Did you hear the one about the company which produced an audited balance sheet declaring it had net assets of $351 million when the market valued the stock at $7 billion? Meet global pokies giant Aristocrat Leisure, which had a two-hour annual meeting at Star City Casino yesterday.
The Australian touched on the debate today:
Shareholder activist Stephen Mayne asked at the AGM why the company had a market capitalisation of $7 billion but only reported net cash assets of $350 million. Chairman David Simpson replied that the market capitalisation of Aristocrat was dictated by the market while the net cash assets had been worked out according to the new international accounting standards.
Corporate Australia has a long tradition of new CEOs coming in and announcing big write-downs that paint the previous guy black and make him look much better in the future. Witness Malcolm Broomhead at North, Don Mercer at ANZ, Paul Anderson at BHP and Peter Smedley at Mayne. Therefore, in light of the current $7 billion market capitalisation and $351 million in claimed net assets, why on earth did the Aristocrat board and auditor allow its new CEO to write down the company's assets by $160 million to just $218.6 million in 2003 – a year when it had positive cash flow of $200 million and was valued by the market at a couple of billion?
Copyright © 2022 The Mayne Report. All rights reserved