Bloomsbury, the publishing company that handles the Harry Potter phenomenon, has announced a 74% drop in annual profits in 2006, a year which saw no new Potter novel hit the bookstands.

In its annual results announcement, Bloomsbury said that pre-tax profit dropped from £20.1m to £5.2m, but this was not a surprise to the market as the firm had issued a profits warning in December last year.

The seventh and final Harry Potter is published this summer in July and some observers are predicting tougher times ahead for Bloomsbury.

“Harry Potter has been a phenomenon for Bloomsbury, especially for its profits in recent years,” said City analyst Colin Perry. “The big question now is how they will fill the sales gap when Harry Potter is history.

“In short, they have to prove that they’re not a one-trick pony and get the magic flowing from other authors to sustain their recent commercial success.”

Bloomsbury chairman, Nigel Newton, acknowledged that 2006 had been “challenging”, a situation reflected in the decline in turnover from £109.1m in 2005 to £74.8m last year.

“We have in place a growth strategy that includes developing new authors, Internet-based initiatives and acquisitions that will all enhance and strengthen our position as a leading publisher,” he said.