Aristocrat Leisure Limited · ASX:ALL
Aristocrat Leisure — FY2004 Earnings Presentation
25 slides from Aristocrat Leisure's earnings presentation, Feb 22, 2005
Slide 1: Welcome to 2004 Full Year Results Presentation
GOOD MORNING LADIES AND GENTLEMEN. THANK YOU FOR JOINING US TODAY. MY NAME IS PAUL ONEILE. | AM THE CHIEF EXECUTIVE OFFICER OF ARISTOCRAT AND | WOULD LIKE TO FORMALLY WELCOME YOU TO OUR 2004 FULL YEAR RESULTS PRESENTATION. WITH ME IS SIMON KELLY, THE COMPANY’S CHIEF FINANCIAL OFFICER. LAST YEAR, WE
Slide 2: Summary of 2004 financial performance
| WILL THEN TAKE YOU THROUGH THE RESULTS FOR OUR PRINCIPLE GEOGRAPHIC SEGMENTS. FINALLY, | WILL GIVE YOU AN OVERVIEW OF OUR CURRENT PRIORITIES AND HOW | SEE THE FUTURE DIRECTION OF ARISTOCRAT. TURNING NOW TO A SUMMARY OF OUR FINANCIAL PERFORMANCE FOR 2004. REVENUE OF $1.15 BILLION REPRESENTED AN INC
Slide 3: Profit and loss account
PLEASE NOTE THAT THROUGHOUT MY PRESENTATION, REFERENCES TO 2003 RESULTS ARE PRE THE ONE-OFF ADJUSTMENTS WE ANNOUNCED LAST YEAR, DETAILS OF WHICH ARE SET OUT IN THE 2003 ANNUAL REPORT. FIRSTLY, TURNING TO THE PROFIT AND LOSS ACCOUNT TOTAL REVENUE INCREASED BY 12.5% TO ARECORD $1.15 BILLION. THE GENER
Slide 4: Profit after tax and non-recurring items
OVER TIME TO BE HIGHER THAN THIS, AS THERE WAS NO OVERSEAS DIVIDEND WITHHOLDING TAX LEAKAGE IN THE YEAR. THE PROFIT AFTER TAX OF $174.7 MILLION REPRESENTS OVER DOUBLE THE PREVIOUS RECORD PROFIT RECORDED IN 2001. AT THIS POINT, | WOULD LIKE TO HIGHLIGHT TWO POTENTIALLY NON- RECURRING ITEMS WHICH DID
Slide 5: EBIT improvement period-on-period
- BETTER THAN EXPECTED PERFORMANCE OF OUR NORTH AMERICAN OPERATIONS, SPECIFICALLY IN PLATFORM AND GAME SALES, AND HIGHER PARTICIPATION FEES PER DAY - WE EXPERIENCED A SHORTFALL IN EXPECTATIONS IN EUROPE, SPECIFICALLY IN RUSSIA, AS WE TRANSITION TO NEW DISTRIBUTION ARRANGEMENTS. WHILE IN SOUTH AMERIC
Slide 6: EBIT bridge: recurring revenue and cost of sales
NORTH AMERICAN RECURRING REVENUE RETURNS FROM USD34 TO USD53 PER DAY. EXCLUDING THE IMPACT OF RECURRING REVENUE, THE EFFECTIVE PRICE/MIX INCREASE ON PRODUCT SALES APPROXIMATES 1.3%. THE COST OF SALES IMPROVEMENT REFLECTS THE FULL YEAR IMPACT OF FACTORS | MENTIONED AT THE HALF YEAR, INCLUDING IMPROVE
Slide 7: R&D, commissions and operating costs
IN PERCENTAGE TERMS, R&D COSTS WERE 5.1% OF REVENUE. THE DECLINE FROM THE 6.2% RECORDED IN 2003 PREDOMINANTLY RESULTS FROM HIGHER REVENUES. THE DECREASE IN AGENT COMMISSIONS RELATES EXCLUSIVELY TO JAPANESE SALES AND REFLECTS CHANGES IN CHANNEL MIX. SELLING, MARKETING AND DISTRIBUTION COSTS AND GENER
Slide 8: Regional contribution and foreign exchange
THE NORTH AMERICAN BUSINESS NOW REPRESENTS THE LARGEST SINGLE CONTRIBUTOR TO GROUP RESULTS. WE NOW ESSENTIALLY HAVE 3 BUSINESSES WHICH GENERATE 86% OF OUR TRADING PROFITS WITH OTHER REGIONS INCREASING THEIR OVERALL CONTRIBUTION TO 14%. INTERNATIONAL PROFITS NOW REPRESENT 70% OF TRADING PROFITS, UP F
Slide 9: Foreign exchange exposure and cash flow
IN JAPAN, THE COMPANY’S OPERATIONS ARE RELATIVELY SELF CONTAINED AND THEREFORE THERE |S LIMITED TRANSACTIONAL FOREIGN EXCHANGE RISK. IN RELATION TO TRANSLATIONAL EXPOSURES, THE COMPANY’S REPORTED RESULTS VARY AS FOREIGN DENOMINATED PROFITS ARE CONVERTED INTO AUSTRALIAN DOLLARS AT PREVAILING RATES. T
Slide 10: Operating cash flow
THE OTHER MAJOR INFLUENCE ON OPERATING CASH FLOW WAS THE $9.9 MILLION CASH OUTFLOW AS A RESULT OF CHANGES IN OPERATING ASSETS AND LIABILITIES. PRIMA FACIE THIS RESULT APPEARS DISAPPOINTING. HOWEVER, UNDERLYING OPERATING CASHFLOW WAS ACTUALLY $30 MILLION BETTER THAN REFLECTED HERE, AS FACTORED BILLS
Slide 11: Net working capital
IN. PREVIOUS PRESENTATIONS | HAVE ANALYSED THE KEY COMPONENTS OF WORKING CAPITAL SEPARATELY. TODAY, | WANT TO FOCUS ONLY ON NET WORKING CAPITAL. WE HAVE, HOWEVER, CONTINUED TO IMPROVE OUR RECEIVABLES AND INVENTORY PERFORMANCE RELATIVE TO SALES, AND | HAVE INCLUDED UPDATED CHARTS AS APPENDICES TO THI
Slide 12: Capital management initiatives
THE OPERATIONAL DEMANDS OF THE BUSINESS AND TO UNDERWRITE ANY FUTURE STRATEGIC OPPORTUNITIES. AT THE SAME TIME, WE ARE DETERMINED TO TAKE A PRO-ACTIVE APPROACH TO CAPITAL MANAGEMENT. TAKING THESE OBJECTIVES INTO ACCOUNT, THE BOARD TODAY ANNOUNCED A NUMBER OF CAPITAL MANAGEMENT INITIATIVES. FIRSTLY,
Slide 13: Key financial data and ratios
FINALLY, THIS CHART SETS OUT SOME KEY FINANCIAL DATA AND RATIOS, WHICH SUMMARISE THE PERFORMANCE OF THE COMPANY FOR THE YEAR COMPARED WITH 2003. EBIT OF $274.8 MILLION EXCEEDS THE 2003 RESULT BY $171 MILLION, OR 165%. WE HAVE FURTHER IMPROVED ON THE WORKING CAPITAL/REVENUE RATIO, WHICH STANDS AT 9.3
Slide 14: Australia results
THEY WERE INSTRUMENTAL IN SUCCESSFULLY DRIVING A NUMBER OF BUSINESS AND COST INITIATIVES THROUGHOUT THE ORGANISATION. | WILL NOW GO THROUGH THE RESULTS AND OUTLOOK FOR EACH OF THE COMPANY’S KEY MARKETS, NAMELY AUSTRALIA, NORTH AMERICA AND JAPAN. | WILL ALSO MAKE SOME GENERAL COMMENTS IN RESPECT OF O
Slide 15: Australia products and market position
CASH EXPRESS™, ONE OF OUR HYPERLINK™ PRODUCTS, REGULARLY RETURNS A PERFORMANCE LEVEL OF DOUBLE THE FLOOR AVERAGE IN THE AUSTRALIAN MARKET. IN TERMS OF GAMES, ZORRO™? WAS CERTAINLY THE STAND OUT PERFORMER, DELIVERING PERFORMANCES OF BETWEEN 1.8 AND 2 TIMES THE FLOOR AVERAGE TO MOST OPERATORS. SO IN V
Slide 16: North America results
| AM CONFIDENT THAT THE PROFIT CONTRIBUTION FROM OUR AUSTRALIAN OPERATION WILL CONTINUE TO GROW. TURNING NOW TO NORTH AMERICA. REVENUE IMPROVED BY 52% FROM $241 MILLION TO $368 MILLION. UNIT SALES WERE UP 36% TO OVER 12,300 UNITS, REFLECTING THE POPULARITY OF OUR PRODUCT, THE EFFORTS OF OUR NORTH AM
Slide 17: North America outlook and initiatives
THE SIGNIFICANT MARGIN IMPROVEMENT — FROM 3.4% TO 28.7% REFLECTED BOTH THE INCREASING RECURRING REVENUE CONTRIBUTION AND THE CONTAINMENT OF OUR FIXED COST BASE. TURNING NOW TO THE INITIATIVES WE HAVE PUT IN PLACE AND THE OUTLOOK FOR NORTH AMERICA. WE WILL CONTINUE TO CAPITALISE ON OUR PRODUCT PERFOR
Slide 18: Japan results
TURNING NOW TO JAPAN REVENUE FELL 6.6% TO $336.8 MILLION, FOLLOWING A RECORD 2003, WHEN SALES MORE THAN DOUBLED. WE SUCCESSFULLY LAUNCHED TWO NEW GAMES DURING 2004, DARUMA-NEKO™ AND KYOJIN-NO-HOSHI 2™. OUR NUMBER OF GAMES SOLD INCREASED BY 2% TO OVER 85,000 UNITS. HOWEVER HIGHER TRADE INS AND _ INVE
Slide 19: Japan outlook and other international markets
ONE OF THE DEVELOPMENTS WE ARE FOLLOWING WITH INTEREST IS THE POSSIBLE APPROVAL OF A TRIAL CASINO. WE ATTENDED THE FIRST MEETING OF THE JAPANESE CASINO ASSOCIATION IN LATE 2004 AND EXHIBITED OUR CASINO STYLE PRODUCT FOR THE FIRST TIME IN JAPAN. WE WILL CONTINUE TO MONITOR THESE DEVELOPMENTS CLOSELY.
Slide 20: New Zealand, South Africa and South America
THIS WAS THE RESULT OF THE RESTRICTIVE LEGISLATIVE AND REGULATORY ENVIRONMENT, WHICH | BELIEVE WILL CONTINUE THROUGH 2005. NOTWITHSTANDING THIS, OUR NEW ZEALAND BUSINESS HAS MADE MAJOR PROGRESS IN TWO IMPORTANT AREAS. WE SUCCESSFULLY LAUNCHED THE MK.V/™ CONVERSION PACKAGE DURING THE YEAR. ZORRO™* WA
Slide 21: Emerging markets and business objectives
OTHER THAN IN THE UK AND SOME PARTS OF EUROPE, WE ADOPT A LOW RISK DISTRIBUTION MODEL FOR EMERGING MARKETS. THIS HAS NOW PROVEN TO BE A SUCCESSFUL MODEL IN RUSSIA AND SOUTH AMERICA AND WILL BE USED ELSEWHERE AS APPROPRIATE. FOR EXAMPLE, WE HAVE ADOPTED THAT MODEL IN NORWAY, AN EMERGING MARKET THAT |
Slide 22: Developing markets and R&D
MARKET IS NOW LIKELY TO BE SMALLER THAN MOST HAD ORIGINALLY ANTICIPATED. WE WILL FOCUS ON ESTABLISHING SIGNIFICANT POSITIONS IN EACH OF THESE DEVELOPING MARKETS AS THEY EMERGE. | HAVE SET AMBITIOUS TARGETS IN THESE NEW MARKETS AND THE EARLY SIGNS ARE VERY POSITIVE, WITH MACAU BEING A PROMINENT EXAMP
Slide 23: Growth framework principles
WE HAVE SIGNIFICANTLY STRENGTHENED OUR EUROPEAN OFFICE AND WE ARE IN THE PROCESS OF TRANSITIONING TO A NEW BUSINESS MODEL IN RUSSIA, AS | MENTIONED EARLIER. TOWARDS THE END OF LAST YEAR WE APPROVED THE ESTABLISHMENT OF NEW OFFICES IN MACAU, OSAKA AND CAPE TOWN. | SAID LAST YEAR THAT | WAS DETERMINED
Slide 24: Acquisition principles and 2005 outlook
IN THE EVENT THAT WE WERE TO CONSIDER AN ACQUISITON, THESE ARE A FEW OF THE PRINCIPLES WE HAVE ADOPTED IN EVALUATING OPPORTUNITIES. - WE WILL NOT BUY MARKET SHARE FOR THE SAKE OF IT. - WE ARE HOWEVER INTERESTED IN OPPORTUNITIES WHICH PROVIDE ACCESS TO KEY INTELLECTUAL PROPERTY OR PRODUCT LINE EXTENS
Slide 25: Outlook and summary of major points
IMPROVEMENT ON THOSE OF THE PRIOR YEAR AND THE OUTLOOK ACROSS OUR BUSINESSES GENERALLY REMAINS POSITIVE. AFTER SUCH A STRONG 2004 RESULT | AM CONFIDENT THAT WE WILL SEE FURTHER PROFIT GROWTH IN THE CURRENT YEAR. | WOULD LIKE TO SUMMARISE THE MAJOR POINTS WE HAVE COVERED THIS MORNING BEFORE WE MOVE I