Sunday 18 August 2019

Share Watch: Bloomsbury shows it still has magic touch for selling books


Harry Potter fans grabbing copies of a book (Ben Stansall/AP)
Harry Potter fans grabbing copies of a book (Ben Stansall/AP)

John Lynch

Imagine the scene: You are in charge of a book publisher and one day you are presented with a typed manuscript, the work of a woman in her early 30s with no published work to her credit.

A handful of people in the office seem quite excited about the first few chapters of the book, not least the eight-year-old daughter of the chairman of the board. However, it is generally known that the book had been circulated to a modest number of publishing houses, so some hard-nosed decision-making has to be made.

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After much pondering, Bloomsbury Publishing decides to order an initial print run of 1,000 copies of 'Harry Potter and the Philosopher's Stone' and the creator, Joanne Rowling, will be given a £1,500 advance. The rest, as they say, is a modern miracle that would defy the wizardry of Harry himself. As a publishing sensation, JK Rowling soon secured an unassailable niche in the world's rich lists.

Bloomsbury Publishing has not done badly out of it either. In the past 21 years, Harry's continuing fascination for old and young readers has been a brilliant boon for the company. It now operates two publishing divisions; consumer and non-consumer.

The consumer division consists of children and adult book publishing with revenues of almost £100m (€111m). In the financial year to the end of February, children's books contributed more than 40pc of group revenues, helped by the illustrated 'Harry Potter' series and a special edition of the 'Philosopher's Stone'.

Fortunately for the company the appeal for children's books has shown no sign of waning. Excluding the little wizard, children's book sales are performing well, helped by Sarah J Mass's books including 'Kingdom of Ash'.

Bloomsbury's adult book revenues are not as buoyant and managed for only half of the children's book sales, however it did well with 'The English Patient', a 1992 novel which won the Booker Prize. Other authors selling well for the company include the recently deceased chef Anthony Bourdain, whose best-known written work is 'Kitchen Confidential'.

Since Rowling stopped writing the 'Harry Potter' stories, Bloomsbury has reorganised its business, investing in academic and professional publishing known as its non-consumer publishing unit. This decision, it believes, generates recurring income that is less susceptible to the volatility of the book market.

The group is also repositioning its business as a digital publisher. Recently it signed a five-year digital subscription contract with the Institute of Chartered Accountants in England for its online tax packages.

The company has made 14 acquisitions, mostly in the academic and specialist areas, pushing revenues to £64m with operating profits of £3.6m. It is also on track to deliver £5m profits from £15m revenues in digital publishing.

While it is 21 years since Harry Potter's adventures at Hogwarts first cheered the Bloomsbury accountants and shareholders, the company still thrives. Today, its financials are strong with revenues for the year at £163m, 60pc from outside the UK, pre-tax profits of £12m and a market value of £179m. The outlook is positive with analysts expecting profits to rise to £16m on revenues of £172m (€192m) helped by rising margins and its digital offerings.

The company's cash flow is robust, putting the group in a strong position to grow organically, bolt on acquisitions or recycle some cash to shareholders. Investors are pleased that the Bloomsbury board is committed to maintaining its progressive dividend policy with 24 straight years of dividend growth.

The investment case for Bloomsbury is strong, but I'm inclined to pass on any flutter outside the FTSE 100 until Boris and his happy gang sort the problem of Brexit.

Nothing in this section should be taken as a recommendation, either explicit or implicit, to buy any of the shares mentioned.

Irish Independent

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