In a strategic move aimed at refining its core operations, affiliate business Raketech Group has divested its non-core US advisory business for a sum of $2.3 million. The transaction, which is anticipated to conclude by August 31, will be settled partially at the time of closing and through an ongoing revenue share agreement. This sale is an important part of Raketech's strategic realignment, allowing the company to focus on key areas identified as vital for future growth.
Financial Impact
Notably, the divestiture will lead to a non-cash impairment charge of approximately €10 million for Raketech. This significant write-down comes on the heels of Raketech's acquisition of the US-facing tipster ATS Consultants in December 2021 for a considerably higher amount of $15.5 million. This acquisition included valued sites like Winnersandwhiners.com, Statsalt.com, and Picksandparlays.com.
Financial Performance
The transaction unfolds against the backdrop of Raketech's recent financial results, revealing a complex picture. The company’s Q2 results, scheduled to be published on August 14, already show a mixed bag. Raketech reported an adjusted EBITDA drop of 17.2% to €5.1 million, while revenue experienced a robust increase of 20.1%, climbing to €19 million. However, the total operating expenses surged by 47.5% to €17.7 million, resulting in a net profit plummet by 93.8%, settling at €174,000.
Despite the immediate financial hit from the non-cash impairment, CEO Johan Svensson remains optimistic about the long-term benefits. "This strategic sale is an important step in streamlining our operations and focusing on our core strengths," he stated. "Despite the one-off non-cash impairment charge, we are confident that this move will enhance our focus, drive improved performance, and deliver long-term sustainable growth and value creation."
Strategic Focus
The divestiture underscores Raketech’s commitment to concentrating on segments with higher growth potential, specifically those tied to digitalized subscription and affiliate marketing revenues. Svensson highlighted this focus, saying, "By leveraging our high-quality US operations, our strategy is to maximize the growth potential in digitalized subscription and affiliate marketing revenues and expand our sub-affiliate marketing and partnership revenue streams."
Part of this strategy involves a newly signed exclusive lead generation agreement, which guarantees Raketech a minimum fee of $250,000 over the next 12 months. This addition reflects the company’s shift toward more progressive and potentially lucrative streams of revenue within the digital landscape.
Conclusion
In conclusion, while the immediate financial repercussions are evident with a significant impairment charge, Raketech's divestiture of its non-core US advisory business for $2.3 million is a calculated move aimed at fortifying its market position and focusing on sustainable growth areas. Svensson’s steady confidence in the company's direction promises a renewed focus that could potentially lead to enhanced performance and value creation in the long term.