Aristocrat mulls entering the booming US online sports betting market

Poker machine giant Aristocrat is steaming ahead with plans to become a more diversified gaming company as its valuation soars.

Aristocrat is transforming from being just a poker machine maker to a digital gaming juggernaut.

Aristocrat is considering entering the US online sports betting market as the poker machine titan becomes a more diversified gaming company.

Chief executive Trevor Croker said the move was on the horizon after Aristocrat’s net profit vaulted 13.9 per cent to $1.1bn in the year to September 30.

“It’s a strong demonstration of the diversification of the business over the years. If you look at going from just being a gaming machine manufacturer to now a diversified business, being a strong player in land-based gaming to also a good player in top five Western markets in digital,” Mr Croker said.

“Throughout the year, we continued to invest in competitive product portfolios to drive further share growth across key segments, greater operational diversification and deeper business capability.

Aristocrat has embarked on a “build and buy” strategy, launching its own real money gaming platform – dubbed ‘Anaxi’ – after its failed takeover tilt of British gaming software company Playtech.

The company has been focusing much of its energies on Anaxi but Mr Croker said the company is considering other digital ventures, including online sports betting.

It comes as the US sports betting market has exploded after the US Supreme Court struck down the Professional and Amateur Sports Protection Act, in May 2018. Goldman Sachs projects the size of the US sports betting market to soar from $US900m to $US39bn ($58bn) by 2033, with Australian companies eager to get in on the action.

“We do want to participate in igaming, ilottery, sports, these are all verticals that are logical solutions when you get our aspiration of being a platform player, so at some point in the future we may do it,” Mr Croker said.

Aristocrat Leisure CEO Trevor Croker in Las Vegas

“I wouldn’t say it’s high on high priorities. Our priorities at the moment are around organic execution, which leverages the strength of our land-based content, our strong customer relationships and also our high regulatory processes around getting games approved.”

The company’s revenue firmed 17.7 per cent to $5.57bn after a “strong performance” in Aristocrat Gaming more than offset headwinds in its digital Pixel United business, which included the relocation of 75 per cent of its employees in Ukraine to other parts of the country or to neighbouring nations such as Poland.

Mr Croker said despite the disruption from Russia’s invasion of Ukraine, the productivity levels of Aristocrat’s Ukrainian employees had returned to pre-conflict levels.

“It’s a testament to our people. To be honest, it’s the people who are doing all this hard work and they’re wanting to work, which is a fantastic sign of our culture.”

The group will pay a final dividend of 26c a share, fully franked, on December 16. This has taken the total cash returned to investors this year to $660m after it announced a $500m share buyback in May.

Aristocrat did not disclose detailed guidance for this financial year, prompting its shares to fall 5 per cent to $35.98 on Wednesday.

“The lack of quantitative guidance, or buyback update, may weigh on sentiment, albeit the positive outlook for North America is strong while weakness in Digital / Pixel has been flagged and expected,” Ord Minnett analysts said.

“Australia/NZ margins disappointed, with the company attributing this to increased supply costs, and in fairness this is a relatively small part of the business. Cash conversion was weaker than we have seen historically and appears to be a function of a receivables and inventory build, which has been a topic of discussion for some time.”

Meanwhile, Andre Fromyhr said the company’s results were slightly below consensus estimates.

“The guidance for ‘NPATA growth’ next year is perhaps not specific enough to swing market forecasts, already at double digit. We also think the slowing ship share momentum and minor quality factors of lower R&D and currency tailwind could drag on Aristocrat price reaction.”