On 7 May 2019, Ainsworth Game Technology Limited (ASX: AGI) recently released its trading update, downgrading its performance expectation for the second half of current financial year.
As per the ASX announcement on 26 February 2019, in the investor presentation related to IH FY2019, the company highlighted that company’s financial results in 1H FY2019 was in line with the expectations. The company expected that in the second half of FY2019, there will be growth in the profitability wrt the first half, driven by the release of new games boosting unit volume across regions.
However, now the company expects that their trading performance for the second half of FY2019 will be below its earlier expectation.
In the 1H FY2019, although there was a decrease in the total revenue by 2%, there was an increase in the net profit after tax by 25% to A$12.1 million. There was a growth in international sales by 18% as compared to the previous corresponding period, contributing 83% of the group revenue.
There was a net cash inflow of A$30.8 million from the operating activities. The company used A$1.9 million in its investing activities and $14.4 million in its financing activities. By the end of 1H FY2019, the company had net cash and cash equivalent of $51.7 million.
The company has now lowered down its guidance for FY2019 Profit After Tax (on a pre-currency basis), expecting it to be ~$4 million. As per the company, its was influenced by intense competitive market pressures as well as delays in the new product approvals which the company could not achieve in the expected timeframes.
Ainsworth Game Technology expects to translate the gradually secured product approvals into improved product performance as well as gains in the domestic market share in the financial year 2020. The continued progress in Americas has partially offset this lower than expected contribution from Australia in the second half of FY2019. As compared to the first half of FY2019, North America expects similar segment results whereas Latin America expects a slight increase in their segment results.
Other than that, the company expects to reduce carrying values of its FY2019 balance sheet of its Australian and digital assets with a non-cash impairment charge, which is expected to be around $5 million. The charge also includes the value of the goodwill associated with the NSW service business given lower NSW unit volume sales of $2.4 million and a dip of $2 million in the AGT’S shares in 616 Digital.
As per the company, the balance sheet of the business remains strong and is in a position to self-fund growth initiatives and technology investments. The company continues to operate well within its financial covenants, and it expects to be cash flow positive in the FY2019. The company expects its net debt by the end of FY2019 on 30 June 2019 to be around $7 million.
The company is moving forward with the development of new products as well as technologies with an aim to improve future profit performance.
The AGI stock has generated a positive YTD return of 5.06%. On 8 May 2019, the stock is trading at A$0.820, down by 1.205% (As at 1:10 PM AEST).
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