Australia’s largest online bookstore Booktopia enters voluntary administration

Booktopia (ASX: BKG) has entered voluntary administration pending an “urgent assessment” of options for sale or recapitalisation.

Insolvency firm McGrathNicol has been appointed and shares in the cash-strapped company will be suspended from trading during the administration process.

All Booktopia subsidiaries including online bookseller, publisher and printer Angus and Robertson have been included in the collapse.

Last-ditch effort

Today’s news follows a last-ditch effort in June to secure working capital for Booktopia, which debuted on the Australian Securities Exchange in 2020 with a market capitalisation of $315.8 million.

The bookseller has been struggling to keep its head above water ever since, announcing initiatives in January 2023 to deliver earnings improvements of up to $15m.

It embarked on a comprehensive business review that resulted in a string of cost-cutting ideas including margin and advertising optimisation, postage recovery and a rationalisation of property leases and obligations.

Mass redundancies

Also on the list was a planned $5m reduction in overheads to be achieved through mass redundancies at Booktopia’s Sydney headquarters.

“We are focused on building a profitable and sustainable business which will position our company for challenging online retail conditions in the near-term,” the company said at the time.

“Letting some of our talented staff go as part of these cost-cutting initiatives is a disappointing but necessary step in these economic conditions.”

Booktopia has since slashed at least 50 jobs in an effort to stay afloat after reporting a 34% cut to its underlying EBITDA to $1.8m for the six months to end December and a 21.1% fall in revenue to $86.3m.

Continued woes

Nevertheless the company has kept bleeding, with a self-driven drop in sales to cope with the logistical challenges of moving to a new 20,000 square metre customer fulfilment centre south of Sydney not helping matters.

Announced in February 2023, the timing of the move coincided with reduced returns in the Australian book market amid cost-of-living pressures, as well as the resignation of key management executives and an ever-declining cash balance.

It was supported by a $12m finance package from Australian non-bank lender Moneytech Finance and AFSG Capital and was believed to be “critical to ensuring Booktopia can deliver industry-leading efficiency in the medium and long-term”.

Re-setting cost base

The new centre, together with the business improvement initiatives, was expected to “reset” Booktopia’s cost base.

“The advanced robotics platform and future-proof design will ensure we can continue to evolve with changing technologies and deliver books in the fastest possible time at the lowest possible cost, well into the future,” it said.

However, as a result of operational disruption and moving expenses, Booktopia’s December half-year revenue and profits failed to provide positive returns for shareholders.

The financials were reported to be “heavily impacted” by a large volume of one-off costs including the new warehouse management system, equipment relocation and consultancy fees.

The 21.1% drop in revenue was “reflective of operational disruption resulting from the transition to the company’s new centre” and led to lower inventory levels, longer delivery times and reduced marketing.