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Quarto Group – a bad first half, but states there's an ‘attractive price’ takeover approach…

By Steve Moore | Wednesday 9 August 2017

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.

Following a recent profit warning, so tries to emphasise “transitional year”, publishing group Quarto (QRT) has announced results for the first half of 2017… as well as an “attractive” price takeover approach…

Noting “a challenging trading background in our key domestic markets”, the results show a significantly increased adjusted pre-tax loss of $8.7 million on lower revenue of $50.2 million. This helped net debt up to $75.9 million, current assets over current liabilities reduce to $22.9 million and non-current liabilities increase to $95.2 million, with it added “the board, in consultation with shareholders, will review the final dividend policy over the coming months”.

With already a significant second half weighting, the company reckons “we have an excellent publishing programme for the Autumn and the Holiday period - one of our strongest in the last few years”. However, it also admits “we expect the soft retail environment to continue”. This has all though been overshadowed by it also announced that;

“it has received an approach to acquire the entire issued and to be issued share capital of the company at a price the board considers to be attractive and reflective of the inherent value of the business as a global publishing platform - and hence worthy of due consideration. Discussions with the bidder are at an early stage and there can be no certainty that an offer will be made or as to the terms of any such offer.”

The net result is the shares up 14% to 159p. This though compares to more than 300p earlier this year and circa 240p before last month’s profit warning. I thus suggest there scope for the ‘attractive price’ takeover approach to still be decently above the current valuation – with this likely seeing those still in here content to hold. However, the “early stage” of discussions in conjunction with the trading and financial situations are sufficient to see me presently stay away.

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