Goodman Group (Goodman or Group) announced its results for the full year ended June 30, 2013, delivering an operating profit of $544 million, which is forecast to grow to $594 million in FY14.
Goodman’s Group Chief Executive Officer, Mr Greg Goodman said, “Goodman has delivered a strong FY13 operating profit of $544 million, slightly ahead of the initial targets set for the year and representing a year on year increase of 17%, equating to 6% growth in operating earnings per security.
“The quality of our operating earnings and the momentum across our business position us well for FY14 and accordingly, we are forecasting a full year operating profit of $594 million, equating to an operating earnings per security of 34.3 cents, up 6% on FY13.” Mr Goodman added.
Adjustments made to the Group’s statutory profit, primarily relating to $293 million of derivative and foreign exchange mark to market movements, resulted in a full year statutory profit of $161 million. Significantly, this was offset by $269 million of foreign currency translation differences from Goodman’s international operations reported through the Group’s balance sheet and not recognised as part of its statutory profit.
This situation arises because the Group’s policy is to hedge its foreign exchange risks. Where the Group invests in foreign assets, it will borrow in that currency or enter into derivatives to create a similar liability. In so doing, it minimises its net asset and income exposure to those currencies. The unrealised mark to market movement of the derivatives (up or down) flows through the income statement each year, however the net investment that is being hedged flows through the balance sheet, predominantly appearing in the balance sheet translation and the reserves, and showing that the derivative costs have been offset. This indicates that the strategy is effective.
“The strong underlying performance from Goodman’s operations can be attributed to the focused delivery of our strategy and day to day operational activities across all parts of our business. The consistency and quality of our product offering and proven capability have also ensured that we are well positioned to benefit from the accelerating business activity in our key markets globally. This is being driven by significant customer and investor demand for prime industrial assets and a number of structural changes that are shaping our sector, including the rapid growth in e-commerce.” Mr Goodman said.
Goodman’s leading global operating platform, access to third party capital, extensive customer relationships and experienced team, have provided significant scope to pursue a range of high quality opportunities during the year, particularly within its Development and Management businesses. Key transactions undertaken by Goodman during the period include entry into the South American market through the establishment of the WTGoodman joint venture in Brazil, consolidation of the Goodman Japan management platform and the acquisition of an interest in the $1.8 billion ATL Logistics Centre in Hong Kong. Endorsement of Goodman’s property expertise is reflected in the fact that the Group obtained 100% of the property management rights for ATL, while only acquiring a 25% interest.
“The global reach provided by Goodman’s operating platform is a key advantage for us and provides a high degree of earnings diversity and stability, with our international businesses contributing 48% of earnings in FY13. We are now fully operational in key logistics markets globally, including the Americas where we have development projects underway, and are well positioned to meet the diverse business needs of our customers, while selectively securing quality investment opportunities for our capital partners. This is highlighted by solid fundamentals across our portfolio and the growth in our development workbook to $2.3 billion. Underlying momentum is strong in all of our markets, particularly in Australia, where we have secured a number of large pre-commitments; China and Japan, where demand continues to run ahead of available supply, and; Europe, which continues to experience high demand led by the e-commerce and automotive sectors.” Mr Goodman commented.
Goodman is focused on delivering consistent and sustainable growth, while maintaining a strong balance sheet position. During the year, $2.8 billion of new third party equity was raised to help fund long-term growth. Property assets and co-investments to the value of $1.8 billion were recycled across the Group and managed funds for redeployment into new initiatives. As a result, the Group’s gearing has reduced to 18.5% and liquidity has increased to $1.8 billion.
“Investor demand for our product has been exceptionally high over the last 12 months and with the ongoing support of our capital partners, we have $3.8 billion of uncalled equity and debt currently available in our managed funds to enable them to participate in development opportunities from the Group and broader market. We secured $2.2 billion of new development commitments during the year and with 92% of current developments either pre-sold or pre-funded by our managed funds or third parties, we are very well positioned to fund our existing development book and selectively expand our activities by continuing to access high quality opportunities.” Mr Goodman said.