Profitable primary care infrastructure specialist Ashley House moved from PLUS to AIM with a £5 million funding in January, ushering in an exciting new growth phase. This beneficiary of Government-backed new infrastructure initiatives in the UK primary care health sector offers strong earnings and dividend growth through its core business alone.

Delivering the lion’s share of sales and profits is the traditional business involving the design and construction of primary care infrastructure (buildings where GPs are based). ‘We have a pretty unique model within the market,’ claims chief executive Jonathan Holmes. ‘We literally do everything to manage the [construction] process, from introductory meetings and feasibility assessments, through to planning, construction and eventual handover of the building. We wrap it all up, delivering better value for money for the NHS.’ During a successful year to April, ten such projects were completed in places including Birmingham, Brighton and, notably, Newcastle where Ashley House delivered a ‘multi-use’ centre bang in line with Labour’s vision of improving healthcare delivery.

NHS LIFT, the Department of Health’s drive to improve and develop primary care facilities, will provide a major growth fillip and could potentially double the size of the group over coming years.

Ashley House is moving into the market in tandem with a heavyweight strategic partner, the Australian investment giant Babcock & Brown, already a key NHS LIFT player that will introduce the company to larger schemes. Under the terms of this strategic alliance, Ashley House’s design and project management skills will be provided to LIFT companies where Babcock & Brown is the private sector partner. And by working together, a greater number of schemes can be completed more efficiently, delivering superior value to the NHS. Significantly, Babcock & Brown interests are strongly aligned with Ashley House through a warrant to subscribe for shares at 120p, auguring well for the alliance’s success. Stage one approval has already been achieved for four schemes, with progress under way on a raft of others.

Additional related revenue streams including asset management fees (under a long-term contract for properties owned by PLUS-listed offshoot AH Medical Properties) as well as the construction of so-called ‘health villages’, broaden Ashley House’s appeal. A move into clinical services through joint ventures with clinicians, where the company can call upon its long-term associations with GPs, is also underway.

Adding further gravitas to Ashley House’s prospects in these markets is new non-executive chairman Sir William Wells, chairman of the NHS Appointments Commission for the past six years and a man who brings a deep understanding of the NHS as well as ‘a terrific contact book’ to the business.

Maiden AIM results for the year to April were exceptionally healthy, showing pre-tax profits (before the costs of joining AIM and a non-cash charge related to the Babcock & Brown warrant) surging 85 per cent north to £4.1 million and dividends increasing by 25 per cent to 5p. Balance sheet strength proved another highlight with Ashley House closing the year with cash balances of £6.1 million, zero debt, and dramatically increased net assets of £11 million.

This year, analysts are looking for a rise in pre-tax profits to over £5 million, ahead of £6.01 million from sales approaching £38 million the following year. Based on those numbers, the shares are swapping hands for only 15.2 times this year’s earnings, dropping to 12.3 for 2009.

Progressive growth in dividends to 6p and then 7p mean the shares also boast excellent prospective yields of 3.6 per cent and 4.1 per cent. Strong Buy.

Ashley House	AIM	£49.7m	114.00p	0.00p
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