Aristocrat earnings slump 75%

26.02.2009, The sales downturn was offset by significant growth in Japan, South Africa and South American markets

Australia.- Aristocrat Leisure Ltd., the world’s second-largest maker of slot machines, recorded a 75 % drop in second-half profit as Australian earnings slumped and the company took a charge to settle a lawsuit.

The company blamed smoking bans and increased taxes on venue operators for the us$ 91 million drop in net earnings. Net income fell to us$ 20 million in the six months ended December, from us$ 78.4 million a year earlier. Second-half figures were calculated by subtracting first-half earnings from the us% 65.4 million full-year profit, the firm reported yesterday.

Chief financial officer Simon Kelly told analysts that Aristocrat’s business activities in Australia were affected by delays the company had encountered in getting new games on to its Viridian gambling platform. He said deteriorating market conditions, coupled with smoking bans and increased taxes on licensed operators, had also affected earnings.


Jamie Odell, who will formally become CEO once he gains regulatory approval, needs to revive sales as the global recession leads US casinos to cut back purchases of new machines and Australian operators stick with existing slots as they adjust to smoking bans. Odell was appointed in December. “We expect the Australian market conditions to remain challenging and difficult to predict,” Executive Chairman David Simpson said in the statement.

Aristocrat shares rose 3.7 % to us$ 2.32 in Sydney after earlier dropping by as much as 3.8 %. The stock has lost 80 % of its value since peaking at us$ 11.43 in February 2007. Earnings before items for the year were us$ 90.7 million, matching the company’s February 10 forecast. The company will pay a second-half dividend of 10 cents, down from 25 cents a year earlier.

Aristocrat took a us$ 37.1 million pretax charge against earnings to settle a class- action lawsuit. Aristocrat also wrote down its stake in Pokertek by us$ 12.8 million while booking us$ 13.5 million of gains from property sales. Odell’s appointment needs the approval of gambling regulators in the more than 60 jurisdictions around the world where the company sells its slot machines.

Second-half Australian earnings before interest, tax, depreciation and amortization fell 61 % to us$ 17.3 million as pubs and clubs spent money creating outdoor smoking areas rather than buying new slot machines.

North American profit rose 19 % to us$ 70.4 million as the slump in the Australian dollar boosted the value of sales. After adjusting for exchange-rate movements, sales fell 5.6 % and profit dropped 11 %. The Australian currency dropped 26.5 % in the second half of 2008, the fourth-worst performer among the 16 most-traded currencies against the US dollar.

Second-half figures were calculated by subtracting first-half earnings from Aristocrat’s net full-year profit of $101.2 million, down 59.1 % on the previous 12 months. However full-year revenue across all markets was down just 3.9 % at us$ 1.079 billion. The sales downturn was partly offset by significant growth in Japan, South Africa and South American markets, the company noted. Sales to Japanese outlets almost doubled on the previous year with 57,000 new poker machines ordered.

Japanese earnings surged ninefold to us$ 16.6 million in the second half as the company boosted sales of so-called Regulation 5 games that comply with new rules curbing payouts on pachislot machines. The games, which are different from pachinko machines, have spinning wheels similar to slot machines and instead of coins use tokens that are exchanged for prizes. Aristocrat sold 57,473 machines in Japan during the year, almost double the amount in 2007.

Yogonet.com / Bloomberg / The Herald Sun (Australia) / Sydney Morning Herald

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