Slot maker’s first-half outlook improves

Tuesday, May 25, 2004 | 10:54 a.m.

BLOOMBERG NEWS

SYDNEY, Australia -- Aristocrat Leisure Ltd., the world's second-biggest slot machine maker, forecast a return to profit in the first half after last year's record loss, boosted by sales of its new game in Japan. The shares soared 14 percent today.

Net income in the six months ending June 30 is forecast to be between A$50 million and A$60 million ($42 million), from a A$33 million loss a year ago, Sydney-based Aristocrat said in a statement to the Australian Stock Exchange.

Aristocrat shares have more than doubled this year on optimism Chief Executive Paul Oneile, hired in November, would return the company to profitability after a bungled Colombian contract and slowing sales in the United States led to last year's loss.

"It's a big profit number and it certainly blew people out of the water," said George Clapham, who helps manage the equivalent of $310 million at ABN Amro Asset Management in Sydney. "It looks to be mostly in Japan, but other businesses are doing better too."

Aristocrat shares rose 53 cents to A$4.31 at the 4 p.m. close of trading in Sydney. The stock has gained 150 percent this year and is the best performer on the benchmark S&P/ASX 200 index. Last year, the shares slumped 63 percent.

More than 12 million shares were traded, almost four times the daily average of the past six months.

The first-half result is expected to include sales of 42,000 to 45,000 gaming machines in Japan, mostly the new "Daruma-Neko" pachislo game, Aristocrat said. Pachislo is similar to slot machines with players stopping the reels by pressing a button. Tokens are used instead of coins, and are then exchanged for prizes.

"These results reflect the underlying strength of the business and the progress that the company continues to make," Oneile said in the statement.

In 2002, Aristocrat shipped about 3,000 slots to Colombian casino operator Carlos Quintero before the sale fell through last year when contractual obligations weren't met. Aristocrat paid $3.5 million to settle a damages claim related to the contract.

Aristocrat said it hasn't made a provision to settle litigation with former chief executive Des Randall, who is suing for about A$13 million in severance payments after being dismissed last year.

The profit forecast is above analyst expectations for the half and may lead to increased full-year forecasts for Aristocrat, said Derek Francis, an analyst at Commonwealth Securities Ltd. in Sydney who rates the stock "hold."

"We will probably be upgrading our full year numbers for net profit to around the A$100 million mark," he said.

Aristocrat had been expected to earn a net profit of A$69 million in 2004, according to the average estimate of 11 analysts surveyed by Thomson Financial.

The company will announce first-half earnings Aug. 24.