Quercus Publishing plc

April 05, 2011 02:00 ET

Final results for the year ended 31 December 2010

                                                                                                   5 April 2011
                                            Quercus Publishing Plc
                                         ("Quercus" or the "Company")
                               Final results for the year ended 31 December 2010

                                 Quercus reports record-breaking 2010 results

Quercus  Publishing Plc, the PLUS-quoted publishing company (symbol: QUPP on PLUS), today announces its audited
results for the year ended 31 December 2010.

Financial Highlights

The highlights for the twelve months ended 31 December 2010 include:

    *       Revenue of £31.8m (2009 £19.1m)
    *       Gross profit margin of 50.1% (2009 36.1%)
    *       Pre-tax profit of £7.5m (2009 £0.9m)
    *       Basic earnings per share 30.81p (2009 3.50p). Diluted earnings per share 26.74p (2009 3.50p)
    *       Net  cash  of  £5.5m (2009 overdraft of £1.2m). Strong cash inflow from operating activities  of  
            £7.1m (2009 £0.4m)
    *       Maiden ordinary dividend of 5.0p per share proposed
    *       Special dividend of 7.0p per share also proposed
    *       Dividends payable on 13 May 2011 to shareholders on the register on 15 April 2011
Operating Highlights

    *       Fastest  growing  trade publisher in the UK with sales (as measured by Nielsen Bookscan)  rising   
            103% over 2009
    *       Year on year revenue growth excluding Stieg Larsson of 55% (Nielsen TCM Top 5000)
    *       11th largest publisher in the UK (2009: 18th)
    *       Launch  of  US joint venture, Silver Oak, with Sterling Publishing (a subsidiary of Barnes and  
            Noble). Launch title Three Seconds debuts on New York Times Bestseller List
    *       New distribution arrangement in Australia with Pan Macmillan
    *       Launch of latest imprint, Jo Fletcher Books, specialising in the horror and science fiction genres
    *       E-Book sales increase sixteen fold in 2010 and represented 3% of revenues
Commenting on the results and prospects for Quercus, David Potter, Chairman, said:

"2010  was  an  excellent year for Quercus, with Stieg Larsson's Millennium Trilogy delivering on  its  earlier
promise and the publishing programme across fiction, non-fiction and children's books making great strides both
commercially and critically.

The  building blocks for growth that we put in place during the year are already bearing fruit. In  particular,
the  Silver Oak joint venture and the new distribution arrangement with Pan Macmillan (in Australia) have  both
exceeded our expectations. Jo Fletcher has already acquired significant new and established writers for her new
imprint and we look forward to launching the first titles in the second half of the year.

Our  digital publishing and marketing initiatives are delivering meaningful results and digital revenues  could
realistically reach 10% of our total revenues over the course of the current year.

There  are  further  growth  initiatives being implemented in 2011 that centre on IP  development  and  digital
deployment that will enhance our offering to consumers and should add significantly to the growth of the group.

The directors are proposing to pay a maiden dividend totalling 12.0p per share in respect of the year ended  31
December 2010. Subject to shareholders' approval, an ordinary dividend of 5.0p per share and  in recognition of
the exceptional performance of The Millennium Trilogy, a special dividend of 7.0p per share will be payable  on
13 May 2011 to shareholders on the register at the close of business on 15 April 2011.

It  is  the directors' intention that, having commenced dividend payments, the Company will adopt a progressive
dividend policy."

Enquiries to:

Quercus Publishing Plc
Mark Smith, Chief Executive                                               Tel: 020 7291 7200

St Helens Capital Partners LLP
Mark Anwyl/Duncan Vasey                                                   Tel: 020 7368 6959
Media Enquiries:
Attila Consultants                                                        Tel: 020 7776 8825
Charles Cook                                                            Mobile: 07710 910563

Chief Executive's Statement

Financial Review

The directors are pleased to report that 2010 was an outstanding year for Quercus.

Group  revenues  increased by 66% to £31.78m (2009: £19.13m), consolidated operating profit  grew  six-fold  to
£7.64m  (2009:  £1.19m)  and  net  cash inflow from operating activities increased  to  £7.13m  (2009:  £0.42m)
resulting  in  net cash of £5.47m at year end (2009: overdraft of £1.16m).While continuing to assess  prudently
the value of all assets on the balance sheet and ensuring that both author advances and origination investments
are appropriately valued, gross margins increased to 50.1%; a significant improvement on the 36.1% gross margin
achieved in 2009.

Selling  and distribution costs increased in percentage terms to 12.6% of revenue (2009: 10.7%) as the  Company
invested both to support the ongoing sales of the Stieg Larsson franchise and to further develop the sales of a
wide  range  of fiction, non-fiction and children's authors on the Quercus list. This marketing investment  and
sales focus resulted in year on year growth of our non-Larsson revenues of 55.6% as measured by Nielsen TCM Top
5000.  Administration  expenses  at  13.4%  of revenues remain well below  the  industry  average  and  compare
positively with the 19.2% of revenues in 2009.

The  operating margin increased to 24.0% of revenues (2009: 6.2%) and interest expenses halved year on year  to
£0.16m (2009: £0.33m).

Net  profit after tax for the year increased 780% to £5.41m (2009: £0.62m) and the net profit after tax  margin
was 17.0% (2009: 3.2%).

Business Review

2010 saw significant developments across all areas in which Quercus operates.

For  the  second year running, Quercus was the fastest growing trade publisher in the UK with sales as measured
by Nielsen Bookscan rising 103% over 2009. Quercus is now the 11th largest publisher in the UK (2009: 18th)

Digital  revenues  increased 1,650% year on year and represented 3.0% of Group revenues by  year  end.  Digital
sales  built  steadily through the course of the year as new reading devices became more  affordable  and  more
widely  available;  the last quarter of 2010 saw a step change in the rate of sale, which  has  continued  into

Quercus  increased investment in our own corporate website, as well as the websites of our authors, to  improve
our  ability to reach the reading community via digital media and social networks. The popularity of our  sites
has improved dramatically and significant additional resource will be added in 2011 to further build our online

Geographical expansion was a focus during the year and in September the Company announced that it was  entering
the  North American fiction market with a new imprint, Silver Oak, a joint venture between Quercus and Sterling
Publishing - a subsidiary of Barnes & Noble, the world's largest bookseller. The first title in the Silver  Oak
programme, Three Seconds by writing duo Roslund & Hellström, was published in January 2011 and spent four weeks
on the New York Times Bestseller List reaching the number 8 position in its second week on sale.

Australia  and  New Zealand (ANZ) have become increasingly important markets for Quercus and a  new  sales  and
distribution arrangement was negotiated during the year with Pan Macmillan, who commenced the representation of
our list on 1 January 2011. The benefits in terms of wider distribution throughout ANZ across the entire author
base have immediately begun to be realised.

Business Review And Future Developments

The key performance indicators for 2010 were:

                                                  2010                    2009
Turnover                                         £31,783,809              £19,132,835
Consolidated operating profit                     £7,635,828               £1,193,324
Consolidated profit before tax                    £7,484,507               £866,598
Operating earnings per share                      43.48 pence              6.80 pence
Basic earnings per share                          30.81 pence              3.50 pence
New titles                                          128                     117

Operating  earnings  per  share is calculated by dividing the consolidated operating profit  £7,635,828  (2009:
£1,193,324) by the weighted average number of shares for the period of 17,561,538 (2009: 17,561,538).


In  2010  Quercus  built on its industry-leading position in translated fiction as the Millennium  Trilogy,  in
which  Quercus holds all English language publishing rights, became the three biggest selling editions in  both
paperback  and e-book in the UK. This success was repeated throughout many overseas territories, including  the
USA, Australia, New Zealand and South Africa. The further success of John Ajvide Lindqvist's Let The Right  One
In, filmed by Hollywood as Let Me In, coupled with the launch of Three Seconds by Swedish writing duo Roslund &
Hellström  and  Maclehose  Press winning the Foreign Fiction prize for the second year  running  with  Philippe
Claudel's Brodeck's Report, has established Quercus firmly as a destination publisher for translated authors.

2010  also  saw  the further development of the Crime and Thriller list with the acquisition  of  international
bestselling thriller writers Richard North Patterson, Brian Freeman and Stephen Coonts. Throughout the year the
Company  focused on developing the careers of exciting debut authors and new talents, in addition to furthering
the growth of established authors Philip Kerr, Elly Griffiths, Craig Russell and Michelle Moran. In particular,
Tom Rachman's The Imperfectionists performed very well as a debut novel and Field Grey and If the Dead Rise Not
have grown the already substantial following for Philip Kerr's Bernie Gunther series.

The  Children's  list further developed our position in 9+ fiction, with Gregory Hughes's  Unhooking  The  Moon
winning the Booktrust teenage prize and Lili St Crow's Strange Angels series leading the list to growth of  25%
in sales over 2009.


The  Non-Fiction list strengthened its position in both hardcover and paperback. Highlights in the  front  list
were  Andrew  Grieg's  At  The Loch of The Green Corrie, which was shortlisted for the  Saltire  Award,  Duncan
Hamilton's  A  Last  English Summer, which was shortlisted for The William Hill Sports Book  of  the  Year  and
Richard  Overy's  The Third Reich. In the paperback list Brian Moynahan's Jungle Soldier and  Patrick  Bishop's
Battle  of  Britain brought the list a wider commercial appeal and the year ended with the launch of the  trade
paperback edition of The King's Speech now a Sunday Times No. 1 bestseller.


Despite  the  difficulties in many markets, the Contract division has had a robust year, improving margins  and
reducing risk by continuing to sell its firm-sale titles to an ever-widening spread of international customers.
Its  backlist  now numbers some 180 titles, for all of which Quercus holds world rights, including  bestsellers
such  as  The  Digital  Photography Handbook, the 50 Ideas series, Hubble, Dinosaurs  and  the  million-selling
Speeches that Changed the World.


This  is  a  very interesting time in the publishing industry, with new and powerful forces at play challenging
the  traditional way of doing things. For a dynamic and entrepreneurial company such as Quercus, we  see  these
winds of change as a significant opportunity to establish our company as a major player for the future.

The  strength of our balance sheet will allow investments across a wide portfolio of intellectual property  and
enable  Quercus to take advantage of the stresses and strains of more traditional companies, who may  not  have
the ability to move as quickly as the new rules dictate.

Although  we  are acutely conscious of the tough economic climate in the UK and developed world and  are  being
cautious  about  deploying  our  resources, 2011 has got off to a strong start and  has  exceeded  management's
expectations.  The surge of digital sales that began in the last quarter of 2010 has continued and  we  believe
that 2011 will mark a step change in consumer behaviour.

The  deliberate decision in 2009 to alter the course of our Non-fiction publishing programme away from academic
subjects  to  the more commercial is paying off with our 2011 titles, notably The King's Speech  and  Dead  Men
Risen,  beginning  to appear on bestseller charts. With new imprints coming on-stream and a  strong  new  title
offering, we look forward to the remainder of our financial year with confidence.

Mark Smith
Chief Executive
5 April 2011

The Directors of Quercus accept responsibility for this announcement.

                                     CONSOLIDATED PROFIT AND LOSS ACCOUNT
                                      FOR THE YEAR ENDED 31 DECEMBER 2010

                                                        Notes                   2010                2009
                                                                                   £                   £
TURNOVER                                                  1               31,783,809          19,132,835
Cost of sales                                                           (15,869,800)        (12,225,000)
GROSS PROFIT                                                              15,914,009           6,907,835
Selling and distribution                                                 (4,004,403)         (2,045,375)
Administration expenses                                                  (4,273,778)         (3,669,136)
OPERATING PROFIT                                          2                7,635,828           1,193,324
Interest receivable and similar income                                         9,074               3,669
Interest payable and similar charges                                       (160,395)           (330,395)
PROFIT ON ORDINARY ACTIVITIES                                              7,484,507             866,598
BEFORE TAXATION                                                                                         
Taxation                                                                 (2,074,058)           (251,496)
PROFIT ON ORDINARY ACTIVITIES                                                                           
AFTER TAXATION AND RETAINED PROFIT FOR THE YEAR                            5,410,449             615,102
EARNINGS PER SHARE                                                                                      
Basic earnings per share                                  3             30.81 pence         3.50 pence
Diluted earnings per share                                3             26.74 pence         3.50 pence
DIVIDENDS PER SHARE                                                                                     
Ordinary dividend                                                         5.0 pence                nil
Special dividend                                                          7.0 pence                nil

All amounts relate to continuing operations.
                                          CONSOLIDATED BALANCE SHEET
                                            AS AT 31 DECEMBER 2010

                                                        Notes                       2010                2009
                                                                                       £                   £
FIXED ASSETS                                                                                                
Tangible assets                                                                  156,076             149,589
CURRENT ASSETS                                                                                              
Stocks                                                                         2,725,839           2,859,295
Debtors                                                                       11,700,342           9,231,631
Cash at bank and in hand                                                       5,468,220               5,406
                                                                              19,894,401          12,096,332
CREDITORS: amounts falling due                                                                              
within one year                                                             (10,125,732)         (7,742,437)
NET CURRENT ASSETS                                                             9,768,669           4,353,895
TOTAL ASSETS LESS CURRENT LIABILITIES                                          9,924,745           4,503,484
PROVISIONS FOR LIABILITIES                                                                                  
Deferred taxation                                                                      -            (13,920)
NET ASSETS                                                                     9,924,745           4,489,564
CAPITAL AND RESERVES                                                                                        
Called up share capital                                                          140,493             140,493
Equity shares to be issued                                                        20,500              20,500
Share premium account                                                          3,477,851           3,477,851
Profit and loss account                                                        6,285,901             850,720
SHAREHOLDERS' FUNDS - All Equity                                               9,924,745           4,489,564
                                       CONSOLIDATED CASH FLOW STATEMENT
                                      FOR THE YEAR ENDED 31 DECEMBER 2010

CASHFLOW STATEMENT                                         Notes                   2010               2009
                                                                                      £                  £
Net cash inflow from operating activities                                     7,130,129            417,837
Returns on investments and servicing of finance                               (151,321)          (326,726)
Capital expenditure and financial investment                                   (98,807)           (76,329)
Taxation                                                                      (255,509)            (1,082)
CASH INFLOW BEFORE FINANCING                                                  6,624,492             13,700
Financing                                                                             -                  -
INCREASE IN CASH IN THE PERIOD                                                6,624,492             13,700
RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET                                 2010               2009
FUNDS/(DEBT)                                                                          £                  £
Increase in cash in the period                                                6,624,492             13,700
Cash inflow from increase in debt                                                     -                  -
MOVEMENT IN NET FUNDS/(DEBT) RESULTING FROM CASH FLOWS                        6,624,492             13,700
Loan notes converted into shares                                                      -                  -
Net debt brought forward                                                    (2,278,487)        (2,292,187)
NET FUNDS/(DEBT) AT 31 DECEMBER 2010                                          4,346,005        (2,278,487)

      A geographical analysis of turnover is given below:
                                                                                   2010                2009
                                                                                      £                   £
        United Kingdom                                                       22,735,387          12,177,673
        USA                                                                   4,060,487           2,950,511
        Canada                                                                  678,868             283,733
        Other                                                                 4,309,067           3,720,918
                                                                             31,783,809          19,132,835

                                                                                    2010               2009
        This is stated after charging:                                                 £                  £
        Depreciation of tangible fixed assets:                                                             
        - owned by the Company                                                    92,320             84,900
        Amortisation of loan note issue costs                                          -             42,764
        Foreign exchange (gain)/loss                                           (380,699)              8,428
        Operating leases - hire of plant and equipment                            54,333             26,870
        Operating leases - land and buildings                                     76,562             77,755

      Earnings per share is calculated on the basis of a profit of £5,410,449 (2009: £615,102) divided  by  the
      weighted  average number of shares in issue for the period of 17,561,538 (2009: 17,561,538). The  diluted
      earnings  per  share is calculated on the assumption that eight (2009: one) tranches of the  options  are
      exercised this year, all other share options are excluded as they are anti-dilutive.
      At  31 December 2010 the effect of converting the loan notes into 2,555,556 shares would save the Company
      £54,993  in  interest costs, net of taxation. In prior years the conversion of the loan notes  was  anti-
      dilutive and was therefore excluded from the calculation of diluted earnings per share.
      These assumptions give rise to a total weighted average number of ordinary shares in issue at the end  of
      the period of 20,436,417 (2009: 17,585,631).

                                                                  Year ended                      Year ended
                                                            31 December 2010                31 December 2009
                                                                           £                               £
        Basic earnings per share                                                                            
        Profit for the year                                        5,410,449                         615,102
                                                          Earnings per share              Earnings per share
        Profit per share                                         30.81 pence                      3.50 pence
                                                                           £                               £
        Diluted earnings per share                                                                          
        Profit for the year                                        5,410,449                         615,102
        Adjusted for after tax saving on conversion                                                         
        of dilutive loan notes                                        54,993                               -
        Profit for the year for diluted calculation                5,465,442                         615,102
                                                            Number of shares                Number of shares
        Weighted average number of shares:                                                                  
        For basic earnings per share                          17,561,538                          17,561,538
        Dilutive effect of share options                             319,323                          24,093
        Dilutive effect of loan note conversion                    2,555,556                               -
        Diluted weighted average number of shares                 20,436,417                      17,585,631
                                                          Earnings per share              Earnings per share
        Diluted profit per share                                 26.74 pence                      3.50 pence

The above information has been extracted from the audited financial statements of the Company.

Contact Information

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