The Jumbo Interactive Ltd (ASX: JIN) share price dropped 15.4% despite unveiling large profit growth in FY19 today.
Jumbo Interactive is an Australian lottery business with its history going back to 2000. The company operates the Ozlotteries website. Jumbo is different to conventional lotteries businesses because tickets are sold online or via a smartphone app. More than three-quarters of customer interactions are completed via mobile devices.
Jumbo’s Big FY19 Result
The lottery business revealed that total transaction value increased by 75% of the year to $321 million. New accounts increased by 107% to 444,005 and active customers went up by 74% to 761,863. The number of large jackpots, $15 million or above, increased by 53% to 49.
Jumbo reported that its continuing operations revenue went up by 64% to $65.2 million.
EBITDA increased by 107% to $40.2 million (click here to learn what EBITDA means) and EBIT rose by 126% to $36.7 million.
Net profit after tax (NPAT) from continuing operations increased by 124% to $26.4 million.
Jumbo said that the new powerball format has proven to be a success with two $100 million Powerball jackpots in August 2018 and January 2019.
The gambling business said that its performance was attributable to its new software platform’s ability to make the most from a favourable run of jackpots, which it boasted is the best selling point to new ‘Software as a Service (SaaS)’ clients.
Jumbo Dividend And Balance Sheet
The Board of Jumbo decided to increase the dividend by 97% to 36.5 cents per share, with the dividend policy remaining at 85% of net profit.
Jumbo’s balance sheet remains in a “healthy” position with net assets of $77 million and cash of $85 million – being $74 million of general cash and $11 million of players’ funds.
Is Jumbo A Buy?
The expectations built into the share price had gotten a bit too high. But, the growth of customers and growing average spend per active customer is impressive.
But I really don’t know what the right price is for something like Jumbo. A high price, a high growth rate in an industry I don’t know much about, I’d put it in my ‘too hard’ basket, but I can see why investors are interested.
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Disclaimer: Any information contained in this article is limited to general financial/investment advice only. The information has not taken into account your specific needs, goals or objectives, so please consider consulting a licenced and trusted adviser before acting on the information. Please read The Rask Group’s Financial Services Guide (FSG) for more information. This article is authorised by Owen Raszkiewicz of The Rask Group, which is a corporate authorised representative No. 1264179 of Strawman Pty Ltd (ACN: 610 908 211) (AFSL: 501 223).
At the time of publishing, Jaz does not have a financial interest in any of the companies mentioned.