Goodman Group (ASX: GMG) is a global property group. It owns, develops and manages industrial real estate in 17 countries including logistics and industrial facilities, warehouses and business parks. Goodman has a market capitalisation of A$26.9 billion.

What are the results from Goodman Group FY19? 

Today (Friday 23 August 2019) Goodman released its FY19 annual results. The main points are as follows:

  • Revenue and other income before fair value adjustments on investment properties for FY19 is $2,132.4 million, up 6.7 per cent from FY18.
  • Statutory accounting profit for FY19 is $1,627.9 million, up 48 per cent from FY18.
  • Operating earnings per share (EPS) for FY19 is 51.6 cents, up 10 per cent from FY18.
  • Distribution per security for FY19 is 30.0 cents (unfranked), up 7 per cent from FY18.

Specific results on company operations are as follows:

  • Property investments earnings for FY19 is $372.1 million, down 3 per cent from FY18.
  • Development earnings for FY19 is $509.2 million, up 4 per cent from FY18.
  • Management earnings for FY19 is $469.7 million, up 48 per cent from FY18.

What were the drivers of this result? 

Property investment:

A driver behind the slight disappointing result from Goodman group’s property investments business reflects the full period effect of asset sales and the weighted average cap rate (WACR) tightening by 36 basis points to 5.1 per cent for the year. On the positive side, Goodman is progressing with planning and re-zoning of sites in Sydney and Melbourne with potentially more than 35,000 apartment sites.

Development:

The good result in Goodman’s development operation was due to increases demand from Goodman’s customers, driven by structural changes, is resulting in an escalation of development activity. Volumes are expected to trend higher with WIP likely to exceed $5 billion in FY20. Also, Goodman Group commenced $4.2 billion in new developments and completed $3.9 billion of projects for the year.

Management:

Management earnings performed particularly well in FY19. The main driver for this is a strong performance of the Partnerships and AUM growth increasing management earnings with an average total return of 15.9 per cent for FY19.

What is the outlook for Goodman Group?

Goodman management notes the following macro trends:

  • “Macro trends globally continue to drive structural changes in our industry and significant opportunity”.
  • “Underlying real estate fundamentals should continue to drive sustainable growth”.

Goodman’s management forecasts FY20 operating profit of $1,040 million (up 10.4 per cent on FY19), operating EPS of 56.3 cents (up 9 per cent on FY19) and a distribution of 30.0 cents per security.

What is the market reaction? 

The initial market reaction to Goodman FY19 is positive. Goodman’s share price is up around 4 per cent and is currently trading at around A$15.45 (11.45, 23 August). Goodman Group trades at a P/E ratio in the high-teens and an annual dividend yield of 2 per cent (unfranked).

 

Disclaimer:

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August 23, 2019