The Goodman Property Trust’s net annual earnings dropped both before & after tax in the year to March, the result of a smaller fair-value gain on its portfolio.
[In my story on Friday, after a cursory look at the results, I wrote that pretax returns were “steady”. This article gives you a better look at performance.]
The trust’s investment portfolio made a $145.8 million fair-value gain last year, but that input dropped 21.3% to $114.7 million this year.
The 6.7% valuation gain in 2016 was a record, and the 2017 gain was 5.4%, lifting the investment portfolio 1.3% to $2.326 billion ($2.297 billion).
Pretax net profit fell 11.1% to $220.5 million ($247.9 million in 2016) and, after tax, it fell 8.3% to $213.8 million ($233.1 million).
Operating earnings rose 4% pretax to $121.7 million ($117 million) and, after tax, rose 8.1% to $106 million ($98.1 million).
Operating earnings/unit rose 1.1% to 9.51c (9.41c) pretax and 5.1% after tax to 8.28c (7.88c).
Net tangible assets rose 8.3% to 130.4c/unit (120.4c), the loan:value ratio was reduced by 10.6% to 29.3% (32.8%) and the look-through loan:value ratio was reduced to 30.6% (33.9%). The management expense ratio was trimmed by 6.4% to 0.44% (0.47%).
Management company Goodman (NZ) Ltd’s chair, Keith Smith, said on Thursday the most important features of the 2017 operating performance were the refinements to the portfolio and realisation of longer-term strategic objectives.
“The progression of the development programme, significant asset sales & selective acquisitions are all having a positive impact on the trust, lifting the quality of the portfolio and adding to its financial strength.”
Chief executive John Dakin said: “With more than $535 million of new projects since 2012, the trust’s development programme is transforming the portfolio. Funded through asset sales, it is a sustainable business activity that is investing in the latest building technologies in some of Auckland’s best locations.
“The increasing capital allocation to the Auckland industrial sector is a deliberate strategy that reflects the strong growth profile of the city and the positive investment characteristics of industrial property. It also positions the trust to benefit from the increasing demand for logistics space as a result of e-commerce.
“Online shopping is increasing the requirement for distribution warehousing in many global markets. It’s an emerging trend that is also adding to the attractiveness of industrial property as an investment class.”
Refining the portfolio
The trust managers secured 154,000m² of new customer lease commitments, representing 16% of the total rentable area, in the last 12 months, increasing the occupancy rate from 97% to 98% and extending the weighted average lease term from 5.7 to 5.8 years.
Mr Dakin said sustained customer demand was also facilitating an intensification of the trust’s development programme: “The trust has been able to accelerate the build-out of its land bank in recent years. With Highbrook Business Park now more than 75% complete, we have made substantial progress in the trust’s development programme.”
Completion of current projects will increase the trust’s investment in the preferred Auckland industrial & business park sector to 77% of total property assets and reduce its land weighting to just 7%.
Mr Smith said: “These favourable operating conditions are expected to continue over the short to medium term and the board believes the existing strategy, with its focus on portfolio quality & development-led growth, remains appropriate.”
Goodman is forecasting 9.0c/unit pretax operating earnings for the 2018 financial year. The reduction from this year’s 9.51c reflected the impact of asset sales & balance sheet deleveraging. Mr Smith said the trust should maintain cash distributions at 6.65c/unit.
19 May 2017: Goodman profit steady
Attribution: Trust annual report, release.