Interim Results

RNS Number : 1643N

Smart Metering Systems PLC

04 September 2013

 



04 September 2013

Smart Metering Systems plc

("SMS" or "the Company")

Interim Results for the six months ended 30 June 2013

Smart Metering Systems plc (AIM: SMS.L) is pleased to announce its interim results which show continuing growth for the six months ended 30 June 2013 and an increased dividend to shareholders.

Financial Highlights

·      Revenue increased by 42% to £13.2m (H1 2012:£9.3m)

·      Recurring meter rental increased by 43% to £6.0m (H1 2012 £4.2m) representing 46% of total revenue

·      Gross Profit increased by 40% to £8.1m (H1 2012:£5.8m)

·      Adjusted EBITDA* increased by 37% to £5.5m (H1 2012:£4.0m)

·      Basic earnings per share increased to 3.27p (H1 2012: 2.60p)

·      Interim dividend increased by 40% to 0.7p per ordinary share

·      Available cash and unused debt facility of £25.5m

*Excluding exceptional items and fair value adjustments

Operational Highlights

·      Total meter portfolio increased by 18% to 401,000 from end of December 2012 (December 2012: 341,000)

·      Increase of 78% in capital investment in meter assets to £10.5m (H1 2012: £5.9m)

·      Increase in annualised recurring meter rental at 30 June 2013 of 43% to £13.0m (H1 2012: £9.1m)

·      Contract extensions or additions with a number of major customers

·      Energy Brokers served increased to 11 from 5 at December 2012

·      ADM™ installations increased to over 7,000 units to date

-       Advanced Trials commenced in the Water and LPG markets in the UK

-       International trials commenced but at early stage

·      Increase of 41% in asset installation revenue to £7.2m (H1 2012: £5.1m) of which Gas
Connection business increased turnover by 37% to £4.1m (H1 2012: £3.0m)

Post Balance Sheet Events

·      Dong Energy contract renewal and extension to include new gas connections, gas meters and data management services using the ADM™ solution. This is a preferred supplier contract covering the entire portfolio of meter points to which Dong Energy are the registered gas supplier.

·      New contract with Opus Energy for gas meters and data management services including the ADM™ solution.

Alan Foy, Chief Executive Officer, commented: "SMS has had another strong trading period. We have continued to increase the number of customers we serve and have shown again a significant increase in our meter portfolio providing on-going recurring revenue. A number of customers have recently increased the number of meters required which underlines the quality of service SMS provides and bodes well for the future. This confidence is reflected in the increase in dividend we have announced today."

For Further Information:

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

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

Chairman's and Chief Executive Officer's Statement

We are pleased to announce continued growth in the first half of 2013, across all our business, in both the number of customers we serve and also the number of meters in our portfolio.

Our Business

Our business is based on connecting, owning, operating and maintaining metering systems and databases on behalf of major energy companies and energy brokers.

Our core focus is on gas meters in the UK, where we aim to:

·      be the market leader in the independent ownership of industrial and commercial meters;

·      establish ADM™ as the industry standard smart metering solution for Industrial and Commercial (I&C) clients; and

·      grow our domestic meters business organically and potentially through new contracts.

We will also seek out new domestic and international markets for our products and services to widen our footprint in the UK.

Operational Review

During the first half of 2013 the meter portfolio has broken the 400,000 level with an increase of 60,000 in the first six months mainly as a result of a number of major contract wins in 2012.

The increase in our meter portfolio is reflected in the build-up of our annualised recurring revenue, providing an increasing percentage of our total revenue.  These recurring revenues are as a result of the long term nature of our contracts which provide an index linked revenue stream.

Industrial and Commercial meters

In addition to recent new contract wins with Dong Energy and Opus Energy, we have had extensions from major customers on existing contracts.

SMS continues to target the energy broker market which provides a useful additional revenue stream. The number of brokers has increased from 5 to 11 since the year end and contracts cover both the provision of meters and the ADM™ device. In addition SMS has also experienced a greater demand for new meters through its I & C gas connections activities.

The value of I & C meters is typically much greater than that of domestic meters and therefore the revenue per meter is approximately 10-15 times higher on average.

ADM™

The ADM™ device is SMS's advanced metering solution which allows for remote meter reading on a half-hourly basis and has been designed in line with our own customer requirements.

SMS has now installed over 7,000 ADM™ devices. Feedback continues to be extremely positive. The ability of remote reading alongside SMS's full service capability in the I & C market provides a major opportunity for the Company in extending the service we offer and the ability to seek out further markets for our overall service.

The Department of Energy & Climate Change (DECC) has recently announced a delay in the start of the UK domestic smart metering programme. The Company believes, however, that the small I & C market will be largely unaffected by this delay as suppliers are already rolling out advanced solutions for commercial reasons to allow their customers to benefit from being able to manage their energy bills at the earliest practicable date rather than waiting until they are mandated to install smart meters. Based on the ADM's competitive price and ease of installation and the ongoing increase in the Company's meter portfolio, SMS expects to benefit from this delay and also to be well placed when the mandated smart metering program actually occurs.

Domestic Meters

SMS, as previously announced, has been contracted by SSE to provide Meter Operations Services in all regions outside of Scotland and the South-East of England up to April 2014. SMS is on track to complete the original 180,000 meter program. 

SMS will continue to support its existing and potential new customers in the domestic market for gas meter services, leaving the business well placed to support our customers in the domestic smart programme now expected to commence in the autumn 2015

Other Markets

SMS' focus is principally on the UK gas market where it continues to see good long term growth potential. However the Company continues to identify and test other potential markets for its products and services.

In the UK water sector, the Company has moved to advanced trials with a number of potential customers. Internationally, with the benefit of funding from Scottish Enterprise, SMS has started trials for the ADM™ device in South Africa and Asia with pre marketing ongoing in the USA.

Financial Review

Results for the year

During the first half of 2013, the Company increased revenue by 42% to £13.2m principally as a result of increasing meters under ownership and management. Annualised recurring meter rental revenue, in line with the Company's strategy, increased to £13.0m compared to £10.8m at the end of 2012.

Asset installation revenue increased to £7.2m (2012 H1: £5.1m) of which the Gas Connection business increased turnover by 37% to £4.1m (2012 H1: £3.0m)

Administration expenses, at £3.9m (excluding exceptional costs), were up compared to the first half 2012, mainly due to investment in staff numbers which have increased to over 100, up 30 since the year end. This increase is in line with the growth of the Company. Depreciation and amortisation increased by 65% to £1.3m due to the increased meter base held by the Company.

Finance costs increased from £318k to £545k due to higher outstanding debt in the period as a result of the increase in meter investment.

Gross profit increased from £5.8m (H1 - 2012) to £8.1m and adjusted EBITDA from £4.0m (H1 - 2012) to £5.5m.

Cash and borrowings

As at 30 June 2013, the Company had net debt of £19.5m (December 2012: £13.9m). This comprised debt of £26.0m (December 2012 £20.4m) and cash balances of £6.5m. Unused facilities were £19.0m.

SMS has a £45.0m facility with Barclays Bank PLC (lead bank), Clydesdale Bank PLC and Lloyds Bank PLC to fund the purchase of meter assets. Interest is paid quarterly at 2.9% plus three month rolling LIBOR on the outstanding balance with drawn funds repaid equally over ten years. 1.45% is paid on undrawn funds. SMS has entered into a hedging arrangement to swap three-month rolling LIBOR, currently at c.0.51%, to a fixed 0.90-0.92% over four years for c.70% of the facility.

Capital investment in meter assets was £10.5m compared to £5.9m in the first half of 2012.

Treasury policies

The Company uses interest rate swaps to manage interest rate fluctuations on interest-bearing loans and borrowings which means that the Company pays a fixed interest rate rather than being subject to fluctuations in the variable rate.

Interest rate swaps covered an amount of £19.8m as at 30 June 2013 (December 2012: £13.2m).

The interest rate swap results in a fixed interest rate of 0.90-0.92%. The termination date for the derivatives is 15 September 2016.

People

Staff numbers have increased during 2013 to over 100.

The most important part of our business is ensuring that we provide the highest quality of service to our customers, a value that continues to underpin the business. The results to date this year reflect the continued dedication of our staff in this endeavour and we would like to thank them for their continued support.

During the six months ended 30 June 2013, Steve Timoney retired from the Board and the Company is actively seeking to recruit an additional non executive Director.

Dividend

At the time of our admission to AIM, we stated that we intended to adopt a dividend policy that will take account of the Group's profitability, underlying growth prospects and availability of cash and distributable reserves, while maintaining an appropriate level of dividend cover.

SMS is therefore delighted to announce a proposed interim cash dividend of 0.7p for the half year ended 30 June 2013 to shareholders. The interim dividend will be will be paid on 22 November 2013 to those shareholders on the register (record date) on 18 October 2013 with an ex-dividend date of 16 October 2013.

Outlook

With growth across all sectors in the first half of 2013, underpinned by an increasing long term recurring meter rental revenue, SMS looks forward with confidence.

SMS plc
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE PERIOD ENDED 30 JUNE 2013

	6 Months ended	6 Months ended	Year ended
	30 June 2013	30 June 2012	31 December 2012
	Unaudited	Unaudited	Audited
	£'000	£'000	£'000
REVENUE	13,188	9,272	21,029
Cost of sales	(5,115)	(3,517)	(7,759)
Gross Profit	8,073	5,755	13,270
Administrative expenses	(4,230)	(2,922)	(7,337)
PROFIT FROM OPERATIONS	3,843	2,833	5,933
Attributable to:
Operating profit before exceptional items	4,156	3,184	7,176
Exceptional items and fair value adjustments	(313)	(351)	(1,243)
Finance costs	(545)	(318)	(739)
Finance income	24	23	33
PROFIT BEFORE TAXATION	3,322	2,538	5,227
Taxation	(594)	(370)	(914)
PROFIT FOR THE YEAR
ATTRIBUTABLE TO EQUITY HOLDERS	2,728	2,168	4,313
Other comprehensive income
Total comprehensive income	2,728	2,168	4,313
Earnings per share - basic (pence)	3.27	2.60	5.18
Earnings per share - diluted (pence)	3.12	2.53	5.00

SMS plc
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2013
	30 June 2013	30 June 2012	31 December 2012
	Unaudited	Unaudited	Audited
	£'000	£'000	£'000
ASSETS
Non-current assets
Intangible assets	1,920	1,890	1,916
Property, plant and equipment	45,721	26,602	36,104
	47,641	28,492	38,020
Current assets
Inventories	692	227	373
Trade & other receivables	3,585	2,428	3,091
Cash and cash equivalents	6,507	4,233	6,455
Other current financial assets	36	7
	10,820	6,895	9,919
TOTAL ASSETS	58,461	35,387	47,939
LIABILITIES
Current liabilities
Trade and other payables	10,095	7,747	8,201
Bank loans and overdrafts	2,834	1,348	2,150
Obligations under hire purchase agreements	4	4	3
Other current financial liabilities		361	170
	12,933	9,460	10,524
Non-current liabilities
Bank loans	23,215	9,152	18,299
Obligations under hire purchase agreements	7	11	10
Deferred tax liabilities	3,098	2,023	2,510
	26,320	11,186	20,819
TOTAL LIABILITIES	39,253	20,646	31,343
NET ASSETS	19,208	14,741	16,596
EQUITY
Share capital	839	833	833
Share premium	8,970	8,653	8,653
Other reserves	1	1	1
Retained earnings	9,398	5,254	7,109
TOTAL EQUITY ATTRIBUTABLE TO
EQUITY HOLDERS OF THE PARENT COMPANY	19,208	14,741	16,596

SMS plc
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE PERIOD ENDED 30 JUNE 2013
	Share	Share	Other	Retained
	capital	premium	reserve	earnings	Total
	£'000	£'000	£'000	£'000	£'000
Attributable to owners of the parent
company:
As at 1 July 2012	833	8,653	1	5,254	14,741
Profit for period				2,145	2,145
Transactions with owners in their
capacity as owners:
Dividends				(417)	(417)
Share options				127	127
Balance as at 31 December 2012	833	8,653	1	7,109	16,596
Profit for period				2,728	2,728
Transactions with owners in their
capacity as owners:
Shares issued	6	317			323
Dividends				(958)	(958)
Share options				519	519
Balance as at 30 June 2013	839	8,970	1	9,398	19,208

SMS plc
CONSOLIDATED CASH FLOW STATEMENT
FOR THE PERIOD ENDED 30 JUNE 2013
	30 June 2013	30 June 2012	31 December 2012
	Unaudited	Unaudited	Audited
	£'000	£'000	£'000
CASH FLOW FROM OPERATING ACTIVITIES
Profit before taxation	3,322	2,538	5,227
Finance costs	545	318	739
Finance income	(24)	(23)	(33)
Fair value movements on derivatives	(206)	33	(151)
Depreciation	1,194	678	1,599
Amortisation	118	118	238
Share based payment expense	519	117	244
Increase in inventories	(319)	(144)	(290)
(Increase)/decrease in trade & other receivables	(494)	(822)	(1,485)
Increase in Trade & other payables	1,890	1,148	1,835
CASH USED IN OPERATIONS	6,545	3,961	7,923
Taxation	(2)		(290)
NET CASH USED IN OPERATIONS	6,543	3,961	7,633
INVESTING ACTIVITIES
Payments to acquire property, plant and equipment	(10,811)	(5,953)	(16,380)
Disposal of fixed asset investment			4
Payment to acquire intangible assets	(122)	(123)	(269)
Finance income	24	23	33
NET CASH USED IN INVESTING ACTIVITIES	(10,909)	(6,053)	(16,612)
FINANCING ACTIVITIES
New borrowings	6,839		10,947
Capital repaid	(1,239)	(673)	(1,671)
Net outflow from other long term creditors	(2)	(1)	(3)
Finance costs	(545)	(318)	(739)
Net proceeds from share issue	323
Dividends paid	(958)		(417)
NET CASH GENERATED FROM FINANCING
ACTIVITIES	4,418	(992)	8,117
Net (decrease)/increase in cash and cash equivalents	52	(3,084)	(862)
Cash and cash equivalents at the beginning of the period	6,455	7,317	7,317
Cash and cash equivalents at the end of the period	6,507	4,233	6,455

SMS plc

Notes to the accounts

1        Basis of preparation and accounting policies

Basis of preparation

The Group's half yearly financial report consolidates the results of the company and its subsidiary undertakings made up to 30 June 2013. The company is a limited liability company incorporated and domiciled in Scotland and whose shares are quoted on AIM, a market operated by The London Stock Exchange.

The financial information contained in this half-yearly financial report does not constitute statutory accounts as defined in section 434 of the Companies Act 2006. It does not therefore include all the information and disclosures required in the annual financial statements and should be read in conjunction with the Group's annual financial statements as at 31 December 2012.

The financial information for the 6 months ended 30 June 2013 is also unaudited.

The Group's statutory accounts for the year ended 31 December 2012 have been delivered to the Registrar of Companies. The report of the auditors on these accounts was unqualified and did not contain a statement under Section 498 of the Companies Act 2006.

The financial statements have been prepared on a going concern basis which the directors believe is appropriate for the following reason:

The directors have prepared cashflow forecasts which show the Group expects to meet its liabilities as they fall due for a period in excess of 12 months from the date of these financial statements. Our forecasts show continued capital investment which is funded from retained profits and external finance. At 30 June 2013, the Group had cash of £6.5m, available facilities of £19.0m and continued to be cash generative through trading operations.

Significant accounting policies

The accounting policies used in the preparation of the financial information for the six months ended 30 June 2013 are in accordance with the recognition and measurement criteria of International Financial Reporting Standards ('IFRS') as adopted by the European Union and are consistent with those which will be adopted in the annual statutory financial statements for the year ended 31 December 2013.

2        Segmental Reporting

For management purposes, the Group is organised into two core divisions, management of assets and installation of meters, which form the basis of the Group's reportable operating segments.  Operating segments within those divisions are combined on the basis of their similar long term economic characteristics and similar nature of their products and services, as follows:

The management of assets comprises regulated management of gas meters and ADM units within the UK.

The installation of meters comprises the installation of domestic and industrial & commercial gas meters throughout the UK.

Management monitors the operating results of its divisions separately for the purpose of making decisions about resource allocation and performance assessment. The operating segments disclosed in the financial statements are the same as reported to the Board. Segment performance is evaluated based on gross profit or loss excluding operating costs not reported by segment; depreciation, amortisation of intangible assets and exceptional items.

The following tables present information regarding the Group's reportable segments for the six months ended 30 June 2013, six months ended 30 June 2012 and the year ended 31 December 2012.

SMS plc

Notes to the accounts (cont.)

2	Segmental Reporting (continued)	Asset	Asset		Total
		management	installation	Unallocated	operations
	30 June 2013	£000's	£000's	£000's	£000's
	Segment revenue	6,023	7,165		13,188
	Operating costs	(1,134)	(3,981)		(5,115)
	Segment profit - group gross profit	4,889	3,184		8,073
	Items not reported by segment
	Other operating costs			(2,605)	(2,605)
	Depreciation	(1,122)		(72)	(1,194)
	Amortisation	(118)			(118)
	Exceptional items			(313)	(313)
	Group operating profit after amortisation and	3,649	3,184	(2,990)	3,843
	exceptional items
	Net finance costs	(521)	-	-	(521)
	Profit before tax	3,128	3,184	(2,990)	3,322
	Tax expense				(594)
	Profit for year				2,728
		Asset	Asset		Total
		management	installation	Unallocated	operations
	30 June 2012	£000's	£000's	£000's	£000's
	Segment revenue	4,189	5,083		9,272
	Operating costs	(989)	(2,528)		(3,517)
	Segment profit - group gross profit	3,200	2,555		5,755
	Items not reported by segment
	Other operating costs			(1,775)	(1,775)
	Depreciation	(647)		(31)	(678)
	Amortisation	(118)			(118)
	Exceptional items			(351)	(351)
	Group operating profit after amortisation
	and exceptional items	2,435	2,555	(2,157)	2,833
	Net finance costs	(295)			(295)
	Profit before tax	2,140	2,555	(2,157)	2,538
	Tax expense				(370)
	Profit for year				2,168

SMS plc

Notes to the accounts (cont.)

2	Segmental Reporting (continued)	Asset	Asset		Total
		management	installation	Unallocated	operations
	31 December 2012	£000's	£000's	£000's	£000's
	Segment revenue	9,254	11,775		21,029
	Operating costs	(2,194)	(5,565)		(7,759)
	Segment profit - group gross profit	7,060	6,210		13,270
	Items not reported by segment
	Other operating costs			(4,266)	(4,266)
	Depreciation	(1,534)		(56)	(1,590)
	Amortisation	(238)			(238)
	Exceptional items			(1,243)	(1,243)
	Group operating profit after amortisation and
	exceptional items	5,288	6,210	(5,565)	5,933
	Net finance costs	(706)			(706)
	Profit before tax	4,582	6,210	(5,565)	5,227
	Tax expense				(914)
	Profit for year				4,313

All revenues and operations are based and generated in the UK.

The Group has one major customer that generated turnover within each segment as listed below:

		6 Months ended	6 Months ended	Year ended
		30 June 2013	30 June 2012	31 December 2012
		Unaudited	Unaudited	Audited
		£'000	£'000	£'000
	Asset management	3,499	2,530	5,511
	Asset installation	2,993	1,899	4,228
		6,492	4,429	9,739

SMS plc

Notes to the accounts (cont.)

2 Segmental Reporting (continued)

No segmentation is presented for the majority of Group assets and liabilities as these are managed centrally, independently of operating segments.

Those assets and liabilities that are managed and reported on a segmental basis are detailed below.

		Asset	Asset	Total
		management	installation	operations
	30 June 2013	£000's	£000's	£000's
	Assets reported by segment
	Intangible assets	1,920	-	1,920
	Plant & machinery	45,373	-	45,373
	Inventories	692	-	692
		47,985	-	47,985
	Assets not reported by segment			10,476
	Total assets			58,461
	Liabilities reported by segment
	Bank loans	26,049	-	26,049
	Obligations under hire purchase agreements	11	-	11
		26,060	-	26,060
	Liabilities not reported by segment			13,193
	Total liabilities			39,253
		Asset	Asset	Total
		management	installation	operations
	30 June 2012	£000's	£000's	£000's
	Assets reported by segment
	Intangible assets	1,890	-	1,890
	Plant & machinery	26,401	-	26,401
	Inventories	227	-	227
		28,518	-	28,518
	Assets not reported by segment			6,869
	Total assets			35,387
	Liabilities reported by segment
	Bank loans	10,500	-	10,500
	Obligations under hire purchase agreements	15	-	15
		10,515	-	10,515
	Liabilities not reported by segment			10,131
	Total liabilities			20,646

SMS plc

Notes to the accounts (cont.)

2 Segmental Reporting (continued)

		Asset	Asset	Total
		management	installation	operations
	31 December 2012	£000's	£000's	£000's
	Assets reported by segment
	Intangible assets	1,916	-	1,916
	Plant & machinery	35,791	-	35,791
	Inventories	373	-	373
		38,080	-	38,080
	Assets not reported by segment			9,859
	Total assets			47,939
	Liabilities reported by segment
	Bank loans	20,449	-	20,449
	Obligations under hire purchase agreements	13	-	13
		20,462	-	20,462
	Liabilities not reported by segment			10,881
	Total liabilities			31,343
3	Earnings per share	6 Months to	6 Months to	Year to
		30 June	30 June	31 December
		2013	2012	2012
		£000's	£000's	£000's
	Profit for year used for calculation of basic EPS	2,728	2,168	4,313
	Amortisation of intangible assets	118	118	238
	Exceptional costs	313	351	1,243
	Tax effect of adjustments	(101)	(113)	(355)
	Earnings for the purpose of adjusted EPS	3,058	2,524	5,439
	Number of shares
	Weighted average number of shares for the
	purpose of calculating basic EPS	83,348,666	83,339,747	83,339,747
	Effect of potentially dilutive ordinary shares:
	- share options	3,947,294	2,341,953	2,957,911
	Weighted average number of ordinary shares for
	the purpose of diluted EPS	87,295,960	85,681,700	86,297,658
	Earnings per share:
	- basic (pence)	3.27	2.60	5.18
	- diluted (pence)	3.12	2.53	5.00
	Adjusted earnings per share:
	- basic (pence)	3.67	3.03	6.53
	- diluted (pence)	3.50	2.95	6.30

The Directors consider that the adjusted earnings per share calculation gives a better understanding of the Group's earnings per share.

	SMS plc
	Notes to the accounts (cont.)
4	Dividend		6 Months to	6 Months to	Year to
			30 June	30 June	31 December
			2013	2012	2012
			£000's	£000's	£000's
	Dividend on equity shares		958	-	417

	After 30 June the directors have approved an interim dividend of 0.7 pence per share for 2013, which has not been accrued as a liability as at 30 June 2012 in accordance with IAS 8. The dividend will be paid on 22 November 2013 with an ex-dividend date of 16 October 2013 and a record date of 18 October 2013.
5	The half yearly financial report was approved by the Board of Directors on 03 September 2013.
6	A copy of this half yearly financial report is available from the Company's Registered Office or by visiting our website at www.sms-plc.com.

 

END

 

 

IR SSSFUDFDSEIU