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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Quarto Group Incorporated | LSE:QRT | London | Ordinary Share | COM STK USD0.10 |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 140.00 | 120.00 | 150.00 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From Apr 2019 to Apr 2024
TIDMQRT
RNS Number : 3402N
Quarto Group Inc
08 August 2017
THE QUARTO GROUP, INC.
("Quarto" or the "Company" or the "Group")
Half-Year Results for the Six Months Ended 30 June 2017
The Quarto Group, Inc. (LSE: QRT), the leading global illustrated book publisher announces its unaudited half year results for the six months ended 30 June 2017.
Results ($m) H1 2017 H1 2016 ---------------------------------- ----------------- ----------------- Group Revenue 50.2 57.9 Adjusted(2) Group Operating (Loss)/Profit (7.2) (0.1) Group Operating (Loss)/Profit (7.6) (0.4) Adjusted(2) (Loss)/Profit before Tax (8.7) (1.6) (Loss)/Profit before Tax (9.2) (1.9) (Loss)/Profit after Tax (5.2) (0.9) Net Debt 75.8 72.5 Interim Dividend - 5.13c/3.93p ---------------------------------- ----------------- ----------------- 1. All results relate to continuing operations.
2. Adjusted measures are stated before amortisation of acquired intangibles and exceptional items.
Financial Highlights
-- Lower than expected publishing performance with revenue down 13%.
-- Lower revenue combined with higher than expected one-off, non recurring costs impacted profit, resulting in a higher adjusted loss before tax of $8.7m (H1 2016 loss: $1.6m).
-- Group overheads, though lower, included one-off, non-recurring costs related to personnel and IT systems upgrades, partially offset by favourable currency movements.
-- Net debt rose 5% to $75.8m (H1 2016: $72.5m) and reflects a higher first half loss, partially offset by a net reduction in working capital.
-- Owing to the increased second half weighting, the Group will not pay an interim dividend but will review the final dividend policy over the coming months in consultation with shareholders.
-- The Board has received a preliminary approach to acquire the Company at a price it considers to be attractive and reflective of the inherent value of the business as a global publishing platform - and hence worthy of due consideration. Discussions with the bidder are at an early stage and there can be no certainty that an offer will be made or as to the terms of any such offer.
Operational Highlights
-- Continued softness in the retail environment across both domestic markets, characterised by a changing product mix and unusually high returns from key customers.
-- In the US, despite a revenue contribution from becker&mayer, total revenue was affected by the significant sales of colouring books in H1 2016 which were not repeated or replaced by another trend in H1 2017.
-- Adult publishing imprints and international English language co-edition sales most strongly hit by market softness. More resilient performance from Children's publishing imprints and Foreign Language sales.
-- Disposals of trading businesses completed, reported within Discontinued Operations for the period to disposal.
-- Strong and deep Autumn and Holiday publishing programme and healthy order book visibility for the second half of the year.
Commenting on the results, Chief Executive, Marcus Leaver said:
"As highlighted in our trading update in July, this set of results is below expectations. However, it needs to be set in the context of both a soft retail environment and the new reality of a higher second-half seasonality for the Group as a pure-play publishing business, especially with the addition of becker&mayer to our portfolio.
It has been a transitional period with the completion of the disposals of our non-core businesses while facing a challenging trading background in our key domestic markets. We have seen lower initial orders and reprints from some large customers. In particular, most of our adult imprints have performed below our expectations.
While we expect the soft retail environment to continue, we have an excellent publishing programme for the Autumn and the Holiday period - one of our strongest in the last few years. Order book visibility is healthy and our sales teams have the right plans in place to capture all possible opportunities. We have confidence throughout the Group in delivering a strong finish to the year."
-S -
For further information please contact: Marcus Leaver, CEO Dorothée de Montgolfier, Group +44 (0)20 7700 Director of Communications 9002
About The Quarto Group
The Quarto Group (LSE: QRT) is the leading global illustrated non-fiction book publisher. Our mission is to make and sell great books that entertain, educate and enrich the lives of adults and children around the world.
Quarto creates and owns proprietary content, publishing books from a diverse portfolio of imprints that are creatively independent and expert in developing long-lasting content across specific niches of interest.
Quarto sells books across 47 countries and in 39 languages through a variety of traditional and non-traditional channels, while constantly looking for new ways to create and deliver content that people need.
Quarto employs over 400 talented people in the US, UK and Hong Kong. The group was founded in London in 1976. It is domiciled in the US and listed on the London Stock Exchange.
For more information, visit quarto.com, quartoknows.com or follow us on Twitter at @TheQuartoGroup.
This statement will be available at the registered office of the Company. A copy will also be displayed on the Company's website: www.quarto.com.
CHIEF EXECUTIVE'S STATEMENT
SUMMARY
The first six months of 2017 have been extremely challenging and the Group's performance reflects the general weakness of the retail environment in this period, with reduced footfall and consumer confidence in both the US and the UK, resulting in lower than usual levels of business with several of our key customers.
Revenue was down by 13% at $50.2m (H1 2016: $57.9m). As a result, the adjusted group operating loss for the first six months was $7.2m (H1 2016: loss of $0.1m) and the adjusted loss before tax was $8.7m (H1 2016: loss of $1.6m). Net debt at 30 June 2016 was $75.8m (H1 2016: $72.5m), an increase of $3.3m over the twelve-month period.
It has been a transitional period for the Group, which saw the successful completion of the planned disposals of its non-core businesses, Books & Gifts Direct (BGD) Australia and Regent Publishing Services. The disposal of BGD New Zealand, the Group's last non-core business, was completed on 7 July 2017. The Group is now fully focused as a pure-play publishing business, which also results in an increased second-half weighted seasonality of full-year results - even more pronounced with the addition of becker&mayer, acquired in August 2016, to the portfolio.
While the soft retail environment is likely to continue for the balance of the year, the Group expects its strong publishing programme for the Autumn and Holiday period, combined with the continuing resilience of its backlist, to result in a significantly better overall performance in the second half. Order book visibility is healthy and the Group is confident that its sales teams have the right plans in place to help deliver a strong finish to the year.
Dividend
After consultation with a large number of shareholders, and in light of the first half performance and the increased second half weighting of full year performance now that Quarto is a pure-play publishing business, the Board has concluded that the Group will not pay an interim dividend. The Board, in consultation with shareholders, will review the final dividend policy over the coming months.
OPERATING REVIEW
Revenue ($m) H1 2017 H1 2016 ------------------- -------- -------- United States 29.6 34.4 United Kingdom 7.5 8.9 Rest of the World 4.9 5.3 Foreign Language 5.5 5.9 Q Partners 2.7 3.4 ------------------- -------- -------- Total Revenue 50.2 57.9 ------------------- -------- -------- Adjusted Operating Profit H1 2017 H1 2016 ($m) --------------------------- ------------------- ----------------- US Publishing (1.7) 2.4 UK Publishing (3.6) (0.1) Q Partners (0.1) (0.1) Group overhead (1.8) (2.3) --------------------------- ------------------- ----------------- Total adjusted operating profit (7.2) (0.1) --------------------------- ------------------- -----------------
Note: Revenue is shown by destination; Adjusted Operating Profit is shown by segment.
Continuing Publishing Operations
Now purely a publishing business, the Group's decline in revenue is a result of several factors prompted by the soft retail environment in the first six months of 2017 - lower initial order quantities, fewer reprints, changing product mix and higher than usual returns from a few key customers. In addition, there were still significant sales of colouring books in H1 2016 which have not been repeated or replaced by another trend in H1 2017. The quality of our Autumn and Holiday frontlist combined with lower return rates should alleviate these pressures for the remainder of the year.
Adult imprints have under-performed our expectations in both domestic markets. Adults' publishing revenue for the first six months of 2017 was $34.4m, 18% lower than the same period last year of $42.0m. That said, we are confident in the quality of our Autumn and Holiday frontlist and expect a significantly better performance in the second half. Forthcoming highlights include eight titles in our Scratch & Create adult activity series, new releases from established authors and new titles in some of our most successful publishing series such as the 1001 and the 30 Seconds series.
Children's imprints have performed resiliently despite pockets of softness, for instance in the educational market. Children's publishing revenue for the first six months of 2017 was $13.4m, 3% higher than the same period last year of $13.0m, including the impact of becker&mayer, acquired in August 2016. We have a very solid frontlist for the second half of the year and expect to show growth over the full year. Wide Eyed Editions and Frances Lincoln Children's Books continue to be successful, as demonstrated by the 'Little People, Big Dreams' series. New titles this Autumn should boost this performance further. We also expect Imagine, a unique picture book based on the John Lennon song and produced in partnership with Amnesty International, to do well with encouraging initial order quantities and 15 foreign editions already sold.
Our Foreign Language business is trading in line with expectations at this time of year, with particularly strong performance from our Children's lists. Overall, we expect the business to show growth for the full year, despite uncertainties in some of the markets in which we conduct business.
Our publishing partnerships and distribution business, Q Partners, is also performing in line with expectations at this time of year. We now have three international publishing partnerships - in Brazil (Quarto Editora), in the Middle East and North Africa (Kalimat Quarto) and a new Spanish language imprint, Quarto Iberoamericana, launching in October 2017 across North and South America. We have recently secured two new distribution agreements - Zest Books and the Viz Annual.
Discontinued Operations
The results from discontinued operations includes the trading results of Regent Publishing Services and BGD Australia to 31 March 2017 and the related profit and loss on disposal on that date. The disposal of the trade and selected assets of BGD New Zealand was completed on 7 July 2017. The trading results for the period are included within discontinued operations.
Further details of these transactions are included in Note 5.
Group overheads
Group overheads, while reducing against prior year and including favourable currency impacts, reflect the inclusion for the first time of becker&mayer as well as some costs arising from the search for a new Chief Financial Officer, some one-time professional fees and expenses related to IT systems upgrades. These are largely non-recurring costs and we expect to return to a normalised level in the second half.
OUTLOOK
Following the disposals of its non-core businesses, Quarto is now fully focused as a pure-play publishing business, with full year results even more dependent on the second half year performance than in previous years.
While the soft retail environment is likely to continue for the balance of the year, the levels of returns and some of the overhead costs incurred in the first half year are not expected to recur in the second half.
The Group's Autumn and Holiday publishing programme is one of the strongest in the last few years, co-edition order book visibility is healthy and sales teams in all channels and markets around the world have the right plans in place to capture all possible opportunities. Overall, management is confident that the Group will deliver a strong finish to the year.
The Group is in the process of agreeing amendments to its banking facilities. This will allow greater flexibility over the remaining term, particularly in light of the pronounced seasonality of the business and degree of sensitivity around working capital movements as previously reported. The level of net debt continues to be monitored and managed closely.
As announced today, the Board has received a preliminary approach to acquire the Company at a price it considers to be attractive and reflective of the inherent value of the business as a global publishing platform - and hence worthy of due consideration. Discussions with the bidder are at an early stage and there can be no certainty that an offer will be made or as to the terms of any such offer.
On behalf of the Board, I would like to thank all our people for their perseverance and commitment in this challenging environment, as well as our partners and suppliers across the world.
Marcus E. Leaver
Chief Executive
THE QUARTO GROUP, INC.
Condensed Consolidated Income Statement
For the six months ended 30 June 2017
Hot Features
Premium
Six months Six months
to to Year ended
30 June 30 June 31 December
2017 2016 2016
(Restated)*
Unaudited Unaudited Audited
Note $'000 $'000 $'000
Continuing operations
Revenue 2 50,159 57,878 154,610
Cost of sales (41,730) (41,726) (103,916)
--------------------------------- ---- ---------- ------------ ------------
Gross profit 8,429 16,152 50,694
Distribution costs (3,265) (3,295) (6,870)
Administrative expenses (12,371) (12,907) (26,835)
--------------------------------- ----
Operating profit before
amortisation of acquired
intangibles and exceptional
items (7,207) (50) 16,989
Amortisation of acquired
intangibles (418) (305) (654)
Exceptional items 3 - - (191)
--------------------------------- ---- ---------- ------------ ------------
Operating profit/(loss) 2 (7,625) (355) 16,144
Finance costs (1,528) (1,566) (3,109)
--------------------------------- ---- ---------- ------------ ------------
(Loss)/profit before
tax (9,153) (1,921) 13,035
Tax credit/(charge) 4 2,655 1,071 (3,756)
--------------------------------- ---- ---------- ------------ ------------
(Loss)/profit for the
period from continuing
operations (6,498) (850) 9,279
Discontinued operations
Profit/(loss) for the
period from discontinued
operations 5 1,243 (14) (14,556)
--------------------------------- ----
(Loss)/profit for the
period (5,255) (864) (5,277)
================================= ==== ========== ============ ============
Attributable to:
Owners of the parent (5,229) (1,083) (5,697)
Non-controlling interests (26) 219 420
--------------------------------- ---- ---------- ------------ ------------
(5,255) (864) (5,277)
================================= ==== ========== ============ ============
(Loss)/earnings per share
(cents)
From continuing operations
Basic 6 (31.8) (4.3) 46.4
Diluted 6 (31.8) (4.3) 45.4
From continuing and discontinued
operations
Basic 6 (25.6) (5.5) (28.5)
Diluted 6 (25.8) (5.4) (27.9)
* Restated as set out in Note 1.
THE QUARTO GROUP, INC.
Condensed Consolidated Statement of Comprehensive Income
For the six months ended 30 June 2017
Six months Six months
to to Year ended
30 June 30 June 31 December
2017 2016 2016
(Restated)*
Unaudited Unaudited Audited
$'000 $'000 $'000
Loss for the period (5,255) (864) (5,277)
Other comprehensive income
which may be reclassified
to profit or loss
Foreign exchange translation
differences 3,807 (1,991) 706
Cash flow hedge: profits/(losses)
arising during the period 30 (170) 150
Tax relating to items that
may be reclassified to profit
or loss - 34 (1,609)
------------------------------------- ---------- ------------ ------------
Total comprehensive (expense)/income
for the period (1,418) (2,991) (6,030)
===================================== ========== ============ ============
Attributable to:
Owners of the parent (1,392) (3,228) (6,460)
Non-controlling interests (26) 237 430
------------------------------------- ---------- ------------ ------------
(1,418) (2,991) (6,030)
===================================== ========== ============ ============
* Restated as set out in Note 1
THE QUARTO GROUP, INC.
Condensed Consolidated Balance Sheet
At 30 June 2017
30 June 30 June 31 December
2017 2016 2016
(Restated)*
Unaudited Unaudited Audited
Note $'000 $'000 $'000
Non-current assets
Goodwill 8 36,468 39,685 36,144
Other intangible assets 3,816 1,936 4,351
Property, plant and equipment 2,296 3,560 1,857
Intangible assets: Pre-publication
costs 63,946 58,139 61,133
Deferred tax assets 2,824 - 2,022
----------------------------------- ---- ---------- ------------ -----------
Total non-current assets 109,350 103,320 105,507
----------------------------------- ---- ---------- ------------ -----------
Current assets
Inventories 21,159 21,610 24,006
Trade and other receivables 41,005 42,079 54,162
Derivative financial instruments 179 18 141
Cash and cash equivalents 9 6,800 7,710 18,824
Assets held for sale 949 - -
----------------------------------- ---- ---------- ------------ -----------
Total current assets 70,092 71,417 97,133
----------------------------------- ---- ---------- ------------ -----------
Total assets 179,442 174,737 202,640
----------------------------------- ---- ---------- ------------ -----------
Current liabilities
Short term borrowings 9 (5,000) (5,000) (5,000)
Derivative financial instruments (58) (180) (94)
Trade and other payables (40,233) (38,507) (59,718)
Tax payable (1,695) (1,258) (4,060)
Liabilities held for sale (198) - -
----------------------------------- ---- ---------- ------------ -----------
Total current liabilities (47,184) (44,945) (68,872)
----------------------------------- ---- ---------- ------------ -----------
Non-current liabilities
Medium and long term borrowings 9 (77,720) (75,247) (75,748)
Deferred tax liabilities (11,093) (6,277) (10,502)
Other payables (6,358) (44) (3,407)
----------------------------------- ---- ---------- ------------ -----------
Total non-current liabilities (95,171) (81,568) (89,657)
----------------------------------- ---- ---------- ------------ -----------
Total liabilities (142,355) (126,514) (158,529)
----------------------------------- ---- ---------- ------------ -----------
Net assets 37,087 48,224 44,111
=================================== ==== ========== ============ ===========
Equity
Share capital 2,045 2,045 2,045
Paid in surplus 33,764 33,764 33,764
Retained profit and other
reserves 1,278 7,517 3,410
----------------------------------- ---- ---------- ------------ -----------
Equity attributable to
owners of the parent 37,087 43,326 39,219
Non-controlling interests - 4,898 4,892
Total equity 37,087 48,224 44,111
=================================== ==== ========== ============ ===========
* Restated as set out in Note 1.
THE QUARTO GROUP, INC.
Condensed Consolidated Statement of Changes in Equity
For the six months ended 30 June 2017
Equity
attributable
Paid to owners
Share in Hedging Translation Treasury Retained of the Non-controlling
capital surplus reserve reserve shares earnings parent interests Total
$000 $000 $000 $000 $000 $000 $000 $000 $000
Balance at 1
January
2017 2,045 33,764 140 (8,850) - 12,120 39,219 4,892 44,111
(Loss)/profit for
the period - - - - - (5,229) (5,229) (26) (5,255)
Foreign exchange
translation
differences - - - 3,807 - - 3,807 - 3,807
Cash flow hedge:
profits arising
during the year - - 30 - - - 30 - 30
Total
comprehensive
(expense)/income
for the period - - 30 3,807 - (5,229) (1,392) (26) (1,418)
----------------- ------- ------- ------- ----------------------- --------- --------- ------------ --------------- -------
Dividends to
shareholders - - - - - (2,018) (2,018) - (2,018)
Dividend
in-specie
paid to
non-controlling
interests - - - - - - - (3,744) (3,744)
Adjustment
arising
from change in
non-controlling
interests - - - - - 1,122 1,122 (1,122) -
Share based
payment
charge - - - - - 156 156 - 156
Balance at 30
June
30 2017 2,045 33,764 170 (5,043) - 6,151 37,087 - 37,087
================= ======= ======= ======= ======================= ========= ========= ============ =============== =======
Balance at 1
January
2016 2,045 33,764 (10) (8,064) (634) 22,780 49,881 5,159 55,040
Prior year
adjustment - - - 127 - (1,723) (1,596) - (1,596)
----------------- ------- ------- ------- ----------------------- --------- --------- ------------ --------------- -------
Balance at 1
January
2016 (Restated)* 2,045 33,764 (10) (7,937) (634) 21,057 48,285 5,159 53,444
(Loss)/profit for
the period - - - - - (1,083) (1,083) 219 (864)
Foreign exchange
translation -
differences - - - (2,009) - - (2,009) 18 (1,991)
Cash flow hedge:
losses arising
during
the year - - (170) - - - (170) - (170)
Tax relating to
items that may
be
reclassified to
profit or loss - - 34 - - - 34 - 34
----------------- ------- ------- ------- ----------------------- --------- --------- ------------ --------------- -------
Total
comprehensive
(expense)/income
for the period - - (136) (2,009) - (1,083) (3,228) 237 (2,991)
----------------- ------- ------- ------- ----------------------- --------- --------- ------------ --------------- -------
Dividends to
shareholders - - - - (1,826) (1,826) - (1,826)
Dividend paid to
non-controlling
interests - - - - - - - (498) (498)
Share based
payment
charge - - - - - 95 95 - 95
Balance at 30
June
30 2016 2,045 33,764 (146) (9,946) (634) 18,243 43,326 4,898 48,224
================= ======= ======= ======= ======================= ========= ========= ============ =============== =======
* Restated as set out in Note 1.
THE QUARTO GROUP, INC.
Condensed Consolidated Statement of Changes in Equity
For the six months ended 30 June 2017
Year ended 31 December 2016 (Audited)
Equity
attributable
Paid to owners
Share in Hedging Translation Treasury Retained of the Non-controlling
capital surplus reserve reserve shares earnings parent interests Total
$000 $000 $000 $000 $000 $000 $000 $000 $000
Balance at 1
January
2016 2,045 33,764 (10) (7,937) (634) 21,057 48,285 5,159 53,444
(Loss)/profit
for
the year - - - - - (5,697) (5,697) 420 (5,277)
Foreign exchange
translation
differences - - - 696 - - 696 10 706
Cash flow hedge:
profits arising
during the year - - 150 - - - 150 - 150
Tax relating to
items that may
be
reclassified to
profit or loss - - - (1,609) - - (1,609) - (1,609)
---------------- -------- ------- -------- ----------- -------- -------- ------------ --------------- -------
Total
comprehensive
income for the
year - - 150 (913) - (5,697) (6,460) 430 (6,030)
---------------- -------- ------- -------- ----------- -------- -------- ------------ --------------- -------
Dividends paid
to
shareholders - - - - - (2,902) (2,902) - (2,902)
Dividends paid
to
non-controlling
interests - - - - - - - (697) (697)
Share based
payments - - - - - 256 256 - 256
Shares
released/sold
from treasury - - - - 634 (594) 40 - 40
---------------- -------- ------- -------- ----------- -------- -------- ------------ --------------- -------
Balance at 31
December
2016 2,045 33,764 140 (8,850) - 12,120 39,219 4,892 44,111
================ ======== ======= ======== =========== ======== ======== ============ =============== =======
THE QUARTO GROUP, INC.
Condensed Consolidated Cash Flow Statement
For the six months ended 30 June 2017
Six months
Six months to
to 30 June Year ended
30 June 2016 31 December
2017 (Restated)* 2016
Unaudited Unaudited Audited
$'000 $'000 $'000
(Loss)/profit for the period (5,255) (864) (5,277)
Adjustments for:
Net finance costs 1,528 1,511 2,945
Depreciation of property,
plant and equipment 537 397 1,080
Tax (credit)/expense (2,655) (921) 3,991
Share based payment charge 156 95 256
Amortisation of acquired
intangibles 418 330 705
Profit/(loss) on discontinued
operations (2,538) - -
Non-cash exceptional items - - 14,203
Amortisation and amounts
written off pre-publication
costs 14,921 14,186 30,540
Movement in fair value
of derivatives (31) 47 120
------------------------------------
Operating cash flows before
movements in working capital 7,081 14,781 48,563
Decrease/(increase) in
inventories 2,410 3,112 1,270
Decrease/(increase) in
receivables 10,923 13,362 1,628
(Decrease)/increase in
payables (11,296) (24,305) (7,715)
------------------------------------ ---------- ------------ ------------
Cash generated by operations 9,118 6,950 43,746
Income taxes paid - (470) (1,436)
------------------------------------ ---------- ------------ ------------
Net cash from operating
activities 9,118 6,480 42,310
Investing activities
Interest received - 55 164
Investment in pre-publication
costs (16,222) (17,250) (37,165)
Purchases of property,
plant and equipment (851) (709) (1,562)
Disposal of subsidiaries 3,650 - -
Acquisition of publishing
assets (4,041) (130) (3,718)
------------------------------------ ---------- ------------ ------------
Net cash used in investing
activities (17,464) (18,034) (42,281)
Financing activities
Dividends paid (2,018) (1,826) (2,902)
Interest payments (1,322) (1,552) (2,725)
External loans repaid (5,432) (2,013) (5,000)
External loans drawn 5,000 - 5,583
Dividends paid to non-controlling
interests - (498) (697)
------------------------------------ ---------- ------------ ------------
Net cash (used)/from in
financing activities (3,772) (5,889) (5,741)
Net (decrease)/increase
in cash and cash equivalents (12,118) (17,443) (5,712)
Cash and cash equivalents
at beginning of period 18,824 25,059 25,059
Foreign currency exchange
differences on cash and
cash equivalents 94 94 (523)
------------------------------------ ---------- ------------ ------------
Cash and cash equivalents
at end of period 6,800 7,710 18,824
==================================== ========== ============ ============
* Restated as set out in Note 1.
THE QUARTO GROUP, INC.
Notes to the condensed financial statements
1. Interim Statement
These interim consolidated financial statements are for the half year to 30 June 2017. They were approved by the board on 7 August 2017. These results are unaudited and have not been reviewed by the auditor. The comparative figures for the six months to 30 June 2016 are also unaudited and derived from the half-yearly financial report for that period, subject to certain restatement changes noted below.
The information for the year ended 31 December 2016 does not constitute statutory accounts as defined in section 434 of the Companies Act 2006. A copy of the statutory accounts for that year has been delivered to the Registrar of Companies. The auditor's report on those accounts was not qualified, did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying the report and did not contain statements under section 498 (2) or (3) of the Companies Act 2006.
Basis of preparation
These interim financial statements have been prepared in accordance with the Disclosure and Transparency Rules of the Financial Conduct Authority and with IAS 34, "Interim Financial Reporting", as adopted by the European Union.
The Directors have formed a judgement that there is a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. For this reason, the Directors continue to adopt the going concern basis in preparing the financial statements. The Group has committed facilities of $85.0m through to 30 April 2019 and is in the process of agreeing amendments to these facilities. This will allow greater flexibility over the remaining term, particularly in light of the pronounced seasonality of the business and degree of sensitivity around working capital movements as previously reported. The Group has complied with all related covenants in the current period.
The accounting policies adopted are consistent with those of the annual financial statements for the year ended 31 December 2016 as described in those financial statements.
Restatement of prior year results
In the process of finalising the results of the Books and Gifts Direct business for the year ended 31 December 2016, errors were uncovered in the cut-off procedures and accounting for returns in relation to stock in transit and the related liability accounts at BGD Australia. The errors related to the value attributed to stock in transit at each of the three years ended 31 December 2016, 31 December 2015 and 31 December 2014 where detailed examination has shown that supplier invoices for stock in transit were not processed in the correct accounting period, nor was the correct accrual or return provision recorded in the financial statements. The error was caused by a failure in controls relating to cut-off and reconciliation procedures in respect of stock in transit and the related purchase clearing accounts, and accounting for returns on certain products. The full impact of the restatement is set out in the 2016 Annual Report and Accounts.
As a result of the above, the results for the period ended 30 June 2016 have been restated.
The impact on the Condensed Consolidated Income Statement is to increase the cost of sales by $0.4m, which is included in the results from discontinued operations. No related tax credit is recognised as there is insufficient evidence that future profits would be available against which the credit could be applied.
The impact on the Condensed Consolidated Balance Sheet at 30 June 2016 is:
Reported Adjustment Restated
$000 $000 $000
Inventories 23,353 (1,743) 21,610
Trade and other payables (38,229) (278) (38,507)
--------------------------- -------- ---------- --------
Impact on net assets (14,876) (2,021) (16,897)
=========================== ======== ========== ========
Impact on total equity 50,245 (2,021) 48,224
=========================== ======== ========== ========
THE QUARTO GROUP, INC.
Notes to the condensed financial statements
2. Segmental analysis
During 2016, the Group concluded an operational review of the business. Following this review, the core publishing businesses were reorganised into three divisions: US Publishing, UK Publishing and Q Partners. This is now the basis on which operating results are reviewed and resources allocated by the Chief Executive.
Due to the seasonality of the business, the Group's sales and segmental results are weighted towards the second half of the year.
Six months to 30 June US UK Total Q Partners
2017 Publishing Publishing Publishing Total
$000 $000 $000 $000 $000
Revenue 26,656 20,834 47,490 2,669 50,159
============ ============ ============ =========== ========
Operating profit before
amortisation of acquired
intangibles and exceptional
items (1,712) (3,577) (5,289) (161) (5,450)
Amortisation of acquired
intangibles (298) (120) (418) - (418)
------------ ------------ ------------ ----------- --------
Segment result (2,010) (3,697) (5,707) (161) (5,868)
Unallocated corporate
expenses (1,757)
Exceptional items -
--------
Operating (loss)/profit (7,625)
Finance costs (1,528)
--------
Loss before tax (9,153)
Tax credit 2,655
--------
Loss after tax from
continuing operations (6,498)
Profit after tax from
discontinued operations 1,243
--------
Loss after tax (5,255)
========
Six months to 30 June Total Q
2016 US Publishing UK Publishing Publishing Partners Total
$000 $000 $000 $000 $000
Revenue 28,493 25,956 54,449 3,429 57,878
============== ============== ============ ========== ========
Operating profit before
amortisation of acquired
intangibles and exceptional
items 2,416 (86) 2,330 (127) 2,203
Amortisation of acquired
intangibles (129) (176) (305) - (305)
-------------- -------------- ------------ ---------- --------
Segment result 2,287 (262) 2,025 (127) 1,898
Unallocated corporate
expenses (2,253)
Exceptional items -
--------
Operating (loss)/profit (355)
Finance costs (1,566)
--------
(Loss)/profit before
tax (1,921)
Tax credit 1,071
--------
Loss after tax from
continuing operations (850)
Loss after tax from
discontinued operations (14)
--------
Loss after tax (864)
========
THE QUARTO GROUP, INC.
Notes to the condensed financial statements
2. Segmental analysis (continued)
Year ended 31 December Total
2016 US Publishing UK Publishing Publishing Q Partners Total
$000 $000 $000 $000 $000
Revenue 74,263 74,071 148,334 6,276 154,610
============== ============== ============ =========== =========
Operating profit before
amortisation of acquired
intangibles and exceptional
items 9,403 12,402 21,805 (67) 21,738
Amortisation of acquired
intangibles (356) (298) (654) - (654)
------------------------------ -------------- -------------- ------------ ----------- ---------
Segment result 9,047 12,104 21,151 (67) 21,084
Unallocated corporate
expenses (4,749)
Exceptional items (191) - (191) - (191)
------------------------------ -------------- -------------- ------------ ----------- ---------
Operating (loss)/profit 8,856 12,104 20,960 (67) 16,144
Finance costs (3,109)
---------
(Loss)/profit before
tax 13,035
Tax (3,756)
---------
Loss after tax from
continuing operations 9,279
Loss after tax from
discontinued operations (14,556)
---------
Loss after tax (5,277)
=========
Geographical revenue
The Group generates its revenue
in the following geographical
areas:
Six months Six months
to to Year ended
30 June 30 June 31 December
2017 2016 2016
Unaudited Unaudited Audited
$'000 $'000 $'000
United States 29,557 34,341 83,516
United Kingdom 7,486 8,867 20,889
Rest of the World 4,961 5,223 11,432
Foreign Language 5,486 6,018 32,497
Q Partners 2,669 3,429 6,276
Total 50,159 57,878 154,610
====================== =========== =========== =============
3. Exceptional items
There were no exceptional items included in loss before tax for the current and previous period. Exceptional items for the year ended 31 December 2016 comprised of acquisition costs including due diligence expenses and other professional fees.
4. Taxation
Taxation for the six months to 30 June 2017 is based on the Group estimated underlying tax rate for the year. We expect the full year effective rate to be substantially consistent with the rate for the period.
THE QUARTO GROUP, INC.
Notes to the condensed financial statements
5. Discontinued operations
On 30 March 2017, the Group completed the disposal of its 75% interest in Regent Publishing Services Limited ("Regent"), its Hong Kong based publishing services business.
On 3 April 2017, the Group completed the disposal of its 100% share of Books & Gifts Direct Pty Limited ("BGD Australia"), its direct sales business in Australia.
On 7 July 2017, the Group completed the disposal of the trade and selected net assets of Books & Gifts Direct Limited ("BGD New Zealand"), its direct sales business in New Zealand. At 30 June 2017, this business is disclosed as a discontinued operation held for sale. The final loss on disposal will be accounted for in the financial statements for the year ended 31 December 2017.
These disposals were completed in line with the Group's strategy of disposing of non-core businesses. Proceeds from the disposals will be used to manage the Group's net debt position as received. The results of the discontinued operations which have been included in the consolidated income statement were:
Regent Six months Six months
to to Year ended
30 June 30 June 31 December
2017 2016 2016
Unaudited Unaudited Audited
$'000 $'000 $'000
Revenue 2,632 7,718 14,466
Expenses (2,804) (6,818) (12,724)
----------------------------- ----------- ----------- -------------
(Loss)/profit before tax (172) 900 1,742
Tax 3 (150) (235)
----------------------------- ----------- ----------- -------------
(Loss)/profit after tax (169) 750 1,507
Profit on disposal 3,236
Tax -
----------------------------- -----------
Net profit attributable
to discontinued operations 3,067
============================= ===========
BGD Australia Six months
Six months to
to 30 June Year ended
30 June 2016 31 December
2017 (Restated)* 2016
Unaudited Unaudited Audited
$'000 $'000 $'000
Revenue 1,199 5,074 12,745
Expenses (1,970) (5,500) (25,728)
-------------------------- ----------- ------------- -------------
Loss before tax (771) (426) (12,983)
Tax - - -
-------------------------- ----------- ------------- -------------
Loss after tax (771) (426) (12,983)
Loss on disposal (698)
Tax -
-------------------------- -----------
Net loss attributable to
discontinued operations (1,469)
========================== ===========
BGD New Zealand Six months Six months
to to Year ended
30 June 30 June 31 December
2017 2016 2016
Unaudited Unaudited Audited
$'000 $'000 $'000
Revenue 2,889 2,673 6,613
Expenses (3,244) (3,029) (9,693)
----------------- ----------- ----------- -------------
Loss before tax (355) (356) (3,080)
Tax - - -
----------------- ----------- ----------- -------------
Loss after tax (355) (356) (3,080)
================= =========== =========== =============
THE QUARTO GROUP, INC.
Notes to the condensed financial statements
6. Earnings per share
Six months
Six months to
to 30 June Year ended
30 June 2016 31 December
2017 (Restated)* 2016
Unaudited Unaudited Audited
$'000 $'000 $'000
From continuing operations
(Loss)/earnings for the purposes
of basic and diluted earnings
per share, being net (loss)/profit
attributable to owners of the
parent (6,498) (850) 9,279
Amortisation of acquired intangibles
(net of tax) 293 226 473
Exceptional items (net of tax) - - 191
--------------------------------------- ---------- ------------ ------------
(Loss)/earnings for the purposes
of adjusted earnings per share (6,205) (624) 9,943
======================================= ========== ============ ============
From continuing and discontinued
operations
(Loss)/earnings for the purposes
of basic and diluted earnings
per share, being net (loss)/profit
attributable to owners of the
parent (5,229) (1,083) (5,697)
Amortisation of acquired intangibles
(net of tax) 293 244 509
Exceptional items - - 6,332
--------------------------------------- ---------- ------------ ------------
Adjusted earnings attributable
to owners of the parent (4,936) (839) 1,144
======================================= ========== ============ ============
Number Number Number
Weighted average number of
shares 20,444,450 19,696,729 19,696,729
Dilutive outstanding options
awards 626,167 971,614 38,591
--------------------------------------- ---------- ------------ ------------
Diluted weighted average number
of 21,070,617 20,668,343 19,735,320
======================================= ========== ============ ============
(Loss)/earnings per share (cents)
From continuing operations
Basic (31.8) (4.3) 46.4
Diluted (31.8) (4.3) 45.4
Adjusted basic (30.4) (3.2) 49.8
Adjusted diluted (30.4) (3.2) 48.7
From continuing and discontinued
operations
Basic (25.6) (5.5) (28.5)
Diluted (25.8) (5.4) (27.9)
* Restated as set out in Note 1.
THE QUARTO GROUP, INC.
Notes to the condensed financial statements
7. Dividends
Six months Six months
to to Year ended
30 June 30 June 31 December
2017 2016 2016
Unaudited Unaudited Audited
$'000 $'000 $'000
Amounts recognised as distributions
to equity holders in the period:
Final dividend for the year
ended 31 December 2016 of
9.87c/7.95p (2015: 9.41c/6.15p) 2,018 1,826 1,853
Interim dividend for the year
ended 31 December 2016 of
5.13c/3.93p (2015: 5.13c/3.35p) - - 1,049
------------------------------------ ---------- ---------- ------------
Total dividend paid for the
period 2,018 1,826 2,902
==================================== ========== ========== ============
The Quarto Group, Inc., as a US incorporated company, is required to collect US dividend withholding taxes on dividend distributions made to its non-US shareholders. The US dividend withholding tax is generally 30% of any dividends paid to Quarto's non-US shareholders, but this amount can potentially be reduced pursuant to an applicable income tax treaty between the US and the country of residence of the non-US shareholder. For example, under the US/UK income tax treaty, the US dividend withholding tax rate can range from nil (applicable to certain UK resident pension trusts and tax exempt entities) to 15% (applicable to UK resident individual shareholders and certain UK corporate shareholders). For US shareholders, no US dividend withholding tax is generally applicable. It should be noted that certain documentation requirements must be met by all shareholders prior to the payment of any dividends to certify their status as a US or non-US shareholder, and, if a non-US shareholder to claim any applicable benefits under the US/UK or other applicable income tax treaty. Each shareholder should consult their own tax adviser to determine whether and to what extent they may be entitled to claim a reduced amount of US dividend withholding taxes under a US income tax treaty.
8. Goodwill
The Group performs its annual impairment review at the end of each financial year. The recent and on-going challenging trading environment gives rise to an indicator of potential impairment and therefore, a full review was undertaken at 30 June 2017. The key inputs to the review were consistent with the review performed at 31 December 2016 and applied to the Group's updated forecasts. The review did not require an impairment charge in respect of either of the two cash generating units of US Publishing and UK Publishing.
9. Net debt and financing
At 30 June 2017, the Group has a $85.0m syndicated bank facility, comprising a term loan and revolving credit facility. These facilities expire in 30 April 2019 and are subject to financial covenants which were all met in the current period.
Net debt is reconciled as follows:
30 June 30 June 31 December
2017 2016 2016
Unaudited Unaudited Audited
$'000 $'000 $'000
Cash and cash equivalents 6,800 7,710 18,824
Cash included in assets
held for sale 128 - -
Short term borrowings (5,000) (5,000) (5,000)
Medium and long term borrowings (77,720) (75,247) (75,748)
Net debt (75,792) (72,537) (61,924)
=========== =========== ============
10. Principal risks and uncertainties facing the Group
There have been no changes to the principal risks and uncertainties facing the Group since the year-end. These are disclosed on pages 22 and 23 of the 2016 Annual Report.
11. Financial Instruments
There are no material differences between the fair value of financial instruments and their carrying value.
THE QUARTO GROUP, INC.
Notes to the condensed financial statements
12. Acquisitions and post balance sheet event
On 7 July 2017, the Group completed the sale of the trade and selected assets of Books & Gifts Direct Limited ("BGD New Zealand"), its direct sales business in New Zealand and last remaining non-publishing business. The business has been acquired by Etailer BGD (2017) Limited, a company incorporated in New Zealand and formed for the purposes of acquiring the business. It is part of the established online retail group Etailer Limited in New Zealand. The cash consideration for the sale is US$0.6m (NZ$0.8m) payable over the next two years. In addition, Quarto is entitled to receive 50% of debtor receipts for the next year and 15% of the profit before interest and tax of the business for the next three years. The cashflows will be used to reduce the Group's bank debt as they are received.
The Board has received a preliminary approach to acquire the Company at a price it considers very attractive and hence worthy of due consideration. Discussions with the potential acquirer are at an early stage and there can be no certainty that an offer will be made.
13. Management Statement
This Interim Management Report (IMR) has been prepared solely to provide additional information to shareholders to assess the Group's strategies and the potential for those strategies to succeed. The IMR should not be relied on by any other party or for any other purpose.
The IMR contains certain forward-looking statements. These statements are made by the directors in good faith based on the information available to them up to the time of their approval of this report but such statements should be treated with caution due to the inherent uncertainties, including both economic and business risk factors, underlying any such forward-looking information.
Responsibility statement
We confirm that to the best of our knowledge:
(a) the condensed set of financial statements, which has been prepared in accordance with IAS 34 "Interim Financial Reporting", gives a true and fair view of the assets, liabilities, financial position and profit or loss of the issuer, or the undertakings included in the consolidation as a whole as required by DTR 4.2.4R;
(b) the interim management report includes a fair review of the information required by DTR 4.27R (indication of important events during the first six months and description of principal risks and uncertainties for the remaining six months of the year); and
(c) the interim management report includes a fair review of the information required by DTR 4.28R (disclosure of related party transactions and changes therein).
By the order of the board
Marcus E. Leaver Peter Read Chief Executive Officer Chairman 7 August 2017 7 August 2017
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR OKODNDBKBDFK
(END) Dow Jones Newswires
August 08, 2017 02:01 ET (06:01 GMT)
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