Early Christmas orders give Bloomsbury a boost

Bloomsbury Publishing (BMY) defied supply chain issues that are plaguing the book industry, recording its highest ever first-half sales, up by a fifth on an organic basis, while profits surged on the back of rising volumes in academic and professional titles.

The publisher has printed products "well in advance" of its usual peaks in the run-up to Christmas and the beginning of the academic year to dodge supply problems both in the printing and transportation of books. Meanwhile, sales have been bolstered by anxious retailers, which have significantly increased their stock levels to ensure they can see out the festive season.

The second half of 2021 could be less rosy for Bloomsbury. Supply chains are still disrupted, large early orders are unlikely to be repeated, and return rates could be high. Peel Hunt left its forecasts unchanged, predicting that the current year split will be £12.9m profit in the first half and £6.5m in the second half, reversing the usual seasonal pattern.

Bloomsbury is looking beyond traditional paperbacks, however. It is also tapping into the world of digital academic products, with Bloomsbury Digital Resources reporting strong revenue growth and a 56 per cent increase in customer numbers year on year. As more academic institutions turn to hybrid learning – and more university libraries subscribe to expensive online resources – this could be an interesting area of growth for the publisher.

Gross margins continue to ratchet up and, although the group registered a net cash outflow, this was largely attributable to the acquisition of Head of Zeus Limited, along with a step-up in inventories. The shares trade at 20 times forecast earnings, hardly prohibitive given steady growth rates and a prospective yield of 2.7 per cent, but with the shares up by 50 per cent over the past 12 months, we think prospects are adequately reflected in the valuation. Hold.

Last IC view: Buy, 242p, 27 Oct 2020