TIDMSMS
RNS Number : 4277C
Smart Metering Systems PLC
17 March 2014
17 March 2014
Smart Metering Systems plc
("SMS", "the Company")
Final results for the year ended 31 December 2013
Smart Metering Systems plc (AIM: SMS.L), the integrated metering
services company that connects, owns, operates and maintains
current generation and new advanced metering assets and databases
is pleased to announce its final results for the 12 months to 31
December 2013 which show continued growth across all business
areas.
Financial Highlights
-- Revenue increased by 33% to GBP27.9m (2012: GBP21.0m)
-- Total annualised recurring meter rental increased by 44% to GBP15.5m (2012: GBP10.8m)
-- Gross profit increased by 34% to GBP17.8m (2012: GBP13.3m)
-- Gross profit margin at 64% (2012: 63%)
-- Adjusted EBITDA* increased by 31% to GBP11.8m (2012: GBP9.0m)
-- EBITDA margin at 42% (2012: 43%)
-- Basic earnings per share increased by 52% to 7.86p (2012: 5.18p)
-- Final dividend of 1.61p per ordinary share making 2.31p for
the full year (2012: 1.65p), an increase of 40%
-- Available cash resources of GBP11.7m at 31 December 2013
-- New long term debt facilities announced on 12 March 2014 with
GBP105.0m revolving credit agreement with Barclays Bank plc (lead
bank), Clydesdale Bank plc and Bank of Scotland plc, replacing all
existing facilities
(*Excluding exceptional items and fair value adjustments).
Operational Highlights
-- Total meter portfolio increased by 38% to 469,000 with
industrial and commercial meters growing by over 118%
-- Capital expenditure on meters increased by 46% to GBP23.3
million, reaching a monthly run rate of approximately GBP2.5
million in December 2013
-- The gas supplier client base grew from 13 to 17, representing
over 80% of the UK industrial and commercial market, and the number
of energy broker contracts increased from 10 to 24
-- Over 16,000 ADM devices deployed in the UK by 31 December
2013 up from 2,000 in December 2012
-- 17 trials of the ADM device in 5 different countries, with
further trials now committed in 3 additional countries
Alan Foy, Chief Executive Officer, commented:
"Our progress in 2013 continued to be in line with our strategic
priorities, at both a financial and operational level. Our gas
meter portfolio increased by 38% year-on-year and we signed major
new contracts with gas suppliers. We now have contracts in place
with 80% of the I&C meter market."
Smart Metering Systems plc 0141 249 3850
Alan Foy, Chief Executive Officer
Glen Murray, Finance Director
Cenkos Securities plc 0131 220 6939 / 0207 397 8900
Neil McDonald
Beth McKiernan
Kreab Gavin Anderson 020 7074 1800
Chris Philipsborn
Anna Schoeffler
Notes to Editors
About Smart Metering Systems
Established in 1995, Smart Metering Systems plc based in
Glasgow, connects, owns, operates and maintains metering systems
and databases on behalf of major energy companies and energy
brokers.
Currently the Company is concentrating its efforts on offering
its unique integrated services to the UK industrial and commercial
gas market in which its customers have an 80% market share.
The Company has further applications for gas with its ADM(TM)
device which allows "smart" functions such as remote reading and
half hourly consumption data to be offered to customers in addition
to the normal metering services. Longer term the Company also has
additional applications for water and LPG.
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
Chairman's statement
Review of the year
Firstly, as the new chairman of SMS, I would like to thank my
predecessor, Kevin Lyon, for his considerable contribution to the
growth and development of the Group and on the successful flotation
of the business on AIM.
I am pleased to confirm SMS has continued to make considerable
progress in 2013 in all three business areas.
Since SMS floated on AIM in 2011, the company has continued to
demonstrate year on year growth and has an established and growing
market position in the UK smart metering market. The business
strategy in the medium term is to maintain high levels of service
to customers in the gas supplier market, increase the run rate with
these customers, and continue to grow the meter asset
portfolio.
SMS has consolidated this position and invested heavily over the
years in IT infrastructure to provide a strong foundation for
growth with the gas suppliers in the market and has established
long-term relationships based on the high levels of service it
provides to its customers. This is reflective of the standards set
by the management and employees with key gas suppliers.
SMS has a clearly defined growth strategy in the gas supplier
market, and together with the potential to establish ADM(TM) as the
industry standard smart metering device, the Group has a very
promising outlook.
During 2013, the Group continued to increase its recurring meter
rental and expand the portfolio of gas meter assets in the face of
competition from market leader National Grid. The order book also
continues to expand with key gas suppliers in the I&C market,
with potential to grow this substantially further to increase SMS's
position in the market.
The UK meter assets business presents a large market opportunity
with a substantial proportion of an estimated 1.6m I&C meters
in the UK to be exchanged for a smart metering solution by 2020
with the added potential of a domestic market rollout.
The order book for ADM(TM) continued to grow and our current gas
supplier contracts provide potential access to over 80% of UK
industrial and commercial gas meters and 40% of residential gas
meters.
Our strategic vision is to be the leading independent provider
of smart metering and data management solutions to suppliers in the
gas sector with the highest levels of service. The way we achieve
this must reflect the evolution in domestic and international
markets as well as a prudent approach to our growth and return to
shareholders.
Our aim in 2014 and in future years is to focus on our three
strategic priorities: grow our domestic meters business organically
and through new contracts; establish our ADM(TM) technology as the
industry standard smart metering solution for industrial and
commercial (I&C) clients, and increase levels of business with,
and services provided to key gas suppliers.
We will also continue to trial ADM data services internationally
in gas, electricity, water and LPG markets.
We will achieve these goals by continuing to invest in providing
the highest levels of service to the gas supplier market and
investing in our research and development capability to ensure we
maintain our competitive advantage.
We also believe that during Alan Foy's continuing leadership the
Group has developed a strong and evolving business model and
strategy that is well positioned to expand the business to reward
our customers and shareholders.
Corporate Culture
SMS's culture is based on a commitment by its employees to know
their customers. This has been instrumental in developing, building
and maintaining trusted relationships with our customers the gas
suppliers. Our core values around good counsel, prudence and wisdom
have ensured we continue to maintain these strong
relationships.
Equally important in terms of operational performance is how our
IT systems and compliance management work with the gas suppliers.
These are integral to how we achieve customer satisfaction and the
building of a trusted relationship.
Board Composition
The Board comprises myself as Non-Executive Chairman, and four
other directors, of which two are Non-Executive. We have sought to
evolve our Board structure to ensure we have a balanced board and
welcome Miriam Greenwood who has recently joined us as a
Non-Executive Director of the Company. She is a qualified barrister
and has spent much of her career in corporate finance working for a
number of leading investment banks and other financial
institutions.
Miriam is a Non-Executive Director of a number of companies
including Henderson Global Trust plc, Mithras Investment Trust plc
and the Offshore Renewable Energy Catapult Limited. She was, for 9
years until 2013, a Non-Executive Director of the Gas and
Electricity Markets Authority (OFGEM) for whom she is currently
Chair of the Gas Network Innovation Expert Panel. A Deputy
Lieutenant of the City of Edinburgh, Miriam was awarded an OBE for
services to corporate finance in 2000.
Miriam will bring considerable experience and knowledge to the
management team and in particular will help with our work in
corporate governance.
Outlook
The Group continues to make progress based on our strategic
priorities and we view the outlook for the market in 2014 as very
promising for our business model.
Chief Executive Officer's statement
We are pleased to announce another strong set of results for the
year ended 31 December 2013. The results reflect the cumulative
effect of the increase in meters and the increasing number of
contracts signed during 2013.
Operational Review
During 2013 we made substantial progress in all three areas of
our business. Following a strong first half where we saw our meter
portfolio increase by 60,000 and break the 400,000 level, growth
accelerated in the second half with a further 69,000 added leading
to a 38% increase year-on-year in our gas meter portfolio. The
progress we have made in establishing long-term recurring revenue
was evidenced by an increase in year-end annualised recurring meter
rental revenue of 44% to GBP15.5m and GBP300k data provision sales
from our ADM(TM) device.
Industrial and Commercial meters
During 2013 we were delighted to announce a number of major new
contracts for the provision of gas meters within DONG Energy, Opus
Gas Supply, Flow Energy, Daligas, and Crown Gas and Power. The
current estimates are for a total programme in excess of 22,000
meters to the end of 2014, of which over 2,000 had already been
delivered by 31 December 2013.
In addition, SMS has also signed contracts with five energy
brokers who provide brokerage and energy management services to
small, medium and large group consumers for the provision of the
ADM(TM) device and gas meters. The broker business is at present a
small but growing part of our portfolio. The increase in customer
base during 2013 now means that SMS has contracts in place with
over 80% of the total I&C meter market.
Once installed, these meters will be on SMS's long-term index
linked contracts and provide recurring revenue for the lifetime of
the assets (expected to be 25 years).
The size of I&C meters is typically much greater than that
of domestic meters and therefore the revenue per meter is
substantially higher: the equivalent number of domestic meters for
these 22,000 contracts would be in the order of 300,000.
Our transactional gas connections business continues to be cash
generative and to secure gas meter ownership for the Group; it has
performed in line with management expectations.
ADM(TM)
The ADM(TM) device is SMS' advanced metering solution which
allows for remote meter reading on a half-hourly basis and has been
designed in line with our own customer requirements.
SMS has now installed over 16,000 ADM(TM) devices and feedback
continues to be very positive. The ability of remote reading
alongside SMS's full service capability in the I&C market
provides a major opportunity for the Company in extending the
service we offer and the ability to seek out further markets for
our overall service.
As in 2012, all new contracts announced in 2013 allow for the
introduction of the ADM(TM) device into I&C premises during
meter replacement programmes.
The Department of Energy & Climate Change (DECC) has
recently announced a delay in the start of the UK domestic smart
metering programme. The Company believes, however, that the small
I&C market will be largely unaffected by this delay as
suppliers are already rolling out advanced solutions for commercial
reasons to allow their customers to benefit from being able to
manage their energy bills at the earliest practicable date rather
than waiting until they are mandated to install smart meters. Based
on the ADM's competitive price and ease of installation and the
ongoing increase in the Company's meter portfolio, SMS expects to
benefit from this delay and also to be well placed when the
mandated smart metering program occurs.
The large I&C market, estimated by SMS to be over 600,000
meters, has to move to an advanced metering solution, with around
60,000 of the very large category having to be completed or
contracted by 2014.
The small I&C market, estimated by SMS at over 1.1 million
meters, has until 2014 to either opt for an advanced metering
solution such as the ADM(TM) device or, alternatively, to be
included in the government's proposed domestic roll out of smart
meters.
SMS believes that both market segments will find the ADM(TM)
device an attractive solution, based on its competitive price and
ease of installation.
The Company received full European Patent Approval for ADM(TM)
in 2012 and continues to progress the potential use of the ADM(TM)
device in other sectors such as the UK's water and LPG industries
and internationally where trials have commenced.
Domestic Meters
SMS was successful during 2013 in obtaining 2 further contracts
in the domestic market. As previously announced SMS has been
contracted by SSE to provide Meter Operations Services in all
regions outside Scotland and the South-East of England up to April
2014, and is on track to complete the original 180,000 meter
program.
SMS will continue to support its existing and potential new
customers in the domestic market for gas meter services, leaving
the business well placed to support our customers in the domestic
smart programme, now expected to commence in the autumn 2015.
We are well placed to capitalise on the this potential rollout
of smart meters in the domestic market, though our future strategic
growth is not reliant on this taking place, either in terms of
capturing market share or in terms of increasing revenue
growth.
Smart Metering Systems plc
Annual report and accounts 2013
Consolidated statement of comprehensive income
For the year ended 31 December 2013
2013 2012
------------------------------------- ------ --------- --------------------
Notes GBP'000 GBP'000
------------------------------------- ------ --------- --------------------
Revenue 1 27,916 21,029
Cost of sales 2 (10,101) (7,759)
------------------------------------- ------ --------- --------------------
Gross profit 17,815 13,270
Administrative expenses 2 (9,248) (7,337)
------------------------------------- ------ --------- --------------------
Profit from operations 2 8,567 5,933
------------------------------------- ------ --------- --------------------
Attributable to
Operating profit before exceptional
items 8,834 7,176
Exceptional items and fair value
adjustments 2 (267) (1,243)
------------------------------------- ------ --------- ====================
Finance costs 5 (1,122) (739)
Finance income 5 26 33
------------------------------------- ------ --------- --------------------
Profit before taxation 7,471 5,227
Taxation 6 (896) (914)
------------------------------------- ------ --------- --------------------
Profit for the year attributable
to equity holders 6,575 4,313
Other comprehensive income - -
------------------------------------- ------ --------- --------------------
Total comprehensive income 6,575 4,313
------------------------------------- ------ --------- --------------------
The profit from operations arises from the Group's continuing
operations.
Earnings per share attributable to owners of the parent during
the year:
Notes 2013 2012
------------------------------------ ------ ----- -----
Basic earnings per share (pence) 7 7.86 5.18
Diluted earnings per share (pence) 7 7.43 5.00
------------------------------------ ------ ----- -----
Consolidated statement of financial position
As at 31 December 2013
2013 2012
-------------------------------------- ------ -------- --------
Notes GBP'000 GBP'000
-------------------------------------- ------ -------- --------
Assets
Non-current
Intangible assets 9 2,018 1,916
Property, plant and equipment 10 57,382 36,104
-------------------------------------- ------ -------- --------
59,400 38,020
-------------------------------------- ------ -------- --------
Current assets
Inventories 12 2,504 373
Trade and other receivables 13 6,099 3,091
Cash and cash equivalents 14 2,073 6,455
Other current financial assets 18 207 -
-------------------------------------- ------ -------- --------
10,883 9,919
-------------------------------------- ------ -------- --------
Total assets 70,283 47,939
Liabilities
Current liabilities
Trade and other payables 15 8,879 8,201
Bank loans and overdrafts 16 3,933 2,150
Commitments under hire purchase
agreements 17 3 3
Other current financial liabilities 18 - 170
-------------------------------------- ------ -------- --------
12,815 10,524
-------------------------------------- ------ -------- --------
Non-current liabilities
Bank loans 16 31,475 18,299
Obligations under hire purchase
agreements 17 6 10
Deferred tax liabilities 20 3,395 2,510
-------------------------------------- ------ -------- --------
34,876 20,819
-------------------------------------- ------ -------- --------
Total liabilities 47,691 31,343
-------------------------------------- ------ -------- --------
Net assets 22,592 16,596
-------------------------------------- ------ -------- --------
Equity
Share capital 22 838 833
Share premium 8,971 8,653
Other reserve 24 1 1
-------------------------------------- ------ -------- --------
Retained earnings 12,782 7,109
-------------------------------------- ------ -------- --------
Total equity attributable to equity
holders of the parent company 22,592 16,596
-------------------------------------- ------ -------- --------
Consolidated statement of changes in equity
For the year ended 31 December 2013
Share Share Other Retained
capital premium reserve earnings Total
Attributable to the owners GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
of the parent company:
------------------------------- -------- --------- -------- --------- --------
As at 1 January 2012 833 8,653 1 2,969 12,456
Profit for the year - - - 4,313 4,313
Transactions with owners
in their capacity as owners:
Dividends (Note 8) - - - (417) (417)
Share options - - - 244 244
------------------------------- -------- --------- -------- --------- --------
As at 31 December 2012 833 8,653 1 7,109 16,596
Profit for the year - - - 6,575 6,575
Transactions with owners
in their capacity as owners:
Dividends (Note 8) - - - (1,546) (1,546)
Shares Issued 5 318 - - 323
Share options - - - 644 644
------------------------------- -------- --------- -------- --------- --------
As at 31 December 2013 838 8,971 1 12,782 22,592
------------------------------- -------- --------- -------- --------- --------
Consolidated statement of cash flows
For the year ended 31 December 2013
2013 2012
GBP'000 GBP'000
---------------------------------------------- --------- ---------
Cash flow from operating activities
Profit before taxation 7,471 5,227
Finance costs 1,122 739
Finance income (26) (33)
Fair value movement on derivatives (377) (151)
Depreciation 2,754 1,599
Amortisation 262 238
Share-based payment expense 644 244
Increase in inventories (2,131) (290)
(Increase) in trade and other receivables (2,961) (1,485)
Decrease in trade and other payables 826 1,835
---------------------------------------------- --------- ---------
Cash generated from operations 7,584 7,923
Taxation (206) (290)
---------------------------------------------- --------- ---------
Net cash generated from operations 7,378 7,633
---------------------------------------------- --------- ---------
Investing activities
Payments to acquire property, plant and
equipment (24,595) (16,380)
Disposal of property, plant and equipment 563 4
Payments to acquire intangible assets (364) (269)
Finance income 26 33
---------------------------------------------- --------- ---------
Net cash used in investing activities (24,370) (16,612)
---------------------------------------------- --------- ---------
Financing activities
New borrowings 17,830 10,947
Capital repaid (2,875) (1,671)
Net outflow from other long-term creditors - (3)
Finance costs (1,122) (739)
Net proceeds from share issue 323 -
Dividend paid (1,546) (417)
---------------------------------------------- --------- ---------
Net cash generated from financing activities 12,610 8,117
Net increase in cash and cash equivalents (4,382) (862)
Cash and cash equivalents at the beginning
of the financial year 6,455 7,317
---------------------------------------------- --------- ---------
Cash and cash equivalents at the end of
the financial year (Note 14) 2,073 6,455
---------------------------------------------- --------- ---------
ACCOUNTING POLICIES
The Company is incorporated and domiciled in the UK. The Group's
activities consist of the rental and management of gas meters and
that of laying infrastructure pipes for industrial and commercial
premises and the provision of specialist technical advice on the
use and management of energy for industrial and commercial
users.
BASIS OF PREPARATION
The consolidated financial statements have been prepared on a
historical cost basis, except for derivative financial instruments
which are measured at fair value in line with applicable accounting
standards. The consolidated financial statements are presented in
British pounds Sterling (GBP), which is also the functional
currency of the Group, and all values are rounded to the nearest
thousand (GBP'000) except where otherwise indicated.
GOING CONCERN
Management prepares budgets and forecasts on a rolling 24 month
basis. These forecasts cover operational cash flows and investment
capital expenditure. The Group has committed bank facilities which
extend to March 2016 and available cash resources at 31 December
2013 of GBP11.7m.
Based on the current projections and facilities in place the
Directors consider it appropriate to continue to prepare the
financial statements on a going concern basis.
BASIS OF CONSOLIDATION
The consolidated financial statements incorporate the
consolidated financial statements of the Company and all Group
undertakings being UK Gas Connection Limited, UK Meter Assets
Limited, UKMA (AF) Limited and UK Data Management Limited. These
are adjusted, where appropriate, to conform to Group accounting
policies and are prepared to the same accounting reference date.
The Company was incorporated on 27 October 2009. The Group was
formed on 24 December 2009 through the acquisition of the entire
share capital of UK Gas Connection Limited and UK Meter Assets
Limited (the only subsidiaries in existence at that time).
Whilst the Group was newly formed, the ultimate ownership of all
companies remained unchanged and, as such, the financial statements
have been prepared based on a reconstruction under common control,
reflecting the Group results for the current and prior years as
though the Group structure has always existed.
USE OF ESTIMATES AND JUDGEMENTS
The preparation of the financial statements requires the use of
estimates and assumptions. Although these estimates are based on
management's best knowledge, actual results ultimately may differ
from these estimates.
The key sources of estimation uncertainty that have a
significant risk of causing material adjustment to the carrying
amounts of assets and liabilities within the next financial year
are the estimation of share-based payment costs. The estimation of
share-based payment costs requires the selection of an appropriate
valuation model, consideration as to the inputs necessary for the
valuation model chosen and the estimation of the number of awards
that will ultimately vest, inputs for which arise from judgements
relating to the probability of meeting non-market performance
conditions and the continuing participation of employees.
REVENUE RECOGNITION
Revenue is recognised to the extent that it is probable that the
economic benefits will flow to the Group and the revenue can be
reliably measured. Revenue is measured at the fair value of the
consideration received, excluding discounts and VAT.
Revenue is recognised when the significant rewards and risk of
ownership have been passed to the buyer. The risk and rewards of
ownership transfer when the Company fulfils its contractual
obligations to customers by supplying services.
METER RENTAL INCOME
Rental income is recognised when the Company is contractually
entitled to it. Rental income is calculated on a daily basis and
invoiced monthly. Rental contracts do not operate on a fixed term
basis and are cancellable by the lessee with immediate effect and
do not transfer risks and rewards of ownership of the underlying
asset. They are therefore considered as operating lease
arrangements and accounted for as such.
GAS CONNECTION
Revenue from gas connection contracts is recognised upon
delivery of the related service, in line with our contractual
entitlement.
DATA MANAGEMENT
Data provision income is recognised when the Company is
contractually entitled to it. Data provision income is invoiced in
advance and is recognised in a straight line over the contract
period.
SEGMENT REPORTING
An operating segment is a group of assets and operations engaged
in providing products or services that are subject to risks and
returns that are different from those of other business segments.
Operating segments are reported in a manner consistent with the
reports made to the chief operating decision maker which are
consistent with the reported results.
The Company considers that the role of chief operating decision
maker is performed by the Board of Directors.
FINANCIAL ASSETS
INITIAL RECOGNITION AND MEASUREMENT
Financial assets within the scope of IAS 39 are classified as
financial assets at fair value through profit or loss, loans and
receivables, held-to-maturity investments, available-for-sale
financial assets or as derivatives designated as hedging
instruments in an effective hedge, as appropriate. The Group
determines the classification of its financial assets at initial
recognition.
Purchases or sales of financial assets that require delivery of
assets within a time frame established by regulation or convention
in the marketplace (regular way trades) are recognised on the trade
date, i.e. the date that the Group commits to purchase or sell the
asset.
The Group's financial assets include cash and short-term
deposits, trade and other receivables, loans and other receivables,
quoted and unquoted financial instruments and derivative financial
instruments.
FINANCIAL LIABILITIES
INITIAL RECOGNITION AND MEASUREMENT
Financial liabilities within the scope of IAS 39 are classified
as financial liabilities at fair value through profit or loss,
loans and borrowings or as derivatives designated as hedging
instruments in an effective hedge, as appropriate. The Group
determines the classification of its financial liabilities at
initial recognition. All financial liabilities are recognised
initially at fair value and in the case of loans and borrowings,
net of directly attributable transaction costs.
The Group's financial liabilities include trade and other
payables, bank overdraft, loans and borrowings, financial guarantee
contracts and derivative financial instruments.
DERECOGNITION
A financial liability is derecognised when the obligation under
the liability is discharged or cancelled or expires. When an
existing financial liability is replaced by another from the same
lender on substantially different terms, or the terms of an
existing liability are substantially modified, such an exchange or
modification is treated as a derecognition of the original
liability and the recognition of a new liability and the difference
in the respective carrying amounts is recognised in the income
statement.
OFFSETTING OF FINANCIAL INSTRUMENTS
Financial assets and financial liabilities are offset, and the
net amount reported in the consolidated statement of financial
position if, and only if, there is a currently enforceable legal
right to offset the recognised amounts and there is an intention to
settle on a net basis, or to realise the assets and settle the
liabilities simultaneously.
INITIAL RECOGNITION AND SUBSEQUENT MEASUREMENT
The Group uses derivative financial instruments such as interest
rate swaps to hedge its interest rate risk. Such derivative
financial instruments are initially recognised at fair value on the
date on which a derivative contract is entered into and are
subsequently remeasured at fair value. Derivatives are carried as
financial assets when the fair value is positive and as financial
liabilities when the fair value is negative. The Group has not
designated any derivatives for hedge accounting.
CURRENT VERSUS NON-CURRENT CLASSIFICATION
Derivative instruments that are not designated as effective
hedging instruments are classified as current or non-current or
separated into a current and non-current portion based on an
assessment of the facts and circumstances (i.e. the underlying
contracted cash flows).
Where the Group will hold a derivative as an economic hedge (and
does not apply hedge accounting) for a period beyond twelve months
after the reporting date, the derivative is classified as
non-current (or separated into current and non-current portions)
consistent with the classification of the underlying item.
Derivative instruments that are designated as, and are effective
hedging instruments, are classified consistent with the
classification of the underlying hedged item. The derivative
instrument is separated into a current portion and non-current
portion only if a reliable allocation can be made.
EXCEPTIONAL ITEMS
The Group presents as exceptional items on the face of the
income statement those material items of income and expense which,
because of the nature or expected infrequency of the events giving
rise to them, merit separate presentation to allow shareholders to
understand better the elements of financial performance in that
year, so as to facilitate comparison with prior periods and to
assess better trends in financial performance.
RESEARCH AND DEVELOPMENT
Expenditure on pure and applied research activities is
recognised in the income statement as an expense as incurred.
Expenditure on product development activities is capitalised if
the product or process is technically and commercially feasible and
the Group intends and has the technical ability and sufficient
resources to complete development, future economic benefits are
probable and if the Group can measure reliably the expenditure
attributable to the intangible asset during its development. The
expenditure capitalised includes the cost of materials, direct
labour and an appropriate proportion of overheads.
Capitalised development expenditure is stated at cost less
accumulated amortisation and accumulated impairment losses.
Amortisation is calculated, when the product or system is
commercialised or in use, so as to write off the cost of an asset,
less its estimated residual value, over the useful economic life of
that asset as follows:
Amortisation 20% on cost straight line
INTANGIBLE ASSETS
Intangible assets acquired separately from third parties are
recognised as assets and measured at cost.
Following initial recognition, intangible assets are measured at
cost at the date of acquisition less any amortisation and any
impairment losses. Amortisation costs are included within the net
operating expenses disclosed in the statement of comprehensive
income.
Intangible assets are amortised over their useful lives as
follows:
Software 12.5% straight line
Useful lives are also examined on an annual basis and
adjustments, where applicable, are made on a prospective basis. The
Company does not have any intangible assets with indefinite
lives.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is stated at cost, net of
accumulated depreciation and/or accumulated impairment losses, if
any. Such cost includes the cost of replacing part of the plant and
equipment and borrowing costs for long-term construction projects
if the recognition criteria are met. When significant parts of
property, plant and equipment are required to be replaced in
intervals, the Group recognises such parts as individual assets
with specific useful lives and depreciation, respectively.
All other repair and maintenance costs are recognised in the
income statement as incurred.
Depreciation is calculated on a straight line basis over the
estimated useful life of the asset as follows:
Short leasehold property 20% on cost
Plant and machinery 5% on cost
Fixtures and fittings 15% on cost
Equipment 33% on cost
Land is not depreciated.
An item of property, plant and equipment and any significant
part initially recognised is derecognised upon disposal or when no
future economic benefits are expected from its use or disposal. Any
gain or loss arising on derecognition of the asset (calculated as
the difference between the net disposal proceeds and the carrying
amount of the asset) is included in the income statement when the
asset is derecognised. The asset's residual values, useful lives
and methods of depreciation are reviewed at each financial year end
and adjusted prospectively, if appropriate.
All fixed assets are initially recorded at cost.
IMPAIRMENT OF ASSETS
Property, plant and equipment and intangible assets are reviewed
for impairment whenever events or changes in circumstances indicate
that the carrying amount may not be recoverable. An impairment loss
is recognised for the amount by which the asset's carrying amount
exceeds its recoverable amount. The recoverable amount is the
higher of an asset's fair value less costs to sell and value in
use. For purposes of assessing impairment assets that do not
individually generate cash flows are assessed as part of the
cash-generating unit to which they belong. Cash-generating units
are the lowest levels for which there are cash flows that are
largely independent of the cash flows from other assets or groups
of assets.
INVENTORIES
Inventories are stated at the lower of cost and net realisable
value. Costs comprise direct materials. Net realisable value
represents the estimated selling price for inventories less all
estimated costs of completion and costs to be incurred in
marketing, selling and distribution.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents in the balance sheet comprise cash at
bank and in hand and short-term deposits with an original maturity
of three months or less. For the purpose of the consolidated
statement of cash flows, cash and cash equivalents consist of cash
and short-term deposits as defined above, net of outstanding bank
overdrafts.
HIRE PURCHASE AGREEMENTS
Assets held under hire purchase agreements are capitalised and
disclosed under tangible fixed assets at their fair value. The
capital element of the future payments is treated as a liability
and the notional interest is charged to the statement of
comprehensive income in proportion to the remaining balance
outstanding.
LEASED ASSETS AND OBLIGATIONS
Finance leases, which transfer to the Group substantially all
the risks and benefits incidental to ownership of the leased item,
are capitalised at the commencement of the lease at the fair value
of the leased property or, if lower, at the present value of the
minimum lease payments. Lease payments are apportioned between
finance charges and reduction of the lease liability so as to
achieve a constant rate of interest on the remaining balance of the
liability. Finance charges are recognised in the income statement.
Leased assets are depreciated over the useful life of the asset.
However, if there is no reasonable certainty that the Group will
obtain ownership by the end of the lease term, the asset is
depreciated over the shorter of the estimated useful life of the
asset and the lease term. Operating lease payments are recognised
as an expense in the income statement on a straight line basis over
the lease term.
All other leases are operating leases and the annual rentals are
charged to the statement of comprehensive income on a straight line
basis over the lease term.
PENSION COSTS
The Group operates a defined contribution pension scheme for
employees. The assets of the scheme are held separately from those
of the Group. The annual contributions payable are charged to the
statement of comprehensive income.
SHARE-BASED PAYMENTS
The costs of equity-settled share-based payments are charged to
the income statement over the vesting period. The charge is based
on the fair value of the equity instrument granted and the number
of equity instruments that are expected to vest.
TAXATION
Tax currently payable is based on the taxable profit for the
year. Taxable profit differs from accounting profit as reported in
the statement of comprehensive income because it excludes items of
income or expense that are taxable or deductible in other years and
it further excludes items that are never taxable or deductible. The
Group's liability for current tax is measured using tax rates that
have been enacted or substantively enacted by the reporting
date.
Deferred tax is the tax expected to be payable or recoverable on
differences between the carrying amount of assets and liabilities
in the financial statements and the corresponding tax bases used in
the computation of taxable profit and is accounted for using the
balance sheet liability method. Deferred tax liabilities are
recognised for all taxable temporary differences and deferred tax
assets are recognised to the extent that it is probable that
taxable profits will be available against which deductible
temporary differences can be utilised. The deferred tax balance is
calculated based on tax rates that have been enacted or
substantively enacted by the reporting date.
ADOPTION OF THE INTERNATIONAL ACCOUNTING STANDARDS NEW
STANDARDS, AMENDMENTS AND INTERPRETATIONS ISSUED BUT NOT YET
EFFECTIVE FOR PERIODS COMMENCING ON OR AFTER 1 JULY 2014
ANNUAL IMPROVEMENTS TO IFRSS 2010/2012 CYCLE (NOT YET ENDORSED
FOR USE IN EU)
IFRS Amendment
--------------------------- -------------------------------------------------------------------
IFRS 2 Share-based Separate definitions of 'service condition' and 'performance
Payment condition' now included in IFRS 2, Appendix A and the
definition of 'vesting condition' and 'market condition'
amended.
Applied prospectively for share-based transactions for
which the grant date is on or after 1 July 2014
IFRS 3 Business Paragraph 40 amended to clarify that contingent consideration
Combinations that meets the definition of a financial instrument
must be classified as equity or financial liability
based on the requirements of IAS 32 only and the reference
to 'or other applicable IFRSs' has been deleted
References to 'IAS 37 or other IFRSs as appropriate'
deleted in paragraph 58(b) for contingent consideration
that is a non-financial asset or liability. This retains
fair value, with changes through profit or loss, as
the subsequent measurement basis for all non-equity
contingent consideration to which IFRS 3 applies.
Consequential amendments made to IAS 37 and IAS 39 (and
IFRS 9) to clarify that contingent consideration in
a business combination that is classified as an asset
or a liability shall be subsequently measured at fair
value with changes in fair value recognised in profit
or loss.
Applied prospectively to business combinations for which
the acquisition date is on or after 1 July 2014.
IFRS 8 Operating A new paragraph 22(aa) added to require disclosure of
Segments the judgements made by management in applying the aggregation
criteria in the standard. This includes a brief description
of the operating segments that have been aggregated
and the economic indicators that have been assessed
in determining that the aggregated operating segments
share similar economic characteristics.
Paragraph 28(c) amended to require a reconciliation
of the total of the reportable segments' assets to the
entity's assets only if the amount is regularly provided
to the chief operating decision maker, consistent with
the requirement in paragraph 28(d) for an entity's liabilities.
IFRS 13 Fair Value Amendment to the Basis for Conclusions to clarify that
Measurement when certain paragraphs from IAS 39 and IFRS 9 were
deleted because IFRS 13 contains guidance for using
present value techniques, the intention was not to remove
the ability of an entity to measure short-term receivables
and payables with no stated interest rate at invoice
amounts without discounting, when the effect of not
discounting is immaterial.
IAS 16 Property, Paragraph 35 amended and new paragraphs added to clarify
Plant and Equipment the treatment of accumulated depreciation when an item
of property, plant and equipment is revalued, as the
IFRS Interpretations Committee had reported to the IASB
that practice differed.
At the date of the revaluation, the asset must be treated
in one of the following ways:
* the gross carrying amount is adjusted in a manner
that is consistent with the revaluation of the
carrying amount of the asset. The accumulated
depreciation at the date of the revaluation is
adjusted to equal the difference between the gross
carrying amount and the carrying amount of the asset
after taking into account accumulated impairment
losses;
* the accumulated depreciation is eliminated against
the gross carrying amount of the asset.
Applies to revaluations in the initial period of application
(i.e. beginning on or after 1 July 2014) and the preceding
period. Adjusted comparative information may be presented
for earlier periods, but there is no requirement to
do so.
IAS 24 Related Paragraph 9 amended and new paragraphs added to extend
Party Disclosures the definition of a related party as IAS 24 was not
clear of the relationship when a management entity provides
key management personnel services to an entity.
The definition of a related party now includes an entity,
or any member of a group of which it is a part, that
provides key management personnel services to the reporting
entity, or to the parent of the reporting entity.
Separate disclosure is required for the provisions of
key management personnel services provided by a separate
management entity. The key management personnel compensation
that is provided by a management entity to its own employees
is excluded from the disclosure requirements.
IAS 38 Intangible Paragraph 80 amended and new paragraphs added to align
Assets the accounting treatment of accumulated depreciation
when an intangible asset is revalued with the amendments
to IAS 16 when an item of property, plant and equipment
is revalued (see above).
Effective date: Periods commencing on or after 1 July 2014 unless
otherwise indicated.
IFRS 1 First-time A footnote to paragraph BC11 and a new paragraph BC11A
Adoption of International added to clarify that if a new IFRS is not yet mandatory
Financial Reporting but permits early application, that IFRS is permitted
Standards but not required to be applied in the entity's first
IFRS financial statements. If a new IFRS is so applied
it must be applied in all the periods presented in the
first IFRS financial statements on a retrospective basis.
Effective from 12 Dec 2013
IFRS 3 Business Paragraph 2(a) amended (and paragraphs added to the
Combinations Basis for Conclusions) to:
* exclude the formation of all types of joint
arrangements (as defined in IFRS 11 Joint
Arrangements, i.e. joint ventures and joint
operations), from the scope of IFRS 3; and
* clarify that the scope exception only applies to the
accounting for the formation of a joint arrangement
in the financial statements of the joint arrangement
itself.
Apply prospectively for periods beginning on or after
1 July 2014
IFRS 13 Fair Value Paragraph 52 of IFRS 13 defines the scope of the exception
Measurement that permits an entity to measure the fair value of
a group of financial assets and financial liabilities
on a net basis if the entity manages that group of financial
assets and financial liabilities on the basis of its
net exposure to either market risk or credit risk. This
is referred to as the portfolio exception.
The IASB has amended paragraph 52 to clarify that the
portfolio exception applies to all contracts within
the scope of IAS 39 Financial Instruments: Recognition
and Measurement or IFRS 9 Financial Instruments, regardless
of whether they meet the definitions of financial assets
or financial liabilities as defined in IAS 32 Financial
Instruments: Presentation.
Periods beginning on or after 1 July 2014. Apply prospectively
from the beginning of the annual period in which IFRS
13 was initially applied.
IAS 40 Investment IAS 40 amended to clarify that reference should be made
Property to IFRS 3 to determine whether the acquisition of investment
property is the acquisition of an asset; or a group
of assets; or a business combination.
This judgement is not based on paragraphs 7-15 of IAS
40, which relate to whether or not property is owner-occupied
or investment property, but is instead based on the
guidance in IFRS 3.
Transitional provisions:
The amendment applies prospectively and consequently
amounts recognised for acquisitions of investment property
in prior periods are not adjusted. However, the IASB
noted that the amendment is really only a clarification
of the interrelationship between IFRS 3 and IAS 40.
It therefore permits an entity to choose to apply the
amendment to individual acquisitions of investment property
that occurred before the effective date if, and only
if, information needed to apply the amendment is available
to the entity.
Apply prospectively to acquisitions of investment property
made in periods beginning on or after 1 July 2014. Adjusted
comparative information may be presented for earlier
periods but there is no requirement to do so.
There are no other IFRS or IFRIC interpretations that are not
yet effective that would be expected to have a material impact on
Smart Metering Systems plc.
None of the above interpretations would have an impact on this
financial information if applied.
Notes to the financial statements
For the year ended 31 December 2013
1 SEGMENTAL REPORTING
For management purposes, the Group is organised into two core
divisions, management of assets and installation of meters, which
form the basis of the Group's reportable operating segments.
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:
The management of assets comprises regulated management of gas
meters within the UK.
The installation of meters comprises installation of domestic
and industrial and commercial gas meters throughout the UK.
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 reported to
the Board. Segment performance is evaluated based on gross profit
or loss excluding operating costs not reported by segment,
depreciation, amortisation of intangible assets and exceptional
items.
The following tables present information regarding the Group's
reportable segments for the years ended 31 December 2013 and 31
December 2012:
Asset Asset Total
management installation Unallocated operations
31 December 2013 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------- ----------- ------------- ------------ -----------
Segment/Group revenue 13,803 14,113 - 27,916
Operating costs (2,575) (7,526) - (10,101)
-------------------------------- ----------- ------------- ------------ -----------
Segment profit - Group gross
profit 11,228 6,587 - 17,815
Items not reported by segment:
Other operating costs - - (5,965) (5,965)
Depreciation (2,654) - (100) (2,754)
Amortisation (262) - - (262)
Exceptional items and fair
value adjustments - - (267) (267)
-------------------------------- ----------- ------------- ------------ -----------
Profit before interest and
tax 8,312 6,587 (6,332) 8,567
Net finance costs (1,096) - - (1,096)
-------------------------------- ----------- ------------- ------------ -----------
Profit before tax 7,216 6,587 (6,332) 7,471
Tax expense (896)
-------------------------------- ----------- ------------- ------------ -----------
Profit for year 6,575
-------------------------------- ----------- ------------- ------------ -----------
Asset Asset Total
management installation Unallocated operations
31 December 2012 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------- ----------- ------------- ------------ -----------
Segment/Group revenue 9,254 11,775 - 21,029
Cost of sales (2,194) (5,565) - (7,759)
-------------------------------- ----------- ------------- ------------ -----------
Segment profit - Group
gross profit 7,060 6,210 - 13,270
Items not reported by segment:
Other operating costs - - (4,257) (4,257)
Depreciation (1,534) - (65) (1,599)
Amortisation (238) - - (238)
Exceptional items and fair
value adjustments - - (1,243) (1,243)
-------------------------------- ----------- ------------- ------------ -----------
Profit before interest
and tax 5,288 6,210 (5,565) 5,933
Net finance costs - - (706) (706)
-------------------------------- ----------- ------------- ------------ -----------
Profit before tax 5,288 6,210 (6,271) 5,227
Tax expense (914)
-------------------------------- ----------- ------------- ------------ -----------
Profit for year 4,313
-------------------------------- ----------- ------------- ------------ -----------
All revenues and operations are based and generated in the
UK.
The Group has one major customer that generated turnover within
each segment as listed below:
2013 2012
GBP'000 GBP'000
--------------------------------- -------- --------
Customer 1 - Asset Management 7,677 5,511
Customer 1 - Asset Installation 4,901 4,228
--------------------------------- -------- --------
12,578 9,739
No segmentation is presented for the majority of Group assets
and liabilities as these are managed centrally, independently of
operating segments.
Those assets and liabilities that are managed and reported on a
segmental basis are detailed below.
SEGMENT ASSETS AND LIABILITIES
Asset Asset Total
management installation operations
31 December 2013 GBP'000 GBP'000 GBP'000
------------------------------------- ----------- ------------- -----------
Assets reported by segment
Intangible assets 2,018 - 2,018
Plant and machinery 57,041 - 57,041
Inventories 2,504 - 2,504
------------------------------------- ----------- ------------- -----------
61,563
------------------------------------- ----------- ------------- -----------
Assets not reported by segment 8,720
------------------------------------- ----------- ------------- -----------
Total assets 70,283
------------------------------------- ----------- ------------- -----------
Liabilities reported by segment
Obligations under hire purchase
agreements 9 - 9
------------------------------------- ----------- ------------- -----------
9
Liabilities not reported by segment 47,682
------------------------------------- ----------- ------------- -----------
Total liabilities 47,691
------------------------------------- ----------- ------------- -----------
Asset Asset Total
management installation operations
31 December 2012 GBP'000 GBP'000 GBP'000
------------------------------------- ----------- ------------- -----------
Assets reported by segment
Intangible assets 1,916 - 1,916
Plant and machinery 35,791 - 35,791
Inventories 373 - 373
------------------------------------- ----------- ------------- -----------
38,080
------------------------------------- ----------- ------------- -----------
Assets not reported by segment 9,859
------------------------------------- ----------- ------------- -----------
Total assets 47,939
------------------------------------- ----------- ------------- -----------
Liabilities reported by segment
Obligations under hire purchase
agreements 13 - 13
------------------------------------- ----------- ------------- -----------
13
------------------------------------- ----------- ------------- -----------
Liabilities not reported by segment 31,330
------------------------------------- ----------- ------------- -----------
Total liabilities 31,343
------------------------------------- ----------- ------------- -----------
2 INCOME STATEMENT BY NATURE AND ITEMS OF EXPENDITURE INCLUDED
IN THE CONSOLIDATED INCOME STATEMENT
2013 2012
GBP'000 GBP'000
---------------------------------------------- -------- --------
Revenue 27,916 21,029
Direct rental costs (2,575) (2,194)
Direct subcontractor costs (6,220) (4,556)
Other direct sales costs and systems rental (1,312) (1,001)
Staff costs (3,830) (2,665)
Depreciation:
- owned assets (2,723) (1,568)
- leased assets (31) (31)
Amortisation (262) (238)
Auditor's remuneration:
- as auditor (51) (43)
- other services (29) (22)
Exceptional costs and fair value adjustments (267) (1,243)
Operating lease costs:
- plant and equipment 1 (30)
Other operating charges (2,050) (1,505)
---------------------------------------------- -------- --------
Operating profit 8,567 5,933
Finance costs (1,122) (739)
Finance income 26 33
---------------------------------------------- -------- --------
Profit before taxation 7,471 5,227
---------------------------------------------- -------- --------
Included in exceptional items and fair value adjustments
expenses are: i) GBP377,143 (2012: GBP(151,000)) relates to the
interest rate hedge fair value adjustment and ii) GBP644,275 (2012:
GBP243,675) that relates to share-based payments. GBPNil (2012:
GBP652,518) restructuring debt, GBPNil (2012: 395,300) settlement
of hedge and GBPNil (2012: GBP102,650) TUPE costs.
Amounts paid to our auditor during the year totalled GBP80,155
(2012: GBP65,480).
This can be analysed as:
2013 2012
--------------------------------------------------- -------- --------
GBP'000 GBP'000
--------------------------------------------------- -------- --------
Statutory audit (Baker Tilly UK Audit LLP) 51 43
Taxation services (Baker Tilly Tax and Accounting
Limited) 15 19
Non-statutory audit services (Baker Tilly
UK Audit LLP) 14 3
--------------------------------------------------- -------- --------
80 65
--------------------------------------------------- -------- --------
3 PARTICULARS OF EMPLOYEES
The average number of staff employed by the Group, including
Executive Directors, during the financial year was:
2013 2012
Number Number
-------------------------------- ------- -------
Number of administrative staff 8 5
Number of operational staff 76 54
Number of sales staff 5 3
Number of IT staff 4 3
Number of Directors 3 3
-------------------------------- ------- -------
96 68
-------------------------------- ------- -------
The aggregate payroll costs, including Executive Directors, of
the above were:
2013 2012
GBP'000 GBP'000
------------------------ -------- --------
Wages and salaries 3,364 2,351
Social security costs 384 256
Staff pension costs 64 40
Director pension costs 18 18
------------------------ -------- --------
3,830 2,665
------------------------ -------- --------
4 DIRECTOR'S EMOLUMENTS
The Directors' aggregate remuneration in respect of qualifying
services were:
2013 2012
GBP'000 GBP'000
----------------------------------------------- -------- --------
Emoluments receivable 589 518
Fees 52 50
Value of Group pension contributions to money
purchase schemes 5 4
Other pension 15 14
----------------------------------------------- -------- --------
661 586
----------------------------------------------- -------- --------
2013 2012
Emoluments of highest paid Director GBP'000 GBP'000
------------------------------------- -------- --------
Total emoluments 387 350
Pension contributions 15 13
------------------------------------- -------- --------
The number of Directors who accrued benefits under Company
pension schemes was as follows:
2013 2012
Number Number
------------------------ ------- -------
Money purchase schemes 1 1
------------------------ ------- -------
5 FINANCE COSTS AND FINANCE INCOME
2013 2012
GBP'000 GBP'000
--------------------------- -------- ----------------------
Finance costs
Bank loans and overdrafts 1,121 738
Finance leases 1 1
--------------------------- -------- ----------------------
Total finance costs 1,122 739
--------------------------- -------- ----------------------
Finance income
Bank interest receivable 26 33
--------------------------- -------- ----------------------
6 TAXATION
2013 2012
GBP'000 GBP'000
--------------------------------------------------- -------- --------
Analysis of charge in the year
Current tax:
Current income tax expense - 200
Over provision in prior year 11 77
--------------------------------------------------- -------- --------
Total current income tax 11
Deferred tax:
Origination and reversal of temporary differences 885 637
--------------------------------------------------- -------- --------
Tax on profit on ordinary activities 896 914
--------------------------------------------------- -------- --------
The charge for the period can be reconciled to the profit per
the consolidated statement of comprehensive income as follows:
Profit before tax 7,471 5,227
-------------------------------------------------- ------ ------
Tax at the UK corporation tax rate of 23% (2012:
24.5%) 1,718 1,281
Expenses not deductible for tax purposes 19 45
Adjustments to tax charge in respect of previous
periods 3 (174)
Change in tax rate (844) (221)
R&D enhanced deductions - (17)
-------------------------------------------------- ------ ------
Tax expense in the income statement 896 914
-------------------------------------------------- ------ ------
7 EARNINGS PER SHARE
The calculation of EPS is based on the following data and number
of shares:
2013 2012
GBP'000 GBP'000
------------------------------------------ -------- --------
Profit for the year used for calculation
of basic EPS 6,575 4,313
Amortisation of intangible assets 262 238
Exceptional costs 267 1,243
Tax effect of adjustments (127) (355)
------------------------------------------ -------- --------
Earnings for the purpose of adjusted EPS 6,977 5,439
------------------------------------------ -------- --------
Number of shares 2013 2012
------------------------------------------------- ----------- -----------
Weighted average number of ordinary shares for
the purposes of basic EPS 83,606,102 83,339,747
Effect of potentially dilutive ordinary shares:
- share options 4,898,694 2,957,911
------------------------------------------------- ----------- -----------
Weighted average number of ordinary shares for
the purposes of diluted EPS 88,504,796 86,297,658
------------------------------------------------- ----------- -----------
Earnings per share:
- basic (pence) 7.86 5.18
- diluted (pence) 7.43 5.00
Adjusted earnings per share:
- basic (pence) 8.35 6.53
- diluted (pence) 7.88 6.30
------------------------------------------------- ----------- -----------
The Directors consider that the adjusted earnings per share
calculation gives a better understanding of the Group's earnings
per share.
8 DIVIDENDS
2013 2012
GBP'000 GBP'000
--------------------------------------------- -------- --------
Equity dividends
Paid during the year:
Dividends on equity shares GBP0.0185 (2012:
GBP0.005) 1,546 417
--------------------------------------------- -------- --------
Total dividends 1,546 417
--------------------------------------------- -------- --------
9 INTANGIBLE ASSETS
Research
and
development Software Total
GBP'000 GBP'000 GBP'000
------------------------ ------------ --------- --------
Cost
As at 1 January 2012 559 1,810 2,369
Additions 269 - 269
------------------------ ------------ --------- --------
As at 31 December 2012 828 1,810 2,638
Additions 364 - 364
------------------------ ------------ --------- --------
As at 31 December 2013 1,192 1,810 3,002
------------------------ ------------ --------- --------
Amortisation
As at 1 January 2012 14 470 484
Charge for year 3 235 238
------------------------ ------------ --------- --------
As at 31 December 2012 17 705 722
Charge for year 27 235 262
------------------------ ------------ --------- --------
As at 31 December 2013 44 940 984
------------------------ ------------ --------- --------
Net book value
At 31 December 2013 1,148 870 2,018
------------------------ ------------ --------- --------
At 31 December 2012 811 1,105 1,916
------------------------ ------------ --------- --------
At 1 January 2012 545 1,340 1,885
------------------------ ------------ --------- --------
10 PROPERTY, PLANT AND EQUIPMENT
Short Plant Fixtures
leasehold and
property machinery and fittings Equipment Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------- ----------- ---------- ------------- ---------- --------
Cost
As at 1 January
2012 31 23,020 25 296 23,372
Additions 72 16,200 91 17 16,380
Disposals - - (13) - (13)
------------------- ----------- ---------- ------------- ---------- --------
As at 31 December
2012 103 39,220 103 313 39,739
Additions 33 24,467 16 79 24,595
Disposals - (687) - - (687)
------------------- ----------- ---------- ------------- ---------- --------
As at 31 December
2013 136 63,000 119 392 63,647
------------------- ----------- ---------- ------------- ---------- --------
Depreciation
As at 1 January
2012 18 1,895 9 123 2,045
Charge for year 12 1,534 11 42 1,599
Disposals - - (9) - (9)
------------------- ----------- ---------- ------------- ---------- --------
As at 31 December
2012 30 3,429 11 165 3,635
Charge for year 20 2,654 16 64 2,754
Disposals - (124) - - (124)
------------------- ----------- ---------- ------------- ---------- --------
As at 31 December
2013 50 5,959 27 229 6,265
------------------- ----------- ---------- ------------- ---------- --------
Net book value
At 31 December
2013 86 57,041 92 163 57,382
------------------- ----------- ---------- ------------- ---------- --------
At 31 December
2012 73 35,791 92 148 36,104
------------------- ----------- ---------- ------------- ---------- --------
At 1 January 2012 13 21,125 16 173 21,327
------------------- ----------- ---------- ------------- ---------- --------
HIRE PURCHASE AGREEMENTS
Included within the net book value of GBP57,382,000 (2012:
GBP36,104,000, 2011: GBP21,327,000) is GBP84,000 (2012: GBP115,000,
2011: GBP145,000) relating to assets held under hire purchase
agreements. The depreciation charged to the consolidated financial
statements in the year in respect of such assets amounted to
GBP31,000 (2012: GBP31,000, 2011: GBP8,000).
The assets are secured by a bond and floating charge (note
16).
11 FINANCIAL ASSET INVESTMENTS
SUBSIDIARY UNDERTAKINGS
Country of Proportion
of
incorporation Holding shares Nature of business
held
------------------- -------------- --------- ----------- -----------------------
All held by the
Company:
UK Gas Connection Scotland Ordinary 100% Gas utility management
Limited shares
UK Meter Assets Scotland Ordinary 100% Gas utility management
Limited shares
UK Data Management Scotland Ordinary 100% Data management
Limited shares
UKMA (AF) Limited* England Ordinary 100% Leasing
shares
------------------- -------------- --------- ----------- -----------------------
* The shareholding in this company is indirect via a subsidiary company.
12 INVENTORIES
2013 2012
GBP'000 GBP'000
------------- -------- --------
Inventories 2,504 373
------------- -------- --------
13 TRADE AND OTHER RECEIVABLES
2013 2012
GBP'000 GBP'000
--------------------------- -------- --------
Trade receivables 3,326 1,270
Prepayments 246 60
Accrued income 1,885 1,516
Other receivables 32 32
Corporation tax repayable 47 -
VAT recoverable 563 213
--------------------------- -------- --------
6,099 3,091
--------------------------- -------- --------
The Directors consider that the carrying amount of trade and
other receivables approximates to their fair value.
The Group's credit risk is primarily attributable to trade
receivables and accrued income. The amounts presented in the
statement of financial position are net of allowances for doubtful
receivables. There was no allowance for doubtful receivables or
provision against accrued income in the year (2013: GBPNil, 2012:
GBPNil). The ageing profile of trade receivables past due date is
shown below:
2013 2012
GBP'000 GBP'000
------------------------------------ -------- --------
31-60 days 299 148
60-90 days 401 56
Over 90 days 198 49
------------------------------------ -------- --------
898 253
------------------------------------ -------- --------
Allowance for doubtful receivables - -
------------------------------------ -------- --------
898 253
------------------------------------ -------- --------
Trade receivables are non-interest-bearing and are generally on
30-90 days terms.
Trade receivables due from related parties at 31 December 2013
amounted to GBPNil (2012: GBPNil, 2011: GBP34,000).
Receivables are all in Sterling denominations.
The Directors are of the opinion that none of the overdue debts
as at 31 December 2013 (2012: GBPNil, 2011: GBPNil) require
impairment.
Accrued income is invoiced periodically and customers are the
same as those within Trade receivables. Due to its nature there is
no accrued income past due.
14 CASH AND CASH EQUIVALENTS
Cash and cash equivalents comprise cash held by the Group. The
carrying amount of the asset approximates the fair value. All
balances are held in Sterling.
During each period, there were no amounts of cash placed on
short-term deposit.
For the purposes of the cash flow statement, cash and cash
equivalents comprise:
2013 2012
GBP'000 GBP'000
------ -------- --------
Cash 2,073 6,455
------ -------- --------
2,073 6,455
------ -------- --------
15 TRADE AND OTHER PAYABLES
2013 2012
GBP'000 GBP'000
----------------- -------- --------
Current
Trade payables 4,569 3,434
Other payables 15 12
Other taxes 249 176
Corporation tax - 148
Deferred income 291 88
Accruals 3,755 4,343
----------------- -------- --------
8,879 8,201
----------------- -------- --------
The maturity profile of trade payables is given below:
2013 2012
GBP'000 GBP'000
-------------- -------- --------
Current 4,026 2,518
31-60 days 160 607
60-90 days 58 42
Over 90 days 325 266
-------------- -------- --------
4,569 3,433
-------------- -------- --------
Trade payables are non-interest-bearing and are normally settled
on 30-45 day terms.
All trade liabilities are Sterling denominated.
16 BANK LOANS AND OVERDRAFTS
2013 2012
GBP'000 GBP'000
----------------- -------- --------------------------------
Current
Bank loans 3,933 2,150
Bank overdrafts - -
----------------- -------- --------------------------------
3,933 2,150
----------------- -------- --------------------------------
Non-current
Bank loans 31,475 18,299
----------------- -------- --------------------------------
Bank overdraft - -
31,475 18,299
----------------- -------- --------------------------------
Bank loans at 31 December 2013 relate to a term loan facility of
GBP45.0m that was finalised in August 2013.
The term loan is available for 24 months, is payable in equal
quarterly instalments based on a ten year repayment profile, with a
final repayment date of 31 July 2017. The term loan attracts
interest at a rate of 2.9% over the three month LIBOR. 1.45% is
paid on undrawn funds.
The banks have a bond and floating charge over current and
future property and assets.
The Group have fixed the bank interest payable through an
interest rate swap (see note 18).
17 COMMITMENTS UNDER HIRE PURCHASE AGREEMENTS
Future minimal commitments under hire purchase agreements are as
follows:
2013 2012
GBP'000 GBP'000
-------------------------------------------- -------- --------
Current
Amounts payable within one year 3 3
-------------------------------------------- -------- --------
Non-current
Amounts payable between two to five years 6 10
Amounts payable after more than five years - -
-------------------------------------------- -------- --------
6 10
The Group has hire purchase contracts for various items of
computer equipment. These leases have terms of renewal but no
purchase options and escalation clauses. Renewals are at the option
of the specific entity that holds the lease.
The Directors consider that the future minimum lease payments
under hire purchase contracts approximate to the present value of
the minimum payments. Obligations under hire purchase contracts are
secured on the underlying assets.
18 OTHER FINANCIAL LIABILITIES AND ASSETS
The Group's treasury policy and management of financial
instruments, which form part of these financial statements, are set
out in the Financial Review.
2013 2012
GBP'000 GBP'000
----------------------------- --------- --------
Other financial assets 207 -
----------------------------- --------- --------
Non-current liabilities
Other financial liabilities - 170
----------------------------- --------- --------
Other financial assets and liabilities relate to the fair value
adjustment on interest rate swaps.
The Group uses interest rate swaps to manage interest rate risk
on interest-bearing loans and borrowings which means that the Group
pays a fixed interest rate rather than being subject to
fluctuations in the variable rate. The Group has not designated
these derivatives as cash flow hedges.
The interest rate swaps cover an interest rate swap for an
amount of GBP28,200,000 as at 31 December 2013 (2012:
GBP13,200,000, 2011: GBP5,500,000) and an interest rate cap over an
amount of GBPNil as at 31 December 2013 (2012: GBPNil, 2011:
GBP5,500,000).
The interest rate swap results in a fixed interest rate of
0.90-0.92%.
The termination date for the derivatives is 15 September
2016.
The movement in the fair value is shown below:
2013 2012
GBP'000 GBP'000
-------------------------- -------- --------
Interest rate swap
Opening position - 18
Adjustment to fair value 207 (18)
-------------------------- -------- --------
Closing position 207 -
-------------------------- -------- --------
Interest rate cap
Opening position (170) (339)
Adjustment to fair value 170 169
-------------------------- -------- --------
Closing position - (170)
-------------------------- -------- --------
FAIR VALUES
The Directors do not consider there to be any material
differences between the fair values and carrying values of any
financial assets or liabilities recorded within these financial
statements at the balance sheet date other than as set out
below.
FAIR VALUE HIERARCHY
The Group uses the following hierarchy for determining and
disclosing the fair value of financial instruments by valuation
technique:
Level 1: quoted (unadjusted) prices in active markets for
identical assets or liabilities;
Level 2: other techniques for which all inputs which have a
significant effect on the recorded fair value are observable,
either directly or indirectly; and
Level 3: techniques which use inputs which have a significant
effect on the recorded fair value that are not based on observable
market data.
At 31 December 2013, the Group held the following financial
instruments measured at fair value:
31 December
2013 Level Level
1 2 Level 3
Liabilities measured at GBP'000 GBP'000 GBP'000 GBP'000
fair value
-------------------------------- ------------ -------- -------- --------
Financial liabilities at
fair value through the income
statement:
-------------------------------- ------------ -------- -------- --------
Interest rate derivatives 207 - 207 -
-------------------------------- ------------ -------- -------- --------
Fair value has been assessed on a Mark to Market basis.
The above assets are shown on the statement of financial
position as other current financial assets and other current
financial liabilities.
During the reporting period ended 31 December 2013, there were
no transfers between Level 1 and Level 2 fair value measurements
and no transfers into and out of Level 3 fair value
measurements.
19 FINANCIAL RISK MANAGEMENT
The Board reviews and agrees policies for managing the risks
associated with interest rate, credit and liquidity risk. The Group
has in place a risk management policy that seeks to minimise any
adverse effect on the financial performance of the Group by
continually monitoring the following risks:
INTEREST RATE RISK
The Group's interest rate risk arises as a result of both its
long and short-term borrowing facilities.
The Group seeks to manage exposure to interest rate fluctuations
through the use of fixed interest rate swaps.
INTEREST RATE SENSITIVITY
The following table demonstrates the sensitivity to a change in
interest rates on loans and borrowings after the impact of hedge
accounting. The Group's profit before tax is affected through the
impact on floating rate borrowings as follows:
Effect
on profit
Increase/decrease before
tax
Pound Sterling in basis GBP'000
points
---------------- ------------------ -----------
2013 1% 72
2012 1% 65
---------------- ------------------ -----------
INTEREST RATE RISK PROFILE OF FINANCIAL LIABILITIES
The interest rate profile of the financial liabilities of the
Group (being bank loans and overdrafts, obligations under finance
leases and other financial liabilities) as at each period end is as
follows:
Fixed rate Variable
rate
financial financial
liabilities liabilities Total
GBP'000 GBP'000 GBP'000
---------------- ------------- ------------- --------
2013 28,209 7,208 35,417
2012 13,213 7,249 20,462
1 January 2012 5,516 5,673 11,189
---------------- ------------- ------------- --------
The fixed rate financial liabilities relates to the portion of
the banking facility that is fixed through hedging instruments.
The following is the maturity profile of the Group's financial
liabilities as at 31 December:
2013 2012
GBP'000 GBP'000
-------------------- -------- --------
Fixed rate
Less than one year 2,824 1,324
Two to five years 11,286 5,289
Over five years 14,099 6,600
-------------------- -------- --------
28,209 13,213
-------------------- -------- --------
Variable rate
Less than one year 1,086 803
Two to five years 4,344 3,212
Over five years 1,778 3,234
-------------------- -------- --------
7,208 7,249
-------------------- -------- --------
INTEREST RATE RISK PROFILE OF FINANCIAL ASSETS
The Group's financial assets at 31 December 2013 comprise cash
and trade receivables. The cash balance of GBP2,073,000 (2012:
GBP6,455,000, 2011: GBP7,317,000) is a floating rate financial
asset.
FAIR VALUES OF FINANCIAL LIABILITIES AND FINANCIAL ASSETS
The fair values, based upon the market value or discounted cash
flows of financial liabilities and financial assets held in the
Group, were not materially different from their book values.
FOREIGN CURRENCY RISK
The Group's exposure to the risk of changes in foreign exchange
rates is insignificant as primarily all of the Group's operating
activities are denominated in pound Sterling.
LIQUIDITY RISK
The Group manages its cash in a manner designed to ensure
maximum benefit is gained whilst ensuring security of investment
sources. The Group's policy on investment of surplus funds is to
place deposits at institutions with strong credit ratings.
The ageing and maturity profile of the Group's material
liabilities are covered within the relevant liability note.
CREDIT RISK
Credit risk with respect to trade receivables and accrued income
is due to the Group trading with a limited number of companies who
are generally large utility companies or financial institutions.
Therefore, the Group does not expect, in the normal course of
events, that these debts are at significant risk. The Group's
maximum exposure to credit risk equates to the carrying value of
cash held on deposit and trade, other receivables and accrued
income.
The Group's maximum exposure to credit risk from its customers
is GBP5,211,000 (2012: GBP2,786,000, 2011: GBP1,445,000) as
disclosed in note 13 - trade and other receivables, and accrued
income.
The Group regularly monitors and updates its cash flow forecasts
to ensure it has sufficient and appropriate funds to meet its
ongoing operational requirements whilst maintaining adequate
headroom on its facilities to ensure no breach in its banking
covenants.
CAPITAL MANAGEMENT
Capital is the equity attributable to the equity holders of the
parent. The primary objective of the Group's capital management is
to ensure that it maintains a strong credit rating and healthy
capital ratios in order to support its business and maximise
shareholder value. The Group manages its capital structure, and
makes adjustments to it, in light of changes in economic
conditions. To maintain or adjust the capital structure, the Group
may adjust the dividend payment to shareholders, sell assets,
return capital to shareholders or issue new shares.
The Group monitors capital on the basis of a leverage ratio.
This ratio is calculated as net debt divided by EBITDA. Net debt is
calculated as total borrowings less cash. EBITDA is calculated as
operating profit before any significant non-recurring items,
interest, tax, depreciation and amortisation.
20 Deferred taxation
The movement in the deferred taxation asset during the period
was:
2013 2012
GBP'000 GBP'000
------------------------------------------------ -------- --------
Opening deferred tax liability 2,510 1,873
Increase in provision through income statement 885 637
------------------------------------------------ -------- --------
Closing deferred tax liability 3,395 2,510
------------------------------------------------ -------- --------
All movements identified have gone through the income
statement.
The Group's provision for deferred taxation consists of the tax
effect of temporary differences in respect of:
2013 2012
GBP'000 GBP'000
------------------------------------------------- -------- --------
Excess of taxation allowances over depreciation
on fixed assets 3,385 2,788
Tax losses available (38) (239)
Fair value of interest rate swaps (net) 48 (39)
------------------------------------------------- -------- --------
3,395 2,510
------------------------------------------------- -------- --------
The deferred tax included in the income statement is as
follows:
2013 2012
GBP'000 GBP'000
----------------------------------------------- -------- --------
Accelerated capital allowances 597 459
Tax losses 201 132
Movement in fair value of interest rate swaps 87 46
----------------------------------------------- -------- --------
885 637
----------------------------------------------- -------- --------
21 RELATED PARTY TRANSACTIONS
A number of key management personnel hold positions in other
entities that result in them having control or significant
influence over the financial or operating policies.
A number of these entities transacted with the Group in the
reporting period. The terms and conditions of the transactions with
key management personnel and their related parties were no more
favourable than those available, or which might reasonably be
expected to be available, on similar transactions to non-key
management personnel and related entities on an arm's length
basis.
During the period, the Group entered into the following
transactions with related parties:
During the year the Group paid rent amounting to GBP41,500
(2012: GBP41,500, 2011: GBP41,500) to the Directors' pension
scheme, Eco Retirement Benefit Scheme, for the use of certain
premises. Both Stephen Timoney and Alan Foy are trustees of the
scheme. At the year-end date, an amount of GBP4,150 (2012:
GBP4,150, 2011: GBP4,150) was outstanding in this regard.
During the year, the Group paid dividends to Stephen Timoney and
Alan Foy of GBP428,170 and GBP164,464 respectively.
Remuneration of key management which includes executive and
non-executive directors together with certain management
personnel:
At At
31 December 31 December
2013 2012
GBP'000 GBP'000
---------------------------------------- ------------ ------------
Salaries and other short term employee
benefits 1,101 754
---------------------------------------- ------------ ------------
22 SHARE CAPITAL
2013 2012
GBP'000 GBP'000
-------------------------------------------- -------- --------
Allotted and called up:
83,877,872 ordinary shares of GBP0.01 each
(2012 and 2011: 83,339,747 ordinary shares
of GBP0.01 each) 839 833
-------------------------------------------- -------- --------
On 4 July 2013 538,125 ordinary share options were exercised and
issued to Kevin Lyon and Nigel Christie.
23 SHARE-BASED PAYMENTS
On 20 June 2011 the Company adopted both an Approved Company
Share Option Plan (the CSOP) and an Unapproved Company Share Option
Plan (the Unapproved Plan).
CSOP
The CSOP is open to any employee of any member of the Group up
to a maximum value of GBP30,000 per employee. No option can be
exercised within three years of its date of grant.
UNAPPROVED PLAN
The Unapproved Plan is open to any employee, Executive Director
or Non-executive Director of the Company or any other Group company
who is required to devote substantially the whole of his time to
his duties under his contract of employment. Except in certain
specified circumstances no option will be exercisable within five
years of its grant.
At 31 Exercise
At 1 January December price Date
Plan 2013 Granted Exercised Lapsed 2013 (pence) exercisable Expiry
date
------------ ------------- -------- --------- --------- ---------- --------- ------------ ---------
CSOP 572,373 - - (6,579) 565,794 76.0 15/7/14 15/7/21
CSOP 39,088 - - - 39,088 153.5 28/5/15 28/5/22
CSOP 12,097 - - (12,097) - 248.0 3/12/15 3/12/22
Unapproved 3,083,333 - - 104,273 2,979,060 60.0 20/6/16 20/6/21
Unapproved 717,500 - 538,125 179,375 - 60.0 20/6/12* 20/2/21
Unapproved 1,162,629 - - - 1,162,629 153.5 28/5/17 28/5/22
Unapproved 805,660 - - 805,660 - 248.0 3/12/17 3/12/22
Unapproved - 179,375 - - 179,375 60.0 28/6/13 28/06/23
------------ ------------- -------- --------- --------- ---------- --------- ------------ ---------
* Only 50% of the options can be exercised at this date.
VALUATION
The fair value of all options granted has been estimated using
the Black-Scholes option model, taking into account the terms and
conditions upon which the options were granted. The following table
lists the inputs to the model used for the year ended 31 December
2013:
Unapproved
plan
--------------------------- -----------
Option strike price (GBP) 60p
Share price (GBP) 309
--------------------------- -----------
Options granted during the year are immediately exercisable.
The weighted average fair value of share options issued during
the year was GBP2.65.
24 OTHER RESERVE
This is a non-distributable reserve that arose by applying
merger relief under s162 CA06 to the shares issued in 2008 in
connection with the Group restructuring. This was previously
recognised as a merger reserve under UK GAAP. Under IFRS, this has
been classed as an "other reserve".
25 COMMITMENTS UNDER OPERATING LEASES
The Group has entered into commercial leases for office space.
These leases have lives between one and 15 years with no renewal
option included in the contracts. There are no restrictions placed
upon the Group by entering into these leases.
Future minimum rentals payable under non-cancellable operating
leases as at each year end are as follows:
2013 2012
GBP'000 GBP'000
-------------------------------------------- -------- --------
Future minimal commitments under operating
lease agreements are as follows:
Payable within one year 205 65
Payable within two and five years 411 704
Payable after five years 135 176
-------------------------------------------- -------- --------
751
-------------------------------------------- -------- --------
26 ULTIMATE CONTROLLING PARTY
There is no ultimate controlling party by virtue of the
structure of shareholdings in the Group.
27 CONTINGENT LIABILITY
The Group is the subject of an ongoing HMRC enquiry in respect
of payments made to Employee Benefit Trusts in prior years. Whilst
the outcome of the enquiry is, as yet, uncertain, the beneficiaries
of the Trusts have provided the Company with indemnities against
any additional tax that may become payable as a result of these
enquiries.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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