FRM.L Regulatory News (FRM)

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

Interim Results for the Six Months ended 29 February 2016

The Group is pleased to announce its interim results for the six months ended 29 February 2016. Formation Group is now predominately a property development and project management company providing professional services to its clients within this sector.

HIGHLIGHTS

· Revenue from continuing operations of £10.178 million (2015: £10.78 million).

· Operating loss from continuing operations of £0.084 million (2015: Profit £0.266 million).

· Profit for the financial period of £2.379 million (2015: profit £0.257 million)

· Cash position as at 29 February 2016 of £0.603 million (31 August 2015 £1.633 million).

· Overall profit to be realised from the investment in Norwich House profit share circa £3.918 million.

· Near completion of the 159-161 Iverson Road development with profits forecast within the 2nd half of the current financial year.

· The disposal of the investment properties held in FG (Bradford) Limited and FG (Bristol) Limited on the 2 October,

2015 with a positive write back of £1.076 million relating to the loans secured on these properties by Dunbar Assets Plc.

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

NOMAD to Formation Group Plc:

Northland Capital Partners Ltd

0207 382 1100

William Vandyk/ Gerry Beaney

BROKER to Formation Group plc

Peterhouse Corporate Finance Limited

0207 469 0930

Duncan Vasey/Fungai Ndoro

MEDIA RELATIONS

Yellow Jersey PR Limited

07825 916 715

Alistair de Kare-Silver / Aidan Stanley

Chairman's Statement

I am pleased to report the Group's results for the six months ended 29 February 2016.

The Group continues to maintain its recent impressive trend of turnover and profitability and is confident that the current year budgeted profit is achievable. This confidence is enhanced by the achievement of the projected profits on the Norwich House profit share and the increasing order book on project management contracts. Furthermore, with the expected successful completion of the 159-161 Iverson Road development the Group is confident that it can continue to source lucrative development opportunities.

William O'Dea

Non-Executive Chairman

19 May 2016

Chief Executive Officer's Report

Overview

Revenue for the period was £10.178 million from continuing operations (2015 £10.780 million) and operating loss from continuing operations was £0.084 million (2015 £0.266 million profit).

Revenue for the period is underpinned by an order book with some larger 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 Preliminary results for the year ending 31 August 2016.

Project Management Division

-Formation Design & Build Limited

The company is now working on two larger sized contracts after a short period of inactivity and will seek to source further contracts to boost profitability.

-Formation Construction Limited

This company was formed in early 2012, to project manage construction work and has substantially increased its revenue. At present the company is managing in excess of eight projects.

Property Development Division

-Formation Homes (London) Ltd

As previously announced, Formation Homes has acquired the development site in 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 this development is near successful completion with profits forecast within the 2nd half of the financial year.

Discontinued Operations

-FG Bradford & FG Bristol Ltd

As previously announced, Dunbar Assets plc have taken management of the properties at FG (Bristol) Limited and FG (Bradford) Limited and are actively marketing these properties with a view to sell. The properties have been funded on a non-recourse basis and any subsequent disposal will be cash neutral for Formation. The properties held in these companies were disposed of on the 2 October 2015

with a positive write back of £1.076 million relating to the loans secured on these properties.

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 2016

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

Consolidated income statement

For the six months ended 29 February 2016

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 29 February 2016

Consolidated statement of changes in equity

For the six months ended 29 February 2016

Consolidated statement of cash flows

For the six months ended 29 February 2016

Notes to the Interim Information

For the six months ended 29 February 2016

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 2015, 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 2015. 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

· No income has been incurred in respect of the Property development division.

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 29 February 2016

3. Discontinued operations (continued)

The investment properties were secured by Dunbar Assets Plc under non-recourse financing and were disposed of on the 2nd October, 2015 with a positive write back of £1.076m on the loans secured against these properties

Discontinued operation relates to the ongoing treatment of results for the investment properties FG Bradford Limited & FG Bristol Limited as part of discontinued operations.

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:

Notes to the Interim Information

For the six months ended 29 February 2016

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

Notes to the Interim Information

For the six months ended 29 February 2016

7. Investments accounted for using the equity method 

In the year ended 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 £6.7 million. 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.

Formation Group Plc is pleased to announce that the investment funds have been fully received.

8. Inventories

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 29 February 2016

9. Bank overdrafts and loans 

The weighted average interest rates paid were as follows:

Bank loan 9 6 7

_____________ ___________ __________

Formation Homes (London) Limited bank loan of £8,507 million, is repayable within eighteen months of the date taken out and is due to be repaid on the 18 June 2016. This facility is secured by Titlestone Real Estate on the 159-161 Iverson Road development. The interest rate payable on this loan is a fixed term rate of 9%. The Board is confident that this loan will be repaid from a combination of proceeds from the property sales at Iverson Road and if needed funds from its Norwich House profit share agreement.