Interim Results
Quarto Group Inc
02 September 2005
THE QUARTO GROUP, Inc. - INTERIM ANNOUNCEMENT
Quarto, the London-based and listed international book publisher, announces that
it is on track to achieve a seventh successive year of progress in underlying
EPS.
• Underlying operating profit increased by 9.9% to £2.2m on revenue up
23.0% to £38.2m.
• The results reflected the growing importance of own-imprint publishing
(following four acquisitions in the 12 months to 30 June 2005), timing
differences on co-edition revenues, and some sales deterioration at the
publishing services business, now consolidated successfully into one
manufacturing facility.
• On a trailing 12-month basis, revenue increased by 14% to £86.9m and
underlying operating profit by 13% to £7.7m. The underlying gross margin
improved to 35% from 32%.
• The interim dividend per share is increased by 5.5% to 2.9p, reflecting
the Board's confidence in the outcome for the year.
• Quarto's core strategy, of focusing on areas of perennial interest,
which it knows well from its extensive experience of publishing
international co-edition books, continues to work well.
• Amongst publishing successes in the period were Quarto's Poker Player's
Bible (which has reprinted four times and is approaching 100,000 copies in
print), Quintet's 1,001 Movies you Must See Before You Die (released last
year, which has notched up almost 400,000 copies in print), Aurum's
Trafalgar (which combines the most detailed account of the battle ever
published and a new biography of Nelson), Rockport's The Design of Dissent
(by the eminent US graphics designer, Milton Glaser) and Creative
Publishing's bestseller Outdoor Projects for your Power Washer (which sold
77,000 copies during the period).
Laurence F. Orbach, Chairman, stated: 'I am happy to report that, for the six
months ended June 30, 2005, operating profit has exceeded our internal forecast.
Although there are unmistakable signs of tightening in some of our core markets,
I hope that we shall be able to achieve our seventh successive annual increase
in adjusted diluted earnings per share, although, probably, not by as much as we
had estimated internally earlier in the year. Quarto is a resilient business,
with a very high percentage of its revenues coming from the sale of books
created in earlier years, both from titles licensed to other publishers, and
from those published under its own imprints. This will continue to stand us in
good stead, and provide a solid platform for further growth.'
Enquiries:
The Quarto Group, Inc. 020-7700 9000
Laurence Orbach (Chairman & CEO)
Mick Mousley (Finance Director)
Bankside Consultants Limited
Charles Ponsonby 020-7367 8851
Ian Payne 020-7367 8853
THE QUARTO GROUP, INC
CHAIRMAN'S STATEMENT
Dear Shareholder:
I am happy to report that, for the six months ended June 30, 2005, Quarto's
operating profit has exceeded our internal forecasts. Although there is growing
uncertainty about the economy, we expect a strong second half of the year.
We are now executing the growth strategy that we outlined to shareholders, by
increasing our publishing presence in areas that we understand well through our
successes in illustrated co-edition book publishing. Quarto publishes books in a
number of non-fiction categories. Our international co-edition imprints license
their titles to other publishers for marketing, sales, and local distribution,
and are not involved in these processes, nor do they hold inventory of the
titles; books appearing under imprints owned by the group are marketed, sold,
and distributed by those imprints, which also hold inventory of the titles. The
first half of 2005 marks the first time that sales of Quarto's own publishing
imprints have exceeded the sales of our international co-edition titles.
Since the second half of 2004, an active program of corporate activity,
involving several acquisitions of publishing imprints, has had a profound impact
on Quarto's business. These acquisitions have performed, over these 12 months,
in line with our expectations, and we continue to work to improve their
contributions. The impact of these changes means that to compare the first half
of 2004 to the first half of 2005 is akin to likening apples to oranges.
Financial Review
For some time, Quarto has published management's trailing 12 month figures to
provide a clearer guide to performance, by reducing the cyclical nature of the
business. It may be more helpful, as an indicator, to view the headline trading
performance over the trailing 12-month periods, ended June 30, 2005 (and
including the acquisitions for some of the time), and June 30, 2004, prior to
the acquisitions. These figures demonstrate the first fruits from our recent
acquisitions, although none is included for the full 12 months. Revenue
increased by 14% to £86.9 million (2004: £75.9 million), and operating profit by
13% to £7.7 million (2004: £6.8 million). The overall gross margin rose to 35%
(2004: 32%).
Overall, our half year results are slightly ahead of management's internal
forecasts for the period. With the change from reporting figures under UK GAAP
to reporting under IFRS, there are modest adjustments to the historic figures,
which are explained in some detail in the Notes. The overall impact on the
adjusted diluted earnings per share, for the year ended December 31, 2004, is a
reduction of 0.8p, from 22.0p to 21.2p. The three substantial differences, i.e.
the calculation of goodwill, the amortization of intangible assets, and the
classification of Quarto's convertible preferred stock as debt rather than
equity, relate entirely to items that have had no impact on cash flow.
International Financial Reporting Standards (IFRS) are used throughout this
results announcement, rather than UK General Accepted Accounting Practice
(GAAP).
For the six months ended June 30, 2005, revenue increased by 23.0% to £38.2
million. Acquisitions contributed £9.4 million, and revenue of continuing
businesses fell by £2.3 million, or 7%. There was, once again, some negative
impact on sales from the comparative sterling-dollar exchange rates ($1.87
compared to $1.82 to £1.00) but, more simply, almost all of the shortfall is
explained by timing differences on co-edition revenues (which were very robust
in 2004, helped by some deliveries which had slipped from 2003), and
deteriorating sales at one of our publishing services units, which resulted in
its profit moving from £104,000 in 2004, to a loss of £34,000 this year, an
adverse swing of £138,000. This deterioration could only be reversed by
unwarranted capital investment, and led us to consolidate its business into our
modern facility at Chippenham, as we announced in April. This is expected to
produce annualized cost savings of £0.3 million, at a one-time charge of £0.6
million.
Operating profit was up 9.9% at £2.2 million, before amortization of intangibles
of £0.6 million, publishing services restructuring costs of £0.6 million, and
the costs of an abortive acquisition of £0.1 million, a total of £1.3 million.
After our four recent acquisitions since last July, net financing costs
increased to £1.0 million (2004: £0.6 million), giving a pre-tax loss of £0.1
million (2004: profit of £1.3 million), and a loss per share of 2.2p (2004:
earnings per share of 4.5p).
Reflecting its confidence in the outcome for the year, your Board has declared
an interim dividend per share of 2.9p (2004: 2.75p), up 5.5%, payable on October
21, 2005 to shareholders on the register at September 23, 2005, with an
ex-dividend date of September 21, 2005.
June 2005 was the final opportunity for holders of the Company's high-yielding
convertible cumulative redeemable shares of preferred stock to convert into
common stock. Holders of 2,947,292 of these converted into 1,768,344 shares of
common stock, increasing the number in issue to 20,444,550. The outstanding
2,255,272 convertible preference shares will be redeemed at a price of £1.00
each on December 31, 2005.
Operational Review
Our core strategy, of focusing our publishing in areas of perennial interest,
which we know well from our extensive experience of publishing international
co-edition books, is continuing to work well. Our largest acquisition since June
30, 2004, Creative Publishing, based in the US, and publishing books primarily
on home improvement, home crafts, and outdoors activities, has two core outlets
for most of its titles, i.e. the bookstore, and the specialty retailer, and
emphasizes our risk-averse approach to stock-holding publishing. Among its core
customers are The Home Depot and Lowe's, both of which have recently reported
strong sales and profit figures.
There were some very positive achievements in our co-edition units. Quarto's
Bible series of how-to arts and crafts titles, reached total sales of almost 1.5
million copies. And, riding the wave of the interest in poker and online
gambling, its Poker Player's Bible has reprinted four times and is approaching
100,000 copies in print.
Quintet's 1001 Movies You Must See Before You Die, released last year, has
notched up almost 400,000 copies in print. The newest title in the 1001 series,
1001 Albums, looks likely to debut with Quintet's largest ever starting print
run, and next spring's 1001 Books has already been pre-sold in five European
languages.
Q+, our books plus imprint, largely involved in children's publishing, is
starting to work on a complete revision of its Let's Start series which, with
nearly six and a half million copies in print, has been a cornerstone of the
business. The relaunch will take place next year.
QED, our start-up children's educational books unit, delivered its second list,
of 59 titles, to customers and distributors in the English-language world.
Gratifyingly, a number of titles were chosen as 'editor's choices' by the USA's
largest children's educational book club. The UK's largest supermarket group has
indicated its strong support for relaunching QED's first list of titles in
paperback format next year.
Quantum had poor sales. Unlike many of the other co-edition units, its UK sales
have been the backbone of its business. These were seriously dented by the
trading difficulties of a number of Quantum's retailing customers and, in
addition, a major German publisher went out of business.
In the book publishing area, Aurum, in the UK, has sold 10,000 copies of its
major new title, Trafalgar, producing revenue of £120,000, which combines the
most detailed account of the battle ever published and a new biography of
Nelson.
Last year's US acquisition of Creative Publishing has now been merged with the
various Rockport imprints into the Quayside Publishing Group, which manages
their combined invoicing, sales, marketing, and fulfillment functions. Rockport
in June published The Design of Dissent, by the eminent US graphic designer,
Milton Glaser, to considerable critical and sales acclaim. It accompanies a
major show illustrating the role of arresting graphics in the politics of
dissent and, in particular, of opposition to war, poverty, and exploitation.
Creative Publishing (CPi) specializes in how-to books in the home improvement
and associated lifestyle areas, covering more prosaic, and less provocative,
subjects than Milton Glaser's title. The best-selling of these, in the first
half of the year, was Outdoor Projects for your Power Washer, which sold 77,000
copies during the period. The third edition of CPi's The Complete Guide to Decks
was released in May, and has already sold 38,000 copies. There is considerable
work to be done to repair the previous neglect of CPi's core publishing. This
involves updating, with current code requirements and standards, many of its
core home improvement titles.
Encouragingly, our owned imprint publishing businesses, which, appropriately,
focus their main energies on their domestic markets, are starting to take
advantage of Quarto's considerable experience in international markets, a trend
that is set to continue and, through licensing, to provide extra profit to their
activities.
Lifetime, based in Australia, (acquired in November 2004) and Premier Books,
based in New Zealand, (acquired in April 2005), both market leaders, in their
respective countries, in the display marketing of books, turned in exemplary
results. With their focus on a value-for-money proposition for the consumer,
they bucked the weaker retailer markets.
Once again, we had very strong performances from Book Sales, and Regent
Publishing Services. Their results, together with the better than expected
performance from our acquisitions, overcame the weaker performance from the
co-edition units, to produce an overall improvement in operating profit greater
than forecast.
Outlook and Risk Factors
The timing of our revenues is now beginning to change to reflect the greater
concentration in stock-holding publishing. This may result in a higher
proportion of our profit falling into the second half of the year.
Previously, dominated as we were by co-edition revenues, reprints were sold when
licensees needed more inventory, and this could happen at any time of the year.
This remains true for the co-edition units but, for the publishing units,
revenue is only booked when reprinted inventory sells through to the retailer
(or other third party). Typically, booksellers return to publishers, in the
first half year, their overstocks of books that didn't sell through during the
prior Christmas selling season.
There is, inherently, higher risk in stock-holding book publishing than in
international co-edition publishing, but this has to be seen in context.
Quarto's focus remains firmly in publishing subjects and categories of proven
sustained and enduring interest and, as we have pointed out on previous
occasions, over half of our revenue comes from the sales of books produced in
prior years. There is no intention to deviate from this focus.
Quarto's business is well spread. No one title, out of the 500 or more titles
per year published by the group, exceeds 1% of total sales; we have a plethora
of autonomously-operated business units with great geographical diversification,
helping to cushion us from the effects of a downturn in any one or two
categories or major geographical markets.
Trade sources in the US, as well as statistical evidence, indicate that the book
retailing market has been down overall for the calendar year. The US is, by far,
our biggest market. Our strong focus in publishing in special interest
categories makes us less heavily dependent than many publishers on book trade
retailing, but we cannot be completely insulated from the overall trend.
In the UK, which accounts for approximately 10% of our sales of books, most of
the book chains are under pressure, as publicity about W H Smith and Ottaker's
attests. Borders has also reported a slowdown in UK sales, and we are also
experiencing de-stocking by Waterstone's. This overshadows some strong sales of
newly published titles. For instance, sales of front list titles, published in
the UK by our Aurum imprint in the first half of this year, are actually up by
about 5% over the same period last year, but returns of backlist titles have
eliminated the impact of this good performance from a strong publishing list.
The experience of retailers in Australia is not very different. For example,
Angus & Robertson (previously a W H Smith subsidiary), is only beginning to pull
out of a slump, and the Collins Booksellers chain collapsed during the period.
In defiance of these strains in book retailing, our direct-selling display
marketing businesses, Lifetime in Australia, and Premier Books in New Zealand,
both exceeded last year's comparative sales.
In corporate activity, we acquired 70% of Premier Books in April, the balance
remaining with existing management and shareholders, subject to a put-and-call
agreement. We also spent considerable time and expense exploring another
acquisition possibility but, unfortunately, were not able to agree terms. We
continue to look at other opportunities.
With our recent acquisitions, we have made good headway in implementing our
strategy, but this remains a work-in-progress. There is more to do to grow the
business significantly, and to leverage our infrastructure to greater effect.
In common with other publishers operating in the consumer market, we are feeling
the effects of a slowdown in consumer spending, which has been commented on by
many in the book industry, and in many other retailing sectors, particularly in
the major English-language markets. In the United States, this now seems to be
easing somewhat. Unhappily, this is not yet so for the UK and some of our other
markets. There is a risk that our customers will see the downturn as being more
than a cyclical adjustment, and will be cautious about ordering inventory.
The English-language markets have been buoyant for a number of years, but are
now much less so, and it may be of some value to shareholders to understand our
reading of the economic outlook in the major English-language markets in terms
of the likely impact on Quarto.
In spite of obvious overheating in some areas, notably in housing, the economies
are not in bad shape. But, the impact of higher fuel prices, higher interest
rates, rising mortgage costs, a visceral feeling that published inflation rate
data does not reflect personal experience of cost increases, and plentiful media
speculation about the possibly parlous state of the economic outlook, have
prompted many people to re-evaluate their priorities. As happened some years
ago, they have decided that they have enough 'stuff', in many instances, and are
holding off on further consumption while they await a clearer picture of the way
the economy is developing. Traditionally, low ticket items, such as books, but
perceived by consumers as having high value, have done well in these
circumstances.
From this perspective, then, we see value in sustained investment in our
publishing lists, and expect that, as a side effect of the squeeze on retailers,
some interesting acquisition opportunities may open up.
Although there are unmistakable signs of tightening in some of our core markets,
I hope that we shall be able to achieve our seventh successive annual increase
in adjusted diluted earnings per share, although, probably, not by as much as we
had estimated internally earlier in the year. Quarto is a resilient business,
with a very high percentage of its revenues coming from the sale of books
created in earlier years, both from titles licensed to other publishers, and
from those published under its own imprints. This will continue to stand us in
good stead, and provide a solid platform for further growth.
Sincerely,
Laurence F Orbach
Chairman and Chief Executive Officer
London, September 2, 2005
THE QUARTO GROUP, INC
UNAUDITED CONDENSED CONSOLIDATED INCOME STATEMENT
for the six months to June 30, 2005
Six months Six months Year ended
ended ended December 31,
June 30, June 30, 2004
2005 2004
£'000 £'000 £'000
Revenue 38,198 31,049 79,750
-------- -------- --------
Operating profit 2,167 1,971 7,516
Less:-
Amortization of intangibles (1) (586) (17) (509)
Restructuring costs (2) (600) - -
Aborted acquisition costs (3) (100) - -
_____ _____ _____
Operating profit 881 1,954 7,007
Financing costs (4) (1,083) (671) (1,680)
Financial income 56 31 65
_____ _____ _____
(Loss) profit before taxation (146) 1,314 5,392
Taxation (5) 39 (340) (1,255)
_____ _____ _____
(Loss) profit for period (107) 974 4,137
------- ----- -------
Profit (loss) for the period attributable to:
Minority interests (6) 285 159 403
Shareholders of the parent company (392) 815 3,734
----- -------
(107) 974 4,137
------- ----- -------
(Loss) earnings per share (2.2)p 4.5p 20.8p
-------- ------ -------
Diluted (loss) earnings per share (2.2)p 4.5p 19.6p
-------- ------ -------
The following information is presented as additional information and does not form part of the
income statement :
Adjusted earnings per share 3.0p 4.6p 22.7p
------ ------ -------
Adjusted diluted earnings per share (7) 3.0p 4.6p 21.2p
------ ------ -------
--- --- ---
£'000 £'000 £'000
EBITDA (Earnings before restructuring
and aborted acquisition costs,
corporate expenses not attributable to
operations, interest, tax, depreciation
and amortization) 3,309 3,160 9,412
------- ------- -------
1 Under IFRS, goodwill arising on acquisitions is no longer amortized, but will
be subject to an annual impairment review. The group made three acquisitions in
2004. These acquisitions included the purchase of intangible assets, with finite
lives, not previously recognised under UK GAAP. Under IFRS, these intangible
assets are reclassified from goodwill, and amortized over their useful economic
lives. This explains the large increase in the amortization charge in the six
month period ended June 30, 2005 compared to June 30, 2004.
2 Restructuring costs relate to our publishing services units, as noted in the
Chairman's letter. The costs include redundancies, dilapidations, losses on
fixed asset disposals, and other losses incurred after closure of our Reading
site was announced.
3 Aborted acquisition costs mainly comprise third party legal and professional
fees.
Six months Six months Year ended
ended ended December 31,
June 30, 2005 June 30, 2004 2004
£'000 £'000 £'000
4 Financing costs comprise:
Bank and other interest (981) (448) (1,234)
Interest on cumulative redeemable
preference shares (102) (223) (446)
treated as debt
--------- ------- ---------
(1,083) (671) (1,680)
--------- ------- ---------
Under IFRS, Quarto's cumulative redeemable preference shares have been separated
into debt and equity components. In these financial statements, they have been
classified principally as debt and the dividends have been treated as a
financial cost on the debt. Net financing costs amounted to £1,027,000 in the
six months ended June 30, 2005, an increase of 60% compared to the six months
ended June 30, 2004. This increase is because the average rate of interest paid
has risen by 44% from 3.6% to 5.2%, and, because of higher net debt levels as a
result of the acquisitions made in the twelve months ended June 30, 2005.
5 Taxation for the six months ended June 30, 2005 is based on the estimated
effective tax rate for the year. The rate that has been used is 27% (June 30,
2004: 26% and December 31, 2004: 23%). The increase compared to the year ended
December 31, 2004 was expected.
6 Minority interests relate to the following business units: Book Sales, Regent,
Global, Aurum, Lifetime, and Premier. The increase in the profit attributable to
minority shareholders in the six months ended June 30, 2005 compared to June 30,
2004 is mainly attributable to the acquisitions made during the twelve month
period ended June 30, 2005.
7 Under IFRS, there are modest adjustments to the historic figures, which are
explained in some detail in the document headed Adoption of International
Financial Reporting Standards (IFRS). The three substantial differences i.e. the
calculation of goodwill, the amortization of intangibles and the classification
of the cumulative redeemable preference shares as debt, have no impact on cash
flow. The cumulative redeemable preference shares have either been converted or
will be redeemed at par at the year end and therefore the most appropriate
measure of the underlying performance of the business going forward is the
adjusted diluted earnings per share.
THE QUARTO GROUP, INC
UNAUDITED CONSOLIDATED BALANCE SHEET
at June 30, 2005
June 30, June 30, December 31,
2005 2004 2004
£'000 £'000 £'000
Non-current assets
Goodwill (1) 9,871 3,071 7,244
Other intangible assets (2) 5,068 249 5,334
Property, plant and equipment 8,604 8,959 8,982
Deferred tax 4 - 4
--- --- ---
23,547 12,279 21,564
-------- -------- --------
Current assets
Inventories (3) 25,650 19,178 20,863
Taxation recoverable 154 94 154
Trade and other receivables (3) 24,512 17,102 23,876
Cash and cash equivalents (4) 5,962 6,287 10,611
------- ------- --------
56,278 42,661 55,504
-------- -------- --------
Total assets 79,825 54,940 77,068
-------- -------- --------
Current liabilities
Short-term borrowings (4) (6,147) (356) (5,283)
Trade and other payables (3) (22,173) (15,774) (24,929)
Current tax liabilities (532) (462) (1,304)
------- ------- ---------
(28,852) (16,592) (31,516)
----------
Net current assets 27,426 26,069 23,988
-------- -------- --------
Non current liabilities
Medium and long-term borrowings (4) (41,448) (33,698) (38,408)
Other payables (218) (243) (210)
Deferred tax liabilities (638) (924) (630)
------- ------- -------
(42,304) (34,865) (39,248)
---------- ---------- ----------
Total liabilities (71,156) (51,457) (70,764)
---------- ---------- ----------
Net assets 8,669 3,483 6,304
------- ------- -------
Equity
Issued capital 1,172 1,063 1,063
======= =======
Share premium account 21,699 19,194 19,199
Reserves (17,279) (19,230) (16,678)
Total equity attributable to equity
holders of the parent 5,592 1,027 3,584
Minority interests 3,077 2,456 2,720
------- ------- -------
8,669 3,483 6,304
------- -------
Total equity and liabilities (79,825) (54,940) (77,068)
---------- ---------- ----------
1 The increase in the value of goodwill carried in the balance sheet at June 30,
2005 compared to December, 2004 relates principally to the acquisition of
Premier, which is commented upon in the Chairman's letter. The increase compared
to June 30, 2004 is principally due to the four acquisitions made during the
twelve months period ended June 30, 2005.
2 The increase in other intangible assets at June 30, 2005 compared to June 30,
2004 is attributed to the four acquisitions made during the twelve months ended
June 30, 2005.
3 Inventories, trade and other receivables and trade and other payables at June
30, 2005 are significantly higher than the comparatives at June 30, 2004, due
principally to the acquisitions.
4 Net debt (which comprises medium and long term borrowings and short-term
borrowings, less cash and cash equivalents) at June 30, 2005 amounted to
£41,633,000 compared to £27,767,000 at June 30, 2004 and £33,080,000 at December
31, 2004. The increase compared to a year ago (£13,866,000), has arisen because
the cash consideration, together with debt assumed, of the four acquisitions
made in the twelve months ended June 30, 2005, amounted to £16,812,000, at the
June 30, 2005 exchange rates. Net debt has increased since the year end,
consistent with prior years, and reflects the seasonal cash outflow in the first
six months of the year. For the six month period ended June 30, 2005 only, the
cash consideration, and debt assumed with regard to acquisitions, amounted to
£2,844,000.
5 The movement in issued capital and share premium account is due to the
conversion of cumulative redeemable shares of preferred stock, which is
commented upon in the Chairman's letter, and the exercise of stock options.
THE QUARTO GROUP, INC
UNAUDITED CONDENSED CASH FLOW STATEMENT
for the six months to June 30, 2004
Six months Six months Year
ended ended ended
June 30, June 30, December 31,
2005 2004 2004
£'000 £'000 £'000
(Loss) profit for the period (107) 974 4,137
Tax (credit) expense (39) 340 1,255
Net finance costs 1,027 640 1,615
Depreciation 578 537 1,073
Amortization 586 17 509
Loss (profit) on sale of fixed assets 73 - (1)
Equity settled share based payment 4 2 4
Changes in working capital (6,286) (5,473) (2,089)
Corporation tax (656) (743) (1,062)
------- ------- ---------
Net cash from operating activities (4,820) (3,706) 5,441
--------- --------- -------
Purchase of tangible fixed assets (net) (114) (613) (982)
Purchase of
subsidiaries (2,844) (183) (13,700)
Interest received 56 31 51
---- ---- ----
Net cash from investing activities (2,902) (765) (14,631)
--------- ------- ----------
Dividends paid (629) (583) (1,077)
Interest paid (1,081) (661) (1,753)
Issue of shares 2,624 26 26
Dividend paid to minority shareholder (117) (103) (103)
New loans (loans repaid) 1,650 (197) 10,967
------- ------- --------
Net cash flows from financing 2,447 (1,518) 8,060
activities ------- --------- -------
--- --- ---
Net decrease in cash and cash (5,275) (5,989) (1,130)
equivalents --------- --------- ---------
Net debt at June 30, 2005 amounted to £41,633,000 compared to £27,767,000 at
June 30, 2004 and £33,080,000 at December 31, 2004. The increase compared to a
year ago (£13,866,000), has arisen because the cash consideration, together with
debt assumed, of the four acquisitions made in the twelve months ended June 30,
2005, amounted to £16,812,000, at the June 30, 2005 exchange rates. Net debt has
increased since the year end, consistent with prior years, and reflects the
seasonal cash outflow in the first six months of the year. For the six month
period ended June 30, 2005 only, the cash consideration, and debt assumed with
regard to acquisitions, amounted to £2,844,000.
Notes:
1. The next annual consolidated financial statements of the
company, for the year period ending December 31, 2005, will be prepared in
accordance with International Financial Reporting Standards (IFRSs) adopted for
use in EU ('adopted IFRSs').
This interim financial information has been prepared on the basis of the
recognition and measurement requirements of IFRSs in issue that either are
endorsed by the EU and effective at December 31, 2005 or are expected to be
endorsed and effective at December 31, 2005, the Group's first annual reporting
date at which it is required to use adopted IFRSs. Based on these IFRSs, the
directors have made assumptions about the accounting policies expected to be
applied and their impact, when the first annual IFRS financial statements are
prepared for the year ending 31 December 2005.
The accounting policies adopted under IFRS are set out in pages 20-23 of the
document headed Adoption of International Financial Reporting Standards, which
is attached to the interim statement and the impact of adopting these accounting
policies is detailed in pages 24-37 of Adoption of International Financial
Reporting Standards.
In addition, the adopted IFRSs that will be effective (or available for early
adoption) in the annual financial statements for the year ending December 31,
2005 are still subject to change and to additional interpretations and therefore
cannot be determined with certainty. Accordingly, the accounting policies for
that annual period will be determined finally only when the annual financial
statements are prepared for the year ending December 31, 2005.
2. The comparative figures for the financial year ended
December 31, 2004 are not the company's statutory accounts for that financial
year. Those accounts, which were prepared under UK Generally Accepted Accounting
Practices, have been reported on by the company's auditors and delivered to the
registrar of companies. The report of the auditors was unqualified and did not
contain statements under section 237(2) or (3) of the Companies Act 1985.
3. The calculation of earnings per share is based on
18,218,281 shares (the weighted average number of issued shares, excluding those
held as treasury stock) (June 30, 2004: 17,944,206 shares; December 31, 2004:
17,955,495) and earnings of £(392,000) (June 30, 2004: £815,000; December 31,
2004: £3,734,000). The calculation of adjusted earnings per share is based on
earnings of £547,000 (June 30, 2004: £828,000; December 31, 2004: £4,079,000),
calculated as follows:
June 30, 2005 June 30, 2004 December 31,
2004
£'000 £'000 £'000
Earnings after minority
interests (392) 815 3,734
Amortization of
intangibles * 428 13 345
Restructuring costs * 438 - -
Costs of aborted
acquisition * 73 - -
___ ___ _____
547 828 4,079
----- ----- -------
Adjusted earnings per
share 3.0p 4.6p 22.7p
------ ------ -------
* net of tax credit
There is no dilution in earnings per share, or adjusted earnings per share, for
the six months ended June 30, 2005 and June 30, 2004. Diluted earnings per share
for the year ended December 31, 2004 is based on earnings of £4,203,000 and
21,427,992 shares. Diluted adjusted earnings per share for the year ended
December 31, 2004 is calculated below, based on earnings of £4,548,000 and
21,427,992 shares.
December 31,
2004
£'000
Adjusted earnings as above 4,079
Interest on convertible note net of tax 23
Interest on convertible redeemable preference shares 446
-----
4,548
-------
Adjusted diluted earnings per share 21.2p
-------
4. Consolidated statement of recognised income and expense for the six months to
June 30, 2005
Six months Six months Year ended
ended June 30, ended June 30, December 31,
2005 2004 2004
£'000 £'000 £'000
Foreign
exchange
translation
differences 268 (352) (357)
Cash flow
hedge: change
in fair value 133 - 130
----- ---------- -----
Income and
expenses
recognised
directly in
equity 401 (352) (227)
(Loss) profit
for the period (107) 974 4,137
------- ----- -------
Total
recognised
income and
expense for
the period 294 622 3,910
----- ----- -------
Attributable to:
Equity holders
of parent 9 463 3,507
Minority
interests 285 159 403
----- ----- -----
294 622 3,910
----- ----- -------
5. Consolidated statement of changes in equity:
Share Capital Share Premium Reserves Total
£'000 £'000 £'000 £'000
Balance at January 1, 2005 1,063 19,199 (16,678) 3,584
Total recognised income and
expense - - 9 9
Share options exercised by
employees - 3 15 18
Equity settled transactions - - 4 4
Shares issued 109 2,497 - 2,606
Dividends to shareholders - - (629) (629)
---------- ----------- ------- -------
Balance at June 30, 2005 1,172 21,699 (17,279) 5,592
------- -------- ---------- -------
THE QUARTO GROUP, INC
MANAGEMENT'S UNAUDITED PRO FORMA OPERATING FINANCIAL STATEMENTS
for the 12 months to June 30, 2005
12 months 12 months
ended ended
June 30, 2005 June 30, 2004
£'000 £'000
Revenue 86,899 75,919
-------- --------
Gross profit 1 30,063 24,625
Overheads 2 (22,351) (17,803)
---------- ----------
Operating profit 3 7,712 6,822
------- -------
1 The gross profit margin is up from 32% to 35%, partly because of improved
margins generally and partly because of higher sales of own imprint titles,
which are at higher than average gross margins.
2 Overheads are up £4,548k. This increase is due to the acquisitions.
3 Operating profit represents 8.9% of sales (2004: 9.0%)
Note:
The above figures do not include amortization of intangible assets or
restructuring costs or the cost of an aborted acquisition.
This information is provided by RNS
The company news service from the London Stock Exchange
Wednesday, 15th May 2024
COMPANIES COVERED:
Latest directors dealings
- 18 minutes ago Spire Healthcare Group
- 24 minutes ago IMI
- 48 minutes ago Northamber
- 1 hour ago Taylor Wimpey
- 2 hours ago Keystone Law Group