Q3 Trading Update

Quarto Group Inc
20 October 2006


 


                             THE QUARTO GROUP, INC.                             

                               Q3 Trading Update                                


Quarto, the fully listed independent book producer and publisher based in
London, announces its trading update for the third quarter of 2006:

'Continued strong performances by our international co-edition book publishing
units has brought unaudited operating profit for the 9 months to September 30,
2006 to £5.3million (2005: £4.8 million), offsetting a poorer performance by
some of our publishing units,' said Laurence F Orbach, chairman and chief
executive officer of Quarto. 'Publishing sales, after treading water for several
months in the United States, showed a marked improvement in September, and this
has been continuing into October. On the co-edition side, we shipped the newest
title in our immensely successful 1001 series, 1001 Paintings You Must See
Before You Die, and Biblica: The Story Behind the Greatest Story Ever Told
which, weighing in at 16.5lbs, is the weightiest title we've ever produced. In
accordance with our normal, and extremely prudent, accounting policy, the
pre-press costs for producing these new titles, which should generate
substantial revenues for years to come, were fully expensed in the period. For
the rest of this year, we have a strong forward order book for co-editions, and
expect good sales for our publishing units, as well. The Frankfurt Book Fair,
the largest annual event in the international book publishing calendar, held two
weeks ago, was a very successful occasion for the Group.

To September 30, 2006.
 
                                 Q3                         9 Months            
                             2006           2005           2006           2005  
                             £000           £000           £000           £000  
Sales                      27,776         28,397         66,072         66,595  
Gross Profit                8,888          9,106         22,951         22,582  
Overheads                  (6,355)        (6,463)       (17,682)       (17,772) 
Operating Profit            2,533          2,643          5,269          4,810  
Interest                     (632)          (617)        (1,840)        (1,644) 
PBT                         1,901          2,026          3,429          3,166  

 

To give a clearer picture of the group's progress over a longer period and to
eliminate seasonal variations, trailing 12 months' trading figures are provided
below.

To September 30, 2006.
                                              Trailing 12 Months                
                                                  2006                    2005  
                                                  £000                    £000  
Sales                                           94,514                  89,639  
Gross Profit                                    32,749                  30,637  
Overheads                                      (23,514)                (22,716) 
Operating Profit                                 9,235                   7,921  
Interest                                        (2,420)                 (2,166) 
PBT                                              6,815                   5,755  
EBITDA*                                         18,099                  16,769  

 

*EBITDA = Earnings Before Interest, Taxes, Depreciation and Amortization of
intangibles and pre-press costs. The amortization of pre-press costs has been
calculated by capitalizing these costs and amortizing them over a period of 36
months from the date of first printing, an industry standard accounting policy.

 

'Third-quarter sales, at £27.8 million (2005: £28.4 million), reflected both the
generally softer publishing sales and a weaker than forecast dollar, and this
fed through to the operating profit line which, at £2.5 million (2005: £2.6
million) was 4% down on the corresponding period. However, for the year to date,
on flat revenue of £66.1 million (2005: £66.6 million), operating profit is up
by almost 10% at £5.3 million (2005: £4.8 million); and for the trailing 12
months to September 30, 2006, revenue rose by 5% to £94.5 million (2005: £89.6
million), and operating profit by almost 17% to £9.2 million (2005: £7.9
million). In spite of higher interest rates for the year, ' continued Orbach,
'net profit before tax increased by 18% to £6.8 million (2005: £5.8 million),
and we believe that our expectations for year ending December 31, 2006 will be
met.'

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 2005, Quarto increased adjusted pre-tax profit by 12% to £6.6m and reported
adjusted diluted earnings per share of 20.8p (21.5p at constant tax rates, which
would have represented a seventh successive annual increase).

 
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  

 



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