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Goodman Group reports $557m earnings and issues upgrade

An artist impresion of a new logistics facility that Goodman is developing on behalf of Amazon in Rheinberg, Germany. Goodman Group has reported a $557 million statutory profit for the first half of the 2017 year and says with solid leasing conditions and its ongoing $10 billion urban renewal program, it expects higher earnings in the coming months.
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Group chief executive Greg Goodman has revised up its 2017 operating earnings per security (EPS) guidance to 43.1¢, a 7.5 per cent increase over 2016. The interim distribution per security is 12.7¢, up 6.7 per cent on the previous corresponding period.

The statutory accounting profit of $557 million includes $275 million valuation gains, contributing to 3.4 per cent growth in net tangible assets to $4.24 per security and there is $2.8 billion of liquidity available for new developments and acquisitions.

UBS said it was a consistent and solid result coinciding with a 1.5 per cent upgrade to the full-year guidance.

“Long-term structural growth drivers of the business remain intact,” UBS says.

Mr Goodman said the growth in e-commerce and the pending arrival of Amazon in would create more demand for efficient and large distribution centres.

Goodman is one Amazon’s main landlords globally and Goodman will construct an additional one million square feet logistics centre for Amazon at the Goodman Commerce Centre Eastvale development. Amazon is scheduled to take occupancy of the new logistics facility in 2018.

“The key structural themes that have been driving the group’s growth remain unchanged. Goodman continues to focus on the execution of its strategy, capitalising on consumerism and the e-commerce-led demand for modern, high-quality logistics space in key gateway cities globally,” Mr Goodman said.

“Over the next two years we will have leverage of close to zero, so we will take that opportunity to look at different markets.”

One of the cash cows for the group is its urban renewal business, where it is selling down non-core land banks.

“Urban Renewal remains a strong contributor to the strength of the balance sheet, and through active management of the sites with change of use possibilities, potentially accommodating 35,000 apartments, will continue to deliver valuation uplifts over time,” Mr Goodman said. “$2.3 billion of sites have been conditionally contracted across the group over the past two years with more than $1 billion expected to be settled by June 30, 2017.”

The group’s development work in progress stands at $3.5 billion with 62 per cent pre-committed across 81 projects in 14 countries and a forecast yield on cost of 7.6 per cent.

“We have development commencements of $1.5 billion with 64 per cent pre-committed and 53 per cent pre-sold to partnerships or third parties,” Mr Goodman said.

Brokers at Shaw & Partners said it was “a great result”.

“A key driver of our ‘miss’ was performance fees achieved in the first half both from development and funds under management activities. Specific to funds under management performance fees, we assumed more of an even spread between the first and second halves, but Goodman is guiding to a stronger first-half skew,” the brokers said.

“Overall, while our full-year 2017 EPS estimate was already above the pre-result guidance, the outlook for the year was even better than we anticipated. Our earnings are under review.”

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