Aveo Healthcare : Full Year Results Announcement

20 August 2014

Aveo Group (ASX:AOG), Australia's leading owner, operator and manager of retirement communities, is pleased to announce that it has recorded a strong financial performance in FY14, enabling it to accelerate its transformation to Australia's only pure retirement group.
For the 12 months to 30 June 2014, Aveo recorded an underlying net profit after tax of $42.1 million. This represents a 7.4% increase on the FY13 result.
Aveo Chief Executive Officer Geoff Grady said: "We have made solid progress since announcing our pure retirement strategy in 2013 and we are on track to hit our medium and longer term retirement group targets."
"Aveo's financial performance over the past year underpins a strengthening investment case for our pure retirement focus. We will continue to build long term, sustainable value for our securityholders", he said.
The key strategic achievements for Aveo in FY14 include:

 Record retirement sales of 711 units;

 A total profit contribution from the Retirement business of $44.8 million, up 60% on FY13;

 Net cash flows from operating activities of $131.6 million, up 130% on FY13;

 Gearing reduced to 15.8%;

 The commencement of construction at four sites to assist meeting the FY16 target of delivering

200 new retirement units;

 Delivery of comprehensive low care services to over 90% of Aveo's owned retirement villages;

 Divestment of $230m of non-retirement assets; and

 Acquisition of two high quality sites for development of 740 units/beds with an end value of $380 million.

Aveo's statutory profit after tax in FY14 (before transfer from foreign currency translation reserve ('FCTR') which did not impact net assets) was $44.8 million, significantly higher than the $166.5 million loss recorded in FY13, and marks a significant turnaround.

About Aveo

"We will grow with older Australians by inspiring greater living choices."

Aveo is a leading and trusted owner, operator and manager of retirement communities across Australia. Aveo's philosophy is underpinned by a commitment to grow with older Australians by inspiring greater living choices. We currently do so for 12,000 residents in 7 5 retirement villages across Australia. Aveo also manages and develops a diversified $585 million property portfolio. Over 30 years, Aveo's portfolio has grown to one that encompasses retirement, residential, commercial, industrial and mixed-use property assets. Together these communities define how hundreds of thousands of people in Australia

live, work, retire and invest.

Issued by Aveo Group (ASX:AOG) comprising Aveo Group Limited ABN 28 010 729 950 and Aveo Funds Management Limited ABN 17 089 800 082, AFSL No.

222273 as Responsible Entity for the Aveo Group Trust ARSN 099 648 754.

aveo.com.au

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 Statutory profit after tax (before transfer from FCTR) of $44.8 million;

 Statutory profit after tax (after transfer from FCTR) of $26.1 million;

 Underlying net profit after tax of $42.1 million for FY14, a 7.4% improvement on the result;

recorded in FY13;

 Net tangible assets per stapled security of $2.78;

 Underlying earnings per stapled security of 9.5 cents;

 Gearing lowered to 15.8%; and

 Distribution of 4.0 cents per security.

Aveo emerged with a more stable and sustainable underlying financial position in FY14 with net debt reduced to $313 million as a result of non-retirement asset sales and the completion of the $232 million capital raising in December 2013. As a result, gearing reduced to 15.8% from 31.5% at the end of FY13. A further $80 million of non-retirement asset proceeds will be received in FY15.

Aveo Group has pursued its pure retirement strategy with energy and focus in FY14 and has achieved
a number of milestones ahead of plan.
Aveo's Retirement business contributed $44.8 million to the Group's overall result in FY14, up 60% from FY13. This was driven by a record 711 sales of retirement units, amounting to a record value of units transacted at $189 million. Sales turnover for the year was 11%, building on the momentum of a
10% turnover result in FY13.
Aveo is maintaining solid levels of deposits on hand and closed the year with a record 145 deposits. In terms of retirement development activity, construction is underway or about to commence at
Albany Creek, Durack, Island Point, Mingarra, as well as Hunters Green and Rose Grange for RVG.
The identified pipeline at 30 June 2013 of circa 600 units has now been upgraded to circa 2,600 units and takes into account additional greenfield sites identified within the existing residential portfolio, as well as the redevelopment components of existing villages within the retirement portfolio.
Aveo continues to seek out and capture opportunities to accelerate the development of its pipeline of new retirement units. Two sites were acquired in May 2014 for $53.6 million, incorporating 14.4 hectares of land at both Norwest Business Park and Sanctuary Cove. The proposed development of these sites will realise approximately 740 high quality retirement units / aged care beds to be
delivered from FY17. The units will have an end value of $380 million and are expected to accommodate around 1,000 residents and will add 10% more units to the owned portfolio and 60% more aged care beds.
In addition to the development sites acquired at Norwest Business Park and Sanctuary Cove, further acquisitions are being targeted to ensure the retirement development pipeline becomes more diversified and meets its FY16 target of 200 delivered units and the FY18 target of 500 delivered units.
Other key achievements for the Retirement business in FY14 include:

 Strategic alliance with RDNS Limited for in-home care and support services for 22 villages across

Australia; and

 Aveo has now also identified additional aged care bed opportunities it intends to develop to add to its existing 209 aged care beds.

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Following the strategic alliance established with RDNS, Aveo has met its stated target of offering care services to 75% of its retirement portfolio by the end of FY14, with now over 90% of villages owned by Aveo with some form of care services being provided.
Geoff Grady said: "Creating a continuum-of-care concept for residents and higher care facilities is a key foundation of our broader pure retirement strategy and part of our commitment to grow with older Australians by inspiring greater living choices."
Aveo is also now progressively rolling out new retirement contracts that align the Group's pure retirement focus with residents' increasing requirements for enhanced care services. These new contracts provide certainty and simplicity for residents and Aveo alike.
In terms of financial returns, Aveo remains on track to deliver on its target of generating a return on its retirement assets (excluding any future retirement asset revaluations after 30 June 2013) of 6.0% -
6.5% by FY16 and 7.5% - 8.0% by FY18.

The Residential Communities and Apartments Division contributed a gross profit of $21.4 million to
Aveo's FY14 result.
In March 2014, Aveo sold three of the four remaining residential development sites at its Gasworks development in Newstead, Brisbane for $40 million. Subsequently, in May, the remaining site was sold for $19.5 million.
The Luxe development in Sydney, which has an end value of $98 million, reached practical completion in June 2014. Following subsequent settlements in July 2014, Aveo has now settled 76 of the 77 apartments at Luxe. The sole remaining apartment will be settled by August 2014. The Milton, Brisbane, is on track for completion in FY16 with 256 pre-sales recorded thus far (85% presold). Only 5 out of 144 apartments remain for sale at the Aerial development at Camberwell in Melbourne and all are expected to be sold by December 2014.

The Commercial and Industrial Division contributed gross profit of $13.0 million to Aveo's FY14 result. Gasometer 1 reached practical completion in Q1 FY14 with the retail space now fully leased and the commercial leasing currently at 37%. Gasometer 1 was independently valued at 30 June 2014 resulting in a development profit of $10.7 million.
The sale of Hepher Road, South-Western Sydney was completed in November 2013 and the sale of Lonsdale Street, Melbourne, was completed in October last year. Luxe retail is currently being marketed.

The strong financial performance of Aveo Group in FY14 has enabled the Board to declare a distribution for the full year amounting to 4.0 cents per security.

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The Board of Aveo Group has also announced today that it is activating a share buyback of up to 6%1
of Aveo Group securities for the balance of FY15.
Aveo Group's overall capital position has strengthened in FY14. In December 2013, Aveo received strong support from security holders and raised capital of $232 million to reduce gearing and debt levels, with Group gearing now at 15.8%, in line with comparable listed retirement companies.

With a stronger financial position, a core commitment to and focus on its pure retirement strategy
and with the resources on board to bring this strategy to fruition, Aveo Group is targeting a FY15 underlying profit after tax increase of 15% - 20% on FY14 and a full year distribution of 5 cents per security.
These commitments are in addition to the previously announced longer term target of generating a return on retirement assets of 6.0% - 6.5% by FY16 and 7.5% - 8.0% by FY18.

END

Institutional Investor Contact:

David Hunt, Chief Financial Officer

T +61 2 9270 6152 | E david.hunt@aveo.com.au

Media Contact:

Justin Kirkwood,

T +61 2 9231 5600 | M +61 411 251 324 | E Justin@kirkwoods.com.au

1

As prescribed by s257B(4) of the Corporations Act 2001 (Cth) (Act), the 10/12 limit for a company proposing to make a buyback is 10% of

the smallest number, at any time during the last 12 months, of votes attaching to voting shares in the company, or in this case 32,157,871

Aveo stapled securities. The buyback is subject to lenders' consent.

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