Financial Analysis of Goodman Group: Strengths, Weaknesses and Competitor Analysis

This report provides a detailed financial analysis of Goodman Group, including strengths, weaknesses, and competitor analysis. It covers profitability, efficiency, and liquidity ratios, as well as financial instruments used by the company. The report also includes an industry introduction and recommendations for the company.

REPORT ON GOODMAN GROUP
GOODMAN GROUP

Table of Contents
1. INDUSTRY INTRODUCTION....................................................................................................2
2. Description of Company................................................................................................................2
3. FINANCIAL INSTRUMENT ANALYSIS...................................................................................3
4. Part-A............................................................................................................................................4
FIANANCIAL RATIO ANALYSIS.....................................................................................................4
3 key financial ratios that apply to your chosen company.................................................................4
Computation of the financial ratios based on the financial statements............................................4
STRENGTHS AND WEAKNESS....................................................................................................6
Part-B COMPETITOR ANALYSIS..........................................................................................................7
5. FINANCIAL MARKET ANALYSIS............................................................................................7
6. Finding CONCLUSIONS AND RECOMMENDATIONS............................................................8
REFERENCES....................................................................................................................................10
Appendix.............................................................................................................................................12

1. INDUSTRY INTRODUCTION
In the world of 21st centaury, the investors are always on the lookout for the better
opportunities for the investments. Now as the world is opening globally, more and more
options are getting available for the investors (Bond, 2010). Commercial property is one such
option. Due to considerable and significant cash flow advantage, growth and stability in
rental prices, decline in vacancy rates, commercial property is fast becoming a smart and top
most choice for the investors in Australia. In last few years downsizing of real estate market,
decreased retail trade profits and boom in online marketing has benefited the commercial
property market and made it investor’s hot favourite (Goodman Company, 2019).
Commercial Property segment is very diversified and includes office buildings, medical
centres, retail stores, hotels, land for commercial farming, malls, warehouses and
redevelopment land. From 2012-2017, commercial real estate market has recorded growth of
10.6 % and revenue of $1.3 billion (Ball, Lizeiri, Macgregor, 2012). The economy in
Australia is now shifting more towards the service based industries and thus so need for the
rented office has increased in last decade which has resulted in high number of revenue and
increased growth (Brigham, and Ehrhardt, 2013).
In this report we are undertaking Goodman group for further study and will do the detailed
analysis of the company financials. We will in detail analyse the various financial ratios,
financial instruments and analysis of strengths and weaknesses of internal factors (Robinson,
and Burnett, 2016).
2. Description of Company
Goodman Limited is an Australian company founded in 1989 by Gregory Goodman.
Company is an integrated industrial and commercial property group and deals in owing,
developing and managing real estate in Australia. The headquarters of the company is
situated in Sydney, New South Wales, Australia. Company profile includes business and
office parks, logistics facilities on large scales and warehouses worldwide. The Goodman
group was listed in ASX in 1995 with eight properties and valuation of A$75 million as
Goodman Hardie Industrial Property Trust. In 2000 it merged with Macquarie Industrial
Trust and became Macquarie Goodman Industrial Trust. Following many acquisitions and
mergers in 2005, it was renamed Macquarie Goodman Group and became largest industrial
property group in Australia. In 2007, Macquarie Bank sold 7.7% interest and company again

got renamed to Goodman Limited. In the last decade company has shown incomprehensible
organic growth, done many acquisitions and mergers, and expanded among European,
American and Asian market (Savytska, 2018).
According to reports, the Group is operating in 16 countries, had 432 properties with69 active
developments going on, as of September 2014. The market capitalization of company stood
at AUD $8.7 billion. Goodman had reported its earning before interest and tax to be $138 m
between 2007 to 2014. The total revenue reported in 2013-2014 was A$ 1,182,800,000, and
net income reported in 2013-2014 was A$ 601,100,100. Goodman Group has 3 divisions:
Development Management, Fund Management and Property Portfolio (Serôdio, McKee, and
Stuckler. (2018)
3. FINANCIAL INSTRUMENT ANALYSIS
There are several financial instrument analysis which could be used by company to raise the
funds for its business. In case of the Goodman Limited, it has been dealing in the financial
instruments such as letter of the credits, bill of exchanges and forward contract. These
financial instruments are helpful for the company to strengthen its return on capital employed
by keeping the low financial cost of capital. The bill of exchange is used by the company to
allow its debtors to pay their debts later on when they do not have capital to make the
business. This allow organization to strengthen the overall turnover. The letter of the credit is
used by the Goodman Limited to take the loan or finance the particular project by the bank.
Goodman Limited has financed AUD $ 123 million in its business by using the letter of the
credit. Most of the assets such as plants and machinery recorded in the balance sheet of the
company is purchased by using the hire purchase agreement. It is also considered as financial
instrument which is used by company to finance its plants and machinery (Tahir, and Azhar,
2013).
Off balance sheet are the imperative items for the investors to assess the financial health of
the company. In case of the Goodman Limited, company has collateral debt securities in its
balance sheet which is regarded as offshore balance sheet in its books of account. These are
the toxic assets in the books of account of Goodman Limited. These offshore assets are not
inherently intended to the balance sheet and owned by other companies. Goodman Limited
has recorded offshore assets of AUD $ 156 in its balance sheet which is owned and supported
by the other companies with a view to share the risk and return associated with the particular

project in organization. This type of funding is mostly supported when company is facing
high risk in tis business process and wants to delegate its risk to other organization.
4. Part-A
FIANANCIAL RATIO ANALYSIS
There are several ratio of the company which helps investors to measure the financial
performance of the company and its future business trends (Tappura, Sievänen, Heikkilä, and
Jussila, 2015).
3 key financial ratios that apply to your chosen company.
 Profitability ratio
 Efficiency ratio
 Liquidity ratio
Computation of the financial ratios based on the financial statements
Profitability ratio
This ratio helps in evaluating the profit earning capacity of the Goodman Limited. This ratio
reveals that company has good amount of profitability and revealing high earning capacity in
long run (Tran, 2017).
Particular Formula of the ratio 2018 2017 2016
a. Gross profit
margin
(gross profit/ total revenue) *
100 45.07% 40.70% 41.22%
b. (Net) profit
margin
(net profit after tax/ total
revenue) * 100 76.21% 52.13% 81.12%
c. Return on equity net income/ shareholder's equity 12.57% 9.51% 16.86%

d. Return on assets
ratio net income/ total assets 8.39% 6.2% 10.78%
Interpretation
It is analysed that the gross profit margin of the Goodman Limited has been increasing. The
net profit of the company is showing the 76% earning which is 5% lower since last three year
but showing the high amount of profitability as compared to other rivals. The return on equity
been low as company is offering very less return to its shareholders and plugging most of its
earnings in its business.
Efficiency ratio
Particular Formula of the ratio 2018 2017 2016
a. days inventory
(average inventory/cost of
goods sold)*365 265 263 193
b. days debtors
(average debtors/operating
revenue)*365 34.53 46.56 36.54
c. days creditor
(average
creditor/purchases)*365 27.29 24.59 22.18
d. asset turnover total sales/ average total assets .11 .13 .14
Interpretation
It is considered that efficiency ratio the Goodman Limited has been decreased and company
has been increasing its day’s inventory. However, the day’s debtors has gone down by 2 days
since last three year which is not a noticeable improvement in its business. The days to
creditors has increased by 5 days which will allow company to lower down its cost of capital.
Current ratio

Particular Formula of the ratio 2018 2017 2016
Current ratio
Current assets/ current
liabilities 3.45 4.13 3.48
Quick ratio Quick assets/ current liabilities 2.93 3.26 2.48
Interpretation
It is found that current ratio the Goodman Limited has been decreased and company has been
keeping high investment in its current assets. However, quick ratio has increased by .50
points since last three year which is way too high increment in its quick asset.
STRENGTHS AND WEAKNESS
Particular Strength Weakness
Profitability ratio This ratio is showing high
earning of the company. it
would be considered as
strength. Company has
highest profitability in the
industry.
-
Efficiency ratio - The efficiency of the
company is way too low to
deploy its assets. This has
been increasing its overall
operating and cost of capital
expenses

Liquidity ratio - Company has been investing
more capital in its liquid
assets which increase its cost
of capital. This would be
considered as weakness for
the company (Yahoo
finance, 2018).
Part-B COMPETITOR ANALYSIS
The competitors of the Goodman are Realterm, Segro, Redwood Group, GLP, RLI investors.
Genetic Literacy Project, Prologis, Swire Pacific and Americold. Relaterm, Segro and
Redwood are three main competitors of Greenwood Group (Newell, 2010). The basis of the
completion in the industry is price and quality of the products offered in market.
Realterm is currently lead by Robert G. Fordi who act as CEO of the company. It is one of
the top competitor of Goodman. The headquarters of the Realterm is based in Annapolis,
Maryland. Realterm was founded in 1991 and mainly into Real Estate Development &
Operations industry. 10% of Goodman’s revenue is generated through Realterm. The
company has more than 300 employees with total funding of $ 4.3M. Total revenue of the
company is $150M. Currently company is managing $4.4 billion in assets through logistics
oriented private equity fund series (Warren-Myers, and Reed, 2010).
Segro is a public entity company listed on London Stock Exchange. It was founded in 1920
and have headquarters in Slough, England, UK. The company deals in property investment
and development. Its main area of business are UK and continental Europe. It is one of the
top rival of Goodman. Its total revenue as of 2018 was £369 million and operating income
was £1,173.4 million. Segro’s net income as in 2018 stood at £ 1,066.1 million. Segro has
more than 285 employees.

5. FINANCIAL MARKET ANALYSIS
The Realterm, Segro and Redwood Group both are strong competitor in market and
influencing the market with their core competency and cost leadership. It is analysed that the
backward integration of these two companies are way too strong and they are having their
own factory to get the raw material prepared and customized for their business. In addition to
this, most of the business player in this industry, connect with each other through their annual
report and notices in market. All these players keep their business more transparent in market
with a view to strengthen its business outcomes and wining the trust of the stakeholders. It is
analysed that all these companies are having strong influence on each other either through the
core competency, market share and other competitive advantage developed in the market
(Vohs, Vohs, and Baumeister, 2016).
Yes, in order to strengthen the industry output, there is requirement of the government
intervention. This will be related to liberalise the some of the regulations and legal
compliance related to business operation in market. The annual quarter filing, legal
compliance related to the products supply and strategic alliance results to several trouble to
organization. This not only takes lot of business costing to comply with these terms and
conditions but also consume lot of time. It has been analysed that if government by its
intervention lower down these legal compliance then it will save company from the several
business costing and also helps companies to sustain their business in market. In addition to
this, government has also mandate all the CSR activities and sustainable business practice for
the companies to align their interest with the society and environment at large. This align the
interest of the general public with the organizational growth and development (Sayce,
Sundberg, and Clements, 2010).
Goodman Company has faced the related party transaction issue in its business in its last two
year. However, company has kept all the business transactions transparent in its books of
account. In the non-qualified audit report, auditors of the company has also published that
company has complied with all the terms and condition in its books of account. Company
needs to work upon the legal compliance issues of the related party transactions in its
business accounts (Newell, 2010).

Goodman Company should set up sustainability legal compliance department in its business
process which will help it to comply with the compliance of the legal business and set ethical
business program in its undertaken business activities (Bond, 2010).
6. FINDING CONCLUSIONS AND RECOMMENDATIONS
 The Realterm, Segro and Redwood Group both are strong competitor in market and
influencing the market and in order to compete them company needs to lower down its
business costing to develop core competency.
 Goodman Company also needs to lower down its business investment in its current assets so
that available capital could be used to strengthen the business outcomes.
 The profitability of the company is way too high therefore, Company should raise most of its
funds by issue of the debts funding.
 Due to the strengthen brand image in market, company should focus on setting up alliance
with other organization which will boost its market share in long run.
 The ethical business practice of Goodman Company should be supported by triple bottom
line approach (Ball, Lizieri, & MacGregor, 2012).
 The gross profit of company is also way too high which should be used to diversify its
business. The return on assets of company has been kept low due to its low efficiency of the
deployed assets.
 Currently Goodman is one of the largest business space in Australia along with largest
provider of industrial property which could be used by company to create core competency to
attract more clients in market.
 These are the toxic assets in the books of account of Goodman Limited which should be used
by company to strengthen the return on capital employed.
 It is concluded that company has maintained strong profitability and will have long term
sustainability in long run.

REFERENCES
Ball, M., Lizieri, C., & MacGregor, B. (2012). The economics of commercial property
markets. Routledge.
Bond, S. (2010). Lessons from the leaders of green designed commercial buildings in
Australia. Pacific Rim Property Research Journal, 16(3), 314-338.
Brigham, E.F. and Ehrhardt, M.C., (2013). Financial management: Theory and practice.
Cengage Learning.
Goodman Company, (2019), annual report, available at https://www.goodman.com/investor-
centre/goodman-group-australia/annual-reports accessed on 22nd May, 2017 from
Newell, G. (2010). Listed property trusts in Australia. Global Trends in Real Estate Finance,
46-63.
Robinson, C. J., and Burnett,, J. (2016). Financial Management Practices: An Exploratory
Study of Capital Budgeting Techniques in the Caribbean Region. Captial Budgeting, 12-55.
Savytska, N. L. (2018). MARKETING STUDY IN THE COMPETITIVE POSITIONS OF
DAIRY INDUSTRY ENTERPRISES. Молодий вчений,, 59(7), 281.
Sayce, S., Sundberg, A., and Clements, B. (2010). Is sustainability reflected in commercial
property prices: an analysis of the evidence base.
Serôdio, P. M., McKee, M., and Stuckler, D. (2018). Coca-Cola–a model of transparency in
research partnerships? A network analysis of Coca-Cola’s research funding (2008–2016).
Public health nutrition, 21(9), pp.1594-1607.
Tahir, R., and Azhar, N. (2013). The adjustment process of female repatriate managers in
Australian and New Zealand (ANZ) companies. Global Business Review, pp.155-167.
Tappura, S., Sievänen, M., Heikkilä, J., and Jussila, . (2015). Accounting. A management
accounting perspective on safety. Safety science,, 71, 151-159.
Tran, T. T. (2017). Corporate social responsibility (CSR) situation in Vietnam. Vietnam:
Rotoulge.

Vohs, Vohs, K., and Baumeister, R. (2016). Handbook of self-regulation, theory, research,
and applications. Guiltford publications
Warren-Myers, G., and Reed, R. (2010). The challenges of identifying and examining links
between sustainability and value: evidence from Australia and New Zealand. Journal of
Sustainable Real Estate, 2(1), 201-220.
Yahoo finance, (2018), Goodman Company financials Retrieved on Available at
https://in.finance.yahoo.com/ accessed on 22nd May, 2017

Appendix
Growth Profitability and Financial Ratios for Goodman
Group
2016-
06
2017-
06
2018-
06 TTM
Revenue AUD Mil 1,689 1,632 1,556 1,808
Gross Margin % 41.2 40.8 45.7 44
Operating Income AUD Mil 179 332 337 401
Operating Margin % 10.6 20.4 21.6 22.2
Net Income AUD Mil 1,274 778 1,098 1,485
Earnings Per Share AUD 0.69 0.42 0.59 0.8
Dividends AUD 0.24 0.26 0.28 0.29
Pay-out Ratio % * 25.9 49.8 64.4 36.5
Shares Mil 1,826 1,827 1,849 1,853
Book Value Per Share * AUD 4.44 4.67 4.82 5.52
Operating Cash Flow AUD Mil
Cap Spending AUD Mil -8 -5 -5 -3
Free Cash Flow AUD Mil 822 581 1,155 913
Free Cash Flow Per Share * AUD 0.42 0.43 0.45
Working Capital AUD Mil 1,742 2,730 2,526
Key Ratios -> Profitability
Margins % of Sales
2016-
06
2017-
06
2018-
06 TTM
Revenue 100 100 100 100
COGS 58.78 59.21 54.3 55.97
Gross Margin 41.22 40.79 45.7 44.03
SG&A 30.51 20.43 24.09 21.86
R&D
Other 0.12
Operating Margin 10.58 20.36 21.61 22.17
Net Int Inc & Other 70.53 31.77 54.52 64.56
EBT Margin 81.12 52.13 76.13 86.73
Profitability
2016-
06
2017-
06
2018-
06 TTM
Tax Rate % 5.52 6.39 6.95 5.35
Net Margin % 75.45 47.65 70.54 82.09
Asset Turnover (Average) 0.14 0.13 0.11 0.14
Return on Assets % 10.78 6.2 8.39 11.35
Financial Leverage (Average) 1.54 1.53 1.47 1.47
Return on Equity % 16.86 9.51 12.57 17
Return on Invested Capital % 13.4 9.61 11.5 13.97
Interest Coverage 11.74 3.6 4.92 8.8
Key Ratios -> Growth
2016- 2017- 2018- Latest

06 06 06 Qtr
Revenue %
Year over Year 45.4 -3.34 -4.65
3-Year Average 25.23 12.09 10.25
5-Year Average 20.34 19.48 12.6
10-Year Average 12.42 7.19 6.57
Operating Income %
Year over Year -15.42 85.91 1.23
3-Year Average -15.52 5.78 16.76
5-Year Average -2.03 9.68 2.56
10-Year Average -6.81 -1.24 3.4
Net Income %
Year over Year 5.51 -38.95 41.14
3-Year Average 99.3 5.79 -3.13
5-Year Average 26.6 13.77 46.82
10-Year Average 9.81 2.26 15.92
EPS %
Year over Year 4.02 -38.97 39.44
3-Year Average 94.54 4.34 -3.98
5-Year Average 20.04 10.13 44.34
10-Year Average -7.41 -12.77 -0.77
Key Ratios -> Cash Flow
Cash Flow Ratios
2016-
06
2017-
06
2018-
06 TTM
Operating Cash Flow Growth % YOY 26.79 -29.36 98.02
Free Cash Flow Growth % YOY 26.24 -29.27 98.86
Cap Ex as a % of Sales 0.5 0.32 0.35 0.14
Free Cash Flow/Sales % 48.64 35.6 74.24 50.48
Free Cash Flow/Net Income 0.64 0.75 1.05 0.61
Key Ratios -> Financial Health
Balance Sheet Items (in %)
2016-
06
2017-
06
2018-
06
Latest
Qtr
Cash & Short-Term Investments 10.79 18.08 17.88 17.88
Accounts Receivable 3.25 4.34 4.53 4.53
Inventory 5.55 5.58 3.87 3.87
Other Current Assets 0.13 0.33 0.14 0.14
Total Current Assets 19.73 28.34 26.42 26.42
Net PP&E 0.16
Intangibles 6.3 6.07 6.07 6.07
Other Long-Term Assets 73.81 65.59 67.51 67.51
Total Assets 100 100 100 100
Accounts Payable 0.59 0.49 0.5 0.5
Short-Term Debt 0.17 0.23 1.66 1.66
Taxes Payable

Accrued Liabilities
Other Short-Term Liabilities 5.06 6.32 5.49 5.49
Total Current Liabilities 5.82 7.04 7.65 7.65
Long-Term Debt 23.59 23.01 21.24 21.24
Other Long-Term Liabilities 3.71 2.96 2.95 2.95
Total Liabilities 33.11 33.01 31.84 31.84
Total Stockholders' Equity 66.89 66.99 68.16 68.16
Total Liabilities & Equity 100 100 100 100
Liquidity/Financial Health
2016-
06
2017-
06
2018-
06
Latest
Qtr
Current Ratio 3.48 4.13 3.45 3.45
Quick Ratio 2.48 3.26 2.93 2.93
Financial Leverage 1.54 1.53 1.47 1.47
Debt/Equity 0.35 0.34 0.31 0.31
Key Ratios -> Efficiency Ratios
Efficiency
2016-
06
2017-
06
2018-
06 TTM
Days Sales Outstanding 9.96 7.79 10.54 9.07
Days Inventory 193.21 263.65 265.6 221.81
Payables Period 22.18 24.99 27.79 23.2
Cash Conversion Cycle 180.99 246.45 248.35 207.67
Receivables Turnover 36.64 46.85 34.63 40.24
Inventory Turnover 1.89 1.38 1.37 1.65
Fixed Assets Turnover 90.82
Asset Turnover 0.14 0.13 0.11 0.14