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magazineSmart Metering Systems’ £291m deal wipes out debt
Smart Metering Systems (SMS:AIM) 612p
Gain to date: 30.2%
Original entry point: Buy at 470p, 24 October 2019
The uncorrelated returns potential offered by Smart Metering Systems (SMS:AIM) have been reinforced.
It posted (17 Mar) a big jump in 2019 revenue to £114m and earnings before interest, tax, depreciation and amortisation (EBITDA) to £50.3m, around 4% ahead of market expectations.
That came after SMS sold a minority of its meter assets to an investment management company and netted £291m, or £282m in cash after expenses, in a deal that values its overall meter portfolio at an attractive 16.4x EBITDA, and allows the company to pay off its existing debt.
That deal will also enable SMS to dramatically hike its dividend in 2020 to 25p per share, payable quarterly, compared to 6.88p per share for 2019.
SMS chief executive Alan Foy told Shares: ‘We have a very strong balance sheet and no debt. We’re focusing on installing 2m smart meters by the end of 2024.
‘We’ll be using our cash, along with a £300m revolving credit facility, solely to invest in gas and electricity meters to satisfy our order book.’
Regarding the coronavirus outbreak, Foy said that while the near-term outlook is uncertain and ‘in the next two to four months we may not fit as many meters as we would like’, its installation target to the end of 2024 remains unchanged.
SHARES SAYS: Keep buying.
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