What to expect from the Aristocrat Leisure (ASX:ALL) FY 2020 results

The Aristocrat Leisure Limited (ASX:ALL) share price will be one to watch next week when it hands in its FY 2020 results…

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The Aristocrat Leisure Limited (ASX: ALL) share price will be on watch next week when the gaming technology company releases its full year results on Wednesday.

Ahead of the release, I thought I would take a look to see what the market was expecting from Aristocrat Leisure in FY 2020.

What is the market expecting?

Aristocrat Leisure is widely expected to report a sharp decline in revenue and profits in FY 2020 due to the impact of COVID-19.

According to a note out of Goldman Sachs, its analysts are forecasting revenue of $3.94 billion and net profit after tax before amortisation of $471 million. This represents a 10% and 47% decline, respectively, over the prior corresponding period.

What about its different segments?

The broker expects the company’s Digital business to have performed exceptionally well in FY 2020. It is forecasting a 27% increase in revenue to $2,273 million.

Goldman commented: “SensorTower continues to point to a solid 2H20E performance across the digital front, and to this end we forecast digital revenue growth of 27% on pcp in 2H/FY20E. We also highlight recent solid trends reported across the Sep quarter by peers such as ZYNGA. Through the half, we note that digital revenues (in USD) were up 36% on pcp on a 6mo rolling basis, driven by Product Madness up 45% and Plarium up 41%.”

The key drag on its performance is expected to be its Land based business. Goldman Sachs is forecasting a 36% decline in revenue to $1,667 million due to COVID-19 casino closures and social distancing initiatives.

While this is disappointing, the broker believes Aristocrat Leisure is well-placed to win market share post-pandemic.

The broker explained: ”While land based revenues will clearly be heavily impacted in 2H20E given the pandemic, we remain of the view that ALL is well-placed to take further share noting its solid balance sheet and recent industry surveys suggesting that it holds 2/3 of the top 5 performing cabinets across key categories.”

What else should you be watching?

The broker revealed that it remains bullish on its Digital business and will be looking out for commentary on the performance of its RAID game and its outlook into FY 2021.

It is also looking for comments around the growth trajectory of its new game, EverMerge. It notes that this has been the second most downloaded game in October.

Goldman will also be focused on the company’s expectations around outright sales and product development into FY 2021 and the shape of land based recovery.

Outlook.

Goldman Sachs isn’t expecting management to provide any real guidance for FY 2021, but there are a few points it is hoping will be clarified.

The broker concluded: “While we believe management will unlikely be able to provide any quantified FY21E group guidance given the fluid nature of the COVID-19 impacts, we will be particularly interested in i) commentary around the speed at which land based revenues can recover in N/A, ii) cost and D&D outlook noting that recently management reiterated their focus on continuing to invest in D&D over the medium term, and iii) any incremental snippets around M&A and desire to step into iGaming.”

Goldman Sachs has a buy rating and $34.00 price target on the company’s shares.

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