Aristocrat’s strong credit metrics would support a plan to expand in real money online gaming through mergers and acquisitions, Fitch Ratings said in a note.
The firm, which has rated Aristocrat’s recently announced new loan facilities at BBB-, said it expects the supplier to continue to pursue strategic M&A following the failed acquisition of Playtech earlier this year.
It said the company has strong financial flexibility and a track record of operating with a conservative balance sheet, maintaining net leverage at below 2.5X. It said in the past, Aristocrat has paid down debt quickly after acquisitions such as Plarium/Big Fish.
“The company’s leverage, strong free cash flow generation, and strong liquidity position give it the financial flexibility to absorb material design and development investment and/or a downturn,” the ratings agency said.
In February, Aristocrat said it was forming a new business division, which will be headed by Mitchell Bowen, to accelerate its plans to develop real money online gaming.
Bowen was formerly CEO of Aristocrat Gaming. His position will be filled by Hector Fernandez, who joined three years ago as chief financial officer of the America’s gaming business.
In an address to shareholders at the group’s annual general meeting, CEO Trevor Croker outlined plans for the new online division. He said it will be taking a “build and buy” approach to scale the business, developing its own platform infrastructure, and carrying out select mergers and acquisitions where appropriate.
The company’s GBP2.7 billion ($3.7 billion) offer to buy U.K.-listed Playtech was thwarted by a group of mystery shareholders.
Further commenting on the strength of Aristocrat’s business, Fitch said that the supplier was able to weather the impact of Covid well due to a fast recovery in U.S. regional gaming markets and its large footprint.
It also benefited from its existing digital segment, which is focused on social gaming, which had an exceptionally strong year.
“Combined revenues only declined mid-single digits for fiscal 2021, much stronger than other suppliers and casino operators, primarily due to ALL’s Digital outperformance,” Fitch said. The digital business went from 16 percent of total revenue in 2017 to 40 percent at the end of 2019.
The firm said it sees limited synergies with Aristocrat’s land-based segment, but its digital products provide healthy diversification.
Leading Market Share: Aristocrat is the top slot supplier in Australia and is an established top-three supplier in North America.