Goodman Group · ASX:GMG
Goodman — H1 FY2012 Earnings Presentation
60 slides from Goodman's earnings presentation, Feb 16, 2012
Slide 1: Results for the half-year ended 31 December 2011
Goodman Group Results for the half-year ended 31 December 2011 For personal use only 16 February 2012 building the future+
Slide 2: Important notice and disclaimer
Important notice and disclaimer For personal use only This document has been prepared by Goodman Group (Goodman Limited (ABN 69 000 123 071) and Goodman Funds Management Limited (ABN 48 067 796 641) (AFSL Number 223621) as the Responsible Entity for Goodman Industrial Trust (ARSN 091 213 839)). This
Slide 3: Contents
Contents For personal use only + Section 1 Highlights + Section 2 Results overview + Section 3 Operational performance + Section 4 Outlook and summary + Appendices – Capital restructure proposal – Results analysis – Investment – Development – Management – Capital management 3
Slide 4: Section 1 Highlights
For personal use only Section 1+ Highlights Interlink, Hong Kong 4
Slide 5: Highlights
Highlights For personal use only + Focused strategy delivering: – Operating profit after tax of $229 million, up 34% on 1HFY2011 – Fully diluted operating EPS of 3.051 cents, up 17% on 1HFY2011 – Distribution per security of 1.80 cents, up 20% on 1HFY2011 – Forecast FY2012 fully diluted operating EP
Slide 6: Highlights
Highlights For personal use only + High occupancy maintained at 96% + Retention rate of 75% and WALE of 5.2 years Own + Leased ~0.9 million sqm across the Group and managed funds platform equating to $92 million of property income + Positive stabilised property valuations driven by rental growth + W
Slide 7: Section 2 Results overview
For personal use only Section 2+ Results overview M7 Business Hub, Australia 7
Slide 8: Results overview
Results overview For personal use only + Underlying fundamentals are on target: 1H FY12 – Performance on track to exceed previous full year EPS guidance Operating profit ($M) 229.2 – Maintained liquidity and low gearing Statutory accounting profit ($M) 200.0 Operating earnings per security (cents)1
Slide 9: Profit and loss
Profit and loss For personal use only + Half year operating profit of $229.2 million: 31 December 2011 income statement 1H FY11 1H FY12 – Foreign EBIT reduced by weighted average AUD $m $m appreciation of 6% compared to 1H FY2011 Investment (look through) 224.5 239.0 – Offset by currency hedges incl
Slide 10: Balance sheet
Balance sheet For personal use only + Strong balance sheet maintained: 31 December 2011 balance sheet – Selective approach to pre-committed and pre-sold 30 Jun 2011 31 Dec 2011 developments $m $m – Managed fund equity raisings and asset recycling Stabilised assets 2,409 2,421 Fund cornerstones1 2,63
Slide 11: Group liquidity position
Group liquidity position For personal use only Debt maturity profile + Cash and available lines of credit of over $1.1 billion at 31 December 2011: – $296 million cash – $852 million available lines + Significant covenant headroom maintained + Average Debt Maturity profile of 5.2 years + ICR at 5.0
Slide 12: Section 3 Operational performance
For personal use only Section 3+ Operational performance Highbrook Business Park, New Zealand 12
Slide 13: Investment
Investment For personal use only + Property fundamentals remain stable reflecting quality of the portfolio and Investment ($m) 1H FY11 1H FY12 customers: Direct 81.7 84.1 – Occupancy maintained at 96% from June 2011 and Cornerstones 142.8 154.9 up 1% from the previous corresponding period Look throu
Slide 14: Development
Development For personal use only + Active developments in all markets: Development ($m) 1H FY11 1H FY12 – Japan development fund in due diligence on back of Osaka site Revenue 48.7 86.0 – Strong pipeline of potential sites and customer pre- EBITDA 35.7 71.0 commitments in Japan and China – On targe
Slide 15: Development projects: commencements
Development projects For personal use only + Major development project commencements Germany – Pforzheim and Koblenz Belgium – Tessenderlo Customer Amazon Customer Stanley Black and Decker Area 222,152 sqm [Insert Area 62,494 sqm image] Lease term 10 years Lease term n/a Contracted owner GMG Contrac
Slide 16: Development projects: completions
Development projects For personal use only + Major development project completions Germany – Graben and Rheinberg Germany – Leipzig Customer Amazon Customer Schenker Area 215,070 sqm [Insert Area 62,951 sqm image] Lease term 7 years Lease term 10 years Contracted owner Contracted owner GELF GELF / G
Slide 17: Management
Management For personal use only + External Assets Under Management (AUM) of $15.3 Management ($m) 1H FY11 1H FY12 billion increased 3.6% on a constant currency basis Fund management fees 30.3 36.3 + Size and scale has resulted in improved margins Property service fees 29.5 30.7 across the managemen
Slide 18: Management - AUM
Management - AUM For personal use only + Major new initiatives completed during the half include: – GELF completes €351 million rights issue and secures new €800 million debt package – GAIF completes US$300 million unsecured note issue with 10 and 12 year maturities – GCLH increases its equity commi
Slide 19: Management platform
Management platform For personal use only Goodman’s six largest funds GAIF GTA GELF ABPP GHKLF GMT1 Total assets $4.7bn $2.7bn $2.2bn $1.7bn $1.5bn $1.3bn GMG co-investment 43.3% 19.9% 29.5% 35.7% 20.0% 17.2%2 GMG co-investment $1.1bn $0.3bn $0.4bn $0.3bn $0.2bn $0.1bn2 Number of properties4 131 61
Slide 20: Section 4 Outlook and summary
For personal use only Section 4+ Outlook and summary Keylink Industrial Estate, Australia 20
Slide 21: Outlook and summary
Outlook and summary For personal use only + Maintain position as a strong global industrial property and business partner in all markets we operate + Entering new markets adopting a low risk and capital partnering approach Strategy + Expanding relationships with major investment partners to capture
Slide 22: Appendix 1 Capital restructure proposal
For personal use only Appendix 1+ Capital restructure proposal Highbrook Business Park, New Zealand 22
Slide 23: Capital restructure proposal
Capital restructure proposal For personal use only + To ensure that Goodman’s corporate and capital structure supports Goodman’s strategy Purpose to be a global owner, developer and manager of industrial property + Ability to pass on franking credits to investors For consideration at 30 March 2012 E
Slide 24: Restructure
Restructure For personal use only + After the Restructure Securityholders will have the same economic interest in Goodman Group 24
Slide 25: Why
Why For personal use only + Need for Restructure arises because of the: – Evolution of the business resulting in more active (management) income relative to passive (rental) income – Growth in offshore markets increasing international earnings – Inability to distribute franking credits + Change ensu
Slide 26: Other capital structure initiatives
Other capital structure initiatives For personal use only Consolidation: + A five into one stapled security consolidation1 – Improves marketability and attractiveness of investing in Goodman – Reduces volatility in GMG’s security price due to a higher per security market price (reduces the bid-ask s
Slide 27: Indicative timetable
Indicative timetable For personal use only EVENT DATE1,2 Record Date to determine Small Holdings 7.00pm 8 February Record Date to identify eligibility to participate in SPP 7.00pm 15 February Notice of EGM with IM dispatched and SPP offer period commences 22 February 2012 SPP offer period closes 5.0
Slide 28: Appendix 2 Results analysis
For personal use only Appendix 2+ Results analysis Kobe, Japan 28
Slide 29: Profit and loss
For personal use only Profit and loss 29
Slide 30: Profit and loss (cont)
Profit and loss (cont) For personal use only GMG results Half Year ended Half Year ended Increase / 31 Dec 2010 31 Dec 2011 (decrease) $M $M $M Property investment1 164.8 171.1 6.3 Management services 50.6 58.4 7.8 Development 48.7 86.0 37.3 Operating earnings net of property expenses 264.1 315.5 51
Slide 31: Profit and loss (cont)
Profit and loss (cont) For personal use only + Total income by business segment for the half year ended 31 December 2011 Category Total Investment Manageme Developme Unallocated Non-cash / nt nt non- recurring items1 $M $M $M $M $M $M Gross property income 111.3 114.4 (3.1) Fund management income 36
Slide 32: Profit and loss (cont)
Profit and loss (cont) For personal use only Category Total Investment Management Developme Unallocated Non- nt operating items1 $M $M $M $M $M $M EBIT – per statutory accounts 180.7 171.1 36.0 71.0 (20.3) (77.1) Net loss from fair value adjustments on investment 2.6 2.6 properties Share of net loss
Slide 33: Reconciliation non-operating items
Reconciliation non-operating items For personal use only Non-operating Items in statutory profit & loss Notes Half Year ended $M 31 Dec 2011 $M Property valuations Net loss from fair value adjustments on investment properties 1 (2.6) Share of net gain from fair value adjustments on investment proper
Slide 34: Financial position
Financial position For personal use only As at 31 December 2011 Direct Investments Development Other Total Assets $M s $M $M $M $M Cash 296.4 296.4 Receivables 25.9 195.9 338.3 560.1 Inventories 652.6 652.6 Investment properties 2,421.4 394.6 2,816.0 Investments accounted for using equity 2,695.5 15
Slide 35: Property valuations
Property valuations For personal use only + Overall property valuations stable with liquidity in all markets + Devaluations primarily on UK and Spain land banks + Marginal tightening in WACR to 7.8% + Revaluations driven primarily by increasing rents + Strong investor demand continues for prime inve
Slide 36: Appendix 3 Investment
For personal use only Appendix 3+ Investment ParkWest Industrial Estate, Australia 36
Slide 37: Leasing
Leasing For personal use only Across the Group and Funds platform: + ~0.9 million sqm leased during the first half + Reversions flat on new leasing deals, with like for like NPI growing at ~3% + Occupancy maintained at 96% from June 2011 and up 1% from the previous corresponding period Division Leas
Slide 38: Customers
Customers For personal use only 1. Includes customers of Goodman Group direct portfolio and its managed funds and is based on net rental income 38
Slide 39: Direct portfolio detail - Australia
Direct portfolio detail - Australia For personal use only Portfolio snapshot Key metrics Total assets A$2.1 billion + 32 properties with a total value of $2.1 billion located across key Australian markets Customers 230 + Leasing deals remain strong across the portfolio: Number of properties 32 – 110
Slide 40: Direct portfolio detail - UK
Direct portfolio detail - UK For personal use only Portfolio snapshot Key metrics Total assets A$0.3 billion + Occupancy at 87% Customers 12 + Strong WALE of 5.0 years + Active enquiry on vacant properties Number of properties 11 + Cap rates stable with current WACR of 8.0% Occupancy 87% Weighted av
Slide 41: Appendix 4 Development
For personal use only Appendix 4+ Development Belleville Logistics Centre, France 41
Slide 42: Developments
Developments For personal use only 1HFY12 Developments Completions Commitments Work in progress Value ($M) 713 938 2,078 Area (m sqm) 0.6 0.9 1.6 Yield (%) 8.2 8.4 8.9 Pre-committed (%) 99 86 87 Weighted Average Lease Term (years) 9.9 8.6 8.2 Development for Third Parties or Funds (%) 100 72 85 Asia
Slide 43: Developments (cont)
Developments (cont) For personal use only + Maintained development pipeline in excess of $10 billion – $0.3 billion of development pipeline committed in 1H12 – Development pipeline restocked (China and Japan landbanks), in excess of $10 billion – Forecast GLA over 6 million sqm – Development pipelin
Slide 44: Appendix 5 Management
For personal use only Appendix 5+ Management Banfield Distribution Centre, Australia 44
Slide 45: Global platform
For personal use only Global platform 45
Slide 46: Goodman Australia Industrial Fund
Goodman Australia Industrial Fund For personal use only Key events Key metrics Total assets A$4.7 billion + Portfolio occupancy increased to 98% Interest bearing liabilities A$1.8 billion + Total leasing of approx 244,650 sqm for the half. Gearing1 39.0% Customers 383 + Approval of four development
Slide 47: Goodman Trust Australia
Goodman Trust Australia For personal use only Key metrics Key events Total assets A$2.7 billion + Portfolio occupancy increased to 98% Interest bearing liabilities A$1.1 billion + Successfully renegotiated margins down for the $1.1 Gearing1 38.4% billion Australian debt facility Customers 216 Number
Slide 48: Goodman European Logistics Fund
Goodman European Logistics Fund For personal use only Key events Key metrics Total assets1 A$2.2 billion + Completed a €351 million equity raise. Underwritten by: Interest bearing liabilities A$1.0 billion – Dutch asset managers, APG (€150 million) and Gearing2 38.6% PGGM (€50 million) Customers 80
Slide 49: Arlington Business Parks Partnership
Arlington Business Parks Partnership For personal use only Key events Key metrics Total assets A$1.7 billion + Leasing activity (completed and exchanged) of 8,579 sqm ($2.7 million net annual rental) over the Interest bearing liabilities A$0.8 billion half (including re-gearing of 2012 onwards lease
Slide 50: Goodman Hong Kong Logistics Fund
Goodman Hong Kong Logistics Fund For personal use only Key events Key metrics + An ongoing focus on customer relationship and Total assets A$1.5 billion favourable market conditions has maintained Interest bearing liabilities A$0.4 billion strength in operational performance, with occupancy Gearing1
Slide 51: Goodman Property Trust
Goodman Property Trust For personal use only Key events Key metrics1 Total assets A$1.3 billion + Active portfolio management: Interest bearing liabilities A$0.5 billion - Over 46,000 sqm of space leased to new or existing Gearing2 35.9% customers, equating to NZ$5.5 million during the 6 Customers 2
Slide 52: Appendix 6 Capital management
For personal use only Appendix 6+ Capital management Consolidated Cargo Complex, Hong Kong 52
Slide 53: Group financial covenants
Group financial covenants For personal use only Covenants Test Covenant Result Headroom Net liabilities1 as a percentage of net tangible assets is Gearing ratio 55.0% 32.2% 22.8% not more than 55.0% Interest cover ratio EBITDA to interest expense at least 2.0x 2.0x 5.0x 3.0x Secured debt as a percen
Slide 54: Currency mix
For personal use only Currency mix 54
Slide 55: Financial risk management
Financial risk management For personal use only Financial risk management in line with Group Board policy +Interest risk management: – 91% hedged over next 12 months – Weighted average hedge maturity of 4.0 years – Weighted average hedge rate of 4.59%1 vs spot 1.78%2 – Current “all in” net WACD 3.61
Slide 56: Financial risk management (cont)
Financial risk management (cont) For personal use only Interest rate + Interest rates are hedged to 91% over next 12 months + Weighted average hedge rate of 4.59%1 vs spot 1.78%2 - NZD – (hedge 6.24%, spot 3.32%) - JPY – (hedge 1.21%, spot 0.39%) - HKD – (hedge 2.62%, spot 0.80%) - GBP – (hedge 8.41
Slide 57: Financial risk management (cont)
Financial risk management (cont) For personal use only Interest rate hedging profile Euro payable GBP payable HKD payable NZD payable JPY payable Fixed Fixed1 Fixed Fixed rate Fixed rate rate rate % rate As at Dec €M % £M % HK$M % NZ$M ¥M % 2.62 (425.0) 8.20 (1,245.1) 3.83 (190.0) 6.33 (11,200.0) 0.
Slide 58: Financial risk management (cont)
Financial risk management (cont) For personal use only Currency hedging profile Amount Amount Maturing in Hedge rate payable Hedge rate payable year ending June HK$M NZ$M 2012 7.4975 (630.0) 1.1774 (5.1)] 2013 4.9077 (62.6) 1.1932 (5.0) Foreign currency denominated balance sheet hedging maturity pro
Slide 59: Exchange rates
Exchange rates For personal use only + Statement of Financial Position – exchange rates as at 31 December 2011 – AUDGBP – 0.6534 (31 December 2010 : 0.6585) – AUDEUR – 0.7813 (31 December 2010 : 0.7647) – AUDHKD – 7.9675 (31 December 2010 : 7.9512) – AUDSGD – 1.3297 (31 December 2010 : 1.3126) – AUD
Slide 60: Thank you
For personal use only thank+you Important Notice This document has been prepared by Goodman Group (Goodman International Limited (ABN 69 000 123 071) and Goodman Funds Management Limited (ABN 48 067 796 641) (AFSL223621) as the Responsible Entity for Goodman Industrial Trust (ARSN 091 213 839)). The