Bloomsbury Publishing Plc (BMY) Earnings Call Transcript

Will Larwood from Berenberg. Three from me, please. Firstly, just in terms of the Harry Potter HBO series. I was just wondering if you could share any color in terms of orders from supermarkets, preorders, just general feeling around that ahead of the HBO release. And secondly, in terms of some benefit from AI licensing deals in H1 and expect it to continue into H2. What about sort of your conversations with other frontier models? How are those progressing? And then finally, just in terms of the Anthropic settlement, can you provide if there's been any change to your expectations for that?

Thanks very much. I'll take HBO, and Keith, AI and Anthropic, kindly. So the preorders are good. And the challenge for us has been to get the series back into the supermarkets who backed Harry Potter so strongly when the original Warner Bros. films started coming out around 2000. And we've succeeded. So the pump is primed. We have significant orders in the U.K. from the major supermarkets. We've doubled down on that by seeking marketing from them to go with it. And I reviewed a list of the individual supermarkets plans, some are planning [ tannoy ] messages to drive people to the Harry Potter section. So what's exciting about this release versus the films 27 years ago is it's the first time we've done a tie-in jacket. And so possibly, we showed on the screen earlier, but we have a very cool jacket image of Harry wearing his Quidditch coat shot from behind and it says 8 Potter, and it's very powerful. So I think they're going to fly off the shelves to a new generation of readers. There are something like 700,000 new 8-year-olds in Britain every year, and it's a long time since the books came out. So I think one of the joys of television is driving people to certain books. And of course, they won't just read this book. The experience of the film release was that they would read the one and then the next and the next. And we saw them cascade through the bestseller list because they were already backlist titles by then. So it does feel as though HBO have -- will take over Christmas Day itself. And so we'll watch the space. I just answered your question in respect of the U.K. But if you imagine our international sales team who were very active at the Frankfurt Book Fair 2 years ago, replicating that performance in pretty much every major market in the world. And to remind you, we do have the English language rights in Harry Potter in every country in the world except the United States. We have Canada and the traditional Commonwealth countries will make up a big chunk of the markets, Australia, New Zealand, South Africa, Canada. But the many other countries where reading a 500-page novel in a foreign language like English isn't a terrifying prospect to 8-year-olds, we will also succeed. Of course, unlike when the first ones came out, these are available in translation now as well, which will mitigate the market. But I think it's going to be very big. AI?

I'll take the AI. Well, as we said, the quality of our academic list is such that we were able to take the original value that we got in FY '26 and see that roll forward into FY '27, which is great. That value is included, obviously, in the first half numbers that we've just announced, and we're expecting further value to come through in the second half of the year and also to continue from that partnership into FY '28 as well. We've always said that, that would be at a lower quantum than we were able to generate in FY '26. That's still our expectation. But what we're also now starting to have is conversations with other parties as well, particularly in the specialist cases as well that you've got within the Academic & Professional arena, both in terms of training deals, which was our first deal that we did, but also increasingly in respect of specialist RA deals that we're looking to strike as well. So that's encouraging. You asked about the Anthropic settlement. We are working through at the moment the disputes process with the settlement administrator. That is a relatively lengthy process. We're working through it at the moment. We still remain -- I mean, I'm not going to prejudge the outcome of the settlement process, but we still expect to receive double-digit million settlement as a result of that.

Melanie from Peel Hunt. I've got two, please. First one is, can you talk about how you're thinking about the level of marketing for Sarah J. Maas releases upcoming in the second half? The second one is Asia for Academic has been going really well. So now it's proven the concept. Do you plan to invest harder in that region?

I might help myself to both of those. The level of marketing for Sarah J. Maas is, as you would imagine, very high. And it's not just us, it's the retailers themselves. If you're a retailer, you're searching for this year's big product, and many of them have concluded it's going to be Sarah J. Maas. And so there are huge internal promotions happening. To give you an example, Target were planning to create a kind of Sarah J. Maas boutique within their shops in the U.S.A., of which there are many with the new book A Court of Splintered Harmony as the hook and the centerpiece, but with a range of other merchandise relating to that universe. And then in other places, more traditional forms of marketing such as pallet sales where they just slap down a huge pallet at the end of an aisle and the books are there. And that seems to induce increased buying. So there is all manners, some shops have produced special things they will give away of their own initiation and funding if you buy the new book from them instead of their competitor next door. So there are 2 kinds of marketing happening, our own marketing, which is considerable and very social media oriented. And then there's the marketing of almost every major retailer on earth. This may well turn out to be the biggest selling book of the year. Certainly, that was the case with Sarah's previous launch. So we'll see. Asia, so yes, it's early days. We don't want to overcook this. So our plans are ambitious, but our execution is only about 9 months old at this stage. As we mentioned earlier, we're creating an Asia studies, academic digital resource within BDR. We have an assiduous editorial team finding very interesting material that hasn't been digitized by anyone else for such a product. And I think knowing what I know, I think that will turn what we're creating into a must-have product for most universities in the world and not just a nice-to-have product. We have our eye, of course, on China, which is such a huge academic market now. And we have various plans in the pipeline.

Alex Pollen from Berenberg. Some on cash, Keith, if that's all right. Just to reiterate that the -- any settlement from Anthropic from as far as you're concerned is not included in any consensus forecast at the moment. Any anecdotal examples around the working capital improvements as well, please? Anything -- any more detail you can give around whether that is some of the changes you put in place since you've come in, et cetera, that have led to that sort of improvement? And then on capital allocation, whether the high levels of cash or likely high levels of expected cash are changing any thoughts around that at all? And then totally unrelated, one on audio and just a general update on how you're seeing the audio market.

Well, I'm glad he was looking at you when he asked most of those questions, Keith.

Let me just address them in that case. So yes, for the consensus cash forecast, Anthropic settlement is not built into those numbers. In terms of the working capital improvements we've got, these are just a series of improvements that are being made. I mean we call out and one of the things I would probably call out specifically is just in relation to stock, finished stock. You will have seen that, that is down considerably in terms of year-on-year. We've obviously got a slight buildup in the half year as we're stocking to sell some major titles. But if you look at it half year to half year, very significantly down due to a series of improvements that we put in place around print run order management, disciplines in terms of sign-off and that, and also starting to use AI in terms of predicting print runs and trying to sort of drive intelligence through the use of that type of technology. So it's a series of improvements that the team are working on across the board. And I think they are starting to yield real results. And you can see that from some of the cash drop-through that we've got in terms of the operating profits that we've delivered. So I am pleased with that. There is more to be done, and we're continuing to look at the efficiency with which we can drive cash drop-through, but it's an encouraging start, I would suggest. Audio...

Audio, what a wonderfully growing market. That is, as you know, with the addition of Spotify with their [ Maicy ] membership worldwide in the audiobook area in November a year ago. And so we've seen huge growth coming just from that quarter alone. But there are quite a handful of other customers buying audio editions from us, Apple among them. And so we see nothing but growth coming from that market. Are there any other questions? Don't be shy. Go for it.

So I just want to ask, are you seeing any boost in Sarah J. Maas' backlist selling in the past few months ahead of the upcoming release?

Yes, absolutely. I think we've seen one of the books go back into the New York Times, Tamsin's nodding encouragingly, in the #10 position in the New York Times bestseller list right now this week. And so that is, of course, a reflection of the beating of the drum in people's anticipation of it. And then one thing, of course, that happens with a book like this is you're having to control an embargo worldwide so that retailers aren't putting the book out early for sale as they begin to arrive in the distribution system. And that creates a lot of excitement, mainly of the negative variety, but it's still excitement and anticipation. So yes, of course, there will be many readers who aren't up to speed with the ACOTAR series, and this is the moment that will push them over the top into becoming readers and reading their way through the series. And so Sarah had 16 novels under the belt, and now there's about to be 18. So it is wonderful because often literary phenomena are restricted to 1, 2, 3, 4 backlist books and to have 18 as we will do is very exciting. Alastair is feeling encouraged.

Let's keep going about Sarah. Hard obviously to sort of speak on her behalf, but sort of what do you think her appetite is to keep being an author, keep writing the new novels? I mean all this excitement coming, is she signing a movie deal anytime soon?

You're absolutely right, that no publisher ever speaks on behalf of their author and their IP is their business. But she's certainly shown great appetite in producing not 1 but 2 books in a row. So I'll leave that fact for you as the measure of it all. I don't think since the days of Charles Dickens and novels being serialized in magazines that I ever seen 2 installments of the story come out so quickly, and we're very fortunate for that. And as for the rest, you'll have to watch this space and gaze into your crystal ball. And the same, there have been no new announcements at all. And so I have no information to impart other than that one day, these novels will make the most stunning films that will absolutely clear up. So we need excitement for the future. We can't be having everything all at once. Okay. Well, thank you all very much indeed for coming and for hearing the story of our -- we believe our record year to the end of February. But we still have to deliver a lot of that. So watch this space.

Thank you.