Aristocrat Leisure Share Price Rallies 8.90% and Hits Expectations

Australian gambling machine manufacture Aristocrat Leisure Ltd [ASX:ALL] has pushed higher this morning, with its share price continuing to rally since the beginning of the year.

At the time of writing Aristocrat Leisure share price is up 8.18% to trade at $28.69.

ALL designs, develops and distributes electronic gaming machines, casino management systems and digital social games. The company’s land-based products are approved for use in more than 300 licensed jurisdictions and are available in over 90 countries. The group also operates within the online social gaming and real money wager markets.

Special 2019 report: The next generation of Aussie income super stars revealed. Hint: it’s not the banks. Click here to claim your copy now (for free).

Half-year results hit targets

After hitting a 15-month low at the beginning of the year, fuelled by disappointing FY2018 results, ALL has been out to prove itself to investors. A note out of investment bank Goldman Sachs set a high bar for the pokie machine manufacturer, expecting a 51% increase in revenue.

ALL published its highly anticipated results this morning, which have obviously pleased investors.

While Aristocrat didn’t quite hit Goldman’s 51% mark, revenue was up 35% to $2.105 billion. EBIT was up 16.8% compared to the prior corresponding period to $644.4 million and net profit after tax also increased by 16.8% to $422.3 million. Aside from revenue, all other metrics exceeded expectations.

According to ALL, revenue growth was principally driven by growth in their gaming operations and digital business segments. In gaming operations, revenue increased 15%, while overall average fee per day increased by 1.3%. Performance was fuelled by continued penetration of their higher performing products.

Digital revenue grew 37% to US$587 million, driven by the realised impact of earlier acquisitions.

The Americas were the standout performer in terms of revenue, posting a 28.3% growth to pull in $957 million. Growth in ANZ was moderate in comparison, with growth of 7.3% contributing $230.6 million in overall revenue. Digital grew by nearly 50% to $820.9 million.

The company increased its dividend by three cents per share from the previous half-year and will pay a fully franked 22 cents per share dividend on 30 May 2019.

What’s next for Aristocrat?

With such strong performance from its digital segment, it’s possible we’ll see a lot more investment in this area. ALL said it had invested significantly in talent and technology to deliver competitive product across a broad range of land-based and digital segments. The group’s investment in D&D represented 11.6% of revenue for the period.

However, daily active users for the digital segment had decreased slightly from 8.3 million to eight million. The company defended the dip in daily users saying the full period impact of the acquisitions, which aimed to introduce a diverse portfolio of customers and social products, monetise differently to Aristocrat’s established digital business. Consequently, this resulted in lower users compared to prior periods.


Ryan Clarkson-Ledward,
For Money Morning

PS: If Aristocrat Leisure looks like a good buy to you, make sure you check out this free investor report revealing the highest potential growth sectors for 2019 and beyond. Download now to find out more.

Ryan Clarkson-Ledward is an Editor at Money Morning.

Ryan holds degrees in both communication and international business. He helps bring Money Morning readers the latest market updates, both locally and abroad. Ryan tackles all the issues investors need to know about that the mainstream media neglects.

Ryan is also the Editor of Australian Small-Cap Investigator, a stock tipping newsletter that hunts down promising small-cap stocks by dissecting the latest events affecting the world.

To find out more about the publications Ryan works on and how you can subscribe, please click on the corresponding link here:

Money Morning Australia