TIDMFRM
RNS Number : 9665D
Formation Group PLC
04 February 2015
FORMATION GROUP PLC
('Formation' or 'the Group')
Preliminary Results for the year ended 31 August 2014
Business Highlights
-- Group revenues have grown by 36% this year from GBP5.85m to
GBP7.94m on the back of increasing workload driven by the current
strong London property market.
-- Reduced loss of GBP0.1m from continuing operations in line
with expectations (2013 loss: GBP0.39m).
-- Gross profit on professional construction services was 11.3%
in the year to 31 August 2014 (31 August 2013: 11.6%).
-- Acquisition of 159-161 Iverson Road, London NW6, as a
development site in West Hampstead, London. The site has the
benefit of a planning approval for 19 residential units and 1
commercial unit.
-- Receipt of GBP1.59m in part payment of the Group's Aldgate Investment Funds.
-- The Group continues to develop its interest in the
construction and property development/management business,
generating income through project development and management of
small/medium scale building projects. Rental incomes, to a far
lesser extent, are also generated on various residential and
commercial investments retained by the Group.
-- On 30 May 2014, the Group announced the appointment of
William O'Dea Chairman, replacing David Kennedy, who remains the
Chief Executive Officer, in the role of Chairman.
William O 'Dea, The Chairman of Formation reports that:
I am pleased to report that The Group is now fully focused on
property development and construction activities for the first time
in its history. We now look forward to operating a secure capital
based property group going forward.
Enquiries:
Formation Group PLC - David Kennedy; Chief Executive Officer -
020 7920 7590
NOMAD to Formation Group PLC;
Zeus Capital Limited - Ross Andrews / Andrew Jones - 0161 831
1512
CHAIRMAN'S STATEMENT
On 30(th) May 2014, the Group announced my appointment as
Chairman, replacing David Kennedy in the role of Chairman. Group
revenues continue to increase year on year with an uplift of 36%
this year from GBP5.85m to GBP7.94m on the back of an increasing
workload driven by the current strong London property market. It is
expected that revenue will grow over the coming financial year with
various work contracts in place and further commitments anticipated
over the coming months.
Whilst this year has seen a loss of GBP0.52m (2013 loss:
GBP0.41m) there has been an improvement in the Group's underlying
financial performance following years of Sport related problems and
restructuring as previously documented. The loss for the year from
discontinued operations of GBP0.4m relates largely to a write down
of the Bradford and Bristol properties to fair value. The
continuous efforts of the Directors and management in this regard
over the years are now showing through financially. The Group is
now solely focused on Property activities which includes property
development for the first time as per the RNS publications of the
11th April 2014 and 10th October 2014 regarding the purchase of the
Iverson Road Site.
An RNS on the 21st March 2014, Formation was informed by Julius
Properties Limited had resolved its legal dispute with Redrow Homes
Limited over a title issue relating to the property at No 1
Commercial Street, London E1 and would be in full receipt of the
majority of the funds by June 2014. Formation Group Plc announced
by further RNS publications on the 11th April and 13th May 2014
that it had received the sum of GBP1.59m in part payment of its
Aldgate Investment Funds. Formation Group Plc is confident it can
source additional funds as and when viable investment opportunities
are found.
The Chief Executive Officer's Report provides further detail on
the individual projects, companies and properties within the Group
at present.
The Group has added and will continue to add to the experienced
base of construction and property personnel it has in order to meet
its increasing contract commitments. It looks forward to utilising
this experience to its advantage over the coming year. It is
anticipated that access to future cash incomes and an improving
credit rating for banking purposes will also allow the Group to
drive further improvements, generate profits and enhance
shareholder value.
The Board and Staff
I am pleased to report that The Group is now fully focused on
property development and construction activities for the first time
in its history. I would like to thank all board members and staff
for the enormous efforts and dedicated contributions they have made
over the past few difficult years in getting the business to where
it now is, problem free and with a strong focus for the future.
We now look forward to operating a secure capital based property
group going forward.
William O'Dea
Non-Executive Chairman
Chief Executive Officer's report and strategic report
Strategic Report
Introduction
This has been a year of consolidation for the Group coupled with
a material increase in revenue. Prudent financial cost cutting
measures of the past are now benefitting the Group's financial
stability with sound foundations.
The primary focus of the Group now remains on taking advantage
of the buoyant London property sector in which we operate in.
Results
The trading results for the year have improved with Group
revenue from continuing operations increasing to GBP7.94m (2013
GBP5.85m).This has resulted in a loss of GBP0.1m from continuing
operations (2013 loss: GBP0.39m). The improved trading results
resulted from an increased order book boosting turnover and
profitability coupled with a lean cost base.
The loss for the year from discontinued operations of GBP0.4m
related largely to a write down of the Bradford and Bristol
properties to fair value.
The Group's result for the year ended 31 August, 2014 after
taxation was a loss of GBP520,000 (2013: GBP405,000).
Key Performance Indicators (KPIs)
Gross profit is considered to be the most meaningful KPI. Gross
profit on professional services was 11.3% in the year to 31 August
2014 (31 August 2013: 11.6%). Turnover has risen by 36% in 2014 to
GBP7.94m (2013 GBP5.85m).
The Group has a strong Health & Safety record and where
possible has enlisted in the considerate contractor scheme. The
Group's aim is to have a zero accident policy. Staff turnover is
non-existent due to careful selection of top personnel and the
Group's excellent reputation has ensured that it has attracted
staff who are loyal and have worked with us in the past. The
Group's policy is to retain high performing individuals and build
strong teams.
Principal activity and business review
The principal activity of the Group is the provision of
professional construction management services.
The subsidiary undertakings principally affecting the profits
and net assets of the Group in the year are listed in note 5 to the
Company financial statements.
Business Overview
The Group continues to develop its interest in the construction
and property development/construction management business,
generating income through project development and management of
small/medium scale building projects. Rental incomes to a far
lesser extent are also generated on various residential and
commercial investments retained by the Group.
Chief Executive Officer's report and strategic report
(continued)
Some schemes in which we have been involved this year are:
(i) Park Road, London N8
Project management on the new build construction of 9 apartments
and associated car parking on the site of a former pub. This
project completed during the financial year.
(ii) Finchley Road, London NW3
Project management on the new build construction of 22 luxury
apartments above a large basement area and associated car parking
in an affluent North London location.
(iii) Boleyn Road, London N16
Project management on the demolition of a pub and the new build
construction of 9 apartments above a ground floor and basement
commercial unit. This project completed during the financial
year.
(iv) Bovis House,142 Northolt Road, South Harrow,HA2 OEE
Project management on a conversion of office to 101 apartments,
associated car parking and land with further development
potential.
(v) South London Press,2-4 Leigham Court Road, London SW16 2PD
Project management on a conversion and new build development of
35 apartments and a commercial unit in a restricted
environment.
(vi) 116-120 Tooley Street, London SE1
Project management on a new build construction of 9 apartments
and a commercial unit in a restricted
and busy environment on Tooley Street, between London Bridge and
Tower Bridge.
(vii) Norwich House,9-11 Streatham High Road, London SW16 1DZ
Pre purchase assistance, appraisal and advice on the acquisition
of a residential development site of circa
100 residential units, associated car parking, 3 commercial
units, freehold interest in adjoining apartment
block, and areas of possible further development potential.
(viii) 159-161 Iverson Road, London NW6
Acquisition of this development site by Formation Homes (London)
Limited (Group subsidiary) in West Hampstead, London. The site has
the benefit of a planning approval for 19 residential units and 1
commercial unit. Completion of its purchase was in October 2014
with construction works scheduled to take 15 months from
commencement of piling works.
Two of the above schemes have been completed during the year
with the others ongoing.
We have seen an increasing appetite from banks this year to
support development funding and the outlook for the buoyant London
property market in the sector we operate in remains positive.
Chief Executive Officer's report and strategic report
(continued)
Investment Property Retained
The Group currently has an interest in the following income
producing investment properties:
(i) 52-58 Commercial Road, London E1
Rocquefort Properties Limited owed the Group an outstanding sum
of GBP275,000 as announced on 14(th) February 2014. In settlement
thereof, it now holds on behalf of Formation Group Plc 11 car
parking spaces valued at GBP25,000 each. The spaces are to be sold
or let as directed by Formation Group Plc who will then receive the
net proceeds.
Principal Risks and Uncertainties
Going concern
With the partial receipt of the Aldgate JV monies, the material
increase in Construction Project Management Contracts and the
acquisition of a development site in London (159-161 Iverson Road,
NW6), the Directors are confident this risk is minimal.
Other potential risks are listed below:-
Potential Risks Mitigation
Health and safety External Professional Health and Safety
advisor engaged.
All site staff fully trained with regular site monitoring and
meetings. This has resulted in a strong health and safety
record.
Client's ability to pay. Client has long track record in
securing bank funding.
Risk of defective build, normal perils on site Full insurances
in place to cover all such eventualities.
such as fire, flooding, accidents etc.
Development and Investments in property Proper checks are in
place prior to purchase using
market with less than 60% gearing. various tools such as market
appraisal, profit
and cash flow projections. However this is always subject
to a downturn in the property sector.
Recruitment and Staffing. The Group is fully satisfied that it
is adequately geared to meet current activity levels.
Chief Executive Officer's report and strategic report
(continued)
Outlook
The business has undergone significant change and challenges
over the past five years. It has been creative in its approach to
such change and challenges, and willing to take the tough decisions
in relation to litigation issues, winding down and liquidating of
companies when necessary and decisions on staffing in order to
ensure the Group's survival in a difficult trading environment.
The outlook is promising with a larger order book than last year
and the belief that it will continue to grow. The completion of the
acquisition of a development site in London by a Group subsidiary
post year end, and the possibility of investing into further London
development opportunities over the coming year offers the potential
of a return to profits for the Group.
We believe the Group is in a position where it is ready to
prosper from the current strong London residential property market.
The balance of Company's investment in Aldgate, being GBP2.80m, is
available for property investment opportunities as agreed with JV
Ventures Finance Limited.
The Chief Executive Officer's report and strategic report have
been approved by the Board.
By order of the Board
David Kennedy
Chief Executive Officer
04February 2015
Consolidated income statement
For the year ended 31 August 2014
Notes 2014 2013
GBP'000 GBP'000
Continuing operations
Revenue 7,941 5,849
Cost of sales (7,149) (5,284)
------- -------
Gross profit 792 565
Administrative expenses (861) (805)
Operating loss from continuing
operations (69) (240)
Finance costs (30) (34)
------- -------
Loss before taxation and
exceptional items (99) (274)
Exceptional Items - (113)
Loss before taxation (99) (387)
Taxation - -
Loss for the year from
continuing operations (99) (387)
Discontinued operations
Loss for the year from
discontinued operations 6 (421) (18)
------- -------
Loss for the year (520) (405)
------- -------
Attributable to:
Equity holders of the parent (520) (405)
(520) (405)
Loss per share
From continuing operations
Basic and diluted 2 (0.05p) (0.19p)
From discontinued operations
Basic and diluted 2 (0.20p) (0.01p)
From continuing and discontinued
operations
Basic and diluted 2 (0.25p) (0.20p)
Consolidated statement of comprehensive income (continued)
For the year ended 31 August 2014
2014 2013
GBP'000 GBP'000
Loss for the year (520) (405)
Other comprehensive expense - -
Total comprehensive expense for the
year (520) (405)
------- -------
Attributable to:
Equity holders of the parent
Continued operations (99) (387)
Discontinued operations (421) (18)
(520) (405)
------- ------
Consolidated statement of financial position
As at 31 August 2014
2014 2013
GBP'000 GBP'000
Non-current assets
Other intangible assets - 1
Property, plant and equipment 15 7
Investments
Investment accounted for using
the equity method 4,648 6,238
Investment property 275 -
4,938 6,246
------- -------
Current assets
Inventories 707 -
Trade and other receivables 2,215 1,951
Cash and cash equivalents 328 240
3,250 2,191
Assets included in disposal
group classified as held-for-sale 3,505 3,918
------- -------
Total current assets 6,755 6,109
------- -------
Total assets 11,693 12,355
------- -------
Current liabilities
Trade and other payables (1,590) (2,073)
Bank loans (4,321) (4,292)
Total current liabilities (5,911) (6,365)
------- -------
Net current assets/(liabilities) 844 (256)
------- -------
Total Liabilities (5,911) (6,365)
------- -------
Net Assets 5,782 5,990
------- -------
Consolidated statement of financial position (continued)
As at 31 August 2014
2014 2013
GBP'000 GBP'000
Equity
Share capital 2,205 2,205
Share premium account 2,106 2,106
Treasury shares - (602)
Capital redemption reserve 61 61
Share option reserve 22 22
Retained earnings 1,388 2,198
Total equity attributable to
the parent's shareholders 5,782 5,990
------- -------
Consolidated statement of changes in equity
31 August 2014
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 01 September
2012 2,205 2,106 (602) 61 22 2,603 6,395
Transactions - - - - - - -
with owners
--------- --------- ----------- ------------ --------- ----------- ---------
Loss and
total comprehensive
income for
the financial
period - - - - - (405) (405)
--------- --------- ----------- ------------ --------- ----------- ---------
Balance
at
31 August
2013 2,205 2,106 (602) 61 22 2,198 5,990
--------- --------- ----------- ------------ --------- ----------- ---------
Transaction
with
Owners
Sale of
treasury
shares - - 602 - - (290) 312
------ ------ ---- --- --- ------ ------
Loss and
total
comprehensive
income for
the financial
period - - - - - (520) (520)
------ ------ ---- --- --- ------ ------
Balance
at
31 August
2014 2,205 2,106 - 61 22 1,388 5,782
Consolidated statement of cash flows
for the year ended 31 August 2014
Notes 2014 2013
GBP'000 GBP'000
Operating activities
Cash used in operations 3 (1,798) (134)
Interest paid (30) (34)
------- -------
Net cash outflow from operating
activities (1,828) (168)
------- -------
Investing activities
Purchases of property, plant
and equipment (16) (8)
Repayments of investment accounted
for using the equity method 1,591 -
Net cash generated by investing
activities 1,575 (8)
------- -------
Financing activities
New loans 30 7
Proceeds on sale of Treasury
Shares 311 -
------- -------
Net cash generated by financing
activities 341 7
------- -------
Net increase/(decrease) in cash
and cash equivalents 88 (169)
Cash and cash equivalents at
the beginning of the year 240 409
------- -------
Cash and cash equivalents at
the end of the year 328 240
------- -------
General information
1. Basis of preparation and going Concern
The consolidated financial statements have been prepared in
accordance with International Financial Reporting Standards (IFRS)
adopted for use in the European Union and IFRIC interpretations
issued by the International Accounting Standards Board and the
Companies Act 2006.
The Group has applied all accounting standards and
interpretations issued relevant to its operations for the period
ended 31 August 2014. The consolidated financial statements have
been prepared on a going concern basis.
The Directors have prepared working capital forecasts for the
period to 29 February 2016. The ability of the Group to continue
trading as a going concern is dependent on the continuing income
streams from existing and new contracts, together with the
continued realisation of the Group's remaining investment from the
Aldgate Development. Additionally, continued support may be
required from its majority shareholder.
Nevertheless after making enquiries, and considering the
uncertainties described above, the directors have a reasonable
expectation that the Group has adequate resources to continue in
operational existence for the foreseeable future. For these
reasons, they continue to adopt the going concern basis in
preparing the annual report and accounts.
2. Loss per share
The calculation of basic and diluted loss per share is based on
the following losses and numbers of shares:
2014 2013
GBP'000 GBP'000
Basic and diluted loss- continuing
operations (99) (387)
Basic and diluted loss - discontinued
operations (421) (18)
---------- ----------
Basic and diluted loss - continuing
and discontinued operations (520) (405)
2014 2013
Number Number
of shares of shares
'000 '000
Weighted average number of shares:
Ordinary shares in issue 220,515 220,515
Treasury shares (9,311) (16,497)
---------- ----------
Basic 211,204 204,018
Dilutive effect of share options - -
Diluted 211,204 204,018
---------- ----------
Loss per share is calculated by dividing the loss for the year
attributable to equity shareholders by the weighted average number
of shares in issue during the year.
The share options in issue are anti-dilutive in respect of the
loss per share calculations in 2014 and 2013.
3. Reconciliation of loss from continuing operations to net cash
inflow from operating activities
2014 2013
GBP'000 GBP'000
Operating loss from continuing operations (69) (240)
Operating loss from discontinued operations (421) (18)
Depreciation of property, plant and
equipment 8 3
Impairment of assets classified as held
for sale 403 -
Amortisation of intangible assets 1 1
Operating cash flows before movements
in working capital (78) (254)
(Increase)/decrease in inventories (697) 1
(Increase) in receivables (540) (141)
(Decrease)/increase in payables (483) 373
Adjustments for exceptional items - (113)
Cash used in operations (1,798) (134)
------- -------
Cash and cash equivalents (which are presented as a single class
of assets on the face of the balance sheet) comprise cash at bank
and other short term highly liquid investments with a maturity of
three months or less
4. Post Balance Sheet Event
An RNS published on 10 October, 2014 announced that, through a
wholly owned subsidiary Formation Homes (London) Limited has now
completed on the purchase of a development site at 159-161 Iverson
Road, London for a total consideration of GBP5.9m The development
consists of 19 apartments and 1 commercial unit with a timetable of
16 months to complete. This purchase has been funded with a
combination of bank funding and cash from Group resources utilising
GBP2.41m from the partial repayment of funds from Formation Group
JV investment in Aldgate.
5. Related party transactions
Transactions between the Company and its subsidiaries, which are
related parties, have been eliminated on consolidation and are not
disclosed in this note.
Included within trade and other receivables is a sum due from
Rocquefort Property Holdings Limited, a company which is owned by
the Impala Discretionary Settlement of which the potential
beneficiaries are D Kennedy and P Kennedy. The amount relates to a
profit share in Whitechapel. The balance at the year end was GBPNil
(2013: GBP777,308).
Movements during the year on this balance are detailed
below:
2014
GBP'000
Balance brought forward 777
Amounts received in
cash (502)
Grant of car parks spaces-held
as investment properties (275)
-------
Balance Carried Forward -
During the year, Group companies entered into the following
transactions with related parties who are not members of the
Group:
The Tulip Trust and Kennedy Private Trust Company Limited as
trustees of The Kennedy Family Discretionary Settlement have an
interest in 140,113,704 shares (2013:115,243,696 shares) in the
Company. During the year:
-- Formation Design & Build Limited & Formation
Construction Limited project managed a number of property
developments for companies controlled by the Osprey Private Trust
Company Limited, as trustees of The Osprey Trust and Kennedy
Private Trust Company Limited and as trustees of Kennedy Family
Discretionary Settlement. Revenue from these contracts totalled
GBP7,893,670 (2013: GBP5,823,000) in the year. At 31 August 2014,
the Group had debtor balances due from these companies of
GBP1,941,676 (2013: GBP930,226).
-- Formation Design & Build Limited leased premises from
Columbia House Properties (No.6) Limited (a company ultimately
owned by Kennedy Private Trust Company Limited as trustees of
Kennedy Family Discretionary Settlement) on a five year lease from
6 September 2012. The terms of the lease include a rental of
GBP29,700 per annum. The charge for the year was GBP29,286 (2013:
GBP30,531).
-- The Group invested in JV Finance Ventures Limited in December
2009 with JV Finance Limited. JV Finance Limited is majority owned
by the J V Purpose Trust. Therefore, JV Finance Limited is viewed
as a related party given its relationship with the Tulip Trust and
Kennedy Family Trust, which is also the majority shareholder in the
Group.
6. Discontinued operations
Discontinued operations relate to the continued treatment of the
investment properties of FG Bradford Limited & FG Bristol
Limited results as part of discontinued operations.
Results of discontinued operations
The results of the discontinued operations which have been
included in the consolidated income statement, were as follows:
2014 2013
GBP'000 GBP'000
Revenue 201 219
Cost of sales (70) (78)
--------- ---------
Gross profit 131 141
Administrative expenses (10) (6)
Impairment of investment properties
- adjustment to fair value
less costs to sell (403) -
Operating (loss)/profit from
discontinued operations (282) 135
Finance costs (139) (153)
--------- ---------
Loss before taxation (421) (18)
Attributable tax expense - -
Loss for the year from discontinued
operations (421) (18)
2014 2013
GBP'000 GBP'000
Investment properties 3,505 3,918
--------- ---------
The investment properties are secured by Dunbar Assets Plc under
non-recourse financing.
An impairment charge has been recognised on the investment
properties which have been written down to its fair value less
costs to sell. This is based on current market evidence.
7. Annual Report and Accounts
The financial information set out in this preliminary
announcement does not constitute statutory accounts as defined by
section 434 and 435 of the Companies Act 2006. The financial
information for the year ended 31 August 2014 has been extracted
from the Group's financial statements upon which the auditor's
opinion is unqualified and does not include any statement under
section 498(2) or 493(2) of the Companies Act 2006.
The annual report will be sent to shareholders on the 4
February, 2015. Additional copies will be available on the
Company's website: www.formationgroupplc.com
8. Annual General Meeting
Formation's Annual General Meeting is to be held on the 27(th)
February, 2015 at the offices of Imparando (UK) Limited, 3rd Floor,
52-58 Commercial Road, London E1 1LP at 11 am.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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