Final Results
Bloomsbury Publishing PLC
30 March 2005
30 MARCH 2005
BLOOMSBURY PUBLISHING PLC
Preliminary Results for the Year Ended 31 December 2004
• Pre-tax profit before goodwill amortisation and exceptional gain increased
6.9% to £16.44m (2003, £15.38m).
• Three number one bestsellers in 2004 in the US, the UK and Germany reflect
the growing strength and breadth of the international publishing portfolio.
• Basic earnings per share before goodwill amortisation and exceptional gain
increased 5% to 17.28p (2003, 16.45p).
• Final dividend increased 47.8% to 2.478p (2003, 1.677p). Full year
dividend increased by 39.5% to 3.00p (2003, 2.151p).
• Investment in future titles at the year end up 25.5% at £20.85m (2003,
£16.61m).
• Board anticipates strong outcome for 2005. Portfolio breadth and
geographical spread, together with new Harry Potter to be published in July,
provide confidence in future prospects.
Commenting on the results and prospects for Bloomsbury, Nigel Newton, Chairman,
said:
'2004 reflected Bloomsbury's emergence as a fully fledged international
publisher with an established position in the world's three largest book markets
of the US, UK and Germany, where we had number one bestsellers in all three
markets. In recent years we have also worked hard to extend our portfolio of
authors and to build our reputation for finding new, first-time writers like
Susanna Clarke, author of Jonathan Strange & Mr Norrell, who achieve
considerable success with their first book.
Bloomsbury will show significant progress in 2005, with the publication of new
titles by JK Rowling, John Irving and Ben Schott, and paperbacks of our 2004
hardcover bestsellers The Two of Us and Jonathan Strange & Mr Norrell. This year
started well with a number of our strongest titles such as Who's Who released in
the first weeks of the year, two new books in the bestseller lists and
pre-orders for the forthcoming Harry Potter hardback substantially higher than
originally anticipated. As a consequence the Group is expected to perform ahead
of our original expectation for 2005 and the Board anticipates that profit
before tax and goodwill will be not less than £20 million.'
For further information, please contact:
Tim Spratt/Charles Palmer, Financial Dynamics 020 7831 3113
Sandy Karon, PA to the Chairman, Bloomsbury Publishing Plc 020 7494 6015
CHAIRMAN'S STATEMENT
Overview
Bloomsbury's strategy to build an international publishing operation began to
bear fruit during 2004. In 2004, for the first time, we achieved a number one
bestseller in all three territories: Jonathan Strange and Mr Norrell in the USA,
The Two of Us by Sheila Hancock in the UK and Schotts Sammelsurium (Schott's
Original Miscellany) in Germany, reflecting the quality and strength of our
portfolio. We acquired titles with world-wide appeal and during the year
published Jonathan Strange & Mr Norrell simultaneously across Bloomsbury in the
UK, Bloomsbury USA and our German subsidiary, Berlin Verlag. The book performed
extremely well in all markets and became one of our top selling titles in 2004.
In the children's division, we published Pirates! - also across all three of our
territories.
The success of our international publishing strategy was reflected in our
results with pre-tax profit before goodwill amortisation and exceptional gain
increasing 6.9% to £16.44m (2003, £15.38m) on turnover up 1.6% to £84.45m (2003,
£83.11m).
During the year, the Group continued to implement its well-defined growth
strategy based on its three operating areas, Children's, Adult and Reference.
For 2004, the breakdown of turnover for these areas was as follows: Children's
48% (2003, 63%), Adult 36% (2003, 22%) and Reference 16% (2003, 15%). Children's
sales, as predicted, decreased by 22.7% to £40.41m (2003, £52.29m) reflecting
the release of Harry Potter and the Order of the Phoenix in hardback in 2003.
Sales of Adult titles increased 64.2% to £30.17m (2003, £18.37m) fuelled by
successes such as Jonathan Strange & Mr Norrell, Schott's Miscellanies and The
Two of Us. Sales from Reference titles increased by 11.4% to £13.87m (2003,
£12.45m), benefiting from the acquisition of the Reeds Nautical Almanac in 2003.
In December 2004, we consolidated our position in the US with the acquisition of
Walker Publishing, Inc., for a total consideration of £3.44m. Walker has been
established in America for 45 years and has built an impressive track record of
bestsellers. The acquisition and integration of Walker will enable Bloomsbury to
broaden its presence in the US market and in particular in adult narrative
non-fiction and children's non-fiction. This is an important step in building a
significant publishing operation in the US - the world's largest publishing
market.
Cash within the group remained healthy at £28.68m (2003, £28.32m).
Financial performance
Turnover increased by 1.6% to £84.45m (2003, £83.11m). This progress was
achieved by strong performances from continuing sales of Harry Potter and the
Order of the Phoenix in hardback and the launch of the paperback in July 2004,
Jonathan Strange & Mr Norrell, The Two of Us and Anthony Bourdain's Les Halles
Cookbook, and in spite of a drop in export sales, which was due to the adverse
movement in the US exchange rate which meant we had to lower prices to compete
against the American publishers of the same books in the open markets and
sometimes lose orders. In addition, our lead title for the year, The Two of Us,
about the life of John Thaw, had an orientation to the UK market and was not a
big export seller.
Profit before tax and goodwill amortisation and exceptional gain improved 6.9%
to £16.44m (2003, £15.38m). Basic earnings per share before goodwill
amortisation and exceptional gain increased by 5% to 17.28 pence (2003, 16.45
pence). Diluted earnings per share, before goodwill amortisation and exceptional
gain, increased by 7.3% to 16.97 pence (2003, 15.82 pence).
At the end of the year the Group had increased its net cash balances to £28.67m
(2003, £28.32m). We continue to invest in future organic growth through
acquiring new authors and titles and through strategic acquisitions which
complement our three core activities.
At 31 December 2004, the Group had under contract 978 titles (2003, 888) for
future publication, with a gross investment of £20.85m (2003, £16.61m). After
payment of the initial tranches of advances to authors, our liability for future
cash payments on these contracted titles at that date was £11.88m (2003 £8.66m).
Children's
In our 2004 interim results we announced the results of our review of the
children's book market in the US and the UK, concluding that there was still
considerable potential for organic growth in children's book publishing.
We were already well established in the fiction market for the age ranges 6-18
and, to capitalise on this success, we decided to broaden our range of titles to
provide a comprehensive publishing programme of titles covering children from
birth to age 18. Growth was to be principally driven organically and the
recruitment process is well underway. We have added capacity to our editorial,
marketing and design departments in both the UK and USA. The first of the titles
in our new pre-school list will be published towards the end of this year. In
addition, we also intend to add critical mass to the children's division through
strategic acquisitions over the coming years.
The children's business in the UK is working well at both title acquisition and
marketing in conjunction with Bloomsbury USA and Berlin Verlag. World rights are
now being acquired on both sides of the Atlantic, building up a powerful
international list for the Group. In Germany, Bloomsbury Kinder- und
Jugendbucher has successfully completed its first full year of trading,
publishing titles acquired primarily through Bloomsbury in the UK and the USA.
Our drive to acquire world rights in our titles continues to feed the German,
American and UK lists and our biggest authors of the year on the three lists,
such as Celia Rees, continue to be shared authors.
Discovering first time authors continues to be one of the main drivers behind
the growth of the children's list. Whispering to Witches by Anna Dale was
published in hardback in 2004 and we have already sold rights in 19 foreign
languages, reflecting our strength in the international fiction market.
The paperback publication of Harry Potter and The Order of the Phoenix in the
summer saw the title go to number one on the bestseller lists and continue to
build the series in the UK and export markets.
Our fiction list saw the development of a new, bright and exciting series with
the publication of the first title in Sue Limb's new series about a teenage
girl's humorous reflections on life. Girl 15, Charming but Insane was widely
recognised as being the best of the teen fiction of its type published in the
year.
The performance of Holes by Louis Sachar during 2004 demonstrated the revenue
generating capabilities of our backlist. The book was selected by Liverpool as
the city-wide read for the initiative 'Liverpool Reads' with extensive T.V. and
media interest.
2004 was a year in which much of the work of the previous years establishing our
Children's list in the fiction and picture book areas came to fruition. With
the focus on developing the pre-school areas of the list, as well as building
our international profile as we publish across the UK, America and Germany, we
have an exciting year ahead.
Adult
2004 was an excellent year for the Adult Division. We began the year with Joanna
Trollope's new novel, Brother and Sister, and Anchee Min's Empress Orchid. A
number of established authors who had recently moved to Bloomsbury had their
books published during the year. These included Justin Cartwright with The
Promise of Happiness, Barbara Trapido with Frankie & Stankie and Ronan Bennett
with Havoc, in its Third Year. The Promise of Happiness was chosen by Richard &
Judy's Book Club, as was A Gathering Light by Jennifer Donnelly which became a
major seller.
Frontlist successes continue to build the value of our backlist. In addition,
the backlist is benefiting from the reversion to us of paperback licences on
books, such as The English Patient by Michael Ondaatje, which we re-issue as
Bloomsbury paperbacks.
The acquisition of worldwide rights reaped significant benefits, with Susanna
Clarke's Jonathan Strange & Mr Norrell an outstanding international publishing
success. Apart from becoming a bestseller in the UK, the US and Germany, we sold
publishing rights to the book in 31 languages. It was shortlisted for the
Whitbread Prize, the Guardian Book Award and the Author's Club Best First Novel
Prize and was longlisted for the Booker Prize. The author has sold the film
rights to New Line, the producers of Lord of the Rings, and the screenplay is to
be written by Christopher Hampton.
In non-fiction we began the year with Frederick Taylor's Dresden, which sold
extremely well in hardback and has just become a major seller in paperback. Ben
Schott's Sporting, Gaming and Idling Miscellany was published in the lead up to
Christmas and performed very well. The big event of the year, however, was the
publication of Sheila Hancock's account of her life with John Thaw, The Two of
Us, which rapidly became a number 1 bestseller.
We continued to buy adult books internationally. We also continued to attract
major authors from other publishing companies, most recently Richard Ford, one
of the greatest living writers and the only winner of both the Pulitzer Prize
and the PEN Faulkner Award for the same book.
Reference & Electronic Media
In 2004, A&C Black achieved solid organic growth across all areas of its list,
with particular success in educational and music books. We published, for the
first time, The Children's Writers' and Artists' Yearbook, a companion volume to
our bestselling Writers' and Artists' Yearbook. This new book has significantly
outperformed expectations and is a valuable addition to our list of annual
publications.
In September, we published our first edition of Reeds Nautical Almanac, the
annual compendium of navigational data, which we acquired in December 2003.
Sales of the Almanac at the end of 2004 were ahead of budget, reflecting
successful integration.
In May 2004, A&C Black's distribution operation was sold to Bloomsbury's
distributor Macmillan Distribution Limited and is running smoothly.
A strategic review of reference publishing within the Group was undertaken
during the year. As from 1 July 2005, the Bloomsbury Reference list, along with
its staff, will become part of A&C Black. This is an exciting move for the list,
whose achievements have included the Bloomsbury English Dictionary database,
which is licensed to Microsoft, Business: The Ultimate Resource and the
Macmillan English Dictionary, which has won numerous awards. The move to A&C
Black will give the list greater leverage in the reference market.
With the increased focus of one reference operation within the Group, A&C Black
can continue its publishing programme to create books with long term revenue
generating capabilities.
International Activities
Bloomsbury USA
Bloomsbury USA showed a significant improvement in its performance during 2004,
reflecting growth in both our children's and adult lists. Faerie Wars by Herbie
Brennan and Jonathan Strange & Mr. Norrell were on the New York Times bestseller
list. Alan Hollinghurst's The Line of Beauty, which we publish in the USA but
not in the UK, won the Man Booker prize in the UK and subsequently became one of
our top selling titles during the year in the US. Anthony Bourdain's Les Halles
Cookbook and Ben Schott also enjoyed success in the US. We now have a director
of rights sales in the US who has significantly increased the value of our
rights deals to third parties on books acquired in the US. We have also started
selling US originated titles into the export markets for the first time. While
growing US revenues we have continued to reduce costs and have negotiated more
favourable terms on our US distribution agreement as a result of the increased
level of business.
The acquisition of Walker Publishing, Inc., brings both a strong non-fiction
adult list and a children's list which focuses on school and library sales. The
Bloomsbury US children's list is heavily focused in the trade and therefore we
expect to utilise Walker's expertise in the school and library market to give
the Bloomsbury list greater exposure in that market. Conversely, Bloomsbury will
provide Walker's list with greater opportunities for sales in the trade.
Walker has a strong reputation for serious non-fiction, but its growth has been
restricted by limited working capital resources. With improved operating
efficiencies, sales and distribution, along with access to the working capital
resources of a larger group, Walker will be expanding its lists both in Adult
and Children's. On the Adult side, it will continue to develop its non-fiction
titles, broadening into current affairs and health. Walker will also continue to
publish and increase its strong backlist. Most importantly, the company will no
longer be licensing its paperback titles to third parties and instead will
publish directly into the paperback market. There will be an initial drop in
turnover and profit in 2005 as these paperback licences are retained but the
company should gain increased turnover and higher margins from 2006 through
publishing the paperbacks under its own imprint.
There are clear synergies between A&C Black and Walker. A&C Black's children's
list, for example, should sit well alongside Walker's Books for Young Readers
and both could be sold together with little additional cost and increased
revenue and margins for the Group. A&C Black currently sells much of its list to
third party publishers in the US. We are currently considering creating an
American A&C Black imprint to sell books directly into the retail, school and
library markets, using Walker's infrastructure.
Berlin
In the first full year following Bloomsbury's acquisition of Berlin Verlag, the
company showed significant progress. Turnover increased, overheads have been cut
and losses were significantly lower than 2003.
In September, we launched our new imprint, Bloomsbury Berlin, which focuses on
titles acquired through Bloomsbury UK and USA. This initiative proved to be an
immediate success with the publication of Susanna Clarke's Jonathan Strange & Mr
Norrell, which was published simultaneously in the UK, US and Germany. However,
Berlin's bestselling title of the year was Schotts Sammelsurium, the German
edition of Schott's Original Miscellany, which has been in the Der Spiegel
bestseller list since September 2004 and reached No 1 in the key weeks before
Christmas. This was a major step forward for the Group.
Berlin Verlag's authors also won several important prizes during the year. The
Hungarian writer Peter Esterhazy won the German Bookseller's Peace Prize, one of
the main lifetime achievement awards in German publishing. Elfriede Jelinek, of
whom we are the originating publisher, won the Nobel Prize in Literature.
The German Children's list, which was launched with six titles in Autumn 2003,
continued to expand and published 15 titles during 2004. Backlist sales for
children's titles were also strong, particularly of Celia Rees's Piraten!
(Pirates!). 2005 will see a further major expansion of the Children's
publishing programme to 31 titles, including paperback editions of key titles
from the first list.
We have continued to change and improve Berlin's systems, including cost, print
and stock controls. We moved to a new distributor in January 2005 to provide a
service on a more cost-effective basis.
In January 2005, Arnulf Conradi, the joint founder of Berlin Verlag, announced
his retirement. He was succeeded as Managing Director by the joint appointment
as Managing Directors of his co-founder Elisabeth Ruge, with responsibility for
the publishing side, and Kathy Rooney, who had already been Bloomsbury's liaison
director for Berlin, with responsibility for the business side of Berlin Verlag.
The handover went smoothly and the new management team is working well and has a
new bestseller this month, Die Siebte Nacht (The Seventh Night) by Alina Reyes,
to be number 4 in the Der Spiegel bestseller list next week. Schotts
Sammelsurium is currently number 3.
Dividend
The directors are recommending a final dividend of 2.478 pence per share (2003,
1.677 pence per share) making a total of 3 pence per share (2003, 2.151 pence
per share) for the year. This represents a 39.5% increase in the full year
dividend in line with our progressive dividend policy, underpinned by the
company's increasing profitability. The final dividend will be payable on 7 July
2005 to Ordinary Shareholders on the register at the close of business on 27 May
2005.
Management and Staff
In April 2005, Richard Cordeschi will become Company Secretary for the Group. He
was previously company secretary to Mansell Plc.
I would like to thank our staff for their tremendous contribution to a very busy
year where we have seen strategic as well as operational achievements.
Prospects
The Group's strategy of establishing an international presence in the UK, US and
Germany and acquiring titles for worldwide publication is bearing fruit. The key
to this success is our editors' enthusiasm to ensure that other areas of the
business benefit from the books that they acquire.
Current Trading
2004 reflected Bloomsbury's emergence as a fully fledged international publisher
with an established position in the world's three largest book markets of the
US, UK and Germany, where we had number one bestsellers in all three markets.
In recent years we have also worked hard to extend our portfolio of authors and
to build our reputation for finding new, first-time writers like Susanna Clarke,
author of Jonathan Strange & Mr Norrell, who achieve considerable success with
their first book.
Bloomsbury will show significant progress in 2005, with the publication of new
titles by JK Rowling, John Irving and Ben Schott, and paperbacks of our 2004
hardcover bestsellers The Two of Us and Jonathan Strange & Mr Norrell. This year
started well with a number of our strongest titles such as Who's Who released in
the first weeks of the year, two new books in the bestseller lists and
pre-orders for the forthcoming Harry Potter hardback substantially higher than
originally anticipated. As a consequence the Group is expected to perform ahead
of our original expectation for 2005 and the Board anticipates that profit
before tax and goodwill will be not less than £20 million.
Nigel Newton
Chairman
29 March 2005
FINANCIAL REVIEW
Overview
The Group has continued to increase revenues and generate positive operating
cash flow. Managing the cost base is a continual part of the Group's drive for
earnings growth and one of the key areas we have focused on in 2004 is the cost
of distribution. With the business increasing in the US, UK and Germany we have
been able to agree more favourable distribution rates for all three of
Bloomsbury USA, A&C Black in the UK and Berlin Verlag.
In December we acquired Walker Publishing, Inc. for a sterling equivalent of
£3.44m. The process of integrating the operation with Bloomsbury USA is already
underway. We have recruited a CFO for Bloomsbury USA who started in March 2005
and he will be responsible for implementing the integration programme and
working closely with senior management to build the US business into a major
revenue stream for the Group.
Results
Turnover for the Group increased 1.6% to £84.45m (2003, £83.11m). The Group's
operations are split into three main operating areas: Children's, Adult and
Reference publishing. For 2004, the breakdown of turnover between the three
areas was: Children's 48% (2003, 63%), Adult 36% (2003, 22%) and Reference 16%
(2003, 15%). Turnover by sales channel in 2004 was: Home £58.85m (2003,
£53.20m), Export £13.04m (2003, £22.62m), USA £9.06m (2003, £4.64m) and Rights
£3.50m (2003, £2.65m). Home sales increased 10.6% which included the success of
The Two of Us by Sheila Hancock. The decline in export sales was partly offset
by the increase in sales at Berlin of £3.90m (2003, £1.99m). The actual drop in
export sales after taking this into account was £11.49m or 55.7% from 2003. This
was due in part to the adverse movement in the US exchange rate which meant that
we had to lower the price of our books to compete against US publishers in the
open markets where we don't have exclusivity. There were also several big titles
such as The Two of Us which did not work as well in the export markets due to
their UK orientation. USA sales increased 95.3% on the back of a number of
bestselling titles such as Jonathan Strange & Mr Norrell, Anthony Bourdain's Les
Halles Cookbook and Alan Hollinghurst's Man Booker prize winning novel, The Line
of Beauty. Rights sales were up 32.1% over 2003 due, in part, to taking on a
dedicated rights manager in the US and strong rights sales from books such as
Jonathan Strange & Mr Norrell and The Icarus Girl.
Gross profit decreased 3.0% to £42.18m (2003, £43.48m). Gross profit margin
decreased to 49.9% (2003, 52.3%) due to the economies of scale achieved from the
printing of Harry Potter and the Order of the Phoenix in hardback in 2003.
Although the paperback edition was published in 2004, the print run was lower
and had a smaller effect on the margin level.
Marketing and distribution costs decreased by 13.5% to £11.38m (2003, £13.15m).
Our prior year marketing expenditure included the cost of the launch of the
hardback of Harry Potter and the Order of the Phoenix. The paperback launch of
the book during 2004 incurred a smaller cost. Amortisation of goodwill
decreased 61.5% to £0.68m (2003, £1.75m). In 2003 we took a one-off impairment
charge for Peter Collin Publishing which was acquired in 2002 and Andrew Brodie
Publications which was acquired in 2003. Administrative expenses excluding
amortisation of goodwill were slightly lower at £15.70m (2003, £15.73m).
Operating profit before the deduction of goodwill amortisation increased 3.4% to
£15.10m (2003, £14.61m).
During 2004 we announced the closure of A&C Black's distribution centre at Eaton
Socon and the subsequent move of the distribution operation to Bloomsbury's
existing distributor, Macmillan Distribution Limited. The move was completed on
1 May 2004 and A&C Black's distribution has now been integrated and is working
smoothly. The net exceptional gain of £0.42m (2003, £nil) takes account of the
gain on disposal of the freehold warehouse of £1.08m less reorganisation costs
of £0.58m. There is an additional £0.08m relating to the loss on the sale of the
Blue Guides travel list during the year.
Net interest receivable rose 73.2% to £1.34m (2003, £0.78m) due to a combination
of higher average cash balances during the year and higher interest rates
achieved for the funds placed on deposit.
The effective corporation tax rate for the year is 24.7% (2003, 28.7%) and takes
account of the gain on disposal of the freehold distribution centre in A&C Black
which has no capital gains tax liability due to indexation and other allowances,
share options exercised during the year and disallowable costs such as goodwill
amortisation of £0.68m (2003, £1.32m). In addition, the tax charge for the year
is net of a deferred tax credit of £0.75m, which includes £0.60m in respect of
tax losses carried forward in Berlin Verlag. This represents the element of
Berlin Verlag's losses which we expect will be utilised in the foreseeable
future.
Basic earnings per share before goodwill amortisation and exceptional gain
increased by 5% to 17.28 pence (2003, 16.45 pence). Fully diluted earnings per
share before goodwill amortisation and exceptional gain increased by 7.3% to
16.97 pence (2003, 15.82 pence).
Balance sheet
Stocks decreased 7.0% to £11.61m (2003, £12.48m). Work in progress was down
34.8% to £3.36m (2003, £5.15m) due to timing of titles at the work in progress
stage and the ongoing amortisation of the electronic databases. Stocks of
finished goods increased 11.8% to £8.04m (2003, £7.19m) due to the stock holding
of an increased number of titles published by the Group during the year and the
stock acquired as a result of the acquisition of Walker.
Group debtors increased 42.6% to £43.37m (2003, £30.41m). Trade debtors
increased 52.9% to £21.25m (2003, £13.90m). This was mainly due to the change in
the timing of the sales over 2003. In 2003 the timing of the sales was skewed to
June and July due to Harry Potter and the Order of the Phoenix being released at
that time. The bulk of the cash, in particular, that relating to UK sales, was
received in the same year. In 2004, sales were skewed towards the year-end with
titles such as Jonathan Strange & Mr Norrell and The Two of US generating
significant revenues in the last quarter of 2004. As our books are sold on a
returnable basis which is standard industry practice, the Group makes a
provision each year for returns within trade debtors. This provision is adjusted
for forecast returns in the following year at the end of each reporting period
using a consistent policy. The provision at the end of 2003 reflected the high
level of sales in the year, including the hardcover Harry Potter and the Order
of the Phoenix which retailers had agreed not to return until 2004 so that it
would be available through the Christmas selling period. I am pleased to report
that due to the stronger than expected sell through rate of titles to consumers
from retailers, including the hardcover of Harry Potter and the Order of the
Phoenix right up to its paperback release on 10 July 2004, a proportion of the
existing provision for returns could be released in 2004, with a net beneficial
effect on turnover of £13.39 million and a corresponding net beneficial effect
on gross profit of £3.87 million. Also, we have made increased provisions in the
2004 profit and loss account against the carrying value of our dictionary
database of £1.23 million, and increased the provision against unearned advances
to authors by £1.03 million, and other provisions by £0.9 million. The net
effect on pre-tax profit after charging all of these provisions (including the
release of the returns provision) was £0.71 million.
Harry Potter and the Half-Blood Prince will be published on 16 July 2005.
Pressure from booksellers about the stock risks they carry on such a big title
has resulted in booksellers being allowed to return unsold stock from November
2005, which means that we should have a clear picture of returns of the new
Harry Potter by this year end. This was not possible with respect to the
previous Harry Potter hardcover due to the returns arrangements agreed with
booksellers on that title explained above.
Prepayments and accrued income increased 29.2% to £20.66m (2003, £15.99m)
reflecting the increase in investment in future titles and increased rights
sales.
Group creditors falling due within one year and after one year increased 6.6% to
£27.77m (2003, 26.06m). £0.089m of the guaranteed loan notes 2005, relating to
the A&C Black acquisition in 2000, were redeemed during the year along with
£0.675m of guaranteed loan notes relating to the acquisition of Reeds Almanac
Limited in 2003. Loan notes outstanding at the end of the year were £0.383m
(2003, £1.147m). Trade creditors increased by 17.2% to £5.79m (2003, £4.94m),
attributable to the acquisition of Walker Publishing, Inc. Accruals and
deferred income increased by 2.5% to £15.33m (2003, £14.96m). Accruals and
deferred income includes royalty payments to authors, which vary from year to
year depending on turnover and the authors' royalty terms. Corporation tax
payable increased to £2.76m (2003, £1.72m) and the proposed final dividend
increased to £1.77m (2003, £1.175m).
Berlin Verlag
Berlin's performance was greatly improved during 2004. Turnover for the company
increased to €5.54m (2003, €2.82m for ten months). The improvement in the
revenue line was mainly attributable to the success of the children's list and
also the Bloomsbury Berlin list which had its first bestselling title with
Schotts Sammelsurium, the German translation and adaptation of Schott's Original
Miscellany. Operating losses before re-organisation costs were reduced 54.6% to
€0.83m (2003, €1.83m for ten months). Cost reduction is still an ongoing
process and with new management in place we are confident that the company will
turn into profit
Cash Flow
£4.37m cash was generated from operating activities during the year (2003,
£14.65m). For 2004, sales were skewed towards the final quarter of the year due
to the planned release of major titles to tie in with the Christmas season. The
bulk of the cash from the sale of these titles will be collected in the first
half of 2005. Corporation tax paid during the year was £3.71m (2003, £4.28m)
and £3.25m was spent on the acquisition of Walker Publishing, Inc.
Shareholders' Funds
At 31 December 2004, Shareholders' funds stood at £70.66m (2003, £58.82m). The
increase was due to retained earnings of £10.02m (2003, £8.20m), share options
exercised during the year and shares issued in connection with the acquisition
of Walker Publishing, Inc.
Accounting Standards and Developments
An International Accounting Standards Regulation was adopted by the Council of
the European Union (EU) in June 2002. This regulation requires all EU companies
listed on an EU stock exchange to use International Financial Reporting
Standards (IFRS), published by the International Accounting Standards Boards
(IASB), to report their consolidated results for the financial years beginning
on or after 1 January 2005. Bloomsbury has begun the process of converting to
these standards and will report under IFRS for the year ended 31 December 2005.
The 2004 figures will also be restated at that time. We will report the Group's
results under IFRS for the first time when we present the interim results for
the six months ending 30 June 2005.
The adoption of IFRS is not expected to have a significant impact on our
financial statements, although we have set out below a commentary on the areas
where there will be notable changes.
Share based payments
IFRS 2 will require Bloomsbury to recognise an expense for share options granted
after 7 November 2002. The Black-Scholes option valuation model has been used in
this process and had IFRS been adopted in its entirety in 2004 an expense
relating to the share options of £0.152m would have been recognised in the
profit and loss account for 2004.
Goodwill amortisation and impairment testing
Under IFRS, Bloomsbury will cease to amortise goodwill to the profit and loss
account. The goodwill in the balance sheet will be subject to an annual
impairment test. It is expected that the goodwill charge will be lower than the
amount charged in the profit and loss account for 2004.
Segmental reporting
More detailed disclosure is required under IFRS of primary and secondary
segments. The Group currently provides a breakdown of revenues by its three
operating divisions, Children's, Adult and Reference. The Group considers that
as the main thrust of its growth is to develop its international publishing
strategy, the primary segmental report should be based on geographical segments
(UK, US, Europe and rest of the world). The secondary segments will be its three
operating divisions.
Future Investment and Strategy
The strategy to acquire rights for worldwide exploitation is paying off as the
Group continues to generate strong positive operating cash flow. Children's
publishing is an area where we consider there is room for increased incremental
growth and the infrastructure is being put in place through recruitment of
additional staff, with the first revenue expected to be generated from our new
pre-school list in the second half of 2005. We are continuing our search for
strategic acquisitions for the Children's operation both in the UK and the US.
The Children's division of Walker will add critical mass to the list and will
provide a valuable conduit into the school and library market for our Bloomsbury
list, as well as potentially providing a publishing platform for A&C Black's
children's list.
Colin Adams ACA
Group Finance Director
29 March 2005
CONSOLIDATED PROFIT AND LOSS ACCOUNT
for the year ended 31 December 2004
Notes 2004 2003
£'000 £'000
Turnover 2 84,449 83,114
Cost of sales (42,270) (39,632)
______ ______
Gross profit 42,179 43,482
Marketing and distribution costs (11,377) (13,147)
Administrative expenses: - goodwill amortisation (675) (1,751)
- other (15,702) (15,729)
______ ______
Operating profit 3 14,425 12,855
Profit on sale of fixed assets in continuing
operations 1,076 -
Loss on sale of publishing assets (77) -
Reorganisation costs in continuing operations (582) -
______ ______
Profit on ordinary activities before interest 14,842 12,855
Net interest receivable 1,342 775
______ ______
Profit on ordinary activities before taxation 16,184 13,630
Taxation on profit on ordinary activities 4 (4,005) (3,915)
______ ______
Profit on ordinary activities after taxation 12,179 9,715
Dividends 5 (2,156) (1,516)
______ ______
Profit for the financial year transferred to
reserves 10,023 8,199
_____ _____
Basic earnings per share 6 17.19p 14.10p
______ ______
Diluted earnings per share 6 16.88p 13.56p
______ ______
Basic earnings per share before goodwill
amortisation and exceptional gain 6 17.28p 16.45p
______ ______
Diluted earnings per share before goodwill
amortisation and exceptional gain 6 16.97p 15.82p
______ ______
Notes
All turnover and results arose from continuing operations.
There were no recognised gains or losses in either year other than the profit
for the year and on this basis a statement of total recognised gains and losses
has not been prepared.
CONSOLIDATED BALANCE SHEET
at 31 December 2004
2004 2003
£'000 £'000
Fixed assets:
Intangible assets 13,547 11,359
Tangible assets 776 1,218
______ ______
14,323 12,577
Current assets:
Stocks 11,614 12,484
Debtors due within one year 38,392 26,706
Debtors due after more than one year 4,980 3,707
Cash at bank and in hand 29,120 29,472
______ ______
84,106 72,369
Creditors: amounts falling due within one year 27,619 25,173
______ ______
Net current assets 56,487 47,196
_____ ______
Total assets less current liabilities 70,810 59,773
Creditors: amounts falling due after more than
one year 154 883
Provisions for liabilities and charges - 69
______ ______
70,656 58,821
______ ______
Equity capital and reserves:
Called up share capital 894 876
Share premium account 35,763 33,967
Capital redemption reserve 20 20
Profit and loss account 33,979 23,958
______ ______
Total shareholders' funds 70,656 58,821
______ ______
The financial statements were approved by the Board of Directors on 29 March
2005.
J N Newton Director C R Adams Director
RECONCILIATION OF MOVEMENTS IN CONSOLIDATED SHAREHOLDERS' FUNDS
for the year ended 31 December 2004
2004 2003
£'000 £'000
Profit on ordinary activities after taxation 12,179 9,715
Dividends (2,156) (1,516)
Exchange loss on opening share capital and reserves of
foreign subsidiaries (2) -
Shares issued on acquisition 148 -
Share options exercised 1,666 2,342
______ ______
Net addition to shareholders' funds 11,835 10,541
Opening shareholders' funds 58,821 48,280
______ ______
Closing shareholders' funds 70,656 58,821
______ ______
CONSOLIDATED CASH FLOW STATEMENT
for the year ended 31 December 2004
2004 2003
£'000 £'000
Net cash inflow from operating activities 7 (a) 4,366 14,650
Returns on investments and servicing of finance
Interest paid (32) (64)
Interest received 1,669 839
______ ______
Net cash inflow from returns on investments and servicing of
finance 1,637 775
Taxation
Tax paid (3,707) (4,283)
Capital expenditure
Purchase of tangible fixed assets (210) (389)
Sale of tangible fixed assets 1,412 18
______ ______
1,202 (371)
Acquisitions and disposals
Purchase of subsidiary undertakings (3,296) (859)
Purchase of publishing assets - (537)
Sale of publishing assets 111 -
Cash acquired with subsidiary 50 -
______ ______
(3,135) (1,396)
Equity dividends paid (1,558) (1,274)
Financing
Repayment of loans (764) (122)
Share options exercised (net of expenses) 1,607 2,319
______ ______
Net cash inflow from financing 843 2,197
______ ______
(Decrease) / increase in cash 7 (b) (352) 10,298
_____ _____
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 2004 are an abridged version of the Company's audited accounts
which will be reported on by the Company's auditors before despatch to the
shareholders and filing with the Registrar of Companies. The accounting policies
applied in 2004 are consistent with those applied in 2003.
2. Geographical analysis of turnover
The directors regard the Group's business as a single segment. Its profit and
turnover arise principally in the United Kingdom where its assets are mainly
located. The table below analyses turnover by destination:
2004 2003
£'000 £'000
United Kingdom 60,551 54,581
North America * 10,861 9,060
Continental Europe 7,920 11,316
Australasia 2,482 4,222
Others 2,635 3,935
_______ _______
84,449 83,114
_______ _______
* Sales in North America include the turnover from Bloomsbury USA, co-edition
sales and the sale of rights and licences to third parties.
In the directors' opinion, disclosure of the analysis of the profit before tax
by geographical segment would be seriously prejudicial to the Group.
3. Operating Profit
Operating profit is stated after charging / (crediting) the following
amounts:
2004 2003
£'000 £'000
Auditors' remuneration:
Statutory audit 95 83
Other services 84 64
Depreciation 323 344
Goodwill amortisation 675 1,751
Profit on disposal of tangible fixed assets - (5)
Operating lease costs:
Hire of plant and machinery 130 54
Other operating leases 949 900
Exchange loss 1,039 239
______ ______
Within trade debtors the Group has a normal provision each year for returns as
the Group's books are sold on a returnable basis which is standard industry
practice and this is adjusted for anticipated returns at the end of each
reporting period by a consistent policy. The provision at the end of 2003
reflected the high level of sales in the year including the hardcover Harry
Potter and the Order of the Phoenix which retailers had agreed not to return
until 2004 so that it would be available through the Christmas selling period.
Due to the stronger than expected sell through rate of titles to consumers from
retailers of titles including the hardcover of Harry Potter and the Order of the
Phoenix right up to its paperback release on 10 July 2004, a proportion of the
provision for returns could be released in 2004 with a net beneficial effect on
turnover of £13.39 million and a corresponding net beneficial effect on gross
profit of £3.87 million.
4. Taxation
(a) Tax charge for the year
2004 2003
£'000 £'000
Based on the profit for the year:
Corporation tax at 30% 4,807 4,243
Less double tax relief - (31)
_______ _______
4,807 4,212
Over provision in respect of prior year (54) (95)
Overseas taxation - current year - 31
_______ _______
4,753 4,148
Deferred tax (748) (233)
_______ _______
4,005 3,915
______ ______
(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:
2004 2003
£'000 £'000
Profit on ordinary activities before tax 16,184 13,630
______ ______
Profit on ordinary activities multiplied by the standard rate of
corporation tax in the UK of 30% 4,855 4,089
Effects of:
Expenses not deductible for tax purposes (primarily goodwill
amortisation) 319 504
Difference between depreciation and capital allowances 87 13
Utilisation of tax losses - (57)
Losses for the year in subsidiary company not utilised 564 409
Corporation tax relief on share options exercised (575) (919)
Difference between profit on disposal of freehold property and
taxable gain (324) -
Different rate of tax on overseas results (119) -
Reversal of database development costs deducted against corporation
tax in prior years - 216
Marginal small companies' rate relief in subsidiary companies - (12)
Adjustment to tax charge in respect of previous periods (54) (95)
______ ______
Corporation tax charge for the year 4,753 4,148
______ ______
5. Dividends
2004 2003
£'000 £'000
Interim, paid 0.522p per share (2003: 0.474p) 383 341
Final proposed 2.478p per share (2003: 1.677p) 1,773 1,175
______ ______
2,156 1,516
______ ______
6. Earnings per share
Basic earnings per share has been calculated by reference to earnings of
£12,179,000 (2003, £9,715,000) and a weighted average number of Ordinary Shares
in issue of 70,841,627 (2003, 68,901,851). The diluted earnings per share has
been calculated by reference to a weighted average number of Ordinary Shares in
issue of 72,135,053 (2003, 71,654,541) which takes account of share options.
Basic and diluted earnings per share excluding goodwill, exceptional items and
the tax effect of exceptional costs have been calculated by reference to
earnings of £12,239,000 (2003, £11,337,000).
The reconciliation between the weighted average number of shares for the basic
earnings per share and the diluted earnings per share is as follows:
2004 2003
Number Number
Weighted average number of shares for basic
earnings per share
70,841,627 68,901,851
Dilutive effect of share options 1,293,426 2,752,690
______ ______
Weighted average number of shares for diluted
earnings per share
72,135,053 71,654,541
______ ______
The reconciliation between earnings before and after goodwill amortisation and
exceptional gain is as follows:
2004 2003
£'000 £'000
Earnings after goodwill amortisation and exceptional
gain 12,179 9,715
Goodwill amortisation 675 1,751
Tax relief on goodwill amortisation - (129)
Exceptional gain (417) -
Tax relief on exceptional costs (198) -
______ ______
Earnings before goodwill amortisation and 12,239 11,337
exceptional gain
______ ______
7. Cash flow statement
(a) Reconciliation of operating profit to net cash flow from operating
activities
2004 2003
£'000 £'000
Operating profit 14,425 12,855
Depreciation of tangible fixed assets 323 344
Goodwill amortisation 675 1,751
Profit on disposal of tangible fixed assets - (5)
Reorganisation costs (582) -
Decrease / (increase) in stocks 1,085 (836)
Increase in debtors (10,955) (5,382)
(Decrease) / increase in creditors (605) 5,923
______ ______
Net cash inflow from operating activities 4,366 14,650
______ ______
(b) Reconciliation to net funds
2004 2003
£'000 £'000
(Decrease) / increase in cash in the year (352) 10,298
Decrease / (increase) in debt 702 (553)
______ ______
Movement in net funds in the year 350 9,745
Net funds at 1 January 28,325 18,580
______ ______
Net funds at 31 December 28,675 28,325
______ ______
8. Annual General Meeting
The Annual General Meeting will be held at 12 noon on Thursday 30 June 2005 at
38 Soho Square, London W1D 3HB.
9. Report and Accounts
Copies of the Report and Accounts will be circulated to shareholders shortly and
may be obtained after the posting date from the Company Secretary, Bloomsbury
Publishing Plc, 38 Soho Square, London W1D 3HB.
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