Ainsworth Game Technology delivers trading update

AInsworth Game TechnologyAGT has made solid progress in executing on its key strategy to deliver profitable growth in international markets. For 1HFY19, revenues and Profit Before Tax (PBT), for both the North American and Latin American businesses, are expected to be ahead of the prior corresponding period (PCP).

In North America, the number of units delivered in 1HFY19 is expected to be higher than in the PCP. Progress is being made in Class III markets, and new jurisdictions. AGT’s proprietary Historical Horse Racing (HHR) system is performing well in Churchill Downs Incorporated’s (CDI) newly opened Derby City Gaming facility in Kentucky. The Company sees further sales opportunities for the HHR system with regulatory approvals having been granted in new markets such as Nebraska and Virginia, and for further collaboration with CDI.

“While AGT continues to make progress in driving growth in the key Americas markets, our performance in the highly challenging domestic markets is adversely impacting our overall results,” AGT CEO Danny Gladstone said.

“With our investments in technology and increased R&D, and the release of newly developed gaming products, we expect to deliver improved results in both domestic and international markets in the second half of the year compared to 1HFY19.”

In Latin America, AGT is benefitting from previous investments made in product design and game performance to maintain market positions across the region. In 1HFY19 the Company expects to report an improved margin performance driven by a higher quality sales mix. AGT will continue to invest in
technology to drive greater product diversification and efficiencies.

The previously noted highly competitive conditions in the Australian market are continuing in FY19. Revenues and PBT for the Australian segment are expected to be materially lower for 1HFY19 compared to the PCP. Overall industry demand has fallen by around 10%. Furthermore, timing issues
around the approval of more complex new products, and the strategic decision to defer product launches into 2HFY19 to maximise market impact and total returns, have affected short term financial results.

AGT has a positive outlook for performance and improved financial results in domestic markets in 2HFY19 compared to 1HFY19 with the expectation that new products gain traction with customers generating higher returns on investment.

AGT expects to report an increase in R&D investments for 1HFY19 and on an ongoing basis. The Board is committed to research and development as the primary driver to compete successfully across its markets and drive growth. The Company also expects to report a modestly adverse impact from the adoption of the new accounting standard AASB 9 which is to be applied for the first time in 1HFY19.

The adoption of this standard requires a higher level of provisioning for receivables credit risk. Given the factors above, compared to the $11.3 million of PBT, which excludes currency movements and the $4.9 million of gains from one off, non-recurring items reported in 1HFY18, AGT expects to report PBT on the same basis of approximately $8.0 million for 1HFY19, subject to period end and external auditors review procedures.

AGT expects to deliver revenue growth and improved profitability in 2HFY19 compared to 1HFY19. The result in 2HFY19 is also expected to show growth in revenues and profitability versus the PCP excluding the significant benefit of sales to CDI (900 units) and to Novomatic (800 kits) realised in 2HFY18.

For the group overall, PBT excluding currency movements, for 2HFY19 is expected to increase by at least 75% on the $8.0 million expected in 1HFY19. A further update on the 2HFY19 will be provided at the time of the release of the interim results in February 2019.