Investment summary

Quarto’s preliminary figures were in line with forecasts – better at the earnings level due to a slightly lower tax charge. Underlying trading is steady in markets that have been dull at best, which in itself is a good performance. The balance sheet has been successfully refinanced. The additional interest cost and the recruitment of new COO Marcus Leaver (from Barnes & Noble subsidiary Sterling Publishing) will affect FY12 earnings, but we expect FY13 to progress. The rating remains at a substantial discount to the market.

Last updated on 23/04/2012

Industry outlook

Book retailing in the major English language markets has been undergoing a seismic shift, with major retail chains undergoing substantive change. Growth in eBooks in fiction is substantial, but the trend is notably slower for other categories. The business model for eBook distribution has again been called into question by the Department of Justice's lawsuit against Apple and several publishing houses. In traditional channels, publishers have (for the greater part) avoided highly damaging bad debts.

Last updated on 23/04/2012