School books, stationery supplier’s months of insolvent trading before $5.9m collapse: Report

A major Queensland stationery supplier is believed to have traded while insolvent for months, including when families unknowingly placed back-to-school orders, before it’s $6m collapse.

Sequel Books and Stationery collapsed owing almost $6 million. Picture: File photo

A major Queensland stationery supplier is believed to have traded while insolvent for at least three months, including during the school holidays when families unknowingly placed back-to-school orders, before it collapsed owing almost $6 million, according to a liquidator’s report.

Sequel Books and Stationery, based at Willawong in Brisbane’s south, was a family-run business which had been trading under its current name for nearly 30 years and was recommended by 55 schools across the state as a preferred supplier.

But after being inundated with more than 1700 customer emails and turning off comments on its Facebook page at the start of the year as it struggled to deliver outstanding orders to parents for back to school, Sequel went into voluntary liquidation on March 18.

A statutory report to creditors compiled by liquidator Chris Baskerville of Jirsch Sutherland which was filed with ASIC last month reveals the true extent of the spiral the business had been in for some time, much before the angry customer complaints started rolling in.

The report reveals that Sequel collapsed owing almost $3m in loans, including $225,000 to the Queensland Rural and Industry Development Authority – a government financial assistance provider for rural and regional communities.

Sequel Books collapsed earlier this year.

According to Mr Baskerville’s report, Sequel has around $88,000 in unpaid wages and superannuation to two employees, there are 193 unsecured creditors out of pocket to the tune of $5.46m, and a further 20 secured creditors owed roughly $356,000.

Among the secured creditors are well-known back-to-school suppliers including Crayola Australia (owed $29,796), Paper Australia (owed $7887), HarperCollins Publishers (owed $4291), and BIC Australia (owed $1962).

Mr Baskerville estimates there is only $690,140 – $734,288 in funds available to repay secured creditors, and only $200,080 – $303,228 for cover debts to unsecured creditors.

Mr Baskerville said in the report that his preliminary investigation indicates that Sequel was unable to pay its debts from November 2023 onwards.

“Trade creditors began being paid outside creditor terms on or just after November 2023 … the records indicate all trade creditors were being paid at month end until October 31.”

However, there are 74 debtors who owe Sequel roughly $229,000, including credit invoices totalling $49,940. At the time of the report, almost $72,000 had been received so far.

Mr Baskerville’s report reveals there is significant money, both owed to Sequel and owed by Sequel, involving the Department of Education and unnamed state schools.

“One of the significant debtors (and creditor) is the State of Queensland, represented by the Department of Education, who in-turn represent several state schools,” Mr Baskerville wrote.

“In summary, several state schools owe the company approximately $41,000 of collectable debtors. On the other hand, the company owes several state schools approximately $44,000 in due and payable debt.”

The liquidator said the business did make an effort to turn its prospects around.

“It is evident that the company was taking steps to look at improving the financial performance and management for the benefit of all stakeholders, including shareholders. This included looking at sources for further funding,” the report read.

Mr Baskerville did preface many of his considerations around insolvent trading with the comment that his investigations are ongoing and yet to be finalised.

He noted there was no indication that Sequel kept improper books, and there was evidence that Sequel had taken steps to improve its governance and seek professional consultants.

Mr Baskerville did provide initial reasons he believes to be behind Sequel’s collapse.

“I have been advised that the founding director is suffering from ill health,” the report said.

“Poor inventory management and the inability to effectively manage the flow of goods and materials into, within, and out of a business which lead to ad to a number of problems, including stockouts, excess inventory, obsolescence, and high carrying costs.

“Increasing reliance on external funding sources to fund operations and the subsequent withdrawal of this support to the company in late 2023.

“Decreasing sales and increasing selling costs.

“Taking steps too late to improve corporate governance and business structure at a time the business was incapable of meeting any long term financial objectives.

“Failing to embrace system improvements through digital transformation.”

At the time of collapse, Sequel Books & Stationery had been operating under the current name since September 1996.

However, the family-run business went back decades further under former business names such as Barker’s Bookstore, DGF Office Supplies, and Sequel School & Office Supplies.

The 55 schools listed on Sequel Books & Stationery’s website:

All Saints Anglican School

Aspley State School

Aquinas College

Bellbird Park State Secondary

Belmont State School

Berrinba East State School

Brisbane Grammar School

Brookfield State School

Burleigh Heads State School

Canungra State School

Citipointe Christian College

Centenary State High School

Clairvaux MacKillop College

Fig Tree Pocket State School

Grovely State School

Hilder Road State School

Hillcrest Christian College

Hills College

Holland Park State School

Jamboree Heights State School

Jindalee State School

John Paul College

Kenmore State High School

Kilcoy State Primary School

Longreach School of Distance Education

Marist College Ashgrove

Marsden State High School

Manly West State School

Mitchelton State School

Mount Alvernia College

Mount Kilcoy State School

Mt Saint Michael’s College

Northside Christian College

Our Lady College Annerley

Padua College

Parklands Christian College

Queensland Academy of Science Mathematics and Technology

San Damiano College

San Sisto College

Seton College

St Aidan’s Anglican Girls Schools

St Francis Xavier Primary School Goodna

St Joseph’s Catholic School Corinda

St Margaret’s Anglican Girls School

St Mary’s College

St Peters Lutheran College Indooroopilly

St Philomena School

The Lakes College

Walloon State School

West Moreton Anglican College

Westside Christian College

Wisdom College

Wishart State School

Wondall Heights State School

Yeronga State School