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DJ Formation Group Plc Half-year Report

 
TIDMFRM 
 
Formation Group PLC 
 
                         ("Formation" or the "Group") 
 
           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 GBP 
    0.33 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 
David Kennedy; Chief Executive Officer 
020 7920 7590 
 
NEX Corporate Advisor 
Peterhouse Corporate Finance Limited 
Fungai Ndoro and Mark Anwyl 
0207 469 0930 
 
Chairman's Statement 
 
I am pleased to report the Group's results for the six months ended 28 February 
2017. 
 
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 GBP 
10.178 million) and operating profit from continuing operations was GBP0.048 
million (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 2017 
 
The interim accounts will be published on the company's website 
www.formationgroupplc.com 
 
Consolidated income statement 
For the six months ended 28 February 2017 
 
                                                 6 months               6 months        Year 
                                                    ended                  ended       ended 
 
                                             28 Feb. 2017           29 Feb. 2016     31 Aug. 
                                                                                        2016 
 
                                        Note  (Unaudited)            (Unaudited)   (Audited) 
 
                                                    GBP'000                  GBP'000       GBP'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 profit/(loss) from continuing  2             48                   (84)         733 
operations 
 
Finance (Expense) / income                           (33)                  1,438       1,424 
 
 
Finance costs                                           -                      -           - 
 
                                                       15                  1,354       2,157 
 
Profit before taxation 
 
Taxation                                 4              -                      -       (394) 
 
Profit for the financial period from                   15                  1,354       1,763 
continuing operations 
 
Discontinued operations 
 
Profit for the financial period from     3              -                  1,025       1,022 
discontinued operations 
 
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      29 Feb. 2016   31 Aug. 2016 
 
                                                              (Unaudited)       (Unaudited)      (Audited) 
 
                                                                    GBP'000             GBP'000          GBP'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 
 

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DJ Formation Group Plc Half-year Report -2-

Assets included in disposal group      3                                -                 -              - 
classified as held-for-sale 
 
 
 
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                                   10,396             9,975         10,381 
owners of the parent 
 
 
Consolidated statement of changes in equity 
For the six months ended 28 February 2017 
 
                   Called   Share              Capital     Share 
                       up premium  Treasury redemption    option  Retained       Total 
                    share account    shares    reserve   reserve  earnings      equity 
 
                  capital 
 
                    GBP'000   GBP'000     GBP'000      GBP'000     GBP'000     GBP'000       GBP'000 
 
Balance at 1        2,205   2,106         -         61        22     3,202       7,596 
September 2015 
 
 
Profit and total 
comprehensive           -       -         -          -         -     2,379       2,379 
income for the 
financial period 
 
 
Balance at 29       2,205   2,106         -         61        22     5,581       9,975 
February 2016 
 
Profit and total 
comprehensive           -       -         -          -         -       406         406 
income for 
the financial 
period 
 
Balance at 31       2,205   2,106         -         61        22     5,987      10,381 
August 2016 
 
 
Profit for the 
financial period        -       -         -          -         -        15          15 
 
Balance at 28       2,205   2,106         -         61        22     6,002      10,396 
February 2017 
 
 
Consolidated statement of cash flows 
For the six months ended 28 February 2017 
 
                                                    6 months       6 months        Year 
                                                       ended          ended       ended 
 
                                                28 Feb. 2017   29 Feb. 2016     31 Aug. 
                                                                                   2016 
 
                                           Note  (Unaudited)    (Unaudited)   (Audited) 
 
                                                       GBP'000          GBP'000       GBP'000 
 
Operating activities 
 
Net cash generated/(used) by operations     6          4,790        (2,857)       5,354 
 
Interest paid                                              -           (24)           - 
 
Net cash inflow/(outflow) from operating               4,790        (2,881)       5,354 
activities 
 
Investing activities 
 
Cash invested in Wembley House profit                (5,000)              -           - 
share 
 
Cash inflow in respect of Norwich House                4,787              -           - 
profit share 
 
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)/generate by investing                  (227)          3,306        (11) 
activities 
 
Financing activities 
 
Reduction in loans                                   (3,314)        (1,455)     (6,646) 
 
Net cash (used) by financing activities              (3,314)        (1,455)     (6,646) 
 
Net increase/(decrease) in cash and cash               1,249        (1,030)     (1,303) 
equivalents 
 
Cash and cash equivalents at the beginning               330          1,633       1,633 
of the period 
 
Cash and cash equivalents at end of the                1,579            603         330 
period 
 
 
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 
 
                                  6 months                  6 months             Year ended 
                                     ended                     ended 
 
                                   28 Feb.                   29 Feb.                31 Aug. 
                                      2017                      2016                   2016 
 
                               (Unaudited)               (Unaudited)              (Audited) 
 
                       Revenue      Profit       Revenue      Profit     Revenue     Profit 
                                                                                       from 
 
                                      From                      from             Continuing 
                                continuing                continuing 
 
                                Operations                operations             Operations 
 
                         GBP'000       GBP'000         GBP'000       GBP'000       GBP'000      GBP'000 
 
By class of business: 
 
Project Management      14,839                    10,178                  23,356 
 
Development              5,345                                     -       6,054 
                                             - 
 
                        20,184       1,215        10,178       1,033      29,410      2,922 
 
Unallocated corporate              (1,167)                   (1,117)                (2,189) 
expenses 
 
Operating profit/                       48                      (84)                    733 
(loss) from continuing 
operations 
 
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. 2017     29 Feb. 2016   31 Aug. 2016 
 
                                            (Unaudited)      (Unaudited)      (Audited) 
 
                                                  GBP'000            GBP'000          GBP'000 
 
Profit from discontinued operations                   -            1,025          1,022 
 
Attributable tax expense                              -                -              - 
 
Profit from discontinued operations                   -            1,025          1,022 
 
 
Notes to the Interim Information 
 
For the six months ended 28 February 2017 
 
3. Discontinued operations (continued) 
 
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    6 months ended       Year ended 
 
                                        28 Feb. 2017      29 Feb. 2016     31 Aug. 2016 
 
                                         (Unaudited)       (Unaudited)        (Audited) 
 
                                               GBP'000             GBP'000            GBP'000 
 
Profit/(loss) for the period: 
 
Basic and diluted earnings -                      15            1.,354            1,763 
continuing operations 
 
Basic and diluted earnings -                       -             1,025            1,022 
discontinued operations 
 
Basic and diluted earnings-                       15             2,379            2,785 
continuing and discontinued 
operations 
 
                                           Number of         Number of        Number of 
 

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DJ Formation Group Plc Half-year Report -3-

                                              Shares            Shares           Shares 
 
                                                '000              '000             '000 
 
Weighted average number of shares: 
 
Basic                                         44,103           220,515          220,515 
 
Diluted                                       45,660           224,355          224,355 
 
 
Notes to the Interim Information 
 
For the six months ended 28 February 2017 
 
6. Reconciliation of profit from operations to net cash from operations 
 
                                                 6 months        6 months    Year ended 
                                                    ended           ended 
 
                                             28 Feb. 2017    29 Feb. 2016       31 Aug. 
                                                                                   2016 
 
                                              (Unaudited)     (Unaudited)     (Audited) 
 
                                                    GBP'000           GBP'000         GBP'000 
 
Operating profit/(loss) for the year from              15            (84)           733 
continuing operations 
 
Operating profit from discontinued                      -           1,049         1,022 
operations 
 
Impairment of investment                                -               -             - 
 
Depreciation of property, plant and                    11               7            15 
equipment 
 
Disposal of asset classed as held for                   -               -         3,311 
sale 
 
Operating cash flows before movements in               26             972         5,081 
working capital 
 
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 
 
 
Notes to the Interim Information 
 
For the six months ended 28 February 2017 
 
7. Inventories 
 
                                                    6 months        6 months         Year 
                                                       ended           ended        ended 
 
                                                     28 Feb.         29 Feb.      31 Aug. 
                                                        2017            2016         2016 
 
                                                 (Unaudited)     (Unaudited)    (Audited) 
 
                                                       GBP'000           GBP'000        GBP'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. 
 
Notes to the Interim Information 
 
For the six months ended 28 February 2017 
 
8. Bank overdrafts and loans 
 
                                           6 months         6 months               Year 
                                              ended            ended              ended 
 
                                            28 Feb.     29 Feb. 2016       31 Aug. 2016 
                                               2017 
 
                                        (Unaudited)      (Unaudited)          (Audited) 
 
                                              GBP'000            GBP'000              GBP'000 
 
Bank loan - term loan facility                    -          (8,507)            (3,314) 
 
                                                             (8,507)            (3,314) 
 
                                           6 months         6 months               Year 
                                              ended            ended              ended 
 
                                            29 Feb.     29 Feb. 2016       31 Aug. 2016 
                                               2016 
 
                                        (Unaudited)      (Unaudited)          (Audited) 
 
                                              GBP'000            GBP'000              GBP'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      6 months     31 Aug. 
                                                        ended         ended        2016 
                                                      28 Feb.       29 Feb. 
                                                         2017          2016 
 
                                                  (Unaudited)   (Unaudited)   (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. 
 
 
 
END 
 

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