June 23, 2019 / 11:59 PM / 22 days ago

UPDATE 2-Aussie retirement-home operator Aveo sees annual profit slump, shares fall

* Co expects FY19 profit to be about 60% lower y-o-y

* Aveo discloses confidential takeover proposal

* Stock top pct loser on ASX200 index

* (Adds share movement, analyst comment)

By Aby Jose Koilparambil

June 24 (Reuters) - Australian retirement-home operator Aveo Group on Monday said it expects annual profit to more than halve due to weak property market conditions, sending its shares about 14% lower.

The Sydney-based firm also revealed that a “preferred party” had made a confidential, non-binding and conditional indicative takeover proposal following extensive due diligence.

Aveo neither named the party nor put a value on the offer and added that the transaction would be discontinued if an agreement could not be reached by July 22.

A downturn in Australia’s property market has created challenges for policymakers worried about the wider economic impact of a housing slump.

Aveo’s guidance weighed heavily on the stock, with the shares touching a more than four-month low of A$1.80 in their biggest intraday percentage decline since Sept. 17, 2018.

The firm said it now expected underlying profit for 2019 to be about A$50 million ($34.7 million). The company reported underlying profit of A$127.2 million in 2018.

Potential customers were delaying decisions to sell their homes and move into retirement accommodation due to weakness in house prices, the company said.

“The guidance was disappointing but was not completely unexpected given how tough the residential market has been during the second half (of 2019),” said Hamish Perks, executive director at Moelis Australia Securities.

“The potential bidder would be viewing this as an opportunity to acquire the group with a big discount.”

The outlook for the residential property market had improved following the recent re-election of the conservative coalition government and a central bank rate cut, boding well for firms such as Aveo in 2020, he added.

Aged care firms in Australia are also under pressure from an ongoing independent public inquiry into abuse and mistreatment in the sector.

$1 = 1.4424 Australian dollars Reporting by Aby Jose Koilparambil in Bengaluru; Editing by Stephen Coates

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