Introduction

Contents

Strategic Report

Business & Financial Highlights 2

Business Model 3

Strategic Framework 4

Chairman’s Statement7

Chief Executive Officer’sReview9

Financial Review12

Principal Risks & Uncertainties16

Corporate Social Responsibility &Section 172 22

Governance

Chairman’s Introduction24

Board of Directors 25

Board Committees 26

Audit Committee Report 28

Remuneration Committee Report 30

Statement of Directors Responsibilities 37

Directors’ Report38

Independent Auditors Report 42

Financial Statements

Glossary

Advisors

Urban Exposure Plc (‘the Company’) and its subsidiaries (together ‘theGroup‘, ‘Urban Exposure’ or ‘we’) announces its auditedGroup financial results for the year ended 31 December 2019. Theseresultsare being published in accordance with AIM Rule 19.

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Business & Financial Highlights

About Urban Exposure Plc

Urban Exposure Plc is a specialist real estate financier which was incorporated and admitted on the AlternativeInvestment Market (“AIM“)operated by the London Stock Exchange in May 2018. The Group provides funding for UK real estate development through the leveraging of its own balance sheet and through third party capital.

Business Highlights

  • After carrying out a strategic review, and in light of the impact of changing market conditions as a result of COVID-19, the Board has concluded that the Group will focus entirely on an orderly wind down of the loan book and return of capital to shareholders.

  • The Group believes that an orderly wind-down of the Company has the potential to produce net returns for Shareholders in a range of 70p to 83p per ordinary share on a fully diluted basis. The Group estimates that 80% of proceeds should be returned to shareholders within 7 to 15 months.

  • In light of the revised strategy and requirements of the Group there have been a number of changes to the Board with Randeesh Sandhu stepping down as Chief Executive Officer, William McKee retiring as Chairman (to be replaced by Graham Warner subject to appointment) and Ravi Takhar leaving the business as a result of redundancy.

  • Both Andrew Baddeley and Nigel Greenaway will stay on as Independent Non-Executive Directors and Sam Dobbyn has taken over as Chief Executive Officer.

  • Current committed loan book has a Weighted Average LTGDV of 68% (2018: 67%).

  • New committed loans during the year totaling £498m (2018: £525m). As a result of specific borrower performance post 31 December 2019 new committed loans now stand at £191m.

The following performance measures as at year end 2019 were as follows:

New committed loans:£498m, £191m post year end (2018: £524.5m)

Projected aggregate income (the Group share, on loan book over life of loans):£21.1m, £13.3m Post year end (2018: £26.9m)

Weighted Average LTGDV:68% (2018: 67%)

WA IRR:11% (2018: 10%)

WA Money Multiple:1.15x (2018: 1.15x)

Financial Highlights

  • Revenue:

    £11.1m (2018: £3.9m)

  • Operating costs (including exceptional costs of £0.5m and share-based expenses of £0.3m)

    £10.8m (2018: £5.9m)

    (2018: including exceptional costs of £0.9m and share-based expenses of £0.5m)

  • Profit after tax for the year:

    £0.1m (2018: Loss £1.7m)

  • Basic profit/(loss) per share:

    0.09p (2018: (1.18p))

  • Net tangible assets(*note 1)

    £133.1m (2018: £137.8m)

  • Net tangible asset value per share:

    84p (2018: 87p)

  • Cash and cash equivalents per share:

    14p (2018: 29p)

  • Loans receivable and Investments per share:

70p (2018: 586p)

*Note 1: Net tangible assets equates to total net assets excluding intangible assets.

Business Model

The Group‘s business model is to provide funding to UKreal estate property developers through the deployment of its financial and human resources.

What we do

The Group generates 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. There are therefore two types of customer: borrowers and capital providers.

The Groupuses its balance sheet as a temporary store or ‘warehouse’ for loans that it executes, beforemoving them into an asset management structure, whilst retaining a proportion on the balance sheet via co-investment in these structures.

How we transact

Our asset management strategy follows two routes:

By using our balance sheet to co-invest with our capital providers, we are fully aligned with their objectives. To enhance our asset management returns and lending capacity, we use leveraged facilities from financial institutions.

What makes us relevant

We provide an essential service to a wide range of stakeholders by facilitating the building of homes within the UK. The market we operate in has two fundamental drivers:

  • Too few homes are being builta recent projection by the government states that approximately 300,000 new homes need to be built in England every year for the next decade in order to keep pace with rising demand and population growth; and

  • A lack of availability of development finance– SME housebuilders’ demands for finance outstripsupply due to the dramatic reduction in traditional bank lending to the residential development sector, largely due to regulatory reform.

Our resources

The Group has a highly experienced team of real estate development finance specialists who have relationships with a wide range of residential property developers throughout the UK. The key to the Group‘sbusiness model is its access to capital from traditional banks to private equity and other alternative credit lenders.

One of the key resources of the Group is its people who are highly skilled and respected industry figures in their relevant fields. Our Group has excellent underwriting processes as well as advanced risk management procedures.

Future value creation

In the future, the Group is expected to focus entirely on the management and wind-down of its existing loan portfolio to maturity in order to maximise returns from the portfolio for the benefit of its shareholders. It will do this through leveraging its significant expertise within the UK real estate sector and by using its key resources to create value for its shareholders, especially during the uncertainty created by current market conditions.

Strategic Framework

The Group had the following strategic objectives for 2019:

  • 1. Grow a profitable loan book while maintaining excellent levels of credit quality

    The Group committed new lending of £498m as at theyear-end that has subsequently reduced to £191msince the year end. The credit quality of the book remains resilient with a WA LTGDV of 68% (2018: 67%). Furthermore, significant pre-sales have been achieved on residential schemes where the Group is providing a development loan, with28% of units (by value) pre-sold.

    The WA IRR for the loan book was 11% (FY 2018: 10%) demonstrating the strong risk adjusted returns generated from the quality of our underwriting. Projected aggregate income over the life of the loans written in 2019 is expected to be £13.3m. This is a decrease on the £26.9m achieved in FY 2018 due to more loans moving into a syndicated asset management model, as well as a reduction inthe loan bookpost year end.

  • 2. Raise additional third-party capital for deployment to the real estate development marketThe Group raised £144.7m of third-party capital for 2019 (2018: £371m). This capital was raised from both an increase in the UBS facility on our KKRpartnershipof £135m and from syndications of loans to alternative credit providers.

  • 3. Invest in our operational efficiency, team learning and development

    The Group‘s operating costs as a percentage of total committed loans was1.1% at FY 2019. During 2019 the Group established a companywide objective management system through the objective and key results (OKRs) approach to driving performance as well as the implementation of a new HR platform.

Future strategy

TheGroup‘s future strategy isfocused entirely on the management of its existing loan portfolio to maturity in order to maximise the returns from the portfolio for the benefitofits shareholders.

As announced, the Group anticipates making distributions to its shareholders on a quarterly basis of the net proceeds of the loans, subject to its then-existing cash requirements. Depending on the circumstances at the time, these distributions will most likely take the form of own-share tender offers which are made to all of the Company’s shareholders. In addition, the Company intends to use its shareholder authority to make on-market own-share purchases at prices that are accretive to the Group’s prevailing tangible net asset value per share, subject to the then funding requirements of the Group and, at least initially, the maintenance of a £10 million cash buffer, which is expected to reduce over time.

When all of the loan book has matured or been sold, the Group proposes that it enters into a voluntary solvent liquidation.



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