EuroSite Power Announces Second Quarter 2024 Financial and Operational Performance
DERBY, UK, August 13, 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, reported net profits of $129,493 for the six months ending June 30, 2024 compare to a net profit of $219,288 for the same period last year. This followed a 9.7% reduction in second quarter revenues from $1,833,394 to $ 1,656,010, the result of softening retail energy prices and despite energy generation increasing 9% in Q2 2024 compared to the same quarter last year. Retail energy price changes and higher maintenance costs also narrowed second quarter gross margin, with gross profits reducing 31.2% from $632,889 in Q2 2023 to $ 435,529 in the second quarter this year. Despite these changes the Company continues to deliver strong financial performance compared to previous years and the overall financial performance for the first half of the year broadly continues the profitable position first established in 2022.
“As we first begun seeing earlier this year, both electricity and gas tariffs have continued to fall by comparison to last year” said Paul Hamblyn, Chief Operating Officer and Managing Director of the UK operating company. He continued “Not only that, but we have also seen more and more customers opt for variable tariffs that change month-on-month as they seek to benefit more immediately from short-term falling wholesale prices. While this has increased price volatility, we have worked hard to help offset these changes by increasing energy generation compared to last year however, with some of the fleet also approaching key maintenance milestones our margin has come under increased pressure”.
The Company also announced that it had recently signed a term sheet to deliver a 1.5MW solar PV microgrid solution, supported by a 500kW battery energy storage facility for existing customer, the Celtic Manor Resort in Newport, South Wales.
Commenting on the Company’s announcement, Dr Elias Samaras, Chief Executive Officer said, “Beyond remaining profitable our goal this year is to grow our new renewables business, and so it’s exciting to report that we start the second half of the year with a term sheet in place. I am also pleased to tell you that as our renewables pipeline is rapidly growing, we have decided to start recruiting to enhance our sales effort in this area and capitalise on these efforts.”
HEADLINES
Half year profitability continues despite weaker second quarter performance as energy prices fall
- Net profit for the first half of 2024 was $129,493 as compared to a net profit of $219,288 in the first half of 2023, a reduction of 40.9%.
- Profit from operations for the second quarter 2024 reduced by 140.9% to a loss of $59,577 as compared to a profit of $145,600 in the same period last year. This was the result of softening retail energy prices and an increased cost of maintenance as some of the existing CHP fleet reached key milestone service requirements.
- Although these consolidated results showed a loss for the second quarter the underlying business remained profitable with the UK operating company delivering net profits of £45,869 ($58,020) in the second quarter as compared to £177,647 ($225,736) in Q2 2023.
- Non-GAAP adjusted EBITDA for the six months to June 30, 2024 was £512,782, an decrease of 15.2% as compared to the $604,059 reported for the same period last year.
- Second quarter Non-GAAP adjusted EBITDA reduced to $141,550 compared to $321,013 in the second quarter of 2023.
- Total revenue decreased 9.7% from $1,833,394 in the second quarter of 2023 to $ 1,656,010 in the same period this year, while total revenues for the first half of 2024 reduced 3.0% to $ 3,714,853 as compared to $3,831,131 in 2023
- Overall gross margin including depreciation in the second quarter 2024 reduced to 26.3% from 34.5% in the same quarter last year, while gross margin excluding depreciation and impairment also reduced to 39.0% from 44.2% for the second quarter of 2023.
- Liquidity and cash position at June 30, 2024 remained strong at $3,321,596, up 36.9% on the cash held at June 30, 2023.
- Q2 2024 GAAP diluted net loss per share (EPS) was $0.0006.
Operational performance
- Total energy production increased by 9.0% to 11,572,738 kWh for the quarter ending June 30, 2024 as compared 10,612,534 kWh for the same period in 2023. Overall, energy production is up 6.0% in 2024 compared to 2023, the result of improved fleet reliability and enhanced out-of-hours monitoring.
- Operational fleet capacity on June 30, 2024 was 47 systems at 45 sites totalling 5,851kW. This is the same number of systems as of June 30, 2023 but system capacity was slightly less at 5,830kW. This change is the result of a new 101kW system being installed at Mercure Hotel St Helens in December 2023 and the 80kW unit at Aberdeen Airport Dyce Hotel being removed following contract termination in April 2024. There are no systems currently under construction.
- With an average remaining contract length of 8.5 years some of the existing fleet of TEDOM units has been approaching milestone maintenance work such as engine overhauls or generator replacements. Despite the Company seeking to minimise disruption but scheduling these works for the summer quarter, some units had to be done sooner after condition-based monitoring highlighted a potential risk of failure. This affected generation and increased costs in the quarter.
- After a review of out-of-hours monitoring management decided to implement 24/7 monitoring supported by TEDOM on key units with the fleet. If this proves beneficial management may decide to roll this out to all TEDOM equipped sites.
- Following notification by ServiceSight to withdraw support of the Company’s Field Service Support software , the Company successfully transitioned to a new solution provided by SimPro.
- The Operation Team underwent some personnel changes during the second quarter with a Service Engineer being terminated and new Plant Maintenance Technician being hired. Recruitment for a replacement Service Engineer continues.
Business and strategic development
- The Company signed a term sheet to provide a 1.5MW solar PV microgrid solution supported by a 500kW battery energy storage system for existing customer, the Celtic Manor Resort in Newport, South Wales. This system will operate alongside the existing CHP systems already under contract at this site and will be provided within a 20-year On-Site Utility agreement funded by a third-party funder. At this stage the Company is undertaking certain technical and regulatory work before negotiating the final OSU agreement with the customer. If successful, the Company expect the proposed system to be operational by the third quarter of 2025.
- The Company is in advanced negotiation with a new funding partner to provide a receivables style agreement to provide 100% project funding for all future solar and other renewable projects. If an agreement is reached, this this facility would work alongside the existing agreement in place with Close Brothers Leasing.
- The active pipeline of solar PV projects continues to grow with over 61 sites totalling more than 24.9MW of installed capacity. To support this activity and grow the pipeline yet further the Company has begun recruitment of two regionally based graduate business development executives.
- The term sheet signed in February to supply a new 200kW CHP for Northpoint Limited did not materialise into a signed contract after the customer elected not to proceed within the project due to price changes required to deliver the thermal output for the CHP to their industrial process. This project was not lost to a competitor.
Outlook and risks
- Management reports that the outlook for its financial performance in 2024 remains positive although the volatility of retail energy prices mean that both revenue and gross profits will continue to be subject to market forces beyond the Management’s control. Management will continue to focus on increasing generation from the existing fleet to help offset some of this variability.
- Management expects profitability to continue, particularly at the UK level 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. Sales effort continues to be focused on renewables although the Company continues to offer CHP solutions.
- Management continues to keep a close eye on customer business performance and have identified a risk to some customers or specific sites, principally due to long-term debt needing to be restructured. This increases the risk of business failure in some customers or individual site closures that could in turn result in either novation or the termination of some existing contracts.
- Following the result of the UK General Election in July 2024 Management expects a series of changes that will impact the energy market and market for renewables in the UK. Immediate changes to the planning regime affecting construction of new energy projects will provide greater opportunity to develop renewable energy projects including the use of onshore wind. Management will monitor these changes and plans to respond to offer new solutions as and when they are identified.
- 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.
Investor Contact:
Dr. Elias Samaras
EuroSite Power Inc.
+44 800 028 8001
elias.samaras@eurositepower.co.uk