TIDMSMS
RNS Number : 0860H
Smart Metering Systems PLC
25 July 2023
25 July 2023
Smart Metering Systems plc
Trading update and Outlook
Smart Metering Systems plc (AIM: "SMS", the "Group"), the
integrated energy infrastructure company owning and managing
meters, energy data, grid-scale batteries and other carbon
reduction (CaRe) assets, provides a trading update for the six
months to 30 June 2023 ("H1 2023") and the Board's future
expectations.
Key Highlights
-- Index-linked Annualised Recurring Revenue ("ILARR") grew
13.3% to GBP110.0m (31 December 2022: GBP97.1m)
-- Meter assets:
o smart meter portfolio increased to c.2.3m (31 December 2022:
c.2.1m)
o contracted smart meter order pipeline of c.1.95m (1) (31
December 2022: c.2.17m)
-- Grid-scale battery storage assets:
o total portfolio increased to 860MW (31 December 2022:
760MW)
-- 140MW operational; performed within the Board's expected
range
-- 470MW fully secured with 150MW expected to be operational in
H2 2023
-- 250MW under exclusivity
-- Continue to build delivery capability, commercial models and
pipelines in developing CaRe assets
-- Capital allocation:
o net debt as at 30 June 2023 was GBP96.3m
o current pipelines (2) can be fully funded from internal cash
generation and debt facilities
o may consider selective asset recycling to maintain a prudent
level of gearing and to support future growth.
Outlook
-- FY 2023 underlying EBITDA and PBT expected to be in line with
the Board's expectations; confident in FY 2024 and medium-term
outlook
o index-linked revenues provide a hedge against short-term
interest rates whilst significantly benefiting long-term cash
flows
-- Expected FY 2023 dividend of 33.275 pence per share, +10% y-o-y in line with stated policy
Tim Mortlock, CEO of SMS said:
"We have delivered another strong operational and financial
performance during H1 2023, a testament to the resilient nature of
our business model which is underpinned by our index-linked
recurring revenues.
Our existing pipeline of meter and grid-scale battery assets is
expected to more than double the Group's EBITDA in c.4 years
compared to FY 2022, with significant additional growth
opportunities in existing and developing CaRe assets (3) ."
(1) Net of meters installed over the same period.
(2) Current pipelines includes the existing c.1.95m meter order
pipeline and 860MW 1 hour duration grid-scale battery
portfolio.
(3) Includes 'Behind-The-Meter', such as solar and storage,
domestic EV chargers, air-sourced heat pumps and public EV charging
infrastructure.
Index-linked annualised recurring revenue
ILARR grew to GBP110.0m as at 30 June 2023, which includes the
annual RPI adjustment. This represents a 13.3% increase since the
year end (31 December 2022: GBP97.1m).
Category % change ILARR Portfolio
Smart meters + 16.9 % GBP71.5m 2.3 million
--------- ---------- ------------
Data assets + 5.6 % GBP16.9m 0.4 million
--------- ---------- ------------
Industrial & Commercial
meters + 17.2 % GBP6.2m 0.1 million
--------- ---------- ------------
Traditional domestic
meters + 5.6 % GBP11.8m 0.2 million
--------- ---------- ------------
Third party assets +3.9 % GBP3.6m 1.4 million
--------- ---------- ------------
Total + 13.3% GBP110.0m 4.5 million
--------- ---------- ------------
Smart meters
Smart meter ILARR grew in line with the Board's expectations
with higher rental per meter, driven by an increased focus on
single fuel and Industrial and Commercial ("I&C") smart meter
installations.
SMS installed c.220,000 (H1 2022: c.230,000) smart meters during
the first half of 2023 and has maintained market share of c.14%,
which is in line with FY 2022.
In H1 2023, SMS's engineering capacity delivered higher volumes
of activity, largely driven by transactional callout services
alongside a higher proportion of single fuel installations. The
Group has further increased its engineering capacity to support
higher transactional volumes and expects the meter installation
run-rate to accelerate during the second half of the year as a
result. This, coupled with SMS's strong supply chain and inventory
levels, provides the Board confidence in the Group's ability to
successfully deliver its contracted smart meter pipeline.
In the period, SMS won a pilot project with Alternative Home
Area Network Company aimed at removing the technical barriers for
smart meters in 'hard to reach' residential properties, which
accounts for c.4% of UK households. This technical solution,
alongside the Group's end-to-end integrated platform, provides
additional growth opportunities in the smart metering space.
Grid-scale battery storage
The Group's operational grid-scale battery portfolio has
performed within the Board's expected range, generating an
annualised EBITDA of c.GBP57,000/MW. The Group generated the
majority of its revenues from Balancing Services, compared to last
year when the majority of revenues were generated from Frequency
Services.
We continue to expect a long-term annualised EBITDA contribution
of GBP57,000-GBP65,000/MW, with the majority of revenues continuing
to be generated from Balancing Services.
Of the total 860MW portfolio, the Group has secured the option
to increase the duration of at least 290MW 1 MW/hour sites to 2
MW/hour sites. This would enable the Group to access further
revenue opportunities from delivery of Balancing Services.
Developing CaRe assets
The Group has continued to build its delivery capability,
commercial models and pipelines for the provision of other
developing CaRe assets and data services:
-- The Clenergy EV platform is used in c.3,500 public chargers
across the UK with significant additional future pipeline.
-- SMS's data services platform 'METIS' will participate this
Autumn as an early adopter in system testing for the implementation
of market-wide half hourly settlement, which, once implemented by
2026, will enable a more flexible energy system.
-- In Behind-the-Meter assets, SMS has partnered with Samsung to
deliver a UK Government funded heat pump trial in Oxford,
comprising 150 heat pumps. This initial project is part of a wider
requirement for 30,000 air source heat pumps across the council by
2040 and could be further upscaled nationwide.
Capital allocation
The Group's current pipeline of smart meters and grid-scale
batteries can be fully funded from asset-backed
internally-generated cash flows and debt facilities.
Notwithstanding this strong position, the Group may consider
selective asset recycling to maintain a prudent level of gearing in
the medium term and to support future growth.
Outlook
FY 2023 pre-exceptional EBITDA and underlying PBT are expected
to be in line with the Board's expectations. The Group remains
confident in FY 2024 and its medium-term outlook.
SMS expects to publish its H1 2023 results on 12 September
2023.
For further information:
Smart Metering Systems plc 0141 249 3850
Tim Mortlock, Chief Executive Officer
Gail Blain, Chief Financial Officer
Dilip Kejriwal, Head of Investor Relations
Cenkos Securities plc (Joint Broker 0131 220 6939 / 020
and Nomad) 7397 8900
Neil McDonald / Pete Lynch
Investec Bank plc (Joint Broker) 020 7597 5970
Christopher Baird / Henry Reast
RBC Capital Markets (Joint Broker) 020 7653 4000
Matthew Coakes / Evgeni Jordanov /
Jack Wood
Instinctif Partners sms@instinctif.com
Tim Linacre / Guy Scarborough / Vivian
Lai
Notes to Editors
Smart Metering Systems plc (www.sms-plc.com) installs and
manages smart meters, energy data, grid scale batteries and other
carbon reduction assets ("CaRe") to facilitate effective energy
management. The Group manages and optimises these assets through
its in-house technology and data analytical platform.
Established in 1995, SMS provides a full end-to-end service,
from funding and installation to management and maintenance, with a
highly skilled workforce, deep engineering expertise and
well-established industrial partnerships.
SMS is leading the low carbon, smart energy revolution in the UK
and is committed to reducing its own carbon emissions to net zero
by 2030. SMS has been recognised with the London Stock Exchange's
Green Economy Mark every year since it was introduced in 2019.
SMS plc is headquartered in Glasgow with a national presence
across twelve UK locations.
SMS's shares are listed on AIM.
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END
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