Auction Technology Group boosted by lockdowns

Covid-19 has accelerated revenue growth at Auction Technology Group (ATG). The newly listed auction business had already transitioned to an online platform before the pandemic, which meant it was well placed to capitalise when the national lockdowns forced more people online.

The platform connects auction houses with bidders and creates auctions across its arts and antiques and industrial and commercial goods divisions. Historically, these auctions have been live but recently there has been a shift towards timed auctions. The punters are certainly happy to buy online: total hammer value was up 31 per cent for the year to £6.3bn. This translated into a 34 per cent jump in revenue.

Revenue from art and antiques sales increased 21 per cent to £16.2m and industrial and commercial saw revenue jump 26.3 per cent to £43.7m. The company cited “an acceleration of a structural trend towards online” and a “deferral of some activity in the second half of full-year 2020” as reasons for this fast growth.

Thanks to the low cost of putting on auctions, adjusted cash profit (Ebitda) outpaced sales, rising 43 per cent to £31.8m. The cash profit margin improved three percentage points to a very healthy 45 per cent.

Despite these impressive adjusted figures, loss before tax actually widened to £27.3m from £19m. This was because of £21.8m of exceptional costs associated with the IPO and the acquisition of two businesses.

ATG has had an acquisitive year. Following the buyout of Auction Mobility last year, in October it purchased LiveAuctioneers, an art and antiques marketplace in North America, financed using a post-period loan of $204m ($153m). This has grown the network of auction houses and bidders; a good defence against future competition.

Given the acceleration last year, management is expecting revenue growth to slow to “high single digit to low double digits” next year. However, this is still ahead of IPO guidance and current analyst consensus.

Numis has increased its cash profit forecast to £48.4m for next year, up from £41.4m, giving ATG a 2022 PE ratio forecast of 53.2. This looks quite expensive but can be justified because it is a high-margin business with a scalable platform. Buy.

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