ACCOUNTS - Final Accounts
ACCOUNTS - Final Accounts
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Registered number:
FOR THE YEAR ENDED 31 AUGUST 2022
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FORMATION GROUP PLC
COMPANY INFORMATION
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FORMATION GROUP PLC
CONTENTS
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FORMATION GROUP PLC
CHAIRMAN'S STATEMENT
FOR THE YEAR ENDED 31 AUGUST 2022
The chairman presents his statement for the period.
I am pleased to present the annual results for Formation Group plc (“the Company”) and its subsidiaries (together, “the Group”) for the year ended 31 August 2022.
The year ended 31 August 2022 result have been pleasing, despite the challenging economic conditions, the business outlook remains positive as it grows its order book. The Group's focus and commitment continues on growing the business investments and establishing a recognised name within the construction sector. Its key focus remains on exceeding client expectations by delivering high quality affordable housing ahead of programme both safely and efficiently. Despite the challenging economic conditions, the business outlook remains positive as it maintains a healthy orderbook and prosperous tenders. The demand for affordable housing continues as the public sector invests more in local and regional developments. The focus remains on exceeding client expectations by delivering high quality affordable housing ahead of programme both safely and efficiently. Every effort is being made to source further development and investment opportunities and the Group is continuing to look for lucrative opportunities. Construction opportunities are being pursued and tendering for various sized residential schemes in London is a regular process. Our cash flow remains strong, profitability and future opportunities look promising. The Group has added and will continue to add to its experience base of construction personnel to drive the business forward. I would like to thank all board members and staff for the enormous efforts and dedicated contributions they have made during the year. I would also like to thank our shareholders for their continued trust and confidence in the Board.
NameP Kennedy
Chairman
Date
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FORMATION GROUP PLC
GROUP STRATEGIC REPORT
FOR THE YEAR ENDED 31 AUGUST 2022
The year ended 31 August 2022 has been a successful year for the Group. The results of the group have predominately been driven by activities of Formation Design & Build Limited and Formation M&E Limited.
Over recent years the Group has successfully expanded its offering and established itself as a main contractor in the construction industry. Formation Design & Build Limited and has successfully built client relationships both in the private sector and public sector. The business operates predominately in the London Area and combines a highly experienced management team with a large pool of designers, suppliers, and subcontractors, with some self-delivery including M&E, Joinery, Drylining and Tiling. The business covers a broad range of project types including hotels, housing, heritage, retail, transport and warehousing, educational establishments, recreational venues, multi-level car parks and high-rise inner-city residential schemes. The Group continues its support in the Market Equities Limited investment and see financial benefits year on year.
The Group board of directors are pleased with the results of 2022, despite the challenging economic conditions, the business outlook remains positive as it grows its order-book.
The Group has increased its activity as a main contractor, through Formation Design & Build Limited and remains open to opportunities in property development and construction management services. The investment in the Formation Design & Build Holding Group is proving to be a success as are the financial results. Projects Ashley 1A was successfully completed this year and was delivered 3 months ahead of programme. Ashley 1 is forecasted to be delivered several months ahead of programme and will be complete in 2023. Both these projects have proven to be successful and have been key to winning several new projects as well as developing new client relationships. The Group has historically project managed central London property developments and had been engaged to provide these project management services by companies which are defined as related parties of Formation Group Plc. During the year, the business did not engage in any new or significant related party contracts. The group continues it support in the Market Equities Limited investment, Formation owns 10,000 USD1 ordinary shares in Market Equities Limited, acquired at a premium of USD 1,299 per share, which represents a 45% joint venture investment in the company. Market Equities is a private limited company, for which shares are incorporated in British Virgin Islands. The Market Equities Group’s principal activity is housebuilding in Ireland.
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FORMATION GROUP PLC
GROUP STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 AUGUST 2022
The board of directors were pleased with the results this year.
Turnover – Turnover increased from £48.079m in 2021 to £58.848m in 2022. Despite the economic challenges the demand for housing remains higher than supply and therefore, the Directors expect to be able to grow turnover as the Group expands its service offering to third party housing providers and developers. Gross profit – Gross profit decreased from £9.180m in 2021 to £7.534m in 2022. There has been a fall in gross margin. A large part of this has been due to lower levels of margin enjoyed by Formation M&E Limited in comparison to last year and also due to inflationary challenges, along with work discounted to create new client relationships to achieve the desired growth. Bank – Bank balance decreased from £14.981m in 2021 to £9.575m in 2022. This decrease in cash was due to a variety of factors details of which is covered in the Statement of cashflow. Net Assets – Net Assets increased from £25.402m in 2021 to £31.649m in 2022. The operating profit being principally generated through ongoing projects and share of profits in joint ventures.
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FORMATION GROUP PLC
GROUP STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 AUGUST 2022
The principal risk to the Group is the uncertainty in the property market, due to rising costs relating to post Brexit, inflation, and the shortage of labour and materials in the construction industry. As noted below, the Group had for some time been dependent on contracts from Related Parties to fully deploy its resources and expertise.
The Group has benefitted from its participation in the 40% profit share agreement with London (North) Properties Limited and Pinacle Developments. Specific risks are listed below: 
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FORMATION GROUP PLC
GROUP STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 AUGUST 2022
The Board makes decisions for the long-term success of the company and its shareholders and complies with the requirements of Section 172 of the Companies Act 2006. As part of any decision-making processes, the directors will consider the need of the Company’s business relationships with Customers, Suppliers, and People. The engagement with and consideration of shareholders is as set out below.
Our Customers The Group strategy is focused on delivering excellent customer service, which is a key part of our business model. To do this the Group has built strong business relationships with our customers, often providing valuable input into the development stages of construction projects to ensure the viability of the proposed projects. The Group have invested in creating a dedicated team focused on taking responsibility for promoting quality and safety in all facets of the business for the benefit of the shareholders. Our Suppliers The group recognises the value of all our suppliers as the key in helping our business run smoothly, from day-to-day operations through to the delivery of construction projects. The Group has long-term business relationships with many of its key suppliers and continues to work together to align business objectives whilst ensuring our payments terms and behaviours do not prevent them from achieving their goals. The People The group is committed to being a responsible business. The Group behaviour is aligned with the expectation of its people, customers, suppliers, shareholders, community and environment. People are at the heart of the delivery of excellent customer service. For our business to succeed we manage people’s performance and develop and bring through talent whilst ensuring the Company operates as efficiently as possible. The management continues to engage directly with the employees through regular visits and meetings taking place across the Group including all constructions sites. Outlook This year the Group completed some key ongoing projects demonstrating its capability in its core property construction activity. The demand for affordable housing continues as the public sector invests more in local and regional developments. The order book and potential leads remain healthy and the focus and commitment continues on growing the business and establishing a recognised name within the main construction sector. Its key focus remains on exceeding client expectations by delivering high quality affordable housing ahead of programme both safely and efficiently. Maintaining will be the challenge during the forthcoming years, the Board will review strategic options for the future. Operating costs will be kept under close supervision.
This report was approved by the board and signed on its behalf.
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FORMATION GROUP PLC
DIRECTORS' REPORT
FOR THE YEAR ENDED 31 AUGUST 2022
The directors present their report and the financial statements for the year ended 31 August 2022.
The directors are responsible for preparing the Group Strategic Report, the Directors' Report and the consolidated financial statements in accordance with applicable law and regulations.
Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have elected to prepare the financial statements in accordance with applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice), including Financial Reporting Standard 102 ‘The Financial Reporting Standard applicable in the UK and Republic of Ireland'. Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and the Group and of the profit or loss of the Group for that period.
In preparing these financial statements, the directors are required to:
∙select suitable accounting policies for the Group's financial statements and then apply them consistently;
∙make judgments and accounting estimates that are reasonable and prudent;
∙state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements;
∙prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group will continue in business.
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and the Group and to enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The profit for the year, after taxation and non-controlling interests, amounted to £4,685,698 (2021 - loss £1,367,616).
No dividends were declared during the year (2021 - £nil).
The directors who served during the year were:
Future developments are set out in the Strategic Report.
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FORMATION GROUP PLC
DIRECTORS' REPORT (CONTINUED)
FOR THE YEAR ENDED 31 AUGUST 2022
Engagement with suppliers, customers and others are set out in the Strategic Report.
The Group has not disclosed information in respect of greenhouse gas emissions, energy consumption and energy efficiency action as its energy consumption in the United Kingdom for the year is 40,000kWh or lower.
On the 31st March 2023 Formation D&B Holdings Limited, a subsidiary, entered into a transaction with a company under common control to purchase some commercial properties for total consideration of £5.5m.
The auditor, Hillier Hopkins LLP, will be proposed for reappointment in accordance with section 485 of the Companies Act 2006.
This report was approved by the board and signed on its behalf.
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FORMATION GROUP PLC
INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF FORMATION GROUP PLC
We have audited the financial statements of Formation Group Plc (the 'parent Company') and its subsidiaries (the 'Group') for the year ended 31 August 2022, which comprise the Consolidated Statement of Comprehensive Income, the Consolidated and Company Statements of Financial Position, the Consolidated Statement of Cash Flows, the Consolidated and Company Statement of Changes in Equity and the related notes, including a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 102 ‘The Financial Reporting Standard applicable in the UK and Republic of Ireland' (United Kingdom Generally Accepted Accounting Practice).
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements section of our report. We are independent of the Group in accordance with the ethical requirements that are relevant to our audit of the financial statements in the United Kingdom, including the Financial Reporting Council's Ethical Standard and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
In auditing the financial statements, we have concluded that the directors' use of the going concern basis of accounting in the preparation of the financial statements is appropriate.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the Group's or the parent Company's ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.
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FORMATION GROUP PLC
INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF FORMATION GROUP PLC (CONTINUED)
The other information comprises the information included in the Annual Report other than the financial statements and our Auditor's Report thereon. The directors are responsible for the other information contained within the Annual Report. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
In our opinion, based on the work undertaken in the course of the audit:
∙the information given in the Group Strategic Report and the Directors' Report for the financial year for which the financial statements are prepared is consistent with the financial statements; and
∙the Group Strategic Report and the Directors' Report have been prepared in accordance with applicable legal requirements.
In the light of the knowledge and understanding of the Group and the parent Company and its environment obtained in the course of the audit, we have not identified material misstatements in the Group Strategic Report or the Directors' Report.
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FORMATION GROUP PLC
INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF FORMATION GROUP PLC (CONTINUED)
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an Auditor's Report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these Group financial statements.
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below:
∙the nature of the industry and sector, control environment and business performance including the remuneration incentives and pressures of key management;
∙the primary responsibility for the prevention and detection of fraud rests with both those charged with governance of the entity and management. We consider the results of our enquiries of management about their own identification and assessment of the risks of irregularities;
∙any matters we identified having obtained and reviewed the Group’s documentation of their policies and procedures relating to:
°identifying, evaluating and complying with laws and regulations and whether they were aware of any instances of non-compliance;
°detecting and responding to the risks of fraud and whether they have knowledge of any actual, suspected or alleged fraud;
°the internal controls established to mitigate risks of fraud or non-compliance with laws and regulations;
∙the matters discussed among the audit engagement team regarding how and where fraud might occur in the financial statements and any potential indicators of fraud.
As a result of these procedures, we considered the opportunities and incentives that may exist within the organisation for fraud and identified the greatest potential for fraud. In common with all audits under ISAs (UK), we are also required to perform specific procedures to respond to the risk of management override, including testing journals and evaluating whether there was evidence of bias by the directors that represented a risk of material misstatement due to fraud.
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FORMATION GROUP PLC
INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF FORMATION GROUP PLC (CONTINUED)
We also obtained an understanding of the legal and regulatory frameworks that the Group operates in, focusing on provisions of those laws and regulations that had a direct effect on the determination of material amounts and disclosures in the financial statements. We focused on laws and regulations that could give rise to a material misstatement in the financial statements, including, but not limited to, the Companies Act 2006 and relevant tax legislation.
Because of the inherent limitations of an audit, there is a risk that we will not detect all irregularities, including those leading to a material misstatement in the financial statements or non-compliance with regulation. This risk increases the more that compliance with a law or regulation is removed from the events and transactions reflected in the financial statements, as we will be less likely to become aware of instances of non-compliance. The risk is also greater regarding irregularities occurring due to fraud rather than error, as fraud involves intentional concealment, forgery, collusion, omission or misrepresentation.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council's website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our Auditor's Report.
This report is made solely to the Company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company's members those matters we are required to state to them in an Auditor's Report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company's members, as a body, for our audit work, for this report, or for the opinions we have formed.
for and on behalf of
Chartered Accountants
Statutory Auditor
Radius House
51 Clarendon Road
Herts
WD17 1HP
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FORMATION GROUP PLC
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 AUGUST 2022
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FORMATION GROUP PLC
REGISTERED NUMBER: 04145632
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 AUGUST 2022
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FORMATION GROUP PLC
REGISTERED NUMBER: 04145632
CONSOLIDATED STATEMENT OF FINANCIAL POSITION (CONTINUED)
AS AT 31 AUGUST 2022
The financial statements were approved and authorised for issue by the board and were signed on its behalf by:
The notes on pages 24 to 46 form part of these financial statements.
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FORMATION GROUP PLC
REGISTERED NUMBER: 04145632
COMPANY STATEMENT OF FINANCIAL POSITION
AS AT 31 AUGUST 2022
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FORMATION GROUP PLC
REGISTERED NUMBER: 04145632
COMPANY STATEMENT OF FINANCIAL POSITION (CONTINUED)
AS AT 31 AUGUST 2022
The financial statements were approved and authorised for issue by the board and were signed on its behalf by:
The notes on pages 24 to 46 form part of these financial statements.
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CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 AUGUST 2022
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CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 AUGUST 2021
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COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 AUGUST 2022
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COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 AUGUST 2021
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FORMATION GROUP PLC
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 AUGUST 2022
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FORMATION GROUP PLC
CONSOLIDATED STATEMENT OF CASH FLOWS (CONTINUED)
FOR THE YEAR ENDED 31 AUGUST 2022
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FORMATION GROUP PLC
CONSOLIDATED ANALYSIS OF NET DEBT
FOR THE YEAR ENDED 31 AUGUST 2022
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FORMATION GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 AUGUST 2022
Formation Group PLC is a company registered in England and Wales, incorporated in the United Kingdom. The registered office address is Oakwood House, 414-422 Hackney Road, London, E2 7SY. The nature of the Group’s operations and its principal activities are set out in the Strategic Report.
The financial statements are presented in pounds sterling which is also the functional currency of the parent company.
2.Accounting policies
The financial statements have been prepared under the historical cost convention unless otherwise specified within these accounting policies and in accordance with Financial Reporting Standard 102, the Financial Reporting Standard applicable in the UK and the Republic of Ireland and the Companies Act 2006.
The preparation of financial statements in compliance with FRS 102 requires the use of certain critical accounting estimates. It also requires Group management to exercise judgment in applying the Group's accounting policies (see note 3).
The Company has taken advantage of the exemption allowed under section 408 of the Companies Act 2006 and has not presented its own Statement of Comprehensive Income in these financial statements.
The Company has taken advantage of the disclosure exemption allowed under FRS 102 "The Financial Reporting Standard applicable in the UK and Republic of Ireland" and has not presented its own Statement of Cash Flows in these financial statements.
The following principal accounting policies have been applied:
The consolidated financial statements present the results of the Company and its own subsidiaries ("the Group") as if they form a single entity. Intercompany transactions and balances between group companies are therefore eliminated in full.
The consolidated financial statements incorporate the results of business combinations using the purchase method. In the Statement of Financial Position, the acquiree's identifiable assets, liabilities and contingent liabilities are initially recognised at their fair values at the acquisition date. The results of acquired operations are included in the Consolidated Statement of Comprehensive Income from the date on which control is obtained. They are deconsolidated from the date control ceases.
The Group has secured several new projects since the year end and has a healthy order book that will provide continued growth for 2023. The group expects to make acceptable levels of profit in these years. After reviewing the cash flow forecasts and projections, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future without the reliance on any external bank funding as the business continues to grow. The Group therefore continues to adopt the going concern basis in preparing its consolidated financial statements.
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FORMATION GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 AUGUST 2022
2.Accounting policies (continued)
Functional and presentation currency
Transactions and balances
Revenue for construction services provided under a fixed price contract represents amounts chargeable for services provided and expenses recharged to clients. Revenue, when the outcome of a transaction can be measured reliably, is recognised by reference to the stage of completion of the services rendered as duly certified by a group Quantity Surveyor. Where it is probable that total costs will exceed total turnover on a particular project, the expected loss is recognised immediately. Revenue for construction services provided under a cost plus management fee contract represents amounts chargeable for services provided and expenses recharged to clients. Revenue, when the outcome of a transaction can be measured reliably, is recognised by reference to costs incurred and according to the terms of the management fee agreement.
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FORMATION GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 AUGUST 2022
2.Accounting policies (continued)
Page 26
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FORMATION GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 AUGUST 2022
2.Accounting policies (continued)
Depreciation is charged so as to allocate the cost of assets less their residual value over their estimated useful lives, using the straight-line method.
Depreciation is provided on the following basis:
The assets' residual values, useful lives and depreciation methods are reviewed, and adjusted prospectively if appropriate, or if there is an indication of a significant change since the last reporting date.
Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised in profit or loss.
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FORMATION GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 AUGUST 2022
2.Accounting policies (continued)
In the consolidated accounts, interests in associated undertakings are accounted for using the equity method of accounting. Under this method an equity investment is initially recognised at the transaction price (including transaction costs) and is subsequently adjusted to reflect the investors share of the profit or loss, other comprehensive income and equity of the associate. The Consolidated Statement of Comprehensive Income includes the Group's share of the operating results, interest, pre-tax results and attributable taxation of such undertakings applying accounting policies consistent with those of the Group. In the Consolidated Statement of Financial Position, the interests in associated undertakings are shown as the Group's share of the identifiable net assets, including any unamortised premium paid on acquisition. Any premium on acquisition is dealt with in accordance with the goodwill policy.
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FORMATION GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 AUGUST 2022
2.Accounting policies (continued)
Provisions are charged as an expense to profit or loss in the year that the Group becomes aware of the obligation, and are measured at the best estimate at the reporting date of the expenditure required to settle the obligation, taking into account relevant risks and uncertainties. When payments are eventually made, they are charged to the provision carried in the Statement of Financial Position.
Page 29
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FORMATION GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 AUGUST 2022
Depreciation and residual value The Directors have reviewed the asset lives and associated residual values of all fixed assets, and have concluded that asset lives and residual values are appropriate. Work in progress Profit on long term contracts is recognised as the work is carried out. Management use judgment to establish whether the substance of a contract is that the right to consideration does not arise until the occurrence of a specific event or service. In this case, turnover and associated costs are not recognised until that event occurs.
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FORMATION GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 AUGUST 2022
Page 31
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FORMATION GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 AUGUST 2022
Page 32
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FORMATION GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 AUGUST 2022
10.Taxation (continued)
On 3 March 2021 the Chancellor of the Exchequer announced an increase in the main rate of UK corporation tax to 25 per cent for businesses with profits greater than £250,000. Businesses with profits of £50,000 or less will continue to be taxed at 19% with marginal relief for profits up to £250,000. These changes were substantially enacted on 25 May 2021 and will take effect from 1 April 2023.
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FORMATION GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 AUGUST 2022
Page 34
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FORMATION GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 AUGUST 2022
11.Tangible fixed assets (continued)
Page 35
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FORMATION GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 AUGUST 2022
Page 36
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FORMATION GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 AUGUST 2022
Page 37
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FORMATION GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 AUGUST 2022
Page 38
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FORMATION GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 AUGUST 2022
Investment properties were valued by the Directors at fair value using estimated yields (6.5%) based on potential income as at the reporting date as they are not currently income generating. There is no change on prior periods. There are no external valuations. There are no contractual obligations to purchase, construct or develop investment property or for repairs, maintenance or enhancements.
Page 39
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FORMATION GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 AUGUST 2022
15.Debtors (continued)
Page 40
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FORMATION GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 AUGUST 2022
Financial risk management objectives
The Group has a centralised financial risk management function which monitors and manages the financial risks relating to the operations of the Group. The primary risks faced by the Group are credit risk, interest risk and liquidity risk. The Board has reviewed and agreed policies for management of this risk. All of the Group’s activities involve analysis, acceptance and management of some degree of risk or combination of risks. The Group’s risk management policies are designed to identify and analyse these risks, to set appropriate risk limits and controls and to monitor the risks and limits continually by means of reliable up-to-date systems. The Group modifies and enhances its risk management policies and systems to reflect changes in markets and products. The Board has formulated a high level Group risk management policy and monitors risk management to allow it to review the effectiveness of the Group’s risk management policies. Capital risk management The capital structure of the Group is presented in the statement of financial position and includes equity, cash and borrowings. The statement of changes in equity provides details of equity and during the year, no bank loans or overdraft facilities were used by the group. If required, short term funding requirements are provided by a bank loan. The objectives when managing capital are to safeguard its ability to continue as a going concern and have access to adequate funding for business opportunities, so that it can provide returns for shareholders and benefits for other stakeholders. The Group manages its capital structure and makes adjustment in light of changes in economic conditions and risk characteristics of the underlying assets. In order to maintain or adjust the capital structure, the Group may issue new shares or draw down debt. The Group maintains sufficient cash levels to enable it to meet its liabilities as they fall due. Management review cash flow forecasts on a regular basis to determine whether the group has sufficient cash reserves to meet future working capital requirements, financing obligations and to take advantage of business opportunities. In reviewing cash flows and identifying the need for further funds, management consider the nature of cash flow requirements and take appropriate action. Finance and interest rate risk The Group finances its operations through cash and cash equivalents, and, when required, bank loans.
Page 41
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FORMATION GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 AUGUST 2022
Credit risk management Credit risk is the risk that financial loss arises from the failure of a customer or counterparty to meet its obligations under a contract. The Group has dedicated standards, policies and procedures to control and monitor all such risks. Although the Group is potentially exposed to credit loss in the event of non-performance by counterparties, such credit risk is controlled through reviews of counterparties and limiting the exposure to any single counterparty. The Group only transacts with entities that have a good credit rating. Customer debtor balances are monitored on an ongoing basis and provision is made for estimated irrecoverable amounts. Liquidity risk management The Group has managed its cash in a manner designed to ensure maximum benefit is gained, whilst ensuring security of investment sources. The Group’s policy on investment of surplus funds limits the placing of deposits to institutions with strong credit ratings. The Group manages liquidity risk by maintaining adequate working capital facilities it is able to draw on and by continuously monitoring forecast and actual cash flows.
Page 42
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FORMATION GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 AUGUST 2022
19.Deferred taxation (continued)
Page 43
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FORMATION GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 AUGUST 2022
Share premium account
Fair value reserve
Other reserves
Profit and loss account
On 22 July 2021, the Group entered into an agreement with Greenford First Consultancy Limited (“Greenford”) through which it transferred 24.99% of the Group’s interest in its contracting businesses, Formation Design & Build Limited and Formation (M&E) Limited to a new holding company, Formation D&B Holdings Limited, (“Holdings”). Greenford subscribed £485,000 for its initial 24.99% shareholding in Holdings, which interest may increase to 50% on 1 May 2024.
The Group operates a defined contributions pension scheme. The assets of the scheme are held separately from those of the Group in an independently administered fund. The pension cost charge represents contributions payable by the Group to the fund and amounted to £47,866 (2021 - £48,140). Contributions totalling £21 (2021 - £1,517) were payable to the fund at the reporting date and are included in creditors.
Page 44
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FORMATION GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 AUGUST 2022
Page 45
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FORMATION GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 AUGUST 2022
Page 46
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