Preliminary Results

Ashley House plc ('the Company'), the health and social care infrastructure provider

Building for the future with new business initiatives

Preliminary results

Ashley House plc ("Ashley House" or the "Company") the health and social care infrastructure specialist today announces its preliminary results for the year ended 30 April 2012.

Operating highlights:

Ø Core competencies maintained

o PCT funded pipeline of 30 projects with a scheme value as yet unrecognised of £106m

o Slow NHS reform - short-term taken prudent stance on no forecast growth and mid-term await growth stimulated by Government imperative to improve primary and community healthcare services

o Acquisition of remaining 50% of AH Scarborough Health Park Limited to cement earnings potential of site from disposal during 2012/13

Ø Strategy to focus on entering and developing new markets bearing fruit

o Diversification into new revenue streams including extra care social housing schemes

o New market pipeline of 26 projects with a scheme value as yet unrecognised of £160m

o Ashley House's services address the growing trend for community based services and social housing with domiciliary care

Financial highlights:

Ø Financial results reflect move into new business areas and previously announced prudent decisions on accounting for NHS-established LIFTCos

o Gross revenues of £23,157,000 (2011: £25,842,000 (net revenues: £16,971,000)) reflecting anticipated challenging changing NHS markets

o Small decrease in administrative expenses with an 8% reduction in staff costs

o EBITDA of £177,000 (2011: £3,037,000)

o An exceptional £20,793,000 impairment charge, being a non cash item, primarily relating to the review of the LIFT intangible announced in January 2012

o Loss before tax consequently £21,769,000 (2011: £7,067,000)

o Net debt of £6,686,000 (2011: net cash of £1,299,000) due to on balance sheet scheme funding but improvement since year end and renewed banking facilities in place

o £7,000,000 of tax losses to be carried forward

Outlook:

Ø Underlying EBITDA expected to be flat in 2012/13

o Post year end two schemes received NHS approval and related profit accrued in current year

o Pro-active management of overheads and cost controls

o New business initiatives anticipated to provide strong growth thereafter

Commenting on the results, Sir William Wells, Chairman said:

"We believe that the actions we have taken to reposition the Group, addressing the well publicised changes to NHS in the primary and community care environments, are beginning to bear fruit.

The underlying need for improved primary and community healthcare estate remains and indeed has probably increased with the passing of the Health and Social Care Act. The Board expects activity in this sector to return once the new NHS management arrangements have settled down.

Trading in the year to 30 April 2013 will remain tough but the Board has taken decisive steps to increase the level and range of earnings to build a stronger underlying business whilst reducing the overhead base. With continuing progress in New Business areas we expect to see a strong return to growth and in the medium term the Board views the Company's prospects as stronger on the back of pent-up demand following NHS reform and particularly from the New Business areas."

Enquiries:

Chairman's statement

Results

The year to 30 April 2012 was exceptionally challenging with the well publicised changes to the health service hampering our NHS clients' ability to reach decisions on premises in the primary and community care environment. Despite this, your Company still made a small profit at EBITDA level of £177,000 (2011: £3,037,000), as the strategy to move the business into new areas started to deliver positive results.

The Company's core business historically has been PCT funded development of infrastructure in the primary and community healthcare sector. This has slowed dramatically over the past few years due to the re-organisation of the NHS, which includes the abolition of PCTs in March 2013 together with the difficult financial climate. The NHS re-organisation is still underway and the Board is acutely aware that the detail of new decision making bodies and processes around primary and community care infrastructure is still unknown. Even when the re-organisation is finalised, activity levels are likely to take time to return to previous levels. Our success in New Business areas, discussed in more depth in the Business Review, is aimed at replacing this delayed revenue.

In order to recognise this changed environment we announced during the year that we had undertaken a prudent impairment review of all intangible assets. Full detail is provided in the Business Review. This has led to a one-off non cash impairment of £20,793,000. The loss before tax was consequently £21,769,000 (2011: £7,067,000). This exercise has simplified our balance sheet leaving only one significant investment, our holding in NHS LIFT (Local Improvement Finance Trust), which will be subject to an annual impairment review. As a consequence we now have a platform for readily visible growth in the future.

Current trading

The slippage of two schemes that we announced on 1 May reduced the level of EBITDA for the year. Since April these two schemes have received the required NHS approvals and the related profit has accrued in the first half of the current financial year. As we stated in May, other than the contribution attributable to these schemes there will be little growth in underlying EBITDA in the current year.

As detailed in the Business Review section below, the Company's net debt position has improved substantially since the year end (24/7/12 net debt: £3,279,000; 30/4/12 net debt: £6,686,000) with the completion of the sale of two of the three projects financed on balance sheet. The third project has also been sold with the contract due to complete when the building is finished in the next few weeks. This will leave the Company with two debt facilities. One, standing today at £1,885,000 (30 April 2012: £2,110,000) is secured on a site owned by a subsidiary. We hope to secure contracts to develop or sell this site in the coming year. The other is the Company's general working capital overdraft facility of £1,800,000.

Outlook

The underlying need for improved primary and community healthcare estate remains and indeed has probably increased with the passing of the Health and Social Care Act. The Board expects activity in this sector to grow once the new NHS management arrangements have settled down.

Trading in the year to 30 April 2013 will remain tough but the Board has taken decisive steps to increase the level and range of earnings to build a stronger underlying business whilst reducing the overhead base. With continuing progress in New Business areas we expect to see a strong return to growth and in the medium term the Board views the Company's prospects as stronger on the back of pent-up demand following NHS reform and particularly from the New Business areas.

Sir William Wells

Chairman

24 July 2012

Business review

Diversifying revenue streams

During the year the Board embarked on a diversification policy to enable it to twin immediate growth in new markets with the anticipated recovery of our core NHS business in the coming years. This has involved a significant investment in people and product development to allow us to sell newly defined products into these markets.

We are pleased to be already able to point to success in this strategy. In the year to 30 April 2012, £5,125,000 of revenue was derived from the New Business areas (2011: £593,000). This represents 22% of gross revenue (2011: 2%). This area of the business works with non PCT clients including private health providers, and Local Authorities and their partners in providing extra care housing. Helping people live more independent lives in the community can have enormous benefits for the individuals whilst realising efficiency savings which meet the objectives and budgets of both Health and Social Care providers.

To demonstrate the impact of this strategy the Board felt it useful to differentiate between PCT funded and new markets in the analysis of its pipeline first published in May and updated below. This data demonstrates the growth of the new markets as the business gets traction in the new areas to complement the ongoing business from our traditional market.

Our pipeline as at July 2012 can be analysed as follows:

As a guide, revenues from on site schemes will be recognised over the next 12 months. Schemes where the Company is in a fee protected position will see revenues recognised over the next 24 months. Where the Company is appointed the time frame is likely to be 12 to 36 months and where we are in active discussions 18 to 48 months. Revenues are only recognised from on site and fee protected schemes. The timeframes in our new markets are likely to be shorter and less variable, on average, than our traditional PCT funded primary care business. 'Scheme value to come' represents the sale valuation of the schemes less any revenue already recognised. Not all the scheme value will flow to Company revenue as the Company occasionally does not act as contractor.

The Board takes confidence from the progress in the new markets and believes its strategy is working and will deliver a larger and more diversified income stream in the future.

Cost reduction

Whilst investing in and funding the new strategic direction, the Board continues to proactively manage the Company's overheads and the year to 30 April 2012 showed a small decrease in administrative expenses, which included an 8.4% reduction in staff costs as the Board continues to reshape the business. A further restructuring, which occurred shortly after the year end, has realised a further £500,000 reduction in overhead on an annualised basis and we thank our staff who have supported the Company so strongly. This has included a reduction in salary of 15% for the Chairman, Chief Executive and the remunerated Non-Executive Director for the year.

Investment partners

Ashley House plc is not a property holding company and seeks to work with investment partners who acquire its developments. New trading relationships have been established during the year with three new project investors buying the three self-funded schemes and giving the Company a number of purchasers for the full range of its now more diversified market offerings. The ability to structure, package and sell long term Government backed investments is a key Company strength. The Board is pleased to be establishing long term funding partnerships with some high calibre investment entities.

Cash management

Since the year end the Company has cancelled its £2,000,000 revolving credit facility with Lloyds Banking Group which was due to expire at the end of September 2012. The Company has agreed an overdraft facility initially of £1,800,000 reducing in line with the Company's projected cashflows to zero from 1 February 2013 when the Company expects to be well into a positive net cash position save for specific project debt. Lloyds Banking Group continues to support the Company. The reduced facility will see lower interest payments and a saving on arrangement fees in the coming year.

As the business diversifies and the range of potential project investors changes, it is important that the Company is flexible in the way that it structures its developments. For the first time this year the Company funded the development of three schemes from its own resources, raising debt finance against two of these schemes before selling them onto investors as the schemes completed. This contributed to a net cash outflow from operations of £5,329,000. The table below shows the net debt position at 30 April 2012 of £6,686,000 which compares to £1,862,000 at 31 October 2011 and a net cash position of £1,299,000 at 30 April 2011. The sale of two of the three schemes have now completed, with associated debt funding repaid. The scheme at Doddinghurst will complete in August and the contracted agreement with the investor will result in the debt passing to the Purchaser and a further cash inflow to the Company.

At the end of April, the Company acquired the remaining 50% in AH Scarborough Health Park Limited for a nominal amount. This gives the Company full control of the development in Scarborough. The acquisition brought the remaining half of the debt on to our balance sheet, and is currently being amortised, standing today at £1,885,000 (30 April 2012: £2,110,000). Sale or development of the site in the coming year is anticipated to lead to a cash inflow as well as full repayment of the debt upon sale completion.

* The revolving credit facility was cancelled by the Company on 24 July 2012 and will be repaid on 31 July 2012. The new overdraft facility of £1,800,000 is available from 24 July 2012.

Intangible assets

At the half year the Group undertook a detailed and prudent review of all the intangible assets held on its balance sheet. The NHS changes have affected current activity levels, notably in LIFT (Local Improvement Finance Trust) Companies, through which PCTs channelled new estate requirements, and the Board has impaired the LIFT investment which had not been impaired since acquisition. The Group has also decided to move from proportional consolidation to equity accounting as a revision of its interpretation of IAS31 as this is deemed more representative and it will need to do so in any case next year on the proposed early adoption of the draft new standard IFRS11, Joint Arrangements. This has resulted in the amalgamation of all balances relating to the LIFT investment into one investment line. Undertaking a prudent impairment review, we have reduced the balance to the level we indicated at half year, £12,500,000. The exclusivity periods have an average life of 12.5 years. The Board will undertake an impairment review of this asset each half year. All goodwill and other intangibles arising from other acquisitions and joint ventures have also been fully amortised or impaired. This has caused a one off large impairment charge in the income statement of £20,793,000. However, it must be stressed that this is a non-cash item. Furthermore, we believe this rigorous review has provided greater clarity to the balance sheet.

Taxation

With the provision against accrued income last financial year and the impairment and amortisation charges made this financial year, the Company has significant tax losses of at least £7,000,000 to carry forward and we continue to discuss with our advisers and HMRC to ensure we maximise this amount.

Dividends

The impairment of the LIFT investment has increased further the Company's negative distributable reserves. Therefore the Board is unable to pay a dividend for the year to 30 April 2012 but will now look to progress a capital restructure to enable the Company to reinstate a cautious, prudent but progressive dividend policy as trading conditions improve.

Social Impact

During the year the Company completed nine Primary Care schemes with a combined list size of 88,000 patients who are now able to access medical services through state of the art facilities. 53 GPs and 236 staff work out of these facilities. Over 300 people external to the Company were employed in the development and construction of these premises. Since the year end the Company has completed its first specialist housing development for people with extra care requirements providing 27 bungalows and staff facilities. Ashley House is proud of the social impact our work has and is keen to explore with all stakeholders how this benefit can be maximised.

Summary

Although this has clearly been an exceptionally tough year the business has emerged leaner and stronger. We have maintained a strong position to help our NHS clients and partners provide cost effective property solutions when it finalises its re-organisation. As important, we have made significant progress in our new markets that, as well as replacing delayed NHS revenues during this year will, in their own right, allow us a strong return to growth thereafter.

24 July 2012

Consolidated statement of comprehensive income

for the year ended 30 April 2012

All of the activities of the Group are classed as continuing.

* See Note 1

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

Consolidated balance sheet

at 30 April 2012

* See Note 1

The financial statements were approved by the Board of directors and authorised for issue on 24 July 2012.

Consolidated statement of changes in equity

for the year ended 30 April 2012

Consolidated statement of cash flows

for the year ended 30 April 2012

Notes to the financial statements

1 Basis of preparation

The financial information set out in this preliminary announcement does not constitute statutory accounts as defined in Section 434 of the Companies Act 2006. The preliminary announcement has been prepared in accordance with applicable standards as stated in financial statements for the year ended 30 April 2012, being based on the Group's financial statements which are prepared in accordance with International Financial Reporting Standards as adopted for use in the EU.

The Group accounts for investments in joint ventures and associates under the equity accounting method. This is a revision to the accounting policy previously employed, where accounting was under the proportional consolidation method. Investments in joint ventures and associates are carried in the consolidated balance sheet at the Group's share of their net assets at the date of acquisition and of their post-acquisition retained profits or losses, less any distributions received. The resulting balance is reviewed for impairment at least annually.

The consolidated statement of comprehensive income shows the Group's share of the joint ventures net profit or loss for the period under share of results from joint ventures.

The Group has made this revision in anticipation of adopting IFRS11, Joint Arrangements in the next reporting period. Proportional consolidation of joint ventures is not permitted under IFRS11. Furthermore management believes that equity accounting better reflects the commercial substance of the commercial agreements. As a result of this revision the comparative financial statements have been restated. This has caused a reduction of £1,700,000 to 2010/11 gross revenue, which is allocated elsewhere in the consolidated statement of comprehensive income resulting in no change to net profit or to net assets in the comparative financial statements.

2 Exceptional items

3 Earnings per ordinary share

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

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

No dividend was paid in the year ended 30 April 2012 (2011: £583,000).

4 Joint ventures and associates

The Group has the following joint ventures and associates which are all incorporated in England and Wales:

Infracare Group Limited, AHBB ELL Holdings Limited, AHBB LHIL Holdings Limited

These companies operate in the NHS LIFT (Local Improvement Finance Trust) arena. The companies are public private partnerships which provide purpose-built premises for health and local authority services in England. The companies are jointly held and controlled with Amber Infrastructure Group (Amber). The Group owns 100% of the "A" shares in these companies, which gives control of development activities. Amber owns 100% of the "B" shares which gives control of investment activities and entitles them to protect existing income streams from underlying investments and gives them the right to future investment opportunities from the NHS LIFT pipeline of projects. These companies do not trade but hold interests in underlying NHS LIFT companies:

Whilst geographically diverse, the above companies all provide identical services to their respective NHS bodies and are managed as one investment by the Group. These investments are presented below in aggregate as LIFTCos.

The Group also jointly controls IPC Plus Limited and Wilco Plus Limited with groups of General Practitioners. These entities are engaged in providing clinical services in West Sussex and Salisbury respectively.

The Group also owns a share in Best Practice (South of England) Limited which provides a healthspace facility for use by local healthcare practitioners in Hampshire. The company is owned with a group of General Practitioners.

The Group also owns a share in Portsmouth Health Limited which provides some clinical services in Portsmouth. The company is owned with the General Practitioners and Care UK.

Impairment

The Group conducted an impairment review of its investments in joint ventures at 30 April 2012.

The carrying value of the LIFTCo investment (which includes the Group's investment in Infracare Partnering Limited (IPL)) 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 arrangement. The Board has assumed that cash flows remain flat from 2015 onwards. The expected future cash flows are discounted using the Group's weighted average cost of capital of 14.0% (2011: 16.7%). 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 £15,382,000. 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 revise the useful economic life to 12.5 years, the average remaining period of exclusivity.

IPC Plus Limited (IPC+) is a joint venture with IPC Limited, formed in the year ended 30 April 2010. The joint venture was established to provide management support to IPC Limited, 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. This has resulted in an impairment charge of £115,000.

Investments in joint ventures

5 Publication of non-statutory accounts

The financial information set out above does not constitute the Group's statutory accounts for the years ended 30 April 2012 or 2011, but is derived from those accounts. Statutory accounts for 2011 have been delivered to the Registrar of Companies and those for 2012 will be delivered following the Company's annual general meeting. The auditors have reported on those accounts; their reports were unqualified, did not draw attention to any matters by way of emphasis without qualifying their report and did not contain statements under s498(2) or (3) Companies Act 2006.