In reporting its financial results for 2016, the Quarto Group emphasized the strength of its publishing operations as the company continued to shed its non-publishing businesses.
Earlier this year, Quarto announced the sale of its Australian-based Books & Gifts Direct business and its Regent Publishing Services unit based in Hong Kong. While Regent added $1.6 million to Quarto’s earnings last year, BGD lost $9.8 million. In connection with the sale of BGD, Quarto took a $14.2 million impairment charge in 2016 which was the major factor in the company reporting a loss of $5.3 million in 2016 compared to earnings of $8.5 million in 2015. Sales were up 3% over 2015, to $188.4 million.
In releasing its results, Quarto CEO Marcus Leaver stressed that the sale of Regent and BDG will allow Quarto to focus on its publishing business. In 2016, publishing revenue rose 6% over 2015, to $154.6 million, and adjusted operating profit increased 17% to $21.7 million. Over the last five years publishing revenue increased 26% and operating profit 70%, Leaver added. “The headline is we are now focused on publishing books and it is something we do really really well,” Leaver said. "I am very happy to just be a publishing company
Quarto’s largest unit is Quarto Publishing Group USA, which had a 12% revenue increase to $81.2 million in 2016. The company benefited from its 2016 purchases of becker & mayer and Harvard Common Press, which added $11.4 million and $1.3 million to revenues, respectively, last year.
The company said it was pleased with results in the U.S., given the slowing sales of adult coloring books in the year, compared to 2015. In addition to the acquisitions, sales in the U.S. were helped by gains in Quarto's children’s business and the expansion of its retail channel. Quarto also added about 1,800 new accounts across a variety of its niche markets last year.
In the U.K., sales fell 6%, to $21.5 million, due to the negative impact of currency exchange. Additionally, the company acknowledged that the U.K. market was somewhat softer in 2016 than in 2015, due in part to uncertainty caused by Brexit.
The Quarto International Co-Editions Group posted a 4% increase in sales last year, to $51.9 million, which it attributed to good results in its children’s imprints. The “outstanding performance” by Ivy Press, which was acquired in 2015, was highlighted.
Leaver noted that sales in both the U.S. and U.K. slowed towards the end of 2016. He added that, given continued uncertainty in both the U.S. and U.K., he is planning cautiously for the early part of 2017. Without making any acquisitions, he said he is targeting a 2%-3% increase in operating profit over last year. Nonetheless, Leaver noted, another acquisition is possible in 2017 “if the right property comes along.”