The company is focusing on its core business assets.
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The Ava Risk Group Ltd (ASX: AVA) share price is flying during early morning trade. This comes after the risk management services and technologies company provided the market with a positive announcement.
At the time of writing, Ava Risk shares are up 10.47% to 47.5 cents. In comparison, the All Ordinaries Index (ASX: XAO) is down 0.48% to 7,811 points.
What did Ava Risk announce?
In today’s release, Ava Risk advised it has entered into a sales and purchase agreement with TTG Bidco Limited.
Under the deal, Ava Risk will divest its non-core Services Division, Ava Global DMCC-LLC, for US$46.4 million. The net cash proceeds are estimated to be US$31.1 million after closing adjustments, payment of management incentives, and accrued bonuses.
The transaction is being targeted for completion during October 2021.
Following the divestment, Ava Risk stated it will focus on its core business divisions. These are Future Fibre Technologies, which handles fibre optic sensing solutions, and BQT Solutions, a provider of high-security card and biometric services.
What did management say?
Ava Risk Group CE, Rob Broomfield commented:
We are pleased to crystallise our return on investment from Ava Global by implementing this Transaction.
From a peak funding investment of US$5.3 million, Ava Risk Group will have received more than US$36.4 million (A$49.6 million) in cash from our Services Division, a net cash return of some 587% over approximately five years. The sale will allow management to fully focus on the Technology Division, growing recurring revenue and expanding into new markets and applications.
An update of our growth strategy and policies around surplus cash will be provided when we report FY2021 results on 30th August.
About the Ava Risk share price
Over the last 12 months, Ava Risk shares have catapulted by more than 75%, but are down around 20% year-to-date. The company’s share price reached a multi-year high of 78.5 cents in December 2020 before treading lower ever since.
On valuation grounds, Ava Risk presides a market capitalisation of about $110 million, with approximately 242 million shares outstanding.
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Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.