Aristocrat Pays Shareholders Dividends as COVID-19 Continues

Aristocrat Gaming

Aristocrat pays shareholders dividend as virus recovery continues

Australian poker machine manufacturer Aristocrat Leisure will pay shareholders a dividend, The Australian reports.

This is despite the company taking millions of dollars from the Federal Government’s JobKeeper payments and halving its full-year net profit.

The company accessed $13.3 million from the government’s wage subsidy program to September 30, as it bore the brunt of forced casino and pokie venue closures.

After suspending its interim dividend in May to strengthen its balance sheet, its board authorised a final payout of 10 cents, citing Aristocrat’s “effective COVID-19 response.”

This represents a decline of 82 per cent in 2019.

Investors lapped up the news, with Aristocrat’s share price surging 3.8 per cent to $34.59, compared with a 0.5 per cent gain across the broader market.

S&P Global Ratings analysts said Aristocrat has made “good progress on its road to recovery” but “meaningful challenges remain, particularly in the company’s land-based Americas business.”

While revenue across its digital business increased 29 per cent to $2.2 billion, its land-based business declined 32 per cent, with analysts expecting the division’s earnings not to recover fully for another two years.

“Earlier than the anticipated reopening of casinos helped to limit the severity of earnings declines in fiscal 2020,” analysts said.

“Further, the digital segment continues to exhibit resilience, somewhat offsetting the significant drop in land-based revenues stemming from country-specific COVID-19 response measures.

“Despite this, group EBITDA declined by 31.8 per cent in fiscal 2020, driven in large part by a fall in the Americas segment’s EBITDA of around 42 per cent.

“We expect COVID-19 related effects on Aristocrat’s land-based operations will continue to constrain EBITDA over the next 12 to 18 months and not return to pre-COVID levels until the year ending September 30, 2022.

But S&P analysts said Aristocrat’s “strong balance sheet” would “help weather uncertainty” and maintained its BB+ rating.

“We anticipate a sluggish recovery in orders of new and replacement outright sale units as casino operators try to preserve liquidity in the face of significant economic uncertainty.”

Land-based operations an area needing improvement

Further constraining the recovery of Aristocrat’s land-based operations will be social distancing measures limiting casino capacity and the number of active gaming machines on a casino floor.

“Aristocrat’s sizeable cash balance of $1.7 billion, undrawn facilities, and minimal near term debt maturities provide an adequate buffer to meet any liquidity pressures over the next 12 months,” the analysts said.

“We believe this balance sheet strength, enhanced liquidity, and progress toward cash flow repair support Aristocrat’s decision to declare a modest full-year dividend.”

Aristocrat’s normalised full-year net profit dived 46.7 per cent to $476.6 million in the year to September 30.

Meanwhile, revenue eased 5.9 per cent to $4.1 billion.

On a statutory basis, profit surged 97.2 per cent to $1.38 billion, thanks to a $1.1 billion deferred tax asset.

“In May, we said that Aristocrat entered the COVID-19 challenge in good shape.

“Six months on, and notwithstanding the uncertainties that remain, we believe we’re well placed to emerge from this period in even better shape,” chief executive Trevor Croker said.

“Our results for the full year to September 30 demonstrate that we have enhanced our financial fundamentals and further accelerated our underlying operational momentum, despite the exceptional challenges and volatility generated by COVID-19 on our business, customers, players and people across the majority of the period.

“Aristocrat continued to take share and maintained its leadership of key gaming markets and segments over the full year, with an increased focus on customer service and engagement. Continued investment in new hardware and games delivered superior operational performance and support resilient demand.”

As a result of coronavirus, Aristocrat stood down 1000 staff from May 1 to the end of June and made an additional 200 roles redundant.

As of October 31, it had 5000 venue customers in Australia that had resumed operations, except in Victoria, after closing in March.

William Brown

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