Moody’s Ratings recently upgraded the outlook for Aristocrat Leisure Ltd, a global gaming supplier, from Stable to Positive. This revision is based on the company’s robust recovery post-COVID-19 and its strategic expansions into the online Real Money Gaming (RMG) sector. In addition to affirming Aristocrat’s Ba1 corporate family rating (CFR) and senior secured first lien term loan B rating, Moody’s highlighted several key factors influencing their decision.
Financial Strength and Recovery
Moody’s revised outlook reflects confidence in Aristocrat’s ability to maintain strong credit metrics and liquidity. The company has shown positive earnings momentum, driven by a vigorous recovery in its gaming operations and significant growth in its RMG business segment. This expansion is expected to enhance Aristocrat’s growth potential through increased investment and potential acquisitions.
Strategic Acquisitions and Business Expansion
The recent acquisition of NeoGames S.A. has bolstered Aristocrat’s business profile by increasing scale and geographic diversification, particularly in the RMG segment. Moody’s anticipates that Aristocrat will continue exploring strategic acquisitions, leveraging its strong balance sheet capacity. Despite potential growth spending, Moody’s expects Aristocrat to uphold credit metrics appropriate for its rating level, maintaining leverage around 1.0x to 1.1x.
Liquidity and Financial Flexibility
Aristocrat boasts an excellent liquidity profile, with approximately AU$2.6 billion (US$1.7 billion) in cash and equivalents, alongside US$500 million available under its revolving credit facility. This substantial liquidity position, coupled with long-dated debt maturity profiles (not maturing until 2027), provides ample financial flexibility for future investments and shareholder returns.
Operational Strength and Market Presence
Moody’s affirmation of Aristocrat’s Ba1 rating underscores the company’s strong market presence and extensive geographical footprint. Aristocrat benefits from a history of developing popular products that resonate well with consumers, supported by a high proportion of recurring revenue from its premium gaming and digital businesses. This revenue stability contributes to the company’s robust credit profile.
Financial Performance
In the six months ending March 31, 2024, Aristocrat reported revenues of AU$3.27 billion (US$2.19 billion) and EBITDA of AU$1.20 billion (US$804 million). These figures underscore Aristocrat’s financial resilience and operational efficiency amidst a recovering global economy.
Moody’s upgraded outlook for Aristocrat Leisure Ltd reflects its confidence in the company’s strategic direction, strong financial performance, and robust liquidity position. Aristocrat’s proactive moves into the RMG sector and recent acquisitions have strengthened its market position and growth prospects, underpinning Moody’s positive assessment of the company’s creditworthiness.