Bloomsbury Regulatory News (BMY)

Bloomsbury Publishing Plc ("Bloomsbury" or "The Group")

Interim Results for the twelve months ended 31 December 2010

 Bloomsbury Publishing Plc today announces twelve month results for the period ended 31 December 2010.

Financial highlights

The highlights for the twelve months ended 31 December 2010 include:

·; Revenue of £90.7m (2009: £87.2m)

·; Adjusted pre-tax profit pre- highlighted items* of £8.4m (2009, £7.7m)

·; Unadjusted pre-tax profit of £5.5m (2009, £7.1m)

·; Adjusted basic earnings per share (pre-highlighted items) of 8.50p (2009, 7.56p) Basic earnings per share of 4.61p (2009, 6.77p)

·; Profit from Bloomsbury USA of £1.3m before central cost recharges of £0.2m (2009, £0.5m before central cost recharges of £0.2m)

·; Net cash of £34.1m (2009, £35.0m). Strong cash inflow from operating activities of £5.1m (2009, outflow £4.3m)

Second interim dividend per share of 3.91p, an increase of 7% on the 2009 final dividend of 3.65p. The intention is to announce a further dividend for the 2 month period to 28 February 2012

*Highlighted items comprise Goodwill impairment, amortisation of intangible assets, acquisition costs, aborted acquisition costs and relocation costs

Operating highlights

·; Best performance ever from Bloomsbury US

·; Berlin Verlag made an operating profit in the second half

·; Bestsellers across the Group:

- Eat, Pray, Love - Elizabeth Gilbert

- The Finkler Question - Howard Jacobson - winner of the 2010 Man Booker Prize

- Operation Mincemeat - Ben Macintyre

- Berthold Beitz - Joachim Kappner

·; Acquisition of Bristol Classical Press

·; E-book sales have grown eighteen fold in 2010 over 2009 from $131k to $2.3m

·; Appointment of two new Non Executive Directors in 2010 and new Group Finance Director in 2011

·; Appointment of a Managing Director, Group Sales and Marketing, a Managing Director of new Children's and Educational division and a new Managing Director of Berlin Verlag

·; Major online initiatives including

- Berg Fashion Library Online

- Public Library Online in new territories

- Professional Library Online

- Winston Churchill Archives digitisation

- Reeds Nautical Online

·; Conception of the strategy for One Global Bloomsbury - Four Worldwide Publishing Divisions. This will be implemented on 1 March 2011 at the start of the new financial year. A&C Black, Berlin Verlag, Berg, Bloomsbury UK and Bloomsbury USA will be replaced by four new worldwide publishing divisions for Adult; Children's and Educational; Academic and Professional; and Business Development which will be the basis of future management structure and reporting

Commenting on the results and prospects for Bloomsbury, Nigel Newton, Chief Executive, said:

"Bloomsbury had an excellent year with a number of bestselling titles and particularly buoyant sales in the final quarter. We are also benefitting from our strong position in digital publishing which continues to experience exciting and unprecedented growth. With sales of digital devices such as the Kindle, Nook and iPad growing rapidly, 2011 will clearly be the year of the e-book. Our overall trade e-book sales are currently running at just under 10% of print sales, a proportion we expect to increase as more backlist titles are added and as the UK market gains the kind of momentum being seen in the US. We believe that digital publishing creates huge opportunities for Bloomsbury and its authors. On 1 March 2011, we will be implementing a new strategic plan for One Global Bloomsbury with Four Worldwide Publishing Divisions. "

For further information, please contact:

Chief Executive's Statement

Bloomsbury is reporting its second set of interim results for the twelve month period to 31st December as its financial year end has moved to 28th February 2011. I am pleased to report that in the second half of 2010 trading in the UK, US and Germany was robust. There were a number of bestselling titles both from new books published during the year and continued sales from books published in previous financial years. Sales were particularly buoyant in the final quarter. In the UK, The Man Booker Prize winner, The Finkler Question by Howard Jacobson, Operation Mincemeat by Ben Macintyre, the film tie-in edition of Eat, Pray, Love by Elizabeth Gilbert and The Flavour Thesaurus by Niki Segnit were amongst our top selling new titles. Books published in prior years continued to be in demand, led by River Cottage Everyday by Hugh Fearnley-Whittingstall and the seven Harry Potter books, which sold well on the back of the film Harry Potter and the Deathly Hallows Part 1 and the release of the series with new jacket designs.

E-books continued to see extraordinary revenue growth, especially in the US, where fiction e-book sales are estimated to be nearly 15% of total sales. Recent reports from Amazon show new best sellers running at 40% of total sales in e-book format. Bloomsbury in the US is experiencing similar figures, especially with new titles. 42% of US sales of Howard Jacobson's The Finkler Question, winner of the 2010 Man Booker Prize, in the first month were e-books. E-book revenues for the Group have grown more than eighteen-fold in 2010 over 2009 from $131K to $2.3m. Global e-book sales are fuelled through a growing range of global sales and distribution partners and the rapid consumer adoption of digital reading, whether through dedicated reading devices, smart phones or tablets.

Our overall trade e-book sales are currently running just under 10% of print sales. This proportion is expected to increase as more negotiations are concluded on e-books for backlist titles and as the UK and elsewhere gains the kind of momentum currently seen in the US.

This Christmas season was dubbed the Kindle season as e-reader sales exceeded high end forecasts. Amazon reported over 8 million Kindles sold last year, over 5 million during Christmas. Apple reported over 7 million iPads sold in the 4th Quarter of 2010 and Barnes & Noble sold over 2.5 million Nooks. Sony, Kobo, and a host of other devices added another million e-reading customers to the legions that already buy e-books. 2011 will clearly be the year of the e-book.

We published nearly 1,800 e-books in 2010. Our focus on e-books is key as many indicators point to the fact that e-book device buyers purchase more e-books than they had in print form before buying an e-book reader. As a long-term focus, we couldn't have a better goal than enabling as much of our business as possible to move to e-book format.

Revenue for the twelve month period was up 4.0% to £90.7m (2009, £87.2m). Gross margin increased to 52.8% (2009, 49.7%) which was due to a number of factors including the full year's trading of the higher margin Bloomsbury Professional acquired in July 2009, lower book returns rates in the UK, higher margins rights and licensing deals, and the moving of the paperback printing of Berlin's business to the UK where the costs are lower.

Marketing and distribution costs were 1.3% lower at £15.2m (2009, £15.4m). Administrative expenses before highlighted items increased 16.5% to £24.7m (2009, £21.2m). £1.2m of increased overhead costs before central cost recharges relate to the additional six months' overhead of Bloomsbury Professional, which was acquired in July 2009. In addition, performance incentives were awarded to staff across the Group. Share option charges also increased to £0.7m (2009, £0.1m). Excluding the share option charge and the incremental cost of the overheads associated with Bloomsbury Professional, administrative expenses increased by 8%. Highlighted items include the amortisation of intangible assets of £0.9m (2009, £0.6m), impairment of goodwill of Berlin Verlag of £1.5m (2009, £nil) costs of £0.3m (2009, £nil) relating to an aborted class one acquisition and costs of £0.1m (2009, £nil) in relation to the relocation of the London offices as part of the Group's reorganisation. We are due to move to the new London offices in August 2011. The impairment of the goodwill in Berlin was made following a review of economic factors affecting Berlin and forecasts not supporting the carrying value. With a new management team and structure, there has been a rationalisation of the publishing programme and reduction of Berlin's cost base as part of the plan to increase profitability in the business.

Profit before investment income, finance costs, tax and highlighted items increased to £8.0m (2009, £6.8m). Unadjusted profit before investment income, finance costs and tax was £5.1m (2009, £6.2m)

Investment income decreased by 72.7% to £0.3m (2009, £1.1m) as a result of lower interest rates and, to a lesser extent, lower average cash balances held during the twelve month period. 2009 benefitted from the overhang of longer-term deposits made in prior years at significantly higher interest rates.

Profit before tax and highlighted items was £8.4m (2009, £7.7m). Unadjusted pre-tax profit was £5.5m (2009, £7.1m).

The adjusted underlying corporation tax rate for 2011 is 28.3%. The Group's effective tax rate for the twelve months ending 31st December 2010 was 38.0% (2009, 30.1%). The increase in the rate is primarily due to highlighted items reducing the pre-tax profit. These highlighted items are the goodwill impairment charge on Berlin of £1.5m (2009, £nil), costs and fees on an aborted class 1 transaction of £0.3m (2009, £nil) and costs associated with the relocation of the London head office of £0.1m (2009, £nil), all of which are disallowable for corporation tax purposes. The adjusted underlying corporation tax rate for 2011 excluding the goodwill impairment charge, abort costs and relocation costs is 28.3%. Within the corporation tax charge itself is a deferred tax credit of £0.4m relating to previously unrecognised losses on the US operation and a write-down of the deferred tax asset of £0.7m on Berlin.

Adjusted basic earnings per share, which excludes highlighted items, was 8.50 pence (2009, 7.56 pence). Basic earnings per share was 4.61 pence (2009, 6.77 pence).

Net cash generated from operating activities for the year was £5.1m (2009, outflow of £4.3m). The operating cash outflow in 2009 included a higher level of royalty payments made in the first half of the year on books sold in the second half of 2008. Net cash balances at 31 December decreased 2.6% to £34.1m (2009, £35.0m). As at 31 December 2010, the Group had under contract 1,322 titles (31 December 2009, 1,073) for future publication, with a gross investment of £21.9m (31 December 2009, £23.7m). After payment of the initial tranches of advances to authors, our commitment for future cash payments on these contracted titles as at 31 December 2010 was £13.4m (31 December 2009, £13.4m).

Since books sold are often returnable by distributors, the Group makes a provision against books sold in the accounting period. The unused provision at the period end is then carried forward as an offset to trade receivables in the balance sheet, in anticipation of further book returns of previous sales subsequent to the period end. A provision for the Group of £6.9m (31 December 2009, £6.5m) for future returns relating to the year to 31 December 2010 and prior year sales has been carried forward in trade receivables in the balance sheet at 31 December 2010. Net provisions of £3.1m (2009, £3.4m) against advances to authors on titles published ('advance provisions') were made in the period.

SECOND INTERIM DIVIDEND

The Directors have declared a second interim dividend of 3.91 pence per share, a 7.0% increase on the 2009 final dividend of 3.65 pence per share, which will be paid on 1 June 2011 to shareholders on the register at close of business on 3 May 2011. The intention is to announce a further dividend for the 2 month period to 28 February 2012.

OPERATIONAL REVIEW

Geographical Analysis

UK

The revenue increase was primarily due to the success of the Adult list and the full year's trading of Bloomsbury Professional which was acquired in July 2009. Bloomsbury's prescient Public Library Online project continues to help libraries offer cost effective online access to books to their communities thereby helping them retain their valued place at the core of a literate society. The service has maintained a 100% renewal rate and is currently available through 18 UK library authorities reaching 7.3 million of the UK population. Based on the success of the service in the UK and its scalability, Public Library Online has now been launched the US, Canada, Australia, New Zealand, Germany and Scandinavia are in discussions with publishers and libraries worldwide to join this publisher led digital library supply service.

North America

The US has turned in its best operating performance to date with strong sales both from books and rights. Almost two thirds of the Group's e-book sales originated in the US and we are seeing no signs of abatement in the growth rate. The Finkler Question was one of our big successes during the year but we are also seeing continued strength in our backlist of titles which has also contributed to 2010's excellent performance. We had three New York Times bestsellers on the Children's list during the year. The academic list is building critical mass by the launch of the A&C Black list in the first half and augmented by the acquisition of Bristol Classical Press List. The Berg list is expected to come on stream in September 2011.

We experienced higher than average book returns mid last year, in particular from Borders. The level of returns from Borders has reduced back down to a normal level and Borders has gone into Chapter 11. The debt is covered by our US distributor so there is no impact on the receivable to us.

Continental Europe

The first half of 2010 was adversely affected by weak sales and above-average returns. Sales in the second half of the year were significantly higher, driven by a number of bestselling books including the paperback edition of Eat, Pray, Love, which was a tie-in to the release of the blockbuster film of the same name in September and the Berthold Beitz biography. A profit of £0.3m was made in the second half of the year.

One of the main focuses for Berlin Verlag was the launch of its e-book publishing programme in the autumn. Sales have been small as expected but will gather momentum in 2011. In addition the German version of Public Library Online was launched in the second half of the year and we are in discussions with other German publishers to host their titles on this platform.

Berlin Academic was added to the Berlin Verlag business in 2010. First steps included establishing a business model and an infrastructure, focusing on innovative electronic publishing services for institutional customers and individual authors, particularly through Open Access publishing models.

Following an assessment of the carrying value of intangible assets at 31 December 2010. an impairment charge of £1.5m has been made in the period to 31 December 2010 to write down goodwill and intangible assets associated with Berlin Verlag to nil. The charge is included within Highlighted items in the income statement.

With our new management team and structure, there is an intense focus on increasing profitability.

Business Divisions

Specialist Publishing Division

Revenues increased 9.1% to £28.7m (2009, £26.3m) which was primarily due to the full year's trading of Bloomsbury Professional. The growth in the academic list is primarily organic. However, in November 2010 we acquired the Bristol Classical Press list, adding a backlist of 900 titles. Bristol Classical Press features important new scholarly research in Archaeology, Classics, Ancient History and Ancient Philosophy. The combination of Bristol Classical Press with Methuen Drama and Arden Shakespeare within the new Academic & Professional Division establishes Bloomsbury as the leading European publisher of primary texts in the humanities at Higher Education level with over 2000 titles in print.

The contract to digitise and publish online the archives of Sir Winston Churchill was agreed in the middle of 2010. This invaluable collection of a million pages will be published in 2012.

2010 was a year of great opportunity for Bloomsbury Professional, with our new digital strategy starting to take effect, and the promise of much more to come in 2011. Revenue from online licensing was significantly ahead of budget in the year, and this was enhanced by the launch of a range of content using Bloomsbury's Public Library Online platform, rebranded as Professional Library Online. Professional Library Online provides an innovative and intuitive platform delivering Bloomsbury Professional's authoritative law and tax research titles to libraries, institutions and professional service firms. It distinguishes itself by combining simple click-and-read technology with portability and market-changing pricing. Within weeks of the November launch, this had led to major new deals with two of the Big 4 accountancy firms. By the end of 2010, Bloomsbury Professional's content was available online in many of the major law, tax and accounting firms. In the coming year, Bloomsbury Professional will launch a number of new fully searchable online services for the tax and legal profession, and will begin to offer a large proportion of its frontlist and backlist content across a range of hand held devices.

Our main markets remain stable, with some positive signs emerging after the turbulence of recent years. Given the must-have nature of our publishing, this is reflected in the high level of renewals for annuals and subscription services, and in the successful launch of a number of major new books and editions, including The Law and Practice Relating to Charities 4th ed by Hubert Picarda QC. Despite the fragility of the Irish economy, our best selling new edition of 2010 was Irish Land Law 4th ed by Professor John Wylie, which illustrates the resilience of the market for professional information, and of our list.

Berg Publishers produced the best performance in its trading history. Sales were strongly boosted by the US co-publication of the Berg Encyclopedia of World Dress and Fashion with Oxford University Press. This major reference work, in development for five years, performed well above expectations in Berg's domestic and export markets. Along with the Berg Fashion Library, it won the prestigious 2011 Dartmouth Medal, awarded by the American Library Association for "extensive and outstanding multidisciplinary coverage of dress, fashion and its impact on society" and was deemed a "landmark of scholarship." In addition, both the print and online versions were named "Outstanding Reference Sources" by the References and Users Services Association, a division of the American Library Association. Digital plans are integral to Berg's growth strategy. Currently this division is focused on developing a suite of online products in its core subjects for its bespoke platform. There are further plans to enhance the Berg Fashion Library offering through additional modules. Future product launches across the Group will benefit from investment to date in the Berg Fashion Library. Backlist digitisation and IP deployment through digital channels are core strategies for 2011. Physical book sales, exclusive of the exceptional publication of the Berg Encyclopedia of World Dress and Fashion, are up 25% on 2009. Journals also continue to perform strongly. Due to the amount of time required to establish subscription products, it is too early to assess the performance of the Berg Fashion Library, but sales to date have exceeded expectations and initial indicators are very positive.

On other specialist lists print on demand and e-book technology has enabled us to republish a range of highly sought after out-of-print titles as print and e-book versions, including fifty books from the prestigious Poyser and Helm ornithology imprints. This successful initiative will be followed up by new ranges and formats in 2011.

The UK education market was challenging in 2010 due to schools' uncertainty about curriculum change from the new government and fear of budget cuts. We anticipate that the market will be somewhat improved in 2011, with increased spending by schools in the first quarter and more certainty concerning budgets which have now been agreed.

In March 2011, we will launch a new digital product based on Reeds Nautical Almanac, the bible of navigational data for leisure sailors. Reeds Nautical Online will be available to all purchasers of the print almanac as a downloadable application for use at sea or on land. Constantly updated, with live weather data, port updates and a unique route planning tool, Reeds Online will enable sailors to search quickly, plan journeys and browse.

Bloomsbury Information had an excellent year which saw the successful delivery of our key management services goals to the Qatar Foundation assisting them in the successful launch of two businesses: Bloomsbury Qatar Foundation Publishing (BQFP) and Bloomsbury Qatar Foundation Journals (BQFJ). BQFP publishes books in English and Arabic on behalf of the Qatar Foundation and was launched in April at a reception at Windsor Castle hosted by the Queen and attended by Her Highness Sheikha Mozah bint Nasser Al Missned, Consort of the Emir of Qatar and Chairperson of the Qatar Foundation. Since its launch, BQFP has published over 30 titles including the Arabic translation of the worldwide bestseller The Gruffalo. BQFP also has an active community outreach programme to encourage a life-long love of reading and writing in Qatar and the region.

In December the astronaut Buzz Aldrin's inspiring talk in Qatar marked the launch of BQFJ, the open-access, online, peer-reviewed, research journals publishing platform (www.qscience.com). This innovative enterprise reflects the commitment of Qatar and the Qatar Foundation to research. The launch journals include Sir Magdi Yacoub's Aswan Heart Centre: Science and Practice, healthcare, librarianship, education and Islamic Studies.

The online financial best practice and information resource (www.qfinance.com) also saw sustained growth through the year achieving over 150,000 unique visitors per month by the final quarter of 2010.

Prospects for 2011 are positive as the new businesses continue to grow. Other business development opportunities in the Middle East and elsewhere are under active pursuit.

Trade Publishing Division

Adult

The Adult division continues to perform well. Revenues for the year were £42.1m (2009, £37.9m) with a contribution before administrative expenses of £15.7m (2009, £11.0m). The strategy for the division has been to focus strongly on the titles with maximum commercial potential whilst keeping tight controls on the level of advance investment, continuing to identify new talented writers and promoting the "long tail" by acquiring established authors' backlists in print and e-book format and moving titles to print on demand. The growth of our food list has been considerable with books published by high profile authors such as Hugh Fearnley-Whittingstall and Heston Blumenthal but also innovative new authors such as Niki Segnit with The Flavour Thesaurus. We continue to look for markets that are showing good growth and we have embarked on building a crime list of high quality writers who will deliver a book a year. Our ten-year strategy of building a serious non-fiction list has matured and concentration on the growth of our paperback list has paid off with a wide variety of bestselling books from the novels from Khaled Hosseini to The Guernsey Literary and Potato Peel Pie Society to Eat, Pray, Love and the books of Ben McIntyre.

The retail landscape is changing with more titles being sold through supermarkets, or online, in print or electronic format. The impact of digitisation is becoming considerable and acquiring world English rights is of premier importance in the digital future. 42% of the US sales of our Booker Prize winner, The Finkler Question, were e-books.

In the last 12 months we have had seven hardback bestsellers in the UK with Alex's Adventures in Wonderland by Alex Belos, The Flavour Thesaurus by Niki Segnit, which was the winner of a design award, MI6: The History of the Secret Intelligence Service 1909-1949 by Keith Jeffery, Operation Mincemeat by Ben McIntyre, Just Kids by Patti Smith, River Cottage Everyday by Hugh Fearnley-Whittingstall and The Finkler Question by Howard Jacobson and three paperback bestsellers, Eat, Pray, Love and Committed by Elizabeth Gilbert, Operation Mincemeat, , in the Sunday Times list. Operation Mincemeat was No 1 in both hardback and paperback and Eat, Pray, Love was the No 1 bestselling non-fiction book in the year of 2010, with it occupying first place for 23 consecutive weeks.

The Man Booker Prize was won byHoward Jacobson with the The Finkler Question, and Patti Smith's Just Kids won the National Book Award. We continue to identify and acquire books that are adopted for the Richard & Judy and TV Bookclub promotions. No and Me , Operation Mincemeat, Major Pettigrew's Last Stand were adopted as a Richard & Judy picks and The Bed I Made and Even the Dogs as TV Bookclub choices.

Children's

Revenues in 2010 were £19.9m (2009, £23.0m) with a corresponding contribution before administrative expenses of £7.1m (2009, £8.3m). Although there were fewer bestselling titles during the year, sales of the seven Harry Potter books were very encouraging on the back of the film Harry Potter and the Deathly Hallows part 1 and the release of the series with new jacket design. What was particularly pleasing was the high level of demand for the paperback box set over the Christmas period. During the year, The Graveyard Book by Neil Gaiman won the Carnegie medal.

2011 also sees the launch of the Wombles series of books brought back in to print and being supported by all the chains as well as the independent bookshops.

Board and management

Ian Cormack was appointed as non-executive Director on 1 January 2011 and also became the Senior Independent Director and Chair of the Audit Committee on that date. Ian Cormack replaces Mike Mayer who stepped down from the Board on 31 December 2010, in accordance with the UK Corporate Governance Code, after 9 years of distinguished service to the Board of Bloomsbury. I would like to thank Mike for his long and distinguished service to the Board of Bloomsbury and his immeasurable contribution to the company over many years. We announced on 25th February 2011 the appointment of Wendy Pallot as Group Finance Director starting on 8th April 2011 and we look forward to welcoming Wendy to the Board then. I would also like to take this opportunity to express my enormous gratitude to Colin Adams for his support and contribution over 17 years at Bloomsbury.

In addition I would like to thank one member of the senior management of Bloomsbury, Jill Coleman, Managing Director of A&C Black who leaves the company on 25th March 2011 after 30 years with A&C Black. Finally, I would like to welcome Emma Hopkin as Managing Director of our new worldwide Children's and Educational Publishing Division who joins us next month.

Outlook

The final two months of the extended financial year to 28 February 2011 are normally fairly quiet for the business which, due to seasonality, are typically loss making. However we are still seeing a lot of activity, with some of our backlist titles, including Major Pettigrew's Last Stand, by Helen Simonson performing well. For new titles, Battle Hymn of the Tiger Mother has gone to No 3 in The Sunday Times bestseller list. Into the new 2011 financial year, we have a novel from Orange-Prize winner, Ann Patchett, and the graphic novel of The Kite Runner by Khaled Hosseini coming. We are publishing four previous Booker shortlist authors: Paul Bailey, Magnus Mills, Abdulrazak Gurnah and Justin Cartwright. New books from Hugh Fearnley-Whittingstall and Heston Blumenthal and new authors Raymond Blanc and Paul Hollywood join our food list.

With effect from 1 March 2011, Bloomsbury will undergo an organisation change. With the huge growth in digital publishing the market for books is becoming more global. Our major customers are also becoming more global, and, indeed, so is the media with whom we promote our books. The increasing demand for e-books means that acquiring world rights to books and exploiting them globally is becoming the most effective way of protecting our territorial copyrights. The Group will be divided into four Global publishing divisions: Adult; Children's & Educational; Academic & Professional; and Bloomsbury Information & Business Development. The two major supporting service divisions for this will be a single unified structure for Sales, Marketing and Rights across the Group and a Group Production function. This is a redeployment of valuable resources within the Group to position us more effectively as a global publisher in print and digital. This is a very exciting move for Bloomsbury as it provides us with a more flexible structure to capitalise on current and future changes in the market place.

Chief Executive

28 February 2011

CONDENSED CONSOLIDATED INCOME STATEMENT

for the twelve months ended 31 December 2010

The notes on pages 15 to 27 form an integral part of these condensed consolidated interim financial statements.CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

for the twelve months ended 31 December 2010

CONDENSED CONSOLIDATED BALANCE SHEET

at 31 December 2010

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY ATTRIBUTABLE TO OWNERS OF THE PARENT

for the twelve months ended 31 December 2010

CONDENSED CONSOLIDATED CASH FLOW STATEMENT

for the twelve months ended 31 December 2010

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

1. Basis of preparation

The condensed consolidated interim financial statements for the six months ended 31 December 2010 and the twelve months ended 31 December 2010 do not constitute statutory accounts as defined in section 434 of the Companies Act 2006. The condensed consolidated interim financial statements have been prepared in accordance with International Accounting Standard ('IAS') 34 'Interim Financial Reporting' as adopted by the European Union ("EU"). They have also been prepared under the historical cost convention.

Having made enquiries of senior management and reviewed cash flow forecasts, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. The factors taken into account include the level of cash reserves, limited impact of economic downturn on book sales and continuing sources of revenue. Thus they continue to adopt the going concern basis of accounting in preparing the condensed consolidated interim financial statements.

The annual financial statements of the Group are prepared in accordance with International Financial Reporting Standards ('IFRS') and International Financial Reporting Interpretations Committee ('IFRIC') pronouncements as adopted by the European Union. The financial information for the year ended 31 December 2009 does not constitute statutory accounts as defined in section 434 of the Companies Act 2006. This information was extracted from the statutory accounts for the year ended 31 December 2009, a copy of which has been delivered to the Registrar of Companies. The auditor's report on those accounts was unqualified and did not include a reference to any matters to which the auditor drew attention by way of emphasis of matter and did not contain a statement under section 498(2) or (3) of the Companies Act 2006.

The accounting policies used in the preparation of the condensed consolidated interim financial statements for the six months ended 31 December 2010 and the twelve months ended 31 December 2010 are consistent with those that the Directors intend to use in the statutory accounts for the fourteen month period ending 28 February 2011.

The accounting policies used in the preparation of the condensed consolidated interim financial statements for the six months ended 31 December 2010 and the twelve months ended 31 December 2010 are consistent with those used in the statutory accounts for the year ended 31 December 2009 other than changes arising from the implementation of the amendments to IFRS3 as detailed below, which impacts the treatment of the acquisition made in the period and future acquisitions but is not applied retrospectively.

The condensed consolidated interim financial statements are unaudited but have been reviewed by the auditors in accordance with International Standard on Review Engagements (UK and Ireland) 2410 'Review of the Interim Financial Information performed by the independent Auditor of the Entity'.

The preparation of condensed consolidated financial statements requires the use of certain critical accounting assumptions. It also requires management to exercise its judgement in the process of applying the Group's accounting policies. The areas requiring a higher degree of judgement and complexity, or areas where assumptions and estimates are significant to the financial statements have been set out in the 2009 Annual Report.

The adoption of IFRS 3 (revised 2008) in the period has lead to a change in accounting policy. This accounting policy applies prospectively and hence has no impact on comparative periods. The revised accounting policy is as follows:

Consolidation

The consolidated financial statements comprise the accounts of the Company and its subsidiaries. The results of the subsidiaries are accounted for in the income statement from the date of acquisition.

Subsidiaries are entities over which the Group has the power to govern the financial and operating policies to obtain economic benefit from their activities. Subsidiaries are fully consolidated from the effective date of acquisition or up to the effective date of disposal, as appropriate.

The acquisition method of accounting is used to account for the acquisition of subsidiaries by the Group. The consideration transferred is measured as the fair value of the assets given, equity instruments issued, contingent consideration and liabilities incurred or assumed at the date of exchange.

Costs directly attributable to the acquisition are expensed as incurred. Previously such costs were capitalised as part of the consideration transferred.

Changes in contingent consideration arising from additional information, obtained within one year of the acquisition date, about facts or circumstances that existed at the acquisition date are recognised as an adjustment to goodwill. Other changes in contingent consideration are recognised through profit or loss, unless the contingent consideration is classified as equity. In such circumstances, changes are recognised within equity. Previously subsequent changes to contingent consideration were recognised as an adjustment to goodwill.

Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are initially measured at fair value at the acquisition date irrespective of the extent of any minority interest.

Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with those used by other members of the Group.

All intra-group transactions, balances and unrealised gains on transactions between Group companies are eliminated on consolidation. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred.

The following Standards, which were effective for this financial period, have no material impact on the financial statements of the Group:

·; IAS 27 (revised 2008), 'Consolidated and separate financial statements'; the revised standard provides guidance relating to the accounting for non-controlling interests in loss making subsidiaries, the acquisition of non-controlling interests and the accounting for subsidiaries when control by the entity is lost.

·; IAS 28 (amended), 'Investments in associates', and IAS 31 (amended), 'Interests in joint ventures'; the amendment provides additional guidance in situations where significant influence or joint control is lost.

·; IAS 39 (amended), 'Eligible Hedged Items'; the amendment provides further clarification in the application guidance.

·; IFRS 2 (amended), 'Group cash-settled Share-based Payment Transactions'; the amendment clarifies that an entity that receives goods or services in a share based payment arrangement must account for those goods or services regardless of which entity in the group settles the transaction.

·; IFRS 1 (revised 2008), 'First-time adoption of IFRS'; additional exemptions for first time adopters.

·; IFRIC 17, 'Distributions of Non-cash Assets to Owners'.

·; IFRIC 18, 'Transfers of Assets to Customers'.

·; Annual Improvements 2009.

There were no Standards and Interpretations which were in issue but not effective at the date of authorisation of these financial statements that the Directors anticipate will have a material impact on the financial position or performance of the Group.

The interim report complies with the requirements of the Disclosure and Transparency Rules ('DTR') of the United Kingdom's Financial Services Authority in respect of half-yearly financial reports. The interim report is the responsibility of, and has been approved by, the Directors who each confirm that to the best of their knowledge:

·; the condensed set of financial statements has been prepared in accordance with IAS 34 as adopted by the EU;

·; the interim management report includes a fair review of the important events during the twelve months ended 31 December 2010 and description of the principal risks and uncertainties for the remaining two months of the period to 28 February 2011, as required by DTR 4.2.7R; and

·; the interim management report includes a fair review of disclosure of related party transactions and changes therein, as required by DTR 4.2.8R.

Principal risks and uncertainties

The Group, like all businesses, faces a number of risks and uncertainties as it conducts its operations. There are a number of factors that could impact the Group's long-term performance and steps are taken to understand and evaluate these in order to achieve our objective of creating long-term, sustainable returns for shareholders.

Principal risks and uncertainties to the business fall into the following categories:

Title Acquisition

Advances to authors have the potential to reduce margins when portions of those advances remain unearned. When considering a title acquisition, an initial purchase evaluation process is carried out and signed off at a senior level. There is also a system of continuous review, analysis and feedback on title performance to better inform future acquisitions.

Market

Consumers may not buy a book that has been sold to retailers, and unsold books are returned for credit. Also, customers seek to price promote many titles which can reduce margins. The steps taken to protect and grow revenues are as outlined in the Chief Executive's Review.

Business Continuity

The security and robustness of our systems, in particular our IT systems, are important in all aspects of our business, whether in respect of the editorial and production processes, publicity, marketing and sales, or in respect of stock monitoring and order fulfilment. IT processes are continually updated and security improved, with daily offsite back-up of electronic files. The performance of our key print and distribution suppliers is regularly monitored.

These risks, together with the financial risks are discussed in more detail in the group financial statements for the year to 31 December 2009. The same risks will apply to the 14 month period to 28 February 2011.

The Directors and their functions are:

J J O'B Wilson - Non-Executive Chairman

J N Newton - Chief Executive

C R Adams ACA - Group Finance Director

R D P Charkin - Executive Director

M J Mayer - Independent Non-Executive Director (resigned 31 December 2010)

S J Thomson - Non-Executive Director

I Cormack - Independent Non-Executive Director (appointed 1 January 2011)

The financial information included in this document has been approved and authorised for issue by the Directors on 28 February 2011.

2. Segmental analysis

As the main thrust of the Group's growth is to develop its international publishing strategy, the internal reporting to the chief operating decision maker is by geographical segments. Management has determined the operating segments based on these reports. All segments derive their revenue from book publishing, sale of publishing and distribution rights, sponsorship and database contracts. The analysis by geographical segment is shown below.

*Inter-segment sales are charged at prevailing market rates

2. Segmental analysis (continued)

Business Divisions

The Group's business divisions are organised into three areas: Trade Adult, Trade Children's and Specialist. The following table provides the analysis for these areas.

Due to the seasonality of the business, the Group's sales, segment and divisional result are weighted towards the second half of the year.

3. Earnings per share

The basic earnings per share for the six months to 31 December 2010 is based on the earnings of £2,747,000 (2009, £3,729,000) and on a weighted average number of Ordinary Shares in issue of 73,870,734 (2009, 73,594,863) after deducting 88,760 (2009, 88,760) shares held by the Employee Benefit Trust. The earnings per share for the twelve months to 31 December 2010 is based on the earnings of £3,401,000 (2009, £4,981,000) and on a weighted average number of Ordinary Shares in issue of 73,731,665 (2009, 73,594,863) after deducting 88,760 (2009, 88,760) shares held by the Employee Benefit Trust. The diluted earnings per share for the six months to 31 December 2010 has been calculated by reference to a weighted average number of Ordinary Shares of 73,874,809 (six months to 31 December 2009, 73,920,795, year ended 31 December 2010, 73,735,740, year ended 31 December 2009, 73,920,795) which takes account of share options and awards.

The reconciliation between the weighted average number of shares for the basic earnings per share and the diluted earnings per share is as follows: