Goodman (ASX:GMG) share price charges higher on results and guidance upgrade

Goodman was on form during the first half…

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Key points

  • Goodman has delivered another strong half year result
  • This is being driven by its strategy to provide essential infrastructure for the digital economy
  • Management has upgraded its guidance for FY 2022

The Goodman Group (ASX: GMG) share price is charging higher on Thursday morning following the release of its half year results.

In early trade, the integrated property company’s shares are up 4.5% to $25.10.

Goodman share price up on strong half year results

  • Total assets under management (AUM) up 32% to $68.2 billion
  • Occupancy remains high at 98.4%
  • Like-for-like net property income growth of 3.4%
  • Operating profit up 28% to $786.2 million
  • Operating earnings per share up 27% to 41.9 cents
  • Development work in progress up 51% to $12.7 billion across 81 projects
  • FY 2022 guidance upgraded

What happened during the first half?

For the six months ended 31 December, Goodman was on form again and delivered a 28% increase in operating profit to $786.2 million.

This was driven by like-for-like net property income growth of 3.4% and a 32% jump in AUM to $68.2 billion. The latter resulted in an 18% increase in management earnings to $258.2 million. Pleasingly, management expects further AUM growth in the coming years due to continued development activity and revaluations.

Management commentary

Goodman’s Chief Executive Officer, Greg Goodman, commented: “The Group’s long-term focus on infill locations is underpinning our strong performance, and driving the volume and scale of the $12.7 billion workbook.”

“It’s also increasing the value of our projects. The average value of our development WIP now exceeds $3,700 per square metre and reflects the prime location, expected growth in rents and consequently better cap rates, for these properties. Goodman continues to grow organically through development activity. This is increasingly reflected in the investment and management business performance as we focus on delivering sustainable opportunities for our customers and investors,” Mr Goodman added.

Outlook

In light of Goodman’s strong performance during the first half, management has upgraded its full year guidance.

It now expects operating earnings growth to be 20% in FY 2022. This compares to prior (also upgraded) guidance of growth in excess of 15%.

However, management has elected to reaffirm its distribution guidance at 30 cents per share rather than upgrade it. This is because it sees attractive opportunities to deploy retained earnings into its development and investment inventory.

Commenting on the company’s outlook, Greg Goodman said: “Our strategy to provide essential infrastructure for the digital economy is delivering. The business is performing strongly across all segments, including our development projects, leasing success, rental growth, significant valuation uplift and the strong performance of our Partnerships.”

“In addition, COVID related disruptions in FY22 have been managed to have less impact on the full year projections than we had initially assumed. The operating outlook for the business is strong and gives us confidence for the remainder of this year. Consequently, we are upgrading our market guidance for FY22, with Operating EPS growth projected to be 20%.”

Motley Fool contributor James Mickleboro 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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