Goodman extend EPS up 13% for 1H19 and lifts outlook12 February 2020
Goodman Group today announced its results for the half year ended 31 December 2019 with an operating profit of $530.4 million, up 14.1% on 1H19, and operating earnings per share (EPS) of 28.8 cents, up 12.9% on 1H19.
Group Chief Executive Officer, Greg Goodman said: “Goodman produced a solid performance from all segments for the first half of FY20. 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.
- Statutory profit for 1H20 was $810.6 million.
- The Group has upgraded its forecast FY20 EPS to 57.3 cents per security, up 11% on FY19 and confirms its forecast full year distribution of 30 cents per share.
Goodman's result continues to be driven by their focus on specific markets where e-commerce is growing, consumer expectations are rising and the need for more efficient supply chains is becoming greater. Goodman continue to build scale in their 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 gearing remains low at 10% which Goodman indicate is appropriate at this time, providing significant investment capacity and financial flexibility.
Key Financial highlights are:
- Operating profit of $530.4 million, up 14.1% on 1H19
- Operating EPS of 28.8 cents, up 12.9% on 1H19
- Statutory profit of $810.6 million (includes the Group’s share of valuation gains, non-cash items and derivative and mark to market movements)
- Distribution of 15.0 cents per stapled security (DPS) in line with the Group’s capital management strategy to achieve a payout ratio in the low 50% range
- Gearing at 10.0%3 (look through gearing at 21.1%)
- Net tangible assets (NTA) per security up 4.9% for the half to $5.60 (since 30 June 2019).
Key Operating highlights are:
- Total AUM of $49.2 billion, and external AUM of $45.7 billion – both up 15%
- Strength in asset pricing driving $1.6 billion in valuation uplift across the Group and Partnerships
- Quality portfolio maintains high occupancy of 98% and like-for-like net property income growth of 3.3%4
- Development work in progress (WIP) of $4.3 billion across 55 projects in 15 countries with a forecast yield on cost of 6.5%
- Average Partnership total returns on track to be in the low-teens for FY20.
Quality properties located in highly sought-after locations means Goodman’s portfolio continues to deliver strong rental returns and consistently high occupancy levels. Earnings from investments are up 17% to $213.3 million as a result of development completions, acquisitions and increased investment in Partnerships.
The Group has invested almost $1 billion in its Partnerships over the last 18 months to fund acquisition and development opportunities, including $120 million in 1H20. The competition for sites and undersupply of quality assets in the markets where Goodman operates, combined with strong investment market conditions, has seen the weighted average cap rate (WACR) across the portfolio compress by 17bps to 4.9% since June 2019.
Key Investment highlights include:
- 1.6 million sqm leased equating to $224 million of annual property income
- Occupancy maintained at 98%
- Weighted average lease expiry (WALE) of 4.7 years in stabilised portfolio (11.7 years for development WIP)
- Like-for-like net property income growth of 3.3%
Limited supply of new developments in our markets, coupled with growing customer demand has given the Group the confidence to grow the development workbook to $4.3 billion (1H19: $3.6 billion) across 55 projects in 15 countries. Development earnings are up 10%, with consistent margins and good future demand. Demand in our markets coupled with increased investment in automated facilities is leading to increased work in progress, and longer lease terms, with a WALE on commencements of 13.1 years and 11.7 years on WIP.
The Group’s development pipeline significantly exceeds $10 billion, generated from both the build-out of land banks under its control, as well as the redevelopment of existing stabilised assets.
Other key Development highlights include:
- Commencements of $1.7 billion
- Development completions of $1.5 billion
- 80% of developments with committed leases on completion
- 77% of WIP undertaken within Partnerships.
External assets under management have grown 15% since December 2018 to $45.7 billion, due to strong valuation gains, development completions and acquisitions across the platform. Management earnings are up 16% with performance fees expected to be strong for the full year, in line with the positive performance of the Partnerships.
Other key Management highlights include:
- Revaluation gains across the portfolio totalled $1.6 billion
- $16.9 billion available in undrawn debt, equity and cash
- Partnership returns expected to be in the low-teens for FY20
Providing the outlook for the Group, Greg Goodman said, “The deliberate concentration of our assets in urban logistics locations is delivering high quality properties for our customers and strong returns for the Group and our Partners. The combined effect of robust customer demand, scarcity of land and available space, and competition from alternative uses in our chosen markets, is generating strong property conditions.
The Group continues to refine its portfolio in line with these changes over time. 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.
The Group has had a strong start to the year and indications for the second half remain positive. As a result, Goodman are increasing the 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.