TIDMFRM
RNS Number : 3733N
Formation Group PLC
29 January 2016
29 January 2016
FORMATION GROUP PLC
('Formation' or 'the Group')
Preliminary Results for the year ended 31 August 2015
Formation Group (AIM: FRM), the property development and project
management company, today announces its preliminary results for the
year ended 31 August 2015 ("the period").
Business Highlights
-- Group revenue growth of 199% to GBP23.764m (2014: GBP7.941m)
on the back of an increasing workload driven by the current strong
London property market;
-- Profits before taxation of GBP2.203m from continuing operations (2014 loss: GBP0.099m);
-- Income of GBP2.421m recognised from the profit share
agreement with Sunbel Development Limited and Pinacle Developments
Limited in relation to a development property at Norwich House;
-- Receipt of GBP4.638m in full and final payment of the Group's Aldgate Investment Funds;
-- The Group continues to develop its interest in the vibrant
property development sector and anticipates profits from its
continuing development at 159-161 Iverson Road, London NW6 in the
year ending August 2016: and
-- The Group strengthened the Board with the appointments of two
non-executive directors, David Walsh and Bartholomew O'Keefe, who
both have extensive property experience.
Commenting on the results, Willie O'Dea, Chairman of Formation
Group, said:
"I am pleased to report on a record year where we achieved
material revenue growth of 199%, and the Group has returned to
profit. Formation Group is now focused purely on property
activities, which includes property development, property
investment and professional construction management. The Group has
a healthy on-going project stream and intends to use the cash
generated from the development at Norwich House and anticipated
profits from Iverson Road to source further development
opportunities.
"We have seen a strong appetite from the banks again this year
to support development funding, and this, coupled with a buoyant
London property market, which we intend to exploit, gives reason
for the Board to view the future with confidence. We look forward
to operating a secure, profitable, capital based property Group
going forward."
Enquiries:
Formation Group plc Tel: +44 (0)
David Kennedy, Chief Executive 20 7920 7590
Officer
Northland Capital Partners Ltd Tel: +44 (0)
(Nomad) 20 7382 1100
William Vandyk / Gerry Beaney
Tel: +44 (0)
Peterhouse Corporate Finance 20 7469 0930
Limited
Duncan Vasey / Fungai Ndoro
Yellow Jersey PR Limited (Media Tel: +44 (0) 7738
Relations) 076 304
Alistair de Kare-Silver /
Aidan Stanley
Notes to Editors
Formation Group Plc (AIM: FRM), headquartered in East London, is
an AIM-listed Company focused on property development and project
management services for small and medium scale building projects in
London and the City periphery.
The Company's portfolio includes both new builds and conversion
projects, and is also diversified through a limited exposure to
commercial work and the rental sector.
The management team combines significant Plc experience with
property expertise. The Company is well positioned to exploit a
buoyant London residential property market, and believes that the
newly added property development division will form a substantial
part of its profitability in the future.
CHAIRMAN'S STATEMENT
I am pleased to report that the year ended 31 August 2015 has
been a record year for Formation Group and the Company is well
positioned for 2016 and the future. Group revenues continue to
increase year on year with an uplift of 199% this year from
GBP7.941m to GBP23.764m 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.
This year has seen a net profit of GBP1.814m (2014 loss:
GBP0.520m), which is an improvement in the Group's underlying
financial performance. The loss for the year from discontinued
operations of GBP0.219m relates largely to a write down of property
values at Bradford and Bristol to fair values (2014 loss of
GBP0.421m related largely to the same), which were sold on 2
October 2015 for GBP3.366m.
The finance income item of GBP2.421m relates to income
recognised from the profit share agreement entered into by
Formation Group Plc as announced on the 8 July 2015 with Sunbel
Development Limited ('Sunbel') and Pinacle Developments Limited
('Pinacle') in relation to a development property at Norwich House,
9-19 Streatham High Road, London which is being converted from
office space to 103 residential units.
The Group is now focused only on property activities, which
includes property development, property investment and professional
construction management. Every effort is being made to source
further development opportunities with the cash resources available
to the Group from its participation in the recent development of
Norwich House and anticipated profits from its continuing
development at Iverson Road, London NW6.
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. The Company looks forward
to utilising this experience to its advantage over the coming year.
It is anticipated that access to future cash incomes and increased
banking facilities will enable the Group to drive further
improvements, increase profits and enhance shareholder value.
I would like to thank all board members and staff for the
enormous efforts and dedicated contributions they have made in
achieving a record year, with an enormous uplift in revenues and
profits for the Group. I would also like to thank our shareholders
for their continued trust and confidence in the Board and in my
leadership as Chairman.
The outlook for the Group is exciting and we look forward to
operating a secure, profitable, capital based property group going
forward and to delivering long-term, sustainable earnings growth to
our shareholders.
William O'Dea
Non-Executive Chairman
CHIEF EXECUTIVE OFFICER'S STATEMENT
I am delighted to report that this has been an exceptional year
for the Group with a material increase in revenue and return to
profits. Formation Group has strengthened its presence in the
London property market through a profit share participation at
Norwich House, in Streatham, London and through the acquisition of
a residential lead development site with planning permission in
Iverson Road, West Hampstead. The outlook for the Group is robust
and the primary focus of Formation Group will be to take advantage
of the buoyant property market that currently exists in the UK.
Results
The trading results for the year have improved with Group
revenue from continuing operations increasing to GBP23.764m (2014
GBP7.941m) due to the larger amount of contracts in progress, which
is in line with management expectations. This has resulted in a
pre-tax profit of GBP2.203m from continuing operations (2014 loss:
GBP0.099m).
The loss for the year from discontinued operations of GBP0.219m
relates largely to a write down of the Bradford and Bristol
properties to fair value.
The Group's result for the year after taxation was a profit of
GBP1.814m (2014: loss of GBP0.520m).
Key Performance Indicators (KPIs)
Gross profit is considered to be the most meaningful KPI. Gross
profit margin on professional services was 6.3% in the year to 31
August 2015 (31 August 2014: 11.3%). Turnover has risen by 199% in
2015 to GBP23.764m (2014 GBP7.941m). The reduction in the Gross
profit margin in the year to 31 August 2015 is mainly due to an
overrun on one of the completed projects.
The Group's building companies are listed in the considerate
contractor scheme. The Group's aim is to have a zero accident
policy. Staff turnover is low due to careful selection of top class
personnel and its excellent reputation continues to attract loyal
and hardworking staff.
Principal activity and business review
The principal activity of the Group is the provision of
professional construction management services with an increasing
focus on the more profitable development/investment business.
The Group has continued to project manage a number of central
London property developments and has been engaged to provide these
project management services by companies which are related parties
of Formation Group plc.
The Group has also commenced the development of the Iverson Road
site. Construction at the site is on-going and the sales of
residential units are anticipated to be recognised in the year
ending 31 August 2016. No amounts have been recognised in relation
to property development or property sales in the year ended 31
August 2015.
In addition, the Group has invested GBP2.444m in the Norwich
House profit share agreement.
The Group has received the remaining funds of GBP4.638m from its
joint venture with JV Finance Limited during the year.
The Group have been involved in the construction project
management of eleven mainly residential projects during the year.
The revenue from these projects were GBP23.764m in the year to 31
August 2015 (2014 GBP7.941m involving eight projects). All of the
projects are located in Greater London. Two of the schemes have
been completed in the year with nine ongoing.
The Group have an investment and financial interest in two of
the projects as follows:
Norwich House,9-11 Streatham High Road, London SW16 1DZ
Project management and profit share participation in a
development site of 103 residential units, associated car parking,
three commercial units and the freehold interest in an adjoining
apartment block. As part of its participation in the profit share,
the Group advanced a loan of GBP2.444m.
(MORE TO FOLLOW) Dow Jones Newswires
January 29, 2016 02:00 ET (07:00 GMT)
On 8 July, the Group entered into a profit share agreement with
Sunbel Development Limited ('Sunbel') and Pinacle Developments
Limited ('Pinacle') in relation to a development property at Cromer
Court, 9-19 Streatham High Road, London, which is being converted
from office space to 98 residential units.
Under the terms of the agreement, Formation has advanced to
Sunbel the sum of GBP2,443,671 to continue work on the development
which commenced in June 2014. The loan attracts no coupon interest
but instead Formation will be entitled to receive 40 per cent of
the net profit arising on the development (i.e. the profit
generated from sales of units after the repayment of debt utilised
to purchase the site, the cost of development, taxation and
repayment of the loan advanced by the Company).
The Norwich House profit share arrangement has been accounted
for as a loan and receivable. After initial recognition, the loan
and receivable is measured at amortised cost being the net present
value of the expected future cash flows due to the Group under the
profit share arrangement, discounted at the effective rate of
interest. Any gain or loss arising from the movement in the loan
and receivable is recognised in finance income or cost, less
provision for impairment.
During the period, the Group received a cash payment of GBP400k
and repayments in the form of completed development properties of
GBP1,589k. At 31 August 2015, the amortised cost of the loan and
receivable was calculated to be GBP2,885k, resulting in finance
income of GBP2,430k being recognised in the year ended 31 August
2015. GBP9k of set up costs in relation to the profit share were
recognised in the profit and loss account during the year,
resulting in net income from the profit share of GBP2,421k.
David Kennedy and Patrick Kennedy, Chief Executive and
Non-executive director of Formation respectively, are directors of
both Sunbel and Pinacle and thus the agreement is considered to be
a transaction with a related party under the AIM Rules for
Companies. The directors of Formation, other than David Kennedy and
Patrick Kennedy, having consulted the Company's nominated adviser
Northland Capital Partners Limited, consider that the terms of the
transaction are fair and reasonable insofar as shareholders are
concerned.
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 complete in March 2016. The
construction and project management works have been financed by
borrowings of GBP5.617m. As the properties were under development
at the year end, no property sales were recognised in these
financial statements.
We have seen a strong appetite from banks again this year to
support development funding and the outlook for the buoyant London
property market, the sector in which we operate remains
positive.
Investment Property Retained
The Group currently has an interest in the following income
producing investment properties:
52-58 Commercial Road, London E1
Rocquefort Properties Limited holds on behalf of Formation Group
Plc 11 car parking spaces valued at GBP25,000 each, a total value
of GBP275,000. 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
Potential risks are listed below:-
Potential Risks Mitigation
----------------------------------- -----------------------------------
The Group's activities are The Group's operational
primarily based on sales management are in close
to related parties. There contact with the directors
is a risk that the related of the key related parties,
parties may not continue and have regular discussions
to enter into contracts about potential opportunities.
with the Group, or that The ability of related parties
related party balances may to pay amounts outstanding
become irrecoverable if is monitored, and payments
the related parties do not are reviewed to ensure that
have the ability to pay. they are received on a timely
basis.
----------------------------------- -----------------------------------
The Group's activities are Management closely monitor
concentrated in the London activity in the property
residential property market. market, and assess whether
This creates the risk that selling prices are appropriate
a downturn in the London based on current market
property market will affect data.
the levels of project management
activity and the market
value of the Iverson Road
properties, and therefore
the Group's profitability.
----------------------------------- -----------------------------------
There is a risk that the Management have prepared
properties in the Iverson detailed forecasts for the
Road development do not Iverson Road development,
generate the revenues expected, and have compared the expected
due to either factors specific sales revenues to current
to the development or due market data. Forecasts are
to a downturn in the local regularly reassessed by
or national property market. management. Sales enquires
This would adversely affect received to date suggests
the Group's profitability. that projected sales values
will be achieved
----------------------------------- -----------------------------------
The Group has recognised Management are closely monitoring
a significant loan and receivable the progress of the Norwich
in relation to the Norwich House development and the
House profit share. There recoverability of the receivable.
is a risk that the timing As the loan was advanced
or amount of the cash flows to a related party of the
received by the Group in Group, management have access
relation to the profit share to relevant financial information
are not consistent with which allows them to monitor
the assumptions made by the expected proceeds.
management in the recognition
of the receivable, or that
amount owed to the Group
is not recoverable.
----------------------------------- -----------------------------------
Outlook
This year the Group delivered a material increase in revenues
and returned to profit. Formation Group is confident that its core
construction and property activity remains strong and that it will
be able to continue to generate substantial revenues. The Group has
a healthy on-going project stream that includes the completion of
the Iverson Road project, expected to occur during the year ending
31 August 2016, and we anticipate this will generate significant
revenues for the Group in the form of property sales. Further cash
receivable to the Group under the Norwich House profit share
agreement is also due in 2016, with an initial GBP0.4m received in
cash and GBP1.589m received in properties in the year ended 31
August 2015.
Formation Group's focus is now purely on property activities,
which includes property development, property investment and
professional construction management. The Board intends to use the
cash generated from the development at Norwich House and
anticipated profits from Iverson Road to source further development
opportunities. We have seen a strong appetite from the banks again
this year to support development funding and this, coupled with a
buoyant London property market, which we intend to exploit, gives
reason for the Board to view the future with confidence.
David Kennedy
Chief Executive Officer
Consolidated income statement
For the year ended 31 August
2015
2015 2014
GBP'000 GBP'000
Continuing operations
Revenue 23,764 7,941
Cost of sales (22,266) (7,149)
__________ __________
Gross profit 1,498 792
Administrative expenses (1,716) (861)
__________ __________
Operating loss from continuing
operations (218) (69)
Finance income 2,421 -
Finance costs - (30)
__________ __________
Profit/(Loss)before taxation 2,203 (99)
Taxation (170) -
__________ __________
Profit/(Loss) for the year from
continuing operations 2,033 (99)
Discontinued operations
Loss for the year from discontinued
operations (219) (421)
__________ __________
Profit/(Loss) for the year 1,814 (520)
__________ __________
Attributable to:
Equity holders of the parent 1,814 (520)
(MORE TO FOLLOW) Dow Jones Newswires
January 29, 2016 02:00 ET (07:00 GMT)
__________ __________
1,814 (520)
__________ __________
Earnings/(Loss) per share
From continuing operations
Basic and diluted 10 0.9p (0.1p)
From discontinued operations
Basic and diluted 10 (0.1) (0.2p)
From continuing and discontinued
operations
Basic and diluted 10 0.8p (0.3p)
Consolidated statement of comprehensive
income
For the year ended 31 August
15
2015 2014
GBP'000 GBP'000
Profit/(Loss) for the year 1,814 (520)
___________ ___________
Total comprehensive Income/(expense)
for the year 1,814 (520)
___________ ___________
Attributable to:
Equity holders of the parent
Continued operations
Discontinued operations 2,033 (99)
(219) (421)
__________ __________
1,814 (520)
__________ __________
Consolidated statement of financial position
As at 31 August 2015
2015 2014
GBP'000 GBP'000
Non-current assets
Other intangible assets - -
Property, plant and equipment 26 15
Investments
Investment accounted for using the
equity method - 4,648
Investment property 275 275
__________ __________
301 4,938
__________ __________
Current assets
Inventories 10,387 707
Trade and other receivables 5,820 2,215
Cash and cash equivalents 1,633 328
__________ __________
17,840 3,250
Assets included in disposal group
classified as held-for-sale 3,311 3,505
__________ __________
Total current assets 21,151 6,755
__________ __________
Total assets 21,452 11,693
__________ __________
Current liabilities
Trade and other payables -3,893 -1,590
Bank loans -9,963 -4,321
__________ __________
Total current liabilities -13,856 -5,911
__________ __________
Net current assets/(liabilities) 7,295 -844
__________ __________
Total liabilities -13,856 -5,911
__________ __________
Net assets 7,596 5,782
__________ __________
Equity
Share capital 2,205 2,205
Share premium account 2,106 2,106
Capital redemption reserve 61 61
Share option reserve 22 22
Retained earnings 3,202 1,388
__________ __________
Total equity attributable to the
parent's shareholders 7,596 5,782
__________ __________
Consolidated statement of changes in equity
For the year ended 31 August 2015
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 September
2014 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
Profit
and total
comprehensive
income
for the
financial
period - - - - - 1,814 1,814
Balance
at
31 August
2015 2,205 2,106 - 61 22 3,202 7,596
Consolidated statement of cash flows
for the year ended 31 August 2015
2015 2014
GBP'000 GBP'000
Operating activities
Cash used in operations -6,752 -1,798
Interest paid -154 -30
__________ __________
Net cash outflow from operating activities -6,906 -1,828
__________ __________
Investing activities
Purchases of property, plant and
equipment -25 -16
Repayment of investment in Norwich 400 -
House profit share
Cash outflow in respect of Norwich -2,444 -
House profit share
Repayments of investment accounted
for using the equity method 4,638 1,591
__________ __________
Net cash generated by investing activities 2,569 1,575
__________ __________
Financing activities
New loans 5,642 30
Proceeds on sale of Treasury Shares - 311
Net cash generated by financing activities __________ __________
5,642 341
__________ __________
Net increase in cash and cash equivalents 1,305 88
Cash and cash equivalents at the
beginning of the year 328 240
__________ __________
Cash and cash equivalents at the
end of the year 1,633 328
__________ __________
Notes
1. Basis of preparation and going concern
The Directors have prepared working capital forecasts for the
period to 28 February 2017 and as a result are satisfied the Group
has sufficient resources to continue in operational existence for
the next 12 months. The financial statements are therefore prepared
on a going concern basis.
2. Earnings/ (loss) per share
The calculation of basic and diluted earnings/ (loss) per share
is based on the following losses and numbers of shares:
2015 2014
GBP'000 GBP'000
Basic and diluted earnings/
(loss)- continuing operations 2,033 (99)
Basic and diluted loss - discontinued
operations (219) (421)
__________ __________
Basic and diluted loss - continuing
and discontinued operations 1,814 (520)
__________ __________
2015 2014
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)
__________ __________
Basic and diluted 220,515 211,204
__________ __________
(MORE TO FOLLOW) Dow Jones Newswires
January 29, 2016 02:00 ET (07:00 GMT)
Formation (LSE:FRM)
Historical Stock Chart
From Jun 2024 to Jul 2024
Formation (LSE:FRM)
Historical Stock Chart
From Jul 2023 to Jul 2024
