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Industrial property investor and developer Goodman Group (ASX: GMG) is ramping up its data centre portfolio amid a softening of its key logistics market, which nonetheless helped drive operating profit 15 per cent higher to $2.05 billion in FY24 thanks to solid rental growth.
However, Goodman’s latest result was marred by a $5.1 billion downward revaluation of assets held across the group and its partnerships, with Goodman’s $1.5 billion share of that hit helping to push the bottom line to a statutory loss of $98.9 million for the year.
Goodman has blamed capitalisation rate expansion during the year in the US, Australia and China, which essentially implies higher risk for assets, for the impairment which was partially offset by strong growth in rents.
In a snapshot of current market trends, Goodman says that its portfolio occupancy remains high at 97.7 per cent while like-for-like net property income grew 4.9 per cent.
Highlighting its push to diversify its asset base, the group says data centres now comprise 40 per cent of Goodman’s current development portfolio of $13 billion across 80 projects.
Goodman also notes that logistics has lost some of its shine in the past year after a period of rapid growth. Although the group says the sector remains positive, demand has moderated to be consistent with pre-pandemic levels.
“The long-term structural demand drivers remain intact,” says Goodman, adding that limited supply is supporting underlying property fundamentals in its markets.
Property investment income in logistics rose 7 per cent to $567 million, while income from partnership investments lifted 10 per cent.
Goodman CEO Greg Goodman says the group continues to provide essential infrastructure, with its warehouses and data centres “supporting the flow of goods and data through the economy”.
“The expansion of the digital economy continues at pace,” he says.
“The growth of e-commerce, cloud computing, and adoption of new technologies, including artificial intelligence and machine learning, is creating significant opportunity for Goodman to develop the infrastructure our customers are seeking.
“This has supported the group’s strong operational results, despite global market uncertainty.”
Goodman says the 15 per cent lift in operating profit, leading to a 14 per cent lift in earnings per share (EPS), is significantly ahead of the group’s guidance of 9 per cent EPS growth.
“Our focus has remained on logistics and data centre opportunities in key cities around the world, where barriers to entry are high and supply is limited,” he says.
Goodman has forecast a positive outlook for the year ahead, with the CEO citing the “active rotation of our capital a key factor in funding sustained earnings growth over the long term”.
“While our logistics offering remains core to the business, with sound underlying fundamentals expected to be maintained, data centres are anticipated to be a major area of growth moving forward,” he says.
“We are in active negotiations with several customers for powered shell and fully fitted turnkey facilities across our power bank, with substantial new starts anticipated to commence between now and the end of 2025.”
Goodman expects to deliver operating EPS of 117.2c per security, up 9 per cent on FY24, with the annual distribution to hold steady at 30c per security.
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