Quercus Publishing plc

May 29, 2012 02:00 ET

Results for the year ended 31 December 2011

                                                                                                29 May 2012

                                          Quercus Publishing Plc
                                Results for the year ended 31 December 2011

Key Quotes

Quercus  Publishing Plc ("Quercus" or the "Company") the PLUS Quoted publishing company  (symbol:  QUPP  on
PLUS), today announces its audited results for the year ended 31 December 2011.

Commenting on the results David Potter, Chairman of Quercus said:
"In  2011 we benefited from our efforts to broaden the revenue stream and invest the Larsson legacy wisely.
We  have developed our digital strategy and recruited new talent. By increasing the size and scope  of  our
business  I  believe  we are well positioned for the future, and this confidence is underlined  by  our  5%
dividend increase."

Mark Smith, Chief Executive of Quercus added:
"We  made  further  good  progress  in  2011 towards Quercus becoming a  well-diversified,  multi-platform,
entrepreneurial publishing business. We continue to invest more each year in securing books and authors  to
enhance  the  intellectual property portfolio of the business and to generate increasing  revenues  in  the
short, medium and long term."


2011 Financial Highlights

The highlights for the twelve months ended 31 December 2011 include:

*     The Group's revenue was GBP24.8m (2010: GBP31.8m)
*     Operating profit (PBIT) of GBP5.9m (2010: GBP7.6m)
*     Operating profit margin of 23.8% (2010: 24.0%)
*     The  Group's  profit  for  the year after taxation was GBP4.4m (2010:  GBP5.4m).  This  gives  basic
      earnings per share of 22.31 pence (2010: 30.81 pence)
*     The  Group  ended the year with net assets of GBP13.2m (2010: GBP9.9m) and cash balances of  GBP4.3m
      (2010: GBP5.5m)
*     The  directors recommend payment of an ordinary dividend of 5.25p per share in respect of  the  year
      ended 31 December 2011 (2010: 5.0p ordinary, 7.0p special).


2011 Operating Highlights

*     Quercus named Publisher of the Year 2011 (Bookseller publishing industry awards)

*     Improved quality of earnings: trade sales from non-Millennium trilogy publications 74% ahead

*     179 new titles (2010: 128 new titles): intellectual property enriched with new authors

*     Strong growth in digital: e-book revenues up 158% on 2010 (now 11 % of 2011 revenue)

*     The Children's list grew 49% in 2011: position in 9+ age group fiction strengthened

*     Investment in infrastructure: new HQ premises and upgraded IT systems

*     Key author awards in the year were Christie Watson (Costa first novel award), Jaimy Gordon
     (National Book Award).

Key performance indicators for 2011:

                                                                 2011              2010
                                                                 GBP'000s          GBP'000s
*   Turnover                                                     24,759            31,784
*   Consolidated operating profit                                5,898             7,635
*   Consolidated profit before tax                               5,876             7,484
*   Operating earnings per share                                 30.1 pence        43.48 pence
*   Basic earnings per share                                     22.31 pence       30.81 pence
   New titles                                                    179               128

Operating  earnings per share is calculated by dividing the consolidated operating profit GBP5,898k  (2010:
GBP7,635k) by the weighted average number of shares for the period of 19,588,814 (2010: 17,561,538).



2011  has been a year of transition for Quercus, from which we expect to see the results over the next  two
years.  We  have  improved the quality of the company's earnings, continuing to benefit  from  the  Larsson
franchise yet growing our other revenues by 74% over the previous year.

A  second  key challenge is to exploit the opportunity in digital publishing. To this end, I am pleased  to
say that our e-book revenues increased by an outstanding 158% in 2011. No one can predict the percentage of
books that will be read on e-Readers in five years' time, however it seems likely that further considerable
growth  will  occur. Whatever the result, we intend to continue supporting our readers  in  the  publishing
formats they demand.

In  any consumer facing business, external recognition is always welcome. I therefore congratulate everyone
at  Quercus on the Company being voted Publisher of the Year in 2011 at the Bookseller publishing  industry

Last  year  the Quercus Executive Board was strengthened further, following an internal reorganisation  and
the appointment of a Finance Director.

Finally,  in  2010  we  paid our maiden dividend to shareholders. I am delighted to say  that  due  to  the
continued  progress of the Company, the Board is proposing a 5% increase in the 2011 ordinary  dividend  to
5.25p per share.

29 May 2012


Financial Review
2011  was  a  transformational  year  for Quercus as we diversified  our  earnings  base  and  invested  in
infrastructure,  people  and intellectual property to drive the future performance  of  the  business.  The
Directors are therefore pleased to report a strong and robust performance, although not as striking as  the
2010 result, when sales of the Stieg Larsson franchise reached their peak.
Group revenues declined by 22% to GBP24,759k (2010: GBP31,784k). However consolidated operating profit held
up  well at GBP5,898k (2010: GBP7,635k).  Net decrease in cash from operations as per the Consolidated Cash
Flow  Statement  was  (GBP1,177k), (2010: increase of GBP6,624k), with cash and  cash  equivalents  in  the
Consolidated Balance Sheet decreasing to GBP4,291k (2010: GBP5,468k). The cash generated from 2011  trading
was utilised in investment in author advances for future books, payment of corporation tax (which moved  in
2011 to an instalment basis) and the payment of the normal dividend and the special dividend.
Whilst  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 and adequate provisions  made,  gross
margins improved to 61.40% (2010: 50.06%) which resulted from increased contributions from rights sales and
digital sales in the year.
Selling  and  distribution costs increased in percentage terms to 15.2% of revenue  (2010:  12.6%)  as  the
Company  invested  to  further develop the sales of a wider range of fiction,  non-fiction  and  children's
authors  on  the Quercus roster. This resulted in year on year growth of our non-Larsson trade  revenue  of
74%. Administration expenses of 22.4% of revenue (2010: 13.4%) increased as the business grew staff numbers
to take the business forward and also moved offices during the year.
The  operating  margin of 23.82% compares favourably with the prior year (2010: 24.02%)  in  light  of  the
substantial changes in the mix of our revenues, away from dependency on a small franchise of titles, and to
a  broader  trading platform. Interest expenses decreased considerably as the Loan Notes were converted  to
equity in the first half of the year.
Net  profit after tax was GBP4,370k (2010: GBP5,410k) and the net profit after tax margin was 17.7%  (2010:
The  Directors  are  proposing an ordinary dividend of 5.25p per share, which equates to GBP1,077k.  (2010:
5.0p  per share which equated to GBP1,026k). The dividend is expected to be paid on 20th July 2012  to  the
shareholders on the register of members at the close of business on 8th June 2012. No special  dividend  is
proposed for 2011. (2010: 7p per share: GBP1,436k).

Business Review

Trading highlights

In  2011  Quercus  maintained the leading position in translated fiction with all three of  the  Millennium
Trilogy  titles  featuring in the top 15 fiction paperback chart of the year.  This continued  success  was
mirrored  in  many of our overseas markets: the U.S., Canada, Australia, New Zealand and South Africa.  The
trilogy  was  also  successful around the globe in e-book editions. Building on this  success  the  Swedish
writing  duo  Roslund and Hellstrom's Three Seconds launched in the U.S. market, through the joint  venture
imprint  Silver Oak, to achieve a place in the New York Times bestseller chart. Three Seconds also went  on
to  win  the  CWA  International Dagger award during the year. Many titles in  the  translation  list  were
nominated  for awards, a highlight being The Dinosaur Feather by Sissel-Jo Gazan being voted  Danish  Crime
novel  of  the  decade. A significant debut for the 2013 list was acquired with You  Are  Evil  by  Roberto

2011  saw a significant development in the Crime and Thriller list with successful upward momentum  of  the
careers of Peter May, Elly Griffiths, Craig Russell and Elena Forbes. Additionally the Company continued to
find  growth  in a number of established names, including Philip Kerr, Richard North Patterson and  Stephen
Coonts.   An  exciting array of debut talent joined Quercus during the year, in particular Alex Connor  and
Anna Smith.
The  wider  fiction  list saw strong investment during 2011 with the hiring of a new publisher,  and  major
investments  were made in acquiring the bestselling authors Dorothy Koomson, Eleanor Moran, Kathryn  Flett,
Christie  Watson  (Winner of the Costa first novel Award) and Jaimy Gordon (winner  of  the  National  Book

Jo  Fletcher  Books  published their first titles in autumn 2011 taking Quercus into the lucrative  Science
fiction, fantasy and horror arena. One of the first titles acquired, Alison Littlewood's A Cold Season, was
a  Richard  and Judy Book Club selection. Most of the authors acquired for the list are on a  world  rights

The Children's list achieved sales growth of 49% in 2011 strengthening further our position in 9+ age group
fiction. Major highlights were David Logan's Lost Christmas which also screened as a BBC film for Christmas
2011. The teenage list continued to excite readers and gain new fans with Jennifer Lynn Barnes's Raised  By
Wolves and Cat Clarke's Entangled.

The  Non-Fiction  list  was  further strengthened in both hardcover and paperback.  Sunday  Times  top  ten
bestsellers  were  achieved with The King's Speech, Dead Men Risen and An Epic  Swindle  as  the  list  was
broadened into popular culture, sport and cookery.  Quercus Non-Fiction is now firmly established as a list
with wide commercial appeal and is attracting more well-known authors with established brands.

Despite the economic difficulties in some markets, we continue to reduce risk by selling illustrated titles
firm-sale to an ever widening spread of international customers. In addition to building relationships with
existing customers in traditional markets, there has been increased focus on new and emerging markets and a
marked  uplift  in sales in territories such as Russia, China and Brazil. Quercus owns world  rights  to  a
backlist  of over 250 illustrated titles including international bestsellers such as Speeches that  Changed
the  World,  Cosmos,  Mountain  High  and  the million-selling 50 Ideas  series.   Recent  developments  in
technology mean that this substantial asset will soon be available as digital content for purchase via  the
latest generation of e-Reader and tablet devices.

Quercus has focused on two strategies to expand its reach into higher quality book publishing. One has been
the  continued  roll  out of new imprints, with Jo Fletcher Books and Heron Books  added  to  the  existing
MacLehose  Press  imprint. Each imprint is headed by an experienced publisher of international  reputation,
who  manages  their  book  acquisition within a specific genre remit, with  support  services  supplied  by

The  other  has been to recruit extremely experienced and well-connected professionals in order  to  ensure
that  we  have  a wider range of agent and author contacts and are acquiring the most commercial  projects.
During  2011 Jo Dickinson joined from Little Brown and Jenny Heller joined from Harper Collins  to  further
enhance our existing strong team of publishers and editors.

We  continue  to  invest more each year in securing books and authors to enhance the intellectual  property
portfolio of the business and to generate increasing revenues in the short, medium and long term.

During 2011 the business moved from its premises in Bloomsbury Square to a new office in Baker Street. This
afforded us an opportunity to design the office space to create an open and interactive environment and  to
upgrade the IT equipment to ensure our teams have the tools to undertake their work efficiently.

We  increasingly  recognise  that we need to invest in communicating with our customer  base  in  order  to
develop  brand  and  author  loyalty and interest. We have been devoting resources  to  creating  dedicated
websites, blogs and to initiating social media initiatives with book reader communities in order  to  place
Quercus  in a pivotal role, which we believe will play to our strengths in the UK and international markets
in the coming years.

Over  the  course of 2011 staff numbers increased from 44 to 67 to support the Company's growth plans.  Our
authors  and  the  team  at Quercus are central to our business. We believe we have  now  built  the  right
infrastructure to support a diversified, multi-platform, entrepreneurial publishing business.

During the year the Quercus Executive Board was strengthened following a reorganisation. David North  moved
to  become Executive Director and Publisher for our range of publishing activities.  Wayne Davies moved  to
become Executive Director, Digital to further develop our e-book publishing of existing and new titles,  as
well  as to develop our online marketing and social media presence. A new appointment saw Paul Lenton  join
as Finance Director.

The  majority of the planning and strategic work undertaken in 2011 will come to fruition in 2012 and 2013.
Our investments in authors and in staff infrastructure, to manage develop and market our titles, means that
we  have  a  publishing programme which we believe will continue to deliver growth and create a diversified
and broader business.

The  current  year has started with pressure continuing in the market for physical books. We  believe  this
partly  reflects macro-economic factors but it is also partly structural, as sales move towards the  e-book
market.  However, our investment in digital publishing means that we are well placed to benefit  from  this
transition,  with over 500 Quercus e-books now available. As ever, the second half of the year remains  the
key  period for sales and as the contribution to the business from the Millennium Trilogy declines, we will
see  a return to a more traditional seasonality in our revenue profile. Overall, we remain confident of the
Company's  growth  prospects and are optimistic that we will see the benefits from investments  in  people,
intellectual property, our 'multi-channel' proposition and the delivery of our digital publishing strategy.


Chief Executive
29 May 2012

MARK SMITH, CHIEF EXECUTIVE                               TEL: 020 7291 7200

MARK ANWYL/DUNCAN VASEY                                   TEL: 020 7368 6959

CHARLES COOK                                              TEL: 020 7776 8825
                                                          MOBILE: 07710 910563

Bill Spears                                               Tel: 020 776 8824
                                                          Mobile: 07786 390 908

                                       QUERCUS PUBLISHING PLC

                                   CONSOLIDATED PROFIT AND LOSS ACCOUNT
                                    FOR THE YEAR ENDED 31 DECEMBER 2011

                                                        Notes         2011                2010
                                                                     GBP'000s           GBP'000s
TURNOVER                                                  1          24,759              31,784
Cost of sales                                                        (9,558)            (15,870)
GROSS PROFIT                                                         15,201              15,914
Selling and distribution                                             (3,753)             (4,004)
Administration expenses                                              (5,550)             (4,275)
OPERATING PROFIT                                                      5,898               7,635
Interest receivable and similar income                                   39                   9
Interest payable and similar charges                                    (61)               (160)
PROFIT ON ORDINARY ACTIVITIES                                         5,876               7,484
BEFORE TAXATION                                                                          
Taxation                                                             (1,506)             (2,074)
PROFIT ON ORDINARY ACTIVITIES                                                            
AFTER TAXATION AND RETAINED PROFIT FOR THE YEAR                       4,370               5,410
EARNINGS PER SHARE                                                                       
Basic earnings per share                                  7           22.31 pence         30.81 pence
Diluted earnings per share                                7           21.95 pence         26.74 pence

All amounts relate to continuing operations.

                                          QUERCUS PUBLISHING PLC

                                        CONSOLIDATED BALANCE SHEET
                                          AS AT 31 DECEMBER 2011

                                                       Notes             2011              2010
                                                                      GBP '000s           GBP'000s
FIXED ASSETS                                                                              
Tangible assets                                                         588                 156
CURRENT ASSETS                                                                              
Stocks                                                                2,841               2,726
Debtors                                                              11,525              11,700
Cash at bank and in hand                                              4,291               5,468
                                                                     18,657              19,894
CREDITORS: amounts falling due                                                              
within one year                                                      (6,060)            (10,125)
NET CURRENT ASSETS                                                   12,597               9,769
TOTAL ASSETS LESS CURRENT LIABILITIES                                13,185               9,925
PROVISIONS FOR LIABILITIES                                                                
Deferred taxation                                                        (3)                  -
NET ASSETS                                                           13,182               9,925
CAPITAL AND RESERVES                                                                        
Called up share capital                                                 164                 140
Equity shares to be issued                                                -                  21
Share premium account                                                 4,808               3,478
Profit and loss account                                               8,210               6,286
SHAREHOLDERS' FUNDS - All Equity                         3           13,182               9,925

                                          QUERCUS PUBLISHING PLC

                                     CONSOLIDATED CASH FLOW STATEMENT
                                    FOR THE YEAR ENDED 31 DECEMBER 2011

CASHFLOW STATEMENT                                        Notes        2011              2010
                                                                      GBP'000s          GBP'000s
Net cash inflow from operating activities                   4         4,554             7,130
Returns on investments and servicing of finance             5            (6)             (151)
Capital expenditure and financial investment                5          (581)              (99)
Taxation                                                    5        (2,870)             (256)
CASH INFLOW BEFORE FINANCING                                          1,097             6,624
Financing                                                   5        (2,274)                -
DECREASE IN CASH IN THE PERIOD                                       (1,177)            6,624
RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET                     2011              2010
FUNDS/(DEBT)                                                          GBP'000s         GBP'000s
(Decrease)/ Increase in cash in the period                          (1,177)             6,624
MOVEMENT IN NET FUNDS/(DEBT) RESULTING FROM CASH                    (1,177)             6,624
Net cash /(debt) brought forward                                     5,468             (1,156)
NET FUNDS AT 31 DECEMBER 2011                               6        4,291              5,468
                                          QUERCUS PUBLISHING PLC


      A geographical analysis of turnover is given below:
                                                                      2011              2010
                                                                    GBP'000s          GBP'000s
        United Kingdom                                              16,545            22,735
        USA                                                          6,457             4,060
        Canada                                                         934               679
        Other                                                          823             4,310
                                                                    24,759            31,784

                                                                      2011            2010
                                                                    GBP'000s        GBP'000s
Ordinary dividend                                                    1,077            1,026
Special dividend                                                         -            1,436
                                                                     1,077            2,462

      The above dividends are proposed for approval by shareholders at the AGM.
GROUP                                                                 2011            2010
                                                                    GBP'000s        GBP'000s
Profit for the period                                                4,370            5,410
Shares options converted                                               188                -
Loan Notes converted                                                 1,145                -
Dividend                                                            (2,462)               -
Share option cost recognised as a charge in the year                    16               25
                                                                     3,257            5,435
Opening shareholders' funds                                          9,925            4,490
Closing shareholders' funds                                         13,182            9,925


                                                                      2011            2010
                                                                    GBP'000         GBP'000
        Operating profit                                             5,898            7,636
        Depreciation of tangible fixed assets                          144               92
        Share option cost                                               16               25
        Loss on disposal                                                 4                -
        (Increase)/Decrease in stocks                                 (115)             133
        Decrease/(Increase) in debtors                                 159           (2,445)
        (Decrease)/ Increase in creditors                           (1,552)           1,689
        NET CASH INFLOW/(OUTFLOW) FROM OPERATIONS                    4,554            7,130


                                                                      2011            2010
        FINANCE                                                     GBP'000s        GBP'000s
        Interest received                                               39                9
        Interest paid                                                  (45)            (160)
        NET CASH OUTFLOW FROM RETURNS ON                                                               
        INVESTMENTS AND SERVICING OF FINANCE                            (6)            (151)

        CAPITAL EXPENDITURE AND FINANCIAL INVESTMENT                  2011            2010
                                                                    GBP'000s        GBP'000s
        Purchase of tangible fixed assets                             (581)             (99)
        TAXATION                                                      2011             2010
                                                                    GBP'000s         GBP'000s
        Taxation                                                    (2,870)            (256)

        FINANCING                                                     2011             2010
                                                                    GBP'000s         GBP'000s
        Issue of ordinary shares                                       188                -
        Dividend Paid                                               (2,462)               -
        Loan notes                                                       -                -
        Repayment of bank loan                                           -                -
        NET CASH (OUTFLOW)/ INFLOW FROM FINANCING                   (2,274)                -


                                            1 January                          Non cash     31 December
                                              2011            Cash flow        changes      2011
                                              GBP'000          GBP'000         GBP'000      GBP'000
        Cash in hand and at bank              5,468            (1,177)               -        4,291
        Bank overdraft and other loans            -                 -                -            -
        Total                                 5,468            (1,177)               -        4,291

      Earnings  per  share  is  calculated  on the basis of a profit of GBP4,370,026  (2010:  GBP5,410,449)
      divided  by  the  weighted  average number of shares in issue for the  period  of  19,588,814  (2010:
      17,561,538).  The diluted earnings per share is calculated on the assumption that ten  (2010:  eight)
      tranches  of  the options are exercised this year; all other share options are excluded as  they  are
      These  assumptions give rise to a total weighted average number of ordinary shares in  issue  at  the
      end of the period of 19,588,814 (2010:17,561,538).

                                                                     Year ended                Year ended
                                                               31 December 2011          31 December 2010
                                                                            GBP                       GBP
        Basic earnings per share                                                                         
        Profit for the year                                           4,370,026                 5,410,449
                                                             Earnings per share        Earnings per share
        Profit per share                                            22.31 pence               30.81 pence
                                                                            GBP                       GBP
        Diluted earnings per share                                                                       
        Profit for the year                                           4,370,026                 5,410,449
        Adjusted for after tax saving on conversion                                                      
        of dilutive loan notes                                                -                    54,993
        Profit for the year for diluted calculation                   4,370,026                 5,465,442
                                                               Number of shares          Number of shares
        Weighted average number of shares:                                                               
        For basic earnings per share                                 19,588,814                17,561,538
        Dilutive effect of share options                                317,068                   319,323
        Dilutive effect of loan note conversion                               -                 2,555,556
        Diluted weighted average number of shares                    19,905,882                20,436,417
                                                             Earnings per share        Earnings per share
        Diluted profit per share                                    21.95 pence               26.74 pence

                                          QUERCUS PUBLISHING PLC

Five Year Trading Summary

                                                 2011        2010        2009         2008        2007
                                             GBP'000s    GBP'000s    GBP'000s     GBP'000s    GBP'000s
Continuing Operations                                                                                 
                                               24,759      31,784      19,133       10,944       8,626
Cost of sales                                 ( 9,558)   ( 15,870)   ( 12,225)     ( 6,072)    ( 4,687)
Gross profit                                                                                          
                                               15,201      15,914       6,908        4,872       3,939
Selling and distribution                      ( 3,753)    ( 4,004)    ( 2,046)     ( 1,405)    ( 1,378)
Administration expenses                       ( 5,550)    ( 4,275)    ( 3,669)     ( 3,438)    ( 2,286)
Operating profit                                                                                      
                                                5,898       7,635       1,193           29         275
Interest receivable and similar income                                                                
                                                   39           9           4            5           6
Interest payable and similar charges             ( 61)      ( 160)      ( 330)       ( 315)      ( 127)
Profit/(loss) on ordinary activities                                                                  
before taxation                                 5,876       7,484         867        ( 281)        154

Taxation                                     ( 1,506)     ( 2,074)      ( 252)          42         (42)
Profit/(loss) on ordinary activities                                                                  
after taxation
and retained profit/(loss) for the year        4,370        5,410         615         (239)        112
Earnings per share                                                                                    
Basic earnings per share                       22.31p       30.81p       3.50p       (1.95)p      1.01p
Diluted earnings per share                     21.95p       26.47p       3.50p       (1.95)p      0.89p


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