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Australia – Aristocrat surpasses 2019 profit by 23 per cent leaving it well positioned for M&A

By - 23 January 2023

The last year has seen Aristocrat Leisure deliver profit of $1.1bn, surpassing its 2019 results by approximately 23 per cent.

The company said it was a ‘high quality result, with strong revenue and profit growth reflecting
sustained investment in top-performing product portfolios, differentiating capabilities, increased
operational diversification and business resilience’ for the 12 months ended 30 September 2022.

Normalised profit after tax and before amortisation of acquired intangibles (NPATA) of $1,099.3m represents an increase of 27 per cent in reported terms, and 20 per cent in constant currency, compared to the prior corresponding period (PCP). This was driven by exceptional performance in North American Gaming Operations and global Outright Sales, despite supply chain disruptions and mixed operating conditions across key markets.

Aristocrat Chief Executive Officer and Managing Director, Trevor Croker, said “Aristocrat’s performance underlines the ongoing implementation of our growth strategy. Throughout the year, we continued to invest in competitive product portfolios to drive further share growth across key segments, greater operational diversification and deeper business capability.

“Aristocrat delivered an increase in revenues of almost 18 per cent year on year, and an annual profit of
$1.1bn that exceeded our 2019 financial year performance by approximately 23 per cent. This highlights the strength of our post-COVID recovery and our ability to execute in a challenging environment.

“Strong performance in Aristocrat Gaming more than offset headwinds in the Pixel United business, again highlighting the increasing diversification and resilience of our Group. “We have made further progress in our ‘build and buy’ strategy to scale in online RMG, with the launch of our new business, Anaxi. While we are focusing first on the North American i-Gaming vertical, we ultimately aim to be the leading gaming platform within the global online RMG industry. We will continue to invest behind this key adjacent growth opportunity as we build Anaxi over the medium-term.

“Aristocrat took significant steps forward in leadership and capability, while continuing to execute against our ambitious ESG commitments. This included preparatory work to allow us to set a science-based emissions reduction target for the Group in calendar 2023. In addition, we made progress in our responsible gameplay agenda, rolled out an enhanced anti-modern slavery training programme and achieved an above-benchmark employee engagement score for the year.

“Our performance highlights the incredible resilience and commitment of our team of over 7,500 people around the world. I want to thank each of our people for their hard work, and their care for each other, as we navigated the conflict in Ukraine and other challenges across the year.

“As we look ahead, we believe that Aristocrat’s outstanding product portfolios, growing operational resilience and capability, along with a highly engaged team and strong culture, positions us well to maintain our momentum despite uncertain conditions,” Mr Croker concluded.

Analysts at Fitch believe Aristocrat is now well-positioned to pursue mergers and acquisitions.

“The company sits in a flexible position to comfortably fund small to mid-size acquisitions and major share buybacks with cash, all while adhering to its conservative net leverage policy,” it said.

“Fitch expects Aristocrat to continue to pursue strategic M&A, particularly in the real-money gaming (RMG) sector, given its strong financial flexibility, solid portfolio of slot content and its lapsed acquisition of Playtech in 2022. Aristocrat’s credit profile has headroom for M&A and Fitch expects future acquisitions to be funded in a manner that is consistent with ‘BBB-’ leverage metrics.”

“In 2020, digital grew over 30 per cent due to more consumers remaining at home using digital products, which helped to offset the significant declines seen in the legacy slot business,” Fitch said. “Despite more entertainment options for consumers, digital continued to experience mid-single digit year-on-year growth in 2021 and 2022.”

The agency is predicting a ‘modest pullback in gaming operations performance in North America offset by continued recovery of outright slot sales and growth in international jurisdictions’ for 2023 with ‘lower revenues for digital in 2023, although still well above pre-pandemic levels, while traditional gaming will experience flattish growth on.’

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