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Aristocrat Leisure (ASX:ALL) - Managing Director & CEO, Trevor Croker
Managing Director & CEO, Trevor Croker
Source: Yogonet
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  • Global gaming provider Aristocrat Leisure (ALL) has strengthened its balance sheet in the six months to March 31, despite COVID-19 pandemic challenges
  • The company managed to end the period with $1.8 billion of liquidity available on a pro-forma basis, providing a safety net against further virus impacts
  • This liquidity boost represents a reduction in net leverage from 1.6x to 1.4x, compared to the prior corresponding period, and comes in part from the decision to suspend the 2020 interim dividend
  • Global casino shutdowns did some damage to the company’s revenue, but this was more than offset by a 19 per cent jump in digital revenues
  • The company believes its newly-formed digital leadership team is driving Aristocrat’s online presence to be a “core growth engine” for the group
  • Despite the mostly positive news, Aristocrat Leisure has taken a bit of a hit today, with shares trading 4.8 per cent lower at $26.02 each

Global gaming provider Aristocrat Leisure (ALL) has strengthened its balance sheet in the six months to March 31, despite the challenges of the COVID-19 pandemic.

A liquid strategy

While the company’s EBITDA and normalised profit after tax and before amortisation (NPATA) were down by 7.7 per cent and 12.8 per cent respectively, Aristocrat managed to end the period with $1.8 billion of liquidity available on a pro-forma basis.

This liquidity boost represents a reduction in net leverage from 1.6x to 1.4x, compared to the prior corresponding period, and comes in part from the decision to suspend the 2020 interim dividend.

Group structural changes announced in 2019 also positively impacted results from the period via the recognition of a $1 billion deferred tax asset, which is expected to bring long-term cash tax savings.

Gamblers move online

Historically, a big chunk of Aristocrat’s revenues come from the sales of slot machines to casinos. The pandemic-related shutdowns of gaming establishments globally has resulted in a six per cent fall in land-based revenues.

This was, however, completely offset by a big boost in digital revenues which rose by 19 per cent, resulting in an overall revenue rise of seven per cent to $2.25 billion.

Aristocrat’s strategy of diversifying into digital markets, with consistent marketing and user growth, has borne fruit during the pandemic.

Targeted user acquisition investment, which now accounts for 29 per cent of digital revenue spending, has resulted in strong growth for the RAID: Shadow Legends brand.

Continued upgrades to evergreen titles Lightning Link and Cashman Casino have also brought positive returns.

The company believes its newly-formed digital leadership team is driving Aristocrat’s online presence to be a “core growth engine” for the group.

On the rebound

Aristocrat’s share price took a huge hit after the onset of the COVID-19 pandemic sent shivers through global markets, and casinos worldwide were deemed non-essential.

The company’s market cap fell by more than half between February 20 and March 23.

Since then, Aristocrat’s share price has been rising steadily, even if it is still well short of the February high, to sit around 30 per cent lower – a considerable recovery given global circumstances and market-wide downturns.

With this positive half-yearly report, and particularly in light of the company’s digital strength, it is likely Aristocrat will continue trending slowly upwards as shuttered venues reopen.

The company’s ample liquidity will easily see it through what could be a long period of considerable uncertainty and constricted upstream cashflows.

Aristocrat Chief Executive Officer and Managing Director Trevor Croker says the company remains in a strong position despite the global downturn.

“Aristocrat delivered a result for the half-year to 31 March 2020 that demonstrates our core strengths and the relevance of our product-led strategy, despite the unprecedented challenges generated by the COVID-19 pandemic,” he said.

“Our progress in driving share through outstanding product and diversifying revenue streams – including across attractive Digital genres and titles – are also evident in this result.”

Chief Executive Officer and Managing Director, Trevor Croker

“Our strong balance sheet, ample liquidity and excellent financial fundamentals position us to emerge from this period strongly, while allowing us full optionality to continue to invest for longterm growth,” he added.

Despite the mostly positive news, Aristocrat Leisure has taken a bit of a hit today, with shares trading 4.8 per cent lower at $26.02 each as at 12:25 pm AEST.

ALL by the numbers
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