Final Results
Bloomsbury Publishing PLC
01 April 2008
BLOOMSBURY PUBLISHING PLC
Preliminary Results for the Year Ended 31 December 2007
2007 was an exceptionally strong year for the Company and this momentum has
continued into the first quarter of 2008.
Financial highlights
The highlights for 2007 include:
•Revenue increased to £150.21m (2006, £74.77m).
•Pre-tax profit improved to £17.86m (2006, £5.20m).
•Basic earnings per share increased to 16.06p (2006, 4.99p).
•Strong cash generation, particularly in the UK, resulting in net cash of
£47.56m (2006, £24.30m).
•Final dividend increased 10% to 3.30p per share (2006, 3.00p). Full year
dividend increased by 9.3% to 4.00p (2006, 3.66p).
•Strong balance sheet which positions group for future growth.
•Good start to current year with a strong pipeline of new titles, in line
with the Board's expectations.
•Acquisition of Featherstone Education Limited, a specialist educational
publisher, on 31 March, 2008.
Operating highlights
•Record breaking performance from adult and children's titles.
•Continued reduction in the Group's cost base following overhead reviews
in UK and USA.
•Strong sales of Khaled Hosseini's The Kite Runner and A Thousand Splendid
Suns and of Harry Potter and the Deathly Hallows.
•Substantial growth in Berlin Verlag, where Harry Potter and the Deathly
Hallows in the English language sold over one million copies. Both Khaled
Hosseini's books enjoyed strong success. Current trading has also been
boosted by the launch of Jonathan Littell's controversial book Die
Wohlgesinnten resulting in hardcover sales exceeding 100,000 copies.
•Future revenue streams generated by deals with existing and new partners
on database content, including Qatar Finance - The Ultimate Resource, a book
and online service.
Commenting on the results and prospects for Bloomsbury, Nigel Newton, Chief
Executive, said:
'This is a good set of results, substantially ahead of last year. We saw strong
growth from our Adult and Children's publishing and also from A&C Black and
Berlin Verlag.
We are now well positioned for the post Harry Potter era. We have reduced
overhead costs, are successfully developing new business areas in specialist
publishing, and have a strong pipeline of titles. We will continue to do what
Bloomsbury does best - discovering new talent and developing it both in the UK
and overseas.
The first quarter of 2008 has started strongly and we have a number of new
database projects under development.'
For further information, please contact:
Nigel Newton, Chief Executive, Bloomsbury Publishing Plc 020 7494 6015
Daniel de Belder / Rosanne Perry, Bell Pottinger 020 78613232
Chairman's statement
This is the first Chairman's statement for Bloomsbury since the Group split the
role of Chairman and Chief Executive in September 2007.
Bloomsbury is a group of businesses, many with a long history, spanning trade
and specialist publishing. Last year Bloomsbury completed 21 years, and much has
been done in 2007 to position the Group for growth in a new stage of its
development. The historic success of Bloomsbury, in which Harry Potter has
played a key role, has unquestionably positioned it well for the future.
The strategy of the Group has therefore been re-defined, changes have been made
to the Board. The Chief Executive and his executive team have organised the
business to take advantage of opportunities in areas where it has growing
strength. They have also rationalised its businesses where needed.
There is now a real momentum behind the Bloomsbury Group. The focus of the
Group's strategy has seen a drive to improve performance and eliminate some of
the inherent risk of the publishing industry. Notable achievements in 2007
included the seventh and final Harry Potter book, and a significant licensing
deal with Qatar Financial Centre Authority. The detailed strategy of the Group
and the structure to deliver that strategy are dealt with in the Chief
Executive's statement.
As far as the Board is concerned, Nigel Newton, the Founder and Chief Executive
of Bloomsbury, has achieved what few founders of a successful company achieve -
transformation of a team where he played a dominant role in making it what it is
today into a business where his leadership allows the interaction of the
non-executive directors and the executive team for constructive, balanced debate
and decision taking.
The clearer reorganised roles of the Board and some significant structural
reorganisation within the Group since those basic changes are evidence of that.
In addition to the split of the roles of Chairman and Chief Executive, the
changes have been helped by further re-composition of the Board.
Richard Charkin, appointed as Executive Director in October 2007, brings a
wealth of experience, leadership, and industry knowledge to Bloomsbury, and an
injection of fresh blood into a stable, long-established management team.
Liz Calder is stepping down from the Board today after twenty one years but she
will very much remain with Bloomsbury, looking after her list of authors. She
has made a huge contribution to the Board, and we are tremendously grateful to
her.
There is, as a result of these changes, a growing distinction between Board and
Executive management, and these changes have introduced a different dynamic into
the Group.
The Combined Code on Corporate Governance issued by the Financial Services
Authority is designed to enhance Board effectiveness and to improve investor
confidence by raising standards of corporate governance. It has been valuable in
giving Bloomsbury a framework against which to assess its own governance
requirements. However, it is deliberately not prescriptive but rather provides a
framework of principles against which Bloomsbury must set the needs of the Group
and its shareholders.
My job, as Non-Executive Chairman, in the year ahead, will be to oversee the
continued development of the Board and its committees, so that they support the
Chief Executive and his Executive team in the realisation of the Group's
strategy and exploitation of the opportunities it brings.
Profitable new publishing opportunities are emerging. Such times as these have
great potential for far-sighted, experienced and nimble businesses with vision
and a strong capital base, and with the organisational capacity to get things
done. Bloomsbury is well placed to realise that potential.
None of Bloomsbury's ambitions would be possible without the commitment of its
entire staff. This Group employs some of the finest and most experienced people
in the industry; it lives by their professionalism, commitment, and dedication.
Without them it would not have its distinguished history and unique brand and,
critically, it would not have the opportunity to realise its ambitions for the
future. On behalf of the Board, of Bloomsbury's authors, of all their readers,
of all the Group's business partners, and - critically - of all the
shareholders, I would like to thank each and every one of them - they have done
an outstanding job.
Jeremy J O'B Wilson
Non-Executive Chairman
Chief Executive's statement
Overview
I am pleased to report excellent results, substantially ahead of last year.
2007 was a landmark year for Bloomsbury Publishing. There were a number of
changes made to the structure of the Group. In September, we split the roles of
Chairman and Chief Executive and Jeremy Wilson was appointed as Non Executive
Chairman alongside me as Chief Executive. In October, Richard Charkin joined as
an Executive Director bringing a wealth of experience, leadership and industry
knowledge.
The Group has conducted a thorough internal strategic review to examine how best
to position the business and maximise returns. As a result, the Board has
decided to divide the Group into two overarching divisions: Trade and
Specialist. We are seeking to maintain our strong position in the UK, US and
German consumer trade publishing sectors whilst expanding organically and
through acquisition our specialist publishing in the educational, academic and
reference fields. I will have responsibility for the Specialist Division and
Richard Charkin for the Trade Division, reporting to me.
Following the review, we are driving reductions in our cost base directly and
through our supply chain. We have completed a thorough overhead review and have
made annualised cost savings to date of £1.75m the principal benefit of which
will be felt in 2008. We are continuing the process and expect to make another
£0.78m of annualised cost savings this year.
Financial performance
Revenue increased by 100.9% to £150.21m (2006, £74.77m), reflecting strong
performances from a number of our key authors including JK Rowling, Khaled
Hosseini, Hugh Fearnley-Whittingstall and William Boyd. Revenues from
Continental Europe, which were generated by Berlin Verlag, increased 45.1% to
£8.53m (2006, £5.88m). Revenues from the US operations reduced by 10.8% to
£13.39m (2006, £15.01m) although in local currency the underlying reduction was
only 3.6% to £14.47m.
Profit before tax increased 243.5% to £17.86m (2006, £5.20m). Basic earnings per
share rose by 221.8% to 16.06 pence (2006, 4.99 pence). Diluted earnings per
share increased by 219.0% to 15.63 pence (2006, 4.90 pence).
At the end of the year the Group had increased its net cash balances to £47.56m
(2006, £24.30m) before the half yearly royalty payments made on 31 March 2008.
We continue to invest in future growth through acquiring new authors, new titles
and specialist publishing acquisitions. Our strong balance sheet supports this
strategy. At 31 December 2007, the Group had under contract 1,240 titles (2006,
1,149) for future publication, with a gross investment of £27.58m (2006,
£30.77m). After payment of the initial tranches of advances to authors, our
liability for future cash payments on these contracted titles at that date was
£16.32m (2006, £18.48m). This is a good time for acquisitions.
Specialist Publishing Division
This is a growth area for us in a publishing sector with lower volatility and
strong margins.
Reference
In 2007 we undertook a number of significant initiatives as part of our strategy
to exploit our content in a wide variety of different formats, in print and
online.
A new publishing agreement was signed with Oxford University Press to produce an
online version of Who's Who. Launched in December 2007, this specially designed
website will join The Oxford Dictionary of National Biography, thus creating the
country's best online biographical source. A major licensing agreement was also
made with Microsoft for a new database.
Also, in conjunction with Microsoft and Ingram/Lightning Source, Bloomsbury is
digitising the Group's entire worldwide backlist thereby becoming fully
digitally, ready to exploit the emerging marketing, sales and rights
opportunities in print and digital editions of our titles, including
e-books. The digital archive will bring operational efficiencies enabling print
on demand where appropriate, thereby unleashing the long tail potential of our
content to niche markets. By participating in Microsoft's Live Search
programme, Bloomsbury Group titles will benefit from controlled search on the
internet leading to increased sales.
A&C Black's backlist sales have always been a core strength. In 2007 print on
demand technology, combined with a new system at our distributor, enabled us to
republish out of print backlist titles using print on demand. Over 500
previously out of print titles were republished in 2007, generating
approximately £126,000 of additional sales.
To mark A&C Black's 200th anniversary, we published editions of two books from
our archive: Don'ts for Wives and Don'ts for Husbands. First published in 1913,
these little books of wise and witty advice for married couples caught the media
and the public imagination and were bestsellers selling nearly half a million
copies. They continue to sell strongly and, for Fathers' Day 2008, we will also
publish another book in the same series, Don'ts for Golfers.
In the last days of 2007 we finalised a significant new agreement to publish
online the annual compendium of navigational data, Reeds Nautical Almanac. The
new website, Reeds Online Almanac, will be aimed at the growing number of
recreational sailors who wish to access navigation and port information online.
Launching in May 2008, it will provide the current navigational information in
the print version, updated in real time, and other enhanced features including
weather forecasting, dynamic synoptic charts as well as a powerful database to
aid quick retrieval of information.
On 31 March 2008 we acquired Featherstone Education Limited. Featherstone
focuses on publishing to support teachers and of education of children up to
seven years old, a rapidly expanding part of the UK market. Responding to the
government's increased emphasis on, and funding for, this sector, Featherstone
is now a market leader in this niche. Sales are likely to be boosted by school's
implementation of the new 'Early Years Foundation Stage' in September 2008 which
requires teachers and educators to follow a 'joined up' learning programme from
years 0-8. Education is core to A&C Black and this acquisition extends our
reach to the 0-7 ages, and to a wider range of customers. Featherstone has a
highly effective direct mail system which will be of considerable benefit in
increasing our direct sales to customers for educational and children's
products. A&C Black will be able to add value to the list with our current
sales and marketing operations to schools, including our school rep force and
with our editorial expertise, particularly in the area of children's music.
In 2008 we will continue to develop and exploit the range of electronic formats
now available for our products, the publication of new mixed media and
whiteboard products for the educational market and website developments such as
an enhanced Writers' and Artists' Yearbook website.
Databases
The creation and ongoing exploitation of content databases in which Bloomsbury
owns all IP rights has been an important element in Bloomsbury's long-term
strategy and these IP projects have contributed good revenue streams and profits
to the Group.
2007 saw significant new activity in this area. We completed new deals with
existing partners, including Microsoft, and we also agreed partnerships with
several new customers.
Foremost among these is the Qatar Financial Centre Authority with whom we
concluded a significant deal in August. Qatar Finance - The Ultimate Resource
will be a new information resource aimed at financial professionals from CEOs
and CFOs to junior accountants. Unique in the breadth and depth of information
and including particular emphasis on best practice and thought leadership, the
project, being written by over 300 high level contributors, will be launched in
2009. The first revenue from this source will occur in 2008.
We are also working on a major new database for licensing, and a number of
parties have expressed interest. We will seek to develop more partnerships and
associations with established websites in our niche areas where we see both
marketing and publishing opportunities for our mutual benefit.
Trade Publishing Division
2007 has been an outstanding year for our Trade Publishing Division, both in
terms of sales and profit growth. The continuing success of Harry Potter, and
individual titles and initiatives are described below. During the year several
key strategic initiatives have also been pursued:
1) maximising the benefits of individual copyrights through publication
wherever possible throughout the English- and German-speaking worlds with new
books by Khaled Hosseini, Ben Schott, William Boyd and Elizabeth Gilbert.
2) recognition of the need to embrace fully the opportunities offered by
digital technology - the Microsoft Live Search Programme, the development of
www.bloomsbury.com.
3) the need to address continuously the cost base of our publishing
operations.
4) a sharper approach to pricing and margins and careful review of distribution
costs in response to tougher trading conditions.
UK
Children's
2007 saw the publication of Harry Potter and the Deathly Hallows, the final
title in the Harry Potter series. With 2,652,656 copies sold out of UK bookshops
on the first day of release, the book exceeded all expectations. With all seven
books in the series now published, the books are available in a range of box
sets and formats. The series will remain a children's classic for years to come.
In 2007 we further established ourselves in the area of series fiction with the
launch of the successful Mermaids SOS series, and we will continue to grow in
this area with the launch in 2008 of The Glitterwings Academy, another series
aimed at young, primarily female, readers. We will launch in 2008 with eight
titles featuring this magical school and one special Christmas volume.
Adult
In 2007 we reduced the number of new titles in the publishing programme, but
committed more time and energy to ensure that each title generated a higher
contribution to revenues and profits.
We continue to develop new talent and to pursue a vigorous marketing strategy on
some promising titles that are not an immediate success. The Kite Runner and
Elizabeth Gilbert's Eat, Pray, Love are notable examples of such 'slow burn'
titles.
We also continue to develop our strategy of buying titles internationally,
Khaled Hosseini and Elizabeth Gilbert are two authors we share with Berlin
Verlag, and, with Bloomsbury USA, Katie Hickman's The Aviary Gate. We continue
to buy world rights where possible, and gain revenue from the sale of some
translation rights where appropriate.
Established Bloomsbury authors with new books coming include David Guterson,
whose Snow Falling on Cedars sold over one million copies, Margaret Atwood,
Justin Cartwright, Anne Michaels (author of Fugitive Pieces) and Ben Schott.
Our strategy to develop our list of serious non-fiction came to fruition in
2007. Bloomsbury won the Samuel Johnson prize with Rajiv Chadresekeran's
Imperial Life in the Emerald City. We had a paperback bestseller with Ben
McIntyre's Agent Zigzag, and his new book about James Bond is published in 2008.
We also had a hardback bestseller, The Last Fighting Tommy and the first volume
of a history of post-war Britain, David Kynaston's Austerity Britain, was
published to spectacular acclaim in 2007.
Our series of highly illustrated food and television tie-in books continues, and
2007 saw the further success of this list with David Dimbleby's TV tie-in How We
Built Britain, Heston Blumenthal's Further Adventures in Search of Perfection
and Hugh Fearnley-Whittingstall's River Cottage Fish Book.
Bloomsbury USA
In spite of tough market conditions in 2007, our US Children's lists have
performed well with several awards and bestsellers, including Newberry winner
Shannon Hale's Princess Academy, and a number of titles are selling well into
2008. The Adult list has proved difficult with fewer books breaking through than
expected. The level of book returns has been high as customers continue to
reduce stock levels. The new publishing lists started in 2006 and launched in
2007 have yet to build critical mass and, to accelerate the US's move back into
profit, we reduced staff and office overheads.
Berlin Verlag
2007 saw substantial growth across all of Berlin Verlag's lists.
In the Spring Ingo Schulze's short story collection, Handy, won the Leipzig Book
Fair Prize. Building on the successes of the Bloomsbury Berlin list in the
Spring, we had several bestsellers including Die Flucht by Tatjana Grafin
Donhoff, a tie-in to a prime time TV series. Khaled Hosseini's new novel, 1000
Strahlende Sonnen (A Thousand Splendid Suns), entered the bestseller charts
immediately on publication.
The paperback list continued to do well, with several titles performing well and
turnover exceeding budget. The main success was the continuing backlist sales of
Khaled Hosseini's Drachenlaufer (The Kite Runner). Originally published in
paperback in November 2004, sales have grown significantly each year, initially
through word of mouth but also, in 2007, backed by a targeted marketing
campaign. Consequently the book climbed the bestseller lists steadily throughout
the year.
Publication of the English language edition of Harry Potter and the Deathly
Hallows in July was a major event in Germany where for the first time many shops
stayed open till 1:00AM so that German children could buy the book in English at
the same time as the rest of the world.
The prospects for 2008 are positive. Berlin's lead title Die Wohlgesinnten by
Jonathan Littell was published in late February. Sales are strong, and the press
and publicity campaign has already ensured massive coverage in important
broadsheets including the Frankfurter Allgemeine Zeitung, which had not only
covered the book extensively but has also created a microsite devoted
exclusively to the book. It created a furore when it was initially published in
France, where Jonathan Littell, an American author, became the first foreigner
to win the Prix Goncourt.
Dividend
The Directors are recommending a final dividend of 3.30 pence per share (2006,
3.00 pence) making a total of 4.00 pence per share (2006, 3.66 pence) for the
year. This represents a 9.3% increase in the full year dividend. The final
dividend will be payable on 1 July 2008 to Ordinary Shareholders on the register
at the close of business on 23 May 2008.
Management and staff
I would like to thank our staff for their tremendous contribution to a very busy
year where we have seen major strategic as well as operational achievements.
Current trading, developments and prospects
The major agreement just signed with Microsoft to digitise Bloomsbury's entire
backlist will enable e-book sales and print on demand orders. The paperback
edition of Harry Potter and the Deathly Hallows will be published in July. Sales
across the Group in the first quarter have been encouraging and we are looking
to build on this through the rest of the year.
Nigel Newton
Chief Executive
1 April 2008
Financial Review
Results
Revenue for the Group increased 100.9% to £150.21m (2006, £74.77m). Bloomsbury's
primary segmental analysis is by geographic breakdown, which follows our
international publishing strategy. Revenue in the UK increased 138.1% to
£128.29m (2006, £53.88m) driven by contributions from key authors including JK
Rowling, Khaled Hosseini, Hugh Fearnley-Whittingstall and William Boyd. US
revenue reduced by 10.8% to £13.39m (2006, £15.01m) as a result of a tough
market and a higher than expected level of book returns, though at 2006 exchange
rates the reduction in US revenue was only 3.6% to £14.47m. For Continental
Europe, revenue, which was generated by Berlin Verlag, increased 45.1% to £8.53m
(2006, £5.88m) on the back of strong performances from authors including Khaled
Hosseini, William Boyd, Ingo Schulze and Zeruya Shalev.
The Group's secondary segmental disclosure is split into three main operating
areas: Children's, Adult and Reference publishing. Under the new Group structure
Children's and Adult form the Trade Publishing Division, and Reference the
Specialist Publishing Division. Children's is a combination of the UK, US and
German lists. For 2007 the breakdown of revenue between the three areas was:
Children's 66% (2006, 37%), Adult 24% (2006, 44%) and Reference 10% (2006, 19%).
Revenue in Children's increased 261.4% to £98.92m (2006, £27.37m). Harry Potter
and the Deathly Hallows, published in July 2007, was the main contributor to the
increase. Gross profit for Children's for 2007 increased 198.9% to £39.60m
(2006, £13.25m) with the contribution to administrative expenses up 219.6% to
£30.01m (2006, £9.39m).
Adult revenue increased 9.7% to £35.85m (2006, £32.67m). The revenue increase
was driven by a number of strong selling titles including The Kite Runner (UK
and Germany), A Thousand Splendid Suns (UK and Germany), The River Cottage Fish
Book (UK) and Restless (UK, USA and Germany). Gross profit for Adult for 2007
was down 17.3% to £13.26m (2006, £16.04m) with contribution to administrative
expenses down 34.0% to £6.01m (2006, £9.10m) which is primarily as a result of
additional advance and stock provision made.
Reference revenue increased 4.8% to £15.45m (2006, £14.74m) due to the full year
results of Methuen Drama, acquired during 2006, and the success of a number of
titles including Don'ts for Husbands and Don'ts for Wives. The gross profit for
2007 was down 8.3% to £6.31m (2006, £6.88m) with contribution before
administrative expenses down 20.7% to £2.64m (2006, £3.33m), which is primarily
as a result of £0.75m (2006, £0.090m) of database development costs carried in
inventories in previous financial years being written down to nil value.
Rights revenue, which includes subsidiary rights, electronic database income and
income derived from third party agencies, increased 8.7% to £5.24m (2006,
£4.82m). The profit attributable to this revenue was £2.95m (2006, £2.67m).
£1.92m (2006, £1.42m) of the profit was generated in the Specialist Publishing
Division and £1.03m (2006, £1.25m) was generated in the Trade Publishing
Division.
Gross profit for the Group increased 63.6% to £59.17m (2006, £36.17m). Gross
profit margin decreased to 39.4% (2006, 48.4%). The decrease was due to a
combination of increased royalty costs, the high level of book returns
experienced and expected in future periods in the UK, US and Germany and
increased stock and advance provisions in Adult across all territories on books
published in previous financial years. Royalty costs increased to £44.00m (2006,
£8.17m) and represented 29.3% of revenues (2006, 10.9% of revenues). Provisions
on unearned advances increased to £9.23m (2006, £2.46m) and represented 6.1% of
revenues (2006, 3.3% of revenues). Stock provisions increased to £4.30m (2006,
£1.59m) and represented 2.9% of revenues (2006, 2.1% of revenues). The
additional stock and advance provisions were made to cover returns of books into
stock during the year and a valuation of advances on titles at their recoverable
amount. In addition to the normal amortisation policy, in the Specialist
Publishing Division £0.75m (2006, £0.09m) of database development costs carried
in inventories in previous financial years have been written down to nil value.
Marketing and distribution costs increased by 42.9% to £20.51m (2006, £14.35m).
The variable element of these costs increased in line with revenue.
Administrative expenses increased 21.1% to £22.18m (2006, £18.31m). The increase
included a dilapidation accrual of £0.63m (2006, £nil) on the Group's offices in
Soho Square, three of which have leases expiring in 2010, the fourth with a
break in 2011. In addition, performance bonuses were also accrued for the first
time since 2005.
Profit before investment income increased 369.5% to £16.48m (2006, £3.51m).
Profit before investment income for the UK increased 388.2% to £18.16m (2006,
£3.72m). The US loss before investment income for the year was £1.64m (2006,
loss £0.26m). Germany's profit before investment income for the year was £0.28m
(2006, £0.20m).
Investment income decreased by 14.5% to £1.48m (2006, £1.73m) primarily as a
result of lower average cash balances during the year.
The effective corporation tax rate for the year is 33.9% (2006, 29.7%). The
increase in the rate from 2006 mainly reflects partial recognition of current
year US tax losses as an increased deferred tax asset, the inability to
recognise an increased deferred tax asset for share based payment charges, for
which tax relief will not be given until the relevant options are exercised, and
certain expenses that are permanently disallowable for tax purposes. The Group
continues to recognise deferred tax assets in respect of tax losses of
Bloomsbury USA and Berlin Verlag which we expect will be utilised in the
foreseeable future.
Basic earnings per share rose by 221.8% to 16.06 pence (2006, 4.99 pence).
Diluted earnings per share increased by 219.0% to 15.63 pence (2006, 4.90
pence).
Balance sheet
Current assets
Inventories decreased 8.9% to £14.41m (2006, £15.82m). Work in progress remained
consistent with 2006 levels. Stocks of finished goods decreased 11.9% to £10.94m
(2006, £12.42m), due to a combination of improved stock control and increased
provisions.
Trade and other receivables increased 54.8% to £76.21m (2006, £49.22m). Trade
receivables increased 169.9% to £47.53m (2006, £17.61m) as a result of the
increase in revenue. Since books sold are generally returnable by customers, the
Group makes a provision against books sold in the accounting period. The unused
provision at year-end is then carried forward as an offset to trade receivables
in the balance sheet, in anticipation of further book returns subsequent to the
year-end. A provision for the Group of £13.03m (2006, £5.51m) for future returns
relating to 2007 and prior sales including Harry Potter and the Deathly Hallows
has been carried forward in trade receivables in the balance sheet at 31
December 2007. This provision at margin represents 8.7% (2006, 7.4%) of
revenues. Within trade and other receivables, prepayments and accrued income
decreased 4.9% to £27.91m (2006, £29.34m) due to increased advance provisions of
£9.23m (2006, £2.46m) against titles published in previous financial years.
Equity and liabilities
At 31 December 2007 total equity stood at £100.07m (2006, £89.33m). The increase
was due to retained earnings of £9.11m (2006, £0.98m), less the increase in
share-based payment reserve due to the share-based payment charge for the year
of £1.01m (2006, £0.65m) and share options exercised during the year.
Current liabilities increased 176.5% to £58.9m (2006, £21.3m). Accruals and
deferred income, which is included in trade and other payables, increased to
£47.04m (2006, £12.23m). Accruals and deferred income includes royalty payments
to authors, which vary from year to year depending on turnover and the authors'
royalty rates which typically escalate on triggered thresholds as volume sales
increase. In 2007 the Group published the highest selling book in its history.
The royalties due to authors, accrued at 31st December 2007, were paid on 31
March 2008. Corporation tax payable increased to £3.10m (2006, £0.52m).
Cash Flow
The Group had a net cash inflow from operating activities before tax of £26.60m
for the year (2006, outflow of £19.92m). Cash generation was particularly strong
for the UK operation by the publication of Harry Potter and the Deathly Hallows.
Corporation tax paid during the year was £1.93m (2006, £5.20m). The amount paid
in 2007 included the impact of a claw-back of corporation tax over-paid on
account for the 2006 financial year. During the year £1.35m (2006, £1.73m) of
interest was received from deposits, and £2.72m (2006, £2.67m) of dividends were
paid. The Group's net cash on the balance sheet as at 31 December 2007 was
£47.56m (2006, £24.30m).
Colin Adams ACA
Group Finance Director
1 April 2008
CONSOLIDATED INCOME STATEMENT
for the year ended 31 December 2007
Notes 2007 2006
Total Total
£'000 £'000
Unaudited
Revenue 2 150,211 74,773
Cost of sales (91,042) (38,602)
______ ______
Gross profit 59,169 36,171
Marketing and distribution
costs (20,513) (14,354)
Administrative expenses (22,181) (18,308)
______ ______
Profit before investment
income 16,475 3,509
Investment income 1,480 1,734
Finance costs (99) (47)
______ ______
Profit before taxation 17,856 5,196
Income tax expense 3 (6,052) (1,544)
______ ______
Profit for the year 11,804 3,652
______ ______
Basic earnings per share 5 16.06p 4.99p
______ ______
Diluted earnings per share 5 15.63p 4.90p
______ ______
CONSOLIDATED BALANCE SHEET
at 31 December 2007
2007 2006
£'000 £'000
Unaudited
ASSETS
Non-current assets
Property, plant and equipment 1,877 2,332
Intangible assets 17,716 17,672
Deferred tax assets 1,848 1,700
______ ______
Total non-current assets 21,441 21,704
______ ______
Current assets
Inventories 14,406 15,818
Trade and other receivables 76,213 49,217
Cash and cash equivalents 47,558 24,304
______ ______
Total current assets 138,177 89,339
______ ______
TOTAL ASSETS 159,618 111,043
______ ______
EQUITY AND LIABILITIES
Capital and reserves attributable
to equity holders of the parent
Ordinary shares
920 918
Share premium
39,191 38,915
Capital redemption reserve
20 20
Share-based payment reserve
2,114 1,104
Translation reserve
(899) (1,236)
Retained earnings
58,723 49,612
______ ______
Total equity
100,069 89,333
______ ______
Liabilities
Non-current liabilities
Deferred tax 135 36
Retirement benefit obligations 77 144
Other payables 390 223
______ ______
Total non-current liabilities 602 403
______ ______
Current liabilities
Trade and other payables 55,852 20,786
Current tax liabilities 3,095 521
______ ______
Total current liabilities 58,947 21,307
______ ______
Total liabilities 59,549 21,710
______ ______
TOTAL EQUITY AND LIABILITIES 159,618 111,043
______ ______
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Share Share Capital Share-based Translation Retained Total
premium redemption payment
capital reserve reserve reserve earnings
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Balances at 1 January
2006 911 38,123 20 453 642 48,634 88,783
Exchange differences on
translating foreign
operations - - - - (1,878) - (1,878)
______ ______ ______ ______ ______ ______ ______
Income recognised
directly in equity - - - - (1,878) - (1,878)
Profit for the year - - - - - 3,652 3,652
______ ______ ______ ______ ______ ______ ______
Total recognised income
and expense for the year - - - - (1,878) 3,652 1,774
Share-based payment
charges - - - 651 - - 651
Dividends - - - - - (2,674) (2,674)
Share issues 7 792 - - - - 799
______ ______ ______ ______ ______ ______ ______
Balances at 31 December
2006 918 38,915 20 1,104 (1,236) 49,612 89,333
Exchange differences on
translating foreign
operations - - - - 337 - 337
Deferred tax on
share-based payment
charges - - - - - 25 25
______ ______ ______ ______ ______ ______ ______
Income recognised
directly in equity - - - - 337 25 362
Profit for the year - - - - - 11,804 11,804
______ ______ ______ ______ ______ ______ ______
Total recognised income
and expense for the year - - - - 337 11,829 12,166
Share-based payment
charges - - - 1,010 - - 1,010
Dividends - - - - - (2,718) (2,718)
Share issues 2 276 - - - - 278
______ ______ ______ ______ ______ ______ ______
Balances at 31 December
2007 (Unaudited) 920 39,191 20 2,114 (899) 58,723 100,069
______ ______ ______ ______ ______ ______ ______
CONSOLIDATED CASH FLOW STATEMENT
for the year ended 31 December 2007
2007 2006
£'000 £'000
Unaudited
Cash flows from operating activities
Net profit before tax 17,856 5,196
Adjustments for:
Depreciation of property, plant and equipment 680 661
Amortisation of publishing relationships 35 36
Loss / (profit) on sale of property, plant and
equipment 1 (1)
Share-based payment charges 1,010 651
Investment income (1,480) (1,734)
Finance costs 99 47
______ ______
18,201 4,856
Decrease / (increase) in inventories 1,540 (971)
Increase in trade and other receivables (28,113) (1,126)
Increase / (decrease) in trade and other payables 34,971 (22,682)
______ ______
Cash generated from / (used in) operations 26,599 (19,923)
Income taxes paid (1,928) (5,195)
______ ______
Net cash inflow / (outflow) from operating activities 24,671 (25,118)
______ ______
Cash flows from investing activities
Purchase of property, plant and equipment (230) (1,379)
Proceeds from sale of property, plant and equipment 9 -
Purchase of businesses (75) (2,419)
Interest received 1,349 1,734
______ ______
Net cash generated from / (used in) investing
activities 1,053 (2,064)
______ ______
Cash flows from financing activities
Share options exercised 278 799
Equity dividends paid (2,718) (2,674)
Interest paid (99) (47)
______ ______
Net cash used in financing activities (2,539) (1,922)
______ ______
Net increase / (decrease) in cash and cash
equivalents 23,185 (29,104)
Cash and cash equivalents at beginning of period 24,304 53,511
Exchange gain / (loss) on cash and cash equivalents 69 (103)
______ ______
Cash and cash equivalents at end of period 47,558 24,304
______ ______
NOTES
1. The above financial information does not constitute statutory accounts as
defined in section 240 of the Companies Act 1985. The above figures for the year
ended 31 December 2007 are an abridged version of the Company's accounts which
will be reported on by the Company's auditors before dispatch to the
shareholders and filing with the Registrar of Companies.
The consolidated financial information has been prepared in accordance with the
recognition and measurement principles of International Financial Reporting
Standards (IFRS) as endorsed by the European Union (EU). The accounting policies
applied in 2007 are consistent with those applied in the Financial Statements
for 2006. The returns provision has changed, as explained in the financial
review.
The statutory accounts for the year ended 31 December 2006 have been lodged with
the Registrar of Companies. These accounts received an audit report which was
unqualified and did not include any reference to matters to which the auditors
drew attention by way of emphasis without qualifying their report or a statement
under section 237(2) or section 237(3) of the Companies Act 1985.
2. Segmental analysis
Geographical segments
The Group considers that as the main thrust of its growth is to develop its
international publishing strategy, the primary segmental reporting should be
based on geographical segments. The analysis by geographical segment is shown
below.
Year ended 31 December 2007
United North Continental Eliminations Total
and
Kingdom America Europe unallocated
costs
£'000 £'000 £'000 £'000 £'000
Revenue
External sales 128,290 13,392 8,529 - 150,211
Inter-segment sales * - - 911 (911) -
_______ _______ _______ _______ _______
Total revenue 128,290 13,392 9,440 (911) 150,211
_______ _______ _______ _______ _______
Result
Segment result 18,160 (1,644) 283 - 16,799
Unallocated central costs - - - (324) (324)
_______ _______ _______ _______ _______
Profit / (loss) before
investment income 18,160 (1,644) 283 (324) 16,475
Investment income 2,492 14 4 (1,030) 1,480
Finance costs (196) (632) (301) 1,030 (99)
_______ _______ _______ _______ _______
Profit / (loss) before
taxation 20,456 (2,262) (14) (324) 17,856
Income tax expense (6,440) 412 (24) - (6,052)
_______ _______ _______ _______ _______
Profit / (loss) for the
year 14,016 (1,850) (38) (324) 11,804
_______ _______ _______ _______ _______
Other Information
Capital additions 198 5 27 - 230
Depreciation and
amortisation 650 45 20 - 715
(Loss) on sale of
property, plant and
equipment (1) - - - (1)
Share-based payment
charges 1,010 - - - 1,010
_______ _______ _______ _______ _______
Balance Sheet
ASSETS
Segment assets 149,279 18,759 13,534 (23,802) 157,770
LIABILITIES
Segment liabilities 53,991 17,896 8,234 (23,802) 56,319
* Inter-segment sales are charged at prevailing market rates.
Year ended 31 December 2006
United North Continental Eliminations Total
and
Kingdom America Europe unallocated
costs
£'000 £'000 £'000 £'000 £'000
Revenue
External sales 53,880 15,011 5,882 - 74,773
Inter-segment sales * 145 - 110 (255) -
_______ _______ _______ _______ _______
Total revenue 54,025 15,011 5,992 (255) 74,773
_______ _______ _______ _______ _______
Result
Segment result 3,724 (260) 199 - 3,663
Unallocated central costs - - - (154) (154)
_______ _______ _______ _______ _______
Profit / (loss) before
investment income 3,724 (260) 199 (154) 3,509
Investment income 2,595 10 - (871) 1,734
Finance costs (143) (538) (237) 871 (47)
_______ _______ _______ _______ _______
Profit / (loss) before
taxation 6,176 (788) (38) (154) 5,196
Income tax expense (1,732) 286 (98) - (1,544)
_______ _______ _______ _______ _______
Profit / (loss) for the
year 4,444 (502) (136) (154) 3,652
_______ _______ _______ _______ _______
Other Information
Capital additions 1,311 32 41 - 1,384
Depreciation and
amortisation 638 44 15 - 697
Profit on sale of
property, plant and
equipment 1 - - - 1
Share-based payment
charges 651 - - - 651
_______ _______ _______ _______ _______
Balance Sheet
ASSETS
Segment assets 103,599 16,689 8,342 (20,955) 107,675
LIABILITIES
Segment liabilities 21,744 13,232 7,132 (20,955) 21,153
* Inter-segment sales are charged at prevailing market rates.
Business segments
The Group's business is organised in three operating areas: Adult, Children's
and Reference. The following table provides the breakdown of revenue and profit
before investment income for these areas.
Year ended 31 December 2007
Adult Children's Reference Unallocated Total
£'000 £'000 £'000 £'000 £'000
Revenue 35,845 98,916 15,450 - 150,211
Cost of sales (22,585) (59,316) (9,141) - (91,042)
_______ _______ _______ _______ _______
Gross profit 13,260 39,600 6,309 - 59,169
Marketing and distribution
costs (7,248) (9,595) (3,670) - (20,513)
_______ _______ _______ _______ _______
Contribution before
administrative expenses 6,012 30,005 2,639 - 38,656
Administrative expenses - - - (22,181) (22,181)
_______ _______ _______ _______ _______
Profit before investment
income 6,012 30,005 2,639 (22,181) 16,475
_______ _______ _______ _______ _______
Year ended 31 December 2006
Adult Children's Reference Unallocated Total
£'000 £'000 £'000 £'000 £'000
Revenue 32,669 27,366 14,738 - 74,773
Cost of sales (16,627) (14,115) (7,860) - (38,602)
_______ _______ _______ _______ _______
Gross profit 16,042 13,251 6,878 - 36,171
Marketing and distribution
costs (6,947) (3,859) (3,548) - (14,354)
_______ _______ _______ _______ _______
Contribution before
administrative expenses 9,095 9,392 3,330 - 21,817
Administrative expenses - - - (18,308) (18,308)
_______ _______ _______ _______ _______
Profit before investment
income 9,095 9,392 3,330 (18,308) 3,509
_______ _______ _______ _______ _______
External sales by destination
United North Continental Total
Kingdom America Europe
£'000 £'000 £'000 £'000
Year ended 31 December 2007
United Kingdom 74,598 - - 74,598
North America 8,494 13,392 - 21,886
Continental Europe 24,992 - 8,529 33,521
Australasia 10,060 - - 10,060
Rest of the world 10,146 - - 10,146
_______ _______ _______ _______
Total external sales 128,290 13,392 8,529 150,211
_______ _______ _______ _______
Year ended 31 December 2006
United Kingdom 42,365 - - 42,365
North America 1,852 15,011 - 16,863
Continental Europe 3,797 - 5,882 9,679
Australasia 3,637 - - 3,637
Rest of the world 2,229 - - 2,229
_______ _______ _______ _______
Total external sales 53,880 15,011 5,882 74,773
_______ _______ _______ _______
3. Taxation
(a) Tax charge for the year
2007 2006
£'000 £'000
Based on the profit for the year:
UK corporation tax at 30% 6,493 1,745
(Over) / under provision in respect
of prior year (277) 9
Overseas taxation - current year (39) 42
_______ _______
6,177 1,796
Deferred tax - UK 159 (50)
- Overseas (284) (202)
_______ _______
6,052 1,544
_______ _______
(b) Factors affecting tax charge for the year
The tax assessed for the year is different from the standard rate of corporation
tax in the UK (30%). The differences are explained below:
2007 2006
£'000 £'000
Profit before taxation 17,856 5,196
______ ______
Profit on ordinary activities multiplied by the
standard rate of corporation tax in the UK of
30% 5,357 1,559
Effects of:
Reduction in tax rates 190 -
Non-deductible revenue expenditure 254 (31)
Share-based payments 348 -
Different rates of tax on overseas results (247) (86)
Tax losses not utilised 549 93
Adjustment to tax charge in respect of previous
periods
- current tax (277) 9
- deferred tax (122) -
______ ________
Tax charge for the year 6,052 1,544
______ ______
4. Dividends
For the prior year
A final dividend of 3.00p per share (£2,203,000) was paid to the equity
shareholders on 5 July 2007, being the amount proposed by the directors, and
subsequently approved by the shareholders at the 2007 Annual General Meeting
(2006: 3.00p per share, £2,189,000).
For the current year
On 16 November 2007 an interim dividend of 0.70p per share (£515,000) was paid
to the equity shareholders (2006: 0.66p per share, £485,000).
The directors propose that a dividend of 3.30p per share will be paid to the
equity shareholders on 1 July 2008. Based on the number of shares currently in
issue, the final dividend will be £2,427,000 (2006, £2,203,000). This dividend
is subject to approval by the shareholders at the Annual General Meeting and has
not been included as a liability in these financial statements.
5. Earnings per share
The basic earnings per share has been calculated by reference to earnings of
£11,804,000 (2006, £3,652,000) and a weighted average number of Ordinary Shares
in issue of 73,518,044 (2006, 73,115,031). The diluted earnings per share has
been calculated by reference to a weighted average number of Ordinary Shares of
75,529,183 (2006, 74,469,114) which takes account of share options and awards
under the Group's Performance Share Plan.
The reconciliation between the weighted average number of shares for the basic
earnings per share and the diluted earnings per share is as follows:
2007 2006
Number Number
Weighted average number of
shares for basic earnings per
share 73,518,044 73,115,031
Dilutive effect of share options
and awards under Performance
Share Plan 2,011,139 1,354,083
______ ______
Weighted average number of
shares for diluted earnings per
share 75,529,183 74,469,114
______ ______
6. Annual General Meeting
The Annual General Meeting will be held at 12 noon on Friday 27 June 2008 at
36 Soho Square, London W1D 3QY.
7. Report and Accounts
Copies of the Report and Accounts will be circulated to shareholders in May and
viewed after the posting date on the Bloomsbury website.
Colin Adams ACA
Group Finance Director
1 April 2008
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