Interim Results
Bloomsbury Publishing PLC
21 September 2004
21 September 2004
BLOOMSBURY PUBLISHING PLC
Interim results for the six months ended 30 June 2004
- Turnover up 6.7% to £30.94m (2003, £29.00m)
- Pre-tax profit before goodwill amortisation and exceptional gain
increased 4.5% to £3.72m (2003, £3.56m)
- Basic earnings per share before goodwill amortisation and
exceptional gain increased 2.5% to 3.74p (2003, 3.65p)
- Interim dividend up 10.1% to 0.522p (2003, 0.474p)
- Good progress made in improving operational efficiencies and
identifying new revenue opportunities
• International publishing programme producing clear benefits. Jonathan
Strange and Mr Norrell has hit Number 3 on The New York Times bestseller
list and Schott's Original Miscellany Number 9 on the Der Spiegel
bestseller list in Germany.
• Investment in children's list continues with the introduction of a
baby and pre-school lists and the expansion of the picture book and
fiction lists
• Outsourcing of A&C Black distribution now complete and operating
smoothly
- Strong second half and 2005 publishing lists
- Well positioned for further growth. Board confident of a
satisfactory outcome to the year
Commenting on the results and prospects for Bloomsbury, Nigel Newton, Chairman,
said:
'With the groundwork laid in the first half, Bloomsbury is entering a very busy
phase for the second half of 2004 and into 2005. The Group is benefiting from a
number of publishing initiatives undertaken in recent years and all of our
divisions have strong publishing programmes with advance orders indicating that
we could potentially have a number of bestsellers, particularly Jonathan Strange
and Mr Norrell. We have now clearly developed strong revenue streams in both the
UK and internationally. Consequently, the Board remains confident of a
satisfactory outcome to the year and beyond into 2005.'
For further information, please contact:
Tim Spratt, Financial Dynamics 020 7831 3113
Charles Palmer, Financial Dynamics
Sandy Karon, PA to the Chairman, Bloomsbury Publishing Plc 020 7494 6015
OVERVIEW OF RESULTS
January to June was a good first half with a number of publishing successes,
including a new novel by Joanna Trollope and a striking new talent in Jennifer
Donnelly with A Gathering Light. During the first half of 2004 we finalised the
launch plans for a particularly strong programme of titles for the second half
of the year and for 2005. We also implemented our plans for the next phase of
Bloomsbury's organic growth, focusing on new revenue streams and improved
operating efficiencies to reduce costs.
Turnover for the first six months increased 6.7% to £30.94m (2003, £29.00m).
Gross profit decreased 4.8% to £14.05m (2003, £14.76m). The gross margin
percentage, as forecast, decreased from 50.9% in the first half of 2003 to 45.4%
in the first half of 2004. The 2003 margin benefited from the publication in
hardback of the new Harry Potter title.
Marketing and distribution costs were 20.5% lower at £4.07m (2003, £5.12m) and
as a percentage of turnover they decreased to 13.1% (2003, 17.7%). Higher
distribution costs were incurred in June 2003 in connection with the publication
of Harry Potter and the Order of the Phoenix. Administrative expenses increased
5.0% to £6.83m (2003, £6.50m) but as a percentage of turnover decreased slightly
to 22.1% (2003, 22.4%). These higher expenses were due to increased salary costs
and the costs of additional office space for expansion.
Net interest increased 33.3% to £0.56m (2003, £0.42m) due to higher average cash
balances and the increase in prevailing interest rates. Pre-tax profit before
goodwill amortisation and exceptional gain increased 4.5% to £3.72m (2003,
£3.56m). The effective rate of corporation tax of 23.2% (2003, 33.1%) reflects
goodwill on consolidation, which is not deductible in calculating the
corporation tax liability, the profit on share options exercised, which can be
set against the corporation tax liability, and an exceptional gain on disposal
of A&C Black's distribution centre at Eaton Socon, which is not liable to tax
due to indexation allowances.
In May we closed A&C Black's distribution centre at Eaton Socon and moved to
Bloomsbury's existing distributor, Macmillan Distribution Limited. The new
arrangement is now working smoothly. The exceptional gain of £0.56m (2003,
£nil) takes account of the net gain on disposal of the freehold warehouse of
£1.09m, less reorganisation costs of £0.45m. The figure includes an additional
£0.08m relating to the loss on the sale of the Blue Guides. Basic earnings per
share before goodwill amortisation and exceptional gain increased 2.5% to 3.74
pence (2003, 3.65 pence).
Net cash inflow from operating activities for the Group for the first six months
of the year was £1.76m (30 June 2003, outflow £1.87m). £1.42m was received from
the disposal of A&C Black's distribution centre at Eaton Socon, resulting in a
net increase in cash for the period of £2.92m (30 June 2003, outflow £3.73m).
Net cash balances at 30 June increased 10.6% to £31.32m (31 December 2003,
£28.33m).
INTERIM DIVIDEND
The directors have declared a 10.1% increase in the interim dividend to 0.522
pence per share (2003, 0.474 pence per share), which will be paid on 19 November
2004 to shareholders on the register at close of business on 5 November 2004.
The increase in the dividend takes account of the profit growth and
cash-generating capability of the Group, as well as the need to retain funds to
respond to opportunities for future expansion and acquisition growth. Dividend
cover was 8.2 times (2003, 5.9 times).
OPERATIONAL REVIEW
One of the fundamental principles of our business model for growth in both the
children's and adult divisions is the close link between Bloomsbury UK,
Bloomsbury USA and Berlin Verlag. The ability to share authors across these
major markets and exploit rights in-house gives us greater control over the
exploitation of those rights. With successful books this can lead to
significantly better margins, up to four times greater than from licences.
Jonathan Strange and Mr Norrell and Schott's Original Miscellany are two good
current examples, and both children's and adult titles are being acquired on
this basis for future publication.
Children's
At the end of 2003 we carried out a review of the children's book market in the
US and the UK. We concluded that there was still considerable potential for
growth in children's book publishing - an area where we are already well
established. The key area of development for Bloomsbury is the fiction market
for the age ranges 6 to 18. This has been underpinned by the success of A
Gathering Light by Jennifer Donnelly, which recently won the Carnegie Medal, the
most prestigious award in children's book publishing in the UK. To increase the
rate of organic growth in the children's division, we are putting in place a
larger editorial, marketing and design infrastructure in both the UK and USA.
The recruitment process is currently underway. The objectives are to increase
our market share in the young fiction and picture book markets and to provide a
comprehensive publishing programme of titles for children from birth to 18 years
of age. As well as aiming to build a more significant list of picture books, we
have also started a new line of baby and pre-school books. The first books in
the list were presented to foreign publishers at the Bologna Children's Book
Fair earlier this year and received a very positive response.
The paperback of Harry Potter and the Order of the Phoenix was published in
July. The sales of the paperback edition have been very good and according to
Booktrack it is the best selling children's book in 2004, in line with our own
management estimates.
Adult division
The Adult division has been working closely with Bloomsbury USA and Berlin
Verlag to develop an international list of bestselling authors. Bloomsbury USA
and Bloomsbury UK have especially been acquiring titles and exploiting the
German rights through Berlin Verlag's new imprint, Bloomsbury Berlin. The
financial and operational benefits of the tripartite arrangement will start to
come through this month, when we publish across all three countries Jonathan
Strange & Mr Norrell by Susanna Clarke. To date we have sold rights in 22 other
countries.
We have continued to add established writers to our current stable of authors.
In the first half these included Chang-rae Lee, Patrick McGrath, Ronan Bennett
and Whitbread winner Justin Cartwright.
We are currently preparing ourselves for a strong Autumn list launch with the
publishing programme including Sheila Hancock's memoir of her life with John
Thaw, The Two Of Us.
Reference and Electronic Media
The extensive re-branding of the former Peter Collin dictionary list is now in
place. We have now databased and updated fifteen subject dictionaries, four
English Language Teaching ('ELT') dictionaries and five ELT Vocabulary titles.
We have agreed new sales distribution arrangements in the USA for the reference
list, which up until now has only been sold to third party licensees on a small
scale. The first books in the US publishing programme will be launched in the
Autumn.
The Macmillan English Dictionary range continues to expand. The Macmillan School
Dictionary was published in the Spring and is already being reprinted by
Macmillan. Sales of this series continue to perform well.
The lead title for 2004 is the Bloomsbury English Dictionary, the fully revised
and updated second edition of the Encarta World English Dictionary, which will
be published in October. This flagship volume includes over 12,000 new words
and senses and detailed help with spelling, grammar and language use. An
extensive marketing and publicity campaign is planned for the launch.
Electronic rights in this new edition have been licensed to Microsoft.
A&C Black
In the first half of 2004, A&C Black took a number of steps to increase
profitability and prepare for future growth.
In April, the loss-making Blue Guide travel list was sold to Somerset Travel
Guides Ltd. The sale of the list is not material to the Group but the disposal
has freed up resources within the company to allow it to concentrate on core
subject areas where it has a major market share.
In May, A&C Black's distribution was transferred to Bloomsbury's distributor
Macmillan Distribution Ltd, in order to allow for future growth. This has been
completed with minimal disruption to the business. Macmillan has a
technologically advanced operation and we are already seeing benefits through
improved service to customers. Back-office sales functions and accounts, which
had previously been located at the Cambridgeshire warehouse, have been relocated
to head office.
Considerable cost savings have also been made by transferring to electronic
databases all our major reference works, including Who's Who, Whitaker's
Almanack and Black's Medical Dictionary.
INTERNATIONAL ACTIVITIES
Bloomsbury USA
As Bloomsbury USA increases its presence in the American market, it has greater
leverage to acquire more rights in the books it buys. A steady stream of
additional rights is being acquired and we have appointed a US-based Rights
Director to ensure that the maximum value is obtained from sub-licences.
We have been working to increase the operating efficiency of the US business as
it expands. The US sales and distribution contract was up for renewal earlier
this year and, due to the increased volumes of business now going through
Bloomsbury USA, we will receive better terms from the second half of this year.
In gearing up for the next phase of growth in children's publishing, Bloomsbury
USA has taken on extra staff to build its presence in the trade and school and
library markets.
Berlin Verlag
The German market experienced difficult conditions in the first half of the
year, and our main focus at Berlin Verlag has been to continue to drive future
top-line growth and reduce overheads. We have now signed an agreement with a new
distributor from the end of the year which will reduce distribution fees.
The children's list performed to budget in the first half of the year, which
bodes well for future growth in this market. We have expanded the list for the
Autumn and have in the pipeline an even more substantial list for 2005.
The new Bloomsbury Berlin list has just been launched with 10 new titles
including Schott's Original Miscellany and Susanna Clarke's Jonathan Strange &
Mr Norrell. Schott's Original Miscellany has already reached No. 9 on Der
Spiegel bestseller list and No. 8 on the Amazon Deutschland bestseller list.
From 1 July, Bloomsbury UK moved its German export business from a third-party
sales force to the new Berlin Verlag sales force. This will enable us to
exercise more control over the sale of books and also to retain part of the
sales commission, previously paid to the agent.
Berlin Verlag is now firmly re-established as an independent operation in the
German book publishing market. While the company continues to require
investment, we are confident that with increasing revenues and reduced costs it
will begin to contribute to Group profit.
BOARD CHANGES
As of today, to comply with market best practice, the Board of Bloomsbury
Publishing Plc has been reduced in number from twelve to six members comprising
three executive directors, Nigel Newton, Colin Adams, Liz Calder, and three
non-executives, Paul Scherer, Michael Mayer and Charles Black. Paul Scherer,
who was recently appointed as Senior Non-Executive Director, is also appointed
as Vice Chairman of Bloomsbury Publishing Plc. A Nominations Committee has also
been appointed. The six executives moving from the Plc Board have been
appointed to directorships of a new management board, Bloomsbury Book Publishing
Company Limited, which also includes the Plc Directors. They are Jill Coleman,
Minna Fry, Sarah Odedina, Alexandra Pringle, Kathy Rooney and David Ward. On
the expiry of my current three-year contract, I intend to sign a new service
contract with a rolling one-year notice period from either party.
The Remuneration Committee recently asked external remuneration consultants (New
Bridge Street Consultants LLP) to advise on the creation of a new share
incentive plan to replace our previous share option schemes, which have now
closed. The new plan will be set up for executive directors and employees. It
was discovered that, due to a misinterpretation of the previous scheme rules,
some options had been granted in excess of the option scheme limits. Options
held by executive directors equal to the number of excess options were cancelled
today for no consideration, details of which are to be found in the notes to the
Accounts.
OUTLOOK
With the groundwork laid in the first half, Bloomsbury is entering a very busy
phase for the second half of 2004 and into 2005. The Group is benefiting from a
number of publishing initiatives undertaken in recent years, and all of our
divisions have strong publishing programmes with advance orders indicating that
we could have a number of bestsellers. We now have clearly developed strong
revenue streams in both the UK and internationally. Consequently, the Board
remains confident of a satisfactory outcome to the year and beyond into 2005.
Nigel Newton
Chairman
21 September 2004
RESULTS
The consolidated unaudited profit and loss account for the six months ended 30
June 2004 was as follows:
6 months 6 months Year
ended ended ended
30 June 30 June 31 December
2004 2003 2003
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Turnover 30,937 29,000 83,114
Cost of sales (16,883) (14,241) (39,632)
Gross profit 14,054 14,759 43,482
Marketing and distribution costs (4,065) (5,120) (13,147)
Administrative expenses (6,830) (6,502) (15,729)
Goodwill amortisation (337) (685) (1,751)
Operating profit 2,822 2,452 12,855
Profit on sale of fixed assets in
continuing operations 1,091 - -
Loss on sale of publishing assets (79) - -
Reorganisation costs in continuing operations
(456) - -
Profit on ordinary activities before interest 3,378 2,452 12,855
Net interest receivable 556 418 775
Profit on ordinary activities before taxation 3,934 2,870 13,630
Taxation (914) (949) (3,915)
Profit on ordinary activities after taxation 3,020 1,921 9,715
Dividends (369) (325) (1,516)
Retained profit for the period 2,651 1,596 8,199
Basic earnings per share 4.28p 2.82p 14.10p
Diluted earnings per share 4.15p 2.73p 13.56p
Basic earnings per share before goodwill 3.74p 3.65p 16.45p
amortisation and exceptional gain
Diluted earnings per share before goodwill 3.63p 3.54p 15.82p
amortisation and exceptional gain
CONSOLIDATED BALANCE SHEET
30 June 2004 30 June 2003 31 December 2003
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Fixed assets
Intangible assets 11,029 8,817 11,359
Tangible assets 822 1,242 1,218
11,851 10,059 12,577
Current assets
Stocks 14,735 18,368 12,484
Debtors due within one year 20,104 33,132 26,706
Debtors due after more than one year 5,133 5,429 3,707
Cash at bank and in hand 32,388 15,443 29,472
72,360 72,372 72,369
Creditors: amounts falling due within one
year
21,406 31,364 25,173
Net current assets 50,954 41,008 47,196
Total assets less current liabilities 62,805 51,067 59,773
Creditors: amounts falling due after
more than one year 723 425 883
Provisions for liabilities and charges 3 278 69
62,079 50,364 58,821
Capital and reserves
Called up share capital 884 857 876
Share premium account 34,626 32,088 33,967
Capital redemption reserve 20 20 20
Profit and loss account 26,549 17,399 23,958
Total shareholders' funds 62,079 50,364 58,821
CONSOLIDATED CASH FLOW STATEMENT
6 months ended 30 6 months ended 30 Year ended
June June 31 December
2004 2003 2003
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Net cash inflow / (outflow) from 1,759 (1,867) 14,650
operating activities
Returns on investments and servicing
of finance
Interest paid (6) (12) (64)
Interest received 857 430 839
Net cash inflow from returns on 851 418 775
investments and servicing of
finance
Taxation
Tax paid (1,624) (1,784) (4,283)
Capital expenditure
Purchase of tangible fixed assets (90) (223) (389)
Sale of tangible fixed assets 1,415 10 18
1,325 (213) (371)
Acquisitions and disposals
Purchase of subsidiary undertakings (7) (144) (859)
Purchase of publishing assets - (520) (537)
Sale of publishing assets 111 - -
104 (664) (1,396)
Equity dividends paid - - (1,274)
Financing
Repayment of loans (83) ( 65) (122)
Share options exercised 584 444 2,319
Net cash inflow 501 379 2,197
Increase / (decrease) in cash 2,916 (3,731) 10,298
RECONCILIATION OF OPERATING PROFIT TO NET CASH FLOW FROM OPERATING ACTIVITIES
6 months ended 30 6 months ended 30 Year ended
June June 31 December 2003
2004 2003
(unaudited) (unaudited) (audited)
£'000
£'000 £'000
Operating profit 2,822 2,452 12,855
Depreciation of tangible fixed assets 162 160 344
Goodwill amortisation 337 685 1,751
Profit on disposal of tangible fixed assets - (3) (5)
Reorganisation costs (456) - -
Increase in stocks (2,368) (6,460) (836)
Decrease / (increase) in debtors 5,138 (11,903) (5,382)
(Decrease) / increase in creditors (3,876) 13,202 5,923
Net cash inflow / (outflow) from 1,759 (1,867) 14,650
operating activities
RECONCILIATION TO NET FUNDS
6 months ended 30 6 months ended 30 Year ended
June June
31 December 2003
2004 2003
(audited)
(unaudited) (unaudited)
£'000
£'000 £'000
Increase / (decrease) in net cash
in the period 2,916 (3,731) 10,298
Decrease / (increase) in debt 83 65 (553)
Movements in net funds in the period 2,999 (3,666) 9,745
Net funds at 1 January 28,325 18,580 18,580
Net funds at 30 June / 31 December 31,324 14,914 28,325
ANALYSIS OF NET FUNDS
1 January Cash 30 June
2004 flow 2004
(audited) (unaudited) (unaudited)
£'000 £'000 £'000
Cash at bank 29,472 2,916 32,388
Debt due within 1 year (1,147) 83 (1,064)
Total 28,325 2,999 31,324
Debt due within one year comprises the loan notes in connection with the
acquisition of A&C Black and Reed's Almanac Limited.
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
6 months ended 30 6 months ended 30 Year ended
June June
31 December 2003
2004 2003
(audited)
(unaudited) (unaudited)
£'000
£'000 £'000
Profit on ordinary activities after
taxation
3,020 1,921 9,715
Dividends (369) (325) (1,516)
Share options exercised 667 444 2,342
Currency translation differences (60) 44 -
Net addition to shareholders' funds 3,258 2,084 10,541
Opening shareholders' funds 58,821 48,280 48,280
Closing shareholders' funds 62,079 50,364 58,821
NOTES TO THE ACCOUNTS:
1. The earnings per ordinary share for the six
months to 30 June 2004 is based on the profit after taxation of £3,020,000 (2003
- £1,921,000) and on a weighted average number of ordinary shares in issue of
70,534,904 (2003 - 68,134,915). The earnings per ordinary share for the twelve
months to 31 December 2003 is based on the profit after taxation of £9,715,000
and a weighted average number of ordinary shares in issue of 68,901,851. The
diluted earnings per share for the six months to 30 June 2004 has been
calculated by reference to a weighted average number of Ordinary Shares of
72,707,392 (2003 - 70,285,779, year ended 31 December 2003 - 71,654,541) which
takes account of share options. Basic and diluted earnings per share excluding
goodwill and exceptional gain and the tax effect thereof for the six months to
30 June 2004 have been calculated by reference to earnings of £2,641,000 (2003 -
£2,485,000, year ended 31 December 2003 - £11,337,000). The diluted earnings per
share for the six months to 30 June 2004 after the cancellation of 4,395,671
shares under option as detailed in note 2 below is 4.20 pence per Ordinary Share
and has been calculated by reference to a weighted average number of Ordinary
Shares of 71,925,976. Diluted earnings per share excluding goodwill and
exceptional gain and the tax effect thereof is 3.67 pence per Ordinary Share.
2. The number of share options that were cancelled
under the 1994 approved executive share option scheme and 1994 unapproved
executive share option scheme is as follows: Nigel Newton 884,222, Colin Adams
498,227, Liz Calder 496,611, Kathy Rooney 496,611, Sarah Odedina 400,000, David
Ward 360,000, Minna Fry 420,000, Alexandra Pringle 420,000 and Jill Coleman
420,000. The total number of share options cancelled is 4,395,671. Following the
cancellation of these options, the executives still hold the following number of
options: Nigel Newton 798,778, Colin Adams 139,389, Liz Calder 419,389, Kathy
Rooney 139,389, Sarah Odedina 96,768, David Ward 40,000, Minna Fry 70,000 and
Alexandra Pringle 70,000. Jill Coleman does not currently hold any share options
outstanding.
3. The figures for the six months ended 30 June 2004
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 2003. Accounts for the year
ended 31 December 2003, 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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