Aristocrat forecasts record first half

Vesna Poljak

Tuesday, May 3, 2005 | 9:34 a.m.

Aristocrat Leisure Ltd., the world's second-largest slot machine maker, said first-half profit may rise about 50 percent to a record on increased sales of new games in the U.S. and Japan. The company's shares rose.

Profit will rise to between A$90 million and A$100 million ($78 million) in the six months to June 30, compared with A$63.3 million a year earlier, Chief Executive Paul Oneile told shareholders at today's annual meeting at Sydney's Star City casino. The shares rose 2 percent to A$10.05.

Oneile, 56, has presided over a revival in earnings by introducing new games and boosting sales in North America, Japan and Macau since replacing Des Randall, who was sacked after a bungled Colombian order led to a record loss in 2003.

"He's obviously done a good job," said Richard Wallace, who helps manage the equivalent of $102 million as managing director of Wallace Funds Management in Sydney. "They've spent a lot of time in the U.S. gaining regulatory approvals and they're just starting to leverage that process now."

North American sales are "strong," Oneile told shareholders. Aristocrat expects to start selling new games including "Zorro" and "Pele" in North America starting in the second-half and will ship "Streetfighter 2" to Japan next month.

Aristocrat last month signed an exclusive Russian distribution agreement with Smartgames Group to expand in the world's fastest-growing gaming market.

Aristocrat shares trade at about 28 times earnings, compared to larger rival International Game Technology, which trades at 21 times earnings, according to data compiled by Bloomberg. Aristocrat shares have risen 162 percent in the past year, compared with a 28 percent decline in Reno, Nevada-based International Game, which in January said 2005 profit will be less than expected because of weak U.S. demand for its slots.

Aristocrat's stock was the worst performer on Australia's S&P/ASX 200 Index in 2003 when the company reported a A$106 million loss.

"That whole process gave them an opportunity to get all the systems right and a lot of the negative share price performance wasn't really related to the business, it was more to do with management difficulties and personnel difficulties," said Wallace Funds' Wallace. "We still like the stock."