smart approach
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Smart Metering Systems plc
Annual report and accounts 2014
Smart Metering Systems plc Annual report and accounts 2014 STRATEGIC REPORT
01 Our highlights
02 Our story
04 Our business model
05 Our strategy and markets
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
20 Directors’ responsibilities statement
FINANCIAL STATEMENTS
22 Independent auditor’s report 
23  C o n s o l i d at e d s t at e m e nt 
of comprehensive income
24  C o n s o l i d at e d s t at e m e nt 
of financial position
25  C o n s o l i d at e d s t at e m e nt 
of changes in equity
26  C o n s o l i d at e d s t at e m e nt  
of cash flows
27 Accounting policies
33 Notes to the financial statements
50 Parent company balance sheet
51  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 2014 01
FINANCIAL HIGHLIGHTS
 › Revenue* increased by 52% to £42.4m (2013: £27.9m) 
– increase of 25% excluding UPL
 › Total annualised recurring revenues increased by 43% 
to £26.2m (2013: £18.3m)
 › Gas metering and data meter recurring rent increased 
41% to £21.9m and data recurring income reached £1.0m
 › Electricity metering and data meter recurring rent doubled 
to £0.6m and data recurring income grew 29% to £2.7m
 › Gross profit increased by 55% to £27.6m (2013: £17.8m) 
– increase of 38% excluding UPL
 › Gross profit margin at 65% (2013: 64%)
 › Underlying EBITDA** increased by 64% to £19.3m 
(2013: £11.8m) – increase of 49% excluding UPL
 › EBITDA margin at 46% (2013: 42%)
 › Underlying PBT** increased by 66% to £12.8m (2013: £7.7m)
 › Underlying earnings per share*** increased by 77% 
to 14.36p (2013: 8.10p) 
 › Final dividend of 1.88p per ordinary share making 2.82p 
for the full year (2013: 2.31p), an increase of 22%
 › Net debt of £57.3m with net debt to EBITDA at 2.9x
 › Available cash and unused debt facility of £47.5m 
at 31 December 2014
 › In November 2014, renegotiation of £105m club 
facility with existing club of lenders to provide further 
funding flexibility
*  Additional revenue streams incorporated in 2014 result from UPL.
**  Underlying EBITDA and PBT are before exceptional items 
and intangible amortisation.
***  Underlying earnings per share is profit after taxation but before 
exceptional items and intangible amortisation, divided by the weighted 
average number of ordinary shares in issue. 
OPERATIONAL HIGHLIGHTS
 › Total gas meter portfolio increased by 29% to 607,000 
(2013: 469,000), with Industrial and Commercial (I&C) 
meters nearly trebling. Electricity meter numbers more 
than doubled to 12,000 (2013: 5,000)
 › Capital expenditure on meters increased by 52% to £35m, 
reaching a monthly run rate of approximately £3m in 
December 2014
 › £14m acquisition of UPL on 14 April 2014 adding in excess 
of £2m EBITDA annual run rate and electricity connections, 
meters, data and energy services to SMS’ services
 › Rhys Wynne, previously managing director of UPL, 
appointed to the new role of Chief Operating Officer of SMS
 › Strengthened Board with the appointments of energy 
sector and corporate finance experts Miriam Greenwood 
and Willie MacDiarmid as Non-executive Directors 
in February 2014 and April 2014 respectively
 › Contract extensions or additions with major customers, 
including BES Utilities (BES) and Total Gas & Power Ltd 
(TGP) (both after full year in February 2015), British Gas 
Business (BGB), DONG Energy Services Limited 
(DONG Limited) and Opus Energy (Opus)
 › ADM™ installations more than doubled to 41,000 units 
by 31 December 2014 (2013: 16,000) 
 › Received full accreditation for water market in the UK
 › International trials continuing
Our highlights 
STRATEGIC REPORT
A year of continued growth across all business areas: recurring 
meter rental, a strong performance in the UK Gas Connection 
and a good set of initial figures for our electricity activity 
in both segments from our UPL acquisition.
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. STRATEGIC REPORT
Smart Metering Systems plc
Annual report and accounts 2014 02
Our story
Smart Metering Systems celebrates its 20th anniversary in 2015 and is still 
the only independent business providing gas and electricity infrastructure 
connection services, gas and electricity meter asset management services 
together with the development of advanced smart metering technology 
solutions to key gas and electricity suppliers in the UK I&C market.
We provide a comprehensive package of solutions driven by our in-depth market knowledge and insight.
1995
The Group was established 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. 
OUR FUTURE
There is the further potential to work with new water 
industry customers and in 2014 SMS received full 
accreditation for water markets in the UK. SMS is 
also exploring avenues to increase its penetration into 
geographic markets, including through UPL’s energy 
management propositions already established in Italy 
and the Caribbean and SMS’ ADM™ device, which is 
currently undergoing trials across three continents. 
SMS’ success story is based on consistently growing 
and delivering trusted relationships with customers in 
the gas and electricity supplier markets. The culture is 
based on the firm’s employees knowing their customers 
and understanding of the market in the UK, and has 
been instrumental in creating a trusted relationship 
based on good counsel, prudence and knowledge.
2011
The business floated 
on AIM. 
2004
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 service 
was established and became an 
Ofgem approved Meter Asset 
Manager (MAM). 
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 
offering serving the I&C market in addition to 
preparing for the potential 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. 
2014
2014 has been a landmark year in SMS’ story, as 
we launched electricity service offerings through 
the acquisition of Utility Partnership Limited 
(UPL), a leading manager of electricity meters 
in the UK and provider of electricity connections, 
design, meter installation, data management 
and energy management services. SMS and UPL 
are highly complementary businesses that share 
similar histories, founded in 1995 and 1996 
respectively, and a vision of becoming the 
leading independent supplier of smart metering 
solutions to suppliers in the utility sector 
providing the highest levels of customer service. 
Less than a year after the acquisition of UPL in 
April 2014, our businesses are fully integrated and 
SMS now provides gas and electricity customers 
with a full end-to-end dual fuel gas and electricity 
service incorporating connections, metering 
assets installation, ownership and management, 
as well as data management services. Strategic report Corporate governance Financial statements
Smart Metering Systems plc
Annual report and accounts 2014 03
UK GAS AND ELECTRICITY MARKETS AND 
THE SMS INTEGRATED SERVICE OFFERING
End consumers
UK licensed gas and electricity suppliers
Ofgem approved 
Meter Asset Manager (MAM)
Helping customers manage 
energy cost and usage
SMS plc
Gas and electricity 
suppliers have 
an obligation for 
metering services
Gas and electricity 
suppliers are mandated 
to supply energy cost 
and usage management
ASSET MANAGEMENT
METER 
SERVICES
ENERGY 
MANAGEMENT
ASSET INSTALLATION
Infrastructure facilitator: 
administration and 
management of utility 
connections and 
meter installations
Gas and electricity 
suppliers are obligated 
to arrange connections 
for their customers
UTILITY 
CONNECTION
ESTA approved 
smart metering data 
collector and aggregator
Gas and electricity 
suppliers are now 
mandated to provide 
smart metering systems
DATA 
SERVICES STRATEGIC REPORT
Smart Metering Systems plc
Annual report and accounts 2014 04
Our business model
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 and electricity connection and metering services markets.
We have contracts with gas and electricity suppliers that provide recurring revenues 
and visibility of earnings backed by robust termination payment arrangements.
The company has four wholly owned subsidiaries offering the following services in gas and electricity:
UTILITY CONNECTION
Infrastructure facilitator: administration and management 
of utility connections and meter installations
Gas and electricity suppliers arrange connections 
for their clients
Our Utility Connection service is one of the UK’s largest 
independent operators. We work in partnership with 
many of the leading providers in the UK gas and 
electricity markets to deliver meter installations, removals 
and exchanges, new gas and electricity supplies 
and increases in capacity.
METER SERVICES
Meter Asset Manager: operations for every UK gas 
and electricity supplier
Gas and electricity suppliers are mandated to provide 
metering services
Our Meter Services are Ofgem approved meter asset 
management companies that own, operate and manage 
commercial and domestic gas and electricity meters on 
behalf of the UK’s leading gas and electricity suppliers 
and independent meter asset managers.
The new enlarged Group is now the largest independent 
provider of gas and electricity meter assets in the UK 
and has two defined business streams offering gas 
and electricity services.
DATA SERVICES
Smart meter data collector: supply and installation 
of smart meter devices
Gas and electricity suppliers have an obligation 
to provide meter data management services
Smart metering is seen as the key to the future efficiency 
of the UK’s energy system. Our Data Services are ESTA 
approved smart metering data collectors and aggregators 
that deliver the Company’s patented ADM™ smart 
metering solution, which is very simple to install and 
highly cost effective and competitive. We strive to 
maintain our client-centric culture and we focus 
on client needs, not product features.
ENERGY MANAGEMENT
Helping customers manage energy cost and usage
Gas and electricity suppliers are mandated to supply 
energy cost and usage management
Our Energy Management services delivers energy 
management services to organisations in the UK, Italy 
and the Caribbean. Further cost savings and reductions 
in energy consumption and carbon emissions can be 
achieved through our invoice management facility, 
automatic monitoring and targeting (aM&T) programme 
and environmental and energy management service. Strategic report Corporate governance Financial statements
Smart Metering Systems plc
Annual report and accounts 2014 05
Our strategy and markets
Our strategy is to be the market leader in the independent 
ownership of gas and electricity meters in the UK.
Market size and outlook
SMS operates in a large UK market with few operators 
currently. We focus on the Industrial and Commercial (I&C) 
market throughout the UK whilst also operating in the domestic 
market. The market size is estimated to be circa 1.6 million I&C 
gas meters and 22 million domestic gas meters. In electricity, 
this breaks down as 2.1 million I&C electricity meters 
and 27 million domestic electricity meters. 
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 investment for 
rolling out and replacing approximately 22 million domestic 
gas meters and 27 million electricity 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), UK Meter Assets of SMS will be one of the 
few participants competing in the market. Nevertheless, 
the growth of our business in the domestic market is not 
predicated on this potential rollout from 2016, which is 
subject to a timeframe set by the UK government.
Our current market share is 65,000 I&C gas meter assets 
(4.1% of the market) and 542,000 domestic gas meter assets 
(2.5% 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. In electricity, our 
current market share is 12,000 I&C electricity meter assets 
(0.6% of the market).
The SMS ADM™ smart metering solution has considerable 
potential to be rolled out in the I&C market, as 1.6 million I&C 
gas meters and 2.1 million electricity 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 and electricity through our ADM™ smart 
metering solution. In electricity, 2.1 million electricity meters 
will need to be smart enabled.
We are also looking to expand into other applications, including 
water and liquefied petroleum gas (LPG), and other geographical 
markets where “smart” applications such as remote reading 
and half-hourly consumption data are important.
INCREASE GROWTH RATE
Grow our domestic meters business 
organically and through new contracts
KEY PRIORITIES
UPSELL THE ADM™ SOLUTION
Establish our technology ADM™ as the industry 
standard smart metering solution for 
industrial and commercial (I&C) clients
OUR PROGRESS IN 2014
 › Annualised recurring 
revenues from gas and 
electricity increased by 
43% to £26.2m
+29%
Total gas meter portfolio 
increased to 607,000 
(domestic and I&C) 
OUR FOCUS FOR 2015
 › Increase recurring rental 
 › Increase meter 
installations in domestic 
and I&C markets
 › Cross-sell multi-utility 
connections metering 
and data management 
services
OUR PROGRESS IN 2014
 › Annualised recurring 
ADM™ data income 
increased by 233% 
to £1.0m 
+156%
Total ADM™ portfolio 
increased to 41,000 
(domestic and I&C) 
OUR FOCUS FOR 2015
 › Increase recurring rental 
 › Continue to explore 
markets excluding 
the UK
 › Trial the device in UK 
electricity markets
 › Explore markets 
for water and LPG 
applications STRATEGIC REPORT
Smart Metering Systems plc
Annual report and accounts 2014 06
Risk management 
The attention of 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 on the market price of the ordinary shares.
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 and electricity meters. If the 
Company fails to register a meter(s) on its IT system, 
wrongly classifies a meter or 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 2014 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 and electricity 
meters 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 have 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 gas market 
and over 40% of the 
domestic gas 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 2014 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 results 
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 manage its 
growth effectively
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 2014 08
REVIEW OF THE YEAR
2014 has been a year of expansion and firsts for SMS, 
putting the business in good stead as we now enter our 
20th anniversary year. In the first half of the year, SMS 
established its electricity service offerings within both 
segments and welcomed 168 new colleagues through the 
acquisition of UPL on 14 April 2014. During the second half 
of the year, SMS appointed Rhys Wynne as Chief Operating 
Officer (COO) of the Company, a new role created following 
the UPL acquisition. SMS is delighted with the success of the 
UPL integration, which has helped secure contract extensions 
or additions from a number of major customers, including 
BES Utilities (BES), British Gas Business (BGB), DONG 
Energy Services Limited (DONG), Opus Energy (Opus) 
and Total Gas & Power Ltd (TGP). SMS and our customers 
are already clearly benefiting from the Company’s full 
end-to-end dual fuel service. 
OUR BUSINESS
I am pleased to confirm SMS has continued to make 
considerable progress in 2014 across all segments 
of the business.
Through the establishment of SMS’ Electricity, SMS has a 
clearly defined growth strategy in the gas and electricity 
supplier markets, positioning the business to fulfil our vision 
of becoming the leading independent provider of metering 
services to the utility sector with the highest level of 
customer service. Together with the potential to establish 
ADM™ as the industry standard smart metering device, 
the Group has a very promising outlook. 
SMS has consistently demonstrated 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 and electricity supplier markets, increase the run 
rate with these customers and continue to grow the meter 
asset portfolio.
The UK meter assets business presents a large market 
opportunity with a substantial proportion of an estimated 
1.6 million I&C meters in the UK to be exchanged for a smart 
metering solution by 2020 with the added potential of a 
domestic market roll out of some 22 million gas meters, 
and in the electricity market this is estimated to be 2.1 million 
I&C meters and 27 million domestic meters. 
The order book for the ADM™ device has continued to grow 
and our current gas and electricity supplier contracts provide 
potential access to over 80% of UK I&C gas meters and 40% 
of residential gas meters. International trials of ADM™ overseas 
in gas, electricity, water and LPG markets continue, where 
we remain encouraged by the progress.
Chairman’s statement
HIGHLIGHTS
 › Considerable progress 
across all segments
 › Established electricity 
service offering 
 › Expanding order book with 
key gas suppliers in the I&C 
market for meter assets 
and ADM device
Paul Dollman
Non-executive Chairman Strategic report Corporate governance Financial statements
Smart Metering Systems plc
Annual report and accounts 2014 09
Our priority in 2015 and beyond is to focus on our three 
strategic areas:
 › grow our domestic meters business organically and 
through new contracts with an emphasis on driving 
recurring income;
 › 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 and electricity suppliers, with a focus on cross-selling 
between the Gas and Electricity across our horizontal 
suite of services.
SMS has developed a strong and evolving business model 
and strategy that provides the most effective scope for 
continued expansion of the business to reward our customers 
and shareholders. 
PEOPLE AND CORPORATE CULTURE 
The acquisition of UPL this year marked SMS’ first-ever 
acquisition. It also marked the coming together of two 
companies that have very similar histories and share the 
same values, culture and approach to customer service. 
It was paramount that for any sort of acquisition to take 
place it needed to be one that maintained SMS’ culture 
based on a commitment by its employees to know and 
serve their customers. 
This has been instrumental in developing, building and 
maintaining trusted relationships with our customers, the 
gas and now also electricity suppliers, who have responded 
positively to the acquisition of UPL. 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 and electricity suppliers. These are integral to how we 
achieve customer satisfaction and the building of a trusted 
relationship. We are excited to be driving forward our strategic 
vision, values and culture through our enlarged team 
and strengthened senior management.
BOARD COMPOSITION
The Board comprises five directors, of whom three are 
Non-executive with me as your Non-executive Chairman. 
We have sought to build our Board structure to ensure 
we have a balanced Board and in the first half of 2014 we 
welcomed two new Non-executive Directors, Miriam Greenwood 
and Willie MacDiarmid, while Nigel Christie retired from the 
Board as a Non-executive Director. The Board would like to 
thank Nigel for his very significant contribution to the Company. 
Energy and corporate finance expert Miriam Greenwood 
is Chair of SMS’ Audit Committee and energy sector 
expert Willie MacDiarmid is Chair of the Company’s 
Remuneration Committee.
Miriam 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. She is a 
Non-executive Director of a number of companies and 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. 
Willie is a reputed senior executive in the energy sector, 
with experience at the highest level with the last two UK 
governments on a variety of strategic and operating 
working groups. As a member of the Scottish Power 
executive team, he successfully led Scottish Power through 
the deregulation of the UK energy market and served 
on their investment committee, and was involved in various 
mergers and acquisitions. Scottish Power’s successful 
metering business was part of his portfolio.
OUTLOOK
Under Alan Foy’s leadership, the expanded dual fuel offer, 
our strengthened senior management and the expertise 
of our Non-executive Directors, alongside our robust IT 
infrastructure, SMS is ideally positioned to maintain our 
competitive advantage and continue to make progress on our 
strategic priorities. 
As we continue to invest in providing the highest levels of 
service to the gas and electricity supplier markets we remain 
confident on the outlook for the business and we view the 
outlook for the market in 2015 as highly promising for our 
business model.
Paul Dollman
Non-executive Chairman STRATEGIC REPORT
Smart Metering Systems plc
Annual report and accounts 2014 10
We are delighted with the continued strong performance 
of the business for the year ended 31 December 2014. 
Recurring income now represents 53% of our total revenue 
compared to 49% of total income in 2013, as we see the 
benefits of our business model of building up the recurring 
income streams. The recurring revenues are as a result of 
the long-term nature of our contracts, which provide an 
index-linked revenue stream. 
ACQUISITION OF UPL
On 14 April 2014, SMS acquired the entire issued share 
capital of UPL. With this acquisition SMS has doubled the 
number of recurring income streams and we are growing 
the electricity meter portfolio, further increasing our 
recurring rental revenue. 
The acquisition is in line with the strategic vision of SMS to 
become the leading independent supplier of smart metering 
solutions to suppliers in the utility sector with the highest 
levels of customer service. 
UPL is now operationally fully integrated into SMS resulting 
in additional income streams across both segments and is 
driving acceleration of the overall strategic vision of SMS’ 
enlarged business in three key areas:
 › drive growth opportunities through connections, metering 
and data management services to an expanded gas and 
electricity customer base;
 › position our business as a dual gas and electricity 
meter provider for the UK’s future smart meter roll out 
programme; and
 › provide further opportunities to expand internationally.
In the first year of acquisition SMS has already added clients, 
including DONG Limited and TGP, to our Electricity division 
and extended existing contracts. UPL’s existing portfolio 
included customers such as Centrica, SSE and EDF, as well 
as Network Rail, Vodafone, Santander, Sainsbury’s, O2 UK 
and Cable & Wireless.
In addition to contract wins and extensions already 
secured through the dual fuel gas and electricity service 
offering, there is the further potential to work with new 
water industry customers. 
SMS also believes there is scope to expand internationally 
through UPL’s energy management propositions already 
established in Italy and the Caribbean and SMS’ ADM™ device, 
which is currently undergoing trials across three continents. 
Chief Executive Officer’s statement 
HIGHLIGHTS
 › Increase in recurring revenues
 › 29% increase in meter portfolio
 › Contract additions and extensions:
 › I&C
 › Domestic
 › Contracts in place with companies 
representing over 80% of the 
total I&C market and over 40% 
of the Domestic market 
 › Underlying earnings per share* 
increased by 77%
 › Final dividend of 1.88p per 
ordinary share
*  Underlying earnings per share is profit after taxation 
but before exceptional items and intangible amortisation, 
divided by the weighted average number of ordinary 
shares in issue.
Alan Foy
Chief Executive Officer Strategic report Corporate governance Financial statements
Smart Metering Systems plc
Annual report and accounts 2014 11
OPERATIONAL REVIEW
During 2014 we made substantial progress across all 
segments of the business. Following a strong first half where 
we saw our gas meter portfolio break the half-million mark with 
an increase of 65,000, growth accelerated in the second half 
to reach a total of 607,000 gas meters, with a further 73,000 
added or a 29% increase year on year. The number of electricity 
meters more than doubled to 12,000 from 5,000 in 2013, bringing 
our overall gas and electricity meter portfolio to 619,000. 
The progress we have made in establishing long-term recurring 
revenue was underlined by an increase in year-end annualised 
recurring meter rental revenue of 41% to £21.9m and data 
provision sales from our ADM™ device more than trebled 
to reach the £1m level. Through the establishment of our 
Electricity services we have added an additional two recurring 
revenue streams, where meter recurring rent doubled to 
£567,000 and data recurring income grew 29% to £2.7m. 
For the first time, recurring income now makes up the 
majority of our total revenue.
INDUSTRIAL AND COMMERCIAL METERS
We were delighted to announce a number of new contracts 
or contract extensions with major customers during 2014. 
We more than doubled our I&C gas meter portfolio to 65,000 
meters from 27,000 meters in 2013. In the gas market we 
secured a significant contract with BGB, while in the electricity 
market we won contracts with Opus and DONG Limited, 
both existing customers of SMS. More recently, in the first 
quarter of 2015 in the Electricity market, we were awarded 
contracts with BES Utilities and with TPG, part of Total S.A., 
which is a current client of our Gas services. 
The increase in customer base during 2014 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 will 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.
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 deployed more than 2.5 times the number of ADM™ 
devices in the UK in 2014, up to 41,000 from 16,000 in 2013. 
The Company remains confident that its ADM™ device technology 
has a broad range of potential applications in gas, electricity, 
water and LPG markets and has been continuing with trials 
of the device internationally.
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. 
As over the last two years, all new contracts announced in 
2014 allow for the introduction of the ADM™ device into I&C 
premises during meter replacement programmes.
DOMESTIC METERS
We grew our domestic gas meter portfolio by 24% 
from 437,000 in 2013 to 542,000 by 31 December 2014. 
Our combined gas and electricity full service offering has 
strengthened our position and SMS’ opportunity in the 
domestic meter market, ideally positioning the business for 
the current UK domestic smart meter roll out programme. 
While we are well placed to capitalise on this roll out of smart 
meters in the UK domestic market, 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.
OTHER MARKETS
We were very pleased to announce during 2014 that 
following an extensive accreditation process the products 
SMS has developed for the UK water market have passed 
all tests and received full accreditation.
Alan Foy
Chief Executive Officer STRATEGIC REPORT
Smart Metering Systems plc
Annual report and accounts 2014 12
Financial review
HIGHLIGHTS
 › Revenues increased by 52%
 › Recurring revenue up 62%, 
representing 53% of total 
revenue
 › Gross profit increased by 55% 
 › Underlying EBITDA* increased 
by 64% 
 › Capital investment on meters up 
by 52%
 › New banking club arrangement 
announced on 12 March 2014 for 
£105.0m
 › Available cash resources of 
£47.5m at the end of year
* Excluding exceptional items and intangible amortisation.
Glen Murray
Finance Director
RESULTS FOR THE YEAR
During 2014, SMS increased revenue by 52% to £42.4m or 
by 25% to £34.9m excluding UPL. Recurring revenue, in line 
with the Company’s strategy, increased to 53% of total 
revenue in 2014, compared to 49% in the same period in 2013.
Gross profit increased by 55% from £17.8m to £27.6m, 
of which the new electricity offerings contributed £2.7m. 
Underlying EBITDA grew 64% from £11.8m to £19.3m, 
with the electricity offerings contributing £1.1m of this total. 
CASH AND BORROWINGS
SMS was delighted to announce in November 2014 an 
agreement with our existing lenders, Barclays Bank plc 
(lead bank), Clydesdale Bank plc and Bank of Scotland plc 
(together, the “Lenders”), on a significant amendment to 
the existing long-term £105m revolving credit facilities (RCF) 
announced in March 2014. The RCF fund the purchase of 
meter assets as part of a phased installation programme in 
line with recent substantial contract wins. The result of the 
amendment was an increase in the loan-to-value ratio 
(i.e. the percentage of the value of each meter asset available 
to be funded through the RCF) from 85% to 100%. 
As at 31 December 2014, the Company had net debt 
of £57.3m compared to £33.3m in 2013, cash resources 
including unused facilities of £47.5m compared to £11.7m 
in 2013 and gearing of 159% (2013: 147%). 
Capital investment in meters in 2014 was £34.5m compared 
to £23.3m in 2013.
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 £30.0m as at 
31 December 2014 (2013: £28.2m). The interest rate swap results 
in a fixed interest rate of 2.80–2.82%. The termination date for 
the derivatives is 15 September 2016.
Glen Murray
Finance Director  Corporate
 go v ernance
14 Board of Directors
16 Corporate governance statement
17 Directors’ remuneration report
19 Directors’ report
20 Directors’ responsibilities statement CORPORATE GOVERNANCE
Smart Metering Systems plc
Annual report and accounts 2014 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 FTSE 250 
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.
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 A R N
Date of appointment 24 December 2009
Committees A R N
Date of appointment 1 January 2011
Committees A R N Strategic report Corporate governance Financial statements
Smart Metering Systems plc
Annual report and accounts 2014 15
Miriam is a partner in SPARK Advisory 
Partners, a corporate advisory boutique, 
a Non-executive Director of Mithras 
Investment Trust plc, Eclipse Shipping 
and a trustee of Fiscal Affairs Scotland. 
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
Audit Committee A
Remuneration Committee R
Nomination Committee N
Committee Chair
Date of appointment 3 February 2014
Committees A R N
A proven executive with a track record 
of delivering outstanding results 
in complex environments. 
Willie is Chairman and Non-Executive 
Director at Fallago Rig and a Non-
executive Director at Business Stream 
where he also chairs the Remuneration 
Committee. He is also a Non-executive 
of Grove Ltd, the Jersey based 
healthcare company.
In 2012 he acted as non-executive/CEO 
of May Gurney PLC, which was AIM listed. 
Here he led a significant turnaround after 
a profits warning, which culminated 
in the sale of the business to Kier PLC. 
This turnaround received The Times 
Turnaround of the year award. 
During 2009 to 2012 Willie was the main 
Board Director of EAGA PLC, a FTSE 
250 energy services company, which 
after successfully entering the green 
energy sector was sold to Carillion PLC.
As a member of the Scottish Power 
Executive Team (Energy Retail Director) 
he successfully led Scottish Power 
through the deregulation of the UK 
energy market. He played a major role 
in the integration of Scottish Power and 
Iberdrola. Scottish Power’s successful 
metering business was part of his portfolio.
Willie had involvement at the highest 
level with the last two UK governments 
utilising experience and skills on a variety 
of working groups with strategic and 
operational dimensions reporting to the 
UK Energy Minister/Director Generals.
Willie MacDiarmid
Non-executive Director
Date of appointment 14 April 2014
Committees A R N CORPORATE GOVERNANCE
Smart Metering Systems plc
Annual report and accounts 2014 16
Corporate governance statement
Paul Dollman 
Miriam 
Greenwood
Willie 
MacDiarmid 
(Chair)
Remuneration 
Committee
Paul Dollman  
 (Chair)
Alan Foy
Miriam 
Greenwood
Willie 
MacDiarmid
Nomination 
Committee
Miriam Greenwood 
(Chair)
Paul Dollman 
Willie 
MacDiarmid
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 UK Corporate Governance Code, as modified by the 
recommendations of the Quoted Companies Alliance (QCA). 
BOARD STRUCTURE
During the year the Company had three 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 hold eight Board meetings per annum.
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 Miriam 
Greenwood (Chair) who succeeded Nigel Christie, Paul Dollman 
and Willie MacDiarmid. 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 
Willie MacDiarmid (Chair), Paul Dollman (previously Chair) 
and Miriam Greenwood. 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 UK Corporate Governance 
Code guidelines.
NOMINATION COMMITTEE
During the year the Nomination Committee was chaired 
by Paul Dollman and also comprised Miriam Greenwood, 
Willie MacDiarmid 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 Chairs 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.
* Glen Murray attends Audit Committee meetings by invitation. Strategic report Corporate governance Financial statements
Smart Metering Systems plc
Annual report and accounts 2014 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 
Director Willie MacDiarmid, Paul Dollman Non-executive 
Chairman and Non-executive Director Miriam Greenwood.
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 their annual fee and that 
their 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 2014 2013
basic salary Bonus contribution in kind Total Total
£ £ £ £ £ £
Executive
S P Timoney — — — — — 48,335
A H Foy 319,507 100,000 15,732 4,090 439,329 422,121
G Murray 103,200 50,000 5,160 1,489 159,849 131,169
Non-executive
K J Lyon — — — — — 67,080
P Dollman 75,000 — — — 75,000 10,333
N B Christie 21,475 — — — 21,475 51,540
M Greenwood 33,333 — — — 33,333 —
W MacDiarmid 30,000 — — — 30,000 —
Total 582,515 150,000 20,892 5,579 758,986 730,578
DIRECTORS’ INTERESTS
The Directors who held office at 31 December 2014 had the following interests in the shares of the Company:
Ordinary shares
2014 2013
£0.01p each £0.01p each
Executive
A H Foy 8,889,958 8,889,958
G Murray — —
Non-executive
P Dollman 10,000 —
M Greenwood 10,000 —
W MacDiarmid — —
8,909,958 8,889,958 CORPORATE GOVERNANCE
Smart Metering Systems plc
Annual report and accounts 2014 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 35,974 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
Glen Murray exercised 3,500 approved share options during the year.
The share price at 31 December 2014 was 395p. The range in the period 1 January to 31 December 2014 was 301.25p 
to 425.5p.
Details of share options granted by the Company at 31 December 2014 are given in note 25. 
Directors’ remuneration report continued Strategic report Corporate governance Financial statements
Smart Metering Systems plc
Annual report and accounts 2014 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 2014.
PRINCIPAL ACTIVITIES
The principal activity of the Group during the year was that 
of an integrated metering services company that connects, 
owns, operates and maintains current generation and new 
advanced metering assets and databases.
The subsidiary undertakings principally affecting the profits 
and net assets of the Group in the year are listed in note 12 
of the consolidated accounts and 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 2014 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 20 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
P Dollman Non-executive Chairman 7 November 2013
N B Christie Non-executive Director 27 May 2011 14 April 2014
A H Foy Chief Executive 24 December 2009
M Greenwood Non-executive Director 3 February 2014
W MacDiarmid Non-executive Director 14 April 2014
G Murray Finance Director 1 January 2011
CHARITABLE AND POLITICAL DONATIONS
During the year the Group made charitable donations of £2,880 
(2013: £7,421).
No political donations were made during the year (2013: £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 payables of the Group 
at 31 December 2014 were equivalent to 39 (2013: 36) days’ 
purchases, based on the average daily amount invoiced 
by suppliers during the year.
SUBSTANTIAL SHAREHOLDINGS
On 1 February 2015, the Company had been notified, in accordance with sections 791 to 828 of the Companies Act, 
of the following interests in the ordinary share capital of the Company:
Name of holder Number % held
S P Timoney 15,144,344 17.70%
Liontrust Asset Management 9,455,257 11.05%
A H Foy 8,889,958 10.32%
Cazenove Capital Management 8,834,738 10.32%
Old Mutual Asset Manager (UK) 6,652,138 7.77%
Standard Life Investments 6,613,750 7.73%
Legal & General Investment Management 5,071,600 5.93%
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
Finance Director
13 March 2015 CORPORATE GOVERNANCE
Smart Metering Systems plc
Annual report and accounts 2014 20
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. Financial 
statements
22 Independent auditor’s report 
23  C o n s o l i d at e d s t at e m e nt 
of comprehensive income
24  C o n s o l i d at e d s t at e m e nt 
of financial position
25  C o n s o l i d at e d s t at e m e nt 
of changes in equity
26  C o n s o l i d at e d s t at e m e nt  
of cash flows
27 Accounting policies
33 Notes to the financial statements
50 Parent company balance sheet
51  Notes to the parent company 
financial statements  FINANCIAL ST A TEMENTS
Smart Metering Systems plc
Annual report and accounts 2014 22
Independent auditor’s report 
To the members of Smart Metering Systems plc
We have audited the group and parent company financial statements (“the financial statements”) which comprise the 
Consolidated Statement of Comprehensive Income, the Consolidated Statement of Financial Position, the Consolidated 
Statement of Changes in Equity, the Consolidated Statement of Cash Flows, the Parent Company Balance Sheet, and the 
related notes. 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, 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/auditscopeukprivate.
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 2014 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 MATTER 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 matters where the Companies Act 2006 requires us 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 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. 
Andrew Allchin (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
13 March 2015 Strategic report Corporate governance Financial statements
Smart Metering Systems plc
Annual report and accounts 2014 23
2014 2013
Notes £’000 £’000
Revenue 2 42,386 27,916
Cost of sales 3 (14,766) (10,101)
Gross profit 27,620 17,815
Administrative expenses 3 (14,832) (9,625)
Other operating income 3 215 —
Profit from operations 3 13,003 8,190
Attributable to:
Operating profit before exceptional items 14,795 8,452
Amortisation of intangibles (1,155) (262)
Exceptional items and fair value adjustments 3 (637) —
Finance costs 6 (2,015) (1,122)
Finance income 6 30 403
Profit before taxation 11,018 7,471
Taxation 7 (225) (896)
Profit for the year attributable to equity holders 10,793 6,575
Other comprehensive income — —
Total comprehensive income 10,793 6,575
The profit from operations arises from the Group’s continuing operations.
Earnings per share attributable to owners of the parent during the year:
Notes 2014 2013
Basic earnings per share (pence) 8 12.71 7.86
Diluted earnings per share (pence) 8 12.23 7.43
Consolidated statement of comprehensive income 
For the year ended 31 December 2014  FINANCIAL ST A TEMENTS
Smart Metering Systems plc
Annual report and accounts 2014 24
2014 2013
Notes £’000 £’000
Assets
Non-current
Intangible assets 10 10,932 2,018
Property, plant and equipment 11 91,277 57,382
Investments 12 83 —
102,292 59,400
Current assets
Inventories 14 1,211 2,504
Trade and other receivables 15 9,474 6,099
Cash and cash equivalents 16 4,285 2,073
Other current financial assets 20 — 207
14,970 10,883
Total assets 117,262 70,283
Liabilities
Current liabilities
Trade and other payables 17 15,140 8,879
Bank loans and overdrafts 18 7,904 3,933
Commitments under hire purchase agreements 19 90 3
Other current financial liabilities 20 70 —
23,204 12,815
Non-current liabilities
Bank loans 18 53,645 31,475
Commitments under hire purchase agreements 19 64 6
Deferred tax liabilities 22 4,395 3,395
58,104 34,876
Total liabilities 81,308 47,691
Net assets 35,954 22,592
Equity
Share capital 24 856 838
Share premium 9,291 8,971
Other reserve 26 4,258 1
Treasury shares 25 (92) —
Retained earnings 21,641 12,782
Total equity attributable to equity holders of the parent company 35,954 22,592
The financial statements on pages 23 to 52 were approved and authorised for issue by the Board of Directors and signed 
on its behalf by:
Glen Murray Company Registration Number
Director SC367563
13 March 2015 
Consolidated statement of financial position
As at 31 December 2014 Strategic report Corporate governance Financial statements
Smart Metering Systems plc
Annual report and accounts 2014 25
Share Share Other Treasury Retained
Attributable to the owners capital premium reserve shares earnings Total
of the parent company: £’000 £’000 £’000 £’000 £’000 £’000
As at 1 January 2013 833 8,653 1 — 7,109 16,596
Total comprehensive income 
for the year — — — — 6,575 6,575
Transactions with owners 
in their capacity as owners:
Dividends (note 9) — — — — (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
Total comprehensive income 
for the year — — — — 10,793 10,793
Transactions with owners 
in their capacity as owners:
Dividends (note 9) — — — — (2,174) (2,174)
Shares issued 18 320 4,257 — — 4,595
Shares held by SIP — — — (92) — (92)
Share options — — — — 240 240
As at 31 December 2014 856 9,291 4,258 (92) 21,641 35,954
See notes 25 and 26 for details of the Treasury shares and Other reserve.
Consolidated statement of changes in equity
For the year ended 31 December 2014  FINANCIAL ST A TEMENTS
Smart Metering Systems plc
Annual report and accounts 2014 26
2014 2013
£’000 £’000
Cash flow from operating activities
Profit before taxation 11,018 7,471
Finance costs 1,738 1,122
Finance income (30) (26)
Fair value movement on derivatives 277 (377)
Depreciation 4,526 2,754
Amortisation 1,155 262
Share-based payment expense 148 644
Movement in inventories 1,636 (2,131)
Movement in trade and other receivables 1,709 (2,961)
Movement in trade and other payables 3,159 826
Cash generated from operations 25,336 7,584
Taxation (220) (206)
Net cash generated from operations 25,116 7,378
Investing activities
Payments to acquire property, plant and equipment (35,779) (24,595)
Disposal of property, plant and equipment 52 563
Payments to acquire intangible assets (539) (364)
Acquisition of subsidiary (12,632) —
Cash acquired with subsidiary 3,420 —
Finance income 30 26
Net cash used in investing activities (45,448) (24,370)
Financing activities
New borrowings 33,003 17,830
Capital repaid (6,862) (2,875)
Hire purchase repayments (10) —
Finance costs (1,738) (1,122)
Net proceeds from share issue 325 323
Dividend paid (2,174) (1,546)
Net cash generated from financing activities 22,544 12,610
Net increase in cash and cash equivalents 2,212 (4,382)
Cash and cash equivalents at the beginning of the financial year 2,073 6,455
Cash and cash equivalents at the end of the financial year (note 16) 4,285 2,073
Consolidated statement of cash flows
For the year ended 31 December 2014 Strategic report Corporate governance Financial statements
Smart Metering Systems plc
Annual report and accounts 2014 27
The Company is incorporated and domiciled in the UK. The Group’s activities consist of integrated metering services 
that connects, owns, operates and maintains current generation and new advanced metering assets and databases.
BASIS OF PREPARATION 
The consolidated financial statements have been prepared on a historical cost basis, except where otherwise stated. 
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. The financial 
statements have been prepared on a consolidated basis with December 2013, with no changes to the accounting framework 
adopted or accounting policies applied.
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 2014 of £47.5m.
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 the following 
Group undertakings being UK Gas Connection Limited, UK Meter Assets Limited, UKMA (AF) Limited, UK Data Management 
Limited and Utility Partnership 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). Utility Partnership Limited was acquired during 
the year and acquisition accounting has been applied to this transaction. 
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.
UPL Italia SRL is deemed immaterial to the Group as a whole and, as a result, has not been consolidated within these 
financial statements.
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 and acquisitions and 
business combinations. 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.
When an acquisition arises the group is required under IFRS 3 to calculate the Purchase Price Allocation (“PPA”). The PPA 
requires companies to report the fair value of assets and liabilities acquired and it establishes useful lives for identified assets.
Subjectivity is involved in PPA with the estimation of the future value of technology, customer relationships and goodwill. 
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 Group fulfils its contractual obligations to customers by supplying services. 
Accounting policies  FINANCIAL ST A TEMENTS
Smart Metering Systems plc
Annual report and accounts 2014 28
METER RENTAL INCOME
Rental income is recognised when the Group 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.
UTILITY CONNECTION
Revenue from 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 Group is contractually entitled to it. Data provision income is invoiced 
in advance and is recognised on a straight line basis 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 
consolidated statement of comprehensive income.
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.
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.
Accounting policies continued  Strategic report Corporate governance Financial statements
Smart Metering Systems plc
Annual report and accounts 2014 29
FINANCIAL LIABILITIES CONTINUED 
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 consolidated statement of comprehensive income 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 consolidated statement of comprehensive income 
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; if 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 administrative expenses disclosed in the consolidated 
statement of comprehensive income.
Intangible assets acquired as part of a business combination are recognised outside goodwill if the asset is separable or 
arises from contractual or other legal rights and its fair value can be measured reliably.
Intangible assets are amortised over their useful lives as follows:
Software  12.5% and 20% straight line
Customer contracts 20%
Useful lives are examined on an annual basis and adjustments, where applicable, are made on a prospective basis.   FINANCIAL ST A TEMENTS
Smart Metering Systems plc
Annual report and accounts 2014 30
GOODWILL
Goodwill arising on consolidation represents the excess of the consideration transferred and the fair value of the 
identifiable assets and liabilities of the acquiree at the date of acquisition. Goodwill on acquisitions of subsidiaries is included in 
‘intangible assets’. Goodwill is not amortised but is tested annually for impairment and is carried at cost less accumulated 
impairment losses. See note 13 for detailed assumptions and methodology. Impairment losses are not subsequently reversed.
Goodwill is allocated to cash-generating units for the purpose of impairment testing. The allocation is made to those 
cash-generating units or groups of cash-generating units that are expected to benefit from the business combination 
in which the goodwill arose identified according to operating segment.
Provisional fair values are adjusted against goodwill if additional information is obtained within one year of the acquisition 
date, about facts or circumstances existing at the acquisition date. Other changes in provisional fair values are recognised 
through profit or loss.
Changes in contingent consideration arising from additional information, obtained within one year of the acquisition date, 
about facts or circumstances that existed at the acquisition date are recognised as an adjustment to goodwill. Other changes 
in contingent consideration are recognised through profit or loss, unless the contingent consideration is classified as equity. 
In such circumstances, changes are recognised within equity.
IMPAIRMENT
At each reporting date, the Group reviews the carrying amounts of its property, plant and equipment and intangibles 
to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication 
exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). 
Where the asset does not generate cash flows that are independent from other assets, the Group estimates 
the recoverable amount of the cash-generating unit (CGU) to which the asset belongs. 
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated 
future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments 
of the time value of money and the risks specific to the asset for which the estimates of future cash flows have been adjusted.
If the recoverable amount of an asset (or CGU) is estimated to be less than its carrying amount, the carrying amount 
of the asset (or CGU) is reduced to its recoverable amount. An impairment loss is recognised as an expense immediately.
Where an impairment loss subsequently reverses, the carrying amount of the asset (CGU) is increased to the revised 
estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount 
that would have been determined had no impairment loss been recognised for the asset (CGU) in prior years. A reversal 
of an impairment loss is recognised as income immediately.
Detailed assumptions with regard to discount, growth and inflation rates are set out in note 13 to the accounts.
Accounting policies continued  Strategic report Corporate governance Financial statements
Smart Metering Systems plc
Annual report and accounts 2014 31
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 consolidated statement of comprehensive income as incurred. 
Depreciation is calculated on a straight line basis over the estimated useful life of the asset as follows:
Freehold property   2% on cost 
Short leasehold property  15% and 20% on cost 
Plant and machinery   5% and 10% on cost 
Fixtures, fittings & equipment 15% and 33% on cost
Motor vehicles   25% 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 consolidated statement of comprehensive income 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.
Property, plant and equipment are initially recorded at cost.
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 consolidated statement of financial position comprises 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 consists 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 property, plant and equipment 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 
consolidated statement of comprehensive income. 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 consolidated statement of comprehensive income on a straight line basis over the lease term.
All other leases are operating leases and the annual rentals are charged to the consolidated statement of comprehensive 
income on a straight line basis over the lease term.  FINANCIAL ST A TEMENTS
Smart Metering Systems plc
Annual report and accounts 2014 32
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 consolidated statement of comprehensive income 
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 consolidated 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.
Deferred tax assets include temporary differences related to employee benefits settled via the issue of share options. 
Recognition of the deferred tax assets assumes share options will have a positive value at the date of vesting, which 
is greater than the exercise price.
STANDARDS AND INTERPRETATIONS
At the date of authorisation of these financial statements, the following standards and interpretations which have not been 
applied in these financial statements were in issue but not yet effective:
Periods commencing
Standard or interpretation on or after
IFRS 2 Amendment Share-based payment 1 July 2014
IFRS 3 Amendment Business combinations 1 July 2014
IFRS 8 Amendment Operating segments 1 July 2014
IFRS 16 Amendment Property, plant and equipment 1 July 2014
IFRS 24 Amendment Related party disclosures 1 July 2014
IFRS 38 Amendment Intangible assets 1 July 2014
IFRS 9 Amendment Financial instruments 1 January 2018
IFRS 10/FRS 28 Amendment Consolidated financial statements 1 January 2016
IFRS 12 Amendment Consolidation 1 January 2016
IFRS 11 Amendment Joint ventures 1 January 2016
IFRS 14 Regulatory deferred accounts 1 January 2016
IFRS 15 Reverse from contracts with customers 1 January 2016
IAS 1 Amendment Disclosures 1 January 2016
IFRS 7 Amendment Financial instruments 1 January 2016
Accounting policies continued  Strategic report Corporate governance Financial statements
Smart Metering Systems plc
Annual report and accounts 2014 33
1 BUSINESS COMBINATIONS
ACQUISITION OF UTILITY PARTNERSHIP LIMITED
On 14 April 2014, Smart Metering Systems acquired 100% of the issued share capital of Utility Partnership Limited (UPL). 
UPL is a manager of electricity meters in the UK and provider of electricity connections, design, meter installations, data 
management and energy management services.
The acquisition has been accounted for using the acquisition method. The fair value of the identifiable assets and liabilities 
of UPL as at the date of acquisition was:
Fair value Previous 
recognised on carrying 
acquisition value
£’000 £’000
Property, plant and equipment 2,539 2,539
Software 3,258 —
Customer contracts 2,160 —
Other financial assets 83 83
Inventories 344 344
Trade and other receivables 5,074 4,998
Cash and cash equivalents 3,420 3,420
Total assets 16,878 11,384
Trade and other payables (879) (879)
Deferred tax (1,137) —
Accruals and deferred income (1,966) (1,950)
Obligations under hire purchase agreements (106) (106)
Total liabilities (4,088) (2,935)
Total identifiable net assets at provisional fair value 12,790
Goodwill arising on acquisition 4,112
Total acquisition cost 16,902
Analysed as:
New shares in Smart Metering System plc 4,270
Cash paid 12,632
Total acquisition cost 16,902
Cash paid (12,632)
Acquisition costs (480)
Net cash acquired with the subsidiary 3,420
Total acquisition cost (9,692)
The provisional fair value has been updated to take into account cash balances which were anticipated would be paid out 
to the vendors at completion.
The consolidated statements include the results of UPL for the period from 14 April to 31 December 2014 during which time 
it contributed £7,461k to revenue and £715k to group profit for the period. 
SMS and UPL are highly complementary and the acquisition will enable significant growth opportunities by offering a full 
end-to-end dual fuel service, incorporating connections, meter assets installation, ownership and management, as well 
as data management services, to the respective gas and electricity customers of SMS and UPL. 
In addition to the above synergies, the acquisition adds energy management services to the Group’s activities.
The goodwill recognised above is attributed to the expected benefits of combining gas and electricity offerings.
Notes to the financial statements
For the year ended 31 December 2014  FINANCIAL ST A TEMENTS
Smart Metering Systems plc
Annual report and accounts 2014 34
1 BUSINESS COMBINATIONS CONTINUED
ACQUISITION OF UTILITY PARTNERSHIP LIMITED CONTINUED
The primary components of this residual goodwill comprise:
 › revenue synergies from dual fuel;
 › the workforce; and
 › new opportunities available to UPL as part of the larger AIM listed Group.
The identifiable intangible assets will be amortised as follows:
 › software – 20%
 › customer contracts – 20%
Transaction costs of £480k incurred on the acquisition have been included within exceptional items in the consolidated 
statement of comprehensive income.
2 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, electric meters and ADM™ units within the UK.
The installation of meters comprises installation of domestic and Industrial and Commercial gas meters and electricity 
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 2014 
and 31 December 2013:
Asset Asset Total
management installation Unallocated operations
31 December 2014 £’000 £’000 £’000 £’000
Segment/Group revenue 22,404 19,982 — 42,386
Cost of sales (3,712) (11,054) — (14,766)
Segment profit – Group gross profit 18,692 8,928 — 27,620
Items not reported by segment:
Other operating costs/income — — (8,299) (8,299)
Depreciation (4,200) — (326) (4,526)
Amortisation (746) — (409) (1,155)
Exceptional items and fair value adjustments — — (637) (637)
Profit from operations 13,746 8,928 (9,671) 13,003
Net finance costs (1,985) — — (1,985)
Profit before tax 11,761 8,928 (9,671) 11,018
Tax expense (225)
Profit for year 10,793
Notes to the financial statements continued
For the year ended 31 December 2014 Strategic report Corporate governance Financial statements
Smart Metering Systems plc
Annual report and accounts 2014 35
2 SEGMENTAL REPORTING CONTINUED
Asset Asset Total
management installation Unallocated operations
31 December 2013 £’000 £’000 £’000 £’000
Segment/Group revenue 13,803 14,113 — 27,916
Cost of sales (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/income — — (6,609) (6,609)
Depreciation (2,654) — (100) (2,754)
Amortisation (262) — — (262)
Profit from operations 8,312 6,587 (6,709) 8,190
Net finance costs (719) — — (719)
Profit before tax 7,593 6,587 (6,709) 7,471
Tax expense (896)
Profit for year 6,575
All revenues and operations are based and generated in the UK.
The Group has one major customer that generated turnover within each segment as listed below:
2014 2013
£’000 £’000
Customer 1 – Asset Management 9,847 7,677
Customer 1 – Asset Installation 5,089 4,901
14,936 12,578
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 2014 £’000 £’000 £’000
Assets reported by segment
Intangible assets 10,932 — 10,932
Plant, plant and equipment 88,504 — 88,504
Inventories 1,211 — 1,211
100,647
Assets not reported by segment 16,615
Total assets 117,262
Liabilities reported by segment
Bank loans 61,549 — 61,549
Obligations under hire purchase agreements 154 — 154
61,703
Liabilities not reported by segment 19,605
Total liabilities 81,308  FINANCIAL ST A TEMENTS
Smart Metering Systems plc
Annual report and accounts 2014 36
2 SEGMENTAL REPORTING CONTINUED
SEGMENT ASSETS AND LIABILITIES CONTINUED
Asset Asset Total
management installation operations
31 December 2013 £’000 £’000 £’000
Assets reported by segment
Intangible assets 2,018 — 2,018
Plant, plant and equipment 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
3  INCOME STATEMENT BY NATURE AND ITEMS OF EXPENDITURE INCLUDED IN THE CONSOLIDATED STATEMENT 
OF COMPREHENSIVE INCOME
2014 2013
£’000 £’000
Revenue 42,386 27,916
Direct rental costs (3,712) (2,575)
Direct subcontractor costs (6,125) (6,220)
Other direct sales costs and systems rental (4,929) (1,312)
Staff costs (6,549) (4,474)
Depreciation:
– owned assets (4,447) (2,723)
– leased assets (79) (31)
Amortisation (1,155) (262)
Other operating income 215 —
Auditor’s remuneration: 
– as auditor (68) (51)
– other services (179) (29)
Exceptional costs and fair value adjustments (637) —
Operating lease costs:
– plant and equipment (5) (1)
Other operating charges (1,713) (2,048)
Profit from operations 13,003 8,190
Finance costs (2,015) (1,122)
Finance income 30 403
Profit before taxation 11,018 7,471
Included in exceptional items and fair value adjustments expenses are: i) £Nil (2013: £(377,143)) relates to the interest rate hedge 
fair value adjustment and ii) £Nil (2013: £644,275) that relates to share-based payments. £Nil (2013: £Nil) restructuring debt, 
£479,691 (2013: £Nil) acquisition costs and £157,500 (2013: £Nil) redundancy costs. Exceptional items totalling £267,000 
have been re-classified under their statutory headings as the Board consider this to better reflect the nature of these costs. 
Included within other direct sales costs and systems rental are staff costs of £2,245,000 (2013: £Nil).
Notes to the financial statements continued
For the year ended 31 December 2014 Strategic report Corporate governance Financial statements
Smart Metering Systems plc
Annual report and accounts 2014 37
3  INCOME STATEMENT BY NATURE AND ITEMS OF EXPENDITURE INCLUDED IN THE CONSOLIDATED STATEMENT 
OF COMPREHENSIVE INCOME CONTINUED
Auditors’ remuneration can be analysed as:
2014 2013
£’000 £’000
Statutory group audit (Baker Tilly UK Audit LLP) 56 39
Statutory parent audit 12 12
Taxation services (Baker Tilly Tax and Accounting Limited) 13 15
Corporate finance (Baker Tilly Corporate Finance LLP) 157 —
Non-statutory audit services (Baker Tilly UK Audit LLP) 9 14
247 80
4 PARTICULARS OF EMPLOYEES
The average number of staff employed by the Group, including Executive Directors, during the financial year was:
2014 2013
Number Number
Number of administrative staff 20 9
Number of operational staff 208 76
Number of sales staff 5 5
Number of IT staff 12 4
Number of Directors 2 2
247 96
The aggregate payroll costs, including Executive Directors, of the employees were:
2014 2013
£’000 £’000
Wages and salaries 7,654 3,364
Social security costs 734 384
Staff pension costs 145 64
Share-based payment 240 644
Director pension costs 21 18
8,794 4,474
5 DIRECTORS’ EMOLUMENTS
The Directors’ aggregate remuneration in respect of qualifying services were:
2014 2013
£’000 £’000
Emoluments receivable 711 589
Fees 21 52
Value of Group pension contributions to money purchase schemes 5 5
Other pension 16 15
753 661
2014 2013
Emoluments of highest paid Director £’000 £’000
Total emoluments 423 387
Pension contributions 16 15  FINANCIAL ST A TEMENTS
Smart Metering Systems plc
Annual report and accounts 2014 38
5 DIRECTORS’ EMOLUMENTS CONTINUED
The number of Directors who accrued benefits under Company pension schemes was as follows:
2014 2013
Number Number
Money purchase schemes 1 1
6 FINANCE COSTS AND FINANCE INCOME 
2014 2013
£’000 £’000
Finance costs
Bank loans and overdrafts 1,731 1,121
Interest rate hedge fair value 277 —
Hire purchase 7 1
Total finance costs 2,015 1,122
Finance income
Bank interest receivable 30 26
Interest rate hedge fair value — 377
Total finance income 30 403
7 TAXATION
2014 2013
£’000 £’000
Analysis of charge in the year
Current tax:
Current income tax expense 372 —
Over provision in prior year — 11
Total current income tax 372 11
Deferred tax:
Origination and reversal of temporary differences (147) 885
Tax on profit on ordinary activities 225 896
The charge for the period can be reconciled to the profit per the consolidated statement of comprehensive income as follows:
Profit before tax 11,018 7,471
Tax at the UK corporation tax rate of 21% (2013: 23%) 2,314 1,718
Expenses not deductible for tax purposes 121 19
Adjustments to tax charge in respect of previous periods 132 3
Change in tax rate — (844)
Deferred tax on share options (2,342) —
Tax expense in the income statement 225 896
Notes to the financial statements continued
For the year ended 31 December 2014 Strategic report Corporate governance Financial statements
Smart Metering Systems plc
Annual report and accounts 2014 39
8 EARNINGS PER SHARE
The calculation of EPS is based on the following data and number of shares: 
2014 2013
£’000 £’000
Profit for the year used for calculation of basic EPS 10,793 6,575
Amortisation of intangible assets 1,155 262
Exceptional costs 637 —
Tax effect of adjustments (394) (64)
Earnings for the purpose of adjusted EPS 12,191 6,773
Number of shares 2014 2013
Weighted average number of ordinary shares for the purposes of basic EPS 84,887,262 83,606,102
Effect of potentially dilutive ordinary shares:
– share options 3,370,617 4,898,694
Weighted average number of ordinary shares for the purposes of diluted EPS 88,257,879 88,504,796
Earnings per share:
– basic (pence) 12.71 7.86
– diluted (pence) 12.23 7.43
Adjusted earnings per share:
– basic (pence) 14.36 8.10
– diluted (pence) 13.81 7.65
The Directors consider that the adjusted earnings per share calculation gives a better understanding of the Group’s earnings 
per share.
9 DIVIDENDS
2014 2013
£’000 £’000
Equity dividends
Paid during the year:
Dividends on equity shares £0.0255 (2013: £0.0185) 2,174 1,546
Total dividends 2,174 1,546  FINANCIAL ST A TEMENTS
Smart Metering Systems plc
Annual report and accounts 2014 40
10 INTANGIBLE ASSETS
Customer
Goodwill contracts Development Software Total
£’000 £’000 £’000 £’000 £’000
Cost 
As at 1 January 2013 — — 828 1,810 2,638
Additions — — 364 — 364
As at 31 December 2013 — — 1,192 1,810 3,002
Additions — — 356 183 539
Additions as part of UPL acquisition 4,112 2,160 — 3,258 9,530
As at 31 December 2014 4,112 2,160 1,548 5,251 13,071
Amortisation
As at 1 January 2013 — — 17 705 722
Charge for year — — 27 235 262
As at 31 December 2013 — — 44 940 984
Charge for year — 332 77 746 1,155
As at 31 December 2014 — 332 121 1,686 2,139
Net book value
At 31 December 2014 4,112 1,828 1,427 3,565 10,932
At 31 December 2013 — — 1,148 870 2,018
At 1 January 2013 — — 811 1,105 1,916
11 PROPERTY, PLANT AND EQUIPMENT
Freehold/
leasehold 
property
Plant and 
machinery
 Fixtures, 
fittings and
 equipment
Motor
vehicles Total
£’000 £’000 £’000 £’000 £’000
Cost
As at 1 January 2013 103 39,220 416 — 39,739
Additions 33 24,467 95 — 24,595
Disposals — (687) — — (687)
As at 31 December 2013 136 63,000 511 — 63,647
Additions 5 35,715 214 — 35,934
Additions as part of UPL acquisition 1,990 — 437 112 2,539
Disposals — (69) — — (69)
As at 31 December 2014 2,131 98,646 1,162 112 102,051
Depreciation
As at 1 January 2013 30 3,429 176 — 3,635
Charge for year 20 2,654 80 — 2,754
Disposals — (124) — — (124)
As at 31 December 2013 50 5,959 256 — 6,265
Charge for year 56 4,200 236 34 4,526
Disposals — (17) — — (17)
As at 31 December 2014 106 10,142 492 34 10,774
Net book value
At 31 December 2014 2,025 88,504 670 78 91,277
At 31 December 2013 86 57,041 92 163 57,382
At 1 January 2013 73 35,791 92 148 36,104
Notes to the financial statements continued
For the year ended 31 December 2014 Strategic report Corporate governance Financial statements
Smart Metering Systems plc
Annual report and accounts 2014 41
11 PROPERTY, PLANT AND EQUIPMENT CONTINUED
HIRE PURCHASE AGREEMENTS
Included within the net book value of £91,277,000 (2013: £57,382,000; 2012: £36,104,000) is £208,000 (2013: £84,000; 
2012: £115,000) 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 £79,000 (2013: £31,000; 2012: £31,000).
The assets are secured by a bond and floating charge (note 18).
12 FINANCIAL ASSET INVESTMENTS
Shares in Group 
undertaking
Unlisted 
investments Total
£’000 £’000 £’000
Cost
As at 1 January 2013 and 31 December 2013 — — —
Additions as part of UPL acquisition 43 40 83
As at 31 December 2014 43 40 83
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
Utility Partnership Limited Wales Ordinary shares 100% Electricity utility 
management
UPL Italia SRL* Italy Ordinary shares 100% Electricity utility 
management
* The shareholding in this company is indirect via a subsidiary company.
13 IMPAIRMENT OF GOODWILL AND INTANGIBLES WITH INDEFINITE LIVES
Goodwill arising on acquisitions is allocated to cash-generating units comprising the acquired businesses. 
The directors believe the cash-generating units comprise the following operating segments, which represent the smallest individual 
groups of assets generating cash flows. Goodwill has been allocated between the Group’s operating segments as follows:
Group
Metering
and data
Utility services
and energy Total
As at 1 January 2014 — — —
Arising on acquisition 2,921 1,191 4,112
As at 31 December 2014 2,921 1,191 4,112
In assessing value in use, the estimated future cash flows of each operating segment are discounted to their present value 
using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to 
the asset. The estimated cash flows are derived by discounting future cash flows that are based on conservative growth and 
attrition rates and discounted at a rate of 8.2%.
The value in use calculated at 31 December 2014 was £20.0m. Comparing this to the net asset value of the operating 
segments identified above, the directors believe the value of goodwill is not impaired as 31 December 2014. 
The accounting treatment resulted in an impairment loss of £nil.  FINANCIAL ST A TEMENTS
Smart Metering Systems plc
Annual report and accounts 2014 42
14 INVENTORIES
2014 2013
£’000 £’000
Finished goods 913 1,737
Consumables 298 767
1,211 2,504
15 TRADE AND OTHER RECEIVABLES
2014 2013
£’000 £’000
Trade receivables 3,588 3,326
Prepayments 542 246
Accrued income 4,816 1,885
Other receivables 70 32
Income tax repayable 57 47
VAT recoverable 401 563
9,474 6,099
The receivables above include the following amounts falling due after more than one year:
2014 2013
£’000 £’000
Accrued income 1,172 —
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. The allowance for doubtful receivables or 
provision against accrued income in the year was £33,414 (2013: £Nil; 2012: £Nil). The ageing profile of trade receivables 
past due date is shown below:
2014 2013
£’000 £’000
31–60 days 210 299
60–90 days 156 401
Over 90 days 151 198
517 898
Allowance for doubtful receivables (33) —
484 898
Trade receivables are non interest-bearing and are generally on 30–90 days terms. 
Trade receivables due from related parties at 31 December 2014 amounted to £Nil (2013: £Nil; 2012: £Nil). 
Receivables are all in Sterling denominations. 
The Directors are of the opinion that £33,000 of the overdue debts as at 31 December 2014 (2013: £Nil; 2012: £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 2014 Strategic report Corporate governance Financial statements
Smart Metering Systems plc
Annual report and accounts 2014 43
16 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:
2014 2013
£’000 £’000
Cash 4,285 2,073
4,285 2,073
17 TRADE AND OTHER PAYABLES
2014 2013
£’000 £’000
Current
Trade payables 7,767 4,569
Other payables 428 15
Other taxes 861 249
Income tax 377 —
Deferred income 1,623 291
Accruals 4,084 3,755
15,140 8,879
The Directors consider that the carrying amount of trade and other payables approximates to their fair value.
The maturity profile of trade payables is given below:
2014 2013
£’000 £’000
Current 5,326 4,026
31–60 days 1,099 160
60–90 days 539 58
Over 90 days 803 325
7,767 4,569
Trade payables are non interest-bearing and are normally settled on 30–45 day terms.
All trade liabilities are Sterling denominated.
18 BANK LOANS AND OVERDRAFTS
2014 2013
£’000 £’000
Current
Bank loans 7,904 3,933
Bank overdraft — —
7,904 3,933
Non-current
Bank loans 53,645 31,475
Bank overdraft — —
53,645 31,475
Bank loans at 31 December 2014 relate to a term loan facility of £105.0m that was finalised in March 2014.
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 14 March 2019. The term loan attracts interest at a rate of 1.9% over the three month LIBOR. 
0.76% 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 20).  FINANCIAL ST A TEMENTS
Smart Metering Systems plc
Annual report and accounts 2014 44
19 COMMITMENTS UNDER HIRE PURCHASE AGREEMENTS
Future minimal commitments under hire purchase agreements are as follows:
2014 2013
£’000 £’000
Current
Amounts payable within one year 90 3
Non-current
Amounts payable between two to five years 64 6
Amounts payable after more than five years — —
64 6
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.
20 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.
2014 2013
£’000 £’000
Other financial assets — 207
Non-current liabilities
Other financial liabilities 70 —
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 £30,000,000 as at 31 December 2014 
(2013: £28,200,000; 2012: £13,200,000).
The interest rate swap results in a fixed interest rate of 2.80–2.82%.
The termination date for the derivatives is 15 September 2016.
The movement in the fair value is shown below:
2014 2013
£’000 £’000
Interest rate swap
Opening position 207 —
Adjustment to fair value (277) 207
Closing position (70) 207
Notes to the financial statements continued
For the year ended 31 December 2014 Strategic report Corporate governance Financial statements
Smart Metering Systems plc
Annual report and accounts 2014 45
20 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 2014, the Group held the following financial instruments measured at fair value:
31 December 
2014 Level 1 Level 2 Level 3
Liabilities measured at fair value £’000 £’000 £’000 £’000
Financial liabilities at fair value through the statement 
of comprehensive income:
Interest rate derivatives 70 — 70 —
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 2014, 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.
21 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
2014 1% 195
2013 1% 72  FINANCIAL ST A TEMENTS
Smart Metering Systems plc
Annual report and accounts 2014 46
21 FINANCIAL RISK MANAGEMENT CONTINUED
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 financial
liabilities liabilities Total
£’000 £’000 £’000
2014 30,153 31,550 61,703
2013 28,209 7,208 35,417
1 January 2013 13,213 7,249 20,462
The fixed rate financial liabilities relate to the portion of the banking facility that is fixed through hedging instruments.
The following is the maturity profile of the Group’s financial liabilities as at 31 December:
2014 2013
£’000 £’000
Fixed rate
Less than one year 3,090 2,824
Two to five years 12,063 11,286
Over five years 15,000 14,099
30,153 28,209
Variable rate
Less than one year 4,603 1,086
Two to five years 19,618 4,344
Over five years 7,329 1,778
31,550 7,208
INTEREST RATE RISK PROFILE OF FINANCIAL ASSETS
The Group’s financial assets at 31 December 2014 comprise cash and trade receivables. The cash balance of £4,285,000 
(2013: £2,073,000; 2012: £6,455,000) 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 £8,278,000 (2013: £5,211,000; 2012: £2,786,000) 
as disclosed in note 15 – 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.
Notes to the financial statements continued
For the year ended 31 December 2014 Strategic report Corporate governance Financial statements
Smart Metering Systems plc
Annual report and accounts 2014 47
21 FINANCIAL RISK MANAGEMENT CONTINUED
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.
22 DEFERRED TAXATION
The movement in the deferred taxation liability during the period was:
2014 2013
£’000 £’000
Opening deferred tax liability 3,395 2,510
Increase in provision through consolidated statement of comprehensive income 1,000 885
Closing deferred tax liability 4,395 3,395
All movements identified have gone through the statement of comprehensive income.
The Group’s provision for deferred taxation consists of the tax effect of temporary differences in respect of:
2014 2013
£’000 £’000
Excess of taxation allowances over depreciation on property, plant and equipment 5,330 3,385
Tax losses available (37) (38)
Deferred tax asset on share options (2,021) —
Deferred tax on intangible acquired as part of UPL 1,137 —
Fair value of interest rate swaps (net) (14) 48
4,395 3,395
The deferred tax included in the consolidated statement of comprehensive income is as follows:
2014 2013
£’000 £’000
Accelerated capital allowances 1,945 597
Tax losses 1 201
Deferred tax asset on share options (2,021) —
Movement in fair value of interest rate swaps (55) 87
(130) 885  FINANCIAL ST A TEMENTS
Smart Metering Systems plc
Annual report and accounts 2014 48
23 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 (2013: £41,500; 2012: £41,500) to the Directors’ pension scheme, 
Eco Retirement Benefit Scheme, for the use of certain premises. Alan Foy is a trustee of the scheme. At the year-end date, 
an amount of £4,150 (2013: £4,150; 2012: £4,150) was outstanding in this regard.
During the year, the Group paid dividends to Alan Foy of £226,694 and Paul Dollman and Miriam Greenwood of £94 each.
Remuneration of key management which includes Executive and Non-executive Directors together with certain 
management personnel:
2014 2013
£’000 £’000
Salaries and other short-term employee benefits 1,122 1,101
24 SHARE CAPITAL
2014 2013
£’000 £’000
Allotted and called up:
85,575,452 ordinary shares of £0.01 each (2013 and 2012: 83,877,872 ordinary shares of £0.01 each) 856 839
On 14 April 2014 1,246,277 shares were issued in part consideration of acquisition of Utility Partnership Limited.
On 23 September 2014 401,176 ordinary share options were exercised and subsequently sold by staff.
On 13 October 2014 7,175 ordinary share options were exercised and subsequently sold by staff.
On 27 October 2014 518 ordinary share options were exercised and subsequently sold by staff.
On 23 December 2014 42,434 ordinary share options were exercised and subsequently sold by staff, 3,500 of them 
by Glen Murray.
25 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.
Notes to the financial statements continued
For the year ended 31 December 2014 Strategic report Corporate governance Financial statements
Smart Metering Systems plc
Annual report and accounts 2014 49
25 SHARE-BASED PAYMENTS CONTINUED
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
2014 Granted Exercised Lapsed
At 
31 December 
2014
Exercise 
price
 (pence)
Date
exercisable
Expiry
date
CSOP 565,794 — (336,503) — 229,291 76.0 15/7/14 15/7/21
CSOP 39,088 — — — 39,088 153.5 28/5/15 28/5/22
Unapproved 2,979,060 — — — 2,979,060 60.0 20/6/16 20/6/21
Unapproved 1,162,629 — — — 1,162,629 153.5 28/5/17 28/5/22
Unapproved 179,375 — (114,800) — 64,575 60.0 28/6/13 28/6/23
Unapproved — 1,430,965 — — 1,430,965 350.0 12/11/14 12/11/24
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 2014:
Unapproved Plan
Option strike price (£) 3.50
Share price (£) 3.95
The weighted average fair value of share options issued during the year was £3.50.
SHARE INCENTIVE PLAN
The Company introduced the Smart Metering Systems Share Incentive Plan (“the SIP”) in October 2014. Participants, which 
could include directors, in the SIP are entitled to purchase, at market value, up to a prescribed number of 1p ordinary shares 
in the Company at the end of each month for which they will receive a like for like matching share. 
A total of 24,382 were purchased in the market by the 163 employees who participated in the SIP during the year. 
As 31 December 2014 the SIP held 24,382 shares on their behalf.
26 OTHER RESERVE
This is a non-distributable reserve that initially arose by applying merger relief under s162 CA06 to the shares issued in 2009 
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”. Additionally, the premium arising on the issue of shares as part of the acquisition 
of Utility Partnership Limited has been credited to this reserve as required by Companies Act 2006.
27 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:
2014 2013
£’000 £’000
Future minimal commitments under operating lease agreements are as follows:
Payable within one year 271 205
Payable within two and five years 375 411
Payable after five years 259 135
905 751
28 ULTIMATE CONTROLLING PARTY
There is no ultimate controlling party by virtue of the structure of shareholdings in the Group.
29 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.  FINANCIAL ST A TEMENTS
Smart Metering Systems plc
Annual report and accounts 2014 50
2014 2013
Notes £’000 £’000
Fixed assets
Investments 2 16,902 —
Current assets
Debtors 3 — 11,241
Creditors
Amounts falling due within one year 4 (492) —
Net current (liabilities/assets) (492) 11,241
Total assets less current liabilities 16,410 11,241
Capital and reserves
Called up share capital 6 856 839
Share premium 7 13,548 8,971
Profit and loss account 7 2,006 1,431
Equity shareholders’ funds 16,410 11,241
The parent company financial statements on pages 50 to 52 were approved and authorised for issue by the Board of Directors 
and signed on their behalf by:
Glen Murray Company Registration Number
Director SC367563
13 March 2015 
Parent company balance sheet 
As at 31 December 2014 Strategic report Corporate governance Financial statements
Smart Metering Systems plc
Annual report and accounts 2014 51
Notes to the parent company financial statements
For the year ended 31 December 2014
1 PARENT COMPANY ACCOUNTING POLICIES
BASIS OF ACCOUNTING
The parent company financial statements have been prepared under the historical cost convention, and in accordance 
with applicable accounting standards.
No separate income statement is provided for Smart Metering Systems plc as permitted by section 409(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 2014 —
Additions 16,902
At 31 December 2014 16,902
Net book value
At 31 December 2014 16,902
At 31 December 2013 —  FINANCIAL ST A TEMENTS
Smart Metering Systems plc
Annual report and accounts 2014 52
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
Utility Partnership Limited Wales Ordinary shares 100% Electricity utility 
management
UPL Italia SRL* Italy Ordinary shares 100% Electricity utility 
management
* The shareholding in this company is indirect via a subsidiary company.
3 DEBTORS AMOUNTS FALLING DUE WITHIN ONE YEAR
2014 2013
£’000 £’000
Amounts owed by Group undertakings — 11,241
— 11,241
4 CREDITORS AMOUNTS FALLING DUE WITHIN ONE YEAR
2014 2013
£’000 £’000
Other creditors 492 —
5 RELATED PARTY TRANSACTIONS
The Company had no material related party transactions to disclose 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
2014 2013
£’000 £’000
Allotted and called up:
85,575,452 ordinary shares of £0.01 each (2013: 83,877,872 ordinary shares of £0.01 each) 856 839
7 RESERVES
Profit and Share Share
loss reserve premium capital
£’000 £’000 £’000
As at 1 January 2014 1,431 8,971 839
Retained earnings 2,750 — —
Share issue — 4,577 17
Dividend paid (2,175) — —
As at 31 December 2014 2,006 13,548 856
Notes to the parent company financial statements 
continued
For the year ended 31 December 2014   Smart Metering Systems plc Annual report and accounts 2014
SMART METERING SYSTEMS PLC
2nd floor  
48 St. Vincent Street  
Glasgow G2 5TS
WWW.SMS-PLC.COM