Final Results - Pre-tax Profit Up 66.4%
Bloomsbury Publishing PLC
27 April 2000
Bloomsbury Publishing Plc
Preliminary results for the year ended 31 December 1999
Bloomsbury Publishing Plc is pleased to announce preliminary
results for the year ended 31 December 1999.
Highlights:
- Pre-tax profits increased by 66.4% to £2.616m (1998: £1.572m)
- Turnover increased by 36.9% to £20.863m (1998: £15.231m)
- Gross margins improved to 51.7% (1998, 50.1%)
- Bloomsbury voted Publisher of the Year at The British Book
Awards
- Worldwide success of launch of Encarta World English
Dictionary database in print and electronic form
- Bloomsbury USA achieves bestseller in first year
- Harry Potter series dominates the book world
Nigel Newton commenting on the company's two operating
divisions:
Reference and Electronic Media Division
'The English language is probably now the most important
communications tool in the world, representing as significant a
commercial opportunity as the internet itself or new
developments in telephony. Bloomsbury's strategic goal for the
Reference and Electronic Media Division is to be one of the
world's leading providers of reference content for print and
electronic publication for this global market. The demand for
content on the internet is insatiable, and with the advent of
new channels for the dissemination of information, such as WAP
technology, the demand for content generated from our databases
is set to continue.'
Book Division
'The future trading prospects for Bloomsbury are excellent. The
increased profile of the company on the back of its successes
in the Book Division is attracting more talented new and
established authors than ever before. New initiatives to expand
the base from which we exploit intellectual property rights
have been put in place.'
'In summary, our divisions are firing on all cylinders with the
successes of the past encouraging us to drive forward with even
greater enthusiasm. We have much to look forward to and remain
confident that Bloomsbury will continue to build on its current
value in the months and years ahead.'
CHAIRMAN'S STATEMENT
Overview
1999 was a vintage year for Bloomsbury Publishing with pre-tax
profits up 66.4% to £2.616m (1998: £1.572m) on a turnover that
increased by 36.9% to £20.863m (1998: £15.231m). The drivers
of this growth were a combination of a very strong list of
books led by the extraordinary success of Harry Potter,
increasing repeat revenue from our backlist catalogue, the
first full year's turnover from Bloomsbury's new American
operation, and the ground-breaking publication of the Encarta
World English Dictionary, which positions Bloomsbury as a
leader in electronic reference publishing. The publishing
industry recognised the achievements of the company by awarding
Bloomsbury Publisher of the Year at the British Book Awards.
Side by side with these achievements, has been the continued
championing of exciting new novelists and the nurturing of our
established authors.
Review of Operations
Reference & Electronic Media Division
For the Reference and Electronic Media Division, 1999 was a
year both of fruition and of broadening the scope of the
business. The Encarta World English Dictionary, an ambitious
three-year project worked on by a global team of more than 350
experts was published to tremendous acclaim in August 1999. It
was the first dictionary to be published worldwide on the same
day and the first to be published simultaneously in print and
electronic formats. The Observer called the work ' a milestone
in the history of our language'. The Times Educational
Supplement wrote, 'Bill Gates' and Bloomsbury's nimble Encarta
dictionary beats an Oxford classic'. To date, it has sold over
100,000 copies in the UK alone in its print edition, rapidly
establishing itself as a leading dictionary and guaranteeing
itself a place on book shelves and computer screens for decades
to come. Following its success, we are now expanding the
dictionary by a further 10,000 words.
The launch of The Encarta World English Dictionary generated
much interest in Bloomsbury's electronic reference expertise.
We have formed a partnership with Macmillan, a global
publishing company, to create a second major dictionary
database. This is aimed at over 750 million learners of English
worldwide, an enormous and rapidly growing market. We estimate
that by the year 2050, over 50% of the world's population will
have some competence in English, compared to 29% today. The
English language is probably now the most important
communications tool in the world, representing as significant a
commercial opportunity as the internet itself or new
developments in telephony. Bloomsbury's strategic goal for the
Reference and Electronic Media Division is to be one of the
world's leading providers of reference content for print and
electronic publication for this global market. The demand for
content on the internet is insatiable, and with the advent of
new channels for the dissemination of information, such as WAP
technology, the demand for content generated from our databases
is set to continue.
During the year, we have been developing a further strategy for
successfully exploiting online and other electronic
opportunities, which will be implemented over the next five
years. We plan to unveil some of these plans in the months
ahead.
Book Division
1999 was another highly successful year for the Book Division,
with Bloomsbury once again demonstrating its ability to develop
both bestselling and first time authors. The year began
spectacularly with the publication of Anna Pavord's magnificent
work, The Tulip, which became an international bestseller and
won the British Book Award for Design and Production. Other
highlights during the year included Lesley Glaister's Sheer
Blue Bliss, a new work from one of Britain's finest young
novelists.
In the spring we published Shadow Box, a first novel by the
Irish writer Antonia Logue, the rights to which we had secured
in a hotly contested auction; Holy Smoke by Jane and Anna
Campion (the former is the author and director of The Piano),
the film of which was released in March this year starring Kate
Winslett. East of the Mountains, by David Guterson, author of
the international bestseller, Snow Falling on Cedars was also
an immediate success. Summer highlights included Ahdaf Soueif's
The Map of Love which was shortlisted for the Booker Prize.
Three major biographies were published: Gore Vidal by Fred
Kaplan, Secrets of the Flesh, a biography of Collette, by
Judith Thurman, and Vaclav Havel by John Keane.
During the year we celebrated the fifth anniversary of our
paperback list, five years in which the list has carved itself
a niche as one of the most innovative and imaginative in the
UK. Highlights of the year included the bestselling Easy
Riders, Raging Bulls, an account of Hollywood in the Sixties
and Seventies, one of the most talked about non-fiction books
of the year. Two established authors, whom we had only
previously published in hardback, have now joined our paperback
list both having seen significant increases in sales: Nadine
Gordimer with The House Gun and Jay McInerney with Model
Behaviour.This underlines the increasing strength of our
paperback list with backlist income growing substantially,
based on the huge success of lead titles and our specialist
categories of film, music and American fiction. 2000 looks like
being an excellent paperback year with a marvellous array of
bestsellers coming through, including East of the Mountains and
The Tulip in paperback.
Harry Potter led the success of the children's list. While
these books reached new heights of popularity, our other
children's fiction and picture books also increased in
strength. 1999 opened with the launch of the paperback edition
of Harry Potter and the Chamber of Secrets. UK paperback sales
of the books now total over 1.3 million. Later in the year the
hard cover of the third in the series of seven books, Harry
Potter and the Prisoner of Azkaban, was launched, selling 1.25
million to date. The books topped the bestseller list for the
whole year. Our early prophecy that Harry Potter would become a
classic of children's literature is rapidly being realised. In
a recent poll, JK Rowling's books were voted second after Roald
Dahl's output of 40 years, as the greatest children's books of
all time.
Equally pleasing has been the strong performance of our other
children's titles. No Matter What by Debi Gliori, lived up to
its promise with publication in 13 countries and sales figures
topping 275,000. Other highlights included Face by Benjamin
Zephania selling 25,000 copies in the UK and The Selfish
Crocodile which has been a paperback success with over 40,000
UK sales. Looking forward we can say with confidence that the
children's list is building up a catalogue of high quality long
term properties.
Bloomsbury USA continued to develop its American list with the
additions of young American authors such as Alyson Richman,
author of The Mask Carver's Son, and James Gunn, author of The
Toy Collector. UK originated titles such as The Tulip also
greatly benefited from having a dedicated marketing team in the
US to drive sales. In 2000, highlights include Kitchen
Confidential by Anthony Bourdain. A serialisation is appearing
in the New Yorker, with the book selected as a 'hot tip' on
Amazon.com.
Management
Alexandra Pringle, who joined us in May 1999, was appointed
Editor-in-Chief of the Book Division on February 11th 2000. She
has many years experience in publishing, as well as having been
a literary agent. Liz Calder is Publishing Director at
Bloomsbury, building on the successes of her many established
and bestselling authors.
David Reynolds left the Company during the year to pursue a
career as an author. He played a vital role as a co-founder of
the Company, and in building Bloomsbury into what it is today.
We thank him for everything and wish him well.
Dividend
The Directors recommend a final dividend of 3.0 pence per
ordinary share (1998: 2.9 pence), making a total of 3.8 pence
per ordinary share (1998: 3.7 pence) for the year. The final
dividend, to be approved at the AGM, will be paid on 4 July
2000 to shareholders on the register on 19 May 2000.
Prospects
The future trading prospects for Bloomsbury are excellent. The
increased profile of the company on the back of its successes
in the Book Division is attracting more talented new and
established authors than ever before. New initiatives to expand
the base from which we exploit intellectual property rights
have been put in place. We recently announced a partnership
with Creative Artists Agency, the leading Hollywood agency, to
sell film rights in selected Bloomsbury books to Hollywood
studios and television producers. Such deals could generate
significant new royalty revenue streams for us in years to
come.
The success of the Encarta World English Dictionary has led to
the establishment of a new partnership with an international
company to develop a third major reference database, the
details of which will be announced in the coming weeks.
Bloomsbury.com, our book sales and marketing site, has been in
operation since September 1997, and has provided us with a
sound basis of knowledge from which to move into our next phase
of internet operation. We believe that there is considerable
scope for Bloomsbury to generate a significant part of its
future operations from online sales. The dotcom market is
currently being flooded with new start-ups, but we feel that
the successful online operations of the future will come from
companies such as ours, with a considerable amount of content
stored in our archives, and a proven, profitable track record.
Further developments on our internet operation will be
announced in the coming months.
In summary, our divisions are firing on all cylinders with the
successes of the past encouraging us to drive forward with even
greater enthusiasm. We have much to look forward to and remain
confident that Bloomsbury will continue to build on its current
value in the months and years ahead.
Nigel Newton
Chairman
FINANCIAL REVIEW
Turnover for 1999 increased by 36.9% to £20.863m (1998,
£15.231m) on the back of a very strong publishing list, a full
year's publishing programme from our Bloomsbury USA operation,
and continued growth in the strength of our backlist. The
increase in backlist revenues and the economies of scale
derived from the large print runs on the Harry Potter series
increased gross profit margins by 1.6% to 51.7% (1998, 50.1%).
Gross profit increased by 41.2% to £10.783m (1998, £7.637m).
Marketing and distribution costs increased by 87.9% to £3.197m
(1998, £1.701m). Key contributors to the increase in marketing
costs include the first full year's operation of Bloomsbury
USA, the launch and ongoing marketing of the Encarta
Dictionary, and promotion of the Harry Potter series.
Distribution costs increased as a result of the growth of trade
and export turnover and the first full year's sales from
Bloomsbury USA. Administrative costs increased by 27.4% to
£4.660m (1998, £3.659m). New personnel have been appointed for
our next phase of organic growth. These include a full time
commissioning editor for Bloomsbury USA, and a new Publishing
Director. There is also a variable element to our
administrative expenses, which have increased as a result of
the increase in turnover. Operating profits increased by 28.5%
to £2.926m (1998, £2.277m).
The interest charge for the year decreased by 56% to £0.310m
(1998, £0.705m) as a result of the funds received from the
rights issue in 1998 and the 5% placing which took place in
November 1999. Bloomsbury has had a low actual tax charge
because of timing differences arising from the different
treatment for tax and accounts purposes of amounts which are
deductible for tax purposes when paid. The directors have taken
the view that some of the timing differences could reverse in
the foreseeable future and therefore, a provision has been made
for deferred tax. The effective tax rate for the year is 31%
per cent which takes account of the adjustment to the deferred
tax provision and the reduction in the corporation tax rate
from 31 per cent to 30 per cent. Profit after tax increased by
60.7% to £1.805m (1998, £1.123m).
Basic earnings per share increased by 13.0% to 13.56 pence
(1998, 12.00 pence). Fully diluted earnings per share increased
by 10.5% to 13.19 pence (1998, 11.94 pence).
Bloomsbury has three major databases; the first, the Encarta
World English Dictionary, was completed and launched in 1999.
The other two, including the English Language Teaching
database, are currently under development. All development
costs of the databases are capitalised in work in progress
which accounts for the bulk of the increase to £5.710m (1998,
£3.770m). The capitalised costs of the Encarta Dictionary
database are being amortised over ten years. Finished stocks
increased by 32.5% to £3.750m (1998, £2.830m), which reflects
the increased stockholding on high stock turn books, the stock
holding for a full year's trading of Bloomsbury USA and the
stockholding of the dictionary. The stock turn of Harry Potter
has been high, and to ensure that the series doesn't go out of
stock, large print runs are commissioned. The year end stock
holding reflects a high proportion of the last print run before
the year end, all of which were rapidly sold early in the New
Year.
Trade debtors increased by 100.5% to £7.580m (1998, £3.781m)
due to very strong second half trading. Export sales increased
159.1% to £8.306m (1998, £3.321m), and as they are on longer
credit terms than UK customers, a greater proportion of those
sales is reflected in trade debtors. The full year's trading of
Bloomsbury USA is also included in the trade debtors at the
year-end. Increasing backlist revenues and sub-licence income
reduced prepayments and accrued income by 16.1% to £11.980m
(1998, £14.280m).
The cash generated by sub-licence rights sales and the sale of
books continues to grow, and is reducing the requirement to
fund our working capital requirements from borrowings. We
believe, however, that acquiring intellectual property rights
through our book division for publication and developing
intellectual property rights in the form of reference
databases, for electronic as well as hard copy publication in
the Media and Electronic Reference Division, is the key to our
future growth. The investment in these two areas, particularly
the development of electronic reference databases, contributed
to a net cash outflow from operating activities of £0.825m
(1998, cash inflow £0.203m). Through a combination of the
proceeds from the placing, which took place on 26th November
1999 and the retained profits for the year, gearing has been
reduced to 2.5% (1998, 14.1%).
Placing
On 23rd November 1999, approximately 5% of the company's share
capital was placed with institutions, raising £3.267m net of
expenses. The proceeds will be used to fund the development of
reference databases and internet activity.
Shareholders' funds
At 31 December 1999, shareholders' funds stood at £18.424m
(1998, £13.765m), the increase due to the retained earnings of
£1.276m (1998, £0.667m) and net receipts from the 5% placing of
£3.267m.
Strategy
Acquiring and developing rights in house for exploitation in
electronic or print form has been a primary profit driver of
the company. We are always seeking to identify new rights to
exploit, and the agreement with the Creative Artists Agency in
Hollywood to sell film rights, highlights our strength in
identifying opportunities for future long term growth. Growing
organically requires long term investment, but our track record
does show that previous year's investments are now generating
significant returns. We are continuing to acquire rights for
worldwide publication through Bloomsbury USA as well as in the
UK. Our balance sheet is strong, with gearing at an all time
low. The list of authors we have built up has already produced
a very strong list for 2000. I am confident that with the
funds received from the placing in November 1999, and cash
being generated from operations, Bloomsbury will continue to
establish itself as a market leader in both the reference and
electronic media division and the book division.
Going concern
Having made enquiries, the directors have a reasonable
expectation that the Company has adequate resources to continue
in operational existence for the foreseeable future. For this
reason, they continue to adopt the going concern basis in
preparing the accounts.
Colin Adams ACA
Finance Director
PROFIT AND LOSS ACCOUNT
for the year ended 31 December 1999
Notes 1999 1998
£'000 £'000
Turnover 2 20,863 15,231
Cost of sales (10,080) (7,594)
______ ______
Gross profit 10,783 7,637
Marketing and distribution (3,197) (1,701)
costs
Administrative expenses (4,660) (3,659)
______ ______
Operating profit 2,926 2,277
Net interest payable (310) (705)
______ ______
Profit on ordinary activities 2,616 1,572
before taxation
Taxation on profit on ordinary (811) ( 449)
activities ______ ______
Profit on ordinary activities 1,805 1,123
after taxation
Dividends 3 ( 529) (456)
______ ______
Profit for the financial year
transferred to reserves 1,276 667
_____ _____
Basic earnings per share 4 13.56p 12.00p
______ ______
Diluted earnings per share 4 13.18p 11.94p
_______ _______
Notes
All turnover and results arose from continuing operations.
There were no recognised gains or losses in either year other
than the profit for the year and on this basis a statement of
recognised gains and losses has not been prepared.
BALANCE SHEET
at 31 December 1999
1999 1998
£'000 £'000
Fixed assets:
Tangible assets 371 284
Current assets:
Stocks 9,507 6,694
Debtors due within one 15,750 12,173
year 3,882 5,907
Debtors due after more 554 -
than one year ______ ______
Cash at bank and in 29,693 24,774
hand
Creditors: amounts falling
due within one year 9,052 7,853
______ ______
Net current assets 20,641 16,921
______ ______
Total assets less current 21,012 17,205
liabilities
Creditors: amounts falling
due after more than one
year 1,926 2,370
Provisions for liabilities
and charges 662 1,070
______ ______
18,424 13,765
Equity capital and
reserves: 700 661
Called up share capital 13,520 10,176
Share premium account 9 9
Capital redemption reserve 4,195 2,919
Profit and loss account ______ ______
18,424 13,765
Total shareholders' funds
______ ______
The financial statements were approved by the Board of
Directors on 27 April 2000.
J N Newton Director C R Adams Director
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
for the year ended 31 December 1999
1999 1998
£'000 £'000
Profit on ordinary 1,805 1,123
activities after taxation
Dividends (529) (456)
Share options exercised 120 -
New shares placed net of 3,263 5,437
expenses
______ _____
Net addition to 4,659 6,104
shareholders' funds
Opening shareholders' funds 13,765 7,661
______ _____
Closing shareholders' funds 18,424 13,765
______ _____
CASH FLOW STATEMENT
for the year ended 31 December 1999
1999 1998
£'000 £'000
Net cash (outflow) / inflow from (807) 203
operating activities
Returns on investments and servicing
of finance
(323) (737)
Interest paid
Interest received 4 7
_____ _____
Net cash outflow from returns on
investments and servicing of finance (319) (730)
Taxation
Tax paid (116) (83)
Capital expenditure
Purchase of fixed assets (178) (79)
Equity dividends paid (491) (333)
Financing
Repayment of loans (413) (2,383)
Share options exercised 120 -
Shares placed (net of expenses) 3,263 5,437
_____ _____
Net cash inflow 2,970 3,054
_____ _____
Increase in cash 1,059 2,032
_____ _____
NOTES TO THE ACCOUNTS
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 1999
are an abridged version of the Company's audited accounts which
will be reported on by the Company's auditors before despatch
to the shareholders and filing to the Registrar of Companies.
2.Geographical analysis of turnover
The directors regard the Company's business as a single
segment. Its profit and turnover arises principally in the
United Kingdom where its assets are located. The table below
analyses turnover by destination:
1999 1998
£'000 £'000
United Kingdom 12,557 11,910
North America 4,975 1,952
Continental Europe 1,338 610
Australasia 1,286 523
Others 707 236
_______ _______
20,863 15,231
_______ _______
In the directors' opinion, disclosure of the analysis of the
profit before tax by geographical segment would be seriously
prejudicial to the Company.
3. Dividends
1999 1998
£'000 £'000
Interim, paid 15 107 72
December 1999
Final proposed 3.0p per 422 384
share
______ ______
529 456
______ ______
4. Earnings per share
Basic earnings per share has been calculated by reference
to earnings of £1,805,000 (1998, £1,123,000) and a weighted
average number of Ordinary Shares in issue of 13,314,273 (1998,
9,358,242). The diluted earnings per share has been calculated
by reference to a weighted average number of Ordinary Shares in
issue of 13,699,566 (1998, 9,404,376).
5. Annual General Meeting
The Annual General Meeting will be held at 12 noon on
Thursday 22nd June 2000 at 38 Soho Square, London, W1V 5DF.
6. 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,
38 Soho Square, London, W1V 5DF.
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