Village Life in third downgrade By Scott Rochfort May 24, 2005
Retirement home builder Village Life cemented its reputation as this year's worst performing stock in the All Ordinaries Index after issuing its second profit downgrade in a fortnight.
After already losing investors' faith in the wake of two profit downgrades since February, Village Life's standing hit a new low yesterday when it said it would no longer meet the downgraded full-year forecast of $4.5 million to $4.7 million it issued on May 9.
The company said its latest downgrade stemmed from a decision to abandon development of three retirement villages in Victoria and Tasmania, which it blamed on "substantially higher" construction costs.
The only factor saving Village Life's share price from extending its 83 per cent slump from its $2.88 January peak was a trading halt ordered by the company's directors last week. Shares in Village Life hit a new low of 43c on May 13.
Village Life went a step further yesterday, requesting its shares be suspended from trading. This was in contrast to the company boasting in a letter to the residents of its 3700 retirement units on May 13 that it would "continue with its rapid growth".
Village Life joint managing directors Tony Roberts and John Krimmer declined to speak to the Herald. A company spokeswoman said they were too busy to speak to the media.
The company also declined to explain details of an agreement signed two weeks ago that, if approved by shareholders, would allow ING Real Estate Management to take management control of Village's listed property trust, Village Life Trust (VTR).
Under the deal, the 19.5 per cent ING-owned VTR would buy 10 retirement villages from Village Life Ltd. ING helped fund a placement of VTR shares last week to finance the purchase.
ING Real Estate chief executive Hugh Thomson said ING was a "believer in the product".
Falling short of endorsing Village Life's current management team, Mr Thomson said: "We believe that the [retirement] sector offers some attractive fundamentals."
In a note to clients, Goldman Sachs JBWere analyst Craig Temby said Village Life's latest profit warning pointed "once again to the company's lack of financial controls and systems".
One analyst appeared puzzled over how construction prices could rise in a building downturn.
"It makes you wonder what the hell's going on," he said.
