Interim Results for the Six Months ended 28 February 2017
The Group is pleased to announce its interim results for the six months ended 28 February 2017. Formation Group is focused solely on property development and project management providing professional services to its clients within this sector.
Highlights
- Revenue from continuing operations of GBP20.184 million (2016: GBP10.178 million).
- Operating profit from continuing operations of GBP0.048 million (2016: Operating loss GBP0.084 million).
- Profit for the financial period of GBP0.015 million (2016: profit GBP2.379 million)
- Cash position as at 28 February 2017 of GBP1.579 million (31 August 2016 GBP0.33 million).
- Final distribution of funds received from the investment in Norwich House profit share agreement.
- Further completion of the units in the 159-161 Iverson Road development with some revenues realised within the financial period reported and expectations that the remaining units will complete in the current financial year.
- New profit share agreement entered into on the 28 February 2017 with London (North) Properties Limited (“London (North)”) and Pinacle Developments Limited (“Pinacle”) in relation to a development property at 34 Wembley Hill Road, Wembley.
Outlook
The Group is trading in line with management’s expectations and the Board remains confident about the Group’s prospects for the remainder of the year.
Enquiries
Formation Group plc
Tel: +44 (0) 20 7920 7590
David Kennedy, Chief Executive Officer
NEX Corporate Advisor
Tel: +44 (0) 20 7469 0930
Fungai Ndoro / Mark Anwyl
Chairman’s Statement
I am pleased to report the Group’s results for the six months ended 28 February. The Group continues to grow its revenue, whilst maintaining profitability, over the period. This has mainly been achieved through increased instructions for our project management services. Furthermore, the Company is confident that the units at the 159-161 Iverson Road development will be sold and contribute to the revenue of the second half of the year. The Group is confident that it can continue to source value enhancing development opportunities.
William O’Dea
Non-Executive Chairman
19 May 2017
Chief Executive Officer’s Report
Overview
Revenue for the period was GBP20.184 million from continuing operations (2016 GBP10.178 million) and operating profit from continuing operations was GBP0.048million (2016 GBP0.084 million loss).
Revenue for the period is underpinned by an order book with large project management contracts in place.
In line with the Group’s current dividend policy, no interim dividend is being declared. However, the Directors will review the position at the time of the final results for the year ending 31 August 2017.
Project Management Division
Formation Design & Build Limited
The company is now working on four projects namely two large and two medium sized contracts having completed one project in the period.Formation Construction Limited
This company was formed in early 2012, to project manage construction work and at present the company is working on two large contracts having completed three projects in the period.During the period, the on-going health and safety executive investigation into Formation Construction Limited following an accident on one its construction sites was still in progress. The directors have no further updates at this stage.
Property Development Division
Formation Homes (London) Ltd
As previously announced, Formation Homes acquired the development site known as ‘Iverson Road’, using a mixture of development funding and cash from the Group’s resources. The scheme comprises 19 residential units and 1 commercial unit. The Group is pleased to announce that the majority of the units have been sold with the expectations that the remaining units will happen within the
current financial year.Discontinued Operations
FG Bradford & FG Bristol Ltd
In the prior period Dunbar Assets plc took management of the properties at FG (Bristol) Limited and FG (Bradford) Limited and were actively marketing these with a view to sell. The properties held in these companies were disposed of on the 2 October 2015 with a positive write back of GBP1.076 million relating to the loans secured on these properties. These companies were non trading within the financial period.Risks and Uncertainties
It is important to the board that we continue to provide all our shareholders with a balanced view of the business including its risks and uncertainties.
The Group’s core activity is now Project Management, Property Development and Property Share investing activities such as the lucrative Norwich House profit share agreement. The Group expects that profits from the property development division and property investing activities will form a substantial part of its profitability in the future.
Outlook
Formation Group is now placing primary focus on property development and property investing activities in addition to its project management business in order to materially boost shareholder value. This can be evidenced in the improved trading position over the last year and the confidence in this continued trend in the short and medium term future.
David Kennedy
Chief Executive Officer
19 May 2017The interim accounts will be published on the company’s website formationgroupplc.com
Consolidated income statement
For the six months ended 28 February 2017
| Note | 6 months ended 28 Feb 2017 (Unaudited) £’000 | 6 months ended 29 Feb. 2016 (Unaudited) £’000 | Year ended 31 Aug. 2016 (Audited) £’000 | ||
| Continuing operations | |||||
| Revenue | 2 | 20,184 | 10,178 | 29,410 | |
| Cost of sales | (18,969) | (9,145) | (26,488) | ||
| Gross profit | 1,215 | 1,033 | 2,922 | ||
| Administrative expenses | (1,167) | (1,117) | (2,189) | ||
| Operating (loss)/profit from continuing operations | 2 | 48 | (84) | 733 | |
| Finance (Expense) Income | (33) | 1,438 | 1,424 | ||
| Finance costs | – | – | – | ||
| Profit before taxation | 15 | 1,354 | 2,157 | ||
| Taxation | 4 | – | – | (394) | |
| Profit for the financial period from continuing operations | 15 | 1,354 | 1,763 | ||
| Discontinued operations | |||||
| Profit/(loss) for the financial period from discontinued operations | 3 | – | 1,025 | 1,022 | |
| Profit for the financial period | 15 | 2,379 | 2,785 | ||
| Attributable to: | |||||
| Owners of parent | 15 | 2,379 | 2,785 | ||
| 15 | 2,379 | 2,785 | |||
| Earnings per share | |||||
| From continuing operations | |||||
| Basic | 5 | 0.0003p | 0.61p | 0.79p | |
| Diluted | 5 | 0.0003p | 0.61p | 0.79p | |
| From discontinued operations | |||||
| Basic | 5 | 0.0p | 0.46p | 0.46p | |
| Diluted | 5 | 0.0p | 0.46p | 0.46p | |
| From continuing and discontinued operations | |||||
| Basic | 5 | 0.0003p | 1.08p | 1.24p | |
| Diluted | 5 | 0.0003p | 1.07p | 1.24p | |
A separate consolidated statement of comprehensive income for Formation Group Plc has not been presented as there are no items to be recognised within it.
Consolidated statement of financial position
As at 28 February 2017
| 28 Feb. 2017 (Unaudited) £’000 | 29 Feb. 2016 (Unaudited) £’000 | 31 Aug. 2016 (Audited) £’000 | ||
| Non-current assets | ||||
| Property, plant and equipment | 25 | 25 | 22 | |
| Investments accounted for using the equity method | – | – | – | |
| Investment property | 275 | 275 | 275 | |
| 300 | 300 | 297 | ||
| Current assets | ||||
| Inventories | 7 | 2,495 | 11,039 | 7,245 |
| Trade and other receivables | 9,789 | 9,063 | 9,888 | |
| Cash and cash equivalents | 1,579 | 603 | 330 | |
| 13,863 | 20,705 | 17,463 | ||
| Assets included in disposal group classified as held-for-sale | 3 | – | – | – |
| Total assets | 14,163 | 21,005 | 17,760 | |
| Current liabilities | ||||
| Trade and other payables | (3,767) | (2,522) | (4,065) | |
| Bank overdrafts and loan | 8 | – | (8,508) | (3,314) |
| (3,767) | (11,030) | (7,379) | ||
| Net current assets | 10,095 | 9,675 | 10,084 | |
| Long term liabilities | ||||
| Bank Overdraft and loan | 8 | – | – | – |
| Total liabilities | (3,767) | (11,030) | (7,379) | |
| Net assets | 10,396 | 9,975 | 10,381 | |
| Equity | ||||
| Share capital | 2,205 | 2,205 | 2,205 | |
| Share premium account | 2,106 | 2,106 | 2,106 | |
| Capital redemption reserve | 61 | 61 | 61 | |
| Share option reserve | 22 | 22 | 22 | |
| Retained earnings | 6,002 | 5,581 | 5,987 | |
| Total equity attributable to the owners of the parent | 10,396 | 9,975 | 10,381 |
Consolidated statement of changes in equity
For the six months ended 28 February 2017
| Called up share capital
£’000 |
Share premium account
£’000 |
Treasury shares
£’000 |
Capital redemption reserve
£’000 |
Share option reserve
£’000 |
Retained earnings
£’000 |
Total equity
£’000 |
|
| Balance at 1 September 2015 | 2,205 | 2,106 | – | 61 | 22 | 3,202 | 7,596 |
| Profit and total comprehensive income for the financial period | – | – | – | – | – | 2,379 | 2,379 |
| Balance at 29 February 2016 | 2,205 | 2,106 | – | 61 | 22 | 5,581 | 9,975 |
| Profit and total comprehensive income for the financial period | – | – | – | – | – | 406 | 406 |
| Balance at 31 August 2016 | 2,205 | 2,106 | – | 61 | 22 | 5,987 | 10,381 |
| Profit for the financial period | – | – | – | – | – | 15 | 15 |
| Balance at 28 February 2017 | 2,205 | 2,106 | – | 61 | 22 | 6,002 | 10,396 |
Consolidated statement of cash flows
For the six months ended 28 February 2017
| Note | 6 months ended 28 Feb. 2017 (Unaudited) £’000 | 6 months ended 29 Feb. 2016 (Unaudited) £’000 | Year ended 31 Aug. 2016 (Audited) £’000 | |
| Operating activities | ||||
| Net cash (used)/ generated by operations | 6 | 4,790 | (2,857) | 5,354 |
| Interest paid | – | (24) | – | |
| Net cash outflow from operating activities | 4,790 | (2,881) | 5,354 | |
| Investing activities | ||||
| Cash invested in Wembley House profit share | (5,000) | – | – | |
| Cash inflow in respect of Norwich House profit share | 4,787 | – | – | |
| Purchases of property, plant and equipment | (14) | (6) | (11) | |
| Repayments of investment accounted for using the equity method | – | – | – | |
| Disposal of Property held for resale | – | 3,312 | – | |
| Net cash (used in) generated by investing activities | (227) | 3,306 | (11) | |
| Financing activities | ||||
| Reduction in loans | (3,314) | (1,455) | (6,646) | |
| Net cash (used) / generated by financing activities | (3,314) | (1,455) | (6,646) | |
| Net (decrease) / increase in cash and cash equivalents | 1,249 | (1030) | (1,303) | |
| Cash and cash equivalents at the beginning of the period | 330 | 1,633 | 1,633 | |
| Cash and cash equivalents at end of the period | 1,579 | 603 | 330 |
Notes to the Interim Information
For the six months ended 28 February 2017
1. Basis of preparation
The financial information set out in this interim report 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 31 August 2016, prepared under IFRS, 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) or (3) of the Companies Act 2006.
The interim financial information has been prepared in accordance with the recognition and measurement principles of International Financial Reporting Standards (IFRS) and on the same basis and using the same accounting policies as used in the financial statements for the year ended 31 August 2016. The interim financial statements have not been audited or reviewed in accordance with the International Standard on Review Engagement 2410 issued by the Auditing Practices Board.
2. Segment information
Discontinued operations in the period primarily relate to the winding down of FG Bradford Limited and FG Bristol Limited
| Revenue | 6 months ended 28 Feb. 2017 (Unaudited) Profit From continuing Operations | Revenue | 6 months ended 29 Feb. 2016 (Unaudited) Profit from continuing operations | Revenue | Year ended 31 Aug. 2016 (Audited) Profit from Continuing Operations | |
| £’000 | £’000 | £’000 | £’000 | £’000 | £’000 | |
| By class of business: | ||||||
| Project Management | 14,839 | 10,178 | 23,356 | |||
| Development | 5,345 | – | – | 6,054 | ||
| Unallocated corporate expenses | (1,167) | (1,117) | (2,189) | |||
| Operating profit/(loss)loss from continuing operations | 48 | (84) | 733 |
3. Discontinued operations
The results of the discontinued operations which have been included in the consolidated income statement, were as follows:
| 6 months ended 28 Feb. 2017 (Unaudited) | 6 months ended 29 Feb. 2016 (Unaudited) | Year ended 31 Aug. 2016 (Audited) | |
| £’000 | £’000 | £’000 | |
| Profit/(Loss) discontinued operations | – | 1,025 | 1,022 |
| Attributable tax expense | – | – | – |
| Profit/(Loss) from discontinued operations | – | 1,025 | 1,022 |
Following the sale of the properties with FG (Bradford) Ltd and FG (Bristol) Limited, the companies were non trading entities during the period.
For notes on Formation Wealth Solutions Ltd, please refer to the note 9.
4. Taxation
A deferred tax asset has not been recognised as the reversal of tax losses is uncertain.
5. Earnings per share
Earnings/(loss) per share are based on the following profits and numbers of shares:
| 6 months ended 28 Feb. 2017 (Unaudited) | 6 months ended 29 Feb. 2016 (Unaudited) | Year ended 31 Aug. 2016 (Audited) | |
| £’000 | £’000 | £’000 | |
| Profit/(loss) for the period: | |||
| Basic and diluted earnings – continuing operations | 15 | 1,354 | 1,763 |
| Basic and diluted earnings – discontinued operations | – | 1,025 | 1,022 |
| Basic and diluted earnings/(losses) – continuing and discontinued operations | 15 | 2,379 | 2,785 |
| Number of Shares ‘000 | Number of Shares ‘000 | Number of Shares ‘000 | |
| Weighted average number of shares: | |||
| Basic | 44,103 | 220,515 | 220,515 |
| Diluted | 45,660 | 224,355 | 224,355 |
6. Reconciliation of profit from operations to net cash from operations
| 6 months ended 28 Feb. 2017 (Unaudited) | 6 months ended 29 Feb. 2016 (Unaudited) | Year ended 31 Aug. 2016 (Audited) | |
| £’000 | £’000 | £’000 | |
| Operating (loss)/profit for the year from continuing operations | 15 | (84) | 733 |
| Operating profit/(loss) from discontinued operations | – | 1,049 | 1,022 |
| Impairment of investment | – | – | – |
| Depreciation of property, plant and equipment | 11 | 7 | 15 |
| Disposal of asset classed as held for sale | – | – | 3,311 |
| Operating cash flows before movements in working capital | 26 | 972 | 5,081 |
| Decrease/(increase) in inventories | 4,750 | (1,419) | 2,743 |
| Decrease/(increase) in receivables | 572 | (1,048) | (1,869) |
| Decrease in payables | (558) | (1,362) | (601) |
| Cash generated/(used) in by operations | 4,790 | (2,857) | 5,354 |
7. Inventories
| 6 months ended 28 Feb. 2017 (Unaudited) | 6 months ended 29 Feb. 2016 (Unaudited) | Year ended 31 Aug. 2016 (Audited) | |
| £’000 | £’000 | £’000 | |
| Work In Progress | 2,495 | 11,039 | 7,245 |
| 2,495 | 11,039 | 7,245 |
The inventory is held at the lower of cost and net realisable value, net of payments received on account. Net realisable value is based on the estimated selling prices less any further costs expected to be incurred. There have been no write down of inventories or amounts recognised in the income statement during the period. The inventory relates to the development site at 161 Iverson Road.
8. Bank overdrafts and loans
| 6 months ended 28 Feb. 2017 (Unaudited) | 6 months ended 29 Feb. 2016 (Unaudited) | Year ended 31 Aug. 2016 (Audited) | |
| £’000 | £’000 | £’000 | |
| Bank loan – term loan facility | – | (8,507) | (3,314) |
| – | (8,507) | (3,314) | |
| 6 months ended 28 Feb. 2017 (Unaudited) | 6 months ended 29 Feb. 2016 (Unaudited) | Year ended 31 Aug. 2016 (Audited) | |
| £’000 | £’000 | £’000 | |
| On demand or within one year | – | (8,507) | (3,314) |
| Due more than one year | – | – | – |
The weighted average interest rates paid were as follows:
| 6 months ended 28 Feb. 2017 (Unaudited) | 6 months ended 29 Feb. 2016 (Unaudited) | 31 Aug. 2016 (Audited) | |
| %. | % | % | |
| Bank loan | 9 | 9 | 7 |
Formation Homes (London) Limited had bank loan of GBP8,507 million, which was repayable within eighteen months of the date taken out. This was subsequently repaid in full on 7 October 2016.This facility was secured by Titlestone Real Estate on the completed 159-161 Iverson Road development. The interest rate payable on this loan was a fixed term rate of 9%.
9. Events after the balance sheet date
On 16 February 2017 a formal resolution was passed by the board to begin the liquidation of Formation Wealth Solutions Limited, a process which is still ongoing. The company had been non-trading for a number of years and as a result the directors believed it best to close the company.