SHARES in Hale Barns-based Formation Group crashed by nearly a third today after it warned of a potential £11.6m hit as a consequence of the collapse of Heritable Bank, a subsidiary of Iceland's Landsbanki.

The administration of Heritable has cast a doubt over a property development at Aldgate East underground station in London's East End.

Formation has acted as investment adviser to the scheme, for which Heritable provided £93m. Now the developer says there is uncertainty over the project's refinancing and completion by the deadline of August, 2011. Formation may be liable to repay the property company under its contract terms if construction and sales conditions are not met.

The news caused AIM-listed Formation's shares to plunge 32.43 per cent, or 3p, to 6.25p.

Formation is best known for managing the business affairs of entertainers and sports stars. Revenues for the year to August 31 rose from £11.1m to £35m and pre-tax profits from £1.4m to £3.35m.