TIDMSMS
RNS Number : 5295U
Smart Metering Systems PLC
30 July 2020
30 July 2020
Smart Metering Systems plc
Trading update and FY 2020 outlook
Smart Metering Systems plc (AIM: "SMS", "the Group"), which
installs and manages smart meters and carbon reduction ("CaRe")
assets to facilitate effective energy management, provides a
trading update for the six months to 30 June 2020 ("H1 2020") and
full year ("FY 2020") outlook.
Highlights
-- Revenue and underlying profit in line with the Board's
earlier expectations, reflecting the resilient nature of the SMS
business model
-- The disposal of a minority of the Group's meter assets for
gross cash proceeds of GBP291m completed on 22 April 2020. This
disposal has resulted in a net Index Linked Annualised Recurring
Revenue ("ILARR") adjustment of GBP17.6m, presented on a pro-forma
basis as GBP72.6m at 31 December 2019 for comparative purposes
-- Like for like ILARR therefore grew 4.6% to GBP75.9m as at 30 June 2020
-- 25p per share dividend for FY 2020 to be paid in four equal
cash instalments, starting October 2020
-- Strong liquidity position with GBP45m net cash and access to
a GBP300m revolving credit facility as at 30 June 2020
-- Domestic smart meter portfolio of 1.27m meters, an increase of 54,000 in H1 2020
-- Contracted order book of a further two million smart meters
with additional metering opportunities from existing customer
base
-- Continued progress on CaRe asset origination with increased scope
Outlook
-- Smart meter installation run-rate expected to return to
pre-COVID levels by the beginning of 2021
-- FY 2020 underlying profitability remains in line with the Board's earlier expectations
Alan Foy , Chief Executive Officer, commented:
"Despite the unprecedented circumstances, our financial
performance was strong, further demonstrating the resilient nature
of our business, the defensive nature of the metering
infrastructure asset class and the stable cash flows it
generates.
"Our substantial contracted order book and strong liquidity
position will allow SMS to roll out millions of smart meters over
the next few years, thereby growing our index linked recurring
revenues.
"T he potential scope of SMS' CaRe asset pipeline has improved
significantly following both the UK Government's stimulus package
aimed at a green recovery from COVID-19 and the renewed ambition to
achieve a zero-carbon economy as soon as possible.
"In addition to delivering strong growth, the long-term cash
generative nature of our business, coupled with SMS' strong
liquidity, supports the sustainable growth in our dividend, whilst
continuing to maintain a prudent capital structure."
COVID-19
Since the emergence of COVID-19, the Group's key priority has
been, and remains, the well-being of its employees and
customers.
As previously reported, non-emergency meter installation
activities were suspended at the end of March due to COVID-19. All
installation activities were subsequently resumed on 1 June
2020.
Resilient Business Model
Both the Group's H1 2020 and FY 2020 revenues and underlying
profitability are expected to be in line with the Board's earlier
expectations, reflecting the resilient nature of SMS' business
model.
SMS' financial performance has been supported by the Group's
long-term ILARR and the traditional meters, which remained on the
wall for longer than anticipated due to a deceleration in the smart
meter exchange programme, and continued to generate revenue over
that period through both meter rental and transactional emergency
work.
The Group's strong cash generation over the period also enabled
the return of funds received from the UK Government under the
Coronavirus Job Retention Scheme.
Growing, Sustainable Dividend
As previously announced, SMS will pay a 25p per share dividend
in respect of FY 2020 (representing an increase of 3.6x over FY
2019), with the first of four equal cash instalments paid in
October 2020.
The Group's growing dividend is well covered by existing
long-term, inflation linked and recurring cash flows.
Enabling the Zero Carbon Economy
SMS' smart meter rollout is helping facilitate the UK's green
revolution by providing customers greater control of their energy
usage. The Group's commitment to enable transition to a zero-carbon
economy has been furthered by the previously announced partnership
with Columbia Threadneedle European Sustainable Infrastructure Fund
to develop a pipeline of CaRe assets.
The Group has made progress in the origination of CaRe assets,
currently at various stages of development, and the potential scope
has improved significantly following the UK Government's stimulus
package aimed at green recovery from COVID-19 and the renewed
ambition to achieve the zero-carbon economy as soon as
possible.
SMS' strong liquidity profile provides the Group with the
resources to address this growing opportunity:
-- GBP45 million net cash position and access to a GBP300m
revolving credit facility at 30 June 2020
-- The reduction in smart meter installations as a result of
COVID-19 also reduced SMS's capital expenditure requirement over
the period, providing further support to the Group's liquidity
position
Financial highlights
-- Meter and data asset ILARR +4.6% to GBP75.9 million as at 30
June 2020 (31 December 2019: GBP72.6 million, proforma)
-- Domestic smart meter ILARR +7.4% to GBP40.9 million
-- Data assets grew 2.2% to GBP12.5 million
-- Industrial and Commercial meters +c.15.8% proforma basis to GBP4.2 million
-- Traditional domestic meter ILARR -1.6% to GBP18.3 million;
the Group expects to exchange these traditional meters for smart
meters over the course of the exchange programme
Following the completion of the sale of a minority of the
Group's meter assets on 22 April 2020, SMS will report a gross gain
on disposal of GBP195 million. Certain costs will also be reported
in Exceptional Items in the Group's annual accounts for FY 2020,
relating primarily to transaction costs associated with the sale of
a minority meter assets, ongoing legacy meter disposals and
COVID-19 related costs and in total currently comprise
approximately GBP15-16 million. Further details will be provided in
the interim results announcement.
Operational highlights
During H1 2020 SMS installed 54,000 domestic smart meters in H1
2020, taking the Group's domestic smart portfolio to 1.27 million
meters.
The Group's total metering and data assets under management
increased to 3.74 million (31 December 2019: 3.73 million) with its
domestic smart meter portfolio increasing by c.4.4% to 1,269,000
(31 December 2019: 1,215,000).
Outlook
Despite the effects of COVID-19, the Group's FY 2020 revenues
and underlying profitability are expected to be in line with the
Board's earlier expectations, reflecting the resilient nature of
SMS's business model.
The Group expects the smart meter installation run-rate to
return to pre-COVID levels by the beginning of 2021.
The Government's extension of the smart meter rollout deadline
by six months to 1 July 2025, is in line with SMS's planning and
has no material impact on the Group's forecasts for its roll out
programme.
H1 2020 results
SMS expects to publish its first half results on 15 September
2020.
For further information:
Smart Metering Systems plc 0141 249 3850
Alan Foy, Chief Executive Officer
Dilip Kejriwal, Investor Relations
Cenkos Securities plc (Nomad and Joint 0131 220 6939 / 020 7397
Broker) 8900
Neil McDonald / Pete Lynch
Investec Bank plc (Joint Broker)
Christopher Baird / Henry Reast 020 7597 5970
RBC Capital Markets (Joint Broker)
Matthew Coakes / Evgeni Jordanov 020 7653 4000
Instinctif Partners 020 7457 2020
Adrian Duffield / Kay Larsen / Chantal
Woolcock
Notes to editors
SMS plc (www.sms-plc.com) installs and manages smart meters and
carbon reduction ("CaRe") assets to facilitate effective energy
management. CaRe assets include all carbon reducing assets
including energy efficiency systems, metering, lighting, battery
storage, distributed generation, EV charging, data and control,
etc.
Established in 1995, SMS provides a full end-to-end service for
metering financing, installation, management and maintenance, with
a highly skilled workforce and deep engineering expertise.
SMS had 3.74 million meter and data assets under management as
of 30 June 2020. SMS's smart meter expertise also enables the
Company to provide consultancy services that allow organisations
and corporates to enhance long term efficiency and effectiveness in
the management of energy.
SMS's energy management and asset installation services also
include infrastructure design, installation, consultancy and
project management services for new gas, electricity, water and
telecoms connections for licensed energy and telecoms suppliers,
end consumers and the UK's licensed electricity Distribution
Network Owners (DNOs).
SMS employs in excess of 1,000 people across the UK who support
the installation and ongoing management of metering assets.
SMS plc is headquartered in Glasgow with 12 locations across the
UK.
SMS's shares are listed on AIM.
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END
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