Losses Continue at Ainsworth Game Technology; Profit Warning Issued
No company like issuing profit warnings but they are necessary sometimes. Ainsworth Game Technology warned shareholders to expect losses of $15 million in the first half of the 2021 fiscal year.
It has been a tough year for ASX-listed Ainsworth Game Technology. The ongoing COVID-19 pandemic and the restrictions surrounding it ate into revenue and profits. The company enjoyed a $10.9 million profit in 2019, although that was down from $31.9 million in 2018.
Ainsworth Game Technology recorded a $43 million loss in FY2020, which ended June 30. The company blamed COVID-19 for the downturn in fortunes. The fourth quarter of the fiscal year is traditionally Ainsworth’s strongest. Most of the world’s casinos slammed shut their doors in March meaning Ainsworth couldn’t make money.
Lawrence Levy took over as Ainsworth Game Technology CEO in July. It has been a baptism of fire, but nobody can blame Levy for the company’s predicament. Nobody foresaw the impact COVID-19 would have on the world, especially the gambling sector.
Former Ainsworth Game Technology CEO Addresses Shareholders
Former CEO Danny Gladstone addressed shareholders at the company’s Annual General Meeting.
“Ainsworth’s FY20 results reflect the impacts of COVID-19. For FY20, sales revenue was $149 million, a decline of 36% compared to $234 million in FY19. With reduced trading in quarter four, which is traditionally the strongest period, the second half of the year contributed approximately 87% of this decline. Our opportunities to operate and sell new machines were inhibited as customers temporarily closed venue and cut capital expenditure programs.”
Gladstone confirmed Ainsworth Game Technology lose $43 million in FY20.
It wasn’t all doom and gloom, however, because the company reduced net debt and has plenty of cash on hand. Net debt fell to $17.5 million while cash on hand stands at $26.5 million.
Current CEO Levy informed shareholders the company repaid $27.3 million of debt during the fiscal year. Ainsworth underwent a number of cost-cutting exercises, also.
Sixty-seven redundancies, 23 in Australia and 44 in Americas, are saving $6.4 million annually. It eliminated a further 40 roles at a cost-saving of $3.8 million per annum.
Year-End Dividends Cancelled
Shareholders were left unhappy with the new Ainsworth Game Technology isn’t paying year-end dividends. The news was expected, but it still stings, especially as the share price continues falling.
The share price is in a steady state of decline. They traded at $0.80 per share at the start of 2020. You can buy them now for only $0.32 per share. They shed 8.572% of their value following the company’s AGM.
Gladstone confirmed the non-payment of dividends.
“Given the effects of the pandemic, the Board decided to place the dividend policy on hold. We will retain this position until the current uncertainties in our markets become more predictable.”
CEO Confident For the Future
Part of a CEO’s job is to keep an air of positivity about the place when talking about the company. Levy did that by putting a positive spin on the past fiscal year and looking forward to 2021.
The acquisition of MTD Gaming in March cost $18 million but is already adding to Ainsworth’s coffers. Its American operations are running at 60-70% capacity but Levy says signs are encouraging.
Its Australian division only made $400,000 profit after revenue fell 22%. Levy is confident this will change as Australia has lower COVID-19 cases compared to other regions.
Online gaming was the shining light for Ainsworth Game Technology. It partnered with Roar Digital in New Jersey to provide 20 exclusive online pokies. The online gaming sector privded $4.6 million, an increase of 10% on the previous year. The statement isn’t clear, however, if that sum is profit or revenue.