Shares in online bookshop Booktopia (ASX: BKG) are on the rise this morning after the company unveiled its plans to improve earnings and reduce costs over the next 18 months.
The announcement, which follows a bitter boardroom battle at the e-commerce retailer over the course of last year, details how BKG will deliver approximately $12-15 million of annualised improvements to earnings to be realised in FY24 and beyond.
Booktopia’s initiatives include adjusting the pricing on various products to reflect costs, changing how it recovers third-party delivery costs, optimising its advertising program to focus more on high-conversion channels and reducing its property/lease obligations requirements.
Also included in this plan is the previously announced exit from the Sydney-based company’s investment in the Australian and New Zealand arm of Welbeck Publishing, resulting in a cash payment of $1.5 million.
Further, the business has undertaken an organisational restructure to reduce costs, involving 30 to 40 redundancies resulting in $4-5 million in cost savings.
These initiatives build on already-announced projects to drive operational efficiencies, including the acquisition of an upgraded customer fulfilment centre in Sydney’s west, close to its existing distribution centre in Lindcombe Business Park.
Shareholders have responded positively to the company’s new direction, pushing the group’s share price up by more than 34 per cent at the time of writing to 27.5 cents - a price not seen since September 2022.
Booktopia chairman Peter George said the plan would position the company well in the near term, but noted the decision to make staff redundant was ‘disappointing but necessary’.
“Booktopia is focused on building a profitable, sustainable business in the interests of all stakeholders and is committed to delivering the Next Gen CFC in 2023 which will position the company for the challenging online retail conditions in the near term,” George said.
“Letting some of our talented staff go as part of these cost cutting initiatives is a disappointing but necessary step in these economic times.”
Booktopia’s latest update follows a tumultuous 2022 for the company which saw its founder and CEO step down from the top role in the wake of a poor set of third-quarter financial results.
Founder Tony Nash remained with Booktopia in a new role exclusively focused on growth at the e-comm operator, however he was eventually asked by the board to leave that role too two months later.
Nash remained a BKG director and substantial shareholder - a position from which he agitated to install new directors to the company.
That boardroom battle led to a complete rout of non-executive positions with the company’s four independent directors including the chairman tendering their resignations in September.
Those that left included Su-Ming Wong who resigned in September, Fiona Pak-Poy and Judy Slayter who both resigned in November, and the company’s chairman Chris Beare who stepped down on the appointment of Peter George into the role on 1 December 2022.
These board members were replaced in December by Abigail Cheadle and Stephen Ezekiel as non-executive directors.
Since the board spill, former chairman Beare addressed shareholders at the 2022 annual general meeting where he acknowledged the struggles Booktopia had been facing, describing the financial year as ‘one of the most challenging in Booktopia’s 18-year history’.
“We have learnt from this and have taken action to improve our future performance,” Beare said.
“While extremely disappointing to have so many one-off items, we decided to bring each of them to account and provide the company with a clean slate on which to move forward.
“While the results for the year were not what we had hoped or planned for, they provide a range of learnings that we are using to position the business to meet the challenges and opportunities that lie ahead.”
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