Revenues from new Games & Entertainment division
HONG KONG — AGTech Holdings Limited (SEHK code: 8279) today announced its financial results for the six month period ending June 30, 2017.
“AGTech reported revenues of HK$54.1 million in the first half of 2017, with revenues contributing from sales from lottery hardware, lottery games and systems, lottery distribution, as well as new initiatives launched in the games and entertainment division,” said John Sun, Chief Executive Officer of AGTech Holdings Limited. “Despite the decrease in revenue mainly from reduced sales of lottery hardware, which is highly regulated and the timing of orders from customers tend to vary throughout the year, we are highly encouraged by the scalability and revenue growth potential of our games and entertainment division, through which we began providing many casual and social games to a broad set of audience across several mobile channels.”
“At our core, lottery technology and services has been and will continue to be AGTech’s domain expertise. For over a decade, we have partnered with both of China’s legal lottery operators, namely the Welfare Lottery and the Sports Lottery, to improve upon the appeal and access of lottery products to end consumers in China, thereby helping to expand the lottery industry as a whole. To this end, we continue to focus on innovations in both lottery product and distribution, as evidenced, amongst other initiatives, by the official launch of the SF-Themed Instant Scratch Lottery, the first lottery product to ever be distributed via a logistics network in China.”
“Importantly, we marked our first significant strategic international expansion in the company’s history when we announced our joint venture agreement with Paytm, India’s leading mobile payment platform, to create a high quality mobile entertainment experience specific to the Indian consumers. This joint venture will enable both companies to tap into the significant potential of the fast growing mobile entertainment market in India, and lays the foundation for further international expansion in the future.”
“Since becoming the exclusive lottery platform of Alibaba Group and Ant Financial Group in 2016, and as we continue to focus on building our industry leading position in lottery through both existing and new potential channels with suitable third party partners, we believe we remain well positioned to receive the appropriate authorization in online distribution of lottery products as and when approved by the lottery authorities.”
Key Financial Highlights
– Revenue was approximately HK$54.1 million as compared to the corresponding period in 2016 of approximately HK$76.6 million.
– The decrease in revenue was mainly due to the reduced sales of lottery hardware products. The supply of lottery hardware in the PRC is highly regulated with only a small number of approved suppliers. Hence, revenue in this business typically exhibits an irregular pattern and has short term volatility since the customer base is concentrated and the timing of orders from customers varied throughout the year.
– Importantly, revenues from new initiatives launched in the games and entertainment business was HK$17.1 million, which represented approximately 32% of total revenues in the first half of 2017.
– Selling, general and administrative expenses was approximately HK$123.8 million, as compared to the corresponding period in 2016 of approximately HK$53.4 million. The increase was mainly due to the addition of staff across the company in anticipation of the launch of many new growth initiatives.
Key Business Updates
Lottery Distribution – SF Lottery
In early July, SF-Themed Instant Scratch Lottery was commercially launched for sale in four pilot cities, namely Shenzhen of Guangdong Province, Nanjing of Jiangsu Province, Changsha of Hunan Province and Nanchang of Jiangxi Province, with the goal of being rolled out in additional provinces throughout the year. This unique lottery product, with industry breakthrough features like the self-service mobile redemption, was designed in conjunction with the National Sports Lottery and approved by the Ministry of Finance, further demonstrating our ability to partner with the appropriate authorities in the Chinese lottery industry for true product and distribution innovation.
Games and Entertainment
In anticipation of the approval and authorization of online distribution of regulated lottery products, we are active in building our online presence and customer-base, seeking to offer games and entertainment content more broadly through the relevant channels of Alibaba Group, Ant Financial Group as well as suitable third party partners. To this end, we continue to leverage our technical know-how and operating experience in lottery, to develop various types of creative, non-lottery social games and entertainment content that are suitable to cater for the evolving tastes of China’s consumers. Importantly, owing to their play-for-fun or mind sports (skill game) characteristics, these non-lottery products fall outside the purview of lottery regulators.
As such, we began distributing many of our casual and social games, as well as the Two-on-One competition poker game, across various Alibaba Group and Ant Financial Group’s mobile channels. While we are in the beginning stages of building this division, initial customer adoption rates are promising and we are excited to continue developing this type of casual and social games and entertainment content, reaching a substantially broader set of audience.
International Business
Importantly, we entered into a joint venture agreement with One97 Communications Limited, parent company of Paytm, India’s leading mobile payment platform. This joint venture plans to offer a variety of entertainment products and services tailored for the Indian consumers, as we leverage our operating experience and technical expertise in products and services such as casual mobile and social games and other user engagement activities. As our first significant strategic international expansion and an important milestone, this joint venture lays the foundation for further international expansion in the future.
Note: Please refer to the company’s Interim Results Announcements for the Six Months Ended 30 June 2017 for complete information, available on the Hong Kong Stock Exchange website at www.hkex.com.