EuroSite Power Reports 2017 Financial and Operational Performance
Increased revenue and gross profit deliver full year positive cash flow
We began 2017 with the primary aim of delivering a positive operating EBITDA and we did it. The UK operation not only achieved a positive cash flow for the year but its net loss position also dramatically improved.
MACCLESFIELD, UK, Mar. 27, 2017 -- EuroSite Power Inc. (OTCPK: EUSP, the "Company") an On-Site Utility solutions provider, offering clean electricity, heat, hot water and cooling solutions to healthcare, hospitality, housing and leisure centers in the United Kingdom (UK) and Europe, reported full year revenues increased 47.6% at $3,655,168 in 2017 compared to $2,476,186 in 2016. Full year gross profits excluding depreciation and impairment in 2017 also increased to $1,360,966 compared to $898,860 in 2016, an improvement of 51.4.%. Adjusted Non-GAAP EBITDA for the year ending December 31, 2017 was a positive $34,944, an increase of 103% when compared to the loss of $1,165,534 in the year ending December 31, 2016. Full year operating EBITDA cash flow at the Company’s UK subsidiary increased 173% to £216,589 ($292,698) compared to a cash flow loss of £297,909 ($366,488).
Speaking about the Company’s full year results Dr Elias Samaras, Chief Executive Officer said “We began 2017 with the primary aim of delivering a positive operating EBITDA and we did it. The UK operation not only achieved a positive cash flow for the year but its net loss position also dramatically improved. At the consolidated level our Non-GAPP EBITDA was also positive. The team have worked hard to fulfil this objective and we are optimistic that the UK operation will achieve profitability during 2018.”
“Underlying this year’s performance is the fact that our operating fleet has now reached a critical mass.” explained Paul Hamblyn, Managing Director of the UK operating company. “With larger systems like Celtic Manor being added to the fleet early in 2017 we were able to reap the benefit in terms of higher revenues throughout the year. This, combined with our earlier decision to bring maintenance in-house also contributed to stronger margins. Elsewhere we also secured our first turnkey projects following the restructure of our business development activity and began the process of diversifying our offer with the aim of focusing on larger systems and multi-site customers.”
Total revenue increased to $3,655,168 (£2,826,998) in 2017 as compared to $2,476,186 (£1,822,073) for 2016, an increase of $1,178,982 (£1,004,924) or 47.6%
Overall gross profit including depreciation for the full year of 2017 increased to $720,474 compared to $287,355 in 2016, an improvement of 150.7%
Overall gross margin including depreciation improved to 19.7% for the year, compared with 11.6% in 2016, an increase of 8.1 percentage points
Full year overall gross profits excluding depreciation and impairment in 2017 increased to $1,360,966 compared to $898,860 in 2016, an improvement of 54.7%
Full year overall gross margin excluding depreciation and impairment in 2017 improved slightly to 37.2% as compared to 36.3% in 2016
UK operating subsidiary achieved a positive EBITDA cash flow for the year totalling £216,589 ($292,698) compared to a negative cash flow of £297,909 ($366,488) in 2016. This represents a swing of 172.7% or £514,499 ($695,294)
The Company achieved an adjusted Non-GAAP EBITDA loss for the year of $34,944 compared to a loss of $1,165,534 in 2016
Additional financial headlines
Energy revenue increased by 27.7% to $3,160,666 (£2,465,799) in 2017 as compared to $ 2,474,447 (£1,822,073) in 2016
Gross margin excluding depreciation and impairment on energy revenue increased from 36.3% for the full year in 2016 to 42.0% for 2017
Total revenue generated by new turnkey projects was $479,302 in 2017. No turnkey projects were not sold in 2016
Increased construction costs on the Company’s initial turnkey project resulted in losses on this project. As a result, the gross margin for turnkey projects was 5.7% in 2017. The second turnkey project has performed in line with expectation delivering a gross margin of >20% to date
Liquidity and cash position at December 31, 2017 remained strong at $3,414,032
Full year 2017 GAAP diluted loss per share (EPS) was $0.01 as compared to a loss of $0.03 in 2016
UK government Enhanced Capital Allowance tax incentive expected to net approximately £70k ($94.5k) for year ending 2017. During the year, a total of £336,748 was received in relation to earlier year claims. A further claim for 2016 totalling £72,086 was also made during 2017 and was paid in March 2018.
Total energy production increased by 30% to 49,374,475 kWh for year ended December 31, 2017 as compared to the same period in 2016
3 systems, totalling 470kW of production were brought into operation through 2017
Decommissioned and removed the 100kW Tecogen system at Dunstable Leisure Center following closure of the center and termination by the customer
Temporarily decommissioned the 101kW solution installed at Wentworth Clubhouse while the building undergoes refurbishment. This unit will be reinstated during Q2 2018
Operational fleet capacity at December 31, 2017 was 34 systems at 32 sites totalling 3,905kW. This compares to 33 systems at 31 sites totalling 3,635kW at the end of 2016
Contracted backlog at December 31, 2017 - 9 systems, 1,296kW
Since January 2018 a further 70kW system at Strood Leisure Center has been brought into operation and added to the fleet. In addition, the 101kW turnkey solution at Salt Ayre Leisure Center and 410kW turnkey solution at Guildford Spectrum have been commissioned
New business and strategic development
Closed new On-Ste Utility agreements with:
Medway City Council for a 70kW system at Strood Leisure Centre and a 125kW system at Medway Park Leisure Centre
The Celtic Manor Resort for an additional 125kW system to be installed at their main Golf Clubhouse
Closed new turnkey projects orders for:
410kW solution at Guildford Spectrum for Guildford Borough Council
101kW solution at Salt Ayre Leisure Centre for Unify Group
Closed new 15-year Maintenance and Service Agreement to cover the newly installed system at Salt Ayre Leisure Centre
Restructured business development team to focus OSU activity on larger systems and multi-site customers and build turkey project business with a focus on public sector tendered projects
Since January 2018 the Company has reached agreement and completed a 50% initial investment in a Cypriot Joint Venture called FCN Energy Logistics Limited. This JV will exploit new market opportunities in Greece for both natural gas supplies and CHP solutions through its 100% owned subsidiary, Blue Grid Gas & Power
Acquisition strategy continues to identify and explore target companies
Outlook and 2018 targets – operational profitability, strategic growth and renewed focus on new sales
UK operating company delivered a net profit in January 2018. Management’s objective is to deliver profitability at the UK operating company level in 2018
Management consider the overall outlook for financial performance in 2018 as good although it highlights that risks remain in the form of future energy price changes and a narrowing spark spread, or unexpected equipment failures
Management further considers that the Company’s fleet size has now achieved critical mass and that the outlook for fleet performance and energy generation is strong as Wentworth Clubhouse is due to be reinstated and new start-ups are expected throughout the first half of the year. Additionally, the larger replacement MAN engine at The Dome in Doncaster will further boost energy production at this site
The new Joint Venture with FCN Energy Logistics Limited, also announced today is a strategic focus for the year with management time and other resources being devoted to ensure it grows its sales pipeline and closes its first OSU equivalent contract during 2018
The Company intends recruiting a new service technician during 2018 in order to support the increasing number of TEDOM systems coming out of warranty and switching to in-house maintenance and a new sales executive will be recruited to further improve the sales pipeline and increase closure rates on new business opportunities
Management continues to believe that Brexit remains a risk both in terms of general business confidence and inflationary pressure
EuroSite Power ended 2017 having achieved its primary objective. The positive EBITDA recorded by its UK operating company demonstrates that critical mass has now been passed and with an operating fleet capable of delivering positive cash flows there remains an underlying momentum towards profitability. Additional gross profit from turnkey projects can help boost this position but Management accept they must remain vigilant to ensuring that turnkey projects are sold and managed correctly.
Relative to 2017, the Company reports that there continues to be a number of factors that could affect 2018 earnings. At a positive level these include the Company's ever larger operating fleet, its increasing use of the more electrically efficient TEDOM equipment and the positive impact of more units being maintained in-house. Less favourably there is some uncertainty around changes to the retail price spark spread through changes in both electricity and gas pricing. In particular, the UK regulator (Ofgem) have announced a review of many of the regulated non-energy costs included in retail electricity prices. This could result in changes to retail prices or the reduction or possible abolition of some or all of the avoided costs shared as revenue by the Company. Any adverse price changes will likely adversely impact margins through the year.
Strategically, the joint venture with FCN Energy Logistics Limited is a priority for the Company. Early indications are that a sales pipeline of suitable projects is being quickly established but uncertainty around sources of project funding could delay initial projects being closed. Blue Grid Gas & Power’s application for a gas supply license is a priority for the year.
Acquisitions remain on the agenda for the Company. While certain potential transactions proved inconclusive in 2017 the Company continues to investigate several targets. As previously stated, these targets align with the Company's overall aims of adding both capacity and capability to its existing operation.
The Company now files its financial statements under the Alternative Reporting Standard (ARS). Financial reports, which are prepared in accordance with US GAAP, are generally provided within 45 days of period end (90 days for fiscal year end results) and are reported to maintain the OTC Pink Limited Information tier.
Following corporate reorganisation and de-registration of the Company’s common stock, with effect from January 1, 2017 foreign exchange gains/losses are reported in the cumulative translation adjustment (CTA) account on the Company’s balance sheet.
Fiscal year-end financial reports for the operating company, EuroSite Power Limited are audited by a PCAOB registered firm and the Company provides current information for the purposes of SEC Rules 144(c)(2) and 10b-5 using the OTC Disclosure & News Service. Financial statements for EuroSite Power Limited are prepared in accordance with UK GAAP, and consequently differences in accounting treatment and presentation may arise.
EuroSite Power sells the energy produced from an onsite energy system to an individual property as an alternative to the outright sale of energy equipment. On-Site Utility solution customers only pay for the energy produced by the system and receive a guaranteed discount rate on the price of the energy. All system capital, installation, operating expenses and support are paid by EuroSite Power.
About EuroSite Power
The Company provides institutional, commercial and small industrial facilities with clean, reliable power, cooling, heat and hot water at lower costs than charged by conventional energy suppliers – without any capital or start-up costs to the energy user. More information can be found at www.eurositepower.co.uk.
This press release contains forward-looking statements under the Private Securities Litigation Reform Act of 1995 that involve a number of risks and uncertainties. Important factors could cause actual results to differ materially from those indicated by such forward-looking statements, as disclosed on the Company’s website and in financial statements held by OTC markets for the fiscal year ended December 31, 2016. This press release does not constitute an offer to buy or sell securities by the Company, its subsidiaries or any associated party and is meant purely for informational purposes. The statements in this press release are made as of the date of this press release, even if subsequently made available by the Company on its website or otherwise. The Company does not assume any obligation to update the forward-looking statements provided to reflect events that occur or circumstances that exist after the date on which they were made.
SOURCE: EuroSite Power Inc.
For further information: Dr Elias Samaras
Chief Executive Officer
+44 844 693 2848
Dr Elias Samaras is the founder, president and managing director of Digital Security Technologies S.A. He was also the founder and president of Plefsis Information Systems S.A. and City Messengers. Elias holds a Master of Science degree from MIT, a Doctor of Philosophy from Columbia University in New York, where he was also a professor for several years and an OPM from Harvard Business School.
Chief Operating Officer
Paul Hamblyn is Chief Operating Officer of EuroSite Power Ltd with responsibility for strategic and new business development of the business.Paul is highly experienced in the energy sector having built an enviable track record prior to joining EuroSite Power. This includes strategic level roles with Corona Energy and the ENER-G Group including 3 years as the Managing Director of ENER-G Efficiency.A leading expert on UK carbon regulation Paul is a regular speaker at major conferences including those organised by the Major Energy Users Council, the Local Government Association and the Westminster Energy Forum. He is also a formerCouncil Member of the Energy Services and Technology Association (ESTA). Paul is a CIBSE accredited Low Carbon Consultant and Energy Assessor as well as principal author of the award-winning CRC Toolkit developed for the London Energy Project.
UK General Manger
Chris Marsland is UK General Manger of EuroSite Power Ltd. He leads the UK operational company and directs its operational and administrative functions. Prior to joining Eurosite Power, Chris built up years of sector expertise in senior positions including the role of Technical Director at Centrica Business Solutions, formerly ENER-G Combined Power Limited. He also Chaired the Association for Decentralised Energy Commercial Forum and is an Association Board Member. Chris earned a first-class bachelor’s degree in electronic engineering and is both a Chartered Engineer and Fellow of the Institute of Engineering & Technology.
Financial Controller & Company Secretary
Laura Chambers is EuroSite Power Ltd’s Financial Controller and Company Secretary. An experienced finance professional, Laura has undertaken financial planning and analysis roles at number of blue-chip businesses including Astra Zeneca. She also spent 7 years at Kellogg’s European Finance Services Centre (EFSC). Qualified as a Chartered Accountant at KPMG’s Manchester office, Laura brings strong organisational skills and broad finance experience to the team.
Head of Operations
Stephen Butler is EuroSite Power Ltd’s Head of Operations. Having joined the company in 2012 as Chief Engineer, Stephen has moved through the business into his current role. With an impressive resume that includes senior mechanical engineering roles at Thames Water and ENER-G Combined Heat and Power Ltd, Stephen brings strong operational, project management and technical experience to the team. He is a Technician Member of the Institution of Engineering and Technology (TMIET).
UK Sales Manager
Martin Evans is our UK Sales Manager. A well-known and seasoned energy sector specialist, he brings a wealth of commercial experience - from start-ups to corporate level engagement – to our team. With a career spanning over 30 years, he has spent much of his career in technology led businesses and manufacturing including aviation and automotive. Martin’s previous roles at cutting-edge low carbon businesses including Grid Beyond, WEMS International and EnergyQuote JHA have given him a unique insight into the challenges faced by many of the UK’s most intensive energy users. He has also amassed over 15 years direct experience in commercial asset finance. Martin studied Applied Chemistry at the University of Manchester.
Mark Brown is our Account Manager. An experienced energy sector professional - particularly in the fields of CHP and renewable technologies - Mark has worked in engineering and technical roles for over 20 years. This includes 11 years at Cogenco UK (now fully integrated into Veolia’s CHP business). A great communicator with a positive approach to creative problem solving and troubleshooting, Mark is a key member of our customer-facing team. He holds qualifications from the Institute of Leadership and Management.
Jacques de Saussure
Non-Executive Chairman of the Board
Jacques de Saussure was Senior Managing Partner of the Pictet Group from 2010 until June 2016 after being elected partner of Pictet in 1987. Founded in Geneva in 1805, Pictet Group is one of Europe’s leading independent wealth and asset managers with EUR 437 billion of assets under management and custody as of 31 December 2015. Jacques is a member of the board of the Swiss Bankers Association and has also served as Vice Chairman of the Swiss Stock Exchange, which merged into SIX group in 2008, where he remained member of the board until 2010. Jacques holds a Master’s degree from MIT’s Sloan School of Management.
Dr Ahmed F. Ghoniem
Dr. Ahmed F. Ghoniem has been a member of our Board of Directors since January 2011. He is the Ronald C. Crane Professor of Mechanical Engineering at the Massachusetts Institute of Technology (MIT). He is also the director of the Center for 21st Century Energy and the head of Energy Science and Engineering at MIT, where he plays a leadership role in many energy-related activities, initiatives and programs. Ahmed holds a Ph.D. in Mechanical Engineering from the University of California, Berkeley, and an M.S. and B.S. in Mechanical Engineering from Cairo University.
Joan Giacinti is the founder and Chief Executive Officer of Sofratesa Group with headquarters in Santo Domingo, Dominican Republic. Joan is also a founder of Aerodom, a concessionaire chosen by the Dominican government to develop, operate and manage airports in the Dominican Republic, which in 2008 was acquired by Advent International. He is the President of the Caribbean region of the French Trade Councils, “Conseillers du Commerce Exterieur” and the President for the Americas of the Forum Francophone des Affaires (FFA). He is also decorated with the Ordre national du Mérite by the President of the French Republic. Joan is a graduate from the École des Hautes Études Commerciales de Paris (HEC).
Marcel Cassard joined Deutsche Bank in 1997 where he is now a member of the Global Markets Executive Committee and Global Head of Fixed Income and Economics Research. Marcel also heads the Bank’s Global Macro Strategy Group, which advises the Board and clients on broad market risks and global economic and financial developments. Previously, Marcel spent five years at the International Monetary Fund. Previous to that, he was an Economist at the Council of Economics Advisers in the Executive Office of the U.S. President. Marcel holds a PhD in Economics from Columbia University.
Mr. Stelios Zavvos
Stelios Zavvos is the Founder and CEO of Zeus Capital Management, a private equity group. With over 35 years of corporate, finance and real estate experience, Stelios is also the Founder and CEO of Continental American Capital, an investment group that focused on real estate investment and financing in the USA. He has served as a Member of the Board of Directors of the NASDAQ listed Star Bulk Carriers Corp, serving on the Board’s Audit Committee. He has also held executive positions in blue-chip companies such as Citibank, Johnson & Johnson and Procter & Gamble. SteliosZavvos holds an MBA from Harvard Business School and an MSc in Civil Engineering.