Registered number: 00954009
FOR THE YEAR ENDED 31 DECEMBER 2024
THE RANDOM HOUSE GROUP LIMITED
COMPANY INFORMATION
THE RANDOM HOUSE GROUP LIMITED
CONTENTS
THE RANDOM HOUSE GROUP LIMITED
STRATEGIC REPORT
FOR THE YEAR ENDED 31 DECEMBER 2024
The directors present their Strategic Report for The Random House Group Limited (‘the Company’ or ‘RHGL’) for the year ended 31 December 2024.
The Company is a subsidiary of Penguin Random House Limited (“PRHL”), a company registered in the United Kingdom. The Company is domiciled and registered in the United Kingdom. The principal activity of the Company continues to be book publishing.
The Company’s turnover for the year was £255,133,870, which was 2.7% lower compared to prior year (2023: £262,304,038). Operating profit for the year increased by £3,807,535 to £37,668,550, which was an 11.2% increase on prior year (2023: £33,861,015). The gross profit margin was 54.7% (2023: 53.1%). Overall, the Company saw a 10.4% increase in profit for the financial year on the prior year. The Company's profit for the financial year was £22,625,559 (2023: £ 20,490,142).
The decrease in turnover in 2024 compared to 2023 was primarily a result of the success of Prince Harry's memoir "Spare" in the prior year, with no comparable title this year. Strong performers in the year continued to be "Atomic Habits" and "In Too Deep", which was published in the final quarter of the year. The Company also saw continued growth in audio sales. The improvement of margin and slight easing of inflationary pressures across cost lines contributed to the increase in operating profit year on year.
The increase in profit for the financial year compared to 2023 was largely driven by the improved operating profitability of the Company, coupled with a reduction in impairment charges on subsidiary companies. Impairment charges in 2024 fell from £4,618,000 in the prior year to £nil. The impact of this was however considerably offset by the increased cash pooling interest costs incurred by the Company in the year compared to 2023.
Earnings before interest, tax, depreciation, amortisation and impairment of non-financial assets (EBITDA) has increased in the financial year by 17.3% to £48,398,170 (2023: £41,619,912). This is largely driven by the reasons outlined above for improved operating profitability, partially offset by the increased depreciation and amortisation charges in the year as a result of new leases entered into.
At the balance sheet date, the Company had net assets of £109,851,570, an increase of 3.42% on the prior year (2023: £106,216,874). The Company paid a dividend of £24,000,000 in the year (2023: £75,000,000). During the year, the Company entered into additonal leases for the full occupation of all floors at Embassy Gardens ("EG"), whilst granting occupancy agreements to fellow Bertelsmann group companies to utilise space at Vauxhall Bridge Road.
The decrease in turnover in 2024 compared to 2023 was primarily a result of the success of Prince Harry's memoir "Spare" in the prior year, with no comparable title this year. Strong performers in the year continued to be "Atomic Habits" and "In Too Deep", which was published in the final quarter of the year. The Company also saw continued growth in audio sales. The improvement of margin and slight easing of inflationary pressures across cost lines contributed to the increase in operating profit year on year.
The increase in profit for the financial year compared to 2023 was largely driven by the improved operating profitability of the Company, coupled with a reduction in impairment charges on subsidiary companies. Impairment charges in 2024 fell from £4,618,000 in the prior year to £nil. The impact of this was however considerably offset by the increased cash pooling interest costs incurred by the Company in the year compared to 2023.
Earnings before interest, tax, depreciation, amortisation and impairment of non-financial assets (EBITDA) has increased in the financial year by 17.3% to £48,398,170 (2023: £41,619,912). This is largely driven by the reasons outlined above for improved operating profitability, partially offset by the increased depreciation and amortisation charges in the year as a result of new leases entered into.
At the balance sheet date, the Company had net assets of £109,851,570, an increase of 3.42% on the prior year (2023: £106,216,874). The Company paid a dividend of £24,000,000 in the year (2023: £75,000,000). During the year, the Company entered into additonal leases for the full occupation of all floors at Embassy Gardens ("EG"), whilst granting occupancy agreements to fellow Bertelsmann group companies to utilise space at Vauxhall Bridge Road.
As announced in the previous year, the Company's subsidiary The Book Service Limited continued to wind down its third party distribution operations during the year. All such operations will fully cease in 2025.
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THE RANDOM HOUSE GROUP LIMITED
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2024
The Company monitors progress and performance during the year and historical trend data which is set out in the following KPIs:
The KPIs are in line with forecast expectations. Detailed explanations for the year on year movements is included in the business review section.
Management makes use of certain alternative performance measures (APMs) that are non-UK GAAP measures. The Board uses these to assess performance of the Company and considers them to provide useful supplementary information to the statutory results. The Board does not consider APMs to be more relevant or reliable than UK GAAP measures and notes that their definition and basis of calculation may differ from other companies. The Company’s APMs are defined and a reconciliation to the most directly comparable UK GAAP measure is shown below.
EBITDA is operating profit as measured using UK GAAP principles adjusted for the effects of depreciation, amortisation and impairment of non-financial assets. EBITDA is reported to the Board as management considers that it provides a useful proxy for the Company’s operating profit excluding non-cash items. It can be reconciled to the operating profit measure reported in the Profit and Loss Account as shown below:
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:
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THE RANDOM HOUSE GROUP LIMITED
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2024
The Company's operations expose it to a variety of commercial and financial risks. The Company is subject to risk management procedures and an annual risk assessment implemented by the ultimate parent Company, Bertelsmann SE & Co KGaA. The Company has procedures in place to make the directors aware of the various risks to the Company’s business. The risks are monitored and reported to management.
Commercial risk
The changing book market and particularly the transition to digital is creating both challenges and opportunities for the Company, notably regarding the latter in terms of new markets and sales channels. The Company is facing increased pressure on margins. Other risks arise from the entry of non-traditional publishers into the market, the decline in retail space in high street bookshops and economic uncertainty. The continuing uncertainty in the global economy and high level of inflation in the UK presents ongoing pressure on costs and margins. The Company actively monitors market trends and these are incorporated into the detailed commercial plans of the business.
Price risk
The Company is exposed to commodity price risk as a result of its operations. The directors regularly review the appropriateness of commodity purchasing policies, particularly in the event of changes to the size or nature of the Company's operations in an attempt to mitigate the risk.
Credit risk
The Company may offer credit terms to its customers which allow payment of the debt after delivery of the goods. The Company is at risk to the extent that a customer may be unable to pay the debt on the specified due date. The Company has mitigated this risk of payment default by implementing policies which ensure that appropriate checks on potential customers are performed before credit terms are granted. Where a customer or group of customers is assessed to have a higher risk profile, these are included within the Company's credit insurance programme.
Liquidity and cash flow risk
The objective of the Company in managing liquidity risk is to ensure that it can meet its financial obligations as and when they fall due. The Company expects to meet its financial obligations through operating cash flows. The Company’s results, including cash flows, are reviewed by the Board on a monthly basis. Risks are further mitigated by the cash pooling arrangements in place across the Bertelsmann group, which ensures funds are available to the Company to meet all liabilities as and when they fall due.
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 RANDOM HOUSE GROUP LIMITED
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2024
The Board operates a structured governance model which supports the Company in ensuring that decisions are considered, documented and reported upon, and in alignment with its strategic plans. Detailed budgets and forecasts are prepared which enable the Board to track performance and ensure that it is as expected, or that mitigation steps are taken to deliver performance in line with, or close to, expectations. The Board and senior management personnel operate within this structure, with the aim of promoting the success of the Company and delivering long- term shareholder value.
The Board is presented with regular board packs and other information that it needs to fulfil its responsibilities. During the period at Board meetings the Board have discussed and made decisions on a number of specific issues including business priorities and strategy, capital investment, and the ongoing management of the current economic situation.
The Board is presented with regular board packs and other information that it needs to fulfil its responsibilities. During the period at Board meetings the Board have discussed and made decisions on a number of specific issues including business priorities and strategy, capital investment, and the ongoing management of the current economic situation.
The 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.
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.
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 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 strives to print and produce diverse, relevant, and accessible content for all customers.
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 strives to print and produce diverse, relevant, and accessible content for all customers.
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THE RANDOM HOUSE GROUP LIMITED
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2024
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 considers 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.
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 its people to work to the highest standards of business conduct.
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 RANDOM HOUSE GROUP LIMITED
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2024
Due to the nature of activities carried out across the Group it is impracticable to calculate energy usage on an individual company by company basis. Random House Group Limited (RHGL) employees are based within the Penguin Random House (PRH) offices at Embassy Gardens, and stock is stored and distributed from the main PRH distribution centre at Colchester. As a result of this, the report is calculated based on apportioned Group streamlined energy and carbon reporting numbers based on employee headcount for inclusion in the financial statements.
UK Greenhouse gas emissions and energy use data for the period 1st January 2024 to 31st December 2024. The previous year ended 2023 figures have been included to demonstrate The Company’s commitment to reducing their energy use and greenhouse gas emissions. As a subsidiary of the ultimate parent Bertelsmann SE & Co KGaA, the UK entities have aligned internal reporting measures to comply with European Sustainability Reporting Standards (ESRS). As a result and for consistency, the emissions reporting format has been revised to focus on Scope 3 categories rather than 'Employee', 'Site', and 'Product-related' data. The overall data included remains unchanged and we have followed the UK BEIS (Department Business, Energy & Industrial Strategy) 2019 guidance to ensure compliance with UK environmental reporting guidelines.
Energy Consumption - Green Electricity – the Company made the decision to purchase electricity from Renewable Resources from October 2018 onwards. To comply with the new internal indicators, the categories for energy consumption have been adjusted. For the Company, 'Renewable Energy Consumption' now includes electricity generated from the solar panels at Frating, while 'Fossil Energy Consumption' pertains to total heat consumption.
UK Greenhouse gas emissions and energy use data for the period 1st January 2024 to 31st December 2024. The previous year ended 2023 figures have been included to demonstrate The Company’s commitment to reducing their energy use and greenhouse gas emissions. As a subsidiary of the ultimate parent Bertelsmann SE & Co KGaA, the UK entities have aligned internal reporting measures to comply with European Sustainability Reporting Standards (ESRS). As a result and for consistency, the emissions reporting format has been revised to focus on Scope 3 categories rather than 'Employee', 'Site', and 'Product-related' data. The overall data included remains unchanged and we have followed the UK BEIS (Department Business, Energy & Industrial Strategy) 2019 guidance to ensure compliance with UK environmental reporting guidelines.
Energy Consumption - Green Electricity – the Company made the decision to purchase electricity from Renewable Resources from October 2018 onwards. To comply with the new internal indicators, the categories for energy consumption have been adjusted. For the Company, 'Renewable Energy Consumption' now includes electricity generated from the solar panels at Frating, while 'Fossil Energy Consumption' pertains to total heat consumption.
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THE RANDOM HOUSE GROUP LIMITED
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2024
∙The Solar PV installation at the Colchester Distribution Centre produced 382,171 kWh of electricity for the site, ~17% of the total requirement in 2024.
∙PRH UK maintained ISO14001 accreditation for their Environmental Management System across the four major sites within the UK.
∙There were noticeable increases in emissions from employee business travel and employee commuting as work returns to normal after the Covid 19 pandemic.
∙In 2024, Embassy Gardens initiated projects to reduce site energy usage by consulting experts to optimise the Building Management System. Improvements included turning off heating in summer and reducing chiller use in winter.
∙The Grantham site experienced overall reductions in all scopes due to a ~40% workforce decrease and lower customer engagement.
∙In 2024, gas consumption at the Frating site decreased by ~40%. This reduction followed a 2023 increase due to the new warehouse extension with three additional gas-fired Air Handling Units (AHUs). Operational issues with some AHUs in 2024 further reduced usage. Energy-saving initiatives included lowering AHU temperatures from 18°C to 17°C during warmer months and adjusting operating hours by closing earlier on Fridays and opening later Sundays. Additionally, the warehouse operated fewer weekends (1 or 2) during the peak period (Sep-Dec) compared to every weekend in previous years, as demand was manageable during weekdays.
∙In late 2023, PRH UK acquired Quadrille Publishing Limited and included their additional 1495 m² warehouse space at Macmillan Distribution Ltd in the Grantham site’s questionnaire. Bertelsmann then estimated the total emissions for this rented space using their methodology.
∙In 2024, Bertelsmann revised the way to calculate the scope 1, 2, and 3 emissions of a paper mill to provide a more complete and sound emission factor. The change in methodology meant moving away from outdated proxy figures and using data from third party industry datasets. The result was a substantial increase in carbon emissions associated with print materials and printer suppliers. 2023 data has been revised and represents the recalculated 2023 data by Bertelsmann, adjusted for the new spend-based categories to enable a more accurate year-to-year comparison.
∙In 2024 we diversified our modes of delivering stock from Europe, increasing our use of rail freight and trucks, powered by post-consumer vegetable oil in addition to our use of diesel trucks. This has helped reduce the carbon emissions associated with inbound freight.
The Company is committed to managing environmental issues effectively across its entire value chain. The Board has set three key targets for the future. The details of these are outlined in the Sustainability Policy:
https://wp.penguin.co .uk/wp-content/uploads /2022/06/Penguin_Sustainability_Policy_Spring_22 -3.pdf
∙Zero by 30: reduce our carbon footprint to become climate neutral in our direct operations by 2021, and in our wider supply chain by 2030
∙Sustainable sourcing: ensure 100% of our paper and other core materials continue to be ethically and sustainably sourced
∙Content: use the power of our brand, books, and authors to amplify the climate emergency and encourage positive behaviour change
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THE RANDOM HOUSE GROUP LIMITED
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2024
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THE RANDOM HOUSE GROUP LIMITED
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2024
2023 represents the recalculated 2023 data by Bertelsmann, adjusted for the new spend-based categories to enable a more accurate year-to-year comparison.
We have followed the UK BEIS (Department Business, Energy & Industrial Strategy) 2019 guidance. The energy and emission figures provided are taken from Bertelsmann’s “Green Screen”, this a Bertelsmann owned internal recording application used by all companies within the Bertelsmann Group including the Company. All conversions are completed using government guidance ratios and the scopes 1, 2 and 3 are as outlined by BEIS guidance pages 50 and 51.
As a subsidiary of the ultimate parent Bertelsmann SE & Co KGaA, the UK entities have aligned internal reporting measures to comply with European Sustainability Reporting Standards (ESRS). As a result and for consistency, the emissions reporting format has been revised to focus on Scope 3 categories rather than 'Employee', 'Site', and 'Product-related' data. The overall data included remains unchanged and we have followed the UK BEIS (Department Business, Energy & Industrial Strategy) 2019 guidance to ensure compliance with UK environmental reporting guidelines. In 2024, Bertelsmann updated the calculation method for Scope 1, 2, and 3 emissions of a paper mill to ensure a more accurate emission factor, using data from third-party industry datasets instead of outdated proxies. This report also includes a recalculation of 2023 data, as provided by Bertelsmann, to reflect the new spending categories for a more accurate comparison.
In addition to the above, the Company have begun to offset site related emissions as of 2021. The offset credits are sourced from a reduction project in the peatlands of Borneo, Indonesia.
This project, managed by Pachama, focuses on carbon sequestration and significantly contributes to biodiversity preservation. Its goal is to prevent deforestation, degradation, and drainage of one of Indonesia’s largest swamps. By collaborating with local communities, the project has successfully protected and restored one of the world’s largest carbon sinks. You can find the project link here: https://app.pachama.com /projects/borneo -peatlands/overview #overview
As a subsidiary of the ultimate parent Bertelsmann SE & Co KGaA, the UK entities have aligned internal reporting measures to comply with European Sustainability Reporting Standards (ESRS). As a result and for consistency, the emissions reporting format has been revised to focus on Scope 3 categories rather than 'Employee', 'Site', and 'Product-related' data. The overall data included remains unchanged and we have followed the UK BEIS (Department Business, Energy & Industrial Strategy) 2019 guidance to ensure compliance with UK environmental reporting guidelines. In 2024, Bertelsmann updated the calculation method for Scope 1, 2, and 3 emissions of a paper mill to ensure a more accurate emission factor, using data from third-party industry datasets instead of outdated proxies. This report also includes a recalculation of 2023 data, as provided by Bertelsmann, to reflect the new spending categories for a more accurate comparison.
In addition to the above, the Company have begun to offset site related emissions as of 2021. The offset credits are sourced from a reduction project in the peatlands of Borneo, Indonesia.
This project, managed by Pachama, focuses on carbon sequestration and significantly contributes to biodiversity preservation. Its goal is to prevent deforestation, degradation, and drainage of one of Indonesia’s largest swamps. By collaborating with local communities, the project has successfully protected and restored one of the world’s largest carbon sinks. You can find the project link here: https://app.pachama.com /projects/borneo -peatlands/overview #overview
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THE RANDOM HOUSE GROUP LIMITED
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2024
The intensity ratio for the Company is calculated by dividing the total annual tCO2e by the actual yearly sales (£ Million).
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 RANDOM HOUSE GROUP LIMITED
DIRECTORS' REPORT
FOR THE YEAR ENDED 31 DECEMBER 2024
The directors present their report and the financial statements for the year ended 31 December 2024.
The profit for the year, after taxation, amounted to £22,625,559 (2023 - £20,490,142).
Dividends of £24,000,000 were paid during the year (2023: £75,000,000).
The directors who served during the year and up to the date of signing the financial statements were:
The Company will continue to seek suitable publishing opportunities to ensure growth. The directors do not anticipate any significant changes in the activities of the Company.
In preparing these financial statements, the directors have assessed the ability of the Company to continue to operate for a period of at least twelve months from the date of signing the financial statements.
The Company has undertaken a risk assessment and forecasting exercise to assess the Company’s liquidity position. The forecast for the going concern period has been prepared using the three year plan approved by the Board and takes account of prior trends and expected titles to be published in the future and key cost drivers such as commodity prices and inflation.
For the purposes of the Company’s going concern assessment, the directors have performed sensitivity analysis on cashflows based on unforeseen changes in demand and the potential impact of increased inflationary pressures. In addition, reverse stress testing has been performed to establish the levels of performance where cash availability would be breached. The results of the analysis demonstrated that there was sufficient cash availability within the current intra group cash pooling facility to deal with all of the identified plausible scenarios.
The forecast is dependent on the group cash pooling facility being available for the going concern period and Bertelsmann UK Limited not seeking repayment of the amounts currently due. The directors note that the terms of the facility state that that it can be terminated by either party with three days notice and, therefore, the Company has received written confirmation from Bertelsmann UK Limited that it will not seek repayment of the amounts currently due for the going concern period.
Based on the Company’s current trading performance, the sensitivity and reverse stress testing scenarios performed and the written confirmation of support from Bertelsmann UK Limited, the directors have a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future, being a period of no less than twelve months from the date of approval of these financial statements. Accordingly, they continue to adopt the going concern basis in preparing the financial statements.
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THE RANDOM HOUSE GROUP LIMITED
DIRECTORS' REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2024
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.
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.
Details on energy and carbon reporting, engagement with customers, suppliers and other stakeholders, and financial risk management policy sections are not included within the Directors Report as they are considered to be of strategic importance to the Company and, as allowed under the Companies Act 2006 s.414C(11), they have instead been included in the Strategic Report.
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THE RANDOM HOUSE GROUP LIMITED
DIRECTORS' REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2024
The auditor, Grant Thornton UK LLP, will be proposed for reappointment in accordance with section 485 of the Companies Act 2006.
This report was approved by the board and signed on its behalf.
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THE RANDOM HOUSE GROUP LIMITED
DIRECTORS' RESPONSIBILITIES STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2024
The directors are responsible for preparing the Strategic Report, the Directors' Report and the financial statements in accordance with applicable law and regulations.
Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have elected to prepare the financial statements in accordance with applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice), including Financial Reporting Standard 101 ‘Reduced Disclosure Framework’. Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs and profit or loss of the Company for that period.
In preparing these financial statements, the directors are required to:
∙select suitable accounting policies and then apply them consistently;
∙make 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 RANDOM HOUSE GROUP LIMITED
INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF THE RANDOM HOUSE GROUP LIMITED
We have audited the financial statements of The Random House Group Limited ("the Company") for the year ended 31 December 2024, which comprise the Profit and loss account, the Statement of comprehensive income, the Balance sheet, the Statement of changes in equity and notes to the financial statements, including a summary of significant accounting 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 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.
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.
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 RANDOM HOUSE GROUP LIMITED
INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF THE RANDOM HOUSE GROUP LIMITED (CONTINUED)
Conclusion relating to going concern (continued)
In auditing the financial statements, we have concluded that the directors' use of the going concern basis of accounting in the preparation of the financial statements is appropriate
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the Company's ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.
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 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.
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.
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.
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THE RANDOM HOUSE GROUP LIMITED
INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF THE RANDOM HOUSE GROUP LIMITED (CONTINUED)
In the light of the knowledge and understanding of the Company and its environment obtained in the course of the audit, we have not identified material misstatements in the Strategic report and Directors' report .
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:
Page 17
THE RANDOM HOUSE GROUP LIMITED
INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF THE RANDOM HOUSE GROUP 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.
Page 18
THE RANDOM HOUSE GROUP LIMITED
INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF THE RANDOM HOUSE GROUP LIMITED (CONTINUED)
Auditor's responsibilities for the audit of the financial statements (continued)
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council's website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor's report.
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
Statutory Auditor, Chartered Accountants
Milton Keynes
Date:
Date:
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THE RANDOM HOUSE GROUP LIMITED
PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED 31 DECEMBER 2024
Page 20
THE RANDOM HOUSE GROUP LIMITED
STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2024
Page 21
THE RANDOM HOUSE GROUP LIMITED
REGISTERED NUMBER: 00954009
BALANCE SHEET
AS AT 31 DECEMBER 2024
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THE RANDOM HOUSE GROUP LIMITED
REGISTERED NUMBER: 00954009
BALANCE SHEET (CONTINUED)
AS AT 31 DECEMBER 2024
The notes on pages 25 to 64 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:
The financial statements were approved and authorised for issue by the board and were signed on its behalf by:
Page 23
THE RANDOM HOUSE GROUP LIMITED
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2024
Page 24
THE RANDOM HOUSE GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2024
The Random House Group Limited ("the Company") is a book publisher. The Company sells its books globally with the majority of sales in the UK. The Company is a private Company limited by shares and is incorporated in the United Kingdom. The address of its registered office is One Embassy Gardens, 8 Viaduct Gardens, London, SW11 7BW.
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 judgement 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:
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 judgement 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:
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.
- 10(d) statement of cash flows;
- 10(f) statement of financial position as at the beginning of the preceding period when retrospective restatement or reclassifications apply;
- 16 statement of compliance with all IFRS;
- 38A requirement for minimum of two primary financial statements, including cash flow statements;
- 38B, 38C, 38D additional comparative information;
- 40A, 40B, 40C, 40D requirements to provide additional statements in respect of retrospective restatements and reclassifications;
- 111 statement of cash flows information; and
- 134 - 136 capital management disclosures.
∙the requirements of IAS 7 Statement of Cash Flows
Page 25
THE RANDOM HOUSE GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2024
2.Accounting policies (continued)
∙the requirements of paragraphs 30 and 31 of IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors
∙the requirements of paragraph 17 and 18A of IAS 24 Related Party Disclosures
∙the requirements in IAS 24 Related Party Disclosures to disclose related party transactions entered into between two or more members of a group, provided that any subsidiary which is a party to the transaction is wholly owned by such a member
This information is included in the consolidated financial statements of Bertelsmann SE & Co KGaA as at 31 December 2024 and these financial statements may be obtained from Bertelsmann SE & Co KGaA, Corporate Communications, Carl Bertelsmann Strasse 270, Postfach 111, D-33311
Gütersloh, Germany.
Gütersloh, Germany.
In preparing these financial statements, the directors have assessed the ability of the Company to continue to operate for a period of at least twelve months from the date of signing the financial statements.
The Company has undertaken a risk assessment and forecasting exercise to assess the Company’s liquidity position. The forecast for the going concern period has been prepared using the three year plan approved by the Board and takes account of prior trends and expected titles to be published in the future and key cost drivers such as commodity prices and inflation.
For the purposes of the Company’s going concern assessment, the directors have performed sensitivity analysis on cashflows based on unforeseen changes in demand and the potential impact of increased inflationary pressures. In addition, reverse stress testing has been performed to establish the levels of performance where cash availability would be breached. The results of the analysis demonstrated that there was sufficient cash availability within the current intra group cash pooling facility to deal with all of the identified plausible scenarios.
The forecast is dependent on the group cash pooling facility being available for the going concern period and Bertelsmann UK Limited not seeing repayment of the amounts currently due. The directors note that the terms of the facility state that that it can be terminated by either party with three days notice and, therefore, the Company has received written confirmation from Bertelsmann UK Limited that it will not seek repayment of the amounts currently due for the going concern period.
Based on the Company’s current trading performance, the sensitivity and reverse stress testing scenarios performed and the written confirmation of support from Bertelsmann UK Limited, the directors have a reasonable expectation that the Company has adequate resources to continue in
Page 26
THE RANDOM HOUSE GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2024
2.Accounting policies (continued)
operational existence for the foreseeable future, being a period of no less than twelve months from the date of approval of these financial statements. Accordingly, they continue to adopt the going concern basis in preparing the financial statements.
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 recevied post year end but before the date of approval of the financial statements.
Page 27
THE RANDOM HOUSE GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2024
2.Accounting policies (continued)
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.
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.
Dividend income is recognised when the right to receive payment is established.
Other operating income consists of income not directly related to the Company's principal activity in relation to the publication of books.
It mainly comprises of the management recharge of administrative, distribution and other operating expenses incurred by the Company on behalf of other group undertakings. It is recognised at a point in time that the services are provided in accordance with the relevant performance obligation. The management charge is a combination of certain fixed costs and the allocation of expenses calculated using agreed specific percentages within a recharge model.
It mainly comprises of the management recharge of administrative, distribution and other operating expenses incurred by the Company on behalf of other group undertakings. It is recognised at a point in time that the services are provided in accordance with the relevant performance obligation. The management charge is a combination of certain fixed costs and the allocation of expenses calculated using agreed specific percentages within a recharge model.
Page 28
THE RANDOM HOUSE GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2024
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
Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction. Non-monetary assets and liabilities denominated in foreign currencies that are stated at fair value are retranslated to the functional currency at foreign exchange rates ruling at the dates the fair value was determined. Foreign exchange differences arising on translation are recognised in the profit and loss account under administrative expenses.
The Company leases various offices, equipment and vehicles. Rental contracts are typically made for fixed periods of 6 months to 10 years but may extend beyond the term where extension options are present.
Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions. The lease agreements do not impose any covenants other than the security interests in the leased assets that are held by the lessor. Leased assets may not be used as security for borrowing purposes.
Leases are recognised as a right-of-use asset and a corresponding lease liability at the date at which the leased asset is available for use by the Company.
Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions. The lease agreements do not impose any covenants other than the security interests in the leased assets that are held by the lessor. Leased assets may not be used as security for borrowing purposes.
Leases are recognised as a right-of-use asset and a corresponding lease liability at the date at which the leased asset is available for use by the Company.
Page 29
THE RANDOM HOUSE GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2024
2.Accounting policies (continued)
Where another group company holds the guarantor and lease of the related property, but is not the sole occupier, the company occupying the leased building holds the right of use asset with the lease liability being shown as a corresponding intercompany payable. The intercompany payable in relation to the lease is calculated using the same methodology as the lease liability above.
Page 30
THE RANDOM HOUSE GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2024
2.Accounting policies (continued)
Defined benefit pension plan
The Company operates a defined benefit plan for certain employees. A defined benefit plan defines the pension benefit that the employee will receive on retirement, usually dependent upon several factors including but not limited to age, length of service and remuneration. A defined benefit plan is a pension plan that is not a defined contribution plan.
The asset or liability recognised in the Balance Sheet in respect of the defined benefit plan is the present value of the defined benefit obligation at the end of the balance sheet date less the fair value of plan assets at the balance sheet date (if any) out of which the obligations are to be settled.
Any asset arising on the defined benefit plan at the balance sheet date is considered to be fully recoverable by the Company. Whilst the trustees of the scheme have a unilateral power to trigger a wind up of the plan without employer consent, and before all benefits have been provided to members in full, it is considered highly unlikely. The only circumstances in which the objectives for which the scheme was established would no longer exist would be when all of the benefits owed to every last beneficiary had either been paid, or secured with an insurance company on a buy-out, or otherwise transferred in full to another arrangement. Therefore, the trustees would not use this power to wind up an ongoing scheme before the death of the last beneficiary.
The defined benefit obligation is calculated using the projected unit credit method. Annually the company engages independent actuaries to calculate the obligation. The present value is determined by discounting the estimated future payments using market yields on high quality corporate bonds that are denominated in sterling and that have terms approximating to the estimated period of the future payments ('discount rate').
Remeasurement gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or credited to equity in other comprehensive income in the period in which they arise.
The amount charged or credited to finance costs is a net interest amount calculated by applying the liability discount rate to the net defined benefit liability or asset.
Past service costs are recognised immediately in the profit and loss account.
Defined contribution pension plan
The Company operates a defined contribution plan for certain employees. A defined contribution plan is a pension plan under which the Company pays fixed contributions into a separate entity. The Company has no legal or constructive obligations to pay further contributions if the fund does not hold sufficient assets to pay all employees the benefits relating to employee service in the current and prior periods.
The Company pays contributions to publicly or privately administered pension insurance plans on a mandatory, contractual or voluntary basis. The Company has no further payment obligations once the contributions have been paid. The contributions are recognised as employee benefit expense when they are due. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in the future payments is available.
The Company operates a defined benefit plan for certain employees. A defined benefit plan defines the pension benefit that the employee will receive on retirement, usually dependent upon several factors including but not limited to age, length of service and remuneration. A defined benefit plan is a pension plan that is not a defined contribution plan.
The asset or liability recognised in the Balance Sheet in respect of the defined benefit plan is the present value of the defined benefit obligation at the end of the balance sheet date less the fair value of plan assets at the balance sheet date (if any) out of which the obligations are to be settled.
Any asset arising on the defined benefit plan at the balance sheet date is considered to be fully recoverable by the Company. Whilst the trustees of the scheme have a unilateral power to trigger a wind up of the plan without employer consent, and before all benefits have been provided to members in full, it is considered highly unlikely. The only circumstances in which the objectives for which the scheme was established would no longer exist would be when all of the benefits owed to every last beneficiary had either been paid, or secured with an insurance company on a buy-out, or otherwise transferred in full to another arrangement. Therefore, the trustees would not use this power to wind up an ongoing scheme before the death of the last beneficiary.
The defined benefit obligation is calculated using the projected unit credit method. Annually the company engages independent actuaries to calculate the obligation. The present value is determined by discounting the estimated future payments using market yields on high quality corporate bonds that are denominated in sterling and that have terms approximating to the estimated period of the future payments ('discount rate').
Remeasurement gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or credited to equity in other comprehensive income in the period in which they arise.
The amount charged or credited to finance costs is a net interest amount calculated by applying the liability discount rate to the net defined benefit liability or asset.
Past service costs are recognised immediately in the profit and loss account.
Defined contribution pension plan
The Company operates a defined contribution plan for certain employees. A defined contribution plan is a pension plan under which the Company pays fixed contributions into a separate entity. The Company has no legal or constructive obligations to pay further contributions if the fund does not hold sufficient assets to pay all employees the benefits relating to employee service in the current and prior periods.
The Company pays contributions to publicly or privately administered pension insurance plans on a mandatory, contractual or voluntary basis. The Company has no further payment obligations once the contributions have been paid. The contributions are recognised as employee benefit expense when they are due. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in the future payments is available.
Page 31
THE RANDOM HOUSE GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2024
2.Accounting policies (continued)
Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years.
Deferred tax is provided on temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The following temporary differences are not provided for: the initial recognition of goodwill; the initial recognition of assets or liabilities that affect neither accounting nor taxable profit other than in a business combination, and differences relating to investments in subsidiaries to the extent that they will probably not reverse in the foreseeable future. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the balance sheet date.
A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the temporary difference can be utilised.
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 in accordance to IAS 36.
An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount, being the higher of an asset’s fair value less costs of disposal or value in use.
For the purposes of assessing impairment, assets are grouped at the lowest levels for which independent cash inflows are generated (cash-generating units). Prior impairments of non-financial assets are reviewed for possible reversal at each reporting date, if there have been favourable events or changes in circumstances, since the impairment loss was recognised that would indicate that the impairment loss no longer exists or might have decreased.
Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable in accordance to IAS 36.
An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount, being the higher of an asset’s fair value less costs of disposal or value in use.
For the purposes of assessing impairment, assets are grouped at the lowest levels for which independent cash inflows are generated (cash-generating units). Prior impairments of non-financial assets are reviewed for possible reversal at each reporting date, if there have been favourable events or changes in circumstances, since the impairment loss was recognised that would indicate that the impairment loss no longer exists or might have decreased.
Page 32
THE RANDOM HOUSE GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2024
2.Accounting policies (continued)
The estimated useful lives range as follows:
Computer Software
Development costs that are directly attributable to the design and testing of identifiable and unique software products controlled by the Company are recognised as intangible assets when the following criteria are met:
Development costs that are directly attributable to the design and testing of identifiable and unique software products controlled by the Company are recognised as intangible assets when the following criteria are met:
∙It is technically feasible to complete the software product so that it will be available for use;
∙Management intends to complete the software product and use it or sell it;
∙There is an ability to use or sell the software product;
∙It can be demonstrated how the software product will generate probable future economic benefits;
∙Adequate technical, financial and other resources to complete the development and to use or sell the software are available; and
∙The expenditure attributable to the software product during its development can be reliably measured.
Directly attributable costs that are capitalised as part of the software product include the software development employee costs and an appropriate portion of relevant overheads. Other development expenditures that do not meet these criteria, as well as ongoing maintenance costs are recognised as the expense is incurred. Development costs previously recognised as an expense are not recognised as an asset in a subsequent period.
Goodwill arises on the acquisition of subsidiaries and represents the excess of the consideration transferred, the amount of any non-controlling interest in the acquiree, the acquisition-date fair value of any previous equity interest in the acquiree and the fair value of the identifiable net assets acquired. At the effective date of adopting FRS 101 the balance of goodwill was nil.
Goodwill is capitalised as an intangible asset and is not amortised in line with IFRS 3. Goodwill is annually reviewed for indicators of impairment as well as comparison to its discounted project profit. Management apply judgement in determining a relevant value of the projected sales and profit of the individual investments. Any impairment charge identified as a result is charged to the profit or loss.
Goodwill is capitalised as an intangible asset and is not amortised in line with IFRS 3. Goodwill is annually reviewed for indicators of impairment as well as comparison to its discounted project profit. Management apply judgement in determining a relevant value of the projected sales and profit of the individual investments. Any impairment charge identified as a result is charged to the profit or loss.
Page 33
THE RANDOM HOUSE GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2024
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. Management applies judgement in determining both the residual value and economic life of the asset.
Gains and losses on disposals of assets are determined by comparing the proceeds with the carrying amount of the asset and are recognised in profit or loss.
Assets under construction are not depreciated. External borrowing costs attributable to assets under construction are accounted for under IAS 23 and added to the asset value if material to the company and can be directly attributed to the asset under construction. All other borrowing costs, including those arising through intercompany borrowing are recognised as an expense when incurred.
Page 34
THE RANDOM HOUSE GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2024
2.Accounting policies (continued)
Stocks mainly comprise of raw materials, finished goods and work in progress in respect of books and are stated at the lower of cost and net realisable value. Cost is determined using FIFO method.
Cost includes the direct costs of paper, printing and binding incurred on a title-by-title basis. Plant costs, which do not vary with the number of copies printed (for example typesetting, origination and illustration), are charged to the income statement in full on publication.
A provision is made for excess, obsolete and slow-moving stocks by considering the future expected sales and comparing to the current quantity held. Any provision for obsolete stock is charged to the profit and loss and included in the value of Inventory as shown in note 15.
Net realisable value is calculated as the estimated selling price in the ordinary course of business less applicable variable selling expenses.
Cost includes the direct costs of paper, printing and binding incurred on a title-by-title basis. Plant costs, which do not vary with the number of copies printed (for example typesetting, origination and illustration), are charged to the income statement in full on publication.
A provision is made for excess, obsolete and slow-moving stocks by considering the future expected sales and comparing to the current quantity held. Any provision for obsolete stock is charged to the profit and loss and included in the value of Inventory as shown in note 15.
Net realisable value is calculated as the estimated selling price in the ordinary course of business less applicable variable selling expenses.
The Company classifies its financial assets in the following categories:
∙Amortised Cost
∙Fair value through profit or loss (FVTPL)
∙Fair value through other comprehensive income (FVOCI)
The classification depends on the purpose for which the financial assets were acquired i.e. the entity’s business model for managing the financial assets and/or the contractual cash flow characteristics of the financial asset. Financial assets are not reclassified subsequent to their initial recognition unless the Company changes its business model for managing financial assets in which case all affected financial assets are reclassified on the first day of the first reporting period following the change in the business model.
A debt investment is measured at FVOCI if it meets both of the following conditions and is not designated as at FVTPL:
∙it is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets; and
∙its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
Subsequent to initial recognition these are measured at amortised cost using the effective interest method. Interest income from these financial assets is included in finance income using the effective interest rate method. Any gain or loss arising on derecognition is recognised directly in profit or loss and presented in other (expenses)/income together with foreign exchange gains and losses. Impairment losses are presented as a separate line item in the profit or loss under ‘net impairment losses on financial and contract assets’.
On initial recognition of an equity investment that is not held for trading, the Company may irrevocably elect to present subsequent changes in the investment’s fair value in OCI. This election is made on an investment-by-investment basis.
Page 35
THE RANDOM HOUSE GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2024
2.Accounting policies (continued)
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.
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.
Trade debtors and amounts owed by group undertakings are stated at amortised cost after provision for bad and doubtful debts.
The Company applies IFRS 9 when using the expected credit loss model. Management adopts the “simplified approach” to determine an amount equal to the lifetime expected credit losses for insignificant trade debtors and a risk score on an individual basis for significant trade debtors. To measure the expected credit losses, trade debtors are grouped based on shared credit risk characteristics and the balance of uninsured debt across the Company.
The Company applies IFRS 9 when using the expected credit loss model. Management adopts the “simplified approach” to determine an amount equal to the lifetime expected credit losses for insignificant trade debtors and a risk score on an individual basis for significant trade debtors. To measure the expected credit losses, trade debtors are grouped based on shared credit risk characteristics and the balance of uninsured debt across the Company.
Provisions are measured as the best estimate of the amount required to settle the obligation, taking into account the related risks and uncertainties.
Page 36
THE RANDOM HOUSE GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2024
2.Accounting policies (continued)
Page 37
THE RANDOM HOUSE GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2024
Published titles:
Upon publication, the realisable value for significant titles will then be adjusted on a title by title basis for the recoverability of the unearned royalty advances on a quarterly basis i.e. advance paid less royalty earnings and subrights income, based on anticipated future sales of the titles as per IAS 36. The royalty advance is expensed at the contracted or effective royalty rate as the related turnover is earned. The carrying amount of royalty advances (net of provision) are included in advance royalties, see note 16 for reference.
(ii) Returns liabilities
The Company has agreements in place to allow customers to return books. As a result the Company makes an estimate of future returns based on historic data, the ageing of sales and business experience. This liability is included within accruals and the value at the year end is £13,221,375 (2023: £13,437,463)
(iii) Defined benefit scheme
The Company has an obligation to pay pension benefits to certain employees. The cost of these benefits and the present value of the obligation depend on a number of factors including life expectancy, salary increases, asset valuations and the discount rate on corporate bonds. Management estimates these factors in determining the net pension obligation in the balance sheet. The assumptions reflect historical experience and current trends.
Management consider it highly unlikely, and contrary to the objects of why the schemes were established, that the trustees would wind up the plan without employer consent before all benefits had been paid in full to the members. As a result, management consider any surplus arising on the defined benefit plan at the balance sheet date to be fully recoverable.
See note 17 for the disclosures of the defined benefit pension scheme.
(iv) Impairment of Investments
Investments in subsidiary companies are held at cost less accumulated impairment losses. The Company tests annually whether investments have suffered any impairment, with the carrying amount being written down for any impairment highlighted.
The Company uses budgeted profits, projected cash flows and weighted average cost of capital in order to determine whether any impairment is required. See note 14 for the carrying amount of investments and associated impairment provision.
(v) Lease accounting
In determining the lease term, management considers all facts and circumstances that create an economic incentive to exercise an extension option, or not exercise a termination option. Extension options (or periods after termination options) are only included in the lease term if the lease is reasonably certain to be extended (or not terminated).
The following factors are normally the most relevant:
• If there are significant penalties to terminate (or not extend), the Company is typically reasonably certain to extend (or not terminate).
• If any leasehold improvements are expected to have a significant remaining value, the Company is typically reasonably certain to extend (or not terminate).
Otherwise, the Company considers other factors including historical lease durations and the costs and business disruption required to replace the leased asset.
Page 38
THE RANDOM HOUSE GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2024
The lease term is reassessed if an option is actually exercised (or not exercised) or the Company becomes obliged to exercise (or not exercise) it. The assessment of reasonable certainty is only revised if a significant event or a significant change in circumstances occurs, which affects this assessment, and that is within the control of the lessee.
The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be readily determined, which is generally the case for leases in the Company, the lessee’s incremental borrowing rate is used, being the rate that the individual lessee would have to pay to borrow the funds necessary to obtain an asset of similar value to the right-of-use asset in a similar economic environment with similar terms, security and conditions.
See note 20 for the net carrying amount of the lease liability and right-of-use asset.
The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be readily determined, which is generally the case for leases in the Company, the lessee’s incremental borrowing rate is used, being the rate that the individual lessee would have to pay to borrow the funds necessary to obtain an asset of similar value to the right-of-use asset in a similar economic environment with similar terms, security and conditions.
See note 20 for the net carrying amount of the lease liability and right-of-use asset.
Analysis of revenue by destination:
Page 39
THE RANDOM HOUSE GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2024
Page 40
THE RANDOM HOUSE GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2024
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Retirement benefits are accruing to two directors (2023: two) under defined benefit pension schemes and to one director (2023: one) under a money purchase scheme.
Page 41
THE RANDOM HOUSE GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2024
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A percentage of total directors’ costs are recharged from the Company to other Penguin Random House group entities. The above directors’ remuneration amounts represent the amount allocated to the Company for services undertaken by the directors of the Company.
Page 42
THE RANDOM HOUSE GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2024
Page 43
THE RANDOM HOUSE GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2024
11.Tax on profit (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 date have been measured using this enacted rate.
Page 44
THE RANDOM HOUSE GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2024
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The Company has no restricted title intangible assets and has none pledged as security for liabilities.
Page 45
THE RANDOM HOUSE GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2024
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Page 46
THE RANDOM HOUSE GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2024
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Page 47
THE RANDOM HOUSE GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2024
Page 48
THE RANDOM HOUSE GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2024
Subsidiary undertakings (continued)
Page 49
THE RANDOM HOUSE GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2024
Subsidiary undertakings (continued)
Page 50
THE RANDOM HOUSE GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2024
15.Stocks (continued)
Page 51
THE RANDOM HOUSE GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2024
The Company, together with its subsidiary, The Book Service Limited, operates two pension schemes of the defined benefit type. The names of the schemes are Penguin Random House Pension Scheme ("PRHPS") and Transworld Publishers Scheme ("TPPS"). The assets of the scheme are for the scheme as a whole and are not allocated to the employees, or ex-employees, of a particular Company. Employees can move freely between the sponsoring companies and so it is not considered practicable to attempt to split the liabilities between the companies, therefore the pension is accounted for in the financial statements of The Random House Group Limited, whose management are responsible for liasing with the trustees who are responsible for making decisions concerning the plan. The defined benefit schemes were closed to new members from 1 July 2002, since when a defined contribution scheme has been operated for new employees.
The benefits which members of the schemes obtain upon retirement depend on when they joined the scheme but the majority of members receive a pension based on 1/60th of pensionable service multiplied by the final pensionable salary.
The scheme pensions are updated in line with the retail price index.
Plan assets held in the fund are governed by local regulations and practice in the United Kingdom. Responsibility for the governance of the plans – including investment decisions and contribution schedules – lies jointly with the Company and the trustees of the funds.
The risks of the schemes are as follows:
(a)Asset volatility
The plan liabilities are calculated using a discount rate set with reference to corporate bond yields; if plan assets underperform this yield, this will create a deficit. The plan holds a significant proportion of equities, which are expected to outperform corporate bonds in the long-term while providing volatility and risk in the short-term.
As the plans mature, the Company intends to reduce the level of investment risk by investing more in assets that better match the liabilities. The first stage of this process was completed in 2015 with the sale of a number of equity holdings and purchase of a mixture of government and corporate bonds. The government bonds represent investments in UK government securities only. The corporate bonds are securities with an emphasis on the UK.
However, the Company believes that due to the long-term nature of the plan liabilities and the strength of the supporting group, a level of continuing equity investment is an appropriate element of the Company’s long-term strategy to manage the plans efficiently.
(b)Changes in bond yields
A decrease in corporate bond yields will increase plan liabilities, although this will be partially offset by an increase in the value of the plans’ bond holdings.
(c)Longevity risk
The liabilities are very sensitive to unexpected changes in future mortality. If longevity increases at a faster pace than assumed then the liabilities will increase at future calculations. The longevity risk can be mitigated by securing benefits for members with insurance companies. There is also a growing market in longevity solutions which may enable this risk to be managed to some degree in the future.
(d)Investment/interest rate risk
The Schemes’ invested assets are allocated heavily to equities, while IAS19 stipulates a discount rate related to corporate bond yields. Therefore the liabilities and assets may react differently to changes in market conditions.
Page 52
THE RANDOM HOUSE GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2024
(e)Inflation risk
The pension obligations are linked to inflation, and higher inflation will lead to higher liabilities (although, in most cases, caps on the level of inflationary increases are in place to protect the plans against extreme inflation). The majority of the plan assets are either unaffected by (fixed interest bonds) or loosely correlated with (equities) inflation, meaning that an increase in inflation will also increase the deficit.
A comprehensive actuarial valuation of the Company's defined benefit pension schemes, using the projected unit basis, was carried out at 31 December 2023 by Capita plc, independent consulting actuaries. Adjustments to the valuations at that date have been made based on the following assumptions for both defined benefit schemes. An average % across the two schemes has been taken for each of the below.
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Page 53
THE RANDOM HOUSE GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2024
Assumptions regarding future mortality are set based on actuarial advice in accordance with published statistics and expectancy in years for a pensioner retiring at age 65:
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Reconciliation of schemes assets and liabilities during the year:
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The net defined benefit asset of £109,320,000 is expected to be recovered in more than 12 months.
Page 54
THE RANDOM HOUSE GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2024
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As the schemes are now closed as defined benefit schemes, the current service cost, as calculated under the projected unit method, will increase as members approach retirement.
Page 55
THE RANDOM HOUSE GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2024
The sensitivity of the defined benefit obligation to changes in the weighted principal assumption are as follows. The sensitivity numbers reflect addition of values for PRHPS and TPPS schemes.
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The above sensitivity analyses are based on a change in an assumption while holding all other assumptions constant. In practice, this is unlikely to occur, and changes in some of the assumptions may be correlated. When calculating the sensitivity of the defined benefit obligation to significant actuarial assumptions the same method (present value of the defined benefit obligation calculated with the projected unit credit method at the end of the reporting year) has been applied as when calculating the pension liability recognised within the statement of financial position.
The methods and types of assumptions used in preparing the sensitivity analysis did not change compared to the previous year.
The fair value of the plan assets was:
The methods and types of assumptions used in preparing the sensitivity analysis did not change compared to the previous year.
The fair value of the plan assets was:
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Included within 'Other' above are investments in other debt instruments, real estate, the Scheme's derivatives and other funds.
Page 56
THE RANDOM HOUSE GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2024
The Company, together with its subsidiary, expects to contribute approximately £Nil (2023: £3,457,000) to its PRHPS defined benefit plan and £Nil (2023: £380,000) to its TPPS defined benefit plan in 2024.
The following information shows the maturity analysis of the expected benefit payments.
Less than 1 year: £11,342,000,
less than 2 years: £11,570,000,
less than 3 years: £11,346,000,
less than 4 years: £12,810,000,
less than 5 years: £12,435,000, and
less than 10 years: £68,408,000.
Defined contribution scheme
Following the closure of the defined benefit scheme to new entrants, the Company provided a defined contribution scheme for its employees, administered by Capita. The defined contribution scheme was replaced in March 2016 by a money purchase scheme administered by Aviva.
The amount recognised as an expense for the defined contribution & money purchase schemes was:
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Page 57
THE RANDOM HOUSE GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2024
Page 58
THE RANDOM HOUSE GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2024
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The lease term on Vauxhall Bridge Road is 11 years with an option to extend for an additional 4 years. As
it is not reasonably certain the option will be exercised, the minimum lease payments for the extension period have not been included in the lease liability.
During the year, the Company entered into new lease agreements for additional floor space at EG.
it is not reasonably certain the option will be exercised, the minimum lease payments for the extension period have not been included in the lease liability.
During the year, the Company entered into new lease agreements for additional floor space at EG.
Page 59
THE RANDOM HOUSE GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2024
Future minimum lease payments as at 31 December 2024 are as follows:
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The total cash outflow for leases during the year was £5,139,253 (2023: £7,388,523).
Page 60
THE RANDOM HOUSE GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2024
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Deferred tax provision
The amounts of income taxes payable in future periods in respect of taxable temporary differences. See note 22 for further detail on the Company’s deferred tax assets and liabilities at the balance sheet date.
Discount provision
The Company has agreements in place to offer discounts on goods offered to customers, usually as a reward for repeated business. The provision is expected to be utilised within 12 months from the balance sheet date.
Onerous contracts
Where a provision is greater than the advance paid on manuscripts which have not yet been delivered, the Company recognises the excess as an onerous contract rather than disclosing in the total unpublished provision included in debtors. These are utilised on various timescales based on manuscript delivery.
Dilapidations provision
The Company has provided for the estimated costs on Embassy Gardens and Grantham to restore the buildings to their original condition as specified in the underlying lease agreements. The Company will settle the provision at the end of the lease tenancy and on vacating the property.
Redundancy provision
Redundancy costs are recharged to the subsidiary companies who the employees provide services for as applicable.
Page 61
THE RANDOM HOUSE GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2024
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Deferred tax assets are recognised within debtors (note 16), the deferred tax liabilities are recognised within provisions (note 21).
The deferred tax assets/(liabilities) have been calculated at 25.00%.
There are no unused tax losses or unused tax credits.
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The provision for deferred tax consists of the following deferred tax liabilities/(assets):
Page 62
THE RANDOM HOUSE GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2024
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Capital redemption reserve
Profit and loss account
25.Commitments
There are commitments to authors for the payment of royalty advances amounting to £74,176,148 at 31 December 2024 (2023: £75,312,896). Together with the advances already paid these will be charged against sales of future accounting periods as the books are published.
Page 63
THE RANDOM HOUSE GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2024
As the Company is a wholly owned subsidiary of Penguin Random House Limited ("PRHL") the Company is exempt from the requirement, under International Accounting Standard 24 ‘Related party disclosures’, to disclose transactions with entities that are wholly owned by PRHL. The Company has taken advantage of this exemption.
During the year the Company entered into the following transactions with related parties not wholly owned by the group:
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Creditor balances are unsecured and no guarantees have been received. Creditor balances will be settled in cash.
Page 64