BLOOMSBURY, PUBLISHER of JK Rowling, will celebrate one last piece of financial wizardry from Harry Potter when founder and chief executive Nigel Newton rolls out its annual figures on Tuesday.

He will disclose that the phenomenal success of Harry Potter And The Deathly Hallows, the final title in the seven-book series, was the major factor behind a spellbinding increase in annualprofitsfrom£5.2millionto above the £17m mark.

And he will claim that the Potter effect will continue for years ahead as the group dips into cash reserves of more than £40m, built up from past Potter sales, to promote new talent and to make further acquisitions.

Despitehisoptimism,though,the group's shares have tumbled from 380p to present levels of around 145p in the past 24 months on fears that the void created by the departure of the young wizard means it will be years before Bloomsbury can repeat the sort of profits achieved in 2007.

While the group has had a string of successful launches in recent months and is making progress in new overseas markets, even the more optimistic analysts believe it could struggle to make much more than £10m profits in the current year, for example.

But directors will say that they are still only scratching the surface of the group's potential in lucrative new areas suchastheinternet,televisionand digital publishing as well as its growing catalogue of reference rights deals.

They will also demonstrate the success of their talent-spotting by pointing to the best-selling performances of Khaled Hosseini's debut novel The Kite Runner, followed by his A ThousandSplendidSuns,helpedbyrave reviewsontheRichardAndJudy show on Channel 4. Other successes included Elizabeth Gaskell's Cranford, David Dimbleby's How We Built Britain and Hugh Fearnley-Whittingstall's The River Cottage Cookbook.

At the same time, the directors are expected to disclose record returns for their Berlin Verlag subsidiary, where the German translations of both Khaled Hosseini books spent several weeks in the number one sales slot and the English language Harry Potter And The Deathly Hallows notched up local sales of more than a million.

The group entered the market in 2003, reversing a trend which had seen UK publishers such as Macmillan and Random House snapped up by German buyers, and has gained from higher margins as a result of the country's preference for hardback books and the absence of cut-price operators.

In contrast, analysts are braced for news of further losses from the group's USoperations,althoughsaleshave grownatacompoundrateof70% annually since Bloomsbury set up shop there in 2002.

Much of the problem is down to unexpectedly high book returns from previous years, resulting in stock provisions that cannot be offset for taxation because of the lack of previous profits.

Moststockbrokerstakeaneutral stance on Bloomsbury shares at currentlevels,althoughtheysaythey could turn positive if directors use their financial resources to make a suitable overseas acquisition.

Bruce Liechi at Investec, though, has broken ranks with a buy recommendation and has set a target price of 200p for the shares.

"The jury remains out post-Harry Potter on 2008 estimates, although clearly the group's 2007 performance gives additional confidence in the management's ability to deliver," he says.

He has a top-of-the-range forecast of £10.5m for this year's pre-tax profits, although he cautions that cash balances could dip to around £35m, even without a major acquisition as the group hands over the latest royalty cheques to Harry Potter's creator JK Rowling, already one of the world's wealthiest women.