UANC.L Regulatory News (UANC)

Urban&Civic plc

("Urban&Civic", the "Company" or the "Group")

Annual results for the year to 30 September 2018

Urban&Civic plc (LSE: UANC) announces its results for the 12 months to 30 September 2018.

Financial highlights

• EPRA net assets £481.2 million at September 2018, up from £439.3 million at September 2017.

• EPRA net assets per share 9.0 per cent higher at 331.8p (304.4p at September 2017).

• Profit before tax up for 12 months to September 2018 at £22.3 million (September 2017: £7.9 million), sales of the bulk of the remaining commercial assets lifting pre-tax profits above trend.

• 85 per cent of Group property assets in strategic projects (September 2017: 69 per cent).

• Large site discount represented a further £210 million at 30 September 2018, equivalent to 145p per share

(September 2017: £99 million, equivalent to 68p per share). Discount reflects store of future value and is proxy for increasing business resilience.

• 30 September 2018 EPRA NAV + large site discount = 476.8p per share, an exceptional year-on-year increase of 28 per cent (30 September 2017: EPRA NAV per share + large site discount = 372.4p per share).

• Net gearing at 30 September 2018 of 16.3 per cent (September 2017: 18.6 per cent), despite £60 million+ of new infrastructure investment. Conservative gearing policy to maintain, supported by long term Homes England facilities

• Final dividend for the year of 2.2p per share, providing a full year dividend of 3.5p. 9.4 per cent increase in line with stated policy to recognise continuing progress.

Project highlights and post year-end events

• Urban&Civic Master Developer model definitively working for housebuilders, community stakeholders and landowners. Approved applications, licensed plot sales and number of new projects all up.

• Group portfolio now exceeds 50,000 residential plots, either consented or being progressed.

• Three new project acquisitions: Priors Hall, Northamptonshire; Manydown in Basingstoke, Hampshire; Calvert in Buckinghamshire. Good locations, not in multiple ownership and playing to Urban&Civic strengths.

• Priors Hall acquired from joint administrators in October 2017; opening valuation up over 24 per cent.

• Good Catesby contribution through realised sales and new allocations. Changed emphasis towards plan led applications.

• 445 completions for the year to 30 September 2018, compared with November 2017 guidance of 315. September especially strong and included brought forward sales. Future realisations guidance repeated, despite current uncertainties.

• Increased large site discount reflects 2,800 new consented units at Wintringham, Cambridgeshire and the acquisition of Priors Hall in development. Discount will increase with each successive strategic consent.

• Intention to apply for Premium Listing in January 2019.

Commenting on these results, Nigel Hugill, Chief Executive of Urban&Civic, said:

"Good results and marked progress with three major project additions to take the total to eight. Urban&Civic has early mover advantage on strategic sites and is establishing a brand that works for housebuilders, community stakeholders and landowners alike. EPRA NAV growth up 9 per cent, appreciably faster than last year, and more than 1,700 plot sales both speak to that advantage. It would be plain naive to be complacent at present but our Master Developer model with 4.5 years forward sales on contracted plots and ten year Homes England backing affords unusual resilience. The revisions to national planning policy were anticipated and are expected to prove to our advantage."

A presentation for analysts and investors will be held at 09.00am today at FTI Consulting, 200 Aldersgate, Aldersgate Street, London, EC1A 4HD.

If you would like to attend please contact Alex King at FTI on +44 (0)20 3727 1000 or urban&civic@fticonsulting.com. A live webcast of the presentation will be available at www.urbanandcivic.com or via the following link: http://webcasting.brrmedia.co.uk/broadcast/5baca187269b0c1ded18906e, and presentation slides will also be available to download.

Alternatively, details for the live dial-in facility are as follows:

Participants: Tel: +44 (0)330 336 9105

Passcode: 1230309

Chief Executive's statement

Introduction

Another set of good results: demonstrable progress across all projects and substantial enlargement to pipeline. EPRA net assets per share were up 9 per cent to 331.8p as at 30 September 2018. The percentage increase in EPRA NAV was a little higher at 9.5 per cent, to reach £481.2 million, as compared with £439.3 million at 30 September 2017. Profit before tax at £22.3 million (year to 30 September 2017: £7.9 million) approached three times that of the previous 12 months, boosted by sales of the bulk of the remaining commercial assets which lifted realised numbers above trend.

A few additional opening observations: first, in contrast with most of the listed property sector, the pace of increase in EPRA NAV actually accelerated against last year (EPRA NAV per share annual increase to September 2017: 7.1 per cent). Second, the estimated large site discount reached the equivalent of 145p per share. That figure represents the gap between our valuers' appraised current open market value of a standard 150 plot parcel on consented sites as discounted to account for the strategic size of our holdings and can reasonably be regarded as a store of future value. It can also be regarded as a proxy for business resilience, rising with each new strategic consent. The increase to 30 September 2018 resulted from in year planning consent having been secured for 2,800 homes within walking distance of the East Coast Mainline station at Wintringham, St Neots, in Cambridgeshire and recognised the opening valuation of our holding at Priors Hall in Northamptonshire. EPRA NAV plus the discount reached 476.8p per share at 30 September 2018, representing an exceptional year-on-year increase of 28 per cent (30 September 2017 EPRA NAV per share plus large site discount: 372.4p).

Also gratifying is that Master Developer is now a recognised descriptor in our industry and that Urban&Civic has come to be regarded as market leader. Large site delivery carries its challenges but your Company enjoys real early mover status. Over the last 12 months, we have sold substantively all of our commercial investments to reinvest in projects where we carry clear competitive advantage. I hanker after going faster but console myself in the knowledge that the average lead times for strategic projects and our skillset and specific experiences are such that the growing list of new entrants expressing interest will struggle to make up ground any time soon. The example at Waterbeach represents a case in point. Undoubtedly important in providing vital additional housing capacity on the northern perimeter of Cambridge but, following procedural delays, not now scheduled to go to planning committee until early 2019. That would be a disappointing two years from application submission in February 2017.

There does seem to have been a discernible slowdown in show home visits to existing sites in November but without corresponding reduction in housebuilder enthusiasm for our product. Quite the reverse. Subsequent to September 2018, 953 additional plots have been contracted or placed under offer with nine different housebuilders. General public caution will obviously impact upon delivery rates, if sustained.

Early mover advantage

The existing early mover advantage that Urban&Civic enjoys has been reflected in strong cross-project demand from our housebuilding customers for fully infrastructured plots, as well as in a growing ability for us to source sites within the broader South East of England, where competition is most intense. Our core model provides for the sale of serviced plots via a percentage participation in the value on sale of completed houses, subject to minimum annual payments from housebuilders. This is highly capital efficient for our customers whilst enabling us to maintain project quality and direction. Seven contracts have been signed since 30 September 2017. The balance of business is also good; five of the contracts were with existing housebuilding customers with two new additions. Of the nine contracts currently under offer, five are repeat customers with four new. Financial terms continue to be above previous budget in all cases with minimums now typically close to current market prices. On completion of the outstanding agreements, we will have approximately 4,000 plots under licence or deferred sale representing 19 per cent of currently consented strategic holdings. Significantly, given prevailing uncertainties, were one to take the minimum drawdown under those contracts, the aggregated outstanding outturn represents an average of four and a half years forward sold. The largest agreements are with the strongest financial covenants.

Recognition of the early mover status of Urban&Civic also means that your Company is genuinely hard to beat when we set out our stall in open competition. We were pleased to be able to acquire Priors Hall from the Joint Administrators at the beginning of the reporting year in October 2017 and duly grateful for the trusted partner support from Homes England received in the process. I would like to think that the level of subsequent progress is seen as justifying that confidence. Then came selection with our partner Wellcome Trust in February 2018 to join with Basingstoke and Deane and Hampshire Councils to steward an important urban extension at Manydown. The level of competition was intense through an extended procurement process and included some of the largest national housebuilders.

We have since been able to secure a further prospective strategic project off market with committed landowners wanting Urban&Civic to act as Master Developer. Calvert in Buckinghamshire is the longest dated and if potentially the most significant of all our existing projects. We have a conditional purchase agreement over approaching 800 acres, with co-operation arrangements to take total land interests close to 2,500 acres in the area of intersection between the intended route for HS2 with the to be restored Varsity Line between Oxford and Cambridge. The co-operation lands adjoin the massive proposed HS2 maintenance depot and, of themselves, could accommodate a new settlement in excess of 10,000 homes. Moreover, an announcement was made by the Department for Transport in September 2018 that the preferred route for the proposed accompanying Expressway was broadly parallel with the Varsity Line. Most likely the new road will run close, or through, existing interests. Singularity of ownership is a fundamental component of efficient large site delivery and discussions have commenced to enlarge the Calvert land area further.

Operating highlights

Three standout operating highlights: the expeditious planning consent at Wintringham, St Neots, showing just what can be achieved in terms of accelerated timing without compromising design quality; the scale of infrastructure works at Rugby; and the extent to which the project at Priors Hall has been rebooted during our still comparatively short ownership. Each speaks to different aspects of the Urban&Civic skillset, the evident alignment with local and national Government priorities and the long-term financial backing of Homes England.

Preliminary works are on site at Wintringham, with a signed section 106 agreement and released planning consent obtained barely 12 months after our initial application submission in October 2017. Urban&Civic acquired a one-third project ownership and management from trusts associated with Nuffield College, Oxford, for an aggregate consideration of £13.3 million only in April 2017. In addition to the new housing, the significant extension to St Neots will include two primary schools, health facilities and 63,500 sq.m. of commercial space. Detailed designs for the striking first primary school from architects dRMM have been submitted with a programme to open in September 2020. Wintringham is in Huntingdonshire, the same District Authority as Alconbury; such was the confidence in the speed of determination that housebuilders also worked contemporaneously to produce detailed designs. Accordingly, the first two will be in a position to commence construction in the early part of 2019. Homes England is providing a £26 million facility for infrastructure investment to accelerate delivery, including our now standard cycle paths and busways. I shall be disappointed if there are not homeowners in occupation at Wintringham by the end of next year, which would be little more than two years after outline application submission. The researched historical average is 6.75 years.

Nuffield College is proving a wonderful partner with a shared commitment to quality delivery and environmentally healthier lifestyles. We are also enjoying a shared economic reward. The Wintringham acquisition consideration represented the equivalent of £14,285 per residential plot, without placing a value on the commercial space. 18 months later at 30 September 2018, the external market valuation from CBRE was £23,900 per the plot. This valuation is well below the minimum under offer receipts.

The project at Rugby, owned jointly with Aviva Investors, provides still clearer demonstration of the transformational large site potential with a committed Master Developer and cross-governmental department backing. Two separate contracts totalling £27.0 million, supported with acceleration funding from Homes England, are running on time and budget to provide important new road and cycle links into Rugby town centre by July of 2019. Our largest licence agreement to date was signed with Redrow over the summer. Meanwhile, the Archbishop of Canterbury visited the newly completed St Gabriel's primary school, which opened with 82 pupils in September. Most recently, LocatED (the Government agency responsible for procuring new free school sites) approved £35 million funding for a new secondary school, to incorporate the listed C station from which the first ever transatlantic telephone call was transmitted in January 1927. The funding will be interest free and repayable on section 106 triggers when they come to fall due (1,800 homes and beyond). Secondary school places are at a premium in Rugby, which ought to be reflected in future absorption rates. Summarising the statistics at Rugby serves to emphasise the robust market position commanded by Urban&Civic: first primary school 2018; link road open 2019; sister secondary school with outstanding rating 2021; and the realistic expectation of accelerating housing sales with close to four and a half year forward sold minimum receipts, all within a revitalised and genuinely good quality environment. These are not easy milestones to emulate.

Similarly at Priors Hall in Northamptonshire, your Company acquired an existing scheme comprising 965 acres of partly built land across the adjoining local authorities of Corby and East Northamptonshire. A sound project that had interested us for some time but for which the experience and financial resources of the original developer fell well short of his ambitions. The gross consideration paid to the Joint Administrators in October 2017 amounted to £40.5 million. Purchasing assets in administration is not for the faint hearted but we were confident of our ground and in the identified upside potential. The local demographic fundamentals also merit reciting: 20 per cent population growth over the past ten years with more than 7 million people living within a 50 mile radius; and a 68-minute direct rail link to London.

We inherited an outline consent for 5,095 residential units, of which 775 were occupied at the time of acquisition. A further 669 plots had been sold to housebuilders and are in the process of being built out with all deferred consideration or overage accruing to Urban&Civic, without additional payment to the Administrators. Total proceeds paid or payable to Urban&Civic with respect to pre-acquisition contracts are now expected to amount to about £12.5 million, leaving a net purchase consideration of £28 million for 3,656 uncontracted plots, or about £7,700 per acquired residential plot after accounting for the value of commercial land. The purchase of Priors Hall was part funded by Homes England and included likely future infrastructure spend, such that total committed facilities for the transaction aggregated £47.0 million, including accrued interest. The terms reflected those afforded to Urban&Civic elsewhere, including the provision that interest is accrued and repayment made only out of distributed proceeds. On the basis of current sales rates, our invested equity capital is unlikely to materially exceed £15 million.

Proactive and knowledgeable senior management has helped tighten up the Priors Hall organisation. Resident involvement has been strengthened and formalised, with discretionary investment being made in practical improvements. Early positives are quantifiable. Housing completions in the 11 months from acquisition to 30 September 2018 numbered 230, compared with just less than 200 per year previously. Two further sales agreements have been signed since the September year end, which will take the total number of housebuilders on site to nine. Contracts are under offer with three small housebuilders to extend the product range. In addition, terms have been agreed with two existing customers for extensions or new parcels. A cafe, a nursery and a Sainsbury's convenience foodstore are on their way. Achieved house prices are edging up in the range £215 to £230 per square foot. Constructive discussions are taking place with the two local authorities regarding restructuring the respective planning consents on land which is not yet built. The appraised value of our holdings at Priors Hall at 30 September 2018 was £55 million, up more than 24 per cent over acquisition cost after adjustment for subsequent investment. The plot holding cost comparison relative to acquisition will not quite be like for like in the future in that the rebalancing of distribution in Zones 2 and 3 is likely to result in an increase in the number of units in higher value East Northamptonshire. Notwithstanding, the per plot valuation at September stood at £10,500. This is one-third of the terms agreed recently on a straightforward land sale in Corby Zone 1.

National Planning Policy Framework modifications

Large sites have always been an important part of the Government's consideration. The modifications to the National Planning Policy Framework, published in July 2018, not only reaffirmed their role in the mix but upped the focus further. Up until July this year the NPPF wording was: "The supply of new homes can sometimes be best achieved through planning for larger scale development, such as new settlements or extensions to existing villages and towns that follow the principles of Garden Cities." The replacement is: "The supply of large numbers of new homes can often be best achieved through planning for larger scale development, such as new settlements or significant extensions to existing villages and towns, provided they are well located and designed, and supported by the necessary infrastructure and facilities." Credible delivery expertise and demonstrable examples with local support are judged essential. Suffice to observe that Alconbury was used by the newly enlarged Ministry of Housing, Communities and Local Government to launch the Garden Cities initiative.

Letwin Review

The long-trailed Letwin Review was also published just after the Budget in November. The Review makes a strong case for aligned ownership and diversity of delivery being fundamental to increasing absorption rates on large sites. This again plays directly to our core strengths. The Urban&Civic approach as Master Developer has been to create diversity in design by working with a range of housebuilders, both local and national, which are collectively deploying a palette of over 100 house types at Alconbury alone. The market is also now responding to the need for a range of tenures with increasing interest in serviced land parcels from those specialising in modern methods of construction, retirement living, PRS and affordable providers. We are working with each of these channels to review opportunities and further diversify our customer base, which not only will improve absorption but is also good business. Buried at the back of the report are a series of structure diagrams for how the public sector/communities could deliver large sites. Our Master Developer model and partnering structuring could most readily be incorporated. That would have the additional benefit to government of the private sector assuming the infrastructure risk, as is our practice in any event.

Catesby

To the extent that we face headwinds other than those arising from prevailing political uncertainty, they may be seen to be in Catesby. Even those go to future prospects, including an apparently changed appeal environment, rather than current performance. For the year under review, Catesby completed four land promotion sales and two parcels at Europa Way with a third under offer. The realised contribution after overheads was £4.2 million, with a further £5.4 million of net EPRA movement. Capital invested in Catesby was £32.6 million in the 30 September 2018 balance sheet. The EPRA uplift over capital invested was £11.5 million.

Planning reflects politics from time to time. Small applications are being consented in growing numbers but above 10 units, non-technical grounds for appeal refusal are tending to prevail, most especially for applications between 100-500 units. Figures for the year to September 2018 show only 13,903 dwellings allowed on appeal on larger applications, the lowest since the adoption of the National Planning Policy Framework in March 2012. As a percentage of the number of residences being appealed, only 23 per cent of appeals were successful. This is a dramatically low number, as it includes those cases where the members have chosen to ignore their officers' recommendation. Recourse to higher courts carries no material liability to objectors and has also become more common. At the time of writing, we await the outcome of two Supreme Court hearings and a High Court Judicial Review. A disinclination for judicial lottery directs the focus towards schemes that are likely to be slower in adoption (having to be taken through local plans). Following the change of tack towards a greater emphasis on plan-led applications, Local Plan inspectors' reports have been received or are awaited currently by Catebsy in respect of allocations aggregating around 650 units.

A likely consequence will be increasing scope for crossover with sub-strategic sites. Catesby will continue to look for new sites requiring infrastructure delivery, along the lines of Europa Way, Warwick. On completion of the infrastructure works next August 2019, 64 per cent of Europa Way plots will have exchanged or completed. Catesby can build competitive advantage on such projects, since infrastructure delivery is not offered by the majority of competing land promoters.

GI placing and premium listing

In early July and following the publication of our interim results to 31 March 2018, GI Partners announced the successful sale of its entire 27.9 per cent holding in Urban&Civic at a price of 305p per share. The exercise was conducted by one of our joint brokers, Stifel Nicolaus, and raised aggregate gross proceeds of £123.4 million. The Company was not a party to the placing and did not receive any of the proceeds.

GI Partners had backed us in the original purchase of Alconbury and did not sell any of its shareholding when Urban&Civic came to market in 2014. The placing was all the more notable for reinforcing the configuration of our shareholder base having been taken up by existing and new investors, the vast majority of which are active small cap, specialist property funds or private client managers. It is a highly knowledgeable shareholder base but one which is conspicuously lacking in generalists and indexed funds.

Separately, our other joint broker, JP Morgan Cazenove, has been in discussion with the Financial Conduct Authority and the UK Listing Authority regarding premium listing for Urban&Civic. The shares trade currently under standard listing designation and, therefore, are not included in any of the main stock market indices. Following general consultation, FCA Listing guidance was altered as from January 2018 inter alia to provide that certain property companies that specialise in the development of projects of extended duration may demonstrate the development of assets more accurately through external property valuation reports than through the conventional three-year revenue accounts. It was recognised that Urban&Civic came within that category and confirmed that the Company is eligible to apply for premium listing via that concessionary route. Accordingly, it is intended that the Company will make application for premium listing on publication of the 2018 Annual Report and Accounts in January 2019.

Immediate priorities

As was the case last year, I am able to report that substantially all those priorities over which we have direction have been accomplished. The switch out of retail and leisure assets into further strategic projects in Autumn 2017 proved timely. The two areas that we have fallen short are in the determination of the outstanding planning application at Waterbeach, Cambridgeshire, that was submitted in February 2017 and our still awaited unblocking in the legal log jam of consented Catesby projects that would otherwise be helping to add to national housing numbers. The Waterbeach application includes 6,500 new homes, three miles north of some of the most dynamic employment creation in the western world on the Cambridge Science and Business Parks. The proposals have been shown to be net positive in terms of biodiversity. Clearance was given by Cambridgeshire County Council Economy and Environment Committee in July and announcement was made in September that the South Cambridgeshire Local Plan had been found sound by Government Inspectors. Both are necessary but not sufficient conditions. The legal challenges faced by Catesby reflect a manifest disproportion in the English Courts which objectors have become expert at exploiting. We have therefore focused on changing policy as described.

Elsewhere, Wintringham remains on track to become possibly the fastest ever strategic site within South East England from application submission to delivery with first occupations before the end of 2019; progress at Priors Hall is evidenced in the opening valuation; Calvert has the makings of the definitive new settlement in the Oxford to Cambridge corridor; the proposed routing for the new Expressway could not be better; and we led the selection at Manydown and are in exclusive due diligence on another significant project acquisition close to the M25, which we would hope to bring forward at pace.

Our commitment to quality delivery and to stakeholder engagement is the crucial engine to the continued building of the Urban&Civic brand. Your Company has an experienced and highly capable team below Board level. Transparent and inclusive internal processes retain project responsibility with formal reporting to an Executive Management Committee and then up to the Board. Manpower additions have been made and the governance structure is designed to cover risk and delivery as the business continues to scale up.

Outlook

The immediate outlook is terribly difficult to evaluate. The level of sales on our sites in the year comfortably exceeded the forecasts made last November. Total sales were 445, compared with guidance of 315 but include a very strong September. Business plan projections are for 635 realisations in the current year 2018/19 with a further 335 in Catesby at Europa Way. Wintringham apart, the investment required to deliver 4,000 plots, either contracted or under offer, has already been made. At Wintringham the necessary net infrastructure investment is expected to be covered by the new Homes England facility. Meanwhile the number of agreements still being signed with existing and new housebuilder customers bears witness to the core attractiveness of our product and the increasing resonance of the Urban&Civic brand. In negotiating those agreements, we were and are not short of first reserves. The queue to build out plots at Waterbeach is round the block, such is the shortage of good quality, well priced, new housing versus demand in North Cambridge. If the changed appeals environment results ultimately in fewer sites above 100 plots coming forward, that ought eventually to be reflected in serviced land pricing within commuting distance of London, where supply is constrained. Outside the broader South East there is no apparent shortage of consented land. Only our targeted areas (and London) show significant shortfalls. Speculative appeals are not likely to be successful. The escalating test for delivery against Local Plan targets can only benefit projects like ours, which offer a better consistency of output. Rentals will begin to feature in a maturing product offer.

The further extension of Help to Buy to 2023 ought to help underpin demand for entry-level new housing. Continuing low interest rates mean that accessibility, rather than affordability, often proves the hurdle for purchasers outside London. There is also growing evidence that first-time buyers in our identified locations are missing out the step of one and two-bedroom first apartment purchase, in favour of two and three-bedroom houses. As corollary, they then stay in their first purchase for longer. Obviously this remains a dynamic process but the signs are that this staying put could be up to 12 years (the pre-Lehmans average was around seven years). Bad for stamp duty receipts but altogether helpful in building new stable communities and with the direct look through into early provision of education and other community facilities. I am not aware of any other company bringing forward new schools at the pace that we anticipate. Elongation in the average length of first purchase occupations would be sufficient response to those scaremongers seeking to argue that Help to Buy purchases create some form of ticking time bomb.

All that said, near term absorption rates must suffer if the drop in consumer confidence is maintained. That is where the rubber hits the road. As a precaution we have cut budget plan sales rate assumptions back 20 per cent which in some cases is actually below contracted minimum draw downs. On that basis, our current estimate of 2019/20 sales still remains sharply upwards with 950 realisations in the year and 135 more at Europa Way. The average length of forward sales at 4.5 years with progressively higher minimums provides your Company with an unusual resilience. The Urban&Civic business model also indisputably benefits from the backing of Homes England, with which our priorities are closely aligned. My expectation is that the agency will be the principal lender to the Group for the foreseeable future, via project-specific funding on consented sites. Homes England has reiterated its long-term support for the business as part of the necessary preliminaries to premium listing. In turn, we will look to bring forward additional strategic projects as the opportunities arise and enlarge the housing offer in existing locations.

Dividend

The final dividend of 2.2p per share maintains the stated policy of increasing distributions to shareholders by 10 per cent per annum when the performance of the Company and the Board's estimation of future prospects are seen as warranting such. This is obviously not an environment to be cavalier, even if our own performance sets us apart from most of our property industry peers. We will monitor the next six months carefully before deciding upon the proposed dividend payout for next year.

A scrip dividend alternative will be made available to the 2018 final payment, for which I shall be electing.

Grateful thanks

I shall never tire of thanking Board and staff colleagues alike for their enthusiasm and unstinting commitment. The sale by GI represented a rite of passage for Urban&Civic. We are most grateful to Mark Tagliaferri and his partners for their early faith in what was then a novel concept. The fact that our co-founding private equity shareholders were able to place a 28 per cent holding with a broad range of existing and new investors in a single session speaks volumes for just how far your Company has travelled. The early mover advantage that everyone worked so hard to achieve is beginning to translate into real business scalability. Grateful thanks to all as we continue to move forward.

Nigel Hugill

Chief Executive

28 November 2018

Financial review

Introduction

Over the last twelve months the Group has continued to trend towards strategic land holdings. Following the acquisition of the 4,320 unit site at Priors Hall, Corby and disposal of four and a half commercial assets (namely the Stansted Hotel development, Feethams and Bradford leisure schemes, Skelton retail park and a 50 per cent share of the Manchester New Square apartment scheme to the Greater Manchester Pension Fund), strategic land now accounts for 85 per cent of the total property portfolio value (30 September 2017: 69 per cent).

Although the Group has seen strong cash generation from commercial sales (realising a combined £105.8 million of gross proceeds in the year), residential delivery and completion proceeds continue to grow and are now underpinned by forward sales contracts of four and a half years duration (reflecting minimum sales rates under licence arrangements).

Total plot completions in the year totalled 4451, which compares to 174 in the six months to 31 March 2018 and 52 in the year to 30 September 2017, with a further 240 plots exchanged or reserved by the year end. Both the number of plot sales and gross cash generated from plot sales (Urban&Civic's share being £21.0 million) exceeded previously stated expectations.

The £14.4 million (182 per cent) improvement in profit before tax remains unrepresentative of future income statements, benefitting greatly from commercial asset sales, although the main driver of EPRA NAV growth, which is up 9.0% in the year to 331.8p per share, continues to be property revaluations.

Key performance indicators

The measures we use to evaluate Group performance, together with the rationale for their use are set out throughout the Strategic Report section of the Annual Report and Accounts, however I have reproduced this year's performance metrics below for your reference:

1. Includes 100 plots at Alconbury (six months ended 31 March 2018: 49; year ended 30 September 2017: 52); 78 at Rugby (six months to 31 March 2018: ten; year ended 30 September 2017: nil); 37 at Newark (six months to 31 March 2018: nil; year ended 30 September 2017: nil); and 230 from pre-acquisition contracts at Priors Hall (acquisition to 31 March 2018: 115).

Ahead of significant residential plots sales, the Group still considers total shareholder return and EPRA NAV measures -which set out the net asset value attributable to equity shareholders adjusted for the revaluation surpluses on trading properties, with tax (EPRA triple net NAV) or without tax (EPRA NAV)- to be significant descriptors of value growth.

Total shareholder return

Urban&Civic's share price has risen 35.1 per cent over the last 24 months (from 225.0p at 30 September 2016 to 304.0p at 30 September 2018) and 17.8 per cent over the last 12 months - a period that included the placing of 40.4 million shares held by GIP U&C S.À R.L (representing 27.9 per cent of issued share capital). Combined with two dividends paid during the year totalling 3.3p, the share price movement has resulted in a total shareholder return of 19.1 per cent for the year. This compares to a 1.0 per cent rise in the FTSE 350 Real Estate Index, a 2.7 per cent increase in the FTSE All Share Index and a 9.0 per cent increase in EPRA NAV per share (which is further analysed below).

Net asset value - EPRA and IFRS

The below EPRA analysis and proportionately consolidated statement of comprehensive income and balance sheet summaries are non-statutory, but are presented to aid understanding and comparability of Group results both this year and between accounting periods.

The movements in Group EPRA and IFRS NAV during the year are summarised below.

1. Classified as property revaluations for the purposes of the below EPRA NAV growth commentary.

2. Includes revaluation of the Morris Homes, Redrow, Crest Nicholson and Avant variable considerations classified as financial assets.

Property revaluations (including trading property write-downs) contributed 30.5p to the Group's EPRA NAV growth of 27.4p per share in the year.

CBRE valued 90 per cent of the property portfolio at 30 September 2018 (30 September 2017: 76 per cent) with the remainder valued by Directors. A more detailed reconciliation between IFRS and EPRA NAV is provided in note 18.

Consolidated statement of comprehensive income

The Group's profit before tax increased by £14.4 million (182 per cent) over last year, largely as a result of commercial asset disposals, growing residential sales and property revaluations outweighing increases in overheads and write-offs of Catesby promotion costs; further explanation is provided below.

1. Including residential property sales and profits from construction contracts as disclosed in note 2.

Revenue

Revenue has more than doubled since last year and comprises £97.9 million of commercial and land promotion sales, £43.3 million of residential property sales (including £8.8 million within joint ventures) and rental and other income of £18.0 million.

The £87.9 million increase over the prior period is predominantly the result of the disposal of our hotel development at Stansted Airport (£49.2 million), sale of a 50 per cent interest in the Manchester New Square apartment development to Greater Manchester Pension Fund (£22.9 million) and sale of the Skelton Retail Park (£7.4 million). Catesby has also seen improved revenues through a promote-and-infrastructure contract for a site known as Europa Way, which contributed £6.7 million to revenue.

Residential property sales have maintained comparable levels to last year although licence fee overages, rather than licence fee minimums, comprise a greater part of revenue this year - reflecting a greater number of plot completions.

Licence receipts continue to be at levels above contractual minimums and during the year Alconbury generated 100 plot completions (30 September 2017: 52); with Newark recording 37 plot completions (30 September 2017: nil); Priors Hall completing on 230 plots (30 September 2017: nil) and the Rugby joint venture making 78 plot sales.

You should note that the 230 plot completions at Priors Hall related to pre-acquisition housebuilding contracts and therefore the receipts in relation to these properties have been credited against the acquisition trade receivable (on the balance sheet) rather than being recognised through the income statement.

The terms minimums, overages and licences have been defined in the glossary.

Gross profit

Gross profits are £11.4 million higher than reported in the year to 30 September 2017 or £12.2 million higher if the Group's share of joint venture trading property sales are proportionately consolidated. Like revenue, this is largely the result of the disposal of Stansted and Skelton (£9.8 million) and Europa Way profits (£2.0 million), net of a £4.0 million adverse movement in trading property write offs/ups.

The £4.0 million increase in write downs over last year is the result of £1.4 million of trading property write ups last year (£1.2 million in relation to Stansted) against £2.6 million of written off Catesby promotion costs this year, where a decision has been made not to seek planning for seven sites.

Profits from trading property sales also include residential sales at Alconbury (£5.1 million) and the 50 per cent owned Rugby site (£2.1 million), and £7.5 million of Catesby land promotion profits (excluding Europa Way).

Residential sales profits at Alconbury comprise £2.5 million generated by the sale of 42 Hopkins homes, overages of £3.0 million on 61 exchanges made by Redrow and Morris, net of £0.4 million of Civic Living set-up costs. Rugby's profits relate to Davidsons' 48 house completions in the year (£1.3 million) and Morris Homes and Crest Nicholson overages (in respect of 42 exchanges).

Administrative expenses

Administrative costs of £18.8 million were expensed in the year, after capitalising £4.7 million into the Group's development projects. At the gross level, the £3.6 million increase in overheads is predominantly the result of a more senior headcount as additional strategic land projects have been taken on in the year, together with one-off reorganisation costs following the acquisition of Priors Hall in October 2017 and increased share option vesting. At the net level, the additional £0.5 million increase over the 12 months to 30 September 2018 is due to a lower proportionate capitalisation (20.0 per cent this year compared to 26.2 per cent last year) following development completion of Feethams, Herne Bay and Stansted and the time taken to reallocate development staff to new projects.

Administrative costs also include a £3.4 million charge in relation to the non-cash share-based payment expense (30 September 2017: £3.1 million). A corresponding credit has been included with retained earnings, resulting in the expense having no NAV impact.

Surplus on revaluation of investment properties and profit on disposal of investment properties

Following the disposal of the Bradford leisure scheme, which realised a £1.2 million profit over the 30 September 2017 CBRE valuation, and the sale of the Feethams leisure scheme at book value, investment properties now comprise the commercial development and expansion areas at Alconbury and a proportion of the Waterbeach site, which could deliver both commercial buildings and residential properties for rent in due course.

The £10.6 million uplift in the year reflects (equally) an improved planning status of the Alconbury expansion area and higher achieved commercial sales values, again at Alconbury.

The Directors have valued Waterbeach interests at cost, recognising that the value of the Development Management Agreements with the Defence Infrastructure Organisation is dependent on planning.

Readers of our accounts will have noticed that the Group now holds a significantly lower proportion of its property interests as investment properties, and consequently movements through the income statement have reduced.

The Group continues to revalue all of its property interests; however, uplifts on trading properties are recognised by EPRA measures only (which are non-statutory).

Given the scale of Alconbury and its bifurcation across the Group's balance sheet, I have set out below how CBRE's valuation is incorporated into the Group's NAV and EPRA measures.

CBRE's valuation of Alconbury increased from £235.5 million to £266.5 million in the year, based on the consistent assumption that we deliver serviced land parcels.

After allowing for housebuilding and commercial construction expenditure incurred at Alconbury, which CBRE did not take into account in its valuation, the total site valuation increases to £275.2 million (representing 45 per cent of the Group's property portfolio value). The allocation of the value within our year-end balance sheet is shown below.

1. £1.5 million movement in year reflects £38.8 million closing EPRA adjustment less £37.3 million opening EPRA adjustment.

2. Includes revaluation of the Morris Homes and Redrow variable considerations classified as a financial asset.

Taxation expense

The tax charge for the year of £3.6 million reflects an effective rate of tax of 16.0 per cent, lower than the average rate of UK corporation tax for the period, principally due to losses brought forward and excess losses generated in the period available to offset realised profits and revaluation surpluses. The charge relates in most part to the tax payable and utilisation of losses brought forward in respect of the sale of the Stansted Hotel and Bradford leisure scheme as well as deferred tax provided on the revaluation of the proportion of Alconbury held as an investment.

Dividend

The Board proposes to pay a final dividend of 2.2p in respect of the year ended 30 September 2018, taking the total dividend to 3.5p, up 9.4 per cent on last year. Subject to shareholder approval at the AGM, the dividend will be paid on 27 February 2019 to shareholders on the register on 11 January 2019. Investors choosing to participate in the dividend reinvestment scheme will need to make their election by 25 January 2019.

The Group paid its final dividend for the year to 30 September 2017 in February 2018 and the interim dividend in July 2018 at rates of 2.0p and 1.3p per share respectively, amounting to £4.5 million in total.

Consolidated balance sheet

Overview

1. All properties held by joint ventures are trading properties.

2. Total property related interests: £609.1 million (30 September 2017: £564.2 million). The 30 September 2017 comparative now incorporates Rugby minimums and overages that were previously classified as other working capital.

Non-current assets

Investment properties

Investment properties at 30 September 2018 amounted to £86.9 million and comprised the commercial development and expansion areas at Alconbury (£83.0 million) and a proportion of the Waterbeach site (£3.9 million), which could deliver both commercial buildings and residential properties for rent in due course.

The Group's total year-end property portfolio, irrespective of balance sheet classification, was valued at £609.1 million, 90 per cent by independent valuers CBRE and 10 per cent by Directors.

Investment in equity accounted joint ventures and associates

Investment in joint ventures and associates has increased by £26.6 million, predominantly the result of the reclassification of the Group's remaining interest in the Manchester New Square development (£14.9 million) - following a 50 per cent disposal to Greater Manchester Pension Fund in April 2018 - and further loans made to the Rugby joint venture to fund infrastructure expenditure (£8.6 million).

Following a resolution to grant planning consent for 2,800 homes at Wintringham, the Group has recognised an £8.5 million valuation uplift in respect of its one-third share through EPRA, with Rugby contributing a further £3.8 million of incremental value.

These uplifts (£12.3 million) together with £2.1 million of residential trading profits booked through the income statement see joint ventures contribute £14.4 million or 9.9p per share to the 27.4p EPRA movement in the year.

Further analysis of the Group's joint ventures can be found in note 11.

Non-current trade and other receivables

The £20.4 million disclosed on the face of the balance sheet comprises both the non-current proportions of the acquired Priors Hall receivables and the discounted value of Morris Homes and Redrow contractual minimums at Alconbury and Avant contractual minimums at Newark. Equivalent receivables are owed to the Rugby joint venture by Crest Nicholson (£5.7 million) and again Morris Homes (£5.9 million). All sums due will be received as and when the houses to which they relate are sold.

Current assets

Trading properties

The carrying value of trading properties decreased by £15.9 million in the year to £273.8 million.

This fall was the result of a combination of the reclassification of Manchester New Square to joint ventures as well as other compensating movements namely: additions of £90.1 million including the acquisition of Priors Hall, development expenditure at the strategic land sites and Catesby promotion expenditure. Against this £106.0 million of disposals or write downs were made including the sale of Stansted and Skelton (£46.8 million) and £26.5 million of residential disposals (incorporating the full cost of 173 plots on contract completion with Avant, the full cost of 58 plots on contract completion with Redrow, 42 Hopkins sales and a 64-plot land parcel to Bellway).

During the year, capitalised overheads and interest within trading properties amounted to £4.2 million and £2.2 million respectively.

Cash

Group cash balances, excluding joint ventures, at the year end totalled £16.6 million, up £4.4 million since last year, predominantly due to sales receipts (£140.6 million) and loan drawdowns (£42.8 million) exceeding development expenditure (£61.4 million), loan repayments on properties sold in the year (£42.0 million) and the £40.5 million acquisition of Priors Hall.

Sales receipts (net of debt repayments) comprised commercial sales receipts of £105.8 million, £17.2 million of Catesby promotion receipts (including cost reimbursement) and £17.6 million of residential sales receipts.

Liabilities

Current and non-current borrowings

The Group or its joint ventures have put in place four new facilities in the year: the first; a 15-year, £46.2 million Homes England acquisition and infrastructure facility in respect of Priors Hall; the second a ten-year, £2.0 million development facility with Huntingdon District Council to fund a second incubator commercial building at Alconbury; and the last two facilities, totalling £75.6 million, were put in place by the Manchester New Square joint venture to fund the development of 351 residential apartments.

At the year end total Group borrowings amounted to £94.9 million (30 September 2017: £93.9 million) with the Group's share of joint ventures borrowing a further £21.8 million (30 September 2017: £13.1 million).

During the year the Group made further drawings of £10.6 million from the Alconbury Homes England facility, together with £28.2 million from the Priors Hall facility (to fund part of the £40.5 million acquisition cost) and £2.0 million from the Incubator 2 development facility. These drawings broadly replaced Stansted, Bradford and Feethams facilities which were repaid following their disposal.

Joint ventures made further drawings during the year of £4.7 million from the Homes England facility within the Rugby joint venture and £3.2 million from the Manchester New Square development facilities.

Financial resources and capital management

The Group's net debt position at 30 September 2018 totalled £78.3 million (30 September 2017: £81.7 million), comprising external borrowings of £94.9 million and cash reserves of £16.6 million, producing a net gearing ratio of 20.1 per cent (30 September 2017: 22.0 per cent) on an IFRS NAV basis and 16.3 per cent (30 September 2017: 18.6 per cent) on an EPRA NAV basis.

On a full look-through basis, which additionally includes the Group's share of joint ventures' net debt, gearing on an EPRA basis increases to 20.6 per cent, still well within our self-imposed limit of 30 per cent.

Of the £118.1 million of borrowings at the year end (which includes the Groups share of joint venture borrowings) 78 per cent (£91.9 million) relate to facilities with Homes England, local authorities or the Housing Infrastructure Fund.

Undrawn facilities at 30 September 2018 totalled £86.0 million (comprising £51.4 million of Group facilities and £34.6 million of joint venture facilities).

The Group's weighted average loan maturity at 30 September 2018 was 7.9 years (30 September 2017: 5.3 years) and weighted average cost of borrowing on drawn debt was 3.3 per cent (30 September 2017: 2.9 per cent).

The Group has no loans maturing over the next three years, with the exception of the £40 million revolving credit facility (RCF), which matures in June 2019, the £11.2 million Homes England facility at Newark, which is currently amortising and due for repayment by March 2021 and £75.6 million of joint venture development loans at Manchester New Square, which will be repaid from sales proceeds. Subsequent to the year end, the Group has received credit committee approved terms for a five-year extension to the RCF, which is now in documentation, and discussions have commenced with Homes England on the extension of the Newark facility. A new £8.6 million development facility for Civic Living has also received credit approval and is in documentation and a £26.0 million infrastructure loan for the Wintringham development (in which Urban&Civic has a one-third interest) is in final form ; both are with Homes England.

The Group maintains a comprehensive business plan model which forecasts the cash usage and generation on a project-by-project and consolidated basis for five years, or longer in relation to our strategic land sites. This model is regularly updated and informs the Group as to its cash needs, allowing us to plan ahead.

David Wood

Group Finance Director

28 November 2018

Consolidated statement of comprehensive income

for the year ended 30 September 2018

The Group had no amounts of other comprehensive income for the current or prior years and the profit for the respective years is wholly attributable to equity shareholders.

The accompanying notes form part of this preliminary financial information.

Consolidated balance sheet

as at 30 September 2018

The accompanying notes form part of this preliminary financial information.

Consolidated statement of changes in equity

for the year ended 30 September 2018

Consolidated cash flow statement

for the year ended 30 September 2018

Notes to the consolidated financial information

for the year ended 30 September 2018

1. Accounting policies

Basis of preparation

The financial information contained in this announcement has been prepared on the basis of the accounting policies set out in the statutory accounts for the year-ended 30 September 2018. Whilst the financial information included in this announcement has been computed in accordance with International Financial Reporting Standards (IFRS), as adopted by the European Union, this announcement does not itself contain sufficient information to comply with IFRS. The financial information does not constitute the Company's statutory accounts for the periods ended 30 September 2018 or 2017, but is derived from those accounts. Those accounts give a true and fair view of the assets, liabilities, financial position and profit and loss of the Company and the undertakings included in the consolidation taken as a whole. Statutory accounts for 2017 have been delivered to the Registrar of Companies and those for 2018 will be delivered following the Company's Annual General Meeting. The auditor's reports on both the 2018 and 2017 accounts were unqualified; did not draw attention to any matters by way of emphasis; and did not contain statements under s498(2) or (3) of the Companies Act 2006.

The principal accounting policies adopted in the preparation of this preliminary financial information are set out below. The policies have been consistently applied to both years, unless otherwise stated.

Functional and presentation currency

All financial information is presented in British Pounds Sterling (£), the functional currency of all Group entities, and has been rounded to the nearest thousand (£'000) unless indicated to the contrary.

Going concern

The consolidated financial information has been prepared on a going concern basis, which assumes that the Group will continue to meet its liabilities as they fall due. At 30 September 2018 the Group has prepared cash flow projections that show that it is expected to have adequate resources to continue in operational existence for the foreseeable future.

In arriving at this assessment the Directors have considered any facilities that are due to expire in the next 12 months against progress made on their extension or renewal to date, and/or the Group's ability to repay the maturing facilities from Group resources.

Adoption of new and revised standards

There have been no new or revised accounting standards that have become effective during the year ended 30 September 2018 which have a material impact on the Group.

New standards and interpretations not yet applied

The IASB has issued or amended the following standards that are mandatory for later accounting years, are relevant to the Group and have not been adopted early. These are:

IFRS 9 'Financial Instruments' (effective date: 1 January 2018)

IFRS 15 'Revenue from Contracts with Customers' (effective date: 1 January 2018)

IFRS 16 'Leases' (effective date: 1 January 2019)

The Group has undertaken an assessment of the impact should these standards have been adopted for the current period of account.

IFRS 9 'Financial Instruments' will be effective for the Group from the period beginning 1 October 2018 and applies to the recognition, derecognition, classification and measurement of financial assets and financial liabilities as well as hedge accounting. Based on the current financial instruments held by the Group, there would be no impact to the Group's current year results, other than possible disclosure items. The main future impact based on current financial instruments held by the Group is likely to be in respect of long-term receivables, which will be revalued where it is identified that there has been an indication of an underlying change in the credit risk of the counterparty.

IFRS 15 'Revenue from Contracts with Customers' will be effective for the Group from the period beginning 1 October 2018 and replaces IAS 18 'Revenue' and IAS 11 'Construction Contracts'. IFRS 15 establishes a five-step principle-based approach to revenue recognition including identifying the contract, the performance obligations within the contract and the point at which these are satisfied, determining the transaction price and allocating it to the performance obligations. The principal impact on the Group that has been identified to date has been assessed as being in respect of determining the transaction price for land sale contracts where the Group will be required to estimate any variable consideration to which it is entitled at the point that the performance conditions of the contract are satisfied. Under certain land sales contracts, the Group is entitled to a minimum payment, with an additional overage receivable dependent on the onward house prices achieved following the construction of houses on the land by the purchaser. Currently, under IAS 18, the Group recognises the contractual minimums at the point of sale with the overage recognised when revenue can be measured reliably. Under IFRS 15, these overage amounts would instead be recognised to the extent that it is highly probable that there will not be a significant reversal of the cumulative amounts recognised. Were IFRS 15 to be applied to the current year results and the overage amounts estimated accordingly, an additional receivable of £3.2 million would be reflected on the balance sheet with corresponding cumulative additional revenue recognised within the income statement and retained earnings, as well as an increase in the share of profits from and the investments in joint ventures of £0.8 million. This acceleration of profits would result in an additional deferred tax liability of £0.8 million based on the tax rates currently in effect. The 2018 figures will be restated in the 2019 accounts to reflect the new accounting treatment.

IFRS 16 'Leases' will be effective for the Group from the period beginning 1 October 2019, and will result in the Group recognising a financial asset and liability on the balance sheet initially at the present value of all future lease payments it is obliged to make for any material leases for which it is the lessee. These are disclosed in note 20. For the year ended 30 September 2018, it has been assessed that this would lead to the recognition on the balance sheet of assets and liabilities of £1.3 million. There is no net impact on profit and loss over the lease term, but under IFRS 16 part of the payment currently recognised within administrative expenses (£0.1 million) in the year ended 30 September 2018 would be recognised as a finance cost. The treatment of leases where the Group is acting as a lessor is substantially unchanged from that currently applied under IAS 17.

The above assessments are based on the assumption that the Group does not take advantage of any of the transitional provisions available within the new standards.

Basis of consolidation

Where the Company has control over an investee, it is classified as a subsidiary. The Company controls an investee if all three of the following elements are present: power over the investee, exposure to variable returns from the investee, and the ability of the investor to use its power to affect those variable returns. Control is reassessed whenever facts and circumstances indicate that there may be a change in any of these elements of control.

The consolidated financial information presents the results of the Group as if it formed a single entity. Intercompany transactions and balances between Group companies are therefore eliminated in full.

Business combinations

The consolidated financial information incorporates the results of business combinations using the purchase method. In the consolidated balance sheet, the acquiree's identifiable assets, liabilities and contingent liabilities are initially recognised at their fair values at the acquisition date. The results of acquired operations are included in the consolidated statement of comprehensive income from the date on which control is obtained.

Joint arrangements

The Group is party to joint arrangements where there are contractual arrangements that confer joint control over the relevant activities of the arrangements to the Group and at least one other party. Joint control is assessed under the same principles as control over subsidiaries.

All of the Group's interests in joint arrangements constitute joint ventures, where the Group has rights to only a share of the net assets of the joint arrangements.

In the consolidated financial information, interests in joint ventures are accounted for using the equity method of accounting whereby the consolidated balance sheet incorporates the Group's share of the net assets of the joint ventures. The consolidated statement of comprehensive income incorporates the Group's share of the joint ventures' profits after tax.

Where there is objective evidence that the investment in a joint venture has been impaired, the carrying amount of the investment is tested for impairment in the same way as other non-financial assets.

Associates

Where the Group has significant influence but not control or joint control over the financial and operating policy decisions of another entity, it is classified as an associate. Associates are initially recorded in the consolidated balance sheet at cost. The Group's share of post-acquisition profits and losses is recognised in the consolidated statement of comprehensive income, except that losses in excess of the Group's investment in the associate are not recognised unless there is an obligation to make good those losses.

Where the Group has a legal obligation to a third party in relation to the losses of an associate, the Group fully provides for its share and the charge is recognised in the consolidated statement of comprehensive income.

Investment properties

Investment properties are properties held for long-term rental income and/or for capital appreciation and are measured initially at cost, including related transaction costs, and subsequently at fair value. Changes in fair value of an investment property at the balance sheet date and its carrying amount prior to remeasurement are recorded in the consolidated statement of comprehensive income.

Investment properties are recognised as an asset when:

• it is probable that future economic benefits that are associated with the investment property will flow to the Group;

• there are no material conditions present that could prevent completion; and

• the cost of the investment property can be measured reliably.

Additions to investment properties in the course of development or refurbishment include the cost of finance and directly attributable internal and external costs incurred during the period of development until the properties are ready for their intended use.

An investment property undergoing redevelopment or refurbishment for continued use as an investment property will remain as an investment property measured at fair value and is not reclassified.

An investment property is classified as held for sale when it is available for immediate sale, management is committed to a plan to sell, an active programme to locate a buyer has been initiated and a sale is expected to occur within 12 months.

A transfer of a property from investment properties to trading properties will be made where there is a change in use such that the asset is to be developed or held with a view to sale.

Trading properties

Trading properties comprise both direct interests in property and indirect beneficial interests in property held through land promotion agreements or other contractual arrangements. They are classified as inventory and are included in the consolidated balance sheet at the lower of cost and net realisable value. Net realisable value is the expected net sales proceeds of the developed property in the ordinary course of business less the estimated costs to completion and associated selling costs. A provision is made to the extent that projected costs exceed projected revenues.

All external and internal costs, including borrowing costs, directly associated with the purchase, promotion and construction of a trading property are capitalised up to the date that the property is ready for its intended use. Property acquisitions are recognised when legally binding contracts that are irrevocable and effectively unconditional are exchanged.

Properties reclassified to trading properties from investment properties are transferred at deemed cost, being the fair value at the date of reclassification.

Properties reclassified from trading properties to investment properties are transferred at cost when there is a change in use of the asset such that it is to be held for long-term rental income and/or for capital appreciation.

Leases

Where the Group is the lessor, the Directors have considered the potential transfer of risks and rewards of ownership in accordance with IAS 17 'Leases' and in their judgement have determined that all such leases are operating leases. Rental income from operating leases is recognised in the consolidated statement of comprehensive income on a straight line basis over the term of the relevant lease.

Where the Group is the lessee, leases in which substantially all risks and rewards of ownership are retained by another party are classified as operating leases. The Directors have determined that all of their lessee arrangements constitute operating leases. Rentals paid under operating leases are charged to the consolidated statement of comprehensive income on a straight line basis over the term of the lease.

Property, plant and equipment

Property, plant and equipment is stated at cost or fair value at the date of transfer less accumulated depreciation and accumulated impairment losses. This includes costs directly attributable to making the asset capable of operating as intended.

Depreciation is provided on all plant and equipment at rates calculated to write off the cost less estimated residual value, based on prices prevailing at the reporting date, of each asset over its expected useful life as follows:

Freehold property - shorter of expected period to redevelopment and 2 per cent straight line

Leasehold improvements - shorter of term of the lease and 10 per cent straight line

Furniture and equipment - 20-33 per cent straight line

Revenue recognition

Revenue is recognised to the extent that it is probable that economic benefits will flow to the Group and the revenue can be reliably measured. Revenue is measured at the fair value of the consideration receivable, including the fair value of any residential properties received in part exchange, excluding VAT. The following recognition policies are applied:

Sale of property

Revenue from the sale of trading and investment properties, including beneficial interests held indirectly through land promotion and other contractual agreements, is recognised when the significant risks and rewards of ownership of the Group's interest have passed to the buyer, usually when legally binding contracts that are irrevocable and effectively unconditional are exchanged and the amount of revenue can be measured reliably. Revenue and profits on construction contracts from trading properties in the course of development where construction risks remain is recognised on a percentage completion basis determined with reference to costs incurred to date as a proportion of total forecast costs at completion.

Revenue from the sale of constructed residential property is recognised on completion of sale.

Rental and hotel income

Rental income arising from property is accounted for on a straight line basis over the term of the lease. Lease incentives, including rent free periods and payments to tenants, are allocated to the consolidated statement of comprehensive income on a straight line basis over the lease term as a deduction from rental income.

Hotel income includes revenues derived from hotel operations, including the rental of rooms and food and beverage sales. Revenue is recognised when rooms are occupied and services have been rendered.

Fees and other income

Fees from development management service arrangements and other agreements are determined by reference to the relevant agreement and recognised as the services are provided.

Taxation

Current tax

The charge for current taxation is based on the results for the year as adjusted for items that are non-taxable or disallowed. It is calculated using rates and laws that have been enacted or substantively enacted by the balance sheet date. Tax payable upon realisation of revaluation gains on investment property disposals that were recognised in prior periods is recorded as a current tax charge with a release of the associated deferred taxation.

Deferred tax

Deferred tax is provided using the balance sheet liability method in respect of temporary differences between the carrying amount of assets and liabilities in the consolidated balance sheet and the corresponding tax base cost used in computing taxable profit.

Deferred tax is determined using tax rates and laws that have been enacted or substantively enacted by the balance sheet date and are expected to apply when the related deferred tax asset is realised or the deferred tax liability is settled. It is recognised in the consolidated statement of comprehensive income except when it relates to items credited or charged directly to equity, in which case the deferred tax is also dealt with in equity.

Deferred tax assets and liabilities are offset when the Group has a legally enforceable right to offset current tax assets against current tax liabilities and the deferred tax assets and liabilities relate to the same taxable entity and the same tax authority.

A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised.

Under IAS 12 'Income Taxes', a deferred tax liability is recognised for tax potentially payable on the realisation of investment properties at fair values at the balance sheet date.

Deferred tax balances are not discounted.

Share-based payments

The fair value of granting share awards under the Group's performance share plan, and the other share-based remuneration of the Directors and other employees, is recognised through the consolidated statement of comprehensive income. The fair value of shares awarded is calculated by using an option pricing model. The resulting fair value is amortised through the consolidated statement of comprehensive income on a straight line basis over the vesting period. The charge is reversed if it is likely that any non-market-based vesting criteria will not be met. The charge is not adjusted for failure to achieve a market vesting condition or where a non-vesting condition is not satisfied.

Employee Benefit Trust

The Group is deemed to have control of its Employee Benefit Trust (EBT) and it is therefore treated as a subsidiary and consolidated for the purposes of the consolidated accounts. The EBT's investment in the parent company's shares is deducted from equity in the consolidated balance sheet as if they were treasury shares. Other assets and liabilities of the EBT are recognised as assets and liabilities of the Group. Any shares held by the EBT are excluded for the purposes of calculating earnings per share and net assets per share.

Retirement benefits

Contributions to defined contribution pension schemes are charged to the consolidated statement of comprehensive income in the period to which they relate.

Government grants

Government grants received in relation to property asset capital expenditure are generally deducted in arriving at the cost of the relevant asset. Where retention of a Government grant is dependent on the Group satisfying certain criteria, it is initially recognised in other loans. When the criteria for retention have been satisfied, the balance is netted against the cost of the asset.

Dividends

Dividends are recognised when they become legally payable. In the case of interim dividends to equity shareholders, this is when the dividends are approved by the Directors and paid. In the case of final dividends, this is when approved by the shareholders at the AGM.

Impairment of non-financial assets (excluding trading properties, investment properties and deferred tax)

Impairment tests on the Group's property, plant and equipment and interests in joint ventures and associates are undertaken at each reporting date to determine whether there is any indication of impairment. If such indication becomes evident, the asset's recoverable amount is estimated and an impairment loss is recognised in the consolidated statement of comprehensive income whenever the carrying amount of the asset exceeds its recoverable amount.

The recoverable amount of an asset is the greater of its fair value less costs to sell and its value in use. The value in use is determined as the net present value of the future cash flows expected to be derived from the asset.

Financial instruments

Financial assets and financial liabilities are recognised in the consolidated balance sheet when the Group becomes a party to the contractual provisions of the instrument.

Cash and cash equivalents

Cash and cash equivalents consist of cash in hand, deposits with banks and other short-term, highly liquid investments with original maturities of three months or less from inception. For the purposes of the cash flow statement, cash and cash equivalents comprise cash in hand and deposits with banks net of bank overdrafts.

Trade and other receivables

Trade and other receivables arising in the normal course of business are initially recognised at fair value and subsequently at amortised cost or recoverable amount. Impairment provisions are recognised when there is objective evidence (such as significant financial difficulties on the part of the counterparty or default or significant delay in payment) that the Group will be unable to collect all of the amounts due under the terms receivable. The amount of such a provision is the difference between the net carrying amount and the present value of the future expected cash flows associated with the impaired receivable. On confirmation that the trade receivable will not be collectable, the gross carrying value of the asset is written off against the associated provision.

Receivables acquired by the Group that include a variable right to receive cash are recognised initially at fair value and are subsequently remeasured to fair value at each reporting date with fair value movements recognised within the income statement.

Trade and other payables

Trade and other payables are initially recorded at fair value and subsequently at amortised cost.

Borrowings

Interest-bearing loans are initially recorded at fair value, net of any directly attributable issue costs, and subsequently recognised at amortised cost.

Borrowing costs

Finance and other costs incurred in respect of obtaining borrowings are accounted for on an accruals basis using the effective interest method and amortised to the consolidated statement of comprehensive income over the term of the associated borrowings.

Borrowing costs directly attributable to the acquisition and construction of investment and trading properties are added to the costs of such properties until the properties are ready for their intended use.

All other borrowing costs are recognised in the consolidated statement of comprehensive income in the period in which they are incurred.

Critical accounting estimates and judgements

The preparation of financial information in accordance with IFRSs requires the use of certain critical accounting estimates and judgements. It also requires management to exercise judgement in the process of applying the Group's accounting policies. Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Although these estimates are based on management's best knowledge of the amount, event or actions, actual results may differ from those estimates.

Areas requiring the use of estimates and critical judgement that may impact on the Group's earnings and financial position include:

Accounting estimates

Valuation of investment and trading properties

For the purposes of calculating the fair value of its investment property portfolio and the net realisable value (and, for EPRA reporting purposes, the fair value) of its trading property portfolio, the Group uses valuations carried out by either independent valuers or the Directors on the basis of market value in accordance with the Appraisal and Valuation Standards of the Royal Institution of Chartered Surveyors. The valuations are based upon assumptions including future rental income, sales prices, an estimate of typical profit margins, anticipated maintenance costs, future development costs and appropriate discount rates. Assumptions used in the valuations of the Group's significant investment property interests carried at valuation at 30 September 2018 are disclosed in note 9. Details of the Group's trading properties that are measured at net realisable value are disclosed in note 13. The valuers and Directors also make reference to market evidence for comparable property transactions and principal inputs and assumptions.

Due to the nature of development timescales, it is routinely necessary to estimate costs to complete and future revenues and to allocate non-unit-specific development costs between units legally completing in the current financial year and in future periods.

Cost of trading property sales

The sale of parcels or units of strategic land requires an allocation of costs, including site-wide infrastructure, any construction costs directly attributable to individual land parcels and capitalised administrative expenses in order to account for cost of sales associated with the disposal. The costs being allocated, based on plot numbers as a proportion of total project plot numbers, include those incurred to date together with an allocation of costs remaining estimated with reference to latest project forecasts.

Taxation

There are transactions and calculations for which the ultimate tax determination is uncertain. As a result, the Group recognises tax liabilities based on estimates of whether additional taxes and interest will be due. The Group believes that its accruals for tax liabilities are adequate for all open years based on its assessment of many factors including past experience and interpretations of tax law. This assessment relies on estimates and assumptions and may involve judgements about future events. The Directors have also exercised their judgement in relation to the recognition of certain deferred tax assets and liabilities. In order to assess whether the Group should recognise a deferred tax asset or liability, the Directors consider the timing and likelihood of expected future profits along with how these expected future profits match up with the existing tax losses within specific Group entities.

Share-based payments

The value of share-based payments is estimated using an option pricing model as at the date of grant and using certain assumptions.

Judgements

Distinction between investment properties and trading properties

Where there is a strategic decision taken to develop any element of an investment property for sale rather than hold for investment purposes, then that element is remeasured to fair value at the decision date and transferred to trading properties. Where there is a strategic decision taken to hold any element of a trading property for long-term capital growth or income, then that element is transferred to investment properties at cost and subsequently held at fair value.

Trading income

Revenue in respect of certain strategic land parcels is determined with reference to the onward house prices achieved following the construction of houses on the land by the purchaser following their acquisition, subject to agreed minimums. Following completion of the parcel sale, once all substantive conditions have been satisfied, revenue is recognised at the minimum amounts receivable discounted to adjust for the counterparty risk and timescale over which these are to be received. The additional variable element of the revenue is recognised at the point where the Directors consider that a reliable estimate can be made of the actual amount receivable taking into consideration reasonable possible outcomes based on historical house price data, timescales to completion and variability of consideration. This is currently considered to be the point of exchange of the house sale given the relatively early stage of each relevant development.

2. Revenue and gross profit

Construction contract revenue is recognised in the consolidated statement of comprehensive income in line with the contract stage of completion on the relevant contract, determined using the proportion of total estimated development costs incurred at the reporting date.

3. Operating profit

1. Total fees for 2018 payable to the Company's auditor are £340,500 (2017: £287,500). Of this, £261,500 (2017: £251,500) relates to audit services and £37,000 (2017: £36,000) to assurance services. £42,000 (2017: £Nil) relates to fees incurred to date for Reporting Accountant services in relation to the Company's proposed premium listing application.

4. Segmental information

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker has been identified as the Board of Directors.

The two principal segments are strategic land and commercial property development. The strategic land segment includes serviced and unserviced land, consented and unconsented land and mixed-use development and promotion sites. The commercial segment includes city centre development and commercial regional developments. All of the Group's revenue is generated in the United Kingdom.

Segmental information is reported in the table that follows in respect of the current year in accordance with the requirements of IFRS 8 'Operating Segments'.

The segmental results that are monitored by the Board include all the separate lines making up the segmental IFRS operating profit. This excludes central overheads and taxation which are not allocated to operating segments.

Consolidated statement of comprehensive income

for the year ended 30 September 2018

In the year ended 30 September 2018, there were two major customers that generated £49,350,000 and £22,961,000 of revenue. Each of these represented 10 per cent or more of the total revenue.

Consolidated balance sheet

as at 30 September 2018

Consolidated statement of comprehensive income

for the year ended 30 September 2017

In the year ended 30 September 2017, there were three major customers that generated £15,509,000, £10,761,000 and £6,781,000 of revenue. Each of these represented 10 per cent or more of the total revenue.

Consolidated balance sheet

as at 30 September 2017

5. Finance income and finance costs

Finance costs are capitalised at the same rate as the Group is charged on respective borrowings.

6. Tax on profit on ordinary activities

(a) Analysis of charge in the year

(b) Factors affecting the tax charge for the year

The effective rate of tax for the year varies from the standard rate of tax in the UK. The differences can be explained below.

(c) Associates and joint ventures

The Group's share of tax on the joint ventures and associates is £Nil (2017: £Nil).

7. Earnings per share

Basic earnings per share

The calculation of basic earnings per share is based on a profit of £18,695,000 (2017: £6,811,000) and on 143,413,414 (2017: 143,300,624) shares, being the weighted average number of shares in issue during the year less own shares held.

Diluted earnings per share

The calculation of diluted earnings per share is based on a profit of £18,695,000 (2017: £6,811,000) and on 145,156,832 (2017: 144,244,702) shares, being the weighted average number of shares in issue less own shares held and the dilutive impact of share options granted.

8. Dividends

The Directors are proposing a final dividend of 2.2p (2017: 2.0p) per share totalling £3,152,000. Dividends are not paid on the shares held by the Employee Benefit Trust. The dividend has not been accrued in the consolidated balance sheet at 30 September 2018.

9. Investment properties

(i) Carrying amount reconciliation

(ii) Operating lease arrangements

Refer to note 20 for details of the operating leases related to investment properties.

(iii) Items of income and expense

During the year ended 30 September 2018, £3,595,000 (2017: £5,106,000) was recognised in the consolidated statement of comprehensive income in relation to rental and ancillary income from investment properties. Direct operating expenses, including repairs and maintenance, arising from investment properties that generated rental income amounted to £2,760,000 (2017: £3,011,000). The Group did not incur any direct operating expenses arising from investment properties that did not generate rental income (2017: £Nil).

(iv) Restrictions and obligations

At 30 September 2018 and 2017 there were no restrictions on the realisability of investment properties or the remittance of income and proceeds of disposal.

There are no obligations, except those already contracted, to construct or develop the Group's investment properties.

(v) Historical cost and capitalisation

The historical cost of investment properties as at 30 September 2018 was £52,284,000 (2017: £76,773,000), which included capitalised interest of £10,705,000 (2017: £10,705,000). There was no interest capitalised during the current or prior year. During the year staff and administrative costs of £486,000 (2017: £725,000) have been capitalised and are included within additions.

(vi) Transfer of properties

On 30 September 2017, based on the terms of the licensing arrangements being agreed or negotiated with housebuilders, the Group agreed that the strategy for the residential part of Alconbury Weald held within investment properties was to develop it for sale. Accordingly, on 30 September 2017 this element of the property was reclassified as a trading property.

On 30 September 2017, based on the site intention set out in the submitted development plan, the Group agreed that the strategy for part of its interest in Waterbeach, previously held wholly within trading stock, was to hold for long-term capital gain and rental income. Accordingly, 32 per cent of the asset value was transferred to investment properties.

(vii) Fair value measurement

The Group's principal investment property, Alconbury Weald, which represents 97 per cent of the year-end carrying value (2017: 60 per cent), is valued on a semi-annual basis by CBRE Limited (CBRE), an independent firm of chartered surveyors, on the basis of fair value. The valuation at each period end is carried out in accordance with guidance issued by the Royal Institution of Chartered Surveyors. Fair value represents the estimated amount that should be received for selling an investment property in an orderly transaction between market participants at the valuation date.

As noted above, the Group's investment properties are all carried at fair value and are classified as level 3 within the fair value hierarchy as some of the inputs used in determining the fair value are based on unobservable market data. The following summarises the valuation technique used in measuring the fair value of Alconbury Weald, the Group's principal investment property, as well as the significant unobservable inputs and their inter-relationship with the fair value measurement. The remaining investment property interests have been valued by the Directors, either with reference to subsequent sales prices achieved or costs incurred to date.

Valuation technique

Discounted cash flows: the valuation model for the Group's strategic land considers the present value of net cash flows to be generated from a property (reflecting the current approach of constructing the infrastructure and discharging the section 106 cost obligations), taking into account expected land value growth rates, build cost inflation, absorption rates and general economic conditions. The expected net cash flows are discounted using risk-adjusted discount rates and the resultant value is benchmarked against transaction evidence.

Significant unobservable inputs

The key inputs to the investment property valuation at Alconbury Weald included:

Inter-relationship between significant unobservable inputs and fair value measurement

The estimated fair value would increase/(decrease) if:

• expected annual land price inflation was higher/(lower);

• expected annual cost price inflation was lower/(higher);

• commercial land value was higher/(lower); and

• risk-adjusted discount rate was lower/(higher).

10. Property, plant and equipment

No assets were held under finance leases in either the current or prior years.

11. Investments

Investments in joint ventures and associates

At 30 September 2018 the Group's interests in its joint ventures were as follows:

Summarised information on joint ventures 2018

Summarised information on joint ventures 2017

SUE Developments LP holds the RadioStation Rugby site.

Summarised information on associate

12. Deferred tax

The net movement on the deferred tax account is as follows:

The deferred tax balances are made up as follows:

At 30 September 2018, the Group had unused tax losses of £23,118,000 (2017: £32,132,000), of which £16,302,000 (2017: £23,120,000) has been recognised as a deferred tax asset. A further £6,227,000 (2017: £5,373,000) has been applied to reduce the Group's deferred tax liability recognised at the balance sheet date as required by IAS 12 'Income Taxes' in respect of tax potentially payable on the realisation of investment properties at fair value at the balance sheet date. No deferred tax asset is recognised in respect of realised or unrealised capital losses if there is uncertainty over future recoverability.

Tax losses of £589,000 (2017: £3,639,000) have not been recognised as it is not considered sufficiently certain that there will be appropriate taxable profits available in the foreseeable future against which these losses can be utilised.

The UK corporation tax rate reduced to 19 per cent from 1 April 2017 and will reduce to 17 per cent from 1 April 2020, which will reduce the amount of UK corporation tax that the Group will have to pay in the future. The Group's deferred tax balances have been measured at rates between 17 and 19 per cent (2017: between 17 and 19 per cent), being the enacted rates of corporation tax in the UK at the balance sheet date against which the temporary differences giving rise to the deferred tax are expected to reverse.

13. Trading properties

During the year staff and administrative costs of £4,238,000 (2017: £4,494,000) have been capitalised and are included within additions.

Capitalised interest of £3,449,000 is included within the carrying value of trading properties as at 30 September 2018 (2017: £1,768,000), of which £2,182,000 (2017: £899,000) was capitalised during the year. Included within disposals is £501,000 (2017: £Nil) of interest previously capitalised and written off on disposal.

The carrying value of trading properties at 30 September 2018 includes £2,656,000 (2017: £2,825,000) measured at net realisable value. The remaining assets have been measured at cost. In arriving at their net realisable value assessments, the Directors have had regard to the current valuations of the properties (where relevant) and the future expected profitability of the asset.

The costs written back in 2017 were as a result of an increase in the value of the properties in question.

14. Trade and other receivables

Trade receivables include minimum amounts due from housebuilders on strategic land parcel sales. Other receivables include an amount of £6,582,000 relating to overage entitlements that were acquired with the Priors Hall asset in the year and attributed a purchase price allocation of £9,366,000. This asset is measured at fair value through profit and loss using a discounted cash flow model and is categorised as level 3 in the fair value hierarchy. The key assumptions applied in the valuation at 30 September 2018 are current expectations over future house price values, the timing of housebuilder delivery and a discount rate of 9.6 per cent. The fair value movement since acquisition is £1,090,000 which has been credited to the income statement for the year. Amounts totalling £3,874,000 have been collected by 30 September 2018.

There were no amounts past due but not impaired at 30 September 2018 or 2017.

15. Trade and other payables

16. Borrowings

Other loans comprise borrowings from Homes England and Huntington District Council and a conditional grant. Interest on borrowing from Homes England is charged at between 2.2 and 2.5 per cent above the EC Reference Rate and the facilities are secured against specific land holdings. The £1,000,000 grant is conditional on certain milestones of construction being achieved before 2020. The grant is only repayable if these are not reached.

There are no bank loans other than the revolving credit facility. In the prior year, bank loans, other than the revolving credit facility, were secured against specific property holdings.

17. Share capital

Movements in share capital in issue

18. Net asset value and EPRA net asset value per share

Net asset value and EPRA net asset value per share are calculated as the net assets or EPRA net assets of the Group attributable to shareholders at each balance sheet date, divided by the number of shares in issue at that date, adjusted for own shares held and the dilutive effect of outstanding share issues.

19. Contingent liabilities, capital commitments and guarantees

The parent company has given guarantees totalling £71,393,000 (2017: £58,040,000) as part of its development obligations.

Capital commitments relating to the Group's development sites, including the Group's share of joint ventures, are as follows:

20. Leases

Operating lease commitments where the Group is the lessee

The future aggregate minimum lease rentals payable under non-cancellable operating leases are as follows:

Operating lease commitments where the Group is the lessor

The future aggregate minimum rentals receivable under non-cancellable operating leases are as follows:

21. Related party transactions

Key management personnel

The Directors of the Company who served during the year are considered to be key management personnel.

Fees, other income and amounts due from joint ventures and associates

The following amounts are due from the Group's joint ventures and associates. These sums relate to loans provided to those entities and form part of the net investment in that entity.

Amounts due from Terrace Hill Residential PLC were provided against at 30 September 2017. On 13 October 2015 Terrace Hill Residential PLC went into liquidation and on 29 June 2018 it was dissolved. The total provision at 30 September 2018 against amounts due from Achadonn Limited was £1,243,000 (2017: £1,243,000).

Fees charged by the Group to SUE Developments LP during the year were £925,000 (2017: £1,017,000). Included in prepayments and accrued income at 30 September 2018 was £273,000 (2017: £362,000) in respect of these fees. Fees charged to Wintringham Partners LLP during the year were £1,048,000 (2017: £Nil) and included in prepayments and accrued income at 30 September 2018 was £801,452.

Glossary of terms

Risk review

Urban&Civic continues to seek to deliver on its strategic objectives while operating through a Board-led risk management framework that:

• establishes the nature and scale of risk that the Group is prepared to take (risk appetite);

• identifies and assesses risks applicable to the Group's strategy and operations (both existing and emerging);

• designs and implements mitigating actions and/or procedures;

• seeks assurance over the effectiveness of those mitigating actions and/or procedures; and

• manages the Group's risks on an ongoing basis against risk appetite, acknowledging that risk cannot be totally eliminated.

1 Establish risk appetite and regularly review: Board

2 Identify and assess relevant risks: Executive Directors and EMC

3 Design and implement mitigation: Executive Directors and EMC

4 Seek assurance over mitigation: Audit Committee and Internal Audit (Grant Thornton)

5 Manage and report on risk: Executive Directors, EMC and business segment subcommittees

Readers of last year's risk section would have noted the introduction of an Executive Management Committee (EMC) into the Group's risk management structure. Over the last 12 months, the EMC has been instrumental in helping the Board embed the risk management framework across the Group, especially down at grass root levels, where emerging risks are typically identified first.

Urban&Civic's size and regional office network provide an opportunity to collate, assess and mitigate risks effectively, but only if supported by effective communication and reporting up, down and across the Group. The EMC, through its composition in part, has assisted greatly in improving communication around the Group.

Risk management structure

The Board has ultimate responsibility for risk management and internal control, with a particular focus on defining the Group's risk appetite, regularly assessing and monitoring the Group's principal risks and reviewing reports produced by internal auditors, (Grant Thornton) on internal controls and risk reports from the EMC and business segment subcommittees.

The Audit Committee reviews the adequacy and effectiveness of the Group's financial and non-financial internal controls and risk management systems on behalf of the Board. The Audit Committee also monitors and reviews the external audit, including the auditor's report and sets the programme for internal audit.

The Executive Directors, with the assistance of the EMC, design and manage the internal controls and risk management systems, ensuring that risk registers and risk reporting are maintained throughout the year. The EMC further relies on business segment subcommittees to help fulfil its risk reporting responsibilities by maintaining live operational risk registers.

Key features of Urban&Civic's risk management framework

• Clear and well communicated risk management framework and structure (including roles and responsibilities)

• Board and Audit Committee review risk (including key risk registers) and internal controls at each meeting

• Annual review (or more frequent if appropriate) by Board, Audit Committee and EMC of risk appetite and corporate (top-down) risk registers

• Bi-monthly review (or more frequent if appropriate) of project risk registers by EMC and business segment subcommittees

• Open door policy to all employees, which aids early identification and resolution of issues

• Clear reporting lines and delegated authorities

• Formal and informal opportunities for intra-group debate and communication

• Sensibly paced systems evolution - avoids shocks to the control framework

• Maintenance of a stable senior management team

• Robust and regular reporting systems (operational and financial as well as risk)

• Appropriate training

• Identify and communicate the process for risk event acceleration outside the formal regular procedures

• Ensure employees understand and have confidence in the Group's whistleblowing policy

Risk management framework components

The principal components of the Group's risk management framework comprise the risk appetite table and risk heat map (see below), risk summary (which highlights Group-wide risk items requiring further consideration and risk profile over time), risk registers (including key risk register, full risk register, development/asset risk registers and corporate risk register) and associated scoring matrices.

The following table summarises the Board's risk appetite and risk behaviour across the Group's identified risk areas.

As previously noted, a key component of the Group's risk management framework is the maintenance of risk registers for each project and business area, which are used to revise and inform corporate level registers that are periodically reviewed by the Board. The corporate-level registers typically include around 30 risks and, in line with last year, the most recent ten key risks (planning being added) are set out on the following pages.