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January 22, 2014 6:02 pm
Quercus, publisher of the Stieg Larsson crime trilogy, has put itself up for sale after worse than expected Christmas trading forced it into discussions with its banks.
The group, which made £5.9m in pre-tax profits in 2011 when the Millennium trilogy topped the best-seller list, had been forecast to make pre-tax profits of up to £3m in the year to December. But last week Quercus warned it was likely to make a “very significant trading loss”.
This week the board – backed by Pentland, the private group which owns brands such as Speedo as well as 47 per cent in Quercus – decided to throw in the towel and find a buyer.
Quercus announced in December it had acquired the rights from Stieg Larsson’s estate to publish the English version of a fourth book in the Millennium series. However, the book, which is being written by Swedish author David Lagercrantz, will not be published until 2015. In the meantime, said Mark Smith, chief executive, conditions for small publishers such as Quercus have become tougher.
He said the industry was polarising and that Quercus had been caught by the accelerating shift to ebooks and the power of online distributors led by Amazon. Digital sales were disappointing during Christmas, traditionally the group’s strongest trading period. At the same time, sellers of physical books have become increasingly conservative, said Mr Smith, “and we have been fighting for shelf space”.
“We need the reach, resources and clout of a big company to compete with the major publishing houses,” he said.
Quercus’s plight contrasts with Bloomsbury Publishing, which said Christmas trading had helped to lift revenues in the fourth quarter to December by a fifth.
Bloomsbury made its name on the back of blockbuster sales of the seven Harry Potter books. As the boy wizard series came to an end, group pre-tax profits fell to £5.2m in 2006, a quarter of the year before. Since then, though, as Bloomsbury has expanded and diversified into professional and educational books, revenues have rebounded. Underlying pre-tax profits in 2012 were £12.5m and are forecast to rise to about £13m this year.
Mr Smith points out that Bloomsbury is 15 years older than Quercus and many times larger. The London-based group has tried to diversify, taking on new staff and new authors such as Suggs, lead singer of Madness, to fill the gap left by the Larsson series. However, it is still largely focused on publishing popular fiction and non-fiction. Expansion has proved expensive with top-tier authors demanding advances of £1m and more, which is well beyond Quercus’s reach.
“We invested in authors and people to raise revenues. But the titles we invested in failed to make an impact and the revenues didn’t come and so we went to the bank,” he said. When the board realised after Christmas that sales still had not come through, it hoisted the “for sale” sign.
The shares, which peaked above 150p in 2011, rose 6 per cent on Wednesday to 32p.
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