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”.    

HEADLINES

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

Operational performance

• 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

Future News Releases

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 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.

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, 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
elias.samaras@eurositepower.co.uk