thousands of Polish zlotys (unless indicated otherwise)
Page 66 of 84
Strategic objectives
According to the assumptions of the new strategy for the years 2019-2023 Grupa Apator wants to be even
closer to the market
and customers, offering their knowledge and competences, acting as a technology consultant who, in close
cooperation with the customer, develops solutions tailored to the needs of today's and tomorrow's needs.
The Group's vision is to maintain its position as an industry leader and expert in Poland in the long term, to
find itself in a position of
in the forefront of suppliers in Germany and Central and Eastern Europe and building the recognition of the
Apator brand on selected other markets. Apator wants to provide customers easy to use
and intuitive solutions for the effective management of all types of energy media.
In the perspective of 2023. The Group is planning a significant increase in the scale of its operations, which is reflected in the following achievements (in 2023) EBITDA at the level of PLN 220 million and sales revenues at the level of PLN 1.4 billion (with average annual growth dynamics of 13% for EBITDA and 8% for sales). The value of sales to foreign markets is also to increase significantly, as a consequence the share of export in total sales should be maintained at the level of over 50%.
The growth will be driven by the development of existing businesses and the expansion of the product
portfolio
towards technologically advanced solutions for energy media management,
including smart solutions and systems for active management of distribution networks. Based on
o high technical competences, gained experience and knowledge of the needs of customers of the sector of
distribution of energy media, Apator wants to participate fully in the technological breakthrough and to
perform for its customers the role of advisor and first choice partner. The Group will focus on segments with
high sales and profitability potential and will develop the sales of high-margin products, including smart
solutions. The achievement of the assumed financial objectives will also be possible thanks to further
improvement of operational efficiency and cost optimisation through the use of synergy effects.
In terms of building the offer, the engine of growth will be, among others, the following:
▪ new generation of measurement devices with electronic static measurement and multienergy solutions,
▪ solutions and services for implementation and maintenance of supervision and metering systems and
predictive management of network assets,
▪ smart metering, billing services, IoT technologies, systems for reading and managing measurement data
based on modern communication technologies.
The objectives of the new strategy will be performed also by further increase of operating efficiency and
therefore Grupa Apator adapts and will continue to adapt internal processes to new market challenges. The
most important actions in this area are:
▪ further, extensive automation and robotization of production processes,
▪ expansion of the competence centre for electronics production in Ostaszewo,
▪ optimisation of the Group (simplification of the capital structure, e.g. mergers, further development of
common functions),
▪ limiting the level of costs through better use of resources and group competences (e.g. coordination of
activities in the following areas: purchasing, inventories, logistics).
Cumulative capital expenditures within the time horizon of the new strategy were assumed at the level of ca. PLN 380 million. The planned investments will be financed from the developed funds and funds released from unused assets and loans. The strategy also provides for a new approach to innovation by creating R&D competence centres in the Group, strengthening R&D teams and Product Managers, as well as allocating an additional fund for the development of innovative ideas.
Report of the Executive Board on activity of Grupa Apator in 2018
Entity name: Grupa Apator
Period covered by the financial statements: 01.01.2018 – 31.12.2018 Reporting currency: Polish zloty (PLN)
Level of rounding: all amounts are expressed in thousands of Polish zlotys (unless indicated otherwise)
Page 67 of 84
Indicators showing the scale of activity and the implementation of strategic objectives
Quantitative sales by main product groups 2018 2017 Change Dynamics y/y
Thousands of units
Thousands of units
Thousands of units
%
electricitymeter 2 063 1 756 307 117%
gasometers 1 334 1 607 - 273 83%
water meters 2 764 2 728 36 101%
heatmeters 80 91 - 11 88%
isolating switches 514 592 - 78 87%
radio overlays 720 710 10 101%
Revenues from sales by segments* 2018 2017 Change Dynamics y/y
In thousand PLN In thousand
PLN In thousand
PLN %
Electricity segment 385 922 348 082 37 840 111%
country 315 933 260 205 55 728 121%
export 69 989 87 877 - 17 888 80%
Gas segment 183 536 271 925 - 88 389 67%
country 29 894 33 238 - 3 344 90%
export 153 642 238 687 - 85 045 64%
Water and heating segment 258 344 263 189 - 4 845 98%
country 103 239 95 610 7 629 108%
export 155 105 167 579 - 12 474 93%
Discontinued operation (Apator Mining) 16 241 23 706 - 7 465 69%
Total revenue 844 043 906 902 - 62 859 93%
country 465 299 411 936 53 363 113%
export 378 744 494 966 - 116 222 77%
Basic financial data*
2018 2017 Change Dynamics y/y
In
thousand
PLN
In thousand
PLN
In
thousand
PLN
%
Sales revenue 844 043 906 902 - 62 859 93%
Sales profit 98 274 72 129 26 145 136%
Profit from operations 92 529 64 609 27 920 143%
EBITDA 134 311 103 893 30 418 129%
Net profit 70 405 43 908 26 497 160%
Equity capital 476 984 455 498 21 486 105%
Long-term liabilities 51 362 65 529 - 14 167 78%
Short-term liabilities 310 844 318 455 - 7 611 98%
Total assets 839 190 839 482 - 292 100%
Gross wages and salaries (including surcharges) 202 137 199 090 3 047 102%
Income tax - 22 773 - 16 188 - 6 585 141%
Current income tax - 17 193 - 15 676 - 1 517 110%
Deferred income tax - 5 580 - 512 - 5 068 1090%
*) Continuing and discontinued activity, analysis of revenues and financial results was presented in point 2 of the Report of the Executive Board of Grupa Apator for 2018.
Report of the Executive Board on activity of Grupa Apator in 2018
Entity name: Grupa Apator
Period covered by the financial statements: 01.01.2018 – 31.12.2018 Reporting currency: Polish zloty (PLN)
Level of rounding: all amounts are expressed in thousands of Polish zlotys (unless indicated otherwise)
Page 68 of 84
Investments, R&D activities
2018 2017 Change Dynamics y/y
In
thousand
PLN
In thousand
PLN
In
thousand
PLN
%
CAPEX capital expenditures, including: 47 282 58 324 - 11 042 81%
tangible fixed assets 32 092 41 341 - 9 249 78%
Intangible and legal assets 15 190 16 983 - 1 793 89%
Operating costs of development offices (R&D) not included in CAPEX
23 830 22 478 1 352 106%
Average annual number of employees in R&D [YOY]. 163.7 149.8 - 109%
16.2. Employee issues
Policies in the area of employee issues in GK Apator On the competitive and specialized market of modern technologies where Grupa Apator operates, the
employees with their knowledge, experience and competences are one of the key resources necessary to
build competitive advantage. For this reason Grupa Apator continuously improves the processes of human
resources management and implements the tools supporting the development of employees and tries to
build their involvement, loyalty and motivation. The rules of work in individual companies of the Group are
regulated by generally applicable laws (including the Labour Code) and internal procedures and instructions.
The key role in determining the approach to management of employee issues at the level of Grupa Apator is
played by the Code of Ethics of Grupa Apator binding in Apator SA and domestic subsidiaries. The
complementary role in defining the standards of the policy towards employees is played, among others, by
Strategy
Corporate Social Responsibility (CSR), Work Regulations of individual companies
and the Collective Bargaining Agreements binding in them, or finally the relevant provisions of the Books of
the Integrated Management System of individual companies of the Group.
The basic tasks of personnel policy of Grupa Apator are as follows:
▪ attracting competent employees,
▪ development of competencies necessary to implement the business strategy,
▪ building commitment and taking care of a high level of satisfaction and motivation of employees,
▪ business support through the implementation of tools for human resources management and solving
current problems.
Treatment of all employees is at the core of all HR activities
with due respect and to strive to create equal opportunities for career development and promotion,
regardless of gender, age, national and ethnic origin, sexual orientation, family situation, (in)disability and
political and religious views. The Group strives to ensure that its employees work in an atmosphere of
openness and tolerance for differences. The activities undertaken concentrate on creating professional
activity, ensuring appropriate working conditions
and friendly atmosphere, offering opportunities for professional development and taking care of the
development of organizational culture.
The objectives in the area of employee issues are defined by:
▪ planning of human resources
▪ recruitment, selection and selection of staff
Report of the Executive Board on activity of Grupa Apator in 2018
Entity name: Grupa Apator
Period covered by the financial statements: 01.01.2018 – 31.12.2018 Reporting currency: Polish zloty (PLN)
Level of rounding: all amounts are expressed in thousands of Polish zlotys (unless indicated otherwise)
Page 69 of 84
▪ adaptation of employees
▪ competence development (training and participation in projects)
▪ motivation (wage and non-wage)
▪ evaluation
▪ progression
▪ leaves
▪ communication between the employees and the Management Board.
Human resource planning is carried out through the establishment of annual and multi-annual establishment
plans. Employer branding activities in the area of recruitment are carried out in the form of participation in job
fairs, cooperation with universities and high schools, media presence, sponsoring of competitions for
students and trainees as well as organizing internship programmes and internships. When recruiting
employees, the Group uses both its own resources and those of the labour market. Depending on the
hierarchy of the position, its complexity, competence requirements, availability of employees
of appropriate qualifications and the date of filling the position, a decision is made on the manner of
recruitment. During recruitment process of employees not only professional skills and competences are
taken into account but also personality traits that are in accordance with organizational culture and values
and model of competence of Grupa Apator. In accordance with the priorities in relations with employees,
from the first days of employment the Group supports them both organizationally and in terms of content,
providing them with the necessary tools and conditions for comfortable and safe performance of their duties.
Improvement of employees' qualifications is achieved through participation in various types of training,
including: obligatory training in the field of occupational health and safety, and training on specific job and
substantive rights.
and specialist, soft, personal development support and company-wide development, e.g. concerning the
management system. Employees also have the opportunity to take advantage of various forms of funding for
language learning, higher education and post-graduate studies. Training is planned and budgeted on an
annual basis, taking into account the needs at the levels of the organisation, teams and individual
employees.
Motivation of employees is provided through pay (consisting of a fixed and variable part depending on the
results achieved) and in non-wage form, including extensive social assistance and the organisation of
various forms of sports activities, events, integration trips or medical care, etc.
Health and Safety The companies of Grupa Apator conduct the policy aimed at ensuring safety and hygiene at work, whose
main objective is elimination of accident hazards and minimization of harmful factors affecting the employee
in the workplace. Actions taken in this area comply with applicable laws and regulations and the provisions of
the developed* occupational health and safety management system according to the PN-N 18001:2007
standard. The ways of achieving OHS objectives are also regulated by a number of internal procedures and
instructions in force in the individual companies of the Group.
Grupa Apator supports health protection of its employees and works on constant improvement of safety
and working conditions, implements solutions to prevent accidents at work, occupational diseases and
potential accidents. The activities carried out include:
▪ hazard identification and risk assessment for each job,
▪ initial, periodic and follow-up medical examinations, protective measures, initial and periodic training
in terms of health and safety rules,
▪ organization of workstations in accordance with applicable regulations and ergonomic principles,
introduction of modern technological lines and devices that positively influence productivity and minimize
the load on employees,
Report of the Executive Board on activity of Grupa Apator in 2018
Entity name: Grupa Apator
Period covered by the financial statements: 01.01.2018 – 31.12.2018 Reporting currency: Polish zloty (PLN)
Level of rounding: all amounts are expressed in thousands of Polish zlotys (unless indicated otherwise)
Page 70 of 84
▪ monitoring of working conditions by the Health and Safety Committees,
▪ separating, marking and preparing workstations, transport routes and fire-fighting agents,
▪ monitoring of identified threats.
*) Implemented in some companies.
Planning and improvement of the OHS process takes place through an annual plan of objectives
and tasks, the monitoring and implementation of which shall be governed by appropriate procedures.
Achievements of HR policy to date In the years 2017-2018 on the level of the whole Grupa Apator it was made:
▪ implementation (developed in 2016) of new solutions in the field of employee remuneration,
▪ implementation (developed in 2016) the System of Periodic Competence Assessment (SOOK) and the
System of Management by Objectives,
Objectives and challenges in the area of employee issues The key challenges in the area of employee issues in the perspective of the next periods at the level of
Grupa Apator include:
▪ developing group values and translating them into patterns of behaviour in the competence model and
building a flu organisational culture on them,
▪ development of group HR strategy and strategic initiatives as well as HR effectiveness measures,
▪ define the target HR structure,
▪ implementation of the PSC
Indicators in the area of employee issues
Employment in the Grupa Apator year 2018** 2017 Dynamics y/y
[%]
Average annual employment [AWU], of which 2 485.0 2 609.7 95% covered by collective agreements 1 436.9 1 446.3 99%
Employment at the end of the year [persons], including:
2 541 2 514 101%
women 1 084 1 011 107%
men 1 457 1 503 97%
Employment at the end of the year [persons], including:
1. Full-time positions 2 503 2 485 101%
women 1 069 999 107%
men 1 434 1 486 96%
2. Part-time positions 38 29 131%
women 15 12 125%
men 23 17 135%
Employment at the end of the year [FTEs], including: 2 526.7 2 496.2 101%
women 1 076.8 997.3 108%
men 1 450.0 1 498.9 97%
Employment at the end of the year [FTEs], including:
1. Agreements for an indefinite period of time
1 933.7
1 834.6
105%
women 737.8 675.3 109%
men 1 195.9 1 159.3 103%
2. Permanent agreements
513.5
611.6
84%
women 298.5 307 97%
Report of the Executive Board on activity of Grupa Apator in 2018
Entity name: Grupa Apator
Period covered by the financial statements: 01.01.2018 – 31.12.2018 Reporting currency: Polish zloty (PLN)
Level of rounding: all amounts are expressed in thousands of Polish zlotys (unless indicated otherwise)
Page 71 of 84
Employment in the Grupa Apator year 2018** 2017 Dynamics y/y
[%]
men 215.0 304.6 71%
3. Trial period agreements
79.5
50.0
159%
women 38.5 15.0 257%
men 41.0 35.0 117%
Off-site employment [FTE] 55.0 64.0 86%
*) Without workers on maternity leave and on maternity leave under the terms of maternity leave, taking paternity, parental or parental leave for the purpose of professional preparation.
**) No data from TOV Apator Metroteks.
Changes in employment in Grupa Apator year 2018** 2017 Dynamics
y/y [%]
Newly recruited employees during the year [persons], of which:
541 489 111%
women 267 206 130 %
men 274 283 97%
persons up to 30 years of age 194 215 90%
persons aged between 30 and 50 279 225 124%
persons above 50 years of age 68 49 139%
production workers 404 337 120%
non-production workers 137 152 90%
Employees made redundant during the year [persons], including:
439 585 75%
women 172 253 68%
men 267 332 80%
production workers 289 422 68%
non-production workers 150 163 92%
voluntary leaves 264 290 91%
involuntary leaves, including: 175 295 59%
transition to pensions 56 59 95%
Stock rotation index [%]* 17.3 23.3 74%
*) Indicator calculated according to the formula: (Number of job vacancies during the year [persons]/employment at the end of the year
[persons])*100.
**) No data from TOV Apator Metroteks.
Health and Safety year 2018** 2017 Dynamics y/y
[%]
Number of complaints filed by employees, including: 2 0 -
administrative staff 1 0 -
production workers 1 0 -
Number of accidents at work, including: 43 35 123%
slight accidents 40 34 118%
medium accidents 0 0 -
serious accidents 1 0 -
fatal accidents 2 1 200%
Accident frequency index* 17.3 13.4 129%
*) Indicator calculated according to the formula: (Annual number of accidents/ Average annual employment[YOY])*1000
**) No data from TOV Apator Metroteks.
Employees training year 2018* 2017 Dynamics y/y
[%]
Number of trained employees [persons], including: 1 583 1 589 100%
1. administrative staff 671 686 98%
women 191 224 85%
men 480 462 104%
2. production workers 912 903 101%
women 442 416 106%
Report of the Executive Board on activity of Grupa Apator in 2018
Entity name: Grupa Apator
Period covered by the financial statements: 01.01.2018 – 31.12.2018 Reporting currency: Polish zloty (PLN)
Level of rounding: all amounts are expressed in thousands of Polish zlotys (unless indicated otherwise)
Page 72 of 84
Employees training year 2018* 2017 Dynamics y/y
[%]
men 470 487 96%
Total Training Budget [TPLN]. 1 548.2 1 473.7 105%
*) No data from TOV Apator Metrotex.
Risks in the area of employee issues In order to minimize the risk, the strengthening and development of HR functions in Grupa Apator is
performed and the programme of HR projects is performed (currently for business lines dedicated to
professional power engineering).
1. Risk of availability of staff (finding specialists/employees with appropriate qualifications)
Precautionary actions:
− early planning of human resources (annual and multi-annual establishment plans),
− employer branding activities in the area of recruitment (participation in job fairs, cooperation with
universities, presence in the media, internship programmes, apprenticeships),
− internal recruitments.
2. Risk of losing key employees
Precautionary actions:
− strengthening and development of HR functions, implementation of the HR program for subsequent
business lines,
− proper preparation of the implementation in the scope of tasks, training and clear definition of the
responsibility of the new employee,
− providing employees with feedback on their work, appreciation of achievements and initiatives (system
of periodic assessments of competences),
− training and development programs,
− building effective motivation systems (management system by objectives),
− conscious and clear communication with employees,
− ensuring the development of team management skills among managers and managers,
− orderly dismissal procedures.
3. Risk of non-compliance with the GDPR
Precautionary actions:
− adapting internal regulations and corporate documentation to the requirements of GDPR,
− adapting the rules on data sharing and entrustment to the requirements of the GDPR,
− shaping employees' awareness through trainings, internal publications, etc,
− adaptation of the information clauses and consent to the processing and storage of data,
− adjusting the provisions of agreements with counterparties,
− validation of technical and ICT security features,
− internal audits on compliance with the GDPR.
4. Risk of lack of identification with the organisation's culture
Precautionary actions:
Report of the Executive Board on activity of Grupa Apator in 2018
Entity name: Grupa Apator
Period covered by the financial statements: 01.01.2018 – 31.12.2018 Reporting currency: Polish zloty (PLN)
Level of rounding: all amounts are expressed in thousands of Polish zlotys (unless indicated otherwise)
Page 73 of 84
− a development-friendly remuneration system based on clear criteria,
− Company Collective Labour Agreements,
− activities of trade unions
− enabling employees to receive feedback on the results of their work thanks to the system of periodic
assessments of competences,
− consistent combating of negative behaviours (discrimination, intimidation, mobbing, harassment),
− social activities that promote integration among employees and identification with the Group's culture.
5. Health and Safety risk
Precautionary action - appropriate risk management procedures:
− identification and assessment of the degree of risk at particular workstations,
− technical equipment of workstations and work organisation in accordance with the requirements of legal
regulations, including the Labour Code,
− the organisation of workstations taking into account ergonomic principles,
− the application of protective measures and technical working measures that meet the specified
requirements,
− zatrudnianie pracowników z kwalifikacjami i warunkami zdrowotnymi i fizycznymi odpowiadającymi
wymaganiom stawianym na danym stanowisku,
− initial, periodic and follow-up medical examinations,
− Initial and periodic training in occupational health and safety, instruction at work,
− activities of the OHS Committee covering, inter alia, cyclical reviews of working conditions, periodic
health and safety assessments, formulation of conclusions on the improvement of working conditions,
− systematic monitoring of threats in the area of performed works,
− procedures to be followed in the event of a hazard, accident or breakdown.
16.3. Anti-corruption and anti-bribery
Anti-corruption and anti-bribery policies The overriding objective of anti-corruption policy is to systematically search for and analyze potential
corruption threats that may occur in the implemented activities, and to take countermeasures to reduce the
probability of corruption activity as soon as possible. The basic document defining the policy and regulating
the activities in the area of counteracting corruption and bribery at the level of Grupa Apator is the Code of
Ethics, in which (in subchapter Acceptance and offering of material benefits) the superior principle in this
area was formulated, according to which Grupa Apator does not accept any activities violating the impartial
making of business decisions. This means, among other things, that employees of the Group must not
accept or offer any material benefits that may influence the actions and decisions of the recipient, and in the
event of a corrupt offer, they must immediately inform their supervisor. Important elements of the system of
counteracting corruption threats in Grupa Apator are moreover:
▪ clear and transparent procedures of conduct, known and available to both Group employees and
employees
and customers and cooperating entities,
▪ monitoring all processes in terms of the possibility of corruption threats and analysing the risk of
corruption activity,
Report of the Executive Board on activity of Grupa Apator in 2018
Entity name: Grupa Apator
Period covered by the financial statements: 01.01.2018 – 31.12.2018 Reporting currency: Polish zloty (PLN)
Level of rounding: all amounts are expressed in thousands of Polish zlotys (unless indicated otherwise)
Page 74 of 84
▪ increasing the awareness of the Group's employees by raising the culture of the organisation, improving
internal communication, improving motivation systems,
▪ building ethical leadership related to internal communication, promotion of ethical attitudes, strengthening
the ethical image of the organization,
▪ educational activities aimed at employees in the field of ethics and counteracting corruption.
Achievements to date in anti-corruption and anti-bribery policy Key achievements in this area include:
▪ development of clear, precise rules of conduct in accordance with the Code of Ethics of Grupa Apator,
communicated both internally and to the business partners, which are confirmed
documents (internal and external) and adopted/implemented procedures (audits, periodic evaluations,
training, contractual provisions),
▪ implementation of the highest standards of corporate governance - transparent and effective policy of
communication with stakeholders.
Objectives and challenges in the area of anti-corruption policy and bribery With a view to 2019, the key challenges in the area of anti-corruption and bribery are as follows:
▪ development and formal implementation of a code of cooperation with suppliers,
▪ improvement of the purchasing management process in accordance with the assumptions of the business
strategy and the plan of objectives and tasks,
▪ improving the supply chain.
Indicators in the area of anti-corruption and bribery
Anti-corruption and anti-bribery 2018 2017
Number of reports of cases of corruption and bribery 0 0
Number of entities in GK Apator assessed in terms of risk of corruption occurrence 16 16
Percentage of entities of GK Apator assessed in terms of risk of occurrence of corruption 100% 100%
Value of donations to political parties and similar institutions 0 0
Risks in the area of anti-corruption and bribery
1. Risk of (employee) fraud
Precautionary actions:
− dissemination of ethical attitudes and ethical models of conduct contained in the Code of Ethics and
other documents at the level of the Group and individual companies,
− training of employees in the area of ethics, corporate culture and corporate governance principles,
− unambiguous definition and dissemination of knowledge among employees on the applicable
procedures for dealing with cases of abuse,
− the internal control system and systematic monitoring to identify potential fraud,
− internal and external audits concerning the regulations in force in the group and the implemented
processes.
2. Risk of relations with suppliers, partners and business partners
Report of the Executive Board on activity of Grupa Apator in 2018
Entity name: Grupa Apator
Period covered by the financial statements: 01.01.2018 – 31.12.2018 Reporting currency: Polish zloty (PLN)
Level of rounding: all amounts are expressed in thousands of Polish zlotys (unless indicated otherwise)
Page 75 of 84
Precautionary actions:
− promoting in all aspects of activity the principles (ethics, honesty, partnership) serving to build
relationships with partners based on mutual trust and mutual benefits,
− clearly defined evaluation and selection criteria for business partners,
− concluding contracts with suppliers who guarantee the performance of the contract,
− obligation of suppliers to get acquainted with and observe the Code of Ethics of Grupa Apator,
− current and periodic assessments of suppliers (supplier audits),
− training for employees in the area of purchasing and cooperation with suppliers.
3. Risk of conflict of interest
Precautionary actions:
− dissemination of knowledge/awareness (among employees and managers/ supervisors)
on potential conflict situations and training in this area,
− absolute compliance with the law, provisions of the Best Practices of WSE Listed Companies and
internal regulations (Regulations of Supervisory Boards, Regulations of Management Boards),
− appropriate provisions in employment contracts/cooperation agreements.
4. Risk of data manipulation (financial)
Precautionary actions:
− Implement the highest standards of corporate governance to ensure transparency
and an effective information policy,
− making the financial statements subject to external audit,
− conscious shaping of investor relations and providing the environment with reliable information
the Group's activities are carried out, among others, through
✓ providing investor service,
✓ publishing current and periodic reports,
✓ organising conferences for the press, investors and analysts,
✓ current meetings with investors and analysts,
✓ cooperation with a public relations agency,
✓ activities of the Audit Committee supporting the Supervisory Board in matters concerning the unit
and consolidated financial reporting, internal control, risk management and cooperation with
statutory auditors,
− systematic improvement of the quality of communication with stakeholders in order to ensure full
transparency of the information provided.
16.4. Respect for human rights
Human rights policy Grupa Apator strives to create work environment and cooperation with business environment in which
human rights are absolutely respected and implements practices to prevent situations in which human rights
Report of the Executive Board on activity of Grupa Apator in 2018
Entity name: Grupa Apator
Period covered by the financial statements: 01.01.2018 – 31.12.2018 Reporting currency: Polish zloty (PLN)
Level of rounding: all amounts are expressed in thousands of Polish zlotys (unless indicated otherwise)
Page 76 of 84
could be violated. The Group's entities comply with Polish law
and international law in this area and operate in accordance with the highest standards regulated by internal
documents. The most important ones are as follows: Code of Ethics of Grupa Apator, Strategy in the scope
of social responsibility of business, Regulations of work of individual companies and relevant provisions of
the Books of Integrated Management System of individual companies of Grupa Apator.
The Group's human rights obligations include the following areas:
▪ Employees - all employees are treated with respect, regardless of their position, gender, age, national
and ethnic origin, sexual orientation, family situation, (in)disability, political and religious beliefs. The
Group companies comply with all applicable regulations concerning employment conditions, improve
human resources management processes and ensure a friendly atmosphere in the workplace.
Counteract mobbing behaviour
and cases of discrimination.
▪ Contractors - The Group strives to respect and promote human rights in its relations with its business
partners
with suppliers, customers and business partners. Cooperation with partners is conditioned, among others,
by the issue of compliance by partners with ethical principles and standards of safety and health at work.
▪ Shareholders - the Group conducts the activity in such way as to secure the interests of the shareholders
of Apator SA. Great importance is also attached to reliable and current information of shareholders about
the current situation of the Group's entities and events related to them.
Achievements to date in the field of human rights policy Key achievements in this area include:
▪ implementation and application of a number of internal regulations concerning standards and values in
force
in relations between employees and with external entities. The Code of Ethics of Grupa Apator plays the
special role here, which includes the standards on which the organizational culture of Grupa Apator is
based, preferred behaviors of employees in relations inside and outside the organization and behaviors
that are fought in the organization (e.g. discrimination, intimidation, mobbing, harassment),
▪ adoption of the principle that all Group companies should pay attention to issues related to
with social responsibility. In cases of doubt, the supplier shall be called upon to provide explanations and
to remedy any irregularities. Negative assessment of compliance with ethical and environmental
standards excludes the supplier from further cooperation.
Objectives and challenges in the area of human rights policy With a view to 2019, the key challenges in the area of human rights are:
▪ shaping appropriate attitudes and educating employees in the area of knowledge of values and ethical
principles applicable in the Group and the related attitudes and behaviours,
▪ continuous monitoring and improvement of employee safety,
▪ development and formal implementation of a code of cooperation with suppliers, as well as development
of mechanisms for verification of suppliers in terms of meeting the requirements of the code*.
Indicators in the area of human rights
Respect for human rights 2018 2017
Number of reports of cases of discrimination/mobbing/intimidation, etc. 0 0
Number of Group entities assessed in terms of risk of human rights violations 16 16
Report of the Executive Board on activity of Grupa Apator in 2018
Entity name: Grupa Apator
Period covered by the financial statements: 01.01.2018 – 31.12.2018 Reporting currency: Polish zloty (PLN)
Level of rounding: all amounts are expressed in thousands of Polish zlotys (unless indicated otherwise)
Page 77 of 84
Respect for human rights 2018 2017
Percentage of Group entities assessed in terms of risk of human rights violations 100% 100%
Risks in the area of human rights**
1. Risk of discriminatory actions within the organisation
Precautionary actions:
− training of employees in the area of ethics, organisational culture and applicable laws,
− dissemination of internal standards for reporting irregularities and providing information and support
among employees.
*) The objective concerns first of all Apator SA. **) Excluding risks in relations with suppliers/cooperators described in section 16.3 Anti-corruption. and corruption.
2. Risk of abuse within the organisation and in relations with partners
Precautionary actions:
− dissemination of ethical attitudes and ethical models of conduct contained in the Code of Ethics and
other documents at the level of the Group and individual companies,
− training of employees in the area of ethics, organisational culture and applicable laws,
− system of internal control and systematic monitoring in terms of respect for human rights within the
organisation and in relations with partners,
− internal and external audits concerning the regulations in force in the Group and the implemented
processes.
16.5. Environmental area
Environmental policies The overriding objective of Grupa Apator in the scope of protection of natural environment is to provide safe
and environmentally friendly products manufactured in conditions ensuring safety of work. The basis for
action is conscious and responsible management of the environmental area. Companies of Grupa Apator
apply to binding legal regulations and undertake also additional obligations which result from high standards
and expectations of the customers.
In order to protect the natural environment, the Group has undertaken to
▪ comply with the requirements of the applicable legal regulations concerning its environmental aspects,
such as pollutants emitted to the atmosphere and sewage
and the waste generated,
▪ saving of raw materials,
▪ implementation of measurement systems for electricity, water, heat and gas consumption management,
▪ education of employees in the field of environmental protection.
Environmental management system is the key element of Integrated Management Policies implemented in
some companies of Grupa Apator, including all manufacturing companies whose level of impact on natural
environment is relatively highest. Furthermore, none of the production companies operates within or in the
immediate vicinity of protected areas or areas of high biodiversity value and is properly used.
and the Group's products and their disposal do not pose a threat to the environment.
Report of the Executive Board on activity of Grupa Apator in 2018
Entity name: Grupa Apator
Period covered by the financial statements: 01.01.2018 – 31.12.2018 Reporting currency: Polish zloty (PLN)
Level of rounding: all amounts are expressed in thousands of Polish zlotys (unless indicated otherwise)
Page 78 of 84
The objectives of the environmental dimension are focused on:
▪ maintaining low pollutant emissions,
▪ saving of natural resources.
▪ sustainable waste management.
These objectives are defined by:
▪ development of measuring systems to optimise energy consumption (development strategy),
▪ the budget for environmental charges (business plan),
▪ monitoring of environmental aspects within the Environmental Management System (objective plan)
and tasks),
▪ analysis (discussion) of the introduction of new materials, raw materials and technologies, purchase of
machinery, equipment and technological lines,
▪ organisation of pro-ecological actions, e.g. collection of batteries, waste equipment, etc. as an element of
environmental education.
Confirmation of the high quality of processes in the field of environmental protection is the fulfillment of the
requirements of the PN-EN ISO 14001:2015 standard, and the activity in the context of environmental
responsibility is further specified in a number of detailed internal regulations in force in the individual
companies of the Group, concerning e.g. electricity and media management, waste management,
measurements, monitoring
and environmental analysis, etc. The course of environmental processes is systematically supervised and
adjusted to changing technological and production processes and new legal requirements. Analysis of
environmental aspects is carried out at every stage of the value chain. In each process, elements of actions
that may interact with the environment are identified. In the improvement of production processes and their
optimization in terms of efficiency, costs, quality and work safety, each time - as very important - pro-
environmental premises are taken into account, i.e. lower consumption of raw materials, minimization of
production waste.
(including elimination of hazardous waste), lower media consumption. Innovations are implemented to
reduce the environmental impact of processes and products.
Environmental policy achievements to date In particular manufacturing companies of Grupa Apator a number of technological and infrastructural
changes were introduced in order to minimize the impact of the conducted activity on natural environment.
The list includes:
▪ in Apator SA:
− start-up of a contact lubrication station for RBK contacts, which results in shortening the assembly time
and limiting the use of grease,
− application of washing equipment for washing details, which resulted in reduction of the consumption of
washing concentrates, electric energy and improvement of the quality of separated waste,
− laser for Fuji and NORAX1 lines, which reduced the amount of printing materials and organic solvents
used.
▪ in Apator Metrix SA:
− Modernisation of the LED lighting installation resulting in a reduction of electricity consumption,
− implementation of automatic stations, resulting in increased efficiency of the technological process,
reduction of electricity consumption per production unit and reduction of the use of chemicals,
− construction and commissioning of a new sewage treatment plant,
Report of the Executive Board on activity of Grupa Apator in 2018
Entity name: Grupa Apator
Period covered by the financial statements: 01.01.2018 – 31.12.2018 Reporting currency: Polish zloty (PLN)
Level of rounding: all amounts are expressed in thousands of Polish zlotys (unless indicated otherwise)
Page 79 of 84
− construction and commissioning of a new enclosure washing facility,
− extinguishing the process of cathoretic painting of enclosures (completion planned for the turn of
2019/2020), aimed at replacing the cathoretic coating with zinc coating.
▪ in Apator Powogaz SA:
− installation of three "Volcan" water heaters on the central heating system, resulting in improved
efficiency of corridor heating and energy savings,
− installation of PVC strip curtains on doors to reduce the cold air flow at the entrances and exits of forklift
trucks and thus save energy.
Environmental objectives and challenges In the perspective of 2019 the key challenges in the area of natural environment for Grupa Apator are as
follows:
▪ implementation of environmental indicators at the levels specified in the action plans of individual
companies,
▪ eco-education of employees,
▪ investments in modern machinery to guarantee - in addition to systematic improvement of the efficiency
of production processes - also minimization of environmental impacts of the operations.
Indicators in the area of environment*
Energy consumption by source 2018 2017 Dynamics y/y [%]
Total electricity consumption [MWh] Total consumption of natural gas [thous. m3] Total heat consumption [GJ] Total fuel consumption (oil, diesel, petrol, LPG) [t]
10 982.5 13 189.6 83%
2 338.9 2 434.5 96%
24 002.8 25 746.0 93%
342.6 333.0 103%
Water consumption
Total water consumption [m3] 20 622.0 24 583.0 84%
Consumption of basic raw materials
Total steel consumption [t] 2 336.9 2 965.4 79%
Total consumption of plastics [t] Total copper consumption [t] Total consumption of paints, varnishes and solvents [t].
2 285.8 1 936.1 118%
705.7 591.5 119%
57.9 81.5 71%
Waste generation/emissions 2018 2017 Dynamics y/y [%]
Quantity of waste generated [kg], including hazardous waste
inert waste
76 276.0 68 230.0 112%
1 528 710.5 1 888 293.0 81%
Recycled waste [kg] 1 167 083.5 1 650 642.0 71%
Disposed waste [kg] 379 842.0 198 776.0 191%
Emissions to atmosphere
Emissions of carbon dioxide [kg] NOx emissions [kg] SOx emissions [kg]
1 367 749.2 1 357 516.8 101%
1 008.5 1 105.9 91%
4.4 6.9 64%
*) Ratios calculated taking into account selected companies of the Group (including all manufacturing companies) which, due to the nature of their operations, are subject to the obligation to monitor environmental impact.
Report of the Executive Board on activity of Grupa Apator in 2018
Entity name: Grupa Apator
Period covered by the financial statements: 01.01.2018 – 31.12.2018 Reporting currency: Polish zloty (PLN)
Level of rounding: all amounts are expressed in thousands of Polish zlotys (unless indicated otherwise)
Page 80 of 84
Environmental charges 2018 2017 Dynamics y/y [%]
Environmental fees [PLN] Costs of production waste disposal [PLN]
25 009.0 5 671.3 441%
262 147.5 229 471.5 114%
Fees for recovery and recycling of packaging, electronics and batteries placed on the market [PLN]
218 874.7 242 405.5 90%
Costs of physico-chemical analyses [PLN] 20 767.0 24 236.3 86%
Costs of water consumption and sewage disposal [PLN] 634 401.2 696 724.6 91%
Environmental risks
1. Risk of failure to comply with applicable legislation, resulting in penalties/increases in
environmental charges
Precautionary actions:
− systematic monitoring of existing legal regulations (amendments to existing regulations, new
regulations) and their validity periods,
− monitoring of basic areas of activity of particular companies of Grupa Apator in terms of compliance with
binding regulations,
− adjusting the Group's internal regulations to the changing legal regulations,
− reporting to the competent authorities and bodies responsible for environmental management,
− appropriate financial mechanisms to secure financial resources for the timely execution of any required
payments (fees, damages),
− training of employees in the field of environment.
2. Risk of occurrence/increase of environmental impact in terms of: 1. the amount of consumption of
raw materials, including non-renewable raw materials, 2. the amount of pollutant emissions
(factors harmful to the environment) causing deterioration of the natural environment (air, water,
soil, etc.)
Precautionary actions:
− continuous monitoring of environmental impacts within the framework of the Environmental
Management System,
− analysis of environmental aspects at each stage of the value chain to identify activities that may interact
with the environment,
− taking into account environmental prerequisites at the stage of planning production processes and their
optimization,
− implementation of solutions/technologies reducing the scale of the impact of the activity on the
environment,
− implementation of measurement systems for electricity, water, heat and gas consumption management,
− environmental management system audits,
− annual reviews of the environmental management system.
16.6. Social issues
Approach to governance in the social field Grupa Apator pursues its business objectives with consideration of social aspects. It ensures ethics in the
supply chain and honesty and openness in relations with customers. By conducting production activity, it
Report of the Executive Board on activity of Grupa Apator in 2018
Entity name: Grupa Apator
Period covered by the financial statements: 01.01.2018 – 31.12.2018 Reporting currency: Polish zloty (PLN)
Level of rounding: all amounts are expressed in thousands of Polish zlotys (unless indicated otherwise)
Page 81 of 84
ensures safety of employees throughout the entire product life cycle, while minimizing the potential negative
impact of its activities on the immediate environment. The Group actively works for the development of the
industry and new technologies. Its members support local communities by co-financing important events in
the region in the fields of culture, art, science and sport. Grupa Apator respects generally binding legal
regulations (including the Labour Code) and acts in accordance with
with the internal procedures in force in individual companies regulating particular processes in the
organisation.
The Group's social commitments cover the following areas:
▪ Employees - the priority is to provide all employees with decent, marketable remuneration and optimal
conditions to perform work, in accordance with the highest standards of occupational health and safety.
▪ Customers - in its relations with customers, the Group is guided by the principle of openness and mutual
respect, it acts in accordance with the following principles
in a professional, impartial and lawful manner. Great importance is attached to the fact that the client
receives full, reliable information about the offer and the rules of cooperation. Individual Group companies
monitor customer expectations and measure customer satisfaction. A number of tools are used to
communicate with customers.
▪ Suppliers/co-operators - effective cooperation with suppliers is crucial for the achievement of the Group's
business objectives. Cooperation in this area is governed by cooperation agreements concluded, defined
in internal procedures and implemented on the basis of appropriate tools for handling and communication
with partners. The purchasing strategy focuses mainly on the selection of reliable partners that meet
specific quality criteria, taking into account price requirements. The companies of Grupa Apator conduct
competitive and open purchasing policy and at the same time take care to observe the binding ethical
rules.
▪ Industry environment - Group companies actively participate in consultations on the prospects for the
development of the idea of smart grids and smart metering in Poland, as well as monitor activities
undertaken in this area at the European level.
▪ Social environment - the Group tries to build positive relations with the immediate environment. Aware of
the needs of the community, it co-finances valuable initiatives and undertakings in the fields of culture, art
and the arts
and sport. Within the framework of charity activity, it supports institutions and social organizations acting
for the benefit of excluded persons and carrying out specific social missions.
Policy achievements to date in the social field Because on the specialized market where Grupa Apator operates, the key importance is the proper
identification of the needs of the customers and then their translation into activities in the area of design,
development works and construction changes, the entities being part of Grupa Apator flexibly adjust their
offer to the current needs of the customers and the development and construction works are consulted with
them directly (by persons dedicated to contact with key customers). The Group companies provide
substantive support by organizing trainings and presentations, technical after-sales support, and after the
implementation of a large-scale implementation project, they analyse the level of customer satisfaction.
Grupa Apator delivers to the market modern devices and measurement and reading systems for all kinds of
utilities (electricity, water, gas, heat) and technically advanced solutions in the area of automatics and
distribution of energy. It develops innovative technologies in cooperation with organizations working to
support research and development processes related to the implementation of smart grids. The Group is
actively working for the development of technological standards supporting the development of smart
metering in Europe.
Objectives and challenges in the policy area of social issues
Report of the Executive Board on activity of Grupa Apator in 2018
Entity name: Grupa Apator
Period covered by the financial statements: 01.01.2018 – 31.12.2018 Reporting currency: Polish zloty (PLN)
Level of rounding: all amounts are expressed in thousands of Polish zlotys (unless indicated otherwise)
Page 82 of 84
With a view to 2019, the key challenges in the social field are:
▪ improvement of tools for communication with customers and implementation of common indicators for
customer satisfaction surveys,
▪ improvement of the supply chain and purchasing management process,
▪ updating the strategy for sponsoring and philanthropic activities.
Indicators in the area of social issues
Suppliers/purchases year 2018* 2017 Dynamics y/y
[%]
Total number of suppliers, including 6 554 6 751 97%
1. Cooperation partners (service providers), including 3 881 3 836 101%
domestic 3 479 3 411 102%
foreign 395 417 95%
indirect import 7 8 87%
2. Other suppliers, including: 2 673 2 915 92%
domestic 1 748 1 827 96%
foreign 834 993 84%
indirect import 91 95 96%
Share of purchases from domestic suppliers in total purchases [%] 46% 44% -
*) No data from TOV Apator Metrotex.
Civil contracts/contracts 2018 2017 Dynamics y/y [%]
Number of self-employed (contracts) total [contracts], including: 27 31 87%
women 2 6 33%
men 25 25 100%
Total other forms of cooperation [agreements], including: 251 297 85%
1. Contracts of mandate 244 271 90%
women 105 95 111%
men 139 176 79%
2. Agreements for specific work. 7 26 27%
women 1 2 50%
men 6 24 25%
Impact on the environment 2018 2017 Dynamics y/y [%]
Number of supported events/initiatives, including: 80 60 133%
sport events 14 13 108%
cultural events 8 16 50%
educational events 9 8 112%
other 49 23 213%
Expenditures on social activity [PLN thousand], including 545 422.5 129%
donations 189 145.0 130 %
sponsoring 356.0 262.5 136%
other 0.0 15.0 -
Risks in the area of social governance*
1. Risk in relations with customers
Precautionary actions:
− verification of contracts for legality,
− training of employees in customer service throughout the product life cycle,
− adherence to the Code of Ethics and training in this area,
− customer satisfaction monitoring,
Report of the Executive Board on activity of Grupa Apator in 2018
Entity name: Grupa Apator
Period covered by the financial statements: 01.01.2018 – 31.12.2018 Reporting currency: Polish zloty (PLN)
Level of rounding: all amounts are expressed in thousands of Polish zlotys (unless indicated otherwise)
Page 83 of 84
− internal and external audits concerning the regulations in force in the Group and the implemented
processes.
2. Risk of relations with local communities
Precautionary actions:
− cooperation and dialogue with NGOs and social partners,
− current information about the implemented projects.
3. Reputation risk
Precautionary actions:
− conducting an information policy compliant with the Code of Best Practice for WSE Listed Companies
and internal regulations; ensuring easy and non-discriminatory access to disclosed information on the
basis of various communication tools,
− training of employees in the area of ethics, organisational culture and applicable laws,
− regular meetings of the Management Boards of individual companies of the Group with employees and
conducting effective internal communication,
− conducting effective marketing and PR activities.
*) Excluding risks in relations with suppliers/cooperators described in section 16.3 Anti-corruption.
and corruption.
Signatures
29th April 2019
Mirosław Klepacki
Signed with a qualified electronic signature
President of the Management Board, Director-General
29th April 2019
Arkadiusz Chmielewski
Signed with a qualified electronic signature
Member of the Management Board, Director for Business Development of Apator Group
Report of the Executive Board on activity of Grupa Apator in 2018
Entity name: Grupa Apator
Period covered by the financial statements: 01.01.2018 – 31.12.2018 Reporting currency: Polish zloty (PLN)
Level of rounding: all amounts are expressed in thousands of Polish zlotys (unless indicated otherwise)
Page 84 of 84
29th April 2019
Małgorzata Mazurek
Signed with a qualified electronic signature
Proxy, Chief Financial Officer