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Aristocrat Leisure Limited (ASX:ALL) shares jump on bumper profit growth

The Aristocrat Leisure Limited (ASX: ALL) share price has stormed 7% higher to a record high of $29.80 in morning trade after the gaming technology company released its half-year results.

The company reported normalised net profit after tax of $310.5 million on revenues of $1,640.9 million. This was an increase of 24.4% and 33.6%, respectively, on the prior corresponding period. In constant currency terms, revenues were 36.7% higher and net profit after tax was 28% higher.

As a comparison, a note out of Goldman Sachs this week revealed that it was looking for sales of $1,635 million and net profit after tax of $312 million.

Earnings per share came in at 48.6 cents, allowing the company to increase its interim dividend by 35.7% to 19 cents per share.

What drove the strong result?

Strong growth in its Americas business drove a $42.9 million improvement in post-tax profit compared to the prior corresponding period. Management advised that this growth was driven by a 19% expansion in the Class III premium gaming operations footprint, together with further growth in the Class II gaming operations footprint and average fee per day.

Supporting this growth was its Digital business which delivered strong post-tax earnings growth of $84.3 million due partly to the scaling of Cashman Casino and the continued success of Heart of Vegas. The segment was also given a boost by the acquisitions of Plarium and Big Fish which completed in the period. The Digital business now accounts for over a third of its revenue and, importantly, high levels of recurring revenues.

Furthermore, thanks to the acquisitions of Plarium and Big Fish, the number of daily active users has now rocketed 493% to 8.3 million. However, average bookings per daily active user (ABPDAU) have fallen to 41 U.S. cents from 49 U.S. cents in the prior corresponding period. But this was due to the new acquisitions introducing a more diverse portfolio of customers and products that monetise differently, impacting the ABPDAU.

One minor drag on its performance was the International Class III business. It saw a post-tax profit decline of $11 million due to the business cycling over a concentration of openings in the segment in the prior corresponding period.

For the full-year management hasn’t provided any concrete guidance, but rather stated that it expects double-digit NPATA growth to continue over the twelve months to 30 September 2018.

The market is expecting net profit after tax of $701 million and I feel reasonably confident that the company is well-positioned to outperform this after the strong first-half.

Should you invest?

I believe that this half-year result demonstrates why Aristocrat Leisure is one of the best growth shares on the Australian share market. And despite its strong growth, its shares still trade at a reasonably undemanding 28x annualised earnings based on the last close price.

In light of this, I think Aristocrat Leisure is well worth considering as an investment with a long-term view. I would suggest investors choose it ahead of industry peers such as Ainsworth Game Technology Limited (ASX: AGI) and Jumbo Interactive Ltd (ASX: JIN).

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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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