Goodman posts earnings upgrade as industrial property booms

Global industrial property giant Goodman has issued a 12 per cent upgrade in earnings guidance as online shopping drives demand for logistics and warehouses.

In half year results, the group posted a record operating profit of $614.9 million, up 16 per cent on the prior corresponding period, and operating earnings per share (EPS) of 33.1¢, up 15 per cent on the same period last year.

The statutory profit was $1.04 billion, for the pandemic-hit six months to December 31, 2020, boosted by the rise in industrial asset values and new developments. The results were ahead of market expectations.

Greg Goodman, Goodman Group CEO at the company’s head office in Sydney.Credit:: Dominic Lorrimer

The ASX-listed $31.2 billion Goodman is one of the biggest global landlords for e-commerce giant Amazon. It has logistics assets across North America, Europe, China Japan, Australia, New Zealand and now Brazil, where it is building four new sites.

Chief executive Greg Goodman co-founded the business 26 years ago with a collection of sheds in Sydney’s southern suburbs. Today it has $52 billion of assets under management and an $8.4 billion development pipeline.

Huge demand for online shopping, the outlook for its development projects and a rise in assets under management resulted in the group forecasting a 12 per cent rise in full year earnings. It was a “good set” of numbers, Mr Goodman said.

He predicted a wave of old warehouses in tightly-held areas of South Sydney and pockets of Melbourne will be razed and replaced with multi-storey, sustainable, automated sites to meet on-time-delivery demand.

Goodman said it will roll out $400 million of rooftop solar, ranging between 100 and 400 megawatts, by 2025. It is also selling older assets, with a deal in the offing with residential developer Meriton for its $55 million site at Epping in Sydney.

“Our business is performing strongly. The continuing shift in use and requirements from our customers, driven by the long-term trends in the digital economy is supporting continued demand for our properties,” Mr Goodman said.

“Consequently, we have upgraded our full year forecast operating profit to $1.2 billion , up 12 per cent on last year. Forecast full year distribution for will remain at 30¢ per security.

“The logistics and warehousing sector are playing a significant role globally in providing essential infrastructure to the digital economy.”

He said global online sales increased by 30 per cent in 2020 and are expected to show strong growth over the next five years. That led to a boom in demand for higher-quality and mechanised warehouses.

The development activity is reflecting these trends and the flow-on effects in the digital space. As a result, Goodman has increased the levels of development work in progress to $8.4 billion.

JP Morgan analysts said Goodman’s development volumes are rapidly expanding, nearly doubling on the level from 12 months ago.

“It has been able to grow volumes whilst at least maintaining margins. This will drive further increases in development earnings over the next 18-24 months which in turn will drive strong assets under management growth, underpinning at least 10 per cent EPS growth for the next three years,” the brokers said.

Goodman shares are up 2.6 per cent to $17.44.

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