Online Bookselling Giant Flounders, Shares Plummet to Less Than 6 Cents

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Australian bookseller and publisher Booktopia Group Ltd—a fast-growing success story since its launch in 2004—appears to be in significant financial strife.

It has been forced to arrange $1 million in emergency funding and has withdrawn its earnings forecasts.

The company also owns Angus and Robertson, another major Australian online bookseller, publisher, and printer. In 2017, Booktopia launched Booktopia Publisher Services and in 2019, it launched its own publishing business.

The business suffered a $16.7 million loss for the six months to Dec. 31, compared to a $3.9 million loss a year ago.

Its underlying earnings before interest, tax, depreciation and amortisation (EBITA) was down 34 percent to a $1.8 million loss, and it sold 20.6 percent fewer books and other items—3.1 million for the half-year.

Tony Nash, Steve Traurig, and Simon Nash started the business in Sydney with a budget of $10 per day.

Initially a drop shipping operation, with website operations and order fulfilment outsourced, the company built its own website and began shipping its own stock in 2007.

It later bought the Angus and Robertson business from Penguin Random House in 2015.

In December 2020 it listed on the ASX at an issue price of $2.30 ($1.53); by August 2021 it had risen to $3.00.

Was the Best Book Retailer 3 Times

The business won National Book Retailer of the Year at the Australian Book Industry Awards in 2016, 2017, and 2019.

It is the only company to have made the AFR/BRW Fast 100 for eight years, from 2009 to 2017, and is currently voted by the public as Australia’s favourite bookstore.

Booktopia successfully raised $20 million in additional capital at the beginning of 2020.

However, it was late entering the digital market, announcing a joint venture that year with Rakuten Kobo to provide e-books and downloadable audiobooks through the Booktopia/ Kobo app.

Senior research associate in media at the University of Sydney, Rob Nicholls, points out that the popularity of the Booktopia name did not translate to the app.

It sits at number 22 in Australia in the “Books” category on the App Store, while competitors Audible and Kindle are one and two, respectively.

Problems for the business became evident in 2021, when founding CEO Tony Nash sold $6 million worth of his shares in December, shortly before the company announced an anticipated drop in earnings.

That prompted an angry reaction from investors and forced his resignation. In August that year, the company was fined $6 million by the Australian Competition & Consumer Commission (ACCC) due to misrepresenting consumers’ rights to refunds and returns.

By June 2022, its shares were worth 17 cents.

CEO Resigns, Layoffs in Progress

In the most recent signs of trouble, CEO David Nenke tendered his resignation on June 3, with immediate effect. Chief Financial Officer Fiona Levens resigned on May 15.

Booktopia also announced it was withdrawing its February earnings guidance, which had suggested earnings of $1 million to $3 million in 2023/24.

At least 50 roles will be considered for redundancy at its Rhodes headquarters in a bid to save $6.1 million in the coming financial year.

To help pay for costs associated with those redundancies, the company has secured a $1 million revolving debt facility with AFSG Capital at an 18 percent interest rate.

The company has issued $400,000 in shares to secure the debt facility and agreed to pay $200,000 when it first borrows from it. GST will be paid on top of those fees, bringing the total cost to $660,000.

The company is seeking consent from its existing secured lender, Moneytech, regarding the debt facility and certain financial reporting covenants.

As a cost-saving measure, Booktopia’s directors have agreed to have their fees paid in the form of shares for the next six months, during which time Chairman Peter George will assume the role of executive chairman.

“The sustained volatility of the economic climate, in addition to changing consumer spending behaviours, have continued to contribute to business results that have been below our expectations,”  Mr George said.

eBooks, Changes at Universities Contributing to Challenges

The company has also announced a number of strategies aimed at improving conversion rates to support increased revenue.

These include making it easier for customers to make website purchases, developing a guest checkout feature, and further optimisations to improve website speed on mobile and desktop, as well as improving the overall book-buying experience.

The company attributed its troubles to economic headwinds and the continued soft performance of the Australian book market.

Tertiary students have also been making cost-conscious decisions about their study and learning materials, affecting performance in that category, Booktopia said.

“Firstly, the [problem is the] shift in reading from pure ink and paper, to e-readers plus ink and paper. Second, a shift by universities away from set texts” contributed to the company’s challenges, Mr. Nicholls said.

Finally, the company has also struggled to meet orders while it transitioned operations to a new dedicated fulfilment centre.

AAP contributed to this story.