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SMS.GB Smart Metering Systems Plc

955.00
0.00 (0.00%)
28 Mar 2024 - Closed
Realtime Data
Share Name Share Symbol Market Type Share ISIN Share Description
Smart Metering Systems Plc AQSE:SMS.GB Aquis Stock Exchange Ordinary Share GB00B4X1RC86
  Price Change % Change Share Price Bid Price Offer Price High Price Low Price Open Price Shares Traded Last Trade
  0.00 0.00% 955.00 890.00 1,020.00 955.00 952.03 955.00 26 16:29:58
Industry Sector Turnover Profit EPS - Basic PE Ratio Market Cap
0 0 N/A 0

Smart Metering Systems PLC Interim Results for six months ended 30 June 2016 (2555K)

20/09/2016 7:00am

UK Regulatory


Smart Metering Systems (AQSE:SMS.GB)
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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

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