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Quarto sales top £100m

20.02.08 Philip Jones

Quarto, the publicly quoted book packager and publisher, has seen sales top £100m in 2007, despite facing what the group called a "weaker economy" in its core US market and adverse currency movement. The group's sales grew 7% to £100.1m, after dipping in the previous year.

The group was spurred on by JR Books, Quarto's newest UK-based venture, which had an "auspicious first year".

Laurence Orbach, chairman and c.e.o., stated: "We have delivered a very solid set of 2007 results." He added: "For our co-edition titles, the forward order book is stronger than it was at this time last year. The publishing segment, by its nature, sells from inventory and does not have such forward visibility, but, even allowing for the lingering problems in the US housing and associated markets, we expect a solid performance for the group in 2008.

"We have strong publishing programs in place and, with a healthy backlist of titles, and greater visibility and availability for these through internet retailers, we feel comfortable that Quarto is in good shape to weather the head winds that may blow."

Quarto's international co-edition publishing segment produced another "robust performance", achieving a strong underlying operating profit margin of 13.6% (2006: 13.7%) on headline revenues of £38.4m that, on an underlying, constant currency basis, were up 6% at £40.7m (2006: £38.4m). The underlying operating profit was 1% ahead at £5.3m.

The publishing segment saw operating profits jump 23% to £6.4m (2006: £5.2m) on sales up 12% to £61.7m (2006: £55.2m), thanks to the $35m acquisition of MBI, Quarto's largest yet.

Overall the group reported adjusted operating profit up by 10% to £10.6m (2006: £9.6m) on revenue growth of 7% to £100.1m. Adjusted operating profit exceeded 10% of revenues for the first time: "we are striving towards a new target of 12.5%", said Orbach.

JR Books had an "auspicious first year": its debut list, launched in late 2007, beat its sales budget by 100%. "After such an excellent start, the pressure is on to deliver an equally stunning second year: we are planning to publish twice as many new titles in 2008, as well as reissue our launch list in paperback, so for now we are growing fast and full of optimism for the future," Orbach wrote in his letter to shareholders.

Aurum Press started the year on a "wave of optimism" following an exceptional 2006, but was hit by an "unprecedented level of returns in the first six months". Orbach said: "It is one of the idiocies of the book trade that the more you sell, the more you get back, even when sales out of the stores are increasing. Thus we paid the price in the first half of 2007 for our sales success in late 2006." Throughout the year, sales continued to drift from the high street to supermarkets and online, in particular to Amazon, the company reported.

Orbach was cautiously optimistic about the future: "The book publishing business, over a very long period, has consistently survived the predations of most other media and prophesies of its imminent demise; the movie industry has adapted itself to the emergence of television, cable, videotapes and DVDs; and so it is likely to continue, but there are no guarantees."

Financial Philip Jones Quarto Laurence Orbach

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