Aveo Group Limited

AOG Details

Shares of Aveo Group Limited (ASX: AOG) tumbled 11.15% on 26^th June 2017, after filing a response statement to Fairfax/Four Corners queries. Shares have slumped as the retirement and nursing home operator faces a media investigation alleging that it has used exorbitant fees and complex contracts to increase profits. Aveo group owns and operates 89 retirement villages across Australia with a total of 11,014 units and more than 13,000 residents. The latest filing with ASX included Aveo's response to the 29 questions raised by Fairfax/Four Corners on 21^st June 2017.

The joint investigation will reveal stories of monetary loss experienced by some of the residents in Aveo retirement villages who are not given adequate support from "underfunded" consumer affairs bodies. Moreover, Four Corners speaks with residents and former residents and reveals the contracts they signed which include specific clauses relating to property sales and ongoing fees. Four Corners and Fairfax journalists probed mainly into Aveo's contracting and property sales processes, as well as the overall treatment of residents at its aged care facilities. However, in response to questions raised by investigators, Aveo says it is trying to simplify and standardize the contracts it has with residents, and that the exit fee on new contracts is 35% of the purchase price if the resident leaves after three years.

For H1FY17, Aveo Group revenues declined 31% to $196.3M, while net income grew by 82% to $121.2M during the same period. Revenues reflects decline of 47% in Non-retirement segment to $126M and net income led by property increase from $34.7M to A$177.1M. The stock has declined 7.0% over the past six months, while it was down 6.4% in the last one year. We give a “Hold” recommendation on the stock at the current market price of $2.71


AOG Daily chart; (Source: Thomson Reuters)

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