Bloomsbury Regulatory News (BMY)

1 Apr 2008 07:01

Bloomsbury Publishing PLC01 April 2008 BLOOMSBURY PUBLISHING PLC Preliminary Results for the Year Ended 31 December 2007 2007 was an exceptionally strong year for the Company and this momentum hascontinued into the first quarter of 2008. Financial highlights The highlights for 2007 include: •Revenue increased to £150.21m (2006, £74.77m). •Pre-tax profit improved to £17.86m (2006, £5.20m). •Basic earnings per share increased to 16.06p (2006, 4.99p). •Strong cash generation, particularly in the UK, resulting in net cash of £47.56m (2006, £24.30m). •Final dividend increased 10% to 3.30p per share (2006, 3.00p). Full year dividend increased by 9.3% to 4.00p (2006, 3.66p). •Strong balance sheet which positions group for future growth. •Good start to current year with a strong pipeline of new titles, in line with the Board's expectations. •Acquisition of Featherstone Education Limited, a specialist educational publisher, on 31 March, 2008. Operating highlights •Record breaking performance from adult and children's titles. •Continued reduction in the Group's cost base following overhead reviews in UK and USA. •Strong sales of Khaled Hosseini's The Kite Runner and A Thousand Splendid Suns and of Harry Potter and the Deathly Hallows. •Substantial growth in Berlin Verlag, where Harry Potter and the Deathly Hallows in the English language sold over one million copies. Both Khaled Hosseini's books enjoyed strong success. Current trading has also been boosted by the launch of Jonathan Littell's controversial book Die Wohlgesinnten resulting in hardcover sales exceeding 100,000 copies. •Future revenue streams generated by deals with existing and new partners on database content, including Qatar Finance - The Ultimate Resource, a book and online service. Commenting on the results and prospects for Bloomsbury, Nigel Newton, ChiefExecutive, said: "This is a good set of results, substantially ahead of last year. We saw stronggrowth from our Adult and Children's publishing and also from A&C Black andBerlin Verlag. We are now well positioned for the post Harry Potter era. We have reducedoverhead costs, are successfully developing new business areas in specialistpublishing, and have a strong pipeline of titles. We will continue to do whatBloomsbury does best - discovering new talent and developing it both in the UKand overseas. The first quarter of 2008 has started strongly and we have a number of newdatabase projects under development." For further information, please contact: Nigel Newton, Chief Executive, Bloomsbury Publishing Plc 020 7494 6015 Daniel de Belder / Rosanne Perry, Bell Pottinger 020 78613232 Chairman's statement This is the first Chairman's statement for Bloomsbury since the Group split therole of Chairman and Chief Executive in September 2007. Bloomsbury is a group of businesses, many with a long history, spanning tradeand specialist publishing. Last year Bloomsbury completed 21 years, and much hasbeen done in 2007 to position the Group for growth in a new stage of itsdevelopment. The historic success of Bloomsbury, in which Harry Potter hasplayed a key role, has unquestionably positioned it well for the future. The strategy of the Group has therefore been re-defined, changes have been madeto the Board. The Chief Executive and his executive team have organised thebusiness to take advantage of opportunities in areas where it has growingstrength. They have also rationalised its businesses where needed. There is now a real momentum behind the Bloomsbury Group. The focus of theGroup's strategy has seen a drive to improve performance and eliminate some ofthe inherent risk of the publishing industry. Notable achievements in 2007included the seventh and final Harry Potter book, and a significant licensingdeal with Qatar Financial Centre Authority. The detailed strategy of the Groupand the structure to deliver that strategy are dealt with in the ChiefExecutive's statement. As far as the Board is concerned, Nigel Newton, the Founder and Chief Executiveof Bloomsbury, has achieved what few founders of a successful company achieve -transformation of a team where he played a dominant role in making it what it istoday into a business where his leadership allows the interaction of thenon-executive directors and the executive team for constructive, balanced debateand decision taking. The clearer reorganised roles of the Board and some significant structuralreorganisation within the Group since those basic changes are evidence of that.In addition to the split of the roles of Chairman and Chief Executive, thechanges have been helped by further re-composition of the Board. Richard Charkin, appointed as Executive Director in October 2007, brings a wealth of experience, leadership, and industry knowledge to Bloomsbury, and an injection of fresh blood into a stable, long-established management team. Liz Calder is stepping down from the Board today after twenty one years but she will very much remain with Bloomsbury, looking after her list of authors. She has made a huge contribution to the Board, and we are tremendously grateful to her. There is, as a result of these changes, a growing distinction between Board andExecutive management, and these changes have introduced a different dynamic intothe Group. The Combined Code on Corporate Governance issued by the Financial ServicesAuthority is designed to enhance Board effectiveness and to improve investorconfidence by raising standards of corporate governance. It has been valuable ingiving Bloomsbury a framework against which to assess its own governancerequirements. However, it is deliberately not prescriptive but rather provides aframework of principles against which Bloomsbury must set the needs of the Groupand its shareholders. My job, as Non-Executive Chairman, in the year ahead, will be to oversee thecontinued development of the Board and its committees, so that they support theChief Executive and his Executive team in the realisation of the Group'sstrategy and exploitation of the opportunities it brings. Profitable new publishing opportunities are emerging. Such times as these havegreat potential for far-sighted, experienced and nimble businesses with visionand a strong capital base, and with the organisational capacity to get thingsdone. Bloomsbury is well placed to realise that potential. None of Bloomsbury's ambitions would be possible without the commitment of itsentire staff. This Group employs some of the finest and most experienced peoplein the industry; it lives by their professionalism, commitment, and dedication.Without them it would not have its distinguished history and unique brand and,critically, it would not have the opportunity to realise its ambitions for thefuture. On behalf of the Board, of Bloomsbury's authors, of all their readers,of all the Group's business partners, and - critically - of all theshareholders, I would like to thank each and every one of them - they have donean outstanding job. Jeremy J O'B WilsonNon-Executive Chairman Chief Executive's statement Overview I am pleased to report excellent results, substantially ahead of last year. 2007 was a landmark year for Bloomsbury Publishing. There were a number ofchanges made to the structure of the Group. In September, we split the roles ofChairman and Chief Executive and Jeremy Wilson was appointed as Non ExecutiveChairman alongside me as Chief Executive. In October, Richard Charkin joined asan Executive Director bringing a wealth of experience, leadership and industryknowledge. The Group has conducted a thorough internal strategic review to examine how bestto position the business and maximise returns. As a result, the Board hasdecided to divide the Group into two overarching divisions: Trade andSpecialist. We are seeking to maintain our strong position in the UK, US andGerman consumer trade publishing sectors whilst expanding organically andthrough acquisition our specialist publishing in the educational, academic andreference fields. I will have responsibility for the Specialist Division andRichard Charkin for the Trade Division, reporting to me. Following the review, we are driving reductions in our cost base directly andthrough our supply chain. We have completed a thorough overhead review and havemade annualised cost savings to date of £1.75m the principal benefit of whichwill be felt in 2008. We are continuing the process and expect to make another£0.78m of annualised cost savings this year. Financial performance Revenue increased by 100.9% to £150.21m (2006, £74.77m), reflecting strongperformances from a number of our key authors including JK Rowling, KhaledHosseini, Hugh Fearnley-Whittingstall and William Boyd. Revenues fromContinental Europe, which were generated by Berlin Verlag, increased 45.1% to£8.53m (2006, £5.88m). Revenues from the US operations reduced by 10.8% to£13.39m (2006, £15.01m) although in local currency the underlying reduction wasonly 3.6% to £14.47m. Profit before tax increased 243.5% to £17.86m (2006, £5.20m). Basic earnings pershare rose by 221.8% to 16.06 pence (2006, 4.99 pence). Diluted earnings pershare increased by 219.0% to 15.63 pence (2006, 4.90 pence). At the end of the year the Group had increased its net cash balances to £47.56m(2006, £24.30m) before the half yearly royalty payments made on 31 March 2008.We continue to invest in future growth through acquiring new authors, new titlesand specialist publishing acquisitions. Our strong balance sheet supports thisstrategy. At 31 December 2007, the Group had under contract 1,240 titles (2006,1,149) for future publication, with a gross investment of £27.58m (2006,£30.77m). After payment of the initial tranches of advances to authors, ourliability for future cash payments on these contracted titles at that date was£16.32m (2006, £18.48m). This is a good time for acquisitions. Specialist Publishing Division This is a growth area for us in a publishing sector with lower volatility andstrong margins. Reference In 2007 we undertook a number of significant initiatives as part of our strategyto exploit our content in a wide variety of different formats, in print andonline. A new publishing agreement was signed with Oxford University Press to produce anonline version of Who's Who. Launched in December 2007, this specially designedwebsite will join The Oxford Dictionary of National Biography, thus creating thecountry's best online biographical source. A major licensing agreement was alsomade with Microsoft for a new database. Also, in conjunction with Microsoft and Ingram/Lightning Source, Bloomsbury isdigitising the Group's entire worldwide backlist thereby becoming fullydigitally, ready to exploit the emerging marketing, sales and rightsopportunities in print and digital editions of our titles, includinge-books. The digital archive will bring operational efficiencies enabling printon demand where appropriate, thereby unleashing the long tail potential of ourcontent to niche markets. By participating in Microsoft's Live Searchprogramme, Bloomsbury Group titles will benefit from controlled search on theinternet leading to increased sales. A&C Black's backlist sales have always been a core strength. In 2007 print ondemand technology, combined with a new system at our distributor, enabled us torepublish out of print backlist titles using print on demand. Over 500previously out of print titles were republished in 2007, generatingapproximately £126,000 of additional sales. To mark A&C Black's 200th anniversary, we published editions of two books fromour archive: Don'ts for Wives and Don'ts for Husbands. First published in 1913,these little books of wise and witty advice for married couples caught the mediaand the public imagination and were bestsellers selling nearly half a millioncopies. They continue to sell strongly and, for Fathers' Day 2008, we will alsopublish another book in the same series, Don'ts for Golfers. In the last days of 2007 we finalised a significant new agreement to publishonline the annual compendium of navigational data, Reeds Nautical Almanac. Thenew website, Reeds Online Almanac, will be aimed at the growing number ofrecreational sailors who wish to access navigation and port information online.Launching in May 2008, it will provide the current navigational information inthe print version, updated in real time, and other enhanced features includingweather forecasting, dynamic synoptic charts as well as a powerful database toaid quick retrieval of information. On 31 March 2008 we acquired Featherstone Education Limited. Featherstonefocuses on publishing to support teachers and of education of children up toseven years old, a rapidly expanding part of the UK market. Responding to thegovernment's increased emphasis on, and funding for, this sector, Featherstoneis now a market leader in this niche. Sales are likely to be boosted by school'simplementation of the new 'Early Years Foundation Stage' in September 2008 whichrequires teachers and educators to follow a 'joined up' learning programme fromyears 0-8. Education is core to A&C Black and this acquisition extends ourreach to the 0-7 ages, and to a wider range of customers. Featherstone has ahighly effective direct mail system which will be of considerable benefit inincreasing our direct sales to customers for educational and children'sproducts. A&C Black will be able to add value to the list with our currentsales and marketing operations to schools, including our school rep force andwith our editorial expertise, particularly in the area of children's music. In 2008 we will continue to develop and exploit the range of electronic formatsnow available for our products, the publication of new mixed media andwhiteboard products for the educational market and website developments such asan enhanced Writers' and Artists' Yearbook website. Databases The creation and ongoing exploitation of content databases in which Bloomsburyowns all IP rights has been an important element in Bloomsbury's long-termstrategy and these IP projects have contributed good revenue streams and profitsto the Group. 2007 saw significant new activity in this area. We completed new deals withexisting partners, including Microsoft, and we also agreed partnerships withseveral new customers. Foremost among these is the Qatar Financial Centre Authority with whom weconcluded a significant deal in August. Qatar Finance - The Ultimate Resourcewill be a new information resource aimed at financial professionals from CEOsand CFOs to junior accountants. Unique in the breadth and depth of informationand including particular emphasis on best practice and thought leadership, theproject, being written by over 300 high level contributors, will be launched in2009. The first revenue from this source will occur in 2008. We are also working on a major new database for licensing, and a number ofparties have expressed interest. We will seek to develop more partnerships andassociations with established websites in our niche areas where we see bothmarketing and publishing opportunities for our mutual benefit. Trade Publishing Division 2007 has been an outstanding year for our Trade Publishing Division, both interms of sales and profit growth. The continuing success of Harry Potter, andindividual titles and initiatives are described below. During the year severalkey strategic initiatives have also been pursued: 1) maximising the benefits of individual copyrights through publicationwherever possible throughout the English- and German-speaking worlds with newbooks by Khaled Hosseini, Ben Schott, William Boyd and Elizabeth Gilbert. 2) recognition of the need to embrace fully the opportunities offered bydigital technology - the Microsoft Live Search Programme, the development ofwww.bloomsbury.com. 3) the need to address continuously the cost base of our publishingoperations. 4) a sharper approach to pricing and margins and careful review of distributioncosts in response to tougher trading conditions. UK Children's 2007 saw the publication of Harry Potter and the Deathly Hallows, the finaltitle in the Harry Potter series. With 2,652,656 copies sold out of UK bookshopson the first day of release, the book exceeded all expectations. With all sevenbooks in the series now published, the books are available in a range of boxsets and formats. The series will remain a children's classic for years to come. In 2007 we further established ourselves in the area of series fiction with thelaunch of the successful Mermaids SOS series, and we will continue to grow inthis area with the launch in 2008 of The Glitterwings Academy, another seriesaimed at young, primarily female, readers. We will launch in 2008 with eighttitles featuring this magical school and one special Christmas volume. Adult In 2007 we reduced the number of new titles in the publishing programme, butcommitted more time and energy to ensure that each title generated a highercontribution to revenues and profits. We continue to develop new talent and to pursue a vigorous marketing strategy onsome promising titles that are not an immediate success. The Kite Runner andElizabeth Gilbert's Eat, Pray, Love are notable examples of such 'slow burn'titles. We also continue to develop our strategy of buying titles internationally,Khaled Hosseini and Elizabeth Gilbert are two authors we share with BerlinVerlag, and, with Bloomsbury USA, Katie Hickman's The Aviary Gate. We continueto buy world rights where possible, and gain revenue from the sale of sometranslation rights where appropriate. Established Bloomsbury authors with new books coming include David Guterson,whose Snow Falling on Cedars sold over one million copies, Margaret Atwood,Justin Cartwright, Anne Michaels (author of Fugitive Pieces) and Ben Schott. Our strategy to develop our list of serious non-fiction came to fruition in2007. Bloomsbury won the Samuel Johnson prize with Rajiv Chadresekeran'sImperial Life in the Emerald City. We had a paperback bestseller with BenMcIntyre's Agent Zigzag, and his new book about James Bond is published in 2008.We also had a hardback bestseller, The Last Fighting Tommy and the first volumeof a history of post-war Britain, David Kynaston's Austerity Britain, waspublished to spectacular acclaim in 2007. Our series of highly illustrated food and television tie-in books continues, and2007 saw the further success of this list with David Dimbleby's TV tie-in How WeBuilt Britain, Heston Blumenthal's Further Adventures in Search of Perfectionand Hugh Fearnley-Whittingstall's River Cottage Fish Book. Bloomsbury USA In spite of tough market conditions in 2007, our US Children's lists haveperformed well with several awards and bestsellers, including Newberry winnerShannon Hale's Princess Academy, and a number of titles are selling well into2008. The Adult list has proved difficult with fewer books breaking through thanexpected. The level of book returns has been high as customers continue toreduce stock levels. The new publishing lists started in 2006 and launched in2007 have yet to build critical mass and, to accelerate the US's move back intoprofit, we reduced staff and office overheads. Berlin Verlag 2007 saw substantial growth across all of Berlin Verlag's lists. In the Spring Ingo Schulze's short story collection, Handy, won the Leipzig BookFair Prize. Building on the successes of the Bloomsbury Berlin list in theSpring, we had several bestsellers including Die Flucht by Tatjana GrafinDonhoff, a tie-in to a prime time TV series. Khaled Hosseini's new novel, 1000Strahlende Sonnen (A Thousand Splendid Suns), entered the bestseller chartsimmediately on publication. The paperback list continued to do well, with several titles performing well andturnover exceeding budget. The main success was the continuing backlist sales ofKhaled Hosseini's Drachenlaufer (The Kite Runner). Originally published inpaperback in November 2004, sales have grown significantly each year, initiallythrough word of mouth but also, in 2007, backed by a targeted marketingcampaign. Consequently the book climbed the bestseller lists steadily throughoutthe year. Publication of the English language edition of Harry Potter and the DeathlyHallows in July was a major event in Germany where for the first time many shopsstayed open till 1:00AM so that German children could buy the book in English atthe same time as the rest of the world. The prospects for 2008 are positive. Berlin's lead title Die Wohlgesinnten byJonathan Littell was published in late February. Sales are strong, and the pressand publicity campaign has already ensured massive coverage in importantbroadsheets including the Frankfurter Allgemeine Zeitung, which had not onlycovered the book extensively but has also created a microsite devotedexclusively to the book. It created a furore when it was initially published inFrance, where Jonathan Littell, an American author, became the first foreignerto win the Prix Goncourt. Dividend The Directors are recommending a final dividend of 3.30 pence per share (2006,3.00 pence) making a total of 4.00 pence per share (2006, 3.66 pence) for theyear. This represents a 9.3% increase in the full year dividend. The finaldividend will be payable on 1 July 2008 to Ordinary Shareholders on the registerat the close of business on 23 May 2008. Management and staff I would like to thank our staff for their tremendous contribution to a very busyyear where we have seen major strategic as well as operational achievements. Current trading, developments and prospects The major agreement just signed with Microsoft to digitise Bloomsbury's entirebacklist will enable e-book sales and print on demand orders. The paperbackedition of Harry Potter and the Deathly Hallows will be published in July. Salesacross the Group in the first quarter have been encouraging and we are lookingto build on this through the rest of the year. Nigel NewtonChief Executive1 April 2008 Financial Review Results Revenue for the Group increased 100.9% to £150.21m (2006, £74.77m). Bloomsbury'sprimary segmental analysis is by geographic breakdown, which follows ourinternational publishing strategy. Revenue in the UK increased 138.1% to£128.29m (2006, £53.88m) driven by contributions from key authors including JKRowling, Khaled Hosseini, Hugh Fearnley-Whittingstall and William Boyd. USrevenue reduced by 10.8% to £13.39m (2006, £15.01m) as a result of a toughmarket and a higher than expected level of book returns, though at 2006 exchangerates the reduction in US revenue was only 3.6% to £14.47m. For ContinentalEurope, revenue, which was generated by Berlin Verlag, increased 45.1% to £8.53m(2006, £5.88m) on the back of strong performances from authors including KhaledHosseini, William Boyd, Ingo Schulze and Zeruya Shalev. The Group's secondary segmental disclosure is split into three main operatingareas: Children's, Adult and Reference publishing. Under the new Group structureChildren's and Adult form the Trade Publishing Division, and Reference theSpecialist Publishing Division. Children's is a combination of the UK, US andGerman lists. For 2007 the breakdown of revenue between the three areas was:Children's 66% (2006, 37%), Adult 24% (2006, 44%) and Reference 10% (2006, 19%). Revenue in Children's increased 261.4% to £98.92m (2006, £27.37m). Harry Potterand the Deathly Hallows, published in July 2007, was the main contributor to theincrease. Gross profit for Children's for 2007 increased 198.9% to £39.60m(2006, £13.25m) with the contribution to administrative expenses up 219.6% to£30.01m (2006, £9.39m). Adult revenue increased 9.7% to £35.85m (2006, £32.67m). The revenue increasewas driven by a number of strong selling titles including The Kite Runner (UKand Germany), A Thousand Splendid Suns (UK and Germany), The River Cottage FishBook (UK) and Restless (UK, USA and Germany). Gross profit for Adult for 2007was down 17.3% to £13.26m (2006, £16.04m) with contribution to administrativeexpenses down 34.0% to £6.01m (2006, £9.10m) which is primarily as a result ofadditional advance and stock provision made. Reference revenue increased 4.8% to £15.45m (2006, £14.74m) due to the full yearresults of Methuen Drama, acquired during 2006, and the success of a number oftitles including Don'ts for Husbands and Don'ts for Wives. The gross profit for2007 was down 8.3% to £6.31m (2006, £6.88m) with contribution beforeadministrative expenses down 20.7% to £2.64m (2006, £3.33m), which is primarilyas a result of £0.75m (2006, £0.090m) of database development costs carried ininventories in previous financial years being written down to nil value. Rights revenue, which includes subsidiary rights, electronic database income andincome derived from third party agencies, increased 8.7% to £5.24m (2006,£4.82m). The profit attributable to this revenue was £2.95m (2006, £2.67m).£1.92m (2006, £1.42m) of the profit was generated in the Specialist PublishingDivision and £1.03m (2006, £1.25m) was generated in the Trade PublishingDivision. Gross profit for the Group increased 63.6% to £59.17m (2006, £36.17m). Grossprofit margin decreased to 39.4% (2006, 48.4%). The decrease was due to acombination of increased royalty costs, the high level of book returnsexperienced and expected in future periods in the UK, US and Germany andincreased stock and advance provisions in Adult across all territories on bookspublished in previous financial years. Royalty costs increased to £44.00m (2006,£8.17m) and represented 29.3% of revenues (2006, 10.9% of revenues). Provisionson unearned advances increased to £9.23m (2006, £2.46m) and represented 6.1% ofrevenues (2006, 3.3% of revenues). Stock provisions increased to £4.30m (2006,£1.59m) and represented 2.9% of revenues (2006, 2.1% of revenues). Theadditional stock and advance provisions were made to cover returns of books intostock during the year and a valuation of advances on titles at their recoverableamount. In addition to the normal amortisation policy, in the SpecialistPublishing Division £0.75m (2006, £0.09m) of database development costs carriedin inventories in previous financial years have been written down to nil value. Marketing and distribution costs increased by 42.9% to £20.51m (2006, £14.35m).The variable element of these costs increased in line with revenue.Administrative expenses increased 21.1% to £22.18m (2006, £18.31m). The increaseincluded a dilapidation accrual of £0.63m (2006, £nil) on the Group's offices inSoho Square, three of which have leases expiring in 2010, the fourth with abreak in 2011. In addition, performance bonuses were also accrued for the firsttime since 2005. Profit before investment income increased 369.5% to £16.48m (2006, £3.51m).Profit before investment income for the UK increased 388.2% to £18.16m (2006,£3.72m). The US loss before investment income for the year was £1.64m (2006,loss £0.26m). Germany's profit before investment income for the year was £0.28m(2006, £0.20m). Investment income decreased by 14.5% to £1.48m (2006, £1.73m) primarily as aresult of lower average cash balances during the year. The effective corporation tax rate for the year is 33.9% (2006, 29.7%). Theincrease in the rate from 2006 mainly reflects partial recognition of currentyear US tax losses as an increased deferred tax asset, the inability torecognise an increased deferred tax asset for share based payment charges, forwhich tax relief will not be given until the relevant options are exercised, andcertain expenses that are permanently disallowable for tax purposes. The Groupcontinues to recognise deferred tax assets in respect of tax losses ofBloomsbury USA and Berlin Verlag which we expect will be utilised in theforeseeable future. Basic earnings per share rose by 221.8% to 16.06 pence (2006, 4.99 pence).Diluted earnings per share increased by 219.0% to 15.63 pence (2006, 4.90pence). Balance sheet Current assets Inventories decreased 8.9% to £14.41m (2006, £15.82m). Work in progress remainedconsistent with 2006 levels. Stocks of finished goods decreased 11.9% to £10.94m(2006, £12.42m), due to a combination of improved stock control and increasedprovisions. Trade and other receivables increased 54.8% to £76.21m (2006, £49.22m). Tradereceivables increased 169.9% to £47.53m (2006, £17.61m) as a result of theincrease in revenue. Since books sold are generally returnable by customers, theGroup makes a provision against books sold in the accounting period. The unusedprovision at year-end is then carried forward as an offset to trade receivablesin the balance sheet, in anticipation of further book returns subsequent to theyear-end. A provision for the Group of £13.03m (2006, £5.51m) for future returnsrelating to 2007 and prior sales including Harry Potter and the Deathly Hallowshas been carried forward in trade receivables in the balance sheet at 31December 2007. This provision at margin represents 8.7% (2006, 7.4%) ofrevenues. Within trade and other receivables, prepayments and accrued incomedecreased 4.9% to £27.91m (2006, £29.34m) due to increased advance provisions of£9.23m (2006, £2.46m) against titles published in previous financial years. Equity and liabilities At 31 December 2007 total equity stood at £100.07m (2006, £89.33m). The increasewas due to retained earnings of £9.11m (2006, £0.98m), less the increase inshare-based payment reserve due to the share-based payment charge for the yearof £1.01m (2006, £0.65m) and share options exercised during the year. Current liabilities increased 176.5% to £58.9m (2006, £21.3m). Accruals anddeferred income, which is included in trade and other payables, increased to£47.04m (2006, £12.23m). Accruals and deferred income includes royalty paymentsto authors, which vary from year to year depending on turnover and the authors'royalty rates which typically escalate on triggered thresholds as volume salesincrease. In 2007 the Group published the highest selling book in its history.The royalties due to authors, accrued at 31st December 2007, were paid on 31March 2008. Corporation tax payable increased to £3.10m (2006, £0.52m). Cash Flow The Group had a net cash inflow from operating activities before tax of £26.60mfor the year (2006, outflow of £19.92m). Cash generation was particularly strongfor the UK operation by the publication of Harry Potter and the Deathly Hallows.Corporation tax paid during the year was £1.93m (2006, £5.20m). The amount paidin 2007 included the impact of a claw-back of corporation tax over-paid onaccount for the 2006 financial year. During the year £1.35m (2006, £1.73m) ofinterest was received from deposits, and £2.72m (2006, £2.67m) of dividends werepaid. The Group's net cash on the balance sheet as at 31 December 2007 was£47.56m (2006, £24.30m). Colin Adams ACAGroup Finance Director1 April 2008 CONSOLIDATED INCOME STATEMENT for the year ended 31 December 2007 Notes 2007 2006 Total Total £'000 £'000 Unaudited Revenue 2 150,211 74,773 Cost of sales (91,042) (38,602) ______ ______Gross profit 59,169 36,171Marketing and distribution costs (20,513) (14,354)Administrative expenses (22,181) (18,308) ______ ______ Profit before investment income 16,475 3,509 Investment income 1,480 1,734Finance costs (99) (47) ______ ______Profit before taxation 17,856 5,196Income tax expense 3 (6,052) (1,544) ______ ______ Profit for the year 11,804 3,652 ______ ______Basic earnings per share 5 16.06p 4.99p ______ ______Diluted earnings per share 5 15.63p 4.90p ______ ______ CONSOLIDATED BALANCE SHEET at 31 December 2007 2007 2006 £'000 £'000 UnauditedASSETSNon-current assetsProperty, plant and equipment 1,877 2,332Intangible assets 17,716 17,672Deferred tax assets 1,848 1,700 ______ ______ Total non-current assets 21,441 21,704 ______ ______ Current assetsInventories 14,406 15,818 Trade and other receivables 76,213 49,217 Cash and cash equivalents 47,558 24,304 ______ ______ Total current assets 138,177 89,339 ______ ______ TOTAL ASSETS 159,618 111,043 ______ ______EQUITY AND LIABILITIESCapital and reserves attributableto equity holders of the parent Ordinary shares 920 918Share premium 39,191 38,915Capital redemption reserve 20 20Share-based payment reserve 2,114 1,104Translation reserve (899) (1,236)Retained earnings 58,723 49,612 ______ ______Total equity 100,069 89,333 ______ ______ LiabilitiesNon-current liabilities Deferred tax 135 36 Retirement benefit obligations 77 144 Other payables 390 223 ______ ______ Total non-current liabilities 602 403 ______ ______ Current liabilities Trade and other payables 55,852 20,786 Current tax liabilities 3,095 521 ______ ______ Total current liabilities 58,947 21,307 ______ ______Total liabilities 59,549 21,710 ______ ______ TOTAL EQUITY AND LIABILITIES 159,618 111,043 ______ ______ CONSOLIDATED STATEMENT OF CHANGES IN EQUITY Share Share Capital Share-based Translation Retained Total premium redemption payment capital reserve reserve reserve earnings £'000 £'000 £'000 £'000 £'000 £'000 £'000 Balances at 1 January 2006 911 38,123 20 453 642 48,634 88,783 Exchange differences on translating foreignoperations - - - - (1,878) - (1,878) ______ ______ ______ ______ ______ ______ ______Income recognised directly in equity - - - - (1,878) - (1,878) Profit for the year - - - - - 3,652 3,652 ______ ______ ______ ______ ______ ______ ______Total recognised income and expense for the year - - - - (1,878) 3,652 1,774 Share-based payment charges - - - 651 - - 651 Dividends - - - - - (2,674) (2,674) Share issues 7 792 - - - - 799 ______ ______ ______ ______ ______ ______ ______Balances at 31 December 2006 918 38,915 20 1,104 (1,236) 49,612 89,333 Exchange differences on translating foreignoperations - - - - 337 - 337 Deferred tax on share-based paymentcharges - - - - - 25 25 ______ ______ ______ ______ ______ ______ ______Income recognised directly in equity - - - - 337 25 362 Profit for the year - - - - - 11,804 11,804 ______ ______ ______ ______ ______ ______ ______Total recognised income and expense for the year - - - - 337 11,829 12,166 Share-based payment charges - - - 1,010 - - 1,010 Dividends - - - - - (2,718) (2,718) Share issues 2 276 - - - - 278 ______ ______ ______ ______ ______ ______ ______Balances at 31 December 2007 (Unaudited) 920 39,191 20 2,114 (899) 58,723 100,069 ______ ______ ______ ______ ______ ______ ______ CONSOLIDATED CASH FLOW STATEMENT for the year ended 31 December 2007 2007 2006 £'000 £'000 UnauditedCash flows from operating activitiesNet profit before tax 17,856 5,196Adjustments for:Depreciation of property, plant and equipment 680 661Amortisation of publishing relationships 35 36Loss / (profit) on sale of property, plant and equipment 1 (1)Share-based payment charges 1,010 651Investment income (1,480) (1,734)Finance costs 99 47 ______ ______ 18,201 4,856Decrease / (increase) in inventories 1,540 (971)Increase in trade and other receivables (28,113) (1,126)Increase / (decrease) in trade and other payables 34,971 (22,682) ______ ______Cash generated from / (used in) operations 26,599 (19,923)Income taxes paid (1,928) (5,195) ______ ______Net cash inflow / (outflow) from operating activities 24,671 (25,118) ______ ______Cash flows from investing activitiesPurchase of property, plant and equipment (230) (1,379)Proceeds from sale of property, plant and equipment 9 -Purchase of businesses (75) (2,419)Interest received 1,349 1,734 ______ ______Net cash generated from / (used in) investing activities 1,053 (2,064) ______ ______ Cash flows from financing activitiesShare options exercised 278 799Equity dividends paid (2,718) (2,674)Interest paid (99) (47) ______ ______Net cash used in financing activities (2,539) (1,922) ______ ______ Net increase / (decrease) in cash and cash equivalents 23,185 (29,104)Cash and cash equivalents at beginning of period 24,304 53,511Exchange gain / (loss) on cash and cash equivalents 69 (103) ______ ______Cash and cash equivalents at end of period 47,558 24,304 ______ ______ 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 2007 are an abridged version of the Company's accounts whichwill be reported on by the Company's auditors before dispatch to theshareholders and filing with the Registrar of Companies. The consolidated financial information has been prepared in accordance with therecognition and measurement principles of International Financial ReportingStandards (IFRS) as endorsed by the European Union (EU). The accounting policiesapplied in 2007 are consistent with those applied in the Financial Statementsfor 2006. The returns provision has changed, as explained in the financialreview. The statutory accounts for the year ended 31 December 2006 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 or a statementunder section 237(2) or section 237(3) of the Companies Act 1985. 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 2007 United North Continental Eliminations Total and Kingdom America Europe unallocated costs £'000 £'000 £'000 £'000 £'000 RevenueExternal sales 128,290 13,392 8,529 - 150,211Inter-segment sales * - - 911 (911) - _______ _______ _______ _______ _______Total revenue 128,290 13,392 9,440 (911) 150,211 _______ _______ _______ _______ _______ResultSegment result 18,160 (1,644) 283 - 16,799Unallocated central costs - - - (324) (324) _______ _______ _______ _______ _______Profit / (loss) before investment income 18,160 (1,644) 283 (324) 16,475 Investment income 2,492 14 4 (1,030) 1,480Finance costs (196) (632) (301) 1,030 (99) _______ _______ _______ _______ _______Profit / (loss) before taxation 20,456 (2,262) (14) (324) 17,856Income tax expense (6,440) 412 (24) - (6,052) _______ _______ _______ _______ _______Profit / (loss) for the year 14,016 (1,850) (38) (324) 11,804 _______ _______ _______ _______ _______Other InformationCapital additions 198 5 27 - 230Depreciation and amortisation 650 45 20 - 715(Loss) on sale of property, plant andequipment (1) - - - (1)Share-based payment charges 1,010 - - - 1,010 _______ _______ _______ _______ _______ Balance SheetASSETSSegment assets 149,279 18,759 13,534 (23,802) 157,770LIABILITIESSegment liabilities 53,991 17,896 8,234 (23,802) 56,319 * Inter-segment sales are charged at prevailing market rates. Year ended 31 December 2006 United North Continental Eliminations Total and Kingdom America Europe unallocated costs £'000 £'000 £'000 £'000 £'000 RevenueExternal 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 on sale of property, plant andequipment 1 - - - 1Share-based payment charges 651 - - - 651 _______ _______ _______ _______ _______ Balance SheetASSETSSegment assets 103,599 16,689 8,342 (20,955) 107,675LIABILITIESSegment liabilities 21,744 13,232 7,132 (20,955) 21,153 * Inter-segment sales are charged at prevailing market rates. Business segments The Group's business is organised in three operating areas: Adult, Children'sand Reference. The following table provides the breakdown of revenue and profitbefore investment income for these areas. Year ended 31 December 2007 Adult Children's Reference Unallocated Total £'000 £'000 £'000 £'000 £'000 Revenue 35,845 98,916 15,450 - 150,211Cost of sales (22,585) (59,316) (9,141) - (91,042) _______ _______ _______ _______ _______Gross profit 13,260 39,600 6,309 - 59,169 Marketing and distribution costs (7,248) (9,595) (3,670) - (20,513) _______ _______ _______ _______ _______Contribution before administrative expenses 6,012 30,005 2,639 - 38,656Administrative expenses - - - (22,181) (22,181) _______ _______ _______ _______ _______Profit before investment income 6,012 30,005 2,639 (22,181) 16,475 _______ _______ _______ _______ _______ 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 _______ _______ _______ _______ _______ External sales by destination United North Continental Total Kingdom America Europe £'000 £'000 £'000 £'000Year ended 31 December 2007 United Kingdom 74,598 - - 74,598North America 8,494 13,392 - 21,886Continental Europe 24,992 - 8,529 33,521Australasia 10,060 - - 10,060Rest of the world 10,146 - - 10,146 _______ _______ _______ _______Total external sales 128,290 13,392 8,529 150,211 _______ _______ _______ _______ Year ended 31 December 2006 United Kingdom 42,365 - - 42,365North America 1,852 15,011 - 16,863Continental Europe 3,797 - 5,882 9,679Australasia 3,637 - - 3,637Rest of the world 2,229 - - 2,229 _______ _______ _______ _______Total external sales 53,880 15,011 5,882 74,773 _______ _______ _______ _______ 3. Taxation (a) Tax charge for the year 2007 2006 £'000 £'000Based on the profit for the year: UK corporation tax at 30% 6,493 1,745 (Over) / under provision in respect of prior year (277) 9Overseas taxation - current year (39) 42 _______ _______ 6,177 1,796Deferred tax - UK 159 (50) - Overseas (284) (202) _______ _______ 6,052 1,544 _______ _______ (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: 2007 2006 £'000 £'000 Profit before taxation 17,856 5,196 ______ ______ Profit on ordinary activities multiplied by thestandard rate of corporation tax in the UK of30% 5,357 1,559Effects of: Reduction in tax rates 190 - Non-deductible revenue expenditure 254 (31) Share-based payments 348 - Different rates of tax on overseas results (247) (86) Tax losses not utilised 549 93 Adjustment to tax charge in respect of previousperiods - current tax (277) 9 - deferred tax (122) - ______ ________ Tax charge for the year 6,052 1,544 ______ ______ 4. Dividends For the prior year A final dividend of 3.00p per share (£2,203,000) was paid to the equityshareholders on 5 July 2007, being the amount proposed by the directors, andsubsequently approved by the shareholders at the 2007 Annual General Meeting(2006: 3.00p per share, £2,189,000). For the current year On 16 November 2007 an interim dividend of 0.70p per share (£515,000) was paidto the equity shareholders (2006: 0.66p per share, £485,000). The directors propose that a dividend of 3.30p per share will be paid to theequity shareholders on 1 July 2008. Based on the number of shares currently inissue, the final dividend will be £2,427,000 (2006, £2,203,000). 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£11,804,000 (2006, £3,652,000) and a weighted average number of Ordinary Sharesin issue of 73,518,044 (2006, 73,115,031). The diluted earnings per share hasbeen calculated by reference to a weighted average number of Ordinary Shares of75,529,183 (2006, 74,469,114) 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: 2007 2006 Number NumberWeighted average number ofshares for basic earnings pershare 73,518,044 73,115,031Dilutive effect of share options and awards under PerformanceShare Plan 2,011,139 1,354,083 ______ ______Weighted average number ofshares for diluted earnings pershare 75,529,183 74,469,114 ______ ______ 6. Annual General Meeting The Annual General Meeting will be held at 12 noon on Friday 27 June 2008 at36 Soho Square, London W1D 3QY. 7. Report and Accounts Copies of the Report and Accounts will be circulated to shareholders in May andviewed after the posting date on the Bloomsbury website. Colin Adams ACAGroup Finance Director1 April 2008 This information is provided by RNS The company news service from the London Stock Exchange