Aristocrat Profits Dented by Slow Cabinet Replacement Cycles

By Ian Neubauer

Gaming machine manufacturer Aristocrat Leisure reported replacement of its machines has fallen to a level that represents a 35 year cycle at its annual general meeting yesterday (Apr 21), with unit sales down 44 per cent over the past 12 months.

The long replacement cycle coalesced with the slow roll out of the company’s Viridian cabinet and Gen7 platform – and the new library of games essential to their performance – to further downgrade profit expectations from $71 million to a possible low of $40 million for the first half of the 2008-09 fiscal year.

“2008 was another challenging year with the gaming industry continuing to experience the difficult conditions that prevailed in 2009,” Aristocrat chairman David Simpson told shareholders at the Sydney meeting.

“The general deterioration of global economic and market conditions already have, and will likely continue to extend these difficult times beyond our original expectations.”

Aristocrat is currently undergoing a strategic review under the stewardship of recently appointed CEO Jamie Odell, who moved over from Foster’s in February to shake up a corporate culture he said is “not where it needs to be”.

Odell is currently solidifying a core executive leadership to execute the new strategy – the complete details of which will be announced when Aristocrat reports its first half results on August 25.

However, the board revealed it will see a continued increase in R&D and the rolling out of new games for its Gen7 platform, with the monies derived in part from an ongoing $275 million capital raising initiative that will help it take advantage of new strategic opportunities going forward.

“While difficult market and economic conditions are expected to continue throughout 2009, the company should benefit from their greater availability and an increasing library of new games in key jurisdictions for much of the New Year,” Simpson said.

Aristocrat shares were trading at $3.45 at midday today (Apr 22) compared to $4.01 seven days ago.