TWO Scottish engineers have netted windfalls totalling £17 million by selling stakes in their Glasgow-based gas meter technology firm ahead of a stock market flotation that will value the firm at £50m.
Stephen Timoney and Alan Foy sold shares in Smart Metering Systems to City institutions and other investors as part of the com-pany’s preparations for admission to the AIM market next month.
The buyers have also provided £10m in a placing completed by the company to help fund its ambitious growth plans.
The company hopes to win a big share of the market for the smart meters that ministers expect to play a key role in helping cut power consumption and related emissions in the UK.
The market is set for dramatic growth. Suppliers are required to make smart meters available to all commercial and industrial consumers by 2014 and all domestic users by 2019.
Mr Foy, the chief executive of the company, said the directors believe the novel metering technology offered by the firm will give it an important edge over rivals.
Smart Metering Systems has developed a device that can be used to send details of customers’ gas usage direct from their premises to suppliers every half-hour. The device can also send information to the web for use by customers.
He said investors appear to share his confidence.
“The placing has gone well and has been substantially oversubscribed in very difficult market conditions, demonstrating the strength of our business model.”
Several firms have pulled flotation plans in recent months.
Founded by its chairman, Mr Timoney, in 1995, Smart Metering Systems already provides meters and related customer and administration services for a range of gas suppliers. The customer base includes Centrica and Gazprom.
Mr Foy said the information provided by the new device could allow suppliers to get a much better idea of demand patterns. This will allow them to adapt their buying policies so that they avoid contracting to buy more gas than they need. They would also need to get fewer meters read by people on site.
Customers could use information from meters to highlight potentially wasteful spikes in consumption.
Mr Foy said the device could be attached easily to most modern meters.
“It’s ‘plug and play’ so unskilled people could fit it,” he said.
Mr Foy declined to give any estimate of the levels of sales and profitability that the firm might achieve.
However, noting that there are 22 million gas meters in place across the UK, Mr Foy said the market is huge.
The company rents its kit to suppliers and could develop a revenue stream stretching years into the future. The technology could be used on any fluid flow devices including water meters.
Mr Foy said there is obvious potential to expand into overseas markets.
He is confident these could be served effectively from Glasgow, where the company currently employs 41 staff.
The 44-year-old declined to say what he would do with his share of the £17m share sale proceeds. The bulk of this is likely to have gone to Mr Timoney, whose holding reduced from 75% to 30%. Mr Foy’s reduced to 16% from 25%.
Aged 46, Mr Timoney founded the group after spending 14 years in the pipelines and meters arm of British Gas and then working in gas marketing at Shell UK.
Mr Foy joined the company in 2004 after working in ScottishPower’s gas transportation and marketing business.
The company achieved under-lying profits of £2.2m on sales of £12.4m last year.
Dealings in the shares will start on AIM on July 6.
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