Australian gaming provider company Aristocrat issued an investor update on Monday, outlining the steps it will undertake in response to the ongoing situation across the world related to the spread of the coronavirus infection. Having as a first priority the health and well-being of its team members and their families, 99% of the company’s employees have been performing their job duties as home-based.
Aristocrat Leisure Limited informed the Australian Stock Exchange /ASX/ that it will temporarily stand down around 1,000 members of its staff, as well as cut permanently 200 jobs, to trim its operating costs.
Labour Cost Reduction
Historically, the company has been heavily reliant revenue-wise on its land-based operations, consisting of two streams of revenues, gaming operations based on a daily fee model and outright sales, delivering around 60% of total revenues for the financial year ending September 2019.
Mid-March was a turning point for the company as all of its land-based gaming partners globally have shut down operations, and Aristocrat believes reopening would be phased in, allowing for a gradual ramping up of gaming venues, albeit with risk mitigation measures in place.
With regards to the closure of land-based operations, the company is considering Group-wide cost-reduction initiatives, such as freeze on hiring and elimination of contractor spend. As 70% of Aristocrat’s operating costs relate to cost of labour, starting May 1 the company is implementing workforce changes related to the land-based gaming related staff, approximately 4,000 employees, with an estimated effect of AU$100 million.
In sales, services and manufacturing operations in venues where there is high uncertainty regarding reopening timeframes, Aristocrat will be standing down until June 30 around 1,000 of its workers. Due to changing priorities, another 200 employees will be downsized permanently.
In line with company’s values, all affected from the redundancy measures employees will receive full support in terms of transition assistance, separation benefits, paid leave and health coverage, as well as counselling and access to government support.
Salary Cuts, No Dividend
By the end of the financial year, September 2020, 200 full-time employees will switch to part-time basis, while another 1,500 will have salary cuts of between 10% and 20%, including a 20% reduction in fees to Board of Directors, as well as a 30% cut on company’s Managing Director and CEO, Trevor Croker, base salary.
Aristocrat said its digital division that accounted for the other 40% of 2019 revenues continued to perform strongly over the recent months, with increase in player activity across almost the whole of the portfolio. The company pointed out it would dedicate more resources in developing extra digital content for Asia through 2020 and 2021, to help support the rebound of casinos in the region.
Though the Group has around AU$1 billion comprised of cash and revolving credit facility, to further boost liquidity Directors decided to suspend Aristocrat’s progressive dividend scheme.
On a side note, Aristocrat has partnered with City of Dreams Manila to donate 1,700 food packages to staff, families and communities working on medical infrastructure sites across 10 hospitals and medical centers in Manila.