Aristocrat Leisure is standing down 1,000 staff despite making record profits of $698.8 million last year. The Australian gaming giant is also imposing pay cuts and scrapping planned shareholder dividends.
Approximately 1,000 staff are being stood down until the end of June 2020. The majority of these employees are employed in land-based sales. Pokies service technicians and manufacturing operations are other affected departments.
The majority of the job losses come from the company’s American workforce, but there are some Australian casualties.
Aristocrat is cutting the pay of 1,500 of its 4,000 staff until the end of the September. These cost-cutting measures are in place in addition to staff layoffs. Staff are taking a pay cut of between 10-20%. Trevor Kroker, Aristocrat’s chief executive, received a $1.6 million salary in 2019. He also received another $4 million and share-based payments. Kroker accepted a 30% salary reduction.
A further 200 full time staff are set to lose their jobs permanently as Aristocrat feels the full brunt of the ongoing COVID-19 pandemic.
Aristocrat Explains Its Cost-Cutting Implementations
Aristocrat Leisure is an Australian pokies manufacturer with its headquarters in Sydney. It started business in 1953 and floated on the Australian Stock Exchange in 1996. Len Ainsworth, now chairman of Ainsworth Game Technology, founded the company. It now makes hundreds of millions of dollars profit annually.
The closure of land-based casinos around the world has hit Aristocrat hard. The majority of its machines are based in the United States with 48,218 of them spread across North America. Aristocrat charges casino a daily fee for each machine. This averages $78.77 per machine, per day, or almost $3.8 million daily.
Efforts to tackle the COVID-19 pandemic include government closing almost all land-based casinos worldwide. This has severely affected Aristocrat’s income streams.
“Since mid-March 2020, almost all of Aristocrat’s land-based customers globally have suspended operations. While highly uncertain, at this stage Aristocrat anticipates that venue reopenings will take place on a phased basis, with a gradual ramping up of gaming floors in line with improvements in consumer confidence and the wind back of social distancing and travel limitations over time.”
A spokesperson revealed it has 25,220 Class II and 22,998 Class III gaming machines across North America.
Some 70% of Aristocrat’s operating expenses relate to people costs. The company continues to foot these costs despite a massive reducing in short-term income.
Stood down staff are eligible for the Australian government’s JobKeeper employment subsidy program. These drastic measures will save the company $100 million over the remainder of the financial year.
Staff Pay With Their Jobs Despite Huge Liquidity
Aristocrat is preparing for a media backlash following these staff reductions. Casino giants Crown Resorts and Star Entertainment have gone down similar paths.
It is less than 12-months since Aristocrat announced record profits. The company enjoyed $4.4 billion in revenue and a record $698.8 million profit. Perhaps more shocking in light of these cost saving measures is the fact Aristocrat has almost $1.1 billion in cash floating around its coffers.
The company also enjoys a hugely successful digital business that continues to bring in millions of dollars. Aristocrat’s digital arm had revenues of $1.79 billion in 2019, equating to 40.7% of total revenue.
Aristocrat does, however, have $2.224 billion worth of debt.
Shareholders expected to receive 56.0 cents per share as a dividend for the 2019 performance. Aristocrat has scrapped plans to award this dividend, saving a further $357.1 million.
CEO Kroker has 315,611 shares in Aristocrat, which means he’s missing out on $176,742.16 worth of dividend payments. It’s difficult to feel sorry for Kroker because he commands a massive salary. He earned a $1,627,064 salary, and more than $1 million in cash bonuses. Kroker walked away with $5,606,277 in 2019, up from $4,538,983. The rich continue to get richer, or so it seems.