The directors present the strategic report for the year ended 31 March 2024.
Turnover decreased by 7.7% on the prior year, primarily due to decreases in some of Republic of Media Limited's key clients’ activity, in part due to a decrease in public sector spending. Group revenues have, however, increased (3.5%) as a consequence of strengthening our gross margin (+0.9%) through improved terms of business across both new & existing clients, and increased non-core revenue(s) during what was predicted to be, a turbulent trading period.
Strategic expansion and refurbishment of our office space was completed as planned, to allow for future growth. This, combined with inflationary cost increases across our business, have resulted in a year-on-year decline in operating profits of 13.1%. Pre-tax profits did however increase 11.6%, mainly due to our strategic use of reserves to capitalise on a higher interest rate economy.
The balance sheet reflects the group's strong financial position at the year end, positive cash flow and prompt cash collection resulting in debtor days of 11 (2023: 8).
While the business continues to rely on a small number of clients for a significant part of its revenue, this is typical of businesses in the marketing services industry - significant progress has been made in diversifying our client base.
Our core operations in regulated categories such as gambling and alcohol are at risk of new legislative and regulatory controls that could, potentially change or reduce our income, however mooted gambling (UK) and alcohol (Scotland) regulations have not materialised.
Higher inflation economy facing UK consumers is undoubtedly impacting client spend, new business and costs with salary inflation and slow new business growth continuing to impact the industry. This is likely to continue for some time however the board is confident that our strategy and financial position will continue to deliver profit in the face of changing economic conditions.
The board currently believes the outlook for the business is secure despite underperforming the headline UK advertising market.
The board has further identified the development of AI media planning tools as both a threat and an opportunity to our core business. We have established working groups to keep abreast of developments in this area and ensure we take advantage of efficiencies created by AI.
Management use a range of performance measures to monitor and manage the business, the key financial performance indicator used relating to profitability. No further information has been disclosed as the directors consider such information to be commercially sensitive. |
The group continues to aim to expand, with several other new ventures currently under consideration – this will further diversify the group’s trading position,and generate new income streams. We continue to believe in the power of diverse perspectives and have expanded the Board of Directors including bringing in a strategic director.
We have also brought additional employees into the ownership of the Group (via share option) which further strengthens our leadership and aids with retaining our most senior talent including finance and client leads.
The Freethinking Group Limited's directors are focused on the wellbeing and happiness of our people and consider these elements to be business critical. Our Fair Work First commitments (available to view on the Republic of Media website homepage) outline our progress in this area but we remain committed to an active belonging & wellbeing program as a key people pillar of our business strategy.
We continue to develop our culture to be supportive, inclusive and diverse and have invested heavily in our Belonging, equity and inclusion programme. Investment in Learning & Development has again increased across the group as we continue to aim to train and retain the best talent to remain competitive.
We recognise that the success of our business is directly aligned with the success of our clients and all our efforts are directed to working in our client’s best interests.
Our environmental and community impact is an important consideration addressed through our policies in these areas and we continue to work to increase the environmental sustainability of our business including retaining our ISO140001 accreditation for Republic of Media Ltd.
The board previously identified cybersecurity as an area of risk. To understand and mitigate this risk, we also retained our information security certification (ISO27001) and invested further in external IT support.
On behalf of the board
The directors present their annual report and financial statements for the year ended 31 March 2024.
The results for the year are set out on page 8.
Ordinary dividends were paid amounting to £623,000. The directors do not recommend payment of a further dividend.
The directors who held office during the year and up to the date of signature of the financial statements were as follows:
Geoghegans resigned as auditors following their merger with MHA on 1 February 2024, MHA were subsequently appointed as auditors. In accordance with the company's articles, a resolution proposing that MHA be reappointed as auditor of the company will be put to a general meeting.
Energy consumption data in kWh is obtained directly from billing data using published conversion factors. The conversion of kWh to Co2 emissions is calculated by reference to the UK Government's published conversion factors for company reporting.
The group has followed the 2019 HM Government Environmental Reporting Guidelines. The group has also used the GHG Reporting Protocol – Corporate Standard and have used the 2024 UK Government’s Conversion Factors for Company Reporting
The company consumed 128,475kWh with a resultant greenhouse gas emission of 26 tonnes of CO2 equivalent. The Intensity Ratio was 0.5 based on full time equivalents.
The chosen intensity measurement ratio is total gross emissions in metric tonnes CO2e per full time equivalents, the recommended ratio for the sector. Both of our buildings are on green energy tariffs.
The company is ISO 14001 Environmental Management accredited. The company has devised a Carbon Reduction plan and is on its way to improving its environmental impact.
In addition to this, this year we have enhanced our Travel & Expenses policy by implementing sustainable travel guidance to reduce our environmental impact.
We have audited the financial statements of The Freethinking Group Limited (the 'parent company') and its subsidiaries (the 'group') for the year ended 31 March 2024 which comprise the group profit and loss account, the group balance sheet, the company balance sheet, the group statement of changes in equity, the company statement of changes in equity, the group statement of cash flows and notes to the financial statements, including 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).
Basis for opinion
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 and parent company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’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.
Conclusions relating to going concern
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 and 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.
Other information
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.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of our audit:
the information given in the 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 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 their environment obtained in the course of the audit, we have not identified material misstatements in the strategic report or the directors' report.
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion:
adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or
the parent company financial statements are not in agreement with the accounting records and returns; or
certain disclosures of directors' remuneration specified by law are not made; or
we have not received all the information and explanations we require for our audit.
As explained more fully in the directors' responsibilities statement, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the directors are responsible for assessing the parent company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the parent company or to cease operations, or have no realistic alternative but to do so.
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 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 specific procedures for this engagement and the extent to which these are capable of detecting irregularities, including fraud is detailed below:
Enquiry of management, those charged with governance around actual and potential litigation and claims;
Enquiry of entity staff in compliance functions to identify any instances of non-compliance with laws and regulations;
Performing audit work over the risk of management override of controls, including testing of journal entries and other adjustments for appropriateness, evaluating the business rationale of significant transactions outside the normal course of business and reviewing accounting estimates for bias;
Reviewing minutes of meetings of those charged with governance;
Reviewing financial statement disclosures and testing to supporting documentation to assess compliance with applicable laws and regulations.
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 is available on the Financial Reporting Council’s website at: https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor's report.
Use of our 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.
The profit and loss account has been prepared on the basis that all operations are continuing operations.
As permitted by s408 Companies Act 2006, the company has not presented its own profit and loss account and related notes. The company’s profit for the year was £880,160 (2023 - £1,958,406 profit).
The Freethinking Group Limited (“the company”) is a private limited company domiciled and incorporated in England and Wales. The registered office is 26 Cross Street, Manchester, M2 7AQ.
The group consists of The Freethinking Group Limited and all of its subsidiaries.
These financial statements have been prepared in accordance with FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland” (“FRS 102”) and the requirements of the Companies Act 2006.
The financial statements are prepared in sterling, which is the functional currency of the company. Monetary amounts in these financial statements are rounded to the nearest £.
The financial statements have been prepared under the historical cost convention. The principal accounting policies adopted are set out below.
The company is a qualifying entity for the purposes of FRS 102, being a member of a group where the parent of that group prepares publicly available consolidated financial statements, including this company, which are intended to give a true and fair view of the assets, liabilities, financial position and profit or loss of the group. The company has therefore taken advantage of exemptions from the following disclosure requirements for parent company information presented within the consolidated financial statements:
Section 7 ‘Statement of Cash Flows’: Presentation of a statement of cash flow and related notes and disclosures;
Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instrument Issues: Interest income/expense and net gains/losses for financial instruments not measured at fair value; basis of determining fair values; details of collateral, loan defaults or breaches, details of hedges, hedging fair value changes recognised in profit or loss and in other comprehensive income;
Section 26 ‘Share based Payment’: Share-based payment expense charged to profit or loss, reconciliation of opening and closing number and weighted average exercise price of share options, how the fair value of options granted was measured, measurement and carrying amount of liabilities for cash-settled share-based payments, explanation of modifications to arrangements;
Section 33 ‘Related Party Disclosures’: Compensation for key management personnel.
The consolidated group financial statements consist of the financial statements of the parent company The Freethinking Group Limited together with all entities controlled by the parent company (its subsidiaries) and the group’s share of its interests in joint ventures and associates.
All financial statements are made up to 31 March 2024.
All intra-group transactions, balances and unrealised gains on transactions between group companies are eliminated on consolidation. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred.
Subsidiaries are consolidated in the group’s financial statements from the date that control commences until the date that control ceases.
The merger reserve represents the group reconstruction using the merger accounting principles which was undertaken on the 20 February 2019.
At the time of approving the financial statements, the directors have a reasonable expectation that the company has adequate resources to continue in operational existence for the foreseeable future. Thus the directors continue to adopt the going concern basis of accounting in preparing the financial statements.
Turnover represents the value of media handled by the company on behalf of clients, together with fees relating to media and research services provided. Media revenue is recognised when charges are made to clients, principally when advertisements appear in the media. Fees are recognised over the period of the relevant assignments or agreements.
Tangible assets are derecognised on disposal or when no future economic benefits are expected. The gain or loss arising on the disposal of an asset is determined as the difference between the sale proceeds and the carrying value of the asset, and is recognised in the profit and loss account.
The carrying value of tangible fixed assets are reviewed for impairment when events or changes in circumstances indicate the carrying value may not be recoverable.
Interests in subsidiaries are initially measured at cost and subsequently measured at cost less any accumulated impairment losses. The investments are assessed for impairment at each reporting date and any impairment losses or reversals of impairment losses are recognised immediately in profit or loss.
A subsidiary is an entity controlled by the group. Control is the power to govern the financial and operating policies of the entity so as to obtain benefits from its activities.
Fixed asset unlisted investments are initially measured at cost and subsequently measured at cost less any accumulated impairment losses. The investments are assessed for impairment at each reporting date and any impairment losses or reversals of impairment losses are recognised immediately in profit or loss.
The group has elected to apply the provisions of Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instruments Issues’ of FRS 102 to all of its financial instruments.
Financial instruments are recognised in the group's balance sheet when the group becomes party to the contractual provisions of the instrument.
Financial assets and liabilities are offset and 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.
Debtors with no stated interest rate or receivable within one year are initially recorded at transaction price. Any losses arising from impairment are recognised in the profit and loss account in other operating expenses.
Creditors with no stated interest rate payable within one year are recorded at transaction price.
Equity instruments issued by the group are recorded at the proceeds received, net of transaction costs. Dividends payable on equity instruments are recognised as liabilities once they are no longer at the discretion of the group.
The tax expense represents the sum of the tax currently payable and deferred tax.
The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the profit and loss account because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting end date.
Deferred tax liabilities are generally recognised for all timing differences and deferred tax assets are recognised to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits. Such assets and liabilities are not recognised if the timing difference arises from goodwill or from the initial recognition of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit.
The carrying amount of deferred tax assets is reviewed at each reporting end date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited in the profit and loss account, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax assets and liabilities are offset if, and only if, there is a legally enforceable right to offset current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority.
The costs of short-term employee benefits are recognised as a liability and an expense.
The cost of any unused holiday entitlement is recognised in the period in which the employee’s services are received.
Termination benefits are recognised immediately as an expense when the company is demonstrably committed to terminate the employment of an employee or to provide termination benefits.
Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due.
Equity-settled share-based payments are measured at fair value at the date of grant by reference to the fair value of the equity instruments granted using the future maintainable earnings model. The fair value determined at the grant date is expensed on a straight-line basis over the vesting period, based on the estimate of shares that will eventually vest. A corresponding adjustment is made to equity.
The expense in relation to options over the parent company’s shares granted to employees of a subsidiary is recognised by the company as a capital contribution, and presented as an increase in the company’s investment in that subsidiary.
Rentals payable under operating leases, including any lease incentives received, are charged to profit or loss on a straight line basis over the term of the relevant lease except where another more systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.
Transactions in currencies other than pounds sterling are recorded at the rates of exchange prevailing at the dates of the transactions. At each reporting end date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the reporting end date. Gains and losses arising on translation in the period are included in profit or loss.
Employee Share Ownership Trust (ESOT)
The Freethinking Group Limited and Republic of Media Limited established the The Freethinking Group Limited Employee Ownership Trust and Republic of Media Limited Employee Share Ownership Trust respectively. They are discretionary trusts, for the purpose of providing incentives and benefits for employees of the company. The respective company sponsors and controls the ESOT and therefore the assets and liabilities of the Trust are included in these financial statements.
In the application of the group’s accounting policies, the directors are required to make judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised where the revision affects only that period, or in the period of the revision and future periods where the revision affects both current and future periods.
The directors consider that there are no significant judgements, estimates or assumptions made which could have a material impact on these financial statements.
The average monthly number of persons (including directors) employed by the group and company during the year was:
Their aggregate remuneration comprised:
The number of directors for whom retirement benefits are accruing under defined contribution schemes amounted to 7 (2023 - 4).
The actual charge for the year can be reconciled to the expected charge for the year based on the profit or loss and the standard rate of tax as follows:
Details of the company's subsidiaries at 31 March 2024 are as follows:
Registered office addresses (all UK unless otherwise indicated):
Deferred tax assets and liabilities are offset where the group or company has a legally enforceable right to do so. The following is the analysis of the deferred tax balances (after offset) for financial reporting purposes:
A defined contribution pension scheme is operated for all qualifying employees. The assets of the scheme are held separately from those of the group in an independently administered fund.
During the year, 67,811 share options were granted with an exercise price of 11,73. The options outstanding at the year end had an exercise price of 11.73, and a remaining contractual life of 9 years.
The fair value of the options as at the the year end is 12.49 and reflects the current price if shares were allotted.
The weighted average fair value of options granted in the year was determined using future maintainable earnings. This is considered appropriate due to the long term nature of the potential exercise date.
The expected life used in the model has been adjusted, based on management’s best estimate, for the effect of non-transferability and exercise restrictions.
Non-vesting conditions are taken into account when estimating the fair value of the option at grant date. Service conditions and non-market performance conditions are taken into account by adjusting the number of options expected to vest at each reporting date.
All the shares are Ordinary shares ranking pari passu in respect of management involvement and participating in winding up.
At the reporting end date the group had outstanding commitments for future minimum lease payments under non-cancellable operating leases, which fall due as follows:
The following amounts were outstanding at the reporting end date:
The following amounts were outstanding at the reporting end date:
Dividends totalling £623,000 (2023 - £916,000) were paid in the year in respect of shares held by the company's directors.