After Harry Potter (BMY)

What is publisher Bloomsbury going to do in 2009?

For the last decade, investment in Bloomsbury has been a game of ‘Guess when the next Harry Potter book will be published’. But after FY2007, which will have the HP7 sales, Bloomsbury is going to have to find a new wonder franchise.

Two telling numbers are the 2005 profit before tax of £20m (when there was a Harry Potter book) and the 2006 PBT of £5.2m (when there was not).

Book publishing generates cash, but requires a surprising amount of capital, and rarely delivers high returns. Bloomsbury seems to be well-managed, but in a hit-based industry with little overall growth, there is just as much chance of disaster as of finding a new boy wizard.

Yesterday’s statement said that FY2007 trading has been strong. But the consensus forecast for 2008 is about 10p per share, which puts the shares on around 16x earnings, while price-to-tangible-book is about 1.65x. The balance sheet is cash heavy but there is as much chance of wasteful acquisitions as there is of a return to shareholders.

The joker is JK Rowling deciding to write Harry Potter 8, but with a consumer downturn apparently on the way, Bloomsbury looks to expensive for me.

January 17, 2008 | Filed Under Companies

 

Comments

One Response to “After Harry Potter (BMY)”

  1. Tom Stanley on January 17th, 2008 5:28 pm

    I found your site on technorati and read a few of your other posts. Keep up the good work. I just added your RSS feed to my Google News Reader. Looking forward to reading more from you.

    Tom Stanley

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