Smart Metering Systems plc (AIM: SMS.L), the integrated metering services company that connects, owns, operates and maintains current generation, advanced and smart metering assets and databases, is pleased to announce the acquisition of the entire issue share capital of three companies: CH4 Gas Utility and Maintenance services Limited (“CH4”), Trojan Utilities Limited (“Trojan Utilities”), and Qton Solutions Limited (“Qton Solutions”) (together, the “Acquisitions”) for a total consideration of up to £6.895 million.
The Acquisitions are in line with SMS’s strategy to grow its meter asset portfolio, particularly in the new domestic smart meter market, and alongside targeting the existing Industrial and Commercial (“I&C”) market.
CH4 and Trojan Utilities will enhance the SMS’ capabilities to be a key participant in the substantial new smart domestic meter market for homes and small business in the UK. CH4 will add approximately 100 engineers and 60 contractors, 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 Utilities, which will significantly enhance SMS’ capability. Out of the approximately 1.6 million domestic smart meters installed so far in the UK, they together represent approximately 23% (368,000) of that figure, independent of SMS. Alongside these installation businesses, IT systems specialist Qton Solutions 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 roll-out.
CH4 Gas Utility and Maintenance Services Limited
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.
Since its establishment in 2011, CH4 has grown successfully and, for the year ended 28 February 2015, reported turnover of £7.64 million with gross profit of £2.95 million and EBITDA (after exceptional items) of £0.89 million.
The initial consideration for CH4 is up to £2 million and is being satisfied through the issue of up to approximately 510,497 ordinary shares of 1p each in SMS (“Ordinary Shares”) at a price of 391.775p per Ordinary Share (the final number of shares is subject to a completion accounts adjustment). In addition, a further up to £0.995 million may be payable through the issue of Ordinary Shares pursuant to an earn out arrangement based on the CH4 business satisfying certain performance criteria over the three years from the date of completion.
Trojan Utilities Limited
Trojan Utilities is a leading installation service provider to energy suppliers in the UK and delivers domestic smart gas and electricity trained and accredited installation services. Established in 2011, Trojan Utilities has over 80 fully trained engineers operates throughout the UK and has already installed over 270,000 gas and electric domestic smart meters, representing over 17% of the national smart metering installed to date. It is currently installing over 3,000 domestic smart meters per week outside of its SMS business.
Trojan Utilities has grown substantially since 2011 and, for the year ended 31 October 2014, recorded turnover of £2.86 million with gross profit of £1.26 million and EBITDA of £0.5m. Trojan Utilities has seen additional growth in 2015 with estimated turnover for year ended 31 October 2015 of £5.76 million, gross profit of £2.13 million but with a reduced EBITDA of £0.067 million as a result of increased investment in operational capacity and UK-wide infrastructure.
The initial consideration for Trojan Utilities is up to £0.5 million and is being satisfied through the issue of up to approximately 127,625 Ordinary Shares at a price of 391.775p per Ordinary Share (the final number of shares is subject to a completion accounts adjustment). In addition, a further up to £0.5 million may be payable through the issue of Ordinary Shares pursuant to an earn out arrangement based on the Trojan Utilities business satisfying certain performance criteria over the three years from the date of completion.
Qton Solutions Limited
Established in Cambridge in 2009, Qton Solutions has a team of 17 IT professionals specialising in the provision of work and field management IT systems applications for gas and electricity metering installations for energy suppliers, installation contractors and meter asset managers and owners in the UK with specific applications tailored for domestic dual fuel smart installations.
These systems have become industry leading since 2011, and have already been responsible for the completion of over 1 million meter installations and are widely used by a number of domestic smart meter installers, energy suppliers, and meter asset owners and managers including SMS.
Qton Solutions has grown very successfully since its establishment and, for the year ended 31 March 2015, reported turnover of £0.99 million with gross profit of £0.34 million and EBITDA (after exceptional items) of £0.23 million, backed with annually recurring licence fee income on it software products of over £0.8 million. -
The consideration for Qton Solutions is up to £2.9 million and is being satisfied through the issue of approximately 740,230 Ordinary Shares at a price of 391.775p per Ordinary Share (the final number of shares is subject to a completion accounts adjustment).
“The acquisitions of CH4 and Trojan Utilities are part of the Company’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 customers in our delivery model for the new domestic smart metering market. In addition, the acquisition of Qton Solutions allows us to gain direct control and ownership of all software applications used by SMS.
"We are delighted to welcome the employees of the three businesses and look forward to working with them.”Chief Executive Officer
The initial consideration shares to be issued in connection with the Acquisitions require to be issued by Friday 25 March 2016 and the exact number of these shares will be announced on their issue.
Smart Metering Systems plc 0141 249 3850
Alan Foy, Chief Executive Officer
Glen Murray, Finance Director
Cenkos Securities plc 0131 220 6939 / 0207 397 8900
Neil McDonald Nick Tulloch
Kreab 020 7074 1800