Property slowdown hits Aveo’s profits

Australian retirement village owner and operator Aveo Group has reported challenging first half results as the Sydney-based group confirmed that it is assessing a number of buyout bids.

Profits fell almost 130% to a loss of A$44.7 million (US$31.9 million) on revenues that dropped 31% to A$144 million.

The broader property market across large parts of Australia has experienced a significant downturn over the past 18 months, with a decrease in average weighted auction clearance rates for the four major capital cities in which Aveo operates from 72% in the final quarter of FY17 to 42% today.

While sales for Aveo might be steady, settlements are not.

“Settlements are taking longer to occur as incoming residents are experiencing increased difficulty in selling their homes,” said chief executive officer Geoff Grady. He explained that this has led to a substantial increase in the number of deposits on hand, from 89 at the end of June last year to 212 at the end of December. “Our underlying profit, at A$12 million for HY19, is driven by the number of unit settlements and is a reflection of this broader property market downturn,” he added.

Aveo appointed Merrill Lynch to manage a strategic review in August last year which began in November. It said that “a number of indicative non-binding bids” had been received from parties interested in a whole of company transaction. A shortlist of bidders is expected to emerge by the end of the month.

Shares in Aveo are down almost 29% over the past year, though thanks to the news about a possible buyout, they gained 3.2% yesterday to A$1.77.