Urban Exposure reports a loss in first year on AIM

Residential development financier and asset manager Urban Exposure reported progress in the development of its asset management business in its first year since incorporation and trading on AIM but has not yet translated this into profits.

For a shortened eight-month financial year from incorporation to 31 December, "full of significant milestones", Urban Exposure recorded a pre-tax loss of £1.7m, primarily due to its strategic objective of growing its asset management business at the expense of short-term profits. However, the company declared a total dividend of 2.5p per share.

Urban Exposure ended the year with a net asset value across its portfolio of £151m and had cash of £46.8m in the bank, having committed £525m in new loans and raised £371m from asset management agreements. The year ended with a total committed loan book of £620m and reported a £670m "live" pipeline.

Operating costs came to £5m in 2018 were higher than planned at 0.8% of the total loan book, as UE invested in nine additional employees, larger office space to accommodate the growing team and put some money into the technological automation of the business.

Having raised a gross £150m in an initial public offer in May, the company warned in November that earnings would be "significantly reduced" in the short term as it shifted its focus to higher-quality loans, with the aim of generating stronger growth in the medium-term.

Chief executive Randeesh Sandhu pivoted from the company's original strategy of providing finance to residential developers around the UK, after strong demand for its funds enabled it to focus on higher-quality, lower loan-to-value loans, which cut short-term income.

Looking forward, Sandhu said the business entered 2019 with a "substantial" pipeline of new loan transactions and ongoing asset management relationships, some of which the group said were "of considerable size and calibre".

Elsewhere, the company poached TP ICAP's head of financial planning Sam Dobbyn to be its new chief financial officer. Dobbyn will join the group in late July, taking finance director Trevor DaCosta's seat at the board.

Sandhu said: "Sam brings a wealth of relevant Plc experience that will be invaluable as we deliver on our growth strategy over the coming years.

As of 0830 BST, Urban Exposure shares had picked up 2.11% to 67.90p.

House broker Liberum again lowered its short-term forecasts, expecting a further deferral in profits in 2019.

"The shares nevertheless trade at a 26% discount to our FY19E NAV of 90p. The economic value of loans written also supports a DPS yield of 7.5%."