Aristocrat Leisure Digital Arm Boosts Balance Sheet

Aristocrat Leisure’s latest financial report would be a complete disaster if not for its buoyant digital division dragging it up.

The casino and gambling industry is reeling from restrictions in place due to the COVID-19 pandemic. Governments around the world imposed social distancing measures, which forced casinos to close for business.

Some industry giants have stood down thousands of employees. Crown Resorts stood down more than 10,000 of its staff. Star Entertainment cut costs by telling thousands of staff they weren’t required. Even Aristocrat Leisure reduced its headcount by approximately 1,000.

Latest financial figures from Aristocrat Leisure make you wonder why those staff are without jobs.

Aristocrat Leisure Falls Back On Digital Division

Aristocrat Leisure usually makes the vast majority of its revenue from pokie machines. The bulk of its business stems from North America, despite being an Australian company. The company charges a daily rate for the rental of its pokies. It makes an astronomical amount of money thanks to owning more than 48,000 machines in the USA alone.

Almost $3.8 million per day comes Aristocrat Leisure’s way. This works out at an average of $78.77 per machine, per day. Nice work if you can get it. The problem lies in that American casinos are closed for business and, therefore, not paying for their pokies. Aristocrat Leisure’s golden goose has stopped laying eggs.

Some 70% of Aristocrat’s operating costs relate to its army of employees. Many of these work in the servicing sector, ensuring pokies work seamlessly at all times. Sales and administration staff are also plentiful. These employees have no work, literally.

Aristocrat’s digital division, that is online pokies, is booming. Players around the world are flocking to online casinos to play table games and pokies. Aristocrat makes money from online casinos paying a license fee for its pokies. More money comes into its coffers the more people play its pokies.

Digital Arm Helps Revenue Increase 7%

The company reported its half-year financial results to the Australian Stock Exchange on May 21. It reported a 7% increase in revenue to $2.25 billion. These latest figures are for the six month up to March 31, 2020 which is before the major COVID-19-related restrictions came into force.

Land based revenue fell by 6% as you would expect, but demand for digital products increased by 20%. Revenue from the digital arm of Aristocrat soared 19%. It’s Class II installed base grew 2% and its Class III installed base grew 9%.

Trevor Croker, CEO and Managing Director for Aristocrat, is delighted with the recent trading figures.

Aristocrat delivered a result for the half year to March 31, 2020 that demonstrates our core strengths and the relevance of our product-led strategy despite the unprecedented challenges generated by the COVID-19 pandemic. Our progress in driving share through outstanding product and diversifying revenue streams – including across attractive digital genres and titles – are also evident of this result.”

EBITDA fell 7.7% to $707.6 million, but its reported results are all in the green.

Group revenue grew 7% with profit after tax coming in $1.305 billion, an increase from $346 million year-on-year. The company is still laden with debt, but this fell from $2.429 billion to $2.25 billion.

Those figures include a $1 billion deferred tax asset.

Massive Liquidity at Aristocrat

Nobody knows what the gambling industry will look like after COVID-19. Some smaller operators will cease to exist. Even some household names will be completely different. Aristocrat Leisure will be fine judging by how much liquidity it enjoys.

It has $1.8 billion of liquidity available. $1.8 billion. It makes you wonder why Aristocrat stood down so many staff when it has this astronomical sum of money available to draw upon.