FRM.L Regulatory News (FRM)

2 May 2006 07:02

Formation Group PLC02 May 2006 2 May 2006 FORMATION GROUP PLC ("Formation" or "the Group") Interim Results for the six months ended 28 February 2006 Formation Group plc provides a range of specialist services to brands andprofessional athletes in the sports sector, including wealth management, sportsmarketing, legal & professional services and representation. Key Points • Turnover increased by 23% to £8.5 million (2005: £6.9 million) • Profit from operations rose by 25% to £510,000 (2005: £408,000)* • Profit before tax grew by 14% to £468,000 (2005: £410,000)* • Basic earnings per share increased 17% to 0.28 pence (2005: 0.24 pence)* • Strategy of building diversified business base of complementary divisions bearing fruit - all four divisions performing in line or ahead of management expectations - particularly strong performances from Wealth Management and Sports Marketing divisions • Investment in divisions will bring further benefits - £1m investment by Sport Marketing division in the UK's first portable LED system - Resources increased within Wealth Management division • Board remains confident of Group's prospects for the remainder of the year * restated in accordance with IFRS John Lawrence, Chairman of Formation, commenting, said, "I am delighted with the progress made by the Group. As our results demonstrate,our strategy of diversifying the business base into related, complementary areasis delivering tangible results. We have sound foundations in place to grow the business, both organically and byacquisition. All divisions are trading in line with or ahead of our expectationsand in the second half of the financial year, the World Cup will also ensurethat all our subsidiaries have an opportunity to add value and demonstrate theirclear point of difference, as FIFA stages the World's largest football event. We remain optimistic about the prospects for the Group for the remainder of theyear and beyond." Enquiries: Formation Group plc Neil Rodford Tel: 020 7448 1000 (today) or 01625 539832 (thereafter)Biddicks Katie Tzouliadis Tel: 020 7448 1000 CHAIRMAN'S STATEMENT It gives me great pleasure to present the Group's results for the six monthsended 28 February 2006. I am delighted with the progress made by the Group, withall divisions trading in line or ahead of our expectations during the period. As our results demonstrate, our strategy of diversifying the business base intorelated, complementary areas is delivering tangible results. Going forward, weintend to add scale to our divisions. I am also pleased to highlight the growthof committed future income. The increasing earnings visibility this providesallows us to plan for the future with added confidence. As well as pursuing organic growth, we believe there are interesting acquisitionopportunities which will help to accelerate our expansion and we are activelyconsidering suitable targets. We remain committed to developing the organisationinto a leading European sports marketing and management business, and feelconfident that the Group will continue to make very good progress over theremainder of the year. John LawrenceNon-Executive Chairman2 May 2006 CHIEF EXECUTIVE OFFICER'S REPORT The interim financial results for the six months ended 28 February 2006 arereported upon under the International Financial Reporting Standards (IFRS) forthe first time. The comparative results for the year ended 31 August 2005 andsix months ended 28 February 2005 have been restated in accordance with IFRSprinciples. Turnover for the period increased by 23% to £8.5 million (2005: £6.9million) and profit from operations increased by 25% to £510,000 (2005:£408,000). The profit before taxation is 14% ahead at £468,000 (2005: £410,000).Basic earnings per share for the period were 0.28 pence (2005: 0.24 pence), anincrease of 17% on last year. As at 28 February 2006, the Group had committed future gross profit of £4.6million (2005: £4.0 million), of which £2.0 million (2005: £1.8 million) will berecognised in the current financial year ending 31 August 2006. At 28 February 2006, the Group has paid all anticipated significantconsideration in respect of its acquisitions, and has provided for deferred andcontingent consideration of £499,000 for the Sponsormatic A/S, RC&A SportsManagement, Capital Sports Solutions, Wroe Sports Management and George UrquhartAssociates acquisitions. The amount provided is to be paid in cash and,therefore, there is no dilutive effect on the Group's shareholders. Groupborrowing as at 28 February stood at £393,000 (2005: £966,000). In line with the Group's current dividend policy, a dividend will not be paid atthe interim stage, however, the Directors expect to recommend the payment of afinal dividend. Trading Formation Group comprises four operating divisions, which trade as individualprofit centres. The divisions are: • Sports Marketing - trading as Fox Advertising, Active Sports Marketing Limited, RC&A Sports Management Limited and Sponsormatic A/S;• Wealth Management - trading as Kingsbridge Asset Management Limited;• Legal & Professional Services - trading as Capital Sports Solutions Limited; and• Representation - trading as Proactive Sports Management Limited, Proactive Scandinavia A/S and Proactive USA. We are satisfied with the trading performance and contribution of each of thedivisions. All companies traded in line with or ahead of our expectations forthe half-year and we remain positive about the trading performance of eachbusiness over the remainder of the year. We continue to benefit from the growthof the sports sector where brands and professional athletes recognise the needfor expert advice in their selected arenas. Sports Marketing Turnover for the period increased by 39% to £4.79 million (2005: £3.45 million)and the contribution for the Division was £687,000 (2005: £616,000), an increaseof 12% on last year. It is pleasing to see an increasing amount of visibilitycoming from underlying contracts. We have been focusing on broadening the scope of our offering to establishedbrands and now offer a range of services, from consultancy and media buyingthrough to short-term focused project work. As a result, a number of our clientsnow buy across the range of our offering. We hope to add further scale via acombination of organic growth and acquisition in the coming twelve months. Atthe end of April, we acquired the first bespoke portable LED perimeteradvertising system in the UK, which will provide on-screen advertising capacityfor televised sporting events. The system offers 240 metres of LED, sufficientto stretch around the full arc of a football stadium. We have invested over £1million in the system, and will be using it at a variety of sporting venues.This capital commitment will be underpinned by long-term rights holders'contracts. Wealth Management Turnover for the period was £2.00 million (2005: £1.73 million) and thecontribution for the Division was £489,000 (2005: £269,000), an increase of 82%year on year. The Division is performing ahead of our expectations, with recentlegislative changes having a materially positive impact. The pension legislative changes which came into force on 6 April 2006 havebenefited this operation with a large number of clients choosing to establishtheir own pension schemes. The annual fees for managing these funds willincrease the level of the trail income within the company and provide a solidfoundation for future growth. We have made significant investment in personnel and in IT infrastructure andare feeling the benefits of this. We are also actively looking at enhancing ourown product range in order to meet the needs of our customers and to enhance ourbusiness. Legal & Professional Services Turnover for the period was £74,000 (2005: £Nil) and the contribution for theDivision was £8,000 (2005: £Nil). During the period, we started to develop the financial brokerage model and feelconfident that this Division has strong potential for future growth. Wecompleted one transaction in the period and are optimistic about the outlook forthe remainder of the year. We are actively seeking opportunities to add scale tothis operation. The government is expected to amend the rules on the ownership of legalpractices in the near future and after these legislative changes pass throughparliament, we will actively seek acquisition opportunities. Representation The Division currently acts for 193 players throughout the world, 121 of whomhave represented their country at international level. Of the players we actfor, 92 are based in the UK, 73 in Europe and 28 in the rest of the world. The performance of the Division is significantly weighted towards the secondhalf of the year. Results for the first half were in line with our expectations,with turnover of £1.68 million (2005: 1.76 million) and a loss of £114,000(2005: profit of £135,000). We completed 38 transfers or contract renewals inthe period. We have 13 licensed agents based out of five locations, with the UKgenerating the major part of our income. Looking forward, we expect to grow thebusiness organically whilst looking to drive through more efficiency in theexisting operation. Employees The Board would like to extend its thanks and appreciation to all the Group'semployees for their commitment and contribution to the Group's success duringthe period. Outlook Our business model of providing a range of specialist services in the sportsarena to brands and professional athletes is well established and we have soundfoundations in place to grow the business, both organically and by acquisition. All divisions are trading in line or ahead of our expectations and in the secondhalf of the financial year, the World Cup will also ensure that all oursubsidiaries have an opportunity to add value and demonstrate their clear pointof difference, as FIFA stages the World's largest football event. We remain optimistic about the prospects for the Group for the remainder of theyear and beyond. Neil RodfordChief Executive2 May 2006 FORMATION GROUP PLC Consolidated income statement - unauditedFor the six months ended 28 February 2006 6 months ended 6 months ended Year ended 28 Feb. 2006 28 Feb. 2005* 31 Aug. 2005* Note (Unaudited) (Unaudited) (Audited) £'000 £'000 £'000 Revenue - continuingoperations 5 8,547 6,936 14,903 Cost of sales (3,363) (2,492) (4,876) ------------ ----------- ------------ Gross profit 5,184 4,444 10,027 Administrative expenses (4,674) (4,036) (8,445) ------------ ----------- ------------ Profit from operations 5 510 408 1,582 Investment income 5 12 12Finance charge (47) (10) (56) ------------ ----------- ------------ Profit before taxation 468 410 1,538 Taxation 6 (145) (129) (469) ------------ ----------- ------------ Profit for the financialperiod attributable toequity holders of parent 323 281 1,069 Dividends 7 (109) (98) (98) ------------ ----------- ------------ Retained profit 214 183 971 ------------ ----------- ------------ Earnings per share -continuing operations Basic 8 0.28p 0.24p 0.93p ------------ ----------- ------------ Diluted 8 0.28p 0.24p 0.93p ------------ ----------- ------------ * Restated in accordance with IFRS FORMATION GROUP PLC Consolidated statement of recognised income and expensesFor the six months ended 28 February 2006 6 months ended 6 months ended Year ended 28 Feb. 2006 28 Feb. 2005* 31 Aug. 2005* (Unaudited) (Unaudited) (Audited) £'000 £'000 £'000 Exchange (loss)/gain onforeign currency translationrecognised directly inequity (1) 9 8 Profit for the financialperiod attributable toequity holders of parent 323 281 1,069 ----------- ----------- ------------ Total recognised income andexpenses for the periodattributable to equityholders of the parent 322 290 1,077 ----------- ----------- ------------ * Restated in accordance with IFRS Consolidated balance sheet - unauditedAs at 28 February 2006 28 Feb. 2006 28 Feb. 2005* 31 Aug. 2005* (Unaudited) (Unaudited) (Audited) £'000 £'000 £'000Non-current assetsGoodwill 17,305 16,147 17,275Other intangible assets 46 57 51Property, plant and equipment 414 463 425Deferred tax asset 94 60 27 -------- -------- ---------- 17,859 16,727 17,778Current assetsTrade and other receivables 5,434 4,563 9,446Cash and cash equivalents 554 96 1,674 -------- -------- ---------- 5,988 4,659 11,120 -------- -------- ---------- Total assets 23,847 21,386 28,898 -------- -------- ----------Current liabilitiesTrade and other payables (6,477) (5,289) (11,407)Tax liabilities (809) (544) (726)Obligations under finance leases (12) (12) (12)Bank overdrafts and loans (100) (335) (400) -------- -------- ---------- (7,398) (6,180) (12,545) -------- -------- ---------- Net current liabilities (1,410) (1,521) (1,425) -------- -------- ---------- Non-current liabilitiesTrade and other payables (539) (605) (820)Tax liabilities (150) - -Obligations under finance leases (35) (48) (42)Bank overdrafts and loans (800) (667) (800) -------- -------- ---------- (1,524) (1,320) (1,662) -------- -------- ---------- Total liabilities (8,922) (7,500) (14,207) -------- -------- ---------- Net assets 14,925 13,886 14,691 -------- -------- ----------EquityShare capital 1,149 1,149 1,149Share premium account 18 18 18Capital redemption reserve 61 61 61Currency and other reserves 3,829 3,792 3,809Profit and loss account 9,868 8,866 9,654 -------- -------- ---------- Total equity 14,925 13,886 14,691 -------- -------- ---------- * Restated in accordance with IFRS FORMATION GROUP PLC Reconciliation of changes in equityFor the six months ended 28 February 2006 6 months ended 6 months ended Year ended 28 Feb. 2006 28 Feb. 2005* 31 Aug. 2005* (Unaudited) (Unaudited) (Audited) £'000 £'000 £'000 Opening equity 14,691 13,676 13,676Dividends paid (109) (98) (98)Net profit for the periodattributable to equity holdersof the parent 323 281 1,069Other reserves movement due toshare options charge 21 18 36Exchange (loss)/gain on foreigncurrency translation recogniseddirectly in equity (1) 9 8 ------------ ------------ ------------Closing equity 14,925 13,886 14,691 ------------ ------------ ------------ * Restated in accordance with IFRS FORMATION GROUP PLC Consolidated cash flow statementFor the six months ended 28 February 2006 6 months ended 6 months ended Year ended 28 Feb. 2006 28 Feb. 2005* 31 Aug. 2005* Note (Unaudited) (Unaudited) (Audited) £'000 £'000 £'000 Cash (used in)/generated byoperations 9 (338) 484 2,210Income taxes received/(paid) 23 26 (129)Interest paid (47) (10) (56) ----------- ----------- -----------Net cash (outflow)/inflowfrom operating activities (362) 500 2,025 ----------- ----------- ----------- Investing activitiesInterest received 5 12 12Proceeds on disposal ofproperty, plant andequipment - 33 62Purchases of property, plantand equipment (73) (121) (196)Purchases of trademarks andrights - (2) (2)Deferred consideration paid (231) (3,031) (3,031)Cash acquired withsubsidiary - - 342Acquisition of subsidiaries (42) (25) (468) ----------- ----------- -----------Net cash used in investingactivities (341) (3,134) (3,281) ----------- ----------- ----------- Financing activitiesDividends paid (109) (98) (98)Repayments of borrowings (300) - -Repayments of obligationsunder finance leases (7) (6) (12)New bank loans raised - 1,000 1,200 ----------- ----------- -----------Net (cash used)/generated byfinancing activities (416) 896 1,090 ----------- ----------- -----------Net decrease in cash andcash equivalents (1,119) (1,738) (166) Cash and cash equivalents atthe beginning of the period 1,674 1,829 1,829 Effect of foreign exchangerate changes (1) 5 11 ----------- ----------- -----------Cash and cash equivalents atend of the period 554 96 1,674 ----------- ----------- ----------- * Restated in accordance with IFRS FORMATION GROUP PLCNotes to the Interim InformationFor the six months ended 28 February 2006 1. Basis of preparation The Group's interim results for the six months ended 28 February 2006 have beenprepared in accordance with International Financial Reporting Standards (IFRS)for the first time and on a historical basis. As a consequence, a number of theaccounting policies adopted in the preparation of these statements are differentto those adopted in preparing the financial statements for the year ended 31August 2005, which were prepared in accordance with UK Generally AcceptedAccounting Practice (UK GAAP). The comparative figures are an abridged version of the Group's full financialstatements, adjusted for the impact of IFRS accounting policies, and, togetherwith other financial information contained in these interim results, do notconstitute statutory financial statements of the Group within the meaning ofsection 240 of the Companies Act 1985. Statutory financial statements for the year ended 31 August 2005 have been filedwith the Registrar of Companies for England and Wales and have been reported onby the Group's auditors. The report of the auditors was not qualified and didnot contain a statement under section 273(2) or (3) of the Companies Act 1985. 2. Transitional arrangements The Group has adopted IFRS from 1 September 2004, the date of transition. TheGroup is required to define its accounting policies under IFRS and then applythese policies retrospectively in determining the opening balance sheet underIFRS at the date of transition. In accordance with IFRS 1, First Time Adoption of International FinancialReporting Standards, the Group can adopt certain optional exemptions from fullrestatement. The Group have adopted the following exemptions: a The Group has elected not to account for any business combinations made before1 September 2004 under IFRS 3. As a result the carrying value of goodwill isfrozen at 1 September 2004. b The Group has elected to retain the UK GAAP valuation of property, plant andequipment at the date of transition. c The Group will only apply the provisions of IFRS 2, Share Based Payments, toall options issued after 7 November 2002 which had not vested at 1 January 2005. Reconciliations and descriptions of the effect of the transition from UK GAAP toIFRS on the Group's net income and equity are included in note 4 of thesestatements. 3. Accounting policies The next annual financial statements of the Group will be prepared in accordancewith IFRS as adopted for use in the EU. IFRS is subject to amendment andinterpretation by the International Accounting Standards Board and there is anon-going process of review and endorsement by the European Commission. The Grouphas prepared this financial information based on the IFRS that the Directorsexpect will be applicable at 31 August 2006. The accounting policies used inpreparing this financial information may need to be updated for any subsequentamendment to IFRS for first time adoption. The accounting policies used in the preparation of this financial informationare: Basis of consolidation The Group's financial statements consolidate the financial statements ofFormation Group PLC and its subsidiary undertakings drawn up to the period end.The results of subsidiaries acquired or sold are consolidated for the periodsfrom or to the date on which control passed. Acquisitions are accounted forunder the acquisition method. Intangible assets - Goodwill Goodwill arising on the acquisition of subsidiary undertakings and businesses,representing any excess of the fair value of the consideration given over thefair value of the identifiable assets and liabilities acquired, is recognised asan asset. Goodwill is reviewed for impairment at least annually and anyimpairment will be recognised in the income statement and is not subsequentlyreversed. As such it is stated at cost less provision for impairment in value. Intangible assets Trademarks are included at cost and depreciated in equal annual instalments overa period of ten years which is their estimated useful economic life. Provisionis made for any impairment. Other rights are image rights which are included at cost and written off inequal instalments over their useful economic life. Provision is made for anyimpairment. Plant, property and equipment Plant, property and equipment are stated at cost, net of depreciation and anyprovision for impairment. Depreciation is provided on all plant, property andequipment at rates calculated to write off the cost or valuation, less estimatedresidual value, of each asset on a straight-line basis over its expected usefullife, as follows: Freehold land and buildings 20 yearsShort leasehold improvements Term of leaseFixtures and fittings 5 yearsOffice equipment Between 3 and 5 yearsPlant & equipment Between 3 and 10 yearsMotor vehicles 4 years Residual value is calculated on prices prevailing at the date of acquisition. Taxation The tax expense represents the sum of the corporation tax currently payable andthe deferred tax charge. The corporation tax currently payable is based on taxable profit for the period.Taxable profit differs from profit before tax as reported in the incomestatement because it excludes items of income or expense that are taxable ordeductible in other years and it further excludes items that are never taxableor deductible. Deferred tax is the tax expected to be payable or recoverable on differencesbetween the carrying amounts of assets and liabilities in the financialstatements and the corresponding tax bases used in the computation of taxableprofit, and is accounted for using the balance sheet liability method. Deferredtax liabilities are generally recognised for all taxable temporary differencesand deferred tax assets are recognised to the extent that it is probable thattaxable profits will be available against which deductible temporary differencescan be utilised. The carrying amount of deferred tax assets is reviewed at each balance sheetdate and reduced to the extent that it is no longer probable that sufficienttaxable profits will be available to allow all or part of the asset to berecovered. Deferred tax is calculated at the average tax rates that are expected to applyin the periods in which the timing differences are expected to reverse based ontax rates and laws that have been enacted by the balance sheet date. Revenue and profit recognition Revenue is recognised to the extent that it is probable that the economicbenefits will flow to the Group and that these benefits can be measuredreliably. It is measured at the fair value of the consideration received orreceivable for goods and services provided, net of discounts, value added taxand excludes intra-group transactions. Revenue and profit for football management services is recognised in accordancewith the terms and conditions of the contract. Revenue derived from image rights held by the Group are recognised on a straightline basis over the terms of the contract. Revenue for sports marketing services represents the commission earned when theservice is provided. Revenue and profit for corporate hospitality events is recognised when the eventtakes place. Revenue is net of VAT and other sales related taxes. Invoices raised by the Group but not yet recognised as revenue, in line with theprofit recognition policy above, are credited to accruals and deferred income.Similarly invoices received by the Group but not yet recognised as costs, inline with the profit recognition policy above, are debited to prepayments andaccrued income. Employee benefits - retirement benefit costs The Group operates a defined contribution scheme. The amount charged to theincome statement in respect of pension costs and other post-retirement benefitsis the contributions payable in the year. Differences between contributionspayable in the year and contributions actually paid are shown as either accrualsor prepayments in the balance sheet. Foreign currency Transactions in foreign currencies are recorded at the rate of exchange at thedate of the transaction. Monetary assets and liabilities denominated in foreigncurrencies at the balance sheet date are reported at the rates of exchangeprevailing at that date. The results of overseas operations and their balance sheets are translated atthe average of the month end rates during that financial period. Exchangedifferences arising on translation of the opening net assets and on foreigncurrency borrowings, to the extent that they hedge the Group's investment insuch operations, are reported in the statement of recognised income and expensesand recognised in equity. All other exchange differences are included in theincome statement. Leases Assets held under finance leases and other similar contracts, which conferrights and obligations similar to those attached to owned assets, arecapitalised in the balance sheet and are depreciated over the shorter of thelease terms and their useful lives. The capital elements of future leaseobligations are recorded as liabilities, while the interest elements are chargedto the income statement over the period of the leases to produce a constant rateof charge on the balance of capital repayments outstanding. Hire purchasetransactions are dealt with similarly, except that assets are depreciated overtheir useful lives. Rentals under operating leases are charged on a straight-line basis over thelease term, even if the payments are not made on such a basis. Benefits receivedand receivable as an incentive to sign an operating lease are similarly spreadon a straight-line basis over the lease term. Finance costs Finance costs of debt are recognised in the income statement over the term ofsuch instruments at a constant rate on the carrying amount. Debt Debt is initially stated at the amount of the net proceeds after deduction ofissue costs. The carrying amount is increased by the finance cost in respect ofthe accounting period and reduced by payments made in the period. Share-based payments The Group issues equity-settled share-based payments to certain employees(including directors). The fair value of these payments is calculated by theGroup using the Black Scholes option pricing model. The expense is recognised ona straight line basis over the period from the date of award to the date ofvesting, based on the Group's best estimate of shares that will eventually vest. Financial instruments Financial assets and financial liabilities are recognised on the Group's balancesheet when the Group becomes a party to the contractual provisions of theinstrument. Profits and losses on financial instruments are recognised in theincome statement as they arise. 4. Explanation of transition to IFRS This note sets out the changes in accounting policies which have arisen from theadoption of IFRS. The restated balance sheets as at 31 August 2004, 28 February2005 and 31 August 2005 have been included, together with the restated incomestatements for the 26 weeks ended 28 February 2005 and the year ended 31 August2005. Differences between IFRS and UK GAAP Share option charge - IFRS 2, Share-based payments This charge to the income statement is for share-based payments in accordancewith IFRS 2. The charge is based on the fair value of the option at the date ofgrant recognised over the vesting period of the option. The fair value has beenmeasured using the Black-Scholes method. Employee benefits - IAS 19, Employee benefits The cost of holidays accrued to staff but not taken has been included in theincome statement. Dividend recognition - IAS 10, Events after the balance sheet date Under IFRS dividends are not recognised as liabilities until approved and soproposed dividends under UK GAAP have been removed from the accounts. Goodwill amortisation - IFRS 3, Business combinations In accordance with IFRS goodwill is no longer amortised but is subject toregular impairment reviews. An adjustment has been made to remove the goodwillamortisation charge under UK GAAP. Cumulative translation differences - IAS 21, The effects of changes in foreignexchange rates Under IFRS, exchange rate differences arising on consolidation from thetranslation of overseas subsidiary companies are required to be recognised in aseparate equity reserve. Reclassification of finance lease receivable - IAS 17, Leases The Group has a financial asset that under IFRS is recognisable as a financelease receivable. Derecognition of financial liabilities - IAS 39, Financial instruments:recognition and measurement A financial liability is derecognised under IFRS when, and only when, it isextinguished. This liability has not been legally discharged and therefore hasbeen restated. 4a Reconciliation of consolidated balance sheet and equity at 1 September 2004 Accounting policy changes under IFRS Cumulative Share option Employee Dividend translation UK GAAP charge benefits recognition differences IFRS £'000 £'000 £'000 £'000 £'000 £'000Non-currentassetsGoodwill 16,336 16,336Otherintangibleassets 60 60Property,plant andequipment 504 504Deferred taxasset 18 7 17 42 -------- -------- -------- -------- -------- -------- 16,918 7 17 - - 16,942 -------- -------- -------- -------- -------- --------CurrentassetsTrade andotherreceivables 6,240 6,240Cash and cashequivalents 1,829 1,829 -------- -------- -------- -------- -------- -------- 8,069 - - - - 8,069 -------- -------- -------- -------- -------- --------Total 24,987 7 17 - - 25,011assets -------- -------- -------- -------- -------- --------CurrentliabilitiesTrade andother (8,735) (57) 98 (8,694)payablesTaxliabilities (404) (404)Obligationsunder financeleases (12) (12) -------- -------- -------- -------- -------- -------- (9,151) - (57) 98 - (9,110) -------- -------- -------- -------- -------- --------Net currentliabilities (1,082) - (57) 98 - (1,041) -------- -------- -------- -------- -------- --------Non-currentliabilitiesTrade andother (2,171) (2,171)payablesObligationsunder financeleases (54) (54) -------- -------- -------- -------- -------- -------- (2,225) - - - - (2,225) -------- -------- -------- -------- -------- --------Totalliabilities (11,376) - (57) 98 - (11,335) -------- -------- -------- -------- -------- --------Net assets 13,611 7 (40) 98 - 13,676 -------- -------- -------- -------- -------- --------EquityCalled-upshare capital 1,149 1,149Share premiumaccount 18 18Capitalredemptionreserve 61 61Currency andother 3,689 24 52 3,765reservesProfit andloss account 8,694 (17) (40) 98 (52) 8,683 -------- -------- -------- -------- -------- --------Total 13,611 7 (40) 98 - 13,676equity -------- -------- -------- -------- -------- -------- 4. b Reconciliation of consolidated balance sheet and equity at 28 February 2005 Accounting policy changes under IFRS Share Cumulative Reclass. of UK option Employee Goodwill translation finance lease GAAP charge benefits amortisation differences receivable IFRS £'000 £'000 £'000 £'000 £'000 £'000 £'000Non-currentassetsGoodwill 15,692 455 16,147Otherintangibleassets 57 57Property,plant andequipment 502 (39) 463Deferred taxasset 35 12 13 60 ------ ------- -------- --------- -------- --------- ------ 16,286 12 13 455 - (39) 16,727 ------ ------- -------- --------- -------- --------- ------CurrentassetsTrade andotherreceivables 4,524 39 4,563Cash and cashequivalents 96 96 ------ ------- -------- --------- -------- --------- ------ 4,620 - - - - 39 4,659 ------ ------- -------- --------- -------- --------- ------Total 20,906 12 13 455 - - 21,386assets ------ ------- -------- --------- -------- --------- ------CurrentliabilitiesTrade andother (5,246) (43) (5,289)payablesTaxliabilities (544) (544)Obligationsunder financeleases (12) (12)Bankoverdraftsand (335) (335)loans ------ ------- -------- --------- -------- --------- ------ (6,137) - (43) - - - (6,180) ------ ------- -------- --------- -------- --------- ------Net currentliabilities (1,517) - (43) - - 39 (1,521) ------ ------- -------- --------- -------- --------- ------Non-currentliabilitiesTrade andother (605) (605)payablesObligationsunder financeleases (48) (48)Bankoverdraftsand (667) (667)loans ------ ------- -------- --------- -------- --------- ------ (1,320) - - - - - (1,320) ------ ------- -------- --------- -------- --------- ------Totalliabilities (7,457) - (43) - - - (7,500) ------ ------- -------- --------- -------- --------- ------Net assets 13,449 12 (30) 455 - - 13,886 ------ ------- -------- --------- -------- --------- ------EquityCalled-upshare capital 1,149 1,149Share premiumaccount 18 18Capitalredemptionreserve 61 61Currency andother 3,689 42 61 3,792reservesProfit andloss account 8,532 (30) (30) 455 (61) 8,866 ------ ------- -------- --------- -------- --------- ------Total 13,449 12 (30) 455 - - 13,886equity ------ ------- -------- --------- -------- --------- ------ 4. c Reconciliation of Group income for six months ended 28 February 2005 Accounting policy changes under IFRS Share option Employee Goodwill Dividend UK GAAP charge benefits amortisation recognition IFRS £'000 £'000 £'000 £'000 £'000 £'000Revenue -continuingoperations 6,936 6,936 Cost of (2,492) (2,492)sales -------- -------- -------- -------- -------- --------Gross profit 4,444 - - - - 4,444 Administrativeexpenses (4,487) (18) 14 455 (4,036) -------- -------- -------- -------- -------- --------(Loss)/profitfromoperations (43) (18) 14 455 - 408 Finance income 2 2 -------- -------- -------- -------- -------- --------(Loss)/profitbeforetaxation (41) (18) 14 455 - 410 Taxation (130) 5 (4) (129) -------- -------- -------- -------- -------- --------(Loss)/profitfor the periodattributableto equityholders of theparent (171) (13) 10 455 - 281 Dividends - (98) (98) -------- -------- -------- -------- -------- --------Retained(loss)/profit (171) (13) 10 455 (98) 183 -------- -------- -------- -------- -------- --------(Loss)/earnings pershare Basic (0.15)p 0.24p -------- --------Diluted (0.15)p 0.24p -------- -------- 4.d Reconciliation of consolidated balance sheet and equity at 31 August 2005 Accounting policy changes under IFRS Share Cumulative Reclass. of Restatement finance UK option Employee Goodwill Dividend translation lease of financial GAAP charge benefits amortisation recognition differences receivable liability IFRS £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000Non-currentassetsGoodwill 16,350 925 17,275Otherintangibleassets 51 51Property,plant andequipment 459 (34) 425Deferred taxasset (36) 17 21 25 27 ------ ------ -------- --------- -------- -------- -------- --------- ------ 16,824 17 21 925 - - (34) 25 17,778 ------ ------ -------- --------- -------- -------- -------- --------- ------CurrentassetsTrade andotherreceivables 9,412 34 9,446Cash and cashequivalents 1,674 1,674 ------ ------ -------- --------- -------- -------- -------- --------- ------ 11,086 - - - - - 34 - 11,120 ------ ------ -------- --------- -------- -------- -------- --------- ------Total 27,910 17 21 925 - - - 25 28,898assets ------ ------ -------- --------- -------- -------- -------- --------- ------CurrentliabilitiesTrade andother (11,365) (69) 109 (82 (11,407)payablesTaxliabilities (726) (726)Obligationsunder financeleases (12) (12)Bankoverdraftsand (400) (400)loans ------- ------ -------- --------- -------- -------- -------- --------- ------- (12,503) - (69) - 109 - - (82) (12,545) ------- ------ -------- --------- -------- -------- -------- --------- -------Net currentliabilities (1,417) - (69) - 109 - 34 (82) (1,425) ------- ------ -------- --------- -------- -------- -------- --------- -------Non-currentliabilitiesTrade andother (820) (820)payablesObligationsunder financeleases (42) (42)Bankoverdraftsand (800) (800)loans ------- ------ -------- --------- -------- -------- -------- --------- ------- (1,662) - - - - - - - (1,662)Totalliabilities (14,165) - (69) - 109 - - (82) (14,207) ------- ------ -------- --------- -------- -------- -------- --------- -------Net assets 13,745 17 (48) 925 109 - - (57) 14,691 ------- ------ -------- --------- -------- -------- -------- --------- -------EquityCalled-upshare capital 1,149 1,149Share premiumaccount 18 18Capitalredemptionreserve 61 61Currency andother 3,689 60 60 3,809reservesProfit andloss account 8,828 (43) (48) 925 109 (60) (57) 9,654 ------- ------ -------- --------- -------- -------- -------- --------- -------Total 13,745 17 (48) 925 109 - - (57) 14,691equity ------- ------ -------- --------- -------- -------- -------- --------- ------- 4.e Reconciliation of Group income for the year ended 31 August 2005 Accounting policy changes under IFRS Share Restatement UK option Employee Goodwill Dividend of financial GAAP charge benefits amortisation recognition liability IFRS £'000 £'000 £'000 £'000 £'000 £'000 £'000 Revenue -continuingoperations 14,903 14,903 Cost of (4,794) (82) (4,876)sales ------ ------- -------- --------- -------- --------- -------Gross profit 10,109 - - - - (82) 10,027 Administrativeexpenses (9,322) (36) (12) 925 (8,445) ------ ------- -------- --------- -------- --------- -------Profit fromoperations 787 (36) (12) 925 - (82) 1,582 Finance charge (44) (44) ------ ------- -------- --------- -------- --------- -------Profit beforetaxation 743 (36) (12) 925 - (82) 1,538 Taxation (508) 10 4 25 (469) ------ ------- -------- --------- -------- --------- -------Profit for theperiodattributableto equityholders of theparent 235 (26) (8) 925 - (57) 1,069 Dividends (109) 11 (98) ------ ------- -------- --------- -------- --------- -------Retainedprofit 126 (26) (8) 925 11 (57) 971 ------ ------- -------- --------- -------- --------- -------Earnings pershare Basic 0.20p 0.93p ------ ------- Diluted 0.20p 0.93p ------ ------- 5. Segment information 6 months 6 months Year ended ended ended 31 Aug. 2005* 28 Feb. 2006 28 Feb. 2005* (Unaudited) (Unaudited) (Audited) Profit/(loss) Profit from Profit from from Revenue operations Revenue operations Revenue operations £'000 £'000 £'000 £'000 £'000 £'000By class ofbusiness:Sportsmarketing 4,787 687 3,449 616 6,734 1,295Wealthmanagement 2,002 489 1,732 269 3,153 485Representation 1,684 (114) 1,755 135 4,910 1,256Legal &professional 74 8 - - 106 41 ------- --------- ------- --------- ------- -------- 8,547 1,070 6,936 1,020 14,903 3,077 ------- ------- -------Common costs (560) (612) (1,495) --------- --------- --------Profit fromoperations 510 408 1,582 --------- --------- -------- * Restated in accordance with IFRS 6. Taxation The taxation charge at 31.0% of profit before taxation, is based on theestimated effective rate of tax on earnings forthe full year ending 31 August 2006. 7. Dividends 6 months ended 6 months ended Year ended 28 Feb. 2006 28 Feb. 2005* 31 Aug. 2005* (Unaudited) (Unaudited) (Audited) £'000 £'000 £'000Dividend paid per share in theperiod of 0.095 pence(2005 - 0.085 pence) 109 98 98 ------------ ------------ ------------ 8. Earnings per shareEarnings per share are based on the following profits and numbers of shares: 6 months ended 6 months ended Year ended 28 Feb. 2006 28 Feb. 2005* 31 Aug. 2005* (Unaudited) (Unaudited) (Audited) £'000 £'000 £'000Profit for the period:Basic and diluted 323 281 1,069 ------------ ------------ ------------ Number of Number of Number of shares shares shares '000 '000 '000Weighted average number ofshares:Basic and diluted 114,874 114,874 114,874 ------------ ------------ ------------ 9. Reconciliation of profit from operations to net cash from operations 6 months ended 6 months ended Year ended 31 Aug. 28 Feb. 2006 28 Feb. 2005* 2005* (Unaudited) (Unaudited) (Audited) £'000 £'000 £'000 Profit from operations 510 408 1,582Depreciation of property, plantand equipment 85 77 178Amortisation of intangibleassets 5 5 10Share option charge 21 18 36Profit on sale of fixed assets - (13) (17) ------------ ------------ ------------Operating cash flows beforemovements in working capital 621 495 1,789Decrease/(increase) inreceivables 4,009 1,707 (1,994)(Decrease)/increase in payables (4,968) (1,718) 2,415 ------------ ------------ ------------Cash (used in)/generated byoperations (338) 484 2,210 ------------ ------------ ------------ * Restated in accordance with IFRS INDEPENDENT REVIEW REPORT TO FORMATION GROUP PLC Introduction We have been instructed by the company to review the financial information forthe six months ended 28 February 2006 which comprises the consolidated incomestatement, the consolidated statement of recognised income and expenses, theconsolidated balance sheet, the reconciliation of changes in equity, theconsolidated cash flow statement and related notes 1 to 9. We have read theother information contained in the interim report and considered whether itcontains any apparent misstatements or material inconsistencies with thefinancial information. This report is made solely to the company, in accordance with Bulletin 1999/4issued by the Auditing Practices Board. Our work has been undertaken so that wemight state to the company those matters we are required to state to them in anindependent review report and for no other purpose. To the fullest extentpermitted by law, we do not accept or assume responsibility to anyone other thanthe company, for our review work, for this report, or for the conclusions wehave formed. Directors' responsibilities The interim report, including the financial information contained therein, isthe responsibility of, and has been approved by, the directors. The directorsare also responsible for ensuring that the accounting policies and presentationapplied to the interim figures are consistent with those applied in preparingthe preceding annual accounts except where any changes, and the reasons forthem, are disclosed. International Financial Reporting Standards As disclosed in note 3, the next annual financial statements of the group willbe prepared in accordance with International Financial Reporting Standards asadopted for use in the EU. Accordingly, the interim report has been prepared inaccordance with the recognition and measurement criteria of IFRS and thedisclosure requirements of the Listing Rules. The accounting policies areconsistent with those that the directors intend to use in the annual financialstatements. Review work performed We conducted our review in accordance with the guidance contained in Bulletin1999/4 issued by the Auditing Practices Board for use in the United Kingdom. Areview consists principally of making enquiries of group management and applyinganalytical procedures to the financial information and underlying financial dataand, based thereon, assessing whether the accounting policies and presentationhave been consistently applied unless otherwise disclosed. A review excludesaudit procedures such as tests of controls and verification of assets,liabilities and transactions. It is substantially less in scope than an auditperformed in accordance with International Standards on Auditing (UK andIreland) and therefore provides a lower level of assurance than an audit.Accordingly, we do not express an audit opinion on the financial information. Review conclusion On the basis of our review we are not aware of any material modifications thatshould be made to the financial information as presented for the six monthsended 28 February 2006. Deloitte & Touche LLPChartered AccountantsManchester 2 May 2006 This information is provided by RNS The company news service from the London Stock Exchange