Up against four of a kind, Aristocrat finds it a tough school
Shares in the poker machine maker surged as much as 9 per cent on Wednesday after it posted an 11 per cent rise in first-half net profit to almost $53 million and raised its dividend. Revenue fell nearly 8 per cent to $383 million due to a weak performance in Japan, one of its largest markets outside Australia and the US.
Pre-tax earnings from its Japanese business dropped 9 per cent because it released just one game in the half, compared with two before.
Profits in Australia and New Zealand - its second-biggest market - fell almost 7 per cent to $40 million due to the impact of regulatory changes in Victoria. But Aristocrat's operations in North America posted a 13 per cent profit rise to $US69 million.
Chief executive Jamie Odell said Australia was "absolutely the most competitive market at the moment", with the company facing strong competitors.
"We have seen improved performance in our games across New South Wales and Queensland, but I would still describe this as
the most competitive marketplace," he said. "The years of incumbency are now being challenged by good-quality competitors, and that is keeping us on our toes and has driven our strategy to move into further segments."
Mr Odell said the solution in Australia was not just to produce better Aristocrat games, but to introduce content from such game designers as Daniel Marks.
Aristocrat will pay an interim dividend of 7¢ a share on June 28, up from 4¢ previously. The company plans to return more money to shareholders by raising its target payout ratio to 80 per cent of net profit, from 60 per cent previously.
Mr Odell said the board preferred to increase the payout ratio rather than opt for a share buyback.
Aristocrat expects net profit in the second half to be similar to those in the first six months.
Michael Pascoe— Page 30
Frequently Asked Questions about this Article…
Aristocrat reported an 11% rise in first-half net profit to almost $53 million while revenue fell nearly 8% to $383 million. The market reacted positively — shares surged as much as 9% on the Wednesday the results were released.
Revenue fell nearly 8% to $383 million mainly because of weaker performance in Japan, one of Aristocrat's largest markets outside Australia and the US. Despite lower revenue, other cost or regional profit changes helped net profit increase.
Pre-tax earnings from Japan dropped about 9% after the business released only one game in the half (versus two previously). Profits in Australia and New Zealand fell almost 7% to $40 million, partly due to regulatory changes in Victoria. North American operations saw a 13% profit rise to US$69 million.
CEO Jamie Odell described Australia as 'absolutely the most competitive market at the moment,' noting strong competitors are challenging incumbents. This competitive pressure is driving Aristocrat to improve game performance and expand into further segments.
Yes. Aristocrat announced an interim dividend of 7¢ a share payable on June 28, up from 4¢ previously. The company also raised its target payout ratio to 80% of net profit from 60%, indicating it plans to return more cash to shareholders rather than favouring share buybacks.
The board has indicated a preference for increasing the payout ratio to 80% of net profit rather than opting for a share buyback, signalling a focus on higher dividend returns to shareholders.
Aristocrat expects net profit in the second half to be similar to the first six months, implying a relatively flat profit outlook for the remainder of the year based on the company's commentary.
Aristocrat plans to lift performance by producing better games and introducing content from external game designers (the article cites designer Daniel Marks). The company said competition has driven its strategy to move into additional segments to stay competitive.
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