REG - Auction Technology - Half-year Report
17/05/2023 07:17
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RNS Number : 6483Z Auction Technology Group PLC 17 May 2023
AUCTION TECHNOLOGY GROUP PLC
INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 MARCH 2023
Strong momentum over the half year and good progress against strategic growth
drivers
London, United Kingdom, 17 May 2023 - Auction Technology Group plc ("ATG",
"the Company", "the Group") (LON: ATG), operator of world- leading
marketplaces for curated online auctions, today announces its unaudited
financial results for the six months ended 31 March 2023.
Financial results
Restated(1)
HY 23 HY 22 Movement Organic(3)
Revenue(2&3) £67.3m £57.7m +17% 5%
Adjusted EBITDA(2) £31.5m £26.8m + 18%
Adjusted EBITDA margin %(2) 47% 46% +1ppt
Operating profit £9.8m £9.2m +7%
Operating margin % 15% 16% -1ppt
Adjusted diluted earnings per share(2) 16.0p 13.4p +19%
Basic earnings per share 9.9p 1.8p +450%
Adjusted net debt(2) £132.4m £122.1m +£10.3m
Cash generated by operations £24.6m £22.1m +11%
Financial highlights
· Revenue of £67.3m, up 17% year-on-year and up 5% on an organic
basis, driven by robust Gross Merchandise Value(4) ("GMV") growth. In line
with our expectations, organic revenue growth accelerated across the period as
we finished annualising strong prior year performance that had benefited from
Covid-19. Reported revenue growth also driven by a contribution from the
acquisition of EstateSales.Net ("ESN") and a favourable movement in the
foreign exchange rate.
· Adjusted EBITDA of £31.5m, up 18% year-on-year; adjusted EBITDA
margin of 47%, up from 46% in HY 22, driven by growth in high-margin
commission and fixed fee revenue.
· Operating profit of £9.8m, compared to £9.2m in the same period
last year after the impact of exceptional items related to the ESN
acquisition, share-based payments, and intangible asset amortisation.
· Adjusted diluted earnings per share of 16.0p compared to 13.4p in
the same period last year as the benefits of higher adjusted EBITDA were
partially offset by higher net finance costs; basic earnings per share of 9.9p
compared to 1.8p largely driven by a deferred tax credit.
· Closing adjusted net debt of £132.4m, in line with the end of FY
22 as strong cash generation was offset by financing for the acquisition of
ESN. Adjusted net debt/adjusted last twelve months EBITDA ratio of 2.3x.
Operational highlights
· GMV of £1.9bn, up 5% year-on-year on a constant currency basis,
driven by resilience in the auction market and continued structural shift
online.
· Take rate(4) flat at 3.2% as the growth in value-added services
as well as higher listing fees across several platforms, offset the mix impact
of a higher growth rate in the Industrial & Commercial ("I&C") sector,
which has a lower commission rate than Art & Antiques ("A&A").
· Strong growth in value-added services revenue, up 17% on a
constant currency basis benefiting from strong uptake of paid-for marketing
solutions. 83% of LiveAuctioneers' US based auctioneers now onboarded on
payments. Strong response on Proxibid to atgPay with 21% of auctioneers
onboarded. Activation of auctions with atgPay on Proxibid proceeding in Q3
23, three months later than initially planned in order to benefit from latest
product enhancements.
· On track with transition to a single technology platform,
including launch of phase one of integrated bidding that now enables
auctioneers to seamlessly cross-list and run timed auctions across our
LiveAuctioneers marketplace and on our Auction Mobility white label.
· Successful acquisition of ESN, a leading US estate sales
platform; integration on track and business performing ahead of initial
expectations.
John-Paul Savant, Chief Executive Officer of Auction Technology Group plc,
said:
"ATG has delivered another robust set of results with solid revenue growth,
margin expansion and strong cash generation, against an uncertain
macroeconomic environment and exceptional growth in the prior year. We have
made great progress against each of our six strategic growth drivers including
the strong adoption of value-added services, expansion of our addressable
market, bidder base and potential network effects with the acquisition of ESN,
and the creation of unique timed auction format opportunities for auctioneers
with the launch of our integrated bidding service.
"As expected, organic revenue growth accelerated across the half and this rate
of growth has continued into the start of the second half. This momentum,
combined with strong traction against our key strategic initiatives, leaves us
confident that we will deliver a higher rate of organic revenue growth in the
second half of the year and into FY 24. ATG has an exciting future ahead,
with unparalleled scale in the curated auction space, plus the reach, product
offering, and impact to truly make a difference for our customers, whether
they be auctioneers ensuring they achieve the highest asset sale price for
their consignors, or bidders seeking unique or specialised secondary goods.
Many growth opportunities exist as we lead the transformation of the auction
industry and follow the well-trodden path of online marketplace development."
Current trading and outlook
As expected, we have seen an improving rate of growth across the first half as
well as at the start of the second half. Auction markets have remained robust
despite an uncertain macroeconomic backdrop. In particular, our A&A
marketplaces have seen positive GMV growth for the three months to end of
April. The momentum in commission and fixed fee revenue in both the A&A
and I&C sectors also gives us confidence in sustained growth for the
balance of the year.
Based on the strength of core marketplace revenue, we reaffirm our guidance
for organic revenue growth, although at the lower to mid end of the range
reflecting the timing of atgPay activation for Proxibid auctions. We remain
confident in delivering full year adjusted EBITDA and adjusted EPS in line
with current market expectations. Given the strong demand from Proxibid
auctioneers already seen for atgPay, we do not expect activation timing to
negatively impact revenue in FY 24 and we remain confident in achieving our
medium-term targets of mid-teens plus organic revenue growth and mid-high 40's
adjusted EBITDA margin.
1. The HY 22 profit attributable to equity holders has been restated
by £1.7m. Full details are provided in note 1 of the Condensed Consolidated
Interim Financial Statements.
2. 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 Condensed
Consolidated Interim 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.
3. The Group has made certain acquisitions that have affected the
comparability of the Group's results. To aid comparisons between HY 23 and HY
22, 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.
4. Refer to glossary for full definition of the terms. GMV and Take
Rate exclude the impact of the acquisition of ESN.
Webcast presentation
There will be a webcast presentation for analysts 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)
J.P. Morgan Cazenove +44 207 742 4000
(Joint corporate broker to ATG)
Bill Hutchings, James Summer, Will Vanderspar
Numis Securities Limited +44 207 260 1000
(Joint corporate broker to ATG)
Nick Westlake, William Baunton
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 the world's leading
marketplaces and auction services for curated online auctions, seamlessly
connecting bidders from around the world to over 3,800 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 in excess of 70,000 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
ATG's purpose is to unlock the value of the curated secondary goods market
and, in doing so, to facilitate the growth of the circular economy. For
auctioneers and sellers of secondary items, we massively extend their reach by
giving access to our diverse and highly fragmented global bidder base,
specialised technology, and operational efficiencies that arise from working
with us. Critically, we help ensure they achieve the highest asset sale
price possible for their consignors. For bidders, we provide access to
millions of unique, specialised, and curated second-hand items through our
eight online marketplaces and listing sites. The combination of the widest
array of inventory and the largest bidder base has enabled us to create a
virtuous circle that benefits both buyers and sellers, with more buyers
participating in online auctions and estate sales resulting in higher realised
prices for second-hand items, which in turn attracts more secondary assets to
be listed and sold online, and thus more bidders.
In the first half of FY 23, we built on our strong track record and delivered
another period of robust operational and financial performance. Growth was
underpinned by the strength of our core business, against both an uncertain
macroeconomic backdrop and the annualising of strong revenue comparatives from
the prior period. Our adjusted EBITDA margin improved to 47%, driven by high
operating leverage of our business. Our cash-generative financial model
enabled us to complete the accretive bolt-on acquisition of ESN whilst also
reducing our gross debt balance. We made great progress against each of our
strategic drivers, which, combined with the improving rate of revenue growth
we saw over the first half, gives us confidence in our outlook for the
remainder of the year and into FY 24.
Progressing against our six strategic drivers
ATG is uniquely positioned to lead the transformation of the auction industry
and in FY 23 we are focused on executing against our second phase of
development: End-to-End Experience. This involves enhancing our core
ecommerce capabilities such as upgrading the user experience, rolling out
integrated payments, providing even-better marketing solutions for sellers,
and providing multiple tiers of service so auctioneers can access the online
market seamlessly through different channels with different rate cards based
on their online activity and sophistication. Six growth drivers underpin our
success and we have made strong progress against each of these in the first
half of FY 23.
1. Expand the Total Addressable Market
The auction market accounts for approximately 42% of all secondary goods
traded in the A&A market and 32%(1) of goods in the core I&C market.
As we grow, we expect our addressable market to grow even faster than the
secondary goods market as more secondary assets from other channels are
attracted to online auctions, driven by higher realised prices generated by
more eyes on every asset, greater transparency for consignors and faster time
to sell, thus enabling quicker payment to consignors and higher velocity of
deal flow for auctioneers.
Over the last six months, auction market activity has proved to be resilient
with over £6bn Total Hammer Value ("THV") on our marketplaces in the first
half, up 11% on a constant currency basis. This in turn has been driven by
growth in the number of auctions hosted on our marketplaces, up 8%
year-on-year, and growth in the number of lots listed on our marketplaces, up
14%. This volume growth has offset the softening of used asset prices in the
I&C equipment market, which is driven by an easing of supply chain
constraints in the primary equipment market. Against an uncertain consumer
backdrop, demand for A&A auctions has also remained robust. Our
auctioneer retention rate has remained in line with previous years, and we
have acquired new auctioneers including Merritt Auctions, a large US based
I&C auctioneer. The acquisition of ESN has also opened up a new adjacent
channel for secondary goods sales for ATG in the estimated $5bn US estate
sales market.
2. Grow the conversion rate
Whilst our conversion rate of 32% was slightly down year-on-year due to the
impact of physical auctions reopening as well continued growth in newer
auctioneers on our marketplaces who initially have a lower conversion rate,
our conversion rate remains over 10 percentage points higher than pre-pandemic
rates. Furthermore, our marketplaces (which currently exclude ESN) continue
to attract significant pools of bidders for auctioneers, with over 808,000 new
bidding accounts created in the last six months contributing to over 6.4m
auction registrations and over 53m online bids placed.
We have made good progress on strategies to drive bidder acquisition,
engagement, and conversion. Key activities include an upgrade to our
recommendation engine to include new product categories, increased number of
email alerts we send, including a new email reminder for bidders who have
browsed but not yet bid on a lot, and SMS alerts across several of our
marketplaces. We have further improved our Search Engine Optimisation to
help our bidders find the most relevant search results, including optimised
sitemaps, enhancements to expired lot pages as well as updates to category,
item, and brand pages.
For auctioneers, we have worked to facilitate the shift from live to timed
auctions through the introduction of a new tiered pricing structure on
Proxibid in March, which incentivises auctioneers to adopt the timed format.
This pricing structure is expected to have a minimal impact on churn,
demonstrating both the stickiness of our auctioneer base as well as the
strength of our competitive position and the value ATG delivers.
3. Enhance the network effect
In the last six months, ATG hosted over 91m bidder sessions on its
marketplaces (excluding ESN), a scale and reach of bidders that is
unparalleled in online curated auctions. In the first half of FY 23, we made
it easier for auctioneers to grow their bidder reach through cross-listing,
with the launch of the first stage of our integrated bidding programme,
'Timed+'. This functionality enables auctioneers using both LiveAuctioneers
and Auction Mobility to seamlessly upload an auction catalogue and to run a
timed auction simultaneously on both platforms. To date, auctions run on
Timed+ have resulted in an average 26% asset price uplift versus if the
auction was listed on Auction Mobility alone, demonstrating the benefits of
the network effect. Adoption rates of Timed+ continue to grow, with large
auctioneers including Bonhams having signed up to the solution. Timed+ not
only incentivises auctioneers to switch to ATG's white label solution, but
also increasingly facilitates the shift to timed auctions, which will further
enhance our conversion rate. Cross-listing also encourages more bidders to
participate in auctions and for those bidders to use ATG as their primary
search portal by presenting them with the broadest array of inventory. This
further enhances our competitive position and the network effect, which all in
turn benefits the auctioneers who work with us, as they see more bidders.
4. Expand operational leverage
ATG has an attractive financial model with high operational leverage and low
capital intensity. As we have grown commission and fixed fee revenue, we
delivered further improvement in our adjusted EBITDA margin, up 1 percentage
point to 47%. In the first half, we increased listing fees across many of
our platforms with many of these fees having not changed since before the
Covid-19 period. Reflecting the high return on investment that our
marketplaces offer auctioneers, we saw an immaterial impact on auctioneer
churn as a result of these price changes. We have driven efficiency in our
sales model through the development of automated analytics reports for our
auctioneers on auction performance, which reduce the need for manual touch
points with our consumer services team, whilst we have also redesigned the
structure of our sales team to ensure we are more able to cross-sell new
solutions and products to our auctioneer base. Our single technology platform
programme is on track, with initial success including a significant
improvement in the stability and security across all our marketplaces, as well
as the development of integrated bidding.
5. Grow the take rate via value-added services
Value-added services revenue grew 17% in the first half of FY 23 on a constant
currency basis. We saw continued strong adoption rates of our auctioneer
marketing products, with 56% of auctioneers across our marketplaces now using
one or more of our paid-for marketing solutions. We have developed new
assets including auctioneer sponsored search, enhanced email segmentation for
bidder campaigns and optimised homepage banners. Measuring the performance
of an auctioneer's marketing investment is critical to ensuring we elevate the
shared-success model of which our clients are a part. We have therefore
developed and rolled out reporting dashboards that allow us to better assess
the performance of auctions that are supported by our marketing. Marketing
uptake is most advanced on LiveAuctioneers and currently represents around 2%
of marketplace GMV, compared to 0.4% of GMV across the whole Group,
highlighting the significant opportunity for further growth across our other
marketplaces.
The acquisition of LiveAuctioneers enabled us to accelerate the development
and roll out of a payment's product across other ATG marketplaces. We have
continued to see strong progress with payments on LiveAuctioneers, with 83% of
US auctioneers having adopted the product at the end of March, 86% of invoices
having been paid through the LiveAuctioneers checkout, and with the payment's
product accounting for 48% of US gross transaction value on the marketplace in
March. We have updated the solution, including the integration of wire
transfers as a payment method. Whilst the activation of auctions with atgPay
on Proxibid will proceed in Q3 23, three months later than planned in order to
add additional functionality to the solution, we have been very pleased with
the rates of adoption we have seen since so far, with 21% of auctioneers
having signed up to the solution by the end of March. This strong demand
gives us confidence in the continued growth in the adoption and usage of
payments over the coming year.
6. Pursue accretive M&A
M&A has been and will continue to be a key growth lever for ATG and the
acquisition of ESN, for a purchase price of $40m, represents an additional
proof point of ATG's strong track record for sourcing and executing on
value-enhancing M&A opportunities within the fragmented secondary goods
market. ESN is a leading US estate sale site, providing a platform to
facilitate estate sales. ESN is a natural fit for ATG, expanding our
immediately addressable market into an attractive adjacent channel for the
resale of secondary goods, in the estimated $5bn US estate sales market. The
acquisition provides significant cross-selling opportunities with the addition
of ESN's 96m bidder sessions and younger demographic being added to ATG's
existing 180m sessions, creating an even larger pool of buyers of secondary
goods. The integration has progressed well since February with the ATG team
working closely with the ESN founders to ensure a smooth transition. Since
completion, ESN has delivered strong revenue growth, ahead of expectations.
Over the next six months, we will be focused on optimising the listing site
include enhanced marketing opportunities and an updated pricing structure, as
well as developing plans to successfully accelerate the digital transformation
of the estate sales industry.
Developing and progressing against our ESG programmes
Sustainability is central to our proposition and we are committed to
highlighting the environmental benefits of buying at auction to bidders.
During the half year, TheSaleroom published a series of social media content
and marketplace editorials showcasing the sustainability credentials of the
items listed on our marketplaces, including highlighting the carbon emissions
saved through buying second hand versus buying new. At the Group level, the
completion of the relocation of our Proxibid office in Omaha in March to a
smaller and more efficient site is a significant step towards our longer term
CO2 reduction targets.
We have also made strong progress against other ESG programmes in the first
half, including the implementation of a new information security management
system, which has been based on a recognised international standard. We were
also delighted with the results from our global employee engagement survey,
which showed that our employees are not only feel highly engaged with ATG, but
are also confident in its strategy and outlook. The survey is testament to
the positive and collaborative culture that we are creating, with 95% of
employees stating they enjoy working with their team. I believe this culture
of engagement and collaboration is a critical enabler for ATG to deliver its
growth ambitions.
Summary
We are pleased with our performance in the first half of FY 23 as we have
continued to execute against each of our strategic growth drivers. We are
confident in our outlook for the rest of the year as we build on the momentum
across the business. Our outlook is also underpinned by the growing adoption
of payments amongst auctioneers, our updated rate card on select marketplaces,
significant improvements being made to the user experience, as well as the
launch of integrated bidding, which will enable more seamless cross-listing
for our auctioneers. The acquisition of ESN further demonstrates our ability
to supplement our organic growth with strategic, accretive bolt-on M&A.
The auction industry is still early in its transformation and ATG's continued
strong operational and financial track record, experienced team and shared
success model provides confidence for us to continue to deliver on our
ambitious growth plans.
John-Paul Savant
Chief Executive Officer
1. Management estimates November 2022; A&A market excludes
eBay
CFO REVIEW
Group presentation of results
The financial results for HY 23 are presented for the six months ended 31
March 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 HY 23. Full details of the accounting implications are detailed
in note 9 of the Condensed Consolidated Interim Financial Statements.
The impact of the acquisition affects the comparability of the Group's
results. Therefore, to aid comparisons between HY 22 and HY 23 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 are used to eliminate the effects of fluctuations in assessing
performance.
Note 3 of the Condensed Consolidated Interim Financial Statements includes a
full reconciliation of all APMs presented to the reported results.
Given that a significant majority of the Group's revenue, costs and cash flows
are now generated in US dollars, the Board has determined that, 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.
Revenue
HY 23 HY 22 Movement Movement
£m £m Reported Organic
Arts & Antiques ("A&A") 31.8 26.9 18% 4%
Industrial and Commercial ("I&C") 29.8 25.1 19% 7%
Total marketplace 61.6 52.0 18% 6%
Auction Services 4.2 4.1 2% (7)%
Content 1.5 1.6 (6)% (6)%
Total 67.3 57.7 17% 5%
Group
Group revenue increased 17% to £67.3m, driven by growth in commission and
fixed fee revenue, a favourable impact from the movement in foreign exchange
and a contribution from the acquisition of ESN. Organic revenue growth of 5%
was driven by organic marketplace revenue growth of 6%, which in turn
benefited from GMV growth of 5% across the Group and a flat take rate of
3.2%. The Group saw revenue declines on an organic basis in both the Auction
Services and Content divisions.
Art & Antiques
Revenue in the A&A segment increased 18% to £31.8m, growing 4% on an
organic basis as the increase in the take rate, largely driven by value-added
services, offset a decline in GMV. GMV across A&A declined by 3% on an
organic basis, impacted by challenging comparisons to the prior year, which
had benefited from tailwinds from the Covid-19 pandemic, as well as continued
headwinds to our conversion rate year-on-year from the reopening of physical
auctions. This decline in conversion rate was partially offset by growth in
the value and volume of items listed on our marketplaces. As the comparisons
eased across the half, we saw an improving rate of GMV growth with
LiveAuctioneers delivering positive GMV growth in the second quarter of FY
23. GMV decline was offset by growth in value-added services revenues driven
by marketing and payments solutions. This growth, combined with fixed fee
increases, resulted in a 0.7ppt increase in the take rate in A&A to
8.3%. The A&A segment also benefited from ESN's contribution since the
date of acquisition on 6 February, which delivered a strong revenue growth
rate, ahead of initial expectations, driven by growth in the volume of estate
sales listings.
Industrial & Commercial
I&C revenue grew 7% on an organic basis and 19% on a reported basis to
£29.8m, driven by a 7% increase in GMV. Activity on I&C marketplaces
remained resilient in the first half, as the headwind from the softening of
exceptionally high used equipment prices in the prior year as well as the
reopening impact of physical auctions was offset by an increase in volume of
items listed on our marketplaces. There was also a benefit from an increase
in the rate of business insolvencies, which are an important source of supply
of assets for I&C. The take rate within I&C was broadly flat, as the
benefits from the uptake of marketing solutions across I&C auctioneers was
offset by a higher mix of lower commission rate items sold. We would expect
the take rate in I&C to increase in the second half, driven by the updated
pricing structure on the Proxibid marketplace as well as the contribution from
payments revenue.
Auction Services
Auction Services revenue of £4.2m increased 2% on a reported basis and
declined 7% on an organic basis. This decline was driven by strong
comparisons in the prior year when the uptake of white label solutions had
been elevated during Covid-19. We continue to see the benefits of enabling
auctioneers to access the online market through multiple channels and ATG's
increasingly integrated suite of products will enable more seamless
cross-listing across ATG marketplaces and ATG white label solutions.
Content
Content revenue declined by 6% to £1.5m. As expected, the segment saw a
fall in advertising volumes as auctioneers increasingly migrate their
marketing spend to the online channel.
Financial performance
Reported
HY 23 Restated(1) Movement
£m HY 22
£m
Revenue 67.3 57.7 17%
Cost of sales (21.3) (18.6) 15%
Gross profit 46.0 39.1 18%
Administrative expenses (36.7) (30.0) 22%
Other operating income 0.5 0.1 400%
Operating profit 9.8 9.2 7%
Adjusted EBITDA (as defined in note 3) 31.5 26.8 18%
Finance income 0.1 - 100%
Finance cost (9.2) (5.5) 67%
Net finance costs (9.1) (5.5) (65)%
Profit before tax 0.7 3.7 (81)%
Income tax 11.2 (1.6) 800%
Profit for the period attributable to the equity holders of the Company 11.9 2.1 467%
1. The HY 22 profit attributable to equity holders has been
restated by £1.7m. Full details are provided in note 1 of the Condensed
Consolidated Interim Financial Statements.
Operating profit
The Group reported an operating profit of £9.8m compared with £9.2m in HY
22, driven by the increase in high gross margin commission and fixed fees
revenue, which offset an increase to the Group's administrative expenses.
Gross profit increased 18% to £46.0m, reflecting revenue growth and a high
flow-through of revenue to gross profit. The gross profit margin of 68% was
broadly flat compared to the prior period as the growth in high margin
commission and fixed fees revenue offset the dilutive gross margin impact from
the growth in payment's revenue.
The Group's administrative expenses increased to £36.7m, driven by the full
year impact of investments in senior management made in FY 22 to support
future growth, an increase in amortisation costs, the adverse impact from
foreign exchange rates, an increase in share-based payments expense and
one-off exceptional costs related to the acquisition of ESN. Amortisation
costs of £15.4m increased by £0.8m compared to HY 22 due to the adverse
impact of foreign exchange rates and the additional acquired intangible assets
in relation to ESN. The share-based payments expense of £3.9m increased
from £2.5m, reflecting the impact of one-off awards for new members of the
senior management team and additional grants awarded in December 2022.
Exceptional costs of £1.7m (HY 22: nil) relate to the acquisition of ESN.
Excluding the impact of exceptional costs, acquired amortisation and
share-based payments, administrative expenses would have increased by £2.3m,
reflecting the movement in foreign exchange and investments in the business to
support future growth.
Adjusted EBITDA
Adjusted EBITDA increased from £26.8m in the six months ended 31 March 2022
to £31.5m, driven by revenue growth, a high flow-through of revenue to
adjusted EBITDA and the contribution from ESN. Adjusted EBITDA margin of 47%
increased by 1ppt as strong growth in high margin revenue offset the full-year
impact of investments made in FY 22 to support future growth.
Net finance costs
Net finance costs were £9.1m in HY 23 (HY 22 restated: £5.5m). Finance
costs of £9.2m (HY 22 restated: £5.5m) primarily relate to interest on the
US dollar-denominated Senior Term Facility in addition to non-cash foreign
exchange losses of £3.7m related to intergroup loan balances. The increase
in finance costs compared to HY 22 was also due to an increase in the interest
rate on the Senior Facility, which is linked to the Secured Overnight
Financing Rate ("SOFR"), as well as the unfavourable movement in foreign
exchange rates with the interest payable in US dollars. In the period, the
Group pre-paid $53.7m of the Senior Term Loan facility. This repayment was
partially offset by the net $21.7m drawdown on our Revolving Credit Facility
to fund the ESN acquisition, which carries a similar interest rate that of to
the Senior Loan Facility. Finance costs also include commitment fees on the
Revolving Credit Facility. Prior period finance costs related to interest
costs on our Senior Term Facility, commitment fees, foreign exchange losses
and the movement in contingent consideration.
Profit before tax
After the impact of net finance costs, the Group reported a profit before tax
of £0.7m, a decrease from £3.7m (restated) in the prior period due to the
increase in net finance costs, which offset the higher operating profit
year-on-year.
Taxation
In the period, there was a tax credit of £11.2m (HY 22 restated: expense of
£1.6m), arising from the profit in the period and a deferred tax credit on
unrealised foreign exchange differences and non-deductible foreign exchange
differences on intergroup loan balances.
The tax charge is based on the effective tax rate estimated on a full year
basis, being applied to reported profit for the six months ended 31 March
2023. The Group's forecast effective tax rate is 21% which excludes the impact
of discreet tax items related to foreign exchange movements and tax rate
changes. The Group's effective tax rate for the six-month period is 1,462%
which reflects the net impact of foreign exchange movements of £11.2m on the
deferred tax liability and £1.0m for change in the blended US tax rate.
Earnings per share and adjusted earnings per share
Basic earnings per share was 9.9p, compared to 1.8p (restated) in the prior
period and diluted earnings per share was 9.7p compared to 1.8p (restated).
The increase was driven by the deferred tax credit on unrealised foreign
exchange differences partially offset by the decrease in profit before tax
compared to the prior period. The weighted average number of shares in issue
during the period was 120.7m (HY 22: 120.2m shares).
Adjusted diluted earnings per share of 16.0p (HY 22: 13.4p) is based on profit
after tax adjusted to exclude share-based payment expense, exceptional items
(operating and finance costs including foreign exchange gains and losses),
amortisation of acquired intangible assets and any related tax effects. The
increase is due to higher adjusted earnings for the period, partially offset
by an increase in the weighted average number of ordinary shares and dilutive
options.
A reconciliation of the Group's diluted earnings per share 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 estates 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 British pound sterling with a mix of revenues
included in the table below.
Revenue HY 23 HY 22
£m £m
United Kingdom 9.7 9.4
North America 55.5 46.4
Germany 2.1 1.9
Total 67.3 57.7
The pound sterling weakened by 10.4% against the US dollar and weakened by
4.2% on an average rate basis against the euro compared to HY 22, as shown in
the table below.
Average rate Closing rate
HY 23 HY 22 Movement FY 22 HY 23 HY 22 Movement FY 22
Euro 1.14 1.19 (4.2)% 1.18 1.14 1.18 (3.4)% 1.13
US dollar 1.20 1.34 (10.4)% 1.27 1.24 1.31 (5.3)% 1.12
When comparing revenue in HY 22 to HY 23, changes to currency exchange rates
had a favourable impact on revenue of £5.4m. Partially offsetting this, the
changes to foreign currency exchange rates had an unfavourable movement on the
Group's cost of sales and administrative expenses of £3.4m when compared to
HY 22.
The Group has loans and borrowings of $172m with interest costs sensitive to
movements in foreign currency. The movement in the US dollar resulted in
unfavourable movements in interest costs of £0.4m compared to HY 22.
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
£11.2m.
The strengthening of the pound sterling against the US dollar during the year
has given rise to a loss of £61.4m on assets held. A £51.7m loss has been
recognised within the foreign currency translation reserve relating to the net
impact of foreign exchange differences arising on the translation of
foreign operations.
Statement of financial position
Overall net assets at 31 March 2023 have decreased by £25.6m to £513.7m
since 30 September 2022. Total assets decreased by £79.4m, driven by the
cash outflow of £44.7m primarily related to the purchase of ESN and the
prepayment of our Senior Term Facility, net of the drawdown of the Revolving
Credit Facility. Goodwill and intangible assets also decreased by £37.7m in
the period, with the goodwill and intangible asset addition of £32.9m
acquired with ESN and other additions of £3.9m being offset by foreign
exchange movements of £59.9m and the amortisation charge of £15.4m. Total
liabilities decreased by £53.7m, primarily due a reduction in loans and
borrowings of £43.2m and a decrease in the deferred tax liabilities of
£17.0m largely driven by the movement on the unrealised foreign exchange
differences, and the unwind of the capitalised acquisition intangible assets.
Cash flow and adjusted net debt
The Group generated strong cash flow from operations (before tax) at £24.6m
(HY 22: £22.1m) driven by the Group's high pass-through of revenue to
adjusted EBITDA and its capital light model. Additions to internally
generated software and to property, plant and equipment in the period was
£4.1m (HY 22: £1.8m) and largely relates to our programme migrating the
Group to a single technology platform, as well as planned investments to
improve our product offering, including new functionality within payments.
The Group pre-paid $53.7m of its Senior Term Loan Facility in the first half
and expects to continue to make prepayments to the Facility through FY 23.
There are no pre-payment penalties associated with the Facility. The Group
paid a cash consideration of $30.0m for the acquisition of ESN on 6 February
2023 using cash available as well as utilising a partial withdrawal of its
Revolving Credit Facility with the Senior Facility.
Adjusted net debt was £132.4m as at 31 March 2023 (restated 30 September
2022: adjusted net debt of £131.4m), with the impact of the acquisition
offsetting cash generation from operations and the movement in foreign
exchange. The Group had cash at bank of £5.2m and borrowings of £137.6m
(restated 30 September 2022: cash at bank of £49.4m and borrowings of
£180.8m). The adjusted net debt/ adjusted last twelve months EBITDA ratio
was 2.3x as at 31 March 2023.
The Group's adjusted free cash flow was £21.8m (HY 22: £24.3m) with a
conversion rate of 69% (HY 22: 91%). The conversion rate was impacted by the
timing of working capital payments driven by stronger trading activity in
March, an increase in additions to internally generated software as well as
the impact from the size and timing of performance related payments. A
reconciliation of cash generated from operations to adjusted free cash flow
and adjusted free cash flow conversion is included below and note 3:
HY 23 HY 22
£m
£m
Adjusted EBITDA 31.5 26.8
Cash generated from operations 24.6 22.1
Adjustments for:
Exceptional items 1.7 -
Working capital from exceptional and other items (0.4) 4.0
Additions to internally generated software (3.9) (1.6)
Additions to property, plant & equipment (0.2) (0.2)
Adjusted free cash flow 21.8 24.3
Adjusted free cash flow conversion 69% 91%
Risk and uncertainties
The Board retains ultimate responsibility for the Group's Risk Management
Framework and continues to undertake ongoing monitoring to review the
effectiveness of the Framework and ensure the principal risks of the Group are
being appropriately mitigated in line with its risk appetite. The principal
risks and uncertainties which could impact the Group for the remainder of the
current financial year remain those detailed on pages 40 to 44 of the 2022
Annual Report available at www.auctiontechnologygroup.com. A summary of the
risks is included as follows:
1. IT infrastructure - stability and business continuity of auction
platforms
2. IT infrastructure - inability to keep pace with innovation and changes
3. Data security/data loss
4. Competition
5. Failure to deliver expected benefits from acquisitions and/or integrate
the business into the Group effectively
6. Attracting and retaining skills/capabilities and succession planning
7. Regulatory compliance
8. Governance and internal control
9. Economic and geo-political uncertainty
The Directors note that the global geopolitical outlook suggests continuing
potential for short-term volatility and instability across markets. A number
of these risks and uncertainties could have an impact on the Group's
performance over the remaining six months of the financial year and could
cause actual results to differ from expected and historical results.
Related parties
Related party disclosures are detailed in note 15.
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
Condensed Consolidated Statement of Profit or Loss and Other Comprehensive
Income or Loss
for the six months ended 31 March 2023
Note Unaudited Restated Audited
six months Unaudited Year
ended six months ended
31 March ended 30 September
2023 31 March 2022
£000 2022 £000
£000
Revenue 4,5 67,311 57,738 119,846
Cost of sales (21,345) (18,607) (40,101)
Gross profit 45,966 39,131 79,745
Administrative expenses (36,638) (30,051) (63,646)
Other operating income 513 103 718
Operating profit 4 9,841 9,183 16,817
Finance income 6 73 1 2,127
Finance cost 6 (9,151) (5,452) (9,665)
Net finance costs 6 (9,078) (5,451) (7,538)
Profit before tax 4 763 3,732 9,279
Income tax 7 11,160 (1,620) (15,406)
Profit/(loss) for the period attributable to the equity holders of the Company 11,923 2,112 (6,127)
Other comprehensive (loss)/income for the period 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 (51,651) 10,041 86,126
Fair value gain/(loss) arising on hedging instruments during the period 13,288 - (16,173)
Tax relating to these items (2,924) - 3,074
Other comprehensive (loss)/income for the period, net of tax (41,287) 10,041 73,027
Total comprehensive (loss)/income for the period attributable to the equity (29,364) 12,153 66,900
holders of the Company
Earnings/(loss) per share p p p
Basic 8 9.9 1.8 (5.1)
Diluted 8 9.7 1.7 (5.1)
The above results are derived from continuing operations.
The Consolidated Statement of Profit or Loss and Other Comprehensive Income or
Loss for the six months ended 31 March 2022 has been restated as detailed in
note 1.
Condensed Consolidated Statement of Financial Position
as at 31 March 2023
Note Unaudited Restated Audited
31 March Unaudited 30 September
2023 31 March 2022
£000 2022 £000
£000
ASSETS
Non-current assets
Goodwill 10 469,085 430,703 488,978
Other intangible assets 10 228,735 227,506 246,475
Property, plant and equipment 729 471 526
Right of use assets 2,126 1,919 1,714
Trade and other receivables 89 85 90
Total non-current assets 700,764 660,684 737,783
Current assets
Trade and other receivables 18,489 16,087 15,790
Tax asset 719 1,408 1,565
Cash and cash equivalents 11 7,622 35,219 51,817
Total current assets 26,830 52,714 69,172
Total assets 727,594 713,398 806,955
LIABILITIES
Non-current liabilities
Loans and borrowings 12 (137,604) (140,643) (149,862)
Tax liabilities (1,067) (1,392) (1,074)
Lease liabilities (1,656) (1,206) (1,094)
Deferred tax liabilities 13 (47,627) (51,614) (64,618)
Total non-current liabilities (187,954) (194,855) (216,648)
Current liabilities
Trade and other payables (24,756) (20,607) (18,780)
Loans and borrowings 12 - (14,276) (30,983)
Tax liabilities (591) (625) (475)
Lease liabilities (606) (837) (746)
Total current liabilities (25,953) (36,345) (50,984)
Total liabilities (213,907) (231,200) (267,632)
Net assets 513,687 482,198 539,323
EQUITY
Share capital 14 12 12 12
Share premium 235,950 235,903 235,903
Other reserve 238,385 238,385 238,385
Capital redemption reserve 5 5 5
Share option reserve 37,557 32,157 34,690
Foreign currency translation reserve 28,377 6,828 66,740
Retained losses (26,599) (31,092) (36,412)
Total equity 513,687 482,198 539,323
The Consolidated Statement of Financial Position at 31 March 2022 has been
restated as detailed in note 1.
Condensed Consolidated Statement of Changes in Equity
for the six months ended 31 March 2023
Share capital Share premium Other reserve Capital Share option reserve Foreign currency translation reserve Retained losses Total
£000 £000 £000 redemption £000 £000 £000 equity
reserve £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
Issue of options as consideration for a business combination, net of - - - - 28,346 - - 28,346
transaction
costs and tax
Movement in equity-settled share-based payments - - - - 4,695 - 78 4,773
Income tax relating to items taken directly to equity - - - - - - (150) (150)
30 September 2022 12 235,903 238,385 5 34,690 66,740 (36,412) 539,323
Profit for the period - - - - - - 11,923 11,923
Other comprehensive loss - - - - - (38,363) (2,924) (41,287)
Total comprehensive (loss)/income for the period - - - - - (38,363) 8,999 (29,364)
Transactions with owners
Exercise of share options - 47 - - - - - 47
Movement in equity-settled share-based payments - - - - 2,867 - 814 3,681
31 March 2023 12 235,950 238,385 5 37,557 28,377 (26,599) 513,687
Share capital Share premium Other reserve Capital Share option reserve Foreign currency translation reserve Retained losses Total
£000 £000 £000 redemption £000 £000 £000 equity
reserve £000
£000
1 October 2021 (restated see note 1) 12 235,903 238,385 5 1,649 (3,213) (33,287) 439,454
Profit for the period - - - - - - 2,112 2,112
Other comprehensive income/(loss) - - - - - 10,041 - 10,041
Total comprehensive income for the period - - - - - 10,041 2,112 12,153
Transactions with owners
Issue of options as consideration for a business, net of transactions costs - - - - 28,346 - - 28,346
and tax
Movement in equity-settled share-based payments - - - - 2,162 - 51 2,213
Tax relating to items taken directly to equity - - - - - - 32 32
31 March 2022 (restated see note 1) 12 235,903 238,385 5 32,157 6,828 (31,092) 482,198
The Consolidated Statement of Changes in Equity at 31 March 2022 has been
restated as detailed in note 1.
Condensed Consolidated Statement of Cash Flows
for the six months ended 31 March 2023
Note Unaudited Restated Audited
six months Unaudited Year
ended six months ended
31 March ended 30 September
2023 31 March 2022
£000 2022 £000
£000
Cash flows from operating activities
Profit before tax 763 3,732 9,279
Adjustments for:
Amortisation of acquired intangible assets 10 13,748 12,855 26,591
Amortisation of internally generated software 10 1,612 1,725 4,118
Depreciation of property, plant and equipment 165 135 280
Depreciation of right of use assets 475 467 920
Share-based payment expense 3,918 2,450 5,226
Net exchange differences - 25 -
Finance income 6 (73) (1) (2,127)
Finance costs 6 9,151 5,452 9,665
Operating cash flows before movements in working capital 29,759 26,840 53,952
(Increase)/decrease in trade and other receivables (3,901) (2,707) 304
Decrease in trade and other payables (1,225) (2,073) (4,847)
Cash generated by operations 24,633 22,060 49,409
Income taxes paid (4,259) (6,123) (9,981)
Net cash from operating activities 20,374 15,937 39,428
Cash flows from investing activities
Acquisition of subsidiaries, net of cash acquired 9 (24,937) (358,763) (358,763)
Additions to internally generated software 10 (3,885) (1,621) (4,209)
Payment for property, plant and equipment (248) (130) (270)
Payment of contingent consideration - (17,295) (20,946)
Net cash used in investing activities (29,070) (377,809) (384,188)
Cash flows from financing activities
Payment of contingent consideration - (1,222) (1,222)
Repayment of loans and borrowings (51,777) (359) (359)
Proceeds from loans and borrowings 21,250 - -
Interest element of lease payments (61) (73) (137)
Capital element of lease payments (449) (481) (959)
Issue of new share capital, net of share issue costs 47 - -
Interest paid (5,026) (1,608) (7,283)
Net cash used in financing activities (36,016) (3,743) (9,960)
Cash and cash equivalents at beginning of the period 51,817 397,451 397,451
Net decrease in cash and cash equivalents (44,712) (365,615) (354,720)
Effect of foreign exchange rate changes 517 3,383 9,086
Cash and cash equivalents at the end of the period 7,622 35,219 51,817
The Consolidated Statement of Cash Flows at 31 March 2022 has been restated as
detailed in note 1.
Notes to the Condensed Consolidated Interim 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.
These Condensed Consolidated Interim Financial Statements have been approved
for issue on 17 May 2023.
These Condensed Consolidated Interim Financial Statements for the period do
not constitute statutory financial statements within the
meaning of s434 of the Companies Act 2006. Statutory accounts for the year
ended 30 September 2022 have been delivered to the Registrar of Companies.
They are also available on the Group's website
(www.auctiontechnologygroup.com). The audit report for those accounts was
unqualified, did not draw attention to any matters by way of emphasis without
qualifying the report and did not contain a statement under 498(2) or (3) of
the Companies Act 2006. These Condensed Consolidated Interim Financial
Statements have been reviewed and not audited.
Basis of preparation
These Condensed Consolidated Interim Financial Statements have been prepared
in accordance with United Kingdom adopted International Accounting Standard
34, "Interim Financial Reporting". The Condensed Consolidated Interim
Financial Statements do not include all the information required for full
annual financial statements and should be read in conjunction with the Group's
Annual Report and Accounts for the year ended 30 September 2022 which have
been prepared in accordance with the requirements of the Companies Act 2006.
In determining the information to be disclosed in the notes to the Condensed
Consolidated Interim Financial statements in accordance with IAS 34, the Group
has taken into account its materiality in relation to these Condensed
Consolidated Interim Financial Statements.
The Condensed Consolidated Interim Financial Statements have been prepared
under the historical cost convention, except for certain financial instruments
which have been measured at fair value.
The accounting policies applied in these Condensed Consolidated Interim
Financial Statements are the same as those applied in the most recent annual
financial statements except for amortisation of other intangible assets and
taxes on income. The acquisition of EstateSales.NET ("ESN") increases the
range of the estimated useful lives on customer relationships from 7 - 14
years to 2 - 14 years. Tax on income in the interim period is recognised by
applying the effective tax rate that would be applicable to the expected full
year profit or loss to the period's result.
The Group's deferred consideration is classified as level 2 (for further
details of fair valuation methods used see note 9). There are no other
financial instruments measured at fair value on a recurring basis.
New and amended accounting standards adopted by the Group
There were no new standards adopted by the Group in the period but the
following amendments became applicable during the current reporting period:
· Annual Improvements to IFRS Standards 2018-2020
· Amendments to IAS 16: Property, Plant and Equipment: proceeds
before intended use
· Amendments to IFRS 3: Business Combinations: reference to
conceptual framework
These amendments did not have a material impact on the Group's accounting
policies and have therefore not resulted in any changes in these Condensed
Consolidated Interim Financial Statements.
Going concern
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 conversion rate
decline and delay in the roll out of payments technology 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. As at 31 March 2023 the Group has adjusted net
debt of £132.4m and is in a net current asset position.
After due consideration, the Directors have concluded that there is a
reasonable expectation that the Group has adequate resources to continue in
operational existence for at least 12 months from the date of this report. For
this reason, the Directors continue to adopt the going concern basis in
preparing these Condensed Consolidated Interim Financial Statements for the
Group.
Restatements
In the second half of FY22, following the acquisition of LiveAuctioneers, a
review was performed to ensure that the functional currency of each subsidiary
within the Group had been correctly determined given the revised structure and
operations of the Group.
As a result of the review, the functional currency for all entities was deemed
to be the currency of the primary economic environment in which the entities
operate with no changes proposed, except for ATG Media US Inc., Proxibid Bidco
Inc., Platinum Parent Inc., Platinum Intermediate Inc., Platinum Purchaser
Inc. and LiveAuctioneers Inc. The functional currency of these entities was
deemed to be pound sterling rather than US dollars. The LiveAuctioneer
entities (Platinum Parent Inc., Platinum Intermediate Inc., Platinum Purchaser
Inc. and LiveAuctioneers Inc.) have been translated into the new functional
currency, using the exchange rate at 1 October 2021, the date they became part
of the Group. As ATG Media US Inc. and Proxibid Bidco Inc. were part of the
Group previously a prior period adjustment was required to be disclosed in the
Group's Annual Report and Accounts for the year ended 30 September 2022.
1 October 2021
The restatement for the prior period adjustment recognised for the year ending
30 September 2021 is aligned with the Consolidated Statement of Changes in
Equity in the Group's Annual Report and Accounts for the year ended 30
September 2022.
31 March 2022
As the review took place in the second half of FY 22 a restatement has been
recognised for the six months ended 31 March 2022 adjusting foreign currency
reserves, finance costs and deferred and income tax. These changes have no
impact on the adjusted measures used as part of the Group's alternative
performance measures.
Below is a summary of the restatement for the six months ended 31 March 2022,
outlining the primary statements and financial statement line items impacted:
Reported Change Restated
31 March
31 March
£000
2022 2022
£000 £000
Consolidated Statement of Profit or Loss and Other Comprehensive Income or
Loss
Finance costs (5,931) 479 (5,452)
Net finance costs (5,930) 479 (5,451)
Profit before tax 3,253 479 3,732
Income tax 539 (2,159) (1,620)
Profit for the year attributable to the equity holders of the Company 3,792 (1,680) 2,112
Foreign exchange differences on translation of foreign operations 10,520 (479) 10,041
Tax relating to these items (1,805) 1,805 -
Other comprehensive income for the year, net of tax 8,715 1,326 10,041
Basic earnings per share (in pence) 3.2 (1.4) 1.8
Diluted earnings per share (in pence) 3.1 (1.4) 1.7
Consolidated Statement of Financial Position and Consolidated Statement of
Changes in Equity
Deferred tax liabilities (50,141) (1,473) (51,614)
Current tax assets 826 582 1,408
Current tax liabilities (1,162) 537 (625)
Foreign currency translation reserves 9,573 (2,745) 6,828
Retained losses (33,483) 2,391 (31,092)
2. Significant judgements and key sources of estimation uncertainty
The preparation of the Group's Condensed Consolidated Interim Financial
Statements requires the use of certain judgements, estimates and assumptions
that affect the reported amounts of assets, liabilities, income and expenses.
In preparing these Condensed Consolidated Interim Financial Statements, the
significant judgements made by management in applying the Group's accounting
policies and the key sources of estimation uncertainty were the same as those
that applied to the most recent annual financial statements for the year ended
30 September 2022 except for the judgements outlined below which are no longer
applicable.
The significant judgements disclosed in the most recent annual financial
statements for the year ended 30 September 2022 no longer applicable are:
· LiveAuctioneers consideration
· Functional currency of subsidiaries
There are no new significant judgements or estimates during the period.
3. Alternative performance measures
The Group uses a number of alternative performance measures ("APMs") in
addition to those measures reported in accordance with United Kingdom adopted
International Accounting Standards ("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 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.
Net finance costs and income tax for the six months ended 31 March 2022 have
been restated as detailed in note 1.
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:
Unaudited Restated Audited
six months Unaudited Year
ended six months ended
31 March ended 30 September
2023 31 March 2022
£000 2022 £000
£000
Profit before tax 763 3,732 9,279
Adjustments for:
Net finance costs (note 6) 9,078 5,451 7,538
Amortisation of acquired intangible assets (note 10) 13,748 12,855 26,591
Amortisation of internally generated software (note 10) 1,612 1,725 4,118
Depreciation of property, plant and equipment 165 135 280
Depreciation of right of use assets 475 467 920
Share-based payment expense 3,918 2,450 5,226
Exceptional operating items 1,746 - -
Adjusted EBITDA 31,505 26,815 53,952
The following table provides the calculation of adjusted EBITDA margin which
represents adjusted EBITDA divided by revenue:
Unaudited Unaudited Audited
six months six months Year
ended ended ended
31 March 31 March 30 September
2023 2022 2022
£000 £000 £000
Reported revenue (note 4,5) 67,311 57,738 119,846
Adjusted EBITDA 31,505 26,815 53,952
Adjusted EBITDA margin 47% 46% 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:
Unaudited Unaudited Audited
six months six months Year
ended ended ended
31 March 31 March 30 September
2023 2022 2022
£000 £000 £000
Acquisition costs (1,746) - -
Exceptional operating items (1,746) - -
For the six months ended 31 March 2023, the Group's exceptional costs were in
respect of the costs relating to the acquisition of ESN on 6 February 2023.
There were no exceptional operating items for the six months ended 31 March
2022 and 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 accrued over the period. The net cash outflow related to
exceptional operating items in the period is £1.3m (31 March 2022: £4.0m, 30
September 2022: £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:
Unaudited Restated Audited
six months Unaudited Year
ended six months ended
31 March ended 30 September
2023 31 March 2022
£000 2022 £000
£000
Profit/(loss) attributable to equity shareholders of the Company 11,923 2,112 (6,127)
Adjustments for:
Amortisation of acquired intangible assets 13,748 12,855 26,591
Exceptional finance items 3,756 2,060 (221)
Share-based payment expense 3,918 2,450 5,226
Exceptional operating items 1,746 - -
Deferred tax on unrealised foreign exchange differences (7,573) 1,474 15,899
Tax on adjusted items (7,866) (4,633) (5,254)
Adjusted earnings 19,652 16,318 36,114
Unaudited Unaudited Audited
six months six months Year
ended ended ended
31 March 31 March 30 September
2023 2022 2022
Number Number Number
Weighted average number of shares (note 8) 120,824,823 120,205,794 120,364,831
Diluted weighted average number of shares (note 8) 122,686,044 122,194,936 122,441,916
p
Adjusted diluted earnings per share (in pence) 16.0 13.4 29.5
The basis for treating these items not already defined above as adjusting is
as follows:
Amortisation of acquired intangible assets acquired 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. 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
management provides users of its Group 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 at HY 23 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 proforma revenue from
reported results:
Unaudited Unaudited
six months six months
ended ended
31 March 31 March
2023 2022
£000 £000
Reported revenue 67,311 57,738
Acquisition related adjustment (1,251) -
Constant currency adjustment - 5,438
Organic revenue 66,060 63,176
Increase in organic revenue % 5%
Adjusted net debt
Adjusted net debt comprises external borrowings net of arrangement fees, cash
and cash equivalents and allows management to monitor the indebtedness of the
Group. Adjusted net debt excludes lease liabilities and restricted cash (see
note 11).
Cash at bank in note 11 has been updated to exclude cash held by the Trustee
of the Group's Employee Benefit Trust. This results in a restatement for the
year ended 30 September 2022 and the six months ended 31 March 2022 (see note
11). This change in policy provides users with more reliable information about
the nature of the Group's cash and cash equivalents.
Unaudited Restated Restated
31 March Unaudited Audited
2023 31 March 30 September
£000 2022 2022
£000 £000
Cash at bank (note 11) 5,217 32,817 49,427
Current loans and borrowings (note 12) - (14,276) (30,983)
Non-current loans and borrowings (note 12) (137,604) (140,643) (149,862)
Total loans and borrowings (137,604) (154,919) (180,845)
Adjusted net debt (132,387) (122,102) (131,418)
Adjusted free cash flow and adjusted free cash flow conversion
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 IFRS
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 exceptional items.
Unaudited Unaudited Audited
six months six months Year
ended ended ended
31 March 31 March 30 September
2023 2022 2022
£000 £000 £000
Adjusted EBITDA 31,505 26,815 53,952
Cash generated from operations 24,633 22,060 49,409
Adjustments for:
Exceptional operating items 1,746 - -
Working capital from exceptional and other items (452) 3,962 4,983
Additions to internally generated software (note 10) (3,885) (1,621) (4,209)
Additions to property, plant and equipment (248) (130) (270)
Adjusted free cash flow 21,794 24,271 49,913
Adjusted free cash flow conversion (%) 69% 91% 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 activities of the Group. ESN which was acquired in the period, has
been allocated to the Arts and Antiques segment. This is on the basis that ESN
traditionally includes items sold on Arts and Antique platforms and the
purpose of the acquisition was to expand its Arts and 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") auction revenues: focused on
offering auction houses that specialise in the sale of arts and antiques
access to the platforms the-saleroom.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 and the liveauctioneers.com payments
platform. 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") auction revenues: 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. 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
to 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 period by reportable segment is as follows:
Unaudited six months ended 31 March 2023
A&A I&C Auction Services Content Centrally allocated Total
£000 £000 £000 £000 costs £000
£000
Revenue 31,839 29,746 4,192 1,534 - 67,311
Adjusted EBITDA (see note 3 for definition and reconciliation) 26,162 25,492 2,769 538 (23,456) 31,505
Amortisation of intangible assets (note 10) (9,778) (4,888) (694) - - (15,360)
Depreciation of property, plant and equipment (89) (74) (2) - - (165)
Depreciation of right of use assets (287) (150) (5) (33) - (475)
Share-based payment expense (1,171) (395) (38) - (2,314) (3,918)
Exceptional operating items (note 3) (1,746) - - - - (1,746)
Operating profit/(loss) 13,091 19,985 2,030 505 (25,770) 9,841
Net finance costs (note 6) - - - - (9,078) (9,078)
Profit/(loss) before tax 13,091 19,985 2,030 505 (34,848) 763
Unaudited six months ended 31 March 2022 (restated)
A&A I&C Auction Services Content Centrally allocated Total
£000 £000 £000 £000 costs £000
£000
Revenue 26,948 25,132 4,060 1,598 - 57,738
Adjusted EBITDA (see note 3 for definition and reconciliation) 22,124 21,965 2,899 559 (20,732) 26,815
Amortisation of intangible assets (note 10) (8,526) (5,453) (601) - - (14,580)
Depreciation of property, plant and equipment (40) (87) (3) (5) - (135)
Depreciation of right of use assets (236) (199) (8) (24) - (467)
Share-based payment expense (768) (416) (1,205) (61) - (2,450)
Operating profit/(loss) 12,554 15,810 1,082 469 (20,732) 9,183
Net finance costs (note 6) - - - - (5,451) (5,451)
Profit/(loss) before tax 12,554 15,810 1,082 469 (26,183) 3,732
Audited 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 which exclude deferred tax 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.
Unaudited 31 March 2023 Unaudited 31 March 2022 Audited 30 September 2022
Total Additions Total Additions Total Additions
non-current assets to non-current non-current assets to non-current non-current assets to non-current
£000 assets £0 assets £00 assets
£000 £000 £000
A&A 485,388 35,351 465,211 412,569 506,484 395,683
I&C 187,109 2,614 167,875 39,402 199,504 58,829
Auction Services 28,209 265 27,490 76 31,704 201
Content 58 - 108 6 91 15
700,764 38,230 660,684 452,053 737,783 454,728
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
Unaudited Unaudited Audited
six months six months Year
ended ended ended
31 March 31 March 30 September
2023 2022 2022
£000 £000 £000
Product and customer types
A&A 31,839 26,948 55,279
I&C 29,746 25,132 52,775
Auction Services 4,192 4,060 8,636
Content 1,534 1,598 3,156
67,311 57,738 119,846
Primary geographical markets
United Kingdom 9,717 9,402 18,539
North America 55,511 46,422 97,765
Germany 2,083 1,914 3,542
67,311 57,738 119,846
Timing of transfer of goods and services
Point in time 62,042 53,033 110,539
Over time 5,269 4,705 9,307
67,311 57,738 119,846
Due to the nature of the Group's business, it is not materially affected by
seasonal or cyclical trading.
6. Net finance costs
Unaudited Restated Audited
six months Unaudited Year
ended six months ended
31 March ended 30 September
2023 31 March 2022
£000 2022 £000
£000
Foreign exchange gain - - 2,070
Interest income 73 1 57
Finance income 73 1 2,127
Interest on loans and borrowings (5,090) (3,094) (7,214)
Amortisation of finance costs (244) (225) (465)
Movements in contingent consideration - (1,860) (1,849)
Movements in deferred consideration (54) - -
Foreign exchange loss (3,702) (200) -
Interest on lease liabilities (61) (73) (137)
Finance cost (9,151) (5,452) (9,665)
Net finance costs (9,078) (5,451) (7,538)
7. Taxation
Unaudited Restated Audited
six months Unaudited Year
ended six months ended
31 March ended 30 September
2023 31 March 2022
£000 2022 £000
£000
Current tax
Current tax on profit/(loss) for the period 2,289 4,816 11,395
Adjustments in respect of prior years - - (903)
Total current tax 2,289 4,816 10,492
Deferred tax
Current year (12,454) (1,670) 6,328
Adjustments from change in tax rates (1,047) (1,608) (564)
Adjustments in respect of prior years 52 82 (850)
Deferred tax (13,449) (3,196) 4,914
Tax (credit)/expense (11,160) 1,620 15,406
The tax on the Group's profit/(loss) before tax differs from the theoretical
amount that would arise using the standard tax rate applicable to the profits
of the Group as follows:
Unaudited Restated Audited
six months Unaudited Year
ended six months ended
31 March ended 30 September
2023 31 March 2022
£000 2022 £000
£000
Profit before tax 763 3,732 9,279
Tax at United Kingdom tax rate of 22% (2022: 19%) 168 709 1,763
Tax effect of:
Expenses not deductible for tax purposes 105 197 -
Additional items deductible for tax purposes - - (1,649)
Differences in overseas tax rates 393 (16) (1,317)
Deferred tax on unrealised foreign exchange differences (7,573) 1,474 15,899
Foreign exchange differences not (taxable)/deductible for tax purposes (3,258) 782 3,027
Adjustments from change in tax rates (1,047) (1,608) (564)
Adjustments in respect of prior years 52 82 (1,753)
Tax (credit)/expense (11,160) 1,620 15,406
The total tax expense recognised based on management's best estimate of the
effective tax rate for the full year, excluding changes to US blended tax
rate, foreign exchange differences and exceptional operating items, is 21% (31
March 2022: 19%) applied to the profit before tax of the six-month period.
Deferred tax credit on unrealised foreign exchange differences of £7.6m
(charge of - 31 March 2022: £1.5m, 30 September 2022: £15.9m) arises from US
holding companies with pound sterling as their functional currency but under
US tax rules remains US dollars. Per the US tax basis these holding companies
included an unrealised foreign exchange loss of £30.0m on intra-group loans
denominated in pound sterling totalling £295.6m (gain of - 31 March 2022:
£5.9m, 30 September 2022: £61.9m). This deferred tax has arisen as under US
tax rules foreign as exchange differences are not taxable until they are
realised.
Profit before tax includes foreign exchange gain of £12.9m from US holding
companies on their US dollar denominated intra-group balances (loss of - 31
March 2022: £3.1m, 30 September 2022: £15.9m) which are not
(taxable)/deductible for US tax purposes giving rise to a permanent difference
of £3.3m (31 March 2022: £0.8m, 30 September 2022: £3.0m).
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:
Unaudited Restated Audited
six months Unaudited Year
ended six months ended
31 March ended 30 September
2023 31 March 2022
£000 2022 £000
£000
Other comprehensive (loss)/income
Current tax (2,924) - 3,074
Equity
Deferred tax - 32 (150)
Tax recognised in other comprehensive income includes income 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 per share is calculated by dividing the
profit/(loss) for the period attributable to ordinary shareholders by the
weighted average number of ordinary shares outstanding during the period,
after excluding the weighted average number of non-vested ordinary shares.
Diluted earnings per share is calculated by dividing the profit/(loss) for the
period attributable to ordinary shareholders by the weighted average number of
ordinary shares including non-vested/non-exercised ordinary shares. During the
period and prior period, the Group awarded conditional share awards to
Directors and certain employees through an LTIP. For the year ended 30
September 2022, the non-vested/non-exercised ordinary shares are anti-dilutive
given the loss for the period and are therefore excluded from the weighted
average number of ordinary shares for the purpose of diluted earnings per
share calculation.
Unaudited Restated Unaudited Audited
six months six months Year
ended ended ended
31 March 31 March 30 September
2023 2022 2022
£000 £000 £000
Profit/(loss) attributable to equity shareholders of the Company 11,923 2,112 (6,127)
Number Number Number
Weighted average number of shares 120,824,823 120,205,794 120,364,831
Weighted average number of shares held by the Employee Benefit Trust (135,521) (26,501) (61,741)
Weighted average number of shares 120,689,302 120,179,293 120,303,090
Dilutive share options 1,996,742 2,015,643 2,138,826
Diluted weighted average number of shares 122,686,044 122,194,936 122,441,916
p p p
Basic earnings/(loss) per share 9.9 1.8 (5.1)
Diluted earnings/(loss) per share 9.7 1.7 (5.1)
9. 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 $40m (£33.2m), with an initial cash
payment of $30.2m (£25.1m), deferred consideration of $10m (£8.3m) payable
after 12 months and a working capital adjustment of $46,000 (£38,000).
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 (£7.9m). Exchange differences to reserves were recorded
within foreign exchange differences on translation of foreign operations in
the Condensed Consolidated Statement of Comprehensive Income or Loss. The
unwinding of discount of £0.4m will be reported as a finance cost in the
Condensed 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 Fair value Provisional
value adjustments fair value
£000 £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
Trade and other payables (438) - (438)
Lease liabilities (264) - (264)
Net assets on acquisition 322 14,126 14,448
Goodwill (note 10) 18,576
Total consideration 33,024
Consideration satisfied by:
Initial cash consideration 25,092
Deferred consideration 7,932
33,024
Net cash outflow arising on acquisition:
Initial cash consideration 25,092
Less: cash and cash equivalent balances acquired (155)
24,937
Acquired intangible assets
Acquired intangible assets represent customer relationships, auction
technology platform and brand for which amortisation of £0.4m has been
charged for the six months ended 31 March 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.
Deferred tax
Goodwill and acquired intangible assets of £32.5m 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 £1.7m (31 March 2022: £nil, 30 September 2022: £nil)
directly related to the business combination have been immediately expensed to
the Condensed Consolidated Statement of Profit or Loss as part of
administrative expenses and included within exceptional items (see note 3).
Between 6 February 2023 and 31 March 2023, ESN contributed £1.3m to Group
revenues and a profit before tax of £0.7m. If the acquisition had occurred on
1 October 2022, Group revenue would have been £69.5m and Group profit before
tax would have been £1.9m.
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
1 October 2021 6,569 46,870 9,546 939 63,924 4,153 141,160 209,237
Acquisition of business 24,494 120,023 21,457 - 165,974 1,820 281,341 449,135
Additions - - - - - 4,209 - 4,209
Amortisation (6,118) (17,436) (2,736) (301) (26,591) (4,118) - (30,709)
Exchange differences 5,029 25,943 5,016 154 36,142 962 66,477 103,581
30 September 2022 29,974 175,400 33,283 792 239,449 7,026 488,978 735,453
Acquisition of business (note 9) 2,161 9,559 2,635 - 14,355 - 18,576 32,931
Additions - - - - - 3,885 - 3,885
Amortisation (2,870) (9,246) (1,458) (174) (13,748) (1,612) - (15,360)
Exchange differences (2,837) (14,459) (2,833) (70) (20,199) (421) (38,469) (59,089)
31 March 2023 26,428 161,254 31,627 548 219,857 8,878 469,085 697,820
Software Customer relationships Brand Non-compete Total acquired intangible assets Internally generated software Goodwill Total
£000 £000 £000 agreement £000 £000 £000 £000
£000
1 October 2021 6,569 46,870 9,546 939 63,924 4,153 141,160 209,237
Acquisition of business 24,494 120,023 21,457 - 165,974 1,820 281,461 449,255
Additions - - - - - 1,621 - 1,621
Amortisation (3,003) (8,403) (1,293) (156) (12,855) (1,725) - (14,580)
Exchange differences 647 3,213 628 25 4,513 81 8,082 12,676
31 March 2022 28,707 161,703 30,338 808 221,556 5,950 430,703 658,209
At 31 March 2023, management have considered if any impairment indicators
exist and concluded no impairment is required. As at 30 September 2022, both
the A&A and Auction Services cash generating units had limited headroom
and were sensitive to a movement in any one of the key assumptions. Management
performed a 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 macro-economics. At 31 March 2023, management considers these
scenarios as disclosed in the Group's most recent Annual Report and Accounts
for the year ended 30 September 2022 to still be applicable.
11. Cash and cash equivalents
Cash and cash equivalents comprise cash at bank and in hand. The carrying
amount of these assets approximates to their fair value.
Unaudited Restated Restated
31 March Unaudited Audited
2023 31 March 30 September
£000 2022 2022
£000 £000
Cash at bank 5,217 32,817 49,427
Restricted cash 2,405 2,402 2,390
7,622 35,219 51,817
Restricted consists of cash held by the Trustee of the Group's Employee
Benefit Trust relating to share awards for employees. These funds are not
available to circulate within the Group on demand.
Cash at bank excludes cash held by the Trustee of the Group's Employee Benefit
Trust. This results in a restatement for the year ended 30 September 2022 and
the six months ended 31 March 2022. 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 loan and borrowings classified as financial liabilities
at amortised cost approximates to their fair value.
Unaudited Unaudited Audited
31 March 31 March 30 September
2023 2022 2022
£000 £000 £000
Current
Senior Term Facility - 14,276 30,983
- 14,276 30,983
Non-current
Senior Term Facility 120,019 140,643 149,862
Revolving Credit Facility 17,585 - -
137,604 140,643 149,862
137,604 154,919 180,845
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 six months ended 31 March
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.
- 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 2025, subject
to the optionality of a further 12-month extension. On 1 February 2023, $26.3m
(£21.3m) was drawn down to partly fund the acquisition of ESN (see note 9),
of which $4.6m (£3.8m) has been repaid during the six months ended 31 March
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 six months ended 31 March 2023.
13. Deferred taxation
The movement in net deferred tax liabilities is as follows:
Total
£000
1 October 2021 (8,894)
Acquisition of business (42,152)
Amount charged to Condensed Consolidated Statement of Profit or Loss (4,914)
Amount charged to equity (150)
Exchange differences (8,508)
30 September 2022 (64,618)
Amount credited to Condensed Consolidated Statement of Profit or Loss 13,449
Exchange differences 3,542
31 March 2023 (47,627)
The net deferred tax liabilities include deferred tax asset of £nil at 31
March 2023 (31 March 2022: £nil; 30 September 2022: £nil).
14. Share capital
Unaudited Unaudited Audited
31 March 31 March 30 September
2023 2022 2022
£000 £000 £000
Allotted, called up and fully paid
121,133,406 ordinary shares at 0.01p each 12 12 12
(31 March 2022: 120,519,793, 30 September 2022: 120,525,304)
12 12 12
The movements in share capital, share premium and other reserve are set out
below:
Number Share Share Other
of
capital
premium
reserve
shares £000 £000 £000
1 October 2022 120,525,304 12 235,903 238,385
Share options exercised 608,102 - 47 -
31 March 2023 121,133,406 12 235,950 238,385
During the period, 608,102 ordinary shares of 0.01p each with an aggregate
nominal value of £61 were issued for options that vested for a cash
consideration of £47,000. These included management rollover options and
restricted stock units granted for the LiveAuctioneers acquisition in FY22,
Long-term Incentive Plan Awards ("LTIP Awards") and shares issued to the Trust
for LTIP Awards that have vested in the period.
15. Related party transactions
During the six months ended 31 March 2023, the Group paid two months' rent of
$20,000 (£17,000) to McQuade Enterprises LLC, a company owned by the previous
owners of ESN. There were other no related party transactions. The Group's
related party transactions for FY 22 are disclosed in the Group's 2022 Annual
Report. There have been no material changes in the related party transactions
described in the last annual report except as detailed above.
16. Events after the balance sheet date
There were no events after the balance sheet date.
Responsibility Statement
The Directors confirm that to the best of our knowledge:
· these Condensed Consolidated Interim Financial Statements have
been prepared in accordance with United Kingdom adopted International
Accounting Standard 34 "Interim Financial Reporting",
· the interim management report includes a fair review of the
information required by DTR 4.2.7R (indication of important events and their
impact during the first six months and description of principal risks and
uncertainties for the remaining six months of the year); and
· the interim management report includes a fair review of the
information required by DTR 4.2.8R (disclosure of related parties'
transactions and changes therein).
By order of the Board,
John-Paul
Savant
Tom Hargreaves
Chief Executive
Officer
Chief Financial Officer
17 May
2023
17 May 2023
Glossary
A&A Art & Antiques
Auction Mobility Auction Mobility LLC
Bidder sessions web sessions on the Group's marketplaces online within a given time frame
BidSpotter the Group's marketplace operated via the www.BidSpotter.co.uk and
www.BidSpotter.com domain
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, on a
proforma basis, 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 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 at HY23 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 are 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, on a proforma basis, 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
Independent Review Report to Auction Technology Group plc
Conclusion
We have been engaged by the Company to review the condensed set of financial
statements in the half-yearly financial report for the six months ended 31
March 2023 which comprises the Condensed Consolidated Statement of Profit or
Loss, Condensed Consolidated Other Comprehensive Income or Loss, the Condensed
Consolidated Statement of Financial Position, the Condensed Consolidated
Statement of Changes in Equity, the Condensed Consolidated Statement of Cash
Flow and related notes 1 to 16.
Based on our review, nothing has come to our attention that causes us to
believe that the condensed set of financial statements in the half-yearly
financial report for the six months ended 31 March 2023 is not prepared, in
all material respects, in accordance with United Kingdom adopted International
Accounting Standard 34 and the Disclosure Guidance and Transparency Rules of
the United Kingdom's Financial Conduct Authority.
Basis for conclusion
We conducted our review in accordance with International Standard on Review
Engagements (UK) 2410 "Review of Interim Financial Information Performed by
the Independent Auditor of the Entity" issued by the Financial Reporting
Council for use in the United Kingdom (ISRE (UK) 2410). A review of interim
financial information consists of making inquiries, primarily of persons
responsible for financial and accounting matters, and applying analytical and
other review procedures. A review is substantially less in scope than an audit
conducted in accordance with International Standards on Auditing (UK) and
consequently does not enable us to obtain assurance that we would become aware
of all significant matters that might be identified in an audit. Accordingly,
we do not express an audit opinion.
As disclosed in note 1, the annual financial statements of the Group are
prepared in accordance with United Kingdom adopted international accounting
standards. The condensed set of financial statements included in this
half-yearly financial report has been prepared in accordance with United
Kingdom adopted International Accounting Standard 34, "Interim Financial
Reporting".
Conclusion relating to going concern
Based on our review procedures, which are less extensive than those performed
in an audit as described in the basis for conclusion section of this report,
nothing has come to our attention to suggest that the Directors have
inappropriately adopted the going concern basis of accounting or that the
Directors have identified material uncertainties relating to going concern
that are not appropriately disclosed.
This conclusion is based on the review procedures performed in accordance with
ISRE (UK) 2410; however future events or conditions may cause the entity to
cease to continue as a going concern.
Responsibilities of the Directors
The Directors are responsible for preparing the half-yearly financial report
in accordance with the Disclosure Guidance and Transparency Rules of the
United Kingdom's Financial Conduct Authority.
In preparing the half-yearly financial report, the Directors are responsible
for assessing the Company's ability to continue as a going concern, disclosing
as applicable, matters related to going concern and using the going concern
basis of accounting unless the Directors either intend to liquidate the
company or to cease operations, or have no realistic alternative but to do so.
Auditor's Responsibilities for the review of the financial information
In reviewing the half-yearly financial report, we are responsible for
expressing to the Company a conclusion on the condensed set of financial
statements in the half-yearly financial report. Our conclusion, including our
conclusion relating to going concern, are based on procedures that are less
extensive than audit procedures, as described in the basis for conclusion
paragraph of this report.
Use of our report
This report is made solely to the company in accordance with ISRE (UK) 2410.
Our work has been undertaken so that we might state to the Company those
matters we are required to state to it in an independent review report and for
no other purpose. To the fullest extent permitted by law, we do not accept or
assume responsibility to anyone other than the Company, for our review work,
for this report, or for the conclusions we have formed.
Deloitte LLP
Statutory Auditor
London, UK
17 May 2023
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