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GMT Interim Result Announcement

Wednesday, 20 November 2013

Goodman (NZ) Limited, the manager of Goodman Property Trust (“GMT” or “Trust”) is pleased to announce the Trust’s interim financial result for the six months ended 30 September 2013.

An expanded property portfolio, leasing and development success and fair value gains on certain property assets and derivative financial instruments have all contributed to a strong interim result.

Financial and operational highlights include:

+ A $33.1 million increase in profit before tax to $70.1 million, compared to a profit of $37.0 million in the previous corresponding period.1

+ A corresponding $33.8 million or 107.0% increase in after tax profit, to $65.4 million.

+ Distributable earnings2 before tax of $50.3 million or 4.18 cents per unit on a weighted average issued unit basis. This compares to $41.0 million or 4.07 cents per unit in the previous corresponding period.

+ Net tangible assets of 98.0 cents per unit, compared to 95.6 cents per unit at 31 March 2013.

+ Active capital management with the sale of Gateside Industry Park for $37.2 million.

+ Accelerating levels of development activity with the commencement of 10 new projects providing 43,238 sqm of office and warehouse space.

+ Strong leasing results with over 80,000 sqm of net rentable area (around 8% of the total investment portfolio) secured on new or revised terms.

+ An occupancy rate of 96% and a weighted average lease term of 5.4 years at 30 September 2013.

Keith Smith, Chairman and Independent Director of Goodman (NZ) Limited said, “The Board is encouraged by the positive momentum in the business and the strong financial result that has been achieved. We are also pleased to have announced new acquisition and capital management initiatives that will further enhance the Trust.”

Result overview


Strong rental cashflows from an expanded property portfolio, together with the positive contribution from recent development completions have been the main contributors to the 23.8% increase in total revenue, to $79.2 million.

With property operating expenses, other administrative expenses and net finance costs materially consistent with the previous comparative period, distributable earnings before tax have increased by 22.7% to $50.3 million.

John Dakin, Chief Executive Officer and Executive Director of Goodman (NZ) Limited said, “A strengthening economy and rising business confidence is having a positive impact on property market dynamics. Improving customer demand is supporting GMT’s strong operating performance and we are pleased to be reporting a distributable earnings result that is consistent with our guidance range.”

Distributable earnings were 4.18 cents per unit before tax and 3.78 cents per unit after tax, on a weighted average issued unit basis.

The reconciliation between the pre-tax profit of $70.1 million and distributable earnings result of $50.3 million includes adjustments for both cash and non-cash items. These adjustments incorporate fair value gains of $20.2 million on certain property assets and derivative financial instruments.

Further information, including a comprehensive bridge between distributable earnings and profit after tax, is provided in the appendix of this announcement.

Portfolio Performance

Improving operating conditions, with strengthening customer demand and low levels of vacancy, is supporting an accelerated development programme.

John Dakin said “The quality of our estates and a proven development capability is helping to attract new businesses into the portfolio and giving existing customers the confidence to expand.”

With 10 new projects announced since March 2013 the Trust has recorded the strongest period of development activity in more than five years.

These new facilities, with an expected total project cost of $86.8 million, will add an additional 43,238 sqm of rentable area to the portfolio on completion.

The heightened level of customer enquiry that is driving development demand is also contributing to positive leasing results with around 8% of the total investment portfolio secured on new or revised terms during the last six months.

This leasing activity has helped the Trust maintain an average occupancy rate of around 95% during the period, with 96% being recorded at 30 September 2013. The Trust had a weighted average lease term of 5.4 years at the same date.

Fonterra Acquisition

A significant new acquisition announced today, will further enhance the portfolio.

Keith Smith said, “Through its relationship with Goodman Group, the Trust has the exclusive opportunity to own one of Auckland’s most significant new office developments. With a long term lease to Fonterra the acquisition will complement the Trust’s existing investments in one of Auckland’s most strategic real estate locations.”

The 16,000 sqm campus style office building is being acquired by GMT, with settlement expected to be in February 2016, following completion of the building and commencement of the lease.

The GMT acquisition price of $92.6 million has been established by an independent valuation and represents an initial cash yield of 8.0%.

Corporate Trust Limited, GMT’s Trustee, has approved the acquisition.

Further detail has been given in a separate announcement provided to the NZX.

Capital Management


Prudent capital management policies have enabled the Trust to retain a strong balance sheet position across a range of market conditions.

Keith Smith said, “The sale of Gateside Industry Park in August 2013 is part of an asset disposal programme that has achieved more than $70 million of sales over the last two years. It’s been a successful strategy that will continue to help fund the Trust’s business growth.”

At 30 September 2013, GMT’s loan to value ratio was 35.6% (net of cash, unamortised bond issue costs and after adjusting for the sale of Gateside Industry Park). Keith Smith said, “We have announced our intention to undertake a new corporate bond issue that will further extend and diversify the Trust’s sources of debt funding. The additional capacity it provides will also help facilitate the progression of our development and investment programmes.”

Further details of the bond offer are expected to be provided late this month, with the offer expected to open in December 2013.

Outlook and Distribution

Today’s improving operating environment, with greater levels of activity, is consistent with earlier expectations and the Board has reaffirmed its earnings and distribution guidance for the year.

Distributable earnings before tax are expected to range between 8.2 and 8.4 cents per unit (on a weighted average issued unit basis) and cash distributions of at least 6.25 cents per unit are expected to be paid.

The record date for the second quarter distribution is 6 December 2013 with the payment date being 18 December 2013. The distribution will comprise, a cash component of 1.5625 cents per unit with associated imputation credits of 0.1714 cents per unit.

For further information please contact:

John Dakin
Chief Executive Officer 
Goodman (NZ) Limited 
(09) 375 6063
(021) 321 541

Andy Eakin
Chief Financial Officer 
Goodman (NZ) Limited 
(09) 375 6077
(021) 305 316

Keith Smith
Chairman
Goodman (NZ) Limited
(021) 920 659

Attachments provided to NZX: 
1. NZX Appendix 1 and Independent Accountants’ Report on Interim Financial
Statements 
2. NZX Appendix 7
3. Investor Presentation

1 The prior period result has been restated to the extent required to reflect GMT’s adoption of New Zealand equivalent to International Financial Reporting Standard 11 ‘Joint arrangements’ (NZ IFRS 11).

2 Distributable earnings is an alternative performance measure used to assist investors in assessing the Trust’s underlying operating performance. Refer to the appendix of this announcement for details on how this measure is calculated.

 

Appendix 1: Distributable Earnings Reconciliation

The following tables are extracted from note 7 to the unaudited consolidated interim financial statements of Goodman

Property Trust for the six months ended 30 September 2013.

$ million

6 months

30 Sep 13

6 months

30 Sep 12

Restated(i)

Profit used in calculating distributable earnings per unit

Profit after tax used in calculating earnings per unit Net change in fair value ofproperty investments Gain on disposal of investment property

Fair value (gain)/loss on derivative financial instruments

Change in cash flow hedge reserve

Interest on deferred settlements

Non distributable items included in share of profit arising from joint ventures Income tax expense included in share of profit arising from joint ventures Income tax expense

31.6 (2.5) (0.1)

0.5

1.1

0.4

4.0

0.6

5.4

65.4 (6.1)

- (14.1)

1.1

0.3 (1.2)

0.2

4.7

(1) Profit used in calculating distributable earnings before tax per unit

50.3

41.0

Current tax expense

Adjustment in respect of prior year’s current tax expense

Tax items included in share of profit arising from joint ventures Depreciationrecovered on disposal of investment property Current tax expense fundedthrough brought forward tax losses

(7.4)

0.4 (0.1)

-

2.4

(4.5)

-

-

0.7

0.4

(2) Profit used in calculating distributable earnings after tax per unit

45.6

37.6

(i) Restated to the extent required to reflect the adoption of NZ IFRS 11 as explained in notes 1 and 2 of the unaudited consolidated interim financial statements of Goodman Property Trust for the sixmonths ended 30 September 2013.

000s

6 months

30 Sep 13

6 months

30 Sep 12

Weighted average number of units used in calculating basic earnings per unitand distributable earnings per unit

Weighted average number of units used in calculating diluted earnings per unitand distributable earnings per unit

1,204,611

1,241,946

1,007,890

1,007,890

Cents

6 months

30 Sep 13

6 months

30 Sep 12

Restated(i)

Attributable to unitholders of Goodman Property Trust

Basic earnings per unit after tax

Diluted earnings per unit after tax

Basic distributable earnings before tax per unit (1) Diluted distributable earningsbefore tax per unit (1) Basic distributable earnings after tax per unit (2)

Diluted distributable earnings after tax per unit (2)

3.14

3.14

4.07

4.07

3.73

3.73

5.43

5.26

4.18

4.05

3.78

3.67

(i) Restated to the extent required to reflect the adoption of NZ IFRS 11 as explained in notes 1 and 2 of the unaudited consolidated interim financial statements of Goodman Property Trust for the sixmonths ended 30 September 2013.

Appendix 1: Distributable Earnings Reconciliation

The following tables are extracted from note 7 to the unaudited consolidated interim financial statements of Goodman

Property Trust for the six months ended 30 September 2013.

$ million

6 months

30 Sep 13

6 months

30 Sep 12

Restated(i)

Profit used in calculating distributable earnings per unit

Profit after tax used in calculating earnings per unit Net change in fair value ofproperty investments Gain on disposal of investment property

Fair value (gain)/loss on derivative financial instruments

Change in cash flow hedge reserve

Interest on deferred settlements

Non distributable items included in share of profit arising from joint ventures Income tax expense included in share of profit arising from joint ventures Income tax expense

31.6 (2.5) (0.1)

0.5

1.1

0.4

4.0

0.6

5.4

65.4 (6.1)

- (14.1)

1.1

0.3 (1.2)

0.2

4.7

(1) Profit used in calculating distributable earnings before tax per unit

50.3

41.0

Current tax expense

Adjustment in respect of prior year’s current tax expense

Tax items included in share of profit arising from joint ventures Depreciationrecovered on disposal of investment property Current tax expense fundedthrough brought forward tax losses

(7.4)

0.4 (0.1)

-

2.4

(4.5)

-

-

0.7

0.4

(2) Profit used in calculating distributable earnings after tax per unit

45.6

37.6

(i) Restated to the extent required to reflect the adoption of NZ IFRS 11 as explained in notes 1 and 2 of the unaudited consolidated interim financial statements of Goodman Property Trust for the sixmonths ended 30 September 2013.

000s

6 months

30 Sep 13

6 months

30 Sep 12

Weighted average number of units used in calculating basic earnings per unitand distributable earnings per unit

Weighted average number of units used in calculating diluted earnings per unitand distributable earnings per unit

1,204,611

1,241,946

1,007,890

1,007,890

Cents

6 months

30 Sep 13

6 months

30 Sep 12

Restated(i)

Attributable to unitholders of Goodman Property Trust

Basic earnings per unit after tax

Diluted earnings per unit after tax

Basic distributable earnings before tax per unit (1) Diluted distributable earningsbefore tax per unit (1) Basic distributable earnings after tax per unit (2)

Diluted distributable earnings after tax per unit (2)

3.14

3.14

4.07

4.07

3.73

3.73

5.43

5.26

4.18

4.05

3.78

3.67

(i) Restated to the extent required to reflect the adoption of NZ IFRS 11 as explained in notes 1 and 2 of the unaudited consolidated interim financial statements of Goodman Property Trust for the sixmonths ended 30 September 2013.