27th May 2011 12:08
Formation Group PLC ("Formation" or "the Group")
Interim Results for the Six Months ended 28 February 2011
27 May 2011
The Group is pleased to announce its interim results for the six months ended 28 February 2011. Formation Group is now predominately a property development and management company providing professional services to its clients within this sector. These services include property development and construction management.
HIGHLIGHTS
·; Revenue from continuing operations of £2.34 million (2010: £1.36m).
·; Operating loss from continuing operations of £0.185 million (2010: £0.87m loss).
·; 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 2011 £0.405 million (31 August 2010 £0.286m).
Enquiries:
Formation Group Plc:
David Kennedy; Chief Executive Officer - 020 7920 7590
NOMAD to Formation Group Plc:
Zeus Capital Limited - Ross Andrews / Tom Rowley - 0161 831 1512
Chairman's Statement
I am pleased to report the Group's results for the six months ended 28 February 2011.
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 Group's head office to the Formation Design and Build offices in London. The Group is now focused on property development and construction management services.
Following the announcement of 28 February 2011, the developer has confirmed that contracts have been exchanged on the remaining residential units of the Whitechapel development. The Directors believe that the successful completion of this transaction will result in the release of the guarantee provided by Formation Group Plc.
I am pleased to confirm that a satisfactory agreement was reached regarding the Administration Order in relation to Heritable Bank, 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 own 36% of J V Finance Ventures Limited having invested into a joint venture as previously disclosed. We have recognised the value of this asset in the balance sheet at cost and I can report that negotiations are progressing regarding the No.1 Commercial Street (Aldgate East) development which if completed 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.
Charles Green
Non-Executive Chairman
27 May 2011
Chief Executive Officer's Report
Revenue for the period was £2.34 million from continuing operations (2010:£1.36 million) and operating losses from continuing operations were £0.185 million (2010:£0.87 million loss).
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 Preliminary results for the year ending 31 August 2011.
Formation Design & Build Limited
The company has instigated various cost cutting measures including redundancies over the past two years 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 in previous years have continued to impact the company's profitability this year.
The company retains a strong base of personnel which will enable it to grow as new developments and project management appointments occur.
Proactive Sports Management Limited
The Group acquired Proactive Sports Management Limited (a previously owned company), primarily to assist in the conduct of its ongoing sports related litigation cases. The company manages various sports related personnel. The ultimate intention is to withdraw from this business at the earliest possible opportunity.
F G (Bristol) Limited
This project has been completed on time and within budget. The Directors are now awaiting instructions from the project's funders regarding future sales or rentals of this project.
F G (Bradford) Limited
This project remains on budget and on time with completion projected at July 2011.
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 in our 2010 year end accounts. 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 Bank 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, which secured the site's release, and settlement with the various creditors to the project that the future development of this site now looks more certain.
As a business we are sensitive 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.
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 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) Incomes anticipated over coming months from various sports related litigation cases that have been funded to date; and
(ii) Discussions regarding Aldgate are at an advanced stage. The Directors remain confident that an agreement can be reached shortly. This occurrence coupled with new contracts being sourced is key to the Group's survival.
David Kennedy
Chief Executive Officer
27 May 2011
The interim accounts will be published on the company's website www.formationgroupplc.com
Consolidated income statement
For the six months ended 28 February 2011
6 months ended | 6 months ended | Year ended | |||||
28 Feb. 2011 | 29 Feb. 2010 | 31 Aug. 2010 | |||||
Note | (Unaudited) | (Unaudited) | (Audited) | ||||
£'000 | £'000 | £'000 | |||||
Continuing operations | |||||||
Revenue | 2 | 2,341 | 1,358 | 2,248 | |||
Cost of sales | (1,724) | (137) | (311) | ||||
Gross profit | 617 | 1,221 | 1,937 | ||||
Administrative expenses | (802) | (2,087) | (3,011) | ||||
Operating loss from continuing operations | 2 | (185) | (866) | (1,074) | |||
Investment income | - | 26 | - | ||||
Finance costs | - | (142) | (104) | ||||
Loss before taxation and exceptional items | (185) | (982) | (1,178) | ||||
Exceptional Items | 7 | - | 3,399 | 3,675 | |||
Profit before taxation | (185) | 2,417 | 2,497 | ||||
Taxation | 4 | - | 275 | 7 | |||
Profit for the financial period from continuing operations | (185) | 2,692 | 2,504 | ||||
Discontinued operations | |||||||
Loss for the financial period from discontinued operations | 3 | (102) | (162) | (1,127) | |||
(Loss) / profit for the financial period | (287) | 2,530 | 1,377 | ||||
Attributable to: | |||||||
Owners of parent | (287) | 2,530 | 1,377 | ||||
Minority interests | - | - | - | ||||
(287) | 2,530 | 1,377 | |||||
Earnings per share | |||||||
From continuing operations | |||||||
Basic | 5 | (0.09p) | 1.22p | 1.22p | |||
Diluted | 5 | (0.09p) | 1.22p | 1.22p | |||
From discontinued operations | |||||||
Basic | 5 | (0.05p) | (0.07p) | (0.55p) | |||
Diluted | 5 | (0.05p) | (0.07p) | (0.55p) | |||
From continuing and discontinued operations | |||||||
Basic | 5 | (0.14p) | 1.15p | 0.67p | |||
Diluted | 5 | (0.14p) | 1.15p | 0.67p | |||
A separate consolidated statement of comprehensive income has not been presented as there are no items to be recognised within it.
Consolidated statement of financial position
As at 28 February 2011
28 Feb. 2011 | 28 Feb. 2010 | 31 Aug. 2010 | ||||
(Unaudited) | (Unaudited) | (Audited) | ||||
£'000 | £'000 | £'000 | ||||
Non-current assets | ||||||
Goodwill | 10,825 | 10,805 | 10,825 | |||
Other intangible assets | 3 | 3 | 3 | |||
Property, plant and equipment | 22 | 54 | 36 | |||
Non-current financial assets | - | - | - | |||
Investments accounted for using the equity method | 6,768 | 4,743 | 6,768 | |||
Deferred tax asset | - | 208 | - | |||
17,618 | 15,813 | 17,632 | ||||
Current assets | ||||||
Inventories | 2,643 | - | 1,826 | |||
Trade and other receivables | 1,131 | 2,548 | 2,035 | |||
Cash and cash equivalents | 405 | 2,446 | 286 | |||
4,179 | 4,994 | 4,147 | ||||
Total assets | 21,797 | 20,807 | 21,779 | |||
Current liabilities | ||||||
Trade and other payables | (1,220) | (2,347) | (2,190) | |||
Current income tax liabilities | (338) | - | (343) | |||
Bank overdrafts and loan | (3,219) | - | (1,939) | |||
(4,777) | (2,347) | (4,472) | ||||
Net current (liabilities) / assets | (598) | 2,647 | (325) | |||
Total liabilities | (4,777) | (2,347) | (4,472) | |||
Net assets | 17,020 | 18,460 | 17,307 | |||
Equity | ||||||
Share capital | 2,205 | 2,205 | 2,205 | |||
Share premium account | 2,106 | 2,106 | 2,106 | |||
Treasury shares | (602) | (602) | (602) | |||
Capital redemption reserve | 61 | 61 | 61 | |||
Merger reserve | 11,265 | 11,265 | 11,265 | |||
Currency reserve | - | 94 | - | |||
Share option reserve | 22 | 63 | 22 | |||
Retained earnings | 1,963 | 3,268 | 2,250 | |||
Total equity attributable to the owners of the parent |
| 17,020 | 18,460 | 17,307 | ||
Total equity | 17,020 | 18,460 | 17,307 | |||
Consolidated statement of changes in equity
For the six months ended 28 February 2011
| Called up share capital | Share premium account |
Treasury shares | Capital redemption reserve |
Merger reserve | Share option reserve |
Currency reserve |
Retained earnings |
Total equity |
£'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
Balance at 1 September 2009 | 2,205 | 2,106 | (602) | 61 | 11,265 | 55 | 94 | 738 | 15,922 |
Share based payment charge | - | - | - | - | - | 8 | - | - | 8 |
Transactions with owners | - | - | - | - | - | 8 | - | - | 8 |
Profit for the financial period |
- |
- |
- |
- |
- |
- |
- |
2,530 |
2,530 |
Other comprehensive income | |||||||||
Exchange differences on translating foreign operations |
- |
- |
- |
- |
- |
- |
- |
- |
- |
Total comprehensive income for the year |
- |
- |
- |
- |
- |
- |
- |
2,530 |
2,530 |
Balance at 28 February 2010 | 2,205 | 2,106 | (602) | 61 | 11,265 | 63 | 94 | 3,268 | 18,460 |
Transfer to retained earnings | - | - | - | - | - | (41) | - | 41 | - |
Transactions with owners | - | - | - | - | - | (41) | - | 41 | - |
Loss for the financial period |
- |
- |
- |
- |
- |
- |
- |
(1,153) |
(1.153) |
Other comprehensive income | |||||||||
Exchange differences on translating foreign operations |
- |
- |
- |
- |
- |
- |
(94) |
94 |
- |
Total comprehensive income for the year |
- |
- |
- |
- |
- |
- |
(94) |
94 |
- |
Balance at 31 August 2010 | 2,205 | 2,106 | (602) | 61 | 11,265 | 22 | - | 2,250 | 17,307 |
Transactions with owners | - | - | - | - | - | - | - | - | - |
Profit for the financial period |
- |
- |
- |
- |
- |
- |
- |
(287) |
(287) |
Other comprehensive income | |||||||||
Total comprehensive income for the year | - | - | - | - | - | - | - | - | - |
- | - | - | - | - | - | - | - | - | |
Balance at 28 February 2011 | 2,205 | 2,106 | (602) | 61 | 11,265 | 22 | - | 1,963 | 17,020 |
Consolidated statement of cash flows
For the six months ended 28 February 2011
6 months ended | 6 months ended | Year ended | ||||
28 Feb. 2011 | 28 Feb. 2010 | 31 Aug. 2010 | ||||
Note | (Unaudited) | (Unaudited) | (Audited) | |||
£'000 | £'000 | £'000 | ||||
Operating activities | ||||||
Cash generated by operations | 6 | (1,156) | (1,758) | (4,129) | ||
Income taxes paid | (5) | (316) | (223) | |||
Interest paid | - | (142) | (104) | |||
Net cash outflow from operating activities | (1,161) | (2,216) | (4,456) | |||
Investing activities | ||||||
Interest received | - | 26 | - | |||
Proceeds on disposal of property, plant and equipment | - | - | 6 | |||
Purchases of property, plant and equipment | - | - | (52) | |||
Deferred consideration paid | - | - | 250 | |||
Purchase of Investments | - | (3,500) | (5,545) | |||
Net cash used in investing activities | - | (3,474) | (5,341) | |||
Financing activities | ||||||
New loans | 1,280 | - | 1,939 | |||
Loan repayments | - | (7,010) | (7,010) | |||
Net cash generated / (used in) by financing activities | 1,280 | (7,010) | (5,071) | |||
Net increase / (decrease) in cash and cash equivalents | 119 | (12,700) | (14,868) | |||
Cash and cash equivalents at the beginning of the period | 286 | 15,154 | 15,154 | |||
Effect of foreign exchange rate changes | - | (8) | - | |||
Cash and cash equivalents at end of the period | 405 | 2,446 | 286 | |||
Notes to the Interim Information
For the six months ended 28 February 2011
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 2010, 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 2010. 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
6 months ended | 6 months ended | Year ended | ||||||
28 Feb. 2011 | 28 Feb. 2010 | 31 Aug. 2010 | ||||||
(Unaudited) | (Unaudited) | (Audited) | ||||||
Revenue | Loss | Revenue | Profit | Revenue | Profit from | |||
From continuing | from continuing | continuing | ||||||
operations | operations | operations | ||||||
£'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |||
By class of business: | ||||||||
Management services | 75 | (65) | - | - | 66 | 36 | ||
Professional services | 2,266 | 206 | 1,358 | 229 | 2,182 | 410 | ||
2,341 | 141 | 1,358 | 229 | 2,248 | 446 | |||
Unallocated corporate expenses | (326) | (1,095) | (1,520) | |||||
Operating loss from continuing operations | (185) | (866) | (1,074) |
3. Discontinued operations
The results of the discontinued operations which have been included in the consolidated income statement, were as follows:
6 months ended | 6 months ended | Year ended | ||||
28 Feb. 2011 | 28 Feb. 2010 | 31 Aug. 2010 | ||||
(Unaudited) | (Unaudited) | (Audited) | ||||
£'000 | £'000 | £'000 | ||||
Profit / (loss) from discontinued operations | 21 | (162) | (1,127) | |||
Attributable tax expense | - | - | - | |||
Profit / (loss) from discontinued operations | 21 | (162) | (1,127) | |||
Loss on disposal of discontinued operations | (123) | - | - | |||
Loss attributable to discontinued operations | (102) | (162) | (1,127) | |||
4. Taxation
A tax has not been recognised as the reversal of tax losses is uncertain.
Notes to the Interim Information
For the six months ended 28 February 2011
5. Earnings per share
Earnings per share are based on the following profits and numbers of shares:
6 months ended | 6 months ended | Year ended | ||||
28 Feb. 2010 | 28 Feb. 2010 | 31 Aug. 2010 | ||||
(Unaudited) | (Unaudited) | (Audited) | ||||
£'000 | £'000 | £'000 | ||||
Profit for the period: | ||||||
Basic and diluted earnings - continuing operations | (185) | 2,692 | 2,504 | |||
Basic and diluted earnings - discontinued operations | (102) | (162) | (1,127) | |||
Basic and diluted earnings - continuing and discontinued operations | (287) | 2,530 | 1,377 | |||
Number of | Number of | Number of | ||||
shares | shares | Shares | ||||
'000 | '000 | '000 | ||||
Weighted average number of shares: | ||||||
Basic | 204,533 | 220,515 | 204,533 | |||
Diluted | 204,533 | 220,515 | 204,533 | |||
6. Reconciliation of profit from operations to net cash from operations
6 months ended | 6 months ended | Year ended | ||||
28 Feb. 2011 | 28 Feb. 2010 | 31 Aug. 2010 | ||||
(Unaudited) | (Unaudited) | (Audited) | ||||
£'000 | £'000 | £'000 | ||||
Operating (loss) / profit for the year from continuing operations | (185) | (866) | (1,074) | |||
Operating loss from disposal of discontinued operations | (102) | (162) | (861) | |||
Taxation | - | - | - | |||
Investment income | - | (26) | - | |||
Depreciation of property, plant and equipment | 14 | 19 | 83 | |||
Share option charge | - | 8 | 8 | |||
Operating cash flows before movements in working capital | (273) | (1,027) | (1,844) | |||
(Increase) / decrease in inventories | (817) | 22 | (1,804) | |||
Decrease / (increase) in receivables | 904 | (408) | 2,287 | |||
Decrease in payables | (970) | (345) | (2,768) | |||
Cash used in by operations | (1,156) | (1,758) | (4,129) | |||
Notes to the Interim Information
For the six months ended 28 February 2011
7. Exceptional Items
In 2010 the amount due from Julius Properties Limited was received and the provision made in 31 August 2009 was reversed.
6 months ended | 6 months ended | Year ended | ||||
28 Feb. 2011 | 28 Feb. 2010 | 31 Aug. 2010 | ||||
(Unaudited) | (Unaudited) | (Audited) | ||||
£'000 | £'000 | £'000 | ||||
Negative Goodwill on acquisition of Proactive Sports Management Ltd | - | - | 228 | |||
Fair value adjustment of trade receivable | - | 3,399 | 3,447 | |||
- | 3,399 | 3,675 | ||||
Related Shares:
FRM.L