Half Yearly Report

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

Interim Results for the Six Months ended 28 February 2014

The Group is pleased to announce its interim results for the six months ended 28 February 2014. Formation Group is now predominantly a property development and project management company providing professional services to its clients within this sector.

HIGHLIGHTS

· Revenue from continuing operations of £3.23 million (2013: £2.36m).

· Operating loss from continuing operations of £0.145 million (2013: £0.072m loss).

· 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.

· Cash position as at 28 February 2014 £0.078 million (31 August 2013 £0.240m).

Post Period End Events

· £1.59 million of the £6.8 million due received from J V Finance Ventures Limited

· Working capital loan of £100,000 fully repaid.

· Appointment of Grant Thornton as group auditors.

· Exchanged on acquisition site for development 161 Iverson Road, London.

· Disposed of Treasury Shares for a cash consideration to Formation of £313,447.

Enquiries:

Formation Group Plc:

David Kennedy; Non-Executive Chairman/Chief Executive Officer - 020 7920 7590

NOMAD to Formation Group Plc:

Zeus Capital Limited - 0161 831 1512

Ross Andrews

Andrew Jones

Chairman's Statement

I am pleased to report the Group's results for the six months ended 28 February 2014.

Since the period ended 28 February, 2014 Formation Group Plc has to date received £1.59m of the £6.8m anticipated to be repaid to it by June 2014 from its 36.88% equity interest In J V Finance Ventures Limited, loan provider to Julius Properties Limited at Aldgate. As announced on 28 February 2014, the Company still expects to receive the majority of the outstanding amount due by 30 June 2014. The Group is pleased to announce that it has an increasing order book on project management contracts. The board believes that the resulting income streams from these contracts will help improve the Group's trading position going forward. Formation intends to utilise the proceeds from its J V investment to purchase development sites with a mixture of cash and bank funding. On 11th April 2014, Formation announced the first of these development sites.

I am also pleased to report that progress is being made in the sourcing of a new non-executive chairman and an announcement is expected shortly.

David Kennedy

Non-Executive Chairman

30 May 2014

Chief Executive Officer's Report

Overview

Revenue for the period was £3.23 million from continuing operations (2013:£2.36 million) and operating losses from continuing operations were £0.145 million (2013:£0.072 million loss).

The increased revenue for the period is due mainly to the finishing of the Park Road London N8 and Salter Street London E14 projects and the start of 4 new projects (with Finchley Road being the substantially largest project) that the Group has managed in the recent past. Additionally, the Group is expecting to start another three to four projects in the second half of the current financial year.

The decrease in gross profit margin in the period is largely due to compensation issues on one of the recently managed projects.

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 2014.

Formation Design & Build Limited

The company continues to trade although at a modest level and retains a core shared base of personnel.

Formation Construction Limited

This company was formed in early 2012 to project manage construction work and has substantially increased its revenue in line with expectations. At present the company is managing three projects with an expectation that another three to four will be started in the second half of the current financial year.

FG (Bradford) & FG (Bristol) Limited

As previously announced Dunbar Assets plc have taken management of the properties at FG (Bristol) Limited and FG (Bradford) Limited with a view to selling the assets. The properties have been funded on a non-recourse basis and any subsequent disposal will be cash neutral for Formation. Further details are set out in notes 9 and 10 to the accounts.

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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 Property Development & Project Management and in doing so has started to utilise the return of its J V investment funds to purchase and develop properties. These will provide further income streams from project management and projected profits from the eventual development and sale.

As announced on 13 May 2014, the Group's wholly owned subsidiary, Formation Design and Build Limited, has now repaid fully its working capital loan with the Kennedy Family Discretionary Settlement (the "Lender") for the purposes of additional working capital. As security for the loan, Formation granted the Lender a registered charge over the net profit share due to Formation arising from the residential and commercialdevelopment at 52-58 Commercial Road, London E1 1LP.This security is now in the process of being released.

The board recognises the cash constraints of the business and continues to closely monitor and manage the working capital position of the Group.

Outlook

There have been many changes in the group structure over the recent past. We are now a property development and project management based Group. We will seek 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 objective but recognising that this will take time.

We have a confident view for the future borne out by:

(i) Funds already received with the balance to be obtained over the coming months from the return of its J V investment.

(ii) Increasing Project Management order book and anticipated future profits from developments. The board believes the resulting income streams could materially improve the Group's trading position going forward.

David Kennedy

Chief Executive Officer & Interim Chairman

30 May 2014

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

Consolidated income statement

For the six months ended 28 February 2013

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 2014

Consolidated statement of changes in equity

For the six months ended 28 February 2014

Consolidated statement of cash flows

For the six months ended 28 February 2014

Notes to the Interim Information

For the six months ended 28 February 2014

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 2013, 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 2013. 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

3. Discontinued operations

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

Notes to the Interim Information

For the six months ended 28 February 2014

4. Taxation

A deferred tax asset has not been recognised as the reversal of tax losses is uncertain.

5. Earnings per share

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

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

7. Exceptional Items

8. Investments accounted for using the equity method 

In the year ending 2010, Formation Group PLC, in partnership with JV Finance Limited, have contributed through JV Finance Ventures Limited, a combined sum of £18.2 million, (Formation Group Plc's contribution of £6.7 million on terms as announced on 2nd September 2010) in order to settle with both Heritable Bank Plc's administrator and outstanding creditors, in order to secure the Aldgate site and the necessary warranties for completed construction works.

Formation Group Plc's percentage shareholding in JV Finance Ventures Limited is 36.88% and is based on Formation's percentage share of long term loans in JV Finance Ventures Limited of £6.7m. On the basis that the loans are repayable in 10 years time and the percentage of the loan directly affects the shareholding, the loans have been treated as an investment in an associated undertaking and is accounted for under the equity method. Accordingly the investment in JV Finance Ventures Limited has been adjusted to the anticipated fair value of the sales proceeds less costs to sell. The fair value is based on the present value of the anticipated future cash flows due within one year.

9. Inventories

The inventory is held at the lower of cost and net realisable value. There have been no write down of inventories or amounts recognised in the income statement during the year. The inventory is secured by Dunbar Assets Plc under non-recourse financing.

It should be noted that the entire value of inventories relates to discontinued operations.

10. Bank overdrafts and loans