Bloomsbury Publishing has long relied on the magic of the Harry Potter series, but a powerful combination of romance, fantasy and dedicated TikTokers is helping its shares to reach new highs with each passing week.
The publisher, which was first listed on the stock market in 1994, is attracting an older generation of fantasy readers with the A Court of Thorns and Roses series by Sarah J Maas, which has exploded in popularity on social media.
Just under three quarters of Bloomsbury’s revenue comes from its consumer-focused business, where pre-tax profits more than doubled in its last financial year to £37.8 million. This was in no small part thanks to Maas, who overall has 16 titles with the publisher. Her sales alone rose by 161 per cent in the year and there is more to come. Her latest book, House of Flame and Shadow, was released at the beginning of this year and Bloomsbury has a contract agreed for a further six titles.
However, there will not be any more releases this year, meaning that City analysts expect sales across the group to fall by 7 per cent to £319 million, before rising again by 8 per cent in the 2026 financial year to £341 million.
This should not worry patient investors. Bloomsbury describes its strategy for long-term investments in its content as its “flywheel effect”: the theory is that focusing on high-quality content drives demand, which in turn generates cash to fund further investment, acquisitions and cash returns. Indeed, the company’s low fixed-cost base means that it is highly cash-generative, with a cash conversion rate of 110 per cent as of the end of its last financial year. Meanwhile, return on capital employed, which measures how effectively it turns its investments into profits, has been on a steady upwards trajectory from only 12 per cent in 2020 to north of 30 per cent last year.
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Much here looks promising, but investors should keep a watchful eye on the non-consumer part of the business. About a quarter of Bloomsbury’s sales comes from academic, professional and “special interest” publishing, where revenues slipped by 4 per cent and profits dropped by roughly a quarter to £9.9 million, which it blamed on a “more normalised” post-Covid environment in higher education.
Most of its sales come from academic and professional publications and its focus on digital content here is helping its margins to improve. Digital publishing (Bloomsbury Digital Resources) now makes up 55 per cent of its revenue in this area and its renewal rate amongacademic customers stands at a strong 90 per cent. Even with this “normalisation” period, the company reiterated in May that it was on track to achieve its target £37 million of sales by February 2028, up from its present £26.6 million.
Growth here should be further supported by its recent acquisition of Rowman & Littlefield, the American academic publishing business, for £65 million, which has been financed by Bloomsbury’s cash reserves, as well as a new £30 million three-year loan. The deal is expected to be accretive in the current year and to be “significantly accretive” from 2026 onwards. Bloomsbury Digital Resources’ revenues including this new business are now expected to hit £41 million by 2028.
Bloomsbury’s track record speaks for itself, delivering earning beats every year since 2008. Since this column last rated the company as a “buy” almost a year ago, the shares have delivered an impressive total return of 48 per cent. The stock then traded at a forward price-to-earnings multiple of 15.4, but its progress over the past 12 months means that investors now price this growth even higher, at a multiple of 18.9. This represents a premium to its five-year average of 17.1, although it now also reflects its stronger presence in American academic publishing. The Sarah J Maas effect may wobble this year, but the long-term potential of Bloomsbury still looks compelling.
Advice Buy
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Why Highly cash-generative with diversifying revenues
Bunzl
Only a handful of companies in the FTSE 100 can say that they have delivered twice the return of the benchmark in the past five years. Bunzl is one of them. Shares in the distribution business have delivered a total return of 65 per cent since the summer of 2019, compared with a 31 per cent return in London’s benchmark index.
With Bunzl, boring is beautiful. indeed, the name may not be familiar outside its devoted following of investors, who have seen adjusted earnings per share rise by a compound annual growth rate of about 10 per cent since 2004.
The company, which was listed on the London Stock Exchange in 1957, says it can date its origins back to 1854 when Moritz Bunzl opened a haberdashery business in what is now the capital of Slovakia. Today it provides a range of distribution services, such as packaging, cleaning materials and personal protection and safety equipment. About 29 per cent of its £11.8 billion in annual revenue comes from the food services sector, followed by 27 per cent from grocery and 16 per cent from safety. The business is highly cash-generative, with a cash conversion rate that has averaged 102 per cent over the past five years and a return on average operating capital of 46 per cent as of 2023.
A key draw for investors is its impressive dividend history. The shares offer a modest 2.3 per cent forward yield, but its cash payouts have been steadily rising for more than three decades, at a compound annual growth rate of 10 per cent between 2004 and 2023.
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Bunzl’s remarkable growth has been driven in part by its active acquisition strategy. It has already spent £600 million on takeovers this year, including of Nisbets, another British-based distributor.
The shares have wobbled a bit this year, down by 1 per cent. Bunzl now trades at a forward price-to-earnings multiple of 16, slightly below its five-year average of 17. This looks decent value for a growing company with such an impressive track record for delivering returns.
Advice Buy
Why High-quality record of maintaining growth
