Quarto's (LON:QRT) $9.8m acquisition of the becker&mayer publishing assets is in line with its strategy of expanding in the US and in children’s publishing and should be usefully earnings enhancing in 2017e. Interim results showed positive progress, with revenue up by 8%. We have increased our revenue and profit forecasts to reflect the acquisition (2017e EPS up 4%). The balance sheet continues to strengthen, with H116 net debt reduced by US$8.5m to $72.5m. Despite a strong relative share price performance over the past 12 months, the 2016e P/E is still undemanding at 6.5x.
Good interims, business increasingly H2 weighted
The highlight of the H116 results was the strong progress in US publishing (revenue up 17%, normalised operating profit by 39%). As usual, there were some ups and downs elsewhere: the core publishing normalised operating profit increased by $1.2m, but a disappointing result from Books & Gifts Direct contributed to a $0.3m overall decline (to $0.4m). Quarto is heavily second-half weighted, especially at the profits level; with trading reported to be on track and a high level of order book visibility our underlying forecasts (before becker&mayer) are unchanged.
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