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Urban Exposure plc (UEX)
Urban Exposure plc: Interim results for the period from 10 April 2018
(incorporation) to 30 September 2018
18-Dec-2018 / 07:00 GMT/BST
Dissemination of a Regulatory Announcement that contains inside information
according to REGULATION (EU) No 596/2014 (MAR), transmitted by EQS Group.
The issuer is solely responsible for the content of this announcement.
18 December 2018
Urban Exposure plc
Interim results for the period from 10 April 2018 (incorporation) to 30
September 2018
Urban Exposure Plc ("the Company") and its subsidiaries (together "the
Group" or "Urban Exposure"), a specialist residential development financier
and asset manager, today announces its unaudited Group financial results for
the period from 10 April 2018 (the date of incorporation) to 30 September
2018 ("the Period"), following its admission to AIM on 9 May 2018 ("IPO").
The Group's financial year ends on 31 December each year and, accordingly,
the period to 30 June is the half-year period in each year for which interim
results will be prepared going forward.
These interim results, are being published in accordance with AIM Rule 18.
The Group will publish its inaugural audited financial results for the
period from 10 April 2018 to 31 December 2018 before 30 June 2019.
Highlights
· As at 30 September 2018, funding of GBP168.4 million had been committed
across seven loans. GBP62.1 million of cash had been deployed in respect of
these seven loans, being 41% of the GBP150 million capital raised in the
IPO.
· On 27 July 2018, the Group announced that it had closed its first
managed account, a partnership agreement with Kohlberg Kravis Roberts
(KKR) with exclusivity, and with a value of GBP165 million (of which the
Group co-invested GBP15m).
· The loss for the period was GBP3.1 million, which includes exceptional
costs of GBP0.6 million and share-based expenses of GBP0.3 million.
· Interim dividend of 0.83 pence per ordinary share
Financial Highlights
Revenue: GBP0.6m
Loss before tax: GBP(3.1)m
Basic loss per share: (2.25)p
Dividend per share: 0.83p
Net assets: GBP155.5m
Cash on balance sheet: GBP80.4m
A copy of the Interim Report will shortly be available on the Company's
website at www.urbanexposureplc.com [1]
Enquiries:
Urban Exposure plc Tel: +44 (0) 845 643 2173
Randeesh Sandhu, CEO
Liberum Capital Limited (Nominated Tel: +44 (0) 20 3100 2000
Adviser and Sole Broker)
Neil Patel
Gillian Martin
Jonathan Wilkes-Green
Louis Davies
MHP Communications (Financial Public Tel: +44 (0) 20 3128 8540
Relations)
Barnaby Fry
Charlie Barker
Patrick Hanrahan
Sophia Samaras
CEO STATEMENT
I am pleased to announce our inaugural set of Group interim results,
covering the period from 10th April 2018 to 30 September 2018. Following our
successful IPO in May this year, we have been delighted with the response
from our key stakeholders, in particular - our borrowers, funders and
employees.
As at 30 September 2018, the Group had written GBP168.4 million of new loans
and secured GBP150 million of external funding via a partnership agreement
with KKR. More importantly, the pipeline for the Group on both sides of the
business - the direct lending division and the asset management division -
that has been generated post-IPO is consistent with our expectations at
listing. We are pleased with the quality of our loan book. The Loan to Value
("LTV") levels offer better credit protection, being 8-10 percentage points
lower than anticipated, at a weighted average of 60.3%. We have been able to
negotiate conservative pre-sales levels which also offer enhanced risk
mitigation. In addition, funding commitments that are both secured and in
the pipeline are at a significant quantum.
Our unlevered gross returns on the seven loans written within the Period
remain in line with the business plan at IPO. In furtherance of the Group's
strategy of growing the asset management business, a number of these loans
will be sold to the KKR partnership structure, or will utilise other
syndication arrangements thereby freeing up the Group's capital for new
loans. 'Loan-on-loan' credit lines (whereby our lending commitments are
matched by equivalent commitments from a third party) are progressing with a
number of institutions, at least one of which is expected to close before 31
December 2018, whilst additional syndication partnership opportunities are
also at an advanced stage.
We have increased our headcount to help execute the enhanced deal pipeline
and asset management relationships, and I am delighted with how the entire
expanded team has stepped up to achieving our targets and the new reporting
and governance requirements of being a listed company.
Accounting for Minimum Earnings
All loans and investments in partnership vehicles will be accounted for on a
Fair Value Basis under the requirements of International Financial Reporting
Standard 9.
The structure of our business model going forward is such that loans are
typically on balance sheet at origination but are thereafter transferred
into the asset management side of the business, whilst maintaining a portion
of the capital commitment. This structure allows the Group to continue its
participation in the loans by virtue of its co-investment, and to free up
capital to originate new loans to our borrowers.
Each loan originated by the Group includes a Minimum Earnings Clause
("MEC"). MECs set a floor on the earnings of each loan originated by the
Group by guaranteeing a minimum return, regardless of the draw-down profile
or an early re-financing of the debt. The projected earnings on each loan
originated always exceed the level of any MECs. Following consultations with
our Auditors, the Group has concluded that loans should be valued based on
their expected cash flow profiles and discounted at a factor equal to the
yield of the underlying loan. The effect of this is that no value is
attributed to the MECs because, on a Fair Value Basis, forecast cash flows
assume that loans follow their anticipated course, thereby excluding the
effect of MECs.
Projected earnings
Below we have set out an indication of minimum and projected earnings for
the seven loan commitments written as at 30 September 2018. In order to
portray a more realistic representation of earnings, loans that have since
been confirmed as moving into an asset management structure are assumed to
have been duly transferred, despite the fact that the actual transfer may
not yet have taken place. To not do so would state a level of MEC earnings
that was unrealistically high, in that it would fail to reflect the
proportion of those earnings that would become due to our co-funders.
Based on loan commitments as at 30 September 2018:
No of loans: 7 (3 subsequently transferred into asset management structures)
Total loan commitments: GBP168.4m (GBP86.2m subsequently to be transferred into
asset management structures)
Loan commitments by Group: GBP82.2m
Projected earnings: GBP11.1m (89% derived from balance sheet deployment)
MECs: GBP5.6m (85% derived from balance sheet deployment)
The breakdown of income categorisation is two-fold:
1) balance sheet income (this includes projected income for loans and loan
commitments on balance sheet at that point in time, plus projected income
for the Group's co-investment stake in any asset management structure);
2) asset management income (which is projected fee and 'promote' income
from the Group's co-investors).
Given that MECs are both contractually secured and legally binding, the
Group is in a position to pay its dividend from what is essentially
'covered' income.
OPERATING REVIEW
During the Period, the Group has deployed approximately 41% of the capital
raised, and secured additional third-party funds of GBP150 million.
Loss before tax
The Group made a loss of GBP3.1 million for the Period. Revenue recognition in
the Period was lower than expected due to the draw-down profile of the
Group's newly originated loan book being more protracted. This was, in turn,
due to higher than anticipated levels of developer equity being contributed
to the loans, and a resultant increase in loan book quality.
Operating expenses
In line with expectations, operating expenses during the Period amounted to
GBP3.7 million, consisting mainly of salaries and benefits totalling GBP1.8
million. It also included GBP0.3 million share-based expenses, relating to the
costs of the Long-Term Incentive Plan and management share options which
were introduced by the Group to motivate and incentivise employees and
exceptional costs of GBP0.6 million for professional and consultancy fees
relating to listing.
Loans
As at 30 September 2018, the Group had completed seven loans, bringing total
lending commitments to GBP168.4 million. The loans are geographically
diversified, covering development projects across the UK, specifically
Central London, Greater London, Essex, Buckinghamshire, Cornwall, Nottingham
and Wales. These loans, in aggregate, will finance the construction of 598
private residential homes, 86 affordable housing units and c. 26,000 sq ft
of commercial real estate (including office space, retail and a hotel).
The average weighted term of these loans is 25 months and the weighted
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