Deutsche Grundstuecksauktionen AG (BE:DGRG) continues to please with an “outstanding” H1, epitomised by the highest first-half gross turnover and net commission for a decade and a trebling of net income. No less encouraging is management’s confidence about the seasonally stronger H2 with a likely repeat of last year’s bumper autumn auctions and sustained favourable macro factors. Robust finances (debt-free) and a proven model should ensure that the company’s enviable dividend record is maintained.
H1 step-change
By any measure the half to June was a success, even if the comparative was relatively subdued. A 40% rise in turnover from spring and summer auction sales delivered a threefold increase in EBITDA, pre-tax profit and net income. Profit conversion would have been yet higher but for a lower net commission rate, reflecting the mix of lots sold (average sales price up an exceptional 42%), fee-sharing in the brokerage business and an elevated H116 level. All five subsidiaries improved profit, including a marked pickup by Norddeutsche and Westdeutsche, while the parent company’s continued but reduced loss was due simply to its effective status as a holding company with associated central costs. Despite a slight reduction, the lot selling quota remained reassuringly high at 84%.
2017 optimism maintained
Management has reaffirmed positive fundamentals for the business, notably interest rates, disposable income and employment. To that we should add demographic advantages such as supply shortages, a rising population and internationally low homeownership. Given gross turnover of €57m in H1 and likely c €30m from its imminent autumn auctions, the company’s stated FY17 target of the average of the last three years, ie €103m or +3%, looks cautious ahead of winter auctions, which tend not to lag materially its peak autumn proceeds.
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