Consumer Discretionary

Booktopia founder calls it quits as earnings and valuation free fall

Tue 03 May 22, 12:41pm (AEST)
Down 6 Chop Fall
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Key Points

  • Booktopia drops two bombs on Tuesday as a search begins for a new CEO
  • Earnings for the 9 months to 31 March fell -63% amid an underperformance in the academic division
  • The company expects earnings to fall more than -70% in FY22, net profit to be a loss

There’s no better way to put it - Booktopia (ASX: BKG) is just another dumpster fire IPO from 2021.

Instead of trying to turn the sinking ship around, co-founder and chief executive Tony Nash has today decided to call it quits. In parallel with his departure, Booktopia announced a -63% decline in earnings for the 9 months to 31 March.

The company's stock is down -22% at noon and close to -85% from August 2021 highs.

Numbers at a glance

For the 9 months to 31 March 2020: 

  • Revenue of $194.7m, up 9% 

  • Earnings of $5.5m, down -63%

  • Distribution labour cost per unit of $1.66, up 23%

  • Average customer spend of $127, up 7% 

The worst possible moment

It's not a good look for a founder and major shareholder to step away after such an abysmal performance.

At present, Mr Nash is Booktopia's largest shareholder with 22.8m shares or 16.6% of the company.

Since listing in December 2020, he has reduced his shareholding only slightly, from 18.6% or 25.5m shares.

Following the massive destruction of shareholder wealth, the value of Mr Nash’s own holdings have plunged from a peak of approximately $75m to almost $10m.

Ugly narrative

Booktopia said that “the growth in online books sales has moderated” as the economy returns to normal. 

A key headwind was within the academic division, where the blame was placed on: 

  • Low volumes of international students

  • Reduction in university students in the first semester

  • Strong employment market encouraging school-leavers to postpone studies

Lower academic book sales alongside increased operating expenses squeezed margins, especially in the third quarter, where earnings declined -65% to $1.5m.

Booktopia tried to reassure investors that things are now operating smoothly, and "will improve again when the second distribution centre is fully commissioned in the next few months."

Full-year outlook

Booktopia expects to deliver full-year revenue of approximately $242m, an 8% increase compared to last year.

Earnings is expected to be between $3-4m, down -70% to -78%. While net profit is expected to be a loss.

Food for thought

There's plenty of Booktopia-like narratives floating around like Kogan (ASX: KGN) and Redbubble (ASX: RBL).

It goes to show that without a fundamentally sound narrative and willing buyers, stocks can be worth less than paper.

2022-05-03 11 55 20-Booktopia Group Ltd (ASX BKG) Share Price - Market Index
Booktopia 12-month price chart

 

Written By

Kerry Sun

Finance Writer & Social Media

Kerry holds a Bachelor of Commerce from Monash University and was Vice President of the University Network for Investing and Trading (UNIT). He is an avid swing trader, and drawn to breakouts and technical set ups. Outside of writing and trading, Kerry is a huge UFC fan, loves poker and bouldering.

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