EuroSite Power Reports Second Quarter 2019 Financial Performance
Increased revenue and reduced losses provide platform for growth
MACCLESFIELD, UK, August 14, 2019 -- 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 second quarter revenues increased 12.7% to $ 1,073,462 compared to $ 952,418 for the second quarter 2018. Gross margin for the quarter ending June 30, 2019 reduced to 16.3% when compared to 25.7% for the same period in 2018, the result of exceptional losses incurred on a single turnkey project. Despite this, net losses improved by $173,330 from a loss of $ 435,387 for the second quarter 2018 to a loss of $ 262,056 for the second quarter 2019.
Commenting on the quarter’s results Chief Executive Officer, Dr Elias Samaras said “Second quarter performance can only be described as mixed. On one hand losses incurred on a single turnkey project resulted in lower gross profit and a negative EBITDA while G&A expenses reduced compared to the prior year. Overall the operational position improved compared to last year, but we recognise the need to eliminate the possibility of future turnkey losses. As a result, we remain focused on our strategy of developing multi-site OSU projects and diversifying our offer to include other energy generation technologies.”
Chief Operating Officer and Managing Director, Paul Hamblyn said, “The underlying performance of our OSU fleet remains strong with both increased energy generation and revenue posted in the second quarter. Moving forwards, we have built a strong pipeline of sales opportunities focused on our core expertise and sector experience. As these opportunities convert into signed contracts our OSU fleet will further grow so helping us meet both our short and long term goals.”
Revenues grow alongside reduced losses
Total revenue increased 12.7% to $1,073,462 for the second quarter 2019 compared to $952,418 for the second quarter 2018
At the UK operational level total revenue increased 19.3% to £835,232 for second quarter 2019 compared to £700,101 for the second quarter 2018. The difference in percentage revenue increase between the Company’s functional currency reporting in US Dollars ($) and the UK operating company’s functional currency of Sterling (£) is due to a 6.25% fall in the value of Sterling since June 30, 2018 resulting from continued Brexit uncertainty
OSU revenues within the UK operating company increased 4.7% to £733,116 for the second quarter 2019 compared to £700,010 for the same quarter last year
Overall gross profit including depreciation for Q2 2019 decreased to $175,415 compared to $244,474 in Q2 2018, a reduction of 28.2%, primarily due to losses incurred on a single turnkey project
Overall gross margin including depreciation decreased to 16.3% for Q2 2019 compared to 25.7% for Q2 2018
Overall gross margin excluding depreciation decreased to 29.6% for Q2 2019 compared to 40.5% for Q2 2018
OSU gross margin excluding depreciation decreased to 39.7% for second quarter 2019 compared to 45.2% for the same period on 2018, reflecting the cyclical higher cost of maintenance associated with planned maintenance activity at specific sites
General and Administrative expenses reduced by $245,759 to $214,547 for Q2 2019 compared to $460,306 for the second quarter 2018, the result of exceptional costs incurred in 2018 not reoccurring
The Company achieved a net loss for the second quarter 2019 of $262,056 compared to a net loss of $435,387 for the second quarter 2018, an improvement of 39.8%
EBITDA cash flow for the UK operating company was negative for the quarter ending June 30, 2019 totalling £19,702 ($25,322) due to exceptional losses incurred on a single turnkey project. This compares to a positive cash flow of £67,986 ($92,257) for the same quarter in 2018
Non-GAAP EBITDA cash flow for the second quarter 2019 was negative $79,041 compared to positive $10,973 in Q2 2018 although the Company remained non-GAAP EBITDA positive for the six months ending June 30, 2019
Liquidity and cash position at June 30, 2019 remained strong at $2,423,488
Total energy production increased by 2.7% to 13,846,238 kWh for quarter ended June 30, 2019 as compared to the same period in 2018
Brought into operation both the 70kW unit at Dunstable Leisure Centre and 200kW unit at CEFAS Weymouth
The two 5.5kW units installed at Hampton by Hilton Luton Airport were decommissioned during the quarter following an agreement with the customer to terminate their OSU contract
Operational fleet capacity at June 30, 2019 was 40 systems at 38 sites totalling 5,100kW (of which 717kW are non-OSU systems maintained for others). This compares to 37 systems at 34 sites totalling 4,199kW (4,098kW non-OSU) at the end of June 2018
The system at Wentworth Clubhouse remains offline awaiting completion of negotiations with the client that may result in a termination of the current OSU contract after refurbishment works undertaken by the client. If terminated the Company will expects to receive both a termination payment and long-term maintenance contract
Contracted backlog at June 30, 2019 - 6 systems, 920kW
The CEFAS Weymouth project incurred unexpected losses towards the end of construction, losses which are expected to impact future earnings in 2019 although the Company reports that it is confident the extent of losses have now been fully quantified
New business and strategic development
Signed Head of Terms for On-Site Utility agreements with two customers for a total of 7 systems totalling 2,450kW
Current sales pipeline totals 9,232kW of qualified multi-site projects. This includes opportunities for major leisure club operators, hotel groups and non-UK projects for a major multi-national FMCG manufacturer
Launched new website as part of an investment in improved sales and marketing content. A new investors microsite will follow within the next quarter
During the quarter the Company appointed a new UK General Manager and created a Chief Operating Officer role to enable senior management to focus on business and strategic development
After the quarter closed the Company hired a new Proposals Engineer to support the sales team in the preparation of customer proposals and pre-sales engineering activity
Blue Grid Gas & Power joint venture:
Secured natural gas trading permit from the Greek Energy Regulator
Signed general framework agreement with Scale Gas (Spanish subsidiary of Enagas group) to jointly form a logistics company that will own and operate small-scale LNG regasification terminals at customer sites
Signed MOU with the Mytilineos group to guarantee LNG supplies on a wholesale basis, so allowing Blue Grid to guarantee supply to its customers
Continued to work on the permitting requirement to allow the start of construction of the Genesis Hospital trigeneration scheme
Continued engagement with London Stock Exchange ELITE programme
Outlook and risks
Relative to 2018, the Company reports that there are a number of factors that could affect 2019 earnings. At a positive level these include the Company's ever-increasing operational fleet and the continued positive impact of more units being maintained in-house as their warranty periods end. In addition, the trend of rising utility prices is expected to continue so boosting revenue in the second half of the year. Less favourably the closure of the CRC Energy Efficiency Scheme and resultant increase to Climate Change Levy rates has proven to have marginally depressed carbon tax revenues and recent signs that the retail price spark spread is narrowing may adversely impact margins through the year. Proposed changes to the charging structure for electricity transmission and distribution costs in October 2019 have the potential to impact both revenue and margin of the Company’s OSU fleet although the full details of these changes are yet to be announced
Due to project and equipment lead time the Company reports that any new business secured this year is now unlikely to have a significant impact on 2019 earnings although, management are working with suppliers to minimise factory lead times
While the Company’s cash position remains strong any new business success could place demands on working cash flow and slow the implementation of projects. As a result, management is working on solutions to improve short-term liquidity
Continuing uncertainty about Brexit could further impact the value of Sterling and so impact the consolidation of earnings when reported by the Company. In addition, lead times for CHP equipment and spare parts may be extended in response to any changed border controls but management will continue to work with its supply chains to mitigate these impacts and minimise risk
Management consider the overall outlook for financial performance for the remainder of 2019 to be good although continued failure to secure early OSU contracts and the exceptional losses reports this quarter increase the risk that profitability could be impacted
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 at least 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 (OSU)
EuroSite Power sells the energy produced from an on-site 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 electricity or total energy produced by the system and receive either a guaranteed discount rate on the price of total energy or a fixed price for electricity. All system capital, installation, system maintenance and support are paid by EuroSite Power, and in the case of No Risk On-Site Utility solution customers all system fuel costs are also 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, 2017. 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.
Dr. Elias Samaras
+44 844 693 2848
Mr. Paul Hamblyn
+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.