Aveo Group FY14 Half Year Results · 2020. 2. 8. · Financial Results & Capital Management 3....

Aveo Group

FY14 Half Year Results For the period ended 31 December 2013

19 February 2014

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

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

5

Key Medium Term Targets

Financial 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

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.

Transitional Period

4.0%

6.5%

8.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

FY14F FY16F FY18F

Re

turn

on

Ass

ets

Ongoing Steps to Achieve Returns

Esta

blis

he

d

Po

rtfo

lio

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

Ret

ire

me

nt

Dev

elo

pm

en

t 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

Car

e a

nd

Su

pp

ort

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

6

Financial Results & Capital Management

7

Key Financial Outcomes

Outcome HY14 HY13 Change Comment on HY14

Statutory Profit/(Loss) after Tax1

$2.2m3 ($28.5m) 108% Reflects transfer from foreign currency translation

reserve – see note 3

Statutory Profit/(Loss) after Tax1 before transfer from FCTR2 $20.9m ($28.5m) 173%

Principally driven by improvement in fair value adjustment to retirement investment property

Underlying Profit after Tax $19.2m4 $23.6m (19%) Improved Retirement result and lower Non-Retirement

contribution

Underlying EPS 5.0cps 9.1cps (45%) Reflects additional shares outstanding following capital

raise completed in December 2013 and reduced underlying earnings

Net Assets $1,425.3m $1,174.0m5 21% Increase in net assets is driven by December 2013

capital raise

NTA per Stapled Security $2.78 $3.535 (21%) Adjusted for additional stapled securities on issue

following December 2013 capital raise

Gearing 20.4% 31.5%5 (11%) 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 3Included 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 2013. 5 Relates to FY13.

8

Divisional Contributions

HY14 ($m)

HY13 ($m)

Change

Retirement

Established Business 20.1 14.4 40%

Development 0.2 1.1 (82%)

Care and Support 0.6 0.6 -

Total Retirement 20.9 16.1 30%

Non-Retirement

Residential Communities and Apartments 12.2 24.0 (49%)

Commercial and Industrial 3.7 2.7 37%

Total Non-Retirement 15.9 26.7 (40%)

Non-Allocated Overheads (5.1) (6.2) (18%)

EBITDA 31.7 36.6 (13%)

Depreciation and Amortisation (0.9) (1.1) (18%)

EBIT 30.8 35.5 (13%)

Interest and Borrowing Expense (10.0) (7.8) 28%

Profit Before Tax 20.8 27.7 (25%)

Income Tax (1.5) (4.2) (64%)

Profit After Tax 19.3 23.5 (18%)

Non-Controlling Interests (0.1) 0.1 (200%)

Net Underlying Profit1 19.2 23.6 (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 2013.

.

9

Capital Management: HY14 Metrics

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 Lines2 $237m $139m

Available Facilities $202m $92m

Weighted Average Borrowing Cost1 8.4%3 8.1%

Weighted Average Debt Maturity 1.7 years3 1.7 years

Fixed % on Drawn Debt 87%3 76%

Fixed % on Facility Limit 61%3 63%

Weighted Average Hedge Maturity 2.4 years3 2.7 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 2014.

Interest Bearing Liabilities and Gearing History

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)

10

Retirement

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

11

Analysis of Retirement Results

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 Business1 $47.5m $52.0m (9%)

Development2 $3.5m $6.2m (43%)

Services3 $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 287 135 113%

Buyback Sales 35 90 (61%)

Newly Developed Sales 11 19 (42%)

Total 333 244 36%

Buyback Purchases (units) 35 45 (22%)

Deposits on Hand 122 124 (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.

234

303

263

205

244

333

-

5,000

10,000

15,000

20,000

25,000

-

50

100

150

200

250

300

350

HY09 HY10 HY11 HY12 HY13 HY14

Re

sid

en

tial

Se

ttle

me

nts

Un

its

AOG Sales (LHS) AOG deposits on hand (LHS) LGA National Settlements (RP Data) (RHS)

12

Sales Trends

Total Unit Sales Levels vs. National Residential Settlements

Source: RP Data (LGA Relative to Villages, Price Point Range $420,000 to $1.2m).

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

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

Established Portfolio


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) 82.5 82.8 (0.3)

Average Age on Entry (years) 76.9 77.0 (0.1)

Average Village Age (years) 24.6 23.6 1.0

Key Valuation Assumptions/Outcomes HY14 FY13 Change

Discount Rate 12.5% 12.5% -

Future Property Price Growth

Medium term 3.5% 3.5% -

Long term 4.5% 4.5% -

Average 20 Year Growth Rate

4.3% 4.3% -

Current Resident Tenure

ILUs Life tables

Life tables

- SAs

Subsequent Resident Tenure (years)

ILUs 10 10 -

SAs 4 4 -

NPV of Annuity Streams $891.2m $891.9m -

13

Achieving Development Targets

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

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

14

Development Activity

Aveo Historical Residential Development Sales

1 Does not include MulphaFKP lots.

60 69 13 123

433 443

380242

67 37

3745

FY10 FY11 FY12 FY13

560 549

430 410

60 6913 123

433 443380 242

67 3737 45

FY10 FY11 FY12 FY13

Retirement Units Land Lots

Apartments Average - Four year

1

15

Care and Support Services

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

In H

om

e

Car

e 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

Nu

trit

ion

Consultants have been engaged to develop a national approach to nutrition, food preparation and delivery of meals into villages

Furt

he

r Se

rvic

es Resident surveys and focus groups with

resident committees are currently being undertaken to facilitate targeted delivery of services

Re

sid

en

tial

A

ged

Car

e In substantial discussions regarding the

expansion and co-location of residential aged care and dementia facilities at existing villages with third party operators

Re

spit

e

Nationwide respite services now available

16

Non-Retirement

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

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

Residential Communities and Apartments


Divisional Profit Contribution1 $12.2m1 $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 Sales2 193 74 161%

Built Product Sales 8 110 (93%)

MulphaFKP JV Lot Sales 104 64 63%

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 2013. 2 Does not include MulphaFKP.

Residential Deposit Flow

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

18

Commercial and Industrial


Divisional Profit Contribution1 $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 Held2 1 3 (66%)

1 Includes utilisation of $0.6m of impairment raised at June 2013. 2 Gasometer 1 held as inventory at HY13 and HY14

19

Outlook

20

Deliver On The Plan That Has Been Put In Place

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

Strategic Plan

Established

Continue to Exit Non-

Retirement

FY14 underlying profit expected to be up on FY13 result

Dividend amount to be determined and announced in June 2014

FY14 Guidance

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

Continue to Execute Strategy

21

Appendices

Appendices

Appendix i. Detailed Financial Information

Appendix ii. Retirement Information

Appendix iii. Non-Retirement Information

Appendix iv. Capital Management

22

23

Statutory Income Statement

HY14 ($m)

HY13 ($m)

Profit/(Loss) From Continuing Operations Before Income Tax 2.4 (33.4)

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 1.4 11.2

Net Profit/(Loss) After Tax Attributable to Stapled Security Holders of the Group 2.2 (28.5)

24

Reconciliation of Statutory Profit to Underlying Profit

HY14 HY13

Gross ($m)

Tax1 ($m)

Net ($m)

Gross ($m)

Tax1 ($m)

Net ($m)

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) 1.2 55.5 (17.2) 38.3

Share of Non-Operating Loss of Equity Accounted Investments 16.5 - 16.5 6.3 - 6.3

Total Retirement 19.9 (2.2) 17.7 61.8 (17.2) 44.6

Non-Retirement

Change in Fair Value of Property Trust portfolio - - - 2.8 - 2.8

Net Development Impairments 0.9 - 0.9 4.1 - 4.1

Provision for Losses 0.9 (0.3) 0.6 2.3 (0.7) 1.6

Other 1.9 (0.5) 1.4 0.6 (0.1) 0.5

Total Non-Retirement 3.7 (0.8) 2.9 9.8 (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

19.2 23.6

1 The tax adjustment in relation to the change in fair value of the retirement investment property includes tax and OEI.

25

Reconciliation of Underlying Profit to Segment Notes

($m)

Underlying Profit

Change in Fair Value of Retirement Investment

Property

Share of Non-

operating 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) - - - - 0.2

Development 0.2 - - - - - - 0.2

Care and Support 0.6 - - - - - - 0.6

Total Retirement 20.9 (3.4) (16.5) - - - - 1.0

Non-Retirement

Residential 12.2 - - (2.6) (0.9) - (0.4) 8.3

Commercial and Industrial 3.7 - - 1.7 - - (0.8) 4.6

Total Non-Retirement 15.9 - - (0.9) (0.9) - (1.2) 12.9

Non-Allocated Overheads (5.1) - - - - 5.2 - 0.1

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) 0.7 - - 0.3 (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) 1.5 - - - - - 1.4

NPAT Attributable to Aveo Group 19.2 (1.2) (16.5) (0.9) (0.6) 3.6 (1.4) 2.2

26

Reconciliation of Retirement Segment Revenues to Segment Note

HY14 ($m)

HY13 ($m)

Segment Revenue

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 Sales1 (3.5) (6.2)

Sales Revenue – Buy Back Sales1 (9.3) (22.6)

Equity Accounted Profits – RVG and US Senior Living 0.3 (1.3)

Interest Income 0.1 0.1

Retirement Revenue per Segment Note 43.7 33.7

1 Included as change in fair value of resident loans in statement of comprehensive income.

HY14 ($m)

HY13 ($m)

Change in Fair Value of Resident Loans on the face of the Statement of Comprehensive Income

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)

27

Reconciliation of Movement in Non-Retirement Assets

Non-Retirement Asset Balance Sheet Movement from 30 June 2013 to 31 December 2013 ($m)

Non-Retirement Assets at 30 June 2013 798.2

Less: Lonsdale Street Sale (31.0)

Pro forma Non-Retirement Assets at 30 June 2013 767.2

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

Closing Non-Retirement Assets at 31 December 2013 792.5

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 2013 684.2

Represented by

Inventories: Residential Communities 326.2

Residential Apartments 115.3

Commercial and Industrial 216.4

Total Inventories 657.9

Investment Properties/Assets held for Sale 19.4

Property, Plant and Equipment 6.9

Pro forma Non-Retirement Assets at 31 December 2013 684.21

Pro forma Non-Retirement Assets at 31 December 2013 as Percentage of Total Assets2 38%

1 Will reduce further upon re-allocation of identified retirement sites from existing land portfolio. 2 Excludes non allocated assets of $140.7m.

Total asset sales

announced of $156.3m

28

Summary Statutory Balance Sheet

HY14 ($m)

FY13 ($m)

Change

Assets

Retirement

Investment Properties (refer slide 30) 2,335.4 2,333.0 -

Investments (refer slide 32) 99.5 91.9 8%

Property, Plant and Equipment 14.8 15.1 (2%)

Intangibles 2.6 2.4 8%

Total Retirement 2,452.3 2,442.4 -

Non-Retirement

Inventories (refer slide 31) 712.9 674.9 6%

Investment Properties / Assets held for sale (refer slide 30) 19.4 50.5 (62%)

Investments (refer slide 32) 53.3 66.1 (19%)

Property, Plant and Equipment 6.9 6.7 3%


Cash/Receivables/Other 143.2 117.3 22%

Total Assets 3,388.0 3,357.9 1%

Liabilities

Payables/Provisions/Deferred Revenue/Other 52.3 92.9 (44%)

Resident Loans and Retirement Deferred Revenue 1,349.6 1,344.8 -

Interest Bearing Liabilities 504.2 685.0 (26%)

Deferred Tax 29.9 30.0 -

Hedge Liability 26.7 31.2 (14%)

Total Liabilities 1,962.7 2,183.9 (10%)

Net Assets 1,425.3 1,174.0 21%

NTA per stapled security $2.78 $3.53 (21%)

29

Management Balance Sheet

HY14 ($m)

FY13 ($m)

Change

Assets

Retirement

Retirement Investment Property1 (refer slide 30) 985.8 988.2 (2%)

Equity Accounted Investments (refer slide 32) 99.5 91.9 8%

Property Plant and Equipment and Intangibles 17.4 17.5 (1%)

Total Retirement 1,102.7 1,097.5 1%

Non-Retirement

Property Trust assets 19.4 50.5 (62%)

Commercial and Industrial Developments 235.1 213.9 10%

Residential Communities 365.3 381.5 (4%)

Residential Apartments 172.7 152.3 13%


Other Assets (including Cash and Trade Receivables) 140.7 115.5 22%

Total Assets 2,035.9 2,011.2 1%

Liabilities

Interest Bearing Liabilities (refer slide 48) 504.2 685.0 (26%)

Derivative Liabilities 32.2 42.1 (24%)

Deferred Tax Liabilities 29.9 30.0 (0%)

Other Liabilities (including Trade Payables, Provisions, Deferred Revenue) 44.3 80.1 (45%)

Total Liabilities 610.6 837.2 (27%)

Net Assets 1,425.3 1,174.0 21%

1 Net of resident loans and deferred income.

30

Investment Property Summary

HY14 ($m)

FY13 ($m)

Change

Retirement

NPV of Annuity Streams (refer slide 13) 891.2 891.9 -

Investment Properties Under Construction 50.6 49.8 2%

New Units Available for First Occupancy 13.9 16.9 (18%)

Buy Back Units Available for Occupancy 30.1 29.6 2%

Retirement Net Valuation 985.8 988.2 (2%)

Resident Loans 1,255.3 1,248.2 1%

Deferred Income Net of Accrued DMF 94.3 96.6 (2%)

Total Retirement Investment Property 2,335.4 2,333.0 -

Non-Retirement

Aveo Property Trust

Investment Properties 19.4 50.5 (62%)

Total Investment Properties 19.4 50.5 (62%)

Assets Reclassified as Available for Sale (19.4) (31.0) (37%)

Operating Lease Receivables and Incentives - - -

Total Non-Retirement Investment Property - 19.5 (100%)

Total Investment Properties per Balance Sheet 2,335.4 2,352.5 (1%)

31

Non-Retirement Inventories Summary

HY14 ($m)

FY13 ($m)

Change

Inventories


Residential Apartments 170.3 147.8 15%

Commercial and Industrial 216.4 198.7 9%

Total Inventories 712.9 674.9 6%

Residential Communities

($m)

Residential Apartments

($m)

Commercial and Industrial

($m)

Total

($m)

Impairment

Balance as at 30 June 2013 191.2 24.7 51.7 267.6

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 2013 186.3 24.3 50.4 261.0

32

Equity-Accounted Investments Summary

HY14 ($m)

FY13 ($m)

Change

Equity-Accounted Investments

Retirement

RVG 94.0 86.9 8%

US Senior Living 5.5 5.0 10%

Total Retirement 99.5 91.9 8%

Non-Retirement

MulphaFKP 53.3 55.6 (4%)

PBD Developments1 - 7.9 (100%)

Brookvale - 2.6 (100%)


Total Equity-Accounted Investments 152.8 158.0 (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.

33

Interest Expense Reconciliation

HY14 ($m)

HY13 ($m)

Change

Interest Expense Paid 29.9 38.7 (23%)

Less: Capitalised Interest

Retirement

Properties Under Construction - 0.5 (100%)

Total Retirement - 0.5 (100%)

Non-Retirement


Commercial and Industrial – Trading 2.7 7.1 (62%)


Total Capitalised Interest 19.9 30.9 (36%)

Net Finance Costs 10.0 7.8 28%

Add: Capitalised Interest Expenses in COGS

Residential Communities 4.6 2.9 59%

Residential Apartments 0.9 10.5 (91%)

Commercial and Industrial – Trading 0.7 0.7 -

Total Capitalised Interest in COGS 6.2 14.1 (56%)

Finance Costs Including Capitalised Interest Expensed in COGS 16.2 21.9 (26%)

34

Corporation Statutory Income Tax Reconciliation

HY14 ($m)

HY13 ($m)

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)

Add: Transfer from Foreign Currency Translation Reserve on Disposal of Foreign Operation 18.7 -

Add: Other Non-Deductible Items (net of non assessable items) (3.1) (2.2)

Add: Unfranked Dividends Received - 3.1

Corporation Adjusted Taxable Profit/(Loss) 5.3 (42.9)

Tax Expense/(Benefit) @ 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 2 - 4.2

Tax Expense/(Benefit) 1.6 (8.7)

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.

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

36

Cash Flow Reconciliation

22

48

8

34

(13)

(7)

(28)

(3)(6)

31

86

0

10

20

30

40

50

60

70

80

90

100

Opening Cash Net RetirementActivity

Net Non-Retirement Activity

Sale of Non-Retirements Assets

Payment forInvestments

Net Interest Paid Distribution Paid Other OperatingCosts

Other Proceeds fromEquity Raise Net ofDebt Repayment

Closing Cash

$m

37

Look Through Gearing Levels

1H14 Aveo ($m)

RVG ($m)

MFKP ($m)

Other ($m)

Look-Through ($m)

Total Assets 3,388.0 - - - 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 - 344.0 89.3 24.7 458.0

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 2,047.0 103.8 86.5 24.1 2,108.6

Borrowings 504.2 - - - 504.2

Less: Cash (85.7) - - - (85.7)

Plus: Share of EAIs Borrowings - 1.2 24.7 17.1 43.0

Less: Share of EAIs Cash - - (2.8) (0.6) (3.4)

Look-Through Net Debt 418.5 1.2 21.9 16.5 458.1

Reported Gearing 20.4% - - - 21.7%

38

Movement in Net Tangible Assets per Security

Net Tangible Assets ($m)

No. of Securities (m)

NTA per Security ($)

As at 30 June 2013 1,136.4 321.6 3.53

Statutory Net Profit 2.2 0.01

Other Comprehensive Income1 21.5 0.07

Increase in Intangible Assets2 (1.4) -

Movements in Reserves3 1.1 -

Issue of New Securities4 228.4 178.5 (0.83)

As at 31 December 2013 1,388.2 500.1 2.78

1 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.

Appendices

39





40

Medium Term ROA Enhancement Strategy

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

Earnings Assets Employed ROA

Established Portfolio EBIT

Retirement Development EBIT

Care & Support Services EBIT

Retirement EBIT2

1 Excludes any future retirement asset revaluations after 30 June 2013 from the calculation of retirement ROA. 2 Excludes non-allocated overheads.

0%

2%

4%

6%

8%

FY14F FY15F FY16F

Re

tire

me

nt

RO

A

FY16F FY18F FY14F

3.5% - 4.0%

6.0% - 6.5%

7.5% - 8.0%

Transitional Period

NPV of DMF/CG Annuity Stream at 30 June 2013 1

Investment in RVG1

Aged Care Assets, Intangibles

Retirement Assets Employed

Future Net Working Capital

41

Retirement: Investment Property Sensitivities

Retirement Investment Property Annuity Stream Sensitivity ($m)

Medium Term Property Price Growth 4.5% 4.0% 3.5% 3.0% 2.5%

Net Present Value of Annuity Streams 932.7 911.7 891.2 872.4 852.5

Long Term Property Price Growth 5.5% 5.0% 4.5% 4.0% 3.5%

Net Present Value of Annuity Streams 1,019.2 950.6 891.2 840.1 793.9

Subsequent Turnover – ILUs (years) 8 9 10 11 12


Discount Rate 11.5% 12.0% 12.5% 13.0% 13.5%

Net Present Value of Annuity Streams 1,024.4 952.7 891.2 837.4 790.0

Average Age of Current Residents (years) 86.5 84.5 82.5 80.5 78.5


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

Assumption

adopted for

accounting

purposes

Village Locations

Legend AOG owned villages

AEH villages

RVG villages

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

Units ILUs SAs Existing

Total Pipeline

Total Units

Aged Care Beds

Total Units and Beds

AOG Balance Sheet1 4,145 875 5,020 2,200 7,220 184 7,404

Aveo Healthcare2 1,028 252 1,280 408 1,688 25 1,713

Total Aveo Group

5,173 1,127 6,300 2,608 8,908 209 9,117

RVG Australia3 2,812 599 3,411 275 3,686 - 3,686

Total Managed 7,985 1,726 9,711 2,883 12,594 209 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.

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


Mingarra VIC AOG 13

Sanctuary Cove QLD AOG 25

Existing Village Redevelopment

- AOG 80

Future Projects Clayfield QLD AEH 149

Durack QLD AEH 52


Southern Gateway Site NSW AOG 40

Mingarra VIC AOG 25

Peregian QLD AOG 22

Redevelopment and Future projects Other - AOG 1,786

Total 2,608 27 57 230 298 1,996

Appendices

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

Available for Sale¹

Percentage Sold

Completed Projects

Aerial, Camberwell Junction VIC Completed 144 9 94%

Subtotal 144 9

Current Projects

LUXE, Woolloomooloo NSW Under construction 77 2 97%

The Milton, Milton QLD Under construction 303 59 81%

The Hudson at Albion Mill, Albion QLD Currently selling 140 68 51%

Subtotal 520 129

Total 664 138

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 2014.

Appendices

46





47

Distributions

HY14 ($m)

FY13 ($m)

Underlying Profit After Tax 19.2 39.2

Adjustments:

Profit from Equity Accounted Investments (3.4) (4.1)

Dividends from Equity Accounted Investments 2.0 5.0

Capitalised Interest (19.9) (63.3)

Capitalised Interest Included in COGS 6.2 27.8

Leasing Commissions, Tenant Incentives and Maintenance Capital Expenditure

(3.3) (9.0)

Amortisation of Leasing Incentives 0.4 1.0

Tax Effect of Above Adjustments 4.1 10.6

Application of Prior Period Tax Losses (2.7) (2.3)

Actual Funds From Operations (AFFO) 2.6 4.9

Distribution Declared - 3.2

DRP - -

Net Distribution - 3.2

Distribution as a % of UPAT - 8%

Distribution as a % of AFFO - 66%

Net distribution as a % of AFFO - 66%

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

48

Summary of Debt Facilities

Net Bank Debt Drawn HY14 ($m)

FY13 ($m)

Change ($m)

Interest Bearing Liabilities1 504 685 (181)

Add: Establishment Fee Adjustments 3 3 -

Add: Convertible Bond Adjustments - 1 (1)

Less: Vendor Finance and Leases (2) (2) -

Total Debt Facilities Drawn 507 688 (181)

Less: Convertible Bond (88) (109) 21

Gross Bank Debt Drawn 419 579 (160)

Less: Available Cash (84) (29) (57)

Net Bank Debt Drawn 335 550 (217)

Summary of Drawn Debt Facilities1

Facility Limit ($m)

Maturity

Retirement

Retirement Syndicate 205 31/08/2015

Aveo Healthcare4 80 30/03/2017

Working Capital Facility⁸ 60 01/08/2014

Total Retirement Facilities 345

Drawn 229

% Drawn 66%

Non-Retirement

Development MOF1 115 31/08/2015

Wilbow3 65 31/07/2014

Gasometer 1 Facility 65 31/10/2016

Convertible Bond5 88 05/01/2014

Currumbin6 4 05/02/2014

Property Trust7 12 30/03/2014

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%

Summary of Undrawn Debt Facilities2

Limit ($m)

Drawn ($m)

Undrawn ($m)

Retirement Facilities 345 229 116

Non-Retirement Facilities 349 233 116

Non-Retirement Project Finance 50 45 5

Total 744 507 237

1 Excludes Bank Guarantees. 2 Undrawn facilities are dependent upon having sufficient security. Facility limit amortisation of $25m as at 31 December 2013. 4 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 2014. 6 Currumbin facility repaid in full 5 February 2014. 7 Awaiting credit approval on an 18 month extension. Management currently in discussion with financier for conversion to evergreen facility. ⁸

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)

Gearing 32.3% <50%

(Underlying EBITDA – Net non-cash component of retirement revaluation + Capitalised interest in COGS-Inventory Impairment) / (Net Finance Costs – Loan Establishment + Capitalised interest in COGS)

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 Valuation1 LVR 38% < 50%

1 Last bank valuations for mortgage security purposes were conducted in December 2012.

50

Interest Rates

Base Funding Cost Summary HY14

Drawn Debt Type ($m) (%) Avg Base Rate Weighted Avg

Maturity

Floating Rate Debt 18 4% 2.7%1 NA

Fixed Rate Debt 488 96% 5.7%2 1.5

Total / Weighted Average 507 100% 5.6% NA

Fixed Rate Debt Profile

FY14 FY15 FY16 FY17

Face Value of Fixed Rate Debt ($m)3 400 400 175 0

Weighted Average Interest Rate on Fixed Rate Debt 5.74% 5.74% 5.99% 0.00%

Weighted Average Time to Maturity (years) 1.9 0.9 0.2 0.0

1 Based on BBSY at 31 December 2013. 2 Includes Convertible Bond and working capital facility fixed debt. 3 Based on bank interest rate swap hedges only.

51

Major Debt Maturity

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

Aveo

Level 5, 99 Macquarie Street, Sydney NSW 2000

T +61 2 9270 6100

F +61 2 9270 6199

aveo.com.au

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