MIDAS SHARE TIPS: Sold! Make a bid for bargain Auction Technology Group, a fast-growing, well managed business at forefront of its field
Early last month Christie’s sold an Andy Warhol portrait of Marilyn Monroe for £155million. A week later, Sotheby’s dispatched a Picasso for almost £54million, while a breathtaking Monet went for £45million.
Mention auctions and these are the sorts of sales that most of us think about. But they are the exception. Around £150billion of goods are sold each year at auction, from second-hand sofas to combine harvesters and industrial baking machines. Not that long ago, all these sales were conducted under the hammer among a roomful of bidders.
Today, a growing number of auctions are online and Auction Technology Group is an undisputed leader in the field. The company listed on the stock market in February last year at £6. The price had shot up to more than £16 by August and has now drifted back to £9.43. At this level, the shares offer clear, long-term potential.
Hitting the mark: Auction Technology Group traces its roots back to 1971 when the specialist magazine Antiques Trade Gazette was launched
Auction Technology Group traces its roots back to 1971 when the specialist magazine Antiques Trade Gazette was launched. The publication exists to this day but, over the past 20 years, ATG has become a pioneer in online auctions, operating seven auction hubs, from the Saleroom, which specialises in art, antiques and collectables in Europe to BidSpotter, which sells industrial machinery, manufacturing equipment and food processing kit.
ATG handles between 60 and 100 auctions every week, selling 30 million items annually, valued at more than £2billion. In each case, auctions are organised by individual auction houses, from farm machine specialists in the US Midwest to whole-home sales in East Anglia. These auctioneers source and value the goods but use ATG’s online marketplaces to conduct the auctions, some entirely via the internet and some a blend of physical and digital bidding.
The system helps buyers, sellers and auctioneers. ATG’s auction hubs are used by thousands of auction houses and can be accessed from around the world. That means bidders can see a wider range of goods than ever before, while vendors are more likely to find willing buyers and secure higher prices than they otherwise would.
The auction business is conservative and online auctions still account for less than a third of global auction sales. However, their appeal is growing and ATG chief executive John Paul Savant is confident that the trend will continue. Physical auctions may have a certain charm but their digital equivalents are much more cost-effective for auctioneers and generate higher sales.
Concerns have been raised that Savant’s business will suffer if the economy tips into recession but there are strong grounds for optimism. Over half ATG’s revenues come from industrial goods and sales tend to rise when times are hard and businesses close down or offload goods to generate cash.
Fewer high-end artworks are sold during economic downturns but most of ATG’s sales are for less than £5,000, primarily driven by what are known in the trade as the four Ds – death, divorce, downsizing and debt. The group also owns i-bidder, where big firms such as Marks & Spencer and Dyson sell off excess stock in bulk – a business that should gain ground if times are tough.
Savant is also expected to drive the company forward by gaining market share, acquiring complementary businesses and moving into new areas, such as shipping.
Brokers forecast a 65 per cent increase in turnover to £116million for the year to September with profits soaring 80 per cent to £40million and further growth in 2023. The company also offers its technology to other auction groups, creating a further source of revenue.
Midas verdict: Auction Technology Group is a fast-growing, well managed business at the forefront of its field. The shares, at £9.43, are a buy.
Traded on: Main market Ticker: ATG Contact: auctiontechnologygroup.com or 020 3725 5500