Interim Results
Bloomsbury Publishing PLC
09 September 2003
9 September 2003
BLOOMSBURY PUBLISHING PLC
Interim results for the six months ended 30 June 2003
GOOD PERFORMANCES ACROSS THE GROUP REFLECT
SUCCESSFUL EXPANSION OF BOOK PORTFOLIO
• Turnover up 18.2% to £29.00m (2002, £24.54m)
• Pre-tax profit before goodwill amortisation increased 13.7% to £3.56m
(2002, £3.13m)
• Basic earnings per share before goodwill amortisation increased 14.1% to
3.65p (2002, 3.20p)*, in line with pre-tax profits
• Interim dividend up 15% to 0.474p (2002, 0.4125p)*
• Extensive activity across all three divisions of adult, reference and
children's and international expansion in Germany and the USA
• Significant investment in titles, marketing and the development of
German acquisition - benefits to come in second half and beyond
• Strong second half publishing list
• Well positioned for further growth. Board confident of a satisfactory
outcome to the year
* Allowing for 1 for 4 share split
Commenting on the results and prospects for Bloomsbury, Nigel Newton, Chairman,
said:
'The first half of 2003 was one of the busiest in the Group's history. We
undertook a major launch schedule of new titles, established our presence in
Germany through the acquisition of Berlin Verlag, and launched the fifth Harry
Potter book.
Bloomsbury has a well balanced portfolio which offers good opportunities for
further growth. New and established authors from Ben Schott to JK Rowling are
achieving highly visible success for the Group. The performance of Harry Potter
and the Order of the Phoenix and its effect on increasing sales of the backlist
ensures that this publishing phenomenon continues to grow in size and value.
Cash flows generated from the Group's established operations will be used to
develop new investments, the most recent of which is Berlin Verlag. Bloomsbury's
publishing programme for the second half of the year is an exciting one and is
the result of the Company's expertise in identifying potential bestsellers; and
those titles are capable of generating not only substantial frontlist sales, but
also backlist revenues in future years.
The Board remains confident of a satisfactory outcome to the year and beyond
into 2004.'
Enquiries:
Tim Spratt/Charles Palmer
Financial Dynamics 020 7831 3113
Sandy Karon, PA to the Chairman,
Bloomsbury Publishing Plc 020 7494 6015
High resolution photographs can be downloaded free of charge from
www.vismedia.co.uk
CHAIRMAN'S STATEMENT
OVERVIEW OF RESULTS
The first half of 2003 was one of the busiest in the Group's history. We
undertook a major launch schedule of new titles, established our presence in
Germany through the acquisition of Berlin Verlag, and launched the fifth Harry
Potter book.
Turnover for the six month period increased 18.2% to £29.00m (2002, £24.54m).
Excluding acquisitions, turnover increased 13.9% to £27.95m (2002, £24,54m). The
Adult Division produced a good performance on the back of the continued success
of Schott's Original Miscellany which has stayed in the bestseller list for the
last 37 weeks. Bloomsbury USA benefited from the first six-month contribution
of its new Children's list. The UK Children's list also performed very well and
benefited in part from the sales of Harry Potter and the Order of the Phoenix
which was released at the end of the period. Part of its sales were recorded in
the first half but the majority will be recorded in the second half. The gross
margin for the Group for the first six months of the year was 50.9% (2002,
46.5%)
In March, the Group made its initial move into foreign language publishing with
the acquisition of Berlin Verlag, a highly regarded German publisher of fiction
and non-fiction. Bloomsbury's long-term strategy has been to grow by retaining
and exploiting more rights in-house as we have done in America rather than
sub-licensing them for a smaller royalty income stream. Foreign language
publishing marks the next phase in retaining rights and exploiting them
ourselves at higher margins.
Marketing costs increased 59% to £5.12m (2002, £3.22m) and as a percentage of
turnover increased to 17.7% (2002, 13.1%). The key contributors to this were the
costs of launching major titles including Margaret Atwood's Oryx and Crake,
Ethan Hawke's Ash Wednesday and Sophie Dahl's The Man with the Dancing Eyes.
Another factor was the higher marketing and distribution costs of Berlin Verlag,
which will be brought into line with Bloomsbury's level in 2004. Administrative
costs for the Group increased 16.9% to £6.50m (2002, £5.56m) but as a percentage
of turnover, reduced slightly to 22.4% (2002, 22.7%).
Pre-tax profit pre-goodwill amortisation increased 13.7% to £3.56m (2002,
£3.13m), including an initial and expected operating loss pre-goodwill
amortisation of £0.47m (2002, £nil) from acquisitions. The effective rate of
corporation tax of 33.1% (2002, 33.7%) reflects goodwill on consolidation, which
is not deductible in calculating the corporation tax liability. Basic earnings
per share before goodwill amortisation increased 14.1% to 3.65 pence (2002, 3.20
pence).
CASH FLOW AND WORKING CAPITAL
Long-term underlying cash flow for the Group remains strong, though there was a
net cash outflow from operating activities of £1.87m for the six month period
(2002, £12.04m inflow), which was due to a combination of the acquisition of
Andrew Brodie Publications, investment in working capital of Berlin Verlag and
continued investment in future years' titles. Cash flow in the first half of
2002 benefited from the receipts of the sales of the Harry Potter books
following the release of the film of Harry Potter and the Philosopher's Stone in
November 2001. We anticipate a similar effect in the second half of 2003 when we
receive the cash from sales of Harry Potter and the Order of the Phoenix. Gross
investment in royalty advances for future unpublished titles at the end of June
increased by 13.3% to £12.57m (31 December 2002, £11.09m). Cash commitments
after deduction of tranches of advances already paid on these titles at the end
of June increased 10.5% to £7.26m (31 December 2002, £6.57m). As at 30 June the
Group had net cash balances of £15.44m (31 December 2002, £19.17m), which
includes £0.53m set aside for loan note holders (31 December 2002, £0.59m).
Increases in stocks and debtors in the first half were principally as a result
of Harry Potter and the Order of the Phoenix. Orders with invoices dated after
the period end are included in stocks. The increase in creditors in the period
was due to print and royalty accruals on Harry Potter and the Order of the
Phoenix. In addition, working capital movements in the period were due in part
to the first time consolidation of Berlin Verlag's accounts at 30 June 2003.
INTERIM DIVIDEND
The directors have declared a 15% increase in the interim dividend to 0.474
pence per share (2002: 0.4125 pence per share), which will be paid on 20
November 2003 to those shareholders on the register at close of business on 7
November 2003. The increase in the dividend takes account of the profit growth
and cash generating capability of the Company and also the need to retain funds
to respond to opportunities available to the Group to invest for future organic
and acquisition growth. Dividend cover was 5.9 times (2002, 6.6 times).
SHARE SPLIT
At an EGM held on 26 June 2003 a resolution was passed to subdivide the existing
Ordinary Shares into four new Ordinary Shares of 1.25p each. The purpose of this
exercise was to increase the marketability and liquidity of the Company's
Ordinary Shares.
OPERATIONAL REVIEW
Adult
The Adult Division maintained its successful track record. We ended 2002 with
two books on the Sunday Times Bestseller list: Donna Tartt's The Little Friend
reached number two and Ben Schott's Schott's Original Miscellany went to number
one and remained on the list for 37 weeks. Two further books appeared in the
top ten in the first half: Sophie Dahl's The Man with the Dancing Eyes and
Margaret Atwood's Oryx and Crake. Margaret Atwood's novel and Barbara Trapido's
Frankie and Stankie have been longlisted for the 2003 Booker Prize. Donna Tartt
won the WH Smith Literary Award and was shortlisted for the Orange Prize. Jon
McGregor's first novel, If Nobody Speaks of Remarkable Things, won the Betty
Trask Prize and the Somerset Maugham Prize.
Looking forward to the Autumn, we have a strong publishing programme including
the The Kite Runner by Khaled Hosseini, Death by Hollywood, a debut thriller by
Steven Bochco, the creator of Hill Street Blues, LA Law and NYPD Blue, and
bestselling novelist David Guterson's new novel Our Lady of the Forest. In
paperback, we are publishing Jeffrey Eugenides' Middlesex, which won the 2003
Pulitzer Prize, and Donna Tartt's The Little Friend. Finally, our non-fiction
Christmas list will include Richard Eyre's diaries, National Service, an
addition to our successful Cities Series, Prague, by John Banville, and a major
new title from Ben Schott, Schott's Food and Drink Miscellany.
Reference and Electronic Media
The period from January to June was one of active consolidation in the Division
as we integrated the Peter Collin acquisition into Bloomsbury Reference. The
titles have been fully databased, updated and improved editorially.
Consequently, we have a growing new range of language databases to which
Bloomsbury owns the copyright to and which we can exploit in print and
electronic form.
The wide variety of rights' deals in the first half ranged from extending our
electronic licences to content aggregators to licensing Armenian rights for a
bilingual edition of our Dictionary of Printing and Publishing.
We continued to sign major deals with new private and public sector customers
for the electronic version of Business - the Ultimate Resource, demonstrating
its high value as an online reference tool for all people at work. New customers
for 2003 include the Engineering Employers Federation, the main industry body
for manufacturers in the UK, supporting over 6,000 companies, who are providing
an online access service to Business via their Strategy Blueprint product, and
Edexcel, one of the UK's largest exam awarding bodies, who are integrating
Business into their e-learning platform for Certificate and Diploma in
Management courses. Other recent customers include Schering Healthcare, Devon
County Council, the NHS Leadership Centre and the North West Development Agency.
The Encarta database is being updated for the publication of the second edition
of the Encarta World English Dictionary. Our rights' licensing strategy for this
database has continued with a major deal for all the range, including
bilinguals, in China, a growing market for English language dictionaries.
The Macmillan Learner's Dictionary series continued to gain critical acclaim and
market share in the large ELT dictionary market around the world. The Macmillan
Essential Dictionary was published in the Spring in print and electronic form. A
significant rights deal for this range of dictionaries was also concluded in
China.
A&C Black
A&C Black continued to increase its turnover as a result of organic growth and
the integration of the three acquisitions made in 2002 and one early in 2003.
Recent successes from these acquisitions include groundbreaking new publications
such as The Migration Atlas from the Poyser ornithology list, and the re-launch
of the Reed's Marine Engineering Series aimed at professional mariners
worldwide. Andrew Brodie Publications, acquired in January 2003, complements our
own schools titles and includes major sellers in the home learning market.
Publishing highlights in the first half have included the widely acclaimed Wild
Flowers of Britain and Ireland and A Book of Pots from Kate Malone, one of
Britain's best known potters.
We look forward to a strong Autumn with new additions to the Whitaker's series
and some high profile sports and fitness books including Fitness on A Plate,
from sports nutritionist Anita Bean, and Marja Putkisto's The Body Lean and
Lifted.
Children's
The first half was very strong for the Children's Division. During the period we
consolidated our reputation in fiction publishing by winning the Carnegie Medal
for Sharon Creech's Ruby Holler. We also published a fine debut novel, A
Gathering Light by Jennifer Donnelly.
After great anticipation Harry Potter and the Order of the Phoenix was launched
on 21 June. The level of interest in the series is unprecedented and underlines
that it will provide significant revenues for the Group for many years to come.
Two further books are still to be written in the series and there are further
films of the books in the pipeline. Sales of the books are in line with our
expectations.
In the Autumn, we have another Sharon Creech novel, Granny Torrelli Makes Soup,
a new novel by Celia Rees, Pirates!, a historical adventure, House Of
Windjammer, by Viv Richardson, and the second novel in Mary Hoffman's trilogy,
Stravaganza. We will also be publishing the paperback edition of Neil Gaiman's
Coraline.
Bloomsbury USA
Bloomsbury's reputation in the US is growing. We have had great success this
year in acquiring high profile authors for the Adult list in both fiction and
non-fiction including David Leavitt, Joanna Trollope, Stanley Bing, as well as
New Yorker writers Elizabeth Kolbert, Robert Sullivan and David Gilbert. We have
increased our success rate in acquiring world rights and have hired a US-based
rights director to maximize the exploitation of rights and licensing across our
growing US list.
The US market was flat during the first half of the year. We have been giving
our titles further reach by establishing relationships with non-traditional
outlets. The Adult list has suffered this year from high returns, although this
was offset by the Children's list, which is enjoying success with its picture
book list and has performed better than budgeted.
The list for the second half of the year is strong. Schott's Original Miscellany
hit the number five position on the New York Times Bestseller list when it was
launched in America in August. Indications are that it could repeat the high
performance of the book in the UK. On the Children's list, Celia Rees's Pirates!
will be published in September and is predicted to be a major seller.
The US operation is building momentum. New titles have been signed up by some of
Bloomsbury USA's major authors such as Anthony Bourdain, Kevin Conley and
Douglas Coupland. Given the reputation we have built in the US market, we will
continue to invest prudently in our US operations. We are planning to increase
the number of new titles published in the Children's list by 14%, and will also
increase the number of books published in the Adult list in 2004 by about 25%.
The additional new books in the adult list will primarily comprise major
bestselling authors. Extra personnel are being taken on in the US to enable this
plan for growth to be implemented.
Berlin Verlag
Berlin Verlag was acquired in March 2003 and is being integrated into the Group.
By the end of June, we had invested Euro 1.95m in the working capital of the
company to fund its programme of expansion including the newly formed children's
publishing operation. Its authors include Nadine Gordimer, Margaret Atwood,
Richard Ford, Peter Esterhazy, Peter Nadas, Zeruya Shalev, Elke Schmitter, Ingo
Schulze and Tilman Spengler. Several of Berlin Verlag's authors currently are
published by Bloomsbury in English. Bloomsbury and Berlin share the same vision:
to identify bestselling authors and publish books of the highest literary
quality. The partnership with Bloomsbury is already enabling Berlin to invest
more aggressively in the German language market, to attract new authors and to
increase market share in a country that has one of the highest readership levels
in the world.
We have already published a number of major titles in Germany in 2003 including
Margaret Atwood's Oryx and Crake, the Hungarian novelist Peter Esterhazy's,
Improved Edition and Susanne Riedel's Die amerikanische Frau. In paperback, the
most important titles in the first half of the year were Ben Jelloun's book on
Islam, Peter Esterhazy's Harmonia Caelestis and Yasmina Reza's first novel Eine
Verzweiflung.
Looking forward to the Autumn, we will be publishing Frances Itani's Deafening,
Gary Shteyngart's The Russian Debutante's Handbook and Khaled Hosseini's The
Kite Runner; the last two have already been published by Bloomsbury in English
in the UK. We also have a new collection of short stories by Nadine Gordimer,
Loot. In non-fiction, our lead titles for the Autumn are Stephen Pinker's The
Clean Slate, which was a bestseller in the US, and Orlando Figes' Natasha's
Dance about Russian culture, both are big books in every sense and have great
potential. The new Children's list is up and running and has six titles for
publication in the Autumn, including Celia Rees's, Pirates! which will also be
published in English by Bloomsbury UK and Bloomsbury USA.
Although the German book market continues to be flat, there are signs that the
market may begin to improve over the next twelve months. Our investment in
Berlin is long-term and titles are already being acquired for 2004 onwards. Our
strategy is to increase our share of the German market by using Bloomsbury's
strong balance sheet to acquire quality authors and also to give Berlin the
added benefit of Bloomsbury's strength in acquiring world rights to books. The
Children's list which will be launched under the Bloomsbury Children's imprint,
is already generating considerable interest in the German book market and there
will be a much broader list for 2004.
Berlin is expected to make an operating loss for 2003. However, with the
increased investment and rationalisation of operating costs we expect the
operation to be making contributions to the Group going forward.
OUTLOOK
Bloomsbury has a well balanced portfolio which offers good opportunities for
further growth. New and established authors from Ben Schott to JK Rowling are
achieving highly visible success for the Group. The performance of Harry Potter
and the Order of the Phoenix and its effect on increasing sales of the backlist
ensures that this publishing phenomenon continues to grow in size and value.
Cash flows generated from the Group's established operations will be used to
develop new investments, the most recent of which is Berlin Verlag. Bloomsbury's
publishing programme for the second half of the year is an exciting one and is
the result of the Company's expertise in identifying potential bestsellers; and
those titles are capable of generating not only substantial frontlist sales, but
also backlist revenues in future years.
The Board remains confident of a satisfactory outcome to the year and beyond
into 2004.
Nigel Newton
Chairman
9 September 2003
RESULTS
The consolidated unaudited profit and loss account for the six months ended 30
June 2003 was as follows:
6 months 6 months 6 months 6 months Year
ended ended ended ended ended
30 June 30 June 30 June 30 June 31 December
2003 2003 2003 2002 2002
(unaudited) (unaudited) (unaudited) (unaudited) (audited)
Continuing
operations Acquisitions Total Total Total
£'000 £'000 £'000 £'000 £'000
Turnover 27,947 1,053 29,000 24,537 68,016
Cost of sales (13,751) (490) (14,241) (13,132) (39,764)
Gross profit 14,196 563 14,759 11,405 28,252
Marketing and distribution costs (4,753) (367) (5,120) (3,221) (7,771)
Administrative expenses (5,835) (667) (6,502) (5,560) (10,339)
Goodwill amortisation (318) (367) (685) (300) (1,362)
Operating profit 3,290 (838) 2,452 2,324 8,780
Net interest receivable 418 504 982
Profit on ordinary activities before 2,870 2,828 9,762
taxation
Taxation (949) (953) (3,061)
Profit on ordinary activities after 1,921 1,875 6,701
taxation
Dividends (325) (282) (1,211)
Retained profit for the period 1,596 1,593 5,490
Basic earnings per share 2.82p 2.76p 9.87p
Diluted earnings per share 2.73p 2.58p 9.26p
Basic earnings per share before 3.65p 3.20p 11.54p
goodwill amortisation
Diluted earnings per share before 3.54p 2.99p 10.83p
goodwill amortisation
CONSOLIDATED BALANCE SHEET
30 June 2003 30 June 2002 31 December 2002
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Fixed assets
Intangible assets 8,817 11,417 11,162
Tangible assets 1,242 1,218 1,176
10,059 12,635 12,338
Current assets
Stocks 18,368 12,359 11,311
Debtors due within one year 33,132 9,604 20,822
Debtors due after more than one year 5,429 3,663 4,058
Cash at bank and in hand 15,443 24,957 19,174
72,372 50,583 55,365
Creditors: amounts falling due within one
year 31,364 16,655 18,683
Net current assets 41,008 33,928 36,682
Total assets less current liabilities 51,067 46,563 49,020
Creditors: amounts falling due after more
than one year 425 298 438
Provisions for liabilities and charges 278 971 302
50,364 45,294 48,280
Capital and reserves
Called up share capital 857 850 845
Share premium account 32,088 31,343 31,656
Capital redemption reserve 20 9 20
Profit and loss account 17,399 13,092 15,759
Total shareholders' funds 50,364 45,294 48,280
CONSOLIDATED CASH FLOW STATEMENT
6 months ended 6 months ended Year ended
30 June 30 June 31 December
2003 2002 2002
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Net cash (outflow) / inflow from operating (1,867) 12,045 12,011
activities
Returns in investments and servicing of finance
Interest paid (12) (22) (53)
Interest received 430 526 1,035
Net cash inflow from returns on investments and 418 504 982
servicing of finance
Taxation
Tax paid (1,784) (2,278) (5,083)
Capital expenditure
Purchase of tangible fixed assets (223) (229) (372)
Sale of tangible fixed assets 10 16 22
(213) (213) (350)
Acquisitions
Purchase of subsidiary undertakings (144) - (703)
Purchase of publishing assets (520) (1,050) (1,359)
(664) (1,050) (2,062)
Equity dividends paid - - (1,092)
Financing
Repayment of loans ( 65) (915) (1,185)
Purchase of own shares - - (1,230)
Share options exercised 444 72 391
Net cash inflow / (outflow) 379 (843) (2,024)
(Decrease) / increase in cash (3,731) 8,165 2,382
RECONCILIATION OF OPERATING PROFIT TO NET CASH FLOW FROM OPERATING ACTIVITIES
6 months ended 6 months ended Year ended
30 June 30 June 31 December
2003 2002 2002
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Operating profit 2,452 2,324 8,780
Depreciation of tangible fixed assets 160 140 316
Goodwill amortisation 685 300 1,362
Profit on disposal of tangible fixed assets (3) (6) (3)
(Increase) / decrease in stocks (6,460) 496 1,683
(Increase) / decrease in debtors (11,903) 16,795 5,514
Increase / (decrease) in creditors 13,202 (8,004) (5,641)
Net cash (outflow) / inflow from operating (1,867) 12,045 12,011
activities
RECONCILIATION TO NET FUNDS
6 months ended 6 months ended Year ended
30 June 30 June 31 December
2003 2002 2002
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
(Decrease) / increase in net cash in the period (3,731) 8,165 2,382
Decrease in debt 65 915 1,185
Movements in net funds in the period (3,666) 9,080 3,567
Net funds at 1 January 18,580 15,013 15,013
Net funds at 30 June / 31 December 14,914 24,093 18,580
ANALYSIS OF NET FUNDS
1 January Cash 30 June
2003 flow 2003
(audited) (unaudited) (unaudited)
£'000 £'000 £'000
Cash at bank 19,174 (3,731) 15,443
Debt due within 1 year (594) 65 (529)
Total 18,580 (3,666) 14,914
Debt due within one year comprises the loan notes in connection with the
acquisition of A&C Black.
RECONCILIATION OF MOVEMENTS IN CONSOLIDATED SHAREHOLDERS' FUNDS
6 months ended 6 months ended Year ended
30 June 30 June 31 December
2003 2002 2002
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Profit on ordinary activities after taxation 1,921 1,875 6,701
Dividends (325) (282) (1,211)
Purchase of own shares - - (1,230)
Share options exercised 444 72 391
Currency translation differences 44 - -
Net addition to shareholders' funds 2,084 1,665 4,651
Opening shareholders' funds 48,280 43,629 43,629
Closing shareholders' funds 50,364 45,294 48,280
NOTES TO THE ACCOUNTS:
1. The earnings per ordinary share for the six months to 30 June 2003 is based
on the profit after taxation of £1,921,000 (2002 - £1,875,000) and on a weighted
average number of ordinary shares in issue of 68,134,915 (2002 - 67,888,068).
The earnings per ordinary share for the twelve months to 31 December 2002 is
based on the profit after taxation of £6,701,000 and a weighted average number
of ordinary shares in issue of 67,899,576. The diluted earnings per share has
been calculated by reference to a weighted average number of Ordinary Shares in
issue of 70,285,779 (6 months ended 30 June 2002 - 72,621,136, year ended
31 December 2002 - 72,363,788) which takes account of share options. Basic and
diluted earnings per share excluding goodwill and the tax effect thereof have
been calculated by reference to earnings of £2,485,000 (6 months ended 30 June
2002 - £2,175,000, year ended 31 December 2002 - £7,837,000).
2. The figures for the six months ended 30 June 2003 do not comprise full
accounts. The financial information included in this document has been approved
by the Directors and prepared on a consistent basis with the accounts for the
year ended 31 December 2002. Accounts for the year ended 31 December 2002, which
received an unqualified audit report, have been lodged with the Registrar of
Companies. This announcement is being sent to shareholders and will be made
available at our registered office.
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