The Management Board of Apator S.A. (“Issuer” or “Company”) announces that on 10 June 2024 The Supervisory Board approved the updated development strategy of the Apator Group within the timeframe until 2028 (“Strategy”) adopted by the Management Board of the Company.

The Strategy is a response to the opportunities and transformational challenges of the electricity, water, heat and gas sectors. The Group wants to take advantage of favourable regulations and funding from the EU supporting the transformation, digitalisation and development of the energy and water sectors. It also plans to expand into new markets related to distributed generation and community energy (RES, energy communities, industry).

The Group maintains its strong position as a European supplier of smart metering equipment and solutions for the management of energy, water and heat and gas distribution networks. At the same time, the Group has defined a mission and vision reflecting the essence and direction of the Group's development in the perspective of the updated Strategy:

VISION: the Apator Group is the first choice in providing integrated solutions of the future for the power and water sectors

MISSION: the Apator Group creates technologies supporting customers in conscious and sustainable management of energy and water utilities.

The foundation on which the Apator Group bases its Strategy are – unique in the CEE region and in the industry – broad technical competences in energy and water utilities management. The Group, as one of the few entities in Europe, has its own specialised R&D and engineering teams, extensive production facilities and marketing, sales and service departments operating with customers in many market segments. Its competences allow it to provide customers with a comprehensive value chain, covering design, construction and manufacturing of products (including manufacturing of key electronic components and software) and their delivery to customers in the form of advanced solutions, systems and services.

The value creation model of the Apator Group is based on five pillars:

• Development of activities in business lines within existing operations (“business-as-usual”) – continuation of organic growth within existing products for established customers.
• Strategic initiatives in business lines – development of current product lines in new directions based on existing competences in the organisation, including the use of new sales opportunities.
• Synergies in the Apator Group – use of the potential for synergies mainly in the areas of sales, production, R&D and administrative processes.
• Efficiency of the organisation – further integration of group processes, inter alia, in the area of development of current products and creation of comprehensive and integrated solutions, centralisation of key processes and resources (“competence centres”).
• Development through innovation – actively seeking new directions for the development of the market offering that can support further business growth in the long term.

The Group identifies the following main strategic opportunities for business development:

• Electricity Segment:
  • distributed microgeneration – industrial energy efficiency, IoT control, energy management
  • Large-scale macrogeneration – energy storage and grid stabilisation, increasing system flexibility, integrated management systems
• Water and Heat segment: water efficiency, service models/billing, generational change to ultrasonic equipment in Europe
• Gas segment: hydrogen and biogas measurement

Under the updated Strategy, the Apator Group plans to achieve the following financial targets in the 2028 perspective:

1. Achievement of an average annual revenue growth rate in the range of 8% to 10% 
2. Increase in EBITDA profitability from 5 to 6 percentage points compared to 2023
3. Net debt/EBITDA ratio at less than 2x
4. CAPEX at 5–7% of revenues

The strategy will be realised in two stages. In the first stage (a period of approx. 2 years), the Group will focus on developing group solutions and implementing organisational initiatives. Their results will be visible in the second stage of the strategy (2026–28) as the achievement of the above-defined financial targets.

The Group’s revenue growth drivers will be the Electricity and Water and Heat segments, where – in addition to the development of current products – the Group plans to implement new integrated solutions in the areas of utility and water management and RES, among others. The Group will focus on implementing new business models based on advanced technological systems and services (XaaS – anything as a service, DaaS – data as a service) and providing advanced analytics for effective management of metering data and infrastructure. The Group wants to offer value to customers in the form of a one-stop shop for energy transformation needs, optimisation of energy utilities and water consumption, billing and meeting climate targets.

Management assumes a significant improvement in EBITDA profitability resulting from organisational initiatives including: consolidation of purchasing processes, increased operational efficiency, production specialisation and standardisation of administrative processes to shared service centres.

In line with the Management Board’s assumptions, the Group’s capital expenditures will be maintained at the level of 5–7% of the Group’s revenues, and a significant part of the investment funds will be allocated to the development of new technologies and products and investments in maintaining modern production potential.

The Management Board’s objective is to keep the Net Debt to EBITDA (LTM) ratio below 2x.

The strategy is mainly based on organic growth resulting from the planned strategic initiatives, nevertheless, the Management Board does not exclude M&A in order to complement competences and take advantage of market opportunities.

The intention of the Company is to maintain the status of a dividend-paying company. The Management Board of Apator SA declares that it will recommend annually to General Shareholders Meetings to pay the dividend in the amount not higher than 75% of the net profit of Apator SA generated for the previous financial year taking into consideration the perspectives of development, current and future financial standing of the Apator Group, conditions of the market environment and investment plans. In its recommendation for General Shareholders Meeting, the Management Board each time will take into consideration the following significant factors:

• investment needs resulting from the performance of the strategy, including the acquisition policy and available ways of its financing,
• liquidity needs of the Apator Group depending on current and expected market and regulatory conditions,
• amount of current and expected commercial and financial liabilities, including potential limitations resulting from financing agreements.

The Management Board envisages the possibility of advance dividend payments.

The strategic assumptions for 2024–2028, published in this current report, have been determined in response to dynamic changes in the market, as well as emerging opportunities and challenges related to the transformation of the electricity, water and heat and gas sectors. In previous years, the Apator Group followed the strategy published in 2018, subsequently revised in October 2022. The profound changes and perturbations that have taken place in recent years and continue to take place in, among other things, supply chains, the competitive structure of the markets, as well as the cost of conducting business, have limited the ability to implement the previous strategy in some of its areas, causing deviations, in particular from the assumed trajectory to reach the EBITDA target. Improving the profitability of the business is now a key area of focus for the future, as addressed in the updated Strategy for 2024–2028, which formally replaces the October 2022 document.

The Issuer points out that, despite the exercise of due diligence, due to the possibility of unforeseen factors (especially in view of the high volatility of the macroeconomic environment) that may materially affect the objectives presented in the Strategy, they cannot be treated as operational or financial forecasts, but only as measures of the implementation of the Strategy, which the Company will strive to achieve during the implementation of the updated Strategy.