The end of its financial year might be September 30 and a long way away, but the chances of Aristocrat Leisure paying a dividend for the final half of the current year is very much up in the air, despite the strong rebound in the share price in the past two months.
Aristocrat yesterday revealed a 14% slide in after-tax half-year net profit, to $305 million for the six months to March 30, with the COVID-19 lockdowns causing most of the damage as the closed most of its casino customers.
Directors were noncommittal about the outlook. In fact, the media release and commentary on the half-year performance didn’t once mention the word outlook or talk about what might happen in the period to the end of September.
The uncertainty caused by the lack of any forward commentary was in fact palpable.
But a comment about the company’s liquidity and back-slapping about the decision to suspend the interim dividend did indicate the real thinking on the board and management.
“Aristocrat continued to take a comprehensive approach to optimising liquidity and positioning to invest for long-term growth, in line with its strategy.
“The Group had $1.8 billion of liquidity available on a pro-forma basis as at 31 March 2020.
“The Directors’ decision to suspend the FY20 interim dividend further enhances the Group’s liquidity position and balance sheet,” directors said.
Shareholders took note of the uncertainty and the shares slid 5% to $25.97 after being as low as $25.25. That was in a weak market that was up for much of the day but dipped lower in late trading.
Aristocrat shares hit a three-year low of $14.81 hit during the market slump in March. Given the uncertainty factor – which is all linked to when its huge casino business returns to being viable (and subject to social distancing rules and there being no secondary outbreaks of COVID-19 infection) Aristocrat shares look like struggling.
Certainly there won’t a repeat of the rebound from the March lows.
Group revenue might have risen 7% to $2.25 billion but most of that was earned before COVID and the lockdowns swamped its customer base globally.
Normalised revenue from its pokies machines business fell 6% in the half, however that was offset by a 19% increase in its digital and video games division.
Aristocrat’s digital business has a lower profit margin almost half that of its poker machines business, however (28% versus 50%), which meant the 19% rise in revenue from games couldn’t offset the weaker revenues from the poker machines.
Aristocrat chief executive Trevor Croker said the result showed it’s “core strengths and the relevance of our product-led strategy, despite the unprecedented challenges generated by the COVID-19 pandemic.”
“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 long-term growth, he said in the statement”.