Smart Metering Systems plc
(“SMS”or the “Company” the parent of the “Group”)
Acquisition of two meter suppliers and IT specialist for up to £6.895 million in shares
Smart Metering Systems plc (AIM: SMS.L), the integrated metering services company that connects, owns, operates and maintains current generation, advanced and smart metering assets and databases, is pleased to announce the acquisition of the entire issue share capital of three companies: CH4 Gas Utility and Maintenance services Limited (“CH4”), Trojan Utilities Limited (“Trojan Utilities”), and Qton Solutions Limited (“Qton Solutions”) (together, the “Acquisitions”) for a total consideration of up to £6.895 million.
The Acquisitions are in line with SMS’s strategy to grow its meter asset portfolio, particularly in the new domestic smart meter market, and alongside targeting the existing Industrial and Commercial (“I&C”) market.
CH4 and Trojan Utilities will enhance the SMS’ capabilities to be a key participant in the substantial new smart domestic meter market for homes and small business in the UK. CH4 will add approximately 100 engineers and 60 contractors, of whom approximately 40 are domestic smart gas and electricity installation engineers, alongside the approximately 80 domestic smart gas and electricity installation engineers from Trojan Utilities, which will significantly enhance SMS’ capability. Out of the approximately 1.6 million domestic smart meters installed so far in the UK, they together represent approximately 23% (368,000) of that figure, independent of SMS. Alongside these installation businesses, IT systems specialist Qton Solutions will help to serve SMS’ existing and future contractors, most of whom use its systems already. This will ensure full confidence to energy suppliers throughout the domestic smart meter roll-out.
CH4 Gas Utility and Maintenance Services Limited
CH4 is a specialist in traditional and smart gas and electricity metering installations to the domestic and I&C sectors. It operates throughout the UK and is a current service provider to SMS.
Since its establishment in 2011, CH4 has grown successfully and, for the year ended 28 February 2015, reported turnover of £7.64 million with gross profit of £2.95 million and EBITDA (after exceptional items) of £0.89 million.
The initial consideration for CH4 is up to £2 million and is being satisfied through the issue of up to approximately 510,497 ordinary shares of 1p each in SMS (“Ordinary Shares”) at a price of 391.775p per Ordinary Share (the final number of shares is subject to a completion accounts adjustment). In addition, a further up to £0.995 million may be payable through the issue of Ordinary Shares pursuant to an earn out arrangement based on the CH4 business satisfying certain performance criteria over the three years from the date of completion.
Trojan Utilities Limited
Trojan Utilities is a leading installation service provider to energy suppliers in the UK and delivers domestic smart gas and electricity trained and accredited installation services. Established in 2011, Trojan Utilities has over 80 fully trained engineers operates throughout the UK and has already installed over 270,000 gas and electric domestic smart meters, representing over 17% of the national smart metering installed to date. It is currently installing over 3,000 domestic smart meters per week outside of its SMS business.
Trojan Utilities has grown substantially since 2011 and, for the year ended 31 October 2014, recorded turnover of £2.86 million with gross profit of £1.26 million and EBITDA of £0.5m. Trojan Utilities has seen additional growth in 2015 with estimated turnover for year ended 31 October 2015 of £5.76 million, gross profit of £2.13 million but with a reduced EBITDA of £0.067 million as a result of increased investment in operational capacity and UK-wide infrastructure.
The initial consideration for Trojan Utilities is up to £0.5 million and is being satisfied through the issue of up to approximately 127,625 Ordinary Shares at a price of 391.775p per Ordinary Share (the final number of shares is subject to a completion accounts adjustment). In addition, a further up to £0.5 million may be payable through the issue of Ordinary Shares pursuant to an earn out arrangement based on the Trojan Utilities business satisfying certain performance criteria over the three years from the date of completion.
Qton Solutions Limited
Established in Cambridge in 2009, Qton Solutions has a team of 19 IT professionals specialising in the provision of work and field management IT systems applications for gas and electricity metering installations for energy suppliers, installation contractors and meter asset managers and owners in the UK with specific applications tailored for domestic dual fuel smart installations.
These systems have become industry leading since 2011, and have already been responsible for the completion of over 1 million meter installations and are widely used by a number of domestic smart meter installers, energy suppliers, and meter asset owners and managers including SMS.
Qton Solutions has grown very successfully since its establishment and, for the year ended 31 March 2015, reported turnover of £0.99 million with gross profit of £0.34 million and EBITDA (after exceptional items) of £0.23 million, backed with annually recurring licence fee income on it software products of over £0.8 million.
The consideration for Qton Solutions is up to £2.9 million and is being satisfied through the issue of approximately 740,230 Ordinary Shares at a price of 391.775p per Ordinary Share (the final number of shares is subject to a completion accounts adjustment).
Commenting on the acquisitions, Alan Foy, Chief Executive Officer, said:
“The acquisitions of CH4 and Trojan Utilities are part of the Company’s strategy to gain direct control of a large proportion of our installation capacity for ongoing delivery of our customer contracts in the I&C and domestic meter markets. This will provide confidence to customers in our delivery model for the new domestic smart metering market. In addition, the acquisition of Qton Solutions allows us to gain direct control and ownership of all software applications used by SMS.
We are delighted to welcome the employees of the three businesses and look forward to working with them.”
The initial consideration shares to be issued in connection with the Acquisitions require to be issued by Friday 25 March 2016 and the exact number of these shares will be announced on their issue.
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. The Company provides 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.
The Company has further applications for gas with its ADM 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. The Company was admitted to the AIM market in July 2011 and is now part of the FTSE AIM 50 index. For more information on SMS please visit the Company’s website: www.sms-plc.com.
CH4 Gas Utility and Maintenance Services Limited
CH4 currently has capacity to install over 160,000 new domestic smart metering installations annually once the current workforce are through full training, indeed over 40 of these engineers are already accredited and have installed over 100,000 gas and electric domestic smart meters for energy suppliers independently of SMS thus far. Overall, CH4 adds 100 engineers and 60 contractors, of which 40 are dual fuel engineers.
In addition CH4 own a domestic smart dual fuel (gas and electricity meters) accredited training academy which will assist in providing additional fully trained installation capacity in support of SMS.
Trojan Utilities Limited
Trojan Utilities currently has capacity to install over 160,000 new domestic smart gas and electricity metering installations annually from an already fully trained and accredited workforce and have developed a high-quality reputation for delivery with its energy supplier customers backed with a strong ethos in health and safety and customer satisfaction.
In addition Trojan Utilities own 35% of the share capital of Utilities Academy, the leading domestic smart metering training and accreditation academy which can assist in providing additional fully trained installation capacity in support of SMS.
Qton Solutions Limited
Qton Solutions have a fully tried, tested and implemented solution for all field management activities involved in domestic smart installations from shared appointment booking with installers and energy suppliers to stock, resource scheduling, installations management, asset registration and more; all key components for successful delivery of customer contracts and providing confidence for new customers to contract for their new domestic gas and electricity smart metering requirements.
About UK Domestic Smart Meter Market
The domestic smart meters project is overseen by the Department of Energy and Climate Change (“DECC”) and aims to install smart meters in homes and small businesses across the UK by 2020.
While DECC are responsible for the overall project management and monitoring, Ofgem are responsible for ensuring customers are protected during the installation phase. Capita has been appointed as the project manager for the data communications standards and Smart Energy GB (a Government funded body) are responsible for the communications campaign.
This initiative requires every home and small business in the UK to have smart or advanced meter functionality by 2020. This will require significant investment for rolling out and replacing approximately 22 million domestic gas meters and 27 million electricity meters.