Gaming machine company Ainsworth Game Technology Limited (ASX: AGI) has seen its shares slide down as much as 7% to $2.07 in morning trade following the company providing an outlook for FY18 at its annual general meeting.
Management announced that trading for the first half of FY18 had been adversely affected by a number of factors. Regulatory delays in Australia, a reduction in unit sales in Asia and a temporary decline in margin in North America due to a change in sales mix is expected to lead to pre-tax profit for the first half (excluding foreign exchange impacts) to decrease in comparison to the prior corresponding period.
However, management did note that pre-tax profit for the group in the second half of FY18 (excluding foreign exchange impacts) would rise compared to the prior corresponding period and that profit expectations for the whole year remain unchanged given the rosier outlook for the second half.
The expected strong second half would result in the Board considering whether to recommence paying out dividends which the company has not done since 2016. A further update to the market will be provided when the company releases its half yearly results in February.
Foolish takeaway
Morning trade appears to have been an overreaction with buyers happy to soak up shares off weak hands with the stock rebounding to trade at $2.19.
The company's sales pipeline in the vital North American market seems strong with large orders already confirmed and with new market opportunities available in Colorado and British Columbia to be accretive in FY18.
The newly licensed Pac-Man Wild Edition is driving demand in North America where management expects to sell a similar level of gaming units in the second half of FY18 than in total during FY17. Recent weakness in the Australian dollar should provide a boost to the company's bottom line with the majority of the company's revenues earned overseas.
The company also expects the release of the new EVO cabinet to recover market share in the Australian market which struggled in FY17 with segment profit declining 17% compared to the prior corresponding period.
