Quarto in revenue and profits drop

Illustrated book publisher Quarto has seen a fall in revenue and profits after what it described as a "tough" first half of 2014.

For the six months ending 30th June 2014, the Quarto Group had revenue of $65.6m (£39.1m), a 9% drop from $72.2m (£43.1m) in the same period on 2013. Underlying profit before taxation also fell, standing at $0.7m (£0.4m) for 2014, falling 59% from $1.7m (£1m) from the same period in the previous year.

Continuing revenue in the core publishing businesses was down 1%, attributed to "US wholesaler HDA ceasing operations, backlist restocking and weak uptake of new titles by major book retailers".

The business did manage to reduce its debts, shrinking the sum down from $83.3m (£49.7m) in 2013 to $81.5m (£48.6m), and down $7m (£4.2m) on a constant currency basis, including the proceeds of a sale of a Swiss property for $1.9m (£1.1m).

Despite the dip in revenue and profits, chief executive Marcus Leaver said he still expected the group to deliver earnings growth in 2014, with better prospects in the second half of the year based on book visibility, strong foreign sales, and the results of product development in 2013.

In a statement, he said: "Despite a tough first half we expect the new product and the marketing and sales initiatives that we invested, in 2013, to deliver a strong second half in our publishing businesses. There are positive signs of the turnaround we targeted in the Books and Gifts Direct business in Australia and New Zealand. The group should deliver earnings growth in 2014 as expected."

Speaking to The Bookseller, he said: "It's been  very challenging. It was a difficult first half. We could have done without a leading wholesaler closing in the US, and we could done without the Australia and New Zealand businesses moving slower than we predicted." He added that the UK market was "quite tough", but said that he was able to look at a broader picture. "We made a lot of investment in our product development, and a lot of investment in our sales and marketing", Leaver said, and added: "We will see our publishing business grow this year… we learnt from the closure of HDA about reaching customers ourselves and developing that."

Asked about dealing with Amazon, he said: "Amazon is relentless in how it works for its customers. Sometimes that is at odds with working with people such as ourselves. Most publishers think they are very good to work with until they are not. The issues for us are very different from the majors, more about discoverability, and that changes from place to place and quarter to quarter. Like every business they have their demands, but we don't play in the same world as Hachette."

Tim Chadwick, chairman of Quarto, said: "We are making steady progress and our people have shown resolve in what has been a challenging year to date. Despite adverse exchange rates, we have paid down debt and will continue to do so. We have a settled board and have established the requisite Audit, Remuneration and Nomination Committees. We are maintaining the interim dividend and will continue our focus on earnings growth and continuing to pay down debt."

In February, when the Quarto Group released its annual results for 2013, it claimed a "solid" year with a revenue and profit dip. It also announced a rebranding for its publishing divisions, to create what Leaver called "a stronger, more coherent Quarto". He said the rebranding had been "a healthy success" for the company in reaching its retail customers.