ASH.L Regulatory News (ASH)

Ashley House plc

Interim Report 2017

Ashley House plc ("Ashley House" or the "Company"), the health and community care property partner today announces its interim results for the six months ended 31 October 2017.

Highlights

Financial highlights

· Revenue reduced to £7.0m (2015/6: £10.7m)

· Statutory loss before taxation £1.9m (2015/6: profit £0.8m)

· Adjusted loss before taxation £1.8m (2015/6: profit £0.2m)

· Net debt £3.5m (2016: £2.4m) but decreased since the period end

Operating highlights

· Joint venture established with Morgan Sindall Investments to grow and deliver the Housing pipeline

· Government makes housing the centre piece of the last budget and relaxed its plans to cap housing benefit to Local Housing Allowance rates

· The above two factors will enable the Company to remain profitable in the full year

· Two schemes currently on site (2016: three) being the diagnostic and treatment centre in Durham and the GP surgery and family centre in Swansea

· Completion of the Wivenhoe health scheme in the period

"As previously signalled, the Company showed a loss for the period to 31 October 2017. In the last couple of months the removal of the threat of the LHA cap along with the establishment of the joint venture with Morgan Sindall were key events for the future of the Company enabling it to press forward in the growth and delivery of its significant housing pipeline as well as the other activity in the business."

Christopher Lyons, Chairman

Enquires:

Ashley House plc 01628 600 340

Antony Walters

Jonathan Holmes

WH Ireland Ltd 0207 220 1666

(Nominated Adviser and broker to Ashley House plc)

Adrian Hadden

Ed Allsopp

James Sinclair-Ford

Chairman's Statement

Ashley House stands at a significant juncture in this its 27th year. The joint venture agreement signed last month with Morgan Sindall Investments and last year's acquisition of a majority stake in the modular business through F1 Modular are key events for the business which will drive the future growth of the Company. Although as expected the half year to 31 October 2017 resulted in a loss, the Government's relaxation of the Local Housing Allowance ("LHA") cap together with the stability afforded by the joint venture should enable the Company to achieve its profit targets for the full year. 

In the period under review, no schemes reached financial close. Financial close is the key point in each scheme's development and the point where, under the Company's accounting policies, the majority of profit is recognised. The lack of schemes reaching financial close was principally due to the Government's policy relating to the LHA cap. In October 2017 the Government announced that it was dropping its plans announced in 2015 to cap housing benefit to LHA rates, enabling the business now to proceed with the delivery of its housing pipeline.

On 15th December the Company announced it had signed a joint venture with Morgan Sindall Investments. The joint venture is now established as a 50:50 Limited Liability Partnership, Morgan Ashley Care Developments LLP which will trade under the brand "Morgan Ashley". By drawing on the market presence, delivery capability and financial strength of the Morgan Sindall Group together with the in-house expertise, relationships and brand of Ashley House, this joint venture will be able to push forward with delivering the Housing pipeline that the Company has built over the last few years. The two teams are also now working together to further grow that pipeline utilising Ashley House networks and via the relationships and frameworks held by the Morgan Sindall group. In the last month Ashley House has won a bid for a 54 apartment extra care scheme in Hampshire which will be delivered by Morgan Ashley.

Morgan Ashley is a 50:50 limited liability partnership. Neither party has control of the entity and neither will therefore consolidate the results and financial position of Morgan Ashley, but the Company will include its proportion of the joint venture's results in the 'share of results of joint ventures' line, just above 'other operating income'. This means that turnover from schemes in the joint venture will not be recognised in Ashley House's income statement but the profit arising will be included gross of corporation tax. The Company has received £2.5m of the consideration from the transaction and expects to receive the remaining £1.5m deferred consideration in the next few weeks.

In November the Company advised that it had two housing schemes that would reach financial close in the coming weeks. Due to this the schemes were excluded from the joint venture with Morgan Sindall. The first of these schemes, in Scarborough should reach financial close this week and work continues on a smaller scheme in Peterborough which is being built in the factory via the subsidiary F1 Modular.

F1 Modular, a business acquired last year, continues to build its pipeline. The Company has recently delivered a six house scheme for Cherwell District Council and an eight bungalow development on former council garage sites for a specialist developer in the North East. The prospective order book for the modular business is growing with two large schemes, one an extra care facility and the other a hotel, both well advanced at the time of writing. Modular construction continues to receive a significant amount of publicity and has a role to play in solving the national housing crisis. Whilst it is still early days for Ashley House in the modular industry, on the assumption that this business is able to deliver these two key schemes, the board believes that the F1 Modular business has a strong future.

Results

The Company expected to make a loss before taxation in the first half of 2017/18 as clients delayed decisions on projects pending Government clarify of the rental cap. That loss was £1.9m (2016/17: profit £0.8m) on revenue of £7.0m (2016/17: £10.7m). The adjusted loss before tax was £1.8m (2016/17: profit £0.2m).

Net debt

The table below shows net debt of £3.5m at 31 October 2017 (2015: £2.4m) which has reduced since the period end. As in previous periods all debt at the end of October was secured on amounts incurred on scheme related expenditure. This is largely land purchased for future schemes which stood at £2.8m (2016: £2.8m) as shown in work in progress at the end of October.

Since the period end the loan from Maureen Moy for £200,000, included in 'Loan - Other' above, has been repaid. Following financial close on the Scarborough scheme, the Company's overdraft facility will reduce from £950,000 to £650,000 whilst the loan relating to Scarborough continues to be repaid at the rate of £17,500 per month.

Pipeline

Following the joint venture with Morgan Sindall Investments, the presentation of the Company's pipeline has changed. The table below shows the activity in the four main areas of the business, with an estimate of the development value of the schemes in each area. The "Housing (outside the Joint Venture)" column will be removed once the schemes in Scarborough and Peterborough are built out as similar schemes will be delivered by Morgan Ashley in the future. As the Morgan Ashley joint venture is a 50% partnership, the results will not be consolidated and therefore the scheme value will not show as turnover of the Company, but profit from those schemes will be included as share of profits within the income statement. Profit recognition and timing for the schemes under Morgan Ashley will follow the normal Ashley House accounting policy.

Outlook

In recent times the Company has suffered delays in getting its much needed extra care housing pipeline to financial close. This has been due to the Government's changing policy on rents which has made the last few periods extremely difficult for the Company. Since the Government's announcement at the end of October this pipeline has now started to be unlocked although some residual risk remains on rent levels. We are excited to be working with our new colleagues in Morgan Sindall. This joint venture, whilst it will take time to evolve, provides a real impetus to the delivery of the current pipeline and establishes a significant platform for our future development and growth capabilities.

The board remains confident that the Company should achieve its profit expectations for the full year. However risk still remains on the timing of closing of the schemes due to the inherent difficulties of dealing with public bodies. This week's expected financial close on Scarborough does highlight the fact that schemes can now progress which means the Company is well placed to grow in the coming months and years.

Christopher Lyons

30 January 2018

Condensed consolidated interim statement of comprehensive income

* Adjusted PBT = Profit before taxation, depreciation, impairment, other operating income and exceptional adjustments.

Condensed consolidated interim balance sheet

Condensed consolidated interim statement of changes in equity

Notes to the condensed consolidated interim financial statements

1 Nature of operations

The principal activity of the Group is the supply of design, construction management and consultancy, primarily working with providers of health and social care on infrastructure developments from project inception to completion of construction and beyond. During the year to 30 April 2017 the Group added an offsite modular construction capability through its 76%, F1 Modular Limited.

Ashley House's condensed consolidated interim financial statements (the interim financial statements) are presented in pounds sterling (£), which is also the functional currency of the parent company. These interim financial statements were approved for issue by the Board of directors on 30 January 2018.

The financial information set out in these interim financial statements does not constitute statutory accounts as defined in Section 434 of the Companies Act 2006. The Group's statutory financial statements for the year ended 30 April 2017 have been filed with the Registrar of Companies. The auditor's report on those financial statements was unqualified and did not contain a statement under Section 498(2) of the Companies Act 2006.

2 Basis of preparation

These interim financial statements are for the six months ended 31 October 2017. They have been prepared following the recognition and measurement principles of IFRS. They do not include all of the information required for full annual financial statement and should be read in conjunction with the consolidated financial statements of the Group for the year ended 30 April 2017.

These interim financial statements have been prepared on the going concern basis, under the historical cost convention, except for the revaluation of certain financial instruments which are carried at fair value.

These interim financial statements have been prepared in accordance with the accounting policies adopted in the last annual financial statements for the year to 30 April 2017.

3 Earnings per share

The calculation of the basic earnings per share is based on the profit attributable to ordinary shareholders divided by the weighted average number of shares in issue during the period.

* Adjusted PBT = Profit before taxation, depreciation, impairment, other operating income and exceptional adjustments