REG - Auction Technology - Final Results
30/11/2023 07:15
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RNS Number : 1345V Auction Technology Group PLC 30 November 2023
AUCTION TECHNOLOGY GROUP PLC
FULL YEAR RESULTS FOR THE YEAR ENDED 30 SEPTEMBER 2023
Diversified revenue mix, created more value for customers and executed against
strategic levers
London, United Kingdom, 30 November 2023 - Auction Technology Group plc
("ATG", "the Company", "the Group") (LON: ATG), operator of world-leading
marketplaces for curated online auctions, today announces its financial
results for the year ended 30 September 2023.
Financial results
FY23 FY22 Movement Organic(2)
Revenue(1&2) £135.2m £119.8m +13% +5%
Adjusted EBITDA(1) £64.0m £54.0m +19%
Adjusted EBITDA margin %(1) 47% 45% +2ppt
Operating profit £22.5m £16.8m +34%
Operating margin % 17% 14% +3ppt
Adjusted diluted earnings per share(1) 32.6p 29.5p +11%
Basic earnings/(loss) per share 13.9p (5.1)p +373%
Adjusted net debt(1) £115.7m £131.4m +£15.7m
Cash generated by operations £57.7m £49.4m +17%
Financial highlights
• Revenue of £135.2m, up 13%, driven by strong growth in value-added
services and further diversification of revenues, contribution from
EstateSales.NET ("ESN") and a favourable movement in foreign exchange. Revenue
up 5% and marketplace revenue up 6% on an organic basis.
• Adjusted EBITDA of £64.0m, up 19% year-on-year; adjusted EBITDA margin of
47%, up 2ppt with high operational leverage driven by growth in high-margin
digital marketing and recurring event fee revenue.
• Operating profit of £22.5m, up 34% year-on-year and includes the impact
of exceptional items related to the ESN acquisition, share-based payments, and
intangible asset amortisation.
• Adjusted diluted earnings per share of 32.6p, up 11% as the growth in
adjusted EBITDA was partially offset by higher net finance costs and an
increase in the effective tax rate; basic earnings per share of 13.9p compared
to a loss of 5.1p, driven by higher adjusted EBITDA and a deferred tax credit
offsetting the impact of higher net finance costs.
• Adjusted net debt/adjusted EBITDA ratio significantly improved to 1.8x
from 2.4x 12 months ago as strong cash generation more than offset financing
for the acquisition of ESN. Closing adjusted net debt reduced to £115.7m from
£131.4m.
Operational highlights
• Value-added services revenue up 27% at constant currency, with multiple
services contributing - strong adoption of paid-for auctioneer digital
marketing solutions, continued penetration of atgPay across LiveAuctioneers
and Proxibid, and successful launch of atgShip, our new integrated shipping
service, on LiveAuctioneers. Value-added services now account for 18% of total
revenue.
• Strong growth of event fees and value-added services drove an increase in
the take rate3, up 0.3ppt to 3.6%.
• Total Hammer Value3 ("THV") up 3% at constant currency to £10.8bn for the
full year, with a small decline in THV in the second half year-on-year
impacted by the normalisation of Industrial & Commercial ("I&C") asset
prices and exceptional activity in the prior year, and by a softening in Art
& Antiques ("A&A") auction markets.
• Gross Merchandise Value3 ("GMV") declined 3% at constant currency,
impacted by slowdown in THV and the commercial decision to rotate volume with
high service requirements and minimal revenue contribution. Excluding this
impact, GMV would be flat and conversion rate would be down 1ppt year-on-year
reflecting the physical auction reopening impact post the Covid-19 pandemic.
• Progress on single technology platform programme including value-added
services modules in addition to the launch and roll out of integrated bidding,
which enables timed auctions to be concurrently held across ATG marketplaces
and on an ATG white label.
• Consolidation of North American operations to streamline decision making
and to drive operational leverage and efficiency.
• Successful acquisition of ESN, a leading US estate sales platform,
expanding our addressable market and adding a new pool of bidders; integration
on track and business performing ahead of initial business case.
• Progress against ESG programmes including pledge to achieve Net zero
emissions by 2040.
1. The Group provides alternative performance measures ("APMs") which
are not defined or specified under the requirements of UK-adopted
International Accounting Standards. We believe these APMs provide readers with
important additional information on our business and aid comparability. We
have included a comprehensive list of the APMs in note 3 to the Consolidated
Financial Statements, with definitions, an explanation of how they are
calculated, why we use them and how they can be reconciled to a statutory
measure where relevant.
2. The Group has made certain acquisitions that have affected the
comparability of the Group's results. To aid comparisons between FY23 and
FY22, organic revenue has been presented to exclude the acquisition of
EstateSales.NET on 6 February 2023. Organic revenue is shown on a constant
currency basis using average exchange rates for the current financial period
applied to the comparative period and is used to eliminate the effects of
fluctuations in assessing performance.
3. Refer to glossary for full definition of the terms. GMV and Take
Rate exclude the impact of the acquisition of ESN.
John-Paul Savant, Chief Executive Officer of Auction Technology Group plc,
said:
"We have continued to deliver a robust financial performance and to execute
well against each of our six strategic growth drivers. We have streamlined
our operating model to accelerate the speed with which we make decisions. As
ATG continues to lead the transformation of the auction industry, we are
focused on what our auctioneer partners and our bidders care about most:
raising the experience of buying at auction to eCommerce standards by
investing in the user experience, including payments, shipping and timed
auction formats. The goal is to expand the pool of online bidders by removing
friction points and, in so doing, to drive higher asset values for auctioneers
and their consignors. We continue to make good progress both organically and
via acquisition, with our successful integration of ESN highlighting yet again
our unique opportunity for accretive inorganic growth within the fragmented
secondary goods market.
"Whilst the macroeconomic environment has become more challenging and impacted
our rate of growth in the second half, we are strengthening our core
proposition with the introduction of revenue streams that are less correlated
with sector trends. The strength of our marketplace business leadership and
traction in our value-added services such as atgPay and atgShip, provide long
runways for growth."
Current trading and outlook
THV and GMV growth have been impacted by macroeconomic factors over the course
of the year. In the short term, the business continues to be impacted by
underlying market growth which remains relatively uncertain. Offsetting this
is the benefit that the Company is seeing from the growth of value-added
services, which when combined with the external factors, leads to a FY24
organic revenue growth outlook of between 5% to 8%. Total revenue growth for
FY24 will be higher than the organic growth rate due to the positive
contribution of ESN. We expect to maintain our adjusted EBITDA margin.
Webcast presentation
There will be a webcast presentation this morning at 9.30am. Please contact
ATG@teneo.com (mailto:ATG@teneo.com) if you would like to attend.
For further information, please contact:
ATG
For investor enquiries rebeccaedelman@auctiontechnologygroup.com
(mailto:rebeccaedelman@auctiontechnologygroup.com)
For media enquiries press@auctiontechnologygroup.com (mailto:press@auctiontechnologygroup.com)
Deutsche Numis +44 207 260 1000
(Joint corporate broker to ATG)
Nick Westlake, William Baunton, Tejas Padalkar
J.P. Morgan Cazenove +44 207 742 4000
(Joint corporate broker to ATG)
Bill Hutchings, James Summer, Will Vanderspar
Teneo Communications +44 207 353 4200
(Public relations advisor to ATG) ATG@teneo.com (mailto:ATG@teneo.com)
Tom Murray, Matt Low, Arthur Rogers
About Auction Technology Group plc
Auction Technology Group plc ("ATG") is the operator of world leading
marketplaces and auction services for curated online auctions, seamlessly
connecting bidders from around the world to around 4,000 trusted auction
houses across two major sectors: Industrial & Commercial ("I&C") and
Art & Antiques ("A&A").
The Group powers eight online marketplaces and listing sites using its
proprietary auction platform technology, hosting just under 86,000 live and
timed auctions each year. ATG has been supporting the auction industry since
1971 and the Group has offices in the UK, US and Germany.
CAUTIONARY STATEMENT The announcement may contain forward-looking statements.
These statements may relate to (i) future capital expenditures, expenses,
revenues, earnings, synergies, economic performance, indebtedness, financial
condition, dividend policy, losses or future prospects, and (ii) developments,
expansion or business and management strategies of the Company.
Forward-looking statements are identified by the use of such terms as
"believe", "could", "should", "envisage", "anticipate", "aim", "estimate",
"potential", "intend", "may", "plan", "will" or variations or similar
expressions, or the negative thereof. Any forward-looking statements contained
in this announcement are based on current expectations and are subject to
known and unknown risks and uncertainties that could cause actual results to
differ materially from those expressed or implied by those statements. If one
or more of these risks or uncertainties materialise, or if underlying
assumptions prove incorrect, the Company's actual results may vary materially
from those expected, estimated or projected. No representation or warranty is
made that any forward-looking statement will come to pass. Any forward-looking
statements speak only as at the date of this announcement. The Company and its
directors expressly disclaim any obligation or undertaking to publicly release
any update or revisions to any forward-looking statements contained in this
announcement to reflect any change in events, conditions or circumstances on
which any such statements are based after the time they are made, other than
in accordance with its legal or regulatory obligations (including under the UK
Listing Rules and the Disclosure Guidance and Transparency Rules of the
Financial Conduct Authority). Nothing in this announcement shall exclude any
liability under applicable laws that cannot be excluded in accordance with
such laws.
LEI Number: 213800U8Q9K2XI3WRE39
CEO REVIEW
Amidst a year with macroeconomic uncertainty, I am pleased to report that ATG
delivered another year of growth, with total revenues up 13% to £135.2m, and
of strong operational performance, with adjusted EBITDA rising 19%
year-on-year to £64.0m. We successfully acquired a new important asset with
the purchase of ESN in February and despite that, we significantly
strengthened our balance sheet, with our leverage ratio decreasing from 2.4x
to 1.8x, reflecting strong cash flow. In FY23, we are pleased to have made
progress against each of our strategic growth drivers.
The long-term opportunities for ATG are significant, given the critical role
of the auction industry and ATG's ability to lead its online transformation.
Buying and selling secondary items enhances sustainability and accelerates the
growth of the circular economy, factors that are of increasing importance to
both professional and consumer buyers. Purchasing secondary items via auctions
represents the best way to ensure total price transparency, addressing a key
objective of buyers to pay a fair price and for sellers to achieve the maximum
fair price possible. The auction industry remains in the early stages of its
online transformation, with standards of user-experience still behind that of
e-commerce. The opportunity and challenge for ATG is to make it easier to buy
at auction and to alleviate points of friction when buying on our
marketplaces. We are extending the penetration of atgPay, which removes a pain
point for auctioneers whilst increasing convenience and confidence for
bidders. We have developed new unique auction formats and multiple tiers of
service to drive operational efficiency for auctioneers and increase choice
for bidders. Most recently, we launched atgShip, an integrated shipping
solution, to further elevate the online auction experience and drive the
conversion rate over the medium term. As a result of these investments, I
believe we are approaching a tipping point, where the services and user
experience offered by our marketplaces will encourage a wider pool of buyers
to buy at online auction, whilst also incentivising auctioneers to use ATG as
their sole service provider to access the online market.
1. Expand the total addressable market
Against an uncertain macroeconomic backdrop and following years of accelerated
growth during the Covid-19 period, THV on our marketplaces grew 3% at constant
currency to just under £11bn. Our marketplaces facilitated just under 86,000
auctions, a 16% increase year-on-year, and we grew our auctioneer base to over
3,900 as we welcomed new auctioneers while maintaining a high auctioneer
retention rate. New auctioneers included Sotheby's, a world leading auctioneer
for art and luxury goods, who have begun listing a number of catalogues on our
marketplaces. All the 'Big 4' Art & Antique auctioneers now use ATG's
marketplaces in some form, highlighting the attractiveness of our bidder
reach, for even the large global auctioneers. Our marketplaces saw a 10%
increase in the number of lots listed in FY23 to over 22m, highlighting
auctioneers continued trust in ATG as their preferred platform to access the
online market.
In the second half, THV declined 5% at constant currency, impacted by the
normalisation of used equipment prices in some I&C categories, following
elevated pricing in prior years driven by shortages of primary equipment, as
well as a softening of A&A market activity impacted by a weaker consumer
macroeconomic environment.
The acquisition of ESN further expanded our reach into a new segment of the
secondary goods market, with estate sales representing an estimated $5 billion
annual market in North America alone. Since acquisition, ESN has attracted
even more estate sellers, with 4,800 active organisations on the platform as
at the end of September, up 4% year-on-year.
2. Grow the conversion rate
The Group conversion rate at 31% decreased 2ppt year-on-year. The rate was
impacted by auctioneers re-opening physical auctions post the Covid-19 period
and also by the mix of auctioneers on our marketplaces, with an increase in
the proportion of new and international auctioneers who bring new THV but
initially have a lower conversion rate. Conversion was also impacted by the
commercial decision to rotate volume with high service requirements and
minimal revenue contribution, for lower levels of volume, but which has a
higher future revenue potential. Excluding the impact, the Group conversion
rate would have been down 1ppt year-on-year and stabilised in the second half,
after the end of the annualisation of the Covid-19 period.
We have continued to make investments which we expect will help to grow our
conversion rate in the medium term. On the bidder side, we have improved our
search engine optimisation through a revised site navigation and site
taxonomy, as well as new lot-focused category pages that help bidders to find
what they are looking for more easily. Since the launch of these pages in the
fourth quarter, GMV generated from search engines has increased by 12%. We
have launched new SMS programmes on The Saleroom, including a watch list
reminder, which helped to drive over 100,000 bids placed from a SMS reminder.
On the seller side, we have continued to facilitate the shift to timed
online-only auctions including through updated pricing structures, that create
economic incentives to switch to a timed auction format. This updated pricing
structure was introduced on Proxibid in March and rolled out on The Saleroom
at the start of FY24. From a product perspective, we know that many
auctioneers want to retain their own brand presence whilst running a timed
auction. Through our integrated bidding programme, we offer Timed+, the unique
ability to run a timed online-only auction on our marketplace and
simultaneously on an ATG white label.
3. Enhance the network effect
Over the past year, we have hosted over 188m bidding sessions on our
marketplaces, up 9% year-on-year, in addition to a further 150m hosted on ESN.
On ATG marketplaces, there were 1.6m new bidding accounts registered, up 12%
year-on-year, and over 11m auction registrations. With this scale and reach,
we are now focused on executing on enhancing the network effect across our
marketplaces by enabling cross-listing on any of our marketplaces through our
integrated bidding programme. Cross-listing offers bidders the widest
selection of inventory easily accessed on an ATG marketplace. We launched
Timed+ in March, which offers integrated bidding on timed online-only auctions
on LiveAuctioneers and Auction Mobility. We further developed the integrated
bidding solution to be used across our other marketplaces and ATG white label
products with launch in early FY24. Since launch, auctions run on Timed+ have
resulted in a double-digit asset price uplift versus if the auction was listed
on Auction Mobility alone. We are now focused on making it easier for
auctioneers to cross-list on multiple marketplaces seamlessly.
4. Expand operational leverage
ATG has an attractive financial model with high operational leverage and low
capital intensity. In FY23, we grew our adjusted EBITDA margin by 2ppt to 47%.
In the year, we increased listing fees across our platforms and we progressed
against our single technology platform including the roll out of our
integrated bidding programme. We reorganised our North America business with
the consolidation of our North America I&C and A&A commercial teams.
This organisation change aligns with our platform strategy to expand
operational leverage by centralising costs and improving scalability. We are
exploring AI solutions and how they can lead to increased personalisation for
our users, better descriptions for our sellers, and better service provided by
ATG.
5. Grow the take rate via value-added services
In FY23, the Group take rate increased 0.3ppt to 3.6%, benefiting from the
growth of value-added services where revenue grew 27% on a constant currency
basis. Value-added services now accounts for 18% of total revenue, versus 9%
three years ago. Marketing adoption continues to be a key growth driver for us
with 59% of auctioneers using a marketing solution. We have continued to roll
out new marketing assets including search advertising units and email
segmentation as well as increasing our social media investments. We
increasingly offer self-serve features as well as marketing subscription
packages which provides us with significant opportunity to continue to grow
marketing revenue beyond its current penetration at 0.5% of GMV.
Onboarding of auctioneers to atgPay has continued to progress with 91% of US
based LiveAuctioneers and 38% of Proxibid auctioneers onboarded by the end of
September. 61% of LiveAuctioneers' US Gross Transaction Value was transacted
through atgPay in September, and we expect this to increase in FY24 as we roll
out autopay on the marketplace. Activation of auctions with atgPay on Proxibid
began in the third quarter and we have seen an improving rate of usage towards
the end of the year, as we have continued to upgrade the product
functionality.
We are very pleased with the launch of atgShip, an integrated shipping
solution for LiveAuctioneers, where we have partnered with professional
shipping services to provide a hassle-free solution. Just under 150
auctioneers had been onboarded by the end of the year, with over 1,500 lots
shipped in the two-month trial. The service is now being rolled out across the
LiveAuctioneers marketplace.
6. Pursue accretive M&A
In February, we acquired ESN for a purchase price of $40m. The acquisition
highlights ATG's opportunity to pursue accretive acquisitions in the
fragmented used goods market and access synergies that are unique to ATG.
Since acquisition, ESN has performed ahead of initial expectations, partly
driven by growth in both the number of buyers and sellers on the listing site,
including 121,000 net new subscribers joining ESN in FY23 taking the total
number of subscribers to 1.1m. Growth has also been driven by strong execution
against strategic initiatives, including the roll out of new marketing
solutions with an increase in both the adoption and the quantity of
advertising units, as well as an updated pricing structure for the site. For
FY24, we continue to see opportunities to further optimise the listing site
whilst also executing on the cross-selling opportunities between ATG's 188m
web sessions and ESN's 150m web sessions.
Progress against our ESG programmes
I am very proud of the progress we have made against our ESG strategy in FY23.
We continue to look for ways to reduce our own environmental impact, and in
FY23 we reduced our Scope 1 and 2 emissions by 26%, facilitated by the
relocation of our Proxibid office to a smaller and more energy-efficient
location. We have set up employee-led groups to discuss and champion ways to
reduce our environmental impact further, whilst also improving our external
reporting disclosures for a wider range of environmental KPIs. We are also
committing to achieving Net zero as a Group by 2040. On social programmes, we
launched All ToGether, our connection and development programme, which
includes the ATG Academy and our new learning and developing courses, with
over 60 training courses having been run in the year. Our newly launched ATG
Values encompass everything that we do, driving the way ATG operates with a
winning team made up of smart, passionate individuals who are connected to our
purpose. We have also strengthened our governance frameworks including a new
information security system which has been based on a recognised international
standard.
Summary
Whilst the macroeconomic environment has become more challenging, ATG has been
able to continue to deliver robust growth, supported by our increasingly
diversified and resilient business model. With many of our strategic
programmes, such as shipping and payments still early in their roll out, I
have confidence that we can continue to grow and to monetise more of the
opportunity in the fragmented online auction market. ATG's market position,
track record, team and sustainable shared success model leave us very well
positioned to continue to deliver value for all our stakeholders.
John-Paul Savant
Chief Executive Officer
CFO REVIEW
Group presentation of results
The financial results for FY23 are presented for the year ended 30 September
2023. On 6 February 2023, the Group completed its acquisition of Vintage
Software LLC., trading as EstateSales.NET ("ESN"), for a consideration of
$40m. The results for ESN are included within the A&A operating segment in
FY23. Full details of the accounting implications are detailed in note 9 of
the Consolidated Financial Statements.
The impact of the acquisition affects the comparability of the Group's
results. Therefore, to aid comparisons between FY22 and FY23 organic revenue
growth is presented to exclude the acquisition of ESN on 6 February 2023.
Organic revenue is shown on a constant currency basis, using average exchange
rates for the current financial period applied to the comparative period and
is used to eliminate the effects of fluctuations in assessing performance.
Note 3 of the Consolidated Financial Statements includes a full reconciliation
of all APMs presented to the reported results for FY23 and FY22.
Given that a significant majority of the Group's revenue, costs and cash flows
are now generated in US dollars, for financial periods beginning on or after 1
October 2023, the Group will change the presentational currency in which the
Group presents its consolidated financial results from pound sterling to US
dollars. FY23 consolidated financial results presented in US dollars are
available on our website at www.auctiontechnologygroup.com
(http://www.auctiontechnologygroup.com)
Revenue
FY23 FY22 Movement Movement
£m £m Reported Organic
Art & Antiques ("A&A") 65.6 55.3 19% 6%
Industrial & Commercial ("I&C") 58.2 52.7 10% 7%
Total marketplace 123.8 108.0 15% 6%
Auction Services 8.3 8.6 (3)% (7)%
Content 3.1 3.2 (3)% (3)%
Total 135.2 119.8 13% 5%
Group
Group revenue increased 13% year-on-year to £135.2m, driven by growth in
marketplace revenue, a favourable movement in the foreign exchange rate and
the acquisition of ESN. On an organic basis, revenue grew 5%, driven by the
growth in value-added services revenue and event fees which offset a 3%
reduction in GMV on our marketplaces. Commission revenue on our marketplaces
was flat year-on-year. Marketplace revenue growth was partially offset by
revenue declines on an organic basis in Auction Services and Content.
Art & Antiques
Revenue in the A&A segment increased 19% to £65.6m, up 6% on an organic
basis predominantly driven by the increase in the take rate by 0.6ppt to 8.6%.
This increase was the result of growth in value-added services adoption,
including marketing and payments, in addition to a small contribution from the
newly launched shipping product, as well as price increases in event fees. GMV
across A&A declined 3% at constant currency impacted by both challenging
comparisons in the first half of the year when the prior year had benefited
from the Covid-19 pandemic and a slowdown in the A&A auction market in the
second half of the year, with A&A THV up 1% for FY23 and down 2% in the
second half. ESN delivered double-digit revenue growth, ahead of plan, driven
by sustained growth in the estate sales subscribers on the site, an increase
to our pricing structure and the growth of marketing revenue on ESN. The ESN
contribution to the FY23 results was from the date of acquisition on 6
February 2023.
Industrial & Commercial
I&C revenue grew 10% on a reported basis to £58.2m and 7% on an organic
basis, driven by a 0.2ppt increase in the take rate to 2.2% that offset a
decline in GMV in the second half. The take rate improvement was driven by the
continued growth in the adoption and penetration of marketing solutions, the
launch of atgPay on Proxibid, which was activated on the marketplace in the
second half of FY23, and the updated pricing structure on Proxibid which was
rolled out from March 2023. GMV declined 3%, impacted by a reversion of used
asset prices in some I&C categories in the second half of the year
following the easing of supply chain constraints in the primary market. GMV
was also impacted by the commercial decision to switch out volume with high
service requirements and minimal revenue contribution, but which has higher
future revenue potential. Excluding this impact, GMV would have been up 1%
year-on-year. Total I&C GMV remains 247% higher than it was pre-pandemic
in FY19 reflecting the attractiveness of our business model.
Auction Services
Auction Services revenue of £8.3m declined 3% on a reported basis and 7% on
an organic basis. Revenue was impacted by a shift of auction activity away
from the white label channel year-on-year and back to physical auctions. In
FY23, we have begun to better integrate our white label solutions with ATG
marketplaces through the launch of our integrated bidding solutions. We would
expect this to result in ATG increasingly becoming the preferred provider for
white label solutions.
Content
Content revenue declined 3% to £3.1m, as expected, driven by the ongoing fall
in advertising volumes as auctioneers increasingly migrate their marketing
spend to the online channel.
Financial performance
Reported
FY23 FY22 Movement
£m £m
Revenue 135.2 119.8 13%
Cost of sales (43.5) (40.1) 8%
Gross profit 91.7 79.7 15%
Administrative expenses (69.8) (63.6) 10%
Other operating income 0.6 0.7 (14)%
Operating profit 22.5 16.8 34%
Adjusted EBITDA (as defined in note 3) 64.0 54.0 19%
Finance income 0.2 2.1 (90)%
Finance cost (15.6) (9.6) (63)%
Net finance costs (15.4) (7.5) (105)%
Profit before tax 7.1 9.3 (24)%
Income tax 9.8 (15.4) 164%
Profit/(loss) for the period attributable to the equity holders of the Company 16.9 (6.1) 377%
Operating profit
The Group reported an operating profit of £22.5m compared to £16.8m in the
prior year, driven by the increase in gross profit which offset the impact
from an increase in year-on-year administrative expenses.
Gross profit increased 15% to £91.7m, with the gross profit margin increasing
1ppt year-on-year, which reflects the revenue growth and a high flow-through
of revenue to gross profit. The Group's administrative expenses increased by
£6.2m to £69.8m. This increase includes £2.7m of one-off exceptional costs
related to the acquisition of ESN (FY22: Nil) and a £1.8m increase in
share-based payments to £7.0m, including the impact of annual grants awarded
in December 2022 and one-off awards for certain members of the Senior
Management Team. We expect the share-based payment expense to broadly
stabilise going forward. The movement in administrative expenses also includes
the impact of foreign exchange movement as well as investments in the business
to support future growth.
Adjusted EBITDA
Adjusted EBITDA definitions and reconciliations to the reported results are
presented in note 3 of the Consolidated Financial Statements.
Adjusted EBITDA increased from £54.0m to £64.0m year-on-year. Adjusted
EBITDA margin increased by 2ppt to 47% due to the growth in high margin
marketing and fixed fee revenue and cost management which offset the
contribution from lower margin payments revenue growth as well as the impact
from ongoing investments in products and services to support future growth.
Net finance costs
Net finance costs were £15.4m compared to net finance costs of £7.5m in FY22
and include the impact of a £4.1m non-cash foreign exchange loss in FY23
versus a £2.1m non-cash foreign exchange gain in FY22 related to intergroup
balances. Excluding this impact, as well as excluding the impact from a £1.6m
year-on-year decrease in the deferred consideration, net finance costs
increased £3.3m year-on-year. The increase primarily relates to higher
interest costs on our US dollar denominated Senior Term Facility, due to the
increase in the Secured Overnight Financing Rate ("SOFR") and the movement in
foreign exchange, offsetting a lower level of borrowings. Our average interest
rate for the year increased from 4% to 8%. During the year, the Group pre-paid
$53.7m of its Senior Term Facility, in addition to repaying $26.3m on the
Revolving Credit Facility ("RCF") that was drawn in the year to fund the ESN
acquisition. In the prior year, finance costs related to interest costs on our
Senior Term Facility, commitment fees, foreign exchange gains and movement in
the contingent consideration. Finance income of £0.2m primarily relates to
interest income in the year (FY22: £2.1m including the foreign exchange
gain). The Group expects a small increase to net finance costs excluding the
impact of foreign exchange in FY24 reflecting a higher average interest rate
offsetting a lower loan balance.
Profit before tax
After the impact of higher net finance costs year-on-year due to the rising
SOFR rates and the movement in foreign exchange, the Group reported a profit
before tax of £7.1m (FY22: £9.3m).
Taxation
The overall tax credit for the year was £9.8m (FY22: £15.4m expense),
arising from the profit in the year and a deferred tax credit on unrealised
foreign exchange differences and non-deductible foreign exchange differences
on intergroup loan balances. The unrealised foreign exchange differences were
not recognised in the Group's profit for the year due to differences in the
functional currency basis under tax and accounting rules for the US holding
entities. The Group's effective tax rate for FY23 was a credit of 137% (FY22:
166%) is higher than the UK tax rate (19% until April 23 and 25% thereafter)
due to the net impact of allowable deductions for the exercise of share
options and the deferred tax liability on the foreign exchange movements in
the year. The tax rate on adjusted earnings of 16% increased from 15% in the
prior year, partly reflecting the increase in the UK corporate tax rate, our
primary tax jurisdiction. The Group expects the tax rate on adjusted earnings
to increase to 19% in FY24, in line with the higher UK tax rate. The Group is
committed to paying its fair share of tax and manages tax matters in line with
the Group's Tax Strategy, which is approved by the Board and is published on
our website www.auctiontechnologygroup.com
(http://www.auctiontechnologygroup.com) .
Earnings/(loss) per share and adjusted earnings per share
Basic and diluted earnings per share was 13.9p and 13.8p respectively compared
to a loss of 5.1p in FY22, as a tax credit offset lower profit before tax
year-on-year. The weighted average number of shares during the period was
122.2m (FY22: 120.3m shares), with the increase year-on-year due to the impact
of vested equity incentive awards.
Adjusted diluted earnings per share was 32.6p compared to 29.5p in FY22 and is
based on profit after tax adjusted to exclude share-based payment expense,
exceptional items (operating and finance costs), amortisation of acquired
intangible assets and any related tax effects. The increase year-on-year is
due to the increase in adjusted EBITDA, partially offset by higher net finance
costs, an increase in the effective tax rate due to an increase in the UK tax
rate and an increase in the weighted average number of ordinary shares and
dilutive options in the year.
A reconciliation of the Group's profit after tax to adjusted diluted earnings
per share is set out in note 3.
EstateSales.NET acquisition
On 6 February 2023, the Group acquired 100% of the equity share capital of
Vintage Software LLC, trading as EstateSales.NET ("ESN"), for total
consideration of $40m funded out of the Group's existing cash balance and debt
facilities. ESN is a leading estate sales listing site in the US and the
purpose of the acquisition was to access an adjacent channel in the resale of
secondary goods and to enable cross-selling opportunities for the Group. The
full acquisition accounting is detailed in note 9.
Foreign currency impact
The Group's reported performance is sensitive to movements in both the US
dollar and the euro against the pound sterling with a mix of revenues included
in the table below.
Revenue FY23 FY22
£m £m
United Kingdom 19.7 18.5
North America 111.6 97.8
Germany 3.9 3.5
Total 135.2 119.8
The average FY23 exchange rate of pound sterling against the US dollar
weakened by 3.1% and by 2.5% against the euro compared to FY22, as shown in
the table below.
Average rate Closing rate
FY23 FY22 Movement FY23 FY22 Movement
Euro 1.15 1.18 (2.5)% 1.15 1.13 1.8%
US dollar 1.23 1.27 (3.1)% 1.22 1.12 8.9%
When comparing revenue in FY22 to FY23, changes to average foreign exchange
rates had a favourable impact on revenue of £3.2m. Partially offsetting this,
changes to foreign exchange rates had an unfavourable movement on the Group's
cost of sales and administrative expenses of £2.5m when compared to FY22.
The tax for the period was also significantly impacted by movements in foreign
currency exchange rates, resulting in a reduction to the tax charge of £9.7m.
The strengthening of the pound sterling against the US dollar over the year
has given rise to a loss of £42.4m on assets held and gain on the external
dollar loan of £11.6m. A net loss of £30.5m has been recognised in the
foreign currency reserve.
For FY24, the Group will change the presentational currency in which the Group
presents its consolidated financial results from pound sterling to US dollars.
Statement of financial position
Overall net assets at 30 September 2023 have decreased by £9.3m to £530.0m
since 30 September 2022. Total assets decreased by £80.9m, largely driven by
the strengthening of pound sterling against the US dollar at the year end
which has reduced total assets by £53.5m. There has been a £47.9m cash
outflow related to the prepayment of our Senior Term Facility, net of the
drawdown to fund the ESN acquisition. Goodwill, intangible and tangible assets
increased due to goodwill and intangible asset additions of £33.0m acquired
with ESN and other additions of £8.7m, net of the amortisation charge for the
year of £30.4m. The Group's goodwill and intangibles were tested for
impairment at 30 September 2023 and no impairment was recognised, although the
A&A and Auction Services cash-generating units remain sensitive to the key
assumptions used in the model. Refer to note 10 for further details.
Total liabilities decreased by £71.6m, primarily due to a reduction in loans
and borrowings of £59.0m, a decrease in deferred tax liabilities of £23.9m,
largely driven by the movement on the unrealised foreign exchange differences
and the unwind of the capitalised acquisition intangible assets, and an
increase in creditors of £7.6m due to the impact of the deferred
consideration.
Cash flow and adjusted net debt
The Group generated strong cash from operations at £57.7m (FY22: £49.4m),
driven by high margin revenue growth which offset higher cash interest cost
year-on-year. The movement in working capital reflects the timing of auction
activity, the size and timing of performance related payments and growth in
the business. The £4.5m increase in additions to internally generated
software primarily relates to our programme to migrate to a single technology
platform as well as investment on new products such as payments. Total
expenditure on additions to internally generated software and payment for
property, plant and equipment was £9.3m, in line with our guidance.
Adjusted net debt as at 30 September 2023 was £115.7m, a decrease from
£131.4m as at 30 September 2022 as strong operating cash flow generation more
than offset the impact of the acquisition of ESN, additions to internally
generated software and foreign exchange movements. The Group had cash at bank
of £6.1m and borrowings of £121.8m as at 30 September 2023 (30 September
2022: cash at bank of £49.4m and borrowings of £180.8m). During the year,
the Group paid $53.7m of its Senior Term Facility, in addition to repaying
$26.3m on the RCF that had been drawn in the year to fund the ESN acquisition.
The adjusted net debt/adjusted EBITDA ratio decreased from 2.4x as at 30
September 2022 to 1.8x.
The Group's adjusted free cash flow was £49.9m (FY22: £49.9m), a conversion
rate of 78.0% (FY22: 92.5%). The decrease in conversion rate reflects the
timing of auction activity, working capital movement as well as an increase in
additions to internally generated software. A reconciliation of cash generated
from operations to adjusted free cash flow and adjusted free cash flow
conversion is included in note 3 of the Consolidated Financial Statements.
FY23 FY22
£m
£m
Adjusted EBITDA 64.0 54.0
Cash generated from operations 57.7 49.4
Adjustments for:
Exceptional items 2.7 -
Working capital from exceptional and other items (1.2) 5.0
Additions to internally generated software (8.7) (4.2)
Additions to property, plant and equipment (0.4) (0.3)
Payment for right of use assets (0.2) -
Adjusted free cash flow 49.9 49.9
Adjusted free cash flow conversion 78.0% 92.5%
Dividends
As per the Group's dividend policy, the Group sees strong growth opportunities
through organic and inorganic investments and, as such, intends to retain any
future earnings to finance such investments. The Company will review its
dividend policy on an ongoing basis but does not expect to declare or pay any
dividends for the foreseeable future. Therefore, no dividends have been paid
or proposed for FY23 or FY22.
Post balance sheet events
There were no post balance sheet events.
Related parties
Related party disclosures are detailed in note 15 to the Consolidated
Financial Statements.
Going concern
In assessing the appropriateness of the going concern assumption, the
Directors have considered the ability of the Group to meet the debt covenants
and maintain adequate liquidity through the forecast period. The Group's
forecasts and projections, taking account of reasonably possible changes in
trading performance, show that the Group is able to operate comfortably within
the level of its current facilities and meet its debt covenant obligations.
Sensitivities have been modelled to understand the impact of the various risks
outlined above on the Group's performance and the Group's debt covenants/cash
headroom, including consideration of a reasonable downside scenario. Given
the current demand for services across the Group at the date of this report,
the assumptions in these sensitivities, when taking into account the factors
set out above, are considered to be unlikely to lead to a debt covenant breach
or liquidity issues under both scenarios.
After making enquiries, the Directors have a reasonable expectation that the
Group has adequate resources to continue in operational existence for the
foreseeable future and that it remains appropriate to continue to adopt the
going concern basis in preparing the financial information.
Tom Hargreaves
Chief Financial Officer
Consolidated Statement of Profit or Loss and Other Comprehensive Income or
Loss
for the year ended 30 September 2023
Note Year ended Year ended
30 September 30 September 2022
2023 £000
£000
Revenue 4,5 135,225 119,846
Cost of sales (43,481) (40,101)
Gross profit 91,744 79,745
Administrative expenses (69,724) (63,646)
Other operating income 556 718
Operating profit 22,576 16,817
Finance income 6 181 2,127
Finance costs 6 (15,611) (9,665)
Net finance costs 6 (15,430) (7,538)
Profit before tax 7,146 9,279
Income tax 7 9,792 (15,406)
Profit/(loss) for the year attributable to the equity holders of the Company 16,938 (6,127)
Other comprehensive (loss)/income for the year attributable to the equity
holders of the Company
Items that may subsequently be transferred to profit and loss:
Foreign exchange differences on translation of foreign operations (42,378) 86,126
Fair value gain/(loss) arising on hedging instruments during the year 11,841 (16,173)
Tax relating to these items 7 (2,606) 3,074
Other comprehensive (loss)/income for the year, net of income tax (33,143) 73,027
Total comprehensive (loss)/income for the year attributable to the equity (16,205) 66,900
holders of the Company
Earnings/(loss) per share P p
Basic 8 13.9 (5.1)
Diluted 8 13.8 (5.1)
The above results are derived from continuing operations.
Consolidated Statement of Financial Position
as at 30 September 2023
Note 30 September 30 September
2023 2022
£000 £000
ASSETS
Non-current assets
Goodwill 10 474,315 488,978
Other intangible assets 10 221,112 246,475
Property, plant and equipment 734 526
Right of use assets 3,231 1,714
Trade and other receivables 113 90
Total non-current assets 699,505 737,783
Current assets
Trade and other receivables 17,894 15,790
Tax asset 101 1,565
Cash and cash equivalents 11 8,539 51,817
Total current assets 26,534 69,172
Total assets 726,039 806,955
LIABILITIES
Non-current liabilities
Loans and borrowings 12 (108,969) (149,862)
Tax liabilities (800) (1,074)
Lease liabilities (2,656) (1,094)
Deferred tax liabilities 13 (40,689) (64,618)
Total non-current liabilities (153,114) (216,648)
Current liabilities
Trade and other payables (26,407) (18,780)
Loans and borrowings 12 (12,861) (30,983)
Tax liabilities (3,098) (475)
Lease liabilities (599) (746)
Total current liabilities (42,965) (50,984)
Total liabilities (196,079) (267,632)
Net assets 529,960 539,323
EQUITY
Share capital 14 12 12
Share premium 14 236,231 235,903
Other reserve 14 238,385 238,385
Capital redemption reserve 5 5
Share option reserve 23,485 34,690
Foreign currency translation reserve 36,203 66,740
Retained losses (4,361) (36,412)
Total equity 529,960 539,323
Consolidated Statement of Changes in Equity
for the year ended 30 September 2023
Note Share capital £000 Share premium £000 Other reserve £000 Capital redemption reserve £000 Share option reserve £000 Foreign currency translation reserve £000 Retained losses Total equity £000
£000
1 October 2021 12 235,903 238,385 5 1,649 (3,213) (33,287) 439,454
Loss for the year - - - - - - (6,127) (6,127)
Other comprehensive income - - - - - 69,953 3,074 73,027
Total comprehensive income/(loss) for the year - - - - - 69,953 (3,053) 66,900
Transactions with owners
Options issued as consideration for a business combination, net of transaction - - - - 28,346 - - 28,346
costs and tax
Share-based payments - - - - 4,695 - 78 4,773
Income tax relating to items taken directly to equity 7 - - - - - - (150) (150)
30 September 2022 12 235,903 238,385 5 34,690 66,740 (36,412) 539,323
Profit for the year - - - - - - 16,938 16,938
Other comprehensive loss - - - - - (30,537) (2,606) (33,143)
Total comprehensive (loss)/income for the year - - - - - (30,537) 14,332 (16,205)
Transactions with owners
Shares issued 14 - 328 - - - - - 328
Options exercised relating to previous business combination - - - - (15,763) - 15,763 -
Share-based payments - - - - 4,558 - 1,956 6,514
30 September 2023 12 236,231 238,385 5 23,485 36,203 (4,361) 529,960
Consolidated Statement of Cash Flows
for the year ended 30 September 2023
Note Year Year
ended ended
30 September 2023 30 September 2022
£000 £000
Cash flows from operating activities
Profit before tax 7,146 9,279
Adjustments for:
Amortisation of acquired intangible assets 10 26,595 26,591
Amortisation of internally generated software 10 3,827 4,118
Depreciation of property, plant and equipment 330 280
Depreciation of right of use assets 896 920
Share-based payment expense 7,028 5,226
Finance income 6 (181) (2,127)
Finance costs 6 15,611 9,665
Operating cash flows before movements in working capital 61,252 53,952
(Increase)/decrease in trade and other receivables (3,259) 304
Decrease in trade and other payables (289) (4,847)
Cash generated by operations 57,704 49,409
Income taxes paid (8,143) (9,981)
Net cash from operating activities 49,561 39,428
Cash flows from investing activities
Acquisition of subsidiaries, net of cash acquired 9 (24,932) (358,763)
Additions to internally generated software 10 (8,727) (4,209)
Payment for property, plant and equipment (411) (270)
Payment for right of use assets (188) -
Interest income received 181 -
Payment of contingent consideration - (20,946)
Net cash used in investing activities (34,077) (384,188)
Cash flows from financing activities
Payment of contingent consideration - (1,222)
Repayment of loans and borrowings 12 (69,110) (359)
Proceeds from loans and borrowings 12 21,250 -
Payment of interest on lease liabilities (189) (137)
Payment of lease liabilities (794) (959)
Shares issued 14 328 -
Interest paid 12 (10,651) (7,283)
Net cash used in financing activities (59,166) (9,960)
Cash and cash equivalents at the beginning of the year 51,817 397,451
Net decrease in cash and cash equivalents (43,682) (354,720)
Effect of foreign exchange rate changes 404 9,086
Cash and cash equivalents at the end of the year 11 8,539 51,817
Notes to the Consolidated Financial Statements
1. Accounting policies
General information
Auction Technology Group plc (the "Company") is a company incorporated in the
United Kingdom under the Companies Act. The Company is a public company
limited by shares and is registered in England and Wales.
Basis of preparation
The Consolidated Financial Statements consolidate those of the Company and its
subsidiaries (together referred to as the "Group"). The parent Company
accounts present information about the entity and not about its Group.
The Consolidated Financial Statements have been prepared and approved by the
Directors in accordance with UK-adopted International Accounting Standards
("UK-adopted IAS") and with the requirements of the Companies Act 2006.
The Consolidated Financial Statements have been prepared under the historical
cost convention, except for certain financial instruments which have been
measured at fair value. All accounting policies set out below have been
applied consistently to all periods presented in these Consolidated Financial
Statements.
The information for the year ended 30 September 2022 does not constitute
statutory accounts for the purposes of Section 435 of the Companies Act 2006.
A copy of the accounts for the Company for the year ended 30 September 2022
has been delivered to the Registrar of Companies. The auditor's report on
those accounts was not qualified and did not contain statements under Section
498(2) or 498(3) of the Companies Act 2006. The accounts for the year ended 30
September 2023 have been audited and finalised on the basis of the financial
information presented by the Directors in this Preliminary Statement and will
be delivered to the Registrar of Companies following the Annual General
Meeting.
New and amended accounting standards effective during the year
The following amended standards and interpretations were effective during the
year:
• Amendments to IAS 16: Property, Plant and Equipment: proceeds before
intended use
• IAS 37: Onerous Contracts: costs of fulfilling a contract
• Annual Improvements to IFRS Standards 2018-2020
• Amendments to IFRS 3: Business Combinations: reference to conceptual
framework
The adoption of the standards and interpretations has not led to any changes
to the Group's accounting policies or had any other material impact on the
financial position or performance of the Group.
New standards, interpretations and amendments issued but not yet effective
The following new accounting standards, amendments and interpretations to
accounting standards have been issued but these are not mandatory for 30
September 2023 and they have not been adopted early by the Group:
• IFRS 17: Insurance Contracts
• Amendments to IAS 1: Classification of liabilities as current and
non-current
• Amendments to IAS 1 and IFRS Practice Statement 2: Disclosure of
accounting policies
• Amendments to IAS 8: Definition of accounting estimates
• Amendments to IAS 12: Deferred Tax related to assets and liabilities
arising from a single transaction
The Directors anticipate that the adoption of planned standards and
interpretations in future periods will not have a material impact on the
Consolidated Financial Statements of the Group.
Going concern
The Directors are required to assess going concern at each reporting period.
The Directors have undertaken the going concern assessment for the Group for a
minimum of 12 months from the date of signing these financial statements. The
Directors have assessed the Group's prospects, both as a going concern and its
longer-term viability. After considering the current financial projections,
the bank facilities available and then applying severe but plausible
sensitivities, the Directors of the Company are satisfied that the Group has
sufficient resources for its operational needs and will remain in compliance
with the financial covenants in its bank facilities for at least the next 12
months from the date of approving these Consolidated Financial Statements. The
process and key judgements in coming to this conclusion are set out below:
Liquidity
The Group entered into the Senior Facilities Agreement on 17 June 2021 which
included the Senior Term Facility for $204.0m for the acquisition of
LiveAuctioneers. The Senior Term Facility was drawn down in full on 30
September 2021 prior to completion of the acquisition of LiveAuctioneers on 1
October 2021. During the year ended 30 September 2023, a prepayment of $53.7m
(£48.0m) was paid on the Senior Term Facility. In the absence of any other
prepayments, the next scheduled repayment would be $7.4m on 30 June 2024. The
loan will be due for repayment on 17 June 2026. At 30 September 2023 the loan
was subject to interest at a margin of 3.00% over US SOFR. In addition, the
Group has a multi-currency revolving credit working capital facility (the
"RCF") for $49.0m. Any sums outstanding under the RCF will be due for
repayment on 17 June 2026. On 1 February 2023, $26.3m (£21.3m) was drawn
down to partly fund the acquisition of ESN (see note 9), which has been repaid
in full as at 30 September 2023. As at 30 September 2023 the Group has
adjusted net debt of £115.7m and is in a net current liability position.
Covenants
The Group is subject to covenant tests on the Senior Term Facility, with the
most sensitive covenant being the net leverage ratio covenant adjusted net
debt: trailing 12-month adjusted EBITDA. The net leverage ratio covenant was a
maximum of 4.0x, which reduced to 3.5x in Q2 FY23, was 3.0x at 30 September
2023 and will reduce to 2.75x in Q4 FY24. Under the base case forecasts and
each of the downside scenarios, including the combined downside scenario,
the Group is forecast to be in compliance with the covenants and have cash
headroom, without applying mitigating actions which could be implemented such
as reducing capital expenditure spend. At 30 September 2023, the net leverage
ratio was 1.8x compared to the limit of 3.0x and therefore the Group was
comfortably within the covenant.
Scenario planning
The Directors have undertaken the going concern assessment for the Group,
taking into consideration the Group's business model, strategy, and principal
and emerging risks. As part of the going concern review the Directors have
reviewed the Group's forecasts and projections, assessed the headroom on the
Group's facilities and the banking covenants. This has been considered under a
base case and several plausible but severe downside scenarios, taking into
consideration the Group's principal risks and uncertainties. These scenarios
include significant reduction in commission revenue due to THV reduction,
significant reduction in commission revenue due to online share decline and
lower revenue growth from value-added services across the Group. None of these
scenarios individually or collectively threaten the Group's ability to
continue as a going concern. Even in the combined downside scenario modelled
(the combination of all downside scenarios occurring at once) the Group would
be able to operate within the level of its current available debt facilities
and covenants. Accordingly, the Directors continue to adopt the going concern
basis in preparing the Consolidated Financial Statements for the year ended
30 September 2023.
Climate change
The Group has assessed the impacts of climate change on the Group's
Consolidated Financial Statements, including our commitment to achieving Net
zero by 2040 and the actions the Group intends to take to achieve those
targets. The assessment did not identify any material impact on the Group's
significant judgements or estimates at 30 September 2023, or the assessment of
going concern and the Group's viability over the next three years.
Specifically, we have considered the following areas:
• the physical and transition risks associated with climate change; and
• the actions the Group is taking to meet its carbon reduction and Net zero
targets.
As a result, the Group has assessed the potential impacts of climate change on
the Consolidated Financial Statements, and in particular on the following
areas:
• the impact on the Group's future cash flows, and the resulting impact such
adjustments to the future cash flows would have on the outcome of the annual
impairment testing of goodwill balances (see note 10), the recognition of
deferred tax assets and our assessment of going concern;
• the carrying value of the Group's assets, in particular the recoverable
amounts of intangible assets and property, plant and equipment; and
• changes to estimates of the useful economic lives of intangible assets and
property, plant and equipment.
2. Significant judgements and key sources of estimation uncertainty
The preparation of the Group's Consolidated Financial Statements requires the
use of certain judgements, estimates and assumptions that affect the reported
amounts of assets, liabilities, income and expenses.
Estimates and judgements are evaluated continually, and are based on
historical experience and other factors, including expectations of future
events that are believed to be reasonable under the circumstances.
Key estimation uncertainties are the key assumptions concerning the future and
other key sources of estimation uncertainty at the reporting date that may
have a significant risk of causing a material adjustment to the carrying
amounts of assets and liabilities within the next period. Changes in
accounting estimates may be necessary if there are changes in the
circumstances on which the estimates were based, or as a result of new
information or more experience.
Significant judgements are those that the Group has made in the process of
applying the Group's accounting policies and that have the most significant
effect on the amounts recognised in the financial statements.
The significant judgements and key sources of estimation uncertainty disclosed
in the annual financial statements for the year ended 30 September 2022 which
are no longer applicable are:
• impairment of goodwill (estimate); and
• LiveAuctioneers consideration (judgement).
For the year ended 30 September 2023, there are no key sources of estimation
uncertainty and the significant judgements are detailed below:
Goodwill and other intangible assets arising from business combinations
The purchase price of an acquired company is allocated between intangible
assets and the net tangible assets of the acquired business with the residual
amount of the purchase price recorded as goodwill. The determination of the
value of the intangible assets requires significant judgements and estimates
to be made by management. These judgements can include, but are not limited
to, the cash flows that an asset is expected to generate in the future and the
appropriate weighted average cost of capital. Of the intangibles acquired, the
customer relationship balances are especially sensitive to changes in
assumptions around discount rates and customer attrition rates (see note 9).
Judgement is also required in determining appropriate useful economic lives
("UEL") of the intangible assets arising from business combinations.
Management makes this judgement on an asset class basis and has determined
that contracts with customers have a UEL of two to 14 years; brands have a UEL
of five to 15 years; software has a UEL of three to 10 years; and non-compete
agreements have a UEL of four years.
Functional currency of subsidiaries
There is an element of judgement required when assessing the functional
currency of each subsidiary against the requirements and guidance of IAS21
"The Effects of Changes in Foreign Exchange Rates", in particular for
intermediate holding companies. There were seven US holding companies within
the Group that have a pound sterling functional currency. However, under US
tax rules, their tax functional currency is US dollars. The US tax basis for
these holding companies for the year ending 30 September 2023 included an
unrealised foreign exchange loss of £28.2m (FY22: gain of £61.9m) on
intra-group loans totalling £295.6m (FY22: loans of £295.6m). Under US tax
rules, foreign exchange gains and losses are not taxable until they are
realised. On a consolidated basis, with the pound sterling functional currency
applied for these US holding companies there was no foreign exchange gain
recognised in the Consolidated Financial Statements.
3. Alternative performance measures
The Group uses a number of alternative performance measures ("APMs") in
addition to those measures reported in accordance with UK-adopted IAS. Such
APMs are not defined terms under UK-adopted IAS and are not intended to be a
substitute for any UK-adopted IAS measure. The Directors believe that the APMs
are important when assessing the ongoing financial and operating performance
of the Group and do not consider them to be more important than, or superior
to, their equivalent UK-adopted IAS. The APMs improve the comparability of
information between reporting periods by adjusting for factors such as one-off
items and the timing of acquisitions.
The APMs are used internally in the management of the Group's business
performance, budgeting and forecasting, and for determining Executive
Directors' remuneration and that of other management throughout the business.
The APMs are also presented externally to meet investors' requirements for
further clarity and transparency of the Group's financial performance. Where
items of income or expense are being excluded in an APM, these are included
elsewhere in our reported financial information as they represent actual
income or costs of the Group.
Other commentary within the CFO's Review, should be referred to in order to
fully appreciate all the factors that affect the Group.
Adjusted EBITDA
Adjusted EBITDA is the measure used by the Directors to assess the trading
performance of the Group's businesses and is the measure of segment profit.
Adjusted EBITDA represents profit/(loss) before taxation, finance costs,
depreciation and amortisation, share-based payment expense and exceptional
operating items. Adjusted EBITDA at segment level is consistently defined but
excludes central administration costs including Directors' salaries.
The following table provides a reconciliation from profit before tax to
adjusted EBITDA:
Year ended Year ended
30 September 30 September
2023 2022
£000 £000
Profit before tax 7,146 9,279
Adjustments for:
Net finance costs (note 6) 15,430 7,538
Amortisation of acquired intangible assets (note 10) 26,595 26,591
Amortisation of internally generated software (note 10) 3,827 4,118
Depreciation of property, plant and equipment 330 280
Depreciation of right of use assets 896 920
Share-based payment expense 7,028 5,226
Exceptional operating items 2,712 -
Adjusted EBITDA 63,964 53,952
The following table provides the calculation of adjusted EBITDA margin which
represents adjusted EBITDA divided by revenue:
Year ended Year ended
30 September 30 September
2023 2022
£000 £000
Reported revenue (note 4,5) 135,225 119,846
Adjusted EBITDA 63,964 53,952
Adjusted EBITDA margin 47% 45%
The basis for treating these items as adjusting is as follows:
Share-based payment expense
The Group has issued share awards to employees and Directors: at the time of
IPO; for the acquisition of LiveAuctioneers; and operates several employee
share schemes. The share-based payment expense is a significant non-cash
charge driven by a valuation model which references the Group's share price.
As the Group is still early in its life cycle as a newly listed business the
expense is distortive in the short term and is not representative of the cash
performance of the business. In addition, as the share-based payment expense
includes significant charges related to the IPO and LiveAuctioneers
acquisition, it is not representative of the Group's steady state operational
performance.
Exceptional operating items
The Group applies judgement in identifying significant items of income and
expenditure that are disclosed separately from other administrative expenses
as exceptional where, in the judgement of the Directors, they need to be
disclosed separately by virtue of their nature or size in order to obtain a
clear and consistent presentation of the Group's ongoing business performance.
Such items could include, but may not be limited to, costs associated with
business combinations, gains and losses on the disposal of businesses,
significant reorganisation or restructuring costs and impairment of goodwill
and acquired intangible assets. Any item classified as an exceptional item
will be significant and not attributable to ongoing operations and will be
subject to specific quantitative and qualitative thresholds set by and
approved by the Directors prior to being classified as exceptional.
The exceptional operating items are detailed below:
Year ended Year ended
30 September 30 September
2023 2022
£000 £000
Acquisition costs 2,712 -
Total exceptional operating items 2,712 -
For the year ended 30 September 2023, the Group's exceptional operating costs
were in respect of the costs relating to the acquisition of ESN on 6 February
2023 (see note 9).
There were no exceptional operating items for the year ended 30 September
2022.
The business has undertaken focused acquisitive activity which has been
strategically implemented to increase income, service range and critical mass
of the Group. Acquisition costs comprise legal, professional, other
consultancy expenditure incurred and retention bonuses for ESN employees
payable one year after completion. The retention bonus is subject to service
conditions and is being accrued over the period. The net cash outflow related
to exceptional operating items in the period is £1.5m (FY22: £4.0m).
Adjusted earnings and adjusted diluted earnings per share
Adjusted earnings excludes share-based payment expense, exceptional items
(operating and finance), amortisation of acquired intangible assets, and any
related tax effects.
The following table provides a reconciliation from profit/(loss) after tax to
adjusted earnings:
Year ended Year ended
30 September 30 September
2023 2022
£000 £000
Profit/(loss) attributable to equity shareholders of the Company 16,938 (6,127)
Adjustments for:
Amortisation of acquired intangible assets 26,595 26,591
Exceptional finance items 4,271 (221)
Share-based payment expense 7,028 5,226
Exceptional operating items 2,712 -
Deferred tax on unrealised foreign exchange differences (7,185) 15,899
Tax on adjusted items (10,272) (5,254)
Adjusted earnings 40,087 36,114
Number Number
Diluted weighted average number of shares in issue (note 8) 123,088,377 122,441,916
p p
Adjusted diluted earnings per share (pence) 32.6 29.5
The basis for treating these items not already defined above as adjusting is
as follows:
Amortisation of acquired intangible assets through business combinations
The amortisation of acquired intangibles arises from the purchase
consideration of a number of separate acquisitions. These acquisitions are
portfolio investment decisions that took place at different times and are
items in the Consolidated Statement of Financial Position that relate to
M&A activity rather than the trading performance of the business.
Exceptional finance items
Exceptional finance items include foreign exchange differences arising on the
revaluation of the foreign currency loans, intercompany and restricted cash,
movements in contingent consideration and costs incurred on the early
repayment of loan costs. These exceptional finance items are excluded from
adjusted earnings to provide readers with helpful additional information on
the performance of the business across periods because it is consistent with
how the business performance is reported and assessed by the Board.
Deferred tax on unrealised foreign exchange differences
In calculating the adjusted tax rate, the Group excludes the potential future
impact of the deferred tax effects on unrealised foreign exchange differences
arising on intercompany loans. The unrealised foreign exchange differences
were not recognised in the Group's profit for the year due to differences in
the functional currency basis under tax and accounting rules for the US
holding entities.
Tax on adjusted items
Tax on adjusted items includes the tax effect of acquired intangible
amortisation, exceptional (operating and finance items) and share-based
payment expense. In calculating the adjusted tax rate, the Group excludes the
potential future impact of the deferred tax effects on deductible goodwill and
intangible amortisation (other than internally generated software), as the
Group prefers to give users of its accounts a view of the tax charge based on
the current status of such items. Deferred tax would only crystallise on a
sale of the relevant businesses, which is not anticipated at the current time,
and such a sale, being an exceptional item, would result in an exceptional tax
impact.
Organic revenue
The Group has made certain acquisitions that have affected the comparability
of the Group's results. Previously the Group had reported proforma revenue and
proforma revenue growth which included acquisitions as if they had occurred at
the start of the comparative period, with the comparative period being
presented on a constant currency basis using the current year exchange rates.
It was deemed by management more appropriate to present organic revenue and
organic revenue growth in FY23 given the size of the ESN acquisition. Organic
revenue shows the current period results excluding the acquisition of ESN on 6
February 2023. Organic revenue is shown on a constant currency basis using
average exchange rates for the current financial period applied to the
comparative period and is used to eliminate the effects of fluctuations in
assessing performance. Refer to the Glossary for the full definition.
The following table provides a reconciliation of organic revenue from reported
results:
Unaudited Unaudited
Year ended Year ended
30 September 2023 30 September 2022
£000 £000
Reported revenue 135,225 119,846
Acquisition related adjustment (5,682) -
Constant currency adjustment - 3,193
Organic revenue 129,543 123,039
Increase in organic revenue % 5%
Adjusted net debt
Adjusted net debt comprises external borrowings net of arrangement fees and
cash at bank which allows management to monitor the indebtedness of the Group.
Adjusted net debt excludes lease liabilities and restricted cash (see note
11).
In the prior year, cash at bank included cash held by the Trustee of the
Group's Employee Benefit Trust, which is not available to circulate within the
Group on demand. This has been included in restricted cash and results in a
restatement for the year ended 30 September 2022. This change in policy
provides users with more reliable information about the nature of the Group's
cash and cash equivalents.
30 September Restated
2023 30 September
£000 2022
£000
Cash at bank (note 11) 6,097 49,427
Current loans and borrowings (note 12) (12,861) (30,983)
Non-current loans and borrowings (note 12) (108,969) (149,862)
Total loans and borrowings (121,830) (180,845)
Adjusted net debt (115,733) (131,418)
Adjusted free cash flow and adjusted free cash flow conversion
Adjusted free cash flow represents cash flow from operations less additions to
internally generated software and property, plant and equipment. Internally
generated software includes development costs in relation to software that are
capitalised when the related projects meet the recognition criteria under
UK-adopted IAS for an internally generated intangible asset. Movement in
working capital is adjusted for balances relating to exceptional items. The
Group monitors its operational efficiency with reference to operational cash
conversion, defined as free cash flow as a percentage of adjusted EBITDA.
The Group uses adjusted cash flow measures for the same purpose as adjusted
profit measures, in order to assist readers of the accounts in understanding
the operational performance of the Group. The two measures used are free cash
flow and free cash flow conversion. A reported free cash flow and cash
conversion rate has not been provided as it would not give a fair indication
of the Group's free cash flow and conversion performance given the high value
of working capital from exceptional items.
Year ended Year ended
30 September 30 September
2023 2022
£000 £000
Adjusted EBITDA 63,964 53,952
Cash generated by operations 57,704 49,409
Adjustments for:
Exceptional operating items 2,712 -
Working capital from exceptional and other items (1,187) 4,983
Additions to internally generated software (note 10) (8,727) (4,209)
Additions to property, plant and equipment (411) (270)
Payment for right of use assets (188) -
Adjusted free cash flow 49,903 49,913
Adjusted free cash flow conversion (%) 78% 93%
4. Operating segments
The operating segments reflect the Group's management and internal reporting
structure, which is used to assess both the performance of the business and to
allocate resources within the Group. The assessment of performance and
allocation of resources is focused on the category of customer for each type
of activity.
The Board has determined an operating management structure aligned around the
four core operations of the Group. ESN which was acquired in the period, has
been allocated to the Art & Antiques segment. This is on the basis that
ESN traditionally includes items sold on Art & Antique platforms and the
purpose of the acquisition was to expand its Art & Antiques segment into
an attractive adjacent channel for the resale of second-hand items.
The four operating segments are as follows:
• Art & Antiques ("A&A") marketplaces: focused on offering auction
houses that specialise in the sale of arts and antiques access to the
platforms thesaleroom.com, liveauctioneers.com, lot-tissimo.com and
EstateSales.NET. A significant part of the Group's services is provision of a
platform as a marketplace for the A&A auction houses to sell their goods.
The segment also generates earnings through additional services such as
listing subscriptions, marketing income, atgPay and atgShip. The Group
contracts with customers predominantly under service agreements, where the
number of auctions to be held and the service offering differs from client to
client.
• Industrial & Commercial ("I&C") marketplaces: focused on offering
auction houses that specialise in the sale of industrial and commercial goods
and machinery access to the platforms BidSpotter.com, BidSpotter.co.uk and
proxibid.com, as well as i-bidder.com for consumer surplus and retail returns.
A significant part of the Group's services is provision of the platform as a
marketplace for the I&C auction houses to sell their goods. The segment
also generates earnings through additional services such as marketing income
and atgPay. The Group contracts with customers predominantly under service
agreements, where the number of auctions to be held and the service offering
differs from client to client.
• Auction Services: includes revenues from the Group's auction house
back-office products with Auction Mobility and other white label products
including Wavebid.com.
• Content: focused on the Antiques Trade Gazette paper and online magazine.
The business focuses on two streams of income: selling subscriptions of the
Gazette and selling advertising space within the paper and online. The
Directors have disclosed information required by IFRS 8 for the Content
segment despite the segment not meeting the reporting threshold.
There are no undisclosed or other operating segments.
An analysis of the results for the year by reportable segment is as follows:
Year ended 30 September 2023
A&A I&C Auction Services Content Centrally allocated Total
£000 £000 £000 £000 costs £000
£000
Revenue 65,624 58,223 8,300 3,078 - 135,225
Adjusted EBITDA (see note 3 for definition and reconciliation) 53,941 49,897 5,216 1,116 (46,206) 63,964
Amortisation of intangible assets (note 10) (19,853) (9,158) (1,411) - - (30,422)
Depreciation of property, plant and equipment (112) (197) (8) (13) - (330)
Depreciation of right of use assets (554) (279) (8) (55) - (896)
Share-based payment expense (1,491) (1,764) (84) - (3,689) (7,028)
Exceptional operating items (note 3) (2,712) - - - - (2,712)
Operating profit/(loss) 29,219 38,499 3,705 1,048 (49,895) 22,576
Net finance costs (note 6) - - - - (15,430) (15,430)
Profit/(loss) before tax 29,219 38,499 3,705 1,048 (65,325) 7,146
Year ended 30 September 2022
A&A I&C Auction Services Content Centrally allocated Total
£000 £000 £000 £000 costs £000
£000
Revenue 55,279 52,775 8,636 3,156 - 119,846
Adjusted EBITDA (see note 3 for definition and reconciliation) 45,777 45,629 6,090 1,089 (44,633) 53,952
Amortisation of intangible assets (note 10) (18,504) (10,931) (1,274) - - (30,709)
Depreciation of property, plant and equipment (87) (176) (6) (11) - (280)
Depreciation of right of use assets (475) (381) (13) (51) - (920)
Share-based payment expense (1,848) (893) (3) - (2,482) (5,226)
Operating profit/(loss) 24,863 33,248 4,794 1,027 (47,115) 16,817
Net finance costs (note 6) - - - - (7,538) (7,538)
Profit/(loss) before tax 24,863 33,248 4,794 1,027 (54,653) 9,279
Segment assets are measured in the same way as in the financial statements.
These assets are allocated based on the operations of the segment and the
physical location of the asset.
30 September 2023 30 September 2022
Total Additions Total Additions
non-current to non-current non-current to non-current
assets assets assets assets
£000 £000 £000 £000
By operating segment
A&A 483,977 38,188 506,484 395,683
I&C 187,313 5,986 199,504 58,829
Auction Services 27,939 350 31,704 201
Content 276 256 91 15
699,505 44,780 737,783 454,728
Year ended Year ended
30 September 30 September
2023 2022
£000 £000
By geographical location
United Kingdom 57,960 65,954
USA 637,489 667,696
Germany 4,056 4,133
699,505 737,783
The Group has taken advantage of paragraph 23 of IFRS 8 "Operating Segments"
and does not provide segmental analysis of net assets as this information is
not used by the Directors in operational decision-making or monitoring of
business performance.
5. Revenue
Year ended Year ended
30 September 30 September
2023 2022
£000 £000
Product and customer types
A&A 65,624 55,279
I&C 58,223 52,775
Auction Services 8,300 8,636
Content 3,078 3,156
135,225 119,846
Primary geographical markets
by location of operations
United Kingdom 19,654 18,539
USA 111,637 97,765
Germany 3,934 3,542
135,225 119,846
by location of customer
United Kingdom 20,029 18,571
USA 102,138 89,055
Europe 7,049 6,648
Rest of world 6,009 5,572
135,225 119,846
Timing of transfer of goods and services
Point in time 122,559 110,539
Over time 12,666 9,307
135,225 119,846
The Group has recognised the following assets and liabilities related to
contracts with customers:
30 September 30 September 1 October
2023 2022 2021
£000 £000 £000
Contract assets 1,486 837 597
Contract liabilities 1,518 1,783 1,367
The following table shows how much of the revenue recognised in the current
reporting period relates to carried-forward contract liabilities:
Year ended Year ended
30 September 30 September
2023 2022
£000 £000
Revenue recognised that was included in the contract liabilities balance at 1,452 1,258
the beginning of the year
6. Net finance costs
Year ended Year ended
30 September 30 September
2023 2022
£000 £000
Foreign exchange gain - 2,070
Interest income 181 57
Finance income 181 2,127
Interest on loans and borrowings (10,572) (7,214)
Amortisation of finance costs (499) (465)
Foreign exchange loss (4,061) -
Movements in contingent consideration (211) (1,849)
Interest on lease liabilities (189) (137)
Interest on tax (79) -
Finance costs (15,611) (9,665)
Net finance costs (15,430) (7,538)
7. Taxation
Year ended Year ended
30 September 30 September
2023 2022
£000 £000
Current tax
Current tax on profit for the year 9,379 11,395
Adjustments in respect of prior years (167) (903)
Total current tax 9,212 10,492
Deferred tax
Current year (18,198) 6,328
Adjustments from change in tax rates (505) (564)
Adjustments in respect of prior years (301) (850)
Deferred tax (19,004) 4,914
Tax (credit)/expense (9,792) 15,406
The tax on the Group's profit before tax differs from the theoretical amount
that would arise using the standard tax rate applicable to profits of the
Group as follows:
Year ended Year ended
30 September 30 September
2023 2022
£000 £000
Profit before tax 7,146 9,279
Tax at United Kingdom tax rate of 22% (FY22: 19%) 1,572 1,763
Tax effect of:
Additional items deductible for tax purposes (643) (1,649)
Differences in overseas tax rates 1 (1,317)
Deferred tax on unrealised foreign exchange differences (7,185) 15,899
Foreign exchange difference not (taxable)/deductible for tax purposes (2,564) 3,027
Adjustments from change in tax rates (505) (564)
Adjustments in respect of prior years (468) (1,753)
Tax (credit)/expense (9,792) 15,406
The deferred tax credit on unrealised foreign exchange differences of £7.2m
(FY22: charge of £15.9m) arises from US holding companies which have pound
sterling as their functional currency for the Consolidated Financial
Statements but US dollar functional currency under US tax rules. Per the US
tax basis these holding companies incurred an unrealised foreign exchange loss
of £28.2m on intra-group loans denominated in pound sterling totalling
£295.6m (FY22: gain of £61.9m). Unrealised foreign exchange differences are
not taxable until realised, giving rise to deferred tax.
The Group's profit before tax includes foreign exchange gain of £10.1m from
US holding companies on their US dollar denominated intra-group balances
(FY22: loss of £15.9m) which are not (taxable)/deductible for US tax purposes
giving rise to a permanent difference of £2.6m (FY22: £3.0m).
The Group's tax affairs are governed by local tax regulations in the UK, US
and Germany. Given the uncertainties that could arise in the application of
these regulations, judgements are often required in determining the tax that
is due. Where management is aware of potential uncertainties in local
jurisdictions, that are judged more likely than not to result in a liability
for additional tax, a provision is made for management's best estimate of the
liability, determined with reference to similar transactions and third-party
advice. This provision at 30 September 2023 amounted to £0.8m (FY22: £1.1m).
Adjustments from changes in tax rates are due to decreases in the blended US
rate for state taxes apportionment. The UK Government announced an increase in
the corporation tax rate from 19% to 25%, with an effective date of 1 April
2023, which was substantively enacted on 24 May 2021.
Tax recognised in other comprehensive income and equity:
Year ended Year ended
30 September 30 September
2023 2022
£000 £000
Other comprehensive income
Current tax (2,606) 3,074
Equity
Deferred tax - (150)
Tax recognised in other comprehensive income includes current tax on the
Group's net investment hedge. Deferred tax directly recognised in equity
relates to share-based payments.
8. Earnings/(loss) per share
Basic earnings/(loss) per share is calculated by dividing the profit/(loss)
for the year attributable to ordinary shareholders by the weighted average
number of ordinary shares outstanding during the year, after excluding the
weighted average number of non-vested ordinary shares.
Diluted earnings/(loss) per share is calculated by dividing the profit/(loss)
for the year attributable to ordinary shareholders by the weighted average
number of ordinary shares including non-vested/non-exercised ordinary shares.
During the year and prior year, the Group awarded conditional share awards to
Directors and certain employees through an LTIP. For FY22, the
non-vested/non-exercised ordinary shares are anti-dilutive given the loss for
the year and are therefore excluded from the weighted average number of
ordinary shares for the purpose of diluted earnings per share calculation.
Year ended Year ended
30 September 30 September
2023 2022
£000 £000
Profit/(loss) attributable to equity shareholders of the Company 16,938 (6,127)
Number Number
Weighted average number of shares in issue 121,050,307 120,364,831
Weighted average number of options vested not exercised 1,338,182 -
Weighted average number of shares held by the Employee Benefit Trust (162,934) (61,741)
Weighted average number of shares 122,225,555 120,303,090
Dilutive share options 862,822 2,138,826
Diluted weighted average number of shares 123,088,377 122,441,916
p p
Basic earnings/(loss) per share 13.9 (5.1)
Diluted earnings/(loss) per share 13.8 (5.1)
9. Business combinations
Business combinations for the year ended 30 September 2023
Acquisition of Vintage Software LLC., trading as EstateSales.NET ("ESN")
On 6 February 2023, the Group acquired 100% of the equity share capital of
ESN. ESN provides a platform to facilitate estate sales across the US. Both
corporate estate sale companies as well as private customers use ESN to
advertise online the sale of millions of unique second-hand items sourced from
a range of events including private home estate sales and business
liquidations. The purpose of the acquisition was to further strengthen the
Group's presence in the US and expand its A&A segment into an attractive
adjacent channel for the resale of second-hand items.
The maximum consideration payable is $40.0m (£33.1m), with an initial cash
payment of $30.2m (£25.1m), deferred consideration of $10.0m (£8.3m) payable
after 12 months and a working capital adjustment of $27,000 (£22,000).
Management calculated the fair value of the deferred consideration using the
acquisition's internal rate of return to discount the liability, resulting in
a liability of $9.6m (£8.0m). Exchange differences to reserves were recorded
within foreign exchange differences on translation of foreign operations in
the Consolidated Statement of Comprehensive Income or Loss. The unwinding of
discount of £0.3m will be reported as a finance cost in the Consolidated
Statement of Profit or Loss over the period of the earn-out.
Provisional purchase price allocation
Management assessed the fair value of the acquired assets and liabilities as
part of the purchase price allocation ("PPA"). This has been prepared on a
provisional basis and the fair values of the assets and liabilities is as set
out below.
Book value Fair value adjustments £000 Provisional fair value
£000 £000
Acquired intangible assets - software - 2,161 2,161
Acquired intangible assets - customer relationships - 9,559 9,559
Acquired intangible assets - brand 229 2,406 2,635
Property, plant and equipment 161 - 161
Right of use assets 438 - 438
Cash and cash equivalents 155 - 155
Trade receivables and other receivables 41 - 41
Lease liabilities (438) - (438)
Trade and other payables (264) - (264)
Net assets on acquisition 322 14,126 14,448
Goodwill (note 10) 18,609
Total consideration 33,057
Consideration satisfied by:
Initial cash consideration 25,087
Deferred consideration 7,970
33,057
Net cash flow arising on acquisition:
Initial cash consideration 25,087
Less: cash and cash equivalent balances acquired (155)
24,932
Acquired intangible assets
Acquired intangible assets represent customer relationships, auction
technology platform and brand for which amortisation of £1.4m has been
charged for the year ended 30 September 2023. The intangible assets will be
amortised over their respective expected useful economic lives: customer
relationships of two to seven years, auction technology platform of five years
and brand of 15 years. A 1% change in the customer attrition rate results in a
£0.5m change in the valuation.
Deferred tax
Goodwill and acquired intangible assets of £33.0m are expected to be
deductible for income tax purposes.
Goodwill
Goodwill arises as a result of the surplus of consideration over the fair
value of the separately identifiable assets acquired. The main reason leading
to the recognition of goodwill is the future economic benefits arising from
assets which are not capable of being individually identified and separately
recognised; these include the value of synergies expected to be realised
post-acquisition, new customer relationships and the fair value of the
assembled workforce within the business acquired.
Acquisition costs of £2.7m directly related to the business combination have
been immediately expensed to the Consolidated Statement of Profit or Loss as
part of administrative expenses and included within exceptional operating
items (see note 3). Between 6 February 2023 and 30 September 2023, ESN
contributed £5.7m to Group revenues and a profit before tax of £1.1m. If the
acquisition had occurred on 1 October 2022, Group revenue would have been
£137.4m and Group profit before tax would have been £8.2m.
10. Goodwill and other intangible assets
Software Customer relationships Brand Non-compete Total acquired intangible assets Internally generated software Goodwill Total
£000 £000 £000 agreement £000 £000 £000 £000
£000
Cost
1 October 2021 11,945 59,817 11,426 1,236 84,424 11,485 141,160 237,069
Acquisition of business 24,494 120,023 21,457 - 165,974 1,820 281,341 449,135
Additions - - - - - 4,209 - 4,209
Exchange differences 5,953 27,966 5,493 260 39,672 2,118 66,477 108,267
30 September 2022 42,392 207,806 38,376 1,496 290,070 19,632 488,978 798,680
Acquisition of business (note 9) 2,161 9,559 2,635 - 14,355 - 18,609 32,964
Additions - - - - - 8,727 - 8,727
Exchange differences (3,040) (14,019) (2,764) (126) (19,949) (1,448) (33,272) (54,669)
30 September 2023 41,513 203,346 38,247 1,370 284,476 26,911 474,315 785,702
Amortisation and impairment
1 October 2021 5,376 12,947 1,880 297 20,500 7,332 - 27,832
Amortisation 6,118 17,436 2,736 301 26,591 4,118 - 30,709
Exchange differences 924 2,023 477 106 3,530 1,156 - 4,686
30 September 2022 12,418 32,406 5,093 704 50,621 12,606 - 63,227
Amortisation 4,610 18,727 2,917 341 26,595 3,827 - 30,422
Exchange differences (527) (1,303) (276) (59) (2,165) (1,209) - (3,374)
30 September 2023 16,501 49,830 7,734 986 75,051 15,224 - 90,275
Net book value
1 October 2021 6,569 46,870 9,546 939 63,924 4,153 141,160 209,237
30 September 2022 29,974 175,400 33,283 792 239,449 7,026 488,978 735,453
30 September 2023 25,012 153,516 30,513 384 209,425 11,687 474,315 695,427
Included within internally generated software is capital work-in-progress of
£3.5m (FY22: £2.8m).
Intangible assets, other than goodwill, have a finite life and are amortised
over their expected useful lives.
The expected amortisation profile of acquired intangible assets is shown
below:
Software Customer relationships Brand Non-compete Total
£000 £000 £000 agreement £000
£000
One to five years 17,070 83,262 14,873 384 115,589
Six to 10 years 7,942 50,879 10,224 - 69,045
11 to 15 years - 19,375 5,416 - 24,791
30 September 2023 25,012 153,516 30,513 384 209,425
10. Goodwill and other intangible assets continued
Impairment assessment
The goodwill and intangibles attributed to each of the Group's cash-generating
units ("CGUs") and groups of CGUs are assessed for impairment at least
annually or more frequently where there are indicators of impairment. The
Group tests for impairment of goodwill at the operating segment level
representing an aggregation of CGUs, the level at which goodwill is monitored
by management. No CGU or group of CGUs is larger than an operating segment as
defined by IFRS 8 "Operating Segments" before aggregation. The recoverable
amount for CGU groups has been determined on a value in use basis ("VIU").
The table below sets out the carrying values of goodwill and other acquired
intangible assets allocated to each CGU at 30 September 2023 along with the
pre-tax discount rates applied to the risk-adjusted cash flow forecasts and
the long-term growth rate.
2023 Goodwill Acquired intangible assets Valuation Long-term Pre-tax
£000 £000 method growth rate discount
rate
A&A marketplaces 299,196 177,091 VIU 3% 12.7%
I&C marketplaces 154,900 25,057 VIU 3% 12.7%
Auction Services 20,219 7,277 VIU 3% 11.4%
Total 474,315 209,425
2022 Goodwill Acquired intangible assets Valuation Long-term Pre-tax
£000 £000 method growth rate discount
rate
A&A marketplaces 304,282 196,672 VIU 3% 13.4%
I&C marketplaces 162,615 33,420 VIU 3% 13.4%
Auction Services 22,081 9,357 VIU 3% 12.1%
Total 488,978 239,449
When testing for impairment, recoverable amounts for all the Group's CGUs and
groups of CGUs are measured at their value in use by discounting the future
expected cash flows from the assets in the CGUs. These calculations use cash
flow projections based on Board approved budgets and approved plans. While the
Group prepares a five-year plan, levels of uncertainty increase as the
planning horizon extends. The Group's plan focuses more closely on the next
three years, however for the purposes of the impairment testing the five-year
forecasts are used as we do not anticipate the long-term growth rate to be
achieved until after this time.
The key assumptions and estimates used for value in use calculations are
summarised as follows:
Assumption Approach
Risk-adjusted cash flows are determined by reference to the budget for the year following the balance
sheet date and forecasts for the following four years, after which a long-term
perpetuity growth rate is applied. The most recent financial budget approved
by the Board has been prepared after considering the current economic
environment in each of the Group's markets. These projections represent the
Directors' best estimate of the future performance of these businesses.
CAGR is the five-year compound annual growth rate from FY23 of the risk-adjusted
cash flows above.
Long-term are applied after the forecast period. These are based on external reports on
growth rates long-term GDP growth rates for the main markets in which each CGU operates.
Therefore, these do not exceed the long-term average growth rates for the
individual markets.
Pre-tax discount rates are derived from the post-tax weighted average cost of capital ("WACC") which
has been calculated using the capital asset pricing model. They are weighted
based on the geographical area in which the CGU group's revenue is generated.
The assumptions used in the calculation of the WACC are benchmarked to
externally available data and they represent the Group's current market
assessment of the time value of money and risks specific to the CGUs.
Movements in the pre-tax discount rates for CGUs since the year ended 30
September 2022 are driven by changes in market-based inputs. Any unsystematic
risk on the CGUs has been inherently built into the cash flows of each of the
CGUs and therefore no additional element of risk has been included in the
discount rates used at 30 September 2023.
Sensitivity analysis
At 30 September 2023 under the impairment assessments prepared there is no
impairment required. However, both the A&A marketplaces and Auction
Services CGUs are sensitive to a movement in any one of the key assumptions.
Management have therefore performed sensitivity analysis based on reasonably
possible scenarios including increasing the discount rates and reducing the
CAGR on the future forecast cash flows, both of which are feasible given the
current future uncertainty of macroeconomics. For the I&C marketplaces
CGU, there is no realistic change of assumption that would cause the CGU's
carrying amount to exceed its recoverable amount.
For the A&A marketplaces CGU, under the base case there is headroom of
£248.8m at 30 September 2023 (FY22: £28.0m). The year-on-year increase in
headroom is due a number of factors but predominantly arises from the
inclusion of ESN in the CGU, reduced discount rate, one year's amortisation
and improved cash flows in the terminal year.
For the recoverable amount to fall to the carrying value, the discount rate
would need to be increased to 17.4% from 12.7% (FY22: 13.9% from 13.4%), the
long-term growth rate reduced to a negative 4.5% from 3.0% (FY22: 2.2% from
3.0%), or the CAGR from FY23 on the five-year future forecast cash flows
reduced by nine ppt (FY22: one ppt). With an uncertain macroeconomic outlook,
it is difficult to model the precise impact on business performance at this
time but should there be an economic downturn the A&A segment is likely to
be impacted in the short term due to reduced sales and margins but it would
then be expected to return to higher growth in later years. Management has
modelled a scenario where A&A CGU revenue declines 4% in both FY24 and
FY25, resulting in a cumulative decrease of 8% with a return to steeper growth
from FY26 to FY28. The overall impact on the five-year adjusted EBITDA CAGR
is a reduction of 3%. A potential increase of 1% in discount rate or a
reasonable worst-case increase of 2% in the discount rate and 3% reduction in
five-year CAGR growth rate could reduce the headroom to £90.0m and £39.0m
respectively (FY22: impairment of £59.0m and £96.0m).
For Auction Services with a headroom of £6.1m (FY22: £1.7m) for the
recoverable amount to fall to the carrying value, the discount rate would need
to be increased to 13.4% from 11.4% (FY22: 12.6% from 12.1%), the long-term
growth rate reduced to 0.2% from 3.0% (FY22: 2.3% from 3.0%), or the CAGR on
the five-year adjusted EBITDA cash flows reduced by two ppt (FY22: three ppt).
Auction Services is particularly sensitive to the long-term growth rate and
discount rate applied. An increase of 1% in the discount rate and 1% reduction
in the long-term growth rate could reduce headroom to £0.7m (FY22: impairment
of £3.6m).
11. Cash and cash equivalents
Cash and cash equivalents comprise cash at bank and in hand and restricted
cash. The carrying amount of these assets approximates to their fair value.
30 September Restated
2023 30 September
£000 2022
£000
Cash at bank 6,097 49,427
Restricted cash 2,442 2,390
8,539 51,817
Restricted cash consists of cash held by the Trustee of the Group's Employee
Benefit Trust relating to share awards for employees.
In the prior year cash at bank included cash held by the Trustee of the
Group's Employee Benefit Trust. As these funds are not available to circulate
within the Group on demand, it is deemed more appropriate this should be
classified as restricted cash. The prior year has been restated accordingly.
This change in policy provides users with more reliable information about the
nature of the Group's cash and cash equivalents.
12. Loans and borrowings
The carrying amount of loans and borrowings classified as financial
liabilities at amortised cost approximates to their fair value.
30 September 30 September
2023 2022
£000 £000
Current
Secured bank loan 12,861 30,983
Non-current
Secured bank loan 108,969 149,862
121,830 180,845
The Group entered into a Senior Facilities Agreement on 17 June 2021 which
included:
• A senior term loan facility (the "Senior Term Facility") for $204.0m for
the acquisition of LiveAuctioneers. The Senior Term Facility was drawn down in
full on 30 September 2021 prior to completion of the acquisition of
LiveAuctioneers on 1 October 2021. During the year ended 30 September 2023, a
prepayment of $53.7m (£48.0m) was paid on the Senior Term Facility. In the
absence of any other prepayments, the scheduled repayment in FY23 is $7.4m on
30 June 2024 and $8.7m on 30 September 2024. The loan will be due for
repayment on 17 June 2026.
• A multi-currency revolving credit working capital facility (the "Revolving
Credit Facility") for $49.0m. Any sums outstanding under the Revolving Credit
Facility will be due for repayment on 17 June 2026. On 1 February 2023,
$26.3m (£21.3m) was drawn down to partly fund the acquisition of ESN (see
note 9), and has been fully repaid by 30 September 2023.
• The Senior Facilities Agreement contains an adjusted net leverage covenant
which tests the ratio of adjusted net debt against adjusted EBITDA and an
interest cover ratio which tests the ratio of adjusted EBITDA against net
finance charges, in each case as at the last date of each financial quarter,
commencing with the financial quarter ending 30 September 2021. The Group has
complied with the financial covenants of its borrowing facilities during the
year ended 30 September 2023.
The movements in loans and borrowings are as follows:
30 September 30 September
2023 2022
£000 £000
1 October 180,845 149,039
Repayment of loans and borrowings (69,110) (359)
Proceeds from loans and borrowings 21,250 -
Accrued interest and amortisation of finance costs 11,071 7,679
Interest paid (10,651) (7,283)
Exchange differences (11,575) 31,769
30 September 121,830 180,845
The currency profile of the loans and borrowings is as follows:
30 September 30 September
2023 2022
£000 £000
US dollar 121,830 180,845
The weighted average interest charge (including amortised cost written off)
for the year is as follows:
Year ended Year ended
30 September 30 September
2023 2022
% %
Secured bank loan 8% 4%
13. Deferred taxation
The movement of net deferred tax liabilities is as follows:
Capitalised goodwill and intangibles Tax losses Share-based payments Foreign Research and development Other Total
£000 £000 £000 exchange £000 temporary differences £000
£000 £000
1 October 2021 (12,229) 1,370 19 1,563 - 383 (8,894)
Acquisition of business (note 9) (43,514) 548 276 511 - 27 (42,152)
Amount credited/(charged) to Consolidated Statement of Profit or Loss 6,327 3,526 1,002 (15,509) - (260) (4,914)
Amount charged to equity - - (150) - - - (150)
Exchange differences (8,869) 673 (13) (308) - 9 (8,508)
30 September 2022 (58,285) 6,117 1,134 (13,743) - 159 (64,618)
Deferred tax asset - - - - - - -
Deferred tax liabilities (58,285) 6,117 1,134 (13,743) - 159 (64,618)
1 October 2022 (58,285) 6,117 1,134 (13,743) - 159 (64,618)
Amount credited to Consolidated 5,922 3,766 674 7,268 1,548 (174) 19,004
Statement of Profit or Loss
Exchange differences 4,163 (475) - 1,172 9 56 4,925
30 September 2023 (48,200) 9,408 1,808 (5,303) 1,557 41 (40,689)
Deferred tax asset - - - - - - -
Deferred tax liabilities (48,200) 9,408 1,808 (5,303) 1,557 41 (40,689)
Tax losses include unrelieved interest in the US, where there are sufficient
taxable profits forecast to be available in the future to enable them to be
utilised. These losses are available indefinitely. Tax on foreign exchange
include unrealised foreign exchange differences arises from US holding
companies with pound sterling as their functional currency for the
Consolidated Financial Statements but US dollar functional currency under US
tax rules (see note 7). A deferred tax asset of £1.6m (2022 nil) relates to
the US research and development credit which is spread over future years
rather than fully deductible in the year it arises.
No deferred tax asset has been recognised in respect of unused tax losses in
the UK of £0.7m (FY22: £0.7m) as it is not considered probable that there
will be future taxable profits available to offset these tax losses. The
losses may be carried forward indefinitely. The temporary differences relating
to the unremitted earnings of overseas subsidiaries amounted to £0.9m (FY22:
£1.1m). However, as the Group can control whether it pays dividends from its
subsidiaries and it can control the timing of any dividends, no deferred tax
has been provided on the unremitted earnings on the basis there is no
intention to repatriate these amounts.
In presenting the Group's deferred tax balances, the Group offsets assets and
liabilities to the extent we have a legally enforceable right to set off the
arising income tax liabilities and assets when those deferred tax balances
reverse.
14. Share capital and reserves
30 September 30 September
2023 2022
£000 £000
Authorised, called up and fully paid
121,491,412 ordinary shares at 0.01p each (FY22: 120,525,304 ordinary shares 12 12
at 0.01p each)
12 12
The movements in share capital, share premium and other reserve are set out
below:
Number of Share capital Share premium Other reserve £000
shares £000 £000
1 October 2021 119,999,990 12 235,903 238,385
Shares issued 506,926 - - -
Shares issued in respect of share-based payment plans 18,388 - - -
30 September 2022 120,525,304 12 235,903 238,385
Shares issued 680,794 - 328 -
Shares issued in respect of share-based payment plans 285,314 - - -
30 September 2023 121,491,412 12 236,231 238,385
For the year ended 30 September 2023
966,108 ordinary shares of 0.01p each with an aggregate nominal value of £97
were issued for options that vested for a cash consideration of £328,000.
These included management rollover options and restricted stock units granted
in FY22 for the acquisition of LiveAuctioneers, Long-term Incentive Plan
Awards ("LTIP Awards"), shares issued under the Share Incentive Plan ("SIP")
and Employee Stock Purchase Plan ("ESPP") and to the Trust for LTIP Awards
that have vested in the year.
For the year ended 30 September 2022
525,314 ordinary shares of 0.01p each with an aggregate nominal value of £53
were issued for options that vested. These included 50% of the restricted
stock units granted for the LiveAuctioneers acquisition, LTIP Awards, shares
issued under the SIP and ESPP and to the Trust for LTIP Awards that have
vested in the year.
Reserves
The following describes the nature and purpose of each reserve within equity:
Retained losses represent the profits/(losses) of the Group made in current and preceding
years.
Other reserve comprises:
• a merger reserve that arose on the Group reorganisation on 13 January 2020
and is the adjustment of the comparative and current year consolidated
reserves of the Group to reflect the statutory share capital and share premium
of Auction Technology Group plc as if it had always existed; and
• share premium, net of share issue costs, recognised in the other reserve
in accordance with section 612 of the Companies Act 2006 for the equity raise
on 17 June 2021 via a cashbox placing.
Capital redemption reserve arose on the redemption or purchase of the Company's own shares. The Company
issued shares directly to the Trusts of 266,322 during the year and held
210,475 as at 30 September 2023 (FY22: 124,927).
Share option reserve relates to share options awarded under the LTIP Awards and options granted in
FY22 for the acquisition of LiveAuctioneers.
Foreign exchange reserve comprises all foreign exchange differences arising from the translation of the
financial statements of foreign operations.
15. Related party transactions
For the year ended 30 September 2023
The Group paid seven months' rent of $80,000 (£64,000) to McQuade Enterprises
LLC, a company owned by the previous owners of ESN. There were other no
related party transactions.
For the year ended 30 September 2022
There were no related party transactions.
Key management personnel compensation
The Group has determined that the key management personnel constitute the
Board and the members of the Senior Management Team.
Year ended Year ended
30 September 30 September
2023 2022
£000 £000
Short-term employee benefits 3,182 4,600
Post-employment benefits 61 73
Share-based payment expense 3,908 3,062
Total key management personnel compensation 7,151 7,735
Remuneration of Directors
The total amounts for Directors' remuneration were as follows:
Year ended Restated1
30 September Year ended
2023 30 September
£000 2022
£000
Short-term employee benefits 1,034 1,354
Non-Executive Directors' fees 334 284
Post-employment benefits 48 46
Share-based payment expense 1,624 1,152
Total Directors' remuneration 3,040 3,142
1 Short-term benefits restated to include annual bonuses.
16. Events after the balance sheet date
There were no other events after the balance sheet date.
Glossary
A&A Art & Antiques
atgPay the Group's integrated payment solution
atgShip the Group's integrated shipping solution
Auction Mobility Auction Mobility LLC
Bidder sessions web sessions on the Group's marketplaces online within a given timeframe
BidSpotter the Group's marketplace operated via the www.BidSpotter.co.uk and
www.BidSpotter.com domain
Big 4 Christie's, Sotheby's, Phillips and Bonhams A&A auction houses
EBITDA earnings before interest, taxes, depreciation and amortisation
ESN the Group's marketplace operated via the www.EstateSales.NET domain
GMV gross merchandise value, representing the total final sale value of all lots
sold via winning bids placed on the marketplaces or the platform, excluding
additional fees (such as online fees and auctioneers' commissions) and sales
of retail jewellery (being new, or nearly new, jewellery)
i-bidder the Group's marketplace operated by the www.i-bidder.com domain
I&C Industrial & Commercial
LiveAuctioneers the Group's marketplace operated via the www.liveauctioneers.com domain
Lot-tissimo the Group's marketplace operated via the www.lot-tissimo.com domain
LTIP Awards the Company's Long-term Incentive Plan
Marketplaces the online auction marketplaces operated by the Group
Conversion rate represents GMV as a percentage of THV; previously called 'online share'
Organic revenue Organic revenue shows the current period results excluding the acquisition of
ESN on 6 February 2023. Organic revenue is shown on a constant currency basis
using average exchange rates for the current financial period applied to the
comparative period and is used to eliminate the effects of fluctuations in
assessing performance.
Proxibid the Group's marketplace operated via the www.proxibid.com domain
The Saleroom the Group's marketplace operated via the www.the-saleroom.com domain
Take rate represents the Group's marketplace revenue, excluding EstateSales.NET, as a
percentage of GMV. Marketplace revenue is the Group's reported revenue
excluding Content and Auction Services revenue
THV total hammer value, representing the total final sale value of all lots listed
on the marketplaces or the platform, excluding additional fees (such as online
fees and auctioneers' commissions) and sales of retail jewellery (being new,
or nearly new, jewellery)
Timed auctions auctions which are held entirely online (with no in-room or telephone bidders)
and where lots are only made available to online bidders for a specific,
pre-determined timeframe
Timed+ the Group's integrated bidding solution for timed auctions on LiveAuctioneers
and Auction Mobility
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