A turnaround in fair value gains lifted the Goodman Property Trust’s half-year profit 47% above the interim result a year earlier.
The trust made $66.4 million pretax ($45.3 million a year earlier) in the September half, including $16.8 million in fair value gains on certain investment properties.
In the September 2017 half, the trust had a fair value loss of $8.4 million, principally from a $12.7 million deduction in land value (no change this time) & $5.4 million deduction for stabilised properties (also no change this time). The difference was a $25.2 million turnaround for September 2018.
The valuation effect contributed heavily to the 50.1% after-tax profit rise to $59.3 million ($39.5 million in 2017), but in terms of adjusted operating earnings the 2 years were very similar – up 0.5% this year to $60.1 million ($59.8 million) pretax, up 0.6% to $51.7 million ($51.4 million) after tax, in both years representing 4c/unit.
Cash earnings/unit rose 2.3% to 3.61c (3.53c). Cash earnings is a non-GAAP financial measure that assesses free cashflow/unit after adjusting for borrowing costs capitalised to land and expenditure related to building maintenance.
The big change this time round that will have a strong bearing on future performance is the reduction in debt, from $836 million representing a 32.4% loan:value ratio, to $406 million, representing a ratio of only 17.5%.
The trust had strong operating results – portfolio occupancy 98.4% & a weighted average lease term of 5.5 years.
It also had $210 million of development work in progress, and expects to start another $75-100 million of new projects this financial year. Committed gearing will still be only 25.8%.
The chair of trust manager Goodman (NZ) Ltd, Keith Smith, said in announcing the result last week: “The focus on Auckland industrial property [now 99% of the portfolio] is contributing to strong financial results and positioning the trust for sustainable growth over the long term.”
Chief executive John Dakin said underlying economic drivers remained strong and customer demand for high quality industrial property continued to exceed supply.
Goodman has $210 million of development projects scheduled for completion over the next 8 months, with over 50% lease commitment, expected to rise to 70% as deals already well progressed are concluded.
Mr Dakin said the low gearing would give the trust greater financial flexibility. The priority is to reinvest, completing development of the trust’s remaining 22ha of landholdings.
In addition, Goodman wants to replenish its development pipeline with acquisitions that offer longer-term opportunity through intensification of use or redevelopment, starting with its $93 million purchase of the Foodstuffs distribution centre at Roma Rd in Mt Roskill, located at the northern end of State Highway 20 near the Waterview Tunnel.
“The population within a 20-minute delivery truck radius is estimated to be almost 700,000 people. With warehouse space already supply constrained, the surrounding consumer catchment makes this an ideal location for fulfilment & logistics companies.”
Attribution: Company release.