Final Results

Bloomsbury Publishing PLC 03 April 2007 Bloomsbury Publishing Plc Preliminary Results for the Year Ended 31 December 2006 â€¢ Results in line with December trading update. â€¢ Pre-tax profit of Â£5.2m (2005, Â£20.1m) on turnover of Â£74.8m (2005, Â£109.1m). â€¢ Final dividend held at 3.00p (2005, 3.00p). Full year dividend increased to 3.66p (2005, 3.60p). â€¢ Investment in future titles at the year end Â£30.77m (2005, Â£22.41m). â€¢ Strong balance sheet with net cash of Â£24.3 million. â€¢ Clear on-going strategy based on strong stable of authors. â€¢ Good start to current year with a strong pipeline of titles including new books by Khaled Hosseini, author of The Kite Runner, and by JK Rowling with Harry Potter and the Deathly Hallows. Commenting on the results and prospects for Bloomsbury, Nigel Newton, Chairman, said: '2006 was a challenging year. These results are in line with the trading update we gave in December. Turning to the current year and beyond, we have in place a growth strategy which includes expanding on our current author relationships, developing new authors, web-based initiatives, content monetisation, leveraging our geographic presence, and acquisitions, all of which we believe will enhance and strengthen our position as a leading publisher.' For further information, please contact: Charles Palmer, Financial Dynamics 020 7831 3113 Overview 2006 was a challenging year. Our results, while disappointing and showing a decline in pre-tax profits, are in line with our December trading statement and reflect significant factors at the end of the year, including a tough pre-Christmas trading environment for Bloomsbury, smaller bestsellers than in previous years and not completing budgeted reference rights sales by the year-end. While we are not satisfied with this overall result, it is important to recognise strong individual performances within the Group that give us confidence about the fundamentals of our business as we look to the future. A&C Black, which we acquired in 2000, had a particularly good year, providing strong repeat revenues and profitability for the Group. Bloomsbury USA exceeded its revenue targets for the year, on the strength of a diverse and growing list of titles, and our German company achieved its second consecutive year of profitability. Although the UK market proved to be problematic for us, many Bloomsbury titles achieved success during the year, including Empress Orchid by Anchee Min and In Search of Perfection by Heston Blumenthal. We are keenly aware that the dynamics of our industry are changing. In addition, the combination of pricing pressure from retailers and pressure from authors' agents for advances is squeezing margins. The industry is coming to grips with these factors, and we are focused on taking the initiative by adapting our business to the new market environment we face. We have put in place a strategic plan to grow revenues from 2007 onwards. This business development strategy is multi-faceted, building on our existing strengths as well as opening doors to new opportunities. It can be summarised as follows: 1. Author relationships and content creation - Capitalising on our proven track record in developing new authors and projects. Our staff have shown creativity and flair in bringing unknown authors to great sales success. Previously unpublished authors published by Bloomsbury whose works have sold more than one million copies include Ben Schott, David Guterson, Khaled Hosseini and JK Rowling. Projects conceived in-house which have had turnover well in excess of Â£1 million include Business: The Ultimate Resource, Encarta World English Dictionary and Macmillan English Dictionary. We are currently accelerating these activities and our forward programme of new projects for future publication is already at a significant level. 2. On-going revenues - Publishing new works by the significant stable of authors we have built up and whose many books have for 21 years formed a vital part of the on-going revenues of the Group. In most cases, these authors do not have long-term or multi-book contracts but consistently bring their new works to Bloomsbury because of the lasting strength of the relationships they have with their editors and the company. Repeat authors who will be published this year and in Spring 2008 alone include Michael Ondaatje, Joanna Trollope, Celia Rees, JK Rowling, Anthony Bourdain and Khaled Hosseini. We will also continue to develop the new authors whose first books for the Group have been published recently or are still in the pipeline. In the UK these include in particular our new history authors such as David Dimbleby, William Dalrymple, AC Grayling and Frederick Taylor, and in food and cookery Heston Blumenthal and Hugh Fearnley-Whittingstall. 3. Geographic leverage - Investing to further develop our business internationally, specifically in the USA and Germany, both markets where we are successfully growing market share and where there is great potential to make even greater inroads. Key to our success will be the continued acquisitions of rights across all our territories. With authors such as Ben Schott and William Boyd, we have already proved that our international publishing strategy can develop bestsellers internationally. 4. Content monetisation - In the digital arena we are taking full advantage of our existing expertise as a content creator, owner and licensor to monetise that content on the internet, to seek opportunities in marketing, to exploit it in new markets and partnerships, and to benefit from the cost-reduction potential offered by print on demand and e-books. TV and film rights can also provide the opportunity for significant revenue streams as we have seen with Larklight. 5. Web-based initiatives - Enhancing our already pioneering activities in new media and electronic publishing to develop opportunities in web marketing and distribution, capitalising on the advances in print on demand and e-books and other opportunities of the digital era. Examples of this activity include our involvement in a project which will we believe create a unique community for readers, writers and publishers, host user-generated content and generate significant on-line advertising opportunities as well as our digitisation project. 6. Acquisitions - Bloomsbury has successfully made 10 acquisitions which have brought real benefits to the business. We are now actively seeking larger acquisitions and looking at companies that not only complement existing activities but broaden our media involvement. We remain focused on opportunities that can either deliver significant advantages of scale or take our business into new (but related) and profitable directions. We have proven ourselves to be effective managers and integrators through our prior acquisition history. Fundamental to our success is the superb stable of authors who write regularly for Bloomsbury and the first-class team of employees who have demonstrated their ability over more than 20 years to find, develop, promote and publish books of the highest calibre. They form the solid foundation of our business as we continue to publish compelling books that consumers want to purchase. We see digitisation as an opportunity rather than a threat. It holds the potential to expand distribution of our content, to monetise that content in new ways and to radically change our cost structure. In our reference division, over 200 titles are now available in e-book format, selling to libraries worldwide and providing an extra revenue stream which is expected to increase substantially from 2007 onwards. A new programme of converting reference titles which are currently unavailable, or slow selling, to print on demand is also producing new sources of repeat revenue and substantial cost savings. We have also put in place our own digitisation programme with a 'Look Inside' widget to enable more of our content to be accessed in web searches which will lead to future book sales and harness the power of online social networking websites. We have a long history of digital content licensing, and we are confident that we can build on that history as the digital world continues to expand in new and exciting ways. We expect 2007 to be a strong year for the Company. In the UK, Restless and Agent Zigzag, two of our 2007 titles, have already achieved bestseller status, and later in the year we will also be publishing two major titles, Harry Potter and the Deathly Hallows and A Thousand Splendid Suns, a new book by Khaled Hosseini whose first novel, The Kite Runner, has sold more than one million copies for us. The Company is actively seeking larger acquisitions. Since Bloomsbury's acquisition of A&C Black, it has doubled its turnover while remaining strongly profitable. Our smaller acquisitions of the past few years, including most recently the Methuen Drama list in June 2006, are performing well. We believe that our disciplined approach will prove to be beneficial and that the opportunities for larger acquisitions will be more favourable in 2007 and 2008. Financial performance Turnover decreased by 31.5% to Â£74.77m (2005, Â£109.11m) due to lower than expected pre-Christmas sales of our titles in the UK retail trade, smaller bestselling titles than in previous years and not completing budgeted reference rights sales prior to the year-end. It should also be borne in mind for comparative purposes that in 2005 we published the hardback of Harry Potter and the Half-Blood Prince. Revenues in the UK decreased 41.8% to Â£53.88m (2005, Â£92.62m). Revenues from US operations rose 36.1% to Â£15.01m (2005, Â£11.03m) on the back of strong sales from lead titles and growth in the backlist. Revenues from Continental Europe, which were generated by Berlin Verlag, increased 7.5% to Â£5.88m (2005, Â£5.47m). Profit before tax decreased 74.2% to Â£5.20m (2005, Â£20.13m). Basic earnings per share decreased by 75.4% to 4.99 pence (2005, 20.30 pence). Diluted earnings per share decreased by 75.4% to 4.90 pence (2005, 19.93 pence). At the end of the year, the Group had net cash balances of Â£24.30m (2005, Â£53.51m). The decline in cash during the year is the result of working capital movements, primarily payment of royalties from 2005 publications and investments in new titles for publication in 2006 and beyond. We also completed the acquisition for cash of the Methuen Drama list during the year. We continue to invest in future growth by acquiring new authors and titles. Our strong balance sheet underpins our investment programme and augurs well for our future. At 31 December 2006, the Group had under contract 1,149 titles (2005, 1,062) for future publication, with a gross investment of Â£30.77m (2005, Â£22.41m). After payment of the initial tranches of advances to authors, our liability for future cash payments on these contracted titles at that date was Â£18.48m (2005, Â£12.05m). UK Publishing Children's There has been a movement in the children's book market towards the adult model: a market primarily dominated by fewer key authors, and fewer bestsellers. Booksellers are focusing on those authors with a strong track record, and supermarkets are selling more children's titles. Against this backdrop, we had a good year in 2006. Our fiction was strongly supported by the chains in both monthly and seasonal promotions. We also had excellent review coverage of our titles which helped ensure their sell-through in the shops. Our picture books competed well, with titles by Mike Terry, Ellie & Elvis and The Selfish Crocodile and Other Animals, performing particularly strongly. Our strategy was to publish into new areas for Bloomsbury Children's Books. Traditionally strong in the area of literary fiction, we focused on the continued development of our pre-school list and co-editions, as well as launching new series in the commercial 5 - 9 year-old fiction area. These included a twelve book series, Mermaids SOS, of which we published the first six titles in 2006. The next six titles are scheduled for publication in the first half of 2007. We also published Open Season, our first series of film tie-in titles, which performed well. Surf's Up is the next series planned for the Summer, an animated adventure starring Jeff Bridges, James Woods and Shia LaBeouf which should be a big Summer family film for young children. We have had a number of children's best-sellers in 2006. Harry Potter and the Half-Blood Prince, as well as the other titles in the series, has been in the paperback bestseller lists. Other titles that have appeared on the lists are Richard Horne's very successful 101 things to do... books and the Septimus Heap series in both hardback and paperback, as well as Araminta Spook, both by Angie Sage. Small Steps by Louis Sachar was a hardback bestseller for us in 2006, and in the Summer of 2007 we will publish the paperback edition. His previous novel, Holes, has been one of our key backlist titles for many years. Our long-standing strategy to acquire world rights resulted in a large number of translation sub-licence deals being concluded during the year. Highlights include Larklight by Philip Reeve which was sold to twelve countries, The Declaration sold in eleven, Tanglewreck in seventeen, as well as a very strong deal for film rights for Larklight with Warner. This is the first in a three-book series by the multi-award winning, bestselling author Philip Reeve. We will publish The Declaration by Gemma Malley in September 2007 simultaneously in the UK, Germany and America. One of our lead titles for 2007, this debut novel is by a very exciting new author in the world of young adult literature. We will also continue to develop our commercial series fiction as well as continue to build our already established authors like Angie Sage, Philip Reeve, Sue Limb, Benjamin Zephaniah and Mary Hoffman into household names. 2007 will also see the publication of the hugely anticipated final instalment in the Harry Potter series, Harry Potter and the Deathly Hallows, which we will be publishing in hardback. For the first time there will be a simultaneous audio release which we will be publishing in a joint venture with Helen Nicoll. Adult In fiction, the year began with a No 1 bestseller, Joanna Trollope's Second Honeymoon, and ended with William Boyd's Restless winning the Costa Novel of the Year Award and being chosen by Richard & Judy for their 2007 Book Club. Douglas Coupland joined Bloomsbury in the UK with J Pod, as did Richard Ford with The Lay of the Land. Other Autumn highlights included a new book by Susanna Clarke, author of Jonathan Strange & Mr Norrell, and twice Booker short-listed Patrick McCabe's new novel, his first for Bloomsbury, Winterwood, which has won the Irish Novel of the Year Award. 2006 was a particularly good year for non-fiction. We published Gordon Brown, Al Gore's bestselling An Inconvenient Truth (the film of which won an Oscar), My Take, the autobiography of Gary Barlow (a top ten bestseller), and the tie-in book to chef Heston Blumenthal's successful television series In Search of Perfection. Two new non-fiction editors at Bloomsbury brought with them writers including William Dalrymple and Hugh Fearnley-Whittingstall. Ben Schott's successful second Almanac was also published. The list for 2007 is consistently strong with big titles being published throughout the year. Bloomsbury is expanding its list with TV tie-ins and food and cookery books. Following on from Heston Blumenthal we published two television tie-ins, The Truth about Food and Don't Die Young, in the early Spring. These will be followed with David Dimbleby's major series How We Built Britain and a tie-in to the new series from Heston Blumenthal. The Autumn will also see important new books by Germaine Greer and Hugh Fearnley-Whittingstall. In fiction we have the new novel by Booker Prize winning Michael Ondaatje, author of The English Patient, while A Thousand Splendid Suns, the new novel by Khaled Hosseini, author of the bestselling The Kite Runner, will be a major publishing event of the year. We continue to strengthen our international ties. We published William Boyd in all three of our territories and he has become a bestseller in Germany for the first time. We are also to publish a major thriller by Ronan Bennett in our territories in the Autumn of this year, as well as Schott's 2008 Almanac. Reference A&C Black celebrates its 200th anniversary in 2007. The longevity of the business and the properties it owns, such as Who's Who and Whitaker's Almanack, demonstrates that this is an operation that can, and will, continue to generate strong recurring revenues and profits for many years to come. The natural history list had a particularly strong year, with a number of successful books published in association with the RSPB, a photographic book on The World of the Polar Bear and a superbly illustrated book on Global Warning by Guardian journalist, Paul Brown. Notable successes in other areas included a new range of media yearbooks, the publication of The Ultimate Teen Book Guide and the launch of the second edition of Business: The Ultimate Resource, now generating significant electronic revenues and published in seven languages, including Chinese and Japanese. In July 2006 we acquired Methuen Drama, a highly prestigious and established list which includes plays by top contemporary authors such as Caryl Churchill, Michael Frayn and Mark Ravenhill, as well as established classics by Bertolt Brecht, Oscar Wilde and Dario Fo. The list is an excellent fit with A&C Black's existing Theatre and Drama books and the combination of the two lists gives A&C Black the largest Theatre and Drama list in the UK. The operation has now been fully integrated with our existing Theatre and Drama business and a backlist re-issue and publicity programme is already underway which is generating a healthy increase in revenues. Prospects for 2007 are good, with strong growth predicted for the Methuen Drama list in all English language markets. New books will include an innovative new Shakespeare in Performance series with recordings of well known productions packaged with the plays, and the first anthology of Noel Coward's letters, many of them previously unpublished, edited by leading Coward scholar Barry Day. Other A&C Black highlights for 2007 will include Young Wisden, a cricket anthology for children in association with Wisden; Left for Dead, the dramatic story of the last survivor of Britain's most disastrous yacht race; Stolen, an illustrated history of the 200 most important stolen art masterpieces; and the launch of a new range of educational books to fit the newly revised Primary National Curriculum. During 2006 we started the development of our fourth major electronic database called Finance - the Ultimate Resource. The database plans are international in scope, reflecting the need for organisations to be aware of the global implications of financial decisions, as well as the impact of international corporate governance changes on business practices. The database will offer finance professionals up-to-date financial advice in print and online together with compelling additional daily content updates and functionality (e.g. video streaming, podcasts, online events) targeted at the global financial community. This is a truly exciting project for us that has already generated considerable interest from third parties eager to participate in its development, branding and launch. Rights deals for a number of our major reference projects are under negotiation, some of which were scheduled for completion in 2006 and, if they are executed in 2007 as we hope, will contribute to 2007. These include both exclusive and non-exclusive deals for electronic publication of a number of the Company's existing databases. One of the most exciting digital projects with which Bloomsbury became involved in 2006 is a new web-based initiative. While YouTube, MySpace and Bebo have grabbed the digital headlines and created the definitive music and video online community space, no one has yet done the same for books, especially in a way which will benefit all the main players in the book business, namely readers, writers, booksellers and publishers. Bloomsbury has made a small initial investment for a controlling interest in this start-up operation. The project is being developed by a small team based in San Francisco. As this is not core to our business, further third party funding is being sought to take the business through to launch towards the end of 2007 or early 2008. Bloomsbury.com has continued to operate successfully as a marketing tool and as a revenue generator. The site had over 7.5m visitors in 2006, and they viewed over 50 million pages. Books have been sold on the site for many years but more recently we have been looking at other ways to monetise the site and take advantage of the UK online ad revenue market which is currently growing at 40% annually. We have appointed an advertising sales agent to generate additional revenues on our websites. International publishing Bloomsbury USA 2006 was a year characterised by significant sales across the list, with growth as planned in both frontlist and backlist titles. Net revenues increased 36.1% to Â£15.01m (2005, Â£11.03m). We increased our expense base during the year to fuel future organic growth. This included the addition of new commissioning editors and expansion of our office space. Revenues associated with this expansion programme are not expected to start coming on-stream until the end of 2007. As a result, the operation made a loss before investment income in 2006 of Â£0.26m (2005, Â£0.48m profit). As part of our expansion programme we have started a new imprint headed by Peter Ginna, former Editorial Director of the Oxford University Press trade division in the US. The imprint will focus on History, Science, Economics and Business. Peter's talent lies in the ability to spot award-winning, high-end non-fiction books with crossover trade appeal. We also hired Nick Trautwein, formerly of HarperCollins, who will be developing titles in the areas of Sports and commercial men's non-fiction. As the operation grows and achieves greater critical mass we continue to look for further economies of scale. During 2006 we renegotiated our printing contracts and restructured the way we create production components, both of which will contribute to more efficient manufacturing in 2007 and beyond. On the adult side, the Nasty Bits by Anthony Bourdain led the list, with other strong titles following close behind: Schott's Almanac, Restless by William Boyd, Field Notes from a Catastrophe by Elizabeth Kolbert and Theories of Everything by Roz Chast. Strong backlist sales include the paperbacks The Highest Tide, History of the World in Six Glasses, The Line of Beauty and the hardbacks Don't Try This at Home and The Map Book. Half of them are shared with Bloomsbury UK and Germany, with four out of the six originated in the US. Although the US operation performed well on the revenue line, margins were hurt by pricing pressure from retailers and upward pressure on author advances. For 2007 we have a strong publishing programme across the adult and children's operations. On the children's side we have Freckle Face Strawberry by the actress Julianne Moore, Princess Academy in paperback, and our bestseller Gone Wild, which just won a Caldecott prize. On the adult side we have a strong list throughout the year, anchored by the Autumn titles: How Life Imitates Chess by Gary Kasparov, No Reservations by Anthony Bourdain, Jacques Cousteau's last book and The US Constitution Revised by Larry Sabato, amongst others. Berlin Verlag Berlin performed well in 2006. Turnover increased 7.5% to Â£5.88m (2005, Â£5.47m) and made an operating profit of Â£0.20m (2005, Â£0.64m). Despite the increase in the underlying business, it was a challenging year. The company has had to operate in an increasingly complex German retail market. Our success in 2006 drew from across all four lists, which shows that the company as a whole has achieved much greater stability under Bloomsbury's ownership. Our paperback list performed well in the year. A strong list was enhanced by the impact of a better focused monthly output and excellent and more commercial cover designs. The star performer was the German language edition of The Kite Runner. Growth in the children's area was encouraging as the list continued to establish itself in the market. We now publish a number of important German children's authors, especially Zoran Dvrenker. Particularly encouraging was the new non-fiction list, which launched in Autumn 2006. 101 Dinge, our bestselling children's title in the year, came from this new list and was a title shared across the Bloomsbury Group. Berlin Verlag, our flagship hardback imprint, showed an improved performance over 2005. Among a number of titles which performed well was Erbin des Verlorenen Landes, the German edition of Kiran Desai's Booker Prize winning novel, Inheritance of Loss. The success of our more commercial hardback imprint, Bloomsbury Berlin, continued with the works of Ben Schott. Other important titles for this list included Unentschlossen (Indecision) by Benjamin Kunkel, one of America's most important new writers, and American bestselling health guru Dr Andrew Weil's Gesund Alter Werden. 2006 was a year of consolidation in the German book trade with book-selling chains gaining in market share at the expense of the independent sector. Our decision in 2005 to increase the number of publication dates across the programme has continued to bring benefits as we are able to position lead titles more successfully across the range of customers and also to achieve excellent levels of publicity and press coverage. Prospects for 2007 are good. The year got off to a very positive start when William Boyd's Ruhelos (Restless), another title and author shared across the Bloomsbury Group, was featured on the important German TV show Lesen! just two weeks after it was published in January. It immediately entered the Spiegel bestseller list. Berlin Verlag's most prestigious German author Ingo Schulze's new short story collection has won the important Leipzig Book Fair Literary Prize and is currently also in the Spiegel bestseller list. Our strategy to add more German authors to our lists, which had previously been dominated by works in translation, is bearing fruit and we have two TV tie-ins on Bloomsbury Berlin's Spring list. The first of these, Die Flucht by Gabriela Sperl and Tatjana Grafin Donhoff, went into the Spiegel bestseller list at Number 6 in mid-March. In the Autumn the lead title will be the second novel by Khaled Hosseini, author of The Kite Runner, for which a major campaign is in preparation. Dividend The directors are recommending a final dividend of 3.00 pence per share (2005, 3.00 pence per share) making a total of 3.66 pence per share (2005, 3.60 pence per share) for the year. The final dividend will be payable on 5 July 2007 to Ordinary Shareholders on the register at the close of business on 25 May 2007. Management and Staff I would like to thank our staff for their tremendous contribution to a very busy year where we have seen strategic as well as operational achievements. Current Trading, Developments and Prospects These are exciting times for the book publishing industry. Digitisation of consumer books will continue to gather momentum as new generation e-readers become available. We are continually looking at ways of improving the revenue-generating capabilities of our intellectual property. We are currently working on a number of preferred partner arrangements with UK TV and production companies. The relationship works two ways: firstly, Bloomsbury can sub-license TV and film rights of books direct to them, and secondly, Bloomsbury can acquire book publishing rights to up-coming TV programmes and films. 2006 saw considerable investment in established authors for our future publishing programme, and we expect this investment to bear fruit over the next 10 years. We will continue to invest in outstanding authors, but we will not forget that our roots lie in identifying first-time authors and building their books into bestsellers. With the continuing upward pressure on author advances this will be a vital part of our strategy to manage our working capital in the most efficient manner. 2007 has got off to a good start with a number of books already in the bestseller lists. The seventh and highly anticipated Harry Potter will be published on 21 July. Maximising our backlist income and celebrating our 21st birthday, we have re-released 21 of our bestselling titles. Our position as an international publisher is now firmly established, and we expect to see further benefits from this and the new areas of publishing that we are entering in the current year and into the future. Nigel Newton Chairman 3 April 2007 Financial Review Results Turnover for the Group decreased 31.5% to Â£74.77m (2005, Â£109.11m). Bloomsbury's primary segmental analysis is by geographic breakdown, which follows our international publishing strategy. Turnover in the UK decreased 41.8% to Â£53.88m (2005, Â£92.62m). US turnover increased 36.1% to Â£15.01m (2005, Â£11.03m) on the back of a strong publishing programme. Some of the key performing titles were The Nasty Bits by Anthony Bourdain, Schott's Almanac 2007 and Princess Academy by Shannon Hale. For Continental Europe, revenues, which were generated by Berlin Verlag, increased 7.5% to Â£5.88m (2005, Â£5.47m). The Group's secondary segmental disclosure is by division, which is split into three main operating areas: Children's, Adult and Reference publishing. These divisions are a combination of the UK, US and German operations. In addition to the provision of turnover by division which has been disclosed in previous years, we are providing additional disclosure on gross profit and contribution to divisional operating profit before administrative expenses. For 2006 the breakdown of turnover between the three areas was: Children's 37% (2005, 63%), Adult 44% (2005, 25%) and Reference 19% (2005, 12%). Revenues in the Children's division decreased 60.3% to Â£27.37m (2005, Â£69.01m). Harry Potter and the Half-Blood Prince was published in hardback in 2005. The gross profit for 2006 was down 61.0% to Â£13.25m (2005, Â£33.96m) with a contribution to administrative expenses down 62.9% to Â£9.39m (2005, Â£25.30m). The reduction in contribution was due to Harry Potter and the Half-Blood Prince being published in hardback in 2005. In the Adult division, revenues increased 18.9% to Â£32.67m (2005, Â£27.47m). The revenue increase was driven by a number of strong selling titles including The Kite Runner (UK and Germany), Schott's Almanac 2007 (UK, US and Germany), My Take (UK), The Nasty Bits (US) and In Search of Perfection (UK). The gross profit for 2006 was down 0.2% to Â£16.04m (2005, Â£16.07m) due to higher royalty costs both in the UK and the US. Contribution to administrative expenses was down 5.3% to Â£9.10m (2005, Â£9.61m). Revenues in the Reference division increased 16.6% to Â£14.73m (2005, Â£12.63m) due to a combination of the acquisition of Methuen Drama during the year, increased revenues from the existing publishing list and stronger rights sales. The gross profit for 2006 was up 23.5% to Â£6.88m (2005, Â£5.57m) with a contribution to administrative expenses up 29.6% to Â£3.33m (2005, Â£2.57m). Rights sales and other income increased 26.8% to Â£4.82m (2005, Â£3.80m). Overall gross profit decreased 34.9% to Â£36.17m (2005, Â£55.59m). Gross profit margin decreased to 48.4% (2005, 51.0%) due to the lower than expected number of bestselling higher-margin books during the year and also the absence of a book on the scale of the hardback edition of Harry Potter and the Half-Blood Prince. Marketing and distribution costs decreased by 20.8% to Â£14.35m (2005, Â£18.11m). The difference was due to the lower turnover during 2006 and also the fact that we incurred higher costs on the launch of Harry Potter and the Half-Blood Prince in 2005. Administrative expenses decreased 2% to Â£18.31m (2005, Â£18.68m). Although there was significant investment in the Group's overhead infrastructure to continue the rate of organic growth, these were offset by costs incurred in the launch of Harry Potter and the Half-Blood Prince in 2005 and the absence of performance related bonuses in 2006. Profit before investment income decreased 81.3% to Â£3.51m (2005, Â£18.81m). Investment income increased by 24.5% to Â£1.73m (2005, Â£1.39m) as a result of increased average cash balances during the year and higher interest rates. Finance costs reduced to Â£0.05m (2005, Â£0.07m). The effective corporation tax rate for the year is 29.7% (2005, 27.2%) and takes account of share options exercised during the year, expenses not deductible for tax purposes and recognition of prior period Berlin Verlag and US tax losses as a deferred tax asset. This represents tax losses which we expect will be utilised in the foreseeable future. Basic earnings per share decreased by 75.4% to 4.99 pence (2005, 20.30 pence). Diluted earnings per share decreased by 75.4% to 4.90 pence (2005, 19.93 pence). Balance sheet Non current assets Property, plant and equipment increased 43.8% to Â£2.33m (2005, Â£1.62m) reflecting the final phase of improvements to the Group's offices in Soho Square. These costs are being amortised over the remaining life of the property leases. Intangible assets, which comprise goodwill and publishing relationships, increased to Â£17.67m (2005, Â£15.51m). Of this, goodwill has increased to Â£17.40m (2005, Â£15.16m), which is primarily due to the goodwill arising on the acquisition of Methuen Drama. Current assets Inventories increased 4.6% to Â£15.82m (2005, Â£15.13m), of which work in progress decreased by 20.1% to Â£3.07m (2005, Â£3.84m) due to the timing of titles at the work in progress stage. Stocks of finished goods increased 11.8% to Â£12.42m (2005, Â£11.11m) due to a combination of the stock holding of an increased number of titles published by the Group during the year and the timing of the release of titles at the end of the financial year. Trade and other receivables increased 1.2% to Â£49.22m (2005, Â£48.63m), of which trade debtors decreased 17.2% to Â£17.61m (2005, Â£21.27m). At the end of 2005 there were still receivables from the publication of the hardback of Harry Potter and the Half-Blood Prince which were received in 2006. Within trade and other receivables, prepayments and accrued income increased 10.3% to Â£29.34m (2005, Â£26.59m) reflecting the increase in investment in titles across all three divisions. As books are returnable by customers, the Group makes a provision against books sold in the accounting period which is then carried forward in trade debtors in the balance sheet in anticipation of book returns received subsequent to the year end. A provision of Â£7.9m for future returns relating to 2005 and prior sales including Harry Potter and the Half-Blood Prince was carried forward in trade debtors in the balance sheet at 31 December 2005 and returns received in 2006 were offset against this provision. This provision relates to the UK trade operation (excluding A&C Black, Bloomsbury USA and Berlin Verlag). Given the lower turnover in 2006 and as there was no new Harry Potter during the year, the closing provision carried forward in trade debtors in the balance sheet at 31 December 2006 was Â£1.6m for this part of the business. Equity and liabilities At 31 December 2006 total equity stood at Â£89.33m (2005, Â£88.78m). The increase was principally due to retained earnings of Â£0.98m (2005, Â£12.43m) and share options exercised during the year. Trade and other payables decreased 52.7% to Â£20.79m (2005, Â£43.97m). Trade payables increased by 15.6% to Â£6.29m (2005, Â£5.44m), which was attributable to the timing of supplier payments at the year end. Accruals and deferred income, which is included in trade and other payables, decreased to Â£12.23m (2005, Â£36.36m). Accruals and deferred income includes royalty payments to authors, which vary from year to year depending on turnover and the authors' royalty rates which typically escalate on triggered thresholds as volume sales increase. In 2005 the Group published the highest selling book in its history. The royalties due to authors accrued at 31 December 2005 were paid on 31 March 2006. The absence of a book published on this scale gave rise to a lower royalty liability at 31 December 2006. Corporation tax payable decreased to Â£0.52m (2005, Â£2.58m) primarily due to lower profits generated. Overseas operations Turnover for Berlin increased 7.5% to Â£5.88m (2005, Â£5.47m). The strategy to have German translation rights published through Berlin is working well with titles such as Restless, The Kite Runner and the Schott series appearing on the German bestseller lists. Profit before investment income for the year was Â£0.20m (2005, Â£0.64m). Turnover for Bloomsbury USA increased 36.1% to Â£15.01m (2005, Â£11.03m) on the back of a strong publishing programme. Higher royalty costs relating to the books published during the year were incurred and, as part of the Group's organic growth strategy, there was additional investment in new commissioning editors and related support and service costs. As a result of the increased investment, Bloomsbury USA made a loss before investment income for the year of Â£0.26m (2005, Â£0.48m profit). Cash Flow The Group had a net cash outflow from operating activities of Â£19.92m for the year (2005, Â£31.14m inflow). The cash inflow in 2005 was a result of the higher revenues generated during the year. The decline in cash during the year is the result of working capital movements, primarily payment of royalties from 2005 publications, which were paid to authors on 31 March 2006, and investments in new titles for publication in 2006 and beyond. Corporation tax paid during the year was Â£5.20m (2005, Â£5.90m). Included in the purchase of property, plant and equipment cost of Â£1.38m (2005, Â£1.27m) is the final refurbishment cost of the Group's offices in Soho Square. Â£2.42m purchase of businesses was for the acquisition of Methuen Drama (2005, Â£0.03m). During the year Â£0.80m (2005, Â£1.80m) was received from the exercise of share options, and Â£2.67m of dividends were paid (2005, Â£2.22m). Future investment and strategy Corporate acquisitions remain an important part of our growth strategy. We have reviewed a number of potential acquisitions to date, applying strict criteria to ensure any targets complement the existing business and provide future growth opportunities for Bloomsbury. We are in a good position with a strong balance sheet and are well placed to fund any acquisitions that meet these criteria. Colin Adams ACA Group Finance Director 3 April 2007 CONSOLIDATED INCOME STATEMENT for the year ended 31 December 2006 Notes 2006 2005 Total Total Â£'000 Â£'000 Revenue 2 74,773 109,108 Cost of sales (38,602) (53,514) ______ ______ Gross profit 36,171 55,594 Marketing and distribution costs (14,354) (18,107) Administrative expenses (18,308) (18,681) ______ ______ Profit before investment income 3,509 18,806 Investment income 1,734 1,392 Finance costs (47) (71) ______ ______ Profit before taxation 5,196 20,127 Income tax expense 3 (1,544) (5,481) ______ ______ Profit for the year 3,652 14,646 ______ ______ Basic earnings per share 5 4.99p 20.30p ______ ______ Diluted earnings per share 5 4.90p 19.93p ______ ______ CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE for the year ended 31 December 2006 2006 2005 Â£'000 Â£'000 Profit for the year 3,652 14,646 Exchange adjustments recognised in reserves (1,878) 640 ______ ______ Total recognised income and expense for the year 1,774 15,286 ______ ______ CONSOLIDATED BALANCE SHEET at 31 December 2006 2006 2005 Â£'000 Â£'000 ASSETS Non-current assets Property, plant and equipment 2,332 1,615 Intangible assets 17,672 15,511 Deferred tax assets 1,700 1,238 ______ ______ Total non-current assets 21,704 18,364 ______ ______ Current assets Inventories 15,818 15,129 Trade and other receivables 49,217 48,630 Cash and cash equivalents 24,304 53,511 ______ ______ Total current assets 89,339 117,270 ______ ______ TOTAL ASSETS 111,043 135,634 ______ ______ EQUITY AND LIABILITIES Capital and reserves attributable to equity holders of the parent Ordinary shares Share premium 918 911 Capital redemption reserve 38,915 38,123 Share-based payment reserve 20 20 Translation reserve 1,104 453 Retained earnings (1,236) 642 49,612 48,634 ______ ______ Total equity 89,333 88,783 ______ ______ Liabilities Non-current liabilities Deferred tax 36 - Retirement benefit obligations 144 130 Other payables 223 163 ______ ______ Total non-current liabilities 403 293 ______ ______ Current liabilities Trade and other payables 20,786 43,974 Current tax liabilities 521 2,584 ______ ______ Total current liabilities 21,307 46,558 ______ ______ Total liabilities 21,710 46,851 ______ ______ TOTAL EQUITY AND LIABILITIES 111,043 135,634 ______ ______ CONSOLIDATED STATEMENT OF CHANGES IN EQUITY Share Share Capital Share-based Translation Retained Total capital premium redemption payment reserve earnings reserve reserve Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Balances at 1 January 2005 894 35,763 20 217 2 36,206 73,102 Exchange differences on translating foreign operations - - - - 640 - 640 Profit for the year - - - - - 14,646 14,646 Share-based payment charges - - - 236 - - 236 Dividends - - - - - (2,218) (2,218) Share issues 17 2,360 - - - - 2,377 ______ ______ ______ ______ ______ ______ ______ Balances at 31 December 2005 911 38,123 20 453 642 48,634 88,783 Exchange differences on translating foreign operations - - - - (1,878) - (1,878) Profit for the year - - - - - 3,652 3,652 Share-based payment charges - - - 651 - - 651 Dividends - - - - - (2,674) (2,674) Share issues 7 792 - - - - 799 ______ ______ ______ ______ ______ ______ ______ Balances at 31 December 2006 918 38,915 20 1,104 (1,236) 49,612 89,333 ______ ______ ______ ______ ______ ______ ______ CONSOLIDATED CASH FLOW STATEMENT for the year ended 31 December 2006 2006 2005 Â£'000 Â£'000 Cash flows from operating activities Net profit before tax 5,196 20,127 Adjustments for: Depreciation of property, plant and equipment 661 400 Amortisation of publishing relationships 36 35 Profit on sale of property, plant and equipment (1) (3) Share-based payment charges 651 236 Investment income (1,734) (1,392) Finance costs 47 71 ______ ______ 4,856 19,474 Increase in inventories (971) (3,442) Increase in trade and other receivables (1,126) (6,353) (Decrease) / increase in trade and other payables (22,682) 21,460 ______ ______ Cash (used in) / generated from operations (19,923) 31,139 Income taxes paid (5,195) (5,898) ______ ______ Net cash (outflow) / inflow from operating activities (25,118) 25,241 ______ ______ Cash flows from investing activities Purchase of property, plant and equipment (1,379) (1,268) Proceeds from sale of property, plant and equipment - 33 Purchase of businesses (2,419) (33) Interest received 1,734 1,392 ______ ______ Net cash (used in) / generated from investing activities (2,064) 124 ______ ______ Cash flows from financing activities Share options exercised 799 1,796 Equity dividends paid (2,674) (2,218) Interest paid (47) (118) Repayment of loans - (445) ______ ______ Net cash used in financing activities (1,922) (985) ______ ______ Net (decrease) / increase in cash and cash equivalents (29,104) 24,380 Cash and cash equivalents at beginning of period 53,511 29,120 Unrealised exchange (loss) / gain on cash and cash equivalents (103) 11 ______ ______ Cash and cash equivalents at end of period 24,304 53,511 ______ ______ NOTES 1. The above financial information does not constitute statutory accounts as defined in section 240 of the Companies Act 1985. The above figures for the year ended 31 December 2006 are an abridged version of the Company's audited accounts which will be reported on by the Company's auditors before dispatch to the shareholders and filing with the Registrar of Companies. The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as endorsed by the European Union (EU). The accounting policies applied in 2006 are consistent with those applied in the Financial Statements for 2005. The returns provision has changed, as explained in the financial review. The statutory accounts for the year ended 31 December 2005 have been lodged with the Registrar of Companies. These accounts received an audit report which was unqualified and did not include any reference to matters to which the auditors drew attention by way of emphasis without qualifying their report. 2. Segmental analysis Geographical segments 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. Year ended 31 December 2006 United North Continental Eliminations Total Kingdom America Europe Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Revenue External sales 53,880 15,011 5,882 - 74,773 Inter-segment sales * 145 - 110 (255) - _______ _______ _______ _______ _______ Total revenue 54,025 15,011 5,992 (255) 74,773 _______ _______ _______ _______ _______ Result Segment result 3,724 (260) 199 - 3,663 Unallocated central costs - - - (154) (154) _______ _______ _______ _______ _______ Profit/(loss) before investment income 3,724 (260) 199 (154) 3,509 Investment income 2,595 10 - (871) 1,734 Finance costs (143) (538) (237) 871 (47) _______ _______ _______ _______ _______ Profit/(loss) before taxation 6,176 (788) (38) (154) 5,196 Income tax expense (1,732) 286 (98) - (1,544) _______ _______ _______ _______ _______ Profit/(loss) for the year 4,444 (502) (136) (154) 3,652 _______ _______ _______ _______ _______ Other Information Capital additions 1,311 32 41 - 1,384 Depreciation and amortisation 638 44 15 - 697 Profit / (loss) on sale of property, plant and equipment (1) - - - (1) _______ _______ _______ _______ _______ Balance Sheet ASSETS Segment assets 105,572 17,290 9,136 (20,955) 111,043 LIABILITIES Segment liabilities 22,300 13,233 7,132 (20,955) 21,710 * Inter-segment sales are charged at prevailing market rates. NOTES TO THE ACCOUNTS 2. Segmental analysis (continued) Year ended 31 December 2005 United North Continental Eliminations Total Kingdom America Europe Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Revenue External sales 92,616 11,027 5,465 - 109,108 Inter-segment sales * 199 - 594 (793) - _______ _______ _______ _______ _______ Total revenue 92,815 11,027 6,059 (793) 109,108 _______ _______ _______ _______ _______ Result Segment result 17,856 478 642 - 18,976 Unallocated central costs - - - (170) (170) _______ _______ _______ _______ _______ Profit before investment income 17,856 478 642 (170) 18,806 Investment income 1,877 - - (485) 1,392 Finance costs (135) (211) (210) 485 (71) _______ _______ _______ _______ _______ Profit before taxation 19,598 267 432 (170) 20,127 Income tax expense (5,567) (197) 283 - (5,481) _______ _______ _______ _______ _______ Profit for the year 14,031 70 715 (170) 14,646 _______ _______ _______ _______ _______ Other Information Capital additions 1,250 13 5 - 1,268 Depreciation and amortisation 383 42 10 - 435 Profit / (loss) on sale of property, plant and equipment 4 - (1) - 3 _______ _______ _______ _______ _______ Balance Sheet ASSETS Segment assets 124,564 17,866 8,541 (15,337) 135,634 LIABILITIES Segment liabilities 43,984 11,927 6,277 (15,337) 46,851 * Inter-segment sales are charged at prevailing market rates. NOTES TO THE ACCOUNTS 2. Segmental analysis (continued) Business segments The Group's business is organised in three operating areas: Adult, Children's and Reference. The following table provides the breakdown of turnover and profit before investment income for these areas. Year ended 31 December 2006 Adult Children's Reference Unallocated Total Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Revenue 32,669 27,366 14,738 - 74,773 Cost of sales (16,627) (14,115) (7,860) - (38,602) _______ _______ _______ _______ _______ Gross profit 16,042 13,251 6,878 - 36,171 Marketing and distribution costs (6,947) (3,859) (3,548) - (14,354) _______ _______ _______ _______ _______ Contribution before administrative expenses 9,095 9,392 3,330 - 21,817 Administrative expenses - - - (18,308) (18,308) _______ _______ _______ _______ _______ Profit before investment income 9,095 9,392 3,330 (18,308) 3,509 _______ _______ _______ _______ _______ Year ended 31 December 2005 Adult Children's Reference Unallocated Total Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Revenue 27,468 69,013 12,627 - 109,108 Cost of sales (11,400) (35,056) (7,058) - (53,514) _______ _______ _______ _______ _______ Gross profit 16,068 33,957 5,569 - 55,594 Marketing and distribution costs (6,456) (8,656) (2,995) - (18,107) _______ _______ _______ _______ _______ Contribution before administrative expenses 9,612 25,301 2,574 - 37,487 Administrative expenses - - - (18,681) (18,681) _______ _______ _______ _______ _______ Profit before investment income 9,612 25,301 2,574 (18,681) 18,806 _______ _______ _______ _______ _______ NOTES TO THE ACCOUNTS 3. Taxation (a) Tax charge for the year 2006 2005 Â£'000 Â£'000 Based on the profit for the year: UK corporation tax at 30% 1,745 5,579 Under / (over) provision in respect of prior year 18 (8) Overseas taxation - current year 33 386 _______ _______ 1,796 5,957 Deferred tax - UK (50) (45) - Overseas (202) (431) _______ _______ 1,544 5,481 _______ _______ (b) Factors affecting tax charge for the year The tax assessed for the year is different from the standard rate of corporation tax in the UK (30%). The differences are explained below: 2006 2005 Â£'000 Â£'000 Profit before taxation 5,196 20,127 ______ ______ Profit on ordinary activities multiplied by the standard rate of corporation tax in the UK of 30% 1,559 6,038 Effects of: Permanent timing differences (31) (180) Utilisation of tax losses 93 (506) Different rates of tax on overseas results (86) 137 Adjustments in respect of previous periods 9 (8) ______ ______ Tax charge for the year 1,544 5,481 ______ ______ 4. Dividends A dividend of 3.00p per share (Â£2,189,000) was paid to the equity shareholders on 6 July 2006, being the amount proposed by the directors, and subsequently approved by the shareholders at the 2006 Annual General Meeting (2005: 2.478p per share, Â£1,773,000). For the current year On 17 November 2006 an interim dividend of 0.66p per share (Â£485,000) was paid to the equity shareholders (2005: 0.60p per share, Â£445,000). The directors propose that a dividend of 3.00p per share will be paid to the equity shareholders on 6 July 2007. Based on the number of shares currently in issue, the final dividend will be Â£2,203,000. (2005, Â£2,189,000). This dividend is subject to approval by the shareholders at the Annual General Meeting and has not been included as a liability in these financial statements. 5. Earnings per share The basic earnings per share has been calculated by reference to earnings of Â£3,652,000 (2005, Â£14,646,000) and a weighted average number of Ordinary Shares in issue of 73,115,031 (2005, 72,134,014). The diluted earnings per share has been calculated by reference to a weighted average number of Ordinary Shares of 74,469,114 (2005, 73,493,581) which takes account of share options and awards under the Group's Performance Share Plan. The reconciliation between the weighted average number of shares for the basic earnings per share and the diluted earnings per share is as follows: 2006 2005 Number Number Weighted average number of shares for basic earnings per share 73,115,031 72,134,014 Dilutive effect of share options and awards under Performance Share Plan 1,354,083 1,359,567 ______ ______ Weighted average number of shares for diluted earnings per share 74,469,114 73,493,581 ______ ______ 6. Annual General Meeting The Annual General Meeting will be held at 12 noon on Thursday 28 June 2007 at 36 Soho Square, London W1D 3QY. 7. Report and Accounts Copies of the Report and Accounts will be circulated to shareholders shortly and may be obtained after the posting date from the Company Secretary, Bloomsbury Publishing Plc, 36 Soho Square, London W1D 3QY. This information is provided by RNS The company news service from the London Stock Exchange FR SSIESESWSEFL

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