DERBY, UK, March 28, 2024 -- 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, delivered its objective of achieving profitability for the year ending December 31, 2023. Net profit for the year was $466,322 compared to a net loss of $102,661 for the year ending December 31, 2022, an increase of 554%.

Commenting on the Company’s full year results Dr. Elias Samaras, Chief Executive Officer, said “After the UK operation paved the way with back-to-back profitable years, we aimed higher, aspiring for profitability on a consolidated level. Today, I am pleased to announce that we have met and even surpassed this goal. As I can also report significant advancements in our renewable offerings, I am confident this is just the start of exciting years to come.”

Other financial metrics the Company reported have also improved. EBIT for the full year of 2023 was $513,488, up 2464% when compared to the prior year’s result of $20,031, and non-GAAP EBITDA increased 82% from $746,881 in 2022 to $1,375,553 in 2023; both improvements being driven by revenues that increased 32% and gross profit rises of 37%, yet the Company managed to limit the change in underlying expenses to 7%.

Full year 2023 revenues increased 32% to $7,563,640, up from $5,724,637 in 2022, the result of customer utility tariffs continuing to rise and improved energy generation by the Company’s fleet of distributed generation equipment.  As a result, gross profit also increased to $2,243,921 in 2023, up 37% from the $1,639,151 reported in 2022. Results were also boosted by a slight improvement in gross margin from 29% to 30%. All this contributed to delivering a net gain per share (basic and diluted) of $0.006.

“The last year has really enabled us to consolidate the gains we saw being achieved in 2022” said Paul Hamblyn, Chief Operating Officer and Managing Director of the UK operating company. “The Operations Team have done a great job of boosting energy generation, uplifting it by nearly 12% compared to the previous year and this, paired with a favorable uptick in energy prices, has fueled a robust growth in revenue. Our focus on managing our expenses amidst rising inflation has been particularly effective, enabling us to optimise cash generation and, consequently, amplify our profit margins. I am delighted to report that our UK operation has not only sustained profitability but has also contributed to a profitable outcome at the consolidated Company level.”

KEY TAKEAWAYS
Income from operations

• The net gain for the year ending December 31, 2023 was $466,322 compared to a net loss of $102,661 for the year ending December 31, 2022.
• The net gain for the fourth quarter ending December 31, 2023 was $77,702 compared to a net loss of $41,507 for the quarter ending December 31, 2022.
• The EBIT or gain from operations for full-year of 2023 was $513,488 compared to an EBIT of $20,031 in the full-year of 2022.
• The EBIT or gain from operations for the quarter ending December 31, 2023 was $80,315 compared to an EBIT or loss from operation of $(21,827) in the same quarter of 2022.
• For the year ending December 31, 2023 the UK operating companies delivered an operational net profit of £679,108 ($859,946) compared to a net profit from operations in 2022 of £200,153 ($242,145), an improvement of 239%.
• The UK operating company delivered a net profit from its operations for Q4 2023 of £164,285 ($209,298) compared to a net profit  from operations of £56,110 ($67,882) in the same quarter in 2022.
• Net gain per share, basic and diluted, was $0.006 for FY 2023 and $0.0009 per share for Q4 2023 compared to losses of $(0.001) and $(0.0005) per share for the same periods in 2022.

EBITDA

• Non-GAAP EBITDA for the fourth quarter (defined as net income or loss attributable to the Company, adjusted for interest, income taxes, depreciation and amortization, stock-based compensation expense and impairment charges) was $405,494 as compared to $175,314 for the same quarter in 2022, an increase of 131%.
• Non-GAAP EBITDA for the year ending December 31, 2023 was $1,375,553 as compared to $746,881 for the same period last year, an improvement of 84%.

Revenues

• Total revenues for the quarter ending December 31, 2023 were $2,175,925, an increase of 37% as compared to the $1,585,514 reported for the same quarter last year.
• For the year ending December 31, 2023 total revenue increased 32% to $ 7,563,640 as compared to the $5,724,637 reported for financial year 2022. Two factors drove this increase: an increase in kWh energy production and rising customer utility tariffs, which in turn was the result of reduced UK government support mid-year and a number of customers exiting fixed lower rate contracts during the year.

Gross Profit

• Gross profit for the fourth quarter of 2023 increased 31% to $526,816 compared to a profit of $403,469 in the same quarter of 2022. This increase would have been greater had a one-off impairment charge taken against the Company’s investment in Blue Grid Gas & Power at its disposal been ignored.
• Gross margin for fourth quarter decreased to 24.2% as compared to the 25.4% posted in the same quarter last year. Had the impairment charge notes above been ignored the underlying gross margin would have increased to 30.3%.
• Gross margin excluding depreciation and impairment for the quarter was up at 38.9% as compared to 37.8% in the fourth quarter of 2022, the result of lowering gas prices narrowing the spark-spread. 
• Gross profit for the financial year of 2023 was $ 2,243,921 compared to profits of $1,639,151 during 2022, an increase of 37%.
• Gross margin for the year ending December 31, 2023 increased 1.1 percentage points to 29.7% as compared to the 28.6% posted for financial year 2022. Gross margin excluding depreciation and impairment for 2023 was down slightly at 41.0% as compared to the 41.4% reported in 2022.

Operating Expenses

• Fourth quarter operating expenses reduced 5% to $446,502 as compared to the $425,296 posted in the same period last year.
• For the year ending December 31,2023 the Company’s operating expenses were $1,730,433, as compared to $1,619,121, an increase of 6.9%. This was primarily the result of an increased headcount and reinstating the UK operating company’s office.    

Additional financial headlines

• Liquidity and cash position at December 31,  2023 remained strong at $ $2,873,724.  The increase from the $1,836,435 closing position at the end of 2022 was driven both by enhance cash generation in the year and the return of monies from the Cypriot subsidiary on disposal of its investment in Blue Grid Gas & Power.
• During the second quarter Attika Holdings Limited, a subsidiary of Aquilla Energy Efficiency Trust informed the Company of its intention not to fund future projects under the terms of the Master Receivable Agreement signed with the company in 2022. While this will not affect any operational projects funded by Attika Holdings it did mean that funding for the four projects secured with Roko Health Clubs was no longer available. As a result, management begun discussions with several other potential funders, but at this time the Company is yet to enter into any new agreements or heads of terms, although one funder has indicated a willingness to fund the Roko Health Club projects. The Company continues to be able to access project funding from Close Brothers. 
• As announced on July 31, 2023 the Company sold its remaining shares in Cyprus based Annova Enterprises Company Limited (Annova), and ultimately its remaining interest in Blue Grid Gas & Power S.A. This was the result of a pre-existing options agreement held by one of the other investment partners in Annova . The proceeds from the sale were Euro 620,000 ($683,478).
• The UK operating company continues to carry a tax loss that can be used to offset current and future tax liabilities. Due to timing differences the tax computation for 2023 is yet to be filed, but shareholders will be updated with detail of the tax loss caried forward once this has been finalised.   

Operational performance

• Total energy production increased by 11.6% to 47,529,318 kWh for the year ending December 31, 2023 as compared to 42,596,258 kWh for the same period in 2022. This reverses the fall experienced 2022 when an insolvency event caused a large 355kW cogeneration system to be shut down from October 2022 onwards, and supply chain problems prolonged periods of downtime for certain assets throughout the year. The aim is to further increase total energy production in 2024.    
• Operational fleet capacity at year-end 2023 was 48 systems at 46 sites totalling 5,923kW. This compares to 46 systems at 44 sites totalling 5,810kW operational and the end of 2022. Of these, 45 systems totalling 5,296kWe are under contract as On-Site Utility Solutions with the remaining 3 systems owned by customers but maintained by the Company. One system is a solar PV installation.
• One system, the 355kW unit installed at the Coventry Building Society Arena remains in a temporary agreement with the site’s new owners, Frasers Group.  
• The 100kW system at Cedar Court Hotel Huddersfield was changed to a winter only operation during the year with the customer’s On-Site Utility agreement being renegotiated to reflect this change.
• The Company completed installation of its first solar PV project during 2023. Alongside this the Company also used this project to gain accreditation under the UK’s Microgeneration Certification Scheme (MCS).
• The 100kW Tecogen equipped site at Roko Health Clubs York was refurbished in August 2023 with a new 100kW Tedom unit being installed as part of a renewed 10-year On-Site Utility agreement with the customer.
• In early December 2023 a new 100kW combined heat and power solution for the Mercure St Helens Hotel was brought into operation.
• At December 31, 2023 the company had three projects in backlog. These are the renewal of the 100kW combined heat and power solutions for the three remaining Roko Health Club sites, but these remain subject to financing provision and ultimately to obtaining planning consent for each project. Management expects to have these situations clarified by the end of Q1 2024.
• The service team supporting and maintaining the fleet of operational assets was expanded during the second quarter of 2023 to include a Parts Co-ordinator to further support the existing Service Manager and four Service Technicians.   
• UK General Manager and statutory director of the UK operating company, Chris Marsland retired from his role in June 2023. While he continues to provide support to the operation as a consultant this has already begun to reduce as new staff are recruited to support the renewables division.

Business and strategic development

• The Company continues to promote its hydrogen ready, Green CHP solution first launched in 2021.
• Post year-end the Company signed a term sheet with Northpoint Limited to provide a 200kW Green CHP solution for its facility in Dukinfield, Cheshire. This project is likely to be implemented as a capital sale with a separate long-term maintenance agreement, but it represents an important milestone for the Company as it will be the first CHP project in the newly targeted manufacturing sector.
• The Company announced appointment of Matthew Brindle as its Sales Director during the third quarter. Matt is responsible for developing and growing sales of the Company’s new Solar On-Site Utility Solution, part of the Company’s renewables division activity. This activity has now completed market testing and an initial pipeline of over 27 projects totalling more than 8,700kW of installed capacity has now been developed. Term sheets for two of these projects, totalling over 2,600 kW of solar PV are expected to be signed early in 2024.
• Following sale of the Company’s remaining shares in Cyprus based Annova Enterprises Company Limited, and ultimately its remaining interest in Blue Grid Gas & Power S.A., the Company has embarked on dissolving its Cypriot subsidiary, EuroSite Power Holdings Limited.

Outlook and risks

• The Company reports that the outlook for its financial performance in 2024 appears to be good with increased revenue and gross profits expected to continue off the back of sustained high energy prices and targeted additional energy production. Gross margin is however, expected to come under pressure from a narrowing spark spread although management expect this to be somewhat offset by higher margin solar PV projects starting to come online later in the year.  Management expects UK profitability to continue but investment in renewables, including hiring new staff to better exploit these opportunities could result in higher overheads and pressure on profitability.
• Risk remains in the volatility of wholesale energy markets and, in particular the ongoing ability for conflict in both Ukraine and the Middle East to increase gas and electricity prices. As the Company’s revenue and gross margin is linked to underlying energy prices Management will continue to monitor these markets closely.  
• Some operational challenges remain, particularly in the form of supply chain problems and availability of staff when recruiting for new roles. Both could cause extended downtime of units that develop a fault and require repair and expansion of our sales effort may also be restricted. Management will continue to do its best to counteract these problems.
• New business development activity, particularly for cogeneration systems remains difficult in the UK as natural gas-fuelled CHP remains disadvantaged compared to the electrification of heat using heat pumps or heightened demand for solar and other renewable solutions.
• Management continues to keep a close eye on customer business performance and have identified a risk to some customers, principally due to long-term debt needing to be restructured. This increases the risk of business failure in some customers that could in turn result in either novation or the termination of some existing contracts.  
• With both UK and US elections within the next 12-months the risk of government policy change is higher than normal.
• Other risks remain in the form of the availability of project credit and other impacts from the Ukrainian or Middle Eastern crisis and/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, 2023. 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.