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Registered number: 05032989









CHILDREN'S CHARACTER BOOKS LIMITED









ANNUAL REPORT AND FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2023

 
CHILDREN'S CHARACTER BOOKS LIMITED
 
 
COMPANY INFORMATION


Directors
Francesca Dow 
Sarah Roscoe (resigned 30 January 2023)
Nancy Twynam 
Thomas Weldon 
Stephen Davies 
Geraldine McBride (appointed 31 January 2023)
Christopher Turner (appointed 31 January 2023, resigned 31 August 2023)




Company secretary
Nicola Evans



Registered number
05032989



Registered office
20 Vauxhall Bridge Road

London

SW1V 2SA




Independent auditor
Grant Thornton UK LLP

Victoria House

199 Avebury Boulevard

Milton Keynes

MK9 1AU





 
CHILDREN'S CHARACTER BOOKS LIMITED
 

CONTENTS



Page
Strategic report
 
1 - 4
Directors' report
 
5 - 6
Directors' responsibilities statement
 
7
Independent auditor's report
 
8 - 12
Statement of comprehensive income
 
13
Balance sheet
 
14
Statement of changes in equity
 
15
Notes to the financial statements
 
16 - 33


 
CHILDREN'S CHARACTER BOOKS LIMITED
 
 
STRATEGIC REPORT
FOR THE YEAR ENDED 31 DECEMBER 2023

Introduction
 
The directors present their Strategic Report of Children's Character Books Limited (the 'Company') for the year ended 31 December 2023.

Principal activities

The Company is a joint venture between Penguin Books Limited (“PBL”) and BBC Studios Distribution Limited (“BBC”). As PBL owns 75% of the joint venture the Company is treated as its subsidiary. The Company is domiciled and registered in the United Kingdom. The principal activity of the Company continues to be book publishing.

Business review
 
The results and financial position of the Company are set out in the attached financial statements. There was a reduction in revenue of 35.58% to £1,718,728 (2022: £2,667,869), this reduction was mainly due to a reduction in volumes sold and hence cost of sales reduced by a similar 32.38%. The year on year reduction in revenue was driven by a decline in Hey Duggee sales which dropped 34.0%. This was consistent with the overall trend of the Hey Duggee brand in the market. There was a reduction in gross profit margin to 29.35% (2022: 32.69%). 
The Company's operating loss increased to £581,412 (2022: £212,311), driven by the reasons discussed above. Loss for the financial year increased to £262,317 (2022: £149,837), which is reflective of the challenging trading conditions in the year.  The increase in the loss for the financial year was partially offset by an increase to the Company's tax credit on loss as a result of the recognition of a deferred tax asset of £155,215 (2022: £nil), as detailed in note 9.

Key performance indicators ('KPIs')
 
The Company monitors progress and performance during the year and historical trend data is set out in the following KPI’s:
 



2023
2022

£
£


Turnover
1,718,728
2,667,869

Gross profit margin
29.35%
32.69%

Operating loss
(581,412)
(212,311)

The KPIs are in line with forecast expectations. Detailed explanations for the year on year movements is included in the business review section.


Page 1

 
CHILDREN'S CHARACTER BOOKS LIMITED
 

STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023

Principal risks and uncertainties
 
The Company's operations expose it to a variety of commercial and financial risks. The Company is subject to risk management procedures and an annual risk assessment implemented by the ultimate parent Company, Bertelsmann SE & Co KGaA. The Company has procedures in place to make the directors aware of the various risks to the Company’s business. The risks are monitored and reported to management.
 
Commercial risk

The changing book market and particularly the transition to digital is creating both challenges and opportunities for the Company, notably regarding the latter in terms of new markets and sales channels. The Company is facing increased pressure on margins. Other risks arise from the entry of non-traditional publishers into the market, the decline in retail space in high street bookshops and economic uncertainty. The continuing uncertainty in the global economy and high level of inflation in the UK presents ongoing pressure on costs and margins. The Company actively monitors market trends and these are incorporated into the detailed commercial plans of the business.
 
Price risk

The Company is exposed to commodity price risk as a result of its operations. The directors regularly review the appropriateness of commodity purchasing policies, particularly in the event of changes to the size or nature of the Company's operations in an attempt to mitigate the risk.
 
Credit risk

The Company may offer credit terms to its customers which allow payment of the debt after delivery of the goods. The Company is at risk to the extent that a customer may be unable to pay the debt on the specified due date. The Company has mitigated this risk of payment default by implementing policies which ensure that appropriate checks on potential customers are performed before credit terms are granted. Where a customer or group of customers is assessed to have a higher risk profile, these are included within the Company's credit insurance programme.
 
Liquidity and cash flow risk

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’s results, including cash flows, are reviewed by the Board on a monthly basis. 

Page 2

 
CHILDREN'S CHARACTER BOOKS LIMITED
 

STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023

Directors' section 172 statement
 
The Directors of the Company must act in accordance with a set of general duties, as detailed in section 172 of the UK Companies Act 2006, summarised as follows:
A director of a Company must act in the way they consider, in good faith, would be most likely to promote the success of the Company for the benefit of its shareholders as a whole and, in doing so have regard (amongst other matters) to:
- the likely consequences of any decisions in the long-term;
- the interest of the Company’s employees;
- the need to foster the Company’s business relationships with suppliers, customers and others;
- the impact of the Company’s operations on the community and environment;
- the desirability of the Company maintaining a reputation for high standards of business conduct; and
- the need to act fairly as between the shareholders of the Company.
Examples of how the Directors have oversight of these stakeholder matters are included throughout the Strategic and Director’s report as well as set out specifically below.
 
Long- term decision making
The Board operates a structured governance model which supports the Group in ensuring that decisions are considered, documented and reported upon, and in alignment with our strategic plans. Detailed budgets and forecasts are prepared which enable the Board to track performance and ensure that it is as expected, or that mitigation steps are taken to deliver performance in line with, or close to, expectations. The Board and senior management personnel operate within this structure, with the aim of promoting the success of the Company and delivering long- term shareholder value.
The Board is presented with regular board packs and other information that it needs to fulfil its responsibilities. During the period at Board meetings the Board have discussed and made decisions on a number of specific issues including business priorities and strategy, capital investment and the ongoing management of the current economic situation.
 
The interest of the Company’s employees
The board recognises that employees are central to the long-term success of the Company. The Company systematically provides employees with information on matters of concern to them, consulting them or their representatives regularly, and providing forums and communication routes so that their views can be taken into account when making decisions that are likely to affect their interests. Employee involvement in the Company is encouraged, as achieving a common awareness on the part of all employees of the financial and economic factors affecting the Company, plays a major role in maintaining its prosperity. The Company also regularly informs staff and staff representatives of Company updates and activities to keep them informed of the Company’s progress and performance.
The Company is committed to employment policies, which follow best practice, based on equal opportunities for all employees, irrespective of sex, race, colour, disability or sexual orientation as well as providing various employee networks to support the diverse and inclusive culture of the Company.
All staff receive regular performance reviews as well as opportunity for learning to support the development of all employees’ careers. This includes training programs and secondment opportunities for staff.
 
Engagement with customers, suppliers and other stakeholders
The directors appreciate the importance of fostering business relationships with key stakeholders, such as customers and suppliers, and focus on the maintenance and growth of these relationships in their decision making and strategic planning. The Company employs dedicated relationship managers to foster these relationships which also ensures the Board has a high degree of visibility to take stakeholder considerations into account.
 
Page 3

 
CHILDREN'S CHARACTER BOOKS LIMITED
 

STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023

Community impact and customer relations
The Board ensures significant consideration is given to the impact of the Company’s operations on the community and their customers in their decision-making. The Company’s approach is to use its position of strength to ensure it is an asset to the communities and people with which it interacts. The Company aim to provide everyone equal access to books, working with a range of organisations to allow the opportunity to read as many books as possible. As part of this, the Company actively invest in young people, partnering with schools and local community projects to nurture and create readers for the future.
The Company continues to make books for everyone ensuring the creators of books, including authors and illustrators, represent the society we live in. In the year, we have continued our ‘WriteNow’ programme which seeks and nurtures writers from under-represented communities as well as providing books in formats to support visually impaired readers. The Company continually strive to print and produce diverse, relevant, and accessible content for all customers.
 
Environmental sustainability
The Company’s leadership team ensure environmental issues are managed effectively and considered in the strategic decisions of the Company. The Company strives to create positive change in reducing the environmental impact of its businesses whilst maintaining effective and continuing business practices. The Company is key in the collaboration of the publishing industry in tackling climate action as part of their role within ‘Publishing Declares’. The Company consider sustainability, ethical and environmental issues when sourcing core material for use in the printing of their books using the books created to provide a positive leverage for behaviour change of our consumers. As part of the environmental strategy, the Company aims to be climate neutral by 2030.
 
High standards of business conduct
The Company has a Code of Conduct setting out the behaviours and values expected of all of our employees, which is communicated to all colleagues. Company processes ensure the Board and management are continually updated on the operation of the code and an independent whistleblowing service enables employees and third parties to anonymously raise concerns. Through its oversight and monitoring role, the Board requires all of our people to work to the highest standards of business conduct.
 
Shareholders
The Board recognises the importance of regular and open dialogue with the shareholders and the need to ensure the strategy and goals of the Company are effectively communicated to them. Feedback on these plans and objectives is welcomed by the directors and major business decisions are made closely and with the approval of the shareholders.

General

The Company is presenting the financial statements in accordance with Financial Reporting Standard 101 Reduced Disclosure Framework (FRS 101).


This report was approved by the board and signed on its behalf.



Francesca Dow
Director

Date: 22 May 2024

Page 4

 
CHILDREN'S CHARACTER BOOKS LIMITED
 
 
 
DIRECTORS' REPORT
FOR THE YEAR ENDED 31 DECEMBER 2023

The directors present their report and the financial statements for the year ended 31 December 2023.

Results and dividends

The immediate parent Company, Penguin Books Limited (“PBL”), owns a 75% interest in the Company, while BBC Studios Distribution Limited owns the remaining 25%. All sales, services and administration matters are carried out by PBL. The shareholders’ agreement stipulates that profits are shared between the owners in accordance with their ownership interest, whereas losses are to be 100% undertaken by PBL.
The loss for the year, after taxation, amounted to £ 262,317 (2022: loss £ 149,837).
No interim dividend was paid in the 2023 financial year (2022: £nil) and no final dividend is proposed (2022: £nil).

Directors

The directors who served during the year were:

Francesca Dow 
Sarah Roscoe (resigned 30 January 2023)
Nancy Twynam 
Thomas Weldon 
Stephen Davies 
Geraldine McBride (appointed 31 January 2023)
Christopher Turner (appointed 31 January 2023, resigned 31 August 2023)

Future developments

With the support of Penguin Random House Limited and the BBC Studios Distribution Limited, the Company will continue to produce high quality children’s books. The directors do not anticipate any significant changes in the activities of the Company. 

Going concern

In preparing these financial statements, the directors have assessed the ability of the Company to continue to operate for a period of at least twelve months from the date of signing the financial statements.
The Company has undertaken a risk assessment and forecasting exercise to assess the Company’s liquidity position. The forecast for the going concern period has been prepared using the three year plan approved by the Board and takes account of prior trends and expected titles to be published in the future and key cost drivers such as commodity prices and inflation.The financial statements have been prepared on a going concern basis which the directors consider to be appropriate given the following considerations.  
Based on the Company’s current trading performance, the sensitivity and reverse stress testing scenarios performed and the written confirmation of support from Penguin Books Limited, the directors have a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future, being a period of no less than twelve months from the date of approval of these financial statements. Accordingly, they continue to adopt the going concern basis in preparing the financial statements.

Matters covered in the Strategic report

Details on engagement with customers, suppliers and other stakeholders, and financial risk management policy sections are not included within the Directors Report as they are considered to be of strategic importance to the Company and, as allowed under the Companies Act 2006 s.414C(11), they have instead been included in the Strategic Report.

Page 5

 
CHILDREN'S CHARACTER BOOKS LIMITED
 
 
 
DIRECTORS' REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023

Streamlined energy and carbon reporting (SECR)

The Company has not disclosed information in respect of greenhouse gas emissions and energy consumption as it satisfies the thresholds for exemption and its energy consumption in the United Kingdom is less than 40,000kWh for the year.

Disclosure of information to auditor

Each of the persons who are directors at the time when this Directors' report is approved has confirmed that:
 
so far as the director is aware, there is no relevant audit information of which the Company's auditor is unaware, and

the director has taken all the steps that ought to have been taken as a director in order to be aware of any relevant audit information and to establish that the Company's auditor is aware of that information.

Auditor

The auditor, Grant Thornton UK LLP, will be proposed for reappointment in accordance with section 485 of the Companies Act 2006.

This report was approved by the board and signed on its behalf.
 



Francesca Dow
Director

Date: 22 May 2024

20 Vauxhall Bridge Road
London
SW1V 2SA

Page 6

 
CHILDREN'S CHARACTER BOOKS LIMITED
 
 
DIRECTORS' RESPONSIBILITIES STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2023

The directors are responsible for preparing the Strategic report, the Directors' 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 applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice), including Financial Reporting Standard 101 ‘Reduced Disclosure Framework’. 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;

state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements;

prepare the  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 to enable them to ensure that the financial statements comply with the Companies Act 2006They 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.

Page 7

 
CHILDREN'S CHARACTER BOOKS LIMITED
 
 
 
INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF CHILDREN'S CHARACTER BOOKS LIMITED
 

Opinion


We have audited the financial statements of Children's Character Books Limited (the 'Company') for the year ended 31 December 2023, which comprise the Statement of Comprehensive Income, the Balance sheet, the Statement of Changes in Equity and notes to the financial statements, including a summary of significant accounting policiesThe financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 101 ‘Reduced Disclosure Framework’ (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 31 December 2023 and of its loss for the year then ended;
the financial statements have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and
the financial statements 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 are responsible for concluding 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 report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify the auditor’s opinion. Our conclusions are based on the audit evidence obtained up to the date of our report. However, future events or conditions may cause the Company to cease to continue as a going concern.
In our evaluation of the directors’ conclusions, we considered the inherent risks associated with the Company's business model including effects arising from macro-economic uncertainties such as the cost of living crisis and the impact of the war in Ukraine, we assessed and challenged the reasonableness of estimates made by the directors and the related disclosures and analysed how those risks might affect the Company's financial resources or ability to continue operations over the going concern period.


Page 8

 
CHILDREN'S CHARACTER BOOKS LIMITED
 
 
 
INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF CHILDREN'S CHARACTER BOOKS LIMITED (CONTINUED)


Conclusions relating to going concern (continued)


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 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 and financial statements other than the financial statements and our auditor's report thereon. The directors are responsible for the other information contained within the Annual reportOur 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 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.


Opinion on other matters prescribed by the Companies Act 2006
 

In our opinion, based on the work undertaken in the course of the 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.
 
Matter on which we are required to report under the Companies Act 2006

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 or the Directors’ report.


Page 9

 
CHILDREN'S CHARACTER BOOKS LIMITED
 
 
 
INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF CHILDREN'S CHARACTER BOOKS LIMITED (CONTINUED)


Matters on which we are required to report by exception
 

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, 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.


Responsibilities of directors
 

As explained more fully in the Directors' responsibilities statement set out on page 7, 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.
 
Auditor's responsibilities for the audit of the financial statements

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. The extent to which our procedures are capable of detecting irregularities, including fraud, is detailed below: 
 
We obtained an understanding of the legal and regulatory frameworks applicable to the Company and industry in which it operates through our general commercial and sector experience, discussions with management and review of board minutes. We determined that the following laws and regulations were most significant: United Kingdom Accounting Standards, including Financial Reporting Standard 101 ‘Reduced Disclosure Framework’ (United Kingdom Generally Accepted Accounting Practice), the Companies Act 2006 and the relevant tax compliance regulations in the UK. In addition, we concluded that there are certain laws and regulations that may have an effect on the determination of the amounts and disclosures in the financial statements such as health and safety and employee matters.


Page 10

 
CHILDREN'S CHARACTER BOOKS LIMITED
 
 
 
INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF CHILDREN'S CHARACTER BOOKS LIMITED (CONTINUED)


Auditor's responsibilities for the audit of the financial statements (continued)
 

We enquired of management concerning the Company’s policies and procedures relating to:
the identification, evaluation and compliance with laws and regulations;
the detection and response to the risks of fraud; and
the establishment of internal controls to mitigate risks related to fraud or non-compliance with laws and regulations.

We enquired of management and those charged with governance, whether they were aware of any instances of non-compliance with laws and regulations or whether they had any knowledge of actual, suspected of alleged fraud.

We assessed the susceptibility of the Company’s financial statements to material misstatement, including how fraud might occur and the risk of management override of controls. Audit procedures are performed by the engagement team included:
identifying and assessing the design effectiveness of controls management has in place to prevent and detect fraud;
challenging assumptions and judgements made by management in its significant accounting estimates;
identifying and testing journal entries, in particular journal entries posted with unusual account combinations that increased revenues or that reduced costs in the Profit and loss account; and
assessing the extent of compliance with the relevant laws and regulations as part of our procedures on the related financial statement item.

In addition, we completed audit procedures to conclude on the compliance of disclosures in the Annual report and financial statements with applicable financial reporting requirements.

These audit procedures were designed to provide reasonable assurance that the financial statements were free from fraud or error. The risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error and detecting irregularities that result from fraud is inherently more difficult than detecting those that result from error, as fraud may involve collusion, deliberate concealment, forgery or intentional misrepresentations. Also, the further removed non-compliance with laws and regulations is from events and transactions reflected in the financial statements, the less likely we would become aware of it; 

The assessment of the appropriateness of the collective competence and capabilities of the engagement team including consideration of the engagement team’s:
understanding of, and practical experience with audit engagements of a similar nature and complexity through appropriate training and participation;
knowledge of the industry in which the client operates; and
understanding of the legal and regulatory requirements specific to the entity including, the provisions of the applicable legislation and the applicable statutory provision.

We communicated relevant laws and regulations and potential fraud risks to all engagement team members. We remained alert to any indications of fraud or non-compliance with laws and regulations throughout the audit.


A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council's website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor's report.

Page 11

 
CHILDREN'S CHARACTER BOOKS LIMITED
 
 
 
INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF CHILDREN'S CHARACTER BOOKS LIMITED (CONTINUED)



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 2006Our 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.





Abigail Towers
Senior Statutory Auditor
for and on behalf of Grant Thornton UK LLP
Statutory Auditor, Chartered Accountants
Milton Keynes

22 May 2024
Page 12

 
CHILDREN'S CHARACTER BOOKS LIMITED
 
 
STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2023

2023
2022
Note
£
£

  

Revenue
 4 
1,718,728
2,667,869

Cost of sales
  
(1,214,316)
(1,795,677)

Gross profit
  
504,412
872,192

Distribution costs
  
(209,554)
(187,356)

Administrative expenses
  
(876,270)
(897,147)

Operating loss
 5 
(581,412)
(212,311)

Tax on loss
 8 
319,095
62,474

Loss for the financial year
  
(262,317)
(149,837)

Other comprehensive income
  
-
-

Total comprehensive income for the year
  
(262,317)
(149,837)

There were no recognised gains and losses for 2023 or 2022 other than those included in the statement of comprehensive income.
All activities derive from continuing operations.

The notes on pages 16 to 33 form part of these financial statements.

Page 13

 
CHILDREN'S CHARACTER BOOKS LIMITED
REGISTERED NUMBER: 05032989

BALANCE SHEET
AS AT 31 DECEMBER 2023

As restated
2023
2022
Note
£
£

Current assets
  

Stocks
 11 
476,061
531,313

Debtors: amounts falling due within one year
 12 
892,807
1,394,008

Bank and cash balances
  
256,770
1,133,538

  
1,625,638
3,058,859

Creditors: amounts falling due within one year
 13 
(1,739,671)
(2,922,780)

Net current (liabilities)/assets
  
 
 
(114,033)
 
 
136,079

Total assets less current liabilities
  
(114,033)
136,079

Provisions for liabilities
  

Provisions
 14 
(12,205)
-


Capital and reserves
  

Called up share capital 
 15 
3,466,667
3,466,667

Profit and loss account
 16 
(3,592,905)
(3,330,588)

  
(126,238)
136,079


The notes on 16 to 33 form part of these financial statements.
Prior year balances have been restated as detailed in note 18.
The financial statements were approved and authorised for issue by the board and were signed on its behalf by: 




Francesca Dow
Director

Date: 22 May 2024

Page 14

 
CHILDREN'S CHARACTER BOOKS LIMITED
 

STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2023


Called up share capital
Profit and loss account
Total equity

£
£
£


At 1 January 2022
3,466,667
(3,180,751)
285,916


Comprehensive income for the year

Loss for the year
-
(149,837)
(149,837)



At 1 January 2023
3,466,667
(3,330,588)
136,079


Comprehensive income for the year

Loss for the year
-
(262,317)
(262,317)


At 31 December 2023
3,466,667
(3,592,905)
(126,238)


The notes on pages 16 to 33 form part of these financial statements.

Page 15

 
CHILDREN'S CHARACTER BOOKS LIMITED
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023

1.


General information

Children’s Character Books Limited (the 'Company') is a book publisher. The Company is a joint venture between Penguin Books Limited (“PBL”) and BBC Studios Distribution Limited (“BBC”). As PBL owns 75% of the joint venture the Company is treated as its subsidiary. The Company is a private company limited by shares and is incorporated in the United Kingdom. The address of its registered office is 20 Vauxhall Bridge Road, London, SW1V 2SA.

2.Accounting policies

 
2.1

Basis of preparation of financial statements

The financial statements have been prepared under the historical cost convention unless otherwise specified within these accounting policies and in accordance with Financial Reporting Standard 101 'Reduced Disclosure Framework' (FRS 101) and the Companies Act 2006.
In preparing these financial statements, the Company applies the recognition, measurement and disclosure requirements of UK-adopted international accounting standards (“UK-adopted IFRS”), but makes amendments where necessary in order to comply with Companies Act 2006 and has set out below where advantage of the FRS 101 disclosure exemptions has been taken.
The preparation of financial statements in compliance with FRS 101 requires the use of certain critical accounting estimates. It also requires management to exercise judgment in applying the Company's accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in note 3.
The following principal accounting policies have been applied:

Page 16

 
CHILDREN'S CHARACTER BOOKS LIMITED
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023

2.Accounting policies (continued)

 
2.2

Financial Reporting Standard 101 - reduced disclosure exemptions

The Company has taken advantage of the following disclosure exemptions under FRS 101:
the requirements of IFRS 7 Financial Instruments: Disclosures
the requirements of paragraphs 91-99 of IFRS 13 Fair Value Measurement
the requirement in paragraph 38 of IAS 1 'Presentation of Financial Statements' to present comparative information in respect of:
 - paragraph 79(a)(iv) of IAS 1;
 - paragraph 73(e) of IAS 16 Property, Plant and Equipment;
 - paragraph 118(e) of IAS 38 Intangible Assets;
the requirements of the following paragraphs of IAS 1, 'Presentation of financial statements':
    -       10(d) statement of cash flows;
    -       10(f) statement of financial position as at the beginning of the preceding period when
             retrospective restatement or reclassifications apply;
    -       16 statement of compliance with all IFRS;
    -       38A requirement for minimum of two primary financial statements, including cash flow
            statements;
    -       38B, 38C, 38D additional comparative information;
    -       40A, 40B, 40C, 40D requirements to provide additional statements in respect of
            retrospective restatements and reclassifications;
    -       111 statement of cash flows information; and
    -       134 - 136 capital management disclosures.
the requirements of IAS 7 Statement of Cash Flows
the requirements of paragraphs 30 and 31 of IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors
the requirements of paragraph 17 and 18A of IAS 24 Related Party Disclosures
the requirements in IAS 24 Related Party Disclosures to disclose related party transactions entered into between two or more members of a group, provided that any subsidiary which is a party to the transaction is wholly owned by such a member

This information is included in the consolidated financial statements of Bertelsmann SE & Co KGaA   as at 31 December 2023 and these financial statements may be obtained from Bertelsmann SE & Co KGaA, Corporate Communications, Carl Bertelsmann Strasse 270, Postfach 111, D-33311 Gütersloh, Germany.

Page 17

 
CHILDREN'S CHARACTER BOOKS LIMITED
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023

2.Accounting policies (continued)

 
2.3

Going concern

In preparing these financial statements, the directors have assessed the ability of the Company to continue to operate for a period of at least twelve months from the date of signing the financial statements.
The Company has undertaken a risk assessment and forecasting exercise to assess the Company’s liquidity position. The forecast for the going concern period has been prepared using the three year plan approved by the Board and takes account of prior trends and expected titles to be published in the future and key cost drivers such as commodity prices and inflation.The financial statements have been prepared on a going concern basis which the directors consider to be appropriate given the following considerations.  
Based on the Company’s current trading performance, the sensitivity and reverse stress testing scenarios performed and the written confirmation of support from Penguin Books Limited, the directors have a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future, being a period of no less than twelve months from the date of approval of these financial statements. Accordingly, they continue to adopt the going concern basis in preparing the financial statements.

Page 18

 
CHILDREN'S CHARACTER BOOKS LIMITED
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023

2.Accounting policies (continued)

  
2.4

Revenue

Revenue is measured at the fair value of the consideration received or receivable, and represents amounts receivable for goods supplied, stated net of discounts, returns and value added taxes. The Company recognises revenue when performance obligations have been satisfied and for the Company this is when the goods (books) have transferred to the customer and the customer has control of these. The Company’s activities are described in detail below. The Company bases its estimate of return on historical results, taking into consideration the type of customer, the type of transaction and the specifics of each arrangement.
 
Sale of books
Revenue from the sale of books is recognised at the point in time when title passes. This is generally at the point of delivery when title passes to the customer and a present right to payment occurs. A liability for anticipated returns is made based primarily on historical return rates. If these estimates do not reflect actual returns in future periods, then revenue could be understated or overstated for a particular period. This estimate of anticipated returns is recognised in creditors in the balance sheet.
 
Digital sales
Revenue from the sale of Ebooks and audio sales are recognised at a point in time when the content is delivered. This is commonly when the customer has access to the download and a present right to payment occurs.
 
Principal v agent considerations
The Company may enter contracts with another party in addition to the customer in the arrangement. An assessment is made for each such contract as to who understands the related good or service prior to the transfer to the end customer to determine if revenue should be recognised on a gross or net basis. Where the Company acts as agent, revenue represents any commissions and fees receivable for such services rendered. Any third-party costs incurred on behalf of the principal that are rechargeable under the contractual arrangement are included in turnover with a corresponding expense recognised in the income statement.
 
Income from subrights
Revenue from licensing and subrights, including film, overseas and electronic, is recognised when the performance obligation under the agreement has been satisfied. This is at the point in time when the associated material is transferred.
An assessment is made on each contract as to the relevant performance obligations to assess whether the customer receives a right to access or use the Company’s intellectual property. Where the performance obligation is deemed over time, an appropriate recognition framework is created based on the consumption and provision of the goods or service in question.
For related sales-based royalties of license of Company’s intellectual property, the income is recognised as the subsequent sale occurs. Where information is not readily available at the reporting date, an estimation is made based on sales growth and historical income collection. If these estimates do not reflect the income subsequently received, then revenue could be understated or overstated for a particular period.

Page 19

 
CHILDREN'S CHARACTER BOOKS LIMITED
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023

2.Accounting policies (continued)

  
2.5

Royalty advances

Advances of royalties paid to authors are included within debtors and are recognised once a signature advance has been paid or manuscript has been accepted or marked as future accepted on the title. Advances of royalties paid to authors under licensing agreements are recognised based on the related performance obligation identified in the contract. Where the advance is not linked to any further obligations by the proprietor, the advance is recognised upon signing of the contract or a specific date identified in the contract.
Advances are presented at their net realisable value, being the advance less any write down or valuation allowance. Management apply judgement in their bi-annual assessment to unpublished books as to whether the book will sustain economic loss based on the future projections of revenues and associated costs. For published titles, a quarterly assessment determines whether the unearned royalty advances of a particular title is recoverable based on the projected future sales of the title and the related royalty income.
Once the author advance is earned out, future author payments are expensed at the contracted or effective royalty rate as the related turnover is earned.

  
2.6

Foreign currency translation

Functional and presentation currency

The Company's functional and presentational currency is GBP.
Items included in the financial statements are measured using the currency of the primary economic environment in which the entity operates. The financial statements are presented in pound sterling, which is also the functional currency of the Company.
 
Transactions and balances

Transactions in a currency other than the functional currency (“foreign currency”) are translated into the functional currency using the spot exchange rates at the dates of the transactions.
At each period end foreign currency monetary items are translated using the closing rate. Management assess the underlying asset and liability in the transaction to determine the nature of the foreign exchange gains and losses. As this results from operating activities gains and losses resulting from the settlement of transactions and from the translation at period end exchange rates of monetary assets and liabilities denominated in foreign currencies, are recognised in the profit and loss account within ‘Administrative expenses’.
Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction. Non-monetary assets and liabilities denominated in foreign currencies that are stated at fair value are retranslated to the functional currency at foreign exchange rates ruling at the dates the fair value was determined. Foreign exchange differences arising on translation are recognised in the profit and loss account under administrative expenses.

Page 20

 
CHILDREN'S CHARACTER BOOKS LIMITED
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023

2.Accounting policies (continued)

 
2.7

Current and deferred taxation

Tax on the profit or loss for the year comprises current and deferred tax. Tax is recognised in the profit and loss account except to the extent that it relates to items recognised directly in equity or other comprehensive income, in which case it is recognised directly in equity or other comprehensive income. 

Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years.

Deferred tax is provided on temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The following temporary differences are not provided for: the initial recognition of goodwill; the initial recognition of assets or liabilities that affect neither accounting nor taxable profit other than in a business combination, and differences relating to investments in subsidiaries to the extent that they will probably not reverse in the foreseeable future. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the balance sheet date. 
A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the temporary difference can be utilised. 

  
2.8

Goodwill

Goodwill arises on the acquisition of subsidiaries and represents the excess of the consideration transferred, the amount of any non-controlling interest in the acquiree, the acquisition-date fair value of any previous equity interest in the acquiree and the fair value of the identifiable net assets acquired. At the effective date of adopting FRS 101 the balance of goodwill was £nil.
Goodwill is capitalised as an intangible asset and is not amortised in line with IFRS 3. Goodwill is annually reviewed for indicators of impairment as well as comparison to its discounted project profit. Management apply judgement in determining a relevant value of the projected sales and profit of the individual investments. Any impairment charge identified as a result is charged to the profit or loss.

  
2.9

Impairment of non-financial assets

Non-financial assets not ready to use are not subject to amortisation and are tested annually for impairment.
Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable in accordance to IAS 36.
An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount, being the higher of an asset’s fair value less costs of disposal or value in use.
For the purposes of assessing impairment, assets are grouped at the lowest levels for which independent cash inflows are generated(cash-generating units). Prior impairments of non-financial assets are reviewed for possible reversal at each reporting date, if there have been favourable events or changes in circumstances, since the impairment loss was recognised that would indicate that the impairment loss no longer exists or might have decreased.

Page 21

 
CHILDREN'S CHARACTER BOOKS LIMITED
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023

2.Accounting policies (continued)

  
2.10

Stocks

Stocks mainly comprise finished goods and work in progress in respect of books and are stated at the lower of cost and net realisable value. Cost is determined using FIFO method.
Cost includes the direct costs of paper, printing and binding incurred on a title-by-title basis. Plant costs, which do not vary with the number of copies printed (for example typesetting, origination and illustration), are charged to the income statement in full on publication.
A provision is made for excess, obsolete and slow-moving stocks by considering the future expected sales and comparing to the current quantity held. Any provision for obsolete stock is charged to the profit and loss and included in the value of Inventory as shown in note 11.
Net realisable value is calculated as the estimated selling price in the ordinary course of business less applicable variable selling expenses.

  
2.11

Financial assets

The Company classifies it's financial assets in the following categories:
- Amortised cost
- Fair Value through profit or loss (FVTPL)
- Fair Value through other comprehensive income (FVOCI)
The classification depends on the purpose for which the financial assets were acquired i.e. the entity's business model for managing the financial assets and/or the contractual cash flow characteristics of the financial asset. Financial assets are not reclassified subsequent to their initial recognition unless the Company changes its business model for managing financial assets in which case all affected financial assets are reclassified on the first reporting period following the change in the business model. 
A debt investment is measured at FVOCI if it meets both of the following conditions and is not designated as at FVTPL:
- it is held within a business model whose objective is achieved by both collecting contracual cash flows and selling financial assets; and 
- its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. 
Subsequent to initial recognition these are measured at amortised cost using the effective interest method. Interest income from these financial assets is included in finance income using the effective interest rate method. Any gain or loss arising on derecognition is recognised directly in profit or loss and presented in other (expenses)/income together with foreign exchange gains and losses. Impairment losses are presented as a seperate line item in the proft or loss under 'net impairment losses on financial and contract assets'.
On inital recognition of any equity investment that is not held for trading, the Company may irrevocable elect to present subsequent changes in the investment's fair value in OCI. This election is made on an investment-by-investment basis.
All financial assets not classified as measured at amortised cost or FVOCI as described above are measured at FVTPL. This includes all derivative financial assets. The Company does not have any assets classified at FVOCI nor FVTPL. 
 
Page 22

 
CHILDREN'S CHARACTER BOOKS LIMITED
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023

2.Accounting policies (continued)

The Company assesses at the end of each reporting period whether there is objective evidence that one or more event has occurred which has impacted on the estimated cash flows of the financial asset.
Financial assets are impaired and impairment losses are incurred only if such objective evidence of impairment can be reliably measured. 

  
2.12

Trade debtors and amounts owed by group undertakings

Trade debtors and amounts owed by group undertakings are stated at amortised cost after provision for bad and doubtful debts.
The Company applies IFRS 9 when using the expected credit loss model. Management adopts the “simplified approach” to determine an amount equal to the lifetime expected credit losses for insignificant trade debtors and a risk score on an individual basis for significant trade debtors. To measure the expected credit losses, trade debtors are grouped based on shared credit risk characteristics and the balance of uninsured debt across the Company.

  
2.13

Bank and cash balances

Bank and cash balances include cash in hand, deposits held at call with banks, other short- term highly liquid investments with original maturities of three months or less, and bank overdrafts. In the balance sheet, bank overdrafts are shown within borrowings in creditors: amounts falling due within one year.

  
2.14

Creditors including group undertakings

Trade and other creditors are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method.
Creditors are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers or a commitment to provide goods and services where monies have been receipted.

Page 23

 
CHILDREN'S CHARACTER BOOKS LIMITED
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023

2.Accounting policies (continued)

 
2.15

Provisions for liabilities and onerous contracts

Provisions are made where an event has taken place that gives the Company a legal or constructive obligation that probably requires settlement by a transfer of economic benefit, and a reliable estimate can be made of the amount of the obligation.
Provisions are charged as an expense to profit or loss in the year that the Company becomes aware of the obligation, and are measured at the best estimate at the balance sheet date of the expenditure required to settle the obligation, taking into account relevant risks and uncertainties.
 
When payments are eventually made, they are charged to the provision carried in the Balance Sheet.

If the Company considers a contract has become onerous, whereby the unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be received from it, an onerous contract provision is recognised for the present obligations under the contract. Onerous contract provisions which arise on advances paid on unpublished manuscripts which have not yet been delivered, are utilised on various timescales based on manuscript delivery and performance. Management estimates the future recoverability based on performance within the contract.

Page 24

 
CHILDREN'S CHARACTER BOOKS LIMITED
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023

3.


Judgements in applying accounting policies and key sources of estimation uncertainty

In the application of the Company’s accounting policies, which are described in note 2, the directors are required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates, underlying assumptions and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable and relevant under the circumstances.
 
Key accounting estimates and assumptions

(i) Advances
Advances of royalties paid to authors are recognised once a contract has been signed or manuscript has been accepted on the title. 
Unpublished titles:
In the case of advances on books not yet published, management may anticipate that the book may sustain an economic loss. The significant titles when unpublished are assessed twice a year for onerous losses, and provisions on a contract level are created as per IAS 37. 
The realisable value of royalty advances relies on a degree of management judgement in determining the profitability of individual author contracts.  The recoverability of royalty advances is based upon a detailed management review of the age of the advance, the future sales projections for new authors and prior sales history of repeat authors. Future sales projections are normally upto one year for domestic sales and upto two years for international sales, and for licencing agreements, varies as per the terms of the agreement. 
Published titles:
Upon publication, the realisable value for significant titles will then be adjusted on a title by title basis basis recoverability of the unearned royalty advances on quarterly basis i.e. advance paid less royalty earnings and sub rights income, basis future sales of the titles as per IAS 36. The royalty advance is expensed at the contracted or effective royalty rate as the related turnover is earned. The carrying amount of royalty advances (net of provision) are included in advance royalties, see note 12 for reference.
(ii) Returns liabilities
The Company has agreements in place to allow customers to return books. As a result the Company makes an estimate of future returns based on historic data, the ageing of sales and business experience. This liability is included within accruals and the value at the year end is £57,448 (2022: £54,632)
(iii) Stocks provisioning
The Company publishes books and is subject to changing customer demands. As a result it is necessary to consider the recoverability of the cost of stock. When calculating the stock provision, management considers the ageing of the stock as well as predicted future sales based on historical sales data by publishing imprint.

Page 25

 
CHILDREN'S CHARACTER BOOKS LIMITED
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023

4.


Revenue

An analysis of revenue by class of business is as follows:


As restated
2023
2022
£
£

Sale of books
1,645,728
2,550,886

Income from subrights
6,740
74,971

Digital sales
66,260
42,012

1,718,728
2,667,869


Analysis of revenue by destination:

As restated
2023
2022
£
£

United Kingdom
1,401,309
2,453,141

Europe
50,528
56,470

Oceania
148,434
68,573

North America
87,316
68,910

Rest of the World
31,141
20,775

1,718,728
2,667,869


Prior year balances have been restated as detailed in note 18.


5.


Operating loss

The operating loss is stated after charging:

2023
2022
£
£

Impairment of inventory
233,827
118,772

Cost of stocks recognised as an expense
751,129
1,166,419

Auditors remuneration:
- Audit services
17,000
7,000


6.


Employees

The Company has no employees.  Staff costs relate exclusively to an allocation of director's remuneration recharged to the Company from the group entity who contractually employs them.  See note 7 for further detail. 

Page 26

 
CHILDREN'S CHARACTER BOOKS LIMITED
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023

7.
Directors' remuneration

Five of the directors who served during the year have service contracts with Penguin Books Limited ("PBL").  A proportion of their time and efforts relate to the Company and therefore an allocation of their emoluments are included in these financial statements.
Two of the directors who served during the year have service contracts with BBC Studios Distribution Limited (“BBC”).  The services of these directors to the Company are deemed to be incidental and accordingly there are no emoluments included in these financial statements.


2023
2022

£
£


Directors' remuneration:

Aggregate emoluments
17,195
19,353

Amounts receivable under long term incentives
-
1,693

Company pension contributions 
1,776
2,446


18,971
23,492

Retirement benefits are accruing to one director (2022: one) under a defined benefit pension scheme and to four directors (2022: three) under a money purchase scheme.




2023
2022

£
£


Highest paid director:

Emoluments
9,681
10,962

Company pension contributions
1,167
1,109


10,848
12,071

All directors who have authority and responsibility for planning, directing and controlling the activities of the Company are considered to be key management personnel. Total remuneration in respect of these individuals was £18,971 (2022: £23,492).


Page 27

 
CHILDREN'S CHARACTER BOOKS LIMITED
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023

8.


Tax on loss


2023
2022
£
£

Corporation tax


UK corporation tax on loss for the year
(163,996)
(62,464)

Adjustments in respect of prior years
26
(10)


Total current tax
(163,970)
(62,474)

Deferred tax


Origination and reversal of timing differences
(155,125)
-

Total deferred tax
(155,125)
-


Tax on loss
(319,095)
(62,474)

Factors affecting tax charge for the year

The tax assessed for the year is lower than (2022: lower than) the standard rate of corporation tax in the UK of 23.5% (2022 - 19%). The differences are explained below:

2023
2022
£
£


Loss before tax
(581,412)
(212,311)


Loss multiplied by standard rate of corporation tax in the UK of 23.5% (2022 - 19%)
(136,632)
(40,339)

Effects of:


Deferred tax valuation allowance reversed
(184,236)
-

Deferred tax not recognised
-
(29,112)

Adjustments in respect of prior years - current tax
26
(10)

Deferred tax rate differences
1,747
6,987

Total tax credit for the year
(319,095)
(62,474)


Factors that may affect future tax charges

An increase in the UK corporation tax rate from 19% to 25% (effective 1 April 2023) was substantively enacted on 24 May 2021. Deferred taxes at the balance sheet date have been measured using this enacted rate.

Page 28

 
CHILDREN'S CHARACTER BOOKS LIMITED
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023

9.

Deferred tax assets

2023 Recognised
2023 unrecognised
2022 Recognised
2022 unrecognised
        £
        £
        £
        £

At 1 January

-

184,237

-
 
213,348
 
Movement

155,125

(184,237)

-
 
(29,111)
 
At 31 December

155,125

-

-
 
184,237
 

The deferred tax asset is recognised within debtors (note 12). 
The deferred tax assets have been calculated at 25.00%.
There are no unused tax losses or unused tax credits.
The Company has recognised a deferred tax asset for the tax base in relation to intangible assets as it will benefit from the tax relief on the Intangible against its own future taxable profits or via group relief of its losses all amounts are due in more than 12 months. 


10.


Goodwill




2023

£



Cost


At 1 January 2023
2,911,114



At 31 December 2023

2,911,114



Amortisation


At 1 January 2023
2,911,114



At 31 December 2023

2,911,114



Net book value



At 31 December 2023
-



At 31 December 2022
-


Page 29

 
CHILDREN'S CHARACTER BOOKS LIMITED
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023

11.


Stocks

2023
2022
£
£

Work in progress (goods to be sold)
100,974
71,767

Finished goods and goods for resale
375,087
459,546

476,061
531,313


There is no significant difference between the replacement cost of stocks and their carrying amounts.
Stocks are stated after provisions for impairment of £459,363 (2022: £225,536). No inventories have been pledged as security for liabilities.



12.


Debtors

2023
2022
£
£


Amounts owed by group undertakings
504,061
1,279,245

Advance royalties
41,172
24,008

Other debtors
4,402
3,866

Prepayments and accrued income
24,051
24,425

Tax recoverable
163,996
62,464

Deferred taxation
155,125
-

892,807
1,394,008


Amounts owed by group undertakings are unsecured, repayable on demand and interest free.
Included in amounts owed by group undertakings is £504,061 (2022: £1,116,340) owed from The Book Service Limited ("TBS"), principally representing trade debtors receivable in TBS on behalf of the Company. Amounts owed by group undertakings are stated after provision for impairment of £Nil (2022: £Nil).
Advance royalties are stated after a provision for impairment of £643,232 (2022: £666,158). The net carrying values are included in advance royalties.

Page 30

 
CHILDREN'S CHARACTER BOOKS LIMITED
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023

13.


Creditors: Amounts falling due within one year

As restated
2023
2022
£
£

Trade creditors
55,990
100,673

Royalty creditors
148,339
137,062

Amounts owed to group undertakings
1,306,769
2,436,866

Accruals and deferred income
228,573
248,179

1,739,671
2,922,780


Amounts owed to group undertakings are unsecured, interest free and repayable on demand.
Prior year balances have been restated as detailed in note 18.


14.


Provisions





Discounts provision
Total

£
£





At 1 January 2023 (as restated)
-
-


Charged to profit or loss
12,205
12,205



At 31 December 2023
12,205
12,205

Discounts provision:
The Company has agreements in place to offer discounts on goods offered to customers, usually as a reward for repeated business. The provision is expected to be utilised within 12 months from the balance sheet date.


15.


Called up share capital

2023
2022
£
£
Allotted, called up and fully paid



2,600,000 (2022 - 2,600,000) Ordinary A shares of £1.00 each
2,600,000
2,600,000
866,667 (2022 - 866,667) Ordinary B shares of £1.00 each
866,667
866,667

3,466,667

3,466,667

There are two classes of ordinary shares. There are no restrictions on dividends and the repayment of capital.

Page 31

 
CHILDREN'S CHARACTER BOOKS LIMITED
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023

16.


Reserves

Profit and loss account

The profit and loss account includes all current and prior period retained profits and losses. All reserves in respect of profit and loss are distributable reserves.


17.


Commitments

There were commitments to authors for the payment of royalty advances amounting to £4,900 at 31 December 2023 (2022: £4,900).


18.


Prior year adjustment

The Company identified the following reclassification restatements to the prior year during the course of preparing these financial statements.
 
a) Reclassification of accruals
The Company has restated the comparative year to include the returns accrual within creditors rather than provisions. The impact of this adjustment is to increase creditors by £54,632 and decrease provisions by the same amount. There was no impact on the Company's net assets or loss after tax at 31 December 2022.
b) Analysis of revenue
The Company has restated the revenue disclosure in order to disaggregate by class of business and by destination. The restated disclosure is in note 4 of these financial statements.


19.


Related party transactions

During the year the Company entered into the following transactions with related parties.  All of these related parties are  subsidiaries within the Bertelsmann group.


Sales


2023
2022

£
£


Penguin Random House Australia Pty Ltd - DK Australia
138,256
64,050

Penguin Random House India Private Limited 
5,976
2,072

Penguin Random House South Africa (Pty) Ltd. 
10
414

Penguin Random House Canada Limited - Canada
8,333
3,069


Distribution costs


2023
2022

£
£


The Book Service Limited
210,163
187,022

Page 32

 
CHILDREN'S CHARACTER BOOKS LIMITED
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023

19.

Related party transactions (continued)


Administratve expenses
2023
2022

£
£


Penguin Books Limited
488,705
332,507

The Random House Group Limited
332,586
247,189

Bertelsmann SE & Co. KGaA 
-
71



Debtors
2023
2022

£
£


The Random House Group Limited
519,516
-

Penguin Books Limited
-
158,054

The Book Service Limited
-
1,116,340

Frederick Warne & Co Limited
-
4,851


Creditors


2023
2022

£
£


Dorling Kindersley Limited
1,528
6,497

The Random House Group Limited
1,138,809
2,097,887

Penguin Books Limited
26,728
-

Frederick Warne & Co Limited
312
-

Phonic Books Limited
7,454
-

Ladybird Books Limited
146,866
332,482

Creditor balances are unsecured and no guarantees have been received. Creditor balances will be settled in cash.



20.


Controlling party

The Company's immediate parent company is Penguin Books Limited ("PBL"). The Company’s ultimate controlling party is Bertelsmann SE & Co KGaA, which is incorporated in Germany. Copies of Bertelsmann SE & Co KGaA’s consolidated financial statements (the smallest and largest financial statements in which the Company is consolidated) can be obtained from:
Bertelsmann SE & Co KGaA
Corporate Communications
Carl Bertelsmann Strasse 270
33311 Gütersloh, Germany

Page 33