Questions from Australian Shareholders' Association (ASA)
ITEM A – Annual Report of Goodman Group
The ASA congratulates the Goodman Group, its Board and Management on yet another outstanding year with returns again exceeding expectations and an ever-strengthening outlook arising from rapid changes in global warehousing and logistics. During FY20, work-in-progress increased from $4.1 billion to $6.5 billion. Three months later, work-in-progress has increased to an impressive $7.3 billion with further increases forecast. How is Goodman ensuring that it has sufficient skilled staff, experienced management and other resources to maintain good control of these new projects? Are staff recruitment and management keeping up with the demand?
Goodman Group is building less but larger, higher value projects globally. These projects are complex, and we have developed a team with specialist skills over many years to manage planning, infrastructure, and construction for projects in these infill markets. It is a competitive marketplace, particularly for people with logistics experience. The importance of our LTIP and equity remuneration to 100% of employees globally is paramount in retaining and incentivising our people to remain with the Group and manage the growth in the business.
What's your process for identifying development opportunities? Are competitors entering industrial at a place that worries you?
I think the good news is that Goodman owns and manages $52 billion of assets around the world. And in those assets, there are many opportunities for redevelopment and many opportunities for intensification of use. So Goodman, as an organization, has a wealth of opportunity within what we already own. So we're not in the market necessarily competing in what I think is rightly pointed out, a very competitive environment. But when we do look at sites -- and we do look at sites on a quarterly basis and we play in the global market. So we're looking at China. We're looking at European markets. We're looking at U.S. markets and obviously, Australia and New Zealand. We have the really good base of people, really good infrastructure and really good processes and governance around it. And what we tend to do is look at the sites that are more difficult, that are longer term and primarily better valued right up-front.
So we do things that a lot of others don't do. We're not looking for gratification quickly. We're looking at long-term returns. And I think when you look at Goodman and you read the annual report and you look through our notes, I think you'll find that we're very much based on the long term and not short term -- a short-term win necessarily. So we managed to handle those competitive markets quite well. We have been competitive, I've got to say. And right at the moment, that competition and that desire for industrial is a very good outcome for your company, whose valuations and things of that nature are also increasing. So we're in a good place, and we have a lot of opportunity. Thank you.
ITEM B – Resolution 2 Re-election of Mr Johns as a Director
The ASA supports the re-election of Mr Johns based on his long history of public company director and chairman roles and his previous executive experience with the Westfield Group. The ASA also congratulates Mr Johns on becoming Chairman-elect of Goodman Group and looks forward to continuing the ASA’s engagement with the company through him.
The ASA also wishes to record its appreciation of the strong stewardship of the Goodman Group shown by Mr Ferrier as Chairman over many years and wishes him well in his retirement.
ITEM B – Resolution 3 Election of Mr Mark Johnson as a Director
The ASA notes that Mr Johnson appears to be well credentialed for the role of a director but he is currently chairman of three other companies, a director of another three companies and a Councillor at the University of NSW. Can Mr Johnson please explain how he can do justice to all of these concurrent roles including that of being Chair of Goodman’s Audit Committee?
Mr Johnson is very experienced and brings significant skills to the Chairman of the audit committee role. Mr Johnsons commitments are with a mix of different company types including Proprietary companies and not for profits. He also has plans to reduce his commitments over the coming year having recently retired from one of his not for profit roles and will be handing off a Chair role at 31 December 2020. We believe he is extremely capable of undertaking the role of director and chair of the Audit committee at Goodman Group.
ITEM B – Resolution 4 Adoption of the Remuneration Report
The ASA notes the significant leadership demonstrated over many years by the CEO and his executive team in achieving the impressive growth of the company and the resulting security holder returns. The ASA also notes the high hurdles in terms of EPS growth needed to achieve the rewards available to the CEO and executive team. Nevertheless, the ASA is of the view that executive remuneration has become excessively high in recent years and looks to continue to even greater levels in future years. The ASA acknowledges that a significant portion of these high remuneration levels has come about from increases in the security price but suggests that such trends could be considered when setting remuneration levels in order to keep remuneration within reasonable bounds. The ASA will therefore vote against the Remuneration Report.
ITEM C Resolution 5 Issue of Performance Rights to Mr Goodman
The ASA acknowledges that Mr Goodman has waived his rights to a Short Term Incentive (STI) and is therefore reliant on his Long Term Incentive (LTI) for the bulk of his executive remuneration. Nevertheless, as foreshadowed in the previous resolution, the ASA believes that the grant of 950,000 Performance Rights to Mr Goodman is excessive and will therefore vote against this resolution.
ITEM C Resolution 6 Issue of Performance Rights to Mr Peeters
For similar reasons stated in Resolution 5, the ASA believes the grant of 380,000 Performance Rights to Mr Peeters is excessive and will therefore vote against this resolution.
ITEM C Resolution 7 Issue of Performance Rights to Mr Rozic
For similar reasons stated in Resolution 5, the ASA believes the grant of 400,000 Performance Rights to Mr Rozic is excessive and will therefore vote against this resolution.