Weak H2 performance prompts Ainsworth profit warning

Australian gaming machines and content provider Ainsworth Game Technology (AGT) has warned that it is likely to miss financial targets for the second half of its 2019 financial year, with its current performance failing to meet expectations.

On a pre currency basis, profit before tax excluding one off items is likely to come in at around Aus$4m (£2.1m/€2.5m/US$2.8m) for the six months through to June 30, 2019. This result remains subject to finalisation and completion of audit procedures.

AGT has put this down primarily to “intense competitive market pressures” in its native Australia and delays in new product approvals. AGT has noted that such approvals are now being progressively secured and expects them to translate into improved product performance and domestic market share gains in FY20.

Continued progress in the Americas has partially offset the lower-than-expected contribution from Australia, with its North America performance level on a half-on-half basis and Latin America up slightly on the first half.

AGT has also noted the impact that a non-cash impairment charge is set to have on its balance sheet for FY19.  The charge is likely to be around Aus$5.0m and includes goodwill associated with its New South Wales business given lower unit volume sales and a Aus$2m drop in the value of AGT’s shares in 616 Digital.

However, AGT maintains that its balance sheet remains strong and is “well placed to self-fund growth initiatives and technology investments”. Net debt is forecast to amount to Aus$4m in the half, which is in line with expectations and down on Aus$13m in the first half.

“AGT is progressing with the development of new products and technologies with the view to improving future profit performance,” AGT said in a statement.

“Additional opportunities to collaborate with major shareholder Novomatic AG and other external content providers are being actively pursued.

“AGT continues to operate well within its financial covenants and expects to be cash flow positive again in FY19.”

The trading update comes after AGT last month named Lawrence Levy as its new CEO. Levy will take up the role on a full-time basis from July 1, 2019, replacing Danny Gladstone, who announced in September of last year that he was to step down as CEO after more than 12 years in the position.

Levy was most recently vice president of global sales at Novomatic, where he had been heading up sales in Europe for Ainsworth, following the Austrian gaming giant's acquisition of a controlling stake in the supplier.