Goodman Property Trust management company chair Keith Smith said yesterday the continued execution of an investment strategy focused on the supply-constrained Auckland industrial market had contributed to another strong operating result in the March 2020 year.
“While the economic outlook has deteriorated rapidly over the last 3 months as a result of Covid-19, the quality of the trust’s $3.1 billion portfolio, its focus on the industrial sector & low level of gearing will enable it to respond to future challenges & opportunities,” Mr Smith said.
He said the manager had refined its investment strategy in recent years to meet the increased demand for warehouse & distribution space across Auckland.
Operating earnings were down, and so were revaluations, but net tangible assets rose, gearing – already very low – was reduced further, and the trust portfolio’s market capitalisation rate firmed.
In short, the industrial property sector continued to perform strongly, especially in Auckland, where Goodman has turned its whole focus.
Non-GAAP financial measures:
Adjusted pretax operating earnings, down 6.2% to $109.7 million ($117 million)
Adjusted after-tax operating earnings, down 9% to $90.5 million ($99.5 million)
Adjusted pretax operating earnings/unit, down 9.7% to 8.16c (9.04c)
Adjusted after-tax operating earnings/unit, down 12.4% to 6.73c (7.68c)
Key operational & financial results (March 2019 figures in brackets):
Pretax statutory profit, down 15.1% to $284.4 million ($334.8 million) including valuation gains down 17.9% to $165.8 million ($201.9 million)
Operating earnings excluding revaluations, down 12% to $118.6 million ($132.9 million)
After-tax profit, down 18% to $261.9 million ($319.5 million)
Net tangible assets, up 10% to 172.7c/unit (157c/unit
Pretax adjusted operating earnings, down 6.2% to $109.7 million, down 9.7%/unit to 8.16c (9.04c)
Cash distributions, unchanged at 6.65c/unit, representing about 107% of cash earnings of 6.22c/unit (6.24c/unit)
$175 million of new equity raised in September & October 2019 through a $150 million placement & a $25 million retail unit offer
Gearing, reduced by 4.1% to 18.9% (19.7%), available liquidity at 31 March almost $400 million
Management expense ratio, up 8.9% to 0.86 (0.79)
Management expense ratio % excluding performance fee, up 2.2% to 0.47% (0.46%)
Development projects, $158.6 million completed, $101 million in progress
Occupancy, 99.4% and a weighted average lease term of 5.5 years, at 31 March 2020.
Market capitalisation rate, 5.4% (5.8%).
Goodman acquired the T&G Global facility in Mt Wellington for $65 million in September and, post-balance date, the neighbouring property at 7-8 Monahan Rd for $13 million.
Chief executive John Dakin said: “Alongside many of our customers in the logistics & warehousing sectors, we have continued to operate through the alert level restrictions, providing the critical business infrastructure that is supporting essential supply chains while maintaining the health & safety of our people, customers & stakeholders.”
“A secure & efficient supply chain that includes warehouse & logistics facilities close to consumers has proven to be essential for a modern city to function & grow.
“Despite the uncertain operating environment, customer demand in the online, logistics, food, consumer goods & digital economy continues to support our portfolio fundamentals & targeted development activity.”
Mr Dakin said the business had adapted its approach to the lockdown to ensure it maintained the trust’s stable cashflows & strong financial position.
Guidance & changes to distribution policy
On the outlook for the 2021 financial year, Mr Dakin said: “If the portfolio continues to perform in line with our expectations, we forecast cash earnings to be materially consistent with last year, at around 6.2c/unit.”
To ensure the business can continue to grow sustainably, Mr Smith said the board amended its distribution policy for the trust. “Adopting a target payout ratio of 80-90% of cash earnings better aligns distributions with the underlying cashflows from the trust’s stabilised portfolio.
“The amendment to the distribution policy is another step in the evolution of a high quality, low risk property business focused on sustainable long-term growth.”
Under the new policy, the trust expects to pay cash distributions of at least 5.3c/unit in the 2021 financial year – subject to no further material adverse changes in market conditions.
Link: 2020 annual report
Attribution: Company release, annual report.