The directors present the strategic report for the year ended 30 June 2023.
The directors, in preparing this strategic report, have complied with s414C of the Companies Act 2006.
Introduction and principal activities
The company is wholly owned by Lord Lloyd Webber and is the ultimate parent of The Really Useful Group group of companies.
The group's principal activities include the development and exploitation of the copyrights and other rights which it owns in musical and dramatic works. It markets these rights internationally through productions, recordings, music publishing, merchandising, television, video and films.
The group’s activities are expected to continue for the foreseeable future.
Operating and Business Review
Turnover increased in the current year by 15.3% to £43.6m (2022: £37.8m) as the group benefited from a full year of trading.
The profit for the year, after taxation, amounted to £9,684,272 (2022: Loss of £2,921,713).
The consolidated balance sheet shows net assets of £23,585,187 (2022: £14,644,887).
Production and licensing showed a significant increase in activity compared to the previous two financial years, which were impacted so significantly by the Coronavirus (COVID-19) pandemic across all the territories in which the group operates.
The group benefited from a number of very successful productions in the financial period, including Phantom of the Opera West End and Australia, the long running Starlight Express Bochum, Japanese productions of Phantom of the Opera and Cats as well the continued success of the US tours of Jesus Christ Superstar and Cats.
However, the significantly higher costs of staging Phantom of the Opera on Broadway, including the impact of COVID-19 safety measures, resulted in the show being unable to run profitably. After a 35-year run, an announcement was made in September 2022 that the show would be closing. Following this announcement, the show achieved record breaking box office in the run up to the final performance on 16th April 2023. The higher royalties and profit shares received over this period positively impacted the group’s results.
The results from these productions offset the costs incurred due to the closure of Bad Cinderella on Broadway.
Key performance indicators
The group considers its key performance indicators to be:
Attendance figures
Average ticket price
Box office takings
Advance bookings
Merchandise spend per head
From the list above, the most important drivers of our business are attendance (2023: 4.63m; 2022: 3.74m) and box office takings (2023: £304.7m; 2022:£210.4m). These figures represent first class productions, which account for the majority of the group’s turnover, and do not include any data from China.
The directors are optimistic that the continued development and exploitation of the group’s copyrights and other rights will result in strong trading results next year.
In August 2023, The Really Useful Group Limited, one of the company's subsidiaries, repaid its term loan and entered into a new 3-year £7m revolving credit facility agreement with Handelsbanken plc.
Principal risks and uncertainties
The group holds various copyrights and other rights to musical and dramatic works. There is a risk that the popularity of these copyrights and other rights may diminish over time and that the group may not be able to exploit them in the same manner as previous years. This risk is considered when the group is planning the performance schedules of various productions and the locations around the world in which the production will play. The group's experience of staging productions is used to ensure that rights are exploited across territories in the best way so as to introduce new audiences to productions and to ensure longevity in the rights held.
Financial risks
The group's activities expose it to a number of financial risks including credit risk, foreign exchange risk and liquidity risk. The principal risks and uncertainties that the group faces are discussed below.
Credit risk
Where the group offers credit to customers, we mitigate the risk by working only with established, reputable companies, running credit risk assessments on suppliers and seeking advance payments where appropriate. The Board does not consider this to be a significant risk.
Foreign exchange risk
The group operates in a number of countries around the world and is therefore exposed to movements in currency exchange rates. The directors consider that the level of trading in overseas currencies does not warrant taking out hedges to manage any fluctuations in exchange rates. However, the group's treasury function manages the risk by disposing of foreign currency balances on a regular basis.
Liquidity risk
In order to ensure that sufficient funds are available for ongoing operations and future developments, the group uses a mixture of its own cash balances and undrawn revolving credit facilities. The group monitors its liquidity position closely through the regular use of cash flows forecasts.
Going concern
After making reasonable enquiries and considering the trading forecasts of the group, the directors have a reasonable expectation that the group has adequate resources to continue in operational existence for at least twelve months from the signing of these financial statements. Accordingly, they continue to adopt the going concern basis in preparing the financial statements.
Further details regarding the adoption of the going concern basis can be found in note 1.3 of the financial statements.
Environment
The group recognises the importance of its environmental responsibilities which are covered in more detail in the S172 statement below.
Section 172 (1) (a) to (f) of the Companies Act 2006 requires that directors must act in a way they consider in good faith, would be most likely to promote the success of the company for the benefit of its members as a whole, and in doing so have regard (amongst other matters) to:
the likely consequences of any decision in the long term
The board meets regularly to discuss and make decisions on matters of strategic importance to the business, to promote the long-term success of the group and to consider the likely long-term impact of any such decisions.
the interests of the company’s employees
The enthusiasm, creativity, hard work and commitment of the group’s employees form the backbone of our business. The group has a number of policies in place to ensure the well-being of staff and provides training across a wide range of areas in order for them to develop and grow. The group operates a management structure that ensures staff are aware of strategic decisions and current performance and likewise provide a forum for matters arising from staff to be escalated and dealt with appropriately.
the need to foster the company’s relationships with suppliers, customers and others
The group works hard to establish and maintain strong relationships with its suppliers and customers. Representatives of the group are in contact regularly with these stakeholders to develop and strengthen these relationships for the benefit of the group.
the impact of the company’s operations on the community and the environment
The group is committed to enhancing and having a positive impact upon local communities where our productions take place. Therefore, the group engages regularly with local presenters and producers. The group also actively promotes theatre and donates to various charities.
The group considers the impact of its decision on the environment. We aim not to send any waste to landfill, have phased out the use of single use plastics wherever possible and partner with green energy suppliers. We actively encourage our office to show initiative to reduce waste, including the sorting and recycling of waste, donating equipment and used technology and putting drinking water taps in place to reduce the use of single use plastic. As much as possible we partner with green suppliers whose products are eco-friendly and reduce the impact on the environment.
the desirability of the company maintaining a reputation for high standards of conduct
The group expects the highest standards of conduct from its employees, customers and suppliers with which it engages.
The group complies with all relevant legislation, including those targeted at preventing discrimination, equal opportunities, anti-bribery, health and safety and dignity at work. Such principles are embedded through the group’s policies.
the need to act fairly between members of the company
The Board engages regularly with the shareholder about the affairs of the group and seeks to take decisions in the best interests of the shareholder.
On behalf of the board
The directors present their annual report and financial statements for the year ended 30 June 2023.
The results for the year are set out on page 10.
No ordinary dividends were paid (2022: £-). The directors do not recommend payment of a final dividend.
The directors who held office during the year and up to the date of signature of the financial statements were as follows:
In accordance with the company's articles, a resolution proposing that Moore Kingston Smith LLP be reappointed as auditor of the group will be put at a General Meeting.
We have audited the financial statements of Really Useful Group Investments Limited (the 'parent company') and its subsidiaries (the 'group') for the year ended 30 June 2023 which comprise the Group Statement of Comprehensive Income, the Group Balance Sheet, the Company Balance Sheet, the Group Statement of Changes in Equity, the Company Statement of Changes in Equity, the Group 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 Financial Reporting Standard 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (United Kingdom Generally Accepted Accounting Practice).
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements section of our report. We are independent of the group and parent 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 group's and parent company’s ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.
Other information
The other information comprises the information included in the annual report 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' 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.
In the light of the knowledge and understanding of the group and the parent company and their environment obtained in the course of the audit, we have not identified material misstatements in the Strategic Report or the 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:
adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or
the parent company financial statements are not in agreement with the accounting records and returns; or
certain disclosures of directors' remuneration specified by law are not made; or
we have not received all the information and explanations we require for our audit.
As explained more fully in the Directors' Responsibilities Statement, 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 group's and parent 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 group or parent company or to cease operations, or have no realistic alternative but to do so.
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.
As part of an audit in accordance with ISAs (UK) we exercise professional judgement and maintain professional scepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purposes of expressing an opinion on the effectiveness of the company’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors.
Conclude 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 group's or the parent 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 auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the group or the parent company to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
Explanation as to what extent 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 material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities,
including fraud is detailed below.
The objectives of our audit in respect of fraud, are; to identify and assess the risks of material misstatement of the financial statements due to fraud; to obtain sufficient appropriate audit evidence regarding the assessed risks of material misstatement due to fraud, through designing and implementing appropriate responses to those assessed risks; and to respond appropriately to instances of fraud or suspected fraud identified during the audit. However, the primary responsibility for the prevention and detection of fraud rests with both management and those charged with governance of the company.
Our approach was as follows:
We obtained an understanding of the legal and regulatory requirements applicable to the company and considered that the most significant are the Companies Act 2006, UK financial reporting standards as issued by the Financial Reporting Council, and UK taxation legislation.
We obtained an understanding of how the company complies with these requirements by discussions with management and those charged with governance.
We assessed the risk of material misstatement of the financial statements, including the risk of material misstatement due to fraud and how it might occur, by holding discussions with management and those charged with governance.
We inquired of management and those charged with governance as to any known instances of noncompliance or suspected non-compliance with laws and regulations.
Based on this understanding, we designed specific appropriate audit procedures to identify instances of non-compliance with laws and regulations. This included making enquiries of management and those charged with governance and obtaining additional corroborative evidence as required.
There are inherent limitations in the audit procedures described above. We are less likely to become aware of instances of non-compliance with laws and regulations that are not closely related to events and transactions reflected in the financial statements. Also, 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.
Use of our report
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken for no purpose other than to draw to the attention of the company’s members those matters we are required to include in an auditor's report addressed to them. To the fullest extent permitted by law, we do not accept or assume responsibility to any party 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.
As permitted by s408 Companies Act 2006, the Company has not presented its own profit and loss account and related notes. The Company’s result for the year was £0 (2022 - £0 profit).
Really Useful Group Investments Limited (“the company”) is a private limited company domiciled and incorporated in England and Wales. The registered office is 6 Catherine Street, London, WC2B 5JY.
The group consists of Really Useful Group Investments Limited and all of its subsidiaries.
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 amounts in these financial statements are rounded to the nearest £.
The financial statements have been prepared under the historical cost convention, modified to include the revaluation of certain financial instruments at fair value. The principal accounting policies adopted are set out below.
The consolidated group financial statements consist of the financial statements of the parent company Really Useful Group Investments Limited together with all entities controlled by the parent company (its subsidiaries) and the group’s share of its interests in joint ventures and associates.
All financial statements are made up to 30 June 2023. Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with those used by other members of the group.
All intra-group transactions, balances and unrealised gains on transactions between group companies are eliminated on consolidation. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred.
Entities in which the group holds an interest and which are jointly controlled by the group and one or more other venturers under a contractual arrangement are treated as joint ventures. Entities other than subsidiary undertakings or joint ventures, in which the group has a participating interest and over whose operating and financial policies the group exercises a significant influence, are treated as associates.
Investments in joint ventures and associates are carried in the group balance sheet at cost plus post-acquisition changes in the group’s share of the net assets of the entity, less any impairment in value. The carrying values of investments in joint ventures and associates include acquired goodwill.
If the group’s share of losses in a joint venture or associate equals or exceeds its investment in the joint venture or associate, the group does not recognise further losses unless it has incurred obligations to do so or has made payments on behalf of the joint venture or associate.
Unrealised gains arising from transactions with joint ventures and associates are eliminated to the extent of the group’s interest in the entity.
The directors have prepared projections and cash flow forecasts for a period of 12 months from the date of approval of these financial statements, which indicate that the group will continue to trade profitably and generate cash from trading. The directors are committed to continuing to grow the business for ongoing long-term success.
Consequently, the directors are confident that the group will have sufficient funds to continue to meet its liabilities as they fall due for at least 12 months from the date of approval of the financial statements and therefore have prepared the financial statements on a going concern basis.
Turnover comprises the amounts receivable, exclusive of Value Added Tax, for goods and services and for royalties from theatre, video and film productions, records, publishing, stock and amateur licensing and merchandising together with box office income in relation to own productions.
Certain royalty revenues from record, music publishing, stock and amateur and merchandising licences and film are recognised once they can be reliably determined, usually once a royalty statement has been received from a third party. This is consistent with industry practice.
All other revenues are recognised on a right to consideration basis.
Co-productions
The group is involved in a number of co-production arrangements with third parties. Where the group's consent is required to affect control over significant decisions these arrangements have been accounted for as joint ventures.
The operating profit earned as a result of the co-production arrangement has been presented on the face of the profit and loss account as a share of the result of the joint venture. The distributions received from co-productions during the year are shown as distributions from joint ventures. If the investment in the co-production is unrecouped at the year end, the group's share of profits is offset against the investment, with no operating profit recognised in the profit and loss account.
Copyrights
Expenditure incurred in relation to the establishment or acquisition of copyrights is recorded at cost less amortisation. The copyrights are being amortised over 10 years.
Capitalised pre-production costs
The group capitalises pre-production development costs incurred subsequent to the green-lighting of a new production to the extent that the directors have a reasonable belief that the production will recoup. Costs capitalised exclude marketing and promotional expenditure incurred in relation to the production. All relevant development expenditure is capitalised within intangible assets as pre-production costs and the group does not distinguish between the cost of physical assets, such as the set, and the development of broader aspects of the show, as the distinction is not useful and the expenditure is considered as a whole.
*The amortisation period commences from the date of opening of the production. The estimated life of the production is under continual re-assessment, with the impact of any changes to the estimated life on the amortisation period being accounted for prospectively.
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 recognised in the profit and loss account.
In the parent company financial statements, investments in subsidiaries, associates and jointly controlled entities 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 group. Control is the power to govern the financial and operating policies of the entity so as to obtain benefits from its activities.
Entities in which the group has a long term interest and shares control under a contractual arrangement are classified as jointly controlled entities.
Investment in theatrical productions consist of non-recourse loans advanced to a production which are repayable out of the profit of the production. These investments are initially measured at fair value which is normally the transaction price. In general fair values subsequent to initial investment cannot be measured reliably so investments in theatrical productions are subsequently measured at cost less impairment.
At each reporting period end date, the group 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.
Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment annually, and whenever there is an indication that the asset may be impaired.
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.
The group 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 group's balance sheet when the group becomes party to the contractual provisions of the instrument.
Financial assets and liabilities are offset and 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, which include debtors 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 comprise loan investments into theatrical productions. Such loans are repaid from funds generated by the profitable running of the productions; are recoverable only to the extent of the net assets available to the production and in the event of early closure of the production before the loan is repaid the group has no further claim against the production; and the timing of the repayments is at the reasonable discretion of the production. Subsequent to repayment the group is entitled to a fixed share of the profit of the production.
There is no reliable measure for the fair value of such instruments which are therefore measured at amortised cost.
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.
Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire or are settled, or when the group 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.
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 group after deducting all of its liabilities.
Basic financial liabilities, including creditors, bank loans andloans from fellow group companies that are classified as debt, 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 payments discounted at a market rate of interest. Financial liabilities classified as payable within one year are not amortised.
Debt instruments which are not being carried at fair value are subsequently carried at amortised cost, using the effective interest rate method.
Trade creditors are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Amounts payable are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities.
Other financial liabilities comprise loans received from investors to finance theatrical productions. Consistent with industry norms these loans are repayable out of the initial profits of the production; are repayable to the extent of the net assets available to the production and in the extent of closure of the production before the loan is repaid the lenders have no further claim against the production; and terms of repayments is at the reasonable discretion of the group. Subsequent to repayment the lenders are entitled to a fixed share of the profits of the production. There is no reliable measure of fair value for such instruments which are therefore measured at amortised cost.
Financial liabilities are derecognised when the group's contractual obligations expire or are discharged or cancelled.
Equity instruments issued by the group 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 group.
Derivatives, including interest rate caps, are not basic financial instruments. Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently remeasured at their fair value. Changes in the fair value of derivatives are recognised in profit or loss in finance costs or income as appropriate. The company does not currently apply hedge accounting for interest rate derivatives.
The tax expense represents the sum of the tax currently payable and deferred tax.
The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the profit and loss account 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 group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting end date.
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 profit and loss account, 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 if, and only if, there is 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.
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 fixed 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.
Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due.
Rentals payable under operating leases, including any lease incentives received, are charged to profit or loss on a straight line basis over the term of the relevant lease except where another more systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.
Transactions in currencies other than pounds sterling are recorded at the rates of exchange prevailing at the dates of the transactions. At each reporting end date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the reporting end date. Gains and losses arising on translation in the period are included in profit or loss.
In the application of the group’s accounting policies, the directors are required to make judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised where the revision affects only that period, or in the period of the revision and future periods where the revision affects both current and future periods.
The following judgements (apart from those involving estimates) have had the most significant effect on amounts recognised in the financial statements.
The investments relate to non-recourse loans to companies involved with theatre productions either directly or indirectly. The directors are required to make a determination at each year end of the likelihood that the productions will recoup and retain the company's investment monies. Forecasting the future performance of a theatrical production is subject to a significant amount of uncertainty, being affected by future estimated box office receipts and running costs
Theatrical productions are commonly held within special purpose vehicles. The management and control of those SPV's is commonly split between multiple producers and is governed by the terms of a a co-production agreement. In determining whether a production SPV should be classified as a subsidiary, joint venture or non-participating interest the company considers that the terms of the co-production agreement are generally the key determinant of control. In many cases ownership of the equity share capital or relative ownership of that capital does not equate to the degree of control the company is able to exercise over the SPV or the company's entitlement to the profits of the SPV.
The estimates and assumptions which have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities are as follows.
Certain royalties revenues from record, music publishing, stock and amateur and merchandising licenses along with profits from productions and investments are recognised once they can be reliably determined, usually once a royalty statement has been received from a third party. Management accrue royalty income to the extent that the value of the royalty statement can be reliably determined, either on receipt of the royalty statement or from accurate reporting.
An analysis of the group's turnover is as follows:
The average monthly number of persons (including directors) employed by the group and company during the year was:
Their aggregate remuneration comprised:
The Directors are considered to be the Key Management Personnel for the purposes of the statutory disclosure requirements for both the current and the prior year.
The actual charge/(credit) for the year can be reconciled to the expected charge/(credit) for the year based on the profit or loss and the standard rate of tax as follows:
Impairment tests have been carried out where appropriate and the following impairment losses have been recognised in profit or loss:
In the comparative period losses relate to an impairment recognised on the capitalised pre-production costs of two productions, which ceased during the period.
Amounts due to undertakings in which the group has participating interest are interest free and repayable on demand.
Bank loans of £9,280,000 represent the balance owing to Handelsbanken plc under a secured, amortising loan agreement entered into in 2018 by The Really Useful Group Limited. This loan agreement also provided the group with a £4,000,000 overdraft which was not drawn at the year end. The loan agreement matured in August 2023 and was repaid in full. Concurrently, The Really Useful Group Limited entered into a new, three year £7,000,000 revolving credit facility and £1,500,000 overdraft with Handelsanken plc. The new facility is secured via a charge over the freehold land and buildings with a net book value of £19,376,997 (2022: £19,783,777) and a group composite guarantee over the assets of the group and carries an interest rate of 1.7% over SONIA.
Investor capital loans are repayable only out of the productions to which the loans relate. The timing of such repayments is at the reasonable discretion of the group. Investors are entitled to a return on their investment equal to a fixed percentage of post recoupment profits of the production.
Deferred tax assets and liabilities are offset where the group or 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:
A defined contribution pension scheme is operated for all qualifying employees. The assets of the scheme are held separately from those of the group in an independently administered fund.
At the year end pension contributions of £nil (2022: £44,151) remained outstanding and have been included within "Other Creditors".
Lord Lloyd Webber advances
Lord Lloyd Webber is the ultimate controlling shareholder of the company. During the year the company incurred royalty costs of £13,752,311 (2022: £5,344,758) due to Lord Lloyd Webber. At the year end £1,171,626 (2022: £44,067) was due to Lord Lloyd Webber in respect of these royalties. The directors consider these transactions have been entered into at arm's length on normal commercial terms.
During the year the company made sales of £6,412 (2022: £13,248) to, and purchases of £19,344 (2022: £25,288) from Escaway Limited, a related party by virtue of common control in respect of recharges. At the year end, the company owed £nil to (2022: £5,907) Escaway Limited.
Payments to third parties
During the year the company made purchases of £149,867 (2022: £147,652) from LW Theatres Group Limited, a related party by virtue of common control. At the year end, the company owed £nil to (2022: £nil) LW Theatres Group Limited.
During the year the company made sales of £363,761 (2022: £500,918) to LW Theatres Group Limited, a related party by virtue of common control. At the year end, the company was owed £44,046 (2022: £63,281) by LW Theatres Group Limited.
During the year the company made sales of £nil (2022: £97) to The Other Songs Limited, a related party by virtue of common control.
During the year, the company made purchases of £122,219 (2022: £89,734) from Lady Lloyd Webber in respect of rent payments. At the year end, the company owed £nil (2022: £nil) to Lady Lloyd Webber.
Joint venture undertakings
During the year, income from joint venture undertakings totalled £11,966,034 (2022: £1,834,946). At the year end, the group was owed £527,082 (2022: £162,761) by joint venture undertakings.
The group made purchases on behalf of joint venture undertakings during the year of £526,881 (2022: £nil). The group has assessed the recoverability of the amounts due from joint venture undertakings and based on this assessment, a provision of £526,881 has been recognised in the profit and loss account for the year.
The ultimate controlling party is Lord Lloyd Webber by virtue of his ownership of 100% of the ordinary share capital of the company.
At the reporting end date the group had outstanding commitments for future minimum lease payments under non-cancellable operating leases, which fall due as follows:
At the reporting end date the group had contracted with tenants for the following minimum lease payments:
Details of the company's subsidiaries at 30 June 2023 are as follows:
The following entities have claimed exemption from audit under section 479A of the Companies Act 2006:
Details of joint ventures at 30 June 2023 are as follows: