Booktopia extends share trading suspension as critical funding announcement looms

Booktopia extends share trading suspension as critical funding announcement looms

Just as so many Booktopia (ASX: BKG) customers had to wait longer than expected for deliveries as the online bookseller transitioned to a new fulfilment centre, so too will investors have to be patient when it comes to a critical funding announcement that was supposed to be released today.

Within the past six weeks the company has experienced walkouts from its CFO and CEO, brought its chairman Peter George and founder Tony Nash into executive roles on nil priced options, and announced 50 redundancies that are expected to bring about $6.1 million in annualised cost savings.

But first the company has to pay those redundancies from a cash position that was just $212,000 at the end of March.

Booktopia secured a $1 million debt facility with AFSG Capital to assist with the payments, but that won't be enough so it is seeking "alternative sources of funding liquidity" to meet redundancy costs and provide ongoing working capital. 

It has now been more than a week since Booktopia called a trading halt on Thursday, 13 June pending a material announcement relating to outcomes from a strategic review launched in February, including progress on seeking additional funding.

That announcement was due before the market opened on the Monday that followed, but on that day, 17 June, shares were put in voluntary suspension as additional funding "not progressed to the extent where it is capable of making an announcement".

The suspension was due to be lifted this morning, but now the company is asking for more time, noting that "indicative interest" has been received from some parties with due diligence currently underway "to determine if support will be forthcoming".

Booktopia did not specify which parties, but explained it had been seeking "support from suppliers, existing shareholders and from other potential funding sources".

"Such [a] transaction, if forthcoming, is necessary for the Company’s continued financial viability," the company stated in its ASX announcement this morning.

"The timetable for coming out of suspension is predicated on the form any potential funding takes and the company expects it will be in a better position to advise on the viability and form of that funding by the end of next week.

"In its opinion, the continued trading of the Company’s securities is likely to be materially prejudicial to its ability to seek support from various parties and to obtain necessary funding."

The strategic review was announced in February following a 21.1 per cent fall in revenue to $86.3 million for the December half, which was aligned with a similar reduction in units sold as the company purposefully scaled back its marketing to reduce demand amidst the disruption of moving to a new customer fulfilment centre (CFC) in South Strathfield.

The company reported the transition also impacted sales due to lower inventory levels and longer delivery times. During the December half, Booktopia also implemented a number of cost-saving initiatives, which are projected to be felt in FY25 but came with $2.8 million in one-off costs.

In April, the company revealed positive operating cash inflows of $781,000 for the generally quiet March quarter, although conditions remained challenging due to economic headwinds and the continued soft performance of the Australian book market.

Booktopia also highlighted that the academic season for tertiary education saw students continuing to make cost-conscious decisions around their study and learning materials, impacting performance in the category.

Within a month of the quarterly result, then CFO Fiona Levens left Booktopia in mid-May after more than 12 years with the company, and her departure was followed by the exit of then CEO and Amazon veteran David Nenke in early June with immediate effect after just over a year in the position.

In response, and on the same day the redundancies were announced, chairman Peter George took on executive responsibilities for a six-month period, while founder and director Tony Nash did the same in a position of sales director.

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