Interim Results
Bloomsbury Publishing PLC
13 September 2005
13 September 2005
Bloomsbury Publishing Plc
Interim Results for the six months to 30 June 2005
- Revenue up 14.3% to £35.37m (2004, £30.94m)
- Pre-tax profit before exceptional items increased 12.4% to £4.08m
(2004, £3.63m)
- Basic earnings per share before exceptional items increased 9.0% to
3.99p (2004, 3.66p)
- International activities producing clear benefits, with Bloomsbury
increasing its publishing programme in the US and Germany
- Latest Harry Potter title has broken all launch records
- Strong publishing lists for second half and into 2006
- Well positioned for further growth
- Board confident of a satisfactory outcome to the year and reiterates
expectation that profit before tax and goodwill impairment, if any, will be not
less than £20m for the year ended 31 December 2005.
Commenting on the results and prospects for Bloomsbury, Nigel Newton, Chairman,
said:
'Bloomsbury has produced a strong set of interim results for the first half,
reflecting the success of new titles, the growth of our publication programme
and the increasing international expansion of the Group. Our overseas operations
in the USA and Germany continue to build on their successes and the Group's
ability to publish its titles in the world's three largest book markets is
producing clear gains.
'We remain confident of a satisfactory outcome to the year and reiterate our
expectation that profit before tax and goodwill impairment, if any, will be not
less than £20 million. Prospects in 2006 and beyond are strong.'
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 has produced a strong set of interim results for the half year ending
30 June 2005, reflecting the success of new titles and the increasing
international expansion of the Group. The figures, including comparatives, have
been prepared in accordance with International Financial Reporting Standards. We
had a number of strong titles in the first half which included the paperback
editions of The Promise of Happiness by Justin Cartwright and The Two of Us by
Sheila Hancock, which went to number one in the non-fiction bestseller list. The
integration of Walker Publishing Company, Inc. into our US operation is
proceeding well and is expected to be substantially complete by the end of
September. Our German operation produced an improved performance.
Revenue for the first six months increased 14.3% to £35.37m (2004, £30.94m) and
benefited in part from the release from the UK into the export markets only of
Harry Potter and the Half-Blood Prince. Gross profit, which also benefited from
the economies of scale achieved on the printing of the export copies of Harry
Potter and the Half-Blood Prince, increased 25.1% to £17.58m (2004, £14.05m),
with the gross margin rising to 49.7% (2004, 45.4%).
Marketing and distribution costs were 59.5% higher at £6.49m (2004, £4.07m) and
as a percentage of turnover they increased to 18.3% (2004, 13.1%). The increase
was due, in part, to distribution and commission costs incurred in the export
release of Harry Potter and the Half-Blood Prince and the marketing and
distribution costs of Walker being incurred for the first time. Administrative
expenses increased 10.9% to £7.66m (2004, £6.91m), primarily due to increased
salary costs from expansion of the Group, including Walker costs for the first
time. As a percentage of turnover, administrative expenses decreased slightly to
21.7% (2004, 22.3%).
Interest income reduced by 22.1% to £0.67m (2004, £0.86m) mainly as a result of
lower average cash balances. Finance costs were reduced to £0.02m (2004, £0.31m)
due to loan note redemptions and a one-off interest charge of £0.30m in 2004
relating to prior years' corporation tax.
Profit before tax and exceptional items increased 12.4% to £4.08m (2004,
£3.63m.). The effective rate of corporation tax for the six months was 29.8%
(2004, 21.2%). In 2004, there was an exceptional gain on the disposal of a
freehold warehouse which was closed during the year and a loss on sale of the
Blue Guides List. There was no capital gains tax liability on the disposal due
to indexation and other allowances. The tax rate also takes account of other
allowances such as share options. In view of the reducing number of share
options held by employees, it is assumed that an equivalent deduction will not
be available in the second half of 2005. As a consequence, the effective tax
rate applied to the results for the first six months ended 30 June had been set
at a rate which takes account of the expected lower deduction in the second half
of 2005.
Basic earnings per share before exceptional items increased 9.00% to 3.99 pence
(2004, 3.66 pence).
Net cash outflow for the Group for the first six months of the year was £4.88m
(30 June 2004, inflow £2.92m). In 2004 the Group received the proceeds from the
sale of the freehold of the warehouse less costs of the re-organisation. In the
first six months of 2005 the Group paid corporation tax of £2.62m (2004,
£1.62m). In addition, there was a significant working capital investment in the
lead up to the publication of Harry Potter and the Half-Blood Prince. As a
result net cash balances at 30 June decreased 12.1% to £23.89m (31 December
2004, £28.68m)
INTERIM DIVIDEND
The directors have declared a 14.9% increase in the interim dividend to 0.600
pence per share (2004, 0.522 pence per share), which will be paid on 18 November
2005 to shareholders on the register at close of business on 4 November 2005.
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.
OPERATIONAL REVIEW
Children's
The Children's division prepared for the launch of Harry Potter and the
Half-Blood Prince on 16 July. The book broke all previous first day sales
records not only for Harry Potter titles but also for any other book, achieving
sales of 2,009,574 in the first 24 hours in the UK alone, up 13.1% on last time
and has shown strong sales since. The launch of the latest Harry Potter title
also stimulated sales of the five earlier books, both in the UK and in the
export markets. The film, Harry Potter and the Goblet of Fire will be released
in November 2005 and should support strong continuing sales.
The Children's list got off to an excellent start at the beginning of 2005 with
a number one hardback best seller Magyk, by Angie Sage. Two other titles were
short-listed for the Carnegie medal, Al Capone Does My Shirts by Gennifer
Choldenko and Heartbeat by previous Carnegie medal winning author Sharon Creech.
The expansion of the Children's list continues. Children's series are strong
sellers in the trade and it is part of the Children's division's growth plan to
develop more series. We have acquired 14 Alexander McCall Smith backlist titles,
which will be published between October this year and July 2006. Development of
the relatively new pre-school list is also progressing well with 17 titles now
scheduled for publication in 2006.
Alfred Kropp by Rick Yancey, which is being published in the second half of this
year, has already been sold in nine languages. Other big titles for the rest of
the year include a first novel Elsewhere by Gabrielle Zevin which is being
published in the autumn and has had good support from booksellers and excellent
advance reviews.
Adult
The paperback list this year is expected to dominate revenues in the Adult
division. 2005 began with the publication of the paperback edition of Justin
Cartwright's The Promise of Happiness, which was featured on the Richard & Judy
TV programme and went on to become one of our big selling titles in the first
half. The Two of Us was released in paperback in June and went straight to
number one in the paperback non-fiction bestseller list. Anchee Min's Empress
Orchid has also been one of our big selling titles.
The publishing programme in the second half of the year is strong. We have a new
novel by John Irving, Until I Find You, and the paperback edition of Jonathan
Strange & Mr Norrell by Susanna Clarke. Leading non-fiction titles include an
authorised biography of Laurence Olivier, The Naming of Names, a ground-breaking
new book by Anna Pavord, author of The Tulip, and an exciting new project from
Ben Schott, Schott's Almanac.
The market for non-fiction continues to be buoyant. To increase our presence in
this market we have appointed a new Publishing Director, Michael Fishwick. He
joins from HarperCollins where for the last 20 years he has published a list of
prize-winning bestselling non-fiction titles including William Dalrymple, Amanda
Foreman, Baroness Thatcher, Sir John Major, Mikhail Gorbachev and many of
Britain's finest historians.
Reference & Electronic Media
The first half of 2005 saw the successful integration of the Bloomsbury
Reference and Electronic Media division with A&C Black which became a single
operating unit within A&C Black from 1 July. This will enable greater marketing
focus for the list and ensure that maximum value is derived from backlist
revenues.
Who's Who attracted widespread publicity on its publication in January, with the
new entries published as a special supplement to The Times newspaper each day
for the week of publication. For the first time, Who's Who has been made
available as a book and online package to single users.
Highlights for the spring included the publication of the new edition of the
Bloomsbury Concise Dictionary, the 41st edition of Black's Medical Dictionary,
which has now sold over 1 million copies in all editions, and the RSPB
Children's Guide to Bird Watching, the latest bestseller in our publishing
relationship with the RSPB.
A&C Black will publish a number of major titles this autumn, including The
Sunday Times Rich List available on book and CD Rom. The latest addition to the
Whitakers publication program is the Whitaker's World of Facts, a new family
reference book by renowned author, researcher and trivia collector Russell Ash.
International Expansion
Bloomsbury USA and Walker Publishing Company, Inc.
The integration of Bloomsbury USA and Walker Publishing is making good progress.
To achieve operational efficiencies, we have combined the publicity, marketing,
production and art departments. A new finance function has been created in the
USA to complete the integration process and to develop the infrastructure for
the next phase of the division's growth. The move to the new distributor is also
working well for Walker. Following the success of Bloomsbury USA's recent
publishing programme - which included Jonathan Strange & Mr Norrell, Schott's
Food & Drink Miscellany and The Line of Beauty in hardback and the acquisition
and integration of Walker, we have now achieved the scale and visibility in the
marketplace to compete with the larger publishing houses while making the most
of an extremely focused, productive and cost-conscious structure.
The publication of titles that were originally acquired in the UK continues in
the USA. In the second half of the year we will launch the paperback of Jonathan
Strange & Mr Norrell which will be the biggest in Bloomsbury USA's history.
Schott's Sporting Gaming and Idling Miscellany is due for publication in the
autumn. In Children's publishing we expect to see success with the launches of
Alfred Kropp, Drift House by Dale Peck, Akimbo and the Lions and Akimbo and the
Elephants by Alexander McCall Smith.
Berlin Verlag
Our German operations have produced a stronger financial performance in the
first half, reflecting the international expansion of the Group. Titles
originally published in the UK and USA are being successfully launched in
Germany through our fully-owned business. The year's sales started well boosted
by the presence of Schotts Sammelsurium (Schott's Original Miscellany) on the
Der Spiegel bestseller list for 52 weeks.
The paperback list continues to grow, particular success coming in the first
half from strong backlist sales of Khaled Hosseini's Drachenlaufer (The Kite
Runner), a title that continues to sell well for Bloomsbury in the UK.
Berlin Verlag's sales reps now sell Bloomsbury UK's English-language titles in
Germany with key titles being warehoused at our German distributor, Prolit.
Consequently we can supply our English-language titles direct to a much wider
range of German bookshops. Our successful launch of Harry Potter and the
Half-Blood Prince in Germany, where pre-publication orders exceeded those of
previous editions and re-orders have been strong, shows the potential of this
new arrangement in a market where the importance of English-language books is
increasing.
Prospects for the second half of 2005 are good, and we expect Berlin Verlag to
perform well. Ben Schott's Sammelsurium remains in the top ten of the Der
Spiegel bestseller list, and early indications are positive for the second Ben
Schott, Schotts Sammelsurium Essen & Trinken (Schott's Food and Drink
Miscellany). All four Berlin imprints have strong autumn lists. The Berlin
Verlag fiction list features two long-awaited books by leading authors Spate
Familie (Late Family) by Zeruya Shalev appeared in late August and Ingo
Schulze's new novel, Neue Leben (New Lives) will be published in October.
We anticipate that the success of last year's hardback fiction debut by Susanna
Clarke, Jonathan Strange & Mr Norrell, will be mirrored when Berlin publishes
the German paperback edition in late autumn.
The Children's list continues to expand in breadth and depth. Many of the key
titles for the autumn are shared with other Bloomsbury affiliated companies in
the UK and USA, including M.I. McAllister's Urchin von den Sternschuppen (Urchin
of the Riding Stars) which has, even before publication, won the 2005 Leander
Prize.
Outlook
The publishing programme for the second half of the year is an exciting one with
books from some of our bestselling authors along with potential bestsellers from
new authors. The performance of the latest Harry Potter title demonstrates its
ability to grow its readership.
Our overseas operations in the USA and Germany continue to build on their
successes and shows that the Group's capacity to publish its titles in the
world's three largest book markets is producing clear benefits. The
infrastructure of Bloomsbury USA will be fully in place this year allowing it to
move into its next phase of growth. Berlin Verlag continues to build on its
successes and over the coming years will become a more significant part of the
Group's operations.
The board remains confident of a satisfactory outcome to the year and reiterates
its expectation that profit before tax and goodwill impairment, if any, will be
not less than £20 million. Prospects into 2006 and beyond are strong as we
expand our publishing list and develop our international operations.
Nigel Newton
Chairman
13 September 2005
CONSOLIDATED RESULTS
The consolidated unaudited income statement for the six months ended 30 June
2005 was as follows:
Notes 6 months ended 6 months ended Year
30 June 30 June ended
2005 2004 31 Dec
2004
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Revenue 2 35,367 30,937 84,449
Cost of sales (17,789) (16,883) (42,270)
Gross profit 17,578 14,054 42,179
Marketing and distribution
costs (6,486) (4,065) (11,377)
Administrative expenses (7,656) (6,906) (15,854)
Operating profit 2 3,436 3,083 14,948
Profit on sale of fixed
assets in continuing
operations - 1,091 1,076
Loss on sale of publishing
assets - (79) (77)
Reorganisation costs in
continuing operations - (456) (582)
Profit before investment
income 3,436 3,639 15,365
Investment income 666 857 1,669
Finance costs (18) (306) (337)
Profit before taxation 4,084 4,190 16,697
Income tax expense (1,219) (890) (3,956)
Profit for the period 2,865 3,300 12,741
Basic earnings per share 3 3.99p 4.68p 17.98p
Diluted earnings per share 3 3.91p 4.54p 17.66p
CONSOLIDATED BALANCE SHEET
30 June 2005 30 June 2004 31 Dec 2004
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
ASSETS
Non-current assets
Property, plant and equipment 1,233 822 776
Goodwill 15,204 11,366 13,872
Publishing rights 355 - 354
Total non-current assets 16,792 12,188 15,002
Current assets
Inventories 17,513 14,735 11,614
Trade and other receivables 52,873 25,308 43,468
Cash and cash equivalents 24,242 32,388 29,120
Total current assets 94,628 72,431 84,202
TOTAL ASSETS 111,420 84,619 99,204
EQUITY AND LIABILITIES
Equity attributable to equity
holders of the parent
Share capital 900 884 894
Share premium 36,848 34,626 35,763
Capital redemption reserve 20 20 20
Share based payment reserve 298 141 217
Translation reserve 133 (60) 2
Retained earnings 37,298 27,148 36,206
Total equity 75,497 62,759 73,102
Non-current liabilities
Deferred tax - 3 -
Employee benefits 97 97 102
Total non-current liabilities 97 100 102
Current liabilities
Trade and other payables 34,087 19,596 22,792
Short-term borrowings 353 1,064 445
Current tax payable 1,386 1,100 2,763
Total current liabilities 35,826 21,760 26,000
Total liabilities 35,923 21,860 26,102
TOTAL EQUITY AND LIABILITIES 111,420 84,619 99,204
STATEMENT OF CHANGES IN EQUITY
Share Share Capital Share based Translation Retained Total
capital premium redemption payment reserve reserve earnings
reserve
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Balances at
1 January 2004 876 33,967 20 65 - 25,023 59,951
Exchange
differences on
translating
foreign
operations - - - - (60) - (60)
Profit for
the period - - - 76 - 3,300 3,376
Dividends - - - - - (1,175) (1,175)
Share issues 8 659 - - - - 667
Balances at
30 June 2004 884 34,626 20 141 (60) 27,148 62,759
Exchange
differences
on translating
foreign operations - - - - 62 - 62
Profit for
the period - - - 76 - 9,441 9,517
Dividends - - - - - (383) (383)
Share issues 10 1,137 - - - - 1,147
Balances at
31 Dec 2004 894 35,763 20 217 2 36,206 73,102
Exchange
differences
foreign operations
on translating - - - - 131 - 131
Profit for
the period - - - 81 - 2,865 2,946
Dividends - - - - - (1,773) (1,773)
Share issues 6 1,085 - - - - 1,091
Balances at
30 June 2005 900 36,848 20 298 133 37,298 75,497
CONSOLIDATED CASH FLOW STATEMENT
for the six months ended 30 June 2005
6 months 6 months ended Year
ended 30 June ended
30 June 2004 31 Dec
2005 (unaudited) 2004
(unaudited) (audited)
£'000 £'000 £'000
Cash flows from operating activities
Net profit before tax 4,084 4,190 16,697
Adjustments for:
Depreciation of tangible fixed assets 152 162 323
Amortisation of publishing rights 18 - -
Profit on sale of property, plant and
equipment (3) (1,091) (1,076)
Share based payment charges 81 76 152
Investment income (666) (857) (1,669)
Finance costs 18 306 337
3,684 2,786 14,764
(Increase) / decrease in inventories (5,910) (2,289) 1,162
(Increase) / decrease in trade and
other receivables (10,158) 5,138 (10,955)
Increase / (decrease) in trade and
other payables 9,631 (3,876) (605)
Cash (used in) / generated from
operations (2,753) 1,759 4,366
Income taxes paid (2,618) (1,624) (3,707)
Net cash (outflow) / inflow from
operating activities (5,371) 135 659
Cash flows from investing activities
Purchase of property, plant and
equipment (607) (90) (210)
Proceeds from sale of property, plant
and equipment - 1,415 1,412
Purchase of subsidiaries (33) (7) (3,296)
Sale of publishing assets - 111 111
Interest received 666 857 1,669
Cash acquired with subsidiaries - - 50
Net cash generated from / (used in)
investing activities 26 2,286 (264)
Cash flows from financing activities
Share options exercised 510 584 1,607
Equity dividends paid - - (1,558)
Interest paid (18) (6) (32)
Repayment of loans (26) (83) (764)
Net cash generated from / (used in)
financing activities 466 495 (747)
Net (decrease) / increase in cash and
cash equivalents (4,879) 2,916 (352)
Cash and cash equivalents at beginning
of period 29,120 29,472 29,472
Unrealised exchange gain on cash and
cash equivalents 1 - -
Cash and cash equivalents at end of
period 24,242 32,388 29,120
ACCOUNTING POLICIES UNDER IFRS
The accounting policies used in the preparation of the accounts for the six
months ended 30 June 2005 are consistent with those used in the statutory
accounts for the year ended 31 December 2004, except insofar as is necessary to
comply with International Financial Reporting Standards, as explained elsewhere
in this document.
(a) ACCOUNTING CONVENTION
The consolidated financial statements have been prepared in accordance with
International Financial Reporting Standards (IFRS) as endorsed by the European
Union (EU).
(b) GOODWILL AND INTANGIBLE ASSETS
Goodwill, being the excess of the cost of acquisition over the fair value of
assets acquired, is capitalised as an intangible asset.
In accordance with IFRS 3, goodwill has been frozen at its net book value at 1
January 2004 and is not amortised, but instead is subject to annual impairment
reviews. Any impairment losses are recognised immediately in the income
statement.
Negative goodwill is credited to the income statement in the period in which it
arises.
Other intangible assets are capitalised and amortised over their expected useful
lives at the following rates:
Publishing Rights 10%
(c) TURNOVER
Turnover represents the amount derived from the provision of goods, services and
rights falling within the Group's ordinary activities, after deduction of trade
discounts, value added tax and anticipated returns. Turnover from book
publishing is recognised from the date of invoice. Turnover from the sale of
publishing and distribution rights, including film, paperback, electronic,
overseas publishing rights and sponsorship, is recognised at the time such sales
are achieved.
(d) STOCKS AND WORK IN PROGRESS
Stocks include paper, sheets and bound stock. The cost of work in progress and
finished stock represents the amounts invoiced to the Group for paper,
origination, printing and binding. Stocks are valued at the lower of cost and
net realisable value.
(e) DEPRECIATION
Property, plant and equipment are depreciated in order to write down their cost
by equal annual instalments over their expected useful lives at the following
rates:
Freehold buildings 2% per annum
Short leasehold improvements 7-17% per annum
Furniture and fittings 10% per annum
Computer equipment 20% per annum
Other office equipment 20% per annum
Motor vehicles 25% per annum
Freehold land is not depreciated.
Depreciation is pro-rated in the years of acquisition and disposal of assets.
(f) ROYALTY ADVANCES TO AUTHORS
Advances to authors are written off to the extent that they are not covered by
anticipated future sales or firm contracts for subsidiary rights receivable.
(g) DEFERRED TAXATION
Provision is made for deferred taxation on all temporary differences between the
carrying amount and the tax bases of assets and liabilities. Deferred tax assets
are only included in the financial statements where recovery is more likely than
not. Deferred taxation is measured on a non-discounted basis.
(h) FOREIGN CURRENCIES
Assets and liabilities in foreign currencies are translated into sterling at
closing rates of exchange at the balance sheet date. Income statements and cash
flows of overseas subsidiary companies are translated into sterling at average
exchange rates for the year.
Exchange differences arising from the retranslation of opening net assets and
income statements at closing rates of exchange are dealt with as movements in
equity. All other exchange differences are charged or credited to the income
statement.
(i) OPERATING LEASES
Operating lease rentals are charged to the income statement as they fall due.
(j) PENSION COSTS
Pension costs relating to defined contribution pension schemes are charged to
the income statement in the period for which contributions are payable.
Until 1997 a subsidiary company operated a defined benefits scheme. The
liability in respect of the defined benefits scheme is the present value of the
defined benefit obligations at the balance sheet date, calculated using the
projected unit credit method, less the fair value of the scheme's assets.
In accordance with IFRS 1, the Group has recognised the pension liability in
full as at 1 January 2004. The current service cost, interest on scheme
liabilities and all actuarial gains and losses are recognised in the income
statement.
(k) SHARE-BASED PAYMENT
Charges for employees' services received in exchange for share-based payment
have been made for all options granted after 7 November 2002 in accordance with
IFRS 2.
Options granted under the Group's share option schemes are equity settled. The
fair value of such options has been calculated using the Black Scholes model,
based on publicly available market data, and is charged to the income statement
over the vesting period.
(l) CONSOLIDATION
The consolidated financial statements comprise the accounts of the Company and
its subsidiaries at the year end. The results of the subsidiaries are accounted
for in the income statement from the date of acquisition.
NOTES TO THE ACCOUNTS
1. Interim accounts
The figures for the six months ended 30 June 2005 do not comprise full accounts.
The financial information included in this document has been approved by the
Directors. The figures relating to the year ended 31 December 2004 have been
derived from the statutory accounts for the year, adjusted to comply with
International Financial Reporting Standards. The statutory accounts for the year
ended 31 December 2004, which received an unqualified audit report, have been
lodged with the Registrar of Companies.
2. Segmental analysis
The Group considers that as the main thrust of its growth is to develop its
international publishing strategy, the primary segmental reporting should be
based on geographical segments. The analysis by geographical segment is shown
below.
Revenue 6 Months ended 6 Months ended Year ended
30 June 30 June 31 December
2005 2004 2004
£'000 £'000 £'000
United Kingdom 31,027 27,670 71,564
North America 2,319 2,136 8,985
Continental Europe 2,021 1,131 3,900
35,367 30,937 84,449
Segment result 30 June 30 June 31 December
2005 2004 2004
£'000 £'000 £'000
United Kingdom 3,487 4,198 16,899
North America 83 (430) (543)
Continental Europe (44) (679) (1,405)
3,526 3,089 14,951
Unallocated central costs (90) (6) (3)
Operating profit 3,436 3,083 14,948
3. Earnings per share
The earnings per ordinary share for the six months to 30 June 2005 is based on
the profit after taxation of £2,865,000 (2004 - £3,300,000) and on a weighted
average number of ordinary shares in issue of 71,878,716 (2004 - 70,534,904).
The earnings per ordinary share for the twelve months to 31 December 2004 is
based on the profit after taxation of £12,741,000 and a weighted average number
of ordinary shares in issue of 70,841,627. The diluted earnings per share for
the six months to 30 June 2005 has been calculated by reference to a weighted
average number of Ordinary Shares of 73,293,754 (2004 - 72,707,392, year ended
31 December 2004 - 72,135,053) which takes account of share options.
4. Post balance sheet events
The directors have proposed an interim dividend of 0.600 pence per share (2004,
0.522 pence per share), which will be paid on 18 November 2005 to shareholders
on the register at close of business on 4 November 2005. Based on the number of
shares in issue at 30 June 2005, the interim dividend will be £432,000 (2004,
£383,000). For the year ended 31 December 2004, the final dividend proposed by
the directors but not provided in the financial statements was 2.478 pence per
share.
EFFECT OF CHANGES IN ACCOUNTING POLICIES ON THE FINANCIAL STATEMENTS FOR THE SIX
MONTHS ENDED 30 JUNE 2004 AND THE YEAR ENDED 31 DECEMBER 2004
Full reconciliations of the results for the six months ended 30 June 2004 and
the year ended 31 December 2004 and the equity at those dates between UK GAAP
and IFRS are set out below. The main changes are explained below.
IFRS 3 - BUSINESS COMBINATIONS
IFRS 3 requires that goodwill on acquisitions should be capitalised at cost and
subject to impairment reviews at each reporting date. Amortisation of goodwill
is not permitted.
Bloomsbury has taken advantage of the option to apply IFRS 3 prospectively from
the date of transition to IFRS (1 January 2004), rather than restate earlier
business combinations. Goodwill has therefore been frozen at net book value at 1
January 2004 and goodwill which was amortised in 2004 under UK GAAP has been
written back.
In respect of the acquisition of Walker Publishing Company, Inc. on 31 December
2004, the goodwill arising on the acquisition has been reassessed and other
identifiable intangible fixed assets, included within goodwill under UK GAAP,
have been separated out in accordance with the principles of IFRS 3 and IAS 38.
These intangible assets, which comprise only publishing rights with a fair value
of £354,000 at the date of acquisition, will be subject to systematic
amortisation charges in accordance with IAS 38, with the unallocable balance,
representing the goodwill on the acquisition, being subject to periodic
impairment reviews. As the acquisition of Walker Publishing Company, Inc. took
place on 31 December 2004, no amortisation was charged in the UK GAAP accounts
in 2004 and there is therefore no effect on the reported profit for that year.
The effect on operating profit for the year ended 31 December 2004 of the
adoption of IFRS 3 is an increase of £675,000, representing the elimination of
the goodwill amortisation charge. There is no goodwill impairment charge for
2004. As the amortisation charge in 2004 was in respect of goodwill not eligible
for tax relief, the writing back of the amortisation does not result in any
change to the tax charge.
IFRS 2 - SHARE BASED PAYMENT
The IFRS income statement includes a charge under IFRS 2 for employee share
options granted after 7 November 2002. The fair value has been calculated using
the Black Scholes model with the resulting charge spread over the vesting
period. The charge for the year ended 31 December 2004 is £152,000 and the
cumulative charge to that date is £217,000.
Corporation tax relief is given at the time that options are exercised on the
difference between the exercise price and the market value of the shares at that
date. Consequently the share based payment charge gives rise to a temporary
difference, in respect of which a deferred tax asset has been recognised.
IAS 19 - EMPLOYEE BENEFITS
Under UK GAAP, the Group had been making disclosures in its financial statements
for a number of years under the transitional provisions of Financial Reporting
Standard 17, but had not yet applied FRS 17 in full at 31 December 2004. IAS 19
is broadly similar to FRS 17, in that it requires surpluses or deficits on
defined benefit pension schemes to be recognised on the balance sheet.
IAS 19 permits a number of options for the recognition of actuarial gains and
losses. Bloomsbury has decided to recognise any variations in full in the income
statement.
The impact of the Group balance sheet at 31 December 2004 is to recognise a
gross pensions deficit of £102,000 and a related deferred tax asset of £31,000.
The profit before taxation for the year ended 31 December 2004 is reduced by
£10,000 and there is a deferred tax credit of £4,000 for the year.
IAS 21 - THE EFFECTS OF CHANGES IN FOREIGN EXCHANGE RATES
Under UK GAAP, Bloomsbury chose to fix acquired overseas goodwill in sterling at
the exchange rate ruling on the dates of the relevant acquisitions. Under IAS
21, goodwill must be denominated in local currencies and retranslated into
sterling at each reporting date at closing exchange rates. The effect of this
change is to increase the carrying value of goodwill in the Group balance sheet
at 31 December 2004 by £4,000.
Under IAS 21, translation differences in respect of the company's investment in
overseas subsidiary companies are included as a separate reserve within
shareholders' equity. In accordance with the exemption in paragraph 22 of IFRS
1, the company has deemed the opening balance on the translation reserve at 1
January 2004 to be zero.
IAS 10 - EVENTS AFTER THE BALANCE SHEET DATE
Under IAS 10 only dividends declared before the balance sheet date may be
included in the financial statements as a liability. As the final dividend for
2004 was declared at the annual general meeting on 30 June 2005, this has been
removed from the financial statements at 31 December 2004, increasing net assets
by £1,773,000.
IAS 7 - CASH FLOW STATEMENTS
The format of the cash flow statement is different under IAS 7 from its UK GAAP
equivalent, FRS 1. Cash flows are now shown under the three broad headings of
Operating, Investing and Financing Activities and some cash flows have been
reclassified as a result.
CONCLUSION
Adoption of IFRS has not had a significant effect on Bloomsbury's reported
results and has had no effect on its cash flows for the six months ended 30 June
2004, or for the year ended 31 December 2004. There has also been no significant
effect on shareholders' equity at those dates.
RECONCILIATIONS TO UK GAAP FINANCIAL STATEMENTS
INCOME STATEMENT RECONCILIATIONS
1. Six months ended 30 June 2004
UK GAAP Adjustments to IAS
comply with IAS
£'000 £'000 £'000
Revenue 30,937 - 30,937
Cost of sales (16,883) - (16,883)
Gross profit 14,054 - 14,054
Marketing and distribution
costs (4,065) - (4,065)
Administrative expenses (6,830) (76) (i) (6,906)
Goodwill amortisation (337) 337 (ii) -
Operating profit 2,822 261 3,083
Profit on sale of fixed
assets in continuing
operations 1,091 - 1,091
Loss on sale of publishing
assets (79) - (79)
Reorganisation costs in
continuing operations (456) - (456)
Profit before investment
income 3,378 261 3,639
Investment income 857 - 857
Finance costs (301) (5) (iii) (306)
Profit before taxation 3,934 256 4,190
Income tax expense (914) 24 (iv) (890)
Profit for the period 3,020 280 3,300
Basic earnings per share 4.28p 0.40p 4.68p
Diluted earnings per share 4.15p 0.39p 4.54p
INCOME STATEMENT RECONCILIATIONS
2. Year ended 31 December 2004
UK GAAP Adjustments to IAS
comply with IAS
£'000 £'000 £'000
Revenue 84,449 - 84,449
Cost of sales (42,270) - (42,270)
Gross profit 42,179 - 42,179
Marketing and distribution
costs (11,377) - (11,377)
Administrative expenses (15,702) (152) (i) (15,854)
Goodwill amortisation (675) 675 (ii) -
Operating profit 14,425 523 14,948
Profit on sale of fixed
assets in continuing
operations 1,076 - 1,076
Loss on sale of publishing
assets (77) - (77)
Reorganisation costs in
continuing operations (582) - (582)
Profit before investment
income 14,842 523 15,365
Investment income 1,669 - 1,669
Finance costs (327) (10) (iii) (337)
Profit before taxation 16,184 513 16,697
Income tax expense (4,005) 49 (iv) (3,956)
Profit for the period 12,179 562 12,741
Basic earnings per share 17.19p 0.79p 17.98p
Diluted earnings per share 16.88p 0.78p 17.66p
(i) Adjustment to comply with IFRS2
(ii) Adjustment to comply with IFRS3
(iii) Adjustment to comply with IAS 19
(iv) Deferred tax asset in respect of adjustments (i) and (iii)
EQUITY RECONCILIATIONS
1. At 1 January 2004
Capital Share based
Share Share redemption payment Translation Retained
capital premium reserve reserve reserve earnings Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Previously
reported 876 33,967 20 - - 23,958 58,821
under UK
GAAP
Change in
accounting - - - - - 1,175 1,175
policy to
comply
with
IAS 10
(Dividends)
Change in
accounting - - - 65 - (65) -
policy to
comply
with
IFRS 2
(Share
options)
Deferred
tax - - - - - 20 20
asset in
respect of
share
based
payment
charge (IAS
12)
Change in
accounting - - - - - (65) (65)
policy to
comply
with
IAS 19
(Employee
benefits)
Restated
under 876 33,967 20 65 - 25,023 59,951
IFRS
EQUITY RECONCILIATIONS
2. At 30 June 2004
Share Share premium Capital Share based Translation Retained Total
redemption payment
reserve reserve
capital £'000 £'000 £'000 reserve earnings £'000
£'000 £'000 £'000
Previously
reported 884 34,626 20 - - 26,549 62,079
under UK
GAAP
Reallocation
of - - - - (60) 60 -
translation
differences
on equity of
overseas
subsidiaries
to
translation
reserve (IAS
21)
Change in
accounting - - - - - 369 369
policy to
comply with
IAS 10
(Dividends)
Change in
accounting - - - 141 - (141) -
policy to
comply with
IFRS 2 (Share
options)
Deferred tax
asset in - - - - - 42 42
respect of
share based
payment
charge (IAS
12)
Change in
accounting - - - - - 337 337
policy to
comply with
IFRS 3
(Goodwill)
Change in
accounting - - - - - (68) (68)
policy to
comply with
IAS 19
(Employee
benefits)
Restated
under 884 34,626 20 141 (60) 27,148 62,759
IFRS
EQUITY RECONCILIATIONS
3. At 31 December 2004
Share Share premium Capital Share based Translation Retained Total
redemption payment
reserve reserve
capital £'000 £'000 £'000 reserve earnings £'000
£'000 £'000 £'000
Previously
reported 894 35,763 20 - - 33,979 70,656
under UK
GAAP
Reallocation
of - - - - (2) 2 -
translation
differences
on equity of
overseas
subsidiaries
to
translation
reserve (IAS
21)
Change in
accounting - - - - - 1,773 1,773
policy to
comply with
IAS 10
(Dividends)
Change in
accounting - - - 217 - (217) -
policy to
comply with
IFRS 2 (Share
options)
Deferred tax
asset in - - - - - 65 65
respect of
share based
payment
charge (IAS
12)
Change in
accounting - - - - - 675 675
policy to
comply with
IFRS 3
(Goodwill)
Change in
accounting - - - - - (71) (71)
policy to
comply with
IAS 19
(Employee
benefits)
Change in
accounting - - - - 4 - 4
policy to
comply with
IAS 21
(Goodwill
on
acquisition
of overseas
subsidiaries)
Restated
under 894 35,763 20 217 2 36,206 73,102
IFRS
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