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Why the Aristocrat Leisure share price just hit a record high

The Aristocrat Leisure Limited (ASX: ALL) share price continued its positive run and hit a new all-time high on Thursday.

In morning trade the gaming technology company’s shares rose 2% to $38.23.

Why did the Aristocrat Leisure share price hit a record high today?

Investors have been buying the company’s shares following the release of its annual general meeting presentation ahead of its event in Sydney.

That presentation included a breakdown on its performance in FY 2019 and an update on its outlook for the year ahead.

In FY 2019, Aristocrat Leisure was on form again and grew its NPATA by 23% over the prior year.

This was the result of market share gains and strong organic growth thanks to its investment in talent, game content, user acquisition and retention. Also supporting its growth was its increasingly broad and competitive product portfolios.

Another positive was that its earnings base continues to diversify. In FY 2019, its digital operations delivered over 40% of total revenue, with its land-based gaming operations and outright sales each contributing around another 30% of total group revenue.

The growth in its digital operations has other benefits as well. The company estimates that this has helped lift its recurring revenues to two-thirds of its overall revenue. This gives the company a firm foundation to build on in the future.


The good news is that management remains confident that FY 2020 will be another successful year for the company. It also doesn’t expect the coronavirus outbreak to have a materially adverse impact on its business.

And while no concrete guidance was provided for the year ahead, it advised that it expects its Land-based Outright Sales operations to make incremental gains in attractive North American adjacencies. It also expects to maintain its market-leading share positions across key for sale segments globally.

For the Land-based Gaming Operations, it expects continued expansion across its total installed base, leveraging its broadening portfolio, while maintaining market-leading average fee per day performance.

And for its Digital operations, management anticipates further growth in bookings, supported by the scaling of recently released new games. Its User Acquisition spend will continue to be allocated dynamically based on game performance and is expected to remain between 25% to 28% of overall Digital revenues.

Another positive is that the company expects the changes in its structure to start to generate cash tax savings. These savings will be used to further enhance the company’s ability to invest to sustain its growth momentum and create value for shareholders.

Its D&D investment across its Land-based and Digital portfolio will grow in dollar terms, but remain broadly flat from a percentage of revenue perspective. And finally, management expects a moderate increase in SG&A across the business. This is due to its investments in digital, data and transformation skillsets for growth.

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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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