Company Registration No. 06979090 (England and Wales)
POTTERMORE LIMITED
ANNUAL REPORT AND FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2021
POTTERMORE LIMITED
COMPANY INFORMATION
Directors
N. Blair
J. Hill
J. Phillips
T. Greene
Secretary
L. Hughes
Company number
06979090
Registered office
Devonshire House
1 Devonshire Street
London
W1W 5DR
Auditor
Citroen Wells
Chartered Accountants
Devonshire House
1 Devonshire Street
London
W1W 5DR
POTTERMORE LIMITED
CONTENTS
Page
Strategic report
1 - 2
Directors' report
3 - 4
Independent auditor's report
5 - 7
Statement of comprehensive income
8
Statement of financial position
9
Statement of changes in equity
10
Statement of cash flows
11
Notes to the financial statements
12 - 24
POTTERMORE LIMITED
STRATEGIC REPORT
FOR THE YEAR ENDED 31 MARCH 2021
- 1 -
The directors present the strategic report for the year ended 31 March 2021.
Fair review of the business
Pottermore is the global digital publisher of the Harry Potter and Fantastic Beasts series as well as other digital audiobooks and eBooks from the Wizarding World. It leads the way in innovative digital publishing and brings new generations of readers together with long-standing fans, celebrating the stories that first began with the Boy Who Lived.
Pottermore Publishing continues to manage the digital publishing and on-line sales of the original Harry Potter series as well as
Harry Potter and the Cursed Child
playscript, the
Fantastic Beasts
screenplays and the Hogwarts Library Books. It also publishes digital non-fiction relating to the Wizarding World.
Wizarding World’s digital channels continue to be managed through Wizarding World Digital LLC, a joint venture between Pottermore Inc and Warner Bros.
Summary
Pottermore Ltd had
an exceptional year benefiting from a significantly increased appetite for digital reading, strong sales performance of the Harry Potter eBooks and digital audiobooks and continued investment in franchise planning in partnership with Warner Bros
.
The company was proud to support the Harry Potter At Home campaign, a project delivered by Wizarding World Digital LLC, to support reading during lockdown. The foundation of this campaign saw celebrities from the Wizarding World and beyond each read a chapter from Harry Potter and the Philosopher’s Stone out loud to a global audience. The chapter reads were made available free on wizardingworld.com. Pottermore Publishing also worked with partners such as Audible and Overdrive during this time to allow free access to the audio book and eBook of Harry Potter and the Philosopher’s Stone in multiple languages.
Pottermore Publishing has
continued to benefit from the open commerce strategy it initiated in 2015, making its content increasingly available globally through online retail and library partners such as Amazon, Apple, Audible, Google, Storytel, Bookbeat, Nextory, Overdrive and Hoopla.
Compared to the prior year, revenue increased to £40.4m (2020: £32.5m).
The company recorded a pre-tax profit of £9.5m (2020 restated: £3.8m) after paying out all royalty obligations delivering a 23% margin.
Financial performance
The company exceeded all target KPIs in the year to 31 March 2021.
Revenues of £40.4m (2020: £32.5m) reflect sales growth during the global lockdown.
Pottermore Publishing also continues to develop its language catalogue, releasing new audio editions of Harry Potter in Bulgarian, Brazilian-Portuguese, Castilian Spanish and Dutch and eBooks in Icelandic.
Cost of sales of £29.0m (2020 restated: £23.7m), including commissions and royalties, are a direct function of the mix of publishing sales in the year.
Administrative expenses at £3.5m (2020: £4.0m) were in line with expectations.
The resulting pre-tax profit is £9.5m and margin of 23% (2020 restated: £3.8m, 12%) after paying out royalty obligations.
A retrospective transfer pricing adjustment was agreed with HMRC in November 2021. This led to an increase to royalties paid by the company in the years to 31 March 2018, 2019, 2020 and 2021.
POTTERMORE LIMITED
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 MARCH 2021
- 2 -
Current trading and outlook
Pottermore Publishing continues to drive sales of the core Harry Potter and Wizarding World digital publishing catalogue through innovative marketing, the development of new content and expansion into new markets and languages.
With global distribution now broadly established through the open commerce strategy, a decision was also taken to close Pottermore’s online shop, with final sales recorded in September 2021.
Digital channels continue to be managed by Wizarding World Digital LLC through subsidiary Pottermore Inc. and Warner Bros.
Sales have continued to be solid, in-line with management expectations during the first half of the 2021/22 financial year.
The current financial year to 31 March 2022 is set to deliver another profitable performance, though one more in-line with pre-pandemic trading.
Research and Development
Pottermore Publishing continues to invest in consumer and industry research to ensure products and distribution agreements align with future reading and listening habits as well as in infrastructure and systems to efficiently manage business processes from product concept through to sales and royalty reporting.
Principal risks and uncertainties
Management seek to adopt a low risk approach to all areas of the business.
Non-financial risks include brand and intellectual property protection. These risks are managed through digital file security processes and investment in anti-piracy services.
Credit risk
Risk is minimal as digital products are paid for prior to fulfilment. In relation to income from other business to business sources, all third parties are subject to verification procedures carried out by management to ensure agreements are made with reputable companies.
Foreign currency risk
Foreign currency is a key risk. Transaction currencies have been limited to GBP, USD and EUR. Funds payable in respect of commissions, royalties and expenses are maintained and paid for in the respective currencies to minimise any exposure to potential exchange losses on conversion of funds.
Where future foreign currency income is guaranteed, Pottermore purchases forward trades to minimise foreign exchange risk on receipt of funds and protect against fluctuations from budget rates.
Liquidity and cash flow risk
The directors consider the company to have sufficient available funds for operations and planned development. Cash flow forecasts and cash requirements are monitored closely, to ensure the company has sufficient liquid resources to meet the operating needs of the business.
Price risk
Various options are available in relation to the services required for the company’s operating needs. These are regularly reviewed and authorised by management to ensure that the goods and services required are not obtained at a higher price than necessary.
N. Blair
Director
14 January 2022
POTTERMORE LIMITED
DIRECTORS' REPORT
FOR THE YEAR ENDED 31 MARCH 2021
- 3 -
The directors present their annual report and financial statements for the year ended 31 March 2021.
Principal activities
The principal activity of the company is that of digital publishing, including publishing and distributing eBooks and Digital Audio Books, online retail and digital channels.
Directors
The directors who held office during the year and up to the date of signature of the financial statements were as follows:
N. Blair
J. Hill
J. Phillips
T. Greene
Results and dividends
The results for the year are set out on page 8.
The directors do not recommend the payment of a final dividend.
Auditor
The auditor, Citroen Wells,
is
deemed to be reappointed under section 487(2) of the Companies Act 2006.
Statement of directors' responsibilities
The directors are responsible for preparing the annual 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 United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the company and of the profit or loss of the company for that period. In preparing these financial statements, the directors are required to:
-
select suitable accounting policies and then apply them consistently;
-
make judgements and accounting estimates that are reasonable and prudent;
-
state whether the financial statements have been prepared in accordance with applicable accounting standards, identify those standards, and note the effect and the reasons for any material departure from those standards; and
-
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 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.
POTTERMORE LIMITED
DIRECTORS' REPORT (CONTINUED)
FOR THE YEAR ENDED 31 MARCH 2021
- 4 -
Statement of disclosure to auditor
So far as the directors are aware, there is no relevant audit information of which the company's auditor
is
unaware. Additionally, the directors have taken all the necessary steps that they ought to have taken as directors in order to make themselves aware of all relevant audit information and to establish that the company's auditor
is
aware of that information.
The company has chosen in accordance with Companies Act 2006, s. 414C(11) to set out in the company's strategic report information required by Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008, Sch. 7 to be contained in the directors' report. It has done so in respect of
an assessment of the assets, liabilities, financial position and profit or loss of the company, an indication of financial risk management objectives and policies, an indication of exposure to price risk, credit risk, liquidity risk and cash flow risk and important events occurring since the year end.
On behalf of the board
N. Blair
Director
14 January 2022
POTTERMORE LIMITED
INDEPENDENT AUDITOR'S REPORT
TO THE MEMBERS OF POTTERMORE LIMITED
- 5 -
Opinion
We have audited the financial statements of Pottermore Limited (the 'company') for the year ended 31 March 2021 which comprise the statement of comprehensive income, the statement of financial position, the statement of changes in equity, the statement of cash flows and notes to the financial statements, including significant accounting policies.
The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including FRS 102
The Financial Reporting Standard applicable in the UK and Republic of Ireland
(United Kingdom Generally Accepted Accounting Practice).
In our opinion the financial statements:
-
give a true and fair view of the state of the company's affairs as at 31 March 2021 and of its profit for the year then ended;
-
have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and
-
have been prepared in accordance with the requirements of the Companies Act 2006.
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the
Auditor's
responsibilities for the audit of the
financial statements
section of our report. We are independent of the
company
in accordance with the ethical requirements that are relevant to our audit of the
financial statements
in the UK, including the FRC’s Ethical Standard
, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Conclusions relating to going concern
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 other than the financial statements and our auditor's report thereon. The directors are responsible for the other information contained within the annual report. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of our audit
:
-
the information given in the strategic report and the directors'
r
eport 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.
POTTERMORE LIMITED
INDEPENDENT AUDITOR'S REPORT (CONTINUED)
TO THE MEMBERS OF POTTERMORE LIMITED
- 6 -
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the company and its environment obtained in the course of the audit, we have not identifie
d
material misstatements in the strategic report and the directors'
r
eport
.
We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion:
-
adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us; or
-
the financial statements are not in agreement with the accounting records and returns; or
-
certain disclosures of
remuneration specified by law are not made; or
-
we have not received all the information and explanations we require for our audit.
Responsibilities of directors
As explained more fully in the directors'
r
esponsibilities
s
tatement, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of
financial statements
that are free from material misstatement, whether due to fraud or error. In preparing the
financial statements
, the
directors are
responsible for assessing the company
'
s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the
directors
either
intend
to liquidate the company or to cease operations, or have no realistic alternative but to do so.
Auditor's responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the
financial statements
as a whole are free from material misstatement, whether due to fraud or error, and to issue an
auditor's
report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with
ISAs (UK)
will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these
financial statements
.
The extent to which the audit was considered capable of detecting irregularities including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect irregularities, including fraud. The risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery or intentional misrepresentations, or through collusion. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below. However, the primary responsibility for the prevention and detection of fraud rests with both those charged with governance of the entity and management.
Our approach was as follows:
-
We obtained an understanding of the legal and regulatory frameworks that are applicable to the company and determined that the most significant are those that relate to the reporting framework (FRS 102, the Companies Act 2006) and the relevant direct and indirect tax compliance regulation in the United Kingdom.
-
We understood how the company is complying with those frameworks by making enquiries of management and seeking representations from those charged with governance. We corroborated our understanding by reviewing supporting documentation including board meeting minutes.
-
We assessed the susceptibility of the company’s financial statements to material misstatement, including how fraud might occur by considering the risk of management override of internal control and by designating revenue recognition as a fraud risk
.
We performed journal entry testing by specific risk criteria, with a focus on journals indicating large or unusual transactions based on our understanding of the business. We tested completeness of income through substantive tests performed, analytical review procedures and cut off tests on the revenue recognised.
POTTERMORE LIMITED
INDEPENDENT AUDITOR'S REPORT (CONTINUED)
TO THE MEMBERS OF POTTERMORE LIMITED
- 7 -
-
Based on this understanding we designed our audit procedures to identify non-compliance with such laws and regulations. Our procedures involved enquiries of management and those charged with governance, review of legal and professional expenses
and review of board meeting minutes.
-
The engagement partner ensured that the engagement team collectively had the appropriate competence, capabilities and skills to identify or recognise non-compliance with applicable laws and regulations.
A further description of our responsibilities is available on the Financial Reporting Council’s website at: https://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.
Stephen Simou FCA (Senior Statutory Auditor)
For and on behalf of Citroen Wells
17 January 2022
Chartered Accountants
Statutory Auditor
Devonshire House
1 Devonshire Street
London
W1W 5DR
POTTERMORE LIMITED
STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 MARCH 2021
- 8 -
2021
2020
as restated
Notes
£'000
£'000
Revenue
2
40,369
32,522
Cost of sales
(28,959)
(23,719)
Gross profit
11,410
8,803
Administrative expenses
(3,495)
(3,966)
Operating profit
3
7,915
4,837
Investment income
43
125
Other gains and losses
6
1,494
(1,116)
Profit before taxation
9,452
3,846
Tax on profit
7
(1,801)
(716)
Profit for the financial year
7,651
3,130
The income statement has been prepared on the basis that all operations are continuing operations.
POTTERMORE LIMITED
STATEMENT OF FINANCIAL POSITION
AS AT
31 MARCH 2021
31 March 2021
- 9 -
2021
2020
as restated
Notes
£'000
£'000
£'000
£'000
Fixed assets
Intangible assets
8
175
334
Plant and equipment
9
6
29
181
363
Current assets
Trade and other receivables
13
7,711
7,705
Cash at bank and in hand
43,290
28,269
51,001
35,974
Current liabilities
14
(32,915)
(25,721)
Net current assets
18,086
10,253
Total assets less current liabilities
18,267
10,616
Equity
Retained earnings
18,267
10,616
The financial statements were approved by the board of directors and authorised for issue on 14 January 2022 and are signed on its behalf by:
N. Blair
Director
Company Registration No. 06979090
POTTERMORE LIMITED
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 MARCH 2021
- 10 -
Retained earnings
£'000
As restated for the period ended 31 March 2020:
Balance at 1 April 2019
12,894
Effect of prior year adjustment
(5,408)
As restated
7,486
Year ended 31 March 2020:
Profit and total comprehensive income for the year
3,130
Balance at 31 March 2020
10,616
Year ended 31 March 2021:
Profit and total comprehensive income for the year
7,651
Balance at 31 March 2021
18,267
POTTERMORE LIMITED
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 MARCH 2021
- 11 -
2021
2020
as restated
Notes
£'000
£'000
£'000
£'000
Cash flows from operating activities
Cash generated from operations
20
16,856
9,139
Income taxes paid
(1,878)
(2,009)
Net cash inflow from operating activities
14,978
7,130
Investing activities
Purchase of intangible assets
(245)
Interest received
43
125
Net cash generated from/(used in) investing activities
43
(120)
Net increase in cash and cash equivalents
15,021
7,010
Cash and cash equivalents at beginning of year
28,269
21,259
Cash and cash equivalents at end of year
43,290
28,269
POTTERMORE LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2021
- 12 -
1
Accounting policies
Company information
Pottermore Limited is a
private
company
limited by shares
incorporated in
England and Wales
.
The registered office is
Devonshire House, 1 Devonshire Street, London, W1W 5DR.
The
business correspondence address
is
PO Box 7828, London, W1A 4GE.
1.1
Accounting convention
These financial statements have been prepared in accordance with FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland” (“FRS 102”) and the requirements of the Companies Act 2006.
The financial statements are prepared in
sterling
, which is the functional currency of the company.
Monetary a
mounts
in these financial statements are
rounded to the nearest £.
The financial statements have been prepared on the historical cost convention, modified to include certain financial instruments at fair value. The principal accounting policies adopted are set out below.
The company has taken advantage of the exemption under section
405(2)
of the
Companies Act 2006 not to prepare consolidated accounts
on the basis that the net assets of the subsidiary as at 31 March 2021 are not material.
Therefore, t
he
financial statements
present information about the company as an individual entity and not about its group
.
1.2
Going concern
A
true
t the time of approving the financial statements
,
t
he directors have a reasonable expectation that the
company
has adequate resources to continue in operational existence for the foreseeable future. Thus
,
t
he directors continue to adopt the going concern basis of accounting in preparing the financial statements.
1.3
Revenue
Revenue
represents royalties, other fees and online retail sales receivable stated net of VAT.
Royalties and other fees are recognised as earned, when and to the extent that, the company obtains the right to consideration in exchange for its performance under contracts.
Revenue from
the sale of online retail sales
is recognised when the significant risks and rewards of ownership
or the rights for usage have
passed to the buyer, the amount of revenue can be measured reliably, it is probable that the economic benefits associated with the transaction will flow to the
company
and the costs incurred or to be incurred in respect of the transaction can be measured reliably.
1.4
Intangible fixed assets other than goodwill
Software costs are recognised at cost, and subsequently measured at cost less accumulated amortisation and accumulated impairment losses. Amortisation is recognised so as to write off the cost of the asset less the residual value over the useful life of 3-5 years, starting from the date the intangible asset is brought into use.
1.5
Property, plant and equipment
Plant
and equipment
costing £2,000 or more are capitalised and
are
m
easured at cost or valuation, net of depreciation and any impairment losses.
Depreciation is recognised so as to write off the cost or valuation of assets less their residual values over their useful lives on the following bases:
Fixtures, fittings and computer equipment
Straight line over 5 years
POTTERMORE LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MARCH 2021
1
Accounting policies
(Continued)
- 13 -
The gain or loss arising on the disposal of an asset is determined as the difference between the sale proceeds and the carrying value of the asset, and
is credited or charged to profit or loss
.
1.6
Non-current investments
Interests in subsidiaries are initially measured at cost and subsequently measured at cost less any accumulated impairment losses.
The investments are assessed for impairment at each reporting date
and
any
impairment
losses or reversals of impairment losses are recognised immediately in
profit
or
loss
.
A subsidiary is an entity controlled by the company
. Control is
the power to govern the financial and operating policies of
the
entity so as to obtain benefits from its activities.
As detailed in note 1.1 a subsidiary may be excluded from consolidation when its inclusion is not material for the purpose of giving a true and fair.
A subsidiary excluded from consolidation on these grounds and where the parent still exercises a significant influence over the subsidiary is treated as an associate using the equity method.
1.7
Impairment of non-current assets
At each reporting
period
end date, the
company
reviews the carrying amounts of its tangible
and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the
company
estimates the recoverable amount of the cash-generating unit to which the asset belongs.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in
profit
or
loss
, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.
Recognised impairment losses are reversed if, and only if, the reasons for the impairment loss have ceased to apply. Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit)
in
prior years. A reversal of an impairment loss is recognised immediately in
profit
or
loss
, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.
1.8
Cash and cash equivalents
Cash and cash equivalents include cash in hand, deposits held at call with banks and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities.
POTTERMORE LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MARCH 2021
1
Accounting policies
(Continued)
- 14 -
1.9
Financial instruments
The company has elected to apply the provisions of Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instruments Issues’ of FRS 102 to all of its financial instruments.
Financial instruments are recognised in the company's statement of financial position when the company becomes party to the contractual provisions of the instrument.
Financial assets and liabilities are offset
, with
the net amounts presented in the financial statements
,
when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle on a net basis or to realise the asset and settle the liability simultaneously.
Basic financial assets
Basic financial assets, which include
trade and other receivables
and cash and bank balances, are initially measured at transaction price including transaction costs and are subsequently carried at amortised cost using the effective interest
method unless the arrangement constitutes a financing transaction, where the transaction is measured at the present value of the future receipts discounted at a market rate of interest.
Financial assets classified as receivable within one year are not amortised.
Other financial assets
Other financial assets are initially measured at fair value, which is normally the transaction price. Such assets are subsequently carried at fair value and the changes in fair value are recognised in
profit
or
loss
.
Impairment of financial assets
Financial assets, other than those
held
at
fair value through profit and loss
, are assessed for indicators of impairment at each reporting end date.
Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows have been affected.
If an asset is impaired, the impairment loss is the difference between the carrying amount and the present value of the estimated cash flows discounted at the asset’s original effective interest rate. The impairment loss is recognised in profit or loss.
If there is a decrease in the impairment loss arising from an event occurring after the impairment was recognised, the impairment is reversed. The reversal is such that the current carrying amount does not exceed what the carrying amount would have been, had the impairment not previously been recognised. The impairment reversal is recognised in profit or loss.
Derecognition of financial assets
Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire or are settled, or when
the company
transfers the financial asset and substantially all the risks and rewards of ownership to another entity, or if some significant risks and rewards of ownership are retained but control of the asset has transferred to another party that is able to sell the asset in its entirety to an unrelated third party.
Classification of financial liabilities
Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the company after deducting all of its liabilities.
POTTERMORE LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MARCH 2021
1
Accounting policies
(Continued)
- 15 -
Basic financial liabilities
Basic financial liabilities, including
trade and other payables
are
initially recognised at transaction price unless the arrangement constitutes a
financing transaction, where the debt instrument is measured at the present value of
the future receipts discounted at a market rate of interest.
Financial liabilities classified as payable within one year are not amortised.
Debt instruments are subsequently carried at amortised cost, using the effective
interest rate method.
Trade payables
are obligations to pay for goods or services that have been acquired
in the ordinary course of business from suppliers. A
m
ounts payable are classified as
current liabilities if payment is due within one year or less. If not, they are presented
as non-current liabilities.
Trade payables
are recognised initially at transaction price
and subsequently measured at amortised cost using the effective interest method.
Other financial liabilities
Debt instruments that do not meet the conditions in FRS 102 paragraph 11.9 are subsequently measured at fair value through profit or loss. Debt instruments may be designated as
being measured at
fair value though profit or loss to eliminate or reduce an accounting mismatch or if the instruments are measured and their performance evaluated on a fair value basis in accordance with a documented risk management or investment strategy.
Derecognition of financial liabilities
Financial liabilities are derecognised when the company’s contractual obligations
expire or are discharged or cancelled.
1.10
Equity instruments
Equity instruments issued by the company are recorded at the proceeds received, net of transaction costs. Dividends payable on equity instruments are recognised as liabilities once they are no longer at the discretion of the company.
1.11
Derivatives
Derivatives are initially recognised at fair value at the date a derivative contract is entered into and are subsequently remeasured to fair value at each reporting end date. The resulting gain or loss is recognised in
profit
or
loss
immediately
.
A derivative with a positive fair value is recognised as a financial asset, whereas a derivative with a negative fair value is recognised as a financial liability
, to the extent that it is not covered by cash held by the broker.
1.12
Taxation
The tax expense represents the sum of the tax currently payable and deferred tax.
Current tax
The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the
income statement
because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The
company’s
liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting end date.
POTTERMORE LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MARCH 2021
1
Accounting policies
(Continued)
- 16 -
Deferred tax
Deferred tax liabilities are generally recognised for all timing differences and deferred tax assets are recognised to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits. Such assets and liabilities are not recognised if the timing difference arises from goodwill or from the initial recognition of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit.
The carrying amount of deferred tax assets is reviewed at each reporting end date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited in the
income statement
, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax assets and liabilities are offset when the
company
has a legally enforceable right to offset current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority.
1.13
Employee benefits
The costs of short-term employee benefits are recognised as a liability and an expense, unless those costs are required to be recognised as part of the cost of stock or
non-current assets
.
The cost of any unused holiday entitlement is recognised in the period in which the employee’s services are received.
Termination benefits are recognised immediately as an expense when the company is demonstrably committed to terminate the employment of an employee or to provide termination benefits.
1.14
Retirement benefits
Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due.
POTTERMORE LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MARCH 2021
- 17 -
2
Revenue
An analysis of the company's revenue is as follows:
2021
2020
£'000
£'000
Revenue analysed by class of business
Digital publishing
40,369
32,522
2021
2020
£'000
£'000
Revenue analysed by geographical market
United Kingdom
730
529
European Union
11,625
7,617
Rest of the World
28,014
24,376
40,369
32,522
3
Operating profit
2021
2020
Operating profit for the year is stated after charging/(crediting):
£'000
£'000
Fees payable to the company's auditor for the audit of the company's financial statements
31
32
Fees payable to the company's auditor for all other non-audit services
5
12
Depreciation of plant and equipment
23
23
Amortisation of intangible assets
159
159
4
Employees
The average monthly number of persons employed by the company during the year was:
2021
2020
Number
Number
Directors
4
4
Other staff
24
25
Total
28
29
POTTERMORE LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MARCH 2021
4
Employees
(Continued)
- 18 -
Their aggregate remuneration comprised:
2021
2020
£'000
£'000
Wages and salaries
1,080
2,222
Social security costs
120
211
Pension costs
44
76
1,244
2,509
5
Directors' remuneration
2021
2020
£'000
£'000
Remuneration for qualifying services
45
314
Company pension contributions to defined contribution schemes
4
45
318
The number of directors for whom retirement benefits are accruing under defined contribution schemes amounted to 0 (2020 - 1).
Remuneration disclosed above includes the following amounts paid to the highest paid director:
Remuneration for qualifying services
25
180
The key management personnel of the
company
comprise the
directors
and the senior management team
.
The total amount of
compensation
received by key management personnel for their services to the
company
was £
126,870 (2020: 452,201).
Certain directors were remunerated by an entity controlled by key management personnel. Consideration payable on behalf of the entity in exchange for directors services rendered to the entity was £270,365 (2020: £nil). This consideration was not included in directors remuneration.
6
Other gains and losses
2021
2020
£'000
£'000
Fair value (losses)/gains on financial instruments
Gains/(losses) on forward foreign exchange contracts
1,651
(1,640)
Other gains/(losses)
(Loss)/gain on foreign exchange
(157)
524
1,494
(1,116)
POTTERMORE LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MARCH 2021
- 19 -
7
Taxation
2021
2020
£'000
£'000
Current tax
UK corporation tax on profits for the current period
1,801
684
Deferred tax
Origination and reversal of timing differences
32
Total tax charge
1,801
716
The actual charge for the year can be reconciled to the expected charge for the year based on the profit or loss and the standard rate of tax as follows:
2021
2020
£'000
£'000
Profit before taxation
9,452
3,846
Expected tax charge based on the standard rate of corporation tax in the UK of 19.00% (2020: 19.00%)
1,796
731
Change in deferred tax assets
32
Permanent capital allowances in excess of depreciation
5
(47)
Tax expense for the year
1,801
716
8
Intangible fixed assets
£'000
Cost
At 1 April 2020 and 31 March 2021
538
Amortisation and impairment
At 1 April 2020
204
Amortisation charged for the year
159
At 31 March 2021
363
Carrying amount
At 31 March 2021
175
At 31 March 2020
334
POTTERMORE LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MARCH 2021
- 20 -
9
Plant and equipment
Fixtures, fittings and computer equipment
£'000
Cost
At 1 April 2020 and 31 March 2021
105
Depreciation and impairment
At 1 April 2020
76
Depreciation charged in the year
23
At 31 March 2021
99
Carrying amount
At 31 March 2021
6
At 31 March 2020
29
10
Fixed asset investments
2021
2020
Notes
£
£
Investments in subsidiaries
11
8
8
Movements in fixed asset investments
Shares in group undertakings
£
Cost
At 1 April 2020 & 31 March 2021
8
Carrying amount
At 31 March 2021
8
At 31 March 2020
8
11
Subsidiaries
Details of the company's subsidiary at 31 March 2021 are as follows:
Name of undertaking
Country of
Nature of business
Class of
% Held
incorporation
shares held
Direct
Indirect
Pottermore Inc.
USA
Digital Entertainment
Ordinary
100.00
-
POTTERMORE LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MARCH 2021
11
Subsidiaries
(Continued)
- 21 -
Registered Office addresses:
1
Santa Monica Blvd, Suite 1750, Los Angeles, CA, 90025
12
Financial instruments
2021
2020
£'000
£'000
Carrying amount of financial assets
Instruments measured at fair value through profit or loss
41
(1,610)
13
Trade and other receivables
2021
2020
Amounts falling due within one year:
£'000
£'000
Trade receivables
4,145
5,139
Corporation tax recoverable
1,355
1,278
Amounts owed by group undertakings
74
69
Other receivables
1,674
751
Prepayments and accrued income
368
373
7,616
7,610
Deferred tax asset (note 15)
95
95
7,711
7,705
14
Current liabilities
2021
2020
£'000
£'000
Trade payables
1,619
3,004
Other taxation and social security
53
55
Other payables
25,563
17,803
Accruals and deferred income
5,680
4,859
32,915
25,721
15
Deferred taxation
Deferred tax assets and liabilities are offset where the company has a legally enforceable right to do so. The following is the analysis of the deferred tax balances (after offset) for financial reporting purposes:
Assets
Assets
2021
2020
Balances:
£'000
£'000
Accelerated capital allowances
95
95
POTTERMORE LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MARCH 2021
15
Deferred taxation
(Continued)
- 22 -
There were no deferred tax movements in the year.
16
Retirement benefit schemes
2021
2020
Defined contribution schemes
£'000
£'000
Charge to profit or loss in respect of defined contribution schemes
44
76
The company operates a defined contribution pension scheme for all qualifying employees.
The assets of the scheme are held separately from those of the company in an independently administered fund.
17
Share capital
2021
2020
£
£
Ordinary share capital
Issued and fully paid
1 Ordinary Share of £1
1
1
POTTERMORE LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MARCH 2021
- 23 -
18
Related party transactions
During the year the company entered into the following transactions with related parties:
Sales
Purchases
2021
2020
2021
2020
£'000
£'000
£'000
£'000
Entities controlled by key management personnel
6,690
5,641
Entities under common control
-
-
159
525
Entities over which the company has joint control or significant influence
93
304
-
-
Individuals with control over the company
-
-
14,224
11,101
The following amounts were outstanding at the reporting end date:
2021
2020
Amounts due to related parties
£'000
£'000
Entities controlled by key management personnel
3,045
4,442
Entities under common control
66
544
Individuals with control over the company
25,548
17,778
2021
2020
Amounts due from related parties
£'000
£'000
Entities over which the company has joint control or significant influence
259
334
Income and expenses between related parties are made in the ordinary course of business. All outstanding balances with related parties are unsecured, interest-free and payable in accordance with the agreements held with those related parties and all fall for settlement within one year.
Prior year related party transaction disclosures have been restated, see note 21 for further information.
The company is controlled by J. K. Rowling.
19
Analysis of changes in net funds
1 April 2020
Cash flows
31 March 2021
£'000
£'000
£'000
Cash at bank and in hand
28,269
15,021
43,290
POTTERMORE LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MARCH 2021
- 24 -
20
Cash generated from operations
2021
2020
£'000
£'000
Profit for the year after tax
7,651
3,130
Adjustments for:
Taxation charged
1,801
716
Investment income
(43)
(125)
Amortisation and impairment of intangible assets
159
159
Depreciation and impairment of plant and equipment
23
23
Movements in working capital:
Decrease/(increase) in trade and other receivables
71
(1,340)
Increase in trade and other payables
7,194
6,576
Cash generated from operations
16,856
9,139
21
Prior period adjustment
Following a retrospective transfer pricing adjustment, as approved by HM Revenue & Customs, royalties payable have been adjusted for the year ended 31 March 2018, 2019 & 2020. This adjustment, including the necessary tax amendments, is summarised as follows:
Changes to the statement of financial position
As previously reported
Adjustment
As restated at 31 Mar 2020
£'000
£'000
£'000
Current assets
Debtors due within one year
6,427
1,278
7,705
Creditors due within one year
Taxation and social security
(929)
874
(55)
Other payables
(14,342)
(11,324)
(25,666)
Net assets
19,788
(9,172)
10,616
Capital and reserves
Profit and loss
19,788
(9,172)
10,616
Changes to the income statement
As previously reported
Adjustment
As restated
Period ended 31 March 2020
£'000
£'000
£'000
Cost of sales
(19,072)
(4,647)
(23,719)
Taxation
(1,599)
883
(716)
Profit for the financial period
6,894
(3,764)
3,130
2021-03-31
2020-04-01
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