Ainsworth Flags $43.1M Goodwill Hit Amid North American Setback
Ainsworth Game Technology reveals a significant $43.1 million goodwill impairment tied to its North American operations, alongside other one-off losses, tempering its FY25 profit outlook.
- Non-cash goodwill impairment of $43.1 million from North American CGU underperformance
- Additional one-off losses of $22.7 million mainly from currency impacts and transaction costs
- Underlying EBITDA steady at approximately $48 million, but margin contracts to 16.5%
- Debt-to-equity ratio rises to 24% due to increased bank loan facility usage
- Underlying profit before tax slightly revised down to around $21 million
A Significant Write-Down in North America
Ainsworth Game Technology has disclosed a substantial non-cash goodwill impairment of $43.1 million related to its North American Cash Generating Unit (CGU). This impairment stems from the underperformance of the unit during the 2025 financial year, prompting a reassessment of growth prospects and asset valuations. The goodwill in question originated from prior acquisitions of Nova Technologies and MTD Gaming Inc., which now appear less valuable under current market conditions.
This development follows a detailed internal review and preliminary auditor consultations, signalling a cautious approach ahead of the final audited results. The impairment reflects a recalibrated outlook for the North American segment, which has struggled to meet earlier growth expectations.
Additional One-Off Costs and Currency Pressures
Beyond the goodwill write-down, Ainsworth anticipates other one-off losses totalling $22.7 million. These are primarily attributed to net foreign currency losses, transaction costs linked to a terminated scheme of arrangement and off-market takeover offers, as well as impairments related to its Online CGU. These factors collectively weigh on the company’s financial performance for the year.
Underlying Performance Holds Steady but Margins Squeeze
Despite these setbacks, Ainsworth expects its underlying EBITDA for FY25 to remain stable at around $48 million, mirroring the prior year. However, the EBITDA margin is forecast to contract from 18.3% to 16.5%, reflecting increased cost pressures and lower-than-anticipated sales that have resulted in higher inventory levels. This margin compression has also exerted pressure on operating cash flows.
The company’s leverage has increased, with the debt-to-equity ratio rising to 24% from 22% at the previous corresponding period. This is due to greater utilisation of its secured bank loan facility, although the company reassures that financial covenants tied to its US-based operating subsidiary remain intact.
Outlook and Market Implications
Ainsworth now expects an underlying profit before tax, excluding currency and one-off items, of approximately $21 million, slightly down from the $21.5 million previously forecast. The company emphasises that these figures remain subject to final audit and period-end closure processes, leaving some room for adjustment.
Investors will be watching closely how Ainsworth navigates these challenges, particularly the North American market’s recovery and the management of foreign exchange risks. The impairment signals a need for strategic recalibration, but the company’s ability to maintain loan covenants offers some reassurance amid the turbulence.
Bottom Line?
Ainsworth’s FY25 results highlight operational headwinds and financial recalibration, setting the stage for a critical year ahead.
Questions in the middle?
- How will Ainsworth adjust its strategy to revive North American growth?
- What impact will currency fluctuations have on future earnings and cash flow?
- Could further impairments or restructuring be on the horizon following the audit?
