DJ Financial results for the period from 10 April 2018 (incorporation) to 31 December 2018
Dow Jones received a payment from EQS/DGAP to publish this press release.
Urban Exposure plc (UEX)
Financial results for the period from 10 April 2018 (incorporation) to 31
December 2018
03-Apr-2019 / 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.
3rd April 2019
Urban Exposure Plc
Solid start to a new growth phase
Financial results for the period from 10 April 2018 (incorporation) to 31
December 2018
Urban Exposure Plc ("the Company") and its subsidiaries (together "the
Group" or "Urban Exposure" or "we"), a specialist residential development
financier and asset manager, today announces its audited Group financial
results for the period from 10 April 2018 (the date of incorporation) to 31
December 2018 ("the Period"), following its admission to AIM on 9 May 2018
("IPO" or "Admission").
The Group's financial year ends on 31 December each year. These results are
being published in accordance with AIM Rule 19.
Business Highlights
· Funding of GBP525 million was committed across 16 loans during the Period.
· The Group 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 has committed to invest up to GBP15 million).
· The Group closed its first discretionary senior secure debt facility
with UBS into the KKR partnership with a value of up to GBP165 million,
increasing the lending capacity of the partnership to GBP330 million.
· Overall third-party Assets Under Management ("AUM") raised for the first
eight months of operation totalled GBP371 million (excluding IPO proceeds).
Financial Highlights
· Income for the Period was GBP3.9 million
· Operating loss for the Period before exceptional items was GBP1.1 million
and the total loss for the Period was GBP1.7 million, including exceptional
costs of GBP0.9 million and share-based expenses of GBP0.5 million
· Operating costs before exceptional items were GBP5.0 million, representing
0.81% of total committed loans
· Dividend per share: 2.5p
· proposed final dividend of 1.67 pence per share (interim dividend of
0.83 pence per share)
· Basic loss per share: (1.18)p
· Adjusted loss per share*: (0.58)p
· Net asset value: GBP151m
· Net asset value per share: 95p
Operational Highlights
· New committed loans:GBP525m
· Deployed by the Group:GBP93m
· Projected aggregate income (on loan book over life of loans):GBP69m
· Projected aggregate income (the Group's share, on loan book over life of
loans):GBP 27m
· Guaranteed minimum income (on loan book over life of loans):GBP43m
· Guaranteed minimum income (the Group's share, on loan book over life of
loans):GBP15m
· Weighted average LTGDV:67%
Weighted average IRR (unlevered):10%*: Adjusted loss per share is the basic
loss per share adjusted to exclude exceptional items of GBP0.9m (being GBP0.6m
costs related to the IPO and GBP0.3m exceptional professional costs)
Randeesh Sandhu, Chief Executive Officer, commented:
"In what has been a transformational year for the Group, we have made good
progress towards achieving the long-term business plan set out at IPO. We
have successfully provided facilities totalling GBP525m in less than eight
months on competitive, flexible finance terms to some of the most highly
regarded SME developers operating in the UK today. We have generated higher
than expected projected aggregate income despite being uncompromising in
maintaining the high level of credit quality on our loan book.
"We have expanded and developed our asset management activities to increase
the funds available for deployment, raising GBP371m of new capital in the
Period, making great strides in building on our existing relationships. We
also have a substantial live pipeline of GBP670m potential new loan
transactions.
"If ambitious government targets to build 300k new homes every year are to
be realised, we estimate there is a lending opportunity of GBP394 billion over
the next decade across the UK. Of this, the 'funding gap' equates to GBP237
billion of development finance opportunities. The very significant scale of
this shortfall gives us confidence that, using our unique set of resources
and expertise, we will be able to build our market share achieving revenue
growth, profitability and long-term shareholder value."
A copy of the Report will shortly be available on the Company's website at
www.urbanexposureplc.com [1] and hard copies will be sent to shareholders in
due course.
Enquiries:
Urban Exposure Plc Tel: +44 (0) 845 643 2173
Randeesh Sandhu, CEO
Liberum Capital Limited (Nominated Tel: +44 (0) 20 3100 2000
Adviser & Joint Corporate Broker)
Neil Patel
Gillian Martin
Jonathan Wilkes-Green
Louis Davies
Jefferies International Limited (Joint Tel: +44 (0) 20 7029 8000
Corporate Broker)
Ed Matthews
William Brown
MHP Communications (Financial Public Tel: +44 (0) 20 3128 8100
Relations)
Barnaby Fry
Charlie Barker
Patrick Hanrahan
Sophia Samaras
This announcement is released by Urban Exposure Plc and contains information
that qualified or may have qualified as inside information for the purposes
of Article 7 of the Market Abuse Regulation (EU) 596/2014 ("MAR"). For the
purposes of MAR and Article 2 of Commission Implementing Regulation (EU)
2016/1055, this announcement is made by Randeesh Sandhu, Chief Executive
Officer of Urban Exposure Plc.
Notes to Editors
Urban Exposure plc is a specialist residential development finance and asset
manager that has been formed to provide finance for UK real estate
development. The Group focuses on generating interest and fees from
originating loans on its balance sheet, before moving the loans into asset
management structures, from which origination and management fee income is
generated from institutional investors. The Group therefore services two
types of customer: borrowers and capital providers. For additional
information, please visit Urban Exposure's website: www.urbanexposureplc.com
and on twitter @UrbanExposureuk, LinkedIn:
www.linkedin.com/company/urban-exposure/ and Facebook:
www.facebook.com/UrbanExposureUK/
CEO'S REVIEW
2018 was a transformational year for the Group, during which we joined the
AIM market. We have made a solid start to this new phase for the Group and
laid firm foundations for the coming years.
Trading and Dividend
The reported loss of GBP1.7m covers a period of less than eight months.
Overall, we have made solid progress, with a total of GBP525m in committed
loans and GBP371m in new capital available through our partnership
arrangements. Gross projected aggregate income on the loan book as a whole
is GBP69m (with just under GBP43m as the guaranteed minimum amount). Our share
of the projected aggregate income is GBP27 million, which will eventually
translate to earnings in the financial statements over the life of the
loans. Our share of the minimum income is GBP15 million. The weighted average
LTGDV on the loan book is 67% and the weighted average IRR is 10%
(unlevered), demonstrating excellent credit quality whilst delivering a
strong IRR.
While the raising of capital must occur alongside the commitment of new
loans, the two are still distinct business activities and the business will
one day manage capital in excess of its committed loan book. The Group
'warehouses' loans until capital raised via asset management strategies
matches loan commitments. We call this period, estimated to be two to three
years following the IPO, the 'ramp-up' period. Over time, as the assets
under management grow, the Group will have the ability to grow its loan book
without having to warehouse each loan temporarily. I will refer to this
stage as the "steady state". The premium earnings multiple that asset
managers' share prices trade at typically, as opposed to balance sheet
lenders who often trade at a multiple of book value, shows that the market
recognises and values this as higher quality earnings.
Initially, given the time it can take to deploy capital into committed
loans, we will value the business using a combination of both NAV and
earnings. After the 'ramp-up' period, this valuation approach should
gradually transition away from NAV towards earnings as the key measure.
Key achievements
For the Group, the eight months to 31 December have been full of significant
milestones. Whilst the business today makes a loss, looking at this in
isolation fails to paint a true picture of the business's achievements in
2018, some of which were exceptional.
Shortly after the IPO, in July 2018, the Company entered into a partnership
with KKR, with an initial size of GBP165m. A partnership with such an industry
behemoth involved KKR undertaking a considerable degree of diligence on the
Company, the competition and the sector. This is a clear demonstration of
our profile and calibre, the size of the market opportunity and the extent
of investor appetite in the sector.
In December 2018, the partnership closed a first-of-its-kind, blind-pool
discretionary loan-on-loan funding line with UBS, which provided the Group
with a GBP165m facility on a portfolio basis. Additionally, the Group also
secured an additional loan-on-loan funding line from Aviva Investors for a
single loan within the partnership structure. The combined firepower of the
KKR and UBS venture therefore currently provides circa GBP363m of development
lending available to the Group. The Group also syndicated loans to other
financial institutions during the Period. The total lending capacity raised
in 2018 was GBP371m.
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DJ Financial results for the period from 10 April -2-
The various relationships secured with high calibre investment partners will
of course improve our routes to market, demonstrating our growing market
stature improving and in turn, the quality of our capital base. These
relationships also allow us to leverage our partners' market standing and
experience, by, for example, securing more favourable terms on facilities
utilised to enhance returns.
Capital raising
We have a strong institutional investor network and deep-rooted
relationships from the management team's 16 years in the industry, initially
as principal developers and then, after the global financial crisis, as a
non-bank, specialist development finance lender in the UK. The nature of the
asset class, and the technical expertise required in underwriting and
managing development loans, requires a specialist team to operate in the
space. The Group's platform provides institutional investors with the ideal
opportunity to gain exposure to the sector with the benefit of our robust
mitigation of various risks alongside return protection mechanisms,
demonstrated by our lending and asset management track record.
Investor appetite and capital inflows into the sector are strong and
demonstrable through our market partnerships announced in 2018, from large
private equity funds and financial institutions to development finance
providers.
Asset management opportunities are prioritised on the basis of i) increasing
the Group's capacity to lend with sufficient operational flexibility to
allow us to transact on loans in a timely manner; ii) being secured at rates
which are sufficiently competitive to enable us to deploy the funds
effectively into the marketplace; (iii) being accretive to our total
returns.
Managing discretionary pools of capital, both public and private, as well as
raising additional managed accounts and loan-on-loan debt lines, achieves
these objectives for the Group.
Loan credit quality
At 31 December 2018, the Group had executed 16 loans with commitments
totalling GBP525m with some of the most highly regarded and experienced real
estate developers in the UK, including the Galliard Group, Mace Group and
Strawberry Star. Our ability to approach loan structuring with a
solutions-based focus, incorporating flexibility and ingenuity, has seen a
marked increase in the quality of enquiries from both the developer and
broker communities. We employ robust credit guidelines, rigorous deal
appraisal and stringent policies and procedures to mitigate market risk in
our lending and operations.
The Group has pursued a strategy of geographical diversification, executing
funding in regional cities such as Birmingham and Manchester. Residential
developments in certain regional locations appeal to the domestic
owner-occupier market as well as the investor market and, whilst
affordability in London remains challenging, these locations offer
relatively affordable accommodation and are supported by strong demand-side
factors.
The Group negotiates levels of pre-sales prior to initial drawdown of
particular loans. Demand at many schemes is strong, and our stringent
pre-sale requirements are often surpassed, both in terms of sales velocity
and prices achieved.
An increased quality of counterparty often results in lower leverage
requirements due to higher equity contributions from borrowers. Lower
leverage doesn't just reduce lender risk through the larger equity buffer,
it also disproportionately diminishes the construction risk. The majority of
the build risk is typically within the ground and, in the very early stages
of construction, more cash equity up front from the developer means this
risk can be significantly reduced prior to the Group advancing any funds.
Our loan book exhibits this at a number of projects. We also seek to
mitigate cost overrun risk through a combination of fixed price contracts,
performance bonds and guarantees from appropriately capitalised entities.
The corollary to securing higher levels of equity up front from the borrower
is that the Group defers its own income due to loan drawdowns occurring
later. However, we protect against this risk, including the risk of early
prepayment, through Minimum Income Clauses in our loan contracts. This
allows us to lend against highly de-risked assets, knowing that a minimum
level of income will still be received regardless of the final drawdown
profile.
Investing for the future
As we commence 2019, the increased operational budget includes nine
additional employees, larger office space to accommodate the growing team,
and investment in the technological automation of the business. At 0.81% of
the c. GBP620m of total committed loan book, we are comfortable this
represents a good investment for the Group and should generate a strong ROE
within three years.
We continue to focus on seeking benefits for our customers through
digitising our business processes, providing our clients with an online
interface to manage their dealings with us. This project will also improve
internal efficiencies through streamlining the origination, underwriting,
management and syndication of existing loans, and the servicing of asset
management relationships.
Market outlook
We constantly monitor the macro economic and political environment in the
UK, the housing market, and the capital markets. The outlook remains
positive in the medium term, despite the uncertainties associated with the
UK's exit path from the European Union.
Looking forward
In 2019, our strategy is to build on the positive foundations laid in 2018,
to service our borrower clients through competitively priced and modestly
geared loans, and to continue to raise deep and diverse pools of
institutional capital to finance these loans by servicing the needs of our
capital providers.
The Group enters 2019 with a substantial live pipeline of new loan
transactions and ongoing asset management relationships, some of which are
of considerable size and calibre. We are focused on ensuring the growth in
our loan book and assets under management will translate into profit and
total shareholder return over the medium term.
We continue to recognise that our business is, and always will be, a work in
progress, constantly growing and refining itself as we strive to achieve our
vision. 2019 is going to be an exciting year for us as we continue to build
on what we do best, and what we can do better.
Randeesh Sandhu
Chief Executive Officer
Finance Review
Since the IPO, the Group has made good progress in the development of the
asset management business, although this is not yet reflected in the
reported earnings.
Overview
The Group's operating loss before exceptional items was GBP1.1m, and total
reported loss after tax was GBP1.7m. This was primarily driven by the Group's
strategic objective to grow its asset management business, with a focus on
building a sustainable platform with predictable and recurring income
streams, profitability and therefore total shareholder return, at the
expense of short-term profits.
A high-quality loan book, with more equity from developers and consequently
slower drawdown of funds, also had an adverse impact on short-term income.
The projected aggregate income generated by the existing loan book is in
line with expectations and the Group expects to expand its lending capacity
through its fund-raising activities. The reported loss includes exceptional
one-off costs of GBP0.9m and share-based expenses of GBP0.5m.
The headline financial results for the period from 10 April 2018 to 31
December 2018 are presented in this Finance Review.
Income recognition
In furtherance of the Group's strategic objective to grow its asset
management business, the loans originated by the Group are sold or
syndicated to third parties, which delays the recognition of income.
All loans and investments in partnership vehicles are accounted for on a
fair value basis under the requirements of IFRS 9.
The structure of our business model is such that loans are typically on
balance sheet at origination but are thereafter transferred into an asset
management structure, 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 borrowers.
Each loan originated by the Group includes a Minimum Income Clause ('MIC').
MICs set a floor on the income from each loan originated by the Group,
regardless of the drawdown profile or an early refinancing of the debt.
Projected aggregate income from each loan represents all interest and other
connected revenue streams earned over the life of the loan and always
exceeds the level of any MIC.
Income
GBPm Period to 31 December
2018
Income 3.9
Operating costs (5.0)
Operating loss before exceptional (1.1)
items
Exceptional items (0.9)
Loss before taxation (2.0)
Taxation 0.3
Loss after taxation (1.7)
Basic EPS (1.18p)
Diluted EPS (1.18p)
Dividend per share 0.83p
Capital
GBPm 31 December 2018
Committed loan capital 524.5
Third party funds raised 371.0
Cash and cash equivalents 46.8
Net asset value 150.5
NAV per share 95p
Shares in issue 165,000
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DJ Financial results for the period from 10 April -3-
Shares in issue (excluding treasury shares) 158,494
Income that is generated from capital committed by the Group (before
subsequently being transferred to the asset management business) or from
asset management fees can only be recognised once committed loans are drawn
down. If there is a delay in the drawdown of loans by a developer, due for
example to the developer committing more equity to the development, there
will be a delay in the recognition of income in the income statement. Income
recognised in the Period is therefore lower than expected due to some loans
being drawn down later than forecast.
The total projected aggregate income due to the Group is GBP27m. This
projected aggregate income will be recognised in the income statement over
the life of the loans. Our forecast earnings profile for this income is:
2018 2019 2020 2021 2022
12% 25% 25% 25% 13%
Going forward, as the Group grows its AUM and the time between closing a
loan and moving it into an asset management structure is accelerated, the
forecast earnings for new loans is more likely to adopt the following
profile:
2019 2020 2021 2022 2023
5% 20% 30% 20% 25%
This can be applied to new loans originated in 2019 and onwards. In 2019,
the Group expects to commit to new lending of between GBP700-900 million. This
would result in additional projected aggregate income of GBP32-42 million.
Financing
During the Period, the Group raised a total of GBP371m of third-party funds,
mainly from its first managed account, a partnership agreement with Kohlberg
Kravis Roberts (GBP150m excluding the Group's investment of GBP15m) plus an
associated loan-on-loan credit line from UBS which will facilitate up to an
additional GBP165m of lending. The commercial terms of asset management fees
and performance fees agreed in connection with this are in line with the
business plan. The performance fees will crystallise at the end of the
agreement's life, once each of the loans is fully redeemed.
Operating costs
The Group has invested significantly in its inaugural Period, with higher
than expected operating costs amounting to GBP5m (excluding exceptional costs
of GBP0.9m). The key area of investment during this 'ramp-up' period was
additional resource, with staff numbers increasing from 16 to 25 since IPO.
Salaries and benefits (including bonus provisions) totalled GBP3.1m, with
GBP0.5m of share-based expenses, relating to the costs of the Long-Term
Incentive Plan. Although costs are higher than previously expected, they
should be seen in the context of the size of the total committed loan book,
with the cost base representing just 0.81% of the loan book.
In 2019, in line with investing in the growth of the business during the
'ramp-up' phase, the Group envisages total operating costs to be
approximately GBP12.5 million.
Exceptional items
Exceptional items relate to costs incurred in relation to the IPO amounting
to GBP0.6m plus one-off professional fees of GBP0.3m.
Earnings per share
Basic loss per share for the Period is 1.18p and adjusted loss per share
(after exceptional costs) is 0.58p, based on a weighted average number of
shares of 145,793,865.
Dividends
In accordance with our dividend policy:
· the Board approved a total dividend for the Period ended 31 December
2018 of 2.5p per Ordinary Share
· one third was paid as an interim dividend which was declared on 17
December 2018 at 0.83p per Ordinary Share
· the balance of 1.67p per Ordinary Share is expected to be declared as a
final dividend for the period ended 31 December 2018 at the Group's AGM
· a dividend of 5.0p per Ordinary Share is expected for 2019
· The Group will have a progressive dividend policy thereafter.
GBP'm 31 December 2018
Balance sheet
Non-current asset 18.6
Fair value of loans 89.5
Contract assets 3.4
Cash and cash equivalents 46.8
Other assets and liabilities (7.8)
Net assets 150.5
GBP'm 31
December
2018
Cash flow
Operating cash flows before movement in working (1.4)
capital
Change in working capital (89.5)
Net cash outflow from operating activities (90.9)
Capital Expenditure (0.4)
Net cash outflow from investing activities (0.4)
Share issue 150.0
Share issue expenses (6.7)
Share buyback (5.2)
Net cash inflow from financing activities 138.1
Net increase in cash and cash equivalents 46.8
Investments
In the Period, GBP2m was invested in the partnership with Kohlberg Kravis
Roberts (KKR), being the Group's 9.1% share of GBP21.4m total invested by the
partners. This was primarily to fund loan drawdowns, and the Group will earn
asset management fees on its share of these drawdowns. The investment is
accounted for at fair value through profit and loss.
Shares
At year end, there were 165,000,000 ordinary shares issued, including
6,505,870 Ordinary Shares held in treasury, which were purchased by the
Company on 14 November 2018.
Tangible assets
Group capital expenditure was GBP0.4m, invested predominantly in new office
premises.
Loans receivable
The fair value of loans as at 31 December 2018 was GBP89.5m. These are held on
the balance sheet with the intention of being transferred to third-party
management structures, thereby growing asset management revenues and freeing
up capital to deploy into new committed loans.
Cash flow
Operating cash outflows before movement in working capital of GBP1.4m reflect
the loss for the period less net adjustments for non-cash items. The large
working capital movement of GBP89.5m reflects the increase in receivables,
being predominantly the deployment of cash into loans. After investment and
financing activities (described above and including GBP6.7m of share issue
costs), the net increase in cash and cash equivalents was GBP46.8m.
Trevor DaCosta
Finance Director
Consolidated statement of comprehensive income
for the Period from 10 April 2018 to 31 December 2018
Before Exceptional items Total
Exceptional
items
GBP'000 GBP'000 GBP'000
Note
Income 3,903 3,903
Operating costs 6,8 (5,011) (869) (5,880)
Operating loss 5 (1,108) (869) (1,977)
Finance costs 9 (12)
Loss before (1,989)
taxation for
Period
Taxation 10 273
Loss after (1,716)
taxation for the
Period and total
comprehensive
income
EARNINGS PER
SHARE
Basic EPS 11 (1.18p)
Diluted EPS 11 (1.18p)
All activities derive from the continuing operations of the Group.
There are no comparatives as the Company was incorporated on 10 April 2018.
The notes form an integral part of this financial Information.
Consolidated statement of financial position
as at 31 December 2018
Non-current assets Note GBP'000s
Intangible assets 13 12,420
Tangible assets 14 4,276
Investments 15 1,949
Total non-current assets 18,645
Current Assets
Loans receivable 17 89,544
Trade and other receivables 18 3,947
Cash and cash equivalents 19 46,806
Total current assets 140,297
Total assets 158,942
Current liabilities
Trade and other payables 20 3,217
Lease liabilities 21 229
Dividends payable 12 1,316
Total current liabilities 4,762
Total Assets less Current liabilities 154,180
Non-current liabilities
Lease liabilities 21 3,576
Deferred tax 22 83
Total non-current liabilities 3,659
Net assets 150,521
Equity and reserves
Share capital 23 1,700
Share premium 24 -
Treasury shares 23 -
Retained earnings 148,821
Total equity and reserves 150,521
There are no comparatives as the Company was incorporated on 10 April 2018.
The Company Registration Number is 11302859.
The notes form an integral part of this Financial Information.
Consolidated statement of changes in equity
for the Period from 10 April 2018 to 31 December 2018
Note Share Share Retained Total
capital premium earnings Equity
GBP'000 GBP'000 GBP'000 GBP'000
Balance at 10 - - - -
April 2018
Loss for the - - (1,716) (1,716)
period
Share-based 25 - - 480 480
payments
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Dividends 12 - - (1,316) (1,316)
payable
Issue of share 23 1,700 163,300 - 165,000
capital
IPO costs - (6,722) - (6,722)
related to
equity issue
Capital 24 - (156,578) 156,578 -
reduction
Share buy back 23 - - (5,205) (5,205)
Balance at 31 1,700 - 148,821 150,521
December 2018
There are no comparatives as the Company was incorporated on 10 April 2018.
Consolidated cash flow statement
for the Period from 10 April 2018 to 31 December 2018
Note GBP'000
Cash flows from operating activities
Loss for the Period after taxation (1,716)
Adjustments for non-cash items:
Amortisation of intangible assets 5 122
Share-based payments 5 480
Finance costs 9 12
Deferred tax credit for Period 10 (273)
(1,375)
Changes in working capital
Increase in payables 2,160
Increase trade investments (1,949)
Increase in receivables (89,693)
Net cash outflow from operating activities (90,857)
Cash flows from investing activities
Payments for purchase of tangible assets 14 (410)
Net cash outflow from investing activities (410)
Cash flows from financing activities
Proceeds from the issue of share capital 23 150,000
Share issue expenses 24 (6,722)
Share buyback (5,205)
Dividends paid -
Net cash inflow from financing activities 138,073
Net increase in cash and cash equivalents 46,806
Cash and cash equivalents brought forward -
Cash and cash equivalents at 31 December 2018 19 46,806
There are no comparatives as the Company was incorporated on 10 April 2018.
Notes to the consolidated financial information
for the Period from 10 April 2018 to 31 December 2018
1. General information and basis of preparation
...............................................
General information
Urban Exposure 1 Plc was incorporated on 10 April 2018 as a public limited
Company in England and Wales with Company registration number 11302859. The
Company changed its name to Urban Exposure Plc on 27 April 2018 and its
Ordinary Shares were admitted to trading on the Alternative Investment
Market ('AIM'), operated by the London Stock Exchange, on 9 May 2018.
The registered office of the Company is 6 Duke Street, St. James's, London
SW1Y 6BN. The Group's principal activity is the underwriting and management
of loans to UK residential developers.
The financial information set out above does not constitute statutory
accounts within the meaning of section 435(1) and (2) of the Companies Act
2006 or contain sufficient information to comply with the disclosure
requirements of International Financial Standards ("IFRS"). The auditors
have reported on these accounts and their reports were unqualified, did not
draw attention to any matters by way of emphasis and did not contain any
statements under section 498 (2) or (3) of the Companies Act 2006.
The financial statements of Urban Exposure Plc for the Period ended 31
December 2018 were authorised for issue by the Board of Directors on 2 April
2019 and the balance sheet was signed on behalf of the Board by Randeesh
Sandhu, Chief Executive Officer.
The financial information presented in this document has been prepared in
accordance with International Financial Reporting Standards ("IFRSs") and
International Financial Reporting Interpretations Committee ("IFRIC")
interpretations as adopted by the European Union as they apply to the
financial statements of the Group for the period from 10 April to 31
December 2018.
There are no comparatives as the Company was incorporated on 10 April 2018.
Period of account
The Consolidated Financial Information of the Group is in respect of the
reporting Period ('the Period') from 10 April 2018 to 31 December 2018.
Basis of preparation
The Consolidated Financial Information of the Group for the Period comprises
the results of Urban Exposure Plc (the 'Company') and its subsidiaries
(together, the 'Group'). This Financial Information has been prepared on a
going concern basis and in accordance with International Financial Reporting
Standards ('IFRS') as issued by the International Accounting Standards Board
('IASB') and as adopted by the European Union.
This Financial Information has been prepared on the historical cost basis,
except for the trade investments and loan receivables held at fair value at
the end of each reporting period, as explained in the accounting policies
and in note 4. Historical cost is generally based on the fair value of the
consideration given in exchange for goods and services.
The functional and presentational currency of the Group is Sterling.
Going concern
The Directors have, at the time of approving the Financial Information, a
reasonable expectation that the Group has adequate resources to continue in
operational existence for the foreseeable future. The Board is, therefore,
of the opinion that the going concern basis of accounting adopted in the
preparation of the Annual Report is appropriate for at least 12 months from
the date of approval of the Annual Report.
The Directors have made this assessment after reviewing the Group's latest
forecasts for a period of 12 months from the reporting date.
New standards, interpretations and amendments effective from the beginning
of the Period
New standards impacting the Group which have been adopted in the Financial
Information for the Period ended 31 December 2018 are:
* IFRS 9 Financial Instruments
* IFRS 15 Revenue from contracts with customers
* IFRS 16 Leases
IFRS 9 Financial instruments
In the current year, the Group has applied IFRS 9 Financial Instruments (as
revised in July 2014) and the related consequential amendments to other IFRS
Standards that are effective for an annual period that begins on or after 1
January 2018.
IFRS 9 introduces new requirements for:
1) The classification and measurement of financial assets and liabilities
2) The impairment of financial assets, and
3) General hedge accounting.
IFRS 9 Financial instruments
As this is the first Period since incorporation, the standard has been
applied from the beginning of the Period.
All recognised financial assets that are within the scope of IFRS 9 are
required to be measured subsequently at amortised cost or fair value on the
basis of the entity's business model for managing the financial assets and
the contractual cash flow characteristics of the financial assets.
Specifically:
* For trade investments and loan receivables, the Group has reviewed the
business model within which each financial asset is managed and concluded
that all the loans from primary operating activities and equity investments
should be measured at the Fair Value Through Profit and Loss ('FVTPL'). At
initial recognition, the Group measures trade investments and loan
receivables at fair value and any transaction costs are expensed to the
income statement. Following initial recognition, these financial assets are
subsequently valued at fair value on a recurring basis, with gains or losses
arising from changes in fair value recognised through finance income in the
income statement.
* Contract assets are those assets held to collect contractual cash flows.
The contract assets which were acquired as part of the business combination
are originated credit-impaired assets. These assets are monitored for
changes in credit risk, and impairment provisions are adjusted accordingly.
* Financial liabilities being trade payables and other payables are
initially recognised at fair value, and subsequently carried at amortised
cost using the effective interest rate method.
IFRS 15 Revenue from contracts with customers
In the current period, the Group has applied IFRS 15 Revenue from contracts
with customers (as amended in April 2016) which is effective from 1 January
2018. IFRS 15 introduces a five-step approach to revenue recognition.
Prescriptive guidance has been added to IFRS 15 to deal with specific
scenarios.
IFRS 15 uses the term 'contract assets' and 'contract liabilities' to
describe what might commonly be known as 'accrued income' and 'deferred
income'. The Group has adopted the terminology used in IFRS 15 to describe
such balances. The term 'income' is in respect of management fees,
performance fees and movement in contract assets.
The Group's accounting policies for its income streams are disclosed in
detail in note 2.
IFRS 16 Leases
In addition, the Group has early adopted IFRS 16 and has included the
right-of-use assets and lease liabilities in accordance with IFRS 16 from
the beginning of the Period.
The change in the definition of a lease mainly relates to the concept of
control. IFRS 16 distinguishes between leases and service contracts on the
basis of whether the use of an identified asset is controlled by the
customer. Control is considered to exist if the customer has:
* the right to obtain substantially all the economic benefits from the use
of an identifiable asset; and
* the right to direct the use of the asset.
New standards, interpretations and amendments not yet effective
There are a number of standards, amendments to standards and interpretations
which have been issued by the IASB that are effective for future accounting
periods that the Group has decided not to adopt early. The most significant
of these is:
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