Aristocrat Leisure’s Shares Tumbled On ASX Despite Reporting Positive Results

  • Nov 29, 2018 AEDT
  • Team Kalkine
Aristocrat Leisure’s Shares Tumbled On ASX Despite Reporting Positive Results

Aristocrat Leisure Limited’s (ASX: ALL) shares fell by 2.566 percent on 29 November 2018 despite reporting a record FY 2018 NPATA (Net profit after tax and before amortization of acquired intangibles) of A$729.6 million (114.1 cents per share), which is 34 percent higher than the prior year. The increase in NPATA was driven by North American & ANZ results, as well as a transformative and positive contribution from Digital, including new acquisitions. The operating revenue of the company increased by 47.7 percent to $3,624.1 million as compared to the previous corresponding year.

The EBITDA margin of the company decreased by 4.1 pts to 36.7% in FY 2018 compared to 40.8% in 2017. The EBIT Margin of the company is reflecting the high quality of earnings and growth across strategic recurring revenue segments, offset by higher contribution from lower margin Digital social casual games and continued reinvestment in the business, via higher D&D spend. The EPSA of the company increased by 34.2 percent to 114.1 cents in FY 2018. Further, the normalized operating cash flow of the company increased by 24 percent in FY 2018, reflecting ongoing strong cash generating fundamentals.

At the end of FY 2018, the company’s net gearing was at 1.7x times, reflecting the debt funding of the acquisitions of Plarium and Big Fish together with sustained earnings growth and strong free cash flows. The company witnessed strong performance across its Class III premium and Class II Gaming Operations which are driven by top performing content and hardware.

The Board declared a fully franked final dividend of 27.0cps, taking the full year dividends to 46.0 cents per share which is 35 percent higher than the prior year.

As per Aristocrat CEO and Managing Director, Mr. Trevor Croker, the company delivered strong, high-quality earnings growth over the 2018 fiscal year, against a backdrop of mostly flat markets and increasing competitive pressures.

As per the company’s FY 2019 outlook, the earnings are expected to be skewed to the second half, reflecting the timing of digital game releases and corresponding UA investment. In land-based outright sales, the company is expecting incremental gains in attractive North American adjacencies. Further, it is also planning to maintain its market-leading share positions across key sale segments globally, despite relatively flat markets and increasing competitive pressures.

In land-based gaming operations, the company is expecting to expand across its total Gaming Operations installed base, leveraging its broadening portfolio, while maintaining market-leading average fee per day performance.  The company is also expecting further growth in Digital bookings, supported by new game releases with a significant increase in User Acquisition (UA) investment (circa $100m). The company expects a further 100bps - 150bps reduction in the Group’s effective tax rate versus FY 2018.

In the last six months, the share price of the company decreased by 15.14 percent as on 28 November 2018. ALL’s shares traded at $25.445 with a market capitalization of $16.67 billion as on 29 November 2018. It seems that the investors were expecting a further hefty growth in key financial metrics; and this has led to a drop in share price.


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