26 January 2023
Smart Metering Systems plc
Trading update
Smart Metering Systems plc (AIM: “SMS”, the “Group”), an integrated energy infrastructure company, provides a trading update for the year ended 31 December 2022 (“FY 2022”).
Key points
· ILARR(1) grew 13.1% to £97.1m (31 December 2021: £85.9m)
· Meter and data assets:
o smart meter portfolio increased to 2.1m (31 December 2021: 1.7m)
o contracted smart meter order pipeline of c.2.17m(2) (31 December 2021: c.2.55m), net of installations during FY 2022
o continued growth in meter installation run-rate, averaging c.45,000 per month in the second half of the year
· Grid-scale battery assets:
o total portfolio increased to 760MW (31 December 2021: 620MW)
§ 140MW operational and performed significantly ahead of management expectations
§ 470MW fully secured, of which 150MW in construction
§ 150MW under exclusivity
· Net debt at 31 December 2022 was £31.2m (31 December 2021: Net cash £117.7m)
· FY 2022 underlying EBITDA expected to be marginally ahead, and adjusted PBT expected to be materially ahead, of our previous expectations
· Remain confident for 2023 and medium-term outlook
· Expected FY 2022 dividend of 30.25 pence per share, +10% year-over-year, in line with stated policy
Tim Mortlock, CEO of SMS said:
“We delivered strong operational and financial performance during FY 2022, highlighting the attractiveness of our CaRe asset portfolio and the strong execution by our teams. As a consequence, results for the year are expected to be ahead of our previous expectations.
“Our business can deliver significant value in the years ahead, with our inflation-linked recurring revenues from our existing meter and data assets providing considerable protection against macro-economic shocks. The strong momentum in our meter and grid-scale batteries businesses provide us with confidence in our 2023 and medium term outlook.”
(1) Index-linked annual recurring revenue
(2) 0.1m increase offset by 480,000 meter installs in FY 2022
Index-linked annual recurring revenue
Total meter and data asset ILARR was £97.1m at 31 December 2022, which includes the annual RPI adjustment. This represents a 13.1% increase over the year (31 December 2021: £85.9m).
| Category | % change | ILARR | Portfolio |
| Domestic smart meters | + 22.0% | £61.1m | 2.1 million |
| Data assets | + 15.5% | £16.0m | 0.4 million |
| Industrial & Commercial meters | + 14.0% | £5.3m | 0.1 million |
| Traditional domestic meters | – 5.3% | £11.2m | 0.3 million |
| Third party assets | – 36.1% | £3.5m | 1.6 million |
| Total | + 13.1% | £97.1m | 4.5 million |
Meters
During FY 2022, SMS installed 480,000 smart meters, outperforming the Group’s expectations. The monthly installation run-rate improved throughout the year, with an average of c.45,000 smart meters installed per month during H2 2022 (H1 2022: c.35,000 average), a c.50% increase on the same period in 2021.
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 contracted smart meter pipeline.
The total smart meter portfolio increased to 2.1m, with an additional order pipeline of c.2.17m at 31 December 2022, net of meters installed and contract win during the year (31 December 2021: c.2.55m).
Grid-scale batteries
The Group’s first 50MW grid-scale battery site at Burwell commenced trading at the end of January 2022. Two additional sites, 40MW at Barnsley and 50MW at Brookfarm, became operational in December 2022 and we have fully secured a further 200MW of our pipeline in Q4 2022.
The financial performance of these sites has been significantly ahead of the Board’s initial expectations, equivalent to an annualised EBITDA contribution of c.£123,000/MW. The majority of the revenues generated over the year were from the provision of frequency services, such as Dynamic Containment, which we expect to soften over time as the volume of battery storage in the market grows. We continue to expect the longer-term EBITDA contribution to be c. £57,000-£65,000/MW.
As at 31 December 2022, the Group’s portfolio of grid-scale battery assets totalled 760MW (31 December 2021: 620MW), split as follows:
§ 140MW operational (31 December 2021: Nil)
§ 470MW fully secured (31 December 2021: 320MW), including an additional 200MW secured since September 2022
§ 150MW under exclusivity (31 December 2021: 300MW)
Currently, 150MW of assets are under construction, which we expect to become operational in FY 2023.
The Board are pleased with the progress of the grid-scale battery business during FY 2022, with the overall portfolio, operational sites and fully secured sites all increasing over the past 12 months.
Strategic Investments
As previously announced, SMS made two strategic investments in 2022 to accelerate the Group’s EV charging infrastructure capabilities and further expanding its energy data management service offering.
The investment in Clenergy EV, a software business with a Charge Point Operator platform focused on EV charging infrastructure, complements SMS’s existing EV installation capabilities and will enable the Group to deliver a fully end-to-end integrated platform for EV charging infrastructure. We are investing to grow our pipeline in this area over the coming years, addressing the destination, on-street and fleet market segments.
The acquisition of n3rgy, a data software company, will enhance and accelerate SMS’s existing capabilities in smart energy data solutions, providing the Group with a strong competitive position in the significant 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 3rd parties to participate in the National Grid Demand Flexibility Scheme this Winter, which pays end consumers to use less energy at times of stress on the energy network.
Other CaRe assets
The Group continued to build its delivery capability and commercial models for the provision of other ‘Behind-The-Meter’ CaRe assets, such as solar and storage, domestic EV chargers and air-sourced heat pumps. SMS continue to see significant long-term market opportunity in these sectors.
FY 2022 results and medium term outlook
The FY 2022 underlying EBITDA is expected to be marginally ahead, and adjusted PBT expected to be materially ahead, of our previous expectations. The Group remain confident in 2023 and the medium term outlook.
SMS expects to publish its FY 2022 results on 14 March 2023.
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 / Adam Rae Investec Bank plc (Joint Broker)Christopher Baird / Henry Reast RBC Capital Markets (Joint Broker)Matthew Coakes / Evgeni Jordanov / Jack Wood | 020 7597 5970 020 7653 4000 |
| Instinctif Partners | sms@instinctif.com |
| Tim Linacre / Guy Scarborough / Sarah Hourahane |