Bloomsbury Publishing (LSE:BMY) Q2 2027 Earnings Call

0:00 Good morning and welcome to all analysts here in this room and to shareholders and potential shareholders watching the webcast and we welcome all of you. I'm Nigel Newton, I'm Executive Chairman and I'm joined by Keith Underwood, Chief Financial and Operating Officer of Bloomsbury Publishing. have we got the next slide up yes excellent our strategy of diversification has created a portfolio of portfolios much as you all do in your own portfolios of companies you invest in balancing the vicissitudes of one area of publishing against the other we've created a resilient model of Thank you very much.

1:15 Thank you very much. Thank you very much. We have a strong balance sheet with net cash of 22.8 million, which brings capital allocation to the fore.

2:07 The dividend slide, always my favorite, as the chart shows, Bloomsbury has delivered 31 years of consistent dividend growth since flotation in 1994. In the first half of 26-27... So let's recap on the investment case

2:42 For Bloomsbury, this is one of really strong shareholder returns derived from a diversified portfolio across academic and consumer publishing, across print and digital formats, and from an increasingly international audience. As Nigel mentioned earlier, this diversification has created a more resilient model for long-term success. Last year, in FY26, the academic and professional division had strong profits doubling to £25 million, which mitigated lower profits in the consumer division. This year, with academic and professional returning to a more normalised run rate, we're set to deliver record results driven by an exceptional performance in the consumer division. That is the portfolio of portfolios in action.

3:35 So in terms of the financial highlights for the first half of this year, revenue £151.6 million and adjusted profit of £16.8 million with a margin of £11.1 taking EPS to £16.67 pence. Our net cash position is really strong at 22.8 million and the dividend is up 5% continuing that fantastic track record of unbroken dividend growth. Tamsin Anne Bernadette Garrity, The academic and professional division delivered really good growth of 6% on an underlying basis. That's excluding AI within the numbers as well. Delivered growth in all territories and in all formats.

4:46 You can see their print sales, for example, increasing by over 30%, showing strong demand for what is a really resilient format. The intellectual property value and quality of our academic list has enabled us to continue our non-exclusive AI licensing agreement into this financial year, although, as we have always said, it's to a lesser quantum this year, leading to a reduced margin.

5:18 So, consumer bestsellers. Well, in Romanticy, Sarah J. Maas is launching not one but two novels in the most popular of her three series, A Court of Thorns and Roses. Akitar, A Court of Splintered Harmony A Court of Forgotten Melody J.K. Rowling's Harry Potter series is already benefiting from the new Harry Potter TV streaming series starting on Christmas Day itself, no less, on HBO Max, and I predict a Thank you very much.

6:31 Stephen Graham was an instant bestseller with letters to our sons.

7:01 Moving on to the academic and professional division. It's had a very good start to the first half of this year. Revenue growth of around about 6% to £48.8 million and profits of £6.8 million. As I said good underlying growth in all territories and in all formats excluding AI. Just more specifically we have expanded as I mentioned before our business in Asia by opening up the Singapore office as a hub to further capitalise on the projected growth in student numbers in that region. and the team in this area is now really developing new propositions. We've got a new Asia Studies digital resource to bolster the BDR platform. We're establishing key relationships with new institutions and following a range of successful meetings at the Beijing International Book Fair, we're advancing publishing partnerships with several major publishing houses in China.

7:59 Moving to the balance sheet, as you can see it remains very strong. Total net assets for the year up at £213 million and within working capital we've actively managed down our finished stock balances year on year and are continuing to drive operational efficiency. Our net cash position as you can see has improved from 2.4 million last year to 22.8 million this year driven by the profit drop through but also working capital improvements which I referenced. Consistent with the prior years this cash balance decreases in Q3 before increasing again in Q4 ahead of the royalty run in March.

8:44 So just taking that cash bridge, this just shows the movement from the end of last financial year through to the six months to the end of August. Closing net cash balance of 22.8. And as we've said before, capital allocation priorities remain focused on internal growth initiatives to drive organic growth, debt reduction, which you can see we already did in the first half of this year, and also bolt on acquisitions to deliver against our future growth strategies.

9:16 So, summary and outlook. The Bloomsbury portfolio of portfolios, as you have seen, has created a resilient and successful model. We have entered the second half with a strong net cash position and have had an outstanding start underpinning our confidence. We have a strong publishing list for the year ahead with exciting releases in major franchises such as Harry Potter and Sarah J. Maas. As such, the board has confidence in delivering record profit in this financial year, 26-27, in line with expectations.

10:07 And now, we would like to invite a question, Alistair. Thanks so much. Three questions please. Firstly, you noted some sales processes beginning in the area of special interest. Just give us a bit of a colour on whether there are more of those to come and the broader aspirations for improving contribution to profits as a result. Secondly, just give us an update on your M&A pipeline, key areas of focus, levels of activity in the pipeline. And then lastly, can you just talk a little bit more about the underlying trends you're seeing in the market for academic and professional, customer budgets on a like-for-like basis, customer numbers, new subject areas, and the like. Thank you.

11:00 Customer budgets. Customer numbers. Customer budgets. Keith, perhaps you could take the special interest and M&A question and I'll take the underlying trends.

11:20 Yeah, so look, as we announced last time round, we talked about the vertical structure, which gives people a great deal of control and visibility over their bottom lines. Kathleen Farrar, who's running our consumer division in the UK, has special interests now under that division. We are looking at all ways in which we can drive margin up in the consumer area as well and that includes looking at all divisions to make sure they're operating as effectively as we can. You would see that we've previously announced sale processes for Who's Who within that area and also the games division. Those are progressing at the moment. and we will continue to look at areas within the consumer division as well in order to drive margin within that particular area of the business.

12:11 And M&A?

12:12 M&A pipeline. Look, given the cash balances that we've got, we've laid out our capital allocation priorities. M&A is a part of that. We continue to actively look at bolt-on opportunities that can continue to drive top-line growth and margin growth consistent with the way that Bloomsbury has done it before. We've got a very good history as a business of being able to spot good opportunities and integrate them in a way that drives synergies across the operating business. We are actively looking at opportunities at the moment and we'll be able to say more about that in due course.

12:45 Underlying trends in academic. So underlying growth is good in our academic division in all territories. And I think what we've seen is perhaps a recovery from some of the knocks taken by... Thank you very much. Going off the Richter scale in terms of growth in Asia in particular, and that's of course why we've started this base in Singapore in January, which is off to a terrific start.

13:52 So we believe we've adopted the right strategy there, and we'll see how we get on. Hi.

14:06 Thanks. Will Arwood from Berenberg. Three from me, please. Firstly, just in terms of the Harry Potter HBO series, I was just wondering if you could share any colour in terms of orders from supermarkets, pre-orders, just general feeling around that ahead of the HBO release. Secondly, in terms of some benefit from AR licensing deals in H1 and expected to continue into H2, what about sort of Your conversations with other frontier models, how are those progressing? And then finally just in terms of the anthropic settlement, can you provide if there's been any change to your expectations for that?

14:48 Thanks very much. I'll take HBO and Keith AI and Anthropic kindly. So the pre-orders are good and the challenge for us has been to get The series back into the supermarkets who backed Harry Potter so strongly when the original Warner Brothers films started coming out around 2000 and we've succeeded so the the pump is primed we have significant orders in the UK from the major supermarkets we've Double down on that by seeking...

15:41 marketing from them to go with it and I reviewed a list of the individual supermarkets, plans, summer planning, tannoy, messages to drive people to the Harry Potter section. So what's exciting about this release versus the film's 27 years ago is it's the first time we've done a tie-in jacket and so possibly we showed on the screen earlier but we we have a very cool jacket image of Harry wearing his Quidditch coat Shott from behind and it says eight Potter and it's very powerful so I think they're going to fly off the shelves to a new generation of readers there are something like 700,000 new eight-year-olds in in Britain every year and it's a long time since the books came out so I think that the Thank you very much.

17:22 So it does feel as though HBO will take over Christmas Day itself. And so we'll watch the space. I've just answered your question in respect of Thank you very much. We do have the English language rights in Harry Potter in every country in the world except the United States.

18:07 We have Canada. The traditional Commonwealth countries will make up a big chunk of the markets, Australia, New Zealand, South Africa, Canada. But the many other countries where reading... I think it's going to be very big Thank you very much.

19:17 Thank you very much. and professional arena both in terms of training deals which was our first deal that we did but also increasingly in respect of specialist rag deals that we're looking to strike as well so that's encouraging you asked about the anthropic settlement we are Working through at the moment the disputes process with the settlement administrator.

20:02 That is a relatively lengthy process. We're working through it at the moment. We still remain, I mean I'm not going to prejudge the outcome of the settlement process, but we still expect to receive double digit million settlement as a result of that.

20:18 Hi. Hi. Hello. Melanie from Peel Hunt. I've got two, please. The first one is, can you talk about how you're thinking about the level of marketing for surgery mass releases upcoming in the second half? The second one is Asia for academic has been going really well. So now it's proven the concept. Do you plan to invest harder in that region? Thank you.

20:48 I might help myself to both of those. The level of marketing for Sarah J Maas is, as you would imagine, very high. And it's not just us. It's the retailers themselves. If you're a retailer, you're searching for this year's big product, and many of them have concluded it's going to be Sarah J. Maas. And so there are huge internal promotions happening. To give you an example, Target were planning to create a kind of Sarah J.

21:34 Maas Thank you very much. and then in other places more traditional forms of marketing such as pallet sales where they just slap down a huge pallet at the end of an aisle and the books are there and that seems to induce increased buying so there is all manner some shops have produced special There are two kinds of marketing happening.

22:30 Our own marketing, which is considerable and very social media oriented, and then there's the marketing of almost every major retailer on earth. This may well turn out to be the biggest selling book of the year. Certainly that was the case with Sarah's previous launch, so we'll see.

23:18 Asia. So yes, it's early days. We don't want to overcook this. Our plans are ambitious, but our execution is only about nine months old at this stage. As we mentioned earlier, we're creating an Asia Studies project. Thank you very much. Knowing what I know, I think that will turn what we're creating into a must-have product for most universities in the world and not just a nice-to-have product.

24:31 We have our eye of course on China which is such a huge academic market now and we have various plans in the pipeline. Hello Alex.

24:53 Good morning. Hi, Alex Pollan from Burybroke. Someone's on cash, Keith, if that's right. Just to reiterate that any settlement from Anthropic, as far as you're concerned, is not included in any consensus forecasts at the moment. Any anecdotal examples around the working capital improvements as well, please? Any more detail you can give around that? whether that is something that changes you've put in place since you've come in etc that have led to that sort of improvement and then on capital allocation whether you know the high levels of cash or likely high levels of expected cash are changing any thoughts around that at all and then totally unrelated a one on audio and just a general update on How are you seeing the audio market?

25:37 Well, I'm glad he was looking at you when he asked most of those questions, Keith.

25:43 Let me just stress then in that case, so yes, for the consensus cash forecasts, anthropic settlement is not built into those numbers. in terms of the working capital improvements we got these are just a series of improvements that are being made I mean we call out and one of the things I would probably call out specifically is just in relation to stock, finished stock you will have seen that that is down considerably in terms of year on year we've obviously got a slight build up in the half year as we're stocking to sell some major titles but if you look at it half year to half year Thank you very much. It's a series of improvements that the team are working on across the board and I think they are starting to yield real results and you can see that from some of the cash drop through that we've got in terms of the operating profits that we've delivered.

26:46 So I am pleased with that. There is more to be done and we're continuing to look at the efficiency with which we can drive cash drop through but it's an encouraging start I would suggest. Audio

26:58 Audio. What a wonderfully growing market that is, as you know, with the addition of Spossify with their mighty membership worldwide in the audiobook industry. Thank you very much. Are there any other questions? Don't be shy. Oh, go for it.

28:02 Thank you. So I just want to ask, are you seeing any boost in Sarah J Maas' backlist selling in the past few months, you know, ahead of the upcoming release?

28:14 Yeah, absolutely. I think we've seen one of the books go back into the New York Times magazine. Tamsin's nodding encouragingly in the number 10 position in the New York Times bestseller list right now this week and so that is of course a reflection of the beating of the drum in people's anticipation of it and then one thing of course that happens with a book like this is you're having to control an embargo worldwide so that retailers aren't putting the book out early for sale as they begin to arrive in the distribution and that creates a lot of excitement, mainly of the negative variety, but it's still excitement and anticipation.

29:15 So yes, of course there will be many readers who aren't up to speed with the ACOTAR series and and this is the moment that will push them over to the top into becoming readers and reading their way through the series. And so Sarah had 16 novels under the belt and now there's about to be 18. So it is wonderful because often literary phenomena are... Restricted to one, two, three, four backlist books and to have 18 as we will do is very exciting.

30:09 Alistair is feeling encouraged let's keep going about Sarah hard obviously to speak on her behalf but what do you think her appetite is to keep being an author keep writing the new novels all this excitement is coming is she signing a movie deal any time soon?

30:30 You're absolutely right that no publisher ever speaks on behalf of their author and their IP is their business. But she's certainly shown great appetite in producing books. Not one, but two books in a row, so I'll leave that fact for you as the measure of it all. I don't think since the days of Charles Dickens and novels being serialized in magazines have I ever seen two installments of a story come out so quickly, and we're very fortunate for that.

31:15 and as for the rest you'll have to watch this space and gaze into your crystal ball and the same there have been no new announcements at all and so I have We need excitement for the future. We can't be having everything all at once. Okay, well thank you all very much indeed for coming and for hearing the story of our, we believe, our record year to the end of February. But we still have to deliver a lot of that, so watch this space.

32:12 Thank you.