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Magic sales, but profit down at Bloomsbury

The book publisher continues to benefit from Harry Potter
May 22, 2017

The story goes that Amazon (US:AMZN) controls the global book market. The online retailer lowered ebook prices when it launched the Kindle ereader and pushed them up again when it opened a bookshop, to encourage readers back to conventional print. But Bloomsbury Publishing (BMY) is prepared for all eventualities in the ever-expanding Amazon world. The group publishes all of its books in both print and digital formats, and this has helped keep the consumer division growing regardless of where the demand is. In these numbers, consumer revenue rose 28 per cent to £85.4m, with adjusted operating profits up by a third to £7.9m.

IC TIP: Buy at 178p

A key driver of this growth was, once again, Harry Potter. The launch of an illustrated version of the second instalment of the boy wizard's adventures sent revenues for the JK Rowling series up 88 per cent. And with five more illustrated Harry Potter books in train, there's further growth to come from the series.

The publisher achieved strong top-line growth despite the cessation of its high-margin Qatar publishing contract. Bloomsbury's overall adjusted operating profit fell 9 per cent to £12m, but that was down to rising digital investments, including digital academia business Bloomsbury 2020, together with a step-up in marketing spend (with increased commissions) for Harry Potter and unfavourable currency translations, which added significantly to marketing and administration costs.

Continued expenditure and investment means broker Numis expects pre-tax profit in the year to February 2018 to remain flat at £12m, giving EPS of 12.1p (from 12p in FY2016).

BLOOMSBURY PUBLISHING (BMY)

ORD PRICE:178pMARKET VALUE:£134m
TOUCH:178-182p12-MONTH HIGH / LOW:183p140p
DIVIDEND YIELD:3.8%PE RATIO:18
NET ASSET VALUE:185p*NET CASH:£15.5m

Year to 28 FebTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
2013999.810.85.50
20141099.510.65.82
20151119.611.96.10
201612410.413.06.40
20171439.49.86.70
% change+15-9-24+5

Ex-div: 24 Aug

Payment: 20 Sep

*Includes intangible assets of £64m, or 85p a share