Source - RNS
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 £32.3m (H1 2015: £25.8m)

•              Total annualised recurring income* increased by 23% to £37.4m (H1 2015: £30.5m)

•              Underlying EBITDA** increased by 20% to £14.7m (H1 2015: £12.2m)

•              Underlying EBITDA** margin at 45% (H1 2015: 47%)

•              Underlying PBT*** increased by 15% to £9.2m (H1 2015: £8.0m)

•              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 2016

31 Dec 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 ADMTM 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

Nick Tulloch

 

0131 220 6939 / 0207 397 8900

Kreab

Matthew Jervois

Natalie Biasin

Daniel Holgersson

020 7074 1800

 

Notes to editors

 

About Smart Metering Systems Plc

 

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 ADMTM 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™

 

SMS' patented "plug and play" ADM™ 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 £20m p.a. of potential energy savings for customers with an investment requirement of over £63m.

 

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 £32.3m (H1 2015: £25.8m) 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 £37.4m compared with £30.5m during the first half of 2015. In gas, meter recurring rent increased by 7% to £29.7m and data recurring income increased by 9% to £2.4m, while in electricity, meter recurring rent increased by 78% to £1.6m and data recurring income increased by 16% to £3.7m.

 

Underlying EBITDA grew by 20% to £14.7m (H1 2015: £12.2m), with an underlying EBITDA margin of 45% (H1 2015: 47%).

 

Asset Management recurring revenue grew 27% to £17.9m (H1 2015: £14.1m), while Asset Installation revenue increased 33% to £12.8m (H1 2015: £9.6m). Energy Management revenue fell by 10% to £1.8m (H1 2015: £2.0m) 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

ended

30 June

2016

Unaudited

£m

Six months

ended

30 June

2015

Unaudited

£m

Percentage

Increase

%

 

 


 

 

 

 

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 £150m 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 £80.5m (December 2015: £79.0m) with a net debt to annualised underlying EBITDA ratio of 2.74. The Company's available cash and unutilised debt facility stood at £69.5m at 30 June 2016.

 

Capital investment in meter assets and ADM™ installations was £14.8m compared to £21.1m 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.

 

£24.6m of borrowings as at 30 June 2016 (December 2015: £26.4m) 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

 

£'000

£'000

£'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

 

Unaudited

Restated

Unaudited

Audited

 

£'000

£'000

£'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

 

£'000

£'000

£'000

£'000

£'000

£'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

 

£'000

£'000

£'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 £9.3m and available facilities of £60.2m 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

 

£'000

£'000

£'000

£'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

 

£'000

£'000

£'000

£'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

 

£'000

£'000

£'000

£'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

 

£'000

£'000

£'000

£'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 £369k 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™ 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

£'000

£'000

£'000

£'000

£'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

£'000

£'000

£'000

£'000

£'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

£'000

£'000

£'000

£'000

£'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

£'000

£'000

£'000

£'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

£'000

£'000

£'000

£'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

£'000

£'000

£'000

£'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

 

£'000

£'000

£'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

 

£'000

£'000

£'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
 
 
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