Agile Goodman eyes $1bn in earnings from riding the e-commerce boom

The industrial property powerhouse is approaching its operations more like an e-commerce operator than a warehouse owner.

Greg Goodman, CEO of Goodman Group. Picture: James Croucher

Industrial property powerhouse Goodman Group is forecasting it will make about $1 billion this year but is approaching its operations more like an e-commerce operator rushing goods to market than a warehouse owner.

The group has sold off more than $5bn worth of older stock and has refashioned its properties to meet the needs of a younger generation living in cities including London, Los Angeles and Shanghai, which demands products they buy online arrive that day.

“The evolution of our customers’ supply chains is continuing at pace, as growing consumer expectations and demand require them to be faster and more agile,” chief executive Greg Goodman said.

The group, now on the way to running $50bn worth of warehouses worldwide, says consumers are its main focus and it is working with e-commerce majors and traditional suppliers looking to keep up with the shift.

“The projects are larger, more complex, more valuable and are critical infrastructure for a lot of our big customers around the world,” Mr Goodman said.

“Now we almost think of what we’re doing as infrastructure for our customers for the next 10 and 20 years,” he added, saying hundreds of millions of dollars were being poured into the best facilities.

Mr Goodman acknowledged the impact of global trade tensions but said Goodman was focused on domestic delivery of online purchases. While trade issues may cap overall retail spending and affect prices, online was growing “substantially”, he said.

Goodman is trading at a premium and added about 4.38 per cent to close at $15.50 per share on Friday. Most of its metrics defy traditional property analysis, with the group positioning for the next phase of global supply chains.

Mr Goodman said warehouses had switched from a focus on sliding racks used to store products for months to greater mechanisation and robotics to get products to market quickly.

“E-commerce has made that a reality,” he said.

The trust delivered an 11.4 per cent lift in operating profit to $942 million for the last financial year and flagged that it will grow globally on the back of the e-commerce boom.

A decade after hitting rock bottom in the wake of the global financial crisis, the real estate group has also tapped the demand for global pension funds keen for more exposure to logistics. Goodman now operates across Australasia and has pushed into China, continental Europe, Britain, North America and Brazil. It is one of the top listed specialists globally.

Mr Goodman argued the group’s “strategic focus” on owning, developing and managing high-quality industrial properties in key urban centres globally was delivering.

Mr Goodman said there was further momentum for supply chain efficiency and pointed to the group’s focus on sites in major cities that would support last-mile delivery and could also be turned over to more lucrative uses, such as apartments, in future.

Goodman’s sell-off of secondary stock has left it with low gearing and the ability to move on corporate deals. All up it has $13.6bn available in undrawn debt and equity but it has not chased big portfolios in the US and Europe, instead building out its own developments.

“While the market environment for industrial real estate looks strong, we remain prudent in managing our capital,” Mr Goodman said, in a nod to the group’s low debt, which positions it for a turn in the cycle.

Goodman delivered operating earnings per share of 51.6c, up 10.5 per cent on fiscal 2018 and its net profit jumped by 48 per cent to $1.63bn, partly on the back of strong property valuations.

Goodman is forecasting a 10.4 per cent lift in operating profit of $1.04bn, with operating earnings of 56.3c per share, up 9 per cent.

Its development workbook is growing strongly, with work in progress at $4.1bn, and this is expected to reach $5bn next year.

The group has 55 projects in 13 countries.