Ashley House PLC Acquisition and Trading Update (4439Z)
March 14 2017 - 09:11AM
UK Regulatory
TIDMASH
RNS Number : 4439Z
Ashley House PLC
14 March 2017
14 March 2017
Ashley House plc
Acquisition and Trading Update
Ashley House plc (the "Company"), the Extra Care Housing and
Health Property Partner today announces an Acquisition and provides
a Trading Update. The Trading Update highlights the risk of delays
to the closing of certain projects arising from ongoing uncertainty
of Government funding support for such projects which might result
in revenues being delayed from the year ended 30 April 2017 into
the subsequent financial period. As a result of this ongoing
uncertainty, the Board has been actively seeking revenues less
dependent on Government funding and consequently has today
completed the Acquisition of the business and assets of a modular
off-site construction partner with whom the Company has been
working in the last year.
Acquisition
Ashley House is pleased to announce that its majority owned
subsidiary, F1 Modular Limited ("F1M") has completed the
acquisition of the assets and business of its former modular
off-site construction partner. Ashley House has simultaneously
increased its ownership of F1M to 76%.
Ashley House first invested into F1M in May 2016 as a platform
to win schemes for modular construction extending the Company's
range of activity. This provided Ashley House with good visibility
of the existing market for modular construction and the
opportunities specific to Ashley House. The opportunity to acquire
the business and assets of F1M's current modular partner has now
arisen.
"Modern Methods of Construction" or "Offsite Construction" is
poised to play an increasing part in the UK building and
development industry. Highlighted in the recent white paper, Fixing
Our Broken Housing Market, the Prime Minister stated in her
foreword: "We will diversify the housing market, opening it up to
smaller builders and those who embrace innovative and efficient
methods". The Homes and Communities Agency has now been tasked with
stimulating this sector via a GBP2bn fund.
F1M (as enlarged by today's acquisition) is the only modular
contractor to hold a place on Local Government's LHC national
framework NH1 for Housing and is currently bidding to deliver mixed
developments including private accommodation. The short term
pipeline includes contracted housing for two Local Authorities (one
of which is currently in the factory) specialist units for a Welsh
Council and a flow of work with an innovative retail developer
delivering ready built retail pods. F1M is seeking to extend its
reach into schools, student accommodation and other similar
products which are well suited for building in a factory before
being transported to site.
It is also capable of delivering a significant proportion of
Ashley House's own pipeline as the Company will use a mixture of
off-site and traditional build methods for its schemes. It is this
ability to provide an integrated approach involving a modular
solution which was a key benefit in the Company's recent bid win in
York of a 70 bedroom Care Home. This scheme is expected to start
onsite during the Company's next financial year.
The minority shareholders in F1M are individuals already
involved in the modular business undertaking sales and technical
management roles. Ashley House is confident that together it has
the experience, management expertise and most importantly track
record with potential clients to properly manage and grow the
enlarged F1M business.
The business being acquired by F1M from administration produced
a loss of GBP93,000 in the year to 31 December 2015 (the latest
available financial statements). F1M has agreed to pay GBP113,500
for the plant, machinery and other assets of this business and is
entering into a new lease on the 80,000 square foot factory with an
option to acquire the freehold over the next six months and again
after a further five years.
For the year to 31 May 2016, F1M produced a loss of GBP29,000.
Ashley House has today increased its holding in F1M from 52% to 76%
for a maximum consideration of GBP250,000, GBP240,000 of which is
payable only when the enlarged F1M is profitable and a loan of
GBP210,000 from Ashley House has been repaid. The additional 24% of
shares can revert to the minority shareholders once the enlarged
F1M has achieved profits of more than GBP4m over the next three
years.
Acquisition funding is from Ashley House's own cashflow and will
be supplemented in due course by debt to fund working capital on
contracts and on plant and equipment.
Trading Update
As highlighted in the Interim Results statement of 25 January
2017, the Company has been working to agree arrangements with Local
Authority and Housing Association partners in order to financially
close enough of the supported housing or Extra Care pipeline
schemes needed to achieve the anticipated levels of profit for the
year to 30 April 2017.
These partners are hesitant to formally agree final arrangements
whilst the current ongoing Government consultation relating to the
funding for supported housing takes place. Despite continued
positive discussions between partners, the agreements are still not
in place and although they may yet conclude in time it is
increasingly likely that they may fall into the following financial
year.
Even if these discussions do not lead to the achievement of
financial close of the schemes prior to the year end, the Board
advises that it believes the business will still achieve a small
profit at Profit before Tax level for the current financial
year.
It is still very much believed that Extra Care will be an
increasing and successful part of the business and will provide
significant growth in the near future. The Board however is
immensely frustrated at the continued impact of Government policy
change on this key area of the business. Consequently the Company
has been working to develop business streams less reliant on direct
Government support and the Acquisition above leads directly into
this.
Commenting on the acquisition Antony Walters, Chief Executive
said "This is a key opportunity for Ashley House to broaden its
scope of activity and exploit new opportunities in the housing,
care, education, leisure and related markets. We have identified a
significant market demand of off-site construction solutions and
the need to create a new range of products that compliment those
reliant on Government for funding. We look forward to working with
our new colleagues within F1 Modular and building a socially
sustainable business by integrating development and modular
construction."
Enquiries:
Ashley House plc 01628 600 340
Antony Walters
Jonathan Holmes
WH Ireland Limited 0207 220 1666
(Nominated Adviser and broker to Ashley House plc)
Adrian Hadden
Nick Prowting
This information is provided by RNS
The company news service from the London Stock Exchange
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