Bloomsbury Publishing Plc

Interim Results for the six months to 30 June 2008

• Profit before investment income increased 6.1% to £3.5m (2007, £3.3m)

• Investment income increased to £1.9m (2007, £0.6m)

• Earnings per share increased 41.2% to 4.97 pence (2007, 3.52 pence)

• Interim dividend up 7.1% to 0.75p per share (2007, 0.70p)

• Strong list for second half including Alice Schroeder's biography of Warren Buffet; The Snowball; Just Me by Sheila Hancock; The Guernsey Literary and Potato Peel Pie Society by Mary Ann Shaffer; and, on December 4, JK Rowling's The Tales of Beedle The Bard

• Net cash balances increased by 13.0% to £53.8m (31 December 2007, £47.6m)

• Well positioned for further organic and acquisition-related growth 

• Strongest ever first six months sales performance from the UK Adult trade division 

Commenting on the results and prospects for Bloomsbury, Nigel Newton, Chief Executive, said: 

"We have had a good first half performance, particularly, in the UK Adult and Specialist Divisions. As well as continuing to enjoy notable success from long-running bestselling titles such as The Kite Runner, we are also well positioned with strong publishing lists for the second half and beyond. We are now seeing the benefits of our focused strategy, which is positioning us well for the rest of the financial year and the longer term."

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Chief Executive's statement

OVERVIEW

Bloomsbury has had a good start to the year, making excellent progress against its strategy. This performance has been underpinned by strong sales of The Kite Runner and A Thousand Splendid Suns in English and German. The emphasis across the Group has been on bottom-line growth and cash flow improvement. 

For the first half we saw the benefits of improved distribution terms in the USA and the UK, while improved terms from new sales and distribution contracts in Canada, Europe, India and the Far East will begin to flow through to the bottom line by the fourth quarter. Book sales have remained relatively resilient so far during the credit crunch. 

Revenue for the first six months was £42.1m compared to £51.4m in 2007. Harry Potter and the Deathly Hallows was released in hardback into the export markets in June 2007, which is why our gross profit decreased 11% in line with our expectation to £19.4m (2007, £21.8m).  29.6% of the Group's revenue was generated from the top ten authors during the six-month period.  Gross margin increased to 46.1% (2007, 42.4%) as a result of lower royalties due to authors and stock provisions made. 

Marketing and distribution costs were 21.8% lower at £6.8m (2007, £8.7m) and as a percentage of turnover decreased to 16.2% (2007, 16.9%).The higher comparative was due to the costs associated with the release of Harry Potter and the Deathly Hallows into the export markets in June 2007. Administrative expenses decreased 8.1% to £9.1m (2007, £9.9m) as a result of cost reductions made across the Group. As a percentage of turnover, administrative expenses increased to 21.6% (2007, 19.3%). 

Profit before investment income increased 6.1% to £3.5m (2007, £3.3m).

Investment income increased by 216.7% to £1.9m (2007, £0.6m) primarily as a result of higher average cash balances held during the six month period.

Profit before tax increased 38.5% to £5.4m (2007, £3.9m). 

The Group's effective tax rate for the year ending 31 December 2008 is expected to be 31.9%, compared with 33.9% for the year ended 31 December 2007. The reduction in the rate is primarily due to the cut in the UK statutory rate of corporation tax from 30% to 28% with effect from 1 April 2008, combined with a 10% cut in the German corporate tax rate that took effect on 1 January 2008. 

The rate has also been reduced by an overall small favourable tax effect of accounting for share based payments, whereas in 2007 the corresponding effect was a 2% increase in the rate. The rate has also benefited from an expected lower level of tax-disallowable expenditure than in 2007. 

Losses incurred in the US in the first half of the year cannot be relieved against the Group's taxable profits in the UK and at present there is insufficient certainty that the losses will be relieved against future taxable profits in the US to recognise them as a deferred tax asset. This is the main reason why the Group's effective tax rate exceeds the average UK statutory rate for the period of 28.5%.

Basic earnings per share increased 41.2% to 4.97 pence (2007, 3.52 pence). 

Net cash generated from operations by the Group for the first six months of the year was £11.9m (the six months ended 30 June 2007 saw an outflow of £9.4m).  The positive operating cash flow in the first six months of this year was primarily due to improved working capital, the strength of the publishing programme, particularly in the UK and Germany, and lower than anticipated book returns. Key movements within working capital in the first half included receipts from trade receivables as well as the payments of royalties to authors covering book sales made in the last six months of 2007. Net cash balances at 30 June increased 13.0% to £53.8m (31 December 2007, £47.6m). As at 30 June 2008, the Group had under contract 1,222 titles (31 December 2007, 1,240) for future publication, with a gross investment of £26.6m (31 December 2007, £27.6m). After payment of the initial tranches of advances to authors, our liability for future cash payments on these contracted titles as at 30 June 2008 was £15.8m (31 December 2007, £16.3m).

INTERIM DIVIDEND

The Directors have declared a 7.1% increase in the interim dividend to 0.75 pence per share (2007, 0.70 pence per share), which will be paid on 18 November 2008 to shareholders on the register at close of business on 24 October 2008. 

OPERATIONAL REVIEW

Specialist Publishing Division 

The Specialist Publishing Division had a good start to 2008, with strong growth in turnover and profits.  Specialist publishing is positioned to perform well, given its lower discounts and higher price points, lower advances to authors and strong backlist sales. 

The programme of digitising our entire English language catalogue has been completed. This will enable us to increase significantly the range of electronic products we can offer both to individual buyers and to resellers serving the library and institutional markets, where we have already made encouraging sales of e-book collections.

Digitisation also enables us to make our titles more easily available as print on demand ("POD"), a particularly appropriate model for specialist publishing where a wide range of titles are sold in small numbers consistently over a long period of time. In addition to digitising the in-print backlist, we are engaged in an active process of digitising out of print titles in order to offer them POD and in a variety of electronic formats. 

Don'ts for Husbands and Don'ts for Wives continue to sell strongly in 2008. Following their success we published Don'ts for Golfers in May and will be publishing Don'ts for Dancers this autumn. 

We continue to seek acquisitions in our core specialist publishing areas. On 31 March we acquired Featherstone Education, a publisher specialising in books for teachers and carers of 0-7 year olds. This market is expanding rapidly due to government initiatives in preschool and early education. The integration of Featherstone is proceeding according to plan.

The educational list performed strongly in the first half of 2008, backlist sales increased and sales for the relaunch of our 'Developing' series were above expectations. In response to the increasing use of digital and mixed media resources in schools, this year we will be publishing 'Music Express Interactive', a new range of music lessons for the classroom designed to be used on the interactive whiteboards in classrooms across the UK. We will also launch 'Extreme', a new line of books aimed at reluctant boy readers which will sell both in the UK and internationally. 

In the Methuen Drama list, we have signed new publishing contracts with two major estates: Arthur Miller and Bernard Shaw and we will be publishing new scholarly editions of their plays, starting in 2008. 

New database launches in 2008

In 2007 we agreed a partnership with the Qatar Financial Centre Authority for development of a new information resource: Qfinance - The Ultimate Resource. The resource, in print and online, will be aimed at financial professionals from CEOs and CFOs to Junior Accountants. The project is now underway and income is being recognised over several accounting periods from 2008.

In an important new collaboration with Oxford University Press, the 2008 edition of Who's Who and the historical archive of Who's Who were published on-line alongside the Oxford Dictionary of National Biography. As a subscription service, purchased by academic institutions and libraries worldwide, this biographical database should provide a steadily increasing revenue stream to the Group in the future. Subscription customers signed this year include The Ministry of Defence, The Treasury, The BBC and Morgan Stanley. 

This summer we launch the yachtsman's bible, Reeds Nautical Almanac, in an online edition. Covering the whole of the UK and Ireland, from Denmark down the Atlantic Coast to the Azores, the site will give navigational, port and marina information updated in real time, with a variety of enhanced search features for easy information retrieval. Reeds Online Almanac will be the first comprehensive site of this kind, providing essential information for sailors in UK coastal waters. 

Academic Publishing

Bloomsbury intends to expand the academic part of its Specialist Publishing Division and a number of acquisitions under consideration. We have appointed Jonathan Glasspool as Managing Director of Bloomsbury Academic.   The recent growth of the Methuen Drama list, many titles of which sell to higher education students and lecturers, illustrates how well Bloomsbury can reach the academic and higher education markets.

There are a number of reasons why this market is attractive: 

• Many of the sales go via library suppliers and direct to readers. 

• The market is characterised by low book returns, and lower trade discount.  

• Demand is more predictable.

• The economics of short-run publication have improved as a result of the introduction of digital print-on-demand.  

• The market is global and is less dependent upon the UK, where much of Bloomsbury's current sales are generated.  

• Lower internet technology costs make it possible for nimbler players to compete with the larger university presses and academic publishers. 

Trade Publishing Division

Adult

Bloomsbury UK Adult sales performance for the first six months of this year across UK and export markets is the strongest we have seen yet to date.  Sales of Bloomsbury books out of UK outlets monitored by Nielsen BookScan show an increase of 29.2% over the same period last year.

We are continuing to acquire book rights for publication across the Group.  We are responding to a bestseller-driven marketplace by publishing a lower number of titles and concentrating heavily on the sales of our paperback list with an emphasis on innovative digital marketing.

Notable non-fiction successes in the first half of this year include Sally Brampton's Shoot the Damn Dog, which won the Good Housekeeping Non-Fiction book of the year award and The Suspicions of Mr Whicher, which spent a number of weeks at No 2 in the Sunday Times bestseller list and won the Samuel Johnson Prize for Non-fiction.

Important publications to follow in the second half of this year include The Guernsey Literary and Potato Peel Pie Society by Mary Ann Shaffer and Payback by Margaret Atwood, Heston Blumenthal's The Big Fat Duck Cookbook, Wartime Courage by Gordon Brown, The Snowball, Alice Schroeder's biography of Warren Buffett, Schott's Almanac 2009 and Sheila Hancock's follow-up to her bestseller The Two of Us, titled  Just Me.  

 Children's

The Children's division is working against a strong 2007 comparative which includes the publication for the export market of Harry Potter and the Deathly Hallows in hardback. 

2008 started well with the inclusion of a new Neil Gaiman novel as one of the World Book Day Books.  Odd and the Frost Giants has sold over 150,000 copies and is a brilliant start to what is going to be an important year for us in publishing new titles from Neil Gaiman concluding with his much anticipated novel for children, The Graveyard Book.    

We have a new two-book contract with Debi Gliori, with her books to be published in 2009 and 2010.  We have another Dinosaur story coming from Michael Foreman, and Joseph Theobalds has written and illustrated a sequel to his successful Marvin Wants More, titled Marvin Gets Mad!

Television continues to be a strong influence on buying patterns, and we have benefited this year from the success of the television series Gossip Girl with an increase in sales of the book series.  

We look forward to the publication of J K Rowling's The Tales of Beedle The Bard on 4th December, which will raise money for her charity, the Children's High Level Group.

Bloomsbury USA

Our sharing of copyrights across the Atlantic and other initiatives have resulted in a considerable year-on-year improvement in the results of Bloomsbury USA, with sales growth of 10% and a 60% reduction in operating losses. In addition we are paying greater attention to export sales (where the weak dollar has been an advantage) and have established new arrangements for distribution with Penguin Canada and through the Bloomsbury sales network.

The first half saw success in terms of both profitabity and revenue in all our key areas of publishing: in fiction with Katie Hickman's Aviary Gate, in non-fiction with Kate Summerscale's The Suspicions of Mr Whicher, in Bloomsbury Press with Brian Fagan's The Great Warming and in Children's with Shannon Hale's Princess Academy.

The second half will see an acceleration in our fiction paperback publishing with new novels from Douglas Coupland, Ronan Bennett, Will Self and others. The publication in English for the first time of Resistance: A Woman's Journal of Struggle and Defiance in Occupied France looks set to be a major title. Walker Books continues its strong publishing schedule with some outstanding non-fiction such as The Last Days of Old Beijing by Michael Meyer, Stalin's Children by Owen Matthews and an updated verson of Larry J. Sabato's bestselling A Perfect Constitution to coincide with the US presidential election. Both the Bloomsbury and Walker children's lists have a range of titles from established and new authors and illustrators for children.

Berlin Verlag

Berlin Verlag has a strong publishing programe in 2008 although it is working against strong comparatives in 2007 which benefited from sales commission from the sale of Harry Potter and the Deathly Hallows into the German and Austrian markets in June 2007. The ongoing success of the German language editions of Khaled Hosseini's Kite Runner, which has now been in the bestseller list for over two years, and his second novel, A Thousand Splendid Suns, has provided our German operation with continued momentum. On the Berlin Verlag hardback list, our Spring lead title, Die Wohlgesinnten by Jonathan Littell, performed extremely well reaching the Spiegel Top 10 and being featured on the influential TV show LESEN!. Other key performances are Restless by William Boyd, a title shared with the rest of the Bloomsbury Group, and Eat Pray Love, shared with Bloomsbury UK. In the Children's area we are now seeing improved performance in terms both of turnover and margin following a planned reduction in the number of titles published. Our investment in the business is paying off and Berlin is now generating positive cashflow for the Group.

The German book market continues to be stable in financial terms with, however, increasing consolidation on the retail side as the large chains expand into the hitherto strong independent sector. Berlin Verlag's strategy of enhancing relationships with the key chains continues to bear fruit. Costs remain under constant review with further improvements achieved via a new agreement with one of our main printers effective from the second half of 2008.  The prospects for the rest of 2008 are positive.  

Outlook

One of Bloomsbury's strengths is the ability to respond to different market trends. To this end we have completed the process of digitising all our English-language catalogue and have created a digital archive which will respond to electronic demand in all forms - print on demand, e-books, institutional site licences. We are further developing our global sales and marketing infrastructure to ensure that our authors' works are known and available throughout the world via bookshops, the internet, electronic delivery and strong alliances with other media - TV, film, social networks, radio, newspapers and magazines. 

We look forward to the publication on 29 September of Alice Schroeder's remarkable biography of Warren Buffett, The Snowball.  Many years in the writing, this will be one of the most important books of the year. 

The Group's cash position has been strong with £53.8m of cash on deposit (31 December 2007, £47.6m) enabling us to focus on the business going forward and take advantage of opportunities for company and book acquisitions. We have strong publishing lists for the second half and beyond and current trading remains in line with our expectations.

Nigel Newton

Chief Executive

29 August 2008

CONDENSED CONSOLIDATED INCOME STATEMENT

for the six months ended 30 June 2008

The notes on pages 15 to 19 form an integral part of these condensed consolidated interim financial statements.   CONDENSED CONSOLIDATED BALANCE SHEET

at 30 June 2008

  CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY