Smart Metering Systems pleased with first half operations

Smart Metering Systems reported a robust performance for its first half on Tuesday, with its index-linked annual recurring revenue (ILARR) standing at £110m on 30 June 2023, making for a 13% rise from 31 December, and 18% from the same point last year.

The AIM-traded firm said revenue for the six months climbed 26% to reach £79.3m, compared to £62.7m during the first half of 2022.

Its pre-exceptional EBITDA increased 24% to £36.1m, from the prior year's £29.1m, while underlying profit before tax rose 9% to £11.2m.

Net debt as at 30 June totalled £96.3m, swinging from a significant shift from the net cash position of £38.6m on 30 June last year.

Operationally, SMS said a combination of higher rental rates per smart meter, influenced by indexation and a strategic focus on single fuel and industrial and commercial (I&C) smart meter installations, supported growth in ILARR.

The firm said it expanded its smart meter portfolio to 2.3 million, an increase from 2.1 million at the end of 2022.

Meanwhile, the contracted order pipeline stood at 1.95 million, considering a net deduction of around 220,000 smart meters installed during the first half.

Significant growth was seen in total engineer-delivered works, leading to increased transactional revenues and ILARR growth.

Moreover, an increase in engineering capacity was set to speed up the installation rate in the second half, with at least 500,000 installations projected for the year.

The grid-scale battery portfolio meanwhile grew by 100MW, and currently stood at 860MW.

Within that, 240MW was operational, with 50MW expected to be operational in the fourth quarter and 250MW under exclusivity.

SMS recently acquired Evergreen Energy's domestic services division, which focuses on installing and maintaining renewable energy assets for homeowners, such as heat pumps, solar panels, and battery storage.

In addition, the company said it was piloting CaRe asset solutions, including domestic electric vehicle charging under the METIS Energy brand, and launched its first public EV charging hubs.

The company revealed that its pipeline of smart meters and grid-scale batteries would be fully funded through internal cash flows and existing debt facilities.

To support future growth, the group said it might consider selective asset recycling to maintain a prudent level of gearing in the medium term.

For the 2023 financial year, both pre-exceptional EBITDA and underlying profit before tax were anticipated to align with the board's expectations.

Meanwhile, the board projected 2024's pre-exceptional EBITDA to slightly surpass its previous estimates, with year-on-year growth of around 20%.

The dividend for the full year was also expected to grow by 10%, aligning with SMS's ongoing policy.

“SMS continues to deliver operationally and financially, with the strength and resilience of our model reflected in the significant growth in ILARR and EBITDA achieved during the first half of the year,” said chief executive officer Tim Mortlock.

“Our index-linked revenues provide a natural hedge against increased interest rates in the short term whilst significantly benefitting long-term cash flows.

“Our existing pipelines of meters and grid-scale battery assets can be fully funded from our internal cash flows and debt facilities.”

Mortlock said delivery of the pipeline was expected to drive further growth, and to more-than-double the group's EBITDA over the next four years.

“We are working to expand these pipelines, and to deliver the significant additional growth opportunities that exist within our developing CaRe assets.

“We have always been, and will remain, focused on delivering high quality, safe and secure growth.”

At 1034 BST, shares in Smart Metering Systems were down 0.9% at 664p.

Reporting by Josh White for Sharecast.com.