Goodman Group
Annual Report
2022
GOODMAN GROUP
2
Contents
Chairman’s letter
Group CEO letter
Corporate Governance 2021
Goodman Limited and its controlled entities
4
6
8
9
Appendix A – Goodman Logistics (HK) Limited and its subsidiaries
154
Securities information
Glossary
Corporate directory
207
208
209
ANNUAL REPORT 2022
3
GOODMAN GROUP
Chairman's letter
Sustained vision
2022 saw Goodman deliver another very strong result with operating
earnings per security increasing by 24%, well ahead of the initial guidance
to the market of 10%. Significant contributions were made from all areas
of the business. The resilience of the Group’s business strategy and that
of our team has been tested in a challenging environment, and Goodman’s
management has demonstrated their ability to adapt and grow with
changing market conditions.
Investing in sustainable innovation
Over several years, the Group has been working to expand its innovation
strategy. We aim to facilitate and invest in products that provide
sustainable solutions to customers across property technology, supply
chain and transport and construction and manufacturing. Examples
include smart metering, carbon neutral building products, on site safety
management and the use of robotics and electric vehicles to assist with
logistics and transportation.
We remain focused on the long-term sustainability of the business and
are cautious and prudent in our approach to capital management,
retaining significant resources and liquidity to manage through uncertain
economic environments.
Our investment strategy across these technologies provides the Group
with greater access, visibility and insight into the related trends affecting
real estate. Our focus is on evaluating how these can be applied to our
own portfolio to improve sustainable outcomes for all.
Throughout the year, we have progressed our sustainability initiatives
across all aspects of the Environmental, Social and Governance areas.
Our focus is on both short-term programs that we can implement and
measure today while establishing long-term strategies that will have
provide enduring benefits for our business – and for of all our stakeholders
– well into the future.
This includes the Group’s Long Term Incentive Plan (LTIP) which both
incentivises management to achieve superior results and provides
alignment with the interests of securityholders. The Plan also incorporates
environmental and sustainability targets in assessing performance for
all employees.
Our people are our strength and attracting and retaining talent in all our
markets is critical to our success. Given our track record and global
expertise, this has become increasingly difficult as competitors seek
to recruit our high-performing people around the world. Goodman’s
remuneration strategy, featuring a long-term incentive plan that includes
the whole team, has been a key driver of our success, and ability to retain
talent globally.
Sustainability governance
Our Sustainability initiatives are entrenched into the Group’s business
strategy and continue to remain a key priority for the Board and
management. To support the management team and to enhance the
Board’s visibility and efficacy on our ESG initiatives, we are in the process
of establishing a new Sustainability and Innovation Committee which will
commence its activities in October of this year. This Committee will be
Chaired by Chris Green with Phil Pryke and newly appointed Directors,
Hilary Spann and Vanessa Liu, as members. Chris, Hilary and Vanessa
are all New York-based and actively work in the sustainability and
innovation space in their day-to-day businesses and are expertly
positioned for these roles. Phil has experience in the green energy field
and, as the Chair of the Remuneration Committee, plays an important
role in setting and reviewing the LTIP targets.
The Sustainability and Innovation Committee charter can be found here:
https://www.goodman.com/-/media/files/sites/global/who-we-are/
corporate-governance/charters/Sustainability-and-Innovation-Committee-
charter-2022.pdf
4
ANNUAL REPORT 2022
Demonstrating action
At Goodman we remain focused on our long-term sustainable business
model. With a strong and determined global team, we are working with
our customers to address the needs for more efficient and sustainable
supply chains and for our investors to achieve long term, sustainable
returns. At the same time, we are focused on providing our own people
with opportunities and workplaces that enable them to be challenged
and grow. I believe we have the right strategy and culture to achieve
these objectives.
On behalf of the Board, I sincerely thank our customers and investors
for their continued support and the Goodman team for their considerable
efforts in making 2022 a most successful year for the Group.
Sincerely
Stephen Johns
Independent Chairman
Board progression
This year we have made significant progress to deliver on our strategy to
maintain a diverse Board with the appropriate mix of skills, gender and
geographic representation.
Hilary Spann, appointed in April, is a highly experienced global real
estate executive with an extensive background in public and private
equity markets. She is currently a senior executive at NYSE-listed Boston
Properties, Inc, based in New York.
Vanessa Liu was appointed in May. She is an experienced technology
innovator, business leader and digital media entrepreneur. Vanessa is
currently Co-Founder and CEO of SaaS technology company Sugarwork,
and an Independent Director of ASX-listed artificial intelligence company,
Appen Ltd.
Both Hilary’s and Vanessa’s experience and insights are well aligned to our
long-term strategy and values, while bringing greater diversity to the Board
and helping continue to shape Goodman as a forward-thinking company.
At this year’s AGM, Hilary and Vanessa will be standing for election to the
Board. Independent Directors Phil Pryke and Chris Green together with
Executive Director Anthony Rozic will be standing for re-election.
Rebecca McGrath has notified the Goodman Board of her intention to
bring forward her retirement from the Board from the 2024 AGM to 28
February 2023 to accommodate her expanding commitments with other
companies. Since joining the Goodman Board in 2011, the Group has
undergone substantial growth and changed markedly. – Rebecca has
played an important role particularly through her chairmanship of the Risk
and Compliance Committee. – On behalf of the Board and management,
I thank Rebecca for her significant contribution over the last 11 years.
In light of the appointment of our two new directors and the forthcoming
replacement for Rebecca, the Board has asked long standing director,
Phil Pryke, the Chair of the Remuneration Committee, to stand again
for re-election at this year’s AGM. This will help preserve knowledge
and experience on the Board. It is intended that Phil would retire from
the Board during his next term after facilitating a smooth transition for
a new Remuneration Committee Chair.
5
GOODMAN GROUP
Group CEO letter
Goodman Group delivered a strong result for FY22, reflecting the
continued demand for industrial space in our markets. Our customers’
need for more productivity and sustainability from their supply chains
continues to drive this demand. By focusing our portfolio and development
workbook on key infill locations, we have seen accelerating market rental
growth, significant valuation uplift and subsequent outperformance of
our Partnerships.
Key financial highlights:
+
+
+
Operating profit was $1.5 billion, up 25% on FY21,
Operating EPS was 81.3 cents, up 24% on FY21
Statutory profit was $3.4 billion, up 48%.
All business areas have contributed to the Group’s solid performance with:
+
+
+
Investment earnings up 20%
Management earnings up 28%
Development earnings up 34%.
Assets under management have grown 26% to $73 billion, with an average
total return of 21.4% for our Partnerships. We continue to be prudent and
patient with our capital. Over the year $1.8 billion in third party equity was
raised and we completed $8.5 billion of debt refinancing across the Group
and Partnerships.
As a result, the Group’s balance sheet remains well positioned with low
gearing at 8.5%, $2.8 billion of available liquidity, and $18.1 billion available
across the Partnerships.
Optimising operations
The structural changes driving demand for industrial property remain. The
digital economy continues to grow alongside our customers’ need for greater
supply chain efficiency and sustainable properties close to consumers.
We’re working closely with our customers to optimise space, leverage
technology, and provide strategic locations that lower transport
requirements, costs and delivery times.
Property fundamentals remain strong in our markets. With stabilised
occupancy at 98.7%, organic growth through our $13.6 billion development
book continues to provide our customers with a source of quality properties
in key locations. Our developments were 99% leased on completion and the
high level of customer demand, coupled with low levels of supply have seen
market rental growth accelerating at a rapid pace.
Consistent execution of our development workbook, and value-add
across our sites, is contributing to strong margins, and offsetting cost
pressure from increased construction costs globally.
Taking action on climate
Goodman is proactively responding to the global challenges of climate
change and delivering on our ESG commitments. We’re taking action
by reducing carbon emissions, regenerating infill sites, using renewable
energy, developing greener buildings and creating more equitable
supply chains. Through the Goodman Foundation, we’re partnering
with community groups, and have facilitated $11.6 million of charity
contributions throughout the year. We have increased our sustainability
initiatives and commitments have grown from $700 million to
approximately $820 million through to 2025.
Working with our customers and reducing our carbon emissions remains
a priority. We’ve had our carbon reduction targets validated by the
Science-Based Targets initiative and the Group is more than halfway to
our 2025 target of having 400MW of solar PV installed across our global
portfolio. Goodman is also on track to maintain carbon neutrality for our
operations, while importantly, calculating and addressing the embodied
carbon in our developments and investigating low carbon materials.
6
Outlook for FY23
Goodman is forecast to deliver another good performance in FY23, off
the back of a strong year. We have a significant development workbook
underway, continued underlying structural demand from our customers,
and a robust capital position across the Group and Partnerships. As a
result, we expect FY23 operating EPS growth to be 11%.
Focused team
Goodman’s agility, locational strategy and strong balance sheet, mean
we are well positioned to continue to adapt to ongoing market challenges.
Our global team remains focused on providing value and operational
excellence for our customers and investors.
I’d like to thank our people who have continued to live our values of integrity,
determination, innovation and sustainability. They have worked together to
deliver an excellent result for our securityholders and investors. I would also
like to thank you, our securityholders, as well as our customers, and all other
stakeholders for your continued support and contribution to Goodman’s
sustainable growth.
Sincerely
Gregory Goodman
Group Chief Executive Officer
ANNUAL REPORT 2022
7
GOODMAN GROUP
Corporate Governance 2022
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:
+
+
+
Effective controls, risk management, transparency and
corporate responsibility
Strategic planning and alignment of the interests of employees with
those 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.
The diagram below shows an overview of Goodman’s Corporate
governance framework.
Goodman's Corporate Governance Framework
Reflecting the increasing importance of sustainability issues and the
continuing rate of change through technology and innovation, the Board
has also agreed to establish a new Sustainability and Innovation Committee
drawing on the skills and experience of Chris Green (Committee Chair),
Vanessa Liu, Phil Prkye and Hilary Spann. The new Committee will
commence from 1 October 2022.
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
8
Goodman Limited and its controlled entities
Consolidated financial report for the year ended 30 June 2022
ANNUAL REPORT 2022
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
10
78
79
80
81
82
84
85
87
90
91
95
98
110
111
112
113
113
114
114
115
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 2022
119
120
123
124
133
134
136
139
141
143
145
146
147
148
149
150
154
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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 2022 (FY22) 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 GL is identified as having acquired control over
the assets of GIT and GLHK. The consolidated financial statements of
GL therefore include the results of GIT and GLHK.
As permitted by the relief provided in Australian Securities & Investments
Commission (ASIC) Instrument 20-0568, 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.
10
OPERATING AND FINANCIAL REVIEW
About Goodman
Goodman is a specialist global industrial property group. We own,
develop and manage high-quality, sustainable properties that are close to
consumers and provide essential infrastructure for the digital economy.
Goodman and its Partnerships have 410 properties located in key
consumer markets in 14 countries across Asia Pacific, Europe and the
Americas. With $73.0 billion of assets under management, Goodman is the
largest property group listed on the Australian Securities Exchange (ASX)
and invests significantly alongside our capital partners in our Partnerships.
Our integrated business model
Goodman’s Own Develop Manage model focuses the business on its
customers’ current and future needs.
We own and maintain high-quality properties close to consumers, develop
sustainable properties, and manage our global investment portfolio to
a high standard. Goodman works alongside our capital partners, which
include sovereign wealth, pension and large multi-manager funds. In each
market, our dedicated local teams take care of all aspects of property asset
and investment management, ensuring a high level of customer service.
ANNUAL REPORT 2022
Our strategy
Maximise returns by providing essential, sustainable infrastructure for the
digital economy.
+
+
Urbanisation, globalisation, demographics, digitalisation, sustainability
and an increased focus on health and wellbeing: all have changed
the way people live, work and consume. These structural shifts
have increased the importance of industrial properties in the global
supply chain
Globally, the logistics and warehousing sectors are now considered
essential infrastructure for digital economies, and key to the efficient
distribution of products to consumers. As industrial property
specialists, Goodman’s long-term strategy is built on supporting our
customers to deliver in the most sustainable and efficient way possible.
Goodman focuses on key markets and concentrates our portfolio
where the most value can be created for customers and investors.
Our values
As a specialist global industrial property group, we aim to be the best
at what we do, rather than the biggest. Goodman’s values reflect who
we are today and who we want to be long into the future.
These core values are:
1.
2.
3.
4.
Innovation – New ideas push our business forward. We focus on
the future, proactively looking for new opportunities and improved
solutions for our stakeholders that will make the world a better
place for all of us
Determination – Determination gets things done. We are motivated
by excellence and work hard to achieve it, actively pursuing the very
best outcomes for our stakeholders
Integrity – We have integrity, always. We work inclusively and
transparently, balancing the needs of our business and our people,
with the needs of the community and those we do business with
Sustainability – We are building our business for the long term. That
is why we consider the planet and all the people on it in everything
we do. Our initiatives demonstrate our ongoing commitment to having
a positive economic, environmental and social impact on the world.
11
GOODMAN GROUP
Directors’ report
Operating and financial review (continued)
DIVIDENDS/DISTRIBUTIONS PER SECURITY
30c in FY21
Stable, in line with financial risk management objective to sustainably fund future investments
1,863.7 million weighted average number of securities on issue
NET TANGIBLE ASSETS PER SECURITY
$6.68 in FY21
Increase of 25.3%
1,868.2 million securities on issue
OPERATING PROFIT PER SECURITY (OPERATING EPS)1
65.6c in FY21
Increase of 23.9%
$1,219.4 million in FY21
Increase of 25.3%
$2,311.9 million in FY21
Increase of 47.7%
183.2c Statutory profit per security (FY21: 125.4c)
$3,414.0M PROFIT ATTRIBUTABLE TO SECURITYHOLDERS
$1,528.0M OPERATING PROFIT
81.3¢
30¢
$8.37
$73.0BN
$13.6BN
8.5%
$2.8BN
36.7X
INTEREST COVER4
63.7 times in FY21
6.2 years weighted average debt maturity (FY21: 6.3 years)
TOTAL ASSETS UNDER MANAGEMENT
$57.9 billion in FY21
Increase of 26.1%
DEVELOPMENT WORK IN PROGRESS2
$10.6 billion in FY21
Increase of 28.3%
LIQUIDITY
$1.9 billion in FY21
GEARING3
6.8% in FY21
1.
Operating profit per security (operating EPS) is the operating profit divided by the weighted average number of securities on issue during FY22, 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 Long Term Incentive Plan (LTIP).
As it is closely aligned with operating cash generation, 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.
2. Development work in progress (WIP) is the projected end value of active developments across Goodman and its investments in associates and joint ventures (referred to as Partnerships).
3. 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 $133.3 million
(2021: $134.1 million). Total interest bearing liabilities are grossed up for the fair values of certain derivative financial instruments included in other financial liabilities of $79.6 million (2021: $62.3 million).
4. Interest cover is operating profit before net finance expense (operating) and income tax (operating) divided by net finance expense (operating). The calculation is in accordance with the financial
covenants associated with the Group’s unsecured bank loans and includes certain adjustments to the numerator and denominator.
12
Overview
Goodman has delivered a strong operating performance during FY22
with operating profit increasing by 25.3% to $1,528.0 million. This equates
to an operating EPS of 81.3 cents, up 24.0% on FY21.
The business environment is changing, with increased interest rates,
inflation, geopolitical risks and the ongoing impacts of the COVID-19
pandemic; however, the long-term structural drivers of demand for
our assets have not changed. Tight supply and strong customer
demand continue to support leasing across our stabilised portfolio and
developments, with high occupancy in the markets the Group has chosen
to invest in. Our customers continue to intensify their warehousing in order
to enhance their ability to service their customers in urban locations.
There has been an increase in the use of automation and technology to
optimise delivery and improve supply chain efficiency and the Group aims
to continue to facilitate this with the selection of assets in the portfolio.
We have continued to successfully execute our strategy, which is
providing our customers with essential locations and offering productivity
improvements to help absorb cost and time. It is also delivering to the
Group and Partnerships a portfolio of assets with consistently strong risk
adjusted returns. This is reflected in both the Group’s property investment
earnings and management earnings.
Development activity has again been a significant contributor to the
operating performance. Construction costs are increasing globally but
the Group has been able to manage these impacts successfully. However,
by delivering increased productivity and value from our sites and
development execution, Goodman has provided productivity benefits
to customers which has assisted in the maintenance of strong returns.
The investor and customer demand for industrial space has led to
another strong property valuation result, especially in the first half of
the financial year. Rising interest rates have meant that the pace of the
capitalisation rate compression, and therefore valuation growth, slowed
in the second half of the financial year; however, growth in rental income
that is occurring in Goodman’s portfolio has contributed an increasing
proportion of the valuation result. While transactional activity has slowed
in the last quarter, transactions that have completed show that valuations
for good quality real estate in the right locations remain supported.
The total property uplifts (net of tax), including the Group’s share of
Partnerships, for FY22 was $2,326.3 million and the weighted average
capitalisation rate for the stabilised assets in the portfolios contracted
from 4.3% at 30 June 2021 to 4.0% at 30 June 2022.
The operating performance and property valuation results have
contributed to Goodman’s statutory profit attributable to Securityholders
for FY22 increasing by $1,102.1 million to $3,414.0 million. The statutory
profit is reported net of the accounting expense of the Goodman LTIP
of $257.6 million and a loss of $191.4 million from derivative fair value
movements. These items, as well as the property valuation gains, are
excluded from the calculation of operating profit.
ANNUAL REPORT 2022
Goodman’s capital position remains sound. At 30 June 2022, gearing
was 8.5% and the cash and undrawn bank lines available to the Group
were $2.8 billion. In April 2022, the Group closed a US$500 million
Sustainability Linked Bond into the US144A/Regulation S market.
Dividends and distributions relating to FY22 were maintained at 30 cents
per security, equivalent to 37% of operating profit. The cash retained
for future investment in the business enables the maintenance of the
balance sheet and capital position that 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.
Over the year, progress on Environmental, Social and Governance
(ESG) objectives was met or exceeded. Please refer to the FY22 Group
Sustainability Report for more detail. This is expected to be released
before the 2022 Annual General Meeting (AGM).
Key operational highlights for FY22:
Property investment:
+ Property investment earnings of $494.6 million (2021: $411.5 million)
+ $73.0 billion (2021: $57.9 billion) of total AUM, of which the Group
owns a whole or a part share
+ 3.9% like for like growth in net property income (NPI) in Partnerships
+ 98.7% occupancy across the Partnerships.
Management:
+ Management earnings of $588.4 million (2021: $459.1 million)
+ $68.7 billion of external AUM in Partnerships
+ Partnerships reported 21.4% weighted average total return on net assets.
Development:
+ Development earnings of $960.7 million (2021: $717.9 million)
+ $13.6 billion of development WIP (by estimated end value)
+
85% of WIP is currently conducted within, or pre-sold to,
Partnerships or third parties.
13
GOODMAN GROUP
Directors’ report
Operating and financial review (continued)
Analysis of performance
Goodman’s key operating regions are Australia and New Zealand (reported
on a combined basis), Asia (Greater China (including the Hong Kong SAR)
and Japan), Continental Europe (with the vast majority of assets located in
Germany and France), the United Kingdom and the Americas (principally
North America and including 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 controlling 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, plus interest income on loans to development JVs,
less development expenses. Development income includes development
management fees and also performance related revenues associated
with managing individual development projects 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.
14
ANNUAL REPORT 2022
The analysis of Goodman’s performance and the reconciliation of the operating profit to profit for the year attributable to Securityholders for FY22 are
set out in the table below:
Analysis of operating profit
Property investment earnings
Management earnings
Development earnings
Operating earnings
Operating expenses
Net finance expense (operating)1
Income tax expense (operating)2
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 tax
– Deferred tax on fair value adjustments on investment properties
Fair value adjustments related to liability management
– Fair value adjustments on derivative financial instruments
– Share of fair value adjustments on derivative financial instruments in Partnerships
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
Note
2022
$M
2021
$M
494.6
588.4
960.7
411.5
459.1
717.9
2,043.7
1,588.5
(349.3)
(294.0)
1,694.4
1,294.5
(39.3)
(127.1)
(16.4)
(58.7)
1,528.0
1,219.4
6(e)
6(f)
5(d)
15
6(f)
260.1
63.1
2,272.9
1,295.8
(206.7)
(50.4)
2,326.3
1,308.5
(189.7)
(1.7)
(191.4)
83.9
(28.9)
55.0
2
(257.6)
(268.8)
8.7
(248.9)
(2.2)
(271.0)
3,414.0
2,311.9
1.
Net finance expense (operating) excludes derivative mark to market and unrealised foreign exchange movements and interest income from related parties of $6.2 million that has been reported
under development earnings in the analysis above.
2. Income tax expense (operating) excludes the deferred tax movements relating to investment property valuations and other non-operating items, such as the Group’s LTIP.
15
GOODMAN GROUP
Directors’ report
Operating and financial review (continued)
Analysis of performance (continued)
Property investment
Property investment earnings in FY22 of $494.6 million increased by
20% on the prior year and comprised 24% of the total operating earnings
(2021: 26%).
Analysis of property investment earnings
Direct
Partnerships
Key metrics:
Weighted average
capitalisation rate (WACR) (%)
Weighted average
lease expiry (WALE) (years)
Occupancy (%)
2022
$M
103.7
390.9
494.6
2021
$M
79.3
332.2
411.5
2022
2021
4.0
5.2
99
4.3
4.5
89
Goodman’s property portfolios are concentrated in large, urban locations
where available space remains restricted, driven by significant customer
demand, combined with relatively high barriers to entry and limited
supply. Consequently, we are seeing significant market rental growth
across many locations globally. This is supporting strong underlying
investment fundamentals and cash flows in our portfolio.
The directly held properties are primarily in Australia and have potential
for significant long-term growth from redevelopment to more intense
or higher and better uses. The net income from the Group’s directly
held properties increased compared to the prior year as a result of both
like for like increases in NPI and rental income earned from completed
developments (held in inventories, mainly in Continental Europe) prior
to their disposal to Partnerships or third parties.
The more significant component of the Group’s property investment
earnings was from its cornerstone interests in the Partnerships. The
earnings from the Group’s share of these stabilised assets increased
by $58.7 million to $390.9 million compared to the prior year. This
was due to the stabilisation of developments in FY21 and FY22, as the
Group has continued to invest in the Partnerships to fund its share of
those developments and rental income growth from existing stabilised
properties. NPI from the Partnership portfolios in FY22 was up by over
3.9% on a like for like basis compared to FY21 and average occupancy
increased to 99%.
During FY22, the Group’s share of property valuations from the stabilised
portfolios (before deferred tax) was $2,138.8 million (2021: $1,174.9 million),
which included valuation uplifts of $204.3 million (2021: $164.2 million)
on developments that reached completion during the year. In addition,
the Group’s share of property valuations from investment properties
Under Development and those held for sale was $452.1 million
(2021: $223.6 million). Valuation gains occurred in all regions and while
capitalisation rate compression was the main driver, in the first half of the
year, both rental income growth and development activities have provided
an increasing contribution. At 30 June 2022, the WACR for the Group’s
portfolios was 4.0%, compared to 4.3% at the start of the financial year.
The operating income return on Goodman’s investment in the stabilised
portfolios held by the Partnerships was 4.2% compared to 4.3% in FY21,
as the growth in NPI was offset by the impacts of the valuation uplifts
that increased the investment base. These valuation uplifts resulted
in a 21% total return for the financial year. The income returns from
the Partnerships were also impacted by the increased level of active
development which has not yet begun to deliver rental income. Gearing
was maintained at the lower end of target ranges, which continued 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.
16
ANNUAL REPORT 2022
Management
Development
Management earnings in FY22 of $588.4 million increased by 28%
compared to the prior year and comprised 29% of total operating
earnings (2021: 29%). This increase was a combination of higher base
management and property service fees and higher performance fees.
The higher base management fees were primarily a result of the increased
AUM. During FY22, external AUM increased by 27% to $68.7 billion from
$54.0 billion, primarily due to valuations, acquisitions and developments
in the Partnerships.
External AUM
At the beginning of the year
Acquisitions
Disposals
Capital expenditure (developments)
Valuations
Foreign currency translation
At the end of the year
2022
$B
54.0
4.2
(0.9)
2.6
8.2
0.6
68.7
Excluding performance related income, management fee income
earned from the overall management of the Group’s Partnerships was
$380.4 million (2021: $310.1 million). Base management fee income
increased in line with the external AUM, noting that a significant component
of the valuation uplifts were recorded at 31 December 2021 and that the
completion of developments throughout the year was skewed to the
second half of FY22. The base management fee income was supplemented
by both property services income, which was based on the gross property
income in Partnerships, and other income such as leasing fees and
transactional fees.
Performance fee revenue of $208.0 million (2021: $149.0 million) again
provided a strong contribution to the Group’s operating earnings. As in
the prior year, these performance fees arose in Australia/New Zealand,
Asia and Continental Europe, with the higher performance fees in FY22
due to the timing of the assessment dates relative to the prior year. For
FY22, the Partnerships reported a weighted average total return on net
assets of 21.4% (2021: 17.7%) and with the consistently strong performance
of the Partnerships in recent times, a significant backlog of potential fees
may be earned in the future should conditions remain stable.
In FY22, development earnings were $960.7 million (excluding revaluation
gains), an increase of 34% on the prior year and comprised 47% of total
operating earnings (2021: 45%).
Strong occupier demand has continued to give the Group confidence
to grow the development workbook as customers look for sites closer
to consumers and invest in new facilities to accommodate significant
investments in technology and automation. Goodman’s development
activity is underpinning its organic growth with an average annual
production rate for FY22 (based on expected development end value)
of approximately $7.0 billion, an increase of over $1.0 billion on FY21.
WIP (based on development end value) is $13.6 billion at 30 June 2022
(2021: $10.6 billion). The WIP is globally diversified across 85 projects and
has grown in volume, scale and value. The increased scale and complexity
have seen the average development period increase from 19 to 23 months
over the past year. The majority of development activity in FY22 was
again undertaken by or for the Partnerships and third parties (85% of WIP
at 30 June 2022).
While costs have increased globally across the construction process
due to supply chain, labour and material shortages, Goodman’s margins
have remained strong. This has been managed proactively through the
Group’s procurement practices and contingencies for time and cost. In
addition, rental growth and value-add activities across the portfolio and
development projects have provided the ability to mitigate these costs.
The Group remains focused on regeneration of existing land and buildings
and enhancing value through intensification of use such as multi-storey
developments which make up $7.7 billion of the current WIP. Goodman is
continuing to add opportunities to its portfolio incrementally to support
future development in constrained markets, while reducing its impact
on the environment through brownfield developments. Brownfield
developments and regeneration of sites continues to be greater than
50% of our global WIP.
Given the strength in customer demand, especially in locations where the
supply of available land is restricted, the Group has chosen to commence
certain projects prior to securing a pre-lease commitment. Consequently,
of the $7.9 billion of project commencements during the year, 59% had
pre-committed leases. However, of the $6.0 billion of development
completions during the year, 99% had pre-committed leases, a reflection
of the strong customer demand and the Group’s ability to convert that into
lease contracts that support the value of the investment.
17
GOODMAN GROUP
Directors’ report
Operating and financial review (continued)
Analysis of performance (continued)
Operating expenses
For FY22, operating expenses were $349.3 million, up from $294.0 million
in the prior year, an increase of $55.3 million. This was primarily in wages
and salaries, due to additional headcount to support the ongoing activity
levels, inflationary pressures in most regions and additional short-term
incentives due to the outperformance in the Group’s overall operating
profit. The Group’s aim is to keep base remuneration costs relatively
steady, and instead use variable remuneration to incentivise staff.
Administrative and other expenses increased to $90.4 million from
$83.2 million due to recommencement of travel and the associated
costs, higher information technology expenditure and increased
charitable donations.
Net finance expense (operating)
Net finance expense (operating), which excludes interest income on
loans to development JVs, derivative mark to market and unrealised
foreign exchange movements, increased to $39.3 million from
$16.4 million. This was due to a greater level of interest bearing liabilities,
including the new US$500 million Sustainability Linked Bond and higher
interest rates, partly offset by an increase in capitalised interest.
Income tax expense (operating)
Income tax expense (operating) for FY22 at $127.1 million
(2021: $58.7 million) increased 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 increase in the tax expense
was primarily due to the nature and geographic location of the Group’s
increased revenues.
18
Capital management
Interest bearing liabilities
At 30 June 2022, the Group’s available debt facilities and fixed rate
long-term bonds, which totalled $4.6 billion (of which $2.9 billion had been
drawn), had a weighted average maturity of 6.2 years with $0.1 billion due
to mature in FY23. The Group’s cash and undrawn bank facilities totalled
$2.8 billion. During the year, the Group’s issued its first US$500 million
10-year Sustainability Linked Bond into the US144A/Regulation S debt
capital market.
At 30 June 2022, gearing was 8.5% (2021: 6.8%), which continued to
be at the lower end of the Group’s policy range of 0% to 25%. Interest
cover was 36.7 times (2021: 63.7 times) and the Group continued to have
significant headroom relative to its financing covenants. Goodman’s
strong investment grade credit ratings were unchanged over the year.
During FY22, the Group and its Partnerships issued new long-term bonds
of $2.0 billion (including $859.0 million of Sustainability Linked Bonds),
refinanced $6.4 billion of bank debt and secured third party equity
commitments to allocate $1.8 billion that will provide liquidity for ongoing
acquisition and development opportunities. At 30 June 2022,
the Partnerships had $18.1 billion in available cash, undrawn bank
facilities and equity commitments, noting that the majority of the equity
commitments remain subject to the approval by the relevant investment
partners, including Goodman, of proposed property investments for
which the funding is required.
Dividends and distributions
The Group’s distribution for FY22 was maintained at 30 cents per security,
a pay-out ratio of 37%, with 15 cents per security paid on 24 February
2022 and 15 cents per security to be paid on 25 August 2022. 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 distribution for FY22:
+ Goodman Limited did not declare any dividends during the financial
year (2021: $nil)
+ Goodman Industrial Trust declared and accrued distributions
of 27.5 cents per security (2021: 24.0 cents per security), amounting
to $513.8 million (2021: $443.4 million)
+ GLHK declared and accrued a dividend of 2.5 cents per security
(2021: 6.0 cents per security), amounting to $46.7 million
(2021: $110.8 million).
ANNUAL REPORT 2022
Summary of items that reconcile operating
profit to statutory profit
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 loss of $191.4 million
(2021: $55.0 million net gain). This was primarily due to the weakening
of the AUD against the USD and HKD partly offset by a strengthening
of the AUD against the JPY, EUR and GBP and the impact of higher
interest rates on the associated hedge contracts.
Under the Group’s policy, it continues to hedge between 65% and 90%
of the net investment in its major overseas operations. 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 economic 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 FY22, the movement in reserves
attributable to foreign currency movements was a gain of $145.3 million
(2021: $279.4 million loss).
Other non-cash adjustments or non-recurring items
The principal other non-cash adjustments or non-recurring items for
FY22 related to the share based payments expense of $257.6 million
(2021: $268.8 million) for Goodman’s LTIP. The decrease primarily related
to the fact that the Goodman Group security price fell from $21.17 to
$17.84 during FY22 compared to an increase from $14.85 to $21.17 in FY21.
Property valuation related movements
The net gain from fair value adjustments on investment properties directly
held by Goodman was $260.1 million (2021: $63.1 million). The uplift in
value was primarily due to the contraction in capitalisation rates.
Goodman’s share of net gains from fair value adjustments before
deferred tax attributable to investment properties in Partnerships was
$2,330.8 million (2021: $1,335.4 million), a reflection of the quality of the
property portfolios and the continued customer and investor demand
for industrial assets. This valuation uplift comprised $1,674.4 million
(2021: $947.6 million) in respect of the stabilised portfolio, $204.3 million
(2021: $164.2 million) on developments that stabilised during the year)
and $452.1 million (2021: $223.6 million) from investment properties that
were still under development at 30 June 2022.
At 30 June 2022, the WACR for Goodman’s stabilised property portfolios
(both directly held and Partnerships) was 0.3 percentage points lower
than 30 June 2021, declining from 4.3% to 4.0%.
At 30 June 2022, the Group’s share of cumulative valuation gains on
properties that were subject to conditional contracts for disposal,
incorporating all valuation gains since the most recent repositioning
activities commenced, was $429.6 million (2021: $95.9 million).
These gains related to directly held properties and properties held in
Partnerships that have been contracted for disposal and included two
directly held properties that were contracted for disposal in the current
year. The Group’s share of these cumulative valuation gains that have
been reported as part of the statutory result included $333.7 million
recognised in FY22 and $95.9 million in prior reporting periods. No
valuation gains in respect of properties that had previously been subject
to a conditional contract for disposal were realised in the current year
(2021: $nil) and therefore none of the gains has been reflected in the
operating profit for the current or any past periods.
There were no impairment losses associated with the Group’s inventories
during the year.
19
The increase in the directly held development properties is due to the
ongoing acquisitions and development expenditure of $1,267.1 million,
which was greater than the disposals and transfers to stabilised assets
at completion of $909.8 million.
The increase in the Group’s share of development assets in the
Partnerships was due to acquisitions of $710.2 million and valuation
uplifts of $451.3 million (net of deferred tax), partly offset by transfers
to stabilised assets at completion of $724.9 million.
The principal goodwill and intangible asset balances are in Continental
Europe and the United Kingdom. The movement during the year related
to changes in foreign currency exchange rates and there were no
impairments or reversals of impairments.
The movement in the cash balance during the year is explained in the cash
flows section of this report. In respect of the interest bearing liabilities,
Goodman has renegotiated a number of bank facilities to provide ongoing
funds for the business, but the principal change in the drawn debt during
the year was the completion of a US$500 million Sustainability Linked
Bond into the US144A/Regulation S market. The foreign private placement
of ¥12.5 billion is scheduled to mature in April 2023 and is disclosed as a
current liability.
Other assets included receivables, right of use assets from the Group’s
operating leases (primarily office premises) and the fair values of certain
derivative financial instruments, which hedge the Group’s interest rate and
foreign exchange rate risks. There were no material movement during FY22.
Other liabilities include trade and other payables, lease liabilities, the
provision for distributions to Securityholders, fair values of certain
derivative financial instruments and tax liabilities (including deferred
tax). The increase in other liabilities is primarily due to mark to market
movements on derivative financial instruments.
GOODMAN GROUP
Directors’ report
Operating and financial review (continued)
Statement of financial position
Stabilised properties
Cornerstone investments
in Partnerships
Development holdings
Intangible assets
Cash and cash equivalents
Other assets
Total assets
Interest bearing liabilities
Other liabilities
Total liabilities
Net assets
2022
$M
2021
$M
2,387.1
2,022.2
11,903.9
4,455.2
795.4
1,056.0
834.8
8,668.6
3,645.1
822.6
920.4
788.1
21,432.4
16,867.0
2,832.2
2,175.4
2,060.3
1,645.2
5,007.6
3,705.5
16,424.8
13,161.5
The carrying value of the directly held stabilised investment properties
(which included assets held for sale at 30 June 2022 of $598.1 million)
increased by $364.9 million to $2,387.1 million at 30 June 2022. This was
due to acquisitions in Australia and Asia of $409.9 million, development
completions of $477.5 million and valuation uplifts of $260.1 million being
partly offset by disposals of $823.9 million.
The value of Goodman’s cornerstone investments in Partnerships, which
excludes the Group’s share of their development assets, increased by
$3,235.3 million to $11,903.9 million. This movements during the year
included the Group’s net investments in the Partnerships of $462.1 million,
the valuation uplifts (net of deferred tax) across the portfolios of
$1,821.6 million, transfers from development properties on stabilisation of
$709.3 million and the impact of foreign currency translation $195.1 million.
Goodman’s development holdings include directly held properties
(primarily inventories) of $1,976.4 million (2021: $1,650.5 million) and the
Group’s share of development assets in the Partnerships of $2,478.8 million
(2021: $1,994.6 million), and on a combined basis increased during the
year by $810.1 million to $4,455.2 million (2021: $3,645.1 million). This was a
reflection of the increased activity levels in most regions with the Group’s
development WIP (as measured by estimated end value) having increased
from $10.6 billion at 20 June 2021 to $13.6 billion at 30 June 2022.
20
Cash flows
Operating cash flows
Investing cash flows
Financing cash flows
(excluding dividends and distributions)
Dividends and distributions paid
Net increase/(decrease) in cash held
Cash and cash equivalents
at the beginning of the year
Effect of exchange rate
fluctuations on cash held
Cash and cash equivalents
at the end of the year
Operating cash flows
Operating cash flows of $841.0 million (2021: $1,114.7) million were lower
than the prior year. This was mainly due to an increase in the payments
associated with development activities. There was also an increase
in other cash payments, lower cash received from the Partnership
distributions (as a result of sales completed last year) that were partly
offset by higher cash receipts from portfolio performance fees.
The net development cash inflow was $367.1 million (2021: $612.9 million).
The gross receipts from development activities were similar to the prior
year at $1,587.8 million (2021: $1,560.3 million), but the gross payments for
development activities were higher than the prior year at $1,220.7 million
(2021: $947.4 million). This arose in part due to the nature and structure
of the development activities and also the timing of completions,
especially in respect of the developments that are undertaken directly
by the Group and subsequently sold to Partnerships or third parties.
However, it also reflected an investment in inventories that will be
developed to generate profits in future periods. For FY22 overall,
compared to the prior year Goodman undertook a similar percentage
of its total development activities in the Partnerships. When Partnerships
require funding for development activities, then the Group’s share of the
investment is reported in investing cash flows.
The increase in other cash payments is due to the increase in operating
costs, primarily wages and salaries, and also includes the cost of cash
settled performance rights under the LTIP. The cash settled portion of
the LTIP was offset by the issue of new securities to raise an equivalent
amount of funds. That issue is reported in the financing cash flows.
As a result, the LTIP was cash neutral overall.
ANNUAL REPORT 2022
2022
$M
841.0
(1,001.5)
856.9
(557.2)
139.2
2021
$M
1,114.7
(549.9)
(797.7)
(551.4)
(784.3)
920.4
1,792.8
The distributions received from Partnerships in FY22 were $442.5 million,
lower than $536.9 million received in the prior year. The Partnerships
continued to distribute their net cash flows from property investment
(rental income) but the primary reason for this decrease was the timing
of distributions associated with the Group’s share of development
activities in the Partnerships.
The timing of receipts of portfolio performance fees are dependent
on the assessment dates for the Partnerships although revenues may
be recognised in advance of the assessment dates where the consistently
strong Partnership returns mean that the receipt of revenue is highly
probable. The current year included cash receipts from previously
accrued portfolio performance fees; hence, overall receipts were higher
than the prior year.
(3.6)
(88.1)
Investing cash flows
1,056.0
920.4
Investing net cash outflow was $1,001.5 million, an increase of
$451.6 million compared to the prior year. During FY22, the principal
investing cash outflows related to acquisitions of directly held properties
in Asia and the United Kingdom of $431.7 million (2021: $192.2 million)
and to investments in the Group’s Partnerships of $1,332.3 million
(2021: $790.3 million). The Group received proceeds of $671.8 million
from the disposals of investment properties in the United Kingdom
and Australia. Capital returns from the Partnerships of $91.8 million
(2021: $256.3 million) occurred after capital management initiatives
in Goodman UK Partnership and Goodman North America Partnership.
Financing cash flows
Financing cash inflow (net of dividends and distributions) was
$299.7 million, an increase of $1,648.8 million compared to a net cash
outflow of $1,349.1 million in the prior year.
Proceeds from borrowings and derivative financial instruments were
$1,466.5 million (2021: $204.6 million). This included cash inflows in
respect of the the completion of a US$500 million Sustainability Linked
Bond into the US144A/Regulation S debt capital market and drawdowns
on the Group’s revolving bank loans of $777.3 million.
Payments on borrowings and derivative financial instruments were
$789.3 million (2021: $891.9 million). This included repayments on the
Group’s revolving bank loans of $768.4 million. In the prior year, the
cash outflows included the redemption of US$453.8 million notes in the
US144A/Regulation S market.
The net cash flow from related party loans was an inflow of $111.4 million
(2021: $135.0 million net outflow). These loans are provided by the Group
to fund developments in the Partnerships (including JVs) and are repaid
either at completion or when the Partnership obtains its own external debt.
The net proceeds from the issue of stapled securities of $109.7 million
(2021: $64.8 million) were directly used to fund obligations under the LTIP
that have been reported as part of the Group’s operating cash flows.
The other principal financing cash outflows were the distributions paid
to Securityholders of $557.2 million (2021: $551.4 million).
21
GOODMAN GROUP
Directors’ report
Operating and financial review (continued)
Outlook
Goodman has developed significant expertise and a deliberate strategy
to target high barrier to entry markets and to undertake larger, more
complex projects over longer periods of time, providing our customers
access to facilities where they are scarce and has positioned the Group
well for future growth.
In the near term, market conditions are likely to be volatile and the risks
associated with rising inflation, interest rates and slowing economic
activity are elevated. This may impact consumers; however, they
continue to seek faster and more flexible delivery, which requires ongoing
intensification of warehousing in urban locations to optimise delivery
and improve productivity. The business remains agile, focused on the
changing consumption habits across the physical and digital space and,
as a result, the evolving requirements of customers around the world.
Demand is currently exceeding supply in our markets, supporting our
development-led growth strategy and producing well located assets for
the Group and our Partnerships. In addition to strategic site acquisitions,
the opportunities for regeneration of existing assets support our future
development workbook by providing value add opportunities, while
reducing our environmental impact. Our production rate, depth of
customer demand and strong margins are supporting the outlook for
development earnings into FY23.
In addition, the Group continues to maintain a strong balance sheet, which
combined with retained income, provides significant liquidity, stability and
financial resources.
The outlook for property investment and management earnings remains
strong, as the customer demand and supply constraints in the Group’s
markets provide support for both rental growth and a high level of
occupancy. Investment and management earnings will also benefit from
the completion of ongoing developments. Development completions and
market rental growth are also expected to support growth in AUM.
Goodman has made a strong start to FY23 with a significant development
workbook underway, continued underlying structural demand from
customers and a robust capital position across the Group and
Partnerships. The Board believes the Group is positioned to continue to
deliver growth despite the risks associated with current market volatility
and expects to achieve operating EPS growth of 11% in FY23.
The Group sets financial performance targets annually and reviews them
regularly. Forecasts are subject to there being no material adverse change
in market conditions or the occurrence of other unforeseen events.
22
ANNUAL REPORT 2022
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
(debt, equity and cash flow)
Goodman could suffer an inability to deliver
its strategy, or an acute liquidity or solvency
crisis, financial loss or financial distress as a
result of a failure in the design or execution of
its capital management and financing strategy.
+ Low gearing, ample liquidity and appropriate hedging and duration to absorb market shocks
+ Appropriate hedging quantities and duration in accordance with Goodman's FRM policy
+ Diversification and tenure of debt funding sources and maturities
+ Capital partnering transfers risks into Partnerships
+ Diversification of investment partners
+ Distribution pay-out ratio consistent with contribution to increasing development workbook
+ Strong assets that can generate better rental outcomes
+ Long lease terms with prime customers
+ Key urban market strategy – urban, infill locations support re-usability of property
+ Adaptable and re-usable building design – ease to reconfigure for another customer
+ Insurance program including project specific insurance.
+ 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, appropriate hedging and significant
available liquidity to allow for potential market shocks
+ Co-investment with local capital partners
+ Long term leases with review mechanisms.
+ 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 Investment Committee
+ Verification and sign off process for all public announcements
+ Comprehensive insurance program, covering property, liability, directors and officers
and professional indemnity.
Economic and
geopolitical environment
Governance, regulation
and compliance
People and culture
Global economic conditions and government
policies present both risks and opportunities
in the property and financial markets and the
business of our customers, which can impact
the delivery of Goodman's strategy and its
financial performance.
A continued increase in geopolitical tension
between countries could have potential
consequences on our people, operations and
capital partners.
In the near-term, market conditions are likely to
be volatile and the risks associated with rising
inflation, interest rates and slowing economic
activity are elevated.
Non-compliance with legislation, regulators,
or internal policies, or to understand and
respond to changes in the political and
regulatory environment (including taxation)
could result in legal action, financial
consequences and damage our standing
and reputation with stakeholders.
Failure to recruit, develop, support, and
retain staff with the right skills and experience
may result in significant underperformance
or impact the effectiveness of operations
and decision making, in turn impacting
business performance.
+ Succession planning for senior executives
+ Competitive remuneration structures, including the LTIP
+ Performance management and review
+ Goodman values program
+ Learning, development and engagement programs
+ Staff engagement through team strategy days, town halls and the (good) life program.
23
GOODMAN GROUP
Directors’ report
Risks (continued)
Development
Development risks may arise from location,
site complexity, planning and permitting,
infrastructure, size, duration along with general
contractor capability.
Disruption, changes in
demand and obsolescence
The longer-term risk that an inability
to understand and respond effectively
to changes in our competitive landscape
and customer value chain could result
in business model disruption and asset
obsolescence, including the perception
of obsolescence in the short term.
Environmental
sustainability and
climate change
Failure to deliver on Goodman's sustainability
leadership strategy and ambitions may lead 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.
+ Review of development projects by the Goodman Investment Committee
+ Goodman defined design specifications, which cover environmental, technological,
and safety requirements, protecting against short-term obsolescence
+ Redevelopment of older assets to intensify use
+ Pre-selecting and engaging general contractors that are appropriately capitalised
and reviewing contractor liquidity
+ Internal audit reviews
+ Insurance program, both Goodman and general contractor, including project specific insurance
+ Ongoing monitoring and reporting of WIP and levels of speculative development, with
Goodman Board oversight including limits with respect to speculative development and
higher development risk provisions
+ Capital partnering development projects.
+ 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
+ Investment in innovation and technology strategies.
+ 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 Goodman
Investment Committee and relevant Partnership Investment Committee, including
consideration of climate in due diligence and specification
+ Adoption of the Task Force on Climate-Related Financial Disclosures recommendations
as a framework for climate risks.
+ 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 Goodman
Investment Committee
+ Capital expenditure programs keeping pace with property lifecycle.
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
+ Contractor pre-selection and tendering
+ Independence governance structure.
Maintaining security (including cyber
security) of IT environment and data, ensuring
continuity of IT infrastructure and 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
+ Benchmarked strategy for delivery of security IT infrastructure and systems
+ Training and awareness program and other assurance activities for monitoring
and improvement.
There continues to be significant uncertainty
associated with the COVID-19 pandemic,
with mutations of the virus and significant
outbreaks continuing to occur globally. The
approach in enabling the world to stabilise
and transition to a "normal" footing is still to
be understood, while "Zero COVID" policies
by some nations is having both economic and
supply chain issues globally.
+ Protect and support our people
+ Global diversification of Goodman's property portfolios
+ Diversification of customer base
+ In-house property management team enabling flexibility to support and respond
to customers
+ Capital model, strong balance sheet with adequate liquidity available.
Concentration
of counterparties
and markets
Information and
data security
Infectious disease
pandemic
24
QUALIFICATIONS, EXPERIENCE AND
SPECIAL RESPONSIBILITIES OF DIRECTORS
AND COMPANY SECRETARY
Board of Directors
Stephen Johns
Independent Chairman
Stephen is the Independent Chairman and a Non-executive Director of
Goodman Limited, Goodman Funds Management Limited and Goodman
Logistics (HK) Limited.
Appointed: 1 January 2017 (Goodman Limited and Goodman Funds
Management Limited); 19 November 2020 (Goodman Logistics (HK) Limited).
Board Committees: Member of the Audit Committee and Remuneration
Committee, and Chairman of the Nomination Committee.
Skills, Experience and Expertise
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 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.
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.
Other Directorships and Offices
+ Director of the Garvan Institute of Medical Research
+ Director of European-Australian Business Council.
Directorships of Other Listed Entities in the Past Three Years
+ Brambles Limited (August 2004 to June 2020).
ANNUAL REPORT 2022
Gregory Goodman
Group Chief Executive Officer
Greg 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.
Appointed: 7 August 1998 (Goodman Limited and 17 January 1995
Goodman Funds Management Limited); 18 January 2012 (Goodman
Logistics (HK) Limited).
Board Committees: Nil.
Skills, Experience and Expertise
Greg 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 industrial property.
Greg 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.
Other Directorships and Offices
+
+
Director of Goodman (NZ) Limited (the manager of the New Zealand
Exchange listed Goodman Property Trust)
Director and/or representative on other subsidiaries and management
companies of Goodman and its Partnerships.
Christopher Green
Independent Director
Chris is an Independent Non-executive Director of Goodman Limited
and Goodman Funds Management Limited.
Appointed: 28 April 2019.
Board Committees: Member of the Nomination Committee and the
Remuneration Committee (since 19 November 2021). Chris retired
as a member of the Audit Committee on 19 November 2021.
Skills, Experience and Expertise
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.
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.
Other Directorships and Offices
+ Chief Executive Officer of GreenPoint Partners
+ Director of Wyuna Regenerative Ag Pty Limited
+ Director of Infinium Logistics Solutions UK Limited
+ Director of The Opportunity Network
+ Director of Ility inc.
25
GOODMAN GROUP
Directors’ report
Qualifications, experience and special responsibilities of Directors and Company Secretary (continued)
Mark Johnson
Independent Director
Mark is an Independent Non-executive Director of Goodman Limited
and Goodman Funds Management Limited.
Appointed: 1 June 2020.
Board Committees: Chairman of the Audit Committee and member
of the Risk and Compliance Committee.
Skills, Experience and Expertise
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 also has extensive experience as a Director of charities, educational
bodies and mutual organisations and he is currently a director of the
Smith Family, a Councillor at UNSW Sydney and the Chairman of the
Hospitals Contribution Fund of Australia. He was until recently Chairman
and a director of G8 Education Limited and was formerly an independent
director of Coca-Cola Amatil Limited and Westfield Corporation Limited.
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.
Other Directorships and Offices
+ Director of Aurecon Limited
+ Director of Boral Limited
+ Director of Metcash Limited.
Former Directorships of Other Listed Entities in the Past Three Years
+ Coca-Cola Amatil Limited (December 2016 – May 2021)
+ G8 Education Limited (January 2016 – November 2021).
Vanessa Liu
Independent Director
Vanessa is an Independent Non-executive Director of Goodman Limited
and Goodman Funds Management Limited.
Appointed: 1 June 2022.
Board Committees: Nil.
Skills, Experience and Expertise
Vanessa is an experienced technology business leader and currently
Co-Founder and CEO of SaaS technology company Sugarwork, and
an independent director of ASX-listed artificial intelligence company
Appen Ltd (since March 2020). She has more than twenty years
of experience in the technology sector having started her career
at McKinsey in the Telecom, Media & Technology Practice.
She was most recently Vice President of SAP.iO North America,
SAP’s early-stage venture arm, where she recruited and accelerated
87 enterprise software startups. Prior to SAP, Vanessa was Chief
Operating Officer at Trigger Media Group, a digital media venture studio,
and co-founded Trigger’s portfolio companies: digital media company
InsideHook and SaaS technology company Fevo.
Vanessa graduated magna cum laude highest honours with an AB
in Psychology from Harvard University and cum laude with a JD from
Harvard Law School. She was a Fulbright Scholar at Universiteit Utrecht
in the Netherlands. She serves as a Past President Director of the
Harvard Alumni Association and is a Board Advisor of Talking Talent Ltd.
and a Board Observer of Fevo.
Other Directorships and Offices
+ Director of Appen Ltd
+ CEO of Sugarwork.
Rebecca McGrath
Independent Director
Rebecca is an Independent Non-executive Director of Goodman Limited
and Goodman Funds Management Limited.
Appointment: 3 April 2012.
Board Committees: Chairman of the Risk and Compliance Committee
and member of the Nomination Committee and the Audit Committee
(appointed on 19 November 2021). Rebecca resigned as a member of the
Remuneration Committee on 19 November 2021.
Skills, Experience and Expertise
During her executive career at BP plc, Rebecca held numerous senior
roles in finance, operations, corporate planning, project management
and marketing in Australasia, the UK, and Europe. Her last role as a senior
executive was as Chief Financial Officer of BP Australasia. Rebecca was
formerly a director of CSR Limited and Incitec Pivot Limited.
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 Programme. She is Victorian Council
President of the Australian Institute of Company Directors and a member
of the National Board and a member of The Australian British Chamber
of Commerce Advisory Council.
Other Directorships and Offices
+
+
Chairman of OZ Minerals Limited (Director since November 2010)
Director of Macquarie Group Limited and Macquarie Bank Limited
(since January 2021)
+
Director of Investa Wholesale Funds Management Limited
+ Director of Investa Office Management Holdings Pty Ltd
+ Chairman of Scania Australia Pty Limited.
Former Directorships of Other Listed Entities in the Past Three Years
+
Incitec Pivot Limited (September 2011 to December 2020).
26
ANNUAL REPORT 2022
Danny Peeters
Executive Director, Corporate
Danny is an Executive Director of Goodman Limited, Goodman Funds
Management Limited and Goodman Logistics (HK) Limited.
Appointed: 1 January 2013 (Goodman Limited and Goodman Funds
Management Limited); 1 February 2018 (Goodman Logistics (HK) Limited).
Board Committees: Nil.
Anthony Rozic
Deputy Chief Executive Officer and
Chief Executive Officer North America
Anthony is an Executive Director of Goodman Limited and Goodman
Funds Management Limited.
Appointed: 1 January 2013.
Board Committees: Nil.
Skills, Experience and Expertise
Skills, Experience and Expertise
Danny was formerly CEO of Goodman’s European business and has
oversight and is currently the Acting CEO of Goodman’s Brazilian
operations. Danny has been with Goodman since 2006 and has over
20 years of experience in the property and logistics sectors.
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.
Other Directorships and Offices
+
Director and/or representative of Goodman’s subsidiaries and
Partnership entities in Europe and Brazil.
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.
Phillip Pryke
Independent Director
Phillip is an Independent Non-executive Director of Goodman Limited
and Goodman Funds Management Limited.
Appointed: 13 October 2010.
Board Committees: Chairman of the Remuneration Committee, member
of the Audit Committee and the Risk and Compliance Committee
(from 19 November 2021).
Skills, Experience and Expertise
Phillip has wide experience in the fishing, energy, financial services, and
health and technology industries and holds a Bachelor of Economics degree.
Phillip is currently 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.
Other Directorships and Offices
Other Directorships and Offices
+
Director and/or representative of Goodman’s subsidiaries
and Partnership entities in North America.
Hilary Spann
Independent Director
Hilary is an Independent Non-executive Director of Goodman Limited
and Goodman Funds Management Limited.
Appointed: 4 April 2022.
Board Committees: Nil.
Skills, Experience and Expertise
Hilary has an extensive background in public and private equity markets
and is currently a senior executive at NYSE-listed Boston Properties, Inc.
(NYSE: BXP), based in New York. There, she is responsible for all aspects
of the office developer, owner, and manager’s portfolio in the New York
region. She was previously the Head of Real Estate for the Americas at
CPP Investments and prior to that she held a number of senior real estate
roles at JPMorgan in the United States.
Hilary graduated from the Georgia Institute of Technology with a BS and
a Masters in City Planning, both from the College of Architecture. She also
studied architecture at L’École Nationale Supérieure D’architecture de Paris
– La Villette.
+
Director of Goodman (NZ) Limited (the manager of the New Zealand
Exchange listed Goodman Property Trust)
Other Directorships and Offices
+ Director of Carbine Aginvest Corporation Limited.
+
Executive Vice President, Boston Properties, Inc. (NYSE: BXP)
+
Director, ULI Foundation.
27
GOODMAN GROUP
Directors’ report
Qualifications, experience and special responsibilities of Directors and Company Secretary (continued)
Penny Winn
Independent Director
Penny retired as an Independent Non-executive Director of Goodman
Limited and Goodman Funds Management Limited.
Company Secretary
Carl Bicego
Group Head of Legal and Company Secretary
Appointed: 24 October 2006.
Skills, Experience and Expertise
Carl is the Group Head of Legal and 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 and Bachelor
of Economics/Bachelor of Laws (Hons).
Appointed: 1 February 2018 and retired on 18 November 2021.
Board Committees: Member of the Remuneration Committee
and Risk and Compliance Committee until 18 November 2021.
Skills, Experience and Expertise
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 previously served as a director
of a Woolworths business, Greengrocer.com, a Myer business,
sass & bide, Quantium Group and Port Waratah Coal Services Limited.
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.
Other Directorships and Offices
+
Director of CSR Limited (since November 2015)
+
Director of Ampol Limited (since November 2015).
Former Directorships of Other Listed Entities in the Past Three Years
+
Coca-Cola Amatil Limited (December 2019 to May 2021).
28
ANNUAL REPORT 2022
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:
Board meetings
Audit Committee
meetings
Remuneration
Committee meetings
Risk and Compliance
Committee meetings
Nomination
Committee meetings
Held1
Attended
Held1
Attended
Held1
Attended
Held1
Attended
Held1
Attended
Directors
Stephen Johns
Gregory Goodman
Christopher Green2
Mark Johnson
Vanessa Liu3
Rebecca McGrath4
Danny Peeters
Phillip Pryke5
Anthony Rozic
Hilary Spann6
Penny Winn7
10
10
10
10
1
10
10
10
10
4
4
10
10
10
10
1
10
10
10
10
4
4
4
–
1
4
–
3
–
4
–
–
–
4
–
1
4
–
3
–
4
–
–
–
3
–
2
–
–
1
–
3
–
–
1
3
–
2
–
–
1
–
3
–
–
1
–
–
–
4
–
4
–
3
–
–
1
–
–
–
4
–
3
–
3
–
–
1
6
–
6
–
–
6
–
–
–
–
–
1. Reflects the number of meetings individuals were entitled to attend.
2. Christopher Green resigned as a member of the Audit Committee and commenced as a member of the Remuneration Committee on 19 November 2021.
3. Vanessa Liu was appointed to the Board on 1 June 2022.
4. Rebecca McGrath resigned as member of the Remuneration Committee and commenced as a member of the Audit Committee on 19 November 2021.
5. Phillip Pryke commenced as a member of the Risk and Compliance Committee on 19 November 2021.
6. Hilary Spann was appointed to the Board on 4 April 2022.
7. Penny Winn retired on 18 November 2021.
6
–
6
–
–
6
–
–
–
–
–
29
4.
4.1
4.2
4.3
4.4
GROUP PERFORMANCE AND OUTCOMES
Group FY22 highlights
Financial measures
Total security price returns comparison
Remuneration outcomes for FY22
4.4.1 STI outcomes
4.4.2 ESG assessment
4.4.3 LTI outcomes
4.4.3.1 Operating EPS hurdle (75% weighting)
4.4.3.2 Relative TSR hurdle (25% weighting)
4.4.4 Group CEO achievements
4.4.5 Other executive KMP achievements
4.5
LTI grants in relation to FY22 performance
5.
5.1
5.2
6.
6.1
NON-EXECUTIVE DIRECTOR REMUNERATION
Key elements of the Non-Executive Director remuneration policy
Board and committee annual fees
STATUTORY DISCLOSURES
KMP remuneration (statutory analysis)
6.2 Movements in performance rights held by executive KMP
6.3
6.4
6.5
6.6
6.7
6.8
Analysis of performance rights held by executive KMP
Securities issued on exercise of performance rights
Unissued securities under performance rights
Non-Executive Directors’ remuneration (statutory analysis)
Movements in Goodman securities held
Transactions with Directors, executives and their related entities
GOODMAN GROUP
Directors’ report
Remuneration report – audited
Letter from the Chairman and the Remuneration Committee Chair
REMUNERATION GOVERNANCE
The role of the Board and Remuneration Committee
Key activities of the Remuneration Committee for FY22
Key Management Personnel (KMP)
REMUNERATION STRATEGY
Key remuneration principles
Objectives of the remuneration strategy
Remuneration mix and alignment across the Group
EXECUTIVE REMUNERATION FRAMEWORK
Feedback and response
1.
1.1
1.2
1.3
2.
2.1
2.2
2.3
3.
3.1
3.2
Remuneration enhancements for executive KMP
3.3 When is remuneration earned and received?
3.4
3.5
Short-term incentive
Long-term incentive
3.5.1 FY23 LTI awards (five and ten-year plans)
3.5.2 FY22 LTI awards
3.5.3 FY21 LTI awards
3.5.4
Setting operating EPS hurdles for proposed ten year plan
awards to the Group CEO, other executive KMP and other
senior executives
3.5.5
Operating EPS – long-term cash flow alignment with
vesting outcomes
3.6
Non-financial measures
3.6.1 Types of non-financial measures
3.6.2
Integration of non-financial measures into STI
3.6.3
Integration of non-financial measures into LTI
3.7
Considerations for setting of awards
3.7.1 Considerations for award quantum – Goodman Group in context
3.7.2 Considerations for award quantum – structure
3.7.3 Valuation of performance rights (economic value) ten-year grants
30
ANNUAL REPORT 2022
Letter from the Chairman and the Remuneration Committee Chair
Dear Securityholders,
On behalf of the Board, we are pleased to present the 2022 remuneration report, outlining Goodman’s remuneration strategy and principles.
FY22 was another successful year for the Group, significantly exceeding financial performance expectations while making significant progress on our ESG
initiatives. This has been delivered in difficult conditions. The ongoing impact of the COVID-19 pandemic, global political instability, rising inflation and higher
interest rates have all presented challenges for Goodman’s business, our people, customers, investors, and the communities in which we operate and live.
The attraction and retention of talent are critical for the success of the Group and is increasingly challenging as opportunistic competitors seek
to recruit high-performing teams around the world. The Group’s longstanding and consistent approach to remuneration has been a key driver of our
sustained success as an international business.
Our approach is reflected in our strong financial results for FY22 including:
+ Operating profit of $1.5 billion (+25%) for Goodman in FY22 and growth of 59% for the three year period to FY22
(which aligns with the Group’s LTIP testing period)
+ Statutory profit of $3.4 billion for Goodman and $9.0 billion across the combined Group and Partnerships
+ Goodman operating EPS growth of 24% materially exceeding initial expectations of 10%
+ Significant growth in the end value of development work in progress up 28% to $13.6 billion at 30 June 2022, providing a solid base for future profitability
+ Total AUM increasing 26% to $73.0 billion
+ Substantial revaluation growth increasing $8.5 billion across the Group and Partnerships reflecting the quality of the portfolio and the contribution
management has made to enhance its value
+ Low leverage of 8.5% and significant liquidity of $2.8 billion providing strong financial capacity both for resilience and growth.
We have continued to reflect the importance placed on providing financial returns and operating within appropriate sustainability and environmental
objectives, incorporating key targets into the operations and long-term business strategies of the Group.
2021 AGM results and subsequent securityholder engagement
Given the positive feedback from investors on the innovations introduced last year in relation to the new 10 year Long Term Incentive Plan (LTIP) for senior
executives and the introduction of environmental objectives into both the five and 10 year plans, and the significant outperformance of the Group in FY21,
we were disappointed at the level of support for our remuneration report and executive director grants at the 2021 AGM. The Remuneration Committee
takes the result of our remuneration vote extremely seriously and has engaged with a significant proportion of our top 50 securityholders to discuss this
and other governance matters. We also engaged with proxy advisory firms to better understand their views.
In response to investor feedback, we have:
+ Retained the ten year plan for senior executives continuing significant long term alignment with securityholders
+ Reduced the proposed quantum of awards significantly while recognising the exceptional outperformance of the Group in FY22
– for the Group CEO, the proposed number rights under the FY23 awards have declined by 36% and the face value of the proposed award has
declined by 46% relative to FY22 award
– for other executive KMP, the proposed number of rights under the FY23 awards have declined by 20% and the face value of the proposed
awards has declined by 33% relative to FY22 award
+ Adopted significantly more challenging and competitive hurdles for operating EPS, notwithstanding the current, considerable market uncertainties,
which if achieved at the top end of the range, should provide Securityholders with strong performance in both relative and absolute terms. Full
vesting requires almost 60% growth in Operating Profit over four years, relative to the very strong FY22 result.
The Board is always mindful of the focus on overall remuneration levels and spends considerable time each year determining remuneration outcomes.
On the one hand, we recognise the need to attract, retain and incentivise our employees while, on the other hand, meet the range of expectations
of our Securityholders. This is evidenced by the fact that, notwithstanding the outstanding performance achieved in FY22, the Board intends to grant
a significantly reduced number of performance rights to the Group CEO and other executive KMP in FY23 while making the hurdles more challenging.
We look forward to receiving your views and support at our 2022 AGM.
Yours sincerely,
Stephen Johns
Chairman
Phillip Pryke
Chairman, Remuneration Committee
31
GOODMAN GROUP
Directors’ report
Remuneration report – audited (continued)
1. REMUNERATION GOVERNANCE
1.1
The role of the Board and Remuneration Committee
1.2 Key activities of the Remuneration Committee for FY22
Members of the Remuneration Committee for FY22 were:
The Board and the Remuneration Committee is responsible for the
structure of the remuneration of the Group’s employees and for the
specific pay of the Group CEO and other KMP. In setting these, the Board
considers remuneration with a five to ten-year horizon. It takes into
consideration the impact that decisions made over the last three to five
years have had on current performance and how it expects the business
to perform over the next five years and beyond. It is not solely an exercise
in reviewing a single year.
The Board believes the success of Goodman is primarily due to its people
and their ability to execute a global strategy that requires agility, strong
collaboration and an inclusive culture, all of which are key elements
supported by the LTIP.
Member
Phillip Pryke
Stephen Johns
Role
Independent Director and Chairman
of the Remuneration Committee
Independent Director and Chairman
of Goodman Group
Christopher Green Independent Director
(appointed 19 November 2021)
Rebecca McGrath
Penny Winn
Independent Director
(resigned as a member of the Remuneration
Committee on 19 November 2021)
Independent Director
(retired as a Director on 18 November 2021)
The Board:
+ Encourages management to take a long-term strategic view rather
than opportunistic approach to property investment
+ Expect the senior leadership team to accept collective responsibility
for the outcomes
+
Integrates the operational, financial, environmental, and human
strategy to create long-term sustainable returns
+ Focuses on the consistency of cash generation, through the Group’s
operating profit, as the most tangible means of measuring long-term
value creation for Securityholders.
When determining the remuneration levels and outcomes for FY22, the
Remuneration Committee has considered
+ Feedback from Securityholder engagement
+
The significant operational and financial outperformance of the Group
+ The specifics of individual performance.
These have been assessed in the context of the ongoing challenges
presented by COVID-19, the significant volatility and inflationary conditions
affecting the global operating environment and particularly construction
and development. Given the nature of the Group’s global operations the
Remuneration Committee has considered the impact of strong competitor
activity in our sector on attracting and retaining employees.
Refinements to the LTIP this year aim to better balance Securityholder
and employee outcomes while continuing to reinforce Goodman’s long-
term decision making. This is in line with the evolution of the business and
operational strategy, as well as providing competitive remuneration to
attract and retain high quality people.
32
Following significant enhancements to the Remuneration plan in 2021,
the Remuneration Committee has made additional changes for the FY23
awards, in response to investor feedback. Key decisions made and items
considered in the determination of FY22 remuneration, include the following:
+ The quantum of Long Term Incentive (LTI) awards has been reviewed
and in determining these, consideration of both face value and
economic value have been taken into account. Subsequently, there
has been a significant reduction in the number of performance rights
and the face value of proposed FY23 awards:
– for the Group CEO, the number rights has declined by 36% and
the face value of the proposed award has declined by 46% relative
to FY22 awards
– for other executive KMP, the number of rights has declined
by 20% and the face value of the proposed award has declined
by 33% relative to FY22 awards
+ Agreed with the Group CEO (as in prior years) that he would
not participate in the STI award and all his performance-based
remuneration in relation to his FY22 performance will be in the form
of LTI. In general, LTI remains the significant focus of remuneration
awards across the Group
+ Continued the issuance of LTI awards under the ten-year plan for
the Group CEO, executive KMP and other senior executives
+ Continued to make the five-year LTIP plan available to the balance
of employees
+ Further increase in challenge and outperformance required to achieve
hurdles. For the maximum vesting to occur on the operating EPS linked
portion of the plan, a compound annual growth rate (CAGR) of 11% per
annum must be achieved over four years; this equates to almost 60%
growth in Operating Profit in FY26 relative to the very strong FY22 result
+ Additional environmental and sustainability targets have been
included in the FY23 performance right testing conditions.
Changes are also proposed to the Non-Executive Director annual fee
pool to be considered at the 2022 AGM, to facilitate greater use
of committees, keep fees in line with market levels, manage Board
succession and accommodate the potential appointment of additional
Directors’. This is the first change in the Directors’ fee pool since 2006.
ANNUAL REPORT 2022
1.3 Key Management Personnel (KMP)
Member
Executive KMP
Role
Tenure at Goodman
Gregory Goodman
Group Chief Executive Officer
Danny Peeters
Anthony Rozic
Nick Kurtis
Executive Director Corporate
Deputy CEO and CEO North America
Group Head of Equities
Michael O’Sullivan
Group Chief Risk Officer
Nick Vrondas
Group Chief Financial Officer
Non-Executive KMP
Stephen Johns
Chris Green
Mark Johnson
Vanessa Liu
Chairman and Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Rebecca McGrath
Non-Executive Director
Phillip Pryke
Hilary Spann
David Collins
Non-Executive Director
Non-Executive Director
GLHK Non-Executive Director
27 years
16 years 1 month
18 years 1 month
22 years 4 months
19 years 10 months
16 years 2 months
5 years 6 months
3 years 2 months
2 years 1 month
1 month
10 years 3 months
11 years 9 months
3 months
4 years 5 months
2. REMUNERATION STRATEGY
Goodman is one of the largest listed industrial real estate fund managers and developers globally. The Group’s people are largely based outside Australia.
The remuneration structure reflects the requirements in the highly competitive labour markets the Group operates in globally, not just in Australia, and the
objective of aligning multiple regional businesses and operational segments with a global strategy and pay for performance outcomes.
A significant proportion of the value of the Group, reflected in the $17.7 billion premium between the security price of $17.84 at 30 June 2022 and
Goodman’s net tangible assets per security of $8.37, is attributable to the value created across the global platform. Given the active nature of the Group’s
operations, the Board believes that this is almost entirely due to Goodman’s people, the decisions they make and their ability to execute consistently
and at all levels that has positioned the Group to sustainably grow the cash generation measure of the business that is encapsulated by Operating Profit
(as described in the section 3.5.5).
The retention of talent is therefore critical for the long-term success of the Group and is increasingly challenging as opportunistic competitors seek
to recruit high-performing teams around the world. The Group’s remuneration policy is crucial to its ability to have the appropriate human resources
to deliver on the strategy, create the right culture and drive performance for the benefit of all stakeholders.
The Group’s remuneration structure, in particular the focus on equity based reward, has been a key component of its success as an international
organisation. The Board believes aligning all employees 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 quality people in a highly
competitive global environment. It is particularly important considering the challenges created by COVID-19 and global political and capital markets
volatility, as it binds all employees together as owners of the business and is a powerful incentive and driver of operational resilience.
33
Business evolution requires long remuneration time frames
to align outcomes
Goodman’s business has evolved significantly over the past 13 years since
the introduction of the LTIP. Our increased focus on urban infill markets
with their significant increase in complexity has led to longer development
horizons to maximise outcomes which have delivered significant rewards
to investors. In summary:
+ Site acquisition and value add to existing stabilised sites, typically
require five to ten-year (and sometimes longer) time frames to achieve
highest and best use and urban regeneration outcomes
+ The Group’s approach to development considers the lifecycle of an
asset even for new developments which allow further intensification
or change of use at a later time. This sometimes comes at the expense
of short-term performance; however, this approach is consistent with
the Group’s strategic objectives and provides future value realisation
potential, over significant time periods
+
Increased focus on ESG and integration of environmental sustainability
aspirations into the Group’s operational activities requires significant
time periods (often beyond five years) for implementation. Goodman’s
approach to community, environmental sustainability and wellbeing are
long-term aspirations aligned with the financial sustainability objectives.
In the Board’s view, the long-term nature of the structural trends impacting
the sector, the Group’s approach to real estate investment in relation to
this, and investor feedback, supports continuation of the LTIP structure.
The 10 year plan for the Group CEO, other executive KMP and other
senior executives in the organisation, will continue to influence decision
making and closely align with the time periods required to deliver superior
operational results on a sustainable basis. It also provides sufficient
time to implement key ESG initiatives and achieve the Group’s targets,
particularly in relation to longer-dated environmental and sustainability
objectives, in a manner that creates alignment with the outcomes for
Securityholders. The five-year LTIP is longer than most in the S&P/ASX
100 and remains in place for all eligible employees who do not participate
in the ten-year plan but will include hurdles aligned with the ten-year plan.
GOODMAN GROUP
Directors’ report
Remuneration report – audited (continued)
2.1
Key remuneration principles
Continuing alignment of remuneration in line with Group strategy,
structural changes and ESG aspirations
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).
The Group’s capital and resource allocations shift over time in response
to variable market circumstances. The effect of these strategies take
time to manifest, requiring rewards to be measured over longer periods.
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.
There are several key principles of remuneration that the Board considers
to be most relevant:
+ Focus on LTI as the predominant source of pay for performance
for senior members and a material factor for all employees of the
Group. All employees are eligible to receive LTI grants as a material
component of remuneration and are tested using challenging hurdles
without encouraging inappropriate risk (see section 3.5.4), 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 is closely aligned with cash profits)
as the primary testing measure for LTI awards (see section 3.8.5)
– Goodman’s remuneration structure results in a significantly higher
proportion of pay in the form of equity-based performance awards
(87% for the Group CEO versus around 45% for S&P/ASX20 and
S&P/ASX100 CEO’s). As a consequence, despite only 25% of LTI
testing against relative total securityholder return (TSR), employees
have significant alignment and exposure to TSR outcomes versus
typical remuneration structures. In addition, Operating Profit
which determines operating EPS is a cash based measure which
management globally can have a tangible influence on. Importantly
operating EPS is the underlying value driver for Goodman and will
ultimately align with TSR outcomes over the longer term
+ Securityholders are the beneficiaries of the Group-wide outcomes.
Collaboration is required to achieve Group-wide targets across
regions and business units. Remuneration should engender a
collective responsibility for the consolidated outcomes which can
facilitate decision making that leads to the optimal allocation of
resources between locations and activity types to pursue the most
appropriate opportunities at different points in time
+ A culture of ownership, inclusion and alignment, where all employees
experience investment returns aligned with Securityholders creates
stability which reduces turnover
+ Balancing reward and retention with long-term cost to Securityholders
at respective levels of performance.
34
ANNUAL REPORT 2022
2.2
Objectives of the remuneration strategy
Attract
Reward
Long-term alignment of our people and Securityholders
Remuneration structure
Performance conditions
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.
Assessment includes four
key components:
+ Meeting Goodman
behavioural expectations
per the Code of Conduct
+ Achieving operating EPS target
+ Individual financial and
operational assessment
+ Assessment against environmental
and sustainability objectives.
75% tested based on achieving
the cash-based operating EPS
hurdle range
25% tested based on relative TSR
against the S&P/ASX 100 constituents.
The benchmark index aligns with
a significant portion of investors’
benchmarks relevant to their holdings
and provides closest alignment with
their performance
Environmental and sustainability
targets (set by the Board) over
the LTIP testing period with penalty
to vesting outcomes of up to 20%
of rights satisfying the operating
EPS hurdle for material
underperformance against targets.
Fixed remuneration
Low fixed costs, with the
focus on “at-risk” equity.
STI remuneration is a 100%
at-risk performance base
award tied to operational
performance metrics over the
past 12 months. However,
the Group CEO forgoes
STI in favour of LTI.
Similarly, other executive KMP
received between 11% to 21% of
total remuneration in STI.
For the other executive KMP,
payments will be made in
two instalments, the first in
September after the financial
year end and the second
12 months later.
LTI is “at-risk” remuneration
that rewards long-term
sustained performance.
New awards will be granted
in FY23 in relation to FY22
performance achievements
assessment of potential future
contributions and relevant
alignment of KMP.
Ten-year plan awards to Group
CEO, executive KMP and
senior executives tested over
four years and vesting in equal
tranches annually from the
end of year four to the end of
year ten.
Five-year plan awards to
remaining employees tested
over three years and vesting
in equal tranches annually
from the end of year 3 to the
end of year 5.
)
n
o
i
t
a
r
e
n
u
m
e
r
l
a
t
o
t
O
E
C
f
o
%
0
9
y
l
l
i
a
c
p
y
t
(
n
o
i
t
a
r
e
n
u
m
e
r
k
s
i
r
-
t
A
Real estate investment management and development are cyclical, so fixed
employee costs are kept relatively low, below median and mean for comparable
companies. CEO fixed remuneration has not changed for 16 years.
STI is an at-risk component, rewarding financial and non-financial performance
against objectives of the individual and the Group. Awards in FY22 represent 87%
of the maximum for executive KMP (excluding Group CEO).
The performance of individuals is assessed through a performance appraisal
process based on contribution to strategic, financial, operational and ESG
objectives, while also reflecting behavioural expectations (see section 4.4.).
Financial performance is the primary measure in determining the maximum level
of STI for the individual; however, this can be penalised if behavioural standards
or ESG targets are not met or breached (up to 100% of STI for certain measures).
These factors together encourage not only the operating EPS targets being met,
but also that that the method in which they are met matches appropriate risk and
governance settings. Given the complex nature of the Group’s global operations,
individual financial metrics are reflected in the operating EPS. This structure is
simple and transparent and aligns management with the operating EPS growth
expectations of Securityholders. Detailed financial metrics for the business are
additionally disclosed in reporting to the market.
STI uses the operating EPS hurdle that forms part of the formal financial guidance
to the market. It is not directly linked to LTI operating EPS targets as LTIP targets
are set over four years and represent the longer term aspirations of the business.
The weighting to LTI is believed to be the most effective way of rewarding
sustained performance and retaining talent while maintaining alignment with
Securityholders’ experience.
Hurdles are set to be competitive relative to reference groups, challenging for
management with a significant stretch component but without encouraging
inordinate risk in execution (see sections 3.5.4 and 3.5.5) relative to external and
internal reference points.
TSR provides an effective check against increasing risk or unsustainable practices
within the Group. The price to earnings multiple attributable to securities will reflect
the risk in achieving operating EPS targets, which impacts the likelihood of vesting
and the ultimate value upon vesting.
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 on remuneration is significantly greater than its
25% weighting. The combination of 25% TSR testing and 70-90% equity based
awards for executive KMP, provides significant overall exposure to TSR based on
the Group’s remuneration structure is high.
The total number of performance rights outstanding under the LTIP at 30 June
2022 equates to 3.8% of the Group’s issued securities. The maximum number of
performance rights under the LTIP is limited to 5% of the Group’s issued securities.
Equity issuance to all employees encourages a collaborative approach and
broader distribution of remuneration across the entire workforce when the Group
is performing.
35
GOODMAN GROUP
Directors’ report
Remuneration report – audited (continued)
2.3 Remuneration mix and alignment across the Group
FY22 vested remuneration outcome
The Board believes that the alignment between pay and long-term
performance is evidenced by the significant proportion of the total
remuneration that is at risk for the Group CEO, the other executive
KMP and employees throughout the organisation. In respect of the
Group CEO, all of his at risk remuneration is in the form of LTI.
This is demonstrated in the charts below that consider the vested
remuneration received during FY22. Vested remuneration represents
the value that is received during FY22. It includes fixed base pay, STI
and the value of performance rights that vested during FY22 (from prior
grants) using the closing Goodman security price on the day of vesting.
The Board believes that this demonstrates the alignment of the remuneration
outcomes for the Group CEO with the outcomes for Securityholders, who
have experienced strong performance over a significant period alongside
the Group CEO. Had the Securityholder returns been lower, the level of at
risk remuneration would have been lower (due to lower vesting outcomes
and lower value of vesting performance rights) and fixed remuneration
would have made up a greater proportion of the total vested remuneration
in FY22 for all employees, but especially for the Group CEO and the other
executive KMP.
Group CEO FY22 remuneration
3.2%
SQUARE-FULL LTI SQUARE-FULL Fixed remuneration
Executive KMP (excluding Group CEO)
FY22 remuneration 3 year rolling
5%
96.8%
95%
SQUARE-FULL STI and LTI SQUARE-FULL Fixed remuneration
All employees (excluding Executive KMP)
FY22 remuneration
24.6%
75.4%
SQUARE-FULL STI and LTI SQUARE-FULL Fixed remuneration
36
ANNUAL REPORT 2022
3. EXECUTIVE REMUNERATION FRAMEWORK
3.1 Feedback and response
Securityholder feedback
Response
Strong positive feedback regarding the structure
of the plan, testing and vesting period.
Continued the issuance of LTI awards under the ten-year plan for the Group CEO, other executive
KMP and other senior executives (as detailed in Section 3). This will apply to the intended
grant of performance rights to be made in September 2022 in respect of FY22 performance.
While Securityholders recognised the long-term
nature of LTI awards and many recognize economic
value approach, the majority use face value for
determining outcomes.
A significant emphasis has been placed on face value comparison while economic value
assessment has been reviewed. This has seen a significant reduction in face value of awards.
Face value of the proposed FY23 performance rights awards for the Group CEO has declined
46% on FY22 and 33% for executive KMP (excluding Group CEO).
Hurdles are set to be competitive and challenging in
line with long term performance and the risk settings
appropriate for the Group. However, feedback from
some securityholders indicated that additional
‘stretch’ is desirable in the targets based on market
expectations and the Groups strong performance
in recent years, resulting in high vesting outcomes.
Preference for Long Term ESG targets.
LTI hurdles have been reviewed and set such that they remain competitive relative to peers
and challenging for management. The increase in the Upper level of cumulative operating
EPS growth to 11% per annum is in a more uncertain and volatile geopolitical and commercial
environment. Noting that for the CEO LTI forms most of the remuneration, so performance
below threshold will result in 0% vesting and only base salary.
Hurdles for the proposed grants are based off a significant year of outperformance in FY22
(24% operating EPS growth) and if achieved reflects almost 60% Operating Profit growth
over the coming four years. This compares very favourably to the average for the peer groups
and relative to what the Board believes are reasonable long term “Targets” with considerable
additional required stretch.
ESG targets will remain as an additional test for operating EPS tranches of Performance
Rights, allowing for up to 20% reduction in vesting outcomes if targets are materially
missed. Additional environmental and sustainability targets have been included in the
testing conditions for FY23 awards. Progress against targets is reviewed annually.
Preference for long-term at-risk remuneration.
Securityholders prefer in principle lower fixed
and STI remuneration and more at risk LTI.
Agreed with the Group CEO (as in prior years) that he would not participate in the STI award
and all his performance based remuneration in relation to his FY22 performance will be in the
form of LTI.
37
GOODMAN GROUP
Directors’ report
Remuneration report – audited (continued)
3.2 Remuneration enhancements for executive KMP
Key testing criteria and modifications made to the Long Term Incentive plan
EPS performance testing Ten-year plan FY22
Change
Ten-Year plan FY23
Comment/rationale
Threshold
6% (CAGR) in operating
EPS.
No
6% CAGR in operating
EPS.
Vesting at Threshold
25%
No
25%
Target
Not previously disclosed.
Yes
8-9% CAGR in operating
EPS.
Vesting at Target
N/a
55
%-70%
Upper level
10% CAGR in operating
EPS.
Yes
11% CAGR in operating
EPS.
Performance at the threshold hurdle level (CAGR in operating EPS of
6% for the 4 years to FY26) for performance rights vesting to start has
been set such that it requires performance in excess of that expected
from relevant peer groups S&P/ASX100 (0%pa) and S&P/ASX200 REIT’s
(4.6%pa) based on “Visible Alpha” and broker research) but would only
result in 25% vesting and subsequent remuneration outcomes that are
expected to be in line with the median for the peers.
Performance at Target hurdle level (CAGR in operating EPS of 8-9%
for the 4 years to FY26 pa) is in line with aspirations determined by the
Board to be reasonable (which already include a significant number of
assumptions concerning growth in activity levels, funding needs and
market conditions remaining buoyant) and is in excess of broker research
estimates1 for the Group (7.8% pa) and materially in excess of peers.
Performance at the Upper level (CAGR in operating EPS of 11% pa for the 4
years to FY26) would require outcomes significantly above Target (2%-3%
pa) significantly higher than broker research estimates (+3% pa). The
upper level of the testing range represents an additional approximately
$200 million of additional operating profit to be generated in FY26 relative
to the Target and consensus views.
Vesting at Upper level
100%
No
100%
TSR performance hurdle Ten-Year plan FY22
Change
Ten-Year plan FY23
Comment/rationale
Testing criteria
TSR against ASX 100.
0% at 50th percentile
25% at 51st percentile
Straight line vesting
percentage to
90th percentile
where 100% vests.
No
No
TSR against ASX 100.
Peer group for relative TSR is to remain the S&P/ASX 100, which correlates
with most investor benchmarks relevant to Securityholders.
Outperformance required before any portion is vested.
0% at 50th percentile
25% at 51st percentile
Straight line vesting
percentage to
90th percentile
where 100% vests.
Ten-Year plan FY22
Change
Ten-Year plan FY23
Comment/rationale
Targets set by the Board
are tested at the end of
year four.
Penalty applies to the
number of performance
rights that have
satisfied the operating
EPS hurdle with 20%
maximum reduction
in the event of material
underperformance
against targets.
Yes
(additional
Hurdles)
Targets set by the Board
are tested annually and
at the end of year four.
Penalty applies to the
number of performance
rights that have satisfied
the operating EPS
hurdle with 20%
maximum reduction in
the event of material
underperformance
against targets.
Given environmental and sustainability initiatives are integrated into
the operations of the business, the penalty applies to the number of
performance rights that have satisfied the operating EPS hurdle with 20%
maximum reduction in the event of material underperformance against
targets.
Testing thresholds
Environmental and
sustainability hurdles
Environmental
and sustainability
performance
38
ANNUAL REPORT 2022
The chart below illustrates the components of KMP remuneration in relation to FY22 performance using:
+ Current fixed base pay
+ STI award (where applicable)
+ LTI award value using 100% of the intended grant to be made in September 2022 based on the face value at 30 June 2022 as detailed in section 3.4.
REMUNERATION
Fixed remuneration (%)
STI (%) LTI (%)
Gregory Goodman
Danny Peeters
Anthony Rozic
Nick Kurtis
Michael O’Sullivan
Nick Vrondas
14
15
14
10
10
11
17
20
14
12
15
86
68
66
76
78
74
Note: This analysis is different to both the statutory presentation of remuneration and the vested remuneration, which are referred to elsewhere in the remuneration report.
Under the ten-year plan and with the above remuneration structure:
+
The Group CEO would not receive any performance-based reward in respect of his performance for FY22 if the Group does not meet its minimum
performance hurdles under the LTIP over the next four years (measured at 30 June 2026)
+ The ultimate value of the award will be subject to Goodman’s security price performance and will only be fully realised over the ten years to
September 2032.
39
GOODMAN GROUP
Directors’ report
Remuneration report – audited (continued)
3.3 When is remuneration earned and received?
The chart below illustrates the timing of receipt of the remuneration components for executive KMP. Performance goals under the ten-year plan must
be achieved over a period of four years to qualify for performance-based pay. Vesting then occurs in seven equal tranches from years four to ten. There
is no certainty of vesting and the final cash outcome is dependent on the movement in the security price over the next ten years.
Fixed
remuneration
100% of fixed pay
awarded in cash
STI
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
and subject to no material underperformance
against environmental and sustainability targets.
Performance measured at the end of year 4.
25% of award based on a relative TSR hurdle.
Performance measured at the end of year 4
14% of LTI award (subject to service/
performance requirements) vests
shortly after the end of year 4
14% of LTI award (subject to service / performance
requirements) vests shortly after the end of year 5
LTI
Performance period
(1 year)
14% of LTI award (subject to service / performance requirements)
vests shortly after the end of year 6
14% of LTI award (subject to service / performance requirements)
vests shortly after the end of year 7
14% of LTI award (subject to service / performance requirements)
vests shortly after the end of year 8
14% of LTI award (subject to service / performance requirements)
vests shortly after the end of year 9
14% of LTI award (subject to service / performance requirements)
vests shortly after the end of year 10
Current year
Year 1
Year 2
Year 3
Year 4
Year 5
Year 6
Year 7
Year 8
Year 9
Year 10
n
o
i
t
a
r
e
n
u
m
e
r
k
s
i
r
t
A
40
ANNUAL REPORT 2022
3.4 Short-term incentive
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?
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.
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).
What is the maximum
award participants
may earn?
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.
How is the
STI earned?
How is the
individual STI
award determined?
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 and appropriate.
STI for all staff is subject to: (1) meeting behavioural expectations under the Group Code of Conduct; (2) achieving operating EPS (based on
the annual target for the relevant year which is disclosed to the market at the beginning of the year in the form of “guidance” (3) financial and
operational assessment; and (4) assessment against environmental and sustainability targets.
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. Overall Group
financial performance relative to targets is the primary assessment, overlaid with required achievement against environmental and sustainability
objectives and adherence to the Group’s core values. The Remuneration 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.
Consideration is also given to the total remuneration package with a view to retaining and appropriately aligning and motivating employees.
Is there
malus/clawback?
Is STI deferred
into equity?
What happens to STI
upon termination?
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.
No. A much greater portion of remuneration for executive KMP is in the form of LTI (equity) than arguably 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 executive 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) or resign from the organisation. The Board has discretion to pay deferred STI in
exceptional circumstances, where employees leave the Group, with good leaver status, due to certain personal circumstances or due to
permanent disablement or death.
3.5 Long-term incentive
The LTIP is an equity plan where rewards are at risk and dependent on performance and time. 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 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. The threshold target with respect to operating EPS (where only 25% of performance rights
vest) is significantly ahead of estimates for the S&P/ASX 100 and S&P/ASX200 REIT sector
+
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.
+ Performance rights represent a small portion of the Group equity and a small percentage of the value created for Securityholders if they vest
The key terms of both plans are set out overleaf.
41
GOODMAN GROUP
Directors’ report
Remuneration report – audited (continued)
3.5.1 FY23 LTI awards (five and ten-year plans)
Questions in relation to grants to be made in FY23
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 either the five year or the ten-year plans. Executive KMP and senior
executives participate in the ten-year plan.
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, net assets or voting 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. The total five year and ten-year performance rights outstanding under the LTIP are capped at 5% of issued capital
with vesting of approximately 1% pa, 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
in which the Group operates and the value of the team in the local and global marketplace, as appropriate.
How is the number
of rights determined?
The Board’s sets the quantum based on a number of factors described in sections 3.7.1 and 3.7.2. The number of rights is then determined
by dividing the LTI award amount by face value per right, as determined by the Board.
What are the
performance
measures?
Behaviour in accordance with Goodman’s core values is an absolute requirement for the granting of performance rights.
The Board believes that the commercial decisions management 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 Group-wide performance of the operations (see section 3.5.5).
The hurdles are set to be competitive and challenging relative to external and internal historical and prospective reference points (see section 3.5.4).
TSR provides an effective check against increasing risk practices within the Group in that 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.
The proposed FY23 LTI awards, will incorporate environmental and sustainability targets, in addition to the operating EPS and relative TSR
hurdles. Targets set by the Board will be tested annually and at the end of the LTIP testing period. A penalty can apply to the number of
performance rights that have satisfied the operating EPS hurdle, with 20% maximum reduction if material underperformance against the
environmental and sustainability targets occur.
What is the weighting?
75% operating EPS hurdle
25% relative TSR hurdle
What is the
performance period?
Ten-Year plan: both operating EPS and relative TSR performance are tested over four financial years starting from 1 July in the year the grant was
made. Operating EPS growth is assessed in the fourth year relative to the year preceding the year of the grant. Environmental and sustainability
targets are reviewed annually and tested at the end of year four.
Five year plan: 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. Environmental and sustainability
targets are reviewed annually and tested at the end of year three.
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?
Executive KMP
equity holding
Ten-Year plan: Subject to meeting performance hurdles, vesting occurs in equal tranches shortly after the end of years 4 – 10, provided
participants remain employed by the Group.
Five year plan: Subject to meeting performance hurdles, vesting occurs in equal tranches shortly after the end of years 3 – 5, 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 in Special Circumstances.
Performance rights lapse upon the employee leaving Goodman unless in Special Circumstances (primarily Death, Total and Permanent
Disablement, Redundancy and Retirement in the normal course) in which case they are not subject to the employment requirement and vest
subject to performance hurdles being met and the usual timetable.
Performance rights have no Securityholder rights prior to vesting (e.g. distributions, voting, rights issue participation). They would be subject
to reconstruction in instances of corporate events such as stock splits or stock consolidations.
Executive KMP are required to hold 100% of the value of their fixed remuneration in Goodman securities, determined at time of purchase.
In addition, Goodman’s remuneration structure includes significant emphasis on performance-based remuneration in equity and the overall
exposure of executive KMP to Goodman Group securities extends significantly beyond this requirement principally through participation in
the LTIP.
42
ANNUAL REPORT 2022
Relative TSR tested (25% of grant)
TSR awards are subject to achievement of cumulative. TSR relative to the S&P/ASX 100
over a four year period:
– 25% of awards vest for performance at the 51st percentile.
– Awards vest on a sliding scale between 25% and 100% for performance between
the 51st and the 90th percentile.
– 100% of awards vest for performance at the 90th percentile or above.
Relative TSR tested (25% of grant)
TSR awards are subject to achievement of cumulative TSR relative to the S&P/ASX 100
over a three year period:
– 25% of awards vest for performance at the 51st percentile.
– Awards vest on a sliding scale between 25% and 100% for performance between
the 51st and the 90th percentile.
– 100% of awards vest for performance at the 90th percentile or above.
What are the vesting
conditions for FY23
ten-year plan grants?
What are the vesting
conditions for FY23
five year plan grants?
Operating EPS tested (75% of grant)
The Board has set an operating EPS performance
hurdle of growing operating EPS from the FY22 result
of 81.3 cents to between 102.7 cents (Threshold level)
and 123.4 cents (Upper level) in FY26. 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%pa and 11%pa CAGR
in operating EPS or approximately 26% to 52%
cumulatively over the four year testing period.
In addition, a penalty may apply to the number of
performance rights that have satisfied the operating
EPS hurdle if environmental and sustainability targets
are not met. These are reviewed by the Board annually
and at the end of the testing period with 20% maximum
reduction in the number of rights vesting under the
operating EPS tranches, in the event of material
underperformance against targets at final testing year.
Operating EPS tested (75% of grant)
The Board has set an operating EPS performance
hurdle of growing operating EPS from the FY22 result
of 81.3 cents to between 96.9 cents (Threshold level)
and 111.2 cents (Upper level) in FY25. 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% pa and 11% CAGR in operating
EPS or approximately 19% to 37% cumulatively over
the three year testing period.
In addition, a penalty may apply to the number of
performance rights that have satisfied the operating
EPS hurdle if environmental and sustainability targets
are not met. These are reviewed by the Board annually
and at the end of the testing period with 20% maximum
reduction in the number of rights vesting under the
operating EPS tranches, in the event of material
underperformance against targets at final testing year.
Can the hurdles
be adjusted?
No (subject to ASX Listing Rule adjustments).
No.
43
GOODMAN GROUP
Directors’ report
Remuneration report – audited (continued)
3.5.2 FY22 LTI awards
Questions specific to grants made in FY22
What happens to
LTIP awards upon
termination?
Performance rights lapse upon the employee leaving Goodman unless in Special Circumstances (primarily Death, TPD, Redundancy and
Retirement in the normal course) in which case they are not subject to the employment requirement and vest subject to performance hurdles
being met and the usual timetable.
What are the vesting
conditions for FY22
ten-year plan grants?
Operating EPS tested (75% of grant)
The Board has set an operating EPS performance hurdle of
growing operating EPS from the FY21 result of 65.6 cents to between
82.8 cents (Threshold level) and 96.0 cents (Upper level) in FY25.
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 10% CAGR in operating EPS or approximately 26% to 46%
cumulatively over the four year testing period.
In addition, a penalty may apply to the number of performance rights
that have satisfied the operating EPS hurdle if environmental and
sustainability targets are not met. These are reviewed by the Board
annually and at the end of the testing period with 20% maximum
reduction in the number of rights vesting under the operating EPS
tranches, in the event of material underperformance against targets
at final testing year.
Relative TSR tested (25% of grant)
TSR awards are subject to achievement of cumulative. TSR relative
to the S&P/ASX 100 over a four year period:
– 25% of awards vest for performance at the 51st percentile.
– Awards vest on a sliding scale between 25% and 100% for
performance between the 51st and the 90th percentile.
– 100% of awards vest for performance at the 90th percentile
or above.
What are the vesting
conditions for FY22
five year plan grants?
Operating EPS tested (75% of grant)
The Board has set an operating EPS performance hurdle of growing
operating EPS from the FY21 result of 65.6 cents to between 78.1
cents (Threshold level) and 87.3 cents (Upper level) in FY24. 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 10% CAGR
in operating EPS or approximately 19% to 33% cumulatively over the
three year testing period.
Relative TSR tested (25% of grant)
TSR awards are subject to achievement of cumulative TSR relative
to the S&P/ASX 100 over a three year period:
– 25% of awards vest for performance at the 51st percentile.
– Awards vest on a sliding scale between 25% and 100% for
performance between the 51st and the 90th percentile.
– 100% of awards vest for performance at the 90th percentile
or above.
3.5.3 FY21 LTI awards
Questions specific to the grants made in FY21
What are the
vesting conditions
for FY21 grants?
Operating EPS tested (75% of grant)
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% CAGR
in operating EPS or approximately 19% to 30% cumulatively over the
three year testing period.
Relative TSR tested (25% of grant)
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.
44
ANNUAL REPORT 2022
3.5.4 Setting operating EPS hurdles for proposed ten-year plan awards to
the Group CEO, other executive KMP and other senior executives
The Board believes that the hurdles are competitive and challenging for
the following reasons:
The operating EPS target range under the ten-year plan is only for the
purpose of testing criteria for vesting of performance rights. The range
does not constitute earnings guidance for the Group.
The hurdles are set in line with the “pay for performance” culture and the
desire for them to be both challenging and competitive while maintaining
the integrity of the business strategy and risk management objectives
in a sustainable manner.
More challenging hurdles have been set for the FY23 performance rights
awards when compared to recent years. The Board has set an operating
EPS performance hurdle for operating EPS growth relative to the FY22
result of 81.3 cents of between 102.7 cents (Threshold level) and 123.4 cents
(Upper Level) in FY26. 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 11% CAGR in operating EPS or approximately
26% to 52% cumulative growth over the four year testing period.
The range has been set with particular reference to:
+ The significant proportion of the Group’s revenue over the next four
years, being at risk in the sense that it is not currently contracted
and subject to a wide number of variables, particularly in regard to
development activities and performance fees
+ The range of potential real estate opportunities for the Group
globally, given the Group’s risk parameters and concentrated locations
of operation
history is not a reflection of future earnings
+
Increased volatility across the global economic and political
environment which are manifesting in higher cost inflation, slower real
GDP growth rates and higher interest rates
+ The ongoing potential for disruption to business activity resulting
from COVID-19.
Consistent with the Board’s aim to set hurdles which are both challenging
for management and competitive against peers, it is believed that
achievement at or above the top end of the range will represent a strong
performance in both relative and absolute terms. For the Upper Level
vesting to occur on the Operating EPS linked portion of the plan, almost
60% growth in operating profit relative to the very strong FY22 result
needs to be achieved over the next four years.
+ The long-run historical performance of the Group, noting that previous
Base year Profit
+ Goodman’s operating EPS grew strongly over FY20, FY21 and FY22,
despite the impact of COVID over the period (no hurdles were amended
to adjust for COVID during this period). This has resulted in a significantly
higher base year from which to measure operating EPS growth
compared with peer groups. For the 3 year period from FY19-FY22:
– The Group has grown operating EPS by 56%
– The average growth for the S&P/ASX 100 is approximately 24%
– The S&P/ASX 200 REIT’s EPS declined by an average
of approximately 14%
+ The strong growth in earnings in FY22, combined with the higher
hurdles for Upper Level vesting means that a significant acceleration
of growth in operating profit is required to achieve full vesting (relative
to that embedded within the FY22 grants). By way of comparison, an
extrapolation of the growth rates contained within the FY22 grants to
FY26 and applying the previous Upper Level hurdle rate would have
resulted in an operating profit benchmark that is over $300 million
lower than that which will now be applicable for FY26 under the new
hurdles to be applied to the FY23 grant (see table below)
Operating Profit comparison of vesting conditions
At grant
date of FY22
Awards
$M
At grant
date of FY23
Awards
$M
1,358
1,714
1,528
1,929
1,988
2,320
331
FY26 interpolated profit
@ Threshold (6%pa)
FY26 interpolated profit @ the Upper
Level (10% at FY22, 11% at FY23)
Additional profit required due
to higher base year and hurdles
+ Performance at “Target” hurdle level (CAGR in operating EPS of
8-9% for the 4 years to FY26 pa) is in line with aspirational objectives
the Board believes are appropriate (which take into account the risk
management constraints of the Group the Board believes appropriate
for the business, given the context of the global economic and political
environment, higher interest rates, inflation, cost of capital and risk
settings). It is contingent upon increased activity levels and market
conditions remaining favourable. Importantly the Target hurdles are
in excess of peers (see below) and broker research estimates for the
Group (CAGR of approximately 8%)
45
GOODMAN GROUP
Directors’ report
Remuneration report – audited (continued)
+
Performance at the threshold hurdle level (CAGR in operating EPS of
6% pa for the 4 years to FY26) for performance rights vesting to start
has been set such that it requires performance in excess of relevant
peer groups (S&P/ASX 100 (current market consensus expectations
average 0%pa) and S&P/ASX200 REIT’s (current market consensus
expectations average 4% per annum) but would only result in 25%
vesting. Under this scenario it is estimated that the remuneration
outcomes will be well below the median for the above peer groups and
the ASX100
+ Performance at the Upper Level hurdle (CAGR in operating EPS of 11%
for the four years to FY26) would require outcomes significantly ahead
of internal targets and significantly (3% per annum) higher than market
consensus expectations (this equates to an additional circa $200
million in operating profit in FY26 compared to the average broker
research consensus)
+ The hurdles reflect approximately 50% relative earnings growth
outperformance compared to estimates for the S&P/ASX100 and
require the Group to absorb the risk associated with the significant
increase in volatility in the global operating environment, interest rates
and inflation.
The Board believes the higher FY22 hurdle is significantly more
challenging given the current economic environment. The hurdles are
set for the entire period of the plan 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 given the ongoing and unknown impacts of
COVID-19, geo-political tensions and impacts on supply chains, and global
economic activity.
In addition, the hurdles are set with the desire to achieve a sustainable
long-term growth rate that is competitive with the market on a risk
adjusted basis. This is reflected in the relatively low gearing of the Group
and its other risk settings. Taking into account the difference in gearing,
the FY23 hurdles are relatively high compared to peers.
3.5.5 Operating EPS – long-term cash flow alignment with
vesting outcomes
The Group presents statutory profit in accordance with Australian
Accounting Standards, including all required 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 for Securityholders over time. That is the
intent of the Group’s Operating Profit definition, and it is one of the key
measures used to drive the business strategy that is communicated to
employees to execute. This is also why the Board has used operating EPS
as one of the principal targets in its awards of both STI and LTI.
Calculation of operating EPS
Operating EPS has been calculated and applied consistently since being
adopted in 2005.
+ Operating profit intentionally excludes non-cash measures. Previously,
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 underlying long-term earnings
+ As required under the accounting standards, the share-based payments
(SBP) expense in the Group’s statutory income statement reflects the
amortisation of the aggregated fair value applicable to the outstanding
performance rights. Given the volatility inherent in the accounting
valuation of the performance rights, the SBP expense is excluded
from operating profit, like other non-cash items (such as revaluations).
Instead, the Board believes the cost of the plan, which arises from the
future dilution through the issuance of securities under the LTIP, is most
appropriately reflected by including all vested and tested performance
rights in the denominator used for determining operating EPS. This is not
subject to accounting estimation and is a more reliable measure
+ The operating EPS at each reporting date is calculated using the
weighted average number of securities, which includes:
– all securities that have already vested
– rights that have been tested and assessed as having met the hurdles
but have not yet vested
LTI hurdle period
(estimated)
S&P/ASX 1002
S&P/ASX 200 REITs2
Broker Consensus
for GMG3
Threshold level
Target Level
Upper level
Ten-Year plan
operating
EPS hurdles
(cents)
CAGR
in EPS1
FY23 –
FY26
Ten-Year plan
Cumulative
growth in EPS1
FY23 to FY26
-0.1%
4.6%
7.8%
102.7
6%
-0.2%
19.7%
35.2%
26.4%
110.6 – 114.8
8% – 9%
36% – 41%
123.4
11%
51.8%
1. Operating EPS for Goodman Group.
2. Broker Estimates
3. Visible Alpha.
46
ANNUAL REPORT 2022
The inclusion of these unvested performance rights in the operating
EPS calculation is a conservative treatment as:
3.6 Non-financial measures
3.6.1 Types of non-financial measures
+ The financial impact of the performance rights occurs only when
securities are issued through the dilution to net assets at the time of
issuance and the dilution to future operating EPS
+ Not all performance rights vest. This can only occur if testing criteria
are met and by extension, the Group’s performance has achieved or
exceeded performance criteria, which doesn’t align with SBP expense
+ Following successful testing at years three or four (for the five year
plan and ten-year plan respectively), performance rights still have no
entitlement to income (distributions) or net assets nor do they have
any of the other usual Securityholder rights until they vest, which may
be up to six years later (under the ten-year plan).
Therefore, in the Board’s view realised cash profit as represented by
diluted operating EPS is the most reliable measure of value creation for
Securityholders and continues to be an appropriate means by which to
assess employee performance. It is also consistent with the predominant
method of valuation of Goodman by the market.
Use of cash settled “Phantom” performance rights
In certain jurisdictions, it is impractical to issue performance rights which
vest into Goodman securities. In these instances, cash settled Phantom
performance rights are issued, with the same economic outcome on
vesting. From time to time, the Group may issue new securities into
the market to fund the settlement of those rights. This results in the
same outcome to Securityholders as if the Phantoms had been settled
in Goodman securities because it results in the situation where the
dilutionary impact to operating EPS is consistent with the equity settled
performance rights. As in recent years, the Board’s current intention is
to issue securities to fund the cash requirements to settle the Phantoms.
This results in the effective funding of the LTIP having no cash impact for
the Group and as a consequence the share based payments expense
remains effectively a non-cash item in the context of the definition of
operating profit.
Goodman continues to increase accountability and transparency across
a range of non-financial measures which are important to the Group
culture, its stakeholders and the world more broadly. These are integral
components to the operations of the organisation, the health and wellbeing
of the Group’s people and the communities in which Goodman operates.
These values and aspirations encompass a wide range of areas including:
+ Environmental considerations for developments and building operations
+ Energy procurement including renewable targets
+ Group emissions and embodied emissions
+ Health and wellbeing of Goodman’s people and communities
+ Good corporate and social governance including diversity and
inclusion in the workforce
+ Behaviour in line with Goodman’s Code of Conduct.
All of these aspirations are integrated into Goodman’s culture and
business operations and the Group’s financial results are achieved while
also implementing and performing to these standards.
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. 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 our customers and other team members. 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 our policies
+ Respect confidentiality and do not misuse information
+ Manage conflicts of interest
+ Strive to be a great team member.
47
GOODMAN GROUP
Directors’ report
Remuneration report – audited (continued)
Individuals’ behaviour and adherence to the Code of Conduct, governance, implementation of diversity principles and social programs are assessed
as a gate to STI and LTI awards. Breaches can also result in forfeiture of LTI or potentially more severe consequences depending on severity.
Consequences of breaches of Code of Conduct in FY22
Conduct and or behavioural Issues
Consequences
Termination, forfeiture of STI, forfeiture of LTI
In respect of the FY22 STI awards and the intended LTI awards that will be made in September 2022 (in respect of FY22 performance), key environmental
and sustainability targets will also be assessed based on the individuals’ areas of influence and contributions as part of overall assessment.
3.6.2 Integration of non-financial measures into STI
STI process
1st Hurdle
2nd Hurdle
Financial, and operational assessments
(including environmental objectives)
3.6.3 Integration of non-financial measures into LTI
Conduct, Governance, Social and Diversity
Operating EPS
Individual assessment
Impact
Gate
Gate
0% – 100%
The Board also believes that ownership through the LTIP embeds a culture of inclusion and sense of place in the organisation and that this has been
strongly reflected in the Group’s performance over many years and particularly through COVID-19. Behaviour and adherence to the Group’s Code
of Conduct have always been a prerequisite to entitlement to vested LTI and since 2021, additional hurdles for vesting, related to our environmental
and sustainability targets have been incorporated into intended awards.
+ The Board will review progress on targets annually and set review long term targets each year as they relate to the new testing period
+ Environmental and sustainability objectives and their execution are integrated into the operations of the Group, particularly for development projects.
For this reason, the additional penalty criteria will apply to the operating EPS tested performance rights. This aligns operational targets which
are within the control of senior executives and employees at all levels and therefore have the most logical connection to operational performance
+ Targets set by Board will be tested formally at the end of the testing period (year four for the ten-year plan)
+ The penalty applies to the number of performance rights that have satisfied the operating EPS hurdle with 20% maximum reduction in the event
of material underperformance against targets
+ Targets will be reported each year in the remuneration report.
LTI Process – three and four year testing period
Conduct and behaviour
Gate: 0% – 100%
Operating EPS and relative TSR
0% – 100%
Impact
Environmental
and sustainability
The penalty applies to the number of performance rights that have satisfied
the operating EPS hurdle with 20% maximum reduction in the event of material
underperformance against targets
1st Hurdle
2nd hurdle
Group
assessment
48
ANNUAL REPORT 2022
3.7 Considerations for setting of awards
The Board is focused on creating a remuneration structure that supports the Group’s strategy and is aligned with outcomes for Securityholders
and then on determining an appropriate quantum of remuneration under that structure. In assessing the Group CEO and other executive KMP
remuneration for FY22, the Board has given consideration to:
+ Feedback from investor engagement following the disappointing level of support at the November 2021 AGM for remuneration related matters
+ Maintaining the general structure and principles of the Group’s remuneration strategy
+ The Group’s relative performance against operational targets FY22
+ The Group’s consistent track record over the past ten years that has also positioned the business for the future
+ Global market conditions for human capital in the sector
+ Balancing employee and Securityholder outcomes
+ Hurdles and testing criteria for performance rights.
The Board has assessed outcomes for Securityholders, based on the testing criteria under the five and ten-year plan and that the pay for performance
alignment is with all Goodman employees (all permanent employees, 1020 people, are eligible to participate in the LTIP). Based on the proposed
hurdles, the Board believes that significant balance and alignment exists between the cost of the plan and net outcomes achieved for Securityholders
as demonstrated below (see note 4 below):
+ before any performance awards are realised under the ten-year plan hurdles, significant Securityholder value, that equates to $11 billion in market
capitalisation growth, must be created, consistent with >33% TSR over the period (all other things being equal and based on the assumptions set
out in the table below)
+ The maximum employee share of the value created will occur if the awards fully vest through reaching the cumulative 11% CAGR in operating EPS
after four years and the relative TSR performance is at the 90th percentile. This represents only 3.1% of the $19 billion value potentially created for
Securityholders (net of dilution) or 52% potential security price growth (all other things being equal). This would result in approximately 60% TSR
+ If growth were to exceed 11% per annum and the security price grows beyond the assumption above, the employee share diminishes relative
to Securityholders.
Estimated Securityholder value over the four year testing period under the ten-year plan
Plan
Economic outcomes
Cumulative operating profit growth
Cumulative operating EPS growth
Percentage of performance rights vesting1
Year 4 operating profit to meet operating EPS hurdle
Market capitalisation (MCAP) at end of year 42
Net value created for Securityholders (growth in MCAP)2
Assumed security price3
Effect cost of total plan / MCAP
Employee share of Securityholder value created4
<5.99% CAGR over
four years
6.0% CAGR
over four years
11.0% (or greater)
CAGR over
four years
<32.1%
<26.2%
0.0%
<$2.1B
<$43.8B
<$10.4B
n/a
0.0%
0.0%
32.1%
26.2%
25.0%
$2.1B
$43.8B
$10.5B
$22.52
0.3%
1.4%
58.5%
51.8%
100.0%
$2.4B
$52.6B
$19.3B
$27.08
1.1%
3.1%
1. Assumes that the proportion of rights that vest under the operating EPS hurdle also applies to the rights that vest under the relative TSR hurdle.
2. Based on 30 June 2022 security price, assuming the market Price/Earnings (P/E) multiple applied to operating EPS remains unchanged over time and is inclusive of an allowance for increases
in the securities on issue because of securities vesting under the LTIP. Excludes distributions and dividend payments that may be made during the period.
3. Assumes constant P/E multiple at the end of year 4 and the relevant CAGR in operating EPS growth.
4. Values the number of vested securities at the assumed security price which is calculated using the 30 June 2021 value and growing it at the same rate as the operating EPS growth. This includes
full dilution including the five-year plan securities assuming the same growth rate for FY26.
49
GOODMAN GROUP
Directors’ report
Remuneration report – audited (continued)
3.7.1 Considerations for award quantum – Goodman Group in context
The Board and Remuneration Committee have considered the entire
enterprise of the Group and its Partnerships globally, when assessing the
executives’ roles and remuneration awards.
In this context, Goodman:
+ Is an international real estate fund manager
The Group has limited direct comparable market peers in Australia,
having operating businesses in five continents and 14 countries, each with
market driven remuneration outcomes. The Group has 1,025 employees
at 30 June 2022, the majority of whom are offshore, and consequently
Goodman competes for labour in an international market, which the
Board considers when assessing the quantum of remuneration awards.
In FY22, the Board has referenced:
+ Reported $3.4 billion statutory profit, and a combined statutory profit
+ A range of local and global comparators with operations of similar
across the Group and Partnerships of $9.0 billion in FY22
scale and complexity and certain companies in the ASX 20
+ Delivered $8.5 billion in valuation growth across the Group and
Partnerships in FY22
+ Reported NTA of $8.37, with gearing of 8.5% and available liquidity
of $2.8 billion
+ Private equity (PE) firms. Noting that PE firms are significant players
in the logistics real estate sector with considerable new capital with
a desire to assemble teams and invest in the sector. PE remuneration
is particularly relevant because
+ Is the largest listed specialist developer of logistics real estate in the
world, with $13.6 billion of WIP
+ Manages and creates value across of $73 billion of assets globally
which has almost doubled in the past 5 years
+ Manages capital allocation and funding across various activity types,
which is sourced from multiple jurisdictions
+ Has grown to $33.3 billion market capitalisation at 30 June 2022 and
is a member of the S&P/ASX 20 index
– the nature of pay for performance remuneration structures is
highly equity based and outcome-driven similar to the Group’s
remuneration structure and
– the period of testing and realisation of remuneration is linked to
investor outcomes over significant periods up to ten years, again
a similar remuneration structure. The majority of the Group’s
assets are within PE (unlisted) market entities, which in turn creates
significant competition for high quality people
+ Prologis and Segro are relevant global peers from the logistics real
+ Generates 71% of operating earnings from management and
estate sector, albeit Segro is predominantly in the UK
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 71% of operating earnings from international markets with
approximately 70% of employees situated offshore.
– Prologis is larger by market capitalisation and assets, but Goodman
has a more significant proportion of earnings from development and
Management activities
– Segro is smaller, and predominantly UK focused, with small
proportion of its assets in Europe whereas Goodman operates
in 14 countries globally
– The range of Remuneration outcomes are approximately
$10 million-$37 million for these two companies.
50
ANNUAL REPORT 2022
LTI
Term
years
10
4
4
1 year
TSR
3 years
TSR
5 year
TSR
-14.56%
0%
25%
18%
151%
77%
-11%
29%
90%
Various Reference Groups
Peer group
comparator
Reason for
comparison
Annual CEO remuneration
Range Average Median
% LTI
Goodman
Goodman Group CEO
n/a
$19.2m1
S&P/ASX 20
Goodman is number 14
in the S&P/ASX 20 index
$6m – $28m
$10.4m
$9.6m
86%
47%
$6m – $37m
$16m
$13m
62%
Selected
global
comparators
including ASX
companies
with global
operations
S&P/ASX
100 Property
Companies /
REITs
71% of Goodman’s earnings are
outside Australia.
The comparator group provides
a reference to
local companies with
international operations and
similar global companies
Goodman is in the REIT index,
but has limited comparability
given,
typically this Group:
– are domestic only vs
Goodman in 14 countries
– have <20% active earnings vs
Goodman at 70%
– have an average
MCAP of only $12bn
vs Goodman at $33bn
1. Based on proposed FY23 Award.
$5m – $19m
$8.3m
$7.2m
47%
3
-7%
21%
114%
In the Board’s view, the competitive environment for logistics assets and consequently also for teams with skills to develop and manage the products
and services over the long term, has intensified significantly over the past 24 months. Goodman is seen as a global leader in this space and the
potential loss of key employees and regional teams poses significant commercial risk. The Board has also assessed the FY22 awards in this context.
3.7.2 Considerations for award quantum – structure
Given the variability in the components of remuneration structures in the market, Goodman’s comparator group analysis of value and quantum
of awards is assessed in the context of the degree of risk associated with the structures and the vesting periods:
+ The Board has set the hurdles in respect of the intended LTI award for FY23 to provide substantially increased challenges (and risk of achievement)
for all employees and to achieve a high degree of alignment and balance with Securityholder outcomes
+ Performance rights awarded under the LTIP do not have any voting rights or rights to dividends until vested, even after passing testing hurdles
+ Significant financial outperformance in FY22 versus targets and continued outperformance of peer Group over three and five years.
While not the primary measure this year, the Board has considered the economic value of performance rights when allocating awards to employees, as
this is a relevant component for how employees and the Board look at value. Employees make commercial assessments of the equity awards based on:
+ The composition of remuneration, taking into consideration the proportion of cash versus conditional equity
+ An appropriate discount to allow for the lower probability of vesting over the testing period and the more challenging hurdles set by the Board
+ A further discount for time value of money differential given the vesting of the rights occurs over ten years.
51
GOODMAN GROUP
Directors’ report
Remuneration report – audited (continued)
However, as discussed previously, with respect to quantum, the Board has predominantly made final comparison of the awards based on face value.
On this basis of the total remuneration outlined, (noting the proposed LTI awards with longer testing period, longer vesting period and significantly
larger portion at risk) and considering the market capitalisation and performance differentials of the groups above, it is considered that an appropriate
benchmark for the Group CEO’s remuneration is around A$20 million ($10 million economic value).
The Boards proposed award for the Group CEO is detailed below:
Performance
Rights
Price at
30 June
Face Value
(25% vesting)
$M
Face Value
(100% vesting)
$M
Fixed
Remuneration
$M
Total
Remuneration
(25% vesting)
$M
Total
Remuneration
(100% vesting)
$M
FY22 CEO
FY21 CEO
% Change
1,000,000
1,560,000
-36%
$17.84
$21.17
4.5
8.3
-46%
17.8
33.0
-46%
1.4
1.4
0%
5.9
9.7
-39%
19.2
34.4
-44%
Group CEO maximum possible outcomes for FY22 versus FY21
Based on the proposed award, the maximum face value of remuneration which can be received by the Group CEO, (over ten years), if 100% vesting
occurs, is 46% lower than the equivalent award last year, noting that FY22 was the strongest financial performance in the Group’s history.
+ At Threshold performance, (6% pa CAGR in operating EPS for the 4 years to FY26), the Group will have
– significantly outperformed S&P/ASX100 EPS growth estimates over the 4 years to FY26 (56% outperformance)
– significantly outperformed S&P/ASX100 REIT EPS growth estimates over the 4 years to FY26 (32% outperformance)
+ CEO potential remuneration, (all else being equal) to be received over a further 7 years would be $5.9 million, lower than the median of the S&P/ASX20,
the S&P/ASX100 REIT’s and the S&P/ASX100 average
+
At the Upper level, (11% pa CAGR in operating EPS for the 4 years to FY26), the Group will have also
– significantly outperformed analyst broker estimates (Visible Alpha) for the Group (7.8% pa CAGR in EPS for the 4 years to FY26)
– delivered 59% TSR to securityholders
+ CEO potential remuneration, (all else being equal) to be received over a further 7 years would be $19 million, still below various global and local peers
as per the table above
In economic value terms, the award is estimated to be $8.4 million using the valuation methodology employed by Deloitte (an international accounting firm)
(see below). Applying this same methodology to the FY21 award means that the economic value is down 28%.
3.7.3 Valuation of performance rights (Economic Value) 10 year grants
The Board engaged Deloitte (an international accounting firm) to assist in the determination of an economic value for the performance rights.
A modified Black Scholes approach was applied having regard, among other things, to:
+ The probability of achieving the TSR and EPS vesting criteria, and the associated impact that this has on the expected vesting outcome
+
+
Expectations with respect to the Group’s security price (including growth and volatility) and distribution payments
The time value of money applied through a discount rate.
For the determination of the discount rate, a single discount rate was determined having regard for a Discount for Lack of Marketability and the
Capital Asset Pricing Model (CAPM) framework. The economic valuation has included the probability of achieving the TSR and EPS measures, which
are based on historical statistical analysis. This economic valuation returned a value of $8.40 per right as at June 2022. This same methodology
applied to the grants made in 2021 would have returned a valuation of $7.47 per right as at June 2021.
The economic value of the performance rights is determined on a different basis to the fair value of the performance rights for accounting purposes.
52
ANNUAL REPORT 2022
4. GROUP PERFORMANCE AND OUTCOMES
The Group has delivered and exceptional result, significantly outperforming the original estimates notwithstanding the challenging operating
conditions and market volatility. Despite the volatility in the global equity markets, Goodman’s security price has continued to demonstrate
a significant premium to underlying net assets and therefore the value creation by employees and subsequently medium and longer term
outperformance of the peer group indices.
The Group’s remuneration strategy, focused on long-term outcomes, is the key driver of this sustained performance.
4.1
Group FY22 highlights
Financial
Statutory profit of $3,414.0 million for Goodman and $9,029.6 million for the combined Group and Partnerships
Operating profit of $1,528.0 million (up 25% on FY21)
Operating EPS of 81.3 cents (up 24% on FY21)
Maintained distribution of 30.0 cents per security to sustain financial risk management objectives
Net tangible assets per security increased 25% to $8.37 per security
Operational property investment, management, and development
High occupancy maintained at 99% and like for like net property income growth of 3.9%
Total AUM of $73 billion (up 26% on FY21)
Significant outperformance by the 16 Partnerships achieving weighted average returns of over 21%
Development WIP (end value) increased to $13.6 billion and with 99% commitment levels on completions
and 14 year weighted average lease terms
People and culture
Social investment of over $11 million by the Goodman Foundation and through efforts of employees worldwide
Female senior roles now 30% in FY22. Goodman continues to work towards 40% females in senior roles by 2030
and 50/50 representation overall by 2030
Expansion of Goodman’s supply chain ethics towards a global supplier code of conduct increasing the focus
on human rights and potential modern slavery
Strong focus to employees on reinforcing behaviours that are consistent with the Group’s values
Feedback from employees in the Australian business via surveys undertaken in FY22 indicates strong
communication and employee engagement
Environmental
Goodman’s global operations achieved carbon neutrality and certified as a Carbon Neutral Organisation
Transitioned to 100% certified GreenPower secured for Goodman’s Australian operations on 1 July 2021,
increasing Goodman’s global renewable energy usage to approximately 65%
Approximately 203MW of solar PV now installed or committed across the global portfolio, an increase of 78MW in FY22
Commenced calculating the embodied emissions of all of Goodman’s logistics developments globally and
established a framework for integration into approval processes as we transition to carbon neutral developments
Capital management
Maintained significant available liquidity of $2.8 billion for the Group and capital resources of $18.1 billion in the Partnerships
Significant business growth while maintaining low gearing at 8.5%
Group and Partnerships completed debt refinancing transactions totalling $8.5 billion
53
GOODMAN GROUP
Directors’ report
Remuneration report – audited (continued)
Over the past decade, the Group has established a global business with significant specialist expertise, financial resources, and a strategic real estate
portfolio. The business has been deliberately positioned 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 relatively high due to the long term
structural trends that have been identified many years ago
+ 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 several years, including:
+ Significant reduction in financial leverage (gearing) with the target gearing range reduced to 0% to 25% and retaining a position below the mid-point
in the past five years
+
Increased quality of the property portfolio through $30 billion of asset sales since 2013, concentrating the portfolio in predominantly urban infill
markets and providing funding for the development of new buildings
+ Established an international platform with significant depth of experience required to generate excess returns in competitive high barrier to entry markets
+ Diversification of the Group’s sources of debt and tenor
+ Reduced operational risk through undertaking more development activity in Partnerships, which has reduced the volatility of earnings while
increasing return on assets for the Group. The impact of increased development within the Partnerships has increased their returns and the
prospects for Goodman to earn performance fees in the medium to longer term
+ Significant sales of assets that were reconfigured for higher and better residential use over recent years. For these transactions, the substantial profit
was not included in operating profit despite being cash realised gains as they were believed to be over and above the usual course of business
+ Maintained a conservative distribution pay-out ratio to retain funding for growing development activity
+
Investment in innovation and technology to provide knowledge of potential future risks and opportunities for our operations.
Many of these strategic initiatives rely on foregoing some short-term returns to secure potentially larger long-term sustainable returns.
The resilience of the Group through this period is largely due to strategic long-term thinking, a highly talented team with specialist skills, and
incentivising those employees through equity, linked to sustained operational performance over a long period.
4.2 Financial measures
Performance measures
Operating profit ($M)
Operating EPS (cents)
Operating EPS growth (%)
Security price as at 30 June ($)
Distributions per security (cents)
3 year rolling TSR (%)1
NTA per security ($)
Growth in NTA ($B)
Gearing (%)
AUM ($B)
Market capitalisation premium to NTA ($B)
FY17
FY18
FY19
FY20
FY21
FY22
776.0
43.1
7.5
7.87
25.9
72.7
4.21
0.2
5.9
34.6
6.6
845.9
46.7
8.3
9.62
28.0
69.5
4.64
0.9
5.1
38.3
9.0
942.3
1,060.2
1,219.4
1,528.0
51.6
10.5
15.03
30.0
130.8
5.34
1.3
9.7
46.2
17.6
57.5
11.4
14.85
30.0
103.4
5.84
1.0
7.5
51.6
16.5
65.6
14.1
21.17
30.0
133.4
6.68
1.7
6.8
57.9
26.8
81.3
24.0
17.84
30.0
24.7
8.37
3.3
8.5
73.0
17.7
1.
TSR is the increase in market capitalisation plus dividends and distributions, attributable to the respective financial year.
54
ANNUAL REPORT 2022
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 exceptional at 13.5%, which has exceeded forecasts. This has been
achieved while at the same time reducing gearing, and not utilising the short-term benefits of low interest rates to financially engineer performance.
EPS "Guidance" and Growth
%
24.0
25
20
15
10
5
0
14.1
10.5
11.4
9.0
9..0
10.0
8.3
6.0
7.0
FY18
FY19
FY20
FY21
FY22
EPS Guidance
EPS Growth
Gearing
9.7
%
8.5
7.5
6.8
5.0
2018
2019
2020
2021
2022
10
8
6
4
2
0
4.3 Total security price returns comparison
Goodman is the only real estate group currently in the ASX 20 and the 14th largest ASX listed entity at 30 June 2022 with a market capitalisation of
over $33 billion. Despite the volatility in the past 6 months impacting pricing of global interest rate sensitive sectors, the chart below shows the Group
has consistently outperformed the S&P/ASX 20, S&P/ASX 100 and S&P/ASX 200 A-REIT indices over the past three, five and ten years. Importantly,
underlying performance of the operations has been significantly ahead of target.
Security price returns
800
700
600
500
400
300
200
100
0 06/2012
06/2013
06/2014
06/2015
06/2016
06/2017
06/2018
06/2019
06/2020
06/2021
06/2022
Goodman Group
S&P ASX 20
S&P ASX 100
S&P ASX 200 / A-REIT (sector)
R
e
t
u
r
n
(
%
)
55
GOODMAN GROUP
Directors’ report
Remuneration report – audited (continued)
4.4 Remuneration outcomes for FY22
4.4.1 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 FY22 performance will be awarded in the form of performance rights.
Given the global nature of the Group’s operations, the recommendations for the other executive KMP are based on the Remuneration 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.
It should be noted that based on the Group and individual performances in FY22, other executive KMP were eligible for the maximum STI.
Test
Gate 1: Behaviour
Metrics
Code of Conduct: Pass/Fail
Result
Pass
Gate 2: Operating EPS – FY22
operating EPS versus target
Financial and operational assessments
(including environmental objectives)
Operating EPS growth: Target 10% (72.1 cents)
24.0% operating EPS growth (81.3 cents)
Individual assessment
Various (0 – 100%)
The table below indicates the maximum possible STI and the actual STI awarded for FY22.
Executive
Gregory Goodman
Nick Kurtis
Michael O’Sullivan
Nick Vrondas
Danny Peeters
Anthony Rozic
Year
FY22
FY21
FY22
FY21
FY22
FY21
FY22
FY21
FY22
FY21
FY22
FY21
STI
maximum
$M
Actual STI
awarded
$M
Cash
component
$M
2.10
2.10
1.05
1.05
0.75
0.75
1.05
1.05
€M
0.92
0.85
US$M
1.05
1.05
–
–
1.0
–
0.55
0.50
0.90
0.70
€M
0.70
0.70
US$M
1.05
1.05
–
–
0.5
–
0.275
0.25
0.45
0.35
€M
0.35
0.35
US$M
0.525
0.525
Deferred
component
Actual STI %
of maximum
$M
–
–
0.5
–
0.275
0.25
0.45
0.35
€M
0.35
0.35
US$M
0.525
0.525
–
–
95
–
73
67
86
67
76
82
100
100
56
ANNUAL REPORT 2022
4.4.2 ESG assessment
STI (and LTI) award grant assessments are undertaken with reflection on behaviour, governance, social, environmental and sustainability goals and
targets. The Group has made significant contributions and efforts in a wide range of areas, with key highlights including:
+ Goodman’s global operations maintained certification under the Climate Active program for being a Carbon Neutral Organisation*
+ Development of science-based emissions reduction targets validated by the Science Based Target initiative as being ambitious and aligned with
a 1.5°C Paris Agreement pathway
+ Approximately 203MW of solar PV installed and committed on Goodman’s rooftops globally, reaching the halfway point to our 2025 400MW target
+ Continued transition to renewable energy across Goodman’s operations, including 100% GreenPower for Goodman’s Australian operations
electricity usage
+
Integrated a consistent process for calculating and including embodied emissions into the approval process for new developments, with
approximately 750,000 carbon offsets purchased so far for embodied emissions as we transition to carbon neutral developments
+ Development of a Sustainability Linked Bond Framework, providing the criteria for the US$500 million of Sustainability-Linked Bond issuance
completed this year
+ Recognised by Sustainalytics as an ‘Sector’ and ‘Region’ Top Rated ESG performer during 2022 in the ESG Ratings
+ Achieved Sector Leader in the 2021 Global Real Estate Sustainability Benchmark (GRESB) for the Goodman Japan Partnership in the Japan
Industrial Distribution peer group
+ Goodman Group’s Task Force on Climate related Financial Disclosures (TCFD) statement has been updated and is available on the Goodman website
+ Cutting edge sustainability design initiatives in our global development specifications including solar PV, electric vehicle charging points,
LED lighting and drought tolerant landscaping
+ Greater than 50% of Goodman’s developments globally were completed on brownfield developments
+ Continued focus on biodiversity initiatives including support of urban forests and reforestation with tree planting projects completed across
the Continental Europe, United Kingdom and NZ operations
+ Zero workplace fatalities across Goodman’s global operations including our workforce and contractors
+ Development of Goodman’s Sustainable Sourcing Framework to increase focus on supply chain human rights and help meet our sustainability goals
+ Contributed a further $11.6 million to community and philanthropic causes.
*Subject to final verification
Key areas of assessment for FY22 are disclosed below in addition to two new targets for FY23 onwards. The form of disclosure below (subject
to relevant evolution and changes over time as set by the Board) will be used as the basis for future assessment of environmental and sustainability
measures. The measures are formally set over the testing period for performance rights, and are reviewed annually for relevant progress.
Assessment of progress on prior period targets
Target
Long-term target
Progress
Renewable Energy
100% renewable electricity
use within Goodman’s
operations by 2025
Achieved 100% Renewable electricity use Australia
(in Goodman’s operations) during FY22, resulting
in approximately 65% renewable electricity use globally*
On target
*Subject to final verification
Solar PV Installation
400MW of solar PV installed
or committed by 20251
Solar PV installations and commitments increased
to approximately 203MW in FY22
Carbon Neutral
Carbon neutral
operations by 2025
Maintained Carbon Neutral operations during FY222.
This was initially achieved in FY21, four years ahead of target
TCFD
Achieve TCFD by FY22
TCFD compliance achieved, with FY22 statements
updated and registered. This is available online
Occupancy
>95%
99%
1. Subject to Government regulation in each jurisdiction.
2. Formal confirmation from Climate Active due in October 2022.
On target
Ahead of target
Materially
ahead of target
57
GOODMAN GROUP
Directors’ report
Remuneration report – audited (continued)
Additional Targets for FY23 onwards
Target
Embodied
Carbon
Science
Based Targets
Long-term target
Progress
We are committed to measuring,
reducing and offsetting
embodied carbon emissions
from our global development
workbook and have commenced
the process to reduce and offset
this over time
New Target for FY23 onwards. Embodied carbon emissions calculated
and included in all Group Investment Committee development papers
in preparation for future carbon neutral buildings. A number of buildings
have been built on an embodied carbon neutral basis as offsets have
been purchased and retired. Offset procurement guidance and criteria
have been established and procedures are in place with global teams.
Formal Targets to be established during the year
New target
New Target for FY23 onwards
New target
In addition to our continued
commitments to renewable
energy and carbon neutrality,
the Group has committed to
Scope 1 and 2 GHG emissions
reductions of 42% by 2030 in
line with 1.5°C Paris Agreement
pathway and validated by SBTi
Code of conduct, behaviour, social and governance requirements
Assessment area
Long-term target
Outcome
Diversity
Gender ratio
in the workforce
50% gender ratio in
the workforce by 2030
>40% in senior roles by 2030
Women in
senior roles
Governance
Female representation stable with total employees 44% female, 56% male
overall. Senior female roles represent 30% of senior positions. Significant
progress has been made on career development (job scope widening,
internal promotions etc) and recruitment of females into roles that should
over time evolve into senior roles
Senior female roles represent 30% of senior positions. Significant progress
has been made on career development (job scope widening, internal
promotions etc) and recruitment of females into roles that should over time
evolve into senior roles The Group is on track to reach >40% by 2030
Workplace safety Safe working environment with
demonstrable risk controls,
contractor management and
monitoring of key safety metrics
There have been zero fatalities in FY22. This includes Goodman employees
or contractors on Goodman controlled areas or contractor controlled
sites. There has been significant focus on ensuring the implementation and
execution of the Group’s comprehensive safety processes and procedures.
made particularly difficult through pandemic given regional visitation was
not possible
Zero
Zero
Significant
reputational
issues arising
from illegal
conduct
Social
Pass/Fail
On target
On target
On target
On target
Social/charitable
donations
$50 million in social investment
by Goodman Foundation
by 2030
$11.6 million was contributed to community and philanthropic causes
during FY21, taking our total to $31 million in the past 3 years
Ahead of target
58
ANNUAL REPORT 2022
4.4.3
LTI outcomes
Testing as at 30 June 2022 was completed for the grants of performance rights made to executive KMP in respect of executive KMP performance in
FY19 (called FY20 awards). These performance rights were tested over three years and vest in three equal tranches shortly after the third, fourth and fifth
anniversary of the grant. The FY20 awards had two hurdles: operating EPS and a relative TSR, both measured over the three years ended 30 June 2022.
The mechanics of the testing are detailed in section 3.5.
4.4.3.1 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 operating EPS dilution. Operating
EPS growth for the three year period to 30 June 2022 was 57.6%, compared to a cumulative target of 29.5% at the upper level of the threshold.
FY19 LTIP grant – Operating EPS hurdle1
61.4 cents
66.8 cents
81.3 cents
14.5 cents
100%
Threshold level
Upper level
Actual
Outperformance
Outcome
1. Testing period for grant: EPS growth from 1 July 2019 to 30 June 2022. At the threshold level, 25% satisfy the hurdle with a sliding scale up to 100% satisfying the hurdle at the upper level.
4.4.3.2 Relative TSR hurdle (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 on 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 20.5% to 30 June 2022, under the LTIP TSR calculation methodology. This ranked Goodman in the 68th percentile
against the S&P/ASX 100 and consequently 84% of these performance rights vested.
FY19 LTIP grant – TSR hurdle1
20.5%
16.0%
68th
Goodman TSR1
S&P/ASX 100 TSR1
Percentile
Outcome
84%
1.
Testing period for grant: 1 July 2019 to 30 June 2022, in accordance with the LTIP the TSR is based on the 10 day volume weighted average price (VWAP) at beginning and end of testing period and
is therefore different from the three year TSR, sourced from Bloomberg and presented elsewhere in this report.
As a result of satisfying 100% of the operating EPS hurdle and 84% of the relative TSR hurdle, a total of 10,296,905 equity settled performance rights
will vest in September 2022, September 2023 and September 2024. In addition, 2,837,750 cash settled performance rights will also vest. The Group
currently intends to issue the equivalent number of new securities to satisfy those obligations in the future.
59
GOODMAN GROUP
Directors’ report
Remuneration report – audited (continued)
4.4.4 Group CEO achievements
In determining the Group CEO’s remuneration, the Board acknowledged his strong leadership through the challenges of COVID-19, positioning the
business for resilience and significant outperformance in FY22, far exceeding the Group’s operational targets. It has also considered the following
contributing factors and highlights:
Gregory Goodman Group CEO
Leadership
+ Developed and drove a consistent global business strategy across all markets to sustain the performance of the Group despite prolonged and
significant challenges presented by COVID-19 and the increases in volatility, costs and risk in the global operating environment. The Group has
adapted to these challenges and continues to outperform targets, retaining employees and increasing community support and charitable programs
+ He has positioned the business as a leader in its field, managing, motivating and incentivising key personnel across the platform to perform in highly
competitive environment
+ Fostered a culture that focused on delivering quality across all aspects of the business: people, properties and service
+ Led 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, reflected in top decile engagement scores
+ Reinforced Goodman’s purpose aimed at understanding the drivers of change and the needs of customers and all stakeholders to support
their future success
+ 6.4% voluntary staff turnover in FY22
Financial and risk
+ He has fostered continuity of strategy over successive years leading to continued outperformance over benchmark indices and comparator
companies in FY22, and with strong and sustained TSR of 151.36% over five years
+ Delivered:
– Statutory profit of $3.4 billion (up 48%), driven by growth in property values as a result of asset selection over the past few years and operational
activities such as development
– Significant Operating Profit growth of 25% on FY21, to $1,528 million, significantly ahead of budget
– Revaluation growth across the Group and Partnership of $8.5 billion
– Operating EPS of 81.3 cents, up 24% on FY21
– NTA increased 25% to $8.37 per security
– Occupancy increased to 99%
+ Exceeded earnings guidance in FY22 after posting significant outperformance in FY21 through the pandemic and volatile economic conditions
+ Drove a clearly defined capital management strategy with financial leverage of 8.5% and maintained a strong Group balance sheet with
$2.8 billion of liquidity
+ Continued managing relationships with capital partners and secured additional equity and financial facilities to total $18.1 billion of available
funding capacity
+ Integrated strong risk management approaches globally.
Environment
+ Instrumental in significantly increasing the focus on ESG initiatives and programs throughout the Group and a culture which continually looks
to improve Goodman’s impact on the world. In particular:
– Establishing a carbon neutral emissions target for the Group by 2025 and achieving it in FY21
– Significant progress on the 2025 solar PV installation on the rooftops of Goodman’s global portfolios and installing or committing to 78 MW
in FY22 taking global installation and commitment to over 200MW
– Maintained compliance with TCFD since FY21
+ Established a framework for measuring and assessing embodied carbon to transition to carbon neutral developments
+ Drove the development of science-based emissions reduction targets validated by the Science Based Target initiative as being ambitious and
aligned with a 1.5°C Paris Agreement pathway
+ Supported implementation and progression of EV incentive scheme for staff globally to encourage a shift towards lower emissions vehicles.
Social and cultural + Continues to 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 and working with the Board to implement the ten-year plan.
+ Commenced new initiatives and Goodman Foundation commitments to enable it to meet its $50 million 2030 social impact target. The Group
CEO led initiatives that:
– Contributed $11.6 million to community and philanthropic causes including $200,000 raised directly by staff. Expansion of Goodman’s supply
chain ethics towards a global supplier Code of Conduct increasing the focus on human rights and potential modern slavery
– Enabled the Goodman team globally to contribute 2,195 hours to volunteering and community events through the year. The Goodman
Foundation focuses on children and youth, community and its health, and food rescue and the environment
– Through Goodman’s founding food rescue partners have provided meals to charities that help feed people in need and made a significant
commitment to domestic violence prevention.
60
ANNUAL REPORT 2022
The charts below demonstrate the performance of the Group and various key metrics relative to the Group CEO’s vested remuneration outcomes
in FY22 and prior years. They illustrate that the significant operating profit growth, security price growth and consequently returns for Securityholders
over the testing and vesting periods, correlate with increased Group CEO remuneration over time. Despite significant market volatility and price
movement in FY22, the market price of securities between the time of the grant and the time of vesting has seen significant growth, and the Group
CEO (and all recipients of the LTIP) has participated in this performance alongside Securityholders.
The table below includes awarded remuneration at grant date and the vested remuneration over the past five years for the Group CEO. The figures
in this table differ from the statutory disclosure in section 5 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 169% for grants
vesting in FY22).
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
FY17
$M
FY18
$M
FY19
$M
FY20
$M
1.4
–
3.8
7.0
5.2
8.4
3.2
84%
1.4
–
4.7
8.8
6.1
10.2
4.1
88%
1.4
–
7.3
13.5
8.7
14.9
6.2
86%
1.4
–
11.6
25.4
13.0
26.8
13.8
119%
FY21
$M
1.4
–
14.4
35.6
15.8
37.0
21.2
FY22
$M
1.4
–
15.9
42.9
17.3
44.3
26.9
147%
169%
1.
Value based on the security prices at the grant dates for the performance rights that vested in the financial year. This is so as to allow comparison of the security price outperformance over the
period between grant and vesting dates.
61
GOODMAN GROUP
Directors’ report
Remuneration report – audited (continued)
The chart below illustrates the increase in the value of the Group CEO’s vested LTI in FY22 from the date of the original awards in 2017, 2018 and 2019.
These significant gains have arisen due to consistent earnings growth and security price outperformance of the Group.
Value at grant date ($M)
Value of LTIP on vesting ($M)
Performance rights
15.9
Gain due to increase in security price
42.9
4.4.5
Other executive KMP achievements
In FY22, the Board considered the following highlights when assessing other executive KMP:
Danny Peeters
Executive Director, Corporate
+
Successfully overseeing Brazil, playing a critical role in communicating and reinforcing the Group’s strategy, both from
a real estate and corporate perspective – currently acting as CEO ad interim
+ Played a key role in overseeing the Brazil Investment Partnership with strong financial outcomes
+
+
Continued to progress acquisition and permitting of significant infill development sites, positioning the Group and
Partnership in a strong position to capitalise on the growing e-commerce penetration
Construction completion including permits and successful leasing progress of major development sites despite the
challenging pandemic context in Brazil – strong leasing results and asset rotation. Strong focus
on quality of developments and property management to drive long term value of the assets
+
Provided guidance and team coaching in a complex acquisition and development environment effecting above-target performance
+ Embedded key controls and culture with the team working cohesively and capability increasing
+ Drove further integration of the Brazil operation into the global network
+
Provided advice and support to senior management in Continental Europe and Group regarding sustainability and
innovation initiatives
+
Important direct link for the Board to the operations in Continental Europe and Brazil
+ Further improved key controls and culture with the team working cohesively and increasing capability.
62
ANNUAL REPORT 2022
Anthony Rozic
Chief Executive Officer North America, and Deputy Group Chief Executive Officer
+ Significant outperformance to budget EBIT and valuations.
+
Significant investment outperformance during the year through strategic value add, development, re-leasing and debt
issuance initiatives
+ Critical role in communicating and reinforcing the Group’s strategy in the region
+
+
+
+
+
+
+
Managed a focused and motivated team with an emphasis on succession planning strong leadership in embedding
the Goodman values in the behaviour of the team and encouraging teamwork and collaboration
With the COVID-19 disruption and employees working remotely, a high level of productivity has been maintained with
a focus on key operational priorities
Continued to develop a high-quality portfolio and strongly differentiated brand position and building team capabilities
and skill sets for complex acquisitions and developments ahead of future growth
Commenced 2.7 million square feet, completed 2.4 million square feet, stabilised 2.2 million square feet of infill
development projects
Continued to grow infill development pipeline with acquisitions of 2.3m sf in major US gateway cities providing strong
positioning for future performance
Successfully entered the two new target markets of New York and San Francisco with the acquisition of strategic
developments and value add opportunities
Continued to diversify capital sources with the doubling of the debt facility with the second USPP Bond issuance
of $400 million and bank debt extension and increase of $300 million taking total debt to $1 billion with $200 million
of liquidity at the end of the financial year. Maintained gearing level below 14%
+
Successfully oversaw strong growth in business operations in North America, achieving a number of key milestones:
– Significant growth in AUM to $8.4 billion
– Stabilised occupancy of 96.4%
– Maintained a long WALE of 8.9 years
+
+
– Total available uncommitted liquidity in the Partnership $3.8 billion at financial year end
Introduced new regional and global customer relationships to the portfolio over FY22 with a number of developments
pre-leased and replenishing the land/value-add inventory. Emphasis on developing major infill sites and value-add
development skill sets
Successfully launched numerous ESG initiatives including renewable energy solar power and carbon
neutral developments.
Nick Kurtis
Group Head of Equities
+
Formulated and implemented the Partnerships’ strategies to successfully deliver significant total returns. Partnership
investment portfolio delivered annualised average total return on net assets of 21.4% (based on the respective
Partnership reporting periods). Materially in excess of benchmark and target hurdle returns
+ Delivered strong performance metrics including:
– Management earnings contribution of $588 million to the Group’s operating earnings
– Performance fee revenue of $208 million
– Growth in external AUM up 27% to $68.7 billion across 16 Partnerships in 14 countries
+ Strategic asset planning and new asset selection focus resulting in superior property level returns
+ Establishment and communication of Group strategy and values across the investment management platform
+
+
Communication with key capital partners during the COVID-19 disruption and established strategies to ensure portfolio
strategy and execution was consistent with capital partner expectations
Oversight of Partnership capital management plans, including equity, debt and hedging strategies across the whole
portfolio in all jurisdictions
+ Developed the strategy and led execution on new equity raisings of $1.8 billion in FY22
+ Fostered strong relationships with existing and new capital partners
+ Successfully executed continuation of several Partnerships through the course of FY22
+ Established new Partnerships with investors
+
Provided strategic advice across a range of corporate and structural transactions in the business to position
opportunities for future years.
63
GOODMAN GROUP
Directors’ report
Remuneration report – audited (continued)
Michael O’Sullivan
Group Chief Risk Officer
+
+
+
+
+
+
+
+
Responsible for identifying, assessing, and monitoring risks at Goodman and reporting to the Risk and Compliance Committee
Oversee and aligned the Group Investment Committee (GIC) process with strategy execution to ensure
final commercial outcomes remain consistent with Group strategy
A requested member of regional due diligence committee meetings relating to major acquisitions, disposals, and
capital market transactions
Performs a critical role in commercial oversight and assessment of globally complex transactions of the
Group to allow the required level of autonomy at a regional level within delegated authority limits
Maintained risk management frameworks with improved outcomes across the Group and Partnerships
in FY22 adapting to the changing nature of our business including nature, scale, and complexity of development
projects globally
Responsible for co-ordination and reporting of Group Corporate Service functions, specifically as they
relate to the identification and monitoring of non-financial risks with specific reference to internal audit,
safety, sustainability, compliance, insurance and business continuity planning
Work closely with all Group functions, in particular, Finance, Legal, Compliance, Technical, Investment Management
and IT where it relates to risk management practices and processes in those specific functions
FY22 saw continued Group activities, in relation to the GIC process including:
– Over 400 GIC submissions with over 20% involving detailed involvement from the Group Risk function
– WIP of $13.6 billion with an annual production rate of $7.1 billion
– $2.3 billion of asset sales, including both the disposals of directly held developments and disposals
to external parties globally
– $8.4 billion of global acquisitions and development expenditure
– 16 Partnership business plans and strategy proposals across $68.7 billion of external AUM, in which the Group’s
equity investment was $14.4 billion.
Nick Vrondas
Group Chief Financial Officer
+
+
+
+
+
+
+
+
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 FY22 operating
profit of over $1.5 billion
Full oversight of balance sheet and profit and loss outcomes for the Group and Partnerships across multiple
jurisdictions in 14 countries. Effective statutory and management financial reporting giving clarity to support strong
operational decision making
Built improvements and resilience into systems and controls framework. Strengthened monitoring, co-ordination
and consolidation of financial performance and financial position of regional business units
and divisions to exceed budget and financial plans
Effected strong capital management and compliance with financial risk management policies of Group
and Partnerships
Established and oversaw debt finance transactions in banking and debt capital markets of over $8 billion
for the Group and its Partnerships, adding term to maturity profile and diversity of funding sources
Effective hedging and financial risk management. Involved in and oversaw money market and hedge transactions
of $11 billion for the Group and its Partnerships. Progressed framework for future risk mitigation measures and
appropriate enhancements in line with changing nature of the business and industry
Led operational improvements in relation to business IT systems and processes, particularly considering
the necessary changes that the recent operating climate have given rise to
Updated and improved various operational policies to enhance compliance and reduce risk. Has demonstrated
an ability to manage through variable market conditions. Maintains valuable relationships in the capital markets.
64
ANNUAL REPORT 2022
4.5 LTI grants in relation to FY22 performance
The remuneration proposed by the Board in respect of the executive KMP performance in FY22 comprise fixed remuneration, STI awards and awards
under the LTIP.
As discussed in earlier sections, the Board has decided to reduce the number of performance rights to be issued to the Group CEO and other
executive KMP under the LTIP. The Board has taken into account the face value of the grants and their economic value in making its determination.
The Board believes that the significant reduction will find a new balance between the interests of Securityholders and the recipients. The Board also
believes that this will not adversely impact the motivations of the recipients.
The table below lists the maximum number of performance rights which could vest if the maximum hurdles are met over the four years ending
30 June 2026. The minimum vesting percentage is 0% if the threshold hurdles are not met. The vesting of those performance rights that achieve
the performance hurdles (if any) will occur in seven equal tranches in September each year, starting from September 2026 with the last tranche
vesting ten years from initial grant, in September 2032.
The grants that the Board intends to make in September 2022 and proposes to make for Executive Directors after the AGM (subject to Securityholder
approval) in respect of the executive KMP performance in FY22, are detailed below. The FY23 performance rights awards reflect:
+ A reduction in the number of rights for the Group CEO of 36% and other executive KMP of 20%
+ A reduction in the face value for the Group CEO of 46% and 33% for other executive KMP.
Executive
Gregory Goodman
Danny Peeters
Anthony Rozic
Nick Kurtis
Michael O’Sullivan
Nick Vrondas
Year of
grant
Performance
rights proposed
Face value per
performance right
$
Face value
of grant
$M
Economic value per
performance right
$
Economic
value of grant
$M
FY23
FY23
FY23
FY23
FY23
FY23
1,000,000
500,000
550,000
645,000
450,000
550,000
17.84
17.84
17.84
17.84
17.84
17.84
17.8
8.9
9.8
11.5
8.0
9.8
8.40
8.40
8.40
8.40
8.40
8.40
8.4
4.2
4.6
5.4
3.8
4.6
65
GOODMAN GROUP
Directors’ report
Remuneration report – audited (continued)
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 are set considering 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 AGM, total remuneration (including superannuation) payable by Goodman to all Non-Executive
Directors in aggregate must not exceed $2.5 million per annum. For FY22, total Non-Executive Directors’ remuneration was $2.4 million
(2021: $2.4 million). With the recent appointments, increasing size and depth of operations of the Group, and responsibilities of Directors,
the Group will be seeking an increase in permitted Non-Executive Director fee pool at the 2022 AGM.
– The Board has approved the establishment of a Sustainability and Innovation Committee which will be constituted in FY23.
–
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.
–
To align the interests of the Board with Securityholders, the Board updated the Directors’ Security Holding Policy in April 2021. The policy
requires Non-Executive Directors to accumulate and hold Goodman securities with a value equivalent to their pre-tax annual base fee
within three years of appointment, or in the case of the Chairman the pre-tax Chairman’s fee within three years of appointment as Chairman
(subject to a transitional year following adoption of the new policy). For the purpose of this policy, the value of each parcel acquired is the
higher of the purchase price or market value at the end of the financial year.
5.2 Board and committee annual fees
The Board and committee fees that applied for FY22 are set out below:
Chairman
Member
Board
$
625,000
240,000
Audit
Committee
Risk and Compliance
Committee
Remuneration
Committee
Nomination
Committee
$
60,000
30,000
$
50,000
30,000
$
50,000
30,000
$
n/a
30,000
The remuneration of the Non-Executive Director of GLHK was HK$680,000.
66
ANNUAL REPORT 2022
6. STATUTORY DISCLOSURES
6.1 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
Share
based
payments
n
o
i
t
a
u
n
n
a
r
e
p
u
S
s
t
i
f
e
n
e
b
$
4
,
3
r
e
h
t
O
$
l
a
t
o
T
$
– 1,445,570
23,568
2
)
I
T
S
(
s
u
n
o
B
$
–
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
$
Performance
related
l
a
t
o
t
f
o
%
s
a
I
T
L
d
n
a
I
T
S
%
l
a
t
o
T
$
l
a
t
o
t
f
o
%
s
a
I
T
L
%
10,199
14,293,367 15,772,704
90.6
90.6
11,201
1,458,599
21,694
– 44,203
11,854,105
13,378,601
88.6
–
687,955
23,568
1,000,000
8,584
6,253,120
7,973,227
91.0
12,468
719,581
21,694
–
17,509
4,742,939
5,501,723
86.2
88.6
78.4
86.2
–
500,095
23,568
550,000 6,403
4,424,720 5,504,786
90.4
80.4
11,423
485,566
21,694
500,000
13,242
3,336,045
4,356,547
88.1
76.6
–
713,882
23,568
900,000
8,159
5,706,958
7,352,567
89.9
77.6
11,423
691,169
21,694
700,000
18,073
4,598,229
6,029,165
87.9
76.3
€
–
–
€
610,450
593,400
€
–
–
€
700,000
700,000
€
–
–
€
€
3,539,015 4,849,465
87.4
73.0
2,656,555
3,949,955
85.0
67.3
1
s
e
e
f
d
n
a
y
r
a
l
a
S
$
FY22 1,445,570
FY21
1,447,398
Executive
KMP
Gregory
Goodman
Nick Kurtis
FY22
687,955
FY21
707,113
FY22
500,095
FY21
474,143
FY22
713,882
FY21
679,746
€
FY22
610,450
FY21
593,400
Michael
O’Sullivan
Nick
Vrondas
Danny
Peeters6
Anthony
Rozic7
2
)
I
T
S
(
s
u
n
o
B
$
–
–
–
–
–
–
–
–
€
–
–
US$ US$
US$
US$
US$
US$
US$
US$
US$
FY22
729,880
FY21
697,211
–
–
20,149
750,029
17,100 1,050,000 14,651
4,305,210
6,136,989
87.3
70.2
29,466
726,677
16,210
1,050,000
(1,715)
3,445,575
5,236,747
85.8
65.8
The footnotes for this table are set out on the following page.
67
GOODMAN GROUP
Directors’ report
Remuneration report – audited (continued)
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. Salary and fees represent the amounts due under the terms of executives’ service contracts and include movements in annual leave provisions.
2. 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.
3. Other includes changes in long service leave provisions and in the prior year, car parking and reportable fringe benefits.
4. 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. As a result, in FY20 Goodman made additional tax related payments of US$150,005 in respect of the period prior to 1 January 2019. These amounts were on top of Anthony Rozic’s
Australian tax obligations for which he remained exclusively responsible. The Board also advanced under an interest free loan, double-tax amounts in respect of the period prior to 1 January 2019
for which foreign income tax offsets from the Australian Taxation Office will be used to repay the advances.
At 1 July 2021 the advances made by Goodman amounted to US$503,729, and as there have been no further advances or repayments during the year ended 30 June 2022, the balance at
30 June 2022 is also US$503,729. The amount of interest that would have been payable if charged on an arm’s length basis during the year is $20,149 (2021: $20,149). The notional interest amount
has been included in Anthony Rozic’s statutory remuneration (Other remuneration). No other executive KMP received a loan from the Group during the current or prior financial years.
5. 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.
6. 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
7.
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.
68
ANNUAL REPORT 2022
6.2 Movements in performance rights held by executive KMP
The movements in the number of performance rights during FY22 are summarised as follows:
Executive Directors
Gregory Goodman
Danny Peeters
Anthony Rozic
Other executive KMP
Nick Kurtis
Michael O’Sullivan
Nick Vrondas
Held at the
start of the year
Granted as
compensation
Vested
Forfeited
Held at the
end of the year
FY22
FY21
FY22
FY21
FY22
FY21
FY22
FY21
FY22
FY21
FY22
FY21
5,316,667
6,350,000
1,846,667
1,996,250
2,013,333
2,241,666
2,103,333
2,290,416
1,450,000
1,503,750
2,050,000
2,323,750
1,560,000
(1,866,666)
950,000
625,000
380,000
690,000
400,000
805,000
490,000
560,000
340,000
690,000
420,000
(1,983,333)
(566,666)
(529,583)
(633,333)
(628,333)
(633,333)
(677,083)
(413,333)
(393,750)
(650,000)
(693,750)
–
–
–
–
–
–
–
–
–
–
–
–
5,010,001
5,316,667
1,905,001
1,846,667
2,070,000
2,013,333
2,275,000
2,103,333
1,596,667
1,450,000
2,090,000
2,050,000
69
GOODMAN GROUP
Directors’ report
Remuneration report – audited (continued)
6.3 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:
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
r
a
e
Y
1
t
h
g
i
r
e
c
n
a
m
r
o
f
r
e
p
r
e
p
e
u
l
a
v
r
i
a
F
$
s
r
a
e
y
r
o
i
r
p
n
i
r
a
e
y
e
h
t
n
i
d
e
t
s
e
$ V
d
e
t
s
e
% V
f
o
e
u
l
a
v
l
a
t
o
T
e
c
n
a
m
r
o
f
r
e
p
1
d
e
t
n
a
r
g
s
t
h
g
i
r
d
e
t
i
e
f
r
o
% F
%
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
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
Executive
Directors
Gregory
Goodman
1,560,000
18 Nov 2021
FY22
20.16
31,449,600
950,000
19 Nov 2020
FY21
16.07
15,266,500
h
c
i
h
w
n
i
s
r
a
e
y
4
s
t
s
e
v
t
n
a
r
g
l
a
i
c
n
a
n
F
i
2026–2032
2024–2026
2023–2025
$
–
–
–
12,245,326
2022–2024
12,245,326
2021–2023
18,368,000
2020–2022
–
–
–
2026–2032
2024–2026
2023–2025
4,209,326
2022–2024
4,209,326
2021–2023
4,592,000
2020–2022
–
–
–
2026–2032
2024–2026
2023–2025
4,592,000
2022–2024
4,592,000
2021–2023
5,357,326
2020–2022
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
33.3
10,332,000
13,952,000
10,720,000
33.3
33.3
13,536,000
66.7
33.3
12,600,000
6,106,600
4,018,000
4,796,000
–
–
–
–
–
–
–
33.3
3,685,000
33.3
33.3
3,384,000
66.7
33.3
13,910,400
6,428,000
4,362,400
5,232,000
–
–
–
–
–
–
–
33.3
4,020,000
33.3
33.3
3,948,000
66.7
33.3
900,000
20 Nov 2019
FY20
1,600,000
15 Nov 2018
FY19
1,600,000
16 Nov 2017
FY18
2,400,000
30 Sep 2016
FY17
Danny Peeters
625,000
18 Nov 2021
FY22
380,000
19 Nov 2020
FY21
350,000
20 Nov 2019
FY20
550,000
15 Nov 2018
FY19
550,000
16 Nov 2017
FY18
600,000
30 Sep 2016
FY17
Anthony Rozic
690,000
18 Nov 2021
FY22
400,000
19 Nov 2020
FY21
380,000
20 Nov 2019
FY20
600,000
15 Nov 2018
FY19
600,000
16 Nov 2017
FY18
700,000
30 Sep 2016
FY17
Refer to page 71 for explanatory footnotes.
11.48
8.72
6.70
5.64
20.16
16.07
11.48
8.72
6.70
5.64
20.16
16.07
11.48
8.72
6.70
5.64
70
ANNUAL REPORT 2022
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
executive
KMP
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
r
e
p
e
u
l
a
v
r
i
a
F
f
o
e
u
l
a
v
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
Nick Kurtis
805,000
30 Sep 2021
FY22
17.22
13,862,100
490,000
30 Sep 2020
FY21
15.77
7,727,300
380,000
30 Sep 2019
FY20
600,000
28 Sep 2018
600,000
30 Sep 2017
700,000
30 Sep 2016
FY19
FY18
FY17
11.26
8.52
6.41
4,278,800
5,112,000
3,846,000
5.64
3,948,000
Michael
O’Sullivan
560,000
30 Sep 2021
FY22
17.22
9,643,200
340,000
30 Sep 2020
FY21
15.77
5,361,800
300,000
30 Sep 2019
FY20
400,000
28 Sep 2018
390,000
30 Sep 2017
450,000
30 Sep 2016
FY19
FY18
FY17
11.26
8.52
6.41
3,378,000
3,408,000
2,499,900
5.64
2,538,000
Nick
Vrondas
690,000
30 Sep 2021
FY22
17.22
11,881,800
420,000
30 Sep 2020
FY21
15.77
6,623,400
380,000
30 Sep 2019
FY20
600,000
28 Sep 2018
600,000
30 Sep 2017
750,000
30 Sep 2016
FY19
FY18
FY17
11.26
8.52
6.41
4,278,800
5,112,000
3,846,000
5.64
4,230,000
Footnotes to the analysis of executive KMP performance rights table:
s
r
a
e
y
r
o
i
r
p
n
i
d
e
t
s
e
V
%
–
–
–
–
33.3
66.7
–
–
–
–
33.3
66.7
–
–
–
–
33.3
66.7
r
a
e
y
e
h
t
n
i
d
e
t
s
e
V
2
%
–
–
–
33.3
33.3
33.3
–
–
–
33.3
33.3
33.3
–
–
–
33.3
33.3
33.3
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
d
e
t
i
e
f
r
o
F
f
o
e
u
l
a
% V
h
c
i
h
w
n
i
s
r
a
e
y
4
s
t
s
e
v
t
n
a
r
g
l
a
i
c
n
a
n
F
i
2026–2032
2024–2026
2023–2025
$
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
4,592,000
2022–2024
4,592,000
2021–2023
5,357,326
2020–2022
–
–
–
2026–2032
2024–2026
2023–2025
3,061,326
2022–2024
2,984,800
2021–2023
3,444,000
2020–2022
–
–
–
2026–2032
2024–2026
2023–2025
4,592,000
2022–2024
4,592,000
2021–2023
5,740,000
2020–2022
1.
The fair value was determined at grant date for each of the tranches 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 S&P/ASX 100 entities and discounted the future value of any potential future vesting performance rights to arrive at a present value.
2. 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 year equalled the percentage of securities issued during the year.
3. The value of performance rights vested was calculated using the closing price of a Goodman security on the ASX of $22.96 on 1 September 2021, the day the performance rights vested.
4. 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.
71
GOODMAN GROUP
Directors’ report
Remuneration report – audited (continued)
6.4 Securities issued on exercise of performance rights
During FY22, Goodman issued 14,716,648 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.
6.5 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:
Vesting date1
Ten-year plan
Sep 2031
Sep 2030
Sep 2029
Sep 2028
Sep 2027
Sep 2026
Sep 2025
Five-year plan
Sep 2026
Sep 2025
Sep 2024
Sep 2023
Sep 2022
Exercise price $
Number of performance rights2
–
–
–
–
–
–
–
–
–
–
–
–
1,607,145
1,607,143
1,607,144
1,607,142
1,607,142
1,607,142
1,607,142
2,501,648
6,607,973
10,183,285
12,920,177
13,645,975
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.
1.
2. The number of performance rights at the date of this Directors’ report is net of any rights forfeited and excludes 14,641,586 performance rights where the intention is to cash settle.
72
ANNUAL REPORT 2022
6.6 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:
Salary and fees Superannuation benefits
Non-Executive Directors – GL and GFML
Stephen Johns1
Ian Ferrier2
Christopher Green
Mark Johnson
Vanessa Liu3
Rebecca McGrath
Phillip Pryke4
Hilary Spann5
Penny Winn6
Non-Executive Director – GLHK HK$
David Collins7
FY22
FY21
FY22
FY21
FY22
FY21
FY22
FY21
FY22
FY21
FY22
FY21
FY22
FY21
FY22
FY21
FY22
FY21
FY22
FY21
$
601,432
480,131
–
234,619
300,000
264,062
306,432
264,060
20,000
–
344,108
282,368
408,701
357,068
59,048
–
107,850
258,306
HK$
680,000
625,000
$
23,568
21,694
–
8,437
–
–
23,568
21,694
–
–
5,892
21,694
23,568
21,694
–
–
9,195
21,694
HK$
–
–
Total
$
625,000
501,825
–
243,056
300,000
264,062
330,000
285,754
20,000
–
350,000
304,062
432,269
378,762
59,048
–
117,045
280,000
HK$
680,000
625,000
1. Stephen Johns was appointed Chairman on 19 November 2020 and movement in Director’s fees reflects this appointment.
2. Ian Ferrier retired as a Director on 19 November 2020.
3. Vanessa Liu was appointed as a Director on 1 June 2022.
4. Salary and fees for Phillip Pryke included an amount of A$93,747 (NZ$100,000) (2021: A$83,760 (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. Hilary Spann was appointed as a Director on 4 April 2022.
6. Penny Winn retired as a Director on 18 November 2021.
7. David Collins is a director of GLHK and his director’s fees are disclosed in Hong Kong dollars.
73
GOODMAN GROUP
Directors’ report
Remuneration report – audited (continued)
6.7 Movements in Goodman securities held
The movements during the 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
Held at the end
of the year2
Non-Executive Directors –
GL and GFML
Stephen Johns
Christopher Green
Mark Johnson
Vanessa Liu
Rebecca McGrath
Phillip Pryke
Hilary Spann
Penny Winn
Non-Executive Director – GLHK
David Collins
FY22
FY21
FY22
FY21
FY22
FY21
FY22
FY21
FY22
FY21
FY22
FY21
FY22
FY21
FY22
FY21
FY22
FY21
41,143
25,000
78,996
78,996
5,000
–
–
–
43,061
42,144
59,880
59,880
–
–
24,700
24,700
5,000
5,000
Executive Directors – GL and GFML
Gregory Goodman
FY22
38,487,880
Danny Peeters
Anthony Rozic
Other executive KMP
Nick Kurtis
Michael O’Sullivan
Nick Vrondas
FY21
FY22
FY21
FY22
FY21
FY22
FY21
FY22
FY21
FY22
FY21
38,104,547
1,633,131
2,103,548
1,209,460
1,475,958
554,286
503,330
843,119
666,601
129,909
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1,866,666
1,983,333
566,666
529,583
633,333
628,333
633,333
677,083
413,333
393,750
650,000
693,750
–
16,182
–
–
10,000
5,000
–
–
-
917
–
–
3,500
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(39)
–
–
-
-
–
–
-
-
–
–
–
–
–
–
–
–
41,143
41,143
78,996
78,996
15,000
5,000
–
–
43,061
43,061
59,880
59,880
3,500
–
24,700
24,700
5,000
5,000
(1,750,000)
38,604,546
(1,600,000)
38,487,880
-
2,199,797
(1,000,000)
(891,486)
(894,831)
(684,000)
(626,127)
(190,000)
(217,232)
(650,000)
(563,841)
1,633,131
951,307
1,209,460
503,619
554,286
1,066,452
843,119
129,909
129,909
1. Relates to securities held at the later of the start of the financial year or the date of becoming a KMP.
2. Relates to securities held at the earlier of the end of the financial year or the date of ceasing to be a KMP.
74
6.8
Transactions with Directors, executives and their related entities
GreenPoint Real Estate Innovation and Technology Venture, LP
In order to enhance understanding of and access to technologies
that may influence the property sector and the business, the Group
has committed to investing USD15.0 million in GreenPoint Real Estate
Innovation and Technology Venture, LP, a property technology fund that
is a Delaware limited partnership, managed by Greenpoint Group LP,
also a Delaware limited partnership. Greenpoint Group LP is beneficially
owned and controlled by Christopher Green, a director of GL. As at
30 June 2022, the Group had invested USD5.3 million.
Wyuna Regenerative Ag Investment Fund (Wyuna)
The Group has, as part of our ESG strategy, committed to investing
$30.0 million in Wyuna, a fund offering a model blending carbon farming,
red meat production and regeneration in Australia. The fund is managed
by Wyuna Regenerative Ag, which is 50% owned by Christopher Green,
a director of Goodman Limited. As at 30 June 2022, the Group had
invested $nil.
Other than as disclosed elsewhere in the remuneration report, there were
no other transactions with Directors, executives, and their related entities.
ANNUAL REPORT 2022
75
Non-audit services
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 78 and
forms part of this Directors’ report for the financial year.
GOODMAN GROUP
Directors’ report
(continued)
Environmental regulations
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 2022 have been properly
maintained and the financial report for the year ended 30 June 2022
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.
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.
The auditors of Goodman are not indemnified by Goodman or covered
in any way by this insurance in respect of the audit.
76
Rounding
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.
Events subsequent to balance date
There has not arisen in the interval between the end of the financial 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 significantly
the operations of Goodman, the results of those operations, or the state
of affairs of Goodman, in future financial years.
The Directors’ report is made in accordance with a resolution of the Directors.
Stephen Johns
Independent Chairman
Gregory Goodman
Group Chief Executive Officer
Sydney, 16 August 2022
ANNUAL REPORT 2022
77
GOODMAN GROUP
Lead Auditor's Independence Declaration
under Section 307C of the Corporations Act 2001
To the Directors of Goodman Limited and 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 financial year ended 30 June 2022, there have been:
(i)
no contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in relation to the audits; and
(ii)
no contraventions of any applicable code of professional conduct in relation to the audits.
KPMG
Eileen Hoggett
Partner
Sydney
16 August 2022
KPMG, an Australian partnership and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited, a private English company limited
by guarantee. All rights reserved. The KPMG name and logo are trademarks used under license by the independent member firms of the KPMG global organisation. Liability limited by a scheme
approved under Professional Standards Legislation.
78
Consolidated statements of financial position
as at 30 June 2022
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
Total equity attributable to Securityholders
Comprising:
Total equity attributable to GL
Total equity attributable to other entities stapled to GL
Total equity attributable to Securityholders
Note
21(a)
7
8
6(b)
17
9
7
6(b)
6(b)
6(b)
5(d)
17
12
14
10
5(c)
16
11
13
17
10
16
5(d)
11
13
17
20(a)
22(a)
22(b)
Goodman
2022
$M
1,056.0
217.8
77.6
389.0
1.6
608.2
2,350.2
173.4
1,727.1
1,423.7
14,379.6
25.2
496.4
61.4
795.4
19,082.2
21,432.4
606.5
173.4
133.3
299.2
12.5
71.2
1,296.1
111.0
2,698.9
380.3
15.5
58.1
447.7
3,711.5
5,007.6
16,424.8
8,206.1
352.7
7,866.0
16,424.8
2,292.9
14,131.9
16,424.8
2021
$M
920.4
331.3
80.9
235.1
16.5
41.5
1,625.7
277.5
1,192.7
1,851.2
10,660.0
19.9
362.8
54.6
822.6
15,241.3
16,867.0
565.9
160.1
–
294.2
11.9
1.9
1,034.0
125.5
2,060.3
168.4
23.7
82.1
211.5
2,671.5
3,705.5
13,161.5
8,096.4
134.8
4,930.3
13,161.5
1,635.6
11,525.9
13,161.5
The consolidated statements of financial position are to be read in conjunction with the accompanying notes.
ANNUAL REPORT 2022
GIT
2022
$M
473.6
131.0
–
–
1.6
608.2
1,214.4
3,137.4
5.9
495.3
11,356.1
–
373.1
–
–
15,367.8
16,582.2
72.7
–
133.3
233.5
–
25.9
465.4
723.8
2,692.1
267.9
–
–
325.3
4,009.1
4,474.5
12,107.7
8,154.5
238.8
3,714.4
12,107.7
2021
$M
379.8
816.1
–
–
16.5
–
1,212.4
2,528.5
5.9
1,155.7
8,078.4
–
314.4
–
–
12,082.9
13,295.3
607.6
–
–
166.3
–
1.9
775.8
232.2
2,062.8
124.0
–
–
124.6
2,543.6
3,319.4
9,975.9
7,849.0
(33.7)
2,160.6
9,975.9
79
GOODMAN GROUP
Consolidated income statements
for the year ended 30 June 2022
Note
Goodman
2022
$M
Net gain from fair value adjustments on investment properties
6(e)
260.1
Revenue
Gross property income
Management income
Development income
Distributions from investments
Property and development expenses
Property expenses
Development expenses
Other income
2
2
2
2
Net gain on disposal of investment properties
Net gain on disposal of assets held for sale
Net gain on disposal of equity investments
Share of net results of equity accounted investments
Other expenses
Employee expenses
Share based payments expense
Administrative and other expenses
Reversal of previous impairment
Profit before interest and tax
Net finance (expense)/income
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
6(f)
2
2
2
15
15
5(a)
22(a)
22(b)
3
3
2,091.8
1,988.3
2021
$M
112.4
383.9
1,492.0
–
(32.8)
(862.3)
(895.1)
63.1
37.7
–
5.0
1,708.9
1,814.7
(210.8)
(268.8)
(83.2)
–
138.0
511.4
1,441.6
0.8
(33.7)
(554.9)
(588.6)
73.6
12.5
0.2
2,718.2
3,064.6
(258.9)
(257.6)
(90.4)
–
GIT
2022
$M
2021
$M
51.7
60.2
–
–
6.4
58.1
(16.5)
–
(16.5)
208.3
69.8
–
–
2,173.0
2,451.1
–
–
(60.4)
–
(60.4)
–
–
9.1
69.3
(20.2)
(2.3)
(22.5)
60.2
39.3
–
3.2
1,373.8
1,476.5
–
–
(52.1)
17.6
(34.5)
(606.9)
(562.8)
3,960.9
2,345.1
2,432.3
1,488.8
72.8
(304.4)
(231.6)
2,200.7
(133.1)
2,067.6
177.9
(42.4)
135.5
1,624.3
(49.5)
1,574.8
8.3
(231.1)
(222.8)
3,738.1
(324.1)
3,414.0
552.6
2,861.4
3,414.0
183.2
178.8
94.3
(19.4)
74.9
2,420.0
(108.1)
2,311.9
300.2
2,011.7
2,311.9
125.4
122.1
The consolidated income statements are to be read in conjunction with the accompanying notes.
80
Consolidated statements of comprehensive income
for the year ended 30 June 2022
ANNUAL REPORT 2022
Profit for the year
3,414.0
2,311.9
2,067.6
1,574.8
Note
Goodman
2022
$M
2021
$M
GIT
2022
$M
2021
$M
Other comprehensive income/(loss) for the year
Items what will not be classified to profit or loss
Actuarial gains/(losses) on defined benefit
retirement schemes, net of income tax
Effect of foreign currency translation
Items that are or may be reclassified
subsequently to profit or loss
5.6
1.6
7.2
(6.0)
(0.8)
(6.8)
–
–
–
–
–
–
Increase due to revaluation of other financial assets
0.3
0.3
5.0
(2.2)
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
Total comprehensive income for the year
attributable to Securityholders
15.9
143.7
159.9
167.1
3,581.1
542.7
0.3
(278.6)
(278.0)
(284.8)
2,027.1
271.6
3,038.4
1,755.5
3,581.1
2,027.1
22(a)
22(b)
The consolidated statements of comprehensive income are to be read in conjunction with the accompanying notes.
15.9
221.8
242.7
242.7
2,310.3
0.3
(182.2)
(184.1)
(184.1)
1,390.7
81
GOODMAN GROUP
Consolidated statements of changes in equity
for the year ended 30 June 2022
Issued
capital
$M
8,031.7
Asset
revaluation
reserve
$M
(7.2)
Cash flow
hedge
reserve
$M
(5.2)
Note
Attributable to Securityholders
Foreign
currency
translation
reserve
$M
188.6
Employee
compensation
reserve
$M
239.8
Defined
benefit
retirement
schemes
reserve
$M
(31.3)
Total
reserves
$M
384.7
Retained
earnings
$M
3,104.2
Total
$M
11,520.6
Goodman
Balance at 1 July 2020
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
Actuarial losses on defined benefit
superannuation funds, net of income tax
Total other comprehensive income/(loss)
for the year, net of income tax
Total comprehensive income/(loss)
for the year, net of income tax
Transfers
Contributions by and distributions to owners
Dividends/distributions on stapled securities
Issue of stapled securities
Issue costs
Purchase of stapled securities for the LTIP
Equity settled share based payments expense
Deferred taxes associated with the LTIP
Transfer to payables
Balance at 30 June 2021
Total comprehensive income/(loss) for the year
Profit for the year
Other comprehensive (loss)/income
Effect of foreign currency translation
Cash flow hedges:
– Change in value of financial instruments
Increase due to revaluation of other
financial assets
Actuarial gains on defined benefit
superannuation funds, net of income tax
Total other comprehensive income
for the year, net of income tax
Total comprehensive income
for the year, net of income tax
Transfers
Contributions by and distributions to owners
Dividends/distributions on stapled securities
Issue of stapled securities
Issue costs
Purchase of stapled securities for the LTIP
Equity settled share based payments expense
Deferred taxes associated with the LTIP
Balance at 30 June 2022
–
–
–
–
–
–
–
–
19
20(a)
–
65.1
(0.4)
–
–
–
–
8,096.4
–
–
–
–
–
–
–
–
19
20(a)
–
109.8
(0.1)
–
–
–
8,206.1
0.2
–
0.3
–
0.5
0.5
–
–
–
–
–
–
–
–
(6.7)
–
–
–
0.3
–
0.3
0.3
–
–
–
–
–
–
–
(6.4)
–
–
–
0.5
(279.3)
0.3
–
–
–
–
–
0.8
(279.3)
0.8
(279.3)
–
–
–
–
–
–
–
–
–
2,311.9
2,311.9
(0.8)
(279.4)
–
–
(6.0)
(6.8)
0.3
0.3
(6.0)
(284.8)
–
–
–
–
–
(279.4)
0.3
0.3
(6.0)
(284.8)
(6.8)
(284.8)
2,311.9
2,027.1
–
–
(68.4)
–
(68.4)
68.4
–
–
–
–
–
–
–
–
(4.4)
–
–
–
–
–
–
–
(90.7)
–
–
(0.4)
144.1
15.9
–
–
–
–
–
15.5
144.1
15.5
144.1
–
–
–
(22.4)
134.7
8.1
(17.1)
274.7
–
–
–
–
–
–
–
–
–
–
–
–
–
–
11.1
–
(81.8)
–
–
–
–
–
–
53.4
–
–
–
(28.0)
164.8
(4.2)
325.5
–
–
–
–
–
–
–
(38.1)
–
1.6
–
–
5.6
7.2
7.2
–
–
–
–
–
–
–
(30.9)
–
–
–
(22.4)
134.7
8.1
(17.1)
134.8
(554.2)
–
–
–
–
–
–
4,930.3
(554.2)
65.1
(0.4)
(22.4)
134.7
8.1
(17.1)
13,161.5
–
3,414.0
3,414.0
145.3
15.9
0.3
5.6
167.1
–
–
–
–
–
145.3
15.9
0.3
5.6
167.1
167.1
3,414.0
3,581.1
(81.8)
81.8
–
–
–
–
(28.0)
164.8
(4.2)
352.7
(560.1)
–
–
–
–
–
7,866.0
(560.1)
109.8
(0.1)
(28.0)
164.8
(4.2)
16,424.8
The consolidated statements 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).
82
Consolidated statements of changes in equity
for the year ended 30 June 2022
ANNUAL REPORT 2022
GIT
Attributable to Unitholders
Asset
revaluation
reserve
$M
Cash flow
hedge
reserve
$M
Issued
capital
$M
Note
Foreign
currency
translation
reserve
$M
Employee
compensation
reserve
$M
Total
reserves
$M
Retained
earnings
$M
Total
$M
Balance at 1 July 2020
7,623.5
7.0
(5.2)
(38.4)
173.3
136.7
1,029.2
8,789.4
Total comprehensive (loss)/income for the year
Profit for the year
Other comprehensive (loss)/income
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 (loss)/income for the year,
net of income tax
Total comprehensive (loss)/income for the year
Contributions by and distributions to owners
Distributions on ordinary units
19
–
–
–
–
–
–
–
Issue of ordinary units
Issue of ordinary units for the LTIP
Issue costs on ordinary units
Equity settled share based payments transactions
20(a)
42.5
20(a)
183.2
(0.2)
–
–
–
–
(0.2)
0.4
(182.4)
–
(2.2)
(2.4)
0.3
–
0.7
–
–
(182.4)
(2.4)
0.7
(182.4)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Total comprehensive income/(loss) for the year
Profit for the year
Other comprehensive (loss)/income
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 for the year,
net of income tax
Total comprehensive income for the year
Contributions by and distributions to owners
Distributions on ordinary units
Issue of ordinary units
Issue of ordinary units for the LTIP
Issue costs on ordinary units
Equity settled share based payments transactions
–
–
–
–
–
–
–
19
20(a)
71.2
20(a)
234.4
(0.1)
–
–
–
–
(0.2)
(0.3)
222.3
–
5.0
4.8
4.8
–
–
–
–
–
15.9
–
–
–
15.6
222.3
15.6
222.3
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1,574.8
1,574.8
(182.2)
0.3
(2.2)
(184.1)
–
–
–
–
(182.2)
0.3
(2.2)
(184.1)
(184.1)
1,574.8
1,390.7
(443.4)
(443.4)
–
–
–
–
42.5
183.2
(0.2)
13.7
13.7
13.7
–
2,067.6
2,067.6
221.8
15.9
5.0
242.7
–
–
–
–
221.8
15.9
5.0
242.7
242.7
2,067.6
2,310.3
(513.8)
(513.8)
–
–
–
–
71.2
234.4
(0.1)
29.8
29.8
29.8
–
–
–
–
–
–
–
–
Balance at 30 June 2021
7,849.0
4.6
(4.5)
(220.8)
187.0
(33.7)
2,160.6
9,975.9
Balance at 30 June 2022
8,154.5
9.4
11.1
1.5
216.8
238.8
3,714.4
12,107.7
The consolidated statements of changes in equity is to be read in conjunction with the accompanying notes.
83
GOODMAN GROUP
Consolidated cash flow statements
for the year ended 30 June 2022
Goodman
2022
$M
2021
$M
GIT
2022
$M
2021
$M
Note
Cash flows from operating activities
Property income received
Cash receipts from development activities
Other cash receipts from management and other activities
Property expenses paid
Payments for development activities
Other cash payments in the course of operations
Distributions received from equity investments
including Partnerships
Interest received
Finance costs paid
Net income taxes (paid)/refunded
Net cash provided by operating activities
21(b)
Cash flows from investing activities
Net proceeds from disposal of investment properties
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 proceeds from issue of stapled securities
Net cash flows from/to loans with related parties
Proceeds from borrowings and derivative financial instruments
Payments on borrowings and derivative
financial instruments
Dividends and distributions paid
Payments of lease liabilities
Purchase of securities to fund LTIP obligations
Net cash provided by/(used in) 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
138.4
1,587.8
523.8
(28.6)
(1,220.7)
(456.8)
442.5
9.3
(44.2)
(110.5)
841.0
671.8
0.4
4.4
91.8
(431.7)
(1,332.3)
(5.9)
(1,001.5)
109.7
111.4
1,466.5
(789.3)
(557.2)
(13.4)
(28.0)
299.7
139.2
920.4
(3.6)
Cash and cash equivalents at the end of the year
21(a)
1,056.0
The consolidated cash flow statements are to be read in conjunction with the accompanying notes.
Non-cash transactions are included in note 21(c).
108.3
1,560.3
346.4
(41.7)
(947.4)
(381.6)
536.9
9.2
(34.3)
(41.4)
1,114.7
170.2
–
13.1
256.3
(192.2)
(790.3)
(7.0)
(549.9)
64.8
(135.0)
204.6
(891.9)
(551.4)
(17.8)
(22.4)
(1,349.1)
(784.3)
1,792.8
(88.1)
920.4
50.8
62.1
–
–
(13.9)
(1.1)
(60.4)
245.3
8.9
(32.5)
(1.1)
196.0
345.6
–
22.6
20.9
(15.1)
(1,050.0)
–
(676.0)
71.1
279.6
1,456.4
(787.4)
(446.6)
–
–
573.1
93.1
379.8
0.7
473.6
–
–
(21.1)
–
(54.1)
381.7
8.7
(38.2)
0.5
339.6
161.9
–
11.3
166.1
(17.5)
(464.9)
–
(143.1)
42.3
25.1
246.8
(891.9)
(478.2)
–
–
(1,055.9)
(859.4)
1,302.6
(63.4)
379.8
84
Notes to the consolidated financial statements
ANNUAL REPORT 2022
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 sections to which
they relate.
1 Basis of preparation
Goodman Limited and Goodman Industrial Trust are for-profit entities
domiciled in Australia.
Statement of compliance
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 16 August 2022.
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 20-0568,
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.
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.
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.
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 controlled foreign operation are recognised in the foreign
currency translation reserve on consolidation.
85
GOODMAN GROUP
Notes to the consolidated financial statements
Basis of preparation (continued)
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:
Weighted average
As at 30 June
Australian dollars (AUD) to
2022
2021
2022
2021
New Zealand dollars (NZD)
1.0667
1.0745
1.1057
1.0739
Hong Kong dollars (HKD)
5.6626
5.7958
5.4241
5.8222
Chinese yuan (CNY)
Japanese yen (JPY)
Euros (EUR)
4.6840
4.9419
4.6154
4.8412
85.1512
79.6101
93.7770 83.2780
0.6442
0.6262
0.6594
0.6327
British pounds sterling (GBP)
0.5456
0.5546
0.5676
0.5432
United States dollars (USD)
0.7255
0.7472
0.6912
0.7497
Brazilian real (BRL)
3.8037
4.0236
3.5905
3.7528
Changes in accounting policies
A fundamental reform of major interest rate benchmarks is being
undertaken globally, including the replacement of some interbank offered
rates (IBORs) with alternative risk-free rates (referred to as IBOR reform).
The Group has adopted Interest Rate Benchmark Reform – Phase 2
(Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16) from
1 July 2021. These amendments provide reliefs relating to modifications
of financial instruments and lease contracts or hedging relationships
triggered by a replacement of a benchmark interest rate in a contract
with a new alternative benchmark rate. The Group applied the Phase 2
amendments retrospectively. However, in accordance with the exceptions
permitted in the Phase 2 amendments, the Group has elected not to
restate comparatives for the prior periods to reflect the application
of these amendments.
The overall impact of the IBOR reform is not significant in the context
of Goodman’s financial position and performance.
See note 18 for related disclosures about risks, financial assets and
financial liabilities indexed to IBORs.
Apart from the above, the AASB has also issued other amendments
to standards that are first effective from 1 July 2021 but none of these
have a material impact on the Group’s financial statements.
Australian Accounting Standards issued but not yet effective
The Group has not applied any new or amended standard that is not
yet effective but available for early application in the current accounting
period. None of the new or amended accounting standards are expected
to have a significant impact on the future results of the Group.
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.
Measurement of fair values
A number of Goodman’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, 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.
86
ANNUAL REPORT 2022
RESULTS FOR THE YEAR
Management income
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.
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.
Fee income derived from management services relates to investment
management base fees and property services fees and 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 or it relates to a combination of inextricable management and
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.
87
GOODMAN GROUP
Notes to the consolidated financial statements
Results for the year (continued)
2 Profit before income tax (continued)
Development income – disposal of inventories
Net gain on disposal of investment properties
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.
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 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 retirement schemes
The net obligation in respect of defined benefit retirement schemes
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 retirement schemes are recognised in the
income statement.
88
Profit before income tax has been arrived at after crediting/(charging) the following items:
Goodman
2022
$M
Note
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 management1
Net gain on disposal of assets held for sale
Net gain on disposal of special purpose
development entities, including JVs
Development income
Inventory cost of sales
Other development expenses
Development expenses
Disposal of equity investments
Net consideration from disposal of associates and JVs
Carrying value of associates and JVs disposed
6(f)
Net gain on disposal of equity investments
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
Impairment reversals
Reversal of previous impairment on loans to related parties
Impairment reversals
2021
$M
93.0
19.4
112.4
310.1
73.8
383.9
890.5
195.0
274.2
132.3
–
1,492.0
(686.8)
(175.5)
(862.3)
17.0
(12.0)
5.0
(203.4)
(1.4)
(6.0)
120.9
17.1
138.0
380.5
130.9
511.4
803.0
206.8
388.3
–
43.5
1,441.6
(381.8)
(173.1)
(554.9)
8.5
(8.3)
0.2
(251.4)
(0.6)
(6.9)
(258.9)
(210.8)
(164.8)
(57.3)
(35.5)
(257.6)
(17.1)
–
–
(134.7)
(105.4)
(28.7)
(268.8)
(23.0)
–
–
ANNUAL REPORT 2022
GIT
2022
$M
41.4
10.3
51.7
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2021
$M
45.9
14.3
60.2
–
–
–
–
–
–
–
–
–
(2.3)
–
(2.3)
11.3
(8.1)
3.2
–
–
–
–
–
–
–
–
–
17.6
17.6
1.
Fee revenues from single contractual arrangements involving a combination of inextricable investment management and development
management services and recognised over the life of the underlying development projects are classified as development income for statutory
reporting purposes. During the year, $77.0 million (2021: $75.2 million) of such income was recognised.
89
GOODMAN GROUP
Notes to the consolidated financial statements
Results for the year (continued)
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
Profit after tax of $3,414.0 million (2021: $2,311.9 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:
Weighted average number of securities used in calculating basic profit per security
Effect of performance rights on issue
2022
¢
183.2
178.8
2021
¢
125.4
122.1
2022
2021
Number of securities
1,863,693,802
1,844,221,829
45,396,402
48,908,249
Weighted average number of securities used in calculating diluted profit per security
1,909,090,204
1,893,130,078
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
2022
¢
29.7
28.9
2021
¢
16.3
15.9
Profit after tax of $552.6 million (2021: $300.2 million) was used in calculating basic and diluted profit per Goodman Limited share.
90
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
(including the Hong Kong SAR) and Japan), Continental Europe (with
the vast majority of assets located in Germany and France), the United
Kingdom and the Americas (principally North America and including Brazil).
The activities and services undertaken by the operating segments include:
+ Property investment, through both direct ownership and cornerstone
investments in Partnerships
+ Management activities, both investment 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 share based remuneration.
The assets allocated to each operating segment are the property assets,
including the investments in Partnerships and trade and other receivables
associated with the operating activities, 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.
ANNUAL REPORT 2022
91
GOODMAN GROUP
Notes to the consolidated financial statements
Results for the year (continued)
4 Segment reporting (continued)
Information about reportable segments
Goodman
Income statement
External revenues
Australia and
New Zealand
Asia
Continental
Europe
United Kingdom
Americas
Total
2022
$M
2021
$M
2022
$M
2021
$M
2022
$M
2021
$M
2022
$M
2021
$M
2022
$M
2021
$M
2022
$M
2021
$M
Gross property income
90.4
95.8
15.4
6.5
27.5
8.5
Management income
Development income
256.2
147.0
131.3
110.2
91.0
107.4
207.6
223.6
192.0
164.8
891.9
796.5
32.8
245.3
3.0
5.7
1.0
3.3
1.7
27.2
117.3
0.6
138.0
112.4
16.0
511.4
383.9
61.8
1,441.6
1,492.0
Total external revenues
554.2
466.4
338.7
281.5
1,010.4
912.4
41.5
249.6
146.2
78.4
2,091.0
1,988.3
Analysis of external revenues
Revenue from contracts with customers
Assets and services
transferred at a point in time
71.7
106.3
25.0
17.2
792.0
730.5
12.8
228.7
–
–
901.5
1,082.7
Assets and services transferred over time 405.2
282.6
299.5
260.4
193.7
174.2
25.7
20.0
144.5
77.8
1,068.6
815.0
Other revenue
Rental income
(excludes outgoings recoveries)
77.3
77.5
14.2
3.9
24.7
7.7
3.0
0.9
1.7
0.6
120.9
90.6
Total external revenues
554.2
466.4
338.7
281.5
1,010.4
912.4
41.5
249.6
146.2
78.4
2,091.0
1,988.3
Reportable segment profit before tax
616.9
467.4
386.4
324.5
582.5
458.8
41.1
31.8
210.8
128.9
1,837.7
1,411.4
Share of net results of equity
accounted investments
Material non-cash items not included
in reportable segment profit before tax
Net gain/(loss) from fair value
adjustments on investment properties
Share of net gain from fair value adjustments
in equity accounted investments
1,171.5
853.0
215.4
273.2
174.9
165.7
213.6
32.9
942.8
384.1
2,718.2
1,708.9
260.4
63.1
(0.3)
–
–
–
–
–
–
–
260.1
63.1
1,012.0
667.8
96.2
163.1
119.9
107.5
203.8
26.9
839.3
301.6
2,271.2
1,266.9
Australia and
New Zealand
Asia
Continental
Europe
United Kingdom
Americas
Total
Statement of financial position
2022
$M
2021
$M
2022
$M
2021
$M
2022
$M
2021
$M
2022
$M
2021
$M
2022
$M
2021
$M
2022
$M
2021
$M
Reportable segment assets
8,106.2
6,619.9
4,162.0
3,565.7
2,779.7
2,382.2
1,024.9
840.6 4,030.8
2,475.9 20,103.6 15,884.3
Included in reportable segment assets are:
Investment properties
1,086.9
1,687.3
336.8
137.7
–
–
–
26.2
–
–
1,423.7
1,851.2
Investments accounted for
using the equity method
5,709.6
4,251.0
3,102.8
2,808.8
1,020.7
865.2
680.6
408.0
3,865.9
2,327.0
14,379.6 10,660.0
Non-current assets
7,195.8
6,314.6
3,888.8
3,261.8
2,483.6
2,126.5
966.6
761.8
3,876.3
2,335.8
18,411.1
14,800.5
Additions to non-current assets include:
– Investment properties
22.9
23.5
181.2
138.5
–
–
243.7
25.8
–
–
447.8
187.8
– Investments accounted for
using the equity method
455.8
222.4
159.7
129.6
63.3
10.0
162.1
178.8
431.3
196.1
1,272.2
736.9
Reportable segment liabilities
129.9
113.9
268.6
242.4
122.6
111.0
94.5
80.4
319.5
156.2
935.1
703.9
92
ANNUAL REPORT 2022
Australia and
New Zealand
Asia
Continental
Europe
Americas
Total
2022
$M
2021
$M
2022
$M
2021
$M
2022
$M
2021
$M
2022
$M
2021
$M
2022
$M
2021
$M
51.7
60.2
–
–
51.7
60.2
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
5.6
5.6
–
–
5.6
5.6
–
9.1
9.1
–
–
9.1
9.1
–
–
–
–
–
–
–
–
–
–
51.7
5.6
60.2
9.1
57.3
69.3
–
10.3
14.3
–
–
–
41.4
5.6
45.9
9.1
57.3
69.3
GIT
Income statement
External revenues
Gross property income
Distributions from investments
Total external revenues
Analysis of external revenues
Revenue from contracts with customers
Assets and services transferred over time
10.3
14.3
Other revenue
Rental income (excludes outgoings recoveries)
Distributions from investments
Total external revenues
41.4
45.9
–
–
51.7
60.2
Reportable segment profit before tax
239.7
240.2
34.5
33.0
57.3
69.2
91.0
73.9
422.5
416.3
Share of net results of equity accounted investments
1,053.0
726.2
66.4
137.3
144.9
140.0
908.7
370.3
2,173.0
1,373.8
Material non–cash items not included
in reportable segment profit before tax
Net gain from fair value adjustments on investment properties 208.3
60.2
–
–
–
–
–
–
208.3
60.2
Share of net gain from fair value adjustments
in equity accounted investments
Statement of financial position
Reportable segment assets
Included in reportable segment assets are:
917.7
562.9
31.7
104.3
97.5
86.1
808.8
290.5
1,855.7
1,043.8
Australia and
New Zealand
Asia
Continental
Europe
Americas
Total
2022
$M
2021
$M
2022
$M
2021
$M
2022
$M
2021
$M
2022
$M
2021
$M
2022
$M
2021
$M
6,178.8 4,947.0 1,719.4
1,522.5
878.5
732.9
3,736.5 2,268.1
12,513.1 9,470.5
Investment properties
495.3
1,155.7
–
–
–
–
–
–
495.3
1,155.7
Investments accounted for using the equity method
5,054.0
3,601.7
1,719.4
1,522.5
856.4
711.0
3,726.3
2,243.2
11,356.1
8,078.4
Non–current assets
5,555.1
4,939.3 1,719.4
1,522.5
877.8
727.9
3,726.3
2,243.2
11,878.6
9,432.9
Additions to non–current assets include:
– Investment properties
17.6
22.0
–
–
–
– Investments accounted for using the equity method
509.9
186.0
35.5
33.6
61.9
–
–
–
–
17.6
22.0
415.7
189.4
1,023.0
409.0
Reportable segment liabilities
45.2
44.6
–
–
–
0.6
269.5
124.1
314.7
169.3
93
GOODMAN GROUP
Notes to the consolidated financial statements
Results for the year (continued)
4 Segment reporting (continued)
Reconciliation of reportable segment revenues, profit or loss, assets and liabilities
Revenues
Total revenues for reportable segments
Total revenues for other segments
Consolidated revenues
Profit or loss
Total profit before tax for reportable segments
Property investment earnings
Management earnings
Development earnings1
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 Partnerships
– Reversal of previous impairment
on loans to related parties
– Share of fair value adjustments on derivative
financial instruments in Partnerships
– Share based payments expense
– Straight lining of rental income
and tax deferred adjustments
Profit before interest and tax
Net finance (expense)/income1
Consolidated profit before income tax
Assets
Assets for reportable segments
Cash
Other unallocated amounts2
Consolidated total assets
Liabilities
Liabilities for reportable segments
Interest bearing liabilities
Provisions for dividends/distributions to Securityholders
Other unallocated amounts2
Consolidated total liabilities
Note
Goodman
2022
$M
2021
$M
GIT
2022
$M
2,091.0
0.8
2,091.8
494.6
588.4
960.7
(206.0)
1,837.7
(143.3)
1,694.4
1,988.3
–
1,988.3
411.5
459.1
717.9
(177.1)
1,411.4
(116.9)
1,294.5
57.3
0.8
58.1
422.5
–
–
–
422.5
(59.1)
363.4
2021
$M
69.3
–
69.3
416.3
–
–
–
416.3
(51.7)
364.6
6(e)
6(f)
6(f)
2
15
19
260.1
63.1
208.3
60.2
2,272.9
1,295.8
1,849.0
1,072.1
–
(1.7)
(257.6)
(1.0)
3,967.1
(229.0)
3,738.1
20,103.6
649.4
679.4
21,432.4
935.1
2,832.2
280.0
960.3
5,007.6
–
(28.9)
(268.8)
(3.2)
2,352.5
67.5
2,420.0
15,884.3
514.6
468.1
16,867.0
703.9
2,060.3
277.1
664.2
3,705.5
–
6.7
–
4.9
2,432.3
(231.6)
2,200.7
12,513.3
450.6
3,618.3
16,582.2
314.7
2,825.4
233.5
1,100.9
4,474.5
17.6
(28.3)
–
2.6
1,488.8
135.5
1,624.3
9,470.5
349.6
3,475.2
13,295.3
169.3
2,062.8
166.3
921.0
3,319.4
1. Development earnings include $6.2 million (2021: $7.4 million) of interest income from a loan to a development JV. The interest income is reported under finance income in note 15.
2. 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.
94
ANNUAL REPORT 2022
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.
(a) Amounts recognised in the income statement
Current tax expense recognised in the income statement
Current year
Changes in estimates related to prior years
Current tax expense
Deferred tax expense recognised in the income statement
Origination and reversal of temporary differences
Deferred tax expense
Total income tax expense recognised in the income statement
Goodman
GIT
2022
$M
(142.4)
7.3
(135.1)
(189.0)
(189.0)
(324.1)
2021
$M
(66.3)
8.5
(57.8)
(50.3)
(50.3)
(108.1)
2022
$M
(6.0)
–
(6.0)
(127.1)
(127.1)
(133.1)
2021
$M
(0.9)
–
(0.9)
(48.6)
(48.6)
(49.5)
95
GOODMAN GROUP
Notes to the consolidated financial statements
Results for the year (continued)
5 Taxation (continued)
(b) Reconciliation of profit before income tax to income tax expense
Profit before income tax
Prima facie income tax expense calculated at 30% (2021: 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
– Other non-assessable/(non-deductible) items, net
– Benefit of previously unrecognised temporary differences, including tax losses
– Difference in overseas tax rates
– Changes in estimates related to prior years
– Taxes on Partnership income
– Other items
Income tax expense
GIT
Goodman
2022
$M
3,738.1
(1,121.4)
680.4
(36.8)
168.7
95.7
23.6
7.3
(149.7)
8.1
(324.1)
2021
$M
2,420.0
(726.0)
483.5
(34.3)
135.7
68.9
11.2
8.5
(62.8)
7.2
(108.1)
The income tax expense recorded by GIT relates to withholding taxes on actual distributions and deferred taxes on potential future distributions from
Partnerships. Refer to note 5(e).
(c) Current tax receivables/payables
Goodman
2022
$M
2021
$M
(144.0)
(131.8)
110.5
(135.1)
(0.9)
(169.5)
3.9
(173.4)
(169.5)
41.4
(57.8)
4.2
(144.0)
16.1
(160.1)
(144.0)
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
96
ANNUAL REPORT 2022
(d) Deferred tax assets and liabilities
Deferred tax assets/(liabilities) are attributable to the following:
Investment properties1
LTIP
Other items
Tax assets/(liabilities)
Set off of tax
Net tax assets/(liabilities)
Goodman
2022
2021
2022
2021
Deferred tax assets
Deferred tax liabilities
$M
–
39.3
19.9
59.2
(34.0)
25.2
$M
–
27.3
17.4
44.7
(24.8)
19.9
$M
(403.4)
–
(10.9)
(414.3)
34.0
(380.3)
$M
(182.0)
–
(11.2)
(193.2)
24.8
(168.4)
1.
Including potential future distributions from the disposal of investment properties by Partnerships.
Movements in deferred taxes recognised in expenses and equity are attributable to the following:
Deferred tax (expense)/benefit recognised in expenses
Investment properties – fair value adjustments
LTIP
Other items
Total deferred tax expense recognised in expenses
Deferred tax (expense)/benefit recognised in equity
LTIP
Other items
Total deferred tax (expense)/benefit recognised in equity
Total deferred tax movements recognised in expenses and equity
Goodman
2022
$M
2021
$M
(206.7)
16.2
1.5
(189.0)
(4.2)
–
(4.2)
(193.2)
(50.4)
19.2
(19.1)
(50.3)
8.1
(4.7)
3.4
(46.9)
Deferred tax assets of $266.9 million (2021: $323.3 million) arising primarily from tax losses (revenue and capital in nature) and deductions associated
with the LTIP have not been recognised by Goodman.
GIT
At 30 June 2022, deferred tax liabilities of $267.9 million (2021: $124.0 million) have been recognised in relation to potential future distributions from
the disposal of investment properties by Partnerships.
(e) Taxation of 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.
97
GOODMAN GROUP
Notes to 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 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 two 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 receivables in the statement of financial position.
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.
98
ANNUAL REPORT 2022
(b) Summary of investment in property assets
Inventories
Current
Non-current
Assets held for sale
Investment properties
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
2022
$M
389.0
1,727.1
2,116.1
2021
$M
235.1
1,192.7
1,427.8
9
609.3
41.5
6(e)
6(f)(i)
6(f)(ii)
1,286.6
137.1
1,423.7
7,850.7
6,528.9
14,379.6
18,528.7
1,791.1
60.1
1,851.2
6,302.6
4,357.4
10,660.0
13,980.5
GIT
2022
$M
–
5.9
5.9
–
358.3
137.0
495.3
6,814.4
4,541.7
11,356.1
11,857.3
2021
$M
–
5.9
5.9
–
1,093.4
62.3
1,155.7
5,292.9
2,785.5
8,078.4
9,240.0
At 30 June 2022, the total property assets of $18,528.7 million included properties that have been repositioned and were subject to conditional contracts
for disposal. As discussed in the Directors’ report on page 19, the Group’s share of valuation gains since the repositioning activities commenced, was
$429.6 million (2021: $95.9 million).
(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.
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.
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/or 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. The number of sales and the circumstances of each sale are assessed
to determine whether a market segment is active or inactive.
99
GOODMAN GROUP
Notes to the consolidated financial statements
Operating assets and liabilities (continued)
6 Property assets (continued)
Where a market segment is observed to be active, then external
independent valuations are performed for stabilised investment
properties where there has been a combination of factors that are likely
to have resulted in a material movement in valuation. The considerations
include a greater than 10% movement in market rents, more than a
25 basis point movement in capitalisation rates, a material change in
tenancy profile (including changes in the creditworthiness of a significant
customer that may have a material impact on the property valuation),
significant capital expenditure, a change in use (or zoning), a development
has reached completion/stabilisation of the asset or it has been two 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:
+ Current contractual lease terms
+ Current market rents
+ Projected growth in market rents
+ Expected and likely capital expenditures
+ Projected letting up incentives provided to customers and vacant time
on expiry of leases
+ Discount rates – 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 investment market for industrial, logistics and warehousing
properties has continued to be strong during FY22, despite the increased
interest rates in the last quarter of FY22. At 30 June 2022, 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 overall weighted average capitalisation rates for the divisional
portfolios (including Partnerships) are as set out in the table below:
Total portfolio weighted average capitalisation rate
Division
Australia and New
Zealand
Asia
Continental
Europe
United Kingdom
Americas
Goodman
GIT
2022
%
2021
%
2022
%
2021
%
3.9
4.3
3.5
3.7
4.1
4.4
4.4
3.8
4.1
4.0
3.8
3.8
3.5
–
4.1
4.4
3.9
3.9
–
4.0
In respect of the Group’s and GIT’s directly held investment properties
at 30 June 2022, 57% (2021: 59%) and 100% (2021: 78%), respectively,
had been valued by an external independent valuer during the financial
year. All independent valuers used by the Group are required to hold
a recognised and relevant professional qualification and have recent
experience in the location and category of the investment properties
being valued.
For the Partnerships, all properties bar one that had been stabilised
investment properties throughout FY22 were valued by an external
independent valuer during the financial 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). The stabilised investment property
valuations at 30 June 2022 are most sensitive to the following inputs:
+ Capitalisation rates
+ Market rents
+
Incentives provided to customers and/or vacant time
on expiry of leases.
The directly held stabilised investment properties are in Australia
and Asia. The range of market rents and average capitalisation rates
are summarised in the table below:
Valuation
technique
Significant
unobservable inputs
Income
capitalisation
Range of net market
rents (per square metre
Aper annum)
Capitalisation rate
(weighted average)
2022
2021
$90 to
$450
$90 to
$450
4.4%
4.4%
100
ANNUAL REPORT 2022
The impacts on the Group’s financial position that would arise from the changes in capitalisation rates, market rents and incentives/vacant time 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.
Goodman
GIT
Valuation impact for the Group
Valuation impact for GIT
Directly held
properties
$M
1,286.6
Partnerships1
$M
15,215.0
Directly held
properties
$M
358.3
Partnerships1
$M
11,835.5
(132.9)
(70.1)
78.6
167.5
(70.8)
(35.4)
35.4
70.8
(6.9)
(13.9)
(1,722.6)
(913.4)
1,039.2
2,232.4
(627.6)
(313.8)
313.8
627.6
(30.6)
(61.2)
(41.0)
(21.7)
24.8
53.3
(16.5)
(8.3)
8.3
16.5
(1.4)
(2.8)
(1,367.3)
(725.6)
827.3
1,779.5
(466.2)
(233.1)
233.1
466.2
(20.7)
(41.3)
Book value at 30 June 2022
Changes in capitalisation rates:
Increase in cap rates +50 bps
Increase in cap rates +25 bps
Decrease in cap rates -25 bps
Decrease in cap rates -50 bps
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 incentives/ vacant time +3 months
Increase in incentives/ vacant time +6 months
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
For the directly held investment properties under development, external independent valuations are generally not performed, but instead valuations
are determined at each reporting date using the feasibility assessments supporting the developments. The end values of the developments in the
feasibility assessments are based on assumptions such as capitalisation rates, market rents, incentives provided to customers and vacant time 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 are generally in a market range of 10% to 15%; although for larger more complex projects that
are at an early stage of the development, the profit and risk factor could be up to 35%. 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.
In respect of the Partnerships, certain Partnerships obtain external independent valuations of investment properties under development at reporting
dates. However, the majority determine the fair values at reporting dates by reference to the feasibility assessments, with external independent
valuations obtained when the properties has been stabilised.
101
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
2022
$M
389.0
389.0
1,727.1
1,727.1
2021
$M
235.1
235.1
1,192.7
1,192.7
GIT
2022
$M
–
–
5.9
5.9
2021
$M
–
–
5.9
5.9
During the current and prior financial year, no impairment losses were recognised on land and development properties.
During the financial year, borrowing costs of $3.1 million (2021: $3.8 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
Acquisitions
Capital expenditure
Carrying value of properties disposed
Transfers to assets held for sale
Transfers from/(to) inventories
Net gain from fair value adjustments
Effect of foreign currency translation
Goodman
2022
$M
1,851.2
2021
$M
1,901.2
420.4
27.4
(546.5)
(609.3)
2.5
260.1
17.9
163.0
24.8
(127.8)
(41.5)
(131.5)
63.1
(0.1)
Carrying amount at the end of the year
1,423.7
1,851.2
GIT
2022
$M
1,155.7
–
17.6
(276.9)
(609.3)
–
208.3
(0.1)
495.3
2021
$M
1,202.4
–
22.0
(128.9)
–
–
60.2
–
1,155.7
Analysed by segment:
Australia and New Zealand
Asia
United Kingdom
1,086.9
336.8
–
1,687.3
137.7
26.2
495.3
1,155.7
–
–
–
–
1,423.7
1,851.2
495.3
1,155.7
102
ANNUAL REPORT 2022
Goodman
During the financial year, borrowing costs of $nil (2021: $nil) 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
2022
$M
57.6
47.4
37.9
24.5
15.9
87.0
270.3
2021
$M
80.7
63.9
49.4
38.4
30.1
120.4
382.9
GIT
2022
$M
27.1
20.1
14.8
8.4
5.5
10.9
86.8
2021
$M
45.8
37.0
28.6
21.1
16.8
36.9
186.2
(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.
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 Partnerships are accounted for using the equity method. Under this method, Goodman’s
investment is initially recognised at cost. Subsequent to initial recognition, the consolidated financial statements include Goodman’s share of the gains
or losses and other comprehensive income of Partnerships until the date on which significant influence or joint control ceases.
103
GOODMAN GROUP
Notes to the consolidated financial statements
Operating assets and liabilities (continued)
6 Property assets (continued)
(i)
Investments in associates
Investments in Partnerships classified as associates are set out below:
Goodman
Share of net
results
Ownership
interest
Investment
carrying amount
Share of
net results
GIT
Ownership
interest
Investment
carrying amount
Name of associate
Country of
establishment
2022
$M
2021
$M
2022
%
2021
%
2022
$M
2021
$M
2022
$M
2021
$M
2022
%
2021
%
2022
$M
2021
$M
Property investment
Goodman Australia
Industrial Partnership
(GAIP)
Goodman Australia
Partnership (GAP)
Goodman Property
Trust (GMT)1
Goodman Hong Kong
Logistics Partnership
(GHKLP)
Australia
503.4
366.9
28.6
29.1
3,008.3
2,208.5
503.4
366.9
28.6
29.1
3,008.3
2,208.5
Australia
234.1
192.1
19.9
19.9
1,060.0
850.9
234.1
192.1
19.9
19.9
1,060.0
850.9
New Zealand
150.0
126.7
24.9
22.4
825.9
633.4
31.6
–
5.1
–
170.3
–
Cayman Islands
66.4
137.3
20.3
20.3
1,719.4
1,522.5
66.4
137.3
20.3
20.3
1,719.4
1,522.5
Goodman Japan Core
Partnership (GJCP)2
Japan
47.3
29.8
14.4
14.7
380.7
376.3
–
–
–
–
–
–
Goodman European
Partnership (GEP)
Luxembourg
144.9
140.0
19.8
20.4
856.4
711.0
144.9
140.0
19.8
20.4
856.4
711.0
1,146.1
992.8
7,850.7
6,302.6
980.4
836.3
6,814.4
5,292.9
1.
GMT is listed on the New Zealand Stock Exchange (NZX). At 30 June 2022, the market value of Goodman’s investment in GMT using the quoted price on the last day of trading was $651.7 million
(2021: $676.6 million), which compared to the carrying value of $825.9 million. Goodman does not consider its investment impaired as the carrying value is equal to its share of GMT’s net assets
and is supported by independent valuations of the individual investment properties in GMT.
GIT has a 5.1% ownership interest in GMT and is part of Goodman, which has a combined ownership in GMT of 24.9%. As a result, the Directors have assessed that GIT has significant influence
over GMT and has applied the equity method of accounting for its 5.1% interest.
2. Goodman’s ownership interest in GJCP reflected the weighted average ownership interest in the various property investment vehicles.
104
ANNUAL REPORT 2022
The reconciliation of the carrying amount of investments in Partnerships classified as associates is set out as follows:
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
Goodman
2022
$M
6,302.6
2021
$M
5,617.2
GIT
2022
$M
5,292.9
242.7
914.7
(11.3)
1,146.1
15.0
575.6
(4.9)
–
(193.2)
9.5
261.7
765.8
(34.7)
992.8
0.3
287.2
(3.9)
(79.7)
(318.4)
(192.9)
201.3
790.9
(11.8)
980.4
15.0
605.1
–
–
(155.1)
76.1
2021
$M
4,761.4
225.4
643.3
(32.4)
836.3
0.3
211.6
–
(79.7)
(287.6)
(149.4)
Carrying amount at the end of the year
7,850.7
6,302.6
6,814.4
5,292.9
105
GOODMAN GROUP
Notes to the consolidated financial statements
Operating assets and liabilities (continued)
6 Property assets (continued)
The table below includes further information regarding Partnerships classified as associates, held at the end of the financial year:
GAIP
GAP
GMT
GHKLP
GJCP
GEP
2022
$M
2021
$M
2022
$M
2021
$M
2022
$M
2021
$M
2022
$M
2021
$M
2022
$M
2021
$M
2022
$M
2021
$M
Summarised statement
of financial position
Total current assets
1,081.6
698.4
100.6
61.3
6.1
8.3
187.4
75.0
232.2
227.6
200.2
461.3
Total non–current assets
12,266.3
9,338.5
6,513.1
5,338.1
4,435.0
3,562.2
10,679.1
9,188.4
3,825.8
3,672.8
6,818.2
5,318.4
Total current liabilities
348.9
402.2
142.1
98.9
24.0
113.7
244.9
176.2
231.8
23.7
233.7
456.5
Total non–current liabilities
2,545.6
2,097.3
1,212.3
1,094.9
1,105.8
685.8
2,236.3
1,584.9
1,189.4
1,324.7
2,456.5
1,832.1
Net assets (100%)
10,453.4
7,537.4
5,259.3
4,205.6
3,311.3
2,771.0
8,385.3
7,502.3
2,636.8
2,552.0
4,328.2
3,491.1
Summarised statement
of comprehensive income
Revenue
Profit after tax and
revaluations
459.0
418.1
288.6
256.2
112.1
109.4
287.8
270.9
414.2
189.8
239.0
440.8
1,739.1
1,263.1
1,181.0
964.6
701.7
590.2
326.6
677.1
329.4
189.5
656.1
744.4
Other comprehensive income
–
–
–
–
–
–
74.7
1.5
–
–
–
–
Total comprehensive
income (100%)
Goodman
Consolidated
ownership interest
Consolidated
share of net assets
Other items, including
capitalised costs
Distributions receivable1
Carrying amount
of investment
Distributions received
and receivable
GIT
Consolidated
ownership interest
Consolidated
share of net assets
Other items, including
capitalised costs
Distributions receivable1
Carrying amount
of investment
Distributions received
and receivable
1,739.1
1,263.1
1,181.0
964.6
701.7
590.2
401.3
678.6
329.4
189.5
656.1
744.4
28.6%
29.1%
19.9%
19.9%
24.9%
22.4%
20.3%
20.3%
14.4%
14.7%
19.8%
20.4%
2,990.7
2,190.9
1,047.2
837.3
825.7
621.1
1,706.2
1,521.2
380.8
376.2
856.4
711.0
0.1
17.5
1.2
16.4
–
12.8
0.3
13.3
0.2
–
12.3
–
1.3
11.9
1.3
–
(0.1)
–
0.1
–
–
–
–
–
3,008.3
2,208.5
1,060.0
850.9
825.9
633.4
1,719.4
1,522.5
380.7
376.3
856.4
711.0
66.3
66.2
25.1
24.1
17.8
14.7
35.5
33.6
20.3
16.1
28.2
163.7
28.6%
29.1%
19.9%
19.9%
5.1%
–
20.3%
20.3%
2,990.7
2,190.9
1,047.2
837.3
169.6
–
1,706.2
1,521.2
0.1
17.5
1.2
16.4
–
12.8
0.3
13.3
0.7
–
3,008.3
2,208.5
1,060.0
850.9
170.3
66.3
66.2
25.1
24.1
–
–
–
–
–
1.3
11.9
1.3
–
1,719.4
1,522.5
35.5
33.6
–
–
–
–
–
–
–
–
–
–
–
–
19.8%
20.4%
856.4
711.0
–
–
–
–
856.4
711.0
28.2
163.7
1.
Distributions receivable related to distributions provided for but not paid by the Partnerships at 30 June 2022. This was applicable to trusts in Australia where unitholders were presently entitled to
income at the end of the financial year.
106
ANNUAL REPORT 2022
(ii)
Investments in JVs
A summary of the results and ownership interests of principal Partnerships classified as JVs is 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 JV
Country of
establishment
2022
$M
2021
$M
2022
%
2021
%
2022
$M
2021
$M
2022
$M
2021
$M
2022
%
2021
%
2022
$M
2021
$M
Property investment
and development
Goodman China
Logistics Partnership
(GCLP)
Cayman
Islands
56.8
65.2
20.0
20.0
918.0
832.7
United Kigdom
213.4
32.9
35.3
33.3
676.3
404.0
–
–
–
–
–
–
–
–
–
–
–
–
Goodman UK
Partnership (GUKP)1
Goodman North
America Partnership
(GNAP)
Other JVs2
United States
of America
938.6
379.5
55.0
55.0 3,846.0
2,310.6
904.4
365.7
53.0
53.0 3,706.4
2,226.8
363.3
238.5
1,572.1
716.1
1,088.6
810.1
288.2
171.8
6,528.9 4,357.4
1,192.6
537.5
835.3
558.7
4,541.7
2,785.5
1. The consolidated ownership interest in GUKP reflected the weighted average ownership in GUKP, GUKP II and GUKP III.
2. Other JVs included a development JV in Australia where GAIP has paid Goodman a refundable fee of $22.6 million for an option to acquire a 40% interest in the JV from the Group. At 30 June 2022,
the transaction is conditional on certain matters and settlement would only occur on stabilisation of certain development properties in the JV. Therefore, the disposal transaction had not
been reflected in the Group’s results at 30 June 2022. The investment carrying amount at 30 June 2022 and the Group’s share of the fair value adjustment attributable to the properties in the
JV for the year ended 30 June 2022 were aligned with to the disposal price under the option deed.
107
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 Partnerships classified as JVs is set out as follows:
Goodman
GIT
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
Acquisitions
Disposals
Transfer on reclassification as a controlled entity
Capital return
Distributions received and receivable
Effect of foreign currency translation
Carrying amount at the end of the year
2022
$M
4,357.4
204.3
1,358.2
9.6
1,572.1
7.2
696.8
(3.4)
(15.6)
(91.8)
(248.7)
254.9
6,528.9
2021
$M
3,753.6
180.3
530.0
5.8
716.1
2.9
449.7
(8.1)
–
(176.6)
(218.0)
(162.2)
4,357.4
2022
$M
2,785.5
116.0
1,058.1
18.5
1,192.6
–
417.9
–
–
(20.9)
(83.8)
250.4
4,541.7
2021
$M
2,386.9
104.6
428.8
4.1
537.5
–
197.4
(8.1)
–
(86.4)
(85.0)
(156.8)
2,785.5
108
ANNUAL REPORT 2022
The table below includes further information regarding principal Partnerships classified as JVs, held at the end of the financial year:
Summarised statement of financial position
Current assets
Cash and cash equivalents
Other current assets
Total current assets
Total non–current assets
Current liabilities
Other current liabilities
Total current liabilities
Non–current liabilities
Financial liabilities
Other non–current liabilities
Total non–current liabilities
Net assets (100%)
Summarised statement
of comprehensive income
Revenue
Net finance (expense)/income
Income tax expense
Profit after tax and revaluations
Other comprehensive income/(loss)
Total comprehensive income (100%)
Goodman
Consolidated ownership interest
Consolidated share of net assets
Shareholder loan1
Other items, including capitalised costs
Distributions receivable
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
GCLP1
2022
$M
2021
$M
GUKP
2022
$M
2021
$M
GNAP
2022
$M
2021
$M
427.4
148.3
575.7
6,303.3
281.3
84.4
365.7
5,537.5
2,940.6
2,940.6
2,796.4
2,796.4
1,111.8
718.3
1,830.1
2,108.3
215.0
(20.3)
(46.3)
283.8
36.2
320.0
757.7
613.7
1,371.4
1,735.4
193.6
(19.2)
(37.4)
326.2
(12.8)
313.4
20.0%
20.0%
421.7
492.9
3.4
–
918.0
7.3
–
–
–
–
–
–
347.1
482.3
3.3
–
832.7
6.1
–
–
–
–
–
–
41.1
12.9
54.0
2,421.8
24.7
24.7
537.8
–
537.8
1,913.3
39.8
(1.0)
(0.2)
575.6
–
575.6
35.3%
676.0
–
0.3
–
676.3
43.4
1,490.3
1,533.7
–
75.0
56.8
131.8
8,270.0
36.1
36.1
273.8
273.8
287.0
–
287.0
1,210.6
1,144.3
–
1,144.3
6,983.7
28.5
(3.7)
–
98.7
–
98.7
33.3%
403.5
–
0.5
–
404.0
250.0
14.9
(0.4)
1,706.6
–
1,706.6
55.0%
3,841.0
–
5.0
–
3,846.0
62.8
33.7
96.5
4,846.1
102.8
102.8
640.3
6.7
647.0
4,192.8
181.7
6.4
(0.5)
690.0
–
690.0
55.0%
2,306.0
–
4.6
–
2,310.6
3.9
4.6
68.9
57.8
–
–
–
–
–
–
–
–
–
–
–
–
53.0%
53.0%
3,701.4
5.0
–
3,706.4
2,222.2
4.6
–
2,226.8
66.4
55.7
1.
Shareholder loans have been provided by investors of GCLP in proportion to their ownership interest. The shareholder loans are interest free and 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 $1,333.2 million (2021: $721.5 million) and total other comprehensive
income was $nil (2021: $nil). With respect to GIT’s other JVs, the total profit after tax and revaluations was $1,024.5 million (2021: $460.1 million) and total
other comprehensive income was $nil (2021: $nil).
109
GOODMAN GROUP
Notes to the consolidated financial statements
Operating assets and liabilities (continued)
7 Receivables
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.
Current
Trade receivables
Tax receivables
Other receivables
Amounts due from related parties1
Loans to related parties1
Non–current
Other receivables
Loans to related parties1
Goodman
2022
$M
2021
$M
7.8
3.9
123.1
83.0
–
217.8
5.9
167.5
173.4
16.4
16.1
197.2
101.6
–
331.3
7.1
270.4
277.5
2022
$M
0.1
–
3.8
–
127.1
131.0
–
3,137.4
3,137.4
GIT
2021
$M
0.1
1.4
5.8
0.1
808.7
816.1
–
2,528.5
2,528.5
1. Refer to note 24 for details of amounts due from and loans to related parties.
Goodman assessed the receivables balances at 30 June 2022 for expected credit losses (risk of non-payment). The level of provisioning was not
significant in the context of the Group’s financial position.
110
ANNUAL REPORT 2022
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 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
Receivables, 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:
Goodman
2022
$M
2021
$M
111.7
77.6
4.7
–
143.6
80.9
5.0
1.0
Balance at the beginning of the year
Increase due to changes in the measure
of progress during the year
Transfers from contract assets to receivables
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
Effect of foreign currency translation
Balance at the end of the year
Current contract assets and liabilities
Non–current contract liabilities
Contract
assets
$M
80.9
476.9
(480.5)
–
–
0.3
77.6
77.6
–
77.6
Goodman
2022
2021
Contract
liabilities
$M
6.0
Contract
assets
$M
25.7
Contract
liabilities
$M
13.8
–
–
(1.6)
0.1
0.2
4.7
4.7
–
4.7
237.5
(182.3)
–
–
–
80.9
80.9
–
80.9
–
–
(7.7)
0.1
(0.2)
6.0
5.0
1.0
6.0
111
GOODMAN GROUP
Notes to the consolidated financial statements
Operating assets and liabilities (continued)
8 Contract balances (continued)
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
$nil (2021: $12.5 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.
9 Assets held for sale
In June 2022, the Group entered into a conditional contract to dispose
of three controlled entities which own two investment properties. As the
conditions under the contracts had not been satisfied as at 30 June 2022,
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 2022, the disposal group was held at the lower of carrying
amount and fair value less costs to sell, and comprised the following
assets and liabilities within the Australia and New Zealand segment:
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 AUM, total
development project costs or gross property income of Partnerships and
are invoiced as the services are provided.
Receivables
Investment properties
Payables
Assets held for sale
$M
2.5
609.3
(3.6)
608.2
No impairment losses have been recognised in FY22 in respect of the
disposal group.
In the prior year, assets held for sale amounting to $41.5 million comprised
an investment property in Australia. The disposal of the investment
property was completed in FY22.
112
ANNUAL REPORT 2022
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
GIT
2022
$M
76.4
525.4
4.7
–
2021
$M
73.1
487.8
5.0
–
606.5
565.9
111.0
–
–
111.0
124.5
1.0
–
125.5
2022
$M
7.9
61.5
–
3.3
72.7
3.3
–
720.5
723.8
2021
$M
7.1
51.3
–
549.2
607.6
3.7
–
228.5
232.2
1. Refer to note 24 for details of loans from related parties.
11 Provisions
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.
Note
19
Current
Dividends/distributions to Securityholders
Other
Non–current
Defined benefit retirement schemes in the United Kingdom
Other
Goodman
2022
$M
280.0
19.2
299.2
13.9
1.6
15.5
2021
$M
277.1
17.1
294.2
22.0
1.7
23.7
GIT
2022
$M
233.5
–
233.5
–
–
–
2021
$M
166.3
–
166.3
–
–
–
113
GOODMAN GROUP
Notes to the consolidated financial statements
Operating assets and liabilities (continued)
12 Property, plant and equipment
Information about leases for which Goodman is a lessee is detailed below:
2022
$M
2021
$M
453.3
568.0
42.4
1,063.7
359.2
340.3
39.6
739.1
12.5
58.1
70.6
11.9
82.1
94.0
2022
$M
338.4
12.6
1.0
14.4
2021
$M
402.9
15.1
1.0
18.8
Property, plant and equipment at cost
Accumulated amortisation
Property, plant and equipment
at net book value1
2022
$M
147.0
(85.6)
2021
$M
128.7
(74.1)
Right of use assets
Inventories
Investment properties
61.4
54.6
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
1. Refer to note 13 for property, plant and equipment held as a lessee.
13 Leases
Goodman leases office buildings, motor vehicles and office equipment.
Certain investment properties and developments classified as inventories
are also built on land held under leasehold interests.
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 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 Goodman will be reasonably certain to exercise
an extension or termination option.
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. Right of use assets that meet the definition of
investment property are carried at fair value in accordance with note 6(a).
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.
114
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.
ANNUAL REPORT 2022
Impairment
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 is set out by below:
Goodwill
Management rights
Goodman
2022
$M
685.6
109.8
795.4
2021
$M
715.2
107.4
822.6
115
GOODMAN GROUP
Notes to the consolidated financial statements
Operating assets and liabilities (continued)
14 Goodwill and intangible assets (continued)
The carrying value of goodwill and intangible assets is analysed by division in the table below:
Analysed:
Goodwill
Continental Europe
United Kingdom
Other
Subtotal – goodwill
Management rights
Continental Europe
Other
Subtotal – management rights
Total
2022
$M
2021
$M
577.0
86.6
22.0
685.6
32.7
77.1
109.8
795.4
601.4
90.5
23.3
715.2
34.1
73.3
107.4
822.6
A reconciliation of the movement in the cost of goodwill and management rights during the 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
2020
$M
Effect of
foreign
currency
translation
$M
Balance at
30 June
2021
$M
Effect of
foreign
currency
translation
$M
Balance at
30 June
2022
$M
Disposals
$M
628.6
127.9
33.7
790.2
35.3
87.2
122.5
912.7
(19.6)
3.1
(2.8)
(19.3)
(1.2)
(2.5)
(3.7)
(23.0)
609.0
131.0
30.9
770.9
34.1
84.7
118.8
889.7
–
–
–
–
–
(10.9)
(10.9)
(10.9)
(24.7)
(5.6)
(1.6)
(31.9)
(1.4)
3.3
1.9
(30.0)
584.3
125.4
29.3
739.0
32.7
77.1
109.8
848.8
A reconciliation of the movement in the impairment losses during the year is set out below:
Balance at
30 June
2020
$M
Effect of
foreign
currency
translation
$M
Balance at
30 June
2021
$M
Effect of
foreign
currency
translation
$M
Balance at
30 June
2022
$M
Disposals
$M
7.8
39.5
7.8
55.1
11.8
11.8
66.9
(0.2)
1.0
(0.2)
0.6
(0.4)
(0.4)
0.2
7.6
40.5
7.6
55.7
11.4
11.4
67.1
–
–
–
–
(10.9)
(10.9)
(10.9)
(0.3)
(1.7)
(0.3)
(2.3)
(0.5)
(0.5)
(2.8)
7.3
38.8
7.3
53.4
–
–
53.4
Impairment losses
Goodwill
Continental Europe
United Kingdom
Other
Subtotal – goodwill
Management rights
Other
Subtotal – management rights
Total
116
ANNUAL REPORT 2022
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.
Value in use
The value in use for both Continental Europe and the United Kingdom are consistent with the prior years. The Group’s strategy remains the same with
assets focused on core infill locations.
Value in use (A$M)
Key assumptions
Pre-tax discount rate (per annum)
Average annual development (million square metres)
Average annual growth in AUM
Continental Europe
United Kingdom
2,444.3
2,344.9
191.8
161.1
Continental Europe
United Kingdom
11.6%
9.7%
0.60
0.60
7.7%
8.0%
11.9%
9.6%
0.12
0.16
13.2%
21.6%
2022
2021
2022
2021
2022
2021
2022
2021
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 five-year forecast period.
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.
117
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 0.60 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$1.28 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 0.12 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$0.51 billion per annum.
Sources of funding for development activity
Capital inflows required to fund acquisitions and development activity in both divisions are assumed to arise from the following sources: equity investment
directly into Partnerships (including distribution reinvestment plans) by Goodman and its investment partners (in some cases, the projections assume future
equity investment will be greater than existing commitments); lending facilities advanced to Partnerships; debt capital markets; customer-funded turnkey
developments; and proceeds from disposals of assets. It is not practicable to determine the percentage of the total which will flow from each source.
Funds available to Goodman and its investment partners are assumed to be sourced from available global markets and are not limited to lending
markets in the regions to which the relevant intangible asset relates.
AUM
For Continental Europe, the average annual increase in AUM of 7.7% (2021: 8.0%) over the forecast period is consistent with the prior year assumption.
The projected AUM assumes that most of the development over the forecast period is for Partnerships. For the purpose of the value in use
assessments, property values are expected to be stable over the period and no portfolio performance revenue is assumed.
For United Kingdom, the average annual increase in AUM of 13.2% (2021:21.6%) is lower than the prior year forecast due to the stabilisation of
developments during FY22 i.e. a higher starting AUM position. The UK Partnerships are developing several sites that underpin the projected growth
over the five-year period. For the purpose of the forecasts, property values are expected to be stable over the period.
Assumptions impacting the terminal year
Growth rate applied to future cash flows (per annum)
Development in terminal year (million square metres)
Development in terminal year (cost in A$B)
Continental Europe
United Kingdom
2022
2021
2022
2021
2022
2021
2.3%
0.4%
0.60
0.60
1.34
0.92
2.8%
1.5%
0.14
0.19
0.55
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.
118
ANNUAL REPORT 2022
CAPITAL MANAGEMENT
The notes in this section focus on Goodman’s 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
Interest expense from third party loans, overdrafts and derivatives
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
Goodman
2022
$M
2021
$M
GIT
2022
$M
2021
$M
6.5
1.8
–
–
8.3
(42.4)
–
(9.5)
(189.7)
(0.3)
10.8
(231.1)
(222.8)
8.1
2.3
83.9
–
94.3
(18.3)
–
(7.4)
–
(0.4)
6.7
(19.4)
74.9
72.3
0.5
–
–
72.8
(38.2)
(9.7)
(5.3)
(181.5)
(69.7)
–
(304.4)
(231.6)
69.1
1.4
104.0
3.4
177.9
(25.9)
(11.7)
(4.8)
–
–
–
(42.4)
135.5
1.
Borrowing costs were capitalised to inventories and investment properties under development during the year at rates between 0.95% and 4.85% per annum (2021: 0.92% and 4.0% per annum).
119
GOODMAN GROUP
Notes to the consolidated financial statements
Capital management (continued)
Interest bearing liabilities
16
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:
– Foreign private placement
Non–current
Secured:
– Bank loans
Unsecured:
– Bank loans
– USD denominated notes
– EUR denominated notes
– Foreign private placement
Borrowing costs
(a) Bank loans
Secured
Goodman
Note
2022
$M
2021
$M
GIT
2022
$M
2021
$M
16(d)
133.3
133.3
16(a)
9.0
16(a)
16(b)
16(c)
16(d)
–
1,953.1
758.3
–
(21.5)
–
–
–
–
1,133.8
790.3
150.1
(13.9)
133.3
133.3
–
–
1,953.1
758.3
–
(19.3)
–
–
–
–
1,133.8
790.3
150.1
(11.4)
2,698.9
2,060.3
2,692.1
2,062.8
As at 30 June 2022, Goodman and GIT had the following secured bank facilities:
Facility maturity date
13 May 20261
13 May 20261
13 May 20271
18 March 2034
Total at 30 June 2022
Total at 30 June 2021
Goodman
GIT
Facility limit
$M
Amounts
drawn
$M
Facility limit
$M
Amounts
drawn
$M
65.0
65.0
130.0
28.2
288.2
–
–
–
–
9.0
9.0
–
65.0
65.0
130.0
–
260.0
–
–
–
–
–
–
–
1. These facilities, amounting to $260.0 million, are held by a controlled entity that is part of a disposal group at 30 June 2022. The facilities are secured against investment properties that also form
part of the disposal group. Refer to note 9.
120
ANNUAL REPORT 2022
Goodman
GIT
Facility limit
$M
Amounts
drawn
$M
Facility limit
$M
Amounts
drawn
$M
100.0
70.0
30.0
85.2
160.0
100.0
144.7
160.0
54.3
37.5
150.0
150.0
113.7
70.0
30.0
1,455.4
1,045.7
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
100.0
70.0
30.0
–
–
100.0
144.7
–
54.3
37.5
150.0
150.0
113.7
70.0
30.0
1,050.2
589.4
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Unsecured
As at 30 June 2022, Goodman and GIT had the following unsecured bank facilities:
Facility maturity date
31 December 2024
31 March 2025
31 March 2025
31 March 2026
31 March 2026
1 July 2026
31 July 2026
30 September 2026
30 September 2026
30 September 2026
21 October 2026
22 October 2026
31 December 2026
30 June 2027
30 June 2027
Total at 30 June 2022
Total at 30 June 2021
The majority of the unsecured bank loans are multi-currency facilities.
(b) USD denominated notes
As at 30 June 2022, Goodman and GIT had notes on issue in the US144A/Regulation S bond market as follows:
Maturity date
15 Mar 2028
04 May 2032
15 October 2037
Carrying amount at 30 June 2022
Carrying amount at 30 June 2021
(c) EUR denominated notes
Carrying amount
A$M
759.5
723.4
470.2
1,953.1
1,133.8
US$M
525.0
500.0
325.0
1,350.0
850.0
Coupon
(fixed) per
annum
3.70%
4.63%
4.50%
As at 30 June 2022, Goodman and GIT had A$758.3 million (2021: A$790.3 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.
(d) Foreign private placement
As at 30 June 2022, Goodman and GIT had A$133.3 million (2021: A$150.1 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.
121
GOODMAN GROUP
Notes to the consolidated financial statements
Capital management (continued)
16 Interest bearing liabilities (continued)
(e) Finance facilities
30 June 2022
Secured:
– Bank loans1
Unsecured:
– Bank loans
– USD denominated notes
– EUR denominated notes
– Foreign private placement
– Bank guarantees2
30 June 2021
Unsecured:
– Bank loans
– USD denominated notes
– EUR denominated notes
– Foreign private placement
– Bank guarantees2
Goodman
GIT
Facilities
available1
$M
Facilities
utilised
$M
Facilities
available1
$M
Facilities
utilised
$M
288.2
9.0
260.0
1,455.4
1,953.1
758.3
133.3
–
–
1,953.1
758.3
133.3
7.3
1,050.2
1,953.1
758.3
133.3
–
–
–
1,953.1
758.3
133.3
7.3
4,588.3
2,861.0
4,154.9
2,852.0
1,045.7
1,133.8
790.3
150.1
–
–
1,133.8
790.3
150.1
32.7
589.4
1,133.8
790.3
150.1
–
–
1,133.8
790.3
150.1
32.7
3,119.9
2,106.9
2,663.6
2,106.9
1. Facilities available under secured bank loans include $260.0 million of unutilised loans held by a controlled entity that is part of a disposal group at 30 June 2022. Refer to note 9.
2. 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.
122
ANNUAL REPORT 2022
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 (FRM) 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.
Other financial assets
Current
Derivative financial instruments1
Non-current
Derivative financial instruments1
Investment in unlisted securities, at fair value
Goodman
2022
$M
1.6
1.6
482.8
13.6
496.4
2021
$M
16.5
16.5
354.5
8.3
362.8
GIT
2022
$M
1.6
1.6
341.3
31.8
373.1
2021
$M
16.5
16.5
292.4
22.0
314.4
1.
Includes fair values of derivative financial instruments equating to $133.3 million (2021: $134.1 million) that hedge Goodman’s net investments in Continental Europe and the United Kingdom.
Other financial liabilities
Current
Derivative financial instruments1
Non-current
Derivative financial instruments1
Goodman
GIT
2022
$M
71.2
71.2
447.7
447.7
2021
$M
1.9
1.9
211.5
211.5
2022
$M
25.9
25.9
2021
$M
1.9
1.9
325.3
325.3
124.6
124.6
1.
Includes fair values of derivative financial instruments equating to $79.6 million (2021: $62.3 million) that hedge Goodman’s net investments in Continental Europe and the United Kingdom.
123
GOODMAN GROUP
Notes to the consolidated financial statements
Capital management (continued)
18 Financial risk management
The Directors have ultimate responsibility for Goodman’s 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 policy 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 policy 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.
(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.
124
ANNUAL REPORT 2022
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.
As at 30 June 2022, the principal that was used to hedge its exposures using derivatives and the weighted average exchange rates, by currency, are
set out below:
Goodman
AUD receivable/NZD payable
2022
2021
Amounts
payable
Amounts
receivable
Weighted
average
exchange
rate
Amounts
payable
Amounts
receivable
Weighted
average
exchange
rate
NZD’M
(750.0)
HKD’M
AUD’M
AUD/NZD
696.4
1.0775
AUD’M
AUD/HKD
NZD’M
(600.0)
HKD’M
AUD’M
AUD/NZD
557.3
1.0771
AUD’M
AUD/HKD
AUD receivable/HKD payable
(8,340.0)
1,466.9
5.6976
(7,490.0)
1,301.8
5.7659
AUD receivable/EUR payable
AUD receivable/GBP payable
EUR’M
(825.0)
GBP’M
(380.0)
USD’M
AUD’M
AUD/EUR
1,314.0
0.6283
AUD’M
AUD/GBP
703.4
0.5403
AUD’M
AUD/USD
AUD receivable/USD payable
(1,050.0)
1,455.5
0.7221
JPY’M
AUD’M
AUD/JPY
EUR’M
(675.0)
GBP’M
(330.0)
USD’M
(650.0)
JPY’M
AUD’M
AUD/EUR
1,086.7
0.6214
AUD’M
AUD/GBP
587.6
0.5635
AUD’M
AUD/USD
894.7
0.7276
AUD’M
AUD/JPY
AUD receivable/JPY payable
(23,000.0)
297.2
77.5413
(23,000.0)
297.2
77.5413
USD receivable/CNY payable
(4,258.6)
539.6
7.8927
(4,545.2)
600.0
7.5753
CNY’M
USD’M
USD/CNY
CNY’M
USD’M
USD/CNY
125
GOODMAN GROUP
Notes to the consolidated financial statements
Capital management (continued)
18 Financial risk management (continued)
GIT
2022
2021
Amounts
payable
Amounts
receivable
Weighted
average
exchange
rate
Amounts
payable
Amounts
receivable
Weighted
average
exchange
rate
AUD receivable/NZD payable
(450.0)
416.3
1.0814
HKD’M
AUD’M
AUD/HKD
NZD’M
AUD’M
AUD/NZD
NZD’M
(600.0)
HKD’M
AUD’M
AUD/NZD
557.3
1.0771
AUD’M
AUD/HKD
AUD receivable/HKD payable
(7,190.0)
1,264.6
5.6981
(6,990.0)
1,217.8
5.7523
EUR’M
AUD’M
AUD/EUR
EUR’M
AUD’M
AUD/EUR
AUD receivable/EUR payable
AUD receivable/GBP payable
(50.0)
75.7
0.6605
GBP’M
AUD’M
AUD/GBP
(125.0)
228.9
0.5460
USD’M
AUD’M
AUD/USD
AUD receivable/USD payable
(600.0)
820.9
0.7318
JPY’M
AUD’M
AUD/JPY
–
GBP’M
(330.0)
USD’M
(200.0)
JPY’M
–
–
AUD’M
AUD/GBP
587.6
0.5635
AUD’M
AUD/USD
260.2
0.7688
AUD’M
AUD/JPY
AUD receivable/JPY payable
(17,000.0)
225.3
75.4506
(17,000.0)
225.3
75.4506
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 (2021: USD 257.3 million) and pay GBP 53.8 million to GL (2021: GBP 183.9 million).
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$107.9 million (2021: A$72.9 million decrease) for Goodman and A$48.1 million (2021: A$28.6 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$107.9 million (2021: A$72.9 million increase) for Goodman and
A$48.1 million (2021: A$28.6 million) for GIT.
Interest rate risk
Goodman’s interest rate risk arises from variable rate borrowings and the Group’s CCIRS that hedge the overseas investments. Goodman adopts
a policy of hedging such that between 60% and 100% of its current year exposure to changes in interest rates on borrowings is on a fixed rate basis.
Goodman enters into interest rate derivatives (IRD), comprising both interest rate swaps and interest rate caps, to manage cash flow risks associated
with the interest rates on borrowings that are floating. The IRD contracts are for 90-day intervals and involve quarterly payments or receipts of the
net amount of interest.
126
ANNUAL REPORT 2022
As at 30 June 2022, Goodman and GIT’s fixed and floating interest rate exposure (by principal) based on existing interest bearing liabilities and
derivative financial instruments is set out below:
Goodman
30 June 2022
Fixed rate liabilities
Floating rate liabilities
30 June 2021
Fixed rate liabilities
Floating rate liabilities
GIT
30 June 2022
Fixed rate liabilities
Floating rate liabilities
30 June 2021
Fixed rate liabilities
Floating rate liabilities
Interest bearing
liabilities
A$M
2,844.7
9.0
2,853.7
2,074.2
–
2,074.2
Interest bearing
liabilities
A$M
A$M
2,844.7
–
2,844.7
2,074.2
–
2,074.2
Impact of derivatives
CCIRS
A$M
–
(75.6)
(75.6)
–
(123.6)
(123.6)
Impact of derivatives
CCIRS
A$M
A$M
–
3.0
3.0
–
(71.6)
(71.6)
IRD
A$M
747.1
(747.1)
–
(101.4)
101.4
–
IRD
A$M
A$M
(539.8)
539.8
–
(575.6)
575.6
–
Net interest
rate exposure
A$M
3,591.8
(813.7)
2,778.1
1,972.8
(22.2)
1,950.6
Net interest
rate exposure
A$M
A$M
2,304.9
542.8
2,847.7
1,498.6
504.0
2,002.6
As a result of the fixed rate interest bearing liabilities and derivative financial instruments that existed at 30 June 2022, Goodman and GIT would have
the following fixed interest rate exposure (by principal) at the end of each of the next five financial years. This assumes all interest bearing liabilities and
derivative financial instruments mature in accordance with current contractual terms.
Goodman
Number of years post balance date
1 year
2 years
3 years
4 years
5 years
GIT
Number of years post balance date
1 year
2 years
3 years
4 years
5 years
2022
2021
Fixed
interest rate
(by principal)
A$M
3,716.6
3,826.1
3,107.3
2,160.9
1,368.3
Weighted average
interest rate
% per annum
2.12
2.06
2.51
3.22
4.43
Fixed
interest rate
(by principal)
A$M
1,951.0
2,075.2
2,176.4
1,900.8
1,065.2
Weighted average
interest rate
% per annum
2.15
2.12
1.97
2.29
3.36
2022
2021
Fixed
interest rate
(by principal)
A$M
2,502.1
2,674.5
2,651.1
1,836.2
1,111.4
Weighted average
interest rate
% per annum
3.01
2.80
2.84
3.70
5.33
Fixed
interest rate
(by principal)
A$M
1,476.9
1,601.0
1,767.9
1,742.8
907.1
Weighted average
interest rate
% per annum
2.99
2.89
2.54
2.53
4.00
127
GOODMAN GROUP
Notes to the consolidated financial statements
Capital management (continued)
18 Financial risk management (continued)
Sensitivity analysis
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 per annum
higher/lower, with all other variables held constant, the profit attributable
to Securityholders would have increased/decreased by A$8.1 million
(2021: increased/decreased by A$0.2 million) for Goodman and
decreased/increased by A$5.4 million (2021: decreased/increased
by A$5.0 million) for GIT.
Managing interest rate benchmark reform and associated risks
A fundamental reform of major interest rate benchmarks is being
undertaken globally, including the replacement of some interbank
offered rates (IBORs) with alternative risk-free rates (referred to as IBOR
reform). The Group has exposure to IBORs through certain of its bank
loans (interest bearing liabilities) and its derivative instruments (IRD and
CCIRS). Most of the Group’s external interest bearing liabilities are bonds
with fixed coupons and are not exposed to IBORs. The Group’s derivative
instruments are governed by contracts based on the International Swaps
and Derivatives Association (ISDA) master agreements.
The United Kingdom, Japan and the United States had announced
plans to discontinue using London Interbank Offered Rate (LIBOR) by
31 December 2021. The alternative reference rate for sterling LIBOR
is the Sterling Overnight Index Average rate, for Japanese yen LIBOR
is the Tokyo Overnight Average Rate and for US dollar LIBOR is the
Secured Overnight Financing Rate. Amendments to the Group’s
financial instruments with contractual terms indexed to sterling LIBOR
or Japanese yen LIBOR, such that they incorporate the new benchmark
rates, were completed by 31 December 2021. Although US dollar LIBOR
was planned to be discontinued by the end of 2021, in November 2020
the Intercontinental Exchange Benchmark Administration, the Financial
Conduct Authority-regulated and authorised administrator of LIBOR,
announced that it had started to consult on its intention to cease the
publication of certain US dollar LIBORs after June 2023. It is still unclear
when the announcement that will set a date for the termination of the
publication of US dollar LIBOR will take place. Nevertheless, the Group
has finished the process of implementing appropriate fallback provisions
for all US dollar LIBOR indexed exposures.
For Goodman’s other IBOR exposures, the transition to alternative
risk-free rates has been deferred and/or extended and therefore no action
has been or will be taken in that regard until such time as the alternative
reference rates are defined and scheduled. It is expected that these
will follow the conventions established in other markets and the Group
will apply the same principles for those transitions as and when they
become relevant.
The table below details the Group’s exposure at 30 June 2022 to
significant IBORs subject to reform that have yet to transition to alternate
benchmark rates:
IRD
CCIRS
USD LIBOR
Notional amount
Goodman
$M
GIT
$M
900.0
500.0
2,330.0
1,430.0
3,230.0
1,930.0
The exposure disclosed is for derivatives with contractual maturities
after 30 June 2022. Derivative exposure has been reported using the
notional contract amount and where derivatives such as CCIRS have
both a receiver and a payer leg with exposure to IBOR reform, the notional
contract amount is disclosed for both legs.
(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
or potential breaches of financial covenants in its loan arrangements.
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.
128
ANNUAL REPORT 2022
The contractual maturities of financial liabilities are set out below:
Carrying
amount
Contractual
cash flows
Less than
1 year
$M
$M
$M
1-2
year(s)
$M
2-3
years
$M
3-4
years
$M
4-5
years
More than
5 years
$M
$M
USD denominated notes, unsecured
1,953.1
2,822.9
EUR denominated notes, unsecured
Foreign private placement, unsecured
758.3
133.3
799.9
137.7
712.8
70.6
9.0
712.8
121.6
9.0
601.8
12.5
–
139.2
18.3
137.7
58.2
14.2
–
82.7
10.4
–
26.4
76.5
–
82.7
10.4
–
17.6
4.1
–
82.7
760.8
–
8.8
3.9
–
–
10.4
9.0
82.7
2,352.9
–
–
–
–
Total non–derivative financial liabilities
3,637.1
4,603.9
909.5
165.5
196.0
865.2
95.4
2,372.3
33.8
35.3
14.0
5.7
22.2
8.2
3.5
(18.3)
0.7
–
(1,565.0)
(249.5)
1,113.4
218.5
(411.0)
329.5
(257.1)
169.6
(310.8)
189.7
(171.2)
156.4
(165.5)
49.7
34.5
(416.3)
(17.0)
(75.8)
(65.3)
(112.9)
(11.3)
(134.1)
Goodman
As at 30 June 2022
Non–derivative financial liabilities
Payables (excluding contract liabilities)
Lease liabilities
Bank loans, secured1
Derivative financial (assets)/liabilities – net
Net settled2
Gross settled3:
(Inflow)
Outflow
Total derivative financial
(assets)/liabilities – net
As at 30 June 2021
Non–derivative financial liabilities
Payables (excluding contract liabilities)
Lease liabilities
USD denominated notes, unsecured
EUR denominated notes, unsecured
Foreign private placement, unsecured
685.4
94.0
1,133.8
790.3
150.1
685.4
179.2
1,625.3
836.5
158.9
560.9
11.9
45.4
10.9
5.0
61.9
7.9
45.4
10.9
153.9
280.0
31.3
6.3
45.4
10.9
–
93.9
20.9
6.8
45.4
10.9
–
10.4
6.3
45.4
792.9
–
–
140.0
1,398.3
–
–
84.0
855.0
1,538.3
Total non–derivative financial liabilities
2,853.6
3,485.3
634.1
Derivative financial (assets)/liabilities – net
Net settled2
Gross settled3:
(Inflow)
Outflow
Total derivative financial
(assets)/liabilities – net
(18.9)
(17.8)
(36.8)
0.8
10.2
16.9
(1.2)
(7.7)
(138.7)
(570.0)
–
371.2
(82.9)
57.5
(78.0)
87.3
(176.1)
72.1
(77.1)
29.8
(75.7)
62.5
(80.2)
62.0
(157.6)
(216.6)
(62.2)
10.1
(93.8)
(30.4)
(14.4)
(25.9)
1. Contractual cash flows relating to bank loans exclude any estimate of interest payments that might arise under Goodman’s revolving loan facilities.
2. Net settled includes IRD and FEC.
3. Gross settled includes CCIRS.
129
Derivative financial (assets)/liabilities – net
Net settled1
Gross settled2:
(Inflow)
Outflow
Total derivative financial
(assets)/liabilities – net
As at 30 June 2021
Non–derivative financial liabilities
Payables
USD denominated notes, unsecured
EUR denominated notes, unsecured
Foreign private placement, unsecured
GOODMAN GROUP
Notes to the consolidated financial statements
Capital management (continued)
18 Financial risk management (continued)
The contractual maturities of financial liabilities are set out below:
GIT
As at 30 June 2022
Non–derivative financial liabilities
Carrying
amount
Contractual
cash flows
Less than
1 year
$M
$M
$M
1-2
year(s)
$M
2-3
years
$M
3-4
years
$M
4-5
years
More than
5 years
$M
$M
Payables
796.5
796.5
USD denominated notes, unsecured
1,953.1
2,822.9
EUR denominated notes, unsecured
Foreign private placement, unsecured
758.3
133.3
800.0
137.7
72.7
139.2
18.3
137.7
Total non–derivative financial liabilities
3,641.2
4,557.1
367.9
4.8
82.7
10.4
–
97.9
64.5
82.7
10.4
–
282.7
82.7
760.8
–
139.4
82.7
–
–
232.4
2,352.9
–
–
157.6
1,126.2
222.1
2,585.3
(22.0)
141.6
39.4
35.5
33.3
33.5
10.5
(10.5)
30.3
–
(737.3)
753.2
(104.8)
(234.6)
161.1
237.7
(90.9)
100.7
(115.1)
125.6
(51.6)
87.3
(140.1)
40.8
8.3
157.5
95.7
38.6
43.1
44.0
46.2
(109.8)
839.8
1,133.8
790.3
150.1
839.8
1,625.4
836.4
158.9
607.6
45.4
10.9
5.0
–
45.4
10.9
153.9
210.2
95.9
45.4
10.9
–
152.2
9.2
45.4
10.9
–
65.5
123.3
45.4
792.9
–
3.8
1,398.3
–
–
961.6
1,402.1
Total non–derivative financial liabilities
2,914.0
3,460.5
668.9
Derivative financial (assets)/liabilities – net
Net settled1
Gross settled2:
(Inflow)
Outflow
Total derivative financial
(assets)/liabilities – net
1. Net settled includes IRD and FEC.
2. Gross settled includes CCIRS.
(98.3)
(91.3)
(37.0)
(28.2)
(12.5)
(6.6)
(0.8)
(6.2)
(84.1)
(446.9)
–
303.7
(71.4)
56.3
(60.7)
84.1
(120.0)
67.2
(54.4)
28.6
(62.7)
36.9
(77.7)
30.6
(182.4)
(234.5)
(52.1)
(4.8)
(65.3)
(32.4)
(26.6)
(53.3)
130
ANNUAL REPORT 2022
(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, 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
investment grade credit rating 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 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.
Master netting off 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$361.3 million (2021: A$175.2 million) and A$256.1 million (2021: A$112.9 million) of financial assets and financial liabilities in relation to Goodman’s
and GIT’s respective derivative financial instruments to be offset.
(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:
Financial assets
Cash and cash equivalents
Receivables
Other financial assets:
– IRD
– CCIRS
– FEC
– Investments in unlisted securities
Financial liabilities
Payables (excluding contract liabilities)
Interest bearing liabilities1
Other financial liabilities:
– IRD
– CCIRS
– FEC
Carrying
amount
2022
$M
Goodman
Fair
value
2022
$M
Carrying
amount
2021
$M
Fair
value
2021
$M
Carrying
amount
2022
$M
GIT
Fair
value
2022
$M
Carrying
amount
2021
$M
Fair
value
2021
$M
1,056.0
391.2
1,056.0
391.2
920.4
608.8
920.4
608.8
473.6
3,268.4
473.6
3,268.4
379.8
3,344.6
379.8
3,344.6
210.5
271.6
2.3
13.6
1,945.2
210.5
271.6
2.3
13.6
1,945.2
114.3
256.7
–
8.3
1,908.5
114.3
256.7
–
8.3
1,908.5
129.1
194.8
19.0
31.8
4,116.7
129.1
194.8
19.0
31.8
4,116.7
111.9
194.7
2.3
22.0
4,055.3
111.9
194.7
2.3
22.0
4,055.3
712.8
2,832.2
712.8
2,670.6
685.4
2,060.3
685.4
2,236.3
796.5
2,825.4
796.5
2,528.3
839.8
2,062.8
839.8
2,236.3
126.2
272.3
120.4
4,063.9
126.2
272.3
120.4
3,902.3
15.9
118.0
79.5
2,959.1
15.9
118.0
79.5
3,135.1
126.2
225.0
–
3,973.1
126.2
225.0
–
3,676.0
15.9
110.6
–
3,029.1
15.9
110.6
–
3,202.6
1. The fair value of certain fixed rate interest bearing liabilities has been determined by reference to the quoted market prices at 30 June 2022.
131
GOODMAN GROUP
Notes to the consolidated financial statements
Capital management (continued)
18 Financial risk management (continued)
Fair value hierarchy
The table below analyses financial instruments carried at fair value, by valuation method:
As at 30 June 2022
Derivative financial assets
Investments in unlisted securities
Derivative financial liabilities
As at 30 June 2021
Derivative financial assets
Investments in unlisted securities
Derivative financial liabilities
Goodman
GIT
Level 1
Level 2
Level 3
$M
$M
$M
Total
$M
Level 1
Level 2
Level 3
$M
$M
$M
Total
$M
–
–
–
–
–
–
–
–
–
–
484.4
–
484.4
518.9
518.9
371.0
–
371.0
213.4
213.4
–
484.4
13.6
13.6
–
–
–
8.3
8.3
–
–
13.6
498.0
518.9
518.9
371.0
8.3
379.3
213.4
213.4
–
–
–
–
–
–
–
–
–
–
342.9
–
342.9
351.2
351.2
308.9
–
308.9
126.5
126.5
–
342.9
31.8
31.8
–
–
–
22.0
22.0
–
–
31.8
374.7
351.2
351.2
308.9
22.0
330.9
126.5
126.5
There were no transfers between the levels during the year.
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.
132
ANNUAL REPORT 2022
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
FY22 dividends/distributions
GL
GIT
– 31 December 2021
– 30 June 2022
GLHK
Distributions on treasury securities
FY21 dividends/distributions
GL
GIT
– 31 December 2020
– 30 June 2021
GLHK
GIT
Dividends/distributions
cents per security
Total amount
$M
–
–
15.0
12.5
2.5
30.0
30.0
280.2
233.6
46.7
560.5
(0.4)
560.1
Dividends/distributions
cents per security
Total amount
$M
–
–
15.0
9.0
6.0
30.0
277.1
166.3
110.8
554.2
Date of
payment
n/a
24 Feb 2022
25 Aug 2022
25 Aug 2022
Date of
payment
n/a
25 Feb 2021
26 Aug 2021
26 Aug 2021
In FY22, GIT’s distributions were 27.5 cents per security (2021: 24.0 cents per security) amounting to $513.8 million (2021: $443.4 million).
Movement in provision for dividends/distributions to Securityholders
Balance at the beginning of the year
Provisions for dividends/distributions
Dividends/distributions paid
Balance at the end of the year
Goodman
2022
$M
277.1
560.1
(557.2)
280.0
2021
$M
274.3
554.2
(551.4)
277.1
GIT
2022
$M
166.3
513.8
(446.6)
233.5
2021
$M
201.1
443.4
(478.2)
166.3
133
GOODMAN GROUP
Notes to the consolidated financial statements
Capital management (continued)
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
– Treasury securities
Derivative financial liabilities
Total issued capital
Terms and conditions
2022
2021
Number of securities
Goodman
2022
$M
2021
$M
GIT
2022
$M
2021
$M
1,866,989,276
1,233,333
1,868,222,609
1,847,429,255 8,367.1
–
–
(161.0)
1,847,429,255 8,206.1
8,257.3
–
(160.9)
8,096.4
8,303.3 7,997.7
–
(148.7)
8,154.5 7,849.0
–
(148.8)
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
30 Jun 2020
31 Aug 2020
4 Sep 2020
30 Jun 2021
31 Aug 2021
31 Aug 2021
2 Sep 2021
30 Jun 2022
Details
Balance before accumulated issue costs
Securities issued to employees under the LTIP
Issue of securities
Balance before accumulated issue costs
Securities issued to employees under the LTIP
Issue of treasury securities
Issue of securities
Less: Accumulated issue costs
Closing balance
(b) Share based payments
LTIP
Number of
securities
1,828,413,236
15,438,241
3,577,778
1,847,429,255
14,716,648
1,233,333
4,843,373
1,868,222,609
Goodman
$M
8,192.2
–
65.1
8,257.3
–
–
109.8
(161.0)
8,206.1
GIT
$M
7,772.0
183.2
42.5
7,997.7
216.3
18.1
71.2
(148.8)
8,154.5
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
134
Number of rights
2022
2021
68,640,720
73,987,645
23,468,860
16,079,977
(19,545,855)
(19,016,019)
(813,081)
(2,410,883)
71,750,644
68,640,720
–
–
ANNUAL REPORT 2022
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 period from the grant date to the vesting dates. 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 (%)
10–year
rights
issued on
10–year
rights
issued on
5–year
rights
issued on
18 Nov 2021 30 Sep 2021 30 Sep 2021
20.16
24.49
–
25.45
6.8
1.23
1.51
17.22
21.68
–
25.36
6.9
1.38
1.03
17.87
21.68
–
28.54
3.9
1.38
0.49
The model inputs for the remeasurement of the cash settled performance rights at 30 June 2022 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 (%)
10-year
rights issued
in FY22
5-year
rights issued
in FY22
5-year
rights issued
in FY21
5-year
rights issued
in FY20
5-year
rights issued
in FY19
5-year
rights issued
in FY18
13.61
17.84
–
27.44
6.2
1.68
3.42
14.12
17.84
–
29.24
3.2
1.68
3.09
15.02
17.84
–
28.56
2.2
1.68
2.90
17.49
17.84
–
32.65
1.2
1.68
2.35
17.64
17.84
–
36.02
0.7
1.68
2.12
17.79
17.84
–
44.77
0.2
1.68
1.53
Amounts recognised as an expense are set out in note 2. At 30 June 2022, a liability of $126.6 million (2021: $158.0 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.
135
GOODMAN GROUP
Notes to the consolidated financial statements
OTHER ITEMS
The notes in this section set 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:
Bank balances
Call deposits
(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 investments
Non–cash items
Amortisation and depreciation
Share based payments expense
Net gain from fair value adjustments on investment properties
Reversal of previous impairments
Share of net results of equity accounted investments
Net finance expense/(income)
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
– Decrease in provisions
Distributions/dividends received from Partnerships
Net finance costs paid
Net income taxes (paid)/received
Net cash provided by operating activities
(c) Non-cash transactions
Goodman
GIT
2022
$M
811.3
244.7
1,056.0
2021
$M
853.7
66.7
920.4
2022
$M
184.2
289.4
473.6
2021
$M
313.1
66.7
379.8
Goodman
2022
$M
2021
$M
GIT
2022
$M
2021
$M
3,414.0
2,311.9
2,067.6
1,574.8
(73.6)
(0.2)
17.1
257.0
(260.1)
–
(2,718.2)
222.8
324.1
1,182.9
93.4
(646.1)
(0.1)
(85.5)
(0.1)
544.5
441.9
(34.9)
(110.5)
841.0
(37.7)
(5.0)
23.0
266.9
(63.1)
–
(1,708.9)
(74.9)
108.1
820.3
(146.7)
(29.9)
(6.0)
6.7
(0.1)
644.3
536.9
(25.1)
(41.4)
1,114.7
(69.8)
–
–
–
(208.3)
–
(2,173.0)
231.6
133.1
(18.8)
0.7
–
1.4
(1.5)
–
(18.2)
238.9
(23.6)
(1.1)
196.0
(39.3)
(3.2)
–
–
(60.2)
(17.6)
(1,373.8)
(135.5)
49.5
(5.3)
1.7
–
(2.2)
1.8
–
(4.0)
372.6
(29.5)
0.5
339.6
During the current and prior financial years, other than disclosed elsewhere in the consolidated financial statements, there were no significant
non-cash transactions.
136
(d) Reconciliation of liabilities arising from financing activities
Goodman
Balance at 30 June 2020
Changes from financing cash flows
Proceeds from borrowings and
derivative financial instruments
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
New leases
Other borrowing costs
Interest expense on lease liabilities
Debt modification costs
Distributions declared
Total other changes
Balance at 30 June 2021
Proceeds from borrowings and
derivative financial instruments
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
New leases
Other borrowing costs
Interest expense on lease liabilities
Disposal of right of use assets
Distributions declared
Total other changes
Balance at 30 June 2022
ANNUAL REPORT 2022
Interest
bearing
liabilities
Derivative
financial
instruments
Provision
for
distributions
$M
2,938.5
$M
(83.7)
$M
274.3
Lease
liabilities
$M
46.8
200.0
4.6
(891.9)
–
–
(691.9)
(195.8)
(25.7)
–
0.6
–
34.6
–
35.2
–
–
–
4.6
5.4
(83.9)
–
–
–
–
–
–
2,060.3
1,466.5
(157.6)
–
(779.2)
(10.1)
–
–
687.3
83.2
(2.2)
–
3.6
–
–
–
3.6
2,832.2
–
–
(10.1)
12.5
189.7
–
–
–
–
–
–
34.5
–
–
–
(551.4)
(551.4)
–
–
–
–
–
–
554.2
554.2
277.1
–
–
–
(557.2)
(557.2)
–
–
–
–
–
–
560.1
560.1
280.0
–
–
(17.8)
–
(17.8)
–
–
64.2
–
0.8
–
–
65.0
94.0
–
–
(13.4)
–
(13.4)
(1.6)
–
15.6
–
1.0
(25.0)
–
(8.4)
70.6
Total
$M
3,175.9
204.6
(891.9)
(17.8)
(551.4)
(1,256.5)
(190.4)
(109.6)
64.2
0.6
0.8
34.6
554.2
654.4
2,273.8
1,466.5
(789.3)
(13.4)
(557.2)
106.6
94.1
187.5
15.6
3.6
1.0
(25.0)
560.1
555.3
3,217.3
137
GOODMAN GROUP
Notes to the consolidated financial statements
Other items (continued)
21 Notes to the cash flow statements (continued)
–
(891.9)
Interest
bearing
liabilities
$M
2,939.5
Derivatives
used for
hedging
$M
(130.7)
Provision
for
distributions
$M
201.1
Loans with
related
parties, net
$M
(2,319.2)
–
200.0
(891.9)
–
(691.9)
(195.4)
(25.8)
–
–
–
–
–
2.1
34.3
–
36.4
2,062.8
–
1,456.4
(777.3)
–
679.1
79.8
–
–
–
–
–
–
3.7
–
–
3.7
2,825.4
–
46.8
–
–
46.8
5.5
(104.0)
–
–
–
–
–
–
–
–
–
(182.4)
17.4
–
(10.1)
–
7.3
1.9
181.5
–
–
–
–
–
–
–
–
–
8.3
–
–
–
(478.2)
(478.2)
–
–
–
–
–
–
–
–
–
443.4
443.4
166.3
–
–
–
(446.6)
(446.6)
–
–
–
–
–
–
–
–
25.1
–
–
25.1
(4.0)
(0.2)
(183.2)
(13.7)
(69.1)
11.7
(6.9)
–
–
–
(261.2)
(2,559.5)
262.2
–
–
–
262.2
60.3
–
(234.4)
(29.8)
(72.3)
9.7
5.7
–
–
513.8
513.8
233.5
17.4
–
(303.7)
(2,540.7)
Total
$M
690.7
25.1
246.8
(478.2)
(1,098.2)
(193.9)
(130.0)
(183.2)
(13.7)
(69.1)
11.7
(6.9)
2.1
34.3
443.4
218.6
(512.8)
279.6
1,456.4
(787.4)
(446.6)
502.0
142.0
181.5
(234.4)
(29.8)
(72.3)
9.7
5.7
3.7
17.4
513.8
213.8
526.5
GIT
Balance at 30 June 2020
Changes from financing cash flows
Net cash flows from loans to related parties
Proceeds from borrowings and derivative
financial instruments
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
Debt modification costs
Distributions declared
Total other changes
Balance at 30 June 2021
Changes from financing cash flows
Net cash flows from loans to related parties
Proceeds from borrowings and derivative
financial instruments
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
Derivative financial instrument settlement
through loans with related parties
Distributions declared
Total other changes
Balance at 30 June 2022
138
ANNUAL REPORT 2022
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
Issued
capital
$M
Employee
compensation
reserve
$M
Defined
benefit
retirement
schemes
reserve
$M
Total
reserves
$M
Retained
earnings
$M
Total
$M
Balance at 1 July 2020
483.2
(36.9)
33.1
(23.3)
(27.1)
821.9
1,278.0
Total comprehensive
(loss)/income for the year
Profit for the year
Other comprehensive (loss)/income
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
Issue of securities
Issue costs
Equity settled share based
payments transactions
Deferred tax associated with the LTIP
Transfer to payables
Balance at 30 June 2021
Total comprehensive
(loss)/income for the year
Profit for the year
Other comprehensive (loss)/income
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
Issue of securities
Equity settled share based
payments transactions
Deferred tax associated with the LTIP
Balance at 30 June 2022
–
–
–
–
–
11.4
(0.1)
–
–
–
494.5
–
–
–
–
–
19.8
–
–
514.3
–
(28.6)
(28.6)
–
–
–
–
–
–
–
(65.5)
–
(10.9)
(10.9)
–
–
–
–
–
(76.4)
–
–
–
(68.4)
(22.4)
–
–
106.1
8.1
(17.1)
39.4
–
–
–
(81.8)
(28.0)
–
127.0
(4.2)
52.4
–
–
–
–
–
–
–
–
–
–
(23.3)
–
1.0
1.0
–
–
–
–
–
(22.3)
–
300.2
300.2
(28.6)
(28.6)
(68.4)
(22.4)
–
–
106.1
8.1
(17.1)
(49.4)
–
(28.6)
300.2
68.4
271.6
–
–
–
–
(22.4)
11.4
(0.1)
–
–
–
1,190.5
106.1
8.1
(17.1)
1,635.6
–
552.6
552.6
(9.9)
(9.9)
(81.8)
(28.0)
–
127.0
(4.2)
(46.3)
–
(9.9)
552.6
542.7
81.8
–
–
–
(28.0)
19.8
–
–
1,824.9
127.0
(4.2)
2,292.9
139
GOODMAN GROUP
Notes to the consolidated financial statements
Other items (continued)
22 Equity attributable to Goodman Limited and non-controlling interests (continued)
(b) Equity attributable to other entities stapled to Goodman Limited (non-controlling interests)
Attributable to other entities stapled to Goodman Limited (non–controlling interests)
Issued
capital
$M
Balance at 1 July 2020
7,548.5
Asset
revaluation
reserve
Cash flow
hedge
reserve
Foreign
currency
translation
reserve
Employee
compensation
reserve
Defined
benefit
retirement
schemes
reserve
$M
(7.2)
$M
(5.2)
$M
$M
225.5
206.7
$M
(8.0)
Total
reserves
Retained
earnings
$M
$M
Total
$M
411.8
2,282.3
10,242.6
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, net of income tax
Other changes
Total comprehensive
income/(loss) for the year,
net of income tax
Contributions by and
distributions to owners
Dividends/distributions on
stapled securities
Issue of securities
Issue costs
Equity settled share based
payments transactions
–
–
–
–
–
–
53.7
(0.3)
–
–
–
–
0.2
0.5
(250.7)
–
0.3
–
0.3
–
–
0.5
0.8
(250.7)
–
–
–
–
–
–
–
–
–
–
–
–
Balance at 30 June 2021
7,601.9
(6.7)
(4.4)
(25.2)
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, net of income tax
Other changes
Total comprehensive income
for the year, net of income tax
Contributions by and
distributions to owners
Dividends/distributions on
stapled securities
Issue of stapled securities
Issue costs
Equity settled share based
payments transactions
–
–
–
–
–
–
90.1
(0.2)
–
–
–
–
0.3
0.3
–
–
–
–
–
–
(0.4)
155.0
–
15.9
–
–
15.5
155.0
–
–
–
–
–
–
–
–
Balance at 30 June 2022
7,691.8
(6.4)
11.1
129.8
140
–
–
–
–
–
–
–
–
28.6
235.3
–
–
–
–
–
–
–
–
37.8
273.1
–
–
2,011.7
2,011.7
(0.8)
(250.8)
(6.0)
–
(6.0)
0.6
–
–
–
(250.8)
(6.0)
0.6
(6.8)
(256.2)
2,011.7
1,755.5
–
–
–
–
–
–
–
28.6
(554.2)
(554.2)
–
–
–
53.7
(0.3)
28.6
(14.8)
184.2
3,739.8
11,525.9
–
–
2,861.4
2,861.4
0.6
155.2
5.6
16.2
–
–
–
155.2
5.6
16.2
177.0
2,861.4
3,038.4
–
–
–
37.8
(560.1)
(560.1)
–
–
–
90.1
(0.2)
37.8
(8.6)
399.0
6,041.1
14,131.9
5.6
–
6.2
–
–
–
–
ANNUAL REPORT 2022
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 2022 and the results of all such entities for the year ended 30 June 2022.
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
GA Industrial Portfolio Trust1
GIT Investments Holding Trust No.31
Goodman Australia Finance Pty Limited1
Goodman Capital Trust1
Goodman Europe Development Trust1
Goodman Finance Australia Trust1
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
Moorabbin Airport Corporation Pty Ltd
Goodman Belgium NV
Goodman Management Services (Belgium) NV
Goodman China Asset Management Limited
Goodman China Developments
Goodman Developments Asia
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
Goodman Hong Kong Investment Trust1
Goodman Logistics (HK) Limited
Goodman UK Investment (HK) Limited
GPS Hong Kong Limited
Goodman Italy S.R.L.
1. Significant controlled entities of Goodman Industrial Trust.
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Belgium
Belgium
Cayman Islands
Cayman Islands
Cayman Islands
China
China
France
Germany
Hong Kong
Hong Kong
Hong Kong
Hong Kong
Hong Kong
Hong Kong
Hong Kong
Italy
141
GOODMAN GROUP
Notes to the consolidated financial statements
Other items (continued)
23 Controlled entities
Significant controlled entities of Goodman Limited
Country of establishment/ incorporation
Japan
Japan
Luxembourg
Luxembourg
Luxembourg
Luxembourg
Luxembourg
Luxembourg
Luxembourg
New Zealand
New Zealand
New Zealand
New Zealand
The Netherlands
The Netherlands
Spain
United Kingdom
United Kingdom
United States
United States
United States
United States
United States
United States
United States
United States
Goodman Japan Funds Limited
Goodman Japan Limited
GELF Management (Lux) Sàrl
Goodman Finance (Lux) Sàrl1
Goodman Finance Two (Lux) Sàrl1
Goodman Management Holdings (Lux) Sàrl
Goodman Midnight Logistics (Lux) Sàrl
Goodman Property Opportunities (Lux) Sàrl, SICAR
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 Real Estate (Spain) S.L.
Goodman Logistics Developments (UK) Limited
Goodman Real Estate (UK) Limited
Goodman Development Management LLC
Goodman Management USA Inc
Goodman North America LLC
Goodman North America Management LLC
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.
142
ANNUAL REPORT 2022
24 Related parties
The names of KMP of Goodman at any time during the financial year are as follows:
Non-Executive Directors – GL and GFML
Stephen Johns
Christopher Green
Mark Johnson
Vanessa Liu
Rebecca McGrath
Phillip Pryke
Hilary Spann
Penny Winn
Non-Executive Director – GLHK
David Collins
Remuneration of KMP
The KMP remuneration totals are as follows:
Short-term employee benefits
Post-employment benefits
Post-employment benefits
Long-term employee benefits
Executive KMP
Gregory Goodman
Danny Peeters
Anthony Rozic
Nick Kurtis
Michael O’Sullivan
Nick Vrondas
Goodman
Goodman Limited1
2022
$000
7,596.6
203.6
2021
$000
7,693.9
211.8
42,106.0
27,760.3
5,037.4
3,787.7
54,943.6
39,453.7
2022
$000
2021
$000
–
–
–
–
–
–
–
–
–
–
1. The remuneration is paid by wholly owned controlled entities of Goodman Limited.
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.
GreenPoint Real Estate Innovation and Technology Venture, LP
In order to enhance understanding of and access to technologies that may influence the property sector and the business, GIT committed to investing
USD15.0 million in GreenPoint Real Estate Innovation and Technology Venture, LP, a property technology fund that is a Delaware limited partnership,
managed by Greenpoint Group LP, also a Delaware limited partnership. Greenpoint Group LP is beneficially owned and controlled by Christopher
Green, a director of GL. During the year, GIT invested a further USD1.5 million, such that that the total investment at 30 June 2022 was USD5.3 million
(2021: USD3.8 million).
Wyuna Regenerative Ag Investment Fund (Wyuna)
During the year, as part of its ESG strategy, Goodman committed to investing $30.0 million in Wyuna, a fund offering a model blending carbon
farming, red meat production and regeneration in Australia. The fund is managed by Wyuna Regenerative Ag, which is 50% owned by Christopher
Green, a director of GL. Total investment in Wyuna at 30 June 2022 is $nil.
143
GOODMAN GROUP
Notes to the consolidated financial statements
Other items (continued)
24 Related parties (continued)
Transactions with associates and JVs
The transactions with Partnerships during the year were as follows:
Revenue from disposal
of investment properties
Revenue from management
and development activities
Interest charged on loans
to associates and JVs
2022
$000
400,825.4
274,018.6
346,825.4
–
2021
$000
163,046.2
–
163,046.2
–
2022
$000
1,279,744.9
447,461.7
–
–
2021
$000
712,234.5
442,607.0
–
–
2022
$000
–
6,514.7
(36.1)
6,166.6
2021
$000
–
8,131.9
15.7
7,417.6
Goodman
Associates
JVs
GIT
Associates
JVs
In addition to the transactions included in the table above:
+ Goodman incurred $3.7 million of costs from Partnerships, primarily for the leasing of office premises
+ GAIP paid Goodman a refundable fee of $22.6 million for an option to acquire a 40% interest in a JV from the Group.
Amounts due from Partnerships at 30 June 2022 were as follows:
Goodman
GIT
Amounts due from
related parties1
2022
$000
2021
$000
Loans provided
by Goodman2
2022
$000
2021
$000
Amounts due from
related parties1
Loans provided
by GIT2
2022
$000
2021
$000
2022
$000
2021
$000
14,204.2
5,626.5
3,579.3
9,757.3
4,371.3
13,912.2
51,450.8
10,811.2
3,843.9
2,123.8
41,987.7
3,017.4
8,454.0
70,238.0
–
–
–
–
–
–
–
–
–
–
–
–
–
–
6,617.4
24,865.6
31,483.0
12,566.5
18,803.7
31,370.2
–
167,464.7
167,464.7
–
270,368.8
270,368.8
–
–
–
–
–
–
–
–
4.8
4.8
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
70.5
70.5
–
140,162.8
140,162.8
–
240,731.6
240,731.6
Associates
GAIP
GAP
GMT
GHKLP
GJCP
GEP
JVs
GCLP
Other JVs
1. Amounts due from related parties include contract assets arising from transactions with related parties.
2. 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
The transactions with other Goodman entities during the year were as follows:
Management income
Revenue from disposal of investment properties
Reimbursement of expenses
GIT
2022
$000
1,850.9
–
58,381.5
60,232.4
2021
$000
2,384.0
8,073.0
50,392.9
60,849.9
Interest bearing loans exist between GIT and other Goodman entities. At 30 June 2022, interest bearing loans of $3,122.6 million (2021: $3,096.5 million)
were receivable by GIT from other Goodman entities and $723.8 million (2021: $777.7 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.
Additionally, during the year GIT acquired 65,906,199 units in GMT from a controlled entity of GL for consideration of NZ$139.1 million.
144
ANNUAL REPORT 2022
Furthermore, in respect of certain Partnerships, Goodman and its
investment partners have committed to invest further capital, subject to
the approval by the partners (including Goodman) of the expenditures for
which the funding is required. Goodman’s commitment in respect of these
Partnerships is set out below:
+ $30.0 million (2021: $nil) into Wyuna
+ $130.7 million (2021: $136.2 million) into
KWASA Goodman Germany
+ $344.8 million (2021: $410.1 million) into
Goodman Japan Development Partnership
+ $793.8 million (2021: $808.0 million) into GCLP
+ $599.3 million (2021: $512.8 million) into GUKP
+ $1,888.9 million (2021: $2,156.2 million) into GNAP
+ $73.0 million (2021: $72.7 million) into
Goodman Brazil Logistics Partnership.
25 Commitments
Development activities
At 30 June 2022, Goodman was committed to expenditure in respect of
$691.8 million (2021: $534.7 million) on inventories and other development
activities. GIT has no such commitments (2021: $nil).
Investment properties
At 30 June 2022, Goodman had capital expenditure commitments
of $6.1 million (2021: $nil) in respect of its existing investment property
portfolio. GIT had capital expenditure commitments of $4.5 million
(2021: $nil).
Partnerships
At 30 June 2022, Goodman had remaining equity commitments of
$217.9 million (2021: $144.7 million) into GAIP and $135.0 million
(2021: $63.0 million) into GEP. In addition, Goodman has undertaken to
acquire up to 82.1 million units in GAIP if their holder elects to sell them.
The price Goodman will pay will be determined by the prevailing unit price
at the time of the sale. As at 30 June 2022, this equates to a total value
of $162.1 million (cum distribution value) or $161.1 million (ex distribution
price). Goodman’s commitment to this sale process ends in May 2026.
These commitments also apply to GIT.
In relation to GEP, Goodman offers two liquidity facilities which allow
certain of the partners to sell to the Group some or all of their investments
in GEP, but only when Goodman’s ownership interest in GEP is below
40.0%. At 30 June 2022, Goodman’s ownership interest in GEP was 19.8%
and therefore the facilities are available to the partners. The first facility,
which applies to 6.4% of the issued and committed units, would require
Goodman to purchase up to €210.5 million of units (at a 1% discount to
current unit value), subject to a maximum in each quarter of 2.5% of units.
The second facility, which applies to 12.7% of the issued and committed
units, would require Goodman to purchase up to €150.0 million of units
(at a 5% discount to current unit value), subject to a maximum in each
calendar year of €50.0 million.
145
GOODMAN GROUP
Notes to the consolidated financial statements
Other items (continued)
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 assurance services (KPMG Australia)1
– 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
– Audit and review of financial reports (non–KPMG firms)
Goodman
2022
$000
2021
$000
GIT
2022
$000
2021
$000
1,279.1
1,218.7
2,497.8
64.9
670.0
15.0
–
–
172.8
–
178.8
1,101.5
3,599.3
1,161.9
1,127.9
2,289.8
56.7
–
–
18.2
100.0
196.3
23.0
338.5
732.7
3,022.5
737.3
77.3
814.6
41.8
–
–
–
–
–
–
–
41.8
856.4
691.9
85.8
777.7
35.7
–
–
–
91.7
–
–
–
127.4
905.1
151.5
163.4
–
–
1. These assurance services relate to the issue of the US$500 million Sustainability Linked Bond in the US144A/Regulation S market.
146
ANNUAL REPORT 2022
27 Parent entity disclosures
As at, and throughout the financial year ended, 30 June 2022, 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
Profit for the year
Other comprehensive income for the year
Total comprehensive 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
2021
$M
63.0
–
63.0
49.1
1,591.9
164.4
1,163.7
852.5
90.7
39.3
(554.3)
428.2
2022
$M
176.8
–
176.8
223.9
1,895.5
108.6
1,192.4
937.4
90.7
52.4
(377.4)
703.1
GIT
2022
$M
451.7
–
451.7
3,076.5
8,075.8
553.9
3,016.6
8,154.5
–
216.8
(3,312.1)
5,059.2
2021
$M
140.0
–
140.0
2,329.3
7,424.8
1,107.4
2,666.1
7,849.0
–
159.8
(3,250.1)
4,758.7
147
GOODMAN GROUP
Notes to the consolidated financial statements
Other items (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:
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.
Investments in controlled entities and Partnerships
Investments in controlled entities and Partnerships are accounted for
at cost in the financial statements of GL and GIT. Distributions/dividends
received from Partnerships are recognised in the income statement, rather
than being deducted from the carrying amount of these investments.
Tax consolidation
GL 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 2022, the parent entities had no capital commitments
(2021: $nil).
Parent entity contingencies
Capitalisation Deed Poll
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.
US144A/Regulation S senior notes
Under the issue of notes in the US144A/Regulation 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$1,350.0 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.
148
Director's 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 financial statements and the notes of Goodman
Limited and its controlled entities and Goodman Industrial Trust and
its controlled entities set out on pages 79 to 148 and the remuneration
report that is contained on pages 30 to 75 in the Directors’ report,
are in accordance with the Corporations Act 2001, including:
(i)
(ii)
giving a true and fair view of Goodman’s and GIT’s financial
position as at 30 June 2022 and of their performance for the
financial year ended on that date
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 Officer and
Chief Financial Officer for the financial year ended 30 June 2022.
The Directors draw attention to note 1 to the consolidated financial
statements, which includes a statement of compliance with International
Financial Reporting Standards.
Signed in accordance with a resolution of the Directors.
Stephen Johns
Independent Chairman
Gregory Goodman
Group Chief Executive Officer
Sydney
16 August 2022
ANNUAL REPORT 2022
149
GOODMAN GROUP
Independent auditor’s report
To the stapled security holders of Goodman Group and the unitholders of Goodman Industrial Trust
Report on the audits of the Financial Report
Basis for opinions
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 and Directors’
Declaration 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 2022 and of their 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
Reports comprise:
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 these requirements.
Key Audit Matters
The Key Audit Matters we identified for the Goodman Group are:
Consolidated statement of financial position as at 30 June 2022;
+ Recognition of development income; and
+
+
+
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.
+
Valuation of investment properties, investments accounted for using
the equity method and inventories.
Key Audit Matters are those matters that, in our professional judgement,
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.
KPMG, an Australian partnership and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited, a private English company limited by
guarantee. All rights reserved. The KPMG name and logo are trademarks used under license by the independent member firms of the KPMG global organisation. Liability limited by a scheme approved
under Professional Standards Legislation.
150
ANNUAL REPORT 2022
Recognition of development income ($1,441.6m)
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 (28% of revenue and other income);
the unique nature of contracts; and
the judgements applied by us to assess Goodman Group’s
determination of revenue recognised during the period in relation
to contracts which remain in progress at period end.
+
+
Evaluating Goodman Group’s recognition of development income
against the criteria in the accounting standards;
Selecting specific contracts from development income recognised
based on quantitative and qualitative information (such as the size
and complexity of the arrangement) and performed the following:
Income from development management services is recognised
progressively, requiring judgment by us when considering Goodman
Group’s determination of the amount and extent of the services provided
within the period based on contract deliverables.
Goodman Group’s policy is for income from inventory disposals to be
recognised at a point in time when control is transferred to the customer
and fixed price development contracts to be 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.
– Understanding the underlying contractual arrangements,
in particular their unique terms, for their impact to recognition
of development income;
– Where recognition of development income was conditional
upon certain events occurring, checking conditions within the
contract to evidence of achievement of conditions, such as
correspondence with external parties;
– Assessing 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; and
– For revenue recognised based on the stage of completion, assess
the cost assumptions used by the Group in determining the stage
of completion estimate as follows:
• Costs incurred – assessing a sample of costs incurred to date
to relevant underlying external sources, such as invoices; and
• Estimated total costs – assessing a sample of total forecast
costs to secured contracts for construction activities, other
relevant underlying sources, and our understanding of the
industry and economic conditions.
151
GOODMAN GROUP
Valuation of investment properties ($1,423.7m), investments accounted for using the equity method ($14,379.6m)
and inventories ($2,116.1m)
Refer to Note 6 to the Financial Report
The key audit matter
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.
Goodman Group’s policy is investment properties are held at fair value
and inventories are held at the lower of cost and net realisable value,
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 84% of total assets) and contain assumptions
with estimation uncertainty.
This leads to additional audit effort due to differing assumptions
used by Goodman Group based on asset classes, geographies and
characteristics of individual property assets.
We considered significant assumption in the valuation of property
assets including :
+
Investment properties:
– capitalisation rates;
– discount rates;
– 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;
How the matter was addressed in our audit
Our procedures included:
+
+
+
Obtaining an understanding of Goodman Group’s process regarding
the valuation of property assets;
Assessing the methodologies used in the valuations of property
assets, for consistency with accounting standards, industry practice
and Goodman Group’s policies;
Working with real estate valuation specialists to read published
reports and industry commentary to gain an understanding
of prevailing property market conditions.
For a sample of 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 of prevailing property
market conditions;
With assistance of real estate valuation specialists, assessing
a sample of significant assumptions including capitalisation rates,
discount rates, 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 Goodman Group’s historical
performance of the assets and using our industry experience;
+
Assessing the disclosures in the financial report using our
understanding obtained from our testing, against accounting
standard requirements.
– letting up periods and lease incentive costs; and
For a sample of inventories:
– development costs.
In assessing this Key Audit Matter, we involved real estate valuation
specialists, who understand the Group’s investment profile, business
and the economic environment it operates in.
+
Challenging the key assumptions included in Goodman Group’s
internal recoverability assessments and valuations by comparing to
commentary published by industry experts, recent market transactions,
and our knowledge of historical performance of the assets.
152
ANNUAL REPORT 2022
Other Information
Other Information is financial and non-financial information in
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).
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.
Responsibilities of the Directors for the Financial Report
The Directors of the Company and the Responsible Entity are
responsible for:
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 audit 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.
Report on the Remuneration Report
Opinion
In our opinion, the Remuneration Report of Goodman Limited for
the year ended 30 June 2022, complies with Section 300A of the
Corporations Act 2001.
Directors’ responsibilities
+
+
+
preparing the Financial Report that gives a true and fair view
in accordance with Australian Accounting Standards and the
Corporations Act 2001;
The Directors of Goodman Limited are responsible for the preparation
and presentation of the Remuneration Report in accordance with
Section 300A of 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.
Our responsibilities
We have audited the Remuneration Report included on pages 30 to 75
of the Directors’ report for the year ended 30 June 2022.
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
16 August 2022
153
GOODMAN GROUP
Appendix A – Goodman Logistics (HK) Limited
and its subsidiaries
Consolidated financial statements for the year ended 30 June 2022
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
Notes to the consolidated financial statements
Basis of preparation
1 Basis of preparation
Results for the year
2 Profit before interest and income tax
3 Segment reporting
4 Taxation
5 Profit attributable to equity shareholders of the Company
Operating assets and liabilities
6 Property assets
7 Receivables
8 Contract balances
9 Payables
10 Leases
Capital management
11 Net finance expense
12
Interest bearing liabilities
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
154
155
165
167
168
169
170
171
172
174
177
178
179
186
187
189
189
190
190
191
191
196
197
199
201
201
202
203
205
205
206
206
ANNUAL REPORT 2022
Directors of subsidiaries
The names of Directors who have served on the Boards of the
subsidiaries of the Company during FY22 are set out below:
Ai Ning Tan
James Nicholson
Paul Adams
Andrew McGregor
Jan Palek
Paul Heslop
Aurelien Noel
Jason Harris
Peck Khim Yap
Bart Manteleers
Jie Yang
Béla Kakuk
John Conway
Peter Ralston
Philip Turpin
Charles Crossland
John Morton Dakin
Philippe Arfi
Chi Wing Lin
Jorn Bruyninckx
Philippe Van der Beken
Christof Prange
Joseph Salvaggio
Robert Nicholson
Chun Kit Fung
Karl Dockx
Robert Reed
David Anthony Hinchey
Kelly Moore
Shiling Li
Dirk Mölter
Kim Swee Seah
Simone Weyermanns
Dominique Prince
Kristoffer Allan Harvey
Song Yun
Edwin Chong Chee Wai
Lien Standaert
Stephen Young
Francisco Palacio
Luke Caffey
Tai Yit Chan
Garcia Cuenca Ignacio
Mak Chun Kit Jacky
Tan Ai Ning
Gareth Owen
Godfrey Abel
Goh Hoi Lai
Hans Ongena
Henry Kelly
Hugh Baggie
Izak ten Hove
James Cornell
Marwan Bustani
Tang Chenying
Matthew Macdonald
Tim Cruypelans
Matthew Phillips
Timothy Downes
Michael O'Sullivan
Timour Wielemans
Michael Woodford
Wai Ho Stephen Lee
Nicholas Kurtis
Wang Chen
Nick Taunt
Nigel Allsop
Xiaoyin Zhang
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 2022 (FY22).
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).
Principal activities
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.
Financial statements
The financial performance of the Consolidated Entity for the year ended
30 June 2022 and the Consolidated Entity’s financial position at that date
are set out in the consolidated financial report on pages 167 to 206.
During the financial year, the Company declared a final dividend of
2.5 cents per share amounting to $46.7 million. This dividend will be
paid on 25 August 2022. In the prior year, the Company declared a final
dividend of 6.0 cents per share amounting to $110.8 million. This was
paid on 26 August 2021.
Share capital
Details of the movements in share capital of the Company during FY22
are set out in note 16 to the consolidated financial statements.
Directors
The Directors during the year and up to the date of this report were:
Stephen Paul Johns
David Jeremy Collins
Gregory Leith Goodman (alternate Director to Stephen Paul Johns)
Daniel Cornelius D. Peeters.
155
GOODMAN GROUP
Report of the Directors
(continued)
BUSINESS REVIEW
State of affairs
There were no significant changes in the Consolidated Entity’s state
of affairs during the year.
About Goodman Group
Goodman Group is a global industrial property specialist group whose
strategy is to maximise returns by providing essential infrastructure for
the digital economy.
+ Urbanisation, globalisation, demographics, digitalisation, sustainability
and an increased focus on health and wellbeing: all have changed
the way people live, work and consume. These structural shifts
have increased the importance of industrial properties in the global
supply chain
+ Globally, the logistics and warehousing sectors are now considered
essential infrastructure for digital economies, and key to the efficient
distribution of products to consumers. As industrial property specialists,
Goodman Group’s long-term strategy is built on supporting its
customers to deliver in the most sustainable and efficient way possible.
Goodman focuses on key markets and concentrates our portfolio where
the most value can be created for customers and investors.
Goodman Group’s integrated business model
Goodman Group’s Own Develop Manage model focuses
the business on its customers’ current and future needs.
The Consolidated Entity owns and maintains high-quality properties
close to consumers, develops sustainable properties, and manages its
global investment portfolio to a high standard. The Consolidated Entity
works alongside its capital partners, which include sovereign wealth,
pension and large multi-manager funds. In each market, the Consolidated
Entity has dedicated local teams which take care of property asset and
investment management, delivering a high level of customer service.
156
ANNUAL REPORT 2022
Performance review
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 business environment is changing, with increased interest rates,
inflation, geopolitical risks and the ongoing impacts of the COVID-19
pandemic; however, the long-term structural drivers of demand have
not changed. Tight supply and customer demand continues to support
leasing across the stabilised portfolio and developments, with high
occupancy in the Consolidated Entity’s markets. The Consolidated
Entity’s customers continue to intensify warehousing in urban locations
and increase automation and technology to optimise delivery and
improve supply chain efficiency.
The Consolidated Entity has continued to successfully execute its strategy,
which is providing customers with essential locations and offering
productivity improvements to help absorb cost and time. It is also
delivering the Consolidated Entity and its Partnerships a portfolio
of assets at consistently strong risk adjusted returns. This is reflected
in both the property investment earnings and the management earnings.
Development activity has again been a significant contributor to the
operating performance. Construction costs are increasing globally.
However, by delivering increased productivity and value from the project
sites and development execution, the Consolidated Entity has maintained
strong returns.
Property investment activities
Property investment earnings in FY22 of $82.1 million were higher than the
prior year and comprised 9% of the total earnings (2021: 6%).
Net property income
Partnerships
Property investment earnings
Key metrics
Weighted average capitalisation rate (%)
Weighted average lease expiry (years)
Occupancy (%)
2022
$M
40.9
41.2
82.1
2022
4.7
4.2
97.6
2021
$M
13.4
32.7
46.1
2021
4.9
3.8
98.0
Property investment earnings comprise gross property income
(excluding straight lining of rental income), less property expenses, plus
the Consolidated Entity’s share of the results of property investment joint
ventures (JV) (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 controlling operating and financing costs within Partnerships.
In assessing the Consolidated Entity’s underlying performance, the
Directors consider operating profit as well as statutory profit. Operating
profit 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.
The Consolidated Entity’s property portfolios are concentrated in large, urban
locations where available space remains restricted, driven by significant
customer demand, combined with barriers to entry and limited supply.
Consequently, the Consolidated Entity is seeing significant market rental
growth across its locations. This is supporting strong underlying investment
fundamentals and cash flows in the Consolidated Entity’s portfolio.
The Consolidated Entity has delivered a strong operating performance
for FY22, with operating profit increasing by 21.5% to $607.4 million,
compared to $499.8 million for the prior year.
Analysis of operating profit
Property investment earnings
Management earnings
Development earnings
Operating expenses
Net finance expense (operating)1
Income tax expense
Operating profit
2022
$M
2021
$M
82.1
170.6
689.1
941.8
(207.9)
733.9
(12.4)
(114.1)
46.1
146.3
528.0
720.4
(199.6)
520.8
(8.8)
(12.2)
607.4
499.8
1. Net finance expense (operating) excludes derivative mark to market and unrealised foreign
exchange movements.
The net income from the Consolidated Entity’s directly held properties
increased by 205% to $40.9 million compared to the prior year as a result
of acquisitions in Asia in both the current and prior year and rental income
earned from completed developments (held in inventories, mainly in
Continental Europe) prior to their disposal.
The Consolidated Entity’s share of investment earnings from its cornerstone
holdings in the Partnerships increased by 26% to $41.2 million compared
to the prior year. This was due to the stabilisation of developments
in FY21 and FY22, as the Consolidated Entity has continued to invest
in the Partnerships to fund its share of those developments and rental
income growth from existing stabilised properties.
During FY22, the Consolidated Entity’s share of property valuations
from the stabilised portfolios was $269.8 million. Valuation gains occurred
in all regions and while capitalisation rate compression was the main
driver, especially in the first half of the year, both rental income growth
and development completions have provided an increasing contribution.
At 30 June 2022, the weighted average capitalisation rate for the
Consolidated Entity’s portfolios was 4.7%, compared to 4.9% at the start
of FY22.
157
GOODMAN GROUP
Report of the Directors
Business review (continued)
Management activities
Management earnings in FY22 of $170.6 million increased by 17% compared
to the prior year and comprised 18% of total operating earnings (2021: 20%).
The main driver of management earnings was the increase in external AUM.
A reduction in performance related revenue was the result of the timing
of calculation and recognition of fees.
Management earnings
Key metrics
Number of Partnerships
External AUM ($B)
2022
$M
170.6
2022
8
27.8
2021
$M
146.3
2021
7
23.0
Management earnings relate to the revenue from managing both
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.
Development activities
In FY22, development earnings were $689.1 million, an increase of 31% on
the prior year, and comprised 73% of total operating earnings (2021: 73%).
Development activity continued to be strong with work in progress
of $7.1 billion across 36 projects at 30 June 2022. The increase in the
Consolidated Entity’s development earnings was primarily volume driven.
Development earnings consist of development income, plus the
Consolidated Entity’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, plus interest income on loans to
development JVs, less development expenses. Development income
includes development management fees and performance related
revenues associated with managing individual development projects in
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 capital to fund
development activity.
Most of the inventory disposals and fixed price contract income
arose in Continental Europe, as Goodman Group’s 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 the prior year,
most of the development activity in FY22 was undertaken by or for the
Partnerships and third parties.
Other items
Operating expenses increased mainly due to remuneration costs as a result
of modest inflation pressure and cash incentives paid as a result of the
Consolidated Entity’s overall performance. Borrowing costs have increased
as a result of increased borrowings on the Consolidated Entity’s loans. The
increase in tax expense is primarily a function of changes to the origin and
nature of revenue arising from management and development activities.
2022
$M
645.7
43.4
689.1
2022
7.1
2021
$M
487.7
40.3
528.0
2021
5.8
2.3
2.0
36
23
37
18
Net development income
Partnerships
Development earnings
Key metrics
Work in progress ($B)
Work in progress
(million square metres)
Work in progress
(number of developments)
Developments completed during
the year (number of developments)
158
Statement of financial position
Cash flows
Stabilised investment properties
Cornerstone investments
in Partnerships
Development holdings
Cash
Other assets
Total assets
Loans from related parties
Other liabilities
Total liabilities
Non-controlling interests
Net assets attributable
to Shareholders
2021
$M
163.9
Operating cash flows
Investing cash flows
Financing cash flows
Net (decrease)/increase
in cash held
Effect of exchange rate
fluctuations on cash held
Cash and cash equivalents
at the beginning of the year
Cash and cash equivalents
at the end of the year
2022
$M
336.8
1,845.6
1,552.6
357.5
1,190.8
1,470.0
1,140.9
358.4
1,233.0
5,283.3
4,366.2
1,941.0
756.2
1,891.1
705.2
2,697.2
2,596.3
28.2
22.2
2,557.9
1,747.7
The stabilised investment properties relate to acquisitions in Asia.
The carrying value of cornerstone investments in Partnerships has
increased by $375.6 million to $1,845.6 million, principally due to the net
investment in the Partnerships and the valuation uplifts. A reconciliation
of the current year movement in cornerstone investments in Partnerships
is detailed in note 6(f) to the consolidated financial statements.
The increase in development holdings by $411.7 million to $1,552.6 million
is primarily due to additional expenditure on development projects
in Continental Europe, China and the United Kingdom during the year.
Other assets included receivables, fair values of derivative financial
instruments that are in an asset position, 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).
ANNUAL REPORT 2022
2022
$M
216.5
(234.8)
12.5
(5.8)
4.9
2021
$M
473.6
(271.2)
(200.5)
1.9
(11.7)
358.4
368.2
357.5
358.4
The decrease in the net operating cash flows is primarily due to more
development disposals in Continental Europe in the prior year and the
increased investment into new development opportunities.
The net investing cash outflow was due to the net investment in the
Consolidated Entity’s Partnerships, to fund acquisitions and new
developments, plus the acquisitions of investment properties in Asia.
Financing cash flows principally relate to the net proceeds from loans
with related parties and payment of the dividend in August 2021.
159
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.
GOODMAN GROUP
Report of the Directors
Business review (continued)
Outlook
The Consolidated Entity has developed significant expertise and
a deliberate strategy to target high barrier to entry markets and to
undertake larger, more complex projects over longer periods of time,
providing our customers access to facilities where they are scarce
and has positioned the Consolidated Entity well for future growth.
In the near term, market conditions are likely to be volatile and the risks
associated with rising inflation, interest rates and slowing economic
activity are elevated. This may impact consumers; however, they
continue to seek faster and more flexible delivery, which requires ongoing
intensification of warehousing in urban locations to optimise delivery
and improve productivity. The business remains agile, focused on the
changing consumption habits across the physical and digital space and,
as a result, the evolving requirements of customers around the world.
Demand is currently exceeding supply in the Consolidated Entity’s markets,
supporting the Consolidated Entity’s development-led growth strategy
and producing well located assets for the Consolidated Entity and its
Partnerships. In addition to strategic site acquisitions, the opportunities for
regeneration of existing assets support our future development workbook
by providing value add opportunities, while reducing the Consolidated
Entity’s environmental impact. The Consolidated Entity’s production rate,
depth of customer demand and strong margins are supporting the outlook
for development earnings into FY23.
The outlook for property investment and management earnings
remains strong, as the customer demand and supply constraints in the
Consolidated Entity’s markets provide support for both rental growth
and a high level of occupancy. Investment and management earnings will
also benefit from the completion of ongoing developments. Development
completions and market rental growth are also expected to support
growth in AUM.
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.
160
ANNUAL REPORT 2022
The key risks faced by Goodman Group and the controls that have been established to manage those risks are set out below:
Risk area
Mitigation
Capital
management
(debt, equity
and cash flow)
Goodman Group could suffer an inability to deliver its strategy, or an
acute liquidity or solvency crisis, financial loss or financial distress as
a result of a failure in the design or execution of its capital
management and financing strategy.
Economic and
geopolitical
environment
Governance,
regulation and
compliance
Global economic conditions and government policies present both
risks and opportunities in the property and financial markets and the
business of customers, which can impact the delivery of Goodman
Group’s strategy and its financial performance.
A continued increase in geopolitical tension between countries
could have potential consequences on its people, operations and
capital partners.
In the near term, market conditions are likely to be volatile and the
risks associated with rising inflation, interest rates and slowing
economic activity are elevated.
Non-compliance with legislation, regulators, or internal policies, or to
understand and respond to changes in the political and regulatory
environment (including taxation) could result in legal action, financial
consequences and damage its standing and reputation with stakeholders.
People
and culture
Failure to recruit, develop, support, and retain staff with the right skills
and experience may result in significant underperformance or impact
the effectiveness of operations and decision making, in turn impacting
business performance.
Development
Development risks may arise from location, site complexity,
planning and permitting, infrastructure, size, duration along with
general contractor capability.
+ Low gearing, ample liquidity and appropriate hedging and duration
to absorb market shocks
+ Appropriate hedging quantities and duration in accordance with
Goodman Group’s financial risk management policy
+ Diversification and tenure of debt funding sources and maturities
+ Capital partnering transfers risks into Partnerships
+ Diversification of investment partners
+ Change in distribution pay-out ratio consistent with contribution
to increasing development workbook
+ Strong assets that can generate better rental outcomes
+ Long lease terms with prime customers
+ Key urban market strategy – urban, infill locations support re-usability
of property
+ Adaptable and re-usable building design – ease to reconfigure for
another customer
+ Insurance program including project specific insurance.
+ 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, appropriate hedging
and significant available liquidity to allow for potential market shocks
+ Co-investment with local capital partners
+ Long-term leases with review mechanisms.
+ 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
+ Verification and sign off process for all public announcements
+ Comprehensive insurance program, covering property, liability,
directors and officers and professional indemnity.
+ Succession planning for senior executives
+ Competitive remuneration structures, including the Goodman
Group Long Term Incentive Plan (LTIP)
+ Performance management and review
+ Goodman Group values program
+ Learning, development and engagement programs
+ Staff engagement through team strategy days, town halls and the
(good) life program.
+ 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
+ Redevelopment of older assets to intensify use
+ Pre-selecting and engaging general contractors that are
appropriately capitalised and reviewing contractor liquidity
+ Internal audit reviews
+ 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 and higher
development risk provisions
+ Capital partnering development projects.
161
GOODMAN GROUP
Report of the Directors
Risk area
Mitigation
Disruption,
changes in
demand and
obsolescence
The longer-term risk that an inability to understand and respond
effectively to changes in the competitive landscape and customer value
chain could result in business model disruption and asset obsolescence,
including the perception of obsolescence in the short term.
+ 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
+ Investment in innovation and technology strategies.
Environmental
sustainability and
climate change
Failure to deliver on Goodman Group’s sustainability leadership
strategy and ambitions may lead 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.
Concentration
of 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.
Maintaining security (including cyber security) of IT environment
and data, ensuring continuity of IT infrastructure and applications
to support sustainability and growth and prevent operational,
regulatory, financial and reputational impacts.
+ 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
+ Adoption of the Task Force on Climate-Related Financial
Disclosures recommendations as a framework for climate risks.
+ 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 Goodman Group Investment Committee
+ Capital expenditure programs keeping pace with property lifecycle.
+ Diversification of customer base and lease expiries
+ Diversification of capital partners and Partnership expiries
+ Contractor pre-selection and tendering
+ Independence governance structure.
+ Reporting of risks and management activity
+ Proactive monitoring, review and testing of infrastructure
+ Disaster recovery and business continuity planning and testing
+ Benchmarked strategy for delivery of security information
technology infrastructure and systems
+ Training and awareness program and other assurance activities
for monitoring and improvement.
Infectious disease
pandemic
There continues to be significant uncertainty associated with the
COVID-19 pandemic, with mutations of the virus and significant outbreaks
continuing to occur globally. The approach in enabling the world to
stabilise and transition to a “normal” footing is still to be understood, while
“Zero COVID” policies by some nations is having both economic and
supply chain issues globally.
+ Protect and support Goodman Group’s people
+ Global diversification of Goodman Group’s property portfolios
+ Diversification of customer base
+ In-house property management team enabling flexibility to
support and respond to customers
+ Capital model, strong balance sheet with adequate liquidity available.
162
ANNUAL REPORT 2022
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.
Directors’ interests 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
Stephen Paul Johns
David Jeremy Collins
Gregory Leith Goodman
Daniel Cornelius Peeters
Directly held
securities
Indirectly held
securities
–
5,000
874,873
41,143
–
Total
41,143
5,000
37,729,673
38,604,546
–
2,199,797
2,199,797
In addition, Gregory Goodman and Daniel Peeters participate in the 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 2022
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
–
1,560,000
950,000
900,000
1,600,000
1,066,667
800,000
–
–
–
–
–
Daniel Cornelius Peeters
–
625,000
380,000
350,000
550,000
366,667
200,000
–
–
–
–
–
–
–
–
(533,333)
(533,333)
(800,000)
–
–
–
(183,333)
(183,333)
(200,000)
–
–
–
–
–
–
–
–
–
–
–
–
1,560,000
18 Nov 21
2026 – 2032
950,000
900,000
19 Nov 20
2024 – 2026
20 Nov 19
2023 – 2025
1,066,667
15 Nov 18
2022 – 2024
533,334
16 Nov 17
2021 – 2023
–
30 Sep 16
2020 – 2022
625,000
380,000
350,000
366,667
183,334
18 Nov 21
2026 – 2032
19 Nov 20
2024 – 2026
20 Nov 19
2023 – 2025
15 Nov 18
2022 – 2024
16 Nov 17
2021 – 2023
–
30 Sep 16
2020 – 2022
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.
163
GOODMAN GROUP
Report of the Directors
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 financial 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 significantly
the operations of the Consolidated Entity, the results of those operations,
or the state of affairs of the Consolidated Entity, in future financial years.
Declaration by the Group Chief Executive Officer and Chief
Financial Officer
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 Officer and Chief Financial Officer for the
year ended 30 June 2022.
By order of the Board of Directors
Stephen Paul Johns
Independent Chairman
David Jeremy Collins
Director
Sydney
16 August 2022
164
ANNUAL REPORT 2022
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 167 to 206, which comprise the consolidated statement
of financial position as at 30 June 2022, 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 2022
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.
165
GOODMAN GROUP
Independent Auditor's Report (continued)
To the members of Goodman Logistics (HK) Limited (incorporated in Hong Kong with limited liability)
+ 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 significant 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 financial
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 financial statements, including the disclosures, and
whether the consolidated financial statements represent the underlying
transactions and events in a manner that achieves fair presentation.
Obtain sufficient appropriate audit evidence regarding the financial
information of the entities or business activities within the Group to
express an opinion on the consolidated financial 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 significant audit findings,
including any significant deficiencies in internal control that we identify
during our audit.
Certified Public Accountants
8th Floor, Prince’s Building
10 Chater Road
Central, Hong Kong
16 August 2022
166
Consolidated statement of financial position
as at 30 June 2022
ANNUAL REPORT 2022
(expressed in Australian dollars)
Current assets
Cash and cash equivalents
Inventories
Receivables
Contract assets
Current tax receivables
Other assets
Total current assets
Non-current assets
Inventories
Investment properties
Investments accounted for using the equity method
Receivables
Other financial 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 benefits
Dividend payable
Other financial liabilities
Total current liabilities
Non-current liabilities
Payables
Interest bearing liabilities
Loans from related parties
Deferred tax liabilities
Employee benefits
Other financial 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
The notes on pages 171 to 206 form part of these consolidated financial statements.
Approved and authorised for issue by the Board of Directors on 16 August 2022.
Stephen Paul Johns
Director
David Jeremy Collins
Director
Note
17(a)
6(b)
7
8
4(c)
6(b)
6(b)
6(b)
7
13
4(d)
9
21(c)
4(c)
15
13
9
12
21(c)
4(d)
13
16(a)
18
19
2022
$M
357.5
175.2
115.6
60.5
0.6
3.2
712.6
1,377.4
336.8
1,845.6
789.6
174.8
18.8
24.0
3.7
4,570.7
5,283.3
274.6
125.4
32.5
49.0
46.7
45.4
573.6
93.2
9.0
1,815.6
50.5
13.9
141.4
2,123.6
2,697.2
2,586.1
873.0
(605.1)
2,290.0
2,557.9
28.2
2,586.1
2021
$M
358.4
106.4
744.3
55.7
4.2
12.9
1,281.9
1,034.5
163.9
1,470.0
276.2
102.6
15.2
17.1
4.8
3,084.3
4,366.2
263.0
806.7
48.9
45.1
110.8
–
1,274.5
124.7
–
1,084.4
1.6
22.0
89.1
1,321.8
2,596.3
1,769.9
791.9
(629.0)
1,584.8
1,747.7
22.2
1,769.9
167
GOODMAN GROUP
Consolidated statement of comprehensive income
for the year ended 30 June 2022
(expressed in Australian dollars)
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/(loss) 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 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/(loss)
Items that will not be reclassified to profit or loss
Increase due to revaluation of other financial assets
Actuarial gains/(losses) on defined benefit retirement schemes (net of tax)
Item that may be reclassified subsequently to profit or loss
Effect of foreign currency translation
Other comprehensive income/(loss) 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 171 to 206 form part of these consolidated financial statements.
168
Note
2022
$M
2021
$M
2
2
2
6(e)
6(f)
16(b)
11
11
4 (a)
19
45.9
193.7
1,075.0
0.2
1,314.8
(5.0)
(433.5)
(438.5)
(0.3)
3.8
345.3
0.2
349.0
(170.5)
(94.0)
(37.4)
(23.1)
(325.0)
900.3
48.0
(71.4)
(23.4)
876.9
(114.1)
762.8
751.9
10.9
762.8
9.4
5.6
15.0
0.1
0.1
15.1
777.9
767.8
10.1
777.9
15.6
188.7
1,171.7
0.8
1,376.8
(2.2)
(684.7)
(686.9)
–
(1.9)
164.7
1.8
164.6
(166.6)
(124.0)
(33.0)
(42.4)
(366.0)
488.5
21.8
(82.9)
(61.1)
427.4
(12.2)
415.2
408.4
6.8
415.2
7.6
(6.0)
1.6
(21.5)
(21.5)
(19.9)
395.3
389.0
6.3
395.3
ANNUAL REPORT 2022
Non–controlling
interests
$M
20.0
Total
equity
$M
1,414.7
Consolidated statement of changes in equity
for the year ended 30 June 2022
Share
capital
$M
732.0
–
–
–
–
48.6
11.3
–
–
Year ended 30 June 2021
(expressed in Australian dollars)
Balance at 1 July 2020
Total comprehensive
income/(loss) for the year
Profit for the year
Other comprehensive loss for the year
Total comprehensive (loss)/income
for the year, net of income tax
Contributions by and
distributions to owners
Dividends declared/paid
Issue of shares to employees
of Goodman Group
Issue of ordinary shares
Equity settled share based
payments transactions
Deferred tax associated with the LTIP
Acquisition of special purpose
development entity with
non–controlling interests
Balance at 30 June 2021
Year ended 30 June 2022
(expressed in Australian dollars)
Note
19
15
16(a)
16(a)
18(c)
18(c)
Note
Attributable to Shareholders
Retained
earnings
$M
1,287.2
Total
$M
1,394.7
Reserves
$M
(624.5)
–
(19.4)
408.4
–
408.4
(19.4)
(19.4)
408.4
389.0
–
–
–
6.8
8.1
(110.8)
(110.8)
–
–
–
–
48.6
11.3
6.8
8.1
6.8
(0.5)
6.3
(9.0)
–
–
–
–
415.2
(19.9)
395.3
(119.8)
48.6
11.3
6.8
8.1
–
791.9
–
(629.0)
–
1,584.8
–
1,747.7
4.9
22.2
4.9
1,769.9
Share
capital
$M
791.9
Attributable to Shareholders
Retained
earnings
$M
1,584.8
Total
$M
1,747.7
Reserves
$M
(629.0)
Non–controlling
interests
$M
22.2
Total
equity
$M
1,769.9
19
–
–
–
Balance at 1 July 2021
Total comprehensive
income/(loss) for the year
Profit for the year
Other comprehensive
income/(loss) for the year
Total comprehensive income
for the year, net of income tax
Contributions by and
distributions to owners
Dividends declared/paid
Issue of shares to employees
of Goodman Group
Issue of treasury shares
Issue of ordinary shares
Equity settled share based
payments transactions
Deferred tax associated with the LTIP
Acquisition of special purpose
development entity with
non–controlling interests
Balance at 30 June 2022
The notes on pages 171 to 206 form part of these consolidated financial statements.
16(a)
16(a)
18(c)
4.8
18.9
–
–
873.0
–
57.4
15
16(a)
18(c)
–
–
15.9
15.9
–
–
12.2
(4.2)
–
(605.1)
751.9
–
751.9
15.9
10.9
(0.8)
762.8
15.1
751.9
767.8
10.1
777.9
–
–
(46.7)
–
(46.7)
57.4
4.8
18.9
12.2
(4.2)
(5.5)
–
–
–
–
–
(52.2)
57.4
4.8
18.9
12.2
(4.2)
–
–
–
–
–
2,290.0
–
2,557.9
1.4
28.2
1.4
2,586.1
169
GOODMAN GROUP
Consolidated cash flow statement
for the year ended 30 June 2022
(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
Net proceeds from disposal of investment properties
Payments for investment properties
Net proceeds from disposal of equity accounted investments
Return of capital from equity accounted investments
Payments for equity investments
Payments for plant and equipment
Net cash used in investing activities
Cash flows from financing activities
Net proceeds from issue of ordinary shares
Proceeds from borrowings
Net proceeds from/(repayments of) loans with related parties
Payments on derivative financial instruments
Dividends paid to Shareholders
Dividends paid to non–controlling interests
Payments of lease liabilities
Capital contributed by non–controlling interests
Net cash provided by/(used in) financing activities
Net (decrease)/increase in cash held
Cash and cash equivalents at the beginning of the year
Effect of exchange rate fluctuations on cash held
Cash and cash equivalents at the end of the year
The notes on pages 171 to 206 form part of these consolidated financial statements.
170
Note
2022
$M
2021
$M
42.7
1,036.2
300.0
(5.9)
(886.8)
(262.6)
66.1
15.5
(1.0)
(87.7)
14.7
1,155.0
251.7
(2.0)
(821.6)
(204.8)
81.7
16.1
(1.0)
(16.2)
17(b)
216.5
473.6
272.5
(413.0)
4.4
166.3
(263.3)
(1.7)
(234.8)
18.9
9.0
107.5
–
(110.8)
(5.5)
(8.0)
1.4
12.5
(5.8)
358.4
4.9
357.5
5.4
(173.0)
–
139.8
(243.1)
(0.3)
(271.2)
11.3
–
(83.7)
(42.2)
(73.1)
(9.0)
(8.7)
4.9
(200.5)
1.9
368.2
(11.7)
358.4
17(a)
Notes to the consolidated financial statements
(expressed in Australian dollars)
ANNUAL REPORT 2022
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 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.
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 controlled 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 controlled foreign operation are recognised in the foreign
currency translation reserve on consolidation.
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.
Weighted average
As at 30 June
Australian dollars (AUD) to
2022
2021
2022
2021
Hong Kong dollars (HKD)
5.6626
5.7958
5.4241
5.8222
Chinese yuan (CNY)
4.6840
4.9419
4.6154
4.8412
Japanese yen (JPY)
85.1512
79.6101
93.7770
83.2780
Euros (EUR)
0.6442
0.6262
0.6594
0.6327
British pounds sterling (GBP)
0.5456
0.5546
0.5676
0.5432
United States dollars (USD)
0.7255
0.7472
0.6912
0.7497
(e) Changes in accounting policies
A fundamental reform of major interest rate benchmarks is being
undertaken globally, including the replacement of some interbank offered
rates (IBORs) with alternative risk-free rates (referred to as IBOR reform).
The Consolidated Entity has adopted Interest Rate Benchmark Reform
– Phase 2 (Amendments to International Financial Reporting Standard
(IFRS) 9, International Accounting Standard (IAS) 39, IFRS 7, IFRS 4 and
IFRS 16) from 1 July 2021. These amendments provide reliefs relating to
modifications of financial instruments and lease contracts or hedging
relationships triggered by a replacement of a benchmark interest rate
in a contract with a new alternative benchmark rate.
The overall impact of the IBOR reform is not significant in the context
of the Consolidated Entity’s financial position and performance.
See note 14 for related disclosures about risks, financial assets and
financial liabilities indexed to IBORs.
(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.
171
GOODMAN GROUP
Notes to the consolidated financial statements
Basis of preparation (continued)
(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.
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.
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 management services relates to investment
management base fees and property services fees and 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.
172
ANNUAL REPORT 2022
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 or it relates to a combination of inextricable management and
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, when 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 24 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 24 months for larger and more complex developments.
Net gain/(loss) 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 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.
Superannuation
Defined contribution retirement plans
Obligations for contributions to defined contribution retirement plans are
recognised as an expense as incurred.
Defined benefit retirement schemes
The net obligation in respect of defined benefit retirement schemes
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 retirement schemes are recognised in profit or loss.
173
GOODMAN GROUP
Notes to the consolidated financial statements
Results for the year (continued)
2 Profit before interest and income tax (continued)
Profit before interest and income tax has been arrived at after crediting/(charging) the following items:
Management services
Performance related income
Management income
Income from disposal of inventories
Development income from fixed price development contracts
Other development income, including development management1
Net gain on disposal of assets previously classified as held for sale
Net gain on disposal of special purpose development entities, including JVs
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
Depreciation of plant and equipment
Auditor’s remuneration
2022
$M
162.7
31.0
193.7
747.4
114.6
169.6
–
43.4
2021
$M
135.1
53.6
188.7
809.8
98.5
131.1
132.3
–
1,075.0
1,171.7
(354.9)
(78.6)
(619.4)
(65.3)
(433.5)
(684.7)
(169.1)
(1.4)
(163.5)
(3.1)
(170.5)
(166.6)
(8.7)
(1.5)
(9.6)
(1.5)
1. Fee revenues from single contractual arrangements involving a combination of inextricable investment management and development management services and recognised over the life of the
underlying developments projects are classified as development income for statutory reporting purposes. During the period, $77.0 million (2021: $75.2 million) of such income was recognised.
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, both through direct ownership and cornerstone investments in Partnerships
+ Management activities, both investment 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 share based remuneration.
The assets allocated to each operating segment relate to the properties, which also include the investments in Partnerships, and the trade and other
receivables associated with the operating activities, 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.
174
ANNUAL REPORT 2022
Asia
Continental Europe
United Kingdom
Total
2022
$M
2021
$M
2022
$M
2021
$M
15.3
96.8
150.2
0.2
262.5
6.2
77.8
129.9
0.8
214.7
27.6
90.9
892.1
–
1,010.6
8.4
106.7
796.5
–
911.6
24.8
223.2
14.3
0.2
262.5
10.3
197.7
5.9
0.8
214.7
792.2
193.7
729.9
174.0
24.7
–
1,010.6
7.7
–
911.6
2022
$M
3.0
6.0
32.7
–
41.7
12.8
25.9
3.0
–
41.7
2021
$M
2022
$M
2021
$M
1.0
4.2
245.3
–
250.5
45.9
193.7
1,075.0
0.2
1,314.8
15.6
188.7
1,171.7
0.8
1,376.8
228.8
20.8
829.8
442.8
969.0
392.5
0.9
–
250.5
42.0
0.2
1,314.8
14.5
0.8
1,376.8
252.5
205.4
505.2
376.5
42.8
20.4
800.5
602.3
67.2
60.4
7.6
6.5
9.8
6.1
84.6
73.0
43.7
44.2
Asia
2022
$M
1,971.9
2021
$M
1,573.6
22.3
19.2
Continental Europe
2021
$M
1,030.2
2022
$M
1,312.4
203.8
26.8
United Kingdom
2021
2022
$M
$M
752.2
957.2
269.8
90.2
Total
2022
$M
4,241.5
2021
$M
3,356.0
1,000.8
1,743.8
908.0
1,306.6
164.2
1,017.0
154.0
779.6
680.6
899.0
408.0
673.6
1,845.6
3,659.8
1,470.0
2,759.8
181.3
99.9
138.4
57.1
–
1.3
–
10.0
243.6
162.1
25.8
178.8
424.9
263.3
164.2
245.9
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
Assets and services transferred at a point in time
Assets and services transferred over time
Other revenue
Rental income (excludes outgoings recoveries)
Dividends from investments
Total external revenues
Reportable segment
profit before income tax
Other key components of financial
performance included in reportable
segment profit before income tax
Share of net results of equity
accounted investments in Partnerships
(before fair value adjustments)
Material non–cash items not
included in reportable segment
profit before income tax
Share of fair value adjustments
attributable to investment properties
in Partnerships
Statement of financial position
Reportable segment assets
Included in reportable
segment assets are:
Investments in Partnerships
Non–current assets
Additions to non–current assets include:
– Investment properties
– Investments accounted for
using the equity method
Reportable segment liabilities
160.8
137.0
124.1
106.3
113.5
85.8
398.4
329.1
175
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 attributable to investment properties in Partnerships
– Share of fair value adjustments on derivative financial instruments in Partnerships
– Share based payments expense
Net finance expense
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.
Note
2022
$M
2021
$M
1,314.8
1,314.8
1,376.8
1,376.8
6(e)
6(f)
6(f)
16(b)
11
800.5
(66.6)
733.9
(0.3)
269.8
(9.1)
(94.0)
(23.4)
876.9
602.3
(81.5)
520.8
–
90.2
1.5
(124.0)
(61.1)
427.4
4,241.5
1,041.8
3,356.0
1,010.2
5,283.3
4,366.2
398.4
329.1
2,298.8
2,267.2
2,697.2
2,596.3
176
ANNUAL REPORT 2022
4 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 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.
(a) Taxation in the consolidated statement of comprehensive income
Current tax expense – Hong Kong profits tax
Current year
Changes in estimates related to prior years
Current tax expense – overseas
Current year
Changes in estimates related to prior years
Deferred tax (expense)/benefit
Origination and reversal of temporary differences
Total income tax expense
2022
$M
2021
$M
(14.2)
1.9
(12.3)
(59.8)
0.4
(59.4)
(42.4)
(42.4)
(114.1)
(15.1)
1.6
(13.5)
(9.2)
5.7
(3.5)
4.8
4.8
(12.2)
The provision for Hong Kong profits tax for the year ended 30 June 2022 is calculated at 16.5% (2021: 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.
(b) Reconciliation between accounting profit and income tax expense 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
– Changes in estimates related to prior years
Income tax expense
2022
$M
876.9
(206.4)
(11.4)
123.5
(45.4)
23.3
2.3
(114.1)
2021
$M
427.4
(133.3)
(15.3)
172.8
(47.1)
3.4
7.3
(12.2)
177
GOODMAN GROUP
Notes to the consolidated financial statements
Results for the year (continued)
4 Taxation (continued)
(c) Current tax receivables/payables
Net income tax payable 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
– Changes in estimates related to prior years
– Other
Net income tax payable at the end of the year
Current tax receivables
Current tax payables
(d) Deferred tax assets and liabilities
2022
$M
(44.7)
87.7
(74.0)
2.3
(3.2)
(31.9)
0.6
(32.5)
(31.9)
2021
$M
(47.4)
16.2
(24.3)
7.3
3.5
(44.7)
4.2
(48.9)
(44.7)
Deferred tax assets of $18.8 million (2021: $15.2 million) arising from performance rights awarded under the LTIP and deferred tax liabilities
of $50.5 million (2021: $1.6 million) arising from investment properties were recognised in the consolidated statement of financial position.
Movements in deferred taxes recognised in expenses and equity are attributable to the following:
Deferred tax (expense)/benefit recognised in expenses
Investment properties – fair value adjustments
LTIP
Other items
Total deferred tax (expense)/benefit recognised in expenses
Deferred tax benefit/(expense) recognised in equity
LTIP
Other items
Total deferred tax (expense)/benefit recognised in equity
Total deferred tax movements recognised in expenses and equity
2022
$M
(54.6)
7.8
4.4
2021
$M
(0.1)
5.6
(0.7)
(42.4)
4.8
(4.2)
–
(4.2)
(46.6)
8.1
(4.7)
3.4
8.2
Deferred tax assets of $190.0 million (2021: $236.6 million) arising primarily from tax losses have not been recognised by the Consolidated Entity.
5 Profit attributable to equity shareholders of the Company
The consolidated profit attributable to equity shareholders of the Company includes a profit of $265.3 million (2021: $329.9 million) which has been
dealt with in the financial statements of the Company.
178
ANNUAL REPORT 2022
OPERATING ASSETS AND LIABILITIES
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.
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 profit or loss.
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 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 values and at completion external valuations are
obtained to determine the fair values.
For stabilised investment properties, independent valuations are obtained
at least every two 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.
179
GOODMAN GROUP
Notes to the consolidated financial statements
Operating assets and liabilities (continued)
6 Property assets (continued)
(b) Summary of the Consolidated Entity’s investment in property assets
Directly held properties:
Inventories
Current
Non-current
Investment properties
Stabilised investment properties
Property held by Partnerships:
Investments accounted for using the equity method – JVs
(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.
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.
Note
2022
$M
2021
$M
6(d)
6(d)
6(e)
175.2
1,377.4
1,552.6
106.4
1,034.5
1,140.9
336.8
336.8
163.9
163.9
6(f)
1,845.6
1,845.6
1,470.0
1,470.0
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 the asset (city, suburb or regional area)
+ Carrying value of the asset (categorised by likely appeal to private
(including syndicates), national and/or 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.
The number of sales and the circumstances of each sale are assessed
to determine whether a market segment is active or inactive.
180
Where a market segment is observed to be active, then external
independent valuations are performed for stabilised investment
properties where there has been a combination of factors that are likely
to have resulted in a material movement in valuation. The considerations
include a greater than 10% movement in market rents, more than a
25 basis point movement in capitalisation rates, a material change in
tenancy profile (including changes in the creditworthiness of a significant
customer that may have a material impact on the property valuation),
significant capital expenditure, a change in use (or zoning), a development
has reached completion/stabilisation of the asset or it has been two 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:
+ Current contractual lease terms
+ Current market rents
+ Projected growth in market rents
+ Expected and likely capital expenditures
+ Projected letting up incentives provided to customers and vacant
time on expiry of leases
+ Discount rates – 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.
ANNUAL REPORT 2022
Market assessment
The investment market for industrial, logistics and warehousing properties
has continued to be strong during FY22, despite the increased interest
rates in the last quarter of FY22. At 30 June 2022, 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 DCF 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
2022
%
2021
%
5.2
3.4
3.7
5.4
3.7
4.1
Segment
Asia
Continental Europe
United Kingdom
Sensitivity Ananlysis
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(g)). The stabilised
investment property valuations at 30 June 2022 are most sensitive
to the following inputs:
+ Capitalisation rates
+ Market rents
+
Incentives provided to customers and/or vacant time on expiry of leases.
The directly held stabilised investment properties are in Asia. The average
net market rent and weighted average capitalisation rate is summarised
in the table below:
Valuation
technique
Significant unobservable inputs
Income
capitalisation
Average net market rent
(per square metre per annum)
2022
$258
Capitalisation rate (weighted average)
4.2%
181
GOODMAN GROUP
Notes to the consolidated financial statements
Operating assets and liabilities (continued)
6 Property assets (continued)
The impacts on the Consolidated Entity’s financial position that would arise from the changes in capitalisation rates, market rents and incentives/vacant
time are set out in the table below. This illustrates the impacts on the Consolidated Entity in respect of both the directly held stabilised investment
properties and its share of those stabilised investment properties held by Partnerships.
Book value at 30 June 2022
Changes in capitalisation rates:
Increase in capitalisation rates +50 basis points (bps)
Increase in capitalisation rates +25 bps
Decrease in capitalisation rates -25 bps
Decrease in capitalisation rates -50 bps
Changes in market rents:
Decrease in rents -5%
Decrease in rents -2.5%
Increase in rents +2.5%
Increase in rents +5%
Changes in incentives/vacant time2:
Increase in incentives/vacant time +3 months
Increase in incentives/vacant time +6 months
1. Reflects the Consolidated Entity’s share in Partnerships.
2. On assumed lease expiries over the next 12 months.
Investment properties under development
Directly held
properties
A$M
Partnerships1
$M
336.8
1,907.8
(35.6)
(18.8)
21.1
45.1
(14.0)
(7.0)
7.0
14.0
(3.4)
(6.8)
(195.2)
(103.0)
116.1
248.1
(86.0)
(43.0)
43.0
86.0
(6.0)
(12.0)
For the directly held investment properties under development, external independent valuations are generally not performed, but instead valuations are
determined at each reporting date using the feasibility assessments supporting the developments. The end values of the developments in the feasibility
studies are based on assumptions such as capitalisation rates, market rents, incentives provided to customers and vacant time that are consistent with
those observed in the relevant market, adjusted for a profit and risk factor. The profit and risk factors are dependent on the function, location, size and
current status of the developments and are generally in a market range of 10% to 15%; although for larger more complex projects that are at an early stage
of the development, the profit and risk factor could be in the order of 25%. 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.
In respect of the Partnerships, certain Partnerships obtain external independent valuations of investment properties under development at reporting
dates. However, the majority determine the fair values at reporting dates by reference to the feasibility assessments, with external independent
valuations obtained when the properties has been stabilised.
182
ANNUAL REPORT 2022
(d) Inventories
(f) Investments accounted for using the equity method
Current
Land and development properties
Non–current
Land and development properties
Leasehold land and development properties
2022
$M
2021
$M
175.2
175.2
106.4
106.4
964.1
413.3
719.1
315.4
1,377.4
1,034.5
During the current and prior financial year, no impairment losses were
recognised on land and development properties.
(e) Investment properties
Reconciliation of carrying amount of directly held investment properties
Carrying amount at the beginning of the year
Acquisitions
Capital expenditure
Disposals
Net loss from fair value adjustments
Effect of foreign currency translation
2022
$M
163.9
2021
$M
7.2
420.4
163.0
4.5
(269.7)
(0.3)
18.0
1.2
(7.4)
–
(0.1)
Carrying amount at the end of the year
336.8
163.9
Analysed by segment:
Asia
United Kingdom
336.8
–
137.7
26.2
336.8
163.9
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
2022
$M
2021
$M
8.6
8.7
8.2
6.6
3.5
35.6
4.1
2.7
1.1
1.1
0.2
9.2
JVs
A 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 Partnerships
are accounted for using the equity method. Under this method,
the Consolidated Entity’s investment is initially recognised at cost.
Subsequent to initial recognition, the consolidated financial statements
include the Consolidated Entity’s share of the gains or losses and other
comprehensive income of Partnerships until the date on which significant
influence or joint control ceases.
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
183
GOODMAN GROUP
Notes to the consolidated financial statements
Operating assets and liabilities (continued)
6 Property assets (continued)
Name
Property investment and development
Consolidated
share of net
results recognised
Consolidated
ownership interest
Consolidated
investment
carrying amount
Country of
establishment
2022
$M
2021
$M
2022
%
2021
%
2022
$M
2021
$M
Goodman China Logistics Partnership (GCLP)
Cayman Islands
Goodman UK Partnership (GUKP)1
United Kingdom
Other JVs
56.8
213.4
75.1
65.2
32.9
66.6
345.3
164.7
20.0
35.3
20.0
33.3
918.0
832.7
676.3
404.0
251.3
233.3
1,845.6
1,470.0
1. The consolidated ownership interest in GUKP reflected the weighted average ownership in GUKP, GUKP II and GUKP III.
The Consolidated Entity’s property investment 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 of the year 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 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
Dividends/distributions received and receivable
Effect of foreign currency translation
Carrying amount at the end of the year
2022
$M
2021
$M
1,470.0
1,276.2
84.6
269.8
(9.1)
345.3
7.2
263.3
(3.4)
(166.3)
(65.8)
(4.7)
73.0
90.2
1.5
164.7
3.1
245.9
–
(143.2)
(76.4)
(0.3)
1,845.6
1,470.0
184
ANNUAL REPORT 2022
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.
GCLP
GUKP
2022
$M
2021
$M
2022
$M
2021
$M
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
Carrying amount of interest in JV
Summarised statement of comprehensive income
Revenue
Net finance expense
Income tax expense
Profit and total comprehensive income (100%)
Consolidated share of profit and total comprehensive income
Dividends/distributions received and receivable by the Consolidated Entity
427.4
148.3
575.7
281.3
84.4
365.7
41.1
12.9
54.0
6,303.3
5,537.5
2,421.8
43.4
1,490.3
1,533.7
–
–
36.1
36.1
287.0
–
287.0
1,210.6
33.3
403.1
–
0.9
–
24.7
24.7
537.8
–
537.8
1,913.3
35.3
676.0
–
0.3
676.3
404.0
39.8
(1.0)
(0.2)
575.6
213.4
3.9
28.5
(3.7)
–
98.7
32.9
4.6
70.6
89.6
2,870.0
2,707.0
2,940.6
2,796.6
1,111.8
718.3
1,830.1
2,108.3
20.0
421.7
492.9
3.4
918.0
215.0
(20.3)
(46.3)
320.0
64.0
7.3
757.7
613.7
1,371.4
1,735.2
20.0
347.0
482.3
3.4
832.7
193.6
(19.2)
(37.4)
313.4
67.8
6.1
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.
With respect to the Consolidated Entity’s other JVs, the total profit after tax and revaluations was $308.7 million and total other comprehensive
income was $nil.
185
GOODMAN GROUP
Notes to the consolidated financial statements
Operating assets and liabilities (continued)
7 Receivables
Non-derivative financial assets
Impairment
Non-financial assets
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.
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.
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.
Loans and receivables
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.
186
ANNUAL REPORT 2022
Measurement of ECLs
Trade receivables
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.
No trade receivables were impaired at 30 June 2022 and 2021.
There are no significant overdue trade receivables at 30 June 2022.
Other receivables
At 30 June 2022, none of the other receivables balance was overdue
or impaired (2021: $nil).
Amounts due from related parties
At 30 June 2022, none of the amounts due from related parties was
overdue or impaired (2021: $nil). Amounts due from related parties are
typically repayable within 30 days. The amounts due from related
parties are unsecured.
Loans to related parties
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)
2022
$M
5.0
70.2
37.1
3.3
115.6
2021
$M
12.4
94.0
75.3
562.6
744.3
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 (2021: $nil). The loans to related
parties are unsecured.
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.
789.6
789.6
276.2
276.2
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:
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.
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
2022
$M
2021
$M
42.7
60.5
4.6
87.2
55.7
4.8
–
1.0
Significant changes in the contract assets and the contract liabilities
balances during the year are set out below:
187
GOODMAN GROUP
Notes to the consolidated financial statements
Operating assets and liabilities (continued)
8 Contract assets (continued)
Balance at the beginning of the year
Revenue recognised that was included in the
contract liability balance at the beginning of 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
2022
2021
Contract
assets
Contract
liabilities
Contract
assets
Contract
liabilities
$M
55.7
–
(380.4)
385.0
0.2
60.5
60.5
–
60.5
$M
5.8
(1.4)
–
–
0.2
4.6
4.6
–
4.6
$M
25.1
–
(70.5)
101.1
–
55.7
55.7
–
55.7
$M
13.8
(7.7)
–
–
(0.3)
5.8
4.8
1.0
5.8
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 $nil (2021: $nil).
Details regarding the Consolidated Entity’s future rental income associated with existing lease agreements is included in note 6.
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 AUM, total development project costs or gross property income of the Partnerships
and are invoiced as the services are provided.
188
9 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.
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
Note
8
10
8
10
2022
$M
45.7
216.1
4.6
8.2
2021
$M
50.3
201.2
4.8
6.7
274.6
263.0
56.1
64.4
ANNUAL REPORT 2022
10 Leases
The Consolidated Entity leases office buildings, motor vehicles and office
equipment. Certain investment properties and developments classified
as inventories are also built on land held under leasehold interests.
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 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 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. Right of use assets that meet the definition of
investment property are carried at fair value in accordance with note 6(a).
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.
Information about leases for which the Consolidated Entity is a lessee is
detailed below:
Right of use assets
Inventories
Investment properties
Property, plant and equipment
–
37.1
93.2
1.0
59.3
124.7
Lease liabilities
Current
Non–current
The following were recognised during the year:
Additions to right of use assets
Depreciation of right of use assets
Interest expense on lease liabilities
Cash outflows on lease liabilities
2022
$M
413.3
336.8
18.1
768.2
8.2
37.1
45.3
2022
$M
332.0
6.9
0.4
8.0
2021
$M
315.5
137.7
12.1
465.3
6.7
59.3
66.0
2021
$M
344.3
7.6
0.5
8.7
189
GOODMAN GROUP
Notes to the consolidated financial statements
Interest bearing liabilities
12
Interest bearing liabilities comprise bank loans. 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.
Secured:
– Bank loans
Note
12(a)
2022
$M
9.0
9.0
2021
$M
–
–
(a) Bank loans, secured
As at 30 June 2022, the Consolidated Entity had the following secured
bank facilities.
Facility maturity date
18 March 2034
Total at 30 June 2022
Total at 30 June 2021
(b) Finance facilities
30 June 2022
Secured:
– Bank loans
30 June 2021
Secured:
– Bank loans
Facility
limit
$M
Amounts
drawn
$M
28.2
28.2
–
9.0
9.0
–
Facilities
available
$M
Facilities
utilised
$M
28.2
28.2
–
–
9.0
9.0
–
–
CAPITAL MANAGEMENT
11 Net finance 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
Foreign exchange gain
Finance expense
2022
$M
2021
$M
Note
21(c)
11.6
0.9
8.0
27.5
12.7
0.8
8.3
–
48.0
21.8
Interest expense from related party loans
21(c)
(41.8)
(38.9)
Other borrowing costs
Fair value adjustments
on derivative financial instruments
Foreign exchange losses
Capitalised borrowing costs
Net finance expense
(2.7)
(1.1)
(38.5)
(20.1)
–
(32.2)
11.6
9.4
(71.4)
(82.9)
(23.4)
(61.1)
Borrowing costs were capitalised to inventories and investment
properties under development during the financial year at rates between
1.0% and 10.6% per annum (2021: 1.0% and 10.6% per annum).
190
ANNUAL REPORT 2022
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.
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:
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.
+ 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
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
2022
$M
131.3
43.5
174.8
2021
$M
64.4
38.2
102.6
1. Principally relates to the Consolidated Entity’s 10.0% (2021: 10.0%) interest in Goodman
Japan Limited. During the year, a revaluation gain of $9.4 million was recognised in other
comprehensive income (2021: $7.6 million gain). Refer to note 14(d) for assumptions made
in measuring fair value of the unlisted securities.
Other financial liabilities
Current
Derivative financial instruments
Non–current
Derivative financial instruments
2022
$M
45.4
45.4
141.4
141.4
2021
$M
–
–
89.1
89.1
+ 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
and also loans to related parties in North America. 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).
191
GOODMAN GROUP
Notes to the consolidated financial statements
Capital management (continued)
14 Financial risk management (continued)
As at 30 June 2022, 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
HKD’M
(1,150.0)
EUR’M
(775.0)
GBP’M
(255.0)
USD’M
(450.0)
JPY’M
(6,000.0)
CNY’M
(4,258.6)
Amounts
receivable
AUD’M
202.3
AUD’M
1,238.3
AUD’M
474.4
AUD’M
634.6
AUD’M
71.9
USD’M
539.6
2022
Weighted
average
exchange
rate
AUD/HKD
5.6948
AUD/EUR
0.6263
AUD/GBP
0.5375
AUD/USD
0.7092
AUD/JPY
83.4650
USD/CNY
7.9827
Amounts
payable
HKD’M
(500.0)
EUR’M
(675.0)
GBP’M
–
USD’M
(450.0)
JPY’M
(6,000.0)
CNY’M
(4,545.2)
Amounts
receivable
AUD’M
83.9
AUD’M
1,086.7
AUD’M
–
AUD’M
634.6
AUD’M
71.9
USD’M
600.0
2021
Weighted
average
exchange
rate
AUD/HKD
5.9560
AUD/EUR
0.6214
AUD/GBP
–
AUD/USD
0.7092
AUD/JPY
83.4650
USD/CNY
7.5753
AUD receivable/HKD payable
AUD receivable/EUR payable
AUD receivable/GBP payable
AUD receivable/USD payable
AUD receivable/JPY payable
USD receivable/CNY payable
Sensitivity analysis
Throughout the financial year, if the Australian dollar had been 5% (2021: 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 $48.8 million (2021: $36.7 million). If the Australian dollar had been 5% (2021: 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 $48.8 million (2021: $36.7 million).
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 derivatives (IRD) to manage certain cash flow risks associated with floating interest rates on its CCIRS.
As at 30 June 2022, the Consolidated Entity’s fixed and floating rate exposure (by principal) arising from its derivative financial instruments is set out below:
30 June 2022
Fixed rate liabilities
Floating rate liabilities
30 June 2021
Fixed rate liabilities
Floating rate liabilities
Interest bearing
liabilities
$M
–
9.0
9.0
–
–
–
Impact of derivatives
CCIRS
$M
–
(69.9)
(69.9)
–
(52.1)
(52.1)
IRD
$M
1,106.0
(1,106.0)
–
474.2
(474.2)
–
Net interest
rate exposure
$M
1,106.0
(1,166.9)
(60.9)
474.2
(526.3)
(52.1)
As a result of the derivative financial instruments that existed at 30 June 2022, 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.
192
ANNUAL REPORT 2022
2022
2021
Fixed
interest rate
(by principal)
$M
Weighted
average
interest rate
% per annum
Fixed
interest rate
(by principal)
$M
Weighted
average
interest rate
% per annum
1,033.7
970.7
275.3
151.7
151.7
0.54
0.54
0.44
0.31
0.31
474.2
474.2
408.5
158.1
158.1
(0.47)
(0.47)
(0.45)
(0.31)
(0.31)
Number of years post
balance date
1 year
2 years
3 years
4 years
5 years
Sensitivity analysis
Based on the Consolidated Entity’s interest bearing borrowings at 30 June 2022, if interest rates on borrowings had been 100 bps per annum
(2021: 100 bps per annum) higher/lower, with all other variables held constant, the Consolidated Entity’s profit attributable to Shareholders would have
been $11.8 million lower/higher (2021: $10.8 million lower/higher).
Managing interest rate benchmark reform and associated risks
A fundamental reform of major interest rate benchmarks is being undertaken globally, including the replacement of some interbank offered rates
(IBORs) with alternative risk-free rates (referred to as IBOR reform). The Consolidated Entity has exposure to IBORs through certain of its related
party loans and its derivative instruments (IRD and CCIRS). The Consolidated Entity’s derivative instruments are governed by contracts based
on the International Swaps and Derivatives Association (ISDA) master agreements.
The United Kingdom, Japan and the United States had announced plans to discontinue using London Interbank Offered Rate (LIBOR) by 31 December
2021. The alternative reference rate for sterling LIBOR is the Sterling Overnight Index Average rate, for Japanese yen LIBOR is the Tokyo Overnight
Average Rate and for US dollar LIBOR is the Secured Overnight Financing Rate. Amendments to the Consolidated Entity’s financial instruments with
contractual terms indexed to sterling LIBOR or Japanese yen LIBOR, such that they incorporate the new benchmark rates, were completed by
31 December 2021. Although US dollar LIBOR was planned to be discontinued by the end of 2021, in November 2020 the Intercontinental Exchange
Benchmark Administration, the Financial Conduct Authority-regulated and authorised administrator of LIBOR, announced that it had started to consult
on its intention to cease the publication of certain US dollar LIBORs after June 2023. It is still unclear when the announcement that will set a date for
the termination of the publication of US dollar LIBOR will take place. Nevertheless, the Consolidated Entity has finished the process of implementing
appropriate fallback provisions for all US dollar LIBOR indexed exposures.
For the Consolidated Entity’s other IBOR exposures, the transition to alternative risk-free rates has been deferred and/or extended and therefore
no action has been or will be taken in that regard until such time as the alternative reference rates are defined and scheduled. It is expected that these
will follow the conventions established in other markets and the Consolidated Entity will apply the same principles for those transitions as and when
they become relevant.
The table below details the Consolidate Entity’s exposure at 30 June 2022 to significant IBORs subject to reform that have yet to transition to alternate
benchmark rates:
IRD
CCIRS
USD LIBOR
Notional amount
$M
400.0
900.0
1,300.0
The exposure disclosed is for derivatives with contractual maturities after 30 June 2022. Derivatives exposure has been reported using the notional
contract amount and where derivatives such as CCIRS have both a receiver and a payer leg with exposure to IBOR reform, the notional contract
amount is disclosed for both legs.
193
As at 30 June 2022
Non–derivative financial liabilities
Trade and other payables
(excluding contract liabilities)
Lease liabilities
Bank loans, secured
Derivative financial liabilities
Net settled1:
Gross settled2:
(Inflow)
Outflow
Total derivative financial liabilities
As at 30 June 2021
Non–derivative financial liabilities
Trade and other payables (excluding
contract liabilities)
Lease liabilities
Loans from related parties
GOODMAN GROUP
Notes to the consolidated financial statements
Capital management (continued)
14 Financial risk management (continued)
(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
$M
$M
Up to 12
months
$M
1 to 2
year(s)
$M
2 to 3
years
$M
3 to 4
years
$M
4 to 5
years
More than 5
years
$M
$M
317.9
317.9
261.8
56.1
–
Loans from related parties
1,941.0
1,949.0
Total non–derivative financial liabilities
2,313.2
2,370.8
45.3
9.0
94.9
9.0
8.4
–
129.3
399.5
10.9
–
3.1
70.1
73.3
–
26.3
99.6
–
0.9
–
504.8
505.7
–
0.6
–
708.9
709.5
–
0.8
9.0
576.6
586.4
(39.6)
15.5
22.0
5.9
19.6
(20.5)
(5.0)
(6.5)
95.1
–
55.5
(459.5)
308.4
(135.6)
(78.4)
47.1
(9.3)
(95.3)
80.3
(9.1)
(88.8)
57.8
(11.4)
(118.5)
53.2
(85.8)
(72.8)
63.2
(14.6)
(5.7)
6.8
(5.4)
315.9
315.9
251.5
64.4
–
–
–
–
Total non–derivative financial liabilities
2,273.0
2,372.6
1,069.3
66.0
151.4
1,891.1
1,905.3
6.7
811.1
3.8
104.4
172.6
3.3
43.2
46.5
3.8
74.6
78.4
3.3
540.5
543.8
130.5
331.5
462.0
79.4
73.5
0.2
29.0
22.7
23.5
(0.3)
(1.6)
(54.7)
–
24.7
(123.1)
67.5
17.9
(11.5)
1.2
(10.1)
(17.3)
3.2
14.9
(56.1)
4.9
(28.5)
(22.7)
1.1
1.9
(13.0)
25.6
12.3
(2.5)
31.5
27.4
Derivative financial liabilities
Net settled1:
Gross settled2:
(Inflow)
Outflow
Total derivative financial liabilities
1. Net settled includes IRD and FEC.
2. Gross settled includes CCIRS.
194
ANNUAL REPORT 2022
(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 note 7).
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 long-term investment grade credit rating 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 was 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 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)
+ Formal review of the mark to market position of derivative financial instruments by counterparty on a monthly basis.
Master netting off 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.
(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 2022 and 2021.
(i) Fair value hierarchy
The table below analyses financial instruments carried at fair value, by valuation method (see note 1(g)):
Level 1
$M
Level 2
$M
Level 3
$M
Total
$M
As at 30 June 2022
Derivative financial assets
Investment in unlisted securities
Derivative financial liabilities
As at 30 June 2021
Derivative financial assets
Investment in unlisted securities
Derivative financial liabilities
There were no transfers between the levels during the year.
–
–
–
–
–
–
–
–
–
–
131.3
–
131.3
186.8
186.8
64.4
–
64.4
89.1
89.1
–
43.5
43.5
–
–
–
38.2
38.2
–
–
131.3
43.5
174.8
186.8
186.8
64.4
38.2
102.6
89.1
89.1
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 IRD, CCIRS and FEC.
The fair values 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
DCF: 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 $6.1 billion in year five
Average annual development
of 82,500 square metres
Five–year terminal value growth
rate of 0.63%
Risk adjusted post tax discount
rate of 7.20% per annum.
(iii) Reconciliation of Level 3 fair values
Carrying amount at the beginning of the year
Net change in fair value – included in other comprehensive income/(loss)
Effect of foreign currency translation
Carrying amount at the end of the year
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).
+
2022
$M
38.2
9.4
(4.1)
43.5
2021
$M
34.3
7.6
(3.7)
38.2
15 Dividends
During the financial year, the Company declared a final dividend of 2.5 cents per share amounting to $46.7 million. This dividend will be paid on 25 August 2022
In the prior year, the Company declared a final dividend of 6.0 cents per share amounting to $110.8 million. This was paid on 26 August 2021.
196
ANNUAL REPORT 2022
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
Less: Accumulated issue costs
Total issued capital
Date
Details
Ordinary shares, issued and fully paid
30 Jun 2020
Balance at 30 June 2020
31 Aug 2020
Shares issued to employees of Goodman Group1
4 Sep 2020
Ordinary shares issued
30 Jun 2021
Balance at 30 June 2021
31 Aug 2021
Shares issued to employees of Goodman Group1
31 Aug 2021
Treasury shares issued
2 Sep 2021
Ordinary shares issued
30 Jun 2022
Balance at 30 June 2022
2022
2021
Number of shares
1,868,222,609
1,847,429,255
1,868,222,609
1,847,429,255
2022
$M
873.6
(0.6)
873.0
2021
$M
792.5
(0.6)
791.9
Number of shares
$M
Share capital
1,828,413,236
15,438,241
3,577,778
1,847,429,255
14,716,648
1,233,333
4,843,373
1,868,222,609
732.6
48.6
11.3
792.5
57.4
4.8
18.9
873.6
1. During the year, the Company issued 14,716,648 (2021: 15,438,241) shares to employees of Goodman Group under the 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
Vested
Forfeited
Outstanding at the end of the year
Exercisable at the end of the year
Number of rights
2022
2021
22,734,427
24,921,436
8,220,860
5,580,560
(6,208,554)
(5,952,229)
(130,552)
(1,815,340)
24,616,181
22,734,427
–
–
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 period from the grant date to the vesting dates. 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 (%)
10–year rights
issued on
18 Nov 2021
20.16
24.49
–
25.45
6.8
1.23
1.51
10–year rights
issued on
30 Sep 2021
17.22
21.68
–
25.36
6.9
1.38
1.03
5–year rights
issued on
30 Sep 2021
17.87
21.68
–
28.54
3.9
1.38
0.49
The model inputs for the remeasurement of the cash settled performance rights at 30 June 2022 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 (%)
10–year
rights
issued in
FY22
13.61
17.84
–
27.44
6.2
1.68
3.42
5–year
rights
issued In
FY22
14.12
17.84
–
29.24
3.2
1.68
3.09
5–year
rights
issued In
FY21
15.02
17.84
–
28.56
2.2
1.68
2.90
5–year
rights
issued In
FY20
17.49
17.84
–
32.65
1.2
1.68
2.35
Share based payment expense included in profit or loss was as follows:
Share based payment expense:
– Equity settled
– Cash settled
5–year
rights
issued In
FY19
17.64
17.84
–
36.02
0.7
1.68
2.12
2022
$M
41.2
52.8
94.0
5–year
rights
issued In
FY18
17.79
17.84
–
44.77
0.2
1.68
1.53
2021
$M
44.5
79.5
124.0
At 30 June 2022, a liability of $91.7 million (2021: $111.2 million) was recognised in relation to cash settled performance rights.
198
ANNUAL REPORT 2022
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
(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/(loss) 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
– Decrease/(increase) in other assets
– (Decrease)/increase in payables
– Increase in provisions (including employee benefits)
Dividends/distributions received from equity accounted investments
Net finance income received
Net income taxes paid
Net cash provided by operating activities
2022
$M
357.5
357.5
2022
$M
762.8
(3.8)
(0.2)
8.7
94.0
0.3
(345.3)
23.4
114.1
2021
$M
358.4
358.4
2021
$M
415.2
1.9
(1.8)
9.6
124.0
–
(164.7)
61.1
12.2
654.0
457.5
52.0
(447.8)
10.9
(45.8)
0.6
(39.5)
(93.2)
(1.5)
69.5
1.0
223.9
393.8
65.8
14.5
(87.7)
80.9
15.1
(16.2)
216.5
473.6
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
Interest
bearing
liabilities
$M
–
Derivatives
used for
hedging
$M
Dividends
payable
$M
46.8
73.1
Loans
(to)/from
related
parties
$M
1,067.6
Lease
liabilities
$M
28.3
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
9.0
–
–
–
9.0
–
–
–
–
–
–
–
–
–
–
–
–
9.0
(42.2)
–
–
–
(42.2)
–
–
20.1
–
–
–
–
–
–
–
24.7
24.7
–
(17.4)
–
–
(17.4)
–
9.7
38.5
–
–
–
–
–
–
–
–
–
55.5
–
–
–
(73.1)
(73.1)
–
–
–
–
–
–
–
–
110.8
110.8
110.8
110.8
–
–
–
(110.8)
(110.8)
–
–
–
–
–
–
–
–
–
–
46.7
46.7
46.7
–
(83.7)
–
–
(83.7)
14.6
50.0
–
(48.6)
26.2
–
(12.7)
38.9
–
3.8
1,052.3
1,052.3
–
124.9
–
–
124.9
1.5
11.2
–
(57.4)
(32.0)
–
(11.6)
41.8
–
17.4
–
(41.8)
1,148.1
–
–
(8.7)
–
(8.7)
–
–
–
–
–
45.9
–
0.5
–
46.4
66.0
66.0
–
–
(8.0)
–
(8.0)
–
–
–
–
–
13.4
–
0.4
(26.5)
–
–
(12.7)
45.3
Balance at 1 July 2020
Changes from financing cash flows
Payments on derivative financial instruments
Net repayments of loans with related parties
Payments of lease liabilities
Dividends paid
Total changes from financing cash flows
Changes arising from disposal of controlled entities
Effect of foreign exchange movements
Changes in fair value
Other changes
Issue of shares under the LTIP
Equity settled share based payments transactions
New leases
Interest income
Interest expense
Dividends declared
Total other changes
Balance at 30 June 2021
Balance at 1 July 2021
Changes from financing cash flows
Proceeds from borrowings
Net (repayments of)/proceeds from loans with related parties
Payments of lease liabilities
Dividends paid
Total changes from financing cash flows
Changes arising from disposal of controlled entities
Effect of foreign exchange movements
Changes in fair value
Other changes
Issue of shares under the LTIP
Equity settled share based payments transactions
New leases
Interest income
Interest expense
Disposal of right of use assets
Derivative financial instrument settlement through loans with related parties
Dividends declared
Total other changes
Balance at 30 June 2022
200
ANNUAL REPORT 2022
18 Reserves
Asset revaluation reserve
Foreign currency translation reserve
Employee compensation reserve
Defined benefit retirement schemes reserve
Common control reserve1
Total reserves
Consolidated
Company
Note
18(a)
18(b)
18(c)
18(d)
18(e)
2022
$M
36.7
13.6
56.3
(8.8)
(702.9)
(605.1)
2021
$M
27.3
12.7
48.3
(14.4)
(702.9)
(629.0)
2022
$M
36.2
–
52.4
–
–
88.6
2021
$M
27.0
4.8
40.2
–
–
72.0
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 in the 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:
(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
Deferred tax associated with the LTIP
Balance at the end of the year
(d) Defined benefit retirement schemes reserve
Balance at the beginning of the year
Actuarial gains/(losses) on defined benefit retirement schemes (net of tax)
Effect of foreign currency translation
Balance at the end of the year
(e) Common control reserve
Balance at the beginning of the year
Balance at the end of the year
19 Retained earnings
Balance at the beginning of the year
Profit for the year
Dividends declared
Balance at the end of the year
Consolidated
Company
2022
$M
2021
$M
2022
$M
2021
$M
27.3
9.4
36.7
12.7
0.9
13.6
48.3
12.2
(4.2)
56.3
(14.4)
5.6
–
(8.8)
19.7
7.6
27.3
33.5
(20.8)
12.7
33.4
6.8
8.1
48.3
(8.2)
(6.0)
(0.2)
(14.4)
(702.9)
(702.9)
(702.9)
(702.9)
27.0
9.2
36.2
4.8
(4.8)
–
40.2
12.2
–
52.4
–
–
–
–
–
–
19.7
7.3
27.0
–
4.8
4.8
33.4
6.8
–
40.2
–
–
–
–
–
–
Consolidated
Company
Note
15
2022
$M
1,584.8
751.9
(46.7)
2,290.0
2021
$M
1,287.2
408.4
(110.8)
1,584.8
2022
$M
794.7
265.3
(46.7)
1,013.3
2021
$M
575.6
329.9
(110.8)
794.7
201
GOODMAN GROUP
Notes to the consolidated financial statements
Other items (continued)
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.
Interest held
Country of
incorporation
2022
%
2021
%
Hong Kong 100.0
100.0
Significant controlled companies
Principal activities
Goodman Asia Limited
Goodman China Limited
Investment and property management services
Property management and development management consultancy services
Hong Kong 100.0
100.0
Goodman UK Holdings (HK) Limited
Intermediate holding company
Goodman China Asset Management Limited
Investment management
Goodman Developments Asia
Investment and property development
GJSP Limited
GELF Management (Lux) Sàrl
Investment management
Investment management
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
Goodman Logistics Developments (UK) Limited Investment and property management services
Goodman Real Estate (UK) Limited
Investment and property development
Hong Kong 100.0
100.0
Cayman Islands 100.0
100.0
Cayman Islands 100.0
100.0
Japan 100.0
100.0
Luxembourg 100.0
100.0
Luxembourg 100.0
100.0
Luxembourg 100.0
100.0
Luxembourg
94.0
94.0
Luxembourg 100.0
100.0
United Kingdom 100.0
100.0
United Kingdom 100.0
100.0
202
ANNUAL REPORT 2022
Combination of entities or businesses under common control
21 Related party transactions
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.
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
2022
$M
0.6
3.6
19.8
24.0
2021
$M
0.7
3.7
16.1
20.5
203
GOODMAN GROUP
Notes to the consolidated financial statements
Other items (continued)
21 Related party transactions (continued)
(b) Transactions and amounts due from related parties
JVs
GCLP
GUKP
KWASA Goodman Germany
Goodman Japan Development Partnership
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.
Transactions with GL
Management and
development activities
Amounts due
from related parties1
2022
$M
2021
$M
2022
$M
104.5
55.8
10.1
–
170.4
139.1
769.2
5.8
914.1
64.9
–
141.7
–
206.6
135.2
221.9
67.0
424.1
6.6
2.1
–
0.7
9.4
9.8
47.7
–
57.5
2021
$M
12.6
–
–
–
12.6
42.0
36.4
10.4
88.8
During the year, the Consolidated Entity recognised expenses of $23.1 million (2021: $42.4 million) for services provided by a controlled entity of GL.
(c) Financing arrangements with related parties
JVs
GL, GIT and their controlled entities
Loans to
related parties1
Loans from
related parties1
2022
$M
27.3
765.6
792.9
2021
$M
29.6
809.2
838.8
2022
$M
–
2021
$M
–
(1,941.0)
(1,891.1)
(1,941.0)
(1,891.1)
Interest
income/(expense)
charged on loans
to/from related parties
2022
$M
0.4
(30.6)
(30.2)
2021
$M
0.3
(26.5)
(26.2)
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 2022, details in respect of the principal loan balances are
set out below:
+ Loans to GL, GIT and their controlled entities amounting to $765.6 million (2021: $809.2 million) are interest bearing and repayable on demand.
The interest bearing loans incur interest at rates ranging from 0.6% to 5.1% per annum (2021: 0.7% to 7.2% per annum)
+ Loans from GL, GIT and their controlled entities are interest bearing and amount to $1,941.0 million (2021: $1,891.1 million). $125.4 million of the loans
is repayable on demand and $1,815.6 million is repayable greater than one year from the reporting date. The interest bearing loans incur floating
interest at rates ranging from 0.2% to 10.6% per annum (2021: 0.9% to 10.6% per annum).
204
22 Commitments
Development activities
At 30 June 2022, the Consolidated Entity was committed to $206.4 million
(2021: $351.3 million) expenditure in respect of inventories and other
development activities.
Investment properties
At 30 June 2022, the Consolidated Entity had capital expenditure
commitments of $0.1 million (2021: $nil). In the prior year, the Consolidated
Entity had contracted to acquire an investment property for $67.7 million.
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.
US144A/Regulation S senior notes
Under the issue of notes in the US144A/Regulation S bond market,
controlled entities of GIT had on issue USD and EUR notes amounting
to US$1,350.0 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.
ANNUAL REPORT 2022
205
GOODMAN GROUP
Notes to the consolidated financial statements
Other items (continued)
24 Company level statement of financial position
Current assets
Cash
Receivables
Total current assets
Non-current assets
Investments in subsidiaries
Receivables
Other financial assets
Total non-current assets
Total assets
Current liabilities
Payables
Dividend payable
Other financial liabilities
Total current liabilities
Non-current liabilities
Payables
Other financial 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
2022
$M
138.5
7.9
146.4
2,550.5
32.9
267.7
2,851.1
2,997.5
0.5
46.7
45.4
92.6
807.7
122.3
930.0
1,022.6
1,974.9
873.0
88.6
1,013.3
1,974.9
2021
$M
167.8
126.1
293.9
1,821.9
169.8
171.8
2,163.5
2,457.4
96.0
110.8
–
206.8
505.2
86.8
592.0
798.8
1,658.6
791.9
72.0
794.7
1,658.6
The Company level statement of financial position was approved and authorised for issue by the Board of Directors on 16 August 2022.
Stephen Paul Johns
Independent Chairman
David Jeremy Collins
Director
25 Subsequent events
There has not arisen in the interval between the end of the financial year and the date of this 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 the Consolidated Entity, the results of those operations,
or the state of affairs of the Consolidated Entity, in future financial years.
206
Securities information
Top 20 Securityholders
As at 8 September 2022
1.
2.
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
J P MORGAN NOMINEES AUSTRALIA PTY LIMITED
3. CITICORP NOMINEES PTY LIMITED
4. NATIONAL NOMINEES LIMITED
5.
BNP PARIBAS NOMS PTY LTD
6. CITICORP NOMINEES PTY LIMITED
7.
8.
9.
BNP PARIBAS NOMINEES PTY LTD
TRISON INVESTMENTS PTY LTD
BEESIDE PTY LTD ATF THE BEESIDE TRUST
10. HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
11. AUSTRALIAN FOUNDATION INVESTMENT COMPANY LIMITED
12. CUSTODIAL SERVICES LIMITED
13. BNP PARIBAS NOMINEES PTY LTD HUB24 CUSTODIAL SERV LTD
14. UBS NOMINEES PTY LTD
15. NETWEALTH INVESTMENTS LIMITED
16. CPU SHARE PLANS PTY LTD
17. DPCON BVBA
18. ONE MANAGED INVESTMENT FUNDS LTD
19. BNP PARIBAS NOMS (NZ) LTD
20. GOODMAN EQUITIES PTY LTD
Securities held by top 20 Securityholders
Balance of securities held
Total issued securities
Range of securities
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 – over
Total
ANNUAL REPORT 2022
Number of
securities
Percentage of total
issued securities
681,499,089
561,957,776
190,580,369
76,665,425
68,172,806
36,355,892
36,269,494
17,463,993
13,192,040
9,373,751
8,835,000
4,426,940
4,075,984
3,289,853
3,009,858
2,820,000
2,678,465
2,500,000
2,278,718
2,229,540
1,727,684,993
152,784,095
1,880,469,088
36.24
29.88
10.13
4.08
3.63
1.93
1.93
0.93
0.70
0.50
0.47
0.24
0.22
0.17
0.16
0.15
0.14
0.13
0.12
0.12
91.88
8.12
100.00
Number of
Securityholders
Number of
securities
Percentage of total
issued securities
29,629
18,141
3,142
1,813
105
11,301,082
41,687,906
22,361,098
38,963,560
1,766,155,442
52,830
1,880,469,088
0.60
2.22
1.19
2.07
93.92
100
There were 1,113 Securityholders with less than a marketable parcel in relation to 12,398 securities as at 8 September 2022.
Substantial Securityholders1
Vanguard Group Inc.
Leader Investment Corporation; China Investment Corporation
Blackrock Investment Management Limited
State Street Corporation
1. In accordance with latest Substantial Securityholder Notices as at 26 August 2022.
Number of securities
167,546,666
167,247,241
137,503,983
99,948,106
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.
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).
Securityholder approval of securities. During the financial year, 18,892,650 performance rights were issued under the Long Term Incentive Plan, of which 2,875,000 performance rights were issued to
Executive Directors with Securityholder approval under ASX Listing Rule 10.14.
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.
CPP Investments. Formerly 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.
EPS Earnings per security.
GADP Goodman Australia Development Partnership, an unlisted
property investment vehicle specialising in the investment of industrial
property in Australia.
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.
GEP Goodman European Partnership, an unlisted property
investment vehicle specialising in the investment of industrial property
in Continental Europe.
GFML Goodman Funds Management Limited (ABN 48 067 796 641;
AFSL Number 223621).
GHKLP Goodman Hong Kong Logistics Partnership, 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.
GL Goodman Limited (ABN 69 000 123 071) and where the context
requires, its controlled entities.
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.
GUKP Goodman United Kingdom Partnership.
KGIP KWASA-Goodman Industrial Partnership, an unlisted property
investment vehicle specialising in the investment of industrial property
in Australia.
KGG KWASA-Goodman Germany, an unlisted property trust specialising
in the investment of industrial property in Germany.
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”.
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.
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.
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 GFML, 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.
Substantial Securityholder A person or company that holds at least 5%
of Goodman Group’s voting rights.
TSR Total securityholder return.
208
Corporate directory
GOODMAN GROUP
Goodman Limited
ABN 69 000 123 071
Goodman Industrial Trust
ARSN 091 213 839
Goodman Funds Management Limited
Responsible Entity of Goodman Industrial Trust
ABN 48 067 796 641
AFSL Number 223621
Goodman Logistics (HK) Limited
Company No. 1700359
ARBN 155 911 149
REGISTERED OFFICES
The Hayesbery
1-11 Hayes Road
Rosebery NSW 2018
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
Facsimile +852 2525 2070
Email info au@goodman.com
Website
goodman.com
OTHER OFFICES
Amsterdam
Auckland
Beijing
Birmingham
Brisbane
Brussels
Chengdu
Chongqing
Düsseldorf
Guangzhou
Hamburg
Hong Kong
London
Los Angeles
Luxembourg
Madrid
Melbourne
Milan
Munich
New Jersey
Osaka
Paris
Pennsylvania
San Francisco
São Paulo
Shanghai
Shenzhen
Tokyo
ANNUAL REPORT 2022
DIRECTORS
Goodman Limited and Goodman Funds Management Limited
Stephen Johns
Independent Chairman
Danny Peeters
Executive Director
Greg Goodman
Group Chief Executive Officer
Phillip Pryke
Independent Director
Chris Green
Independent Director
Mark G Johnson
Independent Director
Vanessa Liu
Independent Director
Rebecca McGrath
Independent Director
Goodman Logistics (HK) Limited
Stephen Johns
Independent Chairman
David Collins
Independent Director
Danny Peeters
Executive Director
Anthony Rozic
Executive Director
Hilary Spann
Independent Director
Carl Bicego
Company Secretary
Goodman Secretarial
Asia Limited
Company Secretary
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)
Facsimile +61 8 8236 2305
Email
www.investorcentre.com/contact
Website
computershare.com/au
ASX CODE
GMG
AUDITOR
KPMG
Level 38, Tower Three
International Towers Sydney
300 Barangaroo Avenue
Sydney NSW 2000
Australia
209
GOODMAN GROUP
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 2022.
210
ANNUAL REPORT 2022
211