TIDMQRT
RNS Number : 8896A
Quarto Group Inc
17 September 2018
THE QUARTO GROUP, INC.
("Quarto" or the "Company" or the "Group")
Half-Year Results for the Six Months Ended 30 June 2018
The Quarto Group, Inc. (LSE: QRT), the leading global
illustrated book publisher announces its unaudited half-year
results for the six months ended 30 June 2018.
Results ($m) H1 2018 H1 2017
---------------------------------- -------- --------
Group Revenue 56.2 50.2
Adjusted(2) Group Operating Loss (4.7) (7.2)
Group Operating Loss (7.0) (7.6)
Adjusted(2) Loss before Tax (6.6) (8.7)
Loss before Tax (8.9) (9.2)
Loss after Tax (6.7) (5.2)
Net Debt 73.2 75.8
1. All results relate to continuing operations.
2. Adjusted measures are stated before amortization of acquired
intangibles and exceptional items.
Financial Highlights
-- Encouraging trading performance, ahead of the prior year
-- Revenue up 12%
-- Improved gross profit margin of 50.1% (2017: 48.2%)
-- Cost-out programme initiated post period end, and significant
progress made with our banking syndicate to extend facilities until
August 2020
Operational Highlights
-- Solid trading performance in a challenging retail environment in both domestic markets
-- US publishing lists revenue up 9%, compared to 2017
-- UK publishing lists revenue up 17%, compared to 2017, driven
by a strong contribution from children's imprints
Commenting on the results, Chief Executive, CK Lau said:
"This is an encouraging set of results. We have achieved good
year-on-year growth and we are well placed to deliver a solid
performance for the full year.
The Group has had to adjust to various transitions in the
management of the Company during the first half year. Our resilient
and talented staff have stepped up to the challenges we have faced
and are committed to delivering on a leaner and more focused
publishing programme.
The newly constituted Board are concentrating on delivering
stability to the business, and the extension of the banking
facilities will enable us to lay down a key building block in
returning the Group to full-health."
-S -
For further information please contact:
CK Lau, CEO
Natacha Jedzinska, Corporate Communications
Manager +44 (0)207 700 8075
About The Quarto Group
The Quarto Group (LSE: QRT) creates a wide variety of books and
intellectual property products for global distribution, with a
mission to inspire life's experiences. Produced in many formats for
adults, children and the whole family, our products are visually
appealing, information rich and stimulating.
The Group encompasses a diverse portfolio of imprints and
businesses that are creatively independent and expert in developing
long-lasting content across specific niches of interest.
Quarto sells its products globally in over 50 countries and 40
languages, through a variety of sales channels and partnerships,
and five main routes to market - US, UK, International English
Language, Foreign Language and other Partnerships.
Quarto employs c.350 talented people in the US, UK, Hong Kong
and Australia. The Group was founded in London in 1976. It is
domiciled in the US and listed on the London Stock Exchange.
For more information, visit quarto.com, quartoknows.com or
follow us on Twitter at @TheQuartoGroup.
This statement will be available at the registered office of the
Company. A copy will also be displayed on the Company's website:
www.quarto.com.
CHIEF EXECUTIVE'S STATEMENT
SUMMARY
The first six months of 2018 have been challenging as the market
place continues to show softness in the book trade, both in the US
and the UK. However, trading was encouraging for the first half of
the year, with revenue up by 12% at $56.2m (2017: $50.2m). Our
children's imprints performed particularly strongly, with revenues
up 30%. Revenues from our adult imprints were also up, by 5%. The
gross profit margin before amortization of pre-publication costs,
was 50.1% (2017: 48.2%). The increased revenues, together with an
improved gross profit margin, have resulted in a significantly
lower adjusted group operating loss of $4.7m (H1 2017: loss of
$7.2m), in what is our seasonally weak half year. The adjusted loss
before tax was $6.6m (H1 2017: loss of $8.7m). Net debt at 30 June
2018 was $73.2m (H1 2017: $75.8m), a decrease of $2.6m over the
twelve-month period.
Each of our reporting segments produced a solid trading
performance. US Publishing revenues were up 9% compared to the
prior year, UK publishing revenues were up 17% and Q Partners
revenues were up 1%, resulting in an improvement in the Group's
adjusted operating result, as shown in the table below. The US and
UK publishing segments both benefited from an improved seasonal
split of co-edition revenues, with a higher percentage than normal
of expected full-year revenues achieved in the first half.
The book store market continues to be slow and this is likely to
continue for the remainder of the year. We may also see further
consolidation in the book trade and a continued pattern of more
frequent smaller orders, which puts pressure on the supply chain.
The Group expects that its strong autumn and holiday publishing
programme, resurgent backlist and list of break-out titles will
contribute to a positive year-end.
OPERATING REVIEW
Revenue ($m) H1 2018 H1 2017
------------------- -------- -------
United States 34.7 32.1
United Kingdom 8.4 7.5
Rest of the World 6.8 5.4
Europe 6.3 5.2
------------------- -------- -------
Total Revenue 56.2 50.2
------------------- -------- -------
Adjusted Operating Loss ($m) H1 2018 H1 2017
------------------------------- -------- --------
US Publishing (0.6) (1.7)
UK Publishing (2.0) (3.6)
Q Partners (0.1) (0.1)
Group overhead (2.0) (1.8)
------------------------------- -------- --------
Total adjusted operating loss (4.7) (7.2)
------------------------------- -------- --------
Note: Revenue is shown by destination; Adjusted Operating Profit
is shown by segment.
Continuing Publishing Operations
The Group's increase in revenue this year is a result of several
factors prompted by our strong frontlist publishing programme, and
backlist sales particularly from titles published in prior years.
The highlights are our Little People Big Dreams list of titles
which is now approaching 1 million copies in print and still
growing. Our line of healthy cookery titles, led by our Keto
cookery programme, has been very successful, with almost 600,000
copies in print. Returns, which were high last year when the
colouring books fad ended, were at a more normalized level in
2018.
The revenue for our US publishing lists was up 9%, compared to
the prior year, with a strong performance from our Beverly based
imprints, Quarry and Fair Winds Press. In addition, Racepoint
Publishing and becker&mayer! books achieved increased revenues.
A strength of the US programme has been our ability to grow the
specialty retailer accounts base, as the uncertainty of the book
trade continues to show lower sales in our publishing
categories.
The revenue for our UK publishing lists was up 17%, mainly
driven by our children's category, led by Frances Lincoln
Children's, which has performed well in all markets. The Little
People Big Dreams series continues to be a major success; we are
adding additional titles to the programme this autumn, and next
year will be expanding the list to include inspirational male role
models. Young Quarto has also performed strongly in the first half,
selling well in the book trade. Although we have had a good first
half in co-edition, sales to our key co-edition publishers for the
second half of the year are expected to be slower. The launch of
our Build and Become series (White Lion Publishing) has been well
received and, with another four titles to come, we expect continued
growth in the series.
Our international English language sales have seen a good uplift
at the start of the year. We have already matched full-year sales
from the prior year with a strong contribution from our Australian,
Middle Eastern and Asian markets.
We expect our foreign language sales to be slightly lower than
the prior year as a result of market place uncertainty. 2017 was a
record year for our foreign language sales team, significantly
increasing our market reach and growing the business in Asia.
Q Partners, our publishing partners and distribution business,
has performed in line with the prior year's results. Sales have
been slow in Brazil and the launch of Quarto Iberoamericana, our
Spanish language partnership, has still to reach critical mass.
Cost-out programme
We have initiated a cost-out programme, which is designed to
achieve: a right-sizing of the Group; a path to sustainable debt
reduction; a focus on our core strengths; and a disciplined
business model.
The process involved a thorough review of key areas of
expenditure, including but not limited to, pre-publication
expenditure, occupancy costs, payroll and discretionary
expenditure. The benefit of the cost-out programme will not flow
through immediately, as we will have to incur one-time exceptional
costs, mainly in 2018, to implement the plan.
Refinancing
Significant progress has been made with our banks, to extend our
facilities to August 2020. The key terms, which include a debt
reduction programme, have been agreed and we expect to be able to
announce details of the refinancing in the short term.
Year end
We have decided to continue the historical year-end of 31
December - the previous Board had agreed a change to 31 March. By
doing this, we avoid the unnecessary time and cost of carrying out
the additional work that would have been required in restating
comparatives and preparing additional transitional reports.
OUTLOOK
We have produced a strong first-half performance compared to
last year, and we are well placed to deliver a solid result for the
full year.
The newly constituted Board are fully focused on achieving
stability in the business after a period of considerable change.
The extension of the banking facilities will create financial
stability which is a key building block in returning the Group to
full-health. This will allow us to concentrate on the production of
the profitable and beautifully illustrated books for which Quarto
is so well-known.
On behalf of the Board, I would like to thank all staff for
their continued support and loyalty during this recent period of
change and uncertainty, as well as our partners and suppliers
across the world.
CK Lau
Chief Executive
THE QUARTO GROUP, INC.
Condensed Consolidated Income Statement
For the six months ended 30 June 2018
Six months Six months Year ended
to to 31 December
30 June 2018 30 June 2017 2017
Unaudited Unaudited Audited
Note $'000 $'000 $'000
Continuing operations
Revenue 2 56,174 50,159 152,512
Cost of sales (44,237) (40,914) (109,848)
---------------------------------------- ---- ------------- ------------- ------------
Gross profit 11,937 9,245 42,664
Distribution costs (3,778) (3,265) (7,549)
Administrative expenses (12,838) (13,187) (27,922)
---------------------------------------- ----
Operating (loss)/profit before
amortisation of acquired intangibles
and exceptional items (4,679) (7,207) 7,193
Amortisation of acquired intangibles (428) (418) (840)
Exceptional items 3 (1,891) - (24,235)
---------------------------------------- ---- ------------- ------------- ------------
Operating loss 2 (6,998) (7,625) (17,882)
Finance income - - 25
Finance costs (1,902) (1,528) (3,325)
---------------------------------------- ---- ------------- ------------- ------------
Loss before tax (8,900) (9,153) (21,182)
Tax credit 4 2,225 2,655 1,480
---------------------------------------- ---- ------------- ------------- ------------
Loss for the period from continuing
operations (6,675) (6,498) (19,702)
Discontinued operations
Profit for the period from discontinued
operations 5 - 1,243 1,163
---------------------------------------- ----
Loss for the period (6,675) (5,255) (18,539)
======================================== ==== ============= ============= ============
Attributable to:
Owners of the parent (6,675) (5,229) (18,513)
Non-controlling interests - (26) (26)
---------------------------------------- ---- ------------- ------------- ------------
(6,675) (5,255) (18,539)
======================================== ==== ============= ============= ============
Loss per share (cents)
From continuing operations
Basic 6 (35.5) (31.8) (96.4)
Diluted 6 (35.5) (31.8) (96.4)
From continuing and discontinued
operations
Basic 6 (35.5) (25.6) (90.6)
Diluted 6 (35.5) (25.8) (90.6)
THE QUARTO GROUP, INC.
Condensed Consolidated Income Statement
For the six months ended 30 June 2018
Six months Six months Year ended
to to 31 December
30 June 2018 30 June 2017 2017
Unaudited Unaudited Audited
$'000 $'000 $'000
Loss for the period (6,675) (5,255) (18,539)
Other comprehensive income which
may be reclassified to profit or
loss
Foreign exchange translation differences (691) 267 35
Cash flow hedge: Profits arising
during the period 26 30 25
Reclassification to income statement
on disposal of businesses - 3,540 3,540
Tax relating to items that may be
reclassified to profit or loss - - 471
----------------------------------------- ------------- ------------- ------------
Total comprehensive expense for
the period (7,340) (1,418) (14,468)
========================================= ============= ============= ============
Attributable to:
Owners of the parent (7,340) (1,392) (14,442)
Non-controlling interests - (26) (26)
----------------------------------------- ------------- ------------- ------------
(7,340) (1,418) (14,468)
========================================= ============= ============= ============
THE QUARTO GROUP, INC.
Condensed Consolidated Balance Sheet
At 30 June 2018
31 December
30 June 2018 30 June 2017 2017
Unaudited Unaudited Audited
Note $'000 $'000 $'000
Non-current assets
Goodwill 19,144 36,468 19,286
Other intangible assets 3,025 3,816 3,516
Property, plant and equipment 1,870 2,296 2,129
Intangible assets: Pre-publication
costs 60,373 63,946 60,278
Deferred tax assets 3,890 2,824 3,901
----------------------------------- ---- ------------ ------------ -----------
Total non-current assets 88,302 109,350 89,110
----------------------------------- ---- ------------ ------------ -----------
Current assets
Inventories 24,574 21,159 22,637
Trade and other receivables 36,935 41,005 53,460
Derivative financial instruments 191 179 205
Cash and cash equivalents 8 5,047 6,800 17,946
Assets held for sale - 949 -
----------------------------------- ---- ------------ ------------ -----------
Total current assets 66,747 70,092 94,248
----------------------------------- ---- ------------ ------------ -----------
Total assets 155,049 179,442 183,358
----------------------------------- ---- ------------ ------------ -----------
Current liabilities
Short term borrowings 8 (78,294) (5,000) (5,000)
Derivative financial instruments - (58) -
Trade and other payables (47,853) (40,233) (60,796)
Tax payable (1,268) (1,695) (5,243)
Liabilities held for sale - (198) -
----------------------------------- ---- ------------ ------------ -----------
Total current liabilities (127,415) (47,184) (71,039)
----------------------------------- ---- ------------ ------------ -----------
Non-current liabilities
Medium and long term borrowings 8 - (77,720) (76,907)
Deferred tax liabilities (8,397) (11,093) (8,520)
Tax payable (1,016) - (1,116)
Other payables (1,524) (6,358) (1,673)
----------------------------------- ---- ------------ ------------ -----------
Total non-current liabilities (10,937) (95,171) (88,216)
----------------------------------- ---- ------------ ------------ -----------
Total liabilities (138,352) (142,355) (159,255)
----------------------------------- ---- ------------ ------------ -----------
Net assets 16,697 37,087 24,103
=================================== ==== ============ ============ ===========
Equity
Share capital 2,045 2,045 2,045
Paid in surplus 33,764 33,764 33,764
Retained profit and other reserves (19,112) 1,278 (11,706)
----------------------------------- ---- ------------ ------------ -----------
Total equity 16,697 37,087 24,103
=================================== ==== ============ ============ ===========
THE QUARTO GROUP, INC.
Condensed Consolidated Statement of Changes in Equity for the
six months ended 30 June 2018
Equity
attributable
to owners
Share Paid in Hedging Translation Retained of the Non-controlling
capital surplus reserve reserve earnings parent interests Total
$000 $000 $000 $000 $000 $000 $000 $000
Balance at 1
January
2017 2,045 33,764 140 (8,850) 12,120 39,219 4,892 44,111
Loss for the period - - - - (5,229) (5,229) (26) (5,255)
Foreign exchange
translation
differences - - - 267 - 267 - 267
Reclassification to
income
statement on
disposal
of businesses - - - 3,540 - 3,540 - 3,540
Cash flow hedge:
profits
arising during the
period - - 30 - - 30 - 30
Total
comprehensive
(expense)/income
for the period - - 30 3,807 (5,229) (1,392) (26) (1,418)
------------------- ------- ------- ------- ----------------------- --------- ------------ --------------- -------
Dividends to
shareholders - - - - (2,018) (2,018) - (2,018)
Dividend in-specie
paid
to non-controlling
interests - - - - - - (3,744) (3,744)
Adjustment arising
from
change in
non-controlling
interests - - - - 1,122 1,122 (1,122) -
Share based payment
charge - - - - 156 156 - 156
Balance at 30 June
2017 2,045 33,764 170 (5,043) 6,151 37,087 - 37,087
=================== ======= ======= ======= ======================= ========= ============ =============== =======
Balance at 1
January
2018 2,045 33,764 165 (4,793) (7,078) 24,103 - 24,103
Loss for the period - - - - (6,675) (6,675) - (6,675)
Foreign exchange
translation
differences - - - (691) - (691) - (691)
Cash flow hedge:
profits
arising during the
period - - 26 - - 26 - 26
Tax relating to
items
that may be
reclassified
to profit or loss - - - - - - - -
------------------- ------- ------- ------- ----------------------- --------- ------------ --------------- -------
Total comprehensive
(expense)/income
for the period - - 26 (691) (6,675) (7,340) - (7,340)
------------------- ------- ------- ------- ----------------------- --------- ------------ --------------- -------
Dividends to
shareholders - - - - - - - -
Share based payment
credit - - - - (66) (66) - (66)
Balance at 30 June
2018 2,045 33,764 191 (5,484) (13,819) 16,697 - 16,697
=================== ======= ======= ======= ======================= ========= ============ =============== =======
THE QUARTO GROUP, INC.
Condensed Consolidated Statement of Changes in Equity for the
year ended 31 December 2017
Equity
Paid attributable
Share in Hedging Translation Retained to owners of Non-controlling
capital surplus reserve reserve earnings the parent interests Total
$000 $000 $000 $000 $000 $000 $000 $000
Balance at 1
January
2017 2,045 33,764 140 (8,850) 12,120 39,219 4,892 44,111
Loss for the year - - - - (18,513) (18,513) (26) (18,539)
Foreign exchange
translation
differences - - - 46 - 46 (11) 35
Reclassification
to income
statement on
disposal
of businesses - - - 3,540 - 3,540 - 3,540
Cash flow hedge:
profits
arising during
the year - - 25 - - 25 - 25
Tax relating to
items
that may be
reclassified
to profit or
loss - - - 471 - 471 - 471
Total
comprehensive
income
for the year - - 25 4,057 (18,513) (14,431) (37) (14,468)
----------------- ------- ------- ------- ----------------------- --------- ------------ --------------- --------
Dividends to
shareholders - - - - (2,018) (2,018) - (2,018)
Dividend
in-specie paid
to
non-controlling
interests - - - - - - (3,744) (3,744)
Adjustment
arising from
change in
non-controlling
interests - - - - 1,111 1,111 (1,111) -
Share based
payment charge - - - - 222 222 - 222
Balance at 31
December
2017 2,045 33,764 165 (4,793) (7,078) 24,103 - 24,103
================= ======= ======= ======= ======================= ========= ============ =============== ========
THE QUARTO GROUP, INC.
Condensed Consolidated Cash Flow Statement
For the six months ended 30 June 2018
Six months Six months Year ended
to to 31 December
30 June 2018 30 June 2017 2017
Unaudited Unaudited Audited
$'000 $'000 $'000
Loss for the period (6,675) (5,255) (18,539)
Adjustments for:
Net finance costs 1,902 1,528 3,300
Depreciation of property, plant
and equipment 357 381 817
Software amortisation 137 156 315
Tax credit (2,225) (2,655) (1,480)
Impairment of goodwill - - 17,418
Impairment of pre-publication
costs - - 4,868
Share based payments (66) 156 222
Amortisation of acquired intangibles 428 418 841
Gain on divestment of businesses - (2,538) (2,541)
Amortisation and amounts written
off pre-publication costs 16,206 14,921 32,212
Movement in fair value of derivatives (26) (31) (130)
Operating cash flows before movements
in working capital 10,038 7,081 37,303
(Increase)/decrease in inventories (2,030) 2,410 1,281
Decrease/(increase) in receivables 16,314 10,923 (784)
(Decrease)/increase in payables (13,086) (11,296) 6,822
--------------------------------------------------- ------------- ------------- ------------
Cash generated by operations 11,236 9,118 44,622
Income taxes paid (1,865) - -
--------------------------------------------------- ------------- ------------- ------------
Net cash from operating activities 9,371 9,118 44,622
Investing activities
Interest received - - 25
Investment in pre-publication
costs (16,886) (16,222) (35,551)
Purchases of property, plant and
equipment (121) (639) (1,063)
Purchase of software (82) (212) (266)
Disposal of subsidiaries - 3,650 4,588
Acquisition of publishing assets - (4,041) (7,041)
--------------------------------------------------- ------------- ------------- ------------
Net cash used in investing activities (17,089) (17,464) (39,308)
Financing activities
Dividends paid - (2,018) (2,018)
Interest payments (1,651) (1,322) (2,935)
External loans repaid (8,633) (5,432) (8,271)
External loans drawn 5,000 5,000 6,600
Net cash used in financing activities (5,284) (3,772) (6,624)
Net decrease in cash and cash
equivalents (13,002) (12,118) (1,310)
Cash and cash equivalents at beginning
of period 17,946 18,824 18,824
Foreign currency exchange differences
on cash and cash equivalents 103 94 432
--------------------------------------------------- ------------- ------------- ------------
Cash and cash equivalents at end
of period 5,047 6,800 17,946
=================================================== ============= ============= ============
THE QUARTO GROUP, INC.
Notes to the condensed financial statements
1. Interim Statement
These interim consolidated financial statements are for the half
year to 30 June 2018. They were approved by the board on 17
September 2018. These results are unaudited and have not been
reviewed by the Group's auditor. The comparative figures for the
six months to 30 June 2017 are also unaudited and derived from the
interim financial statements for that period.
The information for the year ended 31 December 2017 does not
constitute statutory accounts as defined in section 434 of the
Companies Act 2006. A copy of the statutory accounts for that year
has been delivered to the Registrar of Companies. The auditor's
report on those accounts was not qualified, did not include a
reference to any matters to which the auditor drew attention by way
of emphasis without qualifying the report and did not contain
statements under section 498 (2) or (3) of the Companies Act
2006.
Basis of preparation
These interim financial statements have been prepared in
accordance with the Disclosure and Transparency Rules of the
Financial Conduct Authority and with IAS 34, "Interim Financial
Reporting", as adopted by the European Union.
The Directors have formed a judgement that there is a reasonable
expectation that the Group has adequate resources to continue in
operational existence for the foreseeable future. For this reason,
the Directors continue to adopt the going concern basis in
preparing the financial statements. The Group has committed
facilities of $80.0m through to 30 April 2019. The Group has
complied with its bank covenants and is budgeted to do so for the
foreseeable future.
The accounting policies adopted are consistent with those of the
annual financial statements for the year ended 31 December 2017 as
described in those financial statements.
2. Segmental analysis
US UK Q Partners
Six months to 30 June 2018 Publishing Publishing Total
$000 $000 $000 $000
Revenue 29,180 24,288 2,706 56,174
============ ============ =========== ========
Operating profit before amortisation
of acquired intangibles and
exceptional items (569) (1,980) (121) (2,670)
Amortisation of acquired intangibles (298) (130) - (428)
------------ ------------ ----------- --------
Segment result (867) (2,110) (121) (3,098)
Unallocated corporate expenses (2,009)
Exceptional items (1,891)
--------
Operating loss (6,998)
Finance costs (1,902)
--------
Loss before tax (8,900)
Tax credit 2,225
--------
Loss after tax (6,675)
========
Q
Six months to 30 June 2017 US Publishing UK Publishing Partners Total
$000 $000 $000 $000
Revenue 26,656 20,834 2,669 50,159
============== ============== ========== ========
Operating profit before amortisation
of acquired intangibles and
exceptional items (1,712) (3,577) (161) (5,450)
Amortisation of acquired intangibles (298) (120) - (418)
-------------- -------------- ---------- --------
Segment result (2,010) (3,697) (161) (5,868)
Unallocated corporate expenses (1,757)
Exceptional items -
--------
Operating (loss) (7,625)
Finance costs (1,528)
--------
Loss before tax (9,153)
Tax credit 2,655
--------
Loss after tax from continuing
operations (6,498)
Profit after tax from discontinued
operations 1,243
--------
Loss after tax (5,255)
========
2. Segmental analysis (continued)
Year ended 31 December 2017 US Publishing UK Publishing Q Partners Total
$000 $000 $000 $000
Revenue 74,134 72,737 5,641 152,512
============== ============== =========== =========
Operating profit before amortisation
of acquired intangibles and
exceptional items 4,641 7,099 (431) 11,309
Amortisation of acquired intangibles (596) (244) - (840)
-------------------------------------- -------------- -------------- ----------- ---------
Segment result 4,045 6,855 (431) 10,469
Exceptional items:
Exceptional item - impairment
of Goodwill (17,100) (314) - (17,414)
Exceptional item - pre-publication
asset impairment (1,041) (3,827) - (4,868)
Exceptional items - other (82) (842) (46) (970)
-------------------------------------- -------------- -------------- ----------- ---------
Operating (loss)/profit (14,178) 1,872 (477) (12,783)
Unallocated corporate expenses (4,116)
Corporate exceptional items (983)
---------
Operating loss (17,882)
Finance income 25
Finance costs (3,325)
---------
Loss before tax (21,182)
Tax 1,480
---------
Loss after tax from continuing
operations (19,702)
Profit after tax from discontinued
operations 1,163
---------
Loss after tax (18,539)
=========
Geographical revenue
The Group generates its revenue in the
following geographical areas:
Six months Six months Year ended
to to 31 December
30 June 2018 30 June 2017 2017
Unaudited Unaudited Audited
$'000 $'000 $'000
United States 34,690 32,068 86,444
United Kingdom 8,407 7,486 20,256
Europe 6,293 5,189 29,098
Rest of the World 6,784 5,416 16,714
Total 56,174 50,159 152,512
========================= =============== ============== =============
3. Exceptional items
Six months Six months
to to Year ended
30 June 30 June 31 December
2018 2017 2017
Unaudited Unaudited Audited
$'000 $'000 $'000
Exceptional items comprised:
Goodwill impairment - - 17,414
Reorganisation costs
* Impairment of pre-publication intangible assets - - 4,868
* Staff costs 132 - 544
* Royalty advance provisions - - 409
* Inventory provisions - - 75
* Refinancing costs 893 - 597
Board changes 866 - -
Aborted corporate transaction costs - - 241
Aborted business acquisition costs - - 87
Total 1,891 - 24,235
============================================================= =========== =========== =============
4. Taxation
Taxation for the six months to 30 June 2018 is based on the
Group estimated underlying tax rate for the year.
5. Discontinued operations
On 30 March 2017, the Group completed the disposal of its 75%
interest in Regent Publishing Services Limited ("Regent"), its Hong
Kong based publishing services business. On 3 April 2017, the Group
completed the disposal of its 100% share of Books & Gifts
Direct Pty Limited ("BGD Australia"), its direct sales business in
Australia. On 7 July 2017, the Group completed the disposal of the
trade and selected net assets of Books & Gifts Direct Limited
("BGD New Zealand"), its direct sales business in New Zealand. At
30 June 2017, this business was disclosed as a discontinued
operation held for sale. The final loss on disposal was accounted
for in the year ended 31 December 2017.
These disposals were completed in line with the Group's strategy
of disposing of non-core businesses. Proceeds from the disposal
were used to manage the Group's net debt position as received. The
results of the discontinued operations and the profit or loss on
disposal were included in the consolidated income statement, under
discontinued operations,
6. Earnings per share
Six months Six months
to to Year ended
30 June 30 June 31 December
2018 2017 2017
Unaudited Unaudited Audited
$'000 $'000 $'000
From continuing operations
Loss for the purposes of basic and diluted
earnings per share, being net loss attributable
to owners of the parent (6,675) (6,498) (19,702)
Amortisation of acquired intangibles
(net of tax) 321 293 591
Exceptional items (net of tax) 1,418 - 22,852
--------------------------------------------------- ---------- ---------- ------------
(Loss)/earnings for the purposes of
adjusted earnings per share (4,936) (6,205) 3,741
=================================================== ========== ========== ============
From continuing and discontinued operations
Loss for the purposes of basic and diluted
earnings per share, being net loss attributable
to owners of the parent (6,675) (5,229) (18,513)
Amortisation of acquired intangibles
(net of tax) 321 293 591
Exceptional items (net of tax) 1,418 - 22,852
(Profit) from discontinued operations - - (1,189)
--------------------------------------------------- ---------- ---------- ------------
Adjusted earnings attributable to owners
of the parent (4,936) (4,936) 3,741
=================================================== ========== ========== ============
Number Number Number
Weighted average number of shares 20,444,450 20,444,450 20,444,450
Dilutive outstanding options awards 400,185 626,167 575,631
--------------------------------------------------- ---------- ---------- ------------
Diluted weighted average number of 20,844,635 21,070,617 21,020,081
=================================================== ========== ========== ============
(Loss)/earnings per share (cents) Cents Cents Cents
From continuing operations
Basic (32.6) (31.8) (96.4)
Diluted (32.6) (31.8) (96.4)
Adjusted basic (24.1) (30.4) 18.3
Adjusted diluted (24.1) (30.4) 17.8
From continuing and discontinued operations
Basic (35.5) (25.6) (90.6)
Diluted (35.5) (25.8) (90.6)
From discontinued operations
Basic - 6.2 5.8
Diluted - 6.0 5.7
Discontinued operations earnings
Profit for the period from discontinued
operations - 1,243 1,163
Add: non-controlling interest share
of loss - 26 26
---------- ---------- ------------
- 1,269 1,189
---------- ---------- ------------
THE QUARTO GROUP, INC.
Notes to the condensed financial statements
7. Dividends
Six months Six months
to to Year ended
30 June 30 June 31 December
2018 2017 2017
Unaudited Unaudited Audited
$'000 $'000 $'000
Amounts recognised as distributions
to equity holders in the period:
Final dividend for the year ended 31
December 2017 of nil (2016: 9.87c/7.95p) - 2,018 -
Total dividend paid for the period - 2,018 -
===================================================== ========== ========== ============
The Quarto Group, Inc., as a US incorporated company, is
required to collect US dividend withholding taxes on dividend
distributions made to its non-US shareholders. The US dividend
withholding tax is generally 30% of any dividends paid to Quarto's
non-US shareholders, but this amount can potentially be reduced
pursuant to an applicable income tax treaty between the US and the
country of residence of the non-US shareholder. For example, under
the US/UK income tax treaty, the US dividend withholding tax rate
can range from nil (applicable to certain UK resident pension
trusts and tax-exempt entities) to 15% (applicable to UK resident
individual shareholders and certain UK corporate shareholders). For
US shareholders, no US dividend withholding tax is generally
applicable. It should be noted that certain documentation
requirements must be met by all shareholders prior to the payment
of any dividends to certify their status as a US or non-US
shareholder, and, if a non-US shareholder to claim any applicable
benefits under the US/UK or other applicable income tax treaty.
Each shareholder should consult their own tax adviser to determine
whether and to what extent they may be entitled to claim a reduced
amount of US dividend withholding taxes under a US income tax
treaty.
8. Net debt
30 June 30 June 31 December
2018 2017 2017
Unaudited Unaudited Audited
$'000 $'000 $'000
Net debt comprised:
Cash and cash equivalents 5,047 6,800 17,946
Cash included in assets held for
sale - 128 -
Short term borrowings (78,294) (5,000) (5,000)
Medium and long-term borrowings - (77,720) (76,907)
Net debt (73,247) (75,792) (63,961)
=========== =========== ============
At 30 June 2018, the Group has a $80.0m syndicated facility,
comprising a term loan and revolving credit facility. These
facilities expire on 30 April 2019 and are subject to covenants,
which were all met in the current period.
9. Principal risks and uncertainties facing the Group
There have been no changes to the principal risks and
uncertainties facing the Group since the year-end. These are
disclosed on pages 28 and 29 of the 2017 Annual Report.
10. Financial Instruments
There are no material differences between the fair value of
financial instruments and their carrying value.
11. Management Statement
This Interim Management Report (IMR) has been prepared solely to
provide additional information to shareholders to assess the
Group's strategies and the potential for those strategies to
succeed. The IMR should not be relied on by any other party or for
any other purpose.
The IMR contains certain forward-looking statements. These
statements are made by the directors in good faith based on the
information available to them up to the time of their approval of
this report but such statements should be treated with caution due
to the inherent uncertainties, including both economic and business
risk factors, underlying any such forward-looking information.
Responsibility statement
We confirm that to the best of our knowledge:
(a) the condensed set of financial statements, which has been
prepared in accordance with IAS 34 "Interim Financial Reporting",
gives a true and fair view of the assets, liabilities, financial
position and profit or loss of the issuer, or the undertakings
included in the consolidation as a whole as required by DTR
4.2.4R;
(b) the interim management report includes a fair review of the
information required by DTR 4.27R (indication of important events
during the first six months and description of principal risks and
uncertainties for the remaining six months of the year); and
(c) the interim management report includes a fair review of the
information required by DTR 4.28R (disclosure of related party
transactions and changes therein).
By the order of the board
CK Lau Andrew Cumming
Chief Executive Officer Chairman
17 September 2018 17 September 2018
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR FKQDBOBKDPCD
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