This article is from the Australian Property Journal archive
INDUSTRIAL property giant Goodman Group has upgraded its FY20 earnings growth forecast 11% after posting a strong interim operating profit of $530.4 million, up 14% on last year.
Operating earnings per share (EPS) were 28.8 cents, up 12.9% on the previous corresponding period. Statutory profit was $810.6 million, down from $929.2 million due to lower valuation gains of $363.7 million compared to $596.7 million in the pcp.
CEO Greg Goodman said earnings from investment, development and management all increased by at least 10% from 1H19, while assets under management (AUM) grew 15% to $49.2 billion.
“Our result continues to be driven by our focus on specific markets where e-commerce is growing, consumer expectations are rising and the need for more efficient supply chains is becoming greater.
“We continue to build scale in our target markets, with development work in progress growing to $4.3 billion at the half, and expected to exceed $5 billion. Total available capital across the Partnerships has increased to $16.9 billion, and our gearing at 10% remains appropriate at this time, providing significant investment capacity and financial flexibility,” he added.
Moody’s Investors Service senior credit officer and vice president Matthew Moore said the strong results reflect the portfolio of high-quality assets focused on infill locations with limited vacancy.
“These assets continue to benefit from e-commerce growth and a push for more efficient supply chains. All segments showed strong performance, supported by solid market fundamentals, demand-driven development activity and strong asset pricing.
“Despite potential headwinds from current global events, Goodman Group’s operating performance and financial metrics remain strong and in line with our expectations. Goodman Group’s balance sheet is well positioned, supported by low gearing and a robust liquidity position.” Moore said.
Earnings from investments are up 17% to $213.3 million as a result of development completions, acquisitions and increased investment in partnerships. During the period, 1.6 million sqm was leased equating to $224 million of annual property income and the portfolio occupancy was maintained at 98%, with a weighted average lease expiry (WALE) of 4.7 years. The group also achieved like-for-like net property income growth of 3.3%.
Continued competition for sites and undersupply of quality assets has seen the weighted average cap rate (WACR) across the portfolio compress by 17bps to 4.9% since June 2019.
Goodman said the combined effect of robust customer demand, scarcity of land and available space, and competition from alternative uses in chosen markets, is generating strong property conditions.
“The real estate fundamentals in our markets are set to deliver sustainable and competitive growth through high occupancy and sustained rental growth. Performance of the development business continues to be driven by growing customer demand, with development activity expected to exceed $5 billion. The outlook for the management business remains positive, with total AUM expected to exceed $50 billion by June 2020 and future AUM growth supported by growing development volumes and revaluations over the next few years.
“We are mindful of current global events and continue to monitor them closely. In particular, we are managing our operations in relation to the coronavirus conservatively and prudently. Our priority has been the health and safety of our people and customers, especially in China, where our business is being managed flexibly to allow our customers to operate as safely and efficiently as possible,”
“At this moment, there has been no evidence to suggest any material impact on our business has occurred or will occur in the short term. In a slowing global economic environment, demand for industrial assets from customers and investors remains robust, particularly in the limited supply urban infill markets where the group operates.
“The group has had a strong start to the year and indications for the second half remain positive. As a result, we are increasing our forecast operating EPS for FY20 to 57.3 cents, which is up 11% on FY19. The forecast distribution is maintained at 30.0 cents per security, as we have previously guided.” Goodman concluded.
