Catena Media predicts operating profit dent as German assets incur impairment charge
Affiliate “adjusts European business to new market realities” resulting in €49.4m write-down on previously acquired sports betting sites
Catena Media has warned Q3 operating profit will be negatively impacted by a non-cash impairment of intangible assets, resulting in an estimated write-down of €49.4m (£41.7m).
Approximately €43m of the write-down relates to German sports betting assets the affiliate acquired between 2016 and 2018, which have since decreased in value due to the online gambling regulation and restrictions implemented in the country.
A write-down is an accounting term for the reduction in the book value of an asset when its fair market value (FMV) has fallen below the carrying book value, causing it to become impaired.
The amount to be “written down” is the difference between the book value of the asset and the amount of cash that the business can obtain by disposing of it in the most optimal manner.
The remaining €6.6m of the write-down pertains to French sports betting assets that were originally purchased by Catena Media back in 2018.
“The writedown and consequent impairment charge reflect an updated assessment by management of the assets’ expected future earnings in the context of recent regulatory changes in Germany’s igaming market and overall market conditions,” said the Malta-based affiliate.
“Management regularly assesses expected future earnings in accordance with IAS 36 and may further adjust assets’ amortisation plans. The writedown will have no impact on cash flow.”
Catena Media’s share price rose by more than 6% in early trading on Nasdaq Stockholm, although this was likely due to the preliminary Q3 results guidance posted by the business.
Overall Q3 revenue is expected to come in at €33.1m – a 33% rise on last year – while US igaming revenue looks set to rise by 124% to account for more than half of overall Q3 revenue (51%).
Organic growth is estimated in the region of 23%, rising to 34% when excluding Germany, where revenue plummeted by more than 60% during the quarter.
Q3 adjusted EBITDA is predicted to rise 33% annually to reach €16m.
Catena Media CEO Michael Daly said: “Q3 was an exceptional quarter with September revenue breaking our monthly all-time high.
“This was the result of our strategic investment in organic development, particularly in North America, and was supported by two recent acquisitions in the US and the opening of the igaming market in Arizona.
“The impairment charge adjusts our European business to new market realities following a review by the management team and our focus on transforming the business to reach maximum potential.”
The financial figures in this story are preliminary and unaudited. Catena Media will report its final Q3 financial report on 17 November 2021.