MIDAS SHARE TIPS UPDATE: Picture looks rosy for our tip Quarto as demand for books stays strong

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Gold: Quarto, which publishes award winning children’s books, has done well from the adult colouring craze

The Kama Sutra, The Bear And The Piano and Homemade Sausage: Recipes And Techniques To Grind, Stuff, And Twist Artisanal Sausage At Home seem to have little in common. But they are all books published by Quarto, the world’s leading publisher of illustrated books.

The internet has turned many areas of the publishing market on their head, as costs are chased ever lower by Amazon and other online retailers. But Quarto is in a different space. Most of its titles are either for children or enthusiasts and in both cases the desire for physical books is strong.

Midas tipped Quarto in September 2009, when the shares were 96p. In 2012, a large disgruntled investor, Harwood Capital, complained that the stock was underperforming and ousted the long-serving chairman and founder, Lawrence Orbach.

Ironically, the firm has been run since then by Marcus Leaver – who Orbach chose as his successor – during which time debt has come down, the business has become more efficient and profits have risen.

The shares have done well, too. Today, following strong results last week, they are 256p and analysts believe they have considerably further to go. The Bear And The Piano – Leaver’s personal favourite – was also named best illustrated children’s book by bookseller Waterstones last week.

Quarto sells its books in more than 45 countries and in more than 35 languages, but the bulk of its sales are in the US, particularly middle America. The group is not looking for the next best-seller. Instead, it focuses on spotting trends and creating illustrated books that tap into them.

Last year, for example, it did well from adult colouring books, a craze that began in the UK but has since swept the world.

Quarto covers almost every interest under the sun, from gardening to electric wiring to erotic massage. In most cases, however, books are not just sold in bookshops but in other outlets too, such as craft stores, DIY shops and clothing retailers.

No single book accounts for more than 0.6 per cent of sales and two-thirds of revenues come from the firm’s backlist – titles that are more than a year old. This makes Quarto a much more stable publisher than many and one whose revenues are considerably more predictable.

Last week, the group delivered an 18 per cent increase in profits to $14.1 million (£9.8 million) while the dividend rose from 8.3p to 9.5p, significantly higher than expectations. Results are in dollars as most of the sales are in the US.

In a sign that Quarto is entering a new phase, Tim Chadwick, the chairman brought in by Harwood, is leaving to be replaced by Peter Read, a highly experienced former partner at accountancy giant KPMG

Mindful of the digital revolution, Quarto is making more of its books available online and in electronic format, though most customers prefer print. The group is also keen to expand the children’s book division.

Midas verdict: Quarto has delivered steady growth over the past seven years and investors have done well. They might be tempted to sell some shares and bank a bit of profit but they should keep the rest, as Leaver is passionate about the firm and determined to make it better. New investors could also buy in on any short-term weakness.

Traded on: Main market Ticker: QRT Contact: quartoknows.com or 020 7700 6700