ACCOUNTS - Final Accounts
ACCOUNTS - Final Accounts
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Registered number:
FOR THE YEAR ENDED 31 AUGUST 2023
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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 2023
The chairman presents his statement for the period.
I am delighted to present the annual results for Formation Group PLC and its subsidiaries for the fiscal year ending August 31st, 2023.
Despite facing challenging economic conditions, I am pleased to report that the Group has delivered promising results. Throughout the year, we encountered inflationary pressures and disruptions in the supply chain due to the prevailing economic and political landscape. These factors have affected our margins to some extent. Nevertheless, the Group's commitment to growth and investment remains unwavering. Our primary focus continues to be on expanding our business portfolio and establishing a strong presence in the construction sector. We are dedicated to surpassing client expectations by consistently delivering high-quality, affordable housing projects ahead of schedule and with utmost safety and efficiency. Despite the economic challenges, our outlook remains optimistic. We maintain a healthy order book and have secured prosperous tenders, reflecting the sustained demand for affordable housing, particularly as public sector investment in local and regional developments continues to grow. We are actively seeking out new development and investment opportunities, with a keen eye on maximizing profitability. Our ongoing pursuit of construction opportunities includes regular tendering for residential schemes of various sizes in London and beyond. Our robust cash flow, coupled with promising profitability and future prospects, positions us well for continued success. To drive our business forward, we have been strategically augmenting our team with experienced construction personnel, further enhancing our capabilities and expertise. I extend my heartfelt gratitude to all our board members and staff for their tireless efforts and dedicated contributions throughout the year. Their hard work and commitment have been instrumental in achieving our objectives. I also express my sincere appreciation to our shareholders for their unwavering trust and confidence in the Board. Looking ahead, we are excited about the opportunities that lie ahead and remain committed to delivering value for our shareholders while contributing positively to the communities we serve.
NameP Kennedy
Chairman
Date
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FORMATION GROUP PLC
GROUP STRATEGIC REPORT
FOR THE YEAR ENDED 31 AUGUST 2023
The year ended 31 August 2023 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 it has successfully expanded its offering and established itself as a main contractor in the construction industry and 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 success is underpinned by a fusion of a highly experienced management team and a vast network of skilled designers, reliable suppliers, and proficient subcontractors. This collaborative approach ensures a diverse and comprehensive portfolio of successful projects spanning various sectors, including hotels, housing, heritage sites, retail spaces, transport and warehousing facilities, educational establishments, recreational venues, multi-level car parks, and high-rise inner-city. The roots of Formation are deeply embedded in a commitment to quality, innovation, and a track record of meeting and exceeding expectations. We bring together a wealth of experience, cutting-edge design, and a robust network to create spaces that not only redefine standards but also stand as enduring symbols of our dedication to excellence. The Group also continues its support in the Market Equities Limited investment and see financial benefits year on year.
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FORMATION GROUP PLC
GROUP STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 AUGUST 2023
The Board of Directors is pleased with the 2023 results, which demonstrate resilience in the face of challenging economic conditions. Despite external factors, the business maintains an optimistic outlook, driven by a growing order book.
Strategic Focus The business remains steadfast in its commitment to growth, aiming to establish itself as a recognized name in the main construction sector. Our primary objective is to surpass client expectations by delivering high-quality, affordable housing efficiently and safely, while maintaining a dedication to staying ahead of project timelines. 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 successful, as evidenced by the positive financial results. Project Updates In 2023, Project Ashley 1 was successfully completed, delivered nine months ahead of schedule. Progress on the Chocolate Factory and Remington Road developments has been substantial, and they are forecasted to be delivered slightly ahead of schedule, with completion expected in 2024. The business is gaining a reputation for delivering projects either early or on time, which has been instrumental in winning new projects and developing client relationships. The Group has expanded its client base and development work and is starting to see repeat business from some clients. However, there is a continued focus on strengthening the client base even further. 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 2023
The board of directors are pleased with the results for this year.
Turnover – The Board is pleased to report a notable increase in turnover from £58.847m in 2022 to £66.537m in 2023. Despite economic challenges, the demand for housing outpaces supply, positioning the group for continued growth as it expands services to third-party housing providers and developers Gross profit – As a result of inflationary pressures within the construction industry and supply chain disruptions driven by political factors, the group experienced a marginal decrease in gross profit from £7.534m in 2022 to £6.692m in 2023. While these external challenges played a role, the group remains resilient in managing costs and navigating market dynamics. Notably, the decrease in gross profit has not mirrored the growth in turnover, and the Board is actively addressing these challenges to ensure sustained profitability. The commitment to establishing new client relationships at discounted rates also contributed to the overall strategic approach in achieving the desired growth amidst challenging conditions. Overheads - In 2023, administrative costs surged from £1.473m to £2.519m, reflecting a strategic response to the imminent growth in the order book. This deliberate increase encompasses a proactive expansion of operational capabilities, including investments in technology and human resources. A portion of the rise is attributed to addressing increasing salary costs, emphasizing the group's commitment to securing and retaining top talent. Additionally, the overall overhead increment accounts for inflationary pressures affecting various operational aspects. This comprehensive approach positions the company for seamless handling of the anticipated demand surge while maintaining service excellence. The Board anticipates that these strategic investments will yield substantial returns, contributing significantly to the group's long-term success. Bank – The bank balance demonstrated substantial growth, surging from £9.575m in 2022 to an impressive £14.351m in 2023. This increase is primarily attributed to profit materializing into cash. Additionally, the recovery of historical retentions has been instrumental in bolstering the cash balance. The successful retrieval of these funds reflects the group's proactive approach to financial management and underscores its commitment to optimizing liquidity. Net Assets – Net Assets increased from £31.648m in 2022 to £36.193m in 2023 In conclusion, despite economic headwinds, the company's positive trajectory is evident in its financial indicators and strategic positioning. The Board looks forward to further expansion and success in the coming years
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FORMATION GROUP PLC
GROUP STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 AUGUST 2023
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 2023
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.
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FORMATION GROUP PLC
GROUP STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 AUGUST 2023
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 2023
The directors present their report and the financial statements for the year ended 31 August 2023.
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 minority interests, amounted to £3,774,937 (2022 - £4,685,698).
No dividends were declared during the year (2022 - £nil).
The directors who served during the year were:
Future developments are set out in the Strategic Report.
Engagement with suppliers, customers and others are set out in the Strategic Report.
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FORMATION GROUP PLC
DIRECTORS' REPORT (CONTINUED)
FOR THE YEAR ENDED 31 AUGUST 2023
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.
There have been no significant events affecting the Group since the year end.
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 2023, 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)
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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.
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.
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FORMATION GROUP PLC
INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF FORMATION GROUP PLC (CONTINUED)
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 2023
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FORMATION GROUP PLC
REGISTERED NUMBER: 04145632
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 AUGUST 2023
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FORMATION GROUP PLC
REGISTERED NUMBER: 04145632
CONSOLIDATED STATEMENT OF FINANCIAL POSITION (CONTINUED)
AS AT 31 AUGUST 2023
The financial statements were approved and authorised for issue by the board and were signed on its behalf by:
The notes on pages 27 to 52 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 2023
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FORMATION GROUP PLC
REGISTERED NUMBER: 04145632
COMPANY STATEMENT OF FINANCIAL POSITION (CONTINUED)
AS AT 31 AUGUST 2023
The financial statements were approved and authorised for issue by the board and were signed on its behalf by:
The notes on pages 27 to 52 form part of these financial statements.
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CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 AUGUST 2023
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CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (CONTINUED)
FOR THE YEAR ENDED 31 AUGUST 2023
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COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 AUGUST 2023
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COMPANY STATEMENT OF CHANGES IN EQUITY (CONTINUED)
FOR THE YEAR ENDED 31 AUGUST 2023
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FORMATION GROUP PLC
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 AUGUST 2023
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FORMATION GROUP PLC
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FORMATION GROUP PLC
CONSOLIDATED ANALYSIS OF NET DEBT
FOR THE YEAR ENDED 31 AUGUST 2023
Page 26
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FORMATION GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 AUGUST 2023
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 of £90m that will provide continued growth for 2024. 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 2023
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 2023
2.Accounting policies (continued)
Page 29
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FORMATION GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 AUGUST 2023
2.Accounting policies (continued)
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FORMATION GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 AUGUST 2023
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 2023
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 2023
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.
The Group has elected to apply the provisions of Section 11 “Basic Financial Instruments” of FRS 102 to all of its financial instruments.
Financial instruments are recognised in the Group's Statement of Financial Position when the Group becomes party to the contractual provisions of the instrument.
Financial assets and liabilities are offset, with the net amounts presented in the financial statements, when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle on a net basis or to realise the asset and settle the liability simultaneously.
Basic financial assets
Basic financial assets, which include trade and other receivables, cash and bank balances, are initially measured at their transaction price including transaction costs and are subsequently carried at their amortised cost using the effective interest method, less any provision for impairment, unless the arrangement constitutes a financing transaction, where the transaction is measured at the present value of the future receipts discounted at a market rate of interest.
Discounting is omitted where the effect of discounting is immaterial. The Group's cash and cash equivalents, trade and most other receivables due with the operating cycle fall into this category of financial instruments.
Impairment of financial assets
Financial assets are assessed for indicators of impairment at each reporting date.
Financial assets are impaired when events, subsequent to their initial recognition, indicate the estimated future cash flows derived from the financial asset(s) have been adversely impacted. The impairment loss will be the difference between the current carrying amount and the present value of the future cash flows at the asset(s) original effective interest rate.
If there is a favourable change in relation to the events surrounding the impairment loss then the impairment can be reviewed for possible reversal. The reversal will not cause the current carrying amount to exceed the original carrying amount had the impairment not been recognised. The impairment reversal is recognised in the profit or loss.
Financial liabilities
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FORMATION GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 AUGUST 2023
2.Accounting policies (continued)
Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instruments any contract that evidences a residual interest in the assets of the Group after the deduction of all its liabilities.
Basic financial liabilities, which include trade and other payables, bank loans, other loans and loans due to fellow group companies are initially measured at their transaction price after transaction costs. When this constitutes a financing transaction, whereby the debt instrument is measured at the present value of the future receipts discounted at a market rate of interest. Discounting is omitted where the effect of discounting is immaterial.
Debt instruments are subsequently carried at their amortised cost using the effective interest rate method.
Trade payables are obligations to pay for goods and services that have been acquired in the ordinary course of business from suppliers. Trade payables are classified as current liabilities if the payment is due within one year. If not, they represent non-current liabilities. Trade payables are initially recognised at their transaction price and subsequently are measured at amortised cost using the effective interest method. Discounting is omitted where the effect of discounting is immaterial.
Derecognition of financial instruments
Derecognition of financial assets
Financial assets are derecognised when their contractual right to future cash flow expire, or are settled, or when the Group transfers the asset and substantially all the risks and rewards of ownership to another party. If significant risks and rewards of ownership are retained after the transfer to another party, then the Group will continue to recognise the value of the portion of the risks and rewards retained.
Derecognition of financial liabilities
Financial liabilities are derecognised when the Group's contractual obligations expire or are discharged or cancelled.
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FORMATION GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 AUGUST 2023
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 2023
Page 36
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FORMATION GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 AUGUST 2023
Page 37
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FORMATION GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 AUGUST 2023
11.Taxation (continued)
There were no factors that may affect future tax charges.
Page 38
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FORMATION GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 AUGUST 2023
12.Tangible fixed assets (continued)
Page 40
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FORMATION GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 AUGUST 2023
Page 41
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FORMATION GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 AUGUST 2023
Page 42
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FORMATION GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 AUGUST 2023
Page 43
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FORMATION GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 AUGUST 2023
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.
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FORMATION GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 AUGUST 2023
15.Debtors (continued)
Page 45
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FORMATION GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 AUGUST 2023
The other loan is secured by fixed charge on the leasehold property.
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FORMATION GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 AUGUST 2023
The other loan is secured by fixed charge on the leasehold property.
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FORMATION GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 AUGUST 2023
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.
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FORMATION GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 AUGUST 2023
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.
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FORMATION GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 AUGUST 2023
21.Deferred taxation (continued)
Page 50
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FORMATION GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 AUGUST 2023
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 £64,616 (2022 - £47,866). Contributions totalling £8,356 (2022 - £21) were payable to the fund at the reporting date and are included in creditors.
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FORMATION GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 AUGUST 2023
The ultimate controlling party is Bond Trust Limited, acting as a corporate trustee.
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