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1 Financial results of Apator Capital Group – 25.11.2015

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Financial results of Apator Capital Group 2015

PLN ('000) 9M 2015 9M 2014

Change

y/y

Sales 556 091 517 480 7,5%

Gross profit on sales 151 857 154 627 -1,8%

Margin 27,3% 29,9%

Profit on sales 55 878 69 802 -19,9%

Margin 10,0% 13,5%

EBITDA 83 311 94 503 -11,8%

Margin 15,0% 18,3%

Net profit 49 451 60 045 -17,6%

Margin 8,9% 11,6%

• Significant increase of revenues y/y: – increase in line of electricity (high backlog), – increase in line of gas – impact of full consolidation of

GWI, – impact of consolidation of Elkomtech (PLN 9,7 m),

• Organic increase of sales at the level of 2,6%;

• Decrease of profitability of gross profit on sales: – loss in Apator Rector, – increase of material costs caused by the strengthening

of USD exchange rate ( circa PLN 7 m), – decrease of prices in lines of electricity and gas (high

competition), – change in product mix – increase of share of sales of

less profitable assortments, – situation in non-core entities,

• Increase of overheads:

– one time costs (advising), – consolidation of costs entities purchased: Elkomtech,

Miitors, GWi, – restructuring costs of Rector,

• Release of unnecessary provisions (PLN 3,4 m),

• Largest part of the profit EBITDA provided by metering

segment (79%);

• 44% of revenues of high margin of EBITDA (over 20%);

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Comparison of quarterly results in 2015

Good III quarter 2015: • The highest level of sales;

• Lower gross profit on sales caused by loss in

Apator Rector, after its elimination the profitability at the level of the first quarter;

• Control of costs – slow down of the decrease of profit margin on sales: − decrease of overheads, − maintenance selling costs,

• Increase of EBITDA margin and net profit :

− release of unnecessary provisions, − good results of financial activity

• After elimination of the impact of provisions released, net profit margin at the level of 8,6%;

PLN ('000) I quarter II quarter III quarter

Sales 180 909 183 599 191 584

Gross profit on sales 51 424 50 501 49 933

Margin 28,4% 27,5% 26,1%

Profit on sales 19 666 15 809 20 403

Margin 10,9% 8,6% 10,6%

EBITDA 27 751 23 408 32 153

Margin 15,3% 12,7% 16,8%

Net profit 16 681 12 854 19 917

Margin 9,2% 7,0% 10,4%

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3 330

4 066

48 798

41 402

0

10 000

20 000

30 000

40 000

50 000

60 000

Sales 9M2014 Mining Control Sales 9M2015

Sales - non core y/y

8 886

5 929 86 971

100 404

1 382

0

20 000

40 000

60 000

80 000

100 000

120 000

Sales 9M2014 Ap. Łącz. EKT ICT Sales 9M2015

Sales – grid segment y/y

19 585 18 031

5 041

381 711 414 286

0

50 000

100 000

150 000

200 000

250 000

300 000

350 000

400 000

450 000

Sales 9M2014 Woda Gaz Energia Sales 9M2015

Sales – metering segment y/y

7 396

13 433 32 575

517 480 556 091

0

100 000

200 000

300 000

400 000

500 000

600 000

Sales 9M2014 Metering Grid Non-Core Sales 9M2015

Sales pursuant to segments y/y PLN ‚000 PLN ‚000

PLN ‚000

9% 15% -15% 7,5%

Change 2015/2014 Change 2015/2014

-3% 18% 17% 9%

Change 2015/2014

12% 40% -9% 15%

PLN ‚000

-15% -15% -15%

Change 2015/2014

Sales 9M2014 Water Gas Energy Sales 9M2015

Sales 9M2014 Switchgear EKT ICT Sales 9M2015 Sales 9M2014 Mining Control Sales 9M2015

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Home - export (PLN ’000)

High sales on foreign markets;

Commentary

Slight decrease of share of export in revenues 45% vs 46% y/y;

Geographical structure of sales

Increase of domestic sales by 10% y/y:

Apator: PLN 15 m (high backlog); Elkomtech: PLN 9,7 m ( result of consolidation since the

beginning 2015);

Increase of sales to foreign markets by 4% y/y: impact of full consolidation of GWi – PLN 13 m; decrease of export to Russia by PLN 16 m; increase of export to EU by PLN 29 m;

55%

25%

5%

7% 8%

9M 2015

54%

21%

9%

6%

10%

9M 2014

Polska

UE

Rosja

Indie

Pozostałe

Poland

UE

Russia

India

Other

306 466 277 876

249 626

239 604

0

100 000

200 000

300 000

400 000

500 000

600 000

9M 2015 9M 2014

Home Export

556 091

517 480

Poland

UE

Russia

India

Other

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1 059

94 503

966 9 496

78 023

60 807

16 479

22 505

83 311 330

0

20 000

40 000

60 000

80 000

100 000

120 000

EBITDA 9M2014 Metering Grid Non-Core Koszty nieprzypis EBITDA 9M2015

EBITDA - Apator Capital Group y/y PLN ‚000

EBITDA Margins

15% 8% 17% 16% 19%

EBITDA 9M2014 Metering Grid Non-Core Unallocated costs EBITDA 9M2015

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Net debt (PLN ’000)

Working capital and debt

Increase of working capital: - acquisitions – PLN 6 m - Powogaz – PLN 7 m (decrease of liabilities with tax

ones included), - Rector – PLN 3 m (short term receivables)

Increase of net debt: - Increase of gross debt (acquisitions: Miitors, GWi), - Decrease of cash; Net debt/LTM EBITDA – 1,3 x;

202 993

165 590

186 235

0

50 000

100 000

150 000

200 000

250 000

30.09.2015 31.12.2014 30.09.2014

Working capital (PLN ’000)

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Capex (PLN ’000) Cash flow (PLN ’000)

Capex, cash flow

Conversion of EBITDA to cash 46%; Investment expenses (Miitors, Capex); Financial expenses (loans repayments, payment of

dividend);

Investment expenditure inccurried mainly for the development and automation of manufacturing processes : Capital Group of Metrix (PLN 10 m); Apator SA (PLN 10 m); Capital Group of Powogaz (PLN 5,8 m);

30 456

22 423

0

5 000

10 000

15 000

20 000

25 000

30 000

35 000

9M 2015 9M 2014

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Decrease of profitability y/y, main factors : Problems with Apator Rector – net loss of PLN 6,9 m;

USD exchange rate – increase of manufacturing costs;

Decrease of profitability in electricity and gas lines – increase of competition, decrease of prices;

Additional costs – acquisitions;

Build-up of Apator Capital Group – new competences obtained: Miitors – purchase of 100% shares;

Fellows – purchase and making contribution in kind to Apator Telemetria;

GWi - increase of package of shares to 100%;

Assessment of the situation of Apator Capital Group in 2015 : Steady situation of Apator Capital Group;

Good financial position:

– safe level of debt, correct liquidity – in 4 Q the surety will be released in amount of PLN 100 m related to the

purchase of Elkomtech;

– dividend policy continued – interim dividend payment of PLN 10 m (18th December 2015);

– investment possibilities in Capex and other entities;

In spite of lower profits than planned, results still distinguish positively Apator Capital Group on the market;

Summary of results

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Metering segment - metering line of electricity:

high backlog at home, intensive searching for the opportunities for export;

completion of works related to residential electricity meters with significant lower technical cost of manufacturing in the

first half 2016 ;

Smart City Wrocław project continued;

Metering segment – metering line of gas:

Dutch market – tender of Liander - contract concluded between GWi and L&G (EUR 8 m) and advanced negotiations

related to the contract to be concluded between Metrix and Flonidan (EUR 28 m) for 5 years;

further large tenders for smart gas meters (e.g. the United Kingdom);

intensive research and development – own smart gas meters, reducing technical cost of manufacturing of gas meters,

automation;

Metering segment – metering lines of water and heat:

increase of domestic sales,

increase of export – European Union, Russia;

expansion of product portfolio

– intensive studies on whole ultrasonic water meter family, launching of the first product since 4Q 2016;

– purchase of new communication technologies;

Automation of power grid operation segment:

development of products on smart grid market;

development of integrated IT solutions (Elkomtech and Rector), jointly selling;

Perspectives of development – market opportunities

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Improvement of financial results of Apator Rector – elimination of loss effect in 2015:

completion of performance of long-term contracts being settled according to IAS;

winning new customers and introduction of shorter periods of settlements;

restructuring of resources;

Optimization of the costs of activity:

in the area of technical cost of manufacturing – electronic and inductive electricity meters, gas meters;

overheads;

Hedging of currency exposure:

hedging policy of EUR and USD continued;

natural hedging ;

Integration processes of Apator Capital Group continued (e.g. IT, HR)

Perspectives of development – actions taken in 2015 continued

2016 – perspective of return to profitability of 2014 of Apator Group

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