Smart Metering Systems plc
MINORITY ASSETS DISPOSAL TO RAISE £291M
ENHANCED LONG-TERM, RPI LINKED DIVIDEND POLICY
Smart Metering Systems plc (AIM: SMS, the “Group”, “SMS”) has conditionally sold a minority of the Group's meter assets (the “Disposed Portfolio”) to funds managed by Equitix Investment Management Limited (the “Purchaser”) for a total gross cash consideration of £291 million (the “Disposal”). The Group expects to receive net cash consideration of £282 million, after expenses.
The Disposal will enable the implementation of an enhanced long-term, sustainable dividend payment policy and results in a significant reshaping of SMS's capital structure.
As previously notified the Group is announcing its FY2019 results on 17 March 2020 and can confirm FY2019 results continue to be in line with market expectations.
HIGHLIGHTS
Disposal
- Attractive valuation for a minority of the Group's meter assets
- The cash consideration will result in positive net cash position for the Group overall on completion
- SMS to continue to manage the Disposed Portfolio on behalf of the Purchaser
- Revised dividend policy
- Proposed dividend of 25p per share for FY2020, increasing at least in line with RPI p.a. until FY2024
- Proposed scrip alternative for up to 30% of dividend
- Prudent cash cover expected in all years; earnings cover grows over time
Ongoing capital structure
- Existing debt fully repaid; amended £300 million RCF on the same terms
- Intention to maintain a prudent net debt / EBITDA ratio through the remainder of the roll-out
- Flexibility in funding further growth in a capital efficient way
- UK smart meter roll out opportunity
- Existing portfolio of over 1.2 million domestic smart meters at 31 December 2019
- Order book of a further 2 million meters expected to add c.£40 million to the Group's ILARR
- Additional opportunities beyond order book with contracted and potential customers
- Following BEIS' proposed consultation to extend the deadline to 2024, the smart meter roll-out profile is expected to be more evenly spread, enabling SMS to manage its cost base more efficiently
Alan Foy , Chief Executive Officer, commented:
“This transaction realises considerable cash returns and demonstrates the substantial value of our smart meter portfolio.
“It also will enable us to enhance greatly shareholder value with significant and sustainable increase in dividends – underpinned by our asset-backed, inflation-linked, recurring revenue stream.
“With a strengthened balance sheet, we will also be in a much stronger position to invest in the sizeable UK smart meter rollout programme, which is central to the establishment of a decentralised and decarbonised energy system.”
Achal Bhuwania , Deputy Chief Investment Officer for Equitix, said:
“We are very pleased to participate in the UK smart metering programme whilst creating a long-term partnership with SMS. This acquisition aligns with our business objectives of investing in the country's sustainable energy transition initiatives, which we are excited to be part of.”