Analysis of the FY17 key financials presented by Aveo at their Annual General Meeting is interesting in light of the media accusations of gouging residents and their families.
Their business has two main drivers – turnover of existing homes and sales of new development homes.
For the 12 months they made a retirement profit of $101M, with existing homes making $74M and new development homes $25M (plus care services $1.7M).
They re-sold 1,008 existing homes and 234 new homes.
The profit for each existing home averaged $73,400. With the average occupancy being 10 years, the average departing resident paid $7,340 a year to live in the village, or just $141 per week under their lease license contract.
The 234 new homes sold for an average of $708,000 and generated a profit of $107,000 for Aveo.
In FY17 Aveo sold 171 more new homes than in FY16. They added around $18.3 million profit in FY17 compared to FY16.
The increase in total retirement profit year on year was $21 million. Take out the additional 171 homes built and sold, they made just $3M more profit from FY16 to FY17, or 4%.
Fairfax Media did not get into the detail when it described Aveo’s profit as ‘doubling’ and under the headline: ‘Aveo may be taking a big punt too early’ they said:
“With regulators and various state and federal governments breathing down the collective neck of the retirement village industry it was little surprise that Aveo was in damage control when it released another record profit”.
Supporting our analysis, Aveo’s actual return on assets for FY17 was 6.0% compared to FY16 at 6.3%, reflecting steady performance rather than ‘record profits’.
