Goodman

Goodman Group Securityholder Review 2013

Strength in numbers

Ian Ferrier, AM Independent Chairman

Strength in numbers

The strength of the result delivered by Goodman in 2013 can be attributed to the focused and consistent delivery of the Group’s strategy across all parts of the business. Goodman’s extensive human and capital resources have enabled it to build a leading market position in the industrial property sector and pursue a range of sustainable growth opportunities across its platform globally. This in turn will ensure it continues to grow profitably and generate long-term value for all of its stakeholders.

$544m

operating profit

Financial highlights for the year include:

  • operating profit of $544 million, equating to operating earnings per security of 32.4 cents;
  • statutory profit of $161 million (including $293 million of unrealised derivative and foreign exchange mark to market adjustments which is due to our currency hedging policy and is offset by a favourable $269 million of foreign currency translation recognised in reserves and not through the income statement);
  • total distribution and dividend of 19.4 cents per security, up 8% compared with the same period last year;
  • a strong financial position, with balance sheet gearing reduced to 18.5%, interest coverage ratio of 5.0x and weighted average debt maturity of 5.4 years; and
  • Group liquidity at $1.8 billion.

Print

Building capability and realising profits in new markets take time and our strategy is to invest patiently, expand prudently and position the Group to capitalise on its unique opportunities.

Goodman has expanded and strengthened its global platform and continues to build a sustainable business and brand recognised for its specialist capability and quality industrial product offering. The Group has benefited from a strategy of securing the optimal business mix of significant capital partners, a global and stable customer base and through its network expansion into both large and high growth markets. This activity is underpinned by a prudent allocation of resources.

An undersupply of prime quality industrial space globally and a number of structural changes taking place mean that demand from customers and investors for our development product continues to be strong. Penetration of the third party logistics, e-retail, retail and fast moving consumer goods (FMCG) and automotive sectors all provide profitable sources of growth for the Group across its key markets. The momentum in the Group’s underlying business is being supported by these four key sources of growth that are fuelling demand for high quality logistics assets.

Importantly, Goodman has the expertise, infrastructure and capital to service our customers around the world and the flexibility to adapt to their changing business requirements and the broader structural changes shaping the industrial sector globally.

19.4¢

distribution per security

Third party logistics

The rapid growth in e-commerce, greater supply chain efficiencies, building obsolescence and consolidation among third party logistics providers have facilitated the ongoing growth of our strong long-term relationships with international logistics customers, including DHL, DB Schenker, Nippon Express, Toll and Kuehne + Nagel.

E-retail

Changes in the logistics market driven by the increase in e-retail have meant that this is now Goodman’s fastest growing customer segment, partnering with customers such as Amazon, Zalando, Net-A-Porter and GraysOnline. This is reflected in Goodman’s development work in progress, with a significant number of projects currently underway on behalf of e-retail or e-retail related customers.

Retail and FMCG

High penetration of a core and reliable customer base of traditional retail and FMCG businesses provides consistent returns and recurring opportunities from relationships including Woolworths, Metcash, Tesco, Coca-Cola and Unilever.

Automotive

A rising middle class in developing markets, particularly China and Brazil, is also driving growth in the automotive sector where Goodman partners with customers such as Mazda, BMW, Daimler and Volkswagen.

$1.8bn

liquidity

We adopted a partnering approach when entering two of the world’s largest markets of the US and Brazil, capitalising on local knowledge and expertise to help realise opportunities.

In November, we announced our new joint venture in Brazil with WTorre to form WTGoodman. WTorre is one of Brazil’s leaders in the development and construction of industrial warehouse and logistics facilities and commercial real estate. The joint venture will undertake the development of prime logistics and industrial properties on a 50/50 basis in key markets throughout Brazil. The strategy includes the deployment of a highly experienced team, combining WTorre’s local market expertise and logistics capability, with Goodman’s global customer base and fund management expertise. Construction is underway on phase one of the first development at International Business Park, Rio de Janeiro and is due for completion in 2013.

Since our launch into the US in 2012, we have progressed our expansion into the world’s largest market. We are taking a development led approach and by the end of the year our first property, Goodman Logistics Center Oakland, will be complete. During the 2013 financial year, Goodman North America Partnership secured equity of US$890 million from the Group together with Canada Pension Plan Investment Board on a 55/45 basis.

During the year, we appointed three new executive directors to reflect the global nature of the business and emphasise the importance of Goodman’s diversity and growth of its offshore operations: Mr Anthony Rozic, Deputy Chief Executive Officer, Mr Danny Peeters, Executive Director, Continental Europe and Brazil, and Mr Philip Pearce, Managing Director, Greater China and a director of Goodman Logistics (HK) Limited. The appointments reflect the direct and extensive involvement of these executives in the major logistics markets of North America, Europe and Brazil, and China respectively.

Each new member brings over seven years of experience to the Group and their skill sets will complement the functional and strategic direction of the Board. They will also bring formal responsibility and decision making to enhance communication with the Board and Securityholders, along with assisting the Board with future succession planning.

With fully operational businesses in key global markets, long-term customer and capital partner relationships established and our experienced teams driving a sustainable business model, we are starting the 2014 financial year in a strong position. I would like to thank our Securityholders, customers, capital partners and staff for their continued support and commitment.

Ian Ferrier, AM Independent Chairman