smart approach
smart systems
Smart Metering Systems plc
Annual report and accounts 2013
Smart Metering Systems plc Annual report and accounts 2013 STRATEGIC REPORT
01 Our highlights
02 Business model
04 Our strategy
05 Market size and outlook
06 Risk management
08 Chairman’s statement
10 Chief Executive Officer’s statement
12 Financial review
CORPORATE GOVERNANCE
14 Board of Directors
16 Corporate governance statement
17 Directors’ remuneration report
19 Directors’ report
21 Directors’ responsibilities statement
FINANCIAL STATEMENTS
22 Independent auditor’s report 
23  C o n s o l i d a te d s t a te m e n t 
of comprehensive income
24  C o n s o l i da t e d s t a t e m e n t 
of financial position
25  C o n s o l i da t e d s t a t e m e n t 
of changes in equity
26  C o n s o l i da t e d s t a t e m e n t  
of cash flows
27 Accounting policies
34 Notes to the financial statements
47 Parent company balance sheet
48  Notes to the parent company 
financial statements
Smart Metering Systems plc (SMS) 
connects, owns, operates and maintains 
metering systems and databases on 
behalf of major energy companies.
MORE ONLINE
Read more about SMS online at our 
investor website sms-plc.com Strategic report Corporate governance Financial statements
Smart Metering Systems plc
Annual report and accounts 2013 01
Our highlights 
STRATEGIC REPORT
FINANCIAL HIGHLIGHTS
 › Revenue increased by 33% to £27 .9m (201 2: £21.0m)
 › Total annualised recurring meter rental increased by 44% 
to £1 5.5m (201 2: £10.8m)
 › Gross profit increased by 34% to £1 7 .8m (201 2: £1 3.3m)
 › Gross profit margin at 64% (201 2: 63%) 
 › Adjusted EBITDA* increased by 31 % to £1 1.8m (201 2: £9.0m)
 › EBITDA margin at 42% (201 2: 43%)
 › Basic earnings per share increased by 52% to 7 .86p 
(2012: 5.18p)
 › Final dividend of 1.6 1 p per ordinary share making 2.31 p 
for the full year (201 2: 1.65p), an increase of 40%
 › Available cash resources of £1 1.7m at 31 December 201 3
 › New long term debt facilities announced on 1 2 March 2014 
with £105.0m revolving credit agreement with Barclays Bank plc 
(lead bank), Clydesdale Bank plc and Bank of Scotland plc, 
replacing all existing facilities 
OPERATIONAL HIGHLIGHTS
 › Total meter portfolio increased by 38% to 469,000 with 
the number of meters in its industrial and commercial 
portfolio growing by over 1 18%
 › Capital expenditure on meters increased by 46% to £23.3m, 
reaching a monthly run-rate of approximately £2.5m 
in December 2013
 › The gas supplier client base grew from 1 3 to 1 7 representing 
over 80% of the industrial and commercial market, 
and the number of energy broker contracts increased 
from 10 to 24 
 › Over 16,000 ADM devices deployed in the UK by 
31 December 2013 up from 2,000 in December 2012
 › 17 trials of the ADM device in 5 different countries, with 
further trials now committed in 3 additional countries
A year of growth across all business areas 
and, in particular, a strong performance 
in the UK Gas Connection division. 
* Excluding exceptional items and fair value adjustments.
Revenue £m
2011
16.0
2012
21.0
2013
27.9
£27.9m
+33%
Gross profit £m
2011
8.9
2012
13.3
2013
17.8
£17.8m
+34%
EBITDA* £m
2011
5.7
2012
9.0
2013
11.8
£11.8m
+31%
EBT* £m
2011
4.0
2012
6.5
2013
7.7
£7.7m
+20%
Chief Executive Officer’ s statement p10
Our strategy p04 STRATEGIC REPORT
Smart Metering Systems plc
Annual report and accounts 2013 02
OUR STORY
SMS is the only independent business providing gas infrastructure 
connection services, gas meter asset management services and the 
development of advanced smart metering technology solutions to key 
gas suppliers in the UK industrial and commercial (I&C) markets. 
With over 19 years’ experience operating at the heart of the gas industry, 
we provide a comprehensive package of solutions encompassing all 
aspects of the gas connections and smart metering markets through 
our subsidiary companies, based on our in-depth market knowledge 
and insight.
The Group was established in 1995 to provide services in the gas 
infrastructure connections market which emerged following Ofgem’s 
move to deregulation and liberalisation of the gas industry. Since that 
period, the UK gas market has evolved from the original British Gas 
single monopoly to an unbundled market. 
In the early years, SMS started a UK-wide contracting services business 
using subcontractors from a main base in Scotland. In 2004, a meter 
asset management division was established and became an Ofgem 
approved Meter Asset Manager (MAM). 
In the period 2009–2011, a meter asset portfolio was created and 
built with all gas suppliers in the UK, followed by a new smart metering 
and data management division serving the I&C market in addition to 
preparing for the roll out of smart metering in the domestic market. 
The UK government’s objective is to have all domestic gas and electricity 
consumers installed with a smart metering solution by 2020. 
SMS was successfully floated on AIM in 2011. 
Our business operation is based on connecting, owning, operating and maintaining metering 
systems and databases on behalf of major energy companies and energy brokers as part of 
an integrated service offering in the gas connection and metering services market. 
We have contracts with gas suppliers that provide recurring revenues and visibility 
of earnings backed by robust termination payment arrangements.
Data Management
Smart meter data collector: supply 
and installation of smart meter devices
Smart metering is seen as the key to the future efficiency 
of the UK’s energy system. UK Data Management delivers 
the Company’s patented ADM™ smart metering solution 
which is very simple to install and is highly cost effective 
and competitive. We strive to maintain our client centric 
culture and we focus on client needs, not product features.
Gas Connection
Infrastructure facilitator: management of 
gas connections and meter installations
UK Gas Connection is one of the UK’s largest 
independent operators. We work in partnership with 
many of the leading providers in the UK gas industry 
to deliver meter installations, removals and exchanges, 
new gas supplies and increases in capacity.
Meter Asset Management
Meter asset manager: operations 
for every UK gas supplier 
UK Meter Assets is an Ofgem accredited meter asset 
management company which owns, operates and 
manages commercial and domestic gas meters on 
behalf of the UK’s leading gas suppliers and 
independent meter asset managers.
Business model
The Company has three 
wholly owned subsidiaries: Strategic report Corporate governance Financial statements
Smart Metering Systems plc
Annual report and accounts 2013 03
UK GAS MARKET AND THE SMS INTEGRATED SERVICE OFFERING
End consumers
UK licensed gas suppliers
SMS plc
Gas suppliers are obligated to arrange 
gas connections for their customers
Gas suppliers have an obligation 
for metering services
Gas suppliers are now mandated to 
provide smart metering services
Infrastructure facilitator: 
administration and management 
of gas connections and 
meter installations
Ofgem approved 
Meter Asset Manager (MAM)
ESTA approved smart metering 
data collector and aggregator STRATEGIC REPORT
Smart Metering Systems plc
Annual report and accounts 2013 04
Our strategy is to be the market leader in the independent ownership 
of gas meters in the UK.
Strategic priorities Our progress in 2013 Our focus for 2014
Increase growth rate
Grow our domestic meters 
business organically and 
through new contracts.
 › Annualised recurring meter rental increased 
by 44% to £15.5m
 › Total meter portfolio increased by 38% 
to 469,000 (Domestic and I&C) 
 › Increase recurring rental 
 › Increase meter installations in domestic 
and I&C market
Up sell the ADM solution
Establish our technology ADM™ 
as the industry standard smart 
metering solution for industrial 
and commercial (I&C) clients.
 › Annualised recurring ADM rental income 
increased by 328% to £0.3m
 › Total meter portfolio increased by 617% 
to 16,000 (Domestic and I&C)
 › Increase recurring rental
 › Explore markets ex-UK
 › Explore markets for water, electricity 
and LPG applications
MEASURING OUR PROGRESS
Our key performance indicators monitor our progress and keep our 
focus on delivery. 
We monitor our performance by measuring and tracking key 
performance indicators (KPIs) that we believe are important to our 
longer-term success. Long-term sustainable performance of these KPIs 
is linked to the remuneration arrangements of our Management team.
Annualised recurring meter rent £m
2010
5.9
2011
7.6
2012
10.8
£15.5m
+44%
2013
15.5
Total meter portfolio
2010
214,003
2011
263,749
2012
340,909
468,988
+38%
2013
468,988
KEY PRIORITIES
Our strategy Strategic report Corporate governance Financial statements
Smart Metering Systems plc
Annual report and accounts 2013 05
SMS operates in a large UK market with few operators currently. We focus on the I&C 
markets throughout the UK whilst also operating in the domestic market. The market 
size is estimated to be circa 1.6m I&C gas meters and 22m domestic gas meters.
160,000
51,000
18,000
16,000
15,000
25,000
59,000
57,000
21,000
47,000
Assets
c.469,000
Market size and outlook
While the largest customers in the I&C market 
are required to have advanced metering 
solutions in place by 2014, the government’s 
Smart Metering initiative currently requires 
every home and business in the UK to have 
smart or advanced meter functionality by 2020. 
This will form the foundation of the smart grid 
and will require significant investments for 
rolling out and replacing approximately 
22 million domestic gas meters. 
SMS is well positioned for this new market 
segment. Since gas suppliers will be required 
by regulation to appoint a MAM (Meter Asset 
Manager), the UKMA division (UK Meter Assets) 
of SMS will be one of the few competing 
participants in the market. Nevertheless, 
the growth of our business in the domestic 
market is not predicated on this potential roll 
out from 2015, which is subject to a timeframe 
set by the UK government.
Our current market share is 27,000 I&C 
meter assets (1.6% of the market) and 
442,000 domestic meter assets (2% of the 
market). The Group has contracts in place 
with companies accounting for over 80% 
of the total I&C market and over 40% 
of the domestic market.
The SMS ADM™ smart metering solution 
has great potential to be rolled out in the 
I&C market, as 1.6 million I&C meters will 
need to be smart enabled by 2020. The 
Group has accelerated growth in domestic 
meters and our focus is on becoming the 
preferred partner to our 28 existing gas 
supplier contracted clients in the I&C market 
through our ADM smart metering solution.
We are also looking to expand into other 
applications, including water and LPG 
(liquefied petroleum gas), and other 
geographical markets where “smart” 
applications such as remote reading 
and half-hourly consumption data 
are important. STRATEGIC REPORT
Smart Metering Systems plc
Annual report and accounts 2013 06
Risk management 
The attention of prospective investors is drawn to the fact that ownership of ordinary 
shares will involve a variety of risks which, if they occur, may have a materially adverse 
effect on the Group’s business and financial condition and the market price of the 
ordinary shares could decline.
RISK DESCRIPTION MITIGATION
Failure of physical 
infrastructure or services 
of the Company
The Company operates with a well-established IT support 
infrastructure. Service interruptions and equipment failures may 
expose the Company to financial loss and damage its reputation, 
which could have a material adverse effect on the Company’s 
business, financial condition and results of operations. The Company’s 
business includes the ownership and management of gas meters. 
If the Company fails to register a meter(s) on its IT system, wrongly 
classifies a meter or it loses track of a meter(s) within the system 
then this could also have a material adverse effect.
The Company’s IT infrastructure is subject to failure from a variety 
of causes, including human error, power loss and physical or 
electronic security breaches. Other factors which are out of the 
Company’s control include sabotage, vandalism, network failures, 
natural disasters, fibre optic cable cuts, improper building 
maintenance by the landlords of the buildings in which the IT 
infrastructure is located, and terrorism.
To mitigate against these risks 
the Company has deployed a 
fully redundant failover 
infrastructure which is mirrored 
in real time with all primary 
nodes. The mirrored servers are 
hosted on a secondary site at a 
Tier 1 data centre. A full business 
continuity plan is in place and is 
tested regularly. This plan 
facilitates the use of a secondary 
office place which is fully 
equipped with computers, 
phones and other office 
equipment. Full disaster 
recovery failover to a new office 
environment can occur within 
four hours.
Dependency on key 
clients, terms of contracts, 
financing costs and 
performance levels
In its UKMA business, the Company is in commercial contracts 
with, and largely dependent on, a small number of key gas 
suppliers. Whilst there are termination provisions within such 
contracts, loss of these key clients could have a material adverse 
effect on the future growth of the Company. In addition, 
approximately 90% of the UKMA business revenue at the end 
of December 2013 was derived from consumers who are clients 
of suppliers contracted with the Company for meter asset 
management. The balance of the revenue was derived from 
consumers who had changed to non-contracted gas suppliers. 
In the event that such non-contracted suppliers used another 
MAM and management of the gas meter was changed to the 
new asset manager, the Company would suffer a loss in revenue 
and of the beneficial termination provisions.
The key contracts with gas suppliers require the Company to fulfil 
certain performance obligations. In particular, the Company is 
required to provide meter assets for an agreed price.
In addition, if the Company is unable to meet an appropriate level 
of service in its UKGC business, its reputation may be damaged, 
impairing its ability to retain existing and attract new clients 
and users.
To mitigate these risks the 
Company has now put in place 
full MAM service contracts that 
cover over 80% of the I&C market 
and over 40% of the domestic 
market. These contracts ensure 
that either redemption penalties 
or recurring rentals will be 
payable on the vast majority of 
occasions where a meter point 
moves from one supplier to 
another. Strict service levels are 
monitored daily throughout all 
core business functions to 
ensure the Company meets and 
exceeds customer expectations. Strategic report Corporate governance Financial statements
Smart Metering Systems plc
Annual report and accounts 2013 07
RISK DESCRIPTION MITIGATION
Unforeseen delays and 
cost overruns when rolling 
out new and upgrading 
existing products 
and services
In the future, the Company may experience unforeseen delays 
and expenses in connection with a particular project or initiative. 
Although the Company has budgeted for expected costings, 
additional expenses in the event of unforeseen delays, cost 
overruns, unanticipated expenses, regulatory changes and 
increases in the price of equipment may negatively affect 
the Company.
The Company has considerable 
experience in forecasting 
and managing project 
implementation timetables. 
In addition, the Company 
periodically upgrades and 
replaces its IT infrastructure.
The Company may 
experience accelerated 
demand for its products 
and services
The Company expects to be able to meet its current capital 
expenditures from internal resources and debt facilities. In the 
event that the Company wins a large order for ADM™ devices  
and/or new smart meters, it may consider supporting the working 
capital requirements for such order(s) by the issue of new equity 
and/or debt finance.
If the Company is unable to raise the necessary financing it could 
adversely affect the Company’s ability to expand its business.
The Company maintains close 
relationships with funding 
partners to give the Directors 
confidence that future growth 
can be funded.
The Company could 
be subject to increased 
operating costs, as well 
as claims, litigation or 
other potential liabilities, 
in connection with the 
security and control of the 
Company’s systems and 
the personal data of users
The Company relies on systems and personnel in the Company’s 
locations to physically secure IT infrastructure and user data. Any 
accidental or intentional actions, including computer viruses and 
unauthorised access, could result in increased operating costs or 
claims. The Company may incur significant additional costs to 
protect against such disruptions, the threat of security breaches 
or to alleviate problems caused by such interruptions.
A party who is able to breach the physical premises and/or 
electronic security measures of the Company’s systems could 
damage the Company’s equipment and/or misappropriate its 
proprietary and personal information of the Company’s users, 
causing interruptions or malfunctions. If a third party were able 
to misappropriate data held on the Company’s system then the 
Company could be subject to claims, litigation or other potential 
liabilities. Any security breach could lead to a loss of clients and/or 
existing clients seeking to claim damages. This could have a 
material adverse effect on the Company’s business, financial 
condition and result of operations or future growth.
Our reliable and secure IT systems 
are designed to be highly resilient 
against the most serious levels 
of disruption. Disaster recovery 
facilities are in place to provide 
a fully functional alternate 
location for operations with 
access to all production data. 
All production data is backed 
up live (24/7) to a highly secure 
offsite facility. Disaster events 
are planned for and insured 
against while solutions 
are tested.
The Group’s operations 
could be damaged and 
profitability reduced if 
the Group is not able 
to effectively manage 
its growth
The Group has experienced rapid growth and if it fails to 
effectively manage this growth, its operations could be harmed 
and profitability reduced. This future growth could place significant 
demands on the Group’s operational and financial infrastructure. 
The growth of the Group’s sales and profits in the future will depend, 
in part, on its ability to expand its operation through the roll out 
of new products, the exchange of existing gas meters and the 
launching of its services into new markets and geographies. 
In order to manage its 
planned expansion, the Group 
will need to continually evaluate 
the adequacy of its management 
capability, operational procedures, 
financial controls and information 
systems. Accordingly, there can 
be no assurance that the Group 
will be able to achieve its 
expansion goals on a timely 
or profitable basis. STRATEGIC REPORT
Smart Metering Systems plc
Annual report and accounts 2013 08
REVIEW OF THE YEAR
Firstly, as the new chairman of SMS, I would like to thank my 
predecessor, Kevin Lyon, for his considerable contribution to the 
growth and development of the Group and on the successful 
flotation of the business on AIM. 
I am pleased to confirm SMS has continued to make considerable 
progress in 2013 in all three business areas.
Since SMS floated on AIM in 2011, the Company has continued to 
demonstrate year-on-year growth and has an established and growing 
market position in the UK smart metering market. The business strategy 
in the medium term is to maintain high levels of service to customers 
in the gas supplier market, increase the run rate with these customers, 
and continue to grow the meter asset portfolio. 
SMS has consolidated this position and invested heavily over the years 
in IT infrastructure to provide a strong foundation for growth with the 
gas suppliers in the market and has established long-term relationships 
based on the high levels of service it provides to its customers. This is 
reflective of the standards set by the management and employees 
with key gas suppliers.
SMS has a clearly defined growth strategy in the gas supplier market, 
and together with the potential to establish ADM™ as the industry 
standard smart metering device, the Group has a very promising outlook. 
During 2013, the Group continued to increase its recurring meter rental 
and expand the portfolio of gas meter assets in the face of competition 
from the market leader National Grid. The order book also continues 
to expand with key gas suppliers in the I&C market, with potential to 
grow this substantially further to increase SMS’ position in the market. 
The UK meter assets business presents a large market opportunity with 
a substantial proportion of an estimated 1.6m I&C meters in the UK to 
be exchanged for a smart metering solution by 2020 with the added 
potential of a domestic market rollout. 
The order book for ADM™ continued to grow and our current gas 
supplier contracts provide potential access to over 80% of UK I&C 
gas meters and 40% of residential gas meters. 
Our strategic vision is to be the leading independent provider of smart 
metering and data management solutions to suppliers in the gas sector 
with the highest levels of service. The way we achieve this must reflect 
the evolution in domestic and international markets as well as a 
prudent approach to our growth and return to shareholders. 
Our aim in 2014 and in future years is to focus on our three strategic 
priorities: grow our domestic meters business organically and through 
new contracts; establish our ADM™ technology as the industry standard 
smart metering solution for I&C clients; and increase levels of business 
with, and services provided to, key gas suppliers.
Paul Dollman
Non-executive Chairman
HIGHLIGHTS
 › Increase in recurring meter rental 
and expansion of portfolio of 
gas meter assets 
 › Expanding order book with key gas 
suppliers in the I&C market 
 › Continued growth in order book 
for ADM device 
Chairman’s statement Strategic report Corporate governance Financial statements
Smart Metering Systems plc
Annual report and accounts 2013 09
We will also continue to trial ADM data services internationally in gas, 
electricity, water and LPG markets. 
We will achieve these goals by continuing to invest in providing the 
highest levels of service to the gas supplier market and investing in 
our research and development capability to ensure we maintain our 
competitive advantage. 
We also believe that during Alan Foy’s continuing leadership the Group 
has developed a strong and evolving business model and strategy that 
is well positioned to expand the business to reward our customers 
and shareholders. 
CORPORATE CULTURE 
SMS’ culture is based on a commitment by its employees to know their 
customers. This has been instrumental in developing, building and 
maintaining trusted relationships with our customers – the gas suppliers. 
Our core values around good counsel, prudence and wisdom have 
ensured we continue to maintain these strong relationships.
Equally important in terms of operational performance is how our IT 
systems and compliance management work with the gas suppliers. 
These are integral to how we achieve customer satisfaction and the 
building of a trusted relationship.
BOARD COMPOSITION
The Board comprises myself as Non-executive Chairman, and four other 
Directors, of which two are Non-executive. We have sought to evolve 
our Board structure to ensure we have a balanced board and welcome 
Miriam Greenwood who has recently joined us as a Non-executive 
Director of the Company. She is a qualified barrister and has spent 
much of her career in corporate finance working for a number of 
leading investment banks and other financial institutions. 
Miriam is a Non-executive Director of a number of companies including 
Henderson Global Trust plc, Mithras Investment Trust plc and the 
Offshore Renewable Energy Catapult Limited. She was, for nine years 
until 2013, a Non-executive Director of the Gas and Electricity Markets 
Authority (OFGEM) for whom she is currently Chair of the Gas Network 
Innovation Expert Panel. A Deputy Lieutenant of the City of Edinburgh, 
Miriam was awarded an OBE for services to corporate finance in 2000.
Miriam will bring considerable experience and knowledge to the 
management team and in particular will help with our work in 
corporate governance. 
OUTLOOK
The Group continues to make progress based on our strategic priorities 
and we view the outlook for the market in 2014 as very promising for 
our business model. 
Paul Dollman
Non‑executive Chairman
“ Our strategic vision is to be 
the leading independent 
provider of smart metering 
solutions to suppliers in the 
utility sector with the highest 
levels of service.” STRATEGIC REPORT
Smart Metering Systems plc
Annual report and accounts 2013 10
Chief Executive Officer’s statement 
We are pleased to announce another strong set of results for the year 
ended 31 December 2013. The results reflect the cumulative effect of 
the increase in meters and the increasing number of contracts signed 
during 2013. 
OPERATIONAL REVIEW
During 2013 we made substantial progress in all three areas of our 
business. Following a strong first half where we saw our meter portfolio 
increase by 60,000 and break the 400,000 level, growth accelerated in the 
second half with a further 69,000 added leading to a 38% increase 
year-on-year in our gas meter portfolio. The progress we have made in 
establishing long-term recurring revenue was evidenced by an increase 
in year-end annualised recurring meter rental revenue of 44% to £15.5m 
and £300k data provision sales from our ADM™ device.
INDUSTRIAL AND COMMERCIAL METERS
During 2013 we were delighted to announce a number of major 
new contracts for the provision of gas meters within DONG Energy, 
Opus Gas Supply, Flow Energy, Daligas, and Crown Gas and Power. The 
current estimates are for a total programme in excess of 22,000 meters 
to the end of 2014, of which over 2,000 had already been delivered by 
31 December 2013.
In addition, SMS has also signed contracts with five energy brokers who 
provide brokerage and energy management services to small, medium 
and large group consumers for the provision of the ADM™ device and 
gas meters. The broker business is at present a small but growing part 
of our portfolio. The increase in customer base during 2013 now 
means that SMS has contracts in place with over 80% of the total 
I&C meter market.
Once installed, these meters will be on SMS’ long-term index linked 
contracts and provide recurring revenue for the lifetime of the assets 
(expected to be 25 years).
The size of I&C meters is typically much greater than that of domestic 
meters and therefore the revenue per meter is substantially higher: 
the equivalent number of domestic meters for these 22,000 contracts 
would be in the order of 300,000.
Our transactional gas connections business continues to be cash 
generative and to secure gas meter ownership for the Group; it has 
performed in line with management expectations.
ADM™
The ADM™ device is SMS’ advanced metering solution which allows 
for remote meter reading on a half-hourly basis and has been designed 
in line with our own customer requirements. 
SMS has now installed over 16,000 ADM™ devices and feedback 
continues to be very positive. The ability of remote reading alongside 
SMS’ full service capability in the I&C market provides a major opportunity 
for the Company in extending the service we offer and the ability to 
seek out further markets for our overall service. 
Alan Foy
Chief Executive Officer
HIGHLIGHTS
 › Substantial progress across all 
strategic areas
 › 38% increase in meter portfolio
 › Major new contracts signed:
 › I&C
 › Domestic 
 › Energy brokers 
 › Contracts in place with companies 
representing over 80% of the total 
I&C market and over 40% of the 
Domestic market 
 › Basic earnings per share increased 
by 52%
 › Final dividend of 1.61p per 
ordinary share Strategic report Corporate governance Financial statements
Smart Metering Systems plc
Annual report and accounts 2013 11
As in 2012, all new contracts announced in 2013 allow for the 
introduction of the ADM™ device into I&C premises during meter 
replacement programmes.
The Department of Energy & Climate Change (DECC) has recently 
announced a delay in the start of the UK domestic smart metering 
programme. The Company believes, however, that the small I&C market 
will be largely unaffected by this delay as suppliers are already rolling 
out advanced solutions for commercial reasons to allow their customers 
to benefit from being able to manage their energy bills at the earliest 
practicable date rather than waiting until they are mandated to install 
smart meters. Based on the ADM’s competitive price and ease of 
installation and the ongoing increase in the Company’s meter portfolio, 
SMS expects to benefit from this delay and also to be well placed when 
the mandated smart metering programme occurs.
The large I&C market, estimated by SMS to be over 600,000 meters, has 
to move to an advanced metering solution, with around 60,000 of the 
very large category having to be completed or contracted by 2014.
The small I&C market, estimated by SMS at over 1.1m meters, has until 
2014 to either opt for an advanced metering solution such as the ADM™ 
device or, alternatively, to be included in the government’s proposed 
domestic roll out of smart meters.
SMS believes that both market segments will find the ADM™ device an 
attractive solution, based on its competitive price and ease of installation.
The Company received full European Patent Approval for ADM™ in 
2012 and continues to progress the potential use of the ADM™ device 
in other sectors such as the UK’s water and LPG industries and 
internationally where trials have commenced.
DOMESTIC METERS
SMS was successful during 2013 in obtaining 2 further contracts in the 
domestic market. As previously announced SMS has been contracted 
by SSE to provide Meter Operations Services in all regions outside 
Scotland and the South-East of England up to April 2014, and is on 
track to complete the original 180,000 meter programme.
SMS will continue to support its existing and potential new customers 
in the domestic market for gas meter services, leaving the business well 
placed to support our customers in the domestic smart programme, 
now expected to commence in the autumn 2015. 
We are well placed to capitalise on the this potential roll out of smart 
meters in the domestic market, though our future strategic growth is 
not reliant on this taking place, either in terms of capturing market 
share or in terms of increasing revenue growth.
Alan Foy
Chief Executive Officer
“ In 2013, we announced major 
new contracts to provide gas 
meters with DONG Energy, 
Opus Gas Supply, Flow Energy, 
Daligas and Crown Gas and 
Power. The overall increase 
in the customer base means 
we have contracts in place 
with over 80% of the I&C 
meter market.”
38%
increase year-on-year in our gas meter portfolio
52%
increase of basic earnings per share STRATEGIC REPORT
Smart Metering Systems plc
Annual report and accounts 2013 12
Financial review
RESULTS FOR THE YEAR
During 2013, the Company increased revenue by 33% to £27.9m as a 
result of increasing meters under ownership and management and the 
contracted annual RPI increase. Recurring meter rental revenue, in line 
with the Company’s strategy, increased to 49% of total revenue in 2013 
compared to 44% in the same period in 2012.
Administration expenses, at £9.0m (excluding exceptional costs and fair 
value adjustments), were up 47.4% compared to 2012, substantially due 
to investment in staff numbers which have increased from 77 to 114 in 
line with the growth of the Company and its listed status and increased 
depreciation due to the increased meter base held by the Company.
Finance costs increased from £0.7m to £1.1m due to higher outstanding 
debt in the period as a result of the increase in meter investment.
Gross profit increased from £13.3m to £17.8m and adjusted EBITDA from 
£9.0m to £11.8m.
CASH AND BORROWINGS
As at 31 December 2013, the Company had debt of £35.4m compared 
to £20.4m in 2012, cash balances of £2.1m (2012: £6.5m), unused 
facilities of £9.6m and gearing of 147% (2012: 85%).
On 1 2 March, SMS announced a new facility within the existing banking club 
arrangement with three major UK banks. The £105.0m facility with Barclays 
Bank PLC (lead bank), Clydesdale Bank PLC and Bank of Scotland plc replaced 
the existing arrangement. SMS intends to use the new facility to fund the 
purchase of meter assets during a phased installation over the course 
of the next 24 months in line with the recent substantial contract wins. 
Interest is paid quarterly at 1.9% plus three month rolling LIBOR on the 
outstanding balance with drawn funds repaid equally over ten years. 
0.76% is paid on undrawn funds.
Net debt at 31 December 2013 was £33.3m (2012: £13.9m).
Capital investment in meters was £23.3m in 2013 compared to £16.0m 
in 2012.
TREASURY POLICIES 
The Company uses interest rate swaps to manage interest rate 
fluctuations on interest-bearing loans and borrowings which means 
that the Company pays a fixed interest rate rather than being subject 
to fluctuations in the variable rate. 
Interest rate swaps covered an amount of £28.2m as at 31 December 2013 
(2012: £13.2m).
The interest rate swap results in a fixed interest rate of 0.90–0.92%. 
The termination date for the derivatives is 15 September 2016.
Glen Murray
Finance Director
HIGHLIGHTS
 › Revenues increased by 33%
 › Recurring revenue up 46%, representing 
49% of total revenue
 › Gross profit increased by 34% 
 › Adjusted EBITDA* increased by 31% 
 › Capital investment on meters up by 46%
 › New banking club arrangement 
announced on 1 2 March 201 4 for £105.0m
 › Available cash resources of £1 1.7m 
at the end of year
* Excluding exceptional items and fair value adjustments. Strategic report Corporate governance Financial statements
Smart Metering Systems plc
Annual report and accounts 2013 13
DIVIDEND
At the time of our admission to AIM, we stated that we intended 
to adopt a dividend policy that will take account of the Group’s 
profitability, underlying growth prospects and availability of cash 
and distributable reserves, while maintaining an appropriate level 
of dividend cover. 
SMS is therefore delighted to announce a proposed final cash dividend 
of 1.61p for the financial year ended 31 December 2013 to shareholders. 
In addition to the interim dividend of 0.7p this will make a full year 
distribution of 2.31p. The final dividend will be paid on 30 May 2014 
to those shareholders on the register (record date) on 25 April 2014, 
with an ex-dividend date of 23 April 2014.
Glen Murray
Finance Director
“ We have increased the final 
cash dividend by 43% from 
1.15p in 2012 to 1.65p in 2013.”
Capital investment on meters £m
2011
9.2
2012
16.0
2013
23.3
£23.3m
+46%
Recurring meter rental £m
2011
6.6
2012
9.3
2013
13.6
£13.6m
+47%
Basic EPS pence
2011
2.93
2012
5.18
2013
7.86
7.86p
+52% CORPORATE GOVERNANCE
Smart Metering Systems plc
Annual report and accounts 2013 14
Board of Directors
Paul is a Chartered Accountant and was Group 
Finance Director of John Menzies plc for over 
ten years until May 2013. John Menzies plc is a 
FTSE250 International Support Services business 
with two divisions and has revenues of around 
£2bn. Paul was particularly involved in the 
growth and development of the Aviation division, 
which nearly trebled in size in ten years. Prior to 
that he was Group Finance Director of William 
Grant and Sons Ltd and previously held senior 
finance positions in Inveresk plc, Maddox Group plc 
and Clydesdale Retail Group. He is a Non-executive 
Director of Scottish Amicable Life Association 
Society and is a member of the Audit Committee 
of The National Library of Scotland. Following 
his appointment as Chairman of SMS, he will 
Chair the Company’s Remuneration and the 
Nomination Committees and sit on the 
Audit Committee.
Kevin Lyon retired as Non-executive 
Chairman in November 2013 and was 
succeeded by Paul Dollman.
Alan has responsibility for business growth, 
client management and business operations. 
Prior to joining SMS in 2004, Alan worked for 
Scottish Power and, in 1997, gained approval 
to establish its regulated gas transportation 
and metering business, SP Gas Ltd, which 
under his management grew to become a 
major independent gas transporter in the UK. 
He gained considerable experience in utility 
asset ownership, as well as supply and shipping 
activities. Working within very complex and 
regulated frameworks, his position required a 
full understanding of utility business activities 
such as customer recruitment, licensing, 
regulation, safety, commercial, IT, investment 
and financial policies. Prior to this Alan was a 
director of an international energy consultancy 
practice specialising in energy utilisation 
and design. 
In addition to adding valuable experience 
to the overall business, during his tenure 
with SMS Alan has successfully implemented 
a restructuring and systemising of the Company’s 
activities, as well as successfully gaining and 
retaining new clients and contracts. A professionally 
qualified engineer, Alan places strong emphasis 
on safety, operational performance and financial 
accountability. He also places great importance 
on training of staff members to ensure they 
are receptive and adaptable to business needs 
and operate to a high level of efficiency and 
customer satisfaction.
Glen joined SMS in 2009 as a business 
accountant prior to assuming his current role 
as Finance Director. A qualified accountant 
and experienced financier, he provides the 
business with the structure and controls to 
diligently manage and report on all business 
activities. Glen has key responsibility for 
financial reporting, business plan modelling 
and business performance monitoring and 
reporting against the plan. Glen qualified with 
French Duncan in 1995 and in 1997 joined 
Shin-Etsu Handotai Europe as an accountant, 
with responsibilities including treasury 
management, budgetary control, monthly 
branch accounts and management accounting. 
He later joined Gilchrist & Company (which 
merged with Baker Tilly in May 2009) as a 
senior manager responsible for a team of 
five delivering accountancy, audit, corporate 
finance and VAT services.
Paul Dollman
Non-executive Chairman
Alan Foy
Chief Executive Officer
Glen Murray
Finance Director
Date of appointment 7 November 2013
Committees
Date of appointment 24 December 2009
Committees
Date of appointment 1 January 2011
Committees A A A R R R N N N Strategic report Corporate governance Financial statements
Smart Metering Systems plc
Annual report and accounts 2013 15
Miriam is a Non-executive Director of a 
number of companies including Henderson 
Global Trust plc, Mithras Investment Trust plc 
and the Offshore Renewable Energy Catapult 
Limited. She was, for nine years until 2013, a 
Non-executive Director of the Gas and Electricity 
Markets Authority (OFGEM) for whom she is 
currently Chair of the Gas Network Innovation 
Expert Panel. A Deputy Lieutenant of the City 
of Edinburgh, Miriam was awarded an OBE 
for services to corporate finance in 2000.
Miriam Greenwood
Non-executive Director
Date of appointment 3 February 2014
Committees
Audit Committee A
Remuneration Committee R
Nomination Committee N
Committee Chairman X A R N
Nigel has served in various management 
positions within corporate finance departments 
of investment banking firms. He began his 
career in 1976 at Kleinwort Benson, working in 
both London and New York. From 1985 to 1989, 
he was a managing director in the corporate 
finance department of S.G. Warburg, New York. 
Between 1 989 and 1 991, Nigel served as managing 
director of the corporate finance department 
of Kidder, Peabody International where he was 
responsible for overseeing European mergers 
and acquisitions. From 1991 to 1995, Nigel was 
a director of MacArthur & Co. Limited, following 
which he worked for Columbus Asset Management 
between 1995 and 1999 and Value Investing 
Partners, Inc. between 1999 and 2000. 
From 2000 to 2013, he was a director of RP&C 
International, an investment banking firm 
providing specialist advisory services to public 
and private companies. Amongst other 
directorships, Nigel currently serves as chairman 
of AIM-quoted Maple Energy plc and is a 
member of Maple Energy plc’s audit committee 
on which he acts as chairman. He graduated 
from the University of St. Andrews in Scotland 
and attended the Program for Management 
Development at Harvard Business School.
Nigel Christie
Non-executive Director
Date of appointment 27 May 2011
Committees A R N CORPORATE GOVERNANCE
Smart Metering Systems plc
Annual report and accounts 2013 16
Paul Dollman*  
 (Chairman)
Nigel Christie
Miriam 
Greenwood
Remuneration 
Committee
Paul Dollman*  
 (Chairman)
Nigel Christie
Alan Foy
Miriam 
Greenwood
Nomination 
Committee
Corporate governance statement
Nigel Christie 
(Chairman)
Paul Dollman* Glen Murray**
Miriam 
Greenwood
The Board 
of Directors
Audit 
Committee
The Company has regard, so far as is practicable and appropriate for 
a company of its size and nature, to the provisions of the Corporate 
Governance Code, as modified by the recommendations of the Quoted 
Companies Alliance (QCA). 
BOARD STRUCTURE
During the year the Company had two Independent Non-executive 
Directors on the Board to bring an independent view and to provide 
a balance to the Executive Directors. 
The Board is responsible for formulating, reviewing and approving the 
Group’s strategy, budgets and corporate actions. The Directors intend 
to hold monthly Board meetings.
BOARD COMMITTEES 
The Board delegates certain matters to its three principal committees, 
which deal with audit, remuneration and nomination.
AUDIT COMMITTEE
During the year the Audit Committee comprised Nigel Christie (Chair) 
and Kevin Lyon and Paul Dollman who succeeded Kevin Lyon in 2013. 
Meetings are also attended, by invitation, by the Group Finance Director. 
The Audit Committee is responsible for monitoring the quality of internal 
controls and ensuring that the financial performance of the Group is 
properly measured and reported on. It receives and reviews reports 
from the Group’s management and external auditor relating to the 
interim and annual accounts and the accounting and internal control 
systems in use throughout the Group. The Audit Committee meets 
at least twice in each financial year and has unrestricted access 
to the Group’s external auditor.
REMUNERATION COMMITTEE
During the year the Remuneration Committee comprised Kevin Lyon 
(Chair) and Paul Dollman who succeeded Kevin Lyon in 2013. and 
Nigel Christie. The Remuneration Committee reviews the performance 
of the Executive Directors and makes recommendations to the Board 
on matters relating to their remuneration and terms of service. The 
Remuneration Committee also makes recommendations to the Board 
on proposals for the granting of share options and other equity incentives 
pursuant to any employee share option scheme or equity incentive 
plans in operation from time to time. The Remuneration Committee 
meets at least annually. In exercising this role, the Directors have regard 
to the recommendations put forward in the QCA Guidelines and, 
where appropriate, the Corporate Governance Code guidelines.
NOMINATION COMMITTEE
During the year the Nomination Committee was chaired by Kevin Lyon 
and also comprising Nigel Christie and Alan Foy. The Nomination 
Committee considers the selection and re-appointment of Directors. 
It identifies and nominates candidates to fill Board vacancies and 
regularly reviews the structure, size and composition (including 
the skills, knowledge and experience) of the Board and makes 
recommendations to the Board with regard to any changes.
INTERNAL CONTROL
The Board has overall responsibility for the Group’s system of internal 
control and risk management and for reviewing the effectiveness of 
this system. Such a system can only be designed to manage, rather 
than eliminate, the risk of failure to achieve business objectives and 
can therefore only provide reasonable and not absolute assurance 
against material misstatement or loss.
The Board is of the view that due to the current size and composition 
of the Group, it is not necessary to establish an internal audit function.
RELATIONSHIP WITH SHAREHOLDERS
The Company values its dialogue with both institutional and private 
investors. Effective two way communication with fund managers, 
institutional investors and analysts is actively pursued and this 
encompasses issues such as performance, policy and strategy.
Private investors are encouraged to participate in the Annual General 
Meeting at which the Chairman presents a review of the results and 
comments on current business activity. The Chairmen of the Audit and 
Remuneration Committees will be available at the Annual General 
Meeting to answer any shareholder questions.
Notice of the Annual General Meeting is posted as an enclosure 
of the Annual Report.
GOING CONCERN 
The Directors confirm that, having given consideration to various 
alternative outcomes of future performance together with the available 
bank facilities, they are satisfied that the Company and Group have 
adequate resources to continue in business for the foreseeable future. 
For this reason, they continue to adopt the going concern basis in 
preparing the financial statements.
*  Kevin Lyon retired as Non-executive Chairman in November 2013 and was succeeded by Paul Dollman.
** Glen Murray attends Audit Committee meetings by invitation. Strategic report Corporate governance Financial statements
Smart Metering Systems plc
Annual report and accounts 2013 17
Directors’ remuneration report 
As an AIM Company, Smart Metering Systems plc is required to comply 
with Schedule 8 to the Large and Medium Sized Companies and 
Groups (Accounts and Report) Regulations 2008. The content of this 
report is unaudited unless stated.
REMUNERATION COMMITTEE
The Remuneration Committee comprises the Non-executive Chairman 
(Paul Dollman) and Independent Non-executive Director (Nigel Christie).
The Remuneration Committee reviews the performance of the 
Executive Directors and makes recommendations to the Board on 
matters relating to remuneration, terms of service, granting of share 
options and other equity incentives.
The Remuneration Committee meets at least annually.
REMUNERATION POLICY
The objectives of the remuneration policy are to ensure that the overall 
remuneration of Executive Directors is aligned with the performance 
of the Group and preserves an appropriate balance of income and 
shareholder value.
NON-EXECUTIVE DIRECTORS
Remuneration of the Non-executive Directors, including the Chairman, 
is determined by the Executive Directors. Non-executive Directors are 
not entitled to pensions, annual bonuses or employee benefits. They 
are entitled to participate in share option arrangements relating to the 
Company’s shares. Each of the Non-executive Directors has a letter of 
appointment stating his annual fee and that his appointment is initially 
for a term of three years. Their appointment may be terminated with 
three months’ written notice at any time.
DIRECTORS’ REMUNERATION
The normal remuneration arrangements for Executive Directors consist 
of Directors’ fees, basic salary and annual performance related bonuses.
In addition, they receive private health care, permanent health 
insurance and pension contributions.
DIRECTORS’ EMOLUMENTS
Fees/ Pension Benefits 2013 2012
basic salary Bonus contribution in kind Total Total
£ £ £ £ £ £
Executive
S P Timoney — — — 48,335 48,335 8,026
A H Foy 309,600 77,400 15,000 20,121 422,121 369,578
G Murray 100,000 25,000 5,000 1,169 131,169 95,153
Non-executive
K J Lyon 67,080 — — — 67,080 78,000
P Dollman 10,333 — — — 10,333 —
N B Christie 51,540 — — — 51,540 49,920
Total 538,553 102,400 20,000 69,625 730,578 600,677
DIRECTORS’ INTERESTS
The Directors who held office at 31 December 2013 had the following interests in the shares of the Company:
Ordinary shares
2013 2012
£0.01p each £0.01p each
Executive
A H Foy 8,889,958 8,889,958
G Murray — —
Non-executive
P Dollman — —
N B Christie 290,000 80,000
9,179,958 8,969,958 CORPORATE GOVERNANCE
Smart Metering Systems plc
Annual report and accounts 2013 18
DIRECTORS’ SHARE OPTIONS
Aggregate emoluments disclosed above do not include any amounts for the value of options to acquire ordinary shares in the Company granted 
to or held by the Directors. Details of options for Directors who served during the year are as follows:
Options granted are summarised below:
Number of
shares Earliest
under Exercise Date of date
Type option price grant exercisable
Executive
G Murray Approved 39,474 76p 15/07/11 15/07/14
Unapproved 666,667 60p 20/06/11 20/06/16
Unapproved 28,700 60p 20/06/13 20/06/13
The share price at 31 December 2013 was 303.5p. The range in the period 1 January to 31 December 2013 was 209p to 355p.
Details of share options granted by the Company at 31 December 2013 are given in note 23. 
Directors’ remuneration report continued Strategic report Corporate governance Financial statements
Smart Metering Systems plc
Annual report and accounts 2013 19
Directors’ report
The Directors submit their Annual Report on the affairs of the Group 
together with the financial statements and Auditor’s Report for the year 
ended 31 December 2013.
PRINCIPAL ACTIVITIES
The principal activity of the Group during the year was that of rental 
and management of gas meters and that of laying infrastructure pipes 
for industrial and commercial premises and the provision of specialist 
technical advice on the use and management of energy for I&C users.
The subsidiary undertakings principally affecting the profits and net  
assets of the Group in the year are listed in note [2] to the parent 
company financial statements.
REVIEW OF THE BUSINESS
The Company is required by Section 417 of the Companies Act 2006 to 
set out in this report a fair review of the business and future developments 
of the Group during the financial year ended 31 December 2013 and of 
the position of the Group at the end of the year. This information can 
be found in the Chairman’s Statement and Chief Executive Officer’s 
Review on pages 8 to 11. 
Information on the use of financial instruments by the Group is given 
in note 18 to the financial statements.
DIRECTORS
The Directors, who served throughout the year except as noted, were as follows:
Name of Director Board title Date of appointment Date of resignation
K J Lyon Non-executive Chairman 27 May 2011 7 November 2013
P Dollman Non-executive Chairman 7 November 2013
N B Christie Independent Non-executive Director 27 May 2011
A H Foy Chief Executive 24 December 2009
S P Timoney Deputy Chairman 24 December 2009 28 May 2013
G Murray Finance Director 1 January 2011
CHARITABLE AND POLITICAL DONATIONS
During the year the Group made charitable donations of £7 ,421 (201 2: £1,800).
No political donations were made during the year (2012: Nil).
SUPPLIER PAYMENT POLICY
The Group’s policy is to meet obligations promptly on agreed payment 
dates, unless there is an unresolved query or dispute over the sum due. 
Trade creditors of the Group at 31 December 2013 were equivalent 
to 36 (2012: 36) days purchases, based on the average daily amount 
invoiced by suppliers during the year.
SUBSTANTIAL SHAREHOLDINGS
On 1 February 2014, the Company had been notified, in accordance 
with Sections 791 to 828 of the Companies Act, of the following interest 
in the ordinary share capital of the Company:
Name of holder Number % held
S P Timoney 15,144,344 18.17%
Cazenove Capital Management 9,608,824 11.46%
A H Foy 8,889,958 10.67%
Liontrust Asset Management 8,653,869 10.32%
Legal & General Investment Management 6,193,992 7.38%
Old Mutual Asset Managers (UK) 5,138,318 6.13%
Standard Life Investments 5,053,912 6.03% CORPORATE GOVERNANCE
Smart Metering Systems plc
Annual report and accounts 2013 20
Directors’ report continued
AUDITOR
Each of the Directors at the date of approval of this Annual Report 
confirms that:
 › so far as the Director is aware, there is no relevant audit information 
of which the Company’s auditor is unaware; and
 › the Director has taken all the steps that he/she ought to have taken 
as a Director in order to make himself/herself aware of any relevant 
audit information and to establish that the Company’s auditor is 
aware of that information.
This confirmation is given and should be interpreted in accordance 
with the provisions of section 418 of the Companies Act 2006.
Baker Tilly UK Audit LLP has expressed its willingness to continue in 
office as auditor and a resolution to re-appoint Baker Tilly Audit UK LLP 
will be proposed at the forthcoming AGM.
Approved by the Board of Directors and signed on behalf of the Board. 
Glen Murray
Company secretary
14 March 2014 Strategic report Corporate governance Financial statements
Smart Metering Systems plc
Annual report and accounts 2013 21
Directors’ responsibilities statement
In the preparation of financial statements
The Directors are responsible for preparing the Directors’ Report, 
the strategic report, the Directors’ Remuneration Report, the separate 
Corporate Governance Statement and the financial statements in 
accordance with applicable law and regulations.
Company law requires the Directors to prepare Group and Company 
financial statements for each financial year. The Directors are required 
by the AIM Rules of the London Stock Exchange to prepare Group 
financial statements in accordance with International Financial Reporting 
Standards (IFRS) as adopted by the European Union (EU) and have elected 
under Company law to prepare the Company financial statements in 
accordance with United Kingdom Generally Accepted Accounting 
Practice (United Kingdom Accounting Standards and applicable law).
The Group financial statements are required by law and IFRS adopted 
by the EU to present fairly the financial position and performance of the 
Group; the Companies Act 2006 provides in relation to such financial 
statements that references in the relevant part of that Act to financial 
statements giving a true and fair view are references to their achieving 
a fair presentation.
Under Company law the Directors must not approve the financial 
statements unless they are satisfied that they give a true and fair view 
of the state of affairs of the Group and the Company and of the profit 
or loss of the Group for that period. 
In preparing each of the Group and Company financial statements, 
the Directors are required to:
a. select suitable accounting policies and then apply them consistently;
b.  make judgements and accounting estimates that are reasonable 
and prudent;
c.  for the Group financial statements, state whether they have been 
prepared in accordance with IFRS adopted by the EU and for the 
Company financial statements state whether applicable UK accounting 
standards have been followed, subject to any material departures 
disclosed and explained in the Company financial statements; and
d.  prepare the financial statements on the going concern basis unless 
it is inappropriate to presume that the Group and the Company will 
continue in business.
The Directors are responsible for keeping adequate accounting records 
that are sufficient to show and explain the Group’s and the Company’s 
transactions and disclose with reasonable accuracy at any time the 
financial position of the Group and the Company and enable them 
to ensure that the financial statements and the Directors’ Remuneration 
Report comply with the Companies Act 2006. They are also responsible 
for safeguarding the assets of the Group and the Company and hence 
for taking reasonable steps for the prevention and detection of fraud 
and other irregularities.
The Directors are responsible for the maintenance and integrity of the 
corporate and financial information included on the Smart Metering 
Systems plc website.
Legislation in the UK governing the preparation and dissemination of 
financial statements may differ from legislation in other jurisdictions.  F I N A N C I A L ST A T E M E NT S
Smart Metering Systems plc
Annual report and accounts 2013 22
We have audited the Group and parent company financial statements (“the financial statements”) on pages 23 to 49. The financial reporting framework 
that has been applied in the preparation of the Group financial statements is applicable law and International Financial Reporting Standards (IFRSs) 
as adopted by the European Union. The financial reporting framework that has been applied in the preparation of the parent company financial 
statements is applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice). 
This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit 
work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an auditor’s report 
and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company 
and the Company’s members as a body, for our audit work, for this report, or for the opinions we have formed.
RESPECTIVE RESPONSIBILITIES OF DIRECTORS AND AUDITOR
As more fully explained in the Directors’ Responsibilities Statement on page 21, the Directors are responsible for the preparation of the financial 
statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements 
in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing 
Practices Board’s (APB’s) Ethical Standards for Auditors.
SCOPE OF THE AUDIT OF THE FINANCIAL STATEMENTS
A description of the scope of an audit of financial statements is provided on the Financial Reporting Council’s website at http://www.frc.org.uk/
Our-Work/Codes-Standards/Audit-and-assurance/Standards-and-guidance/Standards-and-guidance-for-auditors/Scope-of-audit/UK-Private-
Sector-Entity-(issued-1-December-2010).aspx
OPINION ON FINANCIAL STATEMENTS
In our opinion: 
 › the financial statements give a true and fair view of the state of the Group’s and of the parent company’s affairs as at 31 December 2013 
and of the group’s profit for the year then ended;
 › the group financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union; 
 › the parent company financial statements have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and
 › the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
OPINION ON OTHER MATTERS PRESCRIBED BY THE COMPANIES ACT 2006
In our opinion:
 › the information given in the Strategic Report and the Directors’ Report for the financial year for which the financial statements are prepared 
is consistent with the financial statements.
MATTERS ON WHICH WE ARE REQUIRED TO REPORT BY EXCEPTION
We have nothing to report in respect of the following:
Under the Companies Act 2006 we are required to report to you if, in our opinion:
 › adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received 
from branches not visited by us; or
 › the parent company financial statements and the part of the Directors’ Remuneration Report to be audited are not in agreement 
with the accounting records and returns; or
 › certain disclosures of directors’ remuneration specified by law are not made; or
 › we have not received all the information and explanations we require for our audit.
Alan Aitchison (Senior Statutory Auditor)
FOR AND ON BEHALF OF BAKER TILLY UK AUDIT LLP, STATUTORY AUDITOR 
CHARTERED ACCOUNTANTS
BRECKENRIDGE HOUSE
274 Sauchiehall Street
Glasgow
G2 3EH
14 March 2014
Independent auditor’s report 
To the members of Smart Metering Systems plc Strategic report Corporate governance Financial statements
Smart Metering Systems plc
Annual report and accounts 2013 23
2013 2012
Notes £’000 £’000
Revenue 1 27,916 21,029
Cost of sales 2 (10,101) (7,759)
Gross profit 17,815 13,270
Administrative expenses 2 (9,248) (7,337)
Profit from operations 2 8,567 5,933
Attributable to:
Operating profit before exceptional items 8,834 7,176
Exceptional items and fair value adjustments 2 (267) (1,243)
Finance costs 5 (1,122) (739)
Finance income 5 26 33
Profit before taxation 7,471 5,227
Taxation 6 (896) (914)
Profit for the year attributable to equity holders 6,575 4,313
Other comprehensive income — —
Total comprehensive income 6,575 4,313
The profit from operations arises from the Group’s continuing operations.
Earnings per share attributable to owners of the parent during the year:
Notes 2013 2012
Basic earnings per share (pence) 7 7.86 5.18
Diluted earnings per share (pence) 7 7.43 5.00
 
Consolidated statement of comprehensive income 
For the year ended 31 December 2013  F I N A N C I A L ST A T E M E NT S
Smart Metering Systems plc
Annual report and accounts 2013 24
2013 2012
Notes £’000 £’000
Assets
Non-current
Intangible assets 9 2,018 1,916
Property, plant and equipment 10 57,382 36,104
59,400 38,020
Current assets
Inventories 12 2,504 373
Trade and other receivables 13 6,099 3,091
Cash and cash equivalents 14 2,073 6,455
Other current financial assets 18 207 —
10,883 9,919
Total assets 70,283 47,939
Liabilities
Current liabilities
Trade and other payables 15 8,879 8,201
Bank loans and overdrafts 16 3,933 2,150
Commitments under hire purchase agreements 17 3 3
Other current financial liabilities 18 — 170
12,815 10,524
Non-current liabilities
Bank loans 16 31,475 18,299
Obligations under hire purchase agreements 17 6 10
Deferred tax liabilities 20 3,395 2,510
34,876 20,819
Total liabilities 47,691 31,343
Net assets 22,592 16,596
Equity
Share capital 22 838 833
Share premium 8,971 8,653
Other reserve 24 1 1
Retained earnings 12,782 7,109
Total equity attributable to equity holders of the parent company 22,592 16,596
The financial statements on pages 23 to 49 were approved and authorised for issue by the Board of Directors and signed on its behalf by:
Glen Murray Company Registration Number
Director SC367563
14 March 2014 
 
Consolidated statement of financial position
As at 31 December 2013 Strategic report Corporate governance Financial statements
Smart Metering Systems plc
Annual report and accounts 2013 25
Share Share Other Retained
capital premium reserve earnings Total
Attributable to the owners of the parent company: £’000 £’000 £’000 £’000 £’000
As at 1 January 2012 833 8,653 1 2,969 12,456
Profit for the year — — — 4,313 4,313
Transactions with owners in their capacity as owners:
Dividends (note 8) — — — (417) (417)
Share options — — — 244 244
As at 31 December 2012 833 8,653 1 7,109 16,596
Profit for the year — — — 6,575 6,575
Transactions with owners in their capacity as owners:
Dividends (note 8) — — — (1,546) (1,546)
Shares issued 5 318 — — 323
Share options — — — 644 644
As at 31 December 2013 838 8,971 1 12,782 22,592
 
Consolidated statement of changes in equity
For the year ended 31 December 2013  F I N A N C I A L ST A T E M E NT S
Smart Metering Systems plc
Annual report and accounts 2013 26
2013 2012
£’000 £’000
Cash flow from operating activities
Profit before taxation 7,471 5,227
Finance costs 1,122 739
Finance income (26) (33)
Fair value movement on derivatives (377) (151)
Depreciation 2,754 1,599
Amortisation 262 238
Share-based payment expense 644 244
Increase in inventories (2,131) (290)
Increase in trade and other receivables (2,961) (1,485)
Decrease in trade and other payables 826 1,835
Cash generated from operations 7,584 7,923
Taxation (206) (290)
Net cash generated from operations 7,378 7,633
Investing activities
Payments to acquire property, plant and equipment (24,595) (16,380)
Disposal of property, plant and equipment 563 4
Payments to acquire intangible assets (364) (269)
Finance income 26 33
Net cash used in investing activities (24,370) (16,612)
Financing activities
New borrowings 17,830 10,947
Capital repaid (2,875) (1,671)
Net outflow from other long-term creditors — (3)
Finance costs (1,122) (739)
Net proceeds from share issue 323 —
Dividend paid (1,546) (417)
Net cash generated from financing activities 12,610 8,117
Net increase in cash and cash equivalents (4,382) (862)
Cash and cash equivalents at the beginning of the financial year 6,455 7,317
Cash and cash equivalents at the end of the financial year (note 14) 2,073 6,455
 
Consolidated statement of cash flows
For the year ended 31 December 2013 Strategic report Corporate governance Financial statements
Smart Metering Systems plc
Annual report and accounts 2013 27
The Company is incorporated and domiciled in the UK. The Group’s activities consist of the rental and management of gas meters and that of 
laying infrastructure pipes for industrial and commercial premises and the provision of specialist technical advice on the use and management 
of energy for industrial and commercial users.
BASIS OF PREPARATION 
The consolidated financial statements have been prepared on a historical cost basis, except for derivative financial instruments which are 
measured at fair value in line with applicable accounting standards. The consolidated financial statements are presented in British pounds 
Sterling (£), which is also the functional currency of the Group, and all values are rounded to the nearest thousand (£’000) except where 
otherwise indicated.
GOING CONCERN
Management prepares budgets and forecasts on a rolling 24 month basis. These forecasts cover operational cash flows and investment capital 
expenditure. The Group has committed bank facilities which extend to March 2016 and available cash resources at 31 December 2013 of £11.7m.
Based on the current projections and facilities in place the Directors consider it appropriate to continue to prepare the financial statements 
on a going concern basis.
BASIS OF CONSOLIDATION 
The consolidated financial statements incorporate the consolidated financial statements of the Company and all Group undertakings being UK 
Gas Connection Limited, UK Meter Assets Limited, UKMA (AF) Limited and UK Data Management Limited. These are adjusted, where appropriate, 
to conform to Group accounting policies and are prepared to the same accounting reference date. The Company was incorporated on 27 October 2009. 
The Group was formed on 24 December 2009 through the acquisition of the entire share capital of UK Gas Connection Limited and UK Meter 
Assets Limited (the only subsidiaries in existence at that time). 
Whilst the Group was newly formed, the ultimate ownership of all companies remained unchanged and, as such, the financial statements have 
been prepared based on a reconstruction under common control, reflecting the Group results for the current and prior years as though the Group 
structure has always existed.
USE OF ESTIMATES AND JUDGEMENTS 
The preparation of the financial statements requires the use of estimates and assumptions. Although these estimates are based on management’s 
best knowledge, actual results ultimately may differ from these estimates.
The key sources of estimation uncertainty that have a significant risk of causing material adjustment to the carrying amounts of assets and liabilities 
within the next financial year are the estimation of share-based payment costs. The estimation of share-based payment costs requires the selection 
of an appropriate valuation model, consideration as to the inputs necessary for the valuation model chosen and the estimation of the number of 
awards that will ultimately vest, inputs for which arise from judgements relating to the probability of meeting non-market performance conditions 
and the continuing participation of employees. 
REVENUE RECOGNITION 
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably 
measured. Revenue is measured at the fair value of the consideration received, excluding discounts and VAT.
Revenue is recognised when the significant rewards and risk of ownership have been passed to the buyer. The risk and rewards of ownership 
transfer when the Company fulfils its contractual obligations to customers by supplying services. 
Accounting policies  F I N A N C I A L ST A T E M E NT S
Smart Metering Systems plc
Annual report and accounts 2013 28
METER RENTAL INCOME
Rental income is recognised when the Company is contractually entitled to it. Rental income is calculated on a daily basis and invoiced monthly. 
Rental contracts do not operate on a fixed term basis and are cancellable by the lessee with immediate effect and do not transfer risks and rewards 
of ownership of the underlying asset. They are therefore considered as operating lease arrangements and accounted for as such.
GAS CONNECTION
Revenue from gas connection contracts is recognised upon delivery of the related service, in line with our contractual entitlement.
DATA MANAGEMENT
Data provision income is recognised when the Company is contractually entitled to it. Data provision income is invoiced in advance 
and is recognised in a straight line over the contract period.
SEGMENT REPORTING 
An operating segment is a group of assets and operations engaged in providing products or services that are subject to risks and returns that 
are different from those of other business segments. Operating segments are reported in a manner consistent with the reports made to the 
chief operating decision maker which are consistent with the reported results.
The Company considers that the role of chief operating decision maker is performed by the Board of Directors.
FINANCIAL ASSETS 
INITIAL RECOGNITION AND MEASUREMENT
Financial assets within the scope of IAS 39 are classified as financial assets at fair value through profit or loss, loans and receivables, held-to-maturity 
investments, available-for-sale financial assets or as derivatives designated as hedging instruments in an effective hedge, as appropriate. 
The Group determines the classification of its financial assets at initial recognition.
Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation or convention in the marketplace 
(regular way trades) are recognised on the trade date, i.e. the date that the Group commits to purchase or sell the asset.
The Group’s financial assets include cash and short-term deposits, trade and other receivables, loans and other receivables, quoted and unquoted 
financial instruments and derivative financial instruments.
FINANCIAL LIABILITIES 
INITIAL RECOGNITION AND MEASUREMENT
Financial liabilities within the scope of IAS 39 are classified as financial liabilities at fair value through profit or loss, loans and borrowings or as 
derivatives designated as hedging instruments in an effective hedge, as appropriate. The Group determines the classification of its financial 
liabilities at initial recognition. All financial liabilities are recognised initially at fair value and in the case of loans and borrowings, net of directly 
attributable transaction costs.
The Group’s financial liabilities include trade and other payables, bank overdraft, loans and borrowings, financial guarantee contracts 
and derivative financial instruments.
DERECOGNITION
A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability 
is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such 
an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability and the difference in the 
respective carrying amounts is recognised in the income statement.
OFFSETTING OF FINANCIAL INSTRUMENTS
Financial assets and financial liabilities are offset, and the net amount reported in the consolidated statement of financial position if, and only if, 
there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, or to realise the assets 
and settle the liabilities simultaneously.
Accounting policies continued  Strategic report Corporate governance Financial statements
Smart Metering Systems plc
Annual report and accounts 2013 29
FINANCIAL LIABILITIES CONTINUED
INITIAL RECOGNITION AND SUBSEQUENT MEASUREMENT
The Group uses derivative financial instruments such as interest rate swaps to hedge its interest rate risk. Such derivative financial instruments 
are initially recognised at fair value on the date on which a derivative contract is entered into and are subsequently remeasured at fair value. 
Derivatives are carried as financial assets when the fair value is positive and as financial liabilities when the fair value is negative. The Group 
has not designated any derivatives for hedge accounting.
CURRENT VERSUS NON-CURRENT CLASSIFICATION
Derivative instruments that are not designated as effective hedging instruments are classified as current or non-current or separated into a current 
and non-current portion based on an assessment of the facts and circumstances (i.e. the underlying contracted cash flows).
Where the Group will hold a derivative as an economic hedge (and does not apply hedge accounting) for a period beyond twelve months after 
the reporting date, the derivative is classified as non-current (or separated into current and non-current portions) consistent with the classification 
of the underlying item.
Derivative instruments that are designated as, and are effective hedging instruments, are classified consistent with the classification of the 
underlying hedged item. The derivative instrument is separated into a current portion and non-current portion only if a reliable allocation 
can be made.
EXCEPTIONAL ITEMS 
The Group presents as exceptional items on the face of the income statement those material items of income and expense which, because of 
the nature or expected infrequency of the events giving rise to them, merit separate presentation to allow shareholders to understand better 
the elements of financial performance in that year, so as to facilitate comparison with prior periods and to assess better trends in financial performance.
RESEARCH AND DEVELOPMENT 
Expenditure on pure and applied research activities is recognised in the income statement as an expense as incurred.
Expenditure on product development activities is capitalised if the product or process is technically and commercially feasible and the Group 
intends and has the technical ability and sufficient resources to complete development, future economic benefits are probable and if the Group 
can measure reliably the expenditure attributable to the intangible asset during its development. The expenditure capitalised includes the cost of 
materials, direct labour and an appropriate proportion of overheads.
Capitalised development expenditure is stated at cost less accumulated amortisation and accumulated impairment losses.
Amortisation is calculated, when the product or system is commercialised or in use, so as to write off the cost of an asset, less its estimated residual 
value, over the useful economic life of that asset as follows:
Amortisation  20% on cost straight line
INTANGIBLE ASSETS 
Intangible assets acquired separately from third parties are recognised as assets and measured at cost.
Following initial recognition, intangible assets are measured at cost at the date of acquisition less any amortisation and any impairment losses. 
Amortisation costs are included within the net operating expenses disclosed in the statement of comprehensive income.
Intangible assets are amortised over their useful lives as follows:
Software   12.5% straight line
Useful lives are also examined on an annual basis and adjustments, where applicable, are made on a prospective basis. The Company does not 
have any intangible assets with indefinite lives.  F I N A N C I A L ST A T E M E NT S
Smart Metering Systems plc
Annual report and accounts 2013 30
PROPERTY, PLANT AND EQUIPMENT 
Property, plant and equipment is stated at cost, net of accumulated depreciation and/or accumulated impairment losses, if any. Such cost includes 
the cost of replacing part of the plant and equipment and borrowing costs for long-term construction projects if the recognition criteria are met. 
When significant parts of property, plant and equipment are required to be replaced in intervals, the Group recognises such parts as individual 
assets with specific useful lives and depreciation, respectively. 
All other repair and maintenance costs are recognised in the income statement as incurred. 
Depreciation is calculated on a straight line basis over the estimated useful life of the asset as follows:
Short leasehold property 20% on cost
Plant and machinery  5% on cost 
Fixtures and fittings   15% on cost
Equipment   33% on cost
Land is not depreciated.
An item of property, plant and equipment and any significant part initially recognised is derecognised upon disposal or when no future economic 
benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net 
disposal proceeds and the carrying amount of the asset) is included in the income statement when the asset is derecognised. The asset’s residual 
values, useful lives and methods of depreciation are reviewed at each financial year end and adjusted prospectively, if appropriate.
All fixed assets are initially recorded at cost.
IMPAIRMENT OF ASSETS
Property, plant and equipment and intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying 
amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. 
The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For purposes of assessing impairment assets that do not 
individually generate cash flows are assessed as part of the cash-generating unit to which they belong. Cash-generating units are the lowest levels for 
which there are cash flows that are largely independent of the cash flows from other assets or groups of assets.
INVENTORIES
Inventories are stated at the lower of cost and net realisable value. Costs comprise direct materials. Net realisable value represents the estimated 
selling price for inventories less all estimated costs of completion and costs to be incurred in marketing, selling and distribution.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents in the balance sheet comprise cash at bank and in hand and short-term deposits with an original maturity of three 
months or less. For the purpose of the consolidated statement of cash flows, cash and cash equivalents consist of cash and short-term deposits 
as defined above, net of outstanding bank overdrafts.
HIRE PURCHASE AGREEMENTS
Assets held under hire purchase agreements are capitalised and disclosed under tangible fixed assets at their fair value. The capital element of 
the future payments is treated as a liability and the notional interest is charged to the statement of comprehensive income in proportion to the 
remaining balance outstanding.
LEASED ASSETS AND OBLIGATIONS
Finance leases, which transfer to the Group substantially all the risks and benefits incidental to ownership of the leased item, are capitalised 
at the commencement of the lease at the fair value of the leased property or, if lower, at the present value of the minimum lease payments. 
Lease payments are apportioned between finance charges and reduction of the lease liability so as to achieve a constant rate of interest on 
the remaining balance of the liability. Finance charges are recognised in the income statement. Leased assets are depreciated over the useful 
life of the asset. However, if there is no reasonable certainty that the Group will obtain ownership by the end of the lease term, the asset is 
depreciated over the shorter of the estimated useful life of the asset and the lease term. Operating lease payments are recognised as an 
expense in the income statement on a straight line basis over the lease term.
All other leases are operating leases and the annual rentals are charged to the statement of comprehensive income on a straight line basis over 
the lease term.
Accounting policies continued  Strategic report Corporate governance Financial statements
Smart Metering Systems plc
Annual report and accounts 2013 31
PENSION COSTS
The Group operates a defined contribution pension scheme for employees. The assets of the scheme are held separately from those of the Group. 
The annual contributions payable are charged to the statement of comprehensive income.
SHARE-BASED PAYMENTS
The costs of equity-settled share-based payments are charged to the income statement over the vesting period. The charge is based on the fair 
value of the equity instrument granted and the number of equity instruments that are expected to vest.
TAXATION
Tax currently payable is based on the taxable profit for the year. Taxable profit differs from accounting profit as reported in the statement of 
comprehensive income because it excludes items of income or expense that are taxable or deductible in other years and it further excludes 
items that are never taxable or deductible. The Group’s liability for current tax is measured using tax rates that have been enacted or substantively 
enacted by the reporting date.
Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amount of assets and liabilities in the 
financial statements and the corresponding tax bases used in the computation of taxable profit and is accounted for using the balance sheet 
liability method. Deferred tax liabilities are recognised for all taxable temporary differences and deferred tax assets are recognised to the extent 
that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. The deferred tax balance 
is calculated based on tax rates that have been enacted or substantively enacted by the reporting date.
ADOPTION OF THE INTERNATIONAL ACCOUNTING STANDARDS NEW STANDARDS, AMENDMENTS AND INTERPRETATIONS 
ISSUED BUT NOT YET EFFECTIVE FOR PERIODS COMMENCING ON OR AFTER 1 JULY 2014
ANNUAL IMPROVEMENTS TO IFRSS 2010/2012 CYCLE (NOT YET ENDORSED FOR USE IN EU)
In December 2013 the IASB published “Annual Improvements to IFRSs – 2010/2012 Cycle” as part of its annual improvements project. A summary 
of the amendments is set out below:
IFRS Amendment
IFRS 2 Share-based Payment Separate definitions of ‘service condition’ and ‘performance condition’ now included in IFRS 2, 
Appendix A and the definition of ‘vesting condition’ and ‘market condition’ amended.
Applied prospectively for share-based transactions for which the grant date is on or after 
1 July 2014.
IFRS 3 Business Combinations Paragraph 40 amended to clarify that contingent consideration that meets the definition of a 
financial instrument must be classified as equity or financial liability based on the requirements 
of IAS 32 only and the reference to ‘or other applicable IFRSs’ has been deleted.
References to ‘IAS 37 or other IFRSs as appropriate’ deleted in paragraph 58(b) for contingent 
consideration that is a non-financial asset or liability. This retains fair value, with changes 
through profit or loss, as the subsequent measurement basis for all non-equity contingent 
consideration to which IFRS 3 applies. 
Consequential amendments made to IAS 37 and IAS 39 (and IFRS 9) to clarify that contingent 
consideration in a business combination that is classified as an asset or a liability shall be 
subsequently measured at fair value with changes in fair value recognised in profit or loss. 
Applied prospectively to business combinations for which the acquisition date is on or after 
1 July 2014.
IFRS 8 Operating Segments A new paragraph 22(a) added to require disclosure of the judgements made by management in 
applying the aggregation criteria in the standard. This includes a brief description of the operating 
segments that have been aggregated and the economic indicators that have been assessed in 
determining that the aggregated operating segments share similar economic characteristics.
Paragraph 28(c) amended to require a reconciliation of the total of the reportable segments’ 
assets to the entity’s assets only if the amount is regularly provided to the chief operating 
decision maker, consistent with the requirement in paragraph 28(d) for an entity’s liabilities.  F I N A N C I A L ST A T E M E NT S
Smart Metering Systems plc
Annual report and accounts 2013 32
Accounting policies continued 
ADOPTION OF THE INTERNATIONAL ACCOUNTING STANDARDS NEW STANDARDS, AMENDMENTS AND INTERPRETATIONS 
ISSUED BUT NOT EFFECTIVE FOR PERIODS COMMENCING ON OR AFTER 1 JULY 2014 CONTINUED
ANNUAL IMPROVEMENTS TO IFRSS 2010/2012 CYCLE (NOT YET ENDORSED FOR USE IN EU) CONTINUED
IFRS Amendment
IFRS 13 Fair Value Measurement Amendment to the Basis for Conclusions to clarify that when certain paragraphs from 
IAS 39 and IFRS 9 were deleted because IFRS 13 contains guidance for using present value 
techniques, the intention was not to remove the ability of an entity to measure short-term 
receivables and payables with no stated interest rate at invoice amounts without discounting, 
when the effect of not discounting is immaterial. 
IAS 16 Property, Plant and Equipment Paragraph 35 amended and new paragraphs added to clarify the treatment of accumulated 
depreciation when an item of property, plant and equipment is revalued, as the IFRS 
Interpretations Committee had reported to the IASB that practice differed.
At the date of the revaluation, the asset must be treated in one of the following ways:
 › the gross carrying amount is adjusted in a manner that is consistent with the revaluation 
of the carrying amount of the asset. The accumulated depreciation at the date of the 
revaluation is adjusted to equal the difference between the gross carrying amount and the 
carrying amount of the asset after taking into account accumulated impairment losses; and
 › the accumulated depreciation is eliminated against the gross carrying amount of the asset.
Applies to revaluations in the initial period of application (i.e. beginning on or after 1 July 2014) 
and the preceding period. Adjusted comparative information may be presented for earlier periods, 
but there is no requirement to do so.
IAS 24 Related Party Disclosures Paragraph 9 amended and new paragraphs added to extend the definition of a related 
party as IAS 24 was not clear of the relationship when a management entity provides 
key management personnel services to an entity.
The definition of a related party now includes an entity, or any member of a group of 
which it is a part, that provides key management personnel services to the reporting entity, 
or to the parent of the reporting entity. 
Separate disclosure is required for the provisions of key management personnel services 
provided by a separate management entity. The key management personnel compensation 
that is provided by a management entity to its own employees is excluded from the 
disclosure requirements.
IAS 38 Intangible Assets Paragraph 80 amended and new paragraphs added to align the accounting treatment 
of accumulated depreciation when an intangible asset is revalued with the amendments 
to IAS 16 when an item of property, plant and equipment is revalued (see above).
Effective date: periods commencing on or after 1 July 2014 unless otherwise indicated.  Strategic report Corporate governance Financial statements
Smart Metering Systems plc
Annual report and accounts 2013 33
ADOPTION OF THE INTERNATIONAL ACCOUNTING STANDARDS NEW STANDARDS, AMENDMENTS AND INTERPRETATIONS 
ISSUED BUT NOT EFFECTIVE FOR PERIODS COMMENCING ON OR AFTER 1 JULY 2014 CONTINUED
ANNUAL IMPROVEMENTS TO IFRSS 2011/2013 CYCLE (NOT YET ENDORSED FOR USE IN EU)
In December 2013 the IASB published “Annual Improvements to IFRSs – 2011/2013 Cycle” as part of its annual improvements project. A summary 
of the amendments is set out below:
IFRS Amendment
IFRS 1 First-time Adoption of International 
Financial Reporting Standards
A footnote to paragraph BC1 1 and a new paragraph BC1 1A added to clarify that if a new IFRS is not 
yet mandatory but permits early application, that IFRS is permitted but not required to be applied 
in the entity’s first IFRS financial statements. If a new IFRS is so applied it must be applied in all the 
periods presented in the first IFRS financial statements on a retrospective basis.
Effective from 1 2 December 201 3.
IFRS 3 Business Combinations Paragraph 2(a) amended (and paragraphs added to the Basis for Conclusions) to: 
 › exclude the formation of all types of joint arrangements (as defined in IFRS 11 Joint 
Arrangements, i.e. joint ventures and joint operations), from the scope of IFRS 3; and
 › clarify that the scope exception only applies to the accounting for the formation 
of a joint arrangement in the financial statements of the joint arrangement itself.
Apply prospectively for periods beginning on or after 1 July 2014.
IFRS 13 Fair Value Measurement Paragraph 52 of IFRS 13 defines the scope of the exception that permits an entity to measure 
the fair value of a group of financial assets and financial liabilities on a net basis if the entity 
manages that group of financial assets and financial liabilities on the basis of its net exposure 
to either market risk or credit risk. This is referred to as the portfolio exception. 
The IASB has amended paragraph 52 to clarify that the portfolio exception applies to all 
contracts within the scope of IAS 39 Financial Instruments: Recognition and Measurement 
or IFRS 9 Financial Instruments, regardless of whether they meet the definitions of financial 
assets or financial liabilities as defined in IAS 32 Financial Instruments: Presentation.
Periods beginning on or after 1 July 2014. Apply prospectively from the beginning 
of the annual period in which IFRS 13 was initially applied.
IAS 40 Investment Property IAS 40 amended to clarify that reference should be made to IFRS 3 to determine whether 
the acquisition of investment property is the acquisition of an asset; or a group of assets; 
or a business combination. 
This judgement is not based on paragraphs 7–1 5 of IAS 40, which relate to whether or not property 
is owner-occupied or investment property, but is instead based on the guidance in IFRS 3. 
Transitional provisions: 
The amendment applies prospectively and consequently amounts recognised for acquisitions 
of investment property in prior periods are not adjusted. However, the IASB noted that the 
amendment is really only a clarification of the interrelationship between IFRS 3 and IAS 40. 
It therefore permits an entity to choose to apply the amendment to individual acquisitions 
of investment property that occurred before the effective date if, and only if, information 
needed to apply the amendment is available to the entity.
Apply prospectively to acquisitions of investment property made in periods beginning on 
or after 1 July 2014. Adjusted comparative information may be presented for earlier periods 
but there is no requirement to do so.
There are no other IFRS or IFRIC interpretations that are not yet effective that would be expected to have a material impact on Smart Metering Systems plc.
None of the above interpretations would have an impact on this financial information if applied.   F I N A N C I A L ST A T E M E NT S
Smart Metering Systems plc
Annual report and accounts 2013 34
1 SEGMENTAL REPORTING
For management purposes, the Group is organised into two core divisions, management of assets and installation of meters, which form the basis 
of the Group’s reportable operating segments. Operating segments within those divisions are combined on the basis of their similar long-term 
economic characteristics and similar nature of their products and services, as follows:
The management of assets comprises regulated management of gas meters within the UK.
The installation of meters comprises installation of domestic and industrial and commercial gas meters throughout the UK.
Management monitors the operating results of its divisions separately for the purpose of making decisions about resource allocation and 
performance assessment. The operating segments disclosed in the financial statements are the same as reported to the Board. Segment 
performance is evaluated based on gross profit or loss excluding operating costs not reported by segment, depreciation, amortisation 
of intangible assets and exceptional items.
The following tables present information regarding the Group’s reportable segments for the years ended 31 December 2013 and 31 December 2012:
Asset Asset Total
management installation Unallocated operations
31 December 2013 £’000 £’000 £’000 £’000
Segment/Group revenue 13,803 14,113 — 27,916
Operating costs (2,575) (7,526) — (10,101)
Segment profit – Group gross profit 11,228 6,587 — 17,815
Items not reported by segment:
Other operating costs — — (5,965) (5,965)
Depreciation (2,654) — (100) (2,754)
Amortisation (262) — — (262)
Exceptional items and fair value adjustments — — (267) (267)
Profit before interest and tax 8,312 6,587 (6,332) 8,567
Net finance costs (1,096) — — (1,096)
Profit before tax 7,216 6,587 (6,332) 7,471
Tax expense (896)
Profit for year 6,575
 
Asset Asset Total
management installation Unallocated operations
31 December 2012 £’000 £’000 £’000 £’000
Segment/Group revenue 9,254 11,775 — 21,029
Cost of sales (2,194) (5,565) — (7,759)
Segment profit – Group gross profit 7,060 6,210 — 13,270
Items not reported by segment:
Other operating costs — — (4,257) (4,257)
Depreciation (1,534) — (65) (1,599)
Amortisation (238) — — (238)
Exceptional items and fair value adjustments — — (1,243) (1,243)
Profit before interest and tax 5,288 6,210 (5,565) 5,933
Net finance costs — — (706) (706)
Profit before tax 5,288 6,210 (6,271) 5,227
Tax expense (914)
Profit for year 4,313
All revenues and operations are based and generated in the UK.
Notes to the financial statements
For the year ended 31 December 2013 Strategic report Corporate governance Financial statements
Smart Metering Systems plc
Annual report and accounts 2013 35
1 SEGMENTAL REPORTING CONTINUED
The Group has one major customer that generated turnover within each segment as listed below:
2013 2012
£’000 £’000
Customer 1 – Asset Management 7,677 5,511
Customer 1 – Asset Installation 4,901 4,228
12,578 9,739
No segmentation is presented for the majority of Group assets and liabilities as these are managed centrally, independently of operating segments.
Those assets and liabilities that are managed and reported on a segmental basis are detailed below.
SEGMENT ASSETS AND LIABILITIES
Asset Asset Total
management installation operations
31 December 2013 £’000 £’000 £’000
Assets reported by segment
Intangible assets 2,018 — 2,018
Plant and machinery 57,041 — 57,041
Inventories 2,504 — 2,504
61,563
Assets not reported by segment 8,720
Total assets 70,283
Liabilities reported by segment
Obligations under hire purchase agreements 9 — 9
9
Liabilities not reported by segment 47,682
Total liabilities 47,691
Asset Asset Total
management installation operations
31 December 2012 £’000 £’000 £’000
Assets reported by segment
Intangible assets 1,916 — 1,916
Plant and machinery 35,791 — 35,791
Inventories 373 — 373
38,080
Assets not reported by segment 9,859
Total assets 47,939
Liabilities reported by segment
Obligations under hire purchase agreements 13 — 13
13
Liabilities not reported by segment 31,330
Total liabilities 31,343
   F I N A N C I A L ST A T E M E NT S
Smart Metering Systems plc
Annual report and accounts 2013 36
2 INCOME STATEMENT BY NATURE AND ITEMS OF EXPENDITURE INCLUDED IN THE CONSOLIDATED INCOME STATEMENT
2013 2012
£’000 £’000
Revenue 27,916 21,029
Direct rental costs (2,575) (2,194)
Direct subcontractor costs (6,220) (4,556)
Other direct sales costs and systems rental (1,312) (1,001)
Staff costs (3,830) (2,665)
Depreciation:
– owned assets (2,723) (1,568)
– leased assets (31) (31)
Amortisation (262) (238)
Auditor’s remuneration: 
– as auditor (51) (43)
– other services (29) (22)
Exceptional costs and fair value adjustments (267) (1,243)
Operating lease costs:
– plant and equipment 1 (30)
Other operating charges (2,050) (1,505)
Operating profit 8,567 5,933
Finance costs (1,122) (739)
Finance income 26 33
Profit before taxation 7,471 5,227
Included in exceptional items and fair value adjustments expenses are: i) £377,143 (2012: £(151,000)) relates to the interest rate hedge fair value 
adjustment and ii) £644,275 (2012: £243,675) that relates to share-based payments. £Nil (2012: £652,518 restructuring debt, £Nil (2012: 395,300) 
settlement of hedge and £Nil (2012: £102,650 TUPE costs).
Amounts paid to our auditor during the year totalled £80,155 (2012: £65,480).
This can be analysed as:
2013 2012
£’000 £’000
Statutory audit (Baker Tilly UK Audit LLP) 51 43
Taxation services (Baker Tilly Tax and Accounting Limited) 15 19
Non-statutory audit services (Baker Tilly UK Audit LLP) 14 3
80 65
3 PARTICULARS OF EMPLOYEES
The average number of staff employed by the Group, including Executive Directors, during the financial year was:
2013 2012
Number Number
Number of administrative staff 8 5
Number of operational staff 76 54
Number of sales staff 5 3
Number of IT staff 4 3
Number of Directors 3 3
96 68
Notes to the financial statements continued
For the year ended 31 December 2013 Strategic report Corporate governance Financial statements
Smart Metering Systems plc
Annual report and accounts 2013 37
3 PARTICULARS OF EMPLOYEES CONTINUED
The aggregate payroll costs, including Executive Directors, of the employees were:
2013 2012
£’000 £’000
Wages and salaries 3,364 2,351
Social security costs 384 256
Staff pension costs 64 40
Director pension costs 18 18
3,830 2,665
4 DIRECTORS’ EMOLUMENTS
The Directors’ aggregate remuneration in respect of qualifying services were:
2013 2012
£’000 £’000
Emoluments receivable 589 518
Fees 52 50
Value of Group pension contributions to money purchase schemes 5 4
Other pension 15 14
661 586
2013 2012
Emoluments of highest paid Director £’000 £’000
Total emoluments 387 350
Pension contributions 15 13
The number of Directors who accrued benefits under Company pension schemes was as follows:
2013 2012
Number Number
Money purchase schemes 1 1
5 FINANCE COSTS AND FINANCE INCOME 
2013 2012
£’000 £’000
Finance costs
Bank loans and overdrafts 1,121 738
Finance leases 1 1
Total finance costs 1,122 739
Finance income
Bank interest receivable 26 33  F I N A N C I A L ST A T E M E NT S
Smart Metering Systems plc
Annual report and accounts 2013 38
6 TAXATION
2013 2012
£’000 £’000
Analysis of charge in the year
Current tax:
Current income tax expense — 200
Over provision in prior year 11 77
Total current income tax 11 277
Deferred tax:
Origination and reversal of temporary differences 885 637
Tax on profit on ordinary activities 896 914
The charge for the period can be reconciled to the profit per the consolidated statement of comprehensive income as follows:
Profit before tax 7,471 5,227
Tax at the UK corporation tax rate of 23% (2012: 24.5%) 1,718 1,281
Expenses not deductible for tax purposes 19 45
Adjustments to tax charge in respect of previous periods 3 (174)
Change in tax rate (844) (221)
R&D enhanced deductions — (17)
Tax expense in the income statement 896 914
7 EARNINGS PER SHARE
The calculation of EPS is based on the following data and number of shares: 
2013 2012
£’000 £’000
Profit for the year used for calculation of basic EPS 6,575 4,313
Amortisation of intangible assets 262 238
Exceptional costs 267 1,243
Tax effect of adjustments (127) (355)
Earnings for the purpose of adjusted EPS 6,977 5,439
Number of shares 2013 2012
Weighted average number of ordinary shares for the purposes of basic EPS 83,606,102 83,339,747
Effect of potentially dilutive ordinary shares:
– share options 4,898,694 2,957,911
Weighted average number of ordinary shares for the purposes of diluted EPS 88,504,796 86,297,658
Earnings per share:
– basic (pence) 7.86 5.18
– diluted (pence) 7.43 5.00
Adjusted earnings per share:
– basic (pence) 8.35 6.53
– diluted (pence) 7.88 6.30
The Directors consider that the adjusted earnings per share calculation gives a better understanding of the Group’s earnings per share.
8 DIVIDENDS
2013 2012
£’000 £’000
Equity dividends
Paid during the year:
Dividends on equity shares £0.0185 (2012: £0.005) 1,546 417
Total dividends 1,546 417
Notes to the financial statements continued
For the year ended 31 December 2013 Strategic report Corporate governance Financial statements
Smart Metering Systems plc
Annual report and accounts 2013 39
9 INTANGIBLE ASSETS
Research and
development Software Total
£’000 £’000 £’000
Cost 
As at 1 January 2012 559 1,810 2,369
Additions 269 — 269
As at 31 December 2012 828 1,810 2,638
Additions 364 — 364
As at 31 December 2013 1,192 1,810 3,002
Amortisation
As at 1 January 2012 14 470 484
Charge for year 3 235 238
As at 31 December 2012 17 705 722
Charge for year 27 235 262
As at 31 December 2013 44 940 984
Net book value
At 31 December 2013 1,148 870 2,018
At 31 December 2012 811 1,105 1,916
At 1 January 2012 545 1,340 1,885
10 PROPERTY, PLANT AND EQUIPMENT
Short leasehold Plant and Fixtures
property machinery and fittings Equipment Total
£’000 £’000 £’000 £’000 £’000
Cost
As at 1 January 2012 31 23,020 25 296 23,372
Additions 72 16,200 91 17 16,380
Disposals — — (13) — (13)
As at 31 December 2012 103 39,220 103 313 39,739
Additions 33 24,467 16 79 24,595
Disposals — (687) — — (687)
As at 31 December 2013 136 63,000 119 392 63,647
Depreciation
As at 1 January 2012 18 1,895 9 123 2,045
Charge for year 12 1,534 11 42 1,599
Disposals — — (9) — (9)
As at 31 December 2012 30 3,429 11 165 3,635
Charge for year 20 2,654 16 64 2,754
Disposals — (124) — — (124)
As at 31 December 2013 50 5,959 27 229 6,265
Net book value
At 31 December 2013 86 57,041 92 163 57,382
At 31 December 2012 73 35,791 92 148 36,104
At 1 January 2012 13 21,125 16 173 21,327
HIRE PURCHASE AGREEMENTS
Included within the net book value of £57,382,000 (2012: £36,104,000, 2011: £21,327,000) is £84,000 (2012: £115,000, 2011: £145,000) relating to assets 
held under hire purchase agreements. The depreciation charged to the consolidated financial statements in the year in respect of such assets 
amounted to £31,000 (2012: £31,000, 2011: £8,000).
The assets are secured by a bond and floating charge (note 16).  F I N A N C I A L ST A T E M E NT S
Smart Metering Systems plc
Annual report and accounts 2013 40
11 FINANCIAL ASSET INVESTMENTS
SUBSIDIARY UNDERTAKINGS
Country of Proportion of 
incorporation Holding shares held Nature of business
All held by the Company:
UK Gas Connection Limited Scotland Ordinary shares 100% Gas utility management
UK Meter Assets Limited Scotland Ordinary shares 100% Gas utility management
UK Data Management Limited Scotland Ordinary shares 100% Data management
UKMA (AF) Limited* England Ordinary shares 100% Leasing
* The shareholding in this company is indirect via a subsidiary company.
12 INVENTORIES
2013 2012
£’000 £’000
Inventories 2,504 373
13 TRADE AND OTHER RECEIVABLES
2013 2012
£’000 £’000
Trade receivables 3,326 1,270
Prepayments 246 60
Accrued income 1,885 1,516
Other receivables 32 32
Corporation tax repayable 47 —
VAT recoverable 563 213
6,099 3,091
The Directors consider that the carrying amount of trade and other receivables approximates to their fair value.
The Group’s credit risk is primarily attributable to trade receivables and accrued income. The amounts presented in the statement of financial position 
are net of allowances for doubtful receivables. There was no allowance for doubtful receivables or provision against accrued income in the year 
(2013: £Nil, 2012: £Nil). The ageing profile of trade receivables past due date is shown below:
2013 2012
£’000 £’000
31–60 days 299 148
60–90 days 401 56
Over 90 days 198 49
898 253
Allowance for doubtful receivables — —
898 253
Trade receivables are non interest-bearing and are generally on 30–90 days terms.
Trade receivables due from related parties at 31 December 2013 amounted to £Nil (2012: £Nil, 2011: £34,000).
Receivables are all in Sterling denominations. 
The Directors are of the opinion that none of the overdue debts as at 31 December 2013 (2012: £Nil, 2011: £Nil) require impairment.
Accrued income is invoiced periodically and customers are the same as those within Trade receivables. Due to its nature there is no accrued 
income past due.
Notes to the financial statements continued
For the year ended 31 December 2013 Strategic report Corporate governance Financial statements
Smart Metering Systems plc
Annual report and accounts 2013 41
14 CASH AND CASH EQUIVALENTS
Cash and cash equivalents comprise cash held by the Group. The carrying amount of the asset approximates the fair value. All balances are held in Sterling.
During each period, there were no amounts of cash placed on short-term deposit.
For the purposes of the cash flow statement, cash and cash equivalents comprise:
2013 2012
£’000 £’000
Cash 2,073 6,455
2,073 6,455
15 TRADE AND OTHER PAYABLES
2013 2012
£’000 £’000
Current
Trade payables 4,569 3,434
Other payables 15 12
Other taxes 249 176
Corporation tax — 148
Deferred income 291 88
Accruals 3,755 4,343
8,879 8,201
The maturity profile of trade payables is given below:
2013 2012
£’000 £’000
Current 4,026 2,518
31–60 days 160 607
60–90 days 58 42
Over 90 days 325 266
4,569 3,433
Trade payables are non interest-bearing and are normally settled on 30–45 day terms.
All trade liabilities are Sterling denominated.
16 BANK LOANS AND OVERDRAFTS
2013 2012
£’000 £’000
Current
Bank loans 3,933 2,150
Bank overdraft — —
3,933 2,150
Non-current
Bank loans 31,475 18,299
Bank overdraft — —
31,475 18,299
Bank loans at 31 December 2013 relate to a term loan facility of £45.0m that was finalised in August 2013.
The term loan is available for 24 months, is payable in equal quarterly instalments based on a ten year repayment profile, with a final repayment 
date of 31 July 2017. The term loan attracts interest at a rate of 2.9% over the three month LIBOR. 1.45% is paid on undrawn funds.
The banks have a bond and floating charge over current and future property and assets.
The Group has fixed the bank interest payable through an interest rate swap (see note 18).  F I N A N C I A L ST A T E M E NT S
Smart Metering Systems plc
Annual report and accounts 2013 42
17 COMMITMENTS UNDER HIRE PURCHASE AGREEMENTS
Future minimal commitments under hire purchase agreements are as follows:
2013 2012
£’000 £’000
Current
Amounts payable within one year 3 3
Non-current
Amounts payable between two to five years 6 10
Amounts payable after more than five years — —
6 10
The Group has hire purchase contracts for various items of computer equipment. These leases have terms of renewal but no purchase options 
and escalation clauses. Renewals are at the option of the specific entity that holds the lease. 
The Directors consider that the future minimum lease payments under hire purchase contracts approximate to the present value of the minimum 
payments. Obligations under hire purchase contracts are secured on the underlying assets.
18 OTHER FINANCIAL LIABILITIES AND ASSETS
The Group’s treasury policy and management of financial instruments, which form part of these financial statements, are set out in the Financial Review.
2013 2012
£’000 £’000
Other financial assets 207 —
Non-current liabilities
Other financial liabilities — 170
Other financial assets and liabilities relate to the fair value adjustment on interest rate swaps.
The Group uses interest rate swaps to manage interest rate risk on interest-bearing loans and borrowings which means that the Group pays a fixed 
interest rate rather than being subject to fluctuations in the variable rate. The Group has not designated these derivatives as cash flow hedges.
The interest rate swaps cover an interest rate swap for an amount of £28,200,000 as at 31 December 2013 (2012: £13,200,000, 2011: £5,500,000) 
and an interest rate cap over an amount of £Nil as at 31 December 2013 (2012: £Nil, 2011: £5,500,000).
The interest rate swap results in a fixed interest rate of 0.90–0.92%.
The termination date for the derivatives is 15 September 2016.
The movement in the fair value is shown below:
2013 2012
£’000 £’000
Interest rate swap
Opening position — 18
Adjustment to fair value 207 (18)
Closing position 207 —
Interest rate cap
Opening position (170) (339)
Adjustment to fair value 170 169
Closing position — (170)
Notes to the financial statements continued
For the year ended 31 December 2013 Strategic report Corporate governance Financial statements
Smart Metering Systems plc
Annual report and accounts 2013 43
18 OTHER FINANCIAL LIABILITIES AND ASSETS CONTINUED
FAIR VALUES
The Directors do not consider there to be any material differences between the fair values and carrying values of any financial assets or liabilities 
recorded within these financial statements at the balance sheet date other than as set out below.
Fair value hierarchy
The Group uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique:
 › Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities;
 › Level 2: other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directly or indirectly; and
 › Level 3: techniques which use inputs which have a significant effect on the recorded fair value that are not based on observable market data.
At 31 December 2013, the Group held the following financial instruments measured at fair value:
31 December 
2013 Level 1 Level 2 Level 3
Liabilities measured at fair value £’000 £’000 £’000 £’000
Financial assets at fair value through the income statement:
Interest rate derivatives 207 — 207 —
Fair value has been assessed on a Mark to Market basis.
The above assets are shown on the statement of financial position as other current financial assets and other current financial liabilities.
During the reporting period ended 31 December 2013, there were no transfers between Level 1 and Level 2 fair value measurements 
and no transfers into and out of Level 3 fair value measurements.
19 FINANCIAL RISK MANAGEMENT
The Board reviews and agrees policies for managing the risks associated with interest rate, credit and liquidity risk. The Group has in place a risk 
management policy that seeks to minimise any adverse effect on the financial performance of the Group by continually monitoring the following risks:
INTEREST RATE RISK
The Group’s interest rate risk arises as a result of both its long and short-term borrowing facilities.
The Group seeks to manage exposure to interest rate fluctuations through the use of fixed interest rate swaps.
INTEREST RATE SENSITIVITY
The following table demonstrates the sensitivity to a change in interest rates on loans and borrowings after the impact of hedge accounting. 
The Group’s profit before tax is affected through the impact on floating rate borrowings as follows:
Effect on profit 
Increase/decrease before tax
Pound Sterling in basis points £’000
2013 1% 72
2012 1% 65
INTEREST RATE RISK PROFILE OF FINANCIAL LIABILITIES
The interest rate profile of the financial liabilities of the Group (being bank loans and overdrafts, obligations under finance leases and other 
financial liabilities) as at each period end is as follows:
Fixed rate Variable rate
financial liabilities financial liabilities Total
£’000 £’000 £’000
2013 28,209 7,208 35,417
2012 13,213 7,249 20,462
1 January 2012 5,516 5,673 11,189
The fixed rate financial liabilities relates to the portion of the banking facility that is fixed through hedging instruments.  F I N A N C I A L ST A T E M E NT S
Smart Metering Systems plc
Annual report and accounts 2013 44
19 FINANCIAL RISK MANAGEMENT CONTINUED
INTEREST RATE RISK PROFILE OF FINANCIAL LIABILITIES CONTINUED
The following is the maturity profile of the Group’s financial liabilities as at 31 December:
2013 2012
£’000 £’000
Fixed rate
Less than one year 2,824 1,324
Two to five years 11,286 5,289
Over five years 14,099 6,600
28,209 13,213
Variable rate
Less than one year 1,086 803
Two to five years 4,344 3,212
Over five years 1,778 3,234
7,208 7,249
INTEREST RATE RISK PROFILE OF FINANCIAL ASSETS
The Group’s financial assets at 31 December 2013 comprise cash and trade receivables. The cash balance of £2,073,000 (2012: £6,455,000, 
2011: £7,317,000) is a floating rate financial asset.
FAIR VALUES OF FINANCIAL LIABILITIES AND FINANCIAL ASSETS
The fair values, based upon the market value or discounted cash flows of financial liabilities and financial assets held in the Group, were not 
materially different from their book values.
FOREIGN CURRENCY RISK
The Group’s exposure to the risk of changes in foreign exchange rates is insignificant as primarily all of the Group’s operating activities 
are denominated in pound Sterling.
LIQUIDITY RISK
The Group manages its cash in a manner designed to ensure maximum benefit is gained whilst ensuring security of investment sources. 
The Group’s policy on investment of surplus funds is to place deposits at institutions with strong credit ratings.
The ageing and maturity profile of the Group’s material liabilities are covered within the relevant liability note.
CREDIT RISK
Credit risk with respect to trade receivables and accrued income is due to the Group trading with a limited number of companies who 
are generally large utility companies or financial institutions. Therefore, the Group does not expect, in the normal course of events, that these 
debts are at significant risk. The Group’s maximum exposure to credit risk equates to the carrying value of cash held on deposit and trade, 
other receivables and accrued income. 
The Group’s maximum exposure to credit risk from its customers is £5,211,000 (2012: £2,786,000, 2011: £1,445,000) as disclosed in note 13 
– trade and other receivables, and accrued income. 
The Group regularly monitors and updates its cash flow forecasts to ensure it has sufficient and appropriate funds to meet its ongoing operational 
requirements whilst maintaining adequate headroom on its facilities to ensure no breach in its banking covenants.
CAPITAL MANAGEMENT
Capital is the equity attributable to the equity holders of the parent. The primary objective of the Group’s capital management is to ensure that it 
maintains a strong credit rating and healthy capital ratios in order to support its business and maximise shareholder value. The Group manages its 
capital structure, and makes adjustments to it, in light of changes in economic conditions. To maintain or adjust the capital structure, the Group 
may adjust the dividend payment to shareholders, sell assets, return capital to shareholders or issue new shares.
The Group monitors capital on the basis of a leverage ratio. This ratio is calculated as net debt divided by EBITDA. Net debt is calculated as total 
borrowings less cash. EBITDA is calculated as operating profit before any significant non-recurring items, interest, tax, depreciation and amortisation.
Notes to the financial statements continued
For the year ended 31 December 2013 Strategic report Corporate governance Financial statements
Smart Metering Systems plc
Annual report and accounts 2013 45
20 DEFERRED TAXATION
The movement in the deferred taxation asset during the period was:
2013 2012
£’000 £’000
Opening deferred tax liability 2,510 1,873
Increase in provision through income statement 885 637
Closing deferred tax liability 3,395 2,510
All movements identified have gone through the income statement.
The Group’s provision for deferred taxation consists of the tax effect of temporary differences in respect of:
2013 2012
£’000 £’000
Excess of taxation allowances over depreciation on fixed assets 3,385 2,788
Tax losses available (38) (239)
Fair value of interest rate swaps (net) 48 (39)
3,395 2,510
The deferred tax included in the income statement is as follows:
2013 2012
£’000 £’000
Accelerated capital allowances 597 459
Tax losses 201 132
Movement in fair value of interest rate swaps 87 46
885 637
21 RELATED PARTY TRANSACTIONS
A number of key management personnel hold positions in other entities that result in them having control or significant influence over 
the financial or operating policies.
A number of these entities transacted with the Group in the reporting period. The terms and conditions of the transactions with key management 
personnel and their related parties were no more favourable than those available, or which might reasonably be expected to be available, on similar 
transactions to non-key management personnel and related entities on an arm’s length basis.
During the period, the Group entered into the following transactions with related parties:
During the year the Group paid rent amounting to £41,500 (2012: £41,500, 2011: £41,500) to the Directors’ pension scheme, Eco Retirement Benefit 
Scheme, for the use of certain premises. Both Stephen Timoney and Alan Foy are trustees of the scheme. At the year-end date, an amount 
of £4,150 (2012: £4,150, 2011: £4,150) was outstanding in this regard.
During the year, the Group paid dividends to Stephen Timoney and Alan Foy of £428,170 and £164,464 respectively.
Remuneration of key management which includes Executive and Non-executive Directors together with certain management personnel:
At At
31 December 
2013
31 December 
2012 
£’000 £’000
Salaries and other short-term employee benefits 1,101 754
22 SHARE CAPITAL
2013 2012
£’000 £’000
Allotted and called up:
83,877,872 ordinary shares of £0.01 each (2012 and 2011: 83,339,747 ordinary shares of £0.01 each) 839 833
On 4 July 2013 538,125 ordinary share options were exercised and issued to Kevin Lyon and Nigel Christie.  F I N A N C I A L ST A T E M E NT S
Smart Metering Systems plc
Annual report and accounts 2013 46
23 SHARE-BASED PAYMENTS
On 20 June 2011 the Company adopted both an Approved Company Share Option Plan (the CSOP) and an Unapproved Company Share Option 
Plan (the Unapproved Plan).
CSOP
The CSOP is open to any employee of any member of the Group up to a maximum value of £30,000 per employee. No option can be exercised 
within three years of its date of grant.
UNAPPROVED PLAN
The Unapproved Plan is open to any employee, Executive Director or Non-executive Director of the Company or any other Group company who 
is required to devote substantially the whole of his time to his duties under his contract of employment. Except in certain specified circumstances 
no option will be exercisable within five years of its grant.
Plan At 1 January 2013 Granted Exercised Lapsed
At 
31 December 
2013
Exercise 
price
 (pence) Date exercisable Expiry date
CSOP 572,373 — — (6,579) 565,794 76.0 15/7/14 15/7/21
CSOP 39,088 — — — 39,088 153.5 28/5/15 28/5/22
CSOP 12,097 — — (12,097) — 248.0 3/12/15 3/12/22
Unapproved 3,083,333 — — 104,273 2,979,060 60.0 20/6/16 20/6/21
Unapproved 717,500 — 538,125 179,375 — 60.0 20/6/12* 20/2/21
Unapproved 1,162,629 — — — 1,162,629 153.5 28/5/17 28/5/22
Unapproved 805,660 — — 805,660 — 248.0 3/12/17 3/12/22
Unapproved — 179,375 — — 179,375 60.0 28/6/13 28/6/23
* Only 50% of the options can be exercised at this date.
VALUATION
The fair value of all options granted has been estimated using the Black-Scholes option model, taking into account the terms and conditions upon 
which the options were granted. The following table lists the inputs to the model used for the year ended 31 December 2013:
Unapproved Plan
Option strike price (£) 0.60
Share price (£) 3.09
Options granted during the year are immediately exercisable.
The weighted average fair value of share options issued during the year was £2.65.
24 OTHER RESERVE
This is a non-distributable reserve that arose by applying merger relief under s162 CA06 to the shares issued in 2008 in connection with the Group 
restructuring. This was previously recognised as a merger reserve under UK GAAP . Under IFRS, this has been classed as an “other reserve”.
25 COMMITMENTS UNDER OPERATING LEASES
The Group has entered into commercial leases for office space. These leases have lives between one and 15 years with no renewal option included 
in the contracts. There are no restrictions placed upon the Group by entering into these leases.
Future minimum rentals payable under non-cancellable operating leases as at each year end are as follows:
2013 2012
£’000 £’000
Future minimal commitments under operating lease agreements are as follows:
Payable within one year 205 65
Payable within two and five years 411 704
Payable after five years 135 176
751 945
26 ULTIMATE CONTROLLING PARTY
There is no ultimate controlling party by virtue of the structure of shareholdings in the Group.
27 CONTINGENT LIABILITY
The Group is the subject of an ongoing HMRC enquiry in respect of payments made to Employee Benefit Trusts in prior years. Whilst the outcome 
of the enquiry is, as yet, uncertain, the beneficiaries of the Trusts have provided the Company with indemnities against any additional tax that may 
become payable as a result of these enquiries.
Notes to the financial statements continued
For the year ended 31 December 2013 Strategic report Corporate governance Financial statements
Smart Metering Systems plc
Annual report and accounts 2013 47
2013 2012
Notes £’000 £’000
Fixed assets
Investments 2 — —
Current assets
Debtors 3 11,241 10,518
Creditors
Amounts falling due within one year 4 — 5
Net current assets 11,241 10,513
Total assets less current liabilities 11,241 10,513
Capital and reserves
Called up share capital 6 839 833
Share premium 7 8,971 8,653
Profit and loss account 7 1,431 1,027
Equity shareholders’ funds 11,241 10,513
The parent company financial statements on pages 47 to 49 were approved and authorised for issue by the Board of Directors and signed 
on their behalf by:
Glen Murray Company Registration Number
Director SC367563
14 March 2014 
Parent company balance sheet 
As at 31 December 2013  F I N A N C I A L ST A T E M E NT S
Smart Metering Systems plc
Annual report and accounts 2013 48
1 PARENT COMPANY ACCOUNTING POLICIES
BASIS OF ACCOUNTING
The parent company financial statements have been prepared under the historical cost convention, with the exception of current asset 
investments held at valuation, and in accordance with applicable accounting standards.
No separate income statement is provided for Smart Metering Systems plc as permitted by S409(3) of the Companies Act 2006.
GOING CONCERN
Based on the current projections and facilities in place the Directors consider it appropriate to continue to prepare the financial statements 
on a going concern basis.
TURNOVER
Turnover represents revenue recognised in the accounts. Revenue is recognised when the Company fulfils its contractual obligations to customers 
by supplying goods and services, or when they have the right to receive the income, and excludes value added tax. Where turnover is recognised 
due to the right to receive the income and the Company has not invoiced for the goods or services supplied an accrual is incorporated for the 
estimate of providing such.
DEFERRED TAXATION
Deferred tax is recognised in respect of all timing differences that have originated but not reversed at the balance sheet date where transactions 
or events that result in an obligation to pay more tax in the future or a right to pay less tax in the future have occurred at the balance sheet date. 
Timing differences are differences between the Company’s taxable profits and its results as stated in the consolidated financial statements that 
arise from the inclusion of gains and losses in tax assessments in periods different from those in which they are recognised in the consolidated 
financial statements.
Deferred tax is measured at the average tax rates that are expected to apply in the periods in which timing differences are expected to reverse, 
based on tax rates and laws that have been enacted or substantively enacted by the balance sheet date. Deferred tax is measured on a 
non-discounted basis.
FINANCIAL INSTRUMENTS
Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity 
instrument is any contract that evidences a residual interest in the assets of the entity after deducting all of its financial liabilities.
Where the contractual obligations of financial instruments (including share capital) are equivalent to a similar debt instrument, those financial 
instruments are classed as financial liabilities. Financial liabilities are presented as such in the balance sheet. Finance costs and gains or losses 
relating to financial liabilities are included in the profit and loss account. Finance costs are calculated so as to produce a constant rate of return 
on the outstanding liability.
Where the contractual terms of share capital do not have any terms meeting the definition of a financial liability then this is classed as an equity 
instrument. Dividends and distributions relating to equity instruments are debited direct to equity.
2 INVESTMENTS
Group
companies
Company £’000
Cost
At 1 January 2013 —
Additions —
At 31 December 2013 —
Net book value
At 31 December 2013 —
At 31 December 2012 —
 
Notes to the parent company financial statements
For the year ended 31 December 2013 2 INVESTMENTS CONTINUED
SUBSIDIARY UNDERTAKINGS
Country of Proportion of 
incorporation Holding shares held Nature of business
All held by the Company:
UK Gas Connection Limited Scotland Ordinary shares 100% Gas utility management
UK Meter Assets Limited Scotland Ordinary shares 100% Gas utility management
UK Data Management Limited Scotland Ordinary shares 100% Data management
UKMA (AF) Limited* England Ordinary shares 100% Leasing
* The shareholding in this company is indirect via a subsidiary company.
3 DEBTORS AMOUNTS FALLING DUE WITHIN ONE YEAR
2013 2012
£’000 £’000
Amounts owed by Group undertakings 11,241 10,518
11,241 10,518
4 CREDITORS AMOUNTS FALLING DUE WITHIN ONE YEAR
2013 2012
£’000 £’000
Other creditors — 5
— 5
5 RELATED PARTY TRANSACTIONS
The Company had no material related party transactions to disclose in line with Financial Reporting Standard 8.
The Group has taken advantage of the exemption in Financial Reporting Standard 8 from the requirement to disclose transactions within the Group.
6 SHARE CAPITAL
2013 2012
£’000 £’000
Allotted and called up:
83,877,872 ordinary shares of £0.01 each (2012: 83,339,747 ordinary shares of £0.01 each) 839 833
7 RESERVES
Profit and Share Share
loss reserve premium capital
£’000 £’000 £’000
As at 1 January 2013 1,027 8,653 833
Retained earnings 1,950 — —
Share issue — 318 6
Dividend paid (1,546) — —
As at 31 December 2013 1,431 8,971 839
8 CONTINGENT LIABILITY
The Group is the subject of an ongoing HMRC enquiry in respect of payments made to Employee Benefit Trusts in prior years. Whilst the outcome 
of the enquiry is, as yet, uncertain, the beneficiaries of the Trusts have provided the Company with indemnities against any additional tax that may 
become payable as a result of these enquiries.
Strategic report Corporate governance Financial statements
Smart Metering Systems plc
Annual report and accounts 2013 49 Smart Metering Systems plc Annual report and accounts 2013
SMART METERING SYSTEMS PLC
2nd floor  
48 St. Vincent Street  
Glasgow G2 5TS
WWW.SMS-PLC.COM