The Aristocrat Leisure Limited (ASX: ALL) share price could be on the move this morning following the release of the gaming technology company’s half year results.
How did Aristocrat Leisure perform in the first half?
For the six months ended March 31, Aristocrat posted a 7% increase in operating revenue to $2,251.8 million. This was driven by a 27.3% increase in Digital segment revenue to $1,044.6 million, which offset declines in its Land-based segments.
However, due to the lower share of Land‐based revenue because of COVID‐ 19 impacts and its investments in user acquisition for its Digital portfolio, the company’s EBITDA margin fell 5 percentage points to 31.4%.
This led to normalised EBITDA falling 7.7% on the prior corresponding period to $707.6 million and normalised NPATA dropping 12.8% to $368.1 million.
On a reported basis, NPATA jumped 232.1% to $1,367.4 million. This was due to a one-off ~$1 billion deferred tax benefit. This follows group structure changes announced in November 2019, which are expected to generate long term cash tax savings.
As was widely expected, Aristocrat has decided to suspend its dividend in order to enhance its liquidity position and balance sheet.
Land-based segment.
During the half, Aristocrat’s Class III Premium installed base grew 9.4% and its Class II installed base grew 1.8%.
Management notes that this was driven by continued penetration of leading hardware configurations and high-performing game titles.
Its market-leading average fee per day (pre-COVID-19 casino closures) increased 0.3% to US$50.20. On an unadjusted basis, the average fee per day for the period was just above US$46.
Digital segment.
The growing Digital business was the star of the show during the half. It delivered double-digit growth in bookings, revenue, and profit during the half.
The RAID: Shadow Legends game was a highlight, continuing its impressive growth trajectory by generating US$160 million in bookings over the six months. This was supported by additional targeted user acquisition (UA) investment.
Speaking of which, the company’s total UA spend grew to 29% of Digital revenue in the period. This was due to the availability of quality investment opportunities.
Another big positive was its growth in Average Bookings Per Daily Active User (ABPDAU). It grew over 30% to US$0.50 due to management’s successful focus on monetisation and the scaling of RAID: Shadow Legends.
Management commentary.
Aristocrat’s chief executive officer and managing director, Trevor Croker, was pleased with how the company performed given the challenging trading conditions.
He commented: “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.”
“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,” he added.
Looking ahead, the chief executive remains focused on growing the business when trading conditions improve.
He said: “We will also continue to drive our strategic advantages in product, with aggressive investment in our core growth engines of Design and Development and User Acquisition to target share and continue to diversify our portfolios.”
“In Land-based, we will execute our ambitious plans to partner and grow with our customers as conditions improve. And in Digital, we will accelerate execution of our portfolio-based growth strategy as we further mature and scale the organisation,” Croker added.
No guidance was given for the second half, which is understandable given the current environment.
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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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