Half Year 2021 Unaudited Financial Results
05 August 2021
- Revenue at €565.0 million, EBITDA at €322.9 million, in line with management expectations, although lower than the prior period due to one-off income received in H1 2020.
- Net income at €84.8 million, adversely impacted by a non-cash deferred tax charge due to a future increase in the UK Corporation tax rate, which was enacted in H1 2021.
- Total gross debt reduced to €1,076.3 million following repayment on maturity of the Group’s 2021 Eurobonds (31 December 2020: €1,614.5 million).
- Cash generated from operating activities remains strong at €229.1 million, but reflects lower EBITDA and higher trade receivables at 30 June 2021 compared to H1 2020, for which cash is due to be received in H2 2021.
- Effective management of COVID-19 with continuous plant operations and customer deliveries; no significant financial impact and liquidity remains robust.
- Order Book at €9.1 billion, extending to the 2030s.
Financial highlights (€ million)
Six months to 30 June 2021 (unaudited)
Six months to 30 June 2020 (unaudited)
|EBITDA margin - %
|Income from operating activities (pre-exceptional item)
|Exceptional item (pre-tax) (ii)
|Income from operating activities (post-exceptional item)
|Net income (pre-exceptional item)
|Exceptional item (post-tax) (ii)
|Net income (post-exceptional item)
|Cash generated from operating activities
(i) EBITDA is earnings before exceptional items, interest (including other finance costs), taxation, depreciation and amortisation and joint venture results. Depreciation and amortisation are adjusted to remove elements of such charges included in changes to inventories and net costs of nuclear provisions. EBITDA is reconciled to income from operating activities on page 9.
(ii) Exceptional item comprises the increase in nuclear provisions for the USA operations as a result of lower discount rates.
Boris Schucht, Chief Executive of Urenco Group, commenting on the half year results, said:
“Urenco’s half year results for 2021 reflect our ongoing resilient financial and operational performance, which has been sustained despite the COVID-19 pandemic. Our plant operations have continued without interruption and our deliveries to customers have been maintained throughout the period. The continued mutual support and flexibility demonstrated by our employees, our customers and key stakeholders is greatly appreciated by Urenco.
Urenco’s finances remain healthy and in line with management expectations. Revenue of €565.0 million and EBITDA of €322.9 million are down on H1 2020 (€617.3 million and €437.6 million respectively) driven by the receipt of one-off income in H1 2020 and a reduction in sales volumes, in line with management expectations. In the period, SWU spot prices continued to increase from their low point of $34/SWU in August 2018, reaching $54/SWU in June 2021. Net income of €84.8 million has also decreased on H1 2020 (€172.7 million post exceptional item) adversely impacted by the items noted above and a non-cash deferred tax charge of €45.5 million due to a future increase in the UK Corporation tax rate, which was enacted in H1 2021. Net financial debt is now at €500.5 million, which is broadly in line with the position at 31 December 2020 (€455.7 million). We retain a strong balance sheet, which will help protect Urenco from any potential longer term adverse consequences of COVID-19 and the ongoing challenges of the enrichment market.
Our updated strategy continues to progress well. Our order book has slightly increased in the first half of 2021 for our core enrichment business. Our UK-based Tails Management Facility (TMF), which responsibly manages the by-product of our enrichment services, is being actively commissioned. We are committed to the long term sustainability of the nuclear industry and we are supporting our customers through the development of next generation fuels, along with expanding our production of medical isotopes.
Sustainability is integral to everything we do at Urenco. We are committed to making a positive contribution to a sustainable net zero future. This year we refreshed our sustainability strategy, ensuring that our key priorities of environmental impact, social impact and governance provide strategic value and direct our day to day activities. We are proud of the important role we play as part of the civil nuclear industry in helping the world to decarbonise. In this respect we have committed to achieving net zero carbon emissions across our business in advance of 2040. We are also increasing our social investment, with a clear focus on multi-year partnerships with charitable organisations and enhanced alignment of our internship, educational and other social programmes. We are also maintaining our strong focus on governance and ethics; we ensure compliance with appropriate regulatory frameworks, we preserve the security of the nuclear industry, we operate in an open and accountable manner and we are committed to ensuring Urenco remains a trustworthy and valuable contributor to society.
The UN Climate Change Conference, COP26, is planned to be held in Glasgow, United Kingdom, in November 2021. It will be important for the nuclear industry to participate in the dialogue and debate, in order to make the case that nuclear energy is a critical part of the solution for climate change and achieving decarbonisation. The use of nuclear energy today avoids emissions roughly equivalent to removing one-third of all cars from the world’s roads. Urenco will support the energy transition and we believe that nuclear power, renewables and hydrogen belong together in a net zero world and they are the future of our energy systems.”
Revenue for the six months ended 30 June 2021 was €565.0 million, a decrease of €52.3 million (8.5%) compared to the same period last year in line with management expectations. A significant driver for the year on year reduction in revenue was the impact of one-off payments of €44.5 million received in 2020 following the settlement of claims filed by Urenco relating to the Chapter 11 bankruptcy of a US customer. This was not repeated in 2021. Furthermore, SWU revenues were lower due to a reduction in both SWU volumes delivered and realised SWU prices.
Overall, revenue for 2021 is expected to show a comparable phasing to 2020 and previous years when sales were weighted to the second half of the year.
EBITDA for the first half of 2021 was €322.9 million, a decrease of €114.7 million (26.2%) from the same period last year (H1 2020: €437.6 million). The decrease in EBITDA is principally due to decreased revenue together with an increase in the net costs of nuclear provisions (excluding exceptional charges) of €49.2 million, and an increase in other operating and administrative expenses of €13.2 million, reflecting inflationary increases in direct operating expenses.
The net costs of nuclear provisions were €86.1 million for the six months ended 30 June 2021, an increase of €23.6 million (H1 2020: €62.5 million). The increase is primarily due to higher tails volumes produced and a reduction in the tails provision released when compared to the prior period.
Net income for H1 2021 of €84.8 million, representing a decrease of €87.9 million compared to H1 2020. The decrease reflects the impact of lower EBITDA and higher tax expenses, partially offset by lower net finance costs.
Net finance costs for the six months ended 30 June 2021 were €32.0 million, compared to €44.0 million for the same period last year. The net finance cost on borrowings of €22.4 million is lower than H1 2020 (€34.6 million) following the repayment at maturity of €534.4 million of the 2021 2.5% Eurobonds in February 2021 and associated swaps and the prepayment in August 2020 of €95.0 million of the 2022 2.25% Eurobonds.
The other key elements of net finance costs were capitalised interest of €23.5 million (H1 2020: €32.7 million), the unwinding of discounting on provisions of €33.6 million (H1 2020: €34.9 million) and foreign exchange gains of €6.9 million (H1 2020: loss of €4.8 million).
In the first half of 2021 the tax expense was €93.1 million (an effective tax rate (ETR) of 52.3%), an increase of €13.6 million over the tax expense of €79.5 million for H1 2020 (ETR: 31.5%). Following the announced increase in the UK corporate tax rate to 25.0% from 19.0%, which was enacted in May 2021, the Group’s net UK deferred tax liability was increased and a one-off non-cash tax charge of €45.5 million was recognised. The tax increase is effective from 1 April 2023. This charge was partially offset by the impact of a reduction in profit before tax.
Operating cash flow before movements in working capital was €412.7 million (H1 2020: €465.6 million) and cash generated from operating activities was €229.1 million (H1 2020: €498.5 million). The lower cash flows from operating activities primarily reflect the impact of lower revenues and an unfavourable movement of working capital balances compared to H1 2020. In the current period, sales deliveries have been relatively closer to the period end when compared to the prior period, resulting in higher trade receivables balances. These trade receivables will be settled in H2 2021 in accordance with agreed payment terms.
Tax paid in the period was €103.9 million (H1 2020: €93.5 million) due to the timing and phasing of cash payments which spans multiple years.
Accordingly, net cash flow from operating activities after tax was €125.2 million compared to €405.0 million in H1 2020.
In the first six months of 2021 the Group invested a total of €58.6 million (H1 2020: €68.3 million), of which the investment in the Tails Management Facility (TMF) represented €13.1 million (H1 2020: €17.3 million).
Net cash outflow from financing activities in H1 2021 increased to €655.0 million compared to €352.7 million in H1 2020, due to the repayment of €534.4 million of Eurobonds on maturity and the payment of a cash dividend of €150.0 million for the year ended 31 December 2020 (2020: €300.0 million).
As at 30 June 2021, the Group held cash and cash equivalents of €277.3 million (31 December 2020: €630.0 million) and short term deposits of €298.5 million (31 December 2020: €528.8 million). Net debt was €500.5 million.
Total provisions as at 30 June 2021 were €2,546.0 million (31 December 2020: €2,355.7 million) of which €3.8 million (31 December 2020: €5.2 million) was included in current liabilities. In H1 2021, additional provisions and the unwinding of discounts were €213.9 million, while utilisation and release of provisions (including exchange differences) were €23.6 million.
Events after the Balance Sheet Date
There are no post balance sheet events that require disclosure.
Outlook and Order Book
Urenco is committed to maintaining its position as a trusted global industry leader. We strive to contribute to a sustainable net zero carbon future, operate safely and form partnerships to deliver measurable positive impacts, be a respected strategic partner and an organisation in which every employee is informed, included and inspired.
To ensure growth in our enrichment business, we are signing new contracts to maintain our global customer base and continuing to raise our profile in new markets. We have security in our core business through the long-term visibility of our Order Book. Our Order Book extends to the 2030s with a value as of 30 June 2021 of €9.1 billion, based on €/$ of 1 : 1.18 (31 December 2020: approximately €9.0 billion based on €/$ of 1 : 1.22). The market price for enrichment remains challenging, although there are reasons for optimism. Spot prices were back above $54 per SWU in June 2021 from their low point of $34 in August 2018. We believe that our unrivalled customer service levels and diversity of supply will allow us to continue to be a partner of choice for our customers. We are also working towards providing support to our customers so that we are well positioned to fuel all nuclear new builds, including the next generation of reactors.
Nuclear power generation has rebounded in 2021, so far reversing half of the decline in output that took place in 2020. While there may be a small reduction in future deliveries as a consequence of the pandemic, many utilities have utilised the decreased demand of last year to advance their maintenance programmes. Overall, investments in nuclear have remained resilient to the economic shocks caused by the coronavirus pandemic, with nuclear playing a key role in many of the announced infrastructure investment plans aligned with net zero. However, in some western power markets, nuclear operators remain under economic stress as power prices and market conditions do not support their continued operation, despite their clear environmental credentials for achieving net zero.
We are confident of the long-term prospects of nuclear energy, which is a key source of reliable, low carbon energy, with a significant pipeline of new reactors planned worldwide. Enriched uranium will continue to be an essential source of fuel, powering current and new nuclear technologies as they come to market.
Commercial operations will increase at our Tails Management Facility and our new stable and medical isotopes cascades are on track to start operations later this year and increase our capacity.
We also continue to monitor the various political uncertainties that could impact our business. We are pleased that the actions we took in advance of the UK’s withdrawal from the European Union have enabled us to maintain our services to customers around the world.
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Urenco is an international supplier of enrichment services and fuel cycle products with sustainability at the core of its business. Operating in a pivotal area of the nuclear fuel supply chain for 50 years, Urenco facilitates zero carbon electricity generation for consumers around the world.
With its head office near London, UK, Urenco’s global presence ensures diversity and security of supply for customers through enrichment facilities in Germany, the Netherlands, the UK and the USA. Using centrifuge technology designed and developed by Urenco, and through the expertise of our people, the Urenco Group provides safe, cost effective and reliable services; operating within a framework of high environmental, social and governance standards, complementing international safeguards.
Urenco is committed to continued investment in the responsible management of nuclear materials; innovation activities with clear sustainability benefits, such as nuclear medicine, industrial efficiency and research; and nurturing the next generation of scientists and engineers.