AGTech reports losses in annual report

The Chinese gambling group AGTech has released its 2013 annual report, posting a revenue and gross profit decline of HK$208.4 million (2012: approximately HK$229.3 million) and approximately HK$91.3 million (2012: approximately HK$101.6 million), respectively.

Management attributed the slowdown to its strategy of transitioning the business from the legacy, lower-growth lottery management division to a high growth gaming technology business.

Gross margin was down 43.8 percent (2012: approximately 44.3 percent.

Other financial elements highlighted in the report include:

* Most revenue came from gaming technologies (game software, systems, hardware and terminals) services.

* The group recorded a loss from business operations of approximately HK$15.2 million (2012: profit of approximately HK$1.3 million).

* The Board does not recommend the payment of a final dividend for the year.

Chairman John Sun said:

“In our Gaming Technologies division, the launch of our second virtual sports game, e-Ball Lottery, in 2013 turns our vision of virtual sports as a fully accepted, high growth, multi-product game category in China into a reality.

“In our terminal hardware business, GOT has once again been named as an approved supplier in the China sports lottery supplier selection process. What’s more encouraging is that GOT has successfully won multiple provincial tenders of the new replacement cycle.

“The delivery of the first batch of terminals to the South African gaming market created another milestone demonstrating GOT’s breakthrough in tapping overseas markets.

“During the period under review, the group launched a new virtual sports lottery game “e-Ball Lottery”  which confirmed virtual sports as a fully accepted, high growth, multi-product game category in China. E-Ball Lottery was launched in China’s largest sports lottery province, Jiangsu, in November 2013 and has been classified by the National Sports Lottery Administration Centre as a sports betting game and operates with a 69 percent payout ratio, the highest payout category in China.

“The Group’s first game “Lucky Racing” has continued to operate successfully in the province of Hunan, in advance of a planned national rollout across the PRC. Having completed its second full calendar year of operation, Lucky Racing continues to be a very popular and successful game. Lucky Racing delivered approximately 26 percent of total sports lottery sales in Hunan province during 2013. During the year under review, our partners at the sports lottery made major strides in completing the “next generation” national high frequency game platform that could carry our Lucky Racing game beyond Hunan. The Group therefore expects the game to be launched in more provinces during this year.

“In light of the very high levels of internet and smart phone penetration in China, the potential regulation of online and mobile distribution of approved lottery products in China promises to create enormous opportunities for the Group. The Group intends to directly participate in this exciting development via the provision of internet/mobile systems and as a distributor/retailer. Sales of the Group’s approved games, such as Lucky Racing and e-Ball Lottery, should also benefit from remote
distribution channels in China.”

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