Bloomsbury is issuing new shares and implementing a raft of cash-saving measures to counter the impact of recent retail closures on its business, which in a "prudent downside scenario" the company estimated could see print revenues fall as much as 75%.
The publisher is issuing close to four million shares to generate £8.4 million in extra cash in wake of the impact of coronavirus on its print book orders.
Reducing discretionary spending, including marketing, is expected to save an average of £900k per month, the company said in a trading update. A recruitment freeze and furloughing staff "with top-up salaries for the majority of those affected" is hoped to save £30k per month.
The majority of employees have meanwhile been asked to take a pay cut for the next three months in a bid to make additional savings of £200k per month. The Bookseller understands that anyone earning over £30,000 a year has been asked to take the pay cut, scaled into bands so that higher pay incurs a higher salary percentage cut. Meanwhile Friday afternoons will be paid time off for all staff.
The company said it is applying for government schemes in the UK, US and Australia to support staff and businesses, to save £700k per month for the first two months and £100k after, if the applications are successful.
Outlining its predicament in wake of the coronavirus, the company said restrictions and retail closures had occured in all of its key markets—the UK, US, Australia and India—as well as in "many other important markets", and this has "impacted" orders for print books in "all" its markets, which last year made up 79% of the company's revenue.
More positively, in the statement, Bloomsbury reported its UK, US and Australia warehouses "remain open and continue supply to customers". It said it has "positive sales prospects through Amazon, even as they prioritise essential crisis services, with strong growth in demand for e-books and audio books". Supermarkets "are trading as previously expected", and the re-opening of the market in China has seen "strong recovery in orders". It also said it was pleased to see sales direct from Bloomsbury.com, and that it has launched a scheme to support independent bookshops by offering a referral incentive for Bloomsbury titles.
Its academic digital revenues are doing well, meanwhile, up over 20% year-on-year for March 2020, and Bloomsbury reported "this trend has continued into April".
However, Bloomsbury said it is currently unable to provide guidance for the year ahead (ending 28th February 2021), levelling the impact of coronavirus on the business "may be substantial".
In what it termed a "prudent downside scenario", its print revenues could fall as much as 75%, and it outlined measures to provide more financial flexibility, which included the issue of 3,766,428 new ordinary shares to raise gross proceeds of approximately £8.4 million, as well as the extension of its banking facilities by an extra year, to May 2022.
"The impact may be substantial; the extent to which the coronavirus crisis will impact our business will depend on the changing positions of our major wholesale print and digital customers, academic institutions and the duration of government lockdowns and restrictions and in particular their impact on retailers and academic institutions," the statement read. "Our strategy of expanding and leveraging our digital rights and products means that we are well placed to benefit from increased demand for our digital resources, audio and e-books as we are with direct supply from Amazon, Bloomsbury.com, Waterstones.com and most internet retailers selling print books.
"Given this uncertainty, management has modelled various scenarios on differing degrees of revenue impact, duration, extended debtor days and periods of recovery. Based on a prudent downside scenario, assuming a 75% decline in print revenues and gradual retailer re-openings, to recovery in January 2021, the Board has determined that the Company undertake a placing to raise approximately £8.4 million of additional headroom to provide financial flexibility to the Company to enable it to maintain appropriate investment to capitalise on future commercial opportunities, whilst ensuring it remains within its banking covenants.
"We have agreed in principle to extend the maturity of our facilities with Lloyds Bank Plc from May 2021 to May 2022 and to amend covenants to exclude IFRS 16."
Salary reductions are also taking place "across the majority of staff, weighted to more senior staff"–understood to affect all those earning more than £30k a year–to save £200k per month, while its Board is taking a salary cut of 30%, saving £30k per month. The number of those staff being furloughed as part of its "immediate proactive measures to conserve cash and reduce costs" is not known.
The company said it has "balanced these actions with being able to retain staff and acquire new titles, as the Company's business model is to commission titles one to two years ahead of publication.
"These actions, combined with our strong net cash position, will safeguard the interests of all shareholders and best position Bloomsbury for future opportunities."
As of 29th February 2020, Bloomsbury had net cash of £31m.