Affiliate business Raketech Group has made a pivotal move in divesting its non-core US advisory business for $2.3 million. The transaction, expected to be finalized by August 31, marks a significant strategic pivot for the company.
Raketech acquired the US-facing tipster ATS Consultants in December 2021 for $15.5 million, which included prominent sites like Winnersandwhiners.com, Statsalt.com, and Picksandparlays.com. The sale will be settled partially on closing and through an ongoing revenue share agreement. However, the divestiture will result in a non-cash impairment charge of approximately €10 million for Raketech.
Focus on Core Strengths
Johan Svensson, CEO of Raketech, emphasized the strategic importance of this sale. "This strategic sale is an important step in streamlining our operations and focusing on our core strengths," Svensson stated. He further elaborated on the anticipated benefits despite the immediate financial impact. "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," he added.
Financial Performance
The decision to offload the US advisory arm comes in the wake of Raketech's Q2 financial results, which paint a mixed picture. While revenue saw a rise of 20.1% to €19 million, adjusted EBITDA dropped by 17.2% to €5.1 million. Furthermore, total operating expenses surged by 47.5% to €17.7 million, causing a steep decline in net profit by 93.8% to a mere €174,000. These figures underscore the challenges Raketech faces in balancing growth with operational efficiency.
Streamlining Operations
As part of its strategy to bolster digitalized subscription and affiliate marketing revenues, Raketech seems determined to refine its focus. "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," explained Svensson.
Aligned with this approach, Raketech signed an exclusive lead generation agreement guaranteeing a minimum fee of $250,000 over the next 12 months. This move is seen as a step towards solidifying its market presence and driving future profitability.
Future Prospects
The divestiture of the US advisory business is poised to free up resources and allow Raketech to concentrate on areas with the highest growth potential. The company’s focus on digitalized subscription and affiliate marketing sectors highlights a strategic shift aimed at capitalizing on emerging trends within the industry.
Raketech's strategic realignment indicates a broader effort to streamline operations and enhance core business functions. The decision to divest non-core assets appears rooted in a clear vision of where the company sees its most substantial growth opportunities.
Investors and market watchers will be keen to see how this strategic pivot influences Raketech’s performance in the coming quarters. With the upcoming Q2 results publication on August 14, more insights into the company’s financial health and future projections are anticipated.
In summary, Raketech's strategic divestiture and its proactive measures to focus on essential growth sectors signal a transformative phase for the company. As it navigates through these changes, the financial community will closely monitor its progress and the impact of these strategic decisions on its long-term performance.