Ainsworth deals second profit warning

POKER machine maker Ainsworth Game Technology has issued its second profit warning for the year, forecasting a full-year net loss of about $11 million following slow sales.

AGT has revised its 2004-05 outlook after ``lower than expected sales in Europe, South Africa and Australia''.

The founder and executive chairman, 81-year-old billionaire pokie king Len Ainsworth, said AGT faced an additional $5 million in one-off expenses from its discontinued merger with Russian poker machine manufacturer Unicum Group, restructuring in Europe and Britain, and other costs.

It had also spent $3.5 million on research and development, licence applications in new markets and staff hiring during the second half.

AGT stock plunged 13.2 per cent, closing 7c down at 46c.

In December 2004, AGT indicated it was expecting a 2004-05 first-half net loss of $1-$2 million, backpedalling from an earlier guidance of a small profit.

The company's return to the red comes one year after it reported its first ever net profit of $2.1 million in 2003-04. The AGT board is planning a restructuring and cost rationalisation to return the company to profitability.

Chief executive David Creary said the cost reduction program was expected to affect the bottom line in 2005-06.

``The restructuring program will ensure costs of production and overheads are reduced with a new focus given to product strategy and the need to deliver quality products into areas offering the greatest prospects for growth, including the Americas, Russia, Macau and Australia,'' he said.

Mr Creary said AGT had received new orders from Unicum, with delivery scheduled for the first quarter of 2005-06.

In response to its expected trading loss AGT plans a $12 million rights issue, fully underwritten by Mr Ainsworth. The proceeds from the issue will be used to reduce the company's debt.

The board said Mr Ainsworth would continue as executive chairman, with a succession plan to be developed following the restructure. AGT and Unicum called off merger talks in March following disagreements over commercial issues.