Goodman Group (ASX:GMG) share price falls after FY21 results

The Goodman Group share price is falling sharply, despite exceeding FY21 forecasts

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The Goodman Group (ASX: GMG) share price has sold off sharply this morning after the company released its full-year FY21 results.

Shortly after opening, shares in the industrial real estate investment trust (REIT) tumbled 4.97% to $22.01. They have since regained some ground and at the time of writing are down 3.5% to $22.35.

Goodman share price slumps despite exceeding guidance

  • Operating profit of $1.22 billion, up 15% on FY20
  • Operating earnings per security (EPS) of 65.5 cents, up 14.1%
  • Statutory profit of $2.3 billion
  • Distribution of 30.0 cents per share
  • Total assets under management (AUM) of $57.9 billion, up 12%
  • Portfolio occupancy rate of 98.1% and like-for-like net property income growth of 3.2%

What happened in FY21 for Goodman Group?

In FY21, the Goodman Group share price has been supported by the company's focus on high barrier to entry markets where land is scarce and use is intensifying.

The company was pleased to highlight that customer demand for space in its locations continues to increase across a range of industries.

"The prolonged impacts of the global pandemic continue to accelerate consumers' propensity to shift to online shopping. Logistics and warehousing has provided critical infrastructure to enable distribution of essential goods to time-sensitive consumers through this period."

As a result, the company cited increasing utilisation of its facilities with an occupancy rate of 98.1% at a weighted average lease expire (WALE) of 4.5 years.

This theme has carried through to the company's development pipeline, with $10.6 billion worth of work in progress.

Encouragingly, the company said there were high levels of pre-commitment at 70% with a 14-year WALE. Additionally, it said projects completed in FY21 were 96% leased.

More broadly speaking, Goodman Group said that "around the world … continues to undertake long-term value-enhancing opportunities by targeting higher and better use through re-zoning or increased floor space ratios with multi-level warehousing facilities".

Goodman Group's FY21 results exceeded its latest forecast of $1.2 billion in operating profit or an earnings per share (EPS) growth of 12%.

Despite coming out ahead of its forecasts, the Goodman share price has tanked 3.5% to $23.35.

What did management say?

Goodman Group chief executive officer Greg Goodman was pleased with the company's performance.

Goodman's adaptable and flexible approach has enabled our people to continue to perform at a high standard and deliver a very strong result in the current environment, with health and well-being remaining a critical priority.

Mr Goodman also highlighted the tailwinds behind the company's focus on high-quality real estate.

Long-term structural trends are well established and are resulting in higher utilisation of space and customer demand. This is providing greater visibility around future requirements for space, and accordingly we have increased WIP further to $10.6 billion at June 2021. The development and valuation growth is flowing through to our partnership platform, where total AUM has increased 12% to $57.9 billion in FY21. With strong income and capital growth, our partnerships have delivered average returns of 17.7%.

What's next for Goodman Group

Looking ahead, Goodman Group said it expects to deliver FY22 operating EPS of 72.2 cents. That would be a 10% increase on FY21 figures.

The company's forecast FY22 distribution is expected to remain steady at 30 cents per share.

Despite the sharp pullback on Thursday, the Goodman share price has rallied more than 16% year-to-date. It is also up 21% in the past 12 months.

Motley Fool contributor Kerry Sun has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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