Quarto Group, Inc. (LON:QRT), the leading global illustrated book publisher announced on the 8th August its unaudited half year results for the six months ended 30 June 2017. Directorstalk caught up with CEO Marcus Leaver to discuss the highlights.
Q1. Marcus could you talk us through the financial headlines for the first half of the year.
A1. 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 a soft retail environment in both the US and the UK – with reduced footfall and consumer confidence resulting in lower than usual levels of business with several of our key customers.
It has been a transitional period with the completion of the disposals of our non-core businesses, resulting in a new reality of a higher second-half seasonality as a pure-play publishing business, especially with the addition of becker&mayer to our portfolio.
Our Adults publishing imprints and international English language co-edition sales have been hit most strongly by market softness and performed below our expectations. We have seen a more resilient performance from our Children’s publishing imprints and Foreign Language sales.
Q2. You have had a challenging first half – what makes you more optimistic about the second half?
A2. While we expect the soft retail environment to continue, we have an excellent publishing programme for the Autumn and the Holiday period – actually, one of our strongest in the last few years across both Adults and Children’s. 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.
Q3. Children’s books have been one of your strategic growth areas. How have they performed and what are your expectations for that part of the business?
A3. Children’s imprints have performed resiliently despite pockets of softness, for instance in the educational market. Our Children’s publishing revenue for the first six months of 2017 was 3% higher than the same period last year, 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!
Overall, our children’s revenues have grown by 135% since 2012 and it remains an area of strong focus for the Group going forward.
Q4. You’ve made some recent acquisitions, how have they been performing?
A4. Both becker&mayer and Harvard Common Press, acquired in 2016, are performing in line with expectations. Becker&mayer is particularly second-half weighted, which adds to the increased seasonality of the Group as a whole.
Q5. You also announced that you have received an approach to acquire the company. Can you comment?
A5. Discussions are at an early stage; no formal offer has been made yet and there can be no certainty that any offer will materialise, although we are gratified by the resources that have been committed by the potential acquirer at this stage. We are naturally proud to have third party validation of the inherent value of our business.
Our main concern is to present the best offer to our shareholders while making sure the potential acquirer would be a good home for each and every one of our employees.
In the meantime, we are all fully focused on delivering our plans for the rest of the year in the midst of a challenging retail environment in both our domestic markets.
Q6. Finally, Quarto Group Inc. has announced some Board changes recently, can you tell us about the significance of these for the business?
A6. We have two new talented female Non-Executive Directors, in addition to Jess Burley. Claire Capeci joined the Board in May. She is Global President, Retail for J. Walter Thompson Worldwide, the WPP-owned advertising agency, and based in New York City. With over 50% of Quarto’s revenues generated in the US, it felt particularly relevant to bring in someone with such solid experience in the world of US retail.
Leslie-Ann Reed joined last week; a chartered accountant who has served in both executive and non-executive roles in publicly listed media and professional services companies. Her skills and experience in supporting mergers and acquisitions particularly, will be of great help to Quarto as we pursue our ambition to become the dominant publisher of illustrated books worldwide.
It is worth noting that our Board is now equally split gender-wise, which we’re very proud of. We have made a conscious effort towards more gender balance at all levels of management. It is critical that Quarto’s team should be as diverse as our books, our customer base and the communities we live and work in.