Quercus Publishing plc
LSE : QUPP

September 26, 2013 02:00 ET

Unaudited Interim Results

Half Year Results for the six months ended 30 June 2013
                                                                                          26 September 2013

                                          Quercus Publishing Plc

                          UNAUDITED HALF YEAR RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2013
                                Transition to Digital Publishing Continues

Quercus  Publishing Plc ("Quercus", the "Group" or the "Company"), the award-winning independent  publisher
in  the digital, trade, contract, paperback and children's sectors, presents its half year results for  the
six months ended 30 June 2013.


Overview

  *       Turnover up 10.9% to £10.2m (2012: £9.2m)

  *       Operating profit down 7% to £0.52m (2012: £0.56m)
        
  *       Digital revenue up 46% to £3.5m (2012: £2.4m)
        
  *       Digital revenue as a % of total revenue was 34.3% (2012: 25.6%)

  *       Cash at bank and in hand £0.3m (31 December 2012: £1.85m)
       

  *       Bestsellers in the period:

            o       The Lewis Trilogy by Peter May
            o       Thursdays in the Park by Hilary Boyd
            o       Dark Winter by David Mark
            o       The Rose Petal Beach by Dorothy Koomson
            o       The Clandestine Cake Club Cookbook by Lynne Hill
            o       Africa by Michael Bright

Commenting on the results Mark Smith, Chief Executive, said:

"The first half of 2013 saw Quercus' return to top line growth after the peak of the Larsson trilogy in
2010 and the prior years' investments in intellectual property, staff and infrastructure are now coming on
stream. The reduction in operating profit for the period is a reflection of the higher level of returns of
physical titles from the UK book trade over the first six months."


CHIEF EXECUTIVE'S REVIEW

Overview

During  the  first  half of the year we have been preparing for the launch of our inaugural  US  publishing
programme with the first release date at the beginning of September 2013. We now have a small team of  four
on  the  ground in serviced offices in New York and have been using our time pre-publication to  build  the
profile of Quercus Publishing Inc. and the titles in the publishing programme.

The  UK book trade has proved somewhat challenging. Structural change due to the continued shift to e-books
has  meant  that,  in  many cases, retailers are adopting a more cautious approach on the  quantities  they
order. We have also experienced a higher than expected level of book returns.  To give us more control over
selling books into our distribution channels we have withdrawn from the Independent Alliance and set up our
own sales force with dedicated teams for both the UK and export markets that will be fully operational this
year.

Financial Results

Turnover  for  the  first six months of the year was up 10.9% to £10.2m (2012: £9.2m).  Revenues  from  the
Larsson series continue to tail off but non-Larsson revenues have offset that with revenues increasing  53%
to  £9.5m (2012:£6.2m). Selling and distribution costs were £1.4m (2012: £1.3m) reflecting the increase  in
revenue.  Administrative expenses increased to £3.5m (2012: £3.3m) reflecting the full cost of the increase
in staff during 2012. Operating profit for the period was £0.52m (2012: £0.56m). Exceptional items of £0.2m
(2012: £0.1m) relate to the costs incurred on the set-up of Quercus Publishing Inc.

The  Company has in place a substantial Revolving Credit Facility with Barclays and expects to utilise part
of this facility during the second half of the year.

Digital

At the end of 2012, we had just over 700 titles available for download; we have now passed the 1000 mark in
the  UK  as  well  as having 100 for the US launch. Digital revenue increased 46% to £3.5m  (2012:  £2.4m).
Although growth has been impressive in the first half, we do not expect it to continue at this level in the
second half as the earlier period's results are flattered by highly discounted retailer promotions that are
unlikely to be repeated in the run up to Christmas. Some of the main e-book drivers were Thursdays  in  the
Park  by  Hilary Boyd, Dark Winter by David Mark, The Lewis Trilogy by Peter May, The Rose Petal  Beach  by
Dorothy Koomson and The Millennium Trilogy by Stieg Larsson.

Quercus's  Direct  to Consumer Platform is now operational and all of our print titles  are  available  for
purchase directly from our website. We will shortly be making available our full e-book catalogue.

Publishing

Our  UK  programme got off to a good start at the beginning of the year. We saw solid sales of Africa,  the
tie-in  to the BBC series narrated by David Attenborough. The Clandestine Cake Club Cookbook by Lynne  Hill
performed well, as did The Rose Petal Beach by Dorothy Koomson and Zero Six Bravo by Damien Lewis. It's All
About  Treo  by  Dave  Heyhoe, the story of the world's most highly decorated dog, has  gained  significant
momentum over the summer, remaining high in the non-fiction charts, and we have high hopes for this book in
the second half of the year.

In  March, George Washington: Gentleman Warrior by Stephen Brumwell was selected as the winner of the  2013
George  Washington  Book  Prize. In July Alex by Pierre Lemaitre was joint winner  of  the  Crime  Writers'
Association International Dagger. Both awards bode well for the launch of these titles in the US.

Outlook

We  have  one of our strongest-ever publishing programs in the second half of this year. In the UK we  will
publish That Close by Suggs and The Great British Year, a tie-in to the forthcoming BBC series. The Higgidy
Cookbook, from the award-winning pie range is receiving strong support from the book trade, as are  Olivier
by  Philip Ziegler, King: My Autobiography, by Ledley King and Rising Tides: Dealing with the Challenges of
a New Era by Liam Fox, MP. In fiction we have a wave of titles from our best-selling authors including When
You Walked Back Into my Life by Hilary Boyd, Motherland by William Nicholson, Prayer by Philip Kerr and The
Flavours of Love by Dorothy Koomson.

In  the US Alex by Pierre Lemaitre is getting superb coverage and could well be our major breakout book  in
our  first  US  publishing programme. There are also many promotional opportunities for George  Washington:
Gentleman Warrior in the run-up to Christmas. We are also receiving excellent support for Loss of Innocence
by  Richard North Patterson, Thursdays in the Park by Hilary Boyd and, and from one of our newer  imprints,
Jo Fletcher Books, Mage's Blood by David Hair.

The  bulk of our profits are forecast to be generated in the last quarter of this year. Whilst the strength
of  our  Q4  programme provides much confidence here, the Christmas sales period remains open to the  usual
vagaries  of  customer sentiment at this time of year.  Looking to the year to date for  guidance,  a  good
start  in the first three months of the year was offset by the relative slowness of the second quarter  and
whilst  the  slowdown has stabilised with signs of trading picking up, this leads to increased  uncertainty
over  forecast trading for the remainder of the year. Combining these factors, it is too early  to  provide
guidance on our revenue and profit levels for the full year.


The Directors of the Company are responsible for the contents of this announcement.

Enquiries to:

QUERCUS PUBLISHING PLC
Mark  Smith,  Chief Executive                                                  Tel:  020  7291 7200

PETERHOUSE CORPORATE FINANCE LIMITED
Mark Anwyl or Duncan Vasey                                                     Tel:  020  7469 0930

Media Enquiries:
ATTILA  CONSULTANTS                                                            Tel:  020  7776 8824
Bill Spears                                                                  Mobile:   07786 390908


Quercus Publishing Plc
Interim consolidated profit and loss
As at 30 June 2013
                                                6 months to          6 months to            Year to 31
                                                30 June 2013         30 June 2012         December 2012
                                                (unaudited)          (unaudited)            (audited)
                                                   £'000s               £'000s                £'000s
                                                                                         
 TURNOVER                                               10,209                9,236                20,429
                                                                                                         
 Cost of sales                                         (4,724)              (4,056)               (9,122)
 GROSS PROFIT                                            5,485                5,180                11,307
                                                                                                         
 Selling and distribution                              (1,443)              (1,344)               (3,348)
 Administration expenses                               (3,523)              (3,279)               (6,498)
 OPERATING PROFIT                                          519                  557                 1,461
                                                                                                         
 Exceptional items                                       (234)                    -                 (107)
 PROFIT ON ORDINARY ACTIVITIES                                                                           
 BEFORE INTEREST                                           285                  557                 1,354
                                                                                                         
 Interest receivable and similar income                      1                   12                    13
 Interest payable and similar charges                     (31)                    -                     -
 PROFIT ON ORDINARY ACTIVITIES                                                                           
 BEFORE TAXATION                                                                                         
                                                           255                  569                 1,367
                                                                                                         
 Taxation                                                 (66)                (154)                 (298)
 PROFIT ON ORDINARY ACTIVITIES                                                                           
 AFTER TAXATION AND RETAINED                                                                             
 PROFIT FOR THE YEAR                                       189                  415                 1,069




Quercus Publishing Plc
Interim consolidated balance sheet
As at 30 June 2013
                                               6 months to           6 months to            Year to 31
                                               30 June 2013          30 June 2012         December 2012
                                               (unaudited)           (unaudited)            (audited)
                                                  £'000s                £'000s                £'000s
                                                                                         
 FIXED ASSETS                                                                                            
 Intangible assets                                        288                     -                     -
 Tangible assets                                          499                   527                   558
                                                          787                   527                   558
                                                                                         
 CURRENT ASSETS                                                                          
 Stocks                                                 2,821                 2,829                 3,359
 Trade and other receivables                           14,184                13,068                13,367
 Corporation tax                                            -                     -                   384
 Cash at bank and in hand                                 309                 2,272                 1,847
                                                       17,314                18,169                18,957
                                                                                         
 CURRENT LIABILITIES                                                                     
 Trade and other creditors                            (5,059)               (4,813)               (6,190)
 Corporation and other taxes                            (148)                 (279)                 (119)
                                                      (5,207)               (5,092)               (6,309)
                                                                                         
 NET CURRENT ASSETS                                    12,107                13,077                12,648
                                                                                         
 PROVISIONS FOR LIABILITIES                                                              
 Deferred taxation                                       (18)                   (3)                  (18)
 NET ASSETS                                            12,876                13,601                13,188
                                                                                         
                                                                                         
 CAPITAL AND RESERVES                                                                    
 Called up share capital                                  164                   164                   164
 Share premium account                                  4,823                 4,812                 4,823
 Profit and loss account                                7,889                 8,625                 8,201
 SHAREHOLDERS' FUNDS - All Equity                      12,876                13,601                13,188





Quercus Publishing Plc
Interim consolidated cash flow statement
As at 30 June 2013
                                                             6 months to          6 months to          Year to 31
                                                            30 June 2013         30 June 2012         December 2012
                                                             (unaudited)          (unaudited)           (audited)
                                                               £'000s               £'000s               £'000s
                                                                                                                    
                                                                                                                    
 Operating profit for the period                                       519                  557                1,461
                                                                                                                    
 Exceptional items                                                   (234)                    -                (107)
 Depreciation of fixed assets                                          134                  108                  219
 (Increase) / decrease in stocks                                       538                   12                (518)
 (Increase) / decrease in debtors                                    (816)                (825)              (1,843)
 Decrease / (increase) in creditors                                (1,168)              (1,414)                  847
 NET CASH INFLOW / (OUTFLOW) FROM OPERATING ACTIVITIES                                                              
                                                                   (1,027)              (1,562)                   59
                                                                                                     
 Interest received                                                       1                   12                   13
 Interest paid                                                           -                    -                    -
 NET CASH INFLOW / (OUTFLOW) FROM RETURNS ON INVESTMENTS                                                            
 AND SERVICING OF FINANCE
                                                                         1                   12                   13
                                                                                                     
 Purchase of intangible assets                                       (300)                    -                    -
 Purchase of tangible fixed assets                                    (61)                 (46)                (189)
 NET CASH OUTFLOW FROM CAPITAL EXPENDITURE AND FINANCIAL                                                            
 INVESTMENT
                                                                     (361)                 (46)                (189)
                                                                                                     
 Taxation                                                              350                (427)              (1,264)
                                                                                                                    
 NET CASH OUTFLOW FROM TAXATION                                        350                (427)              (1,264)
                                                                                                     
 Issue of ordinary shares                                                -                    4                   15
 Dividend paid                                                       (501)                    -              (1,078)
 NET CASH INFLOW  / (OUTFLOW) FROM FINANCING                                                                        
                                                                     (501)                    4              (1,063)
                                                                                                                    
 DECREASE IN CASH IN THE PERIOD                                    (1,538)              (2,019)              (2,444)
 Net cash /(debt) brought forward                                    1,847                4,291                4,291
                                                                                                                    
 NET FUNDS AT PERIOD END                                               309                2,272                1,847



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