Aveo reveals profit collapse against challenging sales

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The stock exchange listed company yesterday released to the market that after 51 weeks sales in the financial year it predicts an underlying profit for FY19 of $50 million.

This compares with its FY18 underlying profit of $127 million.

They expect the 12 months will deliver 900 home ‘sales’ (or settlements). This compares with 974 in FY18, a drop of 8%. But in FY17 before the Four Corners program – the company delivered 1,242 sales. In summary, their sales have dropped 28% in unit terms.

Within this mix is the fact that in FY18 Aveo also delivered 506 new homes into their portfolio.

Across the portfolio of 12,000+ village homes Aveo requires an 10% sales rate a year before new developments to keep vacancies at the minimum and maximise their DMF income. This equates to 1,200 homes.

With 900 sold this year they are likely to have a stock build-up of 300 homes. At $400,000 each and a 30% DMF, there is $36,000,000 missing ‘underlying profit’.

In actual fact Aveo has performed extraordinarily well in a difficult market. The negative spectre of the Four Corners program is inescapable. Below is the Google search today for Aveo Four Corners. Despite this and the negative housing market they report they are now up to 23 net sales per week – which delivers 1200 per year.

This all impacts the valuation of the business at a time of a pending sale – see next story.

 

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