Bloomsbury Publishing Plc

Good morning and a very warm welcome to the Bloomsbury interim results. We're particularly pleased to see so many analysts and on the live stream to see shareholders and potential shareholders. So a very warm welcome to you all. I'm Nigel Newton, Chief Executive of Bloomsbury, and on my right is Penny Scott-Bayfield, Chief Financial Officer. Bloomsbury and Tamsin Geraghty, Head of Investor Relations. We're delighted to present to you now our results for the period, the rather interesting Bloomsbury months of March through to the end of August. You can see on slide two, our strategy of diversification has created a portfolio of portfolios. That is our mantra at Bloomsbury, much as our shareholders, the fund managers do in their own portfolios. in an effort to balance the vicissitudes of one area against another. And we believe we've created a resilient business model for long-term success. We're pleased to report revenue of £160 million in the six months, profit of £24 million with a strong and improved margin of 15%. We've signed our first non-exclusive AI licensing agreement with potential for more. On the one hand and on the other, we have major bestsellers from our consumer division, including Gillian Anderson, who dominates the charts in the second half and has been number one in paperback for nine weeks now. It is of enormous economic significance that our best-selling author, Catherine Rundell, has secured a long-term film deal with Walt Disney Studios for her brilliant Impossible Creatures series. We demonstrate our confidence in the future by increasing the dividend by 5% and stating that we expect to deliver full-year results ahead of expectations. Now on the next slide, Bloomsbury's investment case. Let's consider that for a minute. We built a portfolio which has the benefit of being diversified across academic and consumer publishing, digitally and internationally for resilient success. That is rare in our industry. Now on the next slide, dividend, look at that marvelous upward swing. We have a strong dividend record, which any PLC would be proud of. This continues with a 5% interim dividend increase and expectation of the same for the full year, which reflects both the achievements of this financial year and our confidence that the company is well positioned for further development. And now, may I hand the mic over to Penny for the financial highlights. Penny.

Thank you. So good morning, everyone. Starting with our key financial highlights. First of all, the revenue of 160 million, which you can see against the last two years. Our pre-tax profit was, as Nigel mentioned, a 15% margin. So that's delivering pre-tax profit of 24 million. Our diluted EPS of 22.98%. benefiting from that lower effective tax rate, net cash of 2.4 million, which we'll come on to expand in a minute, and as Nigel has mentioned, the dividend per share of 4.08p at the interim, a 5% increase continuing our track record there. So moving on to our strong balance sheet. So net cash, 2.4 million. That's net of our current $20 million loan. Some of you will remember we took out a $37.5 million loan to help fund our acquisition of Roman Littlefield in May 24. We've used our good cash position and generation to pay a further $10 million of that early, and that's on top of the $7.5 million that we paid down at the end of the previous financial year. then we are working capital you can see the increase there and that's mainly around timing of our debtors but you will see that impact coming through in the cash flow as well overall as you can see remain our strong balance sheet which really underpins our opportunities for the future so moving on to our cash flow Three points I'd like to highlight here. First of all, you can see that trading strength delivering the 24 million of profit in this first half. You can see the 9.4 million going out to dividends, rewarding our shareholders who remain front and center of everything we do. And then you can see the impact of the increased working capital coming through in that first half. We also highlight the advances paid in the period, if you think of that as our pipeline of future consumer titles. So you can see that remains strong. And royalty payments, that's the one payment I'm always extremely happy to make. That's benefiting our authors and you can see how they're really sharing in our success. So coming on now, a deeper dive into our academic and professional division, which as you know, we're presenting it on its own for the first time. So you can see here, first of all, the revenue up 20% in the first half. And as Nigel has mentioned, and we'll talk more about, that's benefited from our first non-exclusive AI licensing agreement. And you can see that has benefited both the revenue and the profit in this first half. We're very pleased to say the integration of Roman and Littlefield, as many of you know, we fully integrate all of our acquisitions, and that's substantially complete. And I know we sort of referencing it almost as a, you know, taken as read that we've done so well on that. But integrating an acquisition that's four times, by a factor of four, the largest acquisition we've done, I think is a real testament to our operational effectiveness and And of course, that allows us to really start benefiting from and leveraging their great content. So we'll come on to more about that shortly. And then as we've highlighted over the last two years, we're seeing continued budgetary pressure on the UK and US institutions in the academic market. But to finish on a more positive note, the expansion in Asia, so we've talked a bit about the opportunities for growth we see here, as we see geopolitical pressure in the UK and the US markets, there's huge opportunities in those Asian markets and we've referenced that before, but just highlighting again, we're continuing with our plans to open that office by the end of the year and really tap into those opportunities in that region. So moving on to the academic divisions P&L. So you can see here we split out the three key types of income here. You can see the digital sales included BDR and the AI licensing within here. You can see that great growth both on last year and the year before. You can see actually surprising resilience of print sales in a market that's really strategically shifting to digital, and you can see that's some resilience in there, but also the impact of that R&L acquisition. We've brought on this incredible quality content. And then looking at the margin strength, which Nigel mentioned, you can see 24% for this period versus the mid-teens, 16% that we've seen in the two previous halves. So we're generally guided to a mid-teens margin, but you can see the potential for upside there.

So on to AI licensing. I'm incredibly excited about the potential. which AI holds for Bloomsbury, both on the sales side in licensing, but also on the streamlining of work processes. So we've signed our first agreement in the period. As we've stressed, we can do as many of these as we like, and we are in contact with all of the major LLMs that you're aware of so watch this place and it's very important for those LLMs to be trained on the highest quality content which is what we I think the many tens of thousands of titles in the academic area that we've built up represent as an opportunity to these tech companies. We've also engaged with our authors, inviting them to opt in. If they don't opt in, then their work won't be trained upon as a result of our deal. Anyway, it could be due to piracy, but we wish to follow the wishes of our authors, and that's very important, and not all our competitors have chosen to do that. Now, most importantly... When you have a contract with an AI company, you have the guardrails that you want in place. And that's very important. And I think the large amounts of litigation, such as the settlement for, I think it was 1.5 billion, which is eye-watering with Anthropic, is encouraging other people to enter into agreements. with publishers rather than inhabit the wild west that they were before. So that is the way the landscape looks at the moment and further potential opportunities are in discussion at the moment.

So updating on digital resources, which as you know is our digital products specifically created for the academic market. So here revenue of 13.6 million, slightly impacted by the adverse or getting the weaker US dollar, so we were up in constant currency. We wanted to really highlight the resilience of this. We've talked before about how when people get BDR products, they hang on to them. They become a really core part of the teaching and learning, and evidenced here by subscriptions being at 50% and renewals rate we're maintaining at 90%. So that really speaks to the resilience. And then, as I mentioned earlier, really starting to leverage the great quality content that we bought in a print perspective from our R&L. So we're continuing to expand our products and the opportunity of R&L digitizing those. So we've got over 6,000 of R&L's titles digitized, and that's enabling us to enhance, including the enhancing the BDR collections title count, which is an important part of being able to grow that.

So the greater diversification of our consumer publishing portfolio continues to shine through with a real breadth of critical and commercial success across multiple genres, as you can see in the slide behind me. In nonfiction, Gillian Anderson's Want has been in the top ten for 15 weeks, including nine in the number one spot, and the good news is there will be a sequel to that book to come. In children's, I've alluded to Catherine Rundell's remarkable deal, apparently agreed personally with the president of Disney, Bob Iger, so we can be confident it will receive good reviews. In addition, the Warner HBO Max series of Harry Potter has started filming last month at Leavesden. And if you just consider the number of books, seven, and consider the growing word count as they move through the series, I think we can expect approaching... well, dozens and dozens of different episodes. This will run and run. And we certainly found when the original movies came out from 2000 with The Philosopher's Stone, that the books were propelled back into the bestseller list by people who'd seen the film, a mass market audience who wanted to understand what was really going on. And there are 800,000 new eight-year-olds in Britain alone every year, let alone... The entire, perhaps some of you are responsible for some of those, let alone the many other countries around the world where we publish the work in the English language, which is really everywhere except the United States. So the series, no... Release date has been announced by HBO Max yet, but we conjecture that it will be in early 2027, helping to introduce the series to more children.

So coming on to the consumer P&L. So first of all, the total revenue of 113 million. I think reminding everyone, as you know, versus a very strong comp last year. But you can see that's still up 13% on two years ago. So you can see that underlying strength. When we're looking against a more normalised period of two years ago, you can see the resilience of both print and digital, and I think within digital really highlighting the audio that we'll come on to next. We talk about our portfolio of portfolios and how we can monetise content, and hopefully this morning we're sharing with you some of the new ways in which we're doing that, but the expanding ways in which we're doing that. So with this deeper dive into audio, one of the key things is that we've been able to increase the market and we're not going to take all the credit for that. Spotify have had quite a big influence there. So as some of you remember, we entered into a non-exclusive deal with Spotify as well and we've really seen the market expand. So that's a wider market and that's reaching new audiences, which we're seeing almost on a daily basis. And as that's happening, we're also increasing our scale. So you can see 1,500 titles. We really prioritise the titles which we think will do best in audio and the scale of the new titles that we're bringing onto those platforms on an almost daily basis. We've highlighted some of the narrators. I think that Catherine Rundell's The Impossible Creature, Sam West, that's a particularly great example of a really super combination which is doing really well. And this is award-winning content. So in any market, what we have to keep doing, which we do so well, is to produce incredibly high content. And that really gets the audience reach.

So, look at... Look at that extraordinary list. These are our current best-selling and some of our upcoming titles still to go this autumn. This year has an array of titles from, as you've seen, Samantha, Shannon, Catherine. Rundell, J.K. Rowling, and Poppy O'Toole. In academic and professional, we're very excited by the launch of the Marvel Age of Comics series. You wouldn't have guessed that would come. from our academic division, but it does, and it's been embraced by Marvel, putting them further in the history books. So looking to our innovative publishing of Harry Potter, we have the Pocket Potter series launching with one book per character, aimed probably at a younger audience than the books themselves. but there is such awareness that these books are grabbed by children, and it's nicely timed to benefit from the huge opportunity of the HBO series. Now, moving on, we launched our Bloomsbury 2030 vision last year, as many of you will remember, and you were there, and we've already achieved much of the operational change that we sought to. Looking at our growth, our strategic expansion in Singapore to capitalise on those huge numbers predicted by the World Bank, of increased student attendance, particularly in Asia, is happening and we will be live and running between now and Christmas. Looking at our portfolio, the integration of Roman and Littlefield is substantially complete. That has been a fantastic acquisition. And turning to our people, we continue to be able to attract the key talent in publishing that we wish to. And starting with our new chief finance officer, Keith, please raise your hand and say hi to Keith. He still works for the Guardian, but he's come to say hello, and Keith will join on the 2nd of February. So a very warm welcome to you, Keith. On the next slide, the Bloomsbury flywheel keeps on spinning in its virtuous circle of investment in content, driving demand and generating cash to fund further investment. Finally, the board expects to deliver full-year profit ahead of expectations. So on this slide, you will see a... a moment when Bloomsbury was voted publisher of the year at a ceremony in May, which was a good moment to see the achievements of my 1,250 colleagues worldwide recognized. So we're now at the exciting bit where we solicit questions from you. Fiona, your hand shot up like a hollow rocket.

Thank you. It's Fiona from Williams and Medicine. First of all, can you give us more background on the structure of the Singapore market? I mean, is there a group of target universities at the top? And are there incumbents and how are you planning to tackle it? That's the first one. The second one is on the AI deals. What sort of proportion of the authors did decide to opt in? And do they get a benefit from so doing? And the third one, because we have to have three, it's the rule. It's really not for the rest of you. It's just on whether there's any improvement in the music in the academic, in the US particularly. Thank you.

Great, sure. Well, including the name Singapore in our expansion may be deceptive because it isn't about Singapore. That's just a base. It's about China, Taiwan, India, the whole region, because that is where new universities are being founded and new budgets are being created. to buy the sort of digital resources that we publish. So Singapore, as many of you know, is a great and stable base in which to have your legal entity, but it's not only about Singapore. On your AI and authors question, that's happening. This is all real-time stuff. So what I can tell you is given that it's pretty hard to get people to sign anything, it goes into the too boring pile next. We are very impressed by the number of authors who've signed and there are many more to come and we're making ourselves available for individual conversations with authors because AI is the big beast in the room and not everybody understands it. And I think it's changing, if not week by week, certainly by month, month by month, as probably all of us start to use AI. even more and realize that our future will depend upon it having high quality information in there. Is there a financial incentive? Absolutely. So we've announced an academic level royalty that they will receive from any income. that we achieve. And so the permission, the option that we sought is to all AI activity. We're not doing it on a deal by deal basis. And the academic market. It has to be great. It is the chief area of investment for most governments in most countries in the world. Yes, it's taken a short-term hit because of new political policies. And we would rather that that were not the case. But it is and it's the new reality and we're all operating well within it. And we've made very clear at this meeting and the previous couple that the significant growth won't be in the old world, it will be in the new world. and we're good at the new world, so watch this space. Alistair.

Thank you, Alastairie from Investec. I'll do two with multiple parts. Thanks for the heads up. Firstly, we obviously touched on some movie rights. We've seen Fox and HarperCollins signing a reciprocal first look agreement. Is that something you might consider and be interested in? And then secondly, if you can comment at all on your AI agreement, is there any recurring element to that in the future? And did you receive a cash payment for that in the first half? Thanks.

Terrific. Movie rights. We've had a first look agreement in the past. We had one with the Brilliant's Creative Artists Agency in Hollywood. But we found that it didn't really move the dial because anything that's so... clearly crying out to be made a movie like Impossible Creatures. It's going to happen regardless of that. Secondly, the sort of books from Bloomsbury's very large annual output that movie studios are going to be interested in will typically be represented by a literary agent and agents always retain the film rights. So it's very unlikely that any first look agreement is actually going to have the rights to deliver that deal. The Catherine Rundell Disney deal was very much done by her agents, but enthusiastically cheered on by Bloomsbury. AI agreements. Well, I personally regard the income as recurring. It's not recurring in the sense of getting a royalty every six months like a... a book contract, but we have new contents the whole time that will be the subject of the AI deals of the future. That's point one. Point two is, does anybody know how many LLMs there are in the world. Well, that includes me. But let's say there are 20. So we've just done one deal and all these people are hungry. So they will recur Alistair in the sense that I see a flow of them for many years to come. And there will be new LLMs. So I think this is the big new business area for publishing. What is the, you know, there's the tech world, which is so multifarious, but what is the middle letter of LLM? It's language, and that's our product, is the language recorded on the page, the written word. And, you know, if you ask ChatGPT a question, you get the answer immediately. in language. So we are the root of all of the riches that will flow from AI. We waited about two years before we did our first AI agreement. because we wanted the market to really establish itself and the mistakes to be made and people to discover that guardrails are a good idea. What we did notice in those two years is that all of those agreements were confidential and that is because they are in an extremely competitive world themselves and they don't want to flag to their competitors, what they're paying, how much they're paying, who they're paying it to, when they're paying. So I can answer nothing on that. The only way I could be totally transparent would be to do no AI deals, and then I would have no questions to answer. Hi.

That was one of the questions I didn't answer.

Yes, and no, we didn't.

Oh, OK. There, you got an answer. Penny's much nicer than me. Hi there, William.

Thanks. Will Lord from Berenberg. Just a couple from me. Firstly, it relates to the AI deal. Is it just purely related to backlist titles or will it include an element of front list? And then secondly, just if you could remind us on Asia and then sort of the potential ramp up of that business into next year, that would be great.

Okay. You can prepare on Asia. And so all AI deals are title specific. You don't say you can have, you know, like a first look option, the rights to future books that we may publish in that area. So in a sense, they're all backlist books. but it would include the very recent publications that we have. Now, of course, we've done our deal on our academic list, which is way over 100,000 titles. I'm not saying that's what's in the deal. I'm saying that's the total universe that's available to be chosen from. But we also have a general side, and it isn't... It isn't really the mood of the world to be putting one's consumer books on the whole into these deals, but it may be in the future. So we've got a lot of gas in the tank, I think, for the front list of the future, if you like, and the whole trade side.

Yeah. So just to share some stats with you. So the World Bank projection of 380 million global higher education students by 2030. So that's up 73% over a nine-year period. And the forecast is for... yeah for 60 of those to be in asia so you can see that expansion we're used to the us market being by far the biggest that's why we've you know expanded there organically and through acquisition but there is huge growth predicted there and already you know there's very specific things happening so singapore are these their their rules for international students making it more attractive for international students which has been one of the challenges in both the us and uk markets But that's more attractive for international students now and for longer term engagement, which is good. South Korea is doing a study career 300,000 initiative specifically to attract 300,000 students. So you can see the sort of scale of stuff that's going on there. In India, where we obviously have had a base for the last 10 years, we're focusing our academic sales efforts there. And we're already seeing foreign universities, US institutions coming into the Indian market, establishing campus approvals, which again helps with the visa side of it. and the US visa restrictions are forcing Asian students to go to different markets. So those are just a few of the KPIs that are driving what's happening in that market.

Fantastic, Penny, thank you. Hi there, you and then you.

Thank you. Just a very quick one on AI and Penny on the margin points. Just to reiterate, there's no change in guidance of the academic margin.

No, that mid-teens.

Okay, fine. And then on audio, I mean, you already have key deals in place with Amazon, Spotify, et cetera. It seems like one of the most exciting parts of growth for the business. Is there anything else? in terms of those sort of deals or anything else you can do to accelerate the growth within that part of the business even further?

Well yes there is, thank you, which is to get more and more of our titles recorded because we do have this huge backlist. We've been lucky to generate cash and to have been able to make some 35 acquisitions and our strategy in each case has been to get hold of that IP. Initially academic publishing we were after it for digital resources where we've done so well and where there's still considerable future potential with what we've got already. But of course we have the audio rights too and that is even seeping into the academic area. If you think about podcasts, many of them are about fairly cerebral subjects. So yes, there is much more we can get off the shelf in our own shop, as well as publishing books in audio more imaginatively, where appropriate with multiple voices and dramatizations rather than just straight readings and there are all kinds of different levels of audio the huge change for bloomsbury was to switch a bit over a year ago from an exclusive contract with one supplier of audio books to a non-exclusive deal with them and so we have many deals now. Spotify is way the most exciting because they're very ambitious and it's all there for free. You just slide along at the top of your Spotify bar and there are books and you can listen to them as it were for free if you're already one of Spotify's millions of music customers. The fact that people start out as a music customer means that they're a different demographic to the competitive demographic and that's quite good because if you look at the Bloomsbury list it's quite youthful many places you know the Sarah Mass audience is largely a youthful one so the developments in audio are all going in our direction and I find it very exciting because it means that you know a book which you used to need to sit down to read you can now read while you're driving or at the gym or standing up or running. So it's inserting books into the interstices of your life, which had previously been book free, I hope.

Thank you. My questions around Asia have been asked, but just as a follow-up on the audio side of things, can you remind us about how the rights work in that area? If you have the audiobook rights to a title, is that across multiple territories or in a specific territory? Is this an opportunity to gain more consumer traction in North America, for example, with some of your titles, or should we think about it not in that way?

Well, the gold standard is, of course, to have America and to have all rights. So we do where we can. And some of our books have been huge audio sellers in America. So that's what we're seeking, but the strict answer to your question is that we have the audio rights in precisely the same countries as the book rights and the sort of minimalist book contract would be for the UK and Commonwealth territories. with an add-on of open markets shared with a separate US publisher, should there be one, often in the continents of Europe and in Asia and Africa. But to a large extent, we have the audio rights everywhere, except in those cases where we don't have American or possibly Canadian rights.

Hi, Jess.

Morning. It's Jessica Park from Peel Hunt. A couple of questions for me, please. The first is on audio. I mean, I'm assuming digital formats, high margins, but do you need to put marketing behind your new releases for audio? And then the second one is, are NLs mostly integrated now? How are you thinking about M&A? And in this kind of environment, you know, for academic, are you finding more deals around better valuations, but some color on the marketplace will be good? And then just the final one, just to make sure I understand this properly. On the AI deal, is there a length to the contract? As in, is there, you know, the content can be used for three years and you get a certain payment. And is it, you know, taking aside new deals, is it a matter of, you know, you get the bump up and then a couple of years, another massive bump up, assuming that no more offers opt in, if you see what I mean?

You can think about AI while I answer audio. So yes, the beauty of a launch is that the publicity that we seek for a new book is platform agnostic. So when we're getting a huge interview for an author, when Catherine Rundell is writing a big piece in the Sunday Times, as she did a few days ago, it's effectively promoting all formats of their work. So that's why we like these launches. They're benefiting the e-book market, They're benefiting the audio book. They're benefiting the print book all at once. So mostly it doesn't involve separate marketing. That's why it's cost effective for us. But yes, of course, we do put, you know, available as an audio book. And we just remind people of what probably has already become a piece of learned consumer knowledge. behaviour then you asked about the integration of Roman and Littlefield sort of more future M&A what are we thinking about in that area Yeah, so we are a destination of choice of people who have a company to sell. So we're looking at probably not everything, but we're looking at almost everything where it's the idea of the other side to approach buyers. And the market... The deal flow is still good. We're being measured in what we're leaping at because at $83 million, Roman and Littlefield consumed a fair chunk of our cash, and there's much more. we can do post-integration to exploit that, and particularly in the form of Bloomsbury's digital resources containing titles. So we continue to look at everything but wish to spend within our means as we digest the jewels. Do you digest jewels? Anyway, digest what we bought already, AI.

Yep, so when we said real confidentiality, I'm afraid we just can't share that information.

Thanks. James Musker at Singers. First on Roman Littlefield and the integration into BDR, 6,000 books out of 40,000, is that a lot of progression done or is there still a lot to go there? What's the level where the deal made sense and you really see the benefits from it. And then in terms of the AI deals within confidentiality, what is it that determines the price of a deal? Is that the size of the LLM? Is it just the number of titles? Is it the use case? And what are the negotiations focused on?

It's a bit... May I leave you, R&L? On AI pricing, well, that's a great question, and that's what I asked myself when we ventured into this space. How are we going to... gauge this so it's a bit like selling your car you know there is kind of a market price that has been normalized in some circles i mean there are actually lots of different ways of of selling AI, but some of them are on a per title basis. So that's one answer. The second answer is what the buyer is prepared to pay. And the third answer is, how good are you at negotiating from that base? And so we took the negotiation part of that very seriously, because it was hugely important when you multiply up by the number of titles. So I hope that answers your question. We did our best.

That's fine. And on R&L, as with any list, there is maybe more economic value from certain titles. So actually, we very much focus on the ones that would generate the most benefit. Of course, we can get benefit from all of them. But I think it's important to notice, first of all, R&L's trading of the business as is. Then we've got the... Then we're starting to really get the benefit from the digital side of it, which we announced when we, you know, it was a really key part of buying it. But then also, you know, those R&L titles have been, you know, have been very much part of the AI deal we've done. So it's actually and that wasn't something we factored in when we when we did the deal. So it's really over delivering from our perspective.

That's a really good point. AI is so new that we did not factor that in in this really quite recent deal, so it's a tremendous upside. And that's why that phrase, content is king, continues to be true, that if you've got the content, you're ready for any new technological or other societal developments that will come along, and that's the strength of what we have at Bloomsbury. Any other questions? Well, thank you all very much. You've been a lovely audience. You've been a lovely online audience as well. I'm just going to close by saying 10 things to know. about Bloomsbury. So up to, who knows, 100 Harry Potter episodes now started filming at Leavesden. Disney commissioning multiple movies about Catherine Rundell's Impossible Creatures. Three, an AI deal done, not just talked about or promised, but done with further deals to come. Want by Gillian Anderson, number one bestseller. You can't get higher than number one Keith Underwood to move from Guardian Media to Bloomsbury as CFO. He didn't have to come, but he chose to come. And then next, number seven, six, Bloomsbury Digital Resources finding new academic research library customers in the East. Seven, Bloomsbury Singapore open soon to harness the explosion in student numbers in Asia. Eight, major signings on the consumer business including Stephen Graham, he of adolescence. the series in a remarkable book about fathers writing letters to their sons in an age where boys are said to be kind of lost. generation, and this will address that, and I think attract a huge amount of publicity. Nine, Bloomsbury voted publisher of the year, not some other publisher, Bloomsbury. And finally, high staff engagement worldwide in our companies in the Great Place to Work survey. Thank you very much.