13th Sep 2005 07:03
Bloomsbury Publishing PLC13 September 2005 13 September 2005 Bloomsbury Publishing Plc Interim Results for the six months to 30 June 2005 - Revenue up 14.3% to £35.37m (2004, £30.94m) - Pre-tax profit before exceptional items increased 12.4% to £4.08m (2004, £3.63m) - Basic earnings per share before exceptional items increased 9.0% to 3.99p (2004, 3.66p) - International activities producing clear benefits, with Bloomsbury increasing its publishing programme in the US and Germany - Latest Harry Potter title has broken all launch records - Strong publishing lists for second half and into 2006 - Well positioned for further growth - Board confident of a satisfactory outcome to the year and reiterates expectation that profit before tax and goodwill impairment, if any, will be not less than £20m for the year ended 31 December 2005. Commenting on the results and prospects for Bloomsbury, Nigel Newton, Chairman,said: "Bloomsbury has produced a strong set of interim results for the first half,reflecting the success of new titles, the growth of our publication programmeand the increasing international expansion of the Group. Our overseas operationsin the USA and Germany continue to build on their successes and the Group'sability to publish its titles in the world's three largest book markets isproducing clear gains. "We remain confident of a satisfactory outcome to the year and reiterate ourexpectation that profit before tax and goodwill impairment, if any, will be notless than £20 million. Prospects in 2006 and beyond are strong." 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 has produced a strong set of interim results for the half year ending30 June 2005, reflecting the success of new titles and the increasinginternational expansion of the Group. The figures, including comparatives, havebeen prepared in accordance with International Financial Reporting Standards. Wehad a number of strong titles in the first half which included the paperbackeditions of The Promise of Happiness by Justin Cartwright and The Two of Us bySheila Hancock, which went to number one in the non-fiction bestseller list. Theintegration of Walker Publishing Company, Inc. into our US operation isproceeding well and is expected to be substantially complete by the end ofSeptember. Our German operation produced an improved performance. Revenue for the first six months increased 14.3% to £35.37m (2004, £30.94m) andbenefited in part from the release from the UK into the export markets only ofHarry Potter and the Half-Blood Prince. Gross profit, which also benefited fromthe economies of scale achieved on the printing of the export copies of HarryPotter and the Half-Blood Prince, increased 25.1% to £17.58m (2004, £14.05m),with the gross margin rising to 49.7% (2004, 45.4%). Marketing and distribution costs were 59.5% higher at £6.49m (2004, £4.07m) andas a percentage of turnover they increased to 18.3% (2004, 13.1%). The increasewas due, in part, to distribution and commission costs incurred in the exportrelease of Harry Potter and the Half-Blood Prince and the marketing anddistribution costs of Walker being incurred for the first time. Administrativeexpenses increased 10.9% to £7.66m (2004, £6.91m), primarily due to increasedsalary costs from expansion of the Group, including Walker costs for the firsttime. As a percentage of turnover, administrative expenses decreased slightly to21.7% (2004, 22.3%). Interest income reduced by 22.1% to £0.67m (2004, £0.86m) mainly as a result oflower average cash balances. Finance costs were reduced to £0.02m (2004, £0.31m)due to loan note redemptions and a one-off interest charge of £0.30m in 2004relating to prior years' corporation tax. Profit before tax and exceptional items increased 12.4% to £4.08m (2004,£3.63m.). The effective rate of corporation tax for the six months was 29.8%(2004, 21.2%). In 2004, there was an exceptional gain on the disposal of afreehold warehouse which was closed during the year and a loss on sale of theBlue Guides List. There was no capital gains tax liability on the disposal dueto indexation and other allowances. The tax rate also takes account of otherallowances such as share options. In view of the reducing number of shareoptions held by employees, it is assumed that an equivalent deduction will notbe available in the second half of 2005. As a consequence, the effective taxrate applied to the results for the first six months ended 30 June had been setat a rate which takes account of the expected lower deduction in the second halfof 2005. Basic earnings per share before exceptional items increased 9.00% to 3.99 pence(2004, 3.66 pence). Net cash outflow for the Group for the first six months of the year was £4.88m(30 June 2004, inflow £2.92m). In 2004 the Group received the proceeds from thesale of the freehold of the warehouse less costs of the re-organisation. In thefirst six months of 2005 the Group paid corporation tax of £2.62m (2004,£1.62m). In addition, there was a significant working capital investment in thelead up to the publication of Harry Potter and the Half-Blood Prince. As aresult net cash balances at 30 June decreased 12.1% to £23.89m (31 December2004, £28.68m) INTERIM DIVIDEND The directors have declared a 14.9% increase in the interim dividend to 0.600pence per share (2004, 0.522 pence per share), which will be paid on 18 November2005 to shareholders on the register at close of business on 4 November 2005.The increase in the dividend takes account of the profit growth andcash-generating capability of the Group, as well as the need to retain funds torespond to opportunities for future expansion and acquisition growth. OPERATIONAL REVIEW Children's The Children's division prepared for the launch of Harry Potter and theHalf-Blood Prince on 16 July. The book broke all previous first day salesrecords not only for Harry Potter titles but also for any other book, achievingsales of 2,009,574 in the first 24 hours in the UK alone, up 13.1% on last timeand has shown strong sales since. The launch of the latest Harry Potter titlealso stimulated sales of the five earlier books, both in the UK and in theexport markets. The film, Harry Potter and the Goblet of Fire will be releasedin November 2005 and should support strong continuing sales. The Children's list got off to an excellent start at the beginning of 2005 witha number one hardback best seller Magyk, by Angie Sage. Two other titles wereshort-listed for the Carnegie medal, Al Capone Does My Shirts by GenniferCholdenko and Heartbeat by previous Carnegie medal winning author Sharon Creech. The expansion of the Children's list continues. Children's series are strongsellers in the trade and it is part of the Children's division's growth plan todevelop more series. We have acquired 14 Alexander McCall Smith backlist titles,which will be published between October this year and July 2006. Development ofthe relatively new pre-school list is also progressing well with 17 titles nowscheduled for publication in 2006. Alfred Kropp by Rick Yancey, which is being published in the second half of thisyear, has already been sold in nine languages. Other big titles for the rest ofthe year include a first novel Elsewhere by Gabrielle Zevin which is beingpublished in the autumn and has had good support from booksellers and excellentadvance reviews. Adult The paperback list this year is expected to dominate revenues in the Adultdivision. 2005 began with the publication of the paperback edition of JustinCartwright's The Promise of Happiness, which was featured on the Richard & JudyTV programme and went on to become one of our big selling titles in the firsthalf. The Two of Us was released in paperback in June and went straight tonumber one in the paperback non-fiction bestseller list. Anchee Min's EmpressOrchid has also been one of our big selling titles. The publishing programme in the second half of the year is strong. We have a newnovel by John Irving, Until I Find You, and the paperback edition of JonathanStrange & Mr Norrell by Susanna Clarke. Leading non-fiction titles include anauthorised biography of Laurence Olivier, The Naming of Names, a ground-breakingnew book by Anna Pavord, author of The Tulip, and an exciting new project fromBen Schott, Schott's Almanac. The market for non-fiction continues to be buoyant. To increase our presence inthis market we have appointed a new Publishing Director, Michael Fishwick. Hejoins from HarperCollins where for the last 20 years he has published a list ofprize-winning bestselling non-fiction titles including William Dalrymple, AmandaForeman, Baroness Thatcher, Sir John Major, Mikhail Gorbachev and many ofBritain's finest historians. Reference & Electronic Media The first half of 2005 saw the successful integration of the BloomsburyReference and Electronic Media division with A&C Black which became a singleoperating unit within A&C Black from 1 July. This will enable greater marketingfocus for the list and ensure that maximum value is derived from backlistrevenues. Who's Who attracted widespread publicity on its publication in January, with thenew entries published as a special supplement to The Times newspaper each dayfor the week of publication. For the first time, Who's Who has been madeavailable as a book and online package to single users. Highlights for the spring included the publication of the new edition of theBloomsbury Concise Dictionary, the 41st edition of Black's Medical Dictionary,which has now sold over 1 million copies in all editions, and the RSPBChildren's Guide to Bird Watching, the latest bestseller in our publishingrelationship with the RSPB. A&C Black will publish a number of major titles this autumn, including TheSunday Times Rich List available on book and CD Rom. The latest addition to theWhitakers publication program is the Whitaker's World of Facts, a new familyreference book by renowned author, researcher and trivia collector Russell Ash. International Expansion Bloomsbury USA and Walker Publishing Company, Inc. The integration of Bloomsbury USA and Walker Publishing is making good progress.To achieve operational efficiencies, we have combined the publicity, marketing,production and art departments. A new finance function has been created in theUSA to complete the integration process and to develop the infrastructure forthe next phase of the division's growth. The move to the new distributor is alsoworking well for Walker. Following the success of Bloomsbury USA's recentpublishing programme - which included Jonathan Strange & Mr Norrell, Schott'sFood & Drink Miscellany and The Line of Beauty in hardback and the acquisitionand integration of Walker, we have now achieved the scale and visibility in themarketplace to compete with the larger publishing houses while making the mostof an extremely focused, productive and cost-conscious structure. The publication of titles that were originally acquired in the UK continues inthe USA. In the second half of the year we will launch the paperback of JonathanStrange & Mr Norrell which will be the biggest in Bloomsbury USA's history.Schott's Sporting Gaming and Idling Miscellany is due for publication in theautumn. In Children's publishing we expect to see success with the launches ofAlfred Kropp, Drift House by Dale Peck, Akimbo and the Lions and Akimbo and theElephants by Alexander McCall Smith. Berlin Verlag Our German operations have produced a stronger financial performance in thefirst half, reflecting the international expansion of the Group. Titlesoriginally published in the UK and USA are being successfully launched inGermany through our fully-owned business. The year's sales started well boostedby the presence of Schotts Sammelsurium (Schott's Original Miscellany) on theDer Spiegel bestseller list for 52 weeks. The paperback list continues to grow, particular success coming in the firsthalf from strong backlist sales of Khaled Hosseini's Drachenlaufer (The KiteRunner), a title that continues to sell well for Bloomsbury in the UK. Berlin Verlag's sales reps now sell Bloomsbury UK's English-language titles inGermany with key titles being warehoused at our German distributor, Prolit.Consequently we can supply our English-language titles direct to a much widerrange of German bookshops. Our successful launch of Harry Potter and theHalf-Blood Prince in Germany, where pre-publication orders exceeded those ofprevious editions and re-orders have been strong, shows the potential of thisnew arrangement in a market where the importance of English-language books isincreasing. Prospects for the second half of 2005 are good, and we expect Berlin Verlag toperform well. Ben Schott's Sammelsurium remains in the top ten of the DerSpiegel bestseller list, and early indications are positive for the second BenSchott, Schotts Sammelsurium Essen & Trinken (Schott's Food and DrinkMiscellany). All four Berlin imprints have strong autumn lists. The BerlinVerlag fiction list features two long-awaited books by leading authors SpateFamilie (Late Family) by Zeruya Shalev appeared in late August and IngoSchulze's new novel, Neue Leben (New Lives) will be published in October. We anticipate that the success of last year's hardback fiction debut by SusannaClarke, Jonathan Strange & Mr Norrell, will be mirrored when Berlin publishesthe German paperback edition in late autumn. The Children's list continues to expand in breadth and depth. Many of the keytitles for the autumn are shared with other Bloomsbury affiliated companies inthe UK and USA, including M.I. McAllister's Urchin von den Sternschuppen (Urchinof the Riding Stars) which has, even before publication, won the 2005 LeanderPrize. Outlook The publishing programme for the second half of the year is an exciting one withbooks from some of our bestselling authors along with potential bestsellers fromnew authors. The performance of the latest Harry Potter title demonstrates itsability to grow its readership. Our overseas operations in the USA and Germany continue to build on theirsuccesses and shows that the Group's capacity to publish its titles in theworld's three largest book markets is producing clear benefits. Theinfrastructure of Bloomsbury USA will be fully in place this year allowing it tomove into its next phase of growth. Berlin Verlag continues to build on itssuccesses and over the coming years will become a more significant part of theGroup's operations. The board remains confident of a satisfactory outcome to the year and reiteratesits expectation that profit before tax and goodwill impairment, if any, will benot less than £20 million. Prospects into 2006 and beyond are strong as weexpand our publishing list and develop our international operations. Nigel NewtonChairman13 September 2005 CONSOLIDATED RESULTS The consolidated unaudited income statement for the six months ended 30 June2005 was as follows: Notes 6 months ended 6 months ended Year 30 June 30 June ended 2005 2004 31 Dec 2004 (unaudited) (unaudited) (audited) £'000 £'000 £'000 Revenue 2 35,367 30,937 84,449 Cost of sales (17,789) (16,883) (42,270)Gross profit 17,578 14,054 42,179Marketing and distributioncosts (6,486) (4,065) (11,377)Administrative expenses (7,656) (6,906) (15,854) Operating profit 2 3,436 3,083 14,948Profit on sale of fixedassets in continuing operations - 1,091 1,076Loss on sale of publishingassets - (79) (77)Reorganisation costs incontinuing operations - (456) (582) Profit before investmentincome 3,436 3,639 15,365Investment income 666 857 1,669Finance costs (18) (306) (337)Profit before taxation 4,084 4,190 16,697Income tax expense (1,219) (890) (3,956)Profit for the period 2,865 3,300 12,741Basic earnings per share 3 3.99p 4.68p 17.98pDiluted earnings per share 3 3.91p 4.54p 17.66p CONSOLIDATED BALANCE SHEET 30 June 2005 30 June 2004 31 Dec 2004 (unaudited) (unaudited) (audited) £'000 £'000 £'000ASSETSNon-current assetsProperty, plant and equipment 1,233 822 776Goodwill 15,204 11,366 13,872Publishing rights 355 - 354Total non-current assets 16,792 12,188 15,002 Current assetsInventories 17,513 14,735 11,614Trade and other receivables 52,873 25,308 43,468Cash and cash equivalents 24,242 32,388 29,120Total current assets 94,628 72,431 84,202 TOTAL ASSETS 111,420 84,619 99,204 EQUITY AND LIABILITIESEquity attributable to equityholders of the parent Share capital 900 884 894Share premium 36,848 34,626 35,763Capital redemption reserve 20 20 20Share based payment reserve 298 141 217Translation reserve 133 (60) 2Retained earnings 37,298 27,148 36,206 Total equity 75,497 62,759 73,102 Non-current liabilities Deferred tax - 3 -Employee benefits 97 97 102 Total non-current liabilities 97 100 102 Current liabilities Trade and other payables 34,087 19,596 22,792Short-term borrowings 353 1,064 445Current tax payable 1,386 1,100 2,763 Total current liabilities 35,826 21,760 26,000 Total liabilities 35,923 21,860 26,102 TOTAL EQUITY AND LIABILITIES 111,420 84,619 99,204 STATEMENT OF CHANGES IN EQUITY Share Share Capital Share based Translation Retained Total capital premium redemption payment reserve reserve earnings reserve £'000 £'000 £'000 £'000 £'000 £'000 £'000Balances at1 January 2004 876 33,967 20 65 - 25,023 59,951 Exchangedifferences ontranslatingforeignoperations - - - - (60) - (60) Profit forthe period - - - 76 - 3,300 3,376 Dividends - - - - - (1,175) (1,175) Share issues 8 659 - - - - 667 Balances at30 June 2004 884 34,626 20 141 (60) 27,148 62,759 Exchangedifferences on translatingforeign operations - - - - 62 - 62 Profit forthe period - - - 76 - 9,441 9,517 Dividends - - - - - (383) (383) Share issues 10 1,137 - - - - 1,147 Balances at31 Dec 2004 894 35,763 20 217 2 36,206 73,102 Exchangedifferences foreign operations on translating - - - - 131 - 131 Profit forthe period - - - 81 - 2,865 2,946 Dividends - - - - - (1,773) (1,773) Share issues 6 1,085 - - - - 1,091 Balances at30 June 2005 900 36,848 20 298 133 37,298 75,497 CONSOLIDATED CASH FLOW STATEMENTfor the six months ended 30 June 2005 6 months 6 months ended Year ended 30 June ended 30 June 2004 31 Dec 2005 (unaudited) 2004 (unaudited) (audited) £'000 £'000 £'000 Cash flows from operating activitiesNet profit before tax 4,084 4,190 16,697Adjustments for:Depreciation of tangible fixed assets 152 162 323Amortisation of publishing rights 18 - -Profit on sale of property, plant andequipment (3) (1,091) (1,076)Share based payment charges 81 76 152Investment income (666) (857) (1,669)Finance costs 18 306 337 3,684 2,786 14,764(Increase) / decrease in inventories (5,910) (2,289) 1,162(Increase) / decrease in trade andother receivables (10,158) 5,138 (10,955) Increase / (decrease) in trade andother payables 9,631 (3,876) (605) Cash (used in) / generated from operations (2,753) 1,759 4,366Income taxes paid (2,618) (1,624) (3,707)Net cash (outflow) / inflow fromoperating activities (5,371) 135 659 Cash flows from investing activitiesPurchase of property, plant and equipment (607) (90) (210)Proceeds from sale of property, plantand equipment - 1,415 1,412Purchase of subsidiaries (33) (7) (3,296)Sale of publishing assets - 111 111Interest received 666 857 1,669Cash acquired with subsidiaries - - 50 Net cash generated from / (used in)investing activities 26 2,286 (264)Cash flows from financing activitiesShare options exercised 510 584 1,607Equity dividends paid - - (1,558)Interest paid (18) (6) (32)Repayment of loans (26) (83) (764) Net cash generated from / (used in)financing activities 466 495 (747) Net (decrease) / increase in cash andcash equivalents (4,879) 2,916 (352) Cash and cash equivalents at beginningof period 29,120 29,472 29,472 Unrealised exchange gain on cash andcash equivalents 1 - - Cash and cash equivalents at end of period 24,242 32,388 29,120 ACCOUNTING POLICIES UNDER IFRS The accounting policies used in the preparation of the accounts for the sixmonths ended 30 June 2005 are consistent with those used in the statutoryaccounts for the year ended 31 December 2004, except insofar as is necessary tocomply with International Financial Reporting Standards, as explained elsewherein this document. (a) ACCOUNTING CONVENTION The consolidated financial statements have been prepared in accordance withInternational Financial Reporting Standards (IFRS) as endorsed by the EuropeanUnion (EU). (b) GOODWILL AND INTANGIBLE ASSETS Goodwill, being the excess of the cost of acquisition over the fair value ofassets acquired, is capitalised as an intangible asset. In accordance with IFRS 3, goodwill has been frozen at its net book value at 1January 2004 and is not amortised, but instead is subject to annual impairmentreviews. Any impairment losses are recognised immediately in the incomestatement. Negative goodwill is credited to the income statement in the period in which itarises. Other intangible assets are capitalised and amortised over their expected usefullives at the following rates: Publishing Rights 10% (c) TURNOVER Turnover represents the amount derived from the provision of goods, services andrights falling within the Group's ordinary activities, after deduction of tradediscounts, value added tax and anticipated returns. Turnover from bookpublishing is recognised from the date of invoice. Turnover from the sale ofpublishing and distribution rights, including film, paperback, electronic,overseas publishing rights and sponsorship, is recognised at the time such salesare achieved. (d) STOCKS AND WORK IN PROGRESS Stocks include paper, sheets and bound stock. The cost of work in progress andfinished stock represents the amounts invoiced to the Group for paper,origination, printing and binding. Stocks are valued at the lower of cost andnet realisable value. (e) DEPRECIATION Property, plant and equipment are depreciated in order to write down their costby equal annual instalments over their expected useful lives at the followingrates: Freehold buildings 2% per annumShort leasehold improvements 7-17% per annumFurniture and fittings 10% per annumComputer equipment 20% per annumOther office equipment 20% per annumMotor vehicles 25% per annum Freehold land is not depreciated. Depreciation is pro-rated in the years of acquisition and disposal of assets. (f) ROYALTY ADVANCES TO AUTHORS Advances to authors are written off to the extent that they are not covered byanticipated future sales or firm contracts for subsidiary rights receivable. (g) DEFERRED TAXATION Provision is made for deferred taxation on all temporary differences between thecarrying amount and the tax bases of assets and liabilities. Deferred tax assetsare only included in the financial statements where recovery is more likely thannot. Deferred taxation is measured on a non-discounted basis. (h) FOREIGN CURRENCIES Assets and liabilities in foreign currencies are translated into sterling atclosing rates of exchange at the balance sheet date. Income statements and cashflows of overseas subsidiary companies are translated into sterling at averageexchange rates for the year. Exchange differences arising from the retranslation of opening net assets andincome statements at closing rates of exchange are dealt with as movements inequity. All other exchange differences are charged or credited to the incomestatement. (i) OPERATING LEASES Operating lease rentals are charged to the income statement as they fall due. (j) PENSION COSTS Pension costs relating to defined contribution pension schemes are charged tothe income statement in the period for which contributions are payable. Until 1997 a subsidiary company operated a defined benefits scheme. Theliability in respect of the defined benefits scheme is the present value of thedefined benefit obligations at the balance sheet date, calculated using theprojected unit credit method, less the fair value of the scheme's assets. In accordance with IFRS 1, the Group has recognised the pension liability infull as at 1 January 2004. The current service cost, interest on schemeliabilities and all actuarial gains and losses are recognised in the incomestatement. (k) SHARE-BASED PAYMENT Charges for employees' services received in exchange for share-based paymenthave been made for all options granted after 7 November 2002 in accordance withIFRS 2. Options granted under the Group's share option schemes are equity settled. Thefair value of such options has been calculated using the Black Scholes model,based on publicly available market data, and is charged to the income statementover the vesting period. (l) CONSOLIDATION The consolidated financial statements comprise the accounts of the Company andits subsidiaries at the year end. The results of the subsidiaries are accountedfor in the income statement from the date of acquisition. NOTES TO THE ACCOUNTS 1. Interim accounts The figures for the six months ended 30 June 2005 do not comprise full accounts.The financial information included in this document has been approved by theDirectors. The figures relating to the year ended 31 December 2004 have beenderived from the statutory accounts for the year, adjusted to comply withInternational Financial Reporting Standards. The statutory accounts for the yearended 31 December 2004, which received an unqualified audit report, have beenlodged with the Registrar of Companies. 2. Segmental analysis The Group considers that as the main thrust of its growth is to develop itsinternational publishing strategy, the primary segmental reporting should bebased on geographical segments. The analysis by geographical segment is shownbelow. Revenue 6 Months ended 6 Months ended Year ended 30 June 30 June 31 December 2005 2004 2004 £'000 £'000 £'000United Kingdom 31,027 27,670 71,564North America 2,319 2,136 8,985Continental Europe 2,021 1,131 3,900 35,367 30,937 84,449 Segment result 30 June 30 June 31 December 2005 2004 2004 £'000 £'000 £'000United Kingdom 3,487 4,198 16,899North America 83 (430) (543)Continental Europe (44) (679) (1,405) 3,526 3,089 14,951Unallocated central costs (90) (6) (3)Operating profit 3,436 3,083 14,948 3. Earnings per share The earnings per ordinary share for the six months to 30 June 2005 is based onthe profit after taxation of £2,865,000 (2004 - £3,300,000) and on a weightedaverage number of ordinary shares in issue of 71,878,716 (2004 - 70,534,904).The earnings per ordinary share for the twelve months to 31 December 2004 isbased on the profit after taxation of £12,741,000 and a weighted average numberof ordinary shares in issue of 70,841,627. The diluted earnings per share forthe six months to 30 June 2005 has been calculated by reference to a weightedaverage number of Ordinary Shares of 73,293,754 (2004 - 72,707,392, year ended31 December 2004 - 72,135,053) which takes account of share options. 4. Post balance sheet events The directors have proposed an interim dividend of 0.600 pence per share (2004,0.522 pence per share), which will be paid on 18 November 2005 to shareholderson the register at close of business on 4 November 2005. Based on the number ofshares in issue at 30 June 2005, the interim dividend will be £432,000 (2004,£383,000). For the year ended 31 December 2004, the final dividend proposed bythe directors but not provided in the financial statements was 2.478 pence pershare. EFFECT OF CHANGES IN ACCOUNTING POLICIES ON THE FINANCIAL STATEMENTS FOR THE SIXMONTHS ENDED 30 JUNE 2004 AND THE YEAR ENDED 31 DECEMBER 2004 Full reconciliations of the results for the six months ended 30 June 2004 andthe year ended 31 December 2004 and the equity at those dates between UK GAAPand IFRS are set out below. The main changes are explained below. IFRS 3 - BUSINESS COMBINATIONS IFRS 3 requires that goodwill on acquisitions should be capitalised at cost andsubject to impairment reviews at each reporting date. Amortisation of goodwillis not permitted. Bloomsbury has taken advantage of the option to apply IFRS 3 prospectively fromthe date of transition to IFRS (1 January 2004), rather than restate earlierbusiness combinations. Goodwill has therefore been frozen at net book value at 1January 2004 and goodwill which was amortised in 2004 under UK GAAP has beenwritten back. In respect of the acquisition of Walker Publishing Company, Inc. on 31 December2004, the goodwill arising on the acquisition has been reassessed and otheridentifiable intangible fixed assets, included within goodwill under UK GAAP,have been separated out in accordance with the principles of IFRS 3 and IAS 38.These intangible assets, which comprise only publishing rights with a fair valueof £354,000 at the date of acquisition, will be subject to systematicamortisation charges in accordance with IAS 38, with the unallocable balance,representing the goodwill on the acquisition, being subject to periodicimpairment reviews. As the acquisition of Walker Publishing Company, Inc. tookplace on 31 December 2004, no amortisation was charged in the UK GAAP accountsin 2004 and there is therefore no effect on the reported profit for that year. The effect on operating profit for the year ended 31 December 2004 of theadoption of IFRS 3 is an increase of £675,000, representing the elimination ofthe goodwill amortisation charge. There is no goodwill impairment charge for2004. As the amortisation charge in 2004 was in respect of goodwill not eligiblefor tax relief, the writing back of the amortisation does not result in anychange to the tax charge. IFRS 2 - SHARE BASED PAYMENT The IFRS income statement includes a charge under IFRS 2 for employee shareoptions granted after 7 November 2002. The fair value has been calculated usingthe Black Scholes model with the resulting charge spread over the vestingperiod. The charge for the year ended 31 December 2004 is £152,000 and thecumulative charge to that date is £217,000. Corporation tax relief is given at the time that options are exercised on thedifference between the exercise price and the market value of the shares at thatdate. Consequently the share based payment charge gives rise to a temporarydifference, in respect of which a deferred tax asset has been recognised. IAS 19 - EMPLOYEE BENEFITS Under UK GAAP, the Group had been making disclosures in its financial statementsfor a number of years under the transitional provisions of Financial ReportingStandard 17, but had not yet applied FRS 17 in full at 31 December 2004. IAS 19is broadly similar to FRS 17, in that it requires surpluses or deficits ondefined benefit pension schemes to be recognised on the balance sheet. IAS 19 permits a number of options for the recognition of actuarial gains andlosses. Bloomsbury has decided to recognise any variations in full in the incomestatement. The impact of the Group balance sheet at 31 December 2004 is to recognise agross pensions deficit of £102,000 and a related deferred tax asset of £31,000.The profit before taxation for the year ended 31 December 2004 is reduced by£10,000 and there is a deferred tax credit of £4,000 for the year. IAS 21 - THE EFFECTS OF CHANGES IN FOREIGN EXCHANGE RATES Under UK GAAP, Bloomsbury chose to fix acquired overseas goodwill in sterling atthe exchange rate ruling on the dates of the relevant acquisitions. Under IAS21, goodwill must be denominated in local currencies and retranslated intosterling at each reporting date at closing exchange rates. The effect of thischange is to increase the carrying value of goodwill in the Group balance sheetat 31 December 2004 by £4,000. Under IAS 21, translation differences in respect of the company's investment inoverseas subsidiary companies are included as a separate reserve withinshareholders' equity. In accordance with the exemption in paragraph 22 of IFRS1, the company has deemed the opening balance on the translation reserve at 1January 2004 to be zero. IAS 10 - EVENTS AFTER THE BALANCE SHEET DATE Under IAS 10 only dividends declared before the balance sheet date may beincluded in the financial statements as a liability. As the final dividend for2004 was declared at the annual general meeting on 30 June 2005, this has beenremoved from the financial statements at 31 December 2004, increasing net assetsby £1,773,000. IAS 7 - CASH FLOW STATEMENTS The format of the cash flow statement is different under IAS 7 from its UK GAAPequivalent, FRS 1. Cash flows are now shown under the three broad headings ofOperating, Investing and Financing Activities and some cash flows have beenreclassified as a result. CONCLUSION Adoption of IFRS has not had a significant effect on Bloomsbury's reportedresults and has had no effect on its cash flows for the six months ended 30 June2004, or for the year ended 31 December 2004. There has also been no significanteffect on shareholders' equity at those dates. RECONCILIATIONS TO UK GAAP FINANCIAL STATEMENTS INCOME STATEMENT RECONCILIATIONS 1. Six months ended 30 June 2004 UK GAAP Adjustments to IAS comply with IAS £'000 £'000 £'000Revenue 30,937 - 30,937 Cost of sales (16,883) - (16,883)Gross profit 14,054 - 14,054Marketing and distributioncosts (4,065) - (4,065)Administrative expenses (6,830) (76) (i) (6,906)Goodwill amortisation (337) 337 (ii) - Operating profit 2,822 261 3,083Profit on sale of fixedassets in continuing operations 1,091 - 1,091Loss on sale of publishingassets (79) - (79)Reorganisation costs incontinuing operations (456) - (456) Profit before investmentincome 3,378 261 3,639Investment income 857 - 857Finance costs (301) (5) (iii) (306)Profit before taxation 3,934 256 4,190Income tax expense (914) 24 (iv) (890)Profit for the period 3,020 280 3,300Basic earnings per share 4.28p 0.40p 4.68pDiluted earnings per share 4.15p 0.39p 4.54p INCOME STATEMENT RECONCILIATIONS 2. Year ended 31 December 2004 UK GAAP Adjustments to IAS comply with IAS £'000 £'000 £'000Revenue 84,449 - 84,449 Cost of sales (42,270) - (42,270)Gross profit 42,179 - 42,179Marketing and distributioncosts (11,377) - (11,377)Administrative expenses (15,702) (152) (i) (15,854)Goodwill amortisation (675) 675 (ii) - Operating profit 14,425 523 14,948Profit on sale of fixedassets in continuing operations 1,076 - 1,076Loss on sale of publishingassets (77) - (77)Reorganisation costs incontinuing operations (582) - (582) Profit before investmentincome 14,842 523 15,365Investment income 1,669 - 1,669Finance costs (327) (10) (iii) (337)Profit before taxation 16,184 513 16,697Income tax expense (4,005) 49 (iv) (3,956)Profit for the period 12,179 562 12,741Basic earnings per share 17.19p 0.79p 17.98pDiluted earnings per share 16.88p 0.78p 17.66p (i) Adjustment to comply with IFRS2(ii) Adjustment to comply with IFRS3(iii) Adjustment to comply with IAS 19(iv) Deferred tax asset in respect of adjustments (i) and (iii) EQUITY RECONCILIATIONS 1. At 1 January 2004 Capital Share based Share Share redemption payment Translation Retained capital premium reserve reserve reserve earnings Total £'000 £'000 £'000 £'000 £'000 £'000 £'000Previouslyreported 876 33,967 20 - - 23,958 58,821under UKGAAP Change inaccounting - - - - - 1,175 1,175policy tocomplywithIAS 10(Dividends) Change inaccounting - - - 65 - (65) -policy tocomplywithIFRS 2(Shareoptions) Deferredtax - - - - - 20 20asset inrespect ofsharebasedpaymentcharge (IAS12) Change inaccounting - - - - - (65) (65)policy tocomplywithIAS 19(Employeebenefits) Restatedunder 876 33,967 20 65 - 25,023 59,951IFRS EQUITY RECONCILIATIONS 2. At 30 June 2004 Share Share premium Capital Share based Translation Retained Total redemption payment reserve reserve capital £'000 £'000 £'000 reserve earnings £'000 £'000 £'000 £'000Previouslyreported 884 34,626 20 - - 26,549 62,079under UKGAAP Reallocationof - - - - (60) 60 -translationdifferenceson equity ofoverseassubsidiariestotranslationreserve (IAS21) Change inaccounting - - - - - 369 369policy tocomply withIAS 10(Dividends) Change inaccounting - - - 141 - (141) -policy tocomply withIFRS 2 (Shareoptions) Deferred taxasset in - - - - - 42 42respect ofshare basedpaymentcharge (IAS12) Change inaccounting - - - - - 337 337policy tocomply withIFRS 3(Goodwill) Change inaccounting - - - - - (68) (68)policy tocomply withIAS 19(Employeebenefits) Restatedunder 884 34,626 20 141 (60) 27,148 62,759IFRS EQUITY RECONCILIATIONS 3. At 31 December 2004 Share Share premium Capital Share based Translation Retained Total redemption payment reserve reserve capital £'000 £'000 £'000 reserve earnings £'000 £'000 £'000 £'000Previouslyreported 894 35,763 20 - - 33,979 70,656under UKGAAP Reallocationof - - - - (2) 2 -translationdifferenceson equity ofoverseassubsidiariestotranslationreserve (IAS21) Change inaccounting - - - - - 1,773 1,773policy tocomply withIAS 10(Dividends) Change inaccounting - - - 217 - (217) -policy tocomply withIFRS 2 (Shareoptions) Deferred taxasset in - - - - - 65 65respect ofshare basedpaymentcharge (IAS12) Change inaccounting - - - - - 675 675policy tocomply withIFRS 3(Goodwill) Change inaccounting - - - - - (71) (71)policy tocomply withIAS 19(Employeebenefits) Change inaccounting - - - - 4 - 4policy tocomply withIAS 21(Goodwillonacquisitionof overseassubsidiaries) Restatedunder 894 35,763 20 217 2 36,206 73,102IFRS This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Bloomsbury