The bankruptcy of HDA, one of Quarto Group's (QRT) major wholesalers, last year highlighted the ongoing existential threat facing the book publishing industry. This caused major disruption to trading in the US, which together with a longer than expected merger of Quarto's New Zealand businesses made for a "challenging year", according to chief executive Marcus Leaver.
Earnings growth was flattered by a big loss on the sale of assets in the prior year. But even stripping out one-off items, adjusted operating profits rose 10 per cent to $15.4m, buoyed by decent top-line performances from the international co-editions and UK publishing divisions and lower admin costs.
A 29 per cent fall in interest payments helped boost pre-tax profit and provides another sign that Quarto is tackling its debts. Though gearing stayed at the level it was a year ago, the company has made progress reducing net debt in absolute terms to $66m, down from $71m. While this still represents a weighty 3.4 times forecast cash profits, a post-period re-financing with four of Quarto's existing banks on improved terms should boost cash generation further.
Broker Peel Hunt forecasts adjusted EPS growth of 20 per cent this year to 55.1¢, based on pre-tax profits of $14.8m.
| QUARTO GROUP (QRT) | ||||
|---|---|---|---|---|
| ORD PRICE: | 170p | MARKET VALUE: | £33m | |
| TOUCH: | 167-173p | 12-MONTH HIGH: | 175p | LOW: 139p |
| DIVIDEND YIELD: | 4.9% | PE RATIO: | 6 | |
| NET ASSET VALUE: | 237¢* | NET DEBT: | 128% | |
| Year to 31 Dec | Turnover ($m) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share (p) |
|---|---|---|---|---|
| 2010 | 176 | 7.8 | 29.2 | 7.5 |
| 2011 | 186 | 9.4 | 38.9 | 7.9 |
| 2012 | 181 | 7.1 | 25.9 | 7.9 |
| 2013 | 176 | 5.8 | 18.6** | 7.9 |
| 2014 | 173 | 12.2 | 45.2 | 8.3 |
| % change | -2 | +112 | +143 | +5 |
Ex-div: 14 Apr Payment: 15 Jun *Includes intangibles of $42m, or 213¢ a share **Restated £1 = $1.469 | ||||
