Auction Technology Group's shares fall to a new low

Shares in marketplace operator Auction Technology Group (ATG) plunged below its IPO price following the release of its annual results. Pre-tax profit was down almost a quarter, and deteriorating performance in the second half of the financial year suggest things may get worse before they get better.

However, its operating margin grew to 17 per cent (from 14 per cent in the prior year) and earnings per share were positive for the first time since the 2021 flotation. 

But Peel Hunt analysts suggest that the group – previously upheld as a counter-cyclical stalwart – has started to fall victim to macroeconomic pressures. Although revenue in its industrial and commercial (I&C) business was up 10 per cent to £58.2mn, the broker said “a combination of higher volumes and higher asset prices last year was unlikely to remain”. 

Performance in the art and antiques (A&A) division was stronger still – with turnover up to almost £66mn from £55mn in FY2022. Clearly investors can’t see this momentum continuing. 

Signs of a slowdown became evident in the second half, with the company reporting that the total hammer value of transactions on its platforms was down 5 per cent at constant currency. It blamed the normalisation of used equipment prices in some I&C categories as well as a “softening of A&A market activity”. 

The group’s conversion rate, a measure of the number of active visitors on its platforms, was also down two percentage points to 31 per cent. This was attributed to auctioneers reopening their physical auction sites following the lifting of lockdown restrictions. 

Although the shares are now trading at a palatable 15 times projected earnings for FY2024, we think there’s reason to be cautious. The slowdown in consumer spending, combined with a return to in-person auctions, doesn’t bode well. Hold. 

Last IC view: Buy, 705p, 17 May 2023