Threefold_Agency_Ltd - Accounts

The directors present the strategic report for the year ended 30 September 2019.

In the year ending 30 September 2019 the principle activity of the company was the planning, selling, campaign execution, and evaluation of retail marketing campaigns for major retail partners.

                    FY2019            FY2018            Change
                     £’000             £’000             %

Gross sales billed to advertisers        24,987            24,252             + 3
Revenues recognised by Threefold        16,004            14,982             + 7
Gross margin                 5,222             5,944             - 12
Operating expenses            (3,221)            (3,376)             - 5    
Operating profit                 2,001             2,568             - 22    

In the above KPIs, gross sales refer to the gross value of media and related services sold to advertisers. The directors believe the gross sales figures can provide a more useful indicator of the underlying revenues generated by the company than the recognised sales revenues. This is for two reasons:

• All gross sales to a retail partner’s suppliers are generated or implemented by the company’s employees who engage directly with those suppliers, win new business, and manage the ensuing implementation of the work, even though in some cases the billing to the supplier may be carried out by the retail partner.

• When the company carries out the billing to suppliers of a retail partner, the directors need to determine whether the company is acting as agent or principal. In an agency relationship the company may collect consideration from its customers on behalf of the principal, but its recognised revenue would include only the amount of its commission or other fees rather than the sales value billed

Over the past 18 months the company has reviewed its portfolio of retailer partnerships and either ended or renegotiated the partnerships in place. While this has led to a year on year decline in gross margin the directors believe that this has protected the long-term profitability of the company through removing partnerships in decline and extending partnerships with long-term value.

Commercial Risks

The company’s business model relies on commercial relationships with major clients and suppliers. In order to mitigate risk, the directors put a focus on the ongoing review of these relationships, ensuring the company is working collaboratively with all major stakeholders and that the business is not reliant on any individual relationships.

Financial Risks Management Objectives and Policies

The company has established a risk and financial management framework whose primary objectives are to protect the company from events that hinder the achievement of its performance objectives. The objectives aim to limit undue counterparty exposure, ensure sufficient working capital exists, and to monitor the management of risk at a business unit level. The company's financial instruments comprise trade receivables, trade payables, and cash. The company is not exposed to any foreign exchange risk as all its assets, liabilities, sales, and purchases are denominated in Sterling.

Credit risk is managed using periodic customer credit checks, the application of credit limits, and the regular monitoring and proactive management of amounts outstanding by the company's credit control function.

Liquidity risk is managed by careful management of working capital to ensure sufficient cash is available for the company to finance its growth and to meet its liabilities as they fall due.

The company has no borrowings and therefore does not have any exposure to interest rate risks

COVID-19 Risk

While the COVID-19 pandemic has had a negative impact on the company’s sales in the second half of FY2020 the board has taken steps to ensure the impact on profit & cash flow is mitigated. This has included: prioritising the preservation of cash within the company throughout the duration of the crisis, taking advantage of financial support offered by the UK government, and the reduction of discretionary costs that are non-essential to business continuity. As a result, the company is expected to trade profitably and with positive cash flows through the COVID-19 pandemic.

On behalf of the board

The directors present their annual report and financial statements for the year ended 30 September 2019.

In the year ending 30 September 2019 the principal activity of the company was the planning, selling, campaign execution, and evaluation of retail marketing campaigns for major retail partners.

The directors who held office during the year and up to the date of signature of the financial statements were as follows:

The results for the year are set out on page 8.

Ordinary dividends were paid amounting to £1,000,000. The directors do not recommend payment of a further dividend.

The auditor, Moore Kingston Smith LLP, is deemed to be reappointed under section 487(2) of the Companies Act 2006.

The directors are responsible for preparing the annual report and the 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 United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). 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 of the profit or loss of the company for that period. In preparing these financial statements, the directors are required to:

•     select suitable accounting policies and then apply them consistently;

•     make judgements and accounting estimates that are reasonable and prudent;

•     prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company 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 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 hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

So far as each person who was a director at the date of approving this report is aware, there is no relevant audit information of which the company’s auditor is unaware. Additionally, the directors individually have taken all the necessary steps that they ought to have taken as directors in order to make themselves aware of all relevant audit information and to establish that the company’s auditor is aware of that information.

We have audited the financial statements of Threefold Agency Ltd (the company') for the year ended 30 September 2019 which comprise the Income Statement, the Balance Sheet and notes to the financial statements, 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 FRS102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (United Kingdom Generally Accepted Accounting Practice).

In our opinion the financial statements:

•     give a true and fair view of the state of the company's affairs as at 30 September 2019 and of its profit for the year then ended;

•     have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and

•     have been prepared in accordance with the requirements of the Companies Act 2006.

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 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

We have nothing to report in respect of the following matters in relation to which the ISAs (UK) require us to report to you where:

• the directors' use of the going concern basis of accounting in the preparation of the financial statements is not appropriate; or

• the directors have not disclosed in the financial statements any identified material uncertainties that may cast significant doubt about the company’s ability to continue to adopt the going concern basis of accounting for a period of at least twelve months from the date when the financial statements are authorised for issue.

Other information

The directors are responsible for the other information. The other information comprises the information included in the annual report, other than the financial statements and our auditor’s report thereon. 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.

In connection with our audit of the financial statements, 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 audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the financial statements or a material misstatement of the other information. 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 company and its environment obtained in the course of the audit, we have not identified material misstatements in the Strategic Report and the Directors' Report.

We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion:

•     adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us; or

•     the 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 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 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.

As part of an audit in accordance with ISAs (UK) we exercise professional judgement and maintain professional scepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purposes of expressing an opinion on the effectiveness of the company’s internal control.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors.

• Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the company to cease to continue as a going concern.

• Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

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 for no purpose other than to draw to the attention of the company’s members those matters we are required to include in an auditor's report addressed to them. To the fullest extent permitted by law, we do not accept or assume responsibility to any party other than the company and the company’s members as a body, for our work, for this report, or for the opinions we have formed.

The Income Statement has been prepared on the basis that all operations are continuing operations.

Threefold Agency Ltd is a private company limited by shares incorporated in England and Wales. The registered office is 22a Leathermarket Street, London, SE1 3HP.

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 pound.

The financial statements have been prepared under the historical cost convention. The principal accounting policies adopted are set out below.

This 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:

• 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’ – Carrying amounts, interest income/expense and net gains/losses for each category of financial instrument; 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;

The financial statements of the company are consolidated in the financial statements of Shopper Media Group Limited. These consolidated financial statements are available from Companies House, Crown Way, Cardiff, CF14 3UZ.

At the balance sheet date, the company made a profit for the year of £true1,636,312 (2018: £2,078,807), and had net assets at that date of £2,596,393 (2018: £1,960,081). Subsequent to the year end, the group has continued to make a profit however as a result of the impact of COVID-19 and the measures taken to contain it in the UK, sales levels have reduced in the second half of the year ending 30 September 2020 and may reduce further in the future. The directors intend to mitigate the impact on profit where necessary through the use of government support measures and reduction of operating expenses. The group has sufficient cash reserves at the date of approval of the financial statements, and therefore the directors believe that the group will be able to continue in business and meet its liabilities as they fall due for a period of at least twelve months from the date of approval of the financial statements.

Revenue is recognised at the fair value of the consideration received or receivable for services provided in the normal course of business, and is shown net of VAT and other sales related taxes. The fair value of consideration takes into account trade discounts, settlement discounts and volume rebates.

Revenue represents income that has been earned from the sale of brand retail media and marketing services, exclusive of VAT. Revenue is recognised on delivery of the media, and where customers' product marketing campaigns comprise multiple elements, turnover is recognised as each element is delivered. Revenue on services is recognised as contract activity progresses. Customer invoicing normally takes place at the commencement of the overall campaign and therefore, where sales invoices are issued prior to the delivery of a campaign element, revenue recognition is deferred until delivery has taken place. Conversely, revenue is accrued if delivery of any element of media and services has already taken place but the related sales invoices have not yet been issued.

In respect of sales contracts the company has determined that it acts as both agent and principal on different contracts. Where the company acts as principal it recognises gross revenue in respect of the contract, as it has exposure to the risks and rewards associated with delivery of services. Where the company acts as agent it may collect consideration from its customers on behalf of the principal but its revenue only includes the amount of its commission or other fees.

Property, plant and equipment are initially measured at cost and subsequently measured at cost or valuation, net of depreciation and any impairment losses.

Depreciation is recognised so as to write off the cost or valuation of assets less their residual values over their useful lives on the following bases:

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 credited or charged to profit or loss.

Cash and cash equivalents are basic financial assets and include cash in hand, deposits held at call with banks, other short-term liquid investments with original maturities of three months or less, and bank overdrafts.

The company only has basic financial instruments measured at amortised cost, with no financial instruments classified as other, or basic financial instruments measured at fair value.

Equity instruments issued by the company are recorded at the proceeds received, net of direct issue costs.

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 company’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.

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. Deferred tax assets and liabilities are offset when the company has 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.

Rentals payable under operating leases, including any lease incentives received, are charged to income 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 lease asset are consumed.

In the application of the company’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 following judgements (apart from those involving estimates) have had the most significant effect on amounts recognised in the financial statements.

The company recognises its revenue for different contracts both as principal and agent. The company accounts for a contract as principal when it has exposure to the significant risks and rewards associated with the rendering of services.

All payroll expenses are borne by the parent company, Shopper Media Group Limited, and then recharged at cost.

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 following are the major deferred tax liabilities and assets recognised by the company and movements thereon:

The deferred tax liability set out above is expected to reverse within the next 3 years and relates to accelerated capital allowances that are expected to mature within the same period.

The company operates a defined contribution pension scheme for all qualifying employees. The assets of the scheme are held separately from those of the company in an independently administered fund.

At the reporting end date the company had outstanding commitments for future minimum lease payments under non-cancellable operating leases, which fall due as follows:

The immediate and ultimate controlling company is Shopper Media Group Limited, a company incorporated in England and Wales. The smallest and largest group in which the accounts are consolidated are those of Shopper Media Group Limited. The registered address of Shopper Media Group Limited is 22a Leathermarket Street, London, SE1 3HP.