Quarto reports 'encouraging' first half, but cuts jobs and closes Minneapolis office

Quarto reports 'encouraging' first half, but cuts jobs and closes Minneapolis office

Quarto has reported an "encouraging" trading performance for the first six months of 2018, including a group revenue rise of 12% year-on-year to $56.2m (2017: $50.2m) and an improved gross profit margin of 50.1% (2017: 48.2%). In the UK, Quarto's publishing lists revenue is up 17%, driven by "a strong contribution" from its children's imprints, while in the US publishing lists revenue is up 9%.

However a spokesperson confirmed that a number of job cuts were made last month, although the precise number has not been given. Following a review of its operations, Quarto will also be closing its Minneapolis office. "The reorganization is intended to improve the company’s financial position and operational performance," the company said.

As part of the interim report, Quarto took the opportunity to reveal details of a new "cost-out programme", involving "a thorough review of key areas of expenditure including but not limited to, pre-publication expenditure, occupancy costs, payroll and discretionary expenditure". It is designed to achieve "a right-sizing of the Group; a path to sustainable debt reduction; a focus on our core strengths; and a disciplined business model", Quarto said.

The results, covering the first six months to 30th June 2018, follow a tumultuous period in which the company has seen a host of changes in its governance. After a shareholder revolt on 17th May, caused by shareholder disagreement over the publisher’s debt, several board members were axed and ousted co-founder Laurence Orbach made a shock return as chairman, prompting the resignation of Marcus Leaver, then chief executive of Quarto, just days later.

Since then, Chuk Kin Lau, newly-appointed to Quarto’s board following the coup, was made Quarto's interim chief executive officer in Leaver's wake, while Orbach, who stepped back to become non-executive director in early July, then departed the board altogether later that month without explanation. Together they own 47% of the publisher (Orbach 20%, Lau 27%).

In the context of what Quarto referred to as a "challenging" market place showing continuing "softness in the book trade" in the UK and US, Lau called the results "encouraging", remarking the company had achieved "good year-on-year growth" and is now "well placed to deliver a solid performance for the full year".

Globally, in particular Quarto's children's imprints were singled out for having performed particularly strongly with revenues up 30%; revenues from its adult imprints were up 5%. Quarto’s group operating loss was $7m, down from last year’s $7.6m, but its after tax loss came in higher at $6.7m compared to $5.2m the year before. Its adjusted group operating loss was $4.7m, whereas in H1 2017 the loss was $7.2m and adjusted loss before tax was $6.6m (H1 2017: loss of $8.7m). Net debt at 30th June 2018 was $73.2m (H1 2017: $75.8m), a decrease of $2.6m over the 12-month period.

In isolation, UK revenue was up 12% from $7.5m to $8.4m, while its operating loss was reduced from $3.6m in H1 2017 to $2m in H1 2018. Highlights from its publishing programme were its Little people Big Dreams series, now approaching one million copies in print. Returns, high last year when the colouring books trend ended, were "at a more normalised level" in the first half of 2018, it said. Quarto meanwhile said both US and UK publishing segments had benefitted from "an improved seasonal split of co-edition revenues, with a higher percentage than normal of expected full-year revenues achieved in the first half".

Alluding to the aforementioned changes, and to a shareholder vote in August to increase Quarto's borrowing powers, Lau said: "The Group has had to adjust to various transitions in the management of the Company during the first half year. Our resilient and talented staff have stepped up to the challenges we have faced and are committed to delivering on a leaner and more focused publishing programme.

"The newly constituted Board are concentrating on delivering stability to the business, and the extension of the banking facilities will enable us to lay down a key building block in returning the Group to full-health."