For the year ended 31 August 2016 the Group reported revenue growth of 24%.
Maintained 2 years of profit growth.
The Company’s growth prospects are enhanced by the addition of property development activities.
Formation Group has a completely restructured management team with significant plc and property experience, and demonstrable record of delivering returns for shareholders.
The Group has a healthy balance sheet with no debt.
The Company also benefits enormously from having an in-house builder so there is need to outsource this function. This gives Formation Group a considerable competitive advantage and ensures that it can retain and maximise its profits.
The Group can easily expand its activity UK wide and has identified significant opportunities for expansion.
How long does does it take to buy the land, get planning permission and then sell?
Projects generally take one to two years to complete. Larger (£30 million plus) projects can take up to three years to deliver depending on phasing, sales and the clients’ funding arrangements.
When will the current projects be completed?
At the end of August 2016, Formation Group had seven on-going contracts with eight completed during the year .The Company’s order book has continued to expand with larger project management contracts in place.
The Company has completed its first property development at 159-161 Iverson Road, London, purchased by Formation Homes (London) Limited, a wholly owned subsidiary of the Company in March 2016.
How difficult is it to get planning permission?
Development issues relating to planning permission are mitigated by Formation Group’s projects that concentrate on ‘permitted development’, which have included conversion of commercial space to residential use.
Is the focus just residential?
The company currently focuses on the residential sector with some elements of commercial build if part of the scheme. We are presently concentrating on the first time buyer market and source conversions, new builds and permitted development projects.
Is the focus just on London?
The Group’s portfolio is centered primarily on London at present. To date the London market is where most of the Company’s growth has come from. 2016 reaffirmed the Company’s rationale for being focused on London, with the London property market growing. This continued upside occurred against earlier predictions that the market would stall in London. This growth was particularly seen in the mid to lower end of the market, which is where the Company focuses on. Formation Group has the structural and managerial capability to move into another region very easily.
Why have you chosen to focus on the lower to mid end of the market?
The government has committed itself to delivering 400,000 affordable houses by 2020-21 for first time buyers, and to creating one million home owners by 2020. This represents a significant opportunity for Formation Group.
What are the risks?
Slow-down in market
Still unknown effect of the ‘Brexit’ vote on property prices and demand
Rise in interest rates
Projects running overschedule and over budget
Cost of capital increasing on projects
What will be the approximate debt burden for funding new developments?
75% debt and 25% equity.
What is the free float?
As of 08/12/2015: 83.29 m shares (37.77% of total outstanding)
What are the plans to pay dividends?
The Group does not currently pay a dividend. However, the Directors are committed to delivering returns to shareholders and it is the Company’s intention, once it has reached a certain level of profitability and size to issue a dividend. The Directors will review its dividend policy during the preparation of its annual results for the year ending 31 August 2016.
What is the Company’s cash position?
Cash and cash equivalents: 08/2016: £.330 million 08/2015: £1.633 million
What further developments have you got in the pipeline?
The Company is assessing further projects and is well placed to take advantage of the opportunities afforded by the housing provision policies outlined in the Autumn Statement 2015. Some new projects are already in the process of being appraised. An update on them will be provided in due course.
How do you plan to develop the Group over the next four years?
The Company recently added a property development arm to its operations. The Group expects that income from this division will form a substantial part of its profitability in the future. The overall strategic objective is to grow the Group’s property portfolio and deliver long-term growth, profitability and sustainable returns to shareholders.