US, Digital Drive Bumper Result At Aristocrat

By Glenn Dyer | More Articles by Glenn Dyer

A higher interim profit and a higher interim dividend saw shares in gambling machine maker, Aristocrat Leisure jump more than 8% yesterday on the ASX.

Aristocrat lifted first-half profit 15% to $356.5 million thanks to improved domestic performance in Australia and strong growth in its North America and digital businesses.

Net profit, which includes one-off items, rose by even more, lifting 34.9% to $346 million for the six months to March 31.

As a result, Aristocrat lifted interim dividend by three cents or 16% to a fully franked 22 cents a share.

“Another double-digit profit improvement over the six months to 31 March 2019 demonstrates our sound and ambitious strategy and strong commercial execution,” Aristocrat CEO Trevor Croker said in yesterday’s statement.

Revenue jumped nearly 30% to $2.1 billion and revenues from major buys in 2017 and 2018 flowed through the balance sheet.

The shares ended up 7% to $28.44.

Aristocrat said digital revenue grew by 37% to $US587 million ($A853m), driven by its acquisition in 2017 of Tel Aviv-based game developer Plarium for $US500 million and its 2018 purchase of Seattle-based Big Fish Games for $US990 million.

Aristocrat said the acquisitions expanded its digital portfolio from “casual casino” games to include casual, strategy, RPG and simulation games.

“We have successfully integrated our recently acquired digital businesses, and make significant progress transitioning towards a stronger, more diverse digital portfolio,” Mr. Coker said.

Looking to the rest of 2018-19 Aristocrat said it was expecting more growth from across all businesses and regions.

“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 – 150bps reduction in the Group’s effective tax rate over FY18; and finally, as we build towards a more diversified Digital portfolio, we continue to expect some skewing of our earnings to the second half of the financial year, reflecting the planned cadence of game releases and investment,” the company said yesterday.

Aristocrat said with its business profile changing over the last few years it now makes the majority of its profit from the US.

It, therefore, plans making changes to its business structure to reduce the overseas taxes it pays by 150 to 250 basis points, to 25% to 26%.

The company said it doesn’t expect the changes to reduce its Australian taxes, which have averaged $120 million a year over the last three years. It has obtained a private ruling from the ATO for the changes.

Glenn Dyer

About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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