Edited Transcript of GMG.AX earnings conference call or presentation 11-Feb-15 10:00pm GMT

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Interim 2015 Goodman gang Pty Ltd earnings Presentation

Sydney, New South Wales Jul 15, 2019 (Thomson StreetEvents) -- Edited Transcript of Goodman gang Pty Ltd earnings council summon or presentation Wednesday, February 11, 2015 at 10:00:00pm GMT

TEXT translation of Transcript

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Corporate Participants

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* Gregory Goodman

Goodman gang - CEO

* Nick Vrondas

Goodman gang - CFO

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Conference summon Participants

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* Simon Chan

Merrill Lynch - Analyst

* Lou Pirenc

Morgan Stanley - Analyst

* Stephen Rich

Credit Suisse gang - Analyst

* Paul Checchin

Macquarie gang Limited - Analyst

* Richard Jones

JPMorgan follow - Analyst

* Sholto Maconochie

CLSA - Analyst

* Tony Sherlock

Morningstar - Analyst

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Presentation

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Operator [1]

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Welcome ought the Goodman gang half year results council call. (Operator instructions). I get ought caution you that this council is being recorded today, Thursday February 12, 2015. I used to now clothes ought hand the council above ought your first speaker, Mr. Gregory Goodman. interest impress at ahead Mr. Goodman.

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Gregory Goodman, Goodman gang - CEO [2]

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Our CFO, Nick Vrondas is too souvenir with me above the summon and will exist speaking a little fraction afterward on. I'll furnish you with an overview of the highlights, which cover your Slides from five ought seven, ago handing above ought Nick.

Goodman delivered an operating use of AUD327 million at the first half, with operating earnings per fraction of AUD0.187, which is up 9% compared with the corresponding period. We're upgrading our forecast sum year operating earnings per security ought AUD0.372, up 7% above final year, which reflects the healthy operating arise at our divisions about the world.

Importantly, a distribution of AUD0.111 per security will exist paid because the half year, up 7% above final year and representing a payout ratio of 60%. development work at proceed increased ought AUD2.9 billion, up 11% and we're performing healthy at sum our operating regions. We hold 69 projects underway at Australia, New Zealand and over Asia, Europe and the Americas.

The guest appeal because estate logistic space at Goodman's size and scale attitude ought furnish access ought opportunities over our markets globally. Customers at many low growth markets are seeking operating efficiencies and a competitive offering. Goodman has both the service and the flexibility ought adapt that ought their concrete needs at the contemporary affair environment. We are specially pleased ought hold started the rollout of our AUD1.8 billion development pipeline at the US.

We are being patient. We are laying the foundations because future growth, acquiring dirt at the faithful charge and importantly, at the faithful locations. We now hold at excess of 150,000 square metres beneath construction and hold made a good go ought this economical year. Also, good proceed is made above planning outcomes at California, PA and New Jersey.

In markets such because the US, Japan and China, we are undertaking more speculative development. This has been done at proven heart locations and over important development partnerships, ought fraction those chief commitments. Highlighting this is an increased quantity of our development work at China this year is being undertaken over our partnership with CPPIB.

Also importantly, 90% of our developments are presold above completion. The gang has maintained a healthy economical place with AUD1.5 billion of liquidity and low gearing of 20%, which gives us important economical flexibility.

The asset sale program and chief recycling being undertaken over our investment partnerships is too providing funding because our development activities. We are rotating property where we confide worthy has been maximised and improve worthy can exist realised by reinvesting chief into a development pipeline, ought construct new produce and an median crop above charge of 8.7%.

This is the use of improving the estate of our overall portfolio, increasing the worthy of our service offering and providing out regulation at the investment level. during the first half we took use of the undersupply of industrial estate and healthy investment impartial conditions, selectively disposing of AUD1.1 billion of investment assets. This activity was chiefly at Australia, New Zealand and the UK, where cap rates hold been strengthening.

A farther AUD1 billion of investments property are expected ought exist sold above the next six months, providing ongoing funding because Goodman's development opportunities. With sum that said and done, sum property beneath management cabin increased by 10% ought AUD29 billion because the half, mainly driven by AUD1.3 billion of development completions and growth at asset valuations.

There were AUD690 million of revaluations over our sum estate portfolio. This uplift reflects the estate of our 439 properties at majestic locations about the world, which are delivering like-for-like rental growth of 2.6% and are maintaining occupancy at 96%.

Finally, we farther advanced our urban renewal activities at the half and we now hold AUD500 million of sites conditionally contracted. A quantity of these sites were revalued after achieving sure planning outcomes at the period, resulting at an expand of nearly AUD170 million. We hope sure revaluations ought exist a recurring estate at future periods with our urban renewal pipeline maintained at above 35,000 apartments.

These activities hold desire language latent ought respond important amounts of chief and importantly worthy ought Goodman. This will enable us above time ought affirm a same healthy and elastic economical position. I'll now hand above ought Nick ought lecture over the results overview.

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Nick Vrondas, Goodman gang - CFO [3]

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Thanks Greg. accordingly the materials released today hold a compatible content I've prepared according ought the same principle used because many years now and you can explore the relevant items over the appendices of the presentation and into your accounts.

We reported a statutory use beneath IFRS of AUD513 million, which compares ought our operating use of AUD327 million because the half. This gap has been driven chiefly by almost AUD290 million of unrealised gains above our estate investments. though you know, we hold recognised an impairment of our European affair Parks, such that we are now carrying investment at GEBPF at nil. We only had one asset left at this sector.

Given our estate revaluations, above half of the gains hold become from the urban renewal sites, where tangible proceed has been made at the planning process. The urban renewal revaluation gains hold flowed over ought reserves and boosted our NTA by almost AUD0.1 per security alone. It's too helped offset the contrary effects of the low Australian dollar above our gearing, enabling us ought hold beneath our desire language target bands.

The revaluation use is something we flagged at our final quarterly. We hope it ought exist an ongoing estate of our results, because more and more of these sites impress at over this process. at addition ought the future revaluation gains cabin ought emerge, we too hope money brook and chief management benefits because these sites are realised.

To that end, we've too progressed the process of monetising the revalued sites with planning consents and we notice that conditional contracts hold been exchanged. to these conditions precedent exist met, the gang and the funds will accept almost AUD500 million ought back their chief management and turning these revaluation gains into money above the next little years.

The other item ought shock above our statutory use was the unrealised derivative mark ought impartial movements because the half of AUD76 million, because a arise of the falling exchange rate. Again, we notice that the other phase of this equation is the increased worthy of our foreign denominated assets, which carry out no brook over our main earnings statement, besides impress at straight ought the rest fraction and can exist seen at the comprehensive earnings and our foreign cash translation reserves. at total, this has added a little more cents ought our NTA.

Finally, we hold the ordinary adjustment because a non-cash base remuneration at the chart of our LTIP. We'd clothes ought memorize you, however, that we carry out adapt our fraction calculate because the vested besides unissued stock at determining our operating earnings per security. Let's concentrate now above the results from an operating point of view.

This is a healthy result. We've lay ourselves at a same good place because the sum year, given our execution ought date. That's why we were able ought up our guidance. You can exclaim on from Slide 10 our development led tactic is paying off at the shut term, because we are seeing good growth at profits, whilst supplying healthy investment produce because the desire term. We hold done this whilst maintaining a good rest fraction and good chief management discipline.

We had a healthy development money brook this half, because of the earlier than expected settlement above a quantity of transactions. This has too led ought earlier than expected use recognition.

Given that the money collection came late at the half, we did hold a higher median rest of development chief above the lecture of the six months. This is because we did fund a quantity of the pre-sold projects over ought completion, ought acknowledge use of our healthy rest fraction and liquidity ought aid us generate a little more margin. We flagged that we used to exist doing this final year.

For those reading the economical statements, you'll exclaim on that this meant that we attracted slightly higher capitalised interest, which was then expensed at the charge of ware sold at the EBIT line. Pleasingly though, our respond above property from developments increased ought 11% this half.

We acknowledge that development earnings hold the latent ought exist more volatile. because a result, we cultivate ought attitude ought flow lower economical leverage ought offset some of that risk.

This too gives us the ability ought grow the rest fraction investment at the future, to the healthy opportunities arise. This will aid buffer latent volatility and vary the mingle among investment and healthy earnings. We remain comfortable, however, with the development danger management at flame of our economical training and our operational danger management referred ought at this presentation.

At the moment our tactic has led us ought constrain the growth at the investment portfolio. Given that we hold rotated property ought finance a development tactic at the JVs and funds, we hold no injected because much money because we used to normally. This fashion that growth at investment earnings rest subdued.

These funds and JVs are at a healthy position, with a newly developed property and stronger rest fraction because a arise of this activity. The short language loss of the investment earnings will exist replaced above time because the development property mature.

We hope ought attitude this tactic at the contemporary environment. However, although the leasing above our property continues ought impress at well, the respond above property because investment has remained strong, despite the rising denominator, because of the higher revaluations.

The other result of our asset rotation tactic is ought constrain the growth at AUM. This statistic was helped a little by the FX translation at December, despite the FX rates, driving one third of the increase, cabin our earnings translation was at the median rate, which was lovely flat.

But despite this, we're cabin seeing sufficient transactional activity and regulation based remuneration, ought drive earnings from our management segment. This to attitude at the contemporary environment.

From Slide 11 you can exclaim on the chief allocation hold been relatively static although June, once you acknowledge into illustrate the revaluation and FX impacts. Of the growth at allocation ought our cornerstone investment, one third was driven by valuations and one third by FX.

We too saw a substantial expand at dividends and distributions from these investments. accordingly our net money injection was relatively small. above the half, we added ought our cornerstone holdings at Asia and Europe predominantly.

The development chief allocation was too influenced by about AUD100 million because the FX translation. at condition of cash, we added about AUD150 million inclusive of capitalised interests. A third of this investment came over the operating money brook and the break can exist seen over the investment money brook and investment properties beneath development and our equity investments relating ought our development JVs. This was predominantly at back of our growth at the Americas, because we hold already indicated we used to exist doing.

So what we're doing is channelling less money than ordinary at investments and more ought back the healthy development pipeline, which is predominantly presold, giving us high money brook visibility and underpinning higher returns, whilst fulfilling the needs of our chief partners. fair at length above Slide 12 at relative ought chief management, we hold built a chief structure that has withstood the FX volatility and facilitated a economical place that comfortably accommodates our contemporary activities and we hold important genius ought enlarge to the opportunities arrive.

We hold continued ought actively carry out our debt book and refinanced early above what little debt maturity we did have, giving us important coverage because many years ought come. at all, Greg, we're executing healthy above our plans and are same strongly positioned because the break of the year and into next year, so, that we can attitude ought forward our desire language growth targets at a sustainable way.

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Gregory Goodman, Goodman gang - CEO [4]

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Thanks Nick.

Now at condition of the operating performance, I've already touched above the key highlights above Slide seven. farther details are outlined above sides 14 ought 18, fair because your reference. Now at this point I'd clothes ought impress ought the hope and the summary.

Goodman's first half arise has positioned us healthy ought affirm earnings momentum above the second half of this year. We are focused. We are committed ought making the faithful indispensable genuine assets decisions, which is providing important opportunities ought carry out healthy financially at a mount of global operating conditions. We are a big beneficiary of the cyclical temper of markets about the speak and the geographic diversity of our operating business.

We hold the ability ought compose our hold investment produce at same attractive pricing. quiet impartial conditions remain attractive ought sell assets, where we hold maximised worthy we will carry out so. We hope ought affirm this activity ought aid fund our growth, quiet maintaining a healthy rest fraction and low gearing and are committed ought maximising the Group's future economical flexibility.

We are forecasting because our investment partnerships ought hold another healthy half, following the 15% returns achieved above median over our funds because the year. farther healthy chief inflows although will too exist expected from the investment groups. Our absolute concentrate is above estate properties, proven locations, enduring guest relationships and delivering sustainable outcomes because the desire term. This concentrate is house the healthy underlying profitability of our affair and we approve our upgraded forecast sum year operating EPS of AUD0.372, which is up 7% above economical year 2014.

That's it because the presentation and I'll now hand above because questions.

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Questions and Answers

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Operator [1]

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(Operator instructions). Simon Chan, Merrill Lynch.

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Simon Chan, Merrill Lynch - Analyst [2]

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Thanks. Good morning, Greg, Nick. I've fair got a link of questions. The first one, I noticed above Slide 34 your pre-committed completions developments are now fair at 85%. I believe previously you've pointed ought numbers that's about 95% ought 100%. Is 85% a even that you're concerned about? How low will you impress at and cabin remain comfortable?

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Nick Vrondas, Goodman gang - CFO [3]

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Hi Simon. It's Nick. Yes, appearance that's a good question. I believe it's possibly worthy fair doing the arithmetic above this, because it's truly fairly ordinary and doesn't -- we are no uncomfortable with it.

We are managing the risks and I believe it's no unexpected. at fact, what I believe you will exclaim on is if you appearance at the starts, which hold been two thirds, about two thirds pre-committed and that's where we are running at at the moment and that's normalised out.

If you appearance -- we're no going ought exist fully leased above completion above each building. Naturally, you hold letting up allowances and that's natural. They could exist up ought 12 months after the completion date.

But above completion it's no uncommon ought hold a region or a third of a house committed. accordingly if you work over the maths, that quantity will trend down, besides normalise at the 70% ought 80% mount of the committed above completion. accordingly that's -- I believe above the next year ordinarily where you used to trend based above the contemporary mingle of developments at the locations we are and the temper of the development we are doing.

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Simon Chan, Merrill Lynch - Analyst [4]

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So fair quiet we are above that, Oakland, hold you got an update above that one? Is that fully leased cabin or is it fair cabin Benjamin colour or whoever leases it?

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Gregory Goodman, Goodman gang - CEO [5]

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No, fully leased and same healthy -- very, same good desire language leases above both units and a same valuable house now, upon being fully committed.

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Simon Chan, Merrill Lynch - Analyst [6]

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Hey guys, I noticed development WIP has gone up from AUD2.6 billion at the half year ought AUD2.9 billion now and Greg, previously I believe you've highlighted the AUD3 billion mark is possibly the max you can go. Is that cabin the same?

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Gregory Goodman, Goodman gang - CEO [7]

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I don't know if I said max. It's more about prudence and I believe you've brought up the puzzle of pre-commitment. We are same conscious of running a sustainable development book.

We can grow above another AUD500 million at development faithful now if we wanted ought at a link of markets. We elect no to, because we are counting the leasing we are doing above a micro base about the speak and we hold weekly leasing arrest ups above developments globally. We know exactly who is coming at and what's happening.

So yes, we can impress at farther if we wish to. We don't believe we shortage ought and we are watching the furnish and appeal equation, specially at China, where you possibly hold a little fraction more exuberance ought construct vacant buildings. Most other markets are no clothes that. accordingly China is the one we are watching nearly bolt by bolt, fairly frankly. besides yes, we could carry out AUD3.5 billion, besides at this point at time we elect no to.

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Simon Chan, Merrill Lynch - Analyst [8]

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Sure, and fair final one. Urban renewal, AUD500 million conditionally contracted, what's the duration of that? Is there a time frame cut-off because that contract?

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Nick Vrondas, Goodman gang - CFO [9]

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Oh, look, I'm no going ought impress at into the conditions of the parliament or the sites, besides the conditions, we feel same comfortable meeting, and that's why we entered into the contracts.

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Simon Chan, Merrill Lynch - Analyst [10]

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Should we hope economical shut this fiscal year or the next fiscal year? I suppose that's my question.

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Nick Vrondas, Goodman gang - CFO [11]

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I believe it's responsible ought exist next fiscal year, and potentially a little fraction later. divide of it -- a little fraction -- the following year.

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Simon Chan, Merrill Lynch - Analyst [12]

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Cool, thanks, Nick. Thanks, Greg. Cheers.

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Gregory Goodman, Goodman gang - CEO [13]

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Okay, thanks, Simon.

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Operator [14]

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Lou Pirenc, Morgan Stanley.

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Lou Pirenc, Morgan Stanley - Analyst [15]

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