Shareholders in Ainsworth Game Technology saw their investment value fall dramatically as August ended due to poor financial results. Australia’s biggest gaming machine manufacturer reported a massive 66-percent fall in profit after tax as a result.
It has been a difficult 12-months and a year of change for Ainsworth. The company issued a profit warning in May 2019 and shares continued to slide since. $0.83 bought you one share in AGT on May 8, but this dropped to $0.75 after the latest financial figures became public knowledge.
Revenue from AGT’s domestic business plummeted by 43 percent to $36.1 million. This resulted in profits of $2.8 million. Overall, profit after tax came in at $10.9 million, down 66-percent from $31.9 million in 2018. AGT blamed the fall in Australian business firmly at the feet of a 55-percent reduction in the number of sales.
Sales also fell in AGT’s largest market, North America, by two-percent and in Latin America by 12-percent. Some 2,952 AGT machines are in North America, 2,931 in Latin America with Australia housing 978 AGT pokies.
Quite worrying for investors is the EBITDA fall of 34-percent to $44.8 million. EBITDA is seen as a key indicator of a company’s health and viability.
It was not all doom and gloom, however, with revenue and profit increasing in North America. Revenue rose eight-percent to $114.0 million. Profit increase 16-percent to $47.1 million and now some 85-percent of AGT’s revenue stems from international operations.
The Thought’s of Ainsworth’s CEO
Ainsworth appointed Lawrence Levy as the company’s Chief Executive Officer on July 1 and he remains confident about AGT.
“I am confident AGT can drive improved long term growth by leveraging its excellent reputation, focusing R&D and complementing organic performance with selective acquisitions.
“My initial observations as the new CEO are that we have a strong footprint in major markets, scale and growing recurring revenues. With an increased focus on investing in game technology and new product development, I expect our domestic performance to progressively improve and our international success to continue.”
“While the FY19 results are relatively weak, AGT is capable of delivering improved performance. We have a professional and motivated workforce, an excellent industry reputation and a well-established footprint across all our markets. We have initiated a review to re-evaluate and focus our R&D investments to develop successful new innovative products to drive long-term growth”
About Ainsworth Game Technology
Len Ainsworth founded Ainsworth Game Technology (AGT) in 1995, aiming to become the leading manufacturer and supplier of gaming solutions. AGT created the iconic Ambassador gaming machine six years later. It became an instant hit with Aussie pokies players because of its vibrant graphics that were much better than rivals’.
AGT continued to improve the ambassador machine and introduced the Ambassador SL in 2007. A jackpot pokies machine, Players Paradise, followed in 2013 and the new A560 cabinet. Ainsworth launched the A600 model in 2015 which continued Ainsworth’s “innovation vision. Its classic design and game promotion qualities are unsurpassed.”
The continued success of AGT saw its number of employee swell to 500 and is now operating in 50 countries because of its continued success.
Novomatic purchased a controlling 52-percent stake in AGT in January 2018 for more than $350 million. Len Ainsworth resigned from his role as an executive director, remaining with the company for 12-months as a consultant.
Upcoming Court Case
Things could become even worse for AGT because it finds itself in the Federal Court of Australia this month. A date of September 4th was set, although this seems to have passed without the case being listened to.
Aristocrat Technologies is suing Ainsworth Game Technology for breaching intellectual property law. Aristocrat claims this happened with Ainsworth’s Lightning Link pokie machine. The company claims an employee of AGT joined Aristocrat as a game designer but left their role less than a month later. They returned to AGT as a senior game designer.
Allegations claim this employee downloaded Lightning Link game mathematics in an Excel spreadsheet onto a USB drive. These were then allegedly used in an AGT pokies machine, but Ainsworth vigorously denies any wrongdoing.
AGT could face a huge fine if found guilty. Aristocrat recently received a $3 million settlement from Castle Hill Gaming for trademark infringements.