Score Value bond fluctuations hit AGTech profit in Q3

15 November 2019

AGTech reported a 3.5% increase in third quarter revenue to HKD$70.3m (£7.0m/€8.1m/$9.0m), but fair value changes related to the supplier’s 2014 purchase of lottery hardware supplier Score Value offset lower operating costs, leading to a drop in profit for the period.

Of AGTech’s $70.3m revenue, lottery hardware made up $49.7m, up 4.2% year-on-year. Lottery games and systems made up a further $11.8m, 1.7% more than in 2018.

The provision of lottery distribution and ancillary services brought in a further $5.1m, 12.5% less than in 2018. Games and entertainment revenue totalled $3.7m, a 31% year-on-year increase.

Employee benefit expenses were AGTech’s largest cost, at $46.8m, though this figure was down 24.4% year-on-year. Costs from purchases of and changes in inventory also declined, to $28.8m. Other operating expenses fell 28.8% to $18.8m.

Depreciation expenses of right-of-use assets totalled $5.2m, while for property and equipment these expenses came to $605,000. Other losses also declined rapidly to $2.8m, down 85.2%.

These drastically reduced costs helped reduce AGTech's Q3 operating loss, which declined 58.8% to $30.8m, down 58.8%.

However, AGTech’s income from the changes in value of bonds convertible to stock or cash fell 44.7% to $76.5m. It said that these bonds linked to the purchase of Score Value, a developer of handheld lottery equipment. Gains from declines in the fair value of items owed by AGTech to the former owners of Score Value brought in a further $6.1m, down 51.4%.

Changes in value of companies in which AGTech holds a noncontrolling stake increased more than six times over to $16.8m.

Finance income, however, increased 45.3% to $8.6m, resulting in a pre-tax profit of $43.5m, down 44.9% year-on-year.

After paying $502,000 in tax, AGTech posted an overall profit of $43.0m, down 44.3%.