The Ainsworth Game Technology Limited (ASX: AGI) share price has climbed 2.5% to $2.46 this morning following the release of its full-year result after the market closed on Tuesday.
Key takeaways from the release include:
- Revenue declined 1% to $282.1 million.
- Earnings before interest, tax, depreciation and amortisation (EBITDA) fell 27% to $70.3 million.
- Profit before tax on a pre-currency basis down 18.4% to $57.4 million.
- Profit after tax is down 32% to $37.9 million.
- Earnings per share of 12 cents.
- Final dividend suspended.
- Outlook: Expects market share growth in international and domestic markets in FY 2018.
Whilst the result certainly does look weak at first glance, it was actually ahead of management's guidance of pre-tax profit (excluding foreign currency translation movements) of at least $56 million thanks to a strong second-half.
The damage was done largely in the first-half of FY 2017. A competitive domestic market and temporary delays in North American approvals led to a significant drop in first-half profit.
Pleasingly the company appears to have moved on from this now. Management advised that there are early signs of recovery in domestic markets, with second-half sales in New South Wales increasing 20% on the prior corresponding period.
This reduced the decline in domestic revenue to 9%, leaving it with revenue of $74.1 million for the year.
Things were far better in North America where Ainsworth Game Technology saw a strong recovery as the year progressed. Second-half sales were 73% higher than the first-half, and profits increased by 112% on the first half.
This led to year-on-year international revenue growth of 2% to $208 million.
A successful launch of its Pac Man Wild Edition game appears to have been a key catalyst for the strong second-half in North America.
Finally, while the company has held back from giving any real guidance for FY 2018, management has stated that it expects to grow its market share both at home and internationally. An update on its first-half will be provided at its AGM on 28 November 2017.
Should you invest?
While I think Ainsworth Game Technology delivered a strong second-half, I'd suggest investors hold off an investment until it updates the market on its first-half performance at its AGM.
Especially as based on this result its shares are changing hands at approximately 20 x earnings now.
To justify this premium over the market average I'd need to see a return to profit growth in FY 2018.
So until then, I would suggest investors consider rival Aristocrat Leisure Limited (ASX: ALL) for these three reasons.
