Goodman Group · ASX:GMG
Goodman — H1 FY2008 Earnings Presentation
80 slides from Goodman's earnings presentation, Feb 13, 2008
Slide 1: Goodman Group Results for the half year ended 31 December 2007
1 Goodman Group Results for the half year ended 31 December 2007
Slide 2: Contents
2 Contents + Section 1 Review + Outlook + Section 2 Financial Performance + Section 3 Key Business Metrics + Section 4 Asia Pacific Review + Section 5 Europe Review + Section 6 Funds Management Review + Section 7 Recap + Section 8 Appendices 13 February 2008
Slide 3: Section 1 – Review and Outlook
3 Section 1 – Review and Outlook+
Slide 4: Review + Outlook
4 Review + Outlook + The Group delivered a very strong result over the half, $290 million operating profit + Operating earnings per security (EPS) of 17.5c (+11% v pcp) + Ahead of target to deliver forecast FY08 EPS of 34.0c (+8% v FY07) + Earnings composition – Business segments in line – 79% inves
Slide 5: Review + Outlook
5 Review + Outlook + Group is in a sound capital position – Liquidity and facilities in place to cover all maturities out to May 2009 – Significant re-financing completed since July 2007 – $1.1 billion during the period – Subsequently refinanced $1.4 billion ($0.8 billion with NAB / ANZ in January a
Slide 6: Review + Outlook
6 Review + Outlook + Property investments average rental increase of 3.2% YTD + Very short vacancy periods (less than 3 months) + Total property investment portfolio +$0.5 billion to $5.8 billion with strong expected IRR + Business Space AUM $21.1 billion (+8%) ex GPI + All business space funds outp
Slide 7: Review + Outlook
7 Review + Outlook Goodman Outlook + Outlook for profitability remains on track and continue to target consistent long term growth + Business model diverse, robust, has longevity and provides flexibility + Asset pricing will reward prime quality assets + Customers consolidating into markets and seek
Slide 8: Section 2 – Financial Performance
8 Section 2 – Financial Performance+
Slide 9: Financial Performance
9 Financial Performance + 1H FY08 profit of $284.9 million translates to operating profit of $290.3 million + Operating EPS 17.5c and DPS 17.0c up 10.9% and 7.9% respectively + Ahead of budget and well placed to deliver 34c forecast for full year Half Year Ended Half Year Ended Increase/ 31 Dec 2007
Slide 10: Financial Position
10 Financial Position + Credit ratios comfortably within bank covenants and rating agency targets - compares well to peers + Capital allocation supports the desired earnings mix and long term strategy 31 Dec 2007 30 June 2007 Capital Allocation $B $B Property Investments 5.9 5.3 Development Land and
Slide 11: Revaluation Summary
11 Revaluation Summary + Net revaluation loss of $15 million Investments Dec-07 WACR WACR chg Assets Dec-Jun + Asia Pacific: $B Dec-07 % % – Australia direct portfolio +$63.2 million Australia – Direct 1 2.8 7.0 (0.4) – Share of funds (GAIF, HK, NZ) +$32.7 million Australia – Fund 0.5 7.0 (0.4) – Ot
Slide 12: Capital Management
12 Capital Management + Equity – DRP was on for September 2007 quarter and suspended in December 2007 – Listed $327 million Hybrid (Goodman PLUS) in December 2007 + Debt – Maintain BBB+/Baa1 S&P/Moody’s ratings – Successfully established a new €525 million revolving facility in Europe in December 20
Slide 13: Debt Management
13 Debt Management + Average Debt Maturity profile of 3.56 years1 + Facilities are mainly unsecured (only 1.7% secured) on common terms for all financiers + The Group established US$5.0 billion Euro Medium Term Note (“EMTN”) Program, positioning the Group to tap the market opportunistically, as mark
Slide 14: Debt Management
14 Debt Management + Debt Maturity Profile of Goodman Managed Funds – Weighted Average Debt maturity profile of 3.96 years – Recently launched a fully underwritten $1.6 billion four year facility for Goodman Australia Industrial Fund (“GAIF”) – Successful £800 million CMBS issuance for ABPP during t
Slide 15: Capital Management
15 Capital Management + Financial Risk Management in line with Group board policy – Interest risk management is conservative with – 84% hedged in the first 12 months and to the upper end of policy for 8 years – Weighted average hedge maturity of 5.2 years – Weighted average hedge rate of 4.58% vs sp
Slide 16: Section 3 – Key Business Metrics
16 Section 3 – Key Business Metrics+
Slide 17: Capital Allocation
17 Capital Allocation + Total property investment portfolio up $0.5 billion to $5.8 billion – reduction of $0.7 billion direct Australian investments – increase directly owned warehoused assets $0.4 billion – increase of $0.8 billion cornerstone1 + Group owned development assets held constant in abs
Slide 18: Earnings Composition
18 Earnings Composition + Geographic property assets allocation Property Assets ($bn) Aus & NZ Other Asia UK Europe Total Investment Property 3.9 0.4 1.1 0.4 5.8 78% Development Land & WIP 0.6 0.1 0.7 0.2 1.6 22% Total 4.5 0.5 1.8 0.6 7.4 61% 7% 24% 8% + Capital allocation influences EBIT mix – abil
Slide 19: Investment Income
19 Investment Income + Property Investment (53% of operating EBIT) – 71% from directly owned (7.0% yield) – 29% cornerstone (5.5% yield) – total return focused funds with core+ attributes – lower interest rate markets – Reduction in direct property income supplemented by cornerstone investment + Tar
Slide 20: Management Services Income
20 Management Services Income + Management services (26% of operating EBIT) – Up 144% on 1H FY07 and 12% on 2H FY07 – Higher volume of off balance sheet development – Services and Funds Management revenue from performance fees represent 16bps of AUM – Margin on overall services at 64% Management Ser
Slide 21: Development
21 Development + Development (21% of operating EBIT) – Commitments increased to $1.5 billion – $1.2 billion completed and – $3.5 billion underway – 7.5% yield on cost (55% Asia Pacific, 45% UK/Europe) bodes well for 2H FY08 / FY09 – ROC of 20% (profit & fees) – with no contribution from UK Logistics
Slide 22: Section 4 – Asia Pacific Review
22 Section 4 – Asia Pacific Review +
Slide 23: Operational Review
23 Operational Review + Australian direct property portfolio - $2.8 billion – Average cap rate of 7.0% across the stabilised portfolio – WALE 4.8 years – Occupancy 97% – Customer retention 71% - reflecting estate based assets with low down times – Average rental growth of 3.2% – Average down-time be
Slide 24: Operational Review
24 Operational Review + Developments – Commitments of $696 million - 74% in managed funds (68% pre-committed) – Completions of $523 million - 58% in managed funds – Developments underway increased 19% to $1.9 billion (74% in managed funds) Australia – Secured 67,660 sqm from top 3 logistic customers
Slide 25: Regional Activities
25 Regional Activities + Expansion of Hong Kong via development and asset management footprint – The HK Fund acquired Woo Kee Hong Building for $56 million having sold EverGain Plaza – Estimated end value of Hong Kong development pipeline of $0.5 billion ($1.0 billion in 50:50 JV with Macquarie Bank
Slide 26: Section 5 – Europe Review
26 Section 5 – Europe Review +
Slide 27: Operational Review
27 Operational Review + Investments – $1.4 billion UK Logistics assets currently warehoused (55% Land and WIP / 45% Investment) – Increase in cornerstone interest in ABPP to 21% in line with the Group’s global cornerstone target range – Current cap rates in line with industry averages; UK Logistics
Slide 28: Regional activities
28 Regional activities + UK Logistics platform integrated with 30 staff in Birmingham – Full capability property service / development / funds management in place – Track record of delivering circa 250,000 sqm per annum ($500 million) – 167,921 sqm signed during the period – Portfolio cap rates refl
Slide 29: Regional Activities
29 Regional Activities + Strengthening relationships with key customer through $380 million Sale and Leaseback – Portfolio to be acquired by GELF + Business performance supported medium term through significant land bank – Increasing opportunities in UK Business Park market – VentureEast mixed use u
Slide 30: Goodman Property Investors (GPI)
30 Goodman Property Investors (GPI) + $17.0 billion of assets under management + Direct Mandate business is primarily a “portfolio management” function provided to individual clients – Approximately 20 accounts, diversified across all asset classes – Mature operating platform delivering stable earni
Slide 31: Section 6 – Fund Management
31 Section 6 – Fund Management +
Slide 32: Goodman Fund Strategy
32 Goodman Fund Strategy + Goodman funds management strategy designed for long term outperformance + Primarily partnerships with sophisticated wholesale investors + “Sharing” of development projects with fund investors to enhance fund performance – Primarily Core Plus investment strategy (80% Invest
Slide 33: Funds Platform
33 Funds Platform + Robust funds management platform continues to achieve investor support – 8% growth in Business Space AUM (ex-GPI) + Business Space fund performance and fundamentals remain strong – 41.5% average gearing1 – $0.7 billion in un-drawn equity available to be called – $1.6 billion in d
Slide 34: Fund Platform Capital
34 Fund Platform Capital + Capital Partners1,2 – 84 (+6% from FY07) investors in two or more Goodman Funds – Strong investor relationships – Long term focus – 49% (by value) of investors are international 1. Excludes GPI 2. Including holdings in GMG 13 February 2008
Slide 35: Fund Platform Capital
35 Fund Platform Capital 2 + Fund Platform – Primarily open end funds with “Review Events” at 10-year term – Weighted average life >10 years1 – No fund Review Events in the next 5 years – 57% of funds have their first review event beyond 2018 – AUM diversified across 8 different funds – AUM geograph
Slide 36: Drivers of AUM Growth
36 Drivers of AUM Growth Business Space AUM Growth $1.6bn + $21.1 billion of Business Space AUM Drivers 1H FY08 – $1.6 billion net increase over the half year Open $19.5bn – 8% growth for the half year period Acquisitions on market $0.5bn Acquisitions from GMG $2.1bn Developments $1.5bn + $4.1 billi
Slide 37: Fund Platform Capital
37 Fund Platform Capital + Raised $0.8 billion in equity for Business Space Funds – GAIF, GMT, GELF, ABPP + Balance of un-drawn capital ($2.3 billion) – $0.7 billion of un-drawn equity capital within business space funds – $1.6 billion of debt capacity 13 February 2008
Slide 38: Fund Platform Performance
38 Fund Platform Performance Key Fund Highlights Management Services – Europe + UK Business Parks - ABPP – Decrease in property portfolio value of 5.7% over the year – Impacted by increase in yields of 44bps to 5.9% – Property portfolio (ungeared) total return in CY07 of -2.0% – Outperformed IPD UK
Slide 39: Fund Platform Performance
39 Fund Platform Performance Key Fund Highlights Management Services – Europe + Continental European Logistics - GELF – Increase in property portfolio value of 1.5% for CY07 – Portfolio average yield of 6.4% - 20bps compression from launch – Fund total return of 11.5% for CY07 – outperforming benchm
Slide 40: Fund Platform Performance
40 Fund Platform Performance Key Fund Highlights Management Services – Asia Pacific + Australia - GAIF – Fund total return of 15.2% annualised for the period – Portfolio yields of 7.0% – Outperformed benchmark over period – Acquired 22 properties from the Group for $640 million – Investors have appr
Slide 41: Fund Platform Performance
41 Fund Platform Performance Key Fund Highlights Management Services – Asia Pacific + New Zealand - GMT – Successful NZ$275 million equity raising to fund the acquisition of 50% in Highbrook – 4.2% increase in FY09 cash distributions forecast 13 February 2008
Slide 42: Fund Platform Performance – Growth Initiatives
42 Fund Platform Performance Growth Initiatives – Asia Pacific + Significant focus from investor base to this region given the attractive risk/return investment metrics – reviewing opportunities to meet demand + Focus on Japan and China markets for fund launches in the coming 12 months + Ongoing str
Slide 43: Section 7 – Recap
43 Section 7 – Recap+
Slide 44: Recap and Outlook
44 Recap and Outlook + 11% EPS growth recorded – ahead of budget for the year + Demand from occupiers remains strong + Management income grown rapidly + Developments above budget + Effectively managing capital + Organic FY08 forecast EPS 34cps (growth of 8%) + Business is very well positioned for su
Slide 45: Section 8 – Appendices
45 Section 8 – Appendices+
Slide 46: Appendices
46 Appendices Contents Page Number + Financial Performance 47 + Reconciliation of Distributions 48 + Total Income by Business Segment 49 + Total Income by Geographic Segment 50 + Movement in Net Assets 51 + Financial Position 52 + Capital Management 53 + Debt Management 56 + Financial Risk Managemen
Slide 47: Financial Performance
47 Financial Performance GMG Results Half Year Ended Half Year Ended Increase / 31 Dec 2007 31 Dec 2006 (decrease) $M $M % Property Investment 193.3 195.4 (1.1) Management Services 192.1 95.1 102.0 Development 96.7 100.0 (3.3) Operating revenue net of property expenses 482.1 390.5 23.5 Unrealised ga
Slide 48: Reconciliation of Distributions
48 Reconciliation of Distributions GMG Results Half Year Ended 31 Dec 2007 $M Profit after tax attributable to Securityholders 284.9 Less unrealised gains on investment property revaluations (54.6) Less unrealised gains included in associate share of profits 54.0 284.3 Add / (Subtract) other AIFRS a
Slide 49: Total Income by Business Segment
49 Total Income by Business Segment + For half year end 31 December 2007 Total Net Property Net Net Unrealised Unallocated Investment Management Development Gains on Category Income Income Income Investment $M Properties $M $M $M $M $M Property income 167.8 167.8 Net gain from fair value adjustment
Slide 50: Total Income by Geographic Segment
50 Total Income by Geographic Segment + For half year end 31 December 2007 Category Total Asia Pacific Europe $M $M $M Net Property Investment Income1 193.3 160.3 33.0 Net Management Income 122.4 70.6 51.8 Net Development Income 96.7 92.9 3.8 Unrealised gains (7.2) 97.9 (105.1) 405.2 421.7 (16.5) Em
Slide 51: Movement in Assets
51 Movement in Assets + For half year end 31 December 2007 Net Tangible Asset Reconciliation $M $M Per Security1 Net assets at 1 July 2007 4,578.2 2.73 Less: Minority interests (23.7) (0.01) Net assets attributable to security holders 4,554.5 2.72 Revaluation of non-current investments during the ye
Slide 52: Financial Position
52 Financial Position + Headline gearing of 40.9% + Look through gearing of 47.0% As at 31 December 2007 Asia Pacific Europe Total $M $M $M Investment properties 3,436.2 1,723.1 5,159.3 Investments in managed funds 1,634.6 627.0 2,261.6 Other assets1,3 908.8 1,275.5 2,184.3 Total assets 5,979.6 3,62
Slide 53: Capital Management
53 Capital Management Equity + $142.8 million in new equity issued during the half year of which $130.8 million went to DRP investors + Closing number of securities on issue 1,715.5 million1 + Market capitalisation of $8,388.8 million at a $4.89 security price as at 31 December 2007 Securities Issue
Slide 54: Capital Management
54 Capital Management Hybrid + Group successfully raised $327 million on its Goodman Plus Hybrid Security + The offer was allocated to the retail brokers and institutions who were bidding participants in the book build process + Margin is set at 190bps over the three month bank bill rate + Significa
Slide 55: Capital Management
55 Capital Management Credit Metrics + The Group maintains the dual long term Credit Ratings as follows: – BBB+ - Standard & Poor’s – Baa1 - Moody’s Investor Services + Credit Ratings reflect the Group’s solid and diversified financial profile + As at 31 December 2007, Total Group Borrowings at $4,0
Slide 56: Debt Management
56 Debt Management + New Facilities to 31 December 2007 – European Facility – €525 million unsecured, revolving credit facility over 5 years completed in December 2007 – Syndicated with 6 International Banks, at market competitive pricing – The facility refinanced the existing €300 million revolving
Slide 57: Debt Management
57 Debt Management 13 February 2008
Slide 58: Financial Risk Management
58 Financial Risk Management + Capital Hedging – The Group, where practical, funds its international commitments and investments in the local foreign currency – Cross Currency Swaps are used on a case by case basis as required + Foreign sourced income – Foreign currency exposures in GBP, EUR, NZD, S
Slide 59: Financial Risk Management
59 Financial Risk Management + Interest Rate – Interest rates are hedged to 84% over next 12 months – Weighted average Hedge Rate of 4.58% vs spot1 4.60% – NZD – (hedge 7.07%, spot 8.09%) – JPY – (hedge 1.52%, spot 1.09%) – SGD – (hedge 3.45%, spot 2.40%) – HKD – (hedge 4.27%, spot 2.83%) – GBP – (h
Slide 60: Financial Risk Management
60 Financial Risk Management Interest Rate Hedging Profile 13 February 2008
Slide 61: Financial Risk Management
61 Financial Risk Management Interest Rate Hedging Profile Euro Payable GBP Payable HKD Payable NZD Payable SGD Payable JPY Payable Fixed Fixed Fixed Fixed Fixed Fixed Rate Rate Rate Rate Rate Rate As at June €M % £M % HK$M % NZ$M % SG$M % ¥M % 2008 (656.4) 3.95% (613.4) 5.02% (1,600.0) 4.28% (257.3
Slide 62: Financial Risk Management
62 Financial Risk Management Currency Hedging Profile Maturing in Hedge Amount Hedge Amount Hedge Amount Hedge Amount Hedge Amount year ending Rate payable Rate payable Rate payable Rate payable Rate payable June £M €M HK$M NZ$M S$M 2008 0.4159 (13.5) 0.5978 (9.6) 6.3543 (12.9) 1.1235 (14.4) 1.2291
Slide 63: Financial Risk Management
63 Financial Risk Management Foreign Currency Denominated Balance Sheet Hedging Maturity Profile Currency Maturity Weighted Average Amount Receivable1 Amount Payable1 Exchange Rate €M 2008 0.6090 A$492.6M €300M NZ$M 2012 1.1328 A$176.6M NZ$200M HK$M 2012 6.7145 A$148.9M HK$1000M ¥M 2012 97.4500 A$51
Slide 64: Financial Risk Management
64 Financial Risk Management Exchange Rates + Statement of Financial Performance – average exchange rates for the 6 months to 31 December 2007 – AUDGBP – 0.4269 (31 December 2006 : 0.4030) – AUDEUR – 0.6164 (31 December 2006 : 0.5955) – AUDHKD – 6.7640 (31 December 2006 : 5.9387) – AUDSGD – 1.2899 (
Slide 65: Property Investment
65 Property Investment + 56 properties with a total value of $3.4 billion1 located across key Australian markets + High volume of leasing deals on a reduced portfolio (7.3% of portfolio vs 4.8% Dec 06) – 112,631 sqm ($11.6 million net annual rental) of existing space leased – Customer retention 66%
Slide 66: Property Investment
66 Property Investment Occupancy, Lease Expiry and Retention + Minimal lease expiry (11.4% of portfolio) over the next 12 months + WALE of 4.8 years – in line with historical average + Occupancy stable at 97% + Customer retention slightly lower than historical average due to early terminations Dec-0
Slide 67: Property Investment
67 Property Investment Leasing Deals + Leased 112,631 sqm of existing space (7.3% of the portfolio compared to 4.8% at December 2006) + $11.6 million net annual rental + Average lease term on new deals of 4.8 years + Average rental increases of 2.0% on new lease transactions with average downtime be
Slide 68: Property Investment
68 Property Investment Rental Increase Profile + Average rental increase of 3.2% YTD + High proportion of market reviews to be offset by fixed reviews in 2H FY08 13 February 2008
Slide 69: Property Investment
69 Property Investment Lease Expiry Profile + Low expiry risk over the coming two years + 39% of income expiring beyond five years 13 February 2008
Slide 70: Property Valuations
70 Property Valuations Property Revaluations - Australia + $1.7 billion (51% of total portfolio) of properties revalued for the half year ended 31 Dec 07 + 4.2% increase over previous book values + Revalued portfolio weighted average capitalisation rate of 6.8% + GMG portfolio weighted average capit
Slide 71: Cornerstone Investment Performance
71 Cornerstone Investment Performance + $2.3 billion invested up $0.8 billion since June 2007 + All funds outperforming since inception + Average rolling total return (annualised) 5.2%3 – Asia Pac 10.2% – Europe -4.2% + Return before revaluation 5.5% Largest cornerstone investments Fund Performance
Slide 72: Acquisitions and Disposals
72 Acquisitions and Disposals Acquisitions Region Acquisitions Disposals + $333 million in acquisitions for the half year $M $M – $189 million in Europe Asia Pacific 1441 1,176 – $144 million in Australia Europe 189 109 Total 333 1,285 1. Includes $55 million of staged settlements Disposals + $1,285
Slide 73: Developments
73 Developments + $3.5 billion of new product currently under development to deliver $2.3 billion pa of completed investment product for Funds + Development commitments for the half-year are 75%, increasing the under development commitments to 66%. + $15 billion+ of gross development value and over
Slide 74: Developments
74 Developments 13 February 2008
Slide 75: Customer Base
75 Customer Base 1. Excludes customers in GPI funds 13 February 2008
Slide 76: Funds Management Overview
76 Funds Management Overview + Management of third party funds on behalf of investors + Total assets under management of $38.1 billion + Diversified across public and private markets in Australia, New Zealand, Hong Kong, Singapore, Japan, UK and Europe 13 February 2008
Slide 77: Funds Management
77 Funds Management + Assets under management $38.1 billion ($21.1 billion in business space ex GPI) 13 February 2008
Slide 78: Funds Management
78 Funds Management Europe Asia Pacific Total Business Parks Logistics AUS AUS NZ HK SGP China Japan UK EUR UK EUR 4 Fund Name ABPP GEPBF GUKLF GELF GIT GAIF GMT MGLF AREIT J-REP AUM $bn $4.1 $0.7 $1.6 $3.4 $3.2 $1.3 $1.1 $2.7 $1.3 $19.3 Warehouse $bn $0.1 $1.4 $0.2 $0.0 $0.1 $1.8 WACR % 5.9% 6.3% 6
Slide 79: Funds Management
79 Funds Management Fund 31 Dec 2007 30 Jun 2007 Variance Variance $B $B $B % GMG 5.2 5.4 (0.2) (4%) A-REIT 2.7 2.6 0.1 4% GMT 1.3 1.1 0.2 18% GAIF 3.2 2.1 1.1 52% MGLF-HK 1.1 1.2 (0.1) (8%) J-REP 1.3 0.8 0.5 63% GELF 1.6 0.5 1.1 220% ABPP 4.0 4.5 (0.5) (11%) GEPBF 0.7 0.6 0.1 17% Other wholesale1 0
Slide 80: Thank you
80 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) (AFSL 223621) as the Responsible Entity for Goodman Industrial Trust (ARSN 091 213 839)). The details in this