Strange as it may sound, the pandemic turned out to be a blessing in disguise for the auction industry as it forced firms to join the 21st century and offer an online service.

Whereas previously many small auction houses were limited to the number of buyers they could accommodate due to lack of physical space, today they can not only tap into their local market but a whole army of online punters at home and increasingly abroad – the auction world has truly gone global.

One of the companies driving this online revolution is FTSE 250 firm Auction Technology Group (ATG).

ARE AUCTIONS BIG BUSINESS?

Getting data on the auction industry isn’t straightforward as it isn’t just the art and antiques market we are interested in – there is a huge secondary market in used industrial, construction, commercial and agricultural machinery as well.

When companies decide they no longer need certain plant and equipment and need to sell it, they can either go direct to a dealer or they can sell it through an auction house.

Dealers typically offer below-market prices, because they have to sit on the equipment until they themselves find a buyer, whereas specialist auction houses typically achieve higher prices because they have an extensive buyer base and auctions create competition.

It’s the same story when banks or administrators have to liquidate a company – in order to get the best returns for stakeholders, they need to achieve the best price possible, which more often than not will be by selling at auction.

Auction houses are able to create a ‘network effect’ by offering high-quality items which attract high-quality bidders – this then attracts more sellers of high-quality items, leading to them signing up more high-quality bidders, and so on.

WHAT DOES ATG DO?

The firm operates world-leading auction marketplaces in through its Industrial and Commercial and Arts and Antiques arms, powering eight online market venues and listing sites with its proprietary technology.

In Industrial and Commercial, which encompasses construction and other heavy equipment, commercial and industrial equipment (basically anything not on wheels) and agricultural equipment, it operates BidSpotter, i-bidder.com and Proxibid.

In Art and Antiques, it operates EstateSale.Net, liveauctioneers, Lot-tissimo and the saleroom.

Altogether, in the year to September, the firm facilitated 88,000 individual auctions with around 24 million lots listed and 390 million bidder sessions.

While the auction industry itself saw lower values and volumes, ATG managed to grow its revenue by 2% on an organic basis with an acceleration to 4% growth in the second half as it attracted more buyers and sellers.

More importantly, it increased it’s ‘take rate’ across its auction marketplaces by selling its customers, the auction houses, more value-added services like paid-for digital advertising, payments processing and shipping.

ATG also strengthened its competitive position with the launch of an integrated white-label marketplace solution, and management believe there is an opportunity to grow its revenues ‘meaningfully’ going forward.

Internally, the company unified multiple data warehouses and consolidated its finance and HR systems across the group creating efficiency gains.

WHY BUY THE SHARES NOW?

Back in 2021, ATG was trading at over £15 per share as investors were swept up with enthusiasm for the online auction industry, and in 2023 the gross merchandise value of all goods traded hit a record.

Since then, GMV has normalised and stock prices have fallen, and although the shares jumped last month when the firm published its full-year results, they are still only around a third of their level three years ago when the firm was making losses.

GMV is actually growing again, led by Industrial and Commercial, one of ATG’s specialties, and the roll-out of new products including the listing of auction lots on other classified websites is attracting more bidders and more auction houses to the firm’s marketplaces.

As far as rolling out its value-added services and increasing its take rate go, analysts at Berenberg describe the company as being ‘in its infancy’ with its rollout and believe it will be a major driver of results next year and beyond.

As a result, ATG’s target to grow revenue by around 5% for the year to September 2025 looks not only achievable but on the conservative side, regardless of the strength of the broader auction market, and we believe there is good scope for the shares to re-rate. 

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