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.
- 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 £291m completed on 22 April 2020. This disposal has resulted in a net Index Linked Annualised Recurring Revenue ("ILARR") adjustment of £17.6m, presented on a pro-forma basis as £72.6m at 31 December 2019 for comparative purposes
- Like for like ILARR therefore grew 4.6% to £75.9m 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 £45m net cash and access to a £300m 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
- 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
"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.
"The 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."Chief Executive Officer
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:
- £45 million net cash position and access to a £300m 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
· Meter and data asset ILARR +4.6% to £75.9 million as at 30 June 2020 (31 December 2019: £72.6 million, proforma)
· Domestic smart meter ILARR +7.4% to £40.9 million
· Data assets grew 2.2% to £12.5 million
· Industrial and Commercial meters +c.15.8% proforma basis to £4.2 million
· Traditional domestic meter ILARR -1.6% to £18.3 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 £195 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 £15-16 million. Further details will be provided in the interim results announcement.
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).
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 Broker)
0131 220 6939 / 020 7397 8900
Neil McDonald / Pete Lynch
Investec Bank plc (Joint Broker)
020 7597 5970
Christopher Baird / Henry Reast
RBC Capital Markets (Joint Broker)
020 7653 4000
Matthew Coakes / Evgeni Jordanov
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.