14 March 2023
Smart Metering Systems plc
Strong and resilient 2022 performance; solid foundation to deliver sustainable growth
Smart Metering Systems plc (AIM: SMS, “SMS”, “the Group”), which installs and manages smart meters, energy data, grid-scale battery storage and other carbon reduction (“CaRe”) assets, today publishes its full year results for the year ended 31 December 2022.
2022 financial performance
| £’m (unless stated otherwise) | 2022 | 2021 | % Change |
| Alternative performance measures | |||
| Index-linked annualised recurring revenue (ILARR)1 | 97.1 | 85.9 | +13% |
| Pre-exceptional EBITDA2 | 63.8 | 52.8 | +21% |
| Underlying profit before taxation3 | 24.5 | 18.3 | +34% |
| Underlying basic EPS (p)4 | 16.06 | 9.60 | +67% |
| Statutory performance measures | |||
| Group revenue | 135.5 | 108.5 | +25% |
| EBITDA | 57.1 | 46.3 | +23% |
| Profit before taxation | 16.0 | 8.3 | +92% |
| Basic EPS (p) | 11.16 | 3.20 | +248% |
| Dividend per share (p) | 30.25 | 27.50 | +10% |
| Net (debt)/cash | (31.2) | 117.7 |
1 ILARR is the revenue generated from meter rental and data contracts at a point in time. Includes revenue from third-party managed meters.
2 Pre-exceptional EBITDA is statutory EBITDA excluding exceptional items.
3 Underlying profit before taxation is profit before taxation excluding exceptional items and amortisation of certain intangibles.
4 Underlying basic EPS is underlying profit after taxation divided by the weighted average number of ordinary shares for the purpose of basic EPS.
A reconciliation between statutory and underlying performance is detailed in the Financial Review section. Percentage changes are calculated based on unrounded amounts as shown in the Financial statements.
Highlights
Financial
· ILARR at 31 December 2022 up 13% to £97.1m (2021: £85.9m)
· Revenue up 25% to £135.5m (2021: £108.5m)
· Pre-exceptional EBITDA up 21% to £63.8m (2021: £52.8m)
· Underlying profit before taxation up 34% to £24.5m (2021: £18.3m)
· Net debt at 31 December 2022 of £31.2m (2021: net cash of £117.7m)
· Undrawn debt facility of £355m (2021: £420m)
Smart meters
· Smart meter portfolio increased to c.2.1m (2021: c.1.7m)
· Contracted smart meter order pipeline of c.2.17m (2021: c.2.55m) reflecting a contract win and net of 480,000 installations
· Continued growth in meter installation run rate, averaging c.45,000 per month in the second half of the year (H2 2021: c.30,000 per month)
Grid-scale batteries
· Grid-scale battery portfolio increased to 760MW at the year end (31 December 2021: 620MW), and since then by a further 100MW project under exclusivity to 860MW including:
· 140MW operational which have performed ahead of management expectations
· 470MW fully secured, including 150MW in construction due to be operational in H2 2023
· 250MW under exclusivity
Other CaRe assets
· Strategic investments in Clenergy EV and n3rgy Data accelerate the Group’s capabilities in electric vehicle (EV) charging infrastructure and energy data management
· The Group continued to build its delivery capability and commercial asset models for the provision of other ‘Behind-the-Meter’ CaRe assets such as solar and storage, domestic EV chargers and air sourced heat pumps
· The Group continue to see significant long term market opportunity in these sectors
Dividend
· 10% increase year-over-year, in line with policy until 2024; covered by long-term, sustainable cash flows generated from existing assets
Outlook
· The FY 2023 pre-exceptional EBITDA is expected to be marginally ahead of and underlying PBT to be in line with our previous expectations; confident in the medium term outlook
· The smart meter installation run-rate is expected to progressively improve throughout rest of the year
· Continued delivery and growth of the grid-scale battery pipeline, with EBITDA contribution expected to be at least within our guided range
· Confident in successfully developing offerings and building pipeline in other CaRe assets
Tim Mortlock , Chief Executive Officer, commented:
“We have delivered another year of strong performance across all our key metrics. This again highlights the attractiveness of our CaRe asset portfolio and the strong execution by our teams.
The strong momentum in our meter and grid-scale batteries businesses provides us with confidence in our 2023 and longer term outlook – we will continue to deliver on our sustainable promises.
We also see significant market opportunities to further accelerate our portfolio of CaRe assets, including EV charging infrastructure and Behind-the-meter solar and storage. Meeting the key challenges of energy security, affordability and sustainability – SMS is strongly positioned to provide the knowledge, engineering, data platforms and services behind the UK’s move to net zero.”
Analyst Webcast
There will be an analyst webcast at 9.00am today – please contact sms@instinctif.com for details. The full year results presentation will be published on the Group’s website.
For further information:
| Smart Metering Systems plc | 0141 249 3850 | |
| Tim Mortlock, Chief Executive OfficerGail Blain, Chief Financial OfficerDilip Kejriwal, Head of Investor Relations | ||
| Cenkos Securities plc (Joint Broker and Nomad) | 0131 220 6939 / 020 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 (PR Adviser) | 020 7457 2020 | |
| Tim Linacre / Guy Scarborough / Sarah Hourahane | SMS@instinctif.com | |
Notes to Editors
Smart Metering Systems plc ( www.sms-plc.com ) installs and manages smart meters, energy data, grid-scale battery storage and other carbon reduction (“CaRe”) assets 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. Since 2019, SMS has been awarded the London Stock Exchange Green Economy Mark every year.
SMS plc is headquartered in Glasgow with a national presence across several UK locations.
SMS shares are quoted on AIM.
Overview
The Group delivered another year of exceptional operational and financial performance in 2022, despite a challenging macro environment. This is evidence of the resilience of our business model and the consistent cash flows generated from our existing portfolio of CaRe assets. The momentum across all our CaRe assets and solutions continued to remain strong providing a solid foundation for growth and these assets will continue to facilitate the transformation to a smarter, low carbon and more flexible energy system.
The meter and data assets ILARR increased 13% to £97.1m, including the annual RPI adjustment. Pre-exceptional EBITDA, marginally upgraded in the FY 2022 trading statement issued on 26 January 2023, was up 21% to £63.8m and underlying PBT, materially upgraded, was up 34% to £24.5m.
The monthly installation run-rate continued to improve throughout the year, with SMS installing 480,000 smart meters in 2022, outperforming the Group’s expectations. The Group have a contracted pipeline of c.2.17 million smart meters to install which will further increase ILARR by c.£50m.
The Group’s first 50MW grid-scale battery site commenced trading in January 2022. Two further sites went live in December 2022 resulting in 140MW operational by end of the year. The financial performance of these sites has been considerably ahead of the Board’s initial expectations. The Group’s grid-scale battery pipeline currently stands at 860MW (31 December 2022: 760MW, 2021: 620MW), of which 140MW is operational and 470MW fully secured with the remaining 250MW under exclusivity.
SMS made two strategic investments in 2022 expanding its offering in energy data management and accelerating the Group’s capabilities in EV charging infrastructure. The Board see significant market opportunity in these and other ‘Behind-the-Meter’ CaRe assets.
UK smart meter rollout
The Group increased the meter installation run rate from c.30,000 per month in H2 2021 to c.45,000 per month in H2 2022. This resulted in SMS installing 480,000 smart meters in 2022, exceeding our expectations and growing our smart meter portfolio to 2.1m as at 31 December 2022 (2021: 1.7m). The Group’s strong supply chain, inventories, delivery capacity and installation run rate provides the Board confidence in the Group’s ability to successfully deliver, and expand, SMS’s smart meter pipeline.
Net of meters installed and including the benefit of a contract win during the year, the contracted smart meter order pipeline stood at c.2.17m at 31 December 2022 (31 December 2021: c.2.55m).
Grid-scale batteries
The Group’s first 50MW grid-scale battery site at Burwell commenced trading in January 2022. Two further sites, 40MW at Barnsley and 50MW at Brook Farm, became operational in December 2022.
Performance of these sites has been significantly ahead of our initial expectations of £57,000-65,000 EBITDA per MW, generating an annualised EBITDA of c.£123,000 per MW. The majority of the revenue generated from these assets was from the provision of frequency services, such as Dynamic Containment, which we expect to soften over time towards our guided range as the volume of battery storage in the market grows.
We are also pleased with the record high pricing achieved by grid-scale battery storage assets during the recent Capacity Market auction in the UK.
As at 31 December 2022, the Group’s portfolio of grid-scale battery storage assets totalled 760MW (31 December 2021: 620MW), and since then the pipeline has increased by a further 100MW to 860MW, split as follows:
· 140MW operational (31 December 2021: nil)
· 470MW fully secured (31 December 2021: 320MW), of which 150MW in construction
· 250MW under exclusivity (31 December 2021: 300MW)
Strategic Investments
SMS made two strategic investments in 2022 to accelerate the Group’s EV charging infrastructure capabilities and further expanding its service offering in energy data management.
The investment in Clenergy EV, a software business with a Charge Point Operator (CPO) platform focused on EV charging infrastructure, complements the SMS EV installation capabilities and has enabled the Group to deliver a fully end-to-end integrated platform for EV charging infrastructure. The CPO platform is currently used in c.2,700 EV charge points across the UK. We are investing further in growing our pipeline of activity in this area over the coming years, addressing the destination, on-street and fleet market segments.
The acquisition of n3rgy, a data software company, enhances and accelerates the SMS existing capabilities in smart energy data solutions, providing the Group with a strong competitive position in a considerable addressable market as the electricity industry moves towards mandatory half-hourly settlement. We have integrated this capability with our existing FlexiGrid platform, enabling energy suppliers and other third parties to participate in the National Grid Demand Flexibility Scheme (DFS) over this Winter, which pays end consumers to use less energy at times of stress on the energy network.
ESG progress and sustainability
During 2022, SMS continued to make progress in executing on its 2030 net zero roadmap. Our ‘handprint’ (carbon emissions mitigated through our customers using our products and services) during the year was 14.5 times higher when compared to our total Scope 1 and Scope 2 ‘footprint’ (carbon emissions generated through our operations for the reasons explained below).
MSCI upgraded SMS’s ESG ratings from A to AA rating in January 2023.
Details on SMS’s Scope 1 and Scope 2 emissions over the last three years are summarised below:
| Scope 1 and 2 emissions (TCO2e) | 2022 | 2021 | 2020 |
| Scope 1 – Company owned vehicles | 3,054.9 | 1,988.0 | 1,690.0 |
| Scope 1 – Building related | 87.6 | 136.2 | 106.8 |
| Scope 2 – Building electricity | 122.0 | 137.5 | 152.4 |
| Scope 2 – Grid-scale batteries electricity | 1,111.2 | 53.1 | – |
Total Scope 1 and Scope 2 emissions in 2022 were higher than the prior year. The increase was due to emissions from operating our new grid-scale battery assets and from our vehicle fleets. Both 2020 and 2021 were also distorted by the effect of the COVID-19 pandemic.
Whilst our fleet related emissions increased because we added vehicles to service the increase in smart meter installations, we improved the overall fuel efficiency with the amount of carbon emissions emitted per vehicle reducing by 5% since 2019. We are now beginning our fleet transition and will introduce 100 mild hybrid vans to the fleet in 2023.
Our Scope 2 emissions from grid-scale batteries reflects the electricity used to operate the cooling and communication systems at our grid-scale battery sites. Grid-scale battery storage plays an essential role in enabling the UK to accelerate the adoption of renewables and so, whilst within the scope of our reporting, we report these emissions separately due to the positive contribution these assets make to the net zero transition.
Emissions related to our buildings fell 23% from 2021 levels as we continued to introduce solar panels and battery storage across our sites.
Dividend
The Board is proposing a 30.25p per share dividend (FY 2021: 27.5p) in line with our stated policy of increasing the dividend +10% year-on-year until 2024. The dividend demonstrates the sustainable growth delivered by our strategy and is covered by long-term, sustainable cash flows generated from our existing portfolio of CaRe assets.
Current trading and outlook
Meters:
· The Group’s ILARR at the end of February 2023 stood at £98.5m (31 December 2022: £97.1m).
· The smart meter installation run-rate is expected to progressively improve throughout rest of the year and we aim to install c.600,000 meters in 2023.
Grid-scale battery storage:
· The grid-scale battery storage assets continued to perform well during the first two months of 2023.
· EBITDA contribution expected to be at least within guided range of £57,000 to £65,000 per MW.
· 150MW of assets are under construction, which we expect to become operational in FY 2023.
FY 2023 outlook:
· The Board expects pre-exceptional EBITDA to be marginally ahead of its previous expectations and underlying PBT to remain in line with its previous expectations.