You may want to reconsider your investment strategies in the wake of prophecies that generative artificial intelligence (GAI) will rule the world. But before you make any hasty decisions, remember that we’ve all been told time and time again that printed books are dead in the water. Yet, the popularity of printed books has defied all logic and expectation, even in the era of Kindle ereaders. Publishers and industry experts projected that ebooks would completely replace print books in the market. But as it turns out, print books are still holding their own, accounting for over 70% of all book sales by volume in the UK last year. And publishing houses, such as Bloomsbury and Penguin Random House (PRH), are still thriving despite facing existential threats from streaming services and smartphones that were predicted to bury reading habits.
In fact, Bloomsbury, the publisher for Harry Potter saga, is on fire, as evidenced by their recently published full-year results. Even in the middle of a pandemic-induced reading revival that many thought was a temporary phenomenon, Bloomsbury still managed to climb 15% in both revenues and pre-tax profits to reach £264.1mn and £25.4mn, respectively, in the 12 months ending February 28th. That’s no small feat for a company that’s dealing with consolidations in the industry and fighting off competition from both within and outside the publishing industry.
Bloomsbury is making strides to adapt to changing market conditions to survive. One such move is to expand into higher margin non-consumer divisions, which includes academic and professional publishing and digital resources business. The latter creates online research portals where users can access information in exchange for a subscription. These resources include a treasure trove of Winston Churchill’s writing archive, among others. With sales of digital resources surging 41%, the division’s profits rose by a staggering 43% to £13.1mn last year. At the core of the consumer division, profits rose by a modest 2% to £18.1mn, while revenues also increased by 12% to reach £166.7mn.
Publishing companies, including Bloomsbury and PRH, are facing threats from multiple sources, such as the rise of generative AI. But recent comments by Bertelsmann’s CEO, Thomas Rabe, suggest that GAI is more of an opportunity than a threat to publishers. Nonetheless, Bloomsbury’s shares are trading at an attractive forward price/earnings ratio of about 15 times. This is significantly lower than its five-year average of 17 times and could be worth considering for savvy investors. Bloomsbury is not resting on its laurels, and neither should you.