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Good morning, and welcome to the Bloomsbury Publishing Plc investor presentation. [Operator Instructions] The company may not be in a position to answer every question received during the meeting itself. However, the company will review all questions submitted today and publish responses where it is appropriate to do so. Before we begin, I would like to submit the following poll. I would now like to hand you over to CEO, Nigel Newton. Good morning to you.
And good morning to you, and thank you all very much for coming to hear the Bloomsbury story of the great year that ended on the 28th of February 2023. So on the first slide, you see an artist impression of our building at 50 Bedford Square. And then on the second side, I'd like to start talking to you about these record results, which were the highest profits and sales in the 37-odd year history of the company, and we're very proud of this. Now we think they are due in part to what the analysts [indiscernible] at Investec calls a Flywheel effects of Bloomsbury, where the investments that we've made are throwing off more cash in turn enables us to buy more and bigger and better books and more investments in digital resources and more investments in company acquisitions as well. So sales are up 15%, which is well ahead of the industry at 4%, and profit is up even more 16%. It's the first time we crossed the GBP 30 million profit threshold. Our secret weapon, if you like, the Bloomsbury digital resources is up an impressive 41%, and the dividend is up by 10%, which is fantastic. So in the left-hand block, you see our kind of overall message, which is that reading has remained an activity of increased popularity even as people have returned from incarceration in their homes to their normal daily lives. So we're very lucky about that. Now on the second slide, we take a look at growth at Bloomsbury and you will see some of the key indexes of this. One of the ones that strikes me the most is in the top right of those 6 tablets that if you look back to just before the beginning of the pandemic, our sales increased 62% and our profits 98%. So it shows what a whirlwinds over time that we've had. And we'll talk to you about these other points as we go through the slides. And I'm now very pleased to hand over to Bloomsbury's Finance Director, Penny Scott-Bayfield.
Good morning, everyone, and great to have you all on the call this morning. So 3 key points to pull out from this slide. First of all, as Nigel has mentioned, a 15% increase in revenue. Second, a 16% increase in our profit. And thirdly, that that's led to an 18% increase in the EPS. So moving on to what's behind this. Both divisions did well. And you can see on the right-hand side of the slide, a 19% increase in our non-consumer division and a 2 percentage point increase in the pretax margin from 11% to 13%. And the combination of those 2 have led to that 43% increase in profit. And then on the left-hand side, you can see the 12% increase in our consumer revenue, and we've maintained that margin at around about 11% to 12%. So looking at revenue in a little bit more detail. As Nigel mentioned, we're ahead of the market. So the U.K. consumer market was up 2%, and the U.K. academic markets up 3%. You can see how well that compares to our 12% growth in consumer and 19% in non-consumer. Of course, that's global. Within that academic and professional, 28% growth there. And as Nigel mentioned, that's been powered by the growth of our BDR revenue, which we'll talk more about later. And then also calling out the 17% growth in children's. As many of you know, we've had a very strong few years in consumer. We continue to build on that and to achieve 17% on top of last year's, really testament to the quality of what we're doing. So moving on to revenue by channel and giving you an update here. You can see here we've called out a 41% increase in BDR, that's in the middle of your slides. We've seen a 29% growth in Audio, and some of you may remember that pre-pandemic, we were expecting this to really start taking off because of consumer behavior as we all, as Nigel said incarcerated. This was a bit slower, but now that's really starting to motor. E-books, very strong growth again here, and that's both from the consumer and particularly the academic side. And then overall, you can see that Print, 9% growth. That's a very, very resilient medium and channel for us. A reminder here that we're absolutely platform-agnostic. Our point is to produce and generate very high quality content, and they get that out into whatever channel best suits for consumer. So moving on to the balance sheet here and giving you an update on our strong financial position. There are 2 points I wanted to call out on this slide. First of all, the net cash, GBP 51.5 million. We remain highly cash generative and that's after paying the increased dividend from last year. And second of all, the increase in working capital, and this is basically down to increasing levels of inventory. So part of the inventory increases we've said there is FX. Equally, we've prioritized throughout the supply chain challenges of the last 3 years. We prioritized making sure supply is available for sale. And we've had this strong demand. That's been our key priority, and an impact to that has been to increase stock levels. As we move forward, we're expecting some of the supply chain challenges to ease slightly, and that will help us keep a lid on that. So moving on to the key movements in our cash flow. First of all, you can see GBP 31 million generated by profit. As we said, we remain highly cash generative. Our dividend payments were just under GBP 9 million and then the net impact of working capital during the year was a negative GBP 2.5 million. And on the right-hand side, we call out our investment in advances. This is our future content pipeline increased by over GBP 2 million during the year and 1 of the few payments I'm delighted to make apart from the dividend, it's our royalty payments, rewarding our [ writers ] for the incredibly strong sales we've seen. And you can see there that's increased from 20 -- just under GBP 27 million to just over GBP 33 million. So if I can hand back to Nigel to take you through the dividend.
So we're very proud of this dividend upward set. I think for 27 years now, we've increased the dividend every year. The Bloomsbury's [indiscernible] great reason to -- our shares. And as you can see, the record is set in the most recent figure. So the cover you all know is in excess of 2x. So if I can go to the next slide, please. So there is more detail about the dividend policy. And we are investing for organic growth, and we are also investing for acquisitions. As you can see, we've made 19 strategic acquisitions since 2008, and most of them have been supporting the academic and special interest division, where we leveraged many of them into further content for the Bloomsbury digital resource platforms. Now on the next slide, you will see our strategy is diversified in 3 different cuts really. The first is Channels, where we do, as you know, digital, we do print books, we do e-books and we do audiobooks. And that's the first, if you like, of our 3 portfolios. Secondly, we're cut by Territory, and we're very excited to have 73% of our revenue coming from overseas, which is just as well in view of the self-inflicted wounds were suffering from here in the U.K. economy at the moment. So our biggest gift is the English language, which is, of course, spoken increasingly all over the world and always expanding the market for our books. And then thirdly, the markets themselves. So nobody else of our size in our industry is combining general publishing with academic publishing. I sometimes wonder why that is because they are such obvious things to go together and most of the individual actions and therefore, overheads required to publish a book are identical between the 2 areas with the exception of commissioning the books and the marketing books, production, selling, legal, HR contracts, distribution, warehouse and all of these [ things ] all the same. So they've enabled us -- if you take a look at all 3 of those factors together, channels, territory and markets, we have a portfolio of portfolios, as much as I'm sure, you as investors do, and this has provided tremendous resilience to the company when 1 thing is down, another thing might well be up. And we are we're marching to the different drummer so that the high streets are the main street on the 1 hand, consumer [ pending ] patterns with our general books and with our academic books, we're working to the long-term budgets held by institutions, universities, colleges worldwide, which is a completely different pace, and it gives Bloomsbury great strength.
So now looking at the excellent A&P performance. So first of all, to call out again the revenue growth, 28% growth to just under GBP 76 million and that's increased by 84% over the last 5 years. So just repeating that 84% growth in the last 5 years. So the investment and the time and effort we put into and the reason we went into this really paying off. And also, which is absolutely key is that we've more than doubled the margin here. So we've increased that over the same 5-year period from 7% to 16%. And this is why some of you will remember that we went into this area in the first place is because of these much higher margins. And then just calling out again at the bottom, the BDR, the strength of the BDR strategy and how that's contributed to this overall result. So in the year that we've just had revenue of just over GBP 26 million, 41% growth. So looking in a little bit more detail about BDR. Just a reminder or an introduction about the BDR strategy. So that building high-margin, high-quality, repeatable digital revenues and accelerating our growth with acquisitions. So we use a combination of our fantastic organic content and acquired content. The success of this has led to both the revenue growth that we've seen and also the impact on the A&P margin. So the revenue growth over the last 5 years has been from GBP 6.5 million to GBP 26 million. We, in fact, beat our first 5-year target by 24%. And at the time, that looked like an incredibly bullish target. So that's an indication of just how successful this has been. And as I mentioned just now, that's driven a doubling over double in the A&P overall margin. So looking now at some of the key KPIs in BDR. First of all, splitting that revenue growth between the organic and acquired. So the organic growth 18%. So we're still achieving high double-digit growth from the organic as well as the impact of the acquisitions. Last year, we made 2 significant acquisitions -- sorry, that's [ year to February '22 ], we made 2 significant strategic acquisitions in this area, and they obviously enormously contributed to that, and we'll talk a bit more about those. Second of all, more customers. So we had a 20% increase in the number of our academic customers to 2,700, but also with the ABC-CLIO acquisition, which was in December '21, we acquired access to the U.S. schools market and we currently have 4,500 customers with that U.S. schools market. We'll talk a bit more about the opportunity there in a minute. The key here is that these are repeatable revenues. So we've maintained our academic customer retention rate above 90%. So these are high-quality, high-margin repeat revenues. So coming on to the opportunity within this area. First of all, a new BDR target to achieve a further 40% organic revenue growth over the 5 years to February '28 to reach GBP 37 million turnover. There would be further upside from future acquisitions in this area. So this is what we're aiming to do just with what we've got at the moment. Looking at the addressable market. So this is what we define as the, this is a market who could buy our products at teaching our subject areas in the English language. So we think there's about 5,000 in the academic institution that's higher education market. So our penetration is about half there and looking at the U.S. schools market, which as I just said, comes from the ABC acquisition, there's 27,000 U.S. schools teaching our subjects. We currently have less than 5,000 customers. So with both those metrics, you can really see the scale of the opportunity that we still have.
So moving on to current -- today's current hot topic in AI, Nigel, back to you.
Well, AI is having as big an impact on our industry as it is others. And given the well-publicized [indiscernible] in the share price as a U.S. study guide public [ share ] Chegg, we were keen to communicate with our shareholders and future shareholders our assessments of the potential impact of AI on Bloomsbury. And I mean, the first thing to say is we don't know because it's happening at such a rapid pace. You probably never heard of ChatGPT before February. But we believe that there is a great deal of upside in it for, if you like, the digitization of many of the work processes that we perform as publishers. It will also create headaches for us with the attribution of books in human being that we're paying really right [ to spoke ] and so on. But we've dealt with other technological challenges and opportunities in the past and expect to take this one in our stride. I do think personally that it is a big threat to mankind in a broader sense. But in a business sense for this industry, it will create I think more opportunities than the real problems. Now why is that? What's different about the industry to Chegg or Pearson? First of all, we published leading brands proprietorial works. If you want Tom Kerridge's new cookbook, you don't wish to just print out some recipes called from the Internet by ChatGPT, Similarly, if you're a fan of the novels of Khalid Hosseini or Kamila Shamsie, you are hooked on that author and you don't want to read something similar written by the robot. So our market position as a publisher to only publish works of excellence and originality has -- is paying off well in this particular conundrum in a way we couldn't possibly have imagined when that became the company's mission at the time of the founding the company in 1986. But it does mean that we have big branded products by famous authors, and we aren't the generic providers of travel and information and guide books to Italy or whatever it may be, where I'm sure that ChatGPT could make a good fist of writing this and we'll compete with generic publishers, but thankfully on the whole not for us. So I hope you are reassured as well as present. Next slide, please.
So looking at special interest, which is the other side of our nonconsumer division. As many of you know, this is our publicly aimed very specific communities. So we have -- we brought in a very targeted publishing strategy here with leading content brands, where we focus on specific areas, including wildlife, nautical, sports, games, military history, this includes Wisden, very well-known brand, Reeds and various lifestyle products, including the award-winning The Happy Me project featured there. And I'm delighted to say that targeted publishing strategy, including very tight cost control is working well, and we've brought this division back into profit this year. So moving on to our Adult Trade division.
So as you can see, we had a good list in the year, and the book model trespasses by Louise Kennedy has become a major bestseller and won many prizes. The growth wasn't as big in consumer trade nor the profit as in previous years. But it is to some extent, hit driven. And that's one of the reasons we started the academic division 12 years ago was to iron out the highest in those -- of consumer publishing, which can deliver, as we've seen with Harry Potter and so many other book's, far greater profit than anything when you have a hit, but it don't always happen and needly contained an arbitrary 12-month periods. But the consumer division overall is a huge engine room of Bloomsbury. And there, you can see some of the books that have done really well. I turn on the next slide. Children's. Children's did have a fantastic year, 17% sales growth. And what was behind that were all trends, Harry Potter, Sarah J. Maas and a range of other outstanding illustrated children's focus and novels and fiction written for children. We give more detail there on the outstanding performance of Harry Potter and Sarah J. Maas, who is up by a staggering 51%, and that growth is coming both from our her new titles, but her backlist titles and there are now 15 books from her. And we have a further 7 men under contract, which is fantastic news. Long-term growth strategies goals where we set out a little table there showing you what our goals were and how we have performed against them. And I think some of these are particularly pleasing the BDR target being 1 of them and another 1 being the increase, as I indicated earlier of our international revenues. So if we go on to the next slide, I'd like to talk about our ESG goals. We've been very lucky in that area and have 1 major prizes in our industry and indeed in all industries in these areas. We won the master investor award for Company of the Year last June, and we've been winning industry prices in the ENI and sustainability. And we also make the point in the right-hand block of this slide at publishing books or at least the books we published is itself a social good. So there's a real virtuous circle between how we do it and what we do. And finally, we give a little snapshot there of the great books that are coming out later this year or have come out since the year began on the first of March. That latter category would include Peter Frankopan's stunning book, The Earth transformed to follow his huge success with The Silk Road. It's cricket season again, and Wisden is selling Wisden cricketers' Almanack, it's selling like hot cakes. If you look down, you'll see a major new novel from Sarah J. Maas. You'll see the Harry Potter Almanac, there's never been a Harry Potter Almanac and you'll see the novel by the famous American novelist Ann Patchett called Tom Lake and 4 prime examples that are very successful academic publishing program. And in summary, we hope that the company will continue to benefit from the flywheel effect we are seeing resilience demand across our divisions. We are on track for the growth of BDR and our strategy. And finally, our trading at the start of this financial year since the first of March has been in line with our expectations. So that ends the formal presentation. And I'd like to hand back to our host of investor, please [indiscernible]
Nigel, penny. Thank you very much indeed for your presentation. [Operator Instructions] Nigel, Penny, as you can see, we have received a number of questions throughout today's presentation. And Penny, if I may hand back to you and kindly ask you to read out the questions and give responses where appropriate to do so, and I'll pick up from you at the end.
Thank you. So to start with, just -- so to start with a couple of the questions that were submitted before the presentation. And they were -- what happened to the admin costs year-on-year? And that's a very simple explanation, we didn't go mad. That was the impact of our the all the acquisitions that in particular, ABC-CLIO which as some of you will know, was a very significant acquisition. That GBP 17 million we paid for that last year. That came in -- that completed in December '21. So the first half comp and the full year comp had a very significant impact on those. So that was the driver behind it. We have been investing in more headcount and so on, but the fundamental reason for that was that. The second point was what can we expect in the future from the academic and professional margin. And then what we've been guiding to in conversations with investors, what we've said is that -- we think the sort of the 16% at mid-teens margin that we've achieved this year is a sensible area that we can -- is a fairly sensible level. So I think that's a reasonable expectation going forward. If you can just give me a minute, and I will find some further questions.
Okay. Our host, can you -- I think you'll have to help me out for a minute because we don't -- I don't have any further questions coming up.
Penny, would you like me to -- even if you talking, do you not see any questions?
So then I have, does Bloomsbury receive direct benefits e.g. license fees, when published titles are used for TV and film? So I'll take that one. Thank you very much for that. The answer is typically, No, the film rights are retained by authors, agents and sold directly to the movie studios and streaming services on their behalf. However, that does not diminish the desirability of such clients to us because a film or a TV show act is a giant 2.5-hour television. If you like for buying the book -- and indeed, it does when Harry Potter And The Sorcerer's Stone came out as a film some years after the book was first published, we saw that book to go back to #1 on the Best Seller list and were at stage for 2 weeks and then people were hooks in number -- the second book when Chamber of Secrets went to #1, and there was this ripple effect right through all of those titles that were already published in a series buydown. So TV and film, fantastic driver.
Thank you, Nigel. And another question here we have about our A&P has some big players, absolutely, instantly, many of them rated more highly than us. I think we're being undervalued by the market in this area. How do we decide what area to focus on and what factors are important? I mean that's exactly it. What we choose to do is go into the areas without that competition. So we leave the STEM subjects to the very big players. And the areas we are dominant in like drama and fashion to give you 2 examples are the areas where we can become dominant and indeed have. So we choose areas where, one, we can achieve a deep vertical and we can dominate the market to where we already have very strong content. So we already have those strong drama and fashion content before we set those up, and what we've been able to do is create products that are now so strong that other people with content in this area are quite happy to license it to us so we create an overall to become and in -- in a way in some areas and aggregation can bring that all together. So essentially, we pick our battles and then go for these key areas. So moving on down here. So you've talked about color on the U.S. revenues and how we develop. So we do disclose these in the back of the presentation. We give you the revenue by source, and then there will be further detail that comes out within the annual report, which is about 3 weeks' time, I think. But essentially, what we've seen in the U.S., both through acquired and organic growth is really significant growth. So ABC is a U.S.-based business, they were selling entirely out of the U.S. And we've seen a lot of BDR growth in the U.S. as well. And equally, Sarah J. Maas is a U.S source, though we discovered our initially from 1 of our U.S. editors and a lot of that growth has also been in the U.S. India, as you know, has had a much more rocky ride through COVID. There's been a humanitarian -- great humanitarian cost there. And equally, now they're coming out of that, and the economy is really booming. So we're seeing some really great growth there. That remains a fairly small market for us. The U.S. is the really significant one. Just another comment from Vivek. So we talked about how the BDR product, how we differentiate ourselves from competitors like Relx. I think we've talked a bit to that. We choose very different subject areas. Nigel, would you like to talk through about the rating?
Sorry, what?
The rating of us compared to some of our competitors in the BDR space.
Sorry, I was looking at the other questions coming in. Yes. So if you look at the stock market rating of the big information giant cycle Relx and in America, John Wiley and Pearson and Taylor & Francis Informa, they are higher than Bloomsbury. So I think the opportunity for us is to communicate with people like you that the direction in which the company is traveling here at Bloomsbury of growing the digital resource side, may eventually result in a new perception of the company away from sole dependents as we had before we started the Bloomsbury academic on high street sales.
Thank you, Nigel. And then I think 1 of our favorite questions, what are we reading at the moment? Nigel is always well ahead of me on this one.
I am reading High Time by Hannah Rothschild. It's the second book in a comic trilogy about extremely wealthy aristocratic family and the crazy things that those characters get up to, it's fantastically enjoyable raw and will be a big seller after it's released today.
And I have just finished Stolen Focus by Johann Hari, which I can incredibly recommend. It's a very zippy read, as you would imagine from an ex journalist. It's slightly terrifying about how our focus can be sucked away, but it's extremely good. And I'm about to start reading Trespasses, which has been very, very, very well reviewed and I know [ everybody has registered, it's up to you ].
Trespasses is the novel to buy through your summer reading, a great love story, illicit love sets in the -- the troubles in Northern Ireland in 1970s. Great book.
Great. And I think that concludes the questions we have.
Penny, Nigel, that's great. And I think you have addressed all the questions you can from investors today. And of course, the company will review all questions submitted today, and we will publish the responses on Investor meet company platform. But before the redirect to investors provided with their feedback, which is particularly important to the company, Nigel, could I please ask you for a few closing comments?
Well, thank you all for being here or particularly valued category of potential shareholder to Bloomsbury because we are owned mainly by [ mighty ] institutions like BlackRock and Canaccord Genuity who are happy with their investments. So there's very little trading that goes on from the institutional side. And we value buying in and buying out that sort of work that goes on in the investor market. And so I reckon we have yes -- a couple of questions, but we will follow up on those later. And thank you all very much for being with us today.
Nigel Penny. Thank you once again for updating investors today. Could I please ask investors not to close this session as you will now be automatically redirected to provide your feedback in order that the Board can better understand your views and expectations. This will only take a few moments to complete, and I'm sure we'll be greatly valued by the company. On behalf of the management team of Bloomsbury publishing plc, we would like to thank you for attending today's presentation. That concludes today's meeting. Good morning to you all.