Smart Metering Systems remains upbeat despite interim loss

(Sharecast News) - AIM-listed Smart Metering Systems has swung into the red, hit by higher depreciation and interest costs.
The Glasgow-based group, which installs and manages smart meters on behalf of energy companies, said group revenues rose to £54.2m from £46.7m in the six months to 30 June, while long-term index-linked annualised recurring revenue (ILARR), its preferred financial metric, increased 14% to £85.9m.

However, earnings before interest, tax, depreciation and amortisation slipped to £20.6m from £23.4m, while the pre-tax loss was £1.7m, compared to pre-tax profit of £10.1m a year earlier.

The numbers were impacted by higher depreciation costs, an increase in interest payments as net debt rose, and £5.2m of exceptional costs relating to the removal of older meters.

Installation rates also stalled in the first half because of industry-wide technical problems.

The company said: "The group's installation run rates in the first half of 2019 were behind initial expectations due to wider industry issues.

"Specifically the rollout of SMETS2 meters was slowed by technical issues, primarily rooted in radio frequency interference of smart meters in the North of England and Scotland, which caused compatibility issues in these regions."

However, chief executive Alan Foy said: "The widely-reported industry-wide installation issues are now substantially addressed, and the mass rollout of SMETS2 can now commence. This is expected to result in a pick-up in the installation run-rate both in the latter part of 2019 and into 2020.

"With over 500 engineers and significant cash and debt facilities, we have the engineering and financial resources to handle our order book of approximately 2m meter installations with headroom for further growth."

Despite that, SMS said that while full-year revenues and ILARR were currently anticipated to be ahead of forecasts, pre-exceptional EBITDA was likely to be "marginally below current market expectations due to an expected c£3m additional net engineering costs, with a consequent impact on underlying profit before tax".

Shares in SMS fell sharply following the results. By 1145 BST, the stock was off 14% at 374.6p.

SMS also announced on Tuesday that Tim Mortlock had been appointed to the newly-created role of chief operating officer. Mortlock has worked for SMS for more than 20 years, most recently as managing director of the meter assets and energy services division.