TIDMSMS
RNS Number : 2555K
Smart Metering Systems PLC
20 September 2016
Smart Metering Systems plc
("SMS" or "the Company")
Interim Results for the six months ended 30 June 2016
Smart Metering Systems plc (AIM: SMS.L) is pleased to announce
its interim results, which show continued strong growth in the six
months to 30 June 2016.
Financial highlights
-- Revenue increased by 25% to GBP32.3m (H1 2015: GBP25.8m)
-- Total annualised recurring income* increased by 23% to GBP37.4m (H1 2015: GBP30.5m)
-- Underlying EBITDA** increased by 20% to GBP14.7m (H1 2015: GBP12.2m)
-- Underlying EBITDA** margin at 45% (H1 2015: 47%)
-- Underlying PBT*** increased by 15% to GBP9.2m (H1 2015: GBP8.0m)
-- Underlying earnings per share **** increased by 23% to 8.45p (H1 2015: 6.90p)
-- Interim dividend of 1.37p per ordinary share, an increase of 25%
* Recurring revenue refers to revenue generated by meter rental
and data contracts. Annualised recurring income refers to the
revenue being generated at a point in time.
** Underlying EBITDA is before exceptional items and other operating income.
*** Underlying PBT is before exceptional items, other operating
income and intangible amortisation.
**** 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.
Operational highlights
-- Completed the acquisition of CH4 Gas Utility and Maintenance
Services Limited (CH4), Trojan Utilities Limited (Trojan), and Qton
Solutions Limited (Qton), further strengthening the Group ahead of
the UK's domestic smart meter rollout programme with full UK-wide
direct installation and IT support capability
-- The Group has an initial order book of 300,000 dual fuel
domestic smart meters from eight contracted energy suppliers who
currently supply energy to circa 2 million homes
-- The Group now manages over 1 million utility metering and
data assets on behalf of energy suppliers in the industrial and
commercial (I&C) and domestic markets and has increased its
asset base in all business areas
30 June 31 Dec
2016 2015 Percentage
units units Increase
---------------------------- --------- ------- ----------
Total gas and electricity
metering and data assets 1,078,000 979,000 10%
Gas meter portfolio 785,000 723,000 9%
Gas data portfolio* 98,000 85,000 15%
Electricity meter portfolio 37,000 29,000 28%
Electricity data portfolio 158,000 142,000 11%
*Includes 84,000 ADM(TM) installations which is SMS' patented
remote meter reading product
Alan Foy, Chief Executive Officer, commented:
"SMS is delighted to deliver another set of strong results for
the first six months of 2016. The numbers exemplify how our
integrated business model of developing and expanding recurring gas
and electricity meter rental and data services income continues to
deliver financial and operational growth.
The first six months have been marked by milestones for the
Company including reaching over a million utility meter and data
assets managed on behalf of a growing customer base of energy
suppliers in the industrial and commercial and domestic markets. In
the domestic smart meter market, we have an initial order book of
300,000 dual fuel domestic smart meters from eight contracted
energy suppliers who currently supply energy to approximately 2
million homes."
For further information:
Smart Metering Systems
plc
Alan Foy, Chief Executive
Officer
Glen Murray, Chief Financial
Officer 0141 249 3850
Cenkos Securities
Neil McDonald 0131 220 6939 / 0207 397
Nick Tulloch 8900
Kreab
Matthew Jervois
Natalie Biasin
Daniel Holgersson 020 7074 1800
Notes to editors
About Smart Metering Systems Plc
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
Livingston, Cardiff, Cambridge, Bolton, Doncaster, Rugby, and
Normanton.
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.
Willie MacDiarmid
Chairman's statement
I am delighted to report another strong set of results for the
first half of 2016.
SMS now manages over 1 million utility metering and data assets
on behalf of an expanding customer base of energy suppliers in the
industrial and commercial (I&C) and domestic markets, including
the new domestic smart meter market, on long-term index-linked
contracts.
During the first half of 2016, SMS signed new contract
agreements for the ownership of domestic smart meters with a number
of energy suppliers, including the UK's largest independent energy
supplier, First Utility, as well as RHE, Green Energy, Flow Energy,
Spark Energy, Our Power, Ecotricity, and Economy Energy, thereby
firmly establishing SMS' position in the new and significant
domestic smart meter market.
The energy suppliers with whom SMS has contracted so far
represent part of the fastest growing segment of the energy supply
market and currently provide energy to circa 2 million of the circa
27 million homes in the UK which will be offered a new smart gas
and electricity meter by 2020.
The first six months are also notable for SMS' strategic
acquisitions of CH4, Trojan, and Qton, who together provide the
Group with the necessary in-house accreditation and capacity to
install and adopt ownership of utility metering assets on behalf of
the UK's licenced suppliers.
CH4 and Trojan, prior to acquisition by SMS, have installed over
400,000 domestic smart meters, which, we understand, accounts for
nearly 20% of all domestic smart meters installed in the UK. These
acquisitions significantly enhance SMS' capability to be one of the
key participants in the ongoing domestic smart meter rollout.
Our business
SMS' business model continues to build strong recurring income
in our gas and electricity business from its installed utility
metering portfolio.
The UK market for ownership of domestic smart meters presents a
significant market opportunity for rollout to some 27 million homes
by 2020.
With the recent acquisitions, SMS has changed its operational
delivery model from being wholly reliant on subcontractors for the
installation of utility meters to gaining direct control of a large
proportion of installation capacity, demonstrating and establishing
the necessary credentials to utility supplier customers and
potentially leading to increasing growth of a share in the UK's
domestic smart meter rollout.
Furthermore, SMS continues to grow its ADM(TM) product and smart
meter installations in the I&C market.
SMS' Asset Installation and Energy Management divisions continue
to perform strongly for UK utility suppliers and blue chip UK and
international customers by providing connections and infrastructure
design consulting services. These include Energy Performance
Certificates (EPC) and Energy Savings Opportunity Scheme (ESOS)
consultancy services, for which SMS is fully accredited, which are
ongoing requirements for large UK companies under the Energy
Performance of Buildings Regulations 2007 and the ESOS Regulations
2014.
In 2016 the Group's strategic priorities continue to be:
1. Continue to install and own utility metering infrastructure
and secure recurring rental and data income from SMS' contracted
energy suppliers.
2. Target the significant domestic smart meter market
opportunity in the UK based on SMS' proven business model and
established market position.
3. Increase levels of business for the Asset Installation and
Energy Management divisions with a focus on cross-selling the full
range of services offered to all SMS' customers.
People
During the first half of 2016, we significantly expanded our
installation field force with the acquisition of CH4 and Trojan.
SMS now employs 660 staff across the UK, an increase from 340 staff
prior to these acquisitions, and this has enhanced our capability
to provide full end-to-end services across connections, asset
management and energy services across the UK. The acquisition of
both CH4 and Trojan provides SMS with a dedicated workforce and two
training academies ensuring the Group has the ability to conduct
in-house training and increase its installation capacity,
particularly for the domestic smart meter rollout. The acquisition
of Qton enhanced Intellectual Property (IP) rights, but,
importantly, added IT skills, in the form of 17 IT professionals,
doubling our in-house IT resource.
During the six months to 30 June 2016, Paul Dollman stepped down
from his position as Non-executive Chairman of SMS, and from the
Board, in order to concentrate on his other business interests. We
thank Paul for all the work he has done for SMS during his three
years as Non-executive Chairman. I have now assumed the role of
Non-executive Chairman from my previous role as Non-executive
Director, which I had undertaken since 2014.
Furthermore, Graeme Bissett was appointed as a Non-executive
Director of the Company. Graeme was appointed as Chair of the
Company's Audit Committee and Miriam Greenwood was appointed as the
Company's Senior Independent Non-executive Director and Chair of
the Company's Remuneration Committee.
Dividend
SMS is pleased to announce a proposed interim cash dividend to
shareholders of 1.37p per ordinary share for the half year ended 30
June 2016, marking a 25% increase. The interim dividend will be
paid on 25 November 2016 to those shareholders on the register
(record date) on 21 October 2016 with an ex-dividend date of 20
October 2016.
Outlook
SMS has continued to deliver on its strategy and operational
plans during the first six months of 2016 and is very well
positioned to continue making progress in its core markets. We have
seen a strong first half of 2016 and have signed eight new
framework agreements with energy suppliers in the domestic smart
meter market. We have also made important strategic acquisitions to
directly employ our engineering workforce for the delivery of
I&C and domestic smart meter installations. We remain confident
on the outlook for the remainder of 2016.
Alan Foy
Chief Executive Officer's statement
During the first half of 2016 our utility meter and data
portfolio increased to 1.08 million, an increase of 99,000 since
the end of December 2015.
Operational review
Our integrated business model of developing and expanding
recurring gas and electricity meter rental and data services income
continues to ensure strong visibility of revenues. We continue to
fulfil our order book in the I&C market.
These recurring revenues are derived from our long-term
index-linked contracts, and support the long-term growth of our
business. The lifetime of SMS' metering assets is expected to be
over 20 years.
The acquisitions announced in the first half of 2016 provide SMS
with extra capacity to provide meter installation services to our
UK licenced energy supplier customers from a number of locations
around the UK, including Glasgow, Livingston, Cardiff, Cambridge,
Bolton, Doncaster, Rugby and Normanton.
UK domestic smart meter market
SMS is providing domestic smart meters as part of the UK
government's domestic smart meter programme. This initiative
requires every home in the UK to have smart meter functionality by
2020. To date, over 2 million have already been installed in the
UK. This will require significant investment for rolling out and
replacing gas and/or electricity meters in approximately 27 million
homes in the UK.
We are very well positioned for this new market, given our
business model, proven track record in the I&C market and the
increased capacity we have secured through our most recent
acquisitions in 2016.
Acquisitions
The acquisitions of CH4 and Trojan have enhanced SMS' capability
to be a key participant in the substantial domestic smart meter
market.
The acquisition of CH4 has added approximately 100 engineers and
60 contractors to the Group, of whom approximately 40 are domestic
smart gas and electricity installation engineers, alongside the
approximately 80 domestic smart gas and electricity installation
engineers from Trojan. Together they have installed approximately
400,000 domestic smart meters in the UK, independent of SMS.
The acquisition of IT systems specialist Qton has given SMS
direct control and ownership of all software applications used by
SMS and indeed other installation contractors in the domestic smart
meter market. Together, these acquisitions streamline our processes
and provide confidence to energy suppliers throughout the domestic
smart meter rollout.
ADM(TM)
SMS' patented "plug and play" ADM(TM) device is deployed to
84,000 I&C meters in the UK, delivering remote meter reading
and half-hourly consumption analysis from installed gas meters,
with accreditation secured for potential application to water
meters.
SMS installed 10,235 units in the first half of 2016, an
increase of 13.8% since December 2015.
Asset installation and energy management
The Asset Installation division continues to provide services to
new retail, residential, commercial, industrial and energy
generation projects on a nationwide basis, with an increasing focus
on the design and planning of heat networks. These projects include
one-off minor and major commercial connections and some of the
largest long-term masterplan mixed-use residential and commercial
projects in the UK, as well as supporting a number of major
national infrastructure projects.
The Energy Management division provides a full range of energy
management services, including comprehensive bureau, energy
efficiency, performance management, procurement and environmental
compliance. It processed and analysed 322,000 billing points and
performed 100 energy audits and compliance surveys, identifying
over GBP20m p.a. of potential energy savings for customers with an
investment requirement of over GBP63m.
SMS works with some of the largest corporate multi-site energy
users in the country and is increasingly focused on the turnkey
funding and implementation of energy reduction measures, often
identified through SMS' own auditing services.
Glen Murray
Chief Financial Officer's review
Results for the period
During the first half of 2016, SMS increased revenue by 25% to
GBP32.3m (H1 2015: GBP25.8m) as a result of increases in Asset
Management (recurring) revenue and Asset Installation revenue,
predominantly through turnover from acquired companies.
Annualised recurring meter rental and data revenue grew by 22.6%
to GBP37.4m compared with GBP30.5m during the first half of 2015.
In gas, meter recurring rent increased by 7% to GBP29.7m and data
recurring income increased by 9% to GBP2.4m, while in electricity,
meter recurring rent increased by 78% to GBP1.6m and data recurring
income increased by 16% to GBP3.7m.
Underlying EBITDA grew by 20% to GBP14.7m (H1 2015: GBP12.2m),
with an underlying EBITDA margin of 45% (H1 2015: 47%).
Asset Management recurring revenue grew 27% to GBP17.9m (H1
2015: GBP14.1m), while Asset Installation revenue increased 33% to
GBP12.8m (H1 2015: GBP9.6m). Energy Management revenue fell by 10%
to GBP1.8m (H1 2015: GBP2.0m) due to a one-off capital project in
the prior year. The underlying recurring Energy Management revenue
this year is marginally ahead of last year. Asset Management
revenue increased as a result of continued investment in our meter
asset portfolio whilst Asset Installation revenue increased
predominantly through the acquisitions of CH4, Trojan and Qton.
Six months Six months
ended ended
30 June 30 June
2016 2015 Percentage
Unaudited Unaudited Increase
GBPm GBPm %
Revenue 32.3 25.8 25.3%
Annualised recurring income* 37.4 30.5 22.6%
Statutory profit from operations 10.3 8.5
Amortisation of intangibles 0.9 0.6
Depreciation 4.3 3.1
Statutory EBITDA 15.5 12.2 26.8%
Other operating income (1.2) -
Exceptional items 0.4 -
Underlying EBITDA 14.7 12.2 20.3%
Net Interest (1.2) (1.1)
Depreciation (4.3) (3.1)
Underlying Profit before taxation 9.2 8.0 15.0%
Exceptional items (0.4) -
Other operating income 1.2 -
Amortisation of intangibles (0.9) (0.6)
Statutory profit before tax 9.1 7.4 22.9%
* Recurring revenue refers to revenue generated by meter rental
and data contracts. Annualised recurring income refers to the
revenue being generated at a point in time.
Cash and borrowings
SMS was delighted to announce in March 2016 a new GBP150m
revolving credit facility, provided by a club of banks: Barclays
plc (lead bank), Bank of Scotland plc and Santander UK plc. This
facility will fund the purchase of meter assets as part of a phased
installation programme in line with recent substantial contract
wins and under this facility we can fund 100% of the value of meter
assets purchased.
As at 30 June 2016, the Company had net debt of GBP80.5m
(December 2015: GBP79.0m) with a net debt to annualised underlying
EBITDA ratio of 2.74. The Company's available cash and unutilised
debt facility stood at GBP69.5m at 30 June 2016.
Capital investment in meter assets and ADM(TM) installations was
GBP14.8m compared to GBP21.1m in the first half of 2015. In the six
months to 30 June 2016, the I&C market segment's change to
smart metering is nearing completion, and domestic smart market is
commencing.
Treasury policies
The Company uses interest rate swaps to manage its exposure to
movements in interest rates.
GBP24.6m of borrowings as at 30 June 2016 (December 2015:
GBP26.4m) were subject to a fixed rate.
Consolidated interim statement of comprehensive income
For the period ended 30 June 2016
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2016 2015 2015
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
----------------------------------------- ---------- ---------- -----------
Revenue 32,312 25,789 53,945
Cost of sales (9,962) (8,547) (17,427)
----------------------------------------- ---------- ---------- -----------
Gross profit 22,350 17,242 36,518
Administrative expenses (13,201) (8,789) (18,484)
Other operating income 1,155 - 1,546
----------------------------------------- ---------- ---------- -----------
Profit from operations 10,304 8,453 19,580
----------------------------------------- ---------- ---------- -----------
Finance costs (1,182) (1,030) (2,118)
Finance income - 1 3
----------------------------------------- ---------- ---------- -----------
Profit before taxation 9,122 7,424 17,465
Taxation (1,793) (1,507) (2,463)
----------------------------------------- ---------- ---------- -----------
Profit for the period attributable
to equity holders 7,329 5,917 15,002
Other comprehensive income - - -
----------------------------------------- ---------- ---------- -----------
Total comprehensive income 7,329 5,917 15,002
----------------------------------------- ---------- ---------- -----------
The profit from operations arises
from the Group's continuing operations.
Earnings per share attributable
to owners of the parent during
the period:
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2016 2015 2015
Unaudited Unaudited Audited
Basic earnings per share (pence) 8.45 6.90 17.46
Diluted earnings per share (pence) 8.29 6.65 16.78
----------------------------------------- ---------- ---------- -----------
Consolidated interim statement of financial position
As at 30 June 2016
30 June 30 June 31 December
2016 2015 2015
Restated
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
------------------------------------ --------- ---------- -----------
Assets
Non-current assets
Intangible assets 14,956 10,445 10,028
Property, plant and equipment 137,818 109,715 125,700
Investments 118 83 83
Trade and other receivables 764 1,046 901
153,656 121,289 136,712
------------------------------------ --------- ---------- -----------
Current assets
Inventories 2,705 838 1,099
Trade and other receivables 14,909 9,277 10,205
Income tax recoverable - - -
Cash and cash equivalents 9,280 2,667 5,711
Other current financial assets - - -
------------------------------------ --------- ---------- -----------
26,894 12,782 17,015
------------------------------------ --------- ---------- -----------
Total assets 180,550 134,071 153,727
------------------------------------ --------- ---------- -----------
Liabilities
Current liabilities
Trade and other payables 23,114 16,649 14,919
Income tax payable 635 118 445
Bank loans and overdrafts 12,439 9,438 8,496
Commitments under hire purchase
agreements 537 70 64
Other current financial liabilities 18 51 46
------------------------------------ --------- ---------- -----------
36,743 26,326 23,970
------------------------------------ --------- ---------- -----------
Non-current liabilities
Bank loans 77,382 63,114 76,219
Commitments under hire purchase
agreements 337 36 14
Deferred tax liabilities 7,999 5,399 6,139
------------------------------------ --------- ---------- -----------
85,718 68,549 82,372
------------------------------------ --------- ---------- -----------
Total liabilities 122,461 94,875 106,342
------------------------------------ --------- ---------- -----------
Net assets 58,089 39,196 47,385
------------------------------------ --------- ---------- -----------
Equity
Share capital 887 861 861
Share premium 10,564 9,614 9,650
Other reserves 8,447 4,258 4,258
Treasury shares (191) (138) (231)
Retained earnings 38,382 24,601 32,847
------------------------------------ --------- ---------- -----------
Total equity attributable to
equity holders of the parent
company 58,089 39,196 47,385
------------------------------------ --------- ---------- -----------
Consolidated interim statement of changes in shareholders'
equity
For the period ended 30 June 2016
Share Share Other Treasury Retained
capital premium reserve shares earnings Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------- ------- ------- ------- -------- -------- -------
Attributable
to owners of
the parent company:
As at 1 July
2015 861 9,614 4,258 (138) 26,146 40,741
Prior period
adjustment - - - - (1,545) (1,545)
---------------------
As at 1 July
2015 (restated) 861 9,614 4,258 (138) 24,601 39,196
Total comprehensive
income for the
period - - - - 9,085 9,085
Transactions
with owners in
their capacity
as owners:
Dividends (note
6) - - - - (947) (947)
Shares issued - 36 - - - 36
Shares held by
Share Incentive
Plan (SIP) - - - (93) - (93)
Share options - - - - 205 205
Income tax effect
of share options - - - - (97) (97)
--------------------- ------- ------- ------- -------- -------- -------
As at 31 December
2015 861 9,650 4,258 (231) 32,847 47,385
Total comprehensive
income for the
period - - - - 7,329 7,329
Transactions
with owners in
their capacity
as owners:
Dividends (note
6) - - - - (1,919) (1,919)
Shares issued 26 914 4,189 - - 5,129
Shares held by
SIP - - - 40 - 40
Share options - - - - 163 163
Income tax effect
of share options - - - - (38) (38)
--------------------- ------- ------- ------- -------- -------- -------
As at 30 June
2016 887 10,564 8,447 (191) 38,382 58,089
--------------------- ------- ------- ------- -------- -------- -------
Consolidated interim statement of cash flows
For the period ended 30 June 2016
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2016 2015 2015
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
----------------------------------- ---------- ---------- -----------
Cash flow from Operating
activities
Profit before taxation 9,122 7,424 17,465
Finance costs 1,182 1,030 2,118
Finance income - (1) (3)
Fair value movements on
derivatives (28) (19) (24)
Depreciation 4,266 3,146 6,816
Amortisation 896 601 1,459
Share-based payment expense 202 204 271
(Increase)/decrease in inventories (1,357) 373 112
Increase in trade and other
receivables (2,065) (905) (1,689)
Increase/(decrease) in trade
and other payables 3,406 (328) (1,776)
----------------------------------- ---------- ---------- -----------
Cash generated from operations 15,624 11,525 24,749
Taxation (287) (110) (304)
----------------------------------- ---------- ---------- -----------
Net cash generated from
operations 15,337 11,415 24,445
----------------------------------- ---------- ---------- -----------
Investing activities
Payments to acquire property,
plant and equipment (14,811) (21,553) (41,474)
Disposal of property, plant
and equipment 290 - 235
Payment to acquire intangible
assets (392) (115) (555)
Cash acquired with subsidiaries 452 - -
Finance income - - 3
----------------------------------- ---------- ---------- -----------
Net cash used in investing
activities (14,461) (21,668) (41,791)
----------------------------------- ---------- ---------- -----------
Financing activities
New borrowings 11,417 15,511 33,059
Borrowings repaid (6,374) (4,508) (9,893)
Hire purchase repayments (218) (49) (76)
Finance costs (1,141) (1,030) (2,118)
Net proceeds from share
issue 928 328 364
Dividends paid (1,919) (1,617) (2,564)
----------------------------------- ---------- ---------- -----------
Net cash generated from
financing activities 2,693 8,635 18,772
----------------------------------- ---------- ---------- -----------
Net increase/(decrease)
in cash and cash equivalents 3,569 (1,618) 1,426
Cash and cash equivalents
at the beginning of the
period 5,711 4,285 4,285
----------------------------------- ---------- ---------- -----------
Cash and cash equivalents
at the end of the period 9,280 2,667 5,711
----------------------------------- ---------- ---------- -----------
Notes to the interim report
For the period ended 30 June 2016
1 Basis of preparation and accounting policies
The Group's half-yearly financial report consolidates the
results of the Company and its subsidiary undertakings made up to
30 June 2016. The Company is a limited liability company
incorporated and domiciled in Scotland whose shares are quoted on
AIM, a market operated by the London Stock Exchange.
The financial information contained in this half-yearly
financial report does not constitute statutory accounts as defined
in section 434 of the Companies Act 2006. It does not therefore
include all the information and disclosures required in the annual
financial statements and should be read in conjunction with the
Group's annual financial statements for the year ended 31 December
2015.
The financial information for the six months ended 30 June 2016
is also unaudited.
The comparative information for the year ended 31 December 2015
has been extracted from the Group's published financial statements
for that year, which were prepared in accordance with International
Financial Reporting Standards (IFRS) as endorsed by the European
Union and have been delivered to the Registrar of Companies. The
report of the auditor on these accounts was unqualified and did not
contain a statement under section 498(2) or (3) of the Companies
Act 2006.
The financial statements have been prepared on a going concern
basis which the Directors believe is appropriate for the following
reason:
The Directors have prepared cash flow forecasts which show the
Group expects to meet its liabilities as they fall due for a period
in excess of twelve months from the date of these financial
statements. Our forecasts show continued capital investment which
is funded from retained profits and external finance, with strong
support from our banking group, together with the ability to raise
additional capital from the equity market. At 30 June 2016, the
Group had cash of GBP9.3m and available facilities of GBP60.2m and
continued to be cash generative through trading operations.
Significant accounting policies
As required in AIM Rule 18, the interim financial information
for the six months ended 30 June 2016 is presented and prepared in
a form consistent with that which will be adopted in the annual
statutory financial statements for the year ended 31 December 2016
and having regard to the IFRS applicable to such annual
accounts.
2 Prior period restatement
The annual financial statements for the year ended 31 December
2015 included a prior period restatement to correctly recognise
revenue on gas connection services and the related subcontractor
costs upon delivery of the underlying services rather than when
paid. The impact on revenue for the period ended 30 June 2015 was
not material and so no adjustment was required.
In addition, income tax receivable and payable and long-term
trade and other receivables were reclassified to be shown on the
face of the Consolidated statement of financial position.
Accordingly, the comparative amounts for the period ended 30 June
2015 have been restated.
3 Business combinations
On 18 March 2016, the Group acquired 100% of the issued share
capital of CH4 Gas Utility and Maintenance Services Limited (CH4),
100% of the issued share capital of Trojan Utilities Limited
(Trojan) and 100% of the issued share capital of Qton Solutions
Limited (Qton).
CH4 and Trojan are meter suppliers and they will enhance SMS'
capability to be a key participant in the substantial new domestic
smart meter market for homes and small businesses in the UK.
Alongside these installation businesses, Qton will help to serve
SMS' existing and future contractors, most of whom use its systems
already. This will ensure full confidence to energy suppliers
throughout the domestic smart meter rollout.
CH4 is a specialist in traditional and smart gas and electricity
metering installations to the domestic and I&C sectors. It
operates throughout the UK and is a current service provider to
SMS.
Trojan is a leading installation service provider to energy
suppliers in the UK and delivers domestic smart gas and electricity
trained and accredited installation services.
Qton has a team of IT professionals specialising in the
provision of work and field management IT systems applications for
gas and electricity metering installations. The customers for the
company's solutions are energy suppliers, installation contractors,
and meter asset managers and owners in the UK with specific
applications tailored for domestic dual fuel smart
installations.
The acquisitions have each been accounted for using the
acquisition method. The fair value of the identifiable assets and
liabilities of each company as at the date of acquisition was as
follows:
CH4 Trojan Qton Total
GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------- ------- ------- ------- -------
Recognised amounts of
identifiable assets acquired
and liabilities assumed:
Property, plant and equipment 366 1,459 18 1,843
Software - 500 1,500 2,000
Customer contracts - - - -
Other financial assets - 109 - 109
Inventories 175 73 - 248
Trade and other receivables 1,622 673 228 2,523
Cash and cash equivalents 167 88 197 452
-------------------------------- ------- ------- ------- -------
Total assets 2,330 2,902 1,943 7,175
-------------------------------- ------- ------- ------- -------
Trade and other payables (551) (516) (38) (1,105)
Accruals and deferred
income (1,046) (1,624) (564) (3,234)
Commitments under hire
purchase agreements (92) (923) - (1,015)
--------------------------------
Total liabilities (1,689) (3,063) (602) (5,354)
-------------------------------- ------- ------- ------- -------
Total identifiable net
assets/(liabilities) 641 (161) 1,341 1,821
-------------------------------- ------- ------- ------- -------
Acquisition date fair
value of the net assets 641 (161) 1,341 1,821
Goodwill arising on acquisition 1,359 579 1,559 3,497
Total consideration transferred
(as equity instruments) 2,000 418 2,900 5,318
-------------------------------- ------- ------- ------- -------
The fair value of the acquired identifiable intangible assets is
provisional pending receipt of the final valuations for those
assets.
The fair value of the equity instruments (ordinary shares)
issued as consideration paid was determined on the basis of the
closing market price of SMS plc's ordinary shares on the date of
acquisition.
There are no contingent consideration arrangements in any of the
acquisitions.
CH4 Trojan Qton Total
GBP'000 GBP'000 GBP'000 GBP'000
--------------------------------- ------- ------- ------- -------
Fair value of acquired
trade and other receivables 1,622 673 228 2,523
The Gross amount due under
the contract is 1,622 673 228 2,523
Of which the following
is expected to be uncollectable - - - -
--------------------------------- ------- ------- ------- -------
The interim financial information includes the results of CH4,
Trojan and Qton for the period 18 March 2016 to 30 June 2016,
during which time:
CH4 Trojan Qton Total
GBP'000 GBP'000 GBP'000 GBP'000
---------------------------- ------- ------- ------- -------
The contribution to revenue
by each company was: 740 2,089 329 3,158
And to Group profit for
the period was: (47) (338) (28) (414)
---------------------------- ------- ------- ------- -------
If the combinations had each taken place at the beginning of the
period:
CH4 Trojan Qton Total
GBP'000 GBP'000 GBP'000 GBP'000
---------------------------- ------- ------- ------- -------
The contribution to Group
profit from each would
have been: (344) (534) (90) (968)
And the contribution to
revenue from continuing
operations from each would
have been: 1,685 3,551 571 5,807
---------------------------- ------- ------- ------- -------
The acquisitions of CH4 and Trojan are part of the Group's
strategy to gain direct control of a large proportion of our
installation capacity for ongoing delivery of our customer
contracts in the I&C and domestic meter markets. This will
provide confidence to our customers in our delivery model for the
new domestic smart metering market. In addition, the acquisition of
Qton allows the Group to gain direct control and ownership of all
software applications used by SMS for asset installation and
ongoing management.
The goodwill recognised above is attributed to the expected
benefits of securing our installation capacity and controlling our
software applications.
None of the goodwill recognised is expected to be deductible for
income tax purposes.
The primary components of this residual goodwill comprise:
-- the workforce;
-- the software capability;
-- revenue synergies from dual fuel; and
-- new opportunities available to each company as part of the larger AIM-listed group.
The identifiable intangible assets will be amortised as
follows:
-- Software - 20%
-- Customer contracts - 20%
Transaction costs of GBP369k incurred on these acquisitions have
been disclosed as exceptional items in the Consolidated interim
statement of comprehensive income and are included within
administrative expenses.
4 Segmental reporting
For management purposes, the Group is organised into three core
divisions, Asset Management, Asset Installation and Energy
Management, which form the basis of the Group's reportable
operating segments and 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:
Asset Management comprises regulated management of gas and
electricity meters and ADM(TM) units within the UK.
Asset Installation comprises the installation of domestic and
I&C gas and electricity meters throughout the UK.
Energy Management comprises the provision of advice on energy
usage and control.
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 those
reported to the Board. Segment performance is evaluated based on
revenue generation and gross profit.
At the most granular level of information presented to the Chief
Operating Decision Maker (CODM), Asset Management aggregates four
operating segments (gas meter rental, electricity meter rental, gas
data and electricity data) principally on the basis that they
derive from the same asset using similar processes for consistent
customers and are often provided together. Asset installation
aggregates two operating segments (gas transactional and
electricity transactional) due to the consistent nature of the
services, customers and delivery processes.
The following segment information is presented in respect of the
Group's reportable segments together with additional balance sheet
information.
Asset Asset Energy Total
Management Installation Management Unallocated operations
30 June 2016 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------- ---------- ------------ ---------- ----------- ----------
Segment/Group revenue 17,699 12,791 1,822 - 32,312
Cost of sales (2,388) (6,529) (1,045) - (9,962)
---------------------------- ---------- ------------ ---------- ----------- ----------
Segment profit - Group
gross profit 15,311 6,262 777 - 22,350
Items not reported
by segment
Other operating costs - - - (6,517) (6,517)
Depreciation (3,933) - - (332) (4,265)
Amortisation (896) - - - (896)
Exceptional items
and fair value adjustments - - - (369) (369)
---------------------------- ---------- ------------ ---------- ----------- ----------
Profit from operations 10,482 6,262 777 (7,217) 10,304
Net finance costs (1,182) - - - (1,182)
---------------------------- ---------- ------------ ---------- ----------- ----------
Profit before tax 9,300 6,262 777 (7,217) 9,122
Tax expense (1,793)
---------------------------- ---------- ------------ ---------- ----------- ----------
Profit for the period 7,329
---------------------------- ---------- ------------ ---------- ----------- ----------
Asset Asset Energy Total
Management Installation Management Unallocated operations
30 June 2015 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------- ---------- ------------ ---------- ----------- ----------
Segment/Group revenue 14,143 9,604 2,042 - 25,789
Cost of sales (1,990) (5,307) (1,250) - (8,547)
---------------------------- ---------- ------------ ---------- ----------- ----------
Segment profit - Group
gross profit 12,153 4,297 792 - 17,242
Items not reported
by segment
Other operating costs - - - (5,074) (5,074)
Depreciation (2,928) - - (186) (3,114)
Amortisation (601) - - - (601)
Exceptional items
and fair value adjustments - - - - -
---------------------------- ---------- ------------ ---------- ----------- ----------
Profit from operations 8,624 4,297 792 (5,260) 8,453
Net finance costs (1,029) - - - (1,029)
---------------------------- ---------- ------------ ---------- ----------- ----------
Profit before tax 7,595 4,297 792 (5,260) 7,424
Tax expense (1,507)
---------------------------- ---------- ------------ ---------- ----------- ----------
Profit for the period 5,917
---------------------------- ---------- ------------ ---------- ----------- ----------
Asset Asset Energy Total
Management Installation Management Unallocated operations
31 December 2015 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------- ---------- ------------ ---------- ----------- ----------
Segment/Group revenue 30,233 19,535 4,177 - 53,945
Cost of sales (4,148) (10,891) (2,388) - (17,427)
---------------------------- ---------- ------------ ---------- ----------- ----------
Segment profit - Group
gross profit 26,085 8,644 1,789 - 36,518
Items not reported
by segment
Other operating costs - - - (8,663) (8,663)
Depreciation (6,366) - - (450) (6,816)
Amortisation (121) - - (1,338) (1,459)
Exceptional items
and fair value adjustments - - - - -
---------------------------- ---------- ------------ ---------- ----------- ----------
Profit from operations 19,598 8,644 1,789 (10,451) 19,580
Net finance costs (2,127) - 4 8 (2,115)
---------------------------- ---------- ------------ ---------- ----------- ----------
Profit before tax 17,471 8,644 1,793 (10,443) 17,465
Tax expense (2,463)
---------------------------- ---------- ------------ ---------- ----------- ----------
Profit for the year 15,002
---------------------------- ---------- ------------ ---------- ----------- ----------
All revenues and operations are based and generated in the
UK.
Those assets and liabilities that are managed and reported on a
segmental basis are detailed below.
Asset Asset Energy Total
Management Installation Management operations
30 June 2016 GBP'000 GBP'000 GBP'000 GBP'000
----------------------- ---------- ------------ ---------- ----------
Assets by segment
Intangible assets 14,956 - - 14,956
Property, plant and
equipment 128,541 - 5,454 133,995
Inventories 2,597 - 108 2,705
----------------------- ---------- ------------ ---------- ----------
146,094 - 5,562 151,656
Assets not by segment 28,894
----------------------- ---------- ------------ ---------- ----------
Total assets 180,550
----------------------- ---------- ------------ ---------- ----------
Liabilities by segment
Bank loans 89,821 - - 89,821
Commitments under hire
purchase agreements 871 - 4 875
----------------------- ---------- ------------ ---------- ----------
90,692 - 4 90,696
Liabilities not by
segment 31,765
----------------------- ---------- ------------ ---------- ----------
Total liabilities 122,461
----------------------- ---------- ------------ ---------- ----------
Asset Asset Energy Total
Management Installation Management operations
30 June 2015 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------ ---------- ------------ ---------- ----------
Assets by segment
Intangible assets 10,445 - - 10,445
Property, plant and equipment 102,252 - 4,744 106,996
Inventories 730 - 108 838
------------------------------ ---------- ------------ ---------- ----------
113,426 - 4,852 118,279
Assets not by segment 15,792
------------------------------ ---------- ------------ ---------- ----------
Total assets 134,701
------------------------------ ---------- ------------ ---------- ----------
Liabilities by segment
Bank loans 72,552 - - 72,552
Commitments under hire
purchase agreements 64 - 42 106
------------------------------ ---------- ------------ ---------- ----------
72,616 - 42 72,658
Liabilities not by segment 22,217
------------------------------ ---------- ------------ ---------- ----------
Total liabilities 94,875
------------------------------ ---------- ------------ ---------- ----------
Asset Asset Energy Total
Management Installation Management operations
31 December 2015 GBP'000 GBP'000 GBP'000 GBP'000
--------------------------- ---------- ------------ ---------- ----------
Assets by segment
Intangible assets 10,028 - - 10,028
Property, plant and
equipment 119,435 - 6,265 125,700
Inventories 996 - 103 1,099
--------------------------- ---------- ------------ ---------- ----------
130,459 - 6,368 136,827
Assets not by segment 16,900
--------------------------- ---------- ------------ ---------- ----------
Total assets 153,727
--------------------------- ---------- ------------ ---------- ----------
Liabilities by segment
Bank loans 84,715 - - 84,715
Commitments under hire
purchase agreements 63 - 15 78
--------------------------- ---------- ------------ ---------- ----------
84,778 - 15 84,793
Liabilities not by segment 21,549
--------------------------- ---------- ------------ ---------- ----------
Total liabilities 106,342
--------------------------- ---------- ------------ ---------- ----------
5 Earnings per share
The calculation of Earnings Per Share (EPS) is based on the
following data and number of shares:
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2016 2015 2015
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
------------------------------------- ---------- ---------- -----------
Profit for the period used for
calculation of basic EPS 7,329 5,917 15,002
Amortisation of intangible assets 896 601 1,459
Other operating income (1,155) - (1,546)
Exceptional costs 369 - -
Tax effect of adjustments (22) (120) 19
------------------------------------- ---------- ---------- -----------
Earnings for the purpose of adjusted
EPS 7,417 6,398 14,934
------------------------------------- ---------- ---------- -----------
Number of shares:
Weighted average number of shares
for the purpose of calculating
basic EPS 86,721,630 85,801,235 85,928,114
Effect of potentially dilutive
ordinary shares:
Share options 1,717,399 3,107,955 3,463,275
------------------------------------- ---------- ---------- -----------
Weighted average number of ordinary
shares for the purpose of diluted
EPS 88,439,029 88,909,190 89,391,389
------------------------------------- ---------- ---------- -----------
Earnings per share:
Basic (pence) 8.45 6.90 17.46
Diluted (pence) 8.29 6.65 16.78
Adjusted earnings per share:
Basic (pence) 8.55 7.46 17.38
Diluted (pence) 8.39 7.20 16.70
------------------------------------- ---------- ---------- -----------
The Directors consider that the adjusted earnings per share
calculation gives a better understanding of the Group's earnings
per share. Adjusted earnings per share removes the effects of
exceptional items, other operating income and amortisation of
intangibles (being items of both income and expense which are
sufficiently large, volatile or one-off in nature) to assist the
reader of the financial statements to get a better understanding of
the underlying performance of the Group.
6 Dividend
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2016 2015 2015
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
-------------------------- ---------- ---------- -----------
Dividend on equity shares 1,919 1,617 2,564
-------------------------- ---------- ---------- -----------
After 30 June the Directors have approved an interim dividend of
1.37p per share for 2016, which has not been accrued as a liability
as at 30 June 2016 in accordance with IAS 8. The dividend will be
paid on 25 November 2016 with an ex-dividend date of 20 October
2016 and a record date of 21 October 2016.
7 The half-yearly financial report was approved by the Board of
Directors on 19 September 2016.
8 A copy of this half-yearly financial report is available from
the Company's registered office or by visiting our website at
www.sms-plc.com.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR KMGMLNLRGVZM
(END) Dow Jones Newswires
September 20, 2016 02:00 ET (06:00 GMT)
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