Aveo reveals 22% increase in FY17 profits – and changes to village contracts

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The listed operator has announced an underlying profit after tax for their retirement business of $108.4M – a 6% return on assets and an increase of 22% on FY16 – driven by its existing retirement portfolio and new developments.

Aveo recorded sales of 1,242 units in FY17, up from 799 in FY16 – a 55% jump. This means they are selling 100 homes a month or three a day. No pressure!

In total, the company delivered 266 new retirement units in FY17, with another 506 new units due to be completed in FY18. More pressure!

After being targeted by Fairfax and Four Corners, inquiry rates are now increasing after falling in July to 60% on the same period last year.

Aveo CEO Geoff Grady has also announced a host of new measures including committing to the eight resolutions recently put forward by the Retirement Living Council; improving its complaint and incident handling procedures including a requirement for independent mediation; simplifying contracts further; and offering money back guarantees and shortened buyback periods.

The markets liked what they heard – Aveo’s shares recovering up 11% at $2.70, the biggest one-day rise for the company in recent years.

Significantly, market analysts are also saying Aveo remains a solid investment. Three issued updates with Macquarie staying stable at $4.35 (Outperform); Morgan Stanley posting favourable comments and maintaining an Overweight rating but reducing their target price from $4.20 to $3.25; and Morgans again having favourable comments and maintaining an Add rating but cutting their target price from $4.10 to $3.61.

Before the announcement, Patersons also said $5.44 (buy); JP Morgan $3.70; Moelis $2.72 (Hold) and Morningstar $3.10.