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Australia – Aristocrat up 12.2 per cent as North America sales return

By - 18 May 2023

Aristocrat’s portfolio of scaled, world-class Gaming and Pixel United assets delivered a quality
result over the six months to March 31 2023, off the back of superior products, ongoing
investment and successful execution, despite mixed market conditions across key segments.

The Australian slot giant reported revenues of $3.1bn, representing an increase of 12.2 per cent, for the six months. Net profit of $659m was 14 per cent above the prior corresponding period, reflecting a strong performance in the Gaming Americas, resilience in Pixel United despite challenging market conditions, interest income benefits and effective strategic investment in talent and technology.

Aristocrat Chief Executive Officer and Managing Director, Trevor Croker, said: “Aristocrat delivered a quality result over the period, demonstrating the ongoing resilience, competitiveness and diversification of our portfolio, as we navigated challenging market conditions and continued to invest fully behind our successful Group growth strategy.

“The benefit of our investment to grow and diversify Aristocrat’s revenue base was particularly evident in our ability to deliver solid revenue growth and stable EBITDA in constant currency at Group level over the half year, with a continued strong performance from the Aristocrat Gaming Americas business more than offsetting the challenging mobile gaming market conditions for Pixel United.

“We continued to invest to grow into attractive adjacencies and verticals, as we build further resilience in our operating portfolio, including through executing our ‘build and buy’ strategy in Online RMG. Our newest operating business, Anaxi, delivered on its initial market entry commitments and established sound foundations for growth. With content agreements signed with partners representing over 55% of the iGaming market in the US, we are comfortably on course to exceed our target of penetrating at least 70% of regulated jurisdictions across North America over the next five years.

“We continued to make meaningful strides forward in our ESG priorities, including progress towards setting and communicating a rigorous, Group-wide, science-based emissions reduction target by the end of calendar 2023. Responsible Gameplay is Aristocrat’s highest sustainability priority, and we remained focused on aligning our core business systems, processes, policies and actions to match our commitments during the period. Our Australian-first trial of cashless gaming technology was recently expanded with the support of the NSW government and a major customer, and is progressing well.

“Strong free cash flow generation was applied to fund Aristocrat’s growth plans, while surplus cash has been appropriately returned to shareholders, including $338 million returned through dividends and on-market share buy-backs, in line with the Group’s disciplined capital allocation framework.

“Our teams faced into considerable economic and political uncertainty during the half, including the continuation of the conflict in Ukraine, and I am tremendously thankful for their efforts. Looking ahead, we will continue to navigate challenges with a focus on portfolio performance and capturing the significant strategic opportunities in front of us including delivering on our online RMG strategy with the proposed acquisition of NeoGames announced earlier this week,” Mr Croker concluded.

The Americas delivered a $59.5m increase in post-tax profit, driven by a 27 per cent increase in Outright Sales units, reflecting increased customer capital availability, penetration of premium Portrait cabinets and successful expansion into strategic adjacencies.

Class III Premium and Class II Gaming Operations installed base grew 9% to exceed 61,000 units, with average fee per day holding broadly stable at US$55. The company retained position as the leading supplier in the US market, achieving portfolio performance of 1.4x floor average3 and exceptional portfolio strength demonstrated by Aristocrat featuring in 20 of the top 25 premium leased games. It continued expansion into attractive adjacencies, including VLT in Canada, Oregon, Illinois, and New York, Washington CDS, and Historical Horse Racing in Kentucky, Louisiana, and New Hampshire.

International Class III growth was driven by operating conditions in Europe, together with benefits from churn across Asia.

Aristocrat has just announced its intention to buy NeoGames, a move that Moody’s analyst Maadhavi Barber beleives won’t have a negative impact on the company’s credit ratings.

“Moody’s expects that the proposed acquisition of NeoGames will have minimal impact on Aristocrat’s credit metrics, given the transaction will be funded with cash,” Mr. Barber said. “The transaction is subject to NeoGames shareholders’ approval, as well as gaming regulatory, antitrust and foreign investment approvals.”

“Aristocrat’s 1H23 results are credit positive,” he added. “Solid performance from the North American gaming operations and outright sales segments offset a reduced contribution from Pixel United (digital), higher input costs and supply chain pressures.

“Moody’s expects Aristocrat to continue performing well in 2H23 in all operating segments, reflecting its strong market position and recurring revenues, which will offset continued spending to grow the Anaxi (online Real Money Gaming) segment.”

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