Shares in the ASX-listed Aristocrat Leisure initially fell by more than six per cent as the company revealed apparently impressive full-year results, fuelled by its land-based and social casino businesses.
By the close of trading overnight, the share price had recovered but nonetheless was still down against the pre-results value – this in spite of Aristocrat posting a 34 per cent increase in full-year profits.
Group profit (NPATA – net profit after tax amortisation) for the 12-month period to September 30, 2018, was AU$729.6m (US$534.1m)
The Americas land-based business saw profit rise 16 per cent to US$650m, while there was also strong performance in Aristocrat’s Australia and New Zealand business, with a segment profit increase of nine per cent, to AU$207m (US$151.5m).
Operating revenue was also up dramatically, by 44.7 per cent to AU$3.62bn (US$2.65bn), so why did shares drop?
The key reasons seems to be that the 34 per cent increase in profit (NPATA), although impressive, was still down against market expectations. Analysts at Goldman Sachs were forecasting a full-year net profit of AU$750m and the Bloomberg consensus median estimate was AU$759m, both higher than the AU$729.6m reported.
In a statement, Aristocrat CEO and managing director, Trevor Croker, said “Aristocrat delivered strong, high-quality earnings growth over the 2018 fiscal year, against a backdrop of mostly flat markets and increasing competitive pressures.
“Pleasingly, the result was driven by strong organic growth across our land-based businesses and [social casino operation] Product Madness, driven by an increasingly broad and competitive product portfolio together with effective execution and a focus on customers and innovation.
“Recurring revenue, including Gaming Operations and Digital Social Casino, accounted for 65 per cent of group revenues, up from 52 per cent. This highlights the progress Aristocrat has made in delivering sustainable earnings and cash flow growth over time, consistent with our strategy and shareholders’ interests,” said Croker.
“Leveraging our strong balance sheet, operating cash flow generation and design and development capability, Aristocrat will continue to focus on unlocking growth… for the benefit of our customers and shareholders.”