AINSWORTH GAME TECHNOLOGY
ANNUAL REPORT 2019
Notice of Annual
General Meeting
Ainsworth Game Technology Limited
ABN 37 068 516 665
Notice is hereby given that the 2019 Annual
General Meeting of the members of
Ainsworth Game Technology Limited will be
held at:
Bankstown Sports Club
“Georges River Room” 8 Greenfield Parade
(Cnr Greenfield Parade and Mona Street)
Bankstown NSW 2200
on Tuesday 26 November 2019 at 11:00am
Results Announcement for Six
Months Ending 31st December
2019:
Tuesday 25th February 2020
Dates may be subject to change
Results Announcement for Year
Ending 30th June 2020:
Tuesday 25th Aug 2020
Dates may be subject to change
Ainsworth 2019
Annual Report
With global vision and an established history
of gaming experience, Ainsworth is able
to provide the global gaming market with
outstanding range of gaming technology
and game combination software.
With a fully integrated operation including
design, development, assembly testing, sales
and field service, Ainsworth encompasses
the entire product development cycles, from
conception through to installation, service
and support.
Contents
Performance Overview
New Products
Board of Directors
Chairman’s Report
Chief Executive Officer’s Report
Shareholder Information
Directors’ Report
Financial Statements
Notes to the Financial Statements
Directors’ Declaration
Independent Auditor’s Report
Lead Auditor’s Independent Declaration
Corporate Directory
2
4
5
6
8
12
14
37
41
91
92
99
100
In accordance with ASX Listing Rule 4.10.3, Ainsworth Game
Technology’s Corporate Governance Statement can be found on
its website at: http://www.agtslots.com.au/corporategovernance
1
ANNUAL REPORT 2019 Performance
Overview
North America
Other Regions
• Excellent performance, revenue +8%, profit
+16%.
• Revenue growth driven by increased sales
of the high performing Quick SpinTM Product
family on the A640 cabinet.
• Higher margin product mix and overhead
containment contributed to increase in
segment profit.
• Operating leverage drove further margin
expansion to 41% (39% in the pcp).
• The number of machines on participation was
2,190 (Class II: 1,009 and Class III: 1,181), -15%.
Latin America
• Delivered profit of $24.0m in challenging
market conditions.
• Decline in revenue to $72.7m due to greater
proportion of refurbished units compared to pcp.
• Legacy game performance is strong, providing
continued profitability across key markets.
• Units under gaming operations increased
strongly again, + 41% to 4,616.
• The average yield per day declined to US$10
due to unfavourable currency movements
and lease to sale conversions of high
performing products.
Australia
• Profit was down to $2.8 million given reduced
fixed overhead recovery.
• Write-down of NSW Service goodwill, $2.4m
• Decrease in revenue of 43% due to lower
sales made resulting from challenging market
conditions and lower than expected product
performance.
• New products such as Electric CashTM, Lucky
BreakTM, Money UpTM and Loaded with LootTM
are expected to deliver improved contributions
in FY20.
• Revenues -35%, profit -35%, due to the
reduced contribution from Novomatic
compared to the pcp and challenging market
conditions in New Zealand and Asia.
• Profit was down by 35% to $6.8 million.
• Online contributed $4.2 million of revenues,
similar to pcp.
Online Gaming
• AGT’s online strategy is to focus on content
distribution, interactive product innovation
and building player databases with live data
capabilities throughout online markets in
Europe and the Americas.
• 62 games developed and approved for online
distribution throughout regulated territories in
Europe, the USA and Latin America in FY19.
• New content distribution agreements with third
party multi-channel platform providers and
casino operators throughout Europe.
• 20 games now approved in New Jersey with
platform provider GVC for PlayMGM online.
• Our new B2C casino, Mustang Money,
continues to grow our player database and
revenues to plan. Social media advertising
positions our brand as a premier online
wagering offering in Mexico.
Financial Highlights
• Strong balance sheet to self-fund growth
strategies.
• Net cash of $6.2m compared to net debt
of ($36.2m) at pcp.
• NPBT excluding currency impacts and
one-off items $13.0m.
• Reported EBITDA $44.8m (2018: $68.0m)
• R&D as a percentage of revenue at 17%
(2018: 13%).
2
AINSWORTH GAME TECHNOLOGY R&D Expenditure - AUD (M)
(Fiscal years ended June 30)
Revenue/Profitability - AUD (M)
(Fiscal years ended June 30)
34.2
34.4
12%
13%
28.6
10%
40.4
17%
FY16
FY17
FY18
FY19
285.5
282.1
265.6
234.3
70.4
FY16
57.4
FY17
39.2
FY18
8.6
FY19
Total R&D Expenditure
R&D as a percentage of Revenues
Profit before Tax (PBT) excluding foreign exchange effects
Total Revenue
Revenues - AUD (M)
(Fiscal years ended June 30)
EBITDA - AUD (M)
(Fiscal years ended June 30)
143.6
159.3
145.3
141.9
122.8
120.3
116.3
118.0
42.0
53.8
38.4
31.9
43.4
24.6
15.1
29.7
FY16
FY17
FY18
FY19
FY16
FY17
FY18
FY19
H1
H2
H1
H2
Historical Performance - AUD (M)
Normalised PAT (All FY’s - excl foreign currency effects)
240.6
147.6
93.0
52.5
285.5
204.0
282.1
208.0
265.6
202.0
234.3
198.2
81.5
52.4
FY15
FY16
74.1
47.6
FY17
*Note 1
63.6
29.3
FY18
36.1
6.5
FY19
Domestic Revenue
Normalised Profit After Tax (PAT)
International Revenue
*Note 1: NPAT H1 FY17 includes $8M reversal of prior year
DTL recognition
3
ANNUAL REPORT 2019 New Products
Quick Spin™
Quick Spin™ is a brand that has a strong foothold in the market in
the Americas and demonstrates our commitment to the profitability
of our A640 cabinet.
New releases such as Super Wheels 7’s™ and Super Lit Vegas™
and new configurations with Link Progressive and a multi
denomination option with games like Turbo Charged™ are among
some of the new titles expected to be released.
Rio Grande Los Toritos™
Rio Grande Los Toritos™ follows the incredible success of Rio
Grande Rapids™, which has been an iconic brand with tremendous
performance in casinos over the years.
The new Rio Grande Los Toritos™ concept presents 3-level Link
Progressive, offering Jackpots with flexible configuration options
to address the need of our clients.
Rio Grande Los Toritos™ includes titles such as Rio Nights™, Rio Fiesta™, Rio Fortune™ and
Rio Treasures™, all with a wide selection of bonuses, free games, and exciting features.
Electric Cash™
Building on Ainsworth’s latest Credit Prize collection experience,
Electric Cash™ will electrify your gaming floor by providing a unique
twist on the Major Jackpot feature.
Electric Cash™ introduces a new symbol driven jackpot feature for
the Major Progressive where 10 coloured symbols award the Jackpot
during the ‘Stick and Spin’ feature. Additionally, Electric Cash™ features
free games, an exciting ‘Stick and Spin’ feature, two Progressives and two levels of Scalable Bonuses.
Electric Cash™ is available as a Standalone and/or Link. (Depending on jurisdictional availability)
Lucky Break™
Searching for new products to captivate your players? Lucky Break™ a
striking new concept in the multi-denomination Standalone Progressive
segment giving players the opportunity of a ‘Lucky Break’.
Two levels of Standalone Progressives and three levels of scalable
Bonuses are awarded in the ‘Lucky Break’ feature by aligning these
prizes with the ‘Lucky Break’ Hotspots. Additional Credit Prizes and
free games build anticipation throughout the ‘Lucky Break’ feature.
Individual free games features vary by game with expanding wilds, multipliers and more. Retriggers
and additional features in the free games enable Jackpot options to be available in any game state.
4
AINSWORTH GAME TECHNOLOGY Board of Directors
Graeme Campbell OAM
Chairman and Independent
Non-Executive Director
Member - Audit Committee
Member - Remuneration and
Nomination Committee
Appointed 18 September
2007, Chairman Since 2016
Danny Gladstone
Non-Executive Director
Former Chief Executive Officer
and Executive Director until 30
June 2019
Appointed Non-Executive
Director 1 July 2019
Harald Neumann
Non-Executive Director
Currently Chief Executive
Officer and Chairman of the
Executive Board of Novomatic
since October 2014.
Appointed 21 February 2017
Michael Yates
B.Com (with merit), LLB
Independent Non-Executive Director
Chairman – Regulatory and
Compliance Committee
Member – Audit Committee
Appointed 15 December
2009
Colin Henson
Dip Law - BAB, FCPA,
FGIA, FAICD
Independent Non-Executive Director
Chairman – Remuneration and
Nomination Committee
Chairman – Audit Committee
Appointed 3 April 2013
Heather Scheibenstock
GAICD, FGIA
Independent Non-Executive Director
Member – Remuneration and
Nomination Committee
Member - Regulatory and
Compliance Committee
Appointed 18 January 2016
5
ANNUAL REPORT 2019 Chairman’s Report
Dear Shareholders,
Ainsworth’s FY19 results reflect our ongoing
commitment to expand and diversify our offerings
in the competitive global gaming market and to
deliver long term results for shareholders.
For FY19, AGT achieved a Profit after Tax of $11
million. On a pre-currency basis, Profit before Tax
was $9 million. These results are not as strong as
we would have liked to report. While we compete
in challenging markets against strong competition,
we have the capacity and the capability to deliver
better results in the future.
We are making progress in executing on our key
strategies. Our goals are to expand our international
footprint, invest in technology to enhance the
product suite, and build our participation fleet to
improve the quality of earnings.
International sales were $198 million and now
account for 85% of the group total. Within this, the
results for North America were excellent with sales
up 8% and profit up 16%. Revenue growth was
driven by increased sales of the high performing
Quick Spin product family on the A640 cabinet.
While we did well in North America, this growth
was offset by the results in Latin America and
Australia, causing a year on year decline in results
for the group overall.
We continue to benefit from our strong market
positions across Latin American markets. However,
results were impacted by deterioration in gaming
operation yields due to local currency devaluations
and a greater proportion of refurbished machine
sales in the current period.
We are transitioning to a new product suite in
Australia. We have recently
launched some
important new games which we expect to re-
energise our performance in the domestic markets.
Additional product launches are also planned for
next year.
The Australian operations results demonstrate
the need to re-evaluate our R&D strategy. This
is the key to long term sustained performance.
This review should be completed by the end of
the calendar year and is expected to lead to a
targeted increase in investment.
6
We continue to make good progress in building
our recurring revenues. These revenues provide
consistency and predictability. While some of our
customers choose to purchase units from the
fleet that are performing well, as we saw in North
America, the total number of units under gaming
operations increased by 16% to 6,806 at the end
of the year.
Our balance sheet and capital position are also
positive features of our financial results. Net
operating cash flow increased by $42 million to
$61 million. We repaid over AUD20 million of debt
and closed the year with net cash of $6 million.
This improved financial strength provides us with
the flexibility to invest in technology and self-fund
our organic growth strategies. It also provides
us with the ability to potentially fund selective
acquisitions to complement organic growth. We
have had success with a previous acquisition and
we will continue to pursue strategic acquisitions
that can enhance our scale, provide new
technologies and improve our earnings.
Given the product transition in Australia and
scope for growth investments to drive long-term
performance, the Board has decided to forgo the
final dividend for the year.
During this period, we also carried out a smooth
and orderly leadership transition. On July 1st Mr
Lawrence Levy commenced as AGT’s new Chief
Executive Officer. Lawrence is a highly respected
and experienced gaming executive. The
directors are confident that he will further assist
AGT achieve its strategies of becoming a leading
provider of innovative gaming technology to the
global market.
As we released to ASX, this will be my last
Annual General Meeting as your Chair. I will be
stepping down from the role following the end of
the meeting. It has been a privilege to chair your
Company. I look forward to providing an ongoing
contribution as Lead Independent Director. The
creation of this new role is an important signal of
our commitment to good governance and effective
Board operations.
AINSWORTH GAME TECHNOLOGY The Board have resolved that previous CEO, Mr
Danny Gladstone will assume the role of Chair
following the AGM. This appointment provides a
greater level of access to Danny’s deep industry
expertise and customer knowledge. We formally
thank him for his significant contribution to AGT as
CEO and look forward to working with him closely
in the future.
While the FY19 results were disappointing, AGT
is capable of delivering improved performance.
We have a dedicated and professional workforce,
an excellent industry reputation and a well-
established footprint across all our markets. As
we re-evaluate and focus our R&D investments to
develop successful new innovative products, we
are confident we can deliver long-term growth.
Acknowledgements
I would like to thank my fellow board members
for their counsel and support. I would also like
to recognise the leadership of our CEO since
his appointment, Mr Lawrence Levy, and his
commitment to delivering improved performance.
The directors would also like to thank our CFO,
Mr Mark Ludski, the rest of the highly capable
executive team, as well as our dedicated and loyal
employees, my fellow shareholders and of course,
our customers for entrusting us with their greatly
appreciated business.
Graeme Campbell
Chairman
7
ANNUAL REPORT 2019 CEO’s Report
Dear Shareholders,
I am pleased to provide this report as your new
CEO. I have been in this industry for over 35
years and have admired Ainsworth’s ability to
innovate, compete and outperform. The company
is well regarded and recognised across all global
markets.
My
initial observations having commenced
in the role in July are that we have a strong
footprint in major markets, scale and growing
recurring revenues. With an increased focus on
investing in game technology and new product
development, I expect our domestic performance
to progressively improve and our international
success to continue.
FY19 Results
On a pre-currency basis, Profit before Tax (PBT)
was $9m, a significant reduction from the $39
million reported in FY18. Sales revenue for
the year was $234 million, a decrease of 12%.
International revenues were broadly similar
at $198 million while domestic revenues were
disappointing at $36 million. Gross profit was
down by 11% to $140 million with gross margins up
slightly at 60%. Group EBITDA was $45 million, a
decline of 34% on the pcp.
North America delivered an excellent result,
increasing revenue by 8% to $114 million. Profitability
was up by 16% to $47 million as we enjoyed some
operating leverage and margin expansion.
Unit sales there were similar at 2,952 compared
to 3,021 last year. FY18 included the sale of 900
historical horse racing machines, inflating the
base. Excluding this substantial order, underlying
sales increased by 39% this year.
The number of machines under gaming operations
in North America fell by 15% to 2,190. The decline
in the gaming operations installed base is a
result of customers preferring to purchase top
performing titles from the fleet and reduce non-
performing titles for optimal floor mix. If a game is
outperforming, we are happy to sell the machine.
We then work to increase the size of the fleet
overall with new titles.
8
Yield per day increased slightly to US$26. Despite
the market being very competitive, this yield has
been climbing steadily, mainly due to our game
performance.
In Latin America, political elections and the
introduction of new gaming taxes adversely
affected local economies and industry spend.
These factors impacted our results. Revenues
were down by 8% and profitability was 22% lower
than last year. Mexico is our largest market in the
region and encouragingly, we continue to deliver
profitable growth and gain market share.
In our Rest of the World segment, revenues fell by
35% to $12 million. We had a reduced contribution
from Novomatic compared to last year. Kits and
other parts sales to them generated $2.5 million
of this revenue. Online gaming contributed $4
million, a similar level to last year.
Revenues declined in Asia and in New Zealand.
Unit volumes were down by 64% to 438 with a
weak second half.
Turning to Australia, AGT’s performance continued
to be adversely impacted by product performance
and competitive pressures. Domestic sales were
poor for the year at $36 million, a decrease of 43%
and profits were $2.8 million. We had minimal sales
to corporates and casinos and our performance
was disappointing across all states.
We are undergoing a significant product transition
to re-energise our performance in the domestic
markets. The recent launches of Loaded with
Loot and Crazy Jackpot are gaining positive
customer feedback. We expect these products to
re-energise our Australian performance and make
a larger contribution to FY20.
Given the reduction in unit volumes in Australia,
we have impaired our NSW Service goodwill
by $2.4 million. We have written off the final
remaining value in the 616 digital assets with a
$1.9m charge and we have taken a $0.9 million
charge against receivables to be prudent.
Total operating costs increased by 11% although
the true underlying rate for the year was much
lower at 6%.
Sales service and marketing expenses increased
by $5 million. Contributing to this was an adverse
AINSWORTH GAME TECHNOLOGY forex translation of $4 million. The balance of
the increase was mostly increased depreciation
given the growth in the gaming operations fleet.
R&D expenses increased by $6 million. Although
this was strategic, again currency had an adverse
effect of $1 million. We increased our third-party
contractors and
technical compliance costs;
decreased the value of the development costs we
capitalised; and prudently increased amortisation
costs from previously capitalised projects.
Headline administration expenses increased by
$2 million. FX made up $1 million, and $2.4 million
was the reversal of a previously recognised LTI
payment expense in FY18.
Overall, operating costs at constant currency
basis was $125 million compared to $117 million in
FY18, resulting in a modest increase of 6%.
Finally on the financial results, our balance sheet
turned from a net debt position last year to a net
cash position at the end of FY19.
We had good working capital controls through the
year and collected more receivables, including
the CDI payment for the 900 machines in
September. Cash increased following investment
in technology, and sales and marketing resources.
We repaid over $20 million of debt and finished
with loans and borrowing at $55.4 million. Our
debt was clearly exceeded by our closing cash
reserves of $61.6 million leaving a net cash
position of $6.2 million.
As well as the cash, we have a debt facility to
fund any inorganic additions. The facility has
been extended to September 2021. This capital
strength is a highlight of the results for me as it
creates growth opportunities and flexibility.
Outlook
I am confident AGT can drive improved long-term
growth by leveraging its excellent reputation,
focusing on R&D and complementing organic
performance with selective acquisitions that
make good financial sense.
Our execution priorities to deliver this improved
performance are clear:
1. Continue to grow unit sales in the key Class II
and III North American markets. For example, our
proprietary Historical Horse Racing product is
performing well and we see good opportunities
to leverage our expertise in this area and expand
our footprint.
2. Increase the number of units on participation to
generate high quality recurring revenues.
3. Successfully launch new products to re-energise
and improve our performance in the domestic
markets.
4. Complete the re-evaluation of our R&D investments
to develop successful new innovative products.
5. Access Novomatic’s significant expertise to
identify and deliver additional benefits from
this strategic partnership.
6. Pursue selective acquisitions that are on
strategy and make good financial sense.
9
ANNUAL REPORT 2019 CEO’s Report
(Continued)
7. Expand our online capabilities with a focus
on content distribution, interactive product
innovation and building player databases with
live data capabilities throughout online markets
in Europe and the Americas.
8. Maintain strong capital disciplines and cost
controls to enhance our financial strength,
provide flexibility, and self-fund our organic
growth strategies.
I wish to express my appreciation to Graeme
Campbell as the Chairman for his commitment
to the Company and for ensuring a smooth
leadership transition. I congratulate him on his
important new role as Lead Independent Director
following the Annual General Meeting.
the
for our
I would also like to credit Danny Gladstone
for building
future
foundations
success and congratulate him on his upcoming
appointment as Chair following the AGM. I look
forward to working closely with Danny to execute
on our strategic priorities. I would also like to
thank the remaining directors for their guidance
and support, the executive teams from North
America, Latin America and Australia for their
impressive work through the year, our talented
employees, our supportive shareholders and,
importantly, our customers who are at the centre
of everything we do.
Lawrence Levy
Chief Executive Officer
10
AINSWORTH GAME TECHNOLOGY AUSTRALIA
AMERICA
LATIN AMERICA
11
ANNUAL REPORT 2019 Distribution of shareholders
NUMBER OF EQUITY SHAREHOLDERS
Performance
Rights
Ordinary
Shares
Options
Category
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and over
1,128
1,938
665
777
67
0
183
97
70
2
1
29
52
464
9
555
Total
4,575
352
The number of shareholders holding less than a marketable
parcel of ordinary shares is 779 (205,965 ordinary shares).
On market buy-back
There is no current on market buy-back of ordinary shares.
Unquoted equity securities
At 19 September 2019, 3,167,271 performance rights and
12,749,343 unlisted non-transferable options have been
issued to 352 and 555 employees, respectively. These
performance rights and options remain unexercised.
Regulatory considerations affecting shareholders
The Company is subject to a strict regulatory regime in regard
to the gaming licences and operations within the gaming
industry. It is necessary for the Company to regulate the
holding of shares to protect the businesses of the Company
in respect of which a gaming licence is held. By accepting
shares, each potential investor acknowledges that having
regard to the gaming laws, in order for the Company to
maintain a gaming licence, the Company must ensure that
certain persons do not become or remain a member of
the Company. The Constitution of the Company contains
provisions that may require shareholders to provide certain
information to the Company and the Company has powers
to require divesture of shares, suspend voting rights and
suspend payments of certain amounts to shareholders.
Shareholder Information
INFORMATION ABOUT SHAREHOLDERS
Shareholder
the Australian
Securities Exchange Limited Listing Rules and not disclosed
elsewhere in this report is set out below:
required by
information
SHARE HOLDINGS (AS AT 19 SEPTEMBER 2019)
Number of shareholders and shares on issue
The issued shares in the Company were 336,793,929
ordinary shares held by 4,575 shareholders.
Substantial shareholders
The number of shares held by substantial shareholders and
their associates are set out below:
Shareholder
Novomatic AG
Votraint No. 1019 Pty Ltd (MCA
Private Investment A/C)
Allan Gray Investment
Management
Spheria Asset Management
Number of
Ordinary Shares
178,150,817
30,133,804
27,653,027
17,385,969
Voting rights
Ordinary shares
The voting rights attaching to ordinary shares are that on
a show of hands every member present in person or by
proxy has one vote and upon a poll, each share shall have
one vote.
Options and Performance Rights
Option and performance right holders have no voting rights.
12 AINSWORTH GAME TECHNOLOGY
Shareholder Information (continued)
Twenty largest shareholders
Name
NOVOMATIC AG
VOTRAINT NO 1019 PTY LIMITED
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
CITICORP NOMINEES PTY LIMITED
J P MORGAN NOMINEES AUSTRALIA PTY LIMITED
ASSOCIATED WORLD INVESTMENTS PTY LTD
NATIONAL NOMINEES LIMITED
BNP PARIBAS NOMS PTY LTD
WRITEMAN PTY LIMITED
MERRILL LYNCH (AUSTRALIA) NOMINEES PTY LIMITED
THE PAVILION MOTOR INN OF WAGGA WAGGA PTY LTD
ASSOCIATED WORLD INVESTMENTS PTY LIMITED
CASOLA HOLDINGS PTY LTD
BNP PARIBAS NOMINEES PTY LTD HUB24 CUSTODIAL SERV LTD DRP
MR CHRISTIAN JOHN HASTINGS AINSWORTH
MR SASHA ALEXANDER CAJKOVAC
MISS PATTARAWADEE SMARNKEO
MRS CHRISTINE EMILY COGHLAN
MR RICHARD JAMES GOLDSACK + MS AMANDA JANE HAY
Number of ordinary
shares held
178 ,150, 8 17
30,133,804
22,408,969
22,027,888
14,843,371
6,332,652
5,765,355
2,783,799
1 , 8 1 1 ,622
1,567,048
1,500,000
1,183,928
1,070,000
777,424
770,650
690,000
684,999
600,000
546,273
Percentage
of total
52.90
8.95
6.65
6.54
4.41
1.88
1.71
0.83
0.54
0.47
0.45
0.35
0.32
0.23
0.23
0.20
0.20
0.18
0.16
MS AMY WAI-CHUN CHAN
Total
530,000
294,178,599
0.16
87.35
ANNUAL REPORT 2019
13
The directors present their report together with the consolidated financial statements of the Group comprising of Ainsworth
Game Technology Limited (the Company) and its subsidiaries for the financial year ended 30 June 2019 and the auditor’s report
thereon.
1. DIRECTORS
The directors of the Company at any time during or since the end of the financial year are:
Name, qualifications
and independence status
CURRENT
Age
Experience, special responsibilities and other directorships
Mr Graeme John Campbell OAM
Chairman and Independent Non-Executive
Director
62 yrs
– Graeme has specialised in the area of liquor and hospitality for over
30 years in corporate consultancy services with particular emphasis on
hotels and registered clubs.
– Former Chairman of Harness Racing NSW, Former Director of Central
Coast Stadium and Blue Pyrenees Wines.
– Recipient of J.P. Stratton award and Ern Manea Gold Medal. Inducted
into the Inter Dominion Hall of Fame in February 2014. Awarded Order
of Australia medal in January 2018 for services to harness racing.
– Director of Liquor Marketing Group Limited (Bottle Mart) since 2013.
– Director of Lantern Hotels Group and Chairman since July 2016.
– Director of NSW Harness Racing Club since October 2016.
– Chairman of Audit Committee of Illawarra Catholic Club Group.
– Chairman of Audit Committee until 1 April 2017 and member since 1 April
2017, member of Regulatory and Compliance Committee until 1 July
2017, member of Remuneration and Nomination Committee since 2015.
– Lead Independent Non-Executive Director since 2013, Chairman since
2016.
65 yrs
– Michael has extensive commercial and corporate law experience in a
Mr Michael Bruce Yates B.Com (with merit),
LLB
Independent Non-Executive Director
career spanning over 35 years.
– He is a former senior corporate partner of Sydney Law practices
Holding Redlich and Dunhill Madden Butler and has acted for a number
of clients involved in the gaming industry.
– Director since 2009.
– Chairman of Regulatory and Compliance Committee since 2013 and
member of Audit Committee since 2015.
– Colin has had a lengthy career in senior corporate positions and as a
director of private and publicly listed companies across a broad range
of industries.
– Former directorships
include; Executive Chairman of Redcape
Property Fund Limited, an ASX Listed Property Trust; Chairman and
non-executive director of Videlli Limited.
– Fellow of the Australian Institute of Company Directors, Fellow of
CPA (Certified Practising Accountants) Australia and Fellow of the
Governance Institute of Australia. Colin is also a non-practising
member of the Law Society of NSW.
– Director since 2013.
– Member of Audit Committee until 1 April 2017 and Chairman since
1 April 2017.
– Chairman of Remuneration and Nomination Committee since 2015.
Mr Colin John Henson, Dip Law- BAB,
FCPA, FGIA, FAICD
Independent Non-Executive Director
71 yrs
14 AINSWORTH GAME TECHNOLOGY
Directors’ Reportfor the year ended 30 June 2019 Name, qualifications
and independence status
CURRENT
Age
Experience, special responsibilities and other directorships
Ms Heather Alice Scheibenstock GAICD, FGIA
Independent Non-Executive Director
51 yrs
Mr Daniel Eric Gladstone
Non-Executive Director
64 yrs
Mr Harald Michael Karl Neumann
Non-Executive Director
57 yrs
– Heather has extensive leadership experience within the gaming and
hospitality industries specialising in strategic planning and offshore
growth spanning over 30 years.
– She has previously held senior executive roles at Echo Entertainment
and Solaire Group.
– Former director of Southern Metropolitan Cemeteries Trust.
– Director of Ability Options since 2017 and SenSen Networks Ltd
from 7 September 2018.
– Chair of Audit and Risk Committee at SenSen Networks Ltd.
– Member of Australian Institute of Company Directors and Women on
Boards.
– Fellow of Governance Institute of Australia.
– Director since 2016.
– Member of Remuneration and Nomination Committee since 2016.
– Member of Regulatory and Compliance Committee since 2017.
– Danny has held senior positions within the gaming industry over a
successful career spanning 40 years.
– Former Chairman of Gaming Technologies Association.
– Inducted into the Club Managers Association Australia Hall of Fame in
2000.
– Member of Regulatory and Compliance Committee since 2010 until
30 June 2019.
– Chief Executive Officer since 2007 (Executive Director since 2010) until
30 June 2019.
– Non-Executive Director since 1 July 2019.
– Harald has extensive leadership experience in senior executive
positions in a career spanning over 20 years mainly within technology
companies.
– Former Regional Chief Executive Officer at Alcatel AG (now Alcatel–
Lucent) a global tele-communications equipment Company.
– Former Managing Director at Bundesrechenzentrum GmbH, the
Austrian government’s information technology service provider, until
2006.
– Former CEO of G4S Security Services Austria AG, the Austrian
subsidiary of one of the world’s leading integrated security companies
before joining Novomatic in 2011.
– Currently Chief Executive Officer and Chairman of the Executive Board
of Novomatic since 2014.
– Graduate of the Vienna University of Economics and Business, Board
Member of the American Chamber of Commerce. Member of the
Rotary Club Klosterneuburg and Member of the Supervisory Board of
Casinos Austria AG since March 2017.
– Non-Executive Director of Ainsworth Game Technology since 2017.
2. COMPANY SECRETARY
Mr Mark L Ludski has held the position of Company Secretary since 2000. Mr ML Ludski previously held the role of Finance
Manager with another listed public company for ten years and prior to that held successive positions in two leading accounting
firms where he had experience in providing audit, taxation and business advisory services.
Mr ML Ludski is a Chartered Accountant holding a Bachelor of Business degree, majoring in accounting and sub-majoring in
economics.
ANNUAL REPORT 2019
15
Directors’ Report (continued)for the year ended 30 June 2019 3. DIRECTORS’ MEETINGS
The number of directors’ meetings (including meetings of committees of directors) and number of meetings attended by each
of the directors of the Company during the financial year are:
Director
GJ Campbell
MB Yates(1)
DE Gladstone
CJ Henson
HA Scheibenstock
HK Neumann(1)
Board Meetings
B
A
11
10
11
11
11
9
11
10
11
11
11
9
Audit Committee
Meetings
Remuneration
& Nomination
Committee Meetings
Regulatory
& Compliance
Committee Meetings
A
2
2
–
2
–
–
B
2
2
–
2
–
–
A
3
–
–
3
3
–
B
3
–
–
3
3
–
A
–
4
4
–
4
–
B
–
4
4
–
4
–
A Number of meetings attended
B Number of meetings held during the year (excluding approved leave of absence)
(1) Mr HK Neumann had approved leave of absence for two Board meetings during the financial year due to the time difference difficulties
and his international country of residence. Mr MB Yates had approved leave of absence for one Board meeting during the year due to
international travel commitments. All associated Board documentation and discussions held during these meetings were provided to
ensure their knowledge of any Company business was appropriately made available.
4. PRINCIPAL ACTIVITIES
The principal activities of the Group during the course of the financial year were the design, development, production, lease,
sale and servicing of gaming machines and other related equipment and services. The Group continues to execute strategies
to expand and diversify its product offerings within both land-based and online gaming markets, including social gaming and
licensed “Real Money” gambling markets.
There were no significant changes in the nature of the activities of the Group during the year.
Objectives
Ainsworth is a well-established and recognised gaming machine developer, designer and manufacturer operating in local and
global markets. Our strategy is to profitably and sustainably expand this footprint by leveraging off our deep expertise and
substantial experiences for the benefit of all shareholders.
The Group’s objectives are to:
– focus on regaining market share decline in domestic market and growing international revenue;
– improve profitability within geographical markets that are expected to achieve the greatest contributions to the Group’s
financial results, and creation of sustained growth;
– diversify and expand on contributions from recurring revenue through units under gaming operation;
– continue investing in product research and development in order to provide quality market leading products that are innovative
and entertaining, and result in increased player satisfaction and therefore greater venue profitability;
– expand presence within online gaming markets, including social gaming and licensed “Real Money” gambling markets;
– prudently manage levels of investment in working capital and further improve cash flow from operations to facilitate investment
in growth opportunities; and
– provide a growing return on shareholder equity through increasing profitability, payment of dividends and share price growth.
In order to meet these objectives, the following priority actions will continue to apply in future financial years:
– grow the Group’s footprint and operating activities in domestic and international markets;
– continual investment in research and development to produce innovative products with leading edge technology;
– review and evaluate growth opportunities both organically and through acquisitions;
– manage product and overhead costs through improved efficiencies in supply chain and inventory management;
– actively pursue initiatives to improve and reduce investment in working capital;
– maintain best practice compliance policies and procedures and increase stakeholder awareness of the Group’s regulatory
environment; and
– ensure retention and development of the Group’s talent base.
16 AINSWORTH GAME TECHNOLOGY
Directors’ Report (continued)for the year ended 30 June 2019 5. OPERATING AND FINANCIAL REVIEW
Overview of the Group
The Group’s profit for the year ended 30 June 2019 was a profit after tax of $10.9 million, a decrease of 66% on the $31.9 million
in 2018. The profit after tax excluding the effect of net foreign currency movement was $6.5 million which is a decrease of 78%
compared to $29.3 million in 2018.
The current year profit before tax result, excluding the effect of net foreign currency gains, was $8.6 million. This result was
achieved on revenue of $234.3 million, a decrease of 12% compared to the previous corresponding period in 2018.
Included in the FY19 results are $1.9 million write down of the remaining carrying amount of 40% investment in 616 Digital LLC
and $2.4 million write down of the goodwill for the Australian service business division.
The following table summarises the results for the year:
In millions of AUD
Total Revenue
Underlying EBITDA
Reported EBITDA
EBIT
Profit before tax
Profit for the year
Total assets
Net assets
Earnings per share (fully diluted)
Total dividends per share
12 months to
30 June 2019
12 months to
30 June 2018
Variance
%
234.3
265.6
43.0
44.8
11.4
14.7
10.9
483.3
393.5
67.6
68.0
40.0
42.3
31.9
506.3
378.8
3.0 cents
9.0 cents
–
4.0 cents
(11.8%)
(36.4%)
(34.1%)
(71.5%)
(65.2%)
(65.8%)
(4.5%)
3.9%
(66.7%)
N/A
A reconciliation of the reported EBITDA to the underlying EBITDA is shown in the following table:
In millions of AUD
Reconciliation:
Profit before tax
Net Interest
Depreciation and amortisation
Reported EBITDA
Foreign currency gains
Impairment losses (Receivables)
Impairment losses (616 Digital LLC)
Impairment losses (NSW Service Goodwill)
Reversal of bad debt provisions
Gain on sale of land
Underlying EBITDA
12 months to
30 June 2019
12 months to
30 June 2018
Variance
%
14.7
(3.3)
33.4
44.8
(6.0)
0.9
1.9
2.4
(1.0)
–
43.0
42.3
(2.3)
28.0
68.0
(3.1)
2.7
2.5
–
–
(2.5)
67.6
(65.2%)
43.5%
19.3%
(34.1%)
(93.5%)
(66.7%)
(24.0%)
N/A
N/A
N/A
(36.4%)
The information presented in this review of operations has not been audited in accordance with the Australian Auditing
Standards.
ANNUAL REPORT 2019
17
Directors’ Report (continued)for the year ended 30 June 2019 5. OPERATING AND FINANCIAL REVIEW (continued)
Shareholder returns
$’000
2019
2018
2017
2016
2015
Profit attributed to owners of the company
$10,895
$31,936
$37,930
$55,703
$70,353
Basic EPS ($A)
Dividends paid
Change in share price ($A)
$0.03
$8,313
($0.37)
$0.10
$0.12
$0.17
$0.22
$4,966
$16,386
$32,245
$32,227
($1.12) No Change
($0.41)
($1.17)
Net profit amounts for 2015 to 2019 have been calculated in accordance with Australian Accounting Standards (AASBs).
Investments for future performance
The Group continues to review and evaluate opportunities within the domestic and international gaming sector. Further
investments in research and development are expected to assist the ongoing expansion and breadth of innovative, technically
advanced and consistently high performing products.
During the year, the Group continued to execute previously identified strategies and plans across its global product development
operations, which most notably includes game development, software and hardware activities. The Group has significantly
bolstered its ability to develop highly competitive game content as a consequence of expanding its internal studios through
the appointment of additional experienced game developers to its internal studios in Australia and Las Vegas. Furthermore,
the Group has entered into agreements with additional new third-party game development studios located in Australia and the
US to further diversify the Group’s game content and complement the innovation capabilities of the Group’s internal studios.
The Group has now started to secure key regulatory approvals for a new EGM software platform that will power the Group’s
future range of games. This software platform provides a more “off-the-shelf” development environment that allows the Group
to deliver a broader and more complex range of gaming content as well as to benefit from the efficiencies provided by modern
software development methodologies and tools. This has also enabled the Group to attract new software development talent
from a larger pool of highly skilled software developers.
Ainsworth Interactive is now a self-contained division that is engaged in the design, development and distribution of digital
gaming solutions for regulated online real-money gaming, social casino and mobile gaming worldwide. Our strategy is to focus
on expanding our game content distribution network throughout the online markets of Europe, Latin America (“LATAM”) and the
USA, continue to invest in interactive product innovation, and for Mustang Money online casino operating in Mexico, continue
to build our database of active players and grow our revenues.
Ainsworth has an extensive range of games developed and approved for online distribution throughout regulated territories in
Europe, USA and LATAM with additional game titles drawn from Ainsworth’s latest range of high performing land-based games
currently under development for release over the coming year.
We have extended our game content development and licensing agreement with the NASDAQ listed Zynga Inc that will extend
and deepen Ainsworth and Zynga’s existing strategic relationship through the addition of new Ainsworth interactive content
to Zynga’s “Hit It Rich” social casino app. Zynga is a leading global social gaming application provider that has successfully
collaborated with Ainsworth since 2015 in the provision of some of Zynga’s best performing social casino games.
Our new B2C casino, Mustang Money, continues to attract new players and grow its player database and its revenues in line
with expectations. We have launched strategic ad campaigns with Facebook, Instagram and Twitter geared at positioning
Ainsworth’s iconic Mustang brand as a premiere online wagering offering in Mexico.
Significant changes in the state of affairs
There were no significant changes in the state of affairs of the Group during the financial year.
18 AINSWORTH GAME TECHNOLOGY
Directors’ Report (continued)for the year ended 30 June 2019 Review of principal businesses
Results in the current period and prior corresponding period are summarised as follows:
In millions of AUD
Segment revenue
Australia
Americas
Rest of World
12 months to
30 June 2019
12 months to
30 June 2018
Variance
Variance
%
36.1
186.7
11.5
63.6
184.4
17.6
Total segment revenue
234.3
265.6
(31.3)
Segment result
Australia
Americas
Rest of World
Total segment result
Unallocated expenses
Net foreign currency gains
R&D expenses
Corporate expenses
Other expenses
Share of loss of equity-accounted investee
Total unallocated expenses
Less : interest included in segment result
EBIT
Net interest
Profit before income tax
Income tax expense
Profit after income tax
2.8
71.1
6.8
80.7
6.0
(40.4)
(25.0)
(4.3)
(0.1)
(63.8)
(5.5)
11.4
3.3
14.7
(3.8)
10.9
19.4
71.3
10.4
101.1
3.1
(34.4)
(23.3)
(2.5)
(0.1)
(57.2)
(3.9)
40.0
2.3
42.3
(10.4)
31.9
(27.5)
(43.2%)
2.3
(6.1)
(16.6)
(0.2)
(3.6)
1.2%
(34.7%)
(11.8%)
(85.6%)
(0.3%)
(34.6%)
(20.4)
(20.2%)
2.9
(6.0)
(1.7)
(1.8)
–
(6.6)
(1.6)
(28.6)
1.0
93.5%
(17.4%)
(7.3%)
(72.0%)
–
(11.5%)
41.0%
(71.5%)
43.5%
(27.6)
(65.2%)
6.6
63.5%
(21.0)
(65.8%)
ANNUAL REPORT 2019
19
Directors’ Report (continued)for the year ended 30 June 2019 5.
OPERATING AND FINANCIAL REVIEW (continued)
Key performance metrics
Segment result margin
Australia
Americas
Rest of World
Segment result margin
R&D expense
Adjusted EBIT(1)
Adjusted profit before income tax(1)
Adjusted profit after income tax(1)
Effective tax rate
% of revenue
Variance
12 months to
30 June 2019
12 months to
30 June 2018
Points
7.8
38.1
59.1
34.4
17.2
2.3
3.7
2.1
30.5
38.7
59.1
38.1
13.0
13.9
14.8
10.8
(22.7)
(0.6)
–
(3.7)
4.2
(11.6)
(11.1)
(8.7)
%
Variance
25.9
24.6
1.3
(1) Excludes net foreign currency gain of $6,045 thousand (2018: Net foreign currency gain of $3,113 thousand).
Revenue
Revenue for the period was $234.3 million, compared to $265.6 million in 2018, a decrease of 12%. International revenue
contributed 85% of total revenue, compared to 76% in prior corresponding period.
Australian revenue declined to $36.1 million in 2019, a decrease 43% compared to prior corresponding period. The decline
is mainly driven by lower sales as a result of minimal business activity with large corporate customers, continuing pressure
from competitors, regulatory approval delays in product submissions and further product development changes which have
deferred the approval and release of previously scheduled key game titles until late second half of 2019. Notwithstanding these
factors, the launch of Loaded with LootTM product in the last quarter in FY19 has been well received by the market.
International revenue was $198.2 million compared to $202.0 million in 2018, a slight decrease of 2%, mainly driven by the
decrease in sales in Europe. The Americas contributed 94% of total international revenue, with North America and Latin America
representing 57% and 37% respectively.
The Americas now constitutes 80% ($186.7 million) of total revenues, an increase of 11% on prior corresponding period. The
Group expects further revenue growth for the Americas by continuing to build its participation fleet to improve the quality of
earnings and capitalising on opportunities resulting from the Historical Horse Racing and Washington State Electronic Scratch
Ticket System development undertaken in previous periods.
North America contributed $114.0 million in total revenue, an increase of 8% compared to prior corresponding period.
The increase in the period is driven by increased sales in game conversions for AGT’s North America top performing game,
Quick SpinTM.
In conjunction with the revenue achieved from outright sales, the Group maintained a base of 2,190 gaming units under
participation arrangements as at the reporting date in North America. Participation revenue decreased slightly contributing
revenue of $28.1 million (25%) in the current period compared to $29.8 million (28%) in the previous period. Further game
content offerings in both Class II and Class III markets is expected to further increase the installed base of products under
participation in this market.
Revenue from Latin America was $72.7 million, compared to $78.7 million in 2018. The Group has increased its footprint within
this region and has 4,616 units under gaming operations in this market at reporting date. This represents an increase of 41%
compared to the 3,269 units under gaming operations as at 30 June 2018. Despite the increased in gaming operations installed
base, the average per day fee has decreased due to the devaluation of Mexican Peso against USD and increased competitor’s
activities.
The Company is positioned to build on its reputation as a provider of high performing gaming products and expects to continue
to expand its established footprint of products under gaming operation.
20 AINSWORTH GAME TECHNOLOGY
Directors’ Report (continued)for the year ended 30 June 2019 Revenue from other international markets (“Rest of World”
segment) of New Zealand, Europe, Asia, and online
contributed $11.5 million representing a decrease of 35%
compared to the prior corresponding period in 2018 as a
result of decrease in unit sales in all the regions within this
segment except for online.
During this period, the Group has established business
opportunities with major casinos such as GVC group for
New Jersey and the Logrand Entertainment Group in Mexico
to offer Ainsworth’s land-based content in ‘Real Money’
gaming market. This land-based content connection results
in Ainsworth’s digital/interactive games being more readily
identifiable and attractive to a broader audience of players
and operators alike in the competitive digital marketplace.
Operating costs
Despite challenging conditions for the Group, gross margin
of 60% was achieved for the full year FY19, which was
broadly consistent with prior corresponding period of
59%. North America, the largest contributor to the overall
gross margin for the Group, increased its margin by 4%.
This increase was however offset by the drop in margin in
the Australia segment due to higher production overhead
recovery costs as a result of lower unit sales.
Operating costs, excluding cost of sales, other expenses
and financing costs were $130.3, an increase of 11% over
2018. This increase was primarily due to increased R&D
expense increased expenditure on new product initiatives,
increased depreciation for additional gaming machines
placed under the participation fleet in Latin America
compared to 2018. Operating costs relating to global
expansion are continually assessed to ensure these costs
are aligned to the achievement of revenue growth before
being incurred.
Research and development (R&D) expense was $40.4
million, an increase of $6.0 million over 2018, which
represented 17% of revenue (2018: 13%). The increase is due
to additional investment in creating a more diverse range
of product offerings which has been offset by cost savings
through the refinement of global product approval process.
The Group expects to continue to invest more in R&D in an
efficient manner to provide revenue opportunities in global
markets the Group operates in.
Administration costs were $25.0 million, an increase of
$1.7 million compared to 2018. The increase in administrative
expenses include the reversal of previously recognised
2015 Performance Rights share based payment amortisation
of $2.4m in 2018. The Group will continue to prudently
manage its administration costs while meeting the Company’s
objectives.
Financing income and costs
Net financing income was $9.3 million in the current period,
compared to a net financing income of $5.4 million in 2018.
This positive movement of $3.9 million was a result of
foreign exchange gain of $6.0 million in the current period
compared to a foreign currency gain of $3.1 million in 2018,
a favourable change of $2.9 million.
Review of financial condition
Capital structure and treasury policy
The Company currently has on issue 336,793,929 ordinary
shares. The Board continues to ensure a strong capital base
is maintained to enable investment in the development of
the business. Group performance is monitored to oversee
an acceptable return on capital is achieved and dividends
are able to be provided to ordinary shareholders in future
periods. There were no changes in the Group’s approach to
capital management.
The Group is exposed to foreign currency risks on sales
and purchases that are denominated in currencies other
than AUD. The Group continually monitors and reviews
the financial impact of currency variations to determine
strategies to minimise the volatility of changes and adverse
financial effects in foreign currency exchange rates.
Cash flows from operations
The Group continues to generate positive cash flows from
operating activities. Net cash inflows from operations for
the year ended 30 June 2019 was $61.2 million, an increase
of $42.0 million compared to the corresponding period
in 2018. Increased in debtors’ collections and efficient
inventory purchase management undertaken during the
period has assisted with the improvement in net operating
cash flows.
Liquidity and funding
Cash and cash equivalents at 30 June 19 was $61.7 million
(2018: $35.7 million). The Group has in place a A$90 million
facility with an expiry date of 30 September 2021 with a
leading Australian bank. This facility will continue to allow the
Group to pursue traditional financing alternatives, including
the ability to minimise working capital investment through
cash reserves and ability to utilise US dollar borrowings.
The strong cash balance in FY19 resulted in a net positive
cash position with cash balances greater than debt at
reporting date. The Group actively monitors its working
capital requirements and has increased its investment
particularly through the recurring revenue in the Americas
under participation arrangements. The Group plans to
continue to repay its loan in coming periods.
Impact of legislation and other external requirements
The Group continues to work with regulatory authorities to
ensure that the necessary product approvals to support its
operations within global markets are granted on a timely
and cost effective basis. The granting of such licenses will
allow the Group to expand its operations. The Group aims
to conduct its business worldwide in jurisdictions where
gaming is legal and commercially viable. Accordingly,
the Group is subject to licensing and other regulatory
requirements of those jurisdictions.
in existing and new
The Group’s ability to operate
jurisdictions could be adversely impacted by new or
changing laws or regulations and delays or difficulties in
obtaining or maintaining approvals and licenses.
ANNUAL REPORT 2019
21
Directors’ Report (continued)for the year ended 30 June 2019 OPERATING AND FINANCIAL REVIEW (continued)
5.
Market Capitalisation
An analysis based upon the share price at 30 June 2019 ($0.670) implies a market capitalisation of $225,652 thousand, which
indicates a deficit of $167,893 thousand to the net assets value of $393,545 thousand as at 30 June 2019. Based on future
growth projections, the directors believe that the Group’s recoverable amount is above market capitalisation at reporting date.
This is also supported by the value in use calculations undertaken to assess the recoverability of the carrying value of cash
generating units as at 30 June 2019 (refer to Note 13 to the financial statements).
6. DIVIDENDS
The following dividends were declared and paid by the Company for year ended 30 June 2019:
Declared and paid during the year 2019
Final 2018 ordinary (franked)
Total amount
Declared after end of year
No dividend has been declared after year end.
Dividends have been dealt within the financial report as:
Dividends – Final 2018 ordinary (franked)
Cents
per share
Total amount
$’000
Date of
payment
2.5
7 November 2018
8,313
8,313
Note
19(c)
$’000
8,313
EVENTS SUBSEQUENT TO REPORTING DATE
7.
Mr Lawrence Levy commenced his role as CEO of the Group from 1 July 2019, consistent with the previous announcements
made on ASX on 5 April 2019 and 1 July 2019.
On 3 July 2019, Aristocrat Technologies Australia Pty Limited commenced proceedings against the Company in the Federal
Court of Australia claiming infringement of intellectual property rights and breach of the Australian Consumer Law. These
proceedings are at a preliminary stage and will be vigorously defended. No liability has been recognised in the financial report.
The Company considers any further disclosure is inappropriate as the matter is currently before the Court and could prejudice
the Company’s defence.
Other than the matter discussed above, there has not arisen in the interval between the end of the financial year and the date of
this report any item, transaction or event of a material and unusual nature likely, in the opinion of the directors of the Company,
to affect significantly the operations of the Group, the results of those operations, or the state of affairs of the Group, in future
financial years.
8. LIKELY DEVELOPMENTS
The Group continues to pursue development initiatives and the necessary product approvals to help ensure sustainable
revenue growth and financial improvement in future periods.
Further execution of strategies through the investment in a social online gaming company is expected to provide complementary
revenue gains within online social and “Real Money” gaming segments in future periods. This strategy is aimed at achieving
increased market share in selected geographical business sectors to positively contribute to Group results in future financial years.
Further information about likely developments in the operations of the Group and the expected results of those operations
in future financial years has not been included in this report because disclosure of the information would be likely to result in
unreasonable prejudice to the Group.
22 AINSWORTH GAME TECHNOLOGY
Directors’ Report (continued)for the year ended 30 June 2019 9. DIRECTORS’ INTERESTS
The relevant interest of each director in the shares and rights over such instruments issued by the companies within the Group
and other related bodies corporate, as notified by the directors to the ASX in accordance with S205G (1) of the Corporations
Act 2001, at the date of this report is as follows:
Mr GJ Campbell
Mr MB Yates
Mr CJ Henson
Ms HA Scheibenstock
Mr DE Gladstone
Mr HK Neumann
Ainsworth Game
Technology Limited
Ordinary shares
Performance
rights over
ordinary shares
389,241
43,600
135,189
15,344
134,765
–
–
–
–
–
–
–
10. SHARE OPTIONS/PERFORMANCE RIGHTS
Unissued shares under performance right
At the date of this report unissued ordinary shares of the Group under performance right are:
Expiry date
01 March 2022
Instrument
Exercise price
Number of
shares
Rights
$Nil
3,224,149
3,224,149
There are no other shares of the Group under performance right.
All performance rights outstanding were granted in FY17 (i.e. 1 March 2017) and are subject to achievement of share price
compounded growth of at least 15% per annum measured at each vesting period. Further details about share based payments
to directors and KMP’s are included in the Remuneration Report in section 15. These rights do not entitle the holder to participate
in any share issue of the Company or any other body corporate.
Shares issued on exercise of options
During or since the end of the financial year, the Group issued no ordinary shares of the Company as a result of the exercise of
options or performance rights.
INDEMNIFICATION AND INSURANCE OF OFFICERS AND AUDITORS
11.
Indemnification
The Group has agreed to indemnify current and former directors of the Group against all liabilities to another person (other
than the Company or a related body corporate) that may arise from their position as directors of the Company and its controlled
entities, except where the liability arises out of conduct involving a lack of good faith. The agreement stipulates that the
Company will meet the full amount of any such liabilities, including costs and expenses.
Neither the Group nor Company have indemnified the auditor in relation to the conduct of the audit.
Insurance premiums
Since the end of the previous financial year, the Company has paid insurance premiums in respect of directors’ and officers’ liability
and legal expenses’ insurance contracts, for current and former directors and officers, including senior executive officers of the
Company and directors, senior executive and secretaries of its controlled entities.
The directors have not included details of the nature of the liabilities covered or the amount of the premium paid in respect of
the directors’ and officers’ liability and legal expenses contracts, as such disclosure is prohibited under the terms of the contract.
ANNUAL REPORT 2019
23
Directors’ Report (continued)for the year ended 30 June 2019 12. NON-AUDIT SERVICES
During the year KPMG, the Group’s auditor, has performed certain other services in addition to the audit and review of the
financial statements.
The board has considered the non-audit services provided during the year by the auditor and in accordance with written advice
provided by resolution of the audit committee, is satisfied that the provision of those non-audit services during the year by the
auditor is compatible with, and did not compromise, the auditor independence requirements of the Corporations Act 2001 for
the following reasons:
– all non-audit services were subject to the corporate governance procedures adopted by the Group and have been reviewed
by the audit committee to ensure they do not impact the integrity and objectivity of the audit; and
– the non-audit services provided do not undermine the general principles relating to auditor independence as set out in APES 110
Code of Ethics for Professional Accountants, as they did not involve reviewing or auditing the auditor’s own work, acting in a
management or decision making capacity for the Group, acting as an advocate for the Group or jointly sharing risks and rewards.
Details of the amounts paid to the auditor of the Group, KPMG, and its network firms for audit and non-audit services provided
during the year are set out below:
Services other than audit and review of financial statements:
Other regulatory audit services
Controlled entity audit
Other services
In relation to taxation services
Audit and review of financial statements
Total paid/payable to KPMG
2019
$
22,500
116,215
138,715
262,000
400,715
LEAD AUDITOR’S INDEPENDENCE DECLARATION
13.
The Lead auditor’s independence declaration is set out on page 99 and forms part of the directors’ report for the financial year
ended 30 June 2019.
14. ROUNDING OFF
The Group is of a kind referred to in ASIC Corporations (Rounding in Financial/Directors’ Report) Instrument 2016/191 and in
accordance with that Instrument, amounts in the consolidated financial statements and directors’ report have been rounded off
to the nearest thousand dollars, unless otherwise stated.
24 AINSWORTH GAME TECHNOLOGY
Directors’ Report (continued)for the year ended 30 June 2019 15. REMUNERATION REPORT
Message from the Chairman of the Remuneration and Nomination Committee
On behalf of the Remuneration and Nomination Committee (RNC) and with the authority of the Board of Directors I provide the
FY19 Remuneration Report. At the 2018 Annual General Meeting (AGM), 1.2% of shareholders voted against our Remuneration
Report following the ‘first strike’ recorded at the 2017 AGM. During the lead-up and subsequent to the 2018 AGM, the Company
and Chairman of the RNC continued to engage with major shareholders to better understand their concerns and ensure robust
remuneration strategies evolve to meet Board objectives.
The Company contracted independent remuneration consultants (Remuneration Strategies Pty Ltd (RS)) to review current
remuneration practices and proxy service reports to recommend remuneration structures to address any shareholder concerns.
The objective of the engagement involved assisting the RNC in not only reviewing the Remuneration Report, but more
importantly developing remuneration structures, including Fixed Remuneration (FR), Short Term Incentives (STI) and Long Term
Incentives (LTI) that achieve the shareholders financial objectives.
The Committee’s approach to remuneration structures includes the following objectives:
– To align executive remuneration with the Group’s business strategy and the interests of shareholders; and
– To support our people strategy by providing competitive rewards to attract, motivate and retain our most important asset –
our people.
The remuneration of key executives is fully aligned to our key business objectives listed in section 15.2 which underpin future
remuneration structures, including STI and LTI compensation programs.
It should be noted that the 1st March 2017 Performance Rights Plan remains in place, based on 15% compound increases in the
Volume Weighted Average Price (VWAP) – refer to section 15.1.5.
FY19 remuneration outcomes
The key remuneration outcomes for FY19 include:
– No fixed annual remuneration increases for key management personnel for FY19 and FY20;
– Short Term Incentive (STI) for FY19 was not awarded given primary Board financial targets were not achieved. It was
determined that no discretionary non-financial awards would be awarded given the non-achievement of these financial
targets;
– Following a review of Long Term Incentive (LTI) by RS, it is expected a new LTI grant will be made within FY20 to help retain
our workforce and better aligned achievement of financial results with the interest of shareholders;
– Previous LTI grants under Rights Share Trust (RST) remain unchanged:
– Grant of 17 March 2015 Performance Rights remaining 50% lapsed on 17 March 2019; and
– Grant of 1 March 2017 Performance Rights, Tranche 2 performance conditions were not met at 1 March 2019 vesting date
and will be re-tested at the next applicable performance period, subject to the higher performance condition for the next
tranche.
We value feedback as our business and remuneration strategies will be continually reviewed to ensure aligned with Board
objectives over the coming year.
Yours sincerely,
CJ Henson
Chairman, Remuneration and Nomination Committee
ANNUAL REPORT 2019
25
Directors’ Report (continued)for the year ended 30 June 2019 Contents
15.1 Remuneration Framework – audited
15.1.1 Fixed compensation
15.1.2 Performance linked compensation
15.1.3 Short-term incentive bonus
15.1.4 Non-Financial KPI’s
15.1.5 Long-term incentive
15.1.6 Short-term and long-term incentive structure
15.1.7 Other benefits
15.2
Linking the Remuneration Framework to business outcomes – audited
15.2.1 Consequences of performance on shareholder wealth
15.3 Service contracts – audited
15.4 Non-executive directors – audited
15.5 Services from remuneration consultants – audited
15.6 Directors’ and executive officers’ remuneration – audited
15.7 Analysis of bonuses included in remuneration – audited
15.8 Equity instruments – audited
15.8.1 Rights over equity instruments granted as compensation
15.8.2 Modification of terms of equity-settled share-based payment transactions
15.8.3 Exercise of options granted as compensation
15.8.4 Details of equity incentives affecting current and future remuneration
15.8.5 Analysis of movements in equity instruments
15.8.6 Rights over equity instruments
15.8.7 Movements in shares
27
27
27
28
28
28
29
29
29
29
29
30
30
31
34
34
34
34
34
35
35
35
36
26 AINSWORTH GAME TECHNOLOGY
Directors’ Report (continued)for the year ended 30 June 2019 15.1 Remuneration Framework – audited
Remuneration is referred to as compensation throughout
this report.
Key management personnel have authority and
responsibility for planning, directing and controlling the
activities of the Group, directly or indirectly, including
directors of the Company and other executives. Key
management personnel comprise the directors of the
Company and senior executives for the Group that are
named in this report.
Compensation levels for key management personnel of the
Group are competitively set to attract and retain appropriately
qualified and experienced directors and executives.
(RNC)
remuneration and nomination committee
The
regularly reviews market surveys on the appropriateness
of compensation packages of the Group given trends in
comparative companies both locally and internationally,
and the objectives of the Group’s compensation strategy. In
addition, independent remuneration consultants are used
to advise the RNC on compensation levels given market
trends.
The compensation structures explained below are
designed to attract suitably qualified candidates, reward
the achievement of strategic objectives, and achieve the
broader outcome of creation of value for shareholders. The
compensation structures take into account:
– The capability and experience of the key management
personnel;
– The key management personnel’s performance against
individual
Indicators
Key Performance
contributions to The Group’s performance;
(KPIs) and
– The Group’s performance including:
– revenue and earnings;
– growth in share price and delivering returns on
shareholder wealth; and
– the amount of incentives within each key management
person’s compensation.
Compensation packages include a mix of fixed and
variable compensation and short-term and
long-term
performance-based incentives.
In addition to their salaries, the Group also provides
non-cash benefits to its key management personnel, and
contributes
to post-employment defined contribution
superannuation plans on their behalf.
15.1.1 Fixed compensation
Fixed compensation consists of base compensation (which
is calculated on a total cost basis and includes any Fringe
Benefits Tax (FBT) charges related to employee benefits
including motor vehicles), as well as employer contributions
to superannuation funds.
Compensation levels are reviewed annually by the RNC
through a process that considers individual, segment and
overall performance of the Group. In addition, market
surveys are obtained to provide further analysis so as to
ensure the directors’ and senior executives’ compensation
is competitive in the marketplace. A senior executive’s
compensation
reviewed on promotion and
performance under the overall financial performance of
the Group. This review determined that no increases were
awarded from the previous year to any key management
personnel.
The RNC undertook a review of fixed compensation levels in
2019 to assist with determining an appropriate mix between
fixed and performance linked compensation for senior
executives of the Group during the year. Given the overall
financial performance in the current period no increases in
base compensation were recommended for the ensuring
year until the broader objective of financial performance
was achieved.
is also
15.1.2 Performance linked compensation
Performance linked compensation includes both short-
term and long-term incentives and is designed to reward
key management personnel for meeting or exceeding their
financial and personal objectives. The short-term incentive
(STI) is an ‘at risk’ bonus provided in the form of cash, while
the long-term incentive (LTI) is provided as performance
rights over ordinary shares of the Company under the rules
of the Employee Rights Share Plans (see Note 23 to financial
statements).
In addition to their salaries, selected key sales management
personnel receive commission on sales within their specific
business segments as part of their service contracts at each
vesting date.
As outlined a review was undertaken by the RNC to
determine and assess current performance
linked
compensation arrangements – STI and LTI plans.
This review was evaluated by the Board to determine
appropriate remuneration levels taking into consideration
the Group’s growth objectives, industry specific and market
considerations and related retention of key employees.
ANNUAL REPORT 2019
27
Directors’ Report (continued)for the year ended 30 June 2019 Details of the vesting conditions for each outstanding plan
are outlined as follows:
1 March 2017 Granted Plan
The performance hurdles for this plan are based on a 15%
compound increase on the share price of $1.86 (VWAP) for
90 days ending 28/02/2017. The hurdles set for this plan
were determined as appropriate due to the following:
– Share Price growth is considered more reflective of
the Group’s underlying performance and is aligned to
shareholder wealth;
– To ensure relevance of
the LTI
for
international
employees;
– International expansion reflects ASX share price and is a
more meaningful performance measure;
– Inherent volatility of the gaming industry makes TSR and
EPS less relevant; and
– There are limited numbers of gaming industry companies
in the ASX.
Vesting on each tranche is as follows:
Tranche 1
Tranche 2
Tranche 3
Tranche 4
20% will vest if the VWAP for 20 days preceding
01/03/2018 is equal or greater than $2.14
20% will vest if the VWAP for 20 days preceding
01/03/2019 is equal or greater than $2.46
20% will vest if the VWAP for 20 days preceding
01/03/2020 is equal or greater than $2.83
40% will vest if the VWAP for 20 days preceding
01/03/2021 is equal or greater than $3.25
This plan currently remains in place.
Rights that do not vest at the end of the final vesting period
will lapse, unless the Board in its discretion determine
otherwise. Upon cessation of employment prior to the
vesting date, rights will be forfeited and lapse. Performance
rights do not entitle holder to dividends that are declared
during the vesting period.
During the year, Tranche 2 of these rights did not vest at the
second vesting date of 1 March 2019 due to performance
conditions not being met. The grant of this Tranche under
the RST will be re-tested at the end of the next applicable
performance vesting date of 1 March 2020, subject to
the higher performance conditions. If the performance
conditions at the end of the next applicable performance
period are satisfied, then the performance rights for
the current performance period and any non-vested
performance rights from prior performance periods will
vest.
15. REMUNERATION REPORT (continued)
15.1 Remuneration Framework – audited (continued)
15.1.3 Short-term incentive bonus
Each year the RNC determines the objectives and KPIs of
the key management personnel. The KPIs generally include
measures relating to the Group, the relevant segment, and
the individual, and include financial, people, customer,
compliance, strategy and risk measures. The measures are
chosen as they directly align the individual’s reward to the
KPIs of the Group and to its strategy and performance.
The financial performance objectives for FY19 comprise
50% for Group ‘profit before tax’ excluding foreign currency
gains/(losses) and 30% for ‘minimum international revenue’
with the remaining 20% being non-financial. These financial
performance targets were assessed by the RNC for all
key management personnel
(excluding non-executive
directors) and it was determined that the Group did not
achieve either the ‘profit before tax’ minimum target or the
minimum international revenue and no STI was payable in
the current year relating to these criteria.
15.1.4 Non-Financial KPI’s
The non-financial objectives comprising 20% vary with
position and responsibility and include measures such
as achieving strategic outcomes, safety measures, and
compliance with established
regulatory processes,
customer satisfaction and staff development. The non-
financial objectives
for key management personnel,
excluding directors (other than Mr Danny Gladstone, the
Chief Executive Officer (CEO)) for FY19 were assessed on
25 June 2019 by the RNC and it was determined that given
non-achievement of the financial performance objectives
no STI under these criteria would be awarded in the current
period.
Currently,
linked component of
compensation comprises approximately 1% (2018: 5%) of
total payments to key management personnel.
the performance
15.1.5 Long-term incentive
Performance Rights Plan
During a previous year an employee incentive plan
was established whereby performance
rights were
granted under the Rights Share Trust (RST). Under the
RST, eligible employees and executives were allocated
performance rights over ordinary shares in the Company.
The performance rights were granted at nil consideration
or exercise price however are dependent on service
conditions, vesting conditions and performance hurdles.
The performance rights convert to ordinary shares of the
Company on a one-for-one basis.
During the year, the final 50% of the rights granted on
17 March 2015 lapsed on 17 March 2019 due to performance
conditions not being met.
28 AINSWORTH GAME TECHNOLOGY
Directors’ Report (continued)for the year ended 30 June 2019 15.1.6 Short-term and long-term incentive structure
Given the highly competitive nature of the gaming industry and to ensure retention of key employees, the RNC has and
continues to consider performance linked remuneration is appropriate.
The current review of both short-term and long-term incentive plans is ongoing to ensure these are aligned to Board and
shareholder interests.
15.1.7 Other benefits
Key management personnel receive additional benefits such as non-monetary benefits, as part of the terms and conditions of
their appointment. Non-cash benefits typically include payment of club memberships and motor vehicles, and the Group pays
fringe benefits tax on these benefits.
15.2 Linking the Remuneration Framework to business outcomes – audited
In the Chairman’s introduction to the Remuneration Report, we indicated that the key business objectives will underpin future
remuneration structures. The objectives are:
– Invest in product development to create a diverse and creative product offering to increase market share in global markets;
– Improve the Group’s performance through revenue and earnings growth in domestic and international markets;
– Improve cash flows through reduction in working capital investment and maintain a strong balance sheet to support growth
and deliver value; and
– Maintain a strong focus on best practice compliance throughout the Group in adherence to gaming laws and regulations.
The following remuneration structures are being considered by the Remuneration Consultant to achieve these business
objectives:
– Short-Term Incentives that measure and reward increased market share in selected global markets, adherent to the Good
Governance and Compliance with Gaming Laws and Regulations;
– Long-Term Incentives that measure and reward revenue and earnings growth in domestic and international markets, as well
as the achievement of the Balance Sheet and using Capital Investment Targets; and
– The objective of these incentive programs is to increase shareholder value for investors and key management stakeholders.
15.2.1 Consequences of performance on shareholder wealth
In considering the Group’s performance and benefits for shareholder wealth, the RNC have regard to the following indices in
respect of the current financial year and the previous four financial years. Profit is considered as one of the financial performance
targets in setting the short-term incentive bonus. Profit amounts for 2015 to 2019 have been calculated in accordance with
Australian Accounting Standards (AASBs).
$’000
2019
2018
2017
2016
2015
Profit attributable to owners of the company
$10,895
$31,936
$37,930
$55,703
$70,353
Dividends paid
Change in share price ($A)
$8,313
($0.37)
$4,966
$16,386
$32,245
$32,227
($1.12) No change
($0.41)
($1.17)
15.3 Service contracts – audited
It is the Group’s policy that service contracts for Australian key management personnel and key employees be unlimited in term
but capable of termination by either party on periods 3 to 12 months’ notice and that the Group retains the right to terminate the
contracts immediately, by making payment equal to the notice period.
The Group has entered into service contracts with each Australian key management personnel that provide for the payment
of benefits where the contract is terminated by the Group. The key management personnel are also entitled to receive on
termination of employment their statutory entitlements of accrued annual and long service leave, together with any accrued
superannuation.
The service contract outlines the components of remuneration paid to the key management personnel but does not prescribe
how remuneration levels are modified year to year. Remuneration levels are reviewed each year to take into account market
conditions, cost-of-living changes, any change in the scope of the role performed by the senior executive, retention of key
personnel and any changes required to meet the principles of the remuneration policy.
ANNUAL REPORT 2019
29
Directors’ Report (continued)for the year ended 30 June 2019 15. REMUNERATION REPORT (continued)
15.3 Service contracts – audited (continued)
Mr Lawrence Levy was appointed as Chief Executive Officer (CEO) effective 1 July 2019 as per his contract with the company
dated 2 May 2019. The contract specifies the duties and obligations to be fulfilled by the CEO and provides that the board and
CEO will early in each financial year, consult and agree objectives for achievement during that year.
The CEO has no entitlement to a termination payment in the event of removal for misconduct as specified in his service contract.
Refer to Note 28 of the financial statements for details on the financial impact in future periods resulting from the Group’s
commitments arising from non-cancellable contracts for services with key management personnel.
15.4 Non-executive directors – audited
Total compensation for all non-executive directors, last voted upon by shareholders at the 2012 Annual General Meeting, is not
to exceed $850,000 per annum, with effect from 1 July 2012. Directors’ base fees are presently $120,000 per annum (excluding
superannuation) and was set based on a review of fees paid to other non-executive directors of comparable companies. The
fees paid to non-executive directors reflect the demands and responsibilities associated with their roles and the global nature
of the operations within the highly regulated environment within which the Group operates. Fees incorporate an allowance
for the onerous probity requirements placed on non-executive directors by regulators of the jurisdictions in which the Group
operates or proposes to operate in. In addition to these fees the cost of reasonable expenses is reimbursed as incurred.
There was no increase in non-executive compensation including Board and Committee fees during the period.
Non-executive directors do not participate in performance related compensation and are not provided with retirement benefits
apart from statutory superannuation.
The CEO and Company Secretary do not receive any additional fees for undertaking Board or Committee responsibilities.
Following a review previously undertaken by an independent remuneration consultant, non-executive director’s fees were
assessed based on current market levels for comparable companies, demands and responsibilities associated with their roles
and the global nature of the Group’s operations within a highly regulated environment to ensure the Board is appropriately
compensated. Other independent non-executive directors who also chair or are a member of a committee receive a
supplementary fee in addition to their annual remuneration. Current fees for directors, excluding superannuation are set out
below.
POSITION
Independent Chair of Board
Australian resident non-executive director
Chair of Audit Committee
Chair of Regulatory and Compliance Committee
Chair of Remuneration and Nomination Committee
Member of Audit Committee
Member of Regulatory and Compliance Committee
Member of Remuneration and Nomination Committee
$
(per annum)
250,000
120,000
20,000
24,000
12,000
12,000
15,000
8,000
15.5 Services from remuneration consultants – audited
The RNC, comprising of independent non-executive directors only, secured the services of an independent remuneration
consultant (Remuneration Strategies Pty Ltd (RS)) to assist the RNC review and evaluate remuneration practices of the Group.
The RNC has received a preliminary report and is awaiting a final report from RS to assist in establishing a long-term incentive
aligned to Board objectives and shareholder interests. A total of $12,900 was paid during the year for these services.
The Board made its own inquiries and reviewed the processes and procedures followed by the remuneration consultant during
the course of their assignment to ensure that they were satisfied that any remuneration recommendations are made free from
undue influence.
The Board’s inquiries included a summary of the way in which the remuneration consultant carried out any work, details of any
interaction with non-executive directors in relation to the assignment and other services, and further questions in relation to
the assignment.
30 AINSWORTH GAME TECHNOLOGY
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ANNUAL REPORT 2019
33
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15. REMUNERATION REPORT (continued)
15.7 Analysis of bonuses included in remuneration – audited
Details of the vesting profile of the short-term incentive cash bonuses included as remuneration to each director of the Company,
and other key management personnel for 2019 are detailed below:
Short term incentive bonus
Included in remuneration
$ (A)
% vested in year
(B)
% forfeited in year
(C)
Director
Mr DE Gladstone
Executives
Mr ML Ludski
Mr V Bruzzese
Mr K Power
20,625
10,920
5,669
3,840
– %
– %
– %
– %
100%
100%
100%
100%
A. Amounts included in remuneration for the 2019 financial year represent the amount accrued in the current year for the Short Term
Incentive bonus achieved in a previous year which represented a deferred component subject to service conditions and the previously
deferred component paid during the period.
B. The amount vested in the 2019 year represented any STI amounts awarded and either paid in the current period or to be paid.
C. The amounts forfeited are due to the performance criteria not being met in relation to the current financial year.
15.8 Equity instruments – audited
All rights refer to rights over ordinary shares of Ainsworth Game Technology Limited, unless otherwise stated, which are
exercisable on a one-for-one basis under the RST plans.
15.8.1 Rights over equity instruments granted as compensation
No options over ordinary shares in the Company were granted as compensation to any key management person during the
reporting period.
15.8.2 Modification of terms of equity-settled share-based payment transactions
No terms of equity-settled share-based payment transactions (including performance rights granted as compensation to a key
management person) have been altered or modified by the issuing entity during the reporting period or the prior period.
15.8.3 Exercise of options granted as compensation
During the reporting period no shares (2018: nil shares) were issued on the exercise of options previously granted as
compensation.
34 AINSWORTH GAME TECHNOLOGY
Directors’ Report (continued)for the year ended 30 June 2019 15.8.4 Details of equity incentives affecting current and future remuneration
Details of vesting profiles of rights held by each key management person of the Group are detailed below:
Mr DE Gladstone
Mr ML Ludski
Mr V Bruzzese
Mr K Power
Instrument
Number
Grant Date
% vested
in year
% forfeited
in year (A)
Financial
years in which
grant vests
Rights
Rights
Rights
Rights
Rights
Rights
Rights
Rights
Rights
Rights
69,471
22 July 2013
263,056 17 March 2015
328,791 01 March 2017
30,854
22 July 2013
95,773 17 March 2015
119,053 01 March 2017
22,685
22 July 2013
52,490 17 March 2015
62,131 01 March 2017
112,228 01 March 2017
– %
– %
– %
– %
– %
– %
– %
– %
– %
– %
100%
100%
100%
100%
100%
– %
100%
100%
– %
– %
–
–
–
–
–
2018-2021
–
–
2018-2021
2018-2021
A. The % forfeited in the year represents the reduction from the maximum number of rights available to vest at the beginning of the year.
15.8.5 Analysis of movements in equity instruments
The movement during the reporting period, by value, of rights over ordinary shares in the Company held by each key
management person of the Group is detailed below:
Mr DE Gladstone
Mr ML Ludski
Mr V Bruzzese
Mr K Power
A. No rights were exercised during the year.
Granted in year
$
Amount paid
on exercise
$
Value of rights
exercised
in year
$(A)
–
–
–
–
–
–
–
–
–
–
–
–
Forfeited
in year
$
429,741
103,879
56,932
–
15.8.6 Rights over equity instruments
The movement during the reporting period, by number of rights over ordinary shares in Ainsworth Game Technology Limited
held, directly, indirectly or beneficially, by each key management person, including their related parties, is as follows:
Held at
1 July 2018
Granted as
compensation
Exercised
Other
Changes*
Held at
30 June 2019
Vested during
the year
Vested and
exercisable at
30 June 2019
Rights
Mr DE Gladstone
Mr ML Ludski
Mr V Bruzzese
Mr K Power
462,771
167,832
88,865
112,228
–
–
–
–
–
–
–
–
(462,771)
(48,779)
(26,734)
–
–
119,053
62,131
112,228
–
–
–
–
–
–
–
–
* Other changes represent rights that were forfeited during the year.
Rights held by key management personnel that are vested and exercisable at 30 June 2019 were Nil (2018: Nil). No rights or
options were held by related parties of key management personnel.
ANNUAL REPORT 2019
35
Directors’ Report (continued)for the year ended 30 June 2019 15. REMUNERATION REPORT (continued)
15.8.7 Movements in shares
The movement during the reporting period in the number of ordinary shares in Ainsworth Game Technology Limited held,
directly, indirectly or beneficially, by each key management person, including their related parties, is as follows:
Current
Mr GJ Campbell
Mr MB Yates
Mr CJ Henson
Ms HA Scheibenstock
Mr DE Gladstone
Mr HK Neumann
Mr M Ludski
Mr V Bruzzese
Mr Kieran Power
Held at
1 July 2018
Purchases
Sales
Dividend
Re-Investment
Plan (DRP)
allotment
Held at
30 June 2019
360,533
30,600
132,164
–
57,395
–
10,000
765
4,662
20,000
13,000
–
15,000
87,000
–
–
–
–
–
–
–
–
–
–
–
–
8,708
–
3,025
344
1,951
–
–
18
–
389,241
43,600
135,189
15,344
146,346
–
10,000
783
4,662
No Shares were granted to key management personnel during the reporting period as compensation in 2018 or 2019.
Mr DE Gladstone resigned as Chief Executive Officer (CEO)/Executive Director on 30 June 2019 and undertook the role as Non-
Executive Director effective 1 July 2019. Mr SL Levy was appointed CEO effective 1 July 2019.
There were no other changes in key management personnel in the period after the reporting date and prior to the date when
the Financial Report was authorised for issue.
This Directors’ report is made out in accordance with a resolution of the directors.
GJ Campbell
Chairman
Dated at Sydney this 27th day of August 2019
36 AINSWORTH GAME TECHNOLOGY
Directors’ Report (continued)for the year ended 30 June 2019
In thousands of AUD
Assets
Cash and cash equivalents
Receivables and other assets
Current tax assets
Inventories
Prepayments
Total current assets
Receivables and other assets
Deferred tax assets
Property, plant and equipment
Intangible assets
Equity-accounted investee
Total non-current assets
Total assets
Liabilities
Trade and other payables
Loans and borrowings
Employee benefits
Current tax liability
Provisions
Total current liabilities
Loans and borrowings
Employee benefits
Deferred tax liabilities
Total non-current liabilities
Total liabilities
Net assets
Equity
Share capital
Reserves
Accumulated losses
Total equity
Note
30-Jun-19
30-Jun-18
18
17
16
17
15
12
13
14
24
21
22
25
21
22
15
19
19
19
61,661
119,964
2,813
66,851
8,436
35,667
153,464
324
79,304
5,239
259,725
273,998
28,648
2,786
130,548
61,555
–
39,259
5,001
118,593
67,496
2,001
223,537
232,350
483,262
506,348
20,945
37,500
12,661
9,590
618
1,015
239
9,513
4,069
1,100
44,829
52,421
42,778
525
1,585
44,888
89,717
71,721
589
2,818
75,128
127,549
393,545
378,799
207,709
187,454
(1,618)
203,032
179,787
(4,020)
393,545
378,799
*
The Group has initially applied AASB 9 and AASB 15 at 1 July 2018. Under the transition methods chosen, comparative information
is not restated.
The notes on pages 41 to 90 are an integral part of these consolidated financial statements.
ANNUAL REPORT 2019
37
Consolidated Statement of Financial Positionas at 30 June 2019 In thousands of AUD
Revenue
Cost of sales
Gross profit
Other income
Sales, service and marketing expenses
Research and development expenses
Administrative expenses
Other expenses
Results from operating activities
Finance income
Finance costs
Net finance income
Share of loss of equity accounted investee
Profit before tax
Income tax expense
Profit for the year
Other comprehensive income
Items that may be reclassified to profit and loss:
Foreign operations - foreign currency translation differences
Total other comprehensive income
Total comprehensive income for the year
Profit attributable to owners of the Company
Total comprehensive income attributable to the owners of the Company
Earnings per share:
Basic earnings per share (AUD)
Diluted earnings per share (AUD)
Note
30-Jun-19
30-Jun-18
7
234,344
265,584
(94,395)
(108,982)
139,949
156,602
8
11
11
14
15
1,228
(64,851)
(40,428)
(25,065)
(5,414)
5,419
11,559
(2,242)
9,317
(54)
14,682
(3,787)
10,895
8,277
8,277
19,172
10,895
19,172
2,929
(59,587)
(34,407)
(23,274)
(5,165)
37,098
7,013
(1,580)
5,433
(224)
42,307
(10,371)
31,936
5,624
5,624
37,560
31,936
37,560
$0.03
$0.03
$0.10
$0.09
*
The Group has initially applied AASB 9 and AASB 15 at 1 July 2018. Under the transition methods chosen, comparative information
is not restated.
The notes on pages 41 to 90 are an integral part of these consolidated financial statements.
38 AINSWORTH GAME TECHNOLOGY
Consolidated Statement of Profit or Loss and Other Comprehensive Incomefor the year ended 30 June 2019 In thousands of AUD
Balance at 1 July 2017
Attributable to owners of the Company
Issued
capital
Equity
compensation
reserve
Fair
value
reserve
Translation
reserve
Profit
reserve
Retained
Earnings/
(Accumulated
losses)
Total
equity
200,245
5,547
9,684
5,363 132,273
(8,476) 344,636
Total comprehensive income for the period
Profit
Transfer between reserves
Other comprehensive income
Foreign currency translation reserve
Total other comprehensive income
Total comprehensive income for the period
–
–
–
–
–
–
–
–
–
–
Transactions with owners, recorded
directly in equity
Issue of ordinary shares under the
Dividend Reinvestment Plan
Dividends to owners of the Company
Share-based payment amortisation
Total transactions with owners
2,787
–
–
2,787
–
–
(1,218)
(1,218)
–
–
–
–
–
–
–
–
–
–
–
–
27,480
31,936
(27,480)
31,936
–
5,624
5,624
–
–
–
–
5,624
5,624
5,624
27,480
4,456
37,560
–
–
–
–
(2,787)
(2,179)
–
(4,966)
–
–
–
–
–
(2,179)
(1,218)
(3,397)
Balance at 30 June 2018
203,032
4,329
9,684
10,987 154,787
(4,020) 378,799
Restated balance at 30 June 2018
203,032
4,329
9,684
10,987 154,787
(4,020) 378,799
Adjustment from intial application
of AASB 15 (net of tax)
Adjustment from initial application
of AASB 9 (net of tax)
–
–
–
–
–
–
–
–
–
–
34
34
(812)
(812)
Adjusted balance at 1 July 2018
203,032
4,329
9,684
10,987 154,787
(4,798) 378,021
Total comprehensive income for the period
Profit
Transfer between reserves
Other comprehensive income
Foreign currency translation reserve
Total other comprehensive income
Total comprehensive income for the period
Transactions with owners, recorded
directly in equity
Issue of ordinary shares under the
Dividend Reinvestment Plan
Dividends to owners of the Company
Share-based payment amortisation
Total transactions with owners
–
–
–
–
–
4,677
–
–
4,677
–
–
–
–
–
–
–
(12)
(12)
–
–
–
–
–
–
–
–
–
–
–
–
7,715
10,895
(7,715)
10,895
–
8,277
8,277
8,277
–
–
–
–
7,715
3,180
8,277
8,277
19,172
–
–
–
–
(4,677)
(3,636)
–
(8,313)
–
–
–
–
–
(3,636)
(12)
(3,648)
Balance at 30 June 2019
207,709
4,317
9,684
19,264 154,189
(1,618) 393,545
*
The Group has initially applied AASB 9 and AASB 15 at 1 July 2018. Under the transition methods chosen, comparative information
is not restated.
The notes on pages 41 to 90 are an integral part of these consolidated financial statements.
ANNUAL REPORT 2019
39
Consolidated Statement of Changes in Equityfor the year ended 30 June 2019 In thousands of AUD
Cash flows from operating activities
Cash receipts from customers
Cash paid to suppliers and employees
Cash generated from operations
Interest received
Income taxes paid
Net cash from operating activities
Cash flows used in investing activities
Proceeds from sale of property, plant and equipment
Interest received
Acquisitions of property, plant and equipment
Development expenditure
Net cash used in investing activities
Cash flows (used in)/from financing activities
Proceeds from borrowings
Borrowing costs paid
Repayment of borrowings
Proceeds from finance lease
Payment of finance lease liabilities
Dividend paid
Net cash (used in)/from financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at 1 July
Effect of exchange rate fluctuations on cash held
Cash and cash equivalents at 30 June
Note
30-Jun-19
30-Jun-18
307,693
254,310
(245,515)
(224,007)
18(a)
12
13
62,178
5,503
(6,473)
61,208
29
11
(6,521)
(3,340)
(9,821)
–
(1,887)
(20,676)
–
(929)
(3,636)
(27,128)
24,259
35,667
1,735
61,661
30,303
–
(11,045)
19,258
4,638
3,900
(8,328)
(5,547)
(5,337)
3,130
(892)
–
217
(178)
(2,179)
98
14,019
21,094
554
35,667
*
The Group has initially applied AASB 9 and AASB 15 at 1 July 2018. Under the transition methods chosen, comparative information
is not restated.
The notes on pages 41 to 90 are an integral part of these consolidated financial statements.
40 AINSWORTH GAME TECHNOLOGY
Consolidated Statement of Cash Flowsfor the year ended 30 June 2019 Index to Notes to the Financial Statements
and Significant Accounting Policies
1.
2.
3.
Reporting entity
Basis of preparation
Significant accounting policies
(a) Basis of consolidation
(b) Foreign currency
(c) Financial instruments
(d) Property, plant and equipment
(e) Intangible assets
(f) Leased assets
(g) Inventories
(h) Impairment
(i) Employee benefits
(j) Provisions
(k) Warranties
(l) Revenue
(m) Lease payments
(n) Finance income and finance costs
(o) Income tax
(p) Earnings per share
(q) Segment reporting
(r)
Changes in new significant
accounting policies
(s) Changes in new standards and
interpretations not yet adopted
4.
5.
6.
7.
Determination of fair values
Financial risk management
Operating segments
Revenue
42
42
42
42
43
43
45
46
46
47
47
48
49
49
49
50
50
50
51
51
51
57
58
59
60
63
8.
9.
Other income
Expenses by nature
10.
Employee benefit expenses
11.
12.
13.
14.
Finance income and finance costs
Property, plant and equipment
Intangible assets
Equity-accounted investee
15.
Taxes
16.
Inventories
17.
Receivables and other assets
18.
Cash and cash equivalents
18a.
Reconciliation of cash flows from
operating activities
19.
Capital and reserves
20.
Earnings per share
21.
Loans and borrowings
22.
Employee benefits
23.
Share-based payments
24.
Trade and other payables
25.
Provisions
26.
Financial instruments
27. Operating leases
28. Capital and other commitments
29.
Related parties
30. Group entities
31.
Subsequent events
32. Auditor’s remuneration
33.
Parent entity disclosures
64
64
65
65
66
67
70
71
72
73
74
74
75
76
77
78
78
81
81
81
86
86
87
89
89
90
90
ANNUAL REPORT 2019
41
for the year ended 30 June 2019 The Group is subject to income taxes in Australia and
jurisdictions where it has foreign operations. Significant
judgement is required in determining the worldwide
provision for income taxes. There are certain transactions
and calculations undertaken during the ordinary course of
business for which the ultimate determination is uncertain.
The Group estimates its tax liabilities based on the Group’s
understanding of the tax law. Where the final outcome
of these matters is different from the amounts that were
initially recorded, such differences will impact the current
and deferred income tax assets and liabilities in the period
in which such determination is made.
Information about assumptions and estimation uncertainties
that have a significant risk of resulting in a material
adjustment to the carrying amounts of assets and liabilities
within the next financial year are included in Note 13 –
Intangible assets and Note 26 – Financial instruments
(trade and other receivables).
3. SIGNIFICANT ACCOUNTING POLICIES
The accounting policies set out below have been applied
consistently to all periods presented in these consolidated
financial statements and have been applied consistently by
Group entities.
Business combination
(a) Basis of consolidation
(i)
The Group accounts for business combinations using
the acquisition method when control is transferred to the
Group (see (a)(ii)). The consideration transferred in the
acquisition is generally measured at fair value as are the
identifiable net assets acquired. Any goodwill that arises
is tested annually for impairment (refer Note 3(h)). Any
gain on a bargain purchase is recognised in profit or loss
immediately. Transaction costs are expensed as incurred,
except if related to the issue of debt of equity securities.
The consideration transferred does not include amounts
related to the settlement of pre-existing relationships. Such
amounts are generally recognised in profit or loss.
(ii) Subsidiaries
Subsidiaries are entities controlled by the Group. The Group
controls an entity when it is exposed to, or has right to,
variable returns from its involvement with the entity and has
the ability to affect those returns through its power over the
entity. The financial statements of subsidiaries are included
in the consolidated financial statements from the date that
control commences until the date that control ceases.
(the
1. REPORTING ENTITY
Ainsworth Game Technology Limited
‘Company’)
is a company domiciled in Australia. The address of the
Company’s registered office is 10 Holker Street, Newington,
NSW, 2127. The consolidated financial statements of the
Company as at and for the year ended 30 June 2019
comprise the Company and its subsidiaries (together
referred to as the ‘Group’ and individually as ‘Group
entities’). The Group is a for-profit entity and primarily is
involved in the design, development, manufacture, sale and
servicing of gaming machines and other related equipment
and services.
2. BASIS OF PREPARATION
(a) Statement of compliance
The consolidated financial statements are general
purpose financial statements which have been prepared in
accordance with Australian Accounting Standards (AASBs)
adopted by the Australian Accounting Standards Board
(AASB) and the Corporations Act 2001. The consolidated
financial statements comply with International Financial
Reporting Standards (IFRSs) adopted by the International
Accounting Standards Board (IASB).
The consolidated financial statements were authorised for
issue by the Board of Directors on 27 August 2019.
(b) Basis of measurement
The consolidated financial statements have been prepared
on the historical cost basis except for loans and borrowings
with a Director related entity, which were measured initially at
fair value and then subsequently carried at amortised cost.
(c) Functional and presentation currency
The financial information of each of the Group’s entities
and foreign branches is measured using the currency of
the primary economic environment in which it operates (the
functional currency).
These consolidated financial statements are presented
in Australian dollars, which is the Company’s primary
functional currency.
The Company is of a kind referred to in ASIC Corporations
(Rounding
Instrument
in Financial/Directors Reports)
2016/191 and in accordance with that Instrument, all financial
information presented in Australian dollars has been
rounded to the nearest thousand unless otherwise stated.
(d) Use of estimates and judgements
The preparation of the consolidated financial statements
in conformity with IFRSs requires management to make
judgements, estimates and assumptions that affect the
application of accounting policies and the reported
amounts of assets, liabilities, income and expenses. Actual
results may differ to these estimates.
Estimates and underlying assumptions are reviewed on
an ongoing basis. Revisions to accounting estimates are
recognised in the period in which the estimate is revised
and in any future periods affected.
42 AINSWORTH GAME TECHNOLOGY
Notes to the Financial Statements (continued)for the year ended 30 June 2019 Interest in equity-accounted investee
(iii)
A joint venture is an arrangement in which the Group has
joint control, and whereby the Group has rights to the
net assets of the arrangement, rather than rights to its
assets and obligations for its liabilities. Interest in a joint
venture is accounted for using the equity method. It is
recognised initially at cost, which includes transactions
costs. Subsequently to initial recognition, the consolidated
financial statements include the Group’s share of the
profit or loss and Other Comprehensive Income (“OCI”)
of the equity-accounted investee, until the date on which
significant influence of joint control ceases.
(iv) Transactions eliminated on consolidation
Intra-group balances and transactions, and any unrealised
income and expenses arising from intra-group transactions,
are eliminated in preparing the consolidated financial
statements in accordance with AASBs.
(v) Acquisitions prior to 1 July 2004
As part of its transition to AASBs, the Group elected to
restate only those business combinations that occurred on
or after 1 July 2004. In respect of acquisitions prior to 1 July
2004, goodwill represents the amount recognised under
the Group’s previous accounting framework, Australian
GAAP.
(vi) Acquisitions on or after 1 July 2004
For acquisitions on or after 1 July 2004, goodwill represents
the excess of the cost of the acquisition over the Group’s
interest in the net fair value of the identifiable assets,
liabilities and contingent liabilities of the acquiree. When
the excess is negative (negative goodwill), it is recognised
immediately in profit or loss.
(vii) Common control acquisitions
Acquisitions made by the Group, where the combining
entities or businesses are ultimately controlled by the
same party or parties before and after the combination,
and that control is not transitory, are treated as common
control transactions and book value accounting is applied.
Under book value accounting no purchase price allocation
is performed. The acquired net assets are included in the
consolidated financial statements at carrying value. The
difference between the consideration transferred and the
net assets is recognised in equity in a common control
reserve.
Foreign currency transactions
(b) Foreign currency
(i)
Transactions in foreign currencies are translated to the
respective
functional currencies of Group entities at
exchange rates at the dates of the transaction. Monetary
assets and liabilities denominated in foreign currencies at
the balance date are retranslated to the functional currency
at the foreign exchange rate at that date. The foreign
currency gain or loss on monetary items is the difference
between amortised cost in the functional currency at the
beginning of the period, adjusted for effective interest and
payments during the period, and the amortised cost in
foreign currency translated at the exchange rate at the end
of the year.
Foreign operations
(ii)
The assets and
liabilities of foreign operations are
translated to Australian dollars at exchange rates at the
reporting date. The income and expenses of foreign
operations are translated to Australian dollars at the
average exchange rates for the period.
Foreign currency differences are recognised in other
comprehensive income and presented in the Translation
Reserve in equity. When a foreign operation is disposed
of such that control is lost, the cumulative amount in the
Translation Reserve related to that foreign operation is
transferred to the profit or loss, as part of gain or loss on
disposal.
When the Group disposes of only a part of its interest in a
subsidiary that includes a foreign operation while retaining
control, the relevant portion of cumulative amounts is re-
attributed to non-controlling interest.
When the settlement of a monetary item receivable from
or payable to a foreign operation is neither planned nor
likely in the foreseeable future, foreign exchange gains and
losses arising from such a monetary item are considered
to form part of a net investment in a foreign operation,
are recognised in other comprehensive income and are
presented in the translation reserve in equity.
(c) Financial instruments
(i) Non-derivative financial assets
Non-derivative financial assets comprise trade and other
receivables and cash and cash equivalents.
Recognition and initial measurement
Trade and other receivables are recognised on the date
that they are originated. Financial assets are derecognised
if the Group’s contractual rights to the cash flows from
the financial assets expire or if the Group transfers the
financial asset to another party without retaining control
or substantially all risks and rewards of ownership of the
financial asset are transferred.
Trade and other receivables are financial assets with fixed
or determinable payments that are not quoted in an active
market. Such assets are recognised initially at fair value.
Subsequent to initial recognition trade and other receivables
are measured at amortised cost using the effective interest
method, less any impairment losses.
Cash and cash equivalents comprise cash balances and call
deposits with original maturities of three months or less
from the acquisition date that are subject to an insignificant
risk of changes in their fair value, and are used by the
Group in the management of its short-term commitments.
ANNUAL REPORT 2019
43
Notes to the Financial Statements (continued)for the year ended 30 June 2019 3.
SIGNIFICANT ACCOUNTING POLICIES
(continued)
Classification and subsequent measurement
Financial assets - Policy applicable from 1 July 2018
On initial recognition, a financial asset is classified as
measured at amortised cost. Financial assets are not
reclassified subsequent to their initial recognition unless
the Group changes its business model for managing
financial assets, in which case all affected financial assets
are reclassified on the first day of the first reporting period
following the change in the business model.
The assessment amount of current and non-current
receivable involves reviewing the contractual term and how
it compares to the current payment trend. When the current
payment trend is less favourable from the contractual term,
the Group will base the current and non-current assessment
on payment trend.
A financial asset is measured at amortised cost if it meets
both of the following conditions and is not designated as
at Fair Value Through Profit or Loss (“FVTPL”):
– it is held within a business model whose objective is to
hold assets to collect contractual cash flows; and
– its contractual terms give rise on specified dates to cash
flows that are solely payments of principal and interest on
the principal amount outstanding.
Financial assets - Business model assessment
The Group makes an assessment of the objective of the
business model in which a financial asset is held at a portfolio
level because this best reflects the way the business is
managed, and information is provided to management. The
information considered includes:
– the stated policies and objectives for the portfolio and
the operation of those policies in practice. These include
whether management’s strategy focuses on earning
contractual interest income, maintaining a particular
interest rate profile, matching the duration of the financial
assets to the duration of any related liabilities or expected
cash outflows or realising cash flows through the sale of
the assets;
– how the performance of the portfolio is evaluated and
reported to the Group’s management;
– the risks that affect the performance of the business
model (and the financial assets held within that business
model) and how those risks are managed;
– how managers of the business are compensated - e.g.
whether compensation is based on the fair value of the
assets managed or the contractual cash flows collected;
and
– the frequency, volume and timing of sale of financial
assets in prior periods, the reasons for such sales and
expectations about future sales activity.
44 AINSWORTH GAME TECHNOLOGY
Transfers of financial assets to third parties in transactions
that do not qualify for derecognition are not considered
sales for this purpose, consistent with the Group’s continuing
recognition of the assets.
Financial assets that are held for trading or are managed
and whose performance is evaluation on a fair value basis
are measured at FVTPL.
Financial assets - Assessment whether contractual cash
flows are solely payments of principal and interest
For the purposes of this assessment, ‘principal’ is defined
as the fair value of the financial asset on initial recognition.
‘Interest’ is defined as consideration for the time value of
money and for the credit risk associated with the principal
amount outstanding during a particular period of time and
for other basic lending risks and costs (e.g. liquidity risk
and administrative costs), as well as a profit margin.
In assessing whether the contractual cash flows are solely
payments of principal and interest, the Group considers the
contractual terms of the instrument. This includes assessing
whether the financial asset contains a contractual term that
could change the timing or amount of contractual cash
flows such that it would not meet this condition. In making
this assessment, the Group considers:
– contingent events that would change the· amount or
timing of cash flows;
– terms that may adjust the contractual coupon rate,
including variable-rate features;
– prepayment and extension features; and
– terms that limit the Group’s claim to cash flows from
specified assets (e.g. non-recourse features).
Financial assets – Subsequent measurement and gains
and losses. Policy applicable from 1 July 2018
Financial assets at amortised cost are subsequently
measured at amortised cost using the effective interest
method. The amortised cost is reduced by impairment
losses. Interest income, foreign exchange gains and losses
and impairment are recognised in profit or loss. Any gain or
loss on derecognition is recognised in profit or loss.
Financial assets - Policy applicable before 1 July 2018
The Group classified its financial assets into loans and
receivables. These assets were subsequently measured at
amortised cost using the effective interest method.
Derecognition
The Group derecognises a financial asset when the
contractual rights to the cash flows from the financial asset
expire, or it transfers the rights to receive the contractual
cash flows in a transaction in which substantially all of the
risks and rewards of ownership of the financial asset are
transferred or in which the Group neither transfers nor
retains substantially all of the risks and rewards of ownership
and it does not retain control of the financial asset.
Notes to the Financial Statements (continued)for the year ended 30 June 2019 The Group enters into transactions whereby it transfers
assets recognised in its statement of financial position, but
retains either all or substantially all of the risks and rewards
of the transferred assets. In these cases, the transferred
assets are not derecognised. Financial assets at fair value
through profit or loss.
(ii) Non-derivative financial liabilities
Non-derivative financial
borrowings and trade and other payables.
liabilities comprise
loans and
Recognition and initial measurement
Debt securities issued and subordinated liabilities are
initially recognised on the date that they are originated.
All other financial liabilities are recognised initially on
the trade date at which the Group becomes a party to
the contractual provisions of the instrument. The Group
derecognises a financial liability when its contractual
obligations are discharged or cancelled or expired.
Loans and borrowings and trade and other payables are
recognised initially at fair value plus any directly attributable
transaction costs. Subsequent to initial recognition, these
financial liabilities are measured at amortised cost with
any difference between cost and redemption value being
recognised in the income statement over the period of the
borrowings on an effective interest basis.
Classification and subsequent measurement
Financial liabilities are classified as measured at amortised
cost or FVTPL. A financial liability is classified as at FVTPL
if it is classified as held-for-trading, it is a derivative or it
is designated as such on initial recognition. Financial
liabilities at FVTPL are measured at fair value and net gains
and losses, including any interest expense, are recognised
in profit or loss. Other financial liabilities are subsequently
measured at amortised cost using the effective interest
method. Interest expense and foreign exchange gains and
losses are recognised in profit or loss. Any gain or loss on
derecognition is also recognised in profit or loss.
terms and conditions of borrowings are
Where
modified, the carrying amount is remeasured to fair value.
Any difference between the carrying amount and fair value
is recognised in equity.
the
Derecognition
The Group derecognises a financial liability when its
contractual obligations are discharged or cancelled, or
expired. The Group also derecognises a financial liability
when its terms are modified and the cash flows of the
modified liability are substantially different, in which case
a new financial liability based on the modified terms is
recognised at fair value.
On derecognition of a financial liability, the difference
between
the
(including any non-cash assets
consideration paid
transferred or liabilities assumed) is recognised in profit
or loss.
the carrying amount extinguished and
(iii) Offsetting
Financial assets and financial liabilities are offset and the
net amount presented in the statement of financial position
when, and only when, the Group currently has a legally
enforceable right to set off the amounts and it intends either
to settle them on a net basis or to realise the asset and
settle the liability simultaneously.
(iv) Share capital
Ordinary shares
Ordinary shares are classified as equity. Incremental costs
directly attributable to issue of ordinary shares and share
options are recognised as a deduction from equity, net of
any tax effects.
Recognition and measurement
(d) Property, plant and equipment
(i)
Items of property, plant and equipment are measured at
cost less accumulated depreciation and impairment losses.
Cost includes expenditures that are directly attributable
to the acquisition of the asset. Purchased software that
is integral to the functionality of the related equipment is
capitalised as part of that equipment.
When parts of an item of property, plant and equipment have
different useful lives, they are accounted for as separate
items (major components) of property, plant and equipment.
Machines previously held as inventory are transferred to
property, plant and equipment when a rental or participation
agreement is entered into. When the rental or participation
agreements cease and the machines become held for sale,
they are transferred to inventory at their carrying amount.
Proceeds are reflected in revenue while value disposed
are recognised as cost of sale. These are treated as an
operating cash flow.
Gains and losses on disposal of an item of property, plant
and equipment are determined by comparing the proceeds
from disposal with the carrying amount of the property,
plant and equipment and are recognised net within “other
income” in profit and loss.
(ii) Subsequent costs
The cost of replacing a part of an item of property, plant and
equipment is recognised in the carrying amount of an item
if it is probable that the future economic benefits embodied
within the part will flow to the Group and its cost can be
measured reliably. The costs of the day-to-day servicing of
property, plant and equipment are recognised in profit or
loss as incurred.
(iii) Depreciation
Depreciation is based on the cost of an asset less its
residual value. Significant components of individual assets
are assessed and if a component has a useful life that is
different from the remainder of that asset, that component is
depreciated separately.
ANNUAL REPORT 2019
45
Notes to the Financial Statements (continued)for the year ended 30 June 2019 3.
SIGNIFICANT ACCOUNTING POLICIES
(continued)
Depreciation is recognised in profit or loss on a straight-
line basis over the estimated useful lives of each part of
an item of property, plant and equipment since this most
closely reflects the expected pattern of consumption of the
future economic benefits embodied in the assets. Leased
assets are depreciated over the shorter of the lease term
and their useful lives unless it is reasonably certain that the
Group will obtain ownership by the end of the lease term.
Land is not depreciated.
Items of property, plant and equipment are depreciated
from the date that they are installed and are ready for use,
or in respect of internally constructed assets, from the date
that the asset is completed and ready for use.
The estimated useful lives for the current and comparative
periods are as follows:
– buildings
– leasehold improvements
– plant and equipment
39 - 40 years
10 years
2.5 - 20 years
The useful lives of capitalised machines leased under
rental or participation agreements are included in the plant
and equipment useful lives.
Depreciation methods, useful lives and residual values
are reviewed at each financial year-end and adjusted
if appropriate.
Intangible assets
(e)
(i) Goodwill
Goodwill that arises upon the acquisition of subsidiaries
is included in intangible assets. For the measurement
of goodwill at initial recognition, see Note 3(a)(v) and (vi).
Goodwill is subsequently carried at cost less accumulated
impairment losses (refer Note 3(h)).
(ii) Research and development
Expenditure on research activities, undertaken with
the prospect of gaining new technical knowledge and
understanding, is recognised in profit or loss when incurred.
Development activities involve a plan or design for the
production of new or substantially improved products and
processes. Development expenditure is capitalised only if
development costs can be measured reliably, the product
or process is technically and commercially feasible, future
economic benefits are probable, and the Group intends
to and has sufficient resources to complete development
and to use or sell the asset. The expenditure capitalised
includes the cost of materials, direct labour and overhead
costs that are directly attributable to preparing the asset
for its intended use. Other development expenditure
and discontinued projects that are expected to have no
further economic benefit are recognised in profit or loss
when incurred.
46 AINSWORTH GAME TECHNOLOGY
is measured at
less accumulated amortisation and accumulated
Capitalised development expenditure
cost
impairment losses.
(iii) Other intangible assets
Other intangible assets, which include intellectual property,
technology and software assets, customer relationships,
tradenames and trademarks, and service contracts, that
are acquired by the Group through business combinations,
which have finite useful lives, are measured at cost less
accumulated amortisation and accumulated impairment
losses. Refer Note 3(a)(i) for details on the determination of
cost of these acquired assets.
(iv) Subsequent expenditure
it
Subsequent expenditure
increases the future economic benefits embodied in the
specific asset to which it relates. All other expenditure,
including expenditure on internally generated goodwill and
brands, is recognised in profit or loss when incurred.
is capitalised only when
(v) Amortisation
Amortisation is based on the cost of an asset less its
residual value. Amortisation is recognised in profit or loss
on a straight-line basis over the estimated useful lives of
intangible assets, other than goodwill, from the date that
they are available for use, since this most closely reflects
the expected pattern of consumption of the future economic
benefit embodied in the asset. The estimated useful lives
for the current and comparative periods are as follows:
– capitalised development costs
– intellectual property
– technology and software
– customer relationships and contracts
acquired
– tradenames and trademarks
– service contracts
4-5 years
3-10 years
5-10 years
3-10 years
3 years
3 years
Amortisation methods, useful lives and residual values
are reviewed at each reporting date and adjusted
if appropriate.
Leased assets
(f)
Leases in terms of which the Group assumes substantially
all the risks and rewards of ownership are classified as
finance leases. Upon initial recognition the leased asset is
measured at an amount equal to the lower of its fair value
and the present value of the minimum lease payments.
Subsequent to initial recognition, the asset is accounted
for in accordance with the accounting policy applicable to
that asset.
Other
leased
assets are not recognised on the Group’s statement of
financial position.
leases are operating
leases and
the
Notes to the Financial Statements (continued)for the year ended 30 June 2019 Inventories
(g)
Inventories are measured at the lower of cost and net
realisable value. The cost of inventories is based on the
first-in first-out principle, and includes expenditure incurred
in acquiring the inventories, production or conversion
costs and other costs incurred in bringing them to their
existing location and condition. In the case of manufactured
inventories and work
includes an
appropriate share of production overheads based on normal
operating capacity. Net realisable value is the estimated
selling price in the ordinary course of business, less the
estimated costs of completion and selling expenses.
in progress, cost
Impairment
(h)
(i) Non-derivative financial assets
Policy applicable after 1 July 2018
The Group recognises loss allowances for expected credit
losses (“ECLs”) on financial assets measured at amortised
cost. The Group measures loss allowances for trade
receivables at an amount equal to lifetime ECLs. When
determining whether the credit risk of a financial asset
has increased significantly since initial recognition and
when estimating ECLs, the Group considers reasonable
and supportable information that is relevant and available
without undue cost or effort. This includes both quantitative
and qualitive information and analysis, based on the Group’s
historical experience and informed credit assessment and
including available forward-looking information.
The Group assumes that the credit risk on a financial asset
has increased significantly if there is significant difficulty
of the borrower or issuer. Lifetime ECLs are the ECLs that
result from possible default events over the expected life
of a financial instrument. The maximum period considered
when estimating ECLs is the maximum contractual period
over which the Group is exposed to credit risk.
Measurement of ECLs
ECLs are a probability-weighted estimate of credit losses.
Credit losses are measured as the present value of all cash
shortfalls (i.e. the difference between the cash flows due
to the entity in accordance with the contract and the cash
flows that the Group expects to receive).
Credit-impaired financial assets
At each reporting date, the Group assesses whether financial
assets carried at amortised cost are credit-impaired. A
financial asset is ‘credit-impaired’ when one or more events
that have a detrimental impact on the estimated future cash
flows of the financial asset have occurred.
Evidence that a financial asset is credit-impaired includes
the following observable data:
– significant financial difficulty of the borrower or issuer;
– the restructuring of a loan or advance by the Group
on terms that the Group would not consider otherwise;
– a breach of contract such as a default or shortfall
of agreed payment plans; or
– it is probable that the borrower will enter bankruptcy
or other financial reorganisation.
Presentation of allowance for ECL in the statement of
financial position
Loss allowances for financial assets measured at amortised
cost are deducted from the gross carrying amount of the
assets.
Write-off
The gross carrying amount of a financial asset is written
off when the Group has no reasonable expectations of
recovering a financial asset in its entirety or a portion
thereof. The Group expects no significant recovery from
the amount written off. However, financial assets that are
written off could still be subject to enforcement activities in
order to comply with the Group’s procedures for recovery
of amounts due.
Policy applicable before 1 July 2018
A financial asset not carried at fair value through profit
or loss is assessed at each reporting date to determine
whether there is any objective evidence that it is impaired.
A financial asset is considered to be impaired if objective
evidence indicates that one or more events have had a
negative effect on the estimated future cash flows of that
asset that can be estimated reliably.
Objective evidence that financial assets are impaired can
include default or delinquency by a debtor, restructuring of
an amount due to the Group on terms that the Group would
not otherwise consider and indications that a debtor will
enter bankruptcy.
Financial assets measured at amortised cost
The Group considers evidence of impairment for financial
assets measured at amortised cost (loans and receivables)
at both a specific and collective level. All individually
significant financial assets are tested for impairment on
an individual basis. The remaining financial assets are
assessed collectively in groups that share similar credit risk
characteristics.
In assessing collective impairment, the Group uses historical
trends of the probability of default, timing of recoveries and
the amount of loss incurred, adjusted for management’s
judgement as to whether current economic, industry and
credit conditions are such that the actual losses are likely
to be greater or less than suggested by historical trends.
ANNUAL REPORT 2019
47
Notes to the Financial Statements (continued)for the year ended 30 June 2019 3.
SIGNIFICANT ACCOUNTING POLICIES
(continued)
An impairment loss in respect of a financial asset measured
at amortised cost is calculated as the difference between
its carrying amount and the present value of the estimated
future cash flows discounted at the original effective interest
rate. All impairment losses are recognised in profit or loss
and reflected in an allowance account against receivables.
An impairment loss is reversed if the reversal can be related
objectively to an event occurring after the impairment loss
was recognised. When a subsequent event causes the
amount of impairment loss to decrease, the decrease in
impairment loss is reversed through profit and loss.
(ii) Non-financial assets
The carrying amounts of the Group’s non-financial assets,
other than inventories and deferred tax assets, are
reviewed at each reporting date to determine whether
there is any indication of impairment. If any such indication
exists then the asset’s recoverable amount is estimated.
For goodwill and intangible assets that have indefinite
lives or that are not yet available for use, recoverable
amount is estimated at each reporting date. An impairment
loss is recognised if the carrying amount of an asset or its
related cash generating unit (CGU) exceeds its estimated
recoverable amount.
The recoverable amount of an asset or CGU is the greater
of its value in use and its fair value less costs to sell. In
assessing value in use, the estimated future cash flows
are discounted to their present value using a pre-tax
discount rate that reflects current market assessments of
the time value of money and the risks specific to the asset
or CGU. For the purpose of impairment testing, assets are
grouped together into the smallest group of assets that
generates cash inflows from continuing use that are largely
independent of the cash inflows of other assets (the “CGU”).
The goodwill acquired in a business combination for the
purpose of impairment testing, is allocated to CGU that is
expected to benefit from the synergies of the combination.
The Group’s corporate assets do not generate separate
cash inflows and are utilised by more than one CGU.
Corporate assets are allocated to CGUs on a reasonable
and consistent basis and tested for impairment as part of the
testing of the CGU to which the corporate asset is allocated.
An impairment loss is recognised if the carrying amount
of an asset or its CGU exceeds its recoverable amount.
Impairment
loss.
Impairment losses recognised in respect of CGUs are
allocated first to reduce the carrying amount of any
goodwill allocated to the CGUs and then to reduce the
carrying amount of the other assets in the CGU on a pro
rata basis.
An impairment loss in respect of goodwill is not reversed.
In respect of other assets, impairment losses recognised in
prior periods are assessed at each reporting date for any
indications that the loss has decreased or no longer exists.
losses are recognised
in profit or
48 AINSWORTH GAME TECHNOLOGY
An impairment loss is reversed if there has been a change
in the estimates used to determine the recoverable
amount. An impairment loss is reversed only to the extent
that the asset’s carrying amount does not exceed the
carrying amount that would have been determined, net
of depreciation or amortisation, if no impairment loss had
been recognised.
Employee benefits
(i)
(i) Defined contribution superannuation funds
A defined contribution plan is a post-employment benefit
plan under which an entity pays fixed contributions into
a separate entity and will have no legal or constructive
obligation to pay further amounts.
to defined contribution
Obligations
superannuation funds are recognised as an employee
benefit expense in profit or loss in the periods during
which services are rendered by employees.
for contributions
(ii) Other long term employee benefits
The Group’s net obligation in respect of long-term employee
benefits is the amount of future benefit that employees have
earned in return for their service in the current and prior
periods plus related on-costs; that benefit is discounted to
determine its present value, and the fair value of any related
assets is deducted. The discount rate is the yield rate at the
reporting date on corporate bonds that have maturity dates
approximating the terms of the Group’s obligations.
(iii) Termination benefits
Termination benefits are recognised as an expense when
the Group is demonstrably committed, without realistic
possibility of withdrawal, to a formal detailed plan to
terminate employment before the normal retirement date or
to provide termination benefits as a result of an offer made
to encourage voluntary redundancy. Termination benefits
for voluntary redundancies are recognised if the Group
has made an offer encouraging voluntary redundancy, it is
probable that the offer will be accepted, and the number of
acceptances can be estimated reliably.
(iv) Short term benefits
Liabilities for employee benefits for wages, salaries and
annual
leave represent present obligations resulting
from employees’ services provided to reporting date
and are calculated at undiscounted amounts based on
remuneration wage and salary rates that the Group expects
to pay as at reporting date including related on-costs, such
as workers remuneration insurance and payroll tax. Non-
accumulating non-monetary benefits, such as cars and free
or subsidised goods and services, are expensed based on
the net marginal cost to the Group as the benefits are taken
by the employees.
A liability is recognised for the amount expected to be
paid under short-term cash bonus plans if the Group has a
present legal or constructive obligation to pay this amount
as a result of past service provided by the employee and
the obligation can be estimated reliably.
Notes to the Financial Statements (continued)for the year ended 30 June 2019 (v) Share-based payment transactions
The grant date fair value of options granted to employees is
recognised as an employee expense, with a corresponding
increase in equity, over the period in which the employees
become unconditionally entitled to the options. The amount
recognised as an expense is adjusted to reflect the actual
number of share options for which the related service and
non-market vesting conditions are expected to be met,
such that the amount ultimately recognised is based on the
number of awards that meet the related service and non-
market performance conditions at the vesting date. Where
such adjustments result in a reversal of previous expenses
these are recognised as a credit to profit or loss in the
period that it is assessed that certain vesting conditions will
not be met.
(j) Provisions
A provision is recognised if, as a result of a past event,
the Group has a present legal or constructive obligation
that can be estimated reliably, and it is probable that an
outflow of economic benefits will be required to settle the
obligation. Provisions are determined by discounting the
expected future cash flows at a pre-tax rate that reflects
current market assessments of the time value of money and,
where appropriate, the risks specific to the liability.
The unwinding of the discount is recognised as a finance
cost.
(k) Warranties
A provision for warranties is recognised when the underlying
products are sold. The provision is based on historical
warranty data and a weighting of all possible outcomes
against their associated probabilities.
(l) Revenue
The transition from AASB 118 Revenue to AASB 15 Revenue
from Contracts with Customers is disclosed under Note 3(r).
Policy applicable after 1 July 2018
(a) Sale of goods and related licences
(i) Machine and part sales
Revenue from the sale of goods in the course of ordinary
activities is measured at the fair value of the consideration
received or receivable, net of returns, allowances and
trade discounts. For machine sales in which the Group
is also responsible for fulfilling performance obligation
related to installation of the machines sold, under AASB 15
the installation is considered as a separate performance
obligation. This is because the promise to install is implicit in
the contract based on established business practices and
creates a valid expectation that the Group will provide the
service to the customer. Therefore, the amount of revenue
recognised is adjusted for machines that are yet to be
installed by the Group. In such circumstances, a reversal of
revenue is recorded.
the portion of
the Group determines
(ii) Multi element arrangements
When gaming machines, games, conversions and other
incidental items are licensed to customers for extended
periods,
the
transaction price that it allocates to each performance
obligation within this arrangement using the relative
standalone selling price. The transaction price is allocated
to each performance obligation based on the proportion
of the standalone selling price of each performance
obligation to the sum of the standalone selling prices of all
performance obligations.
Revenue is recognised for the hardware and software
components upon delivery and
is
recognised on a straight-line basis over the licence term.
The timing of the recognition of conversion option material
right is the earlier of the exercising of the conversion
option or expiry of the option.
interest
income
(iii) Licence income
Licence income, including those received from online
business, is recognised when all obligations in accordance
with the agreement have been met which may be at the
time of sale or over the life of the agreement.
(b) Services
Revenue from services rendered is recognised in profit or
loss when the services are performed.
(c) Participation and rental
Participation revenue is revenue earned when the Group’s
owned machines are placed in venues either directly by
the Group or indirectly through a licensed operator for a
fee. The fee is calculated as either a daily fee or an agreed
fee based upon a percentage of turnover of participating
machines, depending on the agreement.
Revenue from rental of gaming machines is recognised in
profit or loss on a straight line basis over the term of the
rental agreement.
Policy applicable before 1 July 2018
(a) Sale of goods and related licences
(i) Machine and part sales
Revenue from the sale of goods in the course of ordinary
activities is measured at the fair value of the consideration
received or receivable, net of returns, allowances and
trade discounts. Revenue is recognised when persuasive
evidence exists usually in the form of an executed sales
agreement, that the significant risks and rewards of
ownership have been transferred to the buyer, recovery
of the consideration is probable, the associated costs and
possible return of goods can be estimated reliably, there is
no continuing management involvement with the goods, and
the amount of revenue can be measured reliably. Transfer
of risks and rewards vary depending on the individual terms
of the contract of sale.
ANNUAL REPORT 2019
49
Notes to the Financial Statements (continued)for the year ended 30 June 2019 3.
SIGNIFICANT ACCOUNTING POLICIES
(continued)
(ii) Multi element arrangements
When gaming machines, games, conversions and other
incidental items are licensed to customers for extended
periods, revenue is recognised on delivery for gaming
machines and games and
including
conversions on a straight line basis over the licence term.
The revenue recognised for each item is based on the
relative fair values of the items included in the arrangement.
for other
items
(iii) Licence income
Licence income, including those received from online
business, is recognised when all obligations in accordance
with the agreement have been met which may be at the
time of sale or over the life of the agreement.
(b) Services
Revenue from services rendered is recognised in profit or
loss when the services are performed.
(c) Participation and rental
Participation revenue is revenue earned when the Group’s
owned machines are placed in venues either directly by
the Group or indirectly through a licensed operator for a
fee. The fee is calculated as either a daily fee or an agreed
fee based upon a percentage of turnover of participating
machines, depending on the agreement.
Revenue from rental of gaming machines is recognised in
profit or loss on a straight line basis over the term of the
rental agreement.
(m) Lease payments
Payments made under operating leases are recognised in
profit or loss on a straight-line basis over the term of the
lease. Lease incentives received are recognised as an
integral part of the total lease expense, over the term of
the lease.
Minimum lease payments made under finance leases
are apportioned between the finance expense and the
reduction of the outstanding liability. The finance expense
is allocated to each period during the lease term so as
to produce a constant periodic rate of interest on the
remaining balance of the liability.
(n) Finance income and finance costs
Finance income comprises interest income and foreign
currency gains. Interest income is recognised in profit or
loss as it accrues using the effective interest method.
Finance costs comprise interest expense on borrowings
and foreign currency losses. Borrowing costs that are not
directly attributable to the acquisition, construction or
production of a qualifying asset are recognised in profit or
loss using the effective interest method.
Foreign currency gains and losses are reported on a net
basis as either finance income or finance cost depending
on whether foreign currency movements are in a net gain
or net loss position.
50 AINSWORTH GAME TECHNOLOGY
Income tax
is recognised
(o)
Income tax expense comprises current and deferred tax.
Current and deferred tax are recognised in profit or loss
except to the extent that it relates to items recognised
directly in equity, in which case it is recognised in other
comprehensive income.
Current tax is the expected tax payable on the taxable
income for the year, using tax rates enacted or substantively
enacted at the reporting date, and any adjustment to tax
payable in respect of previous years.
Deferred tax
in respect of temporary
differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts
used for taxation purposes. Deferred tax is not recognised
for temporary differences arising from: the initial recognition
of assets or liabilities that affect neither accounting nor
taxable profit, and differences relating to investments in
subsidiaries to the extent that they will probably not reverse
in the foreseeable future.
Deferred tax is not recognised for taxable temporary
differences arising from the initial recognition of goodwill.
Deferred tax is measured at the tax rates that are expected
to be applied to the temporary differences when they
reverse, based on the laws that have been enacted or
substantively enacted by the reporting date.
In determining the amount of current and deferred tax
the Group takes into account the impact of uncertain tax
positions and whether additional taxes and interest may be
due. The Group believes that its accruals for tax liabilities
are adequate for all open tax years based on its assessment
of many factors, including interpretations of tax law and
prior experience. This assessment relies on estimates and
assumptions and may involve a series of judgements about
future events. New information may become available that
causes the Group to change its judgement regarding the
adequacy of existing tax liabilities; such changes to tax
liabilities will impact tax expense in the period that such a
determination is made.
Deferred tax assets and liabilities are offset if there is a
legally enforceable right to offset current tax liabilities and
assets, and they relate to income taxes levied by the same
tax authority on the same taxable entity, or on different tax
entities, but they intend to settle current tax liabilities and
assets on a net basis or their tax assets and liabilities will be
realised simultaneously.
A deferred tax asset is recognised for unused tax losses, tax
credits and deductible temporary differences, to the extent
that it is probable that future taxable profits will be available
against which they can be utilised. Deferred tax assets are
reviewed at each reporting date and are reduced to the
extent that it is no longer probable that the related tax
benefit will be realised, see Note 15.
Notes to the Financial Statements (continued)for the year ended 30 June 2019 (p) Earnings per share
The Group presents basic and diluted earnings per share (EPS) data for its ordinary shares. Basic EPS is calculated by dividing the
profit or loss attributable to ordinary shareholders of the Company by weighted average number of ordinary shares outstanding
during the period. Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and the
weighted average number of ordinary shareholders and the weighted average number of ordinary shares outstanding for the
effects of all dilutive potential ordinary shares, which comprise convertible notes and share options granted to employees.
(q) Segment reporting
An operating segment is a component of the Group that engages in business activities from which it may earn revenues and
incur expenses, including revenues and expenses that relate to transactions with any of the Group’s other components. All
operating segments’ operating results are regularly reviewed by the Group’s CEO to make decisions about resources to be
allocated to the segment and assess its performance, and for which discrete financial information is available.
Segment results that are reported to the CEO include items directly attributable to a segment as well as those that can be
allocated on a reasonable basis.
Changes in new significant accounting policies
(r)
The Group has initially adopted AASB 15 Revenue from Contracts with Customers (see (A) and AASB 9 Financial Instruments
(see B) from 1 July 2018. A number of other new standards are effective from 1 January 2018, but they do not have a material
effect on the Group’s financial statements.
The effect of initially applying these standards is mainly attributable to the following:
– defer recognition of revenue related to installation of machines (see A);
– an adjustment in timing of revenue recognition for performance obligations on multi-element arrangement contracts (see A); and
– an increase in impairment losses recognised on financial assets (see B).
A. AASB 15 Revenue from Contracts with Customers
AASB 15 establishes a comprehensive framework for determining whether, how much and when revenue is recognised. It
replaced AASB 118 Revenues, AASB 111 Construction Contracts and related interpretations.
The Group has adopted AASB 15 using the cumulative effect method (with practical expedients), with the effect of initially
applying this standard recognised at the date of initial application, 1 July 2018. Accordingly, the information presented for the
comparative period has not been restated, i.e. it is presented, as previously reported, under AASB 118, AASB 111 and related
interpretations.
The Group has elected to use the following practical expedients in relation to sale of machines and multi-element arrangement
contracts:
– The promised amount of consideration was not adjusted for the effects of a significant financing component for contracts if
the Group, at contract inception, expects that the period between when the Group transfers a promised good or service to a
customer and when the customer pays for that good or service will be of one year or less; and
– The incremental costs of obtaining a contract was recognised as an expense when incurred where the amortisation period of
the asset that the entity otherwise would have recognised is one year or less. Where the amortisation period is more than one
year the incremental costs of obtaining a contract were minimal.
The following table summarises the impact, net of tax, of transition to AASB 15 on retained earnings at 1 July 2018.
In thousands of AUD
Retained earnings
Machine sale contracts
Multi-element arrangements
Impact at 1 July 2018
Note
(i)
(ii)
Impact of adopting
AASB 15 at 1 July 2018
(62)
96
34
ANNUAL REPORT 2019
51
Notes to the Financial Statements (continued)for the year ended 30 June 2019 3.
SIGNIFICANT ACCOUNTING POLICIES (continued)
The following tables summarise the impacts of adopting AASB 15 on the Group’s statement of financial position as at 30 June
2019 and its statement of profit or loss and other comprehensive income for the year ended 30 June 2019 for each line item
affected. There was no material impact on the Group’s statement of cash flows for the year ended 30 June 2019.
Impact on the consolidated statement of financial position:
30 June 2019
In thousands of AUD
Assets
Current Assets
Trade and other receivables
Total Current Assets
Non-Current Assets
Trade and other receivables
Total Non-Current Assets
Equity
Accumulated losses
Total Equity
As reported
Adjustments
Amounts
without
adoption of
AASB 15
119,964
119,964
28,648
28,648
(1,618)
(1,618)
(51)
(51)
(297)
(297)
(348)
(348)
119,913
119,913
28,351
28,351
(1,966)
(1,966)
Impact on the consolidated statement of profit or loss and other comprehensive income:
For the year ended 30 June 2019
In thousands of AUD
Revenue
Gross profit
Operating profit
Profit before tax
Profit for the year
Total comprehensive income for the year
As reported
Adjustments
234,344
139,949
5,419
14,682
10,895
19,172
(348)
(348)
(348)
(348)
(348)
(348)
Amounts
without
adoption of
AASB 15
233,996
139,601
5,071
14,334
10,547
18,824
52 AINSWORTH GAME TECHNOLOGY
Notes to the Financial Statements (continued)for the year ended 30 June 2019 The details of the new significant accounting policies and the nature of the changes to previous accounting policies in relation
to the Group’s various goods and services offering are set as follows:
Under AASB 15, revenue is recognised when a customer obtains control of goods or services. Determining whether the timing
of the transfer of control should be at a point in time or over time requires judgement.
Type of product/ service
i. Machines sales
Nature, timing of satisfaction of
performance obligations, significant
payment terms
Customers obtain control of machines
when the goods are delivered and
have been accepted by the customer.
Invoices are generated and revenue is
recognised at that point in time.
Nature of change in accounting policy
Under AASB 118, revenue for these
contracts was recognised when
persuasive evidence exists usually
in the form of an executed sale
agreement that the significant risks
and rewards of ownership have been
transferred to the buyer, recovery of
the consideration is probable, the
associated costs and possible return
of goods can be estimated reliably,
there is no continuing management
involvement with the goods, and the
amount of revenue can be measured
reliably.
For machine sales in which the
Group is also responsible for fulfilling
performance obligation related to
installation of the machines sold, under
AASB 15 the installation is considered
as a separate performance obligation.
This is because the promise to install
is implicit in the contract based on
established business practices and
creates a valid expectation that the
Group will provide the service to the
customer. Therefore, the amount of
revenue recognised is adjusted for
machines that are yet to be installed
by the Group. In such circumstances,
a reversal of revenue is recorded.
The impact of these changes on items
other than revenue is a decrease
in trade and other receivables as
described on page 52.
ANNUAL REPORT 2019
53
Notes to the Financial Statements (continued)for the year ended 30 June 2019 3.
SIGNIFICANT ACCOUNTING POLICIES (continued)
Type of product/ service
ii. Multi element arrangements
Nature, timing of satisfaction of
performance obligations, significant
payment terms
When gaming machines, games,
conversions and other incidental items
are licensed to customers for extended
periods, revenue is recognised on
delivery for gaming machines and
games and for other items including
conversion option material rights on
a straight-line basis over the licence
term.
Where a contract contains a significant
financing component, there is no
change from current practice in
recognising interest income over time.
iii. License income
iv. Services
Licence income, including those
received from online gaming business,
is recognised when all obligations in
accordance with the agreement have
been met which may be at the time of
sale or over the life of the agreement.
Revenue from services rendered is
recognised in profit or loss when the
services are performed. The Group has
concluded that revenue from services
meets the criteria set with AASB15 for
revenue recognised over time and
progress will be measured by using the
inputs method.
54 AINSWORTH GAME TECHNOLOGY
Nature of change in accounting policy
Under AASB 118, the Group determines
the portion of the transaction price
that it allocates to each performance
obligation within this arrangement
using the relative standalone selling
price. The transaction price is allocated
to each performance obligation based
on the proportion of the standalone
selling price of each performance
obligation to the sum of the standalone
selling prices of all performance
obligations.
Under AASB 15, the standalone selling
price of the conversion option material
right now reflects the discount the
customer would obtain when exercising
the option, adjusted for the likelihood
that the option will be exercised.
This results in a lower proportion of
transaction price allocated to the
conversion option material right, and
therefore less revenue is deferred. The
timing of the recognition of conversion
option material right is now the earlier
of the exercising of the conversion
option or expiry of the option.
These changes impact the timing and
amount of revenue recognition.
The impact of these changes on items
other than revenue is trade and other
receivables as described on page 52.
AASB 15 did not have a significant
impact on the Group’s accounting
policies.
AASB 15 did not have a significant
impact on the Group’s accounting
policies
Notes to the Financial Statements (continued)for the year ended 30 June 2019 Operating lease revenues including participation and rental falls outside the scope of AASB 15. These revenues are recorded
in accordance with AASB 16 Leases (see below).
B. AASB 9 Financial Instruments
AASB 9 replaces AASB 139 Financial Instruments: Recognition and Measurement. This standard results in changes to accounting
policies for financial assets and liabilities covering classification and measurement and impairment. The Group has elected not
to restate its comparatives and as a result at the date of initial application, that is, at 1 July 2018, the Group adjusted its opening
retained earnings for changes in the impairment provision amount of its financial assets from inception of those assets to this
date.
The following table and the accompanying notes below explain the original measurement of categories under AASB 139 and
the new measurement categories under AASB 9 for each class of the Group’s financial assets and liabilities as at 1 July 2018.
The effect of adopting AASB 9 on the carrying amounts of financial assets at 1 July 2018 relates solely to the new impairment
requirements.
In thousands of AUD
Note
Financial assets
Trade and other receivables
(a)
Cash and cash equivalents
Total financial assets
Financial liabilities
Secured bank loans
Finance lease liabilities
Trade payables
Total financial liabilities
Original
classification
under AASB 139
New classification
under AASB 9
Original carrying
amount under AASB
139
New carrying
amount under AASB
9
Loans and
receivables
Loans and
receivables
Amortised cost
192,723
191,509
Amortised cost
35,667
228,390
35,667
227,176
Other financial
liabilities
Other financial
liabilities
Other financial
liabilities
Other financial
liabilities
Other financial
liabilities
Other financial
liabilities
71,721
239
37,500
109,460
71,721
239
37,500
109,460
a) Trade and receivables that were classified as loans and receivables under AASB 139 are now classified at amortised cost.
An increase of $1,214 thousand in the allowance for impairment over these receivables were recognised in opening retained
earnings at 1 July 2018 on transition to AASB 9.
The following table summarises the impact, net of tax, of transition to AASB 9 on the opening balance of reserves and retained
earnings.
In thousands of AUD
Retained earnings
Note
Impact of adopting AASB 9
at 1 July 2018
Recognition of expected credit losses under AASB 9 recognised over time
(i)
Related tax
Impact at 1 July 2018
(1,214)
402
(812)
ANNUAL REPORT 2019
55
Notes to the Financial Statements (continued)for the year ended 30 June 2019 SIGNIFICANT ACCOUNTING POLICIES (continued)
3.
The details of new significant accounting policies and the nature and effect of the changes to previous accounting policies are
set out as follows:
Impairment of financial assets – trade receivables
(i)
AASB 9 replaces the ‘incurred loss’ model in AASB 139 with the ‘expected credit loss’ (ECL) model. The new impairment
model applies to financial assets measured at amortised cost. Under AASB 9, credit losses are recognised earlier than under
AASB 139.
Under AASB 9, loss allowances are measured on either of the following basis:
– 12 month ECLs: these are ECLs that result from possible default events within the 12 months after the reporting date; and
– lifetime ECLs: these are ECLs that result from all possible default events over the expected life of a financial instrument.
The Group has elected to measure loss allowances for trade receivables at an amount equal to lifetime ECLs.
When determining whether the credit risk of a financial asset has increased significantly since initial recognition and when
estimating ECLs, the Group considers reasonable and supportable information that is relevant and available without undue
cost or effort. This includes quantitative and qualitative information and analysis, based on the Group’s historical experience,
informed credit assessment and forward-looking information.
Measurement of ECLS
ECLs are probability-weighted estimate of credit losses. Credit losses are measured as the present value of all cash shortfalls
(i.e. the difference between the cash flows due to the entity in accordance with the contract and the cash flows that the Group
expects to receive).
Credit-impaired financial assets
At each reporting date, the Group will assess whether financial assets carried at amortised cost are credit-impaired. A financial
asset is ‘credit-impaired’ when one or more events that have a detrimental impact on the estimated future cash flows of the
financial asset have occurred.
Presentation of impairment
Loss allowances for financial assets measured at amortised cost are deducted from the gross carrying amount of the asset.
Impact of the new impairment model
For assets in the scope of the AASB 9 impairment model, impairment losses are generally expected to increase and become
more volatile. The Group has determined that the application of AASB 9’s impairment requirements at 1 July 2018 results in an
additional impairment allowance as outlined as follows:
In thousands of AUD
Loss allowance at 30 June 2018 under AASB 139
Additional impairment recognised at 1 July 2018 on:
Trade and other receivables as at 30 June 2018
Loss allowance at 1 July 2018 under AASB 9
Impact of adopting AASB 9
at 1 July 2018
3,931
1,214
5,145
The ECLs on trade and other receivables were calculated based on actual credit loss experience over the past four years.
Exposures within each group were segmented based on common credit risk characteristics for each geographical region. The
Group performed the calculation of ECL rates based on the customers geographic region and applied the calculated ECL to
the closing trade receivables amounts at reporting date.
56 AINSWORTH GAME TECHNOLOGY
Notes to the Financial Statements (continued)for the year ended 30 June 2019 The following table provides information about the exposure to credit risk and ECLs for trade and other receivables as at 1 July
2018 upon adoption of AASB 9.
In thousands of AUD
Geographical
region
Australia & Other
North America
Latin America
Loss rate
Debtor Balance
Impairment
loss allowance under
AASB 9
Impairment loss
allowance under AASB
139
3.2%
1.6%
3.1%
33,414
69,930
93,309
196,653
(1,085)
(1,126)
(2,934)
(5,145)
(942)
(967)
(2,022)
(3,931)
The methodology described above has also been used at this reporting date. Changes during the period to the Group’s
exposure to credit risk are shown in the following table which provides information about exposure to credit risk and ECLs for
trade and other receivables as at 30 June 2019.
In thousands of AUD
Geographical
region
Australia & Other
North America
Latin America
Loss rate
Debtor Balance
Impairment
loss allowance under
AASB 9
1.8%
3.4%
3.6%
19,109
45,961
87,951
153,021
336
1,541
3,125
5,002
(s) Changes in new standards and interpretations not yet adopted
A number of new standards and amendments to standards are effective for annual periods beginning after 1 July 2018 and
earlier application is permitted, however, the Group has not early adopted the following new or amended standards in preparing
these consolidated financial statements.
The Group has the following updates to information provided in the last annual financial statements about the standards issued
but not yet effective that may have a significant impact on the Group’s consolidated financial statements.
AASB 16 Leases
AASB 16 replaces the current AASB 117 Leases standard. The standard is effective for annual periods beginning 1 January
2019. AASB 16 introduces a single, on-balance sheet lease accounting model for lessees, effectively treating all leases as
finance leases. A lessee recognises a right-of-use asset representing its right to use the underlying asset and a lease liability
representing its obligation to make lease payments. There are recognition exemptions for short-term leases and leases of low-
value items. Lessor accounting remains similar to current practice, i.e. lessors continue to classify leases as finance or operating
leases.
The Group has completed the assessment on the impact on its consolidated financial statements. The Group has assessed all
of the leases at 30 June 2019 and have determined the impact of applying AASB 16 on the financial statements in the period
of initial application at 1 July 2019.
Thus far, the most significant impact identified is that the Group will recognise new assets and liabilities for its operating leases
of office, warehouse, factory facilities and office equipment.
In addition, the nature of expenses related to those leases will now change because AASB 16 replaces the straight-line
operating leases expense with a depreciation charge for right-of-use assets and interest expense on lease liabilities.
Determining whether an arrangement contains a lease
(i)
The Group has an arrangement that was not in the legal form of a lease, for which it concluded that the arrangement contains
a lease of equipment under Interpretation 4.
On transition to AASB 16, the Group can choose whether to:
– apply the AASB 16 definition of a lease to all its contracts, or
– apply a practical expedient and not reassess whether a contract is, or contains, a lease.
ANNUAL REPORT 2019
57
Notes to the Financial Statements (continued)for the year ended 30 June 2019 (ii) Trade and other receivables/payables
For receivables/payables with a remaining life of less than
one year, the notional amount is deemed to reflect the
fair value. The fair value of all other receivables/payables
is estimated as the present value of future cash flows,
discounted at the market rate of interest at the reporting
date.
(iii) Non-derivative financial instruments
Fair value, which is determined for disclosure purposes, is
calculated based on the present value of future principal
and interest cash flows, discounted at the market rate
of interest at the reporting date. In respect of the liability
component of convertible notes, the market rate of interest
is determined by reference to similar liabilities that do not
have a conversion option. For finance leases the market
rate of interest is determined by reference to similar lease
agreements.
(iv) Loans and borrowings
Fair value is calculated based on discounted expected
future principal and interest cash flows.
(v) Finance lease liabilities
The fair value is estimated as the present value of future
for
cash flows, discounted at market
homogeneous lease agreements. The estimated fair values
reflect changes in interest rates.
interest rates
(vi) Share-based payment transactions
The fair value of employee stock options is measured using
the Black Scholes Merton model. Measurement inputs
include share price on measurement date, exercise price
of the instrument, expected volatility (based on weighted
average historic volatility adjusted for changes expected
due to publicly available information), weighted average
expected life of the instruments (based on historical
experience and general option holder behaviour), expected
dividends, and the risk-free
(based on
government bonds). Service and non-market performance
conditions attached to the transactions are not taken into
account in determining fair value.
interest rate
3.
SIGNIFICANT ACCOUNTING POLICIES
(continued)
The Group plans to apply the practical expedient to
grandfather the definition of a lease on transition whereby
all contracts entered into before 1 July 2019 been identified
as leases under AASB 117 and Interpretation 4.
Transition to AASB 16
(ii)
As the lessee, the Group can either apply the standard
using a:
– retrospective approach, or
– modified retrospective approach with optional practical
expedients.
The lessee applies the election consistently to all of its
leases.
Under the modified retrospective approach, the cumulative
effect of adopting AASB 16 will be recognised as an
adjustment to the opening balance of retained earnings at
1 July 2019, with no restatement of comparative information.
Optional practical expedients also allow the lessee to elect,
on a lease-by-lease basis to calculate the right-of-use
asset as either equal to the lease liability or with respect to
historical lease payments.
As at 1 July 2019, the Group expects to recognise a right
of use asset and a corresponding lease liability of $17,972
thousand with no adjustment to the opening retained
earnings, using a modified retrospective approach.
The Group is not required to make any adjustments
for leases in which it is a lessor except where it is an
intermediate lessor in a sub-lease.
No other new standards, amendments to standards and
interpretations are expected to materially affect the Group’s
consolidated financial statements.
4. DETERMINATION OF FAIR VALUES
A number of the Group’s accounting policies and disclosures
require the determination of fair value, for both financial and
non-financial assets and liabilities. Fair values have been
determined for measurement and/or disclosure purposes
based on the following methods. Where applicable, further
information about the assumptions made in determining
fair values is disclosed in the notes specific to that asset or
liability.
Intangible assets
(i)
The fair value of customer contracts acquired in a business
combination is based on the discounted cash flows
expected to be derived from the use or eventual sale of
these contracts. The fair value of other intangible assets is
based on the discounted cash flows expected to be derived
from the use and eventual sale of the assets.
58 AINSWORTH GAME TECHNOLOGY
Notes to the Financial Statements (continued)for the year ended 30 June 2019 5. FINANCIAL RISK MANAGEMENT
Overview
The Group has exposure to the following risks from their
use of financial instruments:
– Credit risk;
– Liquidity risk; and
– Market risk.
This note presents information about the Group’s exposure
to each of the above risks, its objectives, policies and
processes for measuring and managing risk, and the
management of capital. Further quantitative disclosures are
included throughout this financial report.
Risk management framework
The Board of Directors has overall responsibility for the
establishment and oversight of the risk management
framework. The Board has established processes through
the Group’s Audit Committee, which is responsible for
developing and monitoring risk management policies. The
Audit Committee reports regularly to the Board of Directors
on its activities.
Risk management policies are established to identify and
analyse the risks faced by the Group, to set appropriate risk
limits and controls, and to monitor risks and adherence to
limits. Risk management policies and systems are reviewed
regularly to reflect changes in market conditions and the
Group’s activities. The Group, through its training and
management standards and procedures, aims to develop
a disciplined and constructive control environment in which
all employees understand their roles and obligations.
The Group’s Audit Committee oversees how management
monitors compliance with the Group’s risk management
policies and procedures and reviews the adequacy of the
risk management framework in relation to the risks faced by
the Group. The Audit Committee is assisted in its oversight
role by Internal Audit. Internal Audit undertakes reviews of
risk management controls and procedures, the results of
which are reported to the Audit Committee.
Credit risk
Credit risk is the risk of financial loss to the Group if a
customer or counterparty to a financial instrument fails to
meet its contractual obligations, and arises principally from
the Group’s receivables from customers.
Trade and other receivables
The Group’s exposure to credit risk is influenced mainly by
the individual characteristics of each customer, including
the default risk of the industry and country in which
customers operate. The Group’s concentration of credit risk
is disclosed in Note 26.
from
Credit policy guidelines have been introduced under
which each new customer is assessed by the compliance
division as to suitability and analysed for creditworthiness
before the Group’s standard payment and delivery terms
and conditions are offered. The Group’s review includes
investigations, external ratings, when available, and in some
cases bank references. Purchase limits are established
for each customer, which represents the maximum open
amount without requiring approval
the Board.
Customers that fail to meet the Group’s creditworthiness
criteria may only transact with the Group within established
limits unless Board approval is received or otherwise only
on a prepayment basis.
In monitoring customer credit risk, customers are grouped
according to their credit characteristics, including whether
they are an individual or legal entity, whether they are a
distributor, operator or customer, geographic location,
aging profile, maturity and existence of previous financial
difficulties. The Group’s trade and other receivables relate
mainly to the Group’s direct customers, operators and
established distributors. Customers that are graded as
“high risk” require future sales to be made on a prepayment
basis within sales limits approved by the Chief Executive
Officer and Chief Financial Officer, and thereafter only with
Board approval.
Goods are sold subject to retention of title clauses, so that
in the event of non-payment the Group may have a secured
claim. The Group does not require collateral in respect of
trade and other receivables.
The Group has established an allowance for impairment
that represents its estimate of incurred and expected credit
losses in respect of trade and other receivables. The main
components of this allowance are a specific loss component
that relates to individually significant exposures.
Guarantees
The Group’s policy is to provide financial guarantees only for
wholly-owned subsidiaries. At 30 June 2019 no guarantees
were outstanding (2018: none).
Liquidity risk
Liquidity risk is the risk that the Group will not be able to
meet its financial obligations as they fall due. The Group’s
approach to managing liquidity is to ensure, as far as
possible, that it will always have sufficient liquidity to meet
its liabilities when due, under both normal and stressed
conditions, without incurring unacceptable losses or risking
damage to the Group’s reputation.
Typically, the Group ensures that it has access to sufficient
cash on demand to meet expected operational expenses
for a period of 60 days, including the servicing of financial
obligations; this excludes the potential impact of extreme
circumstances that cannot reasonably be predicted, such
as natural disasters.
ANNUAL REPORT 2019
59
Notes to the Financial Statements (continued)for the year ended 30 June 2019 to
6. OPERATING SEGMENTS
Information reported
the Group’s Chief Executive
Officer (CEO) for the purposes of resource allocation and
assessment of performance is focused on the geographical
location of customers of gaming machines. The primary
geographical location of customers and therefore the
Group’s reportable segments under AASB 8 are outlined in
the table on the following page.
The NSW and North and Latin America segments include the
aggregation of the Group’s other operating segments that
are not separately reportable. Included in the NSW and North
and Latin America segments are the results of the operating
segments related to the servicing of gaming machines in
those geographical regions. These operating segments
are considered to have similar economic characteristics as
the nature of the products and services is complementary
and the nature of the regulatory environment and type of
customer are consistent. Performance of each reportable
segment is based on segment revenue and segment
result as included in internal management reports that are
reviewed by the Group’s CEO. Segment result only takes
into account directly attributable costs, which management
believes is the most relevant approach in evaluating
segment performance.
The Group has a large and dispersed customer base. The
Group’s largest customer accounts for only 5% of the total
reportable revenue.
A reconciliation of segment result to net profit after tax is
also included as follows.
5. FINANCIAL RISK MANAGEMENT (continued)
Market risk
Market risk is the risk that changes in market prices, such
as foreign exchange rates and interest rates will affect the
Group’s income or the value of its holdings of financial
instruments. The objective of market risk management
is to manage and control market risk exposures within
acceptable parameters, while optimising the return.
Currency risk
The Group is exposed to currency risk on sales and
purchases that are denominated in a currency other than
the respective functional currencies of Group entities,
primarily the Australian dollar (AUD) and the US dollar
(USD). The currency in which these transactions are
primarily denominated is in USD for the Australian business
operations.
The Group continually monitors and reviews the financial
impact of currency variations to determine strategies to
minimise the volatility of changes and adverse financial
effects in foreign currency exchange rates. No hedging
arrangements were utilised during the reporting period.
In respect of other monetary assets and
liabilities
denominated in foreign currencies, the Group monitors
its net exposure to address short-term imbalances in its
exposure.
Interest rate risk
The Group’s main interest rate risk arises from floating rate
borrowings drawn under bank debt facilities.
Capital management
The Board’s policy is to maintain a strong capital base so
as to maintain investor, creditor and market confidence
and to sustain future development of the business. The
Board continues to monitor group performance so as to
ensure an acceptable return on capital is achieved and that
dividends are able to be provided to ordinary shareholders
in the short term.
The Board continues to review alternatives to ensure
present employees will hold equity in the Company’s
ordinary shares. This is expected to be an ongoing process
establishing long term incentive plans to further align
shareholders and employees’ interests.
There were no changes in the Group’s approach to capital
management during the year. The Group is not subject to
externally imposed capital requirements.
60 AINSWORTH GAME TECHNOLOGY
Notes to the Financial Statements (continued)for the year ended 30 June 2019 .
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*
ANNUAL REPORT 2019
63
7. REVENUE (continued)
In thousands of AUD
Sale of goods
Rendering of services
Rental and participation revenue
8. OTHER INCOME
In thousands of AUD
Royalties income
Bad debts reversed
Gain on sale of property plant and equipment
Other income
9. EXPENSES BY NATURE
In thousands of AUD
Changes in raw material and consumables, finished goods and work in progress
Employee benefits expense
Depreciation and amortisation expense
Legal expenses
Evaluation and testing expenses
Marketing expenses
Operating lease expenses
Impairment loss
Other expenses
Note
2019
2018
177,757
10,577
46,010
211,809
7,862
45,913
234,344
265,584
2019
257
960
–
11
2018
343
–
2,586
–
1,228
2,929
2019
77,673
65,201
33,419
1,015
7,681
5,720
2,331
5,189
2018
98,598
62,101
28,027
801
6,591
5,261
2,241
5,165
31,924
230,153
22,630
231,415
16
10
12,13
27
64 AINSWORTH GAME TECHNOLOGY
Notes to the Financial Statements (continued)for the year ended 30 June 2019 10. EMPLOYEE BENEFIT EXPENSES
In thousands of AUD
Wages and salaries
Short term incentives
Contributions to defined contribution superannuation funds
Increase in liability for annual leave
(Decrease)/increase in liability for long service leave
Termination benefits
Equity settled share-based payment transactions
11. FINANCE INCOME AND FINANCE COSTS
In thousands of AUD
Interest income
Net foreign exchange gain
Finance income
Interest expense on financial liabilities
Finance costs
Net finance income recognised in profit or loss
Note
2019
2018
60,495
56,898
22
22
1,172
3,439
23
(97)
181
(12)
65,201
2019
5,514
6,045
11,559
(2,242)
(2,242)
9,317
1,874
3,483
396
333
335
(1,218)
62,101
2018
3,900
3,113
7,013
(1,580)
(1,580)
5,433
ANNUAL REPORT 2019
65
Notes to the Financial Statements (continued)for the year ended 30 June 2019 Note
Land and
buildings
Plant and
equipment
Leasehold
improvements
12. PROPERTY, PLANT AND EQUIPMENT
In thousands of AUD
Cost
Balance at 1 July 2017
Re-classification of inventory to plant and equipment
Additions
Disposals
Effect of movements in foreign exchange
Balance at 30 June 2018
Balance at 1 July 2018
Re-classification of inventory to plant and equipment
Additions
Disposals
Effect of movements in foreign exchange
Balance at 30 June 2019
Depreciation and impairment losses
Balance at 1 July 2017
Depreciation charge for the year
Disposals
Effect of movements in foreign exchange
Balance at 30 June 2018
Balance at 1 July 2018
Depreciation charge for the year
9
Disposals
Effect of movements in foreign exchange
Balance at 30 June 2019
Carrying amounts
At 1 July 2017
At 30 June 2018
At 30 June 2019
55,066
–
4,389
(2,432)
2,243
59,266
59,266
–
116
–
3,194
62,576
2,386
1,847
–
188
4,421
4,421
2,005
–
278
6,704
52,680
54,845
55,872
101,014
34,201
3,828
(38,694)
2,821
103,170
103,170
36,206
5,246
(22,292)
4,722
127,052
45,932
17,856
(24,417)
1,681
41,052
41,052
22,751
(11,080)
2,134
54,857
55,082
62,118
72,195
Total
159,171
34,201
8,328
(41,289)
5,077
3,091
–
111
(163)
13
3,052
165,488
3,052
–
1,159
–
17
165,488
36,206
6,521
(22,292)
7,933
4,228
193,856
1,293
271
(163)
21
1,422
1,422
313
–
12
1,747
1,798
1,630
2,481
49,611
19,974
(24,580)
1,890
46,895
46,895
25,069
(11,080)
2,424
63,308
109,560
118,593
130,548
Disposals in the table above includes sale of gaming machines previously under participation or rental agreements of
$10,852 thousand (2018: $12,624 thousand) at net book value.
The carrying amount of plant and equipment on operating lease is $57,426 thousand (2018: $46,598 thousand).
Leased plant and equipment
The Group leases plant and equipment and motor vehicles under hire purchase agreements. At the end of each of these
agreements the Group has the option to purchase the equipment at a beneficial price. The leased equipment and guarantees by
the Group secure lease obligations. At 30 June 2019, the net carrying amount of leased plant and equipment was $8 thousand
(2018: $59 thousand).
66 AINSWORTH GAME TECHNOLOGY
Notes to the Financial Statements (continued)for the year ended 30 June 2019 l
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ANNUAL REPORT 2019
67
INTANGIBLE ASSETS (continued)
13.
Impairment testing for development costs
The four main CGUs or Group of CGUs are: Development, Australia and other (comprised of Asia, New Zealand, South Africa
and Europe), North America and Latin America.
The determination of CGUs for the purposes of testing development costs for impairment is consistent with last financial year.
The Group has maintained that the most reasonable and consistent basis upon which to allocate development costs is to have
the Group’s research and development function (‘Development CGU’) recharge product development costs to the Group’s
other CGUs, which are in line with the Group’s geographic operating segments.
The carrying amount of the Group’s development costs amounts to $26,055 thousand (2018: $28,451 thousand), comprising of
$22,151 thousand in development costs relating to product development and $3,904 thousand in development costs relating
to online development activities.
Development costs include development costs relating to products and online gaming that are not yet available for sale and as
such their recoverable amount is assessed at the end of each reporting period.
Product development costs are recharged from the Development CGU to individual CGUs, based on the forecasted unit sales
of each individual CGU. Other assets, consisting of intangible assets and property, plant and equipment, are allocated to the
individual CGUs to which they relate.
The Group has allocated goodwill and intangible assets on a consistent basis with last financial year. This includes allocation
of goodwill arising from the acquisition of Nova Technologies in 2016 which has been allocated to the North America CGU.
The Group’s corporate assets largely comprises of building facilities, IT infrastructure and manufacturing equipment. During
the period, the allocation of the corporate assets was reviewed and management determined that it was more appropriate to
allocate these corporate assets based on the usage pattern by each CGU. Previously, the allocation of corporate assets was
based on the geographical location of those corporate assets.
The recoverable amount of each CGU was estimated based on its value in use. Value in use for each individual CGU was
determined by discounting the future cash flows generated from continuing use of the product development costs over a
five year period. Future cash flows are expected to be generated from the sales of machines and products and are based on
the following key assumptions:
CGUs
Development
Australia and other
North America
Latin America
2019
2018
Average
annual
revenue
growth rate(2)
Discount
rate(1)
17.2%
16.6%
13.5%
18.7%
5.6%
15.8%
3.4%
8.1%
Average
annual
revenue
growth rate(3)
3.3%
2.9%
3.1%
4.0%
Discount
rate(1)
14.3%
15.2%
13.5%
19.8%
(1) Discount rates are pre-tax discount rates.
(2) The 2019 average annual revenue growth rate for 5 years (2020 to 2024) presented above is calculated based on historical experience,
actual operating results and estimated financial results based on planned strategic initiatives. The change in the average growth rate
particularly for the Australia and other CGU is underpinned by the underperformance of this CGU in 2019.
(3) The 2018 average annual revenue growth rate for 5 years (2019 to 2023) presented above is calculated based on historical experience,
actual operating results and estimated financial results based on planned strategic initiatives.
The allocation of goodwill, indefinite useful life intangible assets and other assets to the Groups of CGUs are as follows:
CGUs
Development
Australia and other
North America
Latin America
68 AINSWORTH GAME TECHNOLOGY
2019
Indefinite life
intangible
assets
‘$000
Capitalised
Development
costs
‘$000
Other
assets
‘$000
Recoverable
amount
‘$000
–
–
1,583
–
26,055
–
–
–
20,200
4,810
73,604
44,132
76,367
5,244
128,215
72,296
Goodwill
‘$000
–
–
21,719
–
Notes to the Financial Statements (continued)for the year ended 30 June 2019 CGUs
Development
Australia and other
North America
Latin America
2018
Indefinite life
intangible
assets
‘$000
Capitalised
Development
costs
‘$000
–
–
1,583
–
28,451
–
–
–
Goodwill
‘$000
–
2,436
20,608
–
Other
assets
‘$000
Recoverable
amount
‘$000
581
7,981
99,382
25,067
139,208
23,993
152,133
32,198
Impairment testing for goodwill and indefinite life intangibles
Goodwill arising from the Class II gaming business acquired in 2016 and Nevada license indefinite life intangibles were allocated
to the North America CGU. The recoverable amount of this CGU was estimated based on its value in use, determined by
discounting future cash flows to be generated from the continuing use of the CGU.
The key assumptions used in estimation of value in use were as follows:
– The discount rate of 13.5% (2018: 13.5%) used is a pre-tax rate;
– Five years of cash flows were included in the discounted cash flow model. A long-term growth rate into perpetuity of
1.8% (2018: 2.5%) has been determined based on growth prospects of this CGU industry and the overall economy; and
– The projected average revenue growth rate over the five years is 3.4% (2018: 3.1%) is based on past experience, adjusted for
anticipated revenue growth in the Class II markets in which this CGU operates.
As the recoverable amount of the CGU was estimated to be higher than the carrying amount of the CGU’s assets, no impairment
was considered necessary.
Goodwill arising from service business in Australia was allocated to the Australia and other CGU. The recoverable amount
of this CGU was estimated based on its value in use, determined by discounting future cash flows to be generated from the
continuing use of the CGU.
The key assumptions used in estimation of value in use were as follows:
– The discount rate of 16.6% (2018: 15.2%) used is a pre-tax rate;
– Five years of cash flows were included in the discounted cash flow model. A long-term growth rate into perpetuity of 2.0%
(2018: 2.0%) has been determined based on growth prospects of this CGU industry and the overall economy; and
– The projected average revenue growth rate over the five years is 15.8% (2018: 2.9%) based on past experience, adjusted for
anticipated revenue growth, product development changes which have occurred and planned strategic initiatives.
The deterioration of the Australia and other business performance has resulted in the recoverable amount of this CGU estimated
to be lower than the carrying amount of its CGU’s assets. As such, a write-down of the $2,436 thousand goodwill arising from
service business in Australia is considered necessary.
Impact of possible changes in key assumptions
When taking into account the historical and forecast performance of the Australia and other CGU, an impairment charge of
$2,436 thousand was recognised at 30 June 2019, with headroom of approximately $434 thousand at that date. However, given
this headroom, a change in a key assumption in the Australia and other CGU, in particular the forecast revenue growth rate,
may result in a deficiency in the net recoverable amount when compared to the carrying value of the CGU. In turn, this could
result in further impairment charges in the CGU in future periods. At this point, management is confident to meet the Australia
and other CGU forecast growth rates based on the current strategic initiatives and product portfolios. In respect CGUs’ other
than Australia and other CGU, management does not believe a reasonable possible change in key assumptions will result in a
material impairment charge.
ANNUAL REPORT 2019
69
Notes to the Financial Statements (continued)for the year ended 30 June 2019 14. EQUITY-ACCOUNTED INVESTEE
616 Digital LLC (“616”) is a joint venture in which the Group has 40% ownership interest.
616 is an online social platform provider established in Delaware, USA and operates from Romania and Australia. This
arrangement allows both parties to jointly progress development and marketing of social gaming offering on both desktop
and mobile, leveraging the extensive game content library established for land based markets. An agreement has also been
established where the Group has the ability to purchase the remaining 60% interest in 616 at a future date. The investment in
equity accounted investee for the Group comprise the following:
In thousands of AUD
616 Digital LLC
Ownership
30-Jun-19
Ownership
30-Jun-18
Carrying
amount
30-Jun-19
Carrying
amount
30-Jun-18
40%
40%
–
2,001
The Group’s share of loss of equity accounted investee is $54 thousand (2018: $224 thousand profit).
616’s earnings growth profile continued to be affected by the ongoing maturation of the North American and Australian social
gaming market and an increase in player acquisition and retention costs. These market changes have been to the disadvantage
of smaller operators like 616 in favour of larger scale competitors, and are reflected in lower than previously anticipated year
on year revenue and EBITDA growth. Despite progressive initiatives to consolidate the position and acquire 100% of 616 within
FY20 no certainty exists as to the future profitability of this investment and a write down in the remaining carrying value of AGT’s
40% interest in 616 by $1,878 thousand (2018: $2,451 thousand) was considered necessary in the current period. The write down
is reflected within ‘Other expenses’ and ‘Other expenses not allocated to segments’ in the Consolidated Statement of Profit or
Loss and Other Comprehensive Income and Note 6 respectively.
Summary financial information for the equity accounted investee, not adjusted for the percentage ownership held by the Group,
is as follows:
In thousands of AUD
Cash and cash equivalents
Current assets (excluding cash and cash equivalents)
Non-current assets
Current financial liabilities (excluding trade and other payables and provisions)
Current financial liabilities (including trade and other payables and provisions)
Net Assets
Income
Expenses
Elimination of upstream purchases
Loss
2019
206
9
3
(11)
(112)
95
1,923
(2,393)
334
(136)
2018
705
264
7
(11)
(137)
828
2,069
(2,790)
161
(560)
The movement of the Group’s investment in 616 during the year, adjusted for the percentage ownership held by the Group was
as follows:
Carrying amount at beginning of period
Share of loss
Write down of carrying amount
Effects of movements in foreign exchange
Carrying amount at end of period
2,001
(54)
(1,878)
(69)
–
4,683
(224)
(2,451)
(7)
2,001
70 AINSWORTH GAME TECHNOLOGY
Notes to the Financial Statements (continued)for the year ended 30 June 2019 15. TAXES
Current tax expense
In thousands of AUD
Tax recognised in profit or loss
Current tax expense
Current year
Prior year adjustments
Recognition of R&D tax credits
Deferred tax benefit
Timing differences movement
Reduction in tax rate
Total income tax expense
Reconciliation of effective tax rate
In thousands of AUD
Profit before income tax
Income tax expense using the Company’s domestic tax rate
Effective tax rates in foreign jurisdictions
Non-deductible expenses
Non-assessable income and concessions
Prior year adjustments
Derecognition of tax losses and timing differences
Impact of change in tax rates
Recognised deferred tax assets/liabilities
In thousands of AUD
Employee benefits
Provisions
Property, plant and equipment
Unrealised foreign exchange gain
Other items
Tax loss carry-forwards
Net tax assets/(liabilities)
2019
2018
(11,806)
(179)
7,216
(4,769)
982
–
982
(19,141)
1,849
7,417
(9,875)
(1,480)
984
(496)
(3,787)
(10,371)
2019
(30.0%)
4.19%
(43.66%)
53.71%
(1.22%)
(8.81%)
–
2019
14,682
2018
2018
42,307
(4,405)
(30.00%)
(12,692)
615
(6,409)
7,885
(179)
(1,294)
–
(2.27%)
(15.77%)
17.53%
4.37%
(0.69%)
2.33%
(962)
(6,673)
7,417
1,849
(294)
984
(25.79%)
(3,787)
(24.50%)
(10,371)
2019
2018
2019
2018
Deferred tax assets
Deferred tax liabilities
2,284
677
120
(1,510)
807
408
2,786
2,371
529
82
(1,191)
1,607
1,603
5,001
377
3,446
(6,021)
–
609
4
328
2,210
(4,756)
–
(600)
–
(1,585)
(2,818)
ANNUAL REPORT 2019
71
Notes to the Financial Statements (continued)for the year ended 30 June 2019 15. TAXES (continued)
The deductible temporary differences and tax losses do not expire under current tax legislation. R&D non-refundable tax offset
credits are available to be applied against income tax payable in future years and do not expire under current tax legislation.
Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and
they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they
intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realised simultaneously.
Management has assessed that the carrying amount of the deferred tax assets of $2,786 thousand should be recognised as
management considers it probable that future taxable profits would be available against which they can be utilised.
16.
INVENTORIES
In thousands of AUD
Raw materials and consumables
Finished goods
Stock in transit
Inventories stated at the lower of cost and net realisable value
2019
2018
31,613
33,550
1,688
66,851
37,333
38,254
3,717
79,304
During the year ended 30 June 2019 raw materials, consumables and changes in finished goods and work in progress
recognised as cost of sales amounted to $77,673 thousand (2018: $98,598 thousand).
A re-classification from inventory to property, plant and equipment of $36,206 thousand (2018: $34,201 thousand) was recorded
to reflect gaming products for which rental and participation agreements were entered into during the year.
During the year ended 30 June 2019, the write down of inventories to net realisable value amounted to $2,726 thousand
(2018: $2,365 thousand). The write down is included in cost of sales.
72 AINSWORTH GAME TECHNOLOGY
Notes to the Financial Statements (continued)for the year ended 30 June 2019 17. RECEIVABLES AND OTHER ASSETS
In thousands of AUD
Current
Trade receivables
Less impairment losses
Other assets
Amount receivable from director/shareholder-controlled entities
Non-current
Trade receivables
Note
2019
2018
26
29
122,998
152,266
(5,002)
117,996
593
1,375
(3,931)
148,335
1
5,128
119,964
153,464
28,648
28,648
39,259
39,259
Information about the Group’s exposure to credit and market risks and impairment losses for trade and other receivables is
included in Note 26.
Leasing arrangements
Included in trade receivables are receivables from gaming machines that have been sold under finance lease arrangement.
The lease payments receivable under these contracts is as follows:
In thousands of AUD
2019
2018
Minimum lease payments under finance leases are receivable as follows:
Within one year
Later than one year but not later than 5 years
Unearned finance income
Within one year
Later than one year but not later than 5 years
The present value of minimum lease payments is as follows:
Within one year
Later than one year but not later than 5 years
Lease receivables are classified as follows:
Within one year
Later than one year but not later than 5 years
5,614
3,703
9,317
366
197
563
5,248
3,506
8,754
5,248
3,506
8,754
3,840
6,365
10,205
381
226
607
3,459
6,139
9,598
3,459
6,139
9,598
ANNUAL REPORT 2019
73
Notes to the Financial Statements (continued)for the year ended 30 June 2019 18. CASH AND CASH EQUIVALENTS
In thousands of AUD
Bank balances
Cash deposits
Cash and cash equivalents in the statement of cash flows
2019
2018
59,695
1,966
61,661
33,352
2,315
35,667
The Group’s exposure to interest rate risk and a sensitivity analysis for financial assets and liabilities are disclosed in Note 26.
18A. RECONCILIATION OF CASH FLOWS FROM OPERATING ACTIVITIES
In thousands of AUD
Cash flows from operating activities
Profit for the period
Adjustments for:
Depreciation
Impairment losses on trade receivables and provision for obsolescence
Write down on Equity-accounted investee
Write down of goodwill
Amortisation of intangible assets
Net finance income
Loss/(gain) on sale of property, plant and equipment
Unrealised currency translation movements
Equity-settled share-based payment transactions
Income tax expense
Operating profit before changes in working capital and provisions
Change in trade and other receivables
Change in inventories
Net transfers between inventory and leased assets
Change in other assets
Change in trade and other payables
Change in provisions and employee benefits
Interest received
Income taxes paid
Net cash from operating activities
Note
2019
2018
10,895
31,936
12
14
13
13
11
10
15
25,069
3,601
1,878
2,436
8,350
(9,317)
224
6,062
(12)
3,787
52,973
46,608
15,745
(25,942)
(405)
(21,732)
(5,069)
62,178
5,503
(6,473)
61,208
19,974
5,079
2,451
–
8,053
(5,433)
(2,554)
3,745
(1,218)
10,371
72,404
(19,047)
(2,287)
(22,154)
(545)
3,498
(1,566)
30,303
–
(11,045)
19,258
Interest received relating to receivables in the current period was reclassified from investing activities to operating activities.
74 AINSWORTH GAME TECHNOLOGY
Notes to the Financial Statements (continued)for the year ended 30 June 2019 19. CAPITAL AND RESERVES
(a) Share capital
In thousands of shares
In issue at 1 July
Shares issued under dividend reinvestment plan
In issue at 30 June – fully paid
Ordinary shares
2019
2018
332,513
331,086
4,281
1,427
336,794
332,513
(i) Ordinary shares
The Company does not have authorised capital or par value in respect of its issued shares. All issued shares are fully paid. All
shares rank equally with regard to the Company’s residual assets.
The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote
per share at meetings of the Company.
Issue of ordinary shares
During the year, 4,281 thousand ordinary shares were issued as a result of shareholders participation in the dividend
reinvestment plan.
(b) Nature and purpose of reserve
(i)
Equity compensation reserve
The equity compensation reserve represents the expensed cost of share options issued to employees.
Fair value reserve
(ii)
The fair value reserve comprises the cumulative net change in fair value of related party loans and borrowings where interest
is charged at below market rates.
(iii) Translation reserve
The translation reserve comprises all foreign exchange differences arising from the translation of the financial statements of
foreign operations where their functional currency is different to the presentation currency of the reporting entity.
(iv) Profits reserve
This reserve is comprised wholly of the profits generated by the Australian entity which would be eligible for distribution as a
frankable dividend.
(c) Dividends
The following dividends were paid by the Company during the year:
In thousands of AUD
2.5 cents per qualifying ordinary share (2018: 1.5 cents)
2019
8,313
2018
4,966
After the reporting date, no dividends were proposed by the board of directors (2018: $8,313 thousand). The dividends have
not been recognised as liabilities and there are no tax consequences.
In thousands of AUD
0.0 cents per qualifying ordinary share (2018: 2.5 cents)
2019
–
2018
8,313
The amount of franking credits available to shareholders for subsequent financial years is $30,185 thousand (2018:
$28,931 thousand). The ability to utilise the franking credits is dependent upon the ability to declare dividends.
ANNUAL REPORT 2019
75
Notes to the Financial Statements (continued)for the year ended 30 June 2019 20. EARNINGS PER SHARE
Basic earnings per share
The calculation of basic earnings per share at 30 June 2019 was based on the profit attributable to ordinary shareholders of
$10,895 thousand (2018: $31,936 thousand) and a weighted average number of ordinary shares outstanding during the financial
year ended 30 June 2019 of 335,000 thousand (2018: 331,293 thousand), calculated as follows:
Profit attributable to ordinary shareholders
In thousands of AUD
Profit for the period
Profit attributable to ordinary shareholders
Weighted average number of ordinary shares
In thousands of shares
Issued ordinary shares at 1 July
Effect of shares issued
Weighted average number of ordinary shares at 30 June
Total basic earnings per share attributable to the ordinary equity holders of the
Company
Note
2019
10,895
10,895
2018
31,936
31,936
19
332,513
331,086
2,487
207
335,000
331,293
$0.03
$0.10
Diluted earnings per share
The calculation of diluted earnings per share at 30 June 2019 was based on the profit attributable to ordinary shareholders of
$10,883 thousand (2018: $30,718 thousand) and a weighted average number of ordinary shares outstanding after adjustment
for the effects of all dilutive potential ordinary shares of 338,224 thousand (2018: 336,114 thousand), calculated as follows:
Profit attributable to ordinary shareholders (diluted)
In thousands of AUD
Profit attributable to ordinary shareholders
Amortisation of performance rights (RST)
Profit attributable to ordinary shareholders (diluted)
Weighted average number of ordinary shares (diluted)
In thousands of shares
Weighted average number of ordinary shares at 30 June
Effect of rights and options on issue
Weighted average number of ordinary shares (diluted) at 30 June
Total diluted earnings per share attributable to the ordinary equity holders of the
Company
2019
2018
10,895
(12)
10,883
31,936
(1,218)
30,718
335,000
331,293
3,224
338,224
4,821
336,114
$0.03
$0.09
76 AINSWORTH GAME TECHNOLOGY
Notes to the Financial Statements (continued)for the year ended 30 June 2019 21. LOANS AND BORROWINGS
This note provides information about the contractual terms of the Group’s interest-bearing loans and borrowings, which are
measured at amortised cost. For more information about the Group’s exposure to interest rate, foreign currency and liquidity
risk, see Note 26.
In thousands of AUD
Current
Finance lease liabilities
Secured bank loan
Non-current
Secured bank loan
2019
2018
295
12,366
12,661
42,778
42,778
239
–
239
71,721
71,721
Terms and debt repayment schedule
Terms and conditions of outstanding loans were as follows:
In thousands of AUD
Currency
Nominal
interest rate
Year of
maturity
Finance lease liabilities
AUD
1.73%
Secured bank loan
USD LIBOR+0.85%
2019
2021
Total interest-bearing
liabilities
2019
2018
Face
value
299
55,144
Carrying
amount
295
55,144
Face
value
243
71,721
Carrying
amount
239
71,721
55,443
55,439
71,964
71,960
The bank loan is secured by fixed and floating charges over identified assets of the Company and certain Australian and
US wholly owned subsidiaries, and imposes certain customary financial covenants measured on a six-monthly basis. The Group
has met all its financial covenants during the year.
Finance lease liabilities
Finance lease liabilities of the Group are payable as follows:
In thousands of AUD
Less than one year
Between one and five years
Future
minimum
lease
payments
2019
299
–
299
Present value
of minimum
lease
payments
Future
minimum
lease
payments
2019
295
–
295
2018
243
–
243
Interest
2019
4
–
4
Present value
of minimum
lease
payments
2018
239
–
239
Interest
2018
4
–
4
ANNUAL REPORT 2019
77
Notes to the Financial Statements (continued)for the year ended 30 June 2019 22. EMPLOYEE BENEFITS
In thousands of AUD
Current
Accrual for salaries and wages
Accrual for short term incentive plan
Liability for annual leave
Liability for long service leave
Non-current
Liability for long service leave
2019
2018
1,245
921
4,188
3,236
9,590
525
525
505
1,574
4,165
3,269
9,513
589
589
23. SHARE-BASED PAYMENTS
Performance rights programmes (equity-settled)
On 17 March 2015 and 1 March 2017, employee incentive plans were established whereby performance rights were granted to all
eligible Group employees under the Rights Share Trust (RST). Under the RST eligible employees were allocated performance
rights over ordinary shares in the Company at nil consideration or exercise price however are dependent on service conditions,
vesting conditions and performance hurdles.
The key terms and conditions related to the grants under these programmes are as follows; all rights are to be settled by the
physical delivery of shares.
Grant date/employee entitled
Rights grant to key management at 17 March 2015
Rights grant to senior and other employees at
17 March 2015
Number of
instruments
outstanding
–
–
Rights grant to key management at 1 March 2017
293,412
Rights grant to senior and other employees at
1 March 2017
Total rights RST
2,930,737
3,224,149
Vesting conditions
Contractual life of
options
Four years service and
performance hurdles from grant
date as per RST below
Four years service and
performance hurdles from grant
date as per RST below
Four years service and
performance hurdles from grant
date as per RST below
Four years service and
performance hurdles from grant
date as per RST below
5 years
5 years
5 years
5 years
To be eligible to participate in the RST the employee was selected by the directors and reviewed by the remuneration and
nomination committee. The RST provide for employees to receive shares for no consideration. Each right is convertible to one
ordinary share. Right holders have no voting or dividend rights. On conversion from right to ordinary shares, the issued shares
will have full voting and dividend rights. The ability to exercise the right is conditional on the continuing employment of the
participating employee.
For amounts recorded in profit and loss during the year for share-based payment transactions, see Note 10.
78 AINSWORTH GAME TECHNOLOGY
Notes to the Financial Statements (continued)for the year ended 30 June 2019 The estimate of the fair value of the services received is measured based on the Black Scholes Merton model. The fair value
of services received in return for share options and rights granted are measured by reference to the fair value of share options
and rights granted. The contractual life of the option and right is used as an input into this model. Expectations of early exercise
are incorporated into these models. The expected volatility is based on the historic volatility (calculated based on the weighted
average remaining life of the share options or rights), adjusted for any expected changes to future volatility due to publicly
available information.
Further details of the share performance rights issued under the RST are detailed below.
17 March 2015 Performance rights
(i)
The total rights granted to all eligible employees on 17 March 2015 was 2,555,853. During the year, the remaining 50% of these
performance rights lapsed on 17 March 2019 due to performance hurdles not being met. 942,040 rights were cancelled during
the year with no rights outstanding as at 30 June 2019.
The vesting conditions of the performance rights issued on 17 March 2015 under the RST are as follows:
Date
17 March 2018
17 March 2019
Vesting condition
(% of Rights vesting)
50%
50%
In addition to the vesting conditions on rights granted under the RST, specific performance hurdles relative to Total Shareholder
Return (TSR) relative targets and Earnings per Share (EPS) targets are required to be met as follows:
Vesting date of 17 March 2018:
– 30% vest subject to the TSR target below with a fair value at grant date of $1.9974;
– 70% vest subject to the EPS target below with a fair value at grant date of $2.3164; and
The remaining 50% of the rights vest on 17 March 2019, of which:
– 30% vest subject to the TSR target below with a fair value at grant date of $1.9290; and
– 70% vest subject to the EPS target below with a fair value at grant date of $2.2289.
The inputs used in the measurement of the above fair values at grant date of the equity settlement share based payment plan
under the RST are as follows:
Share price at grant date
Exercise price
Expected volatility
Expected life
Expected dividends
Risk-free interest rate (based on Treasury Bonds)
Total Shareholder Return (TSR) Relative Targets
TSR rank
Less than 50% percentile
50th percentile
Proportion of TSR rights that vest
0%
50%
RST plan
$2.60
–
24.1%
5 years
3.9%
2.5%
Between 50th and 75th percentile
Pro-rata (sliding scale) percentage
At or above 75th percentile
100%
The Comparison Group of Companies for the TSR hurdle are companies in the ASX 300 Index that have the same Consumer
Services GICS industry sector as Ainsworth.
ANNUAL REPORT 2019
79
Notes to the Financial Statements (continued)for the year ended 30 June 2019 23. SHARE-BASED PAYMENTS (continued)
EPS Targets
EPS achievement
Less than 8.0% p.a.
8.0% p.a.
10% p.a.
12.5% p.a.
Proportion of EPS rights that vest
0%
25% plus 1.25% for each 0.1% increase in EPS
50% plus 2.0% for each 0.1% increase in EPS
100%
1 March 2017 Performance rights
(ii)
The total rights granted to all eligible employees on 1 March 2017 was 4,408,803. During the year, Tranche 2 of these rights did
not vest at the second vesting date of 1 March 2019 due to performance conditions not being met. The grant of this Tranche
along with Tranche 1 under the RST will be re-tested at the end of the next applicable performance vesting date of 1 March 2020,
subject to the higher performance conditions. If the performance conditions at the end of the next applicable performance
period are satisfied, then the performance rights for the current performance period and any non-vested performance rights
from prior performance periods will vest. 654,823 rights were cancelled due to termination of employees during the year with
3,224,149 rights outstanding as at 30 June 2019.
The vesting conditions of the performance rights issued on 1 March 2017 under the RST are as follows:
Achievement of the performance hurdle is determined by a 15% compound increase on the share price of $1.86, being the
Volume Weighted Average Price (VWAP) for 90 days ending 28/02/2017.
– Tranche 1 – 20% will vest if the VWAP for 20 days preceding 01/03/2018 is equal to or greater than $2.14.
– Tranche 2 – 20% will vest if the VWAP for 20 days preceding 01/03/2019 is equal to or greater than $2.46.
– Tranche 3 – 20% will vest if the VWAP for 20 days preceding 01/03/2020 is equal to or greater than $2.83.
– Tranche 4 – 40% will vest if the VWAP for 20 days preceding 01/03/2021 is equal to or greater than $3.25.
The fair value of the performance rights granted on 1 March 2017 under the RST are as follows:
Fair value at grant date
– Vesting date 1 March 2018
– Vesting date 1 March 2019
– Vesting date 1 March 2020
– Vesting date 1 March 2021
Fair Value per
option
$0.56
$0.49
$0.42
$0.37
The inputs used in the measurement of the above fair values at grant date of the equity settlement share based payment plan
under the RST were as follows:
Share price at grant date
Exercise price
Expected volatility
Expected life
Expected dividends
Risk-free interest rate (based on Treasury Bonds)
80 AINSWORTH GAME TECHNOLOGY
RST plan
$1.77
–
36.90%
5 years
5.65%
2.31%
Notes to the Financial Statements (continued)for the year ended 30 June 2019 24. TRADE AND OTHER PAYABLES
In thousands of AUD
Current
Trade payables
Other payables and accrued expenses
Amount payable to director/shareholder-controlled entities
29
Note
2019
2018
5,418
15,527
–
18,423
18,964
113
20,945
37,500
The Group’s exposure to currency and liquidity risk related to trade and other payables is disclosed in Note 26.
25. PROVISIONS
In thousands of AUD
Balance at 1 July 2018
Provisions made during the year
Provisions used during the year
Balance at 30 June 2019
Service/
warranties
959
925
(959)
925
Legal
141
90
(141)
90
Total
1,100
1,015
(1,100)
1,015
Contingencies relating to the claims by Aristocrat Technologies Australia Pty Limited has been disclosed under
Note 31 – Subsequent events. The directors are of the opinion that provision is not required in respect of this matter, as it is not
capable of reliable measurement.
26. FINANCIAL INSTRUMENTS
Credit risk
Exposure to credit risk
Trade and other receivables
The carrying amount of the Group’s financial assets represents the maximum credit exposure. The Group’s maximum exposure
to credit risk at the reporting date was:
In thousands of AUD
Receivables
Note
17
Carrying amount
2019
2018
148,019
148,019
192,722
192,722
The Group’s gross maximum exposure to credit risk for trade receivables at the reporting date by geographic region was:
In thousands of AUD
Australia
Americas
Europe
New Zealand
Asia
South Africa
2019
14,658
133,911
1,488
694
2,172
98
2018
23,825
163,247
5,174
1,101
3,070
236
153,021
196,653
ANNUAL REPORT 2019
81
Notes to the Financial Statements (continued)for the year ended 30 June 2019 26. FINANCIAL INSTRUMENTS (continued)
The Group’s concentration of credit risk arises from its two most significant receivable amounts is represented by customers
in North America. They account for $10,147 thousand (2018: $11,384 thousand) and $5,489 thousand (2018: $2,165 thousand) of
the trade receivables carrying amount at 30 June 2019 respectively.
Cash and cash equivalents
The Group held cash of $59,695 thousand at 30 June 2019 (2018: $33,352 thousand) and $1,966 thousand of cash deposits
at 30 June 2019 (2018: $2,315 thousand), which represents its maximum credit exposure on these assets. The cash and cash
deposits are held with bank and financial institution counterparts, which are rated AA- to A-, based on rating agency Standard
& Poor ratings.
Impairment losses
Comparative information under AASB 139
An analysis of the credit quality of trade receivables based on the aging group at 30 June 2018 is as follows:
In thousands of AUD
Not past due
Past due 0-30 days
Past due 31-120 days
Past due 121 days to one year
More than one year
Gross
2018
Impairment
2018
128,398
29,879
22,379
8,996
7,001
196,653
9
–
–
570
3,352
3,931
2018
3,017
(1,896)
2,714
(25)
121
3,931
The exposure to credit risk for trade receivables as at 30 June 2019 by geographic region is disclosed under Note 3(r).
The movement in the allowance for impairment in respect of trade receivables during the year was as follows:
In thousands of AUD
Balance at 1 July
Impairment loss written off
Provision during the year
Reversal of provision
Effect of exchange rate fluctuations
Balance at 30 June 2019
2019
3,931
(309)
2,128
(958)
210
5,002
The provision of $2,128 thousand (2018: $2,714 thousand) was recognised in other expenses in the income statement.
Based on historic default rates and current repayment plans in place, the Group believes that apart from the above, no impairment
is necessary in respect of trade receivables not past due or on amounts past due as these relate to known circumstances that
are not considered to impact collectability.
The allowance for impairment losses in respect of receivables is used to record impairment losses unless the Group is satisfied
that no recovery of the amount owing is possible; at that point the amounts are considered irrecoverable and are written off
against the financial asset directly.
82 AINSWORTH GAME TECHNOLOGY
Notes to the Financial Statements (continued)for the year ended 30 June 2019 Liquidity risk
The following are the contractual maturities of financial liabilities, including estimated interest payments and excluding the
impact of netting agreements:
30 June 2019
In thousands of AUD
Non-derivative financial liabilities
Finance lease liabilities
Secured bank loan
Trade and other payables
Carrying
amount
Contractual
cash flows
6 mths or
less
6-12 mths
1-2 years
2-5 years
295
55,144
20,945
76,384
(299)
(299)
(55,144)
(12,366)
(20,945)
(76,388)
(20,945)
(33,610)
–
–
–
–
–
–
–
–
–
(42,778)
–
(42,778)
It is not expected that the cash flows included in the maturity analysis could occur significantly earlier or at significantly different
amounts.
30 June 2018
In thousands of AUD
Non-derivative financial liabilities
Finance lease liabilities
Secured bank loan
Trade and other payables
Carrying
amount
Contractual
cash flows
6 mths or
less
6-12 mths
1-2 years
2-5 years
239
71,721
(243)
(71,721)
37,500
(37,500)
109,460
(109,464)
(238)
–
(37,500)
(37,738)
(5)
–
–
(5)
–
–
–
–
–
(71,721)
–
(71,721)
Currency risk
The Group is exposed to foreign currency risk on sales and purchases that are denominated in a currency other than the AUD.
The Group monitors and assesses under its Treasury Risk policy and facilities available whether hedging of all trade receivables
and trade payables denominated in a foreign currency from time to time is considered appropriate.
Exposure to currency risk
The Group’s significant exposures to foreign currency risk at balance date were as follows, based on notional amounts:
In thousands of AUD
Trade and other receivables
Secured bank loan
Trade and other payables
2019
2018
USD
Euro
NZD
USD
Euro
NZD
134,903
1,394
682
167,551
4,829
1,087
(55,144)
(14,773)
–
–
–
–
(71,721)
(26,878)
–
–
–
–
Net exposure in statement of financial position
64,986
1,394
682
68,952
4,829
1,087
ANNUAL REPORT 2019
83
Notes to the Financial Statements (continued)for the year ended 30 June 2019 26. FINANCIAL INSTRUMENTS (continued)
The following significant exchange rates applied during the year:
USD
Euro
NZD
Average rate
Reporting date spot rate
2019
2018
0.7156
0.6270
1.0669
0.7753
0.6501
1.0854
2019
0.7013
0.6171
1.0462
2018
0.7391
0.6344
1.0903
Sensitivity analysis
In managing currency risks the Group aims to reduce the impact of short-term fluctuations on the Group earnings. Over the
longer-term, however, permanent changes in foreign exchange will have an impact on profit or (loss).
A 10 percent strengthening of the Australian dollar against the following currencies at 30 June 2019 would have increased/
(decreased) equity and profit or loss by the amounts shown below. This analysis assumes that all other variables remain
constant. This analysis is based on foreign currency exchange rate variances that the Group considered to be reasonably
possible at the end of the reporting period.
Effect In thousands of AUD
30 June 2019
USD
Euro
NZD
30 June 2018
USD
Euro
NZD
Equity Profit or (loss)
(26,673)
(13,197)
(127)
(62)
(127)
(62)
(25,049)
(12,955)
(439)
(99)
(439)
(99)
A 10 percent weakening of the Australian dollar against the following currencies at 30 June 19 would have increased/ (decreased)
equity and profit or loss by the amounts shown below. This analysis assumes that all other variables remain constant. This
analysis is based on foreign currency exchange rate variances that the Group considered to be reasonably possible at the end
of the reporting period.
Effect In thousands of AUD
30 June 2019
USD
Euro
NZD
30 June 2018
USD
Euro
NZD
84 AINSWORTH GAME TECHNOLOGY
Equity Profit or (loss)
36,341
16,129
155
76
155
76
34,454
15,834
536
121
536
121
Notes to the Financial Statements (continued)for the year ended 30 June 2019 Fair values
The fair values of financial assets and liabilities, together with the carrying amounts shown in the statement of financial position,
are as follows:
In thousands of AUD
Assets carried at amortised cost
Receivables and other assets
Cash and cash equivalents
In thousands of AUD
Liabilities carried at amortised cost
Trade and other payables
Secured bank loan
Finance leases
Note
17
18
Note
24
21
21
Carrying
amount
2019
Fair value
2019
Carrying
amount
2018
Fair value
2018
148,612
61,661
148,612
61,661
192,723
35,667
192,723
35,667
210,273
210,273
228,390
228,390
Carrying
amount
2019
Fair value
2019
Carrying
amount
2018
Fair value
2018
20,945
55,144
295
76,384
20,945
55,144
295
37,500
71,721
239
37,500
71,721
239
76,384
109,460
109,460
Estimates of fair values
The methods used in determining the fair values of financial instruments are discussed in Note 4.
Interest rates used for determining fair value
The interest rates used to discount estimated cash flows, where applicable, are based on the government yield curve as of 30
June 2019 plus an adequate constant credit spread and are as follows:
Receivables
Secured bank loan
Leases
2019
2018
4.24% - 6.00%
6.00% - 7.20%
LIBOR+0.85%
LIBOR+0.65%
1.73% 0.90% - 2.90%
Interest rate risk
A reasonably possible change of 100 basis points in interest rates at the reporting date would have increased/ (decreased)
profit or loss. An increase in 100 basis points would lead to a decrease in profit by $254 thousand and a decrease in 100 basis
points would lead to an increase in profit by $254 thousand. This analysis assumes that all other variables, in particular foreign
currency exchange rates, remain constant.
ANNUAL REPORT 2019
85
Notes to the Financial Statements (continued)for the year ended 30 June 2019 27. OPERATING LEASES
Leases as lessee
Non-cancellable operating lease rentals are payable as follows:
In thousands of AUD
Less than one year
Between one and five years
More than five years
2019
2,472
8,525
–
2018
2,386
7,905
–
10,997
10,291
The Group leases a number of warehouse and office facilities under operating leases. The leases typically run for a period
of 1-10 years, with an option to renew the lease after that date. Lease payments are increased every year either by annual
increases of 2-4% per annum, or by market rent reviews at stipulated dates. None of the leases include contingent rentals.
During the year $2,331 thousand was recognised as an expense in profit or loss in respect of operating leases
(2018: $2,241 thousand).
The warehouse and office lease are combined leases of land and buildings. Since the land title does not pass, the rent paid to
the landlord for the building is increased to market rent at regular intervals, and the Group does not participate in the residual
value of the building, it was determined that substantially all the risks and rewards of the building are with the landlord. As such,
the Group determined that the leases are operating leases.
28. CAPITAL AND OTHER COMMITMENTS
In thousands of AUD
Plant and equipment
Contracted but not yet provided for and payable:
Within one year
Employee compensation commitments
Key management personnel
2019
2018
3,234
456
Commitments under non-cancellable employment contracts not provided for in the financial
statements and payable:
Within one year
1,214
2,081
86 AINSWORTH GAME TECHNOLOGY
Notes to the Financial Statements (continued)for the year ended 30 June 2019 29. RELATED PARTIES
The following were key management personnel of the Group at any time during the reporting period and unless otherwise
indicated were key management personnel for the entire period:
Executives
Current
Mr ML Ludski (Chief Financial Officer and Company Secretary,
Ainsworth Game Technology Limited)
Mr V Bruzzese (General Manager Technical Services,
Ainsworth Game Technology Limited)
Mr K Power (Chief Technology Officer, Ainsworth Game
Technology Limited)
Non-executive directors
Current
Mr GJ Campbell
Mr MB Yates
Mr CJ Henson
Ms HA Scheibenstock
Mr HK Neumann
Mr DE Gladstone
(appointed as Non-Executive Director on 1 July 2019)
Executive directors
Former
Mr DE Gladstone (Executive Director and
Chief Executive Officer, Ainsworth Game
Technology Limited), until 30 June 2019
Key management personnel compensation
The key management personnel compensation included in ‘employee benefit expenses’ (see Note 10) is as follows:
In AUD
Short-term employee benefits
Post-employment benefits
Share based payments
Other long term benefits
2019
2018
2,726,942
3,251,162
241,451
286,810
(230,152)
(304,187)
166,546
179,730
2,904,787
3,413,515
Individual directors and executives compensation disclosures
Information regarding individual directors and executive’s compensation and some equity instruments disclosures as permitted
by Corporations Regulations 2M.3.03 and 2M.6.04 is provided in the Remuneration Report section of the Directors’ Report.
Apart from the details disclosed in this note, no director has entered into a material contract with the Group since the end of the
previous financial year and there were no material contracts involving directors’ interests existing at year-end.
ANNUAL REPORT 2019
87
Notes to the Financial Statements (continued)for the year ended 30 June 2019 29. RELATED PARTIES (continued)
Other key management personnel transactions
A number of key management persons, or their related parties, hold positions in other entities that result in them having control
or significant influence over the financial or operating policies of those entities.
A number of those entities transacted with the Group during the year. Other than as described below the terms and conditions
of the transactions with key management persons and their related parties were no more favourable than those available, or
which might reasonably be expected to be available, on similar transactions to non-director related entities on an arm’s length
basis.
The aggregate value of transactions and outstanding balances relating to key management personnel and their related parties
were as follows:
Transactions value year ended
30 June
Balance receivable/
(payable) as at
30 June
In AUD
Note
2019
2018
2019
2018
Key management
person
Transaction
Mr LH Ainsworth Operating lease rental costs
Mr HK Neumann
Sales revenue
Mr HK Neumann
Purchases from Novomatic
Mr HK Neumann Other charges made on behalf of
Novomatic
Mr HK Neumann
Purchases and other charges made
on behalf of the Company
(i)
(ii)
(ii)
(ii)
(ii)
–
774,557
–
–
2,450,269
7,294,551
1,327,918
5,127,919
589,793
–
–
1,488,008
772,708
47,021
–
–
1,504,359
951,505
–
(112,996)
(i) Mr LH Ainsworth was a related party as he was the director of the company during financial year ending 30 June 2018. He ceased to be
a related party on 5th January 2018. Operating leases rental costs of the premises at Newington are from an entity controlled by Mr LH
Ainsworth on normal commercial terms and conditions
(ii) During the year, the Group transacted with Novomatic AG and its related entities of which Mr HK Neumann holds a directorship role in
Novomatic AG. The terms and conditions of these transactions were no more favourable than those available, or which might reasonably
be expected to be available, in similar transactions with non-key management personnel related companies on an arm’s length basis.
Amounts receivable from and payable to key management personnel and their related parties at reporting date arising from
these transactions were as follows:
In AUD
2019
2018
Assets and liabilities arising from the above transactions
Current receivables and other assets
Amount receivable from director/shareholder-controlled entities
1,374,939
5,127,919
Current trade and other payables
Amount payable to director/shareholder-controlled entities
–
112,996
Transaction with joint ventures in which entity is a joint venture
616 Digital LLC (“616”) is a joint venture in which the Group has 40% ownership interest. The portions of transactions with 616
that was not eliminated in applying equity accounting is $200 thousand (2018: $97 thousand).
Further information regarding the joint venture is provided in Note 14.
88 AINSWORTH GAME TECHNOLOGY
Notes to the Financial Statements (continued)for the year ended 30 June 2019
30. GROUP ENTITIES
Parent entity
Ainsworth Game Technology Limited
Subsidiaries
AGT Pty Ltd
AGT Pty Mexico S. de R.L. de C.V.
AGT Pty Peru S.R.L.
AGT Pty Argentina S.R.L.
AGT Pty Colombia SAS
AGT Alderney Limited
Ainsworth Game Technology Inc
Ainsworth Interactive Pty Ltd
AGT Gaming Services S. de R.L de C.V.
AGT Interactive S. de R.L de C.V.
AGT Service Pty Ltd
AGT Service (NSW) Pty Ltd
J & A Machines Pty Ltd
Bull Club Services Pty Ltd
Ownership Interest
Country of
incorporation
2019
2018
Australia
Australia
Mexico
Peru
Argentina
Colombia
Alderney
USA
Australia
Mexico
Mexico
Australia
Australia
Australia
Australia
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
31. SUBSEQUENT EVENTS
Mr Lawrence Levy commenced his role as CEO of the Group from 1 July 2019, consistent with the previous announcements
made on ASX on 5 April 2019 and 1 July 2019.
On 3 July 2019, Aristocrat Technologies Australia Pty Limited commenced proceedings against the Company in the Federal
Court of Australia claiming infringement of intellectual property rights and breach of the Australian Consumer Law. These
proceedings are at a preliminary stage and will be vigorously defended. No liability has been recognised in the financial report.
The Company considers any further disclosure is inappropriate as the matter is currently before the Court and could prejudice
the Company’s defence.
Other than the matters discussed above, there has not arisen in the interval between the end of the financial year and the
date of this report any item, transaction or event of a material and unusual nature likely, in the opinion of the directors of the
Company, to affect significantly the operations of the Group, the results of those operations, or the state of affairs of the Group,
in future financial years.
ANNUAL REPORT 2019
89
Notes to the Financial Statements (continued)for the year ended 30 June 2019
32. AUDITOR’S REMUNERATION
In AUD
Audit and review services
Auditors of the Company - KPMG
Audit and review of financial statements
Other regulatory audit services
Other services
Auditors of the Company - KPMG
In relation to taxation services
2019
2018
262,000
282,000
22,500
22,500
284,500
304,500
116,215
20,000
33. PARENT ENTITY DISCLOSURES
As at and throughout the financial year ended 30 June 2019 the parent entity of the Group was Ainsworth Game Technology
Limited.
In thousands of AUD
Result of parent entity
Profit for the year
Total comprehensive income for the year
Financial position of parent entity at year end
Current assets
Total assets
Current liabilities
Total liabilities
Total equity of parent entity comprising of:
Share capital
Equity compensation and translation reserve
Fair value reserve
Profit reserves
Accumulated losses
Total equity
Parent entity capital commitments for acquisitions of property, plant and equipment
In thousands of AUD
Plant and equipment
Contracted but not yet provided for and payable:
Within one year
90 AINSWORTH GAME TECHNOLOGY
2019
2018
1,382
1,382
21,244
21,244
68,836
71,864
428,003
438,058
24,988
68,394
32,207
84,938
207,709
203,032
12,311
9,684
154,189
(24,284)
10,511
9,684
154,787
(24,894)
359,609
353,120
2019
2018
3,226
456
Notes to the Financial Statements (continued)for the year ended 30 June 2019
1.
In the opinion of the directors of Ainsworth Game Technology Limited (the ‘Company’):
(a) the consolidated financial statements and notes that are set out on pages 37 to 90 and the Remuneration report in
sections 15.1 to 15.8 in the Directors’ report, are in accordance with the Corporations Act 2001, including:
(i)
giving a true and fair view of the Group’s financial position as at 30 June 2019 and of its performance for the financial
year ended on that date; and
(ii) complying with Australian Accounting Standards and the Corporations Regulations 2001; and
(b) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due
and payable.
2.
3.
The directors have been given the declarations required by Section 295A of the Corporations Act 2001 from the chief
executive officer and chief financial officer for the financial year ended 30 June 2019.
The directors draw attention to Note 2(a) to the consolidated financial statements, which includes a statement of compliance
with International Financial Reporting Standards.
Signed in accordance with a resolution of the directors:
Dated at Sydney this 27th day of August 2019.
GJ Campbell
Chairman
ANNUAL REPORT 2019
91
Directors’ Declarationfor the year ended 30 June 2019
Independent
Auditor’s Report
Independent Auditor’s Report
Independent Auditor’s Report
To the shareholders of Ainsworth Game Technology Limited
Report on the audit of the Financial Report
To the shareholders of Ainsworth Game Technology Limited
Report on the audit of the Financial Report
Opinion
We have audited the Financial Report of
Ainsworth Game Technology Limited (the
Opinion
Company).
In our opinion, the accompanying Financial
We have audited the Financial Report of
Report of the Company is in accordance
Ainsworth Game Technology Limited (the
with the Corporations Act 2001, including:
Company).
•
giving a true and fair view of the
In our opinion, the accompanying Financial
Group’s financial position as at 30
Report of the Company is in accordance
June 2017 and of its financial
with the Corporations Act 2001, including:
performance for the year ended on
giving a true and fair view of the
that date; and
Groups financial position as at 30
June 2019 and of its financial
complying with Australian Accounting
performance for the year ended on
Standards and the Corporations
that date; and
Regulations 2001.
•
The Financial Report comprises:
• Consolidated statement of financial position as at 30
June 2017
The Financial Report comprises:
• Consolidated Statement of profit or loss and other
comprehensive income, Consolidated statement of
Consolidated statement of financial position as at 30
changes in equity, and Consolidated statement of
June 2019
cash flows for the year then ended
Consolidated statement of profit or loss and other
• Notes including a summary of significant accounting
comprehensive income, Consolidated statement of
policies
changes in equity, and Consolidated statement of
cash flows for the year then ended
• Directors’ Declaration.
Notes including a summary of significant accounting
policies
The Group consists of the Company and the entities it
controlled at the year-end or from time to time during
the financial year.
Directors Declaration.
complying with Australian Accounting
Standards and the Corporations
Regulations 2001.
The Group consists of the Company and the entities it
controlled at the year-end or from time to time during
the financial year.
Basis for opinion
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. We believe that the audit
evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
We conducted our audit in accordance with Australian Auditing Standards. We believe that the audit
evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Our responsibilities under those standards are further described in the Auditor’s responsibilities for
the audit of the Financial Report section of our report.
Our responsibilities under those standards are further described in the Auditors responsibilities for
the audit of the Financial Report section of our report.
We are independent of the Group in accordance with the Corporations Act 2001 and the ethical
requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics
We are independent of the Group in accordance with the Corporations Act 2001 and the ethical
for Professional Accountants (the Code) that are relevant to our audit of the Financial Report in
requirements of the Accounting Professional and Ethical Standards Boards APES 110 Code of Ethics
Australia. We have fulfilled our other ethical responsibilities in accordance with the Code.
for Professional Accountants (the Code) that are relevant to our audit of the Financial Report in
Australia. We have fulfilled our other ethical responsibilities in accordance with the Code.
KPMG, an Australian partnership and a member firm of the KPMG
network of independent member firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss entity.
Liability limited by a scheme approved under
Professional Standards Legislation.
KPMG, an Australian partnership and a member firm of the KPMG
network of independent member firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss entity.
Liability limited by a scheme approved under
Professional Standards Legislation.
101
88
92 AINSWORTH GAME TECHNOLOGY
for the year ended 30 June 2019
Independent
Auditor’s Report (continued)
Key Audit Matters
The Key Audit Matters we identified are:
Revenue recognition
Recoverability of trade receivables
Carrying value of goodwill and
intangible assets
Key Audit Matters are those matters that, in our
professional judgment, were of most significance in our
audit of the Financial Report of the current period.
These matters were addressed in the context of our
audit of the Financial Report as a whole, and in forming
our opinion thereon, and we do not provide a separate
opinion on these matters.
Revenue recognition
Refer to note 7 of the Financial Report ($234.3m AUD)
The key audit matter
How the matter was addressed in our audit
Revenue recognition was a key audit matter
due to the audit effort associated with multiple
revenue streams with different recognition
criteria across different geographic locations
along with the transition to AASB 15 Revenue
from contracts with customers.
Key revenue streams include;
outright machine and spare parts sales,
rendering of services,
revenue from fixed and participation rental
and
revenue from multi-element arrangements
which consist of several components within
the revenue stream.
Due to varying revenue recognition and
measurement principles of the revenues
generated by the Group, it necessitated greater
involvement by the audit team to evaluate
timing and measurement of revenue
recognised.
Our procedures included:
evaluating the appropriateness of the
Groups revenue recognition policies against
the requirements of AASB 15 Revenue
from contracts with customers and/or AASB
117 Leases;
testing key revenue recognition controls of
the Group, across different geographic
locations, such as the Groups process of
matching underlying documents to
determine the timing of revenue
recognition. In testing this control we
inspected underlying documents such as
invoices, delivery notes, customer
contracts, purchase orders and sales orders;
testing statistical samples of transactions in
key revenue streams, across different
geographic locations, to underlying records.
We inspected the terms and conditions of
the revenue contract for consistency to the
Groups policy for timing and measurement
of revenue recognition;
testing a sample of revenue transactions,
across different geographic locations, from
immediately before and immediately after
year end. We compared the year in which
the revenue was recognised by the Group
to terms of the underlying contract; and
assessing the methodology used to
calculate the Groups multi-element
arrangement revenue by checking samples
of multi-element revenue transactions
102
ANNUAL REPORT 2019
93
for the year ended 30 June 2019 Independent
Auditor’s Report (continued)
recorded by the Group against contract
terms and rates and then recalculating
these samples for accuracy.
Recoverability of trade receivables
Refer to note 17 of the Financial Report ($148.6m AUD)
The key audit matter
How the matter was addressed in our audit
Recoverability of trade receivables was a key
audit matter because payment terms, prevailing
industry practices and market conditions vary
significantly across the different customers and
the geographic locations in which the Group
operates.
These conditions give rise to heightened
exposure to credit risk across the Group, thus
requiring greater audit focus.
The prevailing practice by the Group in certain
locations in which the Group operates is to
provide payment terms which are extended
beyond traditional payment terms observed in
Australia. This required a heightened element of
judgement, and scrutiny to be applied by us
when assessing the recoverability of trade
receivables, such as:
assessment of amounts overdue compared
to contractual payment terms;
evidence from internal diligence performed
by the Group on the continued credit
worthiness of customers;
settlement history of previous sales with
the Group; and
evidence of ongoing dialogue and
correspondence with the Group.
Our audit procedures included:
testing a key control in relation to credit
limit approvals and review of customers
adherence to payment plans by senior
management within the Group;
testing the recoverability of selected
samples of overdue receivable balances
held by the Group across geographic
locations through:
-
-
enquiries with the Group on the
samples selected to understand the
rationale behind the Groups
recoverability assessment;
challenging the Groups recoverability
assessment with our understanding of:
- market practice;
-
-
-
-
ongoing correspondence between the
debtor and the Group;
the Groups internal diligence check on
the credit worthiness of the debtor;
customer payment history; and
customer contract to evidence
recoverability;
evaluating the appropriateness of the
expected credit loss model for the
geographical locations in which the Group
operates in accordance with AASB 9
Financial Instruments; and
for those locations with a heightened risk of
non-recoverability, the trade receivable
balance by customer at year end was
compared against established credit limits.
Our assessment of those locations at higher
risk of non-recoverability was based on the
historical pattern for long outstanding trade
receivables in those locations.
103
94 AINSWORTH GAME TECHNOLOGY
for the year ended 30 June 2019 Independent
Auditor’s Report (continued)
Carrying value of goodwill and intangible assets
Refer to note 13 of the Financial Report ($61.6m AUD)
The key audit matter
How the matter was addressed in our audit
Annual testing of goodwill and intangible assets
is a key audit matter, due to the significant
judgement applied by us when evaluating the
significant forward looking assumptions
including:
forecast cash flows and the growth rates
(including terminal growth rates) applied to
those forecasts in light of current market
conditions. Whilst the Group continues to
generate a profit before interest and tax,
the performance of the Group has
continued its declining trend in the current
year due to ongoing competition and the
underlying performance of games, primarily
in the Australian market. In addition, the
market capitalisation was less than net
assets at 30 June 2019. These conditions
increase the possibility of goodwill and
intangible assets being impaired, plus the
risk of inaccurate forecasts or a wider range
of outcomes for us to consider.
value in use model prepared is sensitive to
the assumptions adopted by the Group
including forecast growth rates and the
discount rates applied for different
jurisdictions and geographic locations
applicable to each identified Cash
Generating Unit (CGU). Such assumptions
have a significant impact on the calculated
recoverable amount of the assets within
the identified CGUs. This drives additional
audit effort to assess the assumptions
adopted by the Group.
discount rates are complex in nature and
vary according to the conditions and
environment in which the CGU operates.
The Group operates in various jurisdictions
and is therefore subject to different
discount rates for each CGU. This drives
additional audit effort in challenging the
assumptions used by the Group in
determining the discount rate for each
CGU.
The Group uses complex models to perform
104
Working with our valuation specialists, our
procedures included:
analysing the Groups share price and market
capitalisation including reading various
analysts reports to obtain an understanding of
the markets view of the value of the Group;
in relation to the key assumptions in the
Groups value in use model, we:
-
-
-
-
-
challenged the Groups forecast cash
flow and growth rates assumptions in
light of ongoing competition and
against historical results of the group;
applied increased scepticism to
assumptions in areas where previous
forecasts were not achieved;
compared key assumptions to the
Board approved plan and strategy;
compared forecast growth rates and
the terminal growth rates to published
studies of industry trends and
expectations across different
jurisdictions and geographic locations ,
and considered differences for the
Groups operations; and
applied our knowledge of the Group,
their past performance, business and
customers, and our industry
experience;
we considered the sensitivity of the models by
varying key assumptions, such as forecast
growth rates, terminal growth rates and
discount rates, within a reasonably possible
range;
we independently developed a discount rate
range, across different jurisdictions and
geographic locations applicable to each
identified CGU. We did this using publicly
available market data for comparable entities,
adjusted by risk factors specific to the Group
ANNUAL REPORT 2019
95
for the year ended 30 June 2019 Independent
Auditor’s Report (continued)
their annual impairment testing of goodwill and
intangible assets. Complex modelling,
particularly those containing highly judgemental
forward-looking assumptions tend to be prone
to greater risk of potential bias, error and
inconsistent application. Such conditions
necessitate additional scrutiny by us, in
particular to address the objectivity of sources
used to derive assumptions, and their
consistent application.
and the industry it operates in;
evaluating the appropriateness of the value in
use model used for goodwill and intangibles
impairment testing against the requirements
of the accounting standards;
we assessed the integrity of the value in use
models used, including the accuracy of the
underlying calculation formulas;
we assessed the appropriateness and
adequacy of the disclosures in the financial
report using our understanding of the issue
obtained from our testing and against the
requirements of the accounting standard; and
we assessed the Groups allocation of
corporate assets to CGUs for reasonableness
and consistency based on the requirements of
the accounting standards.
Other Information
Other Information is financial and non-financial information in Ainsworth Game Technology Limiteds
annual reporting which is provided in addition to the Financial Report and the Auditor's Report. The
Directors are responsible for the Other Information.
The Other Information we obtained prior to the date of this Auditors Report was the Directors
Report, and Remuneration Report. The 2019 At a Glance, Chairmans Report, Chief Executive
Officers Report, Shareholder Information and Corporate Directory are expected to be made available
to us after the date of the Auditor's Report.
Our opinion on the Financial Report does not cover the Other Information and, accordingly, we do not
and will not express an audit opinion or any form of assurance conclusion thereon, with the exception
of the Remuneration Report.
In connection with our audit of the Financial Report, our responsibility is to read the Other
Information. In doing so, we consider whether the Other Information is materially inconsistent with
the Financial Report or our knowledge obtained in the audit, or otherwise appears to be materially
misstated.
We are required to report if we conclude that there is a material misstatement of this Other
Information, and based on the work we have performed on the Other Information that we obtained
prior to the date of this Auditors Report we have nothing to report.
96 AINSWORTH GAME TECHNOLOGY
105
for the year ended 30 June 2019 Independent
Auditor’s Report (continued)
Responsibilities of the Directors for the Financial Report
The Directors are responsible for:
preparing the Financial Report that gives a true and fair view in accordance with Australian
Accounting Standards and the Corporations Act 2001
implementing necessary internal control to enable the preparation of a Financial Report that gives
a true and fair view and is free from material misstatement, whether due to fraud or error
assessing the Groups and Companys ability to continue as a going concern and whether the use
of the going concern assumption is appropriate. This includes disclosing, as applicable, matters
related to going concern and using the going concern basis of accounting unless they either
intend to liquidate the Group and Company or to cease operations, or have no realistic alternative
but to do so.
Auditors responsibilities for the audit of the Financial Report
Our objective is:
to obtain reasonable assurance about whether the Financial Report as a whole is free from
material misstatement, whether due to fraud or error; and
to issue an Auditors Report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in
accordance with Australian Auditing Standards will always detect a material misstatement when it
exists.
Misstatements can arise from fraud or error. They are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the economic decisions of users taken on
the basis of the Financial Report.
A further description of our responsibilities for the audit of the Financial Report is located at the
Auditing and Assurance Standards Board website at:
http://www.auasb.gov.au/auditors_responsibilities/ar1.pdf. This description forms part of our Auditors
Report.
106
ANNUAL REPORT 2019
97
for the year ended 30 June 2019 Independent
Auditor’s Report (continued)
Report on the Remuneration Report
Opinion
Directors responsibilities
In our opinion, the Remuneration Report
of Ainsworth Game Technology Limited
for the year ended 30 June 2019,
complies with Section 300A of the
Corporations Act 2001.
The Directors of the Company are responsible for the
preparation and presentation of the Remuneration
Report in accordance with Section 300A of the
Corporations Act 2001.
Our responsibilities
We have audited the Remuneration Report included in
on pages 25 to 36 of the Directors report for the year
ended 30 June 2019.
Our responsibility is to express an opinion on the
Remuneration Report, based on our audit conducted in
accordance with Australian Auditing Standards.
KPMG
Stephen May
Partner
Sydney
27 August 2019
98 AINSWORTH GAME TECHNOLOGY
107
for the year ended 30 June 2019 Independent Auditor’s Report
To the shareholders of Ainsworth Game Technology Limited
Lead Auditor’s Independence Declaration under
Lead Auditor’s Independence Declaration under
Section 307C of the Corporations Act 2001
Section 307C of the Corporations Act 2001
Report on the audit of the Financial Report
To the Directors of Ainsworth Game Technology Limited
To the Directors of Ainsworth Game Technology Limited
Opinion
I declare that, to the best of my knowledge and belief, in relation to the audit of Ainsworth Game
I declare that, to the best of my knowledge and belief, in relation to the audit of Ainsworth Game
Technology Limited for the financial year ended 30 June 2019 there have been:
Technology Limited for the financial year ended 30 June 2019 there have been:
We have audited the Financial Report of
Ainsworth Game Technology Limited (the
Company).
The Financial Report comprises:
• Consolidated statement of financial position as at 30
June 2017
i.
i.
In our opinion, the accompanying Financial
Report of the Company is in accordance
with the Corporations Act 2001, including:
no contraventions of the auditor independence requirements as set out in the
no contraventions of the auditor independence requirements as set out in the
Corporations Act 2001 in relation to the audit; and
Corporations Act 2001 in relation to the audit; and
no contraventions of any applicable code of professional conduct in relation to the
no contraventions of any applicable code of professional conduct in relation to the
audit.
audit.
• Consolidated Statement of profit or loss and other
comprehensive income, Consolidated statement of
changes in equity, and Consolidated statement of
cash flows for the year then ended
ii.
ii.
•
•
giving a true and fair view of the
Group’s financial position as at 30
June 2017 and of its financial
performance for the year ended on
that date; and
complying with Australian Accounting
Standards and the Corporations
Regulations 2001.
KPMG
KPMG
• Notes including a summary of significant accounting
policies
• Directors’ Declaration.
The Group consists of the Company and the entities it
controlled at the year-end or from time to time during
Stephen May
Stephen May
the financial year.
Partner
Partner
Sydney
Sydney
27 August 2019
27 August 2019
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. We believe that the audit
evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
KPM_INI_01
KPM_INI_01
PAR_SIG_01
PAR_SIG_01
Our responsibilities under those standards are further described in the Auditor’s responsibilities for
the audit of the Financial Report section of our report.
PAR_NAM_01
PAR_NAM_01
PAR_DAT_01
PAR_DAT_01
PAR_POS_01
PAR_POS_01
PAR_CIT_01
PAR_CIT_01
We are independent of the Group in accordance with the Corporations Act 2001 and the ethical
requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics
for Professional Accountants (the Code) that are relevant to our audit of the Financial Report in
Australia. We have fulfilled our other ethical responsibilities in accordance with the Code.
KPMG, an Australian partnership and a member firm of the KPMG
network of independent member firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss entity.
Liability limited by a scheme approved under
Professional Standards Legislation.
88
108
108
KPMG, an Australian partnership and a member firm of the KPMG
KPMG, an Australian partnership and a member firm of the KPMG
network of independent member firms affiliated with KPMG
network of independent member firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss entity.
International Cooperative (“KPMG International”), a Swiss entity.
Liability limited by a scheme approved under
Liability limited by a scheme approved under
Professional Standards Legislation.
Professional Standards Legislation.
ANNUAL REPORT 2019
99
Lead Auditor’s Independent Declarationfor the year ended 30 June 2019
Corporate Directory
Securities Exchange Listing
The Company is listed on the
Australian Securities Exchange.
The Home Exchange is Sydney.
CODE: AGI
Websites
www.agtslots.com.au (Australasia)
www.agtslots.com (The Americas)
Share Registry
Computershare Investor Services
Pty Ltd
Level 3, 60 Carrington Street,
Sydney NSW Australia 2001
Tel:
1300 850 505 (within Aust)
+61 3 9415 4000 (outside Aust)
Fax: +61 3 9473 2500
Auditor
KPMG
Level 38, Tower Three
International Towers Sydney
300 Barangaroo Avenue
Sydney NSW Australia 2000
Tel: +61 2 9335 7000
Fax: +61 2 9335 7001
Other Information
Ainsworth Game Technology Limited,
incorporated and domiciled in
Australia, is a publicly listed company
limited by shares.
ASIA
Macau
Mr Keith Jeffery
Asia Sales Manager
Tel: +61 419 161 554
Email: kjeffery@agtslots.com
Singapore
Mr Alfred Hwee
Key Account Sales Executive
Tel: +65 9176 0666
Email: awhee@agtslots.com
THE AMERICAS
Nevada
5800 Rafael Rivera Way,
Las Vegas, NV 89118
Tel: +1 (702) 954-3000
Fax: +1 (702) 954-3001
Email: enquiries@agtslots.com
Florida
1011 SW 30th Avenue,
Deerfield Beach, FL 33442
Tel: +1 (954) 944-3800
Fax: +1 (954) 317-5555
Email: enquiries@agtslots.com
EUROPE
Novomatic AG
Wiener Strasse 158
2352 Gumpoldskirchen
Austria
Tel: +43 2252 6060
Email: sales@novomatic.com
CORPORATE DIRECTORY
Independent Non-Executive
Directors
Mr GJ Campbell – Chairman
Mr MB Yates
Mr CJ Henson
Ms HA Scheibenstock
Non-Executive Director
Mr DE Gladstone
Mr HK Neumann
Chief Executive Officer
Mr SL Levy
Company Secretary
and Chief Financial Officer
Mr ML Ludski
OFFICES
AUSTRALIA
Corporate and Head Office
10 Holker Street,
Newington NSW Australia 2127
Tel: +61 2 9739 8000
Fax: +61 2 9648 4327
Email: enquiries@agtslots.com
Queensland
Unit 5/3990 Pacific Highway
Loganholme QLD Australia 4129
Tel: +61 7 3209 6210
Fax: +61 7 3209 6510
Email: gcoleman@agtslots.com
Victoria
Mr Wayne Flood
State Sales Manager
Tel: +61 0419 551 454
Email: wflood@agtslots.com
South Australia
Mrs Kelly Frackowski
Snr Sales Manager
Tel: +61 0409 171 616
Email: kfrackowski@agtslots.com
100 AINSWORTH GAME TECHNOLOGY
Corporate Directory
Ainsworth Game Technology
ABN: 37 068 516 665
10 Holker Street, Newington
New South Wales, Australia 2127
T: +61 2 9739 8000
F: +61 2 9648 4327
www.agtslots.com
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