Bloomsbury reports strong half-year, boosted by early purchasing from customers

On the 27th October, Bloomsbury Publishing plc published their unaudited interim results for the six months ended 31st August 2021. In these results, Chief Executive Nigel Newton stated that Bloomsbury had delivered "excellent" results in the half, with year-on-year revenue growth of 29% from the comparable period in 2020. In this article, I will provide more information on the company whilst delving into their financial results over the past five years, including their recent interim report and their annual report to Y/E 2021, to evaluate whether I think their strong performance will withstand post-pandemic and whether they are worthy of consideration for investment.

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Bloomsbury Publishing is a global publishing house based in the UK and listed on the London Stock Exchange. It was established in 1986 and is the original publisher and custodian of the Harry Potter series, which is still a large part of its success story to the present day.

Business Model

Bloomsbury plc is split into two main divisions, consumer and non-consumer. In Bloomsbury’s last annual report to Y/E 2021, the consumer arm of the business accounted for 64% of revenues (at £118.3 million), whilst the non-consumer arm accounted for 36% of revenues (at £66.8 million).

The consumer side of the business includes:

  • Adult Trade (fiction, non-fiction and cookery)

  • Children’s Trade (fiction, non-fiction, picture books, pre-school titles and activity books)

Bloomsbury makes money in their consumer segment through royalties made on their published books. In the adult and children’s trade divisions, Bloomsbury will accept manuscript submissions from prospective authors with literary agents. An author’s agent will recommend their author’s manuscript to commissioning editors that work at Bloomsbury. Then, if the commissioning editor working for Bloomsbury is interested in the manuscript, Bloomsbury will bid for the rights to that manuscript. The author and their agent will review all bids (if multiple bids have been made from different publishers) and will then decide which publishing house to go with. The author will sign a publishing agreement with the publisher, and will usually receive an advance on royalties and then further royalties once sales have bypassed the figure of the advance. The publisher makes money per-sale of the book, and this is an agreed rate of commission as a percentage of the final sale price.

In their adult trade division in Y/E 2021, frontlist titles (books which were published during that year), such as fiction work Piranesi by Susanna Clarke, performed well. From their backlist (books published in prior years), The Song of Achilles by Madeleine Miller was a bestseller and non-fiction Why I’m No Longer Talking to White People About Race by Reni Eddo-Lodge was also a bestseller.

The bulk of Bloomsbury’s turnover each year comes from its backlist, with repeat sales on its older titles and services, of which Bloomsbury has a back catalogue of over 50,000 active titles and digital services.

In their children’s division, the Harry Potter series remains a shining light in the company’s portfolio of titles, with sales of the series growing 7% in Y/E 2021. According to the UK’s Nielsen Bookscan, Harry Potter and the Philosopher's Stone was ranked as the 3rd bestselling children’s book that year, 23 years on from its initial publication — an incredible feat for the series. A further phenomenon in the children’s division are the works of author Sarah J. Maas; her series’ Throne of Glass and A Court of Thorns and Roses are both based on successful children’s stories Cinderella and Beauty and the Beast, and are often touted by the company as significant growth drivers in this division.

Bloomsbury’s non-consumer division produces books and resources mainly in the academic and professional sectors. The academic division specialises in the arts, humanities, social sciences, law and business and management.

Their non-consumer division also comprises Bloomsbury Digital Resources. BDR was conceived in 2015, and its products cover a range of disciplines in the humanities, social sciences, visual arts and performing arts. In terms of BDR, revenue is generated predominantly via annuity-based income. BDR played a large role in Bloomsbury’s success in the Y/E 2021, with the division achieving growth of 49% from the prior year with £12.4 million in revenue.

BDR benefited greatly from the shift to online learning during the pandemic, with a 73% increase in customer base in the academic sector. Now that in-person teaching has returned, it will be interesting to see how many institutions choose to renew their subscription to this service. In Bloomsbury’s recent interim report, the company were hopeful with regards to renewals, stating that Bloomsbury Digital Resources grew by 44% in the period, with a further statement clarifying their positive position going forward: “[t]he focus on our online academic digital resource strategy means we are well placed to continue to benefit from the accelerated shift by academic institutions to digital products to support hybrid learning”.

This image shows Bloomsbury's two operating divisions: their consumer and their non-consumer division. It explains that their consumer division puvlishes trade books for both adults and children in print, ebook, and audio book formats, and sells these books globally. The consumer division in the Y/E 2021 made £14.2 million in profit before taxation, amortisation of acquired intangible assets and other highlighted items and it made £188.3m in revenue. Their non-consumer division comprises the Academic & Professional, Special Interest and Education publishing subdivisions within Bloomsbury. The non-consumer division made £5.4m in profit before taxation, amortisation of acquired intangible assets and other highlighted items. The non-consumer division made £66.8m in revenue.
Source: Bloomsbury's Y/E 2021 Annual Report

Recent Performance

The image shows a table that is comparing Bloomsbury's results in the half year 2021 to the comparable first half year in 2020. Revenue grew by 29%; profit before taxation and highlighted items grew 220%; profit before taxation grew 265%; diluted earnings per share, excluding highlighted items grew 210%; diluted earnings per share grew 263%; net cash grew by 1%; and interim dividend grew by 5%.
Source: Bloomsbury's Interim Report for Half Year ending August 2021

The financial table above is taken from Bloomsbury’s interim report. As you can see, their revenue growth from the comparable period in 2020 was 29%. As explained by their CEO, part of this growth was due to customers ordering stock earlier than in previous years, as retailers and online booksellers must ensure that they have sufficient stock for Christmas due to potential supply chain problems. This is explained further in the Risks section of this article below.

In terms of performance for each business segment, the consumer segment’s revenue grew by 29% to £62.9 million, from £48.6 million in 2020. There was also strong growth in their non-consumer segment, with revenue growth of 27% to £37.7 million, up from £29.7 million in 2020. In terms of profit, consumer profit before taxation and highlighted items increased by £5.6 million to £8.4 million (from £2.7 million in 2020) and in their non-consumer segment, profit before taxation and highlighted items increased by 220% to £4.6 million (2020: £1.4 million).