Bloomsbury Publishing Plc (BMY) Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen, and welcome to the Bloomsbury Publishing Plc Interim Results Investor Presentation. [Operator Instructions] The company may not be in a position to answer every question it receives during the meeting itself. However, the company can review all questions submitted today and will publish our responses when it's appropriate to do so. And before we begin, as usual, we would just like to submit the following poll. And if you could give that your kind attention. I'm sure the company would be most grateful. And I would now like to hand you over to the executive management team from Bloomsbury Publishing Plc. Nigel, good afternoon, sir.

Well, good afternoon to you, and a very warm welcome to all of you here at Bloomsbury headquarters in Bedford Square in London, England. We're very pleased to speak to you with these interim results about the first half of our year. And we're particularly pleased because historically, Bloomsbury was very weighted to the second half with the Christmas book market. But our diversification and our strategy of building a portfolio of portfolios has meant that we also now have a good first half of the year and are not relying on cliffhanger year-end around the Christmas season, thanks to the back-to-the-university season in August and so on. So this portfolio of portfolios, if I can guide you to the slide Page 2. If we could just flip that for you, shows you our -- we hope resilient model for long-term success, a fantastic revenue increase there to nearly GBP 180 million or 32%, and the margin up to 15%. The profit itself is up by [ 50% ]. And the margin is up from 13%. So that's a really good KPI in the publishing industry. Of course, this period saw the very substantial for us acquisition of the great independent academic publisher of North America, Rowman & Littlefield, for $83 million, a big sum for Bloomsbury. And as it says here, trading is in line with expectations. That sounds as it should do. But I think as you all know, with acquisitions, sometimes turnover nosedives immediately after because of all the uncertainty. And so we're really proud of how well, this one -- this very substantial one, is going. You'll also be aware that trading is in line overall for the group with current consensus expectations. So I talk further here about the success of Bloomsbury Digital Resources, about the flywheel effect of our investment in high-quality contact -- content. And finally, about the protection that will be afforded to us from the big online tech platforms in respect to the digital markets bill that was passed as the very last bill of the outscoring government in June, hurrah! This will benefit you in ways you never know it. So on to Slide 3. Bloomsbury 2030. So what does that mean? Well, first of all, it's a vision, not a strategy. It's based on Emerson's statement of, "Please tell me your dreams, not your problems," I misquote him slightly, and ours are to obtain substantial revenue growth in the future, and we're working hard towards that goal. How will we do it through our portfolio, the expansion of our portfolio organically and through further acquisition. And perhaps most of all by motivating our own team, and that is one of the great lessons to us of lockdown that if you make your people, your single-minded focus, you will be rewarded in ways that you couldn't have imagined before. So we just got a Great Place to Work certification, which is great, just like the name says. And moving on, to the financial highlights.

So good afternoon, everyone. Thank you very much for joining us, and I'm going to take you now through the key financial highlights. So if you can see here, we've had revenue growth of 32% in that first half, which is great. We're also very pleased indeed with our 50% growth in pretax profit. That led to the 41% growth in the diluted EPS. You can see they're up 24.68p and then on net cash is now just shy of GBP 10 million. And of course, you'll -- some of you will know that reflects the GBP 30 million sterling loan that we used to part fund the acquisition of Rowman & Littlefield back at the end of May. And the last point to highlight on this slide is the 5% increase in the interim dividend. So if we then come on to revenue, you can see here on this slide the strength of both print and digital. So you can see on the top line, that 34% increase in print revenue, and that very much reflects an increase in consumer print revenue. We've continued to see the accelerated shift away from print to digital in the academic market. And a reminder that, that's a shift that we've anticipated for the last 8 years. So we're very comfortable and indeed that's a core part of our strategy in the academic market. Within e-books, you can see a 44% increase there, and that, again, is actually being driven very much by the consumer market. It's been really interesting to see that our content is selling so well through every meeting that we produce, every channel. You'll also see here on this third line, a 61% increase in the audio revenue. And while that remains a relatively small number at the moment, just a reminder, that 61% growth in this first half is on top of 50% growth last year. So you can see that that's a very fast expanding channel for us. And what we do is push out our great content through whatever channel works best for our customers, whether they're an academic institution or an individual customer. And you've seen there on the fourth line, a very resilient performance from Bloomsbury Digital Resources, up 2%. That's entirely organic. And in the face of the market pressures within the academic market, you could see how strong the demand is there. So if we then come on to the balance sheet. So as many of you know, we have a very strong balance sheet, and that's an important part of our investment proposition for you. So 2 things to highlight here. First of all, as I've already mentioned, we're still in a net cash position despite the loan that we've taken out, and that really reflects the shift year-on-year. So what we've done is, use our virtuous flywheel of generating cash for our trading operations and then using that to reinvest in both organic and acquired content and growth. And the other point to highlight on here is just point about the finished goods inventory. So while that's increased, the underlying stock has actually reduced by 8% and that really reflects what we've printed quite a lot more stock to fulfill our Sarah J. Maas demand. Our underlying working capital control has been even tighter. And obviously, the less we're plugging into stock, the more we're using for investment and for funding future growth. So again, continuing the very positive story you've seen in previous periods. So moving on to our cash flow. We shared this, I think, to highlight the key movements in this first half. So you can see that the second column in the trading strength has generated GBP 27 million of profit and cash, and we've rewarded shareholders with a GBP 9 million worth of dividend payments in the first half. That reflects a significant increase in our final dividend from the end of last year. And you can see in the bottom 2 comments there, the advances paid and the royalties paid. So the advances is effectively our future pipeline on the consumer side of the business and royalty payments reflects what were the success, the financial success that we're sharing with our authors. So that's one of the numbers I'm very happy to see go up. So coming on to the dividend. We're obviously always very pleased to share this slide. Progressive dividend is incredibly important to us. And you can see here not only the consistent progression, but the increases that we've delivered over the last few years. And what we've highlighted here is both the increase in the interim dividend on that pale green column on the far right, but also the dotted outline reflects the market expectation, so consensus expectations of a 5% increase in the final dividend. So we wanted to show you that fact. So coming on here as a reminder of our investment case. So for those of you who are new to it, setting out our investment case. So first of all, it's a flywheel effect of our successful long-term strategy. And this is basically our unique portfolio of consumer and academic publishing, the success of the diversified strategy that Nigel mentioned at the top of this call, and this is diversification across channels, whether it's digital, any form of digital or print, whether it's across markets, we went early from the consumer to the academic market and also across territories. You -- some of you will know that our recent success has been heavily weighted towards the U.S. market, which is the largest consumer and academic market in the world and indeed our most recent acquisition has also been in that market. The second point here is just expanding on what I've just been talking about, our progressive dividend policy to reward shareholders. And the third point here is our continued strategy of growing through acquisitions. So when we're generating the cash, we're using that to invest in both organic and acquired growth. And the R&L acquisition, which we'll talk more to you later in this presentation is a really key reflection of the success of this but also the latest situation on how successful overall the strategy has been. So coming here to a further illustration of our diversified strategy. We talk about having a portfolio of portfolios, and that means within each area, we manage our portfolio as you do it's about balancing the risk and reward and making sure that we're very well set up for growth while remaining incredibly resilient in tougher times. So in this first half, you've seen great growth from the consumer side and a slightly tougher market in the academic side of the business. That combination, which is a turnaround from [indiscernible] period has allowed us to continue to deliver the success financially that you've seen here. And so again, here, we're talking about channels. We're talking about territories and we're talking about markets. So coming back to Nigel, who can take us through the stellar growth in the consumer side.

Well, this is a standout story in this set of results. A 47% revenue leap and a 91% profit leap. This was accompanied by winning Children's Publisher of the Year and the Export award, we have a very high export percentage here. which gives us some protection from the vicissitudes of the British High Street. And we saw the consumer profit margin. increased handsomely to 16%. Now on Slide 12, we show you some of the best sellers that underpinned that sales growth in particular, our success in romantasy. Perhaps some of you saw the week before last, John Gapper, Chief Columnist, the Financial Times piece about the romantasy genre, and the success, which is brought to Bloomsbury in combination with our academic success. I think the strapline was from fantasy to Freud talking about our issue of the complete collected psychological works of Sigmund Freud, which was a Rowman & Littlefield project that we launched just weeks after our takeover of it. So Harry Potter has been a continuous best seller since it came out. We had a great success in this period with Cixin Liu's, The Three Body Problem considered by physicist to be one of the great novels or trilogies about physics. I hope some of you saw the Netflix series that was released in mid-March and drove powerful new sales for this backlist set of books on the Head of Zeus catalog. Samantha Shannon, one of our huge fantasy sellers. And of course, Harry Potter very much helped by the illustrated additions, which Bloomsbury has issued. So on that slide, you'll see some of the recognition that was achieved during the period. Recognition was also achieved after the period and only last night, our author, Anne Michaels, celebrated at the Booker Price award ceremony for her shortlisting of her novel Held, which starts in the trenches of World War I. I recommend that book to you. And moving on to academic and professional. So you'll see the story there that we have experienced vicissitude from funding cycles in this world of changing demographics. But our confidence underpinned by the growth of our customers themselves, namely students. And if you look at the bottom tablet, in the middle of this slide, you'll see the World Bank estimates of 73% growth in student numbers, particularly in Asia, where we have ambitious growth hopes. Drilling down on the next slide to Rowman & Littlefield. So we now publish with their addition of 41,000 titles, a total of 97,000 academic titles, that would have seemed extraordinary in 1986 when this company was started. So that is our lifeblood constant sales of books often published many years ago and significantly strengthens the quality of our earnings. So the integration is going well. We're -- our senior management are over with our colleagues and new colleagues in Virginia right now. So on the next slide, 16. You'll see our ambitions for Bloomsbury Digital Resources, which has been such an important part of our -- changing of the income profile of Bloomsbury to the high-quality repeat revenues. It's a bit like our equivalent of journal publishing that actually being journals of things that academic libraries subscribe to year after year if they haven't bought them out right. So much important going on in BDR at the moment.

So coming on then to our final division, special interest. So here, we have fairly flat revenues. And you've seen that while we're continuing to focus on finding a profitable mix here. Nevertheless, our targeted publishing strategy here with leading brands and focused on different communities. And we've highlighted here a number of critical successes as well as our big brands, including especially Wisden, which again is a big repeat for us. So here, just a reminder of our long-term strategy do we reiterated these in our Bloomsbury 2030 vision. So this is focused on our growth, our portfolio and our people. These are the pillars of our success and our continued focus on what we do and continuing it. So starting with growth. We want to continue using our strong financial position to fund further acquisitions. And here, achieving the Rowman & Littlefield, which is the target we've been after for some time. It's one of the very few remaining of that scale in the U.S. market where we wanted to be in. And as Nigel mentioned earlier, this is a very key part. None of that content has been digitized beyond basic e-books. So that's a real opportunity for us to expand our Bloomsbury Digital Resources using what we've already built there in terms of the platform and the infrastructure to sell that content into existing and new markets. And then we've highlighted here further building out our international revenue. So we're now over 80% of our revenue is outside the U.K. And obviously, that's -- we've talked about diversification of the market. U.S. has been a big focus for us, but Nigel has mentioned, focusing on Asia as well. And then we've talked about infrastructure. So there are 2 big infrastructure projects that we're also working on in order to build an even stronger and more efficient platform for us as a business to continue building forward. So this is the stuff that you don't see, but this is the stuff that makes it really important for us to be able to continue to scale up. So then we talk about portfolio. And here, our goal is to become the most successful independent academic publisher in the humanities and social sciences. And this is where, as you know, that those are the subject areas we focus on. We're focused on digital publishing. So I think one of the pre-recorded, pre-submitted questions was, absolutely if print is declining? We anticipated that well over 8 years ago, and it's been a focus of our strategy, delivering digital content in the academic market, which is how students want to learn and how to academic institutions want to teach. And we really, as you've seen, have delivered great stuff there. So that's both in the BDR and e-book and BDR itself. And we've also delivered this phenomenally strong consumer numbers. So that's really important, underpinned by our Harry Potter and the continued success of that best-selling franchise. And as some of you may know, we have in future, we have some benefits coming up of Warner Brothers are currently filming or they're casting a new series with one series based on each book. So they're -- what they've released is that potentially that starts in 2026 and that will be broadcast over expected a 10-year period. So that's effectively incredible marketing and brings an even wider again to that important part of our portfolio. Just in case there's a question later on, we don't have any influence over the casting. We've had quite a lot of questions about it, but we really don't. So then coming on to the final part of this, so our people. So Nigel mentioned our people are really -- we're a people business, whether it's working with our authors or our own people and their talent. It's really absolutely key to what we do. So we're delighted that we've achieved a Great Place to Work certification in all 4 territories where we have offices. And we want to be the best place to work in publishing, and I think with the certification, we're very much delivering on that. We want to have the very best talent. We've recently done that with the appointment in April of our new U.S. President and who is storming through her heavy workload and very ambitious targets that we're setting. So Nigel, if you want to take us through our second half publishing...

Well, take a look at that embarrassment of riches shown up on the slide. So Gillian Anderson's, Want, went straight to #1 in the Sunday Times Bestseller list. A lot of the action on these titles has been since the new period began on the 1st of September for the second half. William Dalrymple's magisterial, The Golden Road, about the creation of the indosphere of influence from the year about 600 when India exported its religions around the world including to China. And Dan Jones', Henry V, about the great Warrior King and hero of Azincourt. And this book is told in the present tense, and it makes the history very exciting. But then because we're a Bloomsbury, a book that you would never expect to see as a highlight. Poet, Mystic, Widow, Wife in the middle row on the right-hand side. And that's the lives of 4 medieval women, who would have imagined that such a book -- a book about such a subject could be so warmly embraced by these 3 critics who are citing this as one of the books of the year. One of them is Julian of Norwich, who you remember said, "All will be well, and all manner of things will be well." And at the other end of the spectrum, air fryers are the happening thing. And Gino D'Acampo is probably the first major chef to have turned his attention to recipes for the air fryer. A lot of the success in this publishing niches being from up-and-coming riders like our own poppy tool. So it was good to see Gino go to, #1, on the Amazon bestseller list immediately on its release. On the next page, we give the summary. So the summary is currently looking good as we've indicated by the statement where we talked about being -- expecting to be above current consensus, markets expectations. And -- but we only will be above those expectations if you as our shareholders, and I hope our future shareholders do your best and take a look at Bloomsbury.com to see what books you might buy, should you be buying, presents at Christmas this year. There's something for all ages and members of the family. And finally, Bloomsbury enters the FTSE 250. So that was a lovely landmark for the company at beginning of August and brought with it a whole new range of tracker funds that only invest in the FTSE 250. And you can see some of the nice things that were said perhaps at that time. So thank you very much.

Perfect. Nigel, Penny, if I may just jump back in. Thank you very much indeed for your presentation this afternoon. Ladies and gentlemen, please do continue to submit your questions [Operator Instructions] But just while the team take a few moments to review those questions that were submitted already. I'd just like to remind you that a recording of this presentation, along with a copy of the slides and the published Q&A can all be accessed via your investor dashboard. Guys, as you can see there, we have received a number of questions throughout your presentation this afternoon. thank you to all of those on the call for taking the time to submit their questions. But guys at this point, if I may just hand back to you just to read out those questions and give your responses where it's appropriate to do so. And if I pick up from you at the end, that would be great. Thank you.

Thank you. Well, if we start and one of the questions was about a bit more color behind the academic market and our strategy there. So I think as we set out on both announcement and the presentation here, we're seeing the U.K. and the U.S. market, academic market experiencing some budget pressures. There are different reasons behind it. In the U.K., it's very much around international students, a restriction on international student numbers, which has been in place for some years to now is really biting because that's by far the most profitable areas of the market. There are always -- there's also been limits on fee caps in place for the sort of fee caps in place for the last 8 years. And so for any of us, I think if you take out our most profitable market segment and then put a cap on the rest of for revenue, life becomes quite tricky, and that's what we're seeing coming in. However, in the U.S., it's different in the U.S., the larger institutions are still in a very good situation financially, and they remain a very important part of our market. So that's good. It's really the smaller and mid-tier institutions, which are having a tougher time. And that's partly around demographics, but it's partly around the high cost of living, and that's a very strong jobs market over there, which means that for plenty of people, actually, the decision to go financial pressures or what other factors have involved them going into the jobs market rather than higher eduction. So as we say, these are things that we see experiencing current pressures. They're not things that will turn around short term. However, we're very confident in our long-term strategy in this market. And if I can bring in Tamsin Garrity who's our Head of Investor Relations. Tamsin, could you tell us about the low long-term trends and what we're seeing there?

Absolutely. I think near-term, looking at difficulties that Penny has outlined, certainly I would highlight the consensus expectation has those difficulties built-in to the forecast [indiscernible] expecting in the second half of the year. And so certainly we think that that's going to be reflected in the forecast post the results. And then looking at that horizon, so rather than just near term, we've got talent in both, demographics and digital. So we've built our business very strongly around the digital platform with the digital resources. And so we will experience those print declines and we continue that shift to digital. We expect to see the benefit from that, but also from the global tailwinds of the demographics. So if you look at the statistics at 2030, we are expecting global student numbers, in the tertiary education to increase by over 70% out to 2030. And so we should be well positioned to benefit from that -- from our global position in growth in these traditional resources and our wider academic and professional business. And I think if you look rather than just the near term, but [indiscernible] the horizon necessarily are really strong tailwinds to benefit our business.

Thank you. Our next question is about where do -- how do we see the benefit of this as a big TV series. So for example, the Harry Potter coming up, but also the uplift we've seen on the Netflix The Three Body Problem series.

Well, there was a time when the depth of the book was predicted because of the rise of the film industry and the TV industry. But of course, it's been anything but. And they are like huge commercials for the books that they're often based on. And we saw that very clearly when the Harry Potter films were released by Warner Brothers from about 2000 in each of the books that have started coming out to 1997, shot back up to #1 in the bestseller list. So we look forward to the next Harry Potter film outing, which is the streaming series that's been announced and open casting is going on at the moment for who will be the next Harry, Ron and Hermione and all their schoolmates and parents. So that's going to drive fantastic new sales starting from the release of the first films in 2026, I think, they've speculated. So that's great. And I think also when A Court of Thorns and Roses and other Sarah J. Maas titles are filmed. That's going to be great too. So films of our friends, and we're lucky that so many of the greatest Hollywood film franchises of the last 20 years have been based on yes, British Children's Books, Lord of the Rings, The Tales of Narnia, Harry Potter and Roald Dahl and so on.

So that brings us on to the next thing, which is to talk about Sarah J. Maas new releases and so on. So I think, just to be clear, we don't have any information about any TV or film for her. We can see absolutely why there will be a strong appetite for it. And we can see that transformation impact that would have. I'm afraid we don't have any information about the timing of the next Sarah J. Maas' books. But we -- as you know, we have 6 future titles contracted in addition of the 16 that we already have published when we have information about that, we will, of course, share that with the market and with her fans. And so moving on to a very different topic and share buybacks, one of our -- one of the audience has asked about share buybacks. I think what we've always said and we continue to reiterate is that we can see -- with the cash we're generating, we can see continued opportunities for growth in our organic and acquired investments, and we're continuing to deliver on that. In the future, should there be -- should there be a point where we can't see that, then we might consider a share buyback, but it's not on the -- we always look at how we're using our capital and how best to reward our shareholders, but it's not on the table at the moment. . So that then brings on to the acquisitions. One of the questions has been how much we -- what are we planning next. So I think what I would point out is that the Rowman & Littlefield acquisition has been by a sort of margin of 3 to 4x the largest acquisition we've ever done. So we -- and as many of you know, we fully integrate all our acquisitions. So we want to make sure we execute that well and deliver everything that we plan to get out of that, and we can already see the potential. However, there are smaller opportunities out there, and we continue to look at those. So we're balancing financing there. Nigel, is there anything you want to add on that?

I think that puts it extremely well.

Thank you. Great. Okay. And now we're on to our final question, which is what books are we reading. So Nigel, if we can start with you.

Well, I think I should talk about Held by Anne Michaels because it was the subject of so much attention on BBC News last night live from the Booker Prize ceremony. So Held is a story, a novel about love and loss starting in the trenches in World War I and moving through the 20th and first part of the 21st centuries to its finale in the Gulf of Finland in the 2025. It's powerful, it's moving. It's about love and it's written by a novelist who is also a poet. A novelist, who I might say who has had an extraordinary track record here at Bloomsbury. Her first novel Fugitive Pieces was published by us on the 2nd of June 1997, and it went on to win what is now called the Women's Prize for Friction in those days called the Orange Prize and propelling that book to huge sales. And indeed, the Booker Prize shortlisting, she didn't actually win the prize, a book called Orbital Did. But the publicity that comes with a shortlisting has propelled this novel already to sales well beyond what it would have done. So that's my favorite book at the moment, both because I love the writing. It's only 215 pages. So you can find the time in your life to read it but also because of its fantastic sales, including in the audio format.

Thank you, Nigel. Tamsin?

And so I've chosen one for me, to love and lost to lust, Gillian Anderson's Want, which we have a sort of 12-foot mockup in the hallway here. So it's quite a talking point internally. And this book is a wonderful companion of anonymous women's fantasies put together by Gillian Anderson, and we hope for many more. And Penny, what have you been reading at the momen?

So I'm, again, coming -- I'm demonstrating the huge diversity of our list. I'm cooking from the Poppy Cooks' Slow Cooker cookbook. I say, cooking from not very much, but that's excellent. And I'm reading the new Katya Balen, she's one of our brilliant children authors, her book called Ghost, which is as brilliant as her, her 4 other books, so thoroughly enjoying that. So thank you very much indeed, Jake, I'm handing back to you now.

Perfect, Penny, Nigel and Tamsin. That's great and thank you very much indeed for addressing all of those questions that came in from investors this afternoon. And of course, if there are any further questions that do come through, we'll make these available to you immediately after the presentation has ended, just for you to review, to then add any additional responses, of course, where it's appropriate to do so, and we'll publish all those responses out on the platform. But Nigel, perhaps before really just looking to redirect those on the call to provide you with their feedback which I know is particularly important to yourself and the company. If I could please just ask you for a few closing comments to wrap up with, that would be great.

Well, I think that at Bloomsbury, we have found that public ownership is the perfect form of ownership for us. And we look with pity on some of our larger competitors who are small -- huge companies in their own right but small COGS and giants, privately owned European media conglomerates. So we need all of you out there, and please spread the word. And please remember what I said earlier that you can votes with your credit card as well as your investment portfolios by buying some of the books that we've talked about today this Christmas for your loved ones. Thank you.

Perfect. Nigel, that's great. And thank you once again for updating investors this afternoon. Could I please ask investors not to close this session, you'll now be automatically redirected for the opportunity to provide your feedback in order of the management team can really better understand your views and expectations. This will only take a few moments to complete, but I'm sure it'll be greatly valued by the company. On behalf of the management team of Bloomsbury Publishing Plc, we would like to thank you for attending today's presentation. That now concludes today's session. So good afternoon to you all.