The Quarto Group, Inc. (LSE: QRT), the leading global illustrated book publisher and distribution group has given DirectorsTalk its unaudited half-year results for the six months ended 30 June 2015.
Financial Highlights
-- Revenues of $66.2m (H1 2014 $65.6m) -- Adjusted[1] Group Operating Profit of $0.2m (H1 2014: $0.6m) -- Adjusted[2] Loss before Tax of $1.1m (H1 2014: $1.0m) -- Loss before Tax of $1.9m (H1 2014: $0.6m) -- Net debt of $81.0m (H1 2014: $81.5m) -- Interim dividend maintained at 3.35p (H1 2014: 3.35p)
Operational Highlights
-- Core publishing revenues up 6% at half year, driven by the successful integration of acquisitions made in H2 2014
and Q1 2015.
-- Digital developments saw the launches of QuartoKnows.com, the consumer-facing site showcasing Quarto's entire
global publishing programme and thisisyourcookbook.com, a web-to-print personalised cookbook business.
-- Continued progress in children's publishing and foreign language sales.
-- Books & Gifts Direct progressing underlying operations in both Australia and New Zealand.
-- Good prospects for the publishing businesses in the second half based on order book visibility, sales channel
diversity, foreign sales and flow through of 2014 investment in product development.
Commenting on the results, Chief Executive, Marcus Leaver said:”I am pleased that we have continued to make good progress in the first half of 2015. This is a solid set of results that sees Quarto continuing to deliver its business plan. While our half-year results highlight our increased second-half weighting, we have good visibility in all our businesses. This gives us confidence that, for the third year running, we will have a strong second half, deliver growth for the full-year and further reduce our net debt.”
Note on Restatement of Prior Year:
The comparative figures for June 30, 2014 have been restated to be consistent with the audited financial statements for the year ended December 31, 2014. This interim restatement does not affect the full year results for 2014 as reported or our expectations for the current year.
About The Quarto Group
The Quarto Group (LSE: QRT) is the leading global illustrated book publisher and distribution group and is listed on the London Stock Exchange. Quarto employs about 400 talented and creative people in five distinct but complementary businesses – Quarto International Co-editions Group; Quarto Publishing Group USA; Quarto Publishing Group UK; Quarto Hong Kong; and Books & Gifts Direct, Australia & New Zealand.
The Group is well positioned in resilient segments of book publishing with rich reserves of Intellectual Property. Quarto is uniquely positioned for growth as the industry adapts to new means of marketing, sales and routes to market. The Group’s headquarters are in London where the Company was founded in 1976.
This statement will be available at the registered office of the Company. A copy will also be displayed on the Company’s website: www.quartoknows.com
CHIEF EXECUTIVE’S STATEMENT
SUMMARY
I am pleased that we have continued to make good progress in the first half of 2015. This is a solid set of results that sees Quarto continuing to deliver its business plan. While our half-year results highlight our increased second-half weighting, we have good visibility in all our businesses. This gives us confidence that, for the third year running, we will have a strong second half, deliver growth for the full-year and further reduce our net debt.
Revenue was up by 1% at $66.2m (H1 2014: $65.6m). Adjusted Group Operating Profit was down from last year at $0.2m (H1 2014: $0.6m) reflecting an expected shift in seasonality and with interest payments falling by 19%, the Adjusted Group Loss Before Tax was $1.1m (H1 2014: loss of $1.0m). The Group Loss Before Tax was $1.9m (2014: $0.6m), after charging amortisation of acquired intangibles of $0.3m (2014: $0.2m) and exceptional items of $0.5m (2014: gain on sale of property $0.6m). Net debt at 30 June 2015 was $81.0m (H1 2014: $81.5m).
As has been reported earlier in the year, we successfully re-financed our debt for a four-year term with four of the existing banks in the syndicate, at improved terms.
Dividend
The Board is pleased to recommend an interim dividend of 3.35p per share, consistent with the previous year. Notwithstanding the increase in the final dividend for the 2014 financial year, the Board believes that the balance between the interim dividend and final dividend should be more weighted to the final dividend given the increasing second half weighting of revenues and profits compared to prior years.
People
As previously announced Mick Mousley, our Chief Financial Officer, is retiring at the end of August after 28 years with Quarto. The enormous contribution Mick has made to The Quarto Group, its history and its people over the years can never be overstated. On behalf of everyone at Quarto and our shareholders I wish Mick, Diane and their family only the best in the future.
Our new CFO is Michael Connole, FCA. Michael takes up his position on 1 September 2015, becoming a Board Director. He will be responsible for Quarto’s finance and group operations functions. Michael is currently CFO of Global Radio Group, the UK’s leading commercial radio group, a post he has held since 2008.
DIVISIONAL REVIEW
Quarto International Co-Editions (QIC)
Revenue $15.1m (2014: $12.6m)
Adjusted Operating Loss $(1.1)m (2014: $(0.8)m)
As with any portfolio, different businesses tell a different story. We know from experience that the visibility for this segment is consistent and we continue to re-shape and re-define the portfolio.
The integration of Ivy Press in Q1 2015 has been very successful. Performance improvements have been achieved already and the imprint is set to exceed original profit expectations. The planned relocation in Q4 2015 of all the South Coast-based imprints to a single Brighton-based location will bring about further operational improvements.
Quarto Publishing Group USA (QUS)
Revenue $27.2m (2014: $27.0m)
Adjusted Operating Profit $1.8m (2014: $2.0m)
The first few months of 2015 were difficult for our US-based imprints with strike action in some ports on the West Coast affecting deliveries of books to our warehouses. These issues have now been resolved and we expect that the delivery of product to our customers will catch up throughout the rest of the year.
We continue to focus on the niche markets into which we publish and distribute, with direct relationships with retailers now underpinning that strategy. These relationships are performing to our expectations and the visibility for the second half of the year is encouraging especially with our market-leading position in the current adult colouring book phenomenon.
Quarto Publishing Group UK (QUK)
Revenue $7.6m (2014: $7.6m)
Adjusted Operating Profit $0.3m (2014: $0.2m)
Our UK business is performing to expectations and is set to deliver a healthy year of organic growth in revenue and operating profit. While doing this, its management team are transforming its lists to be more global and illustrated in focus, with the children’s element of the business growing in importance.
Books & Gifts Direct (BGD)
Revenue $8.9m (2014: $11.8m)
Adjusted Operating Profit $0.4m (2014: $0.6m)
Our business in Australia and New Zealand continues to make progress with an order book that is more skewed towards the second half than it was last year; this is solely to do with the phasing of buying meetings this year.
Progress has been made in this business this year so far with the full roll out of our proprietary technology and network capacity up to 96% from 85% at the end of 2014.
Obviously currency will have a significant impact on the reported operating profit at the end of 2015, but we have visibility on small year-on-year organic profit growth in local currency results. For a trading business in a market that is not without its economic struggles right now we feel that is an acceptable expectation.
Quarto Hong Kong
Revenue $7.4m (2014: $6.5m)
Adjusted Operating Profit $0.8m (2014: $0.6m)
Quarto Hong Kong had a reasonable start to 2015. Its order book visibility for the rest of the year shows the business performing to our expectations.
KEY INITIATIVES
Children’s Publishing
Revenue $9.2m (2014: $7.4m)
Our growth in Children’s publishing revenues continues, both organically by investment in our own originated product and by acquisition, selling those products in English language and foreign language with increasing competence and reach.
Foreign Rights
Revenue $7.4m (2014: $5.5m)
We anticipate further growth in our foreign language sales by the end of the year with all areas of the publishing businesses contributing, especially our children’s businesses.
Digital Development
ThisIsYourCookbook.com , a web-to-print personalised cookbook using Quarto-owned intellectual property was developed, refined and soft-launched in the UK in first half of the year. Roll out in the US is also in progress with a date for soft launch to be announced soon.
In early July we launched QuartoKnows.com, a new consumer-facing site that showcases and promotes The Quarto Group’s entire global publishing programme. The site allows consumers to discover more books in subjects they are interested in and presents books in ten subject areas each distinctly branded with a unique icon. Direct to consumer sales will launch from 31st August in the USA and 30th September in the UK.
Outlook
We fully anticipate Quarto will have a strong second half of the year with good order book visibility. Quarto will develop further as a business in 2015 and continue to expand our reach in channel, territory and format. We are well-positioned, as we have shown in recent years, to grow organically, capitalising on our strengths, making long-lasting, information-rich books and selling them in as many languages and channels as possible. We also intend to develop the business by making suitable acquisitions, as we have done, that are complementary to our existing businesses and provide financial and operational synergies, taking advantage of opportunities that support the long-term growth of our business around the world.
On behalf of the Board, I would like to thank all of our people in all of our businesses for their continued hard work and commitment as well as our entire ecosystem of partners and network of suppliers.
