Quercus Publishing plc

LSE : QUPP


April 23, 2013 02:00 ET

Unaudited Preliminary Results for the year ended 31 December 2012

23 April 2013
                                                                                     GB00B1G17S00/GBP/PLUS-
exn


                                          Quercus Publishing Plc
                     Unaudited Preliminary Results for the year ended 31 December 2012
                                                     
                                                     
  Quercus Publishing Plc ("Quercus" or the "Company") the ISDX quoted publishing company (symbol: QUPP),
               today announces its preliminary results for the year ended 31 December 2012.
                                                     
Financial highlights

    
    *       Revenues were GBP20.4m (2011: GBP24.8m)    
    
    *       Operating profit GBP1.5m (2011: GBP5.9m)
    
    *       Exceptional charge of GBP0.1m (2011:GBPnil) for start-up costs incurred on Quercus Publishing Inc.
    
    *       Proposed  final  dividend of 2.44p per share (2011: 5.25p), reduced to reflect  the  Company's
            performance in the year and to retain cash for continued investment in the business
    
    *       Basic earnings per share for the year were 5.21p (2011: 22.31p). The diluted earnings per share
            were 5.15p (2011: 21.95p). Basic earnings per share before exceptional charge for the year were 
            5.60p (2011: 22.31p). The diluted earnings per share before exceptional charge were 5.54p 
            (2011: 21.95p).
    
    *       The Company remains debt free with cash of GBP1.8m (2011: GBP4.3m)
        
Operating highlights

    
    *       E-book revenues increased by 137% to GBP6.4m (2011: GBP2.7m)
    
    *       Revenues from non-Larsson titles increased 18% on a like-for-like basis
    
    *       Q1 2013 non-Larsson sales in the UK (based on Nielsen Bookscan top 5000 titles) increased 134%
            over Q1 2012
  
    *       Best-selling titles include Thursdays in The Park by Hilary Boyd, Monday To Friday Man by Alice
            Peterson and The Lewis Trilogy by award winning author, Peter May
    
    *       Sales and distribution agreement signed with Random House Inc. for the launch in 2013 of Quercus
            Publishing Inc. in North America
   
    *       New imprints Jo Fetcher Books and Heron Books are gathering momentum
        
Commenting on the results David Potter, Chairman of Quercus said:

"This was a year of transition, re-investing the proceeds from the Stieg Larsson franchise in new imprints,
infrastructure,  and  retaining US licences, to exploit through Quercus Publishing Inc.  which  is  due  to
launch its first publishing programme in 2013.  Despite a reduction in sales and profits the quality of our
earnings has improved through our investment strategy."

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

"2012  was a year in which we made good progress implementing our long-term growth strategy to broaden  and
deepen our business mix in order to improve our quality of earnings on a sustainable basis.

The  first  quarter of 2013 has got off to a good start. Trading is ahead of our internal  budget.  Nielsen
Bookscan top 5000 title figures for the first three months of 2013 indicate that our non-Larsson book sales
in the UK have increased by 134% over the first three months of 2012. We remain confident in our ability to
build  Quercus  into a global English-language publisher of scale, and generate a sustainable  increase  in
returns to shareholders over time."



For further information, please contact:

Quercus Publishing Plc
Colin Adams, Chief Operating and Chief Financial Officer            Tel: 020 7291 7200

Peterhouse Corporate Finance Limited
Mark Anwyl and Duncan Vasey                                         Tel: 020 7220 9796

Media Enquiries:

Attila Consultants
Charles Cook                                                        Tel: 020 7776 8825
                                                                    Mobile: 07710 910563

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



Chairman's Statement

This  was a year of transition, re-investing the proceeds from the Stieg Larsson franchise in new imprints,
infrastructure,  and  retaining US licences, to exploit through Quercus Publishing Inc.  which  is  due  to
launch its first publishing programme in 2013.  Despite a reduction in sales and profits the quality of our
earnings has improved through our investment strategy.

Part  of  our  growth  plan  includes identifying books which have outstanding  e-book  potential.  We  had
considerable  success with this during the year. Two of our e-books held the number  one  position  in  the
Kindle chart for several months, in a year where one book, Fifty Shades of Grey (published by Random House)
dominated  the charts.  The longer term is not easy to read as hand held devices proliferate and  more  and
more  content  is  becoming  increasingly accessible digitally. This  exciting  environment  provides  many
opportunities  and challenges. We have been assiduous in acquiring new content which is the primary  growth
driver for the business going forward.

I  would also have to say that it was a disappointing year for the share price. As you know, the management
and  staff are all shareholders and share option holders, which aligns our interest with shareholders.  Our
stated  growth  strategy is designed to address this. Share prices are much affected by the  flow  of  news
which is typically less plentiful in a transition year. In the summer PLUS Markets was acquired by ICAP and
renamed ISDX (ICAP Securities & Derivatives Exchange). We opted to give this new market our support but  we
will be reviewing this during 2013.

We  had  an  important strengthening of the Board with the appointment of Colin Adams  as  Chief  Operating
Officer  and  Chief Financial Officer. Colin has extensive experience in publishing having previously  been
Group  Finance  Director  of  Bloomsbury for seventeen years, seeing  that  company  through  a  period  of
considerable transition and growth. At the beginning of 2013 we were joined by Jane Harris as  Director  of
Sales  and  Marketing. She has also had a long and distinguished career in publishing. The  top  management
team is now complete for the next phase of expansion.

The pressures on the macro environment remain significant. The on-going euro crisis, and the UK's and other
countries'  efforts  to  reduce  levels of debt through austerity measures  continue  to  put  pressure  on
household  incomes.  Conditions on the "high street" are still challenging and we have adopted  a  cautious
outlook  on  the  macro-economic environment when planning for the future. We have put  in  place  a  GBP3m
revolving  credit facility during the year to fund any short-term working capital requirements and  provide
funds for above budget acquisitions of titles. To date the facility remains unutilised.

We  will be reducing the dividend to reflect the Company's performance during the year and retain cash  for
investment in the business, proposing a payment of 2.44 pence per share at the AGM.

I  am  pleased  to say that trading in the current year has started well, and we are ahead of our  internal
budgets.  The  board remains optimistic that 2013 will be a year of growth as a result  of  our  investment
strategy,  particularly the move to publish as Quercus Publishing Inc. in the USA,  the  recently  launched
imprints and continued success in publishing titles digitally.

I would like to thank our staff and all our other stakeholders for their support.


Chief Executive's Review

Overview

2012  was  a year in which we made good progress implementing our long-term growth strategy to broaden  and
deepen our business mix in order to improve our quality of earnings on a sustainable basis.

In  my  2011  Chief Executive's Review I highlighted that we had implemented an organic growth strategy  to
diversify  our earnings base by investing in infrastructure, people and intellectual property to drive  the
future performance of the business. An organic growth strategy in a business our size is typically earnings
dilutive  in  the  short term as more key people are recruited and additional books  acquired  to  generate
revenues  and  profits that can take at least two years to come fully on stream. The increase in  headcount
from  44  in  2010  to  71  in  2012  illustrates the level of investment required  to  grow  the  business
organically.  Staff costs increased to GBP4.2m (2011: GBP3.5m) which reflects the full annualised  cost  of
those hired in 2011 and additional staff recruited in 2012.

Whilst  Quercus' results declined from the prior year, the underlying growth in the business excluding  the
Larsson series has been very encouraging. Excluding Larsson, sales have increased by 18% on a like-for-like
basis.  Our  new imprints, Heron Books and Jo Fletcher Books, showed solid growth in 2012 and will  benefit
from full publishing programmes in 2013.

Traditional  book  publishing  is undergoing a great deal of change with the  growth  in  digital  and  the
increasing  use of mobile devices such as e-readers, smart phones and hand-held tablets to access  content.
Quercus'  publishing  list  is ideally suited to this medium and by the end of  2012  e-book  revenues  had
increased  by 137% to GBP6.4m (2011: GBP2.7m). According to Nielsen Bookscan, e-book revenues by  value  in
the  UK represented over 6% of all book revenues in 2012. For Quercus, e-book revenues were 31.5% of  total
sales (2011: 11.0%).

Financial Review

Group  revenues  declined  by  17.7%  to  GBP20.4m (2011: GBP24.8m).  Consolidated  operating  profit  pre-
exceptional  cost  was GBP1.5m (2011: GBP5.9m). The exceptional cost of GBP0.1m (2011: GBPnil)  relates  to
costs  incurred in the set-up of our US operation Quercus Publishing Inc. which is due to launch its  first
publishing programme in September 2013.

Net profit on ordinary activities after tax was GBP1.1m (2011: GBP4.4m).

Dividend

The  Directors are proposing an ordinary dividend of 2.44p per share, which equates to GBP0.5m (2011: 5.25p
which  equated to GBP1.1m). The dividend has been rebased to reflect the current level of profitability  of
the business and maintain the level of cash available for investment in the Company.

Business Review

Digital

Digital  has always been at the centre of the business and books have been acquired with an equally  strong
marketing focus on print and digital. E-book revenues during 2012 represented 31.5% of total Group revenues
(2011:  11%)  and increased by 137% to GBP6.4m (2011: GBP2.7m).  Last year we had over 500 Quercus  e-books
available for download. We now have over 700 with many more in production, including 150 for the US  market
later in 2013.

We  launched our e-commerce platform at the end of 2012, allowing us to sell our full catalogue,  including
special  and  premium  editions, and shortly e-books, direct to consumers from  the  Quercus  website.  The
platform  passed  the  examination  that the Christmas sales period  provided  and  we  will  therefore  be
activating  the  same functionality on the MacLehose Press and Jo Fletcher Books websites, allowing  us  to
sell  directly to the very dedicated translated fiction and sci-fi and fantasy audiences that  these  sites
serve.   Even  more  significantly, the platform contains powerful subscription and  Customer  Relationship
Management (CRM) tools that will allow us to connect and converse directly with our readers.

Quercus Publishing Inc.

In  October  we  signed  a  Sales and Distribution agreement with Random House,  Inc.  to  handle  our  new
publishing programme in North America. This is a very exciting time for us as we have been retaining the US
rights on our books and foregoing the potential licensing revenue for the last few years in preparation for
this launch. Publishing books under our own imprint enables Quercus to fully realise its ambition to become
a  global English language publishing business and participate in the full commercial margin of a  book  as
opposed  to  a  lower  margin through a commission received on a licensing deal.  The  US  book  market  is
considerably  larger  than the UK with e-books representing a much higher proportion of  total  book  sales
which  provides Quercus with an opportunity to scale the business beyond what it has achieved to date.  The
first  publishing programme will start in the autumn of 2013 with 25 titles with a programme of  86  titles
(excluding digital) in 2014.

Fiction

The fiction list showed significant growth during the year. Thursdays in the Park by Hilary Boyd was a best-
selling title in both print and e-book and topped the Kindle chart for many months, as did Alice Peterson's
Monday  to Friday Man.  Award-winning author Peter May had the second of his Lewis Trilogy published during
the  year,  also resident for several months in the highest positions of the Kindle chart, with  the  final
instalment, The Chessmen, published in January 2013, reaching number 4 in the hardback charts. The first in
the  trilogy, The Blackhouse, was a hugely successful Richard and Judy Book Club pick in 2011. Best-selling
women's  fiction author Dorothy Koomson was published for the first time at Quercus and her The Rose  Petal
Beach has gone on to be one of our top selling titles.

MacLehose Press

The  Millennium Trilogy  still features in the top tier of our publishing programme and has  sold  well  in
both  print  and e-book albeit moving to a predicted lower annuity revenue stream.  A number  of  MacLehose
titles were shortlisted for awards during 2012 and the early part of 2013. Both The Dark Valley, by Valerio
Varesi,  and  Until Thy Wrath Be Past, by Asa Larsson, were shortlisted for the Crime Writers'  Association
International  Dagger  for  Best Crime Novel in Translation; Three Strong  Women,  by  Maria  N'Diaye,  was
shortlisted for the Man Booker International Prize 2013. Trieste, by Dasa Drndic, was shortlisted  for  the
Independent Foreign Fiction Prize.

Non-fiction

We  had  a strong non-fiction list for 2012 which was topped off by the publication of the tie-in to  David
Attenborough's  BBC1 series on Africa. New interactive app technology has been used to augment  the  book's
entertainment  value by bringing its images to life via a smartphone or tablet. We had  two  books  by  the
courageous  and  extraordinary Katie Piper, Things Get Better and Start Your  Day  with  Katie,  that  sold
exceptionally  well  supported by strong social media campaigns. It's all about Treo by  Dave  Heyhoe,  the
story of the world's most decorated dog, performed very well in the lead-up to Christmas.

Jo Fletcher Books

Jo  Fletcher  Books is a new list which focuses on the genres of science-fiction, fantasy and  horror.  The
imprint  started 2012 with A Cold Season by Alison Littlewood being selected for the Richard and Judy  Book
Club  and  becoming the imprint's bestselling paperback of the year.  Caribbean writer Karen  Lord's  novel
Redemption  in Indigo received the Kitschies Golden Tentacle Award in early 2013 for best debut novel;  her
science fiction novel The Best of All Possible Worlds is one of our 2013 highlights.

Children's

The  children's  list  continued to flourish in 2012. Highlights included the launch of  two  new  humorous
series: Guinea Pigs Online, for 5-8 year olds, and Sammy's Feral Diaries of Weird, for 8-12 year olds. Both
have  achieved strong sales, and will continue to build with further titles publishing in 2013/14. We  also
welcomed  Che Golden to the list with The Feral Child, the first in her fantasy series for 9+  girls  about
dark faeries, which has subsequently been nominated for the Branford Boase Award for debut fiction.

Heron Books

Heron  Books  is an imprint set up to identify new subject areas of publishing for Quercus and  focuses  on
both fiction and non-fiction. The imprint launched in January 2012 with strong campaigns for bestseller Eva
Rice's  new novel, The Misinterpretation of Tara Jupp, and Ausperity, a much-reported look on how  to  live
the good life on less by Lucy Tobin, the Evening Standard's Finance Editor.

People

During  2012  the staff numbers at Quercus increased from 67 to 71. The increase in staff levels  over  the
last  two  years from 44 in 2010 to the current 71 is part of our plan to grow the business organically  by
starting  new  imprints  such  as Jo Fletcher Books and Heron Book as well as by  augmenting  our  existing
imprints and infrastructure.

During the year the Executive Board was significantly strengthened by two senior appointments.  Colin Adams
joined  as  Chief  Operating  and  Chief Financial Officer in September. Colin  has  spent  many  years  in
publishing, in particular as Group Finance Director of Bloomsbury Publishing Plc for seventeen years.  Jane
Harris joined as Executive Director - Sales and Marketing. Jane has been Sales and Trade Marketing Director
of  Walker  Books  for  the  past six years, and was previously UK Group Sales Director  for  HarperCollins
Publishers.  Both Mike McGrath, Executive Director - Group Sales, and Paul Lenton, Finance  Director,  left
the Company.

I would like to thank all our staff for their commitment and hard work during 2012.

Outlook

We  have  a  very  strong  title list for 2013, the result of the increased investment  in  our  publishing
programme.  Africa  continues to sell well, driven by the BBC Series.  Also  in  non-fiction  we  have  The
Clandestine  Cake  Club  Cookbook by Lynn Hill, another BBC tie-in Wild Seasons by  Stephen  Moss  and  the
official Tour De France 100th Race Anniversary Edition.  Our big autobiography for the autumn is That Close
by  Suggs,  the  lead  singer of Madness. The fiction list has its own share of lead titles  including  the
paperbacks of The Chessmen by Peter May and of The Rose Petal Beach by Dorothy Koomson, as well as her next
book  in  hardback,  Flavours of Love. Following in the footsteps of our previous international  hits  with
translated  fiction, we have particularly high hopes for Alex by Pierre Lemaitre, a French  sensation,  and
Deliverance of Evil by Roberto Costantini, already a bestseller in Italy and around Europe.  Both  will  be
published  by  Quercus in the UK and in the US this year. In February this year, I was at the Random  House
Inc.  sales conference where there was an exceptionally positive response to our inaugural US list for  the
autumn.   A  number  of titles are already showing early promise, including George Washington  -  Gentleman
Warrior by Stephen Brumwell and Loss of Innocence by Richard North Patterson.

The  market  is  continuing  to  change  as it moves towards digital.  E-book  revenues  continue  to  show
significant  growth,  although  with a fast changing technology market  it  is  difficult  to  predict  the
definitive rate at which revenues will increase. Nonetheless, this puts increased pressure on the cost base
for  printed books. However, as we do not have a legacy infrastructure, we are able to keep costs  low  and
increase  investment  in  areas  that  will  continue to drive revenue  growth  longer  term.  We  have  an
exceptionally entrepreneurial team in place and are building a valuable portfolio of titles and  IP,  along
with  a  robust balance sheet with closing cash of GBP1.8m (2011: GBP4.3m), that will drive future earnings
growth in line with our strategy.

The  first  quarter of 2013 has got off to a good start. Trading is ahead of our internal  budget.  Nielsen
Bookscan top 5000 title figures for the first three months of 2013 indicate that our non-Larsson book sales
in the UK have increased by 134% over the first three months of 2012. We remain confident in our ability to
build  Quercus  into a global English-language publisher of scale, and generate a sustainable  increase  in
returns to shareholders over time.

Financial Review

Turnover

Revenue  from  continuing  operations was GBP20.4m (2011: GBP24.8m). The decline  is  attributable  to  the
inevitable tail-off of the three Larsson books which have been our best performing titles in recent  years.
An integral part of Quercus' growth strategy is to build a broader publishing list through new imprints and
increase the number of titles published through existing channels. Non-Larsson revenues increased 18% on  a
like-for-like  basis  over  2012  which demonstrates that this strategy  is  delivering  positive  results.
Building revenues through organic growth takes time as opposed to acquiring businesses but it does, in  our
opinion, generate higher quality earnings.

Segmental analysis

The  Group does not consider that it has different classes of business, and has historically traded  within
an  operating  segment  of one trading business. The Group's management and reporting  structure  has  been
aligned  to  this.  We do not have Executive Directors who are specifically responsible  for  any  discrete
element  of our business revenues, and the Group does not produce separate income statements or report  net
assets  for  any  specific  class  of business within its range of publishing  activities.  Therefore,  the
disclosure for segmental reporting is restricted to an analysis of geographical turnover.

Gross profit margins

The  gross  profit margin was 55.3% (2011: 61.4%) The decline was mainly due to the tail-off of the  higher
margin revenues from the Larsson trilogy which included sub-licence income.

Operating costs

Selling and distribution costs were 16.4% of revenues (2011: 15.2%). The higher percentage of revenues  was
primarily  due  to  high  marketing  spend on new imprints to maximise  their  sales  potential.  Overheads
increased from GBP5.6m in 2011 to GBP6.5m in 2012. The increase is part of our planned expansion  with  the
new  imprints  which includes the full cost of additional staff recruited in 2011, associated office  costs
and staff recruited in 2012. The head count at the end of 2010 was 44 and this had risen, as planned, to 71
by the end of 2012.

Operating profit

Operating  profits  were  GBP1.5m (2011: GBP5.9m). Operating profit margin  was  7.2%  (2011:  23.8%).  Our
strategy  is  to  move  the operating margin back into double digits as the new revenue  streams  begin  to
achieve critical mass.

Exceptional costs

Exceptional  costs  of  GBP0.1m (2011: GBPnil) were incurred during the year  for  the  set-up  of  Quercus
Publishing Inc. which will launch its first publishing list in the autumn of 2013.

Taxation

The  taxation charge for the year was GBP0.3m (2011: GBP1.5m). The corporation tax rate applicable in  2012
is lower at 24.5% than the rate in 2011, 26.5%.

Dividend

The  Directors are proposing an ordinary dividend of 2.44p per share, which equates to GBP0.5m (2011: 5.25p
per share which equated to GBP1.1m).

Earnings per share

Basic  earnings per share for the year were 5.21p (2011: 22.31p). The diluted earnings per share were 5.15p
(2011:  21.95p). Basic earnings per share before exceptional charge for the year were 5.60p (2011: 22.31p).
The diluted earnings per share before exceptional charge were 5.54p (2011: 21.95p).

Cash flow

The  Group's total net cash as at 31 December 2012 was GBP1.8m (2011: GBP4.3m). The reduction in  cash  was
due  to  a  number of factors including the payment of an ordinary dividend during the year based  on  2011
performance and an increase in investment in future titles which is part of our stated growth strategy.

Balance sheet

Current assets

Stock  and work in progress increased by 21.4% to GBP3.4m (2011: GBP2.8m). The increase is due to the stock
holding of a higher number of titles published during the year and the higher work in progress costs as  we
continue to increase the number of titles to be published in 2013.

Trade and other debtors increased by 20.0% to GBP13.8m (2011: GBP11.5m). The increase is in prepayments and
accrued  income  which  is  due  to the continued investment in titles to be  published  in  future  years.
Additionally,  there  was  an overpayment of corporation tax during the year  as  part  of  the  on-account
payment. The payments were based on the profits originally forecast for the year.

Equity and liabilities

As at 31 December 2012 total equity stood at GBP13.2m (2011: GBP13.2m). Movements in this balance primarily
relate to the payment of an ordinary dividend (GBP1.1m) and profit for the year (GBP1.1m).

Total  creditors due within one year, was consistent with 2011 at GBP6.3m (2011: GBP6.1m). Trade  creditors
increased 36.8% to GBP2.6m (2011: GBP1.9m) which is due to the timing of the payments at the year end.



QUERCUS PUBLISHING PLC

UNAUDITED CONSOLIDATED PROFIT AND LOSS ACCOUNT
For the year ended 31 December 2012
                                                               Notes    2012               2011
                                                                        GBP'000s           GBP'000s
                                                                                           
 TURNOVER                                                      2        20,429             24,759
                                                                                           
 Cost of sales                                                          (9,122)            (9,558)
                                                                                           
 GROSS PROFIT                                                           11,307             15,201
                                                                                           
 Selling and distribution                                               (3,348)            (3,753)
 Administration expenses                                                (6,498)            (5,550)
                                                                                           
 OPERATING PROFIT                                                       1,461              5,898
                                                                                           
 Exceptional items                                             3        (107)              -
                                                                                           
 PROFIT ON ORDINARY ACTIVITIES                                          1,354              5,898
 BEFORE INTEREST                                                                           
                                                                                           
 Interest receivable and similar income                                 13                 39
 Interest payable and similar charges                                   -                  (61)
                                                                                           
 PROFIT ON ORDINARY ACTIVITIES                                                             
 BEFORE TAXATION                                                        1,367              5,876
                                                                                           
 Taxation                                                      4        (298)              (1,506)
                                                                                           
 PROFIT ON ORDINARY ACTIVITIES                                                             
 AFTER TAXATION AND RETAINED                                                               
 PROFIT FOR THE YEAR                                                    1,069              4,370
                                                                                           
 EARNINGS PER SHARE                                                                        
 Basic earnings per share                                      10       5.21 pence         22.31 pence
 Diluted earnings per share                                    10       5.15 pence         21.95 pence

All amounts relate to continuing operations.

There were no recognised gains or losses for 2012 or 2011 other than those included in the profit and  loss
account.

QUERCUS PUBLISHING PLC

UNAUDITED CONSOLIDATED BALANCE SHEET
As at 31 December 2012
                                                               Notes    2012               2011
                                                                        GBP'000s           GBP'000s
                                                                                           
 FIXED ASSETS                                                                              
 Tangible assets                                                        558                588
                                                                                           
                                                                                           
 CURRENT ASSETS                                                                            
 Stocks                                                                 3,359              2,841
 Debtors                                                                13,751             11,525
 Cash at bank and in hand                                               1,847              4,291
                                                                                           
                                                                        18,957             18,657
                                                                                           
 CREDITORS: amounts falling due                                                            
 within one year                                                        (6,309)            (6,060)
                                                                                           
 NET CURRENT ASSETS                                                     12,648             12,597
                                                                                           
 TOTAL ASSETS LESS CURRENT LIABILITIES                                  13,206             13,185
                                                                                           
 PROVISIONS FOR LIABILITIES                                                                
 Deferred taxation                                                      (18)               (3)
                                                                                           
 NET ASSETS                                                             13,188             13,182
                                                                                           
 CAPITAL AND RESERVES                                                                      
 Called up share capital                                                164                164
 Share premium account                                                  4,823              4,808
 Profit and loss account                                                8,201              8,210
                                                                                           
 SHAREHOLDERS' FUNDS - All Equity                              6        13,188             13,182



QUERCUS PUBLISHING PLC


UNAUDITED CONSOLIDATED CASH FLOW STATEMENT
For the year ended 31 December 2012
                                                                                           
                                                                                           
 CASHFLOW STATEMENT                                            Notes    2012               2011
                                                                        GBP'000s           GBP'000s
                                                                                           
 Net cash inflow from operating activities                     7        59                 4,554
 Returns on investments and servicing of finance               8        13                 (6)
 Capital expenditure and financial investment                  8        (189)              (581)
 Taxation                                                      8        (1,264)            (2,870)
                                                                                           
 CASH INFLOW BEFORE FINANCING                                           (1,381)            1,097
                                                                                           
 Financing                                                     8        (1,063)            (2,274)
                                                                                           
 DECREASE IN CASH IN THE PERIOD                                         (2,444)            (1,177)
                                                                                           
                                                                                           
                                                                                           
                                                                                           
 RECONCILIATION OF NET CASH FLOW TO                                     2012               2011
 MOVEMENT IN NET FUNDS/(DEBT)                                           GBP'000s           GBP'000s
                                                                                           
 (Decrease)/ Increase in cash in the period                             (2,444)            (1,177)
                                                                                           
                                                                                           
 MOVEMENT IN NET FUNDS/(DEBT)                                                              
 RESULTING FROM CASH FLOWS                                              (2,444)            (1,177)
                                                                                           
 Net cash /(debt) brought forward                                       4,291              5,468
                                                                                           
 NET FUNDS AT 31 DECEMBER 2011                                          1,847              4,291



QUERCUS PUBLISHING PLC


NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2012


1.      ACCOUNTING POLICIES
    
The above unaudited financial information does not constitute statutory financial statements as defined  in
section  434  of  the  Companies Act 2006. The above figures for the year ended 31  December  2012  are  an
abridged  version of the Company's financial statements which will be reported on by the Company's auditors
before  dispatch  to  the  shareholders  and  filing with  the  Registrar  of  Companies.  The  preliminary
announcement was approved by the Board and authorised for issue on 22 April 2013.


2.      TURNOVER
    
A geographical analysis of turnover is given below:

                                                                 2012              2011
                                                                 GBP'000s          GBP'000s
                                                                                   
 United Kingdom                                                  15,457            16,545
 North America                                                   2,911             7,391
 Other                                                           2,061             823
                                                                                   
                                                                 20,429            24,759

USA and Canada, disclosed as separate lines previously, have been combined into North America above as this
is more representative of how the Board currently views the business.

Disclosure  of  the profit and loss information and net assets for each class of business and  geographical
area is not disclosed as in the opinion of the Directors such information would be seriously prejudicial to
the interests of the Group.


3.      EXCEPTIONAL ITEMS
The  exceptional  cost  of  GBP0.1m  (2011: GBPnil) relates to costs incurred  in  the  set-up  of  Quercus
Publishing Inc. which is due to launch its first publishing programme in September 2013.

4.      TAX ON PROFIT ON ORDINARY ACTIVITIES
    
                                                                 2012              2011
                                                                 GBP'000s          GBP'000s
 Analysis of tax charge in year                                                    
 Current tax (see note below)                                                      
 UK corporation tax charge on profits for the year               368               1,492
 Adjustment in respect of prior periods                          (85)              (12)
                                                                                   
 Total current tax                                               283               1,480
                                                                                   
 Deferred tax                                                                      
 Origination and reversal of timing differences                  4                 14
 Adjustment in respect to prior periods                          12                11
 Effect of tax rate change on opening balance                    (1)               1
                                                                                   
 Total deferred tax                                              15                26
                                                                                   
 Tax on profit on ordinary activities                            298               1,506
    


Factors affecting tax charge for year:

The  tax assessed for the year is lower (2011: lower) than the standard rate of corporation tax in  the  UK
(24.5%) (2011: 26.5%).  The differences are explained below:

                                                                 2012              2011
                                                                 GBP'000s          GBP'000s
                                                                                   
 Profit on ordinary activities before tax                        1,367             5,876
                                                                                   
 Profit on ordinary activities multiplied by standard                              
 rate of corporation tax of 24.5% (2011: 26.5%)                  335               1,557
                                                                                   
 Effects of:                                                                       
 Ineligible fixed asset depreciation                             17                8
 Expenses not deductible for tax purposes                        13                19
 Capital allowances in excess of depreciation                    4                 (6)
 Share options exercise relief                                   (2)               (81)
 Share option expense                                            -                 4
 Adjustments to tax charge in respect of previous periods        (85)              (12)
 Marginal relief                                                 -                 (9)
 Other short term timing differences                             1                 -
                                                                                   
 CURRENT TAX CHARGE FOR THE YEAR (SEE NOTE ABOVE)                283               1,480

There were no factors that may affect future tax charges.





5.      PROPOSED DIVIDEND
                                                               2012               2011
                                                               GBP'000s           GBP'000s
                                                                                  
Ordinary dividend                                              501                1,077
                                                                                  


The  proposed dividend of 2.44p per ordinary share will be paid on 17 June 2013 to shareholders  registered
on 3 May 2013. The payment of the dividend is subject to approval of the shareholders at the Annual General
Meeting.


6.      RECONCILIATION OF MOVEMENT IN SHAREHOLDERS' FUNDS
    
                                                               2012               2011
                                                               GBP'000s           GBP'000s
GROUP                                                                             
Profit for the period                                          1,069              4,370
Share options converted                                        15                 188
Loan notes converted                                           -                  1,145
Dividend paid                                                  (1,078)            (2,462)
Share option cost recognised as a charge in the year           -                  16
                                                                                  
                                                               6                  3,257
                                                                                  
Opening shareholders' funds                                    13,182             9,925
                                                                                  
Closing shareholders' funds                                    13,188             13,182


7.      NET CASH FLOW FROM OPERATING ACTIVITIES

                                                               2012               2011
                                                               GBP'000s           GBP'000s
                                                                                  
Operating profit                                               1,461              5,898
Exceptional items                                              (107)              -
Depreciation of tangible fixed assets                          219                144
Share option cost                                              -                  16
Loss on disposal                                               -                  4
(Increase) / decrease in stocks                                (518)              (115)
(Decrease) / increase in debtors                               (1,843)            159
Decrease / (increase) in creditors                             847                (1,552)
                                                                                  
NET CASH INFLOW/(OUTFLOW) FROM OPERATIONS                      59                 4,554


8.      ANALYSIS OF CASH FLOW HEADINGS NETTED IN THE CASH FLOW STATEMENT
    
                                                               2012               2011
                                                               GBP'000s           GBP'000s
                                                                                  
FINANCE                                                                           
Interest received                                              13                 39
Interest paid                                                  -                  (45)
                                                                                  
NET CASH OUTFLOW FROM RETURNS ON INVESTMENTS AND SERVICING OF                     
FINANCE
                                                               13                 (6)
                                                                                  
                                                                                  
CAPITAL EXPENDITURE AND FINANCIAL INVESTMENT                                      
Purchase of tangible fixed assets                              (189)              (581)
                                                                                  
                                                                                  
TAXATION                                                                          
Taxation                                                       (1,264)            (2,870)
                                                                                  
                                                                                  
FINANCING                                                                         
Issue of ordinary shares                                       15                 188
Dividend paid                                                  (1,078)            (2,462)
                                                                                  
NET CASH OUTFLOW FROM FINANCING                                (1,063)            (2,274)


9.      ANALYSIS OF NET FUNDS / (DEBT)
    
                                    1     January   Cash flow       Non-cash        31    December
                                    2012                            changes         2012
                                                                                    
                                    GBP'000s        GBP'000s        GBP'000s        GBP'000s
Cash in hand and at bank            4,291           (2,444)         -               1,847




10.     EARNINGS PER SHARE
    
Earnings  per share is calculated on the basis of a profit of GBP1,068,644 (2011: GBP4,370,026) divided  by
the weighted average number of shares in issue for the period of 20,528,654 (2011: 19,588,814). The diluted
earnings  per  share  is calculated on the assumption that five (2011: ten) tranches  of  the  options  are
exercised this year; all other share options are excluded as they are anti-dilutive.

These  assumptions give rise to a total weighted average number of ordinary shares in issue at the  end  of
the period of 20,753,654 (2011: 19,905,882).

                                                            Year ended 31             Year ended 31
                                                            December 2012             December 2011
                                                                                      
                                                              GBP'000s                 GBP'000s
Basic earnings per share                                                                                 
Profit for the year                                          1,068,644                4,370,026
                                                                                                         
                                                             Earnings per share      Earnings per share
Profit per share                                             5.21 pence              22.31 pence
                                                                                                         
                                                                                                         
Diluted earnings per share                                                                               
Profit for the year                                          1,068,644                4,370,026
                                                                                                         
Profit for the year for diluted calculation                  1,068,644                4,370,026
                                                                                                         
Weighted average number of shares:                                                                       
For basic earnings per share                                20,528,654               19,588,814
Dilutive effect of share options                               225,000                  317,068
                                                                                                         
Diluted weighted average number of shares                   20,753,654               19,905,882
                                                                                                         
                                                            Earnings per share       Earnings per share
Diluted profit per share                                    5.15 pence              21.95 pence


Adjusted earnings per share is calculated as above, with profit for the year adjusted to exclude the  post-
tax effect of exceptional items.

                                                            Year ended 31           Year ended 31
                                                            December 2012           December 2011
                                                                                      
                                                            GBP'000s                  GBP'000s
Adjusted basic earnings per share                                                     
Profit for the year                                         1,068,644                 4,370,026
Exceptional items                                           107,031                   -
Tax effect of exceptional items                             (26,223)                  -
                                                                                      
                                                            1,149,452                 4,370,026
                                                                                      
                                                            Earnings per share        Earnings per share
Profit per share                                            5.60 pence                22.31 pence
                                                                                      
                                                                                      
Adjusted diluted earnings per share                                                   
Profit for the year                                         1,068,644                 4,370,026
Exceptional items                                           107,031                   -
Tax effect of exceptional items                             (26,223)                  -
                                                                                      
Profit for the year for diluted calculation                 1,149,452                 4,370,026
                                                                                      
Weighted average number of shares:                                                    
For basic earnings per share                                20,528,654                19,588,814
Dilutive effect of share options                            225,000                   317,068
                                                                                      
Diluted weighted average number of shares                   20,753,654                19,905,882
                                                                                      
                                                            Earnings per share        Earnings per share
Diluted profit per share                                    5.54 pence                21.95 pence


11.     FIVE YEAR TRADING SUMMARY

                                                  2012         2011        2010         2009         2008
                                                  GBP'000s     GBP'000s    GBP'000s     GBP'000s     GBP'000s
                                                                                                          
CONTINUING OPERATIONS                                                                                     
TURNOVER                                          20,429       24,759      31,784       19,133       10,944
Cost of sales                                     (9,122)      (9,558)     (15,870)     (12,225)     (6,072)
                                                                                                          
GROSS PROFIT                                      11,307       15,201      15,914       6,908        4,872
                                                                                                          
Selling and distribution                          (3,348)      (3,753)     (4,004)      (2,046)      (1,405)
Administration expenses                           (6,498)      (5,550)     (4,275)      (3,669)      (3,438)
                                                                                                          
OPERATING PROFIT                                   1,461        5,898       7,635        1,193           29
                                                                                                          
Exceptional items                                   (107)        -           -            -               -
                                                                                                          
PROFIT ON ORDINARY ACTIVITIES                      1,354        5,898       7,635        1,193           29
BEFORE INTEREST                                                                                           
                                                                                                          
Interest receivable and similar income                13           39           9            4            5
Interest payable and similar charges                 -            (61)       (160)        (330)        (315)
                                                                                                          
PROFIT ON ORDINARY ACTIVITIES                                                                             
BEFORE TAXATION                                    1,367        5,876       7,484          867         (281)
                                                                                                          
Taxation                                            (298)      (1,506)     (2,074)        (252)          42
                                                                                                          
PROFIT ON ORDINARY ACTIVITIES                      1,069        4,370       5,410          615         (239)
AFTER TAXATION AND RETAINED                                                                               
PROFIT FOR THE YEAR                                                                                       
                                                                                                          
EARNINGS PER SHARE                                                                                        
Basic earnings per share                          5.21p        22.31p      30.81p         3.50p       (1.95)p
                                                                         
Diluted earnings per share                        5.15p        21.95p      26.47p         3.50p       (1.95)p
                                                                    


12. ANNUAL GENERAL MEETING
Notice of the Annual General Meeting will be circulated to shareholders in the week commencing 6 May 2013.

13. REPORT AND ACCOUNTS
Copies  of  the  Annual  Report and Financial Statements will be circulated to  shareholders  in  the  week
commencing 6 May 2013 and can be viewed on the Quercus website following the Annual General Meeting.






Contact Information

  • Quercus Publishing plc