Bloomsbury’s Interesting Results

I don’t know why I find Bloomsbury so fascinating, I just do! Maybe it’s because they published the Harry Potter series, maybe it’s their fantastic cookbooks but I think it more likely, given the nerd that I am, that I find their medium to long-term strategy so interesting, this shift away from a reliance on trade towards educational, professional and information based publishing activities.

There is much to ponder in their half-year results but I want to focus on three points, two digital related one not.

Item the first, great sign of the robust nature of the UK digital market, Bloomsbury saw ebooks sales as a percentage of group revenue rise some 66% in terms of group turnover. Without that bounce, the company would have seen an overall drop in top line revenue. I wonder when that might be a problem for them? If print sales do not get a lift but ebook sales continue to rise, when will the revenue problem manifest in that top line revenue figure?

Digital sales mainly comprise ebook sales, which are up by 89% year on year to £4.5 million (2011: £2.4 million). Ebook sales now represent 10% of total Group continuing turnover (2011:  6%) and 15% of the Adult division continuing turnover (2011: 9%).

Item the second, this huge increase has the strange and I would imagine annoying effect of increasing the seasonality of the company’s results! Did we expect this outcome? I guess the answer is to shift reporting seasons to at least exclude January from the second half results?

Ebook sales peak in January and February following the sale of e-reader devices at Christmas and academic sales peak at the beginning of the academic year, in September and October. As these two revenue streams form a higher proportion of total turnover, the proportion of our results accruing in the second half of the financial year increases. 

Item the third, strategy pays off at just the right time. So the children’s division saw a £2.8 million drop in sales! That’s right totally offsetting the gains in ebook sales. What’s more it went from a £0.9 million profit to £0. Yet at the same time the information division delivered in spades.

The division generated 4% of Group continuing sales in the six months ended 31 August 2012 (2011: 4%) and 41% of Group continuing operating profit before highlighted items (2011: 15%). Continuing turnover in the Information division increased by 21% year on year to £1.8 million  (2011: £1.5 million).

Which is a very nice way of say that the margins on this end of the business are totally insane compared to the rest of the business! We know that group profit for the half was £2.1 million and that the Information Division delivered 41% of that or £800,000 give or take. Thus the division had a margin of 44% or so. Diversification and changing the focus away from Trade & Children’s books has saved Bloomsbury’s shareholders from a nasty surprise.

The strategy has worked, and worked well. It’s nice to see in an era when we don’t tend to think of publishers as innovative or rapid actors.

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