The Goodman Group (ASX: GMG) share price had a very topsy turvy year during FY22.
During the first half of the year the business' share price jumped 25%. However, from that high point at the end of the 2021 calendar year, it then sank around 30%. That meant that over the 2022 financial year, it actually sank by more than 10%.
For readers that aren't sure what Goodman does, it's one of the largest property businesses in Australia. It owns, builds and operates industrial property parks around the world, with a sizeable chunk of them in Australia.
While some of the Goodman share price success earlier in the financial year may be explainable by the very low interest rates, the company was reporting a lot of underlying growth too.
Let's look at how the business performed in the first half of the year and then what has happened since.
FY22 half-year result
Goodman reported growth across the board in the first six months.
It reported operating profit of $786.2 million, an increase of 28% year on year.
Total assets under management (AUM) increased by 32% to $68.2 billion, partly benefiting from $6 billion of revaluation gains across the group and partnerships.
It achieved like for like net property income (NPI) growth of 3.4%, with a high portfolio occupancy rate of 98.4%.
The development work in progress (WIP) increased by 51% to $12.7 billion, which was across 81 projects, with a forecast yield on cost of 6.7%.
Growth continues into the FY22 third quarter
Goodman said in the FY22 third quarter that it has continued to successfully execute its strategy, which is to provide customers with essential locations and offer productivity improvements to help absorb costs and time.
The property business noted that customers continue to "intensify warehousing in urban locations, and increase automation and technology to optimise delivery and improve supply chain efficiency."
In terms of the financial numbers, Goodman reported continuing strength, which could be supportive for the Goodman share price. It said it had $13.4 billion of development WIP across 89 projects. It saw NPI growth of 3.7%, with an occupancy rate of 98.7%.
Total AUM rose over the three months to $68.7 billion.
This led to management giving guidance that FY22 earnings per security (EPS) is expected to increase by 23%.
Interest rate increases
As legendary investor Warren Buffett explains, interest rates can be key for influencing asset prices:
The value of every business, the value of a farm, the value of an apartment house, the value of any economic asset, is 100% sensitive to interest rates because all you are doing in investing is transferring some money to somebody now in exchange for what you expect the stream of money to be, to come in over a period of time, and the higher interest rates are the less that present value is going to be. So every business by its nature … its intrinsic valuation is 100% sensitive to interest rates.
The US Federal Reserve has been increasing interest rates for a few months and now the Reserve Bank of Australia (RBA) has joined the hike party as well to combat inflation. This may be a major factor in the recent drop of the Goodman share price.
Only time will tell when central banks stop increasing interest rates.
