The directors present the strategic report for the year ended 31 December 2023.
Fundamental Media Limited (FML) and its subsidiaries (together the “FM Group” or “Group”) continue to offer media research, planning, buying, consulting, and analytics services to clients within the Financial Services and Learning & Development industries. The FM Group offers its clients global coverage combined with local insight and knowledge into the relevant media landscapes ensuring they reach their target audiences wherever they are in the world. Media and central support services are provided out of the London HQ, with additional media teams delivering award-winning market and media intelligence from our offices in Boston, Hong Kong, Rotterdam, and Sydney.
To assist the review of the Directors’ performance of their duties under Section 172, the Strategic Report includes commentary on the business model and strategic objectives, the principal risks identified, the financial performance of the business and relevant non-financial information including our commitment stakeholders.
Executive Summary
The Group has completed another successful year, achieving goals for our traditional business as well as the business transformation goals set by the board in its 5-year plan in 2019.
Investment in technology and staff remains high and the impact of our 5-year plan is increasingly evident as the new business structure is driving growth in both billings and margin. Furthermore, the new sub-brands launched as part of the 5-year plan are developing in line with expectations.
Our leadership team’s commitment to the plan is exemplified by the significant investment in our people and novel technologies and is further validated by the numerous industry awards won by the Group.
Our business focuses on offering strategic support and solutions for marketing departments in the cross border B2B sectors of Asset Management, Insurance, Corporate Finance, and Learning & Development.
A core objective of the sector specific business approach has been to create a centralised data set for all marketing performance data.
The ‘data first’ approach of the business is proving extremely valuable and facilitates fast and robust integration of AI technologies, specifically, the Large Language Model (“Allium”) that will be launched in 2024 within the Alphix Solutions platform and is supporting our media and marketing teams. Allium will be deployed across the full suite of FM solutions through 2024.
The success of our approach and technology offerings has been corroborated by noteworthy awards won during 2023, including:
Drum Awards:
- Agency Business for Fundamental Group – Finalist
Investment Week Investment Marketing and Innovation Awards:
- Open Innovation for Alphix Solutions - Winners
- Agency of the Year for Fundamental Group - Shortlist
- Campaign Innovation for Fundamental Media - Shortlist
Financial Services Forum Awards for Innovation and Transformation:
- Best Innovation in Use of Technology for Alphix Solutions – Highly Commended
- Best Innovation in Marketing for Fundamental Media – Shortlist
Marketing, Advertising and Sales Excellence Awards (MAX):
- Agency of the Year – Fundamental Media
Gramercy Institute Financial Strategy Awards:
- B2B for Fundamental Media with Columbia Threadneedle Investments – Winners
- B2B for Fundamental Media with Morningstar Wealth Management Solutions – Winners
- B2B for Fundamental Media with Baillie Gifford – Winners
Further details of the awards are available on our website.
In response to the rapidly evolving media market, updates have been made to the 5-year development plan (to 2025) as we complete year 3:
Strategic restructure of the business
The 5-year plan progress continues to prepare the group for aggressive scaling across multiple disciplines.
a. Initial steps to delineate between Fundamental Group departments with the objective of establishing separate leadership teams for each department with clear mandates are complete. The departments are as follows:
1. Media planning and buying
Work has commenced on the launching of the ‘SHM division’ within the Media team. This is an enhancement to the current strategic planning and buying service offered by FM.
2. Studio
Sonar Studio has broadened their service offering and have won additional clients (non-media buying clients).
3. Analytics and Intelligence
Alphix Trends, Signals and Vectors have launched in beta and should be live with clients in 2024.
4. Research and Consultancy
The Aureum ‘acquisition’ of Fundamental Research is underway, with Aureum taking over full responsibility for all FM Group generated research.
5. Technology R&D
Fundamental Labs has been at the forefront of conceptualising and launching Trends, Signals, Vectors, xPost and Allium in 2023. A range of initiatives are in the pipeline for 2024.
b. Cross sector expansion
Services are offered to the Business Education, Reinsurance, and Transaction Banking sectors with further expansion under discussion.
Market uncertainty, inflation, geo-political tensions, and the challenge of ‘work from home’ all present risk to our business.
A satellite office in Fleet, Hampshire has been set up to allow a ‘closer to home working’ space for our staff in the area. This has been successful in attracting new staff to an ‘in office’ environment for improved collaboration and teamwork.
The increasing presence of Artificial Intelligence within the industry is an area of interest and presents new opportunities as well as risk. We continue to invest heavily in this area and have a number of initiatives in the Alphix and Labs divisions to integrate AI and LLMs.
The leadership team continues to monitor these risks and develop contingency plans where viable.
FM Group operates a collaborative, transparent management structure. Strategic initiatives are communicated early on to all members of staff, and opportunities for innovation and contribution to our strategic direction are encouraged and rewarded. Formal decision-making structures include:
The Board of Directors: quarterly meetings including approval and review of significant strategic decisions, compliance matters and fiscal responsibility.
The Executive Committee (Exco): responsible for the day-to-day execution of strategy and Board directives.
Working Groups: arranged on functional lines and comprising relevant members of both the Board and the Exco who are responsible for project deliverables and operations improvements.
The 5-year plan has supported the ceding of daily strategic and operational control to each of the departments, with monthly operational and quarterly strategic reporting to the Fundamental Group leadership team.
Investment in technology has continued to drive business process improvements, additional services, and growth in our workforce.
We monitor the following key performance indicators:
Turnover: GBP110.1M (2022: GBP88.5M)
Gross Margin: GBP17.0M (2022: GBP14.1M)
Headcount: 165 (2022: 141)
Profit before tax: GBP2.3M (2022: GBP3.9M)
Although we monitor turnover closely as an indicator of market growth, our strategic focus is on gross margin growth. The year-on-year improvement in 2023 is due to the launch of the new fee-based solutions, and a general move to a retainer-based model from agency buying fee. This higher margin has supported the continued investment in people and technology (all R&D has been expensed) and therefore limited year on year growth at the operating profit level.
The Directors and team recognise that delivering an exceptional, high standard and consistent service to our clients is the cornerstone on which the Fundamental Group is built.
Initiatives in 2023 to support our clients included:
Ongoing research into the impact of cookie deprecation and other privacy driven technological changes.
Updated audience research on buying habits and trends.
Analysis of our data sets at scale to identify Trends in audience consumption.
Fundamental Media has a strong relationship with its media suppliers, regularly working with them to deliver media firsts around the world. 2023 initiatives to support our media partners included:
Planning and build of a publisher dashboard for campaign performance monitoring. Scheduled to launch in 2024.
An ‘Alphix for Publishers’ solution to allow publishers to benefit from the visibility offered by Alphix.
Fundamental Media has always sought to create a collegiate, family feel to the business. 2023 saw a significant increase in employee numbers as we continue to support the growth across the Group.
Despite the Covid era being behind us, the Group has continued to offer:
Full flexible and hybrid working, which ensures our team benefits from the combination of in-office collaboration and the advantages to personal well-being of remote working.
Regular leadership updates in the form of CEO communications and quarterly Town Halls as well as the annual company conference that ensures our team is kept appropriately informed of the business’s progress and strategy.
Our bespoke training and development platform (CPD Hub) allows for continued learning and professional development.
We continue to encourage our people in their mental wellbeing, with our teams around the world marking World Mental Health Day by enjoying breakfast together, encouraging connection and conversation. Our social media pages give regular news flow on our teams’ activities.
A new office in Hampshire is providing a reduced commute for teams in the area – providing an initial test to a decentralised working structure.
The new company structure referenced previously provides benefit beyond the ability to accelerate innovation across the breadth of our services. It is also designed to create opportunity for staff to progress within the company along a range of lines from creative to analytics. This approach is intended to encourage staff to view the Fundamental Group as an opportunity for a long-term career as opposed to a short-term role.
The Directors recognise FM Group’s obligations as a responsible corporate citizen.
During 2023 Fundamental Media achieved an Ecovadis Sustainability rating of Silver. Ecovadis is a globally recognized assessment platform that rates businesses’ sustainability across four key categories: environmental impact, labour and human rights standards, business ethics, and procurement practices.
In all metrics, we achieved a rating of Good or Advanced, with an overall score playing us in the 86th percentile of Marketing and Advertising agencies assessed by Ecovadis globally.
Our employees are given paid time off to support charitable initiatives and are encouraged to give-back to the communities through our Charity and Volunteering policies. Events in 2023 included:
The UK team undertook the Yorkshire Three Peaks Challenge, raising useful funds for two London based community charities:
- Power Mobile Gym which helps empower young people through Boxing and employment pathway programs; and
- Savings Souls Hub a community organisation which provides support for mental health issues as well as a weekly foodbank.
The team also participated in the Citywire Charity Run in support of Citywire’s fundraising for Radio Lollipop, an organisation that supports children in hospital.
Fundamental London continues to partner with Future Frontiers, an education charity supporting young people by providing mentorship in their transition year of school.
Fundamental Media USA actively supports the Financial Communication Society via sponsorship of and attendance at its events. The FCS is a non-profit organisation with a philanthropic mission to support children’s charities including Hope & Heroes, Columbia University Medical Centre, Make-A-Wish and Downey Side Adoption Agency.
Our US team is also part of the Green Network Exchange, a Boston ‘electronics drive’ where we donate unused/retired electronic hardware to prevent it going to landfill.
The FM Group continues to support the asset management industry’s charitable initiatives, including CASCAID events, which had Cancer Research, Great Ormond Street Hospital, and the NSPCC as its chosen beneficiaries for 2023.
Fundamental Media Limited remains a signatory to the UK’s Armed Forces Covenant; supporting the promise made by the nation that those who serve or have served in the Armed Forces, and their families, should be treated fairly and should not face disadvantages when seeking to access public or private goods and services in the UK.
The Fundamental Media Group of companies is committed to acting ethically, achieving the highest standards of quality, honesty, openness, and accountability in all of our business activities, including in the appointment of suppliers. We expect suppliers to operate in compliance with all applicable law and regulations and the values which underpin them. These expectations are documented in our Supplier Code of Conduct, which is reflective of the principles laid out in the UN Global Compact and the UN’s Guiding Principles on Business and Human Rights.
On behalf of the board
The directors present their annual report and financial statements for the year ended 31 December 2023.
The results for the year are set out on page 12.
Ordinary dividends were paid amounting to £2,427,224. The directors do not recommend payment of a final dividend.
The directors who held office during the year and up to the date of signature of the financial statements were as follows:
The objective of the company in managing liquidity risk is to ensure that it can meet its financial obligations as and when they fall due. The company expects to meet its financial obligations through operating cash flows.
The company is exposed to currency exchange rate risk due to a significant proportion of its receivables and operating expenses being denominated in non-Sterling currencies. This risk is largely mitigated by the Company's policy to trade only in local currencies. The net exposure of each currency is monitored and managed.
The company may offer credit terms to its customers which allow payment of the debt after delivery of services. The company is at risk to the extent that a customer may be unable to pay the debt on the specified due date. This risk is mitigated by the strong ongoing customer relationships and strong internal credit control and reviews.
The auditors, Grunberg & Co Limited, will be proposed for re-appointment at the forthcoming Annual General Meeting.
Fundamental Media Limited meets the conditions for de minimis exemption from reporting their level of emissions and energy consumption.
This de minimis exemption falls under the Companies and Limited Liability Partnerships Regulations (SI 2018/ 1155) regulations, which states that where energy consumption is 40,000kWh or less in the UK during the financial year there is no requirement to disclose.
How the Directors have had regard to the need to foster the company's business relationships has been discussed in the section 172 Statement of the Strategic Report. Refer to this for more details.
We have audited the financial statements of Fundamental Media Limited (the 'parent company') and its subsidiaries (the 'group') for the year ended 31 December 2023 which comprise the group income statement, the group statement of comprehensive income, the group statement of financial position, the company statement of financial position, 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; or
the directors were not entitled to prepare the financial statements in accordance with the small companies regime and take advantage of the small companies exemption in preparing the directors' report and take advantage of the small companies exemption from the requirement to prepare a strategic report.
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 extent to which our procedures are capable of detecting irregularities, including fraud, is detailed below.
In identifying and assessing risks of material misstatement in respect of irregularities, including fraud and non-compliance with laws and regulations, we considered the following:
- the nature of the industry and sector and whether the financial results of our client differed from industry trends;
- the legal and regulatory framework that the Company 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;
- the matters discussed among the audit engagement team during the planning process regarding how and where fraud might occur in the financial statements and any potential indicators of fraud.
Audit procedures performed included reviewing the financial statements disclosures and testing to supporting documentation to assess compliance with provisions of relevant laws and regulations described as having a direct effect on the financial statements; discussions with the directors on their own assessment of the risks that irregularities may occur either as a result of fraud or error, their assessment of compliance with laws and regulations and whether they were aware of any instances of non-compliance, including any potential litigation or claims;performing analytical procedures to identify any unusual or unexpected relationships that may indicate risks of material misstatement due to fraud; in addressing the risk of fraud through management override of controls, testing the appropriateness of journal entries and other adjustments; assessing whether the judgements made in making accounting business rationale of any significant transactions that are unusual or outside the normal course of business.
As a result of our assessment, it is considered that there are no laws and regulations for which non-compliance may be fundamental to the operating aspects of the business. However, laws and regulations considered to have a direct effect on the financial statements included the UK Companies Act, Employment Laws, Tax and Pensions legislation and Health & Safety legislation.
No instances of material non compliance were identified. However, the likelihood of detecting irregularities,including fraud,is limited by the inherent difficulty in detecting irregularities, the effectiveness of the entity's controls , and the nature,timing and extent of the audit procedures performed. Irregularities that result from fraud might be inherently more difficult to detect than irregularities that result from error. There is an unavoidable risk that material misstatements may not be detected, even though the audit has been planned and performed in accordance with the ISAs (UK).
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.
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 £2,439,335 (2022 - £2,425,459 profit).
Fundamental Media Limited (“the company”) is a private limited company domiciled and incorporated in England and Wales. The registered office is 100 Cannon Street, 3rd Floor, London, EC4N 6EU.
The group consists of Fundamental Media 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 group financial statements consolidate the financial statements of Fundamental Media Limited and all its subsidiary undertakings drawn up to 31 December 2023. The subsidiaries, where applicable, of the group have taken exemption under FRS102 from preparing individual cash flows.
At the time of approving the financial statements, the directors have a reasonable expectation that the group 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 net invoiced sales of services, excluding value added tax. Turnover is recognised when the risks and rewards of the delivery of service has occurred as follows:
Media consulting or planning services: Sales are recognised according to the contracted delivery criteria.
- Retainer fees: are recognised evenly over the period of the retained services;
- Planning fees: are recognised at the point of delivery of the client-accepted plan.
Media buying:
- Media charges: are recognised on the committed insertion date of the advertising campaign;
- Media buying fees: are recognised on the committed insertion date of the advertising campaign.
- Income from real time buys: is recognised by reference to the stage of completion of the committed views in the advertising campaign.
Expenditure on research and development is written off in the year in which it is incurred.
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 income statement.
In the parent company financial statements, investments in subsidiaries and associates are initially measured at cost and subsequently measured at cost less any accumulated impairment losses.
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.
In the individual financial statements interest in subsidiaries and associates are 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.
An associate is an entity, being neither a subsidiary nor a joint venture, in which the company holds a long-term interest and where the company has significant influence. The group considers that it has significant influence where it has the power to participate in the financial and operating decisions of the associate.
Material investments in associates are initially recognised at the transaction price (including transaction costs) and are subsequently adjusted to reflect the group’s share of the profit or loss, other comprehensive income and equity of the associate using the equity method. Any difference between the cost of acquisition and the share of the fair value of the net identifiable assets of the associate on acquisition is recognised as goodwill. Any unamortised balance of goodwill is included in the carrying value of the investment in associates.
Losses in excess of the carrying amount of an investment in an associate are recorded as a provision only when the company has incurred legal or constructive obligations or has made payments on behalf of the associate.
In the parent company financial statements, investments in associates are accounted for at cost less impairment.
At each reporting period end date, the group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the company estimates the recoverable amount of the cash-generating unit to which the asset belongs.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.
Recognised impairment losses are reversed if, and only if, the reasons for the impairment loss have ceased to apply. Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.
The Group only enters into basic financial instruments transactions that result in the recognition of financial assets and liabilities like trade and other debtors and creditors, loans to related parties and investments in non-puttable ordinary shares.
Financial assets that are measured at cost and amortised cost are assessed at the end of each reporting period for objective evidence of impairment. If objective evidence of impairment is found, an impairment loss is recognised in profit or loss.
Financial assets and liabilities are offset and the net amount reported in the Balance Sheet when there is an 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, including trade and other debtors, are initially recognised at transaction price, 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. Such assets are subsequently carried at amortised cost using the effective interest method less any impairment.
Cash and cash equivalents are represented by cash in hand, deposits held at call with financial institutions, and other short-term highly liquid investments that mature in no more than three months from the date of acquisition and that are readily convertible to known amounts of cash with insignificant risk of change in value.
Basic financial liabilities, including trade and other creditors and loans from related parties, are initially recognised at transaction price, unless the arrangement constitutes a financing transaction, where the debt instrument is measured at the present value of the future payments discounted at a market rate of interest. Such instruments are subsequently carried at amortised cost using the effective interest method less any impairment.
Financial assets, other than those held at fair value through profit and loss, are assessed for indicators of impairment at each reporting end date.
Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows have been affected. If an asset is impaired, the impairment loss is the difference between the carrying amount and the present value of the estimated cash flows discounted at the asset’s original effective interest rate. The impairment loss is recognised in profit or loss.
If there is a decrease in the impairment loss arising from an event occurring after the impairment was recognised, the impairment is reversed. The reversal is such that the current carrying amount does not exceed what the carrying amount would have been had the impairment not previously been recognised. The impairment reversal is recognised in profit or loss.
Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire or are settled, or when the group transfers the financial asset and substantially all the risks and rewards of ownership to another entity, or if some significant risks and rewards of ownership are retained but control of the asset has transferred to another party that is able to sell the asset in its entirety to an unrelated third party.
Financial liabilities are derecognised when the group's contractual obligations expire or are discharged or cancelled.
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 income statement 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 income statement, 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.
Provisions are recognised when the company has a present obligation (legal or constructive) as a result of a past event, it is probable that the group will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation.
The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation.
Where the effect of the time value of money is material, the amount expected to be required to settle the obligation is recognised at present value using a pre-tax discount rate. The unwinding of the discount is recognised as a finance cost in profit or loss in the period it arises.
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.
The group operates a defined contribution pension scheme. Contributions payable to the group's pension scheme are charged to profit or loss in the period to which they relate.
Equity-settled share-based payments to employees and others providing similar services are measured at the fair value of the equity instruments at the grant date. The fair value excludes the effect of non-market-based vesting conditions. Details regarding the determination of the fair value of equity-settled share-based transactions are set out in note 21.
The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the vesting period, based on the Company's estimate of equity instruments that will eventually vest unless the exercise period commences immediately following the grant date, in which case the entire fair value of the equity-settled share-based payment is expensed to the income statement. At each balance sheet date, the Company revises its estimate of the number of equity instruments expected to vest as a result of the effect of non-market-based vesting conditions. The impact of the revision of the original estimates, if any, is recognised in profit or loss such that the cumulative expense reflects the revised estimate, with a corresponding adjustment to equity reserves.
Rentals payable under operating leases are charged to profit or loss on a straight-line basis over the lease term.
The company recognises government grants received relating to the Coronavirus Job Retention Scheme on an accruals basis. The grants are recognised in the Income Statement over the period in which the company recognises the related costs for which the grant is intended to compensate.
Monetary assets and liabilities in foreign currencies are translated into sterling at the rates of exchange ruling at the statement of financial position date. Transactions in foreign currencies are translated into sterling at an average rate of exchange. Exchange differences are taken into account in arriving at the operating result.
For the purpose of presenting consolidated financial statements, the assets and liabilities of the group's foreign operations are translated from their functional currency to sterling using the closing exchange rate. Income and expenses are translated using the average rate for the period, unless exchange rates fluctuated significantly during that period, in which case the exchange rates at the dates of the transactions are used. Exchange differences arising on the translation of group companies are recognised in other comprehensive income and not reclassified to profit and loss.
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 estimates and assumptions which have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities are as follows.
Estimates are made for operational accruals where expenditure invoices may not yet have been received but the liability is believed to have been incurred or where a variance in activity has been recorded. The determination of the annual bonus accrual involves a level of estimation due to the inherent uncertainty associated with future events, market conditions and the companies’ performance.
The average monthly number of persons (including directors) employed by the group and company during the year was:
Their aggregate remuneration comprised:
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:
The Finance Bill 2021 enacted provisions to increase the main rate of corporation tax to 25% from the current rate of 19% from 1 April 2023.
During the year, no impairment provisions have been made against any class of tangible fixed assets.
Details of the company's investment in associate at 31 December 2023 is as follows:
This investment in associate was not equity accounted in the current year as the amount is wholly immaterial. For the year ended 31 December 2023 Nosible Ltd incurred a loss of £31,431 and had net assets of £185,818.
Details of the company's subsidiaries at 31 December 2023 are as follows:
[1] Alphix Solutions Limited became a trading company on 1 January 2024.
During the year, no impairment provisions have been made against any class of debtors.
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.
The following are the major deferred tax liabilities and assets recognised by the group and company, and movements thereon:
A Ordinary shares entitle the holders to two votes per share at all general meetings of the Company. All other classes of shares are entitled to one vote per share.
The directors may vote different dividends on each class of share.
Except for voting rights and rights to dividends as specified above,all shares rank pari passu.
Called-up share capital represents the nominal value of shares that have been issued.
Retained earnings includes all current and prior period retained profits and losses, all of which are distributable reserves.
Foreign exchange reserve comprises translation differences arising from the translation of financial statements of the Group's foreign entities into Sterling (£).
Other reserve represents excess of fair value over nominal value of shares issued in consideration received for the acquisition of subsidiaries where statutory merger relief has been applied.
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 remuneration of key management personnel is as follows.
As at the year end the company owed £339,310 (2022: £426,298) to the directors.