EuroSite Power Reports 2019 Financial and Operational Performance
Increased gross profits and reduced losses helped by higher OSU revenue and lower operating expenses
..the profitable results delivered by our UK subsidiary during the first and fourth quarters of 2019 are more than encouraging..
MACCLESFIELD, UK, April 8, 2020 -- 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 an increase in full year gross profits in 2019 by 12.7% to $ 1,184,425 when compared to $ 1,051,116 in 2018, the result of gross margin increasing from 23.7% during 2018 to 26.5% in 2019. Together with an 8.8% fall in operating expenses this allowed the Company to report a 34.8% reduction in its operating losses from $ 870,689 in 2018 to $ 567,325 in 2019. Full year 2019 revenues increased 0.8% to $ 4,472,635 from $ 4,438,060, but this included an 11% increase in energy revenues from $3,787,045 in 2018 to $4,192,482 in 2019 and a 57% decline in turnkey revenues from $ 651,015 in 2018 to $ 280,153 in 2019 as the Company refocused its activity on its On-Site Utility Solution sales. Adjusted Non-GAAP EBITDA for the year ending December 31, 2019 was a positive $ 69,577 when compared to the positive $ 176,213 reported in 2018. Significantly the Company’s UK subsidiary reported a net profit during both the first and fourth quarters of 2019, a trend that is continuing.
Speaking about the Company’s full year results Dr Elias Samaras, Chief Executive Officer said “Net losses have improved again, and the profitable results delivered by our UK subsidiary during the first and fourth quarters of 2019 are more than encouraging, especially as profits have continued into the early part of 2020. We also remained cash positive in 2019 and with important contract wins late in the year the Company is now well positioned for the coming year. I am also pleased to report that the team have worked hard to diversify the technology behind our offer, and we are now offering both high efficiency chillers and solar PV systems using our proven as On-Site Utility Solutions”.
“Our focus on large multi-site opportunities provided success with a contract being signed with The Club Company for five country clubs across the UK and the contract agreed with Coca-Cola HBC in November now provides a platform to grow our business outside the UK” explained Paul Hamblyn, Chief Operating Officer and Managing Director of the UK operating company. “While we would have preferred stronger revenue growth during 2019 our work in progress now totals over 900kW of systems, many of which will come online early in 2020 so boosting energy generation and revenue creation. In addition, the work we have done to improve gross margin and control our operating costs will help boost returns, so the profitability first seen in 2019 is expected to continue into the new financial year”.
Losses reduce alongside growth in energy revenues and increased gross profit
The net loss from operations for the year ending December 31, 2019 reduced 34.8% to $ 567,325, compared to $870,689 for the year ending December 31, 2018
Total revenue increased 0.8% to $ 4,472,635 for the full year of 2019 compared to $ 4,438,060 for 2018
Energy revenue increased 11% to $4,192,482 for the year ending December 31, 2019 compared to $3,787,045 for the same period in 2018. Full year turnkey revenues fell from $ 651,015 in 2018 to $ 280,153 in 2019
Overall gross profit including depreciation for 2019 increased to $ 1,184,425 compared to $1,051,116 in 2018, an improvement of 12.8%
Overall gross margin including depreciation increased to 26.5% for the twelve months ending December 31, 2019 compared to 23.7% for the same period in 2018
Overall gross margin excluding depreciation and impairment improved to 39.1% for 2019 compared to 37.3% in 2018
Non-GAAP EBITDA reduced to a positive $ 69,577 for the full year of 2019, falling 60.5% when compared to the positive $ 176,213 achieved for the full year of 2018
UK operating company achieved gross profit in during January, February, March, October, November and December 2019 delivering a total £73,670 of profits
Additional financial headlines
Liquidity and cash position at December 31, 2019 remained strong at $ 1,881,974
Full year 2019 GAAP diluted loss per share (EPS) was $0.01, the same as for 2018
UK government Enhanced Capital Allowance tax incentive expected to net £ 47,667 ($ 63,144) for year ending December 31, 2019. This amount is higher than the prior year as a result higher capital expenditure on construction of CHP systems during the year. These monies are expected to be received during 2020 along with an earlier claim of £ 19,999 ($ 25,492) for the year ending December 31, 2018. Please note that the Enhanced Capital Allowance scheme which provides these cash refunds is being withdrawn by UK government in April 2020
As a post balance sheet event the Company made a further $ 550,000 capital injection into the Company’s 50% Joint Venture, FCN Energy Logistics Limited. This investment is to be used by its 100% owned subsidiary, Blue Grid Gas & Power to purchase LNG distribution assets in preparation for LNG supply contracts due for closure early in 2020 and to fund ongoing operating expenses
Total energy production increased by 7.0% to 59,348,234 kWh for the year ending December 31, 2019 as compared 55,490,051 kWh for the same period in 2018
Operational energy fleet capacity at year-end 2019 was 40 systems at 38 sites totalling 5,100kWe compared to 38 systems at 37 sites totalling 4,835kWe at the end of 2018. Of these 36 systems totalling 4,282kWe are under contract as On-Site Utility Solutions with the balance owned by customers, but maintained by the Company under a long-term maintenance contract
The Company signed contracts for 7 new systems totalling 592kW. These systems will be delivered to the International Convention Centre Wales, Brentwood Leisure Centre and five country clubs operated by The Club Company. Each system is secured on a 15-year On-Site Utility Contract and the total anticipated contracted revenues total $8.7 million
The contract for the 101kW system installed at the Wentworth Clubhouse was terminated by the customer as a result of alterations to the building that removed essential heat demand. Contract termination resulted in a termination payment to the Company and transfer of title to the customer. A new long-term maintenance contract has been offered, but it yet to be signed
The contract for two 5.5kW systems installed at the Hampton by Hilton Luton Airport was terminated by mutual consent following failure of the equipment rendering the units beyond economic repair
Contracts for two systems which were yet to be installed were cancelled following failure of the customer’s business and a further contract was cancelled by the Company after consent to install the system was denied by the necessary authorities. This removed 3 systems totalling 364kW from the Company’s declared contract backlog as of December 31, 2018.
The Company reached agreement with its customer to install a larger system at the Doubletree by Hilton Dunblane Hydro. This will increase the installed system capacity to 160kW
Contracted backlog at December 31, 2019 - 10 systems totalling 1,211kW
Achieved practical completion of the CEFAS Weymouth project and completed installation of the system at Dunstable Leisure Centre
Hired Chris Marsland as UK General Manager and director of the UK operating company
New business and strategic development
Signed a new 15-year OSU agreement for a 101kW solution at the Brentwood Leisure Centre, London.
Signed a new 15-year OSU agreement with The Club Company for five solutions. This contract is for a total 390kW being installed at country clubs in Bournemouth, Macclesfield, Reading, Warwick and Witham.
Signed a term sheet in December 2019 with a major UK hotel operator to provide CHP systems for at least two of their 31 properties
Hired a new proposal engineer to support the sales team by providing specialist technical expertise
Reviewed sales strategy to focus on large multi-site customers building a strong sales pipeline through development of a telemarketing led sales process
Participated in the London Stock Exchange’s ELITE programme, connecting growing companies with capital
Outlook and risks
The outlook for 2020 is uncertain as a result of the current Coronavirus crisis. While management is actively engaged in managing the evolving situation the Company is currently unable to quantify the impact to their plans for the year. Measures have been taken to secure all available support being provided by the UK government and the Company’s cash position is expected to provide sufficient liquidity. Management intend updating investors in more detail when announcing its first quarter 2020 results.
The Company intends rolling out its high efficiency chiller and solar PV offers from the start of the second quarter 2020
UK operating company has now delivered a net profit for five consecutive months – October, November, December 2019, January and February 2020. Management’s objective was to deliver profitability at the UK operating company level for financial year 2020, but the effect of the coronavirus crisis makes this less likely
Success of the Blue Grid Gas & Power Joint Venture remains a strategic focus for the year with management time and other resources being devoted to ensuring its continued growth
Management consider the overall outlook for financial performance in 2020 to be uncertain due to the impact of the coronavirus crisis. In addition, other risks remain in the form of future energy price changes and a narrowing spark spread, or unexpected equipment failures
EuroSite Power ended 2019 having achieved profitability at the UK operating company during January, February, March, October, November and December. A trend that has continued in January and February of 2020. It did not however, achieve its aim of achieving profitability at a UK level for the full year 2019. This was the result of losses made on a single turnkey project, a key project being delayed due to consent delays and new business being secured later in the year than originally planned. Looking to the future management believe that the combination of its existing fleet, the higher gross margin and secured new systems being brought into operation will deliver profitability. That said profitability is at risk due to the impact of the coronavirus crisis.
As previously announced, the Company intends to focus on organic growth but management will continue to maintain a watchful eye on any opportunities to acquire companies that align with the Company's overall aims by adding either capacity or 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 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.
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, 2019. 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.
Investor Contact: Dr Elias Samaras - CEO
+44 (0)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.