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Auction Technology Group is unique in that it benefits from lockdowns and inflation. The online platform connects auction houses with potential bidders. Lockdowns boosted demand for digital auctions but unlike other online commerce services, demand hasn’t dropped off. Rising inflation has pushed up prices for second hand goods — which has meant more turnover for ATG.
In the six months to the end of March, pro forma revenue rose 16 per cent and 68 per cent on a reported basis to £57.7mn thanks to strong growth in total hammer value. This led to a 58 per cent jump in adjusted cash profit and a 68 per cent hike in adjusted cash flow.
The company is split between an arts and antiques (A&A) arm and industrial and commercial (I&C). Each division makes up around half of the total revenue and both increased revenues by 16 per cent last year. A&A growth was mainly driven by the sales of additional services, such as payment solutions. Gross merchandise value rose only 2 per cent against tough comparators.
The market is aware of this high-margin, fast-growing platform business, which is why it is trading on an expensive forward price/earnings ratio of 33.3. This high valuation may have been part of the reason why chief executive John-Paul Savant recently decided to sell £1.3mn worth of shares. Chief financial officer Tom Hargreaves also sold £2.6mn worth, while chief operations officer Richard Lewis disposed of £3.94mn worth and Daniel Pennington, senior vice-president of sales sold £263,000.
While Auction Technology Group is better placed than many businesses, the truth is that if we go into a recession there will be fewer transactions of any sort — even of the second-hand variety. Medium-term headwinds are coming, but the long-term prospects are still promising.
SSP chief shows appetite for shares
SSP has been buffeted this way and that by the pandemic. Much of the food and drink outlet operator’s estate is at commuting points such as train stations and airports, which was hardly conducive to success during periods of domestic and international travel restrictions.
The owner of the Upper Crust brand’s latest interim results, released on 24 May and covering the half-year to 31 March, showed signs of progress. Revenue of over £800mn was at 64 per cent of pre-pandemic financial year 2019 levels and the business returned to operating profit. Over 80 per cent of SSP’s estate, including sites train stations, motorway service stations and other leisure locations, is now open.
There was even better news in post-period trading. Revenue for the first six weeks of the second six months of the financial year was at 83 per cent of 2019 levels. The company forecasts that revenue for the second half will come in at around 80-85 per cent against 2019 and it expects to return to 2019 revenue and margin levels by 2024.
Investors liked what they saw, with the company’s shares boosted on results day. They are up by almost 9 per cent since the announcement. Chief executive Patrick Coveney was clearly happy with the share movement — SSP disclosed that he bought £1.6mn-worth of shares on the same day as the results release at £2.55 a share.
Numis has the shares trading on 30 times forward financial year 2023 earnings, which the broker expects to fall to 20 times the following year. Its analysts said that SSP’s fourth quarter “is the most important from a seasonal perspective which may have a disproportionate impact on margin recovery” and dubbed its revenue forecast for the second half as “cautious” given recent performance. CA
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