Investment Matters

Aveo

Aveo released a good result - ahead of our expectations, and the expectations of the market.  Both the retirement and residential divisions grew their earnings (+51% and +66% respectively).  Overall, underlying net profit increased 63% to $89m.  Aveo also announced an acquisition - more on this below.

Aveo's retirement division achieved a record sales volume of 799 units, including 63 newly developed units.  Aveo completed the build of 182 units in FY-16, thus providing a pipeline of sales opportunity for FY-17.   Care and support services achieved modest growth.  Further growth is expected in coming periods, with additional aged care facilities and expansion of services such as food and allied health.

The earnings increase from Aveo's residential division was driven by increased sales of land and built product (houses and apartments).  Remaining units in The Milton (Brisbane) were sold in FY-16, completing Aveo's exit from the apartment market.  Contracts on hand at 30-Jun-16 were worth $253m, consistent with FY-15.

Key metrics continued their positive trend, for instance NTA per security increased 5% to $3.00, Return on Assets increased to 6.3% (was 4.6% in FY-15, and the FY-18 target is 7.5% to 8.0%), and portfolio turnover increased from 11.0% to 11.9%. 

Aveo released a good outlook, with EPS guidance for FY-17 of 18.3cps - an increase of 7.6% on FY-16.  The distribution target is 9 cps, up 13% as compared to FY-16.

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