In a strategic move aimed at streamlining its operations, Raketech Group has announced the divestiture of its non-core US advisory business for a sum of $2.3 million. The transaction, expected to be finalized by August 31, involves a partial settlement at closing and the remainder through an ongoing revenue share agreement.
The sale marks a significant step for Raketech, which acquired the US-facing tipster ATS Consultants in December 2021 for a substantial $15.5 million. The acquisition had brought under its wing well-known sites such as Winnersandwhiners.com, Statsalt.com, and Picksandparlays.com. Despite this promising portfolio, the divestiture decision underscores the company's refocus on its core competencies.
Raketech CEO Johan Svensson elaborated on the rationale behind this move, stating, "This strategic sale is an important step in streamlining our operations and focusing on our core strengths." He added, "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."
Financial Implications
The decision to sell the advisory business will result in a non-cash impairment charge of approximately €10 million for Raketech. This significant write-down reflects the difference between the acquisition cost and the sale price, emphasizing the financial impact of the transaction. However, Raketech seems poised to pivot efficiently by leveraging its high-quality operations to maximize growth in other key areas.
Raketech's Q2 results, set to publish on August 14, will provide further context to these strategic moves. Preliminary figures indicate an adjusted EBITDA drop of 17.2% to €5.1 million, despite a 20.1% rise in revenue to €19 million. It is noteworthy that total operating expenses surged by 47.5% to €17.7 million, leading to a dramatic net profit decline of 93.8% to €174,000.
Focused Growth Strategy
This sale aligns with Raketech’s broader strategy to concentrate on areas with the most promising growth potential. "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," Svensson highlighted.
The company has already made strides in this direction by signing an exclusive lead generation agreement, guaranteeing a minimum fee of $250,000 over the next 12 months. This agreement underlines Raketech’s intent to capitalize on digital revenue streams more aggressively.
The Road Ahead
Raketech's focus on digitalized subscription and affiliate marketing revenues could pave the way for sustainable and scalable growth. The divestiture allows the company to allocate resources and attention to these high-growth areas, which is a prudent approach given the competitive landscape of affiliate marketing.
The transition period might pose challenges, particularly with the immediate financial hit from the impairment charge. However, the long-term prospects seem promising as Raketech doubles down on its core strengths and shifts towards a more optimized operational structure.
Overall, this move is indicative of Raketech's decisive strategy to recalibrate its business model, ensuring that it remains competitive and continues to create value for its shareholders. As the market awaits the detailed Q2 results, all eyes will be on Raketech's next steps in its realigned journey towards growth and profitability.