Aristocrat skates into overseas earnings

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Aristocrat Leisure Ltd has accelerated the revenue contribution of its overseas gaming operations – its international businesses are poised to generate at least 70 per cent of the group’s revenue by 2003.

Aristocrat, the world’s second-biggest poker machine manufacturer, yesterday reported a 16.2 per cent lift in net profit to $31.6 million for the six months to June 30.

Earnings per share increased from 6.5¢ to 7.4¢ while Aristocrat declared an interim dividend of 4.5¢, up from 4¢ a year ago, payable on August 28.

Aristocrat shares, which had been wallowing at a low of $5.40 in late February, closed 21¢ higher at $6.99 yesterday as brokers such as Credit Suisse First Boston recommended the group as a buy, saying that Aristocrat was continuing to deliver on its promises.

Better than expected sales in Japan and the US boosted the result and prompted Aristocrat to lift its overseas revenue projections.

The international businesses, which were expected to contribute nearly half the group’s revenue by 2003, almost exceeded the target two years ahead of schedule.

The chief executive, Mr Des Randall, said that with the group likely to exceed its initial revenue target this year, management had had to revise its expectations.

“In this last period, 45 per cent of our revenue came from outside Australia. We’re currently looking at our goals Togel because we really need to raise the bar,” he said. “Seventy per cent would be achievable [by 2003]. It certainly will be a lot more than 50 per cent.”

Aristocrat is also canvassing expansion opportunities in Japan and the US, as well as the emerging markets of South America, South Africa, Korea and South-East Asia. Expansion would be leveraged off Aristocrat’s existing operations, rather than through acquisitions.

In the six months to June, international sales grew 72.2 per cent while sales in the saturated Australian market fell from $203.9 million a year ago to $187.6 million. Japan and the US each contributed 16 per cent to revenue while New Zealand added 9 per cent.

Aristocrat continues to wean itself off gaming machines as core revenue, with software sales now making up 49 per cent of revenue. Mr Randall said the company was ahead of schedule in increasing its share of the massive Japanese poker machine market, where it expected to have 35,000 units by the end of the year, not 15,00 as forecast.

In the US, nearly 600 orders have been taken for its Penguin Pays game approved by Nevada authorities in May. About 350 orders will show up in the second half.

Penguin Pays was installed in 50 casinos in Nevada – more than 10 per cent of the market – within six weeks of being approved.

Mr Randall said he was comfortable with analysts’ forecasts for a full-year profit of about $85 million. Aristocrat posted a full-year net profit of $64.9 million in 2000.

With its $325 million takeover of Las Vegas company Casino Data Systems expected to contribute to earnings in the second half, Mr Randall said he expected the US operation to grow in dollar terms and as a percentage of total revenue.