Interim Report 2011

Ashley House plc

Interim report 2011

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 2011.

Highlights

6 months ended 31 October 2011

"Our core healthcare market continues to be slow with NHS reform still incomplete and decision making around primary care premises, still ongoing. However, Ashley House has started to gain some traction in new markets reinforcing the Board's view that although this and next year will be fairly flat, growth will return in the medium term."

Sir William Wells, Chairman

Financial

• Gross revenue down 8% to £12.4m (2010: £13.5m) reflecting the impact of the uncertainty surrounding the scope and timing of the Health and Social Care Bill

• EBITDA loss of £0.2m (2010: profit £0.6m)

• Loss after tax of £18.2m (2010: £4.1m) following an impairment charge of £18.2m.

• Adjusted earnings per share based on adjusted EBITDA* 1.51 pence (2010: 1.95 pence)

• Loss per share 31.29 pence (2010: 7.33 pence)

• Net assets down to £20.3m (2010: £41.8m)

• Net debt £1.9m (2010: £1.7m)

Operational

• 7 schemes currently on site with others shortly to commence (2010: 8)

• Good progress in developing new revenue streams in social care housing schemes, which represented 18% of the revenue in the period. These new streams are expected to supplement previously anticipated NHS based revenues and in the medium term will provide significant growth in their own right

• Forward pipeline of £115m of design and build value

*Adjusted EBITDA = EBITDA plus adjustment for the change in revenue estimate and income tax credit

Enquiries:

Ashley House plc Tel: 01628 600 340

Jonathan Holmes, Chief Executive

Antony Walters, Finance Director

Citigate Dewe Rogerson Tel: 020 7638 9571

Ginny Pulbrook / Jos Bieneman

Numis Securities (Nominated Adviser and broker to Ashley House) Tel: 020 7260 1000

Oliver Cardigan / David Poutney

Chairman's statement

Results

As expected, with the continuing difficulties and uncertainty in the NHS, the company performed at a fairly flat level during the first six months of the financial year compared with the previous period. Revenue was down slightly to £12.4m compared to the same period last year. EBITDA showed a small loss of £0.2m (2010: £0.6m profit). A non cash impairment of £18.2m and a tax credit led to a loss after tax of £18.2m (2010: £4.1m).

Intangible assets

As indicated in my report at the end of July 2011, the Board has undertaken a prudent and full impairment review of all intangible assets at the half year. On-going changes to the NHS have affected current activity levels, notably in LIFT where our investment has not been impaired since acquisition. As a result of this review, the carrying value has been significantly impaired and the useful economic life of the asset revised. Whilst the Board anticipates the LIFT arrangements may still have value at the end of their exclusivity periods, it is prudent to amortise the remaining balance to zero by that time. The intangibles arising from the acquisition of Sapphire, which has been fully integrated into the main business and IPC plus have also been fully impaired. This has caused a large one off impairment charge in the income statement of £18.2m. Importantly, this is a non-cash item.

Business Development

The company's management team has made good progress in developing new revenue streams to offset the challenging NHS market conditions. Revenues from new business, particularly in extra care social housing, represented 18% of total revenue in this period compared to 2% in the year to 30 April 2011. This percentage is expected to increase during coming periods.

In terms of the project pipeline within the coming months, the company is expecting to secure a second larger project in the extra care social housing sector and has made good progress with the company advancing to financial close on its first scheme for a private sector health provider. With the traction achieved in new business areas, the Board is confident that in the short term these revenues will supplement previously expected NHS based revenues and in the medium term will provide significant growth in their own right.

Cashflow

The company completed three projects in the period and is currently on site with seven developments, of which three are being funded by the company. Post the period end, we have drawn down development finance on one of these schemes, but the figures reflect £3.7m of income which will be received when the schemes are sold. Had this £3.7m been received prior to the period end, the net cash position would have been £1.8m (30 April 2011: £1.3m). The position at the half year was consequently net debt of £1.9m (2010: £1.7m). The Group's revolving credit facility with Lloyds Banking Group of £2m expires on 30 September 2012. Management has proactively held positive early discussions with the bank with regard to the renewal of this facility. See Note 2.

Pipeline

The slow pace in property decisions continues which in turn means our pipeline of NHS-derived work, upon which we are expecting to recognise revenues in the next two years, is not currently keeping pace with scheme completions and has fallen to £115m. However, the company has a strong and growing list of schemes it is working on for the future, particularly from new business areas and anticipates that the pipeline will slowly start to grow again.

Capital restructure

Following the impairment write down and the ongoing amortisation policy now in place on intangible assets, the company will now explore a capital restructure to replenish distributable reserves. We will report further in due course.

Outlook

As I stated in July, the NHS re-organisation and resulting slow down in decision making on property matters makes it unlikely that we will return to anything other than minimal growth next year. However, we are making significant progress in our business areas and this should help underpin a return to growth in the medium term.

Sir William Wells

ChairmanAshley House plc

30 January 2012

Condensed consolidated interim statement of comprehensive income

Condensed consolidated interim balance sheet

Condensed consolidated interim statement of changes in equity

Condensed consolidated interim cash flow statement

Notes to the condensed consolidated interim financial statements

1 Nature of operations and general information

Ashley House plc and subsidiaries' (the Group) principal activities consist of the supply of design, project management, consultancy services and asset management, primarily allied to the provision of primary and social care infrastructure.

Ashley House plc is the Group's ultimate parent company. It is incorporated and domiciled in Great Britain. The address of Ashley House plc's registered office, which is also its principal place of business, is The Priory, Stomp Road, Burnham, Buckinghamshire SL1 7LW. Ashley House plc's shares are listed on the Alternative Investment Market of the London Stock Exchange.

Ashley House's consolidated interim financial statements are presented in pounds sterling (£), which is also the functional currency of the parent company.

These consolidated condensed interim financial statements have been approved for issue by the Board of directors on 30 January 2012.

The financial information set out in this interim report 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 2011 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 condensed consolidated financial statements are for the six months ended 31 October 2011. 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 statements, and should be read in conjunction with the consolidated financial statements of the Group for the year ended 30 April 2011.

These financial statements have been prepared on the going concern basis, under the historical cost convention, except for the revaluation of certain financial instruments.

The Group has a revolving credit facility of £2,000,000 included within Current Liabilities which expires on 30 September 2012. In previous periods this liability was included within Non-Current Liabilities. The Board's risk management procedures include the monitoring of the status and performance of all material commercial agreements and an active review of the covenant position on the revolving credit facility with regular dialogue with the Group's bankers. The Board has held positive early discussions with the Group's bankers with regard to the renewal of the revolving credit facility, and in conjunction with a review of the Group's 12 month cash flow projections, the Board considers that it is appropriate to continue to adopt the going concern basis in preparing these financial statements.

These condensed consolidated interim financial statements (the 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 2011.

3 Loss per share

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

The calculation of diluted loss per share is based on the basic loss per share, adjusted to allow for the issue of shares and the post-tax effect of dividends and/or interest, on the assumed conversion of all dilutive options and warrants and other dilutive potential ordinary shares.

Reconciliations of the loss and weighted average number of shares used in the calculations are set out below.

4 Dividends

The dividends paid to equity shareholders over the past two years are set out below:

5 Goodwill

The Group has reviewed the goodwill generated on the acquisition of Sapphire Primary Care Developments Limited (SPCD) in 2009, which has now been successfully integrated into the business of the parent company. As no contract pipeline can now be identified relating to this entity it has been determined that no further economic benefit will be generated from the asset and the asset has therefore been fully impaired. The associated deferred tax liability of £1,094,000 has also been de-recognised.

The goodwill which arose on the acquisition of Strategic Property Solutions (SPS) is being amortised in line with profits recognised on development schemes acquired with that business.

6 Other intangible

LIFTCo intangibles

The carrying value of the interests acquired has been reviewed with reference to the forecast earnings expected to be generated from them and the Group's weighted average cost of capital of 16.7%. The exclusivity periods of the existing seven NHS LIFT arrangements which underpin the value of the business have a further 13 years to run on average. The forecast earnings are based on the pipeline of projects being worked on as a result of the 2008 LIFTCo acquisition.

Impairment

The Group conducted an impairment review of all intangible assets at 31 October 2011.

The carrying value of the LIFTCo intangible was assessed against the discounted future cash flows expected to be generated by that asset. The expected future cash flows are taken from the Board's latest forecast which covers the period to 30 April 2015, extrapolated to cover the remaining life of the asset. The Board has assumed that cashflows remain flat from 2015 onwards. The expected future cash flows consider the following factors: management's expectations, based on historic experience and current knowledge of the marketplace; both industry specific and national expected growth rates; continued political uncertainty in the UK health sector. Assumptions made in impairment reviews in previous periods concerning recovery of LIFT incomes to levels achieved in 2009 have been removed. As a result of these considerations, the asset has been impaired by £11.8m. The Board has assessed that, whilst it anticipates the LIFT arrangements may still have value at the end of their exclusivity periods, it is prudent to amortise the carrying value after impairment over the remaining exclusivity period. The useful economic life of the asset has been revised accordingly to 13 years. As a result of this change in estimate, amortisation will be charged at a rate of £1,000,000 per year over the remaining useful economic life of the asset.

The carrying value of the Infracare Partnering (IPL) asset, which is part of the LIFT business, has been assessed on the same basis as the LIFTCo intangible. The contracts held by IPL have been restructured into the parent company. As a result the Board considers the asset to have no remaining economic value, and as such it has been fully impaired.

The SPCD business has now been successfully integrated into the business of the parent company. As no contract pipeline can now be identified relating to this entity it has been determined that no further economic benefit will be generated from the asset and the asset has therefore been fully impaired. The associated deferred tax liability has also been de-recognised.

IPC Plus Limited (IPC+) is a joint venture between Ashley House and IPC Limited, formed in the year ended 30 April 2010. The joint venture was established to provide management support to IPC which provides various clinical services to the NHS. Given the current uncertainty as to how services are to be commissioned in the future the Ashley House Board considers full impairment to be appropriate.

Independent review report to Ashley House plc

We have been engaged by the company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 31 October 2011 which comprises the condensed consolidated interim statement of comprehensive income, the condensed consolidated interim balance sheet, the condensed consolidated interim statement of changes in equity, the condensed consolidated interim cash flow statement and related notes 1 to 6. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

This report is made solely to the company in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board. Our work has been undertaken so that we might state to the company those matters we are required to state to it in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company, for our review work, for this report, or for the conclusions we have formed.

Directors' responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the AIM Rules of the London Stock Exchange.

As disclosed in note 1, the annual financial statements of the group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-yearly/quarterly financial report have been prepared in accordance with the accounting policies the group intends to use in preparing its next annual financial statements.

Our responsibility

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 31 October 2011 is not prepared, in all material respects, in accordance with the AIM Rules of the London Stock Exchange.

Deloitte LLP

Chartered Accountants and Statutory Auditor

Reading

30 January 2012

Company information

Company registration number

2563627

Registered office

The PrioryStomp RoadBurnhamBuckinghamshire SL1 7LW

Directors

Secretary

S Ronaldson

Nominated Adviser and Broker

Numis Securities Limited

The London Stock Exchange Building10 Paternoster SquareLondon EC4M 7LT

Bankers

Lloyds Banking Group

High StreetSloughBerkshire SL1 1DH

Solicitors

Squire, Sanders & Dempsey (UK) LLP

2 Park LaneLeeds LS3 1ES

Auditor

Deloitte LLP

Abbots House

Abbey Street

Reading

Berkshire RG1 3BD

Ashley House plc

The Priory

Stomp Road

Burnham

Buckinghamshire

SL1 7LW

01628 600340

01628 600345

www.ashleyhouseplc.com