AGTech narrows losses in Q1; China lottery director accused to taking bribes

Hong Kong-listed lottery technology supplierAGTech Holdings Ltd. managed to trim its losses in the first quarter of 2015.

AGTech reported a loss of HKD 37.3m (US $4.8m) in the three months ending March 31, an improvement over the HKD 46m lost in the same period last year. Revenue nearly doubled year-on-year to HKD 48.5m but costs of sales and service nearly tripled to HKD 33.7m. Gross profit rose 20.9% but margins fell to 30.6% from 47.7% due to increased competition in China’s sports and welfare lottery market.

AGTech says its revenue boost was largely attributable to contributions from paper scratch ticket hardware manufacturer Zoom Read, which was acquired during Q1. AGTech’s bottom line was undone by share-based payments to directors and other staff, which totaled HKD 22.2m. The company also took a hit from costs associated with its recent acquisition of Score Value Ltd., a developer of handheld technology, games and systems for the Chinese market.

Looking ahead, AGTech expects other Chinese provinces to sign up for its Lucky Racing virtual racing joint venture with UK bookies Ladbrokes and its e-Ball virtual football operation. However, the two products are currently available only in lottery shops in Hunan and Jiangsu provinces respectively, and AGTech has been promising that other provinces will be coming on board for over a year.

AGTech also expects to see “a significant breakthrough in terms of business development” in 2015. AGTech doesn’t currently offer any online or mobile products but the company believes it’s well positioned to take advantage of this market once the Chinese government finishes crafting its new online lottery regulatory framework.

China officially put the kibosh on online lottery sales in March, leading to the first monthly sales decline in years. China’s online suspension followed a surprise audit of its 18 provincial lottery administration centers, which coincided with Beijing’s wider crackdown on corruption among public officials.

On Monday, the crackdown apparently claimed another scalp, as official news agency Xinhua reported prosecutors in the Xinjiang Uygur Autonomous Region were investigating the head of the region’s welfare lottery center for allegedly taking bribes. Yin Mingkui has been placed under unspecified compulsory measures, which can include arrest, detention and residential surveillance.

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