Casino slot machine maker and digital casino games provider Aristocrat Leisure Ltd says it will be standing down about 1,000 staff and cutting down jobs, as part of efforts to “mitigate the impacts” of the Covid-19 pandemic on the group’s business. In a Monday filing to the Australian Securities Exchange, the company said it had also decided to suspend its financial-year 2020 interim dividend.
“Around 1,000 staff will be stood down until the end of June 2020, principally in land-based sales, service and manufacturing operations, reflecting venue closures and uncertain reopening time frames,” said the Australia-listed company. “Around 200 roles will be removed permanently from the business, reflecting changed priorities.”
Aristocrat said it was planned that the “significant workforce changes” would take effect from May 1, 2020. The company had already slashed all “discretionary, consultant and contractor spend in line with revised priorities.”
Aristocrat had in March flagged “softer demand” in the group’s land-based segment, but a solid performance in its digital business. Land-based operations have historically delivered the majority of the group’s revenues. The segment accounted for approximately 60 percent of Aristocrat’s aggregate revenue for the financial year ended September 30, 2019.
In Monday’s filing, Aristocrat said that until the end of the current financial year in September, approximately 200 full-time roles would be moved to part-time work.
The company would also cut between 10 percent and 20 percent the base salaries of about 1,500 staff; and fees payable to Aristocrat’s board of directors would be reduced by 20 percent. The base salary of Aristocrat’s managing director and chief executive, Trevor Croker, would be reduced by 30 percent.
The company said in the document: “The group is supporting all affected employees, including with appropriate transition assistance and separation benefits, access to paid leave and preserving health coverage for U.S. staff (in the case of stand-downs), counselling and assistance accessing government support where available.”
In total, the cost reduction initiatives are expected to deliver approximately AUD100 million (US$64.3 million) in savings over the remainder of the financial year, said Aristocrat.
According to the latest filing, “almost all of Aristocrat’s land-based customers globally have suspended operations” since mid-March.
While the timetable was “highly uncertain”, Aristocrat anticipated that “venue reopenings will take place on a phased basis, with a gradual ramping up of gaming floors in line with improvements in consumer confidence,” and the winding back over time of “social distancing and travel limitations.”
It added: “Aristocrat continues to implement a comprehensive Covid-19 response, focused on protecting its strategic advantages and positioning the land-based business to respond quickly as demand returns.”
The filing quoted Aristocrat’s Mr Croker as saying: “These changes, and other prudent steps we are taking as part of our Covid-19 response, will deliver important operational and financial flexibility, focus and efficiency through this period of uncertainty.”
Aristocrat said additionally that its digital business continued to “perform strongly, with higher bookings and player engagement evident across most of the portfolio.”
In its latest financial year, the company derived approximately 40 percent of aggregate group revenues from the digital segment.
Brokerage JP Morgan Securities Australia Ltd had suggested in a note earlier in April that Aristocrat was “well-positioned” to expand the market for its online-delivered product during a near-worldwide pause in land-based casino operations due to the coronavirus pandemic.
In Monday’s filing, the Australia-listed firm said its balance sheet remained “strong, with over AUD1 billion in available liquidity”.
Such liquidity is comprised of cash from operations and the draw down of the group’s AUD150-million revolving credit facility together with an additional AUD136 million from a “successful upsizing” of the revolving credit facility on April 24.
Aristocrat said that to assist liquidity further and position the group for post- Covid-19 recovery, the firm’s directors had decided to “suspend its progressive dividend policy and do not intend to declare an interim dividend as part of the group’s half-year results”.
“The group is well positioned to preserve its strong balance sheet metrics during this period, including through the scaling back of capital expenditure,” it added.
The company said it had net debt to earnings before interest, taxation, depreciation and amortisation (EBITDA) ratio of 1.4 times as at September 30, 2019. The company also said it had no near-term debt refinancing requirements, and that the underlying credit agreements were “covenant-light in nature”.
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Chairman and chief executive of Las Vegas Sands