17/03/2020

Smart Metering Systems plc (AIM: SMS, “the Group”), which installs and manages smart meters and carbon reduction assets (“CaRe”) to facilitate effective energy management, has published its final results for the 12 months to 31 December 2019.

The Group has also signed a partnership agreement with the Columbia Threadneedle Sustainable Infrastructure Fund (“ESIF”) to develop SMS’s pipeline of CaRe asset opportunities – see separate announcement.

On 12 March 2020, SMS announced that it has conditionally sold a minority of its meter assets to funds managed by Equitix Investment Management for a total gross cash consideration of £291 million. The disposal will enable the implementation of an enhanced long-term, sustainable dividend payment policy and results in a significant reshaping of SMS’s capital structure.

2019 financial performance

£’000 2019 2018
Group revenue 114,281 98,492
Indexed-linked annualised recurring revenue (ILARR)1 90,118 75,358
Pre-exceptional EBITDA2 58,897 51,619
EBITDA 50,370 35,478
Profit before taxation 5,463 5,531
Underlying profit before taxation3 15,577 25,085
Underlying basic EPS (p)4 11.30 18.46
Basic EPS (p) 3.56 3.97
Dividend per share (p) 6.88 5.98
Net debt 219,168 141,989

1 ILARR is the revenue generated from meter rental and data contracts at a point in time. Includes revenue from third-party managed meters.

2 Pre-exceptional EBITDA is statutory EBITDA excluding exceptional items.

3 Underlying profit before taxation is profit before taxation excluding exceptional items and amortisation of intangibles.

4 Underlying basic EPS is underlying profit after taxation divided by the weighted average number of ordinary shares for the purpose of basic EPS. A reconciliation between reported and underlying performance is detailed in the Financial Review section below.

Highlights

Financial

  • Total ILARR increased 20% to £90.1m (2018: £75.3m)
  • Pre-exceptional EBITDA up 14% to £58.9m (2018: £51.6m)

Disposal - announced 12 March 2020

  • £291m gross proceeds from asset disposal
  • Cash consideration will result in positive net cash position for Group overall
  • Post the disposal, retained Group ILARR is £73.2m as at 29 February 2020

Partnership with ESIF

  • Funds SMS’s pipeline of Carbon Reduction (CaRe) assets
  • CaRe assets developed within SMS’s well-established energy management division
  • ESIF to fund and own the CaRe assets - SMS receives incremental long-term asset management fees

Business positioning and opportunities

  • Smart meters
    • Growth in metering assets – total market c.36.5m meters to be exchanged
    • Existing SMS c.2m smart meter order book expected to add c.£40m ILARR
    • Existing SMS customers have additional c.4m to be exchanged
  • Dividend
    • Long-term sustainable growing dividends with upside potential from existing and new meter assets
    • Proposed FY20 dividends increased to 25p – grow at least in line with RPI p.a. to 2024
  • Sustainability is at the heart of SMS’ operations
    • Smart meters are integral part of a flexible, decentralised and decarbonised energy system
    • Well placed to originate CaRe assets in current and emerging electricity generation, storage, heat, lighting and transportation industry market segments

“A 20% increase in our key financial metric - ILARR - and a 14% increase in EBITDA in extremely challenging markets, is a testimony to our market position and operational capabilities.

“Last week’s transaction will not only realise considerable cash returns and demonstrates the substantial value of our smart meter portfolio but also will enable us to enhance greatly shareholder value with a significant and sustainable increase in dividends.

“The UK is the first major economy to adopt net zero emissions by 2050, mainly by electrification strategies. This will need the establishment of a decentralised and decarbonised energy system as well as substantial capital to meet that target.

“A combination of our strengthened balance sheet to support our smart meter rollout programme, todays’ partnership announcement with ESIF and our energy management division’s track record, positions us extremely well to accelerate and rapid expand our CaRe assets in the current and emerging electricity generation, storage, lighting, heating and transportation markets.”

Alan Foy Chief Executive Officer

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For further information:

Smart Metering Systems plc
0141 249 3850
Alan Foy, Chief Executive Officer
David Thompson, Chief Financial Officer
Tim Mortlock, Chief Operating Officer
Dilip Kejriwal, Head of Investor Relations

Cenkos Securities plc (Nomad and Joint Broker)
0131 220 6939 / 020 7397 8900
Neil McDonald
Peter Lynch

Investec Bank plc (Joint Broker)
020 7597 5970
Christopher Baird / Henry Reast

Instinctif
020 7457 2077
Adrian Duffield / Kay Larsen / Chantal Woolcock

Notes to editors

SMS plc (www.sms-plc.com) installs and manages smart meters and carbon reduction assets (“CaRe”) to facilitate effective energy management. 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 3.73 million meter and data assets under management as of 31 December 2019. 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 1,200 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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