Goodman CEO Greg Goodman has lifted earnings guidance for the group. Photo Dominic Lorrimer

Goodman Group lifts guidance with strong developments

Matthew Cranston|Apr 17, 2019

The $12 billion industrial property giant Goodman Group has increased its earnings guidance following a strong net profit of $557 million driven by higher development and management earnings and a $275 million increase in property valuation gains.

Goodman is forecasting fiscal 2017 operating earnings per security of 43.1 cents, up 7.5 per cent on the previous corresponding period. Goodman had guided to 6 per cent earnings per share growth in fiscal 2017.

The group, which has just secured Amazon for a massive logistics centre in California, has dramatically reduced gearing levels to 8.7 per cent and is now forecasting full year distribution of 25.9 cents per security, up from 24 cents per security in FY16.

Continued assets sales have seen the group’s liquidity increase to $2.8 billion.

“Asset rotation, the gateway city strategy and structural macro themes that have been evolving for the sector, are all creating significant opportunities for Goodman to continue to strengthen the quality of its operating platform,” Goodman chief executive Greg Goodman said.

The group’s operating profit of $388 million was up 9 per cent on the previous corresponding period.

Management activities contributed $110 million up from $99 million in the previous corresponding period and ahead of some analysts’ expectations.

Goodman’s development earnings increased to $198 million, up from $177 million in the previous corresponding period.

“Tightening cap rates continue to support margins and also drive returns in development partnerships leading to performance fees,” Mr Goodman said.

Analysts have shown a positive reaction to the results.

JP Morgan’s Richard Jones said Goodman beat its guidance on the back of strong earnings from its active businesses, however, it needed to keep an eye on development margins.

“Goodman’s medium-term challenge is maintaining its earnings growth when yield compression no longer underpins its current above-trend development margins,” Mr Jones said in a note to clients.

“Accretive redeployment of urban renewal proceeds will be required to maintain its 6 per cent earnings per share growth target over the medium term in our view.”