Aristocrat Leisure Limited

Thank you for standing by and welcome to the Aristocrat half-year 2021 results briefing conference call. All participants are in a listen-only mode. There will be a presentation followed by a question and answer session. If you wish to ask a question, you will need to press the star key followed by the number one on your telephone keypad. I would now like to hand the conference over to Mr. Trevor Croker, Chief Executive Officer and Managing Director. Please go ahead.

Good morning and welcome to Aristocrat's financial results presentation for the half years of 51 March 2021. My name is Trevor Croker, Chief Executive Officer and Managing Director of Aristocrat. It is a pleasure to present Aristocrat's half year results today along with Julie Cameron Doe, our Chief Financial Officer, who is on the line, together with Mitchell Bowen, CEO of Aristocrat Gaming and Chief Transformation Officer, and Mike Lane, CEO of Aristocrat Digital. Thank you everyone for joining us. Turning to our agenda on slide two, please note that the full details of the half year results are contained in the review of operations document released this morning. Today we will step through the presentation deck, beginning with a strategic overview of our business before moving to group results, highlights of our operational performance and outlook and finally opening the line to questions. Before we begin, please note the usual disclaimer statement available at the back of today's presentation deck. References to prior corresponding period or PCP related to six months to 31 March 2020. Turning now to slide four. I'd like to begin by referencing Aristocrat's established and proven growth strategy. In a nutshell, we aim to deliver high quality, profitable growth by continuously improving the competitiveness and breadth of our product portfolios and diversifying our business. To do this, we invest in great people, game content, technology and capability, building on the foundations of culture, governance and exceptional financial strength. We are also prepared to invest aggressively, both organically and inorganically, to accelerate our progress. The diagram describes our strategy, Flywheel, which we have shared previously. In the context of the challenges and opportunities highlighted by the COVID pandemic, we took the opportunity to review the strategy during the reporting period. we have made some refinements in terms of emphasis and priority, the strategy remains absolutely sound and today's results demonstrate this. In particular, Aristocrat has taken the right decisions over the recent months to double down our strategic strengths and invest strongly in people, product, customers and culture. Over the course of today's presentation, I will touch on a number of these choices and priorities. As a result, Aristocrat today is a better and more resilient business than we were pre-COVID. With the benefit of a refreshed and effective strategy, together with the belief and capacity to execute vigorously, the business is ideally placed to continue our momentum going forward. Before stepping through the detail of performance for the period, I'd like to take a moment to characterise Aristocrat's business as it continues to grow and transform on slide five. Today, Aristocrat is a gaming, entertainment and technology company of global scale. With diversified portfolios in both gaming and digital markets, we are successfully growing and leveraging world-class titles across multiple platforms and distribution channels. We continue to lift the percentage of overall revenues that derive from recurring sources. This not only builds further resilience in our model, but also gives the business more opportunity to benefit from its exposure to fast-growing segments and improved market conditions. In the reporting period, almost 80% of revenues were derived from recurring sources. Our appetite to invest behind our strategic differentiators and to accelerate growth is also a hallmark of the risk test business. Underpinning our confidence to invest is of course our strong balance sheet, cash flow generation and available liquidity which enable continued execution of our growth strategy over the period despite COVID-driven uncertainties. Finally, this slide also provides a snapshot of the characteristics and performance of our two operational businesses. in digital and gaming over the half year. The roughly even split in terms of revenue contribution further highlights the success of our diversification efforts and improved overall business resilience. Turning to slide six. As I mentioned, over the six months of 31 March 2021, Arisca had chosen to protect and extend our strategic advantages and position the business for sustained growth. I'd now like to provide more colour on these choices. From a people-first perspective, we energised our culture and offered more support, flexibility and recognition to our people. An average engagement score of 8.4 was achieved across our global business in the period, holding at a level above technology industry benchmarks. We also lifted investment in great talent, including leadership development, training and new talent acquisitions, particularly in strategic skillsets. From a customer-centricity perspective, We continue to offer tailored, flexible solutions to gaming customers to support their recovery. This has given deeper strategic partnerships and customer advocacy. In terms of portfolio diversification, we have further broadened our business by penetrating more adjacent markets, segments and digital genres. During the period, we opened two new gaming creative studios and launched and scaled a further world-class digital title in Evermerge. building on earlier digital talent investments in Nestle and Proteus. To support this momentum and underpin long-term growth, $243 million was invested in V&D during the period. While towards the lower end of our historic 11% to 12% of revenue range, it remained robust in absolute terms and market leading compared to peers. We also committed $252 million in the half in UAE. representing a $50 million increase from the PCP and 28% of digital revenues, which was at the high end of our 25% to 28% target range. Turning now to slide seven, our strategy is fundamentally geared to delivering sustainable performance, which means that a robust approach to ESG is an important part of our approach. During the reporting period, we completed a fresh assessment of our material ESG issues. This incorporated input from a wide range of stakeholders including market stakeholders, employees, customers, regulators and business partners. Existing priorities across responsible gameplay, governance, employee relations and diversity and inclusion, ethical sourcing and energy and environment. We largely confirmed but we will apply the many insights seen to refine priorities, drive progress and improve our disclosures going forward. On slide 7 you'll see we have referenced some of the progress achieved across material issues during the reporting period. This includes bringing forward more product innovations and initiatives to inform and empower players, delivering comprehensive anti-bribery and corruption training and foundational work to better understand and quantify our greenhouse gas emissions profile. This work will support more detailed disclosures on emissions consistent with stakeholder feedback work to further strengthen our robust approach to governance with a key focus in the heart. RISC-CREP 2021 ESG Disclosures will be published on our group website in December. We look forward to sharing full details and taking a further step forward in our ESG maturity at that time. I'll now turn to a summary of our group performance for the half year, building on the market disclosures released on 17 May. Turning to slide 9. Over the six months to 31 March 2021, the group delivered a high quality result that reflects the business' diversification and resilience as well as successful execution and the impact of sound investment choices that I outlined. Normalised profit after tax and before amortisation of acquired intangibles or NPAT-A of $412 million was delivered. This represents an increase of 12% in reported and 27% in constant currency compared to the PCP. Reported revenue decreased fractually by 1% to approximately $2.2 billion. On a constant currency basis, revenue was 11% higher than the prior half year, reflecting strong growth in digital and a rebound in gaming across the US and ANZ markets. This strength has been partly offset by performance in the international gaming segment in the reflected the fact that many markets across EMEA and Asia remain closed or subject to travel restrictions. Earnings before interest, tax, depreciation and amortisation or EBITDA was 6% higher than the PCP at $750 million and 19% higher on a constant currency basis, reflecting margin improvement across gaming and digital operations. of acquired intangibles of 64.5 cents represented a 12% increase compared to the PCP. Normalised operating cash flow of $425 million was 31% lower than the PCP as a result of strategic investments to support customer recovery including working capital initiatives. The group's balance sheet remained extremely strong over the period with over $2 billion in available funds and a net debt to EBITDA ratio of 1.2 times at 31 March 2021. The directives have authorised the fully franked dividend of $0.15 per share, $95.6 million in respect to the period ended 31 March 2021. The record date will be Monday 31 May and the payment date will be Friday 2 July 2021. I'll now invite Julie to take us through further details of our group results. Julie.

Thank you, Trevor, and good morning, everyone. Slide 10 sets out the composition of aristocrats' reported end-cafe performance of $412 million, normalised for significant items and compared to the PCP. As Trevor mentioned, the 12% higher NPAT result, a 27% increase in constant currency, was largely driven by an incremental $117 million profit in the digital business, with modest growth across the Americas and AMZ gaming businesses, partly offset by weakness in the international gaming segment and $52 million in currency headwinds. Profit in the America's gaming segments increased $11 million compared to the PCP, an outstanding result that reflects a higher gaming operations contribution. Growth was delivered across both premium Class 3 and Class 2 in-store bases, along with a market-leading fee-per-day result. ANZ gaming markets also benefited from improved consumer sentiment and strong portfolio performance, with profit in the segment up $6 million compared to the PCP. Effective execution drove strong revenue performance across the period, with a notable acceleration through March and, to a lesser extent, April. As Trevor referenced, D&D investment in talent and technology was maintained at strong levels, accelerating over the period as we gained more certainty around performance. The increase in the group's effective tax rate from 24.2% to 24.7% is a function of the geographic profit mix during the harvest. Finally, results for the period were not impacted by any reductions to provision. Turning now to slide 11. The group's cash generating fundamentals remained strong over the six months to 31 March 2021. Normalised operating cash flow decreased 31% to $425 million compared to the prior corresponding period. The change in networking capital of $130 million reflects investments to support the recovery and growth of gaming customers and a decline in inventory levels due to the impact of COVID in the prior year. The decrease in other cash and non-cash inflows was driven by the appreciation of the Australian dollar in the reporting period. Capital expenditure was over $100 million and a half, primarily comprised of continued investment in hardware to support growth in the Americas gaming operations in-store space. Significant non-cash items in the period related to remaining contingent Clarion retention arrangements, while significant cash items in the period related to the Cater and Finnegada legal settlement, as previously disclosed, and Clarion retention payments. Moving now to capital investments and our balance sheet, slide 12. Over the reporting period, Aristocrat continued to allocate capital according to our established priorities in order to promote long-term growth and appropriate shareholder returns. These priorities are set out on the slide, starting with our top priority of organic business investments. Accordingly, over the reporting period, we committed $243 million in D&V to further strengthen our product portfolio. We also invested $252 million in user acquisition to drive performance in digital, and over $100 million in CapEx, as previously noted. Our next priority is to deploy capital on inorganic opportunities to accelerate achievement of our strategy, in line with our rigorous investment criteria. We continue to proactively assess inorganic opportunities to bring new strategic capabilities to the business, facilitate growth into attractive adjacencies, or further expand our product pipeline, particularly in digital. Our third priority is capital returns. In light of market conditions and the group's debt holding, we continue to prioritise liquidity over debt reduction during the reporting period. Trevor referenced the group's strong balance sheet and liquidity position at 31 March 2021, which continues to provide us with financial strength, flexibility and full optionality going forward. Net debt of around $1.3 billion at period end compares favourably to net debt of $1.6 billion reported at 30 September 2020 and represents a net debt to EBITDA leverage ratio of 1.2 times. At 31 March 2021, Aristocrat had total liquidity of over $2 billion, comprised of cash and available revolving credit facilities of $277 million. Our debt facilities, largely drawn from the US term loan fee market, remain competitively priced at a weighted average LIBOR plus 235 basis points. Credit agreements remain covenant-like and provide the group with ample financial flexibility. Our credit ratings also remain unchanged at CD plus BA1, with a recent positive shift to stable outlook, given our strong operating performance. That completes the overview of group results. I will now pass back to Trevor to take us through operational performance and outlook for the remainder of 2021 financial year. Trevor.