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Bloomsbury Publishing flourishing with formats old and new

Interim results in October were ahead of expectations while the trading update at the end of January again had brokers rushing to upgrade their forecasts

Bloomsbury Publishing PLC -

In commercial terms, there have been undoubted winners and losers from the coronavirus (COVID-19) pandemic, and Bloomsbury Publishing PLC (LON:BMY) looks like a winner.

A surge in interest in reading – there are just so many box-sets one can watch on Netflix before one goes Nutsflix – has been a boon for the company while its strategic move to become primarily a digital business-to-business (B2B) publisher focused on the academic and professional information market looks far-sighted.

The strategic growth initiative hatched in 2016 was called Bloomsbury 2020, with the "2020" referring to the year rather than perfect vision, although if the (sorting) hat fits …

Primarily, the “pivot” entailed Bloomsbury increasing its range of digital productions while doing more “reversioning” - translation and localisation of content – and updating of content from its vast back-catalogue.

At the time the initiative was launched, the budget for academic libraries worldwide was estimated to be worth US$5bn so getting a share of that was a prize worth pursuing.

Fast-forward to 2020/21 where lockdowns have accelerated the transition the world over to digital learning and Bloomsbury looks, to use its own words, “well placed to benefit from demand from academic institutions during lockdown”.

In fact, the lockdown has clearly given the group a fillip beyond the world of academia, with the company saying in its half-year results to the end of August 2020 that online book sales and e-book revenues were “significantly higher” than the year before.

The company saw a 47% year-on-year rise in sales of its digital resources, which offer a better margin than good old-fashioned physical books.

The magic margin effect can be seen from the fact that group revenues rose a respectable 10% to £78.3mln from £71.3mln at the interim stage last year while underlying profit before tax rose by an eye-catching 60% to £4.0mln from £2.5mln the previous year.

It was the best half-year earnings figure for the company since 2008 and exceeded the board’s expectations.

Cash-rich and looking for acquisitions

The group ended August 2020 with net cash of £44.1mln, having moved early after the first UK lockdown to tap the market for around £8.4mln through the issue of shares at 223.25p.

Those shares are now trading at 287p, having perked up from around 210p in late October when the company published its sparkling interims.

Small wonder that the company felt confident enough to resume paying cash dividends, with an interim pay-out of 1.28p that was unchanged from the previous year’s interim divi.

Prior to the release of the interims, analysts were expecting the publisher to churn out a full-year underlying profit of £12.1mln on revenue of £161.8mln; those expectations have now shifted northwards to profit of £13.2mln on revenue of £163mln after the company issued a trading update late last month in which it said it continues to trade ahead of expectations.

Lest you get the impression that the focus on becoming primarily a B2B publisher means the company has lost its touch in the Consumer market, Bloomsbury reported last month that this division enjoyed strong trading, driven by a surge in reading during the lockdown, which came as a surprise to those of us who do most of our reading on the daily commute (which currently consists of a trip down a flight of stairs for many of us).

What’s more, it’s not just e-books that are flying off the virtual shelves; according to market research group Nielsen, the volume of print books sold in the UK in 2020 was up 5.2% on 2019.

Looking ahead, the market is wondering what Bloomsbury will do with its cash pile.

The company, which has made 16 acquisitions since 2008, is actively considering acquisition opportunities in line with its long-term growth strategy of growing its Non-Consumer portfolio.

So, the year 2020 may be behind us but Project 2020 is still alive and kicking.

The board is also keen to expand international revenues and reduce its reliance on the UK market, where it currently earns around one-third of its revenues.

Finally, tucked away October's interim results statement was a commitment to ensure that each year new children discover a certain series of books featuring a young bespectacled wizard.

Given that the first book in the series, Harry Potter and the Philosopher's Stone was the fifth best-selling children’s book in the first ten months of 2020 (and likely featured on a lot of Christmas lists) in the UK, there seems little danger of the golden goose failing to carry on laying the golden eggs for a while yet.

As Bloomsbury said in its interim results, “the short-term is difficult to predict because of the pandemic” but the odds on a happy ending look good.

Quick facts: Bloomsbury Publishing PLC

Price: 262.4545 GBX

LSE:BMY
Market: LSE
Market Cap: £214.19 m
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