FRM.L Regulatory News (FRM)

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

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

Consolidated statement of changes in equity

For the six months ended 28 February 2011

Consolidated statement of cash flows

For the six months ended 28 February 2011

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

3. Discontinued operations

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

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. Reconciliation of profit from operations to net cash from operations

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.