Proposed equity placing

RNS Number : 4139X

Smart Metering Systems PLC

24 November 2017

 



For Immediate Release                                                                                        

THIS ANNOUNCEMENT, INCLUDING THE APPENDIX AND THE INFORMATION CONTAINED HEREIN IS RESTRICTED AND IS NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN OR INTO THE UNITED STATES OR ANY OTHER JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OR REGULATIONS OF THAT JURISDICTION. PLEASE SEE THE IMPORTANT NOTICES AT THE END OF THIS ANNOUNCEMENT.  PLEASE SEE THE IMPORTANT NOTICES AT THE END OF THIS ANNOUNCEMENT.

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION. UPON THE PUBLICATION OF THIS ANNOUNCEMENT, THIS INSIDE INFORMATION IS NOW CONSIDERED TO BE IN THE PUBLIC DOMAIN.

24 November 2017

Smart Metering Systems plc

Proposed equity placing to raise approximately £150 million

Refinancing of £280 million revolving credit facility

Smart Metering Systems plc (AIM: SMS.L) ("SMS or the "Company"), the integrated metering services company that connects, owns, operates and maintains current generation and new advanced metering assets and databases, today announces that it proposes to raise approximately £150 million (before expenses) pursuant to a conditional placing of new Ordinary Shares (the "Placing Shares") to institutional investors (the "Placing").

Highlights

·           Proposed placing to raise gross proceeds of approximately £150 million.

·           Refinancing of £280 million revolving credit facility agreed with its syndicate of existing banks, extending the maturity date of the existing facility from March 2019 to November 2020 on similarly attractive terms (the "Extended Debt Facility").

·           Net proceeds of the Placing to be utilised alongside the Extended Debt Facility to give SMS the financial and operational flexibility to fully fund the installation of approximately 2.5 million meters.

·           Flexibility to fund up to approximately 4 million meters in total through a further debt financing at an appropriate point.

·           Placing to be undertaken by way of an accelerated bookbuild exercise (the "Bookbuild") which will be launched immediately following release of this announcement and managed by Cenkos Securities plc ("Cenkos"), Barclays Bank PLC ("Barclays") and Macquarie Capital (Europe) Limited ("Macquarie") (together, the "Joint Bookrunners").

·           Rothschild is acting as Financial Adviser to SMS in connection with the Placing and the Extended Debt Facility.

Willie MacDiarmid, Chairman of SMS, commented:

"The roll-out of smart meters to the domestic energy market represents a significant growth opportunity for SMS, enabling the UK's transition to a low carbon energy economy. We are well placed to accelerate our growth in this roll-out phase and to establish an installed asset base that can deliver attractive returns to our shareholders. SMS needs a more flexible capital structure to enable us to capitalise on this opportunity. The placing and the debt refinancing will enable SMS to enhance its financial strength to take advantage of this attractive investment opportunity for shareholders."

1.    Background to the Placing

The roll-out of smart meters in the UK is a core element of the UK Government's and Ofgem's plan to "unlock a smart energy system fit for the future", as the energy system evolves towards a more decentralised and dynamic energy model. The size of the UK domestic smart meter market roll-out is approximately 53 million meters.

As a company which provides a fully integrated offering and has a demonstrably successful operational track record, SMS is positioned to participate in, and benefit from, a programme which is underpinned by favourable regulatory and commercial drivers. The Company's key strategic objective in the domestic smart metering roll-out is to maximise its market share as part of a 'land-grab' opportunity for this growing UK infrastructure asset class.

SMS now has framework agreements in place for the installation, ownership and management of domestic smart meters with 9 independent energy suppliers. These agreements, whilst non-exclusive, provide SMS with a high level of visibility on its clients' installation programme and give SMS confidence to build on securing a significant market share as the domestic smart meter roll-out accelerates. The market share of all independent suppliers (i.e. those outside of the 'Big 6') has increased significantly in recent years - from approximately 3 per cent in 2013 to approximately 17 per cent at the start of 2017.

With the benefit of a more flexible capital structure SMS will be able to deploy significant amounts of capital in smart metering assets which have highly attractive characteristics. Smart metering rental revenues are characterised as recurring, predictable and inflation-linked and are based on long-term rental contracts with no set termination date, delivering attractive recurring cashflows.

2.    Rationale for the Placing and use of Proceeds

In 2017, SMS has entered a significant growth phase and the Directors believe that the scale of the opportunity before it is more significant than at any time in SMS' history.

The estimated net proceeds of the Placing of approximately £146 million, alongside the unutilised portion of the Company's Extended Debt Facility, give SMS the financial and operational flexibility to fully fund the installation of approximately 2.5 million meters.

The Board also believes that the capital structure formed by the Placing and Extended Debt Facility provides the basis to fund up to approximately 4 million meters in total through a further debt financing at an appropriate point. The Company will continue to carefully assess the efficiency of its capital structure but intends to adopt a prudent approach to leverage which will aim to maintain a ratio of between 3-5x net debt to EBITDA over the growth phase.

Given the size of the UK domestic and small business smart meter market, it is likely that there will be additional opportunities available to SMS as it pursues its growth strategy.  Any opportunity significantly larger than approximately 4 million meters would require a further and more extensive funding review. 

3.    Current Trading and Prospects

Since the Company's interim results to 30 June 2017, the Company's continued investment in its gas and electricity metering and data assets portfolio has seen the total number of meter and data assets under management increase by approximately 8 per cent. to 1.81 million as at 30 September 2017 (30 June 2017: 1.68 million) and total annualised recurring income^[1] has also increased by approximately 8 per cent to £52.3m as at 30 September 2017 (30 June 2016: £48.4 million). SMS has significantly increased the number of domestic smart meters in its portfolio by approximately 56 per cent to 290,253 as at 30 September 2017 (30 June 2017: 185,666), as the domestic smart meter roll-out has gathered pace.

A summary of the Company's unaudited results for the nine months to 30 September 2017 is set out below:

Income Statement	9 months to 30 September 2017	6 months to 30 June 2017
Revenue	£57.9m	£36.8m
Gross Profit	£29.8m	£19.0m
Gross Profit Margin	52%	51%
Underlying EBITDA[2]	£26.0m	£16.2m
Underlying EBITDA margin	45%	44%
Underlying PBT[3]	£13.3m	£8.4m
Underlying earnings per share[4]	12.15p	7.68p
Balance Sheet	9 months to 30 September 2017	6 months to 30 June 2017
Assets
Non-Current	£245.6m	£214.7m
Current	£42.1m	£41.4m
Total Assets	£287.7m	£256.1m
Liabilities
Bank loan < 1 year	£20.2m	£17.0m
Current liabilities	£44.3m	£42.7m
Bank loan > 1 year	£136.0m	£112.8m
Non-current liabilities	£9.7m	£9.5m
Total liabilities	£210.2m	£182.0m
Net Assets	£77.5m	£74.1m
Cashflow Statement	9 months to 30 September 2017	6 months to 30 June 2017
Operating Profit	£17.2m	£11.1m
Depreciation & Amortisation	£11.4m	£7.0m
EBITDA	£28.6m	£18.1m
Working capital	£2.2m	£4.7m
Other	£0.2m	£0.2m
Operating cash flow movement	£31.0m	£23.0m
Tax	£(1.0)m	£(0.9)m
Net interest	£(3.1)m	£(1.7)m
Purchase of fixed assets	£(85.4)m	£(48.9)m
Proceeds from fixed asset disposals	£2.7m	£1.7m
HP repayments	£(0.1)m	£0.0m
Cash Out flow	£(55.9)m	£(26.8)m
Dividends	£(2.4)m	£(2.4)m
Changed in Equity	£1.7m	£1.2m
Net Cash Flow	£(56.6)m	£(28.0)m
Opening net debt	£(94.0)m	£(94.0)m
Closing net debt	£(150.6)m	£(122.0)m

All capital investment following the Company's IPO has been funded through a combination of the Company's operating cash flows and by utilising its existing £280 million revolving credit facility (the "Existing Debt Facility").

Based on unaudited management accounts for the period to 30 September 2017, the Company continues to trade in line with current market expectations.

4.    Debt Refinancing

The Company is also pleased to announce that, on 23 November 2017, it agreed a refinancing of its existing £280 million revolving credit facility (the Extended Debt Facility) with its syndicate of existing banks. The Extended Debt Facility extends the maturity date of the existing facility from March 2019 to November 2020 on similarly attractive terms to the Existing Debt Facility and continues to allow the Company to operate within a net debt to EBITDA covenant of 5.25 times. The Extended Debt Facility provides SMS with greater operational and capital flexibility as SMS seeks to accelerate its growth and investment in the domestic smart meter roll-out.

5.    Details of the Placing

The Placing is being conducted through the Bookbuild which is managed by the Joint Bookrunners. Rothschild is acting as Financial Adviser to the Company and Cenkos is Nominated Adviser and Broker to the Company.

The Bookbuild will open with immediate effect following release of this announcement. The number of Placing Shares to be issued in the Placing, and the price at which such Placing Shares are to be issued in the Placing (the "Placing Price"), will be agreed by the Joint Bookrunners and the Company at the close of the Bookbuild. The timing of the closing of the Bookbuild, pricing and allocations are at the discretion of the Joint Bookrunners and the Company. Details of the Placing Price and the number of Placing Shares to be issued will be announced as soon as practicable after the close of the Bookbuild.

The Placing is subject to the terms and conditions set out in the Appendix (which forms part of this announcement, such announcement and the Appendix together, the "Announcement").

Application will be made to the London Stock Exchange for the Placing Shares to be issued pursuant to the Placing to be admitted to trading on AIM. It is expected that Admission will become effective and that dealings in the Placing Shares will commence on AIM at 8.00am on 22 December 2017.

The Placing Shares will be issued and credited as fully paid and will rank in full for all dividends and other distributions declared, made or paid after the admission of those Ordinary Shares and will otherwise rank on Admission pari passu in all respects with each other and with the Existing Ordinary Shares.

The Company's total costs and expenses associated with the Placing are estimated to be £4 million.

The Placing is conditional upon, amongst other things:

·   the Joint Bookrunners and the Company agreeing the Placing Price and the number of Placing Shares at the close of the Bookbuild;

·    the passing of the resolutions without amendment to be proposed at the General Meeting;

·   the Placing Agreement having become unconditional (save for Admission) and not having been terminated in accordance with its terms prior to Admission;

·   Admission taking place by no later than 8.00 a.m. on 22 December 2017 (or such later date as the Joint Bookrunners may agree in writing with the Company, being not later than 8.00 a.m. on 4 January 2018).

If any of the conditions are not satisfied, the Placing Shares will not be issued and Admission will not take place.

Pursuant to the Placing Agreement, the Joint Bookrunners, as agents for the Company, have agreed to use their reasonable endeavours to procure subscribers for the Placing Shares at the Placing Price.  In addition, Barclays and Macquarie have each severally (and not jointly or jointly and severally) agreed to underwrite, in equal proportions, the settlement risk in the event that any subscriber for Placing Shares procured by the Joint Bookrunners fails to take up their allocation of Placing Shares.

The Placing Agreement contains customary warranties given by the Company in favour of the Joint Bookrunners in relation to, inter alia, the accuracy of the information in this document and other matters relating to the Group and its business. In addition, the Company has agreed to indemnify the Joint Bookrunners in relation to certain liabilities which the Joint Bookrunners may incur in respect of the Placing.

Under the Placing Agreement, the Company has agreed to pay to the Joint Bookrunners a commission based on the aggregate value of the Placing Shares placed at the Placing Price and to Cenkos a corporate fee for the Placing.

The Joint Bookrunners have the right to terminate the Placing Agreement in certain circumstances prior to Admission, in particular, in the event of a breach of any of the warranties or a material adverse change.

The Placing Agreement also provides for the Company to pay all costs, charges and expenses of, or incidental to, the Placing and Admission including all legal and other professional fees and expenses.

The Placing Shares have not been made available to the public and have not been offered or sold in any jurisdiction where it would be unlawful to do so.

This Announcement should be read in its entirety. In particular, your attention is drawn to the "Important Notices" section of this Announcement, to the detailed terms and conditions of the Placing and further information relating to the Bookbuild described in the Appendix to this Announcement (which forms part of this Announcement).

By choosing to participate in the Placing and by making an oral and legally binding offer to acquire Placing Shares, investors will be deemed to have read and understood this Announcement in its entirety (including the Appendix), and to be making such offer on the terms and subject to the conditions of the Placing contained herein, and to be providing the representations, warranties and acknowledgements contained in the Appendix.

6.    Expected Timetable

Announcement of the Placing	24 November 2017
Announcement of the results of the Placing	24 November 2017
Posting of the Circular, the Notice of General Meeting and the Forms of Proxy	27 November 2017
Latest time and date for receipt of Forms of Proxy	9.00 a.m. on 18 December 2017
Voting record date	5.00 p.m. on 18 December 2017
General Meeting	9.00 a.m. on 20 December 2017
Admission effective and dealings in Placing Shares expected to commence on AIM	8.00 a.m. on 22 December 2017

Notes:

1.     Each of the times and dates in the above timetable, and shown elsewhere in this Announcement, are indicative only and if any of the details contained in the timetable above should change, the revised times and dates will be notified to shareholders by means of an announcement through a Regulatory Information Service.

2.     All of the above times refer to London time unless otherwise stated.

3.     All events listed in the above timetable following the General Meeting are conditional on the passing of the resolutions at the General Meeting.

For further information, please contact:

Smart Metering Systems PLC: [phone]

Alan Foy, CEO

David Thompson, CFO

Craig McGinn, Company Secretary          

Cenkos Securities PLC: [phone] / [phone]

Nominated Adviser, Broker and Joint Bookrunner

Iain Macarthur / Neil McDonald

Barclays Bank PLC: [phone]

Joint Bookrunner

Neal West / Eddie Siow / Phil Drake

Macquarie Capital (Europe) Limited: [phone]

Joint Bookrunner

Ben Bailey / Alex Reynolds / Nick Stamp

Rothschild: [phone]

Financial Adviser

Emmet Walsh / Peter Nicklin / Jonathan Finn / Yuri Shakhmin

Kreab: [phone]

Matthew Jervois / Daniel Holgersson

About Smart Metering Systems plc

With its business established in 1995, Smart Metering Systems plc, headquartered in Glasgow, connects, owns and operates gas and electricity meters on behalf of major energy companies. The Company's full end to end energy management services and consultancy business support large blue chip companies in the UK, through a network of offices in Bolton, Cardiff, Cambridge, Doncaster, Enfield, Newmarket, Normanton and Rugby.

The Company's services also include infrastructure design, installation, consultancy and project management services for new gas, electricity, water and telecoms connections for licenced energy and telecoms suppliers, end consumers and the UK's licenced electricity Distribution Network Owners (DNO's).

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.

The information contained within this announcement is inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014. Upon the publication of this announcement this inside information is now considered to be in the public domain.

Regulated Information Classification: Inside information

IMPORTANT NOTICES

This Announcement and the information contained in it is restricted and is not for publication, release or distribution, in whole or in part, directly or indirectly, in, into or from the United States, Australia, Canada, South Africa or Japan or any other state or jurisdiction in which publication, release or distribution would be unlawful, restricted or unauthorised (each a "Restricted Territory"). This Announcement is for information purposes only and does not constitute an offer to sell or issue, or the solicitation of an offer to buy, acquire or subscribe for shares in the capital of the Company in any Restricted Territory or any other state or jurisdiction in which such offer or solicitation is not authorised or to any person to whom it is unlawful to make such offer or solicitation. Any failure to comply with these restrictions may constitute a violation of the securities laws of such jurisdictions. Subject to certain exemptions, the securities referred to in this Announcement may not be offered or sold in any Restricted Territory or for the account or benefit of any national resident or citizen of any Restricted Territory. The Placing Shares have not been and will not be registered under the United States Securities Act of 1933, as amended (the "Securities Act"), or with any securities regulatory authority of any state or other jurisdiction of the United States and may not be offered, sold, taken up, resold, transferred or delivered, directly or indirectly, in, into or within the United States except pursuant to registration under the Securities Act or an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and in compliance with any applicable securities laws of any state or other jurisdiction of the United States. The Placing Shares are being offered and sold (i) in the United States only to a limited number of "qualified institutional buyers" as defined in Rule 144A ("QIBs") pursuant to an exemption from the registration requirements of the Securities Act in a transaction not involving a public offering and in compliance with the securities laws of any state or other jurisdiction of the United States; and (ii) outside the United States in offshore transactions in reliance on and in accordance with Regulation S under the Securities Act ("Regulation S"). No public offering of the Placing Shares referred to in this Announcement is being made in the United States, United Kingdom, any Restricted Territory or elsewhere. No representation is being made as to the availability of any exemption under the Securities Act for the reoffer, resale, pledge or transfer of the Placing Shares.

No prospectus will be made available in connection with the matters contained in this Announcement and no such prospectus is required (in accordance with the Prospectus Directive) to be published. Persons needing advice should consult an independent financial advisor.

This Announcement has been issued by, and is the sole responsibility of, the Company. No representation or warranty, express or implied, is or will be made as to, or in relation to, and no responsibility or liability is or will be accepted by any of the Joint Bookrunners or by any of their respective affiliates or agents as to or in relation to, the accuracy or completeness of this Announcement or any other written or oral information made available to or publicly available to any interested party or its advisers, or any other statement made or purported to be made by or on behalf of the Joint Bookrunners or any of their respective affiliates in connection with the Company, the Placing Shares or the Placing and any responsibility therefore is expressly disclaimed. The Joint Bookrunners and each of their respective affiliates, accordingly disclaim all and any liability, whether arising in tort, contract or otherwise in respect of any statements or other information contained in this Announcement and no representation or warranty, express or implied is made by the Joint Bookrunners or any of their respective affiliates as to the accuracy, completeness or sufficiency of the information contained in this Announcement.

Each of Cenkos Securities plc and Macquarie Capital (Europe) Limited is authorised and regulated by the FCA in the United Kingdom and Barclays Bank PLC is authorised by the Prudential Regulation Authority (the "PRA") and regulated by the PRA and the FCA in the United Kingdom. N M Rothschild & Sons Limited ("Rothschild"), which is authorised and regulated in the United Kingdom by the FCA, is acting as Financial Adviser to the Company in relation to the Placing. Each of the Joint Bookrunners and Rothschild is acting solely for the Company and no one else in connection with the Placing and will not be responsible to anyone other than the Company for providing the protections afforded to its clients nor for providing advice in relation to the Placing and/or any other matter referred to in this Announcement. Apart from the responsibilities and liabilities, if any, which may be imposed on the Joint Bookrunners and Rothschild by the UK Financial Services and Markets Act 2000 or by the regulatory regime established under it, none of the Joint Bookrunners or Rothschild or any of their respective affiliates accepts any responsibility whatsoever for the contents of the information contained in this Announcement or for any other statement made or purported to be made by or on behalf of any of the Joint Bookrunners or Rothschild or any of their respective affiliates in connection with the Company, the Placing Shares or the Placing. Each of the Joint Bookrunners and Rothschild and their respective affiliates accordingly disclaim all and any liability, whether arising in tort, contract or otherwise (save as referred to above) in respect of any statements or other information contained in this Announcement and no representation or warranty, express or implied, is made by any of the Joint Bookrunners or Rothschild or any of their respective affiliates as to the accuracy, completeness or sufficiency of the information contained in this Announcement.

The offering of the Placing Shares in certain jurisdictions may be restricted by law. Neither this Announcement nor any part or copy of it may be taken or transmitted into the United States or distributed, directly or indirectly, in or into the United States, as that term is defined in Regulation S. Neither this Announcement nor any copy of it may be taken, transmitted, or distributed directly or indirectly into any Restricted Territory. Any failure to comply with these restrictions may constitute a violation of United States or other Restricted Territory securities laws. No action has been taken by the Company or the Joint Bookrunners that would permit an offering of such shares or possession or distribution of this Announcement or any other offering or publicity material relating to such shares in any jurisdiction where action for that purpose is required. Persons into whose possession this Announcement comes are required by the Company and the Joint Bookrunners to inform themselves about, and to observe, such restrictions.

The Placing Shares have not been approved or disapproved by the US Securities and Exchange Commission, any state securities commission or any other regulatory authority in the United States, nor have any of the foregoing authorities passed upon or endorsed the merits of the Placing or the accuracy or adequacy of this Announcement.  Any representation to the contrary is unlawful.  Persons (including, without limitation, nominees and trustees) who have a contractual or other legal obligation to forward a copy of the Appendix or this Announcement should seek appropriate advice before taking any action. 

The information in this Announcement may not be forwarded or distributed to any other person and may not be reproduced in any manner whatsoever. Any forwarding, distribution, reproduction, or disclosure of this information in whole or in part is unauthorised. Failure to comply with this directive may result in a violation of the Securities Act or the applicable laws of other jurisdictions.

This Announcement does not identify or suggest, or purport to identify or suggest, the risks (direct or indirect) that may be associated with an investment in the Placing Shares. Any investment decision to buy Placing Shares in the Placing must be made solely on the basis of publicly available information, which has not been independently verified by the Joint Bookrunners.

Any indication in this Announcement of the price at which the existing ordinary shares in the Company have been bought or sold in the past cannot be relied upon as a guide to future performance. Persons needing advice should consult an independent financial adviser.

No statement in this announcement is intended to be a profit forecast and no statement in this announcement should be interpreted to mean that earnings per share of the Company for the current or future financial years would necessarily match or exceed the historical published earnings per share of the Company.

This Announcement includes forward-looking statements, which include all statements other than statements of historic facts, including, without limitation, those regarding the Company's and/or its subsidiaries' (the "Group") financial position, business strategy, plans and objectives of management for future operations, or any statements preceded by, followed by or that include the words "targets", "believes", "expects", "aims", "intends", "will", "may", "anticipates", "would", "could" or similar expressions or negatives thereof. Such forward-looking statements involve known and unknown risks, uncertainties and other important factors beyond the Group's control that could cause the actual results, performance or achievements of the Group to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements. Such forward-looking statements are based on numerous assumptions regarding the Group's present and future business strategies and the environment in which the Group will operate in the future. These forward-looking statements speak only as at the date of this Announcement. The Company, its directors and its or their advisors expressly disclaim any obligation or undertaking to disseminate any updates or revisions to any forward-looking statements contained herein to reflect any change in the Group's expectations with regard thereto or any change in events, conditions or circumstances on which any such statements are based unless required to do so by applicable law or the AIM Rules for Companies, as published and amended from time to time by the London Stock Exchange.

The Placing Shares to be issued pursuant to the Placing will not be admitted to trading on any stock exchange other than the London Stock Exchange.

Neither the content of the Company's website nor any website accessible by hyperlinks on the Company's website is incorporated in, or forms part of, this Announcement.

APPENDIX

TERMS AND CONDITIONS

IMPORTANT INFORMATION ON THE PLACING FOR INVITED PLACEES ONLY

MEMBERS OF THE PUBLIC ARE NOT ELIGIBLE TO TAKE PART IN THE PLACING (AS DEFINED BELOW). THIS ANNOUNCEMENT AND THE TERMS AND CONDITIONS SET OUT IN THIS APPENDIX (TOGETHER, THE "ANNOUNCEMENT") ARE DIRECTED ONLY AT PERSONS WHOSE ORDINARY ACTIVITIES INVOLVE THEM IN ACQUIRING, HOLDING, MANAGING AND DISPOSING OF INVESTMENTS (AS PRINCIPAL OR AGENT) FOR THE PURPOSES OF THEIR BUSINESS AND WHO HAVE PROFESSIONAL EXPERIENCE IN MATTERS RELATING TO INVESTMENTS AND ARE: (A) IF IN A MEMBER STATE OF THE EUROPEAN ECONOMIC AREA (THE "EEA"), PERSONS WHO ARE QUALIFIED INVESTORS ("QUALIFIED INVESTORS") AS DEFINED IN SECTION 86(7) OF THE FINANCIAL SERVICES AND MARKETS ACT 2000, AS AMENDED (THE "FSMA"), BEING PERSONS FALLING WITHIN THE MEANING OF ARTICLE 2.1(e) OF DIRECTIVE 2003/71/EC, AS AMENDED, INCLUDING BY THE 2010 PD AMENDING DIRECTIVE (DIRECTIVE 2010/73/EU), TO THE EXTENT IMPLEMENTED IN THE RELEVANT MEMBER STATE (THE "PROSPECTUS DIRECTIVE"); (B) IF IN THE UNITED KINGDOM, PERSONS WHO FALL WITHIN ARTICLE 19(5) OF THE FINANCIAL SERVICES AND MARKETS ACT 2000 (FINANCIAL PROMOTION) ORDER 2005, AS AMENDED (THE "ORDER"), OR ARE PERSONS WHO FALL WITHIN ARTICLE 49(2)(a) TO (d) ("HIGH NET WORTH COMPANIES, UNINCORPORATED ASSOCIATIONS, ETC") OF THE ORDER; AND (C) PERSONS WHO HAVE BEEN INVITED TO PARTICIPATE IN THE PLACING BY THE BANKS (AS DEFINED BELOW) (ALL SUCH PERSONS TOGETHER BEING REFERRED TO AS "RELEVANT PERSONS").

THIS ANNOUNCEMENT MUST NOT BE ACTED ON OR RELIED UPON BY PERSONS WHO ARE NOT RELEVANT PERSONS. ANY INVESTMENT OR INVESTMENT ACTIVITY TO WHICH THIS ANNOUNCEMENT RELATES IS AVAILABLE ONLY TO RELEVANT PERSONS AND WILL BE ENGAGED IN ONLY WITH RELEVANT PERSONS.

DISTRIBUTION OF THIS ANNOUNCEMENT IN CERTAIN JURISDICTIONS MAY BE RESTRICTED OR PROHIBITED BY LAW OR REGULATION. PERSONS DISTRIBUTING THIS ANNOUNCEMENT MUST SATISFY THEMSELVES THAT IT IS LAWFUL TO DO SO.

THE SECURITIES REFERRED TO IN THIS ANNOUNCEMENT HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED, (THE "SECURITIES ACT") OR UNDER THE SECURITIES LAWS OR WITH ANY SECURITIES REGULATORY AUTHORITY OF ANY STATE OR OTHER JURISDICTION OF THE UNITED STATES, AND MAY NOT BE OFFERED, SOLD, TAKEN UP, RESOLD TRANSFERRED OR DELIVERED DIRECTLY OR INDIRECTLY IN OR INTO THE UNITED STATES ABSENT REGISTRATION UNDER THE SECURITIES ACT EXCEPT PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN COMPLIANCE WITH THE APPLICABLE SECURITIES LAWS OF ANY STATE OR ANY OTHER JURISDICTION OF THE UNITED STATES. THE SECURITIES REFERRED TO IN THIS ANNOUNCEMENT ARE BEING OFFERED AND SOLD IN THE UNITED STATES ONLY TO A LIMITED NUMBER OF "QUALIFIED INSTITUTIONAL BUYERS" AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT ("QIBS") PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN COMPLIANCE WITH THE SECURITIES LAWS OF ANY STATE OR ANY OTHER JURISDICTION OF THE UNITED STATES. THE SECURITIES REFERRED TO IN THIS ANNOUNCEMENT ARE BEING OFFERED AND SOLD OUTSIDE THE UNITED STATES IN OFFSHORE TRANSACTIONS IN ACCORDANCE WITH REGULATION S UNDER THE SECURITIES ACT. NO PUBLIC OFFERING OF THE SECURITIES REFERRED TO IN THIS ANNOUNCEMENT IS BEING MADE IN THE UNITED STATES, THE UNITED KINGDOM OR ELSEWHERE.

None of Smart Metering Systems plc (the "Company"), Cenkos Securities plc ("Cenkos"), Barclays Bank PLC ("Barclays") or Macquarie Capital (Europe) Limited ("Macquarie" and, together with Cenkos and Barclays, the "Banks" and each a "Bank") make any representation to persons who are invited to and who choose to participate in the placing ("Placees") of new ordinary shares in the capital of the Company (the "Placing") of nominal value of one penny (the "Placing Shares") regarding an investment in the securities referred to in this Announcement under the laws applicable to such Placees. Each Placee should consult its own advisers as to the legal, tax, business, financial and related aspects of an investment in the Placing Shares.

By participating in the Placing, Placees will be deemed to have read and understood this Announcement in its entirety, and to be participating, making an offer and acquiring Placing Shares on the terms and conditions contained herein and to be providing the representations, warranties, indemnities, acknowledgments and undertakings contained herein.

Each Placee should consult with its own advisers as to legal, regulatory, tax, business and related aspects of a purchase of Placing Shares.

Details of the Placing Agreement and of the Placing Shares

The Banks and the Company have today entered into a placing agreement (the "Placing Agreement") under which, on the terms and subject to the conditions set out therein, the Banks have agreed to use their reasonable endeavours, as agents of the Company, to procure Placees for the Placing Shares. In addition, Barclays and Macquarie have each severally (and not jointly or jointly and severally) agreed, subject to agreement with the Company as to the number and price of the Placing Shares to be placed with the Placees, to underwrite in equal proportions the settlement risk in the event that any Placees fail to take up their allocation of Placing Shares.

The Placing Shares have been duly authorised and will, when issued, be credited as fully paid and will rank pari passu in all respects with the existing ordinary shares in the Company, including the right to receive all dividends and other distributions declared, made or paid in respect of the ordinary shares of the Company (the "Ordinary Shares") after the date of admission of the Placing Shares.

Application for listing and admission to trading

Application will be made to the London Stock Exchange (the "London Stock Exchange") for admission of the Placing Shares to trading on AIM ("Admission"). It is expected that Admission will become effective on or around 8.00 a.m. on 22 December 2017 and that dealings in the Placing Shares will commence at that time.

 

Bookbuild

The Banks will commence, with immediate, effect the bookbuilding process in respect of the Placing (the "Bookbuild") to determine demand for participation in the Placing by Placees. This Appendix gives details of the terms and conditions of, and the mechanics of participation in, the Placing. No commissions will be paid to Placees or by Placees in respect of any Placing Shares.

The Banks and the Company shall be entitled to effect the Placing by such alternative method to the Bookbuild as they may, in their absolute discretion, determine.

Participation in, and principal terms of, the Placing

1.            The Banks are acting as joint global co-ordinators, joint bookrunners and agents of the Company in connection with the Placing.

2.            Participation in the Placing will only be available to persons who may lawfully be, and are, invited to participate by the Banks. The Banks and their respective affiliates are entitled to enter bids in the Bookbuild as principal.

3.            The Bookbuild will establish a single price payable by all Placees whose bids are successful (the "Placing Price"). The Placing Price and the number of Placing Shares to be issued will be agreed between the Banks and the Company following completion of the Bookbuild. The Placing Price and the number of Placing Shares to be issued will be announced on a Regulatory Information Service ("RIS") following the completion of the Bookbuild (the "Placing Results").

4.           To bid in the Bookbuild, Placees should communicate their bid by telephone to their usual sales contact at Cenkos, Barclays or Macquarie. Each bid should state the number of Placing Shares which the prospective Placee wishes to subscribe for at either the Placing Price which is ultimately established by the Company and the Banks or at prices up to a price limit specified in its bid. The Banks, with the agreement of the Company, reserve the right not to accept a bid from a potential Placee. Bids may also be scaled down by the Banks on the basis referred to in paragraph 8 below.

5.            A bid in the Bookbuild will be made on the terms and subject to the conditions in this Announcement and will be legally binding on the Placee on behalf of which it is made and, except with the relevant Bank's consent, will not be capable of variation or revocation after the time at which it is submitted. Each Placee will have an immediate, separate, irrevocable and binding obligation owed to the relevant Bank, as agent for the Company, to pay the relevant Bank (or as it may direct) in cleared funds an amount equal to the product of the Placing Price and the number of Placing Shares such Placee has agreed to subscribe for and the Company has agreed to allot. The foregoing obligation is given for the benefit of each of the Banks and is irrevocable. Each Placee's obligations will be owed to the relevant Bank and each of the other Banks.

6.            The Bookbuild is expected to close no later than 5.00 p.m. (London time) on 24 November 2017 but may be closed earlier or later at the discretion of the Banks with the agreement of the Company. The Banks may, in agreement with the Company, accept bids that are received after the Bookbuild has closed.

7.            Each prospective Placee's allocation will be agreed between the Banks and the Company and will be confirmed orally by Cenkos, Barclays or Macquarie (as agents for the Company) following the close of the Bookbuild and a contract note will be despatched thereafter. This oral confirmation to such Placee will constitute an irrevocable legally binding commitment upon that person (who will at that point become a Placee) in favour of the Banks and the Company to subscribe for the number of Placing Shares allocated to it at the Placing Price on the terms and conditions set out in this Appendix and in accordance with the Company's articles of association. All obligations under the Bookbuild and Placing will be subject to fulfilment of the conditions referred to below under "Conditions of the Placing" and to the Placing not being terminated on the basis referred to below under "Right to terminate under the Placing Agreement". By participating in the Bookbuild, each Placee will agree that its rights and obligations in respect of the Placing will terminate only in the circumstances described below and will not be capable of rescission or termination by the Placee.

8.            The Banks may choose to accept bids, either in whole or in part, on the basis of allocations determined in agreement with the Company and may scale down any bids for this purpose on such basis as they may determine in consultation with the Company. The Banks may also, notwithstanding paragraphs 4 and 5 above and subject to the prior consent of the Company (i) allocate Placing Shares after the time of any initial allocation to any person submitting a bid after that time; and (ii) allocate Placing Shares after the Bookbuild has closed to any person submitting a bid after that time. The Company reserves the right (upon agreement with the Banks) to reduce or seek to increase the amount to be raised pursuant to the Placing, in its absolute discretion.

9.            Irrespective of the time at which a Placee's allocation pursuant to the Placing is confirmed, settlement for all Placing Shares to be subscribed for pursuant to the Placing will be required to be made at the same time, on the basis explained below under "Registration and Settlement".

10.          To the fullest extent permissible by law, none of the Banks or any of their respective affiliates, agents, directors, officers, consultants or employees shall have any liability to Placees (or to any other person whether acting on behalf of a Placee or otherwise). In particular, none of the Banks or the Company or any of their respective affiliates, agents, directors, officers, consultants or employees shall have any liability (including to the fullest extent permissible by law, any fiduciary duties) in respect of the Bank's conduct of the Bookbuild or of such alternative method of effecting the Placing as the Banks and the Company may agree.

Conditions of the Placing

The Placing is conditional upon the Placing Agreement becoming unconditional and not having been terminated in accordance with its terms. The obligations of the Banks under the Placing Agreement in respect of the Placing Shares are conditional on, among other things:

(a)          the approval of the resolutions to give the Company's directors power to allot the Placing Shares and to dis-apply pre-emption rights in connection with the Placing at the general meeting of the Company to be held on 20 December 2017 (or any adjournment thereof);

(b)          the Company allotting, subject to Admission, the Placing Shares in accordance with the Placing Agreement;

(c)          none of the representations and warranties set out in the Placing Agreement being untrue, inaccurate or misleading on and as at each of the dates stated in the Placing Agreement, in each case by reference to the facts and circumstances then subsisting; and

(d)          Admission having occurred by 8.00 a.m. (London time) on 22 December 2017 (or such later date as the Banks and the Company may agree, being not later than 8.00 a.m. on 4 January 2018).

If: (i) any of the conditions contained in the Placing Agreement are not fulfilled or, where permitted, waived by the Banks by the time or date specified (or such later time and/or date as the Company and the Banks may agree); or (ii) any of such conditions become incapable of being satisfied; or (iii) the Placing Agreement is terminated in the circumstances specified below under "Right to terminate under the Placing Agreement", the Placing will not proceed and the Placees' rights and obligations hereunder in relation to the Placing Shares shall cease and terminate at such time and each Placee agrees that no claim can be made by the Placee in respect thereof. Any such waiver by the Banks will not affect Placees' commitments as set out in this Announcement.

None of the Banks, the Company, nor any holding company of the Company, any subsidiary of the Company, any subsidiary of any such holding company, any branch or associated undertaking an any such company nor any of their respective affiliates, agents, directors, officers, consultants or employees shall have any liability, whether in contract, tort or otherwise, to any Placee (or to any other person whether acting on behalf of a Placee or otherwise) in respect of any decision they may make as to whether or not to waive or to extend the time and/or the date for the satisfaction of any condition to the Placing nor for any decision they may make as to the satisfaction of any condition or in respect of the Placing generally, and by participating in the Placing each Placee agrees that any such decision is within the absolute discretion of the Banks.

Lock-up

The Company has agreed with the Banks that it shall not, without the prior written consent of the Banks, between the date of the Placing Agreement and 90 days after (but including) Admission, (i) directly or indirectly, issue, allot, offer, pledge, sell, contract to sell, lend, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, deposit into any depositary receipt facility or otherwise transfer or dispose of any Ordinary Shares or any securities convertible into or exercisable or exchangeable for Ordinary Shares or file any registration statement under the Securities Act with respect to any of the foregoing (or publicly announce the same); or (ii) enter into any swap or any other agreement or any transaction that transfers, in whole or in part, directly or indirectly, the economic consequence of ownership of the Ordinary Shares, whether any such swap or transaction described in (i) or (ii) above is to be settled by delivery of Ordinary Shares or such other securities, in cash or otherwise. The foregoing shall not apply to (a) the Placing Shares issued under the Placing; (b) any Ordinary Shares issued by the Company upon the exercise of an option or warrant or the conversion of a security outstanding on the date hereof and which have been previously announced or disclosed by the Company; or (c) any Ordinary Shares issued or options to subscribe for Ordinary Shares granted pursuant to existing or proposed employee benefit plans of the Company (as they may be amended) up to, in the case of new options granted, a maximum amount of options in respect of no more than 800,000 Ordinary Shares in aggregate.   

Right to terminate under the Placing Agreement

The Banks are entitled, at any time prior to Admission, to terminate the Placing Agreement in accordance with its terms by giving notice (in writing or orally) in certain circumstances, including a breach of representations and warranties given to the Banks in the Placing Agreement, the occurrence of a material adverse change in the Company's business or in its financial or trading position, or the occurrence of a force majeure event.

Upon such notice being given, the parties to the Placing Agreement shall be released and discharged (except for any liability arising before or in relation to such termination) from their respective obligations under or pursuant to the Placing Agreement, subject to certain exceptions.

By participating in the Placing, each Placee agrees that the exercise or non-exercise by the Banks of any right of termination or other discretion under the Placing Agreement shall be within the absolute discretion of the Banks and that the Banks do not need to make any reference to any Placees and that the Banks shall have no liability to any Placees whatsoever in connection with any such exercise or failure so to exercise.

No prospectus

No offering document or prospectus has been or will be submitted to be approved by the FCA or London Stock Exchange in relation to the Placing and Placees' commitments will be made solely on the basis of the information contained in this Announcement (including this Appendix) which has been released by the Company today and any information publicly announced to a RIS by or on behalf of the Company prior to or on the date of this Announcement and subject to the further terms set forth in the contract note to be provided to individual prospective Placees.

Each Placee, by accepting a participation in the Placing, agrees that the content of this Announcement (including this Appendix) is exclusively the responsibility of the Company and confirms that it has neither received nor relied on any other information, representation, warranty, or statement made by or on behalf of the Banks or the Company or any other person and none of the Banks or the Company nor any of their respective affiliates will be liable for any Placee's decision to participate in the Placing based on any other information, representation, warranty or statement which the Placees may have obtained or received (regardless of whether or not such information, representation, warranty or statement was given or made by or on behalf of such persons). Each Placee acknowledges and agrees that it has relied on its own investigation of the business, financial or other position of the Company in accepting a participation in the Placing. Nothing in this paragraph shall exclude or limit the liability of any person for fraudulent misrepresentation by that person.

Registration and settlement

Settlement of transactions in the Placing Shares following Admission will take place within the system administered by Euroclear UK & Ireland Limited ("CREST"), subject to certain exceptions. The Banks and the Company reserve the right to require settlement for and delivery of the Placing Shares (or a portion thereof) to Placees in certificated form if delivery or settlement is not possible or practicable within the CREST system or would not be consistent with the regulatory requirements in the Placee's jurisdiction.

Following the close of the Bookbuild, each Placee allocated Placing Shares in the Placing will be sent a confirmation from the relevant Bank stating the number of Placing Shares to be allocated to it at the Placing Price, the aggregate amount owed by such Placee to the relevant Bank and settlement instructions. Each Placee agrees that it will do all things necessary to ensure that delivery and payment is completed in accordance with the standing CREST or certificated settlement instructions that it has in place with Cenkos, Barclays or Macquarie.

The Company will deliver the Placing Shares to a CREST account operated by Cenkos (acting as settlement bank) as the Company's agent and each Bank will enter its delivery (DEL) instruction into the CREST system. The input to CREST by a Placee of a matching or acceptance instruction will then allow delivery of the relevant Placing Shares to that Placee by the relevant Bank against payment.

It is expected that settlement will be on or around 8.00 a.m. on 22 December 2017 on a delivery versus payment basis in accordance with the instructions set out in the trade confirmation unless otherwise notified by the Banks.

Interest is chargeable daily on payments not received from Placees on the due date in accordance with the arrangements set out above at the rate of two percentage points above LIBOR as determined by the Banks.

Each Placee is deemed to agree that, if it does not comply with these obligations, the Banks may sell any or all of the Placing Shares allocated to that Placee on such Placee's behalf and retain from the proceeds, for the Banks' account and benefit, an amount equal to the aggregate amount owed by the Placee plus any interest due. The relevant Placee will, however, remain liable for any shortfall below the aggregate amount owed by it and may be required to bear any stamp duty or stamp duty reserve tax (together with any interest or penalties) which may arise upon the sale of such Placing Shares on such Placee's behalf.

If Placing Shares are to be delivered to a custodian or settlement agent, Placees should ensure that the contract note is copied and delivered immediately to the relevant person within that organisation. Insofar as Placing Shares are registered in a Placee's name or that of its nominee or in the name of any person for whom a Placee is contracting as agent or that of a nominee for such person, such Placing Shares should, subject as provided below, be so registered free from any liability to UK stamp duty or stamp duty reserve tax. Placees shall not be entitled to receive any fee or commission in connection with the Placing. If there are any circumstances in which any other stamp duty or stamp duty reserve tax (together with interest and penalties) is payable in respect of the issue of the Placing Shares, none of the Banks or the Company shall be responsible for the payment thereof.

 

Representations and warranties

By participating in the Placing each Placee (and any person acting on such Placee's behalf) irrevocably acknowledges, confirms, undertakes, represents, warrants and agrees (as the case may be) with each of the Company and the Banks (in their capacity as global co-ordinators, bookrunners and placing agents of the Company, in each case as a fundamental term of their application for Placing Shares), the following:

(a)          it has read and understood this Announcement, including this Appendix, in its entirety and that its subscription of Placing Shares is subject to and based upon all the terms, conditions, representations, warranties, acknowledgements, agreements and undertakings and other information contained herein and undertakes not to redistribute or duplicate this Announcement;

(b)          that no offering document or prospectus has been or will be prepared in connection with the Placing and it has not received and will not receive a prospectus or other offering document in connection with the Bookbuild, the Placing or the Placing Shares;

(c)          that the Ordinary Shares are admitted to trading on AIM, and that the Company is therefore required to publish certain business and financial information in accordance with the AIM Rules for Companies and that it is able to obtain or access such information, or comparable information concerning any other publicly traded company, in each case without undue difficulty;

(d)          that none of the Banks or the Company nor any of their respective affiliates, agents, directors, officers, consultants or employees nor any person acting on behalf of any of them has provided, and none of them will provide, it with any material or information regarding the Placing Shares or the Company or any other person other than this Announcement, including this Appendix, nor has it requested any of the Banks, the Company, nor any of their respective affiliates or any person acting on behalf of any of them to provide it with any such material or information;

(e)          unless otherwise specifically agreed with the Banks, that it is not, and at the time the Placing Shares are acquired, neither it nor the beneficial owner of the Placing Shares will be a resident of a Restricted Territory and further acknowledges that the Placing Shares have not been and will not be registered under the securities legislation of the United States or any other Restricted Territory and, subject to certain exceptions, may not be offered, sold, transferred, delivered or distributed, directly or indirectly, in or into those jurisdictions;

(f)           that it is not, unless otherwise specifically agreed with the Banks, within a Restricted Territory or any other jurisdiction in which it is unlawful to make or accept an offer to acquire the Placing Shares;  

(g)          that the content of this Announcement is exclusively the responsibility of the Company and that none of the Banks or any of their respective affiliates, agents, directors, officers, consultants or employees nor any person acting on their behalf has or shall have any liability, in contract, tort or otherwise for any information, representation or statement contained in this Announcement, any misstatements in or omission from any publicly available information relating to the Company, or any information previously or subsequently published by or on behalf of the Company, including, without limitation, any information required to be published by the Company pursuant to applicable laws (the "Exchange Information") and will not be liable for any Placee's decision to participate in the Placing based on any information, representation or statement contained in this Announcement or any information published prior to or on the date of this Announcement by or on behalf of the Company or otherwise. Each Placee further represents, warrants and agrees that the only information on which it is entitled to rely and on which such Placee has relied in committing itself to subscribe for the Placing Shares is contained in this Announcement and any information previously published by the Company by notification to a RIS, such information being all that it deems necessary to make an investment decision in respect of the Placing Shares and that it has neither received nor relied on any other information given or representations, warranties or statements made by the Banks or the Company and none of the Banks or the Company will be liable for any Placee's decision to accept an invitation to participate in the Placing based on any other information, representation, warranty or statement. Each Placee further acknowledges and agrees that it has relied on its own investigation of the business, financial or other position of the Company in deciding to participate in the Placing. None of the Banks, the Company nor any of their respective affiliates has made any representations to it, express or implied, with respect to the Company, the Placing and the Placing Shares or the accuracy, completeness or adequacy of the Exchange Information, and each of them expressly disclaims any liability in respect thereof. Nothing in this paragraph or otherwise in this Announcement excludes the liability of any person for fraudulent misrepresentation made by that person;

(h)          that the issue to it, or the person specified by it for registration as holder, of Placing Shares will not give rise to a liability under any of sections 67, 70, 93 or 96 of the Finance Act 1986 (depositary receipts and clearance services) and that the Placing Shares are not being acquired in connection with arrangements to issue depositary receipts or to issue or transfer Placing Shares into a clearance service;

(i)           that it has complied with its obligations under the Criminal Justice Act 1993, the Market Abuse Regulation (Regulation (EU) No. 596/2014), and in connection with money laundering and terrorist financing under the Proceeds of Crime Act 2002 (as amended), the Terrorism Act 2000, the Terrorism Act 2006, the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 and any related or similar rules, regulations or guidelines, issued, administered or enforced by any government agency having jurisdiction in respect thereof (the "Regulations") and Section 6.3 of the Systems and Controls (SYSC) section of the FCA Handbook  and, if making payment on behalf of a third party, that satisfactory evidence has been obtained and recorded by it to verify the identity of the third party as required by the Regulations;

(j)           that it is acting as principal only in respect of the Placing or, if it is acting for any other person: (i) it is duly authorised to do so and has full power to make the acknowledgments, representations and agreements herein on behalf of each such person; (ii) it exercises sole investment discretion as to each such person's account; (iii) it is and will remain liable to the Banks and the Company for the performance of all its obligations as a Placee in respect of the Placing (regardless of the fact that it is acting for another person); (iv) it is both an "authorised person" for the purposes of the Financial Services and Markets Act 2000 ("FSMA") and a Qualified Investor as defined in the Prospectus Directive acting as agent for such person, and (iv) such person is either (1) a "qualified investor" as referred to at section 86(7) of FSMA or (2) a "client" (as defined in section 86(2) of FSMA) of its that has engaged it to act as such client's agent on terms which enable it to make decisions concerning the Placing or any other offers of transferable securities on such client's behalf without reference to such client;

(k)          that it has not offered or sold and, prior to the expiry of a period of six months from Admission, will not offer or sell any Placing Shares to persons in the United Kingdom, except to Qualified Investors or otherwise in circumstances which have not resulted and which will not result in an offer to the public in the United Kingdom within the meaning of section 85(1) of FSMA;

(l)           if a financial intermediary, as that term is used in Article 3(2) of the Prospectus Directive, that the Placing Shares subscribed for by it in the Placing will not be subscribed for on a non-discretionary basis on behalf of, nor will they be acquired with a view to their offer or resale to, persons in a member state of the EEA other than qualified investors, or in circumstances in which the prior consent of the Banks and the Company has been given to the proposed offer or resale;

(m)        that it has not offered or sold and will not offer or sell any Placing Shares to the public in any member state of the EEA except in circumstances falling within Article 3(2) of the Prospectus Directive which do not result in any requirement for the publication of a prospectus pursuant to Article 3 of that Directive;

(n)          that it has only communicated or caused to be communicated and will only communicate or cause to be communicated any invitation or inducement to engage in investment activity (within the meaning of section 21 of FSMA) relating to the Placing Shares in circumstances in which section 21(1) of FSMA does not require approval of the communication by an authorised person;

(o)          that it has complied and will comply with all applicable provisions of FSMA with respect to anything done by it in relation to the Placing Shares in, from or otherwise involving, the United Kingdom;

(p)          if in a member state of the EEA, unless otherwise specifically agreed with the Banks and the Company in writing, that it is a "qualified investor" within the meaning of Article 2(1)(e) of the Prospectus Directive;

(q)          if in the United Kingdom, that it is a person (i) having professional experience in matters relating to investments who falls within the definition of "investment professionals" in Article 19(5) of the Order or (ii) who falls within Article 49(2)(a) to (d) ("High Net Worth Companies, Unincorporated Associations, etc") of the Order, or (iii) to whom this Announcement may otherwise lawfully be communicated;

(r)           that no action has been or will be taken by the Banks or the Company or any person acting on behalf of the Banks or the Company that would, or is intended to, permit a public offer of the Placing Shares in any country or jurisdiction where any such action for that purpose is required;

(s)          that it (and any person acting on its behalf) has capacity and authority and is otherwise entitled to acquire the Placing Shares under the laws of all relevant jurisdictions which apply to it and that it has fully observed such laws and obtained all such governmental and other guarantees, permits, authorisations, approvals and consents which may be required thereunder and complied with all necessary formalities and that it has not taken any action or omitted to take any action which will or may result in the Banks, the Company or any of their respective directors, officers, agents, employees or advisers acting in breach of the legal or regulatory requirements of any jurisdiction in connection with the Placing and that the subscription for and purchase of the Placing Shares by it or any person acting on its behalf will be in compliance with applicable laws and regulations in the jurisdiction of its residence, the residence of the Company, or otherwise;

(t)           that it has all necessary capacity and has obtained all necessary consents and authorities to enable it to commit to its participation in the Placing and to perform its obligations in relation thereto (including, without limitation, in the case of any person on whose behalf it is acting, all necessary consents and authorities to agree to the terms set out or referred to in this Announcement) and will honour such obligations;

(u)          that it (and any person acting on its behalf) will make payment for the Placing Shares allocated to it in accordance with this Announcement on the due time and date set out herein, failing which the relevant Placing Shares may be placed with other subscribers or sold as the Banks in consultation with the Company may in their absolute discretion determine and without liability to such Placee;

(v)          that its allocation (if any) of Placing Shares will represent a maximum number of Placing Shares which it will be entitled, and required, to subscribe for, and that the Banks or the Company may call upon it to subscribe for a lower number of Placing Shares (if any), but in no event in aggregate more than the aforementioned maximum;

(w)         that the person whom it specifies for registration as holder of the Placing Shares will be (i) itself or (ii) its nominee, as the case may be. None of the Banks or the Company will be responsible for any liability to stamp duty or stamp duty reserve tax or other similar duties or taxes resulting from a failure to observe this requirement. Each Placee and any person acting on behalf of such Placee agrees to indemnify and hold each of the Banks and the Company harmless in respect of the same (together with any and all costs, losses, claims, liabilities, penalties, interest, fines and expenses (including legal fees and expenses)) on an after-tax basis on the basis that the Placing Shares will be allotted to the CREST stock account of Cenkos (acting as settlement bank) who will hold them as nominee on behalf of such Placee until settlement in accordance with its standing settlement instructions;

(x)          that none of the Banks or the Company, nor any of their respective affiliates, nor any person acting on their behalf, is making any recommendations to it or, advising it regarding the suitability of any transactions it may enter into in connection with the Placing and that participation in the Placing is on the basis that it is not and will not be a client of the Banks and that the Banks have no duties or responsibilities to it for providing the protections afforded to their clients or customers or for providing advice in relation to the Placing nor in respect of any representations, warranties, undertakings or indemnities contained in the Placing Agreement nor for the exercise or performance of any of its rights and obligations thereunder including any rights to waive or vary any conditions or exercise any termination right;

(y)          that in making any decision to subscribe for the Placing Shares, it has knowledge and experience in financial, business and international investment matters as is required to evaluate the merits and risks of subscribing for or purchasing the Placing Shares. It further confirms that it is experienced in investing in securities of this nature in this sector and is aware that it may be required to bear, and is able to bear, the economic risk of participating in, and is able to sustain a complete loss in connection with, the Placing. It further confirms that it relied on its own examination and due diligence of the Company and its associates taken as a whole, and the terms of the Placing, including the merits and risks involved, and not upon any view expressed or information provided by or on behalf of the Banks or the Company or their respective affiliates. It further confirms that it has had sufficient time to consider and conduct its own investigation with respect to the offer and purchase of the Placing Shares, including the legal, regulatory, tax, business, currency and other economic and financial considerations relevant to such investment and it will not look to the Company, the Banks, any of their respective affiliates or any person acting on their behalf for all or part of any such loss or losses it or they may suffer;

(z)          that it may not rely on any investigation that either the Banks or any person acting on their behalf may or may not have conducted with respect to the Company and its affiliates or the Placing and the Banks have not made any representation or warranty to it, express or implied, with respect to the merits of the Placing, the subscription for or purchase of the Placing Shares, or as to the condition, financial or otherwise, of the Company and its affiliates, or as to any other matter relating thereto, and nothing herein shall be construed as a recommendation to it to subscribe for the Placing Shares. It acknowledges, understands and agrees that no information has been prepared or verified by, or is the responsibility of, the Banks for the purposes of this Placing;

(aa)        that in connection with the Placing, the Banks and any of their respective affiliates acting as an investor for its own account may take up Placing Shares in the Company and in that capacity may retain, purchase or sell for its own account such Placing Shares in the Company and any securities of the Company or related investments and may offer or sell such securities or other investments otherwise than in connection with the Placing. The Banks do not intend to disclose the extent of any such investment or transactions otherwise than in accordance with any legal or regulatory obligation to do so;

(bb)       that these terms and conditions and any agreements entered into by it pursuant to these terms and conditions, and any non-contractual obligations arising out of or in connection with such agreements, shall be governed by and construed in accordance with the laws of England and Wales and it submits (on behalf of itself and on behalf of any person on whose behalf it is acting) to the exclusive jurisdiction of the English courts as regards any claim, dispute or matter arising out of any such contract, except that enforcement proceedings in respect of the obligation to make payment for the Placing Shares (together with any interest chargeable thereon) may be taken by the Banks or the Company in any jurisdiction in which the relevant Placee is incorporated or in which any of its securities have a quotation on a recognised stock exchange;

(cc)        that the Banks, the Company and their respective affiliates and others will rely upon the truth and accuracy of the representations, warranties and acknowledgements set forth herein and which are given to each of the Banks on its own behalf and to the Company on its own behalf and are irrevocable and it irrevocably authorises the Banks and the Company to produce this Announcement, pursuant to, in connection with, or as may be required by any applicable law or regulation, administrative or legal proceeding or official inquiry with respect to the matters set forth herein;

(dd)       that the exercise or non-exercise by the Banks of any right of termination or other discretion under the Placing Agreement shall be within the absolute discretion of the Banks and that the Banks do not need to make any reference to Placees and that the Banks shall have no liability to Placees whatsoever in connection with any such exercise or failure so to exercise;

(ee)       that it will indemnify on an after tax basis and hold the Banks, the Company and their respective affiliates harmless from any and all costs, claims, liabilities and expenses (including legal fees and expenses) arising out of or in connection with any breach of the representations, warranties, acknowledgements, agreements, obligations and undertakings in this Appendix and further agrees that the provisions of this Appendix shall survive after completion of the Placing.  It further agrees that this indemnity is given for the benefit of each of the Banks, the Company and their respective affiliates and may be enforced by any one of them;

(ff)         that its commitment to subscribe for Placing Shares on the terms set out in this Appendix and in the contract note will continue notwithstanding any amendment that may in future be made to the terms of the Placing and that Placees will have no right to be consulted or require that their consent be obtained with respect to the Placing; and

(gg)        that time is of the essence as regards its obligations under this Appendix.

Additional representations and warranties relating to the United States

In addition to the foregoing, by participating in the Placing, each Placee (and any person acting on such Placee's behalf) irrevocably acknowledges, confirms, undertakes, represents, warrants and agrees (as the case may be) with the Company and the Banks (in their capacity as global co-ordinators, bookrunners and placing agents of the Company, in each case as a fundamental term of their application for Placing Shares), the following:

If outside the United States

(a)          it is not a person located in the United States and you will acquire the Placing Shares in an "offshore transaction", as defined in Regulation S, conducted in accordance with Regulation S and the Placing Shares were not offered to it by means of "directed selling efforts", as defined in Regulation S; and

(b)          it is not acting on a non-discretionary basis for the account or benefit of a person located within the United States at the time the undertaking to subscribe for Placing Shares was given and it is not acquiring the Placing Shares with a view to the offer, sale, resale, transfer, delivery or distribution, directly or indirectly, of any Placing Shares into the United States.

If located in the United States

(a)          it is a QIB within the meaning of Rule 144A ("Rule 144A") under the Securities Act. Further, if it is acquiring the Placing Shares as a fiduciary or agent for one or more investor accounts: (i) each such account is for the benefit of a QIB; (ii) it has investment discretion with respect to each account; and (iii) it has full power and authority to make the representations, warranties, undertakings, agreements and acknowledgments herein on behalf of each such account;

(b)          any Placing Shares it acquires will be for its own account (or for the account of a QIB as to which it exercises sole investment discretion and has authority to make the statements contained in this Appendix) for investment purposes, and not with a view to resale or distribution within the meaning of the US securities laws, subject to the understanding that the disposition of its property shall at all times be and remain within its control;

(c)          the Placing Shares are being offered in a transaction not involving any public offering in the United States for the purposes of the Securities Act and that the Placing Shares are not being and will not be registered under the Securities Act or under any securities laws of any state or other jurisdiction of the United States and may not be offered, sold, resold, taken up, exercised, renounced, transferred or delivered, directly or indirectly, within the United States except pursuant to an applicable exemption from the registration requirements of the Securities Act and in compliance with any applicable securities laws of any state or other jurisdiction of the United States;

(d)          it is an institution which (i) has such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risks of its investment in the Placing Shares; (ii) it, and any accounts for which it is acting, is able to bear the economic risk, and sustain a complete loss, of such investment in the Placing Shares; and (iii) it is aware and understands that no US federal or state or non-US agency has made any finding or determination as to the fairness for investment or any recommendation or endorsement of any such investment;

(e)          it is not taking up the Placing Shares as a result of any "general solicitation" or "general advertising" efforts (as those terms are defined in Regulation D under the Securities Act) or any "directed selling efforts" (as such term is defined in Regulation S under the Securities Act);

(f)           it understands that the Placing Shares will be "restricted securities" within the meaning of Rule 144(a)(3) under the Securities Act and it agrees that for so long as such securities are "restricted securities" (as so defined), they may not be deposited into any unrestricted depositary facility established or maintained by any depositary bank;

(g)          as long as the Placing Shares are "restricted securities" within the meaning of Rule 144(a)(3) under the Securities Act, it will not reoffer, resell, pledge or otherwise transfer the Placing Shares, except in an offshore transaction in accordance with Rule 903 or Rule 904 of Regulation S (which, for the avoidance of doubt, includes a sale on the London Stock Exchange) or some other available exemption from the registration requirements of the Securities Act and in accordance with any applicable securities laws of any state or other jurisdiction of the United States;

(h)          it understands that there may be certain consequences under United States and other tax laws resulting from an investment in the Placing and it has made such investigation and has consulted its own independent advisers or otherwise has satisfied itself concerning, without limitation, the effects of United States federal, state and local income tax laws and foreign tax laws generally;

(i)           it understands that the Company has not undertaken to determine whether it will be treated as a passive foreign investment company (''PFIC'') for U.S. federal income tax purposes for the current year, or whether it is likely to be so treated for future years and neither the Company nor any of the Joint Bookrunners makes any representation or warranty with respect to the same. Accordingly, neither the Company nor any of the Joint Bookrunners can provide any advice to U.S. investors as to whether the Company is or is not a PFIC for the current tax year, or whether it will be in future tax years. Accordingly, neither the Company nor any of the Joint Bookrunners undertakes to provide to U.S. investors or shareholders any information necessary or desirable to facilitate their filing of annual information returns, and U.S. investors and shareholders should not assume that this information will be made available to them;

(i)           it understands that, to the extent the Placing Shares are delivered to it in certificated form, the certificate delivered in respect of the Placing Shares will bear a legend substantially to the following effect for so long as the securities are "restricted securities" within the meaning of Rule 144(a)(3) under the Securities Act:

THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE ''SECURITIES ACT''), OR ANY OTHER APPLICABLE SECURITIES LAW. BY ITS ACCEPTANCE OF THESE SECURITIES THE PURCHASER REPRESENTS THAT IT IS A QUALIFIED INSTITUTIONAL BUYER (''QIB'') AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT AND THAT IT IS EITHER PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF OTHER PURCHASERS WHO ARE QIBs AND AGREES THAT THE SECURITIES ARE NOT BEING ACQUIRED WITH A VIEW TO DISTRIBUTION AND ANY RESALE OF SUCH SECURITIES WILL BE MADE ONLY (1) IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 903 OR RULE 904 OF REGULATION S, (2) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 (IF AVAILABLE) OR ANY OTHER EXEMPTION OR (3) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT.

(k)          it understands that no representation has been made as to the availability of the exemption provided by Rule 144 or any other exemption under the Securities Act for the reoffer, resale, pledge or transfer of the Placing Shares;

(l)           it understands and acknowledges that the Company shall have no obligation to recognise any offer, sale, pledge or other transfer made other than in compliance with the restrictions on transfer set forth and described herein and that the Company may make notation on its records or give instructions to Computershare Investor Services Plc, as the Company's registrar, and any transfer agent of the Placing Shares in order to implement such restrictions;

(m)        it is not, taking into account its participation in the Placing, required to register as a broker-dealer under Section 15 of the Securities Exchange Act of 1934, as amended (the "Exchange Act") (or are a registered broker-dealer under Section 15 of the Exchange Act); and

(n)          it will sign and return the US Investor Letter in the form agreed between the Company and the Joint Bookrunners as soon as possible after confirmation of its allocation in the Placing and in any event prior to settlement of the Placing Shares.

The foregoing acknowledgements, confirmations, undertakings, representations, warranties and agreements are given for the benefit of the Company and the Banks and are irrevocable. Each Placee, and any person acting on behalf of the Placee, acknowledges that none of the Company or the Banks owes any fiduciary or other duties to any Placee in respect of any representations, warranties, undertakings or indemnities in the Placing Agreement.

Miscellaneous

The rights and remedies of the Banks and the Company under these terms and conditions are in addition to any rights and remedies which would otherwise be available to each of them and the exercise or partial exercise of one will not prevent the exercise of others.  Notwithstanding that a Placee's contract as regards their participation in the Placing will be with one Bank, all of the Banks shall have the right under the Contracts (Rights of Third Parties) Act 1999 to enforce the rights, undertakings and provisions in this Appendix which are expressed to be for their benefit.

Please also note that the agreement to allot and issue Placing Shares to Placees (or the persons for whom Placees are contracting as agent) free of stamp duty and stamp duty reserve tax in the UK relates only to their allotment and issue to Placees, or such persons as they nominate as their agents, direct from the Company for the Placing Shares in question. Such agreement also assumes that the Placing Shares are not being acquired in connection with arrangements to issue depositary receipts or to issue or transfer the Placing Shares into a clearance service. None of the Banks or the Company is liable to bear any stamp duty and stamp duty reserve tax and any other similar duties or taxes (transfer taxes) that arise on a sale of Placing Shares if there are any such arrangements or that arise subsequent to their acquisition by Placees or for transfer taxes arising otherwise than under the laws of the United Kingdom. Each Placee should, therefore, take its own advice as to whether any such transfer tax liability arises. Furthermore, each Placee agrees to indemnify on an after-tax basis and hold each of the Banks, the Company and their respective affiliates harmless from any and all interest, fines or penalties in relation to transfer taxes to the extent that such interest, fines or penalties arise from the unreasonable default or delay of that Placee or its agent.

Each Placee and any person acting on behalf of each Placee acknowledges and agrees that the Banks or any of their respective affiliates may, at its absolute discretion, agree to become a Placee in respect of some or all of the Placing Shares.

Each Placee and any person acting on behalf of the Placee acknowledges and agrees that it has neither received nor relied on any inside information concerning the Company in accepting this invitation to participate in the Placing.

No claim shall be made against the Company or the Banks or any other person acting on behalf of such persons by a Placee to recover any damage, cost, loss, charge or expense which it may suffer or incur by reason of or arising from the carrying out by it of the work to be done by it pursuant hereto or the performance of its obligations hereunder or otherwise in connection with the Placing.

Each Placee, and any person acting on behalf of the Placee, acknowledges that the Banks and the Company do not owe any fiduciary or other duties to any Placee in respect of any representations, warranties, undertakings or indemnities in the Placing Agreement.

References to time in this announcement are to London time, unless otherwise stated.

All times and dates in this Announcement may be subject to amendment by the Banks (in their absolute discretion). The Banks shall notify the Placees and any person acting on behalf of the Placees of any changes.

Definitions

The following definitions apply throughout this Announcement unless the context otherwise requires:

"Admission"	admission of the Placing Shares to trading on AIM becoming effective in accordance with the AIM Rules
"AIM"	the AIM market operated by the London Stock Exchange
"AIM Rules"	the rules published by the London Stock Exchange entitled AIM Rules for Companies in force from time to time
"Barclays"	Barclays Bank PLC, registered in England and Wales with company number 01026167 and having its specified address at 5 The North Colonnade, Canary Wharf, London E14 4BB
"Bookbuild"	the accelerated bookbuilding process to be conducted by the Joint Bookrunners
"Business Day"	any day on which AIM is open for trading to occur
"Cenkos"	Cenkos Securities plc, registered in England and Wales with company number 05210733 and having its registered office at 6.7.8 Tokenhouse Yard, London EC2R 7AS
"Company" or "SMS"	Smart Metering Systems plc, a company registered in Scotland with company number SC367563
"CREST"	the relevant system (as defined in the Uncertificated Securities Regulations 2001) in respect of which Euroclear UK & Ireland Limited is the Operator (as defined in such regulations)
"Directors" or "Board"	the directors of the Company as at the date of this Announcement, or any duly authorised committee thereof
"FCA"	the Financial Conduct Authority
"FSMA"	the Financial Services and Markets Act 2000, as amended
"General Meeting"	the general meeting of the Company convened for 9.00 a.m. on 20 December 2017, notice of which is set out in this Announcement, and any adjournment thereof
"Group"	the Company, its subsidiaries, and its subsidiary undertakings
"Joint Bookrunners"	Cenkos, Macquarie and Barclays
"London Stock Exchange"	London Stock Exchange plc
"Macquarie"	Macquarie Capital (Europe) Limited, registered in England and Wales with company number 03704031 and having its registered office at Ropemaker Place, 28 Ropemaker Street, London EC2Y 9HD
"Ordinary Shares"	ordinary shares of £0.01 each in the capital of the Company
"Placing"	the conditional placing of the Placing Shares at the Placing Price by the Joint Bookrunners
"Placing Price"	the price per Placing Share to be determined by the Bookbuild
"Placing Shares"	the new Ordinary Shares to be issued by the Company pursuant to the Placing
"Regulatory Information Service"	a regulatory information service that is approved by the FCA as meeting primary information provider criteria and that is on the list of regulatory information services maintained by the FCA
"Rothschild"	N M Rothschild & Sons Limited
"Securities Act"	the US Securities Act of 1933, as amended
"Shareholders"	holders of Ordinary Shares
"United Kingdom" or "UK"	the United Kingdom of Great Britain and Northern Ireland
"£" and "pence"	respectively, pounds and pence sterling, the lawful currency of the United Kingdom

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[1] Annualised recurring income refers to the revenue being generated at a point in time by meter rental and data contracts.

[2] Underlying EBITDA is before exceptional items and other operating income.

[3] Underlying PBT is before exceptional items, other operating income and intangible amortisation

[4] Underlying earnings per share is profit after taxation but before exceptional items, other operating income and intangible amortisation, divided by the weighted average number of ordinary shares in issue

These figures are rounded compared to those appearing in the Company's interim results announcement dated 12 September 2017

 

END

 

 

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