Equity Analysis /
United Kingdom

GB : Smart Metering Systems PLC - In line results with strong prospects in meters and CaRe

    Alex O’Hanlon
    Alex O’Hanlon

    Analyst - Support Services

    Joe Brent
    Joe Brent

    Analyst - Support Services & Special Situations

    CGS-CIMB
    25 March 2022
    Published by

    The FY 21 EBITDA was 1% ahead of estimates but FD EPS 23% lower as the deferred tax movement was treated as underlying. The battery assets construction timeline remains broadly on track and the performance of the first asset has been in line since coming on line in January. We maintain our EBITDA estimates but reduce FY 22 EPS by 4% to reflect higher depreciation and interest. We expect neutral cash in FY 22, and that net debt will increase along with investment. The increase in inflation should be a positive driver of ILARR and revenues and is a hedge against costs which will also increase. Reassuringly, the meter pipeline remains unimpacted on a net basis by the turmoil among utility providers, and SMS is exclusive with Shell, which adds 536k customers, although some will already have meters. The order pipe-line increased from the FY 20 level of 2.0m to 2.55m despite c. 350k of installations. We maintain our BUY recommendation and TP of 1185p and believe market fears around gas prices have unfairly affected the share price.