In a strategic move to streamline its operations and enhance focus on core strengths, Raketech Group has announced the divestiture of its non-core US advisory business for $2.3 million. The transaction is slated to close by August 31, subject to regulatory approvals. It will be settled partially on closing and through an ongoing revenue share agreement.
The divestment marks a significant milestone for Raketech, underscoring its evolving strategy to optimize and concentrate on high-growth areas. Johan Svensson, CEO of Raketech, emphasized the importance of the sale in a recent statement. "This strategic sale is an important step in streamlining our operations and focusing on our core strengths," he noted. Despite the financial implications, Svensson remains optimistic about the long-term benefits. "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."
The Financial Impact
The ripple effects of the sale include a non-cash impairment charge of approximately €10 million for Raketech, a significant financial adjustment given the current fiscal climate. This charge stems from the initial acquisition of ATS Consultants, a US-focused tipster agency, which Raketech bought in December 2021 for $15.5 million. ATS Consultants brought with it a portfolio of sites including Winnersandwhiners.com, Statsalt.com, and Picksandparlays.com, all of which were integrated into Raketech’s ambit, expanding its footprint in the US market.
Financial Performance in Q2
On August 14, Raketech published its Q2 results, offering a detailed glimpse into its financial health for the period. The results revealed an adjusted EBITDA drop of 17.2% to €5.1 million. However, this was counterbalanced by a noteworthy revenue increase of 20.1%, amounting to €19 million for the quarter. The juxtaposition of rising revenues against a backdrop of increased operating expenses, which surged by 47.5% to €17.7 million, painted a complex picture.
Net profit for the quarter dropped dramatically by 93.8% to €174,000, a stark reminder of the financial impacts that can accompany major strategic shifts and market fluctuations.
Future Prospects and Strategic Positioning
The divestiture aligns with Raketech's broader strategy of focusing on maximising growth potential within its digitalized subscription and affiliate marketing revenues. Svensson articulated this vision clearly, 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."
In addition, Raketech has signed an exclusive lead generation agreement guaranteeing a minimum fee of $250,000 over the next twelve months, further cementing its commitment to driving revenue growth and strategic focus in core operational areas.
The proceeds and agreements from the US advisory business sale will enable Raketech to redeploy resources more strategically, fortifying its position in high-growth domains while mitigating the risks associated with its diverse portfolio.
As the dust settles on this strategic divestiture, eyes will be on Raketech as it navigates the complexities of a rapidly evolving market. For now, the focus remains on harnessing the benefits of the sale and realigning resources to invigorate growth and performance.