Retirement communities operator Aveo has warned that unit sales would be at the “bottom end” of its forecasts as it was still recovering from a public scandal that saw it accused of ripping off and neglecting its residents.
Aveo chief executive Geoff Grady told shareholders at the company’s annual general meeting on Wednesday that demand for units had slowed in July in the wake of a joint Fairfax Media – Four Corners probe into the group which raised concerns about high fees and complicated contracts.
Mr Grady said sales inquiry was down 40 per cent in July compared to the previous year and 25 per cent in August but had improved in the meantime and was expected to normalise by the end of the year.
Mr Grady said the company had launched new contracts, introduced buyback guarantees and undertaken fresh marketing to build back momentum.
Still Aveo now expects to sell just 500 units in the first half of the financial year compared to the 621 sold in the same period last year – a drop of 20 per cent.
Because of that performance the turnover rate for its portfolio would be at the bottom end of its targeted 10 per cent to 12 per cent range although that would be partly boosted by contract conversions and minor development sales.
Turnover is a crucial metric for retirement companies because when a resident leaves a unit that is when the operator recoups the exit fee usually made up of a substantial share in the sale price.
Mr Grady said after the meeting that there was a “recovery of trust that had to be done”.
“It could really only be done from mid-August and onward, so by the time we announced our new product offerings and then got that into the media, we were talking about the end of August,” Mr Grady said.
“So really then to have that recovery over the course of September and October, two months, is doing pretty well.”
Investors responded well to the update. ??????Aveo shares hit a four-month high on Wednesday at $2.715 late in afternoon trading, but it was still well below the price [$3.30] it commanded prior to the Fairfax Media – Four Corners investigation.
Aveo said a class action against Aveo, co-ordinated by Levitt Robinson, was lodged in the Federal Court of on 15 September 2017.
“We believe we have acted appropriately at all times and strongly deny the claims and will strongly contest all the allegations in the proceedings. A defence will be filed later this week and the proceeding is not expected to come back before the Federal Court for a directions hearing again until March 2018,” Mr Grady said.
To help boost sales, the group is on the hunt for development sites with less exposure to its traditional Queensland and Adelaide base. To that end Aveo is developing 64 apartments at the Norwest business park area in Sydney’s Bella Vista, which is owned by its largest shareholder, Mulpha.
He said Aveo supported the regulatory reviews of the retirement sector either completed or underway across all states and supports moves to create a clearer and more consistent regulatory regime
The company copped a significant protest vote against its remuneration report with more than 15 per cent of votes cast against passing it.