Acquisition of Utility Partnership Limited

RNS Number : 7270E

Smart Metering Systems PLC

14 April 2014

 



14th April 2014

Smart Metering Systems plc

("SMS", the "Company" or the "Group")

Acquisition of Utility Partnership Limited

and Board changes

Smart Metering Systems plc (AIM: SMS.L), the integrated metering services company that connects, owns, operates and maintains current generation, advanced and smart metering assets and databases is pleased to announce the acquisition of the entire issued share capital of Utility Partnership Limited ("UPL"), a leading manager of electricity meters in the UKand provider of electricity connections, design, meter installation, data management and energy management services (the "Acquisition").

The consideration for the Acquisition is £14 million, to be settled through a payment of approximately £9.7 million in cash, funded through a new corporate debt facility provided by the Company's existing club of lenders, with the balance of approximately £4.3 million being satisfied by the issue of 1,246,277 ordinary shares of 1p each ("Ordinary Shares") in the Company (the "Consideration Shares"). The Consideration Shares have been issued at a price of £3.4255, being the mid-price of the Ordinary Shares on 14 March 2014, the day before the publication of the Company's final results for the year ended 31 December 2013. The cash consideration for the Acquisition will be adjusted on a cash free debt free basis and on the basis of a normalised working capital following finalisation of completion accounts.

UPL has grown very successfully since its establishment and for the year ended 31 July 2013 turnover was £11.1 million with gross profit of £3.7 million and EBITDA (after exceptional items) of £2.0 million.

SMS is also pleased to announce the appointment of Willie MacDiarmid as a Non-Executive Director of the Company with effect from 14 April 2014. Willie is a proven senior executive with a background in the energy sector who has had involvement at the highest level with the last two UK Governments on a variety of strategic and operating working groups. As a member of the ScottishPower executive team, he successfully led ScottishPower through the deregulation of the UK energy market and served on their investment committee, as well as being involved in various mergers and acquisitions. ScottishPower's successful metering business was part of his portfolio. Willie is fully supportive of SMS' growth and acquisition strategy and will become Chair of the Company's Remuneration Committee.

Furthermore, with effect from 14 April 2014, Nigel Christie, who has been a Non-Executive Director since the Company's AIM IPO in 2011, is retiring from the Board and Miriam Greenwood is taking over the Chair of the Company's Audit Committee. 

Alan Foy, Chief Executive Officer, commented:

"The acquisition of UPL will enable SMS to expand its service offering across the gas and electricity sectors, and the enlarged group will now offer a fully integrated service in these markets. It positions the enlarged Company as a dual gas and electricity service provider and establishes a base from which we can enhance our existing respective client relationships. It will ensure that SMS is well positioned with suppliers of domestic gas and electricity for the future UK domestic smart metering roll out.

We are delighted to welcome Rhys Wynne and his team to SMS and look forward to working with them, continuing to grow and exploring further opportunities this acquisition may provide. We would like to thank our banks for their support and are grateful for the help of our advisers in executing SMS's first acquisition."

Commenting specifically on the Board changes, Paul Dollman, Chairman of SMS, said:

"The Board would like to thank Nigel for his very significant contribution to the Company. He has been involved with SMS since before the company was listed on AIM in 2011 and has provided invaluable advice and support through the years. We wish him every success in the future.

We are delighted to welcome Willie to the Board and look forward to working with him. His considerable PLC experience in the energy space and with ScottishPower's metering activity will be invaluable as we grow the business in the electricity sector. "

Acquisition Rationale

The Acquisition is in line with the strategic vision of SMS to become the leading independent supplier of smart metering solutions to suppliers in the utility sector providing the highest levels of customer service. SMS and UPL are highly complementary and the Acquisition will enable significant growth opportunities by offering a full end-to-end dual fuel service incorporating connections, metering assets installation, ownership and management, as well as data management services to the respective gas and electricity customers of SMS and UPL. There is the further potential to work with new water industry customers.

SMS believes there is scope to increase its penetration into geographic markets through UPL's energy management propositions already established in Italy and the Caribbean and SMS's ADM™ device, which is currently undergoing trials in 5 different countries.

The Company expects the Acquisition to be immediately earnings accretive and value enhancing by providing significant sustainable earnings backed by recurring meter rental and data management provision income.

UPL will join the SMS Group as a new electricity division to be headed by Rhys Wynne, who co-founded UPL in 1996. The enhanced business will operate divisionally from Glasgow ('Gas') and Cardiff ('Electricity', formerly UPL). A new water division will be established to promote data services in the UK and International water markets.

Overview of UPL

Established in 1996 and based in Cardiff, UPL is a provider of full UK metering and data accreditations for the industrial, commercial and domestic markets covering all types of electricity metering installations. It provides connections design, meter installation, ownership and data management and is a supplier of energy management services. UPL was founded by Gary Mawer a 55.41 per cent. shareholder in the business and who will now retire and Rhys Wynne who owned 44.07 per cent. Mr. Mawer and Mr. Wynne and the existing management team of UPL are rolling a significant level of equity investment into SMS and the management team will be further incentivised by 5 year share options based on both personal performance and that achieved by SMS.

UPL has to date managed and installed over 80,000 electricity meters for the UK's electricity suppliers and provides energy management services to major banks and telecoms companies. For more information on UPL visit their web site: www.up-ltd.com

Admission of Consideration Shares

Application will be made to the London Stock Exchange for the Consideration Shares to be admitted to trading on AIM. It is expected that Admission will become effective and that dealings in the Consideration Shares will commence on AIM on 18 April 2014. The Consideration Shares will rank pari passu in all respects with the existing Ordinary Shares.

Following the issue and allotment of the Consideration Shares, the Company will have a total of 85,124,149 Ordinary Shares in issue.  There are no Ordinary Shares held in treasury.  The total number of voting shares in the Company is therefore 85,124,149. This figure may be used by shareholders in the Company as the denominator for the calculations by which they will determine if they are required to notify their interest in, or a change in their interest in, the share capital of the Company under the UK Financial Conduct Authority's Disclosure and Transparency Rules.

More Information about Willie MacDiarmid

In 2012, Willie was a Non-Executive Director and then CEO of AIM listed May Gurney PLC, which he led through a significant turnaround and on to the sale of the business to Keir PLC. During 2009-2012 he was the main Board Director of EAGA PLC (now Carillion Energy Services Limited), a FTSE 250 energy services company, which was sold to Carillion PLC.

Currently, he is the Interim CEO at Barchester Healthcare, a privately owned business with 210 multi-disciplinary care homes in the UK with 11,000 residents and 17,000 staff. 

The Company confirms that in relation to the appointment of Willie MacDiarmid, there is no further information to be disclosed under paragraph (g) of Schedule 2 of the AIM Rules for Companies save as disclosed below:

Full Name:	Donald William (Willie) MacDiarmid
Age:	53
Current Directorships / Partnerships in the last 5 years:	Scottish Water Business Stream Limited Barchester Healthcare Limited
Previous Directorships / Partnerships in the last 5 years:	AC Chesters & Son Limited Ayton Asphalte Company Limited Carillion Energy Services Limited ECT Engineers Limited Energy Retail Association Limited The Energy Saving Trust Limited Engineered Products Limited FDT (Holdings) Limited FDT Associates Limited FDT Contracts Limited Kier FPS Limited Kier MG Group Limited Kier MG Trustees Limited Kier MGIS Limited Kier MG (Regional) Technical Services Limited Kier MG Building Limited Kier MG Estates Limited Kier MG Limited Kier MG Recycling Limited ManWeb Energy Consultants Limited May Gurney PLC N.E.S.T Makers Limited ScottishPower Energy Retail Limited SP Dataserve Limited Turriff Group Limited Turriff Smart Services Limited Underground Moling Services Limited

For further information:

Smart Metering Systems plc	0141 249 3850
Alan Foy, Chief Executive Officer
Glen Murray, Finance Director
Cenkos Securities plc	0131 220 6939 / 0207 397 8900
Neil McDonald
Beth McKiernan
Kreab Gavin Anderson	020 7074 1800
Chris Philipsborn
Anna Schoeffler

Notes to Editors

About Smart Metering Systems

Established in 1995, Smart Metering Systems plc based in Glasgow, connects, owns, operates and maintains metering systems and databases on behalf of major energy companies and energy brokers.

Currently the Company is concentrating its efforts on offering its unique integrated services to the UK industrial and commercial gas market in which its customers have an 80% market share.

The Company has further applications for gas with its ADM™ device which allows "smart" functions such as remote reading and half hourly consumption data to be offered to customers in addition to the normal metering services. Longer term the Company also has additional applications for water and LPG.

The Company was admitted to the AiM market in July 2011 and is now part of the FTSE AiM 50 index. For more information on SMS please visit the Company's website: www.sms-plc.com

 

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