Not being a shareholder in AGI I wasn't lucky enough to get...

Not being a shareholder in AGI I wasn't lucky enough to get along to the AGM, but I was very interested to read Chairman and CEO release on the ASX. So here are my thoughts. I'm not sure where to start as there are so many things to focus on.

Let's start with Nth America - Who the hell does AGI think they are fooling by stating their Nth American business delivered an excellent result. The fundamentals of their Nth American business are absolutely terrible. Two key metrics to the long term health and sustainability of their Nth American business are the number of unit sales and the growth in their gaming operations fleet. So let's look at unit sales, while most of their Nth American competitors (even the smaller Japanese ones) managed to increase their unit sales. In the case of AGI their unit sales were down slightly. What I find most amusing about the way they are trying to "guild the lily" is to remove a 900 machine in FY 18 and then compare it to FY 19 and say aren't we great because we have increased unit sales by 39%. To me this way of position their FY19 unit sales is nothing short of treating investors like complete and utter idiots. What matters is the top line figure and that clearly indicated unit sales are slightly down. Let's now look at their gaming operations fleet, which in my humble opinion is probably the most important metric to look at when it comes to AGI's viability in the key market of Nth America. For context, the size of a gaming operation fleet is the crown jewels for most of AGI competitors. So how did AGI do in FY19, well it comes as no surprise AGI gaming operations fleet shrunk by 15%. That is a very significant reduction when again most of their Nth American competitors either grew their gaming operations fleet or at the worst case maintained it. What really gets me about this is that AGI are selling of gaming operations machines when according to AGI customers prefer to buy. Not sure if any of you are aware but it is a very rare thing for gaming companies to sell of good performing gaming operation machines, yet AGI seems more than happy to do this. To me all that AGI has done is to rob Peter to pay Paul; that is they are flogging off gaming operation machines to book them as for sale units. A well run and health gaming company (take your pick of SG, IGT, ALL etc etc) all manage to grow the for sale units and their gaming operations fleet and one of these segments does not grow at the expense of the other.

Ouch, what is going on in AU - Those are some seriously nasty numbers. If I'm to take one thing out of their Australian results at least they've stopped blaming external factors like regulatory approvals like have been doing for some time. Hmm, so they are blaming product performance. Ok a check on Max Gaming clearly indicates they have a couple of games performing ok. But so do SG, Konami and IGT and they manage to move more units. AGI states they made no sales to corporate or casinos. That is a very sad state of affairs. Sure, some of AGT's games suck but all gaming companies have dogs. Perhaps some of their probably in AU are within the existing sales team particularly given they could even make the sale of even one machine to a corporate or casino. When will the new CEO take a broom to the domestic sales team?

I think it is not unreasonable to suggest that online is a very important aspect of any gaming companies growth and sustainability. Just look at ALL's recent results to see the potential as well as strategic importance. Let's take a look at AGI's online business - their online business contributed just $4 million, yes that is correct $4 million which according to AGI is similar to last FY. That $4 million is a complete embarrassment. Also I think this is just top line revenue what I'd really like to know is how much did AGI spend in getting that $4 million. My guess is that they are only reporting online revenue and not profitability for a very good reason. They've taken a write off in the 616 digital, which I assume from past announcement is part of their online business. I wonder when the CEO is going to make some radical changes to their online business?

I won't even bother wasting any time to look at their RoW numbers other than to say WOW.

How's that increase in OpEx of 11%, what on earth is their finance team doing allowing such a significant increase in OpEx to occur when their income is heading south very fast. AGI has also seen an increase in R&D of $6 million and what has the company got for that--more of the same product they've been turning out since 2014. What is even more frightening is that the new CEO has stated he wants to spend even more which I presume he will do with the same R&D team. The mind really does boggle.

Finally, let's look at their "key priorities" and "strategies for improved long term results". How depressing. There is nothing of any substance whatsoever and these are nothing more than aspirations (improve our game performance, grow online, grow gaming operations blah blah). These are things that gaming companies have been doing for a very long time and these hardly cut it for strategy. Maybe it is the blind leading the blind over at AGI, but since 2014 they have been trying to improve game performance, grow online, grow recurring revenue. All that is going to change now it that the new CEO and the same old board is going to spend even more money with the same team. Let's wait and see how this plays out--anyone care to guess. As for H1 FY20 coming in at a loss, I suspect H2 and beyond will come in at losses based on their "key priorities" and "strategies for improved long term results". As another poster recently suggested, seems like it will be business as usual under the new CEO and the new Chairman.