EuroSite Power Reports Third Quarter 2019 Financial Performance
Increased revenue and reduced losses continue plus new sales announced
MACCLESFIELD, UK, November 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 third quarter revenues increased 15.8% to $ 888,249 compared to $ 767,020 for the third quarter 2018. Gross margin for the quarter ending September 30, 2019 reduced to 25.5% when compared to 28.9% for the same period in 2018 although this result was an improvement over the 16.8% reported for the second quarter of 2019. Net losses improved to a loss of $ 205,341 for the third quarter 2019 compared to a loss of $ 215,457 for the same quarter in 2018. The net loss for the nine months ending September 30, 2019 was $ 556,465 compared to a loss of $ 776,986 for the period ending September 30, 2018, an improvement of 28.4%.
In addition, the Company also reported that it has closed contracts for six sites, totalling 490kW of Combined Heat and Power solutions. Each of these agreements is for 15-years and provides the customer with a fully-funded On-Site Utility Solution delivering discounted energy costs alongside lower carbon emissions. These contract wins are in addition to the CHP Management contract award previously announced from Coca-Cola HBC Northern Ireland Limited, a subsidiary of Coca-Cola Hellenic Bottling Company.
Chief Operating Officer and Managing Director, Paul Hamblyn said, “The third quarter has always presented a challenge for our business as energy production falls due to lower demand for heat and hot water. The fact that we managed to grow our revenue is the result of work done to optimise our fleet the results of which can be seen in both the quarter’s energy production and revenue numbers. As we move forward this optimisation will have yet more positive effects.”
Commenting on the quarter’s results Chief Executive Officer, Dr Elias Samaras said “While some aspects of our third quarter performance saw an improvement over the prior year, we must also be honest and say that we had hoped to be further ahead at this time. That said the news of the recent contract award by Coca-Cola Hellenic Bottling Company and the Club Company contract win for five sites announced today provide the platform needed to achieve profitability. These wins also show that our focus on multi-site customers is now bearing fruit and I am confident our ever-growing sales pipeline will lead to further success”.
Revenues grow alongside reduced losses and new sales
Total revenue increased 15.8% to $888,249 for the third quarter 2019 compared to $767,020 for the third quarter 2018
At the UK operational level total revenue increased 22.4% to £ 720,644 for third quarter 2019 compared to £588,837 for the third quarter 2018. The difference in percentage revenue increase between the Company’s functional currency reporting in US Dollars ($) and the UK operating company’s functional currency of Sterling (£) continues to be the results of currency volatility resulting from continued Brexit uncertainty
OSU revenues within the UK operating company increased 19.6% to £695,032 for the third quarter 2019 compared to £581,012 for the same quarter last year
Overall gross profit including depreciation for Q3 2019 increased to $226,667 compared to $221,981 in Q3 2018, an increase of 2.1%.
Overall gross margin including depreciation decreased to 25.5% for Q3 2019 compared to 28.9% for Q3 2018
Overall gross margin excluding depreciation decreased to 40.9% for Q3 2019 compared to 47.2% for Q3 2018
The Company achieved a net loss for the third quarter 2019 of $205,341 compared to a net loss of $215,457 for the third quarter 2018, an improvement of 4.70%
After the EBITDA cash flow for the UK operating company recorded a loss for the second quarter 2019 this measure returned to a positive position for the quarter ending September 30, 2019 and totalled £21,766 ($26,828). This compares to a positive cash flow of £40,512 ($49,934) for the same quarter in 2018, with the reduction in EBITDA mainly due to continued contract losses from the individual turnkey project noted in the second quarter results.
Non-GAAP EBITDA cash flow for the third quarter 2019 was negative $37,230 compared to negative $19,944 in Q3 2018
Liquidity and cash position at September 30, 2019 remained strong at $2,593,803
On October 15, 2019 the Company announced that it had secured a CHP Management contract with Coca-Cola HBC Northern Ireland Limited, a subsidiary of Coca-Cola Hellenic Bottling Company, one of the largest bottlers of The Coca-Cola Company’s products worldwide
Today the Company announces that is has closed two 15-year contracts to provide On-Site Utility Solutions at 6 sites across the UK. The first contract with The Club Company will result in a total of 390kW of Combined Heat and Power solutions being installed at 5 of the 14 country club sites owned and operated by The Club Company. These clubs combine a traditional golf environment with state-of-the-art health and fitness facilities as well as hotel accommodation at 5 sites. The other contract was closed with Brentwood Leisure Trust and will deliver a 100kW Combined Heat and Power solution at The Brentwood Centre that provides local residents with a fitness centre, two swimming pools, a 12-court sports hall, a dedicated mixed martial arts centre and a 3G synthetic football pitch. Both customers will enjoy the immediate benefits of Combined Heat and Power solutions without the need for upfront capital investment
Total energy production increased by 12.7% to 12,342,215 kWh for quarter ended September 30, 2019 as compared to the same period in 2018
Operational fleet capacity at September 30, 2019 was 40 systems at 38 sites totalling 5,100kW (of which 717kW are non-OSU systems maintained for others). This compares to 39 systems at 36 sites totalling 4,710kW (511kW non-OSU) at the end of September 2018
The system at Wentworth Clubhouse remained offline during the third quarter 2019 however, after the quarter closed the Company reached an agreement in principal to terminate the current OSU agreement and transfer ownership of the system to the customer. In return the Company expects to receive a termination payment and to secure a long-term maintenance contract
Contracted backlog at September 30, 2019 - 7 systems totalling 1,021kW
The problems reported on the CEFAS Weymouth project continued to impact earnings in the third quarter with additional losses being recognised within the income statement. Although the Company reports that the extent of losses is now fully quantified it also reports that some final losses remain to be recognised within the fourth quarter
New business and strategic development
All the Head of Terms signed earlier this year have now either resulted in secured contracts or, in the case of one site the proposed solution failed to be offer a commercially viable solution for either the Company or prospective customer
Current sales pipeline totals 12,872kW of qualified multi-site projects, an increase of 3,549kW compared to the quarter ending June 30, 2019. This includes opportunities for major leisure club operators, hotel groups and non-UK projects for existing customer with sites outside of the UK
The Company hired a new Proposals Engineer to support the sales team in the preparation of customer proposals and pre-sales engineering activity
Continued engagement with London Stock Exchange ELITE programme
Outlook and risks
Management consider the overall outlook for financial performance for the remainder of 2019 to be good such that revenues should continue to grow as a result of fleet optimisation and additional systems that are forecast to be operational before year-end. In addition, the ongoing trend of rising utility prices could further boost revenues, however, increases in gas price could adversely impact margin. Risk remain in the form of unforeseen delays to system construction and increased costs as a result of falls in the value of Sterling
Changes to the charging structure for electricity transmission and distribution costs that started to apply in October 2019 have not dramatically impacted either revenue or margin but more time is needed to better assess the impact of these changes and so a risk remains
Equipment lead times have now extended to such an extent that recently secured contracts may not be able to be delivered until the second half of 2020. Management are investigating alternate sources of supply and working with existing equipment manufacturers to improve lead times
Continuing uncertainty about Brexit could further impact the value of Sterling and so impact the consolidation of earnings when reported by the Company
A further capital injection into the Blue Grid Gas & Power joint venture is likely to be needed before year-end. While the Company’s cash reserves would allow such an investment there is a risk that further new business success could place additional demands on working cash flow such that this could slow the implementation of future projects
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, 2018. 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.
Investor contact: Dr Elias Samaras
+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.