Bloomsbury retains a magical appeal

JK Rowling got a solitary mention in Bloomsbury Publishing’s (BMY) half-year update. That might seem a little churlish given that sales of the Harry Potter series increased by 35 per cent during its 25th anniversary year. The Philosopher's Stone, the first instalment of the Harry Potter series, has been the second-bestselling children's book of the year to date. That’s quite an achievement given that the novel was first published in 1997, but it’s understandable why Bloomsbury might want to bypass the culture wars.

And there was much to commend in the publisher’s half-year results. Organic revenue growth was 12 per cent to the good, with three strategic acquisitions – ABC-CLIO, RGP and HoZ – contributing aggregate revenue of £14.8mn (2021: £4.4mn).

Progress was made across the board. Revenue at the Non-Consumer division grew by 24 per cent to £46.6mn, with Academic & Professional sales buoyed by the ABC-CLIO integration. It’s worth noting that sales for reference works tend to hold up reasonably well during economic downturns. They also afford more predictable margins.

Meanwhile, organic revenue growth from consumer sales increased by a fifth, with Children's Trade publishing leading the way. The fact that sales to youngsters account for a sizeable proportion (some 41 per cent) of the group total is a major plus point as household budgets start to creak. Consumers tend to be price elastic where books are concerned, but that doesn’t apply to the same extent with children’s titles (anything to keep them happy).

The group continues to move beyond the printed word. Group chief executive, Nigel Newton, touted Bloomsbury Digital Resources as “the standout performer during the period, with 69 per cent revenue growth year on year and profit of £6.6mn, an increase of 134 per cent”. The development of digital channels promises to support margins over the long run, although it will necessitate further investment.

The balance sheet remains in good nick, even though there is an inherent drag in remittance from the sale of books due from distributors. Nonetheless, receivables as a proportion of sales were broadly the same as the 2021 half-year comparator.

The revenue mix at Bloomsbury should insulate it to an extent against any slump in discretionary spending, so a forward rating of 16 times Investec’s forecast EPS is not prohibitive. Newton thinks the resilience of the top line is partly because “reading offers a form of escapism and an ideal – and inexpensive – therapy for dealing with the stresses and strains of day-to-day life”. Perhaps a book voucher for Ms Rowling might be in order, then? Buy.

Last IC View: Buy, 390p, 15 Jun 2022