LONDON (Alliance News) - Quarto Group Inc saw its shares fall Tuesday after it reported a fall in revenue and left its dividend unchanged for the first-half of its financial year, despite an uptick in profit on the back of lower finance costs and a profit gain on the sale of a property.
The book publisher and distributor posted a pretax profit of USD1.1 million for the six months to June 30, compared with USD715,000 in the first-half of 2013, which it said was partially down to lower finance costs and a GBP633,000 profit gain after it sold a Swiss property for USD1.9 million.
Revenue fell by 3% to USD65.6 million, from USD72.2 million a year earlier, hit by weakness predominately in the UK and the US, although other parts of its business also faced weaker trading, it said.
The group left its interim dividend unchanged at 3.35 pence per share.
"We are maintaining the interim dividend and will continue our focus on earnings growth and continuing to pay down debt," said Chairman Tim Chadwick in a statement.
Quarto said trading will be weighted towards the second-half of this year more than usual, and said despite setbacks in the first part of the year, it expects to deliver full-year earnings growth.
"On the basis of current levels of underlying trading, the group is on track to meet management expectations for the year and deliver both debt reduction and earnings growth," it said.
Quarto said first-half revenue declined due to a combination of factors. It said revenue in its core publishing businesses were down as a result of its US wholesaler HDA ceasing operations, backlist destocking and weak uptake of new titles by major book retailers.
"Despite a tough first half we expect the new product and the marketing & sales initiatives that we invested, in 2013, to deliver a strong second half in our publishing businesses. There are positive signs of the turnaround we targeted in the Books & Gifts Direct business in Australia and New Zealand," said Chief Executive Officer Marcus Leaver.
Analysts at Peel Hunt believe trading should be stronger in the second-half, but have downgraded its pretax profit forecast for the year to reflect the company's US distributor issue and restructuring costs in New Zealand post acquisition.
"Were it not for the HDA issue we would leave our forecast unchanged. However we do reduce this year?s [pretax profit] expectation by 6% or USD0.8m moving to a USD12.4 million pretax profit... Given the one off nature of the issue driving this downgrade we leave the 2015 forecasts unchanged," the analysts said.
Quarto shares were trading 6.4% lower Tuesday afternoon, at 141.80 pence.
By Rowena Harris-Doughty; rowenaharrisdoughty@alliancenews.com; @rharrisdoughty
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