Gaming machine group Aristocrat Leisure has lifted total dividends for the 2017-18 financial year by 35% after reporting a record net profit of $542.6 million, a rise of 9.6% on the year before.
But directors issued a veiled warning that first half earnings growth in the current financial year might be light on with the company expecting earnings growth to be concentrated in the second half of the 2018-19 financial year.
The company told the ASX the higher result was struck on a 31% jump in revenue to $3.55 billion thanks in part to the purchases of two digital gaming companies.
The company reported a record Australia & New Zealand performance with “segment profit”up 9% to $A207 million; the final dividend is a full franked 27 cents a share, up near a third, from 20 cents a year ago.
The total payout for the year is up 34.3% to 46 cents a share.
Aristocrat Chief Executive Officer 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 Product Madness, driven by an increasingly broad and competitive product portfolio together with effective execution and a focus on customers and innovation. This result was boosted by two significant digital acquisitions that made a positive contribution to the Group and added to our earnings diversity, capabilities and scale.”
“Recurring revenue, including Gaming Operations and Digital Social Casino, accounted for 65% of Group revenues, up from 52% in the prior year. This highlights the progress Aristocrat has made in delivering sustainable earnings and cash flow growth over time, consistent with our strategy and shareholders’ interests.”
Following the acquisition of Israel’s Plarium and US company Big Fish in 2018, digital now represents 27% of Aristocrat’s profit.
But with more and more of its revenue and earnings coming from offshore markets and international businesses like digital gaming (and the lure of strong growth in the Japanese gaming machine market), directors cautioned about the chances of maintaining a full franked payout to shareholders.
“The Group’s ability to frank dividends will be considered going forward, depending on its franking balance and forecast position,” directors said in yesterday’s statement to the ASX.
Aristocrat said on Thursday it expects further growth in 2018-19 despite relatively flat markets and increasing competitive pressures. But the company warned that earnings will be concentrated in the April to September 30, 2019 period.
“Aristocrat’s FY2019 earnings are expected to be skewed to the second half, reflecting the timing of Digital game releases and corresponding UA investment,” directors said.
In other words, shareholders have been told not to expect strong growth in the current October to March first half – indeed earnings could be down on a year earlier.
Investors took note of the cautions another on earnings and the future of fully franked dividends and eased the shares down around 7% at one stage before they rebounded in afternoon trading to end at $25.44, off 2.5%.
The shares are down around a quarter from an all-time high of $32.98 in July.
