Registered number:
FOR THE YEAR ENDED 31 DECEMBER 2023
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THE BOOK SERVICE LIMITED
COMPANY INFORMATION
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THE BOOK SERVICE LIMITED
CONTENTS
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THE BOOK SERVICE LIMITED
STRATEGIC REPORT
FOR THE YEAR ENDED 31 DECEMBER 2023
The directors present their Strategic Report for The Book Service Limited (“the Company” or “TBS”) for the year ended 31 December 2023.
The Company is a subsidiary of The Random House Group 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 warehousing and distribution.
The results and financial position of the Company are set out in the attached financial statements. The Company made a loss for the financial year of £1,007,938 (2022: loss of £805,324).
Turnover has remained static in comparison to the previous year, having increased by 0.6% from £46,209,382 to £46,468,918 in 2023 compared with an 8.3% increase from £42,664,537 to £46,209,382 in 2022. Gross profit margin increased by 4.2% in the year, increasing to 52.0% in 2023 from 47.8% in 2022. With turnover relatively static, the increase in gross profit margin has been driven by a reduction in cost of sales. The reduction is as a result of a decrease in the customer chargeback provision combined with a decrease in temporary staffing costs. Total operating costs have increased in 2023 from £48,343,356 to £52,935,739. A significant factor is the one-off costs of redundancy associated with the announced exit from our third-party distribution business in 2025. Costs associated with the closure amounted to £3,304,024 which are included in the results for the year. Despite continued inflationary pressures, with significant cost increases in several categories, the impact of these increases has been mitigated to some extent by a reduction in costs arising from exiting from third party storage facilities. This has also led to a significant improvement in stock availability for customer orders which is supported by a reduction in internal shortages of around 30% when comparing the second half of 2023 with 2022. This consolidation project was enabled by an expansion of our Frating facility which was completed in the second quarter of 2023. Operational productivity in our warehouse processes is influenced by a combination of customer demand, order profile and process improvements. The stock consolidation project and other process improvements we have made at the Frating site during the year have contributed to a 13% improvement in productivity for 2023 compared with 2022. Although there is a material year on year increase in the operating loss this is largely offset by interest receivable and similar income, thus reducing the year on year loss before tax to £1,175,462 in 2023 (2022: £1,056,315).
The Company monitors progress and performance during the year and historical trend data is set out in the following KPI’s:
- Turnover was £46,468,918 (2022 - £46,209,382) - Gross profit margin for the year was 52% (2022 - 48%) The KPIs are in line with forecast expectations. Detailed explanations for the year on year movements are included in the business review section.
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THE BOOK SERVICE LIMITED
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
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 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. In recent years the publishing industry has seen a large increase in sales of digitalised products, at the expense of a decrease in physical sales. This has plateaued more recently, with physical sales remaining strong. This remains to be an area of focus to ensure the Company is proactive to market changes. 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.
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.
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THE BOOK SERVICE LIMITED
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
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 reforecasts 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 fulfill 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 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 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 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 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.
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.
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THE BOOK SERVICE LIMITED
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
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 aims to provide everyone equal access to books, working with a range of organisations to allow the most equal opportunities as possible to read books. 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.
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.
Over the last few years the distribution facilities have introduced several measures to reduce plastic and improve other packaging solutions for more sustainable options: - Replacement of plastic void fill inside cartons with shredded cardboard. The card shredded is the excess packaging the books arrive in. - Investment in reusable hard plastic totes for dispatch to wholesale customers and distributors. - Investment in hard plastic lids and straps for pallets. These remove the requirement to shrink-wrap a pallet for distribution in the UK. This saves 41m of machine shrink-wrap per pallet. - Investment in new pallet wrap machines and a change to the pallet wrap used reducing the amount of shrink-wrap required on each pallet further. - Switching to paper tape instead of plastic based tape for hand packed cartons at both distribution sites. The above has resulted in a 78% reduction in single use plastic from 2018 to 2023. In July 2021, the business commenced the installation of solar panels at the Frating site, installing solar PV panels onto our Low Bay Order Processing warehouse roof. These provide a capacity of 429 KiloWatts Peak of renewable solar power. All lights that come to end of their life cycle are replaced by LED. The Frating site has 100% LED Lights throughout. The Grantham site has 60% LED and 40% t5 energy saving lamps.
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.
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THE BOOK SERVICE LIMITED
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
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.
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THE BOOK SERVICE LIMITED
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
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THE BOOK SERVICE LIMITED
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
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THE BOOK SERVICE LIMITED
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
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THE BOOK SERVICE LIMITED
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
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.
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THE BOOK SERVICE 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.
The loss for the year, after taxation, amounted to £1,007,938 (2022: loss £805,324).
No interim dividend (2022: £nil) was paid in the 2023 financial year and no final dividend is proposed (2022: £nil).
The directors who served during the year and up to the date of signing the financial statements were:
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 defined contribution 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.
The Company will continue to seek new opportunities for cost efficiencies. The directors do not anticipate any significant changes in the activities of the Company in relation to the operation at its Frating facility.
Following a strategic review, in January 2023 the Company announced a proposal to withdraw from the provision of distribution services to third party clients from its Grantham site in the second half of 2025 along with the closure of the Grantham site. Further to the required consultation period the decision to proceed with this proposal was confirmed on 4 May 2023. Services provided to third party clients will continue as usual until the end of their agreements.
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THE BOOK SERVICE LIMITED
DIRECTORS' REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
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.
Details on energy and carbon reporting, engagement with customers, suppliers and other stakeholders and financial risk management policy sections are not included in 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.
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THE BOOK SERVICE LIMITED
DIRECTORS' REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
The auditor, Grant Thornton UK LLP, will be proposed for reappointment in accordance with section 485 of the Companies Act 2006.
This report was approved by the board on
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THE BOOK SERVICE LIMITED
DIRECTORS' RESPONSIBILITIES STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2023
The directors are responsible for preparing the Strategic report, the Directors' report and the financial statements in accordance with applicable law and regulations.
Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have elected to prepare the financial statements in accordance with applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice), including Financial Reporting Standard 101 ‘Reduced Disclosure Framework’. Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period.
In preparing these financial statements, the directors are required to:
∙select suitable accounting policies and then apply them consistently;
∙make judgements and accounting estimates that are reasonable and prudent;
∙state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements;
∙prepare the 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 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
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THE BOOK SERVICE LIMITED
INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF THE BOOK SERVICE LIMITED
We have audited the financial statements of The Book Service 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 the notes to the financial statements, including a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 101 ‘Reduced Disclosure Framework’ (United Kingdom Generally Accepted Accounting Practice).
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the 'Auditor's responsibilities for the audit of the financial statements' section of our report. We are independent of the Company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC's Ethical Standard and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Conclusions relating to going concern
We are responsible for concluding on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify the auditor’s opinion. Our conclusions are based on the audit evidence obtained up to the date of our report. However, future events or conditions may cause the Company to cease to continue as a going concern. In our evaluation of the directors’ conclusions, we considered the inherent risks associated with the Company's business model including effects arising from macro-economic uncertainties such as the cost of living crisis and the impact of the war in Ukraine, we assessed and challenged the reasonableness of estimates made by the directors and the related disclosures and analysed how those risks might affect the Company's financial resources or ability to continue operations over the going concern period.
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THE BOOK SERVICE LIMITED
INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF THE BOOK SERVICE LIMITED (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.
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 course of the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is 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.
In our opinion, based on the work undertaken in the course of the audit:
∙the information given in the Strategic report and the Directors' report for the financial year for which the financial statements are prepared is consistent with the financial statements; and
∙the Strategic report and the Directors' report have been prepared in accordance with applicable legal requirements.
Matter on which we are required to report under the Companies Act 2006
In the light of the knowledge and understanding of the Company and its environment obtained in the course of the audit, we have not identified material misstatements in the Strategic report or the Directors’ report.
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THE BOOK SERVICE LIMITED
INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF THE BOOK SERVICE LIMITED (CONTINUED)
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:
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THE BOOK SERVICE LIMITED
INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF THE BOOK SERVICE LIMITED (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.
Auditor's responsibilities for the audit of the financial statements (continued)
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THE BOOK SERVICE LIMITED
INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF THE BOOK SERVICE LIMITED (CONTINUED)
A further description of our responsibilities for the audit of the financial statements is located on the FRC's website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor's report.
This report is made solely to the Company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company's members, as a body, for our audit work, for this report, or for the opinions we have formed.
Senior Statutory Auditor
for and on behalf of Grant Thornton UK LLP
Statutory Auditor, Chartered Accountants
Milton Keynes
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THE BOOK SERVICE LIMITED
PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED 31 DECEMBER 2023
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THE BOOK SERVICE LIMITED
STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2023
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THE BOOK SERVICE LIMITED
REGISTERED NUMBER: 00453161
BALANCE SHEET
AS AT 31 DECEMBER 2023
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THE BOOK SERVICE LIMITED
REGISTERED NUMBER: 00453161
BALANCE SHEET (CONTINUED)
AS AT 31 DECEMBER 2023
Restatements to the comparative period have been detailed in note 21 to the financial statements.
The notes on pages 24 to 47 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:
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THE BOOK SERVICE LIMITED
REGISTERED NUMBER: 00453161
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2023
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THE BOOK SERVICE LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
The Company is a private company limited by shares and a subsidiary of The Random House Group Limited, a company registered in the United Kingdom. The Company is domiciled and registered in the United Kingdom. The address of its registered office is 20 Vauxhall Bridge Road, London, SW1V 2SA. The principal activity of the Company continued to be that of book warehousing and distribution. The Company warehouses and distributes its books entirely in the UK.
2.Accounting policies
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:
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THE BOOK SERVICE LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
2.Accounting policies (continued)
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 preceeding 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.
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 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, Corporate Communications, Carl Bertelsmann Strasse 270, Postfach 111, D-33311 Gütersloh, Germany.
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THE BOOK SERVICE LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
2.Accounting policies (continued)
There are no amendments to accounting standards, or IFRIC interpretations that are effective for the year ended 31 December 2023 that have had a material impact on the Company’s financial statements.
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.
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THE BOOK SERVICE LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
2.Accounting policies (continued)
Functional and presentation currency
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
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 services have been provided to the customer. The Company’s activities are described in detail below.
Book warehousing and distribution fees The Company recognises revenue when performance obligations have been satisfied and for the Company this is when the services have transferred to the customer. Revenue from providing the services is recognised in the accounting period in which the services are rendered.
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THE BOOK SERVICE LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
2.Accounting policies (continued)
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THE BOOK SERVICE LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
2.Accounting policies (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:
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.
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.
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THE BOOK SERVICE LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
2.Accounting policies (continued)
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.
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. 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 fair value less costs of disposal and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which they are largely independent cash inflows (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.
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THE BOOK SERVICE LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
2.Accounting policies (continued)
The Company classifies it's financial assets in the following categories:
- Amortised cost - Fair Value through profit or loss (FVTPL) - Fair Value through other comprehensive income (FVOCI) The classification depends on the purpose for which the financial assets were acquired i.e. the entity's business model for management 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 collection 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 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.
Trade debtors and amounts owed by group undertakings are stated at amortised cost after provision for bad and doubtful debts. The Company applies the IFRS 9 simplified approach to measuring expected credit losses which uses a lifetime expected loss allowance for all trade debtors. To measure the expected credit losses, trade debtors are grouped based on shared credit risk characteristics and the days past due.
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.
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THE BOOK SERVICE LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
2.Accounting policies (continued)
Trade creditors and amounts owed to group undertakings are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method.
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. Impairment of trade debtors The Company makes an estimate of the recoverable value of trade and other receivables. When assessing impairment of trade and other receivables, management considers factors including the credit rating of the debtor, the ageing profile of receivables and historical experience. The Company applies the IFRS 9 simplified approach to measuring expected credit losses which uses a lifetime expected loss allowance for all trade receivables. To measure the expected credit losses, trade debtors are grouped based on shared credit risk characteristics and the days past due. See note 15 for the net carrying amount of the receivables and associated impairment provision.
The whole of the revenue is attributable to the Company's principal activity of book warehousing and distribution and arises entirely within the United Kingdom.
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THE BOOK SERVICE LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
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THE BOOK SERVICE LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
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THE BOOK SERVICE LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
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THE BOOK SERVICE LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
10.Tax on loss (continued)
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 dated have been measured using this enacted rate.
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THE BOOK SERVICE LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
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THE BOOK SERVICE LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
The company has lease contracts for vehicles used in the operations of the business.
The amounts recognised in the financial statements in relation to the lease are as follows: Right-of-use assets
Additions to the right-of-use assets during the financial year were £43,624 (2022: £18,165).
Contractual undiscounted cash flows are due as follows:
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THE BOOK SERVICE LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
The following amounts in respect of leases, where the Company is a lessee, have been recognised in the profit and loss:
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THE BOOK SERVICE LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
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THE BOOK SERVICE LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
Deferred tax liabilities recognised on property, plant and equipment timing differences are substantially due in more than 12 months.
Deferred tax assets recognised on other temporary differences relate to timing differences on provisions due within 12 months.
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THE BOOK SERVICE LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
15.Debtors: amounts falling due within one year (continued)
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THE BOOK SERVICE LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
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THE BOOK SERVICE LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
The Company is a member of the Penguin Random House Pension Scheme. This scheme is of the defined benefit type. 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. Because the Company is unable to identify its share of the scheme assets and liabilities on a consistent and reasonable basis as permitted by IAS 19 “Employee benefits” the scheme has been accounted for in these financial statements as if the scheme was a defined contribution scheme. The assets of the scheme are invested by the trustees acting on the advice of independent investment advisors. The pension costs have been assessed in accordance with the advice of a qualified actuary.
The Random House Group Limited ("TRHGL") is the principal employer to the Scheme, and retains responsibility for liabilities arising from obligations of the Scheme. TRHGL would therefore retain responsibility for any surplus or deficit which would arise on the wind up of the plan, or an employer exiting the plan. As detailed in note 5 and from the perspective of the Scheme, the employees of The Book Service Limited are legally contracted with THRGL. Contributions to the scheme are based on pension costs across the group as a whole. The scheme was closed to new members from 30 June 2002. Particulars of the actuarial valuation of the scheme are contained in the financial statements of The Random House Group Limited. For new employees, from 1 July 2002, the Company, together with its parent, The Random House Group Limited, operates a defined contribution pension scheme. With effect from January 2024, the Company contribution towards deficit funding was agreed to be reduced to £nil, given the funding position of the Scheme around the time at which the Schedule of contributions was certified. The Schedule of contributions was certified by the Scheme Actuary on 22 December 2023.
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 scheme was:
Profit and loss account
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THE BOOK SERVICE LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
The Company has restated certain prior year balances relating to the following issues matters identified during the course of preparing these financial statements.
Reclassification adjustments The Company identified a number of reclassification restatements to the prior year, as detailed below.
a) Presentation of operating expenses
The Company has restated the comparative year to reclassify a number of operating expenses general ledger codes to administrative expenses from cost of sales. The impact of the restatement is to increase administrative expenses by £15,807,641, with an equal and opposite decrease to cost of sales. The impact of the adjustment increased gross profit by £15,807,641. There was no impact on the Company's net assets or profit after tax at 31 December 2022. b) Presentation of bad debt provision The Company has restated the comparative year to reclassify an element of its bad debt provision, which related to chargebacks from customers, to accruals. The impact of the restatement is to decrease the bad debt provision by £1,721,436, with an equal and opposite increase to accruals. There was no impact on the Company's net assets or profit after tax at 31 December 2022.
Recognition of bad debt provision
The Company has restated the comparative year to recognise the bad debt provision of group entities, for which the Company carries out the invoicing, cash collection functions and recognises the trade debtors. The impact of the restatement is to increase the bad debt provision by £4,642,976, with an equal and opposite increase to amounts owed to group undertakings. There was no impact on the Company's net assets or profit after tax at 31 December 2022. The overall impact of the above is as follows; • Increase to administrative expenses of £15,807,641 • Decrease to cost of sales of £15,807,641 • Decrease to debtors of £2,921,539 • Decrease to creditors of £2,921,539
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THE BOOK SERVICE LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
21.Prior year adjustment (continued)
Impact of restatements on Balance Sheet
Debtors due within one year
Creditors due within one year
Page 46
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THE BOOK SERVICE LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
Creditor balances are unsecured and no guarantees have been received. Creditor balances will be settled in cash.
The Company's immediate parent company is The Random House Group Limited (“RHG”). RHG is a
wholly owned subsidiary of Penguin Random House Limited (“PRHL”). 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
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