Entire gambling hubs like Macau and Las Vegas and all major sports activity have been shut down due to the coronavirus, leading to hundreds of millions of dollars in lost revenue. Bailouts are already in the works in the U.S., the U.K. and elsewhere, but some industries are concerned that it won’t be enough. Not everyone in the gaming space is expected to feel a massive blow to the gut from COVID-19, though, and Australia-based gaming equipment manufacturer Aristocrat says it’s ready to deal with the virus head-on.
Aristocrat prepared a statement (in pdf) yesterday that is designed to allay fears among investors and the gaming sector that it would be caught up in the revenue freefall hitting other companies. Submitted to the Australian Securities Exchange, the company’s notice recognizes that a softer market will undoubtedly cause a decline in revenue, but asserts that it has, through its business model and operational guidance, been prepared for a calamity such as the coronavirus.
The company explains, “The Group’s outstanding fundamentals continue to underpin our strategy and long-term confidence. Aristocrat has a conservatively geared balance sheet, with a net debt to EBITDA [earnings before interest, taxes, depreciation and amortization] ration of 1.4x (as at 30 September 2019). In addition, Aristocrat’s term loan facility is not due until October 2024 and is covenant lite, providing significant financial flexibility.”
This doesn’t mean that the slot machine manufacturer is taking the current health situation lightly. It has instituted travel bans and social distancing measures for employees across all of its operations, and most of its staff are now working remotely. According to the statement, of the roughly 6,400 employees in the company, 80% are now working from home.
Adding to its ability to remain stable in the face of COVID-19, the company explains that the “diversity of Aristocrat’s operations adds to the Group’s strength and flexibility. Over the 2019 financial year, Digital games delivered over 40$ of total Group revenue, while Land Based gaming operations and outright sales contributed around another 30% each. Operations are also spread across key global and regional markets, and our Digital and Land Based businesses are addressing a broader range of segments and genres than ever before.”
There’s no denying the fact that the coronavirus is going to have a huge impact on the global economy for some time to come. Those companies that have been able to think pragmatically and conduct business in a sensible manner are the ones that will be able to emerge stronger once the virus is defeated.
