The Quarto Group has issued a profit warning, admitting its original guidance for 2017 and beyond had been "set too high". It also blamed a "soft retail environment" for a "disappointing" first-half in advance of its interim results, which are out next month. The group emphasised too that it was transitioning to refocus on its core publishing business, resulting in its business becoming more weighted towards the second half of the year. Nevertheless, shares in the publisher fell 25% upon the news, from 237.5p to 172.5p.
In March Quarto issued market guidance following the disposal of two of its businesses, Hong Kong-based Regent Publishing Services and Books & Gifts Direct (BGD) Australia. However, the guidance used a publishing-only baseline for 2016 which did not reflect the benefit of $2.1m relating to the reduction in the amortisation of capitalised pre-publication costs, it said, meaning that the baseline for 2017 and beyond had been set too high.
Quarto added that the tough retail climate was also likely to impact on its interim results for the six months to 30th June 2017, set to be released on Tuesday 8th August. However, the group said it expected its publishing programme to perform "significantly better" in the second half of the year.
Marcus Leaver, chief executive of The Quarto Group, said it was a "transitional" year for the business as it refocused on its core publishing business. "As expected, we have seen a soft retail environment in the first half of the year in both our domestic markets which, combined with the disposal of our trading businesses earlier this year, means that our results will be even more second-half weighted than in previous years," Leaver said.
"We are making good progress towards our strategic objectives and becoming more operationally agile to respond better to an ever-evolving market environment. We look forward to announcing the appointment of a new CFO in due course and to enjoying the full benefits of our new organisational structure and systems upgrade by year-end."
Quarto announced a change in direction for the company to refocus its efforts on its core publishing business earlier this year, at the same time as revealing a 17% rise in publishing profits. Overall, the business made a loss of $1.3m, thanks to write-down at its now sold Books & Gifts Direct (Australia) business.
It was previously reported that Michael Connole, chief financial officer of the Quarto Group, is leaving the business on 30th September 2017. Brian Porritt, most recently c.f.o. at Huntsworth Plc, has been appointed interim chief financial officer. A permanent c.f.o. will be announed in due course.