News
Quercus makes £280k loss after sales shortfall
07.06.09 | Philip Jones
Quercus Publishing saw its revenue grow by 27% in 2008, but the business plunged to a loss after a sales shortfall with interest payments also doubling over the year, according to results released today (5th June).
As reported in The Bookseller two weeks ago, the company has also confirmed that it has set up a short term working capital facility with its investor the Pentland Group, with £460k already used. This is in addition to the £1.75m it raised from a share issue at the end of 2008. The company also revealed that it had spent £473,866 with literary agency Capel and Land, co-owned by Georgina Capel the wife of its former chairman Anthony Cheetham.
Turnover rose from £8.6m to £10.9m, while operating profit fell to £28,914. However, after interest payments of £314,484 the company made a pretax loss of £280,683. Last year the company made a pretax profit of £154,100, which itself was half what it made in 2006.
Mark Smith, chief executive, said: "The directors are by no means satisfied with these results and have implemented both cost-saving and revenue-generating measures for 2009 to ensure the business is managed in the most effective manner during what could be another challenging year."
Smith said the loss had come as a direct result of a disruption in the UK marketplace that contributed to a shortfall in its trade revenues. The company had been expecting growth of 40%, with sales passing £12m. The shortfall in sales was exacerbated by foreign exchange losses of £0.21m arising from the volatility of the US dollar; this resulted in a loss for the year of £0.24m.
Of the increased debt and higher interest charge, Smith said it was about "how we are choosing to fund the business, before this it was more equity than debt, but now it is about equal". Smith declined to reveal how much was available as part of the new funding but said it was "very significant". He added: "I am now very happy abut the cash situation."
Under the heading "related party transactions", the company revealed that it had spent £473,866 with literary agency Capel and Land, up from £388,737 a year earlier. It added: "This supplier is a related party as Georgina Capel, one of the co-owners of the agency is the wife of Anthony Cheetham." Cheetham was executive chairman of Quercus until November 2008, and abruptly left entirely in February 2009 citing strategic differences. When questioned as to why the information had been provided this year but not in 2008, Smith said that its auditors had decided that the numbers had become "material". In total, Quercus has paid £1,011,986 to Capel and Land to date. Smith refused to say whether this was an unusual amount for a literary agency to earn from one company.
When questioned about trading in 2009, Smith said: "What I'd say is look at the NielsenBookScan figures so far his year, we are 50% up on the same period last year."
Smith added: "The economic environment remains volatile, presenting an element of risk and uncertainty for the business in 2009 that the directors are closely managing. That said, we are pleased to report that trading for the first five months of 2009 has met the directors’ expectations, with sales and margins holding up, costs under control and year to date profit on target. We are confident of achieving better results in 2009, but remain watchful and prudent in the current climate."
Quercus said Stieg Larsson's Girl with the Dragon Tattoo was a "standout success", with the second book in the trilogy published in early 2009, and providing the company with its first number one. The paperback of The Girl who Played with Fire is published in July 2009 and the final instalment hits the stores in October. "We look forward to having all three titles in the marketplace and hope to replicate the success that the Millennium Trilogy has experienced throughout Europe," Smith commented.
Comments on this article
By Stan
Does the Bookseller ever provide anything but PR? Here is an opportunity for real journalism, providing insight into what on the surface looks like questionable accounting and nepotism. Regurgitating press releases and providing little but verbatim interviews is very weak. Come on and give me some value for my sub!05 Jun 09 12:04
By philip.jones@bookseller.co.uk
Yes, there is clearly more to do on this story Stan. But this one was based on the financial statement put out this morning. We will have more to report shortly. Since we broke the news two weeks about Quercus needing to raise more cash, which at the time was an ongoing situation for the company, I don't think your sub has been entirely wasted.05 Jun 09 12:27
By Sinko
So Cheetham's wife gets some very generous business from her husband's company. Didn't his son also have a well-paid job with Quercus for a while? Hmm.05 Jun 09 15:00
By CMS
Forget about the Bookseller Century which turned out to be a predictable roll call of the usual suspects, what we want is a Publishing Connections (like BBC Comedy Connections). Already just in today's Bookseller we have Cheetham-Capel-Cheetham son; Louis Baum-Liz Calder. And the other week we had Amanda Ross-Simon Ross-Jonathon Ross. Only this will give us a true picture of British Publishing and where the influence lies. I fear not in the boardrooms but in the bedrooms.05 Jun 09 15:12
By literatiwatch
'The company also revealed that it had spent £473,866 with literary agency Capel and Land, co-owned by Georgina Capel the wife of its former chairman Anthony Cheetham.' This is old-style nepotism - and the results show that (like in-breeding) it doesn't work. Quercus have always looked like they lacked the discipline of a rigorous quality control and clear strategy. Now we know why: family self indulgence. What with Granta and Quercus both looking increasingly moribund we need some new indy co.s to come through to save UK book publishing's good reputation.05 Jun 09 17:10
By literatiwatch
Come on Bookseller - let's see you encouraging UK publishing to up its game by keeping tabs on dodgy practices and sloppy quality control. Why not get Horace's imaginary niece on the case as supersleuth?05 Jun 09 17:14
By CMS
Move over Publishing Connections (see previous comment), how about Publishing Pet Connections. Just swing by http://www.bookbrunch.co.uk/index.php?option=com_content&view=category&id=915:people&layout=blog&Itemid=88 and find out how Vicky Barnsley's pooch failed to make the connection with Deborah Roger's labrador.08 Jun 09 14:48
