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Shares in book publisher Bloomsbury shot up on Tuesday morning after the firm released its best half-year profits since 2008.
Revenue at the company totalled £78m in the six months running up to the end of August. That was up 10% on the same period in 2019.
Pre-tax profit was even better, rising by 60% to £4m.
You may be wondering why Bloomsbury, which is most famous for publishing the Harry Potter books, was able to do so well in 2020.
Luckily, in this maddening, brain boiling year, there is only one answer to any question you might have — COVID-19.
During lockdown, people seem to have tired of melting their eyeballs by watching hours of Netflix and remembered that they have the ability to read books.
This pushed up sales in Bloomsbury’s consumer division by 17%.
A more interesting development was in the publisher’s non-consumer division.
Revenues for its online learning material grew by 47% to £5.6m. But sales for the non-consumer division as a whole fell by £0.2m to £29.7m.
Of course, Bloomsbury was not the only company to benefit from lockdown.
Supermarkets saw spikes in sales as restaurants shut. Netflix saw a surge in new signups with people forced to stay at home. Even Beyond Meat saw a 194% increase in revenue from grocery stores as people decided to give vegan food a try.
The question for all of these companies is whether the growth they saw is actually sustainable in a post-pandemic world.
As we reported last week, the disinfectant manufacturer Tristel saw a huge spike in revenue because of COVID-19. But its shares still fell, with some investors likely seeing narrower room for growth without a pandemic.
The other problem to be aware of here is that most listed companies have a diverse set of operations. That may mean they stood to gain from COVID in one way but to lose in another.
Domino’s Pizza Group, for example, saw an increase in sales during the first half of this year but ended up with lower profits because of the safety measures it had to put in place in stores.
Bloomsbury faced a similar problem in its non-consumer division. True, sales for its e-learning services were up. But a drop in demand for printed books meant that revenue for the division as a whole was lower than it was in the first half of its 2019 fiscal year.
The question that all of this raises for investors is whether the changes we’ve seen since the pandemic began will remain once it's over.
Take something as simple as working from home. If that continues to be a part of our lives, it may mean there is less money to be made by investing in office rental businesses.
For Bloomsbury, investors will probably be weighing up whether the surge in book buying means we’re now all bibliophiles or if it was a temporary reprieve from the boredom of being stuck at home.
A more important question may also be what will happen in the firm’s non-consumer division. Will there be a move to e-learning or will the publisher’s revenue from that division fall and its printed book sales rise again?
Only time will tell us the answer to such questions.
But for anyone looking to predict the future, it’s worth remembering that human desire is remarkably fickle.
People are happy to read or learn a new language when there isn’t much else to do. Start opening pubs, clubs and the borders to cheap European getaways and the desire to sit at home with a good book may quickly dissipate.
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