Interim Report 2016

Ashley House plc

Interim Report 2016

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 2016.

Highlights

Financial highlights

• Company remains profitable in period.

• Revenue in line with prior year at £10.7m (2015: £10.6m).

• Statutory profit before taxation £0.8m (2015: £0.2m).

• Adjusted profit before taxation £0.2m (2015: £0.4m).

• Net debt £2.4m (2015: £2.6m).

Operating highlights

• Government in consultation on funding for supported housing which is expected to be positively resolved in 2017 but does challenge timing of scheme delivery.

• Award of £11.5m grant funding by the Homes and Communities Agency for future Extra Care schemes with a further £7.5m for other Ashley House schemes via partner.

• Three schemes currently on site (2015: four) being Walton on the Naze (Extra Care) and the Health schemes in Swansea & Wivenhoe.

• Completion of the Harwich Extra Care scheme in December 2016.

• Total forward pipeline, on-site or appointed of 25 schemes with £170.7m of revenue anticipated to be recognised (January 2016: 31 schemes £177.2m).

"The Board is pleased that the business remains profitable and, whilst there are still challenges to overcome considers the business is well placed to grow again in the near future."

 Christopher Lyons, Chairman

Enquiries:

Ashley House plc 01628 600 340

Antony Walters

Jonathan Holmes

WH Ireland 0207 220 1666

(Nominated Adviser and broker to Ashley House plc)

Adrian Hadden

Nick Prowting

Chairman's Statement

I am pleased to advise that Ashley House has produced a profit before tax for the six months to 31 October 2016 on a turnover in line with the previous year.

In September last year we celebrated the Company's 25 year anniversary and Ashley House continues to expand its product and service offering, applying its skills and experience to the development of health, housing and other community projects.

We continue to wait for full clarity on the Government's proposal to top up housing benefit at a local level to fund supported housing. A consultation process commenced in November jointly commissioned by the Department for Communities & Local Government and the Department for Work & Pensions. In its introduction to the consultation document, the Government reiterates that it is "committed to protecting and boosting the supply of supported housing". We continue to work with our clients, both Councils and Registered Providers, to find solutions to enable at least some of our pipeline schemes to proceed whilst this consultation continues.

This month's announcement by the Homes and Communities Agency of grant funding for the next five years included Ashley House with £11.5m of funding for five of our current schemes. In addition, a Registered Provider partner has been awarded £7.5m for another three of our schemes. The total of £19m of grant funding is a strong indication of the progress the Company has made in this area and of the real opportunity for the business to develop out these schemes once the Government's position on social rents becomes clear.

In each case the grant funding allows the rents to be around 20% lower than they would have been and makes the schemes acceptable to the Local Authority Housing Benefits team. It does not in itself close the gap created by the capping of Housing Benefits to Local Housing Allowance levels, but it should help unlock schemes. Having successfully completed our Extra Care scheme in Harwich last month, we remain on site with the scheme in Walton on the Naze which is due to complete in the coming weeks.

We currently believe that three schemes in our Extra Care pipeline will be able to reach contract before our year end thereby qualifying for revenue recognition, although they all still require Local Authority and partner board final approvals.

Whilst our existing products are much required, the Company will continue to diversify in order to lessen the exposure to the risk of Government making changes that affect the fundamental elements of the business. As mentioned in my last statement in July, we continue to work with a modular construction contractor through a joint venture company in order to increase the speed and efficiency of our existing build programmes. This is enabling us to tap into a new range of products and development opportunities that utilise our skills set and importantly start to move us away from a reliance on Government funded schemes. We hope to be able to announce more concerning this venture in the coming months.

In our Health segment we have commenced construction on two new schemes, a fully integrated GP surgery and family centre complex in Swansea and the redevelopment of an old school building into new surgery premises in Wivenhoe, Essex. The diagnostics and treatment centre in Durham will commence on site in the coming weeks. In addition we continue to support our partners Integrated Pathology Partnerships in their programme of creating new pathology laboratories.

Results

The Company made a profit before taxation of £0.8m in the first half of 2016/17 (2015/16: £0.2m) on revenue of £10.7m (2015/16: £10.6m). The gross margin percentage generated was lower than last year due to the increase in construction income which typically has a lower margin than pre-construction income. The adjusted profit before tax was £0.2m (2015/16: £0.4m). The Company also reached agreement to cancel a significant historic liability with the counterparty, enabling a stronger statutory result to be achieved.

The ongoing Government consultation relating to funding for supported housing means that a further complication is added to the process of contracting on schemes. Subject to the timing risk on some of our schemes as referred to above, the Board expects that the Company will be profitable at the full year.

Net debt

The table below shows net debt of £2.4m at 31 October 2016 (2015: £2.6m). The Company's overdraft facility with Lloyds Bank has recently been extended to £0.75m and renewed until 31 December 2017. 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 (2015: £2.8m) as shown in work in progress at the end of October.

In December we announced the refinancing of our loan through a facility with the related party, Invescare Limited. The management of our cash resources continues to be an important aspect of the business.

Pipeline

Ashley House's pipeline as at January 2017 is shown in the table below. The value of the stated pipeline has decreased from the previous information published in July 2016 largely due to the recognition of £10m of revenue from the pipeline in the period.

Outlook 

We continue to make good progress on schemes in our Extra Care segment although this is not helped by delays caused by the Government's consultation process. Despite this we continue to work with our clients to find solutions to enable schemes to progress to site. We continue to broaden the outlook of the business and once this is achieved and the funding of supported housing is resolved as expected, the Board considers that the opportunities for Ashley House are very strong.

The Board is pleased that the business remains profitable and, whilst there are still challenges to overcome considers the business is well placed to grow again in the near future.

Christopher Lyons

25 January 2017

Condensed consolidated interim statement of comprehensive income

* Adjusted PBT = Profit before tax, 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 healthcare and social care on infrastructure developments from project inception to completion of construction and beyond.

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 25 January 2017.

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 2016 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 2016. 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 2016.

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 2016.

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.