Bloomsbury hails 'exceptional' year

UK publishing house Bloomsbury (BMY) has had an “exceptional” year. Fuelled by the success of fantasy writer Sarah J. Maas, revenue jumped by 30 per cent to £342mn and adjusted profit before tax leapt by 57 per cent to £48.7mn. Shareholders are being rewarded with a 25 per cent dividend hike. 

This rapid growth is not set to continue, however. Indeed, analysts expect sales to fall by roughly 17 per cent this year to £284mn, and pre-tax profits are due to decline by 27 per cent to £35.4mn. Management said this reflects the fact that no new Sarah J. Maas title is scheduled for the period – but noted that trading should be “slightly ahead” of forecasts.

The “extraordinary upside potential” of consumer publishing has been proved again and again by Bloomsbury, which published Harry Potter and the Philosopher’s Stone in 1997. However, the state of its non-consumer division needs closer analysis. Non-consumer revenue dipped by 4 per cent to £93.4mn in the period and profits tumbled by almost a quarter to £9.9mn.

Meanwhile, sales growth slowed right down in the digital resources division, from 41 per cent in FY2022 to just 2 per cent in FY2023.

Management blamed this on a “more normalised” post-Covid higher education market, but said it “remains confident in the long-term trends”. Specifically, it believes the digital resources business is still on track to achieve £37mn of turnover by February 2028. The difficulties faced by academic publishers such as Pearson (PSON) cast a shadow, however, and Bloomsbury is competing in a new world of generative artificial intelligence.

Adding to the uncertainty is the retirement of chair Sir Richard Lambert after seven years in the job. He is set to be replaced by John Bason, who is currently an independent non-executive director. 

Bloomsbury is a business of two halves. While the consumer division delivers spectacular but volatile growth, its non-consumer arm is steadier, with recurring revenues and more predictable demand. This is a very attractive combination, and has benefited shareholders for many years. As the Sarah J. Maas effect wears off, however, we will be paying greater attention to the academic division and monitoring how it is faring in a new digital world. Buy.

Last IC View: Buy, 403p, 26 Oct 2023