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Edited Transcript of ALL.AX earnings conference call or presentation 29-Nov-18 2:00am GMT

Full Year 2018 Aristocrat Leisure Ltd Earnings Call

NSW Dec 3, 2018 (Thomson StreetEvents) -- Edited Transcript of Aristocrat Leisure Ltd earnings conference call or presentation Thursday, November 29, 2018 at 2:00:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Julie Cameron-Doe

Aristocrat Leisure Limited - CFO

* Trevor J. Croker

Aristocrat Leisure Limited - CEO, MD & Director

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Conference Call Participants

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* Anthony Longo

CLSA Limited, Research Division - Research Analyst

* David Fabris

Macquarie Research - Research Analyst

* Donald N. Carducci

JP Morgan Chase & Co, Research Division - Analyst

* Larry Gandler

Crédit Suisse AG, Research Division - Director

* Mark Wilson

Deutsche Bank AG, Research Division - MD, Co-Head of Company Research Australia and NZ, and Analyst

* Matthew H. Ryan

UBS Investment Bank, Research Division - Executive Director and Research Analyst

* Nicholas Caley

Baillieu Holst Ltd, Research Division - Research Analyst

* Nick Basile

Goldman Sachs Group Inc., Research Division - Research Analyst

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Presentation

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Operator [1]

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Thank you for standing by, and welcome to the Aristocrat full year results briefing conference call. (Operator Instructions) .

I would now like to hand the conference over to Mr. Trevor Croker, CEO and MD. Please go ahead.

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Trevor J. Croker, Aristocrat Leisure Limited - CEO, MD & Director [2]

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Good afternoon. Welcome to Aristocrat Leisure Limited's financial results presentation for the 12 months to 30th September 2018. My name is Trevor Croker, Chief Executive Officer and Managing Director of Aristocrat. It's a pleasure for me to be presenting today along with Julie Cameron-Doe, our Chief Financial Officer as well as other members of our executive leadership team, both in the room and on the line. Thank you all for joining us.

Before we begin, please note the usual disclaimer statement on Page 2 of our investor presentation pack. Full details of the results are contained in the operating and financial review document released this morning. In today's session, we'll speak the result highlights while also touching on business strategy and our expectations for the 2019 fiscal full year before opening the line to Q&A.

For clarity, all references to prior corresponding period, or PCP, represent the 12 months to 30th of September 2017. Normalized results referred as the reported results, excluding the impact of certain significant items and adjustments, namely contingent retention, fair value adjustments of deferred revenue and expenses relating to both acquisition and integration of Plarium and Big Fish during the reporting period.

Moving now to an overview of Aristocrat's performance for the 2018 fiscal year on Slide 4. Normalized profit after tax and before amortization of acquired intangibles, or NPATA, of $729.6 million represents growth of 34% in reported terms and 33% in constant currency. This compares favorably to the $543 million delivered in the prior 12-month period to 30th of September 2017.

Revenue increased more than 47% to over $3.6 billion; and earnings before interest, tax, depreciation and amortization, EBITDA, increased 33% compared to the PCP to $1.3 billion. In constant currency, revenue was up over 46%, and EBITDA increased more than 31%, reflecting strong Gaming Operations momentum. This was partly offset by lower Digital margins reflecting the impact of lower margins in social games, in line with our expectations and sustained investment in design and development or D&D.

Normalized fully diluted earnings per share before amortization of acquired intangibles of $1.141 represents a 34% reported increase compared to the PCP. Normalized operating cash flow of almost $1 billion was generated in the period. Pro forma net gearing reduced to 1.7x at 30th of September from 2.2x at the announcement of the Big Fish acquisition in November 2017, and 2x in our interim 31 March results.

Turning to dividends. The directors have authorized a fully franked dividend of $0.27 per share in respect of the 6-month period ended 30th September 2018. This represents an increase of 35% or $0.07 compared to the PCP and is reflective of the strong earnings growth and cash flows, together with continued improvement in gearing.

Total dividends for the 2018 financial year of $0.46 per share are 35.3% higher than the PCP. The record date will be the 5th of December and the payment date will be the 19th of December 2018.

Aristocrat delivered a high-quality result in fiscal 2018, further extending our track record of organic growth across relatively flat markets, driven by an increasingly broad and competitive product portfolio together with effective execution and a focus on our customers. This result was boosted by our 2 digital acquisitions that made a positive contribution to the group, in line with our earlier expectations, including by adding to our earnings diversity. In fiscal 2018, the group delivered roughly equal revenues from gaming operations, outright sales and digital operations, with recurring revenues accounting for approximately 2/3 of the total group revenue. Over the course of the year, Aristocrat continued to drive hard for growth and to unlock fresh opportunities.

In Digital, as I mentioned, we completed the acquisition of both Big Fish and Plarium and are continuing to integrate these businesses. They have transformed our digital scale, coalescing an ecosystem of around 8.1 million daily active users and delivered a number of core digital capabilities we need to compete and grow into the future. We also maintained our focus on driving share growth across our core segments while entering attractive land-based adjacencies, consistent with our strategy and rigorous investment criteria. I'll touch on the status of some of these growth adjacencies later in the presentation.

I'd now like to make some content comments on Aristocrat's D&D investment, turning to Slide 5. D&D is our top investment priority at Aristocrat, it underpins our competitiveness in our ability to deliver high-quality, sustainable performance. Investing in technical and creative talent and technology is a core growth enabler, helping us to defend and expand our existing leadership positions while also ensuring we're positioned to unlock priority adjacencies. Today, our global D&D team represents around half of our total employee base of approximately 6,100 people. Over the 2018 full year, D&D investment increased $145 million or 54% to $414 million. This equates to 11.4% of revenue, which represents an increase on the PCP but is broadly consistent with the 11% to 12% range of the business has allocated across recent years. This includes around $100 million of additional investment in our Digital businesses.

Aristocrat takes a pragmatic and valued approach to D&D investment, ensuring that funds are released to the extent and at the pace that ensures that they can be efficiently spent. This case-by-case approach means that investment levels will vary somewhat over time even as our commitment to fully funding D&D remains unchanged.

I'll now invite Julie Cameron-Doe, Aristocrat's Chief Financial Officer, to take us to highlights of our group results on Slide 6. Julie?

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Julie Cameron-Doe, Aristocrat Leisure Limited - CFO [3]

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Thank you, Trevor, and good afternoon, everyone.

I'll first step through the composition of Aristocrat's reported, normalized NPATA performance of $729.6 million reconciled to the PCP. It is notable that of our overall 34% growth in NPATA, 17% was driven from existing businesses, 12% came from acquisitions and the remaining 5% from our lower effective tax rate.

Our Americas business delivered another strong performance, leveraging the momentum recorded in the first half. Profit improved $80 million on the PCP, largely reflecting outstanding Gaming Operations performance. The ANZ business delivered a record result, driven by a strong portfolio of games, market-leading cabinet and a significant lift in conversions, and that profit improved $11.5 million compared to the PCP.

The Digital business delivered over $186 million in incremental profit compared to the PCP, driven by organic growth and the acquisitions of Plarium and Big Fish during the FY 2018 year as Trevor referenced. In the international Class III segment, post-tax profit declined $8.3 million compared to the PCP as the business cycled over a concentration of openings in the first half of the prior year.

Corporate and interest costs increased by almost $32 million compared to the 12 months to the 30th of September 2017, taking into account the incremental funding of acquisitions. This was partially offset by lower corporate costs, including lower one-off consulting costs despite the business becoming significantly more complex and diverse as a result of rigorous cost control. Increased D&D costs of $96 million versus PCP reflected a commitment to invest for future growth as our first priority as Trevor mentioned. A decrease in the group's effective tax rate from 32% to 28.9%, reflecting recent U.S. tax reform, combined with the change in geographic business mix following the acquisitions, drove the $37 million profit benefit. Favorable foreign exchange movements, primarily reflecting a weaker Australian dollar, boosted profit by a further $7 million compared to the PCP.

We've taken Plarium and Big Fish results from their respected acquisition dates of 19th of October 2017 and 10th of January 2018, respectively, presenting the numbers as if there'd been no change in ownership. We're also providing additional transparency to reconcile the normalized and reported results for the year. Normalized NPATA includes around $37 million in post-tax adjustments for significant items, including contingent retention, transaction and integration expenses, and around $38 million post-tax adjustments in relation to the fair value of deferred revenues. A detailed reconciliation is provided as an appendix to this presentation and is consistent with the interim results.

Finally for clarity, I will reiterate the information we provided at our half-year results of the adjustments we've made with respect to the fair value of deferred revenue. This is a function of the acquisitions we've made and treatment of accounting standards. This revenue was not recognized by the previous owners of Plarium and Big Fish and cannot be recognized by the new owners. Therefore, on a statutory basis, our revenue is lower by this amount.

You'll see in our Digital segment reporting that we present a reconciliation of bookings to revenue. Had we not made these fair value adjustments for deferred revenue, this difference would have been significantly higher and not representative of the typical ongoing deferrals we expect to see. Although this is a noncash item and differs to the IFRS treatment applied in our financial statements, we believe this better represents the true underlying performance of the business and enables us to align with how our revenue will be reported in future periods.

Turning now to Slide 7. Aristocrat's balance sheet was, of course, significantly influenced by the largely debt-funded acquisitions of Plarium and Big Fish. As previously noted, net debt of around $2.45 billion compared to net debt of around $2.6 billion reported in March 2018, representing a pro forma leverage ratio of 1.7x versus 2.2x in the prior corresponding period. The significant increase in noncurrent borrowings relates to debt funding of recent digital acquisitions, which were drawn from the group's Term Loan B debt facility. During the period, the company repaid USD 165 million of debt, including USD 150 million of optional repayments, reflective of the company's prudent approach to capital management.

We continue to be comfortable with Aristocrat's net gearing position, given the business's free cash flow generating capability and track record of deleveraging. Aristocrat also maintains a disciplined focus on risk management with stable credit ratings but are aligned to our level of gearing and support our Term Loan B facility arrangement. We believe this provides Aristocrat with financial certainty, competitively priced finance and flexibility going forward.

Normalized operating cash flow of $988 million, represents an increase of more than 23% on a reported prior year comparative. We're pleased with the improvement delivered since the first half result of $302 million, following the return to Australian tax payments and the compressed timing of North American sales around the half year period end. The return to Australian cash tax status has also allowed us to fully frank this year's dividend.

Finally, capital expenditure increased 26% from $214 million to $269 million compared to the PCP. Around 55% of total capital expenditure reflects the investment in hardware required to support growth in the North American Gaming Operations installed base. This is expected to continue to drive high-quality recurring revenue stream and unlock new opportunities in attractive adjacent segments over time.

Turning now to Slide 9. This slide highlights Aristocrat's strong cash flow generation capability and explains the movement in net debt. Aristocrat generated $1.3 billion in EBITDA for the period after self-funding with significant increase in D&D and User Acquisition, or UA, costs during the period.

Working capital improvements totaled $69 million, with a strong improvement evident over the second half of the year. We would expect some working capital investment in 2019 on the back of new product releases across existing markets and with respect to adjacent opportunity. As I mentioned, 55% of our CapEx spend supported growth in our North American Gaming Operations installed base. The residual CapEx spend related to investment in business capability, including IT and leasehold improvements. Strong free cash flow generation and balance sheet management allowed us to fund the 2 major digital acquisitions during the year at a total cost of slightly more than $2 billion, with the inclusion of $107 million in pretax acquisition-related items as explained on Slide 6.

In their first year, pro forma EBITDA from both acquisitions approximated USD 140 million or around AUD 185 million. This contribution, together with the broader strategic benefits we will derive from the acquisition, including scale and new digital capability, are in line with our expectations. The business has maintained its approach of seeking to grow dividends over time with almost $250 million in dividends paid to shareholders during the 2018 fiscal year.

FX translation on net debt amounted to an increase of $221 million. Our U.S.-denominated debt serves as a natural hedge to our offshore businesses. Whilst Aristocrat is a net beneficiary of a strong U.S. dollar at an NPATA level, a stronger U.S. dollar adversely impacts the net interest expense line. Finally, with a closing net debt balance of $2.45 billion, I would stress that Aristocrat has the financial flexibility to support our growth strategy.

That concludes the summary of group performance highlights. I will now pass back to Trevor to comment on operational performance and outlook for the 2019 fiscal year. Trevor?

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Trevor J. Croker, Aristocrat Leisure Limited - CEO, MD & Director [4]

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Thanks, Julie. I'll now share more detail about operational results in key markets and segments, beginning with the Americas on Slide 11.

In local currency, Americas revenue increased around 13% and profit lifted 16% to $1.2 billion and approximately $650 million, respectively, over the reporting period compared to the PCP. Margins expand 140 basis points to 53.1%. North American Gaming Operations continued to drive strong growth, with our Class III premium gaming operations footprint expanding by around 25% to over 20,000 units at period end, driving further share growth in a relatively flat market. Performance was fueled by penetration of leading hardware configurations, including the Arc Double, Helix and RELM XL cabinets, together with top performing proprietary titles such as Lightning Link, Dragon Link, Buffalo Grand and 5 Dragons Grand. The total gaming operations installed base increased over 15% to 44,000 units at period end.

Aristocrat continues to receive outstanding customer feedback in North America, ranking as the leading gaming equipment supplier consistently across a number of casino customer surveys. The most recent EILERS-FANTINI quarter 3 slot survey recognized Aristocrat as having 14 of the top 25 premium leased games in North America, including all of the top 5 titles. Further, Aristocrat was ranked #1 for game performance and took 9 of the top 15 spots in the list of most anticipated premium leased games, including blockbuster licensed titles such as Mad Max, Game of Thrones 2, Walking Dead 3, WESTWORLD and Madonna. And for the fifth year in a row, Aristocrat was named top game supplier at this year's G2E Trade Show. Going forward, we expect our Class III premium gaming operations installed base to benefit from a strong product pipeline targeted at the segments. In particular, we see further potential in Class III premium gaming operations supported by a strong product portfolio across a diverse range of product segments.

In Aristocrat's core game segment, we'll be targeting further growth opportunities with Dragon Link through Dragon Link games and RELM XL content across all denominations, including Buffalo and Liberty Link titles. In Class II gaming operations, VGT's installed base grew 8.1% to 24,264 units compared to the PCP. This was driven by the ongoing success of the Ovation video product and penetration into new gaming jurisdictions outside of Oklahoma.

Average fee per day across the combined Class II and Class III gaming operations footprint increased 2.2% to $51.81 per day. In Class III outright sales, revenue increased 4.7% compared to the prior corresponding period. The business held ship share and margins across an increasingly competitive landscape. Whilst the average sales price declined moderately compared to the PCP, ASP remained above the industry average. This reflects Aristocrat's premium offer, competitive game performance and the introduction of new hardware in Helix XT and Helix Tower in the back half of the year. The business continues to focus on updating and broadening our hardware offer in order to add value to customers and drive growth.

Performance has been strong, as reflected in recent EILERS-FANTINI surveys, with innovative titles including the Link Progressive Gold Stacks 88 Game, Dancing Foo and the new Wonder 4 extension Wonder 4 Boost. We'll continue to support all cabinets with content on Helix+ and ARC, including Mighty Cash and the Wonder 4 series.

Our North American systems business delivered a strong year of growth as we strive to partner more closely with major customers. During 2018, the business executed 23 new installs with Oasis 360. We also signed a long-term partnership with Boyd Gaming, under which Aristocrat will become the sole consumer and management service provider to Boyd's 29 locations, with rollout expected by the end of 2020.

Overall, our largest market, North America, delivered another very strong result over the 12 months to 30th of September 2018, with a broadening and high-performing cabinet and game portfolio driving profit and margin growth. Aristocrat's land-based operations now accounts for around 53% of total segment profit.

We've also made many meaningful progress in leveraging our momentum and capabilities to grow into attractive adjacent segments in North America. I'll now provide an update on highlights across our priority adjacencies and new growth markets on Slide 12.

Our strategy across the land-based business is to defend our market-leading positions while pushing to grow in attractive, high-value segments where we have no or little presence and can offer a point of differentiation to customers. Over the course of 2018, we're focused on expanding our gaming operations capability and now participate in all the major segments of that market in North America, including Class III stepper, both for sale and gaming operations, and Class II video. As a result, we have a stronger, broader portfolio and larger addressable market opportunity before us, with exciting scope for further growth and despite relatively mature market dynamics.

Aristocrat's Class II video product, Ovation, continues to perform well and build momentum. At period end, over 3,650 Ovation units were placed, contributing to the higher overall gaming operations performance for the period compared to the PCP. New hardware configurations were introduced to support the momentum. Going forward, the Class II gaming operations installed base will benefit from the launch of additional games, including the licensed title Professional Bull Riders and a portfolio of new proprietary games and the additional hardware configurations on Arc Single and Helix cabinets. Growing our Class II video footprint is part of our strategy to ensure the VGT business is able to generate both yield and growth over the long term.

Turning now to Class III gaming operations, stepper. During the reporting period the business continued to build out a strong game portfolio to support the new RELM XL cabinet. We successfully launched key titles, including Buffalo Inferno and Buffalo Thundering 7s, which drove pleasing performance and good customer feedback. While they're still relatively early days, we are encouraged by the performance of the RELM XL units and confident of building on this base.

At the same time, our for-sale Class III stepper, the RELM, has had the slowest start and is behind expectations. We're continuing to refine the game portfolio with over 20 titles approved and some strong performance evident in high-denomination products, particularly Diamond Jewel, Cherry Riches and our Triple 7 Wildfire series.

Our video lottery terminals, or VLT, business is another important adjacent market opportunity in North America that Aristocrat has been investing to unlock. We're approaching the end of a 6-month trial with the Atlantic Lottery Corporation in Canada. Aristocrat is cautiously optimistic that early conversions will take place in the first half of financial year 2019. We're also looking at entering trials in Manitoba this year. We look forward to continuing to strengthen and prove out our VLT offer as we work to establish and then build a presence in this attractive market.

Turning now to Slide 13 and the ANZ international Class III results. The ANZ business delivered another record performance, with profit increasing 8.9% and revenues increasing 5.5% to $207 million and $455 million, respectively in constant currency compared to the PCP. Average selling price improved marginally, up less than 1% to $20,487 compared to the $20,348 achieved in the prior corresponding period, driven through sustained sales mix of the Helix+ product family of cabinets. Segment profit margins increased 150 basis points to 45.6%, up from 44.1% in the PCP. This was driven by product mix and the expansion of the ACCESS subscription model, which has also supported strong growth within conversions.

The business also continued to offer more flexible customer solutions through the period with an increase in long-term buying programs for strategic accounts and bundled offers. The ANZ business extended its market-leading ship share performance during the period, driven by the high-performing Helix cabinet range and further penetration of Dragon Cash and Dragon Link product families, with additional games along with the introduction of Player's Choice Emerald and Opal, 5 Dragons Empire and Fantastic Jackpots.

The Helix+ continued to be the cabinet of choice for our games whilst the Helix XT is gaining traction as a differentiated cabinet, supported by an expanding game portfolio. In Macquarie's Australian slot manufacturer report for August 2018, Aristocrat Games again occupied a large majority of the top spots across New South Wales, Queensland and Victoria. We also continue to invest in innovation whilst aggressively defending our worthy assets in ANZ markets. The ANZ team continue to focus on customer-centric improvements to systems, processes and culture while reflecting our belief in the ongoing robustness of this market.

In summary, the ANZ business delivered a strong result for fiscal 2018, defending its market-leading share position and growing earnings in largely flat markets. Once again, this result reflects Aristocrat's competitive and top-performing game in cabinet portfolios, product innovation and customer-focused sales execution.

Turning now to the international Class III segment. International Class III revenue and profit decreased 6% and 11%, respectively, to $202 million and $100 million compared to the PCP as the business cycled over a concentration of new openings in Macau, the Philippines and South Africa. Underlying performance remained strong across the segment, driven by continued penetration of Lightning Link across the Asia Pacific region. As referenced earlier, the business is focused to shift away from casino openings in line with market maturity and more towards working with customers to optimize floors. This trend is expected to continue into FY '19. Mighty Cash, Aristocrat's innovative linked progressive title was launched in the Asia Pacific during the period, and we're encouraged by its strong early performance.

I'll now provide more detail on performance in our Digital gaming segment.

As previously flagged, the Digital business grew significantly over the course of the reporting period supported by strong organic and inorganic growth. Segment margins moderated to 32.8% due to a more diverse portfolio that included acquired lower-margin social games, and also reflecting significant marketing investment during the period. Investment was directed behind new product launches, including FaFaFa Gold, Family Zoo, Lightning Link and the growth of Cashman Casino, Vikings and Cooking Craze.

In U.S. dollars, total portfolio of bookings increased over 245% to just over $1 billion. Segment profit grew 172% to $330.8 million, driven by acquisitions, and with Product Madness, the ongoing performance of Heart of Vegas, Cashman Casino, and the early success of the Lightning Link app.

As mentioned earlier, the acquisition of Plarium and Big Fish have provided the group with significant scale. We now have a sizable digital ecosystem with daily active users, or DAU, of 8.1 million spread across Product Madness with 2 million; Big Fish at 3.6 million; and Plarium at 2.5 million users.

Plarium and Big Fish have introduced a diverse portfolio of customers and products that monetize differently to Aristocrat's established Digital business. This, along with the launch of new games in the period, impacted average bookings per daily active user, or ABDAU, compared to prior corresponding periods. The business remains focused on great content, customer acquisition and retention.

By genre, the social casino DAU across Product Madness and Big Fish comprised around 2.6 million DAU. Social casino bookings of approximately $570 million was up 94%. This reflected ongoing growth in Product Madness and the inclusion of Big Fish's social casino apps. Social casino bookings represented 56% of total digital bookings in FY 2018.

Cashman Casino, Heart of Vegas, FaFaFa Gold and the newly launched Lightning Link app contributed $395 million in bookings, an increase of 35% over the PCP, with Cashman Casino and Lightning Link continuing to scale. The launch of FaFaFa Gold and Lightning Link in fiscal 2018 reflected Product Madness' successful multi-app strategy.

Across social casino, Product Madness' results were further boosted by the inclusion of Big Fish Casino and Jackpot Magic Slots.

Social gaming includes the social games of Plarium and Big Fish, with Big Fish cooking -- within Big Fish, Cooking Craze has quickly scaled with -- from a performance partially offset by maturing titles such as Gummy Drop! and Fairway Solitaire.

In line with our commitment to provide pro forma performance information on Plarium and Big Fish during the first year of their Aristocrat ownership, Slide 15 sets out key pro forma revenue metrics to give you a guide as to the performance we have -- had we owned the business for the full 12-month period.

Turning first to Plarium. Strong performance during the year across Vikings and the new games such as Family Zoo, Lost Island and Alliance, was offset by the performance of online and mobile legacy games, driving a reduction in bookings of 2.1% compared to the prior corresponding period. New releases launched during the period reflect of the strategy of attacking multiple genres and the management of their legacy mobile games.

Growth in mobile was achieved with higher-quality DAU. As a result of the decrease in legacy mobile games, total DAUs declined by 7.4% compared to the prior corresponding period. The business is investing strongly in new game development and UA spend. Lost Island has been globally launched and raved, and RPG or role-playing game in the Vikings-style genre is currently in soft launch. We also anticipate a number of additional Plarium games to be tested in the market through 2019.

Now turning to Big Fish. Big Fish bookings grew 8% compared to the PCP on a pro forma basis. This was driven by the renewed focus on social casino and the scaling of new social gaming titles, including Cooking Craze. DAU over the same period were approximately 3.6 million, 10% lower than the PCP, reflecting the maturing of games such as Gummy Drop! and Fairway Solitaire and games from its browser title range.

Across the year, Big Fish social casino, Big Fish Casino and Jackpot Magic Slots continue to perform strongly with increased monetization despite a modest decline in DAU. Further innovation is planned to drive user retention and monetization over the coming period.

Social casual revenues also increased during the reporting period despite a 12% decline in daily active users, supported by shifting UA spend from mature to scaling titles.

In July 2018, we appointed Jeff Karp, a former EA SPORTS, Zynga and GSN Games executive to lead the business. Jeff and his team have since completed a significant restructure focusing Big Fish on developing fewer, bigger and better games, and introducing greater rigor and strategic clarity across core processes. Big Fish is focused on growing leadership positions across the social casino and games -- casual games genres and has active investment plan with new games launches expected to be phased across 2019.

So in summary, we believe we have the leadership, the capability, scale and opportunity to build a robust portfolio of digital games across social casino and key social games genres. We will invest in the near term to build diversity by genre, genre by geography, mitigating volatility and driving long-term, sustainable performance of our Digital business. Whilst it's early days, as a group, we're learning a lot from each of the acquisitions. This is allowing us to build strong foundations, skills and capabilities so that we can grow in a measured and long-term manner. One example of this is utilizing Plarium's marketing engine and implementing it across all digital businesses, allowing us to leverage our newfound scale.

Going forward, our Digital priorities remain largely unchanged. They include: a strong focus on continuing to attract and retain the best digital talent as an employer of choice; continuing to get smarter and more data-driven in terms of maximizing impact of UA spend, which is the Digital business' largest and most variable cost driver; investing to enhance our live ops capability and embed this across all of our applications; improving our technology infrastructure to more effectively support our current business and facilitate growth; and driving best practice portfolio segmentation and management, including a better phasing of new games and optimum management of maturing titles.

We continue to see outstanding potential in our Digital business and see it as a critical contributor to overall group diversity, long-term growth and performance sustainability.

Turning now to outlook for the 2019 fiscal full year on Slide 16. Aristocrat anticipates continued growth in 2019 fiscal year, reflecting the following.

In land-based outright sales, we expect incremental gains in attractive North American adjacencies in addition to maintaining market-leading share positions across key for-sale segments globally despite relatively flat markets and increasing competitive pressure.

In land-based gaming operations, we expect expansion across our total gaming operations installed base, leveraging our broadening portfolio while maintaining market-leading average fee-per-day performance.

Further growth in digital bookings, supported by new game releases with a significant increase in user acquisition investment of around $100 million as we drive a diversified digital portfolio and fully leverage the potential of our Digital footprint.

We anticipate lifting D&D investment across our land-based and Digital portfolio in absolute dollar terms while remaining broadly in line with the PCP as a percentage of sales.

We anticipate moderate growth in corporate costs as we build the appropriate infrastructure to grow a more complex and diverse business.

We expect a further 100 to 150 basis points reduction in the group's tax effective rate over the financial 2019.

And finally, our expectation is that results will be skewed to the second half of the year, reflecting the timing of Digital game releases and corresponding UA investments.

As we draw to the end of the formal presentation and prior to moving to Q&A, I'd like to recap on the shape of our result for the 2018 full year.

We are very pleased to have delivered a record NPATA outcome, with a strong 34% lift in profit compared to the PCP. 17% was driven from existing businesses; 12% came from the acquisitions; and the remaining 5% driven by our lower effective tax rate.

We believe the significant increase in total dividends declared for the year represents an appropriate reward for shareholder support.

North America segment grew. Growth was driven by an outstanding performance in Gaming Operations and market-leading fee per day and the successful maintenance of ship share in an increasingly competitive outright sales market. Similarly, a record profit result in ANZ reflected to our success in maintaining our market-leading share position with great games, differentiated hardware and enhanced customer service.

We executed a step change in our digital business with further growth in Product Madness and the benefit of 2 significant acquisitions contributing almost 1/3 of group segment profit over the period.

Aristocrat increased investment in D&D and innovation. We're spending up more than 50% in absolute terms, and a firm commitment to sustaining our growth engine.

We have a strong and flexible balance sheet capable of supporting our growth strategy. Finally, we are well placed to deliver continued growth in the 2019 fiscal year.

With that, I'll conclude the formal presentation and open the line to any questions. Thank you.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Your first question comes from Don Carducci from JPMorgan.

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Donald N. Carducci, JP Morgan Chase & Co, Research Division - Analyst [2]

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So just 2 quick questions for me. My first one, can we get any more clarity on the strategy for where any additional UA spend is being allocated and what the expected payback period in months would be?

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Trevor J. Croker, Aristocrat Leisure Limited - CEO, MD & Director [3]

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Yes. Thanks, Don. I will -- so we have an expanding portfolio of genres. And the first part here is we've got a portfolio in Product Madness, which is a mature portfolio with 4 very good apps in that. And we continue to understand our investment and returns on our social casino business. In the Plarium business, we are entering more genres. So we're moving from being just a strategy MMO into RPG and casual, and that's increasing the number of apps that will be released over the year. And that will require UA investment. And in Big Fish, we've got the 2 apps that you're aware of at the moment, and then we'll look to increase our applications in the casual space as we enter and broaden out our portfolio in the Big Fish casual games space. The UA will be spent around launching into those genres. And what we'll be doing is we'll also be cutting UA. So as we referred during the script, we are working back through our apps, and we're actually cutting UA. And that was part of our investment thesis as we bought into digital was to reallocate and put financial rigor behind our UA investment. And therefore, we've got a much closer understanding of each of the genres, which has a different return profile than our existing just social casino. And also we've used the marketing engine from Plarium, which has increased our capacity and our ability to understand UA investment, CPI, LTV and to invest and deploy the UA at the right rates for the right returns. So we have clear performance metrics that we look at each month. We actually look at them by week. But we look at them effectively each month to make sure that we're hitting our metrics and the returns are appropriate for the investments we're making. And the good thing that we've learned through these M&As is that we've been able to take the initial learnings we had at Product Madness and broaden that skill set and create greater capability. As far as returns go, the returns on social casino are shorter because it's easier and far easy to predict than the LTV and CPI are known to us. They get longer as you move into casual, and therefore, we've staggered the launch of apps, and we need to invest initially early in the year for the UA for the number of launch of new games and soft launch games that we've already got in the market now.

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Julie Cameron-Doe, Aristocrat Leisure Limited - CFO [4]

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I might add to that, Don, that although the increases of the order of magnitude of $100 million, as a percentage of the Digital revenue, it remains broadly consistent with the historic performance.

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Donald N. Carducci, JP Morgan Chase & Co, Research Division - Analyst [5]

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Okay, great. And then my last question -- so on the skew in first half, second half for '19 that you're expecting, can you kind of give us a little more clarity on what type of percentage you'd be expecting? Because I would imagine there'd also be maybe some first half tailwinds from northern hemisphere and winter month game play that should assist you. So just kind of curious, a little bit of clarity around what percentage we should expect.

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Trevor J. Croker, Aristocrat Leisure Limited - CEO, MD & Director [6]

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I'll let Julie talk to the piece, but look, northern hemisphere, we don't have a -- we don't have a big -- we have exposure in the northern hemisphere, but we've also got a business that runs across the globe as well. So it's not necessarily just northern hemisphere that will change that, but I'll let Julie talk more around her guidance.

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Julie Cameron-Doe, Aristocrat Leisure Limited - CFO [7]

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Sure. I'm not going to give a specific percentage for half 1 and half 2, but what I would is say is even if you just look at our land-based business, given we have a growing Gaming Operations installed base which grows throughout the year, there's a natural skewing from H1 to H2 there as we anticipate that growth. And then that -- in addition to that, we get the exacerbation from the launch of new games in digital, which -- there'll be more being launched in the first half than the second half with a corresponding increase in user acquisition, which doesn't all pay back in the first half. And that's really what's driving that skewing.

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Operator [8]

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Your next question comes from Matt Ryan with UBS.

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Matthew H. Ryan, UBS Investment Bank, Research Division - Executive Director and Research Analyst [9]

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I've got some questions about the UA spend as well. There seems to be a little bit of confusion in the market, so I just want to clarify to start with. The additional $100 million, is that in addition to what you would normally spend as a percentage of revenue? I think you just mentioned a minute ago that it would be actually quite consistent even after you incorporated that additional spend.

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Julie Cameron-Doe, Aristocrat Leisure Limited - CFO [10]

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Yes, it's consistent, Matt. So the $100 million is not over and above that. With the $100 million included in, in FY '19, we'll remain consistent as a percentage of our digital revenue.

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Matthew H. Ryan, UBS Investment Bank, Research Division - Executive Director and Research Analyst [11]

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Yes. So I guess industry standards some of those can be quite volatile with somewhere around 25% of revenue as UA spend. I think you've sort of said previously you were spending about $350 million, which I guess on a base of $1.4 billion is almost exactly 25% as well. So I guess just in very simple terms, if we're looking at consensus for next year, there's about $500 million of increased digital revenue coming through. So with a very simple way to look at that would be 25% of the incremental $500 million is what you'd anticipate to spend on UA spend?

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Julie Cameron-Doe, Aristocrat Leisure Limited - CFO [12]

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I'm not going to pinpoint -- I can't get down to the exact granularity there, Matt, but I would say that you're not far off with the percentage of revenue you indicated.

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Matthew H. Ryan, UBS Investment Bank, Research Division - Executive Director and Research Analyst [13]

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Yes, okay. So it seems like it's already factored in. So I guess just in regards to the margins, there's obviously some outcomes which could come through. But is it fair to say that margins are coming down in digital, I guess, into '19? And maybe to counter that question specifically, if you could just talk to the mechanics of, I guess, what's changing further out, how lumpy I guess are these investments that you're making in '19?

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Trevor J. Croker, Aristocrat Leisure Limited - CEO, MD & Director [14]

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Yes. Thanks, Matt. First of all, we understand the social casino business quite well. We've been in it for a number of years, and we've also -- through the acquisition of Big Fish, it's given us more clarity and more visibility of social casino. So we feel comfortable around the margins and the way we operate our social casino business. As I said earlier, our social casino business is about 56% of our Digital business, so we have very good line of sight understanding the margins. And you -- and everyone will recall that we have had very high margins in our social casino business. We're going to continue to invest in that business because we know the returns and know what it's worth and how to make it successful. The casual games business is a little bit less -- well, it's less margin, the casual games business. It's a smaller margin product. It's a different type of player, different type of consumer. But the work that we're doing is that we're targeting the segments and the genres where we believe we have the capability and the skills and also areas where we understand the metrics. So we are in Match 3, we are in cards, we are in those genres already, and we understand those metrics. And we're investing against those metrics. And we feel that the margins that we're getting are the right margins. We will look to continue to work on that, but the -- we understand the casual business -- the casino business margins and the way to operate to drive growth and we will now work with casual the same way that we have and establish benchmarks and investment to manage for the future.

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Matthew H. Ryan, UBS Investment Bank, Research Division - Executive Director and Research Analyst [15]

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Okay, great. And then just one quick one on the cost to additions in the U.S., so very, very strong in the second half. I mean just any additional color you can sort of talk to there?

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Trevor J. Croker, Aristocrat Leisure Limited - CEO, MD & Director [16]

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Yes. No, we're very proud of that. As you know, that product is a new introduction and it's certainly been great growth to our VGT business. The way I would characterize it is that growth has come from 14 new tribes that we haven't done business with in the past, and they've got 20 -- across those 14 tribes, there's 20 new casinos that are now containing VGT product predominantly outside of Oklahoma. So we are now growing our business outside of Oklahoma whilst maintaining a very strong footprint in Oklahoma. And it's a -- it was a good result for our business. And the product portfolio that we've got coming through is the right product portfolio and solution to that market as well.

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Operator [17]

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Your next question comes from Nick Basile with Goldman Sachs.

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Nick Basile, Goldman Sachs Group Inc., Research Division - Research Analyst [18]

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Just a question on digital. First off, could you just confirm the revenue growth number that you quoted there for Product Madness was 35% in the full year?

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Trevor J. Croker, Aristocrat Leisure Limited - CEO, MD & Director [19]

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Yes, that's correct. In social casino, Product Madness grew 35%. In social casino for Big Fish, it grew 21%. Both of those were well ahead of category growth rates.

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Nick Basile, Goldman Sachs Group Inc., Research Division - Research Analyst [20]

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Perfect. And in terms of that revenue growth, it seems that the DAUs as a component was broadly flat with the first half. Could you perhaps describe what is happening there? Is it more of the fact that you are doing a soft launch for Lightning Link? Or is there something going on in the market where potentially the number of users is starting to slow in terms of the industry more broadly?

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Trevor J. Croker, Aristocrat Leisure Limited - CEO, MD & Director [21]

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Yes. So I think this is where you look at it from a portfolio point of view is the number of DAU that we've got across our portfolio. And retaining players within the apps is an important part of what we do. There has been a declining DAU across some of the apps, but at the same time our core apps remain solid. We have, as we referred to during the presentation, reduced investment. And so when you reduce investment, you take UA costs out, your DAU declines and you get a tailwind or runoff from a profit point of view. And that's a -- strategic decisions that are being made around the portfolio shape that we want for the future. And some of those legacy items that are not worth investing have got natural DAU decline, and we stopped our UA investment and they turned to more margin.

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Nick Basile, Goldman Sachs Group Inc., Research Division - Research Analyst [22]

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Sure. And just a question on some of those new games you've launched across, I guess, Product Madness and Plarium, Lightning Link Casino and Lost Island. How are you thinking about the ramp-up of those games in the next 6 months? And is it fair to say if you weren't launching more games in this next period, you wouldn't see as much seasonality as you're perhaps calling out first half to second half?

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Trevor J. Croker, Aristocrat Leisure Limited - CEO, MD & Director [23]

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Yes, thanks, Nick. I mean, you second point there is -- the hypothesis is right. UA drives growth in Digital, and if you're going to launch apps, you need to invest to grow those apps. And that's what UA is for. We've taken an approach to enter different genres and to continue to launch a portfolio. So this is about a portfolio of apps in the digital space, not just about one genre being just social casino. We're in social meta casino, and we're now into other genres, cards, casual, meta -- sorry, match, RPG and MMO for our strategy. So each one of those has investment requirements to be successful. So if we were not to put as many apps out there, we wouldn't spend as much UA is the right hypothesis, but we wouldn't get the growth that we want from those businesses. And we want the portfolio across those genres as we know that casual games are growing at about 12% compounded annual growth. Casino is growing at around -- or slightly higher than 10% compound annual growth, and we want to be part of that. And the other one I'd just add is we have Lost Island. You've been seeing the running Lost Island off the back end of '18. And that's now -- we're investing behind Lost Island into '19, and that's what we're currently investing in at the moment for growth. And there are a number of games that are currently in soft launch in various markets that we're looking -- that we're testing.

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Operator [24]

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Your next question comes from Anthony Longo with CLSA.

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Anthony Longo, CLSA Limited, Research Division - Research Analyst [25]

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Just a quick one on tax rate. So again, I just wanted to -- you guys have talked through the progress of potentially benefiting from lower U.S. rates in time. Understand that you mentioned that you're expecting another 154 bps improvement for next year. But what's sort of holding you back in terms of maybe even getting that rate to the mid-20s? And how long would you expect that to -- how long would you expect it to stay?

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Julie Cameron-Doe, Aristocrat Leisure Limited - CFO [26]

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Thanks, Anthony. Yes, on the effective tax rate, the improvement we're foreshadowing for FY '19 is purely the result of having a full year of the lower tax rate. So it's not taking into account any other changes in transfer pricing because that work continues -- is ongoing. So we're not going to fix ourselves with an arbitrary time frame on that because these things, to get them right, they do take time. It's a very complex area, and we want to get the right outcome for the business. Very conscious of our social license to operate as well. So I would ask that you give us the time to do it right, and when we have more information on it, we will come back to you with that.

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Anthony Longo, CLSA Limited, Research Division - Research Analyst [27]

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Yes, sure. Excellent. And then in terms of -- I guess looking at Product Madness again, I mean I've -- took a -- had a quick look at the numbers. And looking at the second half, I mean it's probably tied up on an earlier question, but are you able to get a sense as to how some of those new titles are monetizing versus what Heart of Vegas has done because it kind of feels like that's actually come backwards year-on-year and particularly on the second half?

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Trevor J. Croker, Aristocrat Leisure Limited - CEO, MD & Director [28]

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Yes. So we have been getting more growth out of Cashman and Lightning Link. And Lightning Link is scaling to around about the ABDAU that we expect to see from Heart of Vegas. And Cashman is slightly ahead of the ABDAU to Heart of Vegas. Both of those are scaling, and we're comfortable with the rates that they're scaling at. I think it's very little contribution realistically in '18 from Lightning Link given it was relatively late in the year that was launched, and we'll start to see more growth from that in the '19 period.

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Operator [29]

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Your next question comes from Mark Wilson from Deutsche Bank.

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Mark Wilson, Deutsche Bank AG, Research Division - MD, Co-Head of Company Research Australia and NZ, and Analyst [30]

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Thanks for correcting the presentation earlier. Just in relation to margins in the Americas. Surprised that margins were down 150 basis points second half on first half given the continuing growth in the Class III gaming ops installed base. What's going on with the cost line there?

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Trevor J. Croker, Aristocrat Leisure Limited - CEO, MD & Director [31]

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Yes, thanks, Mark. I'll ask Julie to take you through that detail, and appreciate the recognition.

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Julie Cameron-Doe, Aristocrat Leisure Limited - CFO [32]

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Yes. Thanks, Mark. Yes, we were pleased with our margin expansion over the course of the year, and remember that a lot of the reflection on the margin expansion in H1. When we look at H2, we have been investing upfront in these new adjacencies, where we need to have the organization in place to be able to commercialize these new adjacencies. In addition, we've had higher legal costs in defense of our IP, which it's one of the things that's very important to us. So there's been a number of factors contributing to that so -- but overall, we're very pleased with the margin, the level of 53.1% for the full year.

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Mark Wilson, Deutsche Bank AG, Research Division - MD, Co-Head of Company Research Australia and NZ, and Analyst [33]

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So if I look at the second half, the investments in the adjacencies, that would be coming through in the D&D line. Likewise, the legal costs are coming through in the corporate line, I would've thought.

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Julie Cameron-Doe, Aristocrat Leisure Limited - CFO [34]

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No, no, not always because where they're related to specific businesses, they stay within the business. And I'm not talking about D&D investment in the adjacencies, Mark. I'm actually talking about the organization we need in place to be able to commercialize those new opportunities. So for example, now that we have a much broader portfolio, we need a sales force and a service team that's capable of getting out there and executing on that. They have nothing to do with D&D, but they have to be ready to go in the second half of the year because we were ready to go with a number of those things. Unfortunately, they pushed out into FY '19 and they'll give us great momentum as we get into the first half of FY '19.

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Mark Wilson, Deutsche Bank AG, Research Division - MD, Co-Head of Company Research Australia and NZ, and Analyst [35]

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Okay. So how much was that investment, and how much was the labor cost that you incurred in the Americas division?

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Julie Cameron-Doe, Aristocrat Leisure Limited - CFO [36]

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We wouldn't go into that detail, Mark.

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Operator [37]

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Your next question comes from Larry Gandler with Crédit Suisse.

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Larry Gandler, Crédit Suisse AG, Research Division - Director [38]

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Apologies for belaboring the point around the user acquisition costs. How should I think about the margins next year in digital vis-à-vis the user acquisition costs if you think that, that UA is going to be directed at perhaps more casual and strategy and other non-casino genres? As I understood it, the returns on that sort of UA tended to be lower than casino. So if you're kind of increasing your UA costs at 25%-ish, why would we expect the revenue to grow at that sort of rate if the returns are lower?

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Trevor J. Croker, Aristocrat Leisure Limited - CEO, MD & Director [39]

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Yes, thanks, Larry. I'll make a couple of comments and Julie might make a little bit more detail. First of all, we know that UA dollar spend in social casino gets a bit -- much better return for us. So we definitely know that the UA spend of return is better. So it's not that we will be spending a lot more in casual. We'll be spending money in the social casino business. As I said, it's 56% of our revenue. So we'll continue to invest in cash in social casino, and we know what that looks like. We are planning to release new apps in casual genre, but we also have a very rigorous and structured approach into what we invest into each genre and making sure that it becomes -- and it's viable, and that the return on investment and the criteria for return on investment are set before we go to market, not set as we get into market or as we respond. So it's not a case of -- it's definitely going to be dilutive. We've got an understanding of what it means for our casual casino business and how to invest and that returns very well because it's a flexibility to invest in casual games as we look to grow those and to broaden our portfolio. And each one of those casual genres gives a different return from a UA point of view.

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Julie Cameron-Doe, Aristocrat Leisure Limited - CFO [40]

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Yes, Larry, I'm not sure I'm going to be responding exactly to the question with this. But I suppose the way we look at this is we look at the lifetime when we're doing user acquisitions. And the lifetime is not really a function of the arbitrary fiscal year where we're spending the UA dollars. So from a modeling perspective, when we look at this, the way we allocate our cash is we look at a proportion of revenue that we feel comfortable allocating to user acquisitions. And that is remaining consistent.

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Larry Gandler, Crédit Suisse AG, Research Division - Director [41]

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Okay. Yes, I understand. And I think one of the messages that you gave, if I can just paraphrase it, is the UA spend will be perhaps similar in mix with regards to your revenue. So ex percent on casino, ex percent on casual will be similar to your revenue?

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Julie Cameron-Doe, Aristocrat Leisure Limited - CFO [42]

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Yes, I think that's fine.

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Trevor J. Croker, Aristocrat Leisure Limited - CEO, MD & Director [43]

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Correct.

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Larry Gandler, Crédit Suisse AG, Research Division - Director [44]

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Okay. And just, Julie, while I've got you on, cash flow is very strong, but it looked like there was a lift in payables. Is that a matter of timing? Or is that sort of a structural change in the way you're managing suppliers?

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Julie Cameron-Doe, Aristocrat Leisure Limited - CFO [45]

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Listen, there's no structural change there. There was a very significant -- strong focus on cash management throughout the period which certainly helped. I think the fact that we now have a sizable digital business as part of our mix is helping because it's very light in terms of working capital, no inventory, no long terms with customers. So that certainly helps. But no, nothing structural with regards to suppliers. I think we highlighted at the half year that part of the problem with cash flow was compression in terms of the sales cycle, that we're always subject of that. So we were fortunate that our year-end position wasn't subjected to too much compression. But going forward, we can't solve for compression for a fiscal period with -- when we're selling our products, we're doing it to optimize with our customers and also to meet the requirements of tradeshows and so on.

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Larry Gandler, Crédit Suisse AG, Research Division - Director [46]

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Okay. That's understood. So will the payables reverse in 1H '19, a large chunk of those?

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Julie Cameron-Doe, Aristocrat Leisure Limited - CFO [47]

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Some of them will. I mean it's really -- it's a function of where we're at in the cycle. It won't fully reverse. I mean, what I'd like to say is we're very pleased with almost $1 billion in normalized operating cash flow, which is a great outcome. And it really does demonstrate over the cycle we have a very strong cash generating business. There are points in the cycle that we get this compression, but overall, we're in a good place from a cash flow generating perspective.

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Operator [48]

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Your next question comes from David Fabris with Macquarie.

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David Fabris, Macquarie Research - Research Analyst [49]

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My question is back on the margins in the U.S. Obviously, we saw margins sort of moderate through that second half. But looking into FY '19, I mean, how should we be thinking about that change to the depreciation on those gaming boxes? I think you switched it from 4 years to 3 years back in 2016, so we should start to see a benefit coming through in '19. Are you able to just talk us through that?

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Trevor J. Croker, Aristocrat Leisure Limited - CEO, MD & Director [50]

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Yes, thanks, David. I'll get Julie to answer that one for you.

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Julie Cameron-Doe, Aristocrat Leisure Limited - CFO [51]

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So remember, we have a very broad portfolio now, so about 44,000 units, and we've got Ovation units out there. The Ovation units, if you think about VGT, for example, they had very low-cost cabinets that were out there. So the depreciation on those was pretty low, whereas now we've got more expensive cabinets going out in terms of Ovation. So that's one factor that would increase that. You're correct that we're on a 3-year cycle, but with the growth in gaming operations just as we see the 3 years coming up on the older installed base, we're constantly adding to the installed base as well. So that's going to drive that depreciation up as well.

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David Fabris, Macquarie Research - Research Analyst [52]

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Yes, okay. And just secondly then, just on the capital structure. Obviously, you guys are generating significant cash flow. Gearing's rolling off even with increased investment in digital. What sort of optimal gearing should we be thinking about for someone like Aristocrat?

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Julie Cameron-Doe, Aristocrat Leisure Limited - CFO [53]

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We're pretty comfortable with where we're at. 1.7x with the Term Loan B facility that we have available, we have capacity to fund more through that should we need it. And we're happy with our credit rating which is of investment grade. If we were to try and improve on our credit rating, that would bring us down. We'd need to maintain below the 1.5 level, and we don't see the need to do that for the benefit we get from that.

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Operator [54]

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(Operator Instructions) Your next question comes from Nick Caley with Baillieu Holst.

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Nicholas Caley, Baillieu Holst Ltd, Research Division - Research Analyst [55]

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Just 2 quick ones. Would you describe yourself now as remaining in consolidation mode or you're actively looking at any medium-sized acquisitions? And secondly.

(technical difficulty)

sort of a watching brief, but no action in the U.S. sports wagering industry?

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Trevor J. Croker, Aristocrat Leisure Limited - CEO, MD & Director [56]

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Yes. Thanks, Nick. I got the first question -- first part of the question, then you dropped out and came back at sports wagering. So I think the first question was, are we actively looking at the market versus consolidation?

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Nicholas Caley, Baillieu Holst Ltd, Research Division - Research Analyst [57]

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That's correct.

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Trevor J. Croker, Aristocrat Leisure Limited - CEO, MD & Director [58]

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Yes. So I'll answer that one and we'll go to the second one. We've got a great business. We have core businesses just delivered 7%, 8% growth. We've got acquisition support 12% of the 34% growth, and tax which would be the other 5%. So we're very happy with the way that's working. The core business is as strong. We're working on the way that we integrate our Digital businesses. And we've started to see some of those benefits in the UA and the marketing engine. That said, we are always on the look and we're continuing keep our eyes open for the right M&A and the right targets, but we are highly focused on what we've got to the moment. Our core business, as I said, continues to go -- be a strong business and really working on operationalizing our digital businesses. But we do watch the market. We do see what's happening out there with sports betting online, RMG, and we continue to monitor that. But it'll be the right acquisition for the portfolio that we will look for. And we'll still -- we are still in there. And as Julie said, we have got a very strong cash generation. We've got a great balance sheet. So we have the flexibility, but we are focused on running the business that we've got and integrating our digital businesses for our sustainable long-term growth.

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Nicholas Caley, Baillieu Holst Ltd, Research Division - Research Analyst [59]

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Okay. No, I think you've covered off the second as well, so that's good.

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Operator [60]

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There are no further questions at this time. I'll now hand back to Mr. Croker for closing remarks.

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Trevor J. Croker, Aristocrat Leisure Limited - CEO, MD & Director [61]

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Thank you.

So I'll now call the formal proceedings to a close. On behalf of the broad Aristocrat team, we thank you for your interest in the company, and we wish you a good day. Thank you very much for your interest.