Bloomsbury Interim Results

BLOOMSBURY PUBLISHING PLC

("Bloomsbury" or the "Group")

Unaudited Preliminary Results for the six months ended 31 August 2018

 

Strong strategic progress and growth across the business

Bloomsbury today announces unaudited results for the six months ended 31 August 2018.

The Group delivered a strong first half performance and trading is on track to achieve the Board's expectations for the full year. Traditionally, sales of trade titles peak for Christmas and sales of academic titles at the beginning of the academic year in the autumn. We therefore expect our sales to be second-half weighted, as in previous years.

 

 

Financial Highlights

·     Total revenues grew by 4% to £75.3 million (2017: £72.1 million)

·     Profit before taxation and highlighted items* grew by 13% to £2.9 million (2017: £2.5 million)

·     Profit before taxation of £1.6 million (2017: £1.7 million)

·     Diluted earnings per share, excluding highlighted items*, grew by 12% to 3.14 pence (2017: 2.81p)

·     Robust cash conversion of 172% (2017: 197%), excluding the acquisition, with net cash of £16.9 million at 31 August 2018 (2017: £16.9 million)

·     Interim dividend up 5% to 1.21 pence per share (2017: 1.15 pence per share)

·    The acquisition of I. B. Tauris ("IBT") is expected to deliver £3.5 million of revenue and £0.3 million of profit for the full year, as previously notified

 

Operational Highlights

Consumer division

·     Strong first half results, driven by an excellent Adult Trade performance, with revenue up 22%

·   In Children's Trade, sales of the Harry Potter series in the first half grew by 5%, building on the momentum of last year's Harry Potter twentieth anniversary. Sarah J. Maas titles continued their bestselling performance, with lower sales due two front list titles compared to four for the same period last year

Non Consumer division

·     Strong Academic & Professional performance, with revenue growth of 9%

·     Bloomsbury Digital Resources 2020 ("BDR 2020") Academic & Professional revenues up 13% on a like for like basis, excluding the impact of IFRS15

·    Two new digital resources launched in the first half, Screen Studies and Bloomsbury Early Years, with a further three new launches for the second half, as planned

·   Acquisition of IBT completed for £5.8 million, strengthening our digital resources with its quality academic IP

·   New partnerships with Spotify, announced May 2018, and Yoox Net-A-Porter Group, announced July 2018, demonstrate our ability to develop innovative ways to market our digital offering

·   Announced today, our substantial new five-year digital subscription contract with the Institute of Chartered Accountants of England & Wales ("ICAEW") for Bloomsbury Professional Tax Online, recognition of our digital content with a new B2B partner

 

Bigger Bloomsbury

Bigger Bloomsbury represents our seven key growth initiatives, announced in May. In the first half, we delivered very good progress on all seven of these strategic initiatives, with notable highlights including growth in Adult and Academic & Professional profitability, growth in overseas sales and continued working capital improvement.

 

 

Commenting on the results, Nigel Newton, Chief Executive, said:

"I am very pleased with the performance of our business over the last six months. Adjusted profit before tax is up 13%, driven by revenue growth of 4% and improved profitability in both segments of our business. Each of our territories achieved growth, and the Adult trade division delivered an outstanding performance, increasing revenues by 22%, as part of the turnaround we have been working towards in that division.

These strong results, following our excellent results for the interim and full year last year, demonstrates the underlying strength, resilience and further potential of our strategy.

In Consumer, we saw revenue growth of 5%, driven by success in the Adult division's great frontlist and backlist titles. New strong titles for the second half include Fresh Start by Tom Kerridge, Kingdom of Ash by Sarah J. Maas, the illustrated version of The Tales of Beedle the Bard by J.K Rowling and two new books from Peter Frankopan, The Illustrated Silk Roads and The New Silk Roads.

In Non Consumer, our Academic & Professional division continues to benefit from the Bloomsbury Digital Resources 2020 strategic growth initiative as we accelerate digital revenues and become a leading publisher in the B2B academic and professional market. Announced today, our new five-year subscription deal with the ICAEW, the very prestigious worldwide accountancy body, demonstrates strong ongoing demand for our online tax services.

We have made very good progress in all seven of our Bigger Bloomsbury initiatives focusing on our key growth drivers with targeted strategies across the Group to help grow our revenues and improve our margins over the next five years.

The Group is trading in line with the Board's expectations for the full year."

 

Notes

* Highlighted items comprise amortisation of acquired intangible and major one-off initiatives including professional and restructuring costs relating to the acquisition of IBT.

 

 

 

For further information, please contact:

Bloomsbury Publishing Plc +44 (0) 20 7631 5630

Nigel Newton, Chief Executive

Penny Scott-Bayfield, Group Finance Director

FTI Consulting +44 (0) 203 727 1000

Charles Palmer / Dwight Burden / Leah Dudley [email protected]

 

 

Chief Executive's statement

Overview

It has been a strong six months for Bloomsbury. The Consumer and Non Consumer divisions both grew revenues, resulting in total Group revenues being 4% ahead of last year at £75.3 million (2017: £72.1 million). This growth came from Adult titles and Academic & Professional content. Group profit before tax and highlighted items increased 13% to £2.9 million (2017: £2.5 million).

Our Bloomsbury Digital Resources 2020 ('BDR 2020') digital growth strategy is delivering well, with a 13% increase year on year in Academic & Professional digital resource revenues on a like for like basis. The new five-year contract with the ICAEW, announced today, demonstrates the opportunities to further leverage our professional content on new digital platforms. Group profit includes £0.8 million of net investment in BDR 2020, which comprises £0.5 million on a like for like basis (2017: £0.8 million) and £0.3 million adverse impact of adopting IFRS 15 in the period.

We are focused on making the best use of our capital and to this end, as well as investing in our digital resources, in April 2018 we acquired the academic publisher IBT for £5.8 million. Of this, £4.7 million was consideration to former shareholders for equity, and the remainder was payment for pre-existing loans. Additionally, with Bloomsbury's strong balance sheet, we have been able to declare a 5% increase in the interim dividend.

The highlighted items in the period of £1.3 million (2017: £0.8 million) are the one-off restructuring costs related to acquisitions (£0.4 million) and amortisation of acquired intangible assets (£0.9 million). The effective rate of tax for the period increased to 21% (2017: 19%); the comparative included the benefit of a £0.4 million tax refund following the resolution of a tax loss claim from 2006. The adjusted effective rate of tax was 16% (2017: 16%). Diluted earnings per share for the period, excluding exceptional items, grew 12% to 3.14 pence (2017: 2.81 pence). Including highlighted items, profit before tax was £1.6 million (2017: £1.7 million) and diluted earnings per share was 1.62 pence (2017: 1.87 pence).

Cash

Cash generation continued to be robust with cash at period end of £16.9 million (2017: £16.9 million) and cash conversion of 172% (2017: 197%), excluding the IBT acquisition. This reflects the earlier payment of the 2017/18 final dividend; last year the final dividend was paid in the second half. Our focus on working capital continues - inventories have reduced by 3% or £0.7 million year on year, on a like-for-like basis, despite the revenue growth. We are on track to achieve a 5% reduction in inventory, using constant currencies, in 2018/19, excluding additions from acquisitions. Our strategic priority for cash is organic investment to grow and enhance our existing business. Of the £5.8 million paid for the acquisition of IBT, £5.0 million was paid in cash in the period and the balance will be paid subject to working capital and other adjustments over up to two years. We continue to assess potential acquisitions actively.

Dividend

The Group has a progressive dividend policy while aiming to keep dividend earnings cover in excess of two times. Investment in BDR is leading to earnings cover falling slightly below that level in the short-term, but the dividend is underpinned by strong cash cover. The Board has committed during this period of investment to maintain its progressive dividend policy on the basis that earnings cover will improve as the return on our investment accrues. The Board has declared an interim dividend of 1.21 pence per share, a 5% increase on the 1.15 pence interim dividend for the six months ended 31 August 2017. The dividend will be paid on 29 November 2018 to shareholders on the register at close of business on 2 November 2018.

Consumer Division

The Consumer division consists of Adult and Children's trade publishing. The Consumer division has had a good period with revenue for the division growing by 5% to £47.0 million (2017: £44.7 million), driven by an excellent performance from the Adult division. Operating profit before highlighted items increased by 8% to £3.1 million (2017: £2.9 million).

Adult Trade

The Adult team achieved 22% growth with revenue of £15.9 million (2017: £13.0 million), from success in front and backlist titles, including the paperback edition of Why I'm No Longer Talking To White People About Race by Reni Eddo-Lodge, Home Fire by Kamila Shamsie, Kitchen Confidential by Anthony Bourdain, Sea Prayer by Khaled Hosseini and the film tie-in edition of The Guernsey Literary and Potato Peel Pie Society. Our crime and thriller imprint Raven Books, which opens a new fiction market to Bloomsbury, is performing well with successful titles including The Silent Companions by Laura Purcell and the Sunday Times bestseller The Seven Deaths of Evelyn Hardcastle by Stuart Turton.

Our authors won the most important literary awards, notably the Golden Man Booker Prize with The English Patient by Michael Ondaatje, the Women's Prize for Fiction with Home Fire by Kamila Shamsie and the WHSmith Thumping Good Read Award with The Silent Companions by Laura Purcell. Carol Andersen's One Person No Vote is longlisted for the National Book Award 2018. We were also selected by GCHQ to publish the authorised history of its first 100 years.

Children's Trade

Children's sales were £31.1 million, in line with the same period in 2017. Sales of the Harry Potter series in the first half grew by 5%. Last year's Harry Potter twentieth anniversary generated one of the highest levels of revenue since the initial publications, and we've been pleased to build on this momentum in the first half. The standard edition of Harry Potter and the Philosopher's Stone was the number six bestselling children's book of the year to date on UK Nielsen Bookscan, 21 years after it was first published - every year these classics reach a new generation of readers.

Excluding Harry Potter, Children's sales were 9% lower year on year, due to the timing of Sarah J. Maas releases, with two new titles in the period compared to four last year. The reduction in profit in the first half was due to the timing of Sarah J. Maas releases and the mix of Harry Potter sales.

Our strong Consumer list for the second-half includes Fresh Start by Tom Kerridge, Kingdom of Ash by Sarah J. Maas, the illustrated version of The Tales of Beedle the Bard by J.K Rowling and illustrated by Chris Riddell, and two new books from Peter Frankopan, The Illustrated Silk Roads and The New Silk Roads.

 

Non Consumer Division

The Non Consumer division consists of Academic & Professional, Special Interest and Content Services. Revenues in the division increased by 3% to £28.3 million (2017: £27.4 million). Academic & Professional revenues grew 9% to £18.0 million (2017: £16.6 million).  The Non Consumer division Adjusted operating loss was £0.3 million (2017: loss of £0.4 million). The result reflects improved Academic & Professional profitability, the ongoing investment in the BDR 2020 initiative of £0.8 million (2017: £0.8 million), which included a £0.3 million charge generated by the adoption of IFRS 15, and lower Special Interest profit following the strong comparative with The Strange Death of Europe by Douglas Murray last year.

The strategic growth initiative BDR 2020 will make Bloomsbury a leading non-consumer publisher in the B2B academic and professional information market and significantly accelerate the growth of digital revenues.

We launched two new digital resources during the period, Screen Studies and Bloomsbury Early Years, and our pipeline is strong, with a further three new digital resources launching in the second half, as originally planned. We have also launched new, more flexible ways for our customers to buy from us in the form of "Title by Title" acquisition and the Evidence Based Acquisition models. "Title by Title" makes available for the first time some 4,000 backlist Bloomsbury Academic titles as part of the digital resource programme.

Today we also announced our five-year contract with the ICAEW, to provide their members with access to our online UK tax and financial reporting content. This subscription deal demonstrates the opportunities to market other services to the practice market and further leverage our professional content on new digital platforms.

Bigger Bloomsbury Initiative

Bloomsbury continues to focus on quality revenues and building upon the strong momentum achieved last year. Our Bigger Bloomsbury initiative, announced in May 2018, focusing on our key growth drivers with targeted strategies across the Group to help grow our revenues and improve our margins over the next five years. Good progress made on all seven of these initiatives during the period included:

1.    Growing the profits of the Adult division:

o  Adult operating profit up 121% to £0.4 million

 

2.    Growing the profits of the Academic & Professional division:

o  Academic & Professional profit up 107% to £0.1 million

 

3.    Reducing our finished goods stock further by continuing to roll out globally efficiencies already made in the UK business:

o  Inventories down 3% on a like for like basis

 

4.    Increasing the focus on Bloomsbury's nine biggest assets, starting with Harry Potter, Sarah J. Mass and Tom Kerridge:

o  Strong first half performance on front and back list for key assets

 

5. Maximising the success of Bloomsbury Digital Resources 2020:

o  Our new five-year contract with the ICAEW, leveraging our professional content, and good first half performance with 13% growth in Academic & Professional digital resource revenue on a like for like basis

6. Accelerating the growth of Bloomsbury's sales in the USA, Australia and India;

o  US revenues up 3%, Australia revenues up 5% and India revenues up 33% (in local currency)

7. Developing Bloomsbury China:

o  China Global Publishing - Following signing the Memorandum of Understanding with our Chinese partner China Youth Press International in May 2018, Bloomsbury has developed opportunities with interest from a number of leading Chinese publishers, with the aim of bringing Chinese publishing to Western audiences.

IFRS 15

During the period IFRS 15, Revenue from Contracts with Customers ('IFRS 15'), was introduced. Adoption of this standard has not had a material impact on the Group's results.

In the Non Consumer division, adopting IFRS 15 has impacted the timing of recognition of certain non subscription Perpetual Access ("PA") digital resource sales. Previously, revenue from sales of these products were recognised when the customer was granted access; under IFRS 15 a proportion of these revenues are recognised over 5 years. The impact of this is to defer revenue and profit from certain PA sales compared to the previous treatment. For the six months ended 31 August 2018, the net impact has been to reduce Bloomsbury Digital Resources revenue by £0.3 million and PBTA by £0.3 million.

Outlook

October is the peak period for academic book sales and Christmas for sales of consumer books. We therefore expect our results to continue to be significantly second-half weighted, as in the past.

Our strong Consumer book list for the second half includes the latest from Sarah J. Maas, Kingdom of Ash, the illustrated version of The Tales of Beedle the Bard by J.K. Rowling, illustrated by Chris Riddell, The Restless Girls by Jessie Burton and To Obama by Jeanne Marie Laskas. In addition, Bloomsbury is publishing Tom Kerridge's Fresh Start, a major new cookery book to accompany his new BBC TV series, and two further books from Peter Frankopan, The Silk Roads Illustrated Edition and The New Silk Roads.

Following the successful launch of the 'Title by Title' and Evidence Based Acquisition new sales models as well as two major digital resources so far this year, we are on track to launch three further major digital resources in the second half as planned. Our new partnership with the ICAEW, and previously announced publishing partnerships with the Spotify, Yoox Net-A-Porter and the BFI will also deliver value this year.

The Group is trading in line with the Board's expectations for the full year.

  

 

Condensed Consolidated Interim Income Statement

For the six months ended 31 August 2018

               

	Notes	6 months ended 31 August 2018 £'000	6 months ended 31 August 2017 £'000	Year ended 28 February 2018 £'000
Revenue	3	75,324	72,113	161,510
Cost of sales		(38,436)	(35,417)	(77,155)
Gross profit		36,888	36,696	84,355
Marketing and distribution costs		(10,513)	(11,029)	(22,814)
Administrative expenses		(24,832)	(23,987)	(50,000)
Operating profit before highlighted items		2,842	2,474	13,114
Highlighted items	4	(1,299)	(794)	(1,573)
Operating profit		1,543	1,680	11,541
Finance income		40	55	151
Finance costs		(28)	-	(48)
Profit before taxation and highlighted items		2,854	2,529	13,217
Highlighted items	4	(1,299)	(794)	(1,573)
Profit before taxation	3	1,555	1,735	11,644
Taxation		(326)	(332)	(2,574)
Profit for the period attributable to owners of the Company		1,229	1,403	9,070
Earnings per share attributable to owners of the Company
Basic earnings per share	6	1.65p	1.88p	12.15p
Diluted earnings per share	6	1.62p	1.87p	12.06p

 

 

The accompanying notes form an integral part of this condensed consolidated interim financial report.

 

 

Condensed Consolidated Interim Statement of Comprehensive Income

For the six months ended 31 August 2018

 

	6 months ended 31 August 2018 £'000	6 months ended 31 August 2017 £'000	Year ended 28 February 2018 £'000
Profit for the period	1,229	1,403	9,070
Other comprehensive income Items that may be reclassified to the income statement:
Exchange differences on translating foreign operations	1.931	(1,387)	(3,943)
Items that may not be reclassified to the income statement:
Remeasurements on the defined benefit pension scheme	(11)	3	27
Other comprehensive income for the period net of tax	1,920	(1,384)	(3,916)
Total comprehensive income for the period attributable to owners of the Company	3,149	19	5,154

 

 

Items in the statement above are disclosed net of tax.

 

 

Condensed Consolidated Interim Statement of Financial Position

At 31 August 2018

                                                                                                                                                               

	Notes	31 August 2018 £'000	31 August 2017 £'000	28 February 2018 £'000
Assets
Goodwill		44,753	42,385	42,139
Other intangible assets		22,848	20,402	19,885
Investments		300	300	300
Property, plant and equipment		2,006	2,134	2,083
Deferred tax assets		3,087	4,707	2,092
Trade and other receivables	8	1,486	1,692	1,530
Total non-current assets		74,480	71,620	68,029
Inventories		30,372	28,034	26,677
Trade and other receivables	8	77,257	75,865	76,857
Cash and cash equivalents		16,944	16,853	25,428
Total current assets		124,573	120,752	128,962
Total assets		199,053	192,372	196,991
Liabilities
Retirement benefit obligations		153	251	170
Deferred tax liabilities		2,621	2,197	1,993
Other payables		-	947	-
Provisions		57	43	57
Total non-current liabilities		2,831	3,438	2,220
Trade and other payables		58,837	48,945	55,185
Current tax liabilities		-	631	-
Provisions		205	22	23
Total current liabilities		59,042	49,598	55,208
Total liabilities		61,873	53,036	57,428
Net assets		137,180	139,336	139,563
Equity
Share capital		942	942	942
Share premium		39,388	39,388	39,388
Translation reserve		9,618	10,243	7,687
Other reserves		6,711	6,323	6,455
Retained earnings		80,521	82,440	85,091
Total equity attributable to owners of the Company		137,180	139,336	139,563