Aristocrat Leisure Limited · ASX:ALL
Aristocrat Leisure — Global Gaming Expo (G2E) 2007
26 slides from Aristocrat Leisure's conference presentation, Nov 13, 2007
Slide 1: G2E Presentation
G2E™ Presentation Sydney, 13 November 2007 Aristocrat Leisure Limited (ASX: ALL) today released a presentation given by the Company's Chief Executive Officer and Managing Director, Paul Oneile, at the Global Gaming Expo™ in Las Vegas, Nevada. Enquiries Financial: Simon Kelly (612) 9413 6601 Chief Fi
Slide 2: Aristocrat Leisure Limited G2E November 2007
Aristocrat Leisure Limited G2E November 2007 Chief Executive Officer Chief Financial Officer & Managing Director & Finance Director Paul Oneile Simon Kelly
Slide 3: Disclaimer
Disclaimer This document and any oral presentation accompanying it has been prepared in good faith. However, no express or implied warranty is given as to the accuracy or completeness of the information in this document or the accompanying presentation. All statutory representations and warranties a
Slide 4: Segment Revenue Split — H1 2007
Segment Revenue Split — H1 2007
Slide 5: Substantial and growing shares in key gaming markets worldwide
Aristocrat has substantial and growing shares in key gaming markets throughout the world France 10% Germany 26% Gibraltar 21% Holland 18% Hungary “x Overall 14% Slovenia 22% Video 30% Tes So i Australasia — Pa fic, Argentina 9% + RSA casinos 30% d CHA + RSA LPM 80% Cambodia 14% ° Macau 60% Shastra 6
Slide 6: Opportunities
Opportunities Growth 008 J Replacement cycle Australia | cofwarellicencing model = Replacement cycle - Stepper - video migration - 5 reel stepper |- New markets, Class Il, Ill, VLT Americas - - Recurring revenue = Conversions - South America | - Mexico = Regulation 5 Japan |. class il casinos | Euro
Slide 7: Summary
Summary Short term adverse operating environments in key markets and strength of A$ impacting 2007 Business fundamentals remain strong and key drivers intact + Top line growth — volume and pricing + Leverage of cost structures + Asset leverage * Strong free cash flow - ongoing capital management pro
Slide 8: For personal use only
For personal use only
Slide 9: Speaker script: introduction
GOOD MORNING, LADIES AND GENTLEMEN. MY NAME IS PAUL ONEILE AND | AM THE CHIEF EXECUTIVE OFFICER AND MANAGING DIRECTOR OF ARISTOCRAT. WITH ME TODAY IS SIMON KELLY OUR CHIEF FINANCIAL OFFICER AND FINANCE DIRECTOR. SIMON WILL BE AVAILABLE, ALONG WITH MYSELF, TO TAKE QUESTIONS AT THE END OF MY PRESENTAT
Slide 10: Speaker script: business shape and revenue split
| WILL START WITH A BRIEF RE-CAP OF THE SHAPE OF OUR OVERALL BUSINESS. HERE YOU CAN SEE THAT APPROXIMATELY 80% OF OUR REVENUES ARE DERIVED FROM OUTSIDE OUR DOMESTIC MARKET. APPROXIMATELY 70% OF OUR BUSINESS IS IN MARKET SEGMENTS WHICH WE BELIEVE PROVIDE STRONG GROWTH POTENTIAL. THE SEGMENT HERE | HA
Slide 11: Speaker script: market share by region
LOOKING AT THE VARIOUS REGIONS AROUND THE WORLD, THIS CHART SHOWS YOU OUR PRESENCE IN KEY MARKETS. | WON'T TALK TO EACH ONE BUT WILL SIMPLY HIGHLIGHT A FEW FOR YOU. IN OUR HOME MARKET, WHICH IS MATURE, WE CONTINUE TO MAINTAIN A 67% SHARE AND WE RETAIN SHARES AROUND 50% THROUGHOUT THE REST OF THE REG
Slide 12: Speaker script: Europe, Japan, South America
WHILE MODEST AT THIS STAGE, WE ARE MAKING SIGNIFICANT GAINS IN FRANCE AND | EXPECT OUR SHARE TO SHOW HEALTHY GROWTH OVER THE NEXT FEW _ YEARS. APPROXIMATELY 12 MONTHS AGO WE CHANGED OUR STRATEGY IN THE HIGHLY FRAGMENTED EUROPEAN REGION AND WE ARE SEEING OUR SHARES ACROSS MOST COUNTRIES GROWING CONSI
Slide 13: Speaker script: North America market share
HERE IN NORTH AMERICA WE HAVE GROWN TO OVER 14 % OF THE TOTAL INSTALLED BASE, OR AROUND 30% OF THE VIDEO SEGMENT OF THE MARKET IN WHICH WE HAVE BEEN COMPETING. WE HAVE ONLY JUST ENTERED THE STEPPER SEGMENT AND HAVE VIRTUALLY NO PRESENCE IN THE VIDEO POKER MARKET, WHICH TOGETHER MAKE UP APPROXIMATELY
Slide 14: Speaker script: growth opportunities
ONE OF THE MOST IMPORTANT ASPECTS OF MARKET SHARE FOR US IS THAT WE DO NOT BUY MARKET SHARE. WE RELY ON THE QUALITY OF OUR PRODUCT AND OUR AFTER-SALES SERVICE TO CARVE OUT THE SHARES YOU SEE HERE RATHER THAN BUYING COMPANIES OR HEAVILY DISCOUNTING OUR PRICES. WHAT DOES ALL OF THIS ADD UP TO? WE BELI
Slide 15: Speaker script: Australia and Americas
IN AUSTRALIA, THE REPLACEMENT CYCLE REMAINS AT AN UNSUSTAINABLE LOW. AT CURRENT SALES RATES IT WOULD TAKE 18 YEARS TO REFRESH THE INSTALLED BASE WITH VENUES CONTINUING TO DIVERT CAPITAL TOWARDS DEALING WITH RECENTLY INTRODUCED NON-SMOKING REGULATIONS. WE EXPECT TO SEE A PICK UP IN SPENDING ON THE GA
Slide 16: Speaker script: replacement cycle and video migration
WE EXPECT THE REPLACEMENT CYCLE TO BEGIN TO PICK UP DURING THE COURSE OF 2008 AFTER A COUPLE OF YEARS OF SOFT DEMAND. ALTHOUGH THERE HAS BEEN A RECENT PAUSE IN THE TREND, WE WILL SEE THE ONGOING MIGRATION OF STEPPER TO VIDEO. OVER THE PAST 5 YEARS VIDEO HAS BEEN GROWING AT A RATE OF 1.5 — 2% PER ANN
Slide 17: Speaker script: installed base and conversions
NEW JURISDICTIONS WILL CONTINUE TO EXPAND THE OVERALL MARKET AND, TOGETHER WITH NEW OR EXPANDED GAMING FLOORS, THE INSTALLED BASE IS EXPECTED TO ADD UP TO A FURTHER 250,000 UNITS TO THE MARKET OVER THE NEXT 5 YEARS. AS GAMING EXPANDS AND PLAYERS EXPOSURE TO CASINOS INCREASES, THIS WILL HELP DRIVE TH
Slide 18: Speaker script: South America, Mexico, Japan
WE CONTINUE TO BUILD OUR RELATIONSHIPS AND BUSINESS IN SOUTH AMERICA, ALTHOUGH ON A LOW RISK BASIS. THIS REGION PROVIDES SIGNIFICANT POTENTIAL FOR US GIVEN OUR RELATIVELY LOW MARKET SHARE AT THIS TIME. MEXICO REPRESENTS ANOTHER OPPORTUNITY AS THAT MARKET DEVELOPS. OUR INITIAL SALES OF A LOW COST PRO
Slide 19: Speaker script: Japan and Europe
BASED ON CURRENT SENTIMENT AND INITIAL FEEDBACK WE HAVE HAD ON OUR PRODUCT LINE UP, WE ARE CONFIDENT ABOUT REVERTING TO A 5-6% SHARE OF THIS MARKET OVER THE NEXT 12 MONTHS. WE EXPECT TO SEE THE APPROVAL OF COMMERCIAL CASINOS IN JAPAN WITHIN TWO YEARS, ALTHOUGH IT IS LIKELY THAT THIS WILL INITIALLY B
Slide 20: Speaker script: Europe and Asia
AND FRANCE WHERE WE HAVE REAL TRACTION AT THE MOMENT. WE ARE SEEING A GENERAL MOVE TOWARDS REGULATION AND DIGITISATION OF MECHANICAL AWP’S AND STREET MARKETS. WE EXPECT THIS REGION TO CONTINUE TO POST STRONG COMPOUND GROWTH. IN ASIA, GROWTH WILL CONTINUE WITH THE SUCCESS OF MACAU ENCOURAGING A BROAD
Slide 21: Speaker script: Veridian and electronic tables
SALES VOLUMES WILL HOWEVER BE LUMPY DEPENDENT ON THE TIMING OF MAJOR CASINO OPENINGS. AT G2E WE ARE LAUNCHING OUR NEW HARDWARE AND PLATFORM CALLED VERIDIAN. THIS WILL REPLACE OUR EXISTING PRODUCT WHICH WAS INTRODUCED AROUND 7 YEARS AGO. THIS PLATFORM IS SERVER BASED ENABLED AND PROVIDES OPERATORS WI
Slide 22: Speaker script: server-based products
THEIR POTENTIAL IN THE SHORT TERM HAS BEEN HINDERED BY THE REGULATORY APPROVAL PROCESS IN MANY JURISDICTIONS, HOWEVER AS THIS PROGRESSIVELY CLEARS, THE OPPORTUNITIES WILL OPEN UP. AS AN EXAMPLE, THE RECENT INTRODUCTION OF POKERTEK PRODUCT INTO MACAU IS SHOWING EARLY SIGNS OF SUCCESS, DESPITE POKER N
Slide 23: Speaker script: regulatory timing outlook
HOWEVER, WE EXPECT IT TO BE SOME TIME BEFORE THE FULL POTENTIAL OF THESE TECHNOLOGIES ARE REALISED, WITH ADOPTION LIKELY TO BE EVOLUTIONARY RATHER THAN REVOLUTIONARY. WITH MUCH OF OUR GROWTH COMING FROM NEW MARKETS WHICH ARE DEPENDENT ON REGULATORY CHANGE, THE ONE THING THAT REMAINS THE MOST UNPREDI
Slide 24: Speaker script: summary of 2007 results
SO, TO SUMMARISE, OUR 2007 RESULTS HAVE BEEN IMPACTED BY SHORT TERM ADVERSE OPERATING ENVIRONMENTS IN EACH OF OUR KEY MARKETS, WHICH COMPRISE 75% OF OUR EARNINGS. OUR REPORTED RESULTS HAVE ALSO BEEN IMPACTED BY THE STRENGTHENING OF THE AUSTRALIAN DOLLAR WHICH IS UP AROUND 25% AGAINST THE USD AND YEN
Slide 25: Speaker script: cash flow and capital management
AT THE SAME TIME, AS WE TRANSITION TO A SOFTWARE COMPANY AND INTEGRATOR, WE WILL SEE FURTHER ASSET LEVERAGE. OUR BUSINESS MODEL IS FOCUSED ON CASH FLOW GENERATION AND WE SEE THE COMPANY CONTINUING TO GENERATE STRONG FREE CASH FLOW WHICH WILL GO TO FUND AN ONGOING CAPITAL MANAGEMENT PROGRAM THROUGH I
Slide 26: Speaker script: objective and questions
WE ARE WELL PLACED TO CAPITALISE ON’ THESE OPPORTUNITIES. IT IS OUR OBJECTIVE TO DELIVER TOP QUARTILE UNDERLYING EARNINGS GROWTH OVER THE MEDIUM TERM. AND | AM VERY CONFIDENT WE WILL ACHIEVE THIS GOAL. SLIDE — QUESTIONS THAT CONCLUDES THE FORMAL PART OF MY PRESENTATION. SIMON AND | WOULD NOW BE PLEA