ALL reported an 81% increase in normalised net profit to $865 million in FY21 bringing the company back towards its 2019 pre-COVID performance. Segment profit increased 43.5% to $1,919.3 million as the company maintained its market leading investment in game design, development and technology.
The result was in-line with guidance but the corporate overhead of $112 million was surprisingly high but reflected business growth, some transformational initiatives and higher variable compensation.
The overall result was high quality considering the $99 million FX headwind and was backed by strong operating cash flow of approximately $1.3 billion which was a 30% increase on last year.
ALL’s North American Class III Premium installed base grew 13.8% to 27,719 units and the average fee per day increased 12% to US$57.24 as key titles such as Cash Express: Luxury Line, Buffalo Link and Crazy Rich Asians drove momentum. ALL averaged 17 of the top 25 games on the Eilers and Krejcik premium title list for the year to September 2021.
Investment view
The FY21 result has been overshadowed by the recent acquisition of Playtech for A$5 billion and the associated equity capital raising. There is speculation that ALL may encounter some competition for Playtech before the transaction can be completed subject to regulatory and shareholder approvals.
Potential counterbidders are thought to be lining up offers that may be at a premium to ALL’s price which valued Playtech at an Enterprise Value of £2.7 billion.
There is no guarantee that any alternative party will make a formal bid for Playtech at this point, so ALL does not need to take any immediate action. In the case that a competing bid does emerge, we think any (hypothetically) revised bid by ALL would be viewed as superior given the cash certainty of ALL’s bid and greater likelihood of passing all necessary probity approvals in key Playtech markets – there are more than 30 regulated jurisdictions involved.
ALL would likely fund any incremental money from existing cash resources.
The Playtech acquisition gives ALL a serious entry into the real online money gambling industry and will be highly transformational to the group. It provides complementary growth channels for ALL’s premium gaming content and it will broaden and deepen ALL’s position in the rapidly growing iGaming industry. This is a key catalyst for ALL’s future growth. We retain our Buy recommendation on ALL.
