FROM airA MATTER OF VILLAGELIFE AND DEATHBack in May, CSFB...

FROM air
A MATTER OF VILLAGE
LIFE AND DEATH
Back in May, CSFB analysts were ropable. Having previously rated retirement village developer
Village Life Trust (VLL) Outperform, CSFB was forced to suspend its rating following both a profi t
downgrade, from $11.5-12.5m to $4.5-4.7m, and a total lack of ongoing guidance.
In a bitter tirade CSFB suggested “We think that one of the best decisions taken by founding
shareholders at the time of the fl oat was to sell part of their holdings into the fl oat and pocket $36m
between them.”
Well Village Life is at it again, issuing a third profi t warning for the year, taking expected FY05 profi t
down to $1.5-$1.8m. This actually represents a loss for the second half, and equates to a fi nal result
reaching only 11.6% of the original profi t estimated in the IPO prospectus. Still no FY06 guidance
was forthcoming.
A slightly more circumspect CSFB delivered this news with little qualifi cation this time, clearly having
assumed a position of indifference, and maintained its rating suspension. However, the analysts did
offer that there was nothing in the company’s statement to convince them the Village Life model is
economically viable.
“Our call has been that the model is a ‘Village of Cards’. When one piece falls, all the other pieces
tumble”, was their fi nal word.
Aspect Huntley took the effort reminding us all that Village Life is the only listed group building rental
accommodation to cater for those aged 65 and over on low incomes. Over the next 20 years this
market is expected to grow by 70%.
What the hell did Village management do to completely stuff this up?
The company has cited substantial delays of three development projects. One has now been
abandoned and the others will be scaled down. Management has promised to “review” its systems
and operations, but despite new personnel being sought, the original alchemists who managed to
turn gold into lead – the joint managing directors – are apparently, and remarkably, keeping their
jobs.
Aspect Huntley provides the wonderful rating for Village Life of “Avoid”.
GSJB Were, having downgraded to Underperform (long term Sell) back in May, has trashed its
earnings forecasts and is waiting for results in FY06, which management has now called “a year of
consolidation”.
Will Village Life rollover and die? Something rather dramatic will have to happen to stem the tide, it
would seem. Present management must be about as useful as a chef who could burn water. Where
are those swords?