2019 ANNUAL REPORT
This 2019 Aristocrat Leisure Limited Annual Report for the
financial year ended 30 September 2019 complies with
reporting requirements and contains statutory financial
statements.
This document is not a concise report prepared under
section 314(2) of the Corporations Act. The Aristocrat
Group has not prepared a concise report for the 2019
financial year.
2020 ANNUAL GENERAL MEETING
The 2020 Annual General Meeting will be held at 11.00am
on Thursday, 20 February 2020 at the Aristocrat Head
Office, Building A, Pinnacle Office Park, 85 Epping Road,
North Ryde, NSW, 2113.
Details of the business of the meeting will be contained
in the notice of Annual General Meeting, to be sent to
shareholders separately.
CONTENTS
Company Profile and Key Dates
Message from the Chairman and CEO
Directors' Report
Operating and Financial Review
Remuneration Report
Auditor's Independence Declaration
Nevada Regulatory Disclosure
Five Year Summary
Financial Statements
2019 CORPORATE GOVERNANCE
STATEMENT
The 2019 Corporate Governance Statement can be found
on the Group’s website: www.aristocrat.com.
Independent Auditor's Report
Shareholder Information
Corporate Directory
1
2
3
9
30
56
57
59
61
111
118
121
COMPANY PROFILE
Aristocrat Leisure Limited (ASX: ALL) is a leading gaming
provider and games publisher, with more than 6,400
employees located in offices around the world. Aristocrat
offers a diverse range of products and services including
electronic gaming machines, casino management systems
and digital social games. The Company’s land-based
products are approved for use in more than 300 licensed
jurisdictions and are available in over 80 countries.
For further information visit the Group’s website at
www.aristocrat.com.
KEY DATES*
2019
Record date for Final 2019 Dividend
29 November 2019
Payment date for Final 2019 Dividend 17 December 2019
2020
2020 Annual General Meeting
20 February 2020
Interim Results Announcement
(6 months ending 31 March 2020)
21 May 2020
Full Year Results Announcement
(12 months ending 30 September 2020) 18 November 2020
*Dates subject to change.
1
ARISTOCRAT LEISURE LIMITED Annual Report 2019
MESSAGE FROM THE
CHAIRMAN AND CEO
We’re pleased to report that Aristocrat delivered strong
performance over the 2019 fiscal year, further extending the
business’ trajectory of consistent and high-quality growth with
a record profit of $894.4m1. Group revenue increased almost
23% and 15% in reported terms and in constant currency
respectively, to a fresh all-time high of $4.4 billion.
During the year, the Board continued its program of regular
face-to-face engagement with Aristocrat’s global employee
base, and also met with a broad range of customers in various
jurisdictions. This program helps ensure that Directors receive
direct feedback and are able to maintain effective oversight
over the business’ culture and customer centricity.
This performance was driven by continued strong operational
momentum across both land based and digital businesses.
Aristocrat’s key Americas, ANZ and digital operations all
grew, off the back of increased and targeted investment
in competitive product portfolios, particularly in terms of
design and development (D&D) and digital marketing (user
acquisition).
Aristocrat’s strong cash flows, capacity to fund investment in
further growth and continued reducing gearing levels were
also evident in the fiscal 2019 result. This allowed the Board to
deliver another significant lift in earnings per share, reflected
in a 22% increase in total dividends for the year to 56.0 cents
per share, consistent with our commitment to grow dividends
over time.
Over the course of the year, the Board also continued to
implement an orderly renewal process with the nomination of
Mr Philippe Etienne as a Non-Executive Director (Elect) on 1
October 2019. Philippe was formally appointed to the Board
in November 2019, and shareholders are asked to approve his
appointment at the AGM in February 2020.
Philippe is a seasoned international business leader with
extensive experience as a company director. Philippe’s
strategic and technology skills and international perspectives
are particularly valuable, and we are delighted to welcome an
individual of his calibre to the Board.
In addition, and after more than a decade of service, Mr Steve
Morro has confirmed his intention to retire as a Director of
Aristocrat at the conclusion of the forthcoming AGM. Steve
has made an outstanding contribution to both the Board
and the business, including through its turnaround years and
subsequent growth. Steve has brought deep US market and
global gaming industry expertise to the Board’s deliberations,
which we value greatly. We are particularly pleased therefore
that Steve has agreed to continue his long association with
Aristocrat post his retirement, as a consultant to management.
As a consequence of Steve’s retirement, Mr Pat Ramsay
will assume the role of lead US director, and the Board is
prioritising its US based director recruitment.
1. Net Profit After Tax and before Amortisation of Acquired Intangibles.
Aristocrat has also continued to expand our sustainability
disclosures, consistent with our values, our focus on the long
term and commitment to transparency. Building on progress
made in 2018, further disclosures were published on the
Group website (www.aristocrat.com) at the end of November
2019. In addition to updating and expanding existing content
on topics such as responsible gameplay and employee
relations, the business also reported for the first time on topics
such as energy and environment (including climate-related
issues), community and society and ethical sourcing.
In 2020, the business is expecting to be able to include
more information on energy, and diversity and inclusion, in
line with our progress and shareholders’ interest in these
important issues.
In summary, fiscal year 2019 was another highly successful
and rewarding year at Aristocrat. We wish to particularly
acknowledge and thank the Board and senior management
for its support, energy and commitment. We are also grateful
to the team of more than 6,400 Aristocrat people around the
world, whose hard work and passion for our customers is
reflected in the strong results we delivered over the year.
Finally, we wish to thank you – our shareholders – for your
ongoing interest and support.
Yours sincerely
Neil Chatfield
Chairman
Trevor Croker
Chief Executive Officer &
Managing Director
2
ARISTOCRAT LEISURE LIMITED Annual Report 2019
For the 12 months ended 30 September 2019
Dividends
The Directors present their report together with the
Financial Statements of the Company and its subsidiaries
(the Group) for the 12 months ended 30 September 2019
(the financial year). The information in this report is current as
at 20 November 2019 unless otherwise specified.
Since the end of the financial year, the Directors have
recommended the payment of a final dividend of 34.0 cents
(2018: 27.0 cents) per fully-paid ordinary share. Details of the
dividends paid and declared during the financial year are set
out in Note 1-6 to the Financial Statements.
This Directors’ Report has been prepared in accordance
with the requirements of Division 1 of Part 2M.3 of the
Corporations Act 2001 (Cth) (the Act).
Review and results of operations
A review of the operations of the Group for the financial year
is set out in the Operating and Financial Review which forms
part of this Directors’ Report.
Financial results
The reported result of the Group attributable to shareholders
for the 12 months ended 30 September 2019 was a profit of
$698.8 million after tax (2018: profit of $542.6 million after
tax).
Further details regarding the financial results of the Group
are set out in the Operating and Financial Review and
Financial Statements.
Remuneration Report
Details of the remuneration policies in respect of the
Group’s Key Management Personnel are detailed in the
Remuneration Report which forms part of this Directors’
Report.
Sustainability
Further detail on sustainability can be found on
the Company’s website and forms part of this
Directors’ Report.
website www.aristocrat.com
3
ARISTOCRAT LEISURE LIMITED Annual Report 2019
DIRECTORS’ REPORT Directors’ particulars, experience and special responsibilities
Current Directors
The Directors of the Company throughout the financial year and up to the date of this report are:
Director
NG Chatfield
M.Bus, FCPA, FAICD
CURRENT DIRECTORS
Experience and other directorships
Nominated December 2017. Appointed February 2018.
— Chairman of Costa Group Holdings Limited
— Non-Executive Director of Transurban Group
— Former Chairman of Seek Ltd (retired effective
31 December 2018)
— Former Chairman of Virgin Australia Holdings Ltd
— Former Non-Executive Director of Recall Holdings Ltd and
Iron Mountain, Inc.
— Former Executive Director and Chief Financial Officer of Toll
Holdings Ltd
TJ Croker
Advanced Management
Program (Wharton
School, University of
Pennsylvania)
Appointed 1 March 2017.
— Director of the Australasian Gaming Council
— Director and Chairman of the American Gaming Association
(Chairman effective January 2020)
— Former Executive Vice President, Global Product & Insights,
Aristocrat Leisure Limited
— Former Managing Director, ANZ – Aristocrat Leisure Limited
— Sales Director – Fosters Australia Ltd
Special responsibilities
Non-Executive Chairman
(from 22 February 2019)
Member, Strategic Risk
Committee
(to 30 September 2019)
Member, Regulatory and
Compliance Committee
Member, Human Resources
and Remuneration Committee
(from 22 February 2019)
Member, Audit Committee
(from 22 February 2019)
Managing Director and
Chief Executive Officer
Member, Strategic Risk
Committee
(to 30 September 2019)
KM Conlon
BEc, MBA
Nominated January 2014. Appointed February 2014.
— Non-Executive Director of REA Group Limited and Lynas
Chair, Human Resources and
Remuneration Committee
Corporation Limited
— Member of Chief Executive Women and a Non-Executive
Director of the Benevolent Society
— Member of the Australian Institute of Company Directors
(AICD) Corporate Governance Committee and a former
National Board Member of the AICD
— Former Non-Executive Director of CSR Limited
— Former Partner and Director, Boston Consulting Group
(BCG)
SW Morro
BA, Business
Administration
Nominated December 2009. Appointed December 2010.
— Former Chief Operating Officer and President,
IGT Gaming Division
Member, Strategic Risk
Committee
(to 30 September 2019)
Member, Audit Committee
(from 1 October 2019)
Lead US Director
Member, Regulatory and
Compliance Committee
Member, Human Resources
and Remuneration Committee
4
ARISTOCRAT LEISURE LIMITED Annual Report 2019
DIRECTORS’ REPORT Director
PJ Ramsey
BA, Economics, MBA
Experience and other directorships
CURRENT DIRECTORS
Nominated September 2016. Appointed October 2016.
— Consultant, EPR Properties (a publicly traded REIT)
— Board of Trustees for the Meadows School (Las Vegas, USA)
— Executive Committee member for the TPC Shriners Hospital
for Children Open
Special responsibilities
Chair, Regulatory and
Compliance Committee
Member, Strategic Risk
Committee
(to 30 September 2019)
— Former Independent Director of VizExplorer
— Former Chief Digital Officer of Aristocrat Leisure Limited
Member, Audit Committee
(from 1 October 2019)
S Summers Couder
Dip Electrical
Engineering, Masters in
Electrical Engineering
and Computer Sciences
Cycle de
Perfectionnement Option
(Equivalent MBA)
AM Tansey
BBA, MBA, Juris Doctor
and former CEO of Multimedia Games
— Various senior roles at Caesars Entertainment
(formerly Harrah’s)
Nominated August 2016. Appointed September 2016.
— Independent Director of Semtech Corporation
— Former Independent Non-Executive Director of Alcatel-
Lucent SA and Headwaters Inc.
— Former Chief Executive Officer of Trident Microsystems Inc.
Chair, Strategic Risk Committee
(to 30 September 2019)
Member, Audit Committee
Member, Human Resources
and Remuneration Committee
(from 1 October 2019)
Nominated March 2016. Appointed July 2016.
— Non-Executive Director of Healius Limited (formerly Primary
Health Care Ltd), Lendlease Investment Management
Limited, and the Australian National Maritime Foundation
— Member of Chief Executive Women and Fellow of the
Australian Institute of Company Directors
— Former Non-Executive Director of Adelaide Brighton Ltd
Chair, Audit Committee
Member, Strategic Risk
Committee
(to 30 September 2019)
Member, Regulatory and
Compliance Committee
(from 1 October 2019)
Director
PG Etienne
GradDip Marketing, BSc,
MBA
Advanced Management
Program
DIRECTORS APPOINTED AFTER THE FINANCIAL YEAR
Experience and other directorships
Nominated October 2019. Appointed November 2019.
— Chairman, ANZ Terminals
— Non-Executive Director of Lynas Corporation Limited and
Cleanaway Waste Management Limited
— Former Managing Director & CEO of Innovia Security Pty Ltd
— Former Non-Executive Director of Sedgman Limited
— Various senior executive positions, Orica Limited
Special responsibilities
Member, Human Resources
and Remuneration Committee
Member, Regulatory and
Compliance Committee
5
ARISTOCRAT LEISURE LIMITED Annual Report 2019
DIRECTORS’ REPORT Director
ID Blackburne
BSc (Hons), MBA, PhD
Experience and other directorships
FORMER DIRECTORS
Appointed September 2010. Retired 21 February 2019
— Former Chairman of Recall Holdings Limited, CSR
Limited and Australian Nuclear Science and Technology
Organisation
— Former Non-Executive Director of Suncorp-Metway Limited
and Symbion Health Limited
— Former Independent Director of Teekay Corporation
(listed on the NYSE)
— Former Managing Director of Caltex Australia Limited
Special responsibilities
Non-Executive Chairman
(to 21 February 2019)
Member of each Board
Committee
(to 21 February 2019)
Directors’ attendance at Board and committee meetings during the financial year
The attendance of members of the Board at Board meetings and attendance of members of committees at committee
meetings of which they are voting members is set out below.
(Meetings attended/held)
Director
Board
Audit Committee
Human Resources
and Remuneration
Committee
Regulatory and
Compliance
Committee
Strategic Risk
Committee
NG Chatfield1
13/13
2/2
13/13
13/13
TJ Croker
KM Conlon1
SW Morro1
PJ Ramsey1
12/13
S Summers Couder1 12/13
AM Tansey1
13/13
12/13
ID Blackburne1, 2
6/6
-
-
-
-
4/4
4/4
2/2
Current Directors
3/3
-
5/5
5/5
-
-
-
Former Directors
2/2
4/4
-
-
4/4
4/4
-
-
1/1
3/3
3/3
3/3
-
3/3
3/3
3/3
1/1
1. During FY2019, the Board reviewed each Non-Executive Director’s
independence and confirms that each Non-Executive Director is
independent.
2. Dr ID Blackburne retired from the Board on 21 February 2019.
Company Secretary
The Company Secretary is directly accountable to the Board,
through the Chairman, for all governance matters that relate
to the Board’s proper functioning.
During the financial year, the Group had the following
Company Secretary:
Richard Bell LLB, BComm (Law)
Richard Bell joined Aristocrat in April 2015 and was
appointed as Company Secretary in May 2017. Before
joining Aristocrat, Mr. Bell specialised in Mergers &
Acquisitions at Australian law firm Allens Linklaters.
6
ARISTOCRAT LEISURE LIMITED Annual Report 2019
DIRECTORS’ REPORT
insurance and deeds of indemnity for identity theft with each
Director and nominated officers of the Company. No amount
has been paid pursuant to those indemnities during the
financial year to the date of this Directors’ Report.
The Company has paid a premium in respect of a contract
insuring officers of the Company and its related bodies
corporate against any liability incurred by them arising out
of the conduct of the business of the Company or in or
arising out of the discharge of their duties. In accordance
with normal commercial practices, under the terms of the
insurance contracts, the details of the nature and extent of
the liabilities insured against and the amount of premiums
paid are confidential.
Environmental regulation
The Group’s operations have a limited impact on the
environment. The Group is subject to a number of
environmental regulations in respect of its integration
activities. The Company does not manufacture gaming
machines, it only integrates (assembles) machines and
systems in Australia, the USA, Macau, and the UK. The
Company uses limited amounts of chemicals in its assembly
process. The Directors are not aware of any breaches of any
environmental legislation or of any significant environmental
incidents during the financial year.
Based on current emission levels, the Company is not
required to register and report under the National
Greenhouse and Energy Reporting Act 2007 (Cth) (NGER
Act). However, the Company continues to receive reports
and monitors its position to ensure compliance with the
NGER Act.
The Company is committed to not only complying with
the various environmental laws to which its operations
are subject, but also to achieving a high standard of
environmental performance across all its operations. The
Company is aware of, and continues to plan for, any new
Australian regulatory requirements on climate change. It is
the Company’s view that climate change does not pose any
significant risks to its operations in the short to medium term.
Throughout the Group, new programs and initiatives have
been introduced to ensure the Company is well prepared for
new regulatory regimes and to reduce its carbon footprint.
Principal activities
The principal activities of the Group during the financial year
were the design, development and distribution of gaming
content, platforms and systems, including electronic gaming
machines, casino management systems and digital social
games. The Company’s objective is to be the leading global
provider of gaming solutions.
Significant changes in the state of affairs
Except as outlined below and elsewhere in this Directors’
Report, there were no significant changes in the state of
affairs of the Group during the financial year.
Events after balance date
Refer to Note 6-2 to the Financial Statements for events
which occurred after balance date. Other than the matters
disclosed in Note 6-2, since the end of the year and to
the date of this Directors’ Report, no other matter or
circumstance has arisen that has significantly affected or may
significantly affect the Group’s operations, results of those
operations or state of affairs in future reporting periods.
Likely developments and expected results
Likely developments in the operations of the Group in future
financial years and the expected results of operations are
referred to in the Operating and Financial Review which
forms part of this Directors’ Report.
Options over share capital
No options over Company shares were granted to
executives or Directors during the financial year. There were
no unissued shares or interests in the Company subject to
options at the date of this Directors’ Report and no Company
shares or interests issued pursuant to exercised options
during or since the end of the financial year.
Indemnities and insurance premiums
The Company’s Constitution provides that the Company will
indemnify each officer of the Company against any liability
incurred by that officer in or arising out of the conduct of the
business of the Company or in or arising out of the discharge
of that officer’s duties to the extent permitted by law.
An officer for the purpose of this provision includes any
Director or Secretary of the Company or the Company’s
subsidiaries, executive officers or employees of the
Company or its subsidiaries and any person appointed
as a trustee by, or acting as a trustee at the request of, the
Company, and includes former Directors.
In accordance with the Company’s Constitution, the
Company has entered into deeds of access, indemnity and
7
ARISTOCRAT LEISURE LIMITED Annual Report 2019
DIRECTORS’ REPORT Code of Ethics for Professional Accountants, including
reviewing or auditing the auditor’s own work, acting in
a management or a decision-making capacity for the
Company, acting as advocate for the Company or jointly
sharing economic risk and rewards.
A copy of the Auditor’s Independence Declaration is
attached to this Directors’ Report.
Loans to Directors and executives
No Director or executive held any loans with the Company
during the financial year.
Rounding of amounts to nearest thousand dollars
The Company is of a kind referred to in ASIC Corporations
(Rounding in Financial/Directors’ Reports) Instrument
2016/191 as issued by the Australian Securities and
Investments Commission. Amounts in the Director’s Report
and the Financial Statements have been rounded off to the
nearest whole number of million dollars and one decimal
place representing hundreds of thousands of dollars, or in
certain cases, the nearest dollar in accordance with that class
order.
This report is made in accordance with a resolution of the
Directors and is signed for and on behalf of the Directors.
Mr. NG Chatfield
Chairman
20 November 2019
Proceedings on behalf of the Company
No proceedings have been brought on behalf of the
Company under section 236 of the Act nor has any
application been made in respect of the Company under
section 237 of the Act.
Auditor
PricewaterhouseCoopers (PwC) continues in office in
accordance with section 327 of the Act.
Non-audit services provided by the auditor
The Company, with the prior approval of the Chair
of the Audit Committee, may decide to employ
PricewaterhouseCoopers, the Company’s auditor, on
assignments additional to its statutory audit duties where
the auditor’s expertise and experience with the Company
and/ or the Group are important. The Company has an
Auditor Independence Policy which specifies those non-
audit services which cannot be performed by the Company
auditor. The Policy also sets out the procedures which are
required to be followed prior to the engagement of the
Company’s auditor for any non-audit related service.
Details of the amounts paid or payable to the Company’s
auditor, for audit and non-audit services provided during
the financial year, are set out in Note 6-3 to the Financial
Statements.
The Board of Directors has considered the position and,
in accordance with the advice received from the Audit
Committee, is satisfied that the provision of the non-audit
services as set out in Note 6-3 to the Financial Statements is
compatible with the general standard of independence for
auditors imposed by the Act for the following reasons:
— All non-audit services have been reviewed by the Audit
Committee to ensure they do not impact the impartiality
and objectivity of the auditor.
— PwC is engaged on assignments additional to their
statutory audit duties where PwC’s expertise and
experience with the Group are important. These
assignments are principally tax advice and due diligence
on acquisitions. During the year, PwC was primarily
engaged for tax services relating to assistance with one-
off changes to the Group Structure (refer to Note 6-2 to
the Financial Statements). These services are not recurring.
PwC is awarded assignments on a competitive basis
in accordance with the Auditor Independence Policy,
which in future will restrict PwC from performing tax and
advisory services.
— None of the services undermine the general principles
relating to auditor independence as set out in APES 110
8
ARISTOCRAT LEISURE LIMITED Annual Report 2019
DIRECTORS’ REPORT OPERATING AND FINANCIAL REVIEW
ARISTOCRAT AT A GLANCE
REVENUE
$4.4 BILLION
LICENSED JURISDICTIONS
332
Revenue by Segment
Revenue by Strategic Segment
ANZ
10.4%
Digital
40.7%
Class III
Outright Sales
& Other
31.6%
Gaming
Operations
27.7%
4.6%
International
Class III
COUNTRIES
80
USA
CAN
MEX
ARG
44.3%
Americas
40.7%
Digital
EMPLOYEES
6,400+
EU
GBR
UKR
ISR
RUS
IND
MAC
PHI
SGP
AUS
NZ
9
ARISTOCRAT LEISURE LIMITED Annual Report 2019
OPERATING AND FINANCIAL REVIEW
BUSINESS STRATEGY
Aristocrat has consistently delivered high quality, sustainable growth by
protecting and expanding our core business, and capturing opportunities in new
markets and segments, both organically and through disciplined M&A.
BUSINESS STRATEGIES AND PROSPECTS
FOR FUTURE FINANCIAL YEARS
Aristocrat continues to execute its established growth
strategy, which is built on the three pillars of great talent,
exceptional game content and hardware, and increasing
distribution channels.
The business delivers high quality, sustained growth by
focusing on these core drivers, and working hard to improve
our competitiveness.
Over recent years, Aristocrat has delivered outstanding share
growth in existing markets, while capturing opportunities in
new markets and segments, both organically and through
disciplined M&A. The business’ Digital footprint continues to
scale, with the successful scaling of core Apps and expansion
into new genres.
Over the medium term, Aristocrat will maintain our focus on
delivering above category growth through:
— further share expansion in existing markets;
— pushing further into attractive Land-based adjacencies,
primarily in North America; and
— strong organic investment to ensure sustained core
momentum with a rigorous focus on returns.
Key investment priorities will include product and
technology, core digital, data and transformation skillsets.
Aristocrat is also taking a strategic approach to building
and leveraging connections across our global business to
ultimately bring a broader range of value-adding products,
services and experiences to customers and players.
Aristocrat will continue to drive growth in Digital, with a
diversified portfolio approach across both Social Casino
and Social Casual. Over time, we will look to extend our
leadership positions across multiple attractive social games
genres.
Aristocrat’s strong balance sheet and further growth in
recurring revenues (to above 68% for FY19) also gives the
business broad optionality to invest to sustain our growth
momentum and create value for shareholders. We actively
scan for non-organic opportunities to accelerate our strategy,
in particular bolt-on opportunities that would deliver
strategic capabilities in either Land-based or Digital.
Aristocrat will increasingly seek to take industry leadership
positions on key Environment, Social and Governance
(ESG) issues, including responsible game play, consumer
privacy, and data governance, consistent with our focus on
sustainable and long-term performance for shareholders.
We will also continue to evolve our operating model to
support scalability and the execution of our strategy over
time.
10
ARISTOCRAT LEISURE LIMITED Annual Report 2019
OPERATING AND FINANCIAL REVIEW
REVIEW OF OPERATIONS
GROUP PERFORMANCE
EARNINGS SUMMARY
Key performance indicators for the current period and prior period are set out below.
A$ million
Normalised results1
Operating revenue
EBITDA
EBITA
NPAT
NPATA
Earnings per share (fully diluted)
EPS before amortisation of acquired intangibles (fully diluted)
Total dividend per share
Reported results
Revenue
Profit after tax
NPATA
Balance sheet and cash flow
Net working capital/revenue
Operating cash flow
Closing net debt/(cash)
Gearing (net debt/consolidated EBITDA4)
Constant
currency2
2019
2019
20183
Variance vs. 2018
Constant
currency2
%
Reported
%
4,113.8
4,397.4
3,583.8
1,485.8
1,596.8
1,328.6
1,252.1
1,346.9
1,129.3
699.9
831.2
109.7c
130.3c
56.0c
752.8
894.4
118.0c
140.2c
56.0c
616.9
729.6
96.5c
114.1c
46.0c
4,113.8
4,397.4
3,509.5
650.1
781.4
698.8
840.4
542.6
655.3
14.8
11.8
10.9
13.5
13.9
13.7
14.2
21.7
17.2
19.8
19.2
22.7
20.2
19.3
22.0
22.6
22.3
22.9
21.7
25.3
28.8
28.2
6.0%
5.6%
1,010.1
1,085.5
1.7%
933.8
2,090.3
2,224.1
2,453.0
n/a
1.4x
1.7x
4.3pts
3.9pts
8.2
14.8
n/a
16.2
9.3
0.3x
1. Normalised results and operating cash flow are statutory profit (before and after tax) and operating cash flow, excluding the impact of certain significant items
relating to the acquisitions of Plarium and Big Fish detailed on page 17.
The operating revenue and results for the 12 months to 30 September 2018 reflect the ongoing revenue recognition principles for the acquired businesses
since the date of acquisition, and corresponds to the revenue and results that would have been recognised under Accounting Standards had the businesses
not been acquired to explain the underlying performance of the entity and the drivers of its profit.
2. Results for 12 months to 30 September 2019 are adjusted for translational exchange rates using rates applying in 2018 as referenced in the table on page 21.
3. Comparative period has been restated per note 6-8 in the financial statements.
4. Consolidated EBITDA as defined by the Credit Agreement.
The information presented in this Review of Operations has not been audited in accordance with the Australian Auditing Standards.
11
ARISTOCRAT LEISURE LIMITED Annual Report 2019
OPERATING AND FINANCIAL REVIEW
REVIEW OF OPERATIONS
GROUP PERFORMANCE
OPERATIONAL HIGHLIGHTS
Key operational highlights for the period are set out below:
Increased share while maintaining yield in the Land-based
North America Gaming Operations business:
— Class III Premium installed base grew 14.3% to 22,998
units, with continued penetration of leading hardware
configurations and high-performing game titles.
— Class II installed base grew 3.9% to 25,220 units, driven
by the continued success of the Class II video product
Ovation™.
— Total average fee per day increased 1.3% to US$50.46,
with continued strong product performance in the period.
Grew share in Land-based Outright Sales:
— North America – grew ship share through entry into
adjacent markets: Video Lottery Terminals (VLT),
Washington Central Determinant System (CDS) and
Bartop Poker, with 29.6% growth in unit sales.
— ANZ – maintained market-leading ship share.
— International Class III – continued focus on floor
optimisation strategies.
Profitable growth in the Digital business:
— RAID: Shadow Legends™ was launched globally in March
and continues to deliver strong performance metrics.
— Daily Active Users (DAU) moderated to 7.5 million, driven
by new game launches in the Social Casual segment, that
were offset by a decline in the Social Casino segment,
as we focus our efforts on monetising the existing player
base, consistent with industry trends.
— Average Bookings Per Daily Active User (ABPDAU) grew
modestly to US$0.41 representing our focus on continued
growth in Social Casino monetisation, offset by the growth
of our Social Casual segment which monetises at a lower
rate.
Investment in talent and technology:
— Aristocrat has maintained its strong investment in talent
and technology to drive growth across the Land-based
and Digital businesses, with continued penetration into
adjacent markets.
— The business has continued to lift investment in D&D in
absolute terms.
Strong financial metrics:
— Strong EBITDA margin at 36.3% decreased slightly against
the prior period, with margin expansion across the Land-
based business partly offsetting the expected moderation
driven by the full period impact of the lower margin
Digital acquisitions.
— Gearing (Net Debt/EBITDA) decreased to 1.4x leverage,
from 1.7x pro-forma at 30 September 2018.
— Cash generating fundamentals remain strong,
demonstrated by US$200 million paydown of TLB and 7.0
cents per share (cps) growth in the final dividend to 34.0
cps ($217.1 million).
— Capital expenditure increased 18% to $317 million
supporting further growth in the Americas Gaming
Operations installed base.
12
ARISTOCRAT LEISURE LIMITED Annual Report 2019
OPERATING AND FINANCIAL REVIEW
REVIEW OF OPERATIONS
GROUP PERFORMANCE
PERFORMANCE SUMMARY
Normalised profit after tax and before amortisation of
acquired intangibles (NPATA) of $894.4 million for the
period represented a 23% increase (14% in constant
currency) compared to $729.6 million in the prior
corresponding period. Revenue increased by 23% (15%
in constant currency) driven by growth in Americas and
Digital. Normalised fully diluted earnings per share before
NPATA movement FY18 to FY19 (A$ million)
amortisation of acquired intangibles of 140.2c represents
a 23% (14% in constant currency) increase on the prior
corresponding period.
Net gearing decreased to 1.4x from 1.7x pro-forma
leverage in the prior corresponding period reflecting strong
performance across the business, as well as continued
strength of the cashflow generating fundamentals of the
business.
95.8
4.3
37.0
(9.8)
(7.8)
(41.8)
21.4
65.7
894.4
Americas
ANZ
Digital
International
Class III
Corporate
Costs / Interest
Group D&D
expense
Income tax
rate movement
Foreign
exchange
NPATA
FY 2019
729.6
NPATA
FY 2018
Movements in the graph above are on a constant currency basis and are tax effected at the prior year tax rate.
— Strong growth in the Americas business drove a $95.8
million improvement in post-tax profit, driven by a 14.3%
expansion in the Class III Premium Gaming Operations
footprint, a 3.9% expansion in the Class II Gaming
Operations footprint and growth in the overall average
fee per day (FPD) to over US$50, complemented with
strong Outright Sales performance in the period as a
result of entering adjacent markets (VLT, Washington CDS
and Bartop Poker).
— The ANZ business delivered $4.3 million in incremental
post-tax profit, driven by performance of the Helix+™
and Helix XT™ cabinets, the release of the new Helix X™
cabinet and continued penetration of the Dragon Link™
and Dragon Cash™ game families.
— Digital delivered post-tax earnings growth of $37.0
million due to the full period impact of the acquisitions
and sustained performance across the game portfolio.
— International Class III post-tax profit declined $9.8 million
due to fewer significant new openings and expansions in
the current period.
— Corporate costs and interest increased by $7.8 million
due to the full period impact of the acquisitions.
— The Group’s strategic investment in talent and
technology, represented by higher absolute D&D spend
at 11.4% of revenue, continues to deliver market-leading
products across an expanded range of markets and
segments in line with the Group’s growth strategy.
— The decrease in the Group’s effective tax rate (ETR)
from 28.9% to 27.5%, resulted in a $21.4 million benefit
and reflects the impact of US tax reform and change in
geographic business mix from the acquisitions.
— Foreign exchange positively impacted the business
performance by $65.7 million.
13
ARISTOCRAT LEISURE LIMITED Annual Report 2019
OPERATING AND FINANCIAL REVIEW
REVIEW OF OPERATIONS
GROUP PERFORMANCE
GROUP PROFIT OR LOSS
Results in the current period and prior corresponding period are in reported currency and normalised for significant items
and adjustments as outlined on page 17. Segment profit is stated before amortisation of acquired intangibles.
A$ million
Segment revenue
Australia and New Zealand
Americas
International Class III
Digital
Total segment revenue
Segment profit
Australia and New Zealand
Americas
International Class III
Digital
Total segment profit
Unallocated expenses
Group D&D expense
Foreign exchange
Corporate
Total unallocated expenses
EBIT before amortisation of acquired intangibles (EBITA)
Amortisation of acquired intangibles
EBIT
Interest
Profit before tax
Income tax
Profit after tax (NPAT)
Amortisation of acquired intangibles after tax
Profit after tax and before amortisation of acquired intangibles (NPATA)
1. Comparative period has been restated per note 6-8 in the financial statements.
2019
20181
Variance
%
456.2
1,948.0
204.5
1,788.7
4,397.4
213.6
1,073.2
94.3
528.9
454.5
1,579.9
210.5
1,338.9
3,583.8
207.1
859.2
103.4
438.2
1,910.0
1,607.9
(500.4)
0.3
(63.0)
(563.1)
1,346.9
(184.4)
1,162.5
(124.0)
1,038.5
(285.7)
752.8
141.6
894.4
(413.6)
(3.4)
(61.6)
(478.6)
1,129.3
(156.3)
973.0
(105.4)
867.6
(250.7)
616.9
112.7
729.6
0.4
23.3
(2.9)
33.6
22.7
3.1
24.9
(8.8)
20.7
18.8
(21.0)
n/a
(2.3)
(17.7)
19.3
(18.0)
19.5
(17.6)
19.7
(14.0)
22.0
25.6
22.6
14
ARISTOCRAT LEISURE LIMITED Annual Report 2019
OPERATING AND FINANCIAL REVIEW
REVIEW OF OPERATIONS
GROUP PERFORMANCE
REVENUE
Segment revenue increased $814 million or 23% in reported
currency (15% in constant currency), principally driven by
growth in Digital, Gaming Operations and North American
Outright Sales.
In Gaming Operations, revenue increased 14%, with the
Premium Class III and Class II footprints growing 14.3%
and 3.9% respectively, while overall average fee per day
increased 1.3%. Performance was fuelled by continued
penetration of the high-performing products Lightning
Link™, Dragon Link™, 5 Dragons Grand™, Buffalo Grand™,
Ovation™ and success of the newly launched Buffalo
Diamond™.
Digital revenue grew 24% to US$1,252 million, driven by
the full period impact of the acquisitions, scaling of new and
recently released games and continued strong performance
in Jackpot Magic Slots™ and Cooking Craze™.
In North America Outright Sales, revenue increased 22%,
with ship share growth in an increasingly competitive
environment, including successful entry into the adjacent VLT
Atlantic Canada, VLT Manitoba, Washington CDS and Bartop
Poker markets. Continued strength in average sales price
(ASP) reflected Aristocrat’s continued portfolio depth, led by
the performance of the Helix XT™, Helix Tower™ and Arc™
cabinets.
Australia & New Zealand revenue remained in line with
the prior comparative period at $456 million in reported
currency, while maintaining market-leading ship share.
In International Class III, revenue decreased 3% to $205
million in reported currency, due to fewer significant new
openings and expansions in the current period.
Revenue by Strategic Segment
2019
31.6%
27.7%
$4.40bn
40.7%
2018¹
27.7%
34.9%
$3.58bn
37.4%
Gaming
Operations
Digital
Class III Outright
Sales & Other
1. Comparative period has been restated per note 6-8 in the financial
statements.
All amounts are in reported currency unless otherwise stated.
15
ARISTOCRAT LEISURE LIMITED Annual Report 2019
OPERATING AND FINANCIAL REVIEW
REVIEW OF OPERATIONS
GROUP PERFORMANCE
EARNINGS
Segment profit increased $302 million in reported currency,
up 19% compared to the prior corresponding period.
Margin expansion was achieved in ANZ and Americas, both
driven by product mix.
The full period impact of the Plarium and Big Fish
acquisitions, which introduced the lower margin Social
Casual business to our Digital portfolio, resulted in the
overall Digital margin moderating in line with expectations
from 33% to 30%.
Segment Profit Margin % of Revenue
60%
50%
8
.
6
4
6
.
5
4
1
.
4
4
40%
1
.
5
5
4
.
4
5
7
.
3
5
4
.
2
5
1
.
9
4
1
.
6
4
5
.
1
4
30%
20%
7
.
2
3
6
.
9
2
Australia and
New Zealand
Americas
International
Class III
Digital
2017¹
2018¹
2019
1. Comparative periods have been restated per note 6-8 in the financial
statements.
The Group continued to invest significantly in talent
and technology to deliver competitive product across a
broad range of Land-based and Digital segments. The
Group’s investment in D&D as a percentage of revenue
was maintained at 11.4%, with continued investment in
adjacencies. Total reported spend increased $87 million
or 21% (14% in constant currency), which includes the full
period impact of the Digital acquisitions.
Corporate costs increased by $1.4 million compared to the
prior corresponding period and as a percentage of revenue
decreased to 1.4%.
Net interest expense increased $18.6 million to $124 million,
reflecting the full period impact of increased debt levels to
support the prior period acquisitions.
The effective tax rate (ETR) for the reporting period was
27.5% compared to 28.9% in the prior corresponding
period. This was largely attributable to the changes driven by
US tax reform that came into effect from 1 January 2018 and
the full period impact of a change in business mix resulting
from the acquisitions.
Other Key Margins % of Revenue and ETR
60%
50%
40%
30%
20%
10%
0%
9
.
9
4
9
.
4
4
4
.
3
4
7
.
1
4
1
.
7
3
3
.
6
3
0
.
2
3
9
.
8
2
5
.
7
2
6
.
2
2
4
.
0
2
3
.
0
2
2
.
1
1
5
.
1
1
4
.
1
1
Group D&D
expense/
revenue
Segment
Profit/
revenue
EBITDA/
revenue
NPATA/
revenue
Effective
Tax Rate
2017¹
2018¹
2019
1. Comparative periods have been restated per note 6-8 in the financial
statements.
16
ARISTOCRAT LEISURE LIMITED Annual Report 2019
OPERATING AND FINANCIAL REVIEW
REVIEW OF OPERATIONS
GROUP PERFORMANCE
Reconciliation of statutory revenue to operating revenue
A$ million
Statutory revenue as reported in the financial statements
Add back fair value adjustments relating to the acquisitions
Operating revenue
1. Comparative period has been restated per note 6-8 in the financial statements.
Reconciliation of statutory profit to NPATA
A$ million
Statutory profit as reported in the financial statements
Amortisation of acquired intangibles (tax effected)
Reported profit after tax before amortisation of acquired intangibles
(Reported NPATA)
Add back net loss from significant items and adjustments after tax
Normalised Profit After Tax before amortisation of acquired intangibles
(Normalised NPATA)
Significant items
A$ million
Contingent retention arrangements relating to the acquisitions
Acquisition related transaction, integration and restructuring costs
Net loss from significant items
Significant Items:
2019
4,397.4
-
4,397.4
2019
698.8
141.6
840.4
54.0
894.4
20181
3,509.5
74.3
3,583.8
2018
542.6
112.7
655.3
74.3
729.6
30 Sep 2019
Before tax
After tax
(42.1)
(22.9)
(65.0)
(35.0)
(19.0)
(54.0)
Contingent retention arrangements related to the
acquisitions of Plarium and Big Fish: The Group’s reported
result after tax for the period includes an expense of $35
million relating to the contingent retention arrangements for
the acquisitions of Plarium and Big Fish.
Acquisition related transaction, integration and restructuring
costs: The Group’s reported result after tax for the period
includes an expense of $19 million relating to an onerous
lease provision for the Big Fish Seattle premises, which was
committed to by previous ownership.
17
ARISTOCRAT LEISURE LIMITED Annual Report 2019
OPERATING AND FINANCIAL REVIEW
REVIEW OF OPERATIONS
GROUP PERFORMANCE
BALANCE SHEET
The balance sheet can be summarised as follows:
A$ million
30 Sep 2019
31 Mar 2019
30 Sep 2018
Cash and cash equivalents
Property, plant and equipment
Intangible assets
Other assets
Total assets
Non-current borrowings
Payables, provisions and other liabilities
Total equity
Total liabilities and equity
Net working capital
Net working capital / revenue
Net debt / (cash)
568.6
431.2
4,008.3
1,328.9
6,337.0
2,792.7
1,400.7
2,143.6
6,337.0
248.0
5.6
2,224.1
504.0
415.3
3,882.8
1,201.4
6,003.5
2,933.8
1,182.7
1,887.0
6,003.5
228.5
5.6
428.1
389.3
3,898.8
1,130.6
5,846.8
2,881.1
1,233.2
1,732.5
5,846.8
62.0
1.7
2,429.8
2,453.0
Variance
%
32.8
10.8
2.8
17.5
8.4
(3.1)
13.6
23.7
8.4
300.0
3.9pts
9.3
Significant balance sheet movements from 30 September
2018 are:
Cash and cash equivalents: The increase in cash reflects the
strong cash flow generation capability of the business which
provides opportunities to fund growth.
Net working capital: The increase was driven by revenue
growth, particularly in the Land-based business where there
was compression at the period end due to the timing of new
product releases.
Property, plant and equipment: The increase reflects the
strong growth in the Americas Gaming Operations installed
base, up 9% on prior comparative period, and leasehold
improvements associated with new premises.
Non-current borrowings: The reduction is largely due to
the repayment of US$200 million of the Term Loan B facility
during the reporting period, partly offset by the impact of
foreign exchange on the US dollar denominated loan facility.
Total equity: The change in total equity reflects the result
for the period and changes in reserves due to currency
movements, net of dividends paid during the period.
18
ARISTOCRAT LEISURE LIMITED Annual Report 2019
OPERATING AND FINANCIAL REVIEW
REVIEW OF OPERATIONS
GROUP PERFORMANCE
STATEMENT OF CASH FLOWS
The movement in net debt (debt less cash), after eliminating foreign exchange movements is set out below:
Operating cash flow
A$ million
EBITDA
Change in net working capital
Subtotal
Interest and tax
Acquisition related and significant items (cash and non-cash)
Other cash and non-cash movements
Operating cash flow
Operating cash flow less capex
Consolidated cash flow
A$ million
Operating cash flow
Capex
Acquisitions and divestments
Investing cash flow
Proceeds from borrowings
Repayment of borrowings
Dividends and share payments
Financing cash flow
Net increase/(decrease) in cash
Operating cash flow increased 16.2% to $1,085.5 million
compared to the prior corresponding period, reflecting
continued strong performance and cash flow capabilities
across the businesses with a higher proportion of recurring
revenues, driven by growth in Americas Gaming Operations
and the full period impact of the Digital acquisitions.
Interest and tax increased 11.7% due to the full period
impact of the acquisitions.
Acquisition related and significant items in the current period
include largely provisions relating to contingent retention
arrangements for Plarium and Big Fish and an onerous
contract provision relating to the Big Fish Seattle premises.
2019
1,596.8
(186.0)
1,410.8
(349.7)
(63.5)
87.9
1,085.5
768.9
2019
1,085.5
(316.6)
(20.8)
(337.4)
-
(293.1)
(337.2)
(630.3)
117.8
2018
1,328.6
69.1
1,397.7
(313.0)
(107.3)
(43.6)
933.8
664.8
2018
933.8
(269.0)
(1,938.6)
(2,207.6)
1,660.0
(225.8)
(299.0)
1,135.2
(138.6)
Change
%
20.2
n/a
0.9
(11.7)
40.8
n/a
16.2
15.7
Change
%
16.2
(17.7)
98.9
84.7
n/a
(29.8)
(12.8)
n/a
n/a
Capital expenditure relates primarily to investment in
hardware to support continued strong growth in the
Americas Gaming Operations installed base and leasehold
improvements relating to new premises.
Cash flow in the statutory format is set out in the financial
statements.
19
ARISTOCRAT LEISURE LIMITED Annual Report 2019
OPERATING AND FINANCIAL REVIEW
REVIEW OF OPERATIONS
GROUP PERFORMANCE
FUNDING AND LIQUIDITY
The Group had committed loan facilities of $3.0 billion as at
30 September 2019, comprising a US$1.9 billion Term Loan
B (TLB) facility and a $150 million revolving facility.
During the period, Aristocrat successfully renegotiated its
$100 million revolving facility which was due to mature in
October 2019. The facility limit was increased to $150 million
and the maturity date extended to July 2024. This facility
remains undrawn and provides the Group with competitively
priced financing as well as increased flexibility and overall
liquidity. The Group repaid US$200 million of the Term
Loan B facility during the second half of the year, reflecting
Aristocrat’s strong cash balance and liquidity position
providing the business with flexibility to repay debt.
The Group’s facilities are summarised as follows:
The Group’s interest and debt coverage ratios are as follows
(x):
15x
12.7
11.7
11.4
10x
5x
0x
2.0
2.0
1.7
1.7
1.6
1.4
Facility
Term Loan B
facility
Revolving
facility
Overdraft
facilities
Drawn as at
30 Sep 2019
Limit
Maturity
date
EBITDA*/interest
expense** (x)
Gross debt/
EBITDA* (x)
Net debt (cash)/
EBITDA* (x)
US$1,900.0m US$1,900.0m
Oct 2024
30 Sep 2018
31 Mar 2019
30 Sep 2019
A$0.0m
A$150.0m
Jul 2024
A$0.0m
A$8.0m
Annual
Review
* EBITDA refers to Consolidated EBITDA for the Group as defined in
Aristocrat’s Syndicated Facility Agreement (also referred to as Bank EBITDA).
** Interest expense shown above includes ongoing finance fees relating to
bank debt facility arrangements, such as line fees.
The Group’s leverage (net debt / EBITDA) reduced over
the reporting period, from 1.7x pro-forma at 30 September
2018 to 1.4x at 30 September 2019 reflecting both earnings
growth and free cash flow generation.
CREDIT RATINGS
The Group maintains credit ratings from both Moody’s
Investor Services and Standard & Poor’s to support its Term
Loan B facility arrangements.
As at 30 September 2019, Aristocrat holds credit ratings of
BB+ from Standard & Poor’s and Ba1 from Moody’s.
20
ARISTOCRAT LEISURE LIMITED Annual Report 2019
OPERATING AND FINANCIAL REVIEW
REVIEW OF OPERATIONS
GROUP PERFORMANCE
DIVIDENDS
The Directors have authorised a final fully franked dividend
of 34.0 cents per share (A$217.1 million), in respect to the
12-month period ended 30 September 2019. Total dividends
in respect of the 2019 year amount to 56.0 cents per share
($357.1 million) and represents an increase of 21.7% (or 10.0
cents), reflective of growth in performance, strength of cash
flows and improvement in gearing levels.
The dividend is expected to be declared and paid on 17
December 2019 to shareholders on the register at 5.00pm
on 29 November 2019. The dividend will be fully franked.
FOREIGN EXCHANGE
Given the extent of the Group’s global operations and
the percentage of its earnings derived from overseas, its
reported results are impacted by movements in foreign
exchange rates.
In the 12 months to 30 September 2019, the Australian
dollar was, on average, weaker against the US dollar when
compared to the prior corresponding period.
The impact of translating foreign currency (translational
impact) increased revenue by $283.6 million, while
increasing normalised profit after tax and before amortisation
of acquired intangibles by $63.2 million on a weighted
average basis when compared with rates prevailing in the
respective months in the prior corresponding period. In
addition, as at 30 September 2019, the cumulative effect
of the retranslation of the net assets of foreign controlled
entities (recognised through the foreign currency translation
reserve) was a credit balance of $139.2 million (compared to
a credit balance of $51.9 million as at 30 September 2018).
Based on the Group’s mix of profitability, the major exposure
to translational foreign exchange results from the Group’s
US dollar profits. A US dollar 1 cent change in the US$:A$
exchange rate results in an estimated annualised $12 million
translational impact on the Group’s annual profit after tax and
before amortisation of acquired intangibles. This impact will
vary as the magnitude and mix of overseas profits change.
Foreign exchange rates compared with prior corresponding
periods for key currencies are as follows:
A$:
USD
NZD
EUR
GBP
ZAR
ARS
30 Sep 2019
31 Mar 2019
30 Sep 2018
0.6751
1.0780
0.6193
0.5492
10.2293
38.8778
0.7099
1.0427
0.6327
0.5454
10.2321
30.7823
0.7224
1.0902
0.6223
0.5541
10.2183
29.8258
2019
Average¹
0.7018
1.0573
0.6245
0.5519
10.0755
30.5052
2018
Average¹
0.7573
1.0892
0.6362
0.5621
9.9573
18.3765
1. Average of monthly exchange rates only. No weighting applied.
21
ARISTOCRAT LEISURE LIMITED Annual Report 2019
OPERATING AND FINANCIAL REVIEW
REVIEW OF OPERATIONS
REGIONAL SEGMENT REVIEW
Segment profit represents earnings before interest and tax,
and before significant items associated with the acquisitions
of Plarium and Big Fish, charges for D&D expenditure,
amortisation of acquired intangibles and corporate costs.
The total amount of these items is disclosed in the Group’s
Statement of Profit or Loss. Constant currency amounts refer
to 2019 results restated using exchange rates applying in
2018.
AMERICAS
Summary Profit or Loss
US$ million
Revenue
Profit
Margin
2019
20181 Variance %
1,363.1
1,193.8
750.6
55.1%
649.9
54.4%
14.2
15.5
0.7 pts
1. Comparative period has been restated per note 6-8 in the financial
statements.
In local currency, Americas profits increased by 15.5% to
US$750.6 million driven by strong growth in the Class III
Premium and Class II Gaming Operations footprint and
Class III Outright Sales portfolio; led by continued depth and
strength in the product portfolio and continued penetration
into adjacent markets, including VLT Atlantic Canada, VLT
Manitoba, Washington CDS and Bartop Poker.
North America Gaming Operations units and
Average US$ fee/day
+9%
50,000
40,000
30,000
s
t
i
n
U
20,000
10,000
0
48,218
25,220
44,378
24,264
100.0
80.0
60.0
$49.79
$50.46
20,114
22,998
40.0
U
S
$
p
e
r
d
a
y
1
38,598
22,437
$47.78
16,161
20.0
0.0
2017¹
2018¹
2019
Class III
premium units
Class II units
Gaming operations
US$/day
1. Comparative periods have been restated per note 6-8 in the financial
statements.
22
The Class III Premium Gaming Operations installed base
grew 14% fuelled by continued penetration of the market-
leading game Dragon Link™ on the Arc Single™ cabinet
together with the successful debut of the high-performing
game Buffalo Diamond™ on the Flame55™ cabinet.
Aristocrat successfully launched the new Edge X™ cabinet
with Mad Max Fury Road™, Farmville™ and its pop icon
title Madonna™, and Dollar Storm™ on the new MarsX™
cabinet, the first multi-site jackpot product in the Lightning
Link™ and Dragon Link™ series.
The Class III Premium Gaming Operations installed base
will continue to be supported by a strong product portfolio
across a diverse range of product segments. Aristocrat will
release a range of new titles in FY20, including Zorro: Wild
Ride™ and Billions™ on the Flame55™ cabinet, Star Trek:
Next Generation™ on the Edge X™ cabinet, and Cash
Express: Luxury Line™, which is a continuation of the award-
winning Cash Express™.
Average fee per day across Class II and Class III Premium
Gaming Operations increased 1.3%, driven by game
performance across the portfolio, while maximising floor
share and placements.
In Class II Gaming Operations, placements increased by
3.9% supported by incremental Ovation™ units while
sustaining the existing mechanical footprint.
The Class II Gaming Operations installed base will continue
to be supported by the release of Helix XT™ and MarsX™
cabinets, which include 4K graphics displayed on a curved
42” screen and more than 40 back-catalogue games
including Welcome to Fantastic Jackpots™, Cash Current™,
Wild Up ReSpins™, and Cash Up™.
ARISTOCRAT LEISURE LIMITED Annual Report 2019
OPERATING AND FINANCIAL REVIEW
REVIEW OF OPERATIONS
REGIONAL SEGMENT REVIEW
North America Outright Sales units and Average US$
Price / unit
Latin America Outright Sales units, Average US$ Price / unit
and Recurring Revenue installed base
s
t
i
n
U
18,000
14,000
10,000
6,000
2,000
0
+30% Platform
Growth
24,000
20,000
16,000
12,000
U
S
$
p
e
r
u
n
i
t
8,000
$18,892
$18,682
5
7
5
,
2
1
8
1
3
,
3
1
$18,097
2
6
2
,
7
1
6
0
5
,
2
7
4
1
,
3
4
6
4
,
2
2017
2018
2019
6,000
5,000
4,000
$14,008
s
t
i
n
U
3,000
4
4
6
,
3
5
1
4
,
2
2,000
1,000
$15,081
$14,870
4
4
6
,
4
6
3
0
,
5
6
3
0
,
2
2
1
5
,
1
18,000
16,000
14,000
12,000
U
S
$
p
e
r
u
n
i
t
10,000
8,000
6,000
4,000
0
2017
2018
2019
Platforms
Conversions
Average US$
price/platform unit
Platforms
Recurring revenue
installed base
Average US$
price/platform unit
Latin America revenue decreased 1.3% compared to the
prior corresponding period driven by challenging conditions
in the Mexico and Argentina markets. Steady growth in the
Gaming Operations segment continues, supported by the
penetration of Lightning Link™.
Outright Sales revenue increased by 22% compared to the
prior corresponding period driven by the continued strength
of the overall portfolio led by Helix XT™, Helix Tower™ and
Arc™ cabinets. The MarsX™ dual screen cabinet launched
in July with a suite of five dedicated titles, spearheaded by
Buffalo Gold Revolution™. The depth of the MarsX™ launch
library has led to strong early performance.
In addition, Aristocrat continued its expansion into adjacent
markets, including VLT, Washington CDS and the Multigame
and Poker segment.
ASP remains strong, however slightly lower than prior
periods, driven by expansion into the new adjacent markets.
Video ASP remains in line with prior period driven by strong
performance of Helix XT™ and Helix Tower™.
23
ARISTOCRAT LEISURE LIMITED Annual Report 2019
OPERATING AND FINANCIAL REVIEW
REVIEW OF OPERATIONS
REGIONAL SEGMENT REVIEW
AUSTRALIA AND NEW ZEALAND
INTERNATIONAL CLASS III
Summary Profit or Loss
Summary Profit or Loss
A$ million
Revenue
Profit
Margin
Constant currency
2019
455.2
213.2
46.8%
2018
454.5
207.1
0.2
2.9
Revenue
Profit
45.6%
1.2 pts
Margin
Variance
%
A$ million
Constant currency
2019
2018
210.5
103.4
Variance
%
(7.3)
(13.3)
49.1%
(3.2) pts
195.2
89.6
45.9%
ANZ revenue increased by 0.2% to $455 million in constant
currency compared to the prior corresponding period, while
overall profit increased by 2.9% to $213.2 million.
ANZ margin expanded by 120 bps to 46.8% driven by
favourable commercial mix towards recurring revenue.
ANZ Outright Sales units and Average A$ Price / unit
16,000
12,000
26,000
22,000
$21,252
Class III
Platforms
5,664
6,018
(5.9)
International Class III revenue and profit decreased 7.3%
and 13.3% respectively to $195 million and $89.6 million
compared to the prior corresponding period, with fewer
significant new openings and expansions in APAC, partially
offset by continued growth in EMEA.
The EMEA business launched Helix XT™ and the first
Lightning Link™ Lounge concept during the year. EMEA
continue to take market share in Class II Bingo following the
successful launch in South Africa late in the prior reporting
period.
$20,348
$20,487
8,000
s
t
i
n
U
7
7
3
,
4
1
9
7
0
,
4
1
5
2
4
,
3
1
4,000
0
4
9
2
,
6
4
1
2
,
4
5
2
2
,
4
2017
2018
2019
10,000
18,000
A
$
p
e
r
u
n
i
t
14,000
Platforms
Conversions
Average A$
price/platform unit
The average cabinet selling price increased slightly from the
prior corresponding period driven by positive cabinet mix to
Helix+™ and Helix XT™.
The ANZ business also sustained strong ship share across
the market, driven by the launch of our premium Helix X™
cabinet with the latest Lightning Link™ and Dragon Link™
game releases.
24
ARISTOCRAT LEISURE LIMITED Annual Report 2019
OPERATING AND FINANCIAL REVIEW
REVIEW OF OPERATIONS
REGIONAL SEGMENT REVIEW
DIGITAL
Summary Profit or Loss
US$ million
2019
2018
Variance
%
21.1
24.1
11.9
Bookings
Revenue
Profit
Margin
1,227.8
1,252.2
370.2
29.6%
1,013.9
1,009.2
330.8
32.8%
(3.2) pts
Digital revenue increased by 24% compared to the prior
corresponding period, reflective of the full period impact
of the Big Fish and Plarium acquisitions. The acquisitions
delivered an additional US$239.5 million of revenue
compared to the prior corresponding period.
On a pro-forma basis, revenue grew 8% compared to the
prior corresponding period, driven by successful new game
launches in the Social Casual segment, which includes our
latest evergreen franchise, RAID: Shadow Legends™.
Our Social Casino portfolio, as a whole, remained stable,
with pro-forma revenue growing at 2% compared to the
prior corresponding period. This is reflective of a maturing
market, compounded by a steady decline in players across
the industry.
Digital profits increased 11.9% to US$370.2 million
with segment margin moderating to 29.6% in line with
expectations, due to:
— the full period impact of the lower margin Social
Casual segment introduced through the prior period
acquisitions;
— targeted investment in the development of new features
and live operations in Social Casino; and
— significant marketing investment behind the successful
launch of RAID: Shadow Legends™, launched globally in
March 2019.
+21%
Bookings Growth
1,227.8
589.8
1,013.9
445.1
568.8
638.0
Bookings1 by Type
1,400
1,200
1,000
m
$
S
U
s
g
n
k
o
o
B
i
800
600
400
200
0
292.8
2017
2018
2019
Social Casino
Social Casual
1. Bookings are an operational metric reflecting the amount of virtual
currency, virtual goods and premium games the consumer has purchased.
Reported revenue comprises bookings adjusted for deferred revenue.
Social Casino
The Social Casino segment contributed US$638.0 million in
bookings, an increase of 12% on the prior period, driven by
the full period impact of the Big Fish acquisition.
The focus for the Social Casino segment will remain on
leveraging the strong slot content capabilities across
Aristocrat and enhancing offerings in our existing franchises
through a strong pipeline of new features, including
collectables, social features, missions, and live operations.
Social Casual
The Social Casual segment contributed US$589.8 million
in bookings in the period, an increase of 33% compared to
the prior corresponding period, driven by successful new
game launches, including our latest evergreen franchise,
RAID: Shadow Legends™, and contributions from other
new games such as Lost Island: Blast Adventure™ and Toy
Story Drop!™. Our older titles performed well and above
expectations for games that have been in the market for over
five years. We remain focused on these titles by delivering
continued live operations and content aimed at maintaining
the existing player base.
Aristocrat remains focused on utilising our talent and
capabilities across game design, data, marketing and market
intelligence across the entire Digital portfolio, to deliver a
growth pipeline of new games focused on our target players.
25
ARISTOCRAT LEISURE LIMITED Annual Report 2019
OPERATING AND FINANCIAL REVIEW
REVIEW OF OPERATIONS
REGIONAL SEGMENT REVIEW
Daily Active Users (DAU) and Average US$
bookings per DAU (ABPDAU)
8.1
7.5
0.53
0.40
0.41
ABPDAU
Full year
(US$)
1.7
DAU
Period end
(million)
2017
2018
2019
Daily Active Users (DAU) moderated to 7.5 million, driven by
new game launches in the Social Casual segment that were
offset by a decline in the Social Casino segment, as we focus
our efforts on monetising the existing player base, consistent
with industry trends.
ABPDAU grew US1c compared to the prior corresponding
period, representing our focus on continued growth in
Social Casino monetisation, offset by the growth of our
Social Casual segment which monetises at a lower rate, but
attracting large player bases.
Reconciliation of Revenue to Bookings (US$ millions)
US$ million
2019
2018
2017
Revenue
1,252.2
1,009.2
292.8
Deferred revenue
(24.4)
4.7
-
Bookings
1,227.8
1,013.9
292.8
Digital pro-forma disclosures
US$ million
2019
2018
Variance
%
Bookings
(US$ million)
DAU period end
(million)
1,227.8
1,161.8
5.7
7.5
8.1
(7.4)
On a pro-forma basis, bookings grew 5.7% to US$1,227.8
million driven by new game launches in the Social Casual
segment, which includes our latest evergreen franchise,
RAID: Shadow Legends™, modest growth from our Social
Casino franchises, partly offset by a declining Premium PC
business and legacy titles within the portfolio.
26
ARISTOCRAT LEISURE LIMITED Annual Report 2019
OPERATING AND FINANCIAL REVIEW
PRINCIPAL RISKS
The identification and management of risks that could impact Aristocrat’s strategic and financial objectives is essential to good
corporate governance, and the protection of long-term shareholder value.
The Group’s Risk Management Framework defines how Aristocrat assesses, treats, monitors and reports risks, both current and
emerging, and includes a Risk Appetite Statement indicating the level of risk the Group is willing to accept in the execution of
its strategy.
While Aristocrat has a strong track record of managing multiple and complex risks, some inherent risks remain, including a
number not directly within the Group’s control. Key risks currently identified as relevant to Aristocrat are set out below.
Risk and Description
Example Mitigations
Economic and Gaming Industry Conditions
A decline in economic/gaming industry conditions could:
— adversely affect the ability of our Land-based customers to
finance their operations;
— impact the disposable incomes of players and therefore
spending on entertainment activities.
This could decrease demand for our products and services
impacting Group revenues.
Geopolitical Environment
Our operations and those of our delivery partners exposed
to unstable geopolitical environments could impact
employee engagement, health and safety and our ability to
innovate and create content should geopolitical conditions
deteriorate.
Disruption
Failure to adequately respond to disruption through
innovation and robust market strategies, in the Land-based
and Digital businesses, could impact our market share, and
financial and strategic objectives.
— Monitoring of economic and gaming industry conditions
— Periodic re-evaluation of corporate strategy
— Diversification of product and service offerings, with solid
growth in recurring revenues
— Expansion of addressable markets
— Broadening of our geographic footprint
— Robust assessment of geopolitical conditions prior to new
market entry
— Monitoring of international issues, economic and political
indicators
— Monitoring and evaluation of legislation
— Maintenance of strong relationships with key stakeholders
in affected markets
— Implementation and enhancement of our business
continuity, resilience and redundancy measures
— Diversification of studios/locations
— Continuous monitoring and re-evaluation of company
strategy to account for changing trends, consumer
behaviours, technology changes and competitor initiatives
— Expansion and diversification of products, services and
markets. Targeting of adjacent markets
— Capital allocation to reflect the importance of disruption
and the need to advance product development in an agile
manner
— Strategic M&A
27
ARISTOCRAT LEISURE LIMITED Annual Report 2019
OPERATING AND FINANCIAL REVIEW
PRINCIPAL RISKS
Risk and Description
Example Mitigations
Competition and Product Innovation
The consolidation and entry of new market participants in the
Land-based and Digital markets, requires us to continuously
innovate, and create new content to retain and grow market
share.
If we fail to innovate and produce market viable products
and services, there is an increased risk of growth stagnation,
reduction in market share, and decreases in Group revenue.
Government Gaming Regulation (Land and Digital)
Land-based
A change in government or regulatory policies may impact
our operations or our customers’ operations. Further,
changes in laws or regulations or their interpretation or
enforcement could impact our ability to operate or deliver
our strategies.
Difficulties or delays in obtaining or maintaining required
licences or approvals could negatively impact our business.
This could affect our financial performance.
Social Gaming
Social games are generally not subject to product regulation.
However, the industry is relatively new and stakeholder
expectations are evolving. New regulations have the capacity
to impact our operations.
Cyber/Data Governance
Uncontrolled access to systems and sensitive data could
result in business disruption, financial loss, fines, prosecution
and reputational damage with our customers, employees
and shareholders.
— Continued investment in skills and talent, and retention
strategies
— Diversification of markets and expansion of addressable
markets
— Strong Design and Development investment and rigorous
focus on returns
— Use of strategic partnerships
— Strategic M&A
Land-based
— Maintenance of a comprehensive regulatory compliance
function and governance framework to monitor
the political and regulatory environment across our
jurisdictions, and to evaluate compliance to regulatory
requirements
— Robust reputation, government relations, industry
association and regulatory strategies
Social Gaming
— Monitoring of developments, proposals and rules enacted
by government, industry and digital platform providers
— Active shaping of industry dialogue and constructive
participation in broader debates regarding social
games to inform, educate and appropriately respond to
stakeholder expectations
— Publication and implementation of a global information
security policy
— Implementation of robust and compulsory information
security training program
— Continued review and investment in cyber security
measures and capabilities to improve organisational
maturity
— Review and enhancement of our data management
practices, procedures and expertise
— Maintenance of a business resilience program
Talent
Inability to recruit and retain key talent impacts our ability to
deliver on our strategy and business objectives.
— Refreshed talent management and competency
framework
— Continuous focus on company culture and improvement
of Employee Value Proposition
— Review of incentive and rewards programs
28
ARISTOCRAT LEISURE LIMITED Annual Report 2019
OPERATING AND FINANCIAL REVIEW
PRINCIPAL RISKS
Risk and Description
Distribution Platforms
Example Mitigations
If digital platform partners enforce unfavourable terms of
use, including increased fees, or shutdown our applications,
this could result in higher operating costs, lower margins and
restrict access to customers/players.
— Continued development of in-house platforms
— Monitoring of latest developments, proposals and rules
enacted by platform partners
— Ongoing and proactive dialogue with platform partners
Intellectual Property
Theft of, or inability to protect our intellectual property (IP)
could result in a loss of competitive advantage due to loss
of exclusivity, suppressed innovation, and/or reputation and
brand damage. This could impact our revenues.
Tax
Changes in tax law (including goods and services taxes and
stamp duties), or the way they are interpreted, may impact
the tax liabilities of the Group and the assets in which we hold
an interest.
Treasury
Unfavourable movements in foreign exchange or interest
rates could increase our operating costs.
Unplanned Operational Incident
Operational incident within the business impacts employee
health and wellbeing, or the ability to deliver upon our
contractual requirements, resulting in lost revenue and
reputational impacts.
— Formalised processes for registering trademarks,
copyrights and patents, including the establishment of
quotas
— Investment in capability to support IP management
— Engagement of internal/external legal support
— Contracts with third parties using Aristocrat IP preclude
improper use of IP
— Continued ‘zero tolerance’ approach to IP breaches, and
rigorous enforcement culture
— Monitoring of changes in tax legislation using in-house
and external tax specialists and legal advisors
— Maintenance of a robust Tax Governance Framework
setting out our approach to tax risk management and
governance
— Preparation of an annual Voluntary Tax Transparency Code
Report for public consumption
— Implementation of a robust foreign exchange policy
— Implementation of a comprehensive capital management
strategy, including interest rate hedging strategy
— Business Resilience Framework including Business
Continuity and Disaster Recovery Plans
— Implementation of Crisis Management Program and tool
29
ARISTOCRAT LEISURE LIMITED Annual Report 2019
This Remuneration Report for Aristocrat Leisure Limited
and its controlled entities (Group) for the 12 months ended
30 September 2019 (Reporting Period or FY2019) has
been prepared in accordance with section 300A of the
Corporations Act 2001 (Cth) (the Act), forms part of the
Directors’ Report and has been audited as required by
section 308(3C) of the Act.
Terms used in this Remuneration Report are defined in the
Glossary on page 54.
AT A GLANCE – ALIGNMENT BETWEEN
PERFORMANCE AND OUTCOMES
Stretch NPATA and EPSA targets set by the Board
— Challenging NPATA target (70% weighting) of $833.6m
(on a constant currency basis1) set by the Board in
connection with FY2019 STI grant, which was a 34%
increase on the FY2018 STI target.
— Stretch EPSA target was set by the Board in connection
with the FY2017 LTI grants that vested this year:
Award year
Threshold target Maximum target
FY17
FY16
10%
7.5%
15%
12.5%
— Both NPATA and EPSA targets were set in the context of
broadly flat key markets and segments, with these markets
and segments remaining broadly flat over the course of
the relevant STI and LTI performance periods.
— Both organic and inorganic growth was taken into account
by the Board in setting EPSA growth targets.
• The 7.5%/12.5% min/max EPSA targets in respect of
FY2016 grants were set on the basis that both organic
and inorganic growth would be required in order for
those targets to be achievable.
• The Board then applied further stretch to the
EPSA targets under the FY2017 LTI grant (10%/15%
min/max).
STI outcomes and performance in FY2019
Senior Executives received on average 102% of their
STI target award (compared to the maximum target STI
opportunity of 200%), supported by NPATA increasing by
22.6% to $894.4 million (in reported currency) from the prior
corresponding period.
— Strong NPATA of $894.4 million ($834.2 million on a
constant currency basis1), which was 100% of target,
was driven through management delivering strong
growth through the continued gain of market share
across broadly flat existing markets, while capturing
opportunities in new adjacent markets and segments.
— Strong FCF Conversion of 102%, which was 108% of
target, reflecting cash flow discipline and allowing
Aristocrat to fund growth initiatives.
LTI outcomes and performance in FY2019
100% of PSRs awarded to Executive KMP under the 2017 LTI
Grant vested following testing against the Relative TSR and
Relevant EPSA performance measures.
— 100% of the Relative TSR component (30% of total grant)
vested as Aristocrat’s TSR performance was 109.26%, with
Aristocrat 10th in its Peer Comparator Group and ranked
at the 90th percentile.
— 100% of the Relevant EPSA component (30% of total
grant) vested based on a strong three-year EPSA CAGR of
31.0%.
— Strong Relevant EPSA growth of 31.0%, was driven
through management delivering strong growth through
the continued gain of market share across broadly flat
existing markets, while capturing opportunities in new
adjacent markets and segments.
1. Constant currency basis as set out in the approved budget.
30
ARISTOCRAT LEISURE LIMITED Annual Report 2019
REMUNERATION REPORT OTHER KEY ITEMS TO HIGHLIGHT IN 2019
The Board has approved certain changes to the
remuneration framework and also adopted enhanced
disclosure practices in connection with a number of
remuneration related matters. These included:
— Taking into account feedback from investors and other
external stakeholders and having considered a number
of other LTI performance measures, including various
return metrics, the Board approved a transition from a
Relevant EPSA to a Relevant EPS hurdle (30% weighting)
in connection with future LTI grants.
— In addition to required statutory disclosures, introducing
retrospective disclosure in this Remuneration Report
of the actual quantitative STI targets (NPATA and FCF
Conversion) set by the Board, together with disclosure of
actual performance against those targets.
— Also expanding our disclosures on methodologies
relating to target setting, including how hurdles are
determined to ensure challenging stretch targets are set
and what factors the Human Resources & Remuneration
Committee and Board take into account in setting
stretch targets.
— Strengthening the clawback provisions that apply to
unvested and vested incentives and including additional
governance features into the process of testing incentive
grants to continue to ensure a link between remuneration
and risk.
— Implementing a minimum shareholding policy for Non-
Executive Directors to acquire (within a five-year period) a
minimum shareholding equivalent in value to their annual
base fee.
The Board believes that these changes further enhance
Aristocrat’s remuneration framework and the additional
disclosure practices mean that Aristocrat continues to
provide clear and transparent disclosure.
31
ARISTOCRAT LEISURE LIMITED Annual Report 2019
REMUNERATION REPORT REMUNERATION REPORT OVERVIEW
List of KMPs – FY2019
Table 1 below outlines the KMP and their movements during FY2019
KMP
Position
Location
Term as KMP
Non-Executive Directors
NG Chatfield
Chair1; Director
KM Conlon
SW Morro
PJ Ramsey
AM Tansey
S Summers Couder
ID Blackburne
Executive KMP
Director
Lead US Director2
Director
Director
Director
Chair1; Director
Australia
Australia
Full financial year
Full financial year
United States
Full financial year
United States
Full financial year
Australia
Full financial year
United States
Full financial year
Australia
Retired on 21 February 2019
T Croker
CEO and Managing Director
United States
Full financial year
J Cameron-Doe
CFO
United States
Full financial year
M Bowen
M Wilson
J Sevigny
CEO Global Land Based and
Chief Transformation Officer3
Australia
Full financial year
Managing Director, Americas
United States
Ceased to be employed on 16 September 2019
President, Video Gaming
Technologies
United States
Ceased to be employed on 5 March 2019
J Goldstein
Chief Digital Officer
United States
Ceased to be employed on 4 October 2018
1. Mr Chatfield’s appointment as Chair took effect immediately following the retirement of Dr ID Blackburne on 21 February 2019 at the end of the 2019 Annual
General Meeting.
2. One Non-Executive Director acts as the Lead US Director. The Lead US Director assists the Board with review and oversight of Aristocrat’s North American
business, which accounts for approximately 77% of the Group’s land-based business.
3. Mr Bowen was promoted to the role of CEO Global Land Based and Chief Transformation Officer during the Reporting Period. Prior to this, Mr Bowen was
Managing Director, ANZ & International.
Non-Executive Director appointment after Reporting Period but before date of Remuneration Report
Mr P Etienne was nominated as a Non-Executive Director after the Reporting Period on 1 October 2019, subject to receipt of
all relevant regulatory pre-approvals. These regulatory approvals were subsequently received and Mr Etienne’s appointment
as a Non-Executive Director of the Company was confirmed on 7 November 2019, subject to shareholder approval at the
Annual General Meeting in February 2020.
32
ARISTOCRAT LEISURE LIMITED Annual Report 2019
REMUNERATION REPORT REMUNERATION PHILOSOPHY AND STRATEGY
The following principles guide Aristocrat’s remuneration strategy and ‘pay for performance’ philosophy. The Board is
confident the current remuneration framework supports and drives its business strategy and Group out-performance.
Alignment to shareholder interests and
sustainable shareholder returns
Performance based – link rewards to
business results and strategy
Reflect the markets we recruit from
and need to be competitive in
Encourage behaviours consistent with values
and deliver good customer outcomes
Robust governance with focus on risk
management
Aristocrat is one of a small group of ASX listed companies that derives the majority of its revenues from overseas markets and
is genuinely global in its structure and operations. Although Aristocrat is listed on the Australian Securities Exchange, it has
over 6,400 employees based globally across 80 countries and is licensed in more than 320 jurisdictions.
Aristocrat’s senior leadership is predominantly US based, and the business must increasingly attract and retain leaders in
US and other markets with technology and global management skillsets. US market practice (in particular) places a greater
emphasis on at-risk opportunity, and significant equity grants are commonly used for talent attraction and retention (than in
Australia).
The significant expansion of Aristocrat’s digital business, which now contributes 40.7% of Group revenue, reinforces the need
for Aristocrat’s remuneration structures to evolve and take into account global pay philosophies, particularly those in the
technology industry.
The Board therefore continues to review the structure of Aristocrat’s incentive schemes to ensure they are globally competitive
and effective in retaining, attracting and motivating the leadership and talent it needs to drive business strategy and financial
performance in the interests of shareholders, while continuing to reflect our ‘pay for performance’ philosophy.
CAN
USA
MEX
ARG
RUS
IND
MAC
EU
UKR
GBR
ISR
PHL
SGP
AUS
NZ
The world map above displays the global location of Aristocrat’s employees, with the size of each circle illustrating the number of employees based in that country.
33
ARISTOCRAT LEISURE LIMITED Annual Report 2019
REMUNERATION REPORT SENIOR EXECUTIVE REMUNERATION
FRAMEWORK
Executive remuneration mix
Total remuneration includes both a fixed component and an
at-risk or performance-related component (governing both
short-term and long-term incentives). The Board views the at-
risk component as an essential driver of a high performance
culture and one that contributes to achievement of superior
shareholder returns.
The following illustration shows the remuneration mix for
the Executive KMP in FY2019. It has been modelled on
the average of the Executive KMP’s target opportunity (but
excluding any contractual severance entitlements).
The Board aims to achieve a balance between fixed and
performance-related components of remuneration. The
actual remuneration mix for the Executive KMP will vary
depending on the level of performance achieved at a Group,
business unit and individual level.
At-risk
76%
Fixed
24%
At-risk
59.6%
CEO
LTI
52.0%
Deferred STI
12.0%
Cash STI
12.0%
Fixed
24.0%
Other Executive KMP
LTI
34.4%
Deferred STI
12.6%
Cash STI
12.6%
Fixed
40.4%
Fixed
40.4%
Deferred
equity
64%
Cash
36%
Deferred
equity
47%
Cash
53%
Market insights
Aristocrat engages external consultants1 to provide insights
into comparative executive remuneration practices and pay
mix practices between Australian and global labour markets
in which Aristocrat competes for talent2. These insights
highlight the following:
— The remuneration mix in the North American market is
generally much more leveraged to variable pay through
use of the LTI than the Australian market. As an example,
the total variable component in the CEO remuneration
mix for the US is observed to be 75%, compared to 64% in
Australia. Specifically with reference to LTI, the Australian
CEO’s total remuneration comprises 34% LTI, whereas in
the US, it can be as high as 59%.
— Australian executive remuneration policies are far more
conservative than those in the US – not just in terms of the
level of LTI grants awarded to executives but also in terms
of the pay-for-performance mechanics of incentive plans.
— In both markets, the most prevalent approach is for
companies to employ a 3-year LTI performance period.
— It is common practice for US technology companies to
offer a LTI plan to their executives which is split 50/50
between performance-based awards and time-based
awards only.
— The US technology sector shows a higher prevalence of
time-based stock awards in comparison to performance-
based stock awards. To illustrate, over 80% of companies
in the US technology sector employ time vested restricted
stock as part of incentive arrangements.
— Analysis of typical vesting scales in the US versus Australia
reveals that Australian LTI plans tend to have higher
performance thresholds in their plans compared to
the US, which means that executives are ‘in-the-money’
at lower levels of performance in the US compared to
Australia.
1. Source: Aon.
2. Analysis conducted by Aon on comparator group of organisations based
on comparable size and operations to Aristocrat, including ASX listed
companies with significant US operations.
34
ARISTOCRAT LEISURE LIMITED Annual Report 2019
REMUNERATION REPORT Table 2 Senior Executive Remuneration structure and framework
SENIOR EXECUTIVE REMUNERATION STRUCTURE
Fixed
Between 24% - 50% of total target
remuneration
At-risk
Between 50% - 76% of total target remuneration
Fixed remuneration
Base salary, superannuation and
other benefits
Short-term incentive (STI)
Reward for strong individual and
Group performance during the
Performance Period
Long-term incentive (LTI)
Reward for longer-term
Group performance
— Individual skills, performance,
experience and contribution to
Aristocrat with reference to similar
roles in global competitors and
companies within a range of
Aristocrat’s market capitalisation
— Global geographic location
— Onerous probity requirements by
regulators also considered
Value determined by
Achievement of both annual
financial and non-financial
performance at a:
— Group level
— Business unit level
— Individual level
— Relative TSR – 30% weighting
— Relevant EPSA – 30% weighting
— Individual performance based
vesting condition – 40%
weighting
Cash and superannuation
(or equivalents)
Provides competitive ongoing
remuneration in recognition of
day-to-day accountabilities
Delivered as
50% cash
25% deferred for 12 months
as an award of PSRs
25% deferred for 24 months
as an award of PSRs
Why it is paid?
— Supports annual delivery of
key strategic targets and to
recognise and reward individual
performance
— Deferral into equity supports
sustained performance and more
closely aligns the interests of
executives and shareholders
Award of PSRs vesting after
36 months
— Focuses on multi-year metrics
that support sustained
shareholder value creation
— Delivered in equity to align
the interests of executives and
shareholders
35
ARISTOCRAT LEISURE LIMITED Annual Report 2019
REMUNERATION REPORT HOW VARIABLE REMUNERATION IS
STRUCTURED
Short Term Incentive (STI) – how does it work?
Description
Senior Executives have the opportunity to earn an annual
incentive award which is delivered in cash and deferred
equity awards (in the form of PSRs). The STI Plan recognises
and rewards short-term performance.
The STI Plan is considered to be at-risk remuneration and is
not a guaranteed part of Senior Executive remuneration.
STI opportunity
A target opportunity is set for each Senior Executive, which
is earned if Group and individual performance is on target.
For certain Senior Executives, in a region or business unit,
a target opportunity is set which is earned if regional
performance and individual performance is on target. The
Board determines the total STI pool to be distributed.
Senior Executives (other than the CEO) have a target STI of
between 43% and 70% of fixed remuneration. The CEO has
a target STI of 100% of fixed remuneration. The maximum
STI payout is capped at 200% of a participant’s target STI
opportunity.
Financial performance conditions
No payment is made unless the STI gateway of the Business
Score Threshold (being 85% of the Business Score Goals)
is met.
For employees whose role is multi-regional or global in
nature – including all Executive KMP – their ‘Business Score
Goal’ is the result that is based on the actual financial
performance of Aristocrat in a financial year, calculated by
reference to NPATA and FCF Conversion as follows:
— NPATA – 70% weighting
— FCF Conversion – 30% weighting
The Business Score is converted into the Business Score
Multiplier according to the following chart:
r
e
i
l
p
i
t
l
u
M
e
r
o
c
S
s
s
e
n
i
s
u
B
250%
200%
150%
100%
50%
0%
85%
100%
105%
110%
120%
Business Score
Setting stretch financial performance conditions
The Board utilises the annual budget as the primary input
to determine appropriate stretch financial targets. When
approving the budget, the Board reviews the core principles
and assumptions underpinning the budget. In addition, the
Board also considers expected market growth at the time
of setting targets with the expectation that management
will outperform expected market growth (if any) and, in
the context of broadly flat markets and segments, that
management will deliver growth through the gain of
market share.
Subsequent to the budget having been finalised, the Board
determines the STI financial targets. In order to ensure
sufficient stretch is incorporated, consideration is given to
the quantifiable risks and opportunities that can influence
the Group’s financial performance. The Board considers
significant items in the context of target setting.
Non-financial performance conditions
A ratings scale is used to assess individual performance. No
payment is made for a Senior Executive who has not met or
exceeded a minimum individual performance rating.
Senior Executives are assessed on delivery against
individual KPOs. Individual targets as set out in KPOs
include consideration as to role-related accountabilities
and responsibilities in the context of business strategy and
objectives, as set out in Table 6.
36
ARISTOCRAT LEISURE LIMITED Annual Report 2019
REMUNERATION REPORT
Individuals have a clear line of sight to KPOs and are able
to directly affect outcomes through their own actions.
Individuals are also assessed on behaviour metrics which
contribute to that individual’s overall performance rating.
How STI outcome is then determined
The Individual Performance Multiplier is then used to
determine the quantum of STI payment the Senior Executive
will receive.
Once the Business Score Multiplier and Individual
Performance Multiplier are determined, an individual’s
STI award is calculated as follows:
Individual STI Payment
Individual STI Target
Business Score Multiplier
Individual Performance Multiplier
Reasons for these performance conditions
The Board considers these performance measures to be
appropriate as they are aligned with Aristocrat’s objectives
of delivering sustainable growth and sustainable superior
returns to shareholders. In the case of FCF Conversion, this
measure was chosen as it ensures cash flow discipline, which
in turn allows Aristocrat to fund growth initiatives. In addition,
Senior Executives have a clear line of sight to the targets and
are able to affect results through their actions.
Performance measures and conditions are reviewed annually
and are subject to change as considered appropriate. The
Board has discretion to review and amend the Business
Score Goals during the performance period (up or down)
where significant unforeseen events have occurred which are
outside the control of management.
Who assesses performance?
The Board assesses performance of the CEO and Managing
Director against the performance conditions with the benefit
of advice from the HR and Remuneration Committee.
The CEO and Managing Director assesses the other
Executive KMP’s performance against the performance
conditions and makes recommendations to the HR and
Remuneration Committee which advises the Board in relation
to the CEO and Managing Director’s recommendations and
the review process.
In addition to developing and approving the KPOs of the
CEO and Managing Director, the Board has oversight and
visibility over KPOs of direct reports of the CEO at both the
time of setting and assessing performance against KPOs.
Special mitigating circumstances may be accepted,
determined or approved on a case-by-case basis by the CEO
and Managing Director, and subject to approval by the HR
and Remuneration Committee and the Board.
Deferral terms
If the STI outcome is between 50% and 100% of target STI,
then half of the Senior Executive’s STI outcome is delivered
in cash and the remaining half is deferred in the form of an
equity award of PSRs, with these PSRs vesting as follows:
— 50% after 12 months;
— 50% after 24 months.
Any individual who is internally promoted to a Senior
Executive role is subject to a deferral of 25% of his/her STI
outcome (as opposed to 50%) in his/her first year in the role.
The Board has discretion to determine the percentage which
will be deferred as an equity award if the award is less or
greater than target.
No additional performance conditions apply to vesting of
the PSRs, with the exception of the continued employment
by the relevant Senior Executive as described below.
The number of PSRs is calculated using the volume-weighted
average price (VWAP) over the five trading days immediately
prior to and including the last day of the performance period
(for awards under the 2019 STI Plan, this was 30 September
2019).
Eligibility for dividends
An amount (based upon dividends paid by Aristocrat during
the deferral period) accrues on the PSRs and is paid in cash
at the end of the deferral period if the PSRs vest.
Cessation of employment
If the Senior Executive has ceased employment with the
Company, and is a ‘good leaver’, then the unvested PSRs will
remain on foot and will vest in the ordinary course, unless the
Board determines otherwise.
As a general rule, a Senior Executive will not be deemed to
be a ‘good leaver’ to the extent they are terminated for cause
or underperformance, breach their terms of employment
contract or they resign from Aristocrat.
37
ARISTOCRAT LEISURE LIMITED Annual Report 2019
REMUNERATION REPORT If the Senior Executive has ceased employment with the
Company and is not a ‘good leaver’, then all unvested PSRs
will automatically lapse on or around the date of cessation of
employment with the Group, unless the Board determines
otherwise.
Clawback
In the event of a material misstatement of performance, or
where vesting is not justified, appropriate or supportable
in the opinion of the Board, including if a participant joins a
competitor, the Board has the discretion to lapse unvested
PSRs. The Board has also strengthened the clawback policy
that applies to vested incentives in order to clawback any
shares allocated on vesting of the PSRs, as well as cash
payments received on vesting of PSRs or proceeds from the
sale of shares.
Restrictions on transfer or hedging
PSRs granted under the plan are not transferable and
participants are prohibited from entering into hedging
arrangements in respect of unvested PSRs.
Long Term Incentive (LTI) – how does it work?
This section summarises the terms of LTI grants made
in FY2019.
Description
Under the LTI Plan, annual grants of PSRs are made to
eligible participants to align remuneration with the creation
of shareholder value over the long term.
Vesting conditions
Three vesting conditions apply to LTI grants made during
FY2019:
— Relative TSR
— Relevant EPSA
— Individual performance-based vesting condition
Relative TSR – 30% weighting
Relative TSR performance is assessed over a three-year
period which will commence at the start of the financial year
during which the PSRs are granted.
For any PSRs to vest pursuant to the Relative TSR vesting
condition, Aristocrat’s compound TSR must be equal to or
greater than the median ranking of constituents of the Peer
Comparator Group. The Peer Comparator Group, being
constituents of the S&P/ ASX100 Index, is defined at the
commencement of the performance period and provides
a relative, objective, external market-based performance
measure against those companies with which Aristocrat
competes for capital, customers and talent.
The percentage of PSRs that may vest is determined based
on the following vesting schedule:
Aristocrat’s TSR ranking relative
to Peer Comparator Group
PSRs subject to Relative
TSR vesting condition
that vest (%)
Below the median ranking
At the median ranking
0%
50%
Executive KMPs as well as any employee of the Group who is
invited by the Board is eligible to participate.
Above the median ranking but
below the 75th percentile
Between 50% and 100%,
increasing on a straight-
line basis
Non-Executive Directors are not eligible to participate in the
LTI Plan.
LTI opportunity
The number of PSRs to be granted to a Senior Executive will
be determined by calculating the Face Value of Aristocrat’s
shares and dividing the Senior Executive’s LTI Opportunity
by the Face Value and rounding to the nearest whole figure.
In determining the ‘LTI Opportunity’, the Board will take
into account the nature of the position, the context of the
current market, the function and purpose of the long-term
component and other relevant information.
At or above the 75th percentile
100%
The Board may adjust the TSR vesting conditions to ensure
that an executive is neither advantaged nor disadvantaged
by matters outside of management’s control that affect
achievement of the vesting conditions. The Board will
also exercise its discretion to ensure that the TSR vesting
conditions are adjusted to reflect sustainable growth
outcomes aligned to the interests of shareholders.
Relevant EPSA – 30% weighting
The Relevant EPSA vesting condition is measured by
comparing Aristocrat’s compound annual EPSA growth rate
(CAGR) over a three-year performance period (1 October
2018 to 30 September 2021 in respect of LTI grants in
FY2019) against the ‘minimum’ EPSA growth and the
‘maximum’ EPSA growth thresholds, as set by the Board at
the beginning of this performance period.
38
ARISTOCRAT LEISURE LIMITED Annual Report 2019
REMUNERATION REPORT Relevant EPSA performance will be measured using the most
recent financial year-end prior to the award as the base year,
and the final financial year in the three-year performance
period as the end year.
The percentage of PSRs that may vest is determined based
on the following vesting schedule:
Aristocrat’s EPSA performance
% of vesting of PSRs
Less than the minimum EPSA
growth threshold
Equal to the minimum EPSA
growth threshold
0%
50%
Greater than the minimum EPSA
growth threshold, up to the
maximum EPSA growth threshold
Between 50% and
100%, increasing on a
straight line basis
Greater than the maximum EPSA
growth threshold
100%
The Board may adjust the Relevant EPSA vesting conditions
to ensure that an executive is neither advantaged nor
disadvantaged by matters outside of management’s control
that affect achievement of the vesting conditions.
As is our practice, the EPSA growth thresholds set by the
Board for the performance period are disclosed in the
Remuneration Report published in respect of the year in
which the PSR vesting is tested.
Relevant EPSA targets for the 2017 LTI Grants that vested in
2019 are disclosed in Table 4.
As part of a review by the Human Resources and
Remuneration Committee regarding the appropriateness
of LTI Plan performance measures, it took into account
feedback from investors and other external stakeholders
and the Board ultimately approved a transition from a
Relevant EPSA to a Relevant EPS hurdle (30% weighting) in
connection with future LTI grants, commencing with grants
in FY2020.
Individual performance based vesting condition –
40% weighting
The individual performance-based element of the LTI
Plan will vest subject to the participant having achieved or
exceeded against objective-balanced scorecard KPOs over
the entire course of the three-year performance period in
addition to continuous service for the performance period
(Individual Performance Based Condition). Vesting of
this tranche requires consistent and sustained individual
performance for three years in a row – if KPOs are not met in
any one year then the entire tranche is forfeited. There is no
catch-up or retesting.
The KPOs are aligned to supporting Aristocrat’s longer-term
strategy and driving continued sustainable growth.
Why were these vesting conditions chosen?
Relative TSR
— Ensures alignment between comparative shareholder
return and reward for the executive
— Provides relative, objective, external, market-based
performance measure against those companies with
which Aristocrat competes for capital, customers and
talent
— Is widely understood and accepted by key stakeholders
Relevant EPSA
— Is a relevant indicator of increases in shareholder value
— Neutralises the tax effected amortisation expense of
acquired intangibles, which is a non-cash charge and not
representative of underlying performance of the business
and cash flow generation
— Is a target that provides a suitable line of sight to
encourage executive performance
Individual Performance Based
— Aristocrat is one of a small group of ASX listed companies
that derives the majority of its revenues from overseas
markets and is genuinely global in its structure and
operations. Aristocrat’s senior leadership is predominantly
US based, and the business must increasingly attract and
retain leaders in global markets with technology and
global management skillsets
— This hurdle supports our LTI Plan being competitive to
global peers who have elements of service-based vesting
(restricted stock)
— Importantly, this is a performance-based hurdle requiring
that an Executive KMP meets or exceeds against
objective-balanced scorecard KPOs
— The objective-balanced scorecard KPOs are aligned to
supporting Aristocrat’s longer-term strategy and driving
continued sustainable growth
— This hurdle allows the Board to take into account ‘the how’
(behaviours) and conduct relating to risk management in
determining outcomes relating to this hurdle
— The balanced scorecard approach ensures that
safeguards are in place to protect against the risk of
unintended and unjustified outcomes
The Board is confident that it has the right arrangements
in place to drive performance and retention in line with
shareholders’ interests.
39
ARISTOCRAT LEISURE LIMITED Annual Report 2019
REMUNERATION REPORT Who assesses performance and when?
Clawback
Relative TSR and Relevant EPSA results are calculated
by Aristocrat and an external remuneration advisor tests
these TSR results as soon as practicable after the end of
the relevant performance period. The calculations are
considered by the Board to determine vesting outcomes.
The vesting conditions are therefore tested only at the end
of the performance period. There is no re-testing of vesting
conditions.
Vesting
If PSRs vest, the Board has discretion to either issue new
shares or to acquire shares on-market to satisfy the vestings.
Shares allocated on vesting of the PSRs are subject to the
terms of Aristocrat’s Share Trading Policy and carry full
dividend and voting rights upon allocation.
Are PSRs eligible for dividends?
In the event of a material misstatement of performance, or
where vesting is not justified, appropriate or supportable
in the opinion of the Board, including if a participant joins a
competitor, the Board has the discretion to lapse unvested
PSRs. The Board has also strengthened the clawback policy
that applies to vested incentives in order to clawback any
shares allocated on vesting of the PSRs, as well as any cash
payment received on vesting of PSRs or proceeds from the
sale of shares.
What happens in the event of a change of control?
There is no automatic vesting of PSRs on a change of control.
The Board will (in its discretion) determine the appropriate
treatment regarding PSRs in the event of a change of control.
Where the Board does not exercise this discretion, there will
be a pro-rata vesting of PSRs based on the proportion of
the performance period that has passed at the time of the
change of control event.
Holders of LTI PSRs are not entitled to dividends until the
PSRs have vested and converted into shares.
Restrictions on transfer or hedging
PSRs granted under the plan are not transferable and
participants are prohibited from entering into hedging
arrangements in respect of unvested PSRs.
Cessation of employment
If a participant ceases employment during the first 12
months of the three year performance period then,
regardless of whether the participant is a good or bad
leaver, all unvested PSRs lapse, unless the Board
determines otherwise.
If a participant ceases employment after the first 12 months
of the performance period but before the end of the
performance period:
— the portion of unvested PSRs that are subject to the
Individual Performance Based Condition will lapse
(regardless of whether or not the participant is a ‘good
leaver’), unless the Board determines otherwise;
— if the participant is a ‘good leaver’, a pro-rata portion of
unvested PSRs that are subject to financial performance
hurdles will remain ‘on foot’ and will be tested in the
ordinary course, unless the Board determines otherwise.
If the participant is not a ‘good leaver’, then all of these
unvested PSRs will automatically lapse on or around
the date of cessation of employment, unless the Board
determines otherwise.
As a general rule, a Senior Executive will not be deemed to
be a ‘good leaver’ to the extent they are terminated for cause
or underperformance, breach their terms of employment
contract or they resign from Aristocrat.
40
ARISTOCRAT LEISURE LIMITED Annual Report 2019
REMUNERATION REPORT
STRETCH PERFORMANCE TARGETS,
REMUNERATION OUTCOMES IN FY2019
AND LINK TO BUSINESS STRATEGY AND
SHAREHOLDER INTERESTS
Senior Executive remuneration
Senior Executive remuneration outcomes disclosed
in this Remuneration Report are linked and aligned to
delivery of sustainable shareholder value and driving
business performance over the short and longer term,
rewarding the strong results delivered across the
relevant STI and LTI performance periods (including
in FY2019).
This section of the Remuneration Report provides detail
on target setting by the Board (including how targets are
determined to ensure challenging stretch) and also discloses
the outcome of awards made under:
— the 2019 STI grant (performance period 1 October 2018 –
30 September 2019)
— the 2017 LTI Grant (performance period 1 October 2016 –
30 September 2019)
2019 STI grant targets
A challenging NPATA target (70% weighting) of $833.6m
(on a constant currency basis1) was set by the Board in
connection with FY2019 STI grant, which was a 34% year-on-
year increase on the FY2018 STI target.
The NPATA target was set in the context of broadly flat
key markets and segments, with these markets and
segments remaining broadly flat over the course of the STI
performance period.
In addition to assessing actual financial performance
measures against targets, performance of participants
was also assessed against individual KPOs in order to
determine STI remuneration outcomes. Individual targets
as set out in KPOs included consideration as to role-related
accountabilities and responsibilities in the context of delivery
against Aristocrat’s business strategy and objectives, as set
out in Table 6, as well as assessment against behavior metrics
(‘the how’).
Performance and STI outcomes in FY2019
Senior Executives received on average 102% of their
STI target award (compared to the maximum target STI
opportunity of 200%), supported by normalised NPATA
increasing by 22.6% to $894.4 million (in reported currency)
from the prior corresponding period.
— Strong normalised NPATA of $894.4 million ($834.2
million on a constant currency basis1), which was 100%
of target, was driven through management delivering
growth through the continued gain of market share
across broadly flat existing markets, while capturing
opportunities in new adjacent markets and segments.
— Of the overall 22.6% year-on-year growth in normalised
NPATA, 17.3% was driven from existing business, 3.1%
came from acquisitions and the remaining 2.2% from the
reduction in the effective tax rate.
— Strong FCF Conversion of 102%, which was 108% of
target, reflecting cash flow discipline and allowing
Aristocrat to fund growth initiatives.
104% of Group target STI was awarded in FY2019.
Table 3 below discloses actual quantitative STI targets set by the Board and actual performance against those targets
The Business Score was calculated by reference to the NPATA and FCF Conversion figures as follows:
STI gateway (Business Score Threshold) achieved
Measure + Weighting
NPATA (70%)
FCF Conversion (30%)
Target
$833.6m (34% on FY18 target)
95% (5% on FY18 target)2
STI gateway (Business Score Threshold) achieved
102%
Actual Performance
$834.2m1
STI outcome
100%
108%
Business Score was in excess of the Business Score Threshold
Threshold 85%
Target 100%
Stretch 120%
(max)
NPATA (weighting = 70%)
% of plan awarded = 100%
FCF Conversion (weighting = 30%)
% of plan awarded = 108%
1. Constant currency basis as set out in the approved budget.
2. The FCF Conversion target is set annually based on the anticipated financial performance of the Group for the coming year.
41
ARISTOCRAT LEISURE LIMITED Annual Report 2019
REMUNERATION REPORT LTI grant targets and outcomes in 2019
The following three vesting conditions applied to the 2017 LTI Grant:
— a Relative TSR vesting condition (30% weighting);
— a Relevant EPSA vesting condition (30% weighting); and
— an Individual Performance Based Condition (40% weighting).
Challenging EPSA targets were set by the Board in connection with the 2017 LTI Grants:
— Targets were set in the context of broadly flat key markets and segments.
— Both organic and inorganic growth was taken into account by the Board in setting EPSA growth targets. Specifically, the
7.5%/12.5% min/max EPSA targets set in respect of previous grants were set on the basis that both organic and inorganic
growth would be required in order for those targets to be achievable.
— The Board then applied further stretch to the EPSA target under the 2017 LTI grant (10% min/15% max). This is illustrated in
the table 4 below which shows the EPSA targets for LTI Grants between FY15 – FY17 (inclusive).
Management went on to deliver growth through the gain of market share across these broadly flat markets as shown in table 5.
Table 4 below discloses the Relevant EPSA Targets for LTI Grants between FY15 to FY17
Award year
FY17
FY16
FY15
Threshold
Target
10%
7.5%
7.5%
Maximum
Target
15%
12.5%
12.5%
Actual
31.0%
45.4%
54.4%
Performance
Period
FY17 – FY19
FY16 – FY18
FY15 – FY17
Vesting Date
After 30 September 2019
After 30 September 2018
After 30 September 2017
Award Outcome
Achieved
Achieved
Achieved
Relevant EPSA
Impact of accounting adjustments on remuneration outcomes
Normalised NPATA (not reported NPATA) is used for purposes of determining remuneration outcomes as normalised NPATA
is reflective of the actual underlying operational performance of the Group. Therefore, NPATA of $894.4m was used for
purposes of testing the EPSA growth outcome in connection with the 2017 LTI Grant and the testing of the outcome of the
2019 STI grant.
The impact of accounting adjustments as well as a reconciliation between normalised and reported NPATA is set out below:
Reconciliation of statutory profit to NPATA
A$ million
Statutory profit as reported in the financial statements
Amortisation of acquired intangibles (tax effected)
Reported profit after tax before amortisation of acquired intangibles
(Reported NPATA)
Add back net loss from significant items and adjustments after tax
Normalised Profit After Tax before amortisation of acquired intangibles (Normalised NPATA)
Significant items
A$ million
Contingent retention arrangements relating to the acquisitions
Acquisition related transaction, integration and restructuring costs
Net loss from significant items
Significant items:
2019
698.8
141.6
840.4
54.0
894.4
2018
542.6
112.7
655.3
74.3
729.6
30 Sep 2019
Before tax
(42.1)
(22.9)
After tax
(35.0)
(19.0)
(65.0)
(54.0)
Contingent retention arrangement related to the acquisition of Plarium and Big Fish: The Group’s reported result after tax
for the period includes an expense of $35 million relating to the contingent retention arrangements for the acquisitions of
Plarium and Big Fish.
Acquisition related transaction, integration and restructuring costs: The Group’s reported result after tax for the period
includes an expense of $19 million relating to an onerous lease provision for the Big Fish Seattle premises which was
committed to by previous ownership.
42
ARISTOCRAT LEISURE LIMITED Annual Report 2019
REMUNERATION REPORT 2017 LTI Grant vesting outcomes
Disclosed below is the outcome of the 2017 LTI Grant (tested over the three-year performance period ended 30 September
2019).
Financial targets and performance
Table 5 below discloses the LTI financial targets set by the Board and performance against those targets
30 September 2019: Three-year performance period ends for 2017 LTI Grants.
Performance is tested in November 2019 for Relative TSR and Relevant EPSA
Relative TSR (30% weighting)
Aristocrat’s TSR performance versus that of the Peer Comparator Group over the 2017 LTI Grant performance period 1 October 2016 to 30 September 2019:
Aristocrat TSR Performance v Peer Comparator Group (%)
ALL
ASX 100 Accumulation Index
240
220
200
180
160
140
120
100
)
%
(
e
u
a
V
l
80
C T 2 0 1 6
D E C 2 0 1 6
O V 2 0 1 6
M A R 2 0 1 7
J A N 2 0 1 7
FE B 2 0 1 7
M A Y 2 0 1 7
A P R 2 0 1 7
J U N 2 0 1 7
SE P 2 0 1 7
A U G 2 0 1 7
J U L 2 0 1 7
C T 2 0 1 7
D E C 2 0 1 7
O V 2 0 1 7
M A R 2 0 1 8
J A N 2 0 1 8
FE B 2 0 1 8
M A Y 2 0 1 8
A P R 2 0 1 8
J U N 2 0 1 8
SE P 2 0 1 8
A U G 2 0 1 8
J U L 2 0 1 8
C T 2 0 1 8
D E C 2 0 1 8
O V 2 0 1 8
M A R 2 0 1 9
J A N 2 0 1 9
FE B 2 0 1 9
M A Y 2 0 1 9
A P R 2 0 1 9
J U N 2 0 1 9
SE P 2 0 1 9
A U G 2 0 1 9
J U L 2 0 1 9
O
O
N
N
N
O
With a TSR performance of 109.26%, Aristocrat was the 10th top performer (equivalent to 90th percentile) of its Peer Comparator Group.
100% of the PSRs linked to the Relative TSR measure vested
Relevant EPSA (30% weighting)
100% of the Relevant EPSA component vested given that Aristocrat’s actual EPSA CAGR across the consecutive three-year performance period was 31.0%.
This growth was delivered through gain of market share achieved across broadly flat existing markets and segments while capturing opportunities in new
adjacent markets and segments. Of the overall 31.0% year-on-year growth in EPSA CAGR, 24.5% was driven from existing business, 4.7% came from
acquisitions and the remaining 1.8% from the reduction in the effective tax rate.
1 Oct 2016 to 30 Sept 2019
Threshold EPS Target
Maximum EPS Target
Actual Outcome
Relevant EPS Achievement
3 year CAGR
10%
15%
31.0%
100%
Relevant EPSA
100% of the PSRs linked to the Relevant EPSA measure vested
Individual performance
Individual Performance-Based Condition (40% weighting) for Executive KMP: 62% of PSRs linked to the individual
performance based condition vested for those Executive KMP granted the 2017 LTI awards, which requires the
Executive KMP to achieve or exceed the required performance rating based on calibration against a set of objective
balanced scorecard KPOs. These KPOs are aligned to supporting Aristocrat’s longer term strategy and driving continued
sustainable growth.
43
ARISTOCRAT LEISURE LIMITED Annual Report 2019
REMUNERATION REPORT
Table 6 below discloses remuneration outcomes in FY2019 and alignment to business strategy and Group performance
Business
strategy and
objectives…
Are reflected in LTI
and STI performance measures…
STI Individual performance rating
In excess of 68% of Group revenues now derive from recurring sources
Measures include growth in US Gaming Operations,
sustainability of strong market position in Australia
and continued growth in profitability of the digital
business
STI performance measure of NPATA
Measures profitability across the Group
STI performance measure of FCF Conversion
Measures free cash flow generated by the Group
LTI performance measure of Relative TSR Measures
the benefit delivered to shareholders over three
years, including dividend payments and movement in
the share price over and above a market benchmark
LTI performance measure of Relevant EPSA
Measures profitability across the Group on a per
share basis
STI Individual performance rating
Measures include increasing the size of Aristocrat’s
addressable markets and generating revenue from
adjacent opportunities
Profitability
and financial
performance
Unlocking
adjacent
opportunities
and growing
addressable
market
Recurring
revenue
growth /
taking market
share
Risk
management
STI Individual performance rating
Measures include continuing to embed effective
risk management throughout the organization to
support achievement of business objectives and fulfill
corporate governance objectives
Product
quality and
innovation,
great game
content and
customer
centric culture
STI Individual performance rating
Measures include product quality and delivery,
product innovation, great game content and
embedding customer centric culture across the
Group
Leadership
Effectiveness
and High
performing
People and
Culture
STI Individual performance rating
Measures include development, retention and
succession planning across all management levels
and for creative talent
Measures also include attracting, developing and
retaining gaming design talent
Directly affects
remuneration
outcomes
Total LTI
vesting
outcome in
FY2019 =
100% of target
based on TSR
and EPSA
performance
measures
CEO STI
outcome in
FY2019 =
119% of target
Average STI
outcome
in FY2019
for other
Executive
KMP = 76% of
target
So, Aristocrat’s
actual performance…
EXCEEDED
NPATA increasing year-on-year by 22.6% to $894.4 million (in reported
currency)
EBITDA up 20% to $1.597 million, with industry leading EBITDA margins
maintained
Achieved strong FCF Conversion of 108% of target
Aristocrat achieved a TSR of 109.26% over the 2017 LTI grant
performance period, 10th in its Peer Comparator Group and ranked at
the 90th percentile
Compounded EPSA growth rate of 31.0% exceeded set targets
Revenue increased by 23% in broadly flat markets to a new record level
of $4.4bn (in reported currency)
EXCEEDED
In excess of 16% of volume of units sold in the Americas derive from
adjacent market sources
30% growth in Outright Sales units driven by expansion into adjacent
markets and launch of new hardware (eg MarsX™, EdgeX™,
WinnersWorld™ cabinets)
Highly successful entry into an adjacency - the collection role playing
game (CRPG) genre - with the global launch of RAID: Shadow
Legends™ in February 2019, now a top 3 mobile game in the CRPG
genre
Successful expansion into adjacent markets in North America, including
Video Lottery Terminals (VLT), Washington Central Determinant System
(CDS), Class III Stepper, Class II Video (Ovation™) and Bartop Poker
EXCEEDED
Share gains continued across both Class II and Class III installed bases
Market leading ship share in ANZ
Digital revenues increased by 34% to $1.79bn (in reported currency)
Digital profits increased by 11.9% to US$370.2m
MET
Risk appetite frameworks and statements developed and agreed with
the Board, and operationalised throughout the organisation
Aggregate staff correct response rate under cyber security training
program increased to 71% in 2019 (from 57% in 2018), placing Aristocrat
significantly above the industry benchmark of 37%
Completed global program to ensure Aristocrat is compliant with the
EU’s GDPR legislation
Lost Time Injury rate of 1.6% compared to the Gambling Industry
average declared by Safe Work Australia of 7.7%
EXCEEDED
Best overall supplier of slot content
Aristocrat was awarded the following at the inaugural EKG Slot Awards
show in February 2019:
—
—
—
Top Performing New Premium Game – Dragon Link: Happy &
Prosperous™
Top Performing Premium Game – Dragon Link™
—
—
—
Top Performing New Video Reel Core Game – Wonder 4 Boost™
Top Performing Proprietary Branded Game – Dragon Link™
Best New Social Slot Game – Lightning Link™
Winner at the Global Gaming Awards for ‘Land-Based Supplier of the
Year’ and ‘Slot of the Year’ for Buffalo Diamond™
Continued focus on the customer experience with the roll-out of
SalesForce for Service in ANZ
Improvement in Quality metrics over FY18 from 90.5% to 95% and the
establishment of a quality baseline across the business
MET
Increased employee participation in Global Engagement Survey –
overall engagement score of 66%
Strong investment in culture-building across the business, including
holding a Global Leadership Conference during FY19 at which long
term growth aspirations were set, along with sessions on culture and
business leadership development
High potential talent assessment conducted with the goal to achieve nil
turnover for critical population
3 of 5 key senior executive appointments were internal candidates
44
ARISTOCRAT LEISURE LIMITED Annual Report 2019
Alignment between remuneration and Group performance
Numerous elements of Aristocrat’s remuneration strategy and framework are directly linked to Group performance.
The table below sets out information about movements in shareholder wealth for the financial years ended 30 September
2015 to 30 September 2019, highlighting alignment between Aristocrat’s remuneration strategy and framework and Group
performance over the past 5 years.
Further details about the Group’s performance over this period can be found in the Five-Year Summary contained in this
Annual Report.
Table 7 Summary of movement in shareholder wealth
Share price as at financial
year-end (A$)
Total dividends (cps)
Normalised EPS (fully
diluted) / EPSA (fully diluted)
(cps)2
TSR (%)
Short-term cash incentives
(% of Group target)
LTI (% vesting) based on
Relative TSR and Relevant
EPSA performance measures
12 months to
30 Sep 2019
12 months to
30 Sep 2018
12 months to
30 Sep 2017
12 months to
30 Sep 2016
12 months to
30 Sep 20151
30.60
56.0
28.44
46.0
21.00
34.0
15.81
25.0
8.61
17.0
118.0/140.2
96.5/114.1
77.5/85.0
54.9/62.4
30.1/37.1
10%
104%
38%
130%
35%
172%
87%
176%
50%
170%
100%
100%
100%
100%
94%
1. The opening share price for the 12 months to 30 September 2015 was $5.84.
2. Excluding the effect of significant items which are not representative of the underlying operational performance of the Group.
Historical earnings performance – NPATA and EBITA (A$m)
1,400
1,200
1,000
m
$
800
600
400
200
0
9
.
6
4
3
,
1
4
.
4
9
8
3
.
9
2
1
,
1
6
.
9
2
7
1
.
8
5
8
4
.
3
4
5
4
.
3
7
6
2
.
8
9
3
0
.
1
3
4
1
.
6
3
2
FY2015
FY2016
FY2017
FY2018
FY2019
Normalised EBITA
Linear (Normalised EBITA)
Normalised NPATA
Linear (Normalised NPATA)
45
ARISTOCRAT LEISURE LIMITED Annual Report 2019
REMUNERATION REPORT
REMUNERATION GOVERNANCE
Overview
The following diagram represents Aristocrat’s remuneration decision-making structure.
Board
Review and approval
Exercise of discretion in relation to targets, goals or funding pools
HR and Remuneration Committee
Board remuneration framework and policy
Executive KMP & NED remuneration outcome recommendations
Management
Proposals on executive remuneration outcomes
Implementing remuneration policies
Remuneration advisors
External and independent remuneration
advice and information
Details of the composition and responsibilities of the Human Resources (HR) and Remuneration Committee are set out in the
Corporate Governance Statement (and can be found at www.aristocrat.com).
Use of remuneration advisors
In making recommendations to the Board, the HR and Remuneration Committee seeks advice from external advisors from
time to time to assist in its deliberations. The HR and Remuneration Committee appointed Ernst & Young (EY) as Aristocrat’s
‘Remuneration Consultant’ for the purposes of the Corporations Act.
Remuneration advisors are engaged by the Chairperson of the HR and Remuneration Committee with an agreed set of
protocols that determine the way in which remuneration recommendations would be developed and provided to the Board.
This process is intended to ensure there can be no undue influence by Executive KMP to whom any recommendations
may relate.
No remuneration recommendations, as defined by the Act, were made by the remuneration advisors during the
Reporting Period.
46
ARISTOCRAT LEISURE LIMITED Annual Report 2019
REMUNERATION REPORT Service agreements
The remuneration and other terms of employment for the Executive KMP are formalised in service agreements, which have no
specified term. Each of these agreements provide for performance-related bonuses under the STI program, and participation,
where eligible, in the LTI Plan. Other major provisions of the service agreements of the Executive KMP are as follows:
Table 8 Service agreements
Notice to be given
by Executive
Notice to be given
by Group1
Termination
payment
Post-employment
restraint
CEO and Managing Director
T Croker
6 months
12 months
12 months (fixed remuneration)
12 months
Other Executive KMP
J Cameron-Doe
M Bowen
6 months
6 months
1. Payments may be made in lieu of notice period.
6 months
6 months
12 months (fixed remuneration)
12 months
6 months (fixed remuneration)
12 months
The key terms of service agreements with each of Mr Wilson, Mr Sevigny and Mr Goldstein have been outlined in previous
years’ Remuneration Reports and are not restated here given their departure from the business.
Disclosures under Listing Rule 4.10.22
A total of 1,095,098 securities were acquired on-market by the Aristocrat Employee Equity Trust during the Reporting Period
(at an average price per security of $22.67) to satisfy Aristocrat’s obligations under various equity and related plans.
Share trading policy
Aristocrat’s share trading policy prohibits the use of Derivatives (as defined in the policy) in relation to unvested equity
instruments, including PSRs and vested securities which are subject to disposal restrictions. Derivatives may be used in relation
to vested positions which are not subject to disposal restrictions, subject to compliance with the other provisions of the share
trading policy.
Senior Executives are strictly prohibited from entering into a margin loan or similar funding arrangements to acquire
Aristocrat’s securities and from using Aristocrat securities as security for a margin loan or similar funding arrangements.
Breaches of Aristocrat’s share trading policy are regarded very seriously and may lead to disciplinary action being taken
(including termination of employment).
47
ARISTOCRAT LEISURE LIMITED Annual Report 2019
REMUNERATION REPORT NON-EXECUTIVE DIRECTOR REMUNERATION
Details of the Non-Executive Directors of Aristocrat during
the Reporting Period are provided in the Directors’ Report.
Components and details of Non-Executive Director
remuneration
Non-Executive Directors receive a fixed fee (inclusive of
superannuation and committee memberships) for services
to the Board. The Chair of each committee receives an
additional fee for that service.
There were no increases in Board or Committee fees for the
Reporting Period.
Securing and retaining talented, qualified
Directors
Director fee levels are set having regards to:
— The responsibilities, time commitments and
workload expected
— ASX market and direct industry peers
— Being competitive across Aristocrat’s two
major jurisdictions (US and Australia)
Preserving independence and impartiality
Director remuneration consists of base
(Director) fees and Committee fees. No
element of Director remuneration is ‘at risk’ (i.e.
fees are not based on the performance of the
Group or individual Directors)
Aligning Director and security holder interests
Directors are encouraged to hold Aristocrat
securities and the Board has endorsed
minimum security holding guidelines for
Directors
Competitive fee levels have been a particular focus for the
Board due to its ongoing commitment to an orderly renewal
and succession planning process.
Aristocrat has increasingly transformed into a truly global
business with extensive scale, complexity and diversity, which
has in turn significantly increased both Board and Committee
workloads and overseas travel expectations. In addition,
developments in the corporate governance landscape are
leading to increased expectations and demands of Non-
Executive Directors on ASX boards.
Fees also reflect the regulatory requirements of the
environment in which Aristocrat operates, which imposes
considerable demands on the Non-Executive Directors and
their families who are required to disclose detailed personal
and financial information and submit to interviews, including
in foreign jurisdictions.
Certain global companies pay a supplemental travel
payment to non-resident Directors who are required to
attend Board meetings away from their principal residential
domicile, which Aristocrat does not do. Non-Executive
Directors are entitled to be reimbursed for all reasonable
business-related expenses, including travel, as may be
incurred in the discharge of their duties.
Aristocrat does not make sign-on payments to new Non-
Executive Directors and the Board does not provide for
retirement allowances for Non-Executive Directors.
Aggregate fee pool approved by shareholders
Non-Executive Directors’ fees (including committee fees) are
set by the Board within the maximum aggregate amount of
A$3,200,000 per annum approved by shareholders at the
AGM in February 2018.
Table 9 Non-Executive Director fees payable during the Reporting Period
Board fees per annum
Chairman
Non-Executive Director
Lead US Director
Amount (inclusive of all statutory superannuation
obligations)
A$625,000
A$250,000 / US$220,000
Additional US$40,000
Committee Chair (Audit, HR & Remuneration)
Additional A$45,000 / US$35,000
Committee Chair (Strategic, Regulatory & Compliance)
Additional A$35,000 / US$30,000
Committee member (per committee, capped at two
committees per person)
Additional A$15,000 / US$10,000
48
ARISTOCRAT LEISURE LIMITED Annual Report 2019
REMUNERATION REPORT STATUTORY REMUNERATION TABLES AND DATA
Key KMP movements in FY2019
Mr Bowen was promoted to CEO Global Land Based and Chief Transformation Officer during the Reporting Period. Prior to
this, Mr Bowen was Managing Director, ANZ & International.
Given the strategic importance of this newly created global position in a highly competitive global market for talent, Mr Bowen
was awarded a special equity grant of 50,000 PSRs with a three year vesting period. The special equity will vest on 21 June
2022 subject to Mr Bowen having achieved or exceeded against objective-balanced scorecard KPOs over the entire course of
the three-year performance period, in addition to continuous service for the entire performance period.
Mr M Wilson ceased to be employed on 16 September 2019 and forfeited all unvested awards, totaling 69,019 PSRs.
Details of Executive KMP remuneration
The following table reflects the accounting value of remuneration attributable to Executive KMP, derived from the various
components of their remuneration. This does not necessarily reflect actual amounts paid to Executive KMP due to the
conditional nature (for example, performance criteria) of some of these accrued amounts.
As required by the Accounting Standards, the table includes credits for PSRs which were forfeited during the year and the
amortised value of PSRs that may vest or best available estimates attributable to PSRs which may be lapsed or forfeited in
future reporting periods.
Table 10 Statutory Executive KMP remuneration table
Short-term benefits
($)
Post-employment
benefits
($)
Executive
Year
Cash
Salary1
Cash
Bonuses2
Non-
Monetary
Benefits³
Superannu-
ation
Termination4
CEO & Managing Director
2019
1,627,064
1,011,036
2018
1,457,094
804,590
37,939
220,526
-
2,083
T Croker
Executive KMP
J Cameron-
Doe9
M Bowen
Executive KMP
M Wilson10
J Sevigny10
J Goldstein10
Total
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
825,159
388,860
444,240
290,506
542,974
262,500
466,250
216,974
62,152
119,845
1,130
18,065
725,499
599,259
-
-
306,710
30,712
390,836
198,504
445
748,288
37,674
754,910
313,614
-
225,802
-
-
-
-
4,563
25,000
25,000
10,252
15,405
10,613
Share-based payments6
($)
Total
% of Share
Based
remuner-
ation (LTI
PSRs)
STI PSRs7
LTI PSRs8
$
%
763,371
2,166,867
5,606,277
512,859
1,541,831
4,538,983
234,762
371,895
1,882,828
87,468
112,762
1,078,940
234,792
392,145
1,491,083
218,906
191,541
1,152,115
38.7%
34.0%
19.8%
10.5%
26.3%
16.6%
Long-Term
Benefits
($)
Long
Service
Leave5
-
-
-
19,556
32,542
15,379
-
(260,863)
(296,072)
178,816
(165.6%)
2,694
368,493
222,656
1,545,929
14.4%
-
-
-
-
-
-
-
-
-
-
-
-
782,115
-
380,000
-
-
-
-
-
-
600,398
68,781
11,360
1,924,158
-
-
-
-
37,674
1,360,712
0.0%
0.6%
0.0%
0.0%
26.9%
17.9%
2019
4,149,206
1,860,900
101,666
45,865
-
32,542
972,062
2,634,835
9,797,076
2018
4,470,041
2,158,196
389,148
47,051
1,162,115
37,629
1,256,507
2,080,150
11,600,837
1. Amounts shown as cash salary and fees include amounts sacrificed in lieu of other benefits at the discretion of the individual. To the extent that benefits are
paid and subject to Fringe Benefits Tax (FBT), the above amount includes FBT. Executive KMPs based in the US have their cash salary denominated in USD
which is converted to AUD based on the monthly Group exchange rates.
2. Amounts reflect the non-deferred cash component of the 2019 STI incentives.
3. Non-monetary benefits include travel costs, professional fees for tax advice and associated FBT. In relation to T Croker and J Cameron-Doe, the 2018 amounts
relate to relocation costs in connection with a permanent relocation to the US, not a secondment or expatriate arrangement. In the case of J Cameron-Doe,
part of the 2019 amounts also relate to relocation costs in connection with her permanent relocation to the US.
4. Amounts reflect accruals in connection with the termination of employment (inclusive of any accruals for payments in lieu of notice).
5. The amounts provided for by the Group during the financial year in relation to accruals for long service leave.
49
ARISTOCRAT LEISURE LIMITED Annual Report 2019
REMUNERATION REPORT 6.
In accordance with the requirements of the Australian Accounting Standards, remuneration includes a proportion of the fair value of equity compensation
granted or outstanding during the year. The fair value of equity instruments which do not vest during the reporting period is determined as at the grant date
and is progressively allocated over the vesting period. The amount included as remuneration is not related to or indicative of the benefit (if any) that individual
Executive KMP may ultimately realise should the equity instruments vest. An independent accounting valuation for each tranche of PSRs at their respective
grant dates has been performed by Deloitte. In undertaking the valuation of the PSRs, Deloitte has used a TSR model and an EPSA model. These models are
described below:
TSR model – Deloitte uses the Monte-Carlo simulation-based model which incorporates the impact of performance hurdles and the vesting scale on the value
of the PSRs. This pricing model takes into account factors such as the Company’s share price at the date of grant, volatility of the underlying shares, the risk-free
rate of return, expected dividend yield and the likelihood that vesting conditions will be met. The accounting valuation of rights issued is allocated equally over
the vesting period.
EPSA and individual performance model – The Black-Scholes-Merton model was used to determine the fair value of PSRs. This pricing model takes into
account factors such as the Company’s share price at the date of grant, the risk-free rate of return, expected dividend yield and time to maturity. The
accounting valuation of rights issued is allocated over the vesting period so as to take into account the expected level of vesting over the performance period.
For the purposes of remuneration packaging, the ’face value’ (volume-weighted average price for the 5 trading days up to and including the day before the
start of the performance period) is adopted for determining the total number of PSRs to be allocated as this valuation best reflects the fair value of PSRs to
each executive at that time. The requirements of AASB 2 in relation to the treatment of non-market vesting conditions, such as earnings per share growth and
share-based remuneration requiring shareholder approval, results in accounting expense and disclosures differing from the value allocated for the purposes
of remuneration packaging.
7. A component of STI awards payable to Executive KMP will be satisfied by the grant of deferred share rights. Half will vest after one year, with the remainder
vesting after two years, both subject to relevant forfeiture conditions. Any individual who is internally promoted to a Senior Executive role is only subject to a
deferral of 25% of their STI outcome (as opposed to 50%) in his/her first year. The accounting expense for STI share rights represents the expense attributable
to the service period that has been completed for each deferred award. Therefore, the amounts reflected for the 12 months to 30 September 2019 include the
accounting accruals attributable to deferred share rights pursuant to the 2017, 2018 and 2019 STI awards.
8. The share-based payments expense includes the impact of PSRs that were granted in previous years that are being expensed for accounting purposes
over the vesting period, as well as the PSRs that were granted in the reporting period. Also includes best available estimates attributable to PSRs which may
be lapsed or forfeited in future reporting periods. The Special Equity granted to M Bowen upon his appointment as CEO Global Land Based and Chief
Transformation Officer is included in the calculations.
9. J Cameron-Doe’s FY2018 remuneration reflects 8 months’ remuneration in her role as CFO only as she was not an Executive KMP prior to her appointment as
CFO on 31 January 2018.
10. M Wilson, J Sevigny and J Goldstein left the Company during FY2019.
Table 11 Details of 2019 short-term awards paid and deferred
For the 12
months ended
30 September
2019
T Croker
Total award1
$
2,022,072
Cash
payment2
$
1,011,036
Deferred
component3
$
1,011,036
No. Share
Rights vesting
1 Oct 20203
16,529
No. Share
Rights vesting
1 Oct 20213
16,529
Other Executive KMP
J Cameron-Doe
M Bowen
Former Executive KMP
M Wilson
J Sevigny
J Goldstein
777,720
525,000
-
198,504
-
388,860
262,500
-
198,504
-
388,860
262,500
6,357
4,292
6,357
4,292
-
-
-
-
-
-
-
-
-
Total award as
% of target STI
% of total
award
deferred
119%
131%
140%
0%
83%
0%
50%
50%
50%
0%
0%
0%
1. Amounts reflect the value of the total 2019 awards. See footnotes 2 and 3 for an explanation of the cash and deferred components of the total award.
2. Amounts reflect the cash component of the 2019 awards paid to participants. Amounts in USD are translated at the average rate for the year.
3. Amounts reflect the value of 2019 awards deferred into PSRs. Part of the deferred component of awards will vest on 1 October 2020 and the remainder on
1 October 2021. The number of PSRs is determined using the five day VWAP up to and including 30 September 2019, being $30.58. Amounts in USD are
translated at the FX rate on the grant date.
50
ARISTOCRAT LEISURE LIMITED Annual Report 2019
REMUNERATION REPORT
Table 12 Details of PSRs with a three year performance period granted to Executive KMP, including their related parties,
during the Reporting Period
Performance rights with a three-year performance period were granted during the Reporting Period as follows:
T Croker
J Cameron-Doe
M Bowen
Former Executive KMP
M Wilson
J Sevigny
J Goldstein
Rights granted1
116,390
31,425
66,424
18,622
-
-
Value of grant2 ($)
2,252,798
608,256
1,870,899
360,448
-
-
1. The number of rights granted calculated based on the Face Value, as further explained on page 38. The rights that were vested or forfeited during the
Reporting Period are set out in Table 13.
2. Other than M Bowen’s special equity grant of 50,000 PSRs, all PSRs were granted on 22 March 2019. The fair value of the rights that were granted on 22 March
2019 are $10.38 for rights with a total shareholder return condition and $23.20 for rights with an individual performance based condition and EPSA condition.
M Bowen’s special equity grant of 50,000 PSRs was awarded on 21 June 2019. The fair value of the rights granted on 21 June 2019 is $31.06 for rights with an
individual performance based condition. The values shown in the above table represent the maximum value of the grants made. The minimum value is zero.
Table 13 Details of the movement in numbers of PSRs with a three year performance period during the Reporting Period
T Croker
J Cameron-Doe
M Bowen
M Wilson
J Sevigny
J Goldstein
Balance at
1 October 2018
241,845
Granted during
the year1
116,390
Vested2,3
(42,624)
Lapsed/ forfeited
-
Balance at 30
September 2019
315,611
21,077
34,954
32,948
112,659
35,335
31,425
66,424
18,622
-
-
-
(11,775)
-
(57,110)
-
-
-
(51,570)
(55,549)
(35,335)
52,502
89,603
-
-
-
1. The value of the PSRs granted to Executive KMP during the year (including the aggregate value of PSRs granted) is set out in Table 12. No options were granted
during the year to any Executive KMP.
2. The value of each PSR on the date of vesting is the closing price of the Company’s shares on the ASX on the preceding trading day.
3. As shares are immediately allocated upon the vesting of PSRs, there will be no instances where PSRs are vested and exercisable, or vested but not yet
exercisable.
51
ARISTOCRAT LEISURE LIMITED Annual Report 2019
REMUNERATION REPORT Details of Non-Executive Director remuneration
Table 14 Details of Non-Executive Director remuneration for the Reporting Period
Short-term benefits
($)
Post-employment benefits
($)
Share-based
payments ($)
Total
Cash salary and
fees1
Fees for extra
services2
Superannuation3 Retirement benefits4 Options and PSRs
$
465,373
187,513
285,000
252,089
384,959
347,373
370,690
317,521
370,690
330,930
285,000
248,284
234,615
517,500
2,396,327
2,201,210
-
-
-
15,000
-
15,000
-
15,000
-
15,000
-
15,000
-
15,000
-
90,000
24,764
17,814
25,000
23,257
-
-
-
-
-
-
25,000
22,895
9,896
25,000
84,660
88,966
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
490,137
205,327
310,000
290,346
384,959
362,373
370,690
332,521
370,690
345,930
310,000
286,179
244,511
557,500
2,480,987
2,380,176
Directors
NG Chatfield
KM Conlon
SW Morro
PJ Ramsey
S Summers Couder
A Tansey
Year
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
Former Non-Executive Director
ID Blackburne
Total
2019
2018
2019
2018
1. Amounts shown as cash salary and fees include amounts sacrificed in lieu of other benefits at the discretion of the individual. To the extent that any non-
monetary benefits are subject to Fringe Benefits Tax (FBT), amounts shown include FBT.
2. Each Non-Executive Director received a fixed sum of A$15,000 in FY2018 in relation to the diligence, negotiation and execution of the Big Fish Games, Inc.
acquisition and associated debt financing.
3. Superannuation contributions include amounts required to satisfy the Group’s obligations under applicable Superannuation Guarantee legislation.
4. Non-Executive Directors are not entitled to any retirement benefit.
52
ARISTOCRAT LEISURE LIMITED Annual Report 2019
REMUNERATION REPORT SHAREHOLDINGS
Movement in shares
The tables below details movements during the year in the number of ordinary shares held by KMP, their close family
members, and entities controlled, jointly controlled or significantly influenced by KMP or their close family members.
No amounts are unpaid on any of the shares issued. The tables below exclude any unvested PSRs under the STI Plan and the
LTI Plan.
Table 15 Details of Non-Executive Director shareholdings
Non-Executive Directors
NG Chatfield
KM Conlon
SW Morro
PJ Ramsey
S Summers Couder
A Tansey
ID Blackburne1
Balance at 1 October 2018 Purchased/ Transferred Balance as at 30 September 2019
18,000
10,000
8,000
10,514
40,000
19,360
6,050
1,570
90,000
-
-
-
4,600
2,000
-
10,514
40,000
19,360
10,650
3,570
-
1. As at 21 February 2019 given Dr Blackburne ceased to be a Non-Executive Director on that date.
Table 16 Details of Executive KMP shareholdings
T Croker
J Cameron-Doe
M Bowen
M Wilson (ceased employment on
16 September 2019)
J Sevigny (ceased employment on
5 March 2019)
J Goldstein (ceased employment
on 4 October 2018)
Executive Director and other Executive KMP
Balance at
1 October 2018
255,756
6,993
-
-
-
-
Performance
shares vested
63,065
Other net changes
during the year
(12,594) 1
Balance as at 30
September 2019
306,227
11,903
21,171
28,117
77,880
-
(13,633)
(10,000)
(28,117)
(77,880)
-
5,263
11,171
-
-
-
1. Compulsory employer sale of 12,594 shares for T Croker for the purposes of satisfying US withholding tax liabilities payable on vesting of PSRs.
Loans or other transactions with KMP
No KMP or their related parties held any loans from the Group during or at the end of the year ended 30 September 2019 or
prior year. Apart from the details disclosed in this Report, there were no transactions between KMP (or their related parties)
and the Company or any of its subsidiaries during the Reporting Period.
53
ARISTOCRAT LEISURE LIMITED Annual Report 2019
REMUNERATION REPORT GLOSSARY
2017 LTI Grant
Awards made under the LTI Plan during FY2017 with a three-year performance period from
1 October 2016 to 30 September 2019
Aristocrat
Aristocrat Leisure Limited and (where applicable) the Group
Business Score
For Executive KMP and employees in corporate functions – is the result that is based on the actual
financial performance of Aristocrat in a financial year, calculated by reference to NPATA and FCF
Conversion
For Employees in a region or business unit (including Big Fish Games and Product Madness) – is
the result that is based in part on the actual performance of Aristocrat (as above) and in part on
the actual regional or business unit performance, using EBITA in place of NPATA for both profit
and FCF Conversion calculations
Business Score Goals
Aristocrat’s and individual business unit’s/region’s financial performance goals, approved by the
Board at the start of the performance period, that need to be achieved under the STI Plan
Business Score
Threshold
The minimum Business Score required to receive payment under the STI Plan (being 85% of the
Business Score Goals)
EBIT
EBITA
ESPA
Executive KMP
Face Value
FCF Conversion
KMP
KPO
LTI Plan
Earnings before interest and tax, on a normalised basis excluding significant items as disclosed in
the Operating and Financial Review section of the Annual Report
Earnings before interest, taxes and amortisation of acquired intangibles, on a normalised basis
excluding significant items as disclosed in the Operating and Financial Review section of the
Annual Report
Fully diluted EPS before amortisation of acquired intangibles disclosed in the Operating and
Financial Review section of the Annual Report
Those KMP who were also part of Aristocrat’s Executive Steering Committee during the Reporting
Period, being (i) T Croker (CEO and Managing Director), (ii) J Cameron-Doe (Chief Financial
Officer), (iii) M Bowen (CEO Global Land Based and Chief Transformation Officer), (iv) M Wilson
(Managing Director, Americas – for part year), (v) J Sevigny (President, Video Gaming Technologies
– for part year), (vi) J Goldstein (Chief Digital Officer – for part year)
The volume-weighted average price of Aristocrat shares for the 5 trading days up to and including
the day before the start of the performance period
In the case of Executive KMP, this is a target based on free cash flow as a percentage of
NPATA. For all employees (other than Big Fish Games and Product Madness employees), it is a
percentage of NPATA (Group Score) or EBITA (Business Score (Land-based)), as applicable. The
exceptions are Big Fish Games and Product Madness employees, as they do not have FCF targets
Persons who, directly or indirectly, have authority and responsibility for planning, directing and
controlling the activities of Aristocrat and the Group during the Reporting Period
Key Performance Objective
Aristocrat’s long-term incentive plan
Normalised EPS
Fully diluted earnings per share, normalised for significant items as disclosed in the Operating
and Financial Review section of the Annual Report
54
ARISTOCRAT LEISURE LIMITED Annual Report 2019
REMUNERATION REPORT NPATA
Net profit after tax before amortisation of acquired intangibles, normalised for significant items as
disclosed in the Operating and Financial Review section of the Annual Report
Peer Comparator Group Constituents of the S&P/ASX100 Index, defined at the commencement of the
performance period
PSR
Relative TSR
Relevant EPS
Relevant EPSA
Performance Share Right, with each right entitling the holder to receive one fully-paid ordinary
share in Aristocrat on vesting (or if the Board determines, an equivalent cash payment). Vesting of
PSRs may be subject to vesting conditions and performance hurdles
Aristocrat’s compounded TSR measured against the ranking of constituents of the Peer
Comparator Group
Cumulative EPS over the performance period compared to a target set by the Board at the
commencement of the performance period
Cumulative EPSA over the performance period compared to a target set by the Board at the
commencement of the performance period
Senior Executives
The group of senior executives consisting of: (i) the Executive KMP, and (ii) other members of
Aristocrat’s Executive Steering Committee (details of which can be found on www.aristocrat.com)
STI Plan
TSR
Aristocrat’s short-term incentive plan
Total shareholder return measures the percentage growth in the share price together with the
value of dividends received during the relevant three year performance period, assuming all
dividends are reinvested into new securities
55
ARISTOCRAT LEISURE LIMITED Annual Report 2019
REMUNERATION REPORT Auditor’s Independence Declaration
As lead auditor for the audit of Aristocrat Leisure Limited for the year ended 30 September 2019, I
declare that to the best of my knowledge and belief, there have been:
(a)
no contraventions of the auditor independence requirements of the Corporations Act 2001 in
relation to the audit; and
(b)
no contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of Aristocrat Leisure Limited and the entities it controlled during the
period.
MK Graham
Partner
PricewaterhouseCoopers
Sydney
20 November 2019
PricewaterhouseCoopers, ABN 52 780 433 757
One International Towers Sydney, Watermans Quay, Barangaroo, GPO BOX 2650, SYDNEY NSW 2001
T: +61 2 8266 0000, F: +61 2 8266 9999, www.pwc.com.au
Level 11, 1PSQ, 169 Macquarie Street, Parramatta NSW 2150, PO Box 1155 Parramatta NSW 2124
T: +61 2 9659 2476, F: +61 2 8266 9999, www.pwc.com.au
Liability limited by a scheme approved under Professional Standards Legislation.
56
ARISTOCRAT LEISURE LIMITED Annual Report 2019
The Nevada Gaming Commission has requested that the
following be brought to the attention of shareholders.
Summary of the Nevada Gaming Regulations
The manufacture, sale and distribution of gaming devices,
internet and mobile gaming, and cashless wagering systems
for use or play in Nevada and the operation of slot machine
routes and inter-casino linked systems are subject to:
(i) the Nevada Gaming Control Act and the regulations
promulgated thereunder (collectively, the “Nevada Act”);
(ii) and various local ordinances and regulations.
Gaming and manufacturing and distribution operations in
Nevada are subject to the licensing and regulatory control of
the Nevada Gaming Commission (“Nevada Commission”),
the Nevada State Gaming Control Board (“Nevada Board”)
and various other county and city regulatory agencies,
collectively referred to as the “Nevada Gaming Authorities”.
Nevada Regulatory Disclosure
The laws, regulations and supervisory procedures of the
Nevada Gaming Authorities are based upon declarations of
public policy which are concerned with, among other things:
(i) the prevention of unsavory or unsuitable persons from
having a direct or indirect involvement with gaming,
manufacturing or distributing activities at any time or in
any capacity;
(ii) the establishment and maintenance of responsible
accounting practices and procedures;
(iii) the maintenance of effective controls over the financial
practices of licensees, including the establishment of
minimum procedures for internal fiscal affairs and the
safeguarding of assets and revenues, providing reliable
record keeping and requiring the filing of periodic
reports with the Nevada Gaming Authorities;
(iv) the prevention of cheating and fraudulent practices; and
(v) providing a source of state and local revenues through
taxation and licensing fees.
Aristocrat Leisure Limited (“the Company”) is registered with
the Nevada Commission as a publicly traded corporation
(a “Registered Corporation”) and has been found suitable
to directly or indirectly own the stock of two subsidiaries
(collectively, the “Operating Subsidiaries”), one subsidiary
has been licensed as a manufacturer and a distributor of
gaming devices and an Internet Gaming System (“IGS”)
Service Provider, the other subsidiary has been licensed
as a manufacturer and a distributor of gaming devices, an
operator of a slot machine route and an IGS Service Provider.
A manufacturer’s and distributor’s license permits the
manufacturing, sale and distribution of gaming devices and
cashless wagering systems for use or play in Nevada or for
distribution outside of Nevada. A license as an operator of
a slot machine route permits the placement and operation
of gaming devices upon the business premises of other
licensees on a participation basis and also permits the
operation of inter-casino linked systems consisting of gaming
devices only. The IGS Service Provider license allows the
provision of certain services of internet gaming to licensed
Internet Operators.
If it were determined that the Nevada Act was violated by the
Company or the Operating Subsidiaries, the registration of
the Company and the licenses of the Operating Subsidiaries
could be limited, conditioned, suspended or revoked,
subject to compliance with certain statutory and regulatory
procedures. In addition, the Company, the Operating
Subsidiaries and the persons involved could be subject to
substantial fines for each separate violation of the Nevada
Act at the discretion of the Nevada Commission.
Any beneficial owner of a Registered Corporation’s voting
securities (in the case of the Company its ordinary shares),
regardless of the number of voting securities owned, may
be required to file an application, be investigated, and
have their suitability as a beneficial owner of the Registered
Corporation’s voting securities determined if the Nevada
Commission has reason to believe that such ownership
would otherwise be inconsistent with the declared policies
of the state of Nevada. The applicant must pay all costs of
investigation incurred by the Nevada Gaming Authorities in
conducting any such investigation.
The Nevada Act requires any person who acquires a
beneficial ownership of more than 5% of a Registered
Corporation’s voting securities to report the acquisition
to the Nevada Commission. The Nevada Act requires
that beneficial owners of more than 10% of a Registered
Corporation’s voting securities apply to the Nevada
Commission for a finding of suitability within thirty days after
the Chairman of the Nevada Board mails the written notice
requiring such filing.
Under certain circumstances, an “institutional investor”, as
defined in the Nevada Act, which acquires the beneficial
ownership of more than 10%, but not more than 25% of a
Registered Corporation’s voting securities may apply to the
Nevada Commission for a waiver of such finding of suitability
if such institutional investor holds the voting securities for
investment purposes only. An institutional investor that has
been granted a waiver by the Nevada Commission may
beneficially own more than 25%, but not more than 29%,
of the voting securities of a Registered Corporation, only if
such additional ownership results from a stock repurchase
program conducted by a Registered Corporation, and
upon the condition that such institutional investor does
not purchase or otherwise acquire any additional voting
securities of the Registered Corporation that would result
in an increase in the institutional investor’s ownership
57
ARISTOCRAT LEISURE LIMITED Annual Report 2019
NEVADA REGULATORY DISCLOSURE percentage. Further, an institutional investor that is subject
to NRS 463.643(4) as a result of its beneficial ownership
of voting securities of a Registered Corporation and that
has not been granted a waiver by the Commission, may
beneficially own more than 10%, but not more than 11%, of
the voting securities of such Registered Corporation, only if
such additional ownership results from a stock repurchase
program conducted by the Registered Corporation,
upon the condition that such institutional investor does
not purchase or otherwise acquire any additional voting
securities of the Registered Corporation that would result
in an increase in the institutional investor’s ownership
percentage. Unless otherwise notified by the chairman,
such an institutional investor is not required to apply to the
commission for a finding of suitability, but shall be subject to
reporting requirements as prescribed by the chairman.
The applicant is required to pay all costs of investigation
incurred by the Nevada Gaming Authorities.
The Nevada Act provides that any person who fails or
refuses to apply for a finding of suitability or a license within
thirty days after being ordered to do so by the Nevada
Commission or the Chairman of the Nevada Board, may be
found unsuitable. The same restrictions apply to a record
holder (in the case of the Company a registered holder) if the
record owner, after request, fails to identify the
beneficial owner.
Any person found unsuitable and who holds, directly
or indirectly, any of the voting securities of a Registered
Corporation beyond such period of time as may be
prescribed by the Nevada Commission may be guilty
of a criminal offence under Nevada law. A Registered
Corporation can be sanctioned, including the loss of its
approvals if, after it receives notice that a person is unsuitable
to be the holder of the voting securities of the Registered
Corporation or to have any other relationship with the
Registered Corporation, it:
(i) pays that person any dividend or interest upon its voting
securities,
(ii) allows that person to exercise, directly or indirectly, any
voting right conferred through securities held by that
person,
(iii) pays remuneration in any form to that person for services
rendered or otherwise, or
(iv) fails to pursue all lawful efforts to require such unsuitable
person to relinquish his voting securities including,
if necessary, the immediate purchase of said voting
securities for cash at fair market value.
The Nevada Commission may, in its discretion, require the
holder of any debt security of a Registered Corporation to
file applications, be investigated and be found suitable to
own the debt security of a Registered Corporation. If the
Nevada Commission determines that a person is unsuitable
to own such security, then pursuant to the Nevada Act, the
Registered Corporation can be sanctioned, including the loss
of its approvals, if without the prior approval of the Nevada
Commission, it:
(i) pays to the unsuitable person any dividend, interest, or
any distribution whatsoever;
(ii) recognises any voting right by such unsuitable person in
connection with such securities;
(iii) pays the unsuitable person remuneration in any form; or
(iv) makes any payment to the unsuitable person by way of
principal, redemption, conversion, exchange, liquidation,
or similar transaction.
A Registered Corporation may not make a public offering
of its securities without the prior approval of the Nevada
Commission if the securities or proceeds therefrom are
intended to be used to construct, acquire or finance gaming
facilities in Nevada, or to retire or extend obligations
incurred for such purposes. On June 21, 2001, the Nevada
Commission granted the Company prior approval to make
public offerings for a period of two years subject to certain
conditions (“Shelf Approval”). This approval has been
extended and remains in place today. However, the Shelf
Approval may be rescinded for good cause without prior
notice upon the issuance of an interlocutory stop order by
the Chairman of the Nevada Board. The Shelf Approval does
not constitute a finding, recommendation or approval by the
Nevada Commission or the Nevada Board as to the accuracy
or adequacy of the prospectus or the investment merits of
the securities offered. Any representation to the contrary is
unlawful. An application to renew the Shelf Approval (which
can only be issued for a maximum term of three years) will
be lodged with the Commission when required.
Other Regulatory requirements – Other Gaming Authorities
throughout the world may require any person who acquires
a beneficial ownership of more than 5% of a Registered
Corporation’s voting securities to report the acquisition
to the Gaming Authority and in some cases, apply to the
Gaming Authority for a finding of suitability within thirty days
of acquiring more than 5% of the Registered Corporation’s
voting securities. The applicant is subject to the same rules as
in Nevada in relation to an unsuitable finding. The applicant
is required to pay all costs of investigation incurred by the
Gaming Authorities.
A copy of the Nevada Act is available on request from:
The Secretary, Aristocrat Leisure Limited
Building A, Pinnacle Office Park,
85 Epping Road
North Ryde NSW 2113 Australia
Telephone: +61 2 9013 6000
https://www.aristocrat.com/contact/
58
ARISTOCRAT LEISURE LIMITED Annual Report 2019
NEVADA REGULATORY DISCLOSURE $’m (except where indicated)
12 months to
30 Sep 2019
12 months to
30 Sep 2018
12 months to
30 Sep 2017
12 months to
30 Sep 2016
12 months to
30 Sep 2015
Profit and loss items
Revenue 1
EBITDA 2
Depreciation and amortisation
EBIT 2
Net interest expense
Profit before income tax expense 2
Income tax expense
Profit after income tax expense 2
Significant items and discontinued
operations after tax
Reported net profit attributable to
members of Aristocrat Leisure Limited
Total dividend paid
Balance sheet items
Contributed equity
Reserves
Retained earnings
Total equity
Cash and cash equivalents
Other current assets
Property, plant and equipment
Intangible assets
Other non-current assets
Total assets
Current payables and other
liabilities
Current borrowings
Current tax liabilities and
provisions
Non-current borrowings
Non-current provisions
Other non-current liabilities
Total liabilities
Net assets
4,397.4
1,596.8
(434.3)
1,162.5
(124.0)
1,038.5
(285.7)
752.8
3,583.8
1,328.6
(355.6)
973.0
(105.4)
867.6
(250.7)
616.9
2,453.8
1,001.2
(220.0)
781.2
(53.1)
728.1
(233.0)
495.1
2,128.7
1,582.4
806.0
(208.9)
597.1
(89.9)
507.2
(156.7)
350.5
523.1
(162.3)
360.8
(81.3)
279.5
(88.0)
191.5
(54.0)
(74.3)
-
-
(5.1)
698.8
312.4
542.6
249.0
495.1
185.2
350.5
121.0
715.1
2.6
1,425.9
2,143.6
568.6
1,164.6
431.2
4,008.3
164.3
6,337.0
856.3
-
185.1
2,792.7
30.4
328.9
4,193.4
2,143.6
715.1
(23.5)
1,040.9
1,732.5
428.1
924.0
389.3
3,898.8
206.6
5,846.8
821.1
-
196.4
2,881.1
13.8
201.9
4,114.3
1,732.5
715.1
(116.8)
747.3
1,345.6
547.1
647.9
241.3
1,687.7
168.9
3,292.9
460.0
0.1
193.0
1,199.3
13.8
81.1
1,947.3
1,345.6
693.8
(55.7)
437.4
1,075.5
283.2
591.9
217.5
1,736.5
158.6
2,987.7
434.9
-
114.3
1,287.8
13.4
61.8
1,912.2
1,075.5
186.4
101.1
693.8
15.7
207.9
917.4
329.0
569.5
203.4
1,941.8
175.0
3,218.7
402.7
0.1
39.5
1,779.5
14.7
64.8
2,301.3
917.4
59
ARISTOCRAT LEISURE LIMITED Annual Report 2019
FIVE YEAR SUMMARY $’m (except where indicated)
Other information
12 months to
30 Sep 2019
12 months to
30 Sep 2018
12 months to
30 Sep 2017
12 months to
30 Sep 2016
12 months to
30 Sep 2015
Employees at year end
Number
6,400
6,100
3,640
3,200
2,912
Return on Aristocrat
shareholders' equity 2
Basic earnings per share 2
Net tangible assets/(liabilities)
per share
Total dividends per share –
ordinary
Dividend payout ratio 2
Issued shares at year end
Net (cash)/debt 3
Net cash (debt)/equity
%
Cents
35.1
118.1
35.6
96.7
36.8
77.7
32.6
55.1
20.9
30.3
$
(2.92)
(3.39)
(0.54)
(1.04)
(1.61)
Cents
%
'000
$'m
%
56.0
47
638,544
2,224.1
(103.8)
46.0
48
638,544
2,453.0
(141.6)
34.0
44
25.0
45
17.0
56
638,544
637,120
637,120
652.3
(48.5)
1,004.6
(93.4)
1,450.6
(158.1)
1. Revenue as per segment results.
2. Before the impact of abnormal and one-off items that are not representative of the underlying operational performance of the Group. The non-IFRS information
presented above has not been audited in accordance with the Australian Auditing Standards.
3. Current and non-current borrowings net of cash and cash equivalents.
60
ARISTOCRAT LEISURE LIMITED Annual Report 2019
FIVE YEAR SUMMARY FINANCIAL STATEMENTS
CONTENTS
Statement of profit or loss and other
comprehensive income
Balance sheet
Statement of changes in equity
Cash flow statement
Notes to the financial statements
1 Business performance
1-1 Segment performance
1-2 Revenues
1-3 Expenses
1-4 Taxes
1-5 Earnings per share
1-6 Dividends
2 Operating assets and liabilities
2-1 Trade and other receivables
2-2 Inventories
2-3 Intangible assets
2-4 Property, plant and equipment
2-5 Trade and other payables
2-6 Provisions
3 Capital and financial structure
3-1 Borrowings
3-2 Other financial assets and financial
liabilities
3-3 Reserves and retained earnings
3-4 Contributed equity
3-5 Net tangible assets/(liabilities) per share
3-6 Capital and financial risk management
3-7 Net debt reconciliation
62
63
64
65
67
67
69
72
73
75
76
77
77
78
79
82
83
84
85
85
86
88
89
90
90
95
4 Group structure
4-1 Business combinations
4-2 Subsidiaries
5 Employee benefits
5-1 Key management personnel
5-2 Share-based payments
6 Other disclosures
6-1 Commitments and contingencies
6-2 Events occurring after reporting date
6-3 Remuneration of auditors
6-4 Related parties
6-5 Parent entity financial information
6-6 Deed of cross guarantee
6-7 Basis of preparation
6-8 Changes in accounting policies
Directors’ declaration
96
96
96
97
97
98
102
102
103
104
104
104
105
107
109
110
61
ARISTOCRAT LEISURE LIMITED Annual Report 2019
STATEMENT OF PROFIT OR LOSS
AND OTHER COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 SEPTEMBER 2019
Consolidated
Revenue
Cost of revenue
Gross profit
Other income
Design and development costs
Sales and marketing costs
General and administration costs
Finance costs
Profit before income tax expense
Income tax expense
Profit for the year
Other comprehensive income
Items that may be reclassified to profit or loss
Exchange difference on translation of foreign operations
Net investment hedge
Changes in fair value of interest rate hedge
Other comprehensive income for the year, net of tax
Total comprehensive income for the year
Earnings per share attributable to ordinary equity holders of the Company
Basic earnings per share
Diluted earnings per share
Notes
2019
$'m
2018
$'m
1-2 and 6-8
4,397.4
3,509.5
6-8
(1,970.8)
(1,537.2)
2,426.6
1,972.3
1-2
11.1
1-3
(500.4)
(217.1)
(611.6)
(135.1)
973.5
1-4
(274.7)
698.8
3-3
3-3
3-3
1-5
1-5
108.0
(20.7)
(64.7)
22.6
721.4
Cents
109.6
109.5
13.5
(413.6)
(181.3)
(512.5)
(115.3)
763.1
(220.5)
542.6
115.0
(25.1)
15.6
105.5
648.1
Cents
85.0
84.9
The above statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes.
62
ARISTOCRAT LEISURE LIMITED Annual Report 2019
BALANCE SHEET
AS AT 30 SEPTEMBER 2019
Consolidated
ASSETS
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Other financial assets
Current tax assets
Total current assets
Non-current assets
Trade and other receivables
Other financial assets
Property, plant and equipment
Intangible assets
Deferred tax assets
Total non-current assets
Total assets
LIABILITIES
Current liabilities
Trade and other payables
Current tax liabilities
Provisions
Other financial liabilities
Deferred revenue
Total current liabilities
Non-current liabilities
Trade and other payables
Borrowings
Provisions
Other financial liabilities
Deferred tax liabilities
Deferred revenue
Other liabilities
Total non-current liabilities
Total liabilities
Net assets
EQUITY
Contributed equity
Reserves
Retained earnings
Total equity
Note
2019
$'m
2018
$'m
2-1
2-2
3-2
2-1
3-2
2-4
2-3
1-4
2-5
2-6
3-2
2-5
3-1
2-6
3-2
1-4
3-4
3-3
3-3
568.6
941.3
163.0
6.5
53.8
1,733.2
105.0
6.5
431.2
4,008.3
52.8
4,603.8
6,337.0
720.0
122.1
63.0
-
136.3
1,041.4
50.6
2,792.7
30.4
48.4
152.4
14.7
62.8
3,152.0
4,193.4
2,143.6
715.1
2.6
1,425.9
2,143.6
428.1
720.0
159.9
7.4
36.7
1,352.1
112.1
22.2
389.3
3,898.8
72.3
4,494.7
5,846.8
669.2
141.7
54.7
3.2
148.7
1,017.5
26.5
2,881.1
13.8
-
122.7
18.2
34.5
3,096.8
4,114.3
1,732.5
715.1
(23.5)
1,040.9
1,732.5
The above balance sheet should be read in conjunction with the accompanying notes.
63
ARISTOCRAT LEISURE LIMITED Annual Report 2019
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 SEPTEMBER 2019
Consolidated
Balance at 1 October 2017
Profit for the year ended 30 September 2018
Other comprehensive loss
Total comprehensive income for the year
Transactions with owners in their capacity as owners:
Net movement in share-based payments reserve
3-3
Dividends provided for and paid
Contributed
equity
$'m
Reserves
$'m
Retained
earnings Total equity
$'m
$'m
Note
715.1
(116.8)
747.3
1,345.6
-
-
-
-
-
-
105.5
105.5
(12.2)
-
(12.2)
-
542.6
-
542.6
542.6
105.5
648.1
-
(249.0)
(249.0)
(12.2)
(249.0)
(261.2)
Balance at 30 September 2018
715.1
(23.5)
1,040.9
1,732.5
Change in accounting policy
Restated balance at 1 October 2018
6-8
-
-
(1.4)
(1.4)
715.1
(23.5)
1,039.5
1,731.1
Profit for the year ended 30 September 2019
Other comprehensive income
Total comprehensive income for the year
Transactions with owners in their capacity as owners:
Net movement in share-based payments reserve
Dividends provided for and paid*
3-3
1-6
-
-
-
-
-
-
Balance at 30 September 2019
715.1
*Payment of dividends relates to the 2018 final dividend and 2019 interim dividend.
The above statement of changes in equity should be read in conjunction with the accompanying notes.
-
698.8
22.6
22.6
-
698.8
698.8
22.6
721.4
3.5
-
3.5
2.6
-
3.5
(312.4)
(312.4)
(312.4)
(308.9)
1,425.9
2,143.6
64
ARISTOCRAT LEISURE LIMITED Annual Report 2019
CASH FLOW STATEMENT
FOR THE YEAR ENDED 30 SEPTEMBER 2019
Consolidated
Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
Other income
Interest received
Interest paid
Transaction costs paid relating to the acquisition of subsidiaries
Income tax paid
Net cash inflow from operating activities
Cash flows from investing activities
Payments for property, plant and equipment
Proceeds from sale of property, plant and equipment
Payments for intangibles
Payment for acquisition of subsidiaries (net of cash acquired)
Net cash outflow from investing activities
Cash flows from financing activities
Payments for shares acquired by the employee share trust
Repayments of borrowings
Proceeds from borrowings
Finance lease payments
Dividends paid
Net cash (outflow)/inflow from financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Effects of exchange rate changes
Cash and cash equivalents at the end of the year
The above cash flow statement should be read in conjunction with the accompanying notes.
2019
$'m
2018
$'m
4,314.2
3,684.1
(2,880.2)
(2,412.8)
1.2
7.0
(123.8)
-
(232.9)
1,085.5
3.6
7.1
(85.8)
(28.1)
(234.3)
933.8
(247.9)
(198.1)
-
(68.7)
(20.8)
1.1
(72.0)
(1,938.6)
(337.4)
(2,207.6)
(24.8)
(292.4)
(50.0)
(225.7)
-
1,660.0
(0.7)
(312.4)
(630.3)
117.8
428.1
22.7
568.6
(0.1)
(249.0)
1,135.2
(138.6)
547.1
19.6
428.1
65
ARISTOCRAT LEISURE LIMITED Annual Report 2019
CASH FLOW STATEMENT CONTINUED
FOR THE YEAR ENDED 30 SEPTEMBER 2019
Reconciliation of net operating cash flows
Consolidated
Profit for the year
Non-cash items
Depreciation and amortisation
Equity-settled share-based payments
Net loss on sale and impairment of property, plant and equipment
Net foreign currency exchange differences
Non-cash borrowing costs amortisation
Change in operating assets and liabilities (adjusted for the impact of acquisitions):
(Increase)/decrease in assets
— Receivables and deferred revenue
— Inventories
— Other operating assets
Increase/(decrease) in liabilities
— Payables
— Provisions
— Tax balances
Net cash inflow from operating activities
2019
$'m
2018
$'m
698.8
542.6
434.3
26.0
6.7
(28.2)
6.0
(222.4)
12.5
(20.6)
134.3
24.9
13.2
1,085.5
355.6
24.2
0.6
3.7
6.5
(25.0)
(58.1)
(35.8)
127.5
10.4
(18.4)
933.8
Depreciation and amortisation
Cash and cash equivalents
The depreciation and amortisation amount above includes
amortisation of $20.8m (2018: $17.1m) that is classified as
contra-revenue in the profit and loss.
Cash and cash equivalents include cash on hand and at
bank.
66
ARISTOCRAT LEISURE LIMITED Annual Report 2019
NOTES TO THE FINANCIAL STATEMENTS
1. BUSINESS PERFORMANCE
This section provides the information that is most relevant to understanding the financial performance of the Group during
the financial year.
Details on the primary operating assets used and liabilities incurred to support the Group’s operating activities are set out in
Section 2 while the Group’s financing activities are outlined in Section 3.
1-1 Segment performance
1-4 Taxes
1-2 Revenues
1-3 Expenses
1-5 Earnings per share
1-6 Dividends
1-1 SEGMENT PERFORMANCE
(a) Identification of reportable segments
(b) Segment results
The activities of the entities in the Group are predominantly
within a single business which is the development, assembly,
sale, distribution and service of games and systems.
Management has determined the operating segments
based on the reports reviewed by the chief operating
decision maker. Reports reviewed consider the business
primarily from a geographical perspective. The following
reportable segments have been identified:
— The Americas;
— Australia and New Zealand;
— Digital; and
— International Class III.
Segment results represent earnings before interest and
tax, and before significant items and adjustments, design
and development expenditure, amortisation of acquired
intangibles, selected intercompany charges and corporate
costs.
Segment revenues and expenses are those that are directly
attributable to a segment and the relevant portion that can
be allocated to the segment on a reasonable basis.
Segment revenues, expenses and results exclude transfers
between segments. The revenue from external parties
reported to the chief operating decision maker is measured
in a manner consistent with that in the statement of profit or
loss and other comprehensive income.
67
ARISTOCRAT LEISURE LIMITED Annual Report 2019
NOTES TO THE FINANCIAL STATEMENTS
1. BUSINESS PERFORMANCE CONTINUED
1-1 SEGMENT PERFORMANCE CONTINUED
The Americas
Australia and
New Zealand
$'m
$'m
Digital
$'m
International
Class III
Consolidated
$'m
$'m
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
Revenue
Revenue from external
customers
Acquisition accounting fair
value adjustments
1,948.0 1,579.9
456.2
454.5 1,788.7 1,338.9
204.5
210.5 4,397.4 3,583.8
-
-
-
-
-
(74.3)
-
-
-
(74.3)
Statutory revenue
1,948.0 1,579.9
456.2
454.5 1,788.7 1,264.6
204.5
210.5 4,397.4 3,509.5
Results
Segment results
1,073.2
859.2
213.6
207.1
528.9
438.2
94.3
103.4 1,910.0 1,607.9
Interest revenue
Interest expense
Design and development
costs
Amortisation of acquired
intangibles
Expenses from significant
items
Acquisition fair value
adjustments not allocated
to a segment
Other expenses
Profit before income
tax expense
Income tax expense
Profit for the year
Other segment information
Non-current assets other
than financial and deferred
tax assets
Depreciation and
amortisation expense
9.6
9.9
(135.1)
(115.3)
(500.4)
(413.6)
(184.4)
(156.3)
(63.5)
(51.3)
-
(62.7)
(53.2)
(65.0)
973.5
763.1
(274.7)
(220.5)
698.8
542.6
2,108.2 2,040.1
178.5
143.5 2,224.7 2,189.1
33.1
27.5 4,544.5 4,400.2
173.0
142.9
21.7
17.5
22.3
14.7
12.1
7.1
229.1
182.2
The amortisation of acquired intangibles amounting to $184.4m (2018:$156.3m) does not form part of segment results.
68
ARISTOCRAT LEISURE LIMITED Annual Report 2019
NOTES TO THE FINANCIAL STATEMENTS
1. BUSINESS PERFORMANCE CONTINUED
1-2 REVENUES
Revenue from contracts with customers
disaggregated by business:
2019
$'m
2018
$'m
Gaming operations
Digital
1,218.1
995.3
1,788.7 1,264.6
Class III outright sales and other revenue 1,390.6 1,249.6
Total revenue
4,397.4 3,509.5
Gaming operations revenue is derived from contracts with
customers in the Americas reporting segment, while Class
III outright sales and other revenue is derived from contracts
with customers across the Americas, Australia and New
Zealand, and International Class III reporting segments.
Other income
Interest
Foreign exchange gains
Sundry income
Total other income
2019
$'m
2018
$'m
9.6
0.3
1.2
9.9
-
3.6
11.1
13.5
Interest income is recognised using the effective interest
method.
Recognition and measurement for contracts with customers
Revenue is measured at the fair value of the consideration
received or receivable. Amounts disclosed as revenue are
net of jackpot liability expenses, returns, trade allowances,
settlement discounts and duties and taxes paid.
69
ARISTOCRAT LEISURE LIMITED Annual Report 2019
NOTES TO THE FINANCIAL STATEMENTS
1. BUSINESS PERFORMANCE CONTINUED
1-2 REVENUES CONTINUED
Revenue by
business
Revenue
stream
Revenue recognition methods
and payment timing
Description of revenue recognition
Participation
revenue from
lease contracts
Over time recognition, with
payments received monthly
Gaming
operations
Fixed fee lease
income
Over time recognition, with
payments received monthly
Digital
Digital revenue
Point in time and over time
recognition, with payments
usually received monthly
Machine sales
Licence income
Point in time recognition,
with payments received over
various terms depending on
negotiations with customers
Point in time and over time
recognition, with payment
received either upfront or on a
monthly basis
Participation revenue is a variable consideration that is
recognised over time on a monthly basis. The amount of revenue
recognised monthly is calculated by an agreed fee based upon a
percentage of turnover or the net win of participating machines.
Operating leases rental income is recognised on a straight
line basis over the term of the lease contract. Rental income is
calculated by multiplying a daily fee by the total number of days
the machine has been operating on the venue floor. Selling profit
on finance leases is recognised in accordance with machine
sales. Finance income is recognised based on a constant
periodic rate of return on the remaining balance of the finance
lease investment.
Revenue is recognised when credits purchased by customers are
consumed, or if the items purchased with credits are available
to the player for the entire time that they play the game, the
average player life. Amounts relating to credits not used at year
end are included in deferred revenue. Statistical analysis is used
to determine the average consumption periods of credits within
games based on historical information such as repurchase
intervals.
When control of the goods has transferred, usually upon delivery
of goods to the customer.
When all obligations in accordance with the agreement have
been met, which may be at the time of sale or over the life of the
agreement.
Systems
contracts
Point in time and over time.
Payment terms include in
advance as well as other terms
as negotiated with customers
Systems hardware and software is recognised when control has
transferred, usually upon delivery of goods to the customer.
Revenue from the installation of the system is recognised over
time as the performance obligation is satisfied.
Service revenue
Over time recognition, with
payments usually received
monthly or in advance
Recognised evenly over the period of the service agreement
or as services are performed. Revenue received in advance on
prepaid service contracts is included in deferred revenue.
Class III
outright
sales and
other
revenue
Multiple
element
arrangements
Point in time and over time
recognition depending on the
component, with payments
received over various terms
depending on negotiations with
customers
The transaction price for multiple element arrangements
is allocated to each performance obligation based on the
proportion of their stand-alone selling prices. Stand-alone selling
prices are determined based on the current market price of each
of the performance obligations when sold separately. Where
there is a discount on the arrangement, such discounts are
allocated proportionally between the performance obligations.
Revenue is then recognised for each performance obligation as
control passes to the customer. Multiple element arrangements
may include revenue from sales of goods as well as gaming
operations revenue.
The above policies are in line with the new Accounting Standard AASB 15 Revenues from Contracts with Customers. Refer
to Note 6-8 for information on the impact of the change in accounting policies which overall had an immaterial impact on
the Group.
70
ARISTOCRAT LEISURE LIMITED Annual Report 2019
NOTES TO THE FINANCIAL STATEMENTS
1. BUSINESS PERFORMANCE CONTINUED
1-2 REVENUES CONTINUED
Note 2-1 shows the assets relating to contracts with
customers under trade receivables. The balance sheet shows
liabilities from contracts with customers as deferred revenue,
with the current amount of $136.3m (2018: $148.7m)
expected to be recognised as revenue in the next 12 months
and $14.7m ($18.2m) expected to be recognised in the 2021
and 2022 years. Deferred revenue relates to performance
obligations that are not satisfied at the end of the reporting
period. Within other receivables, amounts totalling $45.3m
(2018: $37.1m) relate to payments made to customers for
entering sales contracts. These payments are amortised as
contra-revenue over the period of the agreement.
Changes in transaction price only impact a small portion of
the revenues generated by the Group, usually in connection
with multiple element arrangements. For contracts with
variable consideration, the Group uses an expected
value to estimate the amount of revenue that should be
recognised, based on historical and forecast information.
The amount of consideration allocated to the contract is
regularly reassessed to ensure it represents the most recent
information.
Standard warranties are provided for goods sold, with
provision made for costs expected to arise from these
obligations. These costs are typically not material.
71
ARISTOCRAT LEISURE LIMITED Annual Report 2019
NOTES TO THE FINANCIAL STATEMENTS
1. BUSINESS PERFORMANCE CONTINUED
1-3 EXPENSES
Depreciation and amortisation
Property, plant and equipment
— Buildings
— Plant and equipment
— Leasehold improvements
Total depreciation and amortisation of
property, plant and equipment
Intangible assets
— Customer relationships and contracts
— Game names
— Technology and software
— Intellectual property and licences
— Capitalised development costs
Total amortisation of intangible assets
Total depreciation and amortisation
Employee benefits expense
Remuneration, bonuses and on-costs
Superannuation costs
Post-employment benefits other than
superannuation
Share-based payments expense
Total employee benefits expense
Lease payments
Rental expense relating to operating
leases
— Minimum lease payments
General and administration costs
reconciliation
General and administration before
acquisition costs and amortisation of
acquired intangibles
Acquisition related transaction, integration,
restructuring and retention costs
Amortisation of acquired intangibles
included in general and administration
costs
Total general and administration costs
Other expense items
Write down of inventories to net realisable
value
Legal costs (including acquisition
transaction costs)
Net foreign exchange (gain)/loss
2019
$'m
2018
$'m
Recognition and measurement
Lease payments
0.8
3.1
182.4 143.6
8.8
13.9
197.1 155.5
54.1
13.3
48.5
10.6
125.3 107.0
12.4
4.5
216.4 183.0
413.5 338.5
15.9
7.8
732.7 614.5
28.5
33.7
6.1
26.0
6.2
24.2
798.5 673.4
51.6
42.2
Payments made under operating leases (net of any incentives
received from the lessor) are recognised in the profit or loss
on a straight-line basis over the period of the lease. Finance
leases are capitalised at the lease’s inception at the fair value
of the leased property, or, if lower, the present value of
the minimum lease payments. The rental obligation cost is
charged to profit or loss over the lease period.
Finance and borrowing costs
Finance costs comprise interest expense on borrowings, the
costs to establish financing facilities (which are expensed over
the term of the facility) and finance lease interest charges.
Short-term employee benefits
Liabilities for wages and salaries, including non-monetary
benefits and annual leave are recognised in other payables in
respect of employees’ services up to the reporting date. The
amounts are measured at the amounts expected to be paid
when the liabilities are settled.
Long-term benefits
The liability for long service leave which is not expected
to be settled within 12 months after the end of the period
is recognised in the provision for employee benefits and
measured as the present value of expected future payments to
be made in respect of services provided by employees up to
the reporting date. Consideration is given to expected future
wage and salary levels, experience of employee departures and
periods of service. Expected future payments are discounted
using market yields at the reporting date on corporate bonds
with terms to maturity and currency that match, as closely as
possible, the estimated future cash outflows.
Bonus plans
363.7 304.9
63.5
51.3
184.4 156.3
611.6 512.5
The Group recognises a liability and an expense for bonuses
based on criteria that takes into account the profit attributable
to the Company’s shareholders. The Group recognises a
liability where contractually obliged or where there is past
practice that has created a constructive obligation. Where
bonus plans are settled by way of the issue of shares in the
Company, the expense is accounted for as part of the share-
based payments expense.
Employee benefit on-costs
8.8
8.2
20.8
(0.3)
43.6
3.2
Employee benefit on-costs, including payroll tax, are
recognised and included in employee benefit liabilities and
costs when the employee benefits to which they relate are
recognised as liabilities.
72
ARISTOCRAT LEISURE LIMITED Annual Report 2019
NOTES TO THE FINANCIAL STATEMENTS
1. BUSINESS PERFORMANCE CONTINUED
2019
$'m
2018
$'m
237.6
243.2
(2.4)
(11.6)
(d) Revenue and capital tax losses
Unused gross tax losses for which no
deferred tax asset has been recognised
Unused gross capital tax losses for
which no deferred tax asset has been
recognised
Revenue and capital tax losses
41.0
(22.8)
Potential tax benefit
2019
$'m
2018
$'m
1.0
1.0
204.4
205.4
204.8
205.8
61.7
61.7
Unused revenue losses were incurred by Aristocrat Leisure
Limited’s overseas subsidiaries. All unused capital tax losses
were incurred by Australian entities.
Current taxes
The income tax expense for the year is the tax payable on
the current period’s taxable income based on the applicable
income tax rate for each jurisdiction adjusted by changes in
deferred tax assets and liabilities, current income tax of prior
years and unused tax losses/credits.
The current income tax charge is calculated on the basis of
the tax laws enacted or substantively enacted at the end of
the reporting period in the countries where the Company’s
subsidiaries operate and generate taxable income.
1-4 TAXES
Major components of income tax
expense are:
(a) Income tax expense
Current
Current year
Adjustment for prior years
Deferred
Temporary differences
Adjustment for prior years
Income tax expense
(1.5)
11.7
274.7
220.5
Deferred income tax (benefit)/expense
included in income tax expense
comprises:
Change in net deferred tax assets
39.5
(11.1)
Deferred income tax expense/(benefit)
included in income tax expense
39.5
(11.1)
(b) Tax reconciliation
Profit before tax
973.5
763.1
Tax at the Australian tax rate of 30%
(2018: 30%)
292.1
228.9
Impact of changes in tax rates and law
8.9
(4.4)
Exempt income
Non-deductible expenses
Research and development tax credit
Tax credits written off
Difference in overseas tax rates
Adjustment in respect of previous years
income tax
Income tax expense
(15.6)
(14.9)
10.5
(12.3)
1.2
(6.2)
16.9
(7.2)
0.6
0.5
(3.9)
0.1
274.7
220.5
Average effective tax rate
28.2% 28.9%
(c) Amounts recognised directly in
equity
Net deferred tax - credited directly to
equity
0.7
12.9
73
ARISTOCRAT LEISURE LIMITED Annual Report 2019
NOTES TO THE FINANCIAL STATEMENTS
1. BUSINESS PERFORMANCE CONTINUED
1-4 TAXES CONTINUED
(e) Deferred tax
Gross deferred tax assets
Employee benefits
Accruals and other provisions
Provision for stock obsolescence
Unrealised foreign exchange losses
Other
Gross deferred tax assets
Deferred tax liabilities:
Financial liabilities
Share-based equity
2019
$'m
2018
$'m
41.7
31.8
5.9
5.1
5.4
46.5
41.8
9.1
6.7
-
Deferred tax is accounted for in respect of temporary
differences arising from differences between the carrying
amount of assets and liabilities and the corresponding tax
base.
Deferred tax assets and liabilities are offset when they relate
to income taxes levied by the same taxation authority and
the Company/Group intends to settle its current tax assets
and liabilities on a net basis.
89.9
104.1
Tax consolidation
(3.5)
2.8
(1.7)
(2.3)
Plant, equipment and intangible assets
(188.8)
(150.5)
Net deferred tax (liabilities)/assets
(99.6)
(50.4)
Movements
Balance at the start of the year
Credited/(charged) to profit or loss
Credited directly to equity
Deferred tax liabilities recognised on
acquisitions
Foreign exchange currency and other
movements
Balance at the end of the year
Deferred taxes
(50.4)
(39.5)
0.7
41.4
11.1
12.9
-
(92.6)
(10.4)
(99.6)
(23.2)
(50.4)
Deferred tax is recognised for all taxable temporary
differences and is calculated based on the carrying amounts
of assets and liabilities for financial reporting purposes and
the amounts used for taxation purposes. Deferred tax is not
recognised for temporary differences relating to:
— initial recognition of goodwill;
— initial recognition of assets or liabilities in a transaction
that is not a business combination and that affects neither
accounting nor taxable profit;
— investments in subsidiaries, where the Group is able
to control the timing of the reversal of the temporary
difference and it is probable that they will not reverse in
the foreseeable future.
The Company and its wholly-owned Australian controlled
entities are part of a tax-consolidated group under
Australian taxation law. Aristocrat Leisure Limited is the
head entity in the tax-consolidated group. Entities within
the tax-consolidated group have entered into a tax funding
arrangement and a tax sharing agreement with the head
entity. Under the terms of the tax funding arrangement,
Aristocrat Leisure Limited and each of the entities in the
tax-consolidated group have agreed to pay (or receive) a tax
equivalent payment to (or from) the head entity, based on
the current tax liability or current tax asset of the entity. Each
entity in the tax-consolidated group measures its current
and deferred taxes as if it continued to be a separate taxable
entity in its own right.
Key judgements and estimates:
Income tax provision
The Group is subject to income taxes in Australia
and jurisdictions where it has foreign operations.
Significant judgement is required in determining
the worldwide provision for income taxes.
There are certain transactions and calculations
undertaken during the ordinary course of business
for which the ultimate determination is uncertain.
The Group estimates its tax liabilities based on the
Group’s understanding of the tax law. Where the
final outcome of these matters is different from
the amounts that were initially recorded, such
differences will impact the current and deferred
income tax assets and liabilities in the period in
which such determination is made.
74
ARISTOCRAT LEISURE LIMITED Annual Report 2019
NOTES TO THE FINANCIAL STATEMENTS
1. BUSINESS PERFORMANCE CONTINUED
1-5 EARNINGS PER SHARE
Basic and diluted earnings per share (EPS) calculations
Net profit attributable to members of Aristocrat Leisure Limited ($'m)
Weighted average number of ordinary shares (WANOS) used in calculating basic EPS
(number)
Effect of Performance Share Rights (number)
WANOS used in calculating diluted EPS (number)
Basic EPS (cents per share)
Diluted EPS (cents per share)
2019
698.8
2018
542.6
637,371,843 638,123,160
532,631
1,179,478
637,904,474 639,302,638
109.6
109.5
85.0
84.9
Basic earnings per share
Information concerning the classification of securities
The calculation of basic earnings per share is based on the
profit attributable to ordinary shareholders and the weighted
average number of ordinary shares outstanding.
Diluted earnings per share
The calculation of diluted earnings per share is based on the
profit attributable to ordinary shareholders and the weighted
average number of ordinary shares outstanding after
adjustments for the effects of all dilutive potential ordinary
shares.
Share-based payments
Rights granted to employees under share-based payments
arrangements are considered to be potential ordinary shares
and have been included in the determination of diluted
earnings per share. Details relating to the rights are set out in
Note 5-2.
Included within the weighted average number of potential
ordinary shares related to Performance Share Rights are
97,470 (2018: 172,409) Performance Share Rights that had
lapsed during the year.
Share-based payments trust
Shares purchased on-market and issued shares through the
Aristocrat Employee Equity Plan Trust have been treated as
shares bought back and cancelled for the purpose of the
calculation of the weighted average number of ordinary
shares in calculating basic earnings per share. At the end of
the reporting period, there were 1,198,754 (2018: 1,686,397)
shares held in the share trust.
75
ARISTOCRAT LEISURE LIMITED Annual Report 2019
NOTES TO THE FINANCIAL STATEMENTS
1. BUSINESS PERFORMANCE CONTINUED
1-6 DIVIDENDS
Ordinary shares
Dividend per share (cents)
Franking percentage (%)
Cost ($'m)
Payment date
Franking credits
2019
Final
34.0c
100%
217.1
2019
Interim
22.0c
100%
140.0
2018
Final
27.0c
100%
172.4
2018
Interim
19.0c
100%
121.3
17 December 2019
2 July 2019
19 December 2018
3 July 2018
The franking account balance at 30 September 2019 was
$145.8m (2018: $105.6m).
Recognition and measurement
Provision is made for the amount of any dividend declared,
being appropriately authorised and no longer at the
discretion of the entity, on or before the end of the financial
year but not distributed at reporting date. The final 2019
dividend had not been declared at the reporting date and
therefore is not reflected in the financial statements.
Dividends not recognised at year end
Since the end of the year, the Directors have recommended
the payment of a final dividend of 34.0 cents (2018: 27.0
cents) per fully paid ordinary share, franked at 100%. The
aggregate amount of the proposed final dividend expected
to be paid on 17 December 2019 out of retained earnings
at 30 September 2019, but not recognised as a liability at
the end of the year is $217.1m (including dividends to the
Aristocrat Employee Equity Plan Trust).
76
ARISTOCRAT LEISURE LIMITED Annual Report 2019
NOTES TO THE FINANCIAL STATEMENTS
2. OPERATING ASSETS AND LIABILITIES
This section provides information relating to the operating assets and liabilities of the Group which contribute to the business
platform for generating revenues and profits.
2-1 Trade and other receivables
2-4 Property, plant and equipment
2-2 Inventories
2-3 Intangible assets
2-5 Trade and other payables
2-6 Provisions
2-1 TRADE AND OTHER RECEIVABLES
Current
Trade receivables
Provision for impairment
Loan receivables
Other receivables
Total current receivables
Non-current
Trade receivables
Loan receivables
Other receivables
2019
$'m
2018
$'m
814.9
613.6
(12.2)
(14.5)
9.2
2.7
129.4
941.3
118.2
720.0
70.9
7.1
27.0
69.0
8.0
35.1
Total non-current receivables
105.0
112.1
Movements in the provision:
At the start of the year
Restatement through opening retained
earnings - change in accounting policy
Provisions recognised during the year
Foreign currency exchange differences
Provisions no longer required
(14.5)
(17.8)
(1.4)
-
(0.9)
4.6
-
(0.9)
(1.4)
5.6
At the end of the year
(12.2)
(14.5)
The above provision for impairment includes $10.1m
(2018: $11.0m) of trade receivables past due and
considered impaired. Included in the provision is $7.3m
(2018: $9.4m) relating to Latin America trade receivables.
Trade receivables past due but not
impaired
Under 3 months
3 months and over
Total receivables past due but not
impaired
72.3
10.3
94.2
4.2
82.6
98.4
Trade receivables
Trade receivables are recognised initially at fair value and
subsequently at amortised cost using the effective interest
method, less an allowance for impairment. Current trade
receivables are non-interest bearing and generally have
credit terms of up to 120 days. If the contract with the
customer has a significant financing component, receivables
are recognised at present value, and interest is recognised
over the contract term.
There were no significant changes in trade receivables
outside of normal sales and cash collections.
Impairment of trade receivables
The Group measures expected credit losses using a lifetime
expected loss allowance for all trade receivables. To measure
the expected credit losses, trade receivables have been
grouped based on shared credit risk characteristics and the
days past due. A provision matrix is then determined based
on the historic credit loss rate for each group, adjusted for
forward looking information on factors affecting the ability
of the customers to settle trade receivables. In the prior
year, a provision was established when there was objective
evidence that the Group will not be able to collect amounts
due. Refer to Note 6-8 for details on the impact of this
change in accounting policy that had an immaterial impact
on the Group. The change in accounting policy was the result
of a change in accounting standards.
Other receivables
These include prepayments, other receivables and long-term
deposits incurred under normal terms and conditions and
which do not earn interest. They do not contain impaired
assets and are not past due.
Fair value
Due to their short-term nature, the carrying amount of
current receivables are estimated to represent their fair value.
Non-current receivables are carried at discounted carrying
values which are estimated to represent their fair value.
77
ARISTOCRAT LEISURE LIMITED Annual Report 2019
NOTES TO THE FINANCIAL STATEMENTS
2. OPERATING ASSETS AND LIABILITIES CONTINUED
2-2 INVENTORIES
Current
Raw materials and stores
Work in progress
Finished goods
Inventory in transit
Provision for obsolescence and
impairment
Total inventories
2019
$'m
2018
$'m
Inventory expense
Inventories recognised as an expense during the year ended
30 September 2019 amounted to $452.3m (2018: $396.7m).
141.0
129.5
Recognition and measurement
5.9
42.6
0.4
10.2
42.4
1.7
(26.9)
(23.9)
163.0
159.9
Inventories are valued at the lower of cost and net realisable
value. Cost comprises direct materials, direct labour and
an appropriate proportion of variable and fixed overhead
expenditure, the latter being allocated on the basis of normal
operating capacity. Net realisable value is the estimated
selling price in the ordinary course of business less the
estimated costs to sell.
Key judgements and estimates: Carrying value of inventory
The Group assess at each reporting date whether inventory is recorded at the lower of cost and net realisable
value, including assessing the expected sales of slow moving inventories. These assessments involve estimates and
assumptions that are based on current expectations of demand and market conditions, including opportunities to
sell into new markets.
78
ARISTOCRAT LEISURE LIMITED Annual Report 2019
NOTES TO THE FINANCIAL STATEMENTS
2. OPERATING ASSETS AND LIABILITIES CONTINUED
Customer
relationships
and contracts
Tradenames
and game
names
Intellectual
property and
licences
Capitalised
development
costs
Technology
and software
Goodwill
Total
156.1
(13.1)
143.0
24.2
-
87.2
(29.6)
57.6
58.3
-
5.3
-
59.4
(28.0)
31.4
637.0
4,367.6
(213.5)
(468.8)
423.5
3,898.8
16.2
18.5
1.1
-
110.6
1,687.7
47.8
66.3
338.2
2,022.3
(0.2)
(0.2)
973.4
505.0
-
-
1,547.0
13.0
117.7
-
-
(48.5)
(10.6)
(12.4)
(4.5)
(107.0)
(183.0)
211.1
42.3
11.7
6.4
0.1
34.1
305.7
2,731.5
511.8
143.0
57.6
31.4
423.5
3,898.8
2-3 INTANGIBLE ASSETS
$’m
Cost
Accumulated amortisation
-
(184.6)
Net carrying amount
2,731.5
511.8
2,731.5
696.4
Carrying amount at
1 October 2017
Additions
Additions on acquisition
of subsidiaries
Disposals
Amortisation charge
Foreign currency exchange
movements
Carrying amount at
30 September 2018
Carrying amount at 1 October
2018
Additions
Amortisation charge
Foreign currency exchange
movements
Carrying amount at 30
September 2019
-
-
-
-
Cost
Accumulated amortisation
2,923.1
745.3
-
(253.8)
Net carrying amount
2,923.1
491.5
167.1
(27.9)
139.2
96.5
(46.7)
49.8
57.6
4.4
82.9
709.0
4,723.9
(36.2)
(351.0)
(715.6)
46.7
358.0
4,008.3
31.4
23.0
(7.8)
423.5
3,898.8
37.6
65.0
(125.3)
(216.4)
2,731.5
511.8
143.0
-
-
(54.1)
(13.3)
(15.9)
191.6
33.8
9.5
3.7
0.1
22.2
260.9
2,923.1
491.5
139.2
49.8
46.7
358.0
4,008.3
79
ARISTOCRAT LEISURE LIMITED Annual Report 2019
NOTES TO THE FINANCIAL STATEMENTS
2. OPERATING ASSETS AND LIABILITIES CONTINUED
2-3 INTANGIBLE ASSETS CONTINUED
Intangible assets
Useful life
Amortisation
method
Recognition and measurement
Goodwill
Indefinite
Not
amortised
Goodwill acquired in a business combination is measured at cost and
subsequently measured at cost less any impairment losses. The cost
represents the excess of the cost of a business combination over the fair
value of the identifiable assets and liabilities acquired.
Customer
relationships and
contracts
Up to 15
years
Straight line
Customer relationships and contracts acquired in business combinations
are carried at cost less accumulated amortisation and any accumulated
impairment losses.
Tradenames
Indefinite
Not
amortised
The tradenames were acquired as part of business combinations and
recognised at fair value at the dates of acquisition. These have an
indefinite life so are not amortised, but rather tested for impairment at
each reporting date.
The factors that determined that this asset has an indefinite useful life
included the history of the business and tradename, the market position,
stability of the industry and the expected usage.
Up to 15
years
Straight line
Game names were acquired as part of business combinations. Game
names are recognised at their fair value at the date of acquisition and are
subsequently amortised.
Up to 8 years Straight line
Intellectual property and licences are carried at cost less accumulated
amortisation and impairment losses.
Game names
Intellectual property
and licences
Capitalised design
and development
costs
Up to 4 years Straight line
Technology and
software
Up to 7 years Straight line
Capitalised development costs are costs incurred on internal
development projects. Development costs are only capitalised when
they relate to the creation of an asset that can be used or sold to
generate benefits and can be reliably measured.
Technology and software is carried at cost less accumulated amortisation
and impairment losses. Technology and software acquired through
business combinations is measured at the fair value at acquisition date
and is subsequently amortised.
(a) Impairment tests
Goodwill and other assets are allocated to the Group’s
cash-generating units (CGUs) for the purpose of impairment
testing. A CGU is the smallest identifiable group of assets
that generate cash inflows that are largely independent of
the cash inflows from other assets or groups of assets.
A summary of the goodwill allocation
by CGU is presented below:
2019
$'m
2018
$'m
Americas segment
Americas (excluding VGT)
VGT
Digital segment
Product Madness
Big Fish
Plarium
109.1
1,019.9
101.9
953.1
26.5
24.8
1,201.2 1,122.4
566.4
529.3
Total goodwill at the end of the year
2,923.1 2,731.5
The VGT CGU also includes $18.4m and Big Fish $46.7m
relating to tradenames that are not amortised, and are tested
for impairment annually.
80
ARISTOCRAT LEISURE LIMITED Annual Report 2019
NOTES TO THE FINANCIAL STATEMENTS
2. OPERATING ASSETS AND LIABILITIES CONTINUED
2-3 INTANGIBLE ASSETS CONTINUED
(b) Key assumptions used for value-in-use calculations
A discounted cash flow model has been used based on operating and investing cash flows (before borrowing costs and
tax impacts) in valuing the Group’s CGUs that contain intangible assets. The following inputs and assumptions have been
adopted:
Inputs
Assumptions
Cash flow projections
Financial budgets and strategic plans approved by the Board to 2020 and management
projections from 2021 to 2024. These projections, which include projected revenues,
gross margins and expenses, have been determined based on past performance and
management expectations for the future. Expected market conditions in which each CGU
operates have been taken into account in the projections.
Pre-tax annual discount rate
Americas (excluding VGT)
VGT
Product Madness
Big Fish
Plarium
Americas (excluding VGT)
VGT
Terminal growth rate
Product Madness
Big Fish
Plarium
2019
10.0%
9.0%
10.2%
11.1%
11.7%
2.0%
2.0%
3.0%
3.0%
3.0%
2018
10.6%
9.5%
10.7%
11.4%
11.7%
2.0%
2.0%
3.0%
3.0%
3.0%
Allocation of head office assets
The Group’s head office assets do not generate separate cash inflows and are utilised
by more than one CGU. Head office assets are allocated to CGUs on a reasonable and
consistent basis and tested for impairment as part of the testing of the CGU to which the
head office assets are allocated.
(c) Impact of possible changes in key assumptions
With regard to the assessment of the value-in-use of the
Americas, VGT and Product Madness CGUs, management
do not believe that a reasonably possible change in any one
of the key assumptions would lead to a material impairment
charge.
Plarium and Big Fish were acquired in the prior year.
Impairment testing was performed for 2018 and 2019, and
no impairment was required to be recorded as a result.
Going forward, should management projections fall below
low to mid single digit growth rates an impairment may
result in future financial years. Growth in Digital businesses is
dependent on the success of existing games and those that
are being developed or will be developed in future periods.
Assumptions do not include all games developed being
successful.
Key judgements and estimates:
Recoverable amount of intangible assets
The Group tests annually whether goodwill and
other intangible assets that are not amortised
have suffered any impairment. The recoverable
amounts of cash-generating units have been
determined based on value-in-use calculations.
These calculations require the use of assumptions.
The above note details these assumptions and the
potential impact of changes to the assumptions.
81
ARISTOCRAT LEISURE LIMITED Annual Report 2019
NOTES TO THE FINANCIAL STATEMENTS
2. OPERATING ASSETS AND LIABILITIES CONTINUED
2-4 PROPERTY, PLANT AND EQUIPMENT
Land and buildings
$'m
Leasehold
improvements
$'m
Plant and equipment
$'m
Total
$'m
2019
2018
2019
2018
2019
2018
2019
2018
Cost
32.0
28.8
124.0
119.9
920.1
746.8
1,076.1
895.5
Accumulated depreciation/
amortisation
Net carrying amount
Carrying amount at the start
of the year
Additions
Additions on acquisition of
subsidiaries
Disposals
Transfers*
Depreciation and
amortisation
Foreign currency exchange
differences
Carrying amount at the end
of the year
(18.1)
13.9
(16.1)
12.7
(33.3)
90.7
(41.1)
(593.5)
(449.0)
(644.9)
(506.2)
78.8
326.6
297.8
431.2
389.3
12.7
2.2
-
(0.2)
(0.8)
8.8
0.2
6.5
-
(0.4)
78.8
25.8
-
(5.5)
(0.3)
25.7
41.8
16.3
-
0.4
297.8
214.0
206.8
185.7
389.3
242.0
241.3
227.7
-
-
(24.9)
19.0
(2.8)
12.7
-
(5.7)
(26.0)
41.8
(2.8)
12.7
(0.8)
(3.1)
(13.9)
(8.8)
(182.4)
(143.6)
(197.1)
(155.5)
0.8
0.7
5.8
3.4
22.1
20.0
28.7
24.1
13.9
12.7
90.7
78.8
326.6
297.8
431.2
389.3
*Transfers predominantly relate to gaming operations assets that have been transferred to and from inventory.
Recognition and measurement
Derecognition
All property, plant and equipment are stated at historical cost
less accumulated depreciation/amortisation and impairment.
The expected useful lives and depreciation and amortisation
methods are listed below:
Asset
Buildings
Leasehold
improvements
Useful life
Depreciation
method
Up to 40 years
Straight line
Up to 12 years
Straight line
Plant and equipment
Up to 10 years
Straight line
Land
Indefinite
No depreciation
An item of property, plant and equipment is derecognised
when it is sold or disposed, or when its use is expected to
bring no future economic benefits. Gains and losses on
disposals are determined by comparing disposal proceeds
with the carrying amount of the asset and are recognised
within ‘other income’ in the profit or loss in the period the
disposal occurs.
82
ARISTOCRAT LEISURE LIMITED Annual Report 2019
NOTES TO THE FINANCIAL STATEMENTS
2. OPERATING ASSETS AND LIABILITIES CONTINUED
2-5 TRADE AND OTHER PAYABLES
Current
Trade payables
Deferred consideration
Accrued expenses
Total current payables
Non-current
Accrued expenses
Total non-current payables
2019
$'m
2018
$'m
188.8
216.2
-
531.2
720.0
20.8
432.2
669.2
50.6
50.6
26.5
26.5
Recognition and measurement
Trade payables and other payables are recognised when the
Group becomes obliged to make future payments resulting
from the purchase of goods and services. The amounts
are unsecured and are usually paid within 120 days of
recognition. Accrued expenses include accruals for short-
term employee benefits, employment taxes, user acquisition
costs, legal fees and other administrative expenses.
The deferred consideration in 2018 related to the final
payment for the VGT acquisition.
The carrying amounts of trade and other payables are
estimated to represent their fair value.
83
ARISTOCRAT LEISURE LIMITED Annual Report 2019
NOTES TO THE FINANCIAL STATEMENTS
2. OPERATING ASSETS AND LIABILITIES CONTINUED
2-6 PROVISIONS
Current
Non-current
Carrying amount at
the end of the year
Movements in provisions
Employee
benefits
$'m
Make good
allowances
$'m
Progressive
jackpot liabilities
$'m
Onerous lease
and other
provisions
$'m
Total
$'m
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
23.7
1.7
20.2
1.3
0.6
5.6
0.6
9.4
35.0
3.1
33.3
3.1
3.7
20.0
0.6
-
63.0
30.4
54.7
13.8
25.4
21.5
6.2
10.0
38.1
36.4
23.7
0.6
93.4
68.5
Movements in each class of provision during the financial year, other than employee benefits, are set out below:
Make good
allowances
$'m
Progressive
jackpot liabilities
$'m
Onerous lease
and other
provisions
$'m
2019
2018
2019
2018
2019
2018
Carrying amount at the start of the year
10.0
9.2
36.4
34.9
Payments
Additional provisions recognised
Additions on acquisition of subsidiaries
Reversal of provisions recognised
Foreign currency exchange differences
Carrying amount at the end of the year
-
0.4
-
(4.5)
0.3
6.2
-
(48.3)
(38.5)
0.4
49.0
37.1
-
-
0.4
10.0
-
(1.5)
2.5
38.1
-
-
2.9
36.4
0.6
(0.2)
23.3
-
(0.1)
0.1
23.7
-
(0.6)
0.5
0.7
(0.2)
0.2
0.6
Recognition and measurement
Provisions are recognised when:
Provision is made for the estimated cash flows expected to
be required to settle the obligation.
(a) the Group has a present legal or constructive obligation
Make good allowances
as a result of past events;
(b) it is probable that an outflow of resources will be required
to settle the obligation; and
(c) the amount has been reliably estimated.
Progressive jackpot liabilities
In certain jurisdictions in the United States, the Group is liable
for progressive jackpots, which are paid as an initial amount
followed by either:
(a) an annuity paid out over 19 or 20 years after winning; or
(b) a lump sum amount equal to the present value of the
progressive component.
Provision is made for the estimated discounted cash flows
expected to be required to satisfy the make good clauses in
the lease contracts.
Onerous Leases
Provision is made for onerous leases when the expected
costs of the contract exceed the expected benefits. This
usually arises when property is not able to be fully utilised,
and sub-lease rents are lower than required payments.
84
ARISTOCRAT LEISURE LIMITED Annual Report 2019
NOTES TO THE FINANCIAL STATEMENTS
3. CAPITAL AND FINANCIAL STRUCTURE
This section provides information relating to the Group’s capital structure and its exposure to financial risk, how they affect the
Group’s financial position and performance, and how the risks are managed.
The Directors review the Group’s capital structure and dividend policy regularly and do so in the context of the Group’s ability
to invest in opportunities that grow the business, enhance shareholder value and continue as a going concern.
3-1 Borrowings
3-5 Net tangible assets/(liabilities) per share
3-2 Other financial assets and financial liabilities
3-6 Capital and financial risk management
3-3 Reserves and retained earnings
3-7 Net debt reconciliation
3-4 Contributed equity
3-1 BORROWINGS
Non-current
Secured
Bank loans
Lease liabilities
Total non-current borrowings
2019
$'m
2018
$'m
2,792.3 2,880.2
0.9
2,792.7 2,881.1
0.4
Recognition and measurement
Borrowings are initially recognised at fair value, net of
transaction costs. Borrowings are subsequently measured at
amortised cost using the effective interest method. Fees paid
on the establishment of loan facilities are included as part of
the carrying amount of the borrowings.
The fair value of borrowings approximates the carrying
amount.
The Group’s borrowings are denominated in USD.
For an analysis of the sensitivity of borrowings to interest rate
and foreign exchange risk, refer to Note 3-6.
Financing arrangements
Unrestricted access was available at balance date to the following lines of credit:
Credit standby arrangements
Notes
Total
Unused
Total
Unused
2019
$'m
2018
$'m
Total facilities
— Bank overdrafts
— Bank loans
Total facilities
(i)
(ii)
8.0
2,942.3
2,950.3
8.0
150.0
158.0
7.8
2,980.2
2,988.0
7.8
100.0
107.8
(i) The bank overdraft facilities (A$5,000,000 and
US$2,000,000) are subject to annual review.
(ii) Syndicated loan facilities:
— US$1,900 million fully underwritten US Term Loan B
debt facility maturing 19 October 2024.
— A$150 million 5 year Revolving facility maturing 22 July
2024.
These secured facilities are provided by a syndicate of banks
and financial institutions and are supported by guarantees
from certain members of the Company’s wholly owned
subsidiaries. Various affirmative and negative covenants on the
Group are imposed, including restrictions on encumbrances,
and customary events of default. As part of the corporate
facility, the Group is subject to certain customary financial
covenants measured on a six-monthly basis. The Group was in
compliance with all debt covenants during the year.
Borrowings are currently priced at a floating rate of LIBOR
plus a fixed credit margin as specified in the Term Loan B
Syndicated Facility Agreement. A portion of the interest rate
exposure has been fixed under separate interest rate swap
arrangements. Approximately 60% of the exposure is fixed
with hedging out to 2022.
85
ARISTOCRAT LEISURE LIMITED Annual Report 2019
NOTES TO THE FINANCIAL STATEMENTS
3. CAPITAL AND FINANCIAL STRUCTURE CONTINUED
3-2 OTHER FINANCIAL ASSETS AND
FINANCIAL LIABILITIES
Financial assets
Current
Debt securities held-to-maturity
Interest rate swap contracts - cash flow
hedges
Other investments
Total current financial assets
Non-current
Debt securities held-to-maturity
Interest rate swap contracts - cash flow
hedges
Other investments
Total non-current financial assets
Financial liabilities
Current
Derivatives used for hedging
Total current financial liabilities
Non-current
Interest rate swap contracts - cash flow
hedges
Total non-current financial liabilities
2019
$'m
2018
$'m
6.4
6.5
0.1
-
6.5
0.2
0.7
7.4
5.8
5.2
-
0.7
6.5
16.7
0.3
22.2
-
-
3.2
3.2
48.4
48.4
-
-
(a) Classification
The Group classifies its financial assets as those measured at
amortised cost and those to be measured subsequently at
fair value. The classification depends on the entity’s business
model for managing the financial assets and the contractual
terms of the cash flows.
Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss are
financial assets held for trading. A financial asset is classified
in this category if acquired principally for the purpose of
selling in the short term. Derivatives are classified as held for
trading unless they are designated as hedges.
Amortised cost
The Group classifies its financial assets as at amortised
cost only if the asset is held with the objective to collect
contractual cashflows and these cashflows are solely
principal and interest.
Financial assets at amortised cost comprise trade and other
receivables, debt securities held-to-maturity and other
investments.
(b) Measurement
At initial recognition, the Group measures a financial asset
at its fair value plus, in the case of a financial asset not at fair
value through profit or loss (FVPL), transaction costs that
are directly attributable to the acquisition of the financial
asset. Transaction costs of financial assets carried at FVPL are
expensed in profit or loss.
Financial assets at amortised cost are subsequently carried at
amortised cost using the effective interest method.
Gains or losses arising from changes in the fair value of the
‘financial assets at fair value through profit or loss’ category
are presented in the statement of comprehensive income
within other income or other expenses in the period in which
they arise.
Further information on financial assets and liabilities is
disclosed in Note 3-6.
(c) Impairment
The loss allowances for financial assets are based on
assumptions about risk of default and expected loss rates.
The Group uses judgement in making these assumptions
and selecting the inputs to impairment calculations, based
on the Group’s past history and existing market conditions
as well as forward-looking estimates at the end of each
reporting period.
Refer to Note 2-1 regarding the expected credit losses
approach used to assess impairment of trade and other
receivables.
86
ARISTOCRAT LEISURE LIMITED Annual Report 2019
NOTES TO THE FINANCIAL STATEMENTS
3. CAPITAL AND FINANCIAL STRUCTURE CONTINUED
The effects of interest rate swaps on the Group’s financial
position and performance are as follows:
Carrying amount - assets/
(liabilities)
Notional amount in USD
Maturity dates
Hedge ratio
Change in fair value of interest
rate hedges since 1 October
Weighted average hedged
rate for the year
2019
$'m
2018
$'m
(48.3)
16.9
1,133.0
1,133.0
2020 - 2022 2019 - 2020
1:1
1:1
(64.7)
15.6
2.20%
1.84%
3-2 OTHER FINANCIAL ASSETS AND
FINANCIAL LIABILITIES (CONTINUED)
(d) Derivatives and hedging
Derivatives are initially recognised at fair value on the date a
derivative contract is entered into, and they are subsequently
remeasured to their fair value at the end of each reporting
period. The accounting for subsequent changes in fair
value depends on whether the derivative is designated as a
hedging instrument, and if so, the nature of the item being
hedged.
Hedge effectiveness for interest rate swaps is determined at
inception of the hedge relationship, and through periodic
prospective effectiveness assessments. As all critical terms
matched during the year, the economic relationship was
100% effective, and there was no hedge ineffectiveness.
Cash flow hedges
The Group designates interest-rate swaps contracts as
hedges of interest rate risk associated with floating interest
cash flows of borrowings drawn under a Term Loan B facility
(cash flow hedges). Group policy is to maintain at least 30-
70% of its borrowings at fixed rate using floating-to-fixed
interest rate swaps to achieve this when necessary. The
Group’s borrowings are carried at amortised cost.
Swaps currently in place cover approximately 60% (2018
– 54%) of the Term Loan B facility outstanding. The fixed
interest rates of the swaps range between 2.02% and
2.75% (2018: 1.64% and 2.75%) and the floating rate of the
borrowings at the end of the reporting period was 2.28%
(2018: 2.35%). The swap contracts require settlement of net
interest receivable or payable every quarter. The settlement
dates coincide with the dates on which interest is payable on
the underlying debt.
87
ARISTOCRAT LEISURE LIMITED Annual Report 2019
NOTES TO THE FINANCIAL STATEMENTS
3. CAPITAL AND FINANCIAL STRUCTURE CONTINUED
3-3 RESERVES AND RETAINED EARNINGS
$’m
Balance at 1 October 2017
Profit for the year
Currency translation differences
Net investment hedge
Movement in fair value of interest rate hedges
Retained
earnings
747.3
542.6
-
-
-
Total comprehensive income for the year
542.6
Transactions with owners in their capacity as
owners
Dividends paid or provided for
Share-based payments expense
Issues of shares to and purchases of shares by
the Aristocrat Employee Share Trust
Share-based tax and other adjustments
(249.0)
-
-
-
Foreign
currency
translation
reserve
Share-
based
payments
reserve
Interest
rate hedge
reserve
Non-
controlling
interest
reserve
Total
reserves
(38.0)
(70.8)
(0.9)
(7.1)
(116.8)
-
115.0
(25.1)
-
89.9
-
-
-
-
-
108.0
(20.7)
-
-
-
-
-
-
-
-
24.2
(50.0)
13.6
(83.0)
-
-
-
15.6
15.6
-
-
-
-
-
-
-
-
-
-
-
-
-
14.7
14.7
(7.1)
(7.1)
-
-
-
-
-
-
-
26.0
(24.8)
2.3
-
-
-
-
(64.7)
(64.7)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
115.0
(25.1)
15.6
105.5
-
24.2
(50.0)
13.6
(23.5)
(23.5)
-
108.0
(20.7)
-
(64.7)
22.6
-
26.0
(24.8)
2.3
2.6
51.9
(83.0)
Balance at 30 September 2018
1,040.9
51.9
Balance at 1 October 2018
Profit for the year
Currency translation differences
Net investment hedge
Change in accounting policy (refer to Note 6-8)
Movement in fair value of interest rate hedges
1,040.9
698.8
-
-
(1.4)
-
Total comprehensive income/(loss) for the year
697.4
87.3
Transactions with owners in their capacity as
owners
Dividends paid or provided for
Share-based payments expense
Issues of shares to and purchases of shares by
the Aristocrat Employee Share Trust
Share-based tax and other adjustments
(312.4)
-
-
-
-
-
-
-
Balance at 30 September 2019
1,425.9
139.2
(79.5)
(50.0)
(7.1)
88
ARISTOCRAT LEISURE LIMITED Annual Report 2019
NOTES TO THE FINANCIAL STATEMENTS
3. CAPITAL AND FINANCIAL STRUCTURE CONTINUED
3-3 RESERVES AND RETAINED EARNINGS
CONTINUED
Nature and purpose of reserves:
Interest rate hedge reserve
Foreign currency translation reserve
The foreign currency translation reserve records the foreign
currency exchange differences arising from the translation of
foreign operations, the translation of transactions that hedge
the Company’s net investment in a foreign operation or the
translation of foreign currency monetary items forming part
of the net investment in foreign operations.
The interest rate hedge reserve is used to record gains or
losses on interest rate hedges that are recognised in other
comprehensive income.
Non-controlling interest reserve
The non-controlling interest reserve is used to record
transactions with non-controlling interests that do not result
in the loss of control.
Share-based payments reserve
The share-based payments reserve is used to recognise
the fair value of all shares, options and rights both issued
and issued but not exercised under the various employee
share plans, as well as purchases of shares by the Aristocrat
Employee Share Trust.
3-4 CONTRIBUTED EQUITY
Shares
$'m
2019
2018
2019
2018
Ordinary shares, fully paid
638,544,150
638,544,150
715.1
715.1
Movements in ordinary share capital
Ordinary shares at the beginning of the year
638,544,150 638,544,150
715.1
Shares issued during the year
-
-
-
Ordinary shares at the end of the financial year
638,544,150 638,544,150
715.1
715.1
-
715.1
Ordinary shares
Ordinary shares have no par value and entitle the holder to participate in dividends and the winding up of the Company in
proportion to the number of, and amounts paid on, the shares held. Holders of ordinary shares are entitled to one vote per
share at meetings of the Company.
Recognition and measurement
Incremental costs directly attributable to the issue of new shares are shown in contributed equity as a deduction, net of tax,
from the proceeds.
If the entity reacquires its own equity instruments, for example as the result of a share buy-back, those instruments are
deducted from equity and the associated shares are cancelled. No gain or loss is recognised in the profit or loss and the
consideration paid including any directly attributable incremental cost (net of income taxes) is recognised directly in equity.
There is no current on-market buy back.
89
ARISTOCRAT LEISURE LIMITED Annual Report 2019
NOTES TO THE FINANCIAL STATEMENTS
3. CAPITAL AND FINANCIAL STRUCTURE CONTINUED
3-5 NET TANGIBLE ASSETS/(LIABILITIES)
PER SHARE
3-6 CAPITAL AND FINANCIAL RISK
MANAGEMENT
2019
$
2018
$
Net tangible liabilities per share
(2.92)
(3.39)
A large proportion of the Group’s assets are intangible in
nature, including goodwill and identifiable intangible assets
relating to businesses acquired. These assets are excluded
from the calculation of net tangible assets per share, which
results in a negative amount.
Net assets per share at 30 September 2019 were $3.36
(2018: $2.71).
(a) Capital management
The Group’s overall strategic capital management objective
is to maintain a funding structure, which provides sufficient
flexibility to fund the operational demands of the business
and to underwrite any strategic opportunities.
The Group has managed its capital through interest and
debt coverage ratios as follows:
Gross debt/bank EBITDA*
Net debt/(cash)/bank EBITDA*
Interest coverage ratio (bank EBITDA*/
interest expense**)
2019
2018
1.7x
1.4x
2.0x
1.7x
12.7x
11.4x
* Bank EBITDA refers to Consolidated EBITDA for the Group as defined in
Aristocrat’s Syndicated Facility Agreement.
** Interest expense includes ongoing finance fees relating to bank debt facility
arrangements, such as line fees.
This section explains the Group’s exposure to financial risks
and how these risks could affect the Group’s future financial
performance.
(b) Financial risk management
Financial risk management is carried out by a central treasury
department (Group Treasury) under policies approved by the
Board of Directors. Group Treasury identifies, evaluates and
hedges financial risks in close co-operation with the Group’s
operating units. The Board provides written principles for
overall risk management, as well as policies covering specific
areas, such as foreign exchange risk, interest rate risk, credit
risk, use of derivative financial instruments and investment of
excess liquidity.
The Group’s overall risk management program focuses
on the unpredictability of financial markets and seeks
to minimise potential adverse effects on the financial
performance of the Group. The Group uses derivative
financial instruments such as foreign exchange contracts
and interest rate swaps to hedge certain risk exposures.
Derivatives are exclusively used for hedging purposes, i.e.
not as trading or other speculative instruments.
90
ARISTOCRAT LEISURE LIMITED Annual Report 2019
NOTES TO THE FINANCIAL STATEMENTS
3. CAPITAL AND FINANCIAL STRUCTURE CONTINUED
3-6 CAPITAL AND FINANCIAL RISK MANAGEMENT CONTINUED
Risk
Exposure arising from Measurement
Management
Market risk:
Interest rate
Market risk:
Foreign
exchange
Market risk:
Price risk
Credit risk
Floating rate
borrowings drawn
under a Term Loan B
facility
Future commercial
transactions and
recognised assets and
liabilities denominated
in a currency that is not
the entity’s functional
currency
The Group’s exposure
to commodity price
risk is indirect and is
not considered likely
to be material
Cash and cash
equivalents, trade
and other receivables,
derivative financial
instruments, debt
securities held-to-
maturity and other
investments
Liquidity risk
Borrowings and other
liabilities
Sensitivity analysis
— Use of floating to fixed swaps; and
— The mix between fixed and floating rate debt is reviewed on
a regular basis under the Group Treasury policy.
Sensitivity analysis
& cash flow
forecasts
— The Group's foreign exchange hedging policy reduces the
risk associated with transactional exposures; and
— Unrealised gains/losses on outstanding foreign exchange
contracts are taken to the profit or loss on a monthly basis.
Nil
Nil
— Customers and suppliers are appropriately credit assessed
per Group policies;
Ageing analysis &
credit ratings
— Derivative counterparties and cash transactions are limited
to high credit quality financial institutions; and
— Cash and cash equivalents are predominantly held with
counterparties which are rated 'A' or higher.
Cash flow
forecasts and
debt covenants
— Maintaining sufficient cash and marketable securities;
— Maintaining adequate amounts of committed credit facilities
and the ability to close out market positions; and
— Maintaining flexibility in funding by keeping committed
credit lines available.
Hedge of net investment in foreign entity
At 30 September 2019, US$203.2m (2018: $228.6m) of the US Term Loan B debt facility shown in Note 3-1 that is held
within an Australian company has been designated as a hedge of the net investment in an American subsidiary. The foreign
exchange gains and losses on translation of the borrowing into Australian dollars at the end of the reporting period are
recognised in other comprehensive income and accumulated in the foreign currency translation reserve within shareholders
equity (Note 3-3). Hedges of net investments in foreign operations are accounted for similar to cash flow hedges. There was
no ineffectiveness to be recorded in the profit or loss from net investment foreign entity hedges.
91
ARISTOCRAT LEISURE LIMITED Annual Report 2019
NOTES TO THE FINANCIAL STATEMENTS
3. CAPITAL AND FINANCIAL STRUCTURE CONTINUED
3-6 CAPITAL AND FINANCIAL RISK MANAGEMENT CONTINUED
Summarised sensitivity analysis
The following table summarises the sensitivity of the Group’s non-derivative financial assets and financial liabilities to interest
rate risk and foreign exchange risk. These sensitivities are prior to the offsetting impact of hedging instruments, and are shown
on a pre-tax basis:
Carrying amount
Interest rate risk
Foreign exchange risk
$’m
-1% Profit
$’m
+1% Profit
$’m
-10% Profit
$’m
+10% Profit
$’m
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
Financial assets
Cash and cash
equivalents
Receivables
Debt securities held-
to-maturity
Other investments
Financial liabilities
Payables
Borrowings
Progressive jackpot
liabilities
Total increase/
(decrease)
568.6
1,046.3
428.1
832.1
(5.7)
(4.3)
-
-
5.7
-
4.3
-
12.2
0.7
11.7
1.0
770.6
695.7
(0.1)
(0.1)
0.1
0.1
-
-
-
-
-
-
-
-
2,792.7 2,881.1
28.1
29.1
(28.1)
(29.1)
38.1
36.4
0.4
0.4
(0.4)
(0.4)
0.4
9.6
-
-
0.1
5.8
(0.3)
(7.8)
(0.1)
(4.8)
-
-
-
-
-
-
(6.5)
(5.6)
5.3
4.6
-
-
-
-
-
-
-
-
22.7
25.1
(22.7)
(25.1)
3.5
0.3
(2.8)
(0.3)
Refer to Notes 3-1 and 3-2 for details of hedging undertaken to manage interest rate risk. Changes in the fair value of interest
rate swaps are recognised in equity. A 1% increase in interest rates would cause a $42.4m (2018: $30.1m) increase in the fair
value of swap contracts held at year end. A 1% decrease would cause a $43.7m (2018: $30.6m) decrease in the fair value of
swaps held at year end.
Maturities of financial liabilities
(ii) based on the remaining period to the expected
The table below analyses the Group’s financial liabilities into
relevant maturity groupings as follows:
(i) based on their contractual maturities:
— all non-derivative financial liabilities, and
— net and gross settled derivative financial instruments
for which the contractual maturities are essential for an
understanding of the timing of cash flows.
settlement date:
— derivative financial liabilities for which the contractual
maturities are not essential for an understanding of
the timing of cash flows.
The amounts disclosed in the table are the contractual
undiscounted cash flows. Balances due within 12 months
equal their carrying balances, as the impact of discounting is
not significant.
92
ARISTOCRAT LEISURE LIMITED Annual Report 2019
Deferred
consideration
Borrowings
Borrowings - interest
payments
Progressive jackpot
liabilities
Derivatives
Net settled (interest
rate swaps)
Gross settled (forward
foreign exchange
contracts)
— (inflow)
— outflow
NOTES TO THE FINANCIAL STATEMENTS
3. CAPITAL AND FINANCIAL STRUCTURE CONTINUED
3-6 CAPITAL AND FINANCIAL RISK MANAGEMENT CONTINUED
Contractual maturities of financial liabilities
Less than 1 year
Between 1 to 5
years
Over 5 years
Total contractual
cash flows
Carrying amount
(assets)/liabilities
$'m
$'m
$'m
$'m
$'m
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
Non-derivatives
Trade payables
188.8
216.2
-
-
Accrued expenses
531.2
432.2
50.6
26.5
-
-
-
-
-
-
188.8
216.2
188.8
216.2
581.8
458.7
581.8
458.7
-
20.8
-
20.8
20.8
-
-
-
-
-
0.4
15.7
2,792.3
2,865.4
2,792.7
2,881.1
2,792.7
2,881.1
109.4
121.9
438.1
489.4
5.7
122.6
553.2
733.9
-
-
35.0
33.3
1.5
1.8
1.6
1.3
38.1
36.4
38.1
36.4
Total non-derivatives
864.4
824.4
490.6
533.4
2,799.6
2,989.3
4,154.6
4,347.1
3,601.4
3,613.2
(0.1)
(0.2)
48.4
(16.7)
(103.5)
(162.4)
103.5
165.6
Total (inflow)/outflow
-
Total derivatives
(0.1)
3.2
3.0
(c) Foreign currency risk
-
-
-
-
-
-
48.4
(16.7)
-
-
-
-
-
-
48.3
(16.9)
48.3
(16.9)
-
-
-
-
(103.5)
(162.4)
103.5
165.6
-
3.2
-
-
-
-
3.2
3.2
48.3
(13.7)
48.3
(13.7)
The carrying amounts of the Group’s current and non-current
receivables are denominated in the following currencies:
The carrying amounts of the Group’s current and non-current
payables are denominated in the following currencies:
US dollars
Australian dollars
Other(1)
2019
$'m
2018
$'m
778.0
617.1
US dollars
191.4
176.4
76.9
38.6
Australian dollars
Other(1)
Total carrying amount
1,046.3
832.1
Total carrying amount
(1) Other refers to a basket of currencies (including Euro, Pound Sterling, Israeli New Shekel and New Zealand Dollar).
2019
$'m
2018
$'m
578.8
521.8
135.5
143.4
56.3
30.5
770.6
695.7
93
ARISTOCRAT LEISURE LIMITED Annual Report 2019
NOTES TO THE FINANCIAL STATEMENTS
3. CAPITAL AND FINANCIAL STRUCTURE CONTINUED
3-6 CAPITAL AND FINANCIAL RISK
MANAGEMENT CONTINUED
(d) Credit risk
The maximum exposure to credit risk at the reporting
date is the carrying amount of each class of receivables
mentioned above. Refer above for more information on
the risk management policy of the Group. The Group holds
guarantees over the debts of certain customers.
The value of debtor balances over which guarantees are
held is detailed below:
2019
$’m
2018
$’m
Trade receivables with guarantees
14.8
8.5
Trade receivables without guarantees
858.8
659.6
Total trade receivables
873.6
668.1
(e) Forward exchange contracts
The Group enters into derivatives in the form of forward exchange contracts to hedge foreign currency denominated receivables
and also to manage the purchase of foreign currency denominated inventory and capital items. The following table provides
information as at 30 September 2019 on the net fair value of the Group’s existing foreign exchange hedge contracts:
Currency pair
AUD/EUR
AUD/USD
AUD/ZAR
AUD/NZD
Total
Weighted average
exchange rate
Maturity profile(1)
1 year or less
$'m
1 to 7 year(s)
$'m
Net fair value
gain/(loss)(2)
$’m
0.6167
0.6773
10.1951
1.0791
30.2
69.4
1.3
2.6
103.5
-
-
-
-
-
-
-
-
-
-
(1) The foreign base amounts are converted at the prevailing period end exchange rate to AUD equivalents.
(2) The net fair value of the derivatives above is included in financial assets/(liabilities).
(f) Fair value measurements
This section explains the judgements and estimates made in determining the fair values of the financial instruments that are
recognised and measured at fair value in the financial statements. To provide an indication about the reliability of the inputs
used in determining fair value, the Group has classified its financial instruments into the three levels prescribed under the
accounting standards. An explanation of each level follows below the table.
Level 1
$'m
Level 2
$'m
Level 3
$'m
Total
$'m
2019
2018
2019
2018
2019
2018
2019
2018
Assets
Interest rate swap contracts
Total assets at the end of the year
Liabilities
Interest rate swap contracts
Derivatives used for hedging
Total liabilities at the end of the year
-
-
-
-
-
-
-
-
-
-
0.1
0.1
16.9
16.9
48.4
-
48.4
-
3.2
3.2
-
-
-
-
-
-
-
-
-
-
0.1
0.1
16.9
16.9
48.4
-
48.4
-
3.2
3.2
94
ARISTOCRAT LEISURE LIMITED Annual Report 2019
NOTES TO THE FINANCIAL STATEMENTS
3. CAPITAL AND FINANCIAL STRUCTURE CONTINUED
3-6 CAPITAL AND FINANCIAL RISK MANAGEMENT CONTINUED
Fair value
hierarchy levels Definition
Valuation technique
Level 1
Level 2
The fair value is determined using the
unadjusted quoted market price in an active
market for similar assets or liabilities.
The fair value is calculated using
predominantly observable market data other
than unadjusted quoted prices for an identical
asset or liability.
The Group did not have any Level 1 financial instruments
at the end of the current and prior reporting periods. The
quoted market price used for financial assets held by the
Group is the current bid price.
Derivatives used for hedging are valued using forward
exchange rates at the balance sheet date. Interest rate
swap contracts are valued using the present value of
estimated future cashflows based on observable yield
curves.
Level 3
The fair value is calculated using inputs that are
not based on observable market data.
The Group does not have any Level 3 financial
instruments.
There were no transfers between levels in the fair value hierarchy and no changes to the valuation techniques applied since 30
September 2018. The carrying amount of financial instruments not measured at fair value approximates fair value.
3-7 NET DEBT RECONCILIATION
This section sets out an analysis of net debt and the movements in net debt.
Net Debt
Cash and cash equivalents
Non-current borrowings
Net debt
Net debt - opening balance
Net increase/(decrease) in cash
Debt repayments (including finance leases)
Proceeds from borrowings
Amortisation of borrowing costs
Foreign exchange movements
Net debt - end of year
2019
$'m
2018
$'m
568.6
428.1
(2,792.7)
(2,881.1)
(2,224.1)
(2,453.0)
(2,453.0)
117.8
293.1
(652.3)
(138.6)
225.8
-
(1,660.0)
(6.0)
(6.5)
(176.0)
(221.4)
(2,224.1)
(2,453.0)
95
ARISTOCRAT LEISURE LIMITED Annual Report 2019
NOTES TO THE FINANCIAL STATEMENTS
4. GROUP STRUCTURE
This section explains significant aspects of the Group structure, including its controlled entities and how changes affect the
Group structure. It provides information on business acquisitions and disposals made during the current and prior financial
years and the impact they had on the Group’s financial performance and position.
4-1 Business combinations
4-2 Subsidiaries
4-1 BUSINESS COMBINATIONS DURING
THE PRIOR YEAR
Recognition and measurement
The Group accounts for business combinations using the
acquisition method when control is transferred to the Group.
The consideration transferred in the acquisition is measured
at fair value. Acquisition-related costs are expensed as
incurred in the profit or loss.
(a) Plarium Global Limited
On 19 October 2017 the Group acquired 100% of Plarium
Global Limited (Plarium) for $700.3m. The net identifiable
assets acquired were $212.7m, with goodwill of $487.6m
recognised. Plarium is a free-to-play, social and web-based
game developer, headquartered in Israel. The acquisition
significantly expanded Aristocrat’s Digital addressable
market in adjacent gaming segments.
(b) Big Fish Games Inc.
On 10 January 2018 the Group acquired 100% of Big Fish
Games Inc. (Big Fish) for $1,257.9m. The net identifiable
assets acquired were $221.9m, with goodwill of $1,036.0m
recognised. Big Fish is a global publisher of free-to-play
games that operates across three key business lines that are
focused on specific game segments, including social casino,
social gaming and premium paid games. The acquisition
provided a platform for growth through existing successful
applications and a pipeline of new applications.
4-2 SUBSIDIARIES
The principal controlled entities of the Group are listed
below. These were wholly owned during the current and
prior year, unless otherwise stated:
Controlled entities
Country of
incorporation
Aristocrat Technologies Australia Pty Ltd
Australia
Aristocrat International Pty Ltd
Australia
Aristocrat Technologies, Inc.
Video Gaming Technologies, Inc.
Product Madness Inc.
Big Fish Games Inc.
Plarium Global Limited
USA
USA
USA
USA
Israel
Aristocrat (Macau) Pty Limited
Australia
Aristocrat Technologies Macau Limited
(Incorporated in 2019)
Macau
Aristocrat Technologies NZ Limited
New Zealand
Aristocrat Technologies Europe Limited
UK
Aristocrat Technologies Mexico,
S.A. DE C.V.
Aristocrat Service Mexico, S.A. DE C.V.
AI (Puerto Rico) Pty Limited
Aristocrat (Argentina) Pty Limited
Mexico
Mexico
Australia
Australia
Aristocrat Technologies India Private Ltd
India
Product Madness (UK) Limited
Aristocrat Technologies Spain S.L.
UK
Spain
96
ARISTOCRAT LEISURE LIMITED Annual Report 2019
NOTES TO THE FINANCIAL STATEMENTS
5. EMPLOYEE BENEFITS
This section provides a breakdown of the various programs the Group uses to reward and recognise employees and key
executives, including Key Management Personnel.
5-1 Key management personnel
5-2 Share-based payments
5-1 KEY MANAGEMENT PERSONNEL
Key management personnel compensation
Key management personnel includes all Non-Executive
Directors, Executive Directors and Senior Executives who
were responsible for the overall planning, directing and
controlling of activities of the Group. During the year
ended 30 September 2019, 6 Executive Directors and
Senior Executives (2018: 7 Executive Directors and Senior
Executives) were designated as key management personnel.
2019
$
2018
$
Short-term employee benefits
8,508,099 10,200,351
Post-employment benefits
130,525
165,751
Long-term benefits
Termination benefits
32,542
44,484
-
1,130,992
Share-based payments
3,606,897
3,950,715
Key management personnel
compensation
12,278,063 15,492,293
Detailed remuneration disclosures are provided in the
remuneration report.
97
ARISTOCRAT LEISURE LIMITED Annual Report 2019
NOTES TO THE FINANCIAL STATEMENTS
5. EMPLOYEE BENEFITS CONTINUED
5-2 SHARE-BASED PAYMENTS
The Remuneration Report, presented in the Directors’ Report, also provides detailed disclosure on share-based payments.
Plan
Description
Shares outstanding at
the end of the year
Performance share
plan ("PSP")
A long-term employee share scheme that provides for eligible employees to be
offered conditional entitlements to fully paid ordinary shares in the parent entity
(‘Performance Share Rights’). Performance Share Rights issued under the PSP are
identical in all respects other than performance conditions and periods.
40 employees (2018:
36) were entitled
to 1,073,102 rights
(2018: 1,247,201)
Deferred equity
employee plan
Certain eligible employees are offered incentives of share rights that are based on
individual and company performance, subject to continued employment. Should
the performance criteria be met, an amount of share rights are granted. The shares
outstanding at 30 September 2019 result from the meeting of performance criteria
in the 2017 and 2018 financial years. These rights are subject to the respective
employees remaining with the Group until October 2019 and October 2020.
364,346
(2018: 882,386)
Key employee
equity program
Certain eligible employees are offered incentives of share rights that are based on
individual and company performance, subject to continued employment. Should
the performance criteria be met, an amount of share rights are granted.
244,102 (2018: Nil)
Deferred short-
term incentive
plan
Upon the vesting of short-term incentives, Executives receive the incentives as
50% cash, with 50% deferred as Performance Share Rights. These share rights are
expensed over the vesting periods, being two and three years.
172,700
(2018: 339,031)
General employee
share plan
("GESP")
GESP is designed to provide employees with shares in the parent entity under
the provisions of Division 83A of the Australian Income Tax Assessment Act. The
number of shares issued to participants in the Plan is the offer amount divided
by the weighted average price at which the Company’s shares are traded on the
Australian Securities Exchange during the five days immediately before the date of
the offer.
Nil (2018: Nil)
Other grants
Contractual share rights are granted to retain key employees from time to time
across the Group, including after acquisitions, subject to continued employment.
The value of share rights granted are expensed over the respective vesting periods.
940,924
(2018: 629,399)
(a) Share-based payments expense
Total expenses arising from share-based payment transactions recognised during the year as part of employee benefits
expense were as follows:
Performance Share Plan
Deferred Equity Employee Plan
Key Employee Equity Program
Deferred Short-Term Incentive Plan
General Employee Share Plan
Other grants
2019
$'m
2018
$'m
6.6
1.6
7.6
1.7
0.8
7.7
5.9
3.7
3.6
3.8
0.7
6.5
26.0
24.2
98
ARISTOCRAT LEISURE LIMITED Annual Report 2019
NOTES TO THE FINANCIAL STATEMENTS
5. EMPLOYEE BENEFITS CONTINUED
5-2 SHARE-BASED PAYMENTS CONTINUED
Recognition and measurement
The fair value of rights granted is recognised as an employee benefits expense with a corresponding increase in equity. The
total amount to be expensed is determined by reference to the fair value of the rights granted, which includes any market
performance conditions and the impact of non-vesting conditions but excludes the impact of any individual performance
based and non-market performance vesting conditions.
Non-market vesting conditions are included in assumptions about the number of rights that are expected to vest. The total
expense is recognised over the vesting period, which is the period over which all the specified vesting conditions are to be
satisfied. At the end of each period, the Group revises its estimates of the number of rights that are expected to vest based on
the non-market vesting conditions. It recognises the impact of the revision to original estimates, if any, in profit or loss, with a
corresponding adjustment to equity.
Shares issued through the Aristocrat Employee Equity Plan Trust continue to be recognised in the share-based payments
reserve in equity. Similarly, treasury shares acquired by the Aristocrat Employee Equity Plan Trust are recorded in share-based
payments trust reserves. Information relating to these shares is disclosed in Note 3-3.
The market value of shares issued to employees for no cash consideration under the General Employee Share Plan is
recognised as an employee benefits expense with a corresponding increase in reserves.
(b) Performance Share Plan (‘PSP’)
Accounting fair value of Performance Share Rights granted
The assessed accounting fair values of Performance Share Rights granted during the financial years ended 30 September
2019 and 30 September 2018 are as follows:
Timing of grant of
rights
Performance
period start date
Performance period
expiry date
Performance condition
Accounting
valuation date
Accounting
valuation ($)
2019 financial year 1 October 2018
30 September 2021
EPSG
22 March 2019
TSR
Individual performance
TSR
2018 financial year 1 October 2017
30 September 2020
EPSG
27 April 2018
Individual performance
10.38
23.20
23.20
20.22
25.73
25.73
The accounting valuation represents the independent valuation of each tranche of Performance Share Rights at their
respective grant dates. The valuations have been performed by Deloitte using Total Shareholder Return (‘TSR’), Earnings
Per Share Growth (‘EPSG’) and individual performance condition models. Performance Share Rights with a market vesting
condition (for example, TSR) incorporates the likelihood that the vesting condition will be met. The accounting valuation of
Performance Share Rights with a non-market vesting condition (for example, EPSG) does not take into account the likelihood
that the vesting condition will be met.
99
ARISTOCRAT LEISURE LIMITED Annual Report 2019
NOTES TO THE FINANCIAL STATEMENTS
5. EMPLOYEE BENEFITS CONTINUED
5-2 SHARE-BASED PAYMENTS CONTINUED
(i) Total Shareholder Return (‘TSR’) model
Deloitte has developed a Monte-Carlo Simulation-based
model which simulates the path of the share price according
to a probability distribution assumption. The pricing model
incorporates the impact of performance hurdles and the
vesting scale on the value of the share rights. The model
considers the Relative TSR hurdles to be market hurdles
and any individual performance conditions attached to the
Relative TSR rights are not used in the determination of the
fair value of the rights at the valuation date. This pricing
model takes into account such factors as the Company’s
share price at the date of grant, volatility of the underlying
share price, expected dividend yield, risk free rate of return
and time to maturity.
(ii) Earnings Per Share Growth (‘EPSG’) model, individual
performance condition
Deloitte has utilised a Black-Scholes-Merton model to
determine the fair value of share rights. This pricing model
takes into account such factors as the Company’s share price
at the date of grant, volatility of the underlying share price,
expected dividend yield, risk-free rate of return and time to
maturity.
The accounting valuation of the rights has been allocated
equally over the vesting period.
The model inputs for share rights granted during the year
ended 30 September 2019 and year ended 30 September
2018 included:
Input
Consideration
Share rights granted
Zero consideration and have
a three year life.
2019
2018
Share price at grant date
$24.41
$26.90
Price volatility of Company's
shares
Dividend yield
Risk-free interest rate
25.5%
1.9%
1.4%
24.8%
1.7%
2.3%
The expected price volatility is based on the historical
volatility of the share price of the Company due to the long-
term nature of the underlying share rights.
100
ARISTOCRAT LEISURE LIMITED Annual Report 2019
NOTES TO THE FINANCIAL STATEMENTS
5. EMPLOYEE BENEFITS CONTINUED
5-2 SHARE-BASED PAYMENTS CONTINUED
Performance Share Rights are detailed in the tables below:
Consolidated – 2019
Grant date
Performance period
expiry date
Rights at start
of year
New rights
issues
Rights
vested
Rights
lapsed
Rights at
end of year
Number
Number
Number
Number
Number
3 March 2016
30 September 2018
28 March 2017
30 September 2019
27 April 2018
30 September 2020
542,304
231,023
473,874
-
-
-
22 March 2019
30 September 2021
-
463,637
(542,304)
-
-
-
-
(14,351)
(58,694)
(22,387)
-
216,672
415,180
441,250
1,247,201
463,637
(542,304)
(95,432)
1,073,102
Consolidated – 2018
Grant date
Performance period
expiry date
Rights at start
of year
New rights
issues
Number
Number
1 October 2014
30 September 2017
27 February 2015
30 September 2017
3 March 2016
30 September 2018
28 March 2017
30 September 2019
529,532
329,589
542,304
261,776
-
-
-
-
27 April 2018
30 September 2020
-
508,345
Rights
vested
Number
(529,532)
(329,589)
-
-
-
1,663,201
508,345
(859,121)
Rights
lapsed
Rights at
end of year
Number
Number
-
-
-
(30,753)
(34,471)
(65,224)
-
-
542,304
231,023
473,874
1,247,201
101
ARISTOCRAT LEISURE LIMITED Annual Report 2019
NOTES TO THE FINANCIAL STATEMENTS
6. OTHER DISCLOSURES
This section provides details on other required disclosures relating to the Group to comply with the accounting standards and
other pronouncements.
6-1 Commitments and contingencies
6-5 Parent entity financial information
6-2 Events occurring after reporting date
6-6 Deed of cross guarantee
6-3 Remuneration of auditors
6-7 Basis of preparation
6-4 Related parties
6-1 COMMITMENTS AND CONTINGENCIES
(a) Commitments
Capital commitments
Capital expenditure contracted for at the reporting date but not recognised as liabilities:
Property, plant and equipment
Lease commitments
Non-cancellable operating leases
The Group leases various offices and plant and equipment under non-cancellable operating leases.
Commitments for minimum lease payments are as follows:
Under one year
Between one and five years
Over five years
Commitments not recognised in the financial statements
Sub-lease payments
2019
$’m
2018
$’m
5.3
0.5
43.4
161.4
198.6
403.4
35.3
121.3
170.9
327.5
Future minimum lease payments expected to be received in relation to non-cancellable sub-leases
of operating leases
9.0
1.5
102
ARISTOCRAT LEISURE LIMITED Annual Report 2019
NOTES TO THE FINANCIAL STATEMENTS
6. OTHER DISCLOSURES CONTINUED
6-1 COMMITMENTS AND CONTINGENCIES
CONTINUED
(b) Contingent liabilities
The Group and parent entity have contingent liabilities at 30
September 2019 in respect of the following matters:
(i) a contingent liability may exist in relation to certain
guarantees and indemnities given in the ordinary course
of business by the Group;
(ii) controlled entities within the Group are and become
parties to various legal actions in the ordinary course of
business and from time to time. The Directors consider
that any liabilities arising from this type of legal action are
unlikely to have a material adverse effect on the Group;
(iii) controlled entities within the Group may become parties
to various legal actions concerning intellectual property
claims. Intellectual property claims can include challenges
to the Group’s patents on various products or processes
and/or assertions of infringement of third party patents.
Most intellectual property claims involve highly complex
issues. Often, these issues are subject to substantial
uncertainties and therefore the probability of damages,
if any, being sustained and an estimate of the amount of
damages is difficult to ascertain. Based on the information
currently available, the Directors consider that there are no
current claims likely to have a material adverse effect on
the Group;
(iv) Aristocrat Leisure Limited, Aristocrat International Pty
Ltd, Aristocrat Technologies Australia Pty Ltd, Aristocrat
(Holdings) Pty Limited, Aristocrat (Asia) Pty Limited,
Aristocrat (Macau) Pty Limited, Aristocrat Technologies
Holdings Pty Limited, System 7000 Pty Limited and
Aristocrat Technical Services Pty Limited are parties to
a deed of cross guarantee which has been lodged with
and approved by the Australian Securities & Investments
Commission as discussed in Note 6-6; and
(v) There are two current pending lawsuits in Washington
State relating to the online social gaming platform Big
Fish Casino, which is part of Big Fish Games, Inc. Aristocrat
completed its acquisition of Big Fish Games, Inc from
Churchill Downs Incorporated (“CDI”) in January 2018.
— In April 2015, Cheryl Kater filed a purported class
action lawsuit against CDI in the US Federal District
Court for the Western District of Washington (the
“District Court”).
— In February 2019 an individual named Manasa
Thimmegowda filed a lawsuit in the District Court
seeking redress against Big Fish Games, Inc., Aristocrat
Technologies Inc., Aristocrat Leisure Limited and CDI.
These two lawsuits allege, among other claims, that certain
games Big Fish offers for play are games of chance that
are prohibited by Washington law. In both lawsuits the
plaintiffs are seeking, among other things, return of monies
lost, reasonable attorney’s fees, injunctive relief, and treble
and punitive damages. The plaintiffs in both lawsuits are
represented by the same counsel, who have described the
Thimmegowda lawsuit as “essentially a companion case that
fills in any gaps left by Kater.”
Aristocrat is not aware of any other US Court having found
in favour of a plaintiff in a matter involving similar facts and
issues to those in these Washington State lawsuits.
These cases are going through the court process. Aristocrat
and CDI are working together to vigorously defend the
actions for all defendant parties, and believe that there are
meritorious legal and factual defences against the plaintiffs’
allegations and requests for relief.
Aristocrat has a number of contractual protections from
CDI, including broad indemnification for any and all losses
connected with the Kater litigation.
6-2 EVENTS OCCURRING AFTER
REPORTING DATE
As advised to the market in May 2019, it was expected that
changes would be made to the group corporate structure
which would align the structure with the underlying operations
and management. The company also advised that a favourable
private ruling had been received from the ATO.
Since 30 September 2019, these changes were made to the
Group structure to ensure that it remains fully aligned to the
underlying business model. The completion of these changes
as well as receipt of the necessary regulatory approvals result
in the Group being entitled to additional non-Australian tax
deductions. In the year ended 30 September 2020, this will
result in the recognition of a deferred tax asset of approximately
$1b in respect of future non-Australian tax deductions.
The recognition of deferred tax assets is a key judgement
(consistent with Note 1-4). Judgement is required in determining
the recognition of the carrying value of the deferred tax assets. A
reassessment of the carrying amount of the deferred tax assets
will be performed at each reporting period.
Other than the matter above, there has not arisen in the interval
between the end of the year and the date of this report any
item, transaction or event of a material and unusual nature
likely, in the opinion of the Directors of the Company, to affect
significantly the operations of the Group, the results of those
operations, or the state of affairs of the Group, in future financial
reporting periods.
Refer to Note 1-6 for information regarding dividends declared
after reporting date.
103
ARISTOCRAT LEISURE LIMITED Annual Report 2019
NOTES TO THE FINANCIAL STATEMENTS
6. OTHER DISCLOSURES CONTINUED
6-3 REMUNERATION OF AUDITORS
During the year, the following fees were paid or payable to
the auditor of the parent entity, PricewaterhouseCoopers
and its related practices:
6-5 PARENT ENTITY FINANCIAL INFORMATION
(a) Summary financial information
The individual financial statements for the parent entity show
the following aggregate amounts:
Audit or review of financial reports
Australia
Overseas
Total remuneration for audit/
review services
Other assurance services
Overseas
Total remuneration for other
assurance services
Total remuneration for assurance
services
Tax and advisory services
Australia
Overseas
Total remuneration for advisory
services
2019
2018
$
$
1,113,000 1,015,000
2,285,826 2,303,000
Balance sheet
Current assets
Total assets
3,398,826 3,318,000
Current liabilities
-
-
-
-
3,398,826 3,318,000
Total liabilities
Net assets
Shareholders' equity
Contributed equity
Reserves
Retained profits/(Accumulated
losses)
3,291,362 1,837,866
Total equity
2019
$’m
2018
$’m
36.0
1,006.5
111.9
111.9
894.6
715.1
184.2
(4.7)
894.6
63.3
995.0
129.8
129.8
865.2
715.1
158.2
(8.1)
865.2
1,569,090 1,621,478
Profit for the year after tax
316.3
254.0
4,860,452 3,459,344
Total comprehensive income
after tax
316.3
254.0
It is the Group’s policy to employ PricewaterhouseCoopers
(PwC) on assignments additional to their statutory audit
duties where PwC’s expertise and experience with the
Group are important. These assignments are principally tax
advice and due diligence on acquisitions. During the year,
PricewaterhouseCoopers was primarily engaged for tax
services relating to assistance with one-off changes to the
Group Structure (refer to note 6-2). These services are not
recurring. PwC is awarded assignments on a competitive
basis in accordance with the non-audit services policy, which
in future will restrict PwC from performing tax and advisory
services.
6-4 RELATED PARTIES
(a) Other transactions with key management personnel
There were no other related party transactions aside from
disclosures under key management personnel. Refer to
Note 5-1.
(b) Subsidiaries
Interests in subsidiaries are set out in Note 4-2.
(b) Guarantees entered into by the parent entity
Cross guarantees given by the parent entity are set out in
Note 6-6.
(c) Contingent liabilities of the parent entity
Contingent liabilities of the parent entity are set out in Note 6-1.
Recognition and measurement
The financial information for the parent entity, Aristocrat
Leisure Limited, disclosed above has been prepared on the
same basis as the consolidated financial statements, except
for investments in subsidiaries where they are accounted for
at cost less impairment charges in the financial statements of
Aristocrat Leisure Limited.
104
ARISTOCRAT LEISURE LIMITED Annual Report 2019
NOTES TO THE FINANCIAL STATEMENTS
6. OTHER DISCLOSURES CONTINUED
6-6 DEED OF CROSS GUARANTEE
Pursuant to ASIC Corporations Instrument 2016/785, the
wholly owned subsidiaries listed below are relieved from the
Corporations Act 2001 requirements for preparation, audit
and lodgement of a financial report and Directors’ Report.
It is a condition of the Instrument that the Company and each
of the participating subsidiaries enter into a Deed of Cross
Guarantee (Deed). The effect of the Deed, dated 28 August
2019, is that the Company guarantees to each creditor
payment in full of any debt in the event of winding up of any
of the participating subsidiaries under certain provisions of
the Corporations Act. If a winding up occurs under other
provisions of the Corporations Act, the Company will only
be liable in the event that after six months, any creditor has
not been paid in full. The subsidiaries have also given similar
guarantees in the event the Company is wound up.
The subsidiaries subject to the Deed are:
— Aristocrat Technologies Australia Pty Limited
— Aristocrat International Pty Limited
— Aristocrat (Asia) Pty Limited
— Aristocrat (Macau) Pty Limited
— Aristocrat (Holdings) Pty Limited
— Aristocrat Technologies Holdings Pty Ltd
— System 7000 Pty Ltd
— Aristocrat Technical Services Pty Ltd
The above named companies represent a Closed Group for
the purposes of the Instrument, and as there are no other
parties to the Deed that are controlled by the Company,
they also represent the Extended Closed Group. Aristocrat
Technologies Holdings Pty Limited, System 7000 Limited
and Aristocrat Technical Services Pty Limited joined the cross
guarantee group during 2019. This did not have a material
impact on the results or financial position of the cross
guarantee group.
Set out below is the statement of profit or loss and other
comprehensive income of the Closed Group:
Revenue
Dividends received from related
parties
Other income from related parties
Other income from non-related
parties
Cost of revenue and other
expenses
Employee benefits expense
Finance costs
Depreciation and amortisation
expense
Profit before income tax
Income tax expense
Profit for the year
Other comprehensive income
Changes in fair value of interest
rate hedge
Other comprehensive
income net of tax
Total comprehensive
income for the year
Set out below is a summary of
movements in consolidated
retained earnings of the Closed
Group:
Retained earnings at the beginning
of the financial year
Restatement through opening
retained earnings
Profit for the year
Dividends paid
2019
$’m
2018
$’m
493.7
546.9
-
462.9
503.5
374.5
2.5
6.7
(173.7)
(150.5)
(12.2)
(221.9)
(161.5)
(15.3)
(21.8)
(17.6)
600.9
1,015.3
(171.4)
(163.8)
429.5
851.5
(3.5)
(3.5)
2.3
2.3
426.0
853.8
909.4
306.9
(1.4)
-
429.5
851.5
(312.4)
(249.0)
Retained earnings at the end of
the financial year
1,025.1
909.4
105
ARISTOCRAT LEISURE LIMITED Annual Report 2019
NOTES TO THE FINANCIAL STATEMENTS
6. OTHER DISCLOSURES CONTINUED
6-6 DEED OF CROSS GUARANTEE CONTINUED
Set out below is the balance sheet of the Closed Group:
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Total current assets
Non-current assets
Trade and other receivables
Investments
Property, plant and equipment
Deferred tax assets
Intangible assets
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Current tax liabilities
Provisions
Deferred revenue and other liabilities
Total current liabilities
Non-current liabilities
Trade and other payables
Borrowings
Provisions
Deferred revenue and other liabilities
Total non-current liabilities
Total liabilities
Net assets
Equity
Contributed equity
Reserves
Retained earnings
Total equity
2019
$’m
2018
$’m
97.7
142.7
23.8
264.2
86.5
153.6
37.6
277.7
345.7
347.4
1,375.8
1,375.5
13.5
37.7
115.3
11.8
41.9
80.7
1,888.0
1,857.3
2,152.2
2,135.0
174.0
110.1
15.0
19.1
189.9
136.6
13.6
22.3
318.2
362.4
0.2
298.1
8.7
6.5
313.5
631.7
1.3
312.7
6.5
12.9
333.4
695.8
1,520.5
1,439.2
715.1
715.1
(219.7)
(185.3)
1,025.1
909.4
1,520.5
1,439.2
106
ARISTOCRAT LEISURE LIMITED Annual Report 2019
NOTES TO THE FINANCIAL STATEMENTS
6. OTHER DISCLOSURES CONTINUED
6-7 BASIS OF PREPARATION
Corporate information
Aristocrat Leisure Limited is a for-profit company
incorporated and domiciled in Australia and limited by
shares publicly traded on the Australian Securities Exchange.
This financial report covers the financial statements for the
consolidated entity consisting of Aristocrat Leisure Limited
and its subsidiaries (together referred to as the Group). A
description of the nature of the Group’s operations and its
principal activities is included in the Directors’ Report and
the Operating and Financial Review. The financial report
was authorised for issue in accordance with a resolution of
Directors on 20 November 2019.
The Group’s registered office and principal place
of business is:
Aristocrat Leisure Limited
Building A, Pinnacle Office Park
85 Epping Road
North Ryde NSW 2113
Australia
The Group ensures that its corporate reporting is timely,
complete and available globally. All press releases, financial
statements, and other information are available in the
investor information section of the Company’s website:
www.aristocrat.com
Basis of preparation
These general purpose financial statements have been
prepared in accordance with Australian Accounting
Standards, other authoritative pronouncements of the
Australian Accounting Standards Board, International
Financial Reporting Standards (IFRS) as issued by the
International Accounting Standards Board (IASB) and the
Corporations Act 2001. The report presents information
on a historical cost basis, except for financial assets and
liabilities (including derivative instruments), which have
been measured at fair value and for classes of property,
plant and equipment which have been measured at
deemed cost. Amounts have been rounded off to the
nearest whole number of million dollars and one decimal
place representing hundreds of thousands of dollars, or
in certain cases, the nearest dollar in accordance with the
relief provided under the ASIC Corporations (Rounding in
Financial/Directors’ Reports) Instrument 2016/191 as issued
by the Australian Securities and Investments Commission.
Policies have been applied consistently for all years
presented, unless otherwise stated.
Comparative information is reclassified where appropriate to
enhance comparability.
Principles of consolidation
The consolidated financial statements incorporate the
financial statements of Aristocrat Leisure Limited (the
Company) and its subsidiaries as at 30 September 2019.
Subsidiaries are fully consolidated from the date on which
control is transferred to the Group. They are deconsolidated
from the date that control ceases. The Group controls an
entity when the Group is exposed to, or has rights to, variable
returns from its involvement with the entity and has the
ability to affect those returns through its power to direct the
activities of the entity.
In preparing the consolidated financial statements, all
intercompany balances, transactions and unrealised gains
have been eliminated. Accounting policies of subsidiaries
have been changed where necessary to ensure consistency
with the policies adopted by the Group.
The Group has a trust to administer the Group’s employee
share scheme. This trust is consolidated as it is controlled by
the Group.
Foreign currency
The consolidated financial statements are presented in
Australian dollars. Items included in the financial statements
of each of the Group’s entities are measured using the
currency of the primary economic environment in which the
entity operates (the functional currency).
The results and financial position of foreign operations are
translated into Australian dollars at the reporting date using
the following applicable exchange rates:
Foreign currency amount
Applicable exchange rate
Income and expenses
Average exchange rate
Assets and liabilities
Reporting date
Equity
Reserves
Historical date
Historical date
Foreign exchange gains and losses resulting from translation
are recognised in the statement of profit or loss, except for
qualifying cash flow hedges which are deferred to equity.
Foreign exchange differences resulting from translation of
foreign operations are initially recognised in the foreign
currency translation reserve and subsequently transferred to
the profit or loss on disposal of the foreign operation.
107
ARISTOCRAT LEISURE LIMITED Annual Report 2019
NOTES TO THE FINANCIAL STATEMENTS
6. OTHER DISCLOSURES CONTINUED
6-7 BASIS OF PREPARATION CONTINUED
New accounting standards and interpretations
The following new accounting standard has been published that is not mandatory for 30 September 2019 reporting periods
and has not been early adopted by the Group. The status of the Group’s assessment of the impact of the new standard is set
out below:
Reference
Description
Financial Year
of Application
by Aristocrat
Impact on the Group
AASB 16
Leases
AASB 16 removes the
classification of leases as
either operating leases
or finance leases for
the lessee. The lease
becomes an on-balance
sheet liability that attracts
interest, together with a
new asset on the balance
sheet.
2020
The Group has continued to assess the impact of the new lease
standard in preparation for it being applied from 1 October
2019. Changes to the leases standard will impact the Group on
leases of property, plant and equipment. By bringing operating
leases on the balance sheet, there will be an increase in assets
and a corresponding increase in liabilities. Furthermore, the
Group will no longer recognise ‘rent expense’ in relation to
operating leases, but rather depreciation expense on the right
of use asset and interest expense on the lease liability. Note
6-1 provides information on operating lease commitments that
are currently recorded off-balance sheet. On transition to the
new standard these will be recognised on-balance sheet after
discounting to present value.
Estimates of the opening adjustments at 1 October 2019 are:
— A lease liability of $303m
— A right of use asset of $244m (adjusted for existing lease
incentives, rent accruals and onerous lease provisions)
Comparative information will not be restated.
The new standard is not expected to have any unfavourable
impacts on debt covenants.
There are no other standards that are not yet effective and that would be expected to have a material impact on the entity in
the current or future reporting periods and on foreseeable future transactions.
108
ARISTOCRAT LEISURE LIMITED Annual Report 2019
NOTES TO THE FINANCIAL STATEMENTS
6. OTHER DISCLOSURES CONTINUED
Hedge accounting
The Group has applied the AASB 9 hedge accounting
requirements prospectively from the date of initial
application on1 October 2018 in line with the transition
provision of the accounting standard. Changes in the
standard resulting from new hedge accounting requirements
have not had a material impact for the Group.
AASB 15 Revenue from Contracts with Customers
(‘AASB 15’)
AASB 15 is based on the principle that revenue is recognised
when control of goods or services transfers to the customer.
The notion of control replaced the notion of the transfer
of risks and rewards to the customer. AASB 15 replaced
previous revenue recognition standards including AASB 118
Revenue and AASB 111 Construction Contracts.
The Group applied the full retrospective method on
adoption of AASB 15. The main change as a result of the
new standard is jackpot liability expenses are classified as
contra revenue rather than as expenses. The comparatives
in the statement of profit or loss and other comprehensive
income have been amended to show results on a like-for-like
basis. This has resulted in a restated decrease in revenue by
$40.3m and a corresponding restated decrease in cost of
revenue for the period ended 30 September 2018.
While the adoption of AASB 15 resulted in other changes in
accounting policies, no material adjustments to the current
and preceding financial reporting periods resulted and
hence there were no further adjustments to comparative
financial information on adoption of AASB 15. Refer to Note
1-2 for accounting policies relating to revenue from contracts
with customers.
6-8 CHANGES IN ACCOUNTING POLICIES
From 1 October 2018, the Group adopted new accounting
standards for financial instruments and revenue from
contracts with customers. The changes in accounting policy
resulting from these and the impact on the Group’s financial
statements is set out below:
AASB 9 Financial Instruments (‘AASB 9’)
AASB 9 addresses the classification, measurement and
derecognition of financial assets and financial liabilities.
It also includes an expected loss impairment model and
a reformed approach to hedge accounting. AASB 9
replaces AASB 139 Financial Instruments: Recognition and
Measurement.
Credit losses on trade receivables
The Group has measured expected credit losses, using the
lifetime expected loss allowance for all trade receivables. To
measure the expected credit losses, trade receivables have
been grouped based on shared credit risk characteristics
and days past due. A provision matrix is then determined
based on the historic credit loss rate for each group, adjusted
for any material expected changes to the future credit risk
for the group. The doubtful debts provision has increased
by $1.4m on transition to the new ‘expected loss model’. The
method under the previous accounting standard was based
on an ‘incurred loss’ model, where provisions were only
recognised if there were indicators that a customer would
not make its payment obligations.
In accordance with the transitional provisions in AASB 9,
comparative financial information has not been restated
for this increase in the doubtful debts provision, and the
resulting adjustment to the carrying values in the opening
balance sheet has been recognised in opening retained
earnings on 1 October 2018.
Closing retained earnings
30 September 2018
AASB 9 doubtful debts provision
resulting from the application of the
'expected loss model'
$’m
1,040.9
(1.4)
Opening retained earnings 1 October 2018
1,039.5
109
ARISTOCRAT LEISURE LIMITED Annual Report 2019
DIRECTORS’ DECLARATION
for the year ended 30 September 2019
In the Directors’ opinion:
(a) the financial statements and notes set out on pages 61 to 109 are in accordance with the Corporations Act 2001 including:
(i) complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting
requirements;
(ii) giving a true and fair view of the consolidated entity’s financial position as at 30 September 2019 and of its
performance, for the financial year ended on that date; and
(b) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and
payable; and
(c) at the date of this declaration, there are reasonable grounds to believe that the members of the Extended Closed Group
identified in Note 6-6 will be able to meet any obligations or liabilities to which they are, or may become, subject by virtue
of the deed of cross guarantee described in Note 6-6.
Note 6-7 confirms that the financial statements also comply with International Financial Reporting Standards as issued by the
International Accounting Standards Board.
The Directors have been given declarations by the Chief Executive Officer and Managing Director and Chief Financial Officer
required by section 295A of the Corporations Act 2001.
This declaration is made in accordance with a resolution of the Directors.
N Chatfield
Chairman
Sydney
20 November 2019
110
ARISTOCRAT LEISURE LIMITED Annual Report 2019
Independent auditor’s report
To the members of Aristocrat Leisure Limited
Report on the audit of the financial report
Our opinion
In our opinion:
The accompanying financial report of Aristocrat Leisure Limited (the Company) and its controlled entities
(together the Group) is in accordance with the Corporations Act 2001, including:
(a) giving a true and fair view of the Group's financial position as at 30 September 2019 and of its
financial performance for the year then ended
(b) complying with Australian Accounting Standards and the Corporations Regulations 2001.
What we have audited
The Group’s consolidated financial report comprises:
●
●
●
●
●
●
the balance sheet as at 30 September 2019
the statement of changes in equity for the year then ended
the cash flow statement for the year then ended
the statement of profit or loss and other comprehensive income for the year then ended
the notes to the financial statements, which include a summary of significant accounting policies
the directors’ declaration.
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under
those standards are further described in the Auditor’s responsibilities for the audit of the financial report
section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
Independence
We are independent of the Group in accordance with the auditor independence requirements of the
Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical
Standards Board’s APES 110 Code of Ethics for Professional Accountants (including Independence
Standards) (the Code) that are relevant to our audit of the financial report in Australia. We have also
fulfilled our other ethical responsibilities in accordance with the Code.
PricewaterhouseCoopers, ABN 52 780 433 757
One International Towers Sydney, Watermans Quay, Barangaroo, GPO BOX 2650, SYDNEY NSW 2001
T: +61 2 8266 0000, F: +61 2 8266 9999, www.pwc.com.au
Level 11, 1PSQ, 169 Macquarie Street, Parramatta NSW 2150, PO Box 1155 Parramatta NSW 2124
T: +61 2 9659 2476, F: +61 2 8266 9999, www.pwc.com.au
Liability limited by a scheme approved under Professional Standards Legislation.
111
ARISTOCRAT LEISURE LIMITED Annual Report 2019
Our audit approach
An audit is designed to provide reasonable assurance about whether the financial report is free from
material misstatement. Misstatements may arise due to fraud or error. They are considered material if
individually or in aggregate, they could reasonably be expected to influence the economic decisions of
users taken on the basis of the financial report.
We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion
on the financial report as a whole, taking into account the geographic and management structure of the
Group, its accounting processes and controls and the industry in which it operates.
Materiality
● For the purpose of our audit we used overall Group materiality of $48 million, which represents
approximately 5% of the Group’s profit before tax.
● We applied this threshold, together with qualitative considerations, to determine the scope of our audit and
the nature, timing and extent of our audit procedures and to evaluate the effect of misstatements on the
financial report as a whole.
● We chose Group profit before tax because, in our view, it is the benchmark against which the performance of
the Group is most commonly measured and it is a generally accepted benchmark.
● We utilised a 5% threshold based on our professional judgement, noting it is within the range of commonly
acceptable thresholds.
Audit Scope
● Our audit focused on where the Group made subjective judgements; for example, significant accounting
estimates involving assumptions and inherently uncertain future events.
● The Group comprises entities located globally with the most financially significant operations being located in
Australia and in Tulsa and Las Vegas in the United States of America (USA). Other operations are located in
Seattle and Tel Aviv. Accordingly, we structured our audit as follows:
-
The group team was led by our team from PwC Australia ("group audit team”). The group audit team
conducted an audit of the special purpose financial information of businesses operating in Australia used
to prepare consolidated financial statements.
- Under instructions from and on behalf of the group audit team, component auditors in:
112
ARISTOCRAT LEISURE LIMITED Annual Report 2019
o Three USA locations (Las Vegas, Nashville and Seattle) performed an audit of the
respective special purpose financial information for those locations used to prepare the
consolidated financial statements.
o
Israel performed specified audit procedures over selected financial statement items within
the respective special purpose financial information for the location used to prepare the
consolidated financial statements.
● The Group audit team communicated regularly with these component audit teams during the year through
face-to-face meetings, phone calls and/or written instructions. The group audit team also met with local
management of each financially significant operation.
● Each year, the group audit team rotates its site visits. During the current period, the group audit team have
visited management and finance teams from the following locations: Sydney, Nashville, Las Vegas, Seattle
and the Las Vegas integration facility.
● The group audit team undertook the remaining audit procedures, including over significant financial
statement items at the Group level, the Group consolidation and the financial report preparation, and audit
procedures over the remuneration report.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our
audit of the financial report for the current period. The key audit matters were addressed in the context of
our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide a
separate opinion on these matters. Further, any commentary on the outcomes of a particular audit
procedure is made in that context. We communicated the key audit matters to the Audit and Risk
Committee.
Key audit matter
How our audit addressed the key audit matter
Revenue from contracts with customers
Refer to note 1-2 $4,397.4m
Revenue was a key audit matter given the:
●
●
financial significance of revenue to the financial
statements
complexity of contractual arrangements and
diversity of products and services
Aristocrat has multiple revenue streams. For the
revenue streams (excluding digital), accounting for
revenue contracts is complex due to contractual
arrangements with customers such as delayed
settlement, delayed delivery, bundling of products and
multiple element agreements.
For the digital revenue stream, determining the
amount of bookings to be recognised as revenue versus
deferred revenue is complex due to the determination
In obtaining sufficient appropriate audit evidence, our
procedures included, amongst others:
●
considering and assessing the Group’s revised
accounting policy in line with the new
Australian Accounting Standards
requirements
● obtaining an understanding and evaluating
the controls over the revenue and
receivables business process
●
considering the complexity associated with
Aristocrat’s revenue streams by assessing a
sample of contractual arrangements and
testing underlying transactions. This
included identifying performance
obligations and reviewing the allocation of
113
ARISTOCRAT LEISURE LIMITED Annual Report 2019
of when credits purchased by a customer are
consumed. This varies by game.
transaction price and the method of
revenue recognition
Income Taxes
Refer to note 1-4 and 6-2
The Group operates globally and is subject to tax
regimes and tax legislation administered by separate
tax authorities in a number of countries. Transfer
pricing arrangements between different countries is a
complex tax and accounting area. Judgement by the
Group is involved in accounting for uncertain tax
positions where determination has not yet been made
by the relevant tax authorities at the date of this
financial report.
Under the relevant legislation in certain territories
some tax assessments remain open to challenge for an
extended period. There is a risk that the position
adopted by the Group could be challenged by tax
authorities. This may result in a material change in the
accounting estimate.
Subsequent to 30 September 2019, changes to the
Group structure were made as outlined in Note 6-2.
Judgement has been applied when quantifying
amounts included in these disclosures.
● where material contracts included bundling
of different products, comparing the
revenue allocation of the products sold to
recent examples of sales of that product on
a standalone basis and checking the
discounts provided had been
proportionally allocated across the
different elements of the contract
●
evaluating the related financial statement
disclosures for consistency with Australian
Accounting Standards requirements.
We focussed our efforts on obtaining an understanding
of the business and associated tax considerations.
Our procedures included amongst others:
●
●
evaluating the analysis conducted by the
Group for judgements made in respect of the
ultimate amounts expected to be paid to tax
authorities
assessing the consistency of assumptions
inherent in accounting positions, in years
where tax assessments are still open, to
historically agreed positions with tax
authorities
● obtaining relevant correspondence with tax
authorities and the Group’s tax advisors
●
●
●
engaging PwC tax experts to consider
potential global tax risks within the Group
assessing the appropriateness of the Group’s
disclosure in the financial report in light of
Australian Accounting Standard requirements
considering the appropriateness of the
disclosure included within Note 6-2 including
reviewing the appropriateness of the Group’s
assumptions.
114
ARISTOCRAT LEISURE LIMITED Annual Report 2019
Estimated recoverable amount of goodwill -
VGT, Plarium and Big Fish
Refer to note 2-3 Intangible Assets – Goodwill -
$2,923.1m
Goodwill in relation to VGT, Plarium and Big Fish is
recognised on the balance sheet and is significantly
greater than materiality.
Assisted by PwC valuation experts in aspects of our
work, our audit procedures in assessing the recoverable
amount of goodwill included, amongst others;
Under Australian Accounting Standards, the Group is
required to test the goodwill and indefinite lived
intangible assets annually for impairment, irrespective
of whether there are any indicators of impairment.
This assessment is inherently complex and
judgemental. It requires judgement by the Group in
forecasting the operational cash flows of the Group’s
cash generating units, and determining discount rates
and terminal growth rates used in the discounted cash
flow models used to assess impairment (the models).
● developing an understanding and testing the
overall calculation and methodology of the
Group’s impairment assessment
●
●
●
●
●
assessing the identification of the cash
generating units for the purposes of
impairment testing and the attribution of net
assets, revenues and costs to those cash
generating units
assessing the cash flow forecasts included in
the models with reference to actual historical
earnings
comparing the forecasts to the Board
approved budget
testing the mathematical accuracy of the
models
assessing the terminal growth rates and
discount rates applied in the models by
comparing them to external information
sources
● performing sensitivity analyses over the key
assumptions used in the models and applied
other values within a range that we assessed
as being reasonably possible
●
evaluating the related financial statement
disclosures for consistency with Australian
Accounting Standards requirements
115
ARISTOCRAT LEISURE LIMITED Annual Report 2019
Other information
The directors are responsible for the other information. The other information comprises the information
included in the annual report for the year ended 30 September 2019, but does not include the financial
report and our auditor’s report thereon.
Our opinion on the financial report does not cover the other information and accordingly we do not
express any form of assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information
and, in doing so, consider whether the other information is materially inconsistent with the financial
report or our knowledge obtained in the audit, or otherwise appears to be materially misstated.
If, based on the work we have performed on the other information that we obtained prior to the date of
this auditor’s report, we conclude that there is a material misstatement of this other information, we are
required to report that fact. We have nothing to report in this regard.
Responsibilities of the directors for the financial report
The directors of the Company are responsible for the preparation of the financial report that gives a true
and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for
such internal control as the directors determine is necessary to enable the preparation of the financial
report that gives a true and fair view and is free from material misstatement, whether due to fraud or
error.
In preparing the financial report, the directors are responsible for assessing the ability of the Group to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either intend to liquidate the Group or to cease
operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes
our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit
conducted in accordance with the Australian Auditing Standards will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material if,
individually or in the aggregate, they could reasonably be expected to influence the economic decisions of
users taken on the basis of the financial report.
A further description of our responsibilities for the audit of the financial report is located at the Auditing
and Assurance Standards Board website at: http://www.auasb.gov.au/auditors_responsibilities/ar1.pdf.
This description forms part of our auditor's report.
116
ARISTOCRAT LEISURE LIMITED Annual Report 2019
Report on the remuneration report
Our opinion on the remuneration report
We have audited the remuneration report included in pages 30 to 55 of the directors’ report for the year
ended 30 September 2019.
In our opinion, the remuneration report of Aristocrat Leisure Limited for the year ended 30 September
2019 complies with section 300A of the Corporations Act 2001.
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the remuneration
report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an
opinion on the remuneration report, based on our audit conducted in accordance with Australian
Auditing Standards.
PricewaterhouseCoopers
MK Graham
Partner
Sydney
20 November 2019
117
ARISTOCRAT LEISURE LIMITED Annual Report 2019
Distribution of equity securities as at 19 November 2019
Size of holding
1- 1,000
1,001- 5,000
5,001- 10,000
10,001- 100,000
100,001- over
TOTAL
Less than a marketable parcel of $500.00
Holders of
Performance
Share Rights1
Shareholders
Number of
shares2
% of issued
capital
720
161
29
39
3
952
404
20,507
6,486
813
454
73
28,333
801
7,594,001
14,010,062
5,831,434
9,795,729
601,312,924
638,544,150
3,928
1.190
2.190
0.910
1.530
94.170
100.000
0.00062
1. All share rights are allocated under the Company’s incentive programs to take up ordinary shares in the capital of the Company. These share rights are subject
to the rules of the relevant program and are unquoted and non-transferable.
2. Fully paid ordinary shares (excludes unvested performance share rights that have not been converted into shares).
Substantial shareholders 19 November 2019
As at 19 November 2019, the following shareholders were registered by the Company as a substantial shareholder, having
notified the Company of a relevant interest in accordance with Section 671B of the Corporations Act 2001 (Cth), in the voting
shares below:
Name of shareholder
Blackrock Group
The Vanguard Group, Inc.
Number of ordinary
shares held
44,990,466
32,730,782
% of issued capital
Date of notice
7.04%
5.126%
1/10/2019
6/12/2018
118
ARISTOCRAT LEISURE LIMITED Annual Report 2019
SHAREHOLDER INFORMATION Twenty largest ordinary shareholders as at 19 November 2019
Name of shareholder
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
J P MORGAN NOMINEES AUSTRALIA PTY LIMITED
CITICORP NOMINEES PTY LIMITED
NATIONAL NOMINEES LIMITED
BNP PARIBAS NOMINEES PTY LTD
WRITEMAN PTY LIMITED
THUNDERBIRDS ARE GO PTY LTD
ARMINELLA PTY LIMITED
ECA 1 PTY LIMITED
MAAKU PTY LIMITED
ARGO INVESTMENTS LIMITED
AMP LIFE LIMITED
BNP PARIBAS NOMS (NZ) LTD
UBS NOMINEES PTY LTD
CS THIRD NOMINEES PTY LIMITED
AVANTEOS INVESTMENTS LIMITED
MERRILL LYNCH (AUSTRALIA) NOMINEES PTY LIMITED
NETWEALTH INVESTMENTS LIMITED
INVIA CUSTODIAN PTY LIMITED
J P MORGAN SECURITIES AUSTRALIA LIMITED
Number of ordinary
shares held
% issued capital
244,511,232
121,075,390
76,358,059
37,149,879
33,481,987
27,137,475
16,327,754
14,692,200
8,552,904
5,284,127
3,264,665
1,999,147
1,816,201
1,375,561
1,006,014
901,742
816,828
752,144
739,262
705,358
38.292%
18.961%
11.958%
5.818%
5.243%
4.250%
2.557%
2.301%
1.339%
0.828%
0.511%
0.313%
0.284%
0.215%
0.158%
0.141%
0.128%
0.118%
0.116%
0.110%
119
ARISTOCRAT LEISURE LIMITED Annual Report 2019
SHAREHOLDER INFORMATION Voting Rights
At meetings of shareholders, each shareholder may vote
in person or by proxy, attorney or (if the shareholder is a
body corporate) corporate representative. On a show of
hands, every person present who is a shareholder or a
representative of a shareholder has one vote and on a poll
every shareholder present in person or by proxy or attorney
has one vote for each fully paid ordinary share. Performance
share right holders have no voting rights.
Regulatory Considerations affecting Shareholders
Aristocrat Leisure Limited and its subsidiaries could be
subject to disciplinary action by gaming authorities in
some jurisdictions if, after receiving notice that a person is
unsuitable to be a shareholder, that person continues to
be a shareholder. Because of the importance of licensing
to the Company and its subsidiaries, the Constitution
contains provisions that may require shareholders to provide
information and also gives the Company powers to divest
or require divestiture of shares, suspend voting rights and
withhold payments of certain amounts to shareholders or
other persons who may be unsuitable.
Shareholder enquiries
You can access information about Aristocrat Leisure Limited
and your holdings via the internet. Aristocrat’s website,
www.aristocrat.com, has the latest information on Company
announcements, presentations and reports. Shareholders
may also communicate with the Company via its website. In
addition, there is a link to the Australian Securities Exchange
to provide current share prices. The share registry manages
all your shareholding details. Visit www.boardroomlimited.
com.au and access a wide variety of holding information,
make changes to your holding record and download forms.
You can access this information via a security login using
your Securityholder Reference Number (SRN) or Holder
Identification Number (HIN).
Dividends
Electronic Funds Transfer
The Company has a mandatory direct payment of dividends
program for all shareholders who were requested to
complete and submit Direct Credit payment instructions
with the Company’s share registrar. Shareholders who have
not submitted valid Direct Credit payment instructions will
receive a notice from the Company’s share registrar
advising that:
(i) the relevant dividend amount is being held as direct
credit instructions have not been received;
(ii) the relevant dividend will be credited to the nominated
bank account as soon as possible on receipt of direct
credit instructions; and
(iii) no interest is payable on the dividend being withheld.
Such notices are sent to shareholders who have not
completed and submitted a Direct Credit of Dividends
instructions on the record date of the relevant dividend.
Dividend Reinvestment Plan
The Directors consider whether the Company’s Dividend
Reinvestment Plan (DRP) should operate each time a
dividend is declared.
The DRP Rules and the ‘Dividend Reinvestment Plan
Application or Variation Form’ are available from the
Company’s share registrar, Boardroom Limited on
1300 737 760 (in Australia), or +61 2 9290 9600
(international) or email enquiries@boardroomlimited.com.au
Shareholders should note that: (i) Shareholders who elect to
participate in the DRP and who do not revoke their elections
will automatically participate on the next occasion the DRP
is activated; (ii) the fact that the DRP operated in respect
of any dividend does not necessarily mean that the DRP
will operate in respect of any further dividends (a separate
decision is made for each dividend); and (iii) when the
DRP does operate, the DRP rules provide that the number
of shares that DRP participants will receive will not be
determinable on the Record Date determined by the Board.
120
ARISTOCRAT LEISURE LIMITED Annual Report 2019
SHAREHOLDER INFORMATION CORPORATE DIRECTORY
Directors
NG Chatfield
Non-Executive Chairman
TJ Croker
Chief Executive Officer and
Managing Director
KM Conlon
Non-Executive Director
PG Etienne
Non-Executive Director
SW Morro
Non-Executive Director
AM Tansey
Non-Executive Director
S Summers Couder
Non-Executive Director
PJ Ramsey
Non-Executive Director
Company Secretary
RH Bell
Global Headquarters
Aristocrat Leisure Limited
Building A, Pinnacle Office Park
85 Epping Road
North Ryde NSW 2113
Australia
Telephone: + 61 2 9013 6300
Facsimile: + 61 2 9013 6200
Australia
Building A, Pinnacle Office Park
85 Epping Road
North Ryde NSW 2113
Australia
Telephone: + 61 2 9013 6300
Facsimile: + 61 2 9013 6200
New Zealand
The Americas
North America
Europe
Great Britain
Aristocrat Technologies Inc.
Aristocrat Technologies Europe Limited
10220 Aristocrat Way
Las Vegas Nevada 89135
USA
Telephone: + 1 702 270 1000
Facsimile: + 1 702 270 1001
Video Gaming Technologies, Inc.
308 Mallory Station Road
Franklin TN 37067
USA
Telephone: + 1 615 372 1000
Facsimile: + 1 615 372 1099
Big Fish Games, Inc.
906 Alaskan Way
Seattle Washington 98104
USA
Telephone: + 1 206 213 5753
Facsimile: + 1 206 213 3696
South America
Aristocrat (Argentina) Pty Limited
Acassuso Office Park
Dardo Rocha No 78 1er Piso
(1640) Acassuso
Partido de San Isidro
Provincia de Buenos Aires
Telephone: + 5411 4708 5400
Facsimile: + 5411 4708 5454
Asia
Macau
Aristocrat (Macau) Pty Limited
17th Floor, Hotline Centre
335-341 Alameda Drive
Carlos d’ Assumpcao
Macau
Telephone: + 853 2872 2777
Fax: + 853 2872 2783
25 Riverside Way Uxbridge
Middlesex UB8 2YF U.K.
Telephone: + 44 1895 618 500
Facsimile: + 44 1895 618 501
Israel
Plarium Global Limited
2 Abba Eban Blvd
Herzliya
Israel
Telephone: + 972 9 9540211
Facsimile: + 972 9 9607827
Investor Contacts
Share Registry
Boardroom Limited
Grosvenor Place, Level 12
225 George Street
Sydney NSW 2000
Australia
Telephone: 1300 737 760 (in Australia)
Telephone: +61 2 9290 9600
(international)
Email: enquiries@boardroomlimited.com.au
Website: www.boardroomlimited.com.au
Auditor
PricewaterhouseCoopers
One International Towers Sydney
Watermans Quay, Barangaroo
Sydney NSW 2001
Australia
Stock Exchange Listing
Aristocrat Leisure Limited
Ordinary shares are listed on the
Australian Securities Exchange
CODE: ALL
Internet Site
Aristocrat Technologies NZ Limited
Singapore
Unit E, 7 Echelon Place
Highbrook
Auckland 2013
New Zealand
Telephone: +649 259 2000
Facsimile: +649 259 2001
Aristocrat (Singapore) Pty Limited
www.aristocrat.com
61 Kaki Bukit Avenue 1
Shun Li Industrial Park #04-29
Singapore 417943
Telephone: + 656 444 5666
Facsimile: + 656 842 4533
Investor Email Address
Investors may send email queries to:
investor.relations@aristocrat.com
121
ARISTOCRAT LEISURE LIMITED Annual Report 2019
This page has intentionally been left blank.
122
ARISTOCRAT LEISURE LIMITED Annual Report 2019
This page has intentionally been left blank.
123
ARISTOCRAT LEISURE LIMITED Annual Report 2019
aristocrat.com
Aristocrat Leisure Limited
Building A, Pinnacle Office Park
85 Epping Road
North Ryde NSW 2113
P.O. Box 361
North Ryde BC NSW 1670
AUSTRALIA
Tel +61 2 9013 6000
Fax +61 2 9013 6200
ABN 44 002 818 368