Smart meter firm grows profits by 20% amid energy crisis in UK

·3-min read
Tim Mortlock succeeded Alan Foy as chief executive of Glasgow-based Smart Metering Systems on March 1. Picture: Smart Metering Systems
Tim Mortlock succeeded Alan Foy as chief executive of Glasgow-based Smart Metering Systems on March 1. Picture: Smart Metering Systems

GLASGOW-based Smart Metering Systems (SMS) has grown profits by 20 per cent amid turmoil in energy markets and said it is well positioned for further growth.

The company, which installs smart meters on behalf of energy firms, grew underlying pre-tax profits to £18.3 million in 2021 from £15.2m in the preceding year.

The results cover a year in which a range of energy firms went under following a surge in gas prices on international markets. This has left millions of consumers in the UK facing steep increases in their energy bills.

The increase in profits could fuel controversy about the official smart meter programme. Take up of meters is running well short of expectations years after the scheme was launched.

The Conservative Liberal Democrat coalition government decided to require energy firms to install smart meters in all the UK’s homes and small businesses in the belief they could help to reduce energy wastage. The rollout was meant to be completed by the end of 2020.

However, a progress report published last week showed only 50 per cent of the meters in use in households and small businesses at the end of 2021 were classed as smart.

HeraldScotland: Picture: Peter Byrne/PA Wire
HeraldScotland: Picture: Peter Byrne/PA Wire

Picture: Peter Byrne/PA Wire

Yesterday’s results announcement from SMS underlines how much money firms are making in a market which has attracted keen interest from international investors.

SMS generates revenues by supplying meters and data collection technology for use by energy firms under long term contracts. The group had around 4.2 million meters and related assets under management at the year end. It owns most of the meters concerned

Recurring revenues increased to £85.9m in 2021 from £77m last time. They look set to rise steadily.

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After increasing its installation run rate to over 30,000 per month in the second half of the year, the company said it is targeting a progressive improvement on that measure.

Ian McInally at SMS’ joint house broker Cenkos noted the group’s revenues will be boosted as a result of recent increases in the inflation rate.

“Given that all SMS meter rental contracts contain automatic, upwards only RPI inflation increases, we see this as a long-term driver of additional value,” said Mr McInally.

Rating SMS shares a buy, Mr McInally also noted that the company increased the gross profit margin it achieved on sales to 77 per cent last year, from 71%, helped by improved control of the operating cost base.

SMS said it suffered only a “negligible impact” following the failure of some energy suppliers last year and has strengthened its customer base. In December the company extended a contract to install smart meters for Shell’s energy supply business until the end of 2025.

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Chief executive Tim Mortlock said yesterday that SMS has a solid pipeline of orders.

The company launched its first large scale battery facility in January. Others are in the pipeline.

HeraldScotland: Picture: Smart Metering Systems
HeraldScotland: Picture: Smart Metering Systems

Picture: Smart Metering Systems

In September SMS raised £175m equity funding from investors to support growth. In March 2020 it clinched a £291 million deal to sell 187,000 of its meters to funds managed by the Equitix private equity business.

Yesterday the company reiterated plans to increase its dividend by 10% annually until 2024 citing the benefit of long-term index-linked cash flows. The 2021 payout totalled 27.5p per share, against 25p last time.

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After being put back to 2024, the deadline for completion of the smart meter programme was extended to June 2025 amid challenges posed by the pandemic.

Last week, the Department of Business Energy and Industrial Strategy said the percentage of meters classed as smart or advanced increased by seven points in 2021, from 43%.

SMS has around 1,200 employees, including 210 in its Glasgow head office.

Shares in the company closed down 4p at 716p.

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