Smart Metering Systems Regulatory News (SMS)

31 January 2020

Smart Metering Systems plc

Year end trading update and market outlook

Smart Metering Systems plc (AIM: SMS, the "Group"), the UK's largest integrated installer for independent energy suppliers and manager of smart meters, provides a trading update and market outlook.

Highlights

·; FY 2019 financial performance in line with current market expectations

·; Total index linked annualised recurring revenue ("ILARR") grew 20% to £90.1m

·; Total meter and data assets under management grew 19% to 3.7million

o Smart meter portfolio grew 44% to 1,215,000 meters

·; BEIS smart meter roll-out extension to December 2024 provides energy suppliers with greater flexibility. Roll-out profile expected to be more evenly spread with the proposed introduction of compulsory annual installation targets for energy suppliers

·; SMS will continue to address the significant smart metering market opportunity with a continued focus on securing long-term inflation-linked, sustainable revenue streams supported by an ongoing cost discipline and efficient long-term capital structure

FY2019 trading update

The Group's continued investment throughout the year saw the total number of metering and data assets under management increase by approximately 19% to 3.7million by 31 December 2019 (3.1million at 31 December 2018). This figure includes a portfolio of 1.2million domestic smart meters.

Total ILARR increased by 20% to £90.1m as at 31 December 2019. Meter recurring revenue grew by 23% to £77.8m, while data recurring revenue was £12.3m. Recurring meter revenue from smart meters was £38.0m, from traditional domestic meters £18.6m, and I&C meters £21.2m.

FY2019 year-end net debt is expected to be c.£220m, in-line with the Board's expectations.

Based on unaudited management accounts, SMS expects that its financial performance for FY2019 is in line with the current market expectations. 

The Group's results for the year ending 31 December 2019 are expected to be released on 17 March 2020.

Smart Meter rollout deadline extension to 2024

The political commitment to the smart meter rollout, built on the economic and environmental business case, has been reaffirmed by BEIS's intention to introduce compulsory annual installation targets on the energy suppliers between 2020 and 2024.

The BEIS consultation provides a stricter regulatory regime, albeit over an extended time period, for energy suppliers. The extension has provided energy suppliers with greater timing flexibility than before, and SMS now expects the installation profile to be more evenly spread until 2024 as a result.

SMS smart meter market opportunity

SMS has strong order book visibility over the medium-term which, coupled with a well-established engineering, IT platform and financial capacity, allows the Group to take advantage of these opportunities.

SMS will continue to deliver on its order pipeline, and wider market opportunity, with a strong focus on engineering efficiency and cost discipline. SMS will also continue to seek to have an efficient long-term capital structure.

Group Strategy

The Group continues to focus on securing long-term inflation-linked, sustainable revenue streams. As at the end of 2019, SMS generated an ILARR of £59.2m through its mature I&C and domestic smart meter portfolios, with additional pipeline opportunities from its existing contracts with independent energy suppliers initially to add a further c£40m in recurring rental. The Group remains committed to enhancing shareholder value whilst also investing in future growth of the business in a cost and capital efficient way.

SMS has also invested over several years in the foundations for future growth, resulting in a very experienced management team, well-established utility infrastructure design & installation, asset & data management and energy services divisions with a UK-wide presence, and a central cloud-based IT and data platform. Additionally, the Group's FlexiGrid software controls operations to integrate energy storage systems, renewable generation and vehicle charging into the UK's energy systems, shaping demand to follow renewable energy supply and operate as a Virtual Power Plant.

This fully-integrated platform enhances the Group's ability to provide a comprehensive end-to-end service proposition to its established industrial, domestic and energy services customer base.

Awarded London Stock Exchange Green Economy Mark

SMS has been awarded the Green Economy Classification & Mark by the London Stock Exchange. This accreditation identifies London-listed companies and funds that generate over 50% of total annual revenues from products and services that contribute to the global green economy.

Future opportunities

Beyond the UK domestic smart market opportunity, SMS continues to develop its capabilities to deliver innovative and integrated energy solutions to its customers. SMS is leveraging the foundations established in smart meters to grow its service proposition and establish new asset classes at the centre of the energy system as the economy transitions to a more sustainable and low-carbon future.

Monetising of a minority of the Group's meter assets

The Group continues to be in discussions regarding the sale of a minority of the Group's meter assets. A further update on the possible sale will be provided as and when appropriate.

Alan Foy, Chief Executive Officer, commented:

"This year marks our 25th anniversary, a testament to SMS's secure business foundation and long-term business model. Through our established industry-wide partnerships and strong integrated delivery platform we are committed to creating a resilient energy infrastructure for the future, focussed on delivering long-term value for all our stakeholders.

"SMS will continue to address the smart meter roll-out opportunity over the extended rollout period, with focus on securing long-term inflation-linked, sustainable revenue streams supported by an ongoing cost discipline and an efficient long-term capital structure."

For further information:

Notes to editors

SMS plc (www.sms-plc.com) installs smart meters and data loggers that facilitate effective energy management and a low carbon future. 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's asset management business had 3.7million 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). In addition SMS's FlexiGrid software controls enables installed energy storage systems, renewable energy sources and electric vehicle charging to be fully integrated into the UK's energy systems shaping demand to follow renewable energy supply.

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.