Ashley House Plc (ASH) - A Shareholder Friendly Recovery Situation.

Friday, Sep 16 2016 by

 Ashley House (LON:ASH)

Ticker: ASH
Sector: Construction & Engineering (AIM) - Floated 2007

Share Price: 7.75p

Yesterday, I was pleased to attend the AGM of Ashley House (LON:ASH), a microcap company where I have been a shareholder for the last 3 years. Over this period, however, I have taken little interest in the company for one reason or another but have kept an eye on it and various events over the last 12 months sparked my interest to put in some proper leg work and get to know the company better.

Firstly what does Ashley House actually do? Well, their website summarises this as follows:

Ashley House is a leading Extra Care Housing and Health Property Partner working with providers and commissioners in the public, private and community sectors. The Company has 25 years of experience in providing innovative approaches in the resourcing, funding, design and development of flexible and efficient social and community health, care and supported living environments”.

In essence they work with local councils / public authorities, funders (the likes of ‘Assura’ and ‘Funding Affordable Homes’) and external design teams (Architects, Planning Consultants etc) to design and build:

? Primary and community healthcare facilities (daycare centres, dental surgeries, secondary care centres etc) – this falling within their ‘Health’ Property offering

? Homes with care and support (affordable housing for older people or those with care needs) – this falling within their ‘Extra Care’ Housing offering. These schemes are typically 3-4 x the size of their ‘Health’ schemes although lower margin but generally ‘better’ schemes.

? Community Pathology labs and Social Welfare Centres – this falling within their ‘Community Infrastructure’ offering.

The previous bedrock of the Ashley House (LON:ASH) business was the ‘Health’ sector (GP surgeries) but this suffered a set-back around 2010 due to changes in Government policy (abolition of PCTs etc) and the company has since being re-establishing itself by successfully diversifying, primarily into the ‘Extra Care’ sector.

The Board comprises 2 Executives namely Antony Walters (CEO) and Jonathan Holmes (Commercial Director and ex. CEO). Christopher Lyons as the non-exec Chairman with Stephen Minion, Andrew Willetts and John…

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Ashley House plc is engaged in 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. The Company's segments include Extra Care and Health. The Company is engaged in extra care housing and health property partner services, which allows to work with providers and commissioners in various sectors. The Company's solutions include GPSpace, LivingSpace, WellbeingSpace, EstateSpace, EnergySpace and VisitorSpace. The Company's GPSpace offers various projects, such as GP practices, pharmacies, opticians, various services and alternative therapies. LivingSpace is a solution for older people and those with learning, physical or sensory difficulties and mental health needs. WellbeingSpace enables the promotion of a community's health and social needs through various combinations, such as health centers and pharmacies. more »

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24 Posts on this Thread show/hide all

drvodkaquickstep 4th Jul '17 5 of 24

Liking the F1 Modular website (76% owned by Ashley House) - basic but good to see they are the only supplier approved across all 8 regions of England & Wales.


6 units already under construction in Banbury, Oxfordshire. 2 houses up in 8 hrs - impressive.

I am anticipating some positive news flow over the next 12 months given heightened awareness of social housing issues in the UK.

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drvodkaquickstep 17th Aug '17 6 of 24

Interesting insights into 76% owned F1 Modular and the pre-construction / modular housing work they are currently undertaking:

"F1 Modular and Ashley House already do a lot of business with social landlords across the UK, producing homes for Scottish housing associations that meet Scottish Government’s Gold Sustainability Standard, for example (the products are highly efficient, in regard to heat and sustainability). The housing that is being created on the day that I visit is an order from Cherwell Council and the company is in negotiations with three Welsh HAs to add to their development pipelines too".

Hoping for some further updates in the FY results due out sometime this month.

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drvodkaquickstep 1st Nov '17 7 of 24

Finally the news shareholders have been awaiting starting last week (25 October 2017) with the government announcing that the Local Housing Allowance (LHA) rate will not be applied to the social rented sector.

Further updates from Govt this morning with the share price responding accordingly.

WHI currently maintaining their 15p price target although I now expect this to be updated.

Still some awful numbers expected for this year and there are still some challenging cashflow / funding issues with the business, BUT, a whole lot rosier with the LHA rent cap issue now essentially resolved.

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drvodkaquickstep 15th Dec '17 8 of 24

The news all shareholders have awaited:

Shares up 39% as i write. This seems like a very good outcome given the slightly precarious nature of Ashley House’s balance sheet (cash) prior to this news. A well known and reputable partner helps de-risk even if there is a slight compromise on future upside.

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Edward John Canham 15th Dec '17 9 of 24

On first reading this is a transformative deal - good for both sides but %wise better for Ashley House (LON:ASH).

They are being paid £4M (75% of todays starting MV) to put their pipeline into a 50% JV with arguably one of the best contractors in the business. They therefore retain 50% of the profit on their pipeline. With the firepower of MS behind them they must have equally had a step change in their ability to win new contracts.

Good news.


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vik2001 16th Dec '17 10 of 24

will this still affect funding issues with the business, or will the deal change this around?

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Edward John Canham 16th Dec '17 11 of 24

The £4m being paid will mean Ashley House (LON:ASH) will be debt free - debts stood at £2.3M at 30 April 17.

My understanding is that the funding issue with the contract pipeline was with the customers - the LHA caps where making these schemes uneconomic. This block was removed by the PM in late October. The DCLG subsequently announced further concessions to sheltered and extra care housing on 31st October 17. This I presume means these schemes are good to go and the action by Morgan Sindall (LON:MGNS) would seem to confirm this and equally that they consider this to be a growth area in the future (there was positive noises in the budget).


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vik2001 16th Dec '17 12 of 24

thanks for that. I don't understand this sector at all. but have been trying to figure out potential upside for the future.

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jonthetourist 16th Dec '17 13 of 24

Can anyone shed any light on this - seems unusual to me.

"Ashley House has today
increased its holding in F1M from 52% to 76% for a maximum consideration of £250,000,
£240,000 of which is payable only when the enlarged F1M is profitable and a loan of
£210,000 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 £4m
over the next three years. "

You make the business a success and give lots of it back? I am hoping I have missed something.


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Edward John Canham 16th Dec '17 14 of 24

As far as I'm concerned F1Modular is a total distraction - I'd be staggered if it achieves £4M of profits in the next three years (or the next decade) - as far as I can see it achieved virtually nothing in the first year(ish) of ownership.

I currently only hold this share for the MS JV (previously their Supported Housing pipeline) and to a minor extent their Healthcare business - modular stuff has been around for years, it has no moat (and I promised myself I'd never use that term) and is basically just a useful option when considering how you're going to build. How you build is not a problem, having the ability to build, is.


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drvodkaquickstep 16th Dec '17 15 of 24

Nice to see some comments here - a few points that I will add:

1) Modular - don't agree with your comments Phil as whilst modular / off-site / pre-construction has indeed been talked about for a long time in the industry (at least from the early 1990's as I recall), it is now being used across the construction industry with a number of the large contractors already having their own in-house capabilities (and using them) alongside large consultants like Atkins and AECOM developing their own expertise.

Of course, F1 Modular have already completed some of their own schemes most recently the one in Banbury, Oxfordshire. That said, they are up against stiff competition but have already secured places on frameworks so its one to watch.

2) With respect to funding and their balance sheet going forward it would seem, as already noted by Phil, that the Group will now be debt free depending on how exactly the Board deploy the capital. They have a GBP 1.5m facility with Invescare as well as a facility provided by NED Stephen Minion and another by John Moy's wife if I recall. All of these loans are, I believe, at around 10% ish interest so not cheap. These could be paid off, leaving money to invest in their various schemes including their modular capacity / capability as well as reducing their interest costs.

Essentially it's a transformational deal for Ashley House (LON:ASH) and it would be fantastic to see them return to the days when they delivered 20%+ ROCE.

WHI's detailed research note from Oct 2017 (prior to LHA rent cap removal and MS deal) concludes:

"Whilst risks remain, the valuation multiples currently ascribed are significantly
undemanding With the shares trading on a FY 2018E PER of just 1.9x and EV/EBITDA
of 2.2x, the multiples are highly attractive, should management deliver as planned. We
reiterate our 15p share price target and Speculative Buy recommendation, which would
still imply a significant 50% discount to the wider peer group

My initial valuation is circa £14m or 23p share and they are now in my top 5 holdings across SIPP and ISA by value after Friday's news.

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vik2001 16th Dec '17 16 of 24

id expect to probably see some profit taking after the big rise. so I probably hold of a little before I make a initial small purchase. but this is starting to look interesting. thanks for flagging it.

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drvodkaquickstep 20th Dec '17 17 of 24

Further to the news on Friday of last week I was pleased to speak to a representative of the company this week to clarify a few points concerning the JV and other matters of interest. The following are my notes of this discussion - any errors / omissions are completely of my own account.

Q. I had previously understood that the £200m housing pipeline was to be delivered over 2-3 yrs but anticipate this may be more like 3-4 years – can you clarify?
A. Our ambition is to deliver 10/12 schemes a year or circa one per month so in theory the current pipeline could be delivered in 2 years, however, we need some time to mobilise the JV and things will ramp up over time so the likelihood is that it will take around 4 years. That said, we anticipate the pipeline to grow under the JV so it’s rather dynamic.

Q. Can you clarify the composition of the ‘pipeline’ i.e. does the £200m typically fall through as revenue for the Group?
A. Its “Total Investment Value” i.e. what the Client would have pay for the scheme but yes this typically all comes through as revenue. Profit margins are double digit.

Q. I believe from the RNS that the JV will work on a straight 50/50 basis i.e. MS will receive all profits on their £100m of the pipeline – is this correct?
A. Yes that is correct. What is important to note here is that all the schemes will be fronted by Ashley House with Morgan Sindell providing various resources behind the scenes. It’s important to us that we retain the integrity that Ashley House is known for by our Clients and end users. Right from the beginning we made it clear that we didn’t want Morgan Sindell to just come in and build out their schemes although looking further ahead as the JV matures that will probably happen. The Broker Note in January will provide further details.

Q. The RNS states that the cash received from Morgan Sindell will be used for Working Capital and to invest into modular etc – do you also plan to pay back the directors loans and other debt facilities?
A. As we start to deliver schemes on site and further cash is generated, yes that is the plan as these debt facilities are quite expensive.

Q. I understand that Govt is still in a consultation period re: the LHA rent cap etc?
A. Yes they are still to announce the structure of Social Rents now that the cap is not going to be enforced. The feedback from our Client’s is that they are confident to move ahead with schemes now despite the lack of final confirmation from Govt.

Q. Can you summarise what Morgan Sindell will bring to Ashley House as part of the JV aside from resources etc.
A. They are active in many areas such as large regeneration schemes that undoubtedly will have elements of social care within them that we can deliver for them, they will also have other smaller schemes that have S106 agreements requiring social care facilities and also there is scope to work together on modular schemes. There is lots of scope to leverage the relationship and we see the housing pipeline growing significantly going forward. Morgan Sindell see Extra Care as a growth area so will also bring that expertise to them.

In summary a very useful discussion and I have decided to further add to my already overweight holding. I retain my initial (slightly broad brush) 18-23p price target.

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drvodkaquickstep 16th Jan '18 18 of 24

I thought it worthwhile to add to my previous posts by providing some information re: F1 Modular, the 76% owned subsidiary of Ashley House. Ashley House first invested in F1 Modular back in May 2016 taking a 52% stake and further supplemented this acquisition by buying a further 24% as announced on 14th March 2017 taking their ownership up to 76%.

The rationale for buying into this business is provided in the RNS’s and primarily allows the Group to further diversify their service offering whilst also benefiting from an increased awareness (and growth) across the construction / real estate sector of the benefits of modular / offsite construction.

The F1 Modular website unfortunately is rather scant on detail but I am aware that the factory has a theoretical capacity of 750 houses / per annum although realistically this is more like 250-400 as stated on the website.

Clearly this sort of capacity turned into actual output would generate revenues in the tens of millions but the challenge is securing projects and funding them etc. The Board need to convert the current losses at F1 into profits and build the business (and its reputation) so that they can secure more (and bigger) schemes going forward. Another challenge is a big one – the industry / clients / LHA's adopting a new construction method (‘change’) – a useful article is provided here:

Investors who want to see how profitable a modular housing business can be should take a look at the accounts of Premier Modular Ltd (although they also have a big rental business).

Schemes currently completed by F1 include some housing units in Banbury (Oxford), at least one retail unit for Greggs (the bakers) in Bracknell and 8 new bungalows in Stanley in conjunction with HUSK / Karbon Homes:

With respect to certification of the ‘modules’ produced by F1, I am aware that they have BBA certification as provided here:

With respect to the Council of Mortgage Lenders (CML) position on MMC (Modern Methods of Construction) generally my understanding is as provided in the following links:

In summary its rather work in progress from CML and goes back to the point above re: adopting change.

With the demise of Carillion this week and an increasingly strong and persistent push by various factions of the construction industry to “modernise or die”, I feel confident we will see more and more offsite / modular construction in the UK and look forward to further news flow from the Group.

Hope this is helpful….

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Edward John Canham 24th Jan '18 19 of 24


You seem to be closer than most to Ashley House and I don't know about other shareholders but I'm slightly underwhelmed by their performance in the last couple of months, given that the prospects have improved dramatically.

It might be worth reminding them they only have 5 more working days to deliver their interim accounts. We all know these are going to show a loss but given their finance department will have completed the numbers in mid-November and they don't need auditing - why the excessive delay? Lets get them out of the way. I'd really like to feel that future accounts, reflecting the new deal, will come out quicker!

Whilst I accept there are many reasons to sell and only one to buy, Mrs Moy's sales in November and December after two bits of good news does not give a good impression.

In part of the answer to your questions above (17 of 18) the reply is:-

"The Broker Note in January will provide further details." Therefore, in December, the company knows there's going to be a broker's note that will explain things more clearly - not aware this has been issued yet. Also, I don't get broker's notes - what good is this to me?


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drvodkaquickstep 24th Jan '18 20 of 24

Hi Phil

Always good to get other investors thoughts - much appreciated.

Firstly short term performance i.e. between the recent news of the JV to-date is not really worth measuring to be honest. This is a micro cap with very little retail or institutional investor interest. If we all had a pound for each time we wondered why Mr Market did what he did we would all be doing very nicely! That said I do get your point.

What I do agree with you on is the tardiness of their accounts which I have raised to management before. At the time of the prelims I was advised that results were slow out the block as various things were going on behind the scenes that I ascertain they may have wanted to include in the results. This time round they may be wanting to include the finance close of the 2 schemes that everyone is aware of. Not sure, but I fully agree that they need to get their results out much more quickly and I will be raising this again.

I don't have any insights as to why Mrs Moy would decide to sell - people sell for various reasons and its hard to second guess. Its a bit frustrating to see any selling but each to their own. I think (given recent developments) there are many reasons to buy rather than to sell.....?

The Broker Note will be released at the time of the results although the results themselves should provide enough clarity on all the things investors want to know, namely:

1) More details on the JV
2) How F1 modular is performing and mgt thoughts on investment into this subsidiary
3) Management thoughts re: the ongoing Govt consultation re: social rents (now LHA cap is dead) - still a risk item
4) Financial close on the 2 current schemes
5) More details on how the cash from the MS JV will be spent
6) The 2018/19 outlook statement
7) etc

I am expecting to see results either tomorrow or Friday.

Comments welcome and I recommend coming to the AGM this year.

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drvodkaquickstep 11th Jun '18 21 of 24

A useful recap for investors here on the potential prospects for Ashley House (LON:ASH) as demand for 'Extra Care' facilities increases and they are now able to build out their substantial pipeline backlog post the LHA rent cap being lifted. Seems the Morgan Sindell JV is also gaining traction and it's excellent news that their previously loss making F1 Modular business will be profitable for FY 2019.

May 2018 Trading Statement:

I am hoping to facilitate management presenting at a ShareSoc or Mello event post their Oct FY results.

2019 EPS forecasts (if achieved) = PE 3.5!

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jonthetourist 11th Jun '18 22 of 24

In reply to post #372389

You have been a voice in the wilderness for so long on this one that I hope the train is really gathering speed now. (Not least because I am aboard!) The value looks compelling.


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drvodkaquickstep 16th Aug '18 23 of 24

Investors in Ashley House (LON:ASH) will no doubt be pleased to see the FY2018 results as released today.

 Whilst I have not yet had chance to digest them in any detail due to other commitments, I have summarised my thoughts below:

• Whilst the results are very good they are flattered by some exceptionals such as the reversal of an impairment.

• The Morgan Sindell (MGNS) JV as announced on 15th December 2017 was transformational for the Group at a time when their cash position was fragile. They now have a much improved balance sheet as well as a very reputable and respected partner in MGNS to deliver (and grow) their big pipeline of projects. I anticipate great things from this JV with further cross selling opportunities.

• The lifting of the LHA rent cap late in 2017 unlocked their significant (£200m) pipeline of ‘housing and health’ projects; this otherwise being a major constraint in moving schemes forward. The structure of social rents by Govt still needs to be resolved / announced and investors can only keen an eye out for any newsflow on this.

• Funding of schemes was a prior issue as long standing shareholders will be aware. Funding Affordable Homes ( and other providers including various REITs are now more than happy to fund schemes so this is another black cloud removed.

• The F1 Modular facility in Wales now has its own £18.5m pipeline of projects and they have forward visibility for the rest of this year. Momentum is growing across the construction industry to more widely adopt MMC (Modern Methods of Construction) or ‘offsite’ construction given their various benefits and I foresee this continuing to gain traction. It also allows Ashley House (LON:ASH) to diversify into the education, hospitality and retail sectors to reduce their reliance on Govt decision making. They are hoping to commence work on a large hotel scheme in late 2018 / early 2019.

• Debt has been much reduced and is forecast to be eliminated completely by FY 2020.

• WHI have released an updated Broker Note today showing PBT of £2m for FT2019 rising to £2.3m by FY 2020 and giving EPS of 3.9p with a forward PE of just 3.5p (prior to this morning’s SP rise). WHI see fair value at 23p giving 50% upside from current prices.

Ashley House (LON:ASH) are a Top 5 holding for me having initially invested in Q3 2013 and added significantly in the 7-8p area during Q3 2016 and further since. Management are open and trustworthy and I look forward to seeing the business further develop and grow from a much improved foundation.

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drvodkaquickstep 24th Aug '18 24 of 24

For anyone who hasn't already seen it, there is a useful write up and interview of Antony Walters (CEO) by Proactive Investor on the FY results here:

12m rolling PE of 4.7 and PEG of 0.2.  Big discount to peer group anticipated to close as they continue to deliver with momentum during 2019/20.

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