Strong momentum in H218 has ensured yet another successful year for Deutsche Grundstücksauktionen (DGA). Boosted by a bumper €15m Q1 auction lot, 2018 saw a 30% rise in both net profit and dividend as surplus cash (DGA has no debt) allows full profit distribution. The current year has also started well with Q1 gross turnover and net commission slightly above the average of last 10 years and positive indications for Q2 auctions. While 2018 will be a hard act to follow thanks to that bumper sale, the offer of further high-value lots is not wishful thinking, given DGA’s good relationship with the Federal Bundesanstalt and excellent publicity as a reference sale. Therefore management’s target for 2019 gross turnover of €109m (average of last five years) may prove cautious.
While not repeating the exceptional-led step-change in financials of H1, DGA’s H2 performance (see page 2), was creditable, matching year-on-year gross turnover, which had been buoyed by the most valuable item then to date at €7m. Also, the net commission rate improved markedly (9.9% vs 9.5%) despite continued price appreciation (average sales price up 8%). As in the first half, the parent company, which bears central costs, was unusually profitable (more than doubled at the net level) but this was substantially offset by a c 30% fall in the subsidiaries’ contribution on 5% lower gross sales. Regional volatility, if acute in the period, is characteristic of DGA and performances tend to compensate for each other.
A favourable outlook statement reflects reiteration of positive fundamentals, notably interest rates, disposable income and employment. Management’s 2019 aim of reaching the average gross turnover of the last five years (€109m) appears undemanding as that would only be flat, adjusted for 2018’s €15m exceptional, and ignores further high-value lots. 8% higher adjusted Q1 gross turnover is complemented by encouraging signs from imminent summer auctions.
While 2018 set a high bar, DGA’s pride in its dividend record (increased for five years in a row) and strong finances (€5m net cash at end 2018 vs €1.6m historical dividend cost) suggest that its payout may at least be maintained. A historical yield of almost 6% is well ahead of that of the small cap market (no direct listed peer).