Aveo Group FY14 Half Year Results For the period ended 31 December February 2014

Transcription

1 Aveo Group FY14 Half Year Results For the period ended 31 December February 2014

2 Agenda 1. Overview 2. Financial Results & Capital Management 3. Retirement 4. Non-Retirement 5. Outlook 6. Appendices i. Detailed Financial Information ii. Retirement Information iii. Non-Retirement Information iv. Capital Management 2

3 Overview 3

4 Steps Achieved on Road to a Pure Retirement Entity Since the announcement of a strategy to transition to a pure retirement company, several key milestones have been achieved Category Milestone Status Branding Change of company name from FKP Property Group to Aveo Group Communicate new strategy to the investment market and staff Leverage Reduce Aveo gearing to levels in line with pure retirement players Asset Sales Sales of Lonsdale St, 50% of The Milton, Yang land at Point Cook, the Hepher Rd industrial land and the Aerial retail complex All pre-existing Non-Retirement fractional interests, including the 50% MulphaFKP joint-venture interest, the small shareholding in PBD and the 50% interest in the Brookvale joint-venture, have been sold Land banks are expected to be rationalised within our strategic timeframes Strong pipeline of interest on remaining assets RVG Sold Metlifecare stake, repaid debt, have substantial cash surplus Strategic Stockland first right of refusal over retirement assets removed Investor Appeal Re-introduced into the S&P/ASX 200 Index 4

5 Care and Support Return on Assets Retirement Development Established Portfolio Key Medium Term Targets Financial Returns Ongoing Steps to Achieve Returns Targeting to improve retirement assets Return on Assets (ROA) 1 Financial return targets of: 6.5% ROA by FY16 8.0% ROA by FY18 Continue to achieve turnover rates at levels in excess of 10%; currently 11% Increase unit pricing; currently achieving valuation for resales Improve Aveo contract terms; introducing improved standard contract 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 4.0% 6.5% 8.0% Pipeline enlarged from 600 units to 2,600 units Delivery planned for 200 new units per annum by FY16 Delivery of 500 new units per annum by FY18 2.0% 1.0% 0.0% FY14F FY16F FY18F Transitional Period 1 Return on assets calculated as retirement EBIT divided by retirement assets (excluding any future retirement asset revaluations after 30 June 2013). See further detail on slide 40. Grow revenue through care and support services to 100% of the portfolio; 75% coverage targeted for FY14 will be achieved Finalise discussions with strategic alliance partners in aged care 5

6 Financial Results & Capital Management 6

7 Key Financial Outcomes Outcome HY14 HY13 Change Comment on HY14 Statutory Profit/(Loss) after Tax 1 $2.2m 3 ($28.5m) 108% Reflects transfer from foreign currency translation reserve see note 3 Statutory Profit/(Loss) after Tax 1 before transfer from FCTR 2 $20.9m ($28.5m) 173% Underlying Profit after Tax $19.2m 4 $23.6m (19%) Underlying EPS 5.0cps 9.1cps (45%) Net Assets $1,425.3m $1,174.0m 5 21% NTA per Stapled Security $2.78 $ (21%) Gearing 20.4% 31.5% 5 (11%) Principally driven by improvement in fair value adjustment to retirement investment property Improved Retirement result and lower Non-Retirement contribution Reflects additional shares outstanding following capital raise completed in December 2013 and reduced underlying earnings Increase in net assets is driven by December 2013 capital raise Adjusted for additional stapled securities on issue following December 2013 capital raise Reduced by December 2013 capital raise, asset sales and operating cash inflow Look Through Gearing 21.7% 34.5% 5 (13%) Reduced by December 2013 capital raise and the pay down of RVG debt 1 Net profit/(loss) after tax attributable to stapled security holders of the Group see slide 23. ²Foreign Currency Translation Reserve 3 Included in the Statutory Result of $2.2m is a transfer of the foreign currency translation reserve relating to Aveo Group s indirect stake in Metlifecare that was sold during the period. An amount of $18.7m was transferred from reserves within equity to the statement of comprehensive income. This transfer did not affect net assets. The reserve accumulated over the life of the Metlifecare investment due to foreign exchange fluctuations. The statutory profit for the period would be $20.9m, had this reserve not been transferred to the statement of comprehensive income as required by Accounting standards. 4 Includes utilisation of $4.8m before tax, $3.4m after tax, of impairments raised at June Relates to FY13. 7

8 Divisional Contributions Retirement HY14 HY13 Change Established Business % Development (82%) Care and Support Total Retirement % Non-Retirement Residential Communities and Apartments (49%) Commercial and Industrial % Total Non-Retirement (40%) Non-Allocated Overheads (5.1) (6.2) (18%) EBITDA (13%) Depreciation and Amortisation (0.9) (1.1) (18%) EBIT (13%) Interest and Borrowing Expense (10.0) (7.8) 28% Profit Before Tax (25%) Income Tax (1.5) (4.2) (64%) Profit After Tax (18%) Non-Controlling Interests (0.1) 0.1 (200%) Net Underlying Profit (19%) Statutory Profit/(Loss) 2.2 (28.5) (108%) 1 The underlying profit has been calculated as per the AICD Underlying Profit Guidelines. Includes utilisation of $4.8m before tax, $3.4m after tax, of impairments raised at June

9 Capital Management: HY14 Metrics Capital raise of $232m successfully completed during the period to reduce gearing and debt levels Reported gearing materially reduced to 20.4% $125m of existing facility limits were cancelled or amortised during the period Available facilities have increased materially Interest coverage ratio is 2.6 times against a covenant of > 2.0 times Pro forma weighted average borrowing cost after redemption of the Convertible Bond (CB) is 8.4% due to the higher proportion of fixed rate debt post repayment from capital raise proceeds Weighted average time to maturity of debt 1.7 years CB redeemed soon after balance date (5 January 2014) Metrics HY14 FY13 Reported Gearing 20.4% 31.5% Look Through Gearing 21.7% 34.5% ICR 2.6x 2.5x Total Interest Bearing Liabilities $504m $685m Undrawn Committed Lines 2 $237m $139m Available Facilities $202m $92m Weighted Average Borrowing Cost 1 8.4% 3 8.1% Weighted Average Debt Maturity 1.7 years years Fixed % on Drawn Debt 87% 3 76% Fixed % on Facility Limit 61% 3 63% Weighted Average Hedge Maturity 2.4 years years 1 Includes margins and line fees. 2 Undrawn facilities are dependent upon having sufficient security. 3 Pro forma after Convertible Bond redemption on 5 January Interest Bearing Liabilities and Gearing History 9

10 Retirement 10

11 Analysis of Retirement Results 30% lift in profit contribution from retirement operations driven by an increase in overall sales volumes of 36% and total value of units transacted of 45% Turnover is strong by industry standard at 11% Also positively impacted by a shift from a focus on clearing low profit margin Aveo owned buyback stock in HY13, to a more business as usual sales mix in HY14 Sales mix reflects: significant increase in resident to resident resales, which offset a drop in buyback sales decrease in established business revenue reflects decrease in buyback sales Tight cost control also reflected in lift in underlying operational profit contribution Key Performance Indicators HY14 HY13 Change Profit Contribution Established Business $20.1m $14.4m 40% Development $0.2m $1.1m (82%) Care and Support $0.6m $0.6m - Total Retirement Contribution $20.9m $16.1m 30% Segment Revenue Established Business 1 $47.5m $52.0m (9%) Development 2 $3.5m $6.2m (43%) Services 3 $5.1m $5.5m (7%) Total Retirement Revenue $56.1m $63.7m (12%) Total Value of Units Transacted $89.9m $62.1m 45% Sales volumes (units) Resales % Buyback Sales (61%) Newly Developed Sales (42%) Total % Buyback Purchases (units) (22%) Deposits on Hand (2%) 1 Includes DMF/CG, Admin Fees and Other Income relating to the Existing Business, RVG and US Senior Living Equity Accounted Profits. 2 Includes New Sales Income. 3 Includes Aged Care and Other Support Income. 11

12 Units Residential Settlements Sales Trends HY14 sales of 333 units are the highest sales levels in over five comparable periods achieved Still maintaining solid levels of deposits on hand in addition to the strong sales levels Total Unit Sales Levels vs. National Residential Settlements , , , , , HY09 HY10 HY11 HY12 HY13 HY14 AOG Sales (LHS) AOG deposits on hand (LHS) LGA National Settlements (RP Data) (RHS) Source: RP Data (LGA Relative to Villages, Price Point Range $420,000 to $1.2m). 12

13 Established Portfolio Lift in total DMF/CG generated in line with increases in resident resale levels Average DMF/CG transaction price point increased Lower DMF/CG margins achieved due to the mix of an unusually high rate of residents exiting with below average contract terms Provides an opportunity to convert these less favourable contracts to new standardised contract which have terms more favourable to Aveo Key assumptions used in determining the Investment Property valuation remain consistent with previous periods Consistent assumptions reflected in the fact that the Investment Property asset valuation remains largely unchanged Contribution from RVG expected to increase going forward post pay-down of debt Key Performance Indicators HY14 HY13 Change Gross DMF/CG Generated $23.7m $15.9m 49% Avg DMF/CG Transaction Price Point $267k $259k 3% Avg DMF/CG per Transaction $73k $88k (17%) Avg DMF Rate of Existing Contracts 30% 30% - Avg CG Share of Existing Contracts 51% 50% 1% Portfolio Turnover (based on sales) 11% 8% 3% Occupancy 95% 93% 2% Average Age of Residents (years) (0.3) Average Age on Entry (years) (0.1) Average Village Age (years) Key Valuation Assumptions/Outcomes HY14 FY13 Change Discount Rate 12.5% 12.5% - Future Property Price Growth Average 20 Year Growth Rate Current Resident Tenure Subsequent Resident Tenure (years) Medium term 3.5% 3.5% - Long term 4.5% 4.5% - ILUs SAs 4.3% 4.3% - Life tables Life tables ILUs SAs NPV of Annuity Streams $891.2m $891.9m

14 Development Activity Construction underway at the following sites in FY14: Albany Creek, QLD Durack, QLD Island Point, NSW Mingarra, VIC Hunters Green, VIC Rose Grange, VIC The pipeline has now increased to around 2,600 units taking into account identified greenfield sites within the existing land portfolio, plus redevelopment of existing villages within the portfolio Further site acquisitions under consideration to ensure pipeline is adequate to meet forecast unit delivery in FY16 and FY18 Additional resources being redeployed from within existing broader Aveo business or recruited Achieving Development Targets Aveo Historical Residential Development Sales Historically have consistently developed c.500 units of residential product (lots or apartments) depending upon prevailing market conditions Increase to targeted 500 new retirement units per annum is consistent with this level of broader existing development Simply substituting new retirement development activity for existing residential development activity 1 Does not include MulphaFKP lots FY10 FY11 FY FY FY10 FY11 FY12 FY13 Retirement Units Land Lots1 Apartments Average - Four year 14

15 Respite Residential Aged Care Further Services Nutrition In Home Care Care and Support Services Domestic and care services to be available at over 90% of villages owned by Aveo by end of FY14, in excess of target previously announced of 75% of villages Consultants have been engaged to develop a national approach to nutrition, food preparation and delivery of meals into villages Resident surveys and focus groups with resident committees are currently being undertaken to facilitate targeted delivery of services In substantial discussions regarding the expansion and co-location of residential aged care and dementia facilities at existing villages with third party operators Nationwide respite services now available Home Care Trials with several third party care providers are underway at villages in QLD, VIC and SA to provide full care services into villages and from village to catchment areas Aveo does not provide services directly but facilitates provision of care and support services to residents via these specialist external providers Introduction of these providers to the villages has been met with strong interest and uptake by residents Service provision model via third party providers meets resident needs, is capital efficient, maximises revenue opportunities while minimising the operating risks to Aveo 15

16 Non-Retirement 16

17 Residential Communities and Apartments Divisional contribution reflects very strong land sales at all major land banks and from MulphaFKP JV Current level of sales would see Rochedale sold out in three years and Peregian in four years Second display village is well underway at Saltwater Coast with official opening planned for April 2014 Positive contribution from MulphaFKP JV, reflecting strong sales at Mulgoa Key Performance Indicators HY14 HY13 Change Divisional Profit Contribution 1 $12.2m 1 $24.0m (49%) Gross Profit Land $13.2m $5.5m 140% Gross Profit Apartments $0.1m S21.0m (100%) Sales Revenue $57.7m $113.3m (49%) Land Lot Sales % Built Product Sales (93%) MulphaFKP JV Lot Sales % Average Margin (incl. interest) 2 20% 23% (3%) Average Margin (excl. interest) 2 30% 35% (5%) 1 Includes utilisation of $4.2m of impairment raised at June Does not include MulphaFKP. Residential Deposit Flow Luxe remains on track to be completed and sold out by end of FY14 Targeting sale of remaining Aerial stock by end of FY14 Milton on track for completion in FY16 with 244 pre-sales to date 17

18 Commercial and Industrial Development All retail space at Gasometer 1, Newstead now fully leased with 37% of office space leased, reflecting a slow down in the Brisbane market Sale of Hepher Road, south-western Sydney for $6.5m settled in November 2013 Strong sales volumes at Mackay, with enquiries remaining consistent Investment Property Sale of Lonsdale Street, Melbourne settled in October 2013 for $31.5m Miller Street, Sydney being marketed Key Performance Indicators HY14 HY13 Change Divisional Profit Contribution 1 $3.7m $2.7m 37% Comprised of: Development $1.1m ($0.9m) (222%) Net Rental Income $2.6m $3.6m (27%) Trading Sales Revenue $10.4m $4.2m 148% Investment Properties Held (66%) 1 Includes utilisation of $0.6m of impairment raised at June Gasometer 1 held as inventory at HY13 and HY14 18

19 Outlook 19

20 Deliver On The Plan That Has Been Put In Place Strategic Plan Established Continue to Exit Non- Retirement Continue to Execute Strategy FY14 Guidance Already achieved all the immediate key elements of the strategic plan Resources have been allocated to meet key development and care targets Leverage reduced and now provides operational and strategic flexibility going forward Non-Retirement asset sales are progressing well and are expected to reach the previous target of an 80/20 Retirement/Non-Retirement asset split by earlier than the end of FY16 Maximise shareholder value by consistently demonstrating realisation at or around book value Maximise cash flow generation available from existing established retirement business Focus business performance on delivery of medium term development, care and key financial return targets FY14 underlying profit expected to be up on FY13 result Dividend amount to be determined and announced in June

21 Appendices 21

22 Appendices Appendix i. Detailed Financial Information Appendix ii. Retirement Information Appendix iii. Non-Retirement Information Appendix iv. Capital Management 22

23 Statutory Income Statement Profit/(Loss) From Continuing Operations Before Income Tax 2.4 (33.4) HY14 Income Tax (Loss)/Benefit (1.6) 8.7 Profit/(Loss) From Continuing Operations After Income Tax 0.8 (24.7) Loss After Tax From Discontinued Operations - (15.0) Profit/(Loss) for the Half-Year 0.8 (39.7) Non-Controlling Interest Net Profit/(Loss) After Tax Attributable to Stapled Security Holders of the Group 2.2 (28.5) HY13 23

24 Reconciliation of Statutory Profit to Underlying Profit HY14 HY13 Gross Tax 1 Net Gross Tax 1 Net Statutory Profit after Tax and Non-controlling Interest 2.2 (28.5) Retirement Change in Fair Value of Retirement Investment Property 3.4 (2.2) (17.2) 38.3 Share of Non-Operating Loss of Equity Accounted Investments Total Retirement 19.9 (2.2) (17.2) 44.6 Non-Retirement Change in Fair Value of Property Trust portfolio Net Development Impairments Provision for Losses 0.9 (0.3) (0.7) 1.6 Other 1.9 (0.5) (0.1) 0.5 Total Non-Retirement 3.7 (0.8) (0.8) 9.0 Change in Fair Value of Derivatives (5.2) 1.6 (3.6) (2.1) 0.6 (1.5) Underlying Profit after Tax and Non-controlling Interest The tax adjustment in relation to the change in fair value of the retirement investment property includes tax and OEI. 24

25 Reconciliation of Underlying Profit to Segment Notes Underlying Profit Change in Fair Value of Retirement Investment Property Share of Nonoperating Loss of Equity Investments Net Development Impairments Provision for Losses Change in Fair Value of Derivatives Other Statutory Result Retirement Established Business 20.1 (3.4) (16.5) Development Care and Support Total Retirement 20.9 (3.4) (16.5) Non-Retirement Residential (2.6) (0.9) - (0.4) 8.3 Commercial and Industrial (0.8) 4.6 Total Non-Retirement (0.9) (0.9) - (1.2) 12.9 Non-Allocated Overheads (5.1) EBITDA 31.7 (3.4) (16.5) (0.9) (0.9) 5.2 (1.2) 14.0 Depreciation and Amortisation (0.9) (0.9) EBIT 30.8 (3.4) (16.5) (0.9) (0.9) 5.2 (1.2) 13.1 Interest and Borrowing Expense (10.0) (0.7) (10.7) Profit Before Tax 20.8 (3.4) (16.5) (0.9) (0.9) 5.2 (1.9) 2.4 Income Tax (1.5) (1.6) 0.5 (1.6) Profit After Tax 19.3 (2.7) (16.5) (0.9) (0.6) 3.6 (1.4) 0.8 Non-Controlling Interests (0.1) NPAT Attributable to Aveo Group 19.2 (1.2) (16.5) (0.9) (0.6) 3.6 (1.4)

26 Reconciliation of Retirement Segment Revenues to Segment Note Segment Revenue HY14 HY13 Established Portfolio 47.5m 52.0m Development 3.5m 6.2m Services 5.1m 5.5m Total Retirement Segment Revenue (Slide 11) 56.1m 63.7m Adjustments Sales Revenue New Sales 1 (3.5) (6.2) Sales Revenue Buy Back Sales 1 (9.3) (22.6) Equity Accounted Profits RVG and US Senior Living 0.3 (1.3) Interest Income Retirement Revenue per Segment Note Included as change in fair value of resident loans in statement of comprehensive income. Change in Fair Value of Resident Loans on the face of the Statement of Comprehensive Income HY14 HY13 Change in Fair Value of Resident Loans (Slide 30) 7.1 (40.2) Movement in Deferred Revenue (Slide 30) (2.3) (0.9) Sales Revenue New Sales (3.5) (6.2) Sales Revenue Buyback Sales (9.3) (22.5) Total Change in Fair Value of Resident Loans (8.1) (69.9) 26

27 Reconciliation of Movement in Non-Retirement Assets Non-Retirement Asset Balance Sheet Movement from 30 June 2013 to 31 December 2013 Non-Retirement Assets at 30 June Less: Lonsdale Street Sale (31.0) Pro forma Non-Retirement Assets at 30 June Less: Asset Sales made during the HY14 period (Hepher Road, PBD and Brookvale JV) (17.0) Movement in Equity Accounted Investments during the HY14 period (2.3) Add: Net Development Activity during the HY14 period 44.5 Total asset sales announced of $156.3m Closing Non-Retirement Assets at 31 December Less: Asset Sales Post Half Year End Aerial Retail Complex (9.0) MulphaFKP JV (53.3) Milton/Yang Land (46.0) Pro forma Non-Retirement Assets at 31 December Represented by Inventories: Residential Communities Residential Apartments Commercial and Industrial Total Inventories Investment Properties/Assets held for Sale 19.4 Property, Plant and Equipment 6.9 Pro forma Non-Retirement Assets at 31 December Pro forma Non-Retirement Assets at 31 December 2013 as Percentage of Total Assets 2 38% 1 Will reduce further upon re-allocation of identified retirement sites from existing land portfolio. 2 Excludes non allocated assets of $140.7m. 27

28 Summary Statutory Balance Sheet Assets Retirement HY14 FY13 Change Investment Properties (refer slide 30) 2, , Investments (refer slide 32) % Property, Plant and Equipment (2%) Intangibles % Total Retirement 2, , Non-Retirement Inventories (refer slide 31) % Investment Properties / Assets held for sale (refer slide 30) (62%) Investments (refer slide 32) (19%) Property, Plant and Equipment % Total Non-Retirement (1%) Cash/Receivables/Other % Total Assets 3, , % Liabilities Payables/Provisions/Deferred Revenue/Other (44%) Resident Loans and Retirement Deferred Revenue 1, , Interest Bearing Liabilities (26%) Deferred Tax Hedge Liability (14%) Total Liabilities 1, ,183.9 (10%) Net Assets 1, , % NTA per stapled security $2.78 $3.53 (21%) 28

29 Management Balance Sheet HY14 FY13 Change Assets Retirement Retirement Investment Property 1 (refer slide 30) (2%) Equity Accounted Investments (refer slide 32) % Property Plant and Equipment and Intangibles (1%) Total Retirement 1, , % Non-Retirement Property Trust assets (62%) Commercial and Industrial Developments % Residential Communities (4%) Residential Apartments % Total Non-Retirement (1%) Other Assets (including Cash and Trade Receivables) % Total Assets 2, , % Liabilities Interest Bearing Liabilities (refer slide 48) (26%) Derivative Liabilities (24%) Deferred Tax Liabilities (0%) Other Liabilities (including Trade Payables, Provisions, Deferred Revenue) (45%) Total Liabilities (27%) Net Assets 1, , % 1 Net of resident loans and deferred income. 29

30 Investment Property Summary Retirement HY14 FY13 Change NPV of Annuity Streams (refer slide 13) Investment Properties Under Construction % New Units Available for First Occupancy (18%) Buy Back Units Available for Occupancy % Retirement Net Valuation (2%) Resident Loans 1, , % Deferred Income Net of Accrued DMF (2%) Total Retirement Investment Property 2, , Non-Retirement Aveo Property Trust Investment Properties (62%) Total Investment Properties (62%) Assets Reclassified as Available for Sale (19.4) (31.0) (37%) Operating Lease Receivables and Incentives Total Non-Retirement Investment Property (100%) Total Investment Properties per Balance Sheet 2, ,352.5 (1%) 30

31 Non-Retirement Inventories Summary Inventories HY14 FY13 Change Residential Communities (1%) Residential Apartments % Commercial and Industrial % Total Inventories % Residential Communities Residential Apartments Commercial and Industrial Total Impairment Balance as at 30 June Additional Provisions Recognised Amounts Utilised in relation to pre 30 June 2013 impairments (0.7) (0.4) (0.7) (1.8) Amounts Utilised in relation to 30 June 2013 impairments (4.2) - (0.6) (4.8) Balance as at 31 December

32 Equity-Accounted Investments Summary Equity-Accounted Investments Retirement HY14 FY13 Change RVG % US Senior Living % Total Retirement % Non-Retirement MulphaFKP (4%) PBD Developments (100%) Brookvale (100%) Total Non-Retirement (19%) Total Equity-Accounted Investments (3%) 1 Effective December 2012, the accounts of PBD Developments Limited were deconsolidated from the consolidated Group and treated as an investment in an associate accounted for under the equity method. Effective October 2013, the consolidated Group sold its remaining share in PBD Developments Limited. 32

33 Interest Expense Reconciliation HY14 HY13 Change Interest Expense Paid (23%) Less: Capitalised Interest Retirement Properties Under Construction (100%) Total Retirement (100%) Non-Retirement Residential Communities (26%) Commercial and Industrial Trading (62%) Total Non-Retirement (35%) Total Capitalised Interest (36%) Net Finance Costs % Add: Capitalised Interest Expenses in COGS Residential Communities % Residential Apartments (91%) Commercial and Industrial Trading Total Capitalised Interest in COGS (56%) Finance Costs Including Capitalised Interest Expensed in COGS (26%) 33

34 Corporation Statutory Income Tax Reconciliation Statutory Profit/(Loss) from Continuing Operations before Tax 2.4 (33.4) Less: Property Trust Contribution (12.7) (10.4) Corporation Loss before Tax (10.3) (43.8) HY14 Add: Transfer from Foreign Currency Translation Reserve on Disposal of Foreign Operation Add: Other Non-Deductible Items (net of non assessable items) (3.1) (2.2) Add: Unfranked Dividends Received Corporation Adjusted Taxable Profit/(Loss) 5.3 (42.9) Tax 30% 1.6 (12.9) Prior Period Adjustment - - Adjusted Tax Expense/(Benefit) 1.6 (12.9) Effective Tax Rate 1 (16%) 29% De-Recognition of Deferred Tax Asset Tax Expense/(Benefit) 1.6 (8.7) HY13 1 Calculated as adjusted tax expense or benefit divided by corporation loss before tax. 2 An assessment of the recoverability of certain deferred tax assets related to equity accounted investments was made. This assessment determined that tax benefits were not considered recoverable with sufficient certainty. As a result these tax benefits were de-recognised. 34

35 Group Management Expenses Continued to successfully identify and implement cost saving initiatives Now targeting a reduction of 12% for FY14 Focus continues on: Rationalising corporate functions as business moves to pure play retirement Retirement procurement Improving and automating processes Reallocation of resources from Non- Retirement to Retirement associated with the increased development rates and the expansion of care and support services will impact management expenses going forward Management Expenses HY14 HY13 Change Total $17.7m $22.4m (21%) Management Expenses 35

36 $m Cash Flow Reconciliation (7) (28) (13) (3) (6) Opening Cash Net Retirement Activity Net Non- Sale of Non- Retirement Activity Retirements Assets Payment for Investments Net Interest Paid Distribution Paid Other Operating Costs Other Proceeds from Equity Raise Net of Debt Repayment Closing Cash 36

37 Look Through Gearing Levels 1H14 Aveo RVG MFKP Other Look-Through Total Assets 3, ,388.0 Less: Cash (85.7) (85.7) Less: Resident Loans (1,255.3) (1,255.3) Less: Equity-Accounted Investments (EAIs) (152.8) Plus: Share of EAIs Total Assets Less: Share of EAIs Cash - - (2.8) (0.6) (3.4) Less: Share of EAIs Resident Loans - (240.2) - - (240.2) Look-Through Adjusted Assets 2, ,108.6 Borrowings Less: Cash (85.7) (85.7) Plus: Share of EAIs Borrowings Less: Share of EAIs Cash - - (2.8) (0.6) (3.4) Look-Through Net Debt Reported Gearing 20.4% % 37

38 Movement in Net Tangible Assets per Security Net Tangible Assets No. of Securities (m) NTA per Security ($) As at 30 June , Statutory Net Profit Other Comprehensive Income Increase in Intangible Assets 2 (1.4) - Movements in Reserves Issue of New Securities (0.83) As at 31 December , Includes the transfer from foreign currency translation reserve to statutory profit of $18.7m on disposal of a foreign operation. 2 Principally software licences. 3 Acquisition of non-controlling interests and equity settled employee benefits. ⁴ Securities issued in November 2013 in respect on the Institutional and early retail component of the accelerated non-renounceable pro-rata entitlement offer and in December 2013 in respect of the retail component of that offer. 38

39 Appendices Appendix i. Detailed Financial Information Appendix ii. Retirement Information Appendix iii. Non-Retirement Information Appendix iv. Capital Management 39

40 Retirement ROA Medium Term ROA Enhancement Strategy Earnings Assets Employed ROA Established Portfolio EBIT NPV of DMF/CG Annuity Stream at 30 June % 7.5% - 8.0% 6.0% - 6.5% Retirement Development EBIT Care & Support Services EBIT Investment in RVG 1 Aged Care Assets, Intangibles 6% 4% 2% 3.5% - 4.0% Retirement EBIT 2 Future Net Working Capital 0% FY14F FY15F FY16F FY16F FY18F Retirement Assets Employed Transitional Period Management recently completed an extensive strategic review with a focus on improving Retirements ROA Execution of various business plans have commenced with the aim of meeting medium to long term return targets Example initiatives across business lines include: Established Portfolio: review of existing resident contract structures, streamlining sales processes Development: accelerating deployment of pipeline to meet stated delivery targets Care and Support Services: pursuing strategy to facilitate high levels of resident care options within villages by allying with primary care service providers Existing or new projects that are forecast to be delivered post FY18 will not be included in the retirement assets employed for the periods FY14 to FY18 for the purposes of the ROA calculation 1 Excludes any future retirement asset revaluations after 30 June 2013 from the calculation of retirement ROA. 2 Excludes non-allocated overheads. 40

41 Retirement: Investment Property Sensitivities Key drivers of the net present value of future cash flows and their respective sensitivities from the status quo are presented adjacent Consideration must be given to various portfolio characteristics Property based: age, location, quality of facilities etc. which will drive property demand and capital appreciation in unit prices Resident based: average age will determine proximity of a turnover event and economic contract terms (e.g. accrual period) Discount rate: reflects combination of portfolio investment characteristics Retirement Investment Property Annuity Stream Sensitivity Medium Term Property Price Growth 4.5% 4.0% 3.5% 3.0% 2.5% Net Present Value of Annuity Streams Long Term Property Price Growth 5.5% 5.0% 4.5% 4.0% 3.5% Net Present Value of Annuity Streams 1, Subsequent Turnover ILUs (years) Net Present Value of Annuity Streams Discount Rate 11.5% 12.0% 12.5% 13.0% 13.5% Net Present Value of Annuity Streams 1, Average Age of Current Residents (years) Net Present Value of Annuity Streams Assumption adopted for accounting purposes 41

42 Retirement: Our Portfolio Aveo Group manages 75 villages across the eastern seaboard and Adelaide Villages predominantly located in prime metropolitan locations Portfolio characterised by mature villages with 55 villages more than 20 years old, with established resident communities and a demonstrated resident turnover transaction history Accommodation primarily made up of independent living units (ILUs) but does offer the full range of accommodation options across the resident needs spectrum (including serviced apartments (SAs) and aged care) at selected villages Portfolio Snapshot Village Locations Units ILUs SAs Existing Total Pipeline Total Units Aged Care Beds Total Units and Beds Legend AOG owned villages AEH villages RVG villages AOG Balance Sheet 1 4, ,020 2,200 7, ,404 Aveo Healthcare 2 1, , , ,713 Total Aveo Group 5,173 1,127 6,300 2,608 8, ,117 RVG Australia 3 2, , ,686-3,686 Total Managed 7,985 1,726 9,711 2,883 12, ,803 ¹ Includes 20 units not offered for accommodation purposes e.g. managers units. ² Includes 10 units not offered for accommodation purposes e.g. managers units. 3 Includes 18 units not offered for accommodation purposes e.g. managers units. 42

43 Retirement: Development Delivery Forecast Construction Program Village State Portfolio Units FY14 FY15 FY16 FY17 FY18+ Completion due FY14 Island Point NSW AOG 8 Other Projects - AOG/AEH 19 Under Construction Albany Creek QLD AEH 12 Durack QLD AEH 14 Mingarra VIC AOG 7 Start Construction Within One Year Clayfield QLD AEH 42 Cleveland QLD AEH 13 The Parks QLD AOG 14 Island Point NSW AOG 48 New Project - Victoria VIC AOG 87 Sanctuary Cove QLD AOG 25 Start Construction Within Two years Durack QLD AEH 22 Peregian QLD AOG 32 Island Point NSW AOG 31 Mingarra VIC AOG 13 Sanctuary Cove QLD AOG 25 Existing Village Redevelopment - AOG 80 Future Projects Clayfield QLD AEH 149 Durack QLD AEH 52 Island Point NSW AOG 42 Southern Gateway Site NSW AOG 40 Mingarra VIC AOG 25 Peregian QLD AOG 22 Redevelopment and Future projects Other - AOG 1,786 Total 2, ,996 43

44 Appendices Appendix i. Detailed Financial Information Appendix ii. Retirement Information Appendix iii. Non-Retirement Information Appendix iv. Capital Management 44

45 Residential Communities and Apartments Land projects Location Remaining lots approx. Saltwater Coast, Point Cook VIC 1,200 Peregian Springs and Ridges, Peregian Springs QLD 800 The Rochedale Estates, Rochedale QLD 600 Shearwater, Cowes VIC 100 Currumbin, Gold Coast QLD 500 Total 3,200 Apartment projects Location Status Total Residential Units Completed Projects Available for Sale ¹ Percentage Sold Aerial, Camberwell Junction VIC Completed % Subtotal Current Projects LUXE, Woolloomooloo NSW Under construction % The Milton, Milton QLD Under construction % The Hudson at Albion Mill, Albion QLD Currently selling % Subtotal Total Future Projects Albion Mill, Albion QLD Future stages (subject to future re-masterplan) 275 Gasworks Residential, Newstead QLD Future stages 750 Subtotal 1,025 Total 1,689 ¹ As at 13 February

46 Appendices Appendix i. Detailed Financial Information Appendix ii. Retirement Information Appendix iii. Non-Retirement Information Appendix iv. Capital Management 46

47 Distributions As announced at the Annual General Meeting, the Board have decided to re-instate the dividend/distribution payment The quantum of the dividend will be determined in June 2014, with reference to 40-60% of Underlying Profit After Tax No dividend/distribution will be paid for HY14 HY14 FY13 Underlying Profit After Tax Adjustments: Profit from Equity Accounted Investments (3.4) (4.1) Dividends from Equity Accounted Investments Capitalised Interest (19.9) (63.3) Capitalised Interest Included in COGS Leasing Commissions, Tenant Incentives and Maintenance Capital Expenditure (3.3) (9.0) Amortisation of Leasing Incentives Tax Effect of Above Adjustments Application of Prior Period Tax Losses (2.7) (2.3) Actual Funds From Operations (AFFO) Distribution Declared DRP - - Net Distribution Distribution as a % of UPAT - 8% Distribution as a % of AFFO - 66% Net distribution as a % of AFFO - 66% 47

48 Summary of Debt Facilities Net Bank Debt Drawn HY14 FY13 Change Summary of Drawn Debt Facilities 1 Facility Limit Maturity Interest Bearing Liabilities (181) Add: Establishment Fee Adjustments Add: Convertible Bond Adjustments - 1 (1) Less: Vendor Finance and Leases (2) (2) - Total Debt Facilities Drawn (181) Less: Convertible Bond (88) (109) 21 Gross Bank Debt Drawn (160) Less: Available Cash (84) (29) (57) Net Bank Debt Drawn (217) Summary of Undrawn Debt Facilities 2 Limit Drawn Undrawn Retirement Facilities Non-Retirement Facilities Non-Retirement Project Finance Total Excludes Bank Guarantees. 2 Undrawn facilities are dependent upon having sufficient security. Facility limit amortisation of $25m as at 31 December Debt is in two tranches, Tranche 1 is secured at $50m and available, Tranche 2 for $30m is available subject to bank approval. 5 $87m redeemed 6 January with final redemption of $1m on 7 February Currumbin facility repaid in full 5 February Awaiting credit approval on an 18 month extension. ⁸ Management currently in discussion with financier for conversion to evergreen facility. Retirement Retirement Syndicate /08/2015 Aveo Healthcare /03/2017 Working Capital Facility⁸ 60 01/08/2014 Total Retirement Facilities 345 Drawn 229 % Drawn 66% Non-Retirement Development MOF /08/2015 Wilbow /07/2014 Gasometer 1 Facility 65 31/10/2016 Convertible Bond /01/2014 Currumbin /02/2014 Property Trust /03/2014 Total Non-Retirement Facilities 349 Drawn 233 % Drawn 67% Project Finance LUXE Project Finance 50 28/02/2015 Total Project Finance 50 Amount Drawn 45 % Drawn 90% 48

49 Financial Covenants All financial covenants met Covenant HY14 Required Development MOF (Total Liabilities Resident Obligations Deferred Tax Liability) / (Total Tangible Assets Resident Obligations Deferred Tax Liability) (Underlying EBITDA Net non-cash component of retirement revaluation + Capitalised interest in COGS-Inventory Impairment) / (Net Finance Costs Loan Establishment + Capitalised interest in COGS) Gearing 32.3% <50% Interest Cover 2.6x >2.0x The amount by which total tangible assets exceed total liabilities NTA 1,422m >1,000m (Interest bearing loans and borrowings Cash and cash equivalents)/ (Underlying EBITDA Net non-cash component of retirement revaluation + Capitalised interest in COGS-Inventory Impairment) Net Debt / Underlying EBITDA 5.6x <8.25x Retirement Syndicate (excluding AEH) Cash Receipts (as defined) / (Net Finance Costs Loan Establishment Fees) Interest Cover 2.7x > 1.75x Loan Amount Outstanding / Mortgaged Property Valuation 1 LVR 38% < 50% 1 Last bank valuations for mortgage security purposes were conducted in December

50 Interest Rates Base Funding Cost Summary HY14 Drawn Debt Type (%) Avg Base Rate Weighted Avg Maturity Floating Rate Debt 18 4% 2.7% 1 NA Fixed Rate Debt % 5.7% Total / Weighted Average % 5.6% NA Fixed Rate Debt Profile FY14 FY15 FY16 FY17 Face Value of Fixed Rate Debt Weighted Average Interest Rate on Fixed Rate Debt 5.74% 5.74% 5.99% 0.00% Weighted Average Time to Maturity (years) Based on BBSY at 31 December Includes Convertible Bond and working capital facility fixed debt. 3 Based on bank interest rate swap hedges only. 50

51 Major Debt Maturity 51

52 Aveo Level 5, 99 Macquarie Street, Sydney NSW 2000 T F aveo.com.au Disclaimer The content of this presentation is for general information only. Information in this presentation including, without limitation, any forward-looking statements or opinions (Information) may be subject to change without notice. To the maximum extent permitted by law, Aveo Group Limited, its officers and employees do not make any representation or warranty, express or implied, as to the currency, accuracy, reliability or completeness of the Information and disclaim all responsibility and liability for the Information (including, without limitation, liability for negligence). The information contained in this presentation should not be considered to be comprehensive or to comprise all the information which a security holder or potential investor in Aveo may require in order to determine whether to deal in Aveo securities. This presentation does not take into account the financial situation, investment objectives and particular needs of any particular person. This presentation contains forward-looking statements including indications of, and guidance on, future earnings, financial position and performance. Such forward looking statements are not guarantees of future performance and involve known and unknown risks, uncertainties and other factors, many of which are beyond the control of Aveo and its officers and employees, that may cause actual results to differ materially from those predicted or implied by any forward-looking statements. You should not place undue reliance on these forward-looking statements. There can be no assurance that actual outcomes will not differ materially from these forward-looking statements. All dollar values are in Australian dollars (A$) unless otherwise stated. 52