Jackpot! Aristocrat share price jumps on stellar half-year results

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The Aristocrat Leisure Limited(ASX: ALL)

At the time of writing, the gaming technology company’s shares are up 6.5% to $33.73.

This follows the release of a strong half-year result which has offset the market selloff.

Aristocrat share price tumbles despite strong first half

• Operating revenue up 23.1% to $2,745.4 million
• Earnings before interest, tax, depreciation and amortisation (EBITDA) up 30.3% to $970.3 million
• Normalised net profit after tax before amortisation (NPATA) up 40.9% to $580.1 million
• Operating cash flow increased by 42% to $502.4 million
• Interim dividend up 73.3% to 26 cents per share
• On-market $500 million share buyback announced

What happened during the first half?

For the six months ended 31 March, Aristocrat reported a 23.1% increase in operating revenue to $2,745.4 million.

This was driven by a strong performance from Gaming Operations and Outright Sales, supported by a robust performance from Pixel United. The former reflects customers increasing their capital commitments towards Aristocrat’s high performing products as COVID-19 restrictions eased.

But management isn’t resting on its laurels. During the half, Aristocrat maintained its market-leading investment in game design, development and technology with $313 million invested in design & development (D&D). This represents 11.4% of group revenue. In addition, it revealed that user acquisition (UA) investment remained steady at 28% of Pixel United revenue.

On the bottom line, thanks to a combination of revenue growth and margin improvement, Aristocrat reported an impressive 40.9% increase in NPATA to $580.1 million.

According to a note out of Citi, its analysts were expecting NPATA of $537 million, while the Visible Alpha consensus was $523 million. This means the company has smashed consensus estimates, which goes some way to explaining why the Aristocrat share price is having such a strong start to the day despite the market selloff.

Management commentary

Aristocrat Chief Executive Officer and Managing Director, Trevor Croker, was pleased with the half and notes that the company continues to win market share. He said:

Aristocrat delivered an impressive and resilient performance despite mixed operational conditions and challenges. We took comprehensive action to protect our people and business, while investing strongly to accelerate our growth strategy going forward.

Our sustained investment in talent, technology and product enables us to continue to take share wherever we play and delivered significant top and bottom-line growth in the first half of fiscal 2022.

Mr Croker also revealed that Aristocrat still has its eyes firmly set on the Real Money Gaming market despite its failed acquisition of PlayTech.

We are accelerating the implementation of our ‘build and buy’ strategy to scale in online Real Money Gaming, which provides further channels for us to distribute our world-leading content. Our ambition is to be the leading gaming platform in the global online RMG industry, and we anticipate being live with i-Gaming products in two jurisdictions in the US by the end of calendar year 2022.

Speaking of which, the failed acquisition of PlayTech means the company is sitting on more cash than it requires. In light of this, Aristocrat will shortly undertake a $500 million on-market share buyback. Mr Croker explained:

Aristocrat’s exceptionally robust balance sheet and consistently strong cash flow generation enables us to reinvest in the business, retain our capacity to pursue acquisitions, and return cash via dividends and share buy-backs. We will continue to actively assess growth opportunities, including strategic acquisitions and investment in organic initiatives.

Outlook

While no concrete guidance was given for the full-year, Aristocrat has started the second half strongly and management expects “continued growth.” It also sees opportunities to accelerate its growth strategy. Mr Croker said:

Aristocrat enters the second half with excellent fundamentals and strong operational momentum, a robust balance sheet and an abundance of opportunity to accelerate our growth strategy.

Aristocrat plans for continued growth over the full year to 30 September 2022, assuming no material change in economic and industry conditions.