Regulatory announcements

Bloomsbury Publishing Plc

Maya Abu-Deeb, Group General Counsel & Company Secretary

[email protected]

Hudson Sandler

+44 (0) 20 7796 4133

Dan de Belder / Hattie Dreyfus

[email protected]

Key area

Description

Mitigation

Market

Change in risk:
Increased

Market volatility: Post-pandemic consumer behaviour; impact of economic instability

Sales may be impacted by changes to consumer spending habits following the lifting of pandemic related restrictions.

Economic instability and inflationary pressures may lead to changes in consumer demand for products, impacting revenues and margins.

• Bloomsbury combines academic and general publishing in different formats and distributes its products through different channels. In addition, we operate in multiple countries and sell our products worldwide. This diversified portfolio and customer base, together with our international presence creates a level of resilience in respect of market or country specific downturns;
• Close monitoring of revenue streams, lists and channels; range and diversity of our content; resilience of demand for strong content.
• Continued focus on promoting Non-Consumer sales and BDR products, as Academic customers pivot to digital resources.
• Increased marketing and sales activities focused on retaining reader engagement.
• Renewed focus on promotion of reading for pleasure including at key travel points.

Increased dependence on internet retailing

Growth of online retailers may impact on the discoverability of Bloomsbury titles and lead to a reduction in sales channels available to the Group.

• Grow expert marketing teams skilled in internet sales.
• Engage with multiple internet retailers and support independent retailers.
• Focus on promoting sales from the Company's own website and on direct sales to customers.
• Increase focus on developing other marketing opportunities and other revenue streams, e.g. Academic & Professional digital products, rights and services.

Open access

Policies set by the UK's national research funders, UK Research and Innovations (UKRI) will increasingly require open access availability of scholarly research books by UK Authors. UKRI policies require that digital editions of research books be made freely available online within a year of publication from 2024. UKRI policies are anticipated to affect a small minority of Bloomsbury's research titles from 2024. A future policy associated with the UK's Research Excellence Framework (REF) may impact more research titles from around 2026. The impact of not adapting to this change would directly affect digital and print income from scholarly research titles.

• For titles in scope for UKRI's policy, charge an open access publication fee, paid by UKRI from a ring-fenced budget.
• Positively engage in the policy consultation for future REF policy.
• Pilot innovative new open access business models to explore sustainable ways of providing open access that are not reliant on publishing fees.
• Expand our research commissioning in regions outside of Europe, which are generally not as affected by open access policies.
• Appointment of Director of Research and Open Access to ensure the successful transition to sustainable open access business models. Business workflow and systems are in the process of being adapted to ensure capacity to operate at scale.

Sales of used books

Sales of used books for academic purposes erode backlist sales.

• Digital subscriptions and multiple ebook purchasing models are offered direct to institutions and students.

Rental of textbooks

US readers may license books from retailers for a limited period at a lower cost to buying books, with no revenues or royalty paid to the publisher.

• Develop digital resources and ebook platforms to deliver, direct to institutions and students, the content and flexible pricing models to suit readers' requirements.

Importance
of digital
publishing

Change in risk:
Reduced

BDR revenues and profit

Revenue and profit from BDR products and services may not grow in line with our stretching targets.

• Develop a portfolio of high-quality online content services in markets we understand well.
• Use third party content and content partnerships to scale up projects more quickly and create economies of scale.
• Continue to invest in internal resource and infrastructure to support product pipeline.

Higher project and development costs may be required or incurred than were budgeted for, impacting profit.

• BDR performance is monitored against annual and monthly budgets and reforecasts on a weekly basis.
• The business case for each BDR product requires approval by the Group Finance Director and Managing Director of the Non-Consumer Division. Costs and profitability by project are tracked and reviewed against budget on a monthly and quarterly basis by senior management to identify any corrective action required. Any budget overspend requires approval of the Group Finance Director and Managing Director of the Non-Consumer Division.

Unforeseen circumstances may delay development of new online content services.

• Standardise the digital delivery platform to simplify and speed up the development and implementation of new digital content services.

Reduced budgets for academic libraries and institutions may impact on revenue.

• Adoption of flexible sales models where budgets for annual subscriptions are restricted.
• Broaden the international institutional customer base so that the Company is not reliant on sales in specific territories.

Acquisitions

Change in risk:
Increased

M&A activity

Acquisitions could deliver lower than expected return on investment. Poor acquisitions may result in potential impairment charges.

• Potential acquisition targets are assessed by the members of the Executive Committee according to strategic and cultural fit. Thorough pre-acquisition due diligence is conducted by relevant functions, including finance, legal, publishing and sales. Capital allocation for acquisitions is determined at Group level and approved by the Board. Integration plans are developed at Divisional level and are implemented by a cross-functional team of experts, with Divisional oversight.
• Regular reports are presented to the Board throughout the year on post-acquisition performance, including an assessment of any variation to the expected return on investment.

Title acquisition
Consumer
publishing)

Change in risk:
Reduced

Commercial viability

Titles may be acquired that are not commercially or critically successful.

• Advances over a certain limit are required to be authorised by the Chief Executive and Group Finance Director.
• Financial forecasts are prepared prior to acquisition to predict commercial success.
• Focus on acquiring world rights where possible in order to increase sales opportunities and mitigate the risk posed by competing editions in open markets.
• Editorial guidelines and policies in place to guide acquisition decisions.

Information
and technology
systems

Change in risk:
No change

Cybersecurity/malware attack

Unauthorised access to the Company's systems may result in fraud, data privacy breach, theft of intellectual property, inability to access, or damage to, vital systems and assets, thus causing financial and reputational damage to the Group.

• Clear responsibility for systems, restrictions on software installation, increasing use of the cloud, information back-up, monitoring security risks, internal control reviews of the systems and up-to-date anti-virus software are amongst the measures in place.
• Training provided to all staff on cybersecurity risk.

Inadequate internal access controls or security measures

Inadequate controls over certain processes could lead to sensitive data being inadvertently revealed internally or externally.

• Sensitive personal data is stored securely and protected with password controls or encryption. User access controls are embedded in the Company's finance systems.

Financial
Valuations

Change in risk:
No change

Judgemental valuation of assets and provisions

Significant assets and provisions in the balance sheet depend on judgemental assumptions, e.g. goodwill, advances, intangible rights, inventory and returns provisions.

• Consistent and evidence-based approach to assumptions.
• Board approval of key assumptions.

Intellectual
Property

Change in risk:
No change

Erosion of copyright

Erosion of traditional copyrights.

• Continue policy of support for copyright and intellectual property rights as a fundamental facet of publishing.

Erosion of territorial copyrights as a result of global internet retailing.

• Continue to police infringements of the Group's territorial copyrights and take appropriate action to enforce such rights.

Infringement of Group IP by third parties

Failure to adequately manage and protect the Group's intellectual property rights (including trademarks and copyright) may damage the value of our core assets and impact on profits.

• Adopt robust anti-piracy and procedures.
• Undertake targeted enforcement action against third party infringers.
• Ensure appropriate digital rights management protection of ebooks and digital formats.

Reliance on key
Counterparties; supply chain resilience

Change in risk:

Increased

Failure of key counterparties or breakdown in key counterparty relationships

The failure of key counterparties could result in a significant disruption to the Group's business activities, resulting in lower levels of trading and revenues.

The Group's ability to meet customer demand for print products depends on timely supply from our printing partners. This may be impacted by the availability of raw materials (e.g. paper pulp) and ongoing global supply chain disruption.

A breakdown in key commercial relationships could impact on future publishing opportunities.

• Relationships with key counterparties are closely monitored and actively managed by senior managers. This includes frequent and regular engagement with key counterparties in order to ensure open communication and cooperation and to identify potential issues that may impact on the Company's business at the earliest opportunity. Other mitigations include having appropriate contracts and service level agreements in place, and interrogating the business continuity plans of key counterparties.
• Regular review of global supply chain resilience by the cross-function Supply Chain Working Group to ensure proactive steps are implemented to mitigate supply chain risks and prioritise supply of print titles.
• Ongoing diversification of supplier base.
• Increased local printing to mitigate shipping delays and disruptions.

Talent
Management and retention

Change in risk:
No change

Failure to attract and retain key talent and create an inclusive and supportive environment in which the Group's employees can thrive

Inability to recruit individuals with the necessary skills and experience could impact on Bloomsbury's ability to innovate and grow.

Loss of key talent could lead to loss of skill and knowledge from the business, result in decreased efficiency, impact on staff motivation and undermine external relationships.

• Ongoing employee engagement measures to improve employee experience and organisational culture; more information on these measures is set out on pages 66 to 69 of this Annual Report.
• Continued focus on employee development through training and mentoring programmes for early and midcareer employees.
• Provision of executive coaching for senior staff.
• Ongoing Employee Voice Programme, allowing every employee to have their voice heard directly by senior management and the Board. HR initiatives are implemented in response to matters raised during Employee Voice Meetings.
• Formal appraisal system provides the opportunity to identify learning and development opportunities to support career progression and succession planning.
• Formation of a Diversity and Inclusion Working Group and related Diversity and Inclusion networks.
• Development of a Diversity and Inclusion Action Plan with clear and ambitious targets to increase diversity within Bloomsbury's workforce and author base.
• Appointment of a Diversity, Inclusion and Training manager to oversee Bloomsbury's DE&I network and staff training programmes.
• Global staff turnover by Division and functional area is reported to the Executive Committee and monitored against agreed thresholds.

Legal and
Compliance

Change in risk:
No change

Breach of key contracts by the Company

Breach of a key contract by the Company could result in a claim for damages and/or termination of the contract by the relevant counterparty, resulting in financial loss to the Group.

• Relevant individuals within the business who are engaged in activities which relate to or are governed by key contracts are made aware of the terms of such contracts. Legal advice is sought from the Group's legal function where appropriate to ensure performance by the Company in accordance with contractual terms.

Failure to comply with applicable regulations

Failure to comply with regulations relating to the reporting of annual financial reports may lead to a range of sanctions including fines, imprisonment, reputational damage, and delisting.

• Annual Report and Accounts is reviewed internally by the Head of Group Finance and the Group Finance Director, and externally by the Group's appointed Auditor. Material balances are tested in accordance with relevant standards. The Group Company Secretary advises on content requirements under relevant regulation/legislation.

Failure to comply with privacy regulations may result in significant fines and reputational damage.

• Mitigation in respect of the risk of a data breach is noted above in connection with Information Technology and Systems.
• Since the introduction of the General Data Protection Regulation ("GDPR"), which came into force in May 2018, the Company has implemented a range of measures to ensure compliance with the requirements of GDPR. These include the implementation of policies and guidance in key areas, the provision of training to employees, reviewing and updating the Company's data collection methods and marketing communications, updating supplier terms and conditions, and updating privacy policies on the Company's websites. The Company has appointed a Data Protection Officer to oversee GDPR compliance.

Reputation

Change in risk:
No change

Investor confidence

City confidence undermined by events outside of the Company's control, e.g. collapse of a retailer.

• Diversify the portfolio of products and services to reduce dependencies on individual customers, sales channels and markets.

Cost inflation

New risk

Print Supply Costs

Increased print supply costs resulting from increases to energy prices and raw materials could impact on margin and achievement of the Group's financial targets.

• Long-term contracts with key suppliers to manage and mitigate cost increases; active price management of Bloomsbury products to recover incremental costs; diversification of supplier base.

Year ended
28 February
2022

£'000

Year ended
29 February
2021

£'000

Short-term employee benefits

4,068

2,486

Post-employment benefits

173

208

Share-based payment charge

1,150

1,083

Total

5,391

3,777

28 February
2022
£'000

28 February
2021
£'000

Sale of goods to subsidiaries

15,050

10,482

Management recharges

10,564

8,135

Commission payable to subsidiaries

1

2

Finance income from subsidiaries

81

96

Rights income from joint venture

3

15

Amounts owed by subsidiaries at year end

13,217

14,560

Amounts owed to subsidiaries at year end

70,073

59,502