EuroSite Power Reports Second Quarter 2021 Financial Performance
Post COVID recovery delivers net profit for both the second quarter and the six months to June 30, 2021
DERBY, UK, August 12, 2021 -- 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 a net profit of $135,601 for the second quarter 2021 compared to a net loss of $124,010 for the same period in 2020, an improvement of 209% and a first for the Company. Significantly the second quarter results also meant that the Company ends the first half of 2021 reporting a net profit of $30,633 compared to a loss of $211,978 for the first half of 2020. Importantly, although these results include a $128,816 tax refund from the UK authorities the second quarter still generated a net profit of $6,785 once this is omitted.
Revenues for the second quarter increased strongly by comparison to the first quarter of this year, the result of lockdown measures easing in the UK such that many sports and leisure sites reopened in mid-April although most hotels remained closed until the end of the quarter. Second quarter revenue closed at $1,123,535 compared to $832,988 for the first quarter of this year. By comparison second quarter 2020 revenue was 64% less at $409,601 but revenue for the pre-COVID 2019 second quarter was $1,073,462, some 4% less than in 2021.
In addition to revenue growth increased gross profit and lower expenses helped drive both cash generation and profitability during the second quarter of this year with a positive non-GAAP adjusted EBITDA of $258,582 compared to a negative non-GAAP adjusted EBITDA of $16,048 and $79,041 for the same periods in 2020 and 2019 respectively. First half 2021 non-GAAP adjusted EBITDA was a positive $381,381 compared to a positive $73,353 in 2020, an improvement of 420%.
Commenting on the Company’s performance Paul Hamblyn, Chief Operating Officer and Managing Director of the UK operating company said “We always knew our larger fleet had the potential to deliver higher revenue and ultimately profitability and with lockdown ending we saw many sites reopen and revenue bounce back almost immediately. To then see UK profitability return so quickly was a bonus, but it also gives us confidence about the outlook for the remaining half of the year”. He added “there remain many challenges ahead, particularly rebuilding our sales pipeline but the launch of our new Green CHP offer a few weeks ago has gone well and we are now recruiting new sales staff to help build on this success”.
“Posting out first net profit is a milestone for the Company and one that we aim to repeat now that COVID measure have eased and business begin to return to some sense of normality” said Dr Elias Samaras, Chief Executive Officer. “We know investors want more; more growth and more profit and we aim to deliver both as we recover from the challenges of the past year or so”.
Net profit, continued positive EBITDA and strong cash position
Second quarter 2021 net profit $135,601 compared to a net loss of $124,010 in the same period of 2020. This represents a swing of $259,611 or 209%; the first time the Company has reported a quarterly net profit.
A $30,633 net profit for the 6 months to June 30, 2021 comparing to a $211,978 net loss for the 6 months ending June 30, 2020
EBIT for the second quarter 2021 was a gain of $40,571 compared to a loss of $166,056 in the second quarter of 2020; the second time the Company has reported an EBIT profit
During the quarter the Company received a $128,816 tax incentive resulting from capital expenditure on the construction of CHP systems during the 2020 tax year. This is provided by the UK government and is known as an Enhanced Capital Allowance. The amount received is higher than the $59,128 claimed for the prior year due to greater capital expenditure during 2020. As the Enhanced Capital Allowance scheme which provides these refunds was withdrawn by UK government in April 2020 the Company expect this latest refund to be the last. Although the net profit reported for the second quarter 2021 includes this $128,816 tax benefit the Company would still have reported a net profit of $6,785 had this been excluded.
Second quarter EBITDA increased to a positive $245,319 in 2021 compared to a negative $22,490 in the second quarter 2020, an increase of 1190%. Adjusted non-GAAP EBITDA which excludes the cost of stock based compensation also increased to a positive $258,582 for Q2 2021 as compared to a negative $16,048 in Q2 2020
EBITDA for the first half of 2021 increased to a positive $366,655 compared to a positive $50,887 for the same period in 2020, an increase of 621%. Adjusted non-GAAP EBITDA also increased to a positive $381,381 for the first half of 2021 as compared to a positive $73,353 in 2020
Revenue increased 174% to $1,123,535 for the second quarter of 2021 compared to $409,601 for 2020, the result of COVID restrictions easing and many customer sites reopening
Overall gross profit including depreciation for the second quarter increased to $ 336,788 compared to $40,848 in 2020, an increase of 724%
Overall gross margin including depreciation was 30%, an improvement over the 10% posted for the second quarter 2020
Overall gross margin excluding depreciation and impairment improved to 48% for Q2 2021 compared to 45% for Q2 2020
GAAP diluted gain per share (EPS) was $0.002, an improvement over the $0.002 loss per share reported in 202019
Liquidity and cash position at June 30, 2021 remained strong at $2,095,358
Second quarter energy production increased by 152.4% to 13,004,177 kWh as compared 5,151,799 kWh for the same period in 2020. It also compared favourably to the 13,846,238 kWh generated pre-COVID in the second quarter 2019
Installed energy fleet capacity at June 30, 2021 totalled 48 systems at 45 sites totalling 6,012kWe compared to 40 systems at 38 sites totalling 5,100kWe at the end of June 2020. Of these, 48 systems totalling 5,295kWe are under contract as On-Site Utility Solutions with the balance owned by customers but maintained by the Company under long-term maintenance contracts
By the end of the second quarter all except four systems were back in operation following site closures due to COVID restrictions. Of these four systems all except one, The Brentwood Centre are expected to return to operation during the third quarter. The Brentwood Centre remains off due to the customer entering liquidation
The Company brought no new systems into operation during the quarter and it current backlog remains at zero
During the quarter Société Générale Equipment Finance terminated the master receivables funding arrangement the Company has had in place with it since 2015. This was not due to any action by the Company and the decision only impacts the Company’s ability to fund new projects. Any projects currently funded under this agreement continue based on the terms agreed. A similar funding arrangement with Close Brothers remains in place and management are exploring alternate funding solutions to replace the facility formerly provided by Société Générale
New business and strategic development
The Company signed no contracts during the second quarter but did participate in several public tender opportunities for energy systems using both CHP and solar PV technologies. It has also been rebuilding its sales pipeline away from its traditional hospitality and leisure sectors so badly hit by COVID
The Company launched its new Green CHP offer in June and is developing a number of new sales opportunities as a result. This new offer was also featured in a number of horizontal and vertical sector trade publications including The Energyst, Plant & Works Engineering and Brewers Journal and has been nominated for an Energy Innovation Award
A new Sales Support Associate was hired to support sales activity created by the launch of Green CHP and management have also begun the process of recruiting new business development staff to replace those roles removed as part of its COVID response
Outlook and risks
The UK operating company has now delivered a net profit for 14 out of the 24-month period ending June 30, 2021. Management now believe profitability at a UK level is possible, particularly from the beginning of the fourth quarter and is optimistic of financial year 2021 being profitable. This is due to the larger fleet size combined with the reopening of the economy, in part due to the success of the UK’s COVID vaccination programme. That’s said management remain cautious about the remainder of 2021.
Inflationary pressures are mounting with both labour and material costs increasing due to a combination of shortages of supply and the impact of Brexit on transportation cost and lead times. In addition, wholesale gas and electricity prices have risen sharply in recent months, and management expect this to begin affecting retail energy prices and gross margin from October onwards as several customer utility contracts are renewed
The underlying demand for low carbon on-site energy generation remains strong in the UK with many companies and organisations continuing to respond to the UK government’s policy to achieve net carbon zero by 2050. Further policy announcements are expected in the lead up to the UK’s hosting of the UN Climate Change Conference of the Parties (COP26), including a new Heat and Building Strategy setting out key policies for the decarbonisation of heat. While management believes this is likely to present an opportunity it will also contain risks, particularly for natural gas-fuelled CHP but the Company’s recent launch of its Green CHP offer is design to mitigate these risks. Management will continue to actively engage in the development of alternate technical and commercial solutions designed to exploit any opportunities offered by new policy developments
Other risks remain in the form of the availability of project credit, the impact of reducing grid electricity carbon emissions on future sales, future energy price changes and a narrowing spark spread, or unexpected equipment failures
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, 2020. 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.
For further information: Elias Samaras - Chief Executive Officer +44 800 028 8001 firstname.lastname@example.org
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.