WITH the outlook for the new financial year looking a bit rocky, investors might be tempted into sectors where performance is pretty much guaranteed.
You would think that the retirement home and village business was one of these sectors.
We all know that more and more older Australians are looking for a safe, well-managed place to call home.
Despite the demand, running a retirement living business has proved surprisingly difficult for the management team at Village Life, one of Australia's largest retirement businesses.
Village Life listed in December 2003 at $1.50. They set an expectation of $15.5 million profit this year. Everything was great and on January 4 this year the share price hit $2.88.
Then shareholder Queensland Investment Corp started selling its stake.
QIC are huge and well known as smart operators.
On February 1, Village set a new profit target; down to $11.8 million. The share price dropped and steadied.
On May 9 another announcement; profit would be around $4.5 million.
On May 23 another announcement; ooops, ignore what we said two weeks ago, we don't know what our profit will be.
On June 21 another announcement; profit would be around $1.5 million.
Meanwhile, highly qualified independent director Brett Heading resigned due to a car accident.
However, he didn't resign any of his other board postings; including a role as chairman of a quality biotechnology company.
By now the share price had hit 28 cents.
Leading market observer Nigel Finch from Macquarie Graduate School of Management says Village Life holds important lessons for investors.
"Just because a market is booming don't assume companies in it are doing well," says Finch.
"You have to look at the management; do they know what they are doing?"
There are hard questions the Village Life team needs to answer.
Why are occupancy rates low in a market where there is a shortage of beds?
And why can't the company turn a decent profit even in the management services division?
