Pokies manufacturer Aristocrat Leisure reports $16.4mm loss despite US market strength

Aristocrat Leisure Ltd. is one of the oldest pokies manufacturers in the world, headquartered right here in Australia for more than 60 years. Competition in the poker machine industry has been increasing for decades, and Aristocrat Leisure Ltd. is generally considered a pioneer in that department, but few expected to see the company go from such a positive annual report in 2013 to a red line the following year. The poker machine firm released its annual revenue results for the fiscal year ending September 30^th, 2014 and the overall result was a loss of AUD $16.4 million.

In the fiscal earning year of 2013, the pokies manufacturer reported an overall profit, after taxes, of $107.2 million. That a drastic difference from this year’s results that left Aristocrat in the negative. However, the company blamed several strategic maneuvers in various regions for the adverse figures.

The Australian pokies firm named three major areas that contributed to the overall loss. The largest was an underwhelming $78mm assessment on a pachislots (pachinko slots) business investment in Japan that the company said was, “driven by uncertainty in regulatory environment”. Second was the $43.4mm loss taken on the “disposal of our non-core lotteries business”, bought out by Playtech Plc. in late September. A third trouncing came from the $13.1mm spent on transaction fees and restructuring costs after acquiring the US-based casino games manufacturer, Video Gaming Technologies Inc. (VGT) in July.

The final report revealed that, had it not been for those strategic business maneuvers, Aristocrat’s revenue results would have been on course, amounting to $118.1 million. The pokies company actually saw revenue growth of 7%, rising from $813.8mm to $870.3mm year-over-year. Before calculating taxes and interest, the increase was 11.5%, from $188.1mm to $209.8mm.

When looking at the 7% increase in revenue, minus the poker machine manufacturer’s strategic investments, Aristocrat Leisure said that the US poker machine market had a lot to do with its strong finish. The report showed a 20% increase in video terminal installments in North America, now amounting to a record 9,071 pokies. The average FPD (fee per day) also jumped 10.5% to $46.02, an incline of $4.38.

“Over the course of the year, the business continued to methodically close portfolio gaps while also lifting front-end effectiveness and sales execution,” said Jamie Odell, Chief Executive Officer of Aristocrat Leisure. “Our results reflect a revitalised core product pipeline that is approaching full strength and driving consistent share and value growth in line with our strategy.”

Odell said that the poker machine company expects more impressive results in the coming year, but that some shakier markets will certainly affect the bottom line, just as they did in this fiscal year. “While we expect our operational momentum and market share performance to lift further over the full year to 30 September 2015,” Odell explained, “generally flat to weaker demand in a number of key segments will be a constraint.”

Considering the immense growth seen in the US market this year alone, Aristocrat should have no problem making up for those expected windfalls in smaller, less stable markets.