Underlying publishing revenues ahead
Quarto’s Q315 trading update indicates that full year results are on track to meet management expectations for the full year, with profits strongly weighted to the final quarter. Quarto Group (L:QRT) revenues were flat at $54.4m (Q314: $54.5m), with the benefits of acquisitions and positive performance from the underlying publishing businesses being offset by the twin impacts of currency and difficult trading in Australia and New Zealand. With earnings clearly on a rising trend and the debt level continuing to recede, the rating remains at an unjustifiably sizeable discount to the market and sector.
Underlying publishing moving ahead
Q1’s successful acquisition and integration of Ivy Press (for £1.3m plus £0.2m debt) helped propel publishing revenues forward by 7.9% in Q315. Underlying publishing revenues also increased 1.3%. At the half-year, the children’s offer and foreign language sales were the strongest contributors to progress. Books & Gifts Direct, the Australia and New Zealand operation, benefited in H115 from the previous year’s reorganisation, but is finding the going tough in the throes of the local economic backdrop. The effect is amplified by the translation from Australian dollar to US dollar for reporting purposes, with a further 10% currency headwind in Q315 (17% year-to date). The group has a clear strategy to create high-quality, content-rich books and sell them in as many languages and via as many channels as possible. The underlying progress on this front, and the continuing reduction in the debt (and interest), has led us to make a slight increase in our expectations for FY16 from a PBT of US$14.4m to US$14.6m.
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