Progress in numbers
Year
1995
2020
management $75.5M $51.6B
Assets under
Cities
People
Properties
1
8
8
under management 106K
Square metres
in progress —
Development work
Partnerships —
30
900+
392
19.3M
$6.5B
15
Annual Report 2020
Contents
Chairman’s letter
Group CEO's letter
Operational performance
Global network
Corporate responsibility and sustainability
The Goodman Foundation
Corporate Governance
Goodman Limited and its controlled entities
Appendix A – Consolidated Financial Report
for Goodman Logistics (HK) Limited
Securities information
Glossary
Corporate directory
02
03
04
06
11
15
18
19
149
207
208
210
All figures are in AUD and as at 30 June 2020, unless otherwise stated.
01
Goodman Group
Chairman's letter – A strong fi nish
Sustainable and successful global expansion and growth over
this time can be largely attributable to the Group’s ability, as an
Australian company, to assimilate respectfully into local markets,
complementing them and integrating the cultures near seamlessly.
Goodman’s focus on building strong teams, not only with deep
local expertise, but also aligned to the Group’s values, as well
as to those of our stakeholders, has paid off over the long term.
Over time, relationships with many of our customers and capital
Partners have extended from one market into multiple regions,
allowing our shared intellectual property to be leveraged at scale,
creating a unique and valuable opportunity for Goodman globally.
Critical to our future success, therefore, is retention of our people.
To do this, we foster the right culture and present our teams with
ambitious challenges and appropriate rewards. To protect our
shared perspective of long-term decision-making, Goodman will
remain competitive in remunerating its people and in aligning the
interests of our people with our Securityholders.
Board changes
The Goodman Board welcomes Mark G Johnson as an
Independent Director of Goodman Limited and Goodman Funds
Management Limited, and a member of the Audit Committee.
Mark spent 30 years at PwC where he was CEO from 2008 to
2012. He is currently on a number of listed boards, has extensive
experience in the unlisted private sector and in government,
education and community organisations.
As previously announced, this is my last year as Chairman;
Stephen Johns will succeed me at the Annual General Meetings
in November. Stephen joined the Board in 2017 as an Independent
Director and Chair of the Audit Committee. Over this time, he
has made a valuable contribution to the Board and is very well
positioned to succeed me as Chairman. I am confi dent the Group
will continue to prosper under his Chairmanship.
Finally, I would like to thank Greg and his team. It has been a
privilege since 2003 to serve on, and then Chair, Goodman Group.
It has been a wonderful journey, I have thoroughly enjoyed my time
with the Group and I am delighted to be fi nishing my tenure with
the business in such strong shape.
On behalf of the Board, I sincerely thank our customers and
investors for their continued support and all of Goodman’s people
for their contribution. I wish the Group every continued success
in the future.
Thank you,
Ian Ferrier, AM
Independent Chairma n
Goodman Group’s strong result in FY20 came in a year of
unprecedented challenges globally that tested the resilience
of the business and of our people.
Our fi nancial highlights include:
+
+
+
+
Operating profi t of $1,060.2 million, up 12.5% on FY19
Statutory profi t of $1,504.1 million (includes the Group’s
share of valuation gains, non-cash items and derivative
mark-to-market movements)
Operating earnings per security of 57.5 cents,
up 11.4% on FY19
Distribution per stapled security of 30.0 cents, in line
with the Group’s capital management strategy
+ Gearing at 7.5%, down from 9.7% in FY19
+
Group liquidity of $2.8 billion available, with $1.8 billion
in cash (excludes $16.3 billion of equity commitments,
cash and undrawn debt in Partnerships)
Net tangible assets increased 9.4% to $5.84 per security.
+
The following table outlines the share price performance for the
last 10 years:
Total Securityholder return
relative performance (%)
Goodman
S&P/ASX20
S&P/ASX100
S&P/ASX200 A-REIT
MSCI World REITs
Source: Bloomberg/Nasdaq.
1 year
3 year
5 year 10 year
-0.4
103.4
169.9
566.3
-9.6
-9.5
-8.1
-8.1
15.9
21.4
103.8
17.1
17.1
31.5
119.0
32.2
142.0
8.0
25.5
129.8
Over the decade, Goodman Group has established strong
leadership teams, fi nancial resources and a strategic real estate
portfolio to maximise the sustainability of our earnings through
diffi cult market cycles.
This has been refl ected in a security price that has outperformed
relevant benchmarks in FY20 and consistently over time. Since
30 June 2020, despite the global economic challenges resulting
from COVID-19, we have outperformed the market by 20% as our
investors benefi t from, and react to, the Group’s resilience through
its strategic positioning over many years.
A shared culture and ambition
From the properties we invest in, to the relationships we build
with our customers and Investment Partners, to the commitment
we have for our people – we are focused on fostering long-term
relationships with like-minded stakeholders.
Our people are our greatest asset. Developing and maintaining
a strong, consistent culture is critical to the Group’s success.
I believe Goodman’s heritage has been one of its key strengths.
Over 25 years, the Group has grown from its Australian foundations
into a truly global company with approximately 70% of earnings
from international markets and a consistent company culture that
is also adapted to each local market.
02
Annual Report 2020
Group CEO’s letter – The decade ahead
This year has certainly been an extraordinary one with the
COVID-19 pandemic continuing to have a profound impact
around the world. Throughout this time, Goodman has remained
focused on executing its strategy – to own high-quality properties
in locations where our customers can be close to consumers.
Though it has been refi ned since, this is essentially the strategy
Goodman launched 25 years ago when we listed on the Australian
Securities Exchange.
Few knew then how strongly industrial property would factor
into the wider economy, yet our business has continued to prove
its relevance and resilience. That is true of 2020, too, when
alongside our customers and the logistics and warehousing sector
globally, Goodman has played an important role in delivering and
distributing critical supplies and consumer goods by providing the
essential infrastructure needed to do so.
Our long-term strategy continues to leverage the structural
and behavioural trends that, even before 2020, were fundamentally
changing how we live, work and consume. During the year, those
trends accelerated with e-commerce increasing, many people
moving to remote work arrangements and rising demand for
technology and big data.
For these broader societal reasons, as well as the location and
quality of our property assets, and the deep expertise of our
people, Goodman is well positioned to leverage the opportunities
of the decade ahead. As always, we are looking to the future.
Growth fuelled by customer demand
Goodman adapted to the new operating environment with limited
disruptions and the business continued its long-term growth, while
supporting our customers who were experiencing fi nancial distress
as a result of the pandemic. Over the past decade, the Group
has developed signifi cant expertise, fi nancial resources and a
well-located property portfolio to sustain it through various market
conditions. These strong foundations were evident in our FY20
results with operating performance ahead of guidance.
Customer demand for strategically located space in our $51.6 billion
portfolio increased during the year. Occupancy remained high
and rental growth was steady across several industry segments,
particularly those involved in consumer staples, e-commerce and
data storage.
This strong customer demand is positively impacting our
development business, where work in progress has increased
59% on last year, to $6.5 billion, and is forecast to exceed $7 billion
in the fi rst half of FY21.
Increased development activity is fl owing through to our external
assets under management too, which were up 12%. We now
manage $48 billion on behalf of our capital Partners and delivered
total average returns of 16.6% to them with strong income and
capital growth. Throughout, Goodman remains well capitalised
with total available liquidity of $19.1 billion across the Group and
Partnerships, and the Group further reduced its gearing to 7.5%
at the end of FY20.
FY21 forecast
Operating profi t
$1,165m
+10% on FY20
Increasing commitments
In this changing global landscape, we are signifi cantly increasing
the commitments, contributions and targets within our 2030
Sustainability Strategy. One notable example is increasing
our target from 100 megawatts (MW) to 400 megawatts (MW)
of solar capacity installed on our rooftops globally by 2025.
Meanwhile, in response to the recent Australian bushfi res and the
ongoing global pandemic, Goodman increased both its fi nancial
and non-fi nancial support through the Goodman Foundation to
$13.7 million, to make a greater tangible difference to those who
need it most.
Fast-tracking trends
Prior to the pandemic, consumers were expecting more
convenience with each passing year and technology use was
rising. Both trends spiked when the pandemic hit and what was
predicted to happen in fi ve years is happening today. The signs are
that increased e-commerce adoption and the need for more data
storage are here to stay.
As such, Goodman is keeping a watchful eye on emerging trends
that are showing earlier-than-expected signs of adoption. These
include technologies that aid a more personalised shopping
experience such as artifi cial intelligence, big data and the Internet
of Things. We are also observing the rise of subscription services
and of omnichannel retail, where physical and online sales
are integrated.
While it seems likely these trends will impact our customers,
a big lesson of this year is that not everything is possible to predict.
We do know, however, that whatever trends come to fruition,
our customers will need high-quality and sustainable properties,
close to consumers, in order to leverage them. These properties
will need to accommodate future technology investments, such as
robotics and automation, and they will need to support the health
and well-being of the people working there. All of these continue to
be Goodman priorities.
Forward thinking
This year, more than ever, I am very proud of how the Goodman
team stayed focussed on delivering for our stakeholders around
the world. I thank our people for their adaptability, hard work
and resilience. I’d also like to thank our customers, capital
Partners and investors for their ongoing commitment and
support. I’d especially like to thank Ian Ferrier for his stewardship
as both a board member and Chair. He has made a tremendous
contribution to our business over the years and we wish him well
for the future.
No one could have predicted the year we’ve had. Yet as a
business, we were fortunate enough to be in a position to
manage it. Over the past 10 years, Goodman has been steadily
laying the foundations for the decade ahead – this is how we’ve
always worked. Committing to the long term has put us in the
strong position that we are in today and it is what will allow us to
keeping building on our future successes.
Sincerely,
Operating earnings per security
62.7 cents
+ up 9% on FY20
Distribution per security
30 cents
Greg Goodman
Greg Goodman
Group Chief Executive Offi cer
Group Chief Executive Offi cer
03
Goodman Group
Operational performance
NEXT LEVEL
Goodman delivered a strong FY20 result. While the pandemic
brought some challenges, it also accelerated key societal changes
that are well aligned with Goodman’s existing direction and that
of our customers.
During the year, customer demand for our well-located industrial
properties translated into more development activity, high
occupancy, rental growth, increased assets under management
and, ultimately, strong returns across our property investment and
management businesses.
Own
A focus on infill locations
Customer demand for space in Goodman’s strategic locations
continued to grow due to the ongoing structural changes brought
about by changes in consumer behaviour. These changes
accelerated during the pandemic, as logistics and warehousing
provided critical infrastructure for distribution of essential goods,
and more consumers shifted to online shopping.
Over the medium to longer term, we expect significant
opportunities to arise through planning outcomes across our
$51.6 billion portfolio. This should facilitate redevelopment of
higher intensity multi-storey logistics facilities and data centres as
well as change of use into residential zoning. We are continually
progressing these opportunities through various planning stages.
Property investment highlights include:
+
+
High occupancy maintained at 97.5% and weighted average
lease expiry of 4.5 years
3.0 million sqm leased, equating to $401.7 million of annual
rental property income across the Group and Partnerships
+ Like-for-like net property income growth of 3.0%.*
With more than 1,700 customers, Goodman has a diverse
range of global and local customers across industries including
e-commerce, logistics, retail, consumer goods, automotive,
pharmaceutical and technology.
*Excludes net property income from directly held assets.
Top 20 global customers
(by net income – look through basis)
Amazon
Deutsche Post (DHL)
2.3
%
7.2
A.P. Moller — Maersk
Japan Post (Toll)
Kimberley-Clark Corporation
SF Express
Iron Mountain
Georgia-Pacific
BMW Group
JD.com
DB Schenker
Equinix
Kuehne + Nagel
syncreon
OMLog
Coca-Cola Amatil
Linfox
IVE Group
Coles Group
Mainfreight
1.7
1.6
1.3
1.3
1.1
1.1
1.1
1.0
1.0
0.9
0.8
0.7
0.7
0.7
0.7
0.6
0.6
0.6
04
Annual Report 2020
Develop
Manage
Strong growth in workbook to $6.5 billion
Development activity has been a clear driver of this year’s strong
results. Our work in progress reached $6.5 billion and we expect
it to exceed $7 billion in the first half of FY21.
We have seen solid margins and pre-leasing activity, while the
average lease term of 15.1 years is the longest it’s ever been.
We expect these longer leases to continue, as customers
choose higher value infill locations and invest more in technology
at their facilities.
Our development projects have increased in both scale and value,
with the average time for developments in progress increasing
to about 17 months. This gives greater visibility over development
activities going forward.
Other development highlights include:
+
+
+
Globally diversified workbook across 46 projects
with a forecast yield on cost of 6.5%
Commencing $4.5 billion in new developments
with 79% pre-leased
Completing development projects worth
$2.4 billion with 85% leased.
Development completions and higher valuations
drive strong performance
Goodman delivered average total returns of 16.6% to our capital
Partners in their respective financial years, continuing the trend
of the last five years for double digit returns.
External assets under management grew 12% over FY20 to
$48 billion due to development completions and valuation gains
resulting from cap rate compression. The impact of COVID-19
further increased demand for industrial and logistics assets,
continuing to generate positive revaluations, which grew by
$2.9 billion this year.
The Group has invested more than $1.1 billion in its Partnerships
over the last two years, including $0.3 billion in FY20. This was
mainly to fund development opportunities, as well as incremental
acquisitions of properties with redevelopment opportunities over
the longer term.
Other management highlights include:
+
+
+
+
Management earnings up 9%, enhanced
by the positive performance of the Partnerships
Average Partnership gearing of 19.9%
Weighted average cap rate compression of 23bps
to 4.9% over the year
$16.3 billion available in the Partnerships in equity
commitments*, cash and debt.
* Partnership investments are subject to Investment Committee approval.
Work in progress
($bn)
Assets under management
6.5
>7
3.4
3.5
3.6
4.1
34.1
34.6
29.3
30.5
38.3
35.1
%
51.6
48.0
46.2
42.9
2016
2017
2018
2019
2020
1HFY21(F)
FY16
FY17
FY18
FY19
FY20
SQUARE-FULL Partnerships ($bn) SQUARE-FULL Total ($bn)
05
Goodman Group
Global network
STRATEGY IN PLACE
Communicating customer insights
While Goodman’s business has evolved over time, our fundamental
strategy has remained the same – to own high-quality properties
in strategic locations for our customers.
We’re continuously building a sustainable business for the long
term. We’ve grown from one industrial building in South Sydney,
Australia, purchased for less than $20 million in the mid 1980s,
to 392 properties in five regions across the world, worth more
than $51 billion.
Clear and ongoing communication with our customers is a core
part of how we operate. We conduct regular customer insight
meetings to provide our customers with the information they
need to not only track their spending and plan their budgets,
but to help them communicate with their people and plan for the
future. We discuss what’s happening in their property, their local
area and their industry. We also ask practical questions such as
“What more can Goodman do to lower your operating costs?”,
and “How can we help?”
Sustainability is consistently executed in all our regions, however
each emphasises different aspects to best suit its local market.
Helping our customers grow
Our customers want the most efficient supply chains possible
and to be close to their customers. With 5.8 million sqm across
our portfolio and the capacity to develop more, Goodman is in
an excellent position to provide the facility to suit our customers’
changing needs. Approximately 75% of our development
customers are from our existing customer base – evidence they
appreciate Goodman’s quality product and service.
Sustainability program
Reducing our environmental impact is vital to both Goodman
and our customers. We take a practical approach that manages
natural resources as the valuable assets they are, meeting both
our customers’ commercial and environmental needs. Our
sustainability program currently includes the management of
17,460 trees across the portfolio (around the same number of trees
as in New York’s Central Park), installation of 13MW of solar energy
(enough to power 3,900 homes) and smart irrigation systems
installed across 65 sites saving 40 million litres of water since
1 January 2020 – the equivalent of 16 Olympic swimming pools.
Australia
Date of establishment
1986 – listed on the ASX in 1995
AUM
Properties
Space under management
WIP
Managed Partnerships
Occupancy
$16.3bn
157
5.8m sqm
$1.6bn
4
96.1%
Goodman Group began in Australia where our sustainability
is founded on our long-term relationships with customers and
stakeholders. Some of these well-established relationships with
customers across a range of industries have been flourishing for
more than 20 years and have since expanded overseas.
Yet it’s the strength of these relationships that are most important
to us. We work to continuously improve our service, delivery and
communications to help our customers drive greater efficiencies
out of their properties. This extends to our sustainability program.
Long-term customer relationships
As Australia’s longest-running listed industrial property company,
Goodman has been fortunate to work with some customers for
decades. Iron Mountain – with us since 1992 – remains in its
original, albeit upgraded property, while also growing its footprint
with us across multiple facilities. Other long-term customers have
also we\moved within our portfolio as their businesses have grown
and their needs have changed including DHL (1998), Metcash
(1998), Visy (1998), Toll (1999), Linfox (2002), Coles (2007) and
Woolworths (2008).
06
Annual Report 2020
New Zealand
Date of establishment
AUM
Properties
Space under management
Development work in progress
Managed Partnerships
Occupancy
Long-term community partnership with Kiwi Harvest
Since 2012, KiwiHarvest has collected and redistributed
4.1 million kgs of food, the equivalent of 10.5 million meals.
It’s an exceptional achievement only made possible through
the food contributions of over 250 donors and the collective
efforts of more than 300 volunteers and staff. The Goodman
Foundation was an early supporter, facilitating KiwiHarvest’s
expansion into Auckland in 2017 and its recent move to larger
premises at Goodman’s Highbrook Business Park in 2019.
2003
$2.9bn
11
1.1m sqm
$87m
1
99.6%
Feeding the country through the New Zealand Food Network
Amplifying our work in reducing hunger, food waste and landfill,
Goodman has helped establish the New Zealand Food Network
(NZFN). NZFN collects quality surplus and donated bulk food
from producers, growers and wholesalers, then stores and
distributes it to food rescue organisations, iwi* and charities across
New Zealand from its Auckland warehouse. While two years in
the making, the launch was expedited to help meet the increased
demand caused by COVID-19.
* iwi is a Maori term referring to extended kinship groups or tribes.
As Goodman’s only listed entity outside Australia, Goodman
Property Trust works to deliver sustainable returns for not only
its unitholders, but also customers, people and the community.
Our New Zealand team believes sustainability is about long-term
thinking and leading by example – a business strategy that
delivers positive economic, environmental and social outcomes
for all its stakeholders.
Sustainable business strategy
Goodman in New Zealand has an investment strategy focused
on the Auckland industrial market. It provides customers with
high-quality business premises, close to major transport networks
in New Zealand’s largest consumer market. With demographic
changes and consumer behaviour driving the growth in online
retail, customer demand for well-located facilities, close to
consumers, exceeds supply in many locations across Auckland.
Managing our properties efficiently
Our ability to manage our assets over their lifecycle improves their
long-term environmental and financial performance. Ongoing
energy and waste monitoring across the portfolio allows us to
benchmark our assets against best-practice industry standards.
Energy consumption in FY20 was 74% less than in FY15 and
continues a five-year trend of falling emissions. New energy
efficiency initiatives, HVAC and building management system
upgrades along with divestments of office assets have all
contributed to the reduction.
07
Goodman Group
Global network
(Continued)
Asia
Date of establishment
AUM
Properties
Space under management
WIP
Managed Partnerships
Occupancy
World-leading employee amenity
The Rambler located at Goodman Interlink in Hong Kong, SAR,
is a refreshing space for our customers, their employees and
their guests to socialise and recharge. It is equipped with modern
facilities, digital kiosks, dining areas, a 24-hour pantry and healthy
menu choices. Sustainability is central too; food waste is avoided
with surplus food donated to charity organisation Food Angel,
which redistributes to underprivileged local communities.
2006
$18.6bn
64
5.7m sqm
$3.3bn
5
98.3%
Proximity to consumer concentrations
Goodman’s business in Asia spans Mainland China, Hong Kong
SAR and Japan. Our long-term strategy emphasises the
importance of locations, maintaining growth sustainably and
making safety a priority.
Our properties in Asia are designed to suit our customers’ needs
in land-constrained environments. They have high-quality
amenities to promote health and happiness and are designed
with a sustainable focus.
High-quality properties
Goodman Business Park in Greater Tokyo, Japan, approached
its design with innovative, contemporary flair. This multi-stage
project leads the way in its aesthetic, its customer amenities and
its sustainability features. The façade on Stage 4 of the park,
known as a tensile façade, is a new style of architecture for logistics
spaces. Not only aesthetically pleasing, it is also sustainable,
allowing more natural light to flow with less glare – providing solar
protection and energy savings. This complements the rooftop
solar panels and other sustainability initiatives, which add to its
impressive environmental credentials. All Goodman properties in
Japan are designed and certified to Comprehensive Assessment
System for Built Environment Efficiency (CASBEE) standards.
With access to more than 1.5 billion consumers with a purchasing
power of $US9.2 trillion, it is crucial that Goodman’s Asian-based
customers are in the most urban areas, close to consumers. Our
properties are in the tier 1 cities of Beijing, Shanghai, Chengdu,
Hong Kong, Guangzhou, Tokyo and Osaka – cities with the largest
populations that are leveraging the latest consumer and technology
trends and driving the sustainable growth of our business.
Industry-leading safety program across Asia
With safety a priority across Goodman’s operations, our business
in Asia is focusing on bringing our global safety standards to
the region, constantly seeking innovation from development
projects through to building maintenance. For example, roof
height safety systems have been installed across Mainland China,
Hong Kong SAR and Japan to help safeguard the well-being
of maintenance teams and prevent falls while cleaning or during
maintenance inspections.
08
Annual Report 2020
Europe/UK
Date of establishment
AUM
Properties
Space under management
WIP
Managed Partnerships
Occupancy
Promoting health and well-being
To help our customers attract the right people and enable them to
be as productive as possible, our modern warehouses increasingly
prioritise their health and well-being at work. Our developments
have standard features such as minimum natural light, solar glare
control, acoustic walls, covered bicycle parking and outdoor social
areas for breaks. We also offer running tracks, vegetable gardens,
outdoor fitness facilities and cafés.
2006
$9.2bn
138
5.1m sqm
$759m
3
97.3%
Giving new life to old sites
Sustainability is integrated into our European business strategy
and our portfolio is strategically located around the major
consumer markets of Germany, France, Italy, Spain, Benelux
and the UK.
Designed, built and managed to last, these properties look to
integrate with the environment and the communities they're in,
while also incorporating the kinds of contemporary amenities
our customers seek.
Our sustainability focus in Europe is to transition to net zero
carbon emissions in our own office spaces as well as helping
our customers manage their own sustainability goals.
Environmental initiatives
To increase the sustainability and biodiversity of our properties,
we provide our customers with environmental and well-being
initiatives. These include 5.6MW of solar installed across the
European portfolio, installing electric vehicle charging stations
at all new developments, and landscaping tailored to local
conditions with a focus on native plants, beehives and wildflowers.
Our buildings are designed to sustainable building certification
standards so we can verify their quality and green credentials
with a minimum level of BREEAM Very Good or equivalent.
To maintain our concentration of strategic locations, Goodman
commonly transforms older sites into modern spaces. This is
known as a ‘brownfield development’ – as opposed to building on
a new – or ‘greenfield’ site. More than 50% of our developments
since 2015 have been brownfield sites, placing our customers
closer to their customers and improving their supply chain
efficiency and last mile delivery. Such projects can be challenging,
but lead to environmentally friendly and visually attractive sites that
often benefit the broader community too.
Goodman Energy Tracker roll out
To help our customers to proactively measure and optimise their
energy consumption, our European portfolio is being equipped
with smart meters. The Goodman Energy Tracker smart meter
measures electricity, gas and water usage. This visibility helps
our customers to manage costs, more easily complete their
environmental reporting and encourage behavioural change.
Currently, 25% of the European portfolio is connected to the
energy tracker with more being rolled out over the next year.
09
Goodman Group
Global network
(Continued)
The Americas
Date of establishment
AUM
Properties
Space under management
WIP
Managed Partnerships
Occupancy
2012
$4.6bn
22
1.6m sqm
$731m
2
99.4%
In the Americas, Goodman’s global gateway city strategy spans
the major consumer markets of Los Angeles, New York,
New Jersey and São Paulo. Our growth is prudent and organic.
We align our properties’ location with our customers’ future
direction, so together we can leverage structural and societal
changes such as the growth of e-commerce.
This delivers sustainable outcomes for our customers, while
protecting and enhancing the long-term value of our assets for
our investors.
Strategic acquisitions
Key to our strategy in the Americas is to concentrate on the markets
we believe will deliver over the long term. So, despite the size and
scale of the region, we are growing our business incrementally as
we focus specifically on strategic site selection. Our portfolio is
located close to large consumer populations, where land is scarce
and barriers to entry are high. Securing these sites allows us to
support our customers' current and future growth.
Regenerating and adding value to existing properties
In the United States, we have successfully acquired, upgraded
and repurposed buildings that meet our customers’ modern
requirements. By retrofitting existing warehouses, we are
prolonging their lifecycle and reusing existing materials, which
reduces construction waste, consumption and regenerates local
areas with upgraded façades and amenities.
Holistic community partnership
A great example of working closely with local communities is
our long-standing partnership with Second Harvest Food Bank
of Orange County, which works to fight hunger. We provide
in-kind support, with senior Goodman people on the
organisation’s board, while other Goodman people volunteer
to prep and distribute food. We supply cash grants to fund
innovative concepts too, such as ‘Park-It Market’ (a market
on wheels for seniors) and a COVID-19 drive through, where
people could collect groceries contact-free. Goodman’s most
recent donation resulted in 420,000 meals for those in
need in the local community.
Towards a greener future
We are increasing our green credentials across our property
portfolio in the Americas. Our tangible measures focus on
reduced energy consumption, such as upgrading lighting to
LED technology, and transitioning to using more renewable energy
through the installation of solar panels. We’re investing in initiatives
such as drought tolerant landscaping in the US and tree audits
and management in Brazil. And we’re working with customers
to reduce waste too, with 50% of the waste in our Brazilian
properties diverted to recycling.
10
Annual Report 2020
Corporate responsibility and sustainability
2030 IN THE MAKING
2030 Sustainability Strategy
At Goodman we’re focused on building a sustainable business
for the long term. One that benefits our customers and delivers
returns for our investors.
Our 2030 Sustainability Strategy is one of the measures we hold
ourselves accountable to. It influences long-term outcomes across
the Environmental, Social and Governance (ESG) spectrum.
And it supports Goodman and its stakeholders deliver sustained
growth and develop ongoing resilience.
At Goodman, we believe it’s important to aim high. In FY20, we
accelerated our commitments to renewable energy and carbon
neutrality, and we improved the resilience of our workforce,
business, properties and communities.
Our targets are deliberately ambitious. We know continuing
to achieve them won’t be easy, but we also know if they were
anything less, we wouldn’t be aiming high enough.
2020 highlights
In FY20, Goodman:
1
2
3
4
5
6
7
8
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Was awarded Global Sector Leader in the 2019 Global
Real Estate Sustainability Benchmark (GRESB) Sector Leader
award in the Industrial – Developer category
Completed a global climate risk assessment in accordance
with recommendations by the Task Force on Climate-related
Financial Disclosures (TCFD)
Has approximately 50MW of solar PV installed on rooftops
across the global portfolio
Increased our target from 100MW to 400MW of solar PV
capacity installed by 2025
Further entrenched design initiatives in our global development
specifications such as solar PV, electric vehicle charging points,
LED lighting and drought tolerant landscaping
Completed certified developments in Europe, the UK,
Australia, Japan, China and the United States
Continued major water-saving initiatives at our Australian
properties, reducing consumption by about 60%
Reduced energy use by approximately 15% across the
Australian office portfolio
Contributed $13.7 million to community and philanthropic
causes with a focus on disaster relief, particularly the
Australian bushfires and COVID-19
10 Increased efforts to minimise the risk of modern
slavery potentially occurring in our supply chains.
Goodman’s 2030 Sustainability Strategy provides a clear direction
for the next decade. Led by this strategy, we are well positioned to
transition into a truly sustainable, resilient and low-carbon business.
The strategy focuses on our people and culture, how we engage
with our stakeholders and how we remain a trusted partner in the
broader community. It influences our property locations as well as
how they:
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Are built, powered, operated and respond
to the changing climate
Interact with the surrounding community
Support our customers’ well-being.
Accelerating progress
As the global landscape changes, so must we. Goodman’s 2030
Sustainability Strategy increases our commitments and accelerates
our progress with clearly defined targets to hold ourselves
accountable, under three pillars.
Notably, by 2025, our aim is to have 400MW of solar PV capacity
installed on Goodman’s properties – up substantially from our
previous commitment of 100MW. This will be achieved primarily
through solar investments, generating enough energy to power
about 120,000 houses for a year. In addition, our aim by 2025 is
to be using 100% renewable energy and be carbon neutral.
Looking back to the year that was, the Group has also:
+
Increased both financial and non-financial support through
the Goodman Foundation to $13.7 million. This is focusing
on disaster relief, particularly from the impact of the Australian
bushfires and COVID-19
Completed our global climate risk assessment in accordance
with TCFD recommendations two years ahead of our target.
+
The strategy is structured around three pillars.
Sustainable properties
Our sustainably designed, energy-efficient and professionally
managed properties are strategically located to meet the business,
health and well-being needs of our customers, and to remain
resilient to tomorrow’s global challenges.
People and culture
Our workplaces promote the health, safety and well-being of our
people and our customers. Our people are recruited and rewarded
based on their commitment to our values, their local expertise and
their long-term strategic and ethical thinking.
Corporate performance
Our capital structure is sustainable and we have a positive impact
in our global communities through the Goodman Foundation.
We promote strong leadership and governance, engage regularly
with our stakeholders and measure and disclose our financial and
community impact.
11
Goodman Group
Corporate responsibility and sustainability
(Continued)
Backed by targets that address material issues Goodman has
always practiced long-term thinking. Our sustainability targets
therefore consider material issues that will continue to shape
Goodman as a resilient and sustainable business. During the
year, Goodman focused on the material ESG issues that are
fundamental to building its long-term value and sustainable
performance. They reflect our company principles as well as
input from our stakeholders.
Addressing the UN Sustainable Development Goals
The UN Sustainable Development Goals (SDGs) act as a universal
call to action to address the world’s most significant challenges
including climate change, poverty, gender equality and good health
and well-being for all. During the year, Goodman continued to be
guided by nine of the 17 SDGs, which were identified as most
material to our global business, customers and charity partners.
03 Good health and well- being
05 Gender equality
07 Affordable and clean energy
08 Decent work and economic growth
09 Industry, innovation and infrastructure
11 Sustainable cities and communities
12 Responsible consumption and production
13 Climate action
15 Life on land
Sustainable properties
Increasingly, Goodman’s sustainable properties have innovative
features that improve energy efficiency, performance and the
well-being of our customers.
As a key partner in our customers’ supply chain, we know the
value of strategically located properties. We prioritise accessibility,
efficiency and functionality in properties that can adapt to a range
of uses and are designed with climate resilience top of mind.
We build long-term relationships with our customers and pride
ourselves on maintaining high retention and occupancy rates.
Sustainability specifications
Our specifications differ across our global regions but common
sustainability features in our developments include:
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Strategic site selection close to infrastructure, consumers
and transport
Integrated energy-efficient design including automated
LED lighting
Electrical sub-metering for performance monitoring
and measurement
Solar PV on rooftops to generate clean energy
Increasing installations of charging points for electric vehicles
Water conservation including rainwater harvesting and
drought tolerant/native landscaping
Use of low volatile organic compound materials
Facilities that support good health such as bicycle storage,
fitness equipment and change rooms
Material issues
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Sustainable design and management
Strategic locations
Customer attraction and retention
Climate risk and resilience
Carbon reduction strategies
Smart energy solutions
Flexible and adaptable properties.
Target
Progress
400MW of solar PV
capacity in operation
by 2025
+ Increased our target of 100MW of solar PV installed on our rooftops by 2025 to 400MW
+ Currently, there is approximately 50MW installed and operating globally
+ Completed new installations in Australia, China and Europe with several more planned
Circle Circle Circle Circle Circle
100% renewable
energy use within our
operations by 2025
+ Continued investments in solar PV to provide renewable energy at our properties
+ Significant current use of renewable energy in UK, Europe and New Zealand
+ Looking at ways to supplement our transition to renewable energy through renewable power purchase agreements
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Carbon neutral
operations by 2025
+ Approximately 15% energy reduction across the Australian office portfolio
+ Further investment in onsite solar energy and other efficiency projects
+ Investigating ways to offset residual carbon to achieve carbon neutral day-to-day operations
Maintain >95%
overall occupancy rate
(excluding development activities)
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+ Achieved a 97.5% occupancy rate
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12
Annual Report 2020
People and culture
Goodman’s values and our corporate culture
Goodman’s highest priority during this challenging year was to
support our people and our stakeholders.
Fortunately, our corporate culture and values helped bond our
teams around the world, while our agile working platform enabled
us to adapt to the new working arrangements made necessary
by the COVID-19 pandemic.
Our commitment to well-being and long-term thinking extends
beyond just our people. Increasingly, developments across our
portfolio feature well-being initiatives that benefit our customers
too. These include health and recreation facilities, high-quality
breakout spaces and, where possible, services like gymnasiums
and cafés.
Goodman strives for a safe work culture with zero onsite fatalities
across our global operations. We are working on gender equality
in senior executive roles and prioritising human rights and business
ethics in our supply chain.
Material issues
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+
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Workplace safety
Group and regional leadership
ESG performance targets
Diversity and inclusiveness
Promotion of the Goodman values
Social equity
Customer well-being
Goodman’s values shape our culture and enable us to attract
high-calibre people. They ensure we are united in providing our
customers and investors with high-quality service as well as
innovative and sustainable property and investment solutions.
Our values are global and very much alive wherever we operate.
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customer+focus
Be closer to our customers’ world and their changing needs
innovative+dynamic
Be more creative in our thinking and dynamic in our actions
open+fair
Be adaptable and considerate in our dealings inside and
outside our business
performance+drive
Do what we say we’ll do and make things happen
team+respect
Recognise the worth in each other and collaborate for
better results.
Target
Safe working
environment
Progress
+ Implemented a safety framework across Goodman’s operations
+ Prioritised minimum safety standards and management of critical risk controls
+ Rolled out safety training and contractor management procedures.
+ Unfortunately in FY20, a delivery driver suffered fatal injuries while unloading his truck at a Goodman property
in Chongqing, China and a person suffered a seizure while working from height on a principal contractor-controlled
development site in Australia and later died
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Global supply chain
ethics policy
+ Commenced a modern slavery evaluation process in Australia and drafted Goodman’s modern slavery statement
+ Commenced the expansion of the business ethics program
+ Completed a supply chain review in Australia with a focus on high-risk sectors
Gender ratio of 50/50,
with 40% female
senior executives
100% of employees
assessed as
demonstrating
Goodman’s values
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+ Assessed current gender ratio at 43% female and 57% male, with 23% female senior executives
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+ Implemented a process to monitor how well Goodman’s people are meeting Goodman’s values
+ In August 2020, 98% of Goodman employees were assessed as ‘demonstrating’ or ‘exceeding’ Goodman’s values.
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13
Goodman Group
Corporate responsibility and sustainability
(Continued)
Corporate performance
Managing climate risk – TCFD disclosures
Goodman’s global success in the industrial real estate sector is
founded on our capabilities and expertise, as well as our robust
governance structures. Everyone at Goodman plays a role in
how we sustain our high-performing operations, capital sources
and creditworthiness.
Goodman knows its properties are exposed to the impacts of
various climatic conditions across its diverse operating regions.
We acknowledge that tragic events such as the recent bushfires
in Australia are linked to a changing climate and similar events are
likely in the future.
We engage regularly with our key stakeholders and disclose our
ESG performance to maintain the trust of our capital partners
and customers. Meanwhile, our financial resilience means we can
continue to increase the tangible difference we are making to the
lives of vulnerable people through the Goodman Foundation.
GRESB is the leading ESG survey for the real estate sector and
is one of the main methods Goodman uses to communicate its
performance on ESG matters. The benchmark analyses and
scores a wide range of ESG indicators and provides detailed
insights to investors. In 2019, Goodman Group was awarded
Global Sector Leader in the Industrial – Developer category.
Material issues
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Sustainable operations and results
ESG performance
Responsible investment
Environmental stewardship
Sustainable capital structure
Stakeholder and community engagement
Effective and regular disclosures.
During the year, Goodman worked with environmental
consultant South Pole to complete a comprehensive climate
risk assessment in accordance with TCFD guidelines. We did
this to better understand the potential impacts of various climate
scenarios, to find opportunities to mitigate long-term impacts and,
ultimately, to influence the location, design and management of
Goodman’s properties.
Quantifying climate risks across multiple global regions is a
challenge, particularly on larger continents that are subject to
various conditions and incidents at the same time. However,
we identified the following climate hazards in our climate risk
assessment, based on different scenarios of carbon mitigation
over different timeframes:
Increasing temperatures and heatwaves
Intense precipitation
+
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+ Hailstorms
+ Tropical and ex-tropical windstorms
+ Rising sea levels.
More information on Goodman’s approach to managing
climate risk will be available in Goodman's TCFD statement
published in late 2020 at goodman.com/sustainability.
Target
Progress
Retain investment
grade credit rating
+ Continued to meet financial targets to underpin capital sources and retain credit rating
+ Maintained credit rating at BBB+ (S&P) and Baa1 (Moody’s)
Adopt the TCFD
guidelines for climate
risk assessment and
disclosure by 2022
4 Star Green Star
GRESB rating average
$50m in social
investment by the
Goodman Foundation
by 2030
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+ Committed to adopting the TCFD framework
+ Determined that the Risk and Compliance Committee will oversee Goodman’s climate risk management and
alignment with TCFD
+ Continued working towards completing our first TCFD aligned statement in 2020 – two years ahead of our target
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+ Submitted GRESB responses for eight Goodman entities with results due later in 2020
Achieved strong results in the 2019 GRESB survey including:
– Goodman Group awarded the Global Sector Leader in the Developer
– Industrial peer group achieving 5 Star Green Star status and an ‘A’ for public disclosure
– Goodman Japan Core Partnership awarded Sector Leader for its peer group, for the second consecutive year,
improving its previous score by 15%
– Three of the eight participating entities achieved GRESB’s top rating of 5 Green Stars
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+ Contributed $13.7m to community and philanthropic causes including $6.5m to relief, recovery and firefighting
efforts related to bushfires in Australia.
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14
Annual Report 2020
The Goodman Foundation
FURTHER TOGETHER
Community and community health
The Goodman Foundation unites our people, properties and
resources to make a tangible difference to the lives of people in our
communities. Through our partnerships with an exceptional group
of charities, we’re able to make a real difference, where and when
it matters most.
In this extraordinary year, with the Australian bushfires and the
COVID-19 pandemic, the demand for the services of many of our
partners intensified. The financial strength of the group, however,
meant the Foundation was well positioned to commit to an
increased effort, with a focus on critical areas in times of disaster –
mental health, distribution of food and essential goods, vulnerable
people and domestic violence.
How we help
The Goodman Foundation offers support to charities within three
key areas: Children and youth, Community and community health
and Food rescue and environment.
Support can take the form of:
+
Cash grants – Provided to fund identified projects
or needs over one to three years
Do good – Goodman team volunteering or fundraising
for charities
Give back – Workplace giving schemes that match staff
contributions dollar for dollar
In-kind – Donating our expertise, warehouse space
or other critical items.
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Children and youth
We work with charity organisations that help to protect and
support children or young people around the world.
Auckland Starship Hospital, Bestest Foundation, Clontarf
Foundation, Duffy Books in Homes, Eagle RAPS, El Monte
Promise Foundation, Giant Steps, Great Potentials Foundation,
Keystone Trust, Kids Cancer Project, Kids Under Cover, Little
Boomers Basketball, Little Olive Child Foundation, Middlemore
Foundation, Property Industry Foundation, Raise Foundation,
Smith Family, SOS Children’s Villages, Stepping Stone House,
The Helmsman Project, The Shepherd Centre, Yalari, Youngcare.
We work with charity organisations that support people
living with a condition, illness or disability, or whose efforts
create a more inclusive and equitable community.
Australian Cancer Research Institute, Black Dog Institute,
BlazeAid, Canterbury Brain Collective, Cerebral Palsy Alliance,
Die Arche Germany, Fight MND, Friends & Helpers Foundation,
Greenway, Humpty Dumpty Foundation, Infirmiers De Rue,
Interplast Australia, Long Beach Community Foundation,
MS Australia, NSW Farmers Natural Disaster Relief Fund,
NSW Rural Fire Service, Paralympics Australia, Rural Aid,
Salvation Army, Sandringham Hospital, Spanish Emergency
Military Unit UMA, Special Olympics Australia, SurfAid
International, The Bread & Butter Project, The Fred Hollows
Foundation, Valley Hospital Foundation, Windgap Foundation,
Women’s Community Shelters.
Food rescue and environment
We support charity organisations that reduce waste by redistributing
food or useful items that would otherwise go to landfill.
Fareshare Australia, Feeding Hong Kong, Good360 Australia,
KiwiHarvest, OzHarvest, Second Harvest Food Bank of
Orange County, The Generous and Grateful, Thread Together,
UKHarvest.
Goodman’s people also volunteered their time. As an example,
Matt Devlin, based in Sydney, spent three weeks battling blazes
as a NSW RFS volunteer firefighter. Supported at every stage
through the Goodman Foundation’s Do Good program, and
the wider business, Matt suffered no financial impact, and
Goodman was able to contribute to work that profoundly
benefited the broader community.
In July, Goodman was one of 12 companies to receive the
2020 NSW RFS Supportive Employer Award.
A DEVASTATING FIRE SEASON
Australia’s bushfires burnt from September 2019 to March 2020.
The environmental and emotional impact of the fires was
unprecedented, covering 12 million hectares and killing
33 people, destroying over 3,000 homes and killing or
displacing approximately 3 billion native animals. They also
severely impacted local economies, including regional areas
across the country.
In response to the devastation, Goodman pledged an initial
$5 million to bushfire recovery efforts, which we then increased
to $6.5 million.
This was split between the more urgent grassroots efforts
of organisations such as the NSW Farmers Federation and
Good360 Australia, and infrastructure aiding the longer-term
firefighting efforts of the NSW Rural Fire Service (RFS).
Meanwhile, the Goodman team fundraised to support
BlazeAid’s efforts to rebuild fences and essential infrastructure,
and Good360 Australia in the distribution of critical items for
displaced families.
15
Goodman Group
The Goodman Foundation
(Continued)
Grants for fire-affected farmers
THE RIGHT SOLUTION
The 2019–2020 bushfires had a significant impact on agriculture
and farmers in NSW, affecting 15,994 primary producers. The fires
destroyed around 60,000 hectares of prime farmland, more than
13,000 cattle and sheep perished, orchards and beehives burnt
and incomes evaporated.
To directly help farmers to recover, NSW Farmers Federation set up
a natural disaster relief fund. The Goodman Foundation’s $750,000
donation boosted the fund to more than $1 million, which was
distributed as grants to 357 primary producers. The payments
were put to practical use in replacing stock, fencing, hay reserves,
rainwater tanks, cattle water troughs and beekeeping equipment.
“We lost our home along with all our honey production sheds,
machinery and equipment,” said Peter McGann of Mogo Village
Honey. “We used the grant to buy a couple of shipping containers
and converted them into packing and extracting sheds. We’re also
buying new equipment to resume our beekeeping and
honey production.”
HELP IS ON ITS WAY
During the Australian bushfires of 2019–2020, it became
clear the Foundation wanted to make a tangible, long-term
contribution to support communities impacted by the bushfires.
With that in mind, Goodman contributed the largest corporate
donation ever to the NSW RFS with the purchase of a state-of-
the-art firefighting helicopter.
The multi-purpose helicopter is known as the go-to aircraft –
a workhorse of the industry – with a reputation for performing
reliably in the most extreme environments. It is designed to
get firefighters into hard-to-reach places, and get people
out of harm's way. The chopper will be equipped with a full
range of features such as winch, belly tank for water bombing,
surveillance camera for use in firefighting operations, search
and rescue, and down the wire insertions and extractions. Its
extensive functionality means it can be deployed all year round
in tactical and response operations.
Goodman was committed to doing something substantial to
help. “During the devastating and unprecedented bushfires
earlier in the year, we felt strongly about supporting the NSW
RFS with something that will have a sustainable impact on its
work and the communities it serves,” said Greg Goodman.
NSW RFS Commissioner Rob Rogers welcomed the addition
to the fleet. “It’s fantastic to have the support of the Goodman
Foundation through this first of its kind partnership approach.
The new helicopter will be a valuable additional resource for
us to protect people in the communities we serve. We know
helicopters can play a key role in delivering early, impactful
action on a developing fire,” said Rob. Also adding, “51 people
were rescued by helicopters last fire season. While the current
chopper can take up to four crew, the new model can carry
as many as seven – meaning more room to rescue large
groups of people. The helicopter will also be used out of
fire season to support emergency services in other rescue
operations such as floods.”
The problem
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After a disaster, 70% of donations stop after the first
two months
Poor co-ordination and uninformed giving can create
chaos and inefficiency
Up to 60% of goods donated during disasters end up
in landfill or and are otherwise wasted.
The solution
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Good360 Australia matches brand new goods to the right
people at the right time, to prevent waste and provide hope
and dignity
Good360 Australia works with a vetted network of more
than 2,000 not-for-profits and disadvantaged schools that
know exactly what their communities need
Good360 Australia matches goods throughout the entire
disaster relief lifecycle – prepare, respond, recover, rebuild,
refurnish and relive.
In the wake of any disaster, people want to help and often
donate goods impulsively. Their generosity can easily be
misplaced though, if they’re not giving what’s needed.
That’s where Good360 Australia comes in.
Since 2015, and with Goodman as a founding partner,
Good360 Australia has been connecting new goods, donated
by businesses, to a network of charities and schools that
support Australians in need. In the midst of this year’s bushfires,
however, they realised they needed to step up their efforts.
“We came back in January saying, ‘we have to do more’,”
said Alison Covington, Good360 Australia’s Founder and
Managing Director.
With Goodman’s support, Good360 Australia set up a disaster
recovery arm to get the right goods to the right people at the
right time. “Disasters are a marathon not a sprint and it’s really
important to stage giving over the long-term recovery process,”
says Alison.
In January, Good360 Australia moved into a custom-built
warehouse, donated by Goodman, where it could more
effectively centralise its aid. “Having a high-quality warehouse
has been a game-changer,” said Alison. “We are pinching
ourselves every time we walk in.” The warehouse includes a
volunteering space, a place to engage with the community,
a product storage zone and an area for ‘click and collect’.
When COVID-19 first struck Australia in March, there was a
200% increase in requests for support. To help meet demand,
Goodman provided additional financial support so Good360
Australia could scale up labour and logistics support. One
example has been in the delivery of 65,777 educational kits to
151 charities and schools to support struggling families with
home schooling during the pandemic.
“Goodman’s support of our growth, from day one, has meant
we can be more impactful every year,” said Alison, “which is an
amazing gift to the Australians that Good360 helps.”
16
Annual Report 2020
FACING A GLOBAL PANDEMIC
A safe haven for vulnerable women and children
The COVID-19 pandemic presented many of our charity partners
with a colossal challenge. As demand for their services peaked,
their cash flow, volunteer resources and fundraising options
plummeted. While Goodman focused on helping its customers,
the Foundation looked to support key partners navigate the crisis.
We helped Cerebral Palsy Alliance make the switch from
face-to-face to online support and Raise Foundation ensure
‘at risk’ high school students were able to continue their
mentoring programs online.
When the Tokyo 2020 Paralympic Games were postponed by one
year in March, we helped Paralympics Australia avoid unplanned
storage fees for its competition equipment. We provided pro-bono
warehouse space and financial relief that allowed the team to focus
on keeping its athletes fit and motivated.
For charity partners occupying space in Goodman-managed office
or warehouse facilities, including OzHarvest, Special Olympics,
Fred Hollows Foundation and Windgap, the Foundation provided
significant additional financial support to help them manage their
shortfall in critical revenue due to cancelled fundraising events.
In Europe, the Foundation contributed to street nurse charity,
Infirmiers de Rue, to support homeless people in Belgium, as well
as to the efforts of SOS Children’s Villages in France, Belgium and
Germany to support schooling from home.
Meanwhile, in, California, Goodman helped food re-distribution
service, Second Harvest Food Bank of Orange County, prevent
looming food shortages by purchasing four truckloads of food
while some of the Irvine-based Goodman team volunteered to
pack and distribute essential food supplies.
The Foundation’s work in food redistribution ramped up in other
parts of the world too, with charities OzHarvest, UK Harvest and
KiwiHarvest also seeing increased demand.
Early in the pandemic, experts predicted a rise in the need
for safe spaces for those experiencing domestic violence.
Recognising this, the Goodman Foundation engaged with
Women's Community Shelters (WCS) in Sydney to identify
vulnerable women. These were women who were at significant
risk of family violence and often the first category of people
facing unemployment, but were not eligible for any social funding
programs or government assistance.
Using Goodman’s dedicated grant over three years, WCS
established a Women Without Income program to help around
30 families access safety in shelters, support essential medical or
legal help, and also to transition other families to independent living.
“Through the Women Without Income program, we’ve immediately
been able to support women and children who really had nowhere
else to turn,” said Annabelle Daniel, WCS Chief Executive Officer.
“We’ve provided support including bonds for independent housing,
funds for critical medication and furniture for new homes.”
Stepping up support for Cerebral Palsy Alliance
Cerebral Palsy Alliance (CPA) offers intervention, therapy and all
the benefits of its world-leading research to children and adults
living with cerebral palsy. Over the five years that Goodman has
been a global sponsor of CPA’s leading health and wellness
fundraising event, STEPtember, Goodman has helped raise millions
through its own global fundraising efforts, as well as those from
additional contributors brought on board through the Friends of
Goodman initiative.
About $800,000 was donated during Goodman's 2019
STEPtember campaign alone. However this wasn’t a normal year,
with the pandemic shutting down options for all of CPA’s onsite
therapy visits. CPA identified 400 vulnerable families who urgently
needed to continue their life-changing therapy and Goodman
furthered its support beyond STEPtember to help CPA complete a
swift pivot to Telepractice delivery.
“Thanks to Goodman’s incredible generosity, we were able to
provide 220 families, some the most vulnerable in our community,
with the tools they need to be able to access therapy at home
for their children,” said Rob White, CPA Chief Executive Officer.
“Telepractice has been a life changer for these families, not
only supporting their child’s therapy needs but also ensuring
connectedness and support for the whole family.”
17
Goodman Group
Corporate Governance
Goodman Group (‘Goodman’ or ‘Group’) is a triple stapled
entity comprised of the Australian company, Goodman Limited
(‘GL’), the Australian trust, Goodman Industrial Trust (‘GIT’) and
the Hong Kong company, Goodman Logistics (HK) Limited
(‘GLHK’). The Boards of GL and Goodman Funds Management
Limited as the responsible entity of GIT comprise the same
directors while GLHK has a distinct Board with some overlap
(together they are referred to as the Boards).
The Goodman Boards and Management team are committed to
the highest standards of corporate governance and recognise that
an effective corporate governance culture is critical to the long-term
performance of the business. Goodman’s corporate governance
framework underpins our commitment to maximise long term
sustainable value for Securityholders through:
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effective controls, risk management, transparency
and corporate responsibility;
strategic planning and alignment of the interests of employees
with that of Securityholders and other stakeholders;
meeting stakeholder expectations of a global ASX listed
entity through acting lawfully and responsibly while prudently
managing both financial and non-financial risk; and
ensuring we are an organisation that acts with integrity by
promoting a culture which values the principles of honesty,
fairness, transparency and ethical behaviour.
The diagram below shows an overview of Goodman’s Corporate
governance framework.
Goodman Group Boards
Risk & Compliance
Committee
Audit
Committee
Remuneration &
Nomination Committee
Group CEO
Group Investment
Committee
Finance & Treasury
Committee
Corporate Services
Committee
During the year Goodman has actively considered recent
corporate governance developments including the 4th Edition
Corporate Governance Principles and Recommendations.
Goodman will report against the new principles and
recommendations in FY21 and has conducted a comprehensive
review of its corporate governance practices in preparation.
Further, in response to the pandemic COVID-19 the Group
implemented various business continuity protocols and has
continued to examine, review and adapt its business
systems, processes and procedures, including controls
and governance reporting.
Goodman’s Corporate Governance Statement can be viewed on
our website at goodman.com/who-we-are/corporate-governance
Goodman’s core corporate governance framework documents
including Charters and Policies are available at goodman.com/
who-we-are/corporate-governance. Additional information for
securityholders is available at the Goodman Investor Centre at
goodman.com/investor-centre/
18
Goodman Limited and its controlled entities
Consolidated financial report for the year ended 30 June 2020
Annual Report 2020
CONTENTS
Directors’ report
Lead auditor’s independence declaration
Consolidated statements of financial position
Consolidated income statements
Consolidated statements of comprehensive income
Consolidated statements of changes in equity
Consolidated cash flow statements
Notes to the consolidated financial statements
Basis of preparation
1 Basis of preparation
Results for the year
2 Profit before income tax
3 Profit per security
4 Segment reporting
5 Taxation
Operating assets and liabilities
6 Property assets
7 Receivables
8 Contract balances
9 Assets held for sale
10 Payables
11 Provisions
12 Property, plant and equipment
13 Leases
14 Goodwill and intangible assets
Capital management
15 Net finance (expense)/income
16 Interest bearing liabilities
17 Other financial assets and liabilities
18 Financial risk management
19 Dividends and distributions
20 Issued capital
Other items
21 Notes to the cash flow statements
22 Equity attributable to Goodman Limited
and non-controlling interests
23 Controlled entities
24 Related parties
25 Commitments
26 Auditors’ remuneration
27 Parent entity disclosures
28 Events subsequent to balance date
Directors’ declaration
Independent auditor’s report
Appendix A – Goodman Logistics (HK) Limited
financial report for the year ended 30 June 2020
20
71
72
73
74
75
77
78
78
82
85
86
90
93
106
106
107
108
108
108
109
109
113
114
116
118
126
127
129
132
134
136
138
139
139
140
141
142
149
19
Goodman Group
Directors’ report
The directors (Directors) of Goodman Limited (ABN 69 000 123 071)
and Goodman Funds Management Limited (GFML), the responsible
entity for Goodman Industrial Trust (ARSN 091 213 839), present
their Directors’ report together with the consolidated financial
statements of Goodman Limited and the entities it controlled
(Goodman or Group) and the consolidated financial statements
of Goodman Industrial Trust and the entities it controlled (GIT) at
the end of, or during, the financial year ended 30 June 2020 (FY20)
and the audit report thereon.
Shares in Goodman Limited (Company or GL), units in Goodman
Industrial Trust (Trust) and CHESS Depositary Interests (CDIs) over
shares in Goodman Logistics (HK) Limited (GLHK) are stapled to
one another and are quoted as a single security on the Australian
Securities Exchange (ASX). In respect of stapling arrangements,
Australian Accounting Standards require an acquirer to be
identified and an in-substance acquisition to be recognised and
accordingly Goodman Limited is identified as having acquired
control over the assets of GIT and GLHK. The consolidated
financial statements of Goodman Limited therefore include the
results of GIT and GLHK.
As permitted by the relief provided in Australian Securities
& Investments Commission (ASIC) Instrument 18-0353, the
accompanying consolidated financial statements present both the
financial statements and accompanying notes of Goodman and
GIT. GLHK, which is incorporated and domiciled in Hong Kong,
prepares its financial statements under Hong Kong Financial
Reporting Standards and the applicable requirements of the
Hong Kong Companies Ordinance and accordingly the financial
statements of GLHK have not been included as adjacent columns
in the consolidated financial statements. The financial statements
of GLHK have been included as an appendix to this financial report.
GFML, as responsible entity for the Trust, is solely responsible
for the preparation of the accompanying consolidated financial
report of GIT, in accordance with the Trust’s Constitution and the
Corporations Act 2001.
20
Annual Report 2020
OPERATING AND FINANCIAL REVIEW
The business capabilities are supported by five strategic “pillars”:
1. Quality partnerships – develop and maintain strong
relationships with key stakeholders including customers,
investment partners, suppliers and employees.
2. Quality product and service – deliver high quality product
and customer service in key logistics markets globally by
actively leveraging Goodman’s industrial sector expertise,
development and management experience and global
operating platform.
3. Culture and brand – promote Goodman’s unique and
recognisable brand and embed Goodman’s core values
across each operating division to foster a strong and consistent
culture. The core values are:
+
+
+
+
+
Customer + Focus: “Be closer to the customer’s world
and their changing needs”
Innovative + Dynamic: “Be more creative in our thinking
and more creative in our actions”
Open + Fair: “Be adaptable and considerate in our
dealings inside and outside our business”
Performance + Drive: “Do what we say we’ll do and make
things happen”
Team + Respect: “Recognise the worth in each other and
collaborate for better results”.
4. Operational efficiency – optimise business resources to
maximise effectiveness and drive efficiencies.
5. Capital efficiency – maintain active capital management to
facilitate appropriate returns and sustainability of the business.
Principal activities
Goodman is a global integrated property group and one of the
world’s leading listed industrial property groups. Goodman is
focused on its proven business model of owning, developing and
managing industrial property and business space in key markets
around the world.
The principal activities of Goodman during the course of the
current financial year were investment in directly and indirectly held
industrial property, investment management, property services
and property development. Goodman’s key operating regions
during the financial year were Australia and New Zealand, Asia,
Continental Europe, the United Kingdom and the Americas.
Goodman strategy
Goodman’s purpose is to make space for its stakeholders’
ambitions. This purpose is executed through Goodman’s integrated
business capabilities model – “own+develop+manage”, where its
customers’ need for sustainable solutions and service excellence
in high-quality locations, is at the centre.
DEVELOP
Develop properties in key locations to
meet customers’ business needs
N
W
O
s
e
i
t
r
e
p
o
r
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y
t
i
l
a
u
q
-
h
g
h
i
n
w
O
CUSTOMER
h
e
a
r
t
o
f
o
u
r
b
u
s
n
e
s
s
i
C
u
s
t
o
m
e
r
s
a
r
e
a
t
t
h
e
Manage and invest in high-quality
real estate globally for our investment partners
MANAGE
21
Goodman Group
Directors’ report
Operating and financial review (continued)
Financial highlights
Revenue and other income before fair value adjustments on investment properties ($M)
Fair value adjustments on investment properties
including share of adjustments for Partnerships ($M)
Revenue and other income ($M)
Profit attributable to Securityholders ($M)
Operating profit ($M)
Statutory profit per security – basic (¢)
Operating profit per security (operating EPS) (¢)1
Dividends/distributions in relation to the year ($M)
Dividends/distributions per security in relation to the year (¢)
Weighted average number of securities on issue (M)
Total equity attributable to Securityholders ($M)
Number of securities on issue (M)
Net tangible assets per security ($)
Net assets per security ($)
External assets under management ($B)
Total assets under management ($B)
Development work in progress ($B)2
Gearing (%)3
Interest cover4 (times)
Liquidity ($B)
Weighted average debt maturity (years)
2020
1,982.1
651.3
2,633.4
1,504.1
1,060.2
82.4
57.5
548.5
30.0
1,826.0
11,520.6
1,828.4
5.84
6.30
48.0
51.6
6.5
7.5
15.3
2.8
5.8
2019
Change %
2,132.4
(7.0%)
(27.1%)
(13.0%)
(7.6%)
12.5%
(8.3%)
11.4%
0.8%
0.0%
0.8%
9.5%
0.8%
9.4%
8.6%
11.9%
11.7%
58.5%
893.4
3,025.8
1,627.9
942.3
89.9
51.6
544.2
30.0
1,811.7
10,522.5
1,813.9
5.34
5.80
42.9
46.2
4.1
9.7
19.6
2.7
6.6
1.
2.
3.
4.
Operating profit per security (operating EPS) is the operating profit divided by the weighted average number of securities on issue during FY20, including securities
relating to performance rights that have not yet vested but where the performance hurdles have been achieved. Operating profit comprises profit attributable to
Securityholders adjusted for net property valuations gains, non-property impairment losses, net gains/losses from the fair value movements on derivative financial
instruments and unrealised fair value and foreign exchange movements on interest bearing liabilities and other non-cash adjustments or non-recurring items
e.g. the share based payments expense associated with Goodman’s LTIP.
The Directors consider that Goodman’s operating profit is a key measure by which to examine the underlying performance of the business, notwithstanding that
operating profit is not an income measure under International Financial Reporting Standards.
Development work in progress is the end value of ongoing developments across Goodman and its investments in associates and joint ventures (referred to as Partnerships).
Gearing is calculated as total interest bearing liabilities over total assets, both net of cash and the fair values of certain derivative financial instruments included in
other financial assets of $292.5 million (2019: $222.4 million). Total interest bearing liabilities are grossed up for the fair values of certain derivative financial instruments
included in other financial liabilities of $194.0 million (2019: $123.6 million).
Interest cover is operating profit before net finance expense (operating) and income tax (operating) divided by adjusted net finance expense (operating). Adjusted net
finance expense excludes capitalised borrowing costs.
22
Overview
The Board acknowledges the unprecedented times the world
is experiencing and the terrible impact COVID-19 is having on
people’s lives and livelihoods. Goodman’s markets have been
affected at various times and to varying degrees, but the Group
has adapted to this new operating environment with limited
disruption and has continued to grow the business sustainably
for the long term. Goodman plays an important role in providing
both essential infrastructure and making a tangible difference for
customers in the cities in which the Group operates.
Over the past decade, the Group has established significant
human capital, financial resources and a well located real
estate portfolio, to sustain the business through market cycles.
This is reflected in the results for the financial year with Goodman
reporting operating profit of $1,060.2 million, compared to
$942.3 million for the prior year, an increase of 12.5%. This
equates to an operating EPS of 57.5 cents, up 11.4% on FY19.
Goodman’s statutory profit attributable to Securityholders for FY20
was $1,504.1 million, a decrease of $123.8 million compared with
FY19. This included the Group’s share of property valuation gains,
net of deferred tax, of $621.3 million and the accounting expense of
the Goodman LTIP of $164.0 million. There was also a $6.8 million
fair value gain on derivatives which is included in the statutory profit
but excluded from the calculation of operating profit. The decrease
in statutory profit compared to FY19 was principally due to the
lower property valuation gains in FY20.
Goodman has achieved this result while maintaining the prudent
metrics in accordance with its financial risk management policy.
At 30 June 2020, gearing remained low at 7.5% and the funds
available to the Group for future investment were $2.8 billion. On
14 July 2020, a notice of early redemption was issued in relation
to the total of the US$174.5 million (A$253.3 million) outstanding
principal amount of the bonds due for payment in 15 April 2021.
This transaction is due to settle in August 2020, which would have
a commensurate pro-forma impact on liquidity. Over $2.0 billion of
the Group’s total of $2.6 billion of remaining bonds have maturities
of more than five years from 30 June 2020.
Dividends and distributions relating to FY20 were maintained
at 30 cents per security, equivalent to 52% of operating profit.
The cash retained in the business is consistent with the financial
risk management targets and is considered appropriate given
the significant development activity and the commensurate growth
in investments that is expected in the near term.
Annual Report 2020
Key operational highlights:
Property investment:
+
+
+
+
Investment earnings of $425.2 million (2019: $372.1 million)
$51.6 billion of total assets under management (AUM),
of which the Group owns a whole or a part share
3.0% like for like growth in net property income (NPI)
in Partnerships
97.5% occupancy across the Group and Partnerships
Management:
+
+
+
Management earnings of $511.2 million (2019: $469.7 million)
$48.0 billion of external AUM in Partnerships
16.6% total return across Partnerships
Development:
+
+
+
Development earnings of $575.7 million (2019: $509.2 million)
$6.5 billion of development work in progress (WIP)
$4.5 billion of development commencements
“own+develop+manage”
The Group’s focus on urban locations to efficiently service
consumers has provided resilient cashflows across the global
portfolio. This is particularly important in uncertain times, with
Goodman’s assets providing critical infrastructure for delivery of
essential goods and services.
The Group has experienced increased demand for both temporary
and permanent space from customers in the food, consumer
goods and logistics sectors, particularly related to e-commerce
operators and those transitioning to online. The portfolio
occupancy has remained stable at 97.5%, with like for like NPI
growth during FY20 at 3% and, in general, there was relatively
limited closure or disruption of Goodman’s warehouse facilities over
the past few months.
Where Goodman’s most vulnerable customers have been
significantly impacted by the lockdowns and the economic impacts
of the pandemic, then Goodman has worked with them to provide
rental assistance. This includes complying with any local legislation,
with support in the form of rent abatement, rent deferral or lease
restructure. However, the impacts in FY20 have not been material in
the context of the Group’s reported operating profit and net assets.
Furthermore, many of Goodman’s customers have continued to
progress discussions regarding demand for new space in line with
ongoing supply chain consolidation, online expansion and growth
in the digital economy. This has given the Group confidence to
grow its WIP to $6.5 billion at 30 June 2020. The Group continues
to mitigate its development risk through global diversification and
sharing the opportunities with its investment partners, undertaking
79% of developments within the Partnerships at 30 June 2020.
WIP is 76% pre-committed at 30 June 2020, with uncommitted
space representing only 2% of total global portfolio area.
This continued customer demand for industrial space has seen a
strong property valuation result for the financial year. The uplift in
2H was $257.6 million, despite the economic impacts arising from
the pandemic. During FY20, the weighted average capitalisation
rate of the stabilised assets in the Goodman portfolios contracted
from 5.1% to 4.9%.
23
Goodman Group
Directors’ report
Operating and financial review (continued)
Goodman’s external AUM during FY20 increased by 12% to
$48.0 billion at 30 June 2020 from $42.9 billion, which resulted
in higher base management fee revenue in FY20. The increase
in AUM was primarily a result of continued development activity
and the property valuation uplifts on both stabilised assets and
development completions. The Group’s Partnerships again
reported strong total returns and as a consequence, management
earnings for FY20 included portfolio performance fee revenue of
$207.2 million.
While the Group’s portfolios are largely concentrated in key
urban centres, Goodman has continued to rotate assets where
longer-term returns are projected to be lower than the Group’s
and the Partnership’s targets.
Analysis of performance
Goodman’s key operating regions are Australia and New Zealand
(reported on a combined basis), Asia (Greater China and Japan),
Continental Europe (with the vast majority of assets located in
Germany and France), the United Kingdom and the Americas (North
America and Brazil). The operational performance can be analysed
into property investment earnings, management earnings and
development earnings, and the Directors consider this presentation
of the consolidated results facilitates a better understanding of the
underlying performance of Goodman given the differing nature of
and risks associated with each earnings stream.
Property investment earnings consist of gross property income
(excluding straight lining of rental income), less property expenses,
plus Goodman’s share of the operating results of Partnerships
that is allocable to property investment activities which excludes
the Group’s share of property revaluations and derivative mark to
market movements. The key drivers for maintaining or growing
Goodman’s property investment earnings are increasing the level
of AUM (subject also to Goodman’s direct and indirect interest),
maintaining or increasing occupancy and rental levels within the
portfolio, and operating and financing costs within Partnerships.
Management earnings relate to the revenue from managing both
the property portfolios and the capital invested in Partnerships
(management income). This includes performance related revenues
but excludes earnings from managing development activities
in Partnerships, which are included in development earnings.
The key drivers for maintaining or growing management earnings
are activity levels, asset performance, and increasing the level of
AUM, which can be impacted by property valuations and asset
disposals and is also dependent on liquidity including the continued
availability of third party capital to fund both development activity
and acquisitions across Goodman’s Partnerships.
Development earnings consist of development income, plus
Goodman’s share of the operating results of Partnerships that is
allocable to development activities, plus net gains or losses from
disposals of investment properties and equity investments that are
allocable to development activities, less development expenses.
Development income includes development management fees
and also performance related revenues associated with managing
development activity in Partnerships. The key drivers for Goodman’s
development earnings are the level of development activity, land
and construction prices, property valuations and the continued
availability of third party capital to fund development activity.
24
Annual Report 2020
The analysis of Goodman’s performance and the reconciliation of the operating profit to profit attributable to Securityholders for FY20 are
set out in the table below:
Analysis of operating profit
Property investment earnings
Management earnings
Development earnings1
Operating expenses
Net finance expense (operating)2
Income tax expense (operating)3
Operating profit
Adjustments for:
Property valuation related movements
– Net gain from fair value adjustments on investment properties
–
Share of fair value adjustments attributable to investment
properties in Partnerships after tax1
– Deferred tax on fair value adjustments on investment properties
Fair value adjustments and unrealised foreign currency exchange
movements related to liability management
–
–
Fair value adjustments on derivative financial instruments
Share of fair value adjustments on derivative financial
instruments in Partnerships
– Unrealised foreign exchange losses
Other non-cash adjustments or non-recurring items
–
–
Share based payments expense
Straight lining of rental income and tax deferred adjustments
Profit for the year attributable to Securityholders
Change %
14.3%
8.8%
13.1%
9.2%
54.2%
(6.6%)
12.5%
Note
6(e)
6(f)
15
6(f)
15
2
2020
$M
425.2
511.2
575.7
1,512.1
(292.3)
1,219.8
(70.8)
(88.8)
1,060.2
45.2
591.7
(15.6)
621.3
(9.4)
16.2
–
6.8
(164.0)
(20.2)
(184.2)
1,504.1
2019
$M
372.1
469.7
509.2
1,351.0
(267.7)
1,083.3
(45.9)
(95.1)
942.3
146.8
746.6
(21.7)
871.7
6.7
20.4
(10.1)
17.0
(196.6)
(6.5)
(203.1)
1,627.9
1.
2.
3.
In FY19, one of the Partnerships exchanged contracts to sell a development property to a third party. In the period between exchange and settlement, the Group
recognised its $14.4 million share of fair value gain in respect of the property. Settlement occurred in 1H20 and this gain has been categorised as development
earnings in the FY20 analysis of the Group’s performance. The share of fair value adjustments attributable to investment properties in Partnerships has been reduced
by $14.4 million.
Net finance expense (operating) excludes derivative mark to market and unrealised foreign exchange movements.
Income tax expense (operating) excludes the deferred tax movements relating to investment property valuations and other non-operating items.
25
The more significant component of the Group’s investment
earnings is from its cornerstone interests in the managed
Partnerships, where earnings from the stabilised assets increased
by $48.6 million to $346.7 million compared to the prior year.
In addition to the favourable impact of foreign currency translation
on the overseas earnings, there were two main operational factors
for this increase. The first was the stabilisation of developments
during both FY19 and FY20. Goodman has continued to be a
net investor in the Partnerships to fund developments and new
acquisitions. The second was the rental income growth from
existing stabilised properties. Net property income from the
Partnership portfolios was up 3% on a like for like basis in FY20
compared to FY19. Occupancy remained stable and was 97.5%
at 30 June 2020 (2019: 97.6%).
The returns from the Partnerships are also impacted by the level
of debt in each Partnership. Gearing has been maintained at the
lower end of target ranges, which continues to be appropriate
given the ongoing development activity and the aim of Goodman
and its investment partners to position the Partnerships for
sustainable long-term growth. However, during FY20 certain of the
Partnerships did raise new debt, including the first debt issuance
by Goodman North America Partnership (GNAP). The operating
return on Goodman’s investment in the stabilised portfolios held by
the Partnerships was 4.9% compared to 4.9% in FY19, as growth
in net property income and the capital management initiatives in
the Partnerships offset the impacts of the valuation growth that
increased the investment base.
During FY20, the Group’s share of property valuations from
the stabilised portfolios (pre deferred tax) was $551.1 million,
including valuation uplifts on new developments that reached
completion. Valuation gains occurred across all the Group’s
regions, a combination of both capitalisation rate compression
and the growth in rental income. At 30 June 2020, the WACR
for the Group’s portfolios was 4.9%, compared to 5.1% at the
start of FY20.
Goodman Group
Directors’ report
Operating and financial review (continued)
Analysis of performance (continued)
Property investment
Property investment earnings in FY20 of $425.2 million increased
by 14.3% on the prior year and comprised 28% of the total
earnings (2019: 27%).
Analysis of property investment earnings:
Direct
Partnerships
Key metrics:
Weighted average capitalisation rate (WACR) (%)
Weighted average lease expiry (WALE) (yrs)
Occupancy (%)
2020
$M
2019
$M
78.5
74.0
346.7
298.1
425.2
372.1
2020
2019
4.9
4.5
5.1
4.7
97.5
97.6
The Group’s property portfolios are concentrated in large, urban
centres around the world where demand from customers has
put pressure on land use and availability. Customers, including
e-commerce, are continuing to invest in order to improve the
efficiency of their supply chains and data centre users are
looking to expand their operations. During 2H, as the COVID-19
pandemic accelerated the shift in consumer purchasing habits
to online shopping, Goodman has seen increased demand for
both temporary and permanent space from customers in the
food, consumer goods and logistics sectors, particularly related to
e-commerce operators and those transitioning to online.
Despite the lockdowns and other restrictions that all major
economies have experienced in the past few months, there
has been relatively limited closure or disruption of Goodman’s
warehouse facilities and the financial impact on the Group has
not been significant in the context of its consolidated results and
financial position.
Where the Group’s most vulnerable customers have been
impacted by the pandemic, then Goodman has worked with them
to provide rental assistance, which includes compliance with local
legislation. In the majority of cases, assistance has been in the
form of rent deferral or lease restructure. To date, the rate of rental
delinquency has not had a material impact on the Group.
The directly held properties are primarily in Australia and have
potential for significant long-term growth, from the redevelopment
to more intense or higher and better uses. The increase in
earnings from the directly held properties was mainly driven by the
completion of developments with some underlying rental growth.
26
Management
Management earnings in FY20 of $511.2 million increased by 8.8%
compared to the prior year and comprised 34% of total operating
earnings (2019: 35%). The translation of the overseas earnings had
a favourable impact compared to the prior year, however, the main
driver of management earnings was the increase in external AUM.
During FY20, external AUM increased by 12% to $48.0 billion from
$42.9 billion as set out below:
External assets under management
At the beginning of the year
Acquisitions
Disposals
Capital expenditure (developments)
Valuations
Foreign currency translation
At the end of the year
2020
$B
42.9
2.0
(1.4)
1.5
2.9
0.1
48.0
Base management fee income, earned from the overall
management of the Group’s Partnerships, increased in line with
the external AUM. This was supplemented by both property
services income, which increased in line with the gross property
income in Partnerships, and other income such as leasing fees
and transactional fees.
In addition, the consistently high Partnership returns over the past
few years again resulted in a strong contribution from performance
fee revenue, which was relatively stable at $207.2 million (FY19:
$204.3 million).These performance fees arose primarily in Australia/
New Zealand, Asia and Continental Europe.
For FY20, the Partnerships reported average total returns of 16.6%
(2019: 15.9%).
Development
In FY20, development earnings were $575.7 million (excluding
revaluation gains), an increase of 13.1% on the prior year and
comprised 38% of total operating earnings (2019: 38%). The
increase in the Group’s earnings was primarily volume driven
with the overall project returns relatively consistent with the prior
year. Foreign currency translation of overseas earnings also had
a favourable impact on earnings compared to the prior year.
The scale of the Group’s development projects has continued to
grow due to the high value nature of the sites and the complexity
associated with development of infill locations. In the final quarter
of the year, a number of high value projects commenced such
that by 30 June 2020, WIP was $6.5 billion across 46 projects.
During FY20, total project commencements were $4.5 billion,
with completions of $2.4 billion.
Annual Report 2020
The majority of inventory disposals and fixed price contract
income arose in Europe, as Partnerships in Continental Europe
generally acquire completed developments from Goodman.
In the Group’s other operating segments, development earnings
are a mix of development management income, including
performance related income, and transactional activity, including
the Group’s share of development profits reported by Partnerships
themselves. Consistent with the prior year, the majority of
development activity in FY20 was undertaken by Partnerships
(79% of WIP at 30 June 2019).
Consistent with the Group’s strategy, development activity has
been focused on key urban centres, where customer demand
is high and the supply of available land is restricted. In locations,
such as Japan and North America, this has allowed the Group
to commence certain projects prior to pre-lease commitments.
Nevertheless, 76% of WIP was pre-committed at 30 June 2020.
Operating expenses
For FY20, operating expenses increased to $292.3 million from
$267.7 million. The majority of the operating expenses related
to remuneration costs which increased to $203.7 million from
$191.9 million as a result of modest inflation pressure, and the
impact of a weaker Australian dollar on the translation of the
overseas costs. Headcount was maintained in most divisions,
with increases in Continental Europe and the Americas to support
the growth in those regions. The Group’s aim is to keep base
remuneration costs relatively steady, and instead use variable
costs to incentivise staff.
Administrative expenses also increased in FY20. In addition to
the impact of the weaker Australian dollar on the translation of the
overseas costs, the main increases related to compliance costs,
insurance premiums and charitable donations. During 2H20,
Goodman made additional donations to certain of its charitable
partners to help support them during the COVID-19 pandemic
and a significant donation to the New South Wales Rural Fire
Service to purchase and equip a new helicopter to assist in fighting
future bushfires.
Net finance expense (operating)
Net finance expense (operating), which excluded derivative mark
to market and unrealised foreign exchange movements, increased
to $70.8 million from $45.9 million. This was due to lower interest
received on the Group’s cash and higher borrowing expenses on
the Group’s foreign denominated loans and derivatives due mainly
to the impact of the lower Australian dollar.
Income tax expense (operating)
Income tax expense (operating) for FY20 at $88.8 million (2019:
$95.1 million) decreased compared to the prior year. A significant
proportion of Goodman’s earnings related to GIT and its controlled
entities, which, as trusts, are “flow through” entities under
Australian tax legislation, meaning Securityholders (and not GIT)
are taxed on their respective share of income. However, the
decrease in the tax expense was primarily due to the nature and
location of the Group’s development revenues.
27
Goodman Group
Directors’ report
Operating and financial review (continued)
Capital management
Interest bearing liabilities
At 30 June 2020, the Group’s available debt facilities and fixed rate
long-term bonds, which totalled $4.0 billion (of which $2.9 billion
had been drawn), had a weighted average maturity of 5.8 years.
The Group’s cash and undrawn bank facilities were $2.8 billion.
Subsequent to 30 June 2020, the Group has initiated the process
to redeem bonds of $253.3 million that were due to expire in
15 April 2021. This is expected to conclude in 14 August 2020.
At 30 June 2020, gearing was 7.5% (2019: 9.7%), which
continued to be at the lower end of the Group’s policy range of
0% to 25%. Interest cover was 15.3 times (2019: 19.6 times) and
the Group continued to have significant headroom relative to its
financing covenants. Goodman’s credit ratings were unchanged
over the period.
During FY20, the Group and its Partnerships refinanced
over $3.1 billion of bank debt and secured third party equity
commitments of $2.5 billion to provide liquidity for ongoing
acquisition and development opportunities.
Dividends and distributions
The Group’s distribution for FY20 was maintained at 30 cents
per security, a pay-out ratio of 52%, with 15 cents paid on
25 February 2020 and 15 cents to be paid on 28 August 2020.
This pay-out ratio has assisted the Group in retaining sufficient
funds for its ongoing development activity and in keeping gearing
at an appropriate level, within the desired range. The distribution
reinvestment plan was not in operation during the year.
In respect of the separate components that comprise the
30 cents per security:
+
+
+
Goodman Limited did not declare any dividends during the
financial year (2019: $nil).
Goodman Industrial Trust declared and accrued distributions
of 26.0 cents per security (2019: 25.0 cents per security),
amounting to $475.4 million (2019: $453.5 million).
GLHK declared and accrued a dividend of 4.0 cents
per security (2019: 5.0 cents per security), amounting to
$73.1 million (2019: $90.7 million).
28
Summary of items that reconcile operating profit
to statutory profit
Property valuation related movements
The net gain from fair value adjustments on investment properties
of $45.2 million (2019: $146.8 million) related to those assets
directly held by Goodman, principally in Sydney, Australia. The
uplift in value was due to both rental growth and a contraction in
capitalisation rates.
Goodman’s share of net gains from fair value adjustments
after tax attributable to investment properties in Partnerships
was $591.7 million. While this has decreased from $746.6
million in FY19, this represents a strong result in the current
environment, a reflection of the quality of the property portfolios
and the continued customer and investor demand for industrial
assets. The valuation uplift in FY20 included $182 million (2019:
$171 million) from the Group’s share of completed and ongoing
development activity in the Partnerships.
The majority of the uplift on the stabilised portfolios in FY20 was
recorded in the first half of the year. However, despite the economic
uncertainty created by the COVID-19 pandemic, the valuations of
the Group’s portfolios have been in line or slightly increased from
pre-COVID levels. In most regions, there has been transactional
evidence to support the valuation results at 30 June 2020.
At 30 June 2020, the WACR for Goodman’s stabilised property
portfolios (both directly held and Partnerships) decreased from
5.1% to 4.9%.
There were no impairment losses associated with the Group’s
inventories during FY20.
Fair value adjustments and unrealised foreign currency
exchange movements related to liability management
The amount reported in the income statement associated
with the Group’s derivative financial instruments was a net gain of
$6.8 million. Despite the volatility in foreign currency exchange rates
during the second half of FY20, this relatively small net impact was
due to the fact that the rates at the end the year were similar to
those at the start of FY20 for most denominations.
Under the Group’s policy, it continues to hedge between 65%
and 90% of the net investment in its overseas businesses. Where
Goodman invests in foreign assets, it will borrow in that currency
or enter into derivative financial instruments to create a similar
liability. In so doing, Goodman reduces its net asset and income
exposures to those currencies. The unrealised fair value movement
of the derivative financial instruments (up or down) is recorded in
the income statement; however, the foreign currency translation
of the net investment that is being hedged is recorded directly in
reserves. In FY20, the movement in reserves attributable to foreign
currency movements was a loss of $26.7 million, a relatively small
net impact in the context of the Group’s overall foreign net assets.
Annual Report 2020
Other non-cash adjustments or non-recurring items
The principal other non-cash adjustments or non-recurring
items for FY20 related to the share based payments expense of
$164.0 million for Goodman’s LTIP, down from $196.6 million in
FY19. This decrease primarily relates to the introduction of fixed
longer-term earnings per share hurdles associated with the awards
made during FY20 and the fact that the Goodman Group security
price decreased from $15.03 to $14.85 during FY20 compared to
an increase from $9.62 to $15.03 in FY19. The introduction of the
fixed operating EPS hurdle has decreased the likelihood of it being
achieved and at 30 June 2020 the Group has assessed this
probability to be 50%.
Statement of financial position
Stabilised investment properties
1,797.9
1,756.4
Cornerstone investments in Partnerships
7,807.3
6,920.4
2020
$M
2019
$M
The Group’s cash and interest bearing liabilities should
be considered together. On a net basis, the liability was
$1,156.6 million at 30 June 2020 compared to $1,367.9 million
at 30 June 2019. This reduction in the net liability reflects strong
operating cash inflows, which funded both the Group’s net
investment in Partnerships and the dividends/distributions to
Securityholders. The net cash inflow for FY20 was $189.6 million.
Other assets included receivables and the fair values of derivative
financial instruments that are in an asset position. The derivatives
financial instruments, both those in an asset and those in a liability
position, are in place to hedge the Group’s interest rate and foreign
exchange rate risks.
Other liabilities included trade and other payables, the provision for
dividends/distributions to Securityholders, fair values of derivative
financial instruments that are in a liability position and tax liabilities
(including deferred tax). The movement during the year was
primarily due to increases in the liability fair values of certain of the
derivatives and increased income tax liabilities.
Development holdings
Intangible assets
Cash and cash equivalents
Other assets
Total assets
Interest bearing liabilities
Other liabilities
Total liabilities
Net assets
3,140.1
2,991.8
Cash flow
845.8
840.0
1,781.9
1,607.1
765.2
797.1
Operating cash flows
16,138.2
14,912.8
Investing cash flows
2,938.5
2,975.0
1,679.1
1,415.3
4,617.6
4,390.3
11,520.6
10,522.5
Financing cash flows
(excluding dividends and distributions)
Dividends and distributions paid
Net increase/(decrease) in
cash and cash equivalents held
Cash and cash equivalents
at the beginning of the year
2020
$M
2019
$M
1,156.9
827.5
(306.4)
(818.2)
(114.6)
(320.5)
(546.3)
(528.7)
189.6
(839.9)
1,607.1
2,406.8
The carrying value of wholly-owned, stabilised investment
properties increased by $41.5 million to $1,797.9 million at
30 June 2020. This was primarily due to valuation uplifts of
$45.2 million during the year, offset by some minor disposals.
The value of Goodman’s cornerstone investments in Partnerships,
which excludes the Group’s share of development assets in the
Partnerships, increased by $886.9 million to $7,807.3 million,
due to the valuation uplifts across the portfolios, stabilisation of
developments (primarily in GNAP) and funding for new acquisitions,
net of new bank debt facilities or bond issuances by the
Partnerships.
Goodman’s development holdings, which include the Group’s
share of development assets in the Partnerships as well as the
directly held properties, increased during the year by $148.3 million
to $3,140.1 million. This was a result of both the increased activity
levels that occurred in most regions and valuation uplifts associated
with investment properties under development in the Partnerships
(primarily in Asia and North America). A number of large projects
commenced in the latter part of the year, which resulted in
development WIP increasing to $6.5 billion at 30 June 2020.
At 30 June 2019, the principal goodwill and intangible asset
balances were in Continental Europe and the United Kingdom.
The movement during FY20 related to changes in foreign currency
exchange rates and there have been no impairments or reversals
of impairments.
Effect of exchange rate fluctuations on cash held
(3.9)
40.2
Cash and cash equivalents
at the end of the year
1,792.8
1,607.1
Operating cash flow
Operating cash flows of $1,156.9 million increased relative to the
prior year and was also higher than the Group’s operating profit
of $1,060.2 million.
This was primarily attributable to higher receipts from management
activities during FY20.
The net development cash flows were at a similar level to the prior
year, although both the gross receipts from development activities
and the gross payments for development activities were lower. This
arose due to the nature and structure of the development activities
– with less development costs being incurred directly by the Group.
Instead Goodman undertook more developments in joint ventures
or in Partnerships with the Group’s share of the funding reported in
investing activities.
The distributions received from Partnerships in FY20 were
$462.2 million, increased from $365.4 million in the prior year.
This the main reason for the higher distributions relating to
development activities in the Partnerships.
29
Goodman Group
Directors’ report
Operating and financial review (continued)
Investing cash flow
Outlook
Investing cash flows in FY20 primarily related to the net investments
in Goodman’s Partnerships of $806.6 million (2019: $920.6 million).
This investment occurred principally in Asia and North America
to fund the ongoing development activity in those Partnerships.
There were also capital returns from partnerships in Australia and
North America of $428.4 million during FY20 as the Partnerships
raised new debt.
The investment property acquisitions of $234.3 million were in
Australia and the United Kingdom, although the United Kingdom
property was sold to Goodman UK Partnership (disposal of
controlled entities) later in the year. The investment property
disposals also related to Australia.
Financing cash flow
Financing cash flows include the drawdowns and repayments
associated with Goodman’s interest bearing liabilities.
The principal financing cash outflows were the distributions
paid to Securityholders.
The ongoing COVID-19 pandemic has not had a material financial
impact on Goodman. For FY21, the business conditions for
industrial assets are expected to remain favourable. The Group is
strategically well placed given its financial and operational strength.
The Board sets targets annually and reviews them regularly.
Overall, the Group expects to achieve operating profit for FY21
of $1,165 million, which equates to operating EPS of 62.7 cents,
up 9% on FY20. Forecasts are subject to there being no material
adverse change in market conditions or the occurrence of other
unforeseen events.
Development demand continues to increase which has given the
Group confidence to accelerate growth in WIP. The development
WIP of $6.5 billion at 30 June 2020 has an average expected duration
of about 17 months so the revenue from these projects will emerge
during FY21 and FY22. Furthermore, with current customer demand
levels and the Group’s capacity to meet this demand, the Group
believes that there is scope for it to increase its level of development
activity materially during FY21, which would see WIP exceed $7 billion
by 31 December 2020. Other prospective projects currently being
contemplated would result in this level of WIP being sustained for
a prolonged period. This increase in development is projected to
contribute to higher total AUM, resulting in growth in both property
investment earnings and management earnings over time.
In order for the Group to fund the anticipated increase in the capital
allocated to development activities, including funding its share
of investment in Partnerships, and to keep the Group’s financial
leverage at the appropriately lower end of the policy range, the
Directors intend to hold the distribution at 30 cents per security
for FY21 subject to achieving the anticipated profits.
Further information as to other likely developments in the
operations of Goodman and the expected results of those
operations in future financial years has not been included in this
Directors’ report because disclosure of the information would be
likely to result in unreasonable prejudice to Goodman.
30
Annual Report 2020
Risks
Goodman identifies strategic and operational risks for each of its regions as part of its strategy process. The key risks, an assessment
of their likelihood of occurrence and consequences and controls that are in place to mitigate the risks are reported to the Board annually.
Goodman has established formal systems and processes to manage the risks at each stage of its decision making process. This is
facilitated by a Group Investment Committee comprising senior executives, chaired by the Group Chief Executive Officer, which considers
all major operational decisions and transactions. The Group Investment Committee meets on a weekly basis.
The Board has separate committees to review and assess key risks. The Risk and Compliance Committee reviews and monitors a range
of material risks in Goodman’s risk management systems including, among other risks, market risks, operational risks, sustainability,
regulation and compliance and information technology. The Audit Committee reviews and monitors financial risk management and
tax policies.
The key risks faced by Goodman and the controls that have been established to manage those risks are set out below:
Risk area
Mitigation
Capital
management
Ensuring long-term availability of funding from
both investors and financial institutions to support
the sustainability of the business and the delivery
of Goodman's strategy.
Economic and
geopolitical
environment
The COVID-19 pandemic is currently forecast
to cause the worst global recession since World
War II and be more than twice as deep as the
recession associated with the 2007-09 global
financial crisis. How prolonged this recession will
be is uncertain.
Geopolitical and geo-economic tensions are
still heightened and continue to rise among the
world’s major powers.
The global economic climate and future
movements in interest rates present risks and
opportunities in property and financing markets
and the businesses of the Group's customers
which can impact both the delivery of the
Group's strategy and financial performance.
+ Board approved Financial Risk Management policy
+ Prudent capital management with cash flow requirements, gearing
and available liquidity reviewed monthly and reported to the Board
+ Diversification of debt funding sources and maturities
+ Diversification of investment partners
+ Change in distribution pay-out ratio consistent with contribution
to increasing development workbook
+ Global diversification of Goodman’s property portfolios
+ Focus on core property portfolios in key urban market locations
+ Focus on cost management
+ Prudent capital management with low gearing and significant
available liquidity to allow for potential market shocks
+ Co-investment with local capital partners
Governance,
regulation and
compliance
Non-compliance and changes to the regulatory
environments (including tax) impact Goodman's
business, including its reputation.
+ Independent governance structures
+ Core values and attitudes, with an embedded compliance
culture focused on best practice
+ Dedicated Chief Risk Officer and Compliance Officer
+ Review of transactions by the Group Investment Committee
People and culture
Retaining the executive management team,
who support the sustainability of the business.
Maintaining an organisational culture, in a
changing workplace environment, commensurate
with Goodman’s values.
+ Succession planning for senior executives
+ Competitive remuneration structures
+ Performance management and review
+ Goodman values program
Development
Development risks may arise from location,
site complexity, planning and permitting,
infrastructure, size, duration along with general
contractor capability.
+ Review of development projects by the Group Investment Committee
+ Goodman defined design specifications, which cover environmental,
technological, and safety requirements, protecting against
short-term obsolescence
+ Internal audit reviews with reporting to the Risk and
Compliance Committee
+ Insurance program, both Goodman and general contractor,
including project specific insurance
+ Ongoing monitoring and reporting of WIP and levels of speculative
development, with Board oversight including limits with respect
to speculative development
31
Goodman Group
Directors’ report
(continued)
Risk area
Mitigation
Disruption, changes
in demand and
obsolescence
Through advancement in technology and
rapid growth in e-commerce (as seen through
automation/robotics, driverless vehicles and an
increase in demand for data centre use), there
is a longer-term risk that warehouses become
obsolete and not fit for purpose through their
specialisation and/or location.
Environmental and
climate change
Failure to properly identify and mitigate both
physical and transition risks from climate change,
leading to a negative impact on Goodman’s
reputation, ability to raise capital and a disruption
to operations and stranded assets.
Asset and portfolio
Inability to execute asset planning and
management strategies, including leasing
risk exposures, can reduce returns from
Goodman’s portfolios.
+ Key urban market strategy – urban, infill locations support
re-usability of property
+ Adaptable and re-usable building design – ease to reconfigure
for another customer
+ Geographic diversification
+ Capital partnering transfers risks into Partnerships
+ Insurance program (both Goodman’s and key contractors),
including project specific insurance covering design and defects
+ Long lease terms with prime customers
+ Corporate Responsibility and Sustainability policy
+ 2030 Sustainability Strategy including the assessment
of individual assets to improve resilience and implementation
of sustainability initiatives
+ Sustainability guidelines for development projects
+ Review and approval of acquisitions and development projects
by the Group Investment Committee and relevant
+ Partnership Investment Committee, including consideration of climate
in due diligence and specification
+ Key urban market strategy – urban, infill locations where customer
demand is strongest
+ Diversification of customer base and lease expiries
+ Review of significant leasing transactions and development projects
by the Group Investment Committee
+ Capital expenditure programs keeping pace with property lifecycle
Concentration to
counterparties
and markets
Information and
data security
Over-exposure to specific areas, such as capital
partners, supply chain, customers and markets,
may limit growth and sustainability opportunities.
+ Diversification of customer base and lease expiries
+ Diversification of capital partners and Partnership expiries
Maintaining security of IT environment and
data, ensuring continuity of IT applications
to support sustainability and growth and
prevent operational, regulatory, financial and
reputational impacts.
+ Reporting of risks and management activity
+ Proactive monitoring, review and testing of infrastructure
+ Disaster recovery and business continuity planning and testing
32
Annual Report 2020
QUALIFICATIONS, EXPERIENCE AND
SPECIAL RESPONSIBILITIES OF
DIRECTORS AND COMPANY SECRETARY
Board of Directors
Ian Ferrier, AM – Independent Chairman
Member of the Audit Committee and
Remuneration and Nomination Committee
Appointed 1 September 2003; Tenure 16 years, 10 months
Appointed to the board of GFML on 23 February 2005;
Tenure 15 years, 4 months
Ian is the Independent Chairman of Goodman Limited
and Goodman Funds Management Limited (appointed on
28 July 2009 having been Acting Chairman from 28 November
2008) and also Goodman Logistics (HK) Limited (since 22 February
2012). Ian is a Fellow of Chartered Accountants Australia and
New Zealand and has in excess of 40 years of experience in
company corporate recovery and turnaround practice. He is also
a director of EnergyOne Limited (since January 2007) and was
formerly the Chairman of Reckon Limited (from August 2004 to
July 2018), InvoCare Limited and Australian Vintage Ltd. Ian is also
a director of a number of private and public companies.
His experience is essentially concerned with understanding the
financial and other issues confronting company management,
analysing those issues and implementing policies and strategies
which lead to success. Ian has significant experience in property
and development, tourism, manufacturing, retail, hospitality and
hotels, infrastructure and aviation and service industries.
Gregory Goodman – Group Chief Executive Officer
Chris is an Independent Director of Goodman Limited and
Goodman Funds Management Limited. Chris is also the Founder
and Chief Executive Officer of GreenPoint Partners, a New York
headquartered firm investing in real estate innovation, technology
and private equity.
Chris spent 16 years at Macquarie Group and was the Global
Head of Macquarie Capital’s real estate business leading its global
expansion through to 2018.
He has a Bachelor of Laws (Honours) degree and a Bachelor
of Commerce (Computer Science and Accounting) degree from
The University of Sydney.
Stephen Johns – Independent Director
Chairman of the Audit Committee and Member of the Risk
and Compliance Committee
Appointed to the board of Goodman Limited and GFML
on 1 January 2017; Tenure 3 years, 6 months
Stephen is an Independent Director of Goodman Limited and
Goodman Funds Management Limited. He was appointed
Chairman Elect in February 2020 and will assume the role of
Chairman upon the retirement of Ian Ferrier at the 2020 Annual
General Meeting in November.
Stephen retired as Chairman of Brambles Limited in June 2020 after
a period of 16 years on that Board and was previously Chairman of
Leighton Holdings Limited and Spark Infrastructure Group. Stephen
is also a director of the Garvan Institute of Medical Research.
Stephen is a former executive of Westfield Group where he had
a long executive career during which he held a number of senior
positions including that of Finance Director from 1985 to 2002. He
was a non-executive director of Westfield Group from 2003 to 2013.
Appointed to the board of Goodman Limited on 7 August 1998;
Tenure 21 years, 11 months
Appointed to the board of GFML on 17 January 1995;
Tenure 25 years, 5 months
He has a Bachelor of Economics degree from The University
of Sydney and is a Fellow of Chartered Accountants Australia
and New Zealand and a Fellow of the Australian Institute of
Company Directors.
Gregory is the Managing Director of Goodman Limited and
Goodman Funds Management Limited and Group Chief Executive
Office of Goodman. He is also an alternate director of Goodman
Logistics (HK) Limited. He is responsible for Goodman’s overall
operations and the implementation of its strategic plan.
He has over 30 years of experience in the property industry with
significant expertise in the industrial property arena. Gregory is
the founder of Goodman, playing an integral role in establishing
its specialist global position in the property market through
various corporate transactions, including takeovers, mergers
and acquisitions.
He is a director of Goodman (NZ) Limited (the manager of the
New Zealand Exchange listed Goodman Property Trust),
and director and/or representative on other subsidiaries and
management companies of the Group and partnerships.
Christopher Green – Independent Director
Member of the Audit Committee
Appointed to the board of Goodman Limited and GFML
on 28 April 2019; Tenure 1 year, 2 months
Mark Johnson – Independent Director
Member of the Audit Committee
Appointed 1 June 2020; Tenure 1 month
Mark is an Independent Director of Goodman Limited and
Goodman Funds Management Limited. Mark is a trained
accountant and spent 30 years at PricewaterhouseCoopers (PwC)
where he was CEO from 2008 to 2012 as well as holding positions
as Asian Deputy-Chairman and as a member of PwC’s global
strategy council.
Mark is currently Chairman of G8 Education Limited, Hospitals
Contribution Fund of Australia and Aurecon Group Pty Ltd. Mark is
also a director at Coca-Cola Amatil Limited (since December 2016),
Corrs Chambers Westgarth and the Smith Family, and a Councillor
at UNSW Sydney. Mark was formerly a director of Westfield
Corporation Limited (May 2013 – June 2018).
Mark holds a Bachelor of Commerce (UNSW) degree and is a
Fellow of Chartered Accountants Australia and New Zealand,
Certified Practicing Accountant Australia and Fellow of the
Australian Institute of Company Directors.
33
Goodman Group
Directors’ report
Qualifications, experience and special responsibilities of Directors and Company Secretary
(continued)
Rebecca McGrath – Independent Director
Chairman of the Risk and Compliance Committee and
Member of the Remuneration and Nomination Committee
Appointed to the board of Goodman Limited and GFML
on 3 April 2012; Tenure 8 years, 3 months
Rebecca is an Independent Director of Goodman Limited and
Goodman Funds Management Limited. Rebecca is also currently
Chairman of OZ Minerals Limited (director since November 2010)
and a director of Incitec Pivot Limited (since September 2011).
Rebecca is also a director of Investa Wholesale Funds Management
Limited, and the Independent Chairman of Scania Australia Pty
Limited. Rebecca was formerly a director of CSR Limited.
During her executive career at BP plc, she held numerous
senior roles in finance, operations, corporate planning, project
management and marketing in Australasia, the UK, and Europe.
Her most recent executive experience was as Chief Financial
Officer of BP Australasia.
Rebecca holds a Bachelors Degree of Town Planning and a
Masters of Applied Science (Project Management) and is a
graduate of the Cambridge University Business and Environment
Program. She is Victorian Council President of the Australian
Institute of Company Directors.
Danny Peeters – Executive Director, Corporate
Appointed to the board of Goodman Limited and GFML
on 1 January 2013; Tenure 7 years, 6 months
Danny is an Executive Director of Goodman Limited, Goodman Funds
Management Limited and Goodman Logistics (HK) Limited. He has
oversight of Goodman’s European and Brazilian operations and
strategy. Danny has been with Goodman since 2006 and has 19 years
of experience in the property and logistics sectors. Danny is a director
and/or representative of Goodman’s investment management entities,
subsidiaries and partnerships in Europe and Brazil.
During his career, Danny has built up extensive experience in the
design, implementation and outsourcing of pan-European supply
chain and real estate strategies for various multinationals. Danny was
Chief Executive Officer of Eurinpro, a developer of tailor made logistic
property solutions in Europe acquired by Goodman in May 2006.
Phillip Pryke – Independent Director
Chairman of the Remuneration and Nomination Committee
and Member of the Audit Committee
Appointed to the board of Goodman Limited and GFML
on 13 October 2010; Tenure 9 years, 9 months
Phillip is an Independent Director of Goodman Limited and
Goodman Funds Management Limited. He is also a director
of Goodman (NZ) Limited, the manager of the New Zealand
Exchange listed Goodman Property Trust. Phillip is currently
also a director of Carbine Aginvest Corporation Limited.
He was formerly the Deputy Chairman and Lead Independent
Director of New Zealand Exchange listed Contact Energy Limited,
a director of Tru-Test Corporation Limited and North Ridge Partners
Pty Limited, Vice President of EDS, Chief Executive of Nextgen
Networks, Chief Executive Officer of Lucent Technologies Australia
Pty Limited and New Zealand Health Funding Authority and
a Member of the Treaty of Waitangi Fisheries Commission.
34
Anthony Rozic – Deputy Group Chief Executive Officer
and Chief Executive Officer, North America
Appointed to the board of Goodman Limited and GFML on
1 January 2013; Tenure 7 years, 6 months
Anthony is an Executive Director and Deputy Chief Executive
Officer (since August 2010). He was appointed Chief Executive
Officer, North America in September 2016, and in that role is
responsible for setting and managing the strategy, business
performance and corporate transactions for the Group’s North
American business.
Anthony joined Goodman in 2004 as Group Chief Financial
Officer and was appointed Group Chief Operating Officer in
February 2009 before taking on his current positions.
Anthony is a qualified Chartered Accountant and has over
20 years’ experience in the property industry having previously
held a number of senior roles in the property funds management
industry and chartered accountancy profession.
Penny Winn – Independent Director
Member of the Remuneration and Nomination Committee
and Risk and Compliance Committee
Appointed to the board of Goodman Limited and GFML
on 1 February 2018; Tenure 2 years, 5 months
Penny is an Independent Director of Goodman Limited and
Goodman Funds Management Limited. Penny is also currently a
director of CSR Limited (since November 2015), director of Ampol
Limited (since November 2015) and director of Coca-Cola Amatil
Limited (since December 2019). Penny was formerly the Chair of
Port Waratah Coal Services Limited (June 2015 – December 2019).
Penny has over 30 years of experience in retail, supply chain
and digital strategy in senior management roles in Australia
and overseas, including as Director Group Retail Services with
Woolworths Limited (2011 – 2015) where she was responsible
for leading the Logistics and Information Technology divisions,
Online Retailing and the Customer Engagement teams across
the organisation. She has previously served as a director of
a Woolworths business, Greengrocer.com, a Myer business,
sass & bide, and Quantium Group.
Penny is a graduate of the Australian Institute of Company Directors
and holds a Bachelor of Commerce from the Australian National
University and a Master of Business Administration from the
University of Technology, Sydney.
Company Secretary
Carl Bicego – Group Head of Legal and Company Secretary
Appointed as Company Secretary of Goodman Limited
and GFML on 24 October 2006
Carl is the Group Head of Legal and the Company Secretary of
the Company. He was admitted as a solicitor in 1996 and joined
Goodman from law firm Allens in 2006. Carl holds a Master of Laws
degree and Bachelor of Economics/Bachelor of Laws (Hons) degrees.
Annual Report 2020
Directors’ meetings (GL and GFML)
The number of Directors’ meetings held (including meetings of committees of Directors) and the number of meetings attended by each
of the Directors during the financial year were:
Directors
Ian Ferrier
Gregory Goodman
Christopher Green
Stephen Johns
Mark Johnson1
Rebecca McGrath
Danny Peeters
Phillip Pryke
Anthony Rozic
Penny Winn
Board meetings
Audit
Committee
meetings
Remuneration
and Nomination
Committee meetings
Risk and
Compliance
Committee meetings
Held2
Attended
Held2
Attended
Held2
Attended
Held2
Attended
9
9
9
9
2
9
9
9
9
9
9
9
9
9
2
9
9
9
9
9
4
–
4
4
1
–
–
4
–
–
4
–
4
4
1
–
–
4
–
–
5
–
–
–
–
5
–
5
–
5
5
–
–
–
–
5
–
5
–
5
–
–
–
4
–
4
–
–
–
4
1. Mark Johnson was appointed as a director on 1 June 2020.
2. Reflects the number of meetings individuals were entitled to attend.
–
–
–
4
–
4
–
–
–
4
35
Goodman Group
Directors’ report
Remuneration report – audited (continued)
REMUNERATION REPORT – AUDITED
Sustained performance
Dear Securityholders,
On behalf of the Board, we are pleased to present the 2020
remuneration report, outlining Goodman’s remuneration strategy
and principles.
Goodman’s remuneration framework is essential to attracting
and retaining high quality professionals with local expertise,
who develop businesses and relationships globally and drive
Goodman’s long-term success. It is integral to the exceptional
results delivered for Securityholders.
The past financial year has been marked by enormous
challenges for the business and communities. Extreme weather
conditions resulting in droughts and bushfires in Australia,
followed by the global COVID-19 pandemic in the final months
of this financial year caused unprecedented health, social and
economic consequences.
Our business plays an important role in providing both essential
infrastructure and making a tangible difference to the communities
in which we operate, and Goodman has reacted to the crises
through increasing support to affected groups.
Social impact grants from the Goodman Foundation and donations
from Goodman staff have increased to $13.7million. This included
contributions to the NSW Rural Fire Service and communities
affected by the NSW bushfires, as well as Goodman’s charitable
partners, and Goodman staff also provided 8,600 hours of
volunteer assistance. Additionally, the Group has not taken any
government relief in Australia (JobKeeper).
Managing the welfare of employees has been a critical
consideration in achieving the Group’s financial and operational
targets. This situation has required practically all employees to work
remotely for extended periods of time. Our focus and commitment
to keeping our teams motivated and demonstrating genuine
support and concern for employees (and their families) have been
considerable. Managers within the Group, in particular the senior
executives have demonstrated significant levels of leadership,
compassion and commitment in their efforts to achieve the Group’s
commercial objectives.
Goodman is a leading internationally diversified real estate fund
manager in the logistics real estate sector. The retention of
talent is essential for the long term success of the business and
is increasingly challenging as opportunistic competitors seek
to recruit Goodman’s high-performing teams, in each of our
markets. The Group’s remuneration policy plays a critical role in
helping to ensure that Goodman has the right human resources to
deliver our strategy, create the right culture and drive performance
for all stakeholders.
Over more than a decade, the Group has established strong
and resilient leadership teams, financial resources and a strategic
real estate portfolio, to maximise sustainability of earnings through
difficult market cycles. This has allowed us to adapt to the new
operating environment with limited disruption and continue to grow
for the long term. As a result, the Board is proud that Goodman
has performed strongly through this period despite world market
dislocation and volatility. Our long-term vision, which includes a
strong focus on cash flow, liquidity, and risk management, has
been executed consistently and diligently.
Total Securityholder return (TSR) for the Group versus comparable
indices is detailed below, indicating sustained material
outperformance over many years:
Total securityholder
returns
1 year
%
3 years
%
5 years
%
10 years
%
Goodman1
S&P/ASX 20
S&P/ASX 100
S&P/ASX 200 A-REIT
MSCI World REITs2
-0.4
-9.6
-9.5
-8.1
-8.1
103.4
15.9
17.1
17.1
8.0
169.6
21.4
31.5
32.2
25.5
566.3
103.8
119.0
142.0
129.8
Source: Bloomberg/Nasdaq
1. Goodman TSR does not assume reinvestment of distributions.
2. MSCI World REITs index returns measured in USD Goodman.
FY20 results delivered significant outperformance both
operationally and for Securityholders while positioning the business
for future growth. Despite the market uncertainty, our measured
approach over many years has allowed Goodman to retain, and
also exceed, previous operating EPS guidance for FY20 and
commit to firm operating EPS guidance for FY21. This is in an
environment where most of the ASX listed entities have withdrawn
FY20 guidance and are not expected to provide guidance for the
year ahead. The Board’s belief in pay for performance culture is
reflected in the challenging hurdles set for FY21 remuneration
awards, which if achieved, will have provided Securityholders with
top quartile performance and 30% growth in operating profit over
the past three years (significantly ahead of consensus expectations
for the S&P/ASX 100).
Key performance highlights include:
+
+
+
+
+
+
+
Significant outperformance of the major local and global
indices in 2020 and over the medium and longer term
(past three and five years)
Goodman operating EPS growth materially exceeded
targets compared with the S&P/ASX 100, which is expected
to show an average -14.4% decline for FY20
Statutory profit of $1.5 billion for Goodman and $4.8 billion
across the combined Group and Partnerships
Operating profit of $1.1 billion (+12.5%) in FY20 for Goodman
Significant growth in development work in progress (WIP) up
59% during FY20 to $6.5 billion at 30 June 2020, positioning
the business well into FY21
Total assets under management (AUM) increased 12% to
$51.6 billion
Substantial revaluation growth of $2.9 billion across the Group
and Partnerships.
36
Annual Report 2020
We continue to engage in an open and meaningful dialogue with
Securityholders and other stakeholders to enhance understanding
of our policy and its contribution to Goodman’s performance as
well as our understanding of Securityholder concerns and local
and global market practices. We hope we can rely on your support
at our 2020 Annual General Meeting in November.
Yours sincerely,
Ian Ferrier, AM
Chairma n
Phillip Pryke
Chairman, Remuneration and Nomination Committee
Continued improvement and alignment
of the Long Term Incentive Plan
As you are aware, in 2019, the Board announced several
changes to the remuneration framework which have now been
implemented. Specifi cally, the operating EPS hurdle under the
Long Term Incentive Plan (LTIP) is measured over three years from
the date of each grant, as opposed to setting annual targets.
We have also signifi cantly enhanced our disclosures in support
of variable remuneration, rationale for the performance metrics
and the comparator sets used in assessing remuneration levels.
We believe that our fundamental principle of aligning all our people
and Securityholders meaningfully through equity, is unique in the
Australian market and has been a signifi cant factor in building
the resilience of our business. This should continue to deliver
the Group’s and Securityholders’ desired outcomes despite the
uncertain outlook for global markets.
In line with commentary in prior years, the Remuneration and
Nomination Committee has made some additional distinctions in
the remuneration approach applied to executive key management
personnel (KMP) to further align them with long-term performance.
Several years ago, the Group Chief Executive Offi cer (CEO)
agreed with the Board to not receive short-term incentive (STI)
but to receive all performance based remuneration in the form of
long-term incentive (LTI), to focus on signifi cant long-term alignment
of pay with Securityholders’ returns. It was also consistent with a
responsibility for developing and implementing a long-term strategy
and providing leadership in this form of remuneration.
The other executive KMP can be differentiated in their roles
and responsibilities where some hold regional responsibilities
including specifi c fi nancial targets and others perform wider global
strategic roles. The Board and Remuneration and Nomination
Committee have determined that where executive KMP have a
greater focus on Group strategy and implementation, they should
have a relatively larger proportion of equity based remuneration
(as a proportion of total remuneration) and less emphasis on STI.
The Board believes that these individuals have more infl uence
on setting and maintaining the Group’s strategy and should be
increasingly aligned with the long-term outcomes of the Group and
returns to Securityholders. This structure also minimises the risk of
inappropriate reward or penalisation as a result of market volatility
and unexpected market movements over the short term.
37
Goodman Group
Directors’ report
Remuneration report – audited (continued)
1. REMUNERATION PHILOSOPHY
AND LINK TO BUSINESS STRATEGY
Goodman is a globally diversified real estate fund manager and
one of the largest listed industrial property managers and
developers in the world. Goodman’s people are largely based
outside Australia, and consequently, Goodman’s remuneration
structure has some key differences from the Australian market.
This reflects the requirements of the labour markets we are
competing in globally, not just in Australia, and the objective of
aligning multiple regional businesses and operational segments
with Group performance outcomes.
The retention of talent is critical for the long term and is increasingly
challenging as opportunistic competitors seek to recruit
Goodman’s high-performing teams, in each of our markets. The
Group’s remuneration policy plays a critical role in helping to ensure
that Goodman has the right human resources to deliver its strategy,
create the right culture and drive performance for all stakeholders.
As a result, the key component of remuneration is equity based
reward. The Board believes aligning ALL people at Goodman
with Securityholders through the Group’s remuneration policy has
added significant value to the Group. It has been a fundamental
differentiator in generating and rewarding long-term performance
and retaining Goodman’s people in a highly competitive global
environment. It is particularly important in light of the challenges
COVID-19 has created, as it binds all employees together as
owners of the business and is a powerful incentive and driver of
operational resilience.
Our remuneration framework takes a long-standing partnership
approach where Goodman’s people participate in the long-term
success of the Group alongside Securityholders.
38
Annual Report 2020
1.1 THE ROLE OF THE BOARD AND REMUNERATION
1.2 KEY REMUNERATION PRINCIPLES
AND NOMINATION COMMITTEE
The Board believes the success of Goodman is primarily due to
the depth of talent globally executing a strategy that requires strong
collaboration and the culture of inclusion created by the LTIP.
Given the cyclical nature of real estate, incentive structures
within real estate businesses are highly outcome driven (particularly
by private equity real estate managers where most institutional
assets reside).
As a result, the Board:
+
+
+
Encourages management to take a long-term strategic
rather than opportunistic approach to property investment
Has overlaid the operational, financial and human strategy
in order to create long-term sustainable returns
Focuses on the consistency of cash profit as the most
tangible means of measuring long-term value creation
for Securityholders.
The Board annually considers remuneration with a three to five year
view. It considers how the performance of the Group has been
influenced by the decisions over the last three to five years and how
it expects the business to perform over the next three to five years.
It is not solely an exercise in reviewing a single year.
The Remuneration and Nomination Committee has considered the
specifics of individual performance, in the context of the COVID-19
environment and collectively in the context of the Group’s
continued strong performance. Given the nature of the Group’s
global operations, the Remuneration and Nomination Committee
has paid particular attention to the global marketplace and the
competitors in that sector. Industrial and logistics real estate,
and Goodman’s success, has made its people a target for new
entrants to the sector and existing competitors looking to emulate
the Group’s performance. The Remuneration and Nomination
Committee believes this requires a wide global remit in order to
set competitive remuneration allowing for the strong component
of remuneration that is at risk.
This changing international landscape will result in Goodman’s
capital and resource allocations shifting over time, with the aim
of delivering the best risk adjusted returns overall albeit this may
be to the detriment of one part of the global business and to
the benefit of another. The Group’s remuneration framework is
therefore focused on influencing long-term decision making and
collaboration across business units and international operations
to derive sustainable outcomes.
While considered unique in the Australian market, the LTIP reflects
several key principles of remuneration at Goodman:
+
+
+
+
Focus on LTI as the predominant source of pay for
performance. All employees are eligible to receive LTI grants
as a material component of remuneration and are tested
using challenging hurdles (see section 2.4.2), enhancing
alignment of rewards across the Group with Securityholders
Aligning the deliverable outcomes of all employees globally
with Goodman’s aspirations of long-term cash flow growth,
resilience and sustainability. This is practically achieved
through the focus on operating profit (which reflects cash
profits) as the primary testing measure for LTI awards
(see section 2.4.1)
Collaboration to achieve Group-wide targets across regions
and business units
A culture of ownership, inclusion and alignment.
This philosophy has enabled Goodman to deliberately position
its business over the past decade to maximise sustainability of
earnings in varying market cycles that has resulted in consistent
long-term security price outperformance.
39
Goodman Group
Directors’ report
Remuneration report – audited (continued)
1.3 OBJECTIVES OF REMUNERATION STRATEGY
Attract
Remuneration structure
Fixed remuneration
Low fixed costs
STI at-risk remuneration
Group CEO: 0% of remuneration
Other executive KMP: 0%-18% of total remuneration
For executive KMP: 50% of STI paid in cash after release
of full year results and 50% deferred for 12 months
STI is an at-risk award for outperformance over the
past 12 months.
Failure to meet STI gates (i.e. Code of Conduct and
operating EPS) will result in zero award.
LTI at-risk remuneration
Rewards long-term sustained performance.
New grants will be awarded in FY21 as a result of FY20
performance achievements and assessment of potential
future contributions.
Issued as performance rights tested over three years and
vesting over three to five years.
Encourages a more collaborative approach and broader
distribution of performance across the entire workforce
when the Group is performing, not just for executive KMP.
n
o
i
t
a
r
e
n
u
m
e
r
k
s
i
r
-
t
A
40
Reward
Performance conditions
Long-term alignment of Goodman’s people and Securityholders
Alignment with strategy and long-term performance
Scope and complexity of the role, individual absolute and relative
comparison in the relevant market and comparator group.
Real estate investment management and development are cyclical, so fixed employee costs are kept low. Most KMP fixed
remuneration has not grown in several years.
Gate 1: meeting Goodman behavioural expectation per the
Code of Conduct
STI is an at-risk component, rewarding financial and non-financial performance against objectives of the individual and the Group.
Awards have varied from 0% to 100% of the maximum over time and have averaged 57% of maximum allowable over the past
Gate 2: achieving operating EPS target
Financial measures
The Group’s financial objectives vary with strategic priorities
but include level of operating EPS growth which is a collective
function of:
– property investment performance
– development performance
– Partnership performance
–
sustainable capital management in line with the risk
management objectives
Non-financial measures
A balance of measures that underpin the sustainability
of the business including performance to environmental
targets, customer satisfaction, Partnership performance,
risk management, safety and diversity.
Assessment of conduct is continual in the organisation and is a
gate to any STI. The Board believes this non-financial objective,
in particular adhering to the Code of Conduct, is an absolute and
hence applying a specific percentage weighting to each measure
is not effective.
– operating EPS hurdle range (75%)
–
relative TSR against the S&P/ASX 100 (25%) – this aligns with
investors’ benchmarks relevant to their holdings and provides
closest alignment with their performance.
five years.
The performance of individuals is assessed through a detailed bottom up performance appraisal process based on contribution
to defined objectives that reflect behavioural expectations, annual contribution to results as well as strategic and other contributions
where these results or benefits may be reflected in future years. Base salaries for the executive KMP roles are set low versus peers
and this is carried through in lower STI outcomes for relevant KMP. The focus on STI as a form of reward has reduced in favour of
LTI, in line with a culture and ethos of sustainable outcomes.
Operating profit growth and capital management are of the highest importance in financial assessment. These factors together
encourage not only the operating EPS targets being met but also that the method in which they are met matches appropriate risk
and quality settings.
This structure is simple and transparent and aligns management with the operating EPS growth expectations of Securityholders.
The weighting to LTI is believed to be the most effective way of rewarding sustained performance and retaining talent.
Despite the impact of COVID-19 the security price has remained stable and underlying performance has exceeded targets.
The expected number of performance rights to be awarded in FY21 will be broadly consistent with FY20, and fewer than that
vesting in September 2020.
Operating EPS is a critical measure of long-term performance (see section 2.4.1).
Hurdles are set to be competitive and challenging (see section 2.4.2) relative to external and internal reference points.
The relative TSR and operating EPS hurdles interact as TSR impacts the value of all performance rights. Given the significant skew
in remuneration to performance rights, the impact of the TSR hurdle is greater than its 25% weighting in that TSR provides an
effective check against increasing risk practices within the Group. The price to earnings multiple attributable to securities will reflect
the perceived risk in achieving operating EPS targets, which impacts the likelihood of vesting and the ultimate value upon vesting.
The total number of equity settled performance rights outstanding under the LTIP equates to 3.4% of the Group’s issued securities.
The proposed number of FY21 awards (both equity and cash settled) is 0.9% of the total securities on issue.
The maximum number of performance rights under the LTIP is limited to 5% of the Group’s issued securities.
1.3 OBJECTIVES OF REMUNERATION STRATEGY
Attract
Remuneration structure
Fixed remuneration
Low fixed costs
STI at-risk remuneration
Group CEO: 0% of remuneration
Other executive KMP: 0%-18% of total remuneration
For executive KMP: 50% of STI paid in cash after release
of full year results and 50% deferred for 12 months
STI is an at-risk award for outperformance over the
past 12 months.
Failure to meet STI gates (i.e. Code of Conduct and
operating EPS) will result in zero award.
n
o
i
t
a
r
e
n
u
m
e
r
k
s
i
r
-
t
A
LTI at-risk remuneration
Rewards long-term sustained performance.
New grants will be awarded in FY21 as a result of FY20
performance achievements and assessment of potential
future contributions.
Issued as performance rights tested over three years and
vesting over three to five years.
Encourages a more collaborative approach and broader
distribution of performance across the entire workforce
when the Group is performing, not just for executive KMP.
Gate 1: meeting Goodman behavioural expectation per the
Code of Conduct
Gate 2: achieving operating EPS target
Financial measures
The Group’s financial objectives vary with strategic priorities
but include level of operating EPS growth which is a collective
function of:
– property investment performance
– development performance
– Partnership performance
management objectives
Non-financial measures
–
sustainable capital management in line with the risk
A balance of measures that underpin the sustainability
of the business including performance to environmental
targets, customer satisfaction, Partnership performance,
risk management, safety and diversity.
Assessment of conduct is continual in the organisation and is a
gate to any STI. The Board believes this non-financial objective,
in particular adhering to the Code of Conduct, is an absolute and
hence applying a specific percentage weighting to each measure
is not effective.
– operating EPS hurdle range (75%)
–
relative TSR against the S&P/ASX 100 (25%) – this aligns with
investors’ benchmarks relevant to their holdings and provides
closest alignment with their performance.
Annual Report 2020
Reward
Performance conditions
Long-term alignment of Goodman’s people and Securityholders
Alignment with strategy and long-term performance
Scope and complexity of the role, individual absolute and relative
comparison in the relevant market and comparator group.
Real estate investment management and development are cyclical, so fixed employee costs are kept low. Most KMP fixed
remuneration has not grown in several years.
STI is an at-risk component, rewarding financial and non-financial performance against objectives of the individual and the Group.
Awards have varied from 0% to 100% of the maximum over time and have averaged 57% of maximum allowable over the past
five years.
The performance of individuals is assessed through a detailed bottom up performance appraisal process based on contribution
to defined objectives that reflect behavioural expectations, annual contribution to results as well as strategic and other contributions
where these results or benefits may be reflected in future years. Base salaries for the executive KMP roles are set low versus peers
and this is carried through in lower STI outcomes for relevant KMP. The focus on STI as a form of reward has reduced in favour of
LTI, in line with a culture and ethos of sustainable outcomes.
Operating profit growth and capital management are of the highest importance in financial assessment. These factors together
encourage not only the operating EPS targets being met but also that the method in which they are met matches appropriate risk
and quality settings.
This structure is simple and transparent and aligns management with the operating EPS growth expectations of Securityholders.
The weighting to LTI is believed to be the most effective way of rewarding sustained performance and retaining talent.
Despite the impact of COVID-19 the security price has remained stable and underlying performance has exceeded targets.
The expected number of performance rights to be awarded in FY21 will be broadly consistent with FY20, and fewer than that
vesting in September 2020.
Operating EPS is a critical measure of long-term performance (see section 2.4.1).
Hurdles are set to be competitive and challenging (see section 2.4.2) relative to external and internal reference points.
The relative TSR and operating EPS hurdles interact as TSR impacts the value of all performance rights. Given the significant skew
in remuneration to performance rights, the impact of the TSR hurdle is greater than its 25% weighting in that TSR provides an
effective check against increasing risk practices within the Group. The price to earnings multiple attributable to securities will reflect
the perceived risk in achieving operating EPS targets, which impacts the likelihood of vesting and the ultimate value upon vesting.
The total number of equity settled performance rights outstanding under the LTIP equates to 3.4% of the Group’s issued securities.
The proposed number of FY21 awards (both equity and cash settled) is 0.9% of the total securities on issue.
The maximum number of performance rights under the LTIP is limited to 5% of the Group’s issued securities.
41
Goodman Group
Directors’ report
Remuneration report – audited (continued)
2. EXECUTIVE REMUNERATION FRAMEWORK
2.1 PEER GROUP AND QUANTUM ASSESSMENT
As in previous years, the Board and Remuneration and Nomination Committee have considered the entire enterprise of the Group
and its Partnerships globally, when assessing the executives roles.
In this context, Goodman:
+
+
+
+
+
+
+
+
+
Is an international real estate fund manager
Manages and creates value in respect of $51.6 billion of assets globally
Manages capital allocation and funding across various activity types, which is sourced from multiple sophisticated markets
and jurisdictions
Is one of the largest developer of logistics real estate in the world, with a current WIP of $6.5 billion of new product
Generated a combined statutory profit across the Group and Partnerships of $4.8 billion in FY20
Is the 13th largest entity listed on the ASX and is a member of the S&P/ASX 20 index
Generates 72% of earnings from management and development activities which require more intensive day to day activity
than a passive investment portfolio
Provides its customers and partners with investment management, asset management, development, financial, transaction
and capital management services in the listed and private equity capital markets globally
Derives 72% of earnings from international markets with 70% of employees situated offshore.
The Group has limited direct comparable real estate market peers in Australia, having operating businesses in five continents and
17 countries, each with market driven remuneration outcomes. The Group’s 958 staff (at 30 June 2020) are mostly offshore, and
consequently Goodman competes for labour in an international market, which the Board considers when assessing the quantum
of remuneration awards.
2.1.1 PEER GROUP COMPARATORS AND CONSIDERATIONS FOR THE GROUP CEO
The comparisons of various peer groups, chief executive officers’ and the Goodman CEO remuneration, have been considered
by the Board in the context of the underlying remuneration structure, determining the components and the hurdles which apply.
Peer group
comparator Reason for comparison
Goodman
Goodman CEO
Annual CEO remuneration1
Range Average Median
% LTI
1 year
TSR3
3 years
TSR3
5 years
TSR3
n/a
$15.5m $15.5m
91%
51%
0%
103%
165%
-11%
21%
49%
S&P/ASX 20
Goodman is number 13 in the S&P/ASX 20 index.
$6m-$22m
$11m
$9m
Selected ASX
listed entities
with global
operations
72% of GMG earnings are outside Australia.
The comparator group provides a reference
for local companies operating offshore in
a number of industries.
Global REITs
including
Australia2
Goodman is the largest constituent of the Australian
S&P/ASX REIT index (by market capitalisation)
and is three times the size of the second largest.
Goodman is one of the largest listed developers
of logistics space globally and one of the largest
global industrial property entities.
$5m-$22m
$11m
$10m
43%
-4%
37%
83%
$5m-$44m
$15m
$10m
72%4
-2%
37%
83%
1.
Reflects fixed base pay and the face value of the intended award of performance rights, using the closing Goodman security price of $14.85 at 30 June 2020.
Peer group comparator information is calculated using ISS pay benchmarking data and methodology.
2. TSR reflects the MSCI World REITs index measured in USD.
3. Median TSR for the relevant peer group comparator.
4. Excluding Prologis, the LTI as a percentage of total remuneration is c50%.
42
Private equity managers were also considered for comparison,
particularly with respect to the nature of pay for performance
remuneration structures in those types of enterprises but were
not cited as direct comparisons for quantum setting purposes.
For many entities, returns in FY20 are likely to have been
significantly dislocated given the impact of COVID-19 which should
be taken into account when assessing the comparator group.
When assessing the Group CEO’s remuneration for FY20 the
components considered by the Board are:
+
+
Current fixed base pay
Performance rights to be awarded in FY21 (subject to
securityholder approval) to be tested over FY21 – FY23 and
vesting in FY24 – FY26.
The assessment of the value of the performance rights referred
to in this section uses face value metrics, as opposed to the
economic value. This is common market practice. That is, no
discount has been applied to the attributed value of performance
rights for vesting risk or time value of money. The Board has
considered the total remuneration noting in its determination
that the comparability of other remuneration schemes is limited,
particularly as it relates to:
+ Proportion at risk – fixed pay is significantly lower in absolute
terms and represents only 9% of total potential remuneration
for FY20. As in previous years the Group CEO will not
participate in the STI award or any other form of variable cash
remuneration (comparatively, the market average fixed pay
and STI is approximately 50% of total remuneration)
91% of his remuneration for FY20 performance will be taken
in the form of performance rights, the ultimate value of which
is at risk. By way of comparison, the average proportion of
remuneration in LTI for the S&P/ASX 20 and S&P/ASX 100 is
51% and 48% respectively.
+
This means that the Group CEO would not receive any LTI in
respect of his performance for FY20 if the Group did not meet
its performance hurdles under the LTIP over the next three
years. Furthermore, the ultimate value of the award will be
subject to Goodman’s security price performance over the
next five years. Full remuneration for performance in FY20
will only be realised if these conditions are satisfied, and
Goodman’s performance is at least sustained until FY26.
This results in a more significant portion of the Group CEO’s
remuneration that is at risk compared to most other ASX
listed entities.
The Board considers Goodman’s remuneration awards have been
set on the basis that the hurdles set for the FY21 performance
rights awards are significantly more challenging than relative to
the FY20 awards. This is due to the more uncertain and volatile
operating ESG expected in the future (see section 2.4.2 on
proposed FY21 LTIP EPS grant targets).
Annual Report 2020
2.2 REMUNERATION COMPONENTS FOR
EXECUTIVE KMP – CONTINUED ENHANCEMENTS
The Remuneration and Nomination Committee has continued
to make improvements to the structure of remuneration. In FY20,
the Board made some additional distinctions in the remuneration
approach applied to individual KMP to further align them with
long-term performance. Several years ago, the Group CEO agreed
with the Board that he would not participate in the STI scheme
and any performance based remuneration would be in the form
of LTI, to increase long-term alignment of pay with Securityholders’
returns. It was also consistent with the Group CEO’s responsibility
for developing and implementing a long-term strategy.
The Board believes the other executive KMP can be differentiated
in their roles and responsibilities where some hold specific regional
responsibilities and others perform wider global strategic roles.
The Board has determined that:
+ Nick Kurtis (Group Head of Equities), Michael O’Sullivan
(Group Chief Risk Officer) and Nick Vrondas (Group Chief
Financial Officer) who have a greater focus on Group strategy
and implementation should have a relatively larger proportion
of equity based remuneration (as a proportion of total
remuneration) and less emphasis on STI. The change reflects
that these individuals have more influence on the setting and
maintaining the Group’s strategy and should be increasingly
aligned with the long-term outcomes of the Group and returns
to Securityholders
Anthony Rozic (Chief Executive Officer, North America) and
Danny Peeters (Executive Director, Corporate) with regional
operational responsibilities continue to have a more balanced
weighting to STI in line with the current approach. Their STI
remuneration is also expected to be more variable reflecting
annual achievements.
+
On that basis, STI awards for executive KMP (excluding the Group
CEO) have declined by 27% compared with FY19, while LTI awards
have increased 12% from the FY19 levels. Overall remuneration
awarded for these executive KMP has been set with reference
to the individual achievement, market comparatives, and the
proportion of remuneration at risk for each executive KMP.
There are no changes to fixed remuneration levels for executive
KMP in FY21.
43
Goodman Group
Directors’ report
Remuneration report – audited (continued)
The chart below illustrates the components of KMP remuneration using:
+
+
+
Current fixed base pay
The STI outcome
An LTI award value using 100% of intended grant to be made in FY21
at $14.85 per right, which was the security price at 30 June 2020.
Fixed remuneration (%) STI (%) LTI (%)
Gregory Goodman
Danny Peeters
Anthony Rozic
Nick Kurtis
Michael O’Sullivan
Nick Vrondas
15
18
9
12
12
8
9
9
7
8
91
73
70
91
85
83
At risk
This chart reflects the significant level of overall remuneration that is at risk. This analysis is different to both the statutory presentation
of remuneration and the vested remuneration, which are detailed later in the remuneration report.
2.2.1 WHEN IS REMUNERATION EARNED AND RECEIVED?
Performance goals must be achieved over a period of three years to qualify for performance based pay. Vesting then occurs in equal
tranches from years three to five. However, there is no certainty of vesting and the outcome is dependent on the movement in the security
price over the next five years.
The chart below illustrates the timing of receipt of the remuneration components. It demonstrates the requirement for sustained
operational performance over five years from the end of FY20 for the performance based remuneration to vest. This is further emphasised
by a significant proportion of the executive KMP remuneration that is in the form of LTI.
Fixed
remuneration
STI
100% of fixed
pay awarded
in cash
Performance
period (1 year),
50% awarded
in cash
50% of total STI
deferred for 1 year,
awarded in cash
75% of award based on an operating EPS hurdle
(performance measured at the end of year 3)
25% of award based on a relative TSR hurdle
(performance measured at the end of year 3)
LTI
Performance
period
(1 year)
One third of LTI award (subject to performance/
service requirements) vests shortly after the end of year 3
One third of LTI award (subject to performance/service requirements)
vests shortly after the end of year 4
One third of LTI award (subject to performance/service requirements) vests shortly after the end of year 5
Current year
Year 1
Year 2
Year 3
Year 4
Year 5
n
o
i
t
a
r
e
n
u
m
e
r
k
s
i
r
t
A
44
Annual Report 2020
2.3 STI
STI is a component of remuneration that is at risk. It is specific to achievement of financial and non-financial objectives. This structure is
very transparent and aligns management with the operating EPS growth expectations of Securityholders.
Questions
Who is eligible
to participate
in the STI?
What is the form
of the STI award?
What is the
maximum award
participants
may earn?
How is the
STI earned?
How is the
individual
STI award
determined?
All full-time and part-time permanent employees.
The Group CEO agreed with the Board not to participate in the STI awards, to emphasise reward for long-term decision
making across the organisation.
Nick Kurtis (Group Head of Equities), Michael O’Sullivan (Group Chief Risk Officer) and Nick Vrondas (Group Chief Financial
Officer) have agreed with the Board to forgo varying portions of their STI awards in exchange for LTI, to emphasise reward
for long-term decision making across the organisation.
Cash. For executive KMP, 50% of the STI award is paid on finalisation of Goodman’s full year result.
50% of the STI award is deferred and paid in cash after a period of 12 months and the deferred STI amount is subject to
forfeiture under malus provisions (see below).
STI awards are capped at 150% of fixed remuneration for executive KMP. Target STI for individuals is also compared
to market based remuneration data and their manager’s own assessment of what an appropriate level of incentive
compensation may be relative to the long-term value that person brings to the Group.
The Board sets budget targets for the business annually. These targets are set relative to the market conditions, earnings
visibility, financial structure and strategy and are believed to be challenging but challenging and appropriate. Targets will vary
over time, through cycle and strategy, to ensure they remain contemporary.
STI for all staff is subject to: (1) meeting behavioural expectations under the Group Code of Conduct; and (2) achieving
operating EPS (based on the annual forecast for the relevant year). Securityholder returns are prioritised.
STI rewards annual performance against objectives of the individual and the Group.
The Group objectives include multiple factors as set from time to time, dependent on the market and strategy of the Group.
These primarily fall into five groups:
property investment
–
–
development
– management
–
–
Adherence to the Group’s core values is a minimum hurdle for the STI to vest and the Remuneration and Nomination
Committee looks at conduct and specific judgements are made in relation to this.
The performance of individuals is assessed through a detailed and formal performance appraisal process based on
contribution to defined objectives, behavioural expectations, annual contribution to results as well as strategic and other
contributions where these results or benefits may be reflected in future years.
capital management and
corporate and social responsibility.
Is there
malus/clawback?
The executive KMP STI awards are subject to 50% deferral for 12 months from the date of publication of Goodman’s
financial statements. This deferral period provides protection from malus. The Board has discretion to forfeit deferred
amounts for material misstatement, fraud or adverse changes that would have affected the award where there is
executive responsibility.
Is STI deferred
into equity?
What happens
to STI upon
termination?
No. A much greater portion of remuneration for KMP is in the form of LTI (equity) than any other S&P/ASX 100 entity and
hence they are already significantly more aligned with securityholders’ outcomes than executives at other listed entities.
As a result, in the Board’s view, there is little further benefit in deferring STI into equity.
For all KMP, the deferred portion of STI award is subject to immediate forfeiture in circumstances where employees
are dismissed for cause without notice (e.g. fraud or serious misconduct). The Board has discretion to pay deferred STI
in certain circumstances, where employees leave the Group with good leaver status due to personal circumstances or due
to permanent disablement or death.
45
Goodman Group
Directors’ report
Remuneration report – audited (continued)
2.3.1 CODE OF CONDUCT
The way employees conduct themselves is crucial to the success
of the Group. Goodman has consistent and transparent practices
in place for managing non-compliance with policies and the
approach to risk guides the way all employees are expected to
conduct themselves and hence all remuneration is subject to
meeting these requirements.
Within the Code of Conduct, there is a set of eight guiding
principles that encourage employees to uphold Goodman’s
reputation and behave appropriately in dealing with the Group’s
customers and other team members. Employees are assessed
continually against these principles. The guiding principles are:
+
+
+
+
+
+
+
+
Act in a professional manner
Work as a team and respect others
Treat stakeholders fairly
Value honesty and integrity
Follow the law and the Group’s policies
Respect confidentiality and do not misuse information
Manage conflicts of interest
Strive to be a great team member
The Board also believes that ownership through the LTIP embeds
a culture of inclusion and sense of place in Goodman and that this
has been strongly reflected in the Group’s performance over many
years and particularly through COVID-19. While assessment is
continual, the Code of Conduct is a gate to an individual’s eligibility
to receive a STI and LTI at the time of assessment. The Board
believes that this is an absolute requirement and hence applying
a fixed percentage reduction to the measure is less effective.
The proportional impact of this measure on STI can be anything
from 0% to 100%, as any breach of the Code can have levels
of severity ranging from cessation of employment to minor
performance issues which can be managed and rectified and
may require varying levels of financial impact, training and/or
personal development.
46
Annual Report 2020
2.4 LTI PARAMETERS
The LTIP is an equity plan whose rewards are at risk. It is open to all permanent employees to create alignment with the interests
of Securityholders over the long term.
+
+
No value is derived from LTI unless minimum cumulative performance hurdles of operating EPS and relative TSR are met
or exceeded, and performance rights have no entitlement to income or assets until they vest.
If performance achieves or exceeds long-term targets and performance rights vest, LTI represents the majority of remuneration
for executive KMP and becomes a material component of remuneration for all participating employees.
Questions (in relation to all grants including FY21)
Who is eligible
to participate?
What is the form
of the award?
What is the
maximum LTI
participants
may earn?
All full-time and part-time permanent employees are eligible to participate in the LTIP.
The LTIP awards performance rights linked to the underlying ASX listed securities. The performance rights do not
receive distributions or have any right to income or assets until vesting.
When considering the overall size of LTI awards, the Board also considers the number of securities that could vest and
the associated impact on the operating EPS growth. Performance rights issued under the LTIP are capped at 5% of
issued capital with vesting of approximately 1% per annum, assuming all hurdles are met and all employees remain
employed. The Board considers the performance of the Group in comparison with the comparator group, the amount
of overall operating profit, the competitive nature of the global labour markets where we operate and the value of the
team in the local and global marketplace, as appropriate.
How is the number
of rights determined?
The number of rights is determined by dividing the LTI award amount by the face value of the Goodman security price
(as at the most recent 30 June) rounded to the nearest (lower) 10,000.
What are the
performance
measures?
Behaviour in accordance with core values is an absolute requirement for the granting of performance rights and
a minimum hurdle for LTI awards to vest as continued employment is a pre-condition.
The Board believes that the commercial decisions Goodman makes in fulfilment of its overall financial objectives
are best reflected in two key indicators: operating EPS and TSR (relative to the S&P/ASX 100).
Operating EPS is a critical measure of long-term global performance of the operations (see section 2.4.1).
The hurdles are set to be competitive and challenging relative to external and internal historical and prospective
reference points (see section 2.4.2).
TSR provides an effective check against increasing risk practices within the Group i.e. the security price to earnings
multiple will reflect the perceived risk in the Group in achieving operating EPS targets.
Focus on LTI is an efficient way of rewarding sustained performance and retaining talent.
What is the weighting?
75% operating EPS hurdle
25% relative TSR hurdle
What is the
performance period?
Both operating EPS and relative TSR performance are tested over three financial years starting from 1 July in the year the
grant was made. Operating EPS growth is assessed in the third year relative to the year preceding the year of the grant.
How do the LTIP
awards vest?
Is there
malus/clawback?
What happens
to LTIP awards
upon termination?
What rights are
attached to the
performance rights?
KMP equity holding
Subject to meeting performance hurdles, vesting occurs in equal tranches shortly after the end of years three,
four and five, provided participants remain employed by the Group.
Subject to immediate forfeiture in circumstances where employees are dismissed for cause without notice
(e.g. fraud or serious misconduct). LTI will also be forfeited where employees cease to be employed, unless special
circumstances exist.
Performance rights lapse upon the employee leaving Goodman, except in special circumstances (e.g. where
employees leave the Group with good leaver status due to redundancy or personal circumstances or due to permanent
disablement or death).
Performance rights have no Securityholder rights prior to vesting (e.g. distributions, voting, rights issue participation).
There is no specific requirement for executive KMP to hold a minimum value of Goodman equity. Goodman’s
remuneration structure includes significant emphasis on performance based remuneration in equity. The result is that
over time, there is significantly more alignment and exposure to Goodman’s performance through equity than at other
ASX listed entities.
47
Goodman Group
Directors’ report
Remuneration report – audited (continued)
Questions specific to the intended FY21 grant
What are the vesting
conditions for FY21 grants?
Operating EPS tested (75% of grant)
Relative TSR tested (25% of grant)
Can the hurdles be adjusted?
No
Questions specific to the FY20 grant
What are the vesting
conditions for FY20 grants?
The Board has set an operating EPS
performance hurdle of growing operating EPS
from the FY20 result of 57.5 cents to between
68.5 cents (Threshold level) and 74.5 cents
(Upper level) in FY23. Vesting of 25% of the
operating EPS portion occurs upon satisfying
testing conditions at the Threshold level with
a sliding scale up to 100% at the Upper level.
The range is equivalent to between 6% and
9% Compound Annual Growth Rate (CAGR) in
operating EPS or approximately 19% to 30%
cumulatively over the three year testing period.
TSR awards are subject to achievement of cumulative
TSR relative to the S&P/ASX 100 over a three year period:
–
50% of awards vest for performance at the
51st percentile
Awards vest on a sliding scale between 50% and
100% for performance between the 51st and the
76th percentile
100% of awards vest for performance at the 76th
percentile or above.
–
–
No
Operating EPS tested (75% of grant)
Relative TSR tested (25% of grant)
The Board set an operating EPS performance
hurdle of growing operating EPS from the FY19
result of 51.6 cents to between 61.4 cents
(Threshold level) and 66.8 cents (Upper level)
in FY22. Vesting of 25% of the operating EPS
portion occurs upon satisfying testing conditions
at the Threshold level with a sliding scale up to
100% at the Upper level. The range is equivalent
to between 6% and 9% CAGR in operating EPS
or approximately 19% to 30% cumulatively over
the three year testing period.
TSR awards are subject to achievement of cumulative
TSR relative to the S&P/ASX 100 over a three year period:
–
50% of awards vest for performance at the
51st percentile
Awards vest on a sliding scale between 50% and
100% for performance between the 51st and the
76th percentile
100% of awards vest for performance at the
76th percentile or above.
–
–
No
Can the hurdles be adjusted?
No
Questions specific to outstanding historic grants made between FY16 and FY19
Operating EPS tested (75% of grant)
Relative TSR tested (25% of grant)
Operating EPS awards are subject to
achievement of a cumulative operating EPS
hurdle, which is the combination of three years’
individual operating EPS hurdles. This ensures
that the appropriate balance between short and
long-term challenges is incorporated. With the
vast majority of remuneration through LTI, the
focus remains on sustainable performance.
Targets are disclosed to the market each year
and are equal to the forecast operating EPS.
For FY21, this is 62.7 cents as it relates to the
FY19 award. Performance conditions for the
FY16, FY17 and FY18 awards which have
outstanding tranches, have already been tested.
See Section 3.5.2 for details of testing results for
FY18 awards.
TSR awards are subject to achievement of cumulative
TSR relative to the S&P/ASX 100 over a three year period:
–
50% of awards vest for performance at the
51st percentile
Awards vest on a sliding scale between 50% and
100% for performance between the 51st and the
76th percentile
100% of awards vest for performance at the
76th percentile or above.
–
–
What are the vesting conditions
for prior grants (FY16 – FY19)
currently outstanding?
48
2.4.1 OPERATING EPS – LONG-TERM CASH FLOW
ALIGNMENT WITH VESTING OUTCOMES
The Group provides statutory profit disclosure in accordance with
Australian Accounting Standards, including all required specific
disclosures. The Board believes that managing the business, on
what is primarily a cash profit basis, is fundamental to long-term
resilience and is the strongest determinant of value creation over
time. That is the intent of the operating profit definition. The measure
has been consistently applied since being adopted in 2005.
+
+
+
+
Operating profit intentionally excludes non-cash measures.
In addition, in the past, the Group has excluded significant
realised gains (such as the urban renewal realisation gains)
where these were believed to be cyclical in nature and not
reflective of long-term earnings
The share based payments (SBP) expense reflects the
amortisation of the aggregated fair value applicable to
outstanding performance rights. It is disclosed and expensed
in the Group’s statutory accounts per the accounting
standards. The SBP expense is excluded from the Group’s
operating profit, like other non-cash items (such as
revaluations). It is also excluded from regional budgets, as the
expense is volatile and has no linkage to operational outcomes
Outcomes for employees through the LTIP and equity
performance are directly aligned with the long-term cash profit
growth of the business defined as operating EPS, which is
believed to be the real driver of performance
Operating EPS is a transparent driver of employee
behaviour providing a key link between the generation of
operational outcomes at an individual level and the overall
outcomes directly reflected in operating EPS, which drives
Securityholder value.
Importantly for Securityholders, the Board believes that SBP:
+
+
+
Have no impact on Securityholder value until they vest when
they dilute net tangible assets (NTA) and future earnings
Do not reflect the cost of the plan to Securityholders or the
true value to employees
Increase volatility and decrease earnings transparency on
a short-term basis depending on movements in security price,
subjective assessments and other valuation parameters.
(The Group’s SBP expense decreased 17% in FY20
compared to FY19).
Furthermore, any dilution to Securityholders through the potential
issuance of securities under the LTIP is allowed for in the operating
EPS assessment, as the weighted average number of securities
includes the securities on issue plus those performance rights that
at the start of each financial year had met the three year operating
EPS and TSR hurdles but had not yet vested. The Board considers
this to be conservative as prior to vesting, performance rights have
no entitlement to income or net assets, and therefore there is no
dilution to Securityholders.
+
+
The financial impact of the performance rights occurs
only when securities are issued, through the future operating
EPS dilution
Not all performance rights necessarily vest. This can only
occur if testing criteria are met and by extension, the Group’s
performance has achieved or exceeded performance criteria
Annual Report 2020
+
Following successful testing at year three, only one third of
the tested performance rights vest at that time. The remainder
have no rights until they vest, following the end of years four
and five.
2.4.2 OPERATING EPS HURDLES FOR
PROPOSED FY21 AWARDS
The operating EPS target range used here is for the purpose
of remuneration only, specifically the testing criteria for vesting
of performance rights. The range does not constitute earnings
guidance for the Group.
The Board has set an operating EPS performance hurdle for FY21
of growing operating EPS from the FY20 result of 57.5 cents to
between 68.7 cents (Threshold level) and 74.5 cents (Upper level)
in FY23. At the Threshold level, 25% satisfy the hurdle with a sliding
scale up to 100% satisfying the hurdle at the Upper level. This
range is equivalent to between 6% and 9% CAGR in operating
EPS or approximately 19% to 30% cumulative over the three year
testing period.
Despite market uncertainty, Goodman has committed to firm
operating EPS guidance for FY21. This is in an environment
where most of the ASX listed entities have withdrawn or
reduced guidance and are not expected to give guidance for
the year ahead.
The effective CAGR hurdle is the same as for FY20 awards, but
the Board believes the FY21 hurdle is significantly more challenging
given the current economic environment. The hurdle is set for
the entire period of the grant and hence performance must be
achieved regardless of changes to business conditions globally.
Management and other employees carry the risk associated with
external factors negatively impacting operating earnings and in the
Board’s view this risk has increased due to the unknown impacts of
the current pandemic.
The range has been set with particular reference to:
+
+
+
+
Analyst current consensus expectations of CAGR in operating
EPS of c5% for Goodman over three years compared with the
Threshold at 6% for 25% vesting and Upper level at 9% for
100% vesting
The range of potential real estate opportunities for the
Group globally, given Goodman’s risk parameters and
concentrated locations
The long-run historical performance of the Group
The global economic environment, noting the uncertainty
around COVID-19 induced economic malaise, that the current
rate of inflation in Australia and the major markets in which
Goodman operates globally is around 1% per annum and the
current 10 year rate of interest on government securities in
Australia and most major markets is below 1% per annum.
49
Goodman Group
Directors’ report
Remuneration report – audited (continued)
The Board also notes that:
+
The Group’s FY20 operating EPS growth (which sets the base year for hurdles) was 11.4% (ahead of original target at 9%)
–
–
The S&P/ASX 100 consensus forecast average of a -14.4% EPS decline for FY20
This significant reduction in FY20 EPS for the S&P/ASX 100 will likely give the appearance of higher future growth rates
(off the lower base). Despite Goodman’s resultant relatively higher starting point, the Group must still deliver significantly
higher growth than the S&P/ASX 100 consensus forecast average to achieve the operating EPS Threshold hurdle
(where only 25% of securities vest).
The hurdles are always set with the desire to achieve a sustainable long-term growth rate that is competitive with the market on a risk
adjusted basis, reflecting the low financial leverage of Goodman and other risk settings particularly in the current global pandemic and
economic environment. In the Board’s view, increasing hurdles to unsustainable levels would encourage riskier behaviour, inconsistent
with an acceptable risk tolerance and framework and expectations of Securityholders. This could potentially lead to lower quality earnings
and adversely affect the intent of the LTIP and ultimately Securityholder returns.
LTI hurdle period (estimated)
EPS (cents)
CAGR in EPS
Cumulative
growth in EPS
FY21 – FY231
Cumulative
growth in EPS
FY20 – FY232
S&P/ASX 100
S&P/ASX 200 A-REIT (excluding Goodman)
Goodman consensus forecast
Proposed Threshold level
Proposed Upper level
Economic indicators
10 year bond rate
Inflation rate
4.8%
0.3%
5.6%
6%
9%
15%
1%
17.8%
19%
30%
-1%
-3%
31%
n/a
n/a
68.5
74.5
Australia
(% per annum)
United States
(% per annum)
Europe
(% per annum)
0.9
2.2
0.6
0.6
-0.5
1.3
Sources: Nasdaq, FactSet
1. Three years to FY23 (FY20 base year)
2.
Four years to FY23 (FY19 base year), which incorporates FY20 operating EPS to highlight the impact of COVID-19 on performance. In order to meet the proposed
operating EPS Threshold and Upper levels in respect of the intended FY21 awards, Goodman would need to achieve cumulative operating EPS growth over the four
year period of 33% and 45%, respectively.
50
Annual Report 2020
3. REMUNERATION OUTCOMES AND THE LINK BETWEEN PERFORMANCE AND REWARD
Despite the significant headwinds caused by the global pandemic, the Group has recorded another year of material outperformance,
both of its external relative targets and its internal operational targets. FY20 ended amid significant market volatility due to COVID19
however, while Goodman’s security price has not been immune to the volatility in equity markets, its relative performance in FY20
continued to be significantly ahead of its peer groups, following 10 years of outperformance.
Importantly, all employees at Goodman are eligible to receive a proportion of their remuneration in performance rights which are deferred
for five years and require challenging operational targets to be met in order to be received. This results in all employees having an ongoing
significant exposure to Goodman equity performance which has ensured the strong alignment of employees with Securityholders.
This is a long-standing feature of Goodman’s remuneration approach and the Board believes it is an important factor in operating through
market cycles.
3.1 GROUP FY20 HIGHLIGHTS
Financial
Statutory profit of $1,504.1 million for Goodman and $4.8 billion for the combined Group and Partnerships
Operating profit of $1,060.2 million (up 12.5% on FY19)
Operating EPS of 57.5 cents (up 11.4% on FY19)
Maintained distribution of 30.0 cents per security
Net tangible assets (NTA) per security increased 9.4% to $5.84 per security
Operational property investment, management and development
High occupancy maintained at 97.5% and like for like net property income growth of 3%
Total AUM of $51.6 billion (up 12% on FY19)
Significant outperformance by the 15 Partnerships achieving average returns of 16.6%
Development WIP increased 59% to $6.5 billion and expected to grow in FY21, with higher pre-commitment levels
and 15 year weighted average lease term
People and culture
All permanent employees are equity owners through the LTIP
Significant community impact made by the Goodman Foundation, with contributions from the Foundation and Goodman
staff more than doubling to $13.7 million and Goodman people around the world volunteering 8,600 hours of their time
Implemented additional strategies to improve labour standards, improved fair work practices, improve ethical standards
in the business community and eradicate potential instances of modern-day slavery in the Group’s supply chains
LEAD safety performance metrics highlight further reduced safety non-conformances in Goodman’s projects and asset
management operations
99% of employees assessed as demonstrating Goodman values
Environmental
Implementation of Goodman’s 2030 sustainability strategy that focuses on the Group’s material environmental, social and
governance priorities and twelve pivotal sustainability targets
Goodman targeting net zero operational carbon emissions and 400MW of solar installations globally by 2025
Global climate risk assessment completed in accordance with Taskforce on Climate-Related Financial Disclosures (TCFD)
Goodman awarded the Global Sector Leader in the 2019 Global Real Estate Sustainability Benchmark (Developer – Industrial category)
Capital management
Maintained significant Group available liquidity at $2.8 billion, including $1.8 billion in cash
Significant business growth while maintaining low gearing at 7.5%
Group and Partnerships completed debt refinancing transactions totalling $3.1 billion
51
Goodman Group
Directors’ report
Remuneration report – audited (continued)
Over the past decade, the Group has established significant human capital, financial resources and a strategic real estate portfolio.
It has deliberately positioned its business to maximise cash flow resilience in varying market cycles, primarily through;
+
+
+
Concentration of the portfolio on logistics real estate in urban infill markets, where supply is limited and demand is driven by consumers
Deleveraging the Group’s balance sheet and retaining significant liquidity
Partnering with long-term capital to share risk and return over a significant globally diversified platform
This has included specific actions over successive years, including:
+
+
+
+
+
+
Significant reduction in financial leverage (gearing) over the last decade from 47.9% to 7.5%
Increased quality of the property portfolio through over $23 billion of asset sales since 2013 concentrating the portfolio in
predominantly urban infill markets and providing funding for the development of new buildings
Diversification of the Group’s sources of debt and tenor
Reduced operational risk through undertaking more development activity in Partnerships, which has reduced volatility of earnings
but increasing return on assets for the Group. The impact of increased development within the Partnerships has increased their
returns and the prospects for performance fees in the medium to longer term
Significant sales of assets that were reconfigured for higher and better residential use. On these transactions, the substantial profit
was not included in operating profit despite being cash realised gains as they were believed to be over and above the usual course
of business
Maintained a conservative distribution pay-out ratio to retain funding for growing development demand.
The resilience of the Group through this period, is in large part due to this strategic long-term thinking and incentivising employees through
equity linked to sustained operational performance over a long period.
3.2 FINANCIAL MEASURES
Performance measures
Operating profit ($M)
Operating EPS (cents)
Operating EPS growth (%)
Security price as at 30 June ($)
Distributions per security (cents)
TSR (%)
3 year TSR growth ($B)1
NTA per security ($)
Growth in NTA ($B)
Gearing (%)
AUM ($B)
Market capitalisation premium to NTA ($B)
FY15
653.5
FY16
714.5
FY17
776.0
FY18
845.9
FY19
FY20
942. 3
1,060.2
37.2
6.9
6.27
22.2
30.0
3.8
3.46
1.1
17.3
30.3
4.9
40.1
7.8
7.11
24.0
17.0
5.1
4.10
1.2
11.8
34.1
5.4
43.1
7.5
7.87
25.9
14.2
4.4
4.21
0.2
5.9
34.6
6.6
46.7
8.3
9.62
28.0
26.0
6.1
4.64
0.9
5.1
38.3
9.0
51.6
10.5
57.5
11.4
15.03
14.85
30.0
59.4
14.6
5.34
1.3
9.7
46.2
17.6
30.0
-0.4
13.5
5.84
1.0
7.5
51.6
16.5
1.
TSR is the increase in market capitalisation plus dividend and distribution, attributable to the respective financial year.
52
Annual Report 2020
The key financial metrics which are aligned with the Group’s strategy, long-term performance and STI and LTI programs for all employees
are operating EPS and relative TSR. CAGR in operating EPS over the past five years has been 9.1%, which has exceeded the forecasts
and therefore the hurdles. This has been achieved while at the same time reducing gearing.
Operating EPS growth and targets
%
C A G R 9 . 1 %
5 y e a r
10.5
11.4
9
7.8
7.5
8.3
7
6
6
6
Gearing
%
23.9
18.9
19.5
17.3
11.8
9.7
7.5
5.9
5.0
FY16
FY17
FY18
FY19
FY20
2012
2013
2014
2015
2016
2017
2018
2019
2020
SQUARE-FULL EPS growth target SQUARE-FULL EPS growth achieved
3.3 TOTAL RETURNS COMPARISON
Goodman was the largest global real estate fund management entity listed on the ASX at 30 June 2020 and one of the world’s largest
developers of logistics Real Estate.
The chart below show the Group has significantly outperformed the S&P/ASX 20, S&P/ASX 100 and S&P/ASX 200 AREIT indices over the
past one, three and five years.
Securityholder return relative performance
300
280
260
240
220
200
180
160
140
120
100
80
60
Jun 2014
Jun 2015
Jun 2016
Jun 2017
Jun 2018
Jun 2019
Jun 2020
SQUARE-FULL Goodman SQUARE-FULL S&P/ASX 20 index SQUARE-FULL S&P/ASX 100 index SQUARE-FULL S&P/ASX 200 A-REIT index
53
Goodman Group
Directors’ report
Remuneration report – audited (continued)
3.4 REMUNERATION MIX ALIGNMENT
ACROSS THE GROUP
The Board believes that the alignment between pay and
long-term performance is evidenced by the significant portion
of remuneration at risk for the Group CEO, the other executive
KMP and the whole organisation, that is in the form of LTI.
The portion of remuneration at-risk (FY20 STI and performance
rights that vested in FY20) as a proportion of total remuneration
for the Group CEO, the other executive KMP and the remainder
of employees, is illustrated in the charts below. They show strong
alignment between Securityholders and all employees as the
remuneration received as depicted below requires five years
of continued performance. Future remuneration outcomes will
depend on the Group achieving its hurdles over the long term
and the security price.
Vested remuneration is often considered by stakeholders as it
represents the value that is actually received by the KMP during the
year. It includes fixed base pay, STI and the value of performance
rights that actually vested during the year as a result of grants
made in prior periods, using the closing Goodman security price
on the day of vesting.
54
Group CEO FY20 remuneration
5%
95%
SQUARE-FULL STI and LTI SQUARE-FULL Fixed remuneration
Executive KMP (excluding Group CEO) FY20 remuneration
8%
92%
SQUARE-FULL STI and LTI SQUARE-FULL Fixed remuneration
All employees (excluding executive KMP) FY20 remuneration
32%
68%
SQUARE-FULL STI and LTI SQUARE-FULL Fixed remuneration
Annual Report 2020
3.5 GROUP PERFORMANCE AND REMUNERATION OUTCOMES
3.5.1 STI OUTCOMES
The Board has again agreed with the Group CEO that he will not participate in the STI award. In line with continued focus on sustained
long-term performance, all performance based remuneration relating to the Group CEO’s FY20 performance will be awarded in the
form of LTI.
Given the global nature of the Group’s operations the recommendations for each executive KMP are based on the Remuneration and
Nomination Committee’s review of several sources of market information relating to the individual’s role, region and global comparisons
and specific incentive schemes that apply in competitor organisations.
In FY20, the Board made some additional distinctions in the remuneration approach applied to individual KMP to further align them with
long-term performance. The executive KMP STI outcomes (excluding the Group CEO), on average, are down 27% in FY20, compared
with FY19, (averaging 63% of the maximum potential versus 89% in FY19). This reflects the Board’s decision to focus reward in the form
of LTI for the KMP whose roles have greater focus on overall Group strategy. The table below indicates the maximum possible STI and
the actual STI awarded.
It should be noted that based on the Group and individual performances in FY20, KMP were eligible for the maximum STI.
Test
Gate 1: Behaviour
Gate 2: Operating EPS –
FY20 operating EPS versus target
Metrics
Code of Conduct: Pass/Fail
Operating EPS growth:
Target 9% (56.3 cents)
Result
Pass
11.4% operating EPS growth
(57.5 cents)
Executive
Gregory Goodman
Nick Kurtis
Michael O’Sullivan
Nick Vrondas
Danny Peeters
Anthony Rozic
Year
FY20
FY19
FY20
FY19
FY20
FY19
FY20
FY19
FY20
FY19
FY20
FY19
STI
maximum
$M
Actual STI
awarded
$M
Cash
component
$M
Deferred
component
$M
Actual
STI % of
maximum
2.10
2.10
1.05
1.05
0.75
0.75
1.05
1.05
€M
0.88
0.88
US$M
1.05
1.05
–
–
–
1.00
0.40
0.65
0.60
0.95
€M
0.70
0.70
US$M
1.05
1.00
–
–
–
0.50
0.20
0.325
0.30
0.475
€M
0.35
0.35
US$M
0.525
0.50
–
–
–
0.50
0.20
0.325
0.30
0.475
€M
0.35
0.35
US$M
0.525
0.50
–
–
–
95
53
87
57
90
80
80
100
95
55
Goodman Group
Directors’ report
Remuneration report – audited (continued)
3.5.2 LTI OUTCOMES
Performance rights are granted on an annual basis, are tested over three years and vest in three equal tranches shortly after the third,
fourth and fifth anniversary of the grant. Testing as at 30 June 2020 was completed for the grants of performance rights made to
executive KMP in respect of executive KMP performance in FY17 (called FY18 awards). The FY18 awards had two hurdles: operating
EPS and a relative TSR, both measured over the three years ended 30 June 2020.
The mechanics of the testing are detailed in section 2.4. The first tranche of the FY18 awards will vest in September 2020, the second
tranche will vest in September 2021 and the third tranche in September 2022.
Operating EPS hurdle (75% weighting)
The operating EPS is calculated by dividing operating profit by the weighted average number of securities on issue adjusted to include
all performance rights which have passed the testing criteria, even though they are not yet vested (issued) to account for potential EPS
dilution. Operating EPS growth for the three year period to 30 June 2020 was 33.4%, compared to a cumulative three year target of
23.9%. For each year, the operating EPS was based on the weighted average number of securities on issue plus those performance
rights that at the start of the year had met the three year EPS and TSR hurdles but had not yet vested.
FY18
FY19
FY20
Cumulative
Target
45.7 cents
50.0 cents
56.3 cents
Actual
Outperformance
Outcome
46.7 cents
51.6 cents
57.5 cents
1.0 cent
1.6 cents
1.2 cents
3.8 cents
Pass
Pass
Pass
100%
As a result of achieving the operating EPS hurdle, a total of 11,775,723 equity settled performance rights will vest in September 2020,
September 2021 and September 2022. In addition, 2,273,813 cash settled performance rights will also vest. The Group may elect to issue
the equivalent number of new securities to raise funds to satisfy those obligations in the future.
Relative TSR (25% weighting)
TSR provides an effective check against increasing risk practices within the Group, as the price to earnings multiple will reflect the
perceived risk in the Group.
Relative TSR is measured against the S&P/ASX 100 peer group. Vesting applies a sliding scale:
+
+
0% vests up to and including the 50th percentile
Vesting of 50% starts at the 51st percentile on a sliding scale with 100% vesting at the 75th percentile.
Goodman posted a three year TSR of 103.4% to 30 June 2020, compared with the S&P/ASX 100 index performance of 17.1%.
This ranked Goodman in the 93rd percentile and consequently 100% of these performance rights vested.
FY17 LTIP grant – TSR hurdle1
1. Testing period for grant: 1 July 2017 to 30 June 2020.
GMG TSR1
103.4%
S&P/ASX 100
TSR1
17.1%
Percentile
93rd
Outcome
100%
As a result of achieving the relative TSR hurdle, a total of 3,925,241 equity settled performance rights will vest in September 2020,
September 2021 and September 2022. In addition, 757,938 cash settled performance rights will also vest. The Group may elect to issue
the equivalent number of new securities to raise funds to satisfy those obligations in the future.
56
Annual Report 2020
3.5.3 GROUP CEO
In FY20, the Board considered the following highlights when
assessing the Group CEO, Gregory Goodman:
+
+
+
+
+
+
+
+
+
+
+
+
Developed and drove a consistent global business strategy
across all markets to sustain the performance of the Group
despite significant challenges presented by COVID-19. The
Group has adapted to these challenges and continues
to outperform its own targets and the broader market
performance, retaining employees and increasing community
support and charitable programs.
Exceeded earnings guidance through the COVID-19 affected
period, while most companies on the ASX withdrew guidance
for FY20
Outperformed benchmark indices and comparator
companies in FY20 and delivered strong and sustained TSR
of 103.4% over three years and 170% over five years
Delivered:
–
–
–
–
Statutory profit of $1,504 million, driven by growth in
property values as a result of asset selection over the past
few years and operational activities such as development
Operating profit of $1,060 million, up 12.5% on FY19
Operating EPS of 57.5 cents, up 11.4% on FY19
NTA increased 9% to $5.84 per security
Decreased financial leverage to 7.5% and maintained strong
Group balance sheet with $2.8 billion of liquidity
Instrumental in significantly increasing sustainability initiatives
and programs for the Group. This has included establishing
a zero carbon emissions target for the Group by 2025,
increasing the 2025 target for solar PV capacity installed on
the rooftops of Goodman’s global portfolios from 100MW to
400MW and implementing compliance with TCFD
Fostered a culture that focused on delivering quality across all
aspects of the business: people, properties and service
Lead global internal programs to promote a strong culture
of inclusion, collaboration and conduct across the
organisation, underpinned by the long held principles in the
Group’s Code of Conduct, treating all stakeholders with
integrity, and accountability
Reinforced Goodman’s purpose aimed at understanding the
drivers of change and the needs of the Group’s customers
and all stakeholders to support their future success
Integrated strong risk management approaches globally
Lead the shift for all employees to increase alignment with
Securityholders through the LTIP as the preferred form
of remuneration by taking 100% of performance based
remuneration in performance rights
Increased Goodman Foundation commitments to enable it
to meet its $50 million 2030 social impact target. The Group
CEO drove:
–
Contributions of $13.7 million in FY20, including
$6.6 million for Australian communities affected by the
recent bushfires and $7.1 million contributed by the
Foundation and the Goodman team across a number
of Foundation programs.
–
Directed the Goodman team globally to contribute
8,600 hours of service through the year. The Goodman
Foundation focuses on children and youth, community
and its health, and food rescue and the environment.
Meal program and food rescue charities that have been
supported by Goodman since their inception have
provided over 130 million meals globally.
The charts below demonstrate the performance of the Group
and various key metrics relative to the Group CEO’s vested
remuneration outcomes in FY20 and prior years. They illustrate
significant alignment of Group CEO remuneration outcomes and
the key metrics for testing and vesting of performance rights.
Significant operating profit growth, security price growth and
consequently returns for Securityholders over the testing periods,
correlate with increased Group CEO remuneration over time. Given
the strong increase in the market price of securities between the
time of the grant and the time of vesting, the Group CEO (and all
beneficiaries of the LTIP) have participated in the performance
alongside all investors in the Group.
Importantly, the Group CEO’s vested remuneration as a proportion
of TSR (in $ billion) has trended lower over the past five years,
indicating that the Securityholders have experienced a more than
proportionate benefit from the Group’s performance relative to the
Group CEO.
Group CEO remuneration as a % of TSR (3 year rolling)
0.3
0.2
0.2
0.1
0.3
0.2
0.2
0.2
0.1
0.1
0.1
3.8
FY15
5.1
FY16
4.4
FY17
6.1
FY18
SQUARE-FULL Remuneration at grant date as a proportion of TSR (%)
SQUARE-FULL Vested remuneration as a proportion of TSR (%)
SQUARE-FULL Rolling three year TSR ($bn)
0.1
14.6
FY19
13.5
13.5
FY20
Group CEO remuneration and TSR (3 year rolling)
93
8
6.2
FY15
66
7
4.5
FY16
73
67
8
5.2
FY17
10
6.1
FY18
SQUARE-FULL Remuneration at grant date ($M)
SQUARE-FULL Vested remuneration ($M)
SQUARE-FULL TSR (%)
27
103
130
15
8.7
FY19
13.5
FY20
57
Goodman Group
Directors’ report
Remuneration report – audited (continued)
The table below includes awarded remuneration at the grant date and the vested remuneration over the past five years for the Group
CEO. The numbers in this table differ from the statutory disclosure in section 6 primarily due to the differences in the measurement and
timing of recognition in respect of performance rights granted under the LTIP and not the final vesting outcome. The below figures show
the base salary received by the Group CEO in the respective year plus the value of performance rights which vested during that year
at the closing price on the day the performance rights vested.
The table highlights:
+
+
+
No change in fixed remuneration over the period
The proportion of remuneration from fixed (cash) salary has continued to decline
Significant growth in the value of LTI from grant date to the vesting date due to the increase in security price
(on average an increase of 119% for grants vesting in FY20).
Base salary
STI
Value of LTI on grant date1
Value of LTI on vesting date
Total remuneration based on
LTI value at grant date1
Total vested remuneration based on LTI value at vesting date
Increase in LTI value due to security
price performance of the Group
Percentage growth in value of LTI during vesting period
FY15
$M
FY16
$M
FY17
$M
1.4
2.2
2.6
4.6
6.2
8.2
2.0
74%
1.4
–
3.1
5.2
4.5
6.6
2.1
66%
1.4
–
3.8
7.0
5.2
8.4
3.2
84%
FY18
$M
1.4
–
4.7
8.8
6.1
10.2
4.1
88%
FY19
$M
1.4
–
7.3
13.5
8.7
14.9
6.3
86%
FY20
$M
1.4
–
11.6
25.4
13.0
26.8
13.8
119%
1.
Value based on the security prices at the grant dates for the performance rights that vested in the financial year. This is so as to allow comparison of the security price
outperformance over the period between grant and vesting dates.
This remuneration disclosure indicates available remuneration resulting from the performance over the past three to five years. Grant
vesting outcomes have increased significantly compared to the initial grant value, due to consistent earnings growth and security price
outperformance of the Group.
The chart below illustrates the proportions of vesting outcomes due to grant value and value added since grant date:
Group CEO FY20 vested performance rights
Value at grant date ($M) Value at vesting date ($M)
Performance rights
11.6
Gain due to increased security price
25.4
58
Annual Report 2020
+
+
+
Developed a high-quality portfolio and strongly differentiated
brand position.
Strong leadership in embedding the Goodman values in
the behaviour of the team and encouraging teamwork
with respect
Building team capabilities and skill sets for complex
acquisitions and developments.
In FY20, the Board considered the following highlights when
assessing Group Head of Equities – Nick Kurtis
+
Formulated and implemented the Partnership’s strategies
to successfully deliver significant total returns. Partnership
investment portfolio delivered:
–
–
Annualised total return of 16.6% (based on the respective
Partnership reporting periods) for FY20
Average annualised total return of 16.4% over the past
five years
+
Delivered strong performance metrics including:
–
10% increase in divisional contribution to the Group’s
operating earnings to $511 million
– Performance fees of $207 million
–
Growth in external AUM up 12% to $48 billion across
15 Partnerships in 17 countries
Strong asset selection focus resulting in superior property
level returns
–
+
+
+
+
Fostered strong investor relationships and successful
communication of Partnership strategies and alignment of
interests with investors
Successfully executed continuation of several Partnerships
through the course of FY20
Raised $2.5 billion of additional equity to increase total
available liquidity in the Partnerships to $16.3 billion
Aligned the Group’s and Partnerships’ long-term investment
strategy to optimise financial outcomes.
3.5.4 OTHER EXECUTIVE KMP
In FY20, the Board considered the following highlights when
assessing Executive Director, Corporate – Danny Peeters
+
+
+
+
+
Successfully refined business operations in Continental
Europe and Brazil, playing a critical role in communicating
and reinforcing the Group’s strategy in these diverse regions
Delivered outperformance against all key performance and
financial parameters
Produced strong development results with very active
and profitable development pipeline, and c$800 million
completions in FY20 and continued to secure a strong
development pipeline in core locations moving into FY21
Drove further integration of the Brazil operation into the
global network
In Continental Europe, further positioning of the stabilised
portfolio towards infill, consumption-focused locations:
–
–
–
Current AUM at $8 billion
Occupancy of 98% and weighted average lease expiry
in excess of 4 years
Total Partnership investment return of 12.9%, while
maintaining conservative gearing
+
In Brazil, played a key role in overseeing the successful
second year of the Goodman Brazil Logistics Partnership
(GBLP)with strong leasing activity, resulting in portfolio
occupancy of 99%
–
–
Secured significant infill land banks for GBLP while
successfully progressing permit processes allowing start
of construction in FY21 on previously acquired sites
Provided guidance and leadership in a complex
acquisition and development environment effecting
on-target performance
+
Further embedded key controls and culture with the team
working cohesively and capability increasing.
In FY20, the Board considered the following highlights
when assessing Chief Executive Officer, North America and
Deputy Group Chief Executive Officer – Anthony Rozic
+
+
Critical role in communicating and reinforcing the Group’s
strategy in the region
Successfully oversaw strong growth in business operations
in North America:
– AUM grown to $4.3 billion
– Stabilised occupancy of 95%
– WALE of 7.2 years
–
Created a significant infill development pipeline in major
US gateway cities providing strong positioning for future
performance
Raised US$2.5 billion of equity and US$0.7 billion of debt
capacity to bring total available liquidity in the Partnership
to US$4.7 billion
–
+
Positioned the North American business over FY20 with a
number of developments pre-leased and replenishing the
land/value-add inventory. Emphasis on developing major infill
sites and value-add development skillsets
59
Goodman Group
Directors’ report
Remuneration report – audited (continued)
In FY20, the Board considered the following highlights when
assessing Group Chief Risk Officer – Michael O’Sullivan
In FY20, the Board considered the following highlights when
assessing Group Chief Financial Officer – Nick Vrondas
+
+
+
+
+
Established and refined risk frameworks with improved
outcomes across the Group and Partnerships, adapting to
the structural changes driving Goodman’s business including
nature and scale of development projects globally
Effectively navigated through the changing risk and work
environment that has arisen from COVID-19 while exceeding
targets and strategies set at the beginning of the financial year
Performed a critical role in commercial oversight and
assessment of globally complex transactions for the Group
in FY20. As part of this process, he was an active member
of Due Diligence Committee meetings for major transactions,
disposals and capital market transactions
Coordinated and refined reporting of Group Corporate
Services functions, specifically as they relate to the
identification and monitoring of non-financial risks with specific
reference to internal audit, safety, sustainability, insurance and
business continuity planning
Led a considerable volume of complex transaction activity
in FY20 for Group Risk through the Group Investment
Committee process including:
–
–
$4.5 billion in development commencements
and $2.4 billion of completions
$2.2 billion of asset sales within the Group
and to external parties globally
– $2.3 billion of global acquisitions
–
15 business plans and Partnership strategy
proposals across $51.6 billion of global assets.
+
+
+
+
+
+
Full oversight of balance sheet and profit and loss outcomes
for the Group and Partnerships
Successfully developed and played a key role in the execution
of the business strategy including the management and
allocation of capital that has delivered strong returns to
investors over several years, culminating in operating profit of
$1.06 billion and strong operating profit growth, representing
11.4% operating EPS growth in FY20
Delivered statutory and management financial reporting
across 17 countries and continued improvements in financial
reporting to facilitate active business management
Led operational improvements in relation to business
processes, IT and business intelligence applications
Strengthened monitoring, coordination and consolidation
of financial performance and financial position of regional
business units and divisions to achieve budgets and
financial plans
Refined the financial risk management practices through
variable market conditions, consistently reducing risk:
–
–
–
–
–
Enabled delivery of a strong capital management position
and compliance with financial risk management policies
of the Group and Partnerships
Established debt finance transactions in banking and
debt capital markets of $3.1 billion for the Group and its
Partnerships, adding term to maturity profile and diversity
of funding sources
Effective hedging of financial risk. Involved in and oversaw
derivative and hedge transactions of over $7.0 billion for
the Group and its Partnerships
Updated and improved various operational policies to
enhance compliance
Established a track record in the debt capital markets that
has facilitated strong support for Group issuances.
60
Annual Report 2020
3.6 LTI GRANTS IN FY21 IN RELATION TO FY20 PERFORMANCE
The remuneration awards made by the Board in respect of the executive KMP performance in FY20 comprise fixed remuneration,
STI and awards under the LTIP that will be made in FY21. As discussed in section 2.1, the performance rights will be tested at the end
of FY23. The vesting of those performance rights that achieve the performance hurdles will occur in equal tranches in September 2023,
September 2024 and September 2025. The minimum vesting percentage is 0% if hurdles are not met.
Over the past two years, the number of performance rights proposed to be awarded to the Group CEO have decreased 42%.
In determining its intended award of performance rights, the Board has considered the face value of the FY21 awards for each executive
KMP. This assumes 100% vesting and therefore represents the maximum number of potential securities. It does not consider the risk
of achieving the performance hurdles and that performance rights have no entitlement to distributions over the vesting period or the time
value of money.
Year of grant
Performance
rights proposed
GMG price
$
Face value of grant
$M
Executive
Gregory Goodman
Danny Peeters
Anthony Rozic
Nick Kurtis
Michael O’Sullivan
Nick Vrondas
FY21
FY20
FY21
FY20
FY21
FY20
FY21
FY20
FY21
FY20
FY21
FY20
950,000
900,000
380,000
350,000
400,000
380,000
490,000
380,000
340,000
300,000
420,000
380,000
14.85
15.03
14.85
15.03
14.85
15.03
14.85
15.03
14.85
15.03
14.85
15.03
The face values of grants have been determined using the Goodman security price at 30 June 2020 of $14.85 (FY20 grant face
value-based on the price at 30 June 2019 of $15.03).
14.1
13.5
5.6
5.3
5.9
5.7
7.3
5.7
5.0
4.5
6.2
5.7
61
Goodman Group
Directors’ report
Remuneration report – audited (continued)
4. EXECUTIVE KMP REMUNERATION (STATUTORY ANALYSIS)
Details of the nature and amount of each major element of the remuneration of each executive KMP, as calculated under
Australian Accounting Standards, are set out below:
Long-term
4
,
3
r
e
h
t
O
$
n
o
i
t
a
u
n
n
a
s
t
fi
e
n
e
b
-
r
e
p
u
S
$
l
a
t
o
T
$
17,169 1,413,498
21,003
17,437 1,402,667
20,532
18,010
705,663
21,003
s
u
n
o
B
2
)
I
T
S
(
$
–
–
–
Share
based
payments
e
c
n
a
m
r
o
f
r
e
P
5
)
I
T
L
(
s
t
h
g
i
r
$
3
r
e
h
t
O
$
l
a
t
o
T
$
24,841 10,534,692 11,994,033
24,773
11,352,787
12,800,759
Performance
related
%
s
a
I
T
L
d
n
a
I
T
S
%
s
a
I
T
L
l
a
t
o
t
f
o
%
%
87.8
88.7
87.8
88.7
12,414
3,740,638
4,479,717
83.5
83.5
18,010
708,989
20,532 1,000,000
12,380
3,909,037
5,650,938
86.9
69.2
16,500
503,775
21,003
400,000
(891)
2,493,876
3,417,763
16,500
489,795
20,532
650,000
3,190
2,487,470
3,650,987
16,500
652,320
21,003
600,000
12,421
3,783,979
5,069,723
16,500
701,695
20,532
950,000
12,387
3,964,207
5,648,821
84.7
85.9
86.5
87.0
73.0
68.1
74.6
70.2
€
–
–
€
593,400
584,009
€
–
–
€
700,000
700,000
€
–
–
€
€
2,070,939
3,364,339
2,172,415
3,456,424
82.4
83.1
61.6
62.9
s
u
n
o
B
2
)
I
T
S
(
$
–
–
–
–
–
–
–
–
€
–
–
1
s
e
e
f
d
n
a
y
r
a
l
a
S
$
FY20 1,396,329
FY19 1,385,230
Executive
KMP
Gregory
Goodman
Nick Kurtis FY20
687,653
FY19
690,979
FY20
487,275
FY19
473,295
FY20
635,820
FY19
685,195
€
FY20
593,400
FY19
584,009
Michael
O’Sullivan
Nick
Vrondas
Danny
Peeters6
Anthony
Rozic7
US$
US$
US$
US$
US$
US$
US$
US$
US$
FY20
680,039
FY19
691,821
–
–
170,587
850,626
14,102 1,050,000
14,766
2,548,576
4,478,070
80.4
56.9
12,880
704,701
14,683 1,000,000
65,786
2,803,908
4,589,078
82.9
61.1
The footnotes for this table are set out on the following page.
62
Executive KMP are engaged under written employment contracts
until notice is given by either Goodman or the executive KMP.
Notice periods are for six months except for Gregory Goodman
and Danny Peeters for whom the period is 12 months.
Danny Peeters provides his services through a management
company, DPCON Bvba.
Footnotes to the executive KMP remuneration table
1.
2.
3.
4.
5.
6.
7.
Salary and fees represent the amounts due under the terms of executives’
service contracts and include movements in annual leave provisions.
Executives’ bonus (STI) awards are paid in two instalments: 50% on finalisation
of Goodman’s financial statements and 50% 12 months later. Under Australian
Accounting Standards, this means the entire bonus award is considered
as a long-term benefit with regard to the disclosure of individual executive’s
remuneration. No bonuses were forfeited during the financial year.
Other includes reportable fringe benefits, car parking and changes in long
service leave provisions.
During the period, the Board agreed certain tax equalisation arrangements
with Anthony Rozic in connection with his employment arrangements in the
United States and Australia to ensure that he was no better or worse off. The
Board agreed to pay additional tax related amounts of US$150,005 relating
to the period prior to 1 January 2019. These amounts were on top of his
Australian tax obligations for which he remained exclusively responsible.
The Board also advanced under an interest free loan, double-tax amounts
for which Foreign Income Tax Offsets from the Australian Taxation Office will
be used to repay the advances. At 1 July 2019, the advances amounted to
$nil and at 30 June 2020 equalled US$503,729, the maximum during the
period. The amount of interest that would have been payable if charged on an
arms-length basis during the period would have been $8,490. The additional
tax related amount and the notional interest amount have been included in
Anthony Rozic’s statutory remuneration for FY20 (Other remuneration).
No other executive KMP received a loan from the Group during the current or
prior financial years.
Performance rights are an LTI and in accordance with Australian Accounting
Standards: the values of the awards are determined using option pricing
models and amortised in the income statement over the vesting periods.
The determination of the values of the performance rights that are subject
to the operating EPS hurdles also reflect an assessment of the probability
of the hurdles being met.
The remuneration of Danny Peeters is disclosed in Euros, the currency in
which his base remuneration and STI are determined. The value attributed to
his performance rights is translated from Australian dollars at the weighted
average rate for the relevant financial year.
The remuneration of Anthony Rozic is disclosed in US dollars, the currency
in which his base remuneration and STI are determined. The value attributed
to his performance rights is translated from Australian dollars at the weighted
average rate for the relevant financial year.
Annual Report 2020
5. NON-EXECUTIVE DIRECTOR
REMUNERATION
5.1 KEY ELEMENTS OF THE NON-EXECUTIVE
DIRECTOR REMUNERATION POLICY
–
The policy is structured to ensure independence of judgement
in the performance of their duties.
– Non-Executive Directors receive fixed fees for Board membership
and additional fees for membership of committees.
–
–
–
The fees consider the size and scope of Goodman’s activities and
the responsibilities and experience of the Directors. Periodically,
these fees are benchmarked against data for comparable entities
provided by external advisers.
As approved by Securityholders at the 2006 Annual General
Meeting, total remuneration (including superannuation) payable
by Goodman to all Non-Executive Directors in aggregate must
not exceed $2.5 million per annum. For the current financial year,
total Non-Executive Directors’ remuneration was $2.3 million
(2019: $2.1 million).
The increase in Non-Executive Director fees compared to the prior
financial year was due to the change in composition of the Board.
There have been no changes to the Board and committee annual
fees since 1 January 2018.
– Non-Executive Directors are not entitled to participate in any
STI or LTI schemes as they may be perceived to create a bias
when overseeing executive decision making.
–
The Board has a policy, set out in the Directors’ Securities
Acquisition Plan, for Non-Executive Directors to accumulate a
significant long-term holding of Goodman securities so that they
have an alignment of interests with those of Securityholders.
Under the policy, each Non-Executive Director is required to
acquire securities such that their holding is equal in value to twice
their annual base fees. The value of securities for this purpose
equals the higher of purchase cost or market value at the end of
each financial year. This holding may be acquired at any time but
where not held at the beginning of a financial year, the policy is for
25% of base fees (net of tax) during the financial year to be applied
to the on-market purchase of securities.
63
Goodman Group
Directors’ report
Remuneration report – audited (continued)
5.2 BOARD AND COMMITTEE ANNUAL FEES
Chairman
Member
Board
$
625,000
230,000
Audit
Committee
$
50,000
25,000
Risk and Compliance
Committee
$
Remuneration and
Nomination Committee
$
40,000
25,000
40,000
25,000
Total
$
625,000
625,000
255,000
46,235
305,000
305,000
21,250
–
295,000
295,000
380,357
379,384
–
105,856
280,000
280,000
HK$
625,000
625,000
5.3 NON-EXECUTIVE DIRECTORS’ REMUNERATION (STATUTORY ANALYSIS)
Details of the nature and amount of each major element of the remuneration of Non-Executive Directors, as calculated under
Australian Accounting Standards, are set out below:
Non-Executive Directors – GL and GFML
Salary and fees
$
Superannuation benefits
$
Ian Ferrier1
Christopher Green2
Stephen Johns
Mark Johnson3
Rebecca McGrath
Phillip Pryke4
Jim Sloman5
Penny Winn
Non-Executive Director – GLHK
David Collins6
FY20
FY19
FY20
FY19
FY20
FY19
FY20
FY19
FY20
FY19
FY20
FY19
FY20
FY19
FY20
FY19
FY20
FY19
603,997
604,469
255,000
43,155
283,997
284,469
19,500
–
273,997
274,469
359,354
358,853
–
97,301
258,997
259,469
HK$
625,000
625,000
21,003
20,531
–
3,080
21,003
20,531
1,750
–
21,003
20,531
21,003
20,531
–
8,555
21,003
20,531
HK$
–
–
1.
Ian Ferrier does not receive any additional Board committee fees.
2. Christopher Green was appointed as a Director on 28 April 2019.
3. Mark Johnson was appointed as a Director on 1 June 2020.
4.
Salary and fees for Phillip Pryke included an amount of A$85,357 (NZ$90,000) (2019: A$84,384 (NZ$90,000)) due in respect of his role on the board and audit
committee of Goodman (NZ) Limited, the manager of Goodman Property Trust.
5. Jim Sloman retired as a Director on 15 November 2018.
6. David Collins is a director of GLHK and his director fees are disclosed in Hong Kong dollars.
64
Annual Report 2020
6. OTHER REMUNERATION DISCLOSURES
6.1 MOVEMENTS IN PERFORMANCE RIGHTS HELD BY EXECUTIVE KMP
The movements in the number of performance rights during FY20 are summarised as follows:
Executive Directors
Gregory Goodman
Danny Peeters
Anthony Rozic
Other executives
Nick Kurtis
Michael O’Sullivan
Nick Vrondas
Year
FY20
FY19
FY20
FY19
FY20
FY19
FY20
FY19
FY20
FY19
FY20
FY19
Held at the start
of the year
Granted as
compensation
Vested
Forfeited
Held at the end
of the year
7,231,827
6,962,073
2,158,413
2,064,458
2,470,996
2,394,624
2,568,495
2,544,623
1,607,018
1,568,509
2,603,412
2,547,878
900,000
1,600,000
350,000
550,000
380,000
600,000
380,000
600,000
300,000
400,000
380,000
600,000
(1,781,827)
(1,280,248)
(512,163)
(444,795)
(609,330)
(508,628)
(658,079)
(557,378)
(403,268)
(352,743)
(659,662)
(525,716)
–
(49,998)
–
(11,250)
–
(15,000)
–
(18,750)
–
(8,748)
–
(18,750)
6,350,000
7,231,827
1,996,250
2,158,413
2,241,666
2,470,996
2,290,416
2,568,495
1,503,750
1,607,018
2,323,750
2,603,412
65
Goodman Group
Directors’ report
Remuneration report – audited (continued)
6.2 ANALYSIS OF PERFORMANCE RIGHTS HELD BY EXECUTIVE KMP
Details of the awards of performance rights under the LTIP granted by Goodman as compensation to the executive KMP are set out in the
following tables:
Executive
Directors
Gregory
Goodman
e
c
n
a
m
r
o
f
r
e
p
e
t
a
D
d
e
t
n
a
r
g
s
t
h
g
i
r
1
t
h
g
i
r
e
c
n
a
m
r
o
f
r
e
p
l
r
e
p
e
u
a
v
r
i
a
F
f
o
e
u
a
v
l
l
a
t
o
$ T
1
d
e
t
n
a
r
g
s
t
h
g
i
r
e
c
n
a
m
r
o
f
r
e
p
r
a
e
Y
s
r
a
e
y
r
o
i
r
p
n
i
2
r
a
e
y
e
h
t
n
i
d
e
t
s
e
$ V
d
e
t
s
e
% V
d
e
t
i
e
f
r
o
% F
f
o
e
u
a
% V
l
d
e
t
n
a
r
g
s
t
h
g
i
r
e
c
n
a
m
r
o
f
r
e
p
f
o
r
e
b
m
u
N
900,000
20 Nov 2019
FY20
11.48
10,332,000
1,600,000
15 Nov 2018
1,600,000
16 Nov 2017
2,400,000
30 Sep 2016
FY19
FY18
FY17
8.72
13,952,000
6.70
10,720,000
5.64 13,536,000
–
–
–
–
2,000,000
25 Nov 2015
FY16
995,476
20 Nov 2014
FY15
4.44
4.01
8,880,000
3,991,859
32.5
66.7
–
–
–
–
Danny Peeters
350,000
20 Nov 2019
FY20
11.48
4,018,000
550,000
15 Nov 2018
550,000
16 Nov 2017
600,000
30 Sep 2016
FY19
FY18
FY17
450,000
25 Nov 2015
FY16
497,738
20 Nov 2014
FY15
8.72
6.70
5.64
4.44
4.01
4,796,000
3,685,000
3,384,000
1,998,000
1,995,929
Anthony Rozic
380,000
20 Nov 2019
FY20
11.48
4,362,400
600,000
15 Nov 2018
600,000
16 Nov 2017
700,000
30 Sep 2016
FY19
FY18
FY17
600,000
25 Nov 2015
FY16
542,987
20 Nov 2014
FY15
8.72
6.70
5.64
4.44
4.01
5,232,000
4,020,000
3,948,000
2,664,000
2,177,378
–
–
–
–
32.5
66.7
–
–
–
–
32.5
66.7
Refer to page 67 for explanatory footnotes.
s
t
h
g
i
r
e
c
n
a
m
r
o
f
r
e
p
3
r
a
e
y
e
h
t
n
i
d
e
t
s
e
v
$
–
–
–
i
h
c
h
w
n
i
s
r
a
e
y
s
t
s
e
v
t
n
a
r
g
4
e
t
a
d
y
r
i
p
x
E
l
i
a
c
n
a
n
F
i
2023–2025
2 Sep 2024
2022–2024
1 Sep 2023
2021–2023
1 Sep 2022
11,408,000 2020–2022
1 Sep 2021
2.5
9,269,014
2019–2021
1 Sep 2020
–
–
–
–
–
4,731,839
2018–2020
2 Sep 2019
–
–
–
2023–2025
2 Sep 2024
2022–2024
1 Sep 2023
2021–2023
1 Sep 2022
2,852,000 2020–2022
1 Sep 2021
2.5
2,085,525
2019–2021
1 Sep 2020
–
–
–
–
–
2,365,919
2018–2020
2 Sep 2019
–
–
–
2023–2025
2 Sep 2024
2022–2024
1 Sep 2023
2021–2023
1 Sep 2022
3,327,343 2020–2022
1 Sep 2021
2.5
2,780,700
2019–2021
1 Sep 2020
–
2,580,003
2018–2020
2 Sep 2019
–
–
–
33.3
32.5
33.3
–
–
–
33.3
32.5
33.3
–
–
–
33.3
32.5
33.3
e
c
n
a
m
r
o
f
r
e
p
e
t
a
D
d
e
t
n
a
r
g
s
t
h
g
i
r
1
t
h
g
i
r
e
c
n
a
m
r
o
f
r
e
p
l
r
e
p
e
u
a
v
r
i
a
F
f
o
e
u
a
v
l
l
a
t
o
$ T
1
d
e
t
n
a
r
g
s
t
h
g
i
r
e
c
n
a
m
r
o
f
r
e
p
r
a
e
Y
s
r
a
e
y
r
o
i
r
p
n
i
2
r
a
e
y
e
h
t
n
i
d
e
t
s
e
$ V
d
e
t
s
e
% V
d
e
t
i
e
f
r
o
% F
f
o
e
u
a
% V
l
d
e
t
n
a
r
g
s
t
h
g
i
r
e
c
n
a
m
r
o
f
r
e
p
f
o
r
e
b
m
u
N
Other executives
Nick Kurtis
380,000
30 Sep 2019
FY20
11.26
4,278,800
600,000
28 Sep 2018
600,000
30 Sep 2017
700,000
30 Sep 2016
FY19
FY18
FY17
750,000
23 Sep 2015
FY16
542,987
9 Oct 2014
FY15
8.52
6.41
5.64
4.06
4.05
5,112,000
3,846,000
3,948,000
3,045,000
2,199,097
Michael O’Sullivan
300,000
30 Sep 2019
FY20
11.26
3,378,000
400,000
28 Sep 2018
390,000
30 Sep 2017
450,000
30 Sep 2016
FY19
FY18
FY17
350,000
23 Sep 2015
FY16
418,553
9 Oct 2014
FY15
8.52
6.41
5.64
4.06
4.05
3,408,000
2,499,900
2,538,000
1,421,000
1,695,140
–
–
–
–
32.5
66.7
–
–
–
–
32.5
66.7
–
–
–
33.3
32.5
33.3
–
–
–
33.3
32.5
33.3
66
s
t
h
g
i
r
e
c
n
a
m
r
o
f
r
e
p
3
r
a
e
y
e
h
t
n
i
d
e
t
s
e
v
$
–
–
–
i
h
c
h
w
n
i
s
r
a
e
y
s
t
s
e
v
t
n
a
r
g
4
e
t
a
d
y
r
i
p
x
E
l
i
a
c
n
a
n
F
i
2023–2025 2 Sep 2024
2022–2024 1 Sep 2023
2021–2023 1 Sep 2022
–
–
–
–
3,327,343
2020–2022 1 Sep 2021
2.5
3,475,875
2019–2021 1 Sep 2020
–
–
–
–
–
2,580,989
2018–2020 2 Sep 2019
–
–
–
2023–2025 2 Sep 2024
2022–2024 1 Sep 2023
2021–2023 1 Sep 2022
2,139,000
2020–2022 1 Sep 2021
2.5
1,622,089
2019–2021 1 Sep 2020
–
1,989,512
2018–2020 2 Sep 2019
e
c
n
a
m
r
o
f
r
e
p
e
t
a
D
d
e
t
n
a
r
g
s
t
h
g
i
r
1
t
h
g
i
r
e
c
n
a
m
r
o
f
r
e
p
l
r
e
p
e
u
a
v
r
i
a
F
f
o
e
u
a
v
l
l
a
t
o
$ T
1
d
e
t
n
a
r
g
s
t
h
g
i
r
e
c
n
a
m
r
o
f
r
e
p
r
a
e
Y
s
r
a
e
y
r
o
i
r
p
n
i
2
r
a
e
y
e
h
t
n
i
d
e
t
s
e
$ V
d
e
t
s
e
% V
d
e
t
i
e
f
r
o
% F
f
o
e
u
a
% V
l
d
e
t
n
a
r
g
s
t
h
g
i
r
e
c
n
a
m
r
o
f
r
e
p
f
o
r
e
b
m
u
N
Other executives
Nick Vrondas
380,000
30 Sep 2019
FY20
11.26
4,278,800
600,000
28 Sep 2018
600,000
30 Sep 2017
750,000
30 Sep 2016
FY19
FY18
FY17
750,000
23 Sep 2015
FY16
497,738
9 Oct 2014
FY15
8.52
6.41
5.64
4.06
4.05
5,112,000
3,846,000
4,230,000
3,045,000
2,015,839
–
–
–
–
32.5
66.7
–
–
–
33.3
32.5
33.3
–
–
–
–
Annual Report 2020
i
h
c
h
w
n
i
s
r
a
e
y
s
t
s
e
v
t
n
a
r
g
4
e
t
a
d
y
r
i
p
x
E
l
i
a
c
n
a
n
F
i
2023–2025 2 Sep 2024
2022–2024 1 Sep 2023
2021–2023 1 Sep 2022
s
t
h
g
i
r
e
c
n
a
m
r
o
f
r
e
p
3
r
a
e
y
e
h
t
n
i
d
e
t
s
e
v
$
–
–
–
3,565,000
2020–2022 1 Sep 2021
2.5
3,475,875
2019–2021 1 Sep 2020
–
2,365,905
2018–2020 2 Sep 2019
Footnotes to the analysis of executive KMP performance rights table
1.
The fair value was determined at grant date and calculated using a combination of the standard Black Scholes model with a continuous dividend/distribution yield
and a Monte Carlo model which simulated total returns for each of the ASX 100 entities and discounted the future value of any potential future vesting performance
rights to arrive at a present value.
As performance rights had an exercise price of $nil, Goodman securities were automatically issued to employees when the performance rights vested. Accordingly,
the percentage of performance rights that vested during the financial year equalled the percentage of securities issued during the financial year.
The value of performance rights vested was calculated using the closing price of a Goodman security on the ASX of $14.26 on 2 September 2019, the day the
performance rights vested.
As Goodman securities were automatically issued to employees when the performance rights vested, and lapsed where they failed to do so, the vesting date was
also deemed to be the expiry date.
2.
3.
4.
6.3 SECURITIES ISSUED ON EXERCISE OF PERFORMANCE RIGHTS
During FY20, Goodman issued 14,531,241 securities as a result of the vesting of performance rights. The amount paid by the employees
on exercise of these securities was $nil.
No performance rights have vested since the end of the financial year.
6.4 UNISSUED SECURITIES UNDER PERFORMANCE RIGHTS
At the date of this Directors’ report, unissued securities of Goodman under performance rights i.e. those performance rights that have not
yet vested, were:
Expiry date
Sep 2024
Sep 2023
Sep 2022
Sep 2021
Sep 2020
Exercise price $
Number of performance rights1
–
–
–
–
–
11,639,792
17,149,688
15,700,964
12,486,798
5,276,111
1.
The number of performance rights at the date of this Directors’ report is net of any rights forfeited and excludes 11,734,292 performance rights where the intention is
to cash settle.
67
Goodman Group
Directors’ report
Remuneration report – audited (continued)
6.5 MOVEMENT IN GOODMAN SECURITIES HELD
The movements during the financial year in the number of Goodman securities held, directly, indirectly or beneficially, by each KMP,
including their related parties, are set out below:
Held at
the start of
the year1
Securities issued
on vesting of
performance rights
Acquisitions
Disposals
Non-Executive Directors
– GL and GFML
Ian Ferrier
Christopher Green
(appointed 28 Apr 2019)
Stephen Johns
Mark Johnson
(appointed 1 Jun 2020)
Rebecca McGrath
Phillip Pryke
Penny Winn
Non Executive Directors – GLHK
David Collins
Year
FY20
FY19
FY20
FY19
FY20
FY19
FY20
FY19
FY20
FY19
FY20
FY19
FY20
FY19
FY20
FY19
Executive Directors – GL and GFML
Gregory Goodman
Danny Peeters
Anthony Rozic
Other executives
Nick Kurtis
Michael O’Sullivan
Nick Vrondas
FY20
FY19
FY20
FY19
FY20
FY19
FY20
FY19
FY20
FY19
FY20
FY19
202,922
195,974
78,996
78,996
25,000
15,000
–
–
39,540
36,191
100,880
100,880
24,700
24,700
5,000
–
38,102,720
38,122,472
1,591,385
1,796,590
1,109,460
1,109,460
407,140
660,352
464,967
764,967
–
404,417
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1,781,827
1,280,248
512,163
444,795
609,330
508,628
658,079
557,378
403,268
352,743
659,662
525,716
5,403
6,948
–
–
–
10,000
–
–
2,604
3,349
–
–
–
–
–
5,000
–
–
–
–
–
–
–
–
–
–
(41,000)
–
–
–
–
–
Held at
the end of
the year
208,325
202,922
78,996
78,996
25,000
25,000
–
–
42,144
39,540
59,880
100,880
24,700
24,700
5,000
5,000
5,000
(1,785,000)
38,104,547
–
–
–
–
–
–
–
–
–
–
–
(1,300,000)
38,102,720
–
(650,000)
(242,832)
(508,628)
(561,889)
(810,590)
(201,634)
(652,743)
(659,662)
(930,133)
2,103,548
1,591,385
1,475,958
1,109,460
503,330
407,140
666,601
464,967
–
–
1. Relates to securities held at the later of the start of the financial year or the date of becoming a KMP.
6.6 MOVEMENT IN GOODMAN PROPERTY
6.7 TRANSACTIONS WITH DIRECTORS,
TRUST SECURITIES
EXECUTIVES AND THEIR RELATED ENTITIES
During the year, Michael O’Sullivan disposed of his entire holding,
amounting to 349,650 units, in Goodman Property Trust (GMT).
GMT is listed on the New Zealand Exchange and Goodman owned
21.4% of the issued units at 30 June 2020.
Other than as disclosed elsewhere in the Remuneration report,
there were no other transactions with Directors, executives and their
related entities.
68
Annual Report 2020
Environmental regulations
Non-audit services
Goodman has policies and procedures to identify and
appropriately address environmental obligations that might arise
in respect of Goodman’s operations that are subject to significant
environmental laws and regulation. The Directors have determined
that Goodman has complied with those obligations during the
financial year and that there has not been any material breach.
Declaration by the Group Chief Executive Officer
and Group Chief Financial Officer
The Group Chief Executive Officer and Group Chief Financial
Officer declared in writing to the Board that, in their opinion, the
financial records of Goodman for the year ended 30 June 2020
have been properly maintained and the financial report for the year
ended 30 June 2020 complies with accounting standards and
presents a true and fair view of Goodman’s financial condition and
operational results. The Group Chief Executive Officer and Group
Chief Financial Officer confirmed that the above declaration was,
to the best of their knowledge and belief, founded on a sound
system of risk management and internal control and that the
system was operating effectively in all material respects in relation
to the financial reporting risks.
Disclosure in respect of any indemnification
and insurance of officers and auditors
Pursuant to the Constitution of Goodman, current and former
directors and officers of Goodman are entitled to be indemnified.
Deeds of Indemnity have been executed by Goodman, consistent
with the Constitution, in favour of each Director. The Deed
indemnifies each Director to the extent permitted by law for
liabilities (other than legal costs) incurred in their capacity as a
director of Goodman Limited or a controlled entity and, in respect
of legal costs, for liabilities incurred in defending or resisting civil or
criminal proceedings.
During the financial year, KPMG, Goodman and GIT’s auditor,
performed certain other services in addition to the audit and review
of the financial statements.
The Board has considered the non-audit services provided during
the financial year by the auditor and, in accordance with written
advice authorised by a resolution of the Audit Committee, resolved
that it is satisfied that the provision of those non-audit services
during the financial year by the auditor is compatible with, and did
not compromise, the auditor independence requirements of the
Corporations Act 2001 for the following reasons:
+
+
All non-audit services were subject to the corporate
governance procedures adopted by Goodman and have been
reviewed by the Audit Committee to determine they do not
impact the integrity and objectivity of the auditor
The non-audit services provided do not undermine the
general principles relating to auditor independence as set
out in APES 110 Code of Ethics for Professional Accountants,
as they did not involve reviewing or auditing the auditor’s own
work, acting in a management or decision making capacity
for Goodman, acting as an advocate for Goodman or jointly
sharing risks and rewards.
Details of the amounts paid to the auditor of Goodman and GIT,
KPMG and its network firms, for the audit and non-audit services
provided during the financial year are set out in note 26 to the
consolidated financial statements.
Lead auditor’s independence declaration
under section 307C of the Corporations Act 2001
The lead auditor’s independence declaration is set out on page 71
and forms part of this Directors’ report for the financial year.
Rounding
Goodman has insured to the extent permitted by law, current and
former directors and officers of Goodman in respect of liability
and legal expenses incurred in their capacity as a director or officer.
As it is prohibited under the terms of the contract of insurance,
the Directors have not included details of the nature of the liabilities
covered or the amount of the premiums paid.
Goodman and GIT are entities of a kind referred to in ASIC
Corporations (Rounding in Financial/Directors’ Reports) Instrument
2016/191. In accordance with that Instrument, amounts in this
Directors’ report and the consolidated financial statements have
been rounded to the nearest hundred thousand dollars, unless
otherwise stated.
The auditors of Goodman are not indemnified by Goodman
or covered in any way by this insurance in respect of the audit.
69
Goodman Group
Directors’ report
Events subsequent to balance date
There has not arisen in the interval between the end of the fi nancial
year and the date of this report any item, transaction or event of
a material and unusual nature likely, in the opinion of the Directors,
to affect signifi cantly the operations of Goodman, the results
of those operations, or the state of affairs of Goodman, in future
fi nancial years.
The Directors’ report is made in accordance with a resolution
of the Directors.
Ian Ferrier, AM
Independent Chairman
Gregory Goodman
Group Chief Executive Offi cer
Sydney, 13 August 2020
70
Lead auditor’s independence declaration
under section 307C of the Corporations Act 2001
Annual Report 2020
To: The directors of Goodman Limited and of Goodman Funds Management Limited, as Responsible Entity
for Goodman Industrial Trust
I declare that, to the best of my knowledge and belief, in relation to the audits of Goodman Limited (as the deemed parent presenting
the stapled security arrangement of the Goodman Group) and Goodman Industrial Trust for the fi nancial year ended 30 June 2020,
there have been:
no contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in relation to the audits; and
(i)
(ii) no contraventions of any applicable code of professional conduct in relation to the audits.
KPMG
Eileen Hoggett
Partner
Sydney, 13 August 2020
KPMG, an Australian partnership and a member fi rm of the KPMG network of independent member fi rms affi liated with KPMG International Cooperative
(“KPMG International”), a Swiss entity. Liability limited by a scheme approved under Professional Standards Legislation.
71
Goodman Group
Consolidated statements of financial position
as at 30 June 2020
Current assets
Cash and cash equivalents
Receivables
Contract assets
Inventories
Other financial assets
Assets held for sale
Total current assets
Non-current assets
Receivables
Inventories
Investment properties
Investments accounted for using the equity method
Deferred tax assets
Other financial assets
Property, plant and equipment
Intangible assets
Total non-current assets
Total assets
Current liabilities
Payables
Current tax payables
Interest bearing liabilities
Provisions
Lease liabilities
Other financial liabilities
Total current liabilities
Non-current liabilities
Payables
Interest bearing liabilities
Deferred tax liabilities
Provisions
Lease liabilities
Other financial liabilities
Total non-current liabilities
Total liabilities
Net assets
Equity attributable to Securityholders
Issued capital
Reserves
Retained earnings
Note
21(a)
7
8
6(b)
17
9
7
6(b)
6(b)
6(b)
5
17
12
14
10
5
16
11
13
17
10
16
5
11
13
17
20
Goodman
2020
$M
20191
$M
1,781.9
1,607.1
282.3
25.7
544.1
59.3
112.5
249.6
308.1
307.9
1.3
–
GIT
2020
$M
1,302.6
1,602.1
–
–
59.3
–
2019
$M
1,214.4
1,841.8
–
–
1.3
–
2,805.8
2,474.0
2,964.0
3,057.5
108.3
636.1
1,901.2
9,370.8
10.5
408.8
50.9
845.8
124.7
761.1
1,897.1
8,452.4
6.8
340.4
16.3
840.0
1,487.4
5.9
1,202.4
7,148.3
–
444.1
–
–
1,431.3
6.5
1,158.6
6,401.0
–
399.0
–
–
13,332.4
16,138.2
12,438.8
14,912.8
10,288.1
13,252.1
9,396.4
12,453.9
584.5
140.8
260.1
289.4
17.6
50.4
1,342.8
85.4
2,678.4
121.8
29.0
29.2
331.0
3,274.8
4,617.6
459.3
92.6
–
285.0
–
12.1
849.0
172.5
2,975.0
130.1
27.3
–
236.4
3,541.3
4,390.3
11,520.6
10,522.5
8,031.7
384.7
3,104.2
8,031.7
397.5
2,093.3
655.3
–
260.1
201.1
–
50.4
1,166.9
231.5
2,679.4
82.3
–
–
302.6
3,295.8
4,462.7
8,789.4
7,623.5
136.7
1,029.2
8,789.4
707.6
–
–
181.4
–
12.1
901.1
152.3
2,864.3
62.8
–
–
229.7
3,309.1
4,210.2
8,243.7
7,477.3
97.9
668.5
8,243.7
8,789.4
8,243.7
Total equity attributable to Securityholders
11,520.6
10,522.5
Comprising:
Total equity attributable to GL
Total equity attributable to other entities stapled to GL
Total equity attributable to Securityholders
22(a)
22(b)
1,278.0
10,242.6
11,520.6
936.2
9,586.3
10,522.5
1.
Goodman has adopted AASB 16 Leases with a date of initial application of 1 July 2019 using the modified retrospective approach. Under this approach, the comparative
information is not restated (refer note 1(d)).
The consolidated statements of financial position are to be read in conjunction with the accompanying notes.
72
Consolidated income statements
for the year ended 30 June 2020
Annual Report 2020
Revenue
Gross property income
Management income
Development income
Distributions from investments
Property and development expenses
Property expenses
Development expenses
Other income
Note
2
2
2
2
Goodman
2020
$M
115.9
511.2
2019
$M
114.6
469.7
882.6
1,134.3
1.2
–
GIT
2020
$M
67.9
–
0.3
9.9
2019
$M
80.2
–
31.5
2.9
1,510.9
1,718.6
78.1
114.6
(36.4)
(443.4)
(479.8)
(40.2)
(727.3)
(767.5)
(23.0)
(1.0)
(24.0)
36.5
9.1
825.5
0.1
(28.4)
(31.5)
(59.9)
142.3
8.0
816.6
4.9
Net gain from fair value adjustments on investment properties
Net gain on disposal of investment properties
Share of net results of equity accounted investments
Net gain on disposal of equity investments
6(e)
6(f)
2
45.2
54.5
146.8
15.3
1,022.2
1,132.5
0.6
12.6
Other expenses
Employee expenses
Share based payments expense
Administrative and other expenses
Profit before interest and tax
Net finance income/(expense)
Finance income
Finance expense
Net finance (expense)/income
Profit before income tax
Income tax expense
Profit for the year
Profit attributable to GL
Profit attributable to other entities stapled to GL
Profit for the year attributable to Securityholders
Basic profit per security (¢)
Diluted profit per security (¢)
2
2
15
15
1,122.5
1,307.2
871.2
971.8
(203.7)
(164.0)
(88.6)
(191.9)
(196.6)
(75.8)
(456.3)
(464.3)
–
–
(54.0)
(54.0)
–
–
(51.7)
(51.7)
1,697.3
1,794.0
871.3
974.8
13.2
(93.4)
(80.2)
46.2
(95.5)
(49.3)
133.1
(157.2)
(24.1)
167.4
(114.1)
53.3
1,617.1
1,744.7
847.2
1,028.1
5
(113.0)
(116.8)
(11.1)
(18.4)
1,504.1
1,627.9
836.1
1,009.7
22(a)
22(b)
3(a)
3(a)
315.9
242.8
1,188.2
1,385.1
1,504.1
1,627.9
82.4
80.0
89.9
87.3
The consolidated income statements are to be read in conjunction with the accompanying notes.
73
Goodman Group
Consolidated statements of comprehensive income
for the year ended 30 June 2020
Profit for the year
Other comprehensive income/(loss) for the year
Items that will not be reclassified to profit or loss
Actuarial (losses)/gains on defined benefit superannuation funds
Effect of foreign currency translation
Goodman
2020
$M
2019
$M
Note
GIT
2020
$M
2019
$M
1,504.1
1,627.9
836.1
1,009.7
(8.2)
0.2
(8.0)
3.2
(0.4)
2.8
–
–
–
–
–
–
Items that are or may be reclassified subsequently to profit or loss
Increase/(decrease) due to revaluation of other financial assets
–
–
(5.6)
1.8
Cash flow hedges:
– Change in value of financial instruments
Effect of foreign currency translation
Other comprehensive income/(loss) for the year, net of income tax
Total comprehensive income for the year
Total comprehensive income attributable to GL
Total comprehensive income attributable to other entities stapled to GL
(1.7)
(26.7)
(28.4)
(36.4)
(4.9)
169.6
164.7
167.5
(1.7)
32.5
25.2
25.2
(4.9)
87.5
84.4
84.4
1,467.7
1,795.4
861.3
1,094.1
22(a)
22(b)
281.7
293.7
1,186.0
1,501.7
Total comprehensive income for the year attributable to Securityholders
1,467.7
1,795.4
The consolidated statements of comprehensive income are to be read in conjunction with the accompanying notes.
74
Consolidated statements of changes in equity
for the year ended 30 June 2020
Attributable to Securityholders
Annual Report 2020
l
a
t
i
p
a
c
d
e
u
s
s
I
Note
$M
8,031.7
n
o
i
t
a
u
a
v
e
r
l
t
e
s
s
A
e
v
r
e
s
e
r
$M
(6.9)
e
v
r
e
s
e
r
e
g
d
e
h
w
o
fl
h
s
a
C
$M
1.5
e
v
r
e
s
e
r
n
o
i
t
a
s
n
a
r
t
l
y
c
n
e
r
r
u
c
n
g
e
r
o
F
i
n
o
i
t
a
s
n
e
p
m
o
c
e
e
y
o
p
m
E
l
e
v
r
e
s
e
r
t
fi
e
n
e
b
d
e
n
fi
e
D
l
a
i
r
a
u
t
c
a
s
d
n
u
f
e
v
r
e
s
e
r
s
e
s
s
o
l
s
e
v
r
e
s
e
r
l
a
t
o
T
i
s
g
n
n
r
a
e
d
e
n
a
t
e
R
i
l
a
t
o
T
$M
$M
$M
$M
$M
$M
45.3
171.2
(26.1)
185.0
957.0
9,173.7
Goodman
Balance at 1 July 2018
Total comprehensive income/(loss)
for the year
Profit for the year
Other comprehensive income/(loss)
Effect of foreign currency translation
Cash flow hedges:
– Change in value of financial instruments
Actuarial gains on defined benefit
superannuation funds
Total other comprehensive (loss)/(income)
for the year, net of income tax
Total comprehensive (loss)/income
for the year, net of income tax
Transfers
Contributions by and
distributions to owners
Dividends/distributions on stapled securities
19
Equity settled share based
payments transactions
Balance at 30 June 2019
Total comprehensive income/(loss) for
the year
Profit for the year
Other comprehensive income/(loss)
Effect of foreign currency translation
Cash flow hedges:
– Change in value of financial instruments
Actuarial losses on defined benefit
superannuation funds
Total other comprehensive (loss)/income
for the year, net of income tax
Total comprehensive (loss)/income
for the year, net of income tax
Transfers
Contributions by and
distributions to owners
Dividends/distributions on stapled securities
19
Purchase of securities for the LTIP
Equity settled share based
payments transactions
Balance at 30 June 2020
–
–
–
–
–
–
–
–
–
–
–
–
(0.2)
0.1
169.7
–
–
(4.9)
–
–
–
(0.2)
(4.8)
169.7
(0.2)
(4.8)
169.7
–
–
–
–
–
–
–
–
1,627.9
1,627.9
(0.4)
169.2
–
169.2
–
(4.9)
3.2
3.2
2.8
167.5
–
–
–
(4.9)
3.2
167.5
2.8
167.5
1,627.9 1,795.4
–
–
–
–
–
–
–
–
(52.6)
–
–
–
(52.6)
52.6
–
–
(544.2)
(544.2)
–
97.6
–
97.6
–
97.6
8,031.7
(7.1)
(3.3)
215.0
216.2
(23.3)
397.5 2,093.3 10,522.5
–
–
–
–
–
–
–
–
–
–
–
–
–
(0.1)
(0.2)
(26.4)
–
–
(1.7)
–
–
–
(0.1)
(1.9)
(26.4)
(0.1)
(1.9)
(26.4)
–
–
–
–
–
–
–
–
1,504.1 1,504.1
0.2
(26.5)
–
(26.5)
–
(1.7)
(8.2)
(8.2)
(8.0)
(36.4)
–
–
–
(1.7)
(8.2)
(36.4)
(8.0)
(36.4)
1,504.1
1,467.7
–
–
–
–
–
–
–
–
–
(55.3)
–
(55.3)
55.3
–
–
–
–
–
(19.1)
98.0
–
–
–
–
(548.5)
(548.5)
(19.1)
98.0
–
–
(19.1)
98.0
8,031.7
(7.2)
(5.2)
188.6
239.8
(31.3)
384.7 3,104.2 11,520.6
The consolidated statement of changes in equity is to be read in conjunction with the accompanying notes. For an analysis of equity
attributable to non-controlling interests, refer to note 22(b).
75
Goodman Group
Consolidated statements of changes in equity
for the year ended 30 June 2020
Attributable to Unitholders
l
a
t
i
p
a
c
d
e
u
s
s
I
Note
$M
7,381.3
n
o
i
t
a
u
a
v
e
r
l
t
e
s
s
A
e
v
r
e
s
e
r
$M
10.5
e
v
r
e
s
e
r
n
o
i
t
a
s
n
a
r
t
l
y
c
n
e
r
r
u
c
n
g
e
r
o
F
i
$M
e
v
r
e
s
e
r
e
g
d
e
h
w
o
fl
h
s
a
C
$M
n
o
i
t
a
s
n
e
p
m
o
c
e
e
y
o
p
m
E
l
e
v
r
e
s
e
r
s
e
v
r
e
s
e
r
l
a
t
o
T
i
s
g
n
n
r
a
e
d
e
n
a
t
e
R
i
l
a
t
o
T
$M
$M
$M
$M
1.5
(158.2)
129.3
(16.9)
112.3
7,476.7
GIT
Balance at 1 July 2018
Total comprehensive income/(loss) for the year
Profit for the year
Other comprehensive income/(loss)
Effect of foreign currency translation
Cash flow hedges:
– Change in value of financial instruments
Increase due to revaluation of other financial assets
Total other comprehensive income/(loss)
for the year, net of income tax
Total comprehensive income/(loss)
for the year, net of income tax
Contributions by and distributions to owners
Distributions on ordinary units
Issue of ordinary units under the LTIP
19
20(a)
Equity settled share based payments transactions
–
–
–
–
–
–
–
96.0
–
–
–
–
0.3
0.1
87.1
–
1.8
(4.9)
–
–
–
2.1
(4.8)
87.1
2.1
(4.8)
87.1
–
–
–
–
–
–
–
–
–
Total comprehensive income/(loss) for the year
Profit for the year
Other comprehensive income/(loss)
Effect of foreign currency translation
Cash flow hedges:
– Change in value of financial instruments
Decrease due to revaluation of other financial assets
Total other comprehensive (loss)/income
for the year, net of income tax
Total comprehensive (loss)/income
for the year, net of income tax
Contributions by and distributions to owners
Distributions on ordinary units
19
–
–
–
–
–
–
–
Issue of ordinary units for the LTIP
20(a)
146.2
Equity settled share based payments transactions
–
–
–
–
(5.6)
–
–
(0.2)
32.7
(1.7)
–
–
–
(5.6)
(1.9)
32.7
(5.6)
(1.9)
32.7
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1,009.7 1,009.7
87.5
(4.9)
1.8
84.4
–
–
–
–
87.5
(4.9)
1.8
84.4
84.4 1,009.7 1,094.1
–
–
(453.5)
(453.5)
–
–
96.0
30.4
30.4
30.4
–
836.1
836.1
32.5
(1.7)
(5.6)
25.2
–
–
–
–
32.5
(1.7)
(5.6)
25.2
25.2
836.1
861.3
–
–
(475.4)
(475.4)
–
–
146.2
13.6
13.6
13.6
Balance at 30 June 2019
7,477.3
12.6
(3.3)
(71.1)
159.7
97.9
668.5 8,243.7
Balance at 30 June 2020
7,623.5
7.0
(5.2)
(38.4)
173.3
136.7 1,029.2 8,789.4
The consolidated statement of changes in equity is to be read in conjunction with the accompanying notes.
76
Annual Report 2020
Consolidated cash flow statements
for the year ended 30 June 2020
Cash flows from operating activities
Property income received
Cash receipts from development activities
Other cash receipts from services provided
Property expenses paid
Payments for development activities
Other cash payments in the course of operations
Note
Goodman
2020
$M
2019
$M
GIT
2020
$M
2019
$M
130.2
121.0
64.3
1,031.4
1,181.3
692.1
(39.0)
(619.0)
(337.3)
351.8
(39.8)
(723.7)
(311.5)
–
–
(20.8)
(0.5)
(50.0)
85.5
34.7
–
(28.5)
(7.4)
(51.3)
Distributions received from equity investments, including Partnerships
462.2
365.4
244.0
228.5
Interest received
Finance costs paid
Net income taxes paid
Net cash provided by operating activities
Cash flows from investing activities
18.1
46.2
16.4
43.2
(105.5)
(125.8)
(114.9)
(121.9)
(76.3)
21(b)
1,156.9
(37.4)
827.5
(3.2)
(1.5)
135.3
181.3
Net proceeds from disposal of investment properties
212.3
75.2
Proceeds from disposal of controlled entities, net of cash disposed
Net proceeds from disposal of equity investments
Return of capital by Partnerships
Payments for investment properties
Payments for investments in Partnerships
Payments for plant and equipment
Net cash used in investing activities
Cash flows from financing activities
Net cash flows from loans to related parties
Proceeds from borrowings
Payments on borrowings and derivative financial instruments
Dividends and distributions paid
Payments of lease liabilities
Purchase of securities for the LTIP
Net cash (used in)/provided by financing activities
Net increase/(decrease) in cash held
Cash and cash equivalents at the beginning of the year
Effect of exchange rate fluctuations on cash held
95.6
0.7
428.4
(234.3)
(806.6)
(2.5)
–
123.4
–
(94.5)
(920.6)
(1.7)
2.4
–
0.2
415.0
(12.9)
243.2
–
115.6
–
(10.7)
(552.0)
(657.2)
–
–
(306.4)
(818.2)
(147.3)
(309.1)
(9.8)
50.0
(118.0)
(546.3)
(17.7)
(19.1)
(41.2)
12.6
(291.9)
(528.7)
–
–
511.7
(126.3)
50.0
(0.9)
(455.7)
–
–
–
(262.5)
(438.7)
–
–
(660.9)
(849.2)
105.1
(827.5)
189.6
(839.9)
93.1
(955.3)
1,607.1
2,406.8
1,214.4
2,129.7
(3.9)
40.2
(4.9)
40.0
Cash and cash equivalents at the end of the year
21(a)
1,792.8
1,607.1
1,302.6
1,214.4
The consolidated cash flow statements are to be read in conjunction with the accompanying notes.
Non-cash transactions are included in note 21(c).
77
Goodman Group
Notes to the consolidated financial statements
BASIS OF PREPARATION
This section sets out the general basis upon which
Goodman and GIT have prepared their financial statements
and information that is disclosed to comply with the
Australian Accounting Standards, Corporations Act 2001
or Corporations Regulations.
Specific accounting policies can be found in the section
to which they relate.
1 Basis of preparation
Goodman Limited and Goodman Industrial Trust are for profit
entities domiciled in Australia.
In accordance with ASIC Corporations (Rounding in Financial/
Directors’ Reports) Instrument 2016/191, amounts in these
consolidated financial statements have been rounded to the
nearest hundred thousand dollars, unless otherwise stated.
(c) Foreign currency translation
Functional and presentation currency
Items included in the consolidated financial statements of each
of the controlled entities are measured using the currency of
the primary economic environment in which the entity operates
(functional currency). The consolidated financial statements are
presented in Australian dollars, which is the Company’s and the
Trust’s functional and presentation currency.
(a) Statement of compliance
Transactions
Foreign currency transactions are translated to each entity’s
functional currency at rates approximating to the foreign exchange
rates ruling at the dates of the transactions. Amounts receivable
and payable in foreign currencies at the balance date are translated
at the rates of exchange ruling on that date. Resulting exchange
differences are recognised in the income statement.
Non-monetary assets and liabilities that are measured in terms
of historical cost are translated at rates of exchange applicable at
the date of the initial transaction. Non-monetary items which are
measured at fair value in a foreign currency are translated using the
exchange rates at the date when the fair value was determined.
Translation of controlled foreign operations
The assets and liabilities of controlled foreign operations are
translated into Australian dollars at foreign exchange rates ruling
at the balance date.
Revenue and expenses are translated at weighted average rates
for the financial year. Exchange differences arising on translation
are taken directly to the foreign currency translation reserve.
On cessation of operations in a foreign region, the cumulative
exchange differences relating to the operations in that region, that
have been included in the foreign currency translation reserve, are
reclassified to the income statement.
Exchange differences arising on monetary items that form part
of the net investment in a foreign operation are recognised in the
foreign currency translation reserve on consolidation.
These consolidated financial statements are general purpose
financial statements which have been prepared in accordance
with Australian Accounting Standards adopted by the Australian
Accounting Standards Board (AASB) and the Corporations Act
2001. International Financial Reporting Standards (IFRS) form the
basis of Australian Accounting Standards adopted by the AASB.
The consolidated financial statements also comply with IFRS.
The consolidated financial statements are presented in Australian
dollars and were authorised for issue by the Directors on
13 August 2020.
(b) Basis of preparation of the consolidated financial reports
Shares in the Company, units in the Trust and CDIs over shares
in GLHK are stapled to one another and are quoted as a single
security on the ASX. Australian Accounting Standards require
an acquirer to be identified and an in-substance acquisition to
be recognised. In relation to the stapling of the Company, the
Trust and GLHK, the Company is identified as having acquired
control over the assets of the Trust and GLHK. In the consolidated
statement of financial position of the Group, equity attributable to
the Trust and the CDIs over the shares of GLHK are presented as
non-controlling interests.
As permitted by the relief provided in ASIC Instrument 18-0353,
these financial statements present both the financial statements
and accompanying notes of Goodman and GIT. GLHK, which is
incorporated and domiciled in Hong Kong, prepares its financial
statements under Hong Kong Financial Reporting Standards
and the applicable requirements of the Hong Kong Companies
Ordinance and accordingly the financial statements of GLHK
have not been combined and included as adjacent columns in
this report. The financial statements of GLHK have been included
as an appendix to this report.
The consolidated financial statements are prepared on the
historical cost basis, subject to any impairment of assets, except
that the following assets and liabilities are stated at fair value:
Investment properties
Derivative financial instruments
Investments in unlisted securities
Liabilities for cash settled share based
payment arrangements.
+
+
+
+
78
Annual Report 2020
Exchange rates used
The following exchange rates are the main exchange rates used in translating foreign currency transactions, balances and financial
statements to Australian dollars:
Australian dollars (AUD) to
New Zealand dollars (NZD)
Hong Kong dollars (HKD)
Chinese yuan (CNY)
Japanese yen (JPY)
Euros (EUR)
British pounds sterling (GBP)
United States dollars (USD)
Brazilian real (BRL)
Weighted average
As at 30 June
2020
1.0544
5.2340
4.7200
2019
1.0665
5.6069
4.8819
72.6051
79.4634
0.6071
0.5329
0.6714
2.9963
0.6269
0.5527
0.7152
2.7616
2020
1.0694
5.3402
4.8688
74.2910
0.6128
0.5566
0.6890
3.7602
2019
1.0449
5.4761
4.8141
75.6340
0.6173
0.5523
0.7011
2.6880
(d) Changes in accounting policies
Goodman and GIT have adopted AASB 16 Leases, with a date of initial application of 1 July 2019.
AASB 16 Leases
AASB 16 replaces AASB 117 Leases and other existing guidance on leases. It introduces a single lessee accounting model and requires
a lessee to recognise assets and liabilities for all leases with a term of more than 12 months, unless the underlying asset is of low
value. A lessee is required to recognise a right of use asset representing its right to use the underlying leased asset and a lease liability
representing its obligations to make lease payments.
Goodman applied AASB 16 on 1 July 2019 using the modified retrospective approach. Under this approach, the cumulative effect of
initially applying this standard is recognised at the date of initial application. Comparative information has not been restated and continues
to be reported under AASB 117.
Certain of GIT’s Partnerships have leasehold investment properties that continue to be held at fair value. As a lessee, GIT does not directly
hold any material leases and therefore the new standard will not have a material impact.
Further details of the nature and effect of the changes to previous accounting policies and the transition options applied are set out below:
Accounting policy applicable from 1 July 2019
(i) Definition
AASB 16 defines a lease on the basis of whether a customer controls the use of an identified asset for a period of time, which may be
determined by a defined amount of use. Control is conveyed where the customer has both the right to direct the use of the identified asset
and to obtain substantially all of the economic benefits from that use.
Goodman applied the practical expedient to grandfather the definition of a lease on transition. This means that it will apply AASB 16 to all
contracts entered into before 1 July 2019 that had been identified as leases in accordance with the old leases accounting standard (AASB 117).
(ii) Lessee accounting
Goodman recognises a right of use asset and a lease liability at the lease commencement date. The right of use asset is initially measured
at cost plus any direct costs incurred and an estimate of costs to restore the underlying asset or the site on which it is located, less any
lease incentives received.
The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date,
discounted using the lessee’s incremental borrowing rate. After initial recognition, the lease liability is measured at amortised cost and
interest expense is calculated using the effective interest method. The lease liability is remeasured when there is a change in future lease
payments arising from a change in an index or rate, or there is a change arising from the reassessment of whether Goodman will be
reasonably certain to exercise an extension or termination option. The new standard will result in the gross up of assets and liabilities
where Goodman leases office buildings, motor vehicles, office equipment and development land classified as inventories.
79
Goodman Group
Notes to the consolidated financial statements
Basis of preparation (continued)
1 Basis of preparation (continued)
The right of use assets in respect of office buildings, motor vehicles and office equipment are depreciated using the straight-line method
over the period of the lease. Ground leases of development land that are classified as inventories are not depreciated but are assessed
at each reporting date for impairments to ensure they are recorded at the lower of cost and net realisable value.
(iii) Leasehold investment property
Under AASB 16, Goodman is required to account for all properties on leasehold land as investment properties when these properties
are held for the purpose of leasing to produce rental income and/or for capital appreciation. The adoption of AASB 16 does not have
a significant impact on the Group’s financial statements as the Group has previously applied AASB 140 Investment Property, to account
for all of its leasehold investment properties at fair value. These leasehold investment properties will continue to be carried at fair value.
(iv) Lessor accounting
The accounting policies applicable to Goodman as a lessor remain substantially unchanged from those under AASB 17.
(v) Transitional impact
The following table summarises the impact of the adoption of AASB 16 on Goodman’s consolidated statement of financial position
at 1 July 2019. The comparative information at 30 June 2019 has not been restated.
Impact of adopting AASB 16
At 30 Jun 2019
$M
Adjustments
$M
At 1 Jul 2019
$M
307.9
2,474.0
761.1
16.3
12,438.8
–
849.0
27.3
–
3,541.3
10,522.5
1.1
1.1
14.8
56.0
70.8
17.1
17.1
(3.4)
58.3
54.8
–
309.0
2,475.1
775.9
72.3
12,509.6
17.1
866.1
23.9
58.3
3,596.1
10,522.5
Goodman
Current assets
Inventories
Total current assets
Non-current assets
Inventories
Property, plant and equipment
Total non-current assets
Current liabilities
Lease liabilities
Total current liabilities
Non-current liabilities
Provisions
Lease liabilities
Total non-current liabilities
Net assets
80
Annual Report 2020
Inventories
The adjustment to inventories arises from leasehold land held for development.
Property, plant and equipment
The right of use assets associated with the leases of office buildings, motor vehicles and office equipment are presented as property,
plant and equipment.
Lease liabilities
The present value of future lease payments are presented as lease liabilities.
Operating lease commitments disclosed at 30 June 2019
Discounted using the incremental borrowing rate at 1 July 2019
Recognition exemption for short-term and low value assets
Lease liabilities recognised at 1 July 2019
Comprising:
Current lease liabilities
Non-current lease liabilities
Provisions
At 1 Jul 2019
$M
104.5
(26.1)
(3.0)
75.4
17.1
58.3
75.4
Goodman has applied the practical expedient and adjusted the right of use assets at the date of initial application by the amount provided
for onerous leases.
(vi) Impact on results for the period
After the initial recognition of right of use assets and lease liabilities at 1 July 2019, Goodman, as a lessee, is required to recognise interest
expense on the outstanding balance of the lease liability, and the depreciation of the right of use asset, instead of the previous policy of
recognising rental expenses incurred under operating leases on a straight-line basis over the lease term. The impact on the consolidated
income statement in the current period as a result of this change in policy is not significant compared to the results if AASB 117 had
continued to apply.
In the consolidated cash flow statements, Goodman, as a lessee, has classified the principal portion of lease payments within financing
activities and the interest portion within operating activities. Under AASB 117, the entire lease payment was classified within operating
activities. However, the change does not have a significant impact on the presentation of cash flows.
(e) Australian Accounting Standards issued but not yet effective
The Group has not applied any new standard or interpretation that is not yet effective for the current accounting period. None of the new
accounting standards or interpretations is expected to have a significant impact on the future results of the Group.
(f) Critical accounting estimates used in the preparation of the consolidated financial statements
The preparation of consolidated financial statements requires estimates and assumptions concerning the application of accounting
policies and the future to be made by Goodman. Estimates are continually evaluated and are based on historical experience and other
factors, including expectations of future events that are believed to be reasonable under the circumstances.
The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and
liabilities within the next financial year can be found in the following notes:
+
+
+
Note 6 – Property assets
Note 14 – Goodwill and intangible assets
Note 18 – Financial risk management.
The accounting impacts of revisions to estimates are recognised in the period in which the estimate is revised and in any future
periods affected.
81
Goodman Group
Notes to the consolidated financial statements
Basis of preparation (continued)
1 Basis of preparation (continued)
Measurement of fair values
RESULTS FOR THE YEAR
A number of Goodman’s accounting policies and disclosures
require the measurement of fair values, for both financial and
non-financial assets and liabilities.
The notes in this section focus on the significant items in the
income statement, and include the profit per security, analysis
of the results by operating segment and taxation details.
When measuring the fair value of an asset or a liability, Goodman
uses market observable data as far as possible. Fair values are
categorised into different levels in a fair value hierarchy and have
been defined as follows:
+
+
+
Level 1: quoted prices (unadjusted) in active markets for
identical assets or liabilities
Level 2: inputs other than quoted prices included within Level
1 that are observable for the asset or liability, either directly
(i.e. as prices) or indirectly (i.e. derived from prices)
Level 3: inputs for the asset or liability that are not based
on observable market data (unobservable inputs).
Further information about the assumptions made in measuring
fair values is included in the following notes:
+
+
Note 6 – Property assets
Note 18 – Financial risk management.
82
2 Profit before income tax
Gross property income
Gross property income comprises rental income under operating
leases (net of incentives provided) and amounts billed to customers
for outgoings (e.g. rates, levies, cleaning, security, etc.). Amounts
billed to customers for outgoings are a cost recovery for Goodman
and are recognised once the expense has been incurred.
The expense is included in property expenses.
Rental income under operating leases is recognised on a
straight-line basis over the term of the lease contract. Where
operating lease rental income is recognised relating to fixed
increases in rentals in future years, an asset is recognised. This
asset is a component of the relevant investment property carrying
amount. The cost of lease incentives provided to customers is
amortised on a straight-line basis over the life of the lease as a
reduction of gross property income.
Management and development income
The revenue from management and development activities is
measured based on the consideration specified in a contract with
a customer. Goodman recognises revenue when it transfers control
over a product or service to a customer.
Management income
Fee income derived from investment management and property
services is recognised and invoiced progressively as the services
are provided. Customers make payments usually either monthly
or quarterly in arrears.
Performance related management income generally relates
to portfolio performance fee income, which is recognised
progressively as the services are provided but only when the
income can be reliably measured and is highly probable of not
being reversed. These portfolio performance fees are typically
dependent on the overall returns of a Partnership relative to an
agreed benchmark return, assessed over the life of the Partnership,
which can vary from one year to seven years. The returns are
impacted by operational factors such as the quality and location
of the portfolio, active property management, rental income rates
and development activity but can also be significantly affected
by changes in global and local economic conditions. Accordingly,
portfolio performance fee revenue is only recognised towards the
end of the relevant assessment period, as prior to this revenue
recognition is not considered to be sufficiently certain.
In determining the amount of revenue that can be reliably measured,
management prepares a sensitivity analysis to understand the
impact of changes in asset valuations on the potential performance
fee at the assessment date. The assessment of revenue will depend
on the prevailing market conditions at the reporting date relative to
long-term averages and also the length of time until the assessment
date e.g. the longer the time period to assessment date, the
greater the impact of the sensitivity analysis. The potential portfolio
performance fee revenue is then recognised based on the length of
time from the start of the assessment period to the reporting date
as a proportion of the total assessment period. Where the income
is attributable to development activities that have occurred over the
performance fee period, then it is reported as development income;
otherwise, the income is reported as management income. The
Partnerships make payments in respect of portfolio performances
fees at the end of the performance periods, once the attainment of
the conditions has been verified and the amount of the fee has been
agreed by all parties.
Development income – disposal of inventories
The disposal of inventories is recognised at the point in time
when control over the property asset is transferred to the customer.
This will generally occur on transfer of legal title and payment in
full by the customer. The gain or loss on disposal of inventories
is calculated as the difference between the carrying amount
of the asset at the time of disposal and the proceeds on disposal
(less transaction costs) and is included in the income statement in
the period of disposal.
Development income – development management services
Fee income from development management services (including
master-planning, development management and overall project
management) is recognised progressively as the services are
provided in proportion to the stage of completion by reference
to costs. Payments are received in accordance with the
achievement of agreed milestones over the development period.
The development period can be up to 24 months for larger, more
complex projects.
Performance related development income includes income
associated with the returns from individual developments under the
Group’s management and performance fee income that relates to
development activity. Income in respect of individual developments
is recognised by Goodman on attainment of the performance
related conditions, which is when the income can be reliably
measured and is highly probable of not being reversed. These
amounts are paid by the Partnership when the amounts have
been measured and agreed. Income associated with development
activities as part of a portfolio assessment is recognised on the
same basis as outlined above in the management income section.
Development income – fixed price development contracts
Certain development activities are assessed as being fixed price
development contracts. This occurs when a signed contract exists,
either prior to the commencement of or during the development
phase, to acquire a development asset from Goodman on
completion. Revenue and expenses relating to these development
contracts are recognised in the income statement in proportion to
the stage of completion of the relevant contracts by reference to
costs. The payments may be on completion of the development
once legal title has been transferred. The development period can
be up to 24 months for larger, more complex projects.
Annual Report 2020
Net gain on disposal of investment properties
The disposal of an investment property is recognised at the
point in time when control over the property has been transferred
to the purchaser.
Employee expenses
Wages, salaries and annual leave
Wages and salaries, including non-monetary benefits, and
annual leave that are expected to be settled within 12 months
of the balance date represent present obligations resulting from
employees’ services provided to the balance date. These are
calculated at undiscounted amounts based on rates that are
expected to be paid as at balance date including related on-costs,
such as insurances and payroll tax.
Bonuses
A liability is recognised in other payables and accruals for bonuses
where there is a contractual obligation or where there is a past
practice that has created a constructive obligation. Liabilities for
bonuses are measured at the amounts expected to be paid,
including related on-costs, when they are settled.
Superannuation
Defined contribution funds
Obligations for contributions to defined contribution funds are
recognised as an expense as incurred.
Defined benefit funds
The net obligation in respect of defined benefit funds is
recognised in the statement of financial position and is calculated
separately for each plan by estimating the amount of future
benefit that employees have earned in the current and prior
periods, discounting that amount and deducting the fair value
of any plan assets. The calculation of defined benefit obligations
is performed annually by a qualified actuary using the projected
unit credit method. Remeasurements of the net defined benefit
liability, which comprise actuarial gains and losses and the return
on plan assets (excluding interest), are recognised immediately
in other comprehensive income. Net interest expense and other
expenses related to defined benefit plans are recognised in the
income statement.
83
Goodman Group
Notes to the consolidated financial statements
Results for the year (continued)
2 Profit before income tax (continued)
Profit before income tax has been arrived at after crediting/(charging) the following items:
Goodman
GIT
2020
$M
2019
$M
2020
$M
2019
$M
Gross property income
Rental income
Recovery of property outgoings
Gross property income
Management activities
Management services
Performance related income
Management income
Development activities
Income from disposal of inventories
Income from fixed price development contracts
Other development income, including development management
Net gain on disposal of special purpose development entities
Development income
Inventory cost of sales
Other development expenses
Development expenses
Disposal of equity investments
94.6
21.3
93.5
21.1
115.9
114.6
304.0
207.2
511.2
461.8
82.8
309.5
28.5
265.4
204.3
469.7
486.2
419.7
223.3
5.1
882.6
1,134.3
(329.8)
(113.6)
(343.0)
(384.3)
(443.4)
(727.3)
Net consideration from disposal of associates and JVs
Carrying value of associates and JVs disposed
Net gain on disposal of equity investments
6(f)
7.7
(7.1)
0.6
18.2
(5.6)
12.6
Employee expenses
Wages, salaries and on-costs
Annual and long service leave
Superannuation costs
Employee expenses
Share based payments expense
Equity settled share based payments expense
Cash settled share based payments expense
Other share based payments related costs
Share based payments expense
Amortisation and depreciation
(195.2)
(184.0)
(1.9)
(6.6)
(1.9)
(6.0)
(203.7)
(191.9)
(98.0)
(41.2)
(24.8)
(97.6)
(64.7)
(34.3)
(164.0)
(196.6)
(22.5)
(6.6)
53.6
14.3
67.9
–
–
–
63.7
16.5
80.2
–
–
–
0.3
31.5
–
–
–
0.3
(1.0)
–
(1.0)
0.1
–
0.1
–
–
–
–
–
–
–
–
–
–
–
–
31.5
(31.5)
–
(31.5)
4.9
–
4.9
–
–
–
–
–
–
–
–
–
84
Annual Report 2020
3 Profit per security
Basic profit per security of the Group is calculated by dividing the profit attributable to the Securityholders by the weighted average
number of securities outstanding during the year. Diluted profit per security is determined by adjusting the profit attributable to the
Securityholders and weighted average number of securities outstanding for all dilutive potential securities, which comprise performance
rights issued under the LTIP.
Goodman
Profit per security
Basic profit per security
Diluted profit per security
2020
¢
82.4
80.0
2019
¢
89.9
87.3
Profit after tax of $1,504.1 million (2019: $1,627.9 million) was used in calculating basic and diluted profit per security.
Weighted average number of securities used in calculating basic and diluted profit per security:
2020
2019
Number of securities
Weighted average number of securities used in calculating basic profit per security/share
1,826,031,065
1,811,689,652
Effect of performance rights on issue
54,173,117
52,360,737
Weighted average number of securities used in calculating diluted profit per security/share
1,880,204,182
1,864,050,389
The calculation of profit per security is not required for GIT.
Goodman Limited
Under Australian Accounting Standards, the issued units of the Trust and the CDIs over the shares of GLHK are presented as
non-controlling interests. As a consequence, the Directors are required to present a profit per share and a diluted profit per share
based on Goodman Limited’s consolidated result after tax but excluding the results attributable to the Trust and GLHK.
Profit per Goodman Limited share
Basic profit per Goodman Limited share
Diluted profit per Goodman Limited share
2020
¢
17.3
16.8
2019
¢
13.4
13.0
Profit after tax of $315.9 million (2019: $242.8 million) was used in calculating basic and diluted profit per Goodman Limited share.
85
Goodman Group
Notes to the consolidated financial statements
Results for the year (continued)
4 Segment reporting
An operating segment is a component of Goodman that engages
in business activities from which it may earn revenues and incur
expenses. Goodman reports the results and financial position
of its operating segments based on the internal reports regularly
reviewed by the Group Chief Executive Officer in order to assess
each segment’s performance and to allocate resources to them.
Operating segment information is reported on a geographic basis
and Goodman has determined that its operating segments are
Australia and New Zealand (reported on a combined basis), Asia
(Greater China and Japan), Continental Europe (primarily Germany
and France), the United Kingdom and the Americas (North America
and Brazil).
The activities and services undertaken by the operating
segments include:
+
+
+
Property investment, including both direct ownership and
cornerstone investments in Partnerships
Management activities, both fund and property management
Development activities, including development of directly
owned assets (predominantly disclosed as inventories) and
management of development activities for Partnerships.
The segment results that are reported to the Group Chief Executive
Officer are based on profit before net finance expense and income
tax expense, and also exclude non-cash items such as fair value
adjustments and impairments, corporate expenses and incentive
based remuneration. The assets allocated to each operating
segment primarily include inventories, investment properties and
the operating segment’s investments in Partnerships, but exclude
inter-entity funding, income tax receivables and corporate assets.
The liabilities allocated to each operating segment primarily
relate to trade and other payables associated with the operating
activities, but exclude interest bearing liabilities, derivative financial
instruments, provisions for distributions and corporate liabilities.
The accounting policies used to report segment information are
the same as those used to prepare the consolidated financial
statements of Goodman and GIT.
For the purpose of operating segment reporting, there are no
material intersegment revenues and costs.
Information regarding the operations of each reportable segment
is included on the following pages.
86
Annual Report 2020
Information about reportable segments
Goodman
Income statement
External revenues
Australia and
New Zealand
Asia
Continental
Europe
United
Kingdom
Americas
Total
2020
$M
2019
$M
2020
$M
2019
$M
2020
$M
2019
$M
2020
$M
2019
$M
2020
$M
2019
$M
2020
$M
2019
$M
Gross property income
105.6
104.4
0.1
1.7
–
6.7
159.6
150.4
246.2
184.5
88.0
121.4
9.7
2.3
1.6
2.1
0.5
0.2
115.9
114.6
15.1
11.3
511.2
469.7
Distributions from investments
–
–
–
–
1.2
–
–
–
–
–
1.2
–
Total external revenues
364.8
523.0
440.1
285.2
600.5
756.7
31.0
82.1
74.5
71.6 1,510.9 1,718.6
99.6
268.2
193.8
99.0
511.3
628.6
19.0
78.4
58.9
60.1
882.6 1,134.3
Management income
Development income
Analysis of external revenues
Revenue from contracts
with customers
Assets and services
transferred at a point in time
Assets and services
transferred over time
Other revenue
Rental income (excludes
outgoings recoveries)
11.5
150.5
18.6
22.0
494.4
318.0
4.5
70.3
–
0.7
529.0
561.5
266.1
286.7
421.5
261.6
104.9
434.5
17.0
10.2
74.0
70.7
883.5 1,063.7
Distributions from investments
–
–
87.2
85.8
–
–
1.6
–
–
1.2
4.2
–
9.5
–
1.6
–
0.5
0.2
97.2
93.4
–
–
1.2
–
Total external revenues
364.8
523.0
440.1
285.2
600.5
756.7
31.0
82.1
74.5
71.6 1,510.9 1,718.6
Reportable segment
profit/(loss) before tax
Share of net results of equity
accounted investments
435.8
476.0
477.7
330.9
282.3
324.8
20.9
(26.0)
102.5
89.2 1,319.2 1,194.9
384.7
489.2
394.3
370.5
98.3
86.0
14.8
21.7
130.1
165.1 1,022.2 1,132.5
Material non-cash items not included
in reportable segment profit before tax
Net gain from fair value adjustments
on investment properties
46.4
146.8
–
–
–
–
(1.2)
–
–
–
45.2
146.8
Statement of financial position
2020
$M
2019
$M
2020
$M
2019
$M
2020
$M
2019
$M
2020
$M
2019
$M
2020
$M
2019
$M
2020
$M
2019
$M
Reportable segment assets
5,854.1 5,357.1 3,345.3 2,870.8 2,310.2 2,221.5
891.8
763.5 2,122.8 2,277.4 14,524.2 13,490.3
Non-current assets
5,445.6 5,099.5 2,938.3 2,470.1 1,870.6 1,838.7
591.2
675.5 2,017.3 1,950.1 12,863.0 12,033.9
Included in reportable
segment assets are:
Investment properties
1,894.0 1,866.2
–
–
–
–
7.2
30.9
–
– 1,901.2 1,897.1
Investments accounted for
using the equity method
3,451.5 3,158.5 2,732.8 2,290.8
898.9
861.9
281.0
200.3 2,006.6 1,940.9 9,370.8 8,452.4
Reportable segment liabilities
137.1
164.9
205.9
164.9
101.6
75.5
77.9
86.6
109.5
90.9
632.0
582.8
87
Goodman Group
Notes to the consolidated financial statements
Results for the year (continued)
4 Segment reporting (continued)
Information about reportable segments (continued)
GIT
Income statement
External revenues
Gross property income
Development income
Distributions from investments
Total external revenues
Analysis of external revenues
Revenue from contracts with customers
Assets and services transferred at a point in time
Assets and services transferred over time
Other revenue
Australia and
New Zealand
Asia
Continental
Europe
Americas
Total
2020
$M
2019
$M
2020
$M
2019
$M
2020
$M
2019
$M
2020
$M
2019
$M
2020
$M
2019
$M
67.9
0.3
–
80.2
31.5
–
68.2
111.7
0.3
14.3
31.5
16.5
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
9.9
9.9
–
–
–
9.9
9.9
64.9
83.2
–
–
2.9
2.9
–
–
–
2.9
2.9
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
67.9
0.3
9.9
80.2
31.5
2.9
78.1
114.6
0.3
14.3
31.5
16.5
53.6
63.7
9.9
2.9
78.1
114.6
48.1
70.8
38.3
350.9
303.0
60.2
125.4
159.1
825.5
816.6
Rental income (excludes outgoings recoveries)
53.6
63.7
Distributions from investments
Total external revenues
–
–
68.2
111.7
Reportable segment profit before tax
180.9
183.7
34.3
32.9
Share of net results of equity accounted investments
332.2
422.7
284.7
174.6
Material non-cash items not included
in reportable segment profit before tax
Net gain from fair value adjustments
on investment properties
Statement of financial position
36.5
142.3
–
2020
$M
2019
$M
2020
$M
–
2019
$M
–
2020
$M
–
2019
$M
–
2020
$M
–
36.5
142.3
2019
$M
2020
$M
2019
$M
Reportable segment assets
4,405.5 3,899.4 1,510.6 1,103.0
779.1
739.6 1,953.8 2,065.9 8,649.0 7,807.9
Non-current assets
4,153.2 3,877.9 1,510.6 1,103.0
778.1
739.2 1,934.5 1,871.1 8,376.4 7,591.2
Included in reportable segment assets are:
Investment properties
1,202.4 1,158.6
–
–
–
–
–
– 1,202.4 1,158.6
Investments accounted for using the equity method
2,944.8 2,712.8 1,510.6 1,103.0
758.4
714.1 1,934.5 1,871.1 7,148.3 6,401.0
Reportable segment liabilities
91.3
138.8
–
–
–
(0.3)
82.3
63.4
173.6
201.9
88
Annual Report 2020
Reconciliation of reportable segment revenues, profit or loss, assets and liabilities
Revenues
Total revenue for reportable segments
Consolidated revenues
Profit or loss
Total profit before tax for reportable segments1
Property investment earnings
Management earnings
Development earnings
Operating expenses allocated to reportable segments
Reportable segment profit before tax
Corporate expenses not allocated to reportable segments
Valuation and other items not included in reportable segment profit before tax:
– Net gain from fair value adjustments on investment properties
–
–
–
–
Share of fair value adjustments attributable to investment properties in Partnerships2
Share of fair value adjustments on derivative financial instruments in Partnerships
Share based payments expense
Straight lining of rental income
Profit before interest and tax
Net finance (expense)/income
Note
Goodman
2020
$M
2019
$M
GIT
2020
$M
2019
$M
1,510.9
1,718.6
1,510.9
1,718.6
78.1
78.1
114.6
114.6
425.2
511.2
575.7
372.1
469.7
509.2
(192.9)
(156.1)
1,319.2
1,194.9
(99.4)
(111.6)
1,219.8
1,083.3
45.2
591.7
16.2
146.8
746.6
20.4
(164.0)
(196.6)
(11.6)
(6.5)
1,697.3
1,794.0
6(e)
6(f)
6(f)
15
(80.2)
(49.3)
350.9
(53.6)
297.3
36.5
536.0
15.0
–
(13.5)
871.3
(24.1)
303.0
(51.4)
251.6
142.3
559.8
18.8
–
2.3
974.8
53.3
Consolidated profit before income tax
1,617.1
1,744.7
847.2
1,028.1
Assets
Assets for reportable segments
Cash
Other unallocated amounts3
Consolidated total assets
Liabilities
Liabilities for reportable segments
Interest bearing liabilities
Provisions for dividends/distributions to Securityholders
Other unallocated amounts3
Consolidated total liabilities
14,524.2
13,490.3
8,649.0
7,807.9
1,042.9
1,013.4
1,039.5
1,013.3
571.1
409.1
3,563.6
3,632.7
16,138.2
14,912.8
13,252.1
12,453.9
632.0
582.8
173.6
201.9
2,938.5
2,975.0
2,939.5
2,864.3
19
274.3
772.8
272.1
560.4
201.1
1,148.5
181.4
962.6
4,617.6
4,390.3
4,462.7
4,210.2
1. The allocation of GIT’s segment results to property investment, management and development is not reported to the Group Chief Executive Officer.
2. Net of $14.4 million (2019: $nil) included in development earnings for Goodman.
3.
Other unallocated amounts in Goodman and GIT included other financial assets and liabilities, deferred tax assets, tax payables and provisions which did not relate
to the reportable segments. Additionally, other unallocated assets and liabilities in GIT included loans due from/to controlled entities of Goodman.
89
Goodman Group
Notes to the consolidated financial statements
Results for the year (continued)
5 Taxation
Income tax for the period comprises current tax and movements in deferred tax assets and liabilities. Current tax and movements in
deferred tax assets and liabilities are recognised in the income statement except to the extent that they relate to items recognised directly
in equity, in which case the relevant amounts of tax are recognised directly in equity.
Current tax is the expected tax payable on the taxable income for the financial year and any adjustment to tax payable in respect of
previous financial years.
Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for taxation purposes. The following temporary differences are not accounted for:
+
+
+
Goodwill
The initial recognition of assets or liabilities that affect neither accounting nor taxable profit
Differences relating to investments in controlled entities to the extent that they will probably not reverse in the foreseeable future.
The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and
liabilities. Deferred tax assets or liabilities in respect of investment properties held at fair value are calculated on the presumption that the
carrying amount of the investment property will be recovered through sale. A deferred tax asset is recognised only to the extent that it is
probable that future taxable profits will be available against which the asset can be utilised. Deferred tax assets are reduced to the extent
that it is no longer probable that the related tax benefit will be realised.
Additional income taxes that arise from dividends/distributions are recognised at the same time as the liability to pay the related
dividends/distributions.
Goodman
Current tax expense recognised in the income statement
Current year
Adjustment for current tax in prior periods
Current tax expense
Deferred tax expense recognised in the income statement
Origination and reversal of temporary differences
Deferred tax expense
Total income tax expense1
2020
$M
(128.5)
5.5
(123.0)
10.0
10.0
(113.0)
2019
$M
(72.8)
1.3
(71.5)
(45.3)
(45.3)
(116.8)
1. Total income tax expense includes deferred taxes of $15.6 million (2019: $21.7 million) on fair value adjustments on investment properties
90
Reconciliation of income tax expense to profit before income tax
Profit before income tax
Prima facie income tax expense calculated at 30% (2019: 30%) on the profit before income tax
Decrease/(increase) in income tax due to:
–
Profit attributable to GIT Unitholders
– Current year losses for which no deferred tax asset was recognised
– Non-deductible impairment losses and fair value movements
– Other non-assessable/(deductible) items, net
– Utilisation of previously unrecognised tax losses
– Difference in overseas tax rates
–
–
Adjustment for current tax in prior periods
Taxes on partnership income
– Other items
Income tax expense
Current tax receivable/payable
Net income tax payable
Net income tax payable at the beginning of the year
Decrease/(increase) in current tax payable due to:
– Net income taxes paid
– Current tax expense
– Other
Net income tax payable at the end of the year
Current tax receivables (refer to note 7)
Current tax payables
Annual Report 2020
2020
$M
1,617.1
(485.1)
2019
$M
1,744.7
(523.4)
252.6
301.7
(3.4)
(0.7)
101.3
39.5
5.5
5.5
(25.8)
(2.4)
(113.0)
2020
$M
(85.0)
76.3
(123.0)
(0.1)
(131.8)
9.0
(140.8)
(131.8)
(14.8)
(0.4)
63.0
54.4
29.5
1.3
(22.3)
(5.8)
(116.8)
2019
$M
(50.1)
37.4
(71.5)
(0.8)
(85.0)
7.6
(92.6)
(85.0)
91
Goodman Group
Notes to the consolidated financial statements
Results for the year (continued)
5 Taxation (continued)
Deferred tax assets and liabilities
Deferred tax assets/(liabilities) are attributable to the following:
Investment properties
Receivables
Tax losses
Payables
Provisions
Other items
Tax assets/(liabilities)
Set off of tax
Net tax assets/(liabilities)
Deferred tax assets
Deferred tax liabilities
2020
$M
–
–
–
11.3
10.1
–
21.4
(10.9)
10.5
2019
$M
–
–
14.5
15.1
5.9
0.2
35.7
(28.9)
6.8
2020
$M
(119.4)
(3.4)
–
–
–
(9.9)
(132.7)
10.9
(121.8)
2019
$M
(112.8)
(46.2)
–
–
–
–
(159.0)
28.9
(130.1)
Deferred tax assets of $219.9 million (2019: $248.8 million) in relation to tax losses and payables have not been recognised by Goodman.
GIT
Under current Australian income tax legislation, the Trust is not liable for income tax, including capital gains tax, provided that
Securityholders are presently entitled to the distributable income of the Trust as calculated for trust law purposes. The controlled entities
of the Trust that operate in certain foreign jurisdictions are liable to pay tax in those jurisdictions.
The income tax expense recorded by GIT relates to withholding taxes on actual distributions and deferred taxes on potential future
distributions from Partnerships. At 30 June 2020, deferred tax liabilities of $82.3 million (2019: $62.8 million) have been recognised in
relation to potential future distributions from Partnerships.
92
OPERATING ASSETS AND LIABILITIES
The notes in this section focus on Goodman’s property assets,
working capital and goodwill and intangible assets.
6 Property assets
(a) Principles and policies
Investment in property assets includes both inventories and
investment properties (including those under development), which
may be held either directly or through investments in Partnerships
(both associates and JVs).
Inventories
Inventories relate to land and property developments that are
held for sale or development and sale in the normal course of the
Group’s business. Inventories are carried at the lower of cost or
net realisable value. The calculation of net realisable value requires
estimates and assumptions which are regularly evaluated and are
based on historical experience and expectations of future events
that are believed to be reasonable under the circumstances.
Inventories are classified as non-current assets unless they are
contracted to be sold within 12 months of the end of the reporting
period, in which case they are classified as current assets.
Investment properties
Investment properties comprise investment interests in land and
buildings held for the purpose of leasing to produce rental income
and/or for capital appreciation. Investment properties are carried
at fair value. The calculation of fair value requires estimates and
assumptions which are continually evaluated and are based on
historical experience and expectations of future events that are
believed to be reasonable under the circumstances. Investment
properties are not depreciated as they are subject to continual
maintenance and regularly revalued on the basis described below.
Changes in the fair value of investment properties are recognised
directly in the income statement.
Components of investment properties
Land and buildings (including integral plant and equipment)
comprising investment properties are regarded as composite assets
and are disclosed as such in the consolidated financial report.
Investment property carrying values include the costs of acquiring
the assets and subsequent costs of development, including costs
of all labour and materials used in construction, costs of managing
the projects, holding costs and borrowing costs incurred during the
development periods.
Amounts provided to customers as lease incentives and assets
relating to fixed rental income increases in operating lease
contracts are included within investment property values. Lease
incentives are amortised over the term of the lease on a straight-line
basis. Direct expenditure associated with leasing a property is also
capitalised within investment property values and amortised over
the term of the lease.
Annual Report 2020
Classification of investment properties
Investment properties are classified as either properties under
development or stabilised properties. Investment properties
under development include land, new investment properties
in the course of construction and investment properties that
are being redeveloped. Stabilised investment properties are all
investment properties not classed as being under development
and would be completed properties that are leased or are available
for lease to customers.
For investment properties under development, the carrying values
are reviewed by management at each reporting date to consider
whether they reflect the fair value and at completion external
valuations are obtained to determine the fair values.
For stabilised investment properties, independent valuations are
obtained at least every three years to determine the fair values.
At each reporting date between obtaining independent valuations,
the carrying values are reviewed by management to ensure they
reflect the fair values.
Deposits for investment properties
Deposits and other costs associated with acquiring investment
properties that are incurred prior to obtaining legal title are
recorded at cost and disclosed as other assets in the statement
of financial position.
93
Goodman Group
Notes to the consolidated financial statements
Operating assets and liabilities (continued)
6 Property assets (continued)
(b) Summary of investment in property assets
Inventories
Current
Non-current
Investment properties
Stabilised investment properties
Investment properties under development
Investments accounted for using the equity method
Associates
JVs
Total property assets
Note
6(d)
6(d)
Goodman
GIT
2020
$M
2019
$M
2020
$M
2019
$M
544.1
636.1
307.9
761.1
1,180.2
1,069.0
–
5.9
5.9
–
6.5
6.5
1,797.9
1,756.4
1,192.4
1,147.7
103.3
140.7
10.0
10.9
6(e)
1,901.2
1,897.1
1,202.4
1,158.6
6(f)(i)
6(f)(ii)
5,617.2
4,856.0
4,761.4
4,120.4
3,753.6
3,596.4
2,386.9
2,280.6
9,370.8
8,452.4
7,148.3
6,401.0
12,452.2
11,418.5
8,356.6
7,566.1
(c) Estimates and assumptions in determining property carrying values
Inventories
For both inventories held directly and inventories held in Partnerships, external valuations are not performed but instead valuations are
determined using the feasibility studies supporting the land and property developments. The end values of the developments in the
feasibility studies are based on assumptions such as capitalisation rates, letting up periods and incentives that are consistent with those
observed in the relevant market. If the feasibility study calculations indicate that the forecast cost of a completed development will exceed
the net realisable value, then the inventories are impaired.
Investment properties
Stabilised investment properties
The fair value of stabilised investment properties is based on current prices in an active market for similar properties in the same location
and condition and subject to similar lease and other contracts. The current price is the estimated amount for which a property could be
exchanged between a willing buyer and a willing seller in an arm’s length transaction after proper marketing wherein the parties had each
acted knowledgably, prudently and without compulsion.
94
Annual Report 2020
Approach to determination of fair value
Market assessment
The lockdowns and economic impacts from the COVID-19
pandemic commenced at different times, with Asia affected from
December 2019 and rest of the world from February/March 2020.
The independent valuers would normally calculate fair values
using both observable capitalisation rates and discounted cash
flows. At the start of the pandemic the independent valuers were
concerned that historic market transactional evidence would not
be appropriate to use in their assessments of the valuations of the
investment properties and certain of their valuations undertaken
at March 2020 for the Partnerships placed a greater reliance on
the discounted cash flow methodology and most valuation reports
included a reference to the material uncertainty that existed in the
market at that time.
However, in the last quarter of the financial year, it became clear
that asset values in the industrial, logistics and warehousing sector
had been less impacted than those for other real asset classes.
This was evidenced by market transactions in the three months
ended 30 June 2020 that were completed at values consistent with
the reported valuations from the independent valuers. Accordingly,
at 30 June 2020, the independent valuers have been able to
prepare valuations using both observable capitalisation rates and
discounted cash flows and relatively few valuation reports included
a reference to the uncertainty in the market that was specific to the
subject property.
At 30 June 2020, the Board has been able to assess that all
markets in which the Group operated were active and as a
consequence, no adjustments have been made to the carrying
values of the Group’s stabilised investment property portfolios on
the basis of internally prepared discounted cash flow valuations.
The approach to determination of fair value of investment
properties is applied to both investment properties held directly
and investment properties held in Partnerships.
Valuations are determined based on assessments and estimates
of uncertain future events, including upturns and downturns in
property markets and availability of similar properties, vacancy
rates, market rents and capitalisation and discount rates. Recent
and relevant sales evidence and other market data are taken into
account. Valuations are either based on an external independent
valuation or on an internal valuation.
External valuations are undertaken only where market segments
were observed to be active. In making the determination of
whether a market segment is active, the following characteristics
are considered:
+
+
+
+
Function of the asset (distribution/warehouse or
suburban office)
Location of asset (city, suburb or regional area)
Carrying value of the asset (categorised by likely
appeal to private (including syndicates), national and
institutional investors)
Categorisation as primary or secondary based on a
combination of location, weighted average lease expiry,
quality of tenant covenant (internal assessment based on
available market evidence) and age of construction.
Each property asset is assessed and grouped with assets in
the same or similar market segments. Information on all relevant
recent sales is also analysed using the same criteria to provide a
comparative set. Unless three or more sales are observed in an
individual market segment (taken together with any comparable
market segments as necessary), that market segment is
considered inactive.
Where a market segment is observed to be active, then external
independent valuations are performed for stabilised investment
properties where there has been more than a 25 basis point
movement in capitalisation rates and/or there has been a material
change in tenancy profile (including changes in the credit rating
or financial performance of a significant customer), and/or there
has been significant capital expenditure, and/or there has been
a change in use (or zoning) of the asset and/or it has been three
years since the previous external independent valuation. For
all other stabilised investment properties in an active market
segment, an internal valuation is performed based on observable
capitalisation rates and referenced to independent market data.
Where a market segment is observed to be inactive, then no
external independent valuations are performed and internal
valuations are undertaken based on discounted cash flow (DCF)
calculations. The DCF calculations are prepared over a 10 year
period. The key inputs considered for each individual calculation
are rental growth rates, discount rates, market rental rates and
letting up incentives. Discount rates are computed using the 10
year bond rate or equivalent in each jurisdiction plus increments
to reflect country risk, tenant credit risk and industry risk. Where
possible, the components of the discount rate are benchmarked
to available market data.
95
Goodman Group
Notes to the consolidated financial statements
Operating assets and liabilities (continued)
6 Property assets (continued)
The overall weighted average capitalisation rates for the divisional portfolios (including Partnerships) are as set out in the table below:
Division
Australia and New Zealand
Asia
Continental Europe
United Kingdom
Americas
Total portfolio weighted average capitalisation rate
Goodman
GIT
2020
%
2019
%
2020
%
2019
%
5.1
4.7
4.9
4.5
4.4
5.4
4.8
5.1
4.8
4.6
5.1
4.2
5.0
–
4.4
5.3
4.3
5.2
–
4.6
During the current financial year, the fair values of 59% (2019: 76%) of stabilised investment properties held directly by Goodman were
determined based on a valuation by an independent valuer who held a recognised and relevant professional qualification and had recent
experience in the location and category of the investment property being valued. The equivalent percentage for GIT was 42% (2019: 97%).
For investments in Partnerships, all properties that were stabilised investment properties throughout FY20 were valued by an independent
valuer during the year.
Sensitivity analysis
The fair value measurement approach for directly held investment properties has been categorised as a Level 3 fair value based on the
inputs to the valuation method used (see note 1(f)). The stabilised investment property valuations at 30 June 2020 are most sensitive to the
following inputs:
+
+
+
Capitalisation rates
Market rents
Level of lost income due to incentives provided to customers and/or the amount of vacant time on expiry of a lease.
The majority of directly held stabilised investment properties are in Australia and the average capitalisation rate and the range of market
rents are summarised in the table below:
Valuation technique
Significant unobservable inputs
2020
2019
Income capitalisation
Range of net market rents (per square metre per annum)
$44 to $320
$40 to $320
Capitalisation rate (weighted average)
5.2%
5.4%
96
Annual Report 2020
The impacts on the Group’s financial position that would arise from the changes in capitalisation rates, market rents and incentives/voids
are set out in the table below. This illustrates the impacts on Goodman in respect of both the directly held stabilised investment
properties and its share of those stabilised investment properties held by Partnerships.
Book value at 30 June 2020
1,797.9
10,116.3
1,192.4
7,700.2
Goodman
GIT
Directly held
properties
$M
Partnerships1
$M
Directly held
properties
$M
Partnerships1
$M
Changes in capitalisation rates:
Increase in cap rates +50bps
Increase in cap rates +25bps
Decrease in cap rates -25bps
Decrease in cap rates -50bps
Changes in market rents:
Decrease in rents -10%
Decrease in rents -5%
Increase in rents +5%
Increase in rents +10%
Changes in voids/incentives2:
Increase in voids/ incentives +6 months
Increase in voids/ incentives +3 months
(158.0)
(82.6)
91.0
191.7
(70.5)
(35.3)
35.3
70.5
(10.7)
(5.3)
(964.1)
(506.4)
563.6
1,194.6
(449.7)
(224.8)
224.8
449.7
(62.1)
(31.1)
(109.7)
(57.5)
63.7
134.6
(53.5)
(26.8)
26.8
53.5
(13.2)
(6.6)
(744.5)
(391.3)
436.1
925.2
(333.7)
(166.8)
166.8
333.7
(43.6)
(21.8)
1. Goodman’s share of stabilised investment properties held by Partnerships.
2. On assumed lease expiries over the next 12 months.
Investment properties under development
External valuations are generally not performed for investment properties under development, but instead valuations are determined
using the feasibility studies supporting the developments. The end values of the developments in the feasibility studies are based
on assumptions such as capitalisation rates, letting up periods and incentives that are consistent with those observed in the relevant
market adjusted for a profit and risk factor. This profit and risk factor is dependent on the function, location, size and current status
of the development and is generally in a market range of 10% to 15%. This adjusted end value is then compared to the forecast cost
of a completed development to determine whether there is an increase or decrease in value.
This practice of determining fair value by reference to the development feasibility is generally also applied for Goodman’s investments
in Partnerships. However, certain Partnerships do obtain independent valuations for investment properties under development each
financial year.
97
Goodman Group
Notes to the consolidated financial statements
Operating assets and liabilities (continued)
6 Property assets (continued)
(d) Inventories
Current
Land and development properties
Non-current
Land and development properties
Goodman
Goodman
2020
$M
544.1
544.1
636.1
636.1
2019
$M
307.9
307.9
761.1
761.1
GIT
2020
$M
–
–
5.9
5.9
2019
$M
–
–
6.5
6.5
During the current and prior financial year, no impairment losses were recognised on land and development properties.
During the financial year, borrowing costs of $6.7 million (2019: $23.1 million) previously capitalised into the carrying value of inventories
were expensed to the income statement on disposal of the inventories.
(e) Investment properties
Reconciliation of carrying amount of directly held investment properties
Carrying amount at the beginning of the year
Capital expenditure
Carrying value of properties disposed
Transfers to inventories
Net gain from fair value adjustments
Effect of foreign currency translation
Goodman
2020
$M
1,897.1
123.4
(165.2)
–
45.2
0.7
2019
$M
1,774.6
59.7
(30.4)
(54.5)
146.8
0.9
GIT
2020
$M
2019
$M
1,158.6
1,222.4
8.5
(1.0)
–
36.5
(0.2)
9.2
(215.4)
–
142.3
0.1
Carrying amount at the end of the year
1,901.2
1,897.1
1,202.4
1,158.6
Analysed by segment:
Australia and New Zealand
United Kingdom
1,894.0
7.2
1,901.2
1,866.2
30.9
1,897.1
1,202.4
1,158.6
–
–
1,202.4
1,158.6
98
Annual Report 2020
Goodman
During the financial year, borrowing costs of $1.8 million (2019: $0.6 million) previously capitalised into the carrying value of investment
properties were expensed to the income statement on disposal of the investment properties.
Non-cancellable operating lease commitments receivable from investment property customers
The analysis in the table below reflects the gross property income, excluding recoverable outgoings, based on existing lease agreements.
It assumes that leases will not extend beyond the next review date, where the customer has an option to end the lease.
Non-cancellable operating lease commitments receivable:
Less than one year
One to two years
Two to three years
Three to four years
Four to five years
More than five years
Goodman
20201
$M
85.8
71.4
54.3
44.7
33.3
190.3
479.8
2019
$M
83.8
64.1
48.7
36.9
29.0
128.3
390.8
GIT
2020
$M
47.0
39.3
27.6
20.3
14.4
29.1
2019
$M
47.9
34.5
27.5
17.0
11.3
26.8
177.7
165.0
1. Excludes gross operating income of $83.2 million in respect of a leased property that was disposed in July 2020.
(f) Investments accounted for using the equity method
Investments accounted for using the equity method comprise associates and JVs, which are collectively referred to as Partnerships.
Associates
An associate is an entity in which Goodman exercises significant influence but not control over its financial and operating policies. In the
consolidated financial statements, investments in associates are accounted for using the equity method. Investments in associates are
carried at the lower of the equity accounted amount and recoverable amount. Under this method, Goodman’s share of post-acquisition
gains or losses of associates is recognised in the consolidated income statement and its share of post-acquisition movements in reserves
is recognised in consolidated reserves. Cumulative post-acquisition movements in both profit or loss and reserves are adjusted against
the cost of the investment.
JVs
A JV is an arrangement in which Goodman is considered to have joint control for accounting purposes, whereby Goodman has rights
to the net assets of the arrangement, rather than rights to its assets and obligations for its liabilities. In the consolidated financial
statements, investments in JVs are accounted for using the equity method. Investments in JVs are carried at the lower of the equity
accounted amount and recoverable amount. Goodman’s share of the JVs’ net profit or loss is recognised in the consolidated income
statement from the date the arrangement commences to the date the arrangement ceases. Movements in reserves are recognised
directly in consolidated reserves.
Transactions eliminated on consolidation
Unrealised gains arising from asset disposals to associates and JVs are eliminated to the extent of Goodman’s interest. Unrealised gains
relating to associates and JVs are eliminated against the carrying amount of the investment. Unrealised losses are eliminated in the same
way as unrealised gains unless they evidence an impairment of an asset.
99
Goodman Group
Notes to the consolidated financial statements
Operating assets and liabilities (continued)
6 Property assets (continued)
(i) Investments in associates
Investments in associates are set out below:
Goodman
GIT
Share of net
results
Ownership
interest
Investment
carrying
amount
Share of net
results
Ownership
interest
Investment
carrying
amount
Name of
associate
Country of
establishment
2020
$M
2019
$M
2020
%
2019
%
2020
$M
2019
$M
2020
$M
2019
$M
2020
%
2019
%
2020
$M
2019
$M
Property investment
Goodman Australia
Industrial Partnership
(GAIP)
Goodman Australia
Partnership (GAP)
Goodman Property
Trust (GMT)1
Goodman Hong Kong
Logistics Partnership
(GHKLP)
Australia
201.8 273.8 28.8 28.4 1,729.8 1,543.4
201.8 273.8 28.8 28.4 1,729.8 1,543.4
Australia
91.6 118.5 19.9 19.9
762.6
759.9
91.6 118.5 19.9 19.9
762.6
759.9
New Zealand
52.1 65.9 21.4 21.6
490.8
433.3
–
–
–
–
–
–
Cayman Islands
284.7 174.5 20.2 20.1 1,510.6
1,103.0
284.7 174.5 20.2 20.1 1,510.6 1,103.0
Goodman Japan Core
Partnership (GJCP)2
Japan
32.5 21.4 15.5 16.5
365.0
302.3
–
–
–
–
–
–
Goodman European
Partnership (GEP)
Luxembourg
83.2 60.3 20.4 20.4
758.4
714.1
83.2 60.3 20.4 20.4
758.4
714.1
745.9 714.4
5,617.2 4,856.0
661.3 627.1
4,761.4 4,120.4
1.
2.
GMT is listed on the New Zealand Stock Exchange (NZX). The market value of Goodman’s investment in GMT at 30 June 2020 using the quoted price on the last day
of trading was $565.6 million (2019: $520.6 million).
Goodman’s ownership interest in GJCP reflected the weighted average ownership interest in the various property investment vehicles.
The reconciliation of the carrying amount of investments in associates is set out as follows:
Goodman
GIT
Movement in carrying amount of investments in associates
Carrying amount at the beginning of the year
Share of net results after tax (before fair value adjustments)
Share of fair value adjustments attributable
to investment properties after tax
Share of fair value adjustments on derivative financial instruments
Share of net results
Share of movements in reserves
Acquisitions
Disposals
Capital return
Distributions received and receivable
Effect of foreign currency translation
Carrying amount at the end of the year
2020
$M
4,856.0
226.8
493.3
25.8
745.9
(1.8)
272.6
(6.8)
(59.7)
(207.6)
18.6
5,617.2
2019
$M
4,162.4
223.9
469.7
20.8
714.4
(4.8)
86.8
(5.6)
–
(211.2)
114.0
4,856.0
2020
$M
4,120.4
191.4
445.6
24.3
661.3
(1.8)
187.9
–
(59.7)
(172.0)
25.3
4,761.4
2019
$M
3,569.8
183.6
424.3
19.2
627.1
(4.8)
35.1
–
–
(181.4)
74.6
4,120.4
100
Annual Report 2020
The table below includes further information regarding associates held at the end of the financial year:
GAIP
GAP
GMT
GHKLP
GJCP2
GEP
2020
$M
2019
$M
2020
$M
2019
$M
2020
$M
2019
$M
2020
$M
2019
$M
2020
$M
2019
$M
2020
$M
2019
$M
Summarised statement
of financial position
Total current assets
230.3
347.3
170.9
170.7
13.6
22.6
129.7
64.9
326.2
152.2 1,422.6
186.0
Total non-current assets
8,406.4 7,653.1 4,385.5 3,952.4 2,954.6 2,641.4 8,913.5 7,392.9 3,486.8 2,841.5 5,043.6 5,824.7
Total current liabilities
114.9
367.1
111.4
111.0
111.8
27.3
216.6
568.5
25.7
21.6
365.9
282.8
Total non-current liabilities
2,575.2 2,251.1
682.8
280.1
611.2
673.7 1,411.1 1,446.5 1,424.5 1,140.1 2,376.7 2,222.0
Net assets (100%)
5,946.6 5,382.2 3,762.2 3,732.0 2,245.2 1,963.0 7,415.5 5,442.8 2,362.8 1,832.0 3,723.6 3,505.9
Summarised statement
of comprehensive income
Revenue
428.0
415.8
258.7
245.3
139.0
129.0
294.5
266.1
265.4
177.5
357.4
320.5
Profit after tax and revaluations
730.5
979.8
460.1
595.4
243.0
309.0 1,409.9
871.7
191.8
119.9
404.0
297.7
Other comprehensive income/(loss)
–
–
–
–
–
–
(8.8)
(24.0)
–
–
–
–
Total comprehensive income (100%)
730.5
979.8
460.1
595.4
243.0
309.0 1,401.1
847.7
191.8
119.9
404.0
297.7
Goodman
Consolidated ownership interest
28.8% 28.4% 19.9% 19.9% 21.4% 21.6% 20.2% 20.1% 15.5% 16.5% 20.4% 20.4%
Consolidated share of net assets
1,711.5 1,527.0
749.1
743.0
480.9
423.8 1,498.6 1,091.8
365.5
302.3
758.4
714.1
Other items, including
capitalised costs
1.0
0.9
0.2
0.3
Distributions receivable1
17.3
15.5
13.3
16.6
9.9
–
9.5
1.5
1.1
(0.5)
–
10.5
10.1
–
–
–
–
–
–
–
Carrying amount of investment
1,729.8 1,543.4
762.6
759.9
490.8
433.3 1,510.6 1,103.0
365.0
302.3
758.4
714.1
Distributions received
and receivable
GIT
66.3
75.1
29.2
32.1
18.4
17.3
32.7
34.4
17.2
12.5
43.8
39.8
Consolidated ownership interest
28.8% 28.4% 19.9% 19.9%
Consolidated share of net assets
1,711.5 1,527.0
749.1
743.0
Other items, including
capitalised costs
1.0
0.9
0.2
0.3
Distributions receivable1
17.3
15.5
13.3
16.6
Carrying amount of
investment in associate
Distributions received
and receivable
1,729.8 1,543.4
762.6
759.9
66.3
75.1
29.2
32.1
–
–
–
–
–
–
– 20.2% 20.1%
– 1,498.6 1,091.8
–
–
1.5
1.1
10.5
10.1
– 1,510.6 1,103.0
–
32.7
34.4
–
–
–
–
–
–
– 20.4% 20.4%
–
758.4
714.1
–
–
–
–
–
–
–
758.4
714.1
–
43.8
39.8
1.
2.
Distributions receivable related to distributions provided for but not paid by the associates at 30 June 2020. This was applicable to trusts in Australia where unitholders
were presently entitled to income at the end of the financial year.
The consolidated ownership interest in GJCP reflected the weighted average ownership interest in the various property investment vehicles.
101
Goodman Group
Notes to the consolidated financial statements
Operating assets and liabilities (continued)
6 Property assets (continued)
(ii) Investments in JVs
A summary of the results and ownership interest of principal JVs is set out below:
Goodman
GIT
Share of net results
Ownership interest
Investment
carrying amount
Country of
establishment/
incorporation
2020
$M
2019
$M
2020
%
2019
%
2020
$M
2019
$M
Share of net results
Ownership interest
Investment
carrying amount
Country of
establishment/
incorporation
2020
$M
2019
$M
2020
%
2019
%
2020
$M
2019
$M
Australia
20.0
17.6
40.0
40.0
189.2
176.3
Industrial Partnership (KGIP)
Australia
20.0
17.6
40.0
40.0
189.2
176.3
Luxembourg
13.0
22.9
20.5
19.3
137.4
140.8
Luxembourg
Name of JV
Property investment
KWASA Goodman
Industrial Partnership (KGIP)
KWASA Goodman
Germany (KGG)1
Property development
Goodman Japan Development
Partnership (GJDP)
Japan
49.4
53.4
50.0
50.0
119.3
192.0
Goodman Japan Development
Partnership (GJDP)
Japan
Property investment
and development
Goodman China
Logistics Partnership
(GCLP)
Goodman UK
Partnership (GUKP)
Goodman
North America
Partnership (GNAP)
Other JVs2
Cayman Islands
30.3
122.6
20.0
20.0
737.2
690.3
United Kingdom
14.8
20.9
33.3
33.3
277.0
196.3
United States
of America
127.7
21.1
276.3
163.9
16.8
418.1
55.0
55.0
1,988.5
1,923.9
53.0
53.0
1,916.4
1,854.0
305.0
276.8
3,753.6
3,596.4
Name of JV
Property investment
KWASA Goodman
KWASA Goodman
Germany (KGG)1
Property development
Property investment
and development
Goodman China
Logistics Partnership
(GCLP)
(GUKP)
Goodman UK Partnership
Goodman
North America
Partnership (GNAP)
Other JVs2
–
–
–
–
–
–
–
–
–
–
–
–
123.1
21.1
164.2
157.9
14.0
189.5
–
–
–
–
–
–
–
–
–
–
–
–
281.3
250.3
2,386.9
2,280.6
Cayman Islands
United Kingdom
United States
of America
1.
2.
The consolidated ownership interest in KGG reflected the weighted average ownership in the various property investment vehicles.
Other JVs includes the investment in Goodman Brazil Logistics Partnership.
102
A summary of the results and ownership interest of principal JVs is set out below:
(ii) Investments in JVs
Goodman
Share of net results
Ownership interest
Investment
carrying amount
Country of
establishment/
incorporation
2020
$M
2019
$M
2020
%
2019
%
2020
$M
2019
$M
Industrial Partnership (KGIP)
Australia
20.0
17.6
40.0
40.0
189.2
176.3
Luxembourg
13.0
22.9
20.5
19.3
137.4
140.8
GIT
Name of JV
Property investment
KWASA Goodman
Industrial Partnership (KGIP)
KWASA Goodman
Germany (KGG)1
Property development
Goodman Japan Development
Partnership (GJDP)
Japan
49.4
53.4
50.0
50.0
119.3
192.0
Goodman Japan Development
Partnership (GJDP)
Japan
Cayman Islands
30.3
122.6
20.0
20.0
737.2
690.3
United Kingdom
14.8
20.9
33.3
33.3
277.0
196.3
United States
of America
127.7
21.1
276.3
163.9
16.8
418.1
55.0
55.0
1,988.5
1,923.9
305.0
276.8
3,753.6
3,596.4
1.
2.
The consolidated ownership interest in KGG reflected the weighted average ownership in the various property investment vehicles.
Other JVs includes the investment in Goodman Brazil Logistics Partnership.
Property investment
and development
Goodman China
Logistics Partnership
(GCLP)
Goodman UK Partnership
(GUKP)
Goodman
North America
Partnership (GNAP)
Other JVs2
Cayman Islands
United Kingdom
United States
of America
Name of JV
Property investment
KWASA Goodman
KWASA Goodman
Germany (KGG)1
Property development
Property investment
and development
Goodman China
Logistics Partnership
(GCLP)
Goodman UK
Partnership (GUKP)
Goodman
North America
Partnership (GNAP)
Other JVs2
Annual Report 2020
Share of net results
Ownership interest
Investment
carrying amount
Country of
establishment/
incorporation
2020
$M
2019
$M
2020
%
2019
%
2020
$M
2019
$M
Australia
20.0
17.6
40.0
40.0
189.2
176.3
Luxembourg
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
123.1
21.1
164.2
157.9
14.0
189.5
53.0
53.0
1,916.4
1,854.0
281.3
250.3
2,386.9
2,280.6
103
Goodman Group
Notes to the consolidated financial statements
Operating assets and liabilities (continued)
6 Property assets (continued)
The reconciliation of the carrying amount of investments in JVs is set out as follows:
Movement in carrying amount of investments in JVs
Carrying amount at the beginning of the year
Share of net results after tax (before fair value adjustments)
Share of fair value adjustments attributable
to investment properties after tax
Share of fair value adjustments on derivative financial instruments
Share of net results
Share of movements in reserves
Reclassification of loan to related party
Acquisitions
Disposals
Transfer to assets held for sale
Capital return
Distributions/dividends received and receivable
Effect of foreign currency translation
Goodman
2020
$M
3,596.4
173.1
112.8
(9.6)
276.3
(25.8)
(3.3)
504.2
(0.3)
(11.2)
(368.6)
(252.8)
38.7
2019
$M
2,423.1
141.6
276.9
(0.4)
418.1
(39.8)
–
824.2
–
–
–
(154.6)
125.4
GIT
2020
$M
2,280.6
83.1
90.4
(9.3)
164.2
–
–
2019
$M
1,452.1
54.4
135.5
(0.4)
189.5
–
–
335.8
612.5
–
–
(355.2)
(62.3)
23.8
–
–
–
(44.2)
70.7
Carrying amount at the end of the year
3,753.6
3,596.4
2,386.9
2,280.6
The table below includes further information regarding principal JVs held at the end of the financial year:
KGIP
KGG1
GJDP
GCLP2
GUKP
GNAP
2020
$M
2019
$M
2020
$M
2019
$M
2020
$M
2019
$M
2020
$M
2019
$M
2020
$M
2019
$M
2020
$M
2019
$M
Summarised statement
of financial position
Current assets
Cash and cash equivalents
Other current assets
Total current assets
9.0
1.8
10.8
1.9
1.6
3.5
36.5
14.5
112.6
166.7
231.1
218.1
38.6
21.0
39.6
41.4
6.5
2.7
16.1
18.5
73.5
32.3
2.0
1.2
0.1
1.2
43.0
17.2
128.7
185.2
304.6
250.4
40.6
22.2
39.7
42.6
Total non-current assets
718.4
688.4
1,215.1
1,319.7
378.5
501.1
4,741.5 4,421.8
813.4
572.2 4,291.7 3,537.6
Current liabilities
Other current liabilities
Total current liabilities
Non-current liabilities
16.4
16.4
15.5
88.8
76.3
15.5
88.8
76.3
28.7
28.7
7.2 2,736.5 2,333.6
7.2 2,736.5 2,333.6
15.5
15.5
6.8
6.8
58.5
58.5
90.1
90.1
Financial liabilities
248.0
241.0
460.8
530.3
232.0
283.2
390.1
503.5
Other non-current liabilities
1.4
2.8
37.2
–
12.8
17.1
509.8
456.2
Total non-current liabilities
249.4
243.8
498.0
530.3
244.8
300.3
899.9
959.7
–
–
–
–
–
–
653.1
13.4
666.5
1.1
–
1.1
Net assets (100%)
463.4
432.6
671.3
730.3
233.7
378.8 1,409.7 1,378.9
838.5
587.6 3,606.4 3,489.0
Summarised statement
of comprehensive income
Revenue
43.4
44.5
100.0
63.9
519.6
440.3
193.3
159.9
17.0
16.7
170.1
80.0
Net finance (expense)/income
(7.6)
(9.0)
(5.6)
Income tax expense
–
–
(22.3)
(8.3)
(4.1)
(0.8)
(3.1)
(0.7)
(2.9)
(22.4)
(23.9)
(20.7)
(21.4)
52.0
(5.6)
(18.0)
–
–
(0.4)
(0.2)
(0.4)
Profit after tax
and revaluations
50.0
43.9
80.2
108.6
98.8
109.7
151.4
613.2
44.5
61.9
301.6
333.7
Other comprehensive income
–
–
–
–
–
–
(129.0)
(198.8)
–
–
–
–
Total comprehensive
income (100%)
104
50.0
43.9
80.2
108.6
98.8
109.7
22.4
414.4
44.5
61.9
301.6
333.7
Annual Report 2020
KGIP
KGG1
GJDP
GCLP2
GUKP
GNAP
2020
$M
2019
$M
2020
$M
2019
$M
2020
$M
2019
$M
2020
$M
2019
$M
2020
$M
2019
$M
2020
$M
2019
$M
40.0% 40.0% 20.5% 19.3% 50.0% 50.0% 20.0% 20.0% 33.3% 33.3% 55.0% 55.0%
185.4
173.0
137.4
140.8
116.9
189.4
282.0
275.8
279.5
195.8 1,983.5 1,919.0
–
–
–
–
–
–
–
–
–
–
–
–
451.9
411.2
–
–
–
–
2.4
–
2.6
–
3.4
–
3.3
(2.5)
–
–
0.5
–
5.0
–
4.9
–
Goodman
Consolidated
ownership interest
Consolidated share
of net assets
Shareholder loan2
Other items, including
capitalised costs
Distributions receivable
3.8
3.3
Carrying amount
of investment
Distributions/dividends
received and receivable
GIT
Consolidated
ownership interest
Consolidated share
of net assets
Other items, including
capitalised costs
Distributions receivable
Carrying amount
of investment in JV
Distributions/dividends
received and receivable
189.2
176.3
137.4
140.8
119.3
192.0
737.2
690.3
277.0
196.3 1,988.5 1,923.9
7.1
7.7
20.4
7.6
163.7
82.8
3.1
11.7
–
–
53.6
33.1
40.0% 40.0%
185.4
173.0
–
3.8
–
3.3
189.2
176.3
7.1
7.7
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
53.0% 53.0%
–
1,911.4 1,849.2
–
–
5.0
–
4.8
–
– 1,916.4 1,854.0
–
51.6
31.9
1. The consolidated ownership interest in KGG reflected the weighted average ownership in the various property investment vehicles.
2.
Shareholder loans have been provided by investors of GCLP in proportion to their ownership interest. The shareholder loans are interest free, unsecured and have
no fixed terms of repayment. The shareholder loans are not expected to be repaid within 12 months from the end of the reporting period and the Directors consider
the loans to form part of Goodman’s investment in GCLP.
With respect to Goodman’s other JVs, the total profit after tax and revaluations was $92.9 million (2019: $71.3 million) and total other
comprehensive income was $nil (2019: $nil). With respect to GIT’s other JVs, the total profit after tax and revaluations was $107.5 million
(2019: $72.2 million) and total other comprehensive income was $nil (2019: $nil).
105
Goodman Group
Notes to the consolidated financial statements
Operating assets and liabilities (continued)
7 Receivables
8 Contract balances
Receivables comprise trade and other receivables and loans
to related parties and are recognised on the date that they
are originated, initially at fair value plus any directly attributable
transaction costs. Subsequent to initial recognition, receivables
are measured at amortised cost using the effective interest rate
method, less any impairment losses.
Receivables are derecognised when the contractual rights to
the cash flows from the receivable expire or the Group transfers
the rights to receive the contractual cash flows on the receivable
in a transaction in which substantially all the risks and rewards
of the receivable are transferred.
Contract assets primarily comprise amounts recoverable from
fixed price development contracts (disclosed net of any payments
received on account) and accrued performance fee income where
the Group assesses that the income can be reliably measured.
Contract liabilities primarily comprise consideration received
in advance of the completion of development contracts and
rental guarantees.
The following table provides an analysis of receivables from
contracts with customers (excluding rental income receivables),
contract assets and contract liabilities at the reporting dates:
Current
Trade receivables
Tax receivables
Other receivables
Amounts due from
related parties1
Goodman
2020
$M
2019
$M
GIT
2020
$M
2019
$M
Current
15.6
11.0
9.0
7.6
91.6
111.6
2.7
3.0
4.3
–
–
Receivables, which are included
in trade receivables, other receivables
and amounts due from related parties
13.8
Contract assets
Contract liabilities
Non-current
Contract liabilities
Goodman
2020
$M
2019
$M
146.1
145.2
25.7
308.1
12.3
6.0
1.5
3.0
132.4
119.4
0.3
3.0
Loans to related parties1
33.7
–
1,591.8 1,825.0
282.3
249.6
1,602.1 1,841.8
Non-current
Other receivables
8.1
8.4
–
–
Loans to related parties1
100.2
116.3
1,487.4
1,431.3
108.3
124.7
1,487.4 1,431.3
1. Refer to note 24 for details of amounts due from and loans to related parties.
The Group’s trade receivables balances make up only a small
proportion of the consolidated net assets. The majority of
customers have paid and continue to pay rental income in line with
agreed leases. Goodman has provided limited short-term rental
assistance for some customers and has assessed the receivables
balances at 30 June 2020 for expected credit losses (risk of
non-payment). However, the level of provisioning was not significant
in the context of the Group’s financial position.
106
Annual Report 2020
Significant changes in the contract assets and the contract liabilities balances during the year are set out below:
Balance at the beginning of the year
Revenue recognised that was included in the contract
liability balance at the beginning of the year
Increases due to cash received, excluding amounts
recognised as revenue during the year
Transfers from contract assets to receivables
Increase due to changes in the measure of progress during the year
Effect of foreign currency translation
Balance at the end of the year
Current contract assets and liabilities
Non-current contract liabilities
2020
Contract
assets
$M
308.1
–
–
(823.9)
531.3
10.2
25.7
25.7
–
25.7
Goodman
Contract
liabilities
$M
9.0
(1.6)
6.5
(0.1)
–
–
13.8
12.3
1.5
13.8
2019
Contract
assets
$M
Contract
liabilities
$M
145.4
26.4
–
–
(481.2)
635.1
8.8
308.1
308.1
–
308.1
(17.6)
–
–
–
0.2
9.0
6.0
3.0
9.0
Transaction price allocated to the remaining contract obligations
The amount of the transaction price allocated to the remaining performance obligations under Goodman’s existing contracts was
$14.3 million. This amount represents revenue expected to be recognised in the future from ongoing management and fixed price
development contracts with customers. Goodman will recognise the expected revenue in the future as the work is completed,
which is expected to be within the next 12 months.
Details regarding Goodman’s future rental income associated with existing lease agreements is included in note 6.
In addition, Goodman receives investment management, development management and property services fees under various contracts
that it has with its Partnerships. These contracts are for varying lengths of time and are typically transacted on terms that are consistent
with market practice. The revenues under these contracts are linked to the assets under management, total development project costs
or gross property income of Partnerships and are invoiced as the services are provided.
9 Assets held for sale
In March 2020, the Group together with GEP entered into an agreement with a third party to dispose a portfolio of property assets and
the Group’s operating platform in the Czech Republic, Hungary, Poland and Slovakia. The disposal was completed on 8 July 2020.
Accordingly, at 30 June 2020, the directly held assets and liabilities to be disposed have been presented as a disposal group held for sale.
107
Goodman Group
Notes to the consolidated financial statements
Operating assets and liabilities (continued)
9 Assets held for sale (continued)
Assets and liabilities of disposal group held for sale
11 Provisions
At 30 June 2020, the disposal group was held at the lower of
carrying amount, and fair value less costs to sell, and comprised
of the following assets and liabilities within the Continental
Europe segment:
A provision is recognised when there is a legal, equitable or
constructive obligation as a result of a past event and it is probable
that a future sacrifice of economic benefits will be required to settle
the obligation, the timing or amount of which is uncertain.
Current
Dividends/
distributions to
Securityholders
Other provisions
Non-current
Net defined benefit
superannuation
funds in the
United Kingdom
Other provisions
Goodman
2020
$M
2019
$M
Note
GIT
2020
$M
2019
$M
19
274.3
272.1
201.1
181.4
15.1
12.9
–
–
289.4
285.0
201.1
181.4
24.8
18.5
4.2
8.8
29.0
27.3
–
–
–
–
–
–
12 Property, plant and equipment
Property, plant and equipment at cost
Accumulated amortisation
Property, plant and equipment
at net book value1
2020
$M
115.6
(64.7)
2019
$M
59.4
(43.1)
50.9
16.3
1. Refer to note 13 for property, plant and equipment held as a lessee.
Cash
Receivables
Inventories
Investments accounted for
using the equity method
Other assets
Payables1
Assets held for sale
Note
21(a)
6f(ii)
$M
10.9
6.5
89.0
11.2
6.9
(12.0)
112.5
1.
Excludes $77.7 million payable to fellow controlled entities in Goodman Group
as these amounts are eliminated on consolidation.
No impairment losses have been recognised in FY20 in respect
of the disposal group.
10 Payables
Trade and other payables are recognised initially at trade date fair
value plus any directly attributable transaction costs. Subsequent
to initial recognition, trade and other payables are measured at
amortised cost.
Trade and other payables are derecognised when the contractual
obligations are discharged or cancelled or expire.
Financial assets and liabilities are offset and the net amount
presented in the statement of financial position when, and only
when, there is a legal right to offset the amounts and an intention
to either settle on a net basis or to realise the asset and settle
the liability simultaneously.
Current
Trade payables
Other payables
and accruals
Contract liabilities
Loans from related parties1
Non-current
Other payables
and accruals
Contract liabilities
Loans from related parties1
Goodman
2020
$M
2019
$M
GIT
2020
$M
2019
$M
74.8
73.2
0.8
3.0
497.4
380.1
125.8
119.8
12.3
–
6.0
–
–
–
528.7
584.8
584.5
459.3
655.3
707.6
83.9
169.5
0.2
50.0
1.5
–
3.0
–
–
–
231.3
102.3
85.4
172.5
231.5
152.3
1. Refer to note 24 for details of loans from related parties.
108
Annual Report 2020
13 Leases
Impairment
Refer to note 1(d) for the accounting policy on leases.
Information about leases for which Goodman is a lessee is
detailed below:
Right of use assets
Inventories
Investment properties
Property, plant and equipment
Lease liabilities
Current
Non-current
The following were recognised during the year:
Additions to right of use assets
Depreciation for right of use assets
Interest expense on lease liabilities
Cash outflows on lease liabilities
The carrying amounts of goodwill and management rights are
tested annually for impairment. For the purpose of impairment
testing, goodwill and management rights are allocated to the
related cash-generating units monitored by management.
An impairment loss is recognised whenever the carrying
amount of the cash-generating unit exceeds its recoverable
amount. Recoverable amount is the greater of the fair value (net
of disposal costs) and the value in use but given that goodwill
and management rights are not frequently traded (i.e. fair value is
difficult to ascertain), the recoverable amount will be equal to the
value in use of the cash-generating unit. In assessing value in use,
the estimated future cash flows are discounted to their present
value using a pre-tax discount rate that reflects current market
assessments of the time value of money and the risks specific
to the cash-generating unit.
Impairment losses are recognised in the income statement.
Impairment losses recognised in respect of cash-generating
units are allocated first to reduce the goodwill allocated to
the cash-generating unit, then to the carrying amount of the
management rights allocated to the cash-generating unit and
then to reduce the carrying amount of the other assets in the
cash-generating unit on a pro rata basis.
An impairment loss in respect of goodwill is not reversed. An
impairment loss for management rights is reversed only to the
extent that its carrying amount does not exceed its original cost.
A summary of Goodman’s goodwill and intangible assets are set
out by below:
2020
$M
28.4
71.6
37.1
137.1
17.6
29.2
46.8
2020
$M
47.9
17.1
1.3
17.7
14 Goodwill and intangible assets
Goodman recognises both goodwill and indefinite life management
rights in its statement of financial position.
Goodwill
Goodwill arising on the acquisition of controlled entities is stated
at cost less any accumulated impairment losses (refer below).
No amortisation is provided.
Management rights
When fund and/or investment management activities are acquired
as part of a business combination, management rights are
recorded where they arise from contractual or other legal rights,
and the fair value can be measured reliably.
Management rights are stated at cost less impairment.
Management rights are not amortised as they are assumed to have
an indefinite life given they are routinely renewed at minimal cost
and on broadly similar terms.
Goodwill
Management rights
Goodman
2019
$M
730.8
109.2
840.0
2020
$M
735.1
110.7
845.8
The carrying value of goodwill and intangible assets is analysed
by division in the table below:
2020
$M
2019
$M
Analysed:
Goodwill
Continental Europe
United Kingdom
Other
Subtotal – goodwill
Management rights
Continental Europe
Other
Subtotal – management rights
Total
620.8
88.4
25.9
735.1
35.3
75.4
110.7
845.8
615.9
89.2
25.7
730.8
35.0
74.2
109.2
840.0
109
Goodman Group
Notes to the consolidated financial statements
Operating assets and liabilities (continued)
14 Goodwill and intangible assets (continued)
A reconciliation of the movement in the cost of goodwill and management rights during the financial year is set out below:
Cost
Goodwill
Continental Europe
United Kingdom
Other
Subtotal – goodwill
Management rights
Continental Europe
Other
Subtotal – management rights
Total
Balance at
30 June 2018
$M
Effect of
foreign currency
translation
$M
Balance at
30 June 2019
$M
Effect of
foreign currency
translation
$M
Balance at
30 June 2020
$M
608.0
127.1
31.4
766.5
34.1
81.5
115.6
882.1
15.6
1.9
2.0
19.5
0.9
4.2
5.1
24.6
623.6
129.0
33.4
786.0
35.0
85.7
120.7
906.7
5.0
(1.1)
0.3
4.2
0.3
1.5
1.8
6.0
628.6
127.9
33.7
790.2
35.3
87.2
122.5
912.7
A reconciliation of the movement in the impairment losses during the financial year is set out below:
Impairment losses
Goodwill
Continental Europe
United Kingdom
Other
Subtotal – goodwill
Management rights
Other
Subtotal – management rights
Total
Balance at
30 June 2018
$M
Effect of
foreign currency
translation
$M
Balance at
30 June 2019
$M
Effect of
foreign currency
translation
$M
Balance at
30 June 2020
$M
7.5
39.2
7.5
54.2
11.2
11.2
65.4
0.2
0.6
0.2
1.0
0.3
0.3
1.3
7.7
39.8
7.7
55.2
11.5
11.5
66.7
0.1
(0.3)
0.1
(0.1)
0.3
0.3
0.2
7.8
39.5
7.8
55.1
11.8
11.8
66.9
110
Annual Report 2020
Impairments and reversals of impairments
There were no impairment losses or reversals of impairment losses during either the current or prior financial year.
Impairment testing for intangible assets
The carrying values of both goodwill and indefinite life management rights are assessed for impairment annually. For the purpose of
impairment testing, goodwill and indefinite life management rights are allocated to the Goodman divisions that represent the lowest level
within Goodman at which the goodwill and indefinite life management rights are monitored for internal management purposes. Where
goodwill and management rights arise in the same division, impairment testing has been performed on the combined intangible asset.
The impairment tests for all intangible assets are based on each division’s value in use. Value in use is determined by discounting the
future projected cash flows generated from continuing operations. These cash flows are for a five year period, with a year five terminal
value calculated using a terminal growth rate and an appropriate discount rate for each division.
The key drivers of value in respect of the intangible assets are:
+
+
Development cash flows, which are impacted by development volumes and margins and whether the developments are
undertaken directly by Goodman or directly by Partnerships or in joint venture with Partnerships
Management cash flows, which are driven by the level of AUM and net property income in Partnerships and, in the case of portfolio
performance fee income, the long-term performance of the Partnerships.
The estimation of future cash flows requires assumptions to be made regarding uncertain future events. The cash flows do not assume
a downturn in earnings that might arise in the event of a significant adverse change in market conditions for the Group. The cash flows
also assume that Goodman’s management contracts with Partnerships have an indefinite life. This is on the basis that in the past these
contracts have been typically renewed at minimal cost and on broadly similar financial terms.
When assessing a potential impairment, the value in use is compared against the sum of the intangible asset balance and the plant and
equipment balance for each division.
Key assumptions
Value in use (A$M)
Pre-tax discount rate (per annum)
Average annual development (million square metres)
Average annual growth in assets under management (AUM)
Continental Europe
United Kingdom
2020
2019
2020
2019
2020
2019
2020
2019
2,341.7
1,388.1
9.4%
11.1%
0.60
0.77
3.4%
7.9%
153.6
138.4
8.6%
9.5%
0.16
0.18
28.9%
39.2%
All amounts were calculated in local currency and translated to Australian dollars at the closing exchange rate at the end of the financial
period. Averages related to average amounts over the 5 year forecast period.
Value in use
The increase in the Continental Europe value in use compared to the prior year reflects the strategic focus on high value real estate.
Following the disposal of the operations in central and eastern Europe, the Group will concentrate its management and capital resources
to activities in Goodman’s core western and southern markets. The scale of the Group’s development projects will continue to grow due
to the high value nature of the sites and the complexity associated with development of infill locations. This is expected to result in higher
margins, commensurate with the increased scale and complexity of the projects, sustaining development earnings for the long term.
The value in use for the United Kingdom has increased compared to the prior year due to the growth in GUKP over the past 12 months.
Discount rates
The post-tax discount rates were determined using the capital asset pricing model, with individual assumptions referenced to market
data, where available, and adjusting for specific factors associated with each division. A risk premium was included in each division’s
discount rate, reflecting the level of forecasting, size, country and financing risks for that division. The value in use was determined using
the after-tax cash flows and the post-tax discount rates, with the discount rates then converted to the equivalent pre-tax rates.
111
Goodman Group
Notes to the consolidated financial statements
Operating assets and liabilities (continued)
14 Goodwill and intangible assets (continued)
Developments
Demand for modern, well-located industrial product in both Continental Europe and the United Kingdom remains strong. Earnings forecasts
for each division include projects which have not yet been contracted.
Continental Europe
The activities will be focused on core markets in western and southern Europe. The average annual development activity over the next five
years is expected to be 0.6 million square metres and the estimated cash outflow from Goodman and Partnerships required to fund the
assumed development pipeline across the forecast period is A$0.9 billion per annum.
United Kingdom
The activity will continue to be focused on the core markets close to London and along the M1 corridor. In the short term, developments
will include a number of sites that have already been acquired. The division’s development activity over the next five years is forecast to be
0.16 million square metres per annum, on average, which will be undertaken by GUKP, with Goodman earning development management
fee income. The estimated cash outflow from Goodman and GUKP required to finance the assumed development pipeline across the
forecast period is A$0.32 billion per annum.
Sources of funding for development activity
Capital inflows required to fund acquisitions and development activity in both divisions are assumed to arise from the following sources:
equity investment directly into Partnerships (including distribution reinvestment plans) by Goodman and its investment partners (in
some cases, the projections assume future equity investment will be greater than existing commitments); lending facilities advanced to
Partnerships; debt capital markets; customer-funded turnkey developments; and proceeds from disposals of assets. It is not practicable
to determine the percentage of the total which will flow from each source.
Funds available to Goodman and its investment partners are assumed to be sourced from available global markets and are not limited
to lending markets in the regions to which the relevant intangible asset relates.
AUM
For Continental Europe, the average annual increase in AUM of 3.4% (2019: 7.9%) over the forecast period is lower than the prior year
forecasts due to the disposal of assets in central and eastern Europe. The projected AUM assumes that most of the development over
the forecast period is for Partnerships. For the purpose of the value in use assessments, capitalisation rates are expected to be stable
over the period and no portfolio performance revenue is assumed.
For United Kingdom, the significant percentage growth in AUM over the period reflects the fact that GUKP is a relatively new Partnership,
with AUM forecast to grow from £0.5 billion to approximately £1.6 billion. During FY20, GUKP secured a number of sites that will be
developed over the next three years and underpin the projected growth. For the purpose of the forecasts, capitalisation rates are
expected to be stable over the period.
Assumptions impacting the terminal year
Growth rate applied to future cash flows (per annum)
Development in terminal year (million square metres)
Development in terminal year (cost in A$B)
2020
2019
2020
2019
2020
2019
Continental Europe
United Kingdom
0.6%
1.0%
0.60
0.70
0.96
0.99
1.0%
1.6%
0.19
0.18
0.36
0.36
Long-term growth rates have been used to extrapolate cash flow projections beyond the period covered by the five year forecast.
For both Continental Europe and United Kingdom, the growth rate was based on the consumer price indices.
The forecast cost of developments in year five represents the estimated total funding requirements for both directly held developments
and developments within Partnerships. The cost of developments in Australian dollars has remained relatively stable.
112
Annual Report 2020
CAPITAL MANAGEMENT
The notes in this section focus on Goodman and GIT’s financing activities, capital structure and management of the financial risks involved.
15 Net finance (expense)/income
Interest income and expense are recognised using the effective interest rate method.
Finance costs relating to a qualifying asset are capitalised as part of the cost of that asset using a weighted average cost of debt.
Qualifying assets are assets which take a substantial time to get ready for their intended use or sale. All other finance costs are expensed
using the effective interest rate method.
Finance income
Interest income from:
– Related parties
– Other parties
Fair value adjustments on derivative financial instruments
Foreign exchange gains
Finance expense
Goodman
2020
$M
1.3
11.9
–
–
13.2
Interest expense from third party loans, overdrafts and derivatives
(86.6)
Interest expense from related party loans
Other borrowing costs
Fair value adjustments on derivative financial instruments
Foreign exchange losses
Capitalised borrowing costs1
Net finance (expense)/income
–
(8.7)
(9.4)
(0.1)
11.4
(93.4)
(80.2)
2019
$M
0.4
39.1
6.7
–
46.2
(91.8)
–
(7.7)
–
(10.3)
14.3
(95.5)
(49.3)
GIT
2020
$M
123.2
9.9
–
–
133.1
(98.9)
(9.5)
(16.2)
(6.0)
(26.6)
–
(157.2)
(24.1)
2019
$M
79.3
36.4
38.5
13.2
167.4
(89.5)
(19.6)
(5.0)
–
–
–
(114.1)
53.3
1.
Borrowing costs were capitalised to inventories and investment properties under development during the financial year at rates between 1.7% and 4.2% per annum
(2019: 2.5% and 4.9% per annum).
113
Goodman Group
Notes to the consolidated financial statements
Capital management (continued)
16 Interest bearing liabilities
Interest bearing liabilities comprise bank loans, notes issued in the capital markets and private placements. Interest bearing liabilities are
recognised initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, interest bearing liabilities
are measured at amortised cost using the effective interest rate method.
Current
Unsecured:
– USD denominated notes
Non-current
Unsecured:
– Bank loans
– USD denominated notes
–
–
EUR denominated notes
Foreign private placement
Borrowing costs
(a) Bank loans, unsecured
Facility maturity date
30 Sep 2022
30 Sep 2022
30 Sep 2022
31 Mar 2023
1 Jul 2023
31 Dec 2023
30 Jun 2024
31 Jul 2024
30 Sep 2024
30 Sep 2024
31 Dec 2024
30 Jun 2020
30 Jun 2019
Note
16(b)
16(a)
16(b)
16(c)
16(d)
Goodman
2020
$M
260.1
260.1
50.0
1,659.2
815.9
168.3
(15.0)
2019
$M
–
–
112.4
1,904.9
810.0
165.3
(17.6)
GIT
2020
$M
260.1
260.1
50.0
1,659.2
815.9
168.3
(14.0)
2019
$M
–
–
–
1,904.9
810.0
165.3
(15.9)
2,678.4
2,975.0
2,679.4
2,864.3
Goodman
GIT
Facility limit
$M
Amounts drawn
$M
Facility limit
$M
Amounts drawn
$M
107.7
201.9
201.9
75.0
50.0
50.0
75.0
145.1
54.4
37.5
122.4
1,120.9
1,198.0
–
–
–
–
50.0
–
–
–
–
–
–
50.0
112.4
–
–
–
75.0
50.0
50.0
75.0
145.1
54.4
37.5
122.4
609.4
695.6
–
–
–
–
50.0
–
–
–
–
–
–
50.0
–
The majority of the unsecured bank loans are multi-currency facilities.
114
Annual Report 2020
(b) USD denominated notes
As at 30 June 2020, Goodman and GIT had notes on issue in the United States 144A/Reg S bond market as follows:
Notes maturity date
15 Apr 2021
22 Mar 2022
15 Mar 2028
15 Oct 2037
30 Jun 2020
30 Jun 2019
Carrying amount
Face value
Coupon (fixed)
A$M
260.1
425.5
762.0
471.7
1,919.3
1,904.9
US$M
179.2
293.2
525.0
325.0
1,322.4
1,335.5
A$M
253.3
405.3
762.0
471.7
1,892.3
1,859.6
US$M
per annum
6.375%
6.000%
3.700%
4.500%
174.5
279.3
525.0
325.0
1,303.8
1,303.8
On 14 July 2020, a notice of early redemption was issued in relation to the outstanding principal amount of the notes due for payment
on 15 April 2021. This transaction is due to settle on 14 August 2020. These notes are disclosed as a current liability in the consolidated
statements of financial position of Goodman and GIT.
(c) EUR denominated notes
As at 30 June 2020, Goodman and GIT had A$815.9 million (2019: A$810.0 million) (€500.0 million) Reg S EUR denominated senior notes
on issue. The notes have a fixed coupon of 1.375% per annum and mature on 27 September 2025.
115
Goodman Group
Notes to the consolidated financial statements
Capital management (continued)
16 Interest bearing liabilities (continued)
(d) Foreign private placement
As at 30 June 2020, Goodman and GIT had A$168.3 million (2019: A$165.3 million)(¥12.5 billion) in a foreign private placement
denominated in Japanese yen. The facility has a fixed coupon of 3.32% per annum payable semi-annually and expires on 3 April 2023.
(e) Finance facilities
30 June 2020
Unsecured:
– Bank loans
– USD denominated notes1
–
–
EUR denominated notes
Foreign private placement
– Bank guarantees2
30 June 2019
Unsecured:
– Bank loans
– USD denominated notes1
–
–
EUR denominated
Foreign private placement
– Bank guarantees2
Goodman
Facilities
available
$M
Facilities
utilised
$M
GIT
Facilities
available
$M
Facilities
utilised
$M
1,120.9
1,892.3
815.9
168.3
–
50.0
1,892.3
815.9
168.3
32.8
609.4
1,892.3
815.9
168.3
–
50.0
1,892.3
815.9
168.3
–
3,997.4
2,959.3
3,485.9
2,926.5
1,198.0
1,859.6
810.0
165.3
–
112.4
1,859.6
810.0
165.3
22.5
695.6
1,859.6
810.0
165.3
–
–
1,859.6
810.0
165.3
–
4,032.9
2,969.8
3,530.5
2,834.9
1.
2.
Facilities available and facilities utilised in respect of the USD denominated notes represent the face value of the notes on issue and exclude the fair value adjustment
of A$27.0 million (2019: A$45.3 million) that is being amortised over the period to maturity.
Bank guarantees are drawn from facilities available under unsecured bank loans. The guarantees are not reflected as a liability in the statements of financial position.
17 Other financial assets and liabilities
Other financial assets and liabilities primarily comprise derivative financial instruments that are recognised initially on the trade date at
which Goodman and GIT become a party to the contractual provisions of the instrument.
Derivative financial instruments and hedging
Goodman and GIT use derivative financial instruments to hedge their economic exposure to foreign exchange and interest rate risks
arising from operating, investing and financing activities. In accordance with the Group’s Financial Risk Management policy, Goodman
and GIT do not hold or issue derivative financial instruments for speculative trading purposes.
Goodman and GIT’s derivative financial instruments are not designated as a hedge for accounting purposes, and accordingly movements
in the fair value of derivative financial instruments are recognised in the income statement.
Cash flow hedges
Certain of Goodman and GIT’s associates and JVs continue to designate derivative financial instruments as cash flow hedges for
accounting purposes. Goodman’s and GIT’s share of the effective portion of changes in the fair value of derivative financial instruments in
associates and JVs that are designated and qualify as cash flow hedges is recognised in the cash flow hedge reserve. The gain or loss
relating to any ineffective portion is recognised in the income statement.
116
Annual Report 2020
Other financial assets
Current
Derivative financial instruments
Non-current
Derivative financial instruments1
Investment in unlisted securities, at fair value
Goodman
2020
$M
59.3
59.3
405.8
3.0
408.8
2019
$M
1.3
1.3
337.7
2.7
340.4
GIT
2020
$M
59.3
59.3
424.4
19.7
444.1
2019
$M
1.3
1.3
373.9
25.1
399.0
1.
Includes fair values of derivative financial instruments equating to $292.5 million (2019: $222.4 million) that hedge Goodman’s net investments in Continental Europe
and the United Kingdom.
Other financial liabilities
Current
Derivative financial instruments
Non-current
Derivative financial instruments1
Goodman
GIT
2020
$M
50.4
50.4
331.0
331.0
2019
$M
12.1
12.1
236.4
236.4
2020
$M
50.4
50.4
302.6
302.6
2019
$M
12.1
12.1
229.7
229.7
1.
Includes fair values of derivative financial instruments equating to $194.0 million (2019: $123.6 million) that hedge Goodman’s net investments in Continental Europe
and the United Kingdom.
117
Goodman Group
Notes to the consolidated financial statements
Capital management (continued)
18 Financial risk management
(a) Market risk
Foreign exchange risk
Goodman is exposed to foreign exchange risk through its
investments in New Zealand, Hong Kong, China, Japan,
Continental Europe, the United Kingdom, North America and
Brazil. Foreign exchange risk represents the gain or loss that would
be recognised from fluctuations in currency prices against the
Australian dollar as a result of Goodman’s net investment in foreign
operations, future commercial transactions, and other foreign
currency denominated assets and liabilities.
In managing foreign exchange risks, Goodman aims to reduce
the impact of short-term fluctuations on Goodman’s earnings and
net assets. However, over the long term, permanent changes in
foreign exchange rates will have an impact on both earnings and
net assets.
Goodman’s capital hedge policy for each overseas region is to
hedge between 65% and 90% of foreign currency denominated
assets with foreign currency denominated liabilities. This is
achieved by borrowing in the same currency as the overseas
investments to form a natural economic hedge against any
foreign currency fluctuations and/or using derivatives such as
cross currency interest rate swaps (CCIRS) and foreign exchange
contracts (FEC).
The Group’s hedge position is monitored on an ongoing basis and
the Group will enter into new derivatives (including forward start
contracts) and close out or enter into contra derivative contracts
to manage the capital hedge position.
The Directors have ultimate responsibility for Goodman’s financial
risk management (FRM) processes and have established policies,
documented in the FRM policy, to manage Goodman’s exposure
to financial risks and to utilise capital in an efficient manner.
Goodman’s treasury function is responsible for monitoring the day
to day compliance with the Group’s FRM policies and prepares
reports for consideration by management committees and the
Board including:
+
+
+
+
Cash flow projections over a period of at least 12 months
to assess the level of cash and undrawn facilities, and
headline gearing at each month end
Debt maturity profile, to allow the Group to plan well in
advance of maturing facilities
Interest rate hedge profile over the next 10 years, to allow
the Group to manage the proportion of fixed and floating rate
debt in accordance with its FRM policy
Capital hedge position (by currency) and profile of expiring
currency derivatives, to allow the Group to manage its net
investment hedging in accordance with its FRM policy.
Any significant investments or material changes to the finance
facilities or FRM policies require approval by the Board.
Capital management
Goodman’s principal capital management objectives are to
maintain a strong capital base and provide funds for operating
activities (including development expenditure), capital expenditure
and investment opportunities as they arise. This is achieved
through an appropriate mix of debt and equity.
Goodman is able to alter the capital mix by issuing new Goodman
debt and equity securities or hybrid securities, by reinstating
the distribution reinvestment plan, by adjusting the timing of
development and capital expenditure and by selling assets to
reduce borrowings. Goodman also manages capital through its
distribution policy in which distributions made to Securityholders
are based on the Group’s operating profit, subject to a minimum
distribution equal to the taxable income of the Trust.
Goodman’s key financial risks are market risk (including foreign
exchange and interest rate risk), liquidity risk and credit risk.
118
Annual Report 2020
As at 30 June 2020, the principal that was used to hedge its exposures using derivatives and the weighted average exchange rates,
by currency, are set out below:
Goodman
2020
2019
Amounts
payable
Amounts
receivable
Weighted
average
exchange rate
Amounts
payable
Amounts
receivable
Weighted
average
exchange rate
NZD'M
(400.0)
HKD'M
(5,190.0)
EUR'M
(495.0)
GBP'M
(280.0)
USD'M
(450.0)
JPY'M
(21,000.0)
CNY'M
(3,823.9)
A$M
368.3
A$M
908.6
A$M
803.0
A$M
496.6
A$M
634.6
A$M
278.3
US$'M
500.0
AUD/NZD
1.0864
AUD/HKD
5.7260
AUD/EUR
0.6165
AUD/GBP
0.5660
AUD/USD
0.7141
AUD/JPY
NZD'M
(400.0)
HKD'M
(4,690.0)
EUR'M
(495.0)
GBP'M
(280.0)
USD'M
(450.0)
JPY'M
75.4695
(13,000.0)
USD/CNY
7.6477
CNY'M
(2,649.0)
A$M
368.3
A$M
817.7
A$M
803.0
A$M
496.6
A$M
634.6
A$M
168.9
US$'M
372.1
AUD/NZD
1.0864
AUD/HKD
5.7382
AUD/EUR
0.6165
AUD/GBP
0.5660
AUD/USD
0.7092
AUD/JPY
77.0115
USD/CNY
7.1189
2020
2019
Amounts
payable
Amounts
receivable
Weighted
average
exchange rate
Amounts
payable
Amounts
receivable
Weighted
average
exchange rate
NZD'M
(400.0)
HKD'M
(5,190.0)
GBP'M
(280.0)
USD'M
(450.0)
JPY'M
(21,000.0)
CNY'M
–
A$M
368.3
A$M
908.6
A$M
496.6
A$M
634.6
A$M
278.3
US$'M
–
AUD/NZD
1.0864
AUD/HKD
5.7260
AUD/GBP
0.5660
AUD/USD
0.7141
AUD/JPY
NZD'M
(400.0)
HKD'M
(4,690.0)
GBP'M
(280.0)
USD'M
(450.0)
JPY'M
75.4695
(13,000.0)
USD/CNY
–
CNY'M
(2,649.0)
A$M
368.3
A$M
817.7
A$M
496.6
A$M
634.6
A$M
168.9
US$'M
372.1
AUD/NZD
1.0864
AUD/HKD
5.7382
AUD/GBP
0.5660
AUD/USD
0.7092
AUD/JPY
77.0115
USD/CNY
7.1189
AUD receivable/NZD payable
AUD receivable/HKD payable
AUD receivable/EUR payable
AUD receivable/GBP payable
AUD receivable/USD payable
AUD receivable/JPY payable
USD receivable/CNY payable
GIT
AUD receivable/NZD payable
AUD receivable/HKD payable
AUD receivable/GBP payable
AUD receivable/USD payable
AUD receivable/JPY payable
USD receivable/CNY payable
In addition to the derivatives detailed in the table above, GIT also has a FEC with a controlled entity of GL to hedge that entity’s USD
exposure. On maturity of the contract, GIT will receive USD 81.8 million from GL (2019: USD 240.0 million) and pay GBP 53.8 million to GL
(2019: GBP 156.2 million).
119
Goodman Group
Notes to the consolidated financial statements
Capital management (continued)
18 Financial risk management (continued)
Sensitivity analysis
Throughout the financial year, if the Australian dollar had been 5% stronger against all other currencies, with all other variables held
constant, the profit attributable to Securityholders, excluding derivative mark to market and unrealised foreign exchange movements,
would have decreased by A$58.2 million (2019: A$56.0 million decrease) for Goodman and A$22.7 million (2019: A$18.0 million) for
GIT. If the Australian dollar had been 5% weaker against all other currencies, with all other variables held constant, the profit attributable
to Securityholders, excluding derivative mark to market and unrealised foreign exchange movements, would have increased by
A$58.2 million (2019: A$56.0 million increase) for Goodman and A$22.7 million (2019: A$18.0 million) for GIT.
Interest rate risk
Goodman’s interest rate risk arises from variable rate borrowings and the Group’s CCIRS that hedge the overseas investments. Goodman
adopts a policy of hedging such that between 60% and 100% of its current year exposure to changes in interest rates on borrowings
is on a fixed rate basis. Goodman enters into interest rate derivatives (IRD), comprising both interest rate swaps and interest rate caps,
to manage cash flow risks associated with the interest rates on borrowings that are floating. The IRD contracts are for 90 day intervals
and involve quarterly payments or receipts of the net amount of interest.
As at 30 June 2020, Goodman and GIT’s fixed and floating interest rate exposure (by principal) based on existing interest bearing liabilities
and derivative financial instruments is set out below:
Goodman
30 June 2020
Fixed rate liabilities
Floating rate liabilities/(assets)
30 June 2019
Fixed rate liabilities
Floating rate liabilities
GIT
30 June 2020
Fixed rate liabilities
Floating rate liabilities
30 June 2019
Fixed rate liabilities
Floating rate liabilities
Interest bearing
liabilities
A$M
Impact of
derivatives CCIRS
A$M
2,903.5
50.0
2,953.5
2,880.2
112.4
2,992.6
–
41.1
41.1
–
72.8
72.8
Interest bearing
liabilities
A$M
Impact of
derivatives CCIRS
A$M
2,903.5
50.0
2,953.5
2,880.2
–
2,880.2
–
36.3
36.3
–
73.9
73.9
IRD
A$M
156.9
(156.9)
–
176.9
(176.9)
–
IRD
A$M
(169.4)
169.4
–
176.9
(176.9)
–
Net
position
A$M
3,060.4
(65.8)
2,994.6
3,057.1
8.3
3,065.4
Net
position
A$M
2,734.1
255.7
2,989.8
3,057.1
(103.0)
2,954.1
As a result of the fixed rate interest bearing liabilities and derivative financial instruments that existed at 30 June 2020, Goodman and
GIT would have the following fixed interest rate exposure (by principal) at the end of each of the next five financial years. This assumes
all interest bearing liabilities and derivative financial instruments mature in accordance with current contractual terms.
120
Annual Report 2020
Goodman
Number of years
post balance date
1 year
2 years
3 years
4 years
5 years
GIT
2020
2019
Fixed interest rate
(by principal)
A$M
Weighted average
interest rate
% per annum
Fixed interest rate
(by principal)
A$M
Weighted average
interest rate
% per annum
2,962.1
2,730.9
2,777.1
2,977.2
2,694.0
3.02
2.51
2.04
1.91
2.13
2,962.9
2,834.6
2,448.3
2,346.5
2,188.1
3.52
3.42
3.11
2.64
2.53
Number of years
post balance date
Fixed interest rate
(by principal)
A$M
Weighted average
interest rate
% per annum
Fixed interest rate
(by principal)
A$M
Weighted average
interest rate
% per annum
2020
2019
1 year
2 years
3 years
4 years
5 years
Sensitivity analysis
2,601.7
2,241.4
2,287.6
2,555.4
2,530.8
3.52
3.16
2.58
2.30
2.29
2,962.9
2,834.6
2,448.3
2,346.5
2,188.1
3.52
3.42
3.11
2.64
2.53
Throughout the financial year, if interest rates on borrowings (based on the interest bearing liabilities and derivative financial instruments
in place at the end of the year) had been 100 basis points higher/lower, with all other variables held constant, the profit attributable to
Securityholders would have increased/decreased by A$0.7 million (2019: decreased/increased by A$0.1 million) for Goodman and
decreased/increased by A$2.6 million (2019: increased/decreased by A$1.0 million) for GIT.
Price risk
Goodman and GIT are not materially exposed to price risk.
121
Goodman Group
Notes to the consolidated financial statements
Capital management (continued)
18 Financial risk management (continued)
(b) Liquidity risk
Liquidity risk is the risk that Goodman will not be able to meet its financial obligations as they fall due. Goodman’s objective is to maintain
sufficient liquidity to fund short-term working capital, capital expenditure, investment opportunities, debt expiries and distributions. This
is achieved through the monthly preparation of a three year cash flow forecast to understand the uses of funds and to identify potential
shortfalls in funding. This allows Goodman to plan for renewal of debt facilities, negotiation of new debt facilities, new issues of securities,
including the distribution reinvestment plan, and other potential sources of funding.
Goodman’s treasury function is responsible for reporting details of all debt maturities to the Board at its regular meetings.
Goodman seeks to spread its debt maturities such that the total debt repayable in a single financial year does not exceed Board approved
policy levels.
The contractual maturities of financial liabilities are set out below:
Carrying
amount
Contractual
cash flows
Less than
1 year
1 – 2
year(s)
$M
$M
$M
$M
2 – 3
years
$M
3 – 4
years
$M
4 – 5
years
More than
5 years
$M
$M
656.1
46.8
50.0
656.1
572.2
56.3
50.0
17.6
–
50.3
11.3
–
USD denominated notes, unsecured
1,919.3
2,554.1
362.5
472.5
EUR denominated notes, unsecured
Foreign private placement, unsecured
815.9
168.3
883.1
185.0
19.7
6.9
11.2
5.6
16.8
4.5
–
49.4
11.2
172.5
11.2
2.2
50.0
49.4
11.2
–
5.6
1.5
–
49.4
11.2
–
–
19.2
–
1,570.9
818.6
–
3,656.4
4,384.6
978.9
550.9
254.4
124.0
67.7
2,408.7
(124.8)
(127.9)
(55.1)
(35.9)
(20.2)
(0.6)
3.2
(19.3)
–
41.0
(495.7)
521.3
(72.0)
74.4
(93.9)
82.9
(74.3)
99.1
(152.2)
133.5
(34.2)
27.9
(69.1)
103.5
(83.8)
(102.3)
(52.7)
(46.9)
4.6
(19.3)
(3.1)
15.1
Goodman
As at 30 June 2020
Non-derivative financial liabilities
Payables
Lease liabilities
Bank loans, unsecured1
Total non-derivative
financial liabilities
Derivative financial
(assets)/liabilities – net
Net settled2
Gross settled3:
(Inflow)
Outflow
Total derivative financial
(assets)/liabilities – net
As at 30 June 2019
Non-derivative financial liabilities
Payables
Bank loans, unsecured1
622.8
112.4
622.8
112.4
453.3
–
44.6
–
32.7
–
USD denominated notes, unsecured
1,904.9
2,598.5
110.6
334.0
464.3
EUR denominated notes, unsecured
Foreign private placement, unsecured
810.0
165.3
887.8
187.2
19.6
6.8
11.1
5.5
11.1
5.5
27.9
112.4
48.6
11.1
169.4
30.8
–
48.6
11.1
–
33.5
–
1,592.4
823.8
–
Total non-derivative
financial liabilities
Derivative financial
(assets)/liabilities – net
Net settled2
Gross settled3:
(Inflow)
Outflow
Total derivative financial
(assets)/liabilities – net
3,615.4
4,408.7
590.3
395.2
513.6
369.4
90.5
2,449.7
(83.8)
(106.9)
(14.3)
(37.5)
(26.5)
(9.6)
(7.9)
(11.1)
(6.7)
–
(603.8)
645.0
(98.6)
98.5
(95.1)
92.2
(111.9)
(102.7)
(130.1)
97.4
115.9
95.8
(65.4)
145.2
(90.5)
(65.7)
(14.4)
(40.4)
(41.0)
3.6
(42.2)
68.7
1.
2.
3.
Contractual cash flows relating to bank loans exclude any estimate of interest payments that might arise under Goodman’s revolving loan facilities.
Net settled includes IRD and FEC.
Gross settled includes CCIRS.
122
Annual Report 2020
The contractual maturities of financial liabilities are set out below:
Carrying
amount
Contractual
cash flows
Less than
1 year
1 – 2
year(s)
$M
$M
$M
$M
2 – 3
years
$M
3 – 4
years
$M
4 – 5
years
More than
5 years
$M
$M
GIT
As at 30 June 2020
Non-derivative financial liabilities
Payables
Bank loans, unsecured1
886.8
50.0
886.8
50.0
655.3
127.0
–
–
USD denominated notes, unsecured
1,919.3
2,554.1
362.5
472.5
EUR denominated notes, unsecured
Foreign private placement, unsecured
815.9
168.3
883.1
185.0
19.7
6.9
11.2
5.6
–
–
49.4
11.2
172.5
–
50.0
49.4
11.2
–
–
–
49.4
11.2
–
104.5
–
1,570.9
818.6
–
Total non-derivative
financial liabilities
Derivative financial
(assets)/liabilities – net
Net settled2
Gross settled3:
(Inflow)
Outflow
Total derivative financial
(assets)/liabilities – net
As at 30 June 2019
Non-derivative financial liabilities
3,840.3
4,559.1
1,044.4
616.3
233.1
110.6
60.6
2,494.0
(143.4)
(145.0)
(54.5)
(35.5)
(23.4)
(6.8)
(6.5)
(18.3)
–
12.7
(444.3)
466.5
(65.2)
74.4
(85.8)
82.9
(64.8)
(140.7)
99.1
133.5
(22.4)
27.9
(65.4)
48.7
(130.7)
(122.8)
(45.3)
(38.4)
10.9
(14.0)
(1.0)
(35.0)
Payables
859.9
859.9
USD denominated notes, unsecured
1,904.9
2,598.5
EUR denominated notes, unsecured
Foreign private placement, unsecured
810.0
165.3
887.8
187.2
707.6
110.6
19.6
6.8
13.5
334.0
11.1
5.5
10.5
464.3
11.1
5.5
5.8
48.6
11.1
169.4
8.7
48.6
11.1
–
113.8
1,592.4
823.8
–
Total non-derivative
financial liabilities
Derivative financial
(assets)/liabilities – net
Net settled2
Gross settled3:
(Inflow)
Outflow
Total derivative financial
(assets)/liabilities – net
3,740.1
4,533.4
844.6
364.1
491.4
234.9
68.4
2,530.0
(83.8)
(106.9)
(14.3)
(37.5)
(26.5)
(9.6)
(7.9)
(11.1)
(49.6)
–
(856.2)
833.4
(84.9)
98.5
(81.8)
92.2
(98.7)
97.4
(87.7)
115.9
(115.9)
(387.2)
95.4
333.9
(133.4)
(129.7)
(0.7)
(27.1)
(27.8)
18.6
(28.4)
(64.4)
1.
2.
3.
Contractual cash flows relating to bank loans exclude any estimate of interest payments that might arise under Goodman’s revolving loan facilities.
Net settled includes IRD and FEC.
Gross settled includes CCIRS.
123
Goodman Group
Notes to the consolidated financial statements
Capital management (continued)
18 Financial risk management (continued)
(c) Credit risk
Master netting or similar agreements
Goodman enters into derivative transactions under ISDA master
netting off agreements. Under these agreements, where certain
credit events occur (such as a default), all outstanding transactions
under the agreement are terminated and a single net termination
value is payable in full and final settlement.
As Goodman does not have any current legally enforceable
right to offset, the fair values associated with derivative financial
instruments have been presented gross in the statement of
financial position. However, if a credit event occurred, the ISDA
master netting off agreement would allow A$294.7 million
(2019: A$209.6 million) and A$291.9 million (2019: A$207.2 million)
of financial assets and financial liabilities in relation to Goodman’s
and GIT’s respective derivative financial instruments to be offset.
Credit risk represents the loss that would be recognised if
counterparties failed to perform as contracted.
The maximum exposure to credit risk on financial assets,
excluding investments, which have been recognised on the
statement of financial position, is equal to the carrying amount.
Goodman has a policy of assessing the creditworthiness of all
potential customers and is not materially exposed to any one
customer. Goodman evaluates all customers’ perceived credit
risk and may require the lodgement of rental bonds or bank
guarantees, as appropriate, to reduce credit risk. In addition,
all rents are payable monthly in advance. Bank guarantees are
accepted from financial institutions which have an investment
grade credit rating from a major rating agency.
Concentration of credit risk may exist due to receivables in
respect of the disposals of investment properties. The credit
risk is minimised as legal title to the properties is only transferred
upon receipt of proceeds and typically Goodman will have either
received a cash deposit or be the beneficiary of a bank guarantee
for 10% to 20% of the total proceeds.
In relation to material bank deposits, Goodman minimises credit
risk by dealing with major financial institutions. The counterparty
must have a long-term credit rating that is a minimum of an “A”
category (or equivalent) from a major rating agency. The amounts
and other terms associated with bank deposits are formally
reviewed monthly.
The credit risks associated with derivative financial instruments are
managed by:
+
+
+
Transacting with multiple derivatives counterparties that have
a long-term investment grade credit rating
Utilising International Swaps and Derivatives Association
(ISDA) agreements with derivative counterparties in order
to limit exposure to credit risk through netting of amounts
receivable and amounts payable to individual counterparties
(refer below)
Formally reviewing the mark to market position of derivative
financial instruments by counterparty on a monthly basis.
124
Annual Report 2020
(d) Fair values of financial instruments
The carrying amounts shown in the statement of financial position and fair values of financial assets and liabilities are as follows:
Goodman
GIT
Carrying
amount
Fair
value
Carrying
amount
Note
2020
$M
2020
$M
2019
$M
Fair
value
2019
$M
Carrying
amount
Fair
value
Carrying
amount
2020
$M
2020
$M
2019
$M
Fair
value
2019
$M
Financial assets
Cash and cash equivalents
21(a)
1,781.9
1,781.9
1,607.1
1,607.1
1,302.6
1,302.6
1,214.4
1,214.4
Receivables
Other financial assets:
–
IRD
– CCIRS
–
–
FEC
Investments in unlisted securities
Financial liabilities
Payables
Interest bearing liabilities1
Other financial liabilities:
–
IRD
– CCIRS
–
FEC
7
17
10
16
17
390.6
390.6
374.3
374.3
3,089.5
3,089.5
3,273.1
3,273.1
160.3
231.5
73.3
3.0
160.3
231.5
73.3
3.0
38.3
38.3
259.3
259.3
41.4
2.7
41.4
2.7
158.3
231.5
93.9
19.7
158.3
231.5
93.9
19.7
102.2
176.3
96.7
25.1
102.2
176.3
96.7
25.1
2,640.6
2,640.6
2,323.1
2,323.1
4,895.5
4,895.5
4,887.8
4,887.8
656.1
656.1
622.8
622.8
886.8
886.8
859.9
859.9
2,938.5
3,083.1
2,975.0
3,048.0
2,939.5
3,083.1
2,864.3
2,935.7
35.5
277.1
68.8
35.5
277.1
68.8
3.6
212.8
32.1
3.6
212.8
32.1
35.5
35.5
268.9
268.9
48.6
48.6
18.4
187.8
35.6
18.4
187.8
35.6
3,976.0
4,120.6
3,846.3
3,919.3
4,179.3
4,322.9
3,966.0
4,037.4
1.
The fair value of certain fixed rate interest bearing liabilities has been determined by reference to the quoted market prices at 30 June 2020.
Fair value hierarchy
The table below analyses financial instruments carried at fair value, by valuation method (see note 1(f)):
As at 30 June 2020
Derivative financial assets
Investment in unlisted securities
Derivative financial liabilities
As at 30 June 2019
Derivative financial assets
Investment in unlisted securities
Derivative financial liabilities
Goodman
GIT
Level 1
$M
Level 2
$M
Level 3
$M
Total
$M
Level 1
$M
Level 2
$M
Level 3
$M
Total
$M
–
–
–
–
–
–
–
–
–
–
465.1
–
465.1
381.4
381.4
339.0
–
339.0
248.5
248.5
–
3.0
3.0
–
–
–
2.7
2.7
–
–
465.1
3.0
468.1
381.4
381.4
339.0
2.7
341.7
248.5
248.5
–
–
–
–
–
–
–
–
–
–
483.7
–
483.7
353.0
353.0
375.2
–
375.2
241.8
241.8
–
483.7
19.7
19.7
–
–
19.7
503.4
353.0
353.0
–
375.2
25.1
25.1
–
–
25.1
400.3
241.8
241.8
There were no transfers between the levels during the year.
125
Goodman Group
Notes to the consolidated financial statements
Capital management (continued)
18 Financial risk management (continued)
Valuation techniques used to derive Level 2 and Level 3 fair values
The Level 2 derivative financial instruments held by Goodman and GIT consist of IRD, CCIRS and FEC.
The fair values of derivative financial instruments are determined using generally accepted pricing models which discount estimated future
cash flows based on the terms and maturity of each contract and current market interest rates and/or foreign currency rates, adjusted for
specific features of the instruments.
19 Dividends and distributions
Dividends and distributions are recognised when they are declared and before deduction of any withholding tax. Any non-recoverable
withholding tax is included in income tax.
Goodman
FY20 dividends/distributions
GL
GIT
–
–
31 Dec 2019
30 Jun 2020
GLHK
FY19 dividends/distributions
GL
GIT
–
–
31 Dec 2018
30 Jun 2019
GLHK
GIT
Dividends/distributions
cents per security
Total amount
$M
–
15.00
11.00
4.00
30.00
–
274.3
201.1
73.1
548.5
Dividends/distributions
cents per security
Total amount
$M
–
15.00
10.00
5.00
30.00
–
272.1
181.4
90.7
544.2
Date of payment
n/a
25 Feb 2020
28 Aug 2020
28 Aug 2020
Date of payment
n/a
26 Feb 2019
9 Sep 2019
9 Sep 2019
In FY20, GIT’s distributions were 26.0 cents per security (2019: 25.0 cents per security) amounting to $475.4 million (2019: $453.5 million).
Movement in provision for dividends/distributions to Securityholders
Goodman
2020
$M
272.1
548.5
(546.3)
274.3
2019
$M
256.6
544.2
(528.7)
272.1
GIT
2020
$M
181.4
475.4
(455.7)
201.1
2019
$M
166.6
453.5
(438.7)
181.4
Balance at the beginning of the year
Provisions for dividends/distributions
Dividends/distributions paid
Balance at the end of the year
126
Annual Report 2020
20 Issued capital
(a) Ordinary securities
Ordinary securities are classified as equity. Incremental costs directly attributable to issues of ordinary securities are recognised as a
deduction from equity, net of any tax effects.
Stapled securities – issued and fully paid
1,828,413,236
1,813,881,995
8,192.2
8,192.2
7,772.0
7,625.8
2020
2019
Number of securities
Goodman
2020
$M
2019
$M
GIT
2020
$M
2019
$M
Less: Accumulated issue costs
Total issued capital
Terms and conditions
(160.5)
(160.5)
(148.5)
(148.5)
8,031.7
8,031.7
7,623.5
7,477.3
Stapled security means one share in the Company stapled to one unit in the Trust and one CDI over a share in GLHK. Holders of
stapled securities are entitled to receive dividends or distributions as declared from time to time and are entitled to one vote per security
at Securityholders’ meetings. In the event of a winding up, Securityholders rank after creditors and are fully entitled to any net proceeds
of liquidation.
Movement in ordinary securities
Date
Details
30 Jun 2018
Balance before accumulated issue costs
31 Aug 2018
Securities issued to employees under the LTIP
30 Jun 2019
Balance before accumulated issue costs
31 Aug 2019
Securities issued to employees under the LTIP
Less: Accumulated issue costs
30 Jun 2020
Closing balance
(b) Share based payments
LTIP
Number of
securities
Goodman
$M
GIT
$M
1,800,763,877
8,192.2
7,529.8
13,118,118
–
96.0
1,813,881,995
8,192.2
7,625.8
14,531,241
–
(160.5)
146.2
(148.5)
1,828,413,236
8,031.7
7,623.5
The Group’s share based payments primarily relate to performance rights awarded to employees under the LTIP. These performance
rights entitle an employee to either acquire Goodman securities for $nil consideration (equity settled performance rights) or, in certain
jurisdictions, to receive an amount in cash equal to the value of the securities (cash settled performance rights), subject to the vesting
conditions having been satisfied. Further details regarding the vesting conditions are included in the remuneration report section of the
Directors’ report.
During the year, the movement in the number of equity settled and cash settled performance rights under the LTIP was as follows:
Outstanding at the beginning of the year
Granted
Exercised
Forfeited
Outstanding at the end of the year
Exercisable at the end of the year
Number of rights
2020
2019
79,062,163
75,434,623
14,435,282
21,486,688
(17,969,122)
(14,925,092)
(1,540,678)
(2,934,056)
73,987,645
79,062,163
–
–
127
Goodman Group
Notes to the consolidated financial statements
Capital management (continued)
20 Issued capital (continued)
Share based payments transactions
The fair value of equity settled performance rights at the grant date is expensed with a corresponding increase in the employee
compensation reserve over the vesting period. The expense is adjusted to reflect the actual number of performance rights for which
the related service and non-market vesting conditions are expected to be met. The accumulated share based payments expense of
performance rights which have vested or lapsed is transferred from the employee compensation reserve to retained earnings.
The fair value of cash settled performance rights is also recognised as an expense but with a corresponding increase in liabilities over the
vesting period. The expense is adjusted to reflect the actual number of performance rights for which the related service and non-market
vesting conditions are expected to be met. The liability is remeasured at each reporting date and at the vesting date based on the fair
value of the rights.
The fair value of services received in return for performance rights granted under the LTIP is measured by reference to the fair value of the
performance rights granted. The fair value of the performance rights granted during the year was measured as follows:
+
+
Operating EPS tranche: these rights were valued as a granted call option, using the standard Black Scholes model with a
continuous dividend/distribution yield
Relative TSR tranche: these rights were valued using a Monte Carlo model which simulated total returns for each of the ASX 100
stocks and discounted the future value of any potential future vesting performance rights to arrive at a present value. The model
uses statistical analysis to forecast total returns, based on expected parameters of variance and co-variance.
The model inputs for performance rights, both equity and cash settled, awarded during the current financial year included the following:
Fair value at measurement date ($)
Security price ($)
Exercise price ($)
Expected volatility (%)
Rights' expected weighted average life (years)
Dividend/distribution yield per annum (%)
Average risk free rate of interest per annum (%)
Rights issued on
20 Nov 2019
Rights issued on
30 Sep 2019
11.48
14.44
–
18.54
3.8
2.08
0.76
11.26
14.18
–
18.86
3.9
2.12
0.75
The amounts recognised as an expense are set out in note 2. At 30 June 2020, a liability of $91.0 million (2019: $87.4 million) was
recognised in relation to cash settled performance rights.
Goodman’s New Zealand Long Term Incentive Plan
Under Goodman’s New Zealand Long Term Incentive Plan, employees receive approximately half of their LTI in the form of performance
rights over GMT units that vest subject to meeting performance hurdles based on the achievement of distributable earnings targets by
GMT and the relative total unitholder return from holding GMT units compared to other NZX property vehicles. On vesting, delivery of units
in GMT is made from units held by Goodman or acquired on market.
128
Annual Report 2020
OTHER ITEMS
The notes in this section sets out other information that is required to be disclosed to comply with the Australian Accounting Standards,
Corporations Act 2001 or Corporations Regulations.
21 Notes to the cash flow statements
(a) Reconciliation of cash
For the purpose of the cash flow statements, cash and cash equivalents includes cash on hand at the bank and short-term deposits
at call. Cash at the end of the year as shown in the cash flow statements is reconciled to the related items in the statements of financial
position as follows:
Note
Bank balances
Call deposits
Cash classified as assets held for sale
9
Goodman
2020
$M
1,128.8
653.1
1,781.9
10.9
1,792.8
2019
$M
950.5
656.6
1,607.1
–
1,607.1
GIT
2020
$M
649.5
653.1
2019
$M
557.8
656.6
1,302.6
1,214.4
–
–
1,302.6
1,214.4
(b) Reconciliation of profit for the year to net cash provided by operating activities
Goodman
2020
$M
2019
$M
1,504.1
1,627.9
GIT
2020
$M
836.1
2019
$M
1,009.7
Profit for the year
Items classified as investing activities
Net gain on disposal of investment properties
Net gain on disposal of equity investments
Non-cash items
Amortisation and depreciation
Share based payments expense
Net gain from fair value adjustments on investment properties
(54.5)
(0.6)
22.5
156.1
(45.2)
(15.3)
(12.6)
6.6
169.1
(146.8)
Share of net results of equity accounted investments
(1,022.2)
(1,132.5)
Net finance expense/(income)
Income tax expense
Changes in assets and liabilities during the year:
– Decrease/(increase) in receivables
–
(Increase)/decrease in inventories
– Decrease in other assets
–
–
Increase/(decrease) in payables
Increase/(decrease) in provisions
Distributions/dividends received from Partnerships
Net finance costs paid
Net income taxes paid
80.2
113.0
753.4
259.2
(207.0)
3.9
45.3
4.8
859.6
461.0
(87.4)
(76.3)
Net cash provided by operating activities
1,156.9
49.3
116.8
662.5
(78.0)
(8.1)
1.4
13.0
(11.7)
579.1
365.4
(79.6)
(37.4)
827.5
(9.1)
(0.1)
–
–
(36.5)
(825.5)
24.1
11.1
0.1
0.2
0.6
2.5
(0.4)
–
3.0
234.0
(98.5)
(3.2)
135.3
(8.0)
(4.9)
–
–
(142.3)
(816.6)
(53.3)
18.4
3.0
0.2
31.0
2.7
(1.0)
–
35.9
225.6
(78.7)
(1.5)
181.3
129
Goodman Group
Notes to the consolidated financial statements
Other items (continued)
21 Notes to the cash flow statements (continued)
(c) Non-cash transactions
During the current and prior financial years, there were no significant non-cash transactions.
(d) Reconciliation of liabilities arising from financing activities
Derivative
financial
instruments
$M
Provision for
distributions
$M
Lease
liabilities
$M
(39.8)
256.6
Total
$M
3,298.3
12.6
(291.9)
(528.7)
(808.0)
139.3
(21.6)
4.4
544.2
548.6
3,156.6
75.4
50.0
(118.0)
(17.7)
(546.3)
(632.0)
47.0
(8.8)
1.3
(12.2)
548.5
537.6
3,175.9
–
–
–
–
–
–
–
–
–
–
–
75.4
–
–
(17.7)
–
(17.7)
–
–
1.3
(12.2)
–
(10.9)
46.8
–
–
(528.7)
(528.7)
–
–
–
544.2
544.2
272.1
–
–
–
–
(546.3)
(546.3)
–
–
–
–
548.5
548.5
274.3
Goodman
Balance at 1 July 2018
Changes from financing cash flows
Proceeds from borrowings
Payments on borrowings and derivative financial instruments
Distributions paid
Total changes from financing cash flows
Effect of changes in foreign exchange rates
Changes in fair value
Other changes
Other borrowing costs
Distributions declared
Total other changes
Interest
bearing
liabilities
$M
3,081.5
12.6
(249.4)
–
(236.8)
140.8
(14.9)
4.4
–
4.4
–
(42.5)
–
(42.5)
(1.5)
(6.7)
–
–
–
Balance at 30 June 2019
2,975.0
(90.5)
Impact of adopting AASB 16 on 1 July 2019
Changes from financing cash flows
Proceeds from borrowings
Payments on borrowings and derivative financial instruments
Payment of lease liabilities
Distributions paid
Total changes from financing cash flows
Effect of changes in foreign exchange rates
Changes in fair value
Other changes
Interest expense on lease liabilities
Other movements
Distributions declared
Total other changes
Balance at 30 June 2020
–
50.0
(117.1)
–
–
(67.1)
48.8
(18.2)
–
–
–
–
–
–
(0.9)
–
–
(0.9)
(1.8)
9.4
–
–
–
–
2,938.5
(83.7)
130
GIT
Balance at 1 July 2018
Changes from financing cash flows
Net cash flows from loans to related parties
Payments on borrowings and
derivative financial instruments
Distributions paid
Total changes from financing cash flows
Effect of changes in foreign exchange rates
Changes in fair value
Other changes
Issue of units under the LTIP
Equity settled share based payments transactions
Interest income
Interest expense
Interest paid
Other borrowing costs
Distributions declared
Total other changes
Balance at 30 June 2019
Changes from financing cash flows
Net cash flows from loans to related parties
Proceeds from borrowings
Payments on borrowings and
derivative financial instruments
Distributions paid
Total changes from financing cash flows
Effect of changes in foreign exchange rates
Changes in fair value
Other changes
Issue of units under the LTIP
Equity settled share based payments transactions
Interest income
Interest expense
Interest paid
Other borrowing costs
Distributions declared
Total other changes
Balance at 30 June 2020
Annual Report 2020
Interest
bearing
liabilities
$M
2,964.9
Derivatives
used for
hedging
$M
Provision for
distributions
$M
Loans with
related
parties, net
$M
(50.7)
166.6
(2,210.7)
Total
$M
870.1
–
(220.1)
–
(220.1)
134.7
(17.9)
–
–
–
–
–
2.7
–
2.7
–
(42.4)
–
(42.4)
(1.9)
(38.4)
–
–
–
–
–
–
–
–
2,864.3
(133.4)
–
50.0
–
–
50.0
41.3
(18.3)
–
–
–
–
–
2.2
–
2.2
–
–
(0.9)
–
(0.9)
(2.4)
6.0
–
–
–
–
–
–
–
–
2,939.5
(130.7)
–
–
(438.7)
(438.7)
–
–
–
–
–
–
–
–
453.5
453.5
181.4
–
–
–
(455.7)
(455.7)
–
–
–
–
–
–
–
–
475.4
475.4
201.1
(126.3)
(126.3)
–
–
(126.3)
(24.2)
–
(96.0)
(30.4)
(79.3)
19.6
(21.9)
–
–
(208.0)
(2,569.2)
511.7
–
–
–
511.7
18.3
–
(146.2)
(13.6)
(123.2)
9.5
(6.5)
–
–
(280.0)
(2,319.2)
(262.5)
(438.7)
(827.5)
108.6
(56.3)
(96.0)
(30.4)
(79.3)
19.6
(21.9)
2.7
453.5
248.2
343.1
511.7
50.0
(0.9)
(455.7)
105.1
57.2
(12.3)
(146.2)
(13.6)
(123.2)
9.5
(6.5)
2.2
475.4
197.6
690.7
131
Goodman Group
Notes to the consolidated financial statements
Other items (continued)
22 Equity attributable to Goodman Limited and non-controlling interests
Under Australian Accounting Standards, stapled entities are required to separately identify equity attributable to the parent entity from
equity attributable to other entities stapled to the parent. The equity attributable to other entities stapled to the parent is presented as
non-controlling interests in the statement of financial position of the Group. The tables below in notes 22(a) and 22(b) provide an analysis
of equity, profit for the year and total comprehensive income for the year attributable to each of Goodman Limited and the other entities
stapled to Goodman Limited (non-controlling interests).
(a) Equity attributable to Goodman Limited
Attributable to Goodman Limited
Foreign
currency
translation
reserve
$M
Employee
compensation
reserve
$M
Defined
benefit
funds
actuarial
losses
reserve
$M
Total
reserves
$M
Retained
earnings
$M
(50.8)
20.9
(26.1)
(56.0)
155.3
Total
$M
582.5
Goodman
Balance at 1 July 2018
Total comprehensive
income/(loss) for the year
Profit for the year
Other comprehensive
income/(loss)
Effect of foreign
currency translation
Actuarial gains on defined benefit
superannuation funds
Total comprehensive income
for the year, net of income tax
Transfers
Contributions by and
distributions to owners
Equity settled share based
payments transactions
Balance at 30 June 2019
Total comprehensive
income/(loss) for the year
Profit for the year
Other comprehensive
income/(loss)
Effect of foreign
currency translation
Total comprehensive
(loss)/income for the year,
net of income tax
Transfers
Contributions by and
distributions to owners
Purchase of securities for the LTIP
Equity settled share based
payments transactions
Issued
capital
$M
483.2
–
–
–
–
–
–
483.2
–
–
–
–
–
–
–
48.1
–
48.1
–
–
(2.7)
–
(34.2)
(34.2)
–
–
–
Balance at 30 June 2020
483.2
(36.9)
132
–
–
–
–
(52.6)
–
–
242.8
242.8
(0.4)
3.2
2.8
–
47.7
3.2
50.9
(52.6)
–
–
242.8
52.6
47.7
3.2
293.7
–
60.0
28.3
–
(23.3)
60.0
2.3
–
450.7
60.0
936.2
–
–
–
(55.3)
(19.1)
79.2
33.1
–
–
–
–
–
–
(23.3)
–
315.9
315.9
(34.2)
–
(34.2)
(34.2)
(55.3)
315.9
55.3
281.7
–
(19.1)
79.2
(27.1)
–
–
(19.1)
79.2
821.9
1,278.0
Annual Report 2020
(b) Equity attributable to other entities stapled to Goodman Limited (non-controlling interests)
Attributable to other entities stapled to Goodman Limited (non-controlling interests)
Asset
revaluation
reserve
Cash
flow
hedge
reserve
Foreign
currency
translation
reserve
Employee
compensation
reserve
$M
(6.9)
$M
1.5
$M
96.1
$M
150.3
Issued
capital
$M
7,548.5
Defined
benefit
funds
actuarial
losses
reserve
Total
reserves
Retained
earnings
$M
$M
$M
Total
$M
–
241.0
801.7
8,591.2
Balance at 1 July 2018
Total comprehensive
income/(loss) for the year
Profit for the year
Other comprehensive
income /(loss)
Effect of foreign
currency translation
Other changes
Total comprehensive
(loss)/income for the year,
net of income tax
Contributions by and
distributions to owners
Distributions on ordinary units
Equity settled share based
payments transactions
–
–
–
–
–
–
–
–
–
(0.2)
–
0.1
(4.9)
121.6
–
(0.2)
(4.8)
121.6
–
–
–
–
–
–
Balance at 30 June 2019
7,548.5
(7.1)
(3.3)
217.7
Total comprehensive
income/(loss) for the year
Profit for the year
Other comprehensive
income /(loss)
Effect of foreign
currency translation
Actuarial losses on defined
benefit superannuation funds
Other changes
Total comprehensive
(loss)/income for the year,
net of income tax
Contributions by and
distributions to owners
Distributions on ordinary units
Equity settled share based
payments transactions
–
–
–
–
–
–
–
–
–
–
(0.1)
(0.2)
7.8
–
–
–
(1.7)
–
–
(0.1)
(1.9)
7.8
–
–
–
–
–
–
Balance at 30 June 2020
7,548.5
(7.2)
(5.2)
225.5
–
–
–
–
–
37.6
187.9
–
–
–
–
–
–
18.8
206.7
–
–
–
–
–
–
–
–
–
1,385.1
1,385.1
121.5
(4.9)
–
–
121.5
(4.9)
116.6
1,385.1
1,501.7
–
(544.2)
(544.2)
37.6
–
37.6
395.2
1,642.6
9,586.3
–
1,188.2
1,188.2
0.2
7.7
(8.2)
–
(8.2)
(1.7)
–
–
–
7.7
(8.2)
(1.7)
(8.0)
(2.2)
1,188.2
1,186.0
–
–
–
(548.5)
(548.5)
18.8
–
18.8
(8.0)
411.8
2,282.3 10,242.6
133
Goodman Group
Notes to the consolidated financial statements
Other items (continued)
23 Controlled entities
Controlled entities are entities controlled by the Company. Under Australian Accounting Standards, the Company is identified as having
acquired control over the assets of the Trust and GLHK. The consolidated financial statements incorporate the assets and liabilities of all
controlled entities as at 30 June 2020 and the results of all such entities for the year ended 30 June 2020.
Where an entity either began or ceased to be controlled during the financial year, the results of that entity are included only from or to the
date control commenced or ceased.
Unrealised gains and losses and inter-entity balances resulting from transactions with or between controlled entities are eliminated in full
on consolidation.
The significant controlled entities of the Company are set out below:
Significant controlled entities of Goodman Limited
Country of establishment/incorporation
Clayton 3 Trust
GA Industrial Portfolio Trust
GIT Investments Holding Trust No.3
Goodman Australia Finance Pty Limited1
Goodman Capital Trust1
Goodman Europe Development Trust1
Goodman Finance Australia Trust1
Goodman Funding Pty Limited1
Goodman Funds Management Australia Limited
Goodman Funds Management Limited
Goodman Industrial Funds Management Limited
Goodman Industrial Trust
Goodman Property Services (Aust) Pty Limited
Goodman Treasury Trust1
Goodman Ultimo Trust1
Homebush Subtrust1
Moorabbin Airport Corporation Pty Ltd
Goodman Belgium NV
Goodman Management Services (Belgium) NV
Goodman China Asset Management Limited
Goodman China Developments
Goodman Developments Asia
MGI HK Finance1
Goodman Management Consulting (Beijing) Co. Ltd
Goodman Management Consulting (Shanghai) Co. Ltd
Goodman France Sàrl
Goodman Germany GmbH
GFM Hong Kong Limited
Goodman Asia Limited
Goodman China Limited
134
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Belgium
Belgium
Cayman Islands
Cayman Islands
Cayman Islands
Cayman Islands
China
China
France
Germany
Hong Kong
Hong Kong
Hong Kong
Annual Report 2020
Significant controlled entities of Goodman Limited
Country of establishment/incorporation
Goodman Hong Kong Investment Trust
Goodman Logistics (HK) Limited
Goodman UK Investment (HK) Limited
GPS Hong Kong Limited
Goodman Italy S.R.L.
Goodman Japan Funds Limited
Goodman Japan Limited
Goodman Finance (Jersey) Limited1
GELF Management (Lux) Sàrl
Goodman Europe (Lux) Sàrl
Goodman Finance (Lux) Sàrl1
Goodman Finance Two (Lux) Sàrl1
Goodman Management Holdings (Lux) Sàrl
Goodman Meadow Logistics Sàrl
Goodman Midnight Logistics (Lux) Sàrl
Goodman Property Opportunities (Lux) Sàrl, SICAR
Goodman Rowan Logistics S.à.r.l
GPO Advisory (Lux) Sàrl
Goodman Finance NZ Limited1
Goodman Investment Holdings (NZ) Limited
Goodman (NZ) Limited
Goodman Property Services (NZ) Limited
Goodman Galaxy Holding BV
Goodman Netherlands BV
Goodman Logistics Developments (UK) Limited
Goodman Operator (UK) Limited
Goodman Real Estate Adviser (UK) Limited
Goodman Real Estate (UK) Limited
Goodman UK Limited
Goodman Development Management LLC
Goodman Management USA Inc
Goodman North America LLC
Goodman North America Management LLC
Goodman US Finance One, LLC1
Goodman US Finance Two, LLC1
Goodman US Finance Three, LLC1
Goodman US Finance Four, LLC1
Goodman US Finance Five, LLC1
Tarpon Properties REIT Inc1
1. Significant controlled entities of Goodman Industrial Trust.
Hong Kong
Hong Kong
Hong Kong
Hong Kong
Italy
Japan
Japan
Jersey
Luxembourg
Luxembourg
Luxembourg
Luxembourg
Luxembourg
Luxembourg
Luxembourg
Luxembourg
Luxembourg
Luxembourg
New Zealand
New Zealand
New Zealand
New Zealand
The Netherlands
The Netherlands
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United States
United States
United States
United States
United States
United States
United States
United States
United States
United States
135
Goodman Group
Notes to the consolidated financial statements
Other items (continued)
24 Related parties
The names of key management personnel of Goodman at any time during the financial year are as follows:
Executive KMP
Gregory Goodman
Anthony Rozic
Nick Kurtis
Michael O’Sullivan
Nick Vrondas
Non-Executive Directors – GL and GFML
Ian Ferrier, AM
Christopher Green
Stephen Johns
Mark Johnson (appointed 1 June 2020)
Rebecca McGrath
Phillip Pryke
Penny Winn
Non-Executive Directors – GLHK
David Collins
Remuneration of key management personnel
The key management personnel remuneration totals are as follows:
Short-term employee benefits
Post-employment benefits
Equity compensation benefits
Long-term employee benefits
Goodman
2020
$000
7,693.9
211.8
2019
$000
7,253.7
217.0
27,760.3
29,099.3
3,787.7
5,259.5
39,453.7
41,829.5
Company1
2020
$000
2019
$000
–
–
–
–
–
–
–
–
–
–
1. The remuneration is paid by wholly-owned controlled entities of the Company.
GIT does not employ personnel in its own right. However, it is required to have an incorporated responsible entity to manage its activities
and GFML is considered to be the key management personnel of GIT.
Individual Directors’ and executives’ compensation disclosures
Information regarding individual Directors’ and executives’ compensation and some equity instruments disclosures as required by
Corporations Regulations 2M.3.03 is provided in the remuneration report section of the Directors’ report.
Transactions with associates and JVs
The transactions with Partnerships during the financial year were as follows:
Goodman
Revenue from disposal of
investment properties
Revenue from management
and development activities
Interest charged on loans
to associates and JVs
2020
$000
2019
$000
2020
$000
2019
$000
56,900.7
–
883,521.8
893,608.2
2020
$000
–
–
3,953.1
261,195.5
244,908.1
1,319.8
2019
$000
–
415.5
Associates
JVs
136
Annual Report 2020
In the current year, GIT charged interest of $1.0 million (2019: $nil) on loans to associates and JVs.
Amounts due from Partnerships at 30 June 2020 were as follows:
Goodman
GIT
Amounts due from
related parties1
Loans provided
by Goodman2
Amounts due from
related parties1
Loans provided
by GIT2
2020
$000
2019
$000
2020
$000
2019
$000
2020
$000
2019
$000
2020
$000
2019
$000
Associates
GAIP
GAP
GMT
GHKLP
GJCP
GEP
JVs
GCLP
10,850.4
68,582.9
3,633.8
1,540.4
3,196.4
2,498.1
56,779.4
161,545.6
5,352.0
2,761.8
16,526.1
33,267.8
94,682.1
271,852.6
–
–
–
–
–
–
–
–
–
–
3,616.0
3,616.0
7,953.6
7,953.6
20,360.9
38,367.8
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
98.9
98.9
–
–
–
–
–
–
–
–
–
–
–
–
–
–
4,364.8
4,364.8
–
Other JVs
17,353.5
23,158.4
130,296.1
108,357.3
37,714.4
61,526.2
130,296.1
108,357.3
263.2
263.2
2,888.5
69,498.4
23,944.3
2,888.5
69,498.4
23,944.3
1.
2.
Amounts due from related parties include contract assets arising from transactions with related parties.
Loans provided by Goodman and GIT to associates and JVs have been provided on an arm’s length basis.
Transactions between GIT and other Goodman entities
In accordance with the Trust’s Constitution, GFML is entitled to be reimbursed where expenses have been incurred on behalf of the Trust:
Reimbursement of expenses
As at 30 June 2020, no amounts were owed to GFML (2019: $nil).
GIT
2020
$000
2019
$000
52,479.8
49,544.1
Other Goodman entities perform a number of services for GIT. The fees, costs and expenses for the services performed during the year
were as follows:
Management income
Development income
GIT
2020
$000
2,379.0
–
2,379.0
2019
$000
1,951.0
924.8
2,875.8
In addition to the above, interest bearing loans exist between GIT and other Goodman entities. At 30 June 2020, interest bearing loans
of $3,008.0 million (2019: $3,226.3 million) were receivable by GIT from other Goodman entities and $760.0 million (2019: $676.4 million)
was payable by GIT to other Goodman entities. Loans to related Goodman entities bear interest at rates referenced to GIT’s external
funding arrangements.
137
Goodman Group
Notes to the consolidated financial statements
Other items (continued)
25 Commitments
Development activities
At 30 June 2020, Goodman was committed to expenditure in
respect of $251.8 million (2019: $277.9 million) on inventories and
other development activities. GIT has no such commitments
(2019: $nil).
Investment properties
At 30 June 2020, capital expenditure commitments on Goodman’s
existing investment property portfolio was $32.2 million
(2019: $100.9 million). GIT has no such commitments (2019: $nil).
Partnerships
At 30 June 2020, Goodman had a remaining equity commitment
of $65.1 million (2019: $64.8 million) into GEP. This commitment
also applies to GIT.
In relation to GEP, Goodman offers limited liquidity facilities to
investors, which allow the investors to sell to Goodman some or
all of their investment in GEP. Limits apply to these liquidity
facilities and Goodman is only required to offer to purchase up
to €25 million of the issued capital of GEP each half year subject
to a cumulative maximum of €150 million. Furthermore, Goodman
is only required to purchase units where its co-investment in GEP
is either below a prescribed limit or a maximum amount of liquidity
has been provided. Currently, Goodman’s interest in GEP is below
the prescribed limit and the liquidity facility is open for investors.
The commitment under the liquidity facility also applies to GIT.
Furthermore, in respect of certain Partnerships, Goodman and
its investment partners have committed to invest further capital,
subject to the unanimous approval by the partners of the relevant
property acquisition and/or development for which the funding is
required. Goodman’s commitment in respect of these Partnerships
is set out below:
+
+
+
+
+
+
+
+
$nil (2019: $99.7 million) into GHKLP
$23.8 million (2019: $23.8 million) into KGIP
$147.8 million (2019: $150.0 million) into KGG
$436.6 million (2019: $361.0 million) into GJDP
$853.8 million (2019: $872.7 million) into GCLP
$136.8 million (2019: $209.1 million) into GUKP
$2,546.8 million (2019: $855.6 million) into GNAP
$84.4 million (2019: $123.8 million) into
Goodman Brazil Logistics Partnership.
138
26 Auditors’ remuneration
Audit services
Auditor of the Company:
–
–
Audit and review of financial reports (KPMG Australia)
Audit and review of financial reports (overseas KPMG firms)
Other services
– Other regulatory services (KPMG Australia)
– Other advisory services (KPMG Australia)
– Other advisory services (overseas KPMG firms)
–
–
–
–
Taxation compliance services (KPMG Australia)
Taxation compliance services (overseas KPMG firms)
Taxation advice (KPMG Australia)
Taxation advice (overseas KPMG firms)
Total paid/payable to KPMG
Other auditors
Goodman
2020
$000
2019
$000
1,043.8
898.4
1,942.2
926.2
906.9
1,833.1
53.8
80.7
–
123.4
189.2
190.8
257.0
894.9
55.6
18.7
15.8
107.8
144.7
157.1
196.4
696.1
2,837.1
2,529.2
Annual Report 2020
GIT
2020
$000
624.5
73.2
697.7
2019
$000
592.6
16.8
609.4
53.8
36.5
–
–
96.3
35.3
–
1.6
187.0
884.7
–
–
88.3
6.9
–
11.6
143.3
752.7
–
Audit and review of financial reports (non-KPMG firms)
125.9
76.5
–
–
27 Parent entity disclosures
As at, and throughout the financial year ended, 30 June 2020, the parent entities of Goodman and GIT were Goodman Limited and
Goodman Industrial Trust respectively. The financial information for the parent entities is disclosed as follows:
Result of the parent entity
(Loss)/profit for the year
Other comprehensive income for the year
Total comprehensive (loss)/income for the year
Financial position of the parent entity at year end
Current assets
Total assets
Current liabilities
Total liabilities
Total equity of the parent entity comprising:
Issued capital
Profits reserve
Employee compensation reserve
Accumulated losses
Total equity
Goodman
2020
$M
(91.4)
–
(91.4)
53.8
1,570.7
362.7
1,272.2
792.0
90.7
33.1
(617.3)
298.5
2019
$M
279.1
–
279.1
46.8
1,476.5
20.6
1,126.1
757.3
90.7
28.3
(525.9)
350.4
GIT
2020
$M
322.0
–
322.0
2,614.9
7,314.9
2,455.6
2,537.9
2019
$M
343.3
–
343.3
1,714.7
6,873.4
1,972.6
2,029.9
7,623.5
7,477.3
–
173.4
(3,019.9)
4,777.0
–
159.6
(2,793.4)
4,843.5
139
Goodman Group
Notes to the consolidated financial statements
Other items (continued)
27 Parent entity disclosures (continued)
The financial information for the parent entities of Goodman and
GIT has been prepared on the same basis as the consolidated
financial statements, except as set out below:
Parent entity contingencies
Capitalisation Deed Poll
Investments in controlled entities and Partnerships
Investments in controlled entities and Partnerships are accounted
for at cost in the financial statements of Goodman Limited and
Goodman Industrial Trust. Distributions/dividends received from
Partnerships are recognised in the income statement, rather than
being deducted from the carrying amount of these investments.
The Company, GFML, as responsible entity of the Trust, GLHK and
certain of their wholly-owned controlled entities are “investors” under
a Capitalisation Deed Poll (CDP) dated 23 May 2007. Under the CDP,
each investor undertakes to pay to the relevant controlled entity
borrower (borrower) any amounts owing under finance documents for
the purpose of the CDP when the borrower fails to make a payment.
Any payments by an investor to a borrower will be by way of loan to, or
proceeds for the subscription of equity in, the borrower by the investor.
Tax consolidation
United States and Reg S senior notes
Goodman Limited is the head entity in a tax consolidated group
comprising all Australian wholly-owned subsidiaries (this excludes GIT).
The head entity recognises all of the current tax assets and liabilities of
the tax consolidated group (after elimination of intra-group transactions).
Financial guarantees
Where the parent entities have provided financial guarantees in relation
to loans and payables of controlled entities for no compensation, the
fair values of these guarantees are accounted for as contributions and
recognised as part of the cost of the investment.
Parent entity capital commitments
At 30 June 2020, the parent entities had no capital commitments
(2019: $nil).
Under the issue of notes in the United States 144A/Reg S bond
market (refer to notes 16(b) and 16(c)), controlled entities of GIT had
on issue USD and EUR notes amounting to US$1,303.8 million and
€500.0 million respectively. GL, GFML, as responsible entity of the
Trust, and GLHK have unconditionally and irrevocably guaranteed
on a joint and several basis the payment of principal and interest in
respect of each of the notes.
28 Events subsequent to balance date
Goodman and GIT
Other than as disclosed elsewhere in the consolidated financial
report, there has not arisen in the interval between the end of the
financial year and the date of this consolidated financial report any
item, transaction or event of a material and unusual nature likely,
in the opinion of the Directors, to affect significantly the operations
of Goodman and GIT, the results of those operations, or the state
of affairs of Goodman and GIT, in future financial years.
140
DIRECTORS’ DECLARATION
In the opinion of the directors of Goodman Limited and the
directors of Goodman Funds Management Limited, the responsible
entity for Goodman Industrial Trust:
a. the consolidated fi nancial statements and the notes of
Goodman Limited and its controlled entities and Goodman
Industrial Trust and its controlled entities set out on pages
72 to 140 and the remuneration report that is contained on
pages 36 to 68 in the Directors’ report, are in accordance
with the Corporations Act 2001, including:
(i)
giving a true and fair view of Goodman’s and GIT’s
fi nancial position as at 30 June 2020 and of their
performance for the fi nancial year ended on that date
(ii) complying with Australian Accounting Standards
(including Australian Accounting Interpretations) and the
Corporations Regulations 2001
b. there are reasonable grounds to believe that the Company
and the Trust will be able to pay their debts as and when they
become due and payable.
The Directors have been given the declarations required by section
295A of the Corporations Act 2001 from the Group Chief Executive
Offi cer and Chief Financial Offi cer for the fi nancial year ended
30 June 2020.
The Directors draw attention to note 1 to the consolidated fi nancial
statements, which includes a statement of compliance with
International Financial Reporting Standards.
Signed in accordance with a resolution of the Directors.
Ian Ferrier, AM
Independent Chairman
Gregory Goodman
Group Chief Executive Offi cer
Sydney, 13 August 2020
Annual Report 2020
141
Goodman Group
Independent Auditor’s Report
Basis for opinions
We conducted our audits in accordance with Australian Auditing
Standards. We believe that the audit evidence we have obtained
is sufficient and appropriate to provide a basis for our opinions.
Our responsibilities under those standards are further described
in the Auditor’s responsibilities for the audit of the Financial
Report section of our report.
We are independent of the Goodman Group, Goodman Limited,
Goodman Funds Management Limited (the Responsible
Entity of the Trust) and the Trust in accordance with the
Corporations Act 2001 and the ethical requirements of the
Accounting Professional and Ethical Standards Board’s APES
110 Code of Ethics for Professional Accountants (including
Independence Standards) (the Code) that are relevant to our audits
of the Financial Report in Australia. We have fulfilled our other
ethical responsibilities in accordance with the Code.
Key Audit Matters
The Key Audit Matters we identified for the Goodman Group are:
+ Recognition of portfolio performance fee income;
+ Recognition of development income;
+ Valuation of investment properties, investments accounted
for using the equity method and inventories; and
+ Value of intangible assets.
Key Audit Matters are those matters that, in our professional
judgment, were of most significance in our audit of the Financial
Report of the current period.
These matters were addressed in the context of our audit of the
Financial Report as a whole, and in forming our opinion thereon,
and we do not provide a separate opinion on these matters.
To the stapled security holders of
Goodman Group and the unitholders
of Goodman Industrial Trust
REPORT ON THE AUDIT OF THE FINANCIAL REPORT
Opinion
We have audited the Financial Report of Goodman Limited
(the Company) as the deemed parent presenting the stapled
security arrangement of the Goodman Group (the Goodman
Group Financial Report).
We have also audited the Financial Statements of Goodman
Industrial Trust (the Trust Financial Report).
In our opinion, each of the accompanying Goodman Group
Financial Report and Trust Financial Report are in accordance
with the Corporations Act 2001, including:
+ giving a true and fair view of the Goodman Group’s and of
the Trust’s financial position as at 30 June 2020 and of its
financial performance for the year ended on that date; and
complying with Australian Accounting Standards and the
Corporations Regulations 2001.
+
The content of each of the Goodman Group and Trust Financial
Report comprise:
+ Consolidated statement of financial position as at
30 June 2020;
+ Consolidated income statement, Consolidated statement
of comprehensive income, Consolidated statement of
changes in equity, and Consolidated cash flow statement
for the year then ended;
+ Notes including a summary of significant accounting policies;
and
(collectively referred to as Financial Statements)
+ Directors’ Declaration.
The Goodman Group consists of Goodman Limited and the
entities it controlled at the year-end or from time to time during
the financial year, Goodman Industrial Trust (the Trust) and the
entities it controlled at the year-end or from time to time during
the financial year, and Goodman Logistics (HK) Limited and the
entities it controlled at the year-end or from time to time during
the financial year.
KPMG, an Australian partnership and a member firm of the KPMG network
of independent member firms affiliated with KPMG International Cooperative
(“KPMG International”), a Swiss entity.
Liability limited by a scheme approved under Professional Standards Legislation.
142
Annual Report 2020
Recognition of portfolio performance fee income
Refer to Note 2 to the Financial Report (portfolio performance fee income is allocated to management income and development income).
The key audit matter
How the matter was addressed in our audit
The Goodman Group, in its capacity as an investment manager,
earns portfolio performance fees based on agreements with
some of its managed partnerships.
Recognition of portfolio performance fee income is considered
a key audit matter due to the:
+ Quantum of portfolio performance fee income, relative to the
Goodman Group’s total revenue; and
+ Significant judgment exercised by us in assessing the
amount of performance fees recognised by the Goodman
Group. The key assumptions impacting the amount of
performance fees are subject to estimation uncertainty,
bias and inconsistent application. This increases the risk of
inaccurate forecasts or a wider range of possible outcomes
for us to consider. Increased time and effort is spent by the
audit team in assessing these key assumptions.
The amount of portfolio performance fees recognised is impacted
by key assumptions including:
+ Fair value of underlying investment properties (a key driver
of the quantum of performance fees recognised by the
Goodman Group) held by the partnerships. The valuation of
investment properties contains assumptions with estimation
uncertainty such as capitalisation rates, discount rates, rent
relief provided to customers, customer covenant strength,
market rental income, weighted average lease expiry and
vacancy levels, projections of capital expenditure and
lease incentive costs. This leads to additional audit effort
due to the differing assumptions based on asset classes,
geographies and characteristics of individual investment
properties. This was further heightened with the existence of
the COVID-19 pandemic resulting in less market transactions
which are ordinarily a strong source of evidence regarding
property fair values.
+ The level of constraint applied. This is impacted by
the Goodman Group’s expectations of how much
of the performance fee is highly probable to be
received in accordance with the requirements of the
accounting standards.
In assessing this Key Audit Matter, real estate valuation
specialists, who understand the Group’s investment profile and
business, were involved.
Our procedures included:
+ Reading the Goodman Group’s agreements with managed
partnerships to understand the key terms related to
performance fees, including hurdle rates;
+ Evaluating Goodman Group’s accounting policies
regarding the recognition of performance fee income and
valuation of investment properties against accounting
standard requirements;
+ Comparing hurdle rates and performance fee rates to
underlying partnership agreements. We recalculated the
performance fee income using the performance fee rates
in the agreements applied to the value in excess of the
hurdle stipulated in the partnership agreements. We tested
the value in excess of the hurdle set amount by performing
the audit procedures over investment properties below.
We compared the recalculated performance fee to the
amount recorded by the Goodman Group; and
+ Challenging the constraints applied in determining the
amount of performance fees that are highly probable to
be received by the Goodman Group. We did this by
using our knowledge of the Goodman Group, their past
performance, business, and our industry experience
to challenge the Goodman Group’s estimate of current
and forecast managed partnership performance and the
remaining tenure of the partnerships.
For investment properties, taking into account asset classes,
geographies and characteristics of individual investment properties:
+ Assessing the scope, competence and objectivity of the
managed partnerships’ external valuation experts and
internal valuers;
+ Challenging significant assumptions, with reference to
published industry reports and commentary to gain an
understanding of prevailing property market conditions;
+ On a sample basis, assessing the impact on our audit
of “market uncertainty” caveats included in valuations
performed by the Group’s external valuers by inquiring
with management or the Group’s external valuers; and
+ With the assistance of our real estate valuation specialists,
assessing a sample of significant assumptions including
capitalisation rates, discount rates, rent relief provided to
customers, customer covenant strength, market rental
income, weighted average lease expiry and vacancy levels,
projections of capital expenditure and lease incentive costs.
We did this by comparing to market analysis published by
industry experts, recent market transactions, inquiries with
the Goodman Group, historical performance of the assets
and using our industry experience in the current COVID-19
economic environment.
143
Goodman Group
Independent Auditor’s Report
(continued)
Recognition of development income ($882.6m)
Refer to Note 2 to the Financial Report
The key audit matter
How the matter was addressed in our audit
Development income was a key audit matter due to:
Our procedures included:
+ its significant value (34% of revenue and other income);
+ Selecting specific contracts from development income
+ the high volume of transactions; and
+ the judgements applied by us to assess the Goodman
Group’s determination of revenue recognised during the
period in relation to contracts which remain in progress
at period end.
Development income comprises income from disposal of
inventories, other development income (including development
management services) and income from fixed price
construction contracts.
Income from development management services is recognised
progressively, requiring judgment by us when considering
the Goodman Group’s determination of the amount and extent
of the services provided based on contract deliverables.
Income from certain inventory disposals and fixed price
construction contracts is recognised in proportion to the stage
of completion of the relevant contracts. We focused on the
stage of completion estimation which is based on costs incurred
as a percentage of estimated total costs for each contract,
which included consideration of the impact of COVID-19 on
cost and duration of the contract.
recognised (in relation to contracts that remain in progress at
period end) based on quantitative and qualitative information
(such as the size and complexity of the arrangement); and
+ Evaluating Goodman Group’s recognition of development
income against the criteria in the accounting standards.
For the specific contracts selected, our procedures included:
+ Understanding the underlying contractual arrangements,
in particular their unique terms;
+ Where recognition of development income is conditional upon
certain events occurring, checking correspondence with
external parties for evidence of achievement of conditions;
+ Assessing the Goodman Group’s determination of revenue
recognised during the period in accordance with the provision
of services stipulated in the underlying contract or the stage
of completion;
+ For revenue recognised based on the stage of completion,
assessing a sample of costs incurred to date and total
forecast costs against project feasibilities; and
+ Challenging the key assumptions included in the Goodman
Group’s project feasibilities by comparing to commentary
published by industry experts, recent market transactions,
and our knowledge of historical performance of the assets.
As part of this we assessed the impact that COVID-19 has on
actual costs and duration of development projects and the
likely continued impact on key cost and duration assumptions
included in the Goodman Group’s project feasibilities.
144
Annual Report 2020
Valuation of investment properties ($1,901.2m), investments accounted for using the equity method ($9,370.8m)
and inventories ($1,180.2m)
Refer to Note 6 to the Financial Report
The key audit matter
How the matter was addressed in our audit
The Goodman Group’s investments in property assets include
investment properties and inventories, which are held either
directly or through its investments accounted for using the
equity method.
Investment properties are held at fair value and inventories are
held at the lower of cost and net realisable value. The valuation
of property assets are determined using internal methodologies
or through the use of external valuation experts.
The valuation of property assets is a key audit matter as they
are significant in value (being 77% of total assets) and contain
assumptions with estimation uncertainty.
This leads to additional audit effort due to differing assumptions
based on asset classes, geographies and characteristics of
individual property assets. This was further heightened with
the existence of the COVID-19 pandemic resulting in a decline
in market transactions which are ordinarily a strong source of
evidence regarding property fair values.
The valuation of property assets include a number of significant
assumptions:
+ Investment properties:
– capitalisation rates;
– discount rates;
– rent relief provided to customers;
– customer covenant strength;
– market rental income;
– weighted average lease expiry and vacancy levels;
– projections of capital expenditure; and
– lease incentive costs.
+ Inventories:
– forecast capitalisation rates and market rental income;
– land value per square metre;
– letting up periods and lease incentive costs; and
– development costs.
In assessing this Key Audit Matter, we involved real estate
valuation specialists, who understand the Group’s investment
profile and business and the economic environment it operates in.
Our procedures included:
+ Obtaining an understanding of the Goodman Group’s
process regarding the valuation of property assets, including
specific consideration of the impact of COVID-19;
+ Assessing the methodologies used in the valuations of
property assets, for consistency with accounting standards,
industry practice and the Goodman Group’s policies; and
+ Working with real estate valuation specialists to read
published reports and industry commentary to gain an
understanding of prevailing property market conditions.
For investment properties, taking into account asset classes,
geographies and characteristics of individual investment properties:
+ Assessing the scope, competence and objectivity
of external valuation experts and Goodman Group’s
internal valuers;
+ Challenging significant assumptions, with reference to
published industry reports and commentary to gain an
understanding of prevailing property market conditions;
+ On a sample basis, assessing the impact on our audit
of “market uncertainty” caveats included in valuations
performed by the Group’s external valuers by inquiring
with management or the Group’s external valuers;
+ With assistance of real estate valuation specialists,
assessing a sample of significant assumptions including
capitalisation rates, discount rates, rent relief provided to
customers, customer covenant strength, market rental
income, weighted average lease expiry and vacancy levels,
projections of capital expenditure and lease incentive costs.
We did this by comparing to market analysis published by
industry experts, recent market transactions, inquiries with
the Goodman Group, historical performance of the assets
and using our industry experience in the current COVID-19
economic environment; and
+ Assessing the disclosures in the financial report using our
understanding obtained from our testing, against accounting
standard requirements.
For inventories:
+ Challenging the key assumptions included in the Goodman
Group’s internal recoverability assessments (project
feasibilities) and valuations by comparing to commentary
published by industry experts, recent market transactions,
and our knowledge of historical performance of the assets.
145
Goodman Group
Independent Auditor’s Report
(continued)
Value of intangible assets ($845.8m)
Refer to Note 14 to the Financial Report
The key audit matter
How the matter was addressed in our audit
At 30 June 2020 the Goodman Group’s intangible assets
comprised goodwill and management rights. The valuation of
intangible assets was identified as a key audit matter as the
Goodman Group’s annual impairment assessment contains
significant judgments involving forecasting and discounting
future cash flows.
The impairment assessment is based on the value in use model
performed for each division of the Goodman Group. The value in
use models incorporate significant judgment in respect of future
conditions and we focussed on key assumptions such as:
+ forecast cash flows, growth rates and terminal growth rates,
taking into consideration the level and margins from ongoing
development activity, forecast funds management income
(which is primarily dependent on assets under management)
and the impact of COVID-19 on each division. The Group’s
models are sensitive to small changes in these assumptions,
which may reduce available headroom. This drives additional
audit effort specific to their feasibility and consistency of
application to the Group’s strategy; and
+ discount rates – these are complicated in nature and vary
according to the conditions the division is subject to from
time to time.
We involved valuation specialists in assessing this Key Audit Matter.
Our procedures included:
+ Considering the appropriateness of the value in use method
applied by the Goodman Group to perform the annual test
of goodwill and management rights impairment, against the
requirements of the accounting standards.
+ For divisions with significant intangible assets:
– Working with our valuation specialists, comparing
the discount rates and terminal growth rates used
in the value in use models to publicly available data
of comparable entities;
– Assessing the ability of the Goodman Group to
accurately forecast by comparing previous forecasts
to actual results;
– Comparing the division’s forecast cash flows contained
in the value in use models to Board approved forecasts;
– Challenging the divisions forecast cash flows from
development activity and funds management based on
our understanding of local market conditions, including
the impact of the COVID-19 economic environment on
each division; and
– Performing a sensitivity analysis on the discount rates,
growth rates and forecast assets under management
by applying a reasonably possible range of outcomes
to focus our further procedures.
+ Assessing the disclosures in the financial report using our
understanding from our testing and against the requirements
of the accounting standards.
146
Other Information
Other Information is financial and non-financial information in the
Goodman Group’s annual reporting which is provided in addition
to the Financial Report and the Auditor’s Report. The Directors
of the Company and the Directors of the Responsible Entity are
responsible for the Other Information.
The Other Information we obtained prior to the date of this Auditor’s
Report was the Directors’ Report (including the Remuneration
Report). The Chairman’s Letter, Group Chief Executive Officer’s
Report, Corporate Responsibility and Sustainability, Corporate
Governance and Securities Information are expected to be made
available to us after the date of the Auditor’s Report.
Our opinion on the Financial Report does not cover the Other
Information and, accordingly, we do not express an audit opinion
or any form of assurance conclusion thereon, with the exception
of the Remuneration Report and our related assurance opinion.
In connection with our audit of the Financial Report, our
responsibility is to read the Other Information. In doing so, we
consider whether the Other Information is materially inconsistent
with the Financial Report or our knowledge obtained in the audit,
or otherwise appears to be materially misstated.
We are required to report if we conclude that there is a material
misstatement of this Other Information, and based on the work we
have performed on the Other Information that we obtained prior to
the date of this Auditor’s Report, we have nothing to report.
Annual Report 2020
Responsibilities of the Directors
for the Financial Report
The Directors of the Company and the Responsible Entity are
responsible for:
+ preparing the Financial Report that gives a true and fair view
in accordance with Australian Accounting Standards and the
Corporations Act 2001;
+ implementing necessary internal control to enable the
preparation of a Financial Report that gives a true and fair
view and is free from material misstatement, whether due to
fraud or error; and
+ assessing the Goodman Group and Trust’s ability to continue
as a going concern and whether the use of the going concern
basis of accounting is appropriate. This includes disclosing,
as applicable, matters related to going concern and using the
going concern basis of accounting unless they either intend
to liquidate the Goodman Group or the Trust or to cease
operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit
of the Financial Report
Our objective is:
+ to obtain reasonable assurance about whether the Financial
Report as a whole is free from material misstatement, whether
due to fraud or error; and
+ to issue an Auditor’s Report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not
a guarantee that an audit conducted in accordance with
Australian Auditing Standards will always detect a material
misstatement when it exists.
Misstatements can arise from fraud or error. They are considered
material if, individually or in the aggregate, they could reasonably
be expected to influence the economic decisions of users taken
on the basis of the Financial Report.
A further description of our responsibilities for the audits of the
Financial Report is located at the Auditing and Assurance
Standards Board website at:
https://www.auasb.gov.au/admin/file/content102/c3/ar1_2020.pdf.
This description forms part of our Auditor’s Report.
147
Goodman Group
Independent Auditor’s Report
(continued)
REPORT ON THE REMUNERATION REPORT
Opinion
In our opinion, the Remuneration Report of Goodman Limited
for the year ended 30 June 2020 complies with Section 300A
of the Corporations Act 2001.
Directors’ responsibilities
The Directors of the Goodman Limited are responsible for the
preparation and presentation of the Remuneration Report in
accordance with Section 300A of the Corporations Act 2001.
Our responsibilities
We have audited the Remuneration Report included in pages
36 to 68 of the Directors’ report for the year ended 30 June 2020.
Our responsibility is to express an opinion on the Remuneration
Report, based on our audit conducted in accordance with
Australian Auditing Standards.
KPMG
Eileen Hoggett
Partner
Sydney 13 August 2020
148
Annual Report 2020
Appendix A – Goodman Logistics (HK) Limited
and its subsidiaries
Consolidated financial statements for the year ended 30 June 2020
CONTENTS
Report of the directors
Independent auditor’s report
Consolidated statement of financial position
Consolidated statement of comprehensive income
Consolidated statement of changes in equity
Consolidated cash flow statement
150
160
162
163
164
165
Notes to the consolidated financial statements
Basis of preparation
1 Basis of preparation
166
Results for the year
170
2 Profit before interest and tax
172
3 Segment reporting
4
175
5 Profit attributable to equity shareholders of the Company 177
Income tax expense
Operating assets and liabilities
6 Property assets
7 Receivables
8 Contract balances
9 Assets held for sale
10 Payables
11 Leases
Capital management
12 Finance income and expense
13 Other financial assets and liabilities
14 Financial risk management
15 Dividends
16 Share capital
Other items
17 Notes to the consolidated cash flow statement
18 Reserves
19 Retained earnings
20 Investments in subsidiaries
21 Related party transactions
22 Commitments
23 Contingencies
24 Company level statement of financial position
25 Subsequent events
178
184
186
187
187
188
189
190
191
196
197
199
201
202
202
204
205
205
206
206
149
Goodman Group
Report of the directors
The directors have pleasure in submitting their annual financial
report together with the audited financial statements of
Goodman Logistics (HK) Limited (Company) and its subsidiaries
(collectively referred to as the Consolidated Entity) for the year
ended 30 June 2020 (FY20).
Incorporation and principal place of business
Goodman Logistics (HK) Limited was incorporated in Hong Kong
on 18 January 2012 and has its principal place of business at
Suite 901, Three Pacific Place, 1 Queen’s Road East, Hong Kong.
On 22 August 2012, the Company became a party to the stapling
deed with Goodman Limited (GL) and Goodman Industrial Trust
(GIT), and together the three entities and their subsidiaries are
known as Goodman Group. Goodman Group is listed on the
Australian Securities Exchange (ASX).
Financial statements
The financial performance of the Consolidated Entity for the year
ended 30 June 2020 and the Consolidated Entity’s financial
position at that date are set out in the consolidated financial report
on pages 162 to 206.
During the financial year, the Company declared a final dividend
of 4.0 cents per share amounting to $73.1 million. The dividend is
payable out of FY20 profit after tax. In the prior year, the Company
declared a final dividend of 5.0 cents per share amounting to
$90.7 million out of FY19 profit after tax.
Share capital
Details of the movements in share capital of the Company
during FY20 are set out in note 16 to the consolidated
financial statements.
Principal activities
Directors
The principal activities of the Consolidated Entity are investment
in directly and indirectly held industrial property, investment
management, property management services and development
management. The principal activities and other particulars
of the subsidiaries are set out in note 20 to the consolidated
financial statements.
The directors during the year and up to the date of this report were:
Ian Douglas Ferrier, AM
David Jeremy Collins
Gregory Leith Goodman (alternate director to Ian Douglas Ferrier)
Daniel Cornelius D. Peeters.
Directors of subsidiaries
The names of directors who have served on the boards of the subsidiaries of the Company during FY20 are set out below:
Philippe Arfi
Philippe Van der Beken
Philip Turpin
Robert Reed
Shiling Li
Simone Marlene Weyermanns
Stephen Young
Tai Yit Chan
Tang Chenying
Thomas De Meester
Wai Ho Stephen Lee
Wang Chen
Xiaoyin Zhang.
Ales Ruzicka
Aurélien Noel
Bart Manteleers
Chi Wing Lin
Christof Prange
Chun Kit Fung
Clare Gow
Goh Hoi Lai
Henry Kelly
Hugh Baggie
Ian Pritchard
István Kerekes
Izak ten Hove
James Cornell
Kelly Moore
Kim Swee Seah
Kristoffer Allan Harvey
Lien Standaert
Luke Caffey
Marcin Duda
Marwan Bustani
David Anthony Hinchey
Jan Palek
Matthew Macdonald
Dirk Mölter
Dominique Prince
Jaroslaw Czechowicz
Michael Lee
Jason Harris
Michael O’Sullivan
Michael Woodford
Nicholas Kurtis
Paul Adams
Paul Heslop
Peter Ralston
Edwin Chong Chee Wai
Jie Yang
Francisco Palacio
Garcia Cuenca Ignacio
Gareth Owen
Godfrey Abel
John Morton Dakin
Jorn Bruyninckx
Joseph Salvaggio
Karl Dockx
150
Annual Report 2020
The business capabilities are supported by five strategic “pillars”:
1.
Quality partnerships – develop and maintain strong
relationships with key stakeholders including customers,
investment partners, suppliers and employees.
2. Quality product and service – deliver high-quality product
and customer service in key logistics markets globally
by actively leveraging Goodman Group’s industrial sector
expertise, development and management experience and
global operating platform.
3. Culture and brand – promote Goodman Group’s unique
and recognisable brand and maintain Goodman Group’s
core values across each operating division to foster a strong
and consistent culture. The core values are:
+
+
+
+
+
Customer + Focus: “Be closer to the customer’s world
and their changing needs”
Innovative + Dynamic: “Be more creative in our thinking
and more creative in our actions”
Open + Fair: “Be adaptable and considerate in our
dealings inside and outside our business”
Performance + Drive: “Do what we say we’ll do and make
things happen”
Team + Respect: “Recognise the worth in each other and
collaborate for better results”.
4. Operational efficiency – optimise business resources to
maximise effectiveness and drive efficiencies.
5. Capital efficiency – maintain active capital management to
facilitate appropriate returns and sustainability of the business.
BUSINESS REVIEW
State of affairs
During the year, the Consolidated Entity acquired most of the
subsidiaries that comprise Goodman Group’s United Kingdom
business (Dollmist Limited and its subsidiaries). Details of
the acquisition are set out in note 20 to the consolidated
financial statements.
Goodman Group’s strategy
Goodman Group’s purpose is to make space for its stakeholders’
ambitions. This purpose is executed through Goodman Group’s
integrated business capabilities model – “own+develop+manage”,
where its customer’s need for sustainable solutions and service
excellence in high-quality locations, is at the centre.
DEVELOP
Develop properties in key locations to
meet customers’ business needs
N
W
O
s
e
i
t
r
e
p
o
r
p
y
t
i
l
a
u
q
-
h
g
h
i
n
w
O
CUSTOMER
h
e
a
r
t
o
f
o
u
r
b
u
s
n
e
s
s
i
C
u
s
t
o
m
e
r
s
a
r
e
a
t
t
h
e
Manage and invest in high-quality
real estate globally for our investment partners
MANAGE
151
Goodman Group
Report of the directors
Business review (continued)
Performance review
Property investment activities
The Consolidated Entity has operations in Asia, Continental
Europe and the United Kingdom, and its earnings are derived from
property investment, development and management activities.
The Board acknowledges the unprecedented times the world
is experiencing and the terrible impact COVID-19 is having on
people’s lives and livelihoods. The Consolidated Entity’s markets
have been affected at various times and to varying degrees, but the
Consolidated Entity has adapted to this new operating environment
with limited disruption and has continued to grow the business
sustainably for the long term. The Consolidated Entity plays an
important role in providing both essential infrastructure and making
a tangible difference for customers in the cities in which it operates.
The Consolidated Entity has established significant human
capital, financial resources and a well located real estate portfolio,
to sustain the business through market cycles. This is reflected
in the results for FY20 with the Consolidated Entity reporting
operating profit of $390.3 million, compared to $328.1 million
for the prior year.
In assessing Goodman Group’s underlying performance, the
directors consider operating earnings as well as Goodman Group’s
statutory profit. Operating earnings is a proxy for ‘cash earnings’
and is not an income measure under Hong Kong Financial Reporting
Standards. It is defined as profit attributable to Shareholders
adjusted for property valuations, impairment losses and other
non-cash adjustments or non-recurring items.
Analysis of operating profit
Property investment earnings
Development earnings
Management earnings
Operating expenses
Net finance expense (operating)1
Income tax expense (operating)
Operating profit
2020
$M
2019
$M
54.2
36.0
356.6
278.8
219.1
215.1
629.9
529.9
(186.1)
(117.9)
443.8
412.0
(13.3)
(40.2)
(26.3)
(57.6)
390.3
328.1
1.
Net finance expense (operating) excludes derivative mark to market and
unrealised foreign exchange movements.
Property investment earnings in FY20 of $54.2 million were up on
the prior year and comprised 8% of the total earnings (2019: 7%).
Net property income
Partnerships
2020
$M
16.6
37.6
2019
$M
5.1
30.9
Property investment earnings
54.2
36.0
Key metrics
Weighted average capitalisation rate (%)
Weighted average lease expiry (years)
Occupancy (%)
2020
2019
5.2
4.0
5.3
4.4
96.7
98.3
Property investment earnings comprise property income from
completed developments held for sale and the Consolidated
Entity’s share of the results of property investment joint ventures
(referred to by the Consolidated Entity as Partnerships). The
key drivers for maintaining or growing the Consolidated Entity’s
property investment earnings are increasing the level of assets
under management (AUM) (subject also to the Consolidated
Entity’s direct and indirect interest), maintaining or increasing
occupancy and rental levels within the portfolio, and changes
in financing arrangements.
The Consolidated Entity’s property portfolios are concentrated
in large, urban centres around the world where demand from
customers has put pressure on land use and availability.
Customers, including e-commerce, are continuing to invest in order
to improve the efficiency of their supply chains and data centre
users are looking to expand their operations. During the second
half of FY20, as the COVID-19 pandemic accelerated the shift in
consumer purchasing habits to online shopping, the Consolidated
Entity has seen increased demand for both temporary and
permanent space from customers in the food, consumer goods
and logistics sectors, particularly related to e-commerce operators
and those transitioning to online.
Despite the lockdowns and other restrictions that all major
economies have experienced in the past few months, there has
been relatively limited closure or disruption of the Consolidated
Entity’s warehouse facilities and the financial impact on the
Consolidated Entity has not been significant in the context of its
consolidated results and financial position.
Where the Consolidated Entity’s most vulnerable customers have
been impacted by the pandemic, then the Consolidated Entity has
worked with them to provide rental assistance. In the majority of
cases, assistance has been in the form of rent deferral or lease
restructure. To date, the rate of rental delinquency has not had a
material impact on the Consolidated Entity.
The Consolidated Entity’s share of investment earnings from its
cornerstone holdings in the Partnerships increased by 21.7%
to $37.6 million compared to the prior year. This was due to rental
income growth from existing properties and the completion of
developments both during FY19 and FY20.
152
During FY20, the Consolidated Entity’s share of property valuations
from the stabilised portfolios was $20.0 million. Valuation gains
were due to both capitalisation rate compression and the
growth in rental income. At 30 June 2020, the weighted average
capitalisation rate for the Consolidated Entity’s portfolios was
5.2%, compared to 5.3% at the start of FY20.
Development activities
In FY20, development earnings were $356.6 million, an increase
of 28% on the prior year and comprised 57% of total operating
earnings (2019: 53%).
Development activity continued to be strong with 28 developments
completed during the year and work in progress of $3.1 billion
across 21 projects at 30 June 2020. The increase in the
Consolidated Entity’s earnings was primarily volume driven.
Net development income
Partnerships
Development earnings
Key metrics
Work in progress ($B)
Work in progress (million square metres)
Work in progress (number of developments)
Developments completed during the year
(number of developments)
2020
$M
2019
$M
307.0
225.5
49.6
53.3
356.6
278.8
2020
2019
3.1
1.2
21
2.0
1.1
25
28
40
Development earnings comprise development income (including
development management fees) net of expenses, income
from sales of properties (primarily inventories but also including
disposals of special purpose entities in certain jurisdictions) and the
Consolidated Entity’s share of the results of property development
Partnerships. Development income includes performance related
revenues associated with managing development activity in
the Partnerships. The key drivers for the Consolidated Entity’s
development earnings are the level of development activity, land
and construction prices, property valuations and the continued
availability of third party capital to fund development activity.
The majority of inventory disposals and fixed price contract
income arose in Europe, as the Partnerships in Continental Europe
generally acquire completed developments from the Consolidated
Entity. In the Consolidated Entity’s other operating segments,
development earnings are a mix of development management
income, including performance related income, and transactional
activity, including the Consolidated Entity’s share of development
profits reported by the Partnerships themselves.
Consistent with Goodman Group’s strategy, development activity
has been focused on key urban centres, where customer demand
is high and the supply of industrial logistics is restricted. The scale
of the projects has been growing over time as a consequence of
the high value nature of these sites and the complexity associated
with development of infill locations.
Annual Report 2020
Management activities
Management earnings in FY20 of $219.1 million increased by 2%
compared to the prior year and comprised 35% of total operating
earnings (2019: 40%). The two main drivers of management
earnings were the increase in external AUM and the increasing
contribution from portfolio performance fee income.
During FY20, external AUM increased by 6% to $21.5 billion from
$20.2 billion as set out below:
Management earnings
Key metrics
Number of Partnerships
External AUM ($B)
2020
$M
2019
$M
219.1
215.1
2020
2019
7
7
21.5
20.2
Management earnings relates to the revenue from managing the
property portfolios and the capital invested in the Partnerships
(management income). This includes performance related revenues
but excludes earnings from managing development activities in the
Partnerships, which are included in development earnings. The
key drivers for maintaining or growing management earnings are
activity levels, asset performance, and increasing the level of AUM,
which can be impacted by property valuations and asset disposals
and is also dependent on liquidity including the continued
availability of third party capital to fund both development activity
and acquisitions across the Consolidated Entity’s Partnerships.
Base management fee income, earned from the overall
management of the Partnerships, increased in line with the
increase in AUM. This was supplemented by property services
income, which increased in line with the gross property income
in the Partnerships, and other income such as leasing fees and
transactional fees.
Other items
Operating expenses increased mainly due to the growth in
development and management activity levels, particularly with
the acquisition of the business in the United Kingdom, and to
the impact of the increase in the Goodman Group security price
on employee incentive payments. Borrowing costs have fallen
as a result of lower interest rates and the balance of funding
arrangements within the Consolidated Entity. The reduction in tax
expense is primarily a function of changes to the origin and nature
of revenue arising from management and development activities.
153
Goodman Group
Report of the directors
Business review (continued)
Statement of financial position
Cash flow
2020
$M
2019
$M
Stabilised investment properties
7.2
–
Operating cash flows
Cornerstone investments in Partnerships
1,276.2
1,226.9
Investing cash flows
Development holdings
1,056.2
541.2
Financing cash flows
2020
$M
2019
$M
376.3
238.5
(5.4)
(136.4)
(213.4)
(14.4)
157.5
87.7
212.7
115.5
368.2
212.7
Cash
Other assets
Total assets
357.4
212.7
Net increase in cash held
942.0
889.9
Effect of exchange rate fluctuations on cash held
(2.0)
9.5
3,639.0
2,870.7
Cash at the beginning of the year
Loans from related parties
1,731.0
1,102.4
Cash at the end of the year
Other liabilities
Total liabilities
Non-controlling interests
493.3
460.2
2,224.3
1,562.6
20.0
24.7
Net assets attributable to Shareholders
1,394.7 1,283.4
The value of cornerstone investments in Partnerships has
increased by $49.3 million to $1,276.2 million, principally driven
by capital contributions into existing Partnerships. A reconciliation
of the current year movement in cornerstone investments in
Partnerships is detailed in note 6(e) to the consolidated financial
statements. Distributions of income and capital from cornerstone
investments in the current year amounted to $187.3 million.
The increase in development holdings by $515.0 million to $1,056.2
million is primarily due to the acquisition of the United Kingdom
business and additional expenditure on development projects in
Continental Europe, China and the United Kingdom during the year.
Other assets included receivables, other financial assets, contract
assets, property, plant and equipment and tax assets (including
deferred tax). Other liabilities included trade and other payables,
the provision for dividends to Shareholders, fair values of derivative
financial instruments that are in a liability position, employee
benefits and tax liabilities (including deferred tax). The movement
during the year was primarily due to the liability fair values of certain
of the derivatives.
The movement in operating and investing cash flows from
the comparative year is primarily attributable to the timing of
development activities undertaken, both on balance sheet and in
Partnerships, compared with the prior year. The higher operating
cash inflow from development activities was partly offset by
decreased cash flows from management activities.
Investing cash flows primarily relate to investments in the
Partnerships to fund development expenditure.
Financing cash flows comprise principally of proceeds of loans
from related parties offset by dividends paid in FY20. The higher
financing cash outflow in the current financial year was due to the
repayment of related party loans using excess operating cash.
Outlook
The ongoing COVID-19 pandemic has not had a material
financial impact on the Consolidated Entity for FY21, the business
conditions for industrial assets are expected to remain favourable.
The Consolidated Entity is strategically well placed given its
financial and operational strength. An increase in performance is
anticipated from each of the Consolidated Entity’s earning streams,
subject to there being no material adverse change in market
conditions or the occurrence of other unforeseen events.
Further information as to other likely developments in the
operations of the Consolidated Entity and the expected results of
those operations in future financial years has not been included in
this report of the directors because disclosure of the information
would be likely to result in unreasonable prejudice to the
Consolidated Entity.
154
Risks
Goodman Group identifies strategic and operational risks for each
of its regions as part of its strategy process. The key risks, an
assessment of their likelihood of occurrence and consequences
and controls that are in place to mitigate the risks are reported to
the Goodman Group board annually.
Goodman Group has established formal systems and processes
to manage the risks at each stage of its decision making process.
This is facilitated by a Goodman Group Investment Committee
comprising senior executives, chaired by the Group Chief Executive
Officer, which considers all major operational decisions and
transactions. The Goodman Group Investment Committee meets
on a weekly basis.
The Goodman Group board has separate board committees to
review and assess key risks. The Risk and Compliance Committee
reviews and monitors a range of material risks in Goodman
Group’s risk management systems including, among other risks,
market, operational, sustainability, regulation and compliance and
information technology. The Goodman Group Audit Committee
reviews and monitors financial risk management and tax policies.
Annual Report 2020
155
Goodman Group
Report of the directors
Business review (continued)
The key risks faced by Goodman Group and the controls that have been established to manage those risks are set out below:
Risk Areas
Mitigation
Capital management
Ensuring long-term availability of funding from both
investors and financial institutions to support the
sustainability of the business and the delivery of
Goodman Group’s strategy.
Economic and
geopolitical environment
The COVID-19 pandemic is currently forecast to cause
the worst global recession since World War II and more
than twice as deep as the recession associated with
the 2007-09 global financial crisis. How prolonged this
recession will be is uncertain.
Geopolitical and geo-economic tensions are still
heightened and continues to rise among the world’s
major powers.
The global economic climate and future movements in
interest rates present risks and opportunities in property
and financing markets and the businesses of Goodman
Group’s customers which can impact both the delivery
of Goodman Group’s strategy and financial performance.
+ Goodman Group board approved financial risk
management policy
+ Prudent capital management with cash flow
requirements, gearing and available liquidity reviewed
monthly and reported to the Goodman Group board
+ Diversification of debt funding sources and maturities
+ Diversification of investment partners
+ Change in distribution pay-out ratio consistent with
contribution to increasing development workbook.
+ Global diversification of Goodman Group’s
property portfolios
+ Focus on core property portfolios in key urban
market locations
+ Focus on cost management
+ Prudent capital management with low gearing
and significant available liquidity to allow for potential
market shocks
+ Co-investment with local capital partners.
Governance,
regulation and
compliance
Non-compliance and changes to the regulatory
environments (including tax) impact Goodman Group’s
business, including its reputation.
+ Independent governance structures
+ Core values and attitudes, with an embedded
compliance culture focused on best practice
+ Dedicated Chief Risk Officer and Compliance Officer
+ Review of transactions by the Goodman Group
+ Investment Committee.
People and culture
Retaining the executive management team, who
support the sustainability of the business.
Maintaining an organisational culture, in a changing
workplace environment, commensurate with
Goodman Group’s values.
+ Succession planning for senior executives
+ Competitive remuneration structures
+ Performance management and review
+ Goodman Group values program.
Development
Development risks may arise from location,
site complexity, planning and permitting, infrastructure,
size, duration along with general contractor capability.
+ Review of development projects by the
Goodman Group Investment Committee
+ Goodman Group defined design specifications,
which cover environmental, technological,
and safety requirements, protecting against
short-term obsolescence
+ Internal audit reviews with reporting to the
Goodman Group Risk and Compliance Committee
+ Insurance program, both Goodman Group and
general contractor, including project specific insurance
+ Ongoing monitoring and reporting of work in
progress and levels of speculative development,
with Goodman Group board oversight including
limits with respect to speculative development.
156
Annual Report 2020
Risk Areas
Mitigation
Disruption,
changes in demand
and obsolescence
Through advancement in technology and rapid growth
in e-commerce (as seen through automation/robotics,
driverless vehicles and an increase in demand for data
centre use), there is a longer-term risk that warehouses
become obsolete and not fit for purpose through their
specialisation and/or location.
+ Key urban market strategy – urban, infill locations
support re-usability of property
+ Adaptable and re-usable building design – ease to
reconfigure for another customer
+ Geographic diversification
+ Capital partnering transfers risks into partnerships
+ Insurance program (both Goodman Group’s and
key contractors), including project specific insurance
covering design and defects
+ Long lease terms with prime customers.
Environmental and
climate change
Failure to properly identify and mitigate both physical and
transition risks from climate change, leading to a negative
impact on Goodman Group’s reputation, ability to raise
capital and a disruption to operations and stranded assets.
+ Corporate Responsibility and Sustainability policy
+ 2030 Sustainability Strategy including the assessment
of individual assets to improve resilience and
implementation of sustainability initiatives
Asset and portfolio
Inability to execute asset planning and management
strategies, including leasing risk exposures, can reduce
returns from Goodman Group’s portfolios.
+ Sustainability guidelines for development projects
+ Review and approval of acquisitions and
development projects by the Goodman Group
Investment Committee and relevant Partnership
Investment Committee, including consideration
of climate in due diligence and specification.
+ Key urban market strategy – urban, infill locations
where customer demand is strongest
+ Diversification of customer base and lease expiries
+ Review of significant leasing transactions
and development projects by the Group Group
Investment Committee
+ Capital expenditure programs keeping pace with
property lifecycle.
Concentration
to counterparties
and markets
Information and
data security
Over-exposure to specific areas, such as capital partners,
supply chain, customers and markets may limit growth
and sustainability opportunities.
+ Diversification of customer base and lease expiries
+ Diversification of capital partners and
Partnership expiries.
Maintaining security of IT environment and data, ensuring
continuity of IT applications to support sustainability and
growth and prevent operational, regulatory, financial and
reputational impacts.
+ Reporting of risks and management activity
+ Proactive monitoring, review and testing
of infrastructure
+ Disaster recovery and business continuity planning
and testing.
Environmental regulations
The Consolidated Entity has policies and procedures to identify and appropriately address environmental obligations that might arise
in respect of the Consolidated Entity’s operations that are subject to significant environmental regulation under the laws of the countries
the Consolidated Entity operates in. The directors have determined that the Consolidated Entity has complied with those obligations
during the financial year and that there has not been any material breach.
Disclosure in respect of any indemnification of directors
A permitted indemnity provision (as defined in section 469 of the Hong Kong Companies Ordinance) for the benefit of the directors of the
Company is currently in force and was in force throughout this year.
Directors’ interests in contracts
No contract of significance in relation to the Consolidated Entity’s business to which the Company, its subsidiaries or any of its fellow
subsidiaries was a party and in which the directors of the Company had a material interest, whether directly or indirectly, subsisted at the
end of the year or at any time during the year.
157
Goodman Group
Report of the directors
Business review (continued)
Directors’ interest in shares
At the end of the year, the directors (including alternate directors) held the following interests in the stapled securities of Goodman Group,
which are listed on the ASX:
Directors
Ian Douglas Ferrier, AM
David Jeremy Collins
Gregory Leith Goodman
Daniel Cornelius D. Peeters
Direct
securities
208,325
5,000
74,874
Indirect
securities
–
–
Total
208,325
5,000
38,029,673
38,104,547
–
2,103,548
2,103,548
In addition, Gregory Goodman and Daniel Peeters participate in the Goodman Group Long Term Incentive Plan (LTIP) under which they
hold performance rights. Performance rights entitle participants to receive Goodman Group stapled securities without the payment of
consideration, subject to Goodman Group satisfying performance criteria and the participants remaining employees of Goodman Group.
Details of the awards of performance rights under the LTIP granted as compensation to the directors (including alternate directors) at
30 June 2020 are as follows:
Number of
performance
rights at the start
of the year
Number of
performance
rights granted
during the year
Number of
performance
rights vested
during the year
Number of
performance
rights forfeited
during the year
Number of
performance
rights at the
end of the year
Date
performance
rights granted
Financial
years in which
grant vests
Gregory Leith
Goodman
Daniel Cornelius
D. Peeters
–
900,000
1,600,000
1,600,000
2,400,000
1,300,001
331,826
–
–
–
–
–
–
350,000
550,000
550,000
600,000
292,500
165,913
–
–
–
–
–
–
–
–
(800,000)
(650,001)
(331,826)
–
–
(200,000)
(146,250)
(165,913)
–
–
–
–
–
–
–
–
–
–
–
–
900,000
20 Nov 19
2023 – 2025
1,600,000
15 Nov 18
2022 – 2024
1,600,000
16 Nov 17
2021 – 2023
1,600,000
30 Sep 16
2020 – 2022
650,000
25 Nov 15
2019 – 2021
–
20 Nov 14
2018 – 2020
350,000
20 Nov 19
2023 – 2025
550,000
15 Nov 18
2022 – 2024
550,000
16 Nov 17
2021 – 2023
400,000
30 Sep 16
2020 – 2022
146,250
25 Nov 15
2019 – 2021
–
20 Nov 14
2018 – 2020
Apart from the above, at no time during the year was the Company, its subsidiaries or any of its fellow subsidiaries a party to any
arrangement to enable the directors of the Company to acquire benefits by means of the acquisition of shares in or debentures of the
Company or any other related body corporate.
158
Auditors
KPMG retire and, being eligible, offer themselves for re-
appointment. A resolution for the re-appointment of KPMG as
auditors of the Company is to be proposed at the forthcoming
Annual General Meeting.
Subsequent events
There has not arisen in the interval between the end of the
fi nancial year and the date of this report any item, transaction or
event of a material and unusual nature likely, in the opinion of the
directors, to affect signifi cantly the operations of the Consolidated
Entity, the results of those operations, or the state of affairs of the
Consolidated Entity, in future fi nancial years.
Declaration by the Group Chief Executive Offi cer
and Chief Financial Offi cer
The directors have been given declarations equivalent to those
required of listed Australian companies by section 295A of the
Corporations Act 2001 from the Group Chief Executive Offi cer and
Chief Financial Offi cer for the year ended 30 June 2020.
By order of the board of directors
Ian Douglas Ferrier, AM
Director
David Jeremy Collins
Director
Sydney, 13 August 2020
Annual Report 2020
159
Goodman Group
Independent auditor’s report
To the members of Goodman Logistics (HK) Limited (Incorporated in Hong Kong with limited liability)
Opinion
We have audited the consolidated financial statements of
Goodman Logistics (HK) Limited ("the Company") and its
subsidiaries ("the Group") set out on pages 162 to 206, which
comprise the consolidated statement of financial position as at
30 June 2020, the consolidated statement of comprehensive
income, the consolidated statement of changes in equity and the
consolidated cash flow statement for the year then ended and
notes to the consolidated financial statements, including a
summary of significant accounting policies.
In our opinion, the consolidated financial statements give a true
and fair view of the consolidated financial position of the Group
as at 30 June 2020 and of its consolidated financial performance
and its consolidated cash flows for the year then ended in
accordance with Hong Kong Financial Reporting Standards
("HKFRSs") issued by the Hong Kong Institute of Certified Public
Accountants ("HKICPA") and have been properly prepared in
compliance with the Hong Kong Companies Ordinance.
Basis for opinion
We conducted our audit in accordance with Hong Kong Standards
on Auditing ("HKSAs") issued by the HKICPA. Our responsibilities
under those standards are further described in the Auditor’s
responsibilities for the audit of the consolidated financial statements
section of our report. We are independent of the Group in
accordance with the HKICPA’s Code of Ethics for Professional
Accountants ("the Code") and we have fulfilled our other ethical
responsibilities in accordance with the Code. We believe that the
audit evidence we have obtained is sufficient and appropriate to
provide a basis for our opinion.
Information other than the consolidated financial
statements and auditor’s report thereon
The directors are responsible for the other information which
comprises all the information included in the Company’s Report
of the directors.
Our opinion on the consolidated financial statements does not
cover the other information and we do not express any form of
assurance conclusion thereon.
In connection with our audit of the consolidated financial
statements, our responsibility is to read the other information and,
in doing so, consider whether the other information is materially
inconsistent with the consolidated financial statements or our
knowledge obtained in the audit or otherwise appears to be
materially misstated.
If, based on the work we have performed, we conclude that there
is a material misstatement of this other information, we are required
to report that fact. We have nothing to report in this regard.
Responsibilities of the directors for the consolidated
financial statements
The directors are responsible for the preparation of the
consolidated financial statements that give a true and fair view
in accordance with HKFRSs issued by the HKICPA and the
Hong Kong Companies Ordinance and for such internal control
as the directors determine is necessary to enable the preparation
of consolidated financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, the directors
are responsible for assessing the Group’s ability to continue as
a going concern, disclosing, as applicable, matters related to
going concern and using the going concern basis of accounting
unless the directors either intend to liquidate the Group or to cease
operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit
of the consolidated financial statements
Our objectives are to obtain reasonable assurance about whether
the consolidated financial statements as a whole are free from
material misstatement, whether due to fraud or error, and to issue
an auditor’s report that includes our opinion. This report is made
solely to you, as a body, in accordance with section 405 of the
Hong Kong Companies Ordinance, and for no other purpose.
We do not assume responsibility towards or accept liability to any
other person for the contents of this report.
Reasonable assurance is a high level of assurance, but is not
a guarantee that an audit conducted in accordance with HKSAs
will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered
material if, individually or in the aggregate, they could reasonably
be expected to influence the economic decisions of users taken
on the basis of these consolidated financial statements.
As part of an audit in accordance with HKSAs, we exercise
professional judgement and maintain professional scepticism
throughout the audit. We also:
+
+
+
Identify and assess the risks of material misstatement of the
consolidated financial statements, whether due to fraud or
error, design and perform audit procedures responsive to
those risks, and obtain audit evidence that is sufficient and
appropriate to provide a basis for our opinion. The risk of
not detecting a material misstatement resulting from fraud is
higher than for one resulting from error, as fraud may involve
collusion, forgery, intentional omissions, misrepresentations,
or the override of internal control.
Obtain an understanding of internal control relevant to the
audit in order to design audit procedures that are appropriate
in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Group’s internal control.
Evaluate the appropriateness of accounting policies used
and the reasonableness of accounting estimates and related
disclosures made by the directors.
160
+
+
+
Conclude on the appropriateness of the directors’ use of the
going concern basis of accounting and, based on the audit
evidence obtained, whether a material uncertainty exists
related to events or conditions that may cast signifi cant doubt
on the Group’s ability to continue as a going concern. If we
conclude that a material uncertainty exists, we are required to
draw attention in our auditor’s report to the related disclosures
in the consolidated fi nancial statements or, if such disclosures
are inadequate, to modify our opinion. Our conclusions are
based on the audit evidence obtained up to the date of our
auditor’s report. However, future events or conditions may
cause the Group to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the
consolidated fi nancial statements, including the disclosures,
and whether the consolidated fi nancial statements represent
the underlying transactions and events in a manner that
achieves fair presentation.
Obtain suffi cient appropriate audit evidence regarding the
fi nancial information of the entities or business activities within
the Group to express an opinion on the consolidated fi nancial
statements. We are responsible for the direction, supervision
and performance of the Group audit. We remain solely
responsible for our audit opinion.
We communicate with the directors regarding, among other
matters, the planned scope and timing of the audit and signifi cant
audit fi ndings, including any signifi cant defi ciencies in internal
control that we identify during our audit.
KPMG
Certifi ed Public Accountants
8th Floor, Prince’s Building
10 Chater Road
Central, Hong Kong
13 August 2020
Annual Report 2020
161
Goodman Group
Consolidated statement of fi nancial position
as at 30 June 2020
(expressed in Australian dollars)
Current assets
Cash
Inventories
Receivables
Contract assets
Current tax receivables
Other assets
Assets held for sale
Total current assets
Non-current assets
Inventories
Investment properties
Investments accounted for using the equity method
Receivables
Other fi nancial assets
Deferred tax assets
Property, plant and equipment
Other assets
Total non-current assets
Total assets
Current liabilities
Payables
Loans from related parties
Current tax payables
Employee benefi ts
Dividend payable
Total current liabilities
Non-current liabilities
Payables
Loans from related parties
Deferred tax liabilities
Employee benefi ts
Other fi nancial liabilities
Total non-current liabilities
Total liabilities
Net assets
Equity attributable to Shareholders
Share capital
Reserves
Retained earnings
Total equity attributable to Shareholders
Non-controlling interests
Total equity
Note
17(a)
6(b)
7
8
4(c)
9
6(b)
6(b)
6(b)
7
13
4(d)
10
21(c)
4(c)
15
10
21(c)
4(d)
13
16(a)
18
19
2020
$M
357.4
405.1
563.6
25.1
0.8
1.7
97.9
20191
$M
212.7
156.6
556.2
279.5
1.2
1.5
–
1,451.6
1,207.7
553.2
7.2
1,276.2
279.0
36.4
6.3
23.8
5.3
2,187.4
3,639.0
200.5
1,403.7
48.2
39.4
73.1
315.2
–
1,226.9
82.1
28.2
0.1
4.7
5.8
1,663.0
2,870.7
227.5
851.7
28.3
23.9
90.7
1,764.9
1,222.1
57.5
327.3
0.9
24.8
48.9
459.4
2,224.3
1,414.7
732.0
(624.5)
1,287.2
1,394.7
20.0
1,414.7
52.3
250.7
30.8
–
6.7
340.5
1,562.6
1,308.1
696.0
(447.4)
1,034.8
1,283.4
24.7
1,308.1
1.
The Consolidated Entity has adopted HKFRS 16 Leases with a date of initial application of 1 July 2019 using the modifi ed retrospective approach.
Under this approach, the comparative information is not restated (refer note 1(e)).
The notes on pages 166 to 206 form part of these consolidated fi nancial statements.
Approved and authorised for issue by the board of directors on 13 August 2020.
Ian Douglas Ferrier, AM
Ian Douglas Ferrier, AM
Director
162
David Jeremy Collins
David Jeremy Collins
Director
Consolidated statement of comprehensive income
for the year ended 30 June 2020
(expressed in Australian dollars)
Annual Report 2020
Revenue
Gross property income
Management income
Development income
Dividends from investments
Property and development expenses
Property expenses
Development expenses
Other income
Net loss from fair value adjustments on investment properties
Net gain on disposal of investment properties
Share of net results of equity accounted investments
Net gain on disposal of equity accounted investments
Other expenses
Employee expenses
Share based payments expense
Administrative and other expenses
Transaction management fees
Profit before interest and income tax
Net finance income/(expense)
Finance income
Finance expense
Net finance expense
Profit before income tax
Income tax expense
Profit for the year
Profit for the year attributable to:
Shareholders
Non-controlling interests
Profit for the year
Other comprehensive income
Item that will not be reclassified to profit or loss:
Increase due to revaluation of other financial assets
Item that may be reclassified subsequently to profit or loss:
Effect of foreign currency translation
Other comprehensive (loss)/income for the year, net of tax
Total comprehensive income for the year
Total comprehensive income for the year attributable to:
Shareholders
Non-controlling interests
Total comprehensive income for the year
The notes on pages 166 to 206 form part of these consolidated financial statements.
Note
2
2
2
6(e)
2
2
12
12
4
19
2020
$M
21.5
276.5
653.6
–
951.6
(4.9)
(371.5)
(376.4)
(1.2)
0.2
107.0
24.9
130.9
(146.8)
(57.6)
(39.3)
(57.4)
(301.1)
405.0
23.7
(58.8)
(35.1)
369.9
(40.2)
329.7
325.5
4.2
329.7
5.5
5.5
(14.6)
(14.6)
(9.1)
320.6
316.2
4.4
320.6
2019
$M
8.3
317.0
694.7
0.8
1,020.8
(3.2)
(474.8)
(478.0)
–
–
221.2
4.8
226.0
(91.7)
(54.8)
(26.2)
(101.9)
(274.6)
494.2
4.4
(37.4)
(33.0)
461.2
(57.6)
403.6
398.9
4.7
403.6
3.0
3.0
2.5
2.5
5.5
409.1
403.9
5.2
409.1
163
Goodman Group
Consolidated statement of changes in equity
for the year ended 30 June 2020
Year ended 30 June 2019
(expressed in Australian dollars)
Balance at 1 July 2018
Total comprehensive income for the year
Profit for the year
Other comprehensive income for the year
Total comprehensive income
for the year, net of income tax
Contributions by and distributions to owners
Dividend declared/paid
Issue of shares to employees of Goodman Group
Equity settled share based payments transactions
Note
19
15
16(a)
18(c)
Attributable to Shareholders
Share
capital
$M
Reserves
$M
Retained
earnings
$M
Non-
controlling
interests
$M
Total
$M
674.6
(459.6)
726.6
941.6
22.4
Total
equity
$M
964.0
–
–
–
–
21.4
–
–
5.0
398.9
398.9
–
5.0
4.7
0.5
403.6
5.5
5.0
398.9
403.9
5.2
409.1
–
–
7.2
(90.7)
–
–
(90.7)
21.4
7.2
(2.9)
–
–
(93.6)
21.4
7.2
Balance at 30 June 2019
696.0
(447.4)
1,034.8
1,283.4
24.7
1,308.1
Year ended 30 June 2020
(expressed in Australian dollars)
Balance at 1 July 2019
Total comprehensive income for the year
Profit for the year
Other comprehensive (loss)/income for the year
Total comprehensive (loss)/income
for the year, net of income tax
Contributions by and distributions to owners
Dividend declared/paid
Issue of shares to employees of Goodman Group
Equity settled share based payments transactions
Actuarial losses on defined
benefit superannuation funds
Acquisition of entities from Goodman Limited
Acquisition of special purpose development
entity with non-controlling interests
Attributable to Shareholders
Share
capital
$M
Reserves
$M
Retained
earnings
$M
Non-
controlling
interests
$M
Total
$M
Total
equity
$M
696.0
(447.4)
1,034.8
1,283.4
24.7
1,308.1
–
–
–
–
36.0
–
–
–
–
–
(9.3)
325.5
325.5
–
(9.3)
4.2
0.2
329.7
(9.1)
(9.3)
325.5
316.2
4.4
320.6
–
–
5.2
(8.2)
(164.8)
–
(73.1)
–
–
–
–
–
(73.1)
36.0
5.2
(8.2)
(164.8)
(9.8)
–
–
–
–
(82.9)
36.0
5.2
(8.2)
(164.8)
–
0.7
0.7
Note
19
15
16(a)
18(c)
18(d)
18(e)
Balance at 30 June 2020
732.0
(624.5)
1,287.2
1,394.7
20.0
1,414.7
The notes on pages 166 to 206 form part of these consolidated financial statements.
164
Consolidated cash flow statement
for the year ended 30 June 2020
(expressed in Australian dollars)
Cash flows from operating activities
Property income received
Cash receipts from development activities
Other cash receipts from services provided
Property expenses paid
Payments for development activities
Other cash payments in the course of operations
Dividends/distributions received
Interest received
Finance costs paid
Net income taxes paid
Net cash provided by operating activities
Cash flows from investing activities
Proceeds from disposal of investment properties
Proceeds from disposal of controlled entities, net of cash disposed
Payments for investment properties
Proceeds from disposal of equity accounted investments
Capital return from equity accounted investments
Payments for equity investments
Payments for plant and equipment
Cash acquired on acquisition of subsidiaries
Net cash used in investing activities
Cash flows from financing activities
Net (repayments of)/proceeds from loans with related parties
Payments of lease liabilities
Dividends paid to Shareholders
Dividends paid to non-controlling interests
Net cash used in financing activities
Net increase in cash held
Cash at the beginning of the year
Effect of exchange rate fluctuations on cash held
Cash at the end of the year
The notes on pages 166 to 206 form part of these consolidated financial statements.
Note
Annual Report 2020
2020
$M
20.2
796.1
451.5
(4.8)
(513.8)
(418.3)
77.6
21.1
(0.9)
(52.4)
2019
$M
5.8
688.1
186.1
(2.9)
(552.8)
(120.4)
52.8
0.4
(0.6)
(18.0)
17(b)
376.3
238.5
4.8
95.6
(97.1)
–
109.2
(155.7)
(0.1)
37.9
(5.4)
(101.0)
(11.9)
(90.7)
(9.8)
(213.4)
157.5
212.7
(2.0)
368.2
20
17(a)
–
–
–
4.8
50.1
(191.0)
(0.3)
–
(136.4)
78.5
–
(90.0)
(2.9)
(14.4)
87.7
115.5
9.5
212.7
165
Goodman Group
Notes to the consolidated financial statements
BASIS OF PREPARATION
1 Basis of preparation
(a) Statement of compliance
These financial statements have been prepared in accordance with
all applicable Hong Kong Financial Reporting Standards (HKFRSs),
which collective term includes all applicable individual Hong Kong
Financial Reporting Standards, Hong Kong Accounting Standards
(HKASs) and Interpretations issued by the Hong Kong Institute of
Certified Public Accountants (HKICPA) and accounting principles
generally accepted in Hong Kong. These financial statements
also comply with the applicable requirements of the Hong Kong
Companies Ordinance.
(b) Basis of preparation of the consolidated
financial statements
The measurement basis used in the preparation of the
consolidated financial statements is the historical cost basis except
for investment properties and other financial assets which are
stated at fair value.
As at 30 June 2020, the Consolidated Entity had net current
liabilities of $313.3 million. In accordance with the stapling
agreement between the Company (GLHK), Goodman Limited (GL)
and Goodman Funds Management Limited as responsible entity
for Goodman Industrial Trust (GIT), on request, each party (and its
subsidiaries) must provide financial support to the other party (and
its subsidiaries). The financial support to the other party (and its
subsidiaries) may include:
+
+
+
+
Lending money or providing financial accommodation
Guaranteeing any loan or other financing facility including
providing any security
Entering into any covenant, undertaking, restraint, negative
pledge on the obtaining of any financial accommodation or
the provision of any guarantee or security in connection with
any financial accommodation
Entering into any joint borrowing or joint financial
accommodation and providing any guarantee, security,
indemnities and undertakings in connection with the relevant
joint borrowing or joint financial accommodation.
A party need not do anything under the above arrangements to
the extent that the party considers that it is not in the interests of
Goodman Group Securityholders as a whole, or would cause a
member of the party’s group to contravene or breach applicable
laws or particular finance arrangements.
On the basis of the above, the consolidated financial statements
have been prepared on a going concern basis.
The preparation of financial statements in conformity with HKFRSs
requires management to make judgements, estimates and
assumptions that affect the application of policies and reported
amounts of assets, liabilities, income and expenses. The estimates
and associated assumptions are based on historical experience
and various other factors that are believed to be reasonable under
the circumstances, the results of which form the basis of making
the judgements about carrying values of assets and liabilities that
are not readily apparent from other sources. Actual results may
differ from these estimates.
The estimates and underlying assumptions are reviewed on an
ongoing basis. Revisions to accounting estimates are recognised in
the period in which the estimate is revised if the revision affects only
that period, or in the period of the revision and future periods if the
revision affects both current and future periods.
(c) Accounting for acquisitions of non-controlling interests
Acquisitions of non-controlling interests are accounted for as
transactions with equity holders in their capacity as equity holders
and therefore no gain or loss and no goodwill is recognised as a
result of such transactions.
(d) Foreign currency translation
Functional and presentation currency
Items included in the consolidated financial statements of each of
the Company’s subsidiaries are measured using the currency of
the primary economic environment in which the entity operates
(functional currency). The consolidated financial statements are
presented in Australian dollars, which is the Company’s functional
and presentation currency.
Transactions
Foreign currency transactions are translated to each entity’s
functional currency at rates approximating the foreign exchange
rates ruling at the dates of the transactions. Amounts receivable
and payable in foreign currencies at the reporting date are
translated at the rates of exchange ruling on that date. Resulting
exchange differences are recognised in profit or loss.
Non-monetary assets and liabilities that are measured in terms
of historical cost are translated at rates of exchange applicable at
the date of the initial transaction. Non-monetary items which are
measured at fair value in a foreign currency are translated using the
exchange rates at the date when the fair value was determined.
Translation of controlled foreign operations
The assets and liabilities of foreign operations are translated into
Australian dollars at foreign exchange rates applicable at the
reporting date.
Revenue and expenses are translated at weighted average rates for
the financial year. Exchange differences arising on translation are
taken directly to the foreign currency translation reserve until the
disposal or partial disposal of the operations.
Exchange differences arising on monetary items that form part
of the net investment in a foreign operation are recognised in the
foreign currency translation reserve on consolidation.
166
Annual Report 2020
(e) Changes in accounting policies
(ii) Lessee accounting
The Consolidated Entity has adopted HKFRS 16 Leases with
a date of initial application of 1 July 2019.
HKFRS 16 Leases
HKFRS 16 replaces HKAS 17 Leases and other existing guidance
on leases. It introduces a single lessee accounting model and
requires a lessee to recognise assets and liabilities for all leases
with a term of more than 12 months, unless the underlying asset is
of low value. A lessee is required to recognise a right of use asset
representing its right to use the underlying leased asset and a lease
liability representing its obligations to make lease payments.
The Consolidated Entity applied HKFRS 16 on 1 July 2019 using
the modified retrospective approach. Under this approach, the
cumulative effect of initially applying this standard is recognised at
the date of initial application. Comparative information has not been
restated and continues to be reported under HKAS 17.
Further details of the nature and effect of the changes to previous
accounting policies and the transition options applied are set
out below:
Accounting policy applicable from 1 July 2019
(i) Definition
HKFRS 16 defines a lease on the basis of whether a customer
controls the use of an identified asset for a period of time, which
may be determined by a defined amount of use. Control is
conveyed where the customer has both the right to direct the use
of the identified asset and to obtain substantially all of the economic
benefits from that use.
The Consolidated Entity applied the practical expedient to
grandfather the definition of a lease on transition. This means that it
will apply HKFRS 16 to all contracts entered into before 1 July 2019
that had been identified as leases in accordance with the old
leases accounting standard (HKAS 17).
The Consolidated Entity recognises a right of use asset and a
lease liability at the lease commencement date. The right of use
asset is initially measured at cost plus any direct costs incurred
and an estimate of costs to restore the underlying asset or the
site on which it is located, less any lease incentives received.
The right of use asset is subsequently depreciated using the
straight-line method.
The lease liability is initially measured at the present value of the
lease payments that are not paid at the commencement date,
discounted using the lessee’s incremental borrowing rate. After
initial recognition, the lease liability is measured at amortised cost
and interest expense is calculated using the effective interest rate
method. The lease liability is remeasured when there is a change
in future lease payments arising from a change in an index or rate,
or there is a change arising from the reassessment of whether
the Consolidated Entity will be reasonably certain to exercise an
extension or termination option. The new standard will result in
the gross up of assets and liabilities where the Consolidated Entity
leases office buildings, motor vehicles, office equipment and
development land classified as inventories.
The right of use assets in respect of office buildings, motor
vehicles and office equipment are depreciated using the
straight-line method over the period of the lease. Ground
leases of development land that are classified as inventories are
not depreciated, but are assessed at each reporting date for
impairments to ensure they are recorded at the lower of cost and
net realisable value.
(iii) Leasehold investment property
Under HKFRS 16, the Consolidated Entity is required to account
for all properties on leasehold land as investment properties when
these properties are held for the purpose of leasing to produce
rental income and/or for capital appreciation. The adoption of
HKFRS 16 does not have a significant impact on the Consolidated
Entity’s financial statements as the Consolidated Entity has
previously applied HKAS 40 Investment property, to account
for all of its leasehold properties that were held for investment
purposes at fair value. Consequentially, these leasehold investment
properties continue to be carried at fair value.
(iv) Lessor accounting
The accounting policies applicable to the Consolidated Entity as a
lessor remain substantially unchanged from those under HKAS 17.
167
Goodman Group
Notes to the consolidated financial statements
Basis of preparation (continued)
1 Basis of preparation (continued)
(v) Transitional impact
The comparative information at 30 June 2019 has not been restated. The following table summarises the impact of the adoption
of HKFRS 16 on the Consolidated Entity’s consolidated statement of financial position at 1 July 2019:
Current assets
Inventories
Total current assets
Non-current assets
Inventories
Property, plant and equipment
Total non-current assets
Current liabilities
Lease liabilities
Total current liabilities
Non-current liabilities
Lease liabilities
Total non-current liabilities
Net assets
Inventories
Impact of adopting HKFRS 16
At 30 Jun 2019
$M
Adjustments
$M
At 1 Jul 2019
$M
156.6
1,207.7
315.2
4.7
1,663.0
–
1,222.1
–
340.5
1,308.1
8.3
8.3
14.8
11.3
26.1
8.3
8.3
26.1
26.1
–
164.9
1,216.0
330.0
16.0
1,689.1
8.3
1,230.4
26.1
366.6
1,308.1
The adjustment to inventories arises from leasehold land previously classified as operating leases and held for development.
Property, plant and equipment
On the adoption of HKFRS 16, the Consolidated Entity presented the right of use assets associated with the leases of office buildings,
motor vehicles and office equipment as property, plant and equipment. In the prior full year financial report, property, plant and equipment
was included in other assets in the consolidated statement of financial position.
Lease liabilities
The present value of future lease payments are presented as lease liabilities.
Operating lease commitments disclosed at 30 June 2019
Discounted using the incremental borrowing rate at 1 July 2019
Recognition exemption for:
–
short-term leases
Lease liabilities recognised at 1 July 2019
Comprising:
Current lease liabilities
Non-current lease liabilities
168
At 1 Jul 2019
$M
62.9
(25.6)
(2.9)
34.4
8.3
26.1
34.4
Annual Report 2020
(vi) Impact on results for the period
Measurement of fair values
A number of the Consolidated Entity’s accounting policies and
disclosures require the measurement of fair values, for both
financial and non-financial assets and liabilities.
When measuring the fair value of an asset or a liability, the
Consolidated Entity uses market observable data as far as
possible. Fair values are categorised into different levels in a fair
value hierarchy and have been defined as follows:
+
+
+
Level 1: quoted prices (unadjusted) in active markets for
identical assets or liabilities
Level 2: inputs other than quoted prices included within
Level 1 that are observable for the asset or liability, either
directly (i.e. as prices) or indirectly (i.e. derived from prices)
Level 3: inputs for the asset or liability that are not based
on observable market data (unobservable inputs).
Further information about the assumptions made in measuring fair
values is included in the following notes:
Note 6 – Property assets
+
+ Note 14 – Financial risk management.
After the initial recognition of right of use assets and lease liabilities
at 1 July 2019, Consolidated Entity, as a lessee, is required to
recognise interest expense on the outstanding balance of the
lease liability, and the depreciation of the right of use asset, instead
of the previous policy of recognising rental expenses incurred
under operating leases on a straight-line basis over the lease term.
The impact on profit or loss in the current period as a result of
this change in policy is not significant compared to the results if
HKAS 17 continued to apply.
In the consolidated cash flow statement, the Consolidated Entity,
as a lessee, has classified the principal portion of lease payments
within financing activities and the interest portion within operating
activities. Under HKAS 17, the entire lease payment was classified
within operating activities. The Consolidated Entity has determined
that the change does not have a significant impact on the
presentation of cash flows.
(f) Accounting standards issued but not yet effective
The Consolidated Entity has not applied any new standard or
interpretation that is not yet effective for the current accounting
period. None of the new accounting standards or interpretations
is expected to have a significant impact on the future results of the
Consolidated Entity.
(g) Critical accounting estimates used in the preparation
of the consolidated financial statements
The preparation of consolidated financial statements requires
estimates and assumptions concerning the application of
accounting policies and the future to be made by the Consolidated
Entity. Estimates are continually evaluated and are based on
historical experience and other factors, including expectations
of future events that are believed to be reasonable under
the circumstances.
The estimates and assumptions that have a significant risk of
causing a material adjustment to the carrying amounts of assets
and liabilities within the next financial year can be found in the
following notes:
+ Note 6 – Property assets
+ Note 14 – Financial risk management.
The accounting impacts of revisions to estimates are recognised
in the period in which the estimate is revised and in any future
periods affected.
169
Goodman Group
Notes to the consolidated financial statements
Results for the year
RESULTS FOR THE YEAR
2 Profit before interest and income tax
Gross property income
Gross property income comprises rental income under operating
leases (net of incentives provided) and amounts billed to customers
for outgoings (e.g. rates, levies, cleaning, security, etc.). Amounts
billed to customers for outgoings are a cost recovery for the
Consolidated Entity and are recognised once the expense has
been incurred. The expense is included in property expenses.
Rental income under operating leases is recognised on a straight-
line basis over the term of the lease contract. Where operating
lease rental income is recognised relating to fixed increases in
rentals in future years, an asset is recognised. This asset is a
component of the relevant investment property carrying amount.
The cost of lease incentives provided to customers is amortised on
a straight-line basis over the life of the lease as a reduction of gross
property income.
Management and development income
The revenue from management and development activities is
measured based on the consideration specified in a contract with
a customer. The Consolidated Entity recognises revenue when it
transfers control over a product or service to a customer.
Management income
Fee income derived from investment management and property
services is recognised and invoiced progressively as the services
are provided. Customers make payments usually either monthly
or quarterly in arrears.
Performance related management income generally relates
to portfolio performance fee income, which is recognised
progressively as the services are provided but only when the
income can be reliably measured and is highly probable of not
being reversed. These portfolio performance fees are typically
dependent on the overall returns of a Partnership relative to an
agreed benchmark return, assessed over the life of the Partnership,
which can vary from one year to seven years. The returns are
impacted by operational factors such as the quality and location
of the portfolio, active property management, rental income rates
and development activity but can also be significantly affected by
changes in global and local economic conditions. Accordingly,
portfolio performance fee revenue is only recognised towards the
end of the relevant assessment period, as prior to this revenue
recognition is not considered to be sufficiently certain.
In determining the amount of revenue that can be reliably
measured, management prepares a sensitivity analysis to
understand the impact of changes in asset valuations on
the potential performance fee at the assessment date. The
assessment of revenue will depend on the prevailing market
conditions at the reporting date relative to long-term averages and
also the length of time until the assessment date e.g. the longer
the time period to assessment date, the greater the impact of the
sensitivity analysis. The potential portfolio performance fee revenue
is then recognised based on the length of time from the start of
170
the assessment period to the reporting date as a proportion of
the total assessment period. Where the income is attributable to
development activities that have occurred over the performance
fee period, then it is reported as development income, otherwise
the income is reported as management income. The Partnerships
make payments in respect of portfolio performances fees at
the end of the performance periods, once the attainment of the
conditions has been verified and the amount of the fee has been
agreed by all parties.
Development income – disposal of inventories
The disposal of inventories is recognised at the point in time when
control over the property asset is transferred to the customer.
This will generally occur on transfer of legal title and payment
in full by the customer. The gain or loss on disposal of inventories
is calculated as the difference between the carrying amount of
the asset at the time of disposal and the proceeds on disposal
(less transaction costs) and is included in profit or loss in the
period of disposal.
Development income – development management services
Fee income from development management services (including
master-planning, development management and overall project
management) is recognised progressively as the services are
provided in proportion to the stage of completion by reference to
costs. Payments are received in accordance with the achievement
of agreed milestones over the development period. The
development period can be up to twenty four months for larger and
more complex developments.
Performance related development income includes income
associated with the returns from individual developments under
the Consolidated Entity’s management and performance fee
income that relates to development activity. Income in respect of
individual developments is recognised by the Consolidated Entity
on attainment of the performance related conditions, which is
when the income can be reliably measured and is highly probable
of not being reversed. These amounts are paid by the Partnership
when the amounts have been measured and agreed. Income
associated with development activities as part of a portfolio
assessment is recognised on the same basis as outlined above
in the management income section.
Development income – fixed price development contracts
Certain development activities are assessed as being fixed
price development contracts. This occurs when a signed
contract exists, either prior to the commencement of or during
the development phase, to acquire a development asset from
the Consolidated Entity on completion. Revenue and expenses
relating to these development contracts are recognised in
profit or loss in proportion to the stage of completion of the
relevant contracts by reference to costs. The payments may
be on completion of the development once legal title has been
transferred. The development period can be up to twenty four
months for larger and more complex developments.
Annual Report 2020
Net gain on disposal of investment properties
The disposal of an investment property is recognised at the point in time when control over the property has been transferred to
the purchaser.
Employee benefits
Wages, salaries and annual leave
Wages and salaries, including non-monetary benefits, and annual leave that are expected to be settled within 12 months of the
reporting date represent present obligations resulting from employees’ services provided to the reporting date. These are calculated at
undiscounted amounts based on rates that are expected to be paid as at the reporting date including related on-costs, such as workers’
compensation insurance and payroll tax.
Bonuses
A liability is recognised in other payables and accruals for bonuses where there is a contractual obligation or where there is a past
practice that has created a constructive obligation. Liabilities for bonuses that are expected to be settled within 12 months are measured
at the amounts expected to be paid, including related on-costs, when they are settled. Liabilities for bonuses, including related on-costs,
which are expected to be settled after more than 12 months are discounted to reflect the estimated timing of payments.
Defined contribution retirement plans
Obligations for contributions to defined contribution retirement plans are recognised as an expense as incurred.
Profit before interest and income tax has been arrived at after crediting/(charging) the following items:
Management income
Portfolio performance fees
Management income
Income from disposal of inventories
Development income from fixed price development contracts
Other development income, including development management
Net gain on disposal of special purpose development entities
Development income
Inventory cost of sales
Other development expenses
Development expenses
Included in employee expenses are the following items:
Salaries, wages and other benefits
Contributions to defined contribution retirement plans
Employee expenses
Operating lease expense
Depreciation of plant and equipment
Auditor's remuneration
2020
$M
146.4
130.1
276.5
451.6
35.4
165.3
1.3
653.6
(318.8)
(52.7)
(371.5)
(145.5)
(1.3)
(146.8)
–
(11.7)
(1.2)
2019
$M
122.8
194.2
317.0
305.0
310.7
74.5
4.5
694.7
(220.8)
(254.0)
(474.8)
(90.7)
(1.0)
(91.7)
(8.0)
(2.0)
(0.8)
171
Goodman Group
Notes to the consolidated financial statements
Results for the year (continued)
3 Segment reporting
An operating segment is a component of the Consolidated Entity
that engages in business activities from which it may earn revenues
and incur expenses. The Consolidated Entity reports the results
and financial position of its operating segments based on the
internal reports regularly reviewed by the Group Chief Executive
Officer in order to assess each segment’s performance and to
allocate resources to them.
Operating segment information is reported on a geographic basis
and the Consolidated Entity has determined that its operating
segments are Asia (which consists of Greater China and Japan),
Continental Europe and the United Kingdom.
The activities and services undertaken by the operating
segments include:
+
Property investment, comprising the Consolidated Entity’s
cornerstone investments in Partnerships
+ Management activities, both fund and property management
Development activities, including development of directly
+
owned assets (predominantly disclosed as inventories)
and management of development activities for the
Consolidated Entity’s Partnerships.
The segment results that are reported to the Group Chief Executive
Officer are based on profit before net finance expense and income
tax expense, and also exclude non-cash items such as fair value
adjustments and impairments, corporate expenses and incentive
based remuneration. The assets allocated to each operating
segment primarily include inventories, and the operating segment’s
investments in Partnerships, but exclude receivables from GL, GIT
and their controlled entities, income tax receivables and corporate
assets. The liabilities allocated to each operating segment primarily
relate to trade and other payables associated with the operating
activities, but exclude payables to GL, GIT and their controlled
entities, provision for dividends to Shareholders, income tax
payables and corporate liabilities.
The accounting policies used to report segment information are
the same as those used to prepare the consolidated financial
statements for the Consolidated Entity.
For the purpose of operating segment reporting, there are no
material intersegment revenues and costs.
Information regarding the operations of each reportable segment
is included on the following pages.
172
Information about reportable segments
Statement of comprehensive income
External revenues
Gross property income
Management income
Development income
Dividends from investments
Total external revenues
Analysis of external revenues:
Revenues from contracts with customers
Annual Report 2020
Asia
Continental Europe
United Kingdom
Total
2020
$M
2019
$M
2020
$M
2019
$M
2020
$M
2019
$M
2020
$M
2019
$M
1.8
1.5
186.4
195.6
10.5
88.0
6.8
121.4
9.2
2.1
160.1
66.1
476.2
628.6
17.3
–
0.8
–
–
–
348.3
264.0
574.7
756.8
28.6
–
–
–
–
–
–
–
–
–
21.5
8.3
276.5
317.0
653.6
694.7
–
0.8
951.6
1,020.8
486.0
337.4
446.7
677.8
18.9
5.6
951.6
1,020.8
Assets and services transferred at a point in time
15.3
19.4
467.0
318.0
Assets and services transferred over time
331.5
243.2
99.6
434.6
3.7
15.6
Other revenue
Rental income (excludes outgoings recoveries)
1.5
1.4
8.1
4.2
9.3
Total external revenues
348.3
264.0
574.7
756.8
28.6
Reportable segment profit before income tax
259.6
166.7
219.7
279.6
6.1
4.0
485.4
450.3
Other key components of financial
performance included in reportable
segment profit before income tax
Share of net results of equity accounted
investments (before fair value adjustments)
Material non-cash items not included in
reportable segment profit before income tax
Share of fair value adjustments
in equity accounted investments
68.8
68.9
13.3
11.3
4.9
4.0
87.0
84.2
8.2
105.7
1.7
14.4
10.1
16.9
20.0
137.0
Statement of financial position
Reportable segment assets
Investments accounted for using the equity method
(included in reportable segment assets)
2020
$M
2019
$M
2020
$M
2019
$M
2020
$M
2019
$M
2020
$M
2019
$M
1,334.5
1,405.1
880.0
855.4
822.2
202.2
3,036.7
2,462.7
854.7
882.9
140.5
147.7
281.0
196.3
1,276.2
1,226.9
Total non-current assets
991.7
993.9
422.0
472.8
523.4
196.3
1,937.1
1,663.0
Reportable segment liabilities
96.1
76.2
98.7
73.3
103.2
–
298.0
149.5
173
Goodman Group
Notes to the consolidated financial statements
Results for the year (continued)
3 Segment reporting (continued)
Reconciliation of reportable segment revenue, profit or loss, assets and liabilities
Revenue
Total revenue for reportable segments
Consolidated revenues
Profit or loss
Total profit before income tax for reportable segments
Corporate expenses not allocated to reportable segments
Valuation and other adjustments not included in reportable segment profit before income tax:
– Net loss from fair value adjustments on investment properties
– Share of fair value adjustments in equity accounted investments
– Share based payments expense
Net finance expense – refer to note 12
Consolidated profit before income tax
Assets
Total assets for reportable segments
Other unallocated amounts1
Consolidated total assets
Liabilities
Total liabilities for reportable segments
Other unallocated amounts1
Consolidated total liabilities
1. Other unallocated amounts comprise principally receivables from and payables to GL, GIT and their controlled entities.
2020
$M
951.6
951.6
485.4
(41.6)
443.8
(1.2)
20.0
(57.6)
(35.1)
369.9
3,036.7
602.3
3,639.0
298.0
1,926.3
2,224.3
2019
$M
1,020.8
1,020.8
450.3
(38.3)
412.0
–
137.0
(54.8)
(33.0)
461.2
2,462.7
408.0
2,870.7
149.5
1,413.1
1,562.6
174
Annual Report 2020
2020
$M
2019
$M
(41.4)
1.2
(40.2)
(3.6)
0.6
(3.0)
(34.8)
(30.4)
2.0
1.1
(32.8)
(29.3)
32.8
(24.9)
–
32.8
(40.2)
(0.4)
(25.3)
(57.6)
(a) Taxation in the consolidated statement
of comprehensive income
Current tax expense –
Hong Kong profits tax
Current year
Adjustment for prior periods
Current tax expense – overseas
Current year
Adjustment for prior periods
Deferred tax expense
Origination and reversal
of temporary differences
Other
Total income tax expense
The provision for Hong Kong profits tax for year ended 30 June 2020
is calculated at 16.5% (2019: 16.5%) of the estimated assessable
profits for the year. Taxation for overseas subsidiaries is charged at the
appropriate current rates of taxation ruling in the relevant countries.
4 Income tax expense
Income tax for the period comprises current tax and movements
in deferred tax assets and liabilities. Current tax and movements
in deferred tax assets and liabilities are recognised in profit or loss
except to the extent that they relate to items recognised in other
comprehensive income or directly in equity, in which case the
relevant amounts of tax are recognised in other comprehensive
income or directly in equity respectively.
Current tax is the expected tax payable on the taxable income for
the period, using tax rates enacted or substantively enacted at the
reporting date, and any adjustment to tax payable in respect of
previous years.
Deferred tax assets and liabilities arise from deductible and taxable
temporary differences respectively, being the differences between
the carrying amounts of assets and liabilities for financial reporting
purposes and their tax bases. Deferred tax assets also arise from
unused tax losses and unused tax credits. Apart from differences
which arise on initial recognition of assets and liabilities, all deferred
tax liabilities and all deferred tax assets, to the extent that it is
probable that future taxable profits will be available against which
the asset can be utilised, are recognised.
The amount of deferred tax recognised is measured based on
the expected manner of realisation or settlement of the carrying
amount of the assets and liabilities, using tax rates enacted or
substantively enacted at the reporting date. Deferred tax assets
and liabilities are not discounted.
175
Goodman Group
Notes to the consolidated financial statements
Results for the year (continued)
4 Income tax expense (continued)
(b) Reconciliation between income tax expense and accounting profit at applicable tax rates
Profit before income tax
Notional tax on profit before income tax, calculated at the rates applicable to profits in the countries concerned
(Increase)/decrease in income tax due to:
– Current year losses for which no deferred tax asset was recognised
– Non-assessable income
– Non-deductible expense
– Utilisation of previously unrecognised tax losses
–
Adjustment for prior periods
Income tax expense
2020
$M
369.9
(98.1)
(9.4)
104.5
(49.9)
9.5
3.2
(40.2)
2019
$M
461.2
(124.4)
(7.7)
96.0
(43.8)
20.6
1.7
(57.6)
176
(c) Net income tax payable
Net balance at the beginning of the year
Decrease/(increase) in current net tax payable due to:
– Net income taxes paid
– Net income tax expense on current year’s profit
–
Adjustment for prior periods
– Other
Net balance at the end of the year
Current tax receivables
Current tax payables
(d) Deferred tax assets and liabilities
Annual Report 2020
2020
$M
(27.1)
52.4
(76.2)
3.2
0.3
(47.4)
0.8
(48.2)
(47.4)
2019
$M
(12.0)
18.0
(34.0)
1.7
(0.8)
(27.1)
1.2
(28.3)
(27.1)
Deferred tax assets of $6.3 million (2019: $0.1 million) arising from employee benefits and deferred tax liabilities of $0.9 million
(2019: $30.8 million) arising from other receivables were recognised in the consolidated statement of financial position.
5 Profit attributable to equity shareholders of the Company
The consolidated profit attributable to equity shareholders of the Company includes a profit of $395.0 million (2019: $114.7 million) which
has been dealt with in the financial statements of the Company.
177
Goodman Group
Notes to the consolidated financial statements
Operating assets and liabilities
OPERATING ASSETS AND LIABILITIES
Components of investment properties
6 Property assets
(a) Types of property assets
Investment in property assets includes both inventories and
investment properties (including those under development), which
may be held either directly or through investments in Partnerships.
Inventories
Inventories relate to land and property developments that are held
for sale or development and sale in the normal course of business.
Where property developments are forecast to be completed
and sold more than 12 months after the reporting date, then the
inventories are classified as non-current.
Work in progress in relation to land subdivision and development
projects includes the costs of acquisition, planning, management
and development and holding costs such as interest and taxes.
Inventories are carried at the lower of cost or net realisable value.
Net realisable value is the estimated selling price in the normal
course of business, less the estimated costs of completion and
selling expenses. The calculation of net realisable value requires
estimates and assumptions which are continually evaluated and
are based on historical experience and expectations of future
events that are believed to be reasonable under the circumstances.
Investment properties
Investment properties comprise investment interests in land and
buildings held for the purpose of leasing to produce rental income
and/or for capital appreciation. Investment properties are carried
at fair value. The calculation of fair value requires estimates and
assumptions which are continually evaluated and are based on
historical experience and expectations of future events that are
believed to be reasonable under the circumstances. Investment
properties are not depreciated as they are subject to continual
maintenance and regularly revalued on the basis described below.
Changes in the fair value of investment properties are recognised
directly in profit or loss.
Land and buildings (including integral plant and equipment)
comprising investment properties are regarded as composite assets
and are disclosed as such in the consolidated financial statements.
Investment property carrying values include the costs of acquiring
the assets and subsequent costs of development, including costs
of all labour and materials used in construction, costs of managing
the projects, holding costs and borrowing costs incurred during the
development periods.
Amounts provided to customers as lease incentives and assets
relating to fixed rental income increases in operating lease
contracts are included within investment property values. Lease
incentives are amortised over the term of the lease on a straight-line
basis. Direct expenditure associated with leasing a property is also
capitalised within investment property values and amortised over
the term of the lease.
Classification of investment properties
Investment properties are classified as either properties under
development or stabilised properties. Investment properties
under development include land, new investment properties in the
course of construction and investment properties that are being
redeveloped. Stabilised investment properties are all investment
properties not classified as being under development and would
be completed properties that are leased or are available for lease
to customers.
For investment properties under development, the carrying values
are reviewed by management at each reporting date to consider
whether they reflect their fair value and at completion external
valuations are obtained to determine the fair values.
For stabilised investment properties, independent valuations are
obtained at least every three years to determine the fair values. At
each reporting date between obtaining independent valuations, the
carrying values are reviewed by management to ensure they reflect
the fair values.
Deposits for investment properties
Deposits and other costs associated with acquiring investment
properties that are incurred prior to obtaining legal title are
recorded at cost and disclosed as other assets in the consolidated
statement of financial position.
178
(b) Summary of the Consolidated Entity’s investment
in property assets
Directly held property:
Inventories
Current
Non-current
Investment properties
Stabilised investment properties
Property held by Partnerships:
Investments accounted for using
the equity method – joint ventures
Note
2020
$M
2019
$M
6(d)
6(d)
405.1
156.6
553.2
315.2
958.3
471.8
+
7.2
7.2
–
–
6(e)
1,276.2
1,226.9
1,276.2
1,226.9
(c) Estimates and assumptions in determining property
carrying values
Inventories
For both inventories held directly and inventories held in
Partnerships, external valuations are not performed but instead
valuations are determined using the feasibility studies supporting
the land and property developments. The end values of the
developments in the feasibility studies are based on assumptions
such as capitalisation rates, letting up periods and incentives that
are consistent with those observed in the relevant market. If the
feasibility study calculations indicate that the forecast cost of a
completed development will exceed the net realisable value, then
the inventories are impaired.
Stabilised investment properties
The fair value of stabilised investment properties is based on
current prices in an active market for similar properties in the
same location and condition and subject to similar lease and
other contracts. The current price is the estimated amount for
which a property could be exchanged between a willing buyer
and a willing seller in an arm’s length transaction after proper
marketing wherein the parties had each acted knowledgably,
prudently and without compulsion.
Approach to determination of fair value
The approach to determination of fair value of investment
properties is applied to both investment properties held directly
and investment properties held in Partnerships.
Valuations are determined based on assessments and estimates
of uncertain future events, including upturns and downturns in
property markets and availability of similar properties, vacancy
rates, market rents and capitalisation and discount rates. Recent
and relevant sales evidence and other market data are taken into
account. Valuations are either based on an external, independent
valuation or on an internal valuation.
Annual Report 2020
External valuations are undertaken only where market segments
were observed to be active. In making the determination of
whether a market segment is active, the following characteristics
are considered:
+
Function of the asset (distribution/warehouse or
suburban office)
+ Location of the asset (city, suburb or regional area)
+
Carrying value of the asset (categorised by likely
appeal to private (including syndicates), national and
institutional investors)
Categorisation as primary or secondary based on a
combination of location, weighted average lease expiry,
quality of tenant covenant (internal assessment based
on available market evidence) and age of construction.
Each property asset is assessed and grouped with assets in
the same or similar market segments. Information on all relevant
recent sales is also analysed using the same criteria to provide a
comparative set. Unless three or more sales are observed in an
individual market segment (taken together with any comparable
market segments as necessary), that market segment is
considered inactive.
Where a market segment is observed to be active, then external,
independent valuations are performed for stabilised investment
properties where there has been more than a 25 basis points (bps)
movement in capitalisation rates and/or there has been a material
change in tenancy profile and/or there has been significant capital
expenditure, and/or there has been a change in use (or zoning)
of the asset and/or it has been three years since the previous
external, independent valuation. For all other stabilised investment
properties in an active market segment, an internal valuation is
performed based on observable capitalisation rates and referenced
to independent market data.
Where a market segment is observed to be inactive, then no
external, independent valuations are performed and internal
valuations are undertaken based on discounted cash flow (DCF)
calculations. The DCF calculations are prepared over a 10 year
period. The key inputs considered for each individual calculation
are rental growth rates, discount rates, market rental rates and
letting up incentives. Discount rates are computed using the
10 year bond rate or equivalent in each jurisdiction plus increments
to reflect country risk, tenant credit risk and industry risk. Where
possible, the components of the discount rate are benchmarked
to available market data.
Market assessment
The lockdowns and economic impacts from the COVID-19
pandemic commenced at different time, with Asia affected from
December 2019 and Europe from February 2020. The independent
valuers would normally calculate fair values using both observable
capitalisation rates and discounted cash flows. At the start of the
pandemic, the independent valuers were concerned that historic
market transactional evidence would not be appropriate to use in
their assessments of the valuations of the investment properties
and certain of their valuations undertaken at March 2020 for the
Partnerships placed a greater reliance on the discounted cash flow
methodology and most valuation reports included a reference to
the material uncertainty that existed in the market at that time.
179
Goodman Group
Notes to the consolidated financial statements
Operating assets and liabilities (continued)
6 Property assets (continued)
However, in the last quarter of the financial year, it became clear
that asset values in the industrial, logistics and warehousing
sectors had been less impacted than those for other real estate
asset classes. This was evidenced by market transactions in the
three months ended 30 June 2020 that were completed at values
consistent with the reported valuations from the independent
valuers. Accordingly, at 30 June 2020, the independent valuers
have been able to prepare valuations using both observable
capitalisation rates and discounted cash flows and relatively few
valuation reports included a reference to the uncertainty in the
market that was specific to the subject property.
At 30 June 2020, the Board has been able to assess that all
markets in which the Consolidated Entity operated were active
and as a consequence, no adjustments have been made to the
carrying values of the Consolidated Entity’s stabilised investment
property portfolios on the basis of internally prepared discounted
cash flow valuations.
The overall weighted average capitalisation rates for the divisional
portfolios (including Partnerships) are set out in the table below:
Total portfolio weighted
average capitalisation rate
2020
%
5.6
4.3
4.4
2019
%
5.6
4.6
4.5
Division
Asia
Continental Europe
United Kingdom
Sensitivity analysis
The stabilised investment property valuations are most sensitive to
the following inputs:
+
+
+
Capitalisation rates
Market rents
Level of incentives provided to customers and/or the amount
of vacant time on expiry of a lease.
The impacts on the Consolidated Entity’s financial position that
would arise from the changes in the above assumptions are set out
in the table below:
Book value at 30 June 2020
Changes in capitalisation rates:
Increase in capitalisation rates +50bps
Increase in capitalisation rates +25bps
Decrease in capitalisation rates -25bps
Decrease in capitalisation rates -50bps
Changes in market rents:
Decrease in rents -5%
Decrease in rents -2.5%
Increase in rents +2.5%
Increase in rents +5%
Changes in voids/incentives2:
Increase in voids/incentives +6 months
Increase in voids/incentives +3 months
1. Reflects the Consolidated Entity’s share in Partnerships.
2. On assumed lease expiries over the next 12 months.
Partnerships1
$M
1,263.5
(111.5)
(58.3)
64.4
135.8
(62.3)
(31.2)
31.2
62.3
(10.7)
(5.4)
Investment properties under development
External valuations are generally not performed for investment
properties under development, but instead valuations are
determined using the feasibility studies supporting the
developments. The end values of the developments in the feasibility
studies are based on assumptions such as capitalisation rates,
letting up periods and incentives that are consistent with those
observed in the relevant market adjusted for a profit and risk
factor. This profit and risk factor is dependent on the function,
location, size and current status of the development and is
generally in a market range of 10% to 15%. This adjusted end value
is then compared to the forecast cost of a completed development
to determine whether there is an increase or decrease in value.
This practice of determining fair value by reference to the
development feasibility is generally also applied for the
Consolidated Entity’s investments in Partnerships. However,
certain Partnerships do obtain independent valuations for
investment properties under development each financial year.
180
(d) Inventories
Current
Land and development properties
Non-current
Land and development properties
Leasehold land and development properties
Annual Report 2020
2020
$M
405.1
405.1
524.8
28.4
553.2
2019
$M
156.6
156.6
315.2
–
315.2
No impairment losses on land and development properties was recognised in the current and comparative financial years.
(e) Investments accounted for using the equity method
Joint ventures
A joint venture (JV) is an arrangement (referred to by the Consolidated Entity as a Partnership) in which the Consolidated Entity is considered
to have joint control for accounting purposes, whereby the Consolidated Entity has rights to the net assets of the arrangement, rather than
rights to its assets and obligations for its liabilities. In the consolidated financial statements, investments in JVs are accounted for using the
equity method. Investments in JVs are carried at the lower of the equity accounted amount and recoverable amount. The Consolidated
Entity’s share of the JVs’ net profit or loss is recognised in the consolidated profit or loss from the date the arrangement commences to
the date the arrangement ceases. Movements in reserves are recognised directly in the consolidated reserves.
Transactions eliminated on consolidation
Unrealised gains arising from asset disposals with JVs, including those relating to contributions of non-monetary assets on establishment,
are eliminated to the extent of the Consolidated Entity’s interest. Unrealised gains relating to JVs are eliminated against the carrying
amount of the investment. Unrealised losses are eliminated in the same way as unrealised gains, unless they evidence an impairment
of an asset.
The Consolidated Entity’s principal Partnerships are set out below:
Consolidated
share of net
results recognised
Consolidated
ownership
interest
Country of
establishment
2020
$M
2019
$M
2020
%
2019
%
Consolidated
investment
carrying amount
2020
$M
2019
$M
Name
Property investment
KWASA Goodman Germany (KGG)
Luxembourg
13.0
22.9
20.5
19.3
137.4
140.8
Property development
Goodman Japan
Development Partnership (GJDP)
Property investment and development
Japan
49.4
53.3
50.0
50.0
116.8
189.4
Goodman China Logistics Partnership (GCLP) Cayman Islands
Goodman UK Partnership (GUKP)
United Kingdom
Other JVs
30.3
14.8
(0.5)
122.6
20.9
1.5
107.0
221.2
20.0
33.3
20.0
33.3
737.2
277.0
7.8
690.3
196.3
10.1
1,276.2
1,226.9
181
Goodman Group
Notes to the consolidated financial statements
Operating assets and liabilities (continued)
6 Property assets (continued)
GJDP undertakes property development activities, with completed developments sold at, or shortly after, completion depending on
leasing status. The Consolidated Entity’s other Partnerships have a long-term remit to hold investment properties to earn rental income
and for capital appreciation, although they will undertake developments when an appropriate opportunity arises.
The reconciliation of the carrying value at the beginning to the carrying value at the end of the year is set out as follows:
Movements in carrying amount of investments in JVs
Carrying amount at the beginning of the year
Share of net results after tax (before fair value adjustments)
Share of fair value adjustments
Share of net results
Share of movements in reserves
Acquisitions
Capital return
Disposals
Transfer to assets held for sale
Dividends/distributions received and receivable
Effect of foreign currency translation
Carrying amount at the end of the year
2020
$M
1,226.9
87.0
20.0
107.0
(25.8)
153.0
(116.0)
(0.3)
(11.2)
(71.3)
13.9
2019
$M
907.2
84.2
137.0
221.2
(39.8)
189.0
(50.1)
–
–
(52.0)
51.4
1,276.2
1,226.9
182
Annual Report 2020
Summary financial information of JVs
The following table summarises the financial information of the material Partnerships as included in their own financial statements.
The table also reconciles the summarised financial information to the carrying amount of the Consolidated Entity’s interest in the JVs.
Summarised statement of financial position
Current assets
Cash and cash equivalents
Other current assets
Total current assets
Total non-current assets
Current liabilities
Financial liabilities (excluding trade
payables and other provisions)
Other current liabilities
Total current liabilities
Non-current liabilities
Financial liabilities (excluding trade
payables and other provisions)
Other non-current liabilities
Total non-current liabilities
Net assets (100%)
Consolidated ownership interest (%)
Consolidated share of net assets
Shareholder loans1
Other items, including acquisition costs
KGG
GJDP
GCLP
GUKP
2020
$M
2019
$M
2020
$M
2019
$M
2020
$M
2019
$M
2020
$M
2019
$M
36.5
6.5
14.5
2.7
112.6
150.8
231.1
218.1
38.6
16.1
36.2
73.5
32.3
2.0
21.0
1.2
43.0
17.2
128.7
187.0
304.6
250.4
40.6
22.2
1,215.1
1,319.7
378.5
501.1
4,741.5 4,421.7
813.4
572.2
–
–
–
–
220.7
–
–
–
88.8
88.8
76.3
76.3
28.7
28.7
6.2
2,515.9 2,333.4
6.2 2,736.6 2,333.4
15.5
15.5
6.8
6.8
460.8
530.3
232.0
283.2
390.1
503.5
37.2
–
12.8
17.1
509.8
456.2
498.0
530.3
244.8
300.3
899.9
959.7
–
–
–
–
–
–
671.3
730.3
233.7
381.6
1,409.6
1,379.0
838.5
587.6
20.5
19.3
50.0
50.0
20.0
20.0
33.3
33.3
137.4
140.8
116.8
190.8
281.9
275.8
279.2
195.9
–
–
–
–
–
–
–
452.0
411.2
–
(1.4)
3.3
3.3
(2.2)
–
0.4
Carrying amount of interest in JV
137.4
140.8
116.8
189.4
737.2
690.3
277.0
196.3
Summarised statement of comprehensive income
Revenue
Net finance expense/(income)
Income tax expense
100.0
63.9
519.6
440.3
193.3
159.9
(5.6)
(22.3)
(8.3)
(4.1)
(0.8)
(3.1)
(0.7)
(1.1)
(22.4)
(23.9)
(20.7)
(21.4)
17.0
52.0
–
16.7
(5.6)
–
Profit and total comprehensive income (100%)
80.2
108.6
98.8
106.6
22.4
414.4
44.5
62.8
Consolidated share of profit
and total comprehensive income
Dividends/distributions received and
receivable by the Consolidated Entity
13.0
22.9
49.4
53.3
4.5
82.8
14.8
20.9
13.7
5.9
54.5
40.1
3.1
6.0
–
–
1.
Shareholder loans have been provided by investors of GCLP in proportion to their ownership interest. The shareholder loans are interest free, unsecured and have
no fixed terms of repayment. The shareholder loans are not expected to be repaid within 12 months from the end of the reporting period and the directors consider
the loans to form part of the Consolidated Entity’s investment in GCLP.
183
Goodman Group
Notes to the consolidated financial statements
Operating assets and liabilities (continued)
7 Receivables (continued)
7 Receivables
Impairment
Non-derivative financial assets
Non-financial assets
The Consolidated Entity initially recognises loans and receivables
and deposits on the date that they are originated. All other financial
assets are recognised initially on the trade date at which the
Consolidated Entity becomes a party to the contractual provisions
of the instrument.
The Consolidated Entity derecognises a financial asset when
the contractual rights to the cash flows from the asset expire, or
it transfers the right to receive the contractual cash flows on the
financial asset in a transaction in which substantially all the risks
and rewards of ownership of the financial asset are transferred.
Any interest in transferred financial assets that is created or
retained by the Consolidated Entity is recognised as a separate
asset or liability.
Financial assets and liabilities are offset and the net amount
presented in the consolidated statement of financial position when,
and only when, the Consolidated Entity has a legal right to offset
the amounts and intends to either settle on a net basis or to realise
the asset and settle the liability simultaneously.
The carrying amounts of the Consolidated Entity’s assets
(except inventories, refer to note 6(d); and deferred tax assets,
refer to note 4) are reviewed at each reporting date to determine
whether there is any indication of impairment. If such indication
exists, the asset is written down to the recoverable amount.
The impairment is recognised in profit or loss in the reporting
period in which it occurs.
An impairment loss is recognised whenever the carrying amount
of an asset or its cash-generating unit exceeds its recoverable
amount. Impairment losses are recognised in profit or loss,
unless an asset has previously been revalued, in which case the
impairment loss is recognised as a reversal to the extent of that
previous revaluation, with any excess recognised through profit
or loss.
Impairment losses recognised in respect of cash-generating units
are allocated to the carrying amount of any identified intangible
asset and then to reduce the carrying amount of the other assets
in the unit (group of units) on a pro rata basis.
Loans and receivables
Financial assets and contract assets
The Consolidated Entity recognises an impairment loss allowance
for expected credit losses (ECLs) on financial assets measured at
amortised cost and contract assets. Financial assets measured
at amortised cost include cash and cash equivalents, trade
receivables, amounts and loans due from related parties and
other receivables.
Other financial assets measured at fair value are not subject to the
ECL assessment.
Loans and receivables are financial assets with fixed or
determinable payments that are not quoted in an active market.
Such assets are recognised initially at fair value plus any directly
attributable transaction costs. Subsequent to initial recognition,
loans and receivables are measured at amortised cost using the
effective interest rate method, less allowance for impairment of
doubtful debts, except where the receivables are interest-free
loans made to related parties without any fixed repayment terms
or the effect of discounting would be immaterial. In such cases,
the receivables are stated at cost less allowance for impairment
of doubtful debts.
Loans and receivables comprise trade and other receivables,
amounts due from related parties and loans to related parties.
Amounts recoverable on development contracts
Amounts recoverable on development contracts arise when the
Consolidated Entity contracts to sell a completed development
asset either prior to or during the development phase. The
receivables are stated at cost plus profit recognised to date less an
allowance for foreseeable losses and less amounts already billed.
184
Annual Report 2020
Measurement of ECLs
ECLs are a probability-weighted estimate of credit losses. Credit losses are measured as the present value of all expected cash shortfalls.
In measuring ECLs, the Consolidated Entity takes into account information about past events, current conditions and forecasts of future
economic conditions.
Impairment loss allowances for trade receivables, amounts due from related parties, other receivables and contract assets are measured
at an amount equal to a lifetime ECL. Lifetime ECLs are losses that are expected to result from all possible default events over the
expected lives of the items to which the ECL model applies.
The Consolidated Entity recognises an impairment loss allowance equal to the expected losses within 12 months after the reporting date
on loans to related parties, unless there has been a significant increase in credit risk of the loans since initial recognition, in which case the
loss allowance is measured at an amount equal to lifetime ECLs.
Current
Trade receivables
Other receivables
Amounts due from related parties
Loans to related parties
Non-current
Loans to related parties
Note
21(c)
21(c)
2020
$M
11.1
61.8
106.3
384.4
563.6
279.0
279.0
2019
$M
7.8
50.8
89.6
408.0
556.2
82.1
82.1
The maximum exposure to credit risk at the reporting date is the fair value of each class of receivable mentioned above. All non-current
receivables of the Consolidated Entity are due within five years from the reporting date. There is no material difference between the
carrying values and the fair values of receivables.
Trade receivables
No trade receivables were impaired at 30 June 2020 and 2019. There are no significant overdue trade receivables at 30 June 2020.
Other receivables
At 30 June 2020, none of the other receivables balance was overdue or impaired (2019: $nil).
Amounts due from related parties
At 30 June 2020, none of the amounts due from related parties was overdue or impaired (2019: $nil). Amounts due from related parties
are typically repayable within 30 days. The amounts due from related parties are unsecured.
Loans to related parties
Loans to related parties principally relate to loans to fellow subsidiaries of GL and GIT and loans to JVs. Refer to note 21(c) for details of
loans to related parties. During the year, no impairment losses were recognised on loans to related parties (2019: $nil). The loans to related
parties are unsecured.
185
Goodman Group
Notes to the consolidated financial statements
Operating assets and liabilities (continued)
8 Contract balances
Contract assets primarily comprise amounts recoverable from fixed price development contracts (disclosed net of any payments received
on account) and accrued performance fee income where the Consolidated Entity assesses that the income can be reliably measured.
Contract liabilities primarily comprise deposits and other amounts received in advance for development contracts and rental guarantees.
The following table provides an analysis of receivables from contracts with customers (excluding rental income receivables), contract
assets and contract liabilities at the reporting dates:
Current
Receivables from contracts with customers, which are included in trade
receivables, other receivables and amounts due from related parties
Contract assets
Contract liabilities
Non-current
Contract liabilities
Significant changes in the contract assets and the contract liabilities balances during the year are set out below:
2020
$M
2019
$M
110.2
100.0
25.1
12.3
279.5
5.2
1.5
3.0
Balance at the beginning of the year
Revenue recognised that was included in the
contract liability balance at the beginning of the year
Increases due to cash received, excluding amounts
recognised as revenue during the year
Transfers from contract assets to receivables
Increase due to changes in the measure of progress during the year
Effect of foreign currency translation
Other
Balance at the end of the year
Current contract assets and liabilities
Non-current contract liabilities
2020
2019
Contract
assets
$M
279.5
–
–
(729.0)
464.5
10.1
–
25.1
25.1
–
25.1
Contract
liabilities
$M
8.2
(1.6)
7.2
–
–
–
–
13.8
12.3
1.5
13.8
Contract
assets
$M
141.0
–
–
(384.1)
513.9
8.7
–
279.5
279.5
–
279.5
Contract
liabilities
$M
25.6
(17.6)
–
–
–
0.4
(0.2)
8.2
5.2
3.0
8.2
Transaction price allocated to the remaining contract obligations
The amount of the transaction price allocated to the remaining performance obligations under the Consolidated Entity’s existing contracts
is $14.3 million (2019: $21.9 million). This amount represents revenue expected to be recognised in the future from ongoing management
and fixed price development contracts with customers. The Consolidated Entity will recognise the expected revenue in the future as the
work is completed, which is expected to be within the next 12 months.
In addition, the Consolidated Entity receives investment management, development management and property services fees under
various contracts that it has with its Partnerships. These contracts are for varying lengths of time and are typically transacted on terms that
are consistent with market practice. The revenues under these contracts are linked to the assets under management, total development
project costs or gross property income of the Partnerships and are invoiced as the services are provided.
186
Annual Report 2020
9 Assets held for sale
In March 2020, the Consolidated Entity entered into an agreement with a third party to dispose a portfolio of property assets and
the Consolidated Entity’s operating platform in the Czech Republic, Hungary, Poland and Slovakia. The disposal was completed on
8 July 2020. Accordingly, at 30 June 2020, the directly held assets and liabilities to be disposed have been presented as a disposal
group held for sale.
Assets and liabilities of disposal group held for sale
At 30 June 2020, the disposal group was held at the lower of carrying amount and fair value less costs to sell and comprised of the
following assets and liabilities within the Continental Europe segment:
Cash
Receivables
Inventories
Investments accounted for using the equity method
Other assets
Assets held for sale
Payables
Loans from related parties
Lease liabilities
Liabilities held for sale
Note
17(a)
6(e)
2020
$M
10.8
6.5
89.1
11.2
7.0
124.6
5.5
14.6
6.6
26.7
No impairment losses have been recognised in FY20 in respect of the disposal group.
10 Payables
Non-derivative financial liabilities
The Consolidated Entity initially recognises debt securities issued and subordinated liabilities on the date that they are originated. All other
financial liabilities are recognised initially on the trade date at which the Consolidated Entity becomes a party to the contractual provisions
of the instrument.
The Consolidated Entity derecognises a financial liability when the contractual obligations are discharged or cancelled or expire.
Financial assets and liabilities are offset and the net amount presented in the consolidated statement of financial position when, and only
when, the Consolidated Entity has a legal right to offset the amounts and intends to either settle on a net basis or to realise the asset and
settle the liability simultaneously.
The Consolidated Entity has classified non-derivative financial liabilities into the other financial liabilities category. Such financial liabilities
are recognised initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, these financial liabilities
are measured at amortised cost using the effective interest rate method.
187
Goodman Group
Notes to the consolidated financial statements
Operating assets and liabilities (continued)
Other financial liabilities comprise trade payables, other payables and accruals and contract and lease liabilities.
Current
Trade payables
Other payables and accruals
Contract liabilities
Lease liabilities
Non-current
Other payables and accruals
Contract liabilities
Lease liabilities
11 Leases
Refer to note 1(e) for the accounting policy on leases.
Information about leases for which the Consolidated Entity is a lessee is detailed below:
Right of use assets
Inventories
Property, plant and equipment
Lease liabilities
Current
Non-current
The following were recognised during the year:
Additions to right of use assets1
Depreciation of right of use assets
Interest expense on lease liabilities
Cash outflows on lease liabilities
1. Additions to right of use assets include balances on acquisition of entities from GL.
Note
8
11
8
11
2020
$M
63.0
114.7
12.3
10.5
200.5
38.2
1.5
17.8
57.5
2019
$M
26.9
195.4
5.2
–
227.5
49.3
3.0
–
52.3
2020
$M
28.4
18.9
47.3
10.5
17.8
28.3
2020
$M
52.3
9.8
0.9
11.9
188
Annual Report 2020
CAPITAL MANAGEMENT
12 Finance income and expense
Finance income
Interest is recognised on an accruals basis using the effective interest rate method, and, if not received at the reporting date, is reflected
in the consolidated statement of financial position as a receivable.
Finance expense
Expenditure incurred in obtaining debt finance is offset against the principal amount of the interest bearing liability to which it relates,
and is recognised as a finance cost on an effective interest rate basis over the life of the facility or until the facility is significantly modified.
Where a facility is significantly modified, any unamortised expenditure in relation to that facility and incremental expenditure incurred in
modifying the facility are recognised as a finance cost in the financial year in which the significant modification occurs.
Finance costs relating to a qualifying asset are capitalised as part of the cost of that asset using a weighted average cost of debt.
Qualifying assets are assets which take a substantial time to get ready for their intended use or sale. All other finance costs are expensed
using the effective interest rate method.
Finance income
Interest income on loans to:
– Related parties
– Other parties
Interest income from derivatives
Finance expense
Interest expense from related party loans
Other borrowing costs
Fair value adjustments on derivative financial instruments
Foreign exchange loss
Capitalised borrowing costs
Net finance expense
Note
2020
$M
2019
$M
21
21
10.2
1.1
12.4
23.7
(44.9)
(1.2)
(21.8)
–
9.1
(58.8)
(35.1)
3.8
0.6
–
4.4
(37.2)
(0.4)
(6.7)
(0.1)
7.0
(37.4)
(33.0)
Borrowing costs were capitalised to inventories and investment properties under development during the financial year at rates between
2.0% and 4.2% per annum (2019: 2.5% and 5.9% per annum).
189
Goodman Group
Notes to the consolidated financial statements
Capital management (continued)
13 Other financial assets and liabilities
Other financial assets and liabilities are recognised initially on the trade date at which the Consolidated Entity become a party to the
contractual provisions of the instrument.
Derivative financial instruments and hedging
The Consolidated Entity uses derivative financial instruments to hedge its economic exposure to foreign exchange and interest rate risks
arising from operating, investing and financing activities. In accordance with its treasury policy, the Consolidated Entity does not hold or
issue derivative financial instruments for speculative trading purposes.
The Consolidated Entity’s derivative financial instruments are not designated as a hedge for accounting purposes, and accordingly
movements in the fair value of derivative financial instruments are recognised in profit or loss.
Investments in unlisted securities
Subsequent to initial recognition, investments in unlisted securities are measured at fair value and changes therein are recognised as
other comprehensive income and presented in the asset revaluation reserve in equity. Dividends are recognised as income in profit or loss
unless the dividend clearly represents a recovery of part of the cost of the investment. Other net gains and losses are recognised in other
comprehensive income and are never reclassified to profit or loss. When such an asset is derecognised, the cumulative gain or loss in
equity is transferred to retained earnings.
Other financial assets
Derivative financial instruments
Investment in unlisted securities, at fair value1
2020
$M
2.1
34.3
36.4
1.
Principally relates to the Consolidated Entity’s 10.0% (2019: 10.0%) interest in Goodman Japan Limited. During the year, a revaluation gain of $5.5 million was
recognised in other comprehensive income (2019: $3.0 million gain). Refer to note 14(d) for assumptions made in measuring fair value of the unlisted securities.
Other financial liabilities
Derivative financial instruments
2020
$M
48.9
48.9
2019
$M
–
28.2
28.2
2019
$M
6.7
6.7
190
Annual Report 2020
14 Financial risk management
The Consolidated Entity’s capital management and financial risk management processes are managed as part of the wider Goodman
Group. There are established policies, documented in Goodman Group’s financial risk management (FRM) policy document, to ensure
both the efficient use of capital and the appropriate management of the exposure to financial risk.
Goodman Group’s treasury function is responsible for monitoring the day to day compliance with Goodman Group’s FRM policies and
prepares reports for consideration by management committees and Goodman Group’s Board including:
+
+
+
+
Cash flow projections over a period of at least 12 months to assess the level of cash and undrawn facilities, and headline gearing
at each month end
Debt maturity profile, to allow the Goodman Group to plan well in advance of maturing facilities
Interest rate hedge profile over the next 10 years, to allow Goodman Group to manage the proportion of fixed and floating rate debt
in accordance with its FRM policy
Capital hedge position (by currency) and profile of expiring currency derivatives, to allow Goodman Group to manage its net
investment hedging in accordance with its FRM policy.
Any significant investments or material changes to the finance facilities or FRM policies require approval by the Goodman Group Board.
The Consolidated Entity’s key financial risks are market risk (including foreign exchange and interest rate risk), liquidity risk and credit risk.
(a) Market risk
Foreign exchange risk
The Consolidated Entity is exposed to transactional foreign currency risk and net investment foreign currency risk through its investments
in Hong Kong, Japan, China, Continental Europe and the United Kingdom. Foreign exchange risk represents the loss that would be
recognised from adverse fluctuations in currency prices as a result of future commercial transactions, recognised assets and liabilities
and, principally, net investments in foreign operations.
Goodman Group manages foreign currency exposure on a consolidated basis. In managing foreign currency risks, Goodman Group aims
to reduce the impact of short-term fluctuations on earnings and net assets. However, over the long term, permanent changes in foreign
exchange will have an impact on both earnings and net assets.
Goodman Group’s capital hedge policy for each overseas region is to hedge between 65% and 90% of foreign currency denominated
assets with foreign currency denominated liabilities. This is achieved by borrowing in the same functional currency as the investments to
form a natural economic hedge against any foreign currency fluctuations and/or using derivatives such as cross currency interest rate
swaps (CCIRS) and forward exchange contracts (FEC).
The Consolidated Entity has minimal transactional foreign exchange risk as the majority of transactions in each division are in the
functional currency of each division.
As at 30 June 2020, a summary of the derivative financial instruments used to hedge the Consolidated Entity’s exposures arising from its
investments in foreign operations is set out below:
Amounts
payable
Amounts
receivable
EUR'M
(495.0)
CNY'M
(3,823.9)
A$M
803.0
US$'M
500.0
2020
Weighted
average
exchange rate
AUD/EUR
0.6165
USD/CNY
7.6477
Amounts
payable
Amounts
receivable
2019
Weighted
average
exchange rate
EUR'M
(495.0)
CNY'M
–
A$M
803.0
AUD/EUR
0.6165
US$'M
USD/CNY
–
–
AUD receivable/EUR payable
USD receivable/CNY payable
Sensitivity analysis
Throughout the financial year, if the Australian dollar had been 5% (2019: 5%) stronger against all other currencies, with all other variables
held constant, the Consolidated Entity’s profit attributable to Shareholders, excluding derivative mark to market and unrealised foreign
exchange movements, would have decreased by $16.3 million (2019: $31.5 million). If the Australian dollar had been 5% (2019: 5%) weaker
against all other currencies, with all other variables held constant, the Consolidated Entity’s profit attributable to Shareholders, excluding
derivative mark to market and unrealised foreign exchange movements, would have increased by $16.3 million (2019: $31.5 million).
191
Goodman Group
Notes to the consolidated financial statements
Capital management (continued)
14 Financial risk management (continued)
Interest rate risk
Goodman Group adopts a policy that at all times interest rates on between 60% and 100% of the Group’s external borrowings and
derivatives (by principal) are hedged for the next 12 months. The Consolidated Entity’s interest rate risk arises from floating interest rates
on related party loans (receivable and payable) and from the floating interest rate legs of certain CCIRS. The Consolidated Entity does not
hedge its interest rate exposure on related party loans but has entered into interest rate swaps (IRS) to manage certain cash flow risks
associated with floating interest rates on its CCIRS.
As at 30 June 2020, the Consolidated Entity’s fixed and floating rate exposure (by principal) arising from its derivative financial instruments
is set out below:
30 June 2020
Fixed rate liabilities
Floating rate – payable
Floating rate – receivable
Impact of derivatives
CCIRS
A$M
–
807.8
(803.0)
4.8
IRS
A$M
326.4
(326.4)
–
–
Net position
A$M
326.4
481.4
(803.0)
4.8
As a result of the derivative financial instruments that existed at 30 June 2020, the Consolidated Entity would have the following fixed
interest rate exposure (by principal) at the end of each of the next five financial years. This assumes all derivative financial instruments
mature in accordance with current contractual terms.
Number of years
post balance date
Fixed interest rate
(by principal)
A$M
Weighted average
interest rate
% per annum
Fixed interest rate
(by principal)
A$M
Weighted average
interest rate
% per annum
2020
2019
1 year
2 years
3 years
4 years
5 years
Sensitivity analysis
360.3
489.6
489.6
421.8
163.2
(0.52)
(0.47)
(0.47)
(0.45)
(0.31)
–
–
–
–
–
–
–
–
–
–
Based on the Consolidated Entity’s interest bearing borrowings at 30 June 2020, if interest rates on borrowings had been 100 bps
per annum (2019: 100 bps per annum) higher/lower, with all other variables held constant, the Consolidated Entity’s profit attributable
to Shareholders would have been $11.5 million lower/higher (2019: $6.9 million lower/higher).
192
Annual Report 2020
Price risk
The Consolidated Entity is not exposed to price risk.
(b) Liquidity risk
Liquidity risk is the risk that the Consolidated Entity will not be able to meet its financial obligations as they fall due. The Consolidated Entity’s
objective is to maintain sufficient liquidity to fund short-term working capital, capital expenditure, investment opportunities and dividends.
Management seeks to achieve these objectives through the preparation of regular forecast cash flows to understand the application and
use of funds and through the identification of future funding, primarily through loans from related parties in Goodman Group.
The contractual maturities of financial liabilities are set out below:
Carrying
amount
Contractual
cash flows
Up to 12
months
1 – 2
year(s)
2 – 3
years
3 – 4
years
4 – 5
years
More than
5 years
$M
$M
$M
$M
$M
$M
$M
$M
As at 30 June 2020
Non-derivative financial liabilities
Trade and other payables
Contract liabilities
Lease liabilities
Loans from related parties
Total non-derivative financial liabilities
Derivative financial liabilities
Net settled1:
Gross settled2:
(Inflow)
Outflow
Total derivative financial liabilities
As at 30 June 2019
Non-derivative financial liabilities
Trade and other payables
Loans from related parties
215.9
13.8
28.3
1,731.0
1,989.0
215.9
177.7
38.2
13.8
43.3
12.3
12.3
1,753.1
1,409.0
1.5
7.0
5.4
–
–
2.3
148.2
2,026.1
1,611.3
52.1
150.5
–
–
1.6
2.3
3.9
–
–
1.2
2.3
3.5
–
–
18.9
185.9
204.8
18.5
17.2
(0.6)
(0.3)
3.2
6.2
9.8
(1.1)
–
28.3
46.8
(51.4)
54.8
20.6
(6.8)
–
(7.4)
(8.1)
–
(8.4)
(9.5)
(11.5)
(11.8)
–
–
–
(6.3)
(5.3)
(2.0)
(3.7)
54.8
50.0
Total non-derivative financial liabilities
1,374.0
1,403.7
1,079.8
271.6
1,102.4
271.6
1,132.1
222.3
857.5
49.3
5.8
55.1
–
6.0
6.0
–
6.1
6.1
–
137.9
137.9
–
118.8
118.8
Derivative financial liabilities
Gross settled1:
(Inflow)
Outflow
Total derivative financial liabilities
1. Net settled includes IRS and FEC.
2. Gross settled includes CCIRS.
–
6.7
6.7
(89.8)
(13.8)
(13.2)
(13.3)
(15.0)
(14.2)
94.6
4.8
–
–
–
–
0.5
(13.8)
(13.2)
(13.3)
(15.0)
(13.7)
(20.3)
94.1
73.8
193
Goodman Group
Notes to the consolidated financial statements
Capital management (continued)
14 Financial risk management (continued)
(c) Credit risk
Credit risk represents the loss that would be recognised if counterparties failed to perform as contracted.
The maximum exposure to credit risk on financial assets, excluding investments, of the Consolidated Entity which have been recognised
in the consolidated statement of financial position, is the carrying amount (refer to notes 7 and 17(a)).
The Consolidated Entity has a policy of assessing the creditworthiness of all potential customers and is not materially exposed to any one
customer. The Consolidated Entity evaluates all customers’ perceived credit risk.
In relation to material bank deposits, the Consolidated Entity minimises credit risk by dealing with major financial institutions. The
counterparty must have a stable, long-term credit rating that is a minimum of an “A” category (or equivalent) from a major rating agency.
The amounts and other terms associated with bank deposits are formally reviewed monthly.
From time to time, the Consolidated Entity also makes loans to JVs, typically to fund development projects. In making its investment
decisions, the Consolidated Entity will undertake a detailed assessment of the development feasibility and credit risks associated with the
relevant counterparties.
During the current and prior year, credit risk arising from cash and cash equivalents, trade receivables, amounts and loans due from
related parties and other receivables were not determined to be significant and no impairment losses were recognised.
The credit risks associated with derivative financial instruments are managed by:
+
+
+
transacting with multiple derivatives counterparties that have a long-term investment grade credit rating;
utilising International Swaps and Derivatives Association (ISDA) agreements with derivative counterparties in order to limit exposure
to credit risk through netting of amounts receivable and amounts payable to individual counterparties (refer below); and
formal review of the mark to market position of derivative financial instruments by counterparty on a monthly basis.
Master netting or similar agreements
Goodman Group enters into derivative transactions under ISDA master netting off agreements. Under these agreements, where certain
credit events occur (such as a default), all outstanding transactions under the agreement are terminated and a single net termination value
is payable in full and final settlement.
194
Annual Report 2020
(d) Fair values of financial instruments
Except for derivative financial instruments and investments in unlisted securities which are carried at fair value, the Consolidated Entity’s
financial instruments are carried at cost or amortised cost. The carrying amounts of the Consolidated Entity’s financial instruments carried
at cost or amortised cost were not materially different from their fair values as at 30 June 2020 and 2019.
(i) Fair value hierarchy
The table below analyses financial instruments carried at fair value, by valuation method (see note 1(g)):
As at 30 June 2020
Derivative financial assets
Investment in unlisted securities
Derivative financial liabilities
As at 30 June 2019
Investment in unlisted securities
Derivative financial liabilities
There were no transfers between the levels during the year.
Level 1
$M
Level 2
$M
Level 3
$M
–
–
–
–
–
–
–
–
–
2.1
–
2.1
48.9
48.9
–
–
6.7
6.7
–
34.3
34.3
–
–
28.2
28.2
–
–
Total
$M
2.1
34.3
36.4
48.9
48.9
28.2
28.2
6.7
6.7
195
Goodman Group
Notes to the consolidated financial statements
Capital management (continued)
14 Financial risk management (continued)
(ii) Valuation techniques used to derive Level 2 and Level 3 fair values
The Level 2 derivative financial instruments held by the Consolidated Entity consist of IRS, CCIRS and FEC.
The fair value of derivatives are determined using generally accepted pricing models which discount estimated future cash flows based
on the terms and maturity of each contract and current market interest rates and/or foreign currency rates, adjusted for specific features
of the instruments.
The fair value measurement for investment in unlisted securities has been categorised as a Level 3 fair value. The following table shows
the valuation technique used in measuring fair value as well as the significant unobservable inputs used:
Type
Valuation technique
Significant unobservable inputs
Equity securities
+
Goodman
Japan Limited
Discounted cash flows: The valuation
model was determined by discounting
the future cash flows expected to be
generated from continuing operations.
The future cash flows were based
on fund and development forecasts
and then estimating a year five terminal
value using a terminal growth rate
and an appropriate discount rate
+
+
+
+
Assets under management
of $5.4 billion in year five
Average annual development
of 83,500 square metres
Five year terminal value
growth rate of 0.38%
Risk adjusted post tax
discount rate of nil per annum.
(iii) Reconciliation of Level 3 fair values
Carrying amount at the beginning of the year
Acquisitions
Net change in fair value – included in other comprehensive income
Effect of foreign currency translation
Carrying amount at the end of the year
15 Dividends
Inter-relationship between
significant unobservable inputs
and fair value measurement
The estimated fair value would
increase/(decrease) if:
+
The level of assets under
management, development
activity and terminal value growth
rate were higher/(lower) or
The risk adjusted discount rate
were lower/(higher).
+
2020
$M
28.2
0.1
5.5
0.5
34.3
2019
$M
21.5
1.8
3.0
1.9
28.2
During the financial year, the Company declared a final dividend of 4.0 cents per share amounting to $73.1 million. This dividend will be
paid on 28 August 2020. In the prior year, the Company declared a final dividend of 5.0 cents per share amounting to $90.7 million.
196
Annual Report 2020
16 Share capital
(a) Ordinary shares
Ordinary shares of the Company are classified as equity. Incremental costs directly attributable to issues of ordinary shares are
recognised as a deduction from equity, net of any tax effects.
Share capital
Accumulated issue costs
Total issued capital
Details
Ordinary shares, issued and fully paid
Balance at 1 July 2018
Shares issued to employees of Goodman Group1
Balance at 30 June 2019
Shares issued to employees of Goodman Group1
Balance at 30 June 2020
2020
2019
Number of shares
1,828,413,236
1,813,881,995
2020
$M
732.6
(0.6)
732.0
2019
$M
696.6
(0.6)
696.0
Number of shares
Share capital $M
1,800,763,877
13,118,118
1,813,881,995
14,531,241
1,828,413,236
675.2
21.4
696.6
36.0
732.6
1.
During the year, the Company issued 14,531,241 (2019: 13,118,118) shares to employees of Goodman Group under the Goodman Group Long Term Incentive Plan (LTIP).
The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share
at meetings of the Company. All ordinary shares rank equally with regard to the Company’s residual assets.
(b) Equity settled share based payment transactions
LTIP
Goodman Group’s share based payments primarily relate to performance rights awarded to employees under the LTIP. These performance
rights entitle an employee to either acquire Goodman Group securities for $nil consideration (equity settled performance rights) or, in certain
jurisdictions, to receive an amount in cash equal to the value of the securities (cash settled performance rights), subject to the vesting
conditions having been satisfied.
During the year, the movement in the number of equity settled and cash settled performance rights under the LTIP was as follows:
Outstanding at the beginning of the year
Issued
Transferred from other Goodman Group entities
Vested
Forfeited
Outstanding at the end of the year
Exercisable at the end of the year
Number of rights
2020
2019
21,300,216
20,633,959
5,221,335
6,628,500
4,386,501
–
(5,526,953)
(3,674,423)
(459,663)
(2,287,820)
24,921,436
21,300,216
–
–
197
Goodman Group
Notes to the consolidated financial statements
Capital management (continued)
16 Share Capital (continued)
Share based payments transactions
The fair value of equity settled performance rights at the grant date is expensed with a corresponding increase in the employee
compensation reserve over the vesting period. The expense is adjusted to reflect the actual number of performance rights for which
the related service and non-market vesting conditions are expected to be met. The accumulated share based payments expense
of performance rights which have vested or lapsed is transferred from the employee compensation reserve to retained earnings.
The fair value of cash settled performance rights is also recognised as an expense but with a corresponding increase in liabilities over the
vesting period. The expense is adjusted to reflect the actual number of performance rights for which the related service and non-market
vesting conditions are expected to be met. The liability is remeasured at each reporting date and at the vesting date based on the fair
value of the rights.
The fair value of services received in return for performance rights granted under the LTIP is measured by reference to the fair value of the
performance rights granted. The fair value of the performance rights granted during the year was measured as follows:
+
+
Operating earnings per security tranche: these rights were valued as a granted call option, using the standard Black Scholes model
with a continuous dividend yield
Relative total shareholder return tranche: these rights were valued using a Monte Carlo model which simulated total returns for
each of the ASX 100 stocks and discounted the future value of any potential future vesting performance rights to arrive at a present
value. The model uses statistical analysis to forecast total returns, based on expected parameters of variance and co-variance.
The model inputs for performance rights, both equity and cash settled, awarded during the current financial year included the following:
Fair value at measurement date ($)
Security price ($)
Exercise price ($)
Expected volatility (%)
Rights' expected weighted average life (years)
Dividend/distribution yield per annum (%)
Average risk free rate of interest per annum (%)
Share based payment expense included in profit or loss was as follows:
Share based payment expense:
–
Equity settled
– Cash settled
Rights issued on
20 Nov 2019
Rights issued on
30 Sep 2019
11.48
14.44
–
18.54
3.8
2.08
0.76
2020
$M
29.8
27.8
57.6
11.26
14.18
–
18.86
3.9
2.12
0.75
2019
$M
18.6
36.2
54.8
At 30 June 2020, a liability of $51.9 million (2019: $44.9 million) was recognised in relation to cash settled performance rights.
198
Annual Report 2020
OTHER ITEMS
17 Notes to the consolidated cash flow statement
Cash and cash equivalents comprise cash balances and call deposits with original maturities of three months or less.
(a) Reconciliation of cash
Cash as at the end of the year as shown in the consolidated cash flow statement is reconciled to the related items in the consolidated
statement of financial position as follows:
Cash assets
Cash classified as held for sale
Note
9
(b) Reconciliation of profit for the year to net cash provided by operating activities
Profit for the year
Items classified as investing activities
Net gain on disposal of investment properties
Net gain on disposal of equity accounted investments
Non-cash items
Depreciation of plant and equipment
Share based payments expense
Net loss from fair value adjustments on investment properties
Share of net results of equity accounted investments
Net finance expense
Income tax expense
Changes in assets and liabilities during the year:
– Decrease/(increase) in receivables
–
–
–
–
Increase in inventories
(Increase)/decrease in other assets
(Decrease)/increase in payables
Increase/(decrease) in provisions (including employee benefits)
Dividends/distributions received from equity accounted investments
Net finance costs received/(paid)
Net income taxes paid
Net cash provided by operating activities
2020
$M
357.4
10.8
368.2
2020
$M
329.7
(0.2)
(24.9)
11.7
57.6
1.2
(107.0)
35.1
40.2
343.4
253.5
(123.8)
(5.3)
(163.7)
26.8
330.9
77.6
20.2
(52.4)
376.3
2019
$M
212.7
–
212.7
2019
$M
403.6
–
(4.8)
2.0
54.8
–
(221.2)
33.0
57.6
325.0
(121.8)
(91.6)
2.5
90.9
(0.3)
204.7
52.0
(0.2)
(18.0)
238.5
199
Goodman Group
Notes to the consolidated financial statements
Other items (continued)
17 Notes to the consolidated cash flow statement (continued)
(c) Reconciliation of liabilities arising from financing activities
Derivatives
used for
hedging $M
Balance at 1 July 2018
Changes from financing cash flows
Net proceeds from loans with related parties
Dividends paid
Total changes from financing cash flows
Effect of foreign exchange movements
Changes in fair value
Other changes
Interest income
Interest expense
Dividends declared
Total other changes
Balance at 30 June 2019
Balance at 1 July 2019
Changes from financing cash flows
Net repayments of loans with related parties
Payment of lease liabilities
Dividends paid
Total changes from financing cash flows
Changes arising from acquisition of entities from GL
Effect of foreign exchange movements
Changes in fair value
Other changes
Interest income
Interest expense
Dividends declared
Other movements
Total other changes
Balance at 30 June 2020
–
–
–
–
–
6.7
–
–
–
–
6.7
6.7
–
–
–
–
19.2
(0.9)
21.8
–
–
–
–
–
46.8
Dividends
payable
$M
Loans to/
(from) related
parties $M
90.0
474.0
–
(90.0)
(90.0)
–
–
–
–
90.7
90.7
90.7
90.7
–
–
(90.7)
(90.7)
–
–
–
–
–
73.1
–
73.1
73.1
78.5
–
78.5
26.4
–
(3.8)
37.2
–
33.4
612.3
612.3
(101.0)
–
–
(101.0)
505.1
16.5
–
(10.2)
44.9
–
–
34.7
1,067.6
Lease
liabilities
$M
–
–
–
–
–
–
–
–
–
–
–
34.4
–
(11.9)
–
(11.9)
12.9
–
–
–
0.9
–
(8.0)
(7.1)
28.3
200
Annual Report 2020
18 Reserves
Asset revaluation reserve
Foreign currency translation reserve
Employee compensation reserve
Defined benefits funds actuarial losses reserve
Common control reserve1
Total reserves
Note
18(a)
18(b)
18(c)
18(d)
18(e)
Consolidated
Company
2020
$M
19.7
33.5
33.4
(8.2)
(702.9)
(624.5)
2019
$M
14.2
48.3
28.2
–
(538.1)
(447.4)
2020
$M
19.7
–
33.4
–
–
2019
$M
14.2
–
28.2
–
–
53.1
42.4
1.
The common control reserve arises from the acquisition of entities from other members of Goodman Group under the pooling of interest method.
The amount inthe common control reserve reflects the difference between the consideration paid and the carrying values of the assets and liabilities
of the acquired entity at the date of acquisition.
The movements in reserves of the Consolidated Entity and the Company are analysed below:
Consolidated
Company
(a) Asset revaluation reserve
Balance at the beginning of the year
Increase due to revaluation of other financial assets
Balance at the end of the year
(b) Foreign currency translation reserve
Balance at the beginning of the year
Net exchange differences on conversion of foreign operations
Balance at the end of the year
(c) Employee compensation reserve
Balance at the beginning of the year
Equity settled share based payment transactions
Balance at the end of the year
(d) Defined benefits funds actuarial losses reserve
Balance at the beginning of the year
Actuarial losses on defined benefit superannuation funds
Balance at the end of the year
(e) Common control reserve
Balance at the beginning of the year
Acquisition of entities from GL (refer to note 20)
Balance at the end of the year
2020
$M
14.2
5.5
19.7
48.3
(14.8)
33.5
28.2
5.2
33.4
–
(8.2)
(8.2)
2019
$M
11.2
3.0
14.2
46.3
2.0
48.3
21.0
7.2
28.2
–
–
–
(538.1)
(164.8)
(702.9)
(538.1)
–
(538.1)
2020
$M
14.2
5.5
19.7
–
–
–
28.2
5.2
33.4
–
–
–
–
–
–
2019
$M
11.2
3.0
14.2
–
–
–
21.0
7.2
28.2
–
–
–
–
–
–
201
Goodman Group
Notes to the consolidated financial statements
Other items (continued)
19 Retained earnings
Balance at the beginning of the year
Profit for the year
Dividends declared
Consolidated
Company
Note
15
2020
$M
1,034.8
325.5
(73.1)
2019
$M
726.6
398.9
(90.7)
2020
$M
253.7
395.0
(73.1)
575.6
2019
$M
229.7
114.7
(90.7)
253.7
Balance at the end of the year
1,287.2
1,034.8
20 Investments in subsidiaries
Subsidiaries
Subsidiaries are entities controlled by the Company. The Company controls an entity when it is exposed, or has rights, to variable returns
from its involvement with the entity and has the ability to affect those returns through its power over the entity. When assessing whether
the Company has power, only substantive rights (held by the Company and other parties) are considered.
An investment in a subsidiary is consolidated into the consolidated financial statements from the date that control commences until the
date that control ceases. When an entity ceases to be controlled by the Company, it is accounted for as a disposal of the entire interest
in the entity, with a resulting gain or loss being recognised in profit or loss.
In the Company’s statement of financial position, an investment in a subsidiary is stated at cost less impairment losses.
The following list contains only the particulars of subsidiaries which principally affected the results, assets or liabilities of the Consolidated
Entity. The class of shares held is ordinary unless otherwise stated.
Significant controlled companies
Principal activities
Country of
incorporation
Goodman Asia Limited
Goodman China Limited
Investment and property management services
Hong Kong
Property management and development
management consultancy services
Hong Kong
Interest held
2020
%
2019
%
100.0
100.0
100.0
100.0
Goodman China Asset Management Limited
Investment management
Cayman Islands
100.0
100.0
Goodman Developments Asia
GELF Management (Lux) Sàrl
Investment management
Investment and property development
Cayman Islands
100.0
100.0
Goodman Management Holdings (Lux) Sàrl
Intermediate holding company
Goodman Midnight Logistics (Lux) Sàrl
Investment holding company
Goodman Property Opportunities (Lux) Sàrl SICAR Property investment and development
GPO Advisory (Lux) Sàrl
Property management services
Luxembourg
Luxembourg
Luxembourg
Luxembourg
Luxembourg
100.0
100.0
100.0
100.0
100.0
100.0
94.0
94.0
100.0
100.0
Goodman UK Holdings (HK) Limited
Intermediate holding company
United Kingdom
100.0
100.0
202
Annual Report 2020
Combination of entities or businesses under common control
Where the Consolidated Entity acquires entities or businesses from other members of Goodman Group such that all of the
combining entities (businesses) are ultimately controlled by Goodman Group Securityholders both before and after the combination,
the Consolidated Entity applies the pooling of interests method.
At the date of the combination of entities under common control, the assets and liabilities of the combining entities are reflected at their
carrying amounts. No adjustments are made to reflect fair values, or recognise any new assets or liabilities that would otherwise be done
under the acquisition method. The only goodwill that is recognised is any existing goodwill relating to either of the combining entities.
Any difference between the consideration transferred and the equity “acquired” by the Consolidated Entity is reflected within equity
(common control reserve).
Similar to the acquisition method, the results of the “acquired” entity are included only from the date control commenced. Comparatives
are not restated to present the consolidated financial statements as if the entities had always been combined.
Acquisition of entities from GL
On 19 August 2019, the Consolidated Entity acquired Dollmist Limited and its subsidiaries from GL for consideration of $4.3 million.
Dollmist Limited is the holding company of a number of other entities operating in the United Kingdom, which provide investment,
development and property management activities. Dollmist Limited then acquired Goodman Colnbrook (Jersey) Holdings Limited on
29 May 2020 from GL for consideration of $23.4 million. Goodman Colnbrook (Jersey) Holdings Limited holds a development asset
in the United Kingdom.
Carrying values of assets acquired and liabilities assumed
Identifiable assets and liabilities
Cash
Inventories
Investment properties
Investments accounted for using the equity method
Receivables
Other assets
Payables
Total net liabilities acquired
Amounts transferred to common control reserve
Total consideration transferred
Add: Carrying value of net liabilities acquired
Amount transferred to common control reserve
Dollmist Limited
$M
Goodman Colnbrook
(Jersey) Limited
$M
37.9
303.7
12.5
3.9
29.4
13.2
(533.0)
(132.4)
–
94.7
–
–
–
–
(99.4)
(4.7)
$M
27.7
137.1
164.8
The amount transferred to the common control reserve represents the difference between the consideration paid and the carrying value
of the net liabilities of the entity acquired.
203
Goodman Group
Notes to the consolidated financial statements
Other items (continued)
21 Related party transactions
Related parties
(i) A person, or a close member of that person’s family, is related to the Company if that person:
(1) Has control or joint control over the Company
(2) Has significant influence over the Company or
(3) Is a member of the key management personnel of the Company or the Company’s parent.
(ii) An entity is related to the Company if any of the following conditions applies:
(1) The entity and the Company are members of the same group (which means that each parent, subsidiary and fellow subsidiary
is related to the others)
(2) One entity is an associate or JV of the other entity (or an associate or JV of a member of a group of which the other entity
is a member)
(3) Both entities are JVs of the same third party
(4) One entity is a JV of a third entity and the other entity is an associate of the third entity
(5) The entity is a post-employment benefit plan for the benefit of employees of either the Company or an entity related to
the Company
(6) The entity is controlled or jointly controlled by a person identified in (i)
(7) A person identified in (i)(1) has significant influence over the entity or is a member of the key management personnel of the entity
(or of a parent of the entity) or
(8) The entity, or any member of a group of which it is a part, provides key management personnel services to the Company or the
Company’s parent.
Close members of the family of a person are those family members who may be expected to influence, or be influenced by, that person
in their dealings with the entity.
(a) Directors’ remuneration
Directors’ remuneration (including alternate directors) disclosed pursuant to section 383(1) of the Hong Kong Companies Ordinance and
Part 2 of the Companies (Disclosure of Information about Benefits of Directors) Regulation is as follows:
Directors' fees
Salaries, allowances and benefits in kind
Share based payments
(b) Transactions and amounts due from related parties
JVs
GCLP
KGG
Related parties of GL and GIT
Goodman Hong Kong Logistics Partnership
Goodman European Partnership
Other related parties
1. Includes contract assets arising from transactions with related parties.
204
2020
$M
0.6
3.8
13.9
18.3
2019
$M
0.6
3.7
14.8
19.1
Management and
development activities
Amounts due from
related parties1
2020
$M
67.9
41.7
109.6
255.3
323.9
18.7
597.9
2019
$M
58.6
52.5
111.1
191.8
441.9
6.7
640.4
2020
$M
20.4
–
20.4
56.8
20.1
9.0
85.9
2019
$M
34.9
–
34.9
194.3
44.4
3.5
242.2
Annual Report 2020
Transactions with GL
In addition to the acquisition of Dollmist Limited and its subsidiaries and Goodman Colnbrook (Jersey) Limited from GL (refer to note 20),
the Consolidated Entity had other related party transactions and balances, as detailed below.
During the year, the Consolidated Entity recognised expenses of $91.1 million (2019: $97.4 million) for services provided by a controlled
entity of GL.
(c) Financing arrangements with related parties
JVs
GL, GIT and their controlled entities
Related parties of GL and GIT
Goodman European Partnership
Related parties of GL and GIT
Loans to related parties1
Loans from related parties1
2020
$M
60.8
599.0
3.6
3.6
2019
$M
78.5
408.0
3.6
3.6
2020
$M
–
2019
$M
–
(1,731.0)
(1,102.4)
–
–
–
–
Interest income/(expense)
charged on loans to/from
related parties
2020
$M
0.3
(35.0)
–
–
2019
$M
0.3
(33.7)
–
–
663.4
490.1
(1,731.0)
(1,102.4)
(34.7)
(33.4)
1.
Loans by the Consolidated Entity to/from JVs and other related parties have generally been provided on an arm’s length basis. At 30 June 2020, details in respect
of the principal loan balances are set out below:
+
Loans to GL, GIT and its controlled entities amounting to $598.9 million (2019: $408.0 million) are interest bearing and repayable on demand. The interest bearing
loans incur interest at rates ranging from 0.8% to 1.7% per annum (2019: 0.7% to 1.0% per annum)
Loans from GL, GIT and their controlled entities are interest bearing and amount to $1,731.0 million (2019: $1,102.4 million). $310.8 million of the loans is repayable
on demand and $1,420.2 million is repayable greater than one year from the reporting date. The interest bearing loans incur floating interest at rates ranging from
1.0% to 4.4% per annum (2019: 1.6% to 5.0% per annum)
A loan of $3.6 million (2019: $3.6 million) was provided to Goodman Pyrite Logistics (Lux) Sàrl, a controlled entity of Goodman European Partnership, and
incurred interest at 6.9% per annum (2019: 6.9% per annum).
+
+
22 Commitments
At 30 June 2020, the Consolidated Entity was committed to $251.1 million (2019: $274.8 million) expenditure in respect of inventories and
other development activities.
23 Contingencies
Capitalisation Deed Poll
GLHK, GL, GIT and certain of their wholly-owned controlled entities are “investors” under a Capitalisation Deed Poll (CDP) dated
23 May 2007. Under the CDP, each investor undertakes to pay to the relevant controlled entity borrower (borrower) any amounts owing
under finance documents for the purpose of the CDP when the borrower fails to make a payment. Any payments by an investor to a
borrower will be by way of loan to, or proceeds for the subscription of equity in, the borrower by the investor.
United States and Reg S senior notes
Under the issue of notes in the United States 144A/Reg S bond market, controlled entities of GIT had on issue USD and EUR notes
amounting to US$1,303.8 million and €500.0 million respectively. GL, Goodman Funds Management Limited, as responsible entity of GIT,
and GLHK have unconditionally and irrevocably guaranteed on a joint and several basis the payment of principal and interest in respect of
each of the notes.
205
Goodman Group
Notes to the consolidated fi nancial statements
Other items (continued)
24 Company level statement of fi nancial position
Current assets
Cash
Receivables
Total current assets
Non-current assets
Investments in subsidiaries
Other fi nancial assets
Total non-current assets
Total assets
Current liabilities
Dividends payable
Total current liabilities
Non-current liabilities
Payables
Other fi nancial liabilities
Total non-current liabilities
Total liabilities
Net assets
Equity attributable to Shareholders
Share capital
Reserves
Retained earnings
Total equity attributable to Shareholders
Note
18
19
2020
$M
169.5
306.5
476.0
1,169.1
124.1
1,293.2
1,769.2
73.1
73.1
327.3
8.1
335.4
408.5
1,360.7
732.0
53.1
575.6
1,360.7
2019
$M
106.0
258.0
364.0
793.5
182.7
976.2
1,340.2
90.7
90.7
250.7
6.7
257.4
348.1
992.1
696.0
42.4
253.7
992.1
The Company level statement of fi nancial position was approved and authorised for issue by the board of directors on 13 August 2020.
Ian Douglas Ferrier, AM
Director
David Jeremy Collins
Director
25 Subsequent events
There has not arisen in the interval between the end of the fi nancial year and the date of this fi nancial report any item, transaction or
event of a material and unusual nature likely, in the opinion of the directors, to affect signifi cantly the operations of the Consolidated Entity,
the results of those operations, or the state of affairs of the Consolidated Entity, in future fi nancial years.
206
Securities information
Annual Report 2020
Top 20 Securityholders
As at 26 August 2020
Number of
securities
Percentage of total
issued securities
Trison Investments Pty Ltd
1. HSBC Custody Nominees (Australia) Limited
J P Morgan Nominees Australia Limited
2.
3. Citicorp Nominees Pty Limited
4. National Nominees Limited
5. BNP Paribas Noms Pty Ltd
6. BNP Paribas Noms Pty Ltd
7. Citicorp Nominees Pty Limited
8.
9. Beeside Pty Limited
10. Australian Foundation Investment Company Limited
11. HSBC Custody Nominees (Australia) Limited
12. BNP Paribas Noms (NZ) LTD
13. UBS Nominees Pty Ltd
14. HSBC Custody Nominees (Australia) Limited – GSCO ECA
15. HSBC Custody Nominees (Australia) Limited
16. AMP Life Limited
17. Custodial Services Limited
18. DPCON BVBA\C
19. BNP Paribas Nominees Pty Ltd HUB24 Custodial Serv Ltd
20. Milton Corporation Limited
Securities held by top 20 Securityholders
Balance of securities held
Total issued securities
670,060,442
571,388,896
179,918,145
75,849,497
60,218,933
37,845,045
33,312,954
16,874,053
13,192,040
6,685,000
4,442,239
4,270,200
4,179,793
3,988,844
3,083,279
2,661,539
2,383,741
2,103,548
1,783,081
1,690,376
1,695,931,645
132,481,591
1,828,413,236
36.65
31.25
9.84
4.15
3.29
2.07
1.82
0.92
0.72
0.37
0.24
0.23
0.23
0.22
0.17
0.15
0.13
0.12
0.10
0.09
92.73
7.27
100.00
Range of
securities
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 – over
Total
Number of
Securityholders
Number of
securities
Percentage of total
issued securities
17,366
14,999
3,031
1,696
89
37,181
7,258,490
35,611,038
21,529,287
36,193,222
1,727,821,199
0.40
1.95
1.18
1.98
94.50
1,828,413,236
100.00
There were 643 Securityholders with less than a marketable parcel in relation to 2,800 securities as at 26 August 2020.
Substantial Securityholders1
Leader Investment Corporation; China Investment Corporation
Vanguard Group Inc.
Blackrock Investment Management Limited
1. In accordance with latest Substantial Securityholder Notices as at 26 August 2020.
Goodman Logistics (HK) Limited CHESS Depository Interests ASX reserves
the right (but without limiting its absolute discretion) to remove Goodman Logistics
(HK) Limited, Goodman Limited and Goodman Industrial Trust from the official
list of the ASX if a CHESS Depository Interest (CDI) referencing an ordinary share
in Goodman Logistics (HK) Limited, a share in Goodman Limited or a unit in
Goodman Industrial Trust cease to be stapled, or any new securities are issued by
Goodman Logistics (HK) Limited, Goodman Limited or Goodman Industrial Trust
and are not (or CDIs in respect of them are not) stapled to equivalent securities in
the Goodman Group.
Number of securities
168,462,083
165,056,520
117,053,786
Voting rights On a show of hands at a general meeting of Goodman Limited or
Goodman Industrial Trust, every person present who is an eligible Securityholder
shall have one vote and on a poll, every person present who is an eligible
Securityholder shall have one vote for each Goodman Limited share and one vote for
each dollar value of Goodman Industrial Trust units that the eligible Securityholder
holds or represents (as the case may be). At a general meeting of Goodman Logistics
(HK) Limited, all resolutions will be determined by poll, and eligible Securityholders
will be able to direct Chess Depositary Nominees Pty Limited to cast one vote for
each Chess Depositary Instrument (referencing a Goodman Logistics (HK) Limited
share) that the eligible Securityholder holds or represents (as the case may be).
On-market buy-back There is no current on-market buy-back.
207
Goodman Group
Glossary
AASB Australian Accounting Standards Board.
ASX Australian Securities Exchange, or ASX Limited
(ABN 98 008 624 691) or the financial market which it operates
as the case requires.
AUM Assets under management: total value of properties directly
held or under management.
CPPIB Canada Pension Plan Investment Board.
Cps Cents per security.
Cpu Cents per unit.
DPS Distribution per security. Total distributions to investors
divided by the number of securities outstanding.
EBIT Operating profit before net finance expense and income tax.
EPS Earnings per security.
GEP Goodman European Partnership, an unlisted property
investment vehicle specialising in the investment of industrial
property in Continental Europe.
GFM Goodman Funds Management Limited (ABN 48 067 796 641;
AFSL Number 223621).
GHKLP Goodman Hong Kong Logistics Fund, an unlisted
property investment vehicle specialising in the investment of
industrial property in Hong Kong.
GIT Goodman Industrial Trust (ARSN 091 213 839) and its
controlled entities or GFM as Responsible Entity for GIT, where
the context requires.
GJCP Goodman Japan Core Partnership, an unlisted property
investment vehicle specialising in the investment of industrial
property in Japan.
GJDP Goodman Japan Development Partnership, a logistics and
industrial partnership specialising in the development of industrial
property in Japan.
GADP Goodman Australia Development Partnership, an unlisted
property investment vehicle specialising in the investment of
industrial property in Australia.
GL Goodman Limited (ABN 69 000 123 071) and where the
context requires, its controlled entities.
GAIP Goodman Australia Industrial Partnership, an unlisted
property investment vehicle specialising in the investment of
industrial property in Australia.
GAP Goodman Australia Partnership, an unlisted property
investment vehicle specialising in the investment of industrial
property in Australia.
GBLP Goodman Brazil Logistics Partnership.
GCLP Goodman China Logistics Partnership Limited, an unlisted
property investment vehicle specialising in the investment of
industrial property in China.
GMT Goodman Property Trust, a listed property trust on the NZX
managed by GMG.
GNAP Goodman North America Partnership, a logistics and
industrial partnership specialising in the investment of industrial
property in North America.
GLHK Goodman Logistics (HK) Limited (Company No. 1700359;
ARBN 155 911 149) and where the context requires, its
controlled entities.
Goodman Group or GMG Goodman Limited, Goodman Industrial
Trust and Goodman Logistics (HK) Limited, trading as Goodman
Group and where the context requires, their controlled entities.
208
Annual Report 2020
GUKP Goodman United Kingdom Partnership
KGIP KWASA-Goodman Industrial Partnership, an unlisted
property investment vehicle specialising in the investment of
industrial property in Australia.
Stapled The linking together of a GIT unit, a GL share and a CDI
in respect of a GLHK share so that one may not be transferred
or otherwise dealt with without the other and which are quoted
on the ASX jointly as a “stapled security”.
KGG KWASA-Goodman Germany, an unlisted property trust
specialising in the investment of industrial property in Germany.
Stapled Security or Security A GIT unit, a GL share and a CDI
in respect of a GLHK share which are stapled so that they can only
be traded together.
LTI Long term incentive.
STI Short term incentive.
LTIP Long Term Incentive Plan.
Substantial Securityholder A person or company that holds
at least 5% of Goodman Group’s voting rights.
NAV Net asset value: the value of total assets less liabilities.
For this purpose, liabilities include both current and long-term
liabilities. To calculate the net asset value per ordinary security,
divide the net asset value by the number of securities on issue.
TSR Total securityholder return.
Unitholder A unitholder of GIT.
NZX New Zealand Exchange Limited or New Zealand Exchange
being the equity security market operated by it, as the case requires.
Responsible Entity Responsible Entity means a public company
that holds an Australian Financial Services Licence (“AFSL”)
authorising it to operate a managed investment scheme. In respect
of GIT, the Responsible Entity is GFM, a wholly-owned subsidiary
of GL.
S&P Standard & Poor’s: an independent rating agency that
provides evaluation of securities investments and credit risk.
Securityholder A holder of a Stapled Security.
Shareholder A shareholder of GL and/or GLHK.
Sqm Square metres.
Sq ft Square feet.
209
Goodman Group
Corporate directory
Goodman Group
Goodman Limited
ABN 69 000 123 071
Goodman Industrial Trust
ARSN 091 213 839
Responsible Entity of Goodman Industrial Trust
Goodman Funds Management Limited
ABN 48 067 796 641
AFSL Number 223621
Goodman Logistics (HK) Limited
Company No. 1700359
ARBN 155 911 149
Registered offices
Level 17
60 Castlereagh Street
Sydney NSW 2000
Australia
GPO Box 4703
Sydney NSW 2001
Australia
Telephone 1300 791 100 (within Australia)
+61 2 9230 7400 (outside Australia)
Facsimile +61 2 9230 7444
Suite 901
Three Pacific Place
1 Queen’s Road East
Hong Kong
Telephone +852 2249 3100
+852 2525 2070
Facsimile
info-au@goodman.com
Email
goodman.com
Website
Other offices
Allentown
Amsterdam
Auckland
Beijing
Birmingham
Brisbane
Brussels
Budapest
Chengdu
Düsseldorf
Guangzhou
Hamburg
Hong Kong
Kraków
London
Los Angeles
Luxembourg
Madrid
Melbourne
Milan
New Jersey
Osaka
Paris
Poznań
Prague
São Paulo
Shanghai
Sydney
Tokyo
Warsaw
210
Goodman Logistics
(HK) Limited
Ian Ferrier AM
Independent Chairman
David Collins
Independent Director
Danny Peeters
Executive Director
Company Secretary
Goodman Secretarial
Asia Limited
Directors
Goodman Limited and
Goodman Funds
Management Limited
Ian Ferrier AM
Independent Chairman
Greg Goodman
Group Chief Executive Officer
Chris Green
Independent Director
Stephen Johns
Independent Director
Mark G Johnson
Independent Director
Rebecca McGrath
Independent Director
Danny Peeters
Executive Director
Phillip Pryke
Independent Director
Anthony Rozic
Executive Director
Penny Winn
Independent Director
Company Secretary
Carl Bicego
Security Registrar
Computershare Investor Services Pty Limited
Level 5, 115 Grenfell Street
Adelaide SA 5000
Australia
GPO Box 1903
Adelaide SA 5001
Australia
Telephone 1300 723 040 (within Australia)
+61 3 9415 4043 (outside Australia)
+61 8 8236 2305
investorcentre.com/contact
computershare.com
Facsimile
Email
Website
ASX code
GMG
Auditor
KPMG
Level 38, Tower Three,
International Towers Sydney
300 Barangaroo Avenue
Sydney NSW 2000
Australia
Annual Report 2020
Disclaimer: This document has been prepared by Goodman Group (Goodman Limited (ABN 69 000 123 071), Goodman Funds Management Limited (ABN 48 067 796 641;
AFSL Number 223621) as the Responsible Entity for Goodman Industrial Trust (ARSN 091 213 839) and Goodman Logistics (HK) Limited (Company No. 1700359;
ARBN 155 911 149)). It is not intended to be relied upon as advice to investors or potential investors and does not take into account the investment objectives, financial situation
or needs of any particular investor. These should be considered, with professional advice, when deciding if an investment is appropriate. This document is not an offer or
invitation for subscription or purchase of securities or other financial products. It does not constitute an offer of securities in the United States. Securities may not be offered
or sold in the United States unless they are registered under the US Securities Act of 1933 or an exemption from registration is available. This document contains certain
“forward-looking statements”. The words “anticipate”, “believe”, “expect”, “project”, “forecast”, “estimate”, “likely”, “intend”, “should”, “could”, “may”, “target”, “plan” and other
similar expressions are intended to identify forward-looking statements. Indications of, and guidance on, future earnings and financial position and performance are also
forward-looking statements. Due care and attention have been used in the preparation of forecast information. Such forward-looking statements are not guarantees of future
performance and involve known and unknown risks, uncertainties and other factors, many of which are beyond the control of Goodman Group, that may cause actual results
to differ materially from those expressed or implied in such statements. There can be no assurance that actual outcomes will not differ materially from these statements.
All values are expressed in Australian currency unless otherwise stated. September 2020.
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