30th Mar 2005 07:05
Bloomsbury Publishing PLC30 March 2005 30 MARCH 2005 BLOOMSBURY PUBLISHING PLC Preliminary Results for the Year Ended 31 December 2004 • Pre-tax profit before goodwill amortisation and exceptional gain increased 6.9% to £16.44m (2003, £15.38m). • Three number one bestsellers in 2004 in the US, the UK and Germany reflect the growing strength and breadth of the international publishing portfolio. • Basic earnings per share before goodwill amortisation and exceptional gain increased 5% to 17.28p (2003, 16.45p). • Final dividend increased 47.8% to 2.478p (2003, 1.677p). Full year dividend increased by 39.5% to 3.00p (2003, 2.151p). • Investment in future titles at the year end up 25.5% at £20.85m (2003, £16.61m). • Board anticipates strong outcome for 2005. Portfolio breadth and geographical spread, together with new Harry Potter to be published in July, provide confidence in future prospects. Commenting on the results and prospects for Bloomsbury, Nigel Newton, Chairman,said: "2004 reflected Bloomsbury's emergence as a fully fledged internationalpublisher with an established position in the world's three largest book marketsof the US, UK and Germany, where we had number one bestsellers in all threemarkets. In recent years we have also worked hard to extend our portfolio ofauthors and to build our reputation for finding new, first-time writers likeSusanna Clarke, author of Jonathan Strange & Mr Norrell, who achieveconsiderable success with their first book. Bloomsbury will show significant progress in 2005, with the publication of newtitles by JK Rowling, John Irving and Ben Schott, and paperbacks of our 2004hardcover bestsellers The Two of Us and Jonathan Strange & Mr Norrell. This yearstarted well with a number of our strongest titles such as Who's Who released inthe first weeks of the year, two new books in the bestseller lists andpre-orders for the forthcoming Harry Potter hardback substantially higher thanoriginally anticipated. As a consequence the Group is expected to perform aheadof our original expectation for 2005 and the Board anticipates that profitbefore tax and goodwill will be not less than £20 million." For further information, please contact: Tim Spratt/Charles Palmer, Financial Dynamics 020 7831 3113Sandy Karon, PA to the Chairman, Bloomsbury Publishing Plc 020 7494 6015 CHAIRMAN'S STATEMENT Overview Bloomsbury's strategy to build an international publishing operation began tobear fruit during 2004. In 2004, for the first time, we achieved a number onebestseller in all three territories: Jonathan Strange and Mr Norrell in the USA,The Two of Us by Sheila Hancock in the UK and Schotts Sammelsurium (Schott'sOriginal Miscellany) in Germany, reflecting the quality and strength of ourportfolio. We acquired titles with world-wide appeal and during the yearpublished Jonathan Strange & Mr Norrell simultaneously across Bloomsbury in theUK, Bloomsbury USA and our German subsidiary, Berlin Verlag. The book performedextremely well in all markets and became one of our top selling titles in 2004.In the children's division, we published Pirates! - also across all three of ourterritories. The success of our international publishing strategy was reflected in ourresults with pre-tax profit before goodwill amortisation and exceptional gainincreasing 6.9% to £16.44m (2003, £15.38m) on turnover up 1.6% to £84.45m (2003,£83.11m). During the year, the Group continued to implement its well-defined growthstrategy based on its three operating areas, Children's, Adult and Reference.For 2004, the breakdown of turnover for these areas was as follows: Children's48% (2003, 63%), Adult 36% (2003, 22%) and Reference 16% (2003, 15%). Children'ssales, as predicted, decreased by 22.7% to £40.41m (2003, £52.29m) reflectingthe release of Harry Potter and the Order of the Phoenix in hardback in 2003.Sales of Adult titles increased 64.2% to £30.17m (2003, £18.37m) fuelled bysuccesses such as Jonathan Strange & Mr Norrell, Schott's Miscellanies and TheTwo of Us. Sales from Reference titles increased by 11.4% to £13.87m (2003,£12.45m), benefiting from the acquisition of the Reeds Nautical Almanac in 2003. In December 2004, we consolidated our position in the US with the acquisition ofWalker Publishing, Inc., for a total consideration of £3.44m. Walker has beenestablished in America for 45 years and has built an impressive track record ofbestsellers. The acquisition and integration of Walker will enable Bloomsbury tobroaden its presence in the US market and in particular in adult narrativenon-fiction and children's non-fiction. This is an important step in building asignificant publishing operation in the US - the world's largest publishingmarket. Cash within the group remained healthy at £28.68m (2003, £28.32m). Financial performance Turnover increased by 1.6% to £84.45m (2003, £83.11m). This progress wasachieved by strong performances from continuing sales of Harry Potter and theOrder of the Phoenix in hardback and the launch of the paperback in July 2004,Jonathan Strange & Mr Norrell, The Two of Us and Anthony Bourdain's Les HallesCookbook, and in spite of a drop in export sales, which was due to the adversemovement in the US exchange rate which meant we had to lower prices to competeagainst the American publishers of the same books in the open markets andsometimes lose orders. In addition, our lead title for the year, The Two of Us,about the life of John Thaw, had an orientation to the UK market and was not abig export seller. Profit before tax and goodwill amortisation and exceptional gain improved 6.9%to £16.44m (2003, £15.38m). Basic earnings per share before goodwillamortisation and exceptional gain increased by 5% to 17.28 pence (2003, 16.45pence). Diluted earnings per share, before goodwill amortisation and exceptionalgain, increased by 7.3% to 16.97 pence (2003, 15.82 pence). At the end of the year the Group had increased its net cash balances to £28.67m(2003, £28.32m). We continue to invest in future organic growth throughacquiring new authors and titles and through strategic acquisitions whichcomplement our three core activities. At 31 December 2004, the Group had under contract 978 titles (2003, 888) forfuture publication, with a gross investment of £20.85m (2003, £16.61m). Afterpayment of the initial tranches of advances to authors, our liability for futurecash payments on these contracted titles at that date was £11.88m (2003 £8.66m). Children's In our 2004 interim results we announced the results of our review of thechildren's book market in the US and the UK, concluding that there was stillconsiderable potential for organic growth in children's book publishing. We were already well established in the fiction market for the age ranges 6-18and, to capitalise on this success, we decided to broaden our range of titles toprovide a comprehensive publishing programme of titles covering children frombirth to age 18. Growth was to be principally driven organically and therecruitment process is well underway. We have added capacity to our editorial,marketing and design departments in both the UK and USA. The first of the titlesin our new pre-school list will be published towards the end of this year. Inaddition, we also intend to add critical mass to the children's division throughstrategic acquisitions over the coming years. The children's business in the UK is working well at both title acquisition andmarketing in conjunction with Bloomsbury USA and Berlin Verlag. World rights arenow being acquired on both sides of the Atlantic, building up a powerfulinternational list for the Group. In Germany, Bloomsbury Kinder- undJugendbucher has successfully completed its first full year of trading,publishing titles acquired primarily through Bloomsbury in the UK and the USA.Our drive to acquire world rights in our titles continues to feed the German,American and UK lists and our biggest authors of the year on the three lists,such as Celia Rees, continue to be shared authors. Discovering first time authors continues to be one of the main drivers behindthe growth of the children's list. Whispering to Witches by Anna Dale waspublished in hardback in 2004 and we have already sold rights in 19 foreignlanguages, reflecting our strength in the international fiction market. The paperback publication of Harry Potter and The Order of the Phoenix in thesummer saw the title go to number one on the bestseller lists and continue tobuild the series in the UK and export markets. Our fiction list saw the development of a new, bright and exciting series withthe publication of the first title in Sue Limb's new series about a teenagegirl's humorous reflections on life. Girl 15, Charming but Insane was widelyrecognised as being the best of the teen fiction of its type published in theyear. The performance of Holes by Louis Sachar during 2004 demonstrated the revenuegenerating capabilities of our backlist. The book was selected by Liverpool asthe city-wide read for the initiative 'Liverpool Reads' with extensive T.V. andmedia interest. 2004 was a year in which much of the work of the previous years establishing ourChildren's list in the fiction and picture book areas came to fruition. Withthe focus on developing the pre-school areas of the list, as well as buildingour international profile as we publish across the UK, America and Germany, wehave an exciting year ahead. Adult 2004 was an excellent year for the Adult Division. We began the year with JoannaTrollope's new novel, Brother and Sister, and Anchee Min's Empress Orchid. Anumber of established authors who had recently moved to Bloomsbury had theirbooks published during the year. These included Justin Cartwright with ThePromise of Happiness, Barbara Trapido with Frankie & Stankie and Ronan Bennettwith Havoc, in its Third Year. The Promise of Happiness was chosen by Richard &Judy's Book Club, as was A Gathering Light by Jennifer Donnelly which became amajor seller. Frontlist successes continue to build the value of our backlist. In addition,the backlist is benefiting from the reversion to us of paperback licences onbooks, such as The English Patient by Michael Ondaatje, which we re-issue asBloomsbury paperbacks. The acquisition of worldwide rights reaped significant benefits, with SusannaClarke's Jonathan Strange & Mr Norrell an outstanding international publishingsuccess. Apart from becoming a bestseller in the UK, the US and Germany, we soldpublishing rights to the book in 31 languages. It was shortlisted for theWhitbread Prize, the Guardian Book Award and the Author's Club Best First NovelPrize and was longlisted for the Booker Prize. The author has sold the filmrights to New Line, the producers of Lord of the Rings, and the screenplay is tobe written by Christopher Hampton. In non-fiction we began the year with Frederick Taylor's Dresden, which soldextremely well in hardback and has just become a major seller in paperback. BenSchott's Sporting, Gaming and Idling Miscellany was published in the lead up toChristmas and performed very well. The big event of the year, however, was thepublication of Sheila Hancock's account of her life with John Thaw, The Two ofUs, which rapidly became a number 1 bestseller. We continued to buy adult books internationally. We also continued to attractmajor authors from other publishing companies, most recently Richard Ford, oneof the greatest living writers and the only winner of both the Pulitzer Prizeand the PEN Faulkner Award for the same book. Reference & Electronic Media In 2004, A&C Black achieved solid organic growth across all areas of its list,with particular success in educational and music books. We published, for thefirst time, The Children's Writers' and Artists' Yearbook, a companion volume toour bestselling Writers' and Artists' Yearbook. This new book has significantlyoutperformed expectations and is a valuable addition to our list of annualpublications. In September, we published our first edition of Reeds Nautical Almanac, theannual compendium of navigational data, which we acquired in December 2003.Sales of the Almanac at the end of 2004 were ahead of budget, reflectingsuccessful integration. In May 2004, A&C Black's distribution operation was sold to Bloomsbury'sdistributor Macmillan Distribution Limited and is running smoothly. A strategic review of reference publishing within the Group was undertakenduring the year. As from 1 July 2005, the Bloomsbury Reference list, along withits staff, will become part of A&C Black. This is an exciting move for the list,whose achievements have included the Bloomsbury English Dictionary database,which is licensed to Microsoft, Business: The Ultimate Resource and theMacmillan English Dictionary, which has won numerous awards. The move to A&CBlack will give the list greater leverage in the reference market. With the increased focus of one reference operation within the Group, A&C Blackcan continue its publishing programme to create books with long term revenuegenerating capabilities. International Activities Bloomsbury USA Bloomsbury USA showed a significant improvement in its performance during 2004,reflecting growth in both our children's and adult lists. Faerie Wars by HerbieBrennan and Jonathan Strange & Mr. Norrell were on the New York Times bestsellerlist. Alan Hollinghurst's The Line of Beauty, which we publish in the USA butnot in the UK, won the Man Booker prize in the UK and subsequently became one ofour top selling titles during the year in the US. Anthony Bourdain's Les HallesCookbook and Ben Schott also enjoyed success in the US. We now have a directorof rights sales in the US who has significantly increased the value of ourrights deals to third parties on books acquired in the US. We have also startedselling US originated titles into the export markets for the first time. Whilegrowing US revenues we have continued to reduce costs and have negotiated morefavourable terms on our US distribution agreement as a result of the increasedlevel of business. The acquisition of Walker Publishing, Inc., brings both a strong non-fictionadult list and a children's list which focuses on school and library sales. TheBloomsbury US children's list is heavily focused in the trade and therefore weexpect to utilise Walker's expertise in the school and library market to givethe Bloomsbury list greater exposure in that market. Conversely, Bloomsbury willprovide Walker's list with greater opportunities for sales in the trade. Walker has a strong reputation for serious non-fiction, but its growth has beenrestricted by limited working capital resources. With improved operatingefficiencies, sales and distribution, along with access to the working capitalresources of a larger group, Walker will be expanding its lists both in Adultand Children's. On the Adult side, it will continue to develop its non-fictiontitles, broadening into current affairs and health. Walker will also continue topublish and increase its strong backlist. Most importantly, the company will nolonger be licensing its paperback titles to third parties and instead willpublish directly into the paperback market. There will be an initial drop inturnover and profit in 2005 as these paperback licences are retained but thecompany should gain increased turnover and higher margins from 2006 throughpublishing the paperbacks under its own imprint. There are clear synergies between A&C Black and Walker. A&C Black's children'slist, for example, should sit well alongside Walker's Books for Young Readersand both could be sold together with little additional cost and increasedrevenue and margins for the Group. A&C Black currently sells much of its list tothird party publishers in the US. We are currently considering creating anAmerican A&C Black imprint to sell books directly into the retail, school andlibrary markets, using Walker's infrastructure. Berlin In the first full year following Bloomsbury's acquisition of Berlin Verlag, thecompany showed significant progress. Turnover increased, overheads have been cutand losses were significantly lower than 2003. In September, we launched our new imprint, Bloomsbury Berlin, which focuses ontitles acquired through Bloomsbury UK and USA. This initiative proved to be animmediate success with the publication of Susanna Clarke's Jonathan Strange & MrNorrell, which was published simultaneously in the UK, US and Germany. However,Berlin's bestselling title of the year was Schotts Sammelsurium, the Germanedition of Schott's Original Miscellany, which has been in the Der Spiegelbestseller list since September 2004 and reached No 1 in the key weeks beforeChristmas. This was a major step forward for the Group. Berlin Verlag's authors also won several important prizes during the year. TheHungarian writer Peter Esterhazy won the German Bookseller's Peace Prize, one ofthe main lifetime achievement awards in German publishing. Elfriede Jelinek, ofwhom we are the originating publisher, won the Nobel Prize in Literature. The German Children's list, which was launched with six titles in Autumn 2003,continued to expand and published 15 titles during 2004. Backlist sales forchildren's titles were also strong, particularly of Celia Rees's Piraten!(Pirates!). 2005 will see a further major expansion of the Children'spublishing programme to 31 titles, including paperback editions of key titlesfrom the first list. We have continued to change and improve Berlin's systems, including cost, printand stock controls. We moved to a new distributor in January 2005 to provide aservice on a more cost-effective basis. In January 2005, Arnulf Conradi, the joint founder of Berlin Verlag, announcedhis retirement. He was succeeded as Managing Director by the joint appointmentas Managing Directors of his co-founder Elisabeth Ruge, with responsibility forthe publishing side, and Kathy Rooney, who had already been Bloomsbury's liaisondirector for Berlin, with responsibility for the business side of Berlin Verlag.The handover went smoothly and the new management team is working well and has anew bestseller this month, Die Siebte Nacht (The Seventh Night) by Alina Reyes,to be number 4 in the Der Spiegel bestseller list next week. SchottsSammelsurium is currently number 3. Dividend The directors are recommending a final dividend of 2.478 pence per share (2003,1.677 pence per share) making a total of 3 pence per share (2003, 2.151 penceper share) for the year. This represents a 39.5% increase in the full yeardividend in line with our progressive dividend policy, underpinned by thecompany's increasing profitability. The final dividend will be payable on 7 July2005 to Ordinary Shareholders on the register at the close of business on 27 May2005. Management and Staff In April 2005, Richard Cordeschi will become Company Secretary for the Group. Hewas previously company secretary to Mansell Plc. I would like to thank our staff for their tremendous contribution to a very busyyear where we have seen strategic as well as operational achievements. Prospects The Group's strategy of establishing an international presence in the UK, US andGermany and acquiring titles for worldwide publication is bearing fruit. The keyto this success is our editors' enthusiasm to ensure that other areas of thebusiness benefit from the books that they acquire. Current Trading 2004 reflected Bloomsbury's emergence as a fully fledged international publisherwith an established position in the world's three largest book markets of theUS, UK and Germany, where we had number one bestsellers in all three markets.In recent years we have also worked hard to extend our portfolio of authors andto build our reputation for finding new, first-time writers like Susanna Clarke,author of Jonathan Strange & Mr Norrell, who achieve considerable success withtheir first book. Bloomsbury will show significant progress in 2005, with the publication of newtitles by JK Rowling, John Irving and Ben Schott, and paperbacks of our 2004hardcover bestsellers The Two of Us and Jonathan Strange & Mr Norrell. This yearstarted well with a number of our strongest titles such as Who's Who released inthe first weeks of the year, two new books in the bestseller lists andpre-orders for the forthcoming Harry Potter hardback substantially higher thanoriginally anticipated. As a consequence the Group is expected to perform aheadof our original expectation for 2005 and the Board anticipates that profitbefore tax and goodwill will be not less than £20 million. Nigel NewtonChairman29 March 2005 FINANCIAL REVIEW Overview The Group has continued to increase revenues and generate positive operatingcash flow. Managing the cost base is a continual part of the Group's drive forearnings growth and one of the key areas we have focused on in 2004 is the costof distribution. With the business increasing in the US, UK and Germany we havebeen able to agree more favourable distribution rates for all three ofBloomsbury USA, A&C Black in the UK and Berlin Verlag. In December we acquired Walker Publishing, Inc. for a sterling equivalent of£3.44m. The process of integrating the operation with Bloomsbury USA is alreadyunderway. We have recruited a CFO for Bloomsbury USA who started in March 2005and he will be responsible for implementing the integration programme andworking closely with senior management to build the US business into a majorrevenue stream for the Group. Results Turnover for the Group increased 1.6% to £84.45m (2003, £83.11m). The Group'soperations are split into three main operating areas: Children's, Adult andReference publishing. For 2004, the breakdown of turnover between the threeareas was: Children's 48% (2003, 63%), Adult 36% (2003, 22%) and Reference 16%(2003, 15%). Turnover by sales channel in 2004 was: Home £58.85m (2003,£53.20m), Export £13.04m (2003, £22.62m), USA £9.06m (2003, £4.64m) and Rights£3.50m (2003, £2.65m). Home sales increased 10.6% which included the success ofThe Two of Us by Sheila Hancock. The decline in export sales was partly offsetby the increase in sales at Berlin of £3.90m (2003, £1.99m). The actual drop inexport sales after taking this into account was £11.49m or 55.7% from 2003. Thiswas due in part to the adverse movement in the US exchange rate which meant thatwe had to lower the price of our books to compete against US publishers in theopen markets where we don't have exclusivity. There were also several big titlessuch as The Two of Us which did not work as well in the export markets due totheir UK orientation. USA sales increased 95.3% on the back of a number ofbestselling titles such as Jonathan Strange & Mr Norrell, Anthony Bourdain's LesHalles Cookbook and Alan Hollinghurst's Man Booker prize winning novel, The Lineof Beauty. Rights sales were up 32.1% over 2003 due, in part, to taking on adedicated rights manager in the US and strong rights sales from books such asJonathan Strange & Mr Norrell and The Icarus Girl. Gross profit decreased 3.0% to £42.18m (2003, £43.48m). Gross profit margindecreased to 49.9% (2003, 52.3%) due to the economies of scale achieved from theprinting of Harry Potter and the Order of the Phoenix in hardback in 2003.Although the paperback edition was published in 2004, the print run was lowerand had a smaller effect on the margin level. Marketing and distribution costs decreased by 13.5% to £11.38m (2003, £13.15m).Our prior year marketing expenditure included the cost of the launch of thehardback of Harry Potter and the Order of the Phoenix. The paperback launch ofthe book during 2004 incurred a smaller cost. Amortisation of goodwilldecreased 61.5% to £0.68m (2003, £1.75m). In 2003 we took a one-off impairmentcharge for Peter Collin Publishing which was acquired in 2002 and Andrew BrodiePublications which was acquired in 2003. Administrative expenses excludingamortisation of goodwill were slightly lower at £15.70m (2003, £15.73m).Operating profit before the deduction of goodwill amortisation increased 3.4% to£15.10m (2003, £14.61m). During 2004 we announced the closure of A&C Black's distribution centre at EatonSocon and the subsequent move of the distribution operation to Bloomsbury'sexisting distributor, Macmillan Distribution Limited. The move was completed on1 May 2004 and A&C Black's distribution has now been integrated and is workingsmoothly. The net exceptional gain of £0.42m (2003, £nil) takes account of thegain on disposal of the freehold warehouse of £1.08m less reorganisation costsof £0.58m. There is an additional £0.08m relating to the loss on the sale of theBlue Guides travel list during the year. Net interest receivable rose 73.2% to £1.34m (2003, £0.78m) due to a combinationof higher average cash balances during the year and higher interest ratesachieved for the funds placed on deposit. The effective corporation tax rate for the year is 24.7% (2003, 28.7%) and takesaccount of the gain on disposal of the freehold distribution centre in A&C Blackwhich has no capital gains tax liability due to indexation and other allowances,share options exercised during the year and disallowable costs such as goodwillamortisation of £0.68m (2003, £1.32m). In addition, the tax charge for the yearis net of a deferred tax credit of £0.75m, which includes £0.60m in respect oftax losses carried forward in Berlin Verlag. This represents the element ofBerlin Verlag's losses which we expect will be utilised in the foreseeablefuture. Basic earnings per share before goodwill amortisation and exceptional gainincreased by 5% to 17.28 pence (2003, 16.45 pence). Fully diluted earnings pershare before goodwill amortisation and exceptional gain increased by 7.3% to16.97 pence (2003, 15.82 pence). Balance sheet Stocks decreased 7.0% to £11.61m (2003, £12.48m). Work in progress was down34.8% to £3.36m (2003, £5.15m) due to timing of titles at the work in progressstage and the ongoing amortisation of the electronic databases. Stocks offinished goods increased 11.8% to £8.04m (2003, £7.19m) due to the stock holdingof an increased number of titles published by the Group during the year and thestock acquired as a result of the acquisition of Walker. Group debtors increased 42.6% to £43.37m (2003, £30.41m). Trade debtorsincreased 52.9% to £21.25m (2003, £13.90m). This was mainly due to the change inthe timing of the sales over 2003. In 2003 the timing of the sales was skewed toJune and July due to Harry Potter and the Order of the Phoenix being released atthat time. The bulk of the cash, in particular, that relating to UK sales, wasreceived in the same year. In 2004, sales were skewed towards the year-end withtitles such as Jonathan Strange & Mr Norrell and The Two of US generatingsignificant revenues in the last quarter of 2004. As our books are sold on areturnable basis which is standard industry practice, the Group makes aprovision each year for returns within trade debtors. This provision is adjustedfor forecast returns in the following year at the end of each reporting periodusing a consistent policy. The provision at the end of 2003 reflected the highlevel of sales in the year, including the hardcover Harry Potter and the Orderof the Phoenix which retailers had agreed not to return until 2004 so that itwould be available through the Christmas selling period. I am pleased to reportthat due to the stronger than expected sell through rate of titles to consumersfrom retailers, including the hardcover of Harry Potter and the Order of thePhoenix right up to its paperback release on 10 July 2004, a proportion of theexisting provision for returns could be released in 2004, with a net beneficialeffect on turnover of £13.39 million and a corresponding net beneficial effecton gross profit of £3.87 million. Also, we have made increased provisions in the2004 profit and loss account against the carrying value of our dictionarydatabase of £1.23 million, and increased the provision against unearned advancesto authors by £1.03 million, and other provisions by £0.9 million. The neteffect on pre-tax profit after charging all of these provisions (including therelease of the returns provision) was £0.71 million. Harry Potter and the Half-Blood Prince will be published on 16 July 2005.Pressure from booksellers about the stock risks they carry on such a big titlehas resulted in booksellers being allowed to return unsold stock from November2005, which means that we should have a clear picture of returns of the newHarry Potter by this year end. This was not possible with respect to theprevious Harry Potter hardcover due to the returns arrangements agreed withbooksellers on that title explained above. Prepayments and accrued income increased 29.2% to £20.66m (2003, £15.99m)reflecting the increase in investment in future titles and increased rightssales. Group creditors falling due within one year and after one year increased 6.6% to£27.77m (2003, 26.06m). £0.089m of the guaranteed loan notes 2005, relating tothe A&C Black acquisition in 2000, were redeemed during the year along with£0.675m of guaranteed loan notes relating to the acquisition of Reeds AlmanacLimited in 2003. Loan notes outstanding at the end of the year were £0.383m(2003, £1.147m). Trade creditors increased by 17.2% to £5.79m (2003, £4.94m),attributable to the acquisition of Walker Publishing, Inc. Accruals anddeferred income increased by 2.5% to £15.33m (2003, £14.96m). Accruals anddeferred income includes royalty payments to authors, which vary from year toyear depending on turnover and the authors' royalty terms. Corporation taxpayable increased to £2.76m (2003, £1.72m) and the proposed final dividendincreased to £1.77m (2003, £1.175m). Berlin Verlag Berlin's performance was greatly improved during 2004. Turnover for the companyincreased to €5.54m (2003, €2.82m for ten months). The improvement in therevenue line was mainly attributable to the success of the children's list andalso the Bloomsbury Berlin list which had its first bestselling title withSchotts Sammelsurium, the German translation and adaptation of Schott's OriginalMiscellany. Operating losses before re-organisation costs were reduced 54.6% to€0.83m (2003, €1.83m for ten months). Cost reduction is still an ongoingprocess and with new management in place we are confident that the company willturn into profit Cash Flow £4.37m cash was generated from operating activities during the year (2003,£14.65m). For 2004, sales were skewed towards the final quarter of the year dueto the planned release of major titles to tie in with the Christmas season. Thebulk of the cash from the sale of these titles will be collected in the firsthalf of 2005. Corporation tax paid during the year was £3.71m (2003, £4.28m)and £3.25m was spent on the acquisition of Walker Publishing, Inc. Shareholders' Funds At 31 December 2004, Shareholders' funds stood at £70.66m (2003, £58.82m). Theincrease was due to retained earnings of £10.02m (2003, £8.20m), share optionsexercised during the year and shares issued in connection with the acquisitionof Walker Publishing, Inc. Accounting Standards and Developments An International Accounting Standards Regulation was adopted by the Council ofthe European Union (EU) in June 2002. This regulation requires all EU companieslisted on an EU stock exchange to use International Financial ReportingStandards (IFRS), published by the International Accounting Standards Boards(IASB), to report their consolidated results for the financial years beginningon or after 1 January 2005. Bloomsbury has begun the process of converting tothese standards and will report under IFRS for the year ended 31 December 2005.The 2004 figures will also be restated at that time. We will report the Group'sresults under IFRS for the first time when we present the interim results forthe six months ending 30 June 2005. The adoption of IFRS is not expected to have a significant impact on ourfinancial statements, although we have set out below a commentary on the areaswhere there will be notable changes. Share based payments IFRS 2 will require Bloomsbury to recognise an expense for share options grantedafter 7 November 2002. The Black-Scholes option valuation model has been used inthis process and had IFRS been adopted in its entirety in 2004 an expenserelating to the share options of £0.152m would have been recognised in theprofit and loss account for 2004. Goodwill amortisation and impairment testing Under IFRS, Bloomsbury will cease to amortise goodwill to the profit and lossaccount. The goodwill in the balance sheet will be subject to an annualimpairment test. It is expected that the goodwill charge will be lower than theamount charged in the profit and loss account for 2004. Segmental reporting More detailed disclosure is required under IFRS of primary and secondarysegments. The Group currently provides a breakdown of revenues by its threeoperating divisions, Children's, Adult and Reference. The Group considers thatas the main thrust of its growth is to develop its international publishingstrategy, the primary segmental report should be based on geographical segments(UK, US, Europe and rest of the world). The secondary segments will be its threeoperating divisions. Future Investment and Strategy The strategy to acquire rights for worldwide exploitation is paying off as theGroup continues to generate strong positive operating cash flow. Children'spublishing is an area where we consider there is room for increased incrementalgrowth and the infrastructure is being put in place through recruitment ofadditional staff, with the first revenue expected to be generated from our newpre-school list in the second half of 2005. We are continuing our search forstrategic acquisitions for the Children's operation both in the UK and the US.The Children's division of Walker will add critical mass to the list and willprovide a valuable conduit into the school and library market for our Bloomsburylist, as well as potentially providing a publishing platform for A&C Black'schildren's list. Colin Adams ACAGroup Finance Director29 March 2005 CONSOLIDATED PROFIT AND LOSS ACCOUNT for the year ended 31 December 2004 Notes 2004 2003 £'000 £'000 Turnover 2 84,449 83,114 Cost of sales (42,270) (39,632) ______ ______Gross profit 42,179 43,482Marketing and distribution costs (11,377) (13,147)Administrative expenses: - goodwill amortisation (675) (1,751) - other (15,702) (15,729) ______ ______ Operating profit 3 14,425 12,855 Profit on sale of fixed assets in continuingoperations 1,076 -Loss on sale of publishing assets (77) -Reorganisation costs in continuing operations (582) - ______ ______ Profit on ordinary activities before interest 14,842 12,855Net interest receivable 1,342 775 ______ ______Profit on ordinary activities before taxation 16,184 13,630Taxation on profit on ordinary activities 4 (4,005) (3,915) ______ ______Profit on ordinary activities after taxation 12,179 9,715Dividends 5 (2,156) (1,516) ______ ______Profit for the financial year transferred toreserves 10,023 8,199 _____ _____Basic earnings per share 6 17.19p 14.10p ______ ______Diluted earnings per share 6 16.88p 13.56p ______ ______Basic earnings per share before goodwillamortisation and exceptional gain 6 17.28p 16.45p ______ ______Diluted earnings per share before goodwillamortisation and exceptional gain 6 16.97p 15.82p ______ ______ Notes All turnover and results arose from continuing operations. There were no recognised gains or losses in either year other than the profitfor the year and on this basis a statement of total recognised gains and losseshas not been prepared. CONSOLIDATED BALANCE SHEET at 31 December 2004 2004 2003 £'000 £'000Fixed assets: Intangible assets 13,547 11,359 Tangible assets 776 1,218 ______ ______ 14,323 12,577Current assets: Stocks 11,614 12,484 Debtors due within one year 38,392 26,706 Debtors due after more than one year 4,980 3,707 Cash at bank and in hand 29,120 29,472 ______ ______ 84,106 72,369 Creditors: amounts falling due within one year 27,619 25,173 ______ ______ Net current assets 56,487 47,196 _____ ______Total assets less current liabilities 70,810 59,773 Creditors: amounts falling due after more thanone year 154 883 Provisions for liabilities and charges - 69 ______ ______ 70,656 58,821 ______ ______Equity capital and reserves: Called up share capital 894 876 Share premium account 35,763 33,967 Capital redemption reserve 20 20 Profit and loss account 33,979 23,958 ______ ______ Total shareholders' funds 70,656 58,821 ______ ______ The financial statements were approved by the Board of Directors on 29 March2005. J N Newton Director C R Adams Director RECONCILIATION OF MOVEMENTS IN CONSOLIDATED SHAREHOLDERS' FUNDS for the year ended 31 December 2004 2004 2003 £'000 £'000 Profit on ordinary activities after taxation 12,179 9,715 Dividends (2,156) (1,516) Exchange loss on opening share capital and reserves offoreign subsidiaries (2) - Shares issued on acquisition 148 - Share options exercised 1,666 2,342 ______ ______ Net addition to shareholders' funds 11,835 10,541 Opening shareholders' funds 58,821 48,280 ______ ______ Closing shareholders' funds 70,656 58,821 ______ ______ CONSOLIDATED CASH FLOW STATEMENT for the year ended 31 December 2004 2004 2003 £'000 £'000 Net cash inflow from operating activities 7 (a) 4,366 14,650 Returns on investments and servicing of financeInterest paid (32) (64)Interest received 1,669 839 ______ ______Net cash inflow from returns on investments and servicing offinance 1,637 775 TaxationTax paid (3,707) (4,283) Capital expenditurePurchase of tangible fixed assets (210) (389)Sale of tangible fixed assets 1,412 18 ______ ______ 1,202 (371)Acquisitions and disposals Purchase of subsidiary undertakings (3,296) (859) Purchase of publishing assets - (537) Sale of publishing assets 111 - Cash acquired with subsidiary 50 - ______ ______ (3,135) (1,396) Equity dividends paid (1,558) (1,274) Financing Repayment of loans (764) (122) Share options exercised (net of expenses) 1,607 2,319 ______ ______Net cash inflow from financing 843 2,197 ______ ______(Decrease) / increase in cash 7 (b) (352) 10,298 _____ _____ NOTES 1. The above financial information does not constitute statutory accounts asdefined in section 240 of the Companies Act 1985. The above figures for the yearended 31 December 2004 are an abridged version of the Company's audited accountswhich will be reported on by the Company's auditors before despatch to theshareholders and filing with the Registrar of Companies. The accounting policiesapplied in 2004 are consistent with those applied in 2003. 2. Geographical analysis of turnover The directors regard the Group's business as a single segment. Its profit andturnover arise principally in the United Kingdom where its assets are mainlylocated. The table below analyses turnover by destination: 2004 2003 £'000 £'000 United Kingdom 60,551 54,581North America * 10,861 9,060Continental Europe 7,920 11,316Australasia 2,482 4,222Others 2,635 3,935 _______ _______ 84,449 83,114 _______ _______ * Sales in North America include the turnover from Bloomsbury USA, co-editionsales and the sale of rights and licences to third parties. In the directors' opinion, disclosure of the analysis of the profit before taxby geographical segment would be seriously prejudicial to the Group. 3. Operating Profit Operating profit is stated after charging / (crediting) the followingamounts: 2004 2003 £'000 £'000Auditors' remuneration:Statutory audit 95 83Other services 84 64Depreciation 323 344Goodwill amortisation 675 1,751Profit on disposal of tangible fixed assets - (5)Operating lease costs:Hire of plant and machinery 130 54Other operating leases 949 900Exchange loss 1,039 239 ______ ______ Within trade debtors the Group has a normal provision each year for returns asthe Group's books are sold on a returnable basis which is standard industrypractice and this is adjusted for anticipated returns at the end of eachreporting period by a consistent policy. The provision at the end of 2003reflected the high level of sales in the year including the hardcover HarryPotter and the Order of the Phoenix which retailers had agreed not to returnuntil 2004 so that it would be available through the Christmas selling period.Due to the stronger than expected sell through rate of titles to consumers fromretailers of titles including the hardcover of Harry Potter and the Order of thePhoenix right up to its paperback release on 10 July 2004, a proportion of theprovision for returns could be released in 2004 with a net beneficial effect onturnover of £13.39 million and a corresponding net beneficial effect on grossprofit of £3.87 million. 4. Taxation (a) Tax charge for the year 2004 2003 £'000 £'000Based on the profit for the year: Corporation tax at 30% 4,807 4,243Less double tax relief - (31) _______ _______ 4,807 4,212Over provision in respect of prior year (54) (95)Overseas taxation - current year - 31 _______ _______ 4,753 4,148Deferred tax (748) (233) _______ _______ 4,005 3,915 ______ ______ (b) Factors affecting tax charge for the year The tax assessed for the year is different from the standard rate of corporationtax in the UK (30%). The differences are explained below: 2004 2003 £'000 £'000 Profit on ordinary activities before tax 16,184 13,630 ______ ______ Profit on ordinary activities multiplied by the standard rate ofcorporation tax in the UK of 30% 4,855 4,089Effects of:Expenses not deductible for tax purposes (primarily goodwillamortisation) 319 504Difference between depreciation and capital allowances 87 13Utilisation of tax losses - (57)Losses for the year in subsidiary company not utilised 564 409Corporation tax relief on share options exercised (575) (919)Difference between profit on disposal of freehold property andtaxable gain (324) -Different rate of tax on overseas results (119) -Reversal of database development costs deducted against corporationtax in prior years - 216Marginal small companies' rate relief in subsidiary companies - (12)Adjustment to tax charge in respect of previous periods (54) (95) ______ ______Corporation tax charge for the year 4,753 4,148 ______ ______ 5. Dividends 2004 2003 £'000 £'000 Interim, paid 0.522p per share (2003: 0.474p) 383 341Final proposed 2.478p per share (2003: 1.677p) 1,773 1,175 ______ ______ 2,156 1,516 ______ ______ 6. Earnings per share Basic earnings per share has been calculated by reference to earnings of£12,179,000 (2003, £9,715,000) and a weighted average number of Ordinary Sharesin issue of 70,841,627 (2003, 68,901,851). The diluted earnings per share hasbeen calculated by reference to a weighted average number of Ordinary Shares inissue of 72,135,053 (2003, 71,654,541) which takes account of share options.Basic and diluted earnings per share excluding goodwill, exceptional items andthe tax effect of exceptional costs have been calculated by reference toearnings of £12,239,000 (2003, £11,337,000). The reconciliation between the weighted average number of shares for the basicearnings per share and the diluted earnings per share is as follows: 2004 2003 Number NumberWeighted average number of shares for basicearnings per share 70,841,627 68,901,851Dilutive effect of share options 1,293,426 2,752,690 ______ ______Weighted average number of shares for dilutedearnings per share 72,135,053 71,654,541 ______ ______ The reconciliation between earnings before and after goodwill amortisation andexceptional gain is as follows: 2004 2003 £'000 £'000Earnings after goodwill amortisation and exceptionalgain 12,179 9,715Goodwill amortisation 675 1,751Tax relief on goodwill amortisation - (129)Exceptional gain (417) -Tax relief on exceptional costs (198) - ______ ______ Earnings before goodwill amortisation and 12,239 11,337exceptional gain ______ ______ 7. Cash flow statement (a) Reconciliation of operating profit to net cash flow from operatingactivities 2004 2003 £'000 £'000Operating profit 14,425 12,855Depreciation of tangible fixed assets 323 344Goodwill amortisation 675 1,751Profit on disposal of tangible fixed assets - (5)Reorganisation costs (582) -Decrease / (increase) in stocks 1,085 (836)Increase in debtors (10,955) (5,382)(Decrease) / increase in creditors (605) 5,923 ______ ______ Net cash inflow from operating activities 4,366 14,650 ______ ______ (b) Reconciliation to net funds 2004 2003 £'000 £'000(Decrease) / increase in cash in the year (352) 10,298 Decrease / (increase) in debt 702 (553) ______ ______ Movement in net funds in the year 350 9,745 Net funds at 1 January 28,325 18,580 ______ ______ Net funds at 31 December 28,675 28,325 ______ ______ 8. Annual General Meeting The Annual General Meeting will be held at 12 noon on Thursday 30 June 2005 at38 Soho Square, London W1D 3HB. 9. Report and Accounts Copies of the Report and Accounts will be circulated to shareholders shortly andmay be obtained after the posting date from the Company Secretary, BloomsburyPublishing Plc, 38 Soho Square, London W1D 3HB. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Bloomsbury