AVEO INCREASES STATUTORY PROFIT

Written on the 19 February 2014

AVEO INCREASES STATUTORY PROFIT

A STRATEGY to focus heavily on retirement homes is beginning to show results for Aveo Group (ASX:AOG).

The company reports a statutory profit after tax of $2.2 million in the first half of FY14, compared to the $28.5 million loss in the previous corresponding period.

While underlying profit after tax is $19.2 million, lower than the $23.6 million recorded PCP, but that was boosted by a number of one-off settlements.

Sales of non-retirement assets generated $50 million, which combined with a $232 million capital raising venture allowed the company to reduce gearing to 20.4 per cent from 31.5 per cent at FY13.

“Our financial result in HY14 was solid, especially given the strategic initiatives that we undertook. In particular, the strength in sales from our retirement business augers well for continued growth as our retirement strategy evolves,” says CEO Geoff Grady (pictured).

The retirement business contributed $20.9 million to the group’s HY14 result, a 30 per cent uplift from the previous corresponding period.

The residential communities and apartments division contributed $12.2 million to the HY result, while the commercial and industrial division contributed a profit of $3.7 million.

The company launched its plan to run as a pure-play retirement operator last year and expects the 80/20 split of retirement assets to non-retirement assets to be achieved before the end of FY16.

AVEO wants to deliver 200 new retirement units annually by FY16, extending to 500 new retirement units annually by FY18. Overall retirement sales volumes increased 36 per cent in HY14.

“The experience and skill set required to meet these targets already exists within the broader Aveo Group and will involve a refinement of resources rather than creating significant new capabilities.”

It is also aiming to offer care services to 75 per cent of its retirement portfolio by the end of FY14.

Return on retirement assets is expected to improve to 6.5 per cent by FY16 and 8 per cent by FY18.

AOG is trading down 6 per cent at lunch at $2.18 per unit.


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