Australia-based slot machine maker Aristocrat Leisure Ltd on Tuesday announced it would close its main Japanese unit KK Aristocrat Technologies and cease new pachislot game development in that country. The decision follows what the parent describes as a “strategic review” of its Japanese business.
Aristocrat Leisure added it would maintain a “small” presence in Japan via another subsidiary called KK Spiky that would provide service and field support for recent game releases including ‘Black Lagoon 2’.
Pachislot machines are a type of hybrid product incorporating elements of traditional Japanese pachinko machines – that use steel balls – and modern slot machines, with their integrated circuits. Product sales of pachislot machines are mostly in the Japanese domestic market.
The Japan business had become “less relevant to Aristocrat’s predominantly recurring revenue footprint,” said Toni Korsanos, Aristocrat Leisure’s chief financial officer, in Tuesday’s statement.
Wells Fargo Securities LLC said in a note on Thursday regarding Aristocrat Leisure’s global rival IGT Plc, that recurring revenues from proprietary technology and services offered gaming technology companies protection from exposure to the “more volatile gaming and lottery product sales segments”.
“We will continue to prioritise investments behind our growing core segments across Class II, Class III and digital gaming segments,” added Aristocrat Leisure’s Mrs Korsanos in Tuesday’s statement, referring firstly to lottery or bingo-type games, and secondly to casino-type slot machines.
Aristocrat Leisure said the closure of KK Aristocrat Technologies was expected to occur during the current calendar year, with it being regarded as a discontinued business for the purposes of the company’s accounts for the financial year ending September 30, 2015. According to Bloomberg, the main Japan business was founded in 1994.
“The financial impact of the Japan closure is not expected to lead to material incremental costs beyond the impairment charge incurred in the prior financial year,” Aristocrat Leisure added.
In its 2014 annual report for the 12 months to September 30, dated December 18, Aristocrat said it had incurred an AUD78-million (US$60.5-million) impairment on the valuation of its pachislot business in Japan, “driven by uncertainty in regulatory environment”.
Aristocrat Leisure said in the same report that it had only released one game into the Japanese market during the reporting period.
“The reduced volume caused a decrease in profits of A$14.3 million to a loss of A$4.5 million in constant currency. The key game release of Black Lagoon 2 was deferred to 2015: however its commercialisation has since been further delayed by new regulatory and testing requirements introduced late in the year,” Aristocrat added in the 2014 report.
Aristocrat Leisure reported an pre-audit after-tax loss of AUD16.4 million in the 12 months to September 30.
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