Ainsworth Reports Significant Full-year Profit Decrease
The fiscal year for Ainsworth Game Technology ended June 30, 2019. And it was not a good year.
Built on Reputation
Ainsworth Game Technology was founded in 1995 by Len Ainsworth to manufacture and supply gaming solutions. Starting with its signature Ambassador gaming machine, it offered superior graphics and a range of real money pokies for Australian players.
As the Ambassador was upgraded through the years, Ainsworth expanded its market around the world. It was known for its powerful gaming processors, updated technology, and consistently upgraded models.
Profits were always on the rise, especially after launching its A600 product in 2015. And with expanded services – such as assembly, testing, and field help – the company grew to nearly 500 employees and sales to 50 countries.
A Fiscal Year of Changes
Ainsworth knew the rough financials were on the way.
In April, Lawrence Levy was appointed as the new Ainsworth Chief Executive Officer. The company wanted to remain fresh and competitive, to achieve its strategies, to become a leading provider of innovating gaming technology to the global market.
One month later, the company issued its forecast for the final 2019 numbers. It cut its expected profits by more than $3 million, which pushed shares down nearly 10%.
Ainsworth said the gloomy forecast was due to intense market pressure and a delay in securing approvals for new pokies products.
Sales were also down in New South Wales, contributing to a $2 million value reduction of shares in its online social casino business. This pushed the company down on its Australian and digital assets.
Further, a Wilsons analyst said the negative report was a result of five years of a “perennial forecast downgrade mode” and saw no ability for the company to reverse the trend. Besides restricted market opportunities, Ainsworth products are not resonating with buyers.
Predictions Become Reality
When the final numbers did come in for Ainsworth’s full year, they were disappointing.
Ainsworth reported a 66% decrease in post-tax profit, which came in at A$10.9 million. That was in conjunction with a 12% decrease in revenue to $234.3 million. And post-tax profit was $14.7 million, down a massive 65.2% year-on-year.
The online division brought in $4.2 million in sales (down 43%), which put EBITDA at $44.8 million, which was down 34% from the previous year.
With those results, Ainsworth suspended interim and final dividends. The company wants to evaluate its research and development investments and growth opportunities and reinvest the dividends to improve the company’s overall financial position.
Reasons Abound
Ainsworth certainly had reasons for its woes in the financial filings.
“Challenging conditions” in Australia and Latin America were blamed for the sales decline, with the domestic market singled out as a particular problem.
Despite the negative results, Ainsworth tried to highlight a few bright spots. Revenue in North America was up 8%. Its games have been approved for the New Jersey market for use on the PlayMGM online gaming platform, which will be rolled out in partnership with GVC.
The early 2019 release of Mustang Money for online casinos in Mexico is performing well.
Levy had some encouraging words. “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.”
He also noted that AGT is capable of doing better. The workforce is strong and motivated, and the company has a strong reputation in the industry.
Reputation in Court
Speaking of the Ainsworth reputation, a part of that reputation is on trial in the Federal Court of Australia.
Aristocrat designed a slot machine in 2014 called Lightning Link. It offered numerous themes and quickly caught on with land-based casinos around the world.
Lightning Link did so well that even competitor Len Ainsworth commented – in public – that Aristocrat “struck it lucky with a game.” But, Ainsworth said, his company had something better in the works.
That something turned out to be Jackpot Strike in 2017, but the game was strikingly similar to Lightning Link. From the screen design to animation and math, the game was too similar for Aristocrat’s liking.
Some research led Aristocrat to believe that an employee of Ainsworth went to work for Aristocrat, stole the Lightning Link information, and took it back to Aristocrat for it to be copied. And there was enough evidence to warrant the Federal Court of Australia to take the case.
Charges range from copyright infringement to corporate espionage and the deliberate theft of trade secrets.
Oral arguments were supposed to take place in mid-July, but the court postponed the hearing until sometime in September.
