Half Yearly Report

Formation Group PLC ("Formation" or "the Group")

Interim Results for the Six Months ended 28 February 2010

Formation Group PLC is now a predominately property development and management company providing professional services to its clients within this sector. These services include property development, architectural design and construction management.

HIGHLIGHTS

·; Revenue from continuing operations of £1.36 million (2009: £18.85m)

·; Operating loss from continuing operations of £0.87 million (2009: £2.05m profit) .Includes legal fee payments of £600k.

·; The Group continues to trade in line with management's expectations and the board remains confident of the Group's prospects for the remainder of the year

·; Cash position as at 28 February 2010 £2.45 m (31 August 2009 £15.15 m )

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Chairman's Statement

I am pleased to report the Group's results for the six months ended 28 February 2010.

The last 6 month period has seen the implementation of the reorganisation plan with the sale of the loss making wealth management businesses previously announced and a cost reduction program relocating the groups head office to the Formation Design and Build offices in London. The Company is now focused on property development, architectural design and construction management services

I am pleased to confirm that a satisfactory agreement was reached regarding the Administration Order in relation to Heritable Bank PLC, first detailed within our Preliminary announcement in November 2008, which resulted in uncertainty over a contingent underwriting liability. The Group's current maximum liability under this arrangement is £11.6 m. We now own 50% of the Aldgate East Site having invested into a joint venture as previously disclosed. We have prudently put the value of this asset in the balance sheet at cost and I can report that negotiations are progressing regarding the funding to build out the Aldgate East development which when complete would extinguish the contingent liability.

Despite the general economic pressures prevailing at this time the board remains confident of the Group's prospects for the future. The board believes that it is necessary to focus on organic growth ahead of that afforded through potential debt funded acquisitions at this time but as the economy recovers the strategy will be revisited.

John Lawrence MBE

Non-Executive Chairman

28 May 2010

Chief Executive Officer's Report

Revenue for the period was £1.36 million from continuing operations (2009:£18.85 million) and operating loss from continuing operations were £0.87 million 2009:£2.05 million profit).

The reported loss accounts for legal fee payments of £0.6 million. We anticipate showing a material return on this expenditure in the next period's accounts.

In line with the Groups current dividend policy, no interim dividend is being declared. However the Directors will review the position at the time of the Preliminary results for the year ending 31 August 2010.

Formation Asset Management Limited

As reported in the August 2009 accounts, the company's income has been sold in a management buyout with payments continuing to be made as per the agreed terms of that sale. Deregulation from the FSA has been obtained and some litigation issues are being defended which are covered by the company's Professional Indemnity insurance policy

Formation Wealth Solutions Limited

As also reported in the August 2009 accounts, the company has been sold in a management buyout with payments continuing to be made as per the agreed terms of that sale.

Formation Design & Build Limited

The company has instigated various cost cutting measures including redundancies over the past year in response to the decline in market conditions and in particular the property market to which it remains exposed. Heritable Bank's demise and its consequences as reported last year, has particularly impacted the company's profitability this year.

The company retains a strong base of personnel and green shoots of recovery are currently emerging with strong evidence of imminent new project management appointments.

The company maintains a continuing involvement into No 1 Commercial Street with a view to recommencing construction works on site in order to protect and maximize the Groups participation in the purchasing of this site from Heritable Bank's administrators and settlement with the developments various creditors as has been extensively reported.

Formation Architectural Design Limited

The company's workload has declined due to the last two years poor property market conditions. Various cost cutting exercises including redundancies have been instigated to mitigate the effects of this slump.

Recent evidence of new planning application instructions however suggests that our various developer clients are commencing to adopt a more positive view of the property markets future. Current income covers costs and continuous monitoring is in place.

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.

We have disclosed  the material challenges we face within the body of this report. Whilst no business is immune to the vagaries of the current economic climate, our business has continued reason to be cautiously optimistic. The situation arising out of the demise of Heritable Banks and its impact on No 1 Commercial Street (Aldgate East) has cast uncertainties over our business. We however remain optimistic having financially contributed as part of a joint venture agreement in December 2009 to securing the sites release, and settlement with the various creditors to the project that the future development of this site looks more certain.

As a business we are prone to the economic climate and its impact on the property market. We constantly monitor this position and are capable of reacting with speed in order to mitigate our exposure, through overhead and staff cost savings as necessary, whilst always maintaining a strong nucleus.

As a business which is people centric, we remain aware of the need to continue to reward and recognize the often outstanding performance, loyalty and understanding our staff provide. We appreciate their acceptance of the difficult measures we have imposed over the year. We are not complacent in this area and our investment in our people and in the processes in place which assist them is testament to the importance we place on this key component of our business.

The risks associated with a majority shareholder has been well documented in previous reports and we acknowledge that such a high percentage of shares within the control of a single party has its challenges, particularly when considering the sentiment of institutional fund managers towards small cap businesses. It must be noted that in the recent poor economic environment we have benefited from various co operations and financial assistance provided by this majority shareholder.

Outlook

There have been many changes in the group structure over the recent past. We are now a project management and property based company. The future for this market is looking far more positive than that of recent years. We will continue to grow and evolve the business, with a clear view on its needs and our ability to prosper. Extracting the underlying shareholder value that lies within the Group is our foremost desire.

We have a cautiously optimistic view for the future borne out by

(i) Increasing order book (in excess of £560k in April/May)

(ii) Projected profits from the Group's anticipated participation through FG (Bristol) Limited in a mixed use property development/investment acquisition at 176-182 Church Road, St George , Bristol.

(iii) Projected profits from the Group's anticipated participation through FG (Bradford) Limited in a mixed use property development/investment at York House, Upper Piccadilly ,Bradford BD1 4 PB.

(iv) Material incomes anticipated over coming months from various litigation cases funded to date.

David Kennedy

Chief Executive Officer

28 May 2010

The interim accounts will be published on the company's website www.formationgroupplc.com

Consolidated statement of income

For the six months ended 28 February 2010

Consolidated statement of comprehensive income

For the six months ended 28 February 2010

Consolidated statement of financial position

As at 28 February 2010

Consolidated statement of changes in equity

For the six months ended 28 February 2010

Consolidated statement of cashflows

For the six months ended 28 February 2010

Notes to the Interim Information

For the six months ended 28 February 2010

1.Basis of preparation

The Group's interim results for the six months ended 28 February 2010 have been prepared in accordance with the recognition and measurement principles of International Financial Reporting Standards (IFRS). The accounting policies adopted are consistent with those adopted in the preparation of the annual financial statements for the year ended 31 August 2009. The comparative figures are an abridged version of the Group's full financial statements and, together with other financial information contained in these interim results, do not constitute statutory financial statements of the Group within the meaning of section 434 of the Companies Act 2006. Statutory financial statements for the year ended 31 August 2009 have been filed with the Registrar of Companies for England and Wales and have been reported on by the Group's auditors. The report of the auditors was not qualified and did not contain a statement under section 498 (2) or section 498 (3) of the Companies Act 2006.

2.Segment information

3. Discontinued operations

The results of the discontinued operations which have been included in the consolidated income statement, were as follows:

4. Taxation

The taxation charge at 28.0% of profit before taxation, is based on the estimated effective rate of tax on earnings for the full year ending 31 August 2010.

Notes to the Interim Information

For the six months ended 28 February 2010

5. Earnings per share

Earnings per share are based on the following profits and numbers of shares:

Notes to the Interim Information

For the six months ended 28 February 2010

6. Reconciliation of profit from operations to net cash from operations