Young Australians’ reading habits leave plenty to be desired. A 2024 study found that one in three Australians is struggling to read, costing the economy billions of dollars and painting a bleak picture for online booksellers like the Booktopia Group (ASX: BKG).

The Company has been reeling under the impact of declining interest in books, physical ones at least. In its Q3 FY24 report, Booktopia noted that the quarter from January to March was a lean trading period for the Group. This is in line with the softer performance of the book market at the start of the calendar year. It is a quieter period across consumer goods retailers following the festive season, which includes Black Friday, Cyber Monday and Christmas. 

However, the first half of FY24 did not fare much better.

Despite this, the Group delivered positive operating cash inflows of $781,000 for the quarter, thanks to benefits from cost-saving and efficiency initiatives. Cash flows from investing activities continue to reflect the investment in the Company’s intellectual property ($479,000), and cash flows from financing activities reflect the cost of leases and debt facilities ($1.8 million). 

Trading aligned with its projected quarter outlook despite persistently challenging conditions attributable to economic headwinds and the sustained underperformance of the Australian book market. Throughout the tertiary education academic season, students have consistently opted for cost-effective choices regarding their study and learning materials, affecting performance in this sector.

Booktopia continued to roll out initiatives in the Customer Fulfilment Centre (CFC) to improve operational efficiencies in the customer fulfilment process. It is also trying to unlock further cost savings, such as those around lease obligations and other overheads. It is also realising savings from previous restructures, which reduced office employment costs by 34% or $2.2m in Q3 compared to the prior comparative period.

Booktopia reported YTD customer receipts of $144.7 million, recording a cash inflow of $3.8 million. At the end of Q3 FY24, it had cash equivalents of $212k. 

In H1 FY24, the Company’s underlying EBITDA loss sunk further by 34% to $1.8 million. Revenue was down by 21% in H1 FY23 to $86.3 million due to soft trading conditions and the disruption caused by the transition to its new Customer Fulfilment Centre (CFC).

It recorded $700k in CFC project costs. These costs included the transfer of stock and machinery to the new site as well as consultancy fees for the project. It also reported restructuring costs of $2.1m.

To return to “acceptable earnings”, the business is focusing on improving its website experience, optimising inventory, developing the Booktopia brand and furthering its customer-centric commitment through personalisation. 

Even as it does so, the Company’s sales aspirations have turned lukewarm. Booktopia’s initial EBITDA guidance for FY24 was $13.5 million, based on volume growth and business improvement initiatives to reduce costs, including CFC Labour costs and other overheads. Now, it forecasts an underlying EBITDA of $1-3m in FY24.

Booktopia is conducting a strategic review to explore all options to accelerate a return to acceptable earnings. This review is expected to be completed before the end of FY24.