For the first of FundCalibre’s 2025 Q&A articles for Professional Paraplanner, the team talked to Alexandra Jackson, manager of the Rathbone UK Opportunities fund. Alexandra shares insights on two fascinating UK companies. Despite market challenges, these companies have successfully capitalised on their niche markets through strategic growth and innovation.
Why you should listen to the interview: Discover how Bloomsbury and Games Workshop have maintained strong growth in an ever-changing market. With insights from Alexandra Jackson, you’ll discover how these mid-cap companies leverage their unique positions to outperform expectations and create lasting value for investors.
This interview was recorded on 22 January 2025. Please note, answers are edited and condensed for clarity. To gain a fuller understanding and clearer context, please listen to the full interview – see below.
Interview highlights:
BookTok driving returns
“The competition for people’s attention is so high, there’s so much media that you could possibly consume, but actually that very competition from TV and social media, is playing quite a crucial part in bolstering book sales. And that is partly why we love Bloomsbury Publishing.
“So adaptations of books into movies or TV shows and something called BookTok, which we’ve talked about before. They’ve actually led to a surge in sales of the original works. So actually books are continuing to rise in popularity. We saw a record number of physical books sold in the UK during 2022, which I think people thought was a sort of post covid, but actually it’s stuck. And publishers have seen quite strong sales.
“Bloomsbury is quite unusual. There aren’t many listed publishers left out there. And I think this conception that reading is in sort of terminal decline is what’s contributed to quite a low valuation in Bloomsbury. And that was quite appealing to us when we first bought the shares. It’s more diversified as well, and people appreciate they have exposure to different geographies. So this isn’t just a UK business by any stretch. Different genres, different formats. So actually they’ve been able to deliver really consistent and what I think is, really decent growth; they’ve averaged 12% a year over the last 10 years in terms of revenue growth. And that from what people tell you is an industry in structural decline. I think the numbers really prove that it isn’t. It’s great to see that.
“But even better is that in that timeframe they’ve also managed to grow their margins as they transition from physical to digital books, which are much more cost effective. And they’ve also driven returns as well. We love that they hand back the cash that they generate to shareholders and they’ve now had 20 years of unbroken dividend growth. So it’s a really good stock from a shareholder return point of view as well.”
The significance of community
“Games Workshop are well aware of their strengths and the market position they have, but also the complexities of having to operate in such a niche market – but one where your customers are incredibly passionate and incredibly protective about the whole community. It really, really is a community. I think that’s a unique starting point for running a business and certainly for being an investor in a business.
“So the management of the business is hugely important to us, and I actually thoroughly recommend anyone interested in this company to read the Games Workshop annual report. It’s very short, it’s to the point. It doesn’t read like most other companies reports. They call out mistakes that they’ve made during the year, and they talk about the rationale for decisions that they’ve taken. It’s just so clear and it’s very honest and it’s incredibly humble.
“I’m going to read you a little quote from it because it’s just so unusual. So the CEO says: ‘This year our ambitions remain clear, to make the best fantasy miniatures in the world, to engage and inspire our customers and to sell our products globally at a profit. We intend to do this forever. Our decisions are focused on long-term success, not short-term gains.’
“You just never hear CEOs talking like that. And let alone FTSE 100 CEO. So we love that it’s run for the long term. You know, if you want Warhammer models, there’s only one place to go. But we also love the very rich IP that’s in there. That’s a great starting point for an investment. It’s a global business as well, 80% of sales now come from outside the UK and these guys control nearly every aspect of the production so they can respond quite quickly to changes in demand. All their products are designed and made in Nottingham near their HQ, and then they distribute them out to their network of independent stores.”
Keeping the fire coming for UK SMID
“I think if you are still running money in UK SMID-caps right now, after the last almost decade or so, then you are very resilient by now. And you’ve probably got a very supportive boss and kind of team environment around you that still believes in UK equities. I think if you like a challenge, if you thrive on things being a bit tough, and if you are still passionate about the UK, then a difficult market is definitely not something that would depress you. It’s something that hopefully kind of fires you up and allows you to show what you can do. If you really lean into this.
“The UK market is almost less than the sum of its parts, I would say at the moment. What we see bottom up, are some really, really good companies. We’ve talked about a couple of them, but the portfolio is chock full of them and I’ve got a long watch list as well. So it sort of feels like if you can duck and dive a bit and be a bit nimble then there’s quite a lot to prove. I find that exciting still. I’ve definitely still got the fire.”
Conclusion: Bloomsbury Publishing and Games Workshop exemplify how niche markets can drive consistent success. This interview highlights how investing in mid-cap companies offers exciting opportunities often overlooked in favour of larger firms.
Past performance is not a reliable guide to future returns. You may not get back the amount originally invested, and tax rules can change over time. The writer’s views are their own and do not constitute financial advice.
This information should not be relied upon by retail clients or investment professionals. Reference to any particular investment does not constitute a recommendation to buy or sell the investment.
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