Quarto revenue declines 7% but supply chain improvements and new imprints cause for optimism

Revenue for The Quarto Group declined in 2022 but adjusted operating profit improved thanks to “tight cost control" and "lower pre-publication and amortisation costs”, according to the company’s latest financial results.

The final results for the year ended 31st December 2022 showed that revenue declined 7% from $151.5m (£122.5m) in 2021 to $141m (£114m) in 2022, but that adjusted operating profit improved 33% from $16m (£12.9m) in 2021 to $21.3m (£17.2m) in 2022. Profit before tax was up 47% at $20.9m (£16.9m) from $14.2m (£11.5m).

The strength of the balance sheet improved to $67.3m (£54.4m) from $53.2m (£43m) in 2021. The group ended the year with net debt down 89% from $5.5m (£4.4m) in 2021 to $0.6m (£0.48m) in 2022. The publisher said: “Results were driven by nimble publishing maximising opportunities which arose, strong cost-control and reduced finance costs.”

According to the report, broadly 69% of revenue is derived from adult titles and 31% from children’s. New books accounted for 42% of total sales and the backlist “continues to deliver strong sales” at 58% of revenue. The revenue of Quarto’s custom publishing channel stood at $14.2m (£11.5m), up 33% year on year. Commenting on the results, group chief executive officer Alison Goff said that during 2022 as most markets around the world reopened, “We saw a return to buying in physical bookstores, with a corresponding reduction in our online sales”.

Goff added: “With the economic pressures squeezing consumer spending, the overall book market contracted slightly in 2022 with non-fiction sales showing one of the biggest declines, down by 7%."

Nevertheless, she continued that, notwithstanding the sale of SmartLab during 2022, Quarto “outperformed the market, delivering increased market share in all our core categories.”

The report noted: “During the year we ceased offering sales services to other publishers and exited a non-core business with the sale of SmartLab."

On supply chain issues the report stated: “Disruptions to the supply chain continued through much of 2022 with longer than usual shipping times resulting from strikes and port disruptions. To mitigate the impact of these our operations team remained nimble, switching onward shipping to trucks rather than rail when necessary and putting in place local printings. While these measures incurred some extra costs there were significant benefits in maintaining supply to the market. In Q4 we saw much improved freight prices and improved shipping times. We believe the market has now stabilised and we do not anticipate a return to the volatility of 2021 and 2022."

Highlights of 2022 included the McDonald’s Happy Meal Programme putting Little People Big Dreams books into the hands of 40 million children around the world, strong growth in the Manga and Anime market, where Quarto says it has “built significant market share”, a new range of graphic novels produced in partnership with Saturday AM and the continued strong performance of Beautiful Boards: 50 amazing snack boards for any occasion, with has sold over 200,000 copies and raised $2.5m (£2.02m) in revenue over 2022.

Moreover, a custom publishing deal with Pokémon created four titles which delivered $1.5m (£1.2m) in the year, the start-up of a new gift imprint – Kaddo – which will launch in 2023 producing puzzles, games and related products from existing content, the timely publication of Little People Big Dreams: Queen Elizabeth selling over 175,000 copies and a new cookery and health imprint to launch in 2023 expanding “reach into one of the largest categories in non-fiction publishing” were also cited in the report.

The Quarto Group’s 2023 outlook is positive. The report states that Quarto remains in “a good financial position with a strong pipeline of new title publishing for 2023 and beyond”, continuing: “Our large back catalogue is a significant strength and continues to perform well. We feel confident in our ability to navigate the challenging market conditions expected of 2023 and in the broad appeal of our books. Our people culture has been a focus in 2022 and will remain so during 2023. Attracting and retaining high-calibre staff is vital for the long-term health of the business. We remain confident and focused on delivering a sustainable, profitable business for the future.”