Bloomsbury Regulatory News (BMY)

3 Apr 2007 07:02

Bloomsbury Publishing PLC03 April 2007 Bloomsbury Publishing Plc Preliminary Results for the Year Ended 31 December 2006 • Results in line with December trading update. • Pre-tax profit of £5.2m (2005, £20.1m) on turnover of £74.8m (2005, £109.1m). • Final dividend held at 3.00p (2005, 3.00p). Full year dividend increased to 3.66p (2005, 3.60p). • Investment in future titles at the year end £30.77m (2005, £22.41m). • Strong balance sheet with net cash of £24.3 million. • Clear on-going strategy based on strong stable of authors. • Good start to current year with a strong pipeline of titles including new books by Khaled Hosseini, author of The Kite Runner, and by JK Rowling with Harry Potter and the Deathly Hallows. Commenting on the results and prospects for Bloomsbury, Nigel Newton, Chairman,said: "2006 was a challenging year. These results are in line with the trading updatewe gave in December. Turning to the current year and beyond, we have in place agrowth strategy which includes expanding on our current author relationships,developing new authors, web-based initiatives, content monetisation, leveragingour geographic presence, and acquisitions, all of which we believe will enhanceand strengthen our position as a leading publisher." For further information, please contact: Charles Palmer, Financial Dynamics 020 7831 3113 Overview 2006 was a challenging year. Our results, while disappointing and showing adecline in pre-tax profits, are in line with our December trading statement andreflect significant factors at the end of the year, including a toughpre-Christmas trading environment for Bloomsbury, smaller bestsellers than inprevious years and not completing budgeted reference rights sales by theyear-end. While we are not satisfied with this overall result, it is importantto recognise strong individual performances within the Group that give usconfidence about the fundamentals of our business as we look to the future. A&C Black, which we acquired in 2000, had a particularly good year, providingstrong repeat revenues and profitability for the Group. Bloomsbury USA exceededits revenue targets for the year, on the strength of a diverse and growing listof titles, and our German company achieved its second consecutive year ofprofitability. Although the UK market proved to be problematic for us, manyBloomsbury titles achieved success during the year, including Empress Orchid byAnchee Min and In Search of Perfection by Heston Blumenthal. We are keenly aware that the dynamics of our industry are changing. In addition,the combination of pricing pressure from retailers and pressure from authors'agents for advances is squeezing margins. The industry is coming to grips withthese factors, and we are focused on taking the initiative by adapting ourbusiness to the new market environment we face. We have put in place a strategic plan to grow revenues from 2007 onwards. Thisbusiness development strategy is multi-faceted, building on our existingstrengths as well as opening doors to new opportunities. It can be summarised asfollows: 1. Author relationships and content creation - Capitalising on our proventrack record in developing new authors and projects. Our staff have showncreativity and flair in bringing unknown authors to great sales success.Previously unpublished authors published by Bloomsbury whose works have soldmore than one million copies include Ben Schott, David Guterson, Khaled Hosseiniand JK Rowling. Projects conceived in-house which have had turnover well inexcess of £1 million include Business: The Ultimate Resource, Encarta WorldEnglish Dictionary and Macmillan English Dictionary. We are currentlyaccelerating these activities and our forward programme of new projects forfuture publication is already at a significant level. 2. On-going revenues - Publishing new works by the significant stable ofauthors we have built up and whose many books have for 21 years formed a vitalpart of the on-going revenues of the Group. In most cases, these authors donot have long-term or multi-book contracts but consistently bring their newworks to Bloomsbury because of the lasting strength of the relationships theyhave with their editors and the company. Repeat authors who will be publishedthis year and in Spring 2008 alone include Michael Ondaatje, Joanna Trollope,Celia Rees, JK Rowling, Anthony Bourdain and Khaled Hosseini. We will also continue to develop the new authors whose first books for the Grouphave been published recently or are still in the pipeline. In the UK theseinclude in particular our new history authors such as David Dimbleby, WilliamDalrymple, AC Grayling and Frederick Taylor, and in food and cookery HestonBlumenthal and Hugh Fearnley-Whittingstall. 3. Geographic leverage - Investing to further develop our businessinternationally, specifically in the USA and Germany, both markets where we aresuccessfully growing market share and where there is great potential to makeeven greater inroads. Key to our success will be the continued acquisitions ofrights across all our territories. With authors such as Ben Schott and WilliamBoyd, we have already proved that our international publishing strategy candevelop bestsellers internationally. 4. Content monetisation - In the digital arena we are taking full advantageof our existing expertise as a content creator, owner and licensor to monetisethat content on the internet, to seek opportunities in marketing, to exploit itin new markets and partnerships, and to benefit from the cost-reductionpotential offered by print on demand and e-books. TV and film rights can alsoprovide the opportunity for significant revenue streams as we have seen withLarklight. 5. Web-based initiatives - Enhancing our already pioneering activities innew media and electronic publishing to develop opportunities in web marketingand distribution, capitalising on the advances in print on demand and e-booksand other opportunities of the digital era. Examples of this activity includeour involvement in a project which will we believe create a unique community forreaders, writers and publishers, host user-generated content and generatesignificant on-line advertising opportunities as well as our digitisationproject. 6. Acquisitions - Bloomsbury has successfully made 10 acquisitions whichhave brought real benefits to the business. We are now actively seeking largeracquisitions and looking at companies that not only complement existingactivities but broaden our media involvement. We remain focused onopportunities that can either deliver significant advantages of scale or takeour business into new (but related) and profitable directions. We have provenourselves to be effective managers and integrators through our prior acquisitionhistory. Fundamental to our success is the superb stable of authors who write regularlyfor Bloomsbury and the first-class team of employees who have demonstrated theirability over more than 20 years to find, develop, promote and publish books ofthe highest calibre. They form the solid foundation of our business as wecontinue to publish compelling books that consumers want to purchase. We see digitisation as an opportunity rather than a threat. It holds thepotential to expand distribution of our content, to monetise that content in newways and to radically change our cost structure. In our reference division,over 200 titles are now available in e-book format, selling to librariesworldwide and providing an extra revenue stream which is expected to increasesubstantially from 2007 onwards. A new programme of converting reference titleswhich are currently unavailable, or slow selling, to print on demand is alsoproducing new sources of repeat revenue and substantial cost savings. We havealso put in place our own digitisation programme with a "Look Inside" widget toenable more of our content to be accessed in web searches which will lead tofuture book sales and harness the power of online social networking websites.We have a long history of digital content licensing, and we are confident thatwe can build on that history as the digital world continues to expand in new andexciting ways. We expect 2007 to be a strong year for the Company. In the UK, Restless andAgent Zigzag, two of our 2007 titles, have already achieved bestseller status,and later in the year we will also be publishing two major titles, Harry Potterand the Deathly Hallows and A Thousand Splendid Suns, a new book by KhaledHosseini whose first novel, The Kite Runner, has sold more than one millioncopies for us. The Company is actively seeking larger acquisitions. Since Bloomsbury'sacquisition of A&C Black, it has doubled its turnover while remaining stronglyprofitable. Our smaller acquisitions of the past few years, including mostrecently the Methuen Drama list in June 2006, are performing well. We believethat our disciplined approach will prove to be beneficial and that theopportunities for larger acquisitions will be more favourable in 2007 and 2008. Financial performance Turnover decreased by 31.5% to £74.77m (2005, £109.11m) due to lower thanexpected pre-Christmas sales of our titles in the UK retail trade, smallerbestselling titles than in previous years and not completing budgeted referencerights sales prior to the year-end. It should also be borne in mind forcomparative purposes that in 2005 we published the hardback of Harry Potter andthe Half-Blood Prince. Revenues in the UK decreased 41.8% to £53.88m (2005, £92.62m). Revenues from USoperations rose 36.1% to £15.01m (2005, £11.03m) on the back of strong salesfrom lead titles and growth in the backlist. Revenues from Continental Europe,which were generated by Berlin Verlag, increased 7.5% to £5.88m (2005, £5.47m). Profit before tax decreased 74.2% to £5.20m (2005, £20.13m). Basic earnings pershare decreased by 75.4% to 4.99 pence (2005, 20.30 pence). Diluted earnings pershare decreased by 75.4% to 4.90 pence (2005, 19.93 pence). At the end of the year, the Group had net cash balances of £24.30m (2005,£53.51m). The decline in cash during the year is the result of working capitalmovements, primarily payment of royalties from 2005 publications and investmentsin new titles for publication in 2006 and beyond. We also completed theacquisition for cash of the Methuen Drama list during the year. We continue toinvest in future growth by acquiring new authors and titles. Our strong balancesheet underpins our investment programme and augurs well for our future. At 31December 2006, the Group had under contract 1,149 titles (2005, 1,062) forfuture publication, with a gross investment of £30.77m (2005, £22.41m). Afterpayment of the initial tranches of advances to authors, our liability for futurecash payments on these contracted titles at that date was £18.48m (2005,£12.05m). UK Publishing Children's There has been a movement in the children's book market towards the adult model:a market primarily dominated by fewer key authors, and fewer bestsellers.Booksellers are focusing on those authors with a strong track record, andsupermarkets are selling more children's titles. Against this backdrop, we had a good year in 2006. Our fiction was stronglysupported by the chains in both monthly and seasonal promotions. We also hadexcellent review coverage of our titles which helped ensure their sell-throughin the shops. Our picture books competed well, with titles by Mike Terry, Ellie& Elvis and The Selfish Crocodile and Other Animals, performing particularlystrongly. Our strategy was to publish into new areas for Bloomsbury Children's Books.Traditionally strong in the area of literary fiction, we focused on thecontinued development of our pre-school list and co-editions, as well aslaunching new series in the commercial 5 - 9 year-old fiction area. Theseincluded a twelve book series, Mermaids SOS, of which we published the first sixtitles in 2006. The next six titles are scheduled for publication in the firsthalf of 2007. We also published Open Season, our first series of film tie-in titles, whichperformed well. Surf's Up is the next series planned for the Summer, an animatedadventure starring Jeff Bridges, James Woods and Shia LaBeouf which should be abig Summer family film for young children. We have had a number of children's best-sellers in 2006. Harry Potter and theHalf-Blood Prince, as well as the other titles in the series, has been in thepaperback bestseller lists. Other titles that have appeared on the lists areRichard Horne's very successful 101 things to do... books and the Septimus Heapseries in both hardback and paperback, as well as Araminta Spook, both by AngieSage. Small Steps by Louis Sachar was a hardback bestseller for us in 2006, and in theSummer of 2007 we will publish the paperback edition. His previous novel,Holes, has been one of our key backlist titles for many years. Our long-standing strategy to acquire world rights resulted in a large number oftranslation sub-licence deals being concluded during the year. Highlightsinclude Larklight by Philip Reeve which was sold to twelve countries, TheDeclaration sold in eleven, Tanglewreck in seventeen, as well as a very strongdeal for film rights for Larklight with Warner. This is the first in athree-book series by the multi-award winning, bestselling author Philip Reeve.We will publish The Declaration by Gemma Malley in September 2007 simultaneouslyin the UK, Germany and America. One of our lead titles for 2007, this debutnovel is by a very exciting new author in the world of young adult literature. We will also continue to develop our commercial series fiction as well ascontinue to build our already established authors like Angie Sage, Philip Reeve,Sue Limb, Benjamin Zephaniah and Mary Hoffman into household names. 2007 will also see the publication of the hugely anticipated final instalment inthe Harry Potter series, Harry Potter and the Deathly Hallows, which we will bepublishing in hardback. For the first time there will be a simultaneous audiorelease which we will be publishing in a joint venture with Helen Nicoll. Adult In fiction, the year began with a No 1 bestseller, Joanna Trollope's SecondHoneymoon, and ended with William Boyd's Restless winning the Costa Novel of theYear Award and being chosen by Richard & Judy for their 2007 Book Club. DouglasCoupland joined Bloomsbury in the UK with J Pod, as did Richard Ford with TheLay of the Land. Other Autumn highlights included a new book by Susanna Clarke,author of Jonathan Strange & Mr Norrell, and twice Booker short-listed PatrickMcCabe's new novel, his first for Bloomsbury, Winterwood, which has won theIrish Novel of the Year Award. 2006 was a particularly good year for non-fiction. We published Gordon Brown,Al Gore's bestselling An Inconvenient Truth (the film of which won an Oscar), MyTake, the autobiography of Gary Barlow (a top ten bestseller), and the tie-inbook to chef Heston Blumenthal's successful television series In Search ofPerfection. Two new non-fiction editors at Bloomsbury brought with them writersincluding William Dalrymple and Hugh Fearnley-Whittingstall. Ben Schott'ssuccessful second Almanac was also published. The list for 2007 is consistently strong with big titles being publishedthroughout the year. Bloomsbury is expanding its list with TV tie-ins and foodand cookery books. Following on from Heston Blumenthal we published twotelevision tie-ins, The Truth about Food and Don't Die Young, in the earlySpring. These will be followed with David Dimbleby's major series How We BuiltBritain and a tie-in to the new series from Heston Blumenthal. The Autumn willalso see important new books by Germaine Greer and Hugh Fearnley-Whittingstall.In fiction we have the new novel by Booker Prize winning Michael Ondaatje,author of The English Patient, while A Thousand Splendid Suns, the new novel byKhaled Hosseini, author of the bestselling The Kite Runner, will be a majorpublishing event of the year. We continue to strengthen our international ties. We published William Boyd inall three of our territories and he has become a bestseller in Germany for thefirst time. We are also to publish a major thriller by Ronan Bennett in ourterritories in the Autumn of this year, as well as Schott's 2008 Almanac. Reference A&C Black celebrates its 200th anniversary in 2007. The longevity of thebusiness and the properties it owns, such as Who's Who and Whitaker's Almanack,demonstrates that this is an operation that can, and will, continue to generatestrong recurring revenues and profits for many years to come. The natural history list had a particularly strong year, with a number ofsuccessful books published in association with the RSPB, a photographic book onThe World of the Polar Bear and a superbly illustrated book on Global Warning byGuardian journalist, Paul Brown. Notable successes in other areas included anew range of media yearbooks, the publication of The Ultimate Teen Book Guideand the launch of the second edition of Business: The Ultimate Resource, nowgenerating significant electronic revenues and published in seven languages,including Chinese and Japanese. In July 2006 we acquired Methuen Drama, a highly prestigious and establishedlist which includes plays by top contemporary authors such as Caryl Churchill,Michael Frayn and Mark Ravenhill, as well as established classics by BertoltBrecht, Oscar Wilde and Dario Fo. The list is an excellent fit with A&C Black'sexisting Theatre and Drama books and the combination of the two lists gives A&CBlack the largest Theatre and Drama list in the UK. The operation has now beenfully integrated with our existing Theatre and Drama business and a backlistre-issue and publicity programme is already underway which is generating ahealthy increase in revenues. Prospects for 2007 are good, with strong growth predicted for the Methuen Dramalist in all English language markets. New books will include an innovative newShakespeare in Performance series with recordings of well known productionspackaged with the plays, and the first anthology of Noel Coward's letters, manyof them previously unpublished, edited by leading Coward scholar Barry Day.Other A&C Black highlights for 2007 will include Young Wisden, a cricketanthology for children in association with Wisden; Left for Dead, the dramaticstory of the last survivor of Britain's most disastrous yacht race; Stolen, anillustrated history of the 200 most important stolen art masterpieces; and thelaunch of a new range of educational books to fit the newly revised PrimaryNational Curriculum. During 2006 we started the development of our fourth major electronic databasecalled Finance - the Ultimate Resource. The database plans are international inscope, reflecting the need for organisations to be aware of the globalimplications of financial decisions, as well as the impact of internationalcorporate governance changes on business practices. The database will offerfinance professionals up-to-date financial advice in print and online togetherwith compelling additional daily content updates and functionality (e.g. videostreaming, podcasts, online events) targeted at the global financial community.This is a truly exciting project for us that has already generated considerableinterest from third parties eager to participate in its development, brandingand launch. Rights deals for a number of our major reference projects are under negotiation,some of which were scheduled for completion in 2006 and, if they are executed in2007 as we hope, will contribute to 2007. These include both exclusive andnon-exclusive deals for electronic publication of a number of the Company'sexisting databases. One of the most exciting digital projects with which Bloomsbury became involvedin 2006 is a new web-based initiative. While YouTube, MySpace and Bebo havegrabbed the digital headlines and created the definitive music and video onlinecommunity space, no one has yet done the same for books, especially in a waywhich will benefit all the main players in the book business, namely readers,writers, booksellers and publishers. Bloomsbury has made a small initialinvestment for a controlling interest in this start-up operation. The project isbeing developed by a small team based in San Francisco. As this is not core toour business, further third party funding is being sought to take the businessthrough to launch towards the end of 2007 or early 2008. Bloomsbury.com has continued to operate successfully as a marketing tool and asa revenue generator. The site had over 7.5m visitors in 2006, and they viewedover 50 million pages. Books have been sold on the site for many years but morerecently we have been looking at other ways to monetise the site and takeadvantage of the UK online ad revenue market which is currently growing at 40%annually. We have appointed an advertising sales agent to generate additionalrevenues on our websites. International publishing Bloomsbury USA 2006 was a year characterised by significant sales across the list, with growthas planned in both frontlist and backlist titles. Net revenues increased 36.1%to £15.01m (2005, £11.03m). We increased our expense base during the year tofuel future organic growth. This included the addition of new commissioningeditors and expansion of our office space. Revenues associated with thisexpansion programme are not expected to start coming on-stream until the end of2007. As a result, the operation made a loss before investment income in 2006 of£0.26m (2005, £0.48m profit). As part of our expansion programme we have started a new imprint headed by PeterGinna, former Editorial Director of the Oxford University Press trade divisionin the US. The imprint will focus on History, Science, Economics and Business.Peter's talent lies in the ability to spot award-winning, high-end non-fictionbooks with crossover trade appeal. We also hired Nick Trautwein, formerly ofHarperCollins, who will be developing titles in the areas of Sports andcommercial men's non-fiction. As the operation grows and achieves greater critical mass we continue to lookfor further economies of scale. During 2006 we renegotiated our printingcontracts and restructured the way we create production components, both ofwhich will contribute to more efficient manufacturing in 2007 and beyond. On the adult side, the Nasty Bits by Anthony Bourdain led the list, with otherstrong titles following close behind: Schott's Almanac, Restless by WilliamBoyd, Field Notes from a Catastrophe by Elizabeth Kolbert and Theories ofEverything by Roz Chast. Strong backlist sales include the paperbacks TheHighest Tide, History of the World in Six Glasses, The Line of Beauty and thehardbacks Don't Try This at Home and The Map Book. Half of them are shared withBloomsbury UK and Germany, with four out of the six originated in the US. Although the US operation performed well on the revenue line, margins were hurtby pricing pressure from retailers and upward pressure on author advances. For 2007 we have a strong publishing programme across the adult and children'soperations. On the children's side we have Freckle Face Strawberry by theactress Julianne Moore, Princess Academy in paperback, and our bestseller GoneWild, which just won a Caldecott prize. On the adult side we have a strong listthroughout the year, anchored by the Autumn titles: How Life Imitates Chess byGary Kasparov, No Reservations by Anthony Bourdain, Jacques Cousteau's last bookand The US Constitution Revised by Larry Sabato, amongst others. Berlin Verlag Berlin performed well in 2006. Turnover increased 7.5% to £5.88m (2005, £5.47m)and made an operating profit of £0.20m (2005, £0.64m). Despite the increase inthe underlying business, it was a challenging year. The company has had tooperate in an increasingly complex German retail market. Our success in 2006drew from across all four lists, which shows that the company as a whole hasachieved much greater stability under Bloomsbury's ownership. Our paperback list performed well in the year. A strong list was enhanced by theimpact of a better focused monthly output and excellent and more commercialcover designs. The star performer was the German language edition of The KiteRunner. Growth in the children's area was encouraging as the list continued to establishitself in the market. We now publish a number of important German children'sauthors, especially Zoran Dvrenker. Particularly encouraging was the newnon-fiction list, which launched in Autumn 2006. 101 Dinge, our bestsellingchildren's title in the year, came from this new list and was a title sharedacross the Bloomsbury Group. Berlin Verlag, our flagship hardback imprint, showed an improved performanceover 2005. Among a number of titles which performed well was Erbin desVerlorenen Landes, the German edition of Kiran Desai's Booker Prize winningnovel, Inheritance of Loss. The success of our more commercial hardback imprint, Bloomsbury Berlin,continued with the works of Ben Schott. Other important titles for this listincluded Unentschlossen (Indecision) by Benjamin Kunkel, one of America's mostimportant new writers, and American bestselling health guru Dr Andrew Weil'sGesund Alter Werden. 2006 was a year of consolidation in the German book trade with book-sellingchains gaining in market share at the expense of the independent sector. Ourdecision in 2005 to increase the number of publication dates across theprogramme has continued to bring benefits as we are able to position lead titlesmore successfully across the range of customers and also to achieve excellentlevels of publicity and press coverage. Prospects for 2007 are good. The year got off to a very positive start whenWilliam Boyd's Ruhelos (Restless), another title and author shared across theBloomsbury Group, was featured on the important German TV show Lesen! just twoweeks after it was published in January. It immediately entered the Spiegelbestseller list. Berlin Verlag's most prestigious German author Ingo Schulze'snew short story collection has won the important Leipzig Book Fair LiteraryPrize and is currently also in the Spiegel bestseller list. Our strategy to add more German authors to our lists, which had previously beendominated by works in translation, is bearing fruit and we have two TV tie-inson Bloomsbury Berlin's Spring list. The first of these, Die Flucht by GabrielaSperl and Tatjana Grafin Donhoff, went into the Spiegel bestseller list atNumber 6 in mid-March. In the Autumn the lead title will be the second novel by Khaled Hosseini, authorof The Kite Runner, for which a major campaign is in preparation. Dividend The directors are recommending a final dividend of 3.00 pence per share (2005,3.00 pence per share) making a total of 3.66 pence per share (2005, 3.60 penceper share) for the year. The final dividend will be payable on 5 July 2007 toOrdinary Shareholders on the register at the close of business on 25 May 2007. Management and Staff I would like to thank our staff for their tremendous contribution to a very busyyear where we have seen strategic as well as operational achievements. Current Trading, Developments and Prospects These are exciting times for the book publishing industry. Digitisation ofconsumer books will continue to gather momentum as new generation e-readersbecome available. We are continually looking at ways of improving the revenue-generatingcapabilities of our intellectual property. We are currently working on a numberof preferred partner arrangements with UK TV and production companies. Therelationship works two ways: firstly, Bloomsbury can sub-license TV and filmrights of books direct to them, and secondly, Bloomsbury can acquire bookpublishing rights to up-coming TV programmes and films. 2006 saw considerable investment in established authors for our futurepublishing programme, and we expect this investment to bear fruit over the next10 years. We will continue to invest in outstanding authors, but we will notforget that our roots lie in identifying first-time authors and building theirbooks into bestsellers. With the continuing upward pressure on author advancesthis will be a vital part of our strategy to manage our working capital in themost efficient manner. 2007 has got off to a good start with a number of books already in thebestseller lists. The seventh and highly anticipated Harry Potter will bepublished on 21 July. Maximising our backlist income and celebrating our 21stbirthday, we have re-released 21 of our bestselling titles. Our position as aninternational publisher is now firmly established, and we expect to see furtherbenefits from this and the new areas of publishing that we are entering in thecurrent year and into the future. Nigel NewtonChairman3 April 2007 Financial Review Results Turnover for the Group decreased 31.5% to £74.77m (2005, £109.11m). Bloomsbury'sprimary segmental analysis is by geographic breakdown, which follows ourinternational publishing strategy. Turnover in the UK decreased 41.8% to £53.88m(2005, £92.62m). US turnover increased 36.1% to £15.01m (2005, £11.03m) on theback of a strong publishing programme. Some of the key performing titles wereThe Nasty Bits by Anthony Bourdain, Schott's Almanac 2007 and Princess Academyby Shannon Hale. For Continental Europe, revenues, which were generated byBerlin Verlag, increased 7.5% to £5.88m (2005, £5.47m). The Group's secondary segmental disclosure is by division, which is split intothree main operating areas: Children's, Adult and Reference publishing. Thesedivisions are a combination of the UK, US and German operations. In addition tothe provision of turnover by division which has been disclosed in previousyears, we are providing additional disclosure on gross profit and contributionto divisional operating profit before administrative expenses. For 2006 thebreakdown of turnover between the three areas was: Children's 37% (2005, 63%),Adult 44% (2005, 25%) and Reference 19% (2005, 12%). Revenues in the Children's division decreased 60.3% to £27.37m (2005, £69.01m).Harry Potter and the Half-Blood Prince was published in hardback in 2005. Thegross profit for 2006 was down 61.0% to £13.25m (2005, £33.96m) with acontribution to administrative expenses down 62.9% to £9.39m (2005, £25.30m).The reduction in contribution was due to Harry Potter and the Half-Blood Princebeing published in hardback in 2005. In the Adult division, revenues increased 18.9% to £32.67m (2005, £27.47m). Therevenue increase was driven by a number of strong selling titles including TheKite Runner (UK and Germany), Schott's Almanac 2007 (UK, US and Germany), MyTake (UK), The Nasty Bits (US) and In Search of Perfection (UK). The grossprofit for 2006 was down 0.2% to £16.04m (2005, £16.07m) due to higher royaltycosts both in the UK and the US. Contribution to administrative expenses wasdown 5.3% to £9.10m (2005, £9.61m). Revenues in the Reference division increased 16.6% to £14.73m (2005, £12.63m)due to a combination of the acquisition of Methuen Drama during the year,increased revenues from the existing publishing list and stronger rights sales.The gross profit for 2006 was up 23.5% to £6.88m (2005, £5.57m) with acontribution to administrative expenses up 29.6% to £3.33m (2005, £2.57m). Rights sales and other income increased 26.8% to £4.82m (2005, £3.80m). Overall gross profit decreased 34.9% to £36.17m (2005, £55.59m). Gross profitmargin decreased to 48.4% (2005, 51.0%) due to the lower than expected number ofbestselling higher-margin books during the year and also the absence of a bookon the scale of the hardback edition of Harry Potter and the Half-Blood Prince. Marketing and distribution costs decreased by 20.8% to £14.35m (2005, £18.11m).The difference was due to the lower turnover during 2006 and also the fact thatwe incurred higher costs on the launch of Harry Potter and the Half-Blood Princein 2005. Administrative expenses decreased 2% to £18.31m (2005, £18.68m).Although there was significant investment in the Group's overhead infrastructureto continue the rate of organic growth, these were offset by costs incurred inthe launch of Harry Potter and the Half-Blood Prince in 2005 and the absence ofperformance related bonuses in 2006. Profit before investment income decreased81.3% to £3.51m (2005, £18.81m). Investment income increased by 24.5% to £1.73m (2005, £1.39m) as a result ofincreased average cash balances during the year and higher interest rates.Finance costs reduced to £0.05m (2005, £0.07m). The effective corporation tax rate for the year is 29.7% (2005, 27.2%) and takesaccount of share options exercised during the year, expenses not deductible fortax purposes and recognition of prior period Berlin Verlag and US tax losses asa deferred tax asset. This represents tax losses which we expect will beutilised in the foreseeable future. Basic earnings per share decreased by 75.4% to 4.99 pence (2005, 20.30 pence).Diluted earnings per share decreased by 75.4% to 4.90 pence (2005, 19.93 pence). Balance sheet Non current assets Property, plant and equipment increased 43.8% to £2.33m (2005, £1.62m)reflecting the final phase of improvements to the Group's offices in SohoSquare. These costs are being amortised over the remaining life of the propertyleases. Intangible assets, which comprise goodwill and publishingrelationships, increased to £17.67m (2005, £15.51m). Of this, goodwill hasincreased to £17.40m (2005, £15.16m), which is primarily due to the goodwillarising on the acquisition of Methuen Drama. Current assets Inventories increased 4.6% to £15.82m (2005, £15.13m), of which work in progressdecreased by 20.1% to £3.07m (2005, £3.84m) due to the timing of titles at thework in progress stage. Stocks of finished goods increased 11.8% to £12.42m(2005, £11.11m) due to a combination of the stock holding of an increased numberof titles published by the Group during the year and the timing of the releaseof titles at the end of the financial year. Trade and other receivables increased 1.2% to £49.22m (2005, £48.63m), of whichtrade debtors decreased 17.2% to £17.61m (2005, £21.27m). At the end of 2005there were still receivables from the publication of the hardback of HarryPotter and the Half-Blood Prince which were received in 2006. Within trade andother receivables, prepayments and accrued income increased 10.3% to £29.34m(2005, £26.59m) reflecting the increase in investment in titles across all threedivisions. As books are returnable by customers, the Group makes a provisionagainst books sold in the accounting period which is then carried forward intrade debtors in the balance sheet in anticipation of book returns receivedsubsequent to the year end. A provision of £7.9m for future returns relating to2005 and prior sales including Harry Potter and the Half-Blood Prince wascarried forward in trade debtors in the balance sheet at 31 December 2005 andreturns received in 2006 were offset against this provision. This provisionrelates to the UK trade operation (excluding A&C Black, Bloomsbury USA andBerlin Verlag). Given the lower turnover in 2006 and as there was no new HarryPotter during the year, the closing provision carried forward in trade debtorsin the balance sheet at 31 December 2006 was £1.6m for this part of thebusiness. Equity and liabilities At 31 December 2006 total equity stood at £89.33m (2005, £88.78m). The increasewas principally due to retained earnings of £0.98m (2005, £12.43m) and shareoptions exercised during the year. Trade and other payables decreased 52.7% to £20.79m (2005, £43.97m). Tradepayables increased by 15.6% to £6.29m (2005, £5.44m), which was attributable tothe timing of supplier payments at the year end. Accruals and deferred income,which is included in trade and other payables, decreased to £12.23m (2005,£36.36m). Accruals and deferred income includes royalty payments to authors,which vary from year to year depending on turnover and the authors' royaltyrates which typically escalate on triggered thresholds as volume sales increase.In 2005 the Group published the highest selling book in its history. Theroyalties due to authors accrued at 31 December 2005 were paid on 31 March 2006.The absence of a book published on this scale gave rise to a lower royaltyliability at 31 December 2006. Corporation tax payable decreased to £0.52m(2005, £2.58m) primarily due to lower profits generated. Overseas operations Turnover for Berlin increased 7.5% to £5.88m (2005, £5.47m). The strategy tohave German translation rights published through Berlin is working well withtitles such as Restless, The Kite Runner and the Schott series appearing on theGerman bestseller lists. Profit before investment income for the year was £0.20m(2005, £0.64m). Turnover for Bloomsbury USA increased 36.1% to £15.01m (2005, £11.03m) on theback of a strong publishing programme. Higher royalty costs relating to thebooks published during the year were incurred and, as part of the Group'sorganic growth strategy, there was additional investment in new commissioningeditors and related support and service costs. As a result of the increasedinvestment, Bloomsbury USA made a loss before investment income for the year of£0.26m (2005, £0.48m profit). Cash Flow The Group had a net cash outflow from operating activities of £19.92m for theyear (2005, £31.14m inflow). The cash inflow in 2005 was a result of the higherrevenues generated during the year. The decline in cash during the year is theresult of working capital movements, primarily payment of royalties from 2005publications, which were paid to authors on 31 March 2006, and investments innew titles for publication in 2006 and beyond. Corporation tax paid during theyear was £5.20m (2005, £5.90m). Included in the purchase of property, plant andequipment cost of £1.38m (2005, £1.27m) is the final refurbishment cost of theGroup's offices in Soho Square. £2.42m purchase of businesses was for theacquisition of Methuen Drama (2005, £0.03m). During the year £0.80m (2005,£1.80m) was received from the exercise of share options, and £2.67m of dividendswere paid (2005, £2.22m). Future investment and strategy Corporate acquisitions remain an important part of our growth strategy. We havereviewed a number of potential acquisitions to date, applying strict criteria toensure any targets complement the existing business and provide future growthopportunities for Bloomsbury. We are in a good position with a strong balancesheet and are well placed to fund any acquisitions that meet these criteria. Colin Adams ACAGroup Finance Director3 April 2007 CONSOLIDATED INCOME STATEMENTfor the year ended 31 December 2006 Notes 2006 2005 Total Total £'000 £'000 Revenue 2 74,773 109,108 Cost of sales (38,602) (53,514) ______ ______Gross profit 36,171 55,594Marketing and distribution costs (14,354) (18,107)Administrative expenses (18,308) (18,681) ______ ______ Profit before investment income 3,509 18,806Investment income 1,734 1,392Finance costs (47) (71) ______ ______Profit before taxation 5,196 20,127Income tax expense 3 (1,544) (5,481) ______ ______ Profit for the year 3,652 14,646 ______ ______Basic earnings per share 5 4.99p 20.30p ______ ______Diluted earnings per share 5 4.90p 19.93p ______ ______ CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSEfor the year ended 31 December 2006 2006 2005 £'000 £'000 Profit for the year 3,652 14,646Exchange adjustments recognised in reserves (1,878) 640 ______ ______ Total recognised income and expense for the year 1,774 15,286 ______ ______ CONSOLIDATED BALANCE SHEETat 31 December 2006 2006 2005 £'000 £'000ASSETSNon-current assets Property, plant and equipment 2,332 1,615 Intangible assets 17,672 15,511 Deferred tax assets 1,700 1,238 ______ ______ Total non-current assets 21,704 18,364 ______ ______ Current assets Inventories 15,818 15,129 Trade and other receivables 49,217 48,630 Cash and cash equivalents 24,304 53,511 ______ ______ Total current assets 89,339 117,270 ______ ______ TOTAL ASSETS 111,043 135,634 ______ ______ EQUITY AND LIABILITIESCapital and reserves attributable to equityholders of the parent Ordinary shares Share premium 918 911 Capital redemption reserve 38,915 38,123 Share-based payment reserve 20 20 Translation reserve 1,104 453 Retained earnings (1,236) 642 49,612 48,634 ______ ______ Total equity 89,333 88,783 ______ ______ Liabilities Non-current liabilities Deferred tax 36 - Retirement benefit obligations 144 130 Other payables 223 163 ______ ______ Total non-current liabilities 403 293 ______ ______ Current liabilities Trade and other payables 20,786 43,974 Current tax liabilities 521 2,584 ______ ______ Total current liabilities 21,307 46,558 ______ ______ Total liabilities 21,710 46,851 ______ ______ TOTAL EQUITY AND LIABILITIES 111,043 135,634 ______ ______ CONSOLIDATED STATEMENT OF CHANGES IN EQUITY Share Share Capital Share-based Translation Retained Total capital premium redemption payment reserve earnings reserve reserve £'000 £'000 £'000 £'000 £'000 £'000 £'000 Balances at 1 January 2005 894 35,763 20 217 2 36,206 73,102 Exchange differences on translating foreignoperations - - - - 640 - 640 Profit for the year - - - - - 14,646 14,646 Share-based payment charges - - - 236 - - 236 Dividends - - - - - (2,218) (2,218) Share issues 17 2,360 - - - - 2,377 ______ ______ ______ ______ ______ ______ ______ Balances at 31 December2005 911 38,123 20 453 642 48,634 88,783 Exchange differences on translating foreignoperations - - - - (1,878) - (1,878) Profit for the year - - - - - 3,652 3,652 Share-based payment charges - - - 651 - - 651 Dividends - - - - - (2,674) (2,674) Share issues 7 792 - - - - 799 ______ ______ ______ ______ ______ ______ ______Balances at 31 December2006 918 38,915 20 1,104 (1,236) 49,612 89,333 ______ ______ ______ ______ ______ ______ ______ CONSOLIDATED CASH FLOW STATEMENTfor the year ended 31 December 2006 2006 2005 £'000 £'000Cash flows from operating activitiesNet profit before tax 5,196 20,127Adjustments for:Depreciation of property, plant and equipment 661 400Amortisation of publishing relationships 36 35Profit on sale of property, plant and equipment (1) (3)Share-based payment charges 651 236Investment income (1,734) (1,392)Finance costs 47 71 ______ ______ 4,856 19,474Increase in inventories (971) (3,442)Increase in trade and other receivables (1,126) (6,353)(Decrease) / increase in trade and other payables (22,682) 21,460 ______ ______Cash (used in) / generated from operations (19,923) 31,139Income taxes paid (5,195) (5,898) ______ ______Net cash (outflow) / inflow from operating activities (25,118) 25,241 ______ ______Cash flows from investing activitiesPurchase of property, plant and equipment (1,379) (1,268)Proceeds from sale of property, plant and equipment - 33Purchase of businesses (2,419) (33)Interest received 1,734 1,392 ______ ______Net cash (used in) / generated from investing activities (2,064) 124 ______ ______Cash flows from financing activitiesShare options exercised 799 1,796Equity dividends paid (2,674) (2,218)Interest paid (47) (118)Repayment of loans - (445) ______ ______Net cash used in financing activities (1,922) (985) ______ ______ Net (decrease) / increase in cash and cash equivalents (29,104) 24,380Cash and cash equivalents at beginning of period 53,511 29,120Unrealised exchange (loss) / gain on cash and cash equivalents (103) 11 ______ ______Cash and cash equivalents at end of period 24,304 53,511 ______ ______ NOTES 1. The above financial information does not constitute statutory accounts asdefined in section 240 of the Companies Act 1985. The above figures for the yearended 31 December 2006 are an abridged version of the Company's audited accountswhich will be reported on by the Company's auditors before dispatch to theshareholders and filing with the Registrar of Companies. The consolidated financial statements have been prepared in accordancewith International Financial Reporting Standards (IFRS) as endorsed by theEuropean Union (EU). The accounting policies applied in 2006 are consistent withthose applied in the Financial Statements for 2005. The returns provision haschanged, as explained in the financial review. The statutory accounts for the year ended 31 December 2005 have been lodged withthe Registrar of Companies. These accounts received an audit report which wasunqualified and did not include any reference to matters to which the auditorsdrew attention by way of emphasis without qualifying their report. 2. Segmental analysis Geographical segments The Group considers that as the main thrust of its growth is to develop itsinternational publishing strategy, the primary segmental reporting should bebased on geographical segments. The analysis by geographical segment is shownbelow. Year ended 31 December 2006 United North Continental Eliminations Total Kingdom America Europe £'000 £'000 £'000 £'000 £'000RevenueExternal sales 53,880 15,011 5,882 - 74,773Inter-segment sales * 145 - 110 (255) - _______ _______ _______ _______ _______Total revenue 54,025 15,011 5,992 (255) 74,773 _______ _______ _______ _______ _______ResultSegment result 3,724 (260) 199 - 3,663Unallocated central costs - - - (154) (154) _______ _______ _______ _______ _______Profit/(loss) before investment income 3,724 (260) 199 (154) 3,509 Investment income 2,595 10 - (871) 1,734Finance costs (143) (538) (237) 871 (47) _______ _______ _______ _______ _______Profit/(loss) before taxation 6,176 (788) (38) (154) 5,196Income tax expense (1,732) 286 (98) - (1,544) _______ _______ _______ _______ _______Profit/(loss) for the year 4,444 (502) (136) (154) 3,652 _______ _______ _______ _______ _______Other InformationCapital additions 1,311 32 41 - 1,384Depreciation and amortisation 638 44 15 - 697Profit / (loss) on sale of property, plant and equipment (1) - - - (1) _______ _______ _______ _______ _______ Balance SheetASSETSSegment assets 105,572 17,290 9,136 (20,955) 111,043LIABILITIESSegment liabilities 22,300 13,233 7,132 (20,955) 21,710 * Inter-segment sales are charged at prevailing market rates. NOTES TO THE ACCOUNTS 2. Segmental analysis (continued) Year ended 31 December 2005 United North Continental Eliminations Total Kingdom America Europe £'000 £'000 £'000 £'000 £'000RevenueExternal sales 92,616 11,027 5,465 - 109,108Inter-segment sales * 199 - 594 (793) - _______ _______ _______ _______ _______Total revenue 92,815 11,027 6,059 (793) 109,108 _______ _______ _______ _______ _______ResultSegment result 17,856 478 642 - 18,976Unallocated central costs - - - (170) (170) _______ _______ _______ _______ _______Profit before investment income 17,856 478 642 (170) 18,806 Investment income 1,877 - - (485) 1,392Finance costs (135) (211) (210) 485 (71) _______ _______ _______ _______ _______Profit before taxation 19,598 267 432 (170) 20,127Income tax expense (5,567) (197) 283 - (5,481) _______ _______ _______ _______ _______Profit for the year 14,031 70 715 (170) 14,646 _______ _______ _______ _______ _______Other InformationCapital additions 1,250 13 5 - 1,268Depreciation and amortisation 383 42 10 - 435Profit / (loss) on sale of property, plant and equipment 4 - (1) - 3 _______ _______ _______ _______ _______ Balance SheetASSETSSegment assets 124,564 17,866 8,541 (15,337) 135,634LIABILITIESSegment liabilities 43,984 11,927 6,277 (15,337) 46,851 * Inter-segment sales are charged at prevailing market rates. NOTES TO THE ACCOUNTS 2. Segmental analysis (continued) Business segments The Group's business is organised in three operating areas: Adult, Children'sand Reference. The following table provides the breakdown of turnover andprofit before investment income for these areas. Year ended 31 December 2006 Adult Children's Reference Unallocated Total £'000 £'000 £'000 £'000 £'000 Revenue 32,669 27,366 14,738 - 74,773Cost of sales (16,627) (14,115) (7,860) - (38,602) _______ _______ _______ _______ _______Gross profit 16,042 13,251 6,878 - 36,171 Marketing and distribution costs (6,947) (3,859) (3,548) - (14,354) _______ _______ _______ _______ _______Contribution before administrative expenses 9,095 9,392 3,330 - 21,817Administrative expenses - - - (18,308) (18,308) _______ _______ _______ _______ _______Profit before investment income 9,095 9,392 3,330 (18,308) 3,509 _______ _______ _______ _______ _______ Year ended 31 December 2005 Adult Children's Reference Unallocated Total £'000 £'000 £'000 £'000 £'000 Revenue 27,468 69,013 12,627 - 109,108Cost of sales (11,400) (35,056) (7,058) - (53,514) _______ _______ _______ _______ _______Gross profit 16,068 33,957 5,569 - 55,594 Marketing and distribution costs (6,456) (8,656) (2,995) - (18,107) _______ _______ _______ _______ _______Contribution before administrative expenses 9,612 25,301 2,574 - 37,487Administrative expenses - - - (18,681) (18,681) _______ _______ _______ _______ _______Profit before investment income 9,612 25,301 2,574 (18,681) 18,806 _______ _______ _______ _______ _______ NOTES TO THE ACCOUNTS3. Taxation (a) Tax charge for the year 2006 2005 £'000 £'000Based on the profit for the year: UK corporation tax at 30% 1,745 5,579 Under / (over) provision in respect of prior year 18 (8)Overseas taxation - current year 33 386 _______ _______ 1,796 5,957Deferred tax - UK (50) (45) - Overseas (202) (431) _______ _______ 1,544 5,481 _______ _______ (b) Factors affecting tax charge for the year The tax assessed for the year is different from the standard rate of corporationtax in the UK (30%). The differences are explained below: 2006 2005 £'000 £'000 Profit before taxation 5,196 20,127 ______ ______ Profit on ordinary activities multiplied by thestandard rate of corporation tax in the UK of 30% 1,559 6,038Effects of:Permanent timing differences (31) (180) Utilisation of tax losses 93 (506) Different rates of tax on overseas results (86) 137 Adjustments in respect of previous periods 9 (8) ______ ______Tax charge for the year 1,544 5,481 ______ ______ 4. Dividends A dividend of 3.00p per share (£2,189,000) was paid to the equity shareholderson 6 July 2006, being the amount proposed by the directors, and subsequentlyapproved by the shareholders at the 2006 Annual General Meeting (2005: 2.478pper share, £1,773,000). For the current year On 17 November 2006 an interim dividend of 0.66p per share (£485,000) was paidto the equity shareholders (2005: 0.60p per share, £445,000). The directors propose that a dividend of 3.00p per share will be paid to theequity shareholders on 6 July 2007. Based on the number of shares currently inissue, the final dividend will be £2,203,000. (2005, £2,189,000). This dividendis subject to approval by the shareholders at the Annual General Meeting and hasnot been included as a liability in these financial statements. 5. Earnings per share The basic earnings per share has been calculated by reference to earnings of£3,652,000 (2005, £14,646,000) and a weighted average number of Ordinary Sharesin issue of 73,115,031 (2005, 72,134,014). The diluted earnings per share hasbeen calculated by reference to a weighted average number of Ordinary Shares of74,469,114 (2005, 73,493,581) which takes account of share options and awardsunder the Group's Performance Share Plan. The reconciliation between the weighted average number of shares for the basicearnings per share and the diluted earnings per share is as follows: 2006 2005 Number NumberWeighted average number of shares for basicearnings per share 73,115,031 72,134,014Dilutive effect of share options and awards under Performance Share Plan 1,354,083 1,359,567 ______ ______Weighted average number of shares for dilutedearnings per share 74,469,114 73,493,581 ______ ______ 6. Annual General Meeting The Annual General Meeting will be held at 12 noon on Thursday 28 June 2007 at36 Soho Square, London W1D 3QY. 7. Report and Accounts Copies of the Report and Accounts will be circulated to shareholders shortly andmay be obtained after the posting date from the Company Secretary, BloomsburyPublishing Plc, 36 Soho Square, London W1D 3QY. This information is provided by RNS The company news service from the London Stock Exchange