Tax Jackpot Skews Aristocrat Leisure Result

By Glenn Dyer | More Articles by Glenn Dyer

Aristocrat Leisure has almost doubled its statutory net profit to $1.4 billion thanks to the recognition of a $1.1 billion deferred tax asset, giving the wrong impression that the poker machine manufacturer’s coffers were overflowing despite the COVID-19 pandemic.

A truer picture was given by excluding the tax benefit. Aristocrat’s net profit after tax for the year to September 30 fell 52% to $357 million after COVID-19 forced the closure of casinos and gambling venues worldwide.

A slashing of the dividend to 10 cents a share for the year (the final, no interim) from 56 cents confirms the unreal appearance including the tax benefit gave.

The market saw news of the 10 cents a share dividend as positive and a sign of the company’s upbeat view of 2021. Others might argue that with the shares above $34 each some reward had to be handed out.

In fact the shares rose 3.8% to finish at $34.59.

The outlook for casinos and other gaming outlets remains weak and confused looking into 2021 in Australia and the US. Asia is different, but travel will remain hard and tourism will be a shadow of itself for months to come.

The company claims that recognising the deferred tax benefit will generate long term cash tax savings.
Aristocrat said revenue from its pokies business fell 32% compared to the prior year, but that was almost entirely made up for by a 29% jump in revenue from its lower-margin mobile video game business. Total revenue fell only 6%.

Normalised profit after tax and before amortisation of acquired intangibles (NPATA) of $476.6 million represents a decrease of 46.7% in reported terms, compared to the prior corresponding period.

Group revenue decreased 5.9% to $4.1 billion, reflecting a 32% decrease in Aristocrat Gaming (Land-based) revenue, driven by the impact of COVID-19 customer venue closures and social distancing restrictions; largely offset by 29% growth in Aristocrat Digital revenue, in local currency.

Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) fell 32% from the prior corresponding period, at $1,089.4 million.

Aristocrat CEO Trevor Croker, said in yesterday’s statement “The resilience and commitment of Aristocrat’s global team of over 6,000 people has been impressive, particularly over the last ten months.

“In May, we said that Aristocrat entered the COVID-19 challenge in good shape. Six months on, and notwithstanding the uncertainties that remain, we believe we’re well placed to emerge from this period in even better shape.

“Our results for the full year to 30 September 2020 demonstrate that we have enhanced our financial fundamentals and further accelerated our underlying operational momentum, despite the exceptional challenges and volatility generated by COVID-19 on our business, customers, players and people across the majority of the period.

“Aristocrat continued to take share and maintained its leadership of key Gaming markets and segments over the full year, with an increased focus on customer service and engagement. Continued investment in new hardware and games delivered superior operational performance and supported resilient demand.

“Aristocrat Digital delivered exceptional operational performance, while continuing to diversify and strengthen its portfolio and pipeline of new games. Aggressive and dynamic investment in User Acquisition supported momentum and allowed the business to fully leverage COVID-19 related tailwinds, while taking further significant strides forward in organisational scale, capability and effectiveness.

“A strong balance sheet, ample liquidity and robust cash flows provide us with full optionality to continue to invest behind our refined growth strategy and take advantage of acceleration opportunities in the period ahead” Mr Croker concluded.

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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