Quarto sees 2020 revenue fall 7% but profits rose

The Quarto Group saw revenue fall 7% year on year in 2020 to $126.9m (£91.5m) although adjusted operating profit increased to $10.6m (£7.6m) in the same period.

Results for the year ending 31st December 2020 showed revenue down from $135.8m (£97.9m) in 2019, with adjusted operating profit rising from $10m (£7.2m), something Quarto attributed to improved margins and cost reductions. Operating profit was up 6% to $9.3m (£6.7m) while the strength of the balance sheet improved to $43.7m (£31.5m) from $21.1m (£15.2m).

The company's net debt plunged 61% from $50.5m (£36.4m) to $19.7m (£14.2m), helped by an open offer completed in January 2020 that succeeded in raising $16.5m net of expenses. The company also recently announced a refinancing strategy, including a new $20m banking facility.

The publisher saw considerable success with This Book is Anti-Racist by Tiffany Jewell and Aurelia Durand which became a number New York Times bestseller and produced more than $1m of revenue. Meanwhile, the success of the Little People, Big Dreams series continued with titles on David Attenborough and Captain Tom bringing total sales to more than 3.7 million copies, Quarto reported.

Turning to future plans, Quarto announced it intends to increase its market share in six key categories: cookery, home and garden, art and craft, heritage, children's, and wellbeing. The company said it would focus on “bolt-on” acquisitions of publishers or imprints “that could generate synergistic value by leveraging Quarto's procurement, operations, and sales platform”.

Its report also flagged up the importance of the supply chain and the effects on it of Covid-19, revealing disruption of freight shipping has led to shipment delays and a 300% increase in shipping costs. “To counter further disruptions, we will take a flexible holistic supply chain approach and work closely with our logistics suppliers and network of onshore and offshore printers,” the company said.

Group c.e.o. Polly Powell said: "The group returned to profitability in 2019, and the emphasis for the board and senior management in 2020 was to maintain that position whilst focusing on cash generation in order to further improve the group's financial position.

"During 2020, the closure of high street outlets at various points in the year meant that the group had a greater reliance on online retailers for both print and electronic books. In response, the publishing program was refined, in order to concentrate the group's sales and marketing efforts on digital sales and those customers still able to trade such as the grocery supermarkets.

“Tight cost controls were in place throughout the group and the procurement of print, Quarto's biggest single expense, was under scrutiny.

“Consequently, the group ended the year with net debt at $19.7m, down 61% vs prior year (2019: $50.5m). As previously detailed, the success of the open offer of $17.0m allowed the group to further stabilize its financial position. It was decided that a dividend would not be appropriate, until debt was further reduced.”

Quarto's report said it aimed to become a “significant trade publisher in North America, the UK and ANZ”, helped by long-standing co-edition partnerships and the realignment of its children's imprints. A new imprint, Happy Yak, will launch this year focusing on “playful, mass-market children's books”.

Meanwhile, the firm is relaunching the adult list Aurum, allowing it to build a new list of narrative non-illustrated non-fiction books. This development will also provide the opportunity to increase Quarto's e-book offering as well as the impetus to launch audiobooks in 2021, it said.

Quarto will enhance its IT infrastructure to leverage its AI platform and quickly identify trending topics, the report noted. “Traditionally, book publishing has been a creative business based on 'gut instinct' and experience, but we believe the emergence of AI could complement Quarto's creative force and enable our editorial team to produce contents that are highly relevant to our customers,” the report explained.

The report concluded Quarto “is in a good position” to grow in 2021 with the return of high street bookshops. It said: “The supply chain remains a challenge for books being imported from the Far East. However, it is likely that once ships and containers are in the right place, from late spring onwards, both supply and price will edge towards normal levels. Quarto's continuing shift towards profitable trade publishing, and the ever-present appetite for children's books in particular, puts the company on firm footing for the future. With an emphasis on technology, and what it can do for book publishing in particular, the company's outlook is bright.”