Aristocrat Leisure share price on watch after COVID-19 update

The Aristocrat Leisure Limited (ASX:ALL) share price will be on watch today after withdrawing its guidance due to the coronavirus outbreak…

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The Aristocrat Leisure Limited (ASX: ALL) share price will be on watch on Wednesday after it became the latest company to withdraw its earnings guidance due to the coronavirus outbreak.

What did Aristocrat Leisure announce?

This morning the gaming technology company advised that it is withdrawing its earnings guidance due to the continuing uncertainty in relation to the extent and duration of the impacts of COVID-19.

When the company held its annual general meeting last month, management advised that "Aristocrat plans for continued NPATA growth in the 2020 fiscal year."

However, the company has experienced softening demand in global land-based markets. This has been caused by a number of customers initiating temporary venue closures and adopting a more cautious approach to capital expenditure.

Earlier this week Crown Resorts Ltd (ASX: CWN) revealed a number of initiatives to combat the spread of the coronavirus. This includes deactivating every second gaming machine as part of its social distancing strategy.

Positively, its growing Digital business has not been impacted by the coronavirus at this time.

What now?

Aristocrat advised that it is executing comprehensive short and longer term risk management and mitigation plans. It hopes this will position the business to emerge from the challenges caused by COVID19 as quickly and strongly as possible.

Management notes that it has a conservatively geared balance sheet, with a net debt to EBITDA ratio of 1.4x (as at September 30). In addition to this, its term loan facility is not due until October 2024 and is covenant lite. This provides it with significant financial flexibility.

Finally, the company believes the diversity of its operations leave it well-positioned to deal with the current challenges.

It explained: "The diversity of Aristocrat's operations adds to the Group's strength and flexibility. Over the 2019 financial year, Digital games delivered over 40% of total Group revenue, while Land Based gaming operations and outright sales contributed around another 30% each. Operations are also spread across key global and regional markets, and our Digital and Land Based businesses are addressing a broader range of segments and genres than ever before."

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Crown Resorts Limited. 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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