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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DJ Financial results for the period from 10 April -4-
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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* IFRIC Uncertainty over Income Tax positions (effective 1 January 2019).
It is expected that this will not have a material effect.
2. Significant accounting policies
..................................
Basis of consolidation
The Consolidated Financial Information comprise the Financial Information of
the Company and entities controlled by the Company (its subsidiaries) as at
31 December 2018. Subsidiaries are all entities over which the Company has
control. The Company controls an investee when:
1) it has power over the investee;
2) is exposed to, or has rights to variable returns from, its involvement
with the investee; and
3) has the ability to affect those returns through its power over the
investee.
The Group reassesses whether or not it controls an investee if facts and
circumstances indicate that there are changes to one or more of the three
elements of control as stated above.
When the Company has less than a majority of the voting rights of an
investee, it considers that it has power over the investee when the voting
rights are sufficient to give it the ability to direct the relevant
activities of the investee.
Consolidation of a subsidiary begins when the Group obtains control over the
subsidiary and ceases when the Group loses control of the subsidiary.
Specifically, the results of subsidiaries acquired or disposed of during the
period are included in the income statement from the date the Company gains
control until the date when the Company ceases to control the subsidiary.
Where necessary, adjustments are made to the Financial Information of
subsidiaries to bring the accounting policies used into line with the
Group's accounting policies.
All intra-group assets and liabilities, equity, income, expenses and cash
flows relating to transactions between the members of the Group are
eliminated on consolidation.
Business combinations
Acquisitions of businesses are accounted for using the acquisition method.
The consideration transferred in a business combination is measured at fair
value, which is calculated as the sum of the acquisition date fair values of
assets transferred by the Group, liabilities incurred by the Group and the
equity interest issued by the Group in exchange for control of the business
or assets and liabilities. Acquisition-related costs are recognised in the
income statement as incurred.
The identifiable assets acquired and liabilities assumed are recognised at
their fair values at the acquisition date.
Goodwill is measured as the excess of the fair value of the consideration
transferred over the fair value of the acquired assets less liabilities
assumed at the acquisition date. If the fair value of the net assets
acquired exceeds the fair value of the consideration transferred by the
Group, this excess is recognised immediately in the income statement as a
bargain investment gain.
Income recognition
The majority of the Group's revenue arises from movements in the fair value
of loans receivable and trade investments which are held at fair value
through profit and loss.
Asset management fees received from third parties for managing loan
facilities are recognised in the income statement when the related service
has been performed.
The Group receives carried interest from the third-party loans it manages
once those loans exceed a performance target. The recognition of variable
consideration arising in relation to carried interest has been constrained
in order that it is highly probable that there will not be a future reversal
in the amount of revenue recognised when the final carried interest is
calculated.
Where there is a significant financing component included in the transaction
price (for example where fees are payable at the termination of a loan for
services provided at inception or during the term of the loan), the revenue
recognised is calculated by discounting the future cash flows at the
interest rate implicit in the loan.
Financial instruments
Financial assets and liabilities are recognised on the Group's statement of
financial position when the Group has become a party to the contractual
provision of the instrument.
Financial assets and financial liabilities are initially measured at fair
value. Transaction costs that are directly attributable to the acquisition
or issue of financial assets and financial liabilities (other than financial
assets and financial liabilities through profit and loss) are added to or
deducted from the fair value of the financial assets or financial
liabilities, as appropriate, on initial recognition. Transaction costs
directly attributable to the acquisition of financial assets or financial
liabilities at fair value through the income statement are recognised
immediately in the income statement.
Financial assets
Under IFRS 9, the Group is required to classify and measure financial assets
according to the business model within which they are managed and the
contractual terms of the cash flows. Financial assets are measured at
amortised cost if they are held within a business model whose objective is
to hold financial assets in order to collect contractual cash flows, and
their contractual cash flows represent solely payments of principal and
interest. The Group has determined that contract assets, trade and other
receivables, and cash and cash equivalents are financial assets which are
measured at amortised cost.
Financial assets are measured at Fair Value Through Other Comprehensive
Income ('FVTOCI') if they are held within a business model whose objective
is achieved by both collecting contractual cash flows and selling financial
assets, and their contractual cash flows represent solely payments of
principal and interest. Other financial assets are measured at FVTPL.
The Group has reviewed the business model within which each financial asset
is managed and concluded that loan receivables from primary operating
activities should be measured at the FVTPL. The Group has also determined
that certain trade investments meet the criteria for IFRS 9 and should be
measured at FVTPL. For assets measured at FVTPL, at initial recognition, the
Group measures the financial asset at its fair value and any transaction
costs are expensed to the income statement. Following initial recognition,
assets are subsequently valued at fair value on a recurring basis with gains
or losses arising from changes in fair value recognised in the income
statement.
Contract assets
Contract assets are purchased or originated credit-impaired financial
assets. For purchased or originated credit-impaired financial assets, a
credit-adjusted effective interest rate is calculated by discounting the
estimated future cash flows, including expected credit losses, to the
amortised cost of the debt instrument on initial recognition.
The amortised cost of a financial asset is the amount at which the financial
asset is measured at initial recognition minus the principal repayments,
plus the cumulative amortisation using the effective interest method of any
difference between the initial amount and the maturity amount, adjusted for
any loss allowance. These assets are subsequently monitored for changes in
credit risk, and impairment provisions are adjusted accordingly.
De-recognition of financial assets
A financial asset is derecognised when either the contractual rights to the
cash flows expire, or the asset is transferred. The Group holds loan
receivables until a suitable institutional capital provider gains control
and assumes the risks and rewards of the loan receivable. At that point, the
transfer is recorded at the transfer value. This proportion of the loan
qualifies for de-recognition. The proportion of the loan which is not
transferred will remain as a loan receivable and continue to be valued at
fair value.
Financial liabilities
Trade payables and other short-term monetary liabilities are initially
recognised at fair value, and subsequently carried at amortised cost using
the effective interest rate method.
Intangible assets Goodwill
Goodwill arising on the acquisition of subsidiaries or following a business
combination is determined as detailed in the business combination accounting
policy.
Goodwill is not amortised but is reviewed for impairment at least annually.
For the purpose of impairment testing, goodwill is allocated to the Group's
Cash Generating Units (CGUs) expected to benefit from the synergies of the
business combination. The CGUs to which goodwill has been allocated are
tested for impairment annually, or more frequently when there is an
indication that a unit may be impaired. If the recoverable amount of the CGU
is less than the carrying amount of the unit, the impairment loss is
allocated to reduce the carrying amount of any goodwill allocated to the
unit and recognised as an impairment in the income statement. Once an
impairment loss is recognised, it cannot be reversed in a subsequent period.
On disposal of a CGU, the attributable amount of goodwill is included in the
determination of the profit or loss on disposal of that unit.
Other intangible assets
Intangible assets with finite lives are acquired separately at cost less
accumulated amortisation and accumulated impairment losses. The Group's
intangible assets comprise of the brand name acquired by the Group.
Amortisation is calculated to write off the cost of intangible assets less
their estimated residual value using the straight-line method over their
estimated useful lives, and is recognised as a charge in the income
statement. Amortisation methods, useful lives and residual values are
reviewed at each reporting date, and are adjusted where appropriate.
The estimated useful economic lives for the intangible assets are as
follows:
Brands: 10 years
Leased assets
The Group has applied IFRS 16 Leases.
Leases are recognised when the Group enters into a contractual lease which
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conveys the right to control the use of identifiable assets for a period of
time in exchange for consideration.
Upon lease commencement, a lessee recognises a right-of-use asset. If the
right-of-use asset is an investment property, it is valued at fair value.
Where the asset is property, plant or equipment, it is valued at the present
value of the lease payment within tangible assets and separately identified
as a right-of-use tangible asset. Where the lease provides for variable
elements, such as a rent review or rate increases linked to a specific
index, the lease payments are initially measured at current rates. When the
rate varies, this is a re-measuring event and the lease asset and liability
is re-measured and treated as an adjustment to the right-of-use asset and
lease liability.
The lease liability is initially measured at the present value of the lease
payments payable over the lease term and discounted at the rate implicit in
the lease if this can be readily determined. Where this cannot be readily
determined, the Group's incremental borrowing rate is estimated and used to
arrive at the present value of the lease payments. When a re-measurement
event occurs, the lease liability is re-measured at this time.
The Group has elected not to apply IFRS 16 to leases with a lease term of
less than 12 months or where the underlying asset has a low value when new.
In such circumstances, the lease payments are expensed to the income
statement as incurred and disclosed in the operating profit note.
Cash and cash equivalents
Cash and cash equivalents comprise cash in hand, deposits held at call with
banks, and other short-term highly liquid investments with a maturity of
three months or less at the date of acquisition. The carrying value of these
assets approximates their fair value.
Employee benefits Share-based payments
The Group issues compensation to its employees under equity-settled
share-based Long-Term Incentive Plans ('LTIP'). The fair value of
equity-settled share-based payment arrangements granted to employees is
recognised as an expense, with a corresponding increase in equity and spread
over the vesting period of the plan on a straight-line basis. The total
amount to be expensed is determined by reference to the fair value of the
awards made at the grant date, and is adjusted to reflect the number of
awards for which the related service and non-market performance conditions
are expected to be met, such that the amount ultimately recognised is based
on the number of awards that meet the related service and non-market
performance conditions at the vesting date. At each reporting date, the
Group revises its estimate of the number of equity instruments expected to
vest as a result of non-market based vesting conditions. It recognises the
impact of the revision to the original estimates, if any, in the income
statement with a corresponding adjustment to equity over the remaining
vesting period.
Market vesting conditions are factored into the fair value of the options
granted. The fair value of the awards and ultimate expense are not adjusted
on a change in market vesting conditions during the vesting period. As long
as all other vesting conditions are satisfied, a charge is made irrespective
of whether the market vesting conditions are satisfied. The cumulative
expense is not adjusted for failure to achieve a market vesting condition.
Defined contribution plans
Obligations for contributions to defined contribution plans are expensed as
the related service is provided.
Equity
For the purpose of preparing the consolidated Financial Information of the
Group, the share capital represents the nominal value of the issued share
capital of Urban Exposure Plc.
Treasury Shares
Where the Company purchases its own share capital (Treasury Shares), the
consideration paid is set off against share premium. Where the share premium
is nil, consideration above the nominal value of shares is debited against
retained earnings. The proceeds from the sale of own shares held increase
equity. Neither the purchase, cancellation nor sale of own shares leads to a
gain or loss being recognised in the income statement.
Dividend and capital distributions
Dividend and capital distributions to the shareholders are recognised in the
Group's Financial Information in the period in which they are declared and
appropriately approved. Once approved, dividends are recognised as a
liability and as a deduction from equity.
Taxation
Tax expense comprises current and deferred tax.
Current tax
Current Income Tax assets and liabilities are measured at the amount
expected to be recovered or paid to the taxation authorities. The tax rates
and tax laws used to compute the amount are those that are enacted or
substantively enacted.
Deferred tax
Deferred tax is provided on the liability method on temporary differences
between the tax bases of assets and liabilities and their carrying amount
for financial reporting purposes at the reporting date.
Deferred tax liabilities are recognised for all taxable temporary
differences. Deferred tax assets are recognised to the extent that it is
probable that future taxable profits will be available against which the
deferred tax asset can be utilised.
Deferred tax assets and liabilities are measured at the rates that are
expected to apply in the Period when the asset is realised or the liability
is settled, based on tax rates and tax laws that have been enacted or
substantively enacted at the reporting date.
Earnings per share
Basic earnings per share are calculated by dividing profit after tax
attributable to equity shareholders of the parent Company by the weighted
average number of Ordinary Shares in issue during the period.
Diluted earnings per share requires that the weighted average number of
Ordinary Shares in issue is adjusted to assume conversion of all dilutive
potential Ordinary Shares. These arise from awards made under share-based
incentive schemes. Share awards with performance conditions attaching to
them are not considered to be dilutive if the share price on their exercise
is above market price.
Provisions and contingencies
Provisions are liabilities with uncertainties in the amount or timing of
payments. Provisions are recognised if there is a present obligation as a
result of past events, if it is probable that an outflow of resources
embodying economic benefits will be required to settle the obligation, and
if a reliable estimate of the amount of the obligation can be made at the
date of the Statement of Financial Position.
A contingent liability is a possible obligation that arises from past events
or a present obligation that is not recognised as it is not probable that an
outflow of resources will be required to settle the obligation or the amount
of obligation cannot be measured with sufficient reliability. A contingent
liability is disclosed but not recognised.
IPO expenses
Qualifying costs attributable to the primary issuance of shares are debited
directly to equity. They include incremental costs that are directly
attributable to issuing the primary shares, such as advisory and
underwriting fees.
All other non-qualifying costs are taken to the Statement of Comprehensive
Income.
Tangible assets
Leasehold assets, furniture, fixtures and fittings, and equipment are stated
at cost less accumulated depreciation and any recognised impairment loss.
Depreciation is provided on all tangible assets at rates calculated to write
off the cost, less estimated residual value based on prices prevailing at
the date of acquisition of each asset, on a straight-line basis over its
expected useful life as follows:
Right-of-use assets are depreciated over their expected useful life based on
the relevant lease term. Where a break clause is contained within the lease,
an assessment is made as to whether this is likely to be exercised or not
and the lease is depreciated based on the expected lease term.
The useful lives and depreciation rates applicable are as follows:
· Right-of-use leasehold:10 years
· Fixtures and fittings:10 years
· Furniture and office equipment:5 years
· Computer equipment:5 years
The gain or loss arising on the disposal or retirement of an asset is
determined as the difference between the sales proceeds and the carrying
amount of the asset and is recognised in income.
Trade payables
Trade payables are obligations to pay for goods or services that have been
acquired in the ordinary course of business from suppliers. Trade payables
are classified as current liabilities if payment is due within one year,
otherwise they are classified as non-current liabilities.
The directors consider that the carrying amount of trade payables
approximates to their fair value.
Segmental reporting
Under IFRS 8, operating segments are required to be determined based upon
the Group's internal organisation and management structure and the primary
way in which the Chief Operating Decision Maker (CODM) is provided with
financial information. In the case of the Group, the CODM is considered to
be the Executive Committee.
The Executive Committee reviews the activities of the Group as a single
operating segment.
The Group operates only in the United Kingdom and, as a result, no
geographical segments are reported. The Group does not rely on any
individual customer and so no additional customer information is reported.
The Group's Executive Committee is of the opinion that the Group is engaged
in a single segment of the business and the operations of the Group are
wholly within the United Kingdom.
Events after the balance sheet date
Post year-end events that provide additional information about the Group's
position at the balance sheet date and are adjusting events are reflected in
the Financial Information. Post year-end events that are not adjusting
events are disclosed in the notes when material.
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3. Significant accounting judgments, estimates and assumptions
..............................................................
The preparation of the Group's Financial Information requires management to
make judgments, estimates and assumptions that affect the reported amounts
of revenues, expenses, assets and liabilities, and the disclosure of
contingent liabilities, at the reporting date. However, uncertainty about
these assumptions and estimates could result in outcomes that require a
material adjustment to the carrying amount of the asset or liability
affected in future periods.
Judgments and estimates
In the process of applying the Group's accounting policies, management has
made the following judgments, which have the most significant effect on the
amounts recognised in the Consolidated Financial Information:
(a) Determination of fair values
A number of assets and liabilities included in the Group's Financial
Information require measurement at, and/or disclosure of, fair value. Fair
value is the amount for which an asset could be exchanged, or liability
settled, between knowledgeable, willing parties in an arm's-length
transaction at the measurement date.
Fair value is the price that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market participants
at the measurement date, regardless of whether that price is directly
observable or estimated using another valuation technique. In estimating the
fair value of an asset or a liability, the Group takes into account the
characteristics of the asset or liability if market participants would take
those characteristics into account when pricing the asset or liability at
the measurement date. Fair value for measurement and/or disclosure purposes
in these Consolidated Financial Information, is determined on such a basis,
except for share-based payments that are within the scope of IFRS 2, leasing
transactions that are within the scope of IFRS 16, and measurements that
have some similarities to fair value but are not fair value, such as net
realisable value in IAS 2 or value in use in IAS 36.
For financial reporting purposes, fair value measurements are categorised
into Level 1, 2 or 3 based on the degree to which inputs to the fair value
measurements are observable and the significance of the inputs to the fair
value measurement in its entirety, which are described as follows:
* Level 1 inputs are quoted prices (unadjusted) in active markets for
identical assets or liabilities;
* Level 2 inputs are inputs, other than quoted prices included within Level
1, that are observable for the asset or liability, either directly (i.e. as
prices) or indirectly (i.e. derived from prices); and
* Level 3 inputs are unobservable inputs for the asset or liability.
The classification of an item into the above levels is based on the lowest
level of the inputs that has a significant effect on the fair value
measurement of the item. Transfers of items between levels are recognised in
the period in which they occur. Further details of fair values are given in
note 4.
(b) Business combinations
The Group identifies whether an acquisition is a business combination or the
acquisition of assets and liabilities. The Group will then consider the
carrying value of the assets and liabilities acquired in the case of a
business combination and will need to assess whether fair value adjustments
are required, and determine which factors impact on those valuations. The
Group is also required to use judgment in determining the valuation of any
non-cash consideration exchanged in the business combination. Details of the
business combinations in the Period are included in note 27.
(c) Share-based payments
The Group operates two employee compensation schemes, settled in equity. The
fair value of equity-settled share-based payment arrangements requires
significant judgment in the determination of the valuation of options, or
the assumptions regarding vesting conditions being met, which will affect
the expense recognised during the period. These assumptions include the
future volatility of the Company's share price, future dividend yield and
the rate at which awards will lapse or be forfeited. These assumptions are
then applied to a recognised valuation model in order to calculate the fair
value of the awards. The fair value attributed to the awards and hence the
charge made to the income statement could be materially affected should
different assumptions be made to those applied by the Group. Details of
these assumptions are set out in note 26. The Group uses a professional
valuer in the determination of the fair value of options at grant date.
(d) Valuation adjustments
The Credit Committee reviews each financial asset in the Group's portfolio.
Assets which are underperforming are assessed for credit valuation
adjustments. Typical events include, but are not limited to, non-payment of
cash interest, breach of loan covenants, construction cost over-runs or
significant reductions in gross development values.
(e) Deferred tax
In determining the quantum of deferred tax balances to be recognised,
judgment is required in assessing the extent to which it is probable that
future taxable profit will arise in the companies concerned and the timing
of transactions.
4. Financial instruments - fair values and risk management
..........................................................
The Group is exposed through its operations to the following financial
risks:
* credit risk
* liquidity risk
* market risk
In common with other businesses, the Group is exposed to risks that arise
from its use of financial instruments. This note describes the Group's
objectives, policies and processes for managing those risks and the methods
used to measure them. Further quantitative information in respect of these
risks is presented throughout these Financial Information.
The Group's overall risk management programme focuses on the
unpredictability of financial markets and seeks to minimise the effect on
the Group's financial performance. Risk management is carried out by the
Board of Directors. It identifies, evaluates and mitigates financial risks.
The Board provides written policies for credit risk and liquidity risk.
(i) Principal financial instruments
The principal financial instruments used by the Group, from which financial
instrument risk arises, are as follows:
* Loan receivables
* Investments
* Trade and other receivables
* Cash and cash equivalents
* Trade and other payables
(ii) Financial instruments by category
Carrying amount
At 31 December Note Fair value Amortised cost Total
2018 through profit
GBP'000 or loss
Financial assets
Investments 15 1,949 1,949
Loan receivables 17 89,544 89,544
Trade and other 18 3,862 3,862
receivables
Cash and cash 19 46,806 46,806
equivalents
Total financial 91,493 50,668 142,161
assets
Financial
liabilities
Trade and other 20 3,217 3,217
payables
Total financial - 3,217 3,217
liabilities
(iii) Financial instruments not measured at fair value
Financial instruments not measured at fair value include cash and cash
equivalents, trade and other receivables and trade and other payables. The
carrying value of the trade assets and other receivables has been amortised
to estimated net recoverable value where there are circumstances indicating
that the full value will not be recovered. Due to the short-term nature of
cash and cash equivalents and trade and other payables, the Directors
consider that their carrying value approximates to their fair value.
(iv) Financial instruments
measured at fair value
The fair value hierarchy of financial instruments
measured at fair value is provided below.
Fair value
At 31 Level 1 Level 2 Level 3 Total
December
2018
GBP'000
Financial
assets
Investments 1,949 1,949
Loan 89,544 89,544
receivables
Total - - 91,493 91,493
financial
assets
The valuation techniques and significant unobservable inputs used in
determining the fair value measurement at Level 2 and Level 3 financial
instruments, as well as the inter-relationship between key unobservable
inputs and fair value, are set out in the table below.
Financial GBP'000s Valuation Significant Inter-relationship
instrument techniques unobservable between key
used inputs unobservable inputs
(Level 3 and fair value
only) (Level 3 only)
Loan 89,544 Initial Profile and The earlier the
receivables transaction timing of timing of the
costs loan drawdowns and the
subsequentl drawdowns. higher the values
y value at Assumption of the drawdown the
fair value that loan higher the fair
based on can be value of the loan
projected synidicated receivables
future to third
earnings parties at
discounted the fair
at the value
underlying without
estimated applying a
costs of discount.
borrowing
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Equity 1,949 Initial Profile and The earlier the
investments transaction timing of timing of the
costs plus loan drawdowns and the
pro-rata drawdowns higher the values
share of which of the drawdown the
fees plus determine higher the fair
accrued profile and value of the
interest timing of investment. The
investment higher the discount
which rate, the lower the
determine valuation.
the earnings
and eventual
return on
investment.
Total 91,493
financial
assets
Reconciliation of the opening and closing fair
value balance
The reconciliation of the opening and closing fair value
balance of Level 3 financial instruments is provided below:
Reconciliation of Fair value Loan Investments
balances - Level 3 receivabl
es
GBP'000 GBP'000
Balance at 10 - -
April 2018
New loans 104,823 1,949
advanced during
period
Loan Repayments (7,010) -
Loan Sold to (11,488) -
Asset Management
structures
Fair value 3,219 -
through profit
or loss
Transfers out of - -
level 3
Balance at 31 89,544 1,949
December 2018
Risk management framework
The Board has overall responsibility for the determination of the Group's
risk management framework and, whilst retaining ultimate responsibility for
them, it has delegated the authority for designing and operating processes
that ensure the effective implementation of the objectives and policies to
the Chief Risk Officer ('CRO'). The Board receives regular updates from the
CRO through which it reviews the effectiveness of the processes put in place
and the appropriateness of the objectives and policies it sets. The
Executive Committee also reviews the risk management policies and processes
and reports its findings to the Audit Committee.
The overall objective of the Board is to set policies that seek to reduce
risk as far as possible without unduly affecting the Group's competitiveness
or flexibility.
The Audit Committee oversees how management monitors compliance with the
Group's risk management policies and procedures, and reviews the adequacy of
the risk management framework in relation to the risks faced by the Group.
Further details regarding the Group's risk management policies are set out
below:
(a) Credit risk
Credit risk is the risk of financial loss to the Group if a customer or
counterparty to a financial instrument fails to meet its contractual
obligations. The Group is mainly exposed to credit losses if borrowers are
unable to repay loans and outstanding interest and fees. The Group has
stringent underwriting criteria which include third-party valuations and a
full legal documentation pack for each loan written by the Group.
At 31 December 2018, the maximum exposure to credit risk for financial
assets by geographic region was as follows:
Analysis by Loan Investments Trade and Cash and Total
Geographic receivabl other cash
Region es receivabl equivalen
es ts
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Greater 1,222 - 2,634 46,806 50,662
London
East of 39,121 - - - 39,121
England
Midlands - - 582 - 582
South East 21,826 - 295 - 22,121
South West 7,469 - 254 - 7,723
North West 1,419 - 97 - 1,516
Wales 18,487 - - - 18,487
Outside of - 1,949 - - 1,949
UK
89,544 1,949 3,862 46,806 142,161
Four loan receivables represented GBP72,330,000 of the loan receivables
balance. However, risk is mitigated on all loans as property assets relating
to those loans plus other securities and guarantees are provided against all
loans.
The cash and cash equivalents balances of GBP46,806,000 are held with a
Regulated Bank given an A-2 rating by Standard & Poor's.
(b) Liquidity risk
Liquidity risk is the risk the Group will not be able to meet its financial
obligations as they fall due. The Group's policy is to ensure that it will
always have sufficient cash to allow it to meet its liabilities when they
become due. In order to manage liquidity risk, the Group prepares short-term
and medium-term cash flow forecasts. These forecasts are reviewed centrally
to ensure the Group has sufficient liquidity to meet its liabilities when
due, under both normal and stressed conditions, without incurring
unacceptable losses or risking damage to the Group's reputation.
The maturity analysis of the trade and other payables is given as below:
0-1 month 1-3 months 3-6 months Total
GBP'000 GBP'000 GBP'000 GBP'000
Trade and other payables 873 367 1,978 3,217
The Board receives cash flow projections on a monthly basis as well as
information regarding cash balances. At the end of the Period, these
projections indicated that the Group expected to have sufficient liquid
resources to meet its obligations under all reasonably expected
circumstances.
The Group does not commit to any loan to a borrower without clearly
identifying how the loan will be funded over its life. The Group maintains a
minimum level of liquidity to ensure that its projected operational costs
are fully funded for 12 months.
(c) Market risk
Market risk is the risk that a change in the Group's bank funding rates will
impact its return from lending. It is the risk that the fair value or future
cash flows of loans will fluctuate because of changes in interest rates
(interest rate risk).
The Group's financial assets and liabilities have interest rates applied as
follows:
Fixed and Floating Non-Interest Total
Floating interest bearing
interest rate
rate
GBP'000 GBP'000 GBP'000 GBP'000
Financial
assets
Investments 1,949 1,949
Loan 89,544 89,544
receivables
Trade and other 3,862 3,862
receivables
Cash and cash 46,806 - 46,806
equivalents
Total financial 91,493 46,806 3,862 142,161
assets
Financial
liabilities
Trade and other 3,217 3,217
payables
Total financial - - 3,217 3,217
liabilities
The investments and loan receivables are valued at fair values determined by
a number of factors including contractual interest rates applicable to loan
receivables which are generally at a fixed % rate above LIBOR, which is
variable.
The Group manages interest rate risk by ensuring that all loans are subject
to a floor interest rate and move with changes in bank funding costs, or are
appropriately hedged.
The following table shows the sensitivity of fair values grouped in Level 3
to changes in interest rates, for a selection of the largest financial
assets. It is assumed that the interest rates were changed by 1% whilst all
other variables were held constant.
Value in + 1% change in - 1% change
Financial interest rate in interest
Statement rate
GBP'000 GBP'000 GBP'000
Loan receivables 89,544 89,709 89,379
Investments 1,949 1,949 1,949
Balance at 31 91,493 91,658 91,328
December 2018
The fair values are subject to interest rate risk where there is a change in
the market, including a change in LIBOR and the underlying bank base rate,
or a change in the credit rating of the borrower.
(d) Capital management
The Group monitors capital which comprises all components of equity (i.e.
share capital, share premium, treasury capital and retained earnings). The
Group's objective when managing capital is to safeguard its ability to
continue as a going concern in order to provide returns for shareholders and
benefits for other stakeholders.
The Group's objective is also to provide an adequate return to shareholders
by maintaining an optimum capital structure to reduce the cost of capital.
The Group manages its capital structure and makes adjustments to it in light
of changes in economic conditions and the risk characteristics of the
underlying assets. To maintain or adjust the capital structure, the Group
may adjust the dividends paid, return capital to shareholders, issue new
shares or sell assets to reduce debt.
Consistent with others in the industry, the Group monitors capital on the
basis of debt to capital. During the Period, the Group did not have any
loans and borrowing, and therefore the debt to capital ratio is 0%. The
capital at the Period end is GBP150,521,000.
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5. Income
.........
The Group income for the Period was derived as follows:
Fair value income from loan
receivables
Increase in value of contract assets
Management Fees
Total fees income
6. Loss for the Period
......................
The Group operating loss for the Period is stated after charging:
Amortisation of intangible assets
Depreciation of right of use leasehold
Exceptional items (note 9)
Auditors remuneration comprises:
Fees payable to the auditor for the
Group audit
Fees payable to the auditor for the
audit of the subsidiaries
Fees payable to the auditor and its
related entities for other services:
Audit related assurance services
Tax compliance services
Tax advisory services
Other services
Fees for corporate finance services
related to the IPO
Fees included within operating
expenses
Fees for corporate finance services
related to the IPO charged to share
premium
Total Fees payable to auditor
Amounts payable to BDO inclusive of VAT in respect of audit and non-audit
services are disclosed in the table above.
Although the right-of-use leasehold asset was acquired on 20 November 2018,
it was not in a condition available for use until January 2019 and so it has
not been depreciated in the Period.
7. Operating costs
..................
The Group's operating costs are stated after charging:
Before Exceptional items Total
Exceptional items
GBP000 GBP000 GBP000
Staff costs 3,122 - 3,122
Share based payments 480 - 480
Rent, rates and 115 - 115
office costs
Marketing 113 - 113
Audit & Accountancy 128 - 128
Legal & Professional 332 256 588
Fees
IPO Costs - 613 613
Other overheads 721 - 721
5,011 869 5,880
Exceptional items are detailed in note 9.
8. Employee and key management emoluments
.........................................
The employee and director costs during the Period were as follows:
For the Period to 31
December 2018
GBP000
Salaries 2,740
Social security costs 374
Contributions to defined contribution 8
pension schemes
3,122
Share based payment 480
3,602
The average number of employees (including Directors) during the Period was
as follows:
Number
Management 6
Administrative 6
Sales & Risk assessment 9
21
Key management personnel compensation
Key management personnel are those persons having authority and
responsibility for planning, directing and controlling the activities of the
Group, including the directors of the Company listed within this report.
Key management Emoluments
Salary
Other benefits
Social security costs
Pension costs to defined
contributions schemes
Emoluments before share-based
payment charges
Share based payment charges
9. Exceptional items
....................
The following costs were identified as exceptional during the Period:
For the Period to 31
December 2018
GBP000
IPO costs 613
Exceptional legal and professional 256
costs related to investment and
syndication of loans
869
Urban Exposure Plc's Ordinary Shares were admitted to trading on AIM on 9
May 2018. Costs of GBP613,000 related to the IPO were expensed as a one-off
non-recurring cost.
Legal and professional costs incurred in setting up the syndication
agreement with KKR. The set-up costs are an exceptional one-off cost in
defining the arrangement between the parties and are considered exceptional
in size.
10. Finance costs
.................
Interest expense for right-of-use
lease assets
11. Taxation
............
For the Period to 31 December
2018
GBP000
Current tax -
Deferred tax 273
Taxation credit for the Period 273
The standard current rate of tax for the Period ended 31 December 2018 is
19%.
Deferred tax has been accounted for at the substantively enacted Corporation
Tax rate of 19%.
The tax for the Period is based on the loss before taxation and is computed
as follows:
Loss before taxation
Based on loss for the Period at
tax rate of 19%
Expenses not deductible for tax
purposes
Tax credit for the Period
12. Earnings per share (EPS)
............................
Basic earnings/loss per share (EPS) has been calculated based on the loss
for the Period as shown in the Consolidated Statement of Comprehensive
Income divided by the weighted average number of Ordinary Shares in issue.
Diluted EPS has been calculated based on the loss for the Period as shown in
the Consolidated Statement of Comprehensive Income divided by the weighted
average number of Ordinary Shares. Although 3,150,000 share options were in
issue, as these would have an anti-dilutive effect they have not been
included in the calculation of 'Weighted average number of shares for
diluted earnings per share'. In the future, when a profit is generated,
these will have a dilutive impact.
For the Period to
31 December 2018
GBP000
Loss for the Period (1,716)
Loss for the Period excluding (847)
adjusting items
Number of shares
Weighted average number of 145,793,865
shares for basic EPS
Dilutive effect of share -
options
Weighted average number of shares for 145,793,865
diluted EPS
For the Period to 31
December 2018
Basic loss per share 1.18p
Diluted loss per share 1.18p
Adjusted basic loss per share 0.58p
Adjusted diluted loss per share 0.58p
13. Dividend
............
Interim dividend for the Period
Proposed final dividend for the
Period
The Board approved an interim dividend of 0.83p per share on 17 December
2018 which was paid on 21 January 2019. This has been recognised as a
liability at 31 December 2018.
A final dividend of 1.67p per share is proposed, payable to all shareholders
on the Register of Members on 12 April 2019.
The proposed final dividend is subject to approval at the Annual General
Meeting and has not been recognised as a liability at 31 December 2018. The
payment of this dividend will not have any tax consequences for the Group.
14. Intangible assets
.....................
Goodwill Brand Total
GBP000 GBP000 GBP000
Cost
At 10 April 2018 - - -
Acquired during the Period 10,668 1,874 12,542
Cost at 31 December 2018 10,668 1,874 12,542
Amortisation
At 10 April 2018 - - -
Charge for the Period - 122 122
Amortisation at 31 December 2018 - 122 122
Net Book value at 31 December 2018 10,668 1,752 12,420
The Group acquired the goodwill and the brand on acquisition of the business
of Urban Exposure Investment Management LLP on 9 May 2018, as detailed in
note 27.
Brands are amortised on a straight-line basis over their useful economic
lives, currently estimated at 10 years.
Goodwill
The Group tests annually for impairment, or more frequently if there are
indications that goodwill may be impaired.
The carrying amount of goodwill is allocated to CGUs. The directors consider
that the goodwill is allocated to the overall business of Urban Exposure Plc
as one CGU.
The recoverable amount is determined based on the value in use calculation.
The use of this method requires the estimation of future cash flows and the
determination of a discount rate to calculate the present value of the cash
flow.
The basis on which the CGU's recoverable amount has been determined is the
value in use of the asset over a five-year period, discounted at 5.45%, and
assumes growth of the loans, primarily through asset management.
The Group has conducted an analysis of the sensitivity of the impairment
testing to changes in the key assumptions used to determine the recoverable
amount of the CGU to which goodwill is allocated. The directors believe that
any reasonable change in the key assumptions on which the recoverable amount
is based would not cause the aggregate carrying amount to exceed the
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DJ Financial results for the period from 10 April -10-
aggregate recoverable amount of the CGU.
A 10% underperformance against forecast income would reduce the headroom but
would show an aggregate value in excess of the carrying value of goodwill
and hence would not result in an impairment charge. An increase in the
discount applied to the cash flows of 5%, to 10.45%, would reduce the
headroom but would show an aggregate value in excess of the carrying value
of goodwill and hence would not result in an impairment charge.
15. Tangible assets
...................
Right- Furniture, Computer TOTAL
of- fixtures & Equipment
use fittings
short
Leaseh
old
GBP000 GBP000 GBP000 GBP000
Cost
At 10 April 2018 - - - -
Acquired during 3,839 418 19 4,276
the Period
Cost at 31 3,839 418 19 4,276
December 2018
Depreciation
At 10 April 2018 - - - -
Charge for the - - - -
Period
Depreciation at 31 - - - -
December 2018
Net Book value at 3,839 418 19 4,276
31 December 2018
A right-of-use short leasehold was acquired on 20 November 2018 and has been
recognised as an asset in accordance with IFRS 16. The leasehold was not in
a condition available for occupation and was not occupied until January
2019. The furniture, fixtures and fittings and computer equipment were
acquired for the new office. As the date of first use of all the assets is
January 2019, there was no depreciation charge for the Period ended 31
December 2018.
16. Investments
...............
GBP000
Valuation
At 10 April 2018 -
Acquired during the Period 1,949
Valuation at 31 December 2018 1,949
The Group entered into a partnership agreement with Kohlberg Kravis Roberts
(KKR) in which the Group has a 9.1% interest. The purpose of the agreement
is to make loans to real estate developers in the United Kingdom for the
development of residential and mixed-use properties. Under this agreement,
KKR will invest up to GBP150m and Urban Exposure Plc will invest up to GBP15m in
assets under management, with each party contributing as directed under the
partnership agreement, as and when required. At 31 December 2018, the Group
had invested
GBP1,949,000 under this agreement and considers this to be the fair value as
at that date.
The investments are classified as a trade investment under IFRS 9.
Accordingly, they are financial assets measured at FVTPL. See note 4 for
further disclosures.
17. Subsidiaries
................
The principal subsidiaries of Urban Exposure Plc, all of which have been
included in these Consolidated Financial Information, are:
Name of Country of Proportion Principal Activity
company Incorporation of ownership
and Principal interest at
place of 31 December
business 2018
Urban Exposure United Kingdom 100% Holding company
Holdings
Limited
Urban Exposure United Kingdom 100% * Development finance
Lendco Limited
UE SFA 1 United Kingdom 100% * Asset management
Limited
Urban Exposure United Kingdom 100% * Support services
Amco Limited
Indirectly held by a subsidiary
All the subsidiaries are registered at 6 Duke Street, St. James's, London
SW1Y 6BN.
UE SFA 1 Limited (formerly Urban Exposure Security Agent Limited) was
incorporated on 3 May 2018.
Urban Exposure Holdings Limited, Urban Exposure Lendco Limited and Urban
Exposure Amco Limited were acquired by Urban Exposure Plc on 9 May 2018.
Further details are given in note 27.
18. Loan receivables
....................
As at 31 December 2018
GBP000
Loan receivables 89,544
89,544
Please see note 4 for further disclosures relating to financial assets.
.......................................................................
19. Trade and other receivables
...............................
As at 31 December
2018
GBP000
Contract assets 3,409
Other receivables 453
Total financial assets 3,862
Prepayments 85
Total trade and other receivables 3,947
Less: non-current portion of trade (254)
receivables
Less: non-current portion of other (422)
receivables
Current portion 3,271
The carrying value of trade and other receivables classified at amortised
cost approximates to fair value.
Contract assets relate to receivables acquired on the business combination
and are secured by a charge on the assets being developed and are repayable
based on the expected sales of those assets. There is no movement in the
impairment provision in the Period.
Included within trade receivables is a contract asset of GBP254,000 which is
expected to be repaid after more than one year.
Included within other receivables is a deposit of GBP422,000 for the
right-of-use lease asset which is repayable within five years subject to
meeting certain criteria.
20. Cash and cash equivalents
.............................
As at 31 December 2018
GBP000
Cash and cash equivalents - unrestricted 46,806
All the cash and cash equivalents are held in Sterling.
The directors consider that the carrying amount of cash and cash equivalents
approximates to their fair values.
21. Trade and other payables
............................
As at 31 December 2018
GBP000
Trade payables 1,096
Other creditors 117
Accruals 2,004
3,217
The carrying value of trade and other payables is measured at cost which
approximates to fair value. Note 4 gives further disclosures and a maturity
analysis of the financial liabilities.
All trade and other payables are payable within one year.
22. Lease liabilities
.....................
The lease liabilities, as measured at present value, mature as follows:
As at 31 December 2018
Total Within 1 After more than 1
year year
GBP000 GBP000 GBP000
Payable within 1 229 229 0
year
Payable between 325 - 325
1-2 years
Payable between 1,220 - 1220
2-5 years
Payable after 2,031 - 2031
more than 5 years
3,805 229 3,576
The lease liabilities are in respect of the right-of-use leasehold premises
acquired towards the end of the Period for the new head office to facilitate
the Group as it grows.
The leasehold agreement is for 10 years with a five-year tenant-only break
clause. The Group anticipates that this will not be exercised and has
measured the right-of-use leasehold asset and lease liabilities on this
basis.
The lease agreement includes a variable annual service cost which has a
maximum value linked to the RPI. The lease is subject to a rent review after
five years. Both variations will be measured as and when they occur.
23. Deferred tax
The net deferred tax movement for
the Period is as follows:
Brand Tota
l
GBP'000 GBP'00
0
Balance at 10 April 2018 - -
Deferred tax on intangible asset (356) (356
acquired (note 27) )
Credit/(charge) to income 23 272
statement in Period
Deferred tax liability at 31 (333) (83)
December 2018
Deferred tax has been accounted for at the substantively enacted Corporation
Tax rate of 19%.
24. Share capital
.................
Share capital for the Period has been issued as follows:
Number Value Ordinary Deferred Treasury Total
per Shares Shares Shares
share
GBP GBP'000 GBP'000 GBP'000 GBP'000
Issued 10 1 1.00 - -
April 18 on
incorporatio
n
Issued at 16 49,999 1.00 50 50
April 2018
Shares as at 50,000 50 - - 50
30th April
2018
Subdivision 5,000,0 0.01 50 50
50,000 GBP1 00
shares
converted to
5,000,000 1p
shares at
30April 2018
Shares 0.01 (50) 50 -
re-organised
into
Ordinary and
Deferred
shares 30
April 2018
Issued in 14,950, 0.01 150 150
share 000
exchange 9
May 2018
Issued at 150,000 0.01 1,500 1,500
IPO 9 May ,000
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2018
At 31 169,950 1,650 50 - 1,700
December ,000
2018
The movement in the number of shares during the Period is shown as below:
Ordinary Deferred Treasury Total
Shares No. Shares Shares
Number Number Number Number
Issued 10 April 1 - - 1
18 on
incorporation
Issued at 16 49,999 - - 49,999
April 2018
Shares as at 30 50,000 - - 50,000
April 2018
Subdivision 5,000,000 - - 5,000,000
50,000 GBP1
shares
converted to
5,000,000 1p
shares at 30
April 2018
Shares (4,950,000) 4,950,000 - -
re-organised
into Ordinary
and Deferred
Shares 30 April
2018
Issued in share 14,950,000 - - 14,950,000
exchange 9 May
2018
Issued at IPO 9 150,000,000 - - 150,000,00
May 2018 0
Shares (6,505,870) - 6,505,870 -
re-purchased as
Treasury shares
14 November
2018
At 31 December 158,494,130 4,950,000 6,505,870 169,950,00
2018 0
The Company was incorporated on 10 April 2018. On incorporation, the Company
issued 1 Ordinary Share of GBP1 at par value. On 16 April 2018, the Company
issued another 49,999 shares of GBP1 each.
On 30 April 2018, the entire share capital of 50,000 Ordinary Shares was
sub-divided into 5,000,000 Ordinary Shares of GBP0.01 each and re-organised
into 50,000 Ordinary Shares of GBP0.01 each and 4,950,000 Deferred Shares of
GBP0.01 each.
On 9 May 2018, the Company entered into a legacy receivables share exchange
agreement with Urban Exposure Holding Company (Jersey) Limited and as a
result 7,151,300 Ordinary Shares of GBP0.01 each were issued for a
consideration of GBP7,151,300.
On 9 May 2018, the Company entered into another share exchange agreement
with the members of Urban Exposure Investment Management LLP and issued
7,798,700 shares of GBP0.01 each for a consideration of GBP7,848,700.
On 9 May 2018, the Company listed on AIM and issued 150,000,000 of GBP0.01
each at an issue price of GBP1.
On 14 November 2018, the Company re-purchased 6,505,870 GBP0.01 Ordinary
Shares for a consideration of GBP0.80 per share through a share buyback. All
the shares re-purchased are held as Treasury Shares.
The Ordinary Shares have full voting, dividend and capital distribution
rights (including on a winding up). The Ordinary Shares do not confer any
rights of redemption.
The Deferred Shares have no rights to dividends and no right to partake in a
capital distribution (including on a winding up) before all other
shareholders, neither do they confer any right to attend or vote at a
general meeting of the Company.
25. Share premium
.................
As at 31 December 2018
GBP'000
Balance at 10 April 2018 -
Share premium arising on Ordinary 163,300
Shares issued
Share issue costs (6,722)
Transfer to retained earnings (156,578)
Balance at 31 December 2018 -
At 31 May 2018, a resolution was passed authorising, conditional on
admission, the amount standing to the credit of the share premium account of
the Company (less any issue expenses set off against the share premium
account) to be cancelled and the amount of the share premium account so
cancelled to be credited to retained earnings.
An application was made to the High Court to cancel the share premium
account and judgment was obtained by Order of the High Court of Justice,
Chancery Division, to approve the application and the share premium of
GBP156,578,000 was cancelled and credited to retained earnings.
The SH19 form was submitted to Companies House with a copy of the Court
Order on 24 July 2018.
26. Share-based payments
........................
Following the IPO, the Group established equity-settled employee share
schemes under which shares or share options are granted to employees or
directors subject to the terms of the schemes:
There are two share option schemes in operation, and both were set up during
the Period.
The Long-Term Incentive Plan ('LTIP')
The LTIP enables the participants to acquire 'A' Ordinary Shares in Urban
Exposure Holdings Limited ('A Ordinary Shares') as awards. On or after
vesting, the participants may require the Company to acquire the A Ordinary
Shares in exchange for the issue of Ordinary Shares in the Company. The
acquisition price for the A Ordinary Shares shall be the nominal value of
the shares.
The LTIP also grants share options to the participants with a nominal value
exercise price. On exercise, the participants will be issued Ordinary Shares
in the Company. The A Ordinary Shares and the share options will combine to
deliver a maximum number of Ordinary Shares in the Company.
The options vest based on achievement of three separate measures for each of
the periods ended 31 December 2018, 31 December 2019 and 31 December 2020,
with a maximum of 550,000 shares available to vest in each period and a
maximum number of 1,650,000 in total.
Measures:
1. Total shareholder return
2. Annualised return on equity
3. Annualised principal amount of committed loans made or arranged by the
Company
Up to one ninth of the total LTIP share options will vest for achieving and
exceeding each measure on an annual basis. Therefore 183,333 options are
available for achieving each measure at each of the three period ends from
31 December 2018 to 31 December 2020.
The awards granted are subject to rigorous, stretching performance
conditions as set by the Remuneration Committee on an annual basis.
Management Share Options ('MSO')
The MSO enables the participants to acquire A Ordinary Shares in Urban
Exposure Holdings Limited as awards. On or after vesting, the participants
may require the Company to acquire the A Ordinary Shares in exchange for the
issue of Ordinary Shares in the Company. The acquisition price for the A
Ordinary Shares shall be the nominal value of the shares.
The MSO also granted share options to senior management at the date of the
IPO with an exercise price of 100p. On vesting, the participants will be
issued Ordinary Shares in the Company.
Under the scheme, 1,500,000 share options were granted with an exercise
price of 100p. The only vesting condition is that the holders remain within
the employment of the Group. The options will vest on 9 May 2021.
The share-based payments for the Period included in operating costs
comprise:
For the Period to 31 December 2018
GBP000's
Total share-based payment 480
26. Share-based payments continued
The following table illustrates the number and movement in share options
during the Period:
Weighted Grant date/ Vesting date Weighted
average (Lapsed date) average
Exercised remaining
price contractua
(pence) l life
(years)
As at 10
April 2018
LTIP share 1 09/05/2018 31/12/2018 10 years
option
issued
LTIP share 1 09/05/2018 31/12/2019 10 years
option
issued
LTIP share 1 09/05/2018 31/12/2020 10 years
option
issued
MSO issued 100 09/05/2018 09/05/2021 10 years
LTIP share (31/12/2018)
options
lapsed in
period
Analysed
as:
Share
options
exercisabl
e
Share
options
not
exercisabl
e
The fair value of the share-based payments for the LTIP and the MSO has been
calculated based on the Black Scholes Pricing model with the following
assumptions:
LTIP MSO
Current Price (p) 100 100
Exercise Price (p) 1 100
Risk-free rate of return 1.03% 1.03%
Volatility 23.23% 23.23%
Expected life of option (years) 5 5
Value per option (p) 76.93 11.10
27. Business combinations
.........................
On 9 May 2018, Urban Exposure Amco Limited, a 100% subsidiary of Urban
Exposure Plc, acquired the business of Urban Exposure Investment Management
LLP in exchange for 15,000,000 Ordinary Shares of GBP1.
GBP'000
Fair value of consideration
15,000,000 shares of GBP1 each 15,000
The following assets and liabilities were acquired at
fair value:
Intangible assets: brands 1,874
Trade and other receivables: contract assets 3,798
Trade and other payables (984)
Deferred taxation (356)
4,332
Goodwill acquired 10,668
The primary reason for the acquisition was to acquire the original Urban
Exposure business as a going concern including the goodwill, business
information, IT system, the business name, business intellectual property
rights, records and all other property, rights and assets used or intended
to be used in connection with the business and it is these assets which
represent the goodwill. The Company also acquired the rights to revenues in
respect of contract assets which are included in trade and other
receivables.
All assets and liabilities were valued at fair value at the date of
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