Aristocrat Leisure Posts Big Gains After Acquiring Two iGaming Companies

Australian slot machine manufacturer and online casino software designer Aristocrat Leisure has parlayed a pair of high-profile acquisitions into significant profits.

Per the company’s half-year financial reports released on May 23rd, Aristocrat enjoyed a 15 percent year-on-year improvement in profits over the six-month period ending on March 31st.

Aristocrat’s after-tax profits soared to $356 million, buoyed by a boost to $2.15 billion in total revenue – good for a 29.8 percent increase in that regard.

Aristocrat’s Stock Soars on Positive News

When the details were made public to shareholders, the Sydney Morning Herald reports that the price of shares of Aristocrat stock traded on the Australian Securities Exchange (ASX) increased by 7 percent. After ending May 22nd with a price of $26.52 (all dollar amounts expressed in AUD), Aristocrat stock moved to $28.40 by the end of trading one day later.

That sudden leap forward made Aristocrat’s (ALL) the “best performing stock on the ASX200” according to a report by the Australian Associated Press.

The stock went on to reach its highest price since September 10th of last year by climbing to $29.68 on May 28th, and it sits at $29.51 by the end of trading on June 8th.

Trevor Croker – who serves as chief executive officer and managing director for Aristocrat – told investors that six-month numbers bolstered gains secured over the 2018 fiscal year:

“Aristocrat continues to deliver above market profitable growth, leading to strong free cash flow and the ability to reinvest to self-fund future growth, whilst ensuring strong foundations remain in place.”

Another double-digit profit improvement over the six months to 31 March 2019 demonstrates our sound and ambitious strategy and strong commercial execution.”

Acquiring iGaming App Operators Sparks Aristocrat’s Growth

Aristocrat’s recent success stemmed largely from the company’s burgeoning digital enterprises, which include both real money online slot games and free-to-play apps available on social media.

Over the aforementioned six-month period, Aristocrat’s digital wing – which currently boasts 8 million daily active users – generated $853 million in revenue for a 37 percent year-on-year increase. As a result, digital profits improved by 17.2 percent to $255 million over the same span.

On the earnings call, Macquarie Research gaming analyst David Fabris, cited Aristocrat’s increased investments in digital products as fueling the recent gains:

“Overall, a good result beating our expectations.

Digital profit met expectations with ongoing investment expected to support second-half growth.”

Aristocrat became the world’s second-largest online casino game provider in January of 2018, when the company closed an all-cash deal to acquire Seattle-based iGaming firm Big Fish Games for $1.3 billion.

That takeover came five months after Aristocrat paid $635 million to acquire the Israel-based Plarium, best known for its fantasy epic game Vikings: War of Clans.

Big Fish Games specialized in social media gambling apps, blending free-to-play access with paid improvements under the “freemium” model. At the time, Croker pointed to Big Fish Game’s social casino intellectual property as a prime motivation for making the move:

“Big Fish’s digital-first social casino content and industry-leading meta-game capability and applications are highly complementary to Aristocrat’s existing and industry-leading land-based digital content business.”

And after the Plarium deal was finalized, Croker commented on the two companies’ synergy:

“Plarium’s business is strongly aligned with Aristocrat’s, with similar operational approaches to game development and segment and market entry, common focus on producing the world’s best gaming content and a common aspiration to be a market leader in our key target segments.”

Both acquisitions came within Croker’s first year as CEO, and having seen his vision for Aristocrat’s future growth come to fruition, he told investors that diversification via digital addition would continue apace:

“We continued to significantly expand our addressable markets across both digital and land-based segments.

We have successfully integrated our recently acquired digital businesses, and made significant progress transitioning towards a stronger, more diverse digital portfolio.”