DERBY, UK, November 14, 2022 -- 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 up 16.9% at $1,238,092 as compared to the $1,058,798 posted for the same quarter in 2021. Overall, revenues for the nine months ending September 30 were $4,139,122, up 37.3% from the $3,015,321 reported for same period last year. While gross margin reduced in the third quarter, margin for the first 9 months of 2022 remained at 29.9%, the same as for the first 9 months of 2021, delivering a gross profit of $1,235,682, up from the $900,190 posted last year. This helped the Company report a gain from operations or EBIT of $41,857 for the 9 months ending September 30, the first time this has been achieved, and a continued positive EBITDA of $571,567, down marginally from the $572,627 reported in 2021.

Underlying performance of the Company’s UK operating company was stronger still with net profits for the third quarter of £22,937, up 126.1% from the £10,146 reported in 2021. With revenues for the first 9 months of 2022 increasing 50.7% as compared to the same period in 2021 profits have now been achieve in each of the first 9 months of the year, the first time this has been achieved.

“The third quarter delivered good results at a UK level, despite the hottest summer on record and various economic and other challenges” said Paul Hamblyn, Chief Operating Officer and Managing Director of the UK operating company. “Revenues were up, gross profit remaining broadly constant despite the underlying inflation, and we continued to deliver profitability at a UK level, although a falling pound hasn’t helped our consolidated results.”

Commenting on the Company’s results Dr Elias Samaras, Chief Executive Officer said, “While profitability hasn’t returned in the third quarter our earnings before interest and tax has tipped positive for the year to date and we continue to provide a strongly positive EBITDA. Importantly the recent announcement of our first Shared-Risk On-Site Utility contract proves the pressure on energy costs are beginning to force organisations to explore the use of alternate approaches and, with significant savings to be had, CHP is once again gaining traction.”

HEADLINES

Increased revenue, positive EBIT and continued UK profitability  

• Total revenue increased 16.9% to $1,238,092 for the third quarter of 2022 compared to $1,058,798 for the same period in 2021.
• Total revenue for the nine months ending September 30, 2022 was $4,139,122, up 37.3% from the $3,015,321 reported for same period last year. At a UK level revenue increased 50.7% in the same period but the full extent of this increase has been lost due to the fall in the value of the Pound during the reporting period
• EBIT in the first nine months of 2022 totalled a gain of £41,857, an increase of 191.9% as compared to the loss of $45,570 in the same period of 2021.  
• Third quarter net loss was $46,922 in 2022 compared to a net loss of $41,034 in quarter three of 2021, an increase of 14.3%
• Q3 2022 net profits for the UK operating company were £22,937, up 126.1% from the net profit of £10,146 reported in the same period last year
• The net loss for the first 9 months of 2022 was $61,154 as compared to $10,402 for the same period in 2021
• The net profits of the UK operating company in the first 9 months of 2022 were £144,847, up 6.7% from the net profit of £135,767 reported in the same period last year
• Overall gross profit including depreciation for Q3 2022 decreased to $333,059 compared to $350,832 for Q3 2022, a fall of 5.1% due mainly to rising gas prices  
• Overall, third quarter gross margin including depreciation fell to 26.9% from 33.1%, while gross margin excluding depreciation and impairment reduced to 40.4% for Q3 2022 compared to 52.1% for Q3 2021
• Third quarter EBITDA decreased to $147,134 compared to $191,246 in the third quarter of 2022, a decrease of 23.1%
• Non-GAAP EBITDA for the first 9 months of 2022 was $571,567 as compared to $572,627 for the same period in 2021, a fall of 0.2%
• Liquidity and cash position at September 30, 2022 remained strong at $1,838,814. Although this has reduced 10.5% on the value of cash held at September 30, 2021 this is largely the result of the Company’s reserves being held by the UK operating company in Pounds Sterling  

Operational performance

• Total energy production decreased by 27.9% to 8,319,703 kWh for the quarter ending September 30, 2022, as compared 11,535,288 kWh for the same period in 2021. This was largely the result of hight summer temperatures affecting heat demand but also due to the impact of continuing supply chain shortages
• Overall energy production for the nine months ending September 30, 2022 is down 12.5% compared to the first nine months of 2021  
• Operational fleet capacity at September 30, 2022 was 46 systems at 43 sites totalling 5,810kWe. This is the same as at the end of September 2021
• Towards the end of the quarter work began at both the Graduate Cambridge Hotel and Sandbanks Hotel to reinstall the CHP units disconnected as part of planned refurbishment at each hotel. These works are expected to be completed during the fourth quarter, after which both units will be brought back into operation

Business and strategic development

• As reported on 10 November 2022 the Company signed a new Shared Risk On-Site Utility agreement with St Helens Hotel Limited.   The new agreement, which is expected to generate revenues of approximately £1.37 ($1.54) million over its 15-year term is the first of its type secured by the Company. This new form of OSU solution offers customers a fixed rate for the electricity generated by the combined heat and power (CHP) system that will be installed, owned and operated by the Company. The customer will buy the electricity produced by the CHP as well as the gas consumed by the unit, but the heat produced by the CHP is delivered  free of charge. Construction is due to commence early in 2023 and as the CHP unit is already held in stock the system is expected to be operational by the end of quarter one next year

Outlook and risks

• The UK Government has stepped in to help support most business energy users including many of the Company’s customers. The scheme announced, called the Energy Bill Relief Scheme provides a grant that effectively discounts the commodity element of electricity and gas bills for six months commencing 1 October 2022. Government has also indicated that support for targeted sectors will also continue beyond March 2023 but no details have yet been published. Management expects the Energy Bill Relief Scheme to suppress revenues in both the fourth quarter of 2022 and first quarter of 2023. Gross margin is also expected to narrow during the same period. The outlook for the second quarter 2023 onwards is less certain, but management believes it is reasonable to expect some of its customers to continue to benefit from lower energy costs and that this will have a knock on impact to revenues and gross profit. As a result, management are cautious about the prospects for Q4 and into next year    
• The Company continues to suffer extended lead times for parts and some other supplies. In addition, the lead time for new CHP units is increasing with some lead time extending beyond 35 weeks. These issues continue to impact operational systems with extended downtimes for some units. Management continues to seek alternate suppliers and are considering the use of other manufacturers for new CHP systems
• The broader economic outlook, including interest rate increases, inflationary pressures and exchange rate volatility is a cause for concern. The risk of customer failure has increased, and rising interest rates is increasing the cost of debt for new projects. While the credit risk of the Company’s third party funded projects rests with funders the Company is exposed to risk from its self-funded portfolio. Management have tightened the Company’s accounts receivable controls in order to limit exposure to potential bad debts although exposure to this risk is small due to the majority of customer paying by direct debit
• Other risks remain in the form of the availability of project credit, rising interest rates, the impact of reducing grid electricity carbon emissions on new business development and potential changes to government energy policy or unexpected equipment failures

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

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.

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, 2021. 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, CEO
e: elias.samaras@eurositepower.co.uk
t: +44 800 028 8001