Quarto Group Inc

Half-year Report

RNS Number : 3730U
Quarto Group Inc
28 July 2020
 

 

THE QUARTO GROUP, INC.

("Quarto" or the "Company" or the "Group")

 

 

Half-Year Results for the Six Months Ended 30 June 2020

 

 

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 2020.

 

Results ($m)

H1 2020

H1 2019

Group Revenue

46.9

56.4

Adjusted2 Group Operating Loss

(1.8)

(0.9)

Group Operating Loss

(2.5)

(1.3)

Adjusted2 Loss before Tax

(3.3)

(3.7)

Loss before Tax

(4.0)

(4.1)

Loss after Tax

(3.0)

(3.1)

Net Debt

36.6

65.0

 

1. All results relate to continuing operations.

2. Adjusted measures are stated before amortization of acquired intangibles of $0.3m and exceptional items of $0.4m.

 

 

Headlines

· Revenue down 17% at $46.9m as a result of the COVID-19 pandemic.

· Adjusted Operating loss up from $0.9m to $1.8m but lower interest costs led to a marginal reduction in pre-tax losses.

· Net debt reduced in last 12 months by $28.4m (44%) to $36.6m following successful completion of the Open Offer in January 2020, which raised $17.0m, together with strong operating cashflow generation.

 

 

Commenting on the results, Chief Executive, C.K. Lau said:

 

"The drop in revenue due to the COVID-19 pandemic, has led us to initiate a number of cost management initiatives to tightly manage our cash flow. In what is our seasonally weak first 6 months, we managed to limit our operating loss and significantly reduce our debt.

 

Quarto's business model was tested and proven to be resilient during the difficult lockdown period of the past few months. We expect the COVID-19 situation to continue to evolve and this prolonged uncertainty will create a challenging trading environment. Having said that, we remain focused on capturing all possible opportunities in the second half of the year, particularly in the run-up period to the holiday season.

 

The Board is continuing to work on returning the Group to full health, securing long term financing facilities and growing our business again in 2021 and beyond."

 

 

 

- ENDS -

 

The Legal Identifier of the Company is 549300BJ2WPX3QUATW58.

 

 

For further information, please contact:

 

The Quarto Group, Inc.

 

C K Lau, Chief Executive Officer

Michael Clarke, Company Secretary

+44 20 7700 9002

 

About The Quarto Group

 

The Quarto Group (LSE: QRT) creates a wide variety of books and intellectual property products, 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 and distributes its products globally in over 50 countries and 40 languages, through a variety of sales channels, partnerships and routes to market.

 

Quarto employs c.330 talented people in the US and the UK. 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   or follow us on Twitter at  @TheQuartoGroup .

 

 

 

 

 

GROUP CHIEF EXECUTIVE'S STATEMENT

 

SUMMARY

 

Despite our trading for the first six months of 2020 being affected by the COVID-19 pandemic, our financial position remains robust.  Our business model has proved resilient to the disruption and our staff have adapted well to working remotely with the assistance of our efficient IT systems.

 

The Group's revenue was down year on year at $46.9m (H1 2019: $56.4m) as a result of many bookshops and retailers being closed for several months during the global lockdown.

 

The decrease in revenue was evenly spread across Children publishing and Adult publishing, with a 17% drop in both categories, in part as a result of Custom & Co-Edition deals being pushed to later in the financial year. However, the gross profit margin increased marginally to 22.7% (H1 2019: 22.0%).

 

During the pandemic, various government business support schemes and cost management initiatives cushioned the impact of COVID-19. The adjusted Group operating loss came in at $1.8m (H1 2019: $0.9m) in what is our seasonally weaker half year. The adjusted loss before tax was $3.3m (H1 2019: $3.7m), with the Group benefiting from lower interest charges as a result of the Open Offer and strong cash generation.

 

Net debt at 30 June 2020 was $36.6m (H1 2019: $65.0m), a significant decrease of $28.4m (44%) over the twelve-month period. Over half of this improvement is the debt reduction arising from the Open Offer ($17.0m) with the company also benefiting from strong operating cash flow from trading.

 

The book trade market remains soft in both the US and UK markets as consumer confidence takes time to recover.  As a result, the Group expects the trading environment in the second half of the year to remain challenging.

 

OPERATING REVIEW

 

Revenue ($m)

H1 2020

H1 2019

United States

28.7

36.7

United Kingdom

6.4

7.6

Rest of the World

5.6

5.7

Europe

6.2

6.4

Total Revenue

46.9

56.4

 

 

 

 

Adjusted Operating Loss ($m)

H1 2020

H1 2019

US Publishing

(0.4)

1.3

UK Publishing

(0.6)

(1.5)

Group overhead

(0.8)

(0.7)

Total adjusted operating loss

(1.8)

(0.9)

 

Note: Revenue is shown by destination; Adjusted Operating Profit is shown by segment.

 

UK-based Frances Lincoln Children's Books imprint has thrived. "This Book is Anti-Racist" became a No 1 New York Times Bestseller and a USA Today Bestseller. And the "Little People, Big Dreams" series continues to inspire children with new bestsellers such as Martin Luther King, Jr. and David Attenborough.

 

In the US, several Adult imprints continue to do well.  Race Point and Rock Point (based in our New York office) and Quarry Books (based in our Beverley office) have achieved higher revenue and contribution than the previous year. Cookery titles did particularly well during the COVID-19 lockdown with "Epic Air Fryer Cookbook" from Harvard Common Press and "Keto Simple" from Fair Winds Press selling particularly well.

 

Our custom and English language co-editions businesses have experienced a drop in sales as a consequence of our US-based customers showing caution in placing orders during the pandemic. However, our foreign language business remained resilient, with sales up 9% year on year. This is due to order timings, the adoption of new digital sales practices and the benefit of having comprehensive global sales coverage during the travel ban.

 

Trade sales outside of the US & UK were down 15% year on year, with sales in Canada particularly hard-hit due to a disrupted bookshop environment and logistics challenges.

 

We have continued to reduce overhead costs (9% lower) as a direct result of taking immediate cost management initiatives during the COVID-19 pandemic.

 

GOING CONCERN

 

At the time of preparing the annual report for the year ended 31 December 2019, in the early stages of the COVID-19 pandemic, the downside scenario projected for the current year indicated that some of the financial covenants would be breached, although the Group would remain within its banking facilities.  At that time, the Directors were in discussions with its lenders which were perceived as being productive. On 26 June 2020, the Banking syndicate agreed a waiver of the group's financial covenants, except for the liquidity covenants, for the current financial year. Trading for the six months to 30 June 2020 has exceeded the expectations set out in the downside scenario. Taking these factors into account, the Directors continue to form 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 $48m through to 31 July 2021. The Group has complied with its bank covenants and is budgeted to do so for the foreseeable future.

 

OUTLOOK

 

As the COVID-19 situation continues to evolve, the uncertainty it has caused has limited management's visibility on our trading performance in the second half of the year, particularly in the run-up period to the holiday season.

 

While the blanket lockdown that we saw in Q2 is unlikely to happen again, the partial shutdown in certain US states and the prolonged uncertainty of the pandemic will continue to have a negative impact on our trade and co-edition business.

 

That said, the Group has a plan in place to mitigate the short-term impact while growing the business for the long-term. We are confident that, with the support of our two major shareholders (the Lion Rock Group and the Giunti family), the Group will secure new financing to replace the current bank loan that is due for repayment in July 2021.

 

On the publishing front, we are sharpening our content strategy around 6 'best in class' hubs - Children, Gardening, Food & Drink, House & Home, Handicrafts, Arts & Crafts and Mind, Body & Spirit. We will focus on subjects where we do best, reduce imprint overlapping and increase our market share in these categories.

 

We are also putting in place a 'fast publishing' infrastructure that will enable our publishers to identify consumer trends and create relevant content quickly from our huge backlist library, and shorten the Go-to-Market time with the support of our printers and logistics suppliers. We believe that in a world of fake news and misinformation, there is a growing market for 'fast publishing' to provide authoritative and comprehensive information.

 

Last but not least, I would like to thank all the people of Quarto who have set an extraordinary example of professionalism and commitment during these unprecedented times.

 

 

 

C.K. Lau

Group Chief Executive Officer

 

 

 

THE QUARTO GROUP, INC.

 

Condensed Consolidated Income Statement

For the six months ended 30 June 2020

 

Note

Six months to

30 June 2020

  Unaudited

 

$'000

Six months to

30 June 2019

Unaudited

Restated

$'000

Year ended

31 December 2019

Audited

 

$'000

 

 

 

 

 

Continuing operations

 

 

 

 

Revenue

2

46,865

56,390

135,807

Cost of sales

 

(36,232)

(44,007)

(97,782)

 

 

 

 

 

Gross profit

 

10,633

12,383

38,025

 

 

 

 

 

Distribution costs

 

(2,937)

(3,525)

(7,527)

Impairment of financial assets

 

(696)

(195)

(853)

Administrative expenses

 

(8,753)

(9,578)

(19,641)

 

 

 

 

 

Operating (loss)/profit before amortisation of acquired intangibles and exceptional items

 

(1,753)

(915)

10,004

 

 

 

 

 

Amortisation of acquired intangibles

 

(323)

(408)

(811)

Exceptional items

3

(421)

-

(419)

 

 

 

 

 

Operating (loss)/profit

2

(2,497)

(1,323)

8,774

 

 

 

 

 

Finance income

 

-

9

9

Finance costs

 

(1,506)

(2,792)

(4,939)

 

 

 

 

 

(Loss)/profit before tax

 

(4,003)

(4,106)

3,844

 

 

 

 

 

Taxation

4

1,000

1,037

(962)

 

 

 

 

 

 

 

 

 

 

(Loss)/profit for the period

 

(3,003)

(3,069)

2,882

 

 

 

 

 

Attributable to:

 

 

 

 

 

 

 

 

 

Owners of the parent

 

(3,003)

(3,069)

2,882

 

 

 

 

 

(Loss)/earnings per share (cents)

 

 

 

 

 

 

 

 

 

From continuing operations

 

 

 

 

Basic

5

(8.1)

(15.0)

14.1

Diluted

5

(8.1)

(15.0)

14.0

 

 

 

 

 

Adjusted basic

5

(6.6)

(13.5)

19.0

Adjusted diluted

5

(6.6)

(13.5)

18.8

 

 

 

 

 

 

 

 

THE QUARTO GROUP, INC.

Condensed Consolidated Statement of Comprehensive Income

For the six months ended 30 June 2020

 

Six months to

30 June 2020

Unaudited

 

$'000

Six months to

30 June 2019

Unaudited

Restated

$'000

Year ended

31 December 2019

Audited

 

$'000

 

 

 

 

(Loss)/profit for the period

(3,003)

(3,069)

2,882

 

 

 

 

Other comprehensive income which may be reclassified to profit or (loss)

 

 

 

Foreign exchange translation differences

(1,923)

(119)

403

Cash flow hedge: (losses) arising during the period

-

(85)

(105)

Tax relating to items that may be reclassified to profit or loss

-

-

(162)

 

 

 

 

Total comprehensive (expense)/income for the period

(4,926)

(3,273)

3,018

 

 

 

 

Attributable to:

 

 

 

 

 

 

 

Owners of the parent

(4,926)

(3,273)

3,018

 

 

 

THE QUARTO GROUP, INC.

Condensed Consolidated Balance Sheet

At 30 June 2020

Note

30 June 2020

Unaudited

 

30 June 2019

Unaudited

Restated

31 December 2019

Audited

 

 

 

$'000

'$'000

$'000

Non-current assets

 

 

 

 

Goodwill

 

18,765

18,907

19,192

Other intangible assets

 

834

1,809

1,282

Property, plant and equipment

 

9,503

11,112

10,883

Intangible assets: Pre-publication costs

 

44,335

50,350

48,697

Deferred tax assets

 

3,331

3,900

3,331

Total non-current assets

 

76,768

86,078

83,385

 

 

 

 

 

Current assets

 

 

 

 

Inventories

 

16,813

20,561

19,378

Trade and other receivables

 

35,506

42,084

46,397

Derivative financial instruments

 

-

20

-

Cash and cash equivalents

6

11,547

7,694

15,621

 

 

 

 

 

Total current assets

 

63,866

70,359

81,396

 

 

 

 

 

Total assets

 

140,634

156,437

164,781

 

 

 

 

 

Current liabilities

 

 

 

 

Short term borrowings

6

(5,000)

(7,500)

(66,077)

Trade and other payables 

 

(41,482)

(47,465)

(57,381)

Lease liabilities

 

(1,839)

(1,863)

(1,937)

Tax payable

 

(1,718)

(3,018)

(2,831)

 

 

 

 

 

Total current liabilities

 

(50,039)

(59,846)

(128,226)

 

 

 

 

 

Non-current liabilities

 

 

 

 

Medium and long-term borrowings

6

(43,181)

(65,156)

-

Deferred tax liabilities

 

(6,808)

(7,540)

(7,139)

Tax payable

 

(441)

(541)

(433)

Lease liabilities

 

(6,995)

(7,995)

(7,929)

Other payables

 

-

(584)

-

Total non-current liabilities

 

(57,425)

(81,816)

(15,501)

 

 

 

 

 

Total liabilities

 

(107,464)

(141,662)

(143,727)

 

 

 

 

 

Net assets

 

33,170

14,775

21,054

 

 

 

 

 

Equity

 

 

 

 

Share capital

 

4,090

2,045

2,045

Paid in surplus

 

48,701

33,764

33,764

Retained profit and other reserves

 

(19,621)

(21,034)

(14,755)

Total equity

 

33,170

14,775

21,054

 

THE QUARTO GROUP, INC.

Condensed Consolidated Statement of Changes in Equity for the six months ended 30 June 2020

 

Share capital

Paid in surplus

Hedging reserve

  Translation
reserve

 Retained earnings

Equity attributable to
owners of the parent

 

$000

$000

$000

$000

$000

$000

 

 

 

 

 

 

 

Balance at 1 January 2019 as previously stated

2,045

33,764

105

(6,989)

(7,807)

21,118

Prior year adjustment (Note 1)

-

-

-

-

(3,130)

(3,130)

Balance at 1 January 2019

2,045

33,764

105

(6,989)

(10,937)

17,988

 

 

 

 

 

 

 

Loss for the period

-

-

-

-

(3,069)

(3,069)

Foreign exchange translation differences

-

-

-

(119)

-

(119)

Cash flow hedge: profits arising during the period

-

-

(85)

-

-

(85)

Total comprehensive (expense)/income for the period

-

-

(85)

(119)

(3,069)

(3,273)

 

 

 

 

 

 

 

Share based payment charge

-

-

-

-

60

60

Transactions with owners

-

-

-

-

60

60

 

 

 

 

 

 

 

 

 

Balance at 30 June 2019

2,045

20

(7,108)

(13,946)

14,775

 

 

 

 

 

 

 

Balance at 1 January 2020

2,045

33,764

-

(6,748)

(8,007)

21,054

 

 

 

 

 

 

 

Loss for the period

-

-

-

-

(3,003)

(3,003)

Foreign exchange translation differences

-

-

-

(1,923)

-

(1,923)

Cash flow hedge: losses arising during the period

-

-

-

-

-

-

Total comprehensive (expense) for the period

-

-

-

(1,923)

(3,003)

(4,926)

 

 

 

 

 

 

 

 

Share capital raised net of expenses

2,045

14,937

-

-

-

16,982

Share based payment charge

-

-

-

-

60

60

Transactions with owners

2,045

14,937

-

-

60

17,042

 

 

 

 

 

 

 

 

 

Balance at 30 June 2020

4,090

48,701

-

(8,671)

(10,950)

33,170

 

THE QUARTO GROUP, INC.

Condensed Consolidated Statement of Changes in Equity for the year ended 31 December 2019

 

 

Share capital

Paid in surplus

Hedging reserve

  Translation
reserve

 Retained earnings

Equity
attributable
 to
owners of the
parent

 

$000

$000

$000

$000

$000

$000

 

 

 

 

 

 

 

Balance at 1 January 2019 (restated)

2,045

33,764

105

(6,989)

(10,937)

17,988

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Profit for the year

-

-

-

-

2,882

2,882

Foreign exchange translation differences

-

-

-

403

-

403

Cash flow hedge: losses arising during the year

-

-

(105)

-

-

(105)

Tax relating to items that may be reclassified to profit or loss

-

-

-

(162)

-

(162)

Total comprehensive income for the year

-

-

(105)

241

2,882

3,018

 

 

 

 

 

 

 

Share based payment charge

-

-

-

-

48

48

Transactions with owners

-

-

-

-

48

48

 

 

 

 

 

 

 

Balance at 31 December 2019

2,045

33,764

-

(6,748)

21,054

 

 

 

 

 

 

 

 

THE QUARTO GROUP, INC.

Condensed Consolidated Cash Flow Statement

For the six months ended 30 June 2020

 

 

Six months to

30 June 2020

Unaudited

 

Six months to

30 June 2019

Unaudited

Restated

Year ended

31 December 2019

Audited

 

 

 

 

$'000

$'000

$'000

 

 

 

 

 

 

 

 

 

 

(Loss)/profit for the period

 

(3,003)

(3,069)

2,882

Adjustments for:

 

 

 

 

Net finance costs

 

1,506

2,783

4,930

Depreciation of property, plant and equipment

 

1,062

1,089

2,127

Software amortisation

 

123

151

276

Tax (credit)/charge

 

(1,000)

(1,037)

962

Share based payments

 

60

60

48

Amortisation and amounts written off acquired intangibles

 

323

408

811

Amortisation and amounts written off pre-publication costs

 

13,084

13,764

28,694

 

 

 

 

 

 

 

 

 

 

Operating cash flows before movements in working capital

 

12,155

14,149

40,730

 

 

 

 

 

Decrease in inventories

 

2,204

1,734

3,157

Decrease in receivables

 

9,672

12,317

8,961

(Decrease) in payables

 

(15,591)

(15,475)

(8,896)

 

 

 

 

 

Cash generated by operations

 

8,440

12,725

43,952

 

 

 

 

 

Income taxes paid

 

(65)

(385)

(2,650)

 

 

 

 

 

Net cash from operating activities

 

8,375

12,340

41,302

 

 

 

 

 

Investing activities

 

 

 

 

Interest received

 

--

9

9

Investment in pre-publication costs

 

(10,307)

(11,940)

(23,786)

Purchases of property, plant and equipment

 

(11)

(75)

(138)

Acquisition of subsidiaries

 

-

-

(1,250)

 

 

 

 

 

Net cash received/(used) in investing activities

 

(10,317)

(12,006)

(25,165)

 

 

 

 

 

Financing activities

 

 

 

 

Interest payments

 

(819)

(2,341)

(3,709)

Lease payments

 

(954)

(721)

(1,882)

External loans repaid

 

(21,626)

(6,923)

(12,417)

External loans drawn

 

4,501

1,997

1,963

Share capital issued

 

16,982

-

 

 

 

 

 

 

Net cash used in financing activities

 

(1,917)

(7,988)

(16,045)

 

 

 

 

 

Net (decrease)/increase in cash and cash equivalents

 

(3,859)

(7,654)

92

 

 

 

 

 

Cash and cash equivalents at beginning of period

 

15,621

15,384

15,384

 

 

 

 

 

Foreign currency exchange differences on cash and cash equivalents

 

(215)

(36)

145

 

 

 

 

 

Cash and cash equivalents at end of period

 

11,547

7,694

15,621

 

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 2020. They were approved by the board 27 July 2020. These results are unaudited and have not been reviewed by the Group's auditor. The comparative figures for the six months to 30 June 2019 were unaudited and derived from the interim financial statements for that period.

 

The information for the year ended 31 December 2019 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 but did include a reference to material uncertainty in relation to going concern for which the auditor drew attention, 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.

 

Going Concern

At the time of preparing the annual report for the year ended 31 December 2019, in the early stages of the COVID-19 pandemic, the downside scenario projected for the current year indicated that some of the financial covenants would be breached, although the Group would remain within its banking facilities.  At that time, the Directors were in discussions with its lenders which were perceived as being productive. On 26 June 2020, the Banking syndicate agreed a waiver of the group's financial covenants, except for the liquidity covenants, for the current financial year. Trading for the six months to 30 June 2020 has exceeded the expectations set out in the downside scenario. Taking these factors into account, the Directors continue to form 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 $48m through to 31 July 2021. 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 2019 as described in those financial statements.

 

Restatement of prior period results

In the process of finalising the Group's results for the year ended 31 December 2019, there was a reinterpretation of the directly attributable costs and overheads that should be capitalised under IAS 38, as pre-publication costs; in the past, an element of overheads relating to indirect costs were capitalised which represents an error. The Directors accept responsibility for the error in their interpretation of IAS38 and the treatment of indirect overhead costs. This interpretation first introduced in 2005 had not been challenged or commented on, by any of the Company's auditors in the intervening years. The Companies previous auditors include Grant Thornton (2017-2019), Deloitte (2014-2016), Grant Thornton (2007-2013) and RSM (2006).

 

As a result of the above, the results for the period ended 30 June 2019 have been restated.

 

The impact on the Condensed Consolidated Income Statement was to reduce cost of sales by $275,000 and to reduce the taxation credit by $58,000.

 

The impact on the Condensed Consolidated Balance Sheet at 30 June 2019 is:

 

  Reported   Adjustment   Restated

    $000    $000    $000

 

Pre-publication costs  54,110  (3,760)  50,350

Tax payable (2,960)                   (58)  (3,018)

Deferred tax liabilities  (8,445)  905  (7,995)

 

Impact on net assets 17,688 (2,913) 14,775

 

Impact on total equity  17,688 (2,913) 14,775

 

The impact on the Condensed Consolidated Cash Flow Statement was to reduce investment in pre-publication costs by $995,000 and reduce amortisation and amounts written off pre-publication costs by $1,270,000.

   

THE QUARTO GROUP, INC.

Notes to the condensed financial statement

 

2.   Segmental analysis

 

Six months to 30 June 2020

 

 US Publishing

 

UK Publishing

 

Total

 

$000

$000

$000

Revenue

24,989

21,876

46,865

 

 

 

 

Operating loss before amortisation of acquired intangibles and exceptional items

(439)

(551)

(990)

Amortisation of acquired intangibles

(285)

(38)

(323)

Segment result

(724)

(589)

(1,313)

Unallocated corporate expenses

 

 

(763)

Exceptional items

 

 

(421)

Operating loss

 

 

(2,497)

Finance costs

 

 

(1,506)

Loss before tax

 

 

(4,003)

Tax credit

 

 

1,000

Loss after tax

 

 

(3,003)

 

Six months to 30 June 2019 (Restated)

US Publishing

UK Publishing

Total

 

$000

$000

$000

Revenue

32,921

23,469

56,390

 

 

 

 

Operating profit/loss before amortisation of acquired intangibles and exceptional items

1,301

(1,520)

(219)

Amortisation of acquired intangibles

(285)

(123)

(408)

Segment result

1,016

(1,643)

(627)

Unallocated corporate expenses

 

 

(696)

Operating loss

 

 

(1,323)

Finance costs

 

 

(2,783)

Loss before tax

 

 

(4,106)

Tax credit

 

 

1,037

Loss after tax

 

 

(3,069)

 

Year ended 31 December 2019

US Publishing

UK Publishing

Total

 

$000

$000

$000

Revenue

71,488

64,319

135,807

 

 

 

 

Operating profit before amortisation of acquired intangibles and exceptional items

4,511

6,540

11,051

Amortisation of acquired intangibles

(570)

(241)

(811)

Segment result

3,941

6,299

10,240

Unallocated corporate expenses

 

 

(1,047)

Corporate exceptional items

 

 

(419)

Operating profit

 

 

8,774

Finance income

 

 

9

Finance costs

 

 

(4,939)

Profit before tax

 

 

3,844

Tax

 

 

(962)

Profit after tax

 

 

2,882

 

THE QUARTO GROUP, INC.

Notes to the condensed financial statements

 

 

2.  Segmental analysis (continued)

 

Geographical revenue

 

 

 

The Group generates its revenue in the following geographical areas:

 

 

 

 

 

 

 

Six months to

30 June 2020

Unaudited

$'000

Six months to

30 June 2019

Unaudited

$'000

Year ended

31 December 2019

Audited

$'000

United States

28,713

36,749

80,131

United Kingdom

6,349

7,595

19,193

Europe

6,233

6,374

21,392

Rest of the World

5,570

5,672

15,091

Total

46,865

56,390

135,807

 

 

 

3.  Exceptional items

 

Six months to

30 June 2020

Unaudited

$'000

Six months to

30 June 2019

Unaudited

$'000

Year ended

31 December 2019

Audited

$'000

Exceptional items comprised:

 

 

 

Restructuring costs

228

-

-

Refinancing costs

193

-

387

Aborted corporate transaction costs

-

-

32

 

 

 

 

Total

421

-

419

 

4.  Taxation

 

Taxation for the six months to 30 June 2020 is based on the Group estimated underlying tax rate for the year. 

 

 

 

 

THE QUARTO GROUP, INC.

Notes to the condensed financial statements

 

5.  Earnings per share

 

 

Six months to

30 June 2020

Unaudited

 

$'000

Six months to

30 June 2019

Unaudited

Restated

$'000

Year ended

31 December 2019

Audited

 

$'000

From continuing operations

 

 

 

(Loss)/profit for the purposes of basic and diluted earnings per share, being net (loss)/profit attributable to owners of the parent

(3,003)

(3,069)

2,882

Amortisation of acquired intangibles (net of tax)

242

306

654

Exceptional items (net of tax)

316

-

339

(Loss)/earnings for the purposes of adjusted earnings per share

(2,445)

(2,763)

3,875

 

 

 

 

 

Number

Number

Number

Weighted average number of shares

37,069,606

20,444,450

20,444,450

Dilutive outstanding options awards

157,659

250,957

171,597

Diluted weighted average number of shares

37,227,265

20,695,407

20,616,147

 

 

 

 

 

 

 

 

(Loss)/earnings per share (cents)

Cents

Cents

Cents

From continuing operations

 

 

 

Basic

(8.1)

(15.0)

14.1

Diluted

(8.1)

(15.0)

14.0

 

 

 

 

Adjusted basic

(6.6)

(13.5)

19.0

Adjusted diluted

(6.6)

(13.5)

18.8

 

 

 

 

6.  Net debt

 

 

30 June 2020

Unaudited

$'000

30 June 2019

Unaudited

$'000

31 December 19

Audited

$'000

Net debt comprised:

 

 

 

 

Cash and cash equivalents

11,547

7,694

15,621

Short term borrowings

(5,000)

(7,500)

(66,077)

Medium and long-term borrowings

(43,181)

(65,156)

-

Net debt

(36,634)

(64,962)

(50,456)

 

At 30 June 2020, the Group has a $33m syndicated facility, comprising a term loan and revolving credit facility. These facilities expire on 31 July 2021 and are subject to covenants, which were all met in the current period. In addition, the Group has $13.0m of loans with related parties, repayable on 31 July 2021, and a $2.0m overdraft facility.

 

 

7.  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 15 to 17 of the 2019 Annual Report.

 

 

 

 

THE QUARTO GROUP, INC.

Notes to the condensed financial statements

 

 

8.  Financial instruments

 

There are no material differences between the fair value of financial instruments and their carrying value.

 

9.  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

 

 

 

 

Chuk Kin Lau

Chief Executive Officer

Andrew Cumming

Chairman

 

 

27 July 2020

27 July 2020

 


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