Eason suffers €2.5m income hit from free primary schoolbooks scheme

Irish-owned books and stationery retailer Eason says it has suffered a €2.5 million hit to its revenue this year as a result of the Government’s free primary schoolbooks scheme, according to a letter sent to shareholders of the company.

In the note, Eason chairman David Dilger said the free books scheme had a “very negative impact on our traditional schoolbook business”.

“The back-to-school landscape was radically altered this year with the introduction of the Government’s free primary schoolbook scheme, which has undermined our online and in-store schoolbook business. Schoolbook sales year to date are down €2.5 million, €1 million from the stores and the balance from online,” he said.

Mr Dilger added that Eason had “worked hard” at minimising the bottom-line impact of the change, with a significant focus on cost management.

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Separately, Mr Dilger warned about the impact on its payroll costs of a recommendation by the Low Pay Commission to increase the national minimum wage by 12 per cent next year and to move to a €15 per hour living wage by 2026, saying it “could add 20-25 per cent to our payroll costs over that period”.

“This will place a significant additional burden on our business resulting in further price inflation pressure and cost reduction measures. Work has already commenced to identify ways to mitigate this impact,” he said.

In better news, the wet summer weather had a “beneficial impact on footfall, particularly in shopping centres”, where the performance was described as “strong”.

The letter accompanied Eason’s accounts for the year to the end of January 2023. Turnover rose by 7.7 per cent to €112.7 million while pretax profits were 11.4 per cent higher at €4.4 million. Its online store accounted for a quarter of book sales, up from a fifth a year earlier.

The improved profit performance came in spite of a €2 million increase in overheads, including €600,000 in additional energy costs. “Management had to work hard to offset this shortfall through several cost reduction programmes and margin improvements,” Mr Dilger said.

Eason’s payroll costs fell to €21.6 million from €23.4 million a year earlier. The company paid €3.2 million to executives last December under a bonus plan, while they also received just more than €1 million in remuneration.

Mr Dilger’s letter notes that a new long-term incentive plan had been put in place, payable in 2028.

Shareholders were also informed that a valuation by Mazars had put a value of €70 million on the retail business, up €3 million on a year earlier.

On the future outlook, Mr Dilger said the business had forecast Ebitda (earnings before interest, tax, depreciation, and amortisation) of €8 million-€8.5 million this year. This would represent an uplift on the €7 million Ebitda achieved last year.

Eason separated its property and retail units in 2018 into different legal entities as part of a large restructuring of the group. The only properties now directly owned by the retail group are its flagship store on O’Connell Street in Dublin and its outlet in Blanchardstown.