Interim Results

Bloomsbury Publishing PLC 19 September 2006 19th September 2006 BLOOMSBURY PUBLISHING PLC Interim Results for the six months to 30 June 2006 • Six months revenue up 6.5% to £37.66m (2005, £35.37m) • Pre-tax profit increased 3.4% to £4.22m (2005, £4.08m) • Basic earnings per share increased 2.3% to 4.08p (2005, 3.99p) • Interim dividend up 10% to 0.66p (2005, 0.60p) • Investment in future titles excluding reference databases increased 39.4% to £31.24m (31 December 2005, £22.41m), which underpins strong publishing lists for second half and into 2007 • US and German operations performing well • Expansion into new areas of publishing within Children's and Adult divisions • Trading in line with the Board's expectations. Board remains confident of a satisfactory outcome for the year. Commenting on the results and prospects for Bloomsbury, Nigel Newton, Chairman, said: 'Bloomsbury has made good progress in the first six months of 2006. Our international businesses are clearly established and performing well. The benefits of our prior investment in authors and new business initiatives are coming through as planned.' 'The Group's publishing programme for the second half of the year is one of the strongest to date and includes books from some of our bestselling authors and potential bestsellers from new authors. The second half has started well with trading in line with our expectations, and the Board remains confident of a satisfactory outcome to the year.' 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 made good progress in the first six months of 2006. Bloomsbury USA has shown very satisfactory growth, driven by continued re-orders for autumn 2005 titles and strong sales of a number of 2006 titles. Berlin Verlag has performed well compared to the first half of 2005, with top line sales growth and continued focus on the cost base. In the UK, we had three books recommended on television by the Richard and Judy Book Club, and the recent acquisition of Methuen Drama is being successfully integrated. Revenue for the first six months increased 6.5% to £37.66m (2005, £35.37m). Gross profit increased 6.4% to £18.71m (2005, £17.58m), with the gross margin unchanged at 49.7% (2005, 49.7%). Marketing and distribution costs were 4.9% higher at £6.81m (2005, £6.49m), but as a percentage of turnover they decreased slightly to 18.1% (2005, 18.3%). The increase in marketing spend was due to a higher number of lead titles in the first half publishing programme. The increase in distribution costs was primarily a function of the increased turnover. Administrative expenses increased 15.9% to £8.88m (2005, £7.66m), largely due to additional office costs and increased salary costs as the Group continues to grow its publishing programme. As a percentage of turnover, administrative expenses increased to 23.6% (2005, 21.7%). Interest income increased by 83.6% to £1.23m (2005, £0.67m) primarily as a result of higher average cash balances. Profit before tax increased 3.4% to £4.22m (2005, £4.08m.). The effective rate of corporation tax for the six months was 29.4% (2005, 29.8%). Basic earnings per share increased 2.3% to 4.08 pence (2005, 3.99 pence). The exchange adjustments recognised in reserves of £1.08m loss (2005, £0.13m profit) arise from retranslation of foreign subsidiaries' assets and liabilities and reflect principally the weakening of the dollar against sterling since the end of 2005 and the increase in the underlying net asset values. Net cash outflow for the Group for the first six months of the year was £22.4m (30 June 2005, inflow £4.88m). The cash outflow related primarily to royalties paid to authors in March. In the first six months of 2006 the Group also paid corporation tax of £2.28m (2005, £2.62m) and the 2005 final dividend of £2.19m (2005, nil. The final dividend in respect of 2004 was paid in July 2005). In addition, £2.35m was paid for the acquisition of Methuen Publishing. Net cash balances at 30 June decreased 41.8% to £31.12m (31 December 2005, £53.51m). At 30 June 2006 the Group had under contract 1,113 titles (31 December 2005, 1,062) for future publication with a gross investment excluding reference databases of £31.24m (31 December 2005, £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 £18.57m (31 December 2005, £12.05m). INTERIM DIVIDEND The directors have declared a 10% increase in the interim dividend to 0.66 pence per share (2005, 0.60 pence per share), which will be paid on 17 November 2006 to shareholders on the register at close of business on 3 November 2006. 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 In the first half of 2006 we published our first full pre-school list programme. Sixteen titles were released, and we had strong support from book clubs, special and international sales channels. We are now working hard to build critical mass in this area. The new novel, Small Steps, by the bestselling author of Holes, Louis Sachar, was published during the first half of this year. Other significant publications so far this year have been the second in the Septimus Heap series, Flyte, by Angie Sage and the third in the series of books by Sue Limb, Girl 16. Both Angie Sage and Sue Limb are writing a series of books featuring the characters Araminta Spook and Ruby Rogers respectively. The first of these titles will be published in the second half of this year. In June, we published the paperback edition of Harry Potter and The Half-Blood Prince, with copies of the adult and children's paperback editions of this bestselling book released internationally. In October, we are publishing the highly anticipated Larklight by Philip Reeve simultaneously in the UK, Germany and the USA and for which we already have twelve foreign publishers partnering with us, as well as a substantial confirmed film deal. We will also broaden out into the film and TV tie-in market and this autumn will be publishing four titles tying in with the big cinematic children's release Open Season. In the second half we are also publishing a series of in-house originated titles, Mermaid S.O.S., participating in the current successful trend of long series titles for young female readers. Adult The first half of this year got off to a good start with the publication of Joanna Trollope's new novel, Second Honeymoon, which went to No. 1 in the hardback bestseller list. We also had three Richard & Judy Book Club selections in the first half of the year: Moondust by Andrew Smith, Empress Orchid by Anchee Min and The Highest Tide by Jim Lynch. Sales of the Kite Runner continued to build and it remains one of our core backlist titles. We also brought Douglas Coupland to our UK list with his new novel, JPod. We hired a new editor, Richard Atkinson, who specialises in food, lifestyle and TV tie-in books. He brought with him the bestselling food writer, Hugh Fearnley-Whittingstall. He has also made a number of significant TV tie-in purchases, including the book to accompany David Dimbleby's forthcoming BBC series on the buildings of Britain and also a book to tie-in with a major TV series about human anatomy. The appointment of Richard Atkinson and the purchase of these books mark an important move for Bloomsbury into TV-led bestsellers. We have continued to buy major titles for publication this autumn which should create the strongest publishing list in the Adult division in Bloomsbury's history. The fiction list includes So Many Ways to Begin, the second novel from bestselling author Jon McGregor; a major new novel, Restless, from William Boyd who has just joined Bloomsbury (in the UK, US and Germany).; a collection of stories from Man Booker Prize winner Margaret Atwood; and a collection of stories from the author of the bestselling Jonathan Strange & Mr Norrell, Susanna Clarke. We also have one of America's most distinguished novelists, Richard Ford, on the list, and a twice Booker shortlisted Irish writer, Patrick McCabe. Both Jon McGregor's new novel, So Many Ways to Begin, and Nadine Gordimer's Get a Life have been longlisted for the 2006 Man Booker Prize. Kiran Desai's shortlisted novel, The Inheritance, will be published by Berlin Verlag. In non-fiction for the second half of this year, we have autobiographies from Take That's singer/songwriter Gary Barlow and the boxer Amir Khan; food books by Hugh Fearnley-Whittingstall and Heston Blumenthal; history from the bestselling William Dalrymple (author of White Mughals); and, as previously announced, books by Gordon Brown and David Blunkett. Finally, Ruth Badger, who was one of the contestants in the successful TV series, The Apprentice, signed with Bloomsbury. Reference & Electronic Media On 1 June 2006, A&C Black purchased the prestigious theatre list, Methuen Drama, with over 700 titles in print and excellent back-list sales. This list includes works by playwrights such as Caryl Churchill, Willy Russell, Bertold Brecht and Tennessee Williams, as well as famous theatre practitioners such as Stanislavsky and Patsy Rodenburg. A&C Black already has a well-established theatre list which will in future be published under the Methuen Drama imprint, creating the largest drama list in the UK. A&C Black's sales and marketing team has much greater reach into bookshops in the UK and internationally as well as to schools and universities than with Methuen's previous arrangement. We have recently signed a number of agreements for important new drama titles and expect a significant increase in sales over the next five years. A&C Black has had considerable success in acquiring properties to become the dominant players in its niche markets. It is a strategy that has worked well for the business and we are continuing to look for similar acquisition opportunities that will continue to add critical mass. Other highlights in the first six months include a record year for sales of Wisden Cricketers' Almanac, for which we act as sales agents, and another successful collaboration with the RSPB to produce My First Garden Bird Book. In the second half of the year, we will be publishing the second edition of the Bloomsbury reference title Business, which will be underpinned by a major marketing campaign in association with our partners. We also celebrate the 100th anniversary of our bestselling annual reference book The Writers' and Artists' Yearbook with a nationwide marketing campaign which includes a launch at the Edinburgh Book Festival. Major new print and electronic reference database projects are at an advanced planning stage. These follow the Company's successes with the Encarta World English Dictionary and the ELT database partnership with Macmillan. Future database projects may benefit from the surge in online advertising and the increased use of the internet as a research tool. International Bloomsbury USA and Walker Publishing Company, Inc. Bloomsbury USA sales for the first six months of the year were up 46.3% to £6.79m (2005, £4.64m). The strong increase in title sales for the period was driven by a number of factors. Titles published in the autumn of 2005 continued to sell well in 2006. These included Don't Try This at Home, How to Survive a Robot Uprising, Man Booker winner The Line of Beauty, Newberry Award winner Princess Academy and Nanny McPhee. Advance orders on a number of our 2006 titles were also strong, including The Nasty Bits by Tony Bourdain, Field Notes from a Catastrophe by Elizabeth Kolbert and with The Highest Tide by Jim Lynch. The operation made a loss of £0.43m (2005, £0.08m profit) due to continued planned investment in staff and office and to fund its expansion. It is expected to make an operating profit for the full year. Bloomsbury USA moved into mass market publishing with the launch of mass market editions of Susanna Clarke's Jonathan Strange and Mr Norrell and with Herbie Brennan's Faerie Wars. Sales are comfortably ahead of budget and the success of these titles will determine the strategy for future growth of this new revenue stream. In June, we appointed Peter Ginna as Publisher of a new imprint. He will concentrate on developing a list of high profile non-fiction projects to start in September. In July, Nick Trautwein joined the Bloomsbury Adult editorial team where he will develop a list of popular titles on sports, politics and current events. We are looking to appoint a new publisher for our Children's division as we seek to grow this area of our US business more aggressively. We are still focusing on reducing the cost base in the US and in May, we signed a new two-year contract on more favourable terms with our primary US printer which will result in additional production savings. We have a very strong list for the autumn including the US edition of Ben Schott's Almanac, Melissa Fay Greene's There Is No Me Without You and William Boyd's Restless. Pre-orders are already strong for these titles. Berlin Verlag Berlin Verlag continued to show good growth in the first six months of 2006, with revenues increasing 24.3% to £2.51m (2005, £2.02m). Particular successes included Der Teppichhandler by the American author Meg Mullins which was featured on the influential TV show Lesen! in June. Ben Schott's Sammelsurien continues to perform strongly, and on publication of the third volume, Schotts Sammelsurium Sport, Spiel und Mussiggang, in the Spring all three titles appeared together in Der Spiegel bestseller list. The repositioning of the paperback list with its new cover design style has been very well received and the performance of this list continues to improve. We are particularly delighted at the success of Khaled Hosseini's Der Drachenlaufer (The Kite Runner) where sales are greater than ever and the book appeared in the paperback bestseller list for the first time in May. The autumn list highlights include Erbin des Verlorenen Landes by Kiran Desai, Die Kommende Welt by Dara Horn and Impuls, Robert Frenay's book on bionics. Bloomsbury Berlin's lead titles are the German edition of Schott's Almanac which will appear in November, fully reworked for the German market, and Benjamin Kunkel's Unentschlossen. Our first Children's non-fiction list launches in October. The two lead titles on this new list, 101 Dinge and Das 1-2-3 Kinderkochbuch, are both titles shared with Bloomsbury UK and US, and together with the continuing successes in Germany of Ben Schott, Khaled Hosseini and Susanna Clarke bear testimony to the advantages of Bloomsbury's strategy of publishing joint titles globally in order to maximise benefits to the Group as a whole. Sales by Berlin Verlag of Bloomsbury's English-language titles into the German market continue to grow and reach more shops directly rather than through wholesalers. The paperback edition of Harry Potter and the Half-Blood Prince performed particularly well. The benefits of the comprehensive and ongoing review of costs, especially on production, continue to bear fruit and to help margins. Outlook The Group's publishing programme for the second half of the year is one of the strongest to date, and includes books from some of our bestselling authors and potential bestsellers from new authors. We continue to build on the success of our US and German operations and benefits of our strategy of publishing joint titles globally are coming through as expected. We also continue to move into new areas of publishing within our divisions. The second half has started well with trading in line with our expectations. As a result, the Board remains confident of a satisfactory outcome to the year. Nigel Newton Chairman 19 September 2006 CONSOLIDATED INCOME STATEMENT for the six months ended 30 June 2006 Notes 6 months 6 months Year ended ended ended 30 June 30 June 31 December 2006 2005 2005 (unaudited) (unaudited) (audited) £'000 £'000 £'000 Revenue 2 37,659 35,367 109,108 Cost of sales (18,949) (17,789) (53,514) ______ ______ ______ Gross profit 18,710 17,578 55,594 Marketing and distribution costs (6,812) (6,486) (18,107) Administrative expenses (8,883) (7,656) (18,681) ______ ______ ______ Profit before investment income 2 3,015 3,436 18,806 Investment income 1,232 666 1,392 Finance costs (28) (18) (71) ______ ______ ______ Profit before taxation 4,219 4,084 20,127 Income tax expense (1,241) (1,219) (5,481) ______ ______ ______ Profit for the period 2,978 2,865 14,646 ______ ______ ______ Basic earnings per share 3 4.08p 3.99p 20.30p ______ ______ ______ Diluted earnings per share 3 4.01p 3.91p 19.93p ______ ______ ______ CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE for the six months ended 30 June 2006 6 months 6 months Year ended ended ended 30 June 30 June 31 December 2006 2005 2005 (unaudited) (unaudited) (audited) £'000 £'000 £'000 Profit for the period 2,978 2,865 14,646 Exchange adjustments recognised in reserves (1,076) 131 640 ______ ______ ______ Total recognised income for the period 1,902 2,996 15,286 ______ ______ ______ CONSOLIDATED BALANCE SHEET at 30 June 2006 30 June 2006 30 June 2005 31 December 2005 (unaudited) (unaudited) (audited) £'000 £'000 £'000 ASSETS Non-current assets Property, plant and equipment 2,613 1,233 1,615 Intangible assets 17,528 15,559 15,511 Deferred tax assets 1,746 772 1,238 ______ ______ ______ Total non-current assets 21,887 17,564 18,364 ______ ______ ______ Current assets Inventories 15,876 17,513 15,129 Trade and other receivables 40,742 52,101 48,630 Cash and cash equivalents 31,117 24,242 53,511 ______ ______ ______ Total current assets 87,735 93,856 117,270 ______ ______ ______ TOTAL ASSETS 109,622 111,420 135,634 ______ ______ ______ EQUITY AND LIABILITIES Equity attributable to equity holders of the parent Share capital 913 900 911 Share premium 38,392 36,848 38,123 Capital redemption reserve 20 20 20 Share-based payment reserve 743 298 453 Translation reserve (434) 133 642 Retained earnings 49,423 37,298 48,634 ______ ______ ______ Total equity 89,057 75,497 88,783 ______ ______ ______ Non-current liabilities Employee benefits 141 97 130 Other payables 225 337 163 ______ ______ ______ Total non-current liabilities 366 434 293 ______ ______ ______ Current liabilities Trade and other payables 18,350 33,750 43,974 Short-term borrowings - 353 - Current tax payable 1,849 1,386 2,584 ______ ______ ______ Total current liabilities 20,199 35,489 46,558 ______ ______ ______ Total liabilities 20,565 35,923 46,851 ______ ______ ______ TOTAL EQUITY AND LIABILITIES 109,622 111,420 135,634 ______ ______ ______ STATEMENT OF CHANGES IN EQUITY Share Share Capital Share based capital premium redemption payment reserve reserve £'000 £'000 £'000 £'000 Balances at 1 January 2005 894 35,763 20 217 Exchange differences on translating - - - - foreign operations Profit for the period - - - 81 Dividends - - - - Share issues 6 1,085 - - ______ ______ ______ ______ Balances at 30 June 2005 900 36,848 20 298 Exchange differences on translating - - - - foreign operations Profit for the period - - - 155 Dividends - - - - Share issues 11 1,275 - - ______ ______ ______ ______ Balances at 31 December 2005 911 38,123 20 453 Exchange differences on translating - - - - foreign operations Profit for the period - - - 290 Dividends - - - - Share issues 2 269 - - ______ ______ ______ ______ Balances at 30 June 2006 913 38,392 20 743 ______ ______ ______ ______ Translation Retained Total reserve earnings £'000 £'000 £'000 Balances at 1 January 2005 2 36,206 73,102 Exchange differences on translating 131 - 131 foreign operations Profit for the period - 2,865 2,946 Dividends - (1,773) (1,773) Share issues - - 1,091 ______ ______ ______ Balances at 30 June 2005 133 37,298 75,497 Exchange differences on translating 509 - 509 foreign operations Profit for the period - 11,781 11,936 Dividends - (445) (445) Share issues - - 1,286 ______ ______ ______ Balances at 31 December 2005 642 48,634 88,783 Exchange differences on translating (1,076) - (1,076) foreign operations Profit for the period - 2,978 3,268 Dividends - (2,189) (2,189) Share issues - - 271 ______ ______ ______ Balances at 30 June 2006 (434) 49,423 89,057 ______ ______ ______ CONSOLIDATED CASH FLOW STATEMENT for the six months ended 30 June 2006 6 months 6 months Year ended ended ended 30 June 30 June 31 December 2006 2005 2005 (unaudited) (unaudited) (audited) £'000 £'000 £'000 Cash flows from operating activities Net profit before tax 4,219 4,084 20,127 Adjustments for: Depreciation of property, plant and equipment 228 152 400 Amortisation of publishing relationships 18 18 35 Profit on sale of property, plant and equipment (1) (3) (3) Share-based payment charges 290 81 236 Investment income (1,232) (666) (1,392) Finance costs 28 18 71 ______ ______ ______ 3,550 3,684 19,474 Increase in inventories (779) (5,910) (3,442) Decrease / (increase) in trade and other receivables 6,782 (10,158) (6,353) (Decrease) / increase in trade and other payables (25,343) 9,631 21,460 ______ ______ ______ Cash (used in) / generated from operations (15,790) (2,753) 31,139 Income taxes paid (2,278) (2,618) (5,898) ______ ______ ______ Net cash (outflow) / inflow from operating activities (18,068) (5,371) 25,241 ______ ______ ______ Cash flows from investing activities Purchase of property, plant and equipment (1,226) (607) (1,268) Proceeds from sale of property, plant and equipment - - 33 Purchase of businesses (2,350) (33) (33) Interest received 1,232 666 1,392 ______ ______ ______ Net cash (used in) / generated from investing activities (2,344) 26 124 ______ ______ ______ Cash flows from financing activities Share options exercised 271 510 1,796 Equity dividends paid (2,189) - (2,218) Interest paid (28) (18) (118) Repayment of loans - (26) (445) ______ ______ ______ Net cash (used in) / generated from financing activities (1,946) 466 (985) ______ ______ ______ Net (decrease) / increase in cash and cash equivalents (22,358) (4,879) 24,380 Cash and cash equivalents at beginning of period 53,511 29,120 29,120 Unrealised exchange (loss) / gain on cash and cash equivalents (36) 1 11 ______ ______ ______ Cash and cash equivalents at end of period 31,117 24,242 53,511 ______ ______ ______ ACCOUNTING POLICIES The accounting policies used in the preparation of the accounts for the six months ended 30 June 2006 are consistent with those used in the statutory accounts for the year ended 31 December 2005. NOTES TO THE ACCOUNTS 1. Interim accounts The figures for the six months ended 30 June 2006 do not comprise full accounts. The financial information included in this document has been approved by the Directors and prepared on a consistent basis with the accounts for the year ended 31 December 2005. The statutory accounts for the year ended 31 December 2005, 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. External revenue 6 months 6 months Year ended ended ended 30 June 30 June 31 December 2006 2005 2005 (unaudited) (unaudited) (audited) £'000 £'000 £'000 United Kingdom 28,355 28,708 92,616 North America 6,793 4,638 11,027 Continental Europe 2,511 2,021 5,465 _______ _______ _______ 37,659 35,367 109,108 _______ _______ _______ Segment result 6 months 6 months Year ended ended ended 30 June 30 June 31 December 2006 2005 2005 (unaudited) (unaudited) (audited) £'000 £'000 £'000 United Kingdom 3,503 3,487 17,856 North America (430) 83 478 Continental Europe 18 (44) 642 _______ _______ _______ 3,091 3,526 18,976 Unallocated central costs (76) (90) (170) _______ _______ _______ Profit before investment income 3,015 3,436 18,806 _______ _______ _______ The revenues for the United Kingdom and North America for the six months ended 30 June 2005 have been restated to show a more accurate comparison with the current period figures. 3. Earnings per share The earnings per share for the six months to 30 June 2006 is based on the profit after taxation of £2,978,000 (2005 - £2,865,000) and on a weighted average number of Ordinary Shares in issue of 72,918,862 (2005 - 71,878,716). The earnings per share for the twelve months to 31 December 2005 is based on the profit after taxation of £14,646,000 and a weighted average number of Ordinary Shares in issue of 72,134,014. The diluted earnings per share for the six months to 30 June 2006 has been calculated by reference to a weighted average number of Ordinary Shares of 74,280,812 (2005 - 73,293,754, year ended 31 December 2005 - 73,493,581) which takes account of share options. 4. Post balance sheet events The directors have proposed an interim dividend of 0.66 pence per share (2005, 0.60 pence per share), which will be paid on 18 November 2006 to shareholders on the register at close of business on 3 November 2006. Based on the number of shares in issue at 30 June 2006, the interim dividend will be £482,000 (2005, £445,000). INDEPENDENT REVIEW REPORT TO BLOOMSBURY PUBLISHING PLC Introduction We have been instructed by the Company to review the financial information for the six months ended 30 June 2006 which comprises the income statement, statement of recognised income and expense, balance sheet, statement of changes in equity, cash flow statement, accounting policies and related notes set out on pages 6 to 11. We have read the other information contained in the interim report and considered whether it contains any apparent misstatements or material inconsistencies with the financial information. This report, including the conclusion, has been prepared for and only for the Company for the purpose of the Listing Rules of the Financial Services Authority and for no other purpose. We do not, therefore in producing this report, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing. Directors' responsibilities The interim report, including the financial information contained therein, is the responsibility of, and has been approved by the directors. The directors are responsible for preparing the interim report in accordance with the Listing Rules of the Financial Services Authority. The accounting policies are consistent with those that the directors use in the annual financial statements. Review work performed We conducted our review in accordance with guidance contained in Bulletin 1999/4 issued by the Auditing Practices Board for use in the United Kingdom. A review consists principally of making enquiries of group management and applying analytical procedures to the financial information and underlying financial data and based thereon, assessing whether the disclosed accounting policies have been consistently applied unless otherwise disclosed. A review excludes audit procedures such as tests of controls and verification of assets, liabilities and transactions. It is substantially less in scope than an audit and therefore provides a lower level of assurance. Accordingly, we do not express an audit opinion on the financial information. Review conclusion On the basis of our review we are not aware of any material modifications that should be made to the financial information as presented for the six months ended 30 June 2006. Baker Tilly Chartered Accountants 2 Bloomsbury Street London WC1B 3ST 19 September 2006 This information is provided by RNS The company news service from the London Stock Exchange

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