Slot maker Aristocrat’s stock jumps despite loss

Tuesday, Feb. 24, 2004 | 11:09 a.m.

BLOOMBERG NEWS

SYDNEY, Australia -- Shares of Aristocrat Leisure Ltd., last year's worst performer on Australia's benchmark index, surged 20 percent today after the world's second biggest slot-machine maker more than doubled its cash flow and repaid its bank debt.

Chief Executive Paul Oneile, who started in December, said the company has a "clean slate." Writedowns and related costs taken during 2003 totaled A$160 million ($124 million), contributing to a second-half net loss of A$73.1 million.

"The balance sheet now looks solid and they've removed a big risk," said Matt Williams, who helps manage the equivalent of $15 billion at Perpetual Investments in Sydney, including shares of Aristocrat. He spoke after a company briefing for analysts.

Oneile was appointed after a seven-month search and a review of the company's assets. Changes in how Aristocrat manages its business boosted cash from operations to A$204.4 million from A$79 million and cut net debt to A$70.2 million from A$292.1 million by the end of December. It reported full-year results today.

Aristocrat shares rose 39 cents to A$2.39 at the 4 p.m. market close in Sydney. Earlier the stock touched A$2.42. More than 17.2 million shares changed hands, or six times its six-month daily average. The stock has risen 39 percent this year.

Current levels of debt and cash flow "are reasonably sustainable," Chief Financial Officer Simon Kelly told reporters. "It would be fair to observe we have probably picked the low hanging fruit and it will get harder from here."

Oneile succeeded Des Randall, who was fired in April after a bungled South American contract led the company to miss a profit forecast. The Sydney-based company also replaced its U.S. managers and its former CFO, and its chairman quit.

"The strong cash flows generated during the year reflect the underlying financial health of Aristocrat and the resilience of its business," Oneile said.

The company used the cash to help repay its bank debt during the second half of the year, leaving only $130 million of convertible bonds and a nominal bank loan outstanding, it said. Cash assets increased to A$104 million from A$70.3 million.

For the year, Aristocrat said it had a net loss of A$106 million, or 23 cents a share.