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Gaming Guru

Richard N. Velotta

Aristocrat Enjoys Record Earnings

22 February 2005

The Australian parent company of Las Vegas-based Aristocrat Technologies Inc. reported record revenue and earnings for 2004, company executives said in a conference call today.

Aristocrat Leisure Ltd. also forecasts continued growth thanks to its improved market share position in Macau.

"Our success in Macau was driven by the performance of our product," said Chief Executive Officer Paul Oneile. "At the Sands Casino (operated by locally based Las Vegas Sands Inc.), which opened last year, we now have almost 50 percent of the gaming floor. Our games continue to perform exceptionally well in Macau and this gives us confidence that our products will be successful in other Asia-Pacific and Asian markets as they open up."

An analyst with Deutsche Bank AG, affiliated with Deutsche Bank Securities Inc., raised the 12-month price target on Aristocrat from $11.70 to $12 today, based on the Asian outlook.

"We believe that the potential for favorable government regulatory reform could provide Aristocrat with significant opportunities within Singapore and Thailand," said analyst David Leslie in a note to investors about the company's Macau successes.

The company's North American unit also improved with revenue up 52.6 percent to $368.4 million for the year, thanks to an increase in recurring revenue machines up 92.2 percent to 5,294 units and game and platform sales up 35.8 percent to 12,312 units.

"We will continue to capitalize on our product performance," Oneile said. "We will be launching a number of exciting new Hyperlink products during 2005 on a participation basis and a number of new licensed products designed specifically for the American market.

"We will be launching our first video multisite progressive product. The first game to be launched will be 'Zorro,' which has proven to be very successful in Australia and other international markets," he said.

Oneile also said the company doesn't have a substantial share in North America -- Reno-based International Game Technology dominates the market. But the company looks at that as a growth opportunity.

"Historically, our share of key accounts has been substantially lower than our overall market share in the United States," Oneile said. "Growing our share in the majors represents a key opportunity for us to increase sales and visibility in that market."

Much of the growth would be driven, he said, by focusing on participation revenue games and by marketing the company's Mark IV platform, which Oneile said is still relatively new to the U.S. market.

For the year, Aristocrat Leisure reported earnings of $174.7 million, 36.8 cents a share (Australian), compared with $54 million, 11.7 cents a share, in 2003. Results are on revenue of $1.15 billion compared with $1.02 billion (Australian) in 2003.

Oneile said North American sales are trending toward low-denomination games. He said the company's casino management system has been installed in 180 casinos in the United States.