Aristocrat cut back thousands of staff as pokie playing plummets
27 April 2020, Written by Matt Ogg
Poker machine giant Aristocrat Leisure (ASX: ALL) expects to save $100 million from cost reductions including a massive scaling back of staff, salary cuts and reduced executive remuneration.
The Sydney-based manufacturer is a leading pokie manufacturer and its shares have dropped 43 per cent since 21 February, impacted by social distancing rules and travel limitations worldwide.
To tighten its belt Aristocrat has today announced a series of cost-cutting measures relating to its workforce, which accounts for around 70 per cent of its operating expenses.
Around 1,000 staff will be stood down until the end of June, 200 roles will be permanently removed from the business, and until September a further 1,500 staff will have their wages cut by 10-20 per cent and 200 people will move into part-time roles.
The company has also announced the elimination of discretionary, consultant and contractor spend.
The cutbacks relate to the land-based business which historically has accounted for around 60 per cent of revenue, with the remainder coming from Aristocrat's digital business which remains strong.
CEO Trevor Croker's US$1.6 million base salary will be reduced by 30 per cent, while board fees will be cut by 20 per cent.
"We are very sensitive to the impact of necessary cost reduction measures on our people, and will work hard to support them through this difficult time consistent with our 'people first' approach," says Croker.
"We believe that these changes will help maximise opportunities for Aristocrat's dedicated and talented people over the longer term.
"We will continue to do everything we can to restore momentum in our land-based business as quickly as possible recognising the importance of continuing to develop and deliver game content during this period."
He says the steps announced today, as well as other prudent steps we are taking as part of Aristocrat's Covid-19 response, will deliver important operational and financial flexibility, focus and efficiency through this period of uncertainty.
"We are highly focused on protecting and leveraging our strategic advantages, including industryleading Design & Development and effective User Acquisition investment, which Aristocrat will continue to prioritise.
"In land-based, we will ensure the business is ideally poised to partner our customers and grow as conditions improve, while in digital we remain fully focused on executing our growth plans and maximising opportunities at this time."
Aristocrat anticipates 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 of social distancing and travel limitations over time.
The company has around $1 billion of liquidity, comprising cash from operations and the drawdown of the Group's $150 million revolving credit facility together with an additional $136 million headroom available from a successful upsizing of the facility on 24 April.
A recent IBISWorld report in conjunction with the Advanced Manufacturing Expo slotted Aristocrat into its Top 20 list of Australian manufacturers, and is within the Top 10 on the list that are Australian owned.
The Alliance for Gambling Reform estimates more than $1 billion has been saved in pokie machine losses from the public since restrictions began, with the figure approaching $1.5 billion if gambling losses in casinos are also counted.
"That's more than $1 billion that can instead be spent putting food on tables, paying for medical bills and utilities, rent and mortgages," says the alliance's chief advocate, the Rev Tim Costello.
"That's not just making a difference to the lives of people and their families, it will also be helping our economy during these difficult times.
"And beyond the personal financial benefits and those for our economy, this current poker machine shut down will be significantly reducing gambling harm. The impacts of gambling harm takes many forms, not just the loss of money -- these can include mental ill-health, homelessness, family violence and even deaths by suicide in some cases."
He says these issues inevitably escalating through this crisis, but "minimising gambling harm as a contributor to these issues is a good thing".
"That's why I am completely behind a move by the ACT Government to support community clubs in surrendering poker machines in exchange for $15,000 per machine that must go towards retaining and supporting staff," he says.
"What a visionary policy! Imagine if all the other states and territories made similar moves. In South Australia crossbench MPs are supporting a similar move already.
"Football, RSL and other clubs that are meant to serve our communities should be doing just that -- serving communities, not draining them of money via poker machines.
"Imagine if we come out of this crisis with a return to community entertainment and a move away from poker machines. All of those musicians and comedians and other artists currently out of work would have stages on which to perform and help our communities heal as we come together again."
Updated at 11:10am on 27 April 2020.
Author: Matt Ogg