Goodman Group brushes off virus woes, as empire hits $51bn

Goodman Group says rising demand in the pandemic for deliveries and data services has helped lift full year profit 12.5pc.

Goodman Group CEO Greg Goodman. Pic by James Croucher

Industrial property powerhouse the Goodman Group has surged on the back of the coronavirus crisis due to rising demand for deliveries and data services, boosting full-year operating profit by 12.5 per cent to $1.06bn.

The company, which owns and manages warehouses around the world, lifted operating earnings per security by 11.4 per cent to 57.5c, and flagged a 9 per cent lift for this financial year.

Goodman, which has transformed from a traditional landlord into a major international funds manager, is benefiting from the rapid growth of e-commerce, which has been accelerated by the pandemic.

“The events of the last year have resulted in global changes in behaviour including an acceleration of e-commerce adoption, a shift to remote working and a significant increase in the demand for technology and big data,” chief executive Greg Goodman said.

Goodman has funds that own properties and are developing new projects around the world, including a line-up of tenants that includes Amazon locally and offshore, that are allowing it to capitalise on demand for industrial space.

Global companies are also locking into massive warehouses on long leases as they restructure their supply chains. The company primarily develops and manages the properties for major local and international pension funds.

Goodman beat its guidance as development work jumped by 59 per cent on last year to $6.5bn and the company expects it to exceed $7bn in the first half of fiscal 2021.

“This development activity is flowing through to our assets under management which increased 12 per cent to $51.6bn,” Mr Goodman said, noting $2.9bn in revaluation gains.

The company’s shares bumped up 1.3 per cent to $17.93, partly as it rides a wave of demand for logistics assets globally, with the chief executive saying that capitalisation rates, a measure of value, are probably firming in the sector.

“The wall of capital wanting to get into industrial is actually pretty voracious,” he said, with cap rates tightening by 25 basis points in just a month and the company fielding offers on British assets in the 3 per cent cap rate range.

Goodman has also been restocking and outlaid about $140m locally on sites and about $200m in Britain on urban sites.

Larger companies are pouring more capital into massive distribution facilities as they deal with the e-commerce revolution and many of Goodman’s projects are kicking into gear after years of planning.

“There’s a wave of demand around the world which has been coming in this direction,” Mr Goodman said. The company is less reliant on manufacturing and focused more on distributing goods to consumers, which has picked up during COVID-19.

Companies are under pressure to improve delivery and Goodman could be a beneficiary, with the chief executive predicting “some permanency” in goods being shipped to customers, depending on the duration of the pandemic.

Goodman remains well-capitalised, with available liquidity of $2.8bn, including $1.8bn in cash, in addition to the $16.3bn equity commitments, cash and debt available in its partnerships.

After years of selling down completed assets, gearing has also reduced to just 7.5 per cent, with Mr Goodman noting it had sold more than $20bn of real estate in the last five years.
The company turned in a statutory profit of $1.5bn and flagged that it is continuing to build new projects. It already has $6.5bn of work underway across 46 projects.

Goodman said that despite the challenges of the pandemic it was well-positioned to take advantage of key trends, with the chief executive saying there was a “window of demand” which made it possible to develop projects after a period of positioning sites.

The company expects to deliver a fiscal 2021 operating profit of $1.165bn, an increase of 9.9 per cent on last year, and said it would lift earnings per share to 62.7c, a 9 per cent lift on last year. The forecast distribution for fiscal 2021 will remain at 30c per security.

UBS analysts said the result exceeds high expectations and Goodman was guiding to growth this financial year that was ahead of consensus expectations.

Goodman shares have risen around 85 per cent from their March lows, and 34 per cent calendar year to date.