News

Half Year 2016 Unaudited Financial Results

24 August 2016

URENCO Group (“URENCO” or “the Group”), an international supplier of uranium enrichment and nuclear fuel cycle services, today announces its results for the half year ending 30 June 2016.

Summary

• Financial results reflect strong operational performance supported by a long established order book
• Revenues and EBITDA for H1 2016 broadly in line with H1 2015 at €589.2 million and €321.8 million
• Small net loss of €8.5 million as a result of adverse exchange rate movements and significant weakening of pound sterling
• Tails Management Facility (TMF) remains on schedule for commercial operations in late 2017
• Order book extends to 2030 with a value of approximately €15.8 billion
• Continued enrichment market challenges and pricing pressures

Financial highlights

	Six months to 30 June 2016 (unaudited)	Six months to 30 June 2015 (unaudited)
	€m	€m
Revenue	589.2	586.6
EBITDA (i)	321.8	335.3
EBITDA margin - % (i)	54.6%	57.2%
Income from operating activities (i)	162.3	192.9
Net (loss) income	(8.5)	166.0
Net (loss)/income margin - %	(1.4)%	28.3%
Capital expenditure(ii)	207.0	280.6
Cash generated from operating activities (iii)	452.0	423.9

(i) The calculation of EBITDA and Income from operating activities has been amended. EBITDA, EBITDA margin and Income from operating activities for the first six months to 30 June 2015 have been amended or, as appropriate, restated to be on a consistent basis. This has no impact on net income.

(ii) Capital expenditure reflects investment in property, plant and equipment plus the prepayments in respect of fixed asset and intangible asset purchases for the period.

(iii) Cash generated from operating activities has been represented to exclude the cash outflows from payments in respect of settlement of debt hedges, which are now presented under Net cash flow from financing activities. Additionally Cash generated from operating activities has been represented for foreign exchange differences on monetary items, which are now included in Effect of foreign exchange rate changes rather than Increase/(decrease) in payables.

Thomas Haeberle, Chief Executive of URENCO Group, commenting on the half-year results, said:

“URENCO has delivered a strong operating performance in the first half of 2016 utilising the enrichment capacity that has been built over the past decade. Whilst underlying operational performance remained robust, currency movements, especially weakening of pound sterling had a significant adverse impact on our net result. The global enrichment market remains challenging with high levels of oversupply and inventory, resulting in continued pricing pressures, which we expect to continue for the foreseeable future.

Most of the capital investment in our major projects, the USA capacity expansion and the construction of the TMF, has already been incurred. Our focus remains on efficiency and maximising future opportunities and delivering against our long established order book.

URENCO holds a pivotal role in the nuclear fuel supply chain. We take our responsibility very seriously in providing our customers with the enrichment services they need to produce low carbon electricity. Our commitment to responsible uranium stewardship is evidenced by our investment in the TMF at our UK site. We expect the TMF to start commercial operations in 2017.

We are proud of the high standards of customer service we provide, which are driven by the skills and dedication of our workforce across our four geographically diverse enrichment sites. We remain committed to being a reliable long-term partner to our global customers.”

Financial Results

Revenue for the six months to 30 June 2016 was €589.2 million (H1 2015: €586.6 million) reflecting slightly lower SWU sales offset by higher uranium related sales. Overall, the phasing of revenue between the first half and second half of 2016 is expected to show seasonality broadly similar to that in prior years, with a larger proportion in the second half.

EBITDA for H1 2016 decreased by approximately 4% to €321.8 million compared to H1 2015 (H1 2015: €335.3 million) due to a change in the mix between SWU sales and lower margin uranium related sales, and an increase in provisions associated with the operational optimisation of our facilities, to produce higher volumes of low assay feed.

Net finance costs for H1 2016 were €175.2 million, compared to net finance income in H1 2015 of €6.6 million. The most significant drivers of this movement are the financing charges of €83.6 million (H1 2015: €50.9 million gain) which arise on the retranslation of certain unhedged loan balances in a period of significant exchange rate volatility. In addition, losses associated with ineffective cashflow hedges were incurred of €15.0 million (H1 2015: €20.2 million gain).

In H1 2016 there was a tax credit of €4.4 million (corresponding to an effective tax rate of approximately 34%) compared to a tax charge in H1 2015 of €33.5 million (approximately 17%). The tax credit predominately reflects the net loss in the period and the impact of foreign exchange non-taxable gains and non-deductible losses.

Net loss for the six months to 30 June 2016 was €8.5 million, compared to a net income of €166.0 million in H1 2015, primarily reflecting the adverse impact of the finance charges referred to above.

The Group invested €207.0 million in H1 2016 (H1 2015: €280.6 million) of which around 60% was associated with the TMF in the UK, and the remainder spread across the Group’s enrichment facilities. The TMF is scheduled to commence commercial operations in 2017.

Cash generated from operating activities was €452.0 million (H1 2015: €423.9 million) reflecting broadly flat revenue and favourable movements in working capital compared to H1 2015. Tax paid in the period was €68.6 million (H1 2015: €83.5 million) which included a prepayment of income taxes in the Netherlands relating to 2016. Net cash flow from operating activities was €383.4 million compared to €340.4 million in H1 2015.

The final dividend for the year ended 31 December 2015 was €350.0 million, which was fully paid in March 2016. The dividend for the year ended 31 December 2014 was €340.0 million, paid in April 2015.

URENCO’s order book extends to 2030 with a value of approximately €15.8 billion*.

The renewal of our five year revolving credit facility of €750 million was completed in June 2016.

Ratings

The Company’s debt is rated by Moody’s (Baa1/Stable) and Standard & Poor’s (BBB+/Stable/A-2).

Events After The Reporting Period

URENCO announced on 4 August 2016 that Peter Hill CBE will join the URENCO Ltd Board as Independent Non-executive Chairman on 12 October 2016. He replaces Stephen Billingham who has been Chairman this year whilst the search continued to find a permanent independent Chairman. Stephen retires from the Board in October 2016 after seven years’ service on the URENCO Ltd Board.

As of 24 August 2016, no other material structural changes or business events have occurred that might serve to alter any of the disclosures contained in the unaudited interim condensed consolidated financial statements.

*Based on €/$ 1.11 (31 December 2015: €16.6 billion based on €/$ 1.09).

Outlook

Nuclear is a long term business and we consider it to be an essential element in a balanced energy mix. The nuclear sector is expected to grow in the future and URENCO is well positioned to help customers meet their requirements for a secure supply of enrichment services. However, URENCO anticipates the current high levels of inventory and pricing pressures in the global enrichment market to continue in the near term. URENCO will continue to focus on optimisation, innovation and efficiency in order to maximise future opportunities and maintain our position as a long-term, reliable partner to the nuclear industry.

There has been no immediate impact on the Group’s day-to-day operations as a consequence of the UK EU referendum result. However, it has created increased political and economic uncertainty. It is too early to assess the long-term impact of the UK EU exit on global economic conditions, any implications on the uranium enrichment market and our three European based enrichment facilities.

Having just completed the refinancing of our €750m medium term revolving credit facility, we do not anticipate needing to access the debt markets in the near future. Given the backdrop of increased financial market uncertainty this leaves us in a strong funding position. Further weakening of sterling against the euro and the US dollar, before hedging, is moderately favourable to the Group in cash flow terms as we sell in euros and US dollars and have in part a sterling cost base.

We will continue to monitor and respond to market conditions created by the UK EU referendum result to reduce any potential impacts on our operations, customers and employees.

 

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