- »Online Gaming Up Significantly for Australian Company
Online Gaming Up Significantly for Australian Company
Gambling machine giant Aristocrat Leisure had a very positive 2019 fiscal year, taking in record profits and group revenues. The Australian market was a big success for the company, as was its progress in the Americas and with its digital operations arm.
This year started strong as well until the coronavirus pandemic began its damage spree to businesses the world over. Aristocrat was not immune. It stood down approximately 1,000 employees and cut jobs to mitigate the impact of the financial punch. Even with the rough few months and many more to come, Aristocrat was able to book a 7% revenue rise in the first quarter of 2020.
Riding the Wave of 2019
Aristocrat’s year-end report for 2019, which ended on September 30, 2019, put its record profit of $894.4 million on the front page. Of course, alongside that number, group revenue of $4.4 billion was also big news, with a 23% increase in reported terms and 15% in constant currency. Even after taxes, profits were $698.8 million, up from $542.6 million in the previous fiscal year.
Dividends were 22% higher for the year – at 56 cents per share – for a significant earnings lift. And the company boasted of more than 6,400 employees around the world.
The $4.4 billion in revenue came from 80 countries and 332 licensed jurisdictions. These were the primary segments that produced that amount:
- Americas = 44.3%
- Digital = 40.7%
- Australia/New Zealand = 10.4%
- International Class III = 4.6%
And other than the 40.7% in digital revenue, the other parts were broken down into 27.7% from gaming operations and 31.6% in Class III outright sales.
The increases over the previous year were illustrated in these earnings:
- Operating revenue up 22.7%
- EBITDA up 20.2%
- Dividends per share up 21.7%
- Revenue up 25.3%
- Profits after tax up 28.8%
Chairman Neil Chatfield and CEO Trevor Croker called 2019 “another highly successful and rewarding year at Aristocrat.”
Navigating a Rough Early 2020
The pandemic shutdowns were going to affect Aristocrat. It was inevitable. When casinos and almost all non-essential businesses shut down around the world in March, it was going to affect everyone’s bottom lines.
Aristocrat announced in late April that it was going to stand down around 1,000 staff members. Those layoffs would be in place until at least the end of June 2020 and for the sectors of land-based sales, and service and manufacturing operations. And of those employees, two hundred of their roles would be permanently removed from Aristocrat going forward. Another two hundred full-time employees would transition to part-time status.
Further, approximately 1,500 employees took salary cuts of 10% to 20%, board directors took fee reductions of 20%, and Croker’s salary decreased by 30%.
Those cuts took effect on May 1. Reportedly, those cuts saved the company about $100 million.
The company was in the process of implementing a “comprehensive Covid-19 response, focused on protecting its strategic advantages and positioning the land-based business to respond quickly as demand returns.”
Donating to the Philippines Market
As all of this was happening, Aristocrat attended to the Philippines, with which it has long and deep roots. The Philippines was working hard in April to slow the spread of the coronavirus,. Their health care workers were on the front lines to care for the population.
Aristocrat partnered with the City of Dreams Casino to donate 1,700 packages of food to medical sites catering to 10 hospitals and medical centres. The food went to staff members, their families and community members most in need in the Paranaque region.
Managing a Profit Amidst a Pandemic
The first quarter of 2020 was actually the second quarter in Aristocrat’s fiscal year. That made the period ending March 31, 2020, the end of its first half and a positive one, according to the Financial Review.
The pandemic had only just begun to weigh heavily on businesses. With that, Aristocrat managed to close that half with a 7% year-on-year increase to $2.25 billion in revenue. EBITDA was down 8% to $707.6 million, but its operating cash flow increased to $620 million, a jump of 42%. Profits after tax were up 277% to $1.31 billion, part of which was attributed to recognizing a $1 billion deferred tax asset.
One of the most interesting numbers was that a 19% rate of digital revenue growth more than balanced the 6% decrease in land-based gambling revenue of $461 million.
The 20% increase in player purchases for online activities in March was scattered across all offerings, from online casino games to puzzles and other online games. Digital offerings include Cashman slots available on the Google Play store and the Heart of Vegas mobile and Facebook games. Big Fish social casino games are also popular.
Those games are not exactly online casino real-money games, but they do offer in-game purchases of virtual currency. Those purchases rose 19% in the first few months of 2020 to $697.6 million.
It will be interesting to see if Aristocrat begins putting even more of a focus on its digital division going forward considering the societal changes that may stay in place for some time due to COVID-19.