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Registered number: 00954009









THE RANDOM HOUSE GROUP LIMITED









ANNUAL REPORT AND FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2023

 
THE RANDOM HOUSE GROUP LIMITED
 
 
COMPANY INFORMATION


Directors
Mark Gardiner 
Robert Waddington 
Thomas Weldon 
Nihar Malaviya (appointed 1 January 2023)




Company secretary
Sinead Martin



Registered number
00954009



Registered office
20 Vauxhall Bridge Road

London

SW1V 2SA




Independent auditor
Grant Thornton UK LLP

Victoria House

199 Avebury Boulevard

Milton Keynes

MK9 1AU





 
THE RANDOM HOUSE GROUP LIMITED
 

CONTENTS



Page
Strategic Report
 
1 - 8
Directors' Report
 
9 - 11
Directors' Responsibilities Statement
 
12
Independent Auditor's Report
 
13 - 17
Profit and Loss Account
 
18
Statement of Comprehensive Income
 
19
Balance Sheet
 
20 - 21
Statement of Changes in Equity
 
22
Notes to the Financial Statements
 
23 - 68


 
THE RANDOM HOUSE GROUP LIMITED
 
 
STRATEGIC REPORT
FOR THE YEAR ENDED 31 DECEMBER 2023

Introduction
 
The directors present their Strategic Report for The Random House Group Limited (‘the Company’ or ‘RHGL’) for the year ended 31 December 2023.

Principal activities

The Company is a subsidiary of Penguin Random House Limited (“PRHL”), a company registered in the United Kingdom. The Company is domiciled and registered in the United Kingdom. The principal activity of the Company continues to be book publishing.

Business review
 
The Company’s turnover for the year was £262,304,038, which was 13.2% higher compared to prior year (2022: £231,644,201). Operating profit for the year decreased by £5,383,188 to £33,861,015, which was a 13.7% decrease on prior year (2022: £39,244,203). The gross profit margin was 53.1% (2022: 51.2%). However, owing to one-off items in 2022, the Company saw a 35.8% reduction in profit for the financial year on the prior year. The Company's profit for the financial year was £20,490,142 (2022: £ 31,935,603).
The increase in turnover was partly driven by the success of titles such as Prince Harry’s memoir "Spare" and the "Bored of Lunch" series focusing on Air Fryer and Slow Cooker recipes. The Company also experienced growth in audio sales. Although, gross margins saw a slight improvement, administrative expenses were impacted by inflationary cost pressures.
The decrease in profit for the financial year compared to 2022 was largely driven by the profit made on the sale of fixed assets of £13,975,682 in 2022, which was not repeated in 2023.  Impairment of investments increased by £4,351,000 to £4,618,000 on the prior year (2022: £267,000), again contributing to the reduction in profit for the financial year.
Earnings before interest, tax, depreciation, amortisation and impairment of non-financial assets (EBITDA) has fallen in the financial year by 11.0% to £41,190,282 (2022: £46,279,226), this is largely driven by inflationary pressures across most cost lines.
At the balance sheet date, the Company had net assets of £106,216,874, a reduction of 32.8% on the prior year (2022: £158,059,690). The Company paid a dividend of £75,000,000 in the year (2022: £120,000,000). During the year the Company acquired Quadrille Publishing Limited for £16,676,500.  This was a strategic acquisition to help meet future objectives of expanding into new lifestyle literary markets.  

During the year, the Company's subsidiary The Book Service Limited announced proposals to cease its third-party distribution operations in 2025. This will include closure of the Grantham warehouse where the third-party distribution operations are conducted from, which is a leased property held by the Company. 
Page 1

 
THE RANDOM HOUSE GROUP LIMITED
 

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

Key performance indicators (‘KPIs’)

The Company monitors progress and performance during the year and historical trend data which is set out in the following KPIs:

2023
2022
Turnover
£262,304,038
£231,644,201
Gross profit margin
53.1%
51.2%
Earnings before interest, tax, depreciation, amortisation and impairment of non- financial assets (EBITDA)

£41,190,282

£46,279,226

The KPIs are in line with forecast expectations. Detailed explanations for the year on year movements is included in the business review section. 
Management makes use of certain alternative performance measures (APMs) that are non-UK GAAP measures. The Board uses these to assess performance of the Company and considers them to provide useful supplementary information to the statutory results. The Board does not consider APMs to be more relevant or reliable than UK GAAP measures and notes that their definition and basis of calculation may differ from other companies. The Company’s APMs are defined and a reconciliation to the most directly comparable UK GAAP measure is shown below.
EBITDA is operating profit as measured using UK GAAP principles adjusted for the effects of depreciation, amortisation and impairment of non-financial assets. EBITDA is reported to the Board as management considers that it provides a useful proxy for the Company’s operating profit excluding non-cash items. It can be reconciled to the operating profit measure reported in the Profit and Loss Account as shown below:
 

2023
2022
Operating profit
£33,861,015
£39,244,203
Depreciation and amortisation
£7,243,056
£7,035,000
Income from shares in group & other fixed asset investments
£86,211
£23
EBITDA
£41,190,282
£46,279,226

 
Page 2

 
THE RANDOM HOUSE GROUP 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.  Risks are further mitigated by the cash pooling arrangements in place across the Bertelsmann group, which ensures funds are available to the Company to meet all liabilities as and when they fall due. 
 
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 
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. 

Page 3

 
THE RANDOM HOUSE GROUP LIMITED
 

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

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, the closure of the Grantham site 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.
 
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. 

Page 4

 
THE RANDOM HOUSE GROUP LIMITED
 

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

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.


Page 5

 
THE RANDOM HOUSE GROUP LIMITED
 

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

Streamlined Energy and Carbon Reporting Disclosure 2023

Due to the nature of activities carried out across the Group it is impracticable to calculate energy usage on an individual company by company basis. Random House Group Limited (RHGL) employees are based within the Penguin Random House (PRH) offices at Embassy Gardens, and stock is stored and distributed from the main PRH distribution centre at Colchester. As a result of this, the report is calculated based on apportioned Group streamlined energy and carbon reporting numbers based on employee headcount for inclusion in the financial statements. UK Greenhouse gas emissions and energy use data for the period 1st January 2023 to 31st December 2023. The previous year ending 2022 figures have been included to demonstrate the Company’s commitment to reducing their energy use and greenhouse gas emissions. 
Energy Consumption - Green Electricity – The Company made the decision to purchase electricity from Renewable Resources from October 2018 onwards. 
img3a0f.png
In 2023
This is the first year of the newly expanded warehouse at Colchester, an extra 11,000 sqm - this accounts for the increase in total electricity and heat consumption in kWh. 
The Solar PV installation at the Colchester Distribution Centre produced 387,102 kWh of electricity for the site (149,671 kWh apportioned to the Company), 16% of the total requirement in 2023. 
PRH UK maintained ISO14001 accreditation for their Environmental Management System across the four major sites with the UK.
There were noticeable increases in Emissions from employee business travel and employee commuting as work returns to normal after the Covid 19 pandemic. 
There are noticeably higher emissions in Scope 1 Stationary fuels in 2023, this is due to PRH incorrectly reporting Natural Gas supplied heating in Scope 2 Heat in previous years. 

Targets
The Company is committed to managing environmental issues effectively across our entire value chain. We have set three key targets for the future. The details of these are outlined in the PRH Sustainability Policy https://wp.penguin.co .uk/wp-content/uploads /2022/06/Penguin_Sustainability_Policy_Spring_22 -3.pdf
 
Zero by 30: reduce our carbon footprint to become climate neutral in our direct operations by 2021, and in our wider supply chain by 2030
Sustainable sourcing: ensure 100% of our paper and other core materials continue to be ethically and sustainably sourced. 
Content: use the power of our brand, books, and authors to amplify the climate emergency and encourage positive behaviour change
Page 6

 
THE RANDOM HOUSE GROUP LIMITED
 

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

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Page 7

 
THE RANDOM HOUSE GROUP LIMITED
 

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

img626c.png
Reporting Methodology

We have followed the UK BEIS (Department Business, Energy & Industrial Strategy) 2019 guidance. The energy and emission figures provided are taken from Bertelsmann’s “Green Screen”, this a Bertelsmann owned internal recording application used by all companies within the Bertelsmann Group.  All conversions are completed using government guidance ratios and the scopes 1, 2 and 3 are as outlined by BEIS guidance pages 50 and 51. 
In addition to the above the Company has begun to offset site related emissions as of 2021.  2023 offsetting data was not available at the time of report preparation.
img500d.png
* The total amount of electricity procured for 2023 also includes the 361,647 kWh by the Solar PV installation at the Colchester Distribution centre produced. (139,829 kWh apportioned to the Company)
# Gas supplies purchased direct from a supplier were previously reported as Scope 2 Heat instead of Scope 1 Stationary Fuels 

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.


Mark Gardiner
Director

Date: 8 April 2024

Page 8

 
THE RANDOM HOUSE GROUP 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 profit for the year, after taxation, amounted to £20,490,142 (2022 - £31,935,603).

Dividends of £75,000,000 were paid during the year (2022: £120,000,000).

Directors

The directors who served during the year and up to the date of signing the financial statements were:

Mark Gardiner 
Robert Waddington 
Thomas Weldon 
Nihar Malaviya (appointed 1 January 2023)

Future developments

The Company will continue to seek suitable publishing opportunities to ensure growth. 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.
 
For the purposes of the Company’s going concern assessment, the directors have performed sensitivity analysis on cashflows based on unforeseen changes in demand and the potential impact of increased inflationary pressures. In addition, reverse stress testing has been performed to establish the levels of performance where cash availability would be breached. The results of the analysis demonstrated that there was sufficient cash availability within the current intra group cash pooling facility to deal with all of the identified plausible scenarios. 
 
The forecast is dependent on the group cash pooling facility being available for the going concern period and Bertelsmann UK Limited not seeking repayment of the amounts currently due. The directors note that the terms of the facility state that that it can be terminated by either party with three days notice and, therefore, the Company has received written confirmation from Bertelsmann UK Limited that it will not seek repayment of the amounts currently due for the going concern period.
 
Based on the Company’s current trading performance, the sensitivity and reverse stress testing scenarios performed and the written confirmation of support from Bertelsmann UK 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 9

 
THE RANDOM HOUSE GROUP LIMITED
 
 
 
DIRECTORS' REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023

Engagement with employees

The Company systematically provides employees with information on matters of concern to them, consulting them or their representatives regularly, 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 encourages the involvement of employees by means of regular meetings with staff and staff representatives to keep them informed of the Company’s progress. The Company operates a pension scheme for which all employees are eligible.
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. The Company gives full and fair consideration to applications for employment from disabled persons, having regard to their particular aptitudes and abilities. Appropriate arrangements are made for the continued employment and training, career development and promotion of disabled persons employed by the Company. If members of staff become disabled the Company continues employment, either in the same or an alternative position, with appropriate retraining being given if necessary.

Matters covered in the Strategic Report

Details on energy and carbon reporting, 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.

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.


Page 10

 
THE RANDOM HOUSE GROUP LIMITED
 
 
 
DIRECTORS' REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023


Auditor

The auditor, Grant Thornton UK LLPwill 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.
 





Mark Gardiner
Director

Date: 8 April 2024

20 Vauxhall Bridge Road
London
SW1V 2SA

Page 11

 
THE RANDOM HOUSE GROUP 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 and 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 judgments 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 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 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 12

 
THE RANDOM HOUSE GROUP LIMITED
 
 
 
INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF THE RANDOM HOUSE GROUP LIMITED
 

Opinion


We have audited the financial statements of The Random House Group Limited (the 'Company') for the year ended 31 December 2023, which comprise the Profit and Loss Account, 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 profit 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 United Kingdom, 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 13

 
THE RANDOM HOUSE GROUP LIMITED
 
 
 
INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF THE RANDOM HOUSE GROUP LIMITED (CONTINUED)


Conclusion 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 report and financial statements. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. 
Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.


We have nothing to report in this regard.


Opinions on other matters prescribed by the Companies Act 2006
 

In our opinion, based on the work undertaken in the course of 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.


Page 14

 
THE RANDOM HOUSE GROUP LIMITED
 
 
 
INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF THE RANDOM HOUSE GROUP LIMITED (CONTINUED)


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.


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 13, 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 15

 
THE RANDOM HOUSE GROUP LIMITED
 
 
 
INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF THE RANDOM HOUSE GROUP 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.
 
Page 16

 
THE RANDOM HOUSE GROUP LIMITED
 
 
 
INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF THE RANDOM HOUSE GROUP LIMITED (CONTINUED)


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

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.


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.





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

8 April 2024
Page 17

 
THE RANDOM HOUSE GROUP LIMITED
 
 
PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED 31 DECEMBER 2023

As restated
2023
2022
Note
£
£

  

Revenue
 4 
262,304,038
231,644,201

Cost of sales
  
(122,962,987)
(113,138,221)

Gross profit
  
139,341,051
118,505,980

Distribution costs
  
(11,739,451)
(11,515,098)

Administrative expenses
  
(166,195,849)
(135,524,222)

Other operating income
 5 
72,455,264
67,777,543

Operating profit
 6 
33,861,015
39,244,203

Income from shares in group undertakings
 8 
85,980
-

Income from other fixed asset investments
 8 
231
23

Interest receivable and similar income
 9 
4,429,000
1,338,288

Amounts written off investments
 14 
(4,618,000)
(267,000)

Interest payable and similar expenses
 10 
(4,508,277)
(1,373,272)

Profit before tax
  
29,249,949
38,942,242

Tax on profit
 11 
(8,759,807)
(7,006,639)

Profit for the financial year
  
20,490,142
31,935,603

All activities derive from continuing operations.
The notes on pages 23 to 68 form part of these financial statements.

Prior year balances have been restated as detailed in note 25.

Page 18

 
THE RANDOM HOUSE GROUP LIMITED
 

STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2023

2023
2022
Note
£
£


Profit for the financial year

  

20,490,142
31,935,603

Other comprehensive income:
  

Items that will not be reclassified to profit or loss:
  


Actuarial gain on defined benefit schemes
 17 
3,556,055
40,241,153

Movements of deferred tax relating to pension surplus
  
(889,013)
(10,060,288)

Other comprehensive income for the year, net of tax
  
2,667,042
30,180,865

  

  

  

Total comprehensive income for the year
  
23,157,184
62,116,468

The notes on pages 23 to 68 form part of these financial statements.

Page 19

 
THE RANDOM HOUSE GROUP LIMITED
REGISTERED NUMBER: 00954009

BALANCE SHEET
AS AT 31 DECEMBER 2023

As restated
2023
2022
Note
£
£

  

Fixed assets
  

Intangible assets
 12 
4,558,556
4,419,284

Tangible fixed assets
 13 
36,377,776
34,773,632

Right of use assets
 20 
18,953,738
21,759,211

Fixed asset investments
 14 
32,750,481
20,691,981

  
92,640,551
81,644,108

Current assets
  

Stocks
 15 
13,026,554
14,708,346

Debtors: amounts falling due within one year
 16 
281,911,857
246,892,651

Cash at bank and in hand
  
877,423
956,286

Post-employment benefit
 17 
98,949,000
88,307,945

  
394,764,834
350,865,228

Creditors: amounts falling due within one year
 18 
(286,982,787)
(188,586,499)

Net current assets
  
 
 
107,782,047
 
 
162,278,729

Total assets less current liabilities
  
200,422,598
243,922,837

  

Creditors: amounts falling due after more than one year
 19 
(47,094,878)
(48,462,967)

  
153,327,720
195,459,870

Provisions for liabilities
  

Provisions
 21 
(47,110,846)
(37,400,180)

  
 
 
(47,110,846)
 
 
(37,400,180)

  

Net assets
  
106,216,874
158,059,690

Page 20

 
THE RANDOM HOUSE GROUP LIMITED
REGISTERED NUMBER: 00954009
    
BALANCE SHEET (CONTINUED)
AS AT 31 DECEMBER 2023

As restated
2023
2022
Note
£
£

Capital and reserves
  

Called up share capital 
 23 
81,956,072
81,956,072

Capital redemption reserve
 24 
66,409
66,409

Profit and loss account
 24 
24,194,393
76,037,209

  
106,216,874
158,059,690


Prior year balances have been restated as detailed in note 25.
The notes on pages 24 to 69 form part of these financial statements.
The financial statements were approved and authorised for issue by the board and were signed on its behalf by: 




Mark Gardiner
Director

Date: 8 April 2024


Page 21

 
THE RANDOM HOUSE GROUP LIMITED
 

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


Called up share capital
Capital redemption reserve
Profit and loss account
Total equity

£
£
£
£


At 1 January 2022
81,956,072
66,409
133,920,741
215,943,222


Comprehensive income for the year

Profit for the year

-
-
31,935,603
31,935,603

Actuarial gains on pension scheme, net of tax
-
-
30,180,865
30,180,865
Total comprehensive income for the year
-
-
62,116,468
62,116,468


Contributions by and distributions to owners

Dividends: Equity capital
-
-
(120,000,000)
(120,000,000)



At 1 January 2023
81,956,072
66,409
76,037,209
158,059,690


Comprehensive income for the year

Profit for the year

-
-
20,490,142
20,490,142

Actuarial gains on pension scheme, net of tax
-
-
2,667,042
2,667,042
Total comprehensive income for the year
-
-
23,157,184
23,157,184


Contributions by and distributions to owners

Dividends: Equity capital
-
-
(75,000,000)
(75,000,000)


At 31 December 2023
81,956,072
66,409
24,194,393
106,216,874


The notes on pages 23 to 68 form part of these financial statements.

Page 22

 
THE RANDOM HOUSE GROUP LIMITED
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023

1.


General information

The Random House Group Limited ("the Company") is a book publisher. The Company sells its books globally with the majority of sales in the UK.  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:

 
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
Page 23

 
THE RANDOM HOUSE GROUP 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 (continued)

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.

 
2.3

Exemption from preparing consolidated financial statements

The Company is a parent company that is also a subsidiary included in the consolidated financial statements of a larger group by a parent undertaking established under the law of a state other than the United Kingdom and is therefore exempt from the requirement to prepare consolidated financial statements under section 401 of the Companies Act 2006. The consolidated financial statements of the Company's ultimate parent company, Bertelsmann SE & Co KGaA, are available from: Bertelsmann SE & Co KGaA, Carl Bertelsmann Strasse 270, Postfach 111, D-33311
Gütersloh, Germany.

  
2.4

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.
 
For the purposes of the Company’s going concern assessment, the directors have performed sensitivity analysis on cashflows based on unforeseen changes in demand and the potential impact of increased inflationary pressures. In addition, reverse stress testing has been performed to establish the levels of performance where cash availability would be breached. The results of the analysis demonstrated that there was sufficient cash availability within the current intra group cash pooling facility to deal with all of the identified plausible scenarios. 
 
The forecast is dependent on the group cash pooling facility being available for the going concern period and Bertelsmann UK Limited not seeing repayment of the amounts currently due. The directors note that the terms of the facility state that that it can be terminated by either party with three days notice and, therefore, the Company has received written confirmation from Bertelsmann UK Limited that it will not seek repayment of the amounts currently due for the going concern period.
 
Based on the Company’s current trading performance, the sensitivity and reverse stress testing scenarios performed and the written confirmation of support from Bertelsmann UK Limited, the directors have a reasonable expectation that the Company has adequate resources to continue in
Page 24

 
THE RANDOM HOUSE GROUP LIMITED
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023

2.Accounting policies (continued)

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. 

  
2.5

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 25

 
THE RANDOM HOUSE GROUP LIMITED
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023

2.Accounting policies (continued)

  
2.6

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. 

  
2.7

Dividend income

Dividend income is recognised when the right to receive payment is established.

  
2.8

Other operating income

Other operating income consists of income not directly related to the Company's principal activity in relation to the publication of books.
It mainly comprises of the management recharge of administrative, distribution and other operating expenses incurred by the Company on behalf of other group undertakings. It is recognised at a point in time that the services are provided in accordance with the relevant performance obligation. The management charge is a combination of certain fixed costs and the allocation of expenses calculated using agreed specific percentages within a recharge model.

Page 26

 
THE RANDOM HOUSE GROUP LIMITED
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023

2.Accounting policies (continued)

 
2.9

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.

 
2.10

Leases

The Company leases various offices, equipment and vehicles. Rental contracts are typically made for fixed periods of 6 months to 10 years but may extend beyond the term where extension options are present.
Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions. The lease agreements do not impose any covenants other than the security interests in the leased assets that are held by the lessor. Leased assets may not be used as security for borrowing purposes.
Leases are recognised as a right-of-use asset and a corresponding lease liability at the date at which the leased asset is available for use by the Company.

The Company as a lessee

The Company assesses whether a contract contains a lease, at inception of a contract. The Company recognises a right-of-use asset and a corresponding lease liability with respect to all lease agreements in which it is the lessee, except for short-term leases (defined as leases with a lease term of 12 months or less) and leases of low value assets. For these leases, the Company recognises the lease payments as an operating expense on a straight-line basis over the term of the lease unless another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.

Page 27

 
THE RANDOM HOUSE GROUP LIMITED
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023

2.Accounting policies (continued)


2.10
Leases (continued)

The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted by using the rate implicit in the lease or where this is not readily determined, its incremental borrowing rate.

Lease payments included in the measurement of the lease liability comprise:

fixed lease payments (including in-substance fixed payments), less any lease incentives;

variable lease payments that depend on an index or rate, initially measured using the index or rate at the commencement date;


The right-of-use assets comprise the initial measurement of the corresponding lease liability, any lease payments made at or before the commencement day and any initial direct costs in bringing the leased object into use. The right of use assets are subsequently measured at cost less accumulated depreciation and impairment losses. 

Whenever the Company incurs an obligation for costs to dismantle and remove a leased asset or restore the site or underlying asset to the condition required by the terms and conditions of the lease, a provision is recognised and measured under IAS 37. The present value of the expected costs are included in the related right-of-use asset. The obligation is recorded within provisions on the balance sheet. 

Right-of-use assets are depreciated over the shorter period of lease term and useful life of the underlying asset. If the Company expects to exercise a purchase option, the related right-of-use asset is depreciated over the useful life of the underlying asset. The depreciation starts at the commencement date of the lease. Management applies judgement to the expected lease term where early termination or extension options are present in the contract.

The Company applies IAS 36 to determine whether a right-of-use asset is impaired and accounts for any identified impairment loss as described in note 2.19.

As a practical expedient, IFRS 16 permits a lessee not to separate non-lease components, and instead account for any lease and associated non-lease components as a single arrangement. The Company has used this practical expedient.
Where another group company holds the guarantor and lease of the related property, but is not the sole occupier, the company occupying the leased building holds the right of use asset with the lease liability being shown as a corresponding intercompany payable.  The intercompany payable in relation to the lease is calculated using the same methodology as the lease liability above.

Page 28

 
THE RANDOM HOUSE GROUP LIMITED
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023

2.Accounting policies (continued)

  
2.11

Employee benefits

Defined benefit pension plan
The Company operates a defined benefit plan for certain employees. A defined benefit plan defines the pension benefit that the employee will receive on retirement, usually dependent upon several factors including but not limited to age, length of service and remuneration. A defined benefit plan is a pension plan that is not a defined contribution plan.
The asset or liability recognised in the Balance Sheet in respect of the defined benefit plan is the present value of the defined benefit obligation at the end of the balance sheet date less the fair value of plan assets at the balance sheet date (if any) out of which the obligations are to be settled.
Any asset arising on the defined benefit plan at the balance sheet date is considered to be fully recoverable by the Company. Whilst the trustees of the scheme have a unilateral power to trigger a wind up of the plan without employer consent, and before all benefits have been provided to members in full, it is considered highly unlikely. The only circumstances in which the objectives for which the scheme was established would no longer exist would be when all of the benefits owed to every last beneficiary had either been paid, or secured with an insurance company on a buy-out, or otherwise transferred in full to another arrangement. Therefore, the trustees would not use this power to wind up an ongoing scheme before the death of the last beneficiary.
The defined benefit obligation is calculated using the projected unit credit method. Annually the company engages independent actuaries to calculate the obligation. The present value is determined by discounting the estimated future payments using market yields on high quality corporate bonds that are denominated in sterling and that have terms approximating to the estimated period of the future payments ('discount rate').
Remeasurement gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or credited to equity in other comprehensive income in the period in which they arise.
The amount charged or credited to finance costs is a net interest amount calculated by applying the liability discount rate to the net defined benefit liability or asset.
Past service costs are recognised immediately in the profit and loss account.
Defined contribution pension plan
The Company operates a defined contribution plan for certain employees. A defined contribution plan is a pension plan under which the Company pays fixed contributions into a separate entity. The Company has no legal or constructive obligations to pay further contributions if the fund does not hold sufficient assets to pay all employees the benefits relating to employee service in the current and prior periods.
The Company pays contributions to publicly or privately administered pension insurance plans on a mandatory, contractual or voluntary basis. The Company has no further payment obligations once the contributions have been paid. The contributions are recognised as employee benefit expense when they are due. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in the future payments is available.

Page 29

 
THE RANDOM HOUSE GROUP LIMITED
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023

2.Accounting policies (continued)

 
2.12

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. 

 
2.13

Investments

Investments in subsidiaries are measured at cost less accumulated impairment.

At each balance sheet date, management review the investments in order to determine whether there is any objective evidence present that in accordance with IAS 36 would lead to an impairment being charged. 
Prior impairments of non-financial assets (other than goodwill) are reviewed for possible reversals at each reporting date, where a favourable event or change in circumstance has materialised that would indicate the impairment loss no longer exists or has decreased in size. 

  
2.14

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 30

 
THE RANDOM HOUSE GROUP LIMITED
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023

2.Accounting policies (continued)

 
2.15

Intangible assets

Intangible assets are initially recognised at cost. After recognition, under the cost model, intangible assets are measured at cost less any accumulated amortisation and any accumulated impairment losses.

At each reporting date the company assesses whether there is any indication of impairment. If such indication exists, the recoverable amount of the asset is determined which is the higher of its fair value less costs to sell and its value in use. An impairment loss is recognised where the carrying amount exceeds the recoverable amount.

 The estimated useful lives range as follows:

Software Licences
-
4
years

Computer Software
Development costs that are directly attributable to the design and testing of identifiable and unique software products controlled by the Company are recognised as intangible assets when the following criteria are met: 

It is technically feasible to complete the software product so that it will be available for use;
Management intends to complete the software product and use it or sell it;
There is an ability to use or sell the software product;
It can be demonstrated how the software product will generate probable future economic benefits;
Adequate technical, financial and other resources to complete the development and to use or sell the software are available; and
The expenditure attributable to the software product during its development can be reliably measured. 

Directly attributable costs that are capitalised as part of the software product include the software
development employee costs and an appropriate portion of relevant overheads. Other development
expenditures that do not meet these criteria, as well as ongoing maintenance costs are recognised
as the expense is incurred. Development costs previously recognised as an expense are not
recognised as an asset in a subsequent period

  
2.16

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.

Page 31

 
THE RANDOM HOUSE GROUP LIMITED
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023

2.Accounting policies (continued)

 
2.17

Tangible fixed assets

Tangible fixed assets under the cost model are stated at historical cost less accumulated depreciation and any accumulated impairment losses. Historical cost includes expenditure that is directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management.

At each reporting date the company assesses whether there is any indication of impairment by applying the indicators set out in IAS 36. If such indication exists, the recoverable amount of the asset is determined which is the higher of its fair value less costs to sell and its value in use. An impairment loss is recognised where the carrying amount exceeds the recoverable amount and is charged to the profit in loss. 

Depreciation is charged so as to allocate the cost of assets less their residual value over their estimated useful lives, using the straight-line method.

Depreciation is provided on the following basis:

Freehold property
-
40 - 50 years
Leasehold property
-
Over period of lease
Plant and machinery
-
3 - 20 years

The assets' residual values, useful lives and depreciation methods are reviewed, and adjusted prospectively if appropriate, or if there is an indication of a significant change since the last reporting date. Management applies judgement in determining both the residual value and economic life of the asset. 

Gains and losses on disposals of assets are determined by comparing the proceeds with the carrying amount of the asset and are recognised in profit or loss.

Assets under construction are not depreciated. External borrowing costs attributable to assets under construction are accounted for under IAS 23 and added to the asset value if material to the company and can be directly attributed to the asset under construction. All other borrowing costs, including those arising through intercompany borrowing are recognised as an expense when incurred.

 
2.18

Impairment of fixed assets and goodwill

Assets that are subject to depreciation or amortisation are assessed at each balance sheet date to determine whether there is any indication that the assets are impaired. Where there is any indication that an asset may be impaired, the carrying value of the asset (or cash-generating unit to which the asset has been allocated) is tested for impairment. An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset's (or CGU's) fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (CGUs). Non-financial assets that have been previously impaired are reviewed at each balance sheet date to assess whether there is any indication that the impairment losses recognised in prior periods may no longer exist or may have decreased.

Page 32

 
THE RANDOM HOUSE GROUP LIMITED
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023

2.Accounting policies (continued)

  
2.19

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 15.
Net realisable value is calculated as the estimated selling price in the ordinary course of business less applicable variable selling expenses.

  
2.20

Financial assets

The company classifies its 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 day of 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 contractual 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 separate line item in the profit or loss under ‘net impairment losses on financial and contract assets’.
On initial recognition of an equity investment that is not held for trading, the Company may irrevocably 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
Page 33

 
THE RANDOM HOUSE GROUP LIMITED
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023

2.Accounting policies (continued)

assets classified at FVOCI nor FVTPL.
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.

  
2.21

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.

 
2.22

Cash and cash equivalents

Cash and cash equivalents 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.

 
2.23

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 34

 
THE RANDOM HOUSE GROUP LIMITED
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023

2.Accounting policies (continued)

 
2.24

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.

 
2.25

Dividends

Equity dividends are recognised when they become legally payable. Interim equity dividends are recognised when paid. Final equity dividends are recognised when approved by the shareholders at an annual general meeting.

Page 35

 
THE RANDOM HOUSE GROUP LIMITED
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023

3.


Judgments 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, however, there are no significant accounting judgments in this entity.

Key accounting estimates and assumptions

(i) Advances
Advances of royalties paid to authors are recognised upon the payment of signature advance or upon the acceptance of the manuscript 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 up to one year for domestic sales and up to two years for international sales, and for licensing agreements, varies as per the terms of the agreement. 
The carrying amount of royalty advances on unpublished titles, net of provisions are included in advance royalties, see note 16 for reference. The onerous provision created in respect of royalty contacts are recorded in note 21 of the financial statements.
Published titles:
Upon publication, the realisable value for significant titles will then be adjusted on a title by title 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 16 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 £13,437,463 (2022: £11,763,402)

(iii) Defined benefit scheme
The Company has an obligation to pay pension benefits to certain employees. The cost of these benefits and the present value of the obligation depend on a number of factors including life expectancy, salary increases, asset valuations and the discount rate on corporate bonds. Management estimates these factors in determining the net pension obligation in the balance sheet. The assumptions reflect historical experience and current trends. 
Management consider it highly unlikely, and contrary to the objects of why the schemes were established, that the trustees would wind up the plan without employer consent before all benefits had been paid in full to the members.  As a result, management consider any surplus arising on the defined benefit plan at the
Page 36

 
THE RANDOM HOUSE GROUP LIMITED
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023

3.Judgments in applying accounting policies (continued)

balance sheet date to be fully recoverable.
See note 17 for the disclosures of the defined benefit pension scheme.

(iv) Impairment of Investments
Investments in subsidiary companies are held at cost less accumulated impairment losses. The Company tests annually whether investments have suffered any impairment, with the carrying amount being written down for any impairment highlighted. 

The Company uses budgeted profits, projected cash flows and weighted average cost of capital in order to determine whether any impairment is required. See note 14 for the carrying amount of investments and associated impairment provision.

(v) Lease accounting
In determining the lease term, management considers all facts and circumstances that create an economic incentive to exercise an extension option, or not exercise a termination option. Extension options (or periods after termination options) are only included in the lease term if the lease is reasonably certain to be extended (or not terminated).
The following factors are normally the most relevant:
 • If there are significant penalties to terminate (or not extend), the Company is typically reasonably   certain to extend (or not terminate).
 • If any leasehold improvements are expected to have a significant remaining value, the Company   is typically reasonably certain to extend (or not terminate).
Otherwise, the Company considers other factors including historical lease durations and the costs and business disruption required to replace the leased asset.
The lease term is reassessed if an option is actually exercised (or not exercised) or the Company becomes obliged to exercise (or not exercise) it. The assessment of reasonable certainty is only revised if a significant event or a significant change in circumstances occurs, which affects this assessment, and that is within the control of the lessee.
The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be readily determined, which is generally the case for leases in the Company, the lessee’s incremental borrowing rate is used, being the rate that the individual lessee would have to pay to borrow the funds necessary to obtain an asset of similar value to the right-of-use asset in a similar economic environment with similar terms, security and conditions.
See note 20 for the net carrying amount of the lease liability and right-of-use asset.

Page 37

 
THE RANDOM HOUSE GROUP 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
173,432,194
152,838,243

Income from subrights
13,400,930
17,180,779

Digital sales
75,470,914
61,625,179

262,304,038
231,644,201


Analysis of revenue by destination:

As restated
2023
2022
£
£

United Kingdom
170,804,009
119,918,135

Europe
35,935,413
44,779,745

North America
6,080,118
35,083,478

South America
244,325
106,535

Asia
13,751,991
10,855,502

Africa
3,134,509
1,995,145

Oceania
32,353,673
18,905,661

262,304,038
231,644,201


Prior year balances have been restated as detailed in note 25.


5.


Other operating income

As restated
2023
2022
£
£

Management charge
72,341,209
67,666,616

Rents receivable
92,584
92,584

Sundry income
21,471
18,343

72,455,264
67,777,543


Prior year balances have been restated as detailed in note 25.

Page 38

 
THE RANDOM HOUSE GROUP LIMITED
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023

6.


Operating profit

The operating profit is stated after charging/(crediting):

As restated
2023
2022
£
£

Amortisation of intangible assets
1,745,886
1,659,999

Depreciation of tangible fixed assets
2,202,890
1,954,350

Depreciation of right-of-use assets
3,294,280
3,420,651

Profit on disposal of tangible fixed assets
-
(13,975,682)

Cost of stocks recognised as an expense
46,379,126
42,411,428

Impairment of trade receivables
515,891
355,949

Exchange differences
204,020
152,200

Auditors remuneration:


Audit services
185,783
80,134

Audit-related assurance services
5,000
-

Impairment of non-book sale related trade receivables, and any subsequent reversals, and the amortisation charge on intangible assets are included in the profit and loss account within administrative expenses.
Prior year balances have been restated as detailed in note 25.

Page 39

 
THE RANDOM HOUSE GROUP LIMITED
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023

7.


Employees

As restated
2023
2022
£
£

Wages and salaries
80,340,269
72,446,761

Social security costs
9,360,411
8,351,291

Staff pension costs
6,346,822
6,901,381

96,047,502
87,699,433


The average monthly number of employees, including the directors, during the year was as follows:


        2023
  As restated 2022
            No.
            No.







Production
35
33



Selling & distribution
512
528



Administration
700
668



Editorial
329
294

1,576
1,523

671 (2022: 647) employees performed services wholly relating to other group companies. The associated staff costs of £24,633,566 (2022: £21,451,857) were recharged by the Company during the year.
Prior year balances have been restated as detailed in note 25.



2023
2022

£
£


Directors' remuneration:

Aggregate emoluments
904,930
1,005,285

Amounts receivable under long term incentives
79,850
77,404

Company pension contributions to money purchase schemes
83,095
75,547


1,067,875
1,158,236

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


Page 40

 
THE RANDOM HOUSE GROUP LIMITED
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023

7.

Employees (continued)


2023
2022

£
£


Highest paid director:

Emoluments
513,496
576,865

Defined benefit pension scheme accrued at the end of the year
26,108
23,791


539,604
600,656

A percentage of total directors’ costs are recharged from the Company to other Penguin Random House group entities. The above directors’ remuneration amounts represent the amount allocated to the Company for services undertaken by the directors of the Company.
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 £1,067,875 (2022: £1,158,236).



8.


Income from investments

2023
2022
£
£

Dividends received

Income from shares in group undertakings
85,980
-

85,980
-




Dividends received from unlisted investments
231
23

231
23


Page 41

 
THE RANDOM HOUSE GROUP LIMITED
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023

9.


Interest receivable and similar income

2023
2022
£
£


Interest on post- employment benefits
4,429,000
842,000

Other
-
496,288

4,429,000
1,338,288


10.


Interest payable and similar expenses

2023
2022
£
£


Interest payable on cash pooling
3,463,248
488,227

Interest on lease liabilities
784,659
556,894

Other interest payable
260,370
328,151

4,508,277
1,373,272

Further details regarding cash pooling arrangements are included in note 18.

Page 42

 
THE RANDOM HOUSE GROUP LIMITED
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023

11.


Tax on profit


2023
2022
£
£

Corporation tax


UK corporation tax on profits for the year
5,138,506
3,739,747

Adjustments in respect of prior years
553,757
383,457


5,692,263
4,123,204


Double taxation relief
(432,657)
(565,415)


5,259,606
3,557,789

Foreign tax


Foreign tax on income for the year
540,909
706,768

540,909
706,768

Total current tax
5,800,515
4,264,557

Deferred tax


Origination and reversal of temporary differences
3,131,855
2,084,341

Adjustment in respect of prior years
(172,563)
657,741

Total deferred tax
2,959,292
2,742,082


Tax on profit
8,759,807
7,006,639

Further to the above, a deferred tax amount of £889,013 (2022: £10,060,288) in respect of actuarial gains on defined benefit schemes has been included within other comprehensive income.
Page 43

 
THE RANDOM HOUSE GROUP LIMITED
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
 
11.Tax on profit (continued)


Factors affecting tax charge for the year

The tax assessed for the year is higher 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
£
£


Profit before tax
29,249,949
38,942,242


Profit multiplied by standard rate of corporation tax in the UK of 23.5% (2022 - 19%)
6,873,738
7,399,026

Effects of:


Expenses not deductible for tax purposes, other than goodwill amortisation and impairment
1,228,917
(1,133,045)

Adjustments in respect of prior years - current tax
553,757
383,457

Adjustments in respect of prior years - deferred tax
(172,563)
657,741

Non-taxable income
(20,205)
(2,655,380)

Withholding tax not deductible
108,252
141,353

Deferred tax rate differences
187,911
500,242

Chargeable gains
-
1,713,245

Total tax charge for the year
8,759,807
7,006,639


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 44

 
THE RANDOM HOUSE GROUP LIMITED
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023

12.
Intangible assets


Goodwill
Software
Assets under construction
Total

£
£
£
£


Cost:

At 1 January 2023
1,915,682
30,448,197
2,243,311
34,607,190

Additions
-
-
1,764,141
1,764,141

Transfers from tangible fixed assets
-
-
121,017
121,017

Transfers
-
3,250,049
(3,250,049)
-

At 31 December 2023
1,915,682
33,698,246
878,420
36,492,348

Accumulated amortisation: 

At 1 January 2022
1,915,682
28,272,224
-
30,187,906

Amortisation in the year
-
1,745,886
-
1,745,886

At 31 December 2023
1,915,682
30,018,110
-
31,933,792

Net book amounts:

At 31 December 2023
-
3,680,136
878,420
4,558,556

At 31 December 2022
-
2,175,973
2,243,311
4,419,284

The Company has no restricted title intangible assets and has none pledged as security for liabilities.

Page 45

 
THE RANDOM HOUSE GROUP LIMITED
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023

13.


Tangible fixed assets





Freehold property
Long-term leasehold property
Plant and machinery
Assets under construction
Total

£
£
£
£
£



Cost


At 1 January 2023
19,560,152
647,150
21,652,383
16,168,372
58,028,057


Additions
-
-
-
3,928,051
3,928,051


Transfers to intangible fixed assets
-
-
(121,017)
-
(121,017)


Transfers
-
16,621,794
147,969
(16,769,763)
-



At 31 December 2023

19,560,152
17,268,944
21,679,335
3,326,660
61,835,091



Depreciation


At 1 January 2023
8,574,658
549,359
14,130,408
-
23,254,425


Charge for the year
311,554
390,971
1,500,365
-
2,202,890



At 31 December 2023

8,886,212
940,330
15,630,773
-
25,457,315



Net book value



At 31 December 2023
10,673,940
16,328,614
6,048,562
3,326,660
36,377,776



At 31 December 2022
10,985,494
97,791
7,521,975
16,168,372
34,773,632

Assets under construction (AUC) at the year end principally relate to plant and equipment expenditure on projects yet to be completed and delivered at the balance sheet date. On completion the costs are transferred from assets under construction to the appropriate asset group, and depreciated over their useful economic life in accordance with the Company’s accounting policies from this point. During the year, AUC included costs in relation to a new Warehouse Management System following the completion of the warehouse expansion.

Page 46

 
THE RANDOM HOUSE GROUP LIMITED
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023

14.


Fixed asset investments





Investments in subsidiary companies
Listed investments
Unlisted investments
Total

£
£
£
£



Cost


At 1 January 2023
50,330,908
1,343
6,000
50,338,251


Additions
16,676,500
-
-
16,676,500



At 31 December 2023

67,007,408
1,343
6,000
67,014,751



Impairment


At 1 January 2023
29,646,270
-
-
29,646,270


Charge for the period
4,618,000
-
-
4,618,000



At 31 December 2023

34,264,270
-
-
34,264,270



Net book value



At 31 December 2023
32,743,138
1,343
6,000
32,750,481



At 31 December 2022
20,684,638
1,343
6,000
20,691,981

Subsidiaries
The Company’s subsidiaries are listed below. None of the investments are publicly traded. The addition in the year relates to the acquisition of Quadrille Publishing Limited (formerly Hardie Grant UK Limited).
An impairment test was carried out in accordance with International Accounting Standard 36. The carrying amount and the recoverable amount of each investment have been compared to ascertain if impairment is necessary. The recoverable amount is the higher of an asset’s fair value less costs of disposal and value in use.
The impairment charge of £4,618,000 relates to a decline in the recoverable amount of the Company's subsidiary undertakings Woodlands Books Limited (£3,812,000) and Penguin Random House South Africa (Pty) Ltd (£806,000).

Page 47

 
THE RANDOM HOUSE GROUP LIMITED
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023

Subsidiary undertakings


The following were subsidiary undertakings of the Company:

Name

Registered office

Class of shares

Holding

Arrow Books Limited
20 Vauxhall Bridge Road, London, United Kingdom, SW1V 2SA
Ordinary
100%
Bantam Books Limited
20 Vauxhall Bridge Road, London, United Kingdom, SW1V 2SA
Ordinary
100%
Barrie & Jenkins Limited
20 Vauxhall Bridge Road, London, United Kingdom, SW1V 2SA
Ordinary
98%
Bartlett Bliss Productions Limited
20 Vauxhall Bridge Road, London, United Kingdom, SW1V 2SA
Ordinary
100%
Bellew & Higton Publishers Limited
20 Vauxhall Bridge Road, London, United Kingdom, SW1V 2SA
Ordinary
100%
Business Books Limited
20 Vauxhall Bridge Road, London, United Kingdom, SW1V 2SA
Ordinary
100%
Bodley Head Limited (The)
20 Vauxhall Bridge Road, London, United Kingdom, SW1V 2SA
Ordinary
100%
Carousel Books Limited
20 Vauxhall Bridge Road, London, United Kingdom, SW1V 2SA
Ordinary
100%
Century Benham Limited
20 Vauxhall Bridge Road, London, United Kingdom, SW1V 2SA
Ordinary
100%
Century Hutchinson Limited
20 Vauxhall Bridge Road, London, United Kingdom, SW1V 2SA
Ordinary
100%
Century Hutchinson Publishing Limited
20 Vauxhall Bridge Road, London, United Kingdom, SW1V 2SA
Ordinary
100%
Century Publishing Co. Limited
20 Vauxhall Bridge Road, London, United Kingdom, SW1V 2SA
Ordinary
100%
Chatto and Windus Limited
20 Vauxhall Bridge Road, London, United Kingdom, SW1V 2SA
Ordinary
100%
Corgi Books Limited
20 Vauxhall Bridge Road, London, United Kingdom, SW1V 2SA
Ordinary
100%
Hammond, Hammond and Company, Limited
20 Vauxhall Bridge Road, London, United Kingdom, SW1V 2SA
Ordinary
100%
Herbert Jenkins Limited
20 Vauxhall Bridge Road, London, United Kingdom, SW1V 2SA
Ordinary
100%
Hurst & Blackett Limited
20 Vauxhall Bridge Road, London, United Kingdom, SW1V 2SA
Ordinary
100%
Hutchinson & Co. (Publishers) Limited
20 Vauxhall Bridge Road, London, United Kingdom, SW1V 2SA
Ordinary
100%
Hutchinson Books Limited
20 Vauxhall Bridge Road, London, United Kingdom, SW1V 2SA
Ordinary
100%
Hutchinson Childrens Books Limited
20 Vauxhall Bridge Road, London, United Kingdom, SW1V 2SA
Ordinary
100%
Jackdaw Publications Limited
20 Vauxhall Bridge Road, London, United Kingdom, SW1V 2SA
Ordinary
100%
Jonathan Cape Limited
20 Vauxhall Bridge Road, London, United Kingdom, SW1V 2SA
Ordinary
100%
Mainstream Publishing Company (Edinburgh) Limited
4th Floor 115 George Street, Edinburgh, EH2 4JN
Ordinary
100%
Martin Secker and Warburg Limited
20 Vauxhall Bridge Road, London, United Kingdom, SW1V 2SA
Ordinary
100%
Page 48

 
THE RANDOM HOUSE GROUP LIMITED
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
Subsidiary undertakings (continued)


Name

Registered office

Class of shares

Holding

Penguin Random House Ireland Limited
c/o EUGENE F. COLLINS Solicitors, Temple Chambers, 3 Burlington Road, Dublin, Ireland, 4
Ordinary
100%
Penguin Random House South Africa Proprietary Limited
The Estuaries No 4, Oxbow Crescent, Century Avenue, CenturyCity, Cape Town, South Africa, 8000
Ordinary
53.7%
Plane Tree Publishers Limited
20 Vauxhall Bridge Road, London, United Kingdom, SW1V 2SA
Ordinary
100%
Quadrille Publishing Limited
20 Vauxhall Bridge Road, London, United Kingdom, SW1V 2SA
Ordinary
100%
Random House Properties Limited
20 Vauxhall Bridge Road, London, United Kingdom, SW1V 2SA
Ordinary
100%
Random House Publishing Group Limited
20 Vauxhall Bridge Road, London, United Kingdom, SW1V 2SA
Ordinary
100%
Random House UK Ventures Limited
20 Vauxhall Bridge Road, London, United Kingdom, SW1V 2SA
Ordinary
100%
RHA Holdings Pty Limited
16 Dalmore Drive, Scoresby (Melbourne), Victoria 3179, Australia,3179
Ordinary
100%
Sinclair - Stevenson Limited
20 Vauxhall Bridge Road, London, United Kingdom, SW1V 2SA
Ordinary
100%
Stanley Paul & Company Limited
20 Vauxhall Bridge Road, London, United Kingdom, SW1V 2SA
Ordinary
100%
T. Werner Laurie, Limited
20 Vauxhall Bridge Road, London, United Kingdom, SW1V 2SA
Ordinary
100%
Tamarind Limited
20 Vauxhall Bridge Road, London, United Kingdom, SW1V 2SA
Ordinary
100%
The Book Service Limited
20 Vauxhall Bridge Road, London, United Kingdom, SW1V 2SA
Ordinary
100%
The Cresset Press Limited
20 Vauxhall Bridge Road, London, United Kingdom, SW1V 2SA
Ordinary
100%
The Harvill Press Limited
20 Vauxhall Bridge Road, London, United Kingdom, SW1V 2SA
Ordinary
100%
The Hogarth Press Limited
20 Vauxhall Bridge Road, London, United Kingdom, SW1V 2SA
Ordinary
100%
Transworld Publishers Limited
20 Vauxhall Bridge Road, London, United Kingdom, SW1V 2SA
Ordinary
100%
Virgin Books Limited
20 Vauxhall Bridge Road, London, United Kingdom, SW1V 2SA
Ordinary
100%
Woodlands Books Limited
20 Vauxhall Bridge Road, London, United Kingdom, SW1V 2SA
Ordinary
85%

Page 49

 
THE RANDOM HOUSE GROUP LIMITED
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023

15.


Stocks

As restated
2023
2022
£
£

Raw materials and consumables
276,575
2,431

Work in progress (goods to be sold)
1,880,684
2,779,811

Finished goods and goods for resale
10,869,295
11,926,104

13,026,554
14,708,346


There is no significant difference between the replacement cost of stocks and their carrying amounts.
Stocks are stated after provisions for impairment of £3,317,508 (2022: £3,147,202). No inventories have been pledged as security for liabilities.
Prior year balances have been restated as detailed in note 25.


Page 50

 
THE RANDOM HOUSE GROUP LIMITED
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023

16.


Debtors: amounts falling due within one year


As restated
2023
2022
£
£



Trade debtors
3,145,097
7,734,596

Advance royalties
43,932,777
40,969,806

Amounts owed by group undertakings
205,451,870
173,386,998

Other debtors
4,246,213
4,983,746

Prepayments and accrued income
18,018,195
12,305,509

Deferred tax asset
7,117,705
7,511,996

281,911,857
246,892,651


Amounts owed by group undertakings are unsecured, repayable on demand and interest free. 
Included in amounts owed by group undertakings is £179,452,589 (2022: £143,927,858) owed from The Book Service Limited ("TBS"), principally representing trade debtors receivable in TBS on behalf of the company. 
The total debtors balance is stated after provision for impairment of £2,845,753 (2022: £2,329,862). This balance is split between amounts owed by group undertakings £2,613,792 (2022: £2,213,715) and the trade debtors £231,961 (2022: £116,147).
Advance royalties is stated after a provision of £517,303,310 (2022: £500,286,238). Included in advance royalties is £23,734,664 (2022: £21,943,422) relating to manuscripts which will not be published for over a year and staged advances which are date linked over several years rather than to specific titles.
Prior year balances have been restated as detailed in note 25.

Page 51

 
THE RANDOM HOUSE GROUP LIMITED
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023

17.

Post-employment benefit

The Company, together with its subsidiary, The Book Service Limited, operates two pension schemes of the defined benefit type. The names of the schemes are Penguin Random House Pension Scheme ("PRHPS") and Transworld Publishers Scheme ("TPPS"). The assets of the scheme are for the scheme as a whole and are not allocated to the employees, or ex-employees, of a particular Company. Employees can move freely between the sponsoring companies and so it is not considered practicable to attempt to split the liabilities between the companies, therefore the pension is accounted for in the financial statements of The Random House Group Limited, whose management are responsible for liasing with the trustees who are responsible for making decisions concerning the plan. The defined benefit schemes were closed to new members from 1 July 2002, since when a defined contribution scheme has been operated for new employees.
The benefits which members of the schemes obtain upon retirement depend on when they joined the scheme but the majority of members receive a pension based on 1/60th of pensionable service multiplied by the final pensionable salary.
The scheme pensions are updated in line with the retail price index.
Plan assets held in the fund are governed by local regulations and practice in the United Kingdom. Responsibility for the governance of the plans – including investment decisions and contribution schedules – lies jointly with the Company and the trustees of the funds.
The risks of the schemes are as follows:
(a) Asset volatility
The plan liabilities are calculated using a discount rate set with reference to corporate bond yields; if plan assets underperform this yield, this will create a deficit. The plan holds a significant proportion of equities, which are expected to outperform corporate bonds in the long-term while providing volatility and risk in the short-term.
As the plans mature, the Company intends to reduce the level of investment risk by investing more in assets that better match the liabilities. The first stage of this process was completed in 2015 with the sale of a number of equity holdings and purchase of a mixture of government and corporate bonds. The government bonds represent investments in UK government securities only. The corporate bonds are securities with an emphasis on the UK.
However, the Company believes that due to the long-term nature of the plan liabilities and the strength of the supporting group, a level of continuing equity investment is an appropriate element of the Company’s long-term strategy to manage the plans efficiently.
(b) Changes in bond yields
A decrease in corporate bond yields will increase plan liabilities, although this will be partially offset by an increase in the value of the plans’ bond holdings.
(c) Longevity risk
The liabilities are very sensitive to unexpected changes in future mortality. If longevity increases at a faster pace than assumed then the liabilities will increase at future calculations. The longevity risk can be mitigated by securing benefits for members with insurance companies. There is also a growing market in longevity solutions which may enable this risk to be managed to some degree in the future.
(d) Investment/interest rate risk
The Schemes’ invested assets are allocated heavily to equities, while IAS19 stipulates a discount rate related to corporate bond yields. Therefore the liabilities and assets may react differently to changes in market conditions.
Page 52

 
THE RANDOM HOUSE GROUP LIMITED
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023


(e) Inflation risk
The pension obligations are linked to inflation, and higher inflation will lead to higher liabilities (although, in most cases, caps on the level of inflationary increases are in place to protect the plans against extreme inflation). The majority of the plan assets are either unaffected by (fixed interest bonds) or loosely correlated with (equities) inflation, meaning that an increase in inflation will also increase the deficit.
A comprehensive actuarial valuation of the Company's defined benefit pension schemes, using the projected unit basis, was carried out at 31 December 2023 by Capita plc, independent consulting actuaries. Adjustments to the valuations at that date have been made based on the following assumptions for both defined benefit schemes. An average % across the two schemes has been taken for each of the below.


2023
2022

%
%


Discount rate
4.80
4.90

Rate of price inflation (RPI)
3.13
3.20

Rate of increase in salaries
2.58
2.60

Rate of increase of pensions in payment:

- 3% floor & 5% cap
3.10
3.20

- 5% cap
2.98
3.03

- 2.5% cap
2.00
2.05

Revaluation of pensions in deferment
2.58
2.60

Mortality table in retirement
S3 series of tables (table used dependent upon estimated pension amount).
CMI_2022 model with weighting
parameter of 0% for 2020 and 2021
and 25% for 2022 ,a smoothing
parameter of 7, an initial
addition to mortality improvement of
0.5% pa and 1.25% pa long term
rate.
S3 series of tables (table used dependent upon estimated pension amount).
 CMI 2021 projections with a 0% weighting to 2020 and 2021 data, a smoothing parameter of 7, an initial addition to mortality improvement of 0.5% pa and a 1.25% pa long term rate of improvement.


Page 53

 
THE RANDOM HOUSE GROUP LIMITED
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023

Assumptions regarding future mortality are set based on actuarial advice in accordance with published statistics and expectancy in years for a pensioner retiring at age 65:


2023
2022

years
years


Retiring at the end of the reporting year:

Male (from age 65)
21.3 - 23.8
21.8 - 24.2

Female (from age 65)
23.8 - 25.2
23.2 - 25.5

Retiring 20 years after the end of the reporting year:

Male (from age 65)
22.6 - 25.0
24.2 - 25.6

Female (from age 65)
25.3 - 26.5
25.7 - 26.9



Reconciliation of schemes assets and liabilities during the year:


Assets
Liabilities
Total

£
£
£


At 1 January 2023
308,052,945
(219,745,000)
88,307,945

Current service cost
-
(1,181,000)
(1,181,000)

Interest income / (expense)
14,947,000
(10,518,000)
4,429,000

322,999,945
(231,444,000)
91,555,945

Remeasurements:

Gains from change in demographic assumptions
-
2,325,000
2,325,000

Gains from change in financial assumptions
-
(3,427,000)
(3,427,000)

Loss from experience adjustments
-
(2,715,000)
(2,715,000)

Return on plan assets, excluding amounts included in interest expense
7,373,055
-
7,373,055

7,373,055
(3,817,000)
3,556,055

Contributions:

Employers
3,837,000
-
3,837,000

Plan participants
330,000
(330,000)
-

Payments from plan:

Benefit payments
(10,186,000)
10,186,000
-

(6,019,000)
9,856,000
3,837,000

At 31 December 2023
324,354,000
(225,405,000)
98,949,000

The net defined benefit asset of £98,949,000 is expected to be recovered in more than 12 months.

Page 54

 
THE RANDOM HOUSE GROUP LIMITED
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023


Assets
Liabilities
Total

£
£
£


At 1 January 2022
384,737,423
(341,086,000)
43,651,423

Current service cost
-
(2,440,000)
(2,440,000)

Interest income / (expense)
6,911,000
(6,069,000)
842,000

391,648,423
(349,595,000)
42,053,423

Remeasurements:

Loss from change in demographic assumptions
-
(3,771,000)
(3,771,000)

Loss from change in financial assumptions
-
134,421,000
134,421,000

Gain from experience adjustments
-
(8,346,000)
(8,346,000)

Return on plan assets, excluding amounts included in interest expense
(82,062,847)
-
(82,062,847)

(82,062,847)
122,304,000
40,241,153

Contributions:

Employers
6,013,369
-
6,013,369

Plan participants
328,000
(328,000)
-

Payments from plan:

Benefits payments
(7,874,000)
7,874,000
-

(1,532,631)
7,546,000
6,013,369

At 31 December 2022
308,052,945
(219,745,000)
88,307,945

As the schemes are now closed as defined benefit schemes, the current service cost, as calculated under the projected unit method, will increase as members approach retirement.
Page 55

 
THE RANDOM HOUSE GROUP LIMITED
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023

The sensitivity of the defined benefit obligation to changes in the weighted principal assumption are as follows. The sensitivity numbers reflect addition of values for PRHPS and TPPS schemes.




Change in assumption
Increase in assumption
Decrease in assumption


Discount rate
0.5%
(14,180,000)
15,775,000

Salary growth rate
0.5%
1,381,000
(1,308,000)

Pension growth rate
0.5%
6,030,000
(5,778,000)

Life expectancy
+/- by 1 year
7,897,000
(7,843,000)


The above sensitivity analyses are based on a change in an assumption while holding all other assumptions constant. In practice, this is unlikely to occur, and changes in some of the assumptions may be correlated. When calculating the sensitivity of the defined benefit obligation to significant actuarial assumptions the same method (present value of the defined benefit obligation calculated with the projected unit credit method at the end of the reporting year) has been applied as when calculating the pension liability recognised within the statement of financial position.
The methods and types of assumptions used in preparing the sensitivity analysis did not change compared to the previous year.
The fair value of the plan assets was: 




2023
2022

£
£


Equities & property
30,934,463
47,905,892

Corporate bonds
216,109,616
164,334,006

Gilts
56,432,788
65,296,172

Cash
4,839,458
12,939,088

Other
13,954,750
15,655,787

Insured assets
170,556
-

Secured annuities
1,913,000
1,922,000


Total fair value of assets
324,354,631
308,052,945

Included within 'Other' above are investments in other debt instruments, real estate, the Scheme's derivatives and other funds.
 
Page 56

 
THE RANDOM HOUSE GROUP LIMITED
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023

The Company, together with its subsidiary, expects to contribute approximately £3,457,000 (2022: £3,451,000) to its PRHPS defined benefit plan and £380,000 (2022: £359,000) to its TPPS defined benefit plan in 2024.
The following information shows the maturity analysis of the expected benefit payments.
Less than 1 year: £10,103,000,
less than 2 years: £11,191,000,
less than 3 years: £11,430,000,
less than 4 years: £11,246,000,
less than 5 years: £12,624,000, and
less than 10 years: £65,350,000.
Defined contribution scheme
Following the closure of the defined benefit scheme to new entrants, the Company provided a defined contribution scheme for its employees, administered by Capita. The defined contribution scheme was replaced in March 2016 by a money purchase scheme administered by Aviva.
The amount recognised as an expense for the defined contribution & money purchase schemes was:




2023
2022

£
£


Money Purchase Scheme
4,022,590
3,404,523


4,022,590
3,404,523

Page 57

 
THE RANDOM HOUSE GROUP LIMITED
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023

18.


Creditors: Amounts falling due within one year

As restated
2023
2022
£
£

Trade creditors
5,593,192
5,712,216

Amounts owed to group undertakings
177,400,026
69,933,574

Corporation tax
4,197,593
3,119,091

Other taxation and social security
3,811,514
3,427,803

Lease liabilities
6,998,282
6,912,811

Royalty creditors
34,383,933
35,722,489

Other creditors
359,796
22,780

Accruals
49,811,961
51,110,079

Deferred income
4,426,490
12,625,656

286,982,787
188,586,499


Amounts owed to group undertakings (excluding amounts owed to Bertelsmann UK Limited) are unsecured and repayable on demand. Included within this is £154,205,000 (2022: £46,952,844) owed to Bertelsmann UK Limited in respect of a cash pooling facility of £250m which is unsecured and has no fixed repayment date but can be terminated by either party giving three days notice. These amounts incur interest on a monthly basis; the average interest rate for the year was 4.44% (2022: 4.15%).
Prior year balances have been restated as detailed in note 25.


19.


Creditors: Amounts falling due after more than one year

2023
2022
£
£

Royalty creditors
9,475,730
7,031,815

Lease liabilities
35,414,397
41,431,152

Accruals and deferred income
2,204,751
-

47,094,878
48,462,967


Page 58

 
THE RANDOM HOUSE GROUP LIMITED
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023

20.

Leases

Company as a lessee

The Company has lease contracts for various offices and equipment used in the operations. This includes entering into lease contracts for various office floors, known as Embassy Gardens, with a fellow subsidiary company of Penguin Random House Limited, under a licence agreement granted to the company. In accordance with the provisions of ‘IFRS 16: Leases’, the company recognises a right-of use asset for the leased premises which it occupies under licence by another group company. The company recognises a lease liability for the net present value of future rent payments due under the licence agreement, discounted using the interest rate implicit in the lease. The company has no risk as the sub lease terms are the same as the head lease terms.
The amounts recognised in the financial statements in relation to the leases are as follows:









Right-of-use assets


2023
2022

£
£


Buildings
18,427,387
21,628,982

Technology equipment
410,833
77,179

Cars
115,518
53,050


18,953,738
21,759,211


Lease liabilities


2023
2022

£
£


Current
6,998,282
6,912,811

Non-Current
35,414,397
41,431,152


42,412,679
48,343,963

The lease term on Vauxhall Bridge Road is 11 years with an option to extend for an additional 4 years. As
it is not reasonably certain the option will be exercised, the minimum lease payments for the extension
period have not been included in the lease liability.
There are no additions to right-of-use assets in the year.

Page 59

 
THE RANDOM HOUSE GROUP LIMITED
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023


Future minimum lease payments as at 31 December 2023 are as follows:




2023
2022

£
£


Less than one year
7,681,338
7,045,268

Between one year and two years
7,441,893
6,858,611

Between two years and three years
5,878,345
6,606,813

Between three years and four years
5,817,537
6,631,533

Between four years and five years
5,846,877
6,667,175

Later than five years
12,057,952
18,139,353


Total gross payments
44,723,942
51,948,753

Impact of finance expenses
(2,311,263)
(3,604,790)

Carrying amount of liability
42,412,679
48,343,963


The total cash outflow for leases during the year was £7,388,523 (2022: £6,933,877).






Amounts charged to the income statement in respect of leases

2023
2022
£
£



Depreciation- buildings
3,090,654
3,198,210

Depreciation- technology equipment
135,624
83,137

Depreciation- cars
68,002
139,304

Interest on building lease liabilities
767,894
553,957

Interest on technology equipment lease liabilities
12,516
1,804

Interest on car lease liabilities
4,249
1,133

4,078,939
3,977,545

Page 60

 
THE RANDOM HOUSE GROUP LIMITED
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023

21.

Provisions


At 1 January 2023
Expensed to the income statement
Amounts utilised
Expensed to OCI
Changes to discount rate
At 31 December 2023

£
£
£
£
£
£

As restated


Deferred tax provision
22,873,125
2,565,001
-
889,013
-
26,327,139

Discount provision
4,588,598
4,068,084
(4,588,598)
-
-
4,068,084

Onerous contract on advances provision
7,290,708
3,786,232
(4,209,231)
-
-
6,867,709

Dilapidations provision
2,647,749
588,621
-
-
(150,457)
3,085,913

Redundancy provision
-
6,762,001
-
-
-
6,762,001


Total
37,400,180
17,769,939
(8,797,829)
889,013
(150,457)
47,110,846

Deferred tax provision
The amounts of income taxes payable in future periods in respect of taxable temporary differences. See note 22 for further detail on the Company’s deferred tax assets and liabilities at the balance sheet date.
Discount 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.
Onerous contracts
Where a provision is greater than the advance paid on manuscripts which have not yet been delivered, the Company recognises the excess as an onerous contract rather than disclosing in the total unpublished provision included in debtors. These are utilised on various timescales based on manuscript delivery.
Dilapidations provision
The company has provided for the estimated costs on Embassy Gardens and Grantham to restore the buildings to their original condition as specified in the underlying lease agreements. The Company will settle the provision at the end of the lease tenancy and on vacating the property.
Redundancy provision
Redundancy costs are recharged to the subsidiary companies who the employees provide services for as applicable. 
Prior year balances have been restated as detailed in note 25.


Page 61

 
THE RANDOM HOUSE GROUP LIMITED
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023

22.

Deferred tax assets and (liabilities)


Movement in recognised deferred tax during the year:
1 January 2023
Tax credit relating to OCI
Income statement movement
31 December 2023

£
£
£
£


Property plant and equipment
(177,147)
-
(793,754)
(970,901)

Rolled over gain
(618,992)
-
-
(618,992)

Pension scheme
(22,076,986)
(889,013)
(1,771,247)
(24,737,246)


Deferred tax liabilities
(22,873,125)
(889,013)
(2,565,001)
(26,327,139)


Other temporary differences
7,511,996
-
(394,291)
7,117,705


Deferred tax assets
7,511,996
-
(394,291)
7,117,705


Total deferred tax assets and (liabilities)
(15,361,129)
(889,013)
(2,959,292)
(19,209,434)

Deferred tax assets are recognised within debtors (note 16), the deferred tax liabilities are recognised within provisions (note 21) 
The deferred tax assets/(liabilities) have been calculated at 25.00%. 
There are no unused tax losses or unused tax credits.



Deferred tax assets and (liabilities)


Movement in recognised deferred tax during the previous year:
1 January 2022
Tax credit relating to OCI
Income statement movement
31 December 2022

£
£
£
£


Property plant and equipment
2,502,857
-
(2,680,004)
(177,147)

Rolled over gain
(2,251,591)
-
1,632,599
(618,992)

Pension scheme
(10,912,762)
(10,060,288)
(1,103,936)
(22,076,986)


Deferred tax liabilities
(10,661,496)
(10,060,288)
(2,151,341)
(22,873,125)


Other temporary differences
8,102,737
-
(590,741)
7,511,996


Deferred tax assets
8,102,737
-
(590,741)
7,511,996


(2,558,759)
(10,060,288)
(2,742,082)
(15,361,129)

The provision for deferred tax consists of the following deferred tax liabilities/(assets):

Page 62

 
THE RANDOM HOUSE GROUP LIMITED
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023



2023
2022

£
£


Deferred tax assets due within 12 months
1,019,744
1,319,023


Carrying amount at year end 
1,019,744
1,319,023


Deferred tax assets due in more than 12 months
6,097,961
6,192,973

Deferred tax liabilities due in more than 12 months
(26,327,139)
(22,873,125)


Carrying amount at year end
(20,229,178)
(16,680,152)


Total carrying amount at year end
(19,209,434)
(15,361,129)


23.


Called up share capital

2023
2022
£
£
Allotted, called up and fully paid



819,560,718 (2022 - 819,560,718) Ordinary shares of £0.10 each
81,956,072
81,956,072


There is a single class of ordinary shares. There are no restrictions on dividends and the repayment of capital.


24.


Reserves

Capital redemption reserve

The capital redemption reserve consists of amounts transferred from share capital on redemption of issued shares.

Profit and loss account

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

 Page 63

 
THE RANDOM HOUSE GROUP LIMITED
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023

25.


Prior year adjustment

The Company has restated certain prior year balances relating to the following matters identified during the course of preparing these financial statements. 
Management recharge of employee staff costs and recognition of contractual employment liabilities 
Where employees of the Company perform services wholly relating to other group companies, the Company incorrectly excluded these employees from the headcount disclosure and netted the associated employment costs against the management charge income received from the other group companies with administrative expenses. The comparative year has been restated to correct this matter as follows:
 
a) Recognition of management charge income as other operating income
The impact of recognising management charge income on other operating income results in an increase in administrative expenses and other operating income respectively by £21,421,857. There was no impact on the Company's net assets or profit after tax at 31 December 2022.
b) Recognition of salary related accruals
The adjustment to recognise salary related accruals has an equal and opposite impact on balances with group undertakings. The impact of the restatement is to increase creditors and amounts due from group undertakings by £1,215,494. There was no impact on the Company's net assets or profit after tax at 31 December 2022.
c) Headcount disclosure
An adjustment to increase the headcount disclosure within note 7 of these financial statements results in an increase to average monthly employee numbers of 537. 
 
Reclassification adjustments
The Company identified a number of reclassification restatements to the prior year, as detailed below. 

a) Profit on disposal of tangible fixed assets
The Company has restated the comparative year to include the profit on disposal of tangible fixed    assets of £13,975,682 within administrative expenses rather than on a separate line below operating profit. This impacts the face of the profit and loss account only and has no overall impact on profit after tax or the Company's net assets.  
b) Reclassification of balance sheet items 
The Company has restated the comparative year to increase stocks, debtors and creditors in respect of items which previously were netted down within financial statement line items. The impact of this adjustment is to increase stocks and debtors by £265,204 and £1,067,597 respectively, with a corresponding increase to creditors of £1,332,801. 
The deferred tax provision has been updated to show separately the deferred tax asset from the deferred tax liability as previously they had been incorrectly netted against each other. The impact of this is to increase debtors by £7,511,997 and increase the provision the same amount. 
There is no impact on the Company's net assets or profit after tax at 31 December 2022. 
 
 Page 64

 
THE RANDOM HOUSE GROUP LIMITED
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023

25.Prior year adjustment (continued)

c) Reclassification of Grantham dilapidations provision
The Company has restated the comparative year to disclose the dilapidations provision in provisions rather than accruals. The impact of this adjustment is to increase provisions by £1,882,823 and decrease accruals by the same amount. There is no impact on the Company's net assets or profit after tax at 31 December 2022.
d) Reclassification of accruals
The Company has restated the comparative year to include the LTIP accrual and returns accrual within creditors rather than provisions. The impact of this adjustment is to increase creditors by £15,425,119 and decrease provisions by the same amount.There is no impact on the profit after tax at 31 December 2022.  
e) 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.
 
The overall impact of the above is as follows; 

Increase to administrative expenses of £7,446,175
Decrease to profit on disposal of fixed assets of £13,975,682
Increase to other operating income of £21,421,857
Increase to stocks of £265,204
Increase to debtors of £9,795,088
Increase to creditors of £16,090,591
Decrease to provisions of £6,030,299


Impact of restatements on Profit and Loss Account




As previously stated
As restated

2022
2022

£
£


Administrative expenses
128,078,047
135,524,222

Other operating income
46,355,686
67,777,543

 
 Page 65

 
THE RANDOM HOUSE GROUP LIMITED
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
Stocks


As previously stated
As restated

2022
2022

£
£


Raw materials and consumables
2,431
2,431

Work in progress
2,779,811
2,779,811

Finished books
11,660,900
11,926,104


14,443,142
14,708,346



Debtors: amounts falling within one year


As previously stated
As restated

2022
2022

£
£


Trade debtors
4,278,137
7,734,596

Advance royalties 
40,969,806
40,969,806

Amounts owed by group undertakings
171,128,139
173,386,998

Other debtors
4,983,743
4,983,746

Prepayments and accrued income
15,737,738
12,305,509

Deferred taxation
-
7,511,996


237,097,563
246,892,651

 Page 66

 
THE RANDOM HOUSE GROUP LIMITED
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023


Creditors: amounts falling due within one year


As previously stated
As restated

2022
2022

£
£


Trade creditors
12,005,852
5,712,216

Royalty creditors
35,722,489
35,722,489

Amounts owed to group undertakings
68,925,551
69,933,574

Lease liabilities
6,912,811
6,912,811

Taxation
3,119,091
3,119,091

Social security
3,319,104
3,427,803

Other creditors
22,780
22,780

Accruals
29,842,574
51,110,079

Deferred income
12,625,656
12,625,656


172,495,908
188,586,499



As previously stated
2022
As restated 2022

£
£


Provisions
43,430,479
37,400,180


26.Commitments

There are commitments to authors for the payment of royalty advances amounting to £75,312,896 at 31 December 2023 (2022: £64,964,091). Together with the advances already paid these will be charged against sales of future accounting periods as the books are published.

Page 67

 
THE RANDOM HOUSE GROUP LIMITED
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023

27.


Related party transactions

As the Company is a wholly owned subsidiary of Penguin Random House Limited ("PRHL") the Company is exempt from the requirement, under International Accounting Standard 24 ‘Related party disclosures’, to disclose transactions with entities that are wholly owned by PRHL. The Company has taken advantage of this exemption.


During the year the Company entered into the following transactions with related parties not wholly owned by the group:


2023
2022

£
£


Other operating income:

Children's Character Books Limited
332,586
247,189

Woodlands Books Limited
2,290,122
2,220,955




Debtors:

Children's Character Books Limited
1,123,355
2,115,057

Creditors:

Woodlands Books Limited
2,953,267
6,512,060

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

28.


Controlling parties

The Company's immediate parent company is Penguin Random House Limited (“PRHL”). 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 68