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Quarto hit by UK returns

28.08.07 Philip Jones

International publisher and packager Quarto saw sales dip 5% in the six months to 30th June, with profit growth of just 1%, after its UK publishing businesses Aurum and Apple were hit by returns of "strongly promoted" 2006 titles.

The group saw sales dip from £38.3m to £36.6m, with adjusted operating profit up to £1.7m compared with £1.6m a year earlier. Quarto said that underlying profits before tax jumped 60% to £0.7m, while underlying operating profit rose 18% to £1.9m. Laurence Orbach, chairman and chief executive, said he was satisfied with the performance of the group in a "tough and demanding business environment".

However, Orbach admitted that the performance of its UK publishing units Aurum and Apple was "disappointing". The publishing houses saw their combined sales decline by 17%, and operating profit drop by 63%. Orbach said: "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."

Orbach added: "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."

Quarto said there were strong performances from its publishing segment outside the UK, with underlying profit up by 60% to £2.2m and revenues up by 3% to £26m.

Revenues from the International Co-Edition Book Publishing segment, which includes its publishing services units, declined by an underlying 2% to £12.9m and operating profit fell by 50% to £0.48m. Orbach said this was "largely due to timing differences in the delivery of new titles and reprint orders".

Orbach added: "These results are very satisfactory, particularly as we are operating in a tough and demanding business environment. 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."

Financial Philip Jones Quarto Laurence Orbach Aurum Apple

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