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.”

HEADLINES
Strong revenue growth, higher gross margin and positive operating cash flow

• 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.

Operational performance

• 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.

Future News Releases

The Company would like to remind investors that in order to simplify and streamline news provided all financial results and news are only published on the Company’s website (http://investors.eurositepower.co.uk/news-releases). 

Anyone wishing to receive notice of a news release should subscribe to the email alerts service provided within the Company’s investors pages (http://investors.eurositepower.co.uk/email-alerts).

Alternative Reporting Standard

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.

On-Site Utility

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.

FORWARD-LOOKING STATEMENTS

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.