BULL POINTS:
■ Millennium Trilogy underpinning growth
■ Growing international business
■ Opportunity in digital publishing
■ Growing dividends
BEAR POINTS:
■ Still relies on Millennium Trilogy
■ Shares difficult to deal
At one point, almost every Londoner seemed to be clutching a copy of The Girl With The Dragon Tattoo, the first of a trilogy of crime fiction novels written by a former journalist, Stieg Larsson, that would grip the world. The books - known as the Millennium Trilogy - have sold more than 27m copies worldwide and have made Quercus Publishing, which holds the UK rights to the trilogy, the fastest-growing publisher in the UK for the past two years.
| IC TIP RATING | |
|---|---|
| Tip style | Growth |
| Risk rating | Medium |
| Timescale | Long term |
| What do these mean? Find out in our | |
This also meant Quercus had an exceptionally good 2010. As a result, it is paying a special dividend of 7p in addition to its maiden dividend of 5p. Both payments went ex-dividend on 15 April, but the underlying payment should be set to grow.
Although the Larsson trilogy is unlikely to provide Quercus with the franchise opportunities that JK Rowling's Harry Potter series provided for Bloomsbury, the books are being made into movies, so there is potential to drive further revenue growth from the trilogy. Chief executive and founder Mark Smith is looking to relaunch the series alongside the launch of the blockbuster version of The Girl With The Dragon Tattoo, which is set for release at the end of this year.
| ORD PRICE: | 155p | MARKET VALUE: | £27.2m | |
| TOUCH: | 145-155p | 12-MONTH HIGH: | 158p | LOW: 45p |
| DIVIDEND YIELD: | 3.5% | PE RATIO: | 6 | |
| NET ASSET VALUE: | 56p | NET CASH: | £5.5m | |
| Year to 31 Dec | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2007 | 8.6 | 0.15 | 1.0 | nil |
| 2008 | 10.9 | -0.28 | -2.0 | nil |
| 2009 | 19.1 | 0.87 | 3.5 | nil |
| 2010 | 31.8 | 7.48 | 30.8 | 12.0† |
| 2011* | 33.5 | 7.80 | 28.0 | 5.5 |
| % change | +5 | +4 | -9 | – |
Shares traded on PLUS-quoted market Beta: 0.5 *Edison Investment Research forecasts †Includes 7p special dividend (ex-div: 15 Apr) | ||||
There will be no further output from Mr Larsson - he died in 2004, before his three books were even published - so Quercus's big aim now is to broaden its non-Larsson revenues. To do this, Mr Smith is beefing up his publishing team and claims to have attracted some top talent. Earlier this year Gollancz associate publisher Jo Fletcher joined to set up a new fiction and non-fiction list. Ms Fletcher has worked with the likes of Sir Terry Pratchett and Charlaine Harris. Former Harper Collins publisher Susan Watts, who commissioned Jeremy Paxman, Boris Johnson and Conn and Hal Iggulden's Dangerous Book For Boys, has also joined Quercus and launched an imprint, Heron Books.
Non-Larsson book sales will also be buoyed by an expanding international footprint. A joint venture with US-based Sterling Publishing, a subsidiary of Barnes & Noble, has already started to bear fruit. Its debut title, Three Seconds, which is part of a best-selling Swedish crime novel series by Anders Roslund and Börge Hellström, hit the New York Times best-seller list. A distribution arrangement has also been signed with Pan Macmillan in Australia.
Moreover, while some publishers see electronic books as something between a threat and a chore, being a young publishing house means Quercus has the advantage of being able to assemble all the necessary rights at the outset. So, while e-book sales were just 3 per cent of revenues in 2010, they may account for 10 per cent of sales this year.
