Aristocrat Leisure Limited · ASX:ALL
Aristocrat Leisure — H1 2003 Earnings Presentation
59 slides from Aristocrat Leisure's earnings presentation, Aug 12, 2003
Slide 1: Interim Result 2003
Interim Result 2003 Six Months Ending 30 June Crbtoativg
Slide 2: Business Goals
¢ Business Goals — Manage growth responsibly — Maintain leading market shares in Australia and New Zealand and to be No 2 in the global installed market for casino-style gaming machines — Grow international revenue to 70% of Total Revenue — Increase our recurring revenue and participation revenues t
Slide 3: Introduction
Introduction Review of Financials Six Months in Review Review of Operations — Australia — New Zealand — Europe, South Africa & Asia Pacific — Japan — North & South America Movin«
Slide 4: Significant changes to Board
* Significant changes to Board — 2 Directors resigned — David Simpson Director-elect « Will chair Audit Committee ~— Search continues for 2 new Directors * Significant changes to Group management — David Creary Acting CEO * Search continues for permanent CEO — Simon Kelly appointed CFO
Slide 5: Review of Financials
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Slide 6: Total Revenue
Total Revenue EBITDA EBIT Profit Before Tax Profit After Tax Basic EPS (pre goodwill amortisation) (cents) Basic EPS (post goodwill amortisation) (cents) Dividend per share (cents) Jun-03 Jun-02 Change $m $m % 392.6 439.4 (11) (13.8) 86.5 (116) (35.4) 68.7 (152) (43.6) 61.2 (171) (32.9) 41.6 (179) (
Slide 7: International
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Slide 8: Net Debt
Net Debt 257.2 292.1 276.6 Net Debt/Equity (%) 69.9% 73.4% 73.3% Capital Expenditure 15.2 41.7 22.4 Total Tangible Assets 691.9 915.9 733.4 Deferred Revenues 53.4 80.4 66.2 Return on Equity (9%) 20% 11% Interest Cover (L.T.M) 1.6x 6.9x 9.3x
Slide 9: Operating Cash Flow
Operating Cash Flow 33.0 79.0 42.4 % of revenue 8.4% 8.1% 9.6% Less Capital Expenditure (15.2) (41.7) (22.4) Free Cash Flow 17.8 37.3 20.0 Working Capital* 192.0 249.6 242.1 % of Revenue 20.7% 25.6% 26.2% inventory 125.7 206.1 140.5 % of Revenue 13.5% 21.1% 15.2% Accounts Receivable 205.3 338.6 306.
Slide 10: One-off Items include
* One-off Items include: (pre tax $m) South America Contract Variations (4-Apr) North America Terminations (4-Apr) North America Systems (27-May) North America AR Provisions (27-May) North America Inventory Prov (27-May) Manufacturing Inv Prov Increases Australia Termination Costs — Asset Write Down
Slide 11: Normalised profit and loss
Revenue From Sale of Goods Gross Profit Other Revenue (incl Services) Expenses Profit Before Tax Income Tax Expense Profit After Tax HY 2002 $m 390.3 200.0 49.1 (187.9) 61.2 (19.7) HY 2003 $m 351.4 130.3 41.2 (215.1) (43.8) 10.7 (32.9) 2003 One Off Adjustment $m 12.2 37.5 0.0 2003 Normalised $m 363.
Slide 12: Normalised EBITDA, EBIT and profit
EBITDA * EBIT * Profit Before Tax * Profit After Tax * Basic EPS* (pre goodwill amortisation) (cents) Basic EPS* (post goodwill amortisation) (cents) * Result has been normalised by adding back one- off non- recurring charges 39.6 20.1 11.9 4.3 2.8 0.9 86.5 68.7 61.2 41.6 10.8 9.2
Slide 13: Regional Review
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Slide 14: Warren Jowett
Warren Jowett Executive General Manager Australia & Asia Pacific
Slide 15: Australia segment results
Jun-03 Jun-02 % Change Segment Revenue $143.7m $174.8m 18% Segment Contribution $36.9m $54.9m -33%, Segment Contribution - exci price change $36.9m $47.7m -23% Platform Units 5,395 7,160 -25% Platform Average Price 89,434 88,799 7% Total Platform Revenue $50.9m $63.0m -19% Software Units 13,280 17 A
Slide 16: Game approval delays
* Game approval delays — NSW — Jackpot Deluxe — QLD — standard games * New South Wales — Purchasing decline due to reduced trading hours, pending tax legislation and smoking ban ¢ South Australia — Tax increase * Victoria — Smoking impacts
Slide 17: Re-alignment of the Australian business
Re-alignment of the Australian business Reduction of warranty conversions Direct Delivery Reduction in debtor days Customer Relation Management Programs Software, Hardware strategy — Conversions, upgrades — New boxes Product positioning — Product categories Education, Training & Development
Slide 18: Manufacturer install and turnover share
Manufacturer % Install % Turnover 16.6% KON 8.2% STAR 5.3% AGT 2.1% PAC 1.7% OLY 0.2% OTHER 0.05% TOTAL 100.0%
Slide 19: Competitive Product Portfolio
Slide 20: Affect top Clubs earning over $1m
Affect top 500 Clubs earning over $1m Tax changes implemented over coming 7 years Tax increase 2005 — additional $3822 per EGM or 6% to cover increase — ie 540 EGMs need to increase daily net win by $5670 Review all operating expenses Structural changes required Minimal impact to hotels
Slide 21: Increase installation performance
* Increase installation performance — Focus on return on investment for games — Attack under-performing games ¢ Performance reviews — venues direct ¢ Analyse product offerings — Cover games offering to attract and retain players ~ Create points of difference on floor & venue * Off-peak play is a key
Slide 22: Profitable business in capped market
Profitable business in capped market Market share strength Strong game performance Broad spread of products Continual development of unique entertaining products for players CUSTOMERS Customers are our No 1 priority An ouR No.! PRIORITY
Slide 23: New Zealand segment results
Jun-03 Jun-02 % Change Segment Revenue $24.6m $47.8m 38% Segment Contribution $9.5m $5.9m 61% Platform Units 1,161 833 30% Platform Average Price $9,618 $8,833 8% Total Platform Revenue $41.4m $7.4m 50% Software Units 1,787 1,838 3% Software Average Price $3,941 $2,998 11% Total Software Revenue $6.
Slide 24: Mr Cashman and new suite of MKVI games
* Mr Cashman and new suite of MKVI games launched in January — Bonus product range in casinos to be extended in H2 — Reelpower games to be launched in pub/clubs in H2 * Increased Service installed base ¢ Developed low cost machine market * Responsible Gaming Bill
Slide 25: Europe, South Africa & Asia Pacific results
Jun-03 Jun-02 % Change Segment Revenue $417.8m $16.1m 11% Segment Contribution $2.2m $2.9m -24% Platform Units 1,615 4,324 22% Platform Average Price $7,099 $8,276 14% Total Platform Revenue $11.5m $10.9m 6% Software Units 1,722 4,278 35% Software Average Price $2,688 $2,949 9% Total Software Revenu
Slide 26: Holland Casinos
* Holland Casinos — Successful Hyperlink launch * Successful launch of XCite * Russia — Distributorships — Safe payment mechanism * 50% cash on delivery, balance major bank L/C covered — Growing regulated market * UK — 2004/2005 opportunity — Well positioned via relationships
Slide 27: 3-year supply agreement with Tsogo Sun Group
* 3-year supply agreement with Tsogo Sun Group — 67% of Tsogo Sun Group gaming expenditure ¢ Limited Payout (Route) Market — Trials commenced March 2003 — Regulated market expected to open H1 2004 * Further markets emerging — Tanzania, Kenya and Madagascar
Slide 28: SARS and Iraq impacted revenue
SARS and Iraq impacted revenue Macau — continuing negotiations New markets — Cambodia ~— Vietnam Potential emerging markets — Thailand — India
Slide 29: Asia Pacific market jurisdictions
i) India + Gambling is legal in Goa » Pending legislation, Haryana may be the next state to legalise Casinos ) Myanmar + Casinos operate along the Thai border for Thai nationals Malaysia » Legal jurisdiction - gaming available in 60 clubs and Genting Highlands Casino J Cambodia + Government has legi
Slide 30: Japan segment results
Jun-03 Jun-02 % Change Segment Revenue $95.7m $55.5m 72% Segment Contribution $16.6m $10.6m 57% Platform Units 22,397 12,988 72% Platform Average Price $2,609 $3,164 “18% Total Platform Revenue $58.4m $44.1m 42% Software Units 22,397 7,638 197% Software Average Price $1,619 $1,814 “11% Total Softwar
Slide 31: Sammy relationship strengthened
* Sammy relationship strengthened — Extending current manufacturing agreement — Exploring new opportunities globally * Contracted KK Trade — ist National Agent for Aristocrat product * Increased investment in R&D
Slide 32: Kyojin-no-hoshi
* Kyojin-no-hoshi — 1st 5-reel pachislot game in market — Launched Q3 2002, continuing to sell * Mahha go go go — Launched July, indications good — Aristocrat’s 1st combined stepper/LCD game
Slide 33: Gavin Isaacs
Gavin Isaacs President Aristocrat Technologies, Inc loos PESOS
Slide 34: Gavin Isaacs appointed President March 2003
* Gavin Isaacs appointed President March 2003 * Subsequent restructuring of business and objectives * Business rejuvenated — New management — New sales structure — New priorities * Focus on customers
Slide 35: Announced Strategies Going Forward
Announced Strategies Going Forward Implement a Low Cost Business Model Partner with a few customers to optimise revenue and growth New terms and conditions What We Have Done Revised, prudent terms & conditions for doing business Continue to service existing partners Negative revenue and loss reflect
Slide 36: North America segment results
un- un= % Change _ | Segment Revenue $120.3m $136.2m 12% Segment Revenue (Constant 2002 $) $140.0m 3% Segment Contribution ($12.0m) $33.4m 136% Platform Units 3,754 3,834 -2% Platform Average Price $10,269 $12,749 19% Total Platform Revenue $38.5m $48.9m 21% Software Units 5,373 3,929 37% Software A
Slide 37: Optimise core competencies and global leverage
Optimise core competencies and global leverage Shift product mix to higher recurring revenue generation Focus on key target markets and customer segments Enhance and maintain technology leadership in all product segments Work with select partners to optimise revenue and growth opportunities
Slide 38: Recurring Revenue Installed Base Increase
* Recurring Revenue Installed Base Increase — Installed 805 units, incurred growth of 685 in installed base units since Jan. 1, 2003 — 55% increase on prior period in installed base — Hyperlink performance “Outstanding” — On the verge of further recurring revenue releases (Foxworthy, Millioni$er, Ca
Slide 39: Recurring revenue participation units
* Recurring revenue = Participation 800 -— nits 1600 5 1400 - 1200 - 1000 - 8004 2001 2002 2003(H1)
Slide 40: Product Performance — MKVI
* Product Performance — MKVI — Average MKV1 performance well above House average — All Product categories exceeding expectation (Mr Cashman, Reel Power, Stand-alone)
Slide 41: EGM Unit Shipment Improvement
* EGM Unit Shipment Improvement — Increase on prior corresponding period — Gaining momentum with approvals and performance * Receivables Improvement — 17% reduction since December 2002 * Inventory Reduction ~— 22% reduction since December 2002
Slide 42: Sales team restructured
* Sales team restructured — Appointment of Key Sales Management — Restructured divisions — New pricing and margin controls * Service / Customer interface improvement — Terminated Mikohn Agreement — Refocused service strategy — TAG
Slide 43: Increasing Product Approvals
* Increasing Product Approvals — 11 MKVI Titles in New Jersey — 48 MKVI Titles in GLI — Field Trial MKVI Mississippi — Nevada Cashman Approval — Nevada Tickets Approval imminent * Quality improvements — Parts Delivery, Backlog reduced — Plug and Play improvement
Slide 44: OASIS-Systems
* OASIS-Systems — Restructured and refocused group — Renewed strategy — Customer retention and improve satisfaction — New releases at G2E — OASIS Prime — Super BONUSING ~ Handheld Jackpois and fills — Upgrade program commencing Q4
Slide 45: North America summary
Recurring Revenue Installed Base Increase EGM Unit Shipment Improvement Product Performance MKVI “Strong” Receivables Improvement Inventory improvement New Structure Implemented and Accepted Service / Customer interface improvement Quality improvements ncreasing Product Approvals
Slide 46: Ccsronees:
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Slide 47: Meeting challenges head on
* Meeting challenges head on — Restructured management and operations — Monthly Risk Review Committee meetings — Bid review process reinforced — Group Internal Auditor appointed « Reports to CEO and Board — Regular market updates — Continuing to pursue profitable opportunities
Slide 48: Global Gaming Market Maturity Profile
Global Gaming Market Maturity Profile SALES REVENUE INTRODUCTION GROWTH MATURITY alia DECLINE
Slide 49: Business goals progress
Manage growth responsibly v Maintain leading market shares in Australia v and New Zealand and be No 2 in the global Work in installed market for casino-style gaming machines Progress Grow international revenue to 70% of Total Work in Revenue Progress Increase recurring revenue and participation work
Slide 50: Americas, Australia, Japan and other highlights
« Americas ¢ Australia ~ MKVI licensed all ~ Reduced costs jurisdictions, Tickets — Game performance strong underway — Service restructured ~ Strong game performance — Ticket out d driving EGM sales exer our approve — growth in recurring revenue * Japan base ~ Sammy relationship ~ Oasis Systems rest
Slide 51: Outlook for the Second Half
* Outlook for the Second Half (Segment Contribution Profit) — Australia steady on H1, down on pcp — New Zealand steady on H1, down on pcp — Japan steady on H1 and pcp — North America improvement on H1 and pcp — Europe, South Africa, Asia up on H1 and pcp
Slide 52: Thank You. Questions?
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Slide 53: Interim Result 2003 Appendix
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Slide 54: Segment Contribution Profit
SEGMENT CONTRIBUTION PROFIT Australia North America South America New Zealand Jun-03 Jun-02 Change _ Total Countries Contribution Inter-segment eliminations Group R&D Expense Amortisation - Intangibles Foreign Exchange Corporate {incl Mfg under recoveries & Other} Group Segment Contribution Profit (
Slide 55: Total Australian Market
'| Total Australian Market = 200,141 Aristocrat 66% (131,738) Other 34% (68,403) 69%
Slide 56: NSW Gaming Taxes 2003-2010
NSW Gaming Taxes (Ex GST) 2003-2010 % Tax f Current 2005 02007 O2010 $0.2m-$1.0m$1.0m-$5.0m $5.0m - $10.0m + $10.0m Individual Club Earnings from EGMs No. of NSW Clubs 442 375 7 64 Annual earnings from $0.2m-$1.0m : $1.0m-$5.0m.- $5.0m - $10.6m - $10.0m+ Gaming Machines |Avg earnings per EGM l $21]4
Slide 57: 6 Months to June 2003
"6 Months to 30 June 2003 North South Aristocrat Australia America America Japan New Zealand Other Total elim Group PLATFORMS Total Units Sold (Excluding Initial Software) | 5,395] 3,754 | 86 | 22,397 1,161 | 1,615] -_ | 34,408 | Platform Sales - Average Price [ 9.434] 10,260[ —_-156,125 | 2,09] 9.5
Slide 58: 6 Months to June 2002
6 Months to 30 June 2002 North South New Aristocrat Australia America America Japan Zealand Other Total elim Group PLATFORMS Total Units Sold (Excluding initial Software) | 7,160 | 3,834 | 4,558 | 12,988 | 833 | 4,321] -_ | 30,694 | Platform Sales - Average Price [ 8,799 | 42,749 | 6,903 | 3,164 | 8
Slide 59: South America segment results
Jun-03 Jun-02 % Change Segment Revenue ($11.4m) $37.8m 130% Segment Revenue (Constant 2002 $) {$13.0m) 135% Segment Contribution ($25.3m) $41.3m ~324% Platform Units 86 4,558 -98% . b Platform Average Price ($156,125) $6,903 -2362% Total Platform Revenue ($13.4m) $31.5m 143% Software Units 2,386 2,2