TIDMSMS
RNS Number : 4659H
Smart Metering Systems PLC
16 March 2015
16 March 2015
Smart Metering Systems plc
("SMS" or "the Company" or "the Group")
Final results for the year ended 31 December 2014
Smart Metering Systems plc (AIM: SMS.L) is pleased to announce
its final results for the 12 months to 31 December 2014, which show
continued growth across all business areas.
Financial Highlights
-- Revenue* increased by 52% to GBP42.4m (2013: GBP27.9m) -
increase of 25% excluding UPL (now SMS Electricity)
-- Total annualised recurring revenues increased by 43% to GBP26.2m (2013: GBP18.3m)
- Gas metering and data: meter recurring rent increased 41% to
GBP21.9m and data recurring income reached GBP1.0m
- Electricity metering and data: meter recurring rent doubled to
GBP0.6m and data recurring income grew 29% to GBP2.7m
-- Gross profit increased by 55% to GBP27.6m (2013: GBP17.8m) -
increase of 38% excluding UPL
-- Gross profit margin at 65% (2013:64%)
-- Underlying EBITDA** increased by 64% to GBP19.3m (2013:
GBP11.8m) - increase of 49% excluding UPL
-- EBITDA margin at 46% (2013: 42%)
-- Underlying PBT** increased by 66% to GBP12.8m (2013: GBP7.7m)
-- Underlying earnings per share *** increased 77% to 14.36p (2013: 8.10p)
-- Final dividend of 1.88p per ordinary share making 2.82p for
the full year (2013: 2.31p), an increase of 22%
-- Net debt of GBP57.3m and net debt to EBITDA 2.9x
-- Available cash and unused debt facility of GBP47.5m at 31(st) December 2014
-- In November 2014, re-negotiation of GBP105m club facility
with existing club of lenders, Barclays Bank plc (lead bank),
Clydesdale Bank plc and Bank of Scotland plc, to provide further
funding flexibility
* Additional revenue streams incorporated in 2014 resulting from the acquisition of UPL.
* * Underlying EBITDA and PBT is before exceptional items and intangible amortisation.
*** Underlying earnings per share is profit after taxation but
before exceptional items and intangible amortisation, divided by
the weighted average number of ordinary shares in issue.
Operational Highlights
-- Total gas meter portfolio increased by 29% to 607,000 (Dec
2013: 469,000), with industrial and commercial (I&C) meters
nearly trebling. Electricity meter numbers more than doubled to
12,000 (31 December 2013: 5,000)
-- Capital expenditure on meters increased by 52% to GBP35m,
reaching a monthly run rate of approximately GBP3m in December
2014
-- GBP14m acquisition of UPL in April 2014, adding in excess of
GBP2m EBITDA annual run rate and electricity connections, meters,
data and energy services to SMS's services
-- Rhys Wynne, previously managing director of UPL, appointed to
the new role of Chief Operating Officer (COO) of SMS
-- Strengthened Board with the appointments of energy sector and
corporate finance experts Miriam Greenwood and Willie MacDiarmid as
Non-Executive Directors in February 2014 and April 2014
respectively
-- Contract extensions or additions with major customers,
including BES Utilities (BES) and Total Gas & Power Ltd (TGP)
(both after full year in February 2015), British Gas Business
(BGB), DONG Energy Services Limited (DONG Limited) and Opus Energy
(Opus)
-- ADM(TM) installations more than doubled to 41,000 units by 31
December 2014 (31 December 2013: 16,000)
-- Received full accreditation for the water market in the UK
-- International trials continuing
Alan Foy, Chief Executive Officer, commented:
"2014 has been a milestone year for SMS with the establishment
of our Electricity business. Everything we had envisaged for the
UPL acquisition has come to fruition in less than a year. We have
successfully integrated UPL into SMS, increased our recurring
income streams and we have already expanded customer relationships
to benefit from our new dual-fuel service offering. We are well
positioned for continued growth as we progress through 2015, our
20(th) year in business."
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
Nick Tulloch
Kreab 020 7074 1800
Chris Philipsborn
Natalie Biasin
Matthew Jervois
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.
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.
SMS expanded its services into the electricity market through
the acquisition of Utility Partnership Limited in April 2014. The
Company can now provide a fully integrated service from beginning
to end to cover the installation of a gas/electricity
supply/connection to the procurement, installation and management
of a gas or electricity meter asset to the collection and
management of customer data and ongoing energy management services.
Longer term the Company also has additional applications for water
and LPG.
Following its listing, the Company 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
2014 has been a year of expansion and firsts for SMS, putting
the business in good stead as we now enter our 20(th) anniversary
year. In the first half of the year, SMS established its
Electricity service offerings within both segments and welcomed 168
new colleagues through the acquisition of UPL on 14 April 2014.
During the second half of the year, SMS appointed Rhys Wynne as
Chief Operating Officer (COO) of the Company, a new role created
following the UPL acquisition. SMS is delighted with the success of
the UPL integration, which has helped secure contract extensions or
additions from a number of major customers, including BES Utilities
(BES), British Gas Business (BGB), DONG Energy Services Limited
(DONG), Opus Energy (Opus)and Total Gas & Power Ltd (TGP). SMS
and our customers are already clearly benefiting from the Company's
full end-to-end dual fuel service.
Our Business
I am pleased to confirm SMS has continued to make considerable
progress in 2014 across all segments of the business.
With the establishment of SMS Electricity, SMS has a clearly
defined growth strategy in the gas and electricity markets,
positioning the business to fulfil our vision of becoming the
leading independent provider of metering services to the utility
sector with the highest level of customer service. Together with
the potential to establish our ADM(TM) device as the industry
standard smart metering device, the Group has a very promising
outlook.
SMS has consistently demonstrated 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 and electricity
supplier market, increase the run rate with these customers, and
continue to grow the meter asset portfolio.
The UK meter assets business presents a large market opportunity
with a substantial proportion of an estimated 1.6 million
industrial and commercial (I&C) gas meters in the UK to be
exchanged for a smart metering solution by 2020 with the added
potential of a domestic market rollout of some 22 million domestic
gas meters, and in the electricity market this is estimated to be
2.1 million I&C meters and 27 million domestic meters.
The order book for the ADM(TM) device has continued to grow and
our current gas and electricity supplier contracts provide
potential access to over 80% of UK I&C gas meters and 40% of
residential gas meters. International trials of ADM(TM) overseas in
gas, electricity, water and LPG continue, where we remain
encouraged by the progress.
Our priority in 2015 and beyond is to focus on our three
strategic areas:
1) Grow our domestic meters business organically and through new
contracts with an emphasis on driving recurring income
2) Establish our ADM(TM) technology as the industry standard
smart metering solution for I&C clients
3) Increase levels of business with, and services provided to
key gas and electricity suppliers, with a focus on cross-selling
between Gas and Electricity across our horizontal suite of
services
SMS has developed a strong and evolving business model and
strategy that provides the most effective scope for continued
expansion of the business to reward our customers and
shareholders.
People and Corporate Culture
The acquisition of UPL this year marked SMS's first ever
acquisition. It also marked the coming together of two companies
with very similar histories that share the same values, culture and
approach to customer service. It was paramount that for any sort of
acquisition to take place it needed to be one that maintained SMS's
culture founded on a commitment by its employees to know and serve
their customers.
This has been instrumental in developing, building and
maintaining trusted relationships with our customers, the gas and
now also electricity suppliers, who have responded positively to
the acquisition of UPL. Our core values around good advice,
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 and
electricity suppliers. These are integral to the way in which we
deliver and achieve customer satisfaction and building relationship
of trust. We are excited to be driving forward our strategic
vision, values and culture through our enlarged team and
strengthened senior management.
Board Composition
The Board comprises five directors, of whom three are
Non-Executive with me as your Non-Executive Chairman. We have
sought to build our Board structure to ensure we have an
experienced and balanced board and in the first half of 2014 we
welcomed two new Non-Executive Directors, Miriam Greenwood and
Willie MacDiarmid, while Nigel Christie retired from the Board as a
Non-Executive Director. The Board would like to thank Nigel for his
very significant contribution to the Company.
Energy and corporate finance expert Miriam Greenwood is Chair of
SMS's Audit Committee and energy sector expert Willie MacDiarmid is
Chair of the Company's Remuneration Committee.
Miriam is a qualified barrister and has spent much of her career
in corporate finance working for leading investment banks and other
financial institutions. She is a Non-Executive Director of a number
of companies and 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.
Willie is a reputed senior executive in the energy sector, with
experience at the highest level with the last two UK Governments on
a variety of strategic and operating working groups. As a member of
the Scottish Power executive team, he successfully led Scottish
Power through the deregulation of the UK energy market and served
on their investment committee, as well as being involved in various
mergers and acquisitions. Scottish Power's successful metering
business was part of his portfolio.
Outlook
Under Alan Foy's leadership, the expanded dual-fuel offering,
our strengthened senior management and the expertise of our
Non-Executive Directors, alongside our robust IT infrastructure,
SMS is ideally positioned to maintain our competitive advantage and
continue to make progress on our strategic priorities.
As we continue to invest in providing the highest levels of
service to the gas and electricity supplier market we remain
confident on the outlook for the business and we view the outlook
for the market in 2015 as highly promising for our business
model.
Chief Executive Officer's statement
We are delighted with the continued strong performance of the
business for the year ended 31 December 2014.
Recurring income now represents 53% of our total revenue
compared to 49% of total income in 2013, as we see the benefits of
our business model of building up the recurring income streams. The
recurring revenues are as a result of the long-term nature of our
contracts, which provide an index-linked revenue stream.
Acquisition of UPL
On 14 April 2014, SMS acquired the entire issued share capital
of UPL. With this acquisition SMS has doubled the number of
recurring income streams and we are growing the electricity meter
portfolio, further increasing our recurring rental revenue.
The acquisition is in line with the strategic vision of SMS to
become the leading independent supplier of smart metering solutions
to suppliers in the utility sector providing the highest levels of
customer service.
UPL is now operationally fully integrated into SMS bringing in
additional income streams across both segments and is driving
acceleration of the overall strategic vision of SMS's enlarged
business in three key areas:
- Growth opportunities through connections, metering and data
management services to an expanded gas and electricity customer
base
- Positioning our business as a dual gas and electricity meter
provider for the UK's future smart meter rollout programme
- Providing further opportunities to expand internationally
In the first year of acquisition SMS has already added clients
including DONG Limited and TGP to our Electricity customer base, as
well as extending existing contracts. UPL's existing portfolio
included customers such as Centrica, SSE and EDF, as well as
Network Rail, Vodafone, Santander, Sainsbury's, O2 UK and Cable
& Wireless.
In addition to contract wins and extensions already secured
through the dual-fuel electricity and gas service offering, there
is the further potential to work with new water industry
customers.
SMS also believes there is scope to expand internationally
through UPL's energy management propositions already established in
Italy and the Caribbean, and SMS's ADM(TM) device, which is
currently undergoing trials across three continents.
Operational Review
During 2014 we made substantial progress across all segments of
the business. Following a strong first half where we saw our gas
meter portfolio break the half-million mark with an increase of
65,000, growth accelerated in the second half to reach a total of
607,000 gas meters, with a further 73,000 added and a 29% increase
year-on-year. The number of electricity meters more than doubled to
12,000 from 5,000 in 2013, bringing our overall gas and electricity
meter portfolio to 619,000.
The progress we have made in establishing long-term recurring
revenue was underlined by an increase in year-end annualised
recurring meter rental revenue of 41% to GBP21.9m and data
provision sales from our ADM(TM) device more than trebled to reach
the GBP1m level. With the establishment of our Electricity services
we have added an additional two recurring revenue streams, where
meter recurring rent doubled to GBP567,000 and data recurring
income grew 29% to GBP2.7m. For the first time, recurring income
now makes up the majority of our total revenue.
Industrial and Commercial meters
We were delighted to announce a number of new contracts or
contract extensions with major customers during 2014. We more than
doubled our I&C gas meter portfolio to 65,000 meters from
27,000 meters in 2013. In the gas market we secured a significant
contract with BGB, while in the electricity market we won contracts
with Opus and DONG, both existing customers of SMS. More recently,
in the first quarter of 2015, in the electricity market we were
awarded contracts with BES and with TGP, part of Total S.A., which
is a current client of our Gas services business.
The increase in our customer base during 2014 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.
ADM(TM)
The ADM(TM) device is SMS's 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 deployed more than 2.5 times the number of ADM(TM)
devices in the UK in 2014 to 41,000 up from 16,000 in 2013. The
Company remains confident that its ADM(TM) device technology has a
broad range of potential applications in gas, electricity, water
and LPG markets and has been continuing with trials of the device
internationally.
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 also the ability
to seek out further markets for our service more broadly.
As over the last two years, all new contracts announced in 2014
allow for the introduction of the ADM(TM) device into I&C
premises during meter replacement programmes.
Domestic Meters
We grew our domestic gas meter portfolio by 24% from 437,000 in
2013 to 542,000 by year end 2014. Our combined gas and electricity
full service offering has strengthened our position and SMS's
opportunity in the domestic meter market, ideally positioning the
business for the current UK domestic smart meter roll out
programme.
Whilst we are well placed to capitalise on the rollout of smart
meters in the UK domestic market, our future strategic growth is
not reliant on this taking place, either in capturing market share
or in growing revenues.
Other Markets
We were very pleased to announce during 2014 that, following an
extensive accreditation process, the products SMS has developed for
the UK water market have passed all tests and received full
accreditation.
Consolidated statement of comprehensive income
For the year ended 31 December 2014
2014 2013
Notes GBP'000 GBP'000
--------------------------------------------- ----- -------- --------
Revenue 2 42,386 27,916
Cost of sales 3 (14,766) (10,101)
--------------------------------------------- ----- -------- --------
Gross profit 27,620 17,815
Administrative expenses 3 (14,832) (9,625)
Other operating income 3 215 -
--------------------------------------------- ----- -------- --------
Profit from operations 3 13,003 8,190
--------------------------------------------- ----- -------- --------
Attributable to:
Operating profit before exceptional items 14,795 8,452
Amortisation of intangibles (1,155) (262)
Exceptional items and fair value adjustments 3 (637) -
--------------------------------------------- ----- -------- --------
Finance costs 6 (2,015) (1,122)
Finance income 6 30 403
--------------------------------------------- ----- -------- --------
Profit before taxation 11,018 7,471
Taxation 7 (225) (896)
--------------------------------------------- ----- -------- --------
Profit for the year attributable to equity
holders 10,793 6,575
Other comprehensive income - -
--------------------------------------------- ----- -------- --------
Total comprehensive income 10,793 6,575
--------------------------------------------- --------------- --------
The profit from operations arises from the Group's continuing
operations.
Earnings per share attributable to owners of the parent during
the year:
Notes 2014 2013
----------------------------------- ----- ----- ----
Basic earnings per share (pence) 8 12.71 7.86
Diluted earnings per share (pence) 8 12.23 7.43
----------------------------------- ----- ----- ----
Consolidated statement of financial position
As at 31 December 2014
2014 2013
Notes GBP'000 GBP'000
-------------------------------------------- ----- ------- -------
Assets
Non-current
Intangible assets 10 10,932 2,018
Property, plant and equipment 11 91,277 57,382
Investments 12 83 -
-------------------------------------------- ----- ------- -------
102,292 59,400
-------------------------------------------- ----- ------- -------
Current assets
Inventories 14 1,211 2,504
Trade and other receivables 15 9,474 6,099
Cash and cash equivalents 16 4,285 2,073
Other current financial assets 20 - 207
-------------------------------------------- ----- ------- -------
14,970 10,883
-------------------------------------------- ----- ------- -------
Total assets 117,262 70,283
Liabilities
Current liabilities
Trade and other payables 17 15,140 8,879
Bank loans and overdrafts 18 7,904 3,933
Commitments under hire purchase agreements 19 90 3
Other current financial liabilities 20 70 -
-------------------------------------------- ----- ------- -------
23,204 12,815
-------------------------------------------- ----- ------- -------
Non-current liabilities
Bank loans 18 53,645 31,475
Commitments under hire purchase agreements 19 64 6
Deferred tax liabilities 22 4,395 3,395
-------------------------------------------- ----- ------- -------
58,104 34,876
-------------------------------------------- ----- ------- -------
Total liabilities 81,308 47,691
-------------------------------------------- ----- ------- -------
Net assets 35,954 22,592
-------------------------------------------- ----- ------- -------
Equity
Share capital 24 856 838
Share premium 9,291 8,971
Other reserve 26 4,258 1
Treasury shares 24 (92) -
Retained earnings 21,641 12,782
-------------------------------------------- ----- ------- -------
Total equity attributable to equity holders
of the parent company 35,954 22,592
-------------------------------------------- ----- ------- -------
Consolidated statement of changes in equity
For the year ended 31 December 2014
Share Share Other Treasury Retained
capital premium reserve shares earnings Total
Attributable to the GBP'000
owners of the parent
company: GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------- ------- -------- ------- -------- -------- -------
As at 1 January 2013 833 8,653 1 - 7,109 16,596
Total comprehensive
income for the year - - - - 6,575 6,575
Transactions with
owners in their capacity
as owners:
Dividends (note 9) - - - - (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
Total comprehensive
income for the year - - - - 10,793 10,793
Transactions with
owners in their capacity
as owners:
Dividends (note 9) - - - - (2,174) (2,174)
Shares issued 18 320 4,257 - - 4,595
Shares held by SIP - - - (92) - (92)
Share options - - - - 240 240
-------------------------- ------- -------- ------- -------- -------- -------
As at 31 December
2014 856 9,291 4,258 (92) 21, 641 35,954
-------------------------- ------- -------- ------- -------- -------- -------
See notes 25 and 26 for details of the Treasury shares and Other
reserve.
Consolidated statement of cash flows
For the year ended 31 December 2014
2014 2013
GBP'000 GBP'000
------------------------------------------------------ -------- --------
Cash flow from operating activities
Profit before taxation 11,018 7,471
Finance costs 1,738 1,122
Finance income (30) (26)
Fair value movement on derivatives 277 (377)
Depreciation 4,526 2,754
Amortisation 1,155 262
Share-based payment expense 148 644
Movement in inventories 1,636 (2,131)
Movement in trade and other receivables 1,709 (2,961)
Movement in trade and other payables 3,159 826
------------------------------------------------------ -------- --------
Cash generated from operations 25,336 7,584
Taxation (220) (206)
------------------------------------------------------ -------- --------
Net cash generated from operations 25,116 7,378
------------------------------------------------------ -------- --------
Investing activities
Payments to acquire property, plant and equipment (35,779) (24,595)
Disposal of property, plant and equipment 52 563
Payments to acquire intangible assets (539) (364)
Acquisition of subsidiary (12,632) -
Cash acquired with subsidiary 3,420 -
Finance income 30 26
------------------------------------------------------ -------- --------
Net cash used in investing activities (45,448) (24,370)
------------------------------------------------------ -------- --------
Financing activities
New borrowings 33,003 17,830
Capital repaid (6,862) (2,875)
Hire purchase repayments (10) -
Finance costs (1,738) (1,122)
Net proceeds from share issue 325 323
Dividend paid (2,174) (1,546)
------------------------------------------------------ -------- --------
Net cash generated from financing activities 22,544 12,610
------------------------------------------------------ -------- --------
Net increase in cash and cash equivalents 2,212 (4,382)
Cash and cash equivalents at the beginning of
the financial year 2,073 6,455
------------------------------------------------------ -------- --------
Cash and cash equivalents at the end of the financial
year (note 16) 4,285 2,073
------------------------------------------------------ -------- --------
Accounting policies
The Company is incorporated and domiciled in the UK. The Group's
activities consist of integrated metering services that connects,
owns, operates and maintains current generation and new advanced
metering assets and databases.
Basis of preparation
The consolidated financial statements have been prepared on a
historical cost basis, except where otherwise stated. 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. The financial statements have been
prepared on a consolidated basis with December 2013, with no
changes to the accounting framework adopted or accounting policies
applied.
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
2014 of GBP47.5m.
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 the following
Group undertakings being UK Gas Connection Limited, UK Meter Assets
Limited, UKMA (AF) Limited, UK Data Management Limited and Utility
Partnership 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). Utility Partnership Limited was acquired
during the year and acquisition accounting has been applied to this
transaction.
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.
UPL Italia SRL is deemed immaterial to the group as a whole and,
as a result, has not been consolidated within these financial
statements.
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 and acquisitions
and business combinations. 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.
When an acquisition arises the group is required under IFRS 3 to
calculate the Purchase Price Allocation ("PPA"). The PPA requires
companies to report the fair value of assets and liabilities
acquired and it establishes useful lives for identified assets.
Subjectivity is involved in PPA with the estimation of the
future value of technology, customer relationships and
goodwill.
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 Group fulfils its contractual
obligations to customers by supplying services.
Meter rental income
Rental income is recognised when the Group 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.
Utility connection
Revenue from 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 Group is
contractually entitled to it. Data provision income is invoiced in
advance and is recognised on a straight line basis 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-maturityinvestments, 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
consolidated statement of comprehensive income.
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
consolidated statement of comprehensive income 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 consolidated statement of comprehensive income 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
administrative expenses disclosed in the consolidated statement of
comprehensive income.
Intangible assets acquired as part of a business combination are
recognised outside goodwill if the asset is separable or arises
from contractual or other legal rights and its fair value can be
measured reliably.
Intangible assets are amortised over their useful lives as
follows:
Software 12.5% & 20% straight line
Customer contracts 20%
Useful lives are examined on an annual basis and adjustments,
where applicable, are made on a prospective basis.
Goodwill
Goodwill arising on consolidation represents the excess of the
consideration transferred and the fair value of the identifiable
assets and liabilities of the acquiree at the date of acquisition.
Goodwill on acquisitions of subsidiaries is included in 'intangible
assets'. Goodwill is not amortised but is tested annually for
impairment and is carried at cost less accumulated impairment
losses. See note 13 for detailed assumptions and methodology.
Impairment losses are not subsequently reversed.
Goodwill is allocated to cash-generating units for the purpose
of impairment testing. The allocation is made to those
cash-generating units or groups of cash-generating units that are
expected to benefit from the business combination in which the
goodwill arose identified according to operating segment.
Provisional fair values are adjusted against goodwill if
additional information is obtained within one year of the
acquisition date, about facts or circumstances existing at the
acquisition date. Other changes in provisional fair values are
recognised through profit or loss.
Changes in contingent consideration arising from additional
information, obtained within one year of the acquisition date,
about facts or circumstances that existed at the acquisition date
are recognised as an adjustment to goodwill. Other changes in
contingent consideration are recognised through profit or loss,
unless the contingent consideration is classified as equity. In
such circumstances, changes are recognised within equity.
Impairment
At each reporting date, the Group reviews the carrying amounts
of its property, plant and equipment and intangibles to determine
whether there is any indication that those assets have suffered an
impairment loss. If any such indication exists, the recoverable
amount of the asset is estimated in order to determine the extent
of the impairment loss (if any). Where the asset does not generate
cash flows that are independent from other assets, the Group
estimates the recoverable amount of the cash-generating unit (CGU)
to which the asset belongs.
Recoverable amount is the higher of fair value less costs to
sell and value in use. In assessing value in use, the estimated
future cash flows are discounted to their present value using a
pre-tax discount rate that reflects current market assessments of
the time value of money and the risks specific to the asset for
which the estimates of future cash flows have been adjusted.
If the recoverable amount of an asset (or CGU) is estimated to
be less than its carrying amount, the carrying amount of the asset
(or CGU) is reduced to its recoverable amount. An impairment loss
is recognised as an expense immediately.
Where an impairment loss subsequently reverses, the carrying
amount of the asset (CGU) is increased to the revised estimate of
its recoverable amount, but so that the increased carrying amount
does not exceed the carrying amount that would have been determined
had no impairment loss been recognised for the asset (CGU) in prior
years. A reversal of an impairment loss is recognised as income
immediately.
Detailed assumptions with regard to discount, growth and
inflation rates are set out in note 13 to the accounts.
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
consolidated statement of comprehensive income as incurred.
Depreciation is calculated on a straight line basis over the
estimated useful life of the asset as follows:
Freehold property 2% on cost
Short leasehold property 15% and 20% on cost
Plant and machinery 5% and 10% on cost
Fixtures, fittings & equipment 15% and 33% on cost
Motor vehicles 25% 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 consolidated statement of
comprehensive income 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.
Property, plant and equipment are initially recorded at
cost.
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 consolidated statement of
financial position 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 property, plant and equipment 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 consolidated
statement of comprehensive income. 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
consolidated statement of comprehensive income on a straight line
basis over the lease term.
All other leases are operating leases and the annual rentals are
charged to the consolidated 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 consolidated statement of comprehensive income 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 consolidated 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.
Deferred tax assets include temporary differences related to
employee benefits settled via the issue of share options.
Recognition of the deferred tax assets assumes share options will
have a positive value at the date of vesting, which is greater than
the exercise price.
At the date of authorisation of these financial statements, the
following standards and interpretations which have not been applied
in these financial statements were in issue but not yet
affective:
Standard or interpretation Periods commencing
on or after
--------------------------- ----------------------------- -------------------
IFRS 2 Amendment Share based payment 1 July 2014
--------------------------- ----------------------------- -------------------
IFRS 3 Amendment Business combinations 1 July 2014
--------------------------- ----------------------------- -------------------
IFRS 8 Amendment Operating segments 1 July 2014
--------------------------- ----------------------------- -------------------
IFRS 16 Amendment Property, plant & equipment 1 July 2014
--------------------------- ----------------------------- -------------------
IFRS 24 Amendment Related party disclosures 1 July 2014
--------------------------- ----------------------------- -------------------
IFRS 38 Amendment Intangible assets 1 July 2014
--------------------------- ----------------------------- -------------------
IFRS 9 Amendment Financial instruments 1 January 2018
--------------------------- ----------------------------- -------------------
IFRS 10/FRS28 Amendment Consolidated financial 1 January 2016
statements
--------------------------- ----------------------------- -------------------
IFRS 12 Amendment Consolidation 1 January 2016
--------------------------- ----------------------------- -------------------
IFRS 11 Amendment Joint ventures 1 January 2016
--------------------------- ----------------------------- -------------------
IFRS 14 Regulatory deferred accounts 1 January 2016
--------------------------- ----------------------------- -------------------
IFRS 15 Reverse from contracts 1 January 2016
with customers
--------------------------- ----------------------------- -------------------
IAS 1 Amendment Disclosures 1 January 2016
--------------------------- ----------------------------- -------------------
IFRS 7 Amendment Financial instruments 1 January 2016
--------------------------- ----------------------------- -------------------
Notes to the financial statements
For the year ended 31 December 2014
1 Business Combinations
Acquisition of Utility Partnership Limited
On 14 April 2014, Smart Metering Systems acquired 100% of the
issued share capital of Utility Partnership Limited (UPL). UPL is a
manager of electricity meters in the UK and provider of electricity
connections, design, meter installations, data management and
energy management services.
The acquisition has been accounted for using the acquisition
method. The fair value of the identifiable assets and liabilities
of UPL as at the date of acquisition was:
Fair value recognised on acquisition Previous carrying value
GBP'000 GBP'000
------------------------------------------------------------------- ------------------------
Property, plant and equipment 2,539 2,539
Software 3,258 -
Customer contracts 2,160 -
Other financial assets 83 83
Inventories 344 344
Trade and other receivables 5,074 4,998
Cash and cash equivalents 3,420 3,420
--------------------------------------------------------- -------- ------------------------
Total assets 16,878 11,384
--------------------------------------------------------- -------- ------------------------
Trade and other payables (,879) (879)
Deferred tax (1,137)
Accruals and deferred income (1,966) (1,950)
Obligations under hire purchase agreements (106) (106)
--------------------------------------------------------- -------- ------------------------
Total liabilities (4,088) (2,935)
--------------------------------------------------------- -------- ------------------------
Total identifiable net assets at provisional fair value 12,790
Goodwill arising on acquisition 4,112
--------------------------------------------------------- --------
Total acquisition cost 16,902
--------------------------------------------------------- --------
Analysed as:
New shares in Smart Metering System plc 4,270
Cash paid 12,632
----------------------------------------- -------
Total acquisition cost 16,902
----------------------------------------- -------
Cash paid (12,632)
Acquisition costs (480)
Net cash acquired with the subsidiary 3,420
--------------------------------------- ---------
Total acquisition cost (9,692)
--------------------------------------- ---------
The provisional fair value has been updated to take into account
cash balances which were anticipated would be paid out to the
vendors at completion.
The consolidated statements include the results of UPL for the
period from 14 April to 31 December 2014 during which time it
contributed GBP7,461k to revenue and GBP715k to group profit for
the period.
SMS and UPL are highly complementary and the acquisition will
enable significant growth opportunities by offering a full
end-to-end dual fuel service, incorporating connections, meter
assets installation, ownership and management, as well as data
management services, to the respective gas and electricity
customers of SMS and UPL.
In addition to the above synergies, the acquisition adds energy
management services to the Group's activities.
The goodwill recognised above is attributed to the expected
benefits of combining gas and electricity offerings.
The primary components of this residual goodwill comprise:
-- revenue synergies from dual fuel;
-- the workforce; and
-- new opportunities available to UPL as part of the larger AIM listed group.
The identifiable intangible assets will be amortised as
follow:
-- software - 20%
-- customer contracts 20%
Transaction costs of GBP480k incurred on the acquisition have
been included within exceptional items in the consolidated
statement of comprehensive income.
2 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, electric meters and ADM units within the UK.
The installation of meters comprises installation of domestic
and industrial and commercial gas meters and electricity 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 2014 and 31
December 2013:
Asset Asset Total
management installation Unallocated operations
31 December 2014 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------- ---------- ------------ ----------- ----------
Segment/Group revenue 22,404 19,982 - 42,386
Cost of sales (3,712) (11,054) - (14,766)
------------------------------- ---------- ------------ ----------- ----------
Segment profit - Group gross
profit 18,692 8,928 - 27,620
Items not reported by segment:
Other operating costs/income - - (8,299) (8,299)
Depreciation (4,200) - (326) (4,526)
Amortisation (746) - (409) (1,155)
Exceptional items and fair
value adjustments - - (637) (637)
------------------------------- ---------- ------------ ----------- ----------
Profit from operations 13,746 8,928 (9,671) 13,003
Net finance costs (1,985) - - (1,985)
------------------------------- ---------- ------------ ----------- ----------
Profit before tax 11,761 8,928 (9,671) 11,018
Tax expense (225)
------------------------------- ---------- ------------ ----------- ----------
Profit for year 10,793
------------------------------- ---------- ------------ ----------- ----------
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
Cost of sales (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/income - - (6,609) (6,609)
Depreciation (2,654) - (100) (2,754)
Amortisation (262) - - (262)
Profit from operations 8,312 6,587 (6,709) 8,190
Net finance costs (719) - - (719)
------------------------------- ---------- ------------ ----------- ----------
Profit before tax 7,593 6,587 (6,709) 7,471
Tax expense (896)
------------------------------- ---------- ------------ ----------- ----------
Profit for year 6,575
------------------------------- ---------- ------------ ----------- ----------
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:
2014 2013
GBP'000 GBP'000
--------------------------------- -------- --------
Customer 1 - Asset Management 9,847 7,677
Customer 1 - Asset Installation 5,089 4,901
--------------------------------- -------- --------
14,936 12,578
--------------------------------- -------- --------
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 2014 GBP'000 GBP'000 GBP'000
------------------------------------- ----------- ------------- -----------
Assets reported by segment
Intangible assets 10,932 - 10,932
Property, plant and equipment 88,504 - 88,504
Inventories 1,211 - 1,211
------------------------------------- ----------- ------------- -----------
100,647
Assets not reported by segment 16,615
------------------------------------- ----------- ------------- -----------
Total assets 117,262
------------------------------------- ----------- ------------- -----------
Liabilities reported by segment
Bank loans 61,549 - 61,549
Obligations under hire purchase
agreements 154 - 154
------------------------------------- ----------- ------------- -----------
61,703
Liabilities not reported by segment 19,605
------------------------------------- ----------- ------------- -----------
Total liabilities 81,308
------------------------------------- ----------- ------------- -----------
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
Property, plant and equipment 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
-------------------------------------------- ----------- ------------- -----------
3 Income statement by nature and items of expenditure included
in the consolidated statement of comprehensive income
2014 2013
GBP'000 GBP'000
---------------------------------------------- -------- --------
Revenue 42,386 27,916
Direct rental costs (3,712) (2,575)
Direct subcontractor costs (6,125) (6,220)
Other direct sales costs and systems rental (4,929) (1,312)
Staff costs (6,549) (4,474)
Depreciation:
- owned assets (4,447) (2,723)
- leased assets (79) (31)
Amortisation (1,155) (262)
Other operating income 215 -
Auditor's remuneration:
- as auditor (68) (51)
- other services (179) (29)
Exceptional costs and fair value adjustments (637) -
Operating lease costs:
- plant and equipment (5) (1)
Other operating charges (1,713) (2048
---------------------------------------------- -------- --------
Profit from operations 13,003 8,190
Finance costs (2,015) (1,122)
Finance income 30 403
---------------------------------------------- -------- --------
Profit before taxation 11,018 7,471
---------------------------------------------- -------- --------
Included in exceptional items and fair value adjustments
expenses are: i) GBPnil (2013: GBP(377,143) relates to the interest
rate hedge fair value adjustment and ii) GBPnil (2013: GBP644,275)
that relates to share-based payments. GBPnil (2013: GBPNil)
restructuring debt, GBP479,691 (2013: GBPNil) acquisition costs and
GBP157,500 redundancy costs (2013: GBPNil). Exceptional items
totalling GBP267k have been re-classified under their statutory
headings as the Board consider this to better reflect the nature of
these costs. Included within other direct sales costs and systems
rental are staff costs of GBP2,245k (2013: GBPnil).
Auditors remuneration can be analysed as:
2014 2013
GBP'000 GBP'000
Statutory group audit (Baker Tilly UK Audit
LLP) 56 39
Statutory parent audit 12 12
Taxation services (Baker Tilly Tax and Accounting
Limited) 13 15
Corporate finance (Baker Tilly Corporate -
Finance LLP) 157
Non-statutory audit services (Baker Tilly
UK Audit LLP) 9 14
--------------------------------------------------- -------- --------
247 80
--------------------------------------------------- -------- --------
4 Particulars of employees
The average number of staff employed by the Group, including
Executive Directors, during the financial year was:
2014 2013
Number Number
-------------------------------- ------- -------
Number of administrative staff 20 9
Number of operational staff 208 76
Number of sales staff 5 5
Number of IT staff 12 4
Number of Directors 2 2
-------------------------------- ------- -------
247 96
-------------------------------- ------- -------
The aggregate payroll costs, including Executive Directors, of
the employees were:
2014 2013
GBP'000 GBP'000
------------------------ -------- --------
Wages and salaries 7,654 3,364
Social security costs 734 384
Staff pension costs 145 64
Share based payment 240 644
Director pension costs 21 18
------------------------ -------- --------
8,794 4,374
------------------------ -------- --------
5 Directors' emoluments
The Directors' aggregate remuneration in respect of qualifying
services were:
2014 2013
GBP'000 GBP'000
----------------------------------------------- -------- --------
Emoluments receivable (including share based
payment) 711 589
Fees 21 52
Value of Group pension contributions to money
purchase schemes 5 5
Other pension 16 15
----------------------------------------------- -------- --------
753 661
----------------------------------------------- -------- --------
2014 2013
Emoluments of highest paid Director GBP'000 GBP'000
------------------------------------- -------- --------
Total emoluments 423 387
Pension contributions 16 15
------------------------------------- -------- --------
The number of Directors who accrued benefits under Company
pension schemes was as follows:
2014 2013
Number Number
------------------------ ------- -------
Money purchase schemes 1 1
------------------------ ------- -------
6 Finance costs and finance income
2014 2013
GBP'000 GBP'000
-------------------------------- -------- --------
Finance costs
Bank loans and overdrafts 1,731 1,121
Interest rate hedge fair value 277
Hire purchase 7 1
-------------------------------- -------- --------
Total finance costs 2,015 1,122
-------------------------------- -------- --------
Finance income
Bank interest receivable 30 26
Interest rate hedge fair value - 377
-------------------------------- -------- --------
Total finance income 30 403
-------------------------------- -------- --------
7 Taxation
2014 2013
GBP'000 GBP'000
--------------------------------------------------- -------- --------
Analysis of charge in the year
Current tax:
Current income tax expense 372 -
Over provision in prior year - 11
--------------------------------------------------- -------- --------
Total current income tax 372 11
Deferred tax:
Origination and reversal of temporary differences (147) 885
--------------------------------------------------- -------- --------
Tax on profit on ordinary activities 225 896
--------------------------------------------------- -------- --------
The charge for the period can be reconciled to the profit per
the consolidated statement of comprehensive income as follows:
Profit before tax 11,018 7,471
-------------------------------------------------- -------- ------
Tax at the UK corporation tax rate of 21%
(2013: 23%) 2,314 1,718
Expenses not deductible for tax purposes 121 19
Adjustments to tax charge in respect of previous
periods 132 3
Change in tax rate - (844)
Deferred tax on share options (2,342) -
-------------------------------------------------- -------- ------
Tax expense in the income statement 225 896
-------------------------------------------------- -------- ------
8 Earnings per share
The calculation of EPS is based on the following data and number
of shares:
2014 2013
GBP'000 GBP'000
------------------------------------------------- ----------- -----------
Profit for the year used for calculation of
basic EPS 10,793 6,575
Amortisation of intangible assets 1,155 262
Exceptional costs 637 -
Tax effect of adjustments (394) (64)
------------------------------------------------- ----------- -----------
Earnings for the purpose of underlying EPS 12,191 6,773
------------------------------------------------- ----------- -----------
Number of shares 2014 2013
------------------------------------------------- ----------- -----------
Weighted average number of ordinary shares
for the purposes of basic EPS 84,887,262 83,606,102
Effect of potentially dilutive ordinary shares:
- share options 3,370,617 4,898,694
------------------------------------------------- ----------- -----------
Weighted average number of ordinary shares
for the purposes of diluted EPS 88,257,879 88,504,796
------------------------------------------------- ----------- -----------
Earnings per share:
- basic (pence) 12.71 7.86
- diluted (pence) 12.23 7.43
Underlying earnings per share:
- basic (pence) 14.36 8.10
- diluted (pence) 13.81 7.65
------------------------------------------------- ----------- -----------
The Directors consider that the underlying earnings per share
calculation gives a better understanding of the Group's earnings
per share.
9 Dividends
2014 2013
GBP'000 GBP'000
--------------------------------------------- -------- --------
Equity dividends
Paid during the year:
Dividends on equity shares GBP0.0255 (2013:
GBP0.0185) 2,174 1,546
--------------------------------------------- -------- --------
Total dividends 2,174 1,546
--------------------------------------------- -------- --------
10 Intangible assets
Goodwill Customer Development Software Total
Contracts
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------- --------- ----------- ------------ --------- --------
Cost
As at 1 January
2013 - - 828 1,810 2,638
Additions - - 364 - 364
--------------------- --------- ----------- ------------ --------- --------
As at 31 December
2013 - - 1,192 1,810 3,002
Additions - 356 183 539
Additions as part
of UPL Acquisition 4,112 2,160 - 3,258 9,530
--------------------- --------- ----------- ------------ --------- --------
As at 31 December
2014 4,112 2,160 1,548 5,251 13,071
--------------------- --------- ----------- ------------ --------- --------
Amortisation
As at 1 January
2013 - - 17 705 722
Charge for year - - 27 235 262
--------------------- --------- ----------- ------------ --------- --------
As at 31 December
2013 - - 44 940 984
Charge for year - 332 77 746 1,155
--------------------- --------- ----------- ------------ --------- --------
As at 31 December
2014 - 332 121 1,686 2,139
--------------------- --------- ----------- ------------ --------- --------
Net book value
At 31 December 2014 4,112 1,828 1,427 3,565 10,932
--------------------- --------- ----------- ------------ --------- --------
At 31 December 2013 - - 1,148 870 2,018
--------------------- --------- ----------- ------------ --------- --------
At 1 January 2013 - - 811 1,105 1,916
--------------------- --------- ----------- ------------ --------- --------
11 Property, plant and equipment
Freehold/ Plant and Fixtures Motor Vehicles Total
leasehold machinery fittings
property and equipment
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------- ----------- ----------- --------------- --------------- --------
Cost
As at 1 January 2013 103 39,220 416 - 39,739
Additions 33 24,467 95 - 24,595
Disposals - (687) - - (687)
---------------------- ----------- ----------- --------------- --------------- --------
As at 31 December
2013 136 63,000 511 - 63,647
Additions 5 35,715 214 - 35,934
Additions as part
of UPL acquisition 1,990 - 437 112 2,539
Disposals - (69) - - (69)
---------------------- ----------- ----------- --------------- --------------- --------
As at 31 December
2014 2,131 98,646 1,162 112 102,051
---------------------- ----------- ----------- --------------- --------------- --------
Depreciation
As at 1 January 2013 30 3,429 176 - 3,635
Charge for year 20 2,654 80 - 2,754
Disposals - (124) - - (124)
---------------------- ----------- ----------- --------------- --------------- --------
As at 31 December
2013 50 5,959 256 - 6,265
Charge for year 56 4,200 236 34 4,526
Disposals - (17) - - (17)
---------------------- ----------- ----------- --------------- --------------- --------
As at 31 December
2014 106 10,142 492 34 10,774
---------------------- ----------- ----------- --------------- --------------- --------
Net book value
At 31 December 2014 2,025 88,504 670 78 91,277
---------------------- ----------- ----------- --------------- --------------- --------
At 31 December 2013 86 57,041 92 163 57,382
---------------------- ----------- ----------- --------------- --------------- --------
At 1 January 2013 73 35,791 92 148 36,104
---------------------- ----------- ----------- --------------- --------------- --------
Hire purchase agreements
Included within the net book value of GBP91,277,000 (2013:
GBP57,382,000, 2012: GBP36,104,000) is GBP208,000 (2013: GBP84,000,
2012:
GBP115,000) 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
GBP79,000 (2013: GBP31,000, 2012: GBP31,000).
The assets are secured by a bond and floating charge (note
18).
12 Financial asset investments
Shares in group Unlisted investments Total
undertaking
GBP'000 GBP'000 GBP'000
Cost
As at 1 January 2013 and - - -
31 December 2013
Additions as part of UPL
acquisition 43 40 83
As at 31 December 2014 43 40 83
Subsidiary undertakings
Country Proportion
of 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
Utility Partnership Wales Ordinary 100% Electricity utility
Limited shares management
UPL Italia SRL* Italy Ordinary 100% Electricity utility
Shares management
-------------------- -------------- --------- ----------- -----------------------
* The shareholding in this company is indirect via a subsidiary company.
13 Impairment of goodwill and intangibles with indefinite
lives
Goodwill arising on acquisitions is allocated to cash-generating
units comprising the acquired businesses.
The directors believe the cash-generating units comprise the
following operating segments, which represent the smallest
individual groups of assets generating cash flows. Goodwill has
been allocated between the groups operating segments as
follows:
Group Metering & data Utility Services Total
and Energy
GBP'000 GBP'000 GBP'000
As at 1 January 2014 - - -
Arising on acquisition 2,921 1,191 4,112
---------------- ----------------- --------
At 31 December 2014 2,921 1,191 4,112
---------------- ----------------- --------
In assessing value in use, the estimated future cash flows of
each operating segment are discounted to their present value using
a pre-tax discount rate that reflects current market assessments of
the time value of money and the risks specific to the asset. The
estimated cash flows are derived by discounting future cash flows
that are based on conservative growth and attrition rates and
discounted at a rate of 8.2%.
The value in use calculated at 31 December 2014 was GBP20.0m.
Comparing this to the net asset value of the operating segments
identified above, the directors believe the value of goodwill is
not impaired as 31 December 2014. The accounting treatment resulted
in an impairment loss of GBPnil.
14 Inventories
2014 2013
GBP'000 GBP'000
---------------- -------- --------
Finished goods 913 1,737
---------------- -------- --------
Consumables 298 767
---------------- -------- --------
1,211 2,504
---------------- -------- --------
15 Trade and other receivables
2014 2013
GBP'000 GBP'000
---------------------- -------- --------
Trade receivables 3,588 3,326
Prepayments 542 246
Accrued income 4,816 1,885
Other receivables 70 32
Income tax repayable 57 47
VAT recoverable 401 563
---------------------- -------- --------
9,474 6,099
---------------------- -------- --------
The receivables above include the following amounts falling due
after more than one year:
2014 2013
GBP'000 GBP'000
--------------- -------- --------
Accrued income 1,172 -
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. The allowance for doubtful receivables or provision
against accrued income in the year was GBP33,414 (2013: GBPNil,
2012: GBPNil). The ageing profile of trade receivables past due
date is shown below:
2014 2013
GBP'000 GBP'000
------------------------------------ -------- --------
31-60 days 210 299
60-90 days 156 401
Over 90 days 151 198
------------------------------------ -------- --------
517 898
------------------------------------ -------- --------
Allowance for doubtful receivables (33) -
484 898
------------------------------------ -------- --------
Trade receivables are non interest-bearing and are generally on
30-90 days terms.
Trade receivables due from related parties at 31 December 2014
amounted to GBPNil (2013: GBPNil, 2012: GBPNil).
Receivables are all in Sterling denominations.
The Directors are of the opinion that GBP33,000 of the overdue
debts as at 31 December 2014 (2013: GBPNil, 2012: 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.
16 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:
2014 2013
GBP'000 GBP'000
------ -------- --------
Cash 4,285 2,073
------ -------- --------
4,285 2,073
------ -------- --------
17 Trade and other payables
2014 2013
GBP'000 GBP'000
----------------- -------- --------
Current
Trade payables 7,767 4,569
Other payables 428 15
Other taxes 861 249
Income tax 377 -
Deferred income 1,623 291
Accruals 4,084 3,755
----------------- -------- --------
15,140 8,879
----------------- -------- --------
The Directors consider that the carrying amount of trade and
other payables approximates to their fair value.
The maturity profile of trade payables is given below:
2014 2013
GBP'000 GBP'000
-------------- -------- --------
Current 5,326 4,026
31-60 days 1,099 160
60-90 days 539 58
Over 90 days 803 325
-------------- -------- --------
7,767 4,569
-------------- -------- --------
Trade payables are non interest-bearing and are normally settled
on 30-45 day terms.
All trade liabilities are Sterling denominated.
18 Bank loans and overdrafts
2014 2013
GBP'000 GBP'000
---------------- -------- --------
Current
Bank loans 7,904 3,933
Bank overdraft - -
---------------- -------- --------
7,904 3,933
---------------- -------- --------
Non-current
Bank loans 53,645 31,475
Bank overdraft - -
---------------- -------- --------
53,645 31,475
---------------- -------- --------
Bank loans at 31 December 2014 relate to a term loan facility of
GBP105.0m that was finalised in March 2014.
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 14 March 2019. The term loan attracts
interest at a rate of 1.9% over the three month LIBOR. 0.76% is
paid on undrawn funds.
The banks have a bond and floating charge over current and
future property and assets.
The Group has fixed the bank interest payable through an
interest rate swap (see note 20).
19 Commitments under hire purchase agreements
Future minimal commitments under hire purchase agreements are as
follows:
2014 2013
GBP'000 GBP'000
-------------------------------------------- -------- --------
Current
Amounts payable within one year 90 3
-------------------------------------------- -------- --------
Non-current
Amounts payable between two to five years 64 6
Amounts payable after more than five years - -
-------------------------------------------- -------- --------
64 6
-------------------------------------------- -------- --------
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.
20 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.
2014 2013
GBP'000 GBP'000
----------------------------- --------- --------
Other financial assets - 207
----------------------------- --------- --------
Non-current liabilities
Other financial liabilities 70 -
----------------------------- --------- --------
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 GBP30,000,000 as at 31 December 2014 (2013:
GBP28,200,000, 2012: GBP13,200,000).
The interest rate swap results in a fixed interest rate of
2.80-2.82%.
The termination date for the derivatives is 15 September
2016.
The movement in the fair value is shown below:
2014 2013
GBP'000 GBP'000
-------------------------- -------- --------
Interest rate swap
Opening position 207 -
Adjustment to fair value (277) 207
-------------------------- -------- --------
Closing position (70) 207
-------------------------- -------- --------
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 2014, the Group held the following financial
instruments measured at fair value:
31 December
2014 Level 1 Level 2 Level 3
Liabilities measured at fair GBP'000 GBP'000 GBP'000 GBP'000
value
----------------------------------- ------------ -------- -------- --------
Financial liabilities at
fair value through the statement
of comprehensive income :
Interest rate derivatives 70 - 70 -
----------------------------------- ------------ -------- -------- --------
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 2014, 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.
21 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
---------------- ------------------ -----------
2014 1% 195
2013 1% 72
---------------- ------------------ -----------
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 Total
liabilities liabilities
GBP'000 GBP'000 GBP'000
---------------- ------------- ------------- --------
2014 30,153 31,550 61,703
2013 28,209 7,208 35,417
1 January 2013 13,213 7,249 20,462
---------------- ------------- ------------- --------
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:
2014 2013
GBP'000 GBP'000
-------------------- -------- --------
Fixed rate
Less than one year 3,090 2,824
Two to five years 12,063 11,286
Over five years 15,000 14,099
-------------------- -------- --------
30,153 28,209
-------------------- -------- --------
Variable rate
Less than one year 4,603 1,086
Two to five years 19,618 4,344
Over five years 7,329 1,778
-------------------- -------- --------
31,550 7,208
-------------------- -------- --------
Interest rate risk profile of financial assets
The Group's financial assets at 31 December 2014 comprise cash
and trade receivables. The cash balance of GBP4,285,000 (2013:
GBP2,073,000, 2012: GBP6,455,000) 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 GBP8,278,000 (2013: GBP5,211,000, 2012: GBP2,786,000) as
disclosed in note 15 - 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.
22 Deferred taxation
The movement in the deferred taxation liability during the
period was:
2014 2013
GBP'000 GBP'000
-------------------------------------------- -------- --------
Opening deferred tax liability 3,395 2,510
Increase in provision through consolidated
statement of comprehensive income 1,000 885
-------------------------------------------- -------- --------
Closing deferred tax liability 4,395 3,395
-------------------------------------------- -------- --------
All movements identified have gone through the statement of
comprehensive income.
The Group's provision for deferred taxation consists of the tax
effect of temporary differences in respect of:
2014 2013
GBP'000 GBP'000
------------------------------------------------- -------- --------
Excess of taxation allowances over depreciation
on fixed assets 5,330 3,385
Tax losses available (37) (38)
Deferred tax asset on share options (2,021)
------------------------------------------------- -------- --------
Deferred tax on intangible acquired as part
of UPL 1,137
------------------------------------------------- -------- --------
Fair value of interest rate swaps (net) (14) 48
------------------------------------------------- -------- --------
4,395 3,395
------------------------------------------------- -------- --------
The deferred tax included in the consolidated statement of
comprehensive income is as follows:
2014 2013
GBP'000 GBP'000
----------------------------------------------- -------- --------
Accelerated capital allowances 1,945 597
Tax losses 1 201
Deferred tax asset on share options (2,021) -
Movement in fair value of interest rate swaps (55) 87
----------------------------------------------- -------- --------
(130) 885
----------------------------------------------- -------- --------
23 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
(2013: GBP41,500, 2012: GBP41,500) to the Directors' pension
scheme, Eco Retirement Benefit Scheme, for the use of certain
premises. Alan Foy is a trustee of the scheme. At the year-end
date, an amount of GBP4,150 (2013: GBP4,150, 2012: GBP4,150) was
outstanding in this regard.
During the year, the Group paid dividends to Alan Foy of
GBP226,694 and Paul Dollman and Miriam Greenwood of GBP94 each.
Remuneration of key management which includes Executive and
Non-executive Directors together with certain management
personnel:
2014 2013
GBP'000 GBP'000
------------------------------------------------- -------- --------
Salaries and other short-term employee benefits 1,122 1,101
------------------------------------------------- -------- --------
24 Share capital
2014 2013
GBP'000 GBP'000
-------------------------------------------------- -------- --------
Allotted and called up:
85,575,452 ordinary shares of GBP0.01 each (2013
and 2012: 83,877,872 ordinary shares of GBP0.01
each) 856 839
-------------------------------------------------- -------- --------
On 14 April 2014 1,246,277 shares were issued in part
consideration of acquisition of Utility Partnership Limited.
On 23 September 2014 401,176 ordinary share options where
exercised and subsequently sold by staff.
On 13 October 2014 7,175 ordinary share options where exercised
and subsequently sold by staff.
On 27 October 2014 518 ordinary share options where exercised
and subsequently sold by staff.
On 23 December 2014 42,434 ordinary share options were exercised
and subsequently sold by staff, 3,500 of them by Glen Murray.
25 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 1 At Exercise
January 31 December price Date Expiry
Plan 2014 Granted Exercised Lapsed 2014 (pence) exercisable date
------------ ---------- ---------- ---------- ------- ------------- --------- ------------- ---------
CSOP 565,794 - (336,503) - 229,291 76.0 15/7/14 15/7/21
CSOP 39,088 - - - 39,088 153.5 28/5/15 28/5/22
Unapproved 2,979,060 2,979,060 60.0 20/6/16 20/6/21
Unapproved 1,162,629 1,162,629 153.5 28/5/17 28/5/22
Unapproved 179,375 (114,800) 64,575 60.0 28/6/13 28/6/23
Unapproved - 1,430,965 - - 1,430,965 350.00 12/11/14 12/11/24
------------ ---------- ---------- ---------- ------- ------------- --------- ------------- ---------
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
2014:
Unapproved
Plan
--------------------------- -----------
Option strike price (GBP) 3.50
Share price (GBP) 3.95
---------------------------- -----------
The weighted average fair value of share options issued during
the year was GBP3.50.
Share Incentive Plan
The Company introduced the Smart Metering Systems Share
Incentive Plan ("the SIP") in October 2014. Participants, which
could include directors, in the SIP are entitled to purchase, at
market value, up to a prescribed number of 1p ordinary shares in
the Company at the end of each month for which they will receive a
like for like matching share.
A total of 24,382 were purchased in the market by the 163
employees who participated in the SIP during the year. As 31
December 2014 the SIP held 24,382 shares on their behalf.
26 Other reserve
This is a non-distributable reserve that initially arose by
applying merger relief under s162 CA06 to the shares issued in 2009
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". Additionally, the premium
arising on the issue of shares as part of the acquisition of
Utility Partnership Limited has been credited to this reserve as
required by Companies Act 2006.
27 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:
2014 2013
GBP'000 GBP'000
-------------------------------------------- -------- --------
Future minimal commitments under operating
lease agreements are as follows:
Payable within one year 271 205
Payable within two and five years 375 411
Payable after five years 259 135
-------------------------------------------- -------- --------
905 751
-------------------------------------------- -------- --------
28 Ultimate controlling party
There is no ultimate controlling party by virtue of the
structure of shareholdings in the Group.
29 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.
30 Distribution of the annual report and accounts to members
The announcement set out above does not constitute a full
financial statement of the Groups affairs for the years ended 31
December 2013 or 2014. The Groups auditors have reported on the
full accounts for each and have accompanied them with an
unqualified report. The accounts have yet to be delivered to the
Registrar of Companies. The annual report and accounts will be
posted to shareholders in due course and will be available on our
website www.sms-plc.com and for inspection by the public at the
groups registered office during normal business hours.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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