Quarto's revenues fall 17%, but Powell hails good UK trade performance

Quarto's revenues fell by 17% year on year in the first half of 2020, hit by the coronavirus pandemic, but UK c.e.o. Polly Powell has hailed a good trade performance for her side of the business.

Group revenues for the six months to 30th June were $46.9m, down from $56.4m in the same period of 2019, the company reported. Quarto said the revenue fall was spread evenly across children's and adult publishing, declining 17% in each, partly due to custom and co-edition deals being pushed back to later in the year. For the UK market alone, revenues fell 16% to $6.4m from $7.6m in 2019, while in the US they declined a steeper 22% to $28.7m from $36.7m.

The firm's adjusted operating loss was doubled from $0.9m to $1.8m, despite government support schemes and cost management “cushioning” the Covid-19 blow, but lower interest costs led to a marginal reduction in pre-tax losses.

Despite the apparently gloomy headline numbers, UK-based Frances Lincoln Children's Books had “thrived”, the publisher said, with This Book is Anti-Racist becoming a number one New York Times Bestseller and a USA Today bestseller. The Little People, Big Dreams series also continued its success.

Polly Powell, who joined a year ago and is c.e.o. of UK operations, said Frances Lincoln was up 20% year on year and tracking 30% up for July. With much of the business-to-business side moved further back into a historically stronger half of the year, she expected results for the company to look very different by the end of 2020.

Powell, who says the UK business is in “turnaround” as it becomes more trade focused, said: “Our UK trade business had the best May they've ever had, the best June they've ever had and July is fast becoming the best we've ever had in our history."

She admitted some staff had left and not been replaced and there had been redundancies at the reference-focused Ivy Press, although she was unable to give an exact figure.

Across the Quarto business as a whole, custom and English language co-editions businesses saw a drop in sales but the foreign language business remained “resilient”, with sales up 9% year on year.

Addressing the outlook for the rest of 2020, the company report said: “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.”

Quarto said its net debt had reduced in the last 12 months by $28.4m (44%) to $36.6m following its completion of an open share offer in January that raised raised $17m.

C.e.o. 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 six 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."