Bglobal plc (AIM:BGBL), the leading provider of smart energy solutions and services to the UK energy market, is pleased to provide an update on its trading performance for the twelve months ended 31 March 2011 in advance of its preliminary announcement of results, on 4 July 2011.
The Board is pleased to report that in the twelve month period ended 31 March 2011, the Group has been profitable and cash generative and has performed slightly ahead of market expectations. At the year end the Group had cash balances of approximately £7 million which is sufficient for the funding requirements of the Group, including payment of the cash element of the earn out arising from the acquisition of Utiligroup Limited ("Utiligroup").
As well as the turnover from meter installations, the business was able to generate revenue from additional MOP services and projects undertaken for customers and the revenue derived from data collection and aggregation services grew strongly in the year, increasing by more than 75% on the previous year. Accordingly, despite the installation performance of Bglobal Metering being ----behind the Board's expectation, turnover for the business was broadly in line with expectations. Installations were stronger in the second half resulting in 66,056 meters being installed in total for the year.
The Government announced at the end of March 2011 that the mass rollout of smart metering to the residential and SME markets will start in 2014 and this has caused some of our customers to defer their rollout strategies. As a result, the business has seen a marked slowdown in the volume of installations taking place in the industrial and commercial sector. In light of this the Board is revising its installation expectations for the current financial year downwards and this will significantly impact on Bglobal Metering's contribution to Group performance in FY12.
In recognising this reduced contribution, the Board has taken steps to reduce the cost base within Bglobal Metering and has made changes that will generate annual savings of approximately £1 million. The Board will continue to monitor this position and will take action to reduce costs further if necessary. Alongside this constant monitoring of the cost base, the Group will look to further develop new revenue streams and has already made good progress in the half hourly market introducing a competitively priced solution that a number of customers have already contracted to receive.
The integration of Utiligroup into the Group has progressed well and it has traded materially ahead of the Board's expectations. All aspects of this business have performed well and Utiligroup remains a leading supplier of software and services to the utility sector in Europe and Australia. In the UK, Utiligroup is supporting Co-operative Energy as it extends its market entry into a national roll-out and this should provide opportunities for Bglobal to provide smart metering solutions.
A key driver for acquiring Utiligroup was the revenue synergies that we believed could be achieved from combining the sales offerings of Bglobal Metering and Utiligroup and the Board has been particularly pleased to see these starting to come through as the Group's end to end sales proposition has evolved. The business has identified a number of opportunities in data services and is actively marketing these to its customers.The ability to offer a one stop shop to customers from bringing them into the market as an energy supplier, installing and reading smart meters and providing a managed service around billing, sets the Group apart from its competitors. We also believe Electricity Market Reform ("EMR") and increased liquidity in the trading of electricity will bring some major players into the retail arena and the combination of Utiligroup and Bglobal Metering's products and services provides a compelling proposition to new entrants.
Department for Energy and Climate Change ("DECC") Announcement
On 30 March 2011, DECC announced its response to the consultation on the proposals set out in the July 2010 Prospectus for the Smart Metering Implementation Programme and its supporting documents. We welcome the announcement and its conclusions as there is now certainty around the timing of the mass rollout of smart metering and clarity over the structure of the DataCommsCo ("DCC"). Indeed, despite the timing of the mass rollout being a little later than we had hoped for, the announcement does present a number of opportunities for the Group to exploit, with the residential opportunity being just one of those available to us.
What is encouraging is that the Government has acknowledged that smart metering - enabling consumer behaviour change, revolutionising industry processes and customer service, facilitating smart grids - is central to its energy framework and there is a commitment to install 53 million smart meters in the UK by 2019.
The Board believes that, as a result of the DECC's announcement and the publication of the Government's White Paper before the 2011 summer recess, which should provide further clarification for the industry, there are a number of opportunities that will exist for the Group as outlined below:
smart meters need to be available in volume during 2012 and this is further validation of our decision to partner with Samsung Corporation C&T ("Samsung") to produce meters and to assist us in securing funding for suppliers to install such meters. We reported on 14 February 2011 that we had signed a MoU with Samsung. Discussions are ongoing and progressing well in formalising this relationship and we will make a further announcement on this matter in due course;
there are approximately 2 million meters that need to be swapped out in the industrial and commercial sector and we are developing a number of propositions to exploit this opportunity and maintain our market leading position in this sector;
Bglobal has commenced a residential trial involving the provision and installation of smart meters and in-home displays as part of providing an integrated Smart Metering System in the home;
the Board considers that, given the services that Bglobal can currently provide, the Group is well placed to become a service provider to the DCC for the high volume of existing customers managed by Bglobal and on a competitive basis for newly installed customers. In addition, the Group is developing other services, such as a residential gas proposition, which will be important in the future delivery of a dual fuel proposition and energy services to consumers;
the Group welcomes the recent announcements from Ofgem calling for increased competition within the electricity market as this presents a number of opportunities for the Group to maintain its position as a leading supplier of solutions and services to new entrants.
This next financial year will be a transitional period for the Group in which we will seek to continue to develop new revenue streams and work towards being ready to exploit the opportunities that the recent DECC announcement has presented. Whilst meter installations will be lower than previously anticipated, due primarily to the anticipated reduction in meter installations by Bglobal's large customers, the opportunity for the Group to be a leading player in the mass rollout of smart meters and a dominant force in the collection and delivery of smart data remains as strong as ever.
The Board looks forward to updating shareholders on the Group's continued progress at the time of the preliminary announcement of results in early July.
Commenting on the performance, Group Chief Executive Tim Jackson-Smith said: "The Group has made significant progress over the last 12 months and has been profitable and cash generative throughout the last financial year. Whilst the recent announcement from DECC has provided certainty in some areas there are still a lot of issues that need to be clarified over the course of the next 12 months and this will inevitably lead to a reduction in the pace of the rollout of smart meters. However, what is clear is that the mix of products and services that the Group is able to provide means it is well placed to take advantage of the opportunities that the mass rollout of smart meters will bring and the Board is actively positioning the Group to derive maximum benefit from whichever regulatory system is put in place for the residential rollout programme."
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