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Aristocrat lays out “build-and-buy” plans for igaming after H1 revenue growth

| By Daniel O'Boyle
Aristocrat has detailed the “acceleration” of its “build-and-buy” strategy for online gambling, after reporting increased revenue and profit in the six months ended 31 March, the first half of its 2021-22 financial year.

During the period, Aristocrat attempted to acquire online gambling technology giant Playtech, only for shareholders to reject the deal. Following this, the business said it would continue to pursue online opportunities, and then announced the launch of a new online real-money gaming (RMG) arm of the business.

In its earnings report, Aristocrat outlined that its goal for this business was to be the world’s leading online gambling platform.

“Online RMG is a logical growth and diversification opportunity that is highly complementary to both the Aristocrat Gaming and Pixel United [social gaming] businesses,” it said. “It provides

further channels for the distribution of our world-leading content and leverages our strengths including our ability to attack attractive adjacencies through strong investment and effective operational execution.

“This new business has crystalised its objectives and is implementing its plans at full pace, with an ambition to ultimately be the leading gaming platform within the global online RMG industry.”

The business will initially focus its online expansion on the US, planning to launch online products with two new customers in two jurisdictions before the end of the calendar year, with the aim of gaining a “significant share” of the US market within five years.

“Scaling in online RMG is a logical growth and diversification opportunity that is complementary for Aristocrat’s gaming and free to play mobile businesses,” Aristocrat chief executive Trevor Croker said. “It provides another channel for the distribution of our world leading content.

“Our first focus will be in North America given the scale of the opportunity and Aristocrat’s deep customer and regulator relationships.”

When asked if the US would be the sole focus for the online real-money division over the next five years, Croker said it would be the sole focus at first, but that there may also be opportunities in other markets such as Europe that arise in the medium term.

“I think you’ve got it right but I wouldn’t necessarily lock us into five years. We can see that there’s opportunity to be part of the US gaming market, in three of the six open markets by early 2023. 

“It wouldn’t preclude us from going into Europe and other markets, and I wouldn’t quarantine it to five years but we will be able to build the capabilities and technology in North America and then scale it to other markets.”

The business reported strong results in H1, leaving $3.3bn in available liquidity, some of which Croker noted could be used to acquire businesses in the online real-money space.

Aristocrat’s revenue was up 23.1% year-on-year to AU$2.75bn for the half-year.

Pixel United – Aristocrat’s social gaming division – continued to be the largest contributor to revenue, bringing in AU$1.31bn, up by 10.0%.

Meanwhile, for Aristocrat’s gaming machine business, the Americas brought in $1.15bn, up 41.5%, up 281.0%. Australia and New Zealand revenue was $222.7m, up 6.5% while international class gaming added an additional $64.0m, almost four times the previous year’s figure, due to new, “large openings” in the Philippines.

Costs of revenue were up by 11.2% to $1.22bn. This meant Aristocrat’s gross profit was $1.53bn, up 35.3%.

Design and development costs were $312.8m, up 28.8%, selling, general and administrative expenses grew by 22.3% to $444.2m while finance costs grew by 154.6% to $178.0m.

As a result, Aristocrat made a pre-tax profit of $598.0m, up 29.7%.

After an $85.0m income tax expense, down 26.1%, profit for the half-year came to $513.0m, up 48.1%.

“Aristocrat delivered an impressive and resilient performance despite mixed operational conditions and challenges,” Croker said. “We took comprehensive action to protect our people and business, while investing strongly to accelerate our growth strategy going forward.”

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