Art market keeps Auction Technology in the green

The auction market increasingly seems like an underappreciated source of counter-cyclical growth. For proof of this, investors should look no further than Auction Technology Group (ATG), which runs seven online platforms that connect almost 4,000 auction houses to bidders.

In its interim results, the company was able to reaffirm its revenue guidance for the full financial year and boast of 11 per cent growth in the “total hammer value” of sales on its platforms. 

Adjusted Ebitda for the six months to the end of March was £31.5mn – up 18 per cent from the same period last year – with related margins expanding by one percentage point to 47 per cent. Management attributed this performance to an increase in listing fees across several platforms, as well as the “high operational leverage and low capital intensity” of its business model. 

Organic revenue from the arts and antiques (A&A) segment grew 4 per cent in the first half, despite concerns that demand in this market would evaporate in an economic downturn. Meanwhile, organic industrial and commercial sales were up 7 per cent on the first half of 2022.

Auction Technology Group has pushed back the rollout of its atgPay payment processing system to ensure it has the necessary functionality – and this is expected to have a small negative impact on revenue. But with the number of auctions hosted on its marketplaces up 8 per cent year on year, the delay won’t slow momentum significantly.

Broker Peel Hunt puts the group’s full-year price/earnings multiple at 22 – which we think is a fair price to pay for growth. Buy.

Last IC view: Buy, 760p, 1 December 2022