Not yet time to cash-in the chips

Aristocrat Leisure founder Len Ainsworth has taken a beating from the sharemarket, but is patiently hanging on for a turnaround. By JAMES THOMSON

By James Thomson

Aristocrat Leisure founder Len Ainsworth has taken a beating from the sharemarket, but is patiently hanging on for a turnaround.

Worried about the performance of your share portfolio or super fund? Spare a thought for Len Ainsworth and his family. Len, aged 84, is the founder and largest shareholder of the world’s second biggest gaming machine manufacturer Aristocrat Leisure. 

Late this week, Aristocrat announced it was looking to settle a Federal Court class action bought by a group of shareholders who say they suffered losses following the company’s foray into South American markets almost six years ago.

Aristocrat’s shares fell just over 5% during the week, wiping $52 million off the value of the Ainsworth’s family’s Aristocrat shareholding. Since the start of the year, the value of that holding has fallen from $1.5 billion to $995 million. Ouch.

Still, Len isn’t too worried by paper losses. While he’s keen to point out that he doesn’t technically own any Aristocrat shares – they are all held by his wife and children – he is philosophical about the performance of his “very large” share portfolio in recent months. “When I put my cash down for a share, I am very much a victim of the market – the same as everyone else,” he says. “I take the view that you win some, you lose some and I’ve done very well out if, thank you very much.”

Len has needed every bit of his patience with Aristocrat, which he inherited from his father in the 1950s (it made dental equipment at the time) and then turned into a global giant of the gaming industry. In the last 10 years in particular, the Aristocrat story has had it all – betrayal, greed, incompetence and success.

The drama started in December 2001 when Len handed control of Aristocrat to his children after being diagnosed with cancer. He recovered, but family tensions started to rise when his sons refused to allow him to resume control.

Non-family member Des Randall was installed as chief executive, but that didn’t end well either. In early 2003, Randall was sacked over problems in Aristocrat’s North and South American businesses and for misleading the board. Randall’s sacking and the South America disaster led to the start of the class action and a separate case where Randall sued for breach of contract – he lost. During 2003, Aristocrat’s shares fell from $5.60 to as low as 76c.

Then the turnaround began. Former cinema boss Paul Oneile launched a restructure, focusing on a more conservative expansion approach in South America and Eastern Europe, improving sales processes and accounting practices and cementing the company’s position in the booming United States market. By the start of 2007, Aristocrat’s share price was about $15 and the Ainsworth family’s stake was worth more than $2 billion.

It’s all been downhill since, with the company’s recent results disappointing the market. Len says that while there’s nothing he can do – none of the family have any involvement in the management of the company, nor do they even have voting rights attached to their shares – he is comfortable with the company’s performance and dividends. And he says Oneile can hardly be blamed for the class action. “I think that the company is well run and the present managing director is not responsible for the deeds of his predecessor. To tell you the truth, I think the shares are cheap at the moment.”

These days, most of Len’s time is spent running gaming machine manufacturer Ainsworth Game Technology, a much smaller rival to Aristocrat. AGT’s shares have been on a similar trajectory to its bigger rival over the past 12 months, gradually sinking from 50c to around 13c. “The [gaming machine] business worldwide is a little more difficult than it was 12 months ago, but I think it will bounce back,” Len says.

And if you’re worried about the battering your investment portfolio has received in the last six months, relax and take a word of advice from a doyen of the Australian business world on the subject of patience: “I’m very young still, so I’ve got some time for my shares to come good. And if not, they’ll have to follow me into the box.”

This story first appeared in www.businessspectator.com.au