Annual Result Announcement | New Zealand
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Annual Result Announcement

Thursday, 17 May 2012
Goodman (NZ) Limited, the manager of Goodman Property Trust (“GMT” or“Trust”) is pleased to announce the Trust’s annual result for the year ended 31 March 2012.

Key highlights include:

+ A 24.4% increase in profit before tax, from $43.0 million in the previous corresponding period, to $53.5 million.

+ A corresponding $3.8 million increase in after tax profit, to $40.5 million.

+ Distributable earnings before tax of $80.9 million or 8.41 cents per unit.

+ Full year cash distributions of 6.25 cents per unit.

+ Renewed development impetus with the commencement of seven new projects providing 49,615 sqm of net rentable area. This compares with 11,485 sqm in the previous corresponding period.

+ $63.4 million of new equity funding secured through the Distribution Reinvestment Plan.

+ Further refinancing activity with $132.0 million of bank facilities renewed and extended at competitive margins (GMT share $106.0 million).

+ Strong leasing results across the investment portfolio with over 155,000 sqm of space secured on new or revised terms.

+ Achieving an average occupancy rate of 96% over the period with a weighted average lease term of 5.4 years at 31 March 2012.

Result overview

It has been another successful year for the Trust with the strong financial performance reflecting the quality of the underlying property portfolio and the benefits of an active management approach.

Keith Smith, Chairman of Goodman (NZ) Limited, said, “The Board and Management Team are pleased with the sound operating result that has been achieved. The 24.4% increase in profitability to $53.5 million and a 4.4% increase in pre-tax distributable earnings to $80.9 million are particularly satisfying given the sluggish operating conditions that have persisted.”

The additional revenue generated from the Trust’s development programme and earlier acquisitions are reflected in the 2.4% increase in net property income, to $111.3 million, and the 4.4% increase in distributable earnings before tax.

A higher effective tax rate this year has reduced distributable earnings to $74.8 million, compared to $78.0 million in the previous corresponding period.

The higher tax expense results from the removal of building depreciation deductions from 1 April 2011. The impact of the legislative change has been noted in previous annual reports and was incorporated in the earnings guidance for the year.

On a weighted unit basis, distributable earnings were 8.41 cents per unit before tax and 7.78 cents per unit after tax, consistent with the guidance range.

Adjustments for non-cash items including valuation movements, deferred tax, changes in the cash flow hedge reserve and fair value changes in interest rate derivatives provides the reconciliation between distributable earnings and the after tax profit.

The $3.8 million lift in profit to $40.5 million reflects an improved valuation result this year, although the Trust’s portfolio still recorded a 1.2% devaluation overall.

While the movements in non-cash items have no impact on distributable earnings, they contribute to a reduction in adjusted net tangible assets from 97.3 cents per unit last year to 95.4 cents per unit at 31 March 2012.

Next distribution

The record date for the fourth quarter distribution is 14 June 2012 with payment on 21 June 2012. The distribution will include a cash component of 1.5625 cents per unit with 0.1852 cents per unit of imputation credits attached.

This final quarterly payment will result in a full year cash distribution of 6.25 cents per unit, reflecting a payout ratio of 80.4%.

Eligible Unitholders are reminded that the Distribution Reinvestment Plan continues to operate with a 2% discount and any amendment to their participation is required by 5:00pm on the record date. Changes should be advised directly to the registrar, Computershare Investor Services.

Portfolio performance

An active management style and an ongoing focus on customer relationships has facilitated strong leasing results with 15.8% of the investment portfolio leased on new or revised terms during the year.

John Dakin, Chief Executive Officer of Goodman (NZ) Limited, said, “The performance of the investment portfolio is the main driver of the Trust’s financial result and the property services team have worked hard in a highly competitive market to maintain its strong rental streams.”

New service initiatives have enhanced customer satisfaction, helping to maintain portfolio occupancy at 96%, well above the industry average. They have also helped preserve the Trust’s extended average lease term at 5.4 years, ensuring that rental streams are contracted well into the future.

Development progress

Encouraging progress has been achieved in the development programme with almost 50,000 sqm of new projects announced during the year.

Super Cheap Auto has been the largest of these with the Australasian automotive parts supplier committing to a new distribution facility at Savill Link in Otahuhu. At 20,000 sqm it is the largest design build project undertaken by GMT since 2006 and one of the largest industrial developments completed in Auckland over the last 10 years.

There has been further success since the 31 March balance date with a substantial new commitment from Frucor Beverages Limited at M20 Business Park.

Frucor, a leading supplier of non-alcoholic drinks, is relocating its distribution operations from an older facility at the estate, to a new 17,150 sqm purpose built warehouse. The commitment continues the momentum at this business park, closely following the completion of the Kmart distribution centre and Bridgestone warehouse projects.

John Dakin said “Progressing our development programme and realising the value in our strategic land holdings is an important driver of future growth. It broadens the customer base and enhances the overall quality and value of the portfolio.”

With increasing levels of business activity expected to lift occupier demand over the next few years a greater level of design-build commitments are anticipated in 2013 and beyond.

To secure the full benefit of this uplift a limited amount of partially or uncommitted development is also planned. The timing allows the Trust to take advantage of the competitive construction pricing that exists at present and ensures it has the right range of property options to meet future demand.

Capital management

On-going capital management initiatives during the period have maintained the Trust’s strong balance sheet position. These initiatives included:

+ Underwriting the Distribution Reinvestment Plan, raising $63.4 million of new equity;

+ Renewing and extending an $80.0 million tranche of the Trust’s main bank facility for a further 5 years; and

+ The amalgamation and extension of the $52.0 million bank facility for the Viaduct Corporate Centre joint venture (GMT share $26.0 million).

Keith Smith said, “Equity issuance through the Distribution Reinvestment Plan has funded the growth of the development business while the bank refinancing has allowed us to take advantage of competitive rates that exist at present to extend the term of these facilities.”

The Trust has always adhered to prudent financial policies, typically equity funding new opportunities. With property markets strengthening the sale of assets will also be contemplated with the proceeds recycled back into more growth orientated investment and development opportunities.

At 31 March 2012, the Trust had a weighted term to expiry across all its debt facilities of 3.1 years and an interest cover ratio of 2.5 times. The Trust has also deleveraged with net borrowings now representing 35.7% of property assets compared to 36.7% last year.

Outlook and guidance

The current business environment is likely to continue over the next 12 months with only modest economic growth anticipated. The Trust is expected to deliver similar results under these conditions, maintaining its tax paid distribution at 6.25 cents per unit or around 80% of distributable earnings for the 2013 financial year.

While immediate growth prospects are limited, rising business confidence and a positive economic forecast provide a more encouraging longer term outlook. The Trust is well positioned to take advantage of the anticipated lift in economic activity with new leasing initiatives and recent development success strengthening the business.

Attachments provided to NZX:

1. NZX Appendix 1
2. NZX Appendix 7
3. Independent Auditors' Report
4. Investor Presentation