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Registered number: 00155455









FREDERICK WARNE & CO LIMITED









ANNUAL REPORT AND FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2023

 
FREDERICK WARNE & CO LIMITED
 
 
COMPANY INFORMATION


Directors
Francesca Dow 
Mark Gardiner 
Thomas Weldon 




Company secretary
S Martin



Registered number
00155455



Registered office
20 Vauxhall Bridge Road

London

SW1V 2SA




Independent auditor
Grant Thornton UK LLP

Victoria House

199 Avebury Boulevard

Milton Keynes

MK9 1AU





 
FREDERICK WARNE & CO LIMITED
 

CONTENTS



Page
Strategic Report
1 - 6
Directors' Report
7 - 9
Directors' Responsibilities Statement
10
Independent Auditor's Report
11 - 15
Statement of Comprehensive Income
16
Balance Sheet
17
Statement of Changes in Equity
18
Notes to the Financial Statements
19 - 38


 
FREDERICK WARNE & CO LIMITED
 
 
STRATEGIC REPORT
FOR THE YEAR ENDED 31 DECEMBER 2023

Introduction
 
The directors present their Strategic Report of Frederick Warne & Co Limited (“the Company”) for the year ended 31 December 2023.

Principal activities

The Company is a subsidiary of Penguin Books Limited, 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. The Company also exploits its intellectual property through the granting of licences for the manufacture and sale of books and merchandise. The Company continues to sell the television, video and promotional rights of its television series based upon the original characters of Beatrix Potter.

Business review
 
The results and financial position of the Company are set out in the attached financial statements. The Company saw a reduction in revenue of 1.28% to £20,878,123 (2022: £21,149,120), this is due to a fall in book sales of 17.26%. The Company saw a rise in gross profit margin to 57.55% (2022: 53.43%) this was due to controlling of costs and decreases in areas such as brand marketing.
Penguin Ventures (the licensing business for our Children’s owned brands) performed strongly in 2023 with growth in net IP income (merchandising revenue) of 33.0%. Within this our largest owned brand is the Peter Rabbit Classic brand which is accounted within Warne. IP income for Peter Rabbit Classic grew 24% driven primarily by strong performance in the UK and Japan territories. Separate to this, the Peter Rabbit Movie brand is also accounted within Warne and this had a one-off option fee income of £0.5m in 2023. Our licensing business is higher margin than our publishing business so the growth of Penguin Ventures/Peter Rabbit IP income relative to Peter Rabbit publishing contributed to the increase in Warne gross margin percentage due to the mix shift towards the higher margin IP income.
Earnings before interest, tax, depreciation, amortisation and impairment of non- financial assets (EBITDA) has increased by 4.32% to £9,288,517 (2022: £8,903,745), this is due to the increase in gross profit discussed above but the Company has also managed to maintain distribution costs in line year on year.
The Company made a profit for the financial year of £7,688,311 (2022: £7,131,686) an increase of 7.80%. This is driven by the performance of the Company discussed above but also an increase of interest receivable on cash pooling of £732,421 due to the Company's cash pooling facility maintaining a debtor position from March onwards and an increase in the average interest rate for the year to 7.36% (2022: 4.15%).

Financial key performance indicators
 
The Company monitors progress and performance during the year and historical trend data which is set out in the following KPI’s:



2023
2022

£
£


Turnover
20,878,123
21,149,120

Gross profit margin
57.55%
53.43%

Earnings before interest, tax, depreciation, amortisation and impairment of non- financial assets (EBITDA)
9,288,517
8,903,745

The KPIs are in line with forecast expectations. Detailed explanations for the year on year movements is included in the business review section.
 
Page 1

 
FREDERICK WARNE & CO LIMITED
 

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

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
9,260,825
8,715,749

Depreciation and amortisation
4,044
4,043

Impairment of non-financial assets
23,648
183,953

EBITDA
9,288,517
8,903,745

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 plan 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.

Page 2

 
FREDERICK WARNE & CO LIMITED
 

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

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 specifed 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.

Page 3

 
FREDERICK WARNE & CO LIMITED
 

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

Directors’ section 172 statement
 
The Directors of the Company must act in accordance with a set of general duties, as detailed in section 172 of the UK Companies Act 2006, summarised as follows:
A director of a Company must act in the way they consider, in good faith, would be most likely to promote the success of the Company for the benefit of its shareholders as a whole and, in doing so have regard (amongst other matters) to:
• the likely consequences of any decisions in the long-term;
• the interest of the Company’s employees;
• the need to foster the Company’s business relationships with suppliers, customers and others;
• the impact of the Company’s operations on the community and environment;
• the desirability of the Company maintaining a reputation for high standards of business conduct; and
• the need to act fairly as between the shareholders of the Company. 
Examples of how the Directors have oversight of these stakeholder matters are included throughout the Strategic and Director’s report as well as set out specifically below.
 
Long-term decision making

The Board operates a structured governance model which supports the Group in ensuring that decisions are considered, documented and reported upon, and in alignment with our strategic plans. Detailed budgets and forecasts are prepared which enable the Board to track performance and ensure that it is as expected, or that mitigation steps are taken to deliver performance in line with, or close to, expectations. The Board and senior management personnel operate within this structure, with the aim of promoting the success of the Company and delivering long- term shareholder value.
The Board is presented with regular board packs and other information that it needs to fulfil its responsibilities. During the period at Board meetings the Board have discussed and made decisions on a number of specific issues including business priorities and strategy, capital investment, 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.
 
Page 4

 
FREDERICK WARNE & CO LIMITED
 

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

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.
 
Environmental sustainability

The Company’s leadership team ensure environmental issues are managed effectively and considered in the strategic decisions of the Company. The Company strives to create positive change in reducing the environmental impact of its businesses whilst maintaining effective and continuing business practices. The Company is key in the collaboration of the publishing industry in tackling climate action as part of their role within ‘Publishing Declares’. The Company consider sustainability, ethical and environmental issues when sourcing core material for use in the printing of their books using the books created to provide a positive leverage for behaviour change of our consumers. As part of the environmental strategy, the Company aims to be climate neutral by 2030.
 
High standards of business conduct

The Company has a Code of Conduct setting out the behaviours and values expected of all of our employees, which is communicated to all colleagues. Company processes ensure the Board and management are continually updated on the operation of the code and an independent whistleblowing service enables employees and third parties to anonymously raise concerns. Through its oversight and monitoring role, the Board requires all of our people to work to the highest standards of business conduct.

Shareholders

The board recognises the importance of regular and open dialogue with the shareholders and the need to ensure the strategy and goals of the Company are effectively communicated to them. Feedback on these plans and objectives is welcomed by the directors and major business decisions are made closely and with the approval of the shareholders.

General

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

Page 5

 
FREDERICK WARNE & CO LIMITED
 

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


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



Mark Gardiner
Director
Date: 11 July 2024

Page 6

 
FREDERICK WARNE & CO 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 £7,688,311 (2022: £7,131,686).

Dividends of £15,000,000 were paid during the year (2022: £Nil).

Directors

The directors who served during the year were:

Francesca Dow 
Mark Gardiner 
Thomas Weldon 

Future developments

Looking ahead, the market remains challenging and the economic backdrop remains similarly tough. The Company will continue to produce high quality book publishing and the exploitation of intellectual property through the granting of licences for the manufacture and sale of books and merchandise. 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. 
 
Based on the Company’s current trading performance, the sensitivity and reverse stress testing scenarios performed, 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 7

 
FREDERICK WARNE & CO 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 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.

Streamlined energy and carbon reporting (SECR)

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

Disclosure of information to auditor

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

Auditor

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

Page 8

 
FREDERICK WARNE & CO LIMITED
 
 
 
DIRECTORS' REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023

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





Mark Gardiner
Director

Date: 11 July 2024

20 Vauxhall Bridge Road
London
SW1V 2SA

Page 9

 
FREDERICK WARNE & CO LIMITED
 
 
DIRECTORS' RESPONSIBILITIES STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2023

The directors are responsible for preparing the Strategic Report, the Directors' Report and the financial statements in accordance with applicable law and regulations.

Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have elected to prepare the financial statements in accordance with applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice), including Financial Reporting Standard 101 ‘Reduced Disclosure Framework’. Under Company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period.

 In preparing these financial statements, the directors are required to:

select suitable accounting policies and then apply them consistently;

make 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 10

 
FREDERICK WARNE & CO LIMITED
 
 
 
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF FREDERICK WARNE & CO LIMITED
 

Opinion


We have audited the financial statements of Frederick Warne & Co Limited (the 'Company') for the year ended 31 December 2023, which comprise the Statement of Comprehensive Income, the Balance Sheet, the Statement of Changes in Equity and notes to the financial statements, including a summary of significant accounting policiesThe financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 101 ‘Reduced Disclosure Framework’ (United Kingdom Generally Accepted Accounting Practice).


In our opinion:


the financial statements give a true and fair view of the state of the Company's affairs as at 31 December 2023 and of its 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 'Auditors' 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 11

 
FREDERICK WARNE & CO LIMITED
 
 
 
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF FREDERICK WARNE & CO LIMITED (CONTINUED)


Conclusions relating to going concern (continued)


In auditing the financial statements, we have concluded that the directors' use of the going concern basis of accounting in the preparation of the financial statements is appropriate.


Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the Company's ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.


Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.


Other information


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


We have nothing to report in this regard.


Opinion on other matters prescribed by the Companies Act 2006
 

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


the information given in the Strategic Report and the Directors' Report for the financial year for which the financial statements are prepared is consistent with the financial statements; and
the Strategic Report and the Directors' Report have been prepared in accordance with applicable legal requirements.

Matters on which we are required to report under the Companies Act 2006

In the light of the knowledge and understanding of the Company and its environment obtained in the course of the audit, we have not identified material misstatements in the Strategic Report or the Directors' Report.



Page 12

 
FREDERICK WARNE & CO LIMITED
 
 
 
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF FREDERICK WARNE & CO LIMITED (CONTINUED)


Matters on which we are required to report by exception
 

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


adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us; or
the financial statements are not in agreement with the accounting records and returns; or
certain disclosures of directors' remuneration specified by law are not made; or
we have not received all the information and explanations we require for our audit.


Responsibilities of directors
 

As explained more fully in the Directors' Responsibilities Statement set out on page 10, 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 auditors' 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 13

 
FREDERICK WARNE & CO LIMITED
 
 
 
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF FREDERICK WARNE & CO 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 14

 
FREDERICK WARNE & CO LIMITED
 
 
 
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF FREDERICK WARNE & CO LIMITED (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 auditors' 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 auditors' report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company's members, as a body, for our audit work, for this report, or for the opinions we have formed.





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

11 July 2024
Page 15

 
FREDERICK WARNE & CO LIMITED
 
 
STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2023

2023
2022
Note
£
£

  

Revenue
 4 
20,878,123
21,149,120

Cost of sales
  
(8,863,672)
(9,848,946)

Gross profit
  
12,014,451
11,300,174

Distribution costs
  
(389,422)
(391,920)

Administrative expenses
  
(2,364,204)
(2,192,505)

Operating profit
 5 
9,260,825
8,715,749

Interest receivable and similar income
 8 
908,092
175,671

Profit before tax
  
10,168,917
8,891,420

Tax on profit
 9 
(2,480,606)
(1,759,734)

Profit for the financial year
  
7,688,311
7,131,686

Other comprehensive income
  
-
-

  
-
-

Total comprehensive income for the year
  
7,688,311
7,131,686

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

The notes on pages 19 to 38 form part of these financial statements.



Page 16

 
FREDERICK WARNE & CO LIMITED
REGISTERED NUMBER: 00155455

BALANCE SHEET
AS AT 31 DECEMBER 2023

2023
2022
Note
£
£

  

Fixed assets
  

Tangible assets
 10 
38,413
42,457

Current assets
  

Stocks
 11 
899,505
1,062,399

Debtors - amounts falling due within one year
 12 
19,872,024
28,420,327

Cash at bank and in hand
  
43,429
-

  
20,814,958
29,482,726

Creditors: amounts falling due within one year
 13 
(6,643,397)
(7,776,380)

Net current assets
  
 
 
14,171,561
 
 
21,706,346

Total assets less current liabilities
  
14,209,974
21,748,803

  

Provisions for liabilities
  

Provisions
 14 
(13,249)
(240,389)

  
 
 
(13,249)
 
 
(240,389)

  

Net assets
  
14,196,725
21,508,414


Capital and reserves
  

Called up share capital 
 15 
840,320
840,320

Profit and loss account
 16 
13,356,405
20,668,094

  
14,196,725
21,508,414


The notes on pages 19 to 38 form part of these financial statements.
The financial statements were approved and authorised for issue by the board and were signed on its behalf on 11 July 2024.




Mark Gardiner
Director

Page 17

 
FREDERICK WARNE & CO LIMITED
 

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


Called up share capital
Profit and loss account
Total equity

£
£
£


At 1 January 2022
840,320
13,536,408
14,376,728



Profit for the year
-
7,131,686
7,131,686



At 1 January 2023
840,320
20,668,094
21,508,414



Profit for the year
-
7,688,311
7,688,311


Contributions by and distributions to owners

Dividends: Equity capital
-
(15,000,000)
(15,000,000)


At 31 December 2023
840,320
13,356,405
14,196,725


The notes on pages 19 to 38 form part of these financial statements.

Page 18

 
FREDERICK WARNE & CO LIMITED
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023

1.


General information

Frederick Warne & Co Limited (“the Company”) is a book publisher and exploits the intellectual property through the granting of licences for the manufacture and sale of books and merchandise. The Company sells its books globally. The Company is a private Company limited by shares and is incorporated in the United Kingdom. The address of its registered office is 20 Vauxhall Bridge Road, London, SW1V 2SA.

2.Accounting policies

 
2.1

Basis of preparation of financial statements

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

Page 19

 
FREDERICK WARNE & CO LIMITED
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023

2.Accounting policies (continued)

 
2.2

Financial Reporting Standard 101 - reduced disclosure exemptions

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

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

Page 20

 
FREDERICK WARNE & CO LIMITED
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023

2.Accounting policies (continued)

 
2.3

Going concern

In preparing these financial statements, the directors have assessed the ability of the Company to continue to operate for a period of at least twelve months from the date of signing the financial statements.
 
The Company has undertaken a risk assessment and forecasting exercise to assess the Company’s liquidity position. The forecast for the going concern period has been prepared using the three year plan approved by the Board and takes account of prior trends and expected titles to be published in the future and key cost drivers such as commodity prices and inflation. 
 
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. 
 
Based on the Company’s current trading performance, the sensitivity and reverse stress testing scenarios performed, 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.

  
2.4

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. Foreign exchange 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’  except when deferred in other comprehensive income as qualifying cash flow hedges.
Non-monetary items measured at historical cost are translated using the exchange rate at the date of the transaction and non-monetary items measured at fair value are measured using the exchange rate when fair value was determined

Page 21

 
FREDERICK WARNE & CO LIMITED
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023

2.Accounting policies (continued)

  
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 the third party sales information is not readily available at the reporting date, an estimation is made based on the information available to hand. An adjusting post balance sheet adjustment is made where subsequent information is received post year end but before the date of approval of the financial statements. 

Page 22

 
FREDERICK WARNE & CO LIMITED
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023

2.Accounting policies (continued)

 
2.6

Employee benefits

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.

 
2.7

Current and deferred taxation

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

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

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

 
2.8

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. 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.

Page 23

 
FREDERICK WARNE & CO LIMITED
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023

2.Accounting policies (continued)


2.8
Tangible fixed assets (continued)

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:

Owned artwork
-
Over periods of between 3 and 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.

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

  
2.9

Stocks

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

Page 24

 
FREDERICK WARNE & CO LIMITED
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023

2.Accounting policies (continued)

  
2.10

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 instrument 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 amounts 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 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.

Page 25

 
FREDERICK WARNE & CO LIMITED
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023

2.Accounting policies (continued)

  
2.11

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 provision for such events is shown separately in provisions for other liabilities.  
The Company applies the IFRS 9 simplified approach to measuring expected credit losses which uses a lifetime expected loss allowance 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. 

  
2.12

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.

  
2.13

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.

  
2.14

Creditors including group undertakings

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

Page 26

 
FREDERICK WARNE & CO LIMITED
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023

2.Accounting policies (continued)

  
2.15

Provisions for liabilities and onerous contracts

Provisions are made where an event has taken place that gives the Company a legal or constructive obligation that probably requires settlement by a transfer of economic benefit, and a reliable estimate can be made of the amount of the obligation.
Provisions are charged as an expense to profit or loss in the year that the Company becomes aware of the obligation, and are measured at the best estimate at the balance sheet date of the expenditure required to settle the obligation, taking into account relevant risks and uncertainties.
When payments are eventually made, they are charged to the provision carried in the Balance Sheet.
If the Company considers a contract has become onerous, whereby the unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be received from it, an onerous contract provision is recognised for the present obligations under the contract. Onerous contract provisions which arise on advances paid on unpublished manuscripts which have not yet been delivered, are utilised on various timescales based on manuscript delivery and performance. Management estimates the future recoverability based on performance within the contract.

 
2.16

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 27

 
FREDERICK WARNE & CO 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 judgements 
(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 licencing 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 12 for reference.
Published titles:
Upon publication, the realisable value for significant titles will then be adjusted on a title by title basis basis recoverability of the unearned royalty advances on quarterly basis i.e. advance paid less royalty earnings and sub rights income, basis future sales of the titles as per IAS 36. The royalty advance is expensed at the contracted or effective royalty rate as the related turnover is earned. 
The carrying amount of royalty advances (net of provision) are included in advance royalties, see note 12 for reference.
(ii) Returns liabilities
The Company has agreements in place to allow customers to return books. As a result the Company makes an estimate of future returns based on historic data, the ageing of sales and business experience. This liability is included within accruals and the value at the year end is £188,180 (2022: £225,732).

Page 28

 
FREDERICK WARNE & CO 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:


2023
As restated 2022

£
£


Sale of books
7,938,895
9,595,425

Sub-rights income
12,695,760
11,446,754

Digital sales
243,468
106,941

20,878,123
21,149,120


Analysis of revenue by geographical location:


2023
As restated 2022

£
£


United Kingdom
10,922,900
11,017,687

Europe
762,887
1,142,451

North America
2,709,204
2,384,514

Asia 
1,383,517
2,464,289

Oceania
5,033,252
4,091,051

Rest of world
66,363
49,128

20,878,123
21,149,120

The 2022 values have been restated to reflect the accurate geographical split of revenue.



Contract balances:

The following table provides information about receivables, contract assets and contract liabilities from contracts with customers.


2023
2022

£
£


Receivables, which are included in 'Amounts owed by group undertakings'
8,410,724
10,088,353

Contract assets
1,977,631
2,406,585

Contract liabilities
1,512,886
2,532,739

The contract assets primarily relate to the Company’s rights to consideration for sub license income but not billed at the reporting date.
The contract liabilities primarily relate to the advance consideration received from customers under a specific licensing agreement, and for forward dated book publications at the reporting date.
 
Page 29

 
FREDERICK WARNE & CO LIMITED
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023



4.
Revenue (Continued)

Significant changes in the contract assets and the contract liabilities balances during the year are as follows:


2023
2023
2022
2022

£
£
£
£

Contract assets
Contract liabilities
Contract assets
Contract liabilities


Revenue recognised that was included in the contract liability balance at the beginning of the period
-
(1,392,765)
-
(1,327,778)

Increases due to cash received, excluding amounts recognised as revenue during the period
-
262,495
-
272,198

Transfers from contract assets recognised at the beginning of the period to receivables
(2,406,585)
-
(2,674,796)
-

Amounts in brackets denote a reduction in the contract assets and contract liabilities balances.



5.


Operating profit

The operating profit is stated after charging:

2023
2022
£
£

Impairment of inventory
23,648
183,953

Cost of stocks recognised as an expense
3,873,505
4,862,399

Exchange differences
8,990
(772)

Depreciation of tangible fixed assets
4,044
4,043

Auditors remuneration:
 Audit services
17,000
7,000

Page 30

 
FREDERICK WARNE & CO LIMITED
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023

6.


Employees

Staff costs were as follows:


2023
2022
£
£

Wages and salaries
238,770
160,944

Social security costs
13,959
13,595

Staff pension costs
13,394
10,517

266,123
185,056


Employees of the Company are legally contracted with and paid by Penguin Books Limited (PBL). The amounts shown above represent recharges from PBL for employment services performed wholly relating to the principal activities of the Company.
The average monthly number of employees legally contracted with the parent company whose staff costs were recharged to the Company during the year was 36 (2022: 37).


7.
Directors' remuneration

Although the directors of the Company have service contracts with Penguin Books Limited (“PBL”) and The Random House Group Limited (“RHG”), a proportion of their time and efforts relating to the Company, and therefore their emoluments, have been included in these financial statements.


2023
2022

£
£


Directors' remuneration:

Aggregate emoluments
39,057
39,524

Amounts receivable under long term incentives
794
5,239

Company pension contributions 
4,283
4,051


44,134
48,814

Retirement benefits are accruing to 2 directors (2022: 2) under defined benefit pension schemes and to 1 director (2022: 1) under a money purchase scheme.


Page 31

 
FREDERICK WARNE & CO LIMITED
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023

7.

Directors' remuneration (continued)


2023
2022

£
£


Highest paid director:

Emoluments
25,560
24,473

Amounts receivable under long term incentives
-
4,470

Defined benefit pension scheme accrued
3,082
2,929


28,642
31,872

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 £44,134 (2022: £48,814).



8.


Interest receivable and similar income

2023
2022
£
£


Interest receivable on cash pooling
908,092
175,671

908,092
175,671

Further details regarding cash pooling arrangements are included in note 12.

Page 32

 
FREDERICK WARNE & CO LIMITED
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023

9.


Tax on profit


2023
2022
£
£

Corporation tax


UK corporation tax on profits for the year
2,390,297
1,689,369

Adjustments in respect of prior years
49,433
15,762


2,439,730
1,705,131


Double taxation relief
(163,504)
(218,412)


2,276,226
1,486,719

Foreign tax


Foreign tax on income for the year
204,380
273,015

204,380
273,015

Total current tax
2,480,606
1,759,734

Factors affecting tax charge for the year

The tax assessed for the year is higher than (2022 - higher 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
10,168,917
8,891,420


Profit multiplied by standard rate of corporation tax in the UK of 23.5% (2022 - 19%)
2,389,695
1,689,370

Effects of:


Expenses not deductible for tax purposes
601
-

Withholding tax not deductible
40,877
54,602

Adjustments to tax charge in respect of prior periods
49,433
15,762

Total tax charge for the year
2,480,606
1,759,734

Page 33

 
FREDERICK WARNE & CO LIMITED
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
 
9.Tax on profit (continued)


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.


10.


Tangible fixed assets





Owned Artwork

£



Cost


At 1 January 2023
70,762



At 31 December 2023

70,762



Depreciation


At 1 January 2023
28,305


Charge for the year
4,044



At 31 December 2023

32,349



Net book value



At 31 December 2023
38,413



At 31 December 2022
42,457

Note:
The owned artwork relates to the Peter Rabbit series.

Page 34

 
FREDERICK WARNE & CO LIMITED
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023

11.


Stocks

2023
2022
£
£

Work in progress (goods to be sold)
73,411
178,460

Finished goods and goods for resale
826,094
883,939

899,505
1,062,399


There is no significant difference between the replacement cost of stocks and their carrying amounts.
Stocks have been stated after provisions for impairment of £370,179 (2022: £346,531). No stocks have been pledged as security for liabilities.



12.


Debtors: amounts falling due within one year

2023
2022
£
£


Amounts owed by group undertakings
16,976,065
24,516,293

Other debtors
913,047
473,716

Advance royalties
5,281
7,803

Prepayments and accrued income
1,977,631
3,422,515

19,872,024
28,420,327


Amounts owed by group undertakings (excluding amounts owed from Bertelsmann UK Limited) are unsecured, interest free and repayable on demand. Included within this is £8,485,134 (2022: £14,427,940) owed by Bertelsmann UK Limited in respect of a cash pooling facility of £1,000,000 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 7.36% (2022: 4.15%).  
Prepayments and accrued income includes accrued sub-rights income amounting to £1,472,556 (2022: £2,406,585) and prepaid commission of £505,075 (2022: £1,010,149).
 

Page 35

 
FREDERICK WARNE & CO LIMITED
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023

13.


Creditors: Amounts falling due within one year

2023
2022
£
£

Trade creditors
383,776
364,415

Royalty creditors
329,428
741,097

Amounts owed to group companies
617,148
848,927

Corporation tax
2,226,793
1,470,957

Other creditors
138,173
495,704

Accruals
1,042,036
260,139

Deferred income
1,906,043
3,595,141

6,643,397
7,776,380


Amounts owed to group undertakings are unsecured, interest free and repayable on demand.
Deferred income includes £1,130,270 (2022: £2,260,542) which principally relates to a minimum guarantee received under a specific licensing agreement for a six year period.
Other creditors includes £138,173 (2022: £398,442) of VAT payable.

14.


Provisions





Returns provision
Discount provision
Total

£
£
£





At 1 January 2023
225,732
14,657
240,389


Charged to profit or loss
-
13,249
13,249


Utilised in year
-
(14,657)
(14,657)


Transfer to accruals
(225,732)
-
(225,732)



At 31 December 2023
-
13,249
13,249

Returns provision
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 has been reassessed and transferred to accruals in the year.
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.

Page 36

 
FREDERICK WARNE & CO LIMITED
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023

15.


Called up share capital

2023
2022
£
£
Allotted, called up and fully paid



832,000 (2022 - 832,000) Ordinary Shares shares of £0.01 each
8,320
8,320
832,000 (2022 - 832,000) Deferred Shares shares of £1.00 each
832,000
832,000

840,320

840,320

The Ordinary Shares of £0.01 each have no restrictions on dividends or the repayment of capital.
The Deferred Shares of £1.00 each have no voting or dividend rights attached to them.


16.


Reserves

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.


17.


Related party transactions

The Company is a wholly-owned subsidiary of Penguin Random House Limited (PRHL) and as such has taken exemptions under the terms of International Accounting Standard 24 ‘Related party disclosures’, from disclosing related party transactions with other wholly-owned subsidiaries within the Bertelsmann SE & Co KGaA group.
During the year the Company entered into the following transactions with related parties not wholly owned by the group. All these entities are subsidiaries within the Bertelsmann SE & Co KGaA group:



2023
2022

£
£

Debtors

Children's Character Books Limited
312
-

Creditors

Children's Character Books Limited
-
4,851

Sales

Penguin Books, S.A
1,909
3,121

Penguin Random House India Private Limited
29,878
13,340
Page 37

 
FREDERICK WARNE & CO LIMITED
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023

18.


Controlling party

The Company's immediate parent undertaking is Penguin Books Limited (“PBL”).
PBL is a wholly owned subsidiary of Penguin Random House Limited (“PRHL”). At the balance sheet date PRHL was owned by Bertelsmann UK Limited. The Company’s ultimate parent company 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 38