Final results for the year ended 31 December 2014
16 March 2015
Smart Metering Systems plc
("SMS" or "the Company" or "the Group")
Final results for the year ended 31 December 2014
Smart Metering Systems plc (AIM: SMS.L) is pleased to announce its final results for the 12 months to 31 December 2014, which show continued growth across all business areas.
Financial Highlights
· Revenue* increased by 52% to £42.4m (2013: £27.9m) - increase of 25% excluding UPL (now SMS Electricity)
· Total annualised recurring revenues increased by 43% to £26.2m (2013: £18.3m)
- Gas metering and data: meter recurring rent increased 41% to £21.9m and data recurring income reached £1.0m
- Electricity metering and data: meter recurring rent doubled to £0.6m and data recurring income grew 29% to £2.7m
· Gross profit increased by 55% to £27.6m (2013: £17.8m) - increase of 38% excluding UPL
· Gross profit margin at 65% (2013:64%)
· Underlying EBITDA** increased by 64% to £19.3m (2013: £11.8m) - increase of 49% excluding UPL
· EBITDA margin at 46% (2013: 42%)
· Underlying PBT** increased by 66% to £12.8m (2013: £7.7m)
· Underlying earnings per share *** increased 77% to 14.36p (2013: 8.10p)
· Final dividend of 1.88p per ordinary share making 2.82p for the full year (2013: 2.31p), an increase of 22%
· Net debt of £57.3m and net debt to EBITDA 2.9x
· Available cash and unused debt facility of £47.5m at 31st December 2014
· In November 2014, re-negotiation of £105m club facility with existing club of lenders, Barclays Bank plc (lead bank), Clydesdale Bank plc and Bank of Scotland plc, to provide further funding flexibility
* Additional revenue streams incorporated in 2014 resulting from the acquisition of UPL.
* * Underlying EBITDA and PBT is before exceptional items and intangible amortisation.
*** Underlying earnings per share is profit after taxation but before exceptional items and intangible amortisation, divided by the weighted average number of ordinary shares in issue.
Operational Highlights
· Total gas meter portfolio increased by 29% to 607,000 (Dec 2013: 469,000), with industrial and commercial (I&C) meters nearly trebling. Electricity meter numbers more than doubled to 12,000 (31 December 2013: 5,000)
· Capital expenditure on meters increased by 52% to £35m, reaching a monthly run rate of approximately £3m in December 2014
· £14m acquisition of UPL in April 2014, adding in excess of £2m EBITDA annual run rate and electricity connections, meters, data and energy services to SMS's services
· Rhys Wynne, previously managing director of UPL, appointed to the new role of Chief Operating Officer (COO) of SMS
· Strengthened Board with the appointments of energy sector and corporate finance experts Miriam Greenwood and Willie MacDiarmid as Non-Executive Directors in February 2014 and April 2014 respectively
· Contract extensions or additions with major customers, including BES Utilities (BES) and Total Gas & Power Ltd (TGP) (both after full year in February 2015), British Gas Business (BGB), DONG Energy Services Limited (DONG Limited) and Opus Energy (Opus)
· ADM™ installations more than doubled to 41,000 units by 31 December 2014 (31 December 2013: 16,000)
· Received full accreditation for the water market in the UK
· International trials continuing
Alan Foy, Chief Executive Officer, commented:
"2014 has been a milestone year for SMS with the establishment of our Electricity business. Everything we had envisaged for the UPL acquisition has come to fruition in less than a year. We have successfully integrated UPL into SMS, increased our recurring income streams and we have already expanded customer relationships to benefit from our new dual-fuel service offering. We are well positioned for continued growth as we progress through 2015, our 20th year in business."
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Smart Metering Systems plc |
0141 249 3850 |
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Alan Foy, Chief Executive Officer Glen Murray, Finance Director |
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Cenkos Securities plc |
0131 220 6939 / 0207 397 8900 |
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Neil McDonald Nick Tulloch |
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Kreab |
020 7074 1800 |
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Chris Philipsborn Natalie Biasin Matthew Jervois |
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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.
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.
SMS expanded its services into the electricity market through the acquisition of Utility Partnership Limited in April 2014. The Company can now provide a fully integrated service from beginning to end to cover the installation of a gas/electricity supply/connection to the procurement, installation and management of a gas or electricity meter asset to the collection and management of customer data and ongoing energy management services. Longer term the Company also has additional applications for water and LPG.
Following its listing, the Company 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 statement
Review of the year
2014 has been a year of expansion and firsts for SMS, putting the business in good stead as we now enter our 20th anniversary year. In the first half of the year, SMS established its Electricity service offerings within both segments and welcomed 168 new colleagues through the acquisition of UPL on 14 April 2014. During the second half of the year, SMS appointed Rhys Wynne as Chief Operating Officer (COO) of the Company, a new role created following the UPL acquisition. SMS is delighted with the success of the UPL integration, which has helped secure contract extensions or additions from a number of major customers, including BES Utilities (BES), British Gas Business (BGB), DONG Energy Services Limited (DONG), Opus Energy (Opus)and Total Gas & Power Ltd (TGP). SMS and our customers are already clearly benefiting from the Company's full end-to-end dual fuel service.
Our Business
I am pleased to confirm SMS has continued to make considerable progress in 2014 across all segments of the business.
With the establishment of SMS Electricity, SMS has a clearly defined growth strategy in the gas and electricity markets, positioning the business to fulfil our vision of becoming the leading independent provider of metering services to the utility sector with the highest level of customer service. Together with the potential to establish our ADM™ device as the industry standard smart metering device, the Group has a very promising outlook.
SMS has consistently demonstrated year-on-year growth and has an established and growing market position in the UK smart metering market. The business strategy in the medium term is to maintain high levels of service to customers in the gas and electricity supplier market, increase the run rate with these customers, and continue to grow the meter asset portfolio.
The UK meter assets business presents a large market opportunity with a substantial proportion of an estimated 1.6 million industrial and commercial (I&C) gas meters in the UK to be exchanged for a smart metering solution by 2020 with the added potential of a domestic market rollout of some 22 million domestic gas meters, and in the electricity market this is estimated to be 2.1 million I&C meters and 27 million domestic meters.
The order book for the ADM™ device has continued to grow and our current gas and electricity supplier contracts provide potential access to over 80% of UK I&C gas meters and 40% of residential gas meters. International trials of ADM™ overseas in gas, electricity, water and LPG continue, where we remain encouraged by the progress.
Our priority in 2015 and beyond is to focus on our three strategic areas:
1) Grow our domestic meters business organically and through new contracts with an emphasis on driving recurring income
2) Establish our ADM™ technology as the industry standard smart metering solution for I&C clients
3) Increase levels of business with, and services provided to key gas and electricity suppliers, with a focus on cross-selling between Gas and Electricity across our horizontal suite of services
SMS has developed a strong and evolving business model and strategy that provides the most effective scope for continued expansion of the business to reward our customers and shareholders.
People and Corporate Culture
The acquisition of UPL this year marked SMS's first ever acquisition. It also marked the coming together of two companies with very similar histories that share the same values, culture and approach to customer service. It was paramount that for any sort of acquisition to take place it needed to be one that maintained SMS's culture founded on a commitment by its employees to know and serve their customers.
This has been instrumental in developing, building and maintaining trusted relationships with our customers, the gas and now also electricity suppliers, who have responded positively to the acquisition of UPL. Our core values around good advice, prudence and wisdom have ensured we continue to maintain these strong relationships.
Equally important in terms of operational performance is how our IT systems and compliance management work with the gas and electricity suppliers. These are integral to the way in which we deliver and achieve customer satisfaction and building relationship of trust. We are excited to be driving forward our strategic vision, values and culture through our enlarged team and strengthened senior management.
Board Composition
The Board comprises five directors, of whom three are Non-Executive with me as your Non-Executive Chairman. We have sought to build our Board structure to ensure we have an experienced and balanced board and in the first half of 2014 we welcomed two new Non-Executive Directors, Miriam Greenwood and Willie MacDiarmid, while Nigel Christie retired from the Board as a Non-Executive Director. The Board would like to thank Nigel for his very significant contribution to the Company.
Energy and corporate finance expert Miriam Greenwood is Chair of SMS's Audit Committee and energy sector expert Willie MacDiarmid is Chair of the Company's Remuneration Committee.
Miriam is a qualified barrister and has spent much of her career in corporate finance working for leading investment banks and other financial institutions. She is a Non-Executive Director of a number of companies and was, for 9 years until 2013, a Non-Executive Director of the Gas and Electricity Markets Authority (OFGEM) for whom she is currently Chair of the Gas Network Innovation Expert Panel. A Deputy Lieutenant of the City of Edinburgh, Miriam was awarded an OBE for services to corporate finance in 2000.
Willie is a reputed senior executive in the energy sector, with experience at the highest level with the last two UK Governments on a variety of strategic and operating working groups. As a member of the Scottish Power executive team, he successfully led Scottish Power through the deregulation of the UK energy market and served on their investment committee, as well as being involved in various mergers and acquisitions. Scottish Power's successful metering business was part of his portfolio.
Outlook
Under Alan Foy's leadership, the expanded dual-fuel offering, our strengthened senior management and the expertise of our Non-Executive Directors, alongside our robust IT infrastructure, SMS is ideally positioned to maintain our competitive advantage and continue to make progress on our strategic priorities.
As we continue to invest in providing the highest levels of service to the gas and electricity supplier market we remain confident on the outlook for the business and we view the outlook for the market in 2015 as highly promising for our business model.
Chief Executive Officer's statement
We are delighted with the continued strong performance of the business for the year ended 31 December 2014.
Recurring income now represents 53% of our total revenue compared to 49% of total income in 2013, as we see the benefits of our business model of building up the recurring income streams. The recurring revenues are as a result of the long-term nature of our contracts, which provide an index-linked revenue stream.
Acquisition of UPL
On 14 April 2014, SMS acquired the entire issued share capital of UPL. With this acquisition SMS has doubled the number of recurring income streams and we are growing the electricity meter portfolio, further increasing our recurring rental revenue.
The acquisition is in line with the strategic vision of SMS to become the leading independent supplier of smart metering solutions to suppliers in the utility sector providing the highest levels of customer service.
UPL is now operationally fully integrated into SMS bringing in additional income streams across both segments and is driving acceleration of the overall strategic vision of SMS's enlarged business in three key areas:
- Growth opportunities through connections, metering and data management services to an expanded gas and electricity customer base
- Positioning our business as a dual gas and electricity meter provider for the UK's future smart meter rollout programme
- Providing further opportunities to expand internationally
In the first year of acquisition SMS has already added clients including DONG Limited and TGP to our Electricity customer base, as well as extending existing contracts. UPL's existing portfolio included customers such as Centrica, SSE and EDF, as well as Network Rail, Vodafone, Santander, Sainsbury's, O2 UK and Cable & Wireless.
In addition to contract wins and extensions already secured through the dual-fuel electricity and gas service offering, there is the further potential to work with new water industry customers.
SMS also believes there is scope to expand internationally through UPL's energy management propositions already established in Italy and the Caribbean, and SMS's ADM™ device, which is currently undergoing trials across three continents.
Operational Review
During 2014 we made substantial progress across all segments of the business. Following a strong first half where we saw our gas meter portfolio break the half-million mark with an increase of 65,000, growth accelerated in the second half to reach a total of 607,000 gas meters, with a further 73,000 added and a 29% increase year-on-year. The number of electricity meters more than doubled to 12,000 from 5,000 in 2013, bringing our overall gas and electricity meter portfolio to 619,000.
The progress we have made in establishing long-term recurring revenue was underlined by an increase in year-end annualised recurring meter rental revenue of 41% to £21.9m and data provision sales from our ADM™ device more than trebled to reach the £1m level. With the establishment of our Electricity services we have added an additional two recurring revenue streams, where meter recurring rent doubled to £567,000 and data recurring income grew 29% to £2.7m. For the first time, recurring income now makes up the majority of our total revenue.
Industrial and Commercial meters
We were delighted to announce a number of new contracts or contract extensions with major customers during 2014. We more than doubled our I&C gas meter portfolio to 65,000 meters from 27,000 meters in 2013. In the gas market we secured a significant contract with BGB, while in the electricity market we won contracts with Opus and DONG, both existing customers of SMS. More recently, in the first quarter of 2015, in the electricity market we were awarded contracts with BES and with TGP, part of Total S.A., which is a current client of our Gas services business.
The increase in our customer base during 2014 now means that SMS has contracts in place with over 80% of the total I&C meter market.
Once installed, these meters will be on SMS's long-term index linked contracts and provide recurring revenue for the lifetime of the assets (expected to be 25 years).
The size of I&C meters is typically much greater than that of domestic meters and therefore the revenue per meter is substantially higher: the equivalent number of domestic meters for these 22,000 contracts would be in the order of 300,000.
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 deployed more than 2.5 times the number of ADM™ devices in the UK in 2014 to 41,000 up from 16,000 in 2013. The Company remains confident that its ADM™ device technology has a broad range of potential applications in gas, electricity, water and LPG markets and has been continuing with trials of the device internationally.
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 also the ability to seek out further markets for our service more broadly.
As over the last two years, all new contracts announced in 2014 allow for the introduction of the ADM™ device into I&C premises during meter replacement programmes.
Domestic Meters
We grew our domestic gas meter portfolio by 24% from 437,000 in 2013 to 542,000 by year end 2014. Our combined gas and electricity full service offering has strengthened our position and SMS's opportunity in the domestic meter market, ideally positioning the business for the current UK domestic smart meter roll out programme.
Whilst we are well placed to capitalise on the rollout of smart meters in the UK domestic market, our future strategic growth is not reliant on this taking place, either in capturing market share or in growing revenues.
Other Markets
We were very pleased to announce during 2014 that, following an extensive accreditation process, the products SMS has developed for the UK water market have passed all tests and received full accreditation.
Consolidated statement of comprehensive income
For the year ended 31 December 2014
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2014 |
2013 |
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Notes |
£'000 |
£'000 |
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Revenue |
2 |
42,386 |
27,916 |
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Cost of sales |
3 |
(14,766) |
(10,101) |
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Gross profit |
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27,620 |
17,815 |
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Administrative expenses |
3 |
(14,832) |
(9,625) |
|
Other operating income |
3 |
215 |
- |
|
Profit from operations |
3 |
13,003 |
8,190 |
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Attributable to: |
|
|
|
|
Operating profit before exceptional items |
|
14,795 |
8,452 |
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Amortisation of intangibles |
|
(1,155) |
(262) |
|
Exceptional items and fair value adjustments |
3 |
(637) |
- |
|
Finance costs |
6 |
(2,015) |
(1,122) |
|
Finance income |
6 |
30 |
403 |
|
Profit before taxation |
|
11,018 |
7,471 |
|
Taxation |
7 |
(225) |
(896) |
|
Profit for the year attributable to equity holders |
|
10,793 |
6,575 |
|
Other comprehensive income |
|
- |
- |
|
Total comprehensive income |
10,793 |
6,575 |
|
The profit from operations arises from the Group's continuing operations.
Earnings per share attributable to owners of the parent during the year:
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Notes |
2014 |
2013 |
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Basic earnings per share (pence) |
8 |
12.71 |
7.86 |
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Diluted earnings per share (pence) |
8 |
12.23 |
7.43 |
Consolidated statement of financial position
As at 31 December 2014
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2014 |
2013 |
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Notes |
£'000 |
£'000 |
|
Assets |
|
|
|
|
Non-current |
|
|
|
|
Intangible assets |
10 |
10,932 |
2,018 |
|
Property, plant and equipment |
11 |
91,277 |
57,382 |
|
Investments |
12 |
83 |
- |
|
|
|
102,292 |
59,400 |
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Current assets |
|
|
|
|
Inventories |
14 |
1,211 |
2,504 |
|
Trade and other receivables |
15 |
9,474 |
6,099 |
|
Cash and cash equivalents |
16 |
4,285 |
2,073 |
|
Other current financial assets |
20 |
- |
207 |
|
|
|
14,970 |
10,883 |
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Total assets |
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117,262 |
70,283 |
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Liabilities |
|
|
|
|
Current liabilities |
|
|
|
|
Trade and other payables |
17 |
15,140 |
8,879 |
|
Bank loans and overdrafts |
18 |
7,904 |
3,933 |
|
Commitments under hire purchase agreements |
19 |
90 |
3 |
|
Other current financial liabilities |
20 |
70 |
- |
|
|
|
23,204 |
12,815 |
|
Non-current liabilities |
|
|
|
|
Bank loans |
18 |
53,645 |
31,475 |
|
Commitments under hire purchase agreements |
19 |
64 |
6 |
|
Deferred tax liabilities |
22 |
4,395 |
3,395 |
|
|
|
58,104 |
34,876 |
|
Total liabilities |
|
81,308 |
47,691 |
|
Net assets |
|
35,954 |
22,592 |
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Equity |
|
|
|
|
Share capital |
24 |
856 |
838 |
|
Share premium |
|
9,291 |
8,971 |
|
Other reserve |
26 |
4,258 |
1 |
|
Treasury shares |
24 |
(92) |
- |
|
Retained earnings |
|
21,641 |
12,782 |
|
Total equity attributable to equity holders of the parent company |
|
35,954 |
22,592 |
Consolidated statement of changes in equity
For the year ended 31 December 2014
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Share |
Share |
Other |
Treasury |
Retained |
|
|
|
capital |
premium |
reserve |
shares |
earnings |
Total |
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Attributable to the owners of the parent company: |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
As at 1 January 2013 |
833 |
8,653 |
1 |
- |
7,109 |
16,596 |
|
Total comprehensive income for the year |
- |
- |
- |
- |
6,575 |
6,575 |
|
Transactions with owners in their capacity as owners: |
|
|
|
|
|
|
|
Dividends (note 9) |
- |
- |
- |
- |
(1,546) |
(1,546) |
|
Shares issued |
5 |
318 |
- |
- |
- |
323 |
|
Share options |
- |
- |
- |
- |
644 |
644 |
|
As at 31 December 2013 |
838 |
8,971 |
1 |
- |
12,782 |
22,592 |
|
Total comprehensive income for the year |
- |
- |
- |
- |
10,793 |
10,793 |
|
Transactions with owners in their capacity as owners: |
|
|
|
|
|
|
|
Dividends (note 9) |
- |
- |
- |
- |
(2,174) |
(2,174) |
|
Shares issued |
18 |
320 |
4,257 |
- |
- |
4,595 |
|
Shares held by SIP |
- |
- |
- |
(92) |
- |
(92) |
|
Share options |
- |
- |
- |
- |
240 |
240 |
|
As at 31 December 2014 |
856 |
9,291 |
4,258 |
(92) |
21, 641 |
35,954 |
See notes 25 and 26 for details of the Treasury shares and Other reserve.
Consolidated statement of cash flows
For the year ended 31 December 2014
|
|
2014 |
2013 |
|
|
£'000 |
£'000 |
|
Cash flow from operating activities |
||
|
Profit before taxation |
11,018 |
7,471 |
|
Finance costs |
1,738 |
1,122 |
|
Finance income |
(30) |
(26) |
|
Fair value movement on derivatives |
277 |
(377) |
|
Depreciation |
4,526 |
2,754 |
|
Amortisation |
1,155 |
262 |
|
Share-based payment expense |
148 |
644 |
|
Movement in inventories |
1,636 |
(2,131) |
|
Movement in trade and other receivables |
1,709 |
(2,961) |
|
Movement in trade and other payables |
3,159 |
826 |
|
Cash generated from operations |
25,336 |
7,584 |
|
Taxation |
(220) |
(206) |
|
Net cash generated from operations |
25,116 |
7,378 |
|
Investing activities |
|
|
|
Payments to acquire property, plant and equipment |
(35,779) |
(24,595) |
|
Disposal of property, plant and equipment |
52 |
563 |
|
Payments to acquire intangible assets |
(539) |
(364) |
|
Acquisition of subsidiary |
(12,632) |
- |
|
Cash acquired with subsidiary |
3,420 |
- |
|
Finance income |
30 |
26 |
|
Net cash used in investing activities |
(45,448) |
(24,370) |
|
Financing activities |
|
|
|
New borrowings |
33,003 |
17,830 |
|
Capital repaid |
(6,862) |
(2,875) |
|
Hire purchase repayments |
(10) |
- |
|
Finance costs |
(1,738) |
(1,122) |
|
Net proceeds from share issue |
325 |
323 |
|
Dividend paid |
(2,174) |
(1,546) |
|
Net cash generated from financing activities |
22,544 |
12,610 |
|
Net increase in cash and cash equivalents |
2,212 |
(4,382) |
|
Cash and cash equivalents at the beginning of the financial year |
2,073 |
6,455 |
|
Cash and cash equivalents at the end of the financial year (note 16) |
4,285 |
2,073 |
Accounting policies
The Company is incorporated and domiciled in the UK. The Group's activities consist of integrated metering services that connects, owns, operates and maintains current generation and new advanced metering assets and databases.
Basis of preparation
The consolidated financial statements have been prepared on a historical cost basis, except where otherwise stated. The consolidated financial statements are presented in British pounds Sterling (£), which is also the functional currency of the Group, and all values are rounded to the nearest thousand (£'000) except where otherwise indicated. The financial statements have been prepared on a consolidated basis with December 2013, with no changes to the accounting framework adopted or accounting policies applied.
Going concern
Management prepares budgets and forecasts on a rolling 24 month basis. These forecasts cover operational cash flows and investment capital expenditure. The Group has committed bank facilities which extend to March 2016 and available cash resources at 31 December 2014 of £47.5m.
Based on the current projections and facilities in place the Directors consider it appropriate to continue to prepare the financial statements on a going concern basis.
Basis of consolidation
The consolidated financial statements incorporate the consolidated financial statements of the Company and the following Group undertakings being UK Gas Connection Limited, UK Meter Assets Limited, UKMA (AF) Limited, UK Data Management Limited and Utility Partnership Limited. These are adjusted, where appropriate, to conform to Group accounting policies and are prepared to the same accounting reference date. The Company was incorporated on 27 October 2009. The Group was formed on 24 December 2009 through the acquisition of the entire share capital of UK Gas Connection Limited and UK Meter Assets Limited (the only subsidiaries in existence at that time). Utility Partnership Limited was acquired during the year and acquisition accounting has been applied to this transaction.
Whilst the Group was newly formed, the ultimate ownership of all companies remained unchanged and, as such, the financial statements have been prepared based on a reconstruction under common control, reflecting the Group results for the current and prior years as though the Group structure has always existed.
UPL Italia SRL is deemed immaterial to the group as a whole and, as a result, has not been consolidated within these financial statements.
Use of estimates and judgements
The preparation of the financial statements requires the use of estimates and assumptions. Although these estimates are based on management's best knowledge, actual results ultimately may differ from these estimates.
The key sources of estimation uncertainty that have a significant risk of causing material adjustment to the carrying amounts of assets and liabilities within the next financial year are the estimation of share-based payment costs and acquisitions and business combinations. The estimation of share-based payment costs requires the selection of an appropriate valuation model, consideration as to the inputs necessary for the valuation model chosen and the estimation of the number of awards that will ultimately vest, inputs for which arise from judgements relating to the probability of meeting non-market performance conditions and the continuing participation of employees.
When an acquisition arises the group is required under IFRS 3 to calculate the Purchase Price Allocation ("PPA"). The PPA requires companies to report the fair value of assets and liabilities acquired and it establishes useful lives for identified assets.
Subjectivity is involved in PPA with the estimation of the future value of technology, customer relationships and goodwill.
Revenue recognition
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured. Revenue is measured at the fair value of the consideration received, excluding discounts and VAT.
Revenue is recognised when the significant rewards and risk of ownership have been passed to the buyer. The risk and rewards of ownership transfer when the Group fulfils its contractual obligations to customers by supplying services.
Meter rental income
Rental income is recognised when the Group is contractually entitled to it. Rental income is calculated on a daily basis and invoiced monthly. Rental contracts do not operate on a fixed term basis and are cancellable by the lessee with immediate effect and do not transfer risks and rewards of ownership of the underlying asset. They are therefore considered as operating lease arrangements and accounted for as such.
Utility connection
Revenue from connection contracts is recognised upon delivery of the related service, in line with our contractual entitlement.
Data management
Data provision income is recognised when the Group is contractually entitled to it. Data provision income is invoiced in advance and is recognised on a straight line basis over the contract period.
Segment reporting
An operating segment is a group of assets and operations engaged in providing products or services that are subject to risks and returns that are different from those of other business segments. Operating segments are reported in a manner consistent with the reports made to the chief operating decision maker which are consistent with the reported results.
The Company considers that the role of chief operating decision maker is performed by the Board of Directors.
Financial assets
Initial recognition and measurement
Financial assets within the scope of IAS 39 are classified as financial assets at fair value through profit or loss, loans and receivables, held-to-maturityinvestments, available-for-sale financial assets or as derivatives designated as hedging instruments in an effective hedge, as appropriate. The Group determines the classification of its financial assets at initial recognition.
Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation or convention in the marketplace (regular way trades) are recognised on the trade date, i.e. the date that the Group commits to purchase or sell the asset.
The Group's financial assets include cash and short-term deposits, trade and other receivables, loans and other receivables, quoted and unquoted financial instruments and derivative financial instruments.
Financial liabilities
Initial recognition and measurement
Financial liabilities within the scope of IAS 39 are classified as financial liabilities at fair value through profit or loss, loans and borrowings or as derivatives designated as hedging instruments in an effective hedge, as appropriate. The Group determines the classification of its financial liabilities at initial recognition. All financial liabilities are recognised initially at fair value and in the case of loans and borrowings, net of directly attributable transaction costs.
The Group's financial liabilities include trade and other payables, bank overdraft, loans and borrowings, financial guarantee contracts and derivative financial instruments.
Derecognition
A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability and the difference in the respective carrying amounts is recognised in the consolidated statement of comprehensive income.
Offsetting of financial instruments
Financial assets and financial liabilities are offset, and the net amount reported in the consolidated statement of financial position if, and only if, there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, or to realise the assets and settle the liabilities simultaneously.
Initial recognition and subsequent measurement
The Group uses derivative financial instruments such as interest rate swaps to hedge its interest rate risk. Such derivative financial instruments are initially recognised at fair value on the date on which a derivative contract is entered into and are subsequently remeasured at fair value. Derivatives are carried as financial assets when the fair value is positive and as financial liabilities when the fair value is negative. The Group has not designated any derivatives for hedge accounting.
Current versus non-current classification
Derivative instruments that are not designated as effective hedging instruments are classified as current or non-current or separated into a current and non-current portion based on an assessment of the facts and circumstances (i.e. the underlying contracted cash flows).
Where the Group will hold a derivative as an economic hedge (and does not apply hedge accounting) for a period beyond twelve months after the reporting date, the derivative is classified as non-current (or separated into current and non-current portions) consistent with the classification of the underlying item.
Derivative instruments that are designated as, and are effective hedging instruments, are classified consistent with the classification of the underlying hedged item. The derivative instrument is separated into a current portion and non-current portion only if a reliable allocation can be made.
Exceptional items
The Group presents as exceptional items on the face of the consolidated statement of comprehensive income those material items of income and expense which, because of the nature or expected infrequency of the events giving rise to them, merit separate presentation to allow shareholders to understand better the elements of financial performance in that year, so as to facilitate comparison with prior periods and to assess better trends in financial performance.
Research and development
Expenditure on pure and applied research activities is recognised in the consolidated statement of comprehensive income as an expense as incurred.
Expenditure on product development activities is capitalised if the product or process is technically and commercially feasible and the Group intends and has the technical ability and sufficient resources to complete development, future economic benefits are probable and if the Group can measure reliably the expenditure attributable to the intangible asset during its development. The expenditure capitalised includes the cost of materials, direct labour and an appropriate proportion of overheads.
Capitalised development expenditure is stated at cost less accumulated amortisation and accumulated impairment losses.
Amortisation is calculated, when the product or system is commercialised or in use, so as to write off the cost of an asset, less its estimated residual value, over the useful economic life of that asset as follows:
Amortisation 20% on cost straight line
Intangible assets
Intangible assets acquired separately from third parties are recognised as assets and measured at cost.
Following initial recognition, intangible assets are measured at cost at the date of acquisition less any amortisation and any impairment losses. Amortisation costs are included within the net administrative expenses disclosed in the consolidated statement of comprehensive income.
Intangible assets acquired as part of a business combination are recognised outside goodwill if the asset is separable or arises from contractual or other legal rights and its fair value can be measured reliably.
Intangible assets are amortised over their useful lives as follows:
Software 12.5% & 20% straight line
Customer contracts 20%
Useful lives are examined on an annual basis and adjustments, where applicable, are made on a prospective basis.
Goodwill
Goodwill arising on consolidation represents the excess of the consideration transferred and the fair value of the identifiable assets and liabilities of the acquiree at the date of acquisition. Goodwill on acquisitions of subsidiaries is included in 'intangible assets'. Goodwill is not amortised but is tested annually for impairment and is carried at cost less accumulated impairment losses. See note 13 for detailed assumptions and methodology. Impairment losses are not subsequently reversed.
Goodwill is allocated to cash-generating units for the purpose of impairment testing. The allocation is made to those cash-generating units or groups of cash-generating units that are expected to benefit from the business combination in which the goodwill arose identified according to operating segment.
Provisional fair values are adjusted against goodwill if additional information is obtained within one year of the acquisition date, about facts or circumstances existing at the acquisition date. Other changes in provisional fair values are recognised through profit or loss.
Changes in contingent consideration arising from additional information, obtained within one year of the acquisition date, about facts or circumstances that existed at the acquisition date are recognised as an adjustment to goodwill. Other changes in contingent consideration are recognised through profit or loss, unless the contingent consideration is classified as equity. In such circumstances, changes are recognised within equity.
Impairment
At each reporting date, the Group reviews the carrying amounts of its property, plant and equipment and intangibles to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where the asset does not generate cash flows that are independent from other assets, the Group estimates the recoverable amount of the cash-generating unit (CGU) to which the asset belongs.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have been adjusted.
If the recoverable amount of an asset (or CGU) is estimated to be less than its carrying amount, the carrying amount of the asset (or CGU) is reduced to its recoverable amount. An impairment loss is recognised as an expense immediately.
Where an impairment loss subsequently reverses, the carrying amount of the asset (CGU) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (CGU) in prior years. A reversal of an impairment loss is recognised as income immediately.
Detailed assumptions with regard to discount, growth and inflation rates are set out in note 13 to the accounts.
Property, plant and equipment
Property, plant and equipment is stated at cost, net of accumulated depreciation and/or accumulated impairment losses, if any. Such cost includes the cost of replacing part of the plant and equipment and borrowing costs for long-term construction projects if the recognition criteria are met. When significant parts of property, plant and equipment are required to be replaced in intervals, the Group recognises such parts as individual assets with specific useful lives and depreciation, respectively.
All other repair and maintenance costs are recognised in the consolidated statement of comprehensive income as incurred.
Depreciation is calculated on a straight line basis over the estimated useful life of the asset as follows:
Freehold property 2% on cost
Short leasehold property 15% and 20% on cost
Plant and machinery 5% and 10% on cost
Fixtures, fittings & equipment 15% and 33% on cost
Motor vehicles 25% on cost
Land is not depreciated.
An item of property, plant and equipment and any significant part initially recognised is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the consolidated statement of comprehensive income when the asset is derecognised. The asset's residual values, useful lives and methods of depreciation are reviewed at each financial year end and adjusted prospectively, if appropriate.
Property, plant and equipment are initially recorded at cost.
Inventories
Inventories are stated at the lower of cost and net realisable value. Costs comprise direct materials. Net realisable value represents the estimated selling price for inventories less all estimated costs of completion and costs to be incurred in marketing, selling and distribution.
Cash and cash equivalents
Cash and cash equivalents in the consolidated statement of financial position comprise cash at bank and in hand and short-term deposits with an original maturity of three months or less. For the purpose of the consolidated statement of cash flows, cash and cash equivalents consist of cash and short-term deposits as defined above, net of outstanding bank overdrafts.
Hire purchase agreements
Assets held under hire purchase agreements are capitalised and disclosed under property, plant and equipment at their fair value. The capital element of the future payments is treated as a liability and the notional interest is charged to the statement of comprehensive income in proportion to the remaining balance outstanding.
Leased assets and obligations
Finance leases, which transfer to the Group substantially all the risks and benefits incidental to ownership of the leased item, are capitalised at the commencement of the lease at the fair value of the leased property or, if lower, at the present value of the minimum lease payments. Lease payments are apportioned between finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are recognised in the consolidated statement of comprehensive income. Leased assets are depreciated over the useful life of the asset. However, if there is no reasonable certainty that the Group will obtain ownership by the end of the lease term, the asset is depreciated over the shorter of the estimated useful life of the asset and the lease term. Operating lease payments are recognised as an expense in the consolidated statement of comprehensive income on a straight line basis over the lease term.
All other leases are operating leases and the annual rentals are charged to the consolidated statement of comprehensive income on a straight line basis over the lease term.
Pension costs
The Group operates a defined contribution pension scheme for employees. The assets of the scheme are held separately from those of the Group. The annual contributions payable are charged to the statement of comprehensive income.
Share-based payments
The costs of equity-settled share-based payments are charged to the consolidated statement of comprehensive income over the vesting period. The charge is based on the fair value of the equity instrument granted and the number of equity instruments that are expected to vest.
Taxation
Tax currently payable is based on the taxable profit for the year. Taxable profit differs from accounting profit as reported in the consolidated statement of comprehensive income because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group's liability for current tax is measured using tax rates that have been enacted or substantively enacted by the reporting date.
Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amount of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit and is accounted for using the balance sheet liability method. Deferred tax liabilities are recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. The deferred tax balance is calculated based on tax rates that have been enacted or substantively enacted by the reporting date.
Deferred tax assets include temporary differences related to employee benefits settled via the issue of share options. Recognition of the deferred tax assets assumes share options will have a positive value at the date of vesting, which is greater than the exercise price.
At the date of authorisation of these financial statements, the following standards and interpretations which have not been applied in these financial statements were in issue but not yet affective:
|
Standard or interpretation
|
|
Periods commencing on or after |
|
IFRS 2 Amendment |
Share based payment |
1 July 2014 |
|
IFRS 3 Amendment |
Business combinations |
1 July 2014 |
|
IFRS 8 Amendment |
Operating segments |
1 July 2014 |
|
IFRS 16 Amendment |
Property, plant & equipment |
1 July 2014 |
|
IFRS 24 Amendment |
Related party disclosures |
1 July 2014 |
|
IFRS 38 Amendment |
Intangible assets |
1 July 2014 |
|
IFRS 9 Amendment |
Financial instruments |
1 January 2018 |
|
IFRS 10/FRS28 Amendment |
Consolidated financial statements |
1 January 2016 |
|
IFRS 12 Amendment |
Consolidation |
1 January 2016 |
|
IFRS 11 Amendment |
Joint ventures |
1 January 2016 |
|
IFRS 14 |
Regulatory deferred accounts |
1 January 2016 |
|
IFRS 15 |
Reverse from contracts with customers |
1 January 2016 |
|
IAS 1 Amendment |
Disclosures |
1 January 2016 |
|
IFRS 7 Amendment |
Financial instruments |
1 January 2016 |
Notes to the financial statements
For the year ended 31 December 2014
1 Business Combinations
Acquisition of Utility Partnership Limited
On 14 April 2014, Smart Metering Systems acquired 100% of the issued share capital of Utility Partnership Limited (UPL). UPL is a manager of electricity meters in the UK and provider of electricity connections, design, meter installations, data management and energy management services.
The acquisition has been accounted for using the acquisition method. The fair value of the identifiable assets and liabilities of UPL as at the date of acquisition was:
|
Fair value recognised on acquisition £'000 |
Previous carrying value £'000 |
|
|
Property, plant and equipment |
2,539 |
2,539 |
|
Software |
3,258 |
- |
|
Customer contracts |
2,160 |
- |
|
Other financial assets |
83 |
83 |
|
Inventories |
344 |
344 |
|
Trade and other receivables |
5,074 |
4,998 |
|
Cash and cash equivalents |
3,420 |
3,420 |
|
Total assets |
16,878 |
11,384 |
|
|
||
|
Trade and other payables |
(,879) |
(879) |
|
Deferred tax |
(1,137) |
|
|
Accruals and deferred income |
(1,966) |
(1,950) |
|
Obligations under hire purchase agreements |
(106) |
(106) |
|
Total liabilities |
(4,088) |
(2,935) |
|
|
||
|
Total identifiable net assets at provisional fair value |
12,790 |
|
|
Goodwill arising on acquisition |
4,112 |
|
|
Total acquisition cost |
16,902 |
|
Analysed as:
|
New shares in Smart Metering System plc |
4,270 |
|
Cash paid |
12,632 |
|
Total acquisition cost |
16,902 |
|
Cash paid |
(12,632) |
|
Acquisition costs |
(480) |
|
Net cash acquired with the subsidiary |
3,420 |
|
Total acquisition cost |
(9,692) |
The provisional fair value has been updated to take into account cash balances which were anticipated would be paid out to the vendors at completion.
The consolidated statements include the results of UPL for the period from 14 April to 31 December 2014 during which time it contributed £7,461k to revenue and £715k to group profit for the period.
SMS and UPL are highly complementary and the acquisition will enable significant growth opportunities by offering a full end-to-end dual fuel service, incorporating connections, meter assets installation, ownership and management, as well as data management services, to the respective gas and electricity customers of SMS and UPL.
In addition to the above synergies, the acquisition adds energy management services to the Group's activities.
The goodwill recognised above is attributed to the expected benefits of combining gas and electricity offerings.
The primary components of this residual goodwill comprise:
|
• |
revenue synergies from dual fuel; |
|
• |
the workforce; and |
|
• |
new opportunities available to UPL as part of the larger AIM listed group. |
The identifiable intangible assets will be amortised as follow:
|
• |
software - 20% |
|
• |
customer contracts 20% |
Transaction costs of £480k incurred on the acquisition have been included within exceptional items in the consolidated statement of comprehensive income.
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, electric meters and ADM units within the UK.
The installation of meters comprises installation of domestic and industrial and commercial gas meters and electricity 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 years ended 31 December 2014 and 31 December 2013:
|
|
Asset |
Asset |
|
Total |
|
|
management |
installation |
Unallocated |
operations |
|
31 December 2014 |
£'000 |
£'000 |
£'000 |
£'000 |
|
Segment/Group revenue |
22,404 |
19,982 |
- |
42,386 |
|
Cost of sales |
(3,712) |
(11,054) |
- |
(14,766) |
|
Segment profit - Group gross profit |
18,692 |
8,928 |
- |
27,620 |
|
Items not reported by segment: |
|
|
|
|
|
Other operating costs/income |
- |
- |
(8,299) |
(8,299) |
|
Depreciation |
(4,200) |
- |
(326) |
(4,526) |
|
Amortisation |
(746) |
- |
(409) |
(1,155) |
|
Exceptional items and fair value adjustments |
- |
- |
(637) |
(637) |
|
Profit from operations |
13,746 |
8,928 |
(9,671) |
13,003 |
|
Net finance costs |
(1,985) |
- |
- |
(1,985) |
|
Profit before tax |
11,761 |
8,928 |
(9,671) |
11,018 |
|
Tax expense |
|
|
|
(225) |
|
Profit for year |
|
|
|
10,793 |
|
|
Asset |
Asset |
|
Total |
|
|
management |
installation |
Unallocated |
operations |
|
31 December 2013 |
£'000 |
£'000 |
£'000 |
£'000 |
|
Segment/Group revenue |
13,803 |
14,113 |
- |
27,916 |
|
Cost of sales |
(2,575) |
(7,526) |
- |
(10,101) |
|
Segment profit - Group gross profit |
11,228 |
6,587 |
- |
17,815 |
|
Items not reported by segment: |
|
|
|
|
|
Other operating costs/income |
- |
- |
(6,609) |
(6,609) |
|
Depreciation |
(2,654) |
- |
(100) |
(2,754) |
|
Amortisation |
(262) |
- |
- |
(262) |
|
|
|
|
|
|
|
Profit from operations |
8,312 |
6,587 |
(6,709) |
8,190 |
|
Net finance costs |
(719) |
- |
- |
(719) |
|
Profit before tax |
7,593 |
6,587 |
(6,709) |
7,471 |
|
Tax expense |
|
|
|
(896) |
|
Profit for year |
|
|
|
6,575 |
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:
|
|
2014 |
2013 |
|
|
£'000 |
£'000 |
|
Customer 1 - Asset Management |
9,847 |
7,677 |
|
Customer 1 - Asset Installation |
5,089 |
4,901 |
|
|
14,936 |
12,578 |
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.
Segment assets and liabilities
|
|
Asset |
Asset |
Total |
|
|
management |
installation |
Operations |
|
31 December 2014 |
£'000 |
£'000 |
£'000 |
|
Assets reported by segment |
|
|
|
|
Intangible assets |
10,932 |
- |
10,932 |
|
Property, plant and equipment |
88,504 |
- |
88,504 |
|
Inventories |
1,211 |
- |
1,211 |
|
|
|
|
100,647 |
|
Assets not reported by segment |
|
|
16,615 |
|
Total assets |
|
|
117,262 |
|
Liabilities reported by segment |
|
|
|
|
Bank loans |
61,549 |
- |
61,549 |
|
Obligations under hire purchase agreements |
154 |
- |
154 |
|
|
|
|
61,703 |
|
Liabilities not reported by segment |
|
|
19,605 |
|
Total liabilities |
|
|
81,308 |
|
|
Asset |
Asset |
Total |
|
|
management |
installation |
Operations |
|
31 December 2013 |
£'000 |
£'000 |
£'000 |
|
Assets reported by segment |
|
|
|
|
Intangible assets |
2,018 |
- |
2,018 |
|
Property, plant and equipment |
57,041 |
- |
57,041 |
|
Inventories |
2,504 |
- |
2,504 |
|
|
|
|
61,563 |
|
Assets not reported by segment |
|
|
8,720 |
|
Total assets |
|
|
70,283 |
|
Liabilities reported by segment |
|
|
|
|
Obligations under hire purchase agreements |
9 |
- |
9 |
|
|
|
|
9 |
|
Liabilities not reported by segment |
|
|
47,682 |
|
Total liabilities |
|
|
47,691 |
3 Income statement by nature and items of expenditure included in the consolidated statement of comprehensive income
|
|
2014 |
2013 |
|
|
£'000 |
£'000 |
|
Revenue |
42,386 |
27,916 |
|
Direct rental costs |
(3,712) |
(2,575) |
|
Direct subcontractor costs |
(6,125) |
(6,220) |
|
Other direct sales costs and systems rental |
(4,929) |
(1,312) |
|
Staff costs |
(6,549) |
(4,474) |
|
Depreciation: |
|
|
|
- owned assets |
(4,447) |
(2,723) |
|
- leased assets |
(79) |
(31) |
|
Amortisation |
(1,155) |
(262) |
|
Other operating income |
215 |
- |
|
Auditor's remuneration: |
|
|
|
- as auditor |
(68) |
(51) |
|
- other services |
(179) |
(29) |
|
Exceptional costs and fair value adjustments |
(637) |
- |
|
Operating lease costs: |
|
|
|
- plant and equipment |
(5) |
(1) |
|
Other operating charges |
(1,713) |
(2048 |
|
Profit from operations |
13,003 |
8,190 |
|
Finance costs |
(2,015) |
(1,122) |
|
Finance income |
30 |
403 |
|
Profit before taxation |
11,018 |
7,471 |
Included in exceptional items and fair value adjustments expenses are: i) £nil (2013: £(377,143) relates to the interest rate hedge fair value adjustment and ii) £nil (2013: £644,275) that relates to share-based payments. £nil (2013: £Nil) restructuring debt, £479,691 (2013: £Nil) acquisition costs and £157,500 redundancy costs (2013: £Nil). Exceptional items totalling £267k have been re-classified under their statutory headings as the Board consider this to better reflect the nature of these costs. Included within other direct sales costs and systems rental are staff costs of £2,245k (2013: £nil).
Auditors remuneration can be analysed as:
|
|
2014 |
2013 |
|
|
£'000 |
£'000 |
|
Statutory group audit (Baker Tilly UK Audit LLP) |
56 |
39 |
|
Statutory parent audit |
12 |
12 |
|
Taxation services (Baker Tilly Tax and Accounting Limited) |
13 |
15 |
|
Corporate finance (Baker Tilly Corporate Finance LLP) |
157 |
- |
|
Non-statutory audit services (Baker Tilly UK Audit LLP) |
9 |
14 |
|
|
247 |
80 |
4 Particulars of employees
The average number of staff employed by the Group, including Executive Directors, during the financial year was:
|
|
2014 |
2013 |
|
|
Number |
Number |
|
Number of administrative staff |
20 |
9 |
|
Number of operational staff |
208 |
76 |
|
Number of sales staff |
5 |
5 |
|
Number of IT staff |
12 |
4 |
|
Number of Directors |
2 |
2 |
|
|
247 |
96 |
The aggregate payroll costs, including Executive Directors, of the employees were:
|
|
2014 |
2013 |
|
|
£'000 |
£'000 |
|
Wages and salaries |
7,654 |
3,364 |
|
Social security costs |
734 |
384 |
|
Staff pension costs |
145 |
64 |
|
Share based payment |
240 |
644 |
|
Director pension costs |
21 |
18 |
|
|
8,794 |
4,374 |
5 Directors' emoluments
The Directors' aggregate remuneration in respect of qualifying services were:
|
|
2014 |
2013 |
|
|
£'000 |
£'000 |
|
Emoluments receivable (including share based payment) |
711 |
589 |
|
Fees |
21 |
52 |
|
Value of Group pension contributions to money purchase schemes |
5 |
5 |
|
Other pension |
16 |
15 |
|
|
753 |
661 |
|
|
2014 |
2013 |
|
Emoluments of highest paid Director |
£'000 |
£'000 |
|
Total emoluments |
423 |
387 |
|
Pension contributions |
16 |
15 |
The number of Directors who accrued benefits under Company pension schemes was as follows:
|
|
2014 |
2013 |
|
|
Number |
Number |
|
Money purchase schemes |
1 |
1 |
6 Finance costs and finance income
|
|
2014 |
2013 |
|
|
£'000 |
£'000 |
|
Finance costs |
|
|
|
Bank loans and overdrafts |
1,731 |
1,121 |
|
Interest rate hedge fair value |
277 |
|
|
Hire purchase |
7 |
1 |
|
Total finance costs |
2,015 |
1,122 |
|
Finance income |
|
|
|
Bank interest receivable |
30 |
26 |
|
Interest rate hedge fair value |
- |
377 |
|
Total finance income |
30 |
403 |
7 Taxation
|
|
2014 |
2013 |
|
|
£'000 |
£'000 |
|
Analysis of charge in the year |
|
|
|
Current tax: |
|
|
|
Current income tax expense |
372 |
- |
|
Over provision in prior year |
- |
11 |
|
Total current income tax |
372 |
11 |
|
Deferred tax: |
|
|
|
Origination and reversal of temporary differences |
(147) |
885 |
|
Tax on profit on ordinary activities |
225 |
896 |
The charge for the period can be reconciled to the profit per the consolidated statement of comprehensive income as follows:
|
Profit before tax |
11,018 |
7,471 |
|
Tax at the UK corporation tax rate of 21% (2013: 23%) |
2,314 |
1,718 |
|
Expenses not deductible for tax purposes |
121 |
19 |
|
Adjustments to tax charge in respect of previous periods |
132 |
3 |
|
Change in tax rate |
- |
(844) |
|
Deferred tax on share options |
(2,342) |
- |
|
Tax expense in the income statement |
225 |
896 |
8 Earnings per share
The calculation of EPS is based on the following data and number of shares:
|
|
2014 |
2013 |
|
|
£'000 |
£'000 |
|
Profit for the year used for calculation of basic EPS |
10,793 |
6,575 |
|
Amortisation of intangible assets |
1,155 |
262 |
|
Exceptional costs |
637 |
- |
|
Tax effect of adjustments |
(394) |
(64) |
|
Earnings for the purpose of underlying EPS |
12,191 |
6,773 |
|
|
|
|
|
Number of shares |
2014 |
2013 |
|
Weighted average number of ordinary shares for the purposes of basic EPS |
84,887,262 |
83,606,102 |
|
Effect of potentially dilutive ordinary shares: |
|
|
|
- share options |
3,370,617 |
4,898,694 |
|
Weighted average number of ordinary shares for the purposes of diluted EPS |
88,257,879 |
88,504,796 |
|
Earnings per share: |
|
|
|
- basic (pence) |
12.71 |
7.86 |
|
- diluted (pence) |
12.23 |
7.43 |
|
Underlying earnings per share: |
|
|
|
- basic (pence) |
14.36 |
8.10 |
|
- diluted (pence) |
13.81 |
7.65 |
The Directors consider that the underlying earnings per share calculation gives a better understanding of the Group's earnings per share.
9 Dividends
|
|
2014 |
2013 |
|
|
£'000 |
£'000 |
|
Equity dividends |
|
|
|
Paid during the year: |
|
|
|
Dividends on equity shares £0.0255 (2013: £0.0185) |
2,174 |
1,546 |
|
Total dividends |
2,174 |
1,546 |
10 Intangible assets
|
|
|
|
|
|
|
|
|
Goodwill |
Customer Contracts |
Development |
Software |
Total |
|
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
Cost |
|
|
|
|
|
|
As at 1 January 2013 |
- |
- |
828 |
1,810 |
2,638 |
|
Additions |
- |
- |
364 |
- |
364 |
|
As at 31 December 2013 |
- |
- |
1,192 |
1,810 |
3,002 |
|
Additions |
- |
|
356 |
183 |
539 |
|
Additions as part of UPL Acquisition |
4,112 |
2,160 |
- |
3,258 |
9,530 |
|
As at 31 December 2014 |
4,112 |
2,160 |
1,548 |
5,251 |
13,071 |
|
Amortisation |
|
|
|
|
|
|
As at 1 January 2013 |
- |
- |
17 |
705 |
722 |
|
Charge for year |
- |
- |
27 |
235 |
262 |
|
As at 31 December 2013 |
- |
- |
44 |
940 |
984 |
|
Charge for year |
- |
332 |
77 |
746 |
1,155 |
|
As at 31 December 2014 |
- |
332 |
121 |
1,686 |
2,139 |
|
Net book value |
|
|
|
|
|
|
At 31 December 2014 |
4,112 |
1,828 |
1,427 |
3,565 |
10,932 |
|
At 31 December 2013 |
- |
- |
1,148 |
870 |
2,018 |
|
At 1 January 2013 |
- |
- |
811 |
1,105 |
1,916 |
11 Property, plant and equipment
|
|
Freehold/ leasehold property |
Plant and machinery |
Fixtures fittings and equipment |
Motor Vehicles |
Total |
|
|
|||||
|
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
Cost |
|
|
|
|
|
|
As at 1 January 2013 |
103 |
39,220 |
416 |
- |
39,739 |
|
Additions |
33 |
24,467 |
95 |
- |
24,595 |
|
Disposals |
- |
(687) |
- |
- |
(687) |
|
As at 31 December 2013 |
136 |
63,000 |
511 |
- |
63,647 |
|
Additions |
5 |
35,715 |
214 |
- |
35,934 |
|
Additions as part of UPL acquisition |
1,990 |
- |
437 |
112 |
2,539 |
|
Disposals |
- |
(69) |
- |
- |
(69) |
|
As at 31 December 2014 |
2,131 |
98,646 |
1,162 |
112 |
102,051 |
|
Depreciation |
|
|
|
|
|
|
As at 1 January 2013 |
30 |
3,429 |
176 |
- |
3,635 |
|
Charge for year |
20 |
2,654 |
80 |
- |
2,754 |
|
Disposals |
- |
(124) |
- |
- |
(124) |
|
As at 31 December 2013 |
50 |
5,959 |
256 |
- |
6,265 |
|
Charge for year |
56 |
4,200 |
236 |
34 |
4,526 |
|
Disposals |
- |
(17) |
- |
- |
(17) |
|
As at 31 December 2014 |
106 |
10,142 |
492 |
34 |
10,774 |
|
Net book value |
|
|
|
|
|
|
At 31 December 2014 |
2,025 |
88,504 |
670 |
78 |
91,277 |
|
At 31 December 2013 |
86 |
57,041 |
92 |
163 |
57,382 |
|
At 1 January 2013 |
73 |
35,791 |
92 |
148 |
36,104 |
Hire purchase agreements
Included within the net book value of £91,277,000 (2013: £57,382,000, 2012: £36,104,000) is £208,000 (2013: £84,000, 2012:
£115,000) relating to assets held under hire purchase agreements. The depreciation charged to the consolidated financial statements in the year in respect of such assets amounted to £79,000 (2013: £31,000, 2012: £31,000).
The assets are secured by a bond and floating charge (note 18).
12 Financial asset investments
|
|
Shares in group undertaking |
Unlisted investments |
Total |
|
|
£'000 |
£'000 |
£'000 |
|
Cost |
|
|
|
|
As at 1 January 2013 and 31 December 2013 |
- |
- |
- |
|
Additions as part of UPL acquisition |
43 |
40 |
83 |
|
|
|
|
|
|
As at 31 December 2014 |
43 |
40 |
83 |
|
|
|
|
|
Subsidiary undertakings
|
|
Country of |
|
Proportion of |
|
|
|
incorporation |
Holding |
shares held |
Nature of business |
|
All held by the Company: |
|
|
|
|
|
UK Gas Connection Limited |
Scotland |
Ordinary shares |
100% |
Gas utility management |
|
UK Meter Assets Limited |
Scotland |
Ordinary shares |
100% |
Gas utility management |
|
UK Data Management Limited |
Scotland |
Ordinary shares |
100% |
Data management |
|
UKMA (AF) Limited* |
England |
Ordinary shares |
100% |
Leasing |
|
Utility Partnership Limited |
Wales |
Ordinary shares |
100% |
Electricity utility management |
|
UPL Italia SRL* |
Italy |
Ordinary Shares |
100% |
Electricity utility management |
* The shareholding in this company is indirect via a subsidiary company.
13 Impairment of goodwill and intangibles with indefinite lives
Goodwill arising on acquisitions is allocated to cash-generating units comprising the acquired businesses.
The directors believe the cash-generating units comprise the following operating segments, which represent the smallest individual groups of assets generating cash flows. Goodwill has been allocated between the groups operating segments as follows:
|
Group |
Metering & data |
Utility Services and Energy |
Total |
|
|
£'000 |
£'000 |
£'000 |
|
As at 1 January 2014 |
- |
- |
- |
|
Arising on acquisition |
2,921 |
1,191 |
4,112 |
|
At 31 December 2014 |
2,921 |
1,191 |
4,112 |
In assessing value in use, the estimated future cash flows of each operating segment are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. The estimated cash flows are derived by discounting future cash flows that are based on conservative growth and attrition rates and discounted at a rate of 8.2%.
The value in use calculated at 31 December 2014 was £20.0m. Comparing this to the net asset value of the operating segments identified above, the directors believe the value of goodwill is not impaired as 31 December 2014. The accounting treatment resulted in an impairment loss of £nil.
14 Inventories
|
|
2014 |
2013 |
|
|
£'000 |
£'000 |
|
Finished goods |
913 |
1,737 |
|
Consumables |
298 |
767 |
|
|
1,211 |
2,504 |
15 Trade and other receivables
|
|
2014 |
2013 |
|
|
£'000 |
£'000 |
|
Trade receivables |
3,588 |
3,326 |
|
Prepayments |
542 |
246 |
|
Accrued income |
4,816 |
1,885 |
|
Other receivables |
70 |
32 |
|
Income tax repayable |
57 |
47 |
|
VAT recoverable |
401 |
563 |
|
|
9,474 |
6,099 |
The receivables above include the following amounts falling due after more than one year:
|
|
2014 |
2013 |
|
|
£'000 |
£'000 |
|
Accrued income |
1,172 |
- |
The Directors consider that the carrying amount of trade and other receivables approximates to their fair value.
The Group's credit risk is primarily attributable to trade receivables and accrued income. The amounts presented in the statement of financial position are net of allowances for doubtful receivables. The allowance for doubtful receivables or provision against accrued income in the year was £33,414 (2013: £Nil, 2012: £Nil). The ageing profile of trade receivables past due date is shown below:
|
|
2014 |
2013 |
|
|
£'000 |
£'000 |
|
31-60 days |
210 |
299 |
|
60-90 days |
156 |
401 |
|
Over 90 days |
151 |
198 |
|
|
517 |
898 |
|
Allowance for doubtful receivables |
(33) |
- |
|
|
484 |
898 |
Trade receivables are non interest-bearing and are generally on 30-90 days terms.
Trade receivables due from related parties at 31 December 2014 amounted to £Nil (2013: £Nil, 2012: £Nil).
Receivables are all in Sterling denominations.
The Directors are of the opinion that £33,000 of the overdue debts as at 31 December 2014 (2013: £Nil, 2012: £Nil) require impairment.
Accrued income is invoiced periodically and customers are the same as those within Trade receivables. Due to its nature there is no accrued income past due.
16 Cash and cash equivalents
Cash and cash equivalents comprise cash held by the Group. The carrying amount of the asset approximates the fair value. All balances are held in Sterling.
During each period, there were no amounts of cash placed on short-term deposit.
For the purposes of the cash flow statement, cash and cash equivalents comprise:
|
|
2014 |
2013 |
|
|
£'000 |
£'000 |
|
Cash |
4,285 |
2,073 |
|
|
4,285 |
2,073 |
17 Trade and other payables
|
|
2014 |
2013 |
|
|
£'000 |
£'000 |
|
Current |
|
|
|
Trade payables |
7,767 |
4,569 |
|
Other payables |
428 |
15 |
|
Other taxes |
861 |
249 |
|
Income tax |
377 |
- |
|
Deferred income |
1,623 |
291 |
|
Accruals |
4,084 |
3,755 |
|
|
15,140 |
8,879 |
The Directors consider that the carrying amount of trade and other payables approximates to their fair value.
The maturity profile of trade payables is given below:
|
|
2014 |
2013 |
|
|
£'000 |
£'000 |
|
Current |
5,326 |
4,026 |
|
31-60 days |
1,099 |
160 |
|
60-90 days |
539 |
58 |
|
Over 90 days |
803 |
325 |
|
|
7,767 |
4,569 |
Trade payables are non interest-bearing and are normally settled on 30-45 day terms.
All trade liabilities are Sterling denominated.
18 Bank loans and overdrafts
|
|
2014 |
2013 |
|
|
£'000 |
£'000 |
|
Current |
|
|
|
Bank loans |
7,904 |
3,933 |
|
Bank overdraft |
- |
- |
|
|
7,904 |
3,933 |
|
Non-current |
|
|
|
Bank loans |
53,645 |
31,475 |
|
Bank overdraft |
- |
- |
|
|
53,645 |
31,475 |
Bank loans at 31 December 2014 relate to a term loan facility of £105.0m that was finalised in March 2014.
The term loan is available for 24 months, is payable in equal quarterly instalments based on a ten year repayment profile, with a final repayment date of 14 March 2019. The term loan attracts interest at a rate of 1.9% over the three month LIBOR. 0.76% is paid on undrawn funds.
The banks have a bond and floating charge over current and future property and assets.
The Group has fixed the bank interest payable through an interest rate swap (see note 20).
19 Commitments under hire purchase agreements
Future minimal commitments under hire purchase agreements are as follows:
|
|
2014 |
2013 |
|
|
£'000 |
£'000 |
|
Current |
|
|
|
Amounts payable within one year |
90 |
3 |
|
Non-current |
|
|
|
Amounts payable between two to five years |
64 |
6 |
|
Amounts payable after more than five years |
- |
- |
|
|
64 |
6 |
The Group has hire purchase contracts for various items of computer equipment. These leases have terms of renewal but no purchase options and escalation clauses. Renewals are at the option of the specific entity that holds the lease.
The Directors consider that the future minimum lease payments under hire purchase contracts approximate to the present value of the minimum payments. Obligations under hire purchase contracts are secured on the underlying assets.
20 Other financial liabilities and assets
The Group's treasury policy and management of financial instruments, which form part of these financial statements, are set out in the Financial Review.
|
|
2014 |
2013 |
|
|
£'000 |
£'000 |
|
Other financial assets |
- |
207 |
|
Non-current liabilities |
|
|
|
Other financial liabilities |
70 |
- |
Other financial assets and liabilities relate to the fair value adjustment on interest rate swaps.
The Group uses interest rate swaps to manage interest rate risk on interest-bearing loans and borrowings which means that the Group pays a fixed interest rate rather than being subject to fluctuations in the variable rate. The Group has not designated these derivatives as cash flow hedges.
The interest rate swaps cover an interest rate swap for an amount of £30,000,000 as at 31 December 2014 (2013: £28,200,000, 2012: £13,200,000).
The interest rate swap results in a fixed interest rate of 2.80-2.82%.
The termination date for the derivatives is 15 September 2016.
The movement in the fair value is shown below:
|
|
2014 |
2013 |
|
|
£'000 |
£'000 |
|
Interest rate swap |
|
|
|
Opening position |
207 |
- |
|
Adjustment to fair value |
(277) |
207 |
|
Closing position |
(70) |
207 |
Fair values
The Directors do not consider there to be any material differences between the fair values and carrying values of any financial assets or liabilities recorded within these financial statements at the balance sheet date other than as set out below.
Fair value hierarchy
The Group uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique:
· Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities;
· Level 2: other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directly or indirectly; and
· Level 3: techniques which use inputs which have a significant effect on the recorded fair value that are not based on observable market data.
At 31 December 2014, the Group held the following financial instruments measured at fair value:
|
|
31 December |
|
|
|
|
|
2014 |
Level 1 |
Level 2 |
Level 3 |
|
Liabilities measured at fair value |
£'000 |
£'000 |
£'000 |
£'000 |
|
Financial liabilities at fair value through the statement of comprehensive income : |
|
|
|
|
|
Interest rate derivatives |
70 |
- |
70 |
- |
Fair value has been assessed on a Mark to Market basis.
The above assets are shown on the statement of financial position as other current financial assets and other current financial liabilities.
During the reporting period ended 31 December 2014, there were no transfers between Level 1 and Level 2 fair value measurements and no transfers into and out of Level 3 fair value measurements.
21 Financial risk management
The Board reviews and agrees policies for managing the risks associated with interest rate, credit and liquidity risk. The Group has in place a risk management policy that seeks to minimise any adverse effect on the financial performance of the Group by continually monitoring the following risks:
Interest rate risk
The Group's interest rate risk arises as a result of both its long and short-term borrowing facilities.
The Group seeks to manage exposure to interest rate fluctuations through the use of fixed interest rate swaps.
Interest rate sensitivity
The following table demonstrates the sensitivity to a change in interest rates on loans and borrowings after the impact of hedge accounting. The Group's profit before tax is affected through the impact on floating rate borrowings as follows:
|
|
|
Effect on profit |
|
|
Increase/decrease |
before tax |
|
Pound Sterling |
in basis points |
£'000 |
|
2014 |
1% |
195 |
|
2013 |
1% |
72 |
Interest rate risk profile of financial liabilities
The interest rate profile of the financial liabilities of the Group (being bank loans and overdrafts, obligations under finance leases and other financial liabilities) as at each period end is as follows:
|
|
Fixed rate |
Variable rate |
|
|
|
financial liabilities |
financial liabilities |
Total |
|
|
£'000 |
£'000 |
£'000 |
|
2014 |
30,153 |
31,550 |
61,703 |
|
2013 |
28,209 |
7,208 |
35,417 |
|
1 January 2013 |
13,213 |
7,249 |
20,462 |
The fixed rate financial liabilities relates to the portion of the banking facility that is fixed through hedging instruments.
The following is the maturity profile of the Group's financial liabilities as at 31 December:
|
|
2014 |
2013 |
|
|
£'000 |
£'000 |
|
Fixed rate |
|
|
|
Less than one year |
3,090 |
2,824 |
|
Two to five years |
12,063 |
11,286 |
|
Over five years |
15,000 |
14,099 |
|
|
30,153 |
28,209 |
|
Variable rate |
|
|
|
Less than one year |
4,603 |
1,086 |
|
Two to five years |
19,618 |
4,344 |
|
Over five years |
7,329 |
1,778 |
|
|
31,550 |
7,208 |
Interest rate risk profile of financial assets
The Group's financial assets at 31 December 2014 comprise cash and trade receivables. The cash balance of £4,285,000 (2013: £2,073,000, 2012: £6,455,000) is a floating rate financial asset.
Fair values of financial liabilities and financial assets
The fair values, based upon the market value or discounted cash flows of financial liabilities and financial assets held in the Group, were not materially different from their book values.
Foreign currency risk
The Group's exposure to the risk of changes in foreign exchange rates is insignificant as primarily all of the Group's operating activities are denominated in pound Sterling.
Liquidity risk
The Group manages its cash in a manner designed to ensure maximum benefit is gained whilst ensuring security of investment sources. The Group's policy on investment of surplus funds is to place deposits at institutions with strong credit ratings.
The ageing and maturity profile of the Group's material liabilities are covered within the relevant liability note.
Credit risk
Credit risk with respect to trade receivables and accrued income is due to the Group trading with a limited number of companies who are generally large utility companies or financial institutions. Therefore, the Group does not expect, in the normal course of events, that these debts are at significant risk. The Group's maximum exposure to credit risk equates to the carrying value of cash held on deposit and trade, other receivables and accrued income.
The Group's maximum exposure to credit risk from its customers is £8,278,000 (2013: £5,211,000, 2012: £2,786,000) as disclosed in note 15 - trade and other receivables, and accrued income.
The Group regularly monitors and updates its cash flow forecasts to ensure it has sufficient and appropriate funds to meet its ongoing operational requirements whilst maintaining adequate headroom on its facilities to ensure no breach in its banking covenants.
Capital management
Capital is the equity attributable to the equity holders of the parent. The primary objective of the Group's capital management is to ensure that it maintains a strong credit rating and healthy capital ratios in order to support its business and maximise shareholder value. The Group manages its capital structure, and makes adjustments to it, in light of changes in economic conditions. To maintain or adjust the capital structure, the Group may adjust the dividend payment to shareholders, sell assets, return capital to shareholders or issue new shares.
The Group monitors capital on the basis of a leverage ratio. This ratio is calculated as net debt divided by EBITDA. Net debt is calculated as total borrowings less cash. EBITDA is calculated as operating profit before any significant non-recurring items, interest, tax, depreciation and amortisation.
22 Deferred taxation
The movement in the deferred taxation liability during the period was:
|
|
2014 |
2013 |
|
|
£'000 |
£'000 |
|
Opening deferred tax liability |
3,395 |
2,510 |
|
Increase in provision through consolidated statement of comprehensive income |
1,000 |
885 |
|
Closing deferred tax liability |
4,395 |
3,395 |
All movements identified have gone through the statement of comprehensive income.
The Group's provision for deferred taxation consists of the tax effect of temporary differences in respect of:
|
|
2014 |
2013 |
|
|
£'000 |
£'000 |
|
Excess of taxation allowances over depreciation on fixed assets |
5,330 |
3,385 |
|
Tax losses available |
(37) |
(38) |
|
Deferred tax asset on share options |
(2,021) |
|
|
Deferred tax on intangible acquired as part of UPL |
1,137 |
|
|
Fair value of interest rate swaps (net) |
(14) |
48 |
|
|
4,395 |
3,395 |
The deferred tax included in the consolidated statement of comprehensive income is as follows:
|
|
2014 |
2013 |
|
|
£'000 |
£'000 |
|
Accelerated capital allowances |
1,945 |
597 |
|
Tax losses |
1 |
201 |
|
Deferred tax asset on share options |
(2,021) |
- |
|
Movement in fair value of interest rate swaps |
(55) |
87 |
|
|
(130) |
885 |
23 Related party transactions
A number of key management personnel hold positions in other entities that result in them having control or significant influence over the financial or operating policies.
A number of these entities transacted with the Group in the reporting period. The terms and conditions of the transactions with key management personnel and their related parties were no more favourable than those available, or which might reasonably be expected to be available, on similar transactions to non-key management personnel and related entities on an arm's length basis.
During the period, the Group entered into the following transactions with related parties:
During the year the Group paid rent amounting to £41,500 (2013: £41,500, 2012: £41,500) to the Directors' pension scheme, Eco Retirement Benefit Scheme, for the use of certain premises. Alan Foy is a trustee of the scheme. At the year-end date, an amount of £4,150 (2013: £4,150, 2012: £4,150) was outstanding in this regard.
During the year, the Group paid dividends to Alan Foy of £226,694 and Paul Dollman and Miriam Greenwood of £94 each.
Remuneration of key management which includes Executive and Non-executive Directors together with certain management personnel:
|
|
2014 |
2013 |
|
|
£'000 |
£'000 |
|
Salaries and other short-term employee benefits |
1,122 |
1,101 |
24 Share capital
|
|
2014 |
2013 |
|
|
£'000 |
£'000 |
|
Allotted and called up: |
|
|
|
85,575,452 ordinary shares of £0.01 each (2013 and 2012: 83,877,872 ordinary shares of £0.01 each) |
856 |
839 |
On 14 April 2014 1,246,277 shares were issued in part consideration of acquisition of Utility Partnership Limited.
On 23 September 2014 401,176 ordinary share options where exercised and subsequently sold by staff.
On 13 October 2014 7,175 ordinary share options where exercised and subsequently sold by staff.
On 27 October 2014 518 ordinary share options where exercised and subsequently sold by staff.
On 23 December 2014 42,434 ordinary share options were exercised and subsequently sold by staff, 3,500 of them by Glen Murray.
25 Share-based payments
On 20 June 2011 the Company adopted both an Approved Company Share Option Plan (the CSOP) and an Unapproved Company Share Option Plan (the Unapproved Plan).
CSOP
The CSOP is open to any employee of any member of the Group up to a maximum value of £30,000 per employee. No option can be exercised within three years of its date of grant.
Unapproved plan
The Unapproved Plan is open to any employee, Executive Director or Non-executive Director of the Company or any other Group company who is required to devote substantially the whole of his time to his duties under his contract of employment. Except in certain specified circumstances no option will be exercisable within five years of its grant.
|
Plan |
At 1 January 2014 |
Granted |
Exercised |
Lapsed |
At 31 December 2014 |
Exercise price (pence) |
Date exercisable |
Expiry date |
|
CSOP |
565,794 |
- |
(336,503) |
- |
229,291 |
76.0 |
15/7/14 |
15/7/21 |
|
CSOP |
39,088 |
- |
- |
- |
39,088 |
153.5 |
28/5/15 |
28/5/22 |
|
|
|
|
|
|
|
|
|
|
|
Unapproved |
2,979,060 |
|
|
|
2,979,060 |
60.0 |
20/6/16 |
20/6/21 |
|
|
|
|
|
|
|
|
|
|
|
Unapproved |
1,162,629 |
|
|
|
1,162,629 |
153.5 |
28/5/17 |
28/5/22 |
|
|
|
|
|
|
|
|
|
|
|
Unapproved |
179,375 |
|
(114,800) |
|
64,575 |
60.0 |
28/6/13 |
28/6/23 |
|
Unapproved |
- |
1,430,965 |
- |
- |
1,430,965 |
350.00 |
12/11/14 |
12/11/24 |
Valuation
The fair value of all options granted has been estimated using the Black-Scholes option model, taking into account the terms and conditions upon which the options were granted. The following table lists the inputs to the model used for the year ended 31 December 2014:
|
|
|
Unapproved Plan |
|
Option strike price (£) |
|
3.50 |
|
Share price (£) |
|
3.95 |
The weighted average fair value of share options issued during the year was £3.50.
Share Incentive Plan
The Company introduced the Smart Metering Systems Share Incentive Plan ("the SIP") in October 2014. Participants, which could include directors, in the SIP are entitled to purchase, at market value, up to a prescribed number of 1p ordinary shares in the Company at the end of each month for which they will receive a like for like matching share.
A total of 24,382 were purchased in the market by the 163 employees who participated in the SIP during the year. As 31 December 2014 the SIP held 24,382 shares on their behalf.
26 Other reserve
This is a non-distributable reserve that initially arose by applying merger relief under s162 CA06 to the shares issued in 2009 in connection with the Group restructuring. This was previously recognised as a merger reserve under UK GAAP. Under IFRS, this has been classed as an "other reserve". Additionally, the premium arising on the issue of shares as part of the acquisition of Utility Partnership Limited has been credited to this reserve as required by Companies Act 2006.
27 Commitments under operating leases
The Group has entered into commercial leases for office space. These leases have lives between one and 15 years with no renewal option included in the contracts. There are no restrictions placed upon the Group by entering into these leases.
Future minimum rentals payable under non-cancellable operating leases as at each year end are as follows:
|
|
2014 |
2013 |
|
|
£'000 |
£'000 |
|
Future minimal commitments under operating lease agreements are as follows: |
|
|
|
Payable within one year |
271 |
205 |
|
Payable within two and five years |
375 |
411 |
|
Payable after five years |
259 |
135 |
|
|
905 |
751 |
28 Ultimate controlling party
There is no ultimate controlling party by virtue of the structure of shareholdings in the Group.
29 Contingent liability
The Group is the subject of an ongoing HMRC enquiry in respect of payments made to Employee Benefit Trusts in prior years. Whilst the outcome of the enquiry is, as yet, uncertain, the beneficiaries of the Trusts have provided the Company with indemnities against any additional tax that may become payable as a result of these enquiries.
30 Distribution of the annual report and accounts to members
The announcement set out above does not constitute a full financial statement of the Groups affairs for the years ended 31 December 2013 or 2014. The Groups auditors have reported on the full accounts for each and have accompanied them with an unqualified report. The accounts have yet to be delivered to the Registrar of Companies. The annual report and accounts will be posted to shareholders in due course and will be available on our website www.sms-plc.com and for inspection by the public at the groups registered office during normal business hours.
This information is provided by RNS
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