Gaming machine maker Aristocrat Leisure (ALL) has lifted full year profit by almost 17% despite a slide in revenue caused by weak sales in Australia, Japan and several other markets.
It was only a strong year in the huge US market (and lower tax) that helped the company produce the rise in earnings.
Final and annual dividend has been lifted sharply to reflect the higher profit.
The final of 7.5c a share is up sharply from the 2c a share paid last year and the full year payout to shareholders is 14.5c a share, up from 6c a share.
Despite the improved profit and higher dividend, the shares eased by around 3% to $4.63 yesterday.
Perhaps it was a case of buying on the rumour in the run up to the result’s announcement, then taking profits.
Aristocrat said yesterday that it made a net profit of $107 million for the 12 months to September 30, up from $91.7 million for the same period last year. Strong growth from its North American business and an increase in selling prices contributed to the result.
Revenue fell 3.4% to $808.7 million, due to fewer scheduled games releases in Japan and weaker sales back home in Australia.
ALL YTD – Aristocrat profit lifted by US business
"Revenue growth was predominantly driven by the Americas and Online," the company said in commentary.
"This was offset by lower contributions from Japan, Australia and Asia Pacific.
"Segment revenue decreased $29.5 million or 3.5% in reported currency (5.6% in constant currency), predominantly driven by the timing of game releases in Japan.
"Revenue increased 4.3% (1.1% in constant currency) when adjusted for the variability driven by the Japanese game release schedule.
"Segment profit decreased $0.5 million in reported currency, 0.2% compared with the prior corresponding period (2.7% in constant currency). Excluding the variability from Japan year on year, segment profit increased $15.0 million or 5.6% in reported currency or $6.7 million (2.5%) in constant currency.
"Consistent with revenue delivery, stronger earnings from the Americas and Lotteries & Online were offset by Japan, Australia and Asia Pacific.
"This result reinforces the value of a global portfolio where Group EBIT performance remained steady despite the diversity in operating business results.
"The Group’s investment in D&D spend, as a percentage of revenue, was 14.6% (14.8% on a constant currency basis) compared to 14.0% of revenues in the prior corresponding period. Total reported spend increased $1.1 million or 0.9% (decreased 0.1% in constant currency). The Group increased its leverage of D&D spend with further utilisation of the Aristocrat Indian Development Centre (AIDC) coupled with restructuring across Australia and North America.
"Cost control remains a key focus for the Group, with further actions undertaken in the current period to reduce the Group’s fixed cost base. Corporate costs declined 12.6% compared to the prior corresponding period.
"The downward trend in net interest expense was maintained and is representative of the Group’s conservative gearing levels. Net interest expense has decreased $8.9 million or 44.1%. This was principally due to lower average debt levels and reduced borrowing costs. The decrease was greater if adjusted for implied interest of $1.1 million relating to Product Madness acquisition accounting.
"The effective tax rate (ETR) for the reporting period was 20.0% compared to 22.1% in the prior corresponding period. The decrease in ETR is mainly driven by R&D tax concession claims and mix of earnings," Aristocrat pointed out.
The lower tax is a big benefit – the normal tax rate in Australia is 30% – but few companies pay that – there always seems to be tax breaks such as R&D or restructuring losses to lower the taxman’s take.
Chief Executive Officer Jamie Odell said in the statement that the company expects to grow its profitability further over the next 12 months.
"While conditions will remain competitive across major markets, we expect continued strong NPAT (net profit after tax) growth over the 2014 full year, driven by improvement in operational performance across our key markets," he said.
That guidance was more upbeat than many we have seen this reporting and annual meeting season.
