Aristocrat Leisure (ASX:ALL) share price in focus after FY 2020 results

The Aristocrat Leisure Limited (ASX:ALL) share price will be in focus today after the release of its full year results for FY 2020…

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Disappointing results

The Aristocrat Leisure Limited (ASX: ALL) share price will be on watch on Wednesday after the release of its full year results for FY 2020.

How did Aristocrat Leisure perform in FY 2020?

As was widely expected, the COVID-19 pandemic weighed heavily on the gaming technology company’s performance and led to declines in both sales and profits.

For the 12 months ended 30 September, Aristocrat reported a 5.9% decline in operating revenue to $4,139.1 million and a 31.8% reduction in earnings before interest, tax, depreciation and amortisation (EBITDA) to $1,089.4 million.

This reflects a 32% decrease in Aristocrat Gaming (Land-based) revenue, driven by the impact of COVID-19 customer venue closures and social distancing restrictions, which was almost offset by 29% growth in Aristocrat Digital revenue.

On the bottom line, the company posted a 78.2% increase in reported net profit after tax before amortisation (NPATA) to $1,497.2 million. However, this was due to the recognition of a $1.1 billion deferred tax asset following company structure changes.

On a normalised basis, NPATA fell a sizeable 46.7% to $476.6 million. However, this was a touch ahead of expectations, with analysts at Goldman Sachs forecasting NPATA of $471 million.

Due to the Aristocrat board’s confidence in its strengthening performance, it has declared a final fully franked dividend of 10 cents per share.

Segment performance.

The Aristocrat Gaming segment may have posted a sharp decline in revenue, but it has continued to perform strongly in respect to its installed base and average fees.

The company’s Class III premium and Class II installed bases grew 5.9% and 0.3% respectively, thanks to continued penetration of leading hardware configurations and high-performing game titles.

Its market-leading average adjusted fee per day increased 1.1% to US$51 (normalised to exclude the number of days machines were not operating due to COVID-19 impacts).

The company’s Aristocrat Digital segment delivered double-digit growth in bookings, revenue, and profit during FY 2020. It notes that its RAID: Shadow Legends game continued its impressive growth trajectory, generating US$368 million in bookings.

Its aggressive investment in User Acquisition (UA) was maintained to support growth, with total UA spend increasing 1.7 percentage points to 28% of Digital revenue.

The Average Bookings Per Daily Active User (ABPDAU) grew almost 44% to US$0.59. This was due to the successful focus on DAU quality, the scaling of RAID: Shadow Legends, and strong performance across the Social Casino portfolio, supported by COVID-19 related tailwinds.

FY 2021 outlook.

No guidance has been provided for FY 2021.

However, management advised that it expects to maintain or enhance its market-leading positions in Gaming Operations, measured by the number of machines that are operating and game performance.

It also expects further growth in Digital bookings, with its UA spend expected to remain between 25% and 28% of overall Digital revenues.

An increase in selling, general and administrative expense is expected across the business. This is due to the company continuing to scale and deliver its growth strategy. This includes continuing to identify adjacencies that expand its capabilities to create new business and growth through product, distribution, and investment.

Aristocrat’s Chief Executive Officer and Managing Director, Trevor Croker, commented: “A strong balance sheet, ample liquidity and robust cash flows provide us with full optionality to continue to invest behind our refined growth strategy and take advantage of acceleration opportunities in the period ahead.”

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