Restructuring: Focus on profitability and efficiency
The ongoing restructuring of Social Chain AG includes three key measures. Companies or business units that are not profitable will be sold or closed. With this step, Social Chain AG will part with €80 to €100 million of unprofitable revenue. The product range will be reduced by 25 to 30 percent, ensuring that the remaining product portfolio can be marketed with significantly higher margins in 2023/2024. Personnel and structural costs will be reduced by 30 percent.
"We expect these measures to increase our operating EBITDA (excluding proceeds from asset sales) by €35 to €40 million, compared with the previous year. We are confident that we can accomplish this turnaround: from an organizational, operational, and strategic perspective,” says Dr. Kofler. The aforementioned steps shall be completed in the second quarter and will likely show an impact in the second half of the year.
Financing structure significantly improved
Social Chain AG has substantially improved its financing structure during the course of 2022. Bank loans amounting to €36.4 million were repaid. Moreover, DS Group, which is part of Social Chain AG, secured a syndicated loan to the amount of €125 million for three years, with an option to extend for another two years. This primarily finances the working capital of the DS Group. Overall, 84 percent of Social Chain AG's bank loans are now secured long term – compared to only 12 percent in the previous year.
Dr. Georg Kofler, CEO and main shareholder of Social Chain AG, strengthened the company’s economic equity by subordinating shareholder loans of around €37 million. Current financial liabilities were reduced from €197.5 million to €54.8 million. Non-current financial liabilities in accordance with IFRS increased accordingly, to a total of €218.0 million. In addition to the aforementioned syndicated loan, non-current financial liabilities also include lease liabilities (€54 million), loans, mainly comprised of shareholder loans (€41.7 million), and the existing convertible bond (€20.5 million).
Balance sheet cleanup:
Impairment on goodwill amounting to €98.7 million
With its 2022 balance sheet, Social Chain AG has written off €98.7 million of goodwill. Of this amount, around €81 million relate to the DS Group which, owing to the difficult market environment, adjusted its medium-term planning in line with the principles of commercial prudence. The impairments were also reinforced by higher interest rates and the resulting cost of capital in the usual impairment tests. These unscheduled impairment losses were the main driver that have led to a net loss of €106.8 million for the financial year from Social Chain AG’s continuing operations.