Interim Results

Quarto Group Inc 28 August 2007 Tuesday 28 August 2007 THE QUARTO GROUP, INC Interim Announcement Quarto (QRT.L), the fully listed independent book producer and publisher based in London, announces 'very satisfactory' results for the half year to 30 June 2007. • Solid growth sustained: Underlying* profit before tax jumped 60% to £0.7 million (2006: £0.4 million); operating profit rose 18% to £1.9 million (2006: £1.6 million); EBITDA up 7% to £6.3 million (2006: £5.9 million); revenues grew by 2%; dividend is increased by 5% to 3.15p. • Strong financial position: Renewal of $115 million 5-year revolving credit facility negotiated on favorable basis, giving total committed facilities of $165 million; interest rate exposure largely hedged through December 2012 and beyond; continued strong cash generation; debt reduced by underlying 11% (£5.1 million) to £33.3 million; during first half year, cash flow improved by £2.9 million over comparable period. • Strong performances from Publishing segment, and from Publishing and Marketing Services: Underlying profit of Publishing segment up by 60% on strong results outside the UK; revenues increased by 3%, overcoming mixed UK publishing results; operating profit of UK and SE Asia publishing and marketing services businesses increased by 57% on revenues up 24%. • Recovery of Acquisition Costs: Net recovery of costs and break up fee from aborted acquisition of £0.4 million. • Major Publishing Acquisition: Important acquisition of St Paul, MN-based specialty publisher, MBI Publishing, with revenues of $35 million. Laurence Orbach, chairman and chief executive, said: 'These results are very satisfactory, particularly as we are operating in a tough and demanding business environment. Our business is very international, with approximately 80% of non-sterling revenues; it is also a seasonal business, and the first half of the year only provides about 40% of annual revenues. 'Most of the titles we produce and publish are targeted at niche, special interest audiences. This is a growth market for Quarto, not simply because of the continuing and steady spread of specialty retailing, but also because Internet sites building 'communities' for people who share specialized interests are growing in importance as sources for sales and, because of the importance of Internet retailers, such as Amazon.com, providing the 'long tail' of sales. 'Because of the substantial seasonality of our business, we always also provide performance figures on a trailing 12 months' basis as an essential guide to underlying trends. On this measure, at £98.1 million, there was underlying revenue growth of 3%, increased adjusted operating profit of £10.2 million, up 10%, handily exceeding the important figure of 10% operating margin on revenue, and adjusted pretax profit rose by 14% to £7.8 million. 'Of course, we don't live in a make-believe world of 'adjusted'* and 'underlying' results, but in the real world where businesses have to adapt, in an ongoing way, to currency fluctuations, just as they have to adjust to other market and financial changes. We present the two tables below as business performance measures, excluding currency fluctuations, amortization of intangibles, and non-recurring items. The 'statutory' results, prepared under IFRS, are reconciled to these numbers. 'In light of these encouraging results, the board has declared an increased dividend of 3.15p'* *'Underlying' and 'adjusted' numbers presented in this section refer to business performance excluding currency impact, amortization of intangibles, and non-recurring items. The reconciliation to the 'statutory results' appears in Note 8 on page 15 of this announcement. Notes for Editors: Quarto is an international book producer and publisher with two principal strands of activity: it publishes, under imprints owned by the Group, books and art prints in the US, the UK, and Australia; and it creates books that are licensed to other publishers for publication under their own imprints in many languages around the world. In 2006, Quarto increased adjusted pre-tax profit by 9% to £7.3m (2005: £6.7m), and reported adjusted diluted earnings per share of 22.5p, up 6% (2005: 21.3p). Enquiries: The Quarto Group, Inc. Laurence Orbach (Chairman & CEO) 020-7700 9003 Mick Mousley (Finance Director) 020-7700 9004 Bankside Consultants Limited Charles Ponsonby 020-7367 8851 Business Performance Six months to June 30 Underlying Reported Results Headline Underlying (£'000) Results Growth Growth 2007 2007 2006 Revenue 38,872 36,565 38,296 (5)% 2% Adjusted operating 1,911 1,700 1,623 5% 18% profit EBITDA 6,273 5,922 5,858 1% 7% Adjusted profit before 663 521 415 26% 60% taxation Dividend per share 3.15p 3.15p 3.0p 5% 5% Net debt 34,120 33,343 38,470 (13)% (11)% Trailing twelve months 2007 2007 2006 Headline Underlying to June 30 (£'000) Growth Growth Revenue 98,079 91,882 95,136 (3)% 3% Adjusted operating 10,186 9,634 9,224 4% 10% profit EBITDA 18,876 18,041 17,641 2% 7% Adjusted profit before 7,784 7,368 6,820 8% 14% taxation Dividend per share 6.9p 6.9p 6.5p 6% 6% Statutory results 2007 2007 2006 Headline Underlying Growth Growth Operating profit - 1,579 892 77% - Profit (loss) before - 400 (316) - - tax Basic (loss) - (21) (489) - - Basic (loss) per share - (0.1)p (2.5)p - - 2007 Outlook Today, together with these results, we announce the acquisition of MBI, a St Paul, Minnesota-based book publisher and distributor. MBI is a significant acquisition for us and is in line with our strategy of building strength by publishing books for audiences of enthusiasts and professionals, and leveraging our back office infrastructure to achieve improvements in overall financial performance. We expect to move rapidly to integrate MBI's back office activities with Quayside, which is located in the twin city of Minneapolis. MBI is the leading US publisher of books for transport enthusiasts (automobiles, motorcycles, trucks, tractors, aviation, etc), and the major US distributor for a number of overseas, predominantly UK-based publishers of specialist transport titles; it also publishes a respected range of military history and militaria titles, under the Zenith imprint, and a more general list of regional, outdoor activity, sport, and special interest titles under the Voyageur Press imprint. It fits excellently with our various Quayside imprints and we look forward to building upon the strength of the enlarged group. We have acquired MBI at the seasonally busiest time of the year and expect a good contribution from the acquisition. These words are written against a backdrop of continuing volatility, turmoil, and rumbling in financial markets. Only the imprudent would expect that there will be no consequences in the wider commercial world, and we're not rash enough to predict what they may be. As usual, our co-edition business has good forward visibility on its likely sales for the balance of the year and, currency factors aside, these look robust. On the publishing side, our special interest focus in the US has served us very well in the first half of the year. CPi, our publisher of home improvement books under the Black & Decker brand name, largely bucked the tide of negative news affecting the US housing sector, and other imprints specializing in arts and crafts also saw strong first half performances. It's difficult to tell whether this is an indicator of continued strong sales for the balance of the year, but the outlook remains cautiously positive. Having renewed and increased to $115 million our committed 5-year syndicated revolving credit facility, arranged with seven banks, and sold an 8-year Note to Prudential at the end of 2006, we are very strongly financed, and have ample committed funds to achieve our growth ambitions. Cash flow remains strong and improving, as does cash generation from the business and, prior to the acquisition of MBI, we have been steadily reducing our debt. We continue to pursue a growth path, confident that, in the mature and slowly growing book publishing industry, our strategy of concentrating on special interest areas, both with organic growth, and through acquisition, makes us the publisher of choice in a number of evergreen categories, with an efficient and responsive infrastructure that serves both our customers and our creative staff well. Overview of trading Overall, there was a significant difference in the performances of our two segments in the first half of 2007. Revenues of International Co-Edition Book Publishing segment, which includes our publishing services units, declined by an underlying 2% to £12.9 million (2006: £13.2 million), and operating profit fell by 50% to £0.48 million (2006: £0.95 million), largely due to timing differences in the delivery of new titles and reprint orders. This segment has good visibility on its forward orders, and we expect the second half of the year to be much busier. In the Publishing segment, revenues rose by 3% to £26.0 million (2006: £25.1 million), and operating profit increased by 60% to £2.2 million (2006: £1.4 million). International Co-Edition Book Publishing Quarto Books' output in the first half covered the usual broad range of topics, from bird watching to guitar playing, from fantasy art to classical mythology, from Japanese quilting to Chinese brush painting, from decorating cakes to designing computer games. This unerring focus on subjects of enduring interest ensures that, despite the economic uncertainties, Quarto books continue to sell solidly in our major English language markets: reprint orders for the full year in the US are running well ahead of the same period last year. Foreign language sales too are keeping pace: the whimsical fantasy title How to Raise & Keep a Dragon, first published in English in September 2006, has this year been translated into over 20 languages. (Quarto takes this opportunity to disclaim responsibility for an eventual European plague of newly hatched dragons!) Finally, a significant milestone was reached in the first quarter, when we sold the three-millionth copy of Quarto's Bible series of hardcover reference books. The new range of children's product from Q+ was extremely well received at April's Bologna Book Fair. An unusually high number of firm orders were taken at the stand, several key titles were the subject of two- and three-way auctions, and many international customers came back for second, third, and even fourth meetings. The buoyant mood has continued throughout the year, during which the team has been significantly strengthened. Although a legacy of underinvestment means there is still some short-term pain to be borne, almost every key indicator - from volume, to margin, to reach - points to a clear improvement in the underlying business, justifying living with the short-term drag on earnings. A renaissance in the product values is driving a qualitative and quantitative expansion of the customer base, all of which bodes well for the unit in the medium term. Quintet Publishing had a bumpy ride through the spring in its first year without the benefit of the 1001 series (which were last year spun out into new unit Quintessence) but, despite this, delivered on its major customer commitments. Both the new title program and English language reprint sales are showing useful advances, although foreign sales still have some way to go. Three new titles - 500 Soups, 500 Pies & Tarts, and 500 Chocolate Delights- - were added to Quintet's signature Cook's Compendium series in the half-year, and another four are lined up for 2008. Still only two years old, the series notched up its 500,000th sale at the end of June. Marshall Editions continued to make progress, and in 2007 will deliver its biggest new title program since becoming part of the Quarto Group. The unit's increasing significance is reflected in the fact that, earlier this year, three of its titles were chosen as main selections by the largest US and UK book club groups. Marshall has always been a trusted source of family reference and takes its mission to inform very seriously, as the following episode illustrates: In July 2007, just as Marshall was about to reissue its classic Mammoths - Giants of the Ice Age, a near perfectly preserved mammoth calf was discovered in Siberia. Publication was postponed while the book was rewritten to incorporate details of this incredible find. The resulting volume, released later this year, will be the most up-to-date guide to mammoths available anywhere in the world. Quantum has had its work cut out to remain competitive in a cut-throat promotional market, but its response has been typically stoic: clever revamps and reissues, together with an unerring focus on cost control, have kept its traditional business going, albeit on a reduced level, while the acquisition of third-party sales agencies, and the Cartographica line, have provided new avenues to explore: Cartographica's Atlas of the Bible is on its third reprint within a year, and Cartographica's World War II on its second reprint within 6 months. Global Book Publishing bounced back strongly from its disappointing end to last year when AMS, one of its major customers, declared bankruptcy. The customer base is being painstakingly rebuilt with licensing partners of an altogether higher caliber, a recent addition being the Royal Society of Medicine Press, which has bought UK publishing rights to The Anatomy Student's Self-Test Coloring Book. Sales are ahead of budget, deliveries are on schedule, and the team has a strong program of new title presentations to show at October's Frankfurt Book Fair. Qu:id accelerated its investment in reference-driven categories during the first half, with the result that its 2007 publishing program contains twice as many new titles as the previous year's. Improved focus on product development is broadening the books' appeal and sales in foreign language markets have been brisk. QED, Quarto's children's educational publishing unit, is gaining strength, and during the first half of the year has had to beef up its editorial, design, and production resources to meet increasing demand. Sales through the UK book trade are up by 40% on the same period last year, and 50 titles are being reprinted in the autumn. For the full year, the co-edition order book is currently showing a 60% increase on the prior year, and sales to the US-based Scholastic School Book Clubs, for the first time, exceeded half a million dollars. RotoVision is now well advanced with its strategic transition in the US from a trade publishing to a co-edition business model, and this year has broadened its co-edition customer base by a third. Trading in the UK remains fickle, but the unit is taking steps to insulate itself from an over-reliance on this market. Foreign language turnover was up substantially on the comparable period and, gratifyingly, the larger part of this increase derives from reorders. We expect to exceed this year's foreign sales target and are on track to do so. World's Top Photographer's Workshops: Fashion & Advertising, the latest in our flagship photography series, has been used as inspiration for a summer/autumn exhibition, In the Making: Fashion and Advertising, at London's National Portrait Gallery. Early sales results are promising. The term 'international bestseller' is frequently bandied about in publishing circles, but when the topic is Quintessence's 1001 Series, the epithet seems entirely justified: the seven titles published to date are licensed to an unprecedented 40 different publishers around the world, in 27 different languages. The unit spent the first half gearing up for an unusually busy autumn, which sees the launch of 1001 Buildings You Must See Before You Die and 1001 Classical Recordings You Must Hear Before You Die - both heavily backed by in-store campaigns at Borders and Barnes & Noble in the USA and at Waterstone's in the UK - together with the delivery of the first two titles in the spin-off 501 series, of which much is expected. Fine Wine Editions has had a great start to the year. Contributor Jamie Goode won the Glenfiddich Wine Writer of the Year Award for his work in our quarterly magazine The World of Fine Wine. Magazine Tasting Panel member Andreas Larsson was named World's Best Sommelier at a ceremony in Spain. And in May, The World of Fine Wine won the ArtVinum Media Award 2007 at the forum for European Wine Culture in Stuttgart. The award citation described the magazine as 'by far the best wine publication on the market,' and the market seems to agree, with subscriber numbers rising steadily from a modest base. The unit also successfully commissioned and delivered the content of 1001 Wines you Must Drink Before You Die to its Quintessence sibling for publication in 2008. Regent, in Hong Kong, is the bedrock of our publishing services, which supplies the printing needs of many publishers around the world. It had an exceptional first half, which looks like continuing into the balance of the year. Orders from US publishers were particularly strong. Publishing Most of our special interest publishing in the US is organized under the umbrella of the Quayside Group. Our principal publishing strengths are in graphic design, arts and crafts, DIY and home improvement, outdoor enthusiasms, romantic sex, and alternative health and living. Walter Foster, which shares its sales and fulfillment infrastructure with Quayside, publishes art instruction titles for adults and children, including a substantial amount of licensed product. Quayside sales to Michaels stores (the largest retailer of arts and crafts materials in the United States, with approximately 1,000 stores) were strong in the first half of the year, and we added 15 titles to our program. We now have 42 titles in the Michaels plan-o-gram, not including the Walter Foster racks in the art materials section. We continued to see improving sales to JoAnn's craft stores, where sales were up 15 % over last year. JoAnn's has just reported that their comparable store sales increased by 7% in their latest quarter, and this is an encouraging sign. Across the board, the largest increase in sales was at Amazon, where Quayside's register sales were up 27% over the previous year. Our sales through the register were higher than at Barnes and Noble, which emphasizes the growing importance of Internet sales in special interest categories. Sales continued to struggle at the home improvement accounts. Home Depot has presented significant challenges as it grapples with its own retail profile, and our sales fell by 8%. At the faster growing Lowe's home improvement chain, sales were up by 2% over the previous year. Two of our home improvement titles were the first and third best selling titles in the 1,400 store chain. The first six months of 2007 saw solid sales for the Rockport Graphic Design list, which is targeted at professionals. The 1000 series continues to lead the list, with strong domestic and co-edition sales. Two new titles in this series, 1000 Retail Graphics and 1000 Restaurant Graphics boasted nine co-edition partners each on the first printing. The ongoing strength of the series only adds to an established core backlist, with over 200,000 copies in print. Based on the success of the 1000 concept in the design list, we have extended the series successfully to the craft list with the successful launch of 1000 Artist's Trading Cards in Spring 2007 registering sales of more than 10,000 copies in the first 5 months. In 2007 we added Angela Cartwright to our list of 'star' craft authors with her book In this House, which shipped over 8000 copies in the first month. Quarry, our pet list, publishes accessible, illustrated pet care reference books, and bounded ahead this year with 101 Dog Tricks selling 11,000 copies in its first 5 months, and 5 co-editions in the works, and the continued success of the backlist, including the Good Food Cookbook for Dogs of which we sold 13,000 copies in the first half of the year. Quarry's Backyard series grew apace and the newest book in the series, Backyard Blacksmith, has sold over 10,000 copies in less than a year, and backlist titles, such as Backyard Birdwatcher, continued to sell well, with over 25,000 copies in print. The star on the Fair Winds list was 150 Healthiest Foods on Earth. The right amount of information is presented in the strong and approachable voice of Jonny Bowden, a veteran writer with a PhD in nutrition. Fair Winds shipped 30,000 copies, and a third reprint is on order. Jonny will be doing two further titles, in similar format, for 2008: The Most Effective Natural Cures on Earth and The Healthiest Meals on Earth. International sales for the original title, so far, have been disappointing. Quiver's Sex Bible offers strong content, packed with photos, and is a good example of a large investment, spent wisely. Nearly 45,000 copies have been shipped internationally, in five languages, with reprints pending, and we have sold 16,000 to date in the US. In addition, Position Sex has shipped over 9,000 copies in its first four months in print, and we have co-edition printings booked for a further 25,000 copies. Women Loving Women got off to a strong start, with over 7,000 copies shipped on its release. CPi has the number one and number three best selling titles at Lowe's: The Complete Guide to Home Wiring, and The Complete Guide to Home Plumbing. We have now redesigned our Complete Guide series, and the first titles are just being rolled out in the home improvement channel. To take advantage of renewed enthusiasm for sewing, CPi also launched the new and improved Singer Sewing line, with four titles. Over 30,000 copies shipped during the period. Profiting from the popularity of a parallel cyberspace universe, Walter Foster sold 77,000 copies of Nickelodeon's Avatar. The company also extended its presence in the almost 600-strong chain of Cracker Barrel Restaurants and Country Stores, placing a range of 10 children's products on sale. In the UK, Aurum and Apple saw their combined sales decline by 17%, and operating profit was down by 63%. While this is disappointing, much of the decline came from returns of strongly promoted 2006 titles which, although successful, failed to sell through in the numbers ordered by retailers. Sales of new titles remained strong, and gross sales were up by 8% before returns. We expect improvement in UK publishing, but the trend of large retailers to focus most of their attention on newly published titles is a concern and seems bound to drive the 'long tail' to web retailers. JR Books, our new imprint, launches its first titles this autumn, and these will be sold by the Aurum sales team. Our two book display marketing businesses, Lifetime, in Australia, and Premier, in New Zealand, both reported solid results. Lifetime's sales are to state master franchisees and some of these franchises have come up for welcome renewal and for sale. This is having a healthy effect by invigorating the network of sales operations. Premier, which sells through dedicated independent sales agents, is in the process of streamlining its New Zealand territories, and consolidating some of the regional management. Finally, our art print businesses, APG in the US, and Artworks in Australia, continue to struggle with dramatic changes in the framed decor market. Both units suffered small revenue declines, but continued to generate cash overall. We do not anticipate any short-term improvement. STATUTORY RESULTS Financial Review of statutory results Reported revenues are down 5% but, there has been underlying growth of 2%. Operating profit is up 77% at £1.58m (2006: £0.89m), boosted by £0.44m with respect to the net recovery of aborted acquisition costs. Operating profit before amortization of non-current intangibles and non-recurring items is up 5%, at £1.7m (2006: £1.6m). It represents 4.6% (2006: 4.2%) of revenues. The operating profit margin is traditionally lower in the first half of the year due to the seasonality of the business and the fixed nature of the amortization of pre-publication costs. The net interest expense is down 2%, at £1.18m (2006: £1.21m), in spite of higher interest rates across the board, because of the decline in net debt and currency translation of our debt, which is mostly in US dollars. On a trailing 12 months basis, interest cover, based on operating profit before amortization of non-current intangibles and non-recurring items, is 4.25 times (2006: 3.84 times), and is well within our banking covenant. The tax charge has been calculated by reference to what we expect to be our effective tax rate, for the year as a whole, of 28%. The increased dividend of 3.15p (2006: 3.0p) is payable on October 19, 2007, to shareholders on the register at September 21, 2007, with an ex-dividend date of September 19, 2007. Net assets, at £19.3m are up £1.2m compared to June 30, 2006 (£18.1m). Net debt is £33.3m (2006: £38.5m). Underlying net debt, at constant currencies, is £34.1m, down £4.4m, a good improvement. In the first half of the year, we experience a seasonal cash outflow. On an underlying basis, the cash outflow this year was £2.2m, a £2.9m improvement compared to 2006, when it was £5.1m. A key factor in this improvement has been the reduction in the average credit period we extend, from 82 days to 77 days. Net debt to EBITDA is 1.85 times, improved from 2.18 times last year and, again, is well within our banking covenant. THE QUARTO GROUP, INC CONDENSED CONSOLIDATED INCOME STATEMENT for the six months to June 30, 2007 Six months Six months Year ended ended ended December 31, June 30, June 30, 2006 2007 2006 Restated £'000 £'000 £'000 Revenue 36,565 38,296 93,613 Operating profit before amortization of 1,700 1,623 9,557 intangibles and non-recurring items Amortization of intangibles (561) (731) (1,387) Bad debt - - (1,238) Recovery of aborted acquisition costs 440 - - Operating profit 1,579 892 6,932 Finance costs (1,413) (1,367) (2,593) Financial income 234 159 298 Profit (loss) before taxation 400 (316) 4,637 Taxation (83) 85 (1,202) Profit (loss) for period 317 (231) 3,435 Profit (loss) for the period attributable to: Minority interests 338 258 635 Equity holders of the parent company (21) (489) 2,800 317 (231) 3,435 Earnings (loss) per share (0.1)p (2.5)p 14.3p Diluted earnings (loss) per share (0.1)p (2.5)p 13.9p The following information is presented as additional information and does not form part of the income statement : Adjusted earnings per share 0.2p 0.0p 23.4p Adjusted diluted earnings per share 0.2p 0.0p 22.5p THE QUARTO GROUP, INC CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE for the six months ended June 30, 2007 Six months Six months Year ended ended June ended June December 30, 2007 30, 2006 31, 2006 Restated £'000 £'000 £'000 Foreign exchange translation 24 (338) (1,222) differences Cash flow hedge: change in fair value 333 9 - Net income (expense) recognised 357 (329) (1,222) directly in equity Profit (loss) for the period 317 (231) 3,435 Total recognised income and expense for 674 (560) 2,213 the period Attributable to: Equity holders of parent 336 (818) 1,578 Minority interests 338 258 635 674 (560) 2,213 THE QUARTO GROUP, INC CONSOLIDATED BALANCE SHEET at June 30, 2007 June 30, June 30, December 2007 2006 31, 2006 Restated £'000 £'000 £'000 Non-current assets Goodwill 9,910 9,723 9,710 Other intangible assets 2,391 3,810 2,987 Property, plant and equipment 7,345 7,561 7,501 Deferred tax asset 208 24 198 Total non-current assets 19,854 21,118 20,396 Current assets Intangible assets: Pre-publication costs 22,393 21,752 20,919 Inventories 13,256 14,451 13,948 Tax receivable 131 147 178 Trade and other receivables 22,239 23,377 27,022 Cash and cash equivalents 12,789 9,550 13,929 Total current assets 70,808 69,277 75,996 Total assets 90,662 90,395 96,392 Current liabilities Short-term borrowings (4,207) (3,840) (17,800) Trade and other payables (19,562) (19,162) (25,981) Tax payable (1,266) (965) (1,437) (25,035) (23,967) (45,218) Non current liabilities Medium and long-term borrowings (41,925) (44,180) (27,121) Deferred tax liabilities (4,399) (4,096) (4,404) Other payables (20) (114) (21) Total non-current liabilities (46,344) (48,390) (31,546) Total liabilities (71,379) (72,357) (76,764) Net assets 19,283 18,038 19,628 Equity Share capital 1,162 1,162 1,162 Paid in surplus 21,745 21,719 21,740 Retained deficit and other Reserves (7,345) (8,331) (6,951) Total equity attributable to equity 15,562 14,550 15,951 holders of the parent Minority interests 3,721 3,488 3,677 Total equity 19,283 18,038 19,628 THE QUARTO GROUP, INC CONDENSED CASH FLOW STATEMENT for the six months to June 30, 2007 Six months Six months Year ended ended ended December 31, June 30, 2007 June 30, 2006 2006 Restated £'000 £'000 £'000 Profit (loss) for the period 317 (231) 3,435 Tax (credit) expense 83 (85) 1,202 Net finance costs 1,179 1,208 2,295 Depreciation 537 509 959 Amortization of non-current 561 731 1,387 intangible assets Amortization of pre-publication 3,685 3,726 7,461 costs Movement in fair value of 171 - (254) derivatives (Profit) on sale of fixed assets (5) (86) (87) Equity settled share based payment 3 4 7 Changes in working capital (383) (3,911) (2,246) Corporation tax (316) (149) (611) Net cash from operating activities 5,832 1,716 13,548 (Purchase) sale of tangible fixed (375) 431 69 assets (net) Investment in pre-publication costs (5,256) (5,115) (8,444) Purchase of subsidiaries (106) (80) (89) Interest received 234 159 298 Net cash used in investing (5,503) (4,605) (8,166) activities Dividends paid (736) (704) (1,291) Interest paid (1,542) (1,655) (2,797) Issue of shares 9 7 56 Dividends paid to minority (227) (191) (244) shareholders Net (loans repaid) new loans (737) 1,360 583 Net cash flows from financing (3,233) (1,183) (3,693) activities Net (decrease)/increase in cash and (2,904) (4,072) 1,689 cash equivalents Cash and cash equivalents at 12,110 11,899 11,899 beginning of period Foreign currency exchange (248) (781) (1,478) differences on cash and cash equivalents Cash and cash equivalents at end of 8,958 7,046 12,110 period 1. The Interim Report for the six months ended June 30, 2007 has been prepared on the basis of the accounting policies set out in the Annual Report for the year ended December 31, 2006. The comparative figures have been restated for a change of accounting policy from expensing the pre-press development costs of creating a new title to capitalizing them and writing them off over a three-year period following the first delivery of a new title. This accounting policy was first adopted with the 2006 full year results, to be in compliance with IFRS. 2. The financial information contained in this Interim Report does not constitute statutory accounts within the meaning of Section 240 of the Companies Act 1985. The interim accounts for the six months ended June 30, 2007 and the comparative figures for the six months ended June 30, 2006 are unaudited. The comparative figures for the year ended December 31, 2006 are extracted from the accounts for the period, which 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 a statement under Section 237 (2) or (3) of the Companies Act 1985. 3. The bad debt in the year ended December 31, 2006 related to the bankruptcy of Advanced Marketing Services. 4. Net recovery of aborted acquisition costs comprises a break fee less aborted acquisition costs. 5. Taxation for the six months ended June 30, 2007 is based on the estimated effective tax rate for the year. The rate that has been used is 28% (June 30, 2006: 29% and December 31, 2006: 27%). 6. The calculation of earnings per share is based on 19,625,384 shares (the weighted average number of issued shares, excluding those held as treasury stock) (June 30, 2006: 19,560,837 shares; December 31, 2006: 19,563,900) and losses of £21,000 (June 30, 2006: £489,000; December 31, 2006: earnings of £2,800,000). The calculation of adjusted earnings per share is based on earnings of £37,000 (June 30, 2006: £1,000; December 31, 2006: £4,580,000), calculated as follows: June 30, June 30, December 31, 2007 2006 2006 Restated £'000 £'000 £'000 Earnings after minority (21) (489) 2,800 interests Amortization of intangibles * 375 490 962 Bad debt* - - 818 Recovery of acquisition costs* (317) - - 37 1 4,580 Adjusted earnings per share 0.2p 0.0p 23.4p * net of tax and minority interest as appropriate There is no dilution in earnings per share or adjusted earnings per share for the six months ended June 30, 2007 and June 30, 2006. Diluted earnings per share for the year ended December 31, 2006 is based on earnings of £2,845,000 and 20,523,566 shares. Diluted adjusted earnings per share for the year ended December 31, 2006 is calculated below based on earnings of £4,625,000 and 20,523,566 shares. December 31, 2006 £'000 Adjusted earnings as above 4,580 Interest on convertible note net of tax 45 4,625 Adjusted diluted earnings per share 22.5p 7. Consolidated statement of changes in equity: Share Paid in Reserves Total Capital surplus £'000 £'000 £'000 £'000 Balance at January 1, 2007 1,162 21,740 (6,951) 15,951 Total recognised income and - - 336 336 expense Share options exercised by - 5 4 9 employees Equity settled transactions - - 2 2 Dividends to shareholders - - (736) (736) Balance at June 30, 2007 1,162 21,745 (7,345) 15,562 8. Reconciliation of figures included in the Chairman's letter June 30, June 30, December 31, 2007 2006 2006 Restated £'000 £'000 £'000 Adjusted operating profit 1,700 1,623 9,557 Amortization of non-current (561) (731) (1,387) intangibles Non-recurring items 440 - (1,238) Operating profit 1,579 892 6,932 EBITDA Adjusted operating profit 1,700 1,623 9,557 Depreciation 537 509 959 Amortization of pre-publication 3,685 3,726 7,461 costs EBITDA 5,922 5,858 17,977 Adjusted profit before taxation 521 415 7,262 Amortization of non-current (561) (731) (1,387) intangibles Non-recurring items 440 - (1,238) Profit (loss) before taxation 400 (316) 4,637 The table on page 2 shows underlying results in addition to reported results. The underlying results exclude the impact of currency. THE QUARTO GROUP, INC MANAGEMENT'S PRO FORMA ABBREVIATED INCOME STATEMENT for the 12 months to June 30, 2007 12 months 12 months ended ended June 30, 2007 June 30, 2006 £'000 £'000 Revenue 91,882 95,136 Gross profit 32,693 32,846 Overheads (23,059) (23,622) Operating profit 9,634 9,224 Interest (2,266) (2,404) Profit before tax 7,368 6,820 EBITDA 18,041 17,641 Note: The above figures do not include amortization of intangible assets or non-recurring items. This information is provided by RNS The company news service from the London Stock Exchange R

Companies

Quarto Group Inc. (QRT)
UK 100
FTSE quotes by TradingView

Latest directors dealings

All directors dealings today