Eurosite Power Inc (EUSP)

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$EUSP EuroSite Power Reports Third Quarter 2020 Financial Performance
Earnings Announcement | 11/12/2020
November 12, 2020
OTC Disclosure & News Service

Macclesfield, United Kingdom —

This release includes additional documents. Select the link(s) below to view.
EUSP Q3 2020 financial statements.pdf


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 that challenging trading conditions resulting from the COVID-19 crisis continued throughout the third quarter 2020, but that non-GAAP adjusted EBITDA for the nine months ending September 30, 2020 totalled $71,387 compared to a negative $33,658 for the same period in 2019, a swing of $105,044 or 312%. Third quarter 2020 revenues reduced 24.07% to $674,470 when compared to the $888,249 revenues posted for third quarter 2019. Although less than the prior year, third quarter revenues increased by 64.67% or $264,869 when compared to the prior quarter. This followed the easing of COVID restrictions in the UK through the third quarter.



The UK operating company reported a positive 41,775 EBITDA for the third quarter (Q3 2019: 21,767). This followed management actions to lower operating expenses and the return of revenues due to the easing of lockdown measures. The UK company also reported that it has achieved a positive EBITDA in each of the first 9 months of 2020.



Liquidity also remained stable with $1,111,077 of cash or cash equivalents on September 30, 2020, a reduction of $148,841 when compared to the $1,259,918 on hand on June 30, 2020.



As previously stated lockdown measures in the UK began easing for the Companys customers early in July with hotels able to reopen, but indoor fitness studios, gyms, swimming pools, spas and other indoor leisure centers were not permitted to reopen until mid-August. This resulted in generation output in the third quarter 2020 falling by 3,851,186 kWh compared to the third quarter 2019, a reduction of 31.20% however, the third quarter saw an increase of 64.81% compared to the prior quarter with energy output totalling 8,491,029 kWh. While energy generation since the end of the quarter has return to near seasonal norm the recent decision to reimpose lockdown measures in England from November 5, 2020 is expected to have some impact on fourth quarter performance.



Speaking about the third quarter results Dr Elias Samaras, CEO said COVID has continued to have a considerable impact on our performance. Generation and, therefore, revenues are down compared to last year but the fact we have maintained a positive EBITDA is testament to the swift actions taken by management and hard work of the whole team. The fourth quarter will test us again, but we remain confident we can weather the storm.



Although energy generation initially returned quite slowly once the hotels reopened this accelerated as the leisure centers opened in August. We also managed to bring three new sites into operation during the quarter so by the end of the quarter our monthly revenues were down by around 10% compared to 2019 said Paul Hamblyn, Chief Operating Officer and Managing Director. Business development is proving a challenge in our traditional hospitality and leisure sectors but elsewhere we have seen interest from both healthcare and industrial sectors. That said I would expect new business development in 2020 to be seriously limited due to the effect of the pandemic on the UK economy and our customers.



HEADLINES
COVID-19 continues to impact financial performance, but UK operation remains EBITDA positive

Third quarter 2020 energy generation fell by 31.20% to 8,491,029 kWh compared to 12,342,215 kWh in the same quarter last year. As a result, total revenue decreased 07% to $674,470 for Q3 2020 compared to $888,249 for same quarter in 2019
Gross profit decreased to $108,575 for the third quarter 2020 compared to $ 226,667 for the same quarter in 2019. This represented a gross margin of 16.10% for the quarter compared to 25.52% for the same quarter last year
Gross margin excluding depreciation for Q3 2020 was 39.34% as compared to 40.93% for Q3 2019
Operating expenses fell 35.43% to $269,384 for the third quarter 2020, largely the result of the ongoing subsidy of payroll costs under the UK governments Coronavirus Job Retention Scheme and temporary salary cuts. By comparison expenses in Q3 2019 were $417,219
The net loss for the third quarter 2020 reduced to $179,252, a decrease of 12.70% compared to the
$205,341 loss recorded in the third quarter of 2019
Non-GAAP adjusted EBITDA for Q3 2020 was a loss of $1,967 compared to a loss of $37,230 in the same period last year however, non-GAAP adjusted EBITDA for the 9-months ending September 30, 2020 was $71,387 compared to a loss of $33,658 for the 9-months ending September 30, 2019
The UK operating company continued to record positive EBITDA for the three months of the third quarter, resulting in a positive cash flow totalling 41,775. This compared to 21,767 for Q3 2019, an increase of 91.91%
The Companys cash position on September 30, 2020 totalled $1,111,077


Operational performance

Operational fleet capacity at September 30, 2020 was 45 systems at 43 sites totalling 5,696kW (of which 717kW are non-OSU systems maintained for others). This is an increase on the 40 systems at 38 totalling 5,100kW reported at the end of September 2019
The system at Benton Hall Golf & Country Club which completed shortly before lockdown began in March 2020 has now been brought into operation
The systems at Ricoh Arena and the Castle Royle Golf and Country Club began operation adding a 425kW additional generation capacity to the fleet
As part of the Companys technology diversification strategy the first high efficiency chiller system, installed at Roko Health Clubs York site began operation late in July
With planning consent finally granted after delays caused by COVID, construction of the three remaining Club Company sites has now started and the Company anticipate that at two will be operational by year-end
With lockdown forcing the closure of the Doubletree by Hilton Dunblane Hydro the Company is upgrading the existing 100kW system to a high efficiency 160kW, work that is now largely complete. The system is expected to be back in operation during the fourth quarter
Contracted backlog at September 30, 2020 3 systems totalling 250kw


Business Development

Having submitted its report to Coca-Cola HBC identifying additional efficiency projects that can be enacted at it Knockmore Hill bottling plant in Lisburn, Northern Ireland the Company has reached agreement to provide detailed designs for 5 projects, two of which are to be funded and implemented by EuroSite Power. These projects are worth in the region of 0.5m and are expected to be delivered in 2021

Outlook, COVID-19 response and risks

All hotels, indoor fitness studios, gyms, swimming pools, spas and other indoor leisure centers across the UK were able to reopen after August 14, 2020 but various new restrictions implemented in Scotland and Wales since the beginning of October and now in England since November 5 are expected to have an impact on generation output. Management remain uncertain about the impact of these changes although it is hoped the winter weather will help to lessen any downturn in energy generation
Although UK government support for business tapered off through the third quarter newly announced support measures will continue to support payroll costs through the fourth quarter and into 2021. Management plans take advantage of these support measures
Salary reductions continue with all directors and staff agreeing a 10% reduction in pay
In response to the impact of COVID on workloads management are reviewing the viability of certain roles
Liquidity is currently considered good, but with tightening lending criteria there remains a risk that funding may be withdrawn during construction of backlog project, so reducing liquidity. As a result, management took a 100,000 ($ 130,000) government backed loan facility with its banker, NatWest
Management consider the overall outlook for financial performance in 2020 to be uncertain

Future News Releases

Note that all financial results and news are only published on the Companys 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 Companys 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 Companys common stock, with effect from January 1, 2017 foreign exchange gains/losses are reported in the cumulative translation adjustment (CTA) account on the Companys 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 (OSU)

EuroSite Power sells the energy produced from an on-site 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 electricity or total energy produced by the system and receive either a guaranteed discount rate on the price of total energy or a fixed price for electricity. All system capital, installation, system maintenance and support are paid by EuroSite Power, and in the case of No Risk On-Site Utility solution customers all system fuel costs are also 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 Companys website and in financial statements held by OTC markets for the fiscal year ended December 31, 2019. 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
T: [phone]
E: [e-mail]