The very popular and highly respected CEO of NSW-based village operator Aevum is the latest executive to exit in the past 10 days from a major public company in the retirement village sector. His leaving and the reasons given provide a fascinating insight into the realities of todays corporate market.
Simon has been with Aevum for five years, with the last three as CEO. He is widely credited with guiding the reincarnation of the old and sleepy Hibernian Friendly Society with three villages into Aevum with 21 villages and a listing on the stock exchange; he further took the company from a break-even situation to $28 million in profits this year, while growing assets from $133 million to $800 million. Perhaps most importantly in this market, Aevums share price is the second best performing of all the public companies in the retirement sector and has very low debt gearing. A hard-to-beat performance, so why the change?
We asked Aevums chairman Graham Lenzner. He reiterated that Simon had done a great job, citing the quality of the executive team he had built, the stock exchange listing, Aevums growth, its industry leading sales and marketing and the full development book they have at present with four sites in DA and several applying for it. Yet, he went on to say: Aevum now has a reputation as a quality provider with strong finance, management and marketing, but we are a bit weak on development. Acquisitions got us critical mass but we miss the developers profit. When you buy villages you are buying retail, not wholesale. The net result is the Board wants a new CEO with strong property development experience.
Mr. Lenzner pointed out that last year their vacancies were 30 percent below expectation, meaning they made 30 percent less DMF and capital gains income. He furthered: There are three income streams, the developers profit up front, the DMF and the capital gain; for the second two, we may have to wait eight to ten years to collect. For cash flow we need the development profit.
Mr. Lenzner sees Aevum moving into greenfield projects within a year, plus looking at private joint ventures with experienced developers. The new CEO they are still interviewing will lead this direction.
The interesting thing to watch will be how the investment market reacts to this change. The leading analysts held Simon Owen in high regard because he was one of the few CEOs who made a point of regularly visiting his villages and having a thorough understanding of local issues. He was the only public company CEO who made the effort to be a Board Member of the Retirement Village Association. His replacement will need the support of these analysts as Aevum moves into the debt financed greenfield development sector.
As for Simon, he most definitely wishes to stay in the industry. His view of his career change is philosophical. He commented: My single regret is leaving the great team that we have built and the many great friendships.