Digital gaming revenue soars in solid full year results for Aristocrat

25th November 2014 9:41 am GMT

Australian gaming supplier Aristocrat Leisure has reported a 7 per cent increase in revenue to AUD$870.3m for the year ended September 30th, with strong year-on-year growth from the company’s digital offering which included contributions from the Product Madness social gaming business.

Aristocrat said that its full year performance was driven by strong operational delivery, particularly growth in the critical North American gaming operations segment, as well as growth in the North American and Australian outright sales segments.

“With the benefit of our strengthening operational performance, Aristocrat took a number of important decisions to position us for the future and maximise resources behind our growing, core business,” said Aristocrat CEO and managing director Jamie Odell. “The acquisition of VGT (Video Gaming Technologies) shortly after year-end was a bold step forward.

“Aristocrat’s product-led, share-taking strategy delivered outstanding operational performance across core markets and segments in 2014 – particularly in the critical US gaming operations segment, which remains our single most compelling strategic opportunity.”

Full Year 2013/14 Revenue

Australian Dollar (AUD$) FY 2012/13FY 2013/14
Australia and New Zealand 192.3m223.8m
Americas 421.9m459.7m
Rest of World and Japan 199.6m186.8m
- Lotteries and Digital 23.3m64.9m
TOTAL 813.8m870.3m

The Americas region contributed more than half (53 per cent) of the company’s total revenue during the year with $459.7m, having increased 9 per cent compared to the previous year.

Australia and New Zealand contributed revenue of $223.8m, an increase of 16 per cent year-on-year, while the rest of the world and Japan accounted for the remaining $186.8m, down 6 per cent versus the prior year period.

Digital revenues rose by nearly four-fold to $47.5m in constant currency, due to the increased contribution from the company’s social gaming business, Product Madness, driven by higher monetisation rates and daily active user numbers from the Heart of Vegas app.

Daily active user numbers amounted to 800,895 at the end of the period, with overall average revenue per daily active user (ARPDAU) amounting to 26 cents (US) for the period, including ARPDAU of 38 cents for Heart of Vegas.

Product Madness saw sustained growth in the Heart of Vegas suite of applications throughout the period,” said the company. “Higher monetisation rates were driven by the injection of Aristocrat’s native premium land-based content throughout the year and increasingly sophisticated product features and marketing.

“The business will launch additional applications on mobile in the second half of 2015.”

Aristocrat said that its European online content licensing business continues to produce “stable and positively trending” revenue results, with the second half of the year seeing a broad expansion of its distribution network, including a number of major operators as earlier investments in key strategic licensing partnerships started to mature.

“Strong performance in Italy is contributing to further uptake of Aristocrat titles across the region as operator demand for our portfolio scales,” the company said. “Our partnerships position us favourably to take advantage of imminent regulation in emerging markets such as Spain, where further growth opportunities will present in 2015.

At the end of the year, the company had over 354 live game deployments across a network of 54 operators. The best performing games continue to be Choy Sun Doa, Where's the Gold, 50 Lions and Lucky 88.

Overall, the company’s Lotteries and Digital business saw revenue increase 179 per cent to $64.9m during the year.

Aristocrat’s Lotteries business was sold in September to Playtech, with the sale consistent with the company’s strategy to exit non-core businesses and to focus resources on its strategic strengths.

Full Year 2013/14 Results

Australian Dollar (AUD$) FY 2012/13FY 2013/14
Revenue from Continuing Operations 798.0m847.6m
Cost of Revenue (365.7m)(385.9m)
Gross Profit 432.3m461.6m
Other Income 11.4m12.1m
Design and Development Costs (115.8m)(130.1m)
Sales and Marketing Costs (74.0m)(74.7m)
General and Administrative Costs (97.6m)(188.2m)
Finance Costs (16.9m)(14.0m)
Profit/(Loss) for the Year 107.2m(16.4m)
Basic EPS 19.5m(2.9)

Total revenue from continuing operations rose 6 per cent to $847.6m, with cost of revenue climbing 6 per cent to $385.9m. Design and development costs were up 12 per cent to $130.1m, while sales and marketing costs increased 1 per cent to $74.7m. General and administrative expense climbed 93 per cent to $188.2m.

Profit from continuing operations fell by 74 per cent to $29.1m. Including loss from discontinued operations of $45.5m, the company incurred a net loss for the year of $16.4m. This included significant items of $118.1m, comprising $78.0m relating to the impairment of Aristocrat’s Japan Pachislot business, a loss of $43.4m on disposal of its investment in Lotteries, and acquisition related transaction and restructuring costs of $13.1m.

Aristocrat’s board of directors has proposed a final dividend of 8.0 cents per share for the full year period, equivalent to $50.4m in total and representing a payout ratio of 76 per cent of normalised earnings.

“2015 will be a transformative year for Aristocrat as we integrate the VGT business and take the next step forward in executing our vision to deliver the world’s greatest gaming experience every day,” continued Odell. “While we expect our operational momentum and market share performance to lift further over the full year to 30 September 2015, generally flat to weaker demand in a number of key segments will be a constraint.

“Aristocrat will continue to focus on the things we can control – in particular improving our portfolio focus, competitiveness and earnings mix over the 2015 full year. We expect to see a significant lift in the percentage of total revenues that are recurring in nature, as we integrate VGT and continue to grow recurring revenues in our Class III and Digital businesses over the course of 2015.”

Shares in Aristocrat Leisure Limited (Co. Data) (ASX:ALL) gained 1.97 per cent to $6.73 per share in Sydney earlier today in trading.

Pragmatic Play