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Bloomsbury’s magical results

The publisher behind the Harry potter franchise has posted an earnings beat, and expects to outperform analysts' expectations in the new financial year, too
May 24, 2018

It’s taken time for shareholders in Bloomsbury Publishing (BMY:230p) to reap the financial rewards for their loyalty since I included the shares in my 2015 Bargain Shares Portfolio, but investors are certainly warming now to the company best known for publishing author JK Rowling’s best-selling Harry Potter books. Having paid out dividends per share of 25.1p in the past four years, the board has just hiked the final payout by 13.5 per cent to 6.36p to take the total to 7.51p for the financial year to the end of February 2018, covered by EPS of 13.9p, up 10 per cent year on year. Their optimism is well founded.

Buoyed by an outstanding performance from its consumer division, which delivered 20 per cent increases in both operating profit and revenues to £11.4m and £102m, respectively, the publisher modestly beat Peel Hunt’s pre-tax profit forecast of £13m and that’s after it had been upgraded by 7 per cent post the pre-close trading update as I highlighted at the time (‘Small-cap earnings beats’, 21 Mar 2018).

Sales of children’s books soared by almost a quarter to £69m, helped in no small part by the special editions of Harry Potter and the Philosopher's Stone to mark the 20th year anniversary of its publication, the illustrated Harry Potter and the Prisoner of Azkaban and Fantastic Beasts and Where to Find Them. Bloomsbury also published two colour background titles for the British Library Harry Potter exhibition: Harry Potter – A History of Magic: The Book of The Exhibition; and Harry Potter – A Journey Through A History of Magic.

Excluding Harry Potter, children’s book sales were still up by 14 per cent, helped by over 1m sales of Sarah Maas’ book Throne of Glass, and Kate Pankhurst's Fantastically Great Women Who Changed the World, the bestselling children's general non-fiction title of 2017. The autumn book list is equally strong, and profits will also get a lift this year from the recently announced acquisition of London-based academic publisher I.B. Tauris.

There is good news too on Bloomsbury’s 2020 digital strategy which is on track to deliver £5m of profit and £15m of revenues by the 2021-22 financial year. As has always been the case, the company’s balance sheet is in rude health: net cash increased from £15.5m to £25.2m, a sum worth 30p a share, albeit £4.8m of that has since been used to acquire I.B. Tauris.

Analysts have taken note. Malcolm Morgan at brokerage Peel Hunt lifted his current year pre-tax estimate by 7 per cent to £14m, with upgrades for later years to follow to reflect progress being made in digital publishing. Investors have, too, which is why Bloomsbury’s share price has broken above the 190p glass ceiling that capped progress over the past four years.

Trading on a cash-adjusted PE ratio of 15, and with potentially significant international rights sales of the two Harry Potter background titles not embedded in analyst forecasts, I would definitely run with the 52 per cent profit on your holdings if you have been following my advice.

 

■ Simon Thompson's new book Successful Stock Picking Strategies was published on 15 March and can be purchased online at www.ypdbooks.com, or by telephoning YPDBooks on 01904 431 213 to place an order. It is being sold through no other source and is priced at £16.95 plus £2.95 postage and packaging. 

Simon's second book Stock Picking for Profit has now been reprinted and is available to purchase online at www.ypdbooks.com for £16.95, plus £2.95 postage and packaging, or by telephoning YPDBooks on 01904 431 213 to place an order.