Shares in gaming machine maker Aristocrat Leisure (ALL) jumped more than 6% yesterday after the company revealed a 35% rise in interim net profit.
The shares closed up 51 cents at $8.48 in the wake of the profit announcement which revealed more signs that last year’s takeover of Video Gaming technologies was having a positive imp[act on sales and earnings.
And the company sees a repeat of the strong first half result in the second half of its 2014-15 financial year, which ends on September 30.
The higher share price is despite directors maintaining interim dividend at 8 cents a share, according to the report to the ASX.
ALL 1Y – Aristocrat’s profit up strongly
The company said in yesterday’s statement that solid result came from:
"Outstanding revenue, shipshare and profit growth in the Australian outright sale market, the addition of the VGT business, further share and fee per day growth in the Class III premium gaming operations segment and a strong performance in Digital gaming underpinned this result,” directors said in yesterday’s statement.
"Group performance over the first half of fiscal 2015 reflected the successful integration of VGT and ongoing operational improvement across key segments and markets. In particular, the Group is extracting sustainable benefit from strategic investments in targeted games, products and talent, and accelerating the growth of recurring revenues in the Group’s revenue mix.
"Aristocrat also achieved further share and average selling price growth in the North American outright sales segment, despite contracting demand, and maintained its leading share position across Asia Pacific with strong sales into new Macau openings,” directors said.
A jump in the company’s debt to more than $1.4 billion, much of it due to the $1.3 billion takeover of Video Gaming (VGT), provides the answer why directors maintained dividend.
Aristocrat said net profit jumped to $77.6 million, thanks to strong growth in the purchase of VGT last year and a surge in revenues from its digital unit.
Sales jumped 73% to $699.2 million in the six months ending March 31, with its share of recurring revenues from gaming machines doubling in the last year.
Aristocrat has been promoting the VGT deal, which focuses on North America’s tribal casino market, because it gives the company a new income stream.
VGT runs machines, based on a bingo style of game, which allows Aristocrat to take a cut of the revenue from its machines in casinos giving it a new source of income over simply selling a machine outright to a gaming operator.
Australian venues are not allowed to operate gaming machines on a revenue-sharing basis.
Aristocrat’s digital segment increased profit to $15.7 million, driven by strong growth in its Heart of Vegas app.
Chief executive Jamie Odell said in yesterday’s statement that the last six month period has been “genuinely transformative” for Aristocrat.
"We have taken major steps forward in our product-led, share-taking startegy, asserted our focus on driving scale and profitability in critical recurring revenue segments and cleaning up remaining legacy distractions and non-core operations," said Mr Odell.
