EuroSite Power Reports 2020 Financial and Operational Performance
Easing of lockdown and strong fourth quarter delivers EBIT profit for the quarter and
a positive full year EBITDA
Despite the challenge presented by the pandemic, the fact we delivered our first ever EBIT profit from operations in the fourth quarter is more than encouraging.
DERBY, UK, March 25, 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 full year positive EBITDA of $244,525 in 2020 compared to a $17,178 full year loss in 2019. This followed a strong fourth quarter 2020 performance that saw revenues recover to $1,062,012, 57.5% up from those achieved during the third quarter 2020, but an 11% reduction on the pre-COVID fourth quarter 2019 results of $1,195,452. Together with a 26% fall in operating expenses in the fourth quarter this allowed the Company to report an operating profit, excluding interest and tax (EBIT) of $12,714 for the fourth quarter 2020 as compared to a loss of $56,498 for the same quarter in 2019. This is the first time the Company has reported either an EBIT profit in any period of its operation or a positive EBITDA for the full year.
Full year 2020 revenues decreased 26.4% to $3,292,061 from $4,472,635 in 2019, the result of COVID restrictions widely affecting the operation of the Company’s fleet of generators, with many customer sites forced to close in accordance with UK government restrictions. Full year gross margin remained stable at 26.5% although when excluding depreciation gross margin increased to 45.5% in 2020 as compared to 39.1% in 2019, the result of increased spark spread. Significantly, despite the impact of COVID on the Company’s operation its UK subsidiary reported a net profit during both the first and fourth quarters of 2020, a trend that first began in 2019 and management are reporting as continuing into the first quarter of 2021. The UK subsidiary also maintained a positive EBITDA in each month of 2020. Liquidity also remained strong with cash and cash equivalents of $1,924,988 as at December 31, 2020 up from $1,881,974 at the end of 2019.
Speaking about the Company’s full year results Dr Elias Samaras, Chief Executive Officer said “Despite the challenge presented by the pandemic, the fact we delivered our first ever EBIT profit from operations in the fourth quarter is more than encouraging. Losses are down at all levels and the net profit delivered by our UK subsidiary during 7 months of last year combined with the fact that our fleet has grown in the past year sets us up well for when business starts to return to normal. I am sure there remain some challenges ahead, but our strong cash position and recurring revenue business model have proven themselves over the past year and we look forward to better times ahead”.
“Like almost every business across in the UK and elsewhere EuroSite Power was hit by the pandemic, yet the early steps we took to access government support and work with customers to maximise our energy generation minimised the effect. We have also complete all our remaining backlog of projects and so our fleet today is now the largest it has ever been” explained Paul Hamblyn, Chief Operating Officer and Managing Director of the UK operating company. “We also completed our first high efficiency chiller installation and our sales pipeline now includes a number of solar PV solutions in addition to our established CHP offer. That said business development has been significantly impacted by COVID as credit lines have become harder to obtain. However, the as the pipeline includes a number of turnkey projects I would expect to see a greater number of these projects being closed in 2021”.
Full year positive EBITDA, fourth quarter EBIT profit and reduced losses
Full year EBITDA increased to a positive $244,525 in 2020 compared to a $17,178 full year loss in 2019, an increase of 1523% and the first time the Company has reported a full year positive EBITDA
Full year non-GAAP EBITDA increased to a positive $263,117 in 2020, up 278% on the positive $ 69,577 reported for the full year of 2019
EBIT for the fourth quarter 2020 was a profit of $12,714 compared to a loss of $56,498 in the same period of 2019; the first time the Company has reported an EBIT profit
The net loss from operations for the year ending December 31, 2020 reduced 33.3% to $402,488, compared to $603,454 for the year ending December 31, 2019
Total revenue decreased 26.4% to $3,292,061 for the full year of 2020 compared to $ 4,472,635 for 2019, the result of COVID restrictions impacting the business
Energy revenue decreased 22.7% to $3,239,172 for the year ending December 31, 2020 compared to $4,192,482 for the same period in 2019. Full year turnkey revenues fell from $280,153 in 2019 to $52,889 in 2020
Overall gross profit including depreciation for 2020 decreased to $873,547 compared to $1,184,425 in 2019, a decline of 26.2% although this was solely due to lower revenues caused by the COVID pandemic
Overall gross margin including depreciation remained stable at 26.5%
Overall gross margin excluding depreciation and impairment improved to 45.5% for 2020 compared to 39.1% in 2019
The UK operating company achieved a positive EBITDA in each month of 2020 and an overall EBITDA for the year ending December 31, 2020 of £406,755. This represents a 37.1% increase from the £296,588 EBITDA reported for the period ending December 31, 2019
The UK operating company achieved gross profit during January, February, March, April, October, November and December 2020 although full year results were a loss of £68,377 compared to 2019 loss of £171,724, an improvement of 60.2%
Additional financial headlines
Liquidity and cash position at December 31, 2020 remained strong at $1,924,988
Full year 2020 GAAP diluted loss per share (EPS) was $0.005, an improvement over the $0.007 loss per share reported in 2019
UK government Enhanced Capital Allowance tax incentive expected to net £87,499 ($119,628) for year ending December 31, 2020. 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 2021. As the Enhanced Capital Allowance scheme which provides these cash refunds was withdrawn by UK government in April 2020 the Company does not expect to receive further refunds in future years
The UK operating company benefited from pandemic related grants totalling £92,518 ($126,491). The majority, £82,518 ($112,819) related to the UK government’s Coronavirus Job Retention Scheme that supported furloughed staff. These grants do no need to be repaid
The UK operating company entered into a £100,000 ($136,720) government backed Coronavirus Business Interruption Loan with its banker, NatWest. This loan was drawn in October 2020 and under the terms of the agreement the company will make no capital repayments until November 2021 and interest charged in the first 12 months is paid by the UK government. Interest is charged at 2.96% above Bank of England base rate, currently 0.1% and the total term of the loan is 5-years
In May 2020 the Company signed an agreement to sell part of its shareholding in Cyprus based FCN Energy Logistics Limited (“FCN”), parent company and sole owner of Blue Grid Gas and Power S.A. Under the terms of the agreement the Company received EUR 500,000. This reduced the Company’s shareholding to 27.8% but it retains a seat on the board of Blue Grid Gas and Power S.A.
Total energy production decreased by 30.3% to 41,355,788 kWh for the year ending December 31, 2020 as compared 59,348,234 kWh for the same period in 2019. This was directly attributable to sites having to close as a result of government COVID restrictions
Operational energy fleet capacity at year-end 2020 was 47 systems at 45 sites totalling 5,911kWe compared to 40 systems at 38 sites totalling 5,100kWe at the end of 2019. Of these 41 systems totalling 5,194kWe are under contract as On-Site Utility Solutions with the balance owned by customers but maintained by the Company under long-term maintenance contracts
The Company brought into operation a total of 8 systems totalling 848kWe of additional generation capacity throughout 2020. Systems at the International Convention Centre Wales, Ricoh Arena, The Brentwood Centre, Roko York and Club Company’s Benton Hall, Castle Royle, Meyrick Park and Warwickshire golf and country clubs were all constructed and commissioned during the year. In addition, the system at the Doubletree by Hilton Dunblane Hydro also upgraded increasing the CHP unit to a 160kW system
Contracted backlog at December 31, 2020 was a single system of 101kW and, as we reported earlier this month this systems is now also in operation. The Company has no current backlog
The Company closed its permanent office in favour of remote working while the pandemic continues to effect normal business activity. The Company will reconsider its need for a permanent office location once pandemic travel restrictions are lifted
New business and strategic development
The Company signed only one contracts during 2020 before the pandemic restrictions caused business development activities to be suspended. This contract was for a high-efficiency chiller system secured on a 15-year On-Site Utility Contract for an existing customer, Roko Health Clubs
The Company has reached agreement with Coca-Cola HBC to extend its contract into a second year while detailed designs for 5 energy efficiency projects are completed. It is expected that at least of two of these projects are to be funded and implemented by EuroSite Power. These projects are worth in the region of £500,000 ($683,600) and are expected to be delivered in the second half of 2021
The business development team was furloughed for large parts of 2020 and in November management took the decision to terminate two sales roles. Until such time as circumstances permit business development activity is being led by management supported by the remaining account manager
Availability of credit has reduced the Company’s sales pipeline, particularly of On-Site Utility opportunities, but turnkey project opportunities continue to be bid and management has also diversified its fully-funded offer away from its traditional hospitality and leisure sectors
The Company has developed an On-Site Utility model for roof and ground mounted solar PV systems alongside establishing a partnership with trusted suppliers to deliver both the technical and installation support needed to deliver these projects
The Company was named as a supplier on Crown Commercial Services’ Heat Networks and Electricity Generation Assets DPS Agreement during the summer of 2020
The Company achieved Constructionline Silver status allowing the Company to provide streamlined bids for public works across the UK
Blue Grid Gas and Power, in which the Company now holds a minority interest secured their first LNG supply contract. Under the terms of the 3-year, 3,000 tonne per year contract they will be supplying LNG to a steel plant in Montenegro owned by Turkish steel group Tosyali Holdings and is estimated to generate revenues of approx. EUR 1.8 million. Initial revenues from this contract are expected during 2021.
Outlook and risks
The Company reports that the outlook for 2021 remains uncertain as a result of the ongoing Coronavirus crisis. While management is actively engaged in managing the day-to-day situation the Company is currently unable to quantify the impact to their plans for the year. Most of the Company’s UK customers cannot reopen their sites until mid-May and social distancing restrictions are expected to largely remain in place until early in the third quarter. Consequently, business development activity continues to be restricted and with many customer sites closed management expect revenues to fall through the second quarter as spring weather begins to impact demand for heat. 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
The underlying demand for low carbon on-site energy generation remains strong in the UK with many companies and organisations responding 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 policy document regarding the decarbonisation of heat. Management believes this is likely to present both opportunity and risk as it is expected that natural gas-fuelled CHP will be disadvantaged while the electrification of heat using heat pumps, further support for heat networks and green hydrogen will be encouraged. In response management is actively engaged in developing alternate technical and commercial solutions
The UK operating company has now delivered a net profit for 13 out of the 24-month period ending December 31, 2020. With the increased fleet now installed management believe consistent profitability at a UK level is more likely once business returns to normal post pandemic
Despite recent sales success, management believe that its investment in Blue Grid Gas and Power will not deliver benefits until the second half of 2021 at the earliest. As the Company’s shareholding is now reduced to 27.8% management plan to devote less time and other resources than previously but will continue to have a seat on its board of directors
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: Dr Elias Samaras - CEO
+44 (0)800 028 8001
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.