Goodman Upgrades Earnings Guidance, Data Centers Power Growth Ambitions — Update

By David Winning

SYDNEY--Goodman Group upgraded its annual earnings guidance after its first-half operating profit rose by 29%, illustrating how demand for industrial property has stayed robust despite the slowdown in economic activity world-wide.

Goodman, which owns a property portfolio in countries spanning the U.S. to Australia, said it now expects to grow operating earnings per security by 11% in the 12 months through June. That represents an improvement on a prior forecast for 9% growth.

Management stuck with earlier guidance for an annual distribution of 30.0 Australian cents (US$0.19) per security, as it navigates an uncertain economic environment. Goodman has typically been among the most cautious companies with regard to capital, even as it selectively advances new developments and seizes opportunities to expand its land bank.

Goodman says it is benefiting from some structural tailwinds, including more companies embracing artificial intelligence and cloud computing, which has strengthened demand for data centers located close to major cities. In a sign of their growing importance, data centers now account for around 37% of Goodman's work in progress.

"Data centers will be a key area of growth and the acceleration of data center activity is a catalyst for the group to consider multiple opportunities to enhance its returns," said Chief Executive Greg Goodman. "We continue to assess the group's capital allocation to both existing and potential opportunities to provide the best risk-adjusted returns."

Management has also talked up demand for industrial property that is located closer to where people shop and work as companies rethink supply chains to save costs.

Goodman's outlook was provided alongside a net loss of A$220.1 million in the six months through June. Its operating profit was A$1.13 billion.

"Revaluations saw a reduction in property values of A$3.4 billion across the group and partnerships," Goodman said. "The sharp increase in long-term government bond yields had an adverse impact on the global cost of capital for all asset classes and was the main factor contributing to the increase in cap rates in our portfolio, partly offset by market rental growth."

Goodman said its property was 98.4% occupied at the end of December, with like-for-like net property income growth of 5% over the past six months. Total assets under management fell 2% to A$79.0 billion.

Its gearing--a measure of debt relative to equity--was 9.0% at the end of December, up from 8.3% at the end of June.

The company said its development work in progress totals A$12.9 billion across 85 projects at the end of December.

Write to David Winning at david.winning@wsj.com

(END) Dow Jones Newswires

February 14, 2024 16:54 ET (21:54 GMT)

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